The HEIL CO., d/b/a Heil Environmental, Plaintiff-Appellee, v. EVANSTON INSURANCE COMPANY, Defendant-Appellant.
No. 11-6252.
United States Court of Appeals, Sixth Circuit.
Argued: July 18, 2012. Decided and Filed: Aug. 3, 2012.
“Statements ‘made to the authorities who will use them in investigating and prosecuting a crime, ... made with the full understanding that they will be so used,’ are precisely the sort of accusatory statements the Confrontation Clause was designed to address.” United States v. Cromer, 389 F.3d 662, 674 (6th Cir.2004) (quoting Richard D. Friedman, Confrontation: The Search for Basic Principles, 86 Geo. L.J. 1011, 1025 (1998)) (omission in original). “One can imagine the temptation that someone who bears a grudge might have to volunteer to police, truthfully or not, information of the commission of a crime, especially when that person is assured he will not be subject to confrontation.” Id. at 675. The majority rejects the application of this rationale on the basis that the declarant knew his call would prompt police action. Yet surely that is the usual reason for 911 calls. I read Davis to require more than a call “to provide a narrative report of a crime absent any imminent danger“; what that opinion relied on was the fact the “call was plainly a call for help against bona fide physical threat.” Davis, 547 U.S. at 827, 126 S.Ct. 2266. The majority reads more recent caselaw to reject this guidance. I would not.
The majority has taken from Bryant a holding that the lack of an ongoing emergency does not make a declarant‘s statement per se testimonial, and all but declared an end to Confrontation Clause applicability to declarations that report ongoing crimes. While I agree that Bryant requires we look at more than the absence of an ongoing emergency, I do not see a basis for finding a statement nontestimonial solely on the basis that it prompts police action. Indeed, this caller gave some indications of his animus specifically towards Polidore and towards drug dealers generally. Confrontation is the constitutional protection defendants have to explore known and unknown motives. With respect, I believe the majority errantly removes that needed protection here.
Before: SILER and KETHLEDGE, Circuit Judges; MURPHY, District Judge.*
OPINION
STEPHEN J. MURPHY, III, District Judge.
Evanston Insurance Company (“Evanston“) appeals the denial of its post-trial motion for judgment as a matter of law, or in the alternative to alter or amend the judgment. For the following reasons, we VACATE the jury‘s verdict on The Heil
I.
This litigation stems from a wrongful death action brought against The Heil Company (“Heil“) in 2003, for which Evanston, as Heil‘s insurer, assumed Heil‘s defense.
In 2003, Bob Ronske‘s widow sued Heil after a dump truck body, manufactured by Heil and mounted onto Mr. Ronske‘s truck, lowered onto Mr. Ronske causing his death. At the time of the accident, Heil held a commercial general liability policy issued by Evanston that covered the suit. Under the policy, Evanston agreed to insure the first $1 million loss incurred by Heil, in excess of a $500,000 self-insured retention (“SIR“). The policy required Heil to “provide, at [its] own expense, proper defense and investigation of any claim and to accept any reasonable offer of settlement within the [$500,000] Self-Insured Retention.” Am. Compl. at ¶ 8, R. 18. The policy also provided that Evanston, if it chose, had the right to assume charge of the defense and settlement of an action.
Heil retained attorney Craig Pelini to defend it in the Ronske litigation. Pelini defended the matter for over two years, until April 5, 2005, when Evanston notified Heil that it wanted to assume charge of Heil‘s defense. Over Heil‘s objection, Evanston appointed Larry Sutter to replace Pelini as lead counsel. Heil and Evanston agreed, however, that Pelini could remain involved in the defense of the action, that Pelini‘s fees would count toward exhaustion of the SIR, and that Evanston would pay any of Pelini‘s fees in excess of the SIR. Evanston paid $1 million of the settlement, as required under Heil‘s policy. This left Heil responsible for the remaining $4,711,000, including its $500,000 SIR. Heil also incurred $63,533.79 in attorney fees and costs expended in excess of its SIR. Heil unsuccessfully sought payment of the attorney fees and costs from Evanston.
