Court Opinion

ID: 161885
Source: CourtListenerOpinion
Date Created: 2010-08-14 07:20:01+00
Date Added: 2024-06-11T17:24:38.480097
License: Public Domain

F I L E D
                                                                    United States Court of Appeals
                                                                            Tenth Circuit
                     UNITED STATES COURT OF APPEALS
                                                                            JAN 9 2002
                            FOR THE TENTH CIRCUIT
                                                                      PATRICK FISHER
                                                                                Clerk

    ROGER MURRAY, Husband;
    HOPE MURRAY, Wife,

                Plaintiffs-Appellees,

    v.                                              Nos. 00-5194 & 00-5233
                                                    (D.C. No. 99-CV-128-B)
    FIRST MARINE INSURANCE                                (N.D. Okla.)
    COMPANY,

                Defendant-Appellant.

                             ORDER AND JUDGMENT           *

Before KELLY , BALDOCK , and LUCERO , Circuit Judges.

         This appeal stems from an incident involving a boat belonging to plaintiffs

Roger and Hope Murray (“the Murrays”). While maneuvering his boat back to the

launch point, Mr. Murray’s course was crossed by another boat which came upon

*
      After examining the briefs and appellate record, this panel has determined
unanimously to grant the parties’ request for a decision on the briefs without oral
argument. See Fed. R. App. P. 34(f); 10th Cir. R. 34.1(G). The cases are
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      This order and judgment is not binding precedent, except under the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.
Murray so quickly that he had no recourse but to cross the wake created by the

second boat. Murray’s boat became airborne and upon re-entering the water

experienced engine failure. The Murrays eventually brought suit against their

insurer, defendant First Marine Insurance Company (“First Marine”). A jury

awarded the Murrays $5800 in damages, and the court awarded plaintiffs $2100 in

costs and $33,000 in attorneys’ fees. In case No. 00-5194 First Marine appeals

from the verdict, and in companion case No. 00-5233 First Marine appeals the

award of attorneys’ fees. We affirm both judgments.

                                          I

      First Marine offers five reasons for this Court to set aside the jury verdict:

the district court gave an erroneous jury instruction, the plaintiff failed to submit

a statutorily required proof of loss, the court improperly struck the testimony of

one of First Marine’s experts, the court failed to grant First Marine’s motion of

judgment as a matter of law, and the Oklahoma statute under which the Murrays

were awarded prejudgment interest is unconstitutional.

                                          A

      We are urged to set aside the jury verdict because of an alleged error in one

of the instructions given to the jury. Before we can review this issue, however,

we must be satisfied that First Marine properly preserved it by lodging a

                                         -2-
contemporaneous objection in the district court. Our record review suggests the

lack of proper objection.

      In support of its contention that it objected to the offending instruction,

First Marine directs our attention to a portion of the transcript in which the

district court and the parties’ attorneys were discussing the instructions generally.

The discussion at pages 422 through 425 of appellant’s appendix, however, does

not establish First Marine’s objection. In that colloquy, the court and the

attorneys discussed the propriety of giving two standard contract instructions

dealing with construction in favor of a promisee and against a drafter. Whether

these instructions were appropriate depended on whether the insurance policy was

ambiguous. After discussing the provisions of the policy relating to accidental

loss and mechanical breakdown, the court stated that it had interpretive problems

with the language and was inclined to give the two standard instructions. In the

materials identified to us, First Marine’s counsel did not object to what eventually

became an instruction on causation.

      We are presented with only portions of the transcript, and given that we are

not required to comb through the evidence to help make First Marine’s case,      SEC

v. Thomas , 965 F.2d 825, 827 (10th Cir. 1992), without a contemporaneous

objection we are not required to review the propriety of the challenged

                                          -3-
instruction. Hidalgo Props., Inc. v. Wachovia Mortgage Co.       , 617 F.2d 196,

200–01 (10th Cir. 1980).

