Colony Insurance Company v. Fladseth et al

Filing 70

ORDER by Judge Claudia Wilken GRANTING PLAINTIFFS 61 MOTION TO AMEND JUDGMENT. (ndr, COURT STAFF) (Filed on 6/21/2013)

1

IN THE UNITED STATES DISTRICT COURT

2

FOR THE NORTHERN DISTRICT OF CALIFORNIA

3
4

COLONY INSURANCE COMPANY,

5
6
7
8
9
10

No. C 12-1157 CW

Plaintiff,

ORDER GRANTING
PLAINTIFF’S MOTION
TO AMEND JUDGMENT
(Docket No. 61)

v.
DOUGLAS FLADSETH; and LAW OFFICES
OF DOUGLAS C. FLADSETH,
Defendants.
________________________________/

United States District Court
For the Northern District of California

Plaintiff Colony Insurance Company moves to amend the Court’s
11
April 3, 2013 ruling on its motion for summary judgment and the
12
judgment entered on April 4, 2013.

Defendants Douglas Fladseth

13
and the Law Offices of Douglas C. Fladseth oppose the motion.

The

14
Court took Plaintiff’s motion under submission on the papers.
15
Having considered the papers filed by the parties, the Court
16
GRANTS Plaintiff’s motion.
17
BACKGROUND
18
19
20
21
22
23
24
25
26
27
28

Plaintiff insured the Law Offices of Douglas C. Fladseth
under a Lawyers Professional Liability Policy.

In this action,

initiated on March 8, 2012, Plaintiff sought a declaration that it
did not owe a duty of defense or indemnity to Defendants arising
out of two cases brought in state court, Scholz v. Fladseth,
Sonoma County Case No. SCV249442 (the Scholz action), and
Christiansen v. Fladseth, Sonoma County Case No. SCV250126 (the
Christiansen action), as well as “such other and further relief as
the Court deems appropriate.”

First Am. Compl. (1AC), 8-9.

1

On September 12, 2012, Plaintiff filed a motion for summary

2

judgment.

3

among other things, it “is entitled to reimbursement from Fladseth

4

for all sums it has paid in connection with the defense in the

5

Underlying Actions.”

6

13 (seeking reimbursement of amount it had already paid defending

7

Defendants at the time the motion for summary judgment was filed

8

as well as “any additional amounts that may be incurred and paid

9

between now and resolution of this action”).

In the notice of its motion, Plaintiff asserted that,

Docket No. 42, 3; see also Docket No. 42-1,

United States District Court
For the Northern District of California

10

On April 3, 2013, the Court granted Plaintiff’s motion for

11

summary judgment, finding that there was no material dispute of

12

fact that Plaintiff was entitled to declaratory judgment that the

13

underlying actions did not create the potential for coverage under

14

the insurance policy and that, even if there were a basis for

15

coverage, the underlying actions fell into two different

16

exclusions in the policy.

17

address the issue of reimbursement.

18

Clerk entered judgment in favor of Plaintiff.

19

Docket No. 59.

The Court omitted to

On the following day, the
Docket No. 60.

On April 23, 2013, Plaintiff filed the instant motion to

20

amend the judgment to include reimbursement of the money that it

21

had incurred providing Defendants’ defense in the underlying

22

cases.

23
24
25
26
27

Docket No. 61.

On May 6, 2013, Defendants filed a notice of appeal from the
Court’s April 4, 2013 order.

Docket No. 62.
DISCUSSION

Plaintiff moves to amend the judgment under 28 U.S.C. § 2202
or Federal Rule of Civil Procedure 59(e).

28
2

1

Rule 59(e) provides, “A motion to alter or amend a judgment

2

must be filed no later than 28 days after the entry of the

3

judgment.”

4

considering a motion to amend a judgment under Rule 59(e).”

5

Turner v. Burlington N. Santa Fe R.R., 338 F.3d 1058, 1063 (9th

6

Cir. 2003) (citing McDowell v. Calderon, 197 F.3d 1253, 1254 n.1

7

(9th Cir. 1999)).

8

motion may be granted: 1) the motion is necessary to correct

9

manifest errors of law or fact upon which the judgment is based;

“A district court has considerable discretion when

“There are four grounds upon which a Rule 59(e)

United States District Court
For the Northern District of California

10

2) the moving party presents newly discovered or previously

11

unavailable evidence; 3) the motion is necessary to prevent

12

manifest injustice; or 4) there is an intervening change in

13

controlling law.”

14

omitted).

15

Id.

(internal quotation marks and citation

Defendants argue that the Court does not have jurisdiction to

16

consider Plaintiff’s motion because they have already filed a

17

notice of appeal from the April 4, 2013 order.

