Mutual Service Insurance v. Frit Industries, Inc.

[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FILED
FOR THE ELEVENTH CIRCUIT
U.S. COURT OF APPEALS
_________________________ ELEVENTH CIRCUIT
February 6, 2004
No. 00-15856 THOMAS K. KAHN
_________________________ CLERK
D.C. Docket No. 92-00306-CV-T-S
MUTUAL SERVICE INSURANCE
COMPANY,
Plaintiff-Counter-Defendant,
MUTUAL SERVICE CASUALTY
INSURANCE COMPANY,
Plaintiff-Counter-Defendant-
Appellee-Cross-Appellee-
Cross-Appellant,
versus
FRIT INDUSTRIES, INC.,
Defendant-Counter-Claimant-
Cross-Claimant-Appellee,
FIRST STATE INSURANCE COMPANY,
EMPLOYERS INSURANCE OF WAUSAU,
Defendants-Cross-Claimants-
Cross-Appellants,
INTER-INDUSTRY INSURANCE
COMPANY, LTD., INSURCO
INTERNATIONAL, LTD.,
AGRICHEM INSURANCE COMPANY,
LTD.,
Defendants-Cross-Defendants-
Appellants-Cross-Appellees.
_________________________
Appeals from the United States District Court for the
Middle District of Alabama
_________________________
(February 6, 2004)
Before EDMONDSON, Chief Judge, KRAVITCH and GIBSON*, Circuit Judges.
JOHN R. GIBSON, Circuit Judge:
Inter-Industry Insurance Company, Insurco International, and Agrichem
Insurance Company appeal from the district court's denial of their motion to
dismiss for lack of personal jurisdiction, from the district court's declaration that
they have a duty to defend their insured, Frit Industries, in product liability suits
filed against Frit in North Carolina state courts, and from the ruling that they
waived their objection to a request for attorneys' fees. Inter-Industry appeals from
the district court's issuance of a permanent injunction against litigation initiated by
Inter-Industry in the Isle of Man. Mutual Service Casualty Insurance Company
*Honorable John R. Gibson, United States Circuit Judge for the Eighth Circuit, sitting by
designation.
2
appeals the district court's partial denial of prejudgment interest. Frit Industries
cross-appeals the district court's denial of attorneys' fees. We affirm the district
court's denial of the motion to dismiss for lack of personal jurisdiction, its grant of
summary judgment to Frit Industries on the duty to defend issue, and its issuance
of the permanent injunction. We reverse and remand for consideration of whether
Frit is entitled to attorneys' fees based on the offshore insurers' failure to admit
they had a duty to defend, for a determination of the reasonableness of Mutual
Service's attorneys' fees, and for an additional award of prejudgment interest to
Mutual Service.
I.
This case involves an insurance dispute that remained in the district court
for nearly ten years and that included a prior interlocutory appeal to this court.
Frit Industries is an Alabama corporation that manufactures micronutrients for
fertilizers. In 1990, three product liability actions were filed against Frit in North
Carolina state court, alleging that exposure to a certain herbicide in Frit's
micronutrient mix caused the plaintiffs' cancer. Those lawsuits were removed to
federal court, and Frit was ultimately granted summary judgment in all cases,
which the Fourth Circuit recently affirmed. Marsh v. W.R. Grace & Co., 2003 WL
22718177 (4th Cir. Nov. 19, 2003) (unpublished).
3
The exposure periods of the North Carolina plaintiffs to the alleged
carcinogen in Frit's product ranged from 1984 to at least 1988. Over these years,
Frit had numerous insurance policies providing both primary and umbrella
coverage. First State Insurance Company provided insurance from April 30, 1983,
to April 30, 1986. Employers Insurance of Wausau provided insurance from May
1, 1984, to May 1, 1986. Agrichem Insurance Company, Ltd.1 provided insurance
from April 30, 1984, to June 1, 1987. Inter-Industry Insurance Company, Ltd.
provided insurance from June 1, 1987 and continued to provide it at the
commencement of this lawsuit. Mutual Service Casualty Insurance Company
provided insurance from April 30, 1988, to April 30, 1992. Frit gave notice of the
product liability lawsuits to all of these insurers and requested that they protect
Frit's interests. After receiving notice of the lawsuits, Wausau acknowledged its
duty to provide coverage for and defend Frit. Insurco, Agrichem and Inter-
Industry ("the offshore insurers")2 initially contacted counsel to defend Frit, but
subsequently withdrew and denied that they had any duty to defend Frit. First
State and Mutual Service defended Frit under a reservation of rights.
1
Originally, Frit was insured by Agrichem. Insurco International later acquired Agrichem
and assumed liability for its insurance contracts, including Agrichem's policy with Frit. Because
Mutual Service named both as defendants, we refer to both.
2
Agrichem and Insurco are Cayman Islands companies, and Inter-Industry is an Isle of
Man company.
4
On March 5, 1992, Mutual Service3 brought this declaratory judgment
action in the Middle District of Alabama against Frit, Insurco, Agrichem, Inter-
Industry, First State, and Wausau, seeking a determination of each insurer's duties
under their respective policies in the product liability actions. Frit filed counter-
claims against Mutual Service and cross-claims against the offshore insurers. First
State and Wausau (who were defending Frit in the product liability lawsuits along
with Mutual Service) filed cross-claims against the offshore insurers.
The parties filed numerous motions, but we will refer only to those relevant
to this appeal. The offshore insurers made an initial motion to dismiss based on
lack of personal jurisdiction, which the district court denied. Both Frit and the
offshore insurers moved for summary judgment. In April, 1993, the district court
granted Frit's motion and denied the offshore insurers' motion, finding that under
Alabama law the offshore insurers had a duty to defend Frit in the product liability
lawsuits. However, the district court did not include in its order a ruling on
Mutual Service's initial claim for reimbursement of defense costs already incurred
in the product liability actions.
Mutual Service and Frit each moved in May, 1993 to alter or amend the
judgment under Federal Rule of Civil Procedure 59(e). Mutual Service sought pro
3
The complaint was originally filed under the name, "Mutual Service Insurance
Company." Apparently, "Mutual Service Casualty Insurance Company" was the actual party in
interest. Mutual Service corrected the terminology in its amended complaint.
5
rata reimbursement of the amount it had spent defending Frit in the product
liability actions and a declaration that all of the insurers would proportionally
share in the ongoing costs of defending Frit. To protect their right to enforce the
district court's judgment, both Mutual Service and Frit sought a permanent
injunction against litigation Inter-Industry had initiated in the Isle of Man.4
The district court did not rule on these motions until 1998. It granted Frit's
motion to extend and make permanent the relief by enjoining Inter-Industry from
seeking adjudication in the Isle of Man of the district court's ability to rule or to
seek a substantive ruling on the duty to defend issue. The district court also
granted Mutual Service's request for allocation of defense costs among the
insurers, but directed the parties to provide additional information with respect to
the amount owed to Mutual Service. Frit requested attorneys' fees under Federal
Rule of Civil Procedure 37, which the district court denied.
The parties raise a number of issues on appeal. The offshore insurers appeal
the district court's denial of their motion to dismiss for lack of personal
jurisdiction, the grant of summary judgment to Frit, the issuance of the permanent
4
Frit and Mutual Service had successfully obtained a limited temporary injunction not
long after this case began. Mut. Serv. Cas. Ins. Co. v. Frit Indus., Inc., 805 F. Supp. 919, 920
(M.D. Ala. 1992), aff'd, 3 F.3d 442 (11th Cir. 1993). The district court enjoined Inter-Industry
from seeking its own injunction against Frit's and Mutual Service's continued prosecution of this
case and from pursuing a declaration that the parties' duties should be determined in the Isle of
Man. 805 F. Supp. at 925.
6
injunction against the Isle of Man litigation, and the ruling that they waived their
objection to Mutual Service's request for attorneys' fees. Mutual Service appeals
the partial denial of its request for prejudgment interest. Frit appeals the denial of
its request for attorneys' fees. We address each claim in turn.
II.
The offshore insurers first argue that the district court lacked personal
jurisdiction over them. We review the denial of a motion to dismiss for lack of
personal jurisdiction de novo. Cable/Home Communication Corp. v. Network
Prods., Inc., 902 F.2d 829, 855 (11th Cir. 1990).
An analysis of whether personal jurisdiction exists requires a two-step
inquiry. First, we determine whether the exercise of jurisdiction is appropriate
under the forum state's long-arm statute. Sculptchair, Inc. v. Century Arts, Ltd.,
94 F.3d 623, 626 (11th Cir. 1996). Second, we examine whether the exercise of
personal jurisdiction over the defendant would violate the Due Process Clause of
the Fourteenth Amendment to the United States Constitution, which requires that
the defendant have minimum contacts with the forum state and that the exercise of
jurisdiction over the defendant does not offend "traditional notions of fair play and
7
substantial justice." Id. (quoting Int'l Shoe Co. v. Washington, 326 U.S. 310, 316
(1945)).5
Alabama's long-arm statute authorizes Alabama courts to assert jurisdiction
to the fullest extent constitutionally permissible. See Ala. R. Civ. P. 4.2(a)(2);
Sieber v. Campbell, 810 So. 2d 641, 644 (Ala. 2001). Thus, as the offshore
insurers concede, the sole contested issue in our personal jurisdiction analysis is
whether Alabama's exercise of jurisdiction over the offshore insurers violates due
process.
