Opinion
No. 98 CIV. 8428 (DLC)
May 17, 2000
For the Plaintiff, Eugene Wollan, Esq., Jeffrey S. Weinstein, Esq., Elisa T. Gilbert, Esq., Mound Cotton Wollan, New York, N Y 10004
For the Defendants, Dwight B. Palmer, Jr., Esq., Stanley C. Nardoni, Esq., Bell Jones Quinlisk Palmer, Chicago, IL 60606-5233
OPINION ORDER
Plaintiff National Union Fire Insurance Company of Pittsburgh, PA ("National") brought this action seeking a declaratory judgment that defendants The Stroh Companies, Inc. and The Stroh Brewery Company (collectively "Stroh") were not entitled to coverage for losses incurred as a result of glass contamination in iced tea products bottled at one of Stroh's plants. The Court having granted summary judgment in favor of Stroh, Stroh now moves for an award of attorney's fees. For the reasons set forth below, Stroh's motion is denied.
BACKGROUND
The facts and legal issues in the underlying dispute in this case are discussed at length in this Court's December 28, 1999, and March 8, 2000 Opinions. Familiarity with those Opinions is assumed.
DISCUSSION
1. Availability of attorney's fees
Under New York law,
in certain circumstances an insured may be entitled to its legal fees when it has been "cast in a defensive posture" in an action brought by an insurer seeking to avoid "its policy obligations."Commercial Union Assurance Co. PLC v. Oak Park Marina, 198 F.3d 55, 61 (2d Cir. 1999) (quoting Mighty Midgets, Inc. v. Centennial Ins. Co., 416 N.Y.S.2d 559, 564 (N.Y. 1979)). The Second Circuit has made clear, however, that this principle of New York law is applicable only where an insurer has a duty to defend under the policy at issue. In Employers Mutual Casualty Co. v. Key Pharmaceuticals, 75 F.3d 815 (2d Cir. 1996), the court held:
Mighty Midgets does no more than carve out a narrow exception to the general rule that litigation costs are not recoverable by a winning litigant; that exception arises when a policyholder has been cast in a defensive posture by its insurer in a dispute over the insurer's duty to defend.Id. at 824 (emphasis supplied). See also Puritan Ins. Co. v. Eagle Steamship Co. S.A., 779 F.2d 866, 872 (2d Cir. 1985); Aetna Casualty Surety Co. v. Dawson, 444 N.Y.S.2d 10, 12 (1st Dept. 1981)
Stroh acknowledges that National has no duty to defend under the policy at issue, and concedes that the Mighty Midgets principle consequently is inapplicable. Stroh appeals, however, to this Court's inherent power to sanction abusive litigation practices, as well as its authority to impose sanctions under Rule 11, Fed.R.Civ.P., in arguing that attorney's fees are appropriate here.
"Federal courts have `well acknowledged inherent power to levy sanctions in response to abusive litigation practices.'" DLC Management Corp. v. Town of Hyde Park, 163 F.3d 124, 135 (2d Cir. 1998) (sanctions under Rule 37, Fed.R.Civ.P.) (quoting Roadway Express. Inc. v. Piper, 447 U.S. 752, 764 (1980)). These sanctions may include attorney's fees in certain circumstances.
Although the general American rule is that the prevailing litigant is ordinarily not entitled to collect a reasonable attorneys' fee from the loser, an exception allows an award of such fees when the losing party has acted in bad faith, vexatiously, wantonly, or for oppressive reasons.Puritan, 779 F.2d at 873. "Because of the potency of the court's inherent power, courts must take pains to exercise restraint and discretion when wielding it." DLC Management, 163 F.3d at 136.
In order to support an award of attorney's fees on grounds of bad faith, there must be clear evidence that the claims are entirely without color and made for reasons of harassment or delay or for other improper purposes.Puritan, 779 F.2d at 873.
National's behavior in this litigation did not meet this demanding standard. As the Court noted in its March 8 Opinion, National's coverage obligation here arose out of its own failures of due diligence and draftsmanship at the time Stroh added the Heileman group of companies to its insurance policy. The Court found National's attempts to escape its contractual obligations unconvincing. Nevertheless, National's claims were not so "entirely without color," or its behavior so "vexations, wanton or oppressive," to merit an award of attorney's fees as a sanction.
2. Waiver
Stroh also argues that National waived its objections to Stroh's motion for attorney's fees by failing to address this issue in its surreply letters regarding Stroh's original motion for summary judgment. Stroh had concluded its reply memorandum in support of its motion with the sentence: "Awarding Stroh attorney fees is proper too," followed by a single citation to a decision rendered by the New York Supreme Court.
Although Stroh uses the term "waiver," the Second Circuit recently has distinguished waiver, which is the "intentional relinquishment of a known right," from forfeiture, "[w]here a litigant's action or inaction is deemed to incur the consequence of loss of a right." See Hamilton v. Atlas Turner. Inc., 197 F.3d 58, 61 (2d Cir. 1999). Forfeiture is a matter of federal procedural law, see id., and requires a court to "consider all of the relevant circumstances." Id. Stroh introduced the issue of attorney's fees into the case with a casual reference in the concluding paragraph of its reply memorandum, a reference supported by a single citation and no discussion. In these circumstances, the Court will not hold National to have forfeited its opportunity to oppose the imposition of attorney's fees. Nor can the Court infer from National's failure to address the issue in surreply that National "intentionally relinquished" its right to argue against such an award. National has neither waived nor forfeited its right to oppose Stroh's motion for attorney's fees.
CONCLUSION
For the reasons stated, Stroh's motion for attorney's fees is denied.
SO ORDERED: