Opinion
Case No. 97-2509-JWL
February 5, 2001.
MEMORANDUM ORDER
Plaintiff Centennial Management Services, Inc. ("CMS"), the sole shareholder of Centennial Life Insurance Company ("CLIC"), a liquidated insurer, filed this action against CLIC's reinsurers, Axa Re Vie, Axa Reassurance, S.A. and Axa Re Life Insurance Company (collectively "Axa") alleging fraudulent misrepresentation and breach of contract in connection with various reinsurance agreements that Axa entered into with CLIC. In essence, CMS claims that Axa forced CLIC into liquidation. Axa, in turn, filed counterclaims against CMS for fraudulent misrepresentation, fraudulent omission and breach of contract in connection with the same reinsurance agreements. Axa, as a third-party plaintiff, filed these same claims against Centennial Financial Group (CFG), William Vogel and Thomas Enstrom. According to Axa, CMS, CFG, Mr. Vogel and Mr. Enstrom failed to disclose to Axa material information about CLIC's financial condition during the negotiations for the reinsurance agreements. Axa also filed a third-party complaint against the reinsurance brokers, James Irwin and Jardine Group Services Corporation, alleging fraudulent misrepresentation, fraudulent omission, negligent misrepresentation and breach of contract based on the brokers' purported failure to disclose material information about CLIC to Axa during contract negotiations. Finally, the reinsurance brokers filed a counterclaim against Axa alleging that Axa breached the brokerage agreement between the parties by failing to pay certain commissions to the brokers.
CFG and Mr. Enstrom own CMS; Mr. Vogel owns CFG.
The case was tried to a jury over the course of four weeks. At the conclusion of the trial, the jury found in favor of CMS on its fraud claim against Axa, but awarded no damages to CMS. Similarly, the jury found in favor of Axa on its fraud claims against CMS, CFG, Mr. Vogel and Mr. Enstrom, but awarded no damages to Axa. The jury found in favor of Jardine and Mr. Irwin on all of Axa's claims and found in favor of Jardine on its breach of contract claim against Axa. On this claim, the jury awarded Jardine $162,363.00-the total amount of damages sought by Jardine. The court entered judgment on the jury's verdict.
The jury found in favor of Axa on CMS's breach of contract claim.
Specifically, the jury found in favor of Axa on its fraudulent misrepresentation claim against CMS; its fraudulent misrepresentation and fraudulent omission claims against CFG; its fraudulent omission claim against William Vogel; and its fraudulent misrepresentation claim against Thomas Enstrom.
The judgment provides that Axa shall recover its costs of action against CFG. In its bill of costs, Axa requests the clerk to tax as costs more than $200,000 against CFG pursuant to Federal Rule of Civil Procedure 54(d). See Fed.R.Civ.P. 54(d) (costs "shall be awarded as of course to the prevailing party unless the court otherwise directs"). This matter is presently before the court on CFG's motion to disallow costs and objections to Axa's bill of costs (doc. #506). According to CFG, Axa is not entitled to recover costs under Rule 54(d) because Axa is not a "prevailing party" for purposes of Rule 54(d). In the alternative, CFG has raised several specific objections to certain items in Axa's bill of costs. As set forth in more detail below, the court agrees with CFG that Axa is not a prevailing party for purposes of Rule 54(d). CFG's motion is granted.
This award, however, is inconsistent with the rest of the judgment and appears to be an oversight by the clerk of the court. The judgment, for example, is silent as to costs with respect to Axa's fraudulent omission claim against William Vogel and with respect to Axa's fraudulent misrepresentation claim against Thomas Enstrom.
It is well settled that a plaintiff, to qualify as a prevailing party, must obtain at least some relief on the merits of its claim. See Farrar v. Hobby, 506 U.S. 103, 111 (1992). In other words, the plaintiff must obtain an enforceable judgment against the defendant from whom fees (or, in this case, costs) are sought, or comparable relief through a consent decree or settlement. Id. (citations omitted). Moreover, whatever relief the plaintiff obtains must directly benefit the plaintiff at the time of the judgment or settlement. Id. Otherwise, the judgment or settlement cannot be said to "affec[t] the behavior of the defendant toward the plaintiff." Id. (quoting Rhodes v. Stewart, 488 U.S. 1, 4 (1988)). In essence, a plaintiff "prevails" when actual relief on the merits of her claim materially alters the legal relationship between the parties by modifying the defendant's behavior in a way that directly benefits the plaintiff. Id. at 112.