The offshore insurers argue that they have insufficient contacts with
Alabama to justify Alabama's assertion of personal jurisdiction over them. They
rely on affidavits of the companies' secretaries who assert that each is a foreign
corporation with its principal place of business in the Cayman Islands or the Isle
of Man, and that neither has conducted business in Alabama.
The district court, however, relied upon the affidavit of Carl E. Schauble,
Executive Vice-President of Frit, to find jurisdiction over Insurco, Agrichem and
Inter-Industry. Schauble listed each of the liability policies the offshore insurers
issued to Frit in Alabama with the dates of coverage, and he asserted that Frit had
5
Foreign corporations receive the protections of the due process clause even though the
domestic plaintiff is not guaranteed access to the foreign forum. Sea Lift, Inc. v. Refinadora
Costarricense De Petroleo, S.A., 792 F.2d 989, 992 n.2 (11th Cir. 1986).
8
paid in aggregate over $1,100,000 in insurance premiums to the offshore insurers
from Alabama.6
Sufficient minimum contacts exist to justify Alabama's exercise of
jurisdiction. As we have previously noted, "Since the Supreme Court's decision in
McGee v. International Life Ins. Co., 355 U.S. 220, 223 . . . (1957), it has been the
law that a company with insurance obligations in a state in which it has no other
business has submitted to the jurisdiction of the state's courts." Olivier v. Merritt
Dredging Co., Inc., 979 F.2d 827, 833 (11th Cir. 1992); see also Investors Guar.
Fund, Ltd. v. Compass Bank, 779 So. 2d 185, 189 (Ala. 2000) (holding Bermuda
insurer was subject to suit in Alabama because it "contracted to provide a service
in this state and insured a risk located in this state at the time of contracting").
6
The offshore insurers argue that it was improper for the district court to consider the
Schauble affidavit because they had no opportunity to cross-examine him. However, when a
defendant moves to dismiss for lack of personal jurisdiction, an evidentiary hearing is not
required. If the district court does not hold a hearing, the plaintiff must establish a prima facie
case of personal jurisdiction. Morris v. SSE, Inc., 843 F.2d 489, 492 (11th Cir. 1988). A prima
facie case is established when the plaintiff presents sufficient evidence by way of affidavits or
deposition testimony to survive a motion for a directed verdict. Id. The court must construe the
allegations in the complaint as true if they are not contradicted by defendant's evidence. When
defendant's evidence conflicts with plaintiff's, the district court must construe all reasonable
inferences in favor of plaintiff. Id.In this case, the district court properly considered the Schauble affidavit because the two
affidavits the offshore insurers submitted to dispute the assertion of jurisdiction do not contradict
the fundamental point of Schauble's affidavit--that Frit is an Alabama corporation, that Frit was
insured by the foreign companies, and that Frit paid over $1,000,000 in premiums to the offshore
insurers from Alabama.
9
We next consider whether Alabama's exertion of jurisdiction over the
offshore insurers comports with notions of fair play and substantial justice. We
consider the burden on the defendant, Alabama's interest in adjudicating the
dispute, and the plaintiff's interest in obtaining convenient and effective relief.
SEC v. Carrillo, 115 F.3d 1540, 1547 (11th Cir. 1997).
Though there may be some burden on the offshore insurers to defend the
suit in Alabama, any burden is slight and not sufficient to defeat jurisdiction in
this case. Each insurer freely agreed as part of its insurance arrangement to defend
its insureds against litigation, including litigation that arose in the United States.
Moreover, despite their status as foreign insurers, "modern methods of
transportation and communication" have lessened the burden of defending a suit in
a foreign jurisdiction. See id. (quoting Sculptchair, 94 F.3d at 632).
Alabama has a strong interest in the litigation because the suit involves the
failure of a foreign insurer to pay claims due under policies issued to an Alabama
corporation. See Posner v. Essex Ins. Co., Ltd., 178 F.3d 1209, 1221 (11th Cir.
1999) ("Florida . . . [has] a strong interest in seeing this matter resolved in Florida,
as the dispute involves the alleged failure to pay claims under insurance policies
issued by a foreign company to cover Florida property owned by a Florida
resident."); Rossman v. State Farm Mut. Auto. Ins. Co., 832 F.2d 282, 287 (4th
Cir. 1987).
