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State Farm Fire and Casualty Co. v. Hanohano

United States District Court, D. Hawaii

April 29, 2016

STATE FARM FIRE AND CASUALTY COMPANY, an Illinois corporation, Plaintiff,
v.
NOLAN HANOHANO Defendant.

          FINDINGS AND RECOMMENDATION TO GRANT IN PART AND DENY IN PART DEFENDANT/COUNTERCLAIMANT NOLAN HANOHANO'S MOTION FOR ATTORNEYS' FEES

          KENNETH J. MANSFIELD, Magistrate Judge.

         Defendant Nolan Hanohano ("Hanohano") filed a Motion for Attorneys' Fees ("Motion") on February 12, 2016. See ECF No. 47. Hanohano also filed a Statement of Consultation that same day. See ECF No. 49. On March 24, 2016, Plaintiff State Farm Fire And Casualty Company ("State Farm") filed an Opposition. See ECF No. 52. Plaintiff filed a Reply on April 8, 2016. See ECF No. 54.

         The Court finds this matter suitable for disposition without a hearing pursuant to Rule 7.2(d) of the Local Rules of Practice of the United States District Court for the District of Hawaii ("Local Rules"). After reviewing the parties' submissions, and based on the relevant case law, the Court FINDS that Hanohano is entitled to attorneys' fees, but that the amount submitted warrants reduction. Accordingly, the Court RECOMMENDS that Hanohano's Motion be GRANTED IN PART and DENIED IN PART for the reasons set forth below.

         BACKGROUND

         On November 24, 2014, State Farm filed a Complaint ("Complaint") seeking a Declaratory Judgment that it had no obligation to defend or indemnify Hanohano against claims asserted in Dinnan v. City and County of Honolulu, et al., Civil No. 14-00286 DKW-RLP (the "Underlying Lawsuit"), in which Hanohano is named as a defendant. See ECF No. 1.

         Hanohano filed a Counterclaim for Declaratory Judgment on March 18, 2015 ("Counterclaim"). See ECF No. 15. State Farm filed a Motion for Summary Judgment on its Complaint for Declaratory Judgment and Hanohano's Counterclaim on July 28, 2015. See ECF No. 29. State Farm sought a Court declaration that it had no obligation to defend or indemnify Hanohano in the Underlying Lawsuit. Id . On October 20, 2015, Hanohano filed a Countermotion for Summary Judgment. See ECF No. 35. Hanohano sought a Court declaration that State Farm was required to defend him in the Underlying Lawsuit. Id . Hanohano also sought an award of attorneys' fees pursuant to Hawaii Revised Statutes ("HRS") section 431:10-242. Id.

         On January 25, 2016, the Court issued an Order Granting in Part and Denying in Part: (1) State Farm's Motion for Summary Judgment and (2) Hanohano's Countermotion for Summary Judgment ("Order"), wherein the Court held that State Farm (i) had a duty to defend Hanohano in the Underlying Lawsuit, but (ii) was not required to indemnify Hanohano for any punitive damages in the Underlying Lawsuit. See ECF. No. 46. The Court denied without prejudice Hanohano's request for attorneys' fees, deferring any ruling pending the submission of an attorney's fees motion complying with Local Rule 54.3. Id . The Court set a filing deadline of February 12, 2016, ruling that it would enter judgment following resolution of the attorney's fees issue. Id.

         DISCUSSION

         The two primary issues before the court are: (1) whether Hanohano is entitled to attorneys' fees prior to the resolution of the Underlying Lawsuit; and (2) whether the amount of requested attorneys' fees is reasonable.

         To determine whether Hanohano is entitled to fees, the Court must analyze whether an order that State Farm has a duty to defