In re: Deepwater Horizon ( 2015 )

Case: 14-31321 Document: 00513278828 Page: 1 Date Filed: 11/19/2015
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
FILED
No. 14-31321 November 19, 2015
Lyle W. Cayce
Clerk
IN RE: DEEPWATER HORIZON
______________________________________________________________
CAMERON INTERNATIONAL CORPORATION,
Plaintiff - Appellant - Cross - Appellee
v.
LIBERTY INSURANCE UNDERWRITERS, INCORPORATED, also known
as
Liberty International Underwriters,
Defendant - Appellee - Cross - Appellant
Appeals from the United States District Court
for the Eastern District of Louisiana
Before STEWART, Chief Judge, and CLEMENT and ELROD, Circuit Judges.
EDITH BROWN CLEMENT, Circuit Judge:
This is an insurance dispute arising out of the Deepwater Horizon oil
spill. Liberty Insurance Underwriters, Inc. (“Liberty”), appellee-cross-
appellant here, insured Cameron International Corporation (“Cameron”),
appellant-cross-appellee here and the manufacturer of the blowout preventer
used on Deepwater Horizon, for potential losses associated with the blowout
preventer. After the spill, Cameron settled with BP, the well owner, and sought
the policy benefits from Liberty to help cover the settlement costs. For a
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No. 14-31321
number of reasons, Liberty refused to pay, so Cameron sued. The district court
granted summary judgment for Cameron on its breach of contract action,
granted summary judgment for Liberty on Cameron’s claim under the Texas
Insurance Code, and denied Cameron’s motion for attorney’s fees. Both parties
appealed.
CERTIFICATION FROM THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT TO THE SUPREME COURT OF TEXAS,
PURSUANT TO ART. 5, § 3-C OF THE TEXAS CONSTITUTION AND
RULE 58.1 OF THE TEXAS RULES OF APPELLATE PROCEDURE
TO THE SUPREME COURT OF TEXAS AND
THE HONORABLE JUSTICES THEREOF:
I.
This case turns, in part, on a complicated arrangement of
indemnification between some of the parties involved in the spill. BP (a
nonparty here) owned the Macondo oil well and the lease on the continental
shelf. BP contracted with Transocean (also a nonparty here), which owned
Deepwater Horizon, to drill the well, and to indemnify 1 Transocean for liability
associated with drilling. Cameron manufactured and sold Transocean the
blowout preventer connecting the rig to the well, and Transocean indemnified
Cameron for liability associated with the blowout preventer. In short, Cameron
was indemnified by Transocean, which was in turn indemnified by BP.
Cameron did not rely solely on indemnification to protect itself. It created
an insurance “tower” of $500 million in coverage by purchasing insurance from
1 BP disputes that it owes Transocean indemnification, and Transocean disputes that
it owes Cameron indemnification. Neither BP nor Transocean has been found to owe
indemnification. Yet both BP’s contract with Transocean and Transocean’s contract with
Cameron contain clauses that purport to indemnify under some circumstances, and both
Cameron and Transocean sought indemnification under those clauses. This opinion thus uses
“indemnify” and “indemnification” as shorthand for “included a contractual clause that one
party interprets as indemnifying it.” But we express no opinion on whether BP or Transocean
owes indemnification under those clauses.
2
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various insurers. Those insurance policies covered the risk that Cameron
would incur liability as the blowout preventer’s manufacturer. The first $25
million in losses would be covered by one insurer, the next $25 million in losses
would be covered by another, and so forth. 2 Liberty sold Cameron a policy
covering the $50 million in losses between the first $100 million and $150
million in losses. In other words, Liberty’s $50 million policy was excess of the
policies covering the first $100 million in losses, and Cameron obtained other
policies that were excess of Liberty’s policy.
Like many insurance policies, Liberty’s policy incorporated a
subrogation clause. That clause provided that if Cameron could recover from a
third party some or all of the losses paid under the policy, Cameron would
transfer the rights to recover to Liberty, “do nothing after loss to impair these
rights,” and “help [Liberty] enforce them.” For example, if Liberty paid
Cameron $50 million for a covered loss, and a third party was potentially liable
to Cameron for that same loss, Liberty would assert Cameron’s rights against
that third party and receive any recovery up to the amount Liberty paid
Cameron.
After the spill, thousands of lawsuits were filed against BP, Transocean,
Cameron, and others. Cameron sought indemnity (for its potential liability for
pollution) from Transocean under the sales contract, and Transocean refused;
Cameron thus sued Transocean, and Transocean counterclaimed. Transocean,
in turn, sought indemnity from BP under its drilling contract, and BP refused;
Transocean and BP thus also sued each other. And BP sued Cameron, claiming
that, as the manufacturer of the blowout preventer, Cameron was responsible
for the losses that BP incurred.
2 The precise details of the tower vary slightly from this description, but those details
are not important here.
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As well as seeking indemnification from Transocean, Cameron notified
Liberty after the spill of a potential loss covered by the policy. Initially, Liberty
neither rejected nor paid Cameron’s claim.
Following extensive litigation, BP and Cameron began to discuss
settlement. The parties soon developed a framework for that settlement: BP
would indemnify Cameron in exchange for $250 million, 3 but only if Cameron’s
insurers agreed to waive their subrogation rights and Cameron agreed to waive
its indemnification rights against Transocean. Otherwise, BP feared,
Cameron’s insurers would cover Cameron’s settlement costs, then step into
Cameron’s shoes and sue Transocean for indemnification, which would in turn
sue BP for indemnification—for the very $250 million that BP just received.
Why, in other words, would BP settle for a payment from Cameron that
Cameron would ultimately recoup—albeit in a circuitous fashion—from BP?
Alone among Cameron’s insurers, Liberty objected to the settlement and
declined to offer its policy limits of $50 million. Liberty did not agree to a
settlement that waived its subrogation rights and Cameron’s indemnification
rights against Transocean, leaving Liberty on the hook for $50 million. Liberty
also pointed out another clause in its policy that, in its view, meant that its
obligation to pay had not yet been triggered: the Other Insurance Clause. That
clause provided that “[i]f other insurance applies to a ‘loss’ that is also covered
by this policy, this policy will apply excess of such other insurance.” In turn,
the policy defined “other insurance” as “any type of self-insurance,
indemnification or other mechanism by which an Insured arranges for funding
of legal liabilities.” Liberty argued that because Cameron had not yet
exhausted its legal remedies against Transocean, “other insurance”—namely,
3 The parties did not immediately arrive at this number, but that is where they ended
up.
4
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Transocean’s indemnification—“applie[d]” to the loss, so Liberty’s policy was
excess of that other insurance. Cameron disputed this interpretation.
Seeking to assuage Liberty’s concerns about subrogation, Cameron and
BP inserted additional language into the settlement purportedly preserving
Liberty’s subrogation rights. Then—despite Liberty’s refusal to contribute its
policy limits—Cameron went ahead with the settlement, putting up $50
million of its own money in addition to the $200 million its other insurers
contributed.
Because Liberty continued to refuse to offer its policy limits, Cameron
filed this suit, asserting claims for breach of contract and for violations of the
Texas Insurance Code. Liberty moved under Rule 12(c) for judgment on the
pleadings, but the district court denied most of that motion. On cross-motions
for summary judgment, the district court granted Cameron a $50 million
judgment on its breach of contract action. But the district court granted
judgment in favor of Liberty on Cameron’s Texas Insurance Code claims and,
in a later order, denied Cameron’s request for attorney’s fees incurred in this
action.
Cameron appealed the district court’s judgment against it on its claim
under Chapter 541 of the Texas Insurance Code and on its claim for attorney’s
fees. Liberty cross-appealed the district court’s judgment in favor of Cameron
on its breach of contract claim.
II.
This court reviews de novo the district court’s grants of summary
judgment. Morris v. Equifax Info. Servs., LLC, 457 F.3d 460, 464 (5th Cir.
2006). Summary judgment is proper if “there is no genuine dispute as to any
material fact and the movant is entitled to judgment as a matter of law.” Fed.
R. Civ. P. 56(a). The parties do not dispute that Texas law applies to this
diversity case. See Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938).
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III.
Liberty contends that the district court erred in granting Cameron’s
motion for partial summary judgment (and in denying Liberty’s cross-motion
for partial summary judgment) on its breach of contract claim. First, Liberty
argues that Cameron is not entitled to recover under the policy because the
Other Insurance Clause makes the policy apply only in excess of Cameron’s
(unexhausted) indemnity claim against Transocean. Second, Liberty argues
that Cameron, not Liberty, breached the policy by impairing Liberty’s
subrogation rights in the BP settlement. We address each argument in turn.
a.
To begin with, it is undisputed that the policy covers the loss that
Cameron suffered. But Liberty, pointing to the Other Insurance Clause,
contends that because Cameron has an indemnification agreement with
Transocean, “other insurance” “applies” to that loss. Thus, argues Liberty,
Cameron is not yet entitled to coverage because Cameron has not exhausted
that indemnification or obtained a judicial determination that it is not entitled
to indemnification. Cameron responds that its disputed indemnity claim
against Transocean does not “appl[y]” to its loss because Transocean refused
Cameron’s demands for indemnification. Cameron also argues that its
disputed indemnity claim against Transocean does not constitute “other
insurance” at all.
To refresh, the Other Insurance Clause provides that “[i]f other
insurance applies to a ‘loss’ that is also covered by this policy, this policy will
apply excess of such other insurance.” In turn, the policy defines “other
insurance” as “any type of self-insurance, indemnification or other mechanism
by which an Insured arranges for funding of legal liabilities.” “‘Other
insurance’ clauses are generally designed by insurers to ‘avoid an insured’s
temptation or fraud of over-insuring . . . property or inflicting self-injury.’” St.
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Paul Mercury Ins. Co. v. Lexington Ins. Co., 78 F.3d 202, 206 (5th Cir. 1996)
(quoting Hardware Dealers Mut. Fire Ins. Co. v. Farmers Ins. Exch., 444
S.W.2d 583, 586 (Tex. 1969)).
Liberty argues that the district court should have interpreted the Other
Insurance Clause to read, in effect, that if “other insurance” potentially applies
to Cameron’s loss, Liberty’s policy is excess of that insurance. Until a final
judicial determination that Transocean does not have to indemnify Cameron,
then, Liberty’s obligation to pay the policy benefits is not triggered, and thus
it could not have breached the contract.
Cameron counters that the district court properly interpreted the Other
Insurance Clause to mean that Liberty’s policy is excess of other insurance if,
but only if, that “other insurance” actually and presently applies. Thus, because
Transocean refused to indemnify Cameron, Liberty was obligated to pay the
policy benefits.
In our view, Cameron’s interpretation is reasonable and Liberty’s is not.
The plain language of the clause supports Cameron’s reading. Liberty’s policy
is excess only if other insurance “applies,” present tense. See Parrot Ice-Drink
Prods. Of Am., Ltd. v. K & G Stores, Inc., No. 14-09-00008-CV, at *4, 2010 WL
1236322 (Tex. App.—Houston [14th Dist.] March 30, 2010, no pet.) (mem. op.)
(use of present tense in contract establishes “relevant time period”). Liberty’s
interpretation requires the court to read the word “potentially” into the
contract. Tenneco Inc. v. Enter. Prods. Co., 925 S.W.2d 640, 646 (Tex. 1996)
(noting that “courts will not rewrite agreements to insert provisions parties
could have included”). Moreover, the clause provides that Liberty’s policy being
excess of other insurance is conditional on other insurance applying. Liberty
reads this to mean that the policy is excess of other insurance until Cameron
affirmatively shows that no other insurance exists. But see Certain
Underwriters at Lloyd’s of London v. Cardtronics, Inc., 438 S.W.3d 779, 781
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(Tex. App.—Houston [1st Dist.] 2014, no pet.) (finding that to interpret clause
to impose requirement of conclusive determination before recovery where
“explicit statement of such a requirement is wholly absent” would be
unreasonable). That reading would transform the Other Insurance Clause
from a protection against double-insuring into a clause that makes Liberty’s
policy a policy of last resort. 4 Given the purpose for which Cameron obtained
the policy—specifically, to be the primary insurance for the $100 million-$150
million layer of its insurance tower—the clause cannot bear that weight.
