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American Modern Home Insurance Co. v. Thomas

United States District Court, E.D. Missouri, Eastern Division

August 22, 2019

AARON THOMAS, et al., Defendants.



         This Memorandum and Order deals with the motions for attorney's fees and interest and the motion for sanctions.

         A fire occurred in Aaron and Aimee Thomas's apartment on January 3, 2014. The Thomases made a claim on their renter's insurance policy, but their insurer, American Modern Home Insurance Company, never determined the claim. Instead, over two years later, American Modern brought this declaratory judgment action against the Thomases, seeking a declaration that there was no coverage under the policy. After counsel was appointed for them, the Thomases filed a counterclaim, seeking a declaration that they were entitled to recover on the policy and, further, claiming that American Modern was vexatious in its refusal to pay the claim. After a seven-day trial, a jury found in favor of the Thomases and awarded them $19, 093.74 in damages on the policy-coverage claim and the maximum statutory penalty available on the vexatious-refusal-to-pay claim, that is, $2059.37, for a total award of $21, 153.11. Aimee Thomas was not successful on a separate claim of intentional infliction of emotional distress. As part of the judgment entered on the jury's verdicts, the Thomases were awarded their attorney's fees, as provided under Missouri's vexatious-refusal-to-pay statute. At the conclusion of trial, a motion for sanctions filed by the Thomases during trial remained pending.

         After careful consideration of the documentation submitted and the parties' respective positions on attorney's fees, I will award the Thomases attorney's fees in the amount of $661, 505 and will grant their request for prejudgment and post-judgment interest. Although I find that American Modern engaged in sanctionable misconduct, I cannot impose a monetary sanction that is duplicative of the attorney's fee award and therefore must deny the motion for sanctions.

         I. Motion for Attorney's Fees

         I appointed attorneys Kenneth R. Heineman of Husch Blackwell LLP and Jonathan R. Waldron of Lathrop Gage LLP to represent the Thomases in this action. Through counsel, the Thomases seek to recover $992, 267 in attorney's fees. American Modern objects, arguing that attorney's fees are not available to the Thomases. In the alternative, American Modern challenges the amount of fees requested.

         A. Availability of Attorney's Fees

         In a diversity action, state law governs the availability of attorney's fees where no conflicting federal statute or court rule applies. Weitz Co. v. MH Washington, 631 F.3d 510, 528 (8th Cir. 2011). In Missouri, attorney's fees are not recoverable from another party, except when allowed by contract or statute. Trim Fit, LLC v. Dickey, 607 F.3d 528, 532 (8th Cir. 2010) (citing Essex Contracting, Inc. v. Jefferson Cty., 277 S.W.3d 647, 657 (Mo. banc 2009)). In cases where a party prevails against an insurance company on a claim of vexatious refusal to pay, attorney's fees are allowed to the prevailing party by statute. Specifically, Mo. Rev. Stat. § 375.420 provides:

In any action against any insurance company to recover the amount of any loss under a policy of . . . insurance except automobile liability insurance, if it appears from the evidence that such company has refused to pay such loss without reasonable cause or excuse, the court or jury may, in addition to the amount thereof and interest, allow the plaintiff damages not to exceed twenty percent of the first fifteen hundred dollars of the loss, and ten percent of the amount of the loss in excess of fifteen hundred dollars and a reasonable attorney's fee; and the court shall enter judgment for the aggregate sum found in the verdict.

(Emphasis added.) Because the Thomases prevailed on their claim of vexatious refusal to pay against American Modern, an award of attorney's fees is available to them by statute. And the local rules of this Court provide that such statutorily-authorized fees are available in cases where appointed counsel represents the prevailing party. E.D. Mo. L.R. 12.06(C). See also Walitalo v. Iacocca, 968 F.2d 741, 747 (8th Cir. 1992) (“[T]here is certainly no error in shifting liability for court-appointed counsel's fees to a defendant if the plaintiff obtains a judgment against it under a fee-shifting statute[.]”). American Modern argues, however, that despite the plain language of the Missouri statute and this Court's local rule, attorney's fees are not allowable in this case because counsel was appointed, thereby negating the need for the Thomases to recoup any personal expense for counsel. American Modern's argument is misguided.

         A reasonable attorney's fee is based upon the value of counsel's services and is not limited to what a client agrees to or is able to pay. See O'Brien v. B.L.C. Ins. Co., 768 S.W.2d 64, 71 (Mo. banc 1989) (citing Blanchard v. Bergeron, 489 U.S. 87 (1989)). This is particularly true in the circumstances of this case and especially upon consideration of § 375.420's purpose.

         Missouri's vexatious-refusal-to-pay statute is penal in nature with its purpose being “to correct the evil of an arbitrary refusal for the sole purpose of delaying the plaintiff in the collection of his claim.” Willis v. American Nat'l Life Ins. Co., 287 S.W.2d 98, 104 (Mo.Ct.App. 1956). A penal statute must be strictly construed and will not be regarded as including anything “not within its letter.” Id. at 103-04 (quoting State ex inf. Collins v. St. Louis & S.F.R. Co., 142 S.W. 279, 281 (Mo. 1911)). Although American Modern argues that § 375.420's authorization for attorney's fees was not meant to apply to parties with appointed counsel since they, personally, are not out litigation expenses, the plain language of Missouri's vexatious-refusal-to-pay statute allows a prevailing plaintiff a reasonable attorney's fee as part of the judgment, without qualification as to the nature of the attorney-client relationship. I will not regard the statute as limiting attorney's fees to privately-retained counsel only.

