SEX DISCRIMINATION: $61,725 fees, $4,301.34 costs plus prejudgment/post-judgment interest awarded following affirmation of MHRA award of $50,000 emotional distress damages for hostile work environment occasioned by conduct of “sex pest” toward gay female… Molloy.

This administrative review case stems from claims that Amy Lowery, who had been Sarens USA’s Regional Marketing Manager in Missoula, brought against Sarens for hostile work environment, discriminatory discharge, and retaliation. Hearing Officer Caroline Holien sustained Lowery’s claim of a hostile work environment suffered due to comments by Country Manager Mark Watson in Houston (whose nickname in the office was “sex pest” due to his conduct toward female employees) including referring to Lowery as a “dyke” and awarded her $50,000 in emotional distress damages. (MLW 10/5/19). The parties appealed to the Montana Human Rights Commission which affirmed Holien’s decision. Following a hearing 1/8/21, this Court affirmed the agency decision and remanded the issue of attorney fees. The Clerk entered a $50,000 judgment in Lowery’s favor. Lowery requested that the judgment be amended to award interest and attorney fees. The Court agreed to determine a fee award in the first instance. Lowery requests $76,410 fees and $6,271.38 costs. Sarens opposes the motion. The parties also provided further briefing on interest. The 1/8 judgment will be amended to include pre- and post-judgment interest, a fee award of $61,725, and a cost award of $4,301.34. Sarens filed notice of appeal 3/2/21 appealing the 2/2/21 judgment. “If a party files a notice of appeal after the court announced or enters a judgment — but before it disposes of [a motion to alter or amend a judgment] — the notice becomes effective to appeal a judgment or order, in whole or in part, when the order disposing of the last such remaining motion is entered.” FRAP 4(A), (B)(i). Thus the Court retains jurisdiction to address the motions.

Lowery originally sought post-judgment interest from 9/20/19 (the date of Holien’s decision). Following the Court’s request for additional briefing, she now seeks prejudgment interest from 10/21/19 (the date her right to recover vested following Holien’s decision) through 1/8/21 (the date of this Court’s judgment) and post-judgment interest from 1/9 until the judgment is satisfied. Sarens concedes that she is entitled to post-judgment interest from 2/13/20 (the date of the HRC’s decision) onward but insists that she is not entitled to prejudgment interest.

Thus there are 3 contenders for the operative “judgment”: Holien’s 9/20/19 decision (which vested 10/21/19), the HRC’s 2/13/20 final agency decision, and this Court 1/8/21 judgment. Although the answer is far from clear, this Court’s 1/8 judgment makes the most sense. Both the state and federal post-judgment interest statutes refer to interest following a court’s decision. MCA 25-9-204 (“The clerk shall include in the judgment entered up by the clerk any interest on the verdict or decision of the court, from the time it was rendered or made.”); 28 USC 1961(a) (“Interest shall be allowed on any money judgment in a civil case in a district court.”). “In diversity cases such as this one, the court looks to state law to determine the rate of prejudgment interest while federal law determines the rate of post judgment interest.” Lagstein (9th Cir. 2013). It would be impossible for the federal rate to kick in any earlier than this Court’s judgment because the case was not yet in Federal Court and might never have been. Thus the relevant “judgment” for interest purposes was entered 1/8.

Because post-judgment interest is awarded as a matter of right under 28 USC 1961 after that point, the question is whether Lowery is entitled to prejudgment interest. She is. Sarens argues that she is not entitled to such interest because it was not pled. However, her 3/10/20 petition requests the full award amount “with interest.” Sarens next argues that such interest is not appropriate under MCA 27-1-210 because the amount was disputed. But prejudgment interest here is governed by MCA 27-1-211:

Each person who is entitled to recover damages certain or capable of being made certain by calculation and the right to recover that is vested in the person upon a particular day is entitled also to recover interest on the damages from that day except during the time that the debtor is prevented by law or by the act of the creditor from paying the debt.

“There are three prerequisites to recovery under this statute. First, an underlying monetary obligation must exist. Second, the amount of recovery must be capable of being made certain. Third, the right to recover must vest on a particular day.” Edwards (Mont. 2009). Thus “the accrual start date for prejudgment interest necessarily varies depending on the particular facts and circumstances of each case.” Warrington (Mont. 2020).

All 3 prerequisites are met here as of 10/21/19. Holien issued her decision finding for Lowery 9/20/19. She awarded $50,000 in emotional distress, a fixed sum. She gave Sarens 30 days to pay the award. Thus Lowery is entitled to prejudgment interest from 10/21/19 to 1/8/21 at the Montana rate.

The 1/8 judgment shall be amended to award prejudgment interest from 10/21/19 to 1/8/21 at the Montana rate, MCA 25-9-205(1), and post-judgment interest from 1/9/21 until paid at the federal rate, 28 USC 1961.

Lowery seeks $76,410 fees and $6,271.38 costs for 254.7 hours at $300/hr. Sarens argues that this “is excessive and should be significantly reduced.” Fees are awarded in the amount of $61,727 and costs in the amount of $4,301.34.

Sarens argues that Lowery’s fee request should be rejected as untimely under MCA 49-2-505(8) (“An action for attorneys’ fees must comply with the Montana Rules of Civil Procedure.”) and pursuant to those rules, a request for fees must be by motion and “be filed no later than 14 days after the entry of judgment.” MRCivP 54(d)(2)(i). Sarens argues that because Lowery failed to request fees within 14 days of Holien’s decision or the HRC’s FAD, her request is untimely, However, the operative judgment is the Court’s 1/8/21 judgment. Even though Rule 54(a) defines “judgment” as “any order from which an appeal lies,” which could include the agency’s decisions, the 54(d)(2) requirement that fees be pursued through a “motion” does not line up with the §49-2-505(8) provision that a prevailing party can bring an “action for attorney fees” in the district court. Ultimately, because Lowery filed her motion for fees 8 days after this Court’s judgment, her request is timely.