10
Finally, Mutual Service's interest in obtaining convenient and effective
relief is strong in this case, as Alabama appears to be the only forum available
which would allow Mutual Service to join all defendants in the same lawsuit. In
light of the considerations above, we hold that Alabama's exercise of jurisdiction
over Inter-Industry, Agrichem, and Insurco does not violate due process.7
III.
The offshore insurers next contend that the district court erred in granting
Frit's motion for summary judgment. The district court held that the offshore
insurers had a duty to defend Frit in the product liability actions. The insurers offer
two arguments: first, that the district court erred in applying the law of Alabama
rather than the law of the Cayman Islands; and second, that the district court
abused its discretion by not allowing them to withdraw certain admissions. We
review a district court's grant of summary judgment de novo, viewing the evidence
in the light most favorable to the party against whom summary judgment was
granted. Southpace Props., Inc. v. Acquisition Group, 5 F.3d 500, 504 (11th Cir.
1993).
7
Because we conclude that Alabama has personal jurisdiction over the offshore insurers,
we do not address the argument that the insurers waived their defense of lack of personal
jurisdiction.
11
A.
In their motion for summary judgment, Insurco, Agrichem and Inter-
Industry argued that Frit had agreed to a choice-of-law provision mandating that
its insurance agreement would be governed by the law of the Cayman Islands.
Though there was no such provision in the insurance contracts, the offshore
insurers point to a clause in the shareholder agreement Frit signed in order to
obtain insurance coverage from Agrichem. Agrichem is an insurance cooperative,
and as a member Frit was required to accept the shareholder agreement. The
clause states: "This [shareholder] Agreement shall be governed by and construed
in accordance with the laws of the Cayman Islands." The offshore insurers argued
to the district court that this clause also mandated that the insurance policy be
interpreted under the laws of the Cayman Islands. However, the offshore insurers
offered no authority from the Cayman Islands. Absent authority, the district court
held that even if the choice-of-law provision in the shareholder agreement applied,
the court would assume that the law of the Cayman Islands was the same as that of
Alabama. The district court concluded that, under Alabama law, the offshore
insurers had a duty to defend Frit in the product liability actions. The offshore
insurers argue that because they gave proper notice of the potential applicability of
Cayman law under Federal Rule of Civil Procedure 44.1, the district court's
12
holding was error. Federal Rule of Civil Procedure 44.18 requires a party intending
to raise an issue of foreign law to give notice of such in their pleadings or by other
"reasonable notice." The offshore insurers stated their intention to rely on Cayman
Island law at the pretrial conference, thereby giving sufficient notice. See DP
Aviation v. Smiths Indus. Aerospace and Def. Sys. Ltd., 268 F.3d 829, 847 (9th
Cir. 2001) (notice of intent should generally be given by the pretrial conference
and the issue should appear in the pretrial order). However, the offshore insurers
never offered citations to substantive Cayman law. Instead, they filed a motion for
summary judgment based on Alabama law.
The district court is not required to conduct its own research into the content
of foreign law if the party urging its application declines to do so. "Although the
court is permitted to take judicial notice of authoritative statements of foreign law,
nothing requires the court to conduct its own research into obscure sources."
McGhee v. Arabian Am. Oil Co., 871 F.2d 1412, 1424 n.10 (9th Cir. 1989).
8
Federal Rule of Civil Procedure 44.1 provides:
A party who intends to raise an issue concerning the law of a foreign
country shall give notice by pleadings or other reasonable written notice.
The court, in determining foreign law, may consider any relevant material
or source, including testimony, whether or not submitted by a party or
admissible under the Federal Rules of Evidence. The court's
determination shall be treated as a ruling on a question of law.
13
The Restatement (Second) of Conflict of Laws provides: "[W]here either no
information, or else insufficient information, has been obtained about the foreign
law, the forum will usually decide the case in accordance with its own local law
except when to do so would not meet the needs of the case or would not be in the
interests of justice." Restatement (Second) of Conflict of Laws, § 136, cmt. h, at
378-79 (1971); see also Cavic v. Grand Bahama Dev. Co., Ltd., 701 F.2d 879, 882
(11th Cir.1983) (citing Restatement with approval); Seguros Tepeyac, S.A.,
Compania Mexicana de Seguros Generales v. Bostrom, 347 F.2d 168, 174 n.3 (5th
Cir. 1965);9 accord Republican Nat'l Comm. v. Taylor, 299 F.3d 887, 891 (D.C.
