Evanston Insurance Company v. Matanuska-Susitna Borough

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UNITED STATES DISTRICT COURT
DISTRICT OF ALASKA
Evanston Insurance Company, )
)
Plaintiff, ) 3:14-CV-00049 JWS
)
vs. ) ORDER AND OPINION
)
) [Re: Motion at docket 65]
Matanuska-Susitna Borough, )
)
Defendant. )
)
I. MOTION PRESENTED
At docket 65 defendant Matanuska-Susitna Borough (“MSB” or “Defendant”) filed
a motion for attorney’s fees in the declaratory judgment action brought by plaintiff
Evanston Insurance Company (“Evanston” or “Plaintiff”). Evanston responds at
docket 68, and MSB replies at docket 70. Oral argument was not requested and would
not assist the court.
II. BACKGROUND
At issue in the declaratory judgment action was whether Evanston had a duty to
indemnify MSB for prospective damages arising from an underlying lawsuit that was
pending before the court. The underlying lawsuit involved current and former MSB
employees alleging that they were unlawfully excluded from the state’s Public
Case 3:14-cv-00049-JWS Document 71 Filed 03/31/16 Page 1 of 6

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Employees Retirement System (“PERS”) “by means of artificial and discriminatory job
classifications notwithstanding PERS eligibility based upon hourly work totals.”1 MSB
informed its insurance company, Evanston, about the lawsuit, believing that the claims
could trigger coverage under its insurance policy. Evanston denied coverage and
disclaimed any duty to indemnify MSB for losses in the underlying litigation and then
filed the declaratory judgment action. Based on the terms of the Employment Liability
Benefit Endorsement to MSB’s insurance policy, MSB only had coverage for negligent
acts, errors, or omissions in the administration of its employee benefit plans. Evanston
therefore asserted that it did not need to indem nify MSB for any losses stemming from
its intentional act of excluding the plaintiffs in the underlying case from PERS.
Evanston sought summary judgment. In response to the motion for summary
judgment, MSB argued that the declaratory judgment action was premature and should
be deferred until the issue of MSB’s liability in the underlying lawsuit was decided.
Alternatively, it argued that, at most, its actions related to the misclassification and
exclusion of its employees for purposes of PERS were negligent and therefore covered
under the policy. Before the court issued an order on Evanston’s motion for summary
judgment, the plaintiffs in the underlying lawsuit settled for an amount under the
insurance policy’s retained limit of $250,000. Evanston did not contribute to the
settlement. The court, agreeing with Evanston’s briefing on whether the court had
jurisdiction over the declaratory judgment given the settlement of the underlying
litigation, dismissed the declaratory judgment action for a lack of case or controversy.2
MSB now moves for attorney’s fees because it believes it was the prevailing party given
the court’s dismissal.
1Doc. 26-2 at p. 3, ¶ 17.
2Doc. 64
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III. DISCUSSION
Attorney’s fees in this case are governed by Alaska Rule of Civil Procedure 82.3
Alaska Rule 82 provides for an award of attorney’s fees to the “prevailing party.”4 The
determination of who is the “prevailing party” is within the trial court’s discretion.5 “In
cases in which the prevailing party recovers no money judgment, the court . . . shall
award the prevailing party in a case resolved without trial 20 percent of its actual
attorney’s fees which were necessarily incurred.”6
The prevailing party is “the one who successfully prosecutes the action or
successfully defends against it, prevailing on the main issue, even though not to the
extent of the original contention.”7 It is the party “in whose favor the decision or verdict
is rendered and the judgment entered.”8 The main issue initially raised in the
declaratory judgment action was whether Evanston would be liable for any judgment or
settlement of the claims asserted by MSB employees in the underlying case if those
claims exceed the $250,000 retained limit. Evanston filed a summary judgment motion
asking the court to resolve the coverage dispute. In response to the motion for
summary judgment, MSB raised the issue about whether the coverage dispute was
premature. It argued that summary judgement should be denied because the dispute
was not yet ripe for determination given the underlying litigation was still pending. MSB
argued that if it were successful in defending the underlying lawsuit then there would be
3Kona Enters. Inc. v. Estate of Bishop, 229 F.3d 877, 883 (9th Cir. 2000) (“A federal
court sitting in diversity applies the law of the forum state regarding an award of attorney’s
fees.”).
4Alaska R. Civ. P. 82(a).
5State v. Johnson, 958 P.2d 440, 444 (Alaska 1998).
6Alaska R. Civ. P. 82(b)(2).