“In a diversity action the question of attorney’s fees is governed by state law.:” Klopfenstein (9th Cir. 1979). Montana recognizes 2 methods of calculating fees: “the lodestar method, which involves multiplying the number of hours reasonably spent on the case by an appropriate hourly rate in the community for such work” and “the percentage recovery method, which authorizes fees to be paid from a percentage of a common fund or a contingency fee agreement.” Gendron (Mont. 2020). Although both parties argue the motion under the lodestar method, it appears that Lowery’s counsel was under a pseudo-contingency agreement: “Our fee agreement provided that I be paid either 40% of the total recovery after a contested case hearing, or my hourly rate of $250 per hour, whichever is greater.” 40% of Lowery’s award is $20,000. Under the lodestar method, counsel seeks $76,410 for 254.7 hours at $300/hr.

“Ordinarily, when lawyers undertake a representation on a contingency amount, they bargain for a percentage of recovery that accounts for the risk of nonrecovery.” Buckman (Mont. 1989); Wight (Mont. 1983). But the only risk here under the agreement was that his client may not prevail. Should she prevail, counsel was entitled to reasonable fees by statute, determined through the lodestar or cost recovery analysis. (This can be compared to a contingency agreement in cases that do not invoke a fee-shifting statute, such as product liability, in which there is the risk of no recovery and the risk of limited recovery.) In turn, those fees would be paid by the opposing party. Knowing this, it is a bit strange that counsel demanded the “greater” of a contingency or hourly fee arrangement, especially because even if Lowery’s recovery was significant, the amount fixed by a contingency is not binding on the court in awarding fees as it retains discretion in considering a reasonable fee award. Gendron. And the factors relevant to a percentage of recovery calculation are similar to those reviewed under the lodestar method. Id.; Stimac (Mont. 1991). Thus the Court will apply the lodestar calculation but will also consider counsel’s shift of the risk and fixed fee amount. Id. (the court has discretion to adopt a calculation method that reflects a reasonable award).

Under the lodestar method, the 7 Plath (Mont. 2003) factors guide determination of the number of hours reasonably expended. An award must be based on competent evidence and supported by an adequate rationale. Gendron.

As to the Plath factors, counsel successfully litigated at least one of Lowery’s claims through a contested case hearing, a full review by the HRC, and another full review by this Court. He took multiple depositions and extensively briefed the legal and factual basis multiple times. Although not factually complex, the case involved numerous witness reports and statements, some of which were conflicting or inconsistent. Marshalling the record for the contested hearing and litigating this case therefore took skill and time. Employment discrimination is also a nuanced area of the law. Thus, with minor adjustment, counsel spent a reasonable amount of time on this case.

Sarens argues that counsel’s hour entries are vague and non-descriptive, specifically challenging generic entries such as “phone call” or “review email.” However, attorneys are merely required to identify the “general subject matter of their time expenditures.” Hensley (US 1983); Fox (US 2011) (in determining fees, courts “need not and indeed should not, become green-eyeshade accountants as the essential goal is to do rough justice, not to achieve auditing perfection”). While many of counsel’s entries are broad, that does not mean they cannot be evaluated in the context. For example, numerous unidentified phone calls billed at 0.1 to 0.6 hours make sense in the context of discovery. No specific entries are rejected on these grounds.

Lowery also seeks to recover fees for drafting and filing the present motion for fees & costs. Generally, “the prevailing party is not entitled to fees-for-fees.” Swapinski (Mont. 2015). Although there is an exception if fees are provided for by statute, id., the award is still discretionary under §49-2-505(8). Thus, even if recoverable, Lowery’s request for fees for fees totaling 7.8 hours is rejected. This does not mean that she is precluded from seeking fees associated with a successful appeal.

Sarens argues that Lowery’s fee award should be limited to services related to her hostile work environment claim, the only claim on which she prevailed. Montana follows a 2-step approach to determine whether a fee award should be adjusted to reflect success on some claims but not others:

First, did the plaintiff fail to prevail on claims that were unrelated to the claims on which he succeeded? Second, did the plaintiff achieve a level of success that makes the hours reasonably expended a satisfactory basis for making a fee award? Laudert (Mont. 2001); Hensley.

“Distinctly different claims for relief based on different facts and legal theories which are unsuccessful should be excluded from a reasonable fee calculation.” Id. But cases “involving a common core of facts or those based on related legal theories are not as easily separable. Id. “In these situations, the district court should move to the second step and focus on the overall significance of the relief obtained by the plaintiff in relation to the hours reasonably expended on the litigation.” Id.

Sarens focuses on the 1st inquiry, arguing that Lowery succeeded only on her claim for hostile work environment, which is legally and factually distinct from her claims for retaliation and discriminatory discharge. While it is correct that her hostile environment claim was centered on Watson’s conduct while her other 2 claims focused more on the company’s conduct, that does not obviate the common facts underlying her claims. As outlined in this Court’s 1/8 opinion, her claims are interrelated. (Sarens attempts to argue that her claims regarding discharge and pretext were based on an affidavit that was “proven untruthful” and were so unsupported that they were never going to succeed. However, had either this Court or the HRC been the decider in the first instance, Lowery may have succeeded on additional claims.)

Under the 2nd consideration, “the result is what matters” and “even if a plaintiff does not prevail on every claim raised, if the plaintiff achieves significant success, all hours reasonably expended on litigation should be included with the attorney fee award.” Laudert. While a reduction may be justified if a plaintiff has achieved only “limited success,” success is not only measured in money damages. Id. The amount of damages “is only one of many facts that a court should consider in calculating an award of attorney’s fees.” Id. In an HR case such as this, courts “examine success not only in terms of the direct benefit to the plaintiff but also whether the claimant’s actions further effectuated the purpose for which the statute was enacted.” Id.

As a result of Lowery’s claim, Sarens was required to consult an attorney “to develop and implement policies for the identification, investigation and resolution of complaints of discrimination that includes training for its broad members, managers, and supervisors to prevent and timely remedy sexual discrimination on the job.” These policies must provide that “employees will receive information on how to report complaints of discrimination” and “must be approved by the Montana Human Rights Bureau.” Id. Thus this case benefitted all of Sarens’s employees in Montana and sent a message to other employers regarding workplace misconduct. Thus even though Lowery was awarded only $50,000 on one claim, she achieved a level of success necessary to support a full fee award. Id. For the same reason, the Court rejects Sarens’s request that her fee be reduced by 75% “based on Lowery’s vague billing.”

