§1983 claims against Detective in drug defendant suicide survive summary judgment… objections to Erickson’s recommendations sustained, denied… Christensen.

Colton Peterson, 21, was arrested for growing & selling marijuana. Missoula police were informed by multiple sources that he was possibly suicidal and in need of a mental evaluation. Nevertheless, Det. David Krueger pressured him to supply names & information about bigger dealers, including how to set up controlled buys or sells. Less than 2 hours after a meeting with police 7/27/10 at Willard School, where he was given an ultimatum to provide 3 names of dealers or face a lengthy prison sentence, he shot himself in the head with a rifle. His estate and parents sued the officers, Missoula, and Missoula Co. under 42 USC 1983 and state law theories. Magistrate Strong recommended dismissal of all claims. Plaintiffs’ objection as to Strong’s finding that Peterson was not taken into custody is sustained. They do not contend that he was taken into custody 7/27 at Willard School or that he was in custody when he committed suicide. The Court agrees that he was taken into custody 7/26 when he turned himself in during execution of a search warrant at his apartment.

Plaintiffs’ objection as to officer knowledge is sustained. The evidence relative to Krueger’s knowledge is all that matters for resolving whether summary judgment for Krueger is appropriate. Knowledge of all other officers is generally only relevant to whether summary judgment is appropriate on Plaintiffs’ Monell (US 1978) liability claim. Inter alia, Det. Gunter expressed concern to Krueger while executing the warrant that Peterson was potentially suicidal. During the interview at the station, immediately after Krueger obtained from Peterson the names of 2 other dealers, he asked if he was suicidal or thinking of harming himself. That night his mother Juliena Darling repeatedly expressed concern to Krueger that he was suicidal and begged him to detain Peterson and get a mental evaluation. It is reasonable to infer that Krueger knew that Peterson was potentially suicidal.

Plaintiffs’ objection as to evidence that any of the defendants acted to expose Peterson to any new risk of harm is sustained. Although the evidence of what occurred at Willard School conflicts, if Plaintiffs’ version is believed, it is reasonable to infer that Krueger acted in a manner that significantly increased Peterson’s psychological stress and risk of suicide. Ms. Johns’s testimony suggests that Krueger demanded that he provide the names of 3 more dealers or face life in prison. She testified that the interaction had a dramatic effect on his state of mind and that he showed signs of increasing distress.

Plaintiffs have presented sufficient evidence for a jury to conclude that Krueger acted with indifference to Peterson’s risk of suicide, and that this left him in a more dangerous situation that the one in which Krueger found him. Plaintiffs have established that Krueger’s actions violated Peterson’s 14th Amendment right to substantive due process.

Krueger is not entitled to qualified immunity. It is clearly established in the 9th Circuit that state officials may be held liable where they affirmatively and with deliberate indifference place one in danger he would not have otherwise faced. Although there is no 9th Circuit case specifically on point, the contours of the law were sufficiently clear that Krueger may be said to have been on notice that his conduct was unlawful.

Defendants are entitled to summary judgment on the state law negligence and constitutional claims. Strong correctly found that none of the exceptions to the public duty doctrine applies.

Plaintiffs have presented sufficient evidence to allow Juliena’s emotional distress claims to go forward against the City. Psychologist Philip Bornstein opines that she “clearly suffers from PTSD” which he characterizes as “debilitating” and “pervasive.” The claim fails against the County because Krueger was not an agent of the County, even as a Task Force officer.

Monell supervisory liability claims against Sheriff McMeekin and Chief Muir fail. Inter alia, Plaintiffs do not allege or provide evidence that either was present during the investigation of Peterson or other instances where other members of the Drug Task Force violated the rights of other CIs or drug suspects and thus do not forward a valid acquiescence or ratification theory. They point to deficiencies as to specific HIDTA training, but do not dispute that Krueger received all training required by the PD and the DEA course for drug investigators.

