* District Judge of the Eastern District of Texas, sitting by designation. 

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 07-60376

PATRICK JOSEPH ESSINGER, SR, individually and as administrator of the

estate of Jolee Paige Essinger, deceased; CONSTANCE LORRAINE ESSINGER,

individually, and as administrator of the estate of Jolee Paige Essinger, deceased

Plaintiffs - Appellants

v.

LIBERTY MUTUAL FIRE INSURANCE COMPANY

Defendant - Appellee

Appeal from the United States District Court

for the Southern District of Mississippi

Before DAVIS and SOUTHWICK, Circuit Judges, and CLARK, District Judge.*

SOUTHWICK, Circuit Judge:

A policy-holder brought suit for punitive damages against its insurance

company for a failure to recognize the effect of Mississippi law on the calculation

of benefits that were owed. The district court granted the company’s motion for

summary judgment, finding no malice or gross negligence in the company’s

initial failure to understand how state law affected what was owed. 

We affirm. 

United States Court of Appeals

Fifth Circuit

F I L E D

May 20, 2008

Charles R. Fulbruge III

Clerk
No. 07-60376

2

I. Facts and Procedural History

On August 5, 2002, seventeen-year-old Jolee Paige Essinger was killed in

a single-car accident in which she was a passenger. Her parents are the

plaintiffs in this litigation. The driver was Tabitha O’Brien, and there was

another passenger, Christopher Gore. O’Brien lost control while negotiating a

curve, causing the vehicle to overturn. O’Brien and Gore sustained injuries,

while Jolee Essinger was pronounced dead at the scene. 

This case involves two insurance policies. One was purchased by Kevin

Speice, a resident of Pennsylvania, who owned the single vehicle involved in the

accident. Speice maintained coverage under a State Farm policy providing

$25,000 in liability coverage for bodily injury, $15,000 in uninsured motorist’s

coverage, and $10,000 in medical payments coverage. 

Jolee Essinger was insured under a policy purchased from the Defendant

Liberty Mutual by her parents, Patrick and Constance Essinger. The relevant

coverage under the Liberty Mutual policy was $50,000 in uninsured motorist’s

coverage for each of the Essingers’ two vehicles and $1,000 in medical coverage.

The driver, O’Brien, had no insurance. Therefore, the claims made after the

accident for insurance benefits solely involved the State Farm and Liberty

Mutual policies.

On September 11, 2002, the Essingers notified Liberty Mutual of their

daughter’s accident and death. Mr. Essinger stated in his deposition that he

called Liberty Mutual inquiring whether there were benefits to defray Jolee’s

funeral expenses. Liberty Mutual records indicate that Mr. Essinger called the

“800 Center” and inquired whether “he is due anything under his policy.” The

following day, Liberty Mutual’s Eathel James spoke to Mr. Essinger and mailed

a letter advising the Essingers of the $1,000 of medical payments coverage. A

medical payments claim form was included with the letter. Liberty Mutual’s

letter stated that “Your policy has a limit of $1000.00 per person.” 
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3

On September 19, 2002, James again spoke with the Essingers and

advised them to submit documentation about funeral expenses and any funds

received from other insurance companies. The Essingers responded with

relevant documents. Liberty Mutual issued the Essingers a check for $1,000 on

October 14, 2002, and took no further action on the file at that time. 

In the record is a letter from the Essingers, dated October 25, 2002, that

was addressed to Eathel James at Liberty Mutual. The letter stated “My

daughter’s Estate is receiving $25,000 from State Farm. State Farm’s insurance

information is enclosed. Please let me know if the Estate is entitled to any

further recovery from Liberty Mutual.” Liberty Mutual’s brief states that “there

is no evidence that Liberty Mutual ever received this letter.” The parties do not

discuss whether this letter created some duty on Liberty Mutual’s part. Thus,

the fact issue of whether it was ever received is immaterial to the appeal.

On January 28, 2003,the Essingers’ daughter, Rebecca Weyant, contacted

Liberty Mutual to initiate an uninsured motorist claim. The following day,

Liberty Mutual’s Jennifer Gilcrease set up the claim, ordered the police report,

and attempted to contact the Essingers at home. On January 31, 2003,

Gilcrease sent the Essingers a letter with her contact information. Mrs.