After briefing her motion for fees and further addressing interest, Lowery submitted an affidavit requesting payment for an additional 19.6 hours. That request is rejected. She is not entitled to fees for fees, which is the bulk of the 19.6 hours. Moreover, to the extent that work can be attributed to briefing the interest issue, counsel should have been cognizant of the interest statutes and their application when he pled such relief. Put differently, the additional time counsel spent educating himself on this area of the law is “excessive, redundant, or otherwise unnecessary.” Hensley.

Under the lodestar method, “the reasonable hourly rate is calculated according to the prevailing market rates in the relevant community.” Abbey/Land (Mont. 2019). In his pseudo-contingency, counsel agreed to $250/hr, but now seeks $300 since his rate changed during the litigation. He argues that $300 is appropriate based on his 26 years of experience with these types of cases when compared to rates awarded to others with less experience. However, his agreement to $250 reflects his acceptance of that market rate for this type of case. He “shifted” the risk by assuring the highest fee award possible by explicitly requiring his rate of $250. That rate is therefore reasonable. This does not foreclose Lowery from seeking a higher rate for counsel’s work on appeal.

Based on a total hour calculation of 246.9 and a rate of $250, Lowery is awarded $61,725 in fees. While a lodestar amount may be adjusted using a “multiplier” based on factors not considered in the initial calculation, Blum (US 1984), no such adjustment is warranted here. The amount does not have to be proportionate to the damages awarded. Bachmeier (Mont. 2021) (affirming damages award of $100,000 and fees/cost award of $360,072.65). And there is no indication that Lowery frivolously extended the case.

Sarens argues that Lowery is seeking costs not recoverable under Montana Law: costs associates with travel and related to her unsuccessful petition for review. Lowery responds that her costs are not limited by Montana’s cost statute. Neither party addresses the applicable law. In diversity actions, an award of costs is generally a procedural matter governed by federal law. Stender (10th Cir. 2020) (Colorado’s general laws for assessing costs did not apply in diversity case). But “there are limited circumstances in which costs become a substantive matter, namely a federal court sitting in diversity will award costs in accordance with federal law unless a state provision allows for the awarding of costs as part of a substantive, compensatory damages scheme.” Gardner (ND Cal. 2016). That is not the case here.

In Montana, costs are governed by MCA 49-2-505(8) & 25-10-201 and MRCivP 54(d)(1), which all simply allow the Court to award costs. As in Stender, “nothing about the [Montana] statutes indicates a judgment about the scope of state-created rights or remedies.” These statutes apply in every case. Thus federal law controls. 28 USC 1920 provides an exclusive list of items for which a party may recover and does not include attorney travel. Id. $1,374.79 costs associated with counsel’s travel to Houston and mileage are therefore rejected. Sarens further argues that Lowery should not be able to recover her $595.25 filing fees associated with her petition for review in member case CV 20-60-M on the ground that she did not “prevail” on that petition. That argument is persuasive. She is awarded $4,301.34 costs.

Lowery v. Sarens USA, 44 MFR 238, 3/12/21.

Philip Hohenlohe (Hohenlohe Law Office), Helena, for Lowery; Micah Dawson (Fisher & Phillips), Denver, for Sarens.

WRONGFUL DEATH: Claims against trucking company and driver by PR of passenger killed when car lost control on rainy interstate and crossed median into path of truck exceeding speed limit 2-5 mph rejected on summary judgment… Molloy.

Deborah Alteneder was driving a Chevrolet Impala east on I-90 in 6/17 with her fiancé Josh Creel as passenger. She lost control in the rain and slid through the 38-foot median and onto the westbound lane and collided with a Kenworth T800 operated by Mark Loy and owned by Active Truck Transport. Creel and Alteneder died at the scene. Creel’s PR John Creel sued Loy and ATT alleging negligence, wrongful death, survivorship, and loss of consortium, focusing primarily on Loy’s speed which was recorded at 67-70 mph just prior to the crash. Defendants seek summary judgment on the grounds that Loy’s alleged negligence did not cause the MVA and that Alteneder’s conduct severed the chain of causation. They argue that Loy’s speed was irrelevant because Alteneder lost control and entered his lane, making her negligence “the direct and only cause of the crash.” Plaintiff responds that Loy exceeded the appropriate speed and could have otherwise avoided the accident, relying primarily on the analysis & conclusions of commercial trucking expert Lew Grill.

According to the MHP report it was 50 degrees and rainy. Alteneder and Creel were headed from Missoula to Butte to visit her sister. Loy was headed from Miles City to Spokane hauling another semi. Near mile marker 135.85 the Impala negotiated a left curve before entering a straight, level part of I-90. Loy was attempting to pass a semi driven by Carl Booth. The road was wet with ruts that allowed for standing water in both lanes, but was straight and level on both the east and west directions and the lanes were separated by a grassy unprotected median. The speed limit was 80 for vehicles and 65 for trucks. Although somewhat unclear, the report states that “Alteneder lost control of the Impala, overcorrected steering to the left, and began sliding counterclockwise towards the median.” She spun through it and entered the westbound lane into the oncoming traffic. The front of Loy’s truck struck the Impala’s driver’s side, pushing Alteneder into the passenger side.

Booth observed the Impala “lose control” and that it appeared to be traveling “fast.” He said it started turning when the front tire came off the road and the tail spun around, and that it was airborne in the median. Loy said he saw the red vehicle lose control and a back-end slide to the right and that it happened very fast.

The rain made it difficult to mark the scene and officers were only able to complete part of the Total Station measurements the day of the accident and the Impala was too damaged to download its crash data. A Total Station was completed based on further measurements the next day.

The MHP attributed all fault to Alteneder, stating that Loy was not distracted, his vision was not obscured, and he provided “no contributing action.” Its report states that neither Alteneder nor Loy had any drugs or alcohol in their systems, and concludes:

The major contributing factors of this crash are driving too fast for conditions, and excessive steering input. The ruts in the eastbound lanes allowed for pooling water. The tread depth on the tires of the Impala were above the wear bar, however, three out of the four tires measured just 4/32; the forth tire was measured at 8/32. The combination of tread depth, water on the roadway and the vehicles speed exceeded the driver’s ability to maintain control. When control was lost, the driver’s input caused the sedan to cross the median into the path of oncoming traffic.