Plaintiffs’ experts: psychologist Philip Bornstein, Missoula; CPA/ABV/CVA Dale Williams, Missoula; Dr. Carol Bridges, Missoula; Michael Levine, NY (police practices); Dr. William Reid, Texas; Craig Shannon, Esq., Missoula; Randi Price, Missoula.

Defendants’ experts: Jerry Williams, Butte; psychologist Paul Moomaw, Missoula; pathologist Thomas Bennett, Billings; William Everett, Minnesota.

Peterson v. Missoula et al, 41 MFR 499, 8/6/14.

Quentin Rhoades, Rob Erickson, and Nicole Siefert (Sullivan, Tabaracci & Rhoades), Missoula, for Plaintiffs; William Crowley, Natasha Jones, and Tracey Johnson (Boone Karlberg), Missoula, for the City and Muir; Charles McNeil & Jeffrey Roth (Garlington, Lohn & Robinson), Missoula, for the County, Sheriff’s Dept., and McMeekin; Brendon Rohan (Poore, Roth & Robinson), Butte, for Krueger.

INSURANCE: Potentially Liable Party notices under Montana’s CECRA are functional equivalent of “suits” under insurance policies, subject to unequivocal demonstration standard… insurer breached duty to defend when presented with request to defend and PLP letters, should have defended and filed dec action to discern coverage… insured entitled to judgment in the amount of $650,000 consent judgment it paid City for site cleanup, plus attorney fees incurred during CECRA proceedings, post-judgment interest at 10%… entitled to fees for this action, amount to be resolved by the parties… Christensen.

Considering the long-established and judicially approved alternative approach, which is to defend the insured and file a declaratory action to determine coverage, it is mystifying that an insurer would continue to deny a defense to its insured in the face of a coverage question, particularly where the consequences are clear under Montana law and can result in a judgment many times greater than the modest cost of the usual defense. This case presents, again, a clear example of the risk associated with this approach.

Pacific Hide & Fur leased a property in Bozeman 1956-88 that later became known as the CMC Bozeman Asbestos Site. In 1/96 MDEQ notified it that it had been identified as a Potentially Liable Party under Montana’s CECRA. In 3/04 counsel for Pacific notified Great American that it had been identified as a PLP and that the City may assert a contribution claim against it. It attached a schedule of 14 policies it allegedly had purchased from GA and requested defense and indemnity from all claims arising from the site. In 4/11 GA denied Pacific’s request. In 8/07 Pacific executed a consent judgment by which it agreed to a 15% allocation of liability for the site, to be paid to the City as the party that undertook the site cleanup. In 7/10 Pacific executed an agreement & release with the City and tendered a check for $650,000. Pacific sued GA and others in State Court in 5/12 alleging breach of contract and bad faith claims handling. Century and Central National filed notice of removal with which GA joined. The Court bifurcated with Phase I to deal with the contract and declaratory claims and Phase II to deal with the remaining claims. In 10/13 the Court granted summary judgment to Pacific on GA’s statute of limitations defense. The Court now resolves Phase I. This case presents 2 novel & interrelated questions of state law concerning the duty to defend that the Montana Supreme Court has yet to directly address.

PLP notices issued pursuant to CECRA are “suits” under the GA policies. While the parties raise numerous issues, Pacific’s claim for breach hinges on whether, absent a “suit,” notice that it has been identified as a PLP and requested to take further action is sufficient to trigger the duty to defend. Pintlar (9th Cir. 1991) held that EPA’s administrative claims against Gulf Resources in connection with contamination of the Bunker Hill Site in Idaho triggered the insurers’ duty to defend.Anderson (9th Cir. 2013 reaffirmed that holding, stating that it was one of the first among “the huge majority” of US courts which now hold that a policyholder’s receipt of a PLP notice” from EPA is the “functional equivalent” of a suit. Given the similarities between the statutes, the reasoning in Pintlar applies with equal force in the context of CECRA. It also corresponds with Montana’s duty to defend statute — that an insurer “is bound on request of the person indemnified, to defend actions or proceedings brought against the person indemnified.” MCA 28-11-316. “Proceedings,” like those formally commenced by MDEQ against Pacific through its 9/03 letters, are sufficient to trigger the duty to defend.

