Court Opinion

ID: 167183
Source: CourtListenerOpinion
Date Created: 2010-08-14 09:50:50+00
Date Added: 2024-06-11T09:13:37.355535
License: Public Domain

F I L E D
                                                                  United States Court of Appeals
                                                                          Tenth Circuit
                    UNITED STATES COURT OF APPEALS
                                                                          March 14, 2006
                                 TENTH CIRCUIT                          Elisabeth A. Shumaker
                                                                           Clerk of Court

 RICKY EUGENE CLARK,
 individually and on behalf of all others
 similarly situated,                                    No. 04-1315

               Plaintiff-Appellant,
          v.                                            (D. Colorado)
 STATE FARM MUTUAL                               (D.C. No. CIV-00-B-1841)
 AUTOMOBILE INSURANCE
 COMPANY, an Illinois corporation,

               Defendant-Appellee.

                           ORDER AND JUDGMENT *

Before HENRY, HOLLOWAY, and O’BRIEN, Circuit Judges.

      On July 18, 1996, an automobile insured by State Farm Mutual Automobile

Insurance Company (“State Farm”) struck Ricky Eugene Clark, a pedestrian. Mr.

Clark filed a class-action suit against State Farm to collect extended personal

injury protection (“PIP”) benefits under the Colorado Auto Accident Reparations

      *
        This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. The court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
Act (“CAARA”). See C OLO . R EV . S TAT . §§ 10-4-701 to 10-4-726 (2002). 1 He

believed that State Farm’s automobile insurance policy did not conform to

CAARA and should be reformed to provide added PIP benefits. Protracted

litigation ensued, and the district court eventually concluded that Mr. Clark was

entitled to $200,000 in benefits, with the policy reformation taking effect on the

date of the court’s order–December 19, 2003. See Clark v. State Farm Mut. Auto.

Ins. Co., 292 F. Supp. 2d 1252, 1270 (D. Colo. 2003) (“Clark II”). We recently

affirmed the district court. See Clark v. State Farm Mut. Auto. Ins. Co., 433 F.3d

703 (10th Cir. 2005) (“Clark III”).

      After the district court’s December 2003 order, Mr. Clark also filed a

motion for attorney fees, contending that his successful contract reformation

claim entitled him to attorney fees under CAARA. The district court denied

attorney fees, and Mr. Clark now challenges that decision on appeal. We exercise

jurisdiction under 28 U.S.C. § 1291 and affirm the district court.

                                I. BACKGROUND

      1
        Unless otherwise noted, all references to statutes in this opinion are to
C OLO . R EV . S TAT . §§ 10-4-701 to 10-4-726 (2002). CAARA was repealed
effective July 1, 2003, but the parties agree its provisions apply to the 1996
accident.

                                         -2-
      We recently described the facts of this case and need not repeat them in

detail here. See Clark III, 433 F.3d at 706-09. Following the 1996 accident, Mr.

Clark brought various claims against State Farm, including claims for reformation

of contract and for breach of contract for failure to pay PIP benefits. He

maintained that the coverage provided by State Farm’s policy did not conform to

state law after the decision by the Colorado Court of Appeals in Brennan v.

Farmers Alliance Mutual Insurance Co., 961 P.2d 550 (Colo. Ct. App. 1998).

The federal district court dismissed all claims.

      On appeal, we reversed the district court’s dismissal of certain claims,

concluding that Brennan required reformation of State Farm’s policy to provide

extended PIP benefits for injured pedestrians like Mr. Clark. Clark v. State Farm

Mut. Auto. Ins. Co., 319 F.3d 1234 (10th Cir. 2003) (“Clark I”). We remanded

the case for the district court to determine an effective date of reformation and the

amount of extended PIP benefits, if any, to which Mr. Clark was entitled. Id. at

1241-43. On remand, the district court concluded that (1) the date of its

order–December 19, 2003–was the appropriate reformation date, and (2) Mr.

Clark was entitled to a statutory aggregate cap of $200,000 in benefits. See Clark

II, 292 F. Supp. 2d at 1270.