According to the crash data from Loy’s truck, he was traveling 67-70 mph and did not engage his brakes until 1 second before impact.

Grill opined that Loy “caused his own preventable collision” because, inter alia, had he “operated at a safe and reasonable speed he would have had the time and opportunity to see the hazards in front of him” and “according to industry standards, this collision was preventable.”

While Plaintiff shows that Loy’s speed and operation of his truck may have increased the risk of harm to others on the highway, he presents no evidence that those conditions caused the accident. The analysis is somewhat complicated by the fact that no fault is attributable to Creel and thus comparative negligence plays no role. Faulconbridge (Mont. 2006) (“A driver’s negligence cannot be imputed to a passenger for the purpose of comparative negligence.”). Even so, Plaintiff fails to raise a genuine fact issue that Loy’s alleged negligence contributed to the accident or that he should have reasonably anticipated Alteneder’s conduct.

While the facts stretch the “foreseeable zone of risk,” Fisher (Mont. 2008), to its logical limit, Loy owed other motorists a duty to drive in a “careful and prudent manner and at a reduced rate of speed no greater than is reasonable and prudent under the conditions,” §61-8-303(3). Similarly, ATT owed a duty to maintain the vehicle and ensure that Loy had proper training and licensing.

Defendants’ primary argument is that even assuming that Loy exceeded the posted limit and therefore breached his statutory and common law duties, his speed did not cause the accident, but Alteneder’s negligence was the sole cause. Plaintiff argues in response that Loy has presented no evidence that speed was not a factor and that Plaintiff’s expert will opine that if Loy had been driving at a safe and reasonable speed “this crash would not have happened.” But Plaintiff’s evidence speaks to duty and breach, not causation. While he has presented sufficient evidence to raise a genuine fact issue as to the former, he has not as to the latter.

Plaintiff presents evidence that Loy exceeded the posted limit by 2-5 mph. He therefore breached his statutory duty not to exceed the posted limit. Plaintiff further argues that he exceeded the appropriate speed for the wet and rainy road conditions, which is governed by a “reasonable and prudent” person standard. §61-8-303(3). He insists that Loy, as a commercial trucker, should have reduced his speed by 1/3, relying on Grill’s analysis and conclusions. According to Grill, Loy should have been traveling slower given the wet conditions, as speed and road conditions affect sight lines and stopping distance. He further opined that Loy should not have undertaken to pass Booth. Considering the wet and rainy road, this is sufficient to raise a genuine dispute of whether Loy breached his duty of care. Nevertheless, Plaintiff fails to raise a genuine issue as to whether ATT breached its duty of care. While Grill opines that it had a duty to ensure that its drivers were aware of regulations and operated in compliance, there is no evidence that it failed to do so here, nor is there evidence that Loy was not properly trained or unaware of the CDL Manual. Grill simply outlines the regulations without connecting them to Defendants, and thus Plaintiff fails to raise a genuine dispute as to ATT for its own negligence or as to Loy for lack of training.

That leaves causation as it relates to Loy’s driving — first, “whether the defendant’s negligent act was a cause-in-fact of the plaintiff’s injury” and second, “whether the defendant’s act was a proximate cause of the plaintiff’s injury.” Fisher.

While Defendants cannot dispute that the impact of Loy’s truck resulted in Alteneder and Creel’s deaths, they dispute that Loy’s speed or lack of vigilance played a role. They persuasively argue that Plaintiff fails to show that but-for Loy’s allegedly negligent conduct the accident would not have occurred. Grill states that Loy had a duty to “keep a proper lookout in order to perceive hazards in front of him” and recommends that drivers “look at least 12 to 15 seconds ahead” and prepare for potential areas for “conflict” such as intersections, merges, slow traffic, and accident scenes.” But nowhere in his report — or in the MHP report — does it indicate that Loy’s sight lines were obstructed or that he could not stop within that distance. To the contrary, the MHP report states that the road was straight and level and Loy told officers that he saw the Impala traveling on the other side of the median and lose control. Thus there is no evidence that he failed to keep a proper lookout or take reasonable steps to avoid “conflict.” While he was apparently legally passing Booth, neither Plaintiff nor Grill present evidence as to Booth’s speed. Although Grill states that passing on wet roads should only be done when “necessary,” he provides no other context for that assessment. Thus while speed and road conditions could affect sight lines leading to injury, there is no evidence that they did so here.

The same holds for Grill’s opinions on braking distance and impact damage. He states that higher speeds “greatly increase the severity of crashes and stopping distances,” 60 mph can result in an impact and braking distance 9 times greater than 20 mph, and wet roads can double the braking distance, and recommends that drivers on wet roads reduce their speed by 1/3. But these statements and generic measurements similarly lack a nexus to the facts. He does not discuss the length of Loy’s stopping distance in fact or compare it to a reasonable stopping distance, nor does he posit on the variable damage to the Impala or Creel’s injuries. Rather, the evidence presented by Plaintiff relates to whether Loy breached a duty owed to Creel; it does not establish a causal link between the alleged breaches of duty and the harm. Butts (WD Penn. 2010) (discussing this distinction in the context of a fall down a stairway). Grill’s conclusions are generic at best: slower, safer driving prevents accidents. But his opinion that Loy could and should have avoided the accident altogether is merely speculation. Plaintiff ultimately fails to present any evidence that a change in Loy’s speed or driving would have altered the outcome, and has therefore failed to “offer substantial evidence of one of the essential elements of his negligence claim,” making summary judgment appropriate. Not Afraid (Mont. 2015).

But even if Plaintiff successfully raised a genuine dispute as to cause-in-fact, proximate cause forecloses recovery. Defendants are correct that Alteneder was negligent per se in entering Loy’s lane and her actions constitute an independent, intervening cause that severed the chain of causation. §61-8-321. While intervening acts that are foreseeable do not breach the chain of causation, Fisher, and while foreseeability is generally a jury question and may be resolved on summary judgment only “where reasonable minds may reach but one conclusion,” id., reasonable minds could certainly foresee that speeding on a wet road could result in an accident. And rainy conditions may impair a driver’s ability to see obstacles or control his vehicle. But the intervening cause here (Alteneder losing control and crossing the median) was not the foreseeable result of Loy’s alleged traveling too fast for conditions. Because he could not reasonably anticipate Alteneder’s conduct, it broke the chain of causation. Reasonable minds could reach but one conclusion: Creel’s injuries were not foreseeable and substantially caused by Loy’s alleged negligence.

