Nero v. Am. Family Mut. Ins. Co.

• Decision Date: 23 September 2013
• Docket Number: Civil Action No. 11-cv-02717-PAB-MJW
• Citation: Nero v. Am. Family Mut. Ins. Co., Civil Action No. 11-cv-02717-PAB-MJW (D. Colo. Sep 23, 2013)
• Parties: JAMES L. NERO, individually and on behalf of a class of others similarly situated, Plaintiffs, v. AMERICAN FAMILY MUTUAL INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — District of Colorado

JAMES L. NERO, individually and on behalf of a class of others similarly situated, Plaintiffs, v. AMERICAN FAMILY MUTUAL INSURANCE COMPANY, Defendant.

Civil Action No. 11-cv-02717-PAB-MJW

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO

DATED September 23, 2013

Judge Philip A. Brimmer

ORDER

This matter is before the Court on the Motion for Attorneys' Fees Pursuant to C.R.S. § 13-17-201 [Docket No. 91] filed by defendant American Family Mutual Insurance Company. The Court has subject matter jurisdiction pursuant to 28 U.S.C. § 1332.

I. BACKGROUND

On February 15, 2011, plaintiff James L. Nero filed this putative class action against defendant in the District Court for the Northern District of Illinois. See Docket No. 2. In his original complaint, plaintiff brought claims on behalf of the class against defendant for breach of contract, fraudulent concealment, negligent misrepresentation, bad faith breach of contract, and violations of the Colorado Consumer Protection Act ("CCPA"), Colo. Rev. Stat. § 6-1-101 et seq. Docket No. 2 at 6-10. The class claims were based on defendant's alleged failure to provide Personal Injury Protection ("PIP") benefits for insurance policies sold in Colorado as required by the Colorado AutoAccident Reparations Act ("CAARA"), Colo. Rev. Stat. § 10-4-701 et seq. (repealed by Laws 1997, H.B. 97-1209, § 8, eff. July 1, 2003). Id. at 2-5. Plaintiff sought to represent a putative class consisting of:

All persons who paid premiums to American Family Mutual Insurance Company or American Standard Insurance Company of Wisconsin for UM/UIM coverage covering a vehicle during the period from September 16, 1999 to the present, and who were denied coverage for claims arising out of or related to personal injury protection or extended personal injury protection coverage, or expenses that may be reimbursed under personal injury protection or extended personal injury protection coverage, excluding defendants and their employees, officers, directors, and agents.

Id. at 4. On October 19, 2011, the District Court for the Northern District of Illinois transferred the case to this Court pursuant to 28 U.S.C. § 1404(a). See Docket No. 1. On January 3, 2012, plaintiff filed a Corrected Second Amended Complaint [Docket No. 19], raising identical putative class action claims against defendant.¹ Docket No. 19 at 16-24. In the Corrected Second Amended Complaint, plaintiff also raised individual claims against defendant for breach of contract, bad faith delay or denial of insurance benefits in violation of Colo. Rev. Stat. § 10-3-1115, common law bad faith breach of insurance contract, and violations of the CCPA. Id. at 24-29. On January 17, 2012,defendant moved to dismiss plaintiff's complaint. Docket No. 20. On September 28, 2012, the Court granted defendant's motion and dismissed plaintiff's individual claims for failure to state claims pursuant to Fed. R. Civ. P. 12(b)(6). See Docket No. 88. Because plaintiff could not sustain his own claims, the Court also dismissed the claims plaintiff brought on behalf of the putative class. Docket No. 88 at 6.

In the present motion, defendant seeks an award of $52,258.00 in attorneys' fees pursuant to Colo. Rev. Stat. § 13-17-201, which awards attorneys' fees to a defendant who secures pretrial dismissal of all tort claims through a motion brought under Colo. R. Civ. P. 12(b). Docket No. 91 at 7. Defendant states that it incurred $52,258.00 in attorneys' fees for the work performed by its attorneys to secure the dismissal of plaintiff's tort claims. Plaintiff opposes defendant's motion, arguing that the Court should not grant defendant an award of attorneys' fees for two reasons: first, Colorado substantive law does not apply in this case; and, second, even if Colorado law applies, defendant is not entitled to attorneys' fees because plaintiff's claims are based on defendant's breach of contract, and not due to the commission of a tort. Docket No. 98 at 3-5. In the alternative, plaintiff requests that, should defendant receive an award of attorneys' fees, the Court reduce defendant's award because the requested amount is unreasonable. Id. at 10-14.

II. ANALYSIS

A. Choice of Law

Plaintiff asserts that the issues in this case are governed by the law of Illinois, Docket No. 98 at 3, and that, because defendant cannot recover attorneys' fees underIllinois law, the Court should deny defendant's motion. Id. In response, defendant asserts that the substantive law of Colorado applies to the facts of this case because Colorado is the state with the most significant contacts. Docket No. 99 at 2-3.

