Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-07-01011/USCOURTS-ca8-07-01011-0/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 

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1

The Honorable A. Wallace Tashima, United States Circuit Judge for the Ninth

Circuit, sitting by designation. 

United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

Nos. 07-1011/1394/1448

___________

Transcontinental Insurance Company; *

Transportation Insurance Company, *

*

Appellants/Cross-Appellees, *

* Appeals from the United States

v. * District Court for the

* Eastern District of Arkansas.

Rainwater Construction Company, * 

LLC; Timothy Rainwater; Arthur D. *

Rainwater; Rickey J. Kitchen, *

*

Appellees/Cross-Appellants. *

___________

Submitted: November 15, 2007

Filed: December 5, 2007

___________

Before RILEY, TASHIMA,1

 and SMITH, Circuit Judges.

___________

RILEY, Circuit Judge.

Rainwater Construction Company, LLC (Rainwater) purchased insurance

policies from Transcontinental Insurance Company and Transportation Insurance

Company, both subsidiaries of CNA Financial Corporation (collectively, CNA). The

insurance policies contained a “Named Driver Exclusion Endorsement,” which stated

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Scottie and Debbie Lane and Michael and Charlotte New are not parties in this

appeal.

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that insurance coverage “does not apply to any claims, damages, expenses or ‘loss’ . . .

arising out of the maintenance, operation or use of any ‘auto’ by [Rickey Joseph

Kitchen (Kitchen)].” On October 19, 2005, as Kitchen drove a Rainwater truck and

trailer over an overpass, the trailer detached from the truck, crashing into Scottie

Lane’s (Lane) truck and seriously injuring both Lane and Michael New (New), a

passenger in the truck. 

Lane, New, and their respective wives filed suit in the Circuit Court of

Craighead County, Arkansas, in cause numbers CV-2006-235(DB) and

CV-2006-270(JF) (state court actions).2

 CNA defended under a reservation of rights

and then filed this declaratory judgment action in the United States District Court for

the Eastern District of Arkansas in case number 3:06-CV-00083-GH (federal court

action). In the federal court action, CNA sought a declaratory judgment that

Rainwater’s insurance policies precluded insurance coverage under the Named Driver

Exclusion Endorsement for any judgment against Rainwater in the state court actions.

The district court determined that Rainwater’s CNA insurance policies provided

coverage because the sole proximate cause of the accident was “the improperly

attached trailer, not Kitchen’s driving.” The district court also ordered Rainwater to

submit a request for attorney fees pursuant to Arkansas Code section 23-79-209(a).

CNA then accepted the Lanes’ and News’ policy limits settlement demand of

$2 million. The settlement agreement, in letter form, expressly provided:

Transcontinental Insurance Company and Transportation Insurance

Company (CNA) accept your clients’ joint settlement demand of $2

million dollars, payable to the Lanes and News and their counsel, in

exchange for a full release and dismissal with prejudice of all claims

against CNA and its insureds, Rainwater Construction Company, LLC,

Rickey Kitchen, Sharon Rainwater, Timothy Rainwater, Arthur D.

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Although the settlement agreement did not specifically reference Arkansas

cause number CV-2006-270(JF), the parties agree the settlement agreement resolved

this case. 

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Rainwater, asserted in Cause No. 3:06CV00083GH and in Cause No. CV

2006-235(DB), each party to bear their own costs and fees. Mr. Emerson

will draft the formal releases and the dismissal documents in the state

case. I will immediately advise the district court that the cases have

settled and will file with the Eighth Circuit a motion to vacate and

dismiss the federal suit.3

CNA mailed the settlement agreement letter to Rainwater’s attorney and provided a

signature block for Rainwater’s attorney’s signature. Rainwater’s attorney signed the

settlement agreement on behalf of Rainwater. CNA paid the $2 million settlement.

