Rappaport v. State Farm Lloyds

Full title: Mark Rappaport, et al., Plaintiffs, v. State Farm Lloyds, Defendant

Court: United States District Court, N.D. Texas, Dallas Division

Date published: Jun 14, 2000

Civil Action No. 3:97-CV-2747-L (N.D. Tex. Jun. 14, 2000)

Opinion

Civil Action No. 3:97-CV-2747-L

June 14, 2000

MEMORANDUM OPINION AND ORDER

SAM A. LINDSAY, United States District Judge.

Before the court is Plaintiff's Application for Attorneys' fees, filed on August 31, 1999, and resubmitted on October 18, 1999, as ordered by the court in its order of October 7, 1999. The court hereby awards Plaintiffs a total of $18,460 in attorneys' fees reasonably incurred by them to litigate successfully their breach of contract claim, which was decided in their favor by a jury.

I. Factual Background

Plaintiffs Mark and Tracey Rappaport ("Plaintiffs") initially filed suit in state court on October 9, 1997. Defendant State Farm Lloyds ("State Farm") removed this case to federal court on November 7, 1997. Plaintiffs made claims for breach of contract, breach of the duty of good faith and fair dealing (bad faith), violations of Tex. Ins. Code Art. 21.55, fraud, and civil conspiracy. State Farm filed a motion for partial summary judgment on May 15, 1998. On June 11, 1998, Plaintiffs responded to State Farm's motion and filed a cross motion for partial summary judgment. In addition to these filed motions, State Farm filed its Motion to Strike Plaintiffs' Response and Cross-Motion for Summary Judgment and Certain Evidence Attached Thereto on June 26, 1998. On June 22, 1999, the court granted summary judgment for State Farm on Plaintiffs' bad faith, fraud, and civil conspiracy claims and dismissed them from the lawsuit. By the same order, the court denied Plaintiffs' Cross-Motion for Partial Summary Judgment and State Farm's Motion to Strike. Plaintiffs' breach of contract and Art. 21.55 claims therefore remained for jury trial. The case proceeded to trial on August 2, 1999, and the jury found in favor of Plaintiffs on August 5, 1999. The court entered final judgment on the jury verdict on September 30, 1999, and informed the parties that Plaintiffs' request for attorneys' fees would be handled by separate judgment pursuant to Fed.R.Civ.P. 54(d)(2)(C).

On August 9, 1999, the court directed Plaintiffs to file their application for attorneys' fees by August 30, 1999, and cautioned the parties that it did not desire the attorneys' fees issue to become a second piece of major litigation. The court further directed Plaintiffs to segregate their fees and submit fees only for the time spent pursuing the successful claims.

On August 31, 1999, Plaintiffs' Application for Attorneys' Fees was filed. Plaintiffs did not adhere to the court's instructions and lectured the court about the impropriety of requiring them to segregate their fees. In its order of October 7, 1999, the court found that Plaintiffs' contractual claims were not so intertwined that they necessarily required proof of the same essential facts. The court again directed Plaintiffs to segregate their fees and warned Plaintiffs that failure to do so would result in the court segregating the fees and taking any action it deemed appropriate for Plaintiffs' failure to comply with the court's order.

In light of the court's order of October 7, 1999, Plaintiffs' First Amended Application for Attorneys' Fees and Brief was filed on October 18, 1999. By way of their amended fee request, Plaintiffs reduced their initial request from $71,430 to $63, 786, a reduction of $7,644, or just under 11 percent. Plaintiffs contend that the court's order to segregate their fees requires them to perform an impractical or impossible task and maintain that the entire amount of fees initially sought should be recoverable.

State Farm contends that Plaintiffs' fee request lacks adequate documentation or testimony from which the court can reasonably conclude that the attorneys' fees sought were reasonable and necessary. State Farm also contends that Plaintiffs have failed to segregate its fees as required by the court. State Farm, for these reasons, urges the court to deny Plaintiffs' fee request.

II. Analysis

A. Segregation of Fees for Multiple Claims

A prevailing party may recover only those fees that are reasonably expended on the litigation. See Hensley v. Eckerhart, 461 U.S. 424, 433-34 (1983); Watkins v. Fordice, 7 F.3d 453, 458 (5^th Cir. 1993). In assessing the reasonableness of attorneys' fees, the court must first determine the reasonable number of hours expended and the reasonable hourly rate for each participating attorney. See Hensley, 461 U.S. at 433; Louisiana Power Light Co. v. Kellstrom, 50 F.3d 319, 324 (5^th Cir.), cert. denied, 516 U.S. 862 (1995). The fee applicant bears the burden of proof on this issue. See Riley v. City of Jackson, Miss., 99 F.3d 757, 760 (5^th Cir. 1996); Kellstrom, 50 F.3d at 324; In re Smith, 966 F.2d 973, 978 (5^th Cir. 1992); Stewart Title Guar. Co. v. Sterling, 822 S.W.2d 1, 10 (Tex. 1991).

