Opinion
Civil Action No. 3:99-CV-0351-D
February 28, 2001
MEMORANDUM OPINION
In a prior memorandum opinion and order in this case, the court in pertinent part granted the motion for partial summary judgment of defendant-counterplaintiff John L. Hickman ("Hickman") against plaintiff-counterdefendant Utica Mutual Insurance Company ("Utica"), awarding Hickman attorney's fees, expenses, and costs arising from Utica's failure to defend him under a Maryland insurance policy in lawsuits brought against him by CIGNA Insurance Company ("CIGNA") in Insurance Company of North America, et al. v. John L. Hickman, et al., No. 97-04964, in the 101st Judicial District Court of Dallas County, Texas (the " CIGNA suit"), and Reliance Insurance Company ("Reliance") in Reliance Insurance Co. v. J.L. Hickman Co., et al., Civil Action No. MJG-97-3194 (D. Md) (the " Reliance suit"). See Utica Mut. Ins. Co. v. Hickman, 2000 WL 1593640 (N.D. Tex. Oct. 24, 2000) (Fitzwater, J.) " Utica I"). The court held:
This claim for attorney's fees is asserted as an element of damages for breach of contract, not as an ancillary claim for attorney's fees in bringing the instant lawsuit, which will be adjudicated in accordance with the procedure established in Fed.R.Civ.P. 54(d)(2).
Utica is liable under the Maryland policy for breach of contract for failing to defend and indemnify Hickman in the CIGNA suit and for failing to defend Hickman in the Reliance suit. Utica is liable for the expenses, costs, and fees that Hickman has incurred to date defending himself in the CIGNA and Reliance lawsuits. Because the court is unable to determine this amount on the present record, it denies summary judgment concerning the amount of damages for breach of contract.Id. at *7. On February 12, 2001 the parties tried to the court in a bench trial the issue of Hickman's damages (attorney's fees and attorney expenses) for breach of the Maryland policy. For the reasons that follow, the court enters judgment in Hickman's favor for the sum of $51,423.91.
As permitted by Rule 52(a), the court sets out in this memorandum opinion its findings of fact and conclusions of law.
I
The background facts and procedural history of this matter are set forth in the court's opinion in Utica I and need not be repeated at length. See id. at * 1. In sum, the court held that Utica had a duty under a Maryland errors and omissions policy to defend and indemnify Hickman in the CIGNA suit. Id. at *7. The court also held that the policy required Utica to defend, but not to indemnify, Hickman in the Reliance suit. As noted above, the court was unable to determine the amount of Hickman's damages based on the summary judgment record. Id.
Hickman seeks to recover the sum of $51,423.91 in attorney's fees and expenses that he owes the law firm of Geary, Porter Donovan, P.C. ("GPD") and to recover $45,000 that he owes to Michael E. Horn, Esquire ("Horn"). Horn has billed Hickman for legal services rendered before GPD took over representing him. Utica does not challenge specifically GPD's evidence of the services rendered and expenses incurred. Instead, it maintains that Hickman is precluded from recovering these fees and expenses as damages for breach of contract because (1) Hickman failed to designate an attorney's fees expert, as required by Fed.R.Civ.P. 26(a)(2), ¶ I(C) of the court's April 21, 1999 scheduling order, and ¶ 15 of the court's January 20, 2000 trial setting order, and has therefore failed to adduce expert testimony that the fees incurred were reasonable; (2) Hickman failed to provide Utica with copies of the attorneys' bills; and (3) Hickman failed to provide notice to Utica until October 8, 1998 and, because the contract at issue is a claims made policy, Utica is not liable for any defense costs that Hickman incurred in the CIGNA suit before October 8, 1998.
II
The court holds as a threshold matter that Maryland law applies to the calculation of damages. The court has already determined that Maryland law applies to the insurance policy at issue in this suit. See Utica I, 2000 WL 1593640, at *2-*3. Because Utica's duty to pay expenses, costs, and fees is governed by this insurance policy, the court will apply Maryland law to calculate Hickman's damages.
