Assurance Company of America et al v. National Fire & Marine Insurance Company

Filing 230

ORDER Denying 217 Defendant's Motion for Attorney Fees and Costs. Signed by Judge James C. Mahan on 12/19/12. (Copies have been distributed pursuant to the NEF - EDS)

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UNITED STATES DISTRICT COURT
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DISTRICT OF NEVADA
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ASSURANCE CO. OF AMERICA, et
al.,

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2:09-CV-1182 JCM (PAL)

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Plaintiffs,

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v.

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NATIONAL FIRE & MARINE INS.
CO.,

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Defendant.

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ORDER

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Presently before the court is defendant’s motion for attorney’s fees and costs. (Doc. # 217).

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Plaintiffs filed a response (doc. # 222), and defendant filed a reply (doc. # 225).

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I.

Background

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Plaintiffs filed this lawsuit against defendants attempting to consolidate 56 coverage

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litigations into one. The size and scope of the lawsuit was large from the onset. After some of

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plaintiffs’ original claims survived the motion to dismiss and summary judgments stages, 26

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underlying construction defect claims remained at issue for trial.

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Trial was originally set for January 23, 2012. The court rescheduled the trial date to February

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22, 2012, at the request of the defendant. On January 31, 2012, defendant served plaintiff with an

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offer of judgment in the amount of $375,000. At the time of the offer, plaintiffs were seeking

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approximately $1,576,560. Plaintiffs rejected the offer. On February 16, 2012, the parties stipulated

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to postpone the trial date to further participate in settlement negotiations and mediation.

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James C. Mahan
U.S. District Judge

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The negotiations and mediation proved unsuccessful and trial commenced in June 2012. At

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trial, plaintiffs called one witness who had no personal knowledge with respect to any of the

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remaining claims. Plaintiffs then requested this court to take judicial notice of evidence. The

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evidence was improper for judicial notice and the court denied the request. This court then granted

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defendant’s motion for judgment pursuant to Federal Rule of Civil Procedure 52©.

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Defendant now moves the court for attorneys’ fees in the amount of $570,417.60 and certain

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costs not sought in the bill of costs in the amount of $21,391.01. Plaintiffs oppose.

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II.

Legal Standards

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Federal Rule of Civil Procedure 54(d)(2)(B)(ii) provides that a motion for attorney’s fees

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must “specify the judgment and the statute, rule, or other grounds entitling the movant to the award.”

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“A party moving for attorney’s fees must therefore assert an independent source of authority for an

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award.” Gallagher v. Crystal Bay Casino, LLC, no. 3:08-cv-00055, 2012 WL 1409244, at *2 (D.

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Nev. April 20, 2012).

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“In diversity cases, the determination of attorneys’ fees involves an application of Erie v.

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Tompkins, 304 U.S. 64 (1938), to offer of judgment rules.” Kravitz, Schnitzer, Sloane & Johnson

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v. Asta Funding, Inc., no. 2:10-cv-486-JCM-PAL, 2011 WL 5190927, at *1 (D. Nev. Oct. 28, 2011).

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“Statutes allowing for recovery of attorney’s fees are considered substantive for Erie purposes.”

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Walsh v. Kelly, 203 F.R.D. 597, 598 (D. Nev. Sep. 17, 2001). “Federal Rule 68 is inapplicable in a

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case in which the defendant obtains judgment.” MRO Commc’ns, Inc. v. Am. Tel. & Tel. Co., 197

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F.3d 1276, 1280 (9th Cir. 1999) (citing Delta Air Lines, Inc. v. August, 450 U.S. 346, 352 (1981) (“It

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is clear that [Fed.R.Civ.P. 68] applies only to offers made by the defendant and only to judgments

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obtained by the plaintiff. It therefore is simply inapplicable to this case because it was the defendant

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that obtained the judgment.”).

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“Although Fed.R.Civ.P. 68 does not apply in this action, Fed.R.Civ.P. 54(d) allows the court,

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in its discretion, to awards costs to the prevailing party in a lawsuit.” Dietrich v. John Ascuaga’s

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Nugget, No. 3:04-cv-0468, 2007 WL 1101232, at *1 (D. Nev. April 10, 2007); Walsh, 203 F.R.D.

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at 599 (“MRO involved the situation where the defendant received a judgment in the case.

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James C. Mahan
U.S. District Judge

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Therefore, Fed.R.Civ.P. 68 did not apply at all, because that rule governs when a plaintiff receives

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a judgment that is less than the offer made by the defendant. Because the federal rule was

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inapplicable in MRO, the Ninth Circuit did not have a conflict applying Nev.R.Civ.P. 68, and

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awarding attorney’s fees.”) (alterations in original).