Cir. 2002).10 The offshore insurers did not direct the district court or this court to
a single rule of law for the Cayman Islands, either by case law or by statute. They
cannot credibly argue that a different result would follow if that jurisdiction's law
were followed. The district court did not err in applying the law of Alabama in
this case.
9
This court has adopted all prior decisions of the former Fifth Circuit handed down prior
to the close of business on September 30, 1981, as binding precedent. Bonner v. City of
Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc).
10
See also United Int'l Holdings, Inc. v. Wharf (Holdings) Ltd., 210 F.3d 1207, 1224
(10th Cir. 2000); In re Air Crash Disaster Near Chicago, Illinois on May 25, 1979, 644 F.2d 594,
631 (7th Cir. 1981); Walter v. Netherlands Mead N.V., 514 F.2d 1130, 1137 n.14 (3d Cir. 1975);
Bartsch v. Metro-Goldwyn-Mayer, Inc., 391 F.2d 150, 155 n.3 (2d Cir. 1968); 1700 Ocean Ave.
Corp. v. GBR Assocs., 354 F.2d 993, 994 (9th Cir. 1965).
14
B.
Next, the offshore insurers argue that the district court erred in denying their
motion to withdraw certain admissions. Because the control of discovery is
committed to the sound discretion of the trial court, Dukes v. South Carolina Ins.
Co., 770 F.2d 545, 549 (5th Cir. 1985), we review the district court's denial of a
motion to withdraw admissions for abuse of discretion, Perez v. Miami-Dade
County, 297 F.3d 1255, 1263 (11th Cir. 2002), cert denied, 537 U.S. 1193 (2003).
The offshore insurers collectively argued in their summary judgment motion
that they had no duty to defend Frit in the product liability actions because their
policies insured Frit for only one million dollars in the aggregate, and Frit had
reached this limit in a previous lawsuit. The district court rejected their argument
because the only insurer to have paid on its policy was Insurco, and Frit had
separate policies with each company. Moreover, in response to Frit's request
under Federal Rule of Civil Procedure 36, the offshore insurers had already
admitted that their respective policies provided separate limits for each year of
coverage and that the policy limits had not been exhausted. The district court held
that these admissions conclusively established that a single insurer's prior payment
did not exhaust the limits on coverage for all of the policies.
The offshore insurers moved to withdraw their admissions, and the district
court denied their motion. The court determined that the offshore insurers were
15
trying to change their litigation position and that Frit would be prejudiced by the
withdrawal of the admissions. See Fed. R. Civ. P. 36(b). After careful review of
the record, we conclude that the district court did not abuse its discretion.
IV.
The offshore insurers next argue that the district court erred in holding that
they had waived their right to challenge the reasonableness and necessity of the
attorneys' fees Mutual Service incurred in defending the product liability actions
and awarding the full amount of fees requested to Mutual Service. We review an
award of attorneys' fees for an abuse of discretion. See Coastal Fuels Mktg., Inc.
v. Florida Express Shipping Co., Inc., 207 F.3d 1247, 1252 (11th Cir. 2000). "An
abuse of discretion occurs if the judge fails to apply the proper legal standard or to
follow proper procedures in making the determination or bases an award [or a
denial] upon findings of fact that are clearly erroneous." Id. (citing United States
v. Gilbert, 198 F.3d 1293, 1298 (11th Cir. 1999)).
Following the award of summary judgment to Frit, Mutual Service filed a
motion to alter or amend the judgment, requesting that the district court order the
offshore insurers to reimburse the domestic insurers pro rata for the fees and
expenses they had incurred in defending Frit in the product liability actions. The
district court granted the motion, and directed all insurers to submit a joint
16
statement of the amount the offshore insurers owed the domestic insurers and
whether more would be owed in the future.
The parties could not agree on a dollar amount or on a method of allocation,
but they did consent to have a magistrate judge resolve the dispute. The
magistrate judge ruled that the offshore insurers had waived any objection to the
reasonableness and necessity of the attorneys' fees, adopted Mutual Service's
allocation proposal, and entered judgment with respect to expenses for Mutual
Service.
Under Alabama law, "[a]ttorney's fees incurred as a proximate result of . . .
[a] refusal to defend the suit are appropriate damages for breach of contract."
Green v. Standard Fire Ins. Co. of Alabama, 477 So. 2d 333, 335 (Ala. 1985).
Mutual Service is entitled to recover its attorneys' fees only "to the extent that they
are necessarily incurred and reasonable in amount." Highlands Underwriters Ins.