Essinger stated that during a phone call, adjuster Gilcrease asked whether the

Essingers were going to retain counsel, then stated, “I don’t care how many

lawyers you get, you’re only going to get $5,000.” On the other hand, Gilcrease

stated that Mrs. Essinger first asked if they should seek legal counsel, and

Gilcrease responded that Gilcrease personally would not because an attorney

would only take part of the settlement. 

The Essingers initially retained attorney Bryan Vonder Bruegge, who

contacted Gilcrease on February 11, 2003. Gilcrease told him that Liberty

Mutual was prepared to pay $75,000. The attorney rejected the offer, asserting

that Liberty Mutual owed $15,000 additional coverage but refused to explain
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why. On February 12, 2003, after internal review and contact with State Farm

to confirm its coverage and offer of policy limits, Liberty Mutual sent a letter to

the Essingers’ attorney offering a settlement of $75,000, which it stated to be the

applicable policy limits available to the Essingers. It is undisputed, now, that

the policy limit was actually $90,000 because of the operation of Mississippi

caselaw that we will discuss.

On March 5, 2003, Gilcrease called the Essingers’ attorney again. The

attorney said that Liberty Mutual had not offered the policy limits and refused

to explain his calculation. Gilcrease sent the attorney a letter asking for his

analysis of the policy limits, but the Essingers’ attorney did not respond. 

On March 28, 2003, Gilcrease contacted State Farm’s attorney. She was

told that the State Farm policy provided a limit of $15,000 on uninsured or

underinsured motorist coverage, and a limit on liability for bodily injury of

$25,000. As a preview of what is ahead, we will note that the $15,000 uninsured

motorist coverage under the State Farm policy is central to the misunderstood

Mississippi law.

On April 3, 2003, Liberty Mutual received a letter from Robert Tyler, the

Essingers’ new attorney who was retained to handle a claim for bad faith against

Liberty Mutual. The letter states that Liberty Mutual had a duty to be aware

of state law in a jurisdiction in which it issues automobile policies, including the

method of stacking of uninsured motorist benefits and credits or offsets and the

manner in which they are computed for liability payments. He advised Liberty

Mutual that it was not his position to render legal advice to Liberty Mutual and

that the company should confer with Mississippi counsel on the subject. 

Gilcrease contacted Liberty Mutual’s Mississippi counsel, Rick Norton,

who called Tyler. After State Farm’s coverage was confirmed, Liberty Mutual

then became aware that $90,000 was the policy limit after a set-off, not $75,000.

The Essingers, through counsel, accepted the $90,000 settlement offer but
No. 07-60376

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reserved the right to pursue claims against Liberty Mutual for its handling of

the Essingers’ claim.

On July 7, 2003, the Chancery Court of Harrison County, Mississippi,

approved the settlement for the Essingers to receive $90,000 from Liberty

Mutual and $25,000 from State Farm as administrators of Jolee’s estate.

Attorneys’ fees were paid and the remaining funds were divided among seven

wrongful death beneficiaries as determined by the Chancellor. 

On December 29, 2005, the Essingers filed this action in the Circuit Court

of Harrison County. Liberty Mutual removed the action to federal court, and

filed a motion for summary judgment. The district court granted Liberty

Mutual’s motion for summary judgment on April 12, 2007. The Essingers timely

appealed. 

II. Discussion

The sole issue the Essingers present in this appeal is whether the district

court erred in granting summary judgment in favor of Liberty Mutual. The

Essingers phrase the issue as whether Liberty Mutual “can be ignorant of

Mississippi law, adjust a Mississippi claim in violation of Mississippi law, and

not be subject to a jury finding that it committed bad faith.” We review the

district court’s grant of summary judgment de novo, viewing the facts and

inferences in the light most favorable to the nonmoving party. Armstrong v.

American Home Shield Corp., 333 F.3d 566, 568 (5th Cir. 2003). 

We examine first the error that Liberty Mutual committed in making its

calculation of maximum liability, and then consider how that error fits under

Mississippi caselaw on bad faith of insurance companies.