The unequivocal demonstration standard applies to PLP notices. GA does not address Pintlar, let alone set forth an argument as to why the 9th Circuit’s analysis in that case is not equally applicable here, but points to Montana cases to support its position that Pacific only notified it of a “potential claim” and that a “complaint” is required to trigger the “unequivocal demonstration” standard that it claims should govern whether the PLP letters were sufficient to trigger its duty to defend. Given the ruling that a PLP notice constitutes a “suit,” the Court rejects Pacific’s assertion that it was only on notice of a potential claim. In all the cases it cites, a complaint had been filed and the courts were tasked with determining whether coverage existed, and thus none addresses whether a complaint is required in all instances or if there are situations in which an insured may “set forth facts which represent a risk covered by the terms of an insurance policy” through other means. Staples (Mont. 2004). There is simply no good reason or basis in law to ignore or construct an alternative to the unequivocal determination standard in this novel situation where commencement of a CECRA proceeding — and not a complaint — triggers the duty to defend. Pacific faces the sole financial responsibility for removal and/or remediation of contamination at the entire site. The PLP letters will therefore trigger GA’s duty to defend absent an unequivocal demonstration to the contrary.

GA asserts a lost policy defense as to 5 policies. However, Pacific provided copies of 5 proven policies, which also fall outside the sudden & accidental pollution exclusion since it was not included in GA’s policies until 1973. GA’s 3rd basis for denial — the owned property exclusion — cannot withstand application of the unequivocal demonstration standard or the sting of CECRA’s joint & several liability. At the very least, it failed to demonstrate unequivocally that the allegations in the PLP letters trigger coverage under the 5 proven policies, rendering any discussion of the additional policies superfluous, as coverage under a single policy is sufficient to trigger the duty to defend the entirety of MDEQ’s claims. Schwan (Mont. 2013); Newman (Mont. 2013).

GA advances new arguments in the summary judgment proceedings including that Pacific was required to prove coverage before GA was required to provide a defense, Pacific cannot establish that its liability arose from an “occurrence,” and untimely notice of an “occurrence.” The bulk of its briefing could be mistaken for briefing on a declaratory judgment action after tendering a defense to the CECRA claims under reservation of rights. However, it chose instead to take the riskier path by denying coverage after researching MDEQ’s claims and making “unilateral determinations” as to several factual questions. Staples. Thus the Court is presented not with a coverage action, but a claim for breach of the duty to defend. This is not the first time the Court has reminded it that this is an action for breach, not coverage. Several of its arguments attempt to turn the unequivocal demonstration standard on its head, essentially requiring Pacific to prove coverage before GA was required to provide a defense. The Montana Supreme Court has “repeatedly admonished insurers” facing a coverage question to “defend the insured and file a declaratory judgment action to discern coverage.” Freyer (Mont. 2013). GA’s duty to defend was triggered when it was presented with Pacific’s request for coverage and the PLP letters. By denying that request, it breached its duty.

“Where the insurer refuses to defend and does so unjustifiably, that insurer becomes liable for defense costs and judgments.” Staples. Pacific is entitled to judgment in the amount of the $650,000 consent judgment it paid to the City, plus attorney fees incurred during the CECRA proceedings, plus 10% post-judgment interest. It is also entitled to its fees for this action. The Court firmly believes the parties can resolve the fees issue without intervention. An amicable and independent resolution of this issue will conserve scarce judicial resources and save the parties and counsel the time & expense associated with formal proceedings.

Pacific Hide & Fur v. Great American Ins., 41 MFR 460, 5/23/14.

Kyle Gray & Michelle Sullivan (Holland & Hart), Billings, for Pacific; Michael Hooks (Forsberg & Umlauf), Seattle, and Robert Carlson (Corette Black Carlson & Mickelson), Butte, for GA.