Defendants’ motion for summary judgment is granted. The Clerk is directed to enter judgment and close the case.

Creel v. Loy and Active Truck Transport, 44 MFR 237, 3/10/21.

Jacqueline Lenmark & Murry Warhank (Jackson, Murdo & Grant), Helena, and Charles Oswald & Martha Starkey (Harrison & Moberly), Carmel, Indiana, for Creel; Adam Shaw & Shane MacIntyre (Brown Law Firm), Missoula, for Defendants.

INSURANCE: Duty to indemnify in libel action not ripe for declaratory judgment, stayed pending disposition of libel action or resolution of duty to defend claim… amount in controversy basis for federal jurisdiction satisfied regardless of whether adjudication of indemnity claim is deferred… Cavan.

Mary Cameron, a member of the Red Lodge City Council, purchased a renter’s policy with a personal liability limit of $100,000 per occurrence from American Bankers effective 8/7/19. She was sued 10/17/19 in Carbon Co. District Court by Rebecca Narmore alleging defamation by libel and IIED. Cameron tendered defense and indemnification to American Bankers, which agreed to share in her defense with MMIA subject to reservation. American Bankers filed this action seeking a declaration that no coverage exists under the policy for any of the claims asserted against Cameron and that it has no duty to defend or indemnity her. It alleges that the Court has jurisdiction based on diversity and because the amount in controversy exceeds $75,000, measured by the value of defense and indemnification of the claims against Cameron including attorney fees incurred in her defense and any claimed obligation to indemnify her.

It appears that the underlying action remains pending. Thus the issue of American Bankers’ duty to indemnify Cameron is not ripe. When a premature duty to indemnify claim is joined with a ripe duty to defend claim, courts have 2 options — stay the indemnity issue or dismiss the indemnity claim without prejudice. Many courts, including in this District, favor the first approach. The Court is persuaded that the first approach is appropriate here. American Bankers followed the course recommended by the Montana Supreme Court to defend under reservation and file a declaratory judgment action to resolve the coverage question. Freyer (Mont. 2013). The interests of judicial economy and efficiency support staying the indemnity claim, pending either disposition of the underlying action or resolution of the duty to defend claim.

Cameron argues that because the duty to defend claim is not ripe it cannot be considered in determining the amount in controversy, and that American Bankers has failed to establish that the duty to defend claim alone meets the jurisdictional threshold. Her argument is unavailing. The amount in controversy is determined from the face of the pleadings as of the time of filing or removal. “Where an insurer is contesting both its duty to defend and its duty to indemnify the insured, the amount in controversy is the sum of the expense of providing a legal defense plus the value of the claim in the underlying suit.” Society Ins. (N.D. Ind. 2011). A “subsequent amendment to the complaint or partial dismissal that decreases the amount in controversy below the jurisdictional threshold does not oust the federal court of jurisdiction.” Chavez (9th Cir. 2018); St. Paul Mercury (US 1938). Further, although the indemnity claim is stayed, the cost of potential indemnification is still counted toward the amount in controversy. “Many decisions in this and other circuits count the potential outlay for indemnity toward the amount in controversy, whether or not adjudication about indemnity should be deferred until the state case is over.” Sadowski (7th Cir. 2006) (collecting cases). “The amount in controversy is not a prospective assessment of a defendant’s liability. Rather, it is the amount at stake in the underlying litigation.” Chavez. Thus the potential cost of indemnification was put in controversy as soon as American Bankers brought this declaratory action against Cameron.

American Bankers alleges that the value of the defense and indemnification of the claims against Cameron exceeds $75,000. A party need not “prove to a legal certainty that the amount in controversy requirement has been met.” Owens (US 2014). The sum claim controls if it is made in good faith. Higashiguchi (9th Cir. 1997). “To justify dismissal, ‘it must appear to a legal certainty that the claim is really for less than the jurisdictional amount.’” Id.; St. Paul Mercury.

Cameron does not argue that American Bankers’ invocation of diversity jurisdiction was in bad faith. She also has not shown to a legal certainty that the cost to defend and indemnify her falls below $75,000. Therefore the amount in controversy is satisfied, regardless of whether adjudication of the indemnity claim is deferred. Her motion to dismiss is denied.

American Bankers Ins. of Florida v. Cameron, 44 MFR 231, 9/22/20.

Jared Dahle (Garlington, Lohn & Robinson), Missoula, for American Bankers; Jacqueline Papez & Jack Connors (Doney Crowley), Helena, for Cameron.

INSURANCE: Motion by Plaintiff alleging bad faith settlement of vehicle death case to exclude certain testimony & opinions of insurer’s hybrid and retained experts mostly denied… Molloy.

This is a bad faith action arising out of a High Country Paving loaded equipment trailer coming unhitched and colliding with another vehicle in 8/16, killing the driver and seriously injuring the passenger. High Country’s insurer United Fire ultimately settled with the 3rd-party victims for $3 million policy limits without securing a release for High Country. High Country then settled with the 3rd parties for an additional $1.275 million of its own money and then sued United Fire alleging bad faith related to the settlement and breach of contract for failing to pay CGL coverage.

The case was removed to this Court in 9/18. On 5/9/19 this Court certified a question to the Montana Supreme Court regarding United’s duty to obtain a release prior to paying policy limits. That Court issued its decision 12/31/19 clarifying Montana law regarding an insurer’s obligations when catastrophic injury may exceed insurance limits in a clear liability case. In the meantime each party sought to compel disclosure of materials identified in the other’s privilege log and also sought summary judgment. On 11/4/19 this Court granted both motions to compel. High County sought immediate relief by scurrying to the 9th Circuit through a petition for mandamus. Although the case was stayed pending resolution of that writ, the Court ruled on the pending summary judgment motions, determining that factual disputes remained regarding High Country’s bad faith claim but ruling in its favor on its contract claim. The 9th Circuit denied High Country’s mandamus petition 4/2/20. The case is set for trial 10/19/20. High Country seeks to exclude certain testimony and opinions of United’s hybrid and retained experts.