1. “Stacking”

The law that was misunderstood is called “stacking,” a concept applicable

to uninsured motorist coverage in insurance policies. Several Mississippi

precedents have defined and refined the doctrine, as explained in detail in a
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learned treatise. JEFFREY JACKSON, MISS. INS. LAW & PRAC., §§ 18:16-18:23

(2007). We start with one of the statutory definitions of an “uninsured motor

vehicle.” The definition applies “when the liability insurer of such vehicle has

provided limits of bodily injury liability for its insured which are less than the

limits applicable to the injured person provided under his uninsured motorist

coverage.” Miss. Code Ann. § 83-11-103(c)(iii) (2008). We thus compare the

liability limits of $25,000 in the State Farm policy purchased by the owner ofthe

vehicle in which she was riding, to all the uninsured motorist coverage (“UM

coverage”) to which Jolee Essinger was entitled. Her estate could draw on the

$15,000 in UM coverage provided in the vehicle owner’s State Farm policy.

Mississippi law provides that Jolee Essinger’s estate was also entitled to the UM

coverage in her parents’ policy that covered two of their vehicles. The separate

$50,000 policy limit on each of those Essinger vehicles totaled $100,000. Thus,

there was $115,000 worth of UM coverage available. The quoted statutory

definition made the vehicle uninsured (or more aptly, underinsured) because the

$115,000 of available UM coverage far exceeded the $25,000 of liability coverage.

JACKSON, MISS. INS. LAW at § 18:16. 

Added to that analysis is the unfortunate factthat because she was killed,

Jolee Essinger’s estate could claim damages far in excess of the liability limit.

The UM provisions of the available policies were liable up to that limit.

This calculation still does not get us to what the Essinger estate could

claim from both State Farm’s policy on the vehicle involved in the accident and

on her parents’ policy with Liberty Mutual. Mississippi law permits an insurer

to offset UM payments by its liability payments. Id. at § 18:25. State Farm had

the liability coverage relevant to this accident, limited to $25,000 as noted

already. State Farm was entitled to offset its $15,000 UM coverage in toto by

the $25,000 liability payment. Id. (discussing Fidelity & Guar. Underwriters v.

Earnest, 699 So. 2d 585, 587 (Miss. 1997)). Included in the record is a final
No. 07-60376

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decree in the estate proceedings opened in Mississippi state court that

authorized the Jolee Essinger estate to accept $25,000 from State Farm, not

$40,000. That fully satisfied State Farm’s obligations.

The last calculation is how much, if any, Liberty Mutual may offset its

$100,000 UM coverage by State Farm’s $25,000 payment. The answer comes

explicitly from an older case which remains good law: “the uninsured motorists

coverage of each policy of liability insurance is available to the injured insured

until all sums which he shall be entitled to recover from the uninsured motorist

have been recovered.” Harthcock v. State Farm Mut. Auto Ins. Co., 248 So. 2d

456, 461-62 (Miss. 1971). As we have already discussed, the Essinger estate was

entitled to $115,000 of uninsured motorist coverage. The estate had received

$25,000 in liability payments from State Farm. Liberty Mutual was responsible

for the remainder, or $90,000. See Dixie Ins. Co. v. State Farm Mut. Auto. Ins.

Co., 614 So. 2d 918, 921 (Miss. 1992).

These rules, though somewhat complicated, are central components of

Mississippi insurance law. The state’s intermediate court once even stated that

the doctrine was part of the “deeply ingrained and strongly felt public policy” of

Mississippi. Bell v. Government Employees Ins. Co., 672 So. 2d 779 (Miss. Ct.

App. 1995) (mem.) (unpub., and not precedent). Though the state’s Supreme

Court has not gone as far as that, the state Court of Appeals’ fervor reveals that

stacking is a well-known and, for many practitioners and judges, a passionately

protected doctrine in the state.

