Summary
denying motion for sanctions including "reasonable and necessary attorney's fees incurred in preparing and filing the motion to enforce settlement"
Summary of this case from Chen v. Highland Capital Mgmt., L.P.Opinion
Civil Action No. 3:99-CV-1623-D
June 14, 2001
MEMORANDUM OPINION AND ORDER
This case arises from an insurance dispute concerning coverage for water damage to an apartment complex. At mediation, the parties agreed that some issues — including the determination of the amount of non-mold flood damage to the first floor units — would be resolved by binding appraisal. After the appraisal was completed and the insurer tendered payment, the insured refused to release its claim, contending it would also seek prejudgment interest. The insurer now moves the court to enforce the appraisal agreement, contending it represents a settlement of the claim, and seeks sanctions against the insured. For the reasons that follow, the court enforces the agreement but declines to award sanctions.
I
Following a severe rainstorm and flooding, defendant-counterplaintiff U.E. Texas One-Barrington, Ltd. ("Texas One") submitted a loss notice under a policy with plaintiff-counterdefendant Lexington Insurance Company ("Lexington") that insured the Oak Meadow Apartments ("Oak Meadow") in San Antonio, Texas. The claim investigation identified three types of damage to the apartment units: (1) interior damage to the second floor apartment units due to roof leaks, (2) damage to the roofs themselves, and (3) flood damage to the first floor. Texas One also sought lost rents from the storm. After Lexington provided initial funds for immediate repair, loss of rents, and damages, a dispute arose over the extent of Lexington's liability for the damages that Texas One claimed. As a result of this dispute, Lexington filed the instant declaratory judgment action. Texas One asserted a counterclaim for over $3 million in damages to the apartments.
By agreed order, the parties stipulated that Texas One is not entitled to collect any policy benefits for the cost to repair and/or replace the roofs at Oak Meadow and may not collect any judgment entered in its favor against Lexington for the costs associated with the reported damage to the roofs at Oak Meadow. Apr. 7, 2000 Order.
At mediation, the parties entered into a written agreement to submit to binding appraisal the ascertainment of
(a) the actual cash value of the damage to specified first floor units caused by the flood;
(b) the cost to abate and repair mold damage that had developed in the first floor units, not included in (a);
(c) the actual cash value of the damage to the second floor units caused by roof leaks; and
(d) the cost to abate and repair the mold damage that had developed in the second floor units caused by the roof leaks, not included in (c).
P. App. 5. Regarding the first issue, the parties agreed that "this appraisal proceeding is binding and resolves the question of Lexington's liability." Id. at 5, ¶ 9 (emphasis added) (footnote omitted). Concerning the other issues, however, the parties agreed that "[t]he appraisal does not resolve questions of liability or coverage nor is it meant to conclude the dispute between the parties" as to Lexington's liability. Id. at 5, ¶ 10. After the appraisers made their award, Texas One requested and received Lexington's payment for the first floor damage. Although Texas One acknowledged receipt of the payment, it refused to dismiss the claim for damage to the first floor apartments, indicating instead in a letter from its counsel that it would "argue about pre-judgment interest on this amount[.]" Id at 55. Lexington now moves to enforce the agreement, contending that prejudgment interest does not apply to the appraisal award. Texas One opposes the motion.
Lexington has also filed a March 26, 2001 motion for leave to amend its appendix. Because the court is granting Lexington's motion to enforce the settlement agreement without considering the supplement, it denies the motion to amend as moot.
In its response to Lexington's motion, Texas One included a motion for partial summary judgment. In a March 21, 2001 order, the court noted that the motion for partial summary judgment did not comply with the local civil rules and therefore would not be considered.
II A
The enforceability of settlement agreements in diversity cases is governed by state law. Although federal courts possess the inherent power to enforce such agreements, the construction and enforcement of settlement agreements is governed by principles of state law applicable to contracts generally. See Lockette v. Greyhound Lines, Inc., 817F.2d 1182, 1185 (5th Cir. 1987) (per curiam) (quoting Lee v. Hunt, 631 F.2d 1171, 1173-74 (5th Cir. Unit A Dec. 1980)); Borden v. Banacom Mfg. Mktg., Inc., 698 F. Supp. 121, 123 (N.D. Tex. 1988) (Sanders, J.). Because Texas law controls this case, Tex. R. Civ. P. 11 governs the analysis. See Anderegg v. High Standard, Inc., 825 F.2d 77, 80 (5th Cir. 1987) (per curiam); Condit Chem. Grain Co. v. Helena Chem. Corp., 789 F.2d 1101, 1102-03 (5th Cir. 1986). Rule 11 provides that in order for an agreement to be enforced by a court, it must be "in writing, signed and filed with the papers as part of the record[.]"Texas One maintains that the appraisal agreement is merely an agreement for the "limited purpose of determining, in a manner binding on both parties, the amount of damage to the property itself[.]" D. Br. 10. Texas One cites language in the agreement that the appraisal is "limited specifically to the ascertainment of the damage, if any, to the Oak Meadow Apartments[.]" Id. at 4 (quoting P. App. 4). It contends the appraisal agreement is not a settlement agreement because it omits any provisions regarding an agreement to pay any specified sum, and does not provide for a release of claims, termination of litigation, or prejudgment interest and attorney's fees.
