Acuity Mutual Insurance Co v. Darrell Frye

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 12a0306n.06
No. 10-6459
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
FILED
ACUITY MUTUAL INSURANCE ) Mar 20, 2012
COMPANY, ) LEONARD GREEN, Clerk
)
Plaintiff-Appellant, )
) ON APPEAL FROM THE UNITED
v. ) STATES DISTRICT COURT FOR THE
) EASTERN DISTRICT OF TENNESSEE
DARRELL FRYE, et al., )
)
Defendants-Appellees. ) OPINION
Before: MOORE, SUTTON, and DONALD, Circuit Judges.
BERNICE BOUIE DONALD, Circuit Judge. Acuity Mutual Insurance Company
(“Acuity”) appeals from the district court’s order granting a new trial in the above-styled case solely
on the issue of damages. Acuity argues that the district court erred in finding the jury’s valuation
of damages unreasonable and that granting a new trial on the issue of damages was improper.
Finding no error or abuse of discretion and deeming argument unnecessary, Fed. R. App. P. 34(a),
we affirm.
I. BACKGROUND
On February 9, 2009, a fire occurred in a building located at 621 Shallowford Road in
Chattanooga, Tennessee. Defendant-Appellee Darrell Frye (“Mr. Frye”) owned the subject property
and Defendant-Appellee Lafonne Frye (“Ms. Frye” or, collectively, “the Fryes”), d/b/a Trinity
Learning Center, operated a daycare center out of the building. As a result of the fire, the Fryes
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suffered a loss of property. Mr. Frye filed a claim for payment of the loss pursuant to an insurance
policy covering the premises issued by Acuity. Acuity denied the claim and subsequently filed an
action in United States district court to determine the rights and obligations of the parties with
respect to the fire damage.
Acuity alleged that Darrell Frye intentionally set the fire at 621 Shallowford and that,
consequently, Acuity was not obligated under the policy to cover the Fryes’ losses. Acuity alleged
numerous other reasons for the denial of coverage, including that “there were material
misrepresentations in the application for insurance voiding coverage under the policy of insurance
from its inception” and “that the defendant Darrell Frye was not the owner of the business and is,
therefore, not the proper insured under the policy of insurance.” The Fryes denied any culpability
for the fire and alleged that their claim was properly made in accordance with the terms and
conditions of the insurance policy. The Fryes acknowledged that Ms. Frye should have been named
as an insured in the policy, but alleged that it was the fault of Acuity and its agents that she was not
named as an insured.
The case proceeded to trial on April 13, 2010. Both sides presented evidence and argument
with regard to the nature, cause, and origin of the fire. In addition, numerous contractors testified
regarding estimates they provided the Fryes to make the necessary structural and electrical repairs
to the building after the fire. The estimates themselves, which totaled $226,377, were also admitted
into evidence. Acuity did not obtain independent estimates, but did cross-examine the Fryes’
contractors regarding the adequacy of their inspections and their knowledge of pre-existing damage
to the building. Acuity also presented evidence that the roof at 621 Shallowford had been leaking
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for some time prior to the fire, thereby raising the possibility that the estimates included repairs for
damages unrelated to the fire.
On April 16, 2010, the jury rendered a unanimous verdict in favor of the Fryes, finding that
Mr. Frye did not intentionally set fire to the building at 621 Shallowford. The jury further found that
Mr. Frye proved the value of the fire loss and damage to the building to be $35,000, and that Ms.
Frye proved the value of the fire loss of business property and business income to be $4,500 and
$18,000, respectively.