Context also indicates that Cameron’s reading is correct. The policy
states that it is “excess” to both other insurance and the underlying insurance
(the first $100 million in the tower). As to the underlying insurance, however,
the policy expressly provides that even if an underlying insurer is unable or
refuses to pay, Liberty will not “drop down” in coverage. In other words, no
matter what, Liberty’s policy is excess to the underlying policies. The Other
Insurance Clause contains no such provision; Liberty’s policy is excess to other
insurance only if other insurance “applies.” Liberty thus asks us to read
language into the Other Insurance Clause stating that the policy is excess even
to “other insurance” that is uncollectible. But we refuse Liberty’s invitation to
read a provision into the policy, particularly because the policy includes that
provision elsewhere in a similar context.
As the district court noted, moreover, under Liberty’s reading, Cameron
would be better off with no indemnification agreement at all—having both
insurance and a disputed indemnity claim would leave Cameron less protected
4 As Cameron points out, this would place Liberty in quite a favorable position. Either
Transocean indemnifies Cameron, letting Liberty off the hook, or Transocean refuses to
indemnify Cameron and Cameron must pursue costly litigation against Transocean to obtain
a final determination. Liberty could thus rightfully refuse to pay for years on end, something
in tension—to say the least—with its policy term providing that it will “promptly pay” a
covered loss.
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than it would be with only insurance. Yet the policy does not specifically
reference Cameron’s indemnity agreement with Transocean, nor does it
require Cameron to maintain any such agreement. See AMHS Ins. Co. v. Mut.
Ins. Co. of Az., 258 F.3d 1090, 1097 (9th Cir. 2001) (rejecting argument that
“other insurance” clause required insured to exhaust other policy that insured
was not required to maintain and that was not mentioned in policy). So because
Cameron chose to maintain a potential alternative source of protection for its
loss—something Liberty did not require it to do—Cameron would have to
litigate with that alternative source before recovering anything from Liberty.
See 2 Allan D. Windt, Insurance Claims & Disputes § 6:13, at 6-212 (6th ed.
2013) (noting that “[s]uch a result would be manifestly unfair and improper”
and that “the insured should not be penalized because the additional insurance
the insured happened to obtain proves to be uncollectible”); cf. Hardware
Dealers, 444 S.W.2d at 586 (explaining that court must interpret competing
“other insurance” clauses so that “the insured . . . [does not] have less coverage
than if [it] had been protected by only one of the policies”). In short, we do not
read the Other Insurance Clause to require that Cameron exhaustively litigate
other potential sources of coverage before Liberty’s payment obligation is
triggered.
Liberty offers several counterarguments, but none convince. First,
Liberty points to Sherwin-Williams Co. v. Insurance Co. of Pennsylvania, 105
F.3d 258 (6th Cir. 1997), and Manpower Inc. v. Insurance Co. of Pennsylvania,
807 F. Supp. 2d 806 (E.D. Wis. 2011), as supporting its argument. But those
cases merely explain that an insured must exhaust its primary insurance
before seeking coverage from its excess insurer; they do not involve an “other
insurance” clause. See Cardtronics, 438 S.W.3d at 779-80 (distinguishing
Sherwin-Williams and Manpower on that basis). Second, Liberty argues that
the district court erred by finding that the Transocean indemnification
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agreement is not “other insurance” at all. The district court found no such
thing. The district court explained the principle that when an insured has two
policies with competing “other insurance” clauses, those policies should not be
construed to leave the insured with less coverage than if the insured had only
one policy. Then, while acknowledging that the Other Insurance Clause
covered indemnification, the district court simply pointed out that when the
competing policy is not even an insurance policy—which it is not—that
principle likely applies with even more force. Third, Liberty contends that
Cameron’s interpretation reads the word “excess” out of the Other Insurance
Clause. It does not. Instead, it recognizes that Liberty’s policy is excess of other
insurance, but only if that other insurance actually applies; if other insurance
does actually apply, the Other Insurance Clause preserves Liberty’s right to
sue that other insurer for contribution. Fourth, Liberty asserts that under
Cameron’s interpretation, Cameron would never need to attempt to enforce its
indemnification agreement. That, however, ignores Liberty’s subrogation
rights: If Cameron refuses to seek indemnification, Liberty can pay the policy
and then itself sue Transocean for indemnification.
