Opinion ID: 60387
Heading Depth: 2
Heading Rank: 1

Heading: Standard of review and choice of law principles

Text: This Court reviews questions of law, including conflicts of law questions, de novo and district court factual determinations for clear error. Abraham v. State Farm Mut. Auto. Ins. Co., 465 F.3d 609, 611 (5th Cir.2006). We also review de novo the dismissal of a declaratory judgment action when the dismissal is based on a question of law. Sobranes Recovery Pool I, LLC v. Todd & Hughes Constr. Corp., 509 F.3d 216, 220 n. 8 (5th Cir.2007). Magnolia is seeking reimbursement for attorney's fees incurred by its independently-retained counsel in suits where Hartford defended Magnolia under a reservation of rights. Mississippi law requires an insurer defending an insured under a reservation of rights to provide the insured with independent counsel because of the built-in conflict that is created. Twin City Fire Ins. Co. v. City of Madison, 309 F.3d 901, 905 (5th Cir.2002) (applying Moeller v. Am. Guar. & Liab. Ins. Co., 707 So.2d 1062, 1069 (Miss.1996)). Conversely, Louisiana law does not require an insurer to furnish independent counsel merely because it defends an insured under a reservation of rights. See Trinity Universal Ins. Co. v. Stevens Forestry Serv., Inc., 335 F.3d 353, 356 (5th Cir.2003) (applying Louisiana law); see also Nat'l Union Fire Ins. Co. of Pittsburgh, Pa., v. Circle, Inc., 915 F.2d 986, 991 (5th Cir. 1990) ([A]n insurer does not automatically breach its duty to defend merely because it reserves the right to deny coverage under the policy.) (applying Louisiana law). [3] Because Foundation would have a viable cause of action to recover the attorney's fees under Mississippi law, but not under Louisiana law, we must conduct a choice of law analysis to determine which law applies. See Zurich Am. Ins. Co. v. Goodwin, 920 So.2d 427, 432 (Miss.2006) (Choice of law analysis arises only when there is a true conflict between the laws of two states, each having an interest in the litigation.); see also Chapman v. Thrasher Trucking Co., 729 F.Supp. 510, 510 (S.D.Miss.1990) (considering a choice of law analysis necessary only for conflicts hav[ing] a significant effect on the outcome of the case). Sitting in diversity, we apply the choice of law rules of the forum state to determine which state's substantive law applies. In re Katrina Canal Breaches Litig., 495 F.3d 191, 206 (5th Cir.2007). The forum state, Mississippi, resolves choice of law issues by applying the following steps: (1) determine whether the laws at issue are substantive or procedural; (2) if substantive, classify the laws as either tort, property, or contract; and (3) look to the relevant section of the RESTATEMENT (SECOND) OF CONFLICT OF LAWS. See Zurich, 920 So.2d at 433-34. Regarding the first step, we conclude that this issue is substantive in nature. [T]he law of the forum determines whether an issue in the action is substantive or procedural in nature. 1A C.J.S. Actions § 41. In Mississippi, few laws are classified as procedural and for choice of law purposes the Mississippi Supreme Court has labeled as procedural only rules of evidence and procedure, statutes of limitations, and awards of attorney's fees and interest. See Zurich, 920 So.2d at 433. While this dispute generally involves reimbursement for attorney's fees, the more precise issue is whether an insurer must provide an insured with independent counsel when defending them under a reservation of rights. Because resolution of this issue determines whether Foundation has a viable cause of action, and not merely whether a party is entitled to attorney's fees for prevailing in a particular case, the issue is substantive. See Hancock v. Watson, 962 So.2d 627, 629 (Miss.Ct.App.2007); see also Zurich, 920 So.2d at 433. Second, the parties assert, and we agree, that this issue is contractual in nature. Finally, regarding the third step, Mississippi courts seek to determine the center of gravity of a dispute and apply the law of the place which has the most significant relationship to the event and parties or which, because of the relationship or contact with the event and parties, has the greatest concern with the specific issues . . . . Zurich, 920 So.2d at 433 (internal quotation marks omitted). In applying this approach, Mississippi has embraced the Restatement (Second) of Conflict of Laws. Ingalls Shipbuilding v. Fed. Ins. Co., 410 F.3d 214, 230 (5th Cir. 2005). Three Restatement sections are potentially relevant here: sections 6, 188, and 193.