                                            B

      First Marine next argues that the Murrays should not have been awarded

prejudgment interest because they never submitted a proof of loss as required by

title 36, section 3629(B) of the Oklahoma Statutes,   1
                                                          and that this statutory

requirement cannot be waived. Our recent opinion in        Stauth v. National Union

Fire Insurance Co. , 236 F.3d 1260 (10th Cir. 2001), forecloses this argument.

      In Stauth , the insureds were covered by two directors and officers liability

policies, with the newer policy providing greater coverage. When the directors

and officers (the plaintiffs) were sued in two class action lawsuits, they notified

the defendant insurer of the claims and provided it with copies of the complaints.

      The defendant agreed to cover the plaintiffs but only under the older policy.

The plaintiffs brought a declaratory judgment action seeking a determination that

the defendant was obliged to indemnify them under the more generous newer

policy. The district court held that the newer policy provided coverage. The

1
      Title 36, section 3629(B) of the Oklahoma Statutes states in pertinent part:

            It shall be the duty of the insurer, receiving a proof of loss, to
      submit a written offer of settlement or rejection of the claim to the
      insured within ninety (90) days of receipt of that proof of loss. Upon
      a judgment rendered to either party, costs and attorney fees shall be
      allowable to the prevailing party.

                                           -4-
plaintiffs then sought attorneys’ fees under section 3629(B), which the district

court denied on the premise that section 3629(B) requires the submission of a

“proof of loss,” which the plaintiffs had not submitted. On appeal we reversed,

concluding that section 3629(B) applies to declaratory judgment actions,       id. at

1263–64, and that the absence of a formal proof of loss was not a bar to recovery,

id. at 1264–65.

       In attempting to distinguish    Stauth , First Marine argues the case was a

declaratory judgment action and does not apply to first party actions where no

proof of loss is submitted. That reasoning is meritless. The court in      Stauth

simply determined that the statute, which had been applied in first party actions

and indemnity actions, also applied to declaratory judgment actions. Noting that

Oklahoma courts have construed the statute broadly,       id. at 1263, the court in no

way cut back on already-existing law which has long held that section 3629

applies to actions by insureds against their insurers.   See McCorkle v. Great Atl.

Ins. Co. , 637 P.2d 583, 586 (Okla. 1981). The lesson to be taken from       Stauth for

our purposes relates not to the role of the statute in first party actions, but to its

holding regarding the proof-of-loss requirement.

       First Marine argues that, while policy requirements regarding proof of loss

may be waived, the statutory requirement of section 3629(B) cannot.        Stauth holds

otherwise. There, the plaintiffs complied with policy requirements by submitting

                                             -5-
copies of the class action complaints to the defendant. We held that this

compliance with the policy regarding notice, followed by the institution of the

declaratory judgment action, was “all that was necessary to satisfy a ‘proof of

loss’ requirement.” 236 F.3d   at 1265. The same reasoning applies here.

      After the accident, Mr. Murray contacted his insurance agent. The agent

submitted to First Marine what the company calls an Accord Property Loss Notice

which, according to one of First Marine’s corporate representatives, provided

policy information, the name of the insured, phone numbers, contact information,

and a brief description of the loss. Under the terms of the Murrays’ policy, this

notice was all that was required. A sworn proof of loss would only have been

necessary under the policy if First Marine had requested one, which all parties

agree did not happen.

      Thus, just as in Stauth , where notice of the class action suits and

submission of the complaints was sufficient proof of loss for purposes both of the

policy and the statute, here the Murrays’ submission of information to their agent

who generated an Accord Property Loss Notice was sufficient to comply both

with their obligations under the policy and with the statutory requirement.

                                          C

      In support of the argument that the district court improperly struck the

testimony of its expert, Mike Hunter, First Marine points to evidence indicating

                                         -6-
that the district court, prior to trial, had approved Mr. Hunter as an expert

witness, knew the basic opinions he would render, and knew of the contents of his

report. It was only after Mr. Hunter had testified that the court decided to

exclude his testimony.