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“In an action where a district court is exercising its subject matter jurisdiction over a state

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law claim, so long as state law does not run counter to a valid federal statute or rule of court, and

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usually it will not, state law denying the right to attorney’s fees or giving a right thereto, which

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reflects a substantial policy of the state, should be followed.” MRO, 197 F.3d at 1287. (quoting

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Alyeska Pipeline Serv. Co. v. Wilderness Soc’y, 421 U.S. 240, 259 n.31); Walsh, 203 F.R.D. at 599

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(D. Nev. 2001) (“[I]f the state rule awards attorney’s fees for failure to accept offer of judgment, that

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rule should control in a diversity case in the federal court.”).

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This court will then look to Nevada law. “The Nevada Supreme Court has ruled that Nevada

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Rule of Civil Procedure 68 encompasses a judgment against the offeree.” Id. at 1281 (citing Beattie

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v. Thomas, 668 P.2d 268 (Nev. 1983)). Specifically, Nevada Rule 68(f)(2) states that “the offeree

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shall pay the offeror’s post-offer costs, applicable interest on the judgment from the time of the offer

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to the time of entry of the judgment and reasonable attorney’s fees, if any be allowed, actually

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incurred by the offeror from the time of the offeror.” NRS 117.115(4)(d) gives the court

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discretionary power in awarding attorney’s fees. Id. (using the permissive “may”).

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In Beattie, the Nevada Supreme Court discussed the circumstances in which an award of fees

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pursuant to Nevada Rule of Civil Procedure 68 are appropriate. In exercising its discretion regarding

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the allowance of fees and costs under NRCP 68, the court “must carefully evaluate the following

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factors:

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(1) whether the plaintiff’s claim was brought in good faith; (2) whether the defendants’ offer
of judgment was reasonable and in good faith in both its timing and amount; (3) whether
plaintiff’s decision to reject the offer and proceed to trial was grossly unreasonable or in bad
faith; and (4) whether the fees sought by the offeror are reasonable justified in amount.”

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Beattie, 668 P.2d at 274.
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...

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James C. Mahan
U.S. District Judge

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III.

Discussion

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Defendant argues that each of the Beattie factors weigh in its favor. For much of plaintiffs’

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response brief, they do not identify the correct legal standards. When plaintiffs do find the correct

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legal standard, they argue that the Beattie factors weigh against awarding attorney’s fees. The court,

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after considering the motions, affidavits, and exhibits, will address the factors necessary to dispose

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of the motion. “Under Beattie, the district court need only ‘consider’ the four relevant factors.”

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MRO, 197 F.3d at 1284 (quoting Beattie, 668 P.2d at 274.

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A.

Claims Brought in Good Faith

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Plaintiffs originally brought over 50 claims in this lawsuit. Plaintiffs voluntarily dismissed

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some claims and this court granted summary judgment as to some claims. At trial, 26 claims

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remained.

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The court finds that plaintiffs pursued the remaining claims in good faith. It was perhaps a

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misguided strategic decision to pursue so many claims in a single action. The numerous claims may

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have led to plaintiffs being underprepared to proceed properly at trial. However, plaintiffs’ inability

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to secure admissibility of certain fundamental evidence and documents does not mean that the claims

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were not brought in good faith. Plaintiffs, incorrectly in hindsight, believed they had a good chance

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of success on the merits and pursued the claims in good faith.

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B.

Whether the Rejection of the Offer and Proceed to Trial was Grossly Unreasonable
or Bad Faith

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Grossly unreasonable or bad faith rises to a much higher level than poor judgment or

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incorrect tactical decisions. In hindsight, plaintiffs should have accepted the offer. However,

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plaintiffs’ decision to reject the offer was not grossly unreasonable considering the amount sought

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by all the claims and plaintiffs’ decision to participate in negotiations and mediation after rejecting

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the offer. This factor weighs in favor of plaintiffs.

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The court likewise considers the two remaining factors (whether the offer was reasonable and

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in good faith in both timing and amounts and whether the attorney’s fees sought are reasonable) and

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the court finds these factors are either neutral or weigh in favor of plaintiffs.

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James C. Mahan
U.S. District Judge

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Accordingly,

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IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that defendant’s motion for

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attorney’s fees and costs (doc. # 217) be, and the same hereby, is DENIED.
DATED December 19, 2012.

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UNITED STATES DISTRICT JUDGE
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James C. Mahan
U.S. District Judge

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