7Buza v. Columbia Lumber Co., 395 P.2d 511, 514 (Alaska 1964).
8Id.; see also Taylor v. Moutrie-Pelham, 246 P.3d 927, 929 (Alaska 2011).
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no need for Evanston to indemnify it. Thus, it argued, there was not yet a case or
controversy and any decision about coverage would be premature.
Evanston asserted that MSB’s argument regarding the lack of case or
controversy was without merit because “Supreme Court and Ninth Circuit precedent
firmly establish that a determination of an insurer’s duty to indemnify the insured for
damages in pending litigation presents a justiciable question.”9 It relied on National
Chiropractic Mutual Insurance Co. v. Doe,10 where the district court held that “disputes
between a liability insurer and its insured, where the insured is sued by a third party and
the insurer believes that the claim is outside of coverage so that the insured is entitled
to neither an indemnity nor a defense, would appear to present the paradigm situation
in which a declaratory judgment should be available.”11 It then distinguished the cases
MSB relied on and stated that there were no common issues of fact at issue that would
prevent the court from rendering an independent decision on coverage.
The court never issued an order on the issue of coverage or on the issue of
whether there was a ripe controversy. That is, neither party prevailed on the main
issues and arguments presented to the court. Instead, bef ore the court resolved the
motion, the underlying litigation settled. The court then asked for briefing from the
parties as to whether a case or controversy existed after settlement of the underlying
case—a question distinct from the case of controversy issue raised in the summary
judgment briefing. Evanston took the position that indeed there was no longer a ripe
case or controversy, and the court agreed, dismissing the action without prejudice.
MSB now argues that because the underlying litigation ultimately settled and
Evanston’s case was dismissed as a result, it was the prevailing party. It believes that
9Doc. 44 at p. 15 (relying on Maryland Cas. Co. v. Pac. Coal & Oil Co., 312 U.S. 270,
273 (1941), Gov’t Employees Ins. Co. v. Dizol, 133 F.3d 1220, 1222 n.2 (9th Cir. 1998), and
other cases).
1023 F. Supp. 2d 1109 (D. Alaska 1998).
11Id. at 1114.
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the fact that Evanston’s case became moot demonstrates that MSB was correct in its
assessment about the action being premature. In support of its argument, MSB relies
on Hart v. Wolff12 for the proposition that a “prevailing party” includes a party who
succeeds because the case against it is dismissed even when there is no final
determination on the merits. Hart, however, is distinguishable because it involved
dismissal as a result of the plaintiff’s delay or failure to cooperate. In Hart, the plaintiff
sued for defamation concerning misappropriation of funds from a business in which the
plaintiff and defendant had been partners. The plaintiff failed to comply with an order to
produce discovery. The court found that the plaintiff’s disobedience was willful, and as
a sanction it dismissed the plaintiff’s complaint without prejudice. Thus, the case stands
for the proposition “that when litigation is dismissed as a result of the delay or
intransigence of one of the litigants, the trial court may deem the other litigant the
prevailing party for purposes of Rule 82.”13 That is clearly not the situation presented
here. This is also not a case where the plaintiff voluntarily dismissed the case or where
dismissal was based on forum non conveniens.14 The case or controversy went away
because the underlying litigation went away for reasons that were unrelated to
Evanston’s actions and unrelated to any decision in this matter. No party can be said to
have prevailed, particularly given that the court did not finally resolve the rights of the
parties in this court.15
12489 P.2d 114 (Alaska 1971).
13State v. Johnson, 958 P.2d 440, 444 (Alaska 1998).
14See Miller v. Wilkes, 496 P.2d 176, 178 (Alaska 1972), overruled on other grounds by
R.A. Davenny & Assocs., Inc.v. Shinjin Motors Sales Co., 533 P.2d 1112, 1114 (Alaska 1975)
(affirming Civil Rule 82 fee award after voluntary dismissal without prejudice); Bromley v.
Mitchell, 902 P.2d 797, 804-05 (Alaska 1995) (granting attorney’s fees to defendant based on a
dismissal for forum non conveniens).
15See Bromley, 902 P.2d at 804 (discussing when a party can be deemed prevailing
when there has been a dismissal without prejudice and finding that a dismissal without
prejudice due to forum non conveniens can result in attorney’s fees because the ruling has a
preclusive effect in that jurisdiction).
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IV. CONCLUSION
Based on the preceding discussion, MSB’s motion for attorney’s fees at
docket 65 is DENIED.
DATED this 31st day of March 2016.
/s/ JOHN W. SEDWICK
SENIOR UNITED STATES DISTRICT JUDGE
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