Redding v. Prosight Specialty Management Company et al

Filing 367

ORDER IN RESPONSE TO NINTH CIRCUIT REMAND INSTRUCTIONS. Ordering Clerk to notify Court of Appeals for the Ninth Circuit of entry of this Order; ordering Clerk to enter Second Amended Judgment (deleting Richard M. Layne from 6/25/15 Amended Judgment(E CF No. 341)); denying 352 Motion for Relief from Judgment and to Dismiss Sanctions as Satisfied and Moot; denying 354 Motion to File Under Seal; denying 357 Motion to Stay; denying 363 Motion for Discovery; denying 363 Motion for Hearing. Signed by Judge Charles C. Lovell on 11/17/2017. (MKB) Modified on 11/17/2017 copy of Order emailed to Ninth Circuit as directed (DED).

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MONTANA
HELENA DIVISION
BILLIE L. REDDING,

CV 12–98–H–CCL

Plaintiff,
vs.

ORDER IN RESPONSE
TO NINTH CIRCUIT
REMAND INSTRUCTIONS

PROSIGHT SPECIALTY
MANAGEMENT COMPANY, INC.
aka MUTUAL MARINE OFFICE,
INC. PROSIGHT SPECIALTY
INSURANCE GROUP, INC. aka
NYMAGIC, INC. and NEW YORK
MARINE AND GENERAL
INSURANCE COMPANY,
Defendants.

In this case, on February 27, 2015, the district court granted summary
judgment to Defendants New York Marine and General Insurance Company, et
al., (“NYM”) and granted NYM’s motion for fees and costs, imposing a
$107,867.54 sanction of fees and costs on Plaintiff’s counsel, Linda Deola and
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Brian Miller, for their filing of a frivolous motion to disqualify opposing counsel
and discovery violations and violation of the district court’s order, which forced
NYM to file a motion to compel discovery. (ECF No. 304.) NYM had requested
$236,316.94 in fees and costs, but the district court granted $107,867.54.
Linda Deola and Brian Miller are both partners in the law firm of Morrison,
Sherwood, Wilson & Deola, PLLP (“MSWD”), and the Court will refer to them
collectively as “MSWD.”
Subsequently, on June 25, 2015, the district court granted NYM’s second
motion for fees and costs under the Court’s inherent authority and 28 U.S.C.
§1927, imposing a sanction of fees and costs against Plaintiff’s legal team: Linda
Deola, Brian Miller, Richard Layne,1 and MSWD. (ECF No. 340.) NYM had
requested fees and costs in the amount of $1,473,428.90 (excluding the fees and
costs relating to the prior sanction), but the district court granted $515,119.50 in
fees and costs.

Plaintiff’s counsel Richard Layne, of Portland, Oregon, made his
appearance in the case pro hac vice.
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Deola, Miller, Layne and MSWD appealed from the district court’s
imposition of the two sanctions.
The appellate panel of the Ninth Circuit affirmed the district court’s
imposition of both sanctions on June 9, 2017. (ECF No. 347.) The panel found
that ample evidence in the record supported the district court’s finding that a
frivolous motion had been filed and that discovery misconduct had been
committed and that ample evidence supported the sanction against Deola and
Miller of $107,867.54.
The panel found further that sufficient evidence in the record supported the
finding that MSWD acted in ‘bad faith’ or was ‘reckless’ in the litigation of their
client’s claim against NYM, but that there was insufficient evidence in the record
to support a finding of bad faith or recklessness as to Richard Layne. Redding v.
Prosight Specialty Management Co., Inc., 692 Fed.Appx. 447 (Mem.) (June 9,
2017, 9th Cir.). As to the dollar amount of this second sanction, the panel said that
“because the district court awarded sanctions of $515,119.90 in attorneys’ fees and
costs based on Deola’s, Miller’s, and Layne’s conduct, we remand to the district
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court to give it an opportunity to reassess the appropriate amount of sanctions.”
Id. at 448, ¶6.
The panel further clarified its remand instruction on August 16, 2017, when
it denied the petition for rehearing and instructed as follows:
The Court instructs the district court on remand to
reassess the sanctions amount in light of our decision
and the Supreme Court’s recent opinion in Goodyear
Tire & Rubber Co. v. Haeger, 137 S. Ct. 1178 (2017).
(ECF No. 349.)
This Court received the Mandate filed by the Ninth Circuit on August 24,
2017, returning jurisdiction to this district court to carry out its instructions. (ECF
No. 351.) Just hours after the Mandate was filed, MSWD filed several motions
and other documents. These motions and papers appeared to violate the Rule of
Mandate first described by the U.S. Supreme Court in 1895. See In re Sanford
Fork & Tool Co., 160 U.S. 247, 255 (1895).
The “Combined Motion for Relief from Judgment and to Dismiss Sanctions
as Satisfied and Moot” (ECF No. 352) represents MSWD’s attempt to take another

