Court Opinion

ID: 1009814
Source: CourtListenerOpinion
Date Created: 2013-07-04 20:01:40.215427+00
Date Added: 2024-06-11T09:01:18.449554
License: Public Domain

UNPUBLISHED

UNITED STATES COURT OF APPEALS
                FOR THE FOURTH CIRCUIT

FIRST FINANCIAL INSURANCE               
COMPANY,
                  Plaintiff-Appellee,
                 v.
CHARLES A. HAMMONS, d/b/a Charlie
Bob’s Bar, Incorporated,                          No. 02-1208
               Defendant-Appellant,
                and
WILLIAM KEITH MEDFORD,
                           Defendant.
                                        
            Appeal from the United States District Court
     for the Southern District of West Virginia, at Charleston.
              Joseph Robert Goodwin, District Judge.
                           (CA-01-96-2)

                      Argued: December 4, 2002

                      Decided: February 10, 2003

    Before MICHAEL, TRAXLER, and KING, Circuit Judges.

Affirmed by unpublished opinion. Judge King wrote the opinion, in
which Judge Michael joined. Judge Traxler wrote an opinion concur-
ring in the result.

                             COUNSEL

ARGUED: Glen A. Murphy, MCQUEEN, HARMON & MURPHY,
L.C., Charleston, West Virginia, for Appellant. Robert Kemp Morton,
2            FIRST FINANCIAL INSURANCE CO. v. HAMMONS
III, HUDDLESTON, BOLEN, BEATTY, PORTER & COPEN,
L.L.P., Huntington, West Virginia, for Appellee. ON BRIEF: Todd
M. Sponseller, MCQUEEN, HARMON & MURPHY, L.C., Charles-
ton, West Virginia, for Appellant. Marvin Capehart, II, HUDDLES-
TON, BOLEN, BEATTY, PORTER & COPEN, L.L.P., Huntington,
West Virginia, for Appellee.

Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).

                              OPINION

KING, Circuit Judge:

   Charles Hammons appeals the district court’s denial of an attor-
neys’ fees award. Hammons sought the award following his accep-
tance of a Rule 68 offer of judgment to settle a counterclaim in a
declaratory judgment action. As explained below, in the circum-
stances of this case the court properly declined to award fees, and we
affirm.

                                   I.

   Hammons owns a neighborhood tavern known as Charlie Bob’s
Bar, Inc. ("Charlie Bob’s"), in Kanawha County, West Virginia. On
January 14, 1999, two patrons of Charlie Bob’s, William Keith Med-
ford and Michael Robinson, were involved in a fistfight outside the
establishment, and Medford was injured. As a result, on September
8, 1999, Medford sued both Robinson and Charlie Bob’s in the Cir-
cuit Court of Kanawha County (the "Medford Suit").1
    1
   Medford alleged in his Complaint that Hammons, as owner and oper-
ator of Charlie Bob’s, "did or should have foreseen that the assault
against [Medford] would occur because . . . Michael Robinson had been
involved in similar altercations on prior occasions and has a reputation
in the community for violent behavior, particularly when intoxicated."
              FIRST FINANCIAL INSURANCE CO. v. HAMMONS                    3
   At the time of the altercation, Charlie Bob’s was insured by First
Financial Insurance Company ("First Financial") under a commercial
general liability policy. After Medford filed suit, Hammons notified
First Financial and requested that it defend and indemnify Charlie
Bob’s in the Medford Suit. First Financial, however, took the position
that its policy did not provide coverage against Medford’s claims, and
it refused to defend or indemnify Charlie Bob’s.2

   Following First Financial’s denial of coverage, Hammons retained
counsel to represent Charlie Bob’s in the Medford Suit. Thereafter,
Medford dismissed his claims against Charlie Bob’s and substituted
Hammons, personally, as a defendant. In response, Hammons notified
his homeowner’s insurer, Liberty Mutual Insurance Group ("Liberty
Mutual"), of the Medford Suit, and he requested that Liberty Mutual
defend and indemnify him therein. Liberty Mutual agreed to provide
Hammons with a defense to the Medford Suit, but it did so with a res-
ervation of its rights.3

   Hammons retained counsel in November 2000 to assess whether
the First Financial policy provided coverage for the claims made
against him in the Medford Suit, and whether First Financial was obli-
gated to provide defense and indemnity. On November 6, 2000, Ham-
mons demanded of First Financial that it defend and indemnify him
in the Medford Suit. In response, First Financial agreed to defend
Hammons, but it did so with a reservation of its rights.