Under Maryland law, when an insurer is subject to paying attorney's fees as damages in a case such as this, "the insurer is `entitled to have the amount of fees and expenses proven with the certainty and under the standards ordinarily applicable for proof of contractual damages.'" Commercial Union Ins. Co. v. Poter Hayden Co., 698 A.2d 1167, 1214 (Md. Ct. Spec. App. 1997) (quoting Bankers Shippers Ins. Co. v. Electro Enters., Inc., 415 A.2d 278, 279 (Md. 1980)). The Maryland Court of Special Appeals has articulated these standards as follows:
Other jurisdictions have delineated the detail required and the quantum of information that the prevailing party must provide. The overwhelming authority holds that (a) the party seeking the fees, whether for him/herself or on behalf of a client, always bears the burden of presenting evidence sufficient for a trial court to render a judgment as to their reasonableness; (b) an appropriate fee is always reasonable charges for the services rendered; (c) a fee is not justified by a mere compilation of hours multiplied by fixed hourly rates or bills issued to the client; (d) a request for fees must specify the services performed, by whom they were performed, the time expended thereon, and the hourly rates charged; (e) it is incumbent upon the party seeking recovery to present detailed records that contain the relevant facts and computation undergirding the computation of charges; (f) without such records, the reasonableness vel non of the fees can be determined only by conjecture or opinion of the attorney seeking the fees and would therefore not be supported by competent evidence.Maxima Corp. v. 6933 Arlington Dev. Ltd P'ship, 641 A.2d 977, 982-83 (Md.Ct.Spec.App. 1994). In determining reasonableness, the court should consider factors including, but not limited to, the following:
(1) the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly;
(2) the likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer;
(3) the fee customarily charged in the locality for similar legal services;
(4) the amount involved and the results obtained;
(5) the time limitations imposed by the client or by the circumstances;
(6) the nature and length of the professional relationship with the client;
(7) the experience, reputation, and ability of the lawyer or lawyers performing the services; and
(8) whether the fee is fixed or contingent.
See id. at 983. Throughout this inquiry, the burden is on Hickman as the party seeking the attorney's fees. See id.
III
With these standards in mind, the court now addresses the calculation of damages.A
GPD has submitted detailed billing records that satisfy the requirements of Maryland law detailed in Maxima. See DX 1. These records demonstrate that Hickman was charged and is liable for $51,423.91. See DXS 2 and 3. Utica confirmed during trial that it does not object to the individual time entries disclosed in GPD's billing records. Instead, it maintains that Hickman must, but is precluded from, introducing expert testimony that the fees and expenses are reasonable because he failed to designate an attorney's fees expert in accordance with the applicable rule and the court's pertinent scheduling and trial setting orders.
DX 1 shows the fees incurred "as worked," which total $54,086.41. Exercising billing judgment, GPD charged Hickman the sum of $51,423.91. See DXS 2 and 3.
The court has located no Maryland case, and Utica has cited none, that requires that in the circumstances of the present breach of contract claim, a fee award be supported by expert testimony concerning the reasonableness of the fees and expenses. There are reported decisions that apply Maryland law and uphold such awards without explicitly requiring such proof. See, e.g., Federal Leasing, Inc. v. Amperif Corp., 840 F. Supp. 1068, 1076-78 (D. Md. 1993). Accordingly, the court rejects Utica's contention that Hickman is precluded from recovering GPD's fees and expenses as elements of his damages due to the absence of expert testimony as to reasonableness. The court finds based on its own study of the record that the fees and expenses claimed are reasonable and that they otherwise meet the standards set out in Maxima.
B
Utica also argues that Hickman should not recover attorney's fees and expenses as damages because he failed to produce the fee statements of GPD until December 14, 2000. The court evaluates the merits of this assertion — that Hickman produced the requested documents but did not do so on or before the deadlines imposed by rule and by court scheduling order — by determining whether Utica has suffered undue prejudice. The court holds that it did not. Utica does not contest the accuracy of any particular time entry or expense in GPD's billing statements. It does not contend that if it had been given more time to do so, it would have attempted to controvert the reasonableness of a specific service or expense. Absent such an assertion, the tardiness of the production of documents did not unduly prejudice Utica's defense and provides no basis to exclude the evidence. Utica's argument is that the reasonableness of GPD's fees and expenses must be, but is not, supported by expert testimony. This contention rises or falls independently of when Hickman produced GPD's fee statements for inspection.Accordingly, the court holds that Utica is liable to Hickman for the sum of $51,423.91.