Following the entry of judgment on the jury’s verdict, both parties filed post-trial motions
which form the basis of the present appeal. The Fryes filed a motion for new trial on the issue of
damages,1 arguing that the jury verdict was inadequate to compensate them for their proven losses
and that there was insufficient evidence to support the amount of the jury’s verdict. Acuity filed a
motion for judgment notwithstanding the verdict or, alternatively, to alter or amend the judgment,
seeking a judgment in its favor on the issues of arson and damages. The district court denied
Acuity’s motion, finding that reasonable jurors could draw more than one conclusion from the
evidence and thus, that the jury’s verdict with regard to liability should not be disturbed. As to the
Fryes’ motion for new trial, the district court granted the motion only on the issue of determining the
reasonable value of the fire loss and damage to the building.2 In its order dated July 30, 2010, the
1
The Fryes’ motion requested, in the alternative, that the court suggest an additur pursuant to Tenn. Code Ann.
§ 20-10-101. Citing the Seventh Amendment to the United States Constitution and Dimick v. Schiedt, 293 U.S. 474, 486-
87 (1935), the district court declined to make a suggestion of additur. This portion of the district court’s ruling is not
challenged on appeal.
2
W ith regard to the reasonable value of the damage to Trinity Learning Center’s business property and its loss
of business income, the district court found that the jury’s verdict was reasonable and not against the clear weight of the
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district court found that the Fryes presented uncontroverted evidence of property damage exceeding
the policy limit of $218,500 and that Acuity did not dispute the accuracy or the validity of the Fryes’
estimates. The district court concluded that “[a] new trial on the issue of damages to the building
is appropriate because the jury’s award of $35,000 bears no reasonable relation to the uncontroverted
evidence.” A new trial was set for November 16, 2010.
On October 13, 2010, roughly a month before the new trial on damages was to begin, Acuity
filed a document titled “Stipulation of the Parties.” The contents of this document read as follows:
Comes now the parties to the above styled litigation and stipulate that the
damages to be proven in this case will exceed the policy limits of the insurance
policy insuring the defendants in the case. Pursuant to this Court’s order and
previous instructions to the jury that the amount of damages are limited by the limits
of insurance covering the defendants building the parties stipulate that the proof to
be offered at trial regarding damage to the building will exceed the policy limits of
the policy of insurance.
By making the stipulation neither party waives any legal argument made
during the trial or after the completion of the trial in any pleading, in any oral
argument, or in any statement, or offer of evidence to any witness or document in the
trial. The parties, furthermore, do not waive any right of appeal or any right to waive
any argument regarding the circumstances and rulings throughout the trial of this
case.
Thereafter, the district court ordered each party to file a statement advising the court whether it was
necessary to proceed with trial. Both parties filed statements to the effect that the value of the fire
loss and damage to the building exceeded the policy limits and that a new trial on the issue of
damages was unnecessary. Accordingly, on November 12, 2010, the court entered an amended
evidence. The court therefore declined to grant a new trial as to the value of these damages.
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judgment in favor of Darrell Frye in the amount of $225,565.25.3 Ten days later, Acuity initiated
an appeal of the judgment.
II. ANALYSIS
A. Waiver of Acuity’s Right to Appeal
At the outset, we address the Fryes’ argument that, in light of the Stipulation of the Parties
and Acuity’s Statement Regarding Necessity of Proceeding Toward Trial, Acuity waived its right
to appeal the amended judgment and dismissal is thus appropriate. We acknowledge that the unusual
post-trial filings in this case indeed muddy the waters with regard to the propriety of the instant
appeal. Upon piecing together the Stipulation and the Statement, it would appear that after the
district court’s order granting a new trial for damages Acuity 1) conceded that the Fryes’ proof
would show that their damages exceeded the policy limit; 2) agreed that there was no factual dispute
with regard to damages and thus, no need for a new trial; and, 3) acknowledged, at least implicitly,
that the Fryes were entitled to an amended judgment in the amount of the policy limit. It would then
appear that, upon entry of the amended judgment, Acuity promptly and inexplicably appealed the
judgment to which they had just consented. Equally perplexing, Acuity’s Brief makes no mention
at all of its post-trial stipulation or its statement deeming a new trial unnecessary, nor does it address
the potential or perceived effect of these documents on its right to appeal.