      The fact that the district court misunderstood the basic problem with

Mr. Hunter’s appearance at this trial does not mean that the court erred in

eventually excluding the testimony. To the contrary, and to its credit, when the

district court understood the crux of the problem it acted quickly and entirely

properly in striking Mr. Hunter’s testimony.

      Despite the rather unclear presentation in the briefs regarding this issue, it

is a simple one. Under Rule 26(a)(2)(B) of the Federal Rules of Civil Procedure,

an expert witness is required to submit a written report. “The report shall contain

a complete statement of all opinions to be expressed and the basis and reasons

therefor; the data or other information considered by the witness in forming the

opinions; [and] any exhibits to be used as a summary of or support for the

opinions . . . .” Fed. R. Civ. P. 26(a)(2)(B). Mr. Hunter’s testimony was based in

large part on photographs taken of engines similar to that of the Murrays, but his

Rule 26 report made no mention of such photographs and, as such, was not in

compliance with the rule. The Murrays had consistently objected to any

testimony from Mr. Hunter based on the photographs.

                                          -7-
      As the district court explained when it admonished the jury to disregard

Mr. Hunter’s testimony, the idea behind the rule is to give opposing counsel an

opportunity to inquire about the basis of an expert’s testimony. Because the

photographs were not mentioned in the Rule 26 report, the Murrays did not have a

fair opportunity to prepare to cross-examine the expert or his evidence. The court

considered ordering a mistrial but decided instead to strike the offending

testimony and to admonish the jury to disregard it.

      We review this ruling for abuse of discretion.   Gust v. Jones , 162 F.3d 587,

592 (10th Cir. 1998). Such abuse will be found “only where the trial court makes

an arbitrary, capricious, whimsical, or manifestly unreasonable judgement.”

Nalder v. W. Park Hosp. , 254 F.3d 1168, 1174 (10th Cir. 2001). Here, the district

court was faced with an obvious violation of Rule 26 compounded by the fact

that, when he testified, Mr. Hunter went well beyond the opinions expressed in

his written report. Additionally, First Marine had the benefit of the testimony of

another expert, Frank Johnson, thus minimizing the damage to it from the

exclusion of Mr. Hunter. We hold that, under these circumstances, the exclusion

of Mr. Hunter’s testimony was not an abuse of discretion.

                                           D

      First Marine contends that the district court should have granted its Rule 50

motion for judgment as a matter of law, formerly referred to as a directed verdict.

                                           -8-
              In a diversity case, the federal standard is applicable in
       determining whether the evidence is sufficient to go to the jury.
       Under the federal rule, the trial judge may grant a motion for directed
       verdict only when all the inferences to be drawn from the evidence
       are so patently in favor of the moving party that reasonable men
       could not differ as to the conclusions to be drawn therefrom. All
       such evidence and inferences in this regard must be construed in the
       light most favorable to the party against whom the motion is directed.

Hidalgo Props. , 617 F.2d at 198 (citations omitted). This court reviews de novo

the denial of a Rule 50 motion.    Mitchell v. Maynard , 80 F.3d 1433, 1438 (10th

Cir. 1996).

       Applying this standard, and after reviewing the provided portions of the

trial transcript and drawing inferences therefrom in the light most favorable to the

Murrays, see Hidalgo Props. , 617 F.2d at 198, we conclude that the district court

properly denied the motion for judgment as a matter of law. Specifically, the jury

heard testimony from the mechanic who examined the Murrays’ engine and

eventually repaired it that the damage to the engine was caused by “overrev”

when the boat suddenly became airborne. There was also evidence from

Mr. Murray and his passenger on the boat, Mr. Smith, that immediately after

returning to the water the engine ceased to operate. This evidence certainly

provides a legally sufficient evidentiary basis for the jury to find for the Murrays.

