Westchester Surplus Lines Insurance Company v. Clancy & Theys Construction Company

Filing 245

ORDER denying 221 Motion for Attorney Fees. Signed by Senior Judge W. Earl Britt on 11/12/2015. (Marsh, K)

IN THE UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NORTH CAROLINA
WESTERN DIVISION
NO. 5:12-CV-636-BR
WESTCHESTER SURPLUS LINES
INSURANCE CO.,
Plaintiff,
v.

ORDER

CLANCY & THEYS CONSTRUCTION CO.,
Defendant.

This matter is before the court on defendant Clancy & Theys Construction Co.’s
(“Clancy”) motion for attorneys’ fees. (DE # 221.) Plaintiff Westchester Surplus Lines
Insurance Co. (“Westchester”) filed a memorandum in opposition to the motion.1 (DE # 231.)
Clancy filed a reply. (DE # 234.) This matter is ripe for disposition.
As the court has previously recounted in earlier orders, this case arose out of a dispute
over insurance coverage for an error on a construction project. Westchester brought this action
seeking declaratory judgment against Clancy regarding the insurance policy that it has issued to
Clancy and asserting an alternative claim for breach of contract. Clancy counterclaimed for
breach of contract and tortious breach of contract. Clancy’s counterclaim for tortious breach of
contract was dismissed on summary judgment. Prior to a bench trial, Westchester withdrew its
alternate breach of contract claim.

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 Prior to filing its memorandum in opposition, Westchester filed a request that it be allowed to make an adversary
submission to Clancy’s motion for attorneys’ fees. (DE # 228.) As Westchester has in fact filed its adversary
submission (i.e., its opposition brief), this request is moot.

After the bench trial, the court concluded that coverage existed under the policy and
certain exclusions in the policy did not preclude coverage. Accordingly, the court further
concluded that Westchester was not entitled to declaratory judgment in its favor and that it
breached its obligation to insure Clancy. The court awarded Clancy approximately $1.7 million
in damages.
Clancy now seeks its attorneys’ fees and expenses of $54,989.00 pursuant to N.C. Gen.
Stat. § 6-21.5. That statute reads:
In any civil action, special proceeding, or estate or trust proceeding, the court,
upon motion of the prevailing party, may award a reasonable attorney's fee to the
prevailing party if the court finds that there was a complete absence of a
justiciable issue of either law or fact raised by the losing party in any pleading.
The filing of a general denial or the granting of any preliminary motion, such as a
motion for judgment on the pleadings pursuant to G.S. 1A-1, Rule 12, a motion to
dismiss pursuant to G.S. 1A-1, Rule 12(b)(6), a motion for a directed verdict
pursuant to G.S. 1A-1, Rule 50, or a motion for summary judgment pursuant to
G.S. 1A-1, Rule 56, is not in itself a sufficient reason for the court to award
attorney's fees, but may be evidence to support the court's decision to make such
an award. A party who advances a claim or defense supported by a good faith
argument for an extension, modification, or reversal of law may not be required
under this section to pay attorney's fees. The court shall make findings of fact and
conclusions of law to support its award of attorney's fees under this section.
N.C. Gen. Stat. Ann. § 6-21.5.
In North Carolina, a justiciable issue is one that is “‘real and present as opposed to
imagined or fanciful.’”
“In order to find complete absence of a justiciable issue it must
conclusively appear that such issues are absent even giving the pleadings
the indulgent treatment they receive on motions for summary judgment or
to dismiss.” Under this deferential review of the pleadings, a plaintiff
must either: (1) “reasonably have been aware, at the time the complaint
was filed, that the pleading contained no justiciable issue”; or (2) be found
to have “persisted in litigating the case after the point where [he] should
reasonably have become aware that pleading [he] filed no longer
contained a justiciable issue.” Section 6–21.5 was enacted “to discourage
frivolous legal action and that purpose may not be circumvented by
limiting the statute's application to the initial pleadings. Frivolous action
in a lawsuit can occur at any stage of the proceeding and whenever it
occurs is subject to the legislative ban.”
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Credigy Receivables, Inc. v. Whittington, 689 S.E.2d 889, 895 (N.C. Ct. App. 2010) (citations
omitted) (alterations in original). In evaluating justiciability, the court must “review [] all the
relevant pleadings and documents[.]” Lincoln v. Bueche, 601 S.E.2d 237, 241 (N.C. Ct. App.
2004) (citation omitted).
Clancy argues that it is entitled to recover its attorneys’ fees under § 6-21.5 because it
had to defend against three of Westchester’s “claims”: (1) the subject loss did not arise out of
professional services; (2) the subject claim was based on fraud, i.e., Clancy “faked” a claim
against it; and (3) the cost of repair was an investment loss. While at times Clancy characterizes
Westchester as having maintained these “claims,” the only claims that Westchester alleged in its
complaint were, as previously noted, for declaratory judgment and, alternatively, for breach of
contract. The so-called “claims” which Clancy contends lacked justiciability are in actuality
three positions, among many, that Westchester advanced to support its declaratory judgment
claim. According to Westchester, it maintained these positions as part of its proof on the
“overarching” issue of whether the joint venture and Clancy were separate and distinct entities
for the purpose of the insurance policy Westchester issued to Clancy. It argues that two of its
positions were justiciable up until the time the court granted Clancy’s motion in limine on the
issue, and, as for the third position, that it made the strategic decision in trial preparation not to
call its designated expert witness to support that position.
Construing § 6-21.5 strictly, Sunamerica Fin. Corp. v. Bonham, 400 S.E.2d 435, 437
(N.C. 1991), the declaratory judgment claim is the claim the court must evaluate, not some of
theories Westchester initially advanced, but ultimately abandoned, in support of it. The claim
was justiciable at the time Westchester filed its complaint and remained so throughout the course

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of these proceedings, particularly considering the competent evidence and argument Westchester
propounded through the bench trial.
Even if the court considers Westchester’s three positions in isolation, it does not
conclusively appear that there was a complete absence of justiciability as to any of these
positions. Therefore, an award of fees under § 6-21.5 is not warranted.
For the foregoing reasons, Clancy’s motion for attorneys’ fees is DENIED.
This 12 November 2015.

__________________________________
W. Earl Britt
Senior U.S. District Judge

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