Transwest Credit Union v. Cumis Insurance Society
Filing
167
MEMORANDUM DECISION AND ORDER -denying the 161 Motion for Judgment as a Matter of Law and the 161 Motion for New Trial. Signed by Judge Ted Stewart on 4/30/13. (ss)
IN THE UNITED STATES COURT FOR THE DISTRICT OF UTAH
CENTRAL DIVISION
TRANSWEST CREDIT UNION,
Plaintiff,
MEMORANDUM DECISION AND
ORDER DENYING TRANSWEST’S
RENEWED MOTION FOR
JUDGMENT AS A MATTER OF
LAW AND MOTION FOR NEW
TRIAL
vs.
CUMIS INSURANCE SOCIETY, INC.,
Case No. 2:09-CV-297 TS
Defendant.
This matter is before the Court on Plaintiff Transwest Credit Union’s (“Transwest”)
Renewed Motion for Judgment as a Matter of Law and Motion for New Trial.1 Defendant
CUMIS Insurance Society (“CUMIS”) opposes Tanswest’s Motion. For the reasons discussed
more fully below, the Court will deny Transwest’s Motion.
1
Docket No. 161.
1
I. BACKGROUND
Transwest brought its original complaint against CUMIS in Utah state court on March 23,
2009. CUMIS subsequently removed the case to this Court on April 6, 2009. A five-day jury
trial commenced in this matter on January 28, 2013. During the course of trial, Transwest moved
for judgment as a matter of law. The Court denied Transwest’s motion and submitted the matter
to the jury. On February 1, 2013, the jury unanimously found that CUMIS did not breach the
terms of the Credit Union Bond it entered into with Transwest.2 The Clerk of Court entered
judgment in favor of CUMIS on February 4, 2013.3
II. DISCUSSION
A.
JUDGMENT AS A MATTER OF LAW
Transwest asserts that it should be granted judgment as a matter of law because CUMIS
did not introduce specific evidence demonstrating how it was prejudiced by Transwest’s late
notice. CUMIS contends that judgment as a matter of law is not appropriate because there was
ample evidence from which the jury could conclude that CUMIS was prejudiced and, in any
event, the jury had multiple bases to enter a verdict in favor of CUMIS.
“A renewed motion for judgment as a matter of law must be granted if, viewing the
evidence in the light most favorable to the nonmoving party, all the evidence and the inferences
to be drawn from it are so clear that reasonable persons could not differ in their conclusions.”4
2
See Docket No. 153.
3
See Docket No. 159.
4
Banki v. Provident Indem. Life Ins. Co., 95 F. App’x 268, 271 (10th Cir. 2004)
(unpublished) (internal quotation marks and citation omitted).
2
Transwest cites two Utah Supreme Court cases, Busch Corp. v. State Farm Fire and
Casualty Co.5 and AOK Lands v. Shand,6 for the proposition that CUMIS was required to
demonstrate prejudice by its own admissible evidence. Transwest’s reliance on Busch and AOK
Lands is misplaced.
In the cases cited, the court relied on affidavits submitted by the defendants in concluding
that the defendants had been prejudiced by late notice. However, those cases came before the
court on summary judgment.7 At the summary judgment stage, all reasonable inferences must be
drawn in favor of the nonmoving party.8 It follows that, at summary judgment, prejudice will not
be found without the introduction of affirmative evidence demonstrating prejudice.
In contrast, this matter was not resolved at summary judgment but was submitted to the
jury. As the Supreme Court has noted: “The very essence of [the jury’s] function is to select
from among conflicting inferences and conclusions that which it considers most reasonable.”9
“Jurors are supposed to reach their conclusions on the basis of common sense, common
understanding and fair beliefs, grounded on evidence consisting of direct statements by witnesses
5
743 P.2d 1217 (Utah 1987).
6
860 P.2d 924 (Utah 1993).
7
See Busch, 743 P.2d at 1220 (“[T]he district court appropriately granted defendants’
motions for summary judgment” where plaintiffs chose not to file any affidavits to contradict or
deny defendants’ evidence of actual prejudice”); AOK Lands, 860 P.2d at 928 (“[T]rial court was
correct in concluding that prejudice existed as a matter of law” where defendants filed an
affidavit “outlining the prejudice suffered as a result of the approximately nine-year reporting
delay”).
8
See IHC Health Servs., Inc. v. D & K Mgmt., Inc., 196 P.3d 588, 595 (Utah 2008).
9
Tennant v. Peoria & P.U. Ry. Co., 321 U.S. 29, 35 (1944).
3
or proof of circumstances from which inferences can fairly be drawn.”10 Thus, while affirmative
evidence of prejudice is required at the summary judgment stage—where all reasonable
inferences must be drawn in the non-movants favor—the same is not true at trial. At trial the
jury may consider all admissible evidence and draw any supportable inferences.