It is that doctrine about which this Liberty Mutual adjuster lacked a

complete understanding when assessing the claim. The difficulty for the

adjuster arose from not having inquired about the separate UM coverage under

the State Farm policy, not understanding the two UM coverages needed to be

stacked, or not calculating the set-off. The fact that stacking is widely

recognized as applicable does not mean its precise application is easily
No. 07-60376

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understood. The Essingers’ initial attorney, a Mississippi practitioner, did not

consider insurance law a specialty. He stated in a deposition that he found

stacking to be complicated. Because he had not recently re-examined its

principles, he did not want to describe how the $90,000 demand had been

calculated. 

With this review of the proper calculation as the backdrop, we turn to

whether bad faith as Mississippi defines it has been shown.

2. Overview of bad faith and extra-contractual damages 

As we will detail, Mississippi caselaw provides for “extra-contractual

damages” when an insurance company has tortiously breached its contract.

That is because often an insurance company’s financial default is less than the

cost to the insured of judicially forcing a correct payment. When an insurance

company breaches its contract with an insured but does not do so in a way that

is so egregious as to permit the recovery of punitive damages (a recovery option

we will discuss momentarily), the insured in some circumstances will have a

right to attorneys’ fees and other expenses that were reasonably foreseeable.

Universal Life Ins. Co. v. Veasley, 610 So. 2d 290, 295 (Miss. 1992). The

Essingers do not seek those damages, which are an intermediate form of relief

between simply receiving incidental costs of suit (but not attorneys’ fees and

other damages), and getting punitive damages.

Itis true thatthe Essingers earlier in the process kept open the possibility

of pursuing this relief. The release the Essingers gave Liberty Mutual reserved

the right to pursue claims “including, but not limited to, breach of contract

and/or bad faith.” Furthermore, the Essingers in the Complaint asserted a claim

for “tortious breach of contract” and sought actual as well as punitive damages.

ThePlaintiffs’focus sharpened when they responded to Liberty Mutual’s Motion

for Summary Judgment that sought dismissal of all claims, explicitly including

any claims for extra-contractual damages. The Plaintiffs’ response was limited
No. 07-60376

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to the their bad-faith claim. Furthermore, when the district court dismissed the

Essingers’ complaint after discussing only the bad-faith claim, the Essingers

never objected or sought clarification. Finally, on appeal, the Essingers’ sole

argument is that the district court erred in dismissing their bad-faith claim. 

Therefore, to the extent that the Essingers may have reserved a claim for

extra-contractual damages from the release given Liberty Mutual or asserted

such a claim in their complaint, the claim has been abandoned. MacArthur v.

Univ. of Texas Health Ctr., 45 F.3d 890, 895-96 (5th Cir. 1995). 

Instead, the Essingers allege that Liberty Mutual committed what in

Mississippi is usually labeled the tort of bad-faith refusal to pay a claim, but has

also been described as bad-faith refusal to honor an obligation under an

insurance contract. JACKSON, MISS. INS.LAW, § 13:2. Different precedents have

emphasized different elements of the tort, so we find it helpful to state this

summary, prepared by someone who made a careful review of all the caselaw:

In order to recover punitive damages against an insurance

company for bad-faith refusal to pay a claim, or refusal to honor an

obligation under an insurance policy, the insured must first

demonstrate that the claim or obligation was in fact owed. . . .

Second, the insured must demonstrate that the insurer has no

arguable reason to refuse to pay the claim or to perform its

contractual obligation. Finally, in order to recover punitive

damages from the insurer for bad faith, the insured must

demonstrate that the insurer’s breach of the insurance contract

“results from an intentional wrong, insult, or abuse as well as from

such gross negligence as constitutes an intentional tort.”

Id. (quoting Caldwell v. Alfa Ins. Co., 686 So. 2d 1092, 1095 (Miss. 1996)).

We draw from Professor Jackson’s analysis these relevant questions:

(1) Was there a refusal to pay a claim or to honor an obligation?

(2) Was the claim actually owed?

(3) Was there no arguable basis for the company’s actions?
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Inordinate delays in processing claims and a failure to make a meaningful

investigation have combined to create a jury question on bad faith. Lewis v. Equity Nat. Life

Ins. Co., 637 So. 2d 183, 187-88 (Miss. 1994). The allegation in Lewis was a “bad-faith” failure

to investigate the claim that was made. Liberty Mutual timely reviewed the January claim

but made a mistake as to the applicable law that it corrected upon having the mistake

explained. We find Lewis inapposite.