“There can be no [judgment as a matter of law] where there is evidence tending to

support a party’s theory of recovery.”   Id. at 199. The district court was correct

to deny First Marine’s Rule 50 motion.

                                           -9-
                                              E

       In its motion for new trial and amendment of judgment, First Marine argued

that title 36, section 3629 of the Oklahoma Statutes—the section under which the

Murrays were eventually awarded prejudgment interest—is unconstitutional.

After the Oklahoma Attorney General declined the district court’s invitation to

weigh in on this question, the court rejected the constitutional challenge to

section 3629. We do as well.

       Ordinary economic and commercial regulations are subject only to rational

basis scrutiny under the Equal Protection Clause.         FCC v. Beach Communications,

Inc. , 508 U.S. 307, 313–14 (1993). The Supreme Court has admonished that

rational-basis review in equal protection analysis “is not a license for courts to

judge the wisdom, fairness, or logic of legislative choices.”      Id. at 313. Rather, a

statute survives rational-basis scrutiny “if there is a rational relationship between

the disparity of treatment and some legitimate governmental purpose.”         Heller v.

Doe , 509 U.S. 312, 320 (1993). Moreover, under rational-basis review, the

legislature need not actually articulate the legitimate purpose or rationale that

supports the classification at issue. Instead, a statute “must be upheld against

equal protection challenge if there is any reasonably conceivable state of facts

that could provide a rational basis for the classification.”    Id. (quotation omitted).

                                             -10-
      Under this deferential standard of review, we have no difficulty in

concluding that section 3629 is constitutional. Among others, one possible

rational basis for the statute is Oklahoma’s presumed desire to encourage the

prompt and efficient settlement of insurance claims. The legislature may have

felt that the insurance industry needed the threat of a high rate of prejudgment

interest to encourage the settlement of claims. Perhaps, as First Marine would no

doubt point out, the insurance industry is not solely responsible for any delay

(perceived or actual) in the settlement of claims; perhaps policy-holders and their

lawyers are to blame. This may be so, but we have never stated that a policy

aimed at correcting a social ill need solve the entire problem in one fell swoop; in

many cases it may be more prudent and efficacious to address social problems one

step at a time, so that each step may be reviewed and adapted as necessary.   See

Williamson v. Lee Optical of Okla.    , 348 U.S. 483, 489 (1955) (“[T]he reform may

take one step at a time, addressing itself to the phase of the problem which seems

most acute to the legislative mind.”). The district court properly held

section 3629 to be constitutional.

                                            II

      After the jury awarded the Murrays $5800 in damages, the court also

awarded the Murrays $33,000 in attorneys’ fees and affirmed the award of costs

                                           -11-
by the court clerk to the Murrays in the amount of $2100. In case No. 00-5233

First Marine appeals these awards. We affirm.

       Our role in reviewing the district court’s fee award is quite limited.

“We customarily defer to the District Court’s judgment because an appellate court

is not well suited to assess the course of litigation and the quality of counsel.”

Mares v. Credit Bureau of Raton     , 801 F.2d 1197, 1200-01 (10th Cir. 1986)

(quotation omitted). We did not see “the attorneys’ work first hand,” and thus are

not as well situated as the district court, which “has far better means of knowing

what is just and reasonable than an appellate court.”      Id. at 1201 (quotation

omitted). “Accordingly, an attorneys’ fee award by the district court will be upset

on appeal only if it represents an abuse of discretion.”    Id.

       Under the abuse-of-discretion standard, our task is not to assess

independently the merits of each attorney’s performance and fine-tune individual

fee awards. Instead, our job is to determine whether the district court “made a

clear error of judgment or exceeded the bounds of permissible choice in the

circumstances.”    Cummins v. Campbell , 44 F.3d 847, 854 (10th Cir. 1994).