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bite at the apple. They ask this Court to go beyond the remand instructions to
consider its multiple arguments in favor of nullifying the entire sanction against
MSWD, introducing argument available to MSWD prior to final judgment in this
case.2 In addition, MSWD has filed an “Alternative Motion for Discovery and an
Evidentiary Hearing” (ECF No. 363), and a “Motion for Leave to File Under Seal”
a settlement agreement from CV 14-33-BU-SEH (ECF No. 354).
These motions by MSWD represent nothing more than a fishing expedition,
a delay tactic, and a distraction. Instead, what this Court must focus on is what the
Ninth Circuit has told this Court to do on remand: this Court must reassess the
amount of the sanction in light of the reversal of the sanction against Richard
Layne and the Haeger case. “The rule of mandate requires a lower court to act on
the mandate of an appellate court, without variance or examination, only

For example, in this Court’s June 25, 2015, order imposing the
$515,119.50 sanction against MSWD, the undersigned acknowledged what all
counsel already knew, that the then-pending case of Anderson ZurMuehlen & Co.,
P.C. v. New York Marine and General Ins. Co., CV 14-33-BU-SEH, had some
potential relevance to the attorney fees in this case. (ECF No. 340 at 37.)
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execution.” United States v. Garcia-Beltran, 443 F.3d 1126, 1130 (9th Cir. 2006)
(quoting In re Sanford Fork & Tool Co., 160 U.S. 247, 255 (1895)). With clear
remand instructions such as were received by this court in this case, “a district
court is limited by [the Ninth Circuit’s] remand in situations where the scope of
the remand is clear.” United States v. Thrasher, 483 F.3d 977, 982 (9th Cir. 2007).
Neither party has requested the Ninth Circuit to expand the scope of the remand.
Therefore, first, the Court reconsiders the sanction in light of the fact that
attorney Richard Layne must not be included among the sanctioned counsel. This
is not a difficult task. Although Mr. Layne actively participated in Plaintiff
Redding’s underlying state court case, Mr. Layne never participated actively in the
instant case other than to file his appearance pro hac vice. Mr. Layne’s name does
not appear on the First Amended Complaint filed in this case in state court and
removed to this Court on October 19, 2012 (ECF No. 1-1), or on the Amended
Complaint filed on October 25, 2012 (ECF No. 7). He never appeared at any
hearing. He never filed a motion or a brief (except a brief in opposition to having
sanctions imposed against him, which activity is after the relevant period of the
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sanction).
The Court knows virtually nothing about Mr. Layne, except that he referred
Ms. Redding’s underlying claim to local counsel Ms. Deola, and together the two
counsel litigated and then settled that claim in state court. Then he apparently
served some background function in this case, but allowed Ms. Deola to perform
all acts necessary to litigate this case.
The Court has re-examined the detailed attorney time sheets and invoices
that were submitted to the Court on June 19, 2015, in support of the Defendants’
Motion for Fees and Costs (ECF No. 309). (See CM/ECF Clerk’s Remark dated
6/19/2015.) The detailed time sheets show that Plaintiff’s counsel Richard Layne
did not participate in this litigation after February 14, 2014 (which is the start date
set by this Court for compensable attorney fees (ECF No. 340 at 37)), in any
meaningful way, or to interact with opposing counsel in any way. Mr. Layne did
not appear at any hearing held by this Court. Thus, no portion of the $515,119.90
in attorneys’ fees and costs was attributable to Mr. Layne, and this sanction is
appropriate only as to Ms. Deola, Mr. Miller, and the MSWD law firm, as the
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Circuit has held.3
As instructed, this Court has reviewed and carefully considered the case of
Goodyear Tire & Rubber Company v. Haeger, ___ U.S. ___, 137 S. Ct. 1178, 197
L.Ed.2d 585 (2017). The Court concludes that the sanction in this case clearly
meets the but-for test explicated in Haeger because the sanction is “limited to the
fees the innocent party incurred solely because of the misconduct....” Haeger, 137
S.Ct. at 1184. The instant case was probably motivated by the need of Plaintiff’s
counsel to cover up their unethical and unfair treatment of their client in the
underlying state court litigation. It is clear to the Court that there was never any
bad-faith action taken by the insurance company as claimed by counsel, and this
Court believes that truth should have been clear to all of Plaintiff’s counsel at the
outset of this case.
The full amount of innocent party’s attorney fees and costs requested could