Generally, a federal court sitting in diversity applies the forum state's choice of law principles. Trierweiler v. Croxton & Trench Holding Corp., 90 F.3d 1523, 1532 (10th Cir. 1996). However, where a case is transferred from one forum to another under 28 U.S.C. § 1404(a), the transferee court must follow the choice of law rules of the state in which the transferor court sits. Yoder v. Honeywell, Inc., 104 F.3d 1215, 1219 (10th Cir. 1997). Because the case was transferred to this district from the Northern District of Illinois, the Court must apply the choice of law rules of the State of Illinois.

Under Illinois law, a choice of law analysis is required only when it will affect the outcome of the case. Townsend v. Sears, Roebuck & Co., 879 N.E. 2d 893, 898 (Ill. 2007). In the present case, the parties agree that a conflict exists between Illinois and Colorado law with regard to the request for attorneys' fees. Docket No. 98 at 5; Docket No. 99 at 1-4. Specifically, the parties agree that Illinois does not have a statute which provides defendant with attorneys' fees based on the dismissal of plaintiff's tort claims. Because the parties agree that there is a conflict, the Court finds that a resolution of the choice of law issue here will have an impact on the outcome of the attorneys' fees request.²

In their briefs, both parties cite cases discussing Illinois choice of law rules governing the interpretation of insurance contracts that do not have choice of law provisions. See Lapham-Hickey Steel Corp. v. Protection Mut. Ins. Co., 655 N.E. 2d 842, 845 (Ill. 1995); Jupiter Aluminum Corp. v. Home Ins. Co., 225 F.3d 868, 872 (7th Cir. 2000) (applying Illinois law); Emp'rs Ins. of Wausau v. Ehlco Liquidating Trust, 723 N.E. 2d 687, 694 (Ill. App. Ct. 1999); CitiMortgage, Inc. v. Absolute Title Servs., Inc., 2012 WL 1108249, at *4 n.5 (N.D. Ill. April 2, 2012) (applying Illinois law). According to these cases, when an insurance contract lacks a choice of law provision, construction of an insurance contract will be "governed by the location of the subject matter, the place of delivery of the contract, the domicile of the insured or of the insurer, the place of the last act to give rise to a valid contract, the place of performance, or other place bearing a rational relationship to the general contract." Lapham-Hickey, 655 N.E. 2d at 845. However, because Colo. Rev. Stat. § 13-17-201 awards attorneys' fees only in connection with the dismissal of tort claims, the Court finds that the Lapham test does not govern the choice of law issue here. Because plaintiff's class claims alleging fraudulent concealment, negligent misrepresentation, and bad faith, as well as plaintiff's individual claims for statutory bad faith breach of insurance contract, common law bad faith, and violations of the CCPA, are all tort claims, the Court must next determine which law applies to tort claims that do not "arise under the provisions" of the insurancecontract. Barron v. Kane & Roach, Inc., 398 N.E. 2d 244, 246 (Ill. App. Ct. 1979); Travis v. Harris Corp., 565 F.2d 443, 446 (7th Cir. 1977) (applying Indiana law) ("though the contract may be interpreted under Ohio law, . . . the questions of traditional tort law are to be determined in accord with the laws of Indiana, the situs of the injury and domicile of [plaintiff]").

Neither the Illinois Supreme Court nor the Seventh Circuit - interpreting Illinois law - has addressed the question of which law applies to tort claims arising out of an insurance contract without a choice of law provision. See Cunningham Charter Corp. v. Learjet, Inc., 870 F. Supp. 2d 571, 575 (S.D. Ill. 2012). The Seventh Circuit has noted, relying on decisions from other circuits, that district courts sitting in diversity should not apply contractual choice of law clauses to tort claims unless it is clear that the parties intended that the contractual choice of law clause apply to tort claims. See Kuehn v. Childrens Hosp., Los Angeles, 119 F.3d 1296, 1302 (7th Cir. 1997) (applying Wisconsin law) ("One can, it is true, find cases that say that contractual choice of law provisions govern only contractual disputes and not torts . . . But what the cases actually hold is that such a provision will not be construed to govern tort as well as contract disputes unless it is clear that this is what the parties intended") (citation omitted); CERAbio LLC v. Wright Med. Tech., Inc., 410 F.3d 981, 987 (7th Cir. 2005) (applying Wisconsin law). In addition, numerous Illinois federal district courts, without citing to a decision from the Illinois Supreme Court or the Seventh Circuit interpreting Illinois law, have held that a contract's choice of law provision will apply to tort claims if: (1) the choice of law provision indicates that the parties intended Illinois law to govern non-contract claims;and/or (2) the plaintiff's tort claims are "dependent" upon the contract. See Medline Indus. Inc. v. Maersk Medical Ltd., 230 F. Supp. 2d 857, 862 (N.D. Ill. 2002); Cunningham Charter Corp., 870 F. Supp. 2d at 576 (listing cases). These cases find that a tort claim is dependent upon a contract if: (1) the claim alleges a wrong based on the construction and interpretation of the contract; (2) the tort claim is closely related to the parties' contractual relationship; or (3) the tort claim could not exist without the...