Heil initiated the instant litigation in 2008. It brought claims against Evanston for (1) breach of contract, for Evanston‘s failure to pay the attorney fees and costs; (2) violation of
The jury found that Evanston “did” breach the contract and refuse in bad faith to pay Heil amounts owed under the policy, but “did not” fail to settle the wrongful death action against Heil in bad faith. The jury awarded Heil compensatory damages plus prejudgment interest for the breach of contract, $15,883.44 in statutory damages for Evanston‘s bad faith refusal to pay, and also awarded punitive damages of $2 million.
II.
The punitive damages award and the
A.
Evanston argues that there are no legally sufficient grounds to support the punitive damages award because the jury found Evanston not liable “on the only claim submitted to the jury for which punitive damages could be awarded.” Appellant‘s Br. at 15 (emphasis in original). Specifically, Evanston argues that under Tennessee law, punitive damages may not be awarded absent an award of compensatory damages. Heil sought punitive damages on its failure-to-settle claim, but the jury found Evanston not liable and did not award Heil any compensatory damages on that claim. Although the jury did award compensatory damages for breach of contract, the punitive damages award cannot be attributed to that claim, Evanston argues, because
1.
Before proceeding, we must clarify which Civil Rules govern our analysis. First, Evanston raised the above arguments to the district court under both
Second, Heil contends, and the district court concluded, that Evanston‘s arguments are best characterized as an objection to the inconsistency of the verdict, which Evanston waived by not raising at the proper time.
Evanston concedes that it has waived any objection under
2.
We review the denial of a
A district court may alter or amend a judgment under
The district court found that it was not a clear error of law to enter the award because “there are legally sufficient grounds on which the jury could award punitive damages.” Order at 24, R. 72. It held that punitive damages could have been awarded for breach of contract under Tennessee law, or—given the structure of the form and jury‘s questions during deliberation—the jury could have “believed that the punitive damages instruction subsumed the simple bad faith failure to settle claim. It is even possible, given the structure and the content of the jury instructions, that the jury collapsed punitive and compensatory damages in its $2 million punitive damages award.” Id.
The jury‘s award of punitive damages absent a predicate award of compensatory damages was a clear error under Tennessee law. See Whittington v. Grand Valley Lakes, Inc., 547 S.W.2d 241, 243 (Tenn.1977) (noting “the general rule in this jurisdiction that actual or compensatory damages must be found as a predicate for the recovery of punitive damages.“). And, contrary to the district court‘s conclusion, the breach of contract claim is not a legally sufficient alternate basis for the award. Tennessee does permit a plaintiff to recover punitive damages for breach of contract, when he or she shows “fraud, malice, gross negligence, or oppression.” Medley v. A.W. Chesterton Co., 912 S.W.2d 748, 752-53 (Tenn.Ct.App.1995). But
We must next address the proper remedy for the error. As the district court speculated and Heil acknowledges, the jury‘s award of punitive damages was apparently the result of confusion prompted by the verdict form. Specifically, at Question Six, the form asked the jury whether Evanston “did” or “did not” commit bad faith failure to settle. Verdict Form, R. 59. An italicized instruction fol-
Evanston asks us to strike the punitive damages award and leave undisturbed the liability finding. But it is unclear whether, had the jury been properly instructed, it would have eliminated the punitive damages award entirely, or found that Evanston “did” commit bad faith failure to settle and awarded compensatory damages on the claim. We have no basis on which to credit the jury‘s liability finding instead of its finding on punitive damages, or to infer from the punitive damages award that it would have found Evanston liable and awarded compensatory damages had it been properly instructed. Under these circumstances, a new trial on liability and damages is warranted. See Hopkins v. Coen, 431 F.2d 1055, 1057 (6th Cir.1970) (“Were this Court able to divine that one of the [inconsistent] judgments in these consolidated cases was intelligently rendered by the jury, we should remand only the ambiguous one for retrial.“). The verdicts on Heil‘s breach of contract and statutory claims will remain undisturbed.
B.