ATTORNEY FEES: Attorneys entitled to fees based on what client, as assignee of insurer in $3 million “tough love” suicide consent judgment, would have been able to recover for time & expenses pursuing coverage, not on contingency (amended in an attempt to clarify that it “has always been intended to cover the underlying action and any declaratory judgment action required as Third Party beneficiary or First Party assignee”)… Christensen.

Karlye Newman, 16, committed suicide 10/4/04 at Spring Creek Lodge in Sanders Co., a “tough love” behavior modification program. Her mother sued multiple defendants including National Contract Services in State Court for, inter alia, wrongful death/survivorship. NCS tendered the claim to United Fire & Casualty, which refused to defend or indemnify. Newman than reached a settlement with NCS whereby it consented to a $3 million judgment and assigned all of its rights against United to Newman and she signed a covenant not to execute against NCS. Newman then brought this breach of contract and declaratory action against United. This Court granted summary judgment to Newman and entered judgment for the amount of the underlying State Court judgment. (MLW 1/25/14). Newman also sued Teen Help, whose insurer Scottsdale also refused to defend. Teen Help also entered into a consent judgment and covenant not to execute with Newman. Scottsdale was subsequently found to have breached its duty to defend and ordered to pay the judgment against Teen Help. Judge Christopher awarded Newman attorney fees based on a contingency. Newman (Mont. 2013) affirmed the decision to award fees but reversed as to the basis for the award and remanded “for a calculation based upon what Newman, as Teen Help’s assignee, would have been able to recover for her attorney’s time and expenses incurred in pursuing insurance coverage from the defendants.” Newman and her attorneys in this action then amended their contingency agreement in an attempt to clarify that it “has always been intended to cover the underlying action and any declaratory judgment action required as Third Party beneficiary or First Party assignee.” United contends that Newman is only entitled to fees incurred in prosecuting this declaratory action.

Newman emphasizes that under Brewer (Mont. 2003) a 1st-party insured is entitled to fees in an action against its insured, and that under Riordan (36 MFR 382) a court may use a contingency as the basis for that award. She stresses that an assignee is entitled to all rights of the assignor, and that under Riordan this includes the right to seek fees based on a contingency. She contends that the operable contingency in this case, as amended, clarifies that it pertains to both the underlying litigation and prosecution of this declaratory action brought as an assignee.

It is clear, based on Newman, that Newman is entitled to reasonable “fees for services rendered by counsel in enforcing the insurance contract, just as first-party insured [NCS] would have been able to do had it instituted the contract and declaratory action against [United].” It is equally clear that Newman is not entitled to fees based on the contingency between Newman and her lawyers to which NCS was not a party. Id. Their post-hoc amendments to the contingency do not alter this, because they do not make NCS a party to the contingency. While a 1st-party insured may be awarded fees based on a contingency in an action against its insured,Riordan, it does not follow that the assignee of a 1st-party insured’s rights is also entitled to fees based on a contingency between the assignee and his/her lawyers. First, in the assignee contract, the normal justification for the exception to the American Rule is not present. Sampson (Mont. 2006) (“we have declined to extend this exception to third party actions, where there is no privity of contract”); Jacobsen (Mont. 2009) (“The rationale underlying the insurance exception to the American Rule is the existence of a fiduciary duty.”). Outside of her status as an assignee, Newman is not in privity with United, and United owes her no fiduciary duty. Moreover, as Newman held, in the assignee context, the 1st-party insured is not a party to the contingency between the assignee and its lawyers, and has “no contingency fee agreement to impose in the declaratory action.”

NCS is not a party to the original or amended contingency, and the Court will not consider it in determining an award of fees. As in Newman, the Court must base its award “upon what Newman, as [NCS’s] assignee, would have been able to recover for her attorney’s time and expenses incurred in pursuing coverage.” Newman shall submit a renewed motion for fees to allow the Court to determine an award based on reasonable hourly rates, expenses, and hours prosecuting this declaratory action.

Newman v. United Fire & Casualty, 41 MFR 376, 3/19/14.