  On January 31, 2001, First Financial filed this declaratory judg-
ment action against Hammons, d/b/a Charlie Bob’s, Inc. (the "First

Further, Medford alleged that "[o]n the date of the assault, [Hammons]
negligently served intoxicating beverages to Michael Robinson when he
was intoxicated, even though [he] knew or should have known that doing
so increased the danger that Michael Robinson would act in a violent
manner."
   2
     In using the term "coverage," we refer both to the duty of an insurer
to defend and to its duty to indemnify.
   3
     When an insurer defends its insured under a "reservation of rights,"
the insurer reserves its right to discontinue the defense and to deny
indemnification if it thereafter determines that a policy exclusion applies.
4                 FIRST FINANCIAL INSURANCE CO. v. HAMMONS
Financial Suit"), in the district court for southern West Virginia, seek-
ing a declaration that it was not obligated to defend or indemnify
Hammons in the Medford Suit. Hammons counterclaimed against
First Financial, asserting, inter alia, breach of contract and breach of
common law good faith and fair dealing. In his Counterclaim, Ham-
mons sought from First Financial, inter alia, "all damages arising
from Plaintiff’s breach of contract pursuant to Hayseeds, Inc. v. State
Farm Fire & Cas., 177 W. Va. 323, 352 S.E.2d 73 (1986)."4

   On April 8, 2001, two months after the filing of the First Financial
Suit, the Medford Suit was settled. Following the settlement, First
Financial, on November 5, 2001, filed a Rule 68 offer of judgment in
the First Financial Suit.5 The offer of judgment provided, in pertinent
part, as follows:
    4
     Specifically, the Counterclaim sought damages "pursuant to Hay-
seeds," as well as "punitive, compensatory and general damages, includ-
ing pre- and post-judgment interest, attorneys’ fees, costs and expenses."
Notwithstanding this broad ad damnum clause, the crux of a Hayseeds
claim is its attorneys’ fees component. In Hayseeds, the Supreme Court
of Appeals of West Virginia specifically held that, when an insured
"must sue his own insurance company over any property damage claim,
and the [insured] substantially prevails in the action, the company is lia-
ble for the payment of the [insured’s] reasonable attorneys’ fees." 352
S.E.2d at 80. As a corollary thereto, such an insured is also entitled to
damages caused by "the delay in settlement, as well as an award for
aggravation and inconvenience." Id. Thus, while Hammons sought broad
common law damages, the claim that uniquely brought his suit within the
Hayseeds rubric was that for attorneys’ fees.
   5
     Rule 68 of the Federal Rules of Civil Procedure provides, in pertinent
part, as follows:
        At any time more than 10 days before the trial begins, a party
        defending against a claim may serve upon the adverse party an
        offer to allow judgment to be taken against the defending party
        for the money or property or to the effect specified in the offer,
        with costs then accrued. If within 10 days after the service of the
        offer the adverse party serves written notice that the offer is
        accepted . . . the clerk shall enter judgment. . . . If the judgment
        finally obtained by the offeree is not more favorable than the
        offer, the offeree must pay the costs incurred after the making of
        the offer.
Fed. R. Civ. P. 68.
              FIRST FINANCIAL INSURANCE CO. v. HAMMONS                 5
    First Financial Insurance Company offers to allow judgment
    to be taken against it in this matter in the sum of Ten Thou-
    sand Dollars ($10,000). This offer is made pursuant to the
    provisions of Rule 68 of the Federal Rules of Civil Proce-
    dure and will be deemed withdrawn unless you serve a writ-
    ten notice of acceptance of the offer within ten (10) days of
    the date that it was served to you.