For all these reasons, we hold that Cameron’s interpretation of the Other
Insurance Clause is reasonable and that Liberty’s is unreasonable; thus, the
Other Insurance Clause did not permit Liberty to withhold the policy benefits. 5
b.
The above holding regarding the Other Insurance Clause does not end
the matter. That is because Liberty argues that even if Cameron’s
interpretation of the Other Insurance Clause is correct, Cameron forfeited its
right to coverage by breaching the policy’s subrogation clause in settling with
5 Because we conclude that Liberty’s interpretation is unreasonable, we do not reach
the question whether the doctrine of contra proferentem applies.
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BP. But because Liberty breached the contract by wrongfully denying
coverage, thereby waiving its rights under the subrogation clause before
Cameron settled, we do not reach whether Cameron’s settlement violated the
subrogation clause.
Our conclusion that Liberty breached the contract follows from our
holding that Liberty’s interpretation of the Other Insurance Clause was
erroneous. The district court found that Liberty breached the policy before the
settlement by wrongfully constructively denying Cameron’s claim and by
violating the policy’s requirement that Liberty “promptly pay” Cameron’s
claim. 6 Before Cameron and BP settled, Liberty sent Cameron a series of
letters in which it “decline[d] to offer its policy limits” and asserted that the
“policy has not yet attached to this loss” because of Liberty’s interpretation of
the Other Insurance Clause. But as discussed, Liberty’s interpretation of the
Other Insurance Clause was erroneous, the loss was covered, and the policy
had attached. Liberty was required to “promptly pay” Cameron the policy
benefits—and it did not. 7 Instead, it wrongfully refused to pay Cameron unless
and until Cameron obtained—after what would have been extensive
litigation—a final determination that Transocean did not owe it
indemnification. Because Liberty breached the policy by wrongfully denying
coverage under the Other Insurance Clause, it waived its subrogation rights.
See 16 Lee R. Russ & Thomas F. Segalla, Couch on Insurance §§ 224:148,
224:152 (3d ed. 2005); cf. Scottsdale Ins. Co. v. Knox Park Constr., Inc., 488
F.3d 680, 688 (5th Cir. 2007) (holding that insurer who refused coverage based
on erroneous interpretation of policy waived consent-to-settle provision).
6 The district court also found that Liberty breached the contract by refusing a
reasonable settlement. Because we hold that Liberty breached the contract by constructively
denying the claim, we do not address that issue.
7 Liberty’s argument that it did not “refus[e] to ever pay” is thus irrelevant. Liberty
had to pay promptly.
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We thus agree with the district court that Liberty breached the contract,
before Cameron settled with BP, by constructively denying coverage and by
violating the policy’s “prompt payment” requirement. Because Liberty
breached the contract, it waived its rights under the subrogation clause. Thus,
even if Cameron violated that clause in its settlement with BP—a question
that we do not reach—Liberty breached first.
IV.
Cameron argues that the district court erred in dismissing its claim
under Texas Insurance Code Chapter 541. Chapter 541 authorizes
policyholders to file private actions against insurers in order to recover “actual
damages” caused by an insurer’s “unfair method of competition or an unfair or
deceptive act or practice in the business of insurance,” and permits treble
damages in certain circumstances. Tex. Ins. Code Ann. §§ 541.151, 541.003.
Cameron alleged that Liberty violated Chapter 541 by wrongfully denying its
claim under the policy. As actual damages, Cameron claimed only the policy
benefits that Liberty denied and its attorney’s fees related to this action.