Ann Moderie (Moderie Law Firm), Polson, Elizabeth Best (Best Law Offices), Great Falls, Lawrence Anderson, Great Falls, and Thomas Beers (Beers Law Offices), Missoula, for Newman; Dennis Clarke & Stephanie Hollar (Smith, Walsh, Clarke & Gregoire), Great Falls, for United.

INSURANCE: Ambiguous Builders’ Risk policy construed to cover pipeline right of way after it was cleared, excavated, and leveled as “structure” and therefore “Covered Property,” not precluded by “land” exclusion, interpretation not inconsistent with additional coverage for Site Preparation… right of way sustained “direct physical loss or damage” as result of extreme precipitation, covered by policy… insurer did not waive and is not estopped from asserting policy defenses by not including them in reservation letter… Christensen.

Barnard Pipeline contracted with Kern River Gas Transmission to complete the 28-mile Apex Pipeline Expansion Wasatch Loop in Utah. Travelers Property Casualty insured Barnard under a Builder’s Risk policy. Phase 1 involved construction and/or improvement of roads to access the right of way. Unusually heavy precipitation the fall and winter of 2010 led to Barnard filing claims in 12/11 based on damage to access roads and environmental control equipment and losses associated with damage to the right of way. Travelers paid for damage to the roads and environmental equipment but denied the claim for losses to the right of way, concluding that access roads and environmental control equipment were “Covered Property” which had sustained direct physical loss or damage from a “Covered Cause of Loss,” while the right of way was “land” for which coverage was expressly excluded and also that it had not sustained direct physical loss or damage. It stated in a reservation of rights letter in 8/13:

The project description on the Declarations page expressly includes “project access roads” and therefore Travelers is accepting this element of Barnard’s claim. Land is not covered property under the policy. The land making up the right-of-way is distinguished from project access roads which are expressly identified in the policy Declarations. Further, Travelers does not agree that land which becomes saturated is “damaged.”

Travelers paid $1,486,949 for “expenses to repair only access roads that Barnard constructed or improved for the purposes of this project” and the damage to environmental control equipment, and denied the balance of the claim. The parties request partial summary judgment.

Barnard notes that “Covered Property” is defined as “Builders’ Risk” which includes all buildings & structures, even temporary structures, described on the Declarations page. It emphasizes the expansive description of “Builders’ Risk” on the Declarations page and asserts that the work required to prepare the right of way was extremely costly and notes that it was included in the limits of insurance and premium calculation. It points out that the work altered the natural state of the land and served a critical function in completing the project. Once cleared, excavated, and graded, the right of way became a lane for heavy equipment and a platform for construction & installation of the pipe. It asserts that the cleared, excavated, and leveled right of way meets the legal and common definition of “structure” and thus should constitute “Covered Property.”

Travelers contends that the clearing, excavating, and leveling where the pipe was to be laid did not transform the land into a structure as that term is commonly understood and the Court need not look to a dictionary definition of “structure.” It notes that the right of way, even after the work performed on it, was comprised only of soil, and contends that applying Barnard’s definition of “structure” is inconsistent with the policy viewed as a whole because it provides additional coverage for “`Builders’ Risk’ Site Preparation,” which would be rendered unnecessary if excavating a job site transformed the site into a structure.