Co. v. Elegante Inns, Inc., 361 So. 2d 1060, 1066 (Ala. 1978). In ruling that the
offshore insurers had waived their objection to the reasonableness or necessity of
the incurred fees, the magistrate judge relied on Alabama law that an insurer who
specifically denies liability on one ground waives all other grounds or defenses it
could have raised but did not. See, e.g., Home Indem. Co. v. Reed Equip. Co.,
Inc., 381 So. 2d 45, 50 (Ala. 1980).
17
However, not all defenses are capable of being waived under this doctrine.
Rather, the only defenses capable of waiver are those which arise out of an express
condition contained in the insurance contract. First Alabama Bank of
Montgomery, N.A. v. First State Ins. Co., Inc., 899 F.2d 1045, 1063 (11th Cir.
1990); Wood v. Mut. of New York Life Ins. Co., 405 F. Supp. 685, 686 (N.D. Ala.
1975); cf. Reed, 381 So.2d at 50 (waiver cannot be applied to enlarge coverage of
policy).11
Because the requirement that attorneys' fees resulting from a fellow insurer's
breach of contract be reasonable and necessary arises from Alabama law and not
out of an express condition in any of the insurance contracts at issue, the offshore
insurers did not waive their defense by first raising it in response to Mutual
Service's motion to alter or amend the judgment. The district court abused its
discretion in ruling the defense waived.
Mutual Service offers us an alternate ground on which we could affirm: the
offshore insurers failed to raise the reasonableness of attorneys' fees as an issue in
dispute in the pretrial order. Considering the broad discretion the trial court has to
construe its own pretrial memoranda and the deference we give to the trial court's
11
See also, e.g., Am. Auto. Ins. Co v. English, 94 So. 2d 397, 402 (Ala. 1957) (denying
liability on ground that company was not primary insurer waives defenses of lack of sufficient
notice and cooperation on part of insured); Home Ins. Co. v. Jones, 165 So. 211, 213 (Ala. 1935)
(denying liability under fire insurance policy on ground that policy did not cover willful or
fraudulent fire is waiver of defense of proof of loss).
18
decision to allow (or disallow) amendments to pretrial orders, we are unwilling to
hold as a matter of law that the offshore insurers waived their objection when the
district court never ruled on the issue. See Santiago v. Lykes Bros. S.S. Co., Inc.,
986 F.2d 423, 427 (11th Cir. 1993) (instructing jury on theory not in pretrial order
was within judge's discretion); Hodges v. United States, 597 F.2d 1014, 1018 (5th
Cir. 1979). Therefore, we remand to the district court for consideration of this
issue.12
V.
Next, the offshore insurers argue that the district court failed to follow
principles of international abstention when it permanently enjoined litigation filed
by Inter-Industry in the Isle of Man. We review the district court's order granting
an injunction for abuse of discretion. Simmons v. Conger, 86 F.3d 1080, 1085
(11th Cir. 1996).
About three months after Mutual Service filed this lawsuit, Inter-Industry
filed suit against Frit and Mutual Service in the High Court of Justice of the Isle of
Man. Mut. Serv. Cas. Ins. Co. v. Frit Indus., Inc., 805 F. Supp. 919, 920 (M.D.
Ala. 1992). Inter-Industry asked that court to determine whether it had a duty to
12
The offshore insurers also argue that the district court's allocation of defense costs
according to Commercial Union Ins. Co. v. Sepco Corp., 765 F.2d 1543 (11th Cir. 1985) was
error. Sepco is a prior decision of this court interpreting Alabama law, id. at 1575, and it is
controlling precedent. The district court did not err.
19
defend Frit under the insurance policy, to enjoin this suit, and to rule that all Inter-
Industry's duties be determined in the courts of the Isle of Man. Id. at 920-21.
One day later, Insurco and Agrichem filed suit against Frit and Mutual Service in
the courts of the Cayman Islands, seeking a declaratory judgment determining
their duty to defend. Id. at 921.
Frit and Mutual Service moved the district court to enjoin these foreign
lawsuits. The district court enjoined Inter-Industry from seeking an injunction
prohibiting the further prosecution of this action and from seeking a declaration
that all its rights should be determined within the Isle of Man proceedings. Id. at
925. However, the district court refused to enjoin the Cayman Islands proceedings
or the Isle of Man proceedings to the extent that those suits sought to adjudicate
the duty to defend issue. Id. That ruling was affirmed in a per curiam opinion of
this court. Mut. Serv. Cas. Ins. Co. v. Frit Indus., Inc., 3 F.3d 442 (11th Cir. 1993)
(table).