It is clear that late notice alone does not establish prejudice.11 Rather, as this Court held
at trial, prejudice is the loss of a valuable right or benefit, and occurs when an insurer suffers a
material change in its ability to investigate, settle, or defend the claims at issue.12 “The question
of prejudice should be evaluated in light of the purposes of the notice requirements, namely to
enable the insurer to investigate and take the necessary steps to protect its interests,” including
the loss of money or property value.13
With this standard in mind and, viewing the evidence in the light most favorable to
CUMIS, all the evidence and the inferences to be drawn from it are not so clear that reasonable
persons could not differ in their conclusions as to whether CUMIS suffered prejudice as result of
Transwest’s late notice.
As this Court noted previously, CUMIS elicited testimony from a prior financial officer
of Transwest, Paul Metcalf, that Transwest became aware as early as spring 2006 that a number
of the loans in their construction loan portfolio were for speculative home projects. Mr. Metcalf
10
Schulz v. Pa. R.R. Co., 350 U.S. 523, 526 (1956).
11
See Utah Code Ann. § 31A-21-312.
12
F.D.I.C. v. Oldenburg, 34 F.3d 1529, 1547 (10th Cir. 1994).
13
Id. (internal citation omitted).
4
visited various home sites and discovered that many of the homes were not on track to be
completed in a timely fashion, that the homes were for sale, and that there was a concentration
risk resulting from a number of the homes being built in the same geographic areas, at times in
the same cul-de-sac. Mr. Metcalf and the President of Transwest, Marc Mikkelson, also testified
that around the same time, Transwest received a report from a state entity warning that a number
of the construction loans on Transwest’s books were for speculative home projects. In addition,
Mr. Mikkelson testified that he was told by the CEO of a separate credit union that it would not
purchase a part of Transwest’s loan portfolio because it contained speculative loans. This
evidence supports a finding that Transwest was aware of the facts giving rise to its claim nearly a
year before Transwest filed its notice of loss.
CUMIS elicited testimony from both Mr. Mikkelson and Mr. Metcalf that up to ten to
fifteen percent of Transwest’s losses resulted from recovery errors committed by Transwest in
recovering on the loans at issue. CUMIS also elicited testimony from Mr. Mikkelson and Mr.
Metcalf that nearly $2 million of Transwest’s alleged loss is undocumented. Bart Ferrin, an
independent consultant hired by Transwest to review its loan files, testified that a large portion of
the loss most likely resulted from the decline in real estate market values that occurred after the
loans were issued.
These evidences, among others, could lead a reasonable juror to conclude that CUMIS
lost a valuable right or benefit, namely, the ability to investigate and take the necessary steps to
protect its interests, including the loss of money or property value. For this reason, the Court will
deny Transwest’s Renewed Motion for Judgment as a Matter of Law.
5
B.
NEW TRIAL
Federal Rule of Civil Procedure 59 provides that “[t]he Court may, on motion, grant a
new trial . . . for any reason for which a new trial has heretofore been granted in an action at law
in federal court.” Transwest asserts that it is entitled to a new trial based on CUMIS’s failure to
demonstrate prejudice and because CUMIS was allowed to introduce evidence regarding the
change in value of real property in Utah.
A motion for a new trial “may be granted if the district court concludes the ‘claimed error
substantially and adversely’ affected the party’s rights.”14 “A new trial cannot be granted unless
the error was prejudicial.”15
For the same reasons provided in addressing Transwest’s Renewed Motion for Judgment
as a Matter of Law, the Court finds that Transwest’s arguments on the issue of prejudice do not
entitle it to a new trial.
The Court also finds that a new trial is not merited based on the admission of evidence of
the decline in real estate values during the time period in question. As the Court noted above,
Transwest’s own witness, Mr. Ferin, testified as to the losses that resulted from the decline in the
real estate market. Additionally, the Court instructed the jury that: “Because any loss under the
Credit Union Bond must be determined from the time the funds were wrongfully distributed, the
reduction in the value of the loans that resulted from the overall decline in the real estate market
14
Henning v. Union Pac. R.R. Co., 530 F.3d 1206, 1217 (10th Cir. 2008) (quoting
Sanjuan v. IBP, Inc., 160 F.3d 1291, 1297 (10th Cir. 1998)).
15
Id. (internal citations omitted).
6
is irrelevant to any calculation of the loss.”16 The Court finds that any prejudice or confusion that
may have arisen from the introduction of evidence regarding the decline in the real estate market
was cured by this limiting instruction.
In sum, Transwest’s rights were not substantially and adversely affected by either the
admission of evidence regarding the change in value of real property in Utah or by CUMIS’s
failure to submit a witness on the issue of prejudice. Therefore, the Court will deny Transwest’s
request for a new trial.
III. CONCLUSION
It is therefore
ORDERED that Transwest’s Renewed Motion for Judgment as a Matter of Law and
Motion for New Trial (Docket No. 161) is DENIED.
DATED April 30, 2013.
BY THE COURT:
_____________________________________
TED STEWART
United States District Judge
16
Docket No. 158, at 26.
7
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