Travelers’ position runs contrary to the canons of interpretation of an insurance contract, in particular that any ambiguities must be narrowly & strictly construed against the insurer. Hardy (Mont. 2003); Revelation (Mont. 2009). Further, the Court is not persuaded that the work to the right of way did not render it a structure or temporary structure, as that term is understood pursuant to policy provisions. The Montana Supreme Court has approved use of dictionaries to interpret an insurance contract. Horton (Mont. 2003). Travelers cannot dispute that the cleared, excavated, and leveled right of way meets the definition of “structure” as defined in legal and common dictionaries. The policy does not define “structure.” Travelers was obligated to draft a more restrictive definition if the common and legal definition was to be regarded as too expansive. Black’s defines “structure” as “any construction, production, or piece of work artificially built up or composed of parts purposefully joined together.” Webster’s defines it as “something built or constructed, as a building or dam.” These definitions are not inconsistent with what one would typically consider a structure. The right of way existed as raw land before Barnard began working. It extensively changed the inert natural state through use of heavy machinery, turning it into something “artificial” and “purposely joined together,” free of vegetation, level, compact, and more useful for its construction purposes. It used the cleared right of way as a place to perform work and as a lane for its machinery. As Travelers admits, the photo of the excavated right of way submitted with Barnard’s brief appears very much like a large road. Although the right of way may not be the first thing that comes to mind when one thinks of a “structure,” the excavated right of way cannot be easily excluded from the general category of things falling within its broad meaning. The policy does not limit a broad definition of “structure.” Indeed, it invites the reader to be flexible with one’s ordinary understanding of “buildings and structures.” According to the definitions section, “buildings or structures including temporary structures” is part of “Builders’ Risk,” which is what is “Covered Property.” Although it may be difficult to think of “Builders’ Risk” as synonymous with “buildings and structures,” that is what the policy requires. “Builders’ Risk” is then further defined by reference to the Declarations Page, where “Builders’ Risk” appears under the heading of “Covered Property.” Below this is the statement that “We cover only the buildings and structures shown below.” It would be reasonable to expect a list of the “buildings and structures” that the policy covers. However, instead of addresses or specific descriptions of certain buildings and structures, one finds, under “Description,” the following: “APEX PIPELINE EXPANSION WASATCH LOOP SPANNING DAVIS, SALT LAKE & MORGAN COUNTIES, UTAH, INCLUDING THE PROJECT ACCESS ROADS AND ALL PIPE STORAGE SITES IN CONNECTION WITH THIS PROJECT.” Thus the Declarations Page presents the “buildings and structures shown below” in a manner that includes the entire project. It is also notable that on the same line as the expansive project description one finds that the policy identifies only “1” building. The policy thus appears to cover in a unified, all-encompassing manner the project as described. The “Covered Property” is the “Builders’ Risk,” which is “the buildings and structures” as defined in the expansive, all-caps language on the Declarations Page. Indeed, Travelers’ reservation of rights letter refers to “the project description on the Declarations page.” Although its statement of undisputed facts suggests that the all-caps language describes the “job site” rather than the project description, Ms. Young’s deposition testimony stands for the proposition that the all-caps language describes both the “job site” and the “project.” Given that the “job site” is apparently not covered by the policy and that the “project” is covered, this is a confusing explanation indeed.

The Declarations page and definition of “Builders’ Risk,” when read for determining what is “Covered Property,” is ambiguous and the Court will therefore “interpret any doubts in coverage strictly against the insurer.” Brabeck (Mont. 2000). The right of way, after it had been cleared, excavated, and leveled, constituted a “structure” and was therefore “Covered Property.”

The land exclusion, also construed narrowly, does not clearly exclude coverage for the right of way after it had been intentionally & systematically altered from its natural state to improve its functional capacity for completion of the project. Klockner (SDNY 1991) (land exclusion did not preclude damage to excavated site);Mortensen (D.Minn. 1999) (compacted soil in subgrade did not constitute “land”). While the case law is particularly sparse, Travelers has cited no cases that support its reading of the land exclusion.

The Court is not persuaded that interpreting the policy in this manner is impermissibly inconsistent with additional coverage for Site Preparation. To exclude coverage otherwise available under the basic grant of insurance would turn the protective purpose of insurance on its head. The Court also finds persuasive Barnard’s position that this additional coverage generally pertains to where which damage to a building or structure gives rise to the need for additional site preparation. The right of way here constitutes a “structure” under the policy.

The right of way sustained “direct physical loss or damage” as those terms are used in the policy. Travelers does not really contest otherwise. Its argument is based on the proposition that “land” cannot be damaged, but the Court rejects its assertion that the right of way remained “land” after it was cleared, excavated, leveled, and used in the course of construction. The Court also agrees with Barnard that “direct physical loss or damage” suggests that “there was an initial satisfactory state that was changed by some external event into an unsatisfactory state.” Dupuy (MD La. 2012); Trinity (5th Cir. 1990). Damage to the right of way from the extreme precipitation meets this definition of direct “physical loss or damage.”