In its Reply Brief, Acuity addresses for the first time the effect of the post-trial stipulation
as it relates to the Fryes’ waiver argument. First, Acuity correctly points out that the stipulation itself
3
The parties also agreed by stipulation that the policy limit should be amended per its terms from $218,500
to $225,565.25.
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contains an anti-waiver provision, which explicitly states that Acuity did not intend to waive its right
to appeal any rulings made during or after trial, the stipulation regarding the dollar amount of
damages notwithstanding. Acuity argues that this provision preserves its right to appeal the district
court’s order granting a new trial on damages and explains that “the practical effect of the stipulation
is that if [the appellate court] finds that the order granting a new trial is correctly based on law and
fact,” then Acuity will concede that “the amount of damages exceeds the policy limits and there [will
be] no need for a new trial. If, however, [the appellate court] finds that the trial Court’s order
granting a new trial . . . is inappropriate [then] the original jury verdict must be upheld.”
We find that Acuity’s interpretation of the anti-waiver provision is correct and that Acuity
properly preserved its right to appeal the trial court’s order granting a new trial on damages. We
proceed, therefore, to the merits of Acuity’s argument that the district court abused its discretion in
granting the Fryes’ motion for new trial on damages.
B. Order Granting New Trial on Damages
We review a district court’s ruling on a motion for a new trial for abuse of discretion. United
States ex rel. A+ Homecare, Inc. v. Medshares Mgmt. Group, Inc., 400 F.3d 428, 450 (6th Cir.
2005); Brooks v. Toyotomi, Co., 86 F.3d 582, 588 (6th Cir. 1996). “Abuse of discretion is defined
as a definite and firm conviction that the trial court committed a clear error of judgment. A district
court abuses its discretion when it relies on clearly erroneous findings of fact, or when it improperly
applies the law or uses an erroneous legal standard.” Tompkin v. Philip Morris USA, Inc., 362 F.3d
882, 891 (6th Cir. 2004).
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Under Rule 59, after a jury trial a court may grant a new trial on all or some of the issues “for
any reason for which a new trial has heretofore been granted in an action at law in federal court.”
Fed. R. Civ. P. 59(a)(1)(A). Generally, courts have interpreted this Rule to permit a new trial in
circumstances where: 1) the verdict is against the weight of the evidence; 2) the damages are
excessive; or 3) the trial proceedings were influenced by prejudice, bias, or some other unfairness
to the moving party. Conte v. General Housewares Corp., 215 F.3d 628, 637 (6th Cir. 2000). A trial
court may not grant a new trial on the ground of insufficient damages unless the jury verdict is one
that could not reasonably have been reached. Walker v. Bain, 257 F.3d 660, 674 (6th Cir. 2001)
(citing Anchor v. O’Toole, 94 F.3d 1014, 1021 (6th Cir. 1996); TCP Indus., Inc. v. Uniroyal, Inc.,
661 F.2d 542, 546 (6th Cir. 1981)). “The remedy of a new trial for inadequate damages is
appropriate only where the evidence indicates that the jury awarded damages in an amount
substantially less than unquestionably proved by the plaintiff’s uncontradicted and undisputed
evidence.” Id. (citing Anchor v. O’Toole, 94 F.3d 1014, 1021 (6th Cir. 1996)). Thus, if the verdict
is supported by some competent, credible evidence, the motion for new trial should be denied. Id.
The district court articulated and applied the proper standard in considering the Fryes’
motion. In concluding that a new trial on the issue of damages was warranted, the district court
summarized the Fryes’ proof as follows:
When all of the[] estimates are added together, Darrell Frye has presented
evidence that the fire loss and damage to his building exceeds the insurance policy
limit of $218,500.
Lawson Electric Company $27,000
Millwright Construction and Maintenance $26,677
Jones Construction $162,444
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J.D. Helton Roofing Company, Inc. $10,256
Total $226,377
Acuity at trial did not dispute the accuracy and validity of these estimates for
repairing the fire damage to the insured building. Instead, Acuity concentrated its
efforts on seeking to prove that Darrell Frye deliberately set fire to the building.