       In support of its argument, First Marine advances four theories, two of

which we have already rejected—that the Murrays should not recover attorneys’

fees because they did not submit a proof of loss as required by section 3629, and

                                            -12-
that the statute itself is unconstitutional. We address First Marine’s remaining

two contentions:

                                          A

       Prior to the beginning of trial, the district court granted summary judgment

to First Marine on the Murrays’ tort claim for bad faith for which they had sought

$70,000 in damages. In its motion to recover attorneys’ fees, First Marine argued

to the district court that under common law First Marine was the prevailing party

in the tort-claim portion of the lawsuit, and that it was thus entitled to attorneys’

fees and costs incurred in defending against the claim for bad faith. First Marine

was in essence arguing that there were two prevailing parties in this action. The

district court rejected this theory and refused to award fees or costs to First

Marine.

       We review the meaning of “prevailing party” de novo, and the district

court’s determination of which party satisfied that definition for abuse of

discretion. Arkla Energy Res. v. Roye Realty & Developing, Inc.      , 9 F.3d 855,

865–66 (10th Cir. 1993) (applying Oklahoma law).

       Oklahoma law is fairly clear on the question of who qualifies as

a prevailing party. In   Quapaw Co. v. Varnell , 566 P.2d 164 (Okla. Ct. App.

1977), the trial court had awarded fees to both parties after the defendant had

secured summary judgment on two of the plaintiff’s claims and the plaintiff had

                                         -13-
obtained a verdict on its remaining two claims. The Oklahoma Court of Appeals

reversed.

       Adopting reasoning from other jurisdictions,         Quapaw holds that “‘[t]here

can be but one prevailing party in an action at law for the recovery of a money

judgment . . . . [T]he party in whose favor the verdict compels a judgment is

the prevailing party.’”    Id. at 167 (quoting Ozias v. Haley , 125 S.W. 556, 557

(Mo. Ct. App. 1910)). “‘The words “prevailing party” can have no other meaning

except the party in whose favor judgment should be entered. Where there is one

plaintiff and one defendant, there can be but one prevailing party and but one

judgment.’” Id. (quoting Hansen v. Levy , 248 N.Y.S. 200, 201 (N.Y. App. Div.

1930)) (internal quotation omitted). “‘The prevailing party is regarded as that

party who has affirmative judgment rendered in his favor at the conclusion of the

entire case.’”   Id. (quoting Sharpe v. Ceco Corp. , 242 So. 2d 464, 465 (Fla. Dist.

Ct. App. 1970)).

       First Marine argues that its successful defense of the Murrays’ claim for

bad faith entitles it to prevailing-party status as to that claim.     Quapaw holds

otherwise. First Marine’s summary judgment was not “an affirmative judgment

rendered in [its] favor at the conclusion of the entire case.”       Id. at 167. Further,

the Oklahoma Supreme Court in         Taylor v. State Farm Fire & Casualty Co.     ,

explained that recovery of attorneys’ fees is possible only when “the insured loss

                                              -14-
is the core element of the prevailing litigant’s recovery.” 981 P.2d 1253, 1258

(Okla. 1999). The insured loss was the core element of the Murrays’ recovery on

their contract claim. That First Marine successfully defeated an alternative

remedy on this claim does not invest it with prevailing party status.

       First Marine points to language in    Quapaw stating that “[e]ach side may

score, but the one with the most points at the end of the contest is the winner

and . . . is entitled to recover his costs.” 566 P.2d at 167 (quotation omitted).

First Marine argues that by securing summary judgment on the claim for bad faith

it “won” 70,000 points compared to the 5800 points “won” by the Murrays. The

points identified in Quapaw , however, are calculated from affirmative judgments

rather than from a mere defense against a plaintiff’s claim. We have found no

case, and First Marine identifies none, in which a defendant who is granted

summary judgment or otherwise successfully defends on less than all of

a plaintiff’s claims has been deemed the prevailing party.