Thereafter, the district court granted Rainwater’s attorney fees claim in the

amount of $23,667.50. CNA appeals the attorney fees award, arguing (1) the

settlement agreement required “each party to bear their own costs and fees,” and

(2) Rainwater was not entitled to an attorney fees award because the district court

erred in interpreting Rainwater’s insurance policies. Rainwater cross-appeals the

amount of the attorney fees award. 

I. DISCUSSION

We review de novo the district court’s interpretation of the settlement

agreement. Little Rock Sch. Dist. v. N. Little Rock Sch. Dist., 109 F.3d 514, 516 (8th

Cir. 1997). Because the federal courts have diversity jurisdiction over this case

pursuant to 28 U.S.C. § 1332, Northbrook Nat’l Ins. Co. v. Brewer, 493 U.S. 6, 9

(1989), we apply the substantive law of the State of Arkansas, see HOK Sport, Inc.

v. FC Des Moines, L.C., 495 F.3d 927, 934 (8th Cir. 2007).

Under Arkansas law, settlement agreements are treated as contracts. See

Williams v. Davis, 659 S.W.2d 514, 515 (Ark. Ct. App. 1983). “[T]he first rule of

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interpretation of a contract is to give to the language employed the meaning which the

parties intended.” First Nat’l Bank of Crossett v. Griffin, 832 S.W.2d 816, 819 (Ark.

1992). “When contracting parties express their intention in a written instrument in

clear and unambiguous language, it is our duty to construe the written agreement

according to the plain meaning of the language employed.” C. & A. Constr. Co. v.

Benning Constr. Co., 509 S.W.2d 302, 303 (Ark. 1974). “To arrive at the intention

of the parties to a contract, courts may acquaint themselves with the persons and

circumstances and place themselves in the same situation as the parties who made the

contract.” Schnitt v. McKellar, 427 S.W.2d 202, 207 (Ark. 1968). 

Rainwater asserts the settlement agreement is ambiguous regarding the release

of Rainwater’s attorney fees claim. Although the settlement agreement could have

conclusively resolved this issue by providing “each party to bear their own costs and

attorney fees,” simply because the settlement agreement could have been written with

exact clarity does not imply the settlement agreement is ambiguous. Rather, where

the only fees in dispute were Rainwater’s attorney fees, the settlement agreement is

only susceptible to one reasonable interpretation. In this context, the plain meaning

of “fees” refers to Rainwater’s attorney fees. Under these circumstances, the

settlement agreement unambiguously and sufficiently provided that Rainwater

released its attorney fees claim. 

Rainwater also asserts the settlement agreement did not resolve the federal

litigation because (1) CNA accepted the settlement offer of the Lanes and News, who

had no authority to release Rainwater’s attorney fees claim; and (2) Rainwater would

not have gratuitously released its attorney fees claim. In writing the settlement

agreement letter, CNA expressly referenced the federal action’s case number and

submitted the settlement agreement to Rainwater’s attorney. The first addressee on

the settlement agreement letter was Rainwater’s attorney, followed by the attorneys

for the Lanes and the News. The letter expressed a payment of $2 million to the Lanes

and the News “in exchange for a full release and dismissal without prejudice of all

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The settlement agreement letter directed, “Please sign at the bottom to

acknowledge that this comports with your clients’ understanding.” 

5

We express no opinion regarding the propriety of the district court’s

interpretation of the insurance policy.

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claims against CNA” asserted in the federal action. Rainwater’s attorney received the

letter and signed the acceptance signature block on behalf of Rainwater, accepting the

terms of the settlement agreement.4

 By entering into the settlement agreement,

Rainwater released its attorney fees claim in exchange for the settlement of the

Arkansas state court litigation (in which Rainwater potentially faced liability for any

judgment in excess of the policy limits) and the dismissal of CNA’s appeal of the

district court’s judgment (in which Rainwater risked reversal of the district court’s

coverage decision). 

II. CONCLUSION

Because we conclude Rainwater released its attorney fees claim, we need not

consider CNA’s and Rainwater’s other arguments.5

 We reverse and vacate the district

court’s award of attorney fees. 

______________________________

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