Several years later, after the district court entered judgment on the duty to
defend issue, Frit and Mutual Service moved the district court to make its
injunction permanent, which the district court granted. The permanent injunction
expanded the prior injunction in that it prohibited Inter-Industry from attempting
to obtain a conflicting ruling in the Isle of Man on the duty to defend issue.
20
The offshore insurers argue that the district court should not have granted
the injunction because it was contrary to the international abstention doctrine
enunciated by this court in Turner Entm't Co. v. Degeto Film GmbH, 25 F.3d
1512, 1521 (11th Cir. 1994). However, the offshore insurers never moved to
dismiss or stay this suit on the basis of international abstention. The injunction
that the offshore insurers oppose was requested in the context of a Rule 59(e)
motion to alter or amend the judgment.13 The district court issued the injunction
after it issued its opinion on the duty to defend issue.14 Abstention at this point
would be illogical, because the district court had already issued a binding decision
on the same issue Inter-Industry was trying to litigate in the Isle of Man.
"When the injunction is requested after a previous judgment on the merits,
there is little interference with the rule favoring parallel proceedings in matters
subject to concurrent jurisdiction. Thus, a court may freely protect the integrity of
its judgments by preventing their evasion through vexatious or oppressive
relitigation." Laker Airways v. Sabena, Belgian World Airlines, 731 F.2d 909,
928 (D.C. Cir. 1984); see also Bethell v. Peace, 441 F.2d 495, 498 (5th Cir. 1971).
The district court was in the best position to know the history of the case and
13
To the extent that the offshore insurers' argument can be construed as a challenge to the
original injunction, that injunction has already been affirmed by a panel of this court. See Mut.
Serv. Cas. Ins. Co. v. Frit Indus., Inc., 3 F.3d 442 (11th Cir. 1993) (table).
14
Though the district court's ruling on the duty to defend issue was a final judgment, the
case continued to proceed for some time in light of Frit and Mutual Service's Rule 59 motions.
21
assess the strategic conduct of Inter-Industry in seeking to relitigate the duty to
defend issue in the Isle of Man litigation. In this case, the "only conceivable
benefit that [the foreign defendants] would reap if the district court's injunction
were overturned would be the right to attack the pending United States action in a
foreign court." Laker Airways, 731 F.2d at 915. We hold that the district court
did not abuse its discretion in issuing the permanent injunction.
VI.
Mutual Service cross-appeals the district court's partial denial of
prejudgment interest on its award. We review the district court's decision on
prejudgment interest for abuse of discretion. Sunderland Marine Mut. Ins. Co.,
Ltd. v. Weeks Marine Constr. Co., 338 F.3d 1276, 1280 (11th Cir. 2003).
In its October 3, 2000 judgment, the district court awarded damages to
Mutual Service in a sum certain for their expenses through April 30, 1998, and
directed the domestic insurers to file final and complete notices of the expenses
they incurred from April 30, 1998, until the termination of the product liability
actions.
On May 22, 2002, the magistrate judge issued a final ruling allocating
expense costs. The award included prejudgment interest only through October 3,
22
2000.15 The court did not acknowledge or explain its failure to award interest for
October 2000 through May 2002. The court ordered judgment:
For the period since 3 October 2000, in favor of [Mutual Service],
Wausau, and First State and against Agrichem/Insurco and Inter-
Industry for a pro rata share of the fees and expenses which the
defending insurers have paid for the North Carolina litigation,
pursuant to the allocation that has been adopted by this court and
pursuant to which the sums reflected in paragraphs 1, 2, and 3 were
computed.
The magistrate judge's failure to award interest since October 2000 is inconsistent
with the foregoing paragraph, as "the allocation that has already been adopted" did
include prejudgment interest.
An award of prejudgment interest through May 2002, is consistent with
Alabama statutory law:
All contracts, express or implied, for the payment of money, or other
thing, or for the performance of any act or duty bear interest from the
day such money, or thing, estimating it at its money value, should
have been paid, or such act, estimating the compensation therefor in
money, performed.
Ala. Code. § 8-8-8 (1975). "It is well established that an insured is entitled to
collect interest only from the date the loss should have been paid to the date of the
judgment." First Alabama Bank of Montgomery, N.A. v. First State Ins. Co., Inc.,
15
We note that the magistrate judge's May 2002 order is unclear on its face whether its
award included prejudgment interest because it does not include an accounting of the award.
However, the amount awarded corresponds with the amount Mutual Service requested in its
Suggestion of Sums Certain of December 8, 2000, in which Mutual Service includes an itemized
breakdown of requested fees. The amount requested includes prejudgment interest until October
3, 2000.