Barnard contends that it is entitled to summary judgment on Travelers’ affirmative defenses because Travelers can point to no evidence supporting them and that it waived them by not raising them in its reservation letter. Travelers was not obligated to detail all potential defenses in its reservation letter and it has not waived and is not estopped from asserting other defenses. “Waiver is a voluntary and intentional relinquishment of a known right or claim.” Edwards (Mont. 2009). Travelers’ reservation letter expressly reserves its right to pursue additional policy defenses. Thus Barnard has always been on notice of its intention to pursue all available defenses. While MCA 33-18-201(14) requires an insurer to “promptly provide a reasonable explanation of the basis in the insurance policy in relation to the facts or applicable law for denial of a claim,” an insurer does not waive all defenses that are not included in a reservation letter. Portal (Mont. 1993); EOTT (D.Mont. 1999).Portal rejected the contention that an insurer is limited to defenses detailed in a reservation letter when the insured fails to demonstrate prejudice, distinguishingEllinghouse (Mont. 1986) wherein an insurer was estopped from denying coverage when it had initially accepted coverage and assumed defense without reservation. Barnard has always been on notice of Travelers’ intent to assert all applicable policy defenses.

Summary judgment on Travelers’ failure to mitigate defense is inappropriate. Barnard has not explained why it should be dismissed as to damages it is claiming beyond those owed under the policy, and Travelers points to provisions in Barnard’s contract with Kern which arguably could have been utilized to avoid or reduce some of its damages.

Barnard argues that Travelers’ agents admitted in depositions that it has no evidence to dispute the damages Barnard has claimed for damage to the right of way. Travelers cites its expert reports in which they opine that Barnard’s claimed damages are inflated. It also contends that once it decided there was no coverage for losses associated with damages to the right of way it had no duty to further investigate details of the claim, and that it retains the right to investigate and contest the claimed losses. Disputed fact issues remain as to the extent of damages claimed.

Barnard Pipeline v. Travelers Property Casualty, 41 MFR 352, 3/13/14.

Christian Nygren & Patrick Brown (Barnard Pipeline), Bozeman, and Richard Beal (Ashbaugh Beal), Seattle, for Barnard; Marshal Mickelson & Annie Harris (Corette Black Carlson & Mickelson), Butte, Daniel Bentson, Seattle, and Ronald Clark, Portland (Bullivant Houser Bailey), for Travelers.

ATTORNEY FEES: $1,483,449 fees/costs recommended by Strong approved by Christensen for decades of stonewalling by US which forced Plaintiffs to litigate statutory right to coal tract transfer, over objection by US to rates of $500 for 1 attorney, $300 for 6.

An amendment to the Surface Mining Control & Reclamation Act of 1977 entitled coal owners to exchange their coal interests for equally valuable coal owned by the US in situations where mining was prohibited. Notwithstanding the promise of an exchange, Plaintiffs were stymied for many years. They at least twice reached agreement with BLM, but the agreements were never finalized. Thus they were compelled to sue. After 6 years of litigation the exchange was consummated and they received exchange coal valued at $5,536,000. The final issue is the compensation to be paid to Plaintiffs’ attorneys. Magistrate Strong’s task in determining the amount was complicated by Edwards, Frickle & Culver not maintaining contemporaneous time & billing records. The Court suspects that Plaintiffs would not have achieved justice had they not found competent counsel to represent them on a contingency — they would not have been able to fund 6 years of litigation by lawyers charging on an hourly basis. In any event, Judge Cebull found that they should be awarded fees & costs, calculated on a lodestar basis rather than a percentage of the value of the coal. Strong heeded Cebull’s order, applied the appropriate standards, and awarded $1,483,449.12:

Fees for 917.2 hours by Clifford Edwards at $500/hr, totaling $458,600.