         Further, allowing attorney's fees for appointed counsel in vexatious-refusal-to-pay cases generally and in this case particularly not only serves the purpose of the Missouri statute but also the overall interest of properly administering justice. Undertaking federal civil litigation is a time-consuming burden, which is one reason why courts infrequently ask lawyers to serve in civil matters. See Ferguson v. Fleck, 480 F.Supp. 219, 222 (W.D. Mo. 1979). It cannot seriously be disputed that meritorious claims generally benefit from the assistance of counsel; and where the monetary relief sought on a meritorious claim is substantial, private counsel is more likely to accept employment from a party. Id. But where the relief sought by an indigent party is not substantial, there is a greater likelihood that private counsel will not accept such employment - even on meritorious claims.

         Here, the corpus of the policy-coverage claim was under $20, 000. To prevail on the claim would bring little monetary relief and a less-than-substantial penalty under § 375.420's formula. The Thomases sought to retain private counsel to defend them against the insurance company's lawsuit, but they were unsuccessful in their efforts. Given that they alone could not investigate the case or hope to obtain evidence to defend against the insurance company's allegations or prove their own, the appointment of counsel rendered them “equal justice at the bar” on their meritorious claims. See Peterson v. Nadler, 452 F.2d 754, 758 (8th Cir. 1971), abrogated on other grounds by Mallard v. U.S. Dist. Court for S. Dist. of Iowa, 490 U.S. 296 (1989). And I am grateful to counsel for accepting the appointment, which brought no guarantee of payment despite the time-consuming burden put upon them.

         Given the purpose of § 375.420, its plain language that a prevailing plaintiff is allowed “a reasonable attorney's fee” as part of the judgment, and the plain language of Local Rule 12.06(C) of this Court permitting appointed counsel to recover statutorily-authorized fees, I conclude that the Thomases are entitled to an award of reasonable attorney's fees in this action.

         B. Legal Standard

         I have broad discretion in determining the reasonableness of attorney's fees. Selleck v. Keith M. Evans Ins., Inc., 535 S.W.3d 779, 786 (Mo.Ct.App. 2017). And my role as the trial judge in this case renders me an expert in determining a reasonable fee, given my familiarity with all of the issues in the case and with the character of the legal services rendered. Terpstra v. State, 565 S.W.3d 229, 249 (Mo.Ct.App. 2019).

         The calculation of a reasonable fee begins with the lodestar amount, which is “determined by multiplying the number of hours reasonably expended by a reasonable hourly rate in the community.” Berry v. Volkswagen Grp. of Am., Inc., 397 S.W.3d 425, 429 n.3 (Mo. banc 2013). I may adjust this amount upon consideration of several factors, including: 1) the rates customarily charged by the attorneys involved in the case and by other attorneys in the community for similar services; 2) the number of hours reasonably expended on the litigation; 3) the nature and character of the services rendered; 4) the degree of professional ability required; 5) the nature and importance of the subject matter; 6) the amount involved or the result obtained; and 7) the vigor of the opposition. Id. at 431; see also Weitz Co., 631 F.3d at 528-29 (considering factors under state law when determining reasonable attorney's fees in diversity action).

         C. Discussion

         Employing the lodestar method, the Thomases seek an award of attorney's fees totaling $992, 267, which represents 2257.1 hours of work performed by three attorneys, a paralegal, and a litigation support clerk at the law firm of Lathrop Gage LLC; and 837.7 hours of work performed by eight attorneys and a paralegal at the law firm of Husch Blackwell LLP. American Modern objects to the requested fees on several bases, which I will address in turn.

         1. Relation to Actual Damages

         The Thomases sought and recovered the amount they claimed under their insurance policy, $19, 093.74, and the maximum amount of the statutorily-prescribed penalty for American Modern's vexatious refusal to pay the claim, $2059.37, for a total monetary judgment of $21, 153.11.

         American Modern argues that large attorney-fee awards on vexatious-refusal-to-pay claims usually result from large damage awards and, further, that attorney-fee awards that exceed actual-damage awards on such claims “typically” are in the range of 300 to 400 percent of the damages awarded. Given the relatively low damages awarded here, American Modern contends that the requested fee award should be reduced to bring it in line with the Thomases' actual damages and with other vexatious-refusal-to-pay cases. In the particular circumstances of this case, I disagree.

         First, the Missouri Supreme Court has noted that the amount of the verdict or judgment may have little bearing on the amount of the fee award in cases where the applicable fee-shifting statute was promulgated by the legislature to protect the public from harm. Berry, 397 S.W.3d at 431 (quoting Gilliland v. Missouri Athletic Club,273 S.W.3d 516, 523 (Mo. banc 2009) (en banc)). The Missouri legislature enacted the statute under which the Thomases prevailed “to correct the evil of an arbitrary refusal for the sole purpose of delaying the plaintiff in the collection of his claim.” Willis, 287 S.W.2d at 104 (emphasis added). The Thomases were awarded the maximum ...

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