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Despite Mr. Layne’s lack of overt participation in this case, this Court included him in
the sanction because of the fact that he was highly involved in the underlying state litigation and
had every reason to understand that the instant litigation was brought by him in bad faith, just as
much as Ms. Deola and Mr. Miller.
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probably have been imposed under Haeger, but this Court did not impose the full
amount as a sanction. The full amount of sanctions would have been
$1,473,428.90 (and even that amount would have excluded all of the innocent
party’s fees and costs on appeal and on remand, which undoubtedly are not
inconsiderable). (ECF No. 360 at 9 fn.2, Defs’ Brief in Opp.) Moreover, in
imposing the sanction, this Court also excluded all fees of the innocent party from
October, 2012, through February 13, 2014, for the reason that the Court wished to
give Plaintiff’s counsel the benefit of the doubt, allowing for the possibility,
however unlikely, that they had filed this case in good faith in the belief that their
claim against the insurer was legitimate. The Court chose the date February 14,
2014, as the last possible date that Plaintiff’s counsel could reasonably believe that
they were asserting a legitimate claim against the insurer.4

This was a “claims made and reported” professional policy containing a
provision that a claim could not be settled without the written consent of the
insured, AZ. That written consent was not provided by the insured until the
Redding claim was actually settled in 2012 by NYM. However, during the
preliminary pretrial conference in this case on April 12, 2013, Ms. Deola stated
that she believed there was “factual written evidence” that AZ did ask the insurer
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Therefore, the Court imposed “a sanction consisting of the amount that
NYM paid to defense counsel as fees and costs for services and expenses after
February 14, 2014, which is the date when AZ’s Carlson testified that AZ did not
authorize settlement with Redding when her counsel made the 30-day policy limit
demand.” (ECF No. 340 at 37.)
The Haeger case “permits a trial court to shift all of a party’s fees, from
either the start or some midpoint of a suit, in one fell swoop.” 137 S. Ct. at 1187
(emphasis added). This Court’s reasoning is supported by Haeger, which
acknowledges that “[i]f a plaintiff initiates a case in complete bad faith, so that
every cost of defense is attributable only to sanctioned behavior, the court may
make a blanket award.” 137 S. Ct. at 1188. This is the precise case here, only this
Court has cautiously chosen the last possible date when Plaintiff’s counsel should
have known that their claim against the insurer was without a factual or legal