Evanston next argues that the district court violated due process when it submitted the punitive damages claim to the jury because Evanston was not on notice that Heil intended to seek punitive damages. This claim lacks merit. Heil requested punitive damages at the outset of litigation in the complaint and amended complaint. Evanston argues that it nonetheless did not have notice because Heil did not mention punitive damages in the proposed final pretrial order or at trial. But Heil‘s mere failure to reassert its claim for punitive damages in later pleadings, without more, is not decisive enough to negate the notice provided in the complaint. Moreover, Evanston does not cite any pertinent authority for its argument that the alleged lack of notice violates due process. Evanston relies on State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 123 S.Ct. 1513, 155 L.Ed.2d 585 (2003), and in particular, the statement that “a person [must] receive fair notice not only of the conduct that will subject him to punishment, but also of the severity of the penalty that a State may impose.” State Farm, 538 U.S. at 416-17, 123 S.Ct. 1513 (quoting BMW of N. Am., Inc. v. Gore, 517 U.S. 559, 574, 116 S.Ct. 1589, 134 L.Ed.2d 809 (1996)). But the quoted statement refers to a person‘s right to notice that punitive damages may attach to certain conduct, and to notice of the size of the potential award. State Farm did not address the issue presented here: whether it violates due process for the court to instruct the jury on punitive damages when the plaintiff did not reassert its ini-
Evanston separately argues that the award is unconstitutionally excessive. See State Farm, 538 U.S. at 418, 123 S.Ct. 1513 (applying the guideposts set forth in Gore to assess the constitutionality of a punitive damages award). We will not address this argument because, as the district court specifically noted, Evanston did not raise it below. See Order at 25 (“[A]lthough Defendant cites State Farm ..., it does so only on the notice issue and does not argue that the size of the punitive damages award is unreasonable as a matter of law. Therefore that issue has not been presented properly to the Court[.]“); see also United States v. Ellison, 462 F.3d 557, 560 (6th Cir.2006) (“[T]his court generally will not consider an argument not raised in the district court and presented for the first time on appeal.“). In any event, our decision to vacate the award and remand for new trial renders the issue moot.
C.
Finally, Evanston contends that the district court erred by not granting it judgment as a matter of law on its statutory claim for bad faith refusal to pay. We review the evidence under the applicable state law standard. See K & T Enters., Inc. v. Zurich Ins. Co., 97 F.3d 171, 176 (6th Cir.1996). Tennessee law requires that we “take the strongest legitimate view of the evidence in favor of the opponent of the motion, allow all reasonable inferences in his or her favor, discard all countervailing evidence, and deny the motion where there is any doubt as to the conclusions to be drawn from the whole evidence.” Holmes v. Wilson, 551 S.W.2d 682, 685 (Tenn.1977). “Legal determinations, whether made in a diversity case or in a federal question case, [are] always ... reviewed de novo.” K & T Enters., 97 F.3d at 176.
1.
Evanston contends that it is entitled to judgment as a matter of law on this claim because Heil failed to prove that it made a formal demand for payment to Evanston. At trial, Heil introduced as evidence of its demand an April 23, 2007 letter sent via Federal Express to Evanston employee Melissa Hoffman-Schartel. Trial Ex. 7, Appellee‘s Br., App. at 35. The letter followed two unsuccessful email requests for payment. It stated,
Your company has an obligation to make payment. It has not. Inquiries were made to your company and they were
ignored. We demand you make immediate payment for past due invoices. The amount of $10,688.42, which represents the short paid invoices should be reimbursed to The Heil Company. The remaining unpaid invoices should be made payable directly to the Pelini & Associates law firm and should be done immediately....
Id. The “remaining unpaid invoices” referenced totaled approximately $30,000. Trial Tr. at 90, R. 61.
Evanston raises three objections to the letter. First, Evanston argues that the letter cannot serve as evidence of a formal demand because Hoffman-Schartel testified that she never received it. But Heil introduced into evidence the Fed-Ex mailing label and receipt. Trial Ex. 7, Appellee‘s Br., App. at 36. The jury was entitled to credit Heil‘s evidence of mailing and conclude that Evanston received the letter.