      Mr. Clark and State Farm then appealed various decisions of the district

court’s Clark II order. Mr. Clark appealed (1) the effective date of reformation,

                                         -3-
(2) the district court’s application of an aggregate cap to the policy, and (3) the

policy’s reformation only for pedestrians, instead of for all eligible insured

persons. State Farm cross-appealed, challenging the amount of PIP benefits to

which Mr. Clark should be entitled after reformation. We recently affirmed the

district court on all issues raised. See Clark III, 433 F.3d at 714.

      Soon after the Clark II order of December 2003, Mr. Clark also filed a

motion for attorney fees under CAARA, which the district court denied. See

Aplt’s App. vol. II, at 417-19 (Order, filed July 16, 2004). In this appeal, Mr.

Clark now challenges the district court’s order denying him attorney fees incurred

to litigate his contract reformation claim against State Farm. 2

                                 II. DISCUSSION

      “In the absence of a statute, court rule, or private contract to the contrary,

attorney fees are not recoverable by a prevailing party in either a contract or a tort

action.” Adams v. Farmers Ins. Group, 983 P.2d 797, 801 (Colo. 1999) (“Adams

II”). Section 708 of CAARA, however, provided an insured with remedies for

      2
       This attorney-fees appeal was orally argued in conjunction with the merits
appeals to Clark II. See Clark III, 433 F.3d at 703. We previously certified to
the Colorado Supreme Court a question of state law that we believed was
determinative to Mr. Clark’s claim for attorney fees; unfortunately, the court
respectfully declined to answer the question. Left to our own devices, we will do
the best we can to expound state law from our reading of the cases.

                                          -4-
overdue payments to ensure the timely resolution of claims for PIP benefits. That

section, entitled “Prompt payment of direct benefits,” provided in part:

      (1)          Benefits for any period are overdue if not paid within
                   thirty days after the insurer receives reasonable proof of
                   the fact and amount of expenses incurred during that
                   period. . . . In the event that the insurer fails to pay such
                   benefits when due, the person entitled to such benefits may
                   bring an action in contract to recover the same.

                   ...

      (1.5)        If a dispute arises under subsection (1) of this section, . .
                   . the insured, the injured person entitled to benefits, or the
                   insurer may bring an action in contract in the appropriate
                   court to resolve the dispute. . . .

                   ...

      (1.7)(c)     In determining the amount of attorney fees, if any, to be
                   awarded to the insured the arbitrator or court shall
                   consider the following:
                   (I)   The award of attorney fees to the insured shall be in
                         direct proportion to the degree by which the insured
                         was successful in the proceeding.

§ 708 (emphasis added).

      In January 2004, Mr. Clark filed a motion for attorney fees. He contended

that he was entitled to judgment for his costs and attorney fees as a result of the

entry of the Clark II order. The district court concluded that section 708 did not

authorize attorney fees to Mr. Clark because his claims did not concern a failure

to pay “overdue” PIP benefits. See § 708(1). Instead, the court reasoned that he

prevailed under Clark II on his contract reformation claim, with reformation

                                         -5-
effective December 19, 2003. “Thus, the first date Mr. Clark was entitled to the

damages awarded in this case was that same day.” Aplt’s App. vol. II, at 418.

The district court further found that the language of the State Farm policy did not

provide Mr. Clark with a right to attorney fees. Id. at 418-19.

      On appeal, Mr. Clark again maintains that his successful contract

reformation claim entitles him to attorney fees under CAARA and the terms of the

State Farm policy. We review de novo “any statutory constructions or legal

conclusions that provide a basis for the award” of attorney fees, “[a]lthough the

ultimate decision to award fees rests within the district court’s discretion.”

Phelps v. Hamilton, 120 F.3d 1126, 1129 (10th Cir. 1997).

      Mr. Clark first argues that the district court should have reviewed his

request for fees under CAARA’s subsection 708(1.7), which specifically deals

with attorney fees, rather than subsection 708(1), which allows a claimant to bring

an action for “overdue” benefits. A successful contract reformation claim,

according to Mr. Clark, entitles him to seek attorney fees without regard to

whether the benefits were due, overdue, or denied. He further contends that the

State Farm policy and subsection 708(1.5) entitle him to attorney fees. Both

provide that “[i]f a dispute arises,” the insured “may bring an action in contract in

the appropriate court to resolve the dispute.” § 708(1.5); Aplt’s App. vol. I, at

51, § II(b)(5) (Amendment 6090RR).

