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Mid-Continent Casualty Co. v. Petroleum Solutions, Inc.

United States District Court, S.D. Texas, Houston Division

July 12, 2017

MID-CONTINENT CASUALTY CO.
v.
PETROLEUM SOLUTIONS, INC.

          MEMORANDUM AND ORDER ON RENEWED MOTION FOR JUDGMENT AS A MATTER OF LAW AND MOTION FOR NEW TRIAL

          NANCY F. ATLAS SENIOR UNITED STATES DISTRICT JUDGE

         Pending before the Court in this insurance coverage case is Plaintiff Mid-Continent Casualty Company's (“Mid-Continent”) “Renewed Motion for Judgment as a Matter of Law and Motion for New Trial” [Doc. # 193] (collectively, the “Motion”), in which Mid-Continent requests the Court withdraw the Final Judgment signed March 29, 2017 [Doc. # 190] and alter the reasoning in the Memorandum and Order on Entry of Final Judgment [Doc. # 189]. Defendant/Counter-Plaintiff Petroleum Solutions, Inc. (“PSI”) opposes the Motion on numerous grounds. See PSI Response [Doc. # 195]. The Motion is ripe for decision. Having carefully considered the parties' arguments, the entire record in this case, and the applicable law, the Court denies Mid-Continent's Motion.

         I. BACKGROUND

         This declaratory judgment action was originally filed by Mid-Continent in P:\ORDERS\a2008-2009\2009\0422MJML.docx 170712.1445 2009, after an adverse verdict was rendered against PSI in state court. Mid-Continent seeks a declaration regarding the non-existence or scope of indemnity due to PSI, the insured under a commercial general liability policy issued by Mid-Continent for the period May 1, 2001 to May 1, 2002 (the “Policy”). Because of pendency of state court appeals, the Court stayed and administratively closed this case. The Court reactivated the case by agreement in 2015.

         The parties have disputed many issues throughout this case. The Court has made extensive written rulings, [1] which are incorporated by reference. The Court assumes the reader's familiarity with all prior proceedings in this case, and describes in this Memorandum only factual and procedural matters necessary to an understanding of the matters raised in Mid-Continent's Motion.

         The Court ruled as a matter of law on most of the questions raised by the parties in cross-motions for summary judgment, [2] but held that there were certain triable questions of fact. Two of those were decided in a three-day jury trial held in January, 2017.[3]

         Mid-Continent raises four issues in the Motion:[4] (1) whether there is legally and factually sufficient evidence that Mid-Continent waived its right to rely upon a condition precedent in the Policy that PSI cooperate in the investigation and settlement of claims against it (the “cooperation clause”)[5] when, during pretrial proceedings in the underlying Hidalgo County, Texas, products liability suit filed by Bill Head for damage to his real property (“State Court Litigation”), PSI refused to dismiss with prejudice its affirmative claim for indemnity against third-party defendant Titeflex Corporation (“Titeflex”) at the time Titeflex offered to dismiss with prejudice its own claim for attorneys' fees and expenses against PSI;[6] (2) whether Mid-Continent waived the right to a court or jury determination of the amount of fees, expenses, and costs (collectively, “fees”) that were covered under the Policy in light of Mid-Continent's stipulation and other submissions (or lack thereof) in the parties' Joint Pretrial Order (“PTO”) [Doc. # 126];[7] (3) the Court's instructions to the jury on the legal definitions of “cooperation” and “waiver”;[8] and (4) whether the jury's answers at trial were against the great weight and preponderance of the evidence.[9]

         II. Judgment as a Matter of Law

         At trial on the coverage and waiver issues, Mid-Continent moved pursuant to Federal Rule of Civil Procedure 50(a) for judgment as a matter of law on PSI's failure to present evidence of damages.[10] The Court orally denied the motion.[11]Mid-Continent now seeks judgment as a matter of law, contending there is: (1) no evidence it waived its right to rely upon the Policy's cooperation clause and (2) no evidence segregating the amount of Titeflex's attorneys' fees between fees covered and not covered as damages under the Policy.

         Mid-Continent rehashes old arguments. The Court addressed these matters in multiple written rulings and orally on the record in connection with trial. The Court accordingly addresses these issues only briefly after setting forth the applicable legal standard.

         A. Legal Standard for Judgment as a Matter of Law

         Under Federal Rule of Civil Procedure 50, a motion for judgment as a matter of law may be granted if a trial court finds that a “reasonable jury would not have a legally sufficient evidentiary basis to find for the party on that issue[.]” Fed.R.Civ.P. 50(a). A motion for judgment as a matter of law “is properly granted if the facts and inferences point so strongly and overwhelmingly in favor of the moving party that reasonable jurors could not have arrived at a contrary verdict.” See Homoki v. Conversion Servs., Inc., 717 F.3d 388, 395 (5th Cir. 2013) (citing Poliner v. Tex. Health Sys., 537 F.3d 368, 376 (5th Cir. 2008)). In evaluating such a motion, “‘the court must review all of the evidence in the record, draw all reasonable inferences in favor of the nonmoving party, and may not make credibility determinations or weigh the evidence.'” See Poliner, 537 F.3d at 376 (quoting Ellis v. Weasler Eng'g, Inc., 258 F.3d 326, 337 (5th Cir. 2001)).

         If a court denies a motion for judgment as a matter of law following the close of evidence, the party may renew its motion within twenty-eight days of the entry of judgment. Fed.R.Civ.P. 50(b).