Fees for 2,443.2 hours by the 6 other attorneys in the firm at $300/hr, totaling $732,960.

Litigation costs of $180,384.74.

Pre-litigation costs of $111,504.38.

The US urges a lower hourly rate.

A reasonable rate is determined by referencing “the prevailing market rates in the relevant community,” Perdue (US 2010), and “the experience, skill, and reputation of the attorney requesting fees,” Chalmers (9th Cir. 1986). Pursuant to the “no-interest rule,” fees awarded against the US must be based on the rate when the work was performed rather than when the fees are awarded. Shaw (US 1986). The party seeking fees bears the burden of submitting “detailed time records justifying the hours claimed.” Chalmers. Hours may be reduced “where documentation of the hours is inadequate.” Id. Under the SMCRA, fees & costs should only be awarded for hours associated with claims that were intimately tied to resolution of the judicial action and where the claimant achieved “some degree of success on the merits.” Ohio River Valley (4th Cir. 2007). While there is a strong presumption that a lodestar calculation is reasonable without enhancement, it may be overcome in rare cases. Perdue. The USSC has recognized 3 situations where enhancement may be appropriate: the method for determining the rate in the lodestar calculation does not adequately measure the attorney’s true market value, as demonstrated in part during the litigation; the attorney’s performance includes extraordinary outlay of expenses and the litigation is exceptionally protracted; the attorney’s performance involves exceptional delay in payment of fees. (EFC advanced significant litigation costs of $180,384.74, underscoring that had Plaintiffs not had the good fortune of retaining it on a contingency they probably would not have been able to pursue the case.)

The US contends that EFC failed to carry its burden of producing evidence that the requested rate represents the prevailing rate in the community for similar services by lawyers of reasonably comparable skill, experience, and reputation. It emphasizes that determining a reasonable rate “is not made by reference to rates actually charged the prevailing party.” Chalmers. This is without merit. EFC, as its standard practice, took the case on a contingency. The total awarded represents a significant reduction from the rate it charged. Further, it has shown that the requested rate represents the prevailing rate in the community for similar services by lawyers of reasonably comparable skill, experience, and reputation. The affidavit of James Goetz clears this hurdle.

The US also contends that the rate is based on current rather than historical rates. This is unsubstantiated speculation and conflicts with EFC’s undisputed affidavits that in the last several years EFC clients agreed to pay Edwards $500/hr and all others in the firm $300. This hurdle is also cleared.

The Court appreciates, as evidenced by Steven Ruffatto’s affidavit, that other skilled Montana attorneys perform natural resources work at rates less than those charged by EFC. That does not mean that EFC’s rates are therefore unreasonable. Market prices of commodities and services are determined by supply & demand, and thus, in a traditional sense, there really is no such thing as a prevailing market rate for lawyers in a particular community. Blum (US 1994). Experience, skill, and reputation vary greatly within the community and can vary greatly within firms, as evidenced by the rates charged by the attorneys in Ruffatto’s firm. The reality is that Plaintiffs did not, and probably could not, afford lawyers who billed in a traditional hourly manner. Instead, they found highly competent and skilled lawyers who were willing to put aside their other work and risk hundreds of hours and tens of thousands of dollars of costs to pursue their claims for many years. Had Plaintiffs not been successful, their lawyers would have recovered nothing. But Plaintiffs were successful, and their lawyers are entitled to be paid for their efforts.

The Court finds no clear error in any of Strong’s other findings. Fees & costs are awarded as recommended.

Nance, Boedecker, Hayes, Rodolph, and Brown Cattle Shareholders Coal Trust v. Interior, 41 MFR 343, 3/11/14.

Clifford Edwards, Philip McGrady, Christopher Edwards, John Edwards, Roger Frickle, Triel Culver, and Jackie Shields (Edwards, Frickle & Culver), Billings, for Plaintiffs; Ruth Storey (DOJ Natural Resources), DC, and AUSA Victoria Francis.