18

Defendants’ notice of appeal does not become effective until the

19

Court has ruled on Plaintiff’s motion to amend the judgment under

20

Rule 59.

21

provides, “If a party files a notice of appeal after the court

22

announces or enters a judgment--but before it disposes of any

23

motion listed in Rule 4(a)(4)(A)--the notice becomes effective to

24

appeal a judgment or order, in whole or in part, when the order

25

disposing of the last such remaining motion is entered.”

26

of motions contained in Rule 4(a)(4)(A) includes a motion to alter

27

or amend the judgment brought under Rule 59.

28

4(a)(4)(A)(iv).

This is incorrect.

Federal Rule of Appellate Procedure 4(a)(4)(B)(i)

The list

See Fed. R. App. P.

Thus, this Court has jurisdiction to decide this
3

1

motion.

2

F.3d 1102, 1109 (9th Cir. Cal. 2001) (“The notice of appeal in

3

this case did not, however, divest the district court of

4

jurisdiction at the time it was filed because there was then a

5

pending motion for reconsideration.”); Miller v. Transamerican

6

Press, Inc., 709 F.2d 524, 527 (9th Cir. 1983) (“A notice of

7

appeal is jurisdictionally ineffective if filed before disposition

8

of a Rule 59(e) motion to alter or amend the judgment.”).

9

See, e.g., United Nat’l Ins. Co. v. R&D Latex Corp., 242

Defendants also contend that Plaintiff’s motion under Federal

United States District Court
For the Northern District of California

10

Rule of Civil Procedure 59(e) is untimely because it was filed

11

more than ten days after the entry of judgment.

12

as a result, it should be considered a motion for relief from

13

judgment under Federal Rule of Civil Procedure 60(b).

14

however, appear to base this argument on former Rule 59(e), which

15

created a ten-day period for the filing of a motion to alter or

16

amend a judgment, rather than the current version of Rule 59(e),

17

which, as quoted above, provides for a twenty-eight day time

18

period for such a filing.

19

amend the judgment twenty days after the Court ruled on its motion

20

for summary judgment and nineteen days after entry of judgment.

21

Thus, the motion was timely.

They argue that,

Defendants,

Here, Plaintiff filed its motion to

22

Amendment of the judgment is necessary here pursuant to

23

Federal Rule of Civil Procedure 59(e) to correct the Court’s

24

failure to address Plaintiff’s request for reimbursement, and to

25

prevent manifest injustice to Plaintiff caused by requiring it to

26

pay Defendants’ defense costs even though it has no contractual

27
28
4

1

obligation to do so.1

2

considered the issue of reimbursement previously because it

3

ordered that Plaintiff shall recover its costs in prosecuting the

4

instant action.

5

whether Plaintiff, as the prevailing party, should recover its

6

costs of prosecuting the instant case under Federal Rule of Civil

7

Procedure 54(d)(1) is separate from whether Plaintiff should

8

recover the attorneys’ fees and other expenses that it paid for a

9

defense in the underlying actions.

United States District Court
For the Northern District of California

10
11

Defendants appear to argue that the Court

Opp. at 3.

This is incorrect.

The issue of

The Court did not address the

latter in the prior order.
As noted above, the Court has already concluded that the

12

underlying actions did not create a potential for coverage and

13

that they fell into multiple exclusions within the policy.

14

“California law clearly allows insurers to be reimbursed for

15

attorney’s fees and other expenses paid in defending insureds

16

against claims for which there was no obligation to defend.”

17

v. Superior Court, 16 Cal. 4th 35, 51 (1997) (internal quotation

18

marks and citation omitted).

19

Buss

Here, Plaintiff seeks reimbursement of the amount that it has

20

already paid to Defendants’ state court counsel, as well as for

21

additional invoices that it has received and that “are pending

22

review and payment invoices.”

23

Defendants argue that Plaintiff is not entitled to reimbursement

24

of any attorneys’ fees or expenses incurred in the underlying

25

cases because it had delayed in paying the invoices of counsel who

Mot. at 2-3; Fine Decl. ¶ 9.

26
27
28

1

Because the Court finds that amendment is proper under Rule
59(e), it does not reach whether amendment is separately
appropriate under 28 U.S.C. § 2202.
5

1

represented Defendants in the state court cases and thus did not

2

act in good faith.2

3

Plaintiff thus far has paid their counsel in the underlying cases

4

$240,337.20 and that their counsel sent Plaintiff additional

5

invoices in the amount of $113,439.08.3

6

A;4 see also Fine Decl. ¶ 9 & Ex. 1.5

7

$1,057.13 of the amount that Plaintiff has paid represents fees

Defendants have submitted evidence that

Kingsbury Decl. ¶ 5 & Ex.