         B. Mid-Continent's Waiver of Right to Enforce the Policy's Cooperation Clause

         Mid-Continent argues that is entitled to judgment as a matter of law because there is insufficient evidence from which the jury could reasonably conclude Mid-Continent waived its right to enforce the Policy's cooperation clause. In support, Mid-Continent points to its reservation of rights letters sent to PSI during the State Court Litigation. Mid-Continent's arguments are unavailing.

         As an initial matter, it is noted that the jury found that PSI complied with the Policy's cooperation clause with respect to the Titeflex offer proposed in 2008. See Verdict Form [Doc. # 169], Question 1, at 2; see also infra Section III. Thus, the issue of whether Mid-Continent waived its right under the Policy to enforce the cooperation clause is moot. The Court addresses this waiver issue in an abundance of caution, however, in the event Mid-Continent prevails on its position that the Court erred in its instruction to the jury on the standard for cooperation.

         As discussed in the Court's Memorandum and Order on Waiver of Enforcement and Applicable Standard for Breach of the Duty to Cooperate [Doc. # 141], the Court ultimately concluded, contrary to Mid-Continent's arguments, that there was a fact issue regarding Mid-Continent's potential waiver of enforcement of the cooperation clause.[12] Additionally, as detailed below in connection with the propriety of the Court's jury charge, see infra Section III.B.2, PSI presented evidence at trial sufficient to legally support a finding that Mid-Continent waived its right to enforce the cooperation clause. For example, but without limitation, Mid-Continent did not reference PSI's failure to accept Titeflex's pretrial settlement demand when citing the cooperation clause in reservation of rights letters prior to or reasonably after trial in the State Court Litigation. PSI also presented testimony of Mid-Continent's representative acknowledging it would have been appropriate to specify the settlement issue in these letters. There also was clear evidence that Mid-Continent was closely involved in key strategy decisions by PSI's trial and appellate counsel (each of which were chosen by Mid-Continent) in the State Court Litigation.

         The Court concludes, based upon the evidence presented at trial, that there was sufficient evidence to support the jury's determination that Mid-Continent had, in fact, impliedly waived the right to refuse enforcement of the Policy based on the cooperation clause in connection with PSI's refusal to abandon its affirmative claim against Titeflex. Mid-Continent's argument to the contrary is rejected.[13]

         C. Mid-Continent's Waiver of Jury Trial and Additional Rulings on Segregation of Damages Issue

         The Court held the Policy required indemnity for fees PSI was required to pay to Titeflex under subsection (a) of Texas Civil Practice and Remedies Code § 82.002 (“§ 82.002”), the amount Titeflex incurred in defense of Bill Head's claim in the State Court Litigation, [14] but not damages for Titeflex's fees paid by PSI under § 82.002(g) that Titeflex incurred in prosecuting its claim for indemnity against PSI.[15] The State Court Litigation did not result in a finding that segregated Titeflex's fees attributable to § 82.002(a) from fees arising from § 82.002(g).[16]The Court instructed the parties to brief the impact of this circumstance. Instead, on November 30, 2016, the parties submitted their Joint PTO in which they stated:

31. The Parties have stipulated to damages as follows:
a. If the Court determines collateral estoppel does not apply, and PSI only gets the period that Judge Atlas identified in the Amended Opinion and Order, the Parties have agreed that the damages are $136, 499.97 plus $51, 104.40 in post-judgment interest, for a total recovery of $187, 604.17.
b. Alternatively, if the Court determines collateral estoppel applies, the parties have agreed that the damages are $278, 545.36 plus $104, 285.11 in post-judgment interest, for a total recovery of $382, 830.47.
c. These are exclusive of attorneys' fees in this case, and any pre-judgment interest that would apply to the present claim.[17]

         Mid-Continent contends that this stipulation did not relieve PSI of the burden of producing evidence segregating damages between fees the Court held were covered under the Policy and fees held not to be covered. Mid-Continent asserts it therefore is entitled to judgment as a matter of law that PSI failed to prove any damages.

         This contention is unpersuasive for reasons detailed in the Court's post-trial Memorandum and Order on Entry of Final Judgment [Doc. # 189].[18] In summary, in the Joint PTO, Mid-Continent did not reserve for future factual or legal decision any fee segregation issue. Nor did Mid-Continent state at Docket Call or at a later final pretrial hearing on additional evidentiary trial matters that there remained any question for resolution on a damages issue. Nor did Mid-Continent submit any proposed jury issue or instructions to the jury on damages or any segregation of fees issues. As a result, the Court rejected Mid-Continent's attempt, on January 3, 2017, at an “emergency hearing” the day before jury selection and trial, to contravene the plain meaning of the parties' stipulation in the Joint PTO that they had stipulated to the amount of PSI's “damages.”[19] The Court again rejects Mid-Continent's argument. Mid-Continent is not permitted to reduce PSI's recovery from the stipulated amount. There was no triable issue regarding the amount of damages or segregation of fees. Mid-Continent's Motion for Judgment as a Matter of Law on the segregation issue is denied.

         I. New Trial

         Mid-Continent argues it is entitled to a new trial because: (1) the Court's jury charge erroneously instructed the jury on the legal definitions of “cooperation” and “waiver, ” and (2) the jury's answers at trial that PSI cooperated with Mid-Continent and that Mid-Continent waived its right to rely ...


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