Opinion ID: 472544
Heading Depth: 1
Heading Rank: 2

Heading: prior-litigation expenses

Text: 17 The District Court held that Nepera could not recover excessive overcharges in its lawsuit against Sea-Land because the latter was required to correct them in a Section 18(b)(3) proceeding. 44 Since Nepera does not seek review of that ruling, 45 we need not consider whether the Shipping Act precludes relief of that sort in a common-law action. Nepera continues, however, to press the remainder of its demand for compensatory damages--for attorneys' fees and other expenses incurred in obtaining reversal of the Commission's order denying the application for refund and waiver. 46 The District Court treated this effort as a run-of-the-mill request for reimbursement of those items and deemed them nonrecoverable as a matter of law. 47 We conclude that the court erred in doing so. 18 Consideration of Nepera's damages claim requires initially an identification of the body of law controlling. Although the parties have argued the issue pro and con as one of general federal law, 48 that treatment is the product of faulty analysis. Nepera invoked the jurisdiction of the District Court solely on the ground of diverse citizenship, 49 and no other basis of federal-court jurisdiction is apparent. That means that Nepera's claim is to be measured by local rather than federal law. As the Supreme Court has said, 19 in an ordinary diversity case where the state law does not run counter to a valid federal statute or rule of court, and usually it will not, state law denying the right to attorney's fees or giving a right thereto, which reflects a substantial policy of the state, should be followed. 50 20 Moreover, as the Court has made equally plain, local law governs irrespective of whether that law is legislatively or judicially created. 51 21 Our first step, then, is to ascertain the jurisdiction whose law is controlling, and for that purpose we must apply the choice-of-law rules of the District of Columbia. 52 Those rules call for an evaluation and a balancing of the interests of all jurisdictions having some stake in the litigation, and for selection of the law of the jurisdiction bearing the most significant relationship to the tortious occurrence and the litigants. 53 Applying the criteria approved by the District's highest court, 54 District law seems the choice properly to be made. We recognize some degree of involvement of the interests of the states in which the present litigants respectively are incorporated, maintain their principal places of business, and normally conduct their operations. But the dominant factor in the case before us is that the acts and omissions of Sea-Land allegedly constituting negligence pertained to a tariff and an application for relief from freight overcharges, both of which were filed in the District of Columbia. Given the facts of this case, the District's interest as the place where the alleged negligence occurred 55 easily surpasses any interest of the states to which the one party or the other bore some other kind of totally unconnected relationship. We thus conclude that the District's substantive law must govern disposition of the tort issues in this case. 22 District law incorporates the American Rule, under which a party may not be awarded attorneys' fees unless a statute or enforceable contract provides for an award of such fees. 56 Nepera has not steered us toward any statutory or contractual provision assisting its effort. Instead, Nepera relies upon 57 an exception to the American Rule, recognized by many jurisdictions, permitting a plaintiff to recover from the defendant reasonable attorneys' fees incurred in prior litigation against a third party where they were a natural consequence of the defendant's wrongful act. 58 23 This exception has been applied both where the defendant breached a contract 59 and where, as alleged here, the defendant committed a tort, 60 and thereby compelled the plaintiff to litigate against a third party. Underlying the exception is recognition that the plaintiff's expenditures in the earlier suit are logically indistinguishable from other monetary losses caused by tortious conduct for which compensatory damages will lie. 61 The effect of the exception is to put the plaintiff, who found it necessary to litigate with a third party as a result of the defendant's wrong, in the same position he would have occupied had he not been forced to do so. The exception permits the plaintiff to recover all of his losses flowing from the defendant's malfeasance--except, generally speaking, attorneys' fees accruing in the suit in which the recovery is sought 62 --and treats as a mere fortuity the fact that the plaintiff's damages arose from the prior litigation with the third party. 24 District law recognizes a cause of action for wrongful involvement in litigation, which essentially is an analogue of the third-party exception to the American Rule. 63 The District allows a plaintiff in a tort action to recover, as damages, reasonable attorneys' fees incurred in earlier litigation with a third person if the natural and proximate consequences of the defendant's tortious act were to involve the plaintiff in [that] litigation.... 64 All that is required is incurrence of the fees in prior litigation with a third party precipitated by the tortious conduct of the present defendant. 65 25 These principles of District of Columbia law enable Nepera to pursue its claim against Sea-Land for the attorneys' fees incurred by Nepera in the litigation with the Commission respecting the freight overcharges. Nepera asserts that Sea-Land's conduct--its refusal to challenge the Commission's adverse decision--effectively forced Nepera to launch and maintain an ultimately successful proceeding in this court for review and reversal of that decision. Had Sea-Land been willing to assume that burden, Nepera would not have had to pay the fees amassed in that proceeding. 