23
899 F.2d 1045, 1065 (11th Cir. 1990) (emphasis added) (citing Alabama Farm
Bureau Mut. Cas. Ins. Co. v. Williams, 530 So. 2d 1371, 1378 (Ala. 1988)).
Therefore, we reverse with directions to award prejudgment interest on the
amounts owed to Mutual Service from October 3, 2000 until May 22, 2002.
VII.
Frit cross-appeals the district court's denial of its request that the offshore
insurers be ordered to pay the attorneys' fees Frit incurred in proving the truth of a
matter the offshore insurers denied in response to a Federal Rule of Civil
Procedure 37 request to admit. We review the district court's decision to award
costs and attorneys' fees for abuse of discretion. Harris v. Chapman, 97 F. 3d 499,
506 (11th Cir. 1996) (reviewing district court rulings on discovery motions and
discovery sanctions under abuse of discretion standard). An appellate court will
not reverse unless it has a "definite and firm conviction that the district court
committed a clear error of judgment." Marchand v. Mercy Med. Ctr., 22 F.3d 933,
936 (9th Cir. 1994).
In its request for admissions, Frit asked the offshore insurers to admit that,
based on the allegations in the product liability complaints, they had a duty to
defend Frit in those lawsuits. The offshore insurers denied these requests.
Vindicated in a successful summary judgment motion, Frit contends that because
24
it later proved the denial to be erroneous, Frit is entitled to the attorneys' fees it
incurred in proving the accuracy of the requested information.
Federal Rule of Civil Procedure 37(c)(2) provides a sanction for a party's
failure to make an admission properly requested under Rule 36. Rule 37(c)(2)
mandates that the court award the expenses incurred by the party in proving a
denied admission, including attorneys' fees, unless it finds that an enumerated
exception applies: "(A) the request was held objectionable pursuant to Rule 36(a),
or (B) the admission sought was of no substantial importance, or (C) the party
failing to admit had reasonable ground to believe that the party might prevail on
the matter, or (D) there was other good reason for the failure to admit." This
sanction encourages parties to identify undisputed issues early so as to avoid
unnecessary costs. See Marchand, 22 F.3d at 936.
The district court ruled that "the party failing to admit had reasonable
ground to believe that the party might prevail on the matter." Under this
exception, Frit is not entitled to attorneys' fees simply because it eventually
prevailed on the duty to defend issue. The "true test under Rule 37(c) is not
whether a party prevailed at trial but whether he acted reasonably in believing that
he might prevail." Fed. R. Civ. P. R. 37(c) advisory committee's note to 1970
amendment. Frit is therefore entitled to attorneys' fees only if the offshore insurers
25
were unreasonable in denying the existence of a duty when the admissions were
made.
The district court ruled, without discussion, by quoting the language of Rule
37(c)(2). A district court's determination under Rule 37 is entitled to great
deference by this court. See Phipps v. Blakeney, 8 F.3d 788, 790 (11th Cir. 1993)
(district court has broad discretion to control discovery, including the choice
whether or not to impose Rule 37 sanctions). "This does not mean, however, that
we will rubber-stamp the decisions of the district court." Velazquez-Rivera v.
Sea-Land Serv., Inc., 920 F.2d 1072, 1075 (1st Cir. 1990) (Rule 37(b) analysis).
The district court offered no explanation as to how it reached the conclusion that
the offshore insurers' denials were reasonable. Without explanation, it is
impossible for us to determine whether or not the district court acted within the
bounds of its discretion. "[I]n cases invoking the sanction power of Rule 37 the
district court must 'clearly state its reasons so that meaningful review may be had
on appeal.'" Carlucci v. Piper Aircraft Corp., Inc., 775 F.2d 1440, 1453 (11th Cir.
1985) (quoting Wilson v. Volkswagen of Am., Inc., 561 F.2d 494, 505 (4th Cir.
1977)).
Therefore, we remand the issue of whether Frit is entitled to expenses under
Federal Rule of Civil Procedure 37 for the district court to provide an explanation
of its findings on the issue.
26
Conclusion
In summary, we affirm district court's denial of the offshore insurers' motion
to dismiss for lack of personal jurisdiction, its grant of summary judgment to Frit
on the duty to defend issue, and its issuance of the permanent injunction against
litigation initiated by Inter-Industry in the Isle of Man. We reverse and remand for
consideration of whether Frit is entitled to attorneys' fees based on the offshore
insurers' failure to admit they had a duty to defend, for a determination of the
reasonableness of Mutual Service's attorneys' fees, and for an additional award of
prejudgment interest to Mutual Service.
AFFIRMED in part and REMANDED in part.
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