10

(4) Did the company’s actions amountto an intentional wrong or occur due

to gross negligence?1

There is no doubt that the Essingers prevailed on their demand for

$90,000 as opposed to the $75,000 that was offered. So the second factor is

resolved. The third factor on an “arguable basis” is satisfied only “if the insurer

has a reasonable legal or factual basis for denying or delaying payment on the

claim.” Andrew Jackson Life Ins. Co. v. Williams, 566 So. 2d 1172, 1184 & n.12

(Miss. 1990). This factor does not require that there be some unworthy motive,

only that nothing legal or factual would have arguably justified the position

taken. There was, then, no arguable basis for the position Liberty Mutual took

that $75,000 was the policy limit.

Whether to sustain the districtjudge’s decision therefore turns on only two

ofthe factors: were Liberty Mutual’s actions in the category (i.e., something akin

to a denial) for which the egregiousness of the conduct becomes relevant? If so,

were those actions at least grossly negligent? Because of our conclusion that no

denial ever occurred, we examine only that issue.

3. Was there a denial of claim or failure to honor obligation?

A review ofthe record reveals several points at which Liberty Mutual may

not have zealously responded to notice of the death of someone covered by their

policy. Examples occurred in 2002, when the only response to the Essingers

concerned the payment ofthe $1,000 medical expenses. The company was asked

about those expenses, and reviewed only that limited claim. There is no

evidence that Liberty Mutual in 2002 actively examined the policy for all
No. 07-60376

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possible benefits that might be available under it. The company’s actions were

narrowly focused on what the policy-holder requested.

Over an eight-month period, all the benefits due were paid. The issue for

the moment is whether Liberty Mutual’s passivity in 2002 is the kind of

situation that can be seen as an independent tort of bad faith in failing to honor

an obligation under an insurance contract. Our examination of Mississippi

precedents reveals no example of insurance companies being found in bad faith

when they respond accurately to the inquiries made but are not pro-active. It

is not clear that the Essingers even argued that the 2002 events are factually

relevant for their claim. It is true that the Essingers have asserted that they

sent a letter on October 25, 2002, after receipt of the $1,000 payment, asking

what other coverages might be available. Liberty Mutual denied having received

that letter, and more importantly, there is no evidence that the company

responded to the letter by denying there were any other coverages. For us to

find the 2002 events are a basis for a bad-faith claim would be an extension of

Mississippi law on the subject, a step we decline to take.

As to the 2003 actions, Liberty Mutual alleges that at most these facts

show delay and not denial. Liberty Mutual’s errors about stacking resulted in

the miscalculation of the maximum available coverage to the Essingers. The

Essingers would have us conclude that Liberty Mutual’s offer of $75,000 as

constituting the policy limits, was a denial of anything greater. We turn to

Mississippi law on whether these facts constitute a sufficient denial.

This court examined a Mississippi bad-faith claim that arose after insured

and insurer failed to negotiate a settlement on the loss of a log skidder due to

fire. Tutor v. Ranger Ins. Co., 804 F.2d 1395 (5th Cir. 1986). There was a fourto five-month gap between when the claim was made and suit was filed. During

that period, the insurance company investigated the loss, made an offer,

requested additional information when the first offer was rejected, then made
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a higher but still unaccepted offer. Id at 1396. Suit for bad-faith denial of the

claim was filed while negotiations were still occurring. We found that because

there never was a denial, the case involved only a dispute as to the correct value

of the covered property. Id. at 1399. The issue of punitive damages should not

have been submitted to the jury. Id.; see also, Guar. Serv. v. Am. Employers’

Ins., 893 F.2d 725, 728 (5th Cir. 1990) (an insurer stated that it had not been

given information required by the insurance contract to make a proper analysis

of the claim, but did not deny coverage; punitive damages improper). 