On 6/17/19 United disclosed as hybrid witnesses Guy Rogers, Jon Wilson, Katie Huso, and Nick Pagnotta plus a serial list of “Additional Hybrid Witnesses” including Clifford Edwards, Christopher Edwards, John Edwards, Mary Farjadi, Neal Scharmer, and “other representatives of United Fire” who may have formed relevant opinions. On 10/1/19 United disclosed its retained expert Gary Zadick. These individuals are expected to opine as to United’s duty to its insured and the value of the 3rd-party claims against High Country. In light of the answer to the certified question and this Court’s summary judgment ruling, the sole question remaining for trial is whether “the reasonable settlement value of this case exceeded $3 million.” As a preface to considering High Country’s arguments, it is important to note that the methods described are precisely what lawyers, adjusters, and insurers do every day in PI cases. Indeed, the very premise of High Country’s case is the valuation dispute of lawyers and adjusters.

Guy Rogers is a Montana attorney with extensive experience in civil litigation defense. United anticipates that he will provide opinions in 3 areas, only one of which is still at issue: “Whether the reasonable settlement value of the claims against High Country exceeded policy limits.” High Country unpersuasively seeks to exclude this opinion on the ground that it is not reliable and lacks sufficient foundation. It argues that his approach to claim valuation does not meet Daubert requirements because it is “not a scientific or precise exercise.” United responds that Daubert does not apply to non-scientific expert testimony. Neither party is entirely correct. While the rigid factors relevant to a scientific opinion need not be adhered to, courts are required “to make some kind of reliability determination to fulfill their gatekeeping function.” Hangarter (9th Cir. 2004). The factual basis for Rogers’s valuation opinion is stated as:

Mr. Rogers has also been involved in defending numerous personal injury and wrongful death cases, and has defended and tried cases against the Edwards Law Firm. He is familiar with the types of damages claimed and experts routinely retained by the Edwards Law Firm and other top-tier plaintiffs’ firms in personal injury and wrongful death cases. Mr. Rogers has also been the mediator in numerous personal injury and wrongful death cases. Based on the information provided to him by Mr. Scharmer, and his knowledge and experience, Mr. Rogers was of the opinion that it was reasonably clear that High Country’s liability to Mr. Edwards’ clients was in excess of $3,000,000.

He further explained in his deposition that a number of factors go into the “hopper” when valuing a wrongful death case, such as existing jury verdicts, venue, and prior experience in the field, as well as who the plaintiff is, the injuries sustained, and the plaintiff’s family situation. While he conceded that it would not be possible to provide a “precise dollar amount” and “no one has a crystal ball,” he consistently explains his process for determining a reasonable settlement range. The soundness of his methodology is supported by the discussion in Gibson (Mont. 1984), which shows the process lawyers engage in when assessing case values.

High Country further argues that the uncertainties surrounding the value of general damages make it an improper area for expert testimony. This argument highlights the unique procedural posture of the case. Unlike a usual case involving general damages, the jury will not be determining the actual value of the 3rd-party claims, but the reasonableness of an insurer’s valuation of a case. Thus it will need information about what United knew (facts) and how it made its decision based on those facts (opinions). Contrary to High Country’s characterization, Rogers’s approach is not an “amorphous thought experiment,” but a sufficiently reliable practice to be presented to a jury. Moreover, the fact that no one can accurately predict jury verdicts only further supports the importance of expert testimony in this field. The testimony offered by Rogers speaks to how an insurer values a case in certain circumstances. Simply saying that case valuation is impossible does not help a jury answer that question.

High Country further challenges the foundation of Rogers’s testimony, arguing that his opinions are based on a 45-minute call with Neal Scharmer, United’s Chief Legal Counsel/VP. Its brief shows that neither United nor Rogers has attempted to obfuscate the basis of his knowledge or the limits of his factual review. As argued by United, his brief review of the case is ripe for cross; as is High Country’s contention that Rogers did not follow his own methodology. Rogers is permitted to testify as a hybrid witness consistent with his disclosure.

Jon Wilson is likewise a Montana attorney with extensive experience in insurance coverage and civil defense litigation and is expected to testify to the same general subjects as Rogers. According to High Country, he has no firsthand knowledge of the case because he “never spoke to anyone at United Fire and never offered any advice” and argues that his opinions merely bolster or vouch for those offered by Rogers. Wilson’s testimony presents a close question. The record indicates that he was not directly involved in United’s case valuation, but was part of Rogers’s valuation methodology. After he was approached by United, Rogers consulted with Wilson. The question is whether the opinions formed and shared by Wilson during that consultation can be considered opinions formed “during the course of treatment.” Goodman (9th Cir. 2011) (discussing the boundaries under Rule 26(a)(2)(C) for a treating physician). The answer is a cautioned yes. Wilson’s disclosure shows that he formed his own contemporaneous opinion about the value of the case based on the information provided by Rogers. Tarter (D.Mont. 2019) (“When an expert is to offer testimony limited to his or her percipient knowledge i.e. knowledge and opinions formed at the time an earlier evaluation or report was made, the expert is treated as a non-retained expert.”). There is no indication that he offered an opinion or authored a report after the fact. Thus Wilson is permitted to testify to the opinion he formed at that time and its factual basis. However, he is prohibited from framing his testimony in terms that merely bolster Rogers’s opinions. Huawei (N.D. Cal. 2018).

Katie Huso is a Montana attorney with experience in PI and coverage claims. She was United’s coverage counsel. She is expected to testify to the same subject areas as Rogers and Wilson, as well as to the extent of coverage available under High Country’s policy. Given the narrow issues remaining, only her valuation opinion is relevant. High Country argues that it is improper “bolstering” and deficient under Rule 702 and Daubert because she simply changed her tune regarding settlement after speaking to Rogers. She stated in her deposition that she believed the claims were worth at least $3 million but was reluctant to assign a specific dollar value. However, High Country is correct that neither her disclosure nor her deposition provides a basis for her valuation of the claim. Nor does it appear that she provided a contemporaneous valuation. Nevertheless, she provides necessary factual background for how United processes claims such at issue here. Her fact testimony regarding her actions in this case, as well as who she spoke to and why, is permitted.