66 An award to Nepera in the amount of its financial outlay would merely elevate it to the position--except for expenses generated in the instant case--that it would have been in had Nepera not been required to litigate against the Commission. Summary judgment on this claim was therefore inappropriate, and Nepera must now be afforded an opportunity to establish its right to recovery. 67 IV. PUNITIVE DAMAGES 26 The District Court granted summary judgment for Sea-Land on Nepera's demand for punitive damages not only in the belief that Section 18(b)(3) of the Shipping Act affords the exclusive remedy for Nepera's grievances, but also in the view that Nepera had not put forth facts sufficient to legally support an award of such damages. 68 We have already addressed the court's Section 18(b)(3) theory and found it erroneous. 69 We affirm dismissal of the claim for punitive damages, however, on the ground that, as a matter of law, Nepera failed to establish an adequate factual foundation for such an award. 70 27 Punitive damages may be assessed to penalize a defendant for outrageous conduct, and to deter him and others from similar activity in the future. 71 Such damages--also aptly termed exemplary damages--are appropriate when the defendant's misbehavior demonstrates a particularly reckless disregard for the rights of another. 72 Under the law of the District of Columbia, which we are duty bound to accept, 73 even gross negligence is insufficient; 74 punitive damages are awardable only where a defendant's conduct is  'willful and outrageous,' constitute[s] 'gross fraud,' or [is] 'aggravated by evil motive, actual malice, deliberate violence or oppression ...'  75 28 In taking stock of the District Court's grant of summary judgment, we must determine whether Nepera raised a genuine issue as to any material fact 76 and whether the substantive law was correctly applied. 77 In determining whether there was such an issue, we must resolve all inferences following reasonably from the evidence in favor of Nepera, 78 and we may not affirm unless the propriety of the summary disposition is clear. 79 Because an award of summary judgment reflects a determination of law rather than fact, we do not defer to the District Court's conclusions but consider the matter de novo. 80 29 On this appeal, Nepera insists that Sea-Land promised to protect the pre-1978 rate for picolines; that it knowingly submitted a deficient application for leave to waive the overcharges; that, by deliberately filing the application on the last day possible, it foreclosed any chance of correcting it; that it disavowed any responsibility for appealing the Commission's adverse decision; and that this chain of events demonstrated a reckless disregard for the effects of its actions on Nepera. 81 In opposing Sea-Land's motion in the District Court, Nepera relied primarily on an affidavit submitted by Edith Sorderberg, its Export Traffic Coordinator, 82 to support these characterizations of Sea-Land's behavior. Sorderberg averred that prior to any Commission action on the Section 18(b)(3) application, William Eisenlohr, Sea-Land's Manager for Specific Commodities, told her that Sea-Land was aware that the $162.25 per weight-ton rate that Sea-Land had utilized in connection with the application did not correspond precisely to the earlier $6.85 per hundredweight rate. 83 As Sorderberg recalled the conversation, Eisenlohr said that the difference was 'negligible--just a few cents per 100 lbs.' and that the difference was probably due to the fact that the rate was now on a weight-ton basis rather than a 100 lbs. basis. 84 The affidavit also reported that after the Commission's administrative law judge had denied Sea-Land's rate-correction application, 85 Sea-Land representatives conceded that they had round[ed] up 86 in calculating the new rate, and thus had made mistakes in [the] handling of this matter before the FMC ... 87 On the basis of these purported admissions, and the fact that Sea-Land was a party to an earlier Commission proceeding assertedly prohibiting any deviation from a promised rate in a Section 18(b)(3) application, Munoz y Cabrero v. Sea-Land Service, Inc., 88 Nepera contends that there was a genuine issue of fact precluding summary judgment: whether Sea-Land had utilized the disparity in rates in a deliberate attempt to secure an adverse Commission decision enabling it to escape the overcharge relief promised Nepera. 89 30 We reject this tortured attempt to create issues of fact where none exist. It would not be reasonable 90 to infer that Sea-Land purposely filed a faulty application from the bare fact that Sea-Land officials acknowledged a negligible difference resulting from rounding up. 91 Any such inference would be especially anomalous given the fact that this court itself concluded, after reviewing Sea-Land's computations, that the very difference Nepera complains of did not reflect a failure to file the rate that Sea-Land and Nepera had agreed upon. 92 We think it would be equally unreasonable to infer an evil motive from Sea-Land's involvement in Munoz y Cabrero. 93 Because this court has previously characterized that proceeding as both legally distinct 94 and factually different 95 from the one launched by the application submitted on behalf of Nepera, we do not see how it aids Nepera's cause. In the absence of any genuine issue of material fact as to whether the rate incorporated into the Section 18(b)(3) application was the product of malicious or atrocious conduct, any claim for punitive damages predicated upon Sea-Land's last-day filing of the application 96 or its refusal to seek reversal of the adverse Commission decision 97 must be deemed insufficient as a matter of law. 98 Accordingly, we sustain the District Court's determination that summary judgment for Sea-Land on Nepera's punitive-damages claim was warranted.