Court Opinion

ID: 156331
Source: CourtListenerOpinion
Date Created: 2010-08-14 04:36:49+00
Date Added: 2024-06-11T12:39:37.136886
License: Public Domain

F I L E D
                                                                   United States Court of Appeals
                                                                           Tenth Circuit
                     UNITED STATES COURT OF APPEALS
                                                                          MAY 12 1998
                            FOR THE TENTH CIRCUIT
                                                                      PATRICK FISHER
                                                                               Clerk

    DONNA DAVIS,

                Plaintiff-Appellee,

    v.                                                   No. 97-3355
                                                    (D.C. No. 95-CV-4190)
    PRUDENTIAL PROPERTY AND                                (D. Kan.)
    CASUALTY INSURANCE
    COMPANY,

                Defendant-Appellant.

                            ORDER AND JUDGMENT *

Before TACHA, LOGAN, and LUCERO, Circuit Judges.

         After examining the briefs and appellate record, this panel has determined

unanimously that oral argument would not materially assist the determination of

this appeal. See Fed. R. App. P. 34(a); 10th Cir. R. 34.1.9. The case is therefore

ordered submitted without oral argument.

*
      This order and judgment is not binding precedent, except under the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.
      Defendant Prudential Property and Casualty Insurance Company

(Prudential) appeals from the district court’s order awarding attorney’s fees

to plaintiff Donna M. Davis. We affirm.

      The underlying facts of this case are set out in our unpublished decision on

Prudential’s previous appeal, Davis v. Prudential Property & Casualty Insurance

Company, No. 97-3137, 1998 WL 51734, at *1-*2 (10th Cir. Feb. 2, 1998).

In that decision, we affirmed the district court’s order granting Davis summary

judgment in her action against Prudential for underinsured motorist benefits.

See id. at *2, *4. After the district court awarded her summary judgment, Davis

filed a motion seeking an award of attorney’s fees pursuant to Kan. Stat. Ann.

§ 40-256, which provides in pertinent part:

      That in all actions hereafter commenced, in which judgment is
      rendered against any insurance company . . . if it appear from the
      evidence that such company . . . has refused without just cause or
      excuse to pay the full amount of such loss, the court in rendering
      such judgment shall allow the plaintiff a reasonable sum as an
      attorney’s fee for services in such action, including proceeding on
      appeal, to be recovered and collected as a part of the costs[.]

      The district court found that Davis was entitled to attorney’s fees under

§ 40-256. It concluded that Prudential had not denied coverage in reliance upon

a “good faith legal controversy over liability,” but rather had done so in an

attempt “to avoid the consequences of its own tactical miscalculation.” Davis v.

Prudential Property & Cas. Ins. Co., 985 F. Supp. 1251, 1254 (D. Kan. 1997).

                                         -2-
      Davis’s right to recover attorney’s fees depends upon state law. See Gobbo

Farms & Orchards v. Poole Chem. Co., 81 F.3d 122, 123 (10th Cir. 1996). Our

standard of review, however, is a matter of federal law. “We review a district

court’s award of attorney’s fees for abuse of discretion. The district court’s

factual findings are only reversed if clearly erroneous. Legal conclusions and

statutory analysis are reviewed de novo.” Parks v. American Warrior, Inc.,

44 F.3d 889, 892 (10th Cir. 1995) (further citations omitted).

      In determining the appropriateness of the fee award, we will not revisit

those legal and factual conclusions of the district court we upheld in the previous

appeal. They are law of the case. See Rohrbaugh v. Celotex Corp., 53 F.3d 1181,

1183 (10th Cir. 1995) (discussing law of the case doctrine).

      “[U]nder Kansas law the accepted test for determining the existence of ‘just

cause or excuse’ for purposes of § 256 is whether the insurance company’s refusal

is based upon a bona fide controversy over policy coverage.” Glickman, Inc. v.

Home Ins. Co., 86 F.3d 997, 1002 (10th Cir. 1996) (citing cases). “Bona fide

controversy has been further defined to mean a position which is not frivolous or

patently without reasonable foundation.” Id.

      Prudential asserts that it had a bona fide and reasonable ground for

contesting Davis’s claim. Prudential argues that Davis’s failure to give it sixty

days’ notice before the order approving her settlement with the tortfeasor was

                                         -3-
entered, as required by Kan. Stat. Ann. § 40-284(f), prevented her judgment

against the tortfeasor from becoming binding on Prudential. Because there was

no binding judgment, it argues, it was not required to pay the underinsured

motorist claim. Prudential further asserts that this issue was one of first

impression, thus barring an award of attorney’s fees. See Garrison v. State Farm

Mut. Auto Ins. Co., 894 P.2d 226, 235 (Kan. Ct. App.), aff’d, 907 P.2d 891

(Kan. 1995); Nicklin v. Harper, 860 P.2d 31, 39-40 (Kan. Ct. App. 1993)

(holding attorney’s fee award under § 40-256 is inappropriate where insurance

company presents an issue of first impression).