United’s hybrid disclosure as to “additional hybrid witnesses” states:

There are numerous fact witnesses who may provide opinion testimony in this case, including A. Clifford Edwards, Christopher Edwards, John Edwards, Mary Farjadi, Neal Scharmer, and other representatives of United Fire who formed opinions as to High Country’s liability, the reasonable settlement value of the third-party claims, and United Fire’s duties under Montana law. United Fire believes that the opinions that will be expressed by these witnesses are contained in the documents that have or will be produced in this case in discovery.

These witnesses include the plaintiff’s attorneys in the underlying matter and United’s employees. High Country seeks to exclude any such testimony on the grounds that this is not an actual disclosure. It is correct. Even assuming that the short summary identifies the subject of the testimony, it does not include “a summary of the facts and opinions to which the witness is expected to testify.” Rule 26(a)(2)(C)(ii). It is not sufficient to merely reference other unidentified discovery documents. Ibey (D.Mont. 2013). And because United unpersuasively maintains that its disclosure is adequate given the other discovery, there is no basis to conclude that the inadequate disclosure is harmless. Yeti by Molly (9th Cir. 2001) (placing the burden of proving harmlessness on the party facing sanctions. Nonetheless, these witnesses are permitted to testify as fact witnesses to matters limited to what they did and why they did it.

High Country also challenges a retained expert, Gary Zadick. Similar to the hybrid witnesses, Zadick is an experienced insurance litigation attorney. His opinions relate to an insurer’s duties to its insured, as well as the potential settlement value of 3rd-party claims. “The purpose of the detailed and specific disclosure requirements of Rule 26(a)(2)(B) is to provide full information so the parties can prepare for effective and efficient discovery.” Hash (D.Mont. 2009). Thus an expert report should include the “substance” of the testimony and its reasons. Id. “The report should offer the ‘how and why’ of the results, not mere conclusions.” Id. “Bald conclusions of an expert witness, or brief statements of ultimate conclusions with no explanation of the basis and reasons therefore, or the absence of a statement of how the facts support the conclusions, do not satisfy the Rule 26(a)(2)(B) requirements.” Id. High Country argues that Zadick’s report lacks the “how” and the “why.”

The format & content of Zadick’s disclosure is unique. After a brief factual section (that includes some opinions), his opinions are outlined in the “answers” to a series of “questions.” Of the 22 opinions proffered in this manner, only opinions 6 & 7 are relevant to the valuation issue. While High Country is correct that these opinions are somewhat conclusory, he adequately presents his valuation process earlier in his report. Its challenges to his analytical framework are better addressed on cross.

Nor is High Country’s improper supplementation argument compelling. United disclosed a rebuttal report for Zadick 10/30/19. Rebuttal reports are limited to evidence “intended solely to contradict or rebut evidence on the same subject matter identified by another party” in an expert report. Rule 26(a)(2)(D)(ii). Zadick explains that insurers must evaluate claims based on their investigation and information provided by the injured party’s counsel. He addresses the relevant considerations and explains why some facts are speculative and others are determinative. But he also specifically states his disagreement with High Country’s experts as to the ability to predict damage amounts and what types of considerations play a role in lowering or increasing total calculations. His opinions are appropriately “rebuttal.”

High Country’s motion is granted insofar as Huso and the “Additional Hybrid Witnesses” are limited to providing fact testimony at trial, and denied in all other respects.

High Country Paving v. United Fire & Casualty, 44 MFR 221, 4/17/20.

Jeffrey Tierney, Robert Baldwin, and Trent Gardner (Goetz, Baldwin & Geddes), Bozeman, for High Country; Jon Dyre (Crowley Fleck), for United.

WRONGFUL DEATH: Magistrate’s recommended summary judgment rulings in MVA death case involving independent contractor distributor of bakery’s products whose driver was allegedly under influence of marijuana and issues of agency, subservant employment, joint venture, non-delegable duty under Federal Motor Carrier Safety Regulations, negligent selection of independent contractor, punitives… DeSoto.

Daizey Kinn was driving north on US 87 with her mother Shannon McBee and young daughter as passengers 4/2/18. Allen Scarlett was driving south in a BNT Distributing vehicle when he lost control on a turn and struck Kinn’s vehicle. McBee died and Kinn was injured.

BNT supplies food products to grocery stores and other small stores. US Bakery dba Franz Family Bakeries is a major producer of bread products, operating in several western states with bakeries throughout the region and some of those products are delivered from out-of-state facilities to Montana. BNT approached US Bakery in 5/16 to see if it would be interested in having someone distribute its products in the territory that BNT was servicing. They entered into a Distribution Agreement authorizing BNT to sell US Baker products in several Montana locations. It identified BNT as an “independent contractor with management and control of its own business.” Prior to 12/17, US Bakery employed a sales rep who serviced accounts in Lewistown, Stanford, Moore, Hobson, and Eddie’s Corner. BNT added that area to its business in 12/17 and began distributing US Bakery products on a route from Billings to Lewistown which included accounts previously serviced by the US Bakery sales rep as well as other accounts in Harlowton and Ryegate that were not previously serviced by the US Bakery sales rep.

At the time of the MVA, Scarlett was driving a BNT vehicle distributing US Bakery products to retailers along the Lewistown Route including the Lewistown Albertsons, the largest customer of US Bakery on that route. US Bakery entered into a Scan Based Trading System Agreement with Safeway, which operates Albertsons stores, identifying US Bakery as the supplier of the bread products sold at the Lewistown Albertsons. To facilitate scan based trading, it maintained the operating system and provided BNT with handheld devices to place its orders. US Baker collected payment directly from Albertsons for the products sold there, then provided BNT a credit for that amount.

Kinn made a claim against BNT and sued US Bakery 2/4/19. Her original complaint alleged that Scarlett was an employee-in-fact and/or agent of US Bakery and that US Bakery was vicariously liable for Scarlett’s negligent conduct, and that US Bakery and BNT were in a joint venture and US Bakery was jointly liable for Scarlett’s negligence. She asserted claims against US Bakery for negligence, wrongful death, and survival and requested punitives. She filed an amended complaint adding a theory of direct liability alleging that US Bakery failed to exercise reasonable care in selection of BNT as an independent contractor and a theory of vicarious liability alleging that because US Bakery operates vehicles under a public license it had a non-delegable duty of safety and is liable for BNT’s negligence.