Second, Evanston argues that to constitute a “formal demand” under the statute, the insured‘s request for payment must contain an explicit threat of litigation, which Heil‘s letter does not. The text of
Evanston relies on a federal district court decision to argue that the statute requires that the demand include an explicit threat of litigation. See Cracker Barrel Old Country Store, Inc. v. Cincinnati Ins. Co., 590 F.Supp.2d 970, 975 (M.D.Tenn.2008). In Cracker Barrel, the district court noted the Tennessee Supreme Court‘s statement in Kirkpatrick that the statute was intended “to supersede the necessity of suit ... the underlying thought being that the insurers on formal demand so made would, noting the warning, thereby be induced to pay the loss without suit....” See id. (quoting Kirkpatrick, 164 S.W. at 1190). The district court concluded, therefore, that “a formal demand entails explicit threat of bad faith litigation.” Id. The district court dismissed Solomon as “an outlier.” Id.
When construing questions of state law, “[i]f the state‘s highest court has not addressed the issue, [a] federal court must attempt to ascertain how that court would rule if it were faced with the issue.” Meridian Mut. Ins. Co. v. Kellman, 197 F.3d 1178, 1181 (6th Cir.1999). “When a statute is clear, [Tennessee courts] apply the plain meaning without complicating the task.” In re Estate of Tanner, 295 S.W.3d 610, 614 (Tenn.2009). We find
Under this standard, Evanston‘s argument fails. Heil‘s April 23, 2007 letter contains an explicit “demand” for payment. See Trial Ex 7, Appellee‘s Br., App. at 35 (“We demand you make immediate payment....“). The jury was entitled to find that the letter served as the demand required under the statute.
Finally, Evanston argues that Heil‘s demand was insufficient because Heil‘s April 23, 2007 letter did not request the amount Heil eventually sought at trial. But the statute does not require that the insured‘s demand state with precision the amount ultimately claimed in litigation. Evanston cites Tyber v. Great Cent. Ins. Co., 572 F.2d 562, 564 (6th Cir.1978) to argue to the contrary. But in Tyber, the Court held only that the insurer did not act in bad faith when it refused to pay because the amount of loss claimed by the insured kept changing. Tyber, 572 F.2d at 564 (“Unquestionably, there were reasonable bases for controversy in determining the amount of the loss.“). Tyber is inapposite here, where Evanston does not dispute the amount claimed by Heil and does not contest the jury‘s finding of bad faith. And in any event, Heil‘s request was sufficiently definite to provide Evanston notice of its claim. Evanston‘s April 23, 2007 letter demanded payment of the $10,618.42, plus approximately $30,000 in outstanding invoices. Heil‘s communications conveyed that Heil considered Evanston responsible for paying for Pelini‘s ongoing services, and that the costs, therefore, could be expected to continue to accrue. Evanston has not cited any authority suggesting that the statute requires Heil to have submitted additional accountings of the claim in order to preserve its demand.
2.
Finally, Evanston contends that Heil cannot recover the statutory penalty because it failed to introduce proof that it incurred additional “expense, loss, or injury” as a result of Evanston‘s refusal to pay. See
Heil‘s evidence supports the jury‘s award of $15,883.44 in statutory damages. At trial, Heil employee George Paturalski testified about his efforts to get Evanston to pay Pelini‘s fees, including “dragg[ing] them here to court.” See Trial Tr. at 75-56, 81-90, R. 61. Paturalski also testified that Heil may have suffered damage to its
SUMMIT PETROLEUM CORPORATION, Petitioner, v. UNITED STATES ENVIRONMENTAL PROTECTION AGENCY; Lisa Jackson, Respondents. Nos. 09-4348, 10-4572. United States Court of Appeals, Sixth Circuit. Argued: April 17, 2012. Decided and Filed: Aug. 7, 2012.
III.
For the foregoing reasons, we VACATE the jury‘s verdict on Heil‘s claim for bad faith failure to settle and the associated $2 million punitive damages award, and REMAND for a new trial on those issues. We AFFIRM the jury‘s finding that Evanston is liable under