The prevailing party also has a duty to segregate its fees. See United States v. Reid Gary Strickland Co., 161 F.3d 915, 919 (5^th Cir. 1998); Smith, 966 F.2d at 978. This duty exists even though it may be difficult to do so. Reid, 161 F.3d at 922. Segregation of fees is particularly important in a suit involving multiple claims or parties. See Stine v. Marathon Oil Co., 976 F.2d 254, 264 (5^th Cir. 1992) (finding that the district court abused its discretion by not requiring segregation of fees for tort and contract claims). There is a recognized exception to this duty under Texas law "when the causes of action involved in the suit are dependent upon the same set of facts or circumstances and thus are `intertwined to the point of being inseparable.'" Stewart Title, 822 S.W.2d at 10 (quoting Gill Sav. Ass'n v. Chair King, Inc., 783 S.W.2d 674, 680 (Tex.App.-Houston [14^th Dist.] 1989, writ denied and writ granted), aff'd in part and modified in part, 797 S.W.2d 31 (Tex. 1990)); see also Oadra v. Stegall, 871 S.W.2d 882, 888 (Tex.App.-Houston [14^th Dist.] 1994, no writ).

As stated before, the court concluded that the fees in this case could be segregated. The court now elaborates upon its prior orders regarding this matter. First, the elements Plaintiffs must prove to establish fraud and breach of contract are substantially different, thereby warranting research of dissimilar issues and entailing proof or denial of nonidentical facts. See Panizo v. Young Men's Christian Ass'n, 938 S.W.2d 163, 171 (Tex.App. — Houston [1^st Dist.] 1996, no writ) (holding that a `fraud claim required more preparation than the contract claim by itself'). To recover on the contractual cause of action, Plaintiffs must prove the existence of a valid contract, performance, or tendered performance, breach, and damages as a result of the breach. Id. at 170. Under Texas law, the elements of fraud are (1) a material misrepresentation was made; (2) which was false; (3) and which was either known to be false when made or was asserted without knowledge of its truth; (4) which was intended to be acted upon; (5) which was relied upon; and (6) which caused injury. Formosa Plastics Corp. USA v. Presidio Engineers and Contractors, Inc., 960 S.W.2d 41, 47 (Tex. 1998); Sears, Roebuck Co. v. Meadows, 877 S.W.2d 281, 282 (Tex. 1994).

Likewise, the elements of bad faith and conspiracy claims are different from a breach of contract claim. An insurer breaches its duty of good faith and fair dealing by failing to settle a claim where the insurer knew or should have known that it was reasonably clear the claim was covered. State Farm Lloyds v. Nicolau, 951 S.W.2d 444, 448 (Tex. 1997); Universe Life Ins. Co. v. Giles, 950 S.W.2d 48, 54 (Tex. 1997). An insurer's liability for the tort of bad faith is distinct from its liability under its insurance contract. Lyons v. Millers Casualty Ins. of Texas, 866 S.W.2d 597, 600 (Tex. 1993). Insurance carriers retain the right to deny questionable claims without being liable for bad faith, even where the insured's loss is ultimately found to be covered under the policy. Id.; Higginbotham v. State Farm Mutual Automobile Ins. Co., 103 F.3d 456, 459 (5^th Cir. 1997). Thus, the issue of bad faith centers not on whether the claim was valid but whether the insurer's conduct was reasonable in rejecting the claim. Id. at 601. To prevail on a bad faith claim, "the insured must prove that there were no facts before the insurer which, if believed, would justify denial of the claim." Higginbotham, 103 F.3d at 459, citing State Farm Lloyds, Inc. v. Polasek, 847 S.W.2d 279, 284 (Tex.App.-San Antonio 1992, writ denied). As long as the insurer has a reasonable basis for denying or delaying payment of a claim, it is not subject to bad faith liability. Id.; Lyons, 866 S.W.2d at 600. With respect to a civil conspiracy, the essential elements are (1) two or more persons; (2) an object to be accomplished; (3) a meeting of minds on the object or course of action; (4) one or more unlawful, overt acts; and (5) damages as the proximate result. Operation Rescue-National v. Planned Parenthood of Houston and Southeast Texas, Inc., 975 S.W.2d 546, 553 (Tex. 1998); Massey v. Armco Steel Co, 652 S.W. 932 934 (Tex. 1983).