Kinn requests summary judgment that Scarlett was transporting goods in interstate commerce and was therefore subject to the Federal Motor Carrier Safety Regulations, and for summary judgment that US Bakery and BNT were in a joint venture. US Bakery requests summary judgment on liability and punitives which would effectively dispose of all 6 claims.

Kinn cites Watts v. MRL (Mont. 1994) for the proposition that when “an employee is a subservant of a company that was, in turn, a servant of a principal, the employee is deemed a servant of the principal,” and argues that if BNT was a servant of US Bakery, Scarlett is a servant or employee of US Bakery. But while Watts relied on common-law principles, Kinn does not cite any Montana authority applying the subservant theory outside the FELA context as a basis for tort-related vicarious liability. But even assuming that the theory is viable, her evidence is insufficient to raise a material fact issue regarding an employment relationship between Scarlett and US Bakery as there is insufficient evidence that US Bakery controlled or had the right to control his physical conduct on the job. BN principal Bryan Halpin confirmed in his deposition that US Bakery did not have any control over Scarlett’s day-to-day work activities. While Kinn points to evidence that he used scanning devices, trays, and delivery racks provided by US Bakery, that is not sufficient to find that US Bakery controlled or had the right to control his physical conduct on the job, while the undisputed evidence demonstrates that BNT hired him, paid his wages, set the delivery schedule, owned the van, and otherwise had the right to control his day-to-day work. Thus her subservant theory of employment fails as a matter of law.

Kinn also argues that there is sufficient evidence of an agency relationship between US Bakery and BNT such that US Bakery can be held vicariously liable for BNT’s negligence, acting through its driver. However, the Court agrees with US Bakery that, under the Butler (Mont. 2000) factors, the undisputed evidence demonstrates that it did not have control over BNT sufficient to establish an actual agency relationship. For example, as to the 1st factor — right or exercise of control — Kinn points to evidence that US Bakery required BNT to use pricing negotiated between US Bakery and Albertsons, use a proprietary device for ordering products and inventorying deliveries to Albertsons, submit to a scan-based trading system used between Albertsons and US Bakery, and comply with the stale date schedule. However, she overlooks the facts as they relate to the many other customers serviced by BNT. At the beginning of 2018, it had 27 accounts on 2 different routes including the Lewistown Route. While US Bakery set the price for products sold at the Lewistown Albertsons and 2 other accounts, BNT set the price for products sold to all its other customers, and BNT set its own delivery schedule, placed orders for all of its customers, decided what US Bakery products to sell, set the prices for the US Bakery products it sold for the vast majority of its customers, and did not need US Bakery’s permission to add or discontinue servicing other accounts.

Kinn has presented no evidence establishing a material fact issue as to whether US Bakery and BNT intended to create a joint venture, even as to the Lewistown Albertsons. Because “intent is crucial to the determination of whether a joint venture exists,” Pearson (Mont. 2016), US Bakery is entitled to summary judgment on her joint venture theory.

Because the evidence establishes that US Bakery is a private motor carrier the cases holding that a common carrier is liable for the negligence of its independent contractors do not apply. The Court agrees with US Bakery that the Thomas (D.Mont. 1958) rationale in holding that a motor carrier may be vicariously liable under Montana law for the negligence of an independent contractor applies only to common carriers, not to private carriers like US Bakery. Thus US Bakery’s motion for summary judgment on Kinn’s non-delegable duty theory of liability should be granted.

Assuming that BNT is an independent contractor, Kinn’s theory of direct liability alleges that US Bakery failed to exercise reasonable care in selecting BNT. She alleges, inter alia, that it knew that BNT would be delivering its bread products to multiple retailers on a 350-mile roundtrip while “using a commercial motor vehicle with a gross vehicle weight in excess of 10,000 lbs,” and that Scarlett was under the influence of marijuana and BNT did not screen him for drug use before hiring him. Her negligent hiring claim rests in part on the allegation that US Bakery “should have verified that the subcontractor it hired was complying with the FMCSRs.” However, because it did not have a non-delegable duty to ensure that BNT was complying with the FMCSRs, Kinn cannot maintain a negligent hiring claim based on US Bakery’s failure to verify that BNT was complying with those regulations. However, she further alleges that US Bakery failed to exercise reasonable care in selecting BNT as an independent contractor because it did nothing to ensure that it would employ qualified drivers and failed to determine whether it had enacted any safety plan, drug & alcohol policy, or driver training. US Bakery has not shown that it is entitled to JML on this aspect of her claim.

Kinn alleges that US Bakery acted with actual malice “by intentionally disregarding facts that created a high probability of injury and deliberately proceeding to act with indifference to the high probability of injury” to McBee, Kinn, “and any other persons foreseeably on the roadway.” She accuses US Bakery of claiming that BNT “was an independent contractor to avoid the cost of implementing driver safety programs, drug testing, proper driver training programs, and background checks,” and that the MVA “occurred as a direct result of a poorly trained driver who was under the influence of controlled substances at the time of the wreck.” US Bakery argues that it is entitled to summary judgment on this claim for punitives on the ground that it cannot be held liable for the negligence of BNT and its driver under any of Kinn’s theories. However, there are material fact issues precluding summary judgment for US Bakery on her claim for negligent selection of an independent contractor. While it remains to be seen whether she will be able to prove conduct upon which a jury could award punitives, the claim is sufficient to survive summary judgment.

The Court recommends that summary judgment be granted for US Bakery as to Kinn’s agency, joint enterprise, and non-delegable duty theories of liability, but denied as to her negligent hiring theory and claim for punitives; that Kinn’s motion for summary judgment as to joint venture be denied; and that Kinn’s motion for summary judgment as to interstate commerce, survivorship and US Bakery’s motion for summary judgment as to wrongful death damages be denied as moot.

The parties’ motions in limine will be addressed as needed after Judge Christensen has ruled on this F&R.

(The Court was notified 5/11/20 that the case settled.)

Kinn v. United States Bakery, 44 MFR 222, 4/28/20.

Lance Jasper & Robert Bell (Reep, Bell & Jasper), Missoula, for Kinn; Paul Haffeman & Stephanie Hollar (Davis, Hatley, Haffeman & Tighe), Great Falls, for US Bakery.