On November 14, 2001, Hammons accepted the offer of judgment.
Pursuant thereto, judgment was entered against First Financial in the
district court on November 19, 2001, in the sum of $10,000, plus
costs.

   Thereafter, on November 30, 2001, Hammons moved the district
court for an award of attorneys’ fees in the First Financial Suit, main-
taining that he had substantially prevailed in his action against First
Financial and that he was thus entitled to such fees under Hayseeds.
In response, First Financial asserted that its offer of judgment encom-
passed all relief sought in Hammons’s Counterclaim, including Ham-
mons’s Hayseeds claim for attorneys’ fees. First Financial maintained
that Hammons could not "recover outside the Rule 68 Judgment the
damages [he] specifically and repeatedly demanded in [his] Counter-
claim." On December 21, 2001, the court denied Hammons’s motion
for attorneys’ fees. First Fin. Ins. Co. v. Hammons, Order, No. 2:01-
0096 (S.D. W. Va. Dec. 21, 2001). Hammons moved to vacate that
ruling, asserting that he had not been permitted to reply to First Finan-
cial’s objections. After permitting and considering Hammons’s reply,
the court again denied Hammons’s request for attorneys’ fees, and it
entered the order from which Hammons now appeals. First Fin. Ins.
Co. v. Hammons, Order, No. 2:01-0096 (S.D. W. Va. Feb. 1, 2002)
(the "Order"). We possess jurisdiction pursuant to 28 U.S.C. § 1291.

                                   II.

   While we generally review a decision awarding or denying attor-
neys’ fees for abuse of discretion, Hitachi Credit Am. Corp. v. Signet
Bank, 166 F.3d 614, 631 (4th Cir. 1999), when, as here, such a ruling
is premised on a legal interpretation of a procedural rule, our review
is de novo. See Camacho v. Mancuso, 53 F.3d 48, 51 (4th Cir. 1995)
(concluding that the proper standard of review for the interpretation
6              FIRST FINANCIAL INSURANCE CO. v. HAMMONS
of a federal rule is de novo); see also Jason D. W. v. Houston Indep.
Sch. Dist., 158 F.3d 205, 208 (5th Cir. 1998) ("[I]nterpretation of
Rule 68 is an issue of law that we review de novo.").

                                     III.

   Hammons asserts that the court erred in denying his motion for
attorneys’ fees. He contends that the offer of judgment was ambigu-
ous with respect to attorneys’ fees because it failed to specify whether
it included such fees. The ambiguity, he insists, must be construed
against the offeror, First Financial.

   Hammons is correct that, as a general proposition, an ambiguous
Rule 68 offer of judgment should be construed against the offeror. See
Nordby v. Anchor Hocking Packaging Co., 199 F.3d 390, 391 (7th
Cir. 1999) (holding that "any ambiguities in a Rule 68 offer must be
resolved against the [offeror]"); Nusom v. Comh Woodburn, Inc., 122
F.3d 830, 833 (9th Cir. 1997) (concluding that "the ‘usual rules of
contract construction’ apply to a Rule 68 offer of judgment" and
"[t]herefore, ambiguities are construed against the offeror" (citation
omitted)). Ambiguities in a Rule 68 offer "must be resolved against
the defendant, . . . not only because the defendant drafted the offer but
also because the plaintiff is being asked to give up his right to a trial."6
Nordby, 199 F.3d at 391-92.