Although the Supreme Court's decision in Farrar addressed prevailing party status in the context of a party seeking attorneys' fee under 42 U.S.C. § 1988, Axa makes no argument here that a different standard should be applied in the context of a party seeking costs under Rule 54(d). Indeed, in her concurring opinion in Farrar, Justice O'Connor suggests that the standard for determining whether a party is a "prevailing party" would be the same under § 1988 as it would be under Rule 54(d). See Farrar, 506 U.S. at 120 ("Just as a Pyrrhic victor would be denied costs under Rule 54(d), so too should it be denied fees under § 1988."). Moreover, those circuits that have addressed the issue have held that the test for prevailing party status under Rule 54(d) is the same as the test for prevailing party status under § 1988. See Institutionalized Juveniles v. Secretary of Public Welfare, 758 F.2d 897, 926 (3rd Cir. 1985); Studiengesellschaft Kohle v. Eastman Kodak Co., 713 F.2d 128, 132 (5th Cir. 1983).
In Lintz v. American General Finance , Inc., 76 F. Supp.2d 1200 (D.Kan. 1999), this court applied the Supreme Court's decision in Farrar to analogous facts. In Lintz, the jury found that plaintiff Lintz was subjected to sexual harassment and also found that the defendants were liable to plaintiff for the harassing conduct. See id. at 1208. The jury, however, awarded plaintiff Lintz no damages. See id. Nonetheless, plaintiff Lintz maintained that she was entitled to prevailing party status and an award of attorneys' fees under Title VII. See id. Relying on the Supreme Court's decision in Farrar, this court held that plaintiff Lintz's failure to obtain any relief whatsoever rendered her ineligible for prevailing party status and ineligible for an award of attorneys' fees. See id. at 1210; accord Caruthers v. Proctor Gamble Mfg. Co., 177 F.R.D. 667, 669 (D.Kan.) (plaintiff's "complete failure to obtain relief . . . renders his `victory' a technical and insignificant achievement, ineligible for an attorney fee award"), aff'd, 161 F.3d 17 (10th Cir. 1998).
Axa has not attempted to distinguish the facts here from the facts before this court in Lintz. Rather, Axa simply maintains that it is a prevailing party despite its failure to obtain a monetary award. In support of its argument, Axa relies on three District of Kansas cases- Sharon v. Yellow Freight System, Inc., 985 F. Supp. 1274 (D.Kan. 1997); Manildra Milling Corp. v. Ogilvie Mills, Inc., 878 F. Supp. 1417 (D.Kan. 1995); and Burk v. Unified School Dist. No. 329, 116 F.R.D. 16 (D.Kan. 1987). The facts of each of those cases, however, are easily distinguished from the facts presented here. In Sharon, for example, Judge Vratil awarded costs to the plaintiff, despite the fact that the defendant obtained summary judgment on some of the plaintiff's claims, because the plaintiff prevailed on his claims at trial and received a money judgment of $47,916.66. See Sharon, 985 F. Supp. at 1276. Axa's reliance on this case, then, is clearly misplaced. In Manildra, Judge Saffels awarded costs to the plaintiff, despite the fact that the plaintiff did not ultimately obtain a money judgment, because the plaintiff "successfully challenged several of [the defendant's] patents winning a declaration of invalidity" and essentially secured the ability to "use its production process free from risk of infringement and without the necessity of obtaining a license."
See Manildra, 878 F. Supp. at 1424-25. As Judge Saffels emphasized, the plaintiff, in addition to seeking monetary damages, specifically sought and won a declaration that the defendant's patents were invalid and not infringed by the plaintiff. See id. The jury's verdict "stripped [the defendant] of a competitive edge vis-a-vis [the plaintiff] with the result that [the parties] play on a more level field." See id. at 1425. In other words, the relief won by the plaintiff in Manildra materially altered the legal relationship between the parties in a way that directly benefitted the plaintiff, see Farrar, 506 U.S. at 112, and the plaintiff was thus entitled to prevailing party status. Here, of course, there has been no alteration in the relationship between Axa and CFG. Axa received no monetary damages-the only form of relief it requested. Finally, in Burk, Judge O'Connor awarded costs to the plaintiff despite the fact that the jury awarded the plaintiff only $1.00 on his claim. See Burk, 116 F.R.D. at 17. In that respect, Judge O'Connor's decision anticipated the Supreme Court's ruling in Farrar-that an award of nominal damages renders the plaintiff a prevailing party. See Farrar, 506 U.S. at 113. Thus, the distinction between an award of nominal damages and an award of no damages is significant. See Lintz, 76 F. Supp.2d at 1210 (and cases cited therein).