       There are cases in which the Oklahoma courts have recognized exceptions

to the Quapaw “one prevailing party” rule, but those cases do not apply here. In

them, a plaintiff suing for damages is met with a counterclaim (or its equivalent)

for damages by the defendant. When both parties prevail and are awarded money

damages at the end of the case, Oklahoma courts allow there to be two prevailing

parties and award costs and/or fees to each party.   See, e.g. , Midwest Livestock

                                            -15-
Sys., Inc. v. Lashley , 967 P.2d 1197, 1199 (Okla. 1998);    Welling v. Am. Roofing

& Sheet Metal Co. , 617 P.2d 206, 210 (Okla. 1980). In the case at bar, First

Marine did not assert a claim for money damages against the Murrays and was not

awarded any damages or any affirmative judgment at the end of the trial.

      First Marine was not a prevailing party for purposes of an award of

attorneys’ fees. It has advanced no authority to support a claim for costs in the

absence of prevailing-party status. The district court was correct to deny First

Marine costs and fees relating to this case.

                                             B

      As noted above, we will not overturn a fee award unless we are convinced

that the district court “made a clear error of judgment or exceeded the bounds of

permissible choice in the circumstances.”        Cummins , 44 F.3d at 854. Our review

of the parties’ arguments and the order of the district court persuades us that the

court was well within the bounds of reasonableness in making the fee award.      2

      First Marine complains primarily that the court failed to consider the

relationship between the amount the Murrays recovered, $5800, and the amount of

attorneys’ fees awarded, $33,000. We disagree. When read in its entirety, the

order of the court reveals careful consideration of the dynamics of the case and

2
       In reviewing First Marine’s arguments, we note that the record citations in
its brief do not correspond to evidence in the record pertaining to the award of
fees.

                                            -16-
the factors which contributed to the fees incurred by the Murrays. The court

carefully applied the factors outlined in   Oliver’s Sports Center, Inc. v. National

Standard Insurance Co. , 615 P.2d 291, 294–95 (Okla. 1980), in reaching

its decision.

       We note that the court reduced the fee request by approximately one-third

to account for the Murrays’ lack of success on their claim for bad faith and their

withdrawal of their claim for hull damage. Contrary to First Marine’s contention,

the court was well within its authority to then multiply the hours spent by the

Murrays’ attorney by his undisputed hourly rate.     See State ex rel. Burk v. City of

Okla. City , 598 P.2d 659, 660–61 (Okla. 1979) (characterizing such computation

as the “lodestar” of the court’s fee determination).

       First Marine attempts to blame the Murrays for the amount of fees because

they brought a claim for bad faith that it characterizes as unfounded and

unsupported. The opinion of the trial judge who heard this case, however, was to

the contrary. The court examined the “several factors which gave rise to a

legitimate belief on behalf of [the Murrays] that they should proceed with a bad

faith claim.” (Dist. Ct. Order filed Nov. 13, 2000, at 5.) Despite the grant of

summary judgment to First Marine on this claim, the court noted that the claim

was not frivolous and was not one that should have been ignored. We note that it

was First Marine who removed the case to federal court after the addition of the

                                            -17-
claim for bad faith, thereby lengthening the litigation process and the resultant

fees.

        Nor do we find fault with the emphasis placed by the district court on the

fact that the Murrays attempted to settle all claims early in the litigation for the

same amount they recovered at trial, an amount which compensated them for their

contract loss and did not include any payment for the claim for bad faith. First

Marine never responded to this offer, not even to propose a counter-offer. Even

after the district court urged it to settle, First Marine refused to do so. We agree

with the district court that by proceeding, as was its right, to a judicial

determination First Marine “ran the risk that under § 3629, it would ultimately be

assessed [the Murrays’] costs and attorney fees.” (   Id. at 6.) We find no error in

the fee determination as awarded by the district court. Its careful weighing of all

the appropriate factors reveals no basis upon which the award can be overturned.

                                           III

        The judgment is AFFIRMED .

                                         ENTERED FOR THE COURT

                                         Carlos F. Lucero
                                         Circuit Judge

                                           -18-