                                         -6-
      We are not convinced by Mr. Clark’s assertions. First, and most

importantly, entry of the Clark II order did not immediately provide entitlement to

attorney fees under section 708 because Mr. Clark did not prevail on a claim for

“overdue” payments. Instead, the district court reformed the State Farm policy to

make additional PIP benefits available beginning on the date of the order, which

was December 19, 2003. No additional PIP benefits were owed, or “due,” to Mr.

Clark until the reformation became effective. The PIP benefits could not have

been “overdue” as of the order’s date if they had just become “due” that day. See

Clark I, 319 F.3d at 1244 (“[I]f reformation is ordered to correspond to the date

of entry of the order of reformation, there would be no pre-existing duty to pay

extended PIP benefits.”) (referencing 2 L EE R. R USS & T HOMAS F. S EGALLA ,

C OUCH ON I NSURANCE § 26:3 (3d ed. 1995) (hereinafter “C OUCH ”)).

      Colorado law provides that, in an insured’s conventional claim for attorney

fees, we first determine if “the insurer failed to pay such benefits when due.”

Adams v. Farmers Ins. Group, 958 P.2d 502, 504 (Colo. Ct. App. 1997) (“Adams

I”). “Without this predicate act [i.e., the insurer’s failure to pay PIP benefits

when due], the statutory claim fails, and, with it, the court’s authority to award

fees to the insured under § 10-4-708(1.7)(c).” Id.; see also Adams II, 983 P.2d at

804 (Martinez, J., concurring) (“[A]ny attorney fees award [under section 708]

must logically be understood to rest, albeit indirectly, upon the insurer[’s] failure

                                         -7-
to timely pay benefits–the factual and legal predicate for the underlying action.”).

Clark II did not provide Mr. Clark with the “legal predicate” under subsection

708(1) to request attorney fees; rather, that order merely entitled him to extended

PIP benefits beginning on December 19, 2003.

      Second, Mr. Clark’s reliance on the Colorado Supreme Court’s decision in

Adams II is misplaced. There, a jury awarded PIP benefits to the insureds but

inconsistently found in a special interrogatory that the PIP benefits were not

overdue. Adams II, 983 P.2d at 800. Following the jury verdict, the trial court

awarded attorney fees to the insureds. On appeal, the insurer only challenged the

insureds’ entitlement to attorney fees and “did not appeal the jury’s award of . . .

PIP benefits.” Id. A state appellate court reversed the trial court’s order granting

attorney fees. See Adams I, 958 P.2d at 504-05. The Colorado Supreme Court,

however, concluded that the insureds could recover attorney fees under subsection

708(1.7), despite the jury’s finding that benefits were not “overdue.” “[A]bsent

an appeal of the PIP benefits award, the threshold requirement for entitlement to

fees under the Act is whether the party succeeded monetarily in the proceeding

below.” Adams II, 983 P.2d at 803 (emphasis omitted). “[W]here the merits of

the underlying PIP benefits claims are not appealed, courts may not reevaluate

whether the requisite elements of such a claim were present.” Id. at 802.

                                          -8-
      We read Adams II to be relevant to a different set of facts than we have

here. Its holding is applicable when an insurer opts not to appeal the merits of an

insured’s successful PIP benefits claim–which by its definition under subsection

708(1) requires that benefits were overdue–despite a jury’s special interrogatory

that the benefits were not overdue. In the appeal before us, the procedural

posture and the Clark II holdings are wholly different from Adams II. In

December 2003, the district court concluded that reformation of the State Farm

policy necessarily entitled Mr. Clark to additional PIP benefits. The court also

decided, based on equitable factors, that the date of its order should be the

effective reformation date. Therefore, as we stated earlier, no PIP benefits were

“overdue” as of December 19, 2003. See Clark I, 319 F.3d at 1244 (“The fact

that the insured may be entitled to obtain a reformation of the policy does not

impose any obligation upon the insurer to conform to such ‘reformed’ policy

before a court has made such reformation.” (quoting C OUCH § 26:3)). Further,

unlike the Adams litigation, on appeal both parties raised claims on the merits

here. Mr. Clark appealed the effective date of reformation, the application of an

aggregate cap to the policy, and the scope of the policy’s reformation only to

include pedestrians; State Farm appealed the level of benefits to which Mr. Clark

was entitled.