C
Before Hickman obtained representation from GPD in the CIGNA suit and the Reliance suit, Horn represented him. Horn charged Hickman a flat fee of $45,000, which he seeks to recover from Utica as part of his damages. Hickman testified that although the Reliance suit has concluded, the CNA suit is ongoing.
According to the pretrial order, the CIGNA suit was tried in December 1998, resulting in a judgment inter alias against Hickman. The Texas court of appeals reversed the judgment and remanded. PTO at 4-5.
In support of the reasonableness of Horn's $45,000 fee, Hickman submits records of time that Horn spent on the CIGNA suit and the Reliance suit. See DXS 4, 5. Because the fee charged did not depend on the number of hours worked, these records only log time and do not include charges for each entry. See id. The entries include brief descriptions of the nature of the work involved. See id. Utica objects to the admission of these records in evidence on the grounds that they are hearsay and that Hickman has failed to authenticate them as business records.
Because Hickman offers the Horn time reports for the truth of the matters asserted — i.e., that Horn devoted particular amounts of time on the CIGNA suit and the Reliance suit, and performed the specific services stated in the reports — the reports are hearsay. A hearsay statement is nevertheless admissible as a business record under Fed.R.Evid. 803(6) if the authenticity of the record is shown "by the testimony of the custodian or other qualified witness." Fed.R.Evid. 803(6); see also United States v. Box, 50 F.3d 345, 356 (5th Cir. 1995) (noting authentication requirement under Rule 803(6)). Hickman did not establish the foundation under Rule 803(6) for admission of Horn's billing records and Utica properly asserted a hearsay objection at trial. Therefore, the court holds that the time records are inadmissible hearsay and that Hickman has failed to establish a basis to recover as contractual damages fees that he has incurred for Horn's legal services.
D
Utica also contends that Hickman can only recover damages sustained in the CIGNA suit after October 8, 1998, the date Hickman tendered a defense to Utica. According to Utica, before that date, all payments that Hickman made in his own efforts to defend himself were voluntary.
The court has already determined that Utica cannot complain about Hickman's alleged failure to provide timely notice without establishing prejudice resulting from the lack of notice. Utica I, 2000 WL 1593640, at *5. In light of the fact that Utica ultimately declined to defend or indemnify Hickman in the CIGNA suit, it cannot rely on untimely notice as a defense. This lack of notice is immaterial in this case because, even had Hickman given notice, Utica would still have declined coverage under the policy. Utica must therefore pay all reasonable costs, expenses, and fees under the contract regardless whether they were incurred before October 8, 1998.
IV
Hickman argued at trial that until Utica provides an unconditional defense in the CIGNA suit, Utica remains liable for any future fees, expenses, and costs that he incurs as the result of his continuing to provide his own defense in that suit. According to Hickman, Utica has appointed Matt Ritchie, Esquire ("Ritchie") to defend him in the ongoing CIGNA suit. Hickman has expressed concerns about Ritchie's representation based on Utica's previous denials of coverage under the policy at issue and the fact that Utica has sued him.
Although an attorney is employed by an insurer, he "still has the duty to represent the insured with complete fidelity and may not advance the interests of the insurer to the prejudice of the rights of the insured." Cardin v. Pacific Employers Ins. Co., 745 F. Supp. 330, 338 n. 6 (D. Md. 1990) (citation omitted). If Hickman has a valid claim that the attorney provided by Utica is not properly representing him, thus justifying his incurring attorney's fees and expenses in addition to those being paid by Utica, his complaints may properly be the subject of a separate lawsuit, but not this one. Accordingly, the court denies his request for Utica to pay for independent counsel in the CIGNA suit.
* * *
For the reasons set out, the court holds that Hickman is entitled to recover $51,423.91 in damages. Because he has established his claim for breach of the Maryland policy, he is also entitled to apply under the procedure prescribed in Rule 54(d)(2) for an award of attorney's fees for prosecuting the instant suit.