Nodaway Valley Bank v. Continental Cas. Co., 89-2185WM

• Decision Date: 16 October 1990
• Docket Number: No. 89-2185WM,89-2185WM
• Citation: 916 F.2d 1362
• Parties: The NODAWAY VALLEY BANK, Appellee, v. CONTINENTAL CASUALTY COMPANY, Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1362

916 F.2d 1362

The NODAWAY VALLEY BANK, Appellee, v. CONTINENTAL CASUALTY COMPANY, Appellant.

No. 89-2185WM.

United States Court of Appeals Eighth Circuit.

Submitted April 12, 1990.

Decided Oct. 16, 1990.

Michael P. Tone, Chicago, Ill., for appellant.

Paul E. Vardeman, Kansas City, Mo., for appellee.

Before JOHN R. GIBSON and BOWMAN, Circuit Judges, and HENLEY, Senior Circuit Judge.

JOHN R. GIBSON, Circuit Judge.

The Nodaway Valley Bank brought this diversity action to recover a settlement payment and attorney's fees from Continental Casualty Company, which issued a liability policy that covered only Nodaway Valley's directors and officers. The insured individuals, together with certain uninsured corporations and individuals, paid $500,000 to settle a suit brought by the United Missouri Bank and also incurred a total of $300,497 in attorneys' fees and expenses. The district court, ¹ 715 F.Supp. 1458, held that Continental Casualty was responsible for $450,000 of the $500,000 settlement, and $204,134 of the attorneys' fees and costs that were incurred in defending the United Missouri suit. After adding prejudgment interest to the award, the court entered a judgment in favor of Nodaway Valley for $830,860.18. On appeal, Continental contends: (1) that the district court attributed too much of the settlement payment and litigation costs to the insured individuals; and (2) that the court should not have awarded prejudgment interest. We affirm the judgment of the district court. ²

I.

The details of the underlying dispute between United Missouri Bank and the Nodaway Valley Bank are not material to this case. It suffices to say that after United Missouri bought shares of Nodaway Valley, the directors and shareholders of Nodaway Valley executed a squeeze-out merger. In a suit filed in a Missouri state court, United Missouri claimed that Nodaway Valley, its officers and directors, its shareholders, and other corporate entities had violated Missouri law by squeezing out United Missouri. That suit ended in two separate settlement agreements. In one agreement, United Missouri received $500,000 to settle the only count of its claim that was directed solely against Nodaway Valley's directors. In the other agreement, United Missouri received nothing in return for settling the remaining counts of its complaint.

Before the district court, Continental Casualty argued that Nodaway Valley's directors could not recover anything because the losses fell within exclusions contained in Nodaway Valley's policy. The district court granted summary judgment against Continental Casualty on that issue.

The district court then heard testimony concerning the appropriate allocation of the fees and expenses and settlement payment. Nodaway Valley presented testimony by attorneys of the law firm of Stinson, Mag & Fizzell, which had represented Nodaway Valley's directors and the other defendants in the suit brought by United Missouri. Those attorneys testified that the entire $500,000 settlement payment was attributable to the portion of United Missouri's complaint that was directed against only the insured directors. They also testified that $226,816 of fees and costs were incurred in defending Nodaway Valley's directors.

Continental Casualty presented testimony of its claims manager and William H. Bates, an attorney experienced in business litigation who was President-Elect of the Missouri Bar when he testified. Bates testified that seventy to eighty percent of the settlement payment and costs should have been allocated to the corporate holding company that had been used to effect the squeeze-out merger.

After hearing the testimony, the court concluded that "[a]llocating 10% of the responsibility for the settlement to noninsured parties seems almost generous under the circumstances." Nodaway Valley Bank v. Continental Casualty Co., 715 F.Supp. 1458, 1467 (W.D.Mo.1989).

II.

Continental Casualty challenges the district court's decision to allocate ninety percent of the settlement responsibility and a similar percentage of the attorneys' fees to the insured directors. A threshold question is what standard should govern our review of that decision.

A.

Continental Casualty argues that allocating the settlement payment and costs involves a mixed question of law and fact that we should review de novo. Nodaway Valley argues that the allocation decision is a finding of fact that we should review only for clear error.

The Supreme Court has recognized on more than one occasion "the vexing nature of the distinction between questions of fact and questions of law." Pullman-Standard v. Swint, 456 U.S. 273, 288, 102 S.Ct. 1781, 1790, 72 L.Ed.2d 66 (1982). The Pullman-Standard Court stated: "Rule 52(a) does not furnish particular guidance with respect to distinguishing law from fact. Nor do we yet know of any other rule or principle that will unerringly distinguish a factual finding from a legal conclusion." Id. The Court reiterated these observations in Cooter & Gell v. Hartmarx Corp., --- U.S. ----, 110 S.Ct. 2447, 110 L.Ed.2d 359 (1990), again offering no simple prescription and focusing instead on whether the district or appellate court was " 'better positioned' " to make a particular determination. Id., 110 S.Ct. at 2458-60.