Axa also relies on a case from the Southern District of Indiana, Mary M. v. North Lawrence Community Sch. Corp., 951 F. Supp. 820 (S.D.Ind.), rev'd on other grounds, 131 F.3d 1220 (7th Cir. 1997). In Mary M., the district court, with virtually no analysis, held that the plaintiff was a prevailing party entitled to costs despite the fact that "plaintiff's victory on liability came with an award of zero damages." See Mary M., 951 F. Supp. at 828. Perhaps recognizing that the case is not binding on this court, Axa nonetheless urges the court to apply the Mary M. holding because the Mary M. court, according to Axa, applied Tenth Circuit case law in reaching its decision. Axa's argument is unavailing.
Although the Mary M. court cited to the Tenth Circuit's opinion in American Insurance Co. v. El Paso Pipe Supply Co., 978 F.2d 1185 (10th Cir. 1992), the Circuit's holding in that case simply does not support the conclusions of the Mary M. court. In El Paso Pipe Supply Co., the plaintiff brought suit against two defendants, GE and EPPSCO, for breach of contract and breach of warranties. See 978 F.2d at 1187. Although the jury determined that both defendants breached the relevant contract and warranties, the jury found that the plaintiff's damages of approximately $34,000 resulted from only GE's breach. See id. In other words, EPPSCO was not found liable for any of the plaintiff's damages. See id. On appeal, EPPSCO argued that it was the prevailing party because it was not found liable for any of the plaintiff's damages. See id. at 1192. The Circuit rejected this argument, essentially concluding that the plaintiff was entitled to nominal damages from EPPSCO. Echoing the decision of the district court, the Tenth Circuit recognized that "although [the plaintiff] did not seek or receive nominal damages against EPPSCO, nominal damages are recoverable against a party who breaches a contract even where no actual damages can be proved." See id. at 1192-93. The Circuit then affirmed the district court's conclusion that a party who recovers only nominal damages will be considered the prevailing party. See id. at 1192. Thus, the Circuit rejected EPPSCO's argument that it was the prevailing party. In other words, the Tenth Circuit's opinion in El Paso Pipe Supply Co. simply anticipates one of the rules subsequently set forth by the Supreme Court in Farrar-that a party who receives nominal damages will generally be considered a prevailing party. Here, Axa neither obtained nor was entitled to nominal damages on its fraud claim against CFG. See Kronos, Inc. v. AVX Corp., 612 N.E.2d 289, 292 (N.Y. 1993) (although nominal damages are always available in breach of contract actions, they are allowed in tort only if necessary to protect an "important technical right" where no actual injury can be shown). For this reason, the Tenth Circuit's decision is not applicable here. Moreover, the Mary M. court's reliance on El Paso Pipe Supply Co. is misplaced. In short, then, the court is simply not persuaded by the decision in Mary M.
The district court had awarded the plaintiff costs and fees pursuant to a written provision in the contract executed between the parties. See El Paso Pipe Supply Co., 978 F.2d at 1187-88. Under that provision, the seller (in this case, the defendants) was responsible for paying reasonable legal fees and costs "if the Seller [was] not the prevailing party." See id. at 1192. Thus, EPPSCO argued that it was the prevailing party in an effort to avoid the consequences of the fee provision in the contract. See id. at 1192-93.
For all of the foregoing reasons, the court reaffirms its decision in Lintz that a party who fails to obtain any relief whatsoever is not a prevailing party. There has been no alteration in the relationship between Axa and CFG. Standing alone, any moral satisfaction Axa may have received from its technical victory cannot bestow prevailing party status. See Farrar, 506 U.S. at 112. In sum, Axa's failure to obtain any relief renders it ineligible for "prevailing party" status and ineligible for an award of costs. CFG's motion is granted.
IT IS THEREFORE ORDERED BY THE COURT THAT CFG's motion to disallow costs (doc. #506) is granted and Axa shall not be entitled to recover its costs of action.
IT IS SO ORDERED.