      Given the effective reformation date, it is irrelevant to consider whether

State Farm actually appealed the effective date or any other part of the district

                                          -9-
court’s December 2003 order. Indeed, for our purposes, the pertinent part of the

district court’s order–the effective date of reformation, which we recently upheld

on appeal–favored State Farm, and the insurer had no reason to appeal that. It

makes little sense to encourage State Farm to appeal a district court’s decision

only so it can be in a more favorable position to avoid payment of attorney fees.

In Adams II, though, the proceedings were much different. In that context, an

appellate court’s re-examination of the “factual underpinnings of a verdict in

favor of insureds,” even though the insurers did not appeal, “clearly favors the

position of insurers” because the insurers did not have “the expense of appealing

the merits of the underlying claim.” Adams II, 983 P.3d at 803. Therefore, while

it was relevant to consider whether the insurers actually appealed the underlying

claim in Adams, here we need not examine the nature of State Farm’s appeal

when considering whether attorney fees are appropriate.

      Third, Mr. Clark cites dicta from Adams II to argue that State Farm’s denial

of his PIP benefits claims entitles him to attorney fees under CAARA. In Adams

II, the court stated in a footnote: “We also note, without deciding, that it is

possible to reconcile the jury’s monetary verdict with its finding that the benefits

were not ‘overdue’ if one assumes that the [insurer] erroneously denied [the

insureds’] claims for the $22,000 in PIP benefits.” 983 P.3d at 804 n.8. The

Colorado Supreme Court admittedly did not decide that an insurer’s denial of a

claim would be a sufficient legal predicate to recover PIP benefits under

                                          -10-
subsection 708(1). Further, it specifically noted elsewhere that “the payment of

PIP benefits must have been ‘overdue’ before an insured may bring a cognizable

claim under [CAARA].” Id. at 801. Regardless of any difference between an

insurer’s failure to pay PIP benefits when due and its denial of such benefits,

judicial reformation of State Farm’s policy did not obligate the insurer to pay

promptly–or not deny–Mr. Clark’s PIP benefits until December 19, 2003.

      Fourth, we do not adopt Mr. Clark’s position that entitlement to attorney

fees is controlled only by whether an insured succeeds in prosecuting his case.

Section 708 is entitled “Prompt payment of direct benefits,” and it “establishes a

limited time frame in which insurance companies must quickly pay claims due

under insureds’ personal injury protection provisions of their automobile

insurance contracts.” State Farm Mut. Auto. Ins. Co. v. Broadnax, 827 P.2d 531,

536 n.13 (Colo. 1992) . We distinguish this provision from other states’ no-fault

statutes that expressly provide attorney fees to any successful claim by an insured

against an insurer. See, e.g., F LA . S TAT . § 627.428(1) (explaining that an insurer

is liable for fees in a proceeding wherein an insured prevails against the insurer);

id. § 627.736(8) (applying the attorney-fee provision of section 627.428 to PIP

benefits claims).

      We further agree with the district court that the State Farm policy and

subsection 708(1.5), which both allow the insured to bring an action in contract if

a dispute arises, in no way mandate the recovery of attorney fees. The State Farm

                                          -11-
policy simply specifies that the payment of benefits to the insured will follow

CAARA and authorizes any suit to resolve a benefits dispute. Moreover, the

plain language of subsection 708(1.5) references “a dispute aris[ing] under

subsection (1),” and we have previously concluded that Mr. Clark does not have a

predicate claim under subsection 708(1) because his benefits were not “overdue.”

      Because we affirm the district court on other grounds, we need not address

CAARA’s detailed notice requirements to seek attorney fees. See § 708(1.7)(a)

(outlining certain requisite procedures for a claimant to follow when claiming

benefits and attorney fees).

                               III. CONCLUSION

      Accordingly, we AFFIRM the district court’s order denying Mr. Clark’s

motion for attorney fees. We also DENY as moot State Farm’s motion for leave

to file a response to Mr. Clark’s supplemental brief regarding the timely filing of

notice of claims.

                                Entered for the Court,

                                Robert H. Henry
                                Circuit Judge

                                        -12-