This court has also considered the fine distinctions between legal and factual questions. In United States ex rel. Morris Construction, Inc. v. Aetna Casualty Insurance Co., 908 F.2d 375 (8th Cir.1990), and in In re McCrary's Farm Supply, Inc., 705 F.2d 330 (8th Cir.1983), our analysis focused on whether the question at issue required the application of a technical, legally oriented standard or whether it required the application of a non-technical, factually oriented standard. Using these principles, we found that the term "subcontractor" as used in the Miller Act had a sufficiently technical meaning that it presented a mixed question of law and fact that should be reviewed de novo. Morris Construction, 908 F.2d at 377-78 & n. 4. In contrast, in McCrary, we held that what constitutes a "place of business" was a factual question because it was based on a "non-technical statutory standard closely related to practical human experience." 705 F.2d at 332.

We have recently considered a question similar to the one before us, and held that a district court's determination of the percentages of responsibility for a judgment based on constitutional violations should be reviewed under the clearly erroneous rule. Jenkins v. State of Missouri, 855 F.2d 1295 (8th Cir.1988), aff'd in part and rev'd in part on other grounds, --- U.S. ----, 110 S.Ct. 1651, 109 L.Ed.2d 31 (1990) (apportionment of seventy-five percent responsibility to the state for desegregation costs and twenty-five percent to the school district). We are satisfied that apportionment of the responsibility for the covered and non-covered settlement amount, fees and expenses similarly presents a factual issue.

Cases concerning the apportionment of liability under comparative fault are also illuminating. In Mandel v. United States, 793 F.2d 964 (8th Cir.1986), we stated that apportionment of fault under the Arkansas comparative fault statute is a question for the fact finder and reviewable only for clear error. Id. at 969. In St. Hilaire Moye v. Henderson, 496 F.2d 973 (8th Cir.), cert. denied, 419 U.S. 884, 95 S.Ct. 151, 42 L.Ed.2d 125 (1974), this court stated that the fact finder has the responsibility to "assess the facts and apportion negligence among the parties as he deems proper...." Id. at 982. Such an apportionment may be reversed only if clearly erroneous. Id. Similarly, in Chicago & North Western Railway Co. v. Minnesota Transfer Railway Co., 371 F.2d 129 (8th Cir.1967), this court applied a clearly erroneous standard to the review of a judgment allowing contribution among tortfeasors. Id. at 131. In a Fifth Circuit case, Campbell v. Barsky, 265 F.2d 463 (5th Cir.1959), the court reviewed under the clearly erroneous standard a district court's decision to allocate 65% of the fault in an automobile accident to the plaintiff. Id. at 464.

In addition to these cases, numerous Eighth Circuit decisions hold that the calculation and award of damages is a question of fact reviewable only for clear error. See, e.g., Webb v. Arresting Officers, 749 F.2d 500, 501 (8th Cir.1984); Apex Mining Co. v. Chicago Copper & Chem. Co., 340 F.2d 985, 987 (8th Cir.1965).

We also observe that the allocation of settlement responsibilities requires a fact-bound inquiry similar to the type of inquiry required in the determination of negligence or discriminatory intent. The Supreme Court has stated that a finding of intentional discrimination is a finding of fact to be reviewed under the clearly erroneous standard, Anderson v. City of Bessemer City, 470 U.S. 564, 573, 105 S.Ct. 1504, 1511, 84 L.Ed.2d 518 (1985), and that the determination of negligence is "generally reviewed deferentially." Cooter & Gell, 110 S.Ct. at 2459.

Without dispute, the question of whether or not there is coverage under the insurance contract is a legal determination. This issue was decided by summary judgment and is unchallenged. We also recognize that the question of exposure to damages in the underlying case involved legal questions as well as the application of the facts to those questions. The remaining question, however, simply involves how much is covered or not covered by the insurance policy.

At its core, this issue concerns the evaluation of the comparative responsibilities of the particular parties and of their exposure to an award of damages in the underlying suit. Evidence of this evaluation came from lawyers representing the Nodaway bank officers and directors, the claim manager for Continental, and a lawyer testifying as an expert witness, all of whom gave opinions as to the respective liability of the non-insured corporate entities and the insured individual officers and...