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Missouri Highways and Transportation Commission v. Cincinnati Insurance Co.

United States District Court, W.D. Missouri, Western Division

July 9, 2015

THE MISSOURI HIGHWAYS AND TRANSPORTATION COMMISSION, et al., Plaintiffs,
v.
CINCINNATI INSURANCE COMPANY, Defendant.

ORDER

NANETTE K. LAUGHREY, District Judge.

Pending before the Court are cross motions for approval of Settlement Agreement filed by Plaintiffs Missouri Highways and Transportation Commission ("MHTC") and Yuna Chow, et al. ("Chow Plaintiffs"), Docs. 249 and 252. For the following reasons, MHTC's motion is denied as moot. The Chow Plaintiffs' motion is granted in part.

I. Background

This case involved a dispute about whether insurance coverage exists for a tort judgment entered against MHTC in the Circuit Court for Clay County, Missouri (the "Clay County action"). The Clay County action arose from a June 24, 2001 single-car accident that occurred on a northbound portion of Interstate 29, near its intersection with Missouri Route W, in Holt County, Missouri. Three persons were killed in the accident and four others were injured. The accident was ultimately determined to have been caused in part by a dangerous and defective condition on the highway, specifically an edge drop-off and rutting on the shoulder.

On September 15, 2014, the Court granted partial summary judgment for MHTC, concluding that Cincinnati had a duty to provide a defense to MHTC in the Clay County action. Subsequently, the Court awarded MHTC $51, 884.64 in attorneys' fees, to be paid by Cincinnati as a result of its breach of the duty to defend.[1] [Doc. 196, 230].

On February 12, 2015, during the pre-trial conference on the failure to indemnify claim, the parties reached a settlement, the terms of which are sealed. [Doc. 240]. Parties agreed that the settlement agreement encompassed all outstanding claims in the case. This necessarily included any claim by MHTC against Cincinnati for breach of the duty to defend.

In April 2015, the parties submitted independent motions for approval of settlement. [Doc. 249, 252]. MHTC's petition asked the Court to determine that it was entitled to $51, 884.64 from the settlement in satisfaction of the attorney fee award made by the Court during the litigation. [Doc. 196, 230]. It also requested that the Court specifically allocate attorneys' fees to the Plaintiffs' firms involved in the case. The Chow Plaintiffs opposed both requests. In June, the parties filed a revised settlement agreement and release which included the following statement:

MHTC is executing this release upon the agreement that the payment of $14, 347.63 will be made to MHTC. That payment will fully satisfy the $51, 884.64 Judgment made on 2/9/15 in favor of MHTC against Cincinnati for the failure of Cincinnati to defend MHTC. Such payment will come out of the attorneys' fees that are assessed, awarded and otherwise payable to Roger G. Brown as a part of his contingency fee recovery in this case in representing the Chow Plaintiffs. Regardless of the fee paid to Roger G. Brown, he will be fully responsible for the full payment of the $14, 347.63.

[Doc. 277, p. 12]. In light of this agreement, the Court assumes that the parties' dispute regarding the $51, 884.64 attorneys' fees award has been resolved. The two remaining issues before the Court are whether the terms of the Settlement Agreement are reasonable and whether the Court has jurisdiction over the dispute regarding the allocation of attorneys' fees in this case.

II. Discussion

A. Jurisdictional Considerations

As jurisdiction is a threshold matter, the Court must first determine whether it is permitted to resolve the parties' dispute regarding the division of attorneys' fees in this case. The federal courts are courts of limited jurisdiction, possessing only power authorized by the Constitution and statute. Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S. 375, 377 (1994). However, under the doctrine of ancillary jurisdiction, claims that are otherwise lacking an independent basis for federal jurisdiction can still be considered if they are factually interdependent with an underlying case or controversy. Peacock v. Thomas, 516 U.S. 349, 355 (1996). The purpose of ancillary jurisdiction is the practical need "to protect legal rights or effectively to resolve an entire, logically entwined lawsuit." Owen Equipment & Erection Co. v. Kroger, 437 U.S. 365, 377 (1978).

Whether a court may exercise ancillary jurisdiction over an issue depends on the degree to which the issue is interrelated with the underlying claim. Ancillary jurisdiction is appropriate if the resolution of the claim will affect the judgment of the court. See United States v. Afremov, 611 F.3d 970, 976 (8th Cir. 2010) (finding no ancillary jurisdiction over a contract claim in criminal case when resolution of the contract dispute would not affect the criminal case). For the Court to possess ancillary jurisdiction over this fee dispute, the dispute must have some effect on the Settlement Agreement or in some way affect the rights of the plaintiffs. See Avery v. Manitowoc, 428 F.Supp.2d 891, 894 (E.D. Wis. 2006) (finding ancillary jurisdiction where fee dispute could affect plaintiff rights, liability, or settlement amount).

Due to the existence of a minor plaintiff in this lawsuit, the Court must approve the fairness of the Settlement Agreement before it can be enforced. Fiegener v. Freeman-Oak Health System, 996 S.W.2d 767, 774 (Mo. App. 1999); see R.S.Mo. ยง 507.184(3). The fairness of the agreement, however, is only impacted by the reasonableness of the total award of attorneys' fees, not the allocation of attorneys' fees among the firms involved in the lawsuit. C.f. Marino v. Pioneer Edsel Sales, Inc., 349 F.3d 746, 753 (4th Cir. 2003) (holding that it was proper for the court to retain jurisdiction over an attorneys' fee dispute where "the amount of attorney's fees paid... can effect [ sic ] the fairness and reasonableness of the class action settlement as a whole."). There is no disagreement about the total attorney fees to be paid from the settlement. On the other hand, resolving the fee dispute would involve interpreting the fee-sharing agreements between the firms, which have nothing to do with the Chow Plaintiffs or MHTC. Nor has Cincinnati ...


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