Liberty argued below that under this court’s decision in Great American
Insurance Co. v. AFS/IBEX Financial Services, Inc., to maintain a Chapter
541 claim, Cameron was required to assert some injury other than the policy
benefits and attorney’s fees. 612 F.3d 800, 808 & n.1 (5th Cir. 2010). Cameron
countered that the district court should have instead applied the Supreme
Court of Texas’s decision in Vail v. Texas Farm Bureau Mutual Insurance Co.,
754 S.W.2d 129 (Tex. 1988). There, the Supreme Court of Texas held that an
insured who is wrongfully denied policy benefits need not show any injury
independent from the denied policy benefits. 754 S.W.2d at 136. The district
court agreed with Cameron that, under Texas law, Cameron need not assert
any injury independent from the policy benefits as actual damages. Even so,
the district court held that it was bound by this court’s language to the contrary
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in Great American and granted judgment for Liberty on Cameron’s Chapter
541 claim.
Cameron argues on appeal that Vail is still good law in Texas—a
proposition with which the district court agreed—and that Great American is
an incorrect description of Texas law. 8 Liberty counters that the Supreme
Court of Texas has sub silentio overruled Vail.
Because this issue turns on an important question of Texas state law,
and because subsequent decisions from the Supreme Court of Texas and
Texas’s intermediate appellate courts arguably cast doubt on Vail’s continued
vitality, we certify the question to the Supreme Court of Texas. See Tex. Const.
art. V, § 3–c(a); Tex. R. App. P. 58.1. “The decision of whether to certify a
question lies within our sound discretion.” Patterson v. Mobil Oil Corp., 335
F.3d 476, 487 (5th Cir. 2003) (citation omitted). We do not “lightly abdicate our
mandate to decide issues of state law when sitting in diversity.” Jefferson v.
Lead Indus. Ass’n, Inc., 106 F.3d 1245, 1248 (5th Cir. 1997). But certification
“may be advisable where important state interests are at stake and the state
courts have not provided clear guidance on how to proceed.” In re Katrina
Canal Breaches Litig., 613 F.3d 504, 509 (5th Cir. 2010) (citation and internal
quotation marks omitted).
The question here involves an important state interest—namely, the
availability of a cause of action under the Texas Insurance Code where the
insurer wrongfully denied the policy benefits but caused the insured no
damages other than those denied benefits. Had this issue arisen immediately
following Vail, there likely would have been “controlling [Texas] Supreme
Court precedent” counseling against certification. Tex. R. App. P. 58.1; see Vail,
8 Cameron acknowledges that this panel is bound by prior panel decisions, but argues
that the language in Great American on which the district court relied is non-binding dicta.
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754 S.W.2d at 136. But in Great American, this court interpreted a more recent
case from the Supreme Court of Texas, Provident American Insurance Co. v.
Castañeda, 988 S.W.2d 189, 198-99 (Tex. 1998), as setting out the opposite rule
from that in Vail. 9 612 F.3d at 808 & n.1. And since we decided Great American,
the Supreme Court of Texas has not addressed the issue—although some
recent decisions from Texas intermediate appellate courts indicate that
(contrary to the view we expressed in Great American) Vail, not Castañeda,
governs the issue. See United Nat’l Ins. Co. v. AMJ Invs., LLC, 447 S.W.3d 1,
11 (Tex. App.—Houston [14th Dist.] 2014, pet. dism’d) reh’g overruled (Oct. 7,
2014), rev. dismissed (Mar. 27, 2015) (explicitly rejecting insurer’s
independent-injury argument, citing Vail and distinguishing Castañeda);
USAA Tex. Lloyd’s Co. v. Menchaca, No. 13-13-00046-CV, 2014 WL 3804602,
at *9 (Tex. App.—Corpus Christi, July 31, 2014, pet. filed) (mem. op.)
(approvingly quoting Vail’s holding that independent injury is not required).
Rather than second-guess our reading of current Texas law, we find it prudent
to obtain clarity from Texas itself. The parties’ arguments regarding whether
Vail remains good law “illuminate the magnitude and wide ramifications . . .
for insurance law” that this issue presents. In re Deepwater Horizon, 728 F.3d
491, 500 (5th Cir. 2013), certified question answered, No. 13-0670, 2015 WL
674744 (Tex. Feb. 13, 2015), reh’g withdrawn (May 29, 2015). We thus conclude
that certification is appropriate here.
9 Even before we decided Great American, some Texas intermediate appellate courts
similarly had interpreted Castañeda as requiring an independent injury. See, e.g., Laird v.