Somewhat similarly,the Mississippi Supreme Court held that a trial court

correctly refused to submit the issue of punitive damages to the jury. Caldwell,

686 So. 2d at 1092. The estate for a person killed in a multi-vehicle accident

filed a claim in February 1991, and the insurance company began its

investigation. Id. at 1093-94. Counsel for that estate sent the insurer a demand

letter setting a settlement deadline of April 1, 1991. Settlement was not reached

by that date and suit was filed. Id. On May 28, 1991, after the investigation

was complete, Alfa tendered its policy limits of $202,000. Id. The Court

concluded that summary judgmentin favor of Alfa was proper because the claim

had never been denied, but payment was delayed pending a proper investigation.

Id. at 1099.

To allow a comparison between what occurred in these precedents and the

events here, we summarize Liberty Mutual’s actions regarding the death claim.

The almost ten weeks from January 28 until April 4, 2003, may be broken down

conceptually into four periods. We look for whether a “denial of a claim” or

refusal to honor an obligation occurred. 

(1) From January 28 until February 12, Liberty Mutual processed the

claim and offered what it perceived to be policy limits. The offer was rejected on

February 11 by the Essingers’ counsel on the telephone, but he would not

explain his calculation; the adjuster’s notes stated her confusion. On February
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12, Liberty Mutual sent a letter to this attorney setting out the $75,000 offer,

calling it the “available limits minus the off-set from the State Farm underlying

coverage.” The initial offer was the commencement of negotiations. True,

because of its error, Liberty Mutual did not think it owed more. But that error

could be corrected through negotiation. There was no “denial.” 

(2) From February 12 until March 5, Liberty Mutual apparently awaited

a response to its letter. On March 5, an adjuster called the Essingers’ counsel

to determine where matters stood, and was told without explanation that the

policy limits had not been offered. A letter was sent by the adjuster to counsel

on March 5, requesting an explanation. We find no denial, as this second time

period was part of the negotiation, with the error by Liberty Mutual being

exacerbated by counsel’s refusal to explain the problem.

(3) From March 5 until April 3, Liberty Mutual waited for the Essingers

to respond. On March 28, the adjuster contacted State Farm and learned, or was

again told, about the $15,000 additional UM coverage. On April 3, Liberty

Mutual received a letter from the Essingers’ new counsel stating that he had

been hired to pursue a bad-faith claim and suggesting the adjuster talk to her

own counsel to figure out why the policy limit was not $75,000. Here too we find

no denial, as Liberty Mutual explicitly held open the door to considering further

information from the Essingers on why more was owed. 

(4) On April 3-4, Liberty Mutual’s adjuster finally checked with counsel,

learned that $90,000 was the proper amount, and started the internal process

for getting the greater amount authorized and offered. Within days, the error

was corrected and the proper amount was offered. Those last few days resolved

the problem and do not constitute the denial needed.

During the ten weeks of the processing of the claim for UM benefits,

Liberty Mutual created the problem for its insured by failing to understand what

those who adjustinsurance claims in Mississippi must know – how stacking and
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set-off of UM coverages operate. The company offered what it considered to be

its policy limits, but at various points during the period under consideration,

indicated that it would consider further information revealing where it was

wrong. There never was a denial of a claim or failure to honor an obligation as

required to make a jury issue of bad faith.

At some point, an insurance company’s conduct may reveal such a

refractory attitude, such as rejecting reasonable responses from its claimant

despite verbal indications of flexibility, that a denial might arise from what

superficially appears to be negotiation. We find no fact question here. The

district judge ruled in part on the basis that no denial of a claim occurred. We

find no dispute of material fact on that point. There is no reason to discuss the

remaining issue on the relative egregiousness of the conduct.

We cannot fail to note, though, that because of the insurance company’s

negligence in understanding Mississippi law, a substantial reduction occurred

in the amount actually received by the Essingers following this tragic accident.

That reduction occurred because of the need to employ counsel to receive what

was due. We have found no denial of a proper claim, but there certainly was

damage. Extra-contractual damages might have been available to make the

insured whole had they been pursued. See Veasley, 610 So. 2d at 295. It is,

nonetheless, understandable that punitive damages were sought instead. 

The judgment of the district court is AFFIRMED.