The elements regarding each of Plaintiffs' claims are distinct, and thus the court cannot conclude that the causes of action are "intertwined to the point of being inseparable." The court acknowledges that overlapping facts exist between Plaintiffs' fraud and breach of contract claim; however, the two claims also have substantially different elements that would require proof or denial of nonidentical facts. Simply stated, Plaintiffs need not prove fraud to prevail on their breach of contract claim. See Panizo, 938 S.W.2d at 171. The same is true for Plaintiffs' bad faith and conspiracy claims. Plaintiffs would not be required to prove bad faith and conspiracy to prevail on their breach of contract claim, although there is some overlapping of facts. Segregation of fees is not impractical or impossible in this case. The court remains steadfastly convinced that Plaintiffs could have segregated many of their fees. For whatever reason, Plaintiffs have refused to perform this task as ordered by the court.

Litigants "take their chances" that a district court will reduce or reject fee requests if they submit inadequate applications. Wegner v. Standard Ins. Co., 129 F.3d 814, 822 (5^th Cir. 1997) (citing Louisiana Power Light Co. v. Kellstrom, 50 F.3d 319, 326-27 (5^th Cir. 1995). Although specifically instructed to segregate their fees, Plaintiffs refused to do so. Plaintiffs did not even attempt to perform the task of segregating the fees. Additionally, the records of Plaintiffs' lead counsel, Mr. Mark A. Ticer, are sketchy and vague in many instances and do not contain sufficient explanatory detail for the court to determine which hours were expended on the contracts and Art. 21.55 claims, In light of the deficiencies in Plaintiffs' lead counsel's records and the failure to segregate, Plaintiffs' amended fee application provides a totally inadequate allocation of time expended on each claim, and it is impossible for the court to determine the amount of time that was reasonably expended on Plaintiffs' successful contract claim prior to June 22, 1999, the date the court ruled on State Farm's motion for partial summary judgment and Plaintiffs' cross motion for summary judgment. After this date, the only claims that remained were the breach of contract and Art. 21.55 claims, and the time expended was directly attributable to these claims. Accordingly, no issue of segregation is present after June 22, 1999. The only question is the reasonableness of the fee. The court therefore denies all fees requested by Plaintiffs on or before June 22, 1999. The failure of Plaintiffs to segregate is really unexplainable and inexcusable, given that they were forewarned regarding the need to segregate their fees and were granted a second chance to file their fee request.^_

_ In their amended fee application, Plaintiffs included requests on a number of matters on which they did not prevail, for example, their motions to remand, amend complaint, strike experts, and others. Plaintiffs have no right to bill and recover for time expended on issues for which they did not prevail. See Walker v. United States Dep't of Hous. Urban Dev., 99 F.3d 761, 769 (5^th Cir. 1996). The court, however, does not address this issue regarding any matter on or before June 22, 1999, as it is moot based on the court's ruling on Plaintiffs' failure to segregate.

B. Hours of Lead Counsel Mark A. Ticer after June 22, 1999

Plaintiffs' lead counsel has submitted records for work performed after the ruling on the motion for summary judgment on June 22, 1999. See Plaintiffs' First Amended Application for Attorneys' Fees, Exhibit 2-A. The exhibit has entries which total 100.8 hours. Most of these entries contain sufficient detail or the court is actually aware of the services that were performed, and the court is therefore able to determine the necessity and reasonableness of the services performed. For example, most of the entries on Exhibit 2-A relate to trial preparation, attendance at trial and time expended on Plaintiffs' fee request. There is, however, an entry for July 22, 1999, which states "2.0 prep.-depos" and one for July 23, 1999, which states "6.0 depos." The entries do not reflect the name of the person deposed. The court has attempted to link these entries with Exhibit 5, Depositions. The entry for the two hours appears to correspond with the Norvell deposition on Exhibit 5, and thus will be allowed by the court. With respect to the entry for six hours, there is insufficient detail, as Exhibit 5 contains no dates, and the court is unable to match the entry on Exhibit 2-A with any entry on Exhibit 5. The court finds the latter entry to be lacking in explanatory detail. A district court may eliminate hours when the supporting documentation is too vague to permit meaningful review. Leroy v. City of Houston, 906 F.2d 1068, 1080 (5^th Cir. 1990). Accordingly, the court denies recovery for the six hours listed for July 23, 1999.

Finally, there is an entry on Exhibit 2-A for July 28, 1999, which states "Prepare letter to cover research — 2.5." This entry references a letter to the court in which Plaintiffs' lead counsel urged or intimated that the court should abstain in this case. This letter was totally unnecessary on the eve of trial. Moreover, the court did not abstain and tried the case. The letter should never have been written, and the time expended to write it was not reasonable. Accordingly, the court will not allow recovery of the 2.5 hours expended on the letter. Based on the court's findings, the total amount of hours to be allowed for Mr. Ticer is 92.3 hours. This amount represents the total amount of hours claimed on Exhibit 2-A, less the 8.5 hours disallowed by the court.