Defendants offer proof that

8
9
10
United States District Court
For the Northern District of California

2

11
12

The Court notes that Defendants did not make this argument
in opposition to Plaintiff’s request for reimbursement in its
motion for summary judgment.
3

13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

Plaintiff states that it has received additional invoices
in the amount of $105,189.18 from Defendants’ state court counsel
that are pending review. Fine Decl. ¶ 9. With Defendants’ later
opposition, they provide evidence that two additional invoices
have also been submitted to Plaintiff, bringing the total to
$113,439.08. Kingsbury Decl. ¶ 5 & Ex. A.
4

The Court notes that the spreadsheets attached as Exhibit A
appear to include two minor errors. Page seven seems to include
erroneously an entry in the amount of $1,347.57 in the column of
amounts paid by Plaintiff. However, this amount is not included
in the total amount paid by Plaintiff on page five, which also
appears to indicate that this amount was written off. The same
error appears to have been made with an entry in the amount of
$514.57 on page six, which is omitted on page four and appears to
have been written off.
5

When compared using the invoice numbers, the spreadsheet
submitted by Plaintiff with the Fine declaration generally matches
those provided by Defendants. However, Plaintiff’s spreadsheet
appears to include a number of typographical and mathematical
errors. For example, there is an extra digit in the amount for
invoice number 68956 and two of the digits in the amount for
invoice number 69080 appear to be transposed. In addition, the
numbers on the spreadsheet do not add up to the subtotals shown.
For example, the sum of $8,859.51, $14,198.49 and $63,947.14, the
amounts of payments pending for representation in one of the two
state court cases, is $86,555.14, not $87,005.14, as shown on the
spreadsheet. Similar errors in addition appear to have been made
when totaling the amounts paid to date. The Court uses
Defendants’ figures, which do not appear to have the same
mistakes.
6

1

for late payment.6

2

authority that this would bar Plaintiff from recovering any of the

3

money that it paid.

4

acted in bad faith by failing to make timely payments for some of

5

the invoices that it received.

6

accrual of some late fees negatively impacted the representation

7

that Defendants received in the underlying cases.

8

explained in Buss, “the insurer does not have a duty to defend the

9

insured as to the claims that are not even potentially covered”

Defendants, however, do not offer any

Defendants also have not shown that Plaintiff

Nor is there evidence that the

In addition, as

United States District Court
For the Northern District of California

10

and “[w]ith regard to defense costs for these claims, the insurer

11

has not been paid premiums by the insured” and “did not bargain to

12

bear these costs.”

13

unjustly enriched by requiring the insurer to bear such

14

unbargained-for defense costs, resulting in a windfall for the

15

insured at the expense of the insurer.

16

late fees were incurred as a result of Plaintiff’s failure to make

17

timely payments in particular instances and not as part of the

18

expense otherwise required to provide Defendants with

19

representation in the state court cases, Plaintiff will not

20

recover the $1,057.13 that it paid as late fees.

21

Buss, 16 Ca. 4th at 51.

Id.

The insured would be

However, because the

Thus, Plaintiff has shown that it is entitled to

22

reimbursement in the amount of $239,280.05 for the money that it

23

has already paid and which was not for late fees.

24

Plaintiff has not demonstrated that it is entitled to

However,

25
26
6

27

It appears that an additional $1,862.14 in late fees was
waived by Defendants’ counsel. Kingsbury Decl. ¶ 5, Ex. A.

28
7

1

reimbursement for the money that it has not actually paid,

2

specifically the amount on invoices that Defendants’ state court

3

counsel has submitted to Plaintiff and that are “pending review.”

4

Fine Decl. ¶ 9.

5

in fact paid any of these invoices and thus that there is anything

6

to “recover.”7

Plaintiff has not provided any evidence that it

7

CONCLUSION

8
9

Plaintiff’s motion to amend the judgment is GRANTED (Docket
No. 61).

The Clerk shall enter an amended judgment providing that

United States District Court
For the Northern District of California

10

Plaintiff shall recover $239,280.05 from Defendants and that post-

11

judgment interest, calculated at the legal rate set forth in 28

12

U.S.C. § 1961(a), shall accrue on this amount until it is paid in

13

full.

14

IT IS SO ORDERED.

15
16

Dated:

17

6/21/2013

CLAUDIA WILKEN
United States District Judge

18
19
20
21
22
23
24
25
26
27
28

7

In light of the fact that these bills were “pending review”
by Plaintiff after the Court had already entered judgment that it
was not required to pay for Defendants’ representation in the
state court proceedings, it is not clear if or why Plaintiff would
have paid these bills.
8