  An offer of judgment that is silent with respect to attorneys’ fees
may well be ambiguous, depending on the circumstances of the case,
because the term "‘judgment’ can mean either the substantive relief
ordered, . . . or that plus attorneys’ fees." Id. at 392. In this case, how-
ever, we find no ambiguity in First Financial’s offer of judgment. The
award of attorneys’ fees was the primary substantive relief that Ham-
mons sought in his Counterclaim; and the offer of judgment plainly
encompassed all damages asserted therein. See Offer of Judgment,
First Fin. Ins. Co. v. Hammons, No. 2:01-0096 (S.D. W. Va. Nov. 5,
    6
   Courts have also recognized that "a plaintiff who receives a Rule 68
offer is in a difficult position because the offer has a binding effect when
refused as well as when accepted." Webb v. James, 147 F.3d 617, 621
(7th Cir. 1998) (noting plaintiff’s potential liability for costs after reject-
ing an offer of judgment).
              FIRST FINANCIAL INSURANCE CO. v. HAMMONS                    7
2001) ("First Financial . . . offers to allow judgment to be taken
against it in this matter in the sum of Ten Thousand Dollars." (empha-
sis added)).

   In Count II of his Counterclaim, Hammons specifically sought
attorneys’ fees when he demanded "all damages arising from Plain-
tiff’s breach of contract pursuant to Hayseeds." A Hayseeds claim
may well be unique to West Virginia, and its assertion in the Counter-
claim compels the conclusion that the offer of judgment encompassed
attorneys’ fees. In its Hayseeds decision, the Supreme Court of
Appeals of West Virginia explained that, in the American system of
civil justice, "it is generally held that, in the absence of a statutory or
contractual provision providing for such recovery, attorneys’ fees
may not be recovered in an action on an insurance policy." 352 S.E.2d
at 78. As Justice Neely observed, however, "cases between policy-
holders and insurers [are] one of the prominent instances where the
American rule concerning attorneys’ fees works badly." Id. Accord-
ingly, the court ruled that "whenever a policyholder must sue his own
insurance company, . . . and the policyholder substantially prevails in
the action, the company is liable for the payment of the policyholder’s
reasonable attorneys’ fees." Id. at 80. Thus, a Hayseeds claim is com-
prised, in substantial part, of attorneys’ fees.7

   We agree with the district court that "attorneys’ fees were not
something sought outside of the pleadings," but instead "constituted
a large part of the relief sought in the [Counterclaim] itself." Order
at 3. The court aptly observed that, where "attorneys’ fees are actually
  7
    The presence of the Hayseeds claim in Hammons’s Counterclaim dis-
tinguishes this proceeding from one in which a plaintiff’s principal claim
seeks injunctive relief or damages. Such a plaintiff may ordinarily
recover attorneys’ fees only by way of a supplemental claim pursuant to
a fee-shifting statute. See, e.g., 42 U.S.C. § 1988 (providing for awards
of attorneys’ fees to plaintiffs who bring successful civil rights actions);
42 U.S.C. § 12205 (providing for awards of attorneys’ fees to plaintiffs
who bring successful claims pursuant to Americans with Disabilities
Act); 5 U.S.C § 552(a)(4)(E) (providing for awards of attorneys’ fees to
plaintiffs who bring successful claims pursuant to Freedom of Informa-
tion Act). By contrast, a plaintiff asserting a Hayseeds claim is seeking
attorneys’ fees as part and parcel of his principal recovery.
8             FIRST FINANCIAL INSURANCE CO. v. HAMMONS
a part of the substantive relief sought in [the] judgment, then using the
word ‘judgment’ alone in an offer to settle the matter creates no
ambiguity." Id. at 2. As such, the offer of judgment made by First
Financial was, in this setting, unambiguous: the "judgment" that First
Financial offered encompassed the Hayseeds claim for attorneys’ fees
that Hammons had advanced in his Counterclaim.

                                  IV.

  Pursuant to the foregoing, we affirm the judgment of the district
court.

                                                            AFFIRMED

TRAXLER, Circuit Judge, concurring in the result:

   I agree with my colleagues that the circumstances of this case leave
no doubt that the offer of judgment included attorney’s fees. I submit
this separate opinion only because in my judgment the offer was
unambiguous and would have included attorney’s fees whether there
was an explicit claim for them in the pleadings or not.