CMI Lloyds, 261 S.W.3d 322, 328 (Tex. App.—Texarkana, 2008, no pet.) (“An insured is not
entitled to recover extra-contractual damages unless the complained-of actions or omissions
cause injury independent of the injury resulting from a wrongful denial of policy benefits.”);
United Servs. Auto. Ass’n v. Gordon, 103 S.W.3d 436, 442 (Tex. App.—San Antonio, 2002, no
pet.) reh’g overruled (March 12, 2003) (same).
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V.
Cameron argues that the district court abused its discretion in denying
its motion for attorney’s fees. After the district court granted Cameron’s motion
for summary judgment and awarded Cameron $50 million plus interest,
Cameron moved for attorney’s fees under Federal Rule of Civil Procedure
54(d)(2). The district court denied that motion, holding that Cameron
“impliedly waived” its claim for attorney’s fees. 10
In the district court’s view, by the time Cameron moved for attorney’s
fees, the district court “twice ha[d] considered and dismissed Cameron’s
theories regarding attorney’s fees.” Thus, because the district court had
“already expended considerable time and effort to resolve [the parties’] dispute,
which has included two claims for attorneys’ fees,” and because the dispute
“represents only a fraction of a percent of this massive and very active
multidistrict litigation” (MDL 2179, In re Deepwater Horizon), the district
court was “simply not inclined to hear a third theory concerning [Liberty’s]
purported liability for attorneys’s [sic] fees when that theory could have been
presented before the Court issued the” judgment for Cameron. Put another
way, the district court found that Cameron should have included its request
for attorney’s fees in its summary judgment briefing.
Cameron, however, did not waive its claim for attorney’s fees, impliedly
or otherwise. To impliedly waive its claim, Cameron must have, through some
“act from which an intention to waive may be inferred or from which waiver
follows as a legal result,” misled Liberty to its prejudice “into the honest belief
10The district court acknowledged in its summary judgment order that, under Texas
law, Cameron would be entitled to recover reasonable attorney’s fees absent waiver, a point
which Liberty does not dispute. Indeed, because Cameron prevailed on its breach of contract
claim, the “award of reasonable fees is mandatory.” Mathis v. Exxon Corp., 302 F.3d 448, 462
(5th Cir. 2002); see Grapevine Excavation, Inc. v. Md. Lloyds, 35 S.W.3d 1, 5 (Tex. 2000)
(same).
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that such waiver was intended or consented to.” Wells Fargo Bus. Credit v. Ben
Kozloff, Inc., 695 F.2d 940, 947 (5th Cir. 1983). Cameron requested fees in its
amended complaint and moved for fees within fourteen days after the district
court entered judgment as required by Rule 54(d)(2). Liberty responds that,
having raised claims for attorney’s fees during summary judgment, Cameron
was required to present all such claims at that time. Despite Liberty’s
argument, though, Cameron did not present a substantive claim for attorney’s
fees incurred in this litigation during summary judgment. That much is
revealed by examining the context in which Cameron discussed its “two claims
for attorneys’ fees.”
First, as discussed above, Liberty moved for summary judgment on
Cameron’s claim for recovery under Chapter 541 of the Texas Insurance Code,
arguing that Cameron had not suffered any “actual damages.” Cameron
responded that its actual damages were the withheld policy benefits and its
attorney’s fees in litigating this action. After rejecting Cameron’s argument
that the withheld policy benefits constituted actual damages, the district court
also rejected Cameron’s argument that its attorney’s fees—standing alone—
could constitute actual damages, and granted judgment for Liberty on
Cameron’s Chapter 541 claim. The district court did not, however, address
Cameron’s entitlement to attorney’s fees incurred in this litigation other than
to note that Texas law provides that a prevailing party in a breach of contract
action may recover reasonable attorney’s fees.
Second, both parties moved for summary judgment on Cameron’s claim
that, under the policy, Liberty had to reimburse Cameron for its attorney’s fees
related to the underlying MDL proceedings—proceedings distinct from this
litigation. The district court granted summary judgment for Liberty, finding
that it did not have to reimburse Cameron for those fees. Put differently, the
district court denied one of Cameron’s substantive claims for relief in this
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litigation; again, it did not address Cameron’s entitlement to attorney’s fees
incurred in this litigation.