      In Prudential’s previous appeal, we rejected this argument, and held that

Prudential was liable to Davis for underinsured motorist benefits. We now

further determine that the argument did not provide Prudential with a bona fide

reason for failing to pay benefits. Although, as Prudential argues, the order

approving the settlement was entered before it should have been, this factor is

inconsequential in light of the facts and circumstances of this case. As detailed

in our decision on the previous appeal, Prudential was barred from challenging

the settlement agreement, because it had notice of but failed to timely intervene

in Davis’s lawsuit against the tortfeasor. See Davis, 1998 WL 51734, at *2.

Moreover, Prudential forfeited its right of subrogation by making an improper

tender of substitutionary proceeds to itself and Davis. See id. at *3; see generally

                                          -4-
Kan. Stat. Ann. § 40-284(f). The premature entry of the order approving the

settlement agreement did not provide it with just cause or excuse for its failure

to pay benefits.

      We also reject Prudential’s contention that the Kansas Court of Appeals

decision in Dalke v. Allstate Ins. Co., 935 P.2d 1067 (Kan. Ct. App. 1997),

gave it a nonfrivolous basis for denying benefits in this matter. See Davis,

1998 WL 51734, at *3 (rejecting Dalke argument on the merits). Dalke held that

an underinsured motorist who failed to provide any notice to her underinsurance

carrier lost her right to obtain benefits pursuant to § 40-284(f), regardless of

whether she could show that the insurance company suffered prejudice from the

lack of notice. See Dalke, 935 P.2d at 1072. Dalke was published after

Prudential had made its decision to deny benefits and after the parties had

submitted their summary judgment materials in this case. Prudential could not

have relied upon a good faith interpretation of Dalke to justify denial of benefits.

Moreover, Dalke does not address the circumstances at issue here; in Dalke the

insured gave no notice at all to her insurance carrier, and the carrier did not

mismanage its own subrogation rights as Prudential did in this case.

      Prudential has failed to show that the district court abused its discretion

in awarding Davis attorney’s fees. Having determined that an attorney’s fee

                                          -5-
award was appropriate, we next address Prudential’s arguments concerning the

amount of fees awarded. In its order, the district court stated the following:

      Plaintiff submits statements of services documenting 163.5 attorney
      hours and 88.2 law clerk hours. These totals appear somewhat
      excessive for this case, particularly in light of the numerous vague
      entries. Nevertheless, it is clear that plaintiff’s request for $15,000
      is significantly below what the lodestar calculation would produce
      at the number of hours submitted. The court finds it reasonable to
      award fees for 120 attorney hours rather than the requested 163.5
      attorney hours and 88.2 law clerk hours. At an hourly rate of
      $125.00, that still results in an award of $15,000.

Appellant’s Supp. App. 641-42.

      Prudential asserts that the district court abused its discretion by failing to

apply a lodestar calculation. The calculation of attorney’s fees in a diversity case

is determined with reference to state law. See Public Serv. Co. v. Continental

Cas. Co., 26 F.3d 1508, 1520 (10th Cir. 1994); see generally Mangold v.

California Pub. Util. Comm’n, 67 F.3d 1470, 1478 (9th Cir. 1995). We have

found no Kansas case which applies the lodestar method to calculate the proper

amount of attorney’s fees under Kan. Stat. Ann. § 40-256. The district court did

not abuse its discretion by failing to apply the lodestar calculation.

      Prudential argues, alternatively, that the district court did apply a lodestar

calculation, but did so incorrectly, requiring reversal. We disagree. Although the

court’s reliance on the number of hours submitted rather than “the total number

of hours reasonably expended,” see Phelps v. Hamilton, 120 F.3d 1126, 1131

                                          -6-
(10th Cir. 1997), might require reversal if this were a case in which the lodestar

method were used to arrive at an ultimate figure, the district court here merely

used the lodestar calculation as a gauge of reasonableness. The district court

arrived at a reasonable hourly rate ($125) and a reasonable number of hours on

which to base the award (120), thus fulfilling the essential “reasonableness”

function of the lodestar calculation. See generally Pennsylvania v. Delaware

Valley Citizens’ Council, 478 U.S. 546, 563-66 (1986) (discussing lodestar

analysis).

      Under Kansas law, the issue is whether the award provided “fair and

reasonable compensation” to the insured’s attorney. See Evans v. Provident Life

& Accident Ins. Co., 815 P.2d 550, 561 (Kan. 1991). The trial court is presumed

to be an expert in the area of attorney’s fees, and can draw upon this expertise in

evaluating their reasonableness. See id. at 562. The party challenging the

attorney’s fee award must show that the award is unreasonable. See id.

      This brings us to Prudential’s final argument, that the attorney’s fee award

is unreasonable. Prudential points out the district court’s comments about

excessive hours and vague entries. But Prudential ignores the fact that the district

court addressed these concerns by completely eliminating the 88.2 law clerk hours

for which Davis sought payment, and by reducing the number of attorney hours

requested by more than twenty-five percent.

                                         -7-
      Prudential further argues that $15,000 is an extraordinary amount of

attorney’s fees for what it deems a simple case based on a brief complaint and

decided on summary judgment without discovery. Prudential’s argument is belied

by its own summary judgment appendices filed in this court, which include over

six hundred pages. We conclude that the district court did not abuse its discretion

in approving the attorney’s fee award of $15,000.

      AFFIRMED.

                                                    Entered for the Court

                                                    James K. Logan
                                                    Circuit Judge

                                        -8-