After reviewing the evidence, the Court concludes that the jury’s verdict and
award of $35,000 is unreasonable and against the clear weight of the evidence. The
uncontroverted evidence established that the loss and damage to the insured building
exceeded the maximum coverage limit of $218,500 in the insurance policy. A
reasonable jury could not reach the verdict that the fire loss and damage to the
insured building is an extremely low $35,000. The verdict of $35,000 is inadequate
to compensate Darrell Frye because it is substantially less than the amount of
damages that was unquestionably proved by the undisputed evidence. A new trial on
the issue of damages to the building is appropriate because the jury’s award of
$35,000 bears no reasonable relation to the uncontroverted evidence.
The district court essentially found that because Acuity did not present its own estimates of the fire
damage to the building, the Fryes’ proof with respect to damages was conclusive. In other words,
if the jury found that Acuity was liable, it was required to award the Fryes damages in the amount
of their estimates in the absence of any other evidence regarding the cost of repairs.
On appeal, Acuity acknowledges that it did not dispute the dollar amounts of the Fryes’
estimates, but argues that “the reasonableness of the dollar amounts was clearly brought into
question by the totality of the evidence presented at trial.” In particular, Acuity argues that the
testimony it elicited from the Fryes’ contractors on cross-examination suggested potential bias, the
Fryes’ failure to mitigate damages, and the contractors’ failure to account for pre-existing damage
to the building in their estimates. All of this, Acuity argues, called the credibility of the Fryes’
contractors and the reliability of their estimates into question and provided the jury with sufficient
information from which it could reasonably render a verdict in the amount of $35,000.
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Acuity’s argument fails because there is simply no evidence in the record to support a jury
verdict of $35,000. The Fryes presented evidence that the fire damage to the building totaled
$226,337. While a reasonable jury could perhaps find that the Fryes were entitled to less than this,
the amount of the jury’s award, to be reasonable, still must be supported by some competent, credible
evidence. Acuity offered neither argument nor evidence at trial with regard to the dollar amount it
would actually cost the Fryes to repair the fire damage to their building. Moreover, the verdict form
gives no indication of the breakdown of the award, i.e., an explanation of how the jury arrived at the
figure of $35,000. Upon review of the record, the figure appears to be arbitrary, bearing no relation
to the Fryes’ estimates, which were the only evidence produced at trial of the actual cost to repair
the fire damage. Thus, while Acuity may have, in the eyes of the jury, successfully discounted the
reliability of the Fryes’ witnesses and evidence, it failed to produce any evidence of its own. In light
of this absence of evidentiary support for the jury’s award of $35,000, we find that the district court
did not abuse its discretion in granting a new trial on the issue of damages to the building.
C. The Fryes’ Motion for Sanctions
Finally, we address the Fryes’ motion for sanctions. The Fryes argue that Acuity’s appeal
is frivolous, and therefore that Acuity should be ordered to pay their attorneys’ fees and costs on
appeal, because its brief fails to cite any authority that warrants reversal of the district court. It is
true that the only citations to legal authority in Acuity’s brief appear in the extended excerpts of the
district court’s order. The essence of Acuity’s argument on appeal, however, is that the district court
incorrectly concluded that the jury’s verdict was unreasonable in light of the evidence. Thus,
Acuity’s brief cites to the testimony and evidence of record which, in Acuity’s view, supports the
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reasonableness of the jury’s verdict. In pursuing the instant appeal, Acuity asked this court to review
that evidence and determine whether the district court abused its discretion in finding that the jury’s
verdict was unreasonable. Although we have answered this question in the negative, we do not find
that Acuity’s appeal was frivolous. Accordingly, the Fryes’ motion for sanctions is DENIED.
III. CONCLUSION
For the foregoing reasons, we AFFIRM the district court’s grant of a new trial on the issue
of damages and its amended judgment. The Fryes’ motion to dismiss the appeal and for sanctions
is DENIED.
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