C. Hours of Jack Thomas Jamison

Plaintiffs' co-counsel, Jack Thomas Jamison, has submitted documentation for services he performed for Plaintiffs. Plaintiffs seek a total of $8,050 for Mr. Jamison's services. This is based on 41.25 hours at the rate of $200 an hour. Mr. Jamison's first documented entry in this case is in July 1999.

State Farm contends that the services of Mr. Jamison were neither necessary nor reasonable because it was not necessary for two attorneys to try a breach of contract case of this nature. State Farm notes that at the time Mr. Jamison's services were sought, the amount of damages in the breach of contract had been stipulated by the parties as $8,900. State Farm's position is that the addition of Mr. Jamison to a relatively simple breach of contract case was "overkill."

The court is convinced that Mr. Jamison's services were not necessary for the prosecution of this action. Mr. Ticer had handled this case on all claims prior to Mr. Jamison's entry into the case, and Plaintiffs have provided no evidence that Mr. Ticer could not have performed these same services. The only claim that remained was really the breach of contract claim. The court does not understand why an additional lawyer with essentially the same skill, experience, and knowledge as that of Mr. Ticer was needed at this stage of the litigation, and Plaintiffs have produced insufficient evidence to establish that Mr. Jamison's services were needed. The court recognizes that certain lawsuits need multiple lawyers, but this lawsuit was not such a case. The court also recognizes that Mr. Jamison took an active role in the trial; however, the services he rendered could have been performed by Mr. Ticer. While the court recognizes the contributions made by Mr. Jamison, performance of his services made those of Mr. Ticer unnecessary. Since both attorneys are billing and requesting compensation at the same hourly rate, allowing recovery for the services rendered by Mr. Jamison would be deducting from the services performed by Mr. Ticer. Whether the court deducts from the amount of recovery allowed for Mr. Ticer's services or disallows recovery for the services of Mr. Jamison, the net result of fees disallowed is the same. Plaintiffs are entitled to no award of fees from the court for services performed by Mr. Jamison. Any fees to which Mr. Jamison is entitled is a matter between him and Mr. Ticer or Plaintiffs. His fees cannot be recovered at the expense of State Farm. For the reasons stated herein, the court denies recovery of all fees sought on behalf of Jack Thomas Jamison.

D. Hourly Rate for Mark A. Ticer

The court, having determined the number of hours reasonably expended on Plaintiffs' successful breach of contract claim, now determines the reasonable hourly rate. See Hensley, 461 U.S. at 433. Plaintiffs' lead counsel submitted an affidavit that his hourly rate is $200 per hour and that this rate is the prevailing rate in the Dallas legal market for reasonable and necessary services based on his ability, skill, knowledge, and competence. Mr. Ticer also avers that $200 per hour is his usual and customary fee in these kinds of cases. State Farm contends that Mr. Ticer had requested $175 in another case shortly before Plaintiffs' fee request in this case. The court is aware of what constitutes the usual and customary fee for reasonable and necessary services in the Dallas legal market for an attorney of Mr. Ticer's ability, competence, knowledge, and skill. The court concludes that $200 per hour is within the range of reasonableness for an attorney of Mr. Ticer's ability, competence, knowledge, and skill. Accordingly, Plaintiffs will be compensated for Mr. Ticer's services at the rate of $200 per hour.

E. Lodestar Amount

The total amount of fees to be recovered by Plaintiffs in this case is $18,460. This figure is the product of hours allowed for Mr. Ticer (92.3) multiplied by the reasonable hourly rate of $200 per hour.

F. Miscellaneous Matters

Some matters and issues raised by the parties were not discussed by the court in this opinion. The court only considered those matters which were necessary to its decision. Any issue not addressed by the court was deemed to be moot, irrelevant, or unnecessary with respect to its ruling on Plaintiffs' fee application.

III. Conclusion

Plaintiffs undoubtedly could have received a larger fee; however, their defiance of the court's orders caused their overall fees to be reduced. Plaintiffs wholly failed to allocate their fees as directed by the court. The court will not use its scarce judicial resources to perform a task that Plaintiffs could have and should have performed. The result reached by the court reflects the choice Plaintiffs elected to make. For the reasons previously stated, Defendant State Farm is hereby ordered to pay to Plaintiffs the sum of $18,460 as reasonable attorneys' fees incurred on their successful breach of contract claim.

It is so ordered.