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Gallatin Fuels, Inc. v. Westchester Fire Insurance Co.

October 31, 2007

GALLATIN FUELS, INC., PLAINTIFF,
v.
WESTCHESTER FIRE INSURANCE COMPANY, DEFENDANT.



The opinion of the court was delivered by: Ambrose, Chief District Judge.

OPINION and ORDER OF COURT

SYNOPSIS

Before the Court are various Motions by both Plaintiff and Defendant to amend this Court's June 2, 2004 Order awarding Plaintiff attorneys' fees, costs and prejudgment interest in light of the decision of the Third Circuit, dated August 9, 2007. For the reasons set forth below, I grant in part Defendant's Motion to Amend the Judgment to Vacate the Award of Prejudgment Interest and grant in part and deny in part Plaintiff's Motion seeking attorneys' fees and costs in connection with its Appeal of the underlying liability judgment.

I. MOTIONS BEFORE THE COURT

A. BACKGROUND

Familiarity with the facts underlying the action are assumed. A jury trial was held in February 2006 on Plaintiff's claims for breach of contract and bad faith. The jury awarded $1.325 million in compensatory damages on the breach of contract claim and $20 million as punitive damages under 42 Pa. C.S.A. § 8371 for Defendant's bad faith. By opinion and order dated March 28, 2006, I reduced the jury's punitive damages award to $4.5 million, and entered judgment in the total amount of $5.825 million (the "Judgment"). By order dated June 2, 2006, I denied Defendant's motion pursuant to FRCP 50 for judgment as a matter of law. By separate order, I also granted Plaintiff's Motion for Attorneys' Fees, Costs and Prejudgment Interest pursuant to 42 Pa. C.S.A. § 8371, in the amounts of $1.1 million for attorneys fees and costs and $403,553.34 for prejudgment interest (the "Award"). The Judgment was never amended or conformed to account for the Award.

Both parties appealed the Judgment to the Third Circuit. It is undisputed that Defendant did not appeal the Award. By Opinion dated August 9, 2007, the Third Circuit affirmed that part of the Judgment finding and awarding damages for bad faith, reversed the jury's finding for Plaintiff on the breach of contract claim, and vacated the award of compensatory damages for breach of contract. Specifically, the Third Circuit held that the insurance policy had been cancelled at the time of loss, and thus Plaintiff had no right to recover under the policy for its loss. The Third Circuit also ordered that the parties shall bear their own costs on appeal. On September 12, 2007, the Third Circuit denied the parties' petitions for Rehearing. It issued its "Certified Copy of the Judgment together with Copy of the Opinion" on September 21, 2007, in lieu of a mandate.

B. DEFENDANT'S MOTION TO ALTER AND/OR AMEND THE AWARD.

Defendant moves pursuant to FRCP 59(e) to alter and/or amend the Award to vacate the award of prejudgment interest, attorneys' fees and costs. According to Defendant, such an award is no longer warranted in light of the Third Circuit's reversal of the breach of contract claim and vacating of the compensatory damages award. Plaintiff opposes the Motion on the grounds that the instant Motion is subsumed within the issues that were or could have been appealed, and thus is now beyond the jurisdiction of this Court. In addition, Plaintiff argues that the Motion is contrary to the provisions of 42 Pa. C.S.A. § 8371.*fn1

"Any motion to alter or amend a judgment shall be filed no later than 10 days after entry of the judgment." Fed. R. Civ. P. 59(e). Since this motion was made more than a year after entry of the Award, it is untimely pursuant to Rule 59(e).

However, a court may convert a motion brought pursuant to Rule 59(e) into a motion brought pursuant to Rule 60(b). Ahmed v. Dragovich, 297 F.3d 201, 209 (3d Cir. 2002) (court will consider untimely motion to amend under Rule 59(e) as timely motion under Rule 60(b)); Mash v. Township of Haverford Dep't of Codes Enforcement, 2007 WL 2692333, at *4 (E.D. Pa. Sept. 11, 2007)("The Third Circuit has stated that the purpose of the motion for reconsideration, not the actual Rule of Civil Procedure cited in the motion, should determine its character."). Rule 60(b) provides, in relevant part: "On motion and upon such terms as are just, the court may relieve a party or a party's legal representative from a final judgment, order or proceeding for the following reasons:. . .(5) the judgment has been satisfied, released or discharged, or a prior judgment upon which it is based has been reversed or otherwise vacated, or it is no longer equitable that the judgment should have prospective application. . . ." Fed. R. Civ. P. 60(b) (emphasis added). A motion brought pursuant to Rule 60(b)(5) shall be made "within a reasonable time." Id. The present motion was filed within less than two weeks of the Third Circuit's mandate. Accordingly, I find that the motion is timely pursuant to Rule 60(b)(5).

Plaintiff argues that Defendant could and should have raised the issue of attorneys' fees, costs and prejudgment interest with the Third Circuit, and that by failing to do so, it has waived its right to challenge the Award by motion. Plaintiff is incorrect. The Third Circuit considers appeals of judgments on the merits as distinct from awards of attorneys' fees. See Gleason v. Norwest Mortgage, Inc., 243 F.3d 130, 137 (3d Cir. 2001). Moreover, a district court may entertain a Rule 60(b) motion even where the appellate mandate did not so provide. Standard Oil Co. of Ca. v. United States, 429 U.S. 17, 19 (1976) (relying on district court to screen out frivolous Rule 60(b) motions). Here, there is no dispute, indeed the Third Circuit expressly recognized in its Opinion, that Defendant did not appeal the Award. Since the Third Circuit did not consider the issue of attorneys' fees and prejudgment interest, and its mandate did not expressly bar consideration of those issues, this Court is free to consider Defendant's Motion to Amend the Award under Rule 60(b)(5).

The Ninth Circuit addressed a comparable scenario in California Med. Ass'n v. Shalala, 207 F.3d 575 (9th Cir. 2000). In that case, the district court entered judgment in favor of the plaintiff which had sued for higher Medicare reimbursements, and then granted a subsequent § 1988 motion for attorneys' fees. 207 F.3d at 576. Defendant paid the fee award, but appealed the district court's merits decision. Id. After the Ninth Circuit reversed the merits decision, the defendant sought a return of the fees, but was rebuffed. Id. She then moved for relief under FRCP 60(b)(5) on the grounds that the fee award was no longer valid because it was based on a judgment that had been vacated. Id.

The Ninth Circuit rejected the argument that the defendant was required to appeal both the underlying merit judgment and the fee award. "A separate appeal of the fee award would have been a meaningless formality, as [defendant] had no quarrel with the award beyond her contention that she should have prevailed on the merits, and thus owed no fees at all. . . .[T]his is precisely the scenario under which a Rule 60(b)(5) motion rather than a separate appeal of the fee award is appropriate." Id. at 578; see also, Flowers, 286 F.3d at 801 (following Seventh and Ninth circuits to hold that "a party must file a separate appeal only when it challenges some aspect of the award itself."); 15B Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice and Procedure ยง 3915.6, at 344 (2d ed. 1992) ("If no appeal was taken from the award, some means must be found to avoid the unseemly spectacle of enforcing a fee award based on a judgment that has been reversed; if the court and parties ...


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