B
The relevant provision of the appraisal agreement supports Lexington's interpretation. It explicitly states:
With respect solely to the ascertainment of the actual cash value of the damage to the first floor units . . . caused by the October 1998 flood, this appraisal proceeding is binding and resolves the question of Lexington's liability"
P. App. 5, ¶ 9 (emphasis added) (footnote omitted). Texas One characterizes the appraisal agreement as limited solely to the issue of actual cash value for the damages, preserving the parties' rights to dispute other issues. The court rejects this argument.
When Lexington and Texas One entered into the appraisal agreement, Lexington did not dispute that the policy covered non-mold damage to specified first floor units. As Texas One recognizes in its brief, the parties only needed to resolve the amount of the damage. See D. Br. at 11. Paragraph 9 could have read, "[w]ith respect solely to the ascertainment of the actual cash value of the damage to the first floor units . . . caused by the October 1998 flood, this appraisal proceeding is binding." If the phrase "resolves the question of Lexington's liability" is not construed to limit Lexington's liability for first floor non-mold damage to that ascertained by the appraisal, and to exclude liability for any other type of relief, it is rendered meaningless, since Lexington had already admitted that it was liable under the policy and contested only the amount of the loss. Under Texas law, however, a contractual term must not be interpreted so that it is rendered meaningless or redundant. See Bank One, Tex., N.A. v. FDIC, 16 F. Supp.2d 698, 707 (N.D. Tex. 1998) (Fitzwater, J.).
Morever, the agreement explicitly distinguishes between the binding effect of the appraisal as to non-mold damage to specified first floor units and the remaining issues — first floor mold damage, non-mold damage to second floor apartments, and second floor mold damage. The document expressly resolves Lexington's liability as to the first issue, but expressly "does not resolve questions of liability or coverage nor is it meant to conclude the dispute between the parties as to" the remaining issues. It is therefore objectively apparent that the parties intended that the appraisal agreement completely resolve Lexington's liability in this one categorical respect.
In view of the settlement, Texas One is not entitled to prejudgment interest on the amount Lexington paid for non-mold loss to the specified first floor units. Under Texas law, "neither statutory nor common law provides that prejudgment interest may be awarded by a court for settlement agreements." Miller v. Twin-City Fire Ins. Co., 1999 WL 7892, at *2 (Tex.App. 1999, no writ). Prejudgment interest is therefore available only by contract. Because Lexington and Texas One did not agree in the appraisal agreement to such relief, Texas One is barred from recovering it.
Texas One challenges Lexington's citation of Miller on the ground that, under Tex. R. App. P. 47.7, unpublished opinions have no precedential authority and must not be cited. D. Br. at 2-3, 11. It recognizes, however, that federal courts are allowed to use unpublished federal court opinions as persuasive authority, and therefore raises the matter to emphasize that Miller lacks precedential value. As in 5636 Alpha Road v. NCNB Texas National Bank, 879 F. Supp. 655, 663 n. 11 (N.D. Tex. 1995) (Fitzwater, J.), the court recognizes that this case may not be cited as precedent and does not deem itself bound to follow Miller. The court cites it as an apt summary of settled Texas law.
The court therefore grants Lexington's motion to enforce the settlement agreement. Texas One must, within 15 days of the date this memorandum opinion and order is filed, file with the clerk of court a notice of dismissal dismissing its claim for non-mold flood damage to the first floor units of Oak Meadow that are the subject of the appraisal agreement. See P. App. 5 n. 1.
III
Lexington also moves the court to sanction Texas One by awarding Lexington its reasonable and necessary attorney's fees incurred in preparing and filing the motion to enforce settlement. Because Lexington does not cite the authority on which it relies to seek such relief, the court cannot apply the proper standards to assess whether it is entitled to attorney's fees. Accordingly, this aspect of its motion is denied.
IT IS SO ORDERED.