To sum up, Cameron did not present a claim for attorney’s fees incurred
in this litigation on either purported “claim”—and the issue was certainly not
“squarely presented,” as Liberty contends. None of Cameron’s arguments
during summary judgment regarded its entitlement to attorney’s fees incurred
in this litigation. Nor did the district court reject any claim for attorney’s fees
incurred in this litigation—indeed, the district court acknowledged that Texas
law provides for recovery of attorney’s fees in cases like this. Because Cameron
did not present any claim for attorney’s fees incurred in this litigation until it
filed its motion for attorney’s fees, Cameron did not waive that claim.
Liberty counters that whether Cameron waived its right to attorney’s
fees is a procedural issue governed by federal law. 11 But this argument is both
meritless and irrelevant. 12 Liberty contends that, under federal law, because
Cameron discussed attorney’s fees during summary judgment, but did not
raise the present argument regarding attorney’s fees, that argument is waived.
See Brady Nat’l Bank v. Gulf Ins. Co., 94 F. App’x 197, 205 (5th Cir. 2004)
(holding that federal law applies to bar party from presenting argument on
appeal where party did not present argument below); see also Kiewit E. Co. v.
L & R Constr. Co., 44 F.3d 1194, 1203-04 (3d Cir. 1995) (holding that where
plaintiff raised argument for recovery of attorney’s fees from one defendant
during summary judgment, alternative argument for recovery of attorney’s
fees from another defendant raised for first time after trial was waived). But
as discussed, Cameron did not present a claim for attorney’s fees incurred
11 Liberty also argues that Cameron waived its claim for attorney’s fees because it did
not include a request for attorney’s fees in its complaint or amended complaint. But Cameron
did request attorney’s fees in its amended complaint.
12 The district court did not mention which standard of waiver it was applying.
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during this litigation during summary judgment and then present a new
argument regarding that claim in its later motion for attorney’s fees, as in
Brady and Kiewit. Instead, Cameron merely discussed attorney’s fees in the
context of arguments regarding other issues unrelated to its entitlement to
attorney’s fees incurred in this litigation. So the federal waiver rule that
Liberty cites both does not apply (because the question is whether Cameron
waived a claim, not an argument) and is irrelevant (because Cameron never
presented any claim for attorney’s fees incurred in this litigation during
summary judgment).
In sum, Cameron did not waive, impliedly or otherwise, its claim for
attorney’s fees incurred in this litigation. And as Cameron points out, moving
for attorney’s fees during summary judgment would have been premature:
Cameron did not know whether it would prevail, let alone on which claims it
would prevail. See, e.g., Amerisure Ins. Co. v. Navigators Ins. Co., 611 F.3d 299,
313 n.5 (5th Cir. 2010) (attorney’s fees request premature where entitlement
to recovery was unresolved); see also Fed. R. Civ. P. 54(d)(2)(B)(i) (requiring fee
motions to be filed “no later than 14 days after the entry of judgment”). Under
Texas law, prevailing on the merits is an essential element for recovering
attorney’s fees, so a motion for attorney’s fees before the merits had been
resolved would necessarily have failed. See State Farm Life Ins. Co. v. Beaston,
907 S.W.2d 430, 437 (Tex. 1995). Because Cameron did not impliedly waive its
claim for attorney’s fees, the district court abused its discretion in denying
Cameron’s motion.
VI.
For the reasons described above, we AFFIRM the district court’s grant
of summary judgment for Cameron on its breach of contract claim. We
REVERSE the district court’s denial of Cameron’s motion for attorney’s fees
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and REMAND for a determination of the proper amount of those fees. And we
certify the following question to the Supreme Court of Texas:
Whether, to maintain a cause of action under Chapter 541 of the
Texas Insurance Code against an insurer that wrongfully withheld
policy benefits, an insured must allege and prove an injury
independent from the denied policy benefits?
We disclaim any intention or desire that the Supreme Court of Texas confine
its reply to the precise form or scope of the question certified.
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