to pay full policy limits to Ms. Redding and that this factual issue should preclude
granting NYM’s motion for judgment on the pleadings. After years of discovery,
it became clear that Ms. Deola had no such evidence and had no reason to think
that she would ever have such evidence.
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basis. Thus, the Court concludes that the full amount of the sanction meets the
but-for test because these attorney’s fees “would not have been incurred except for
the misconduct.” Id.
The Court will add one further comment. NYM, the innocent party, has not
received a double-recovery by virtue of the sanction. This sanction was imposed
in June, 2015, long before the conclusion of the satellite litigation known to all
parties and to the Court. In 2016, NYM prevailed upon its counterclaim against
AZ, which then settled with NYM in November, 2016, by agreeing to pay a sum to
cover NYM’s attorney fees, less the sanctions imposed in this case. Essentially,
the instant case reached final judgment below before the satellite litigation.
There is no double recovery because (1) NYM incurred at least (and
probably more than) $3.4 million in attorney fees,5 (2) $622,987.44 in attorney fee
sanctions payable to NYM entered in an Amended Judgment in this case on
June 25, 2015,6 and (3) in November, 2016, AZ agreed to pay $2.1 million for the
5

ECF No. 361, Dec. of M. Goodman, ¶5.

6

ECF No. 341.
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remainder of NYM’s attorney fees in this and the other district court case (ECF
No. 361, ¶6).7
Simple math shows that no double recovery occurred.
In examining the MSWD motions and briefs asserting res judicata and
accord and satisfaction, the Court finds them to be wholly without merit and in
violation of the rule of mandate. See In re Sanford Fork & Tool Co., 160 U.S.
247, 255 (1895). Unfortunately, it is just this sort of frivolous argument that
continues to increase NYM’s, the innocent party’s, attorneys’ fees and costs, both
at the district court level and on appeal. Finally, the Court cannot see any purpose
in delaying enforcement of the other $107,867.54 sanction that was imposed on

ECF No. 361, Dec. M. Goodman, ¶6. See Anderson ZurMuehlen & Co.,
P.C. v. New York Marine and General Ins. Co., CV 14-33-BU-SEH. In this
declaratory judgment action, AZ sought to invalidate its 2012 indemnification
agreement with NYM, in which AZ agreed to pay any attorney fees incurred by
NYM in subsequent litigation arising from the Redding claim. On June 24, 2016,
a full year after the attorney fees sanctions were imposed against MSWD in this
case, the Hon. Judge S. Haddon, presiding over CV 14-33-BU-SEH, granted
NYM’s summary judgment motion and denied AZ’s summary judgment motion;
that case was settled by the parties in November, 2016.
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Ms. Deola and Mr. Miller, jointly and severally, on February 27, 2015 (ECF No.
304) and affirmed in full by the Ninth Circuit on June 9, 2017 (ECF No. 347).
Accordingly,
IT IS HEREBY ORDERED that the Clerk shall notify the Court of Appeals
for the Ninth Circuit of the entry of this Order. This Court has completed its
reassessment of the sanctions in light of the reversal of the sanction against
Richard Layne and for compliance with the Haeger case, and this Court finds that
Haeger confirms this Court’s imposition of sanctions as to MSWD. The Clerk
shall enter a Second Amended Judgment, deleting Richard M. Layne from the
Amended Judgment entered on June 25, 2015 (ECF No. 341).
IT IS FURTHER ORDERED that the Combined Motion (ECF No. 352), the
Alternative Motion for Discovery and an Evidentiary Hearing (ECF No. 363), and
the Motion For Leave to File Under Seal (ECF No. 354) are DENIED.
IT IS FURTHER ORDERED that MSWD’s motion to continue to stay
enforcement of the judgment in the amount of $107,867.54 and approve bond in
the amount of $112,000.00 (ECF No. 357) is DENIED.
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The Clerk shall notify the Court of Appeals for the Ninth Circuit of the
entry of this order.
Dated this 17th day of November, 2017.

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