Warren Drilling Co., Inc. v. Ace American Insurance Company et al

Filing 96

OPINION AND ORDER denying 88 Motion for Attorney Fees. Signed by Judge James L Graham on 5/8/2015. (ds)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
Warren Drilling Co., Inc.,
v.

Case No. 2:12-cv-425

Plaintiff,

Judge Graham

Equitable Production Company,

Magistrate Judge Kemp

Defendant.
Opinion and Order
This indemnification action is before the court on the motion of plaintiff Warren Drilling
Company for an award of attorney’s fees that it incurred in this suit to prove the reasonableness of
the amounts it expended in settling the underlying Hagy litigation.
On April 16, 2014, the court granted summary judgment to Warren on the issue of which
party was liable under the indemnification provisions of a Drilling Contract between Warren and
defendant Equitable Production Company (now known as “EQT”). However, the court found that
Warren had not satisfied its burden, under applicable Pennsylvania law, of proving the
reasonableness of the settlement amount and its litigation expenses in the Hagy litigation. The court
directed Warren to submit evidence and briefing on the issue of the reasonableness of those
amounts:
Warren bears the burden of proving both the reasonableness of the
settlement amount and its litigation expenses. County of Delaware v. J.P. Mascaro &
Sons, Inc., 830 A.2d 587, 593 (Pa. Super. Ct. 2003) (citing Tugboat Indian, 5 A.2d
153; McClure, 585 A.2d 19).
Warren has not yet satisfied its burden. Though it has submitted evidence
that it reached a $40,000 settlement with the Hagys, see Warren Aff., ¶ 11, it has not
provided any analysis as to why that amount was reasonable, other than to vaguely
assert that a trial would have been expensive. Further, Warren has merely alleged
that it expended $155,000 in attorneys’ fees and costs in connection with the Hagy
litigation, without submitting any evidence to substantiate that amount. And
Warren’s analysis of the reasonableness of the alleged amount is largely limited to the
point that it was less than what Warren believes EQT’s fees and costs were in the
Hagy litigation.

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Accordingly, the court will instruct the parties to submit additional evidence
and briefing on the issues of the reasonableness of the settlement amount and of the
litigation expenses.
Doc. 69 at 12.
Warren then filed a supplemental brief, and in an August 26, 2014 order the court approved
the reasonableness of the amounts sought by Warren:
Warren has submitted a brief and evidence in support of its position on the
reasonableness of the amount of its settlement with the Hagys and of its attorneys’
fees and costs in the Hagy litigation. The settlement amount was $40,000. In its
submission, Warren demonstrates that at the time of the settlement, it expected to
incur a minimum of $43,000 to $68,000 in additional attorneys’ fees relating to
moving for summary judgment and attending to final pre-trial matters (not including
the jury trial itself). Thus, Warren argues that a $40,000 settlement was a less
expensive alternative to further litigation.
As to its attorneys’ fees and costs, Warren demonstrates that over the course
of a year and a half of litigation, it incurred a total of 465 hours of legal services at
rates that varied from $65 per hour to $190 per hour. The total attorneys’ fees were
$84,477.50. Warren incurred $8000.50 in costs (largely court reporter fees) and
$61,911.44 in expert fees. The expert fees were incurred pursuant to a fee-sharing
agreement among the defendants, including EQT, in the Hagy litigation.
In response EQT stipulates to the reasonableness of the settlement amount,
attorneys’ fees, costs, and expert fees. EQT reserves its right to contest on appeal
the issue of its liability to defend and indemnify Warren.
In light of EQT’s stipulation, the court finds that the amounts of the
settlement and of Warren’s attorneys’ fees and costs are reasonable.
Doc. 81 at 5-6.
In its current motion, Warren argues that EQT should have stipulated to the reasonableness
of the amounts incurred in settling the Hagy litigation when it responded on February 27, 2013 to
plaintiff’s requests for admission under Fed. R. Civ. P. 36. Warren points specifically to Requests
for Admission Numbers 12 and 18:
12.

Admit that the Settlement Amount was fair and reasonable.

RESPONSE: Denied. All other parties were granted summary judgment.
18.
Admit that the legal fees, costs, and expenses incurred and paid by Plaintiff
in the Civil Action in the amount of $99,380.00 were reasonable.
RESPONSE: EQT has made reasonable inquiry but the information known or
reasonably obtainable by it is insufficient to enable it to admit or deny this request.
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Doc. 57-3 at 4-6. Warren argues that EQT, which had been a party to the Hagy litigation and had
been provided with an accounting of Warren’s expenses in the Hagy litigation in June 2012, learned
nothing new between February 27, 2013 and when it made its stipulation after the grant of summary
judgment on the issue of liability. According to Warren, EQT lacked a good faith basis to refuse to
admit to the reasonableness of Warren’s expenses in the Hagy litigation, and EQT’s failure to do so
caused Warren to expend an additional $30,100 in this lawsuit in demonstrating the reasonableness
of those expenses.
Warren’s motion must be denied under the safe harbor provisions of Rule 37(c)(2):
(2) Failure to Admit. If a party fails to admit what is requested under Rule 36 and if
the requesting party later proves a document to be genuine or the matter true, the
requesting party may move that the party who failed to admit pay the reasonable
expenses, including attorney’s fees, incurred in making that proof. The court must
so order unless:
(A) the request was held objectionable under Rule 36(a);
(B) the admission sought was of no substantial importance;
(C) the party failing to admit had a reasonable ground to believe that it might prevail
on the matter; or
(D) there was other good reason for the failure to admit.
Fed. R. Civ. P. 37(c)(2).
The court finds that EQT had reasonable ground to believe that it could prevail on the
issues presented by Request for Admission Number 12.

Two other defendants to the Hagy

litigation, including EQT, obtained judgment in their favor on the merits. In EQT’s view, Warren
could have obtained judgment as well and its decision to settle, for any amount, was unreasonable
because it disqualified Warren from seeking indemnification.

EQT believed that Warren’s

settlement would cause Warren’s indemnification claim to fail under Pennsylvania’s “actual liability”
rule, which requires an indemnitee in a second lawsuit to offer “practically the same evidence” that
the injured party would have submitted in the first action in order to prove the indemnitee’s liability
to the injured party. Martinique Shoes, Inc. v. New York Progressive Wood Heel Co., 217 A.2d
781, 783 (Pa. Super. Ct. 1966); Philadelphia Elec. Co. v. Hercules, Inc., 762 F.2d 303, 317 (3d Cir.
1985). Although this court ultimately held that the Drilling Contract contained sufficient language

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to opt out of the actual liability rule, 1 see doc. 69 at 11-12, EQT’s denial of Request for Admission
Number 12 reflected a correct view of the default rule in Pennsylvania.
The court further finds that EQT had good reason for its failure to admit Request for
Admission Number 18. The amount that Request Number 18 asked EQT to admit was reasonable,
$99,380.00, is greater than the amount the court ultimately approved as reasonable for Warren’s
attorneys’ fees and costs, $92,478.00 ($84,477.50 in attorneys’ fees plus $8000.50 in costs). Even the
counsel retained by Warren to opine on the reasonableness of their fee request arrived at this lower
amount of $92,478.00.
Accordingly, Warren’s motion for attorneys’ fees (doc. 88) is denied.

s/ James L. Graham
JAMES L. GRAHAM
United States District Judge
DATE: May 8, 2015

This court’s holding that the parties contracted out of the actual liability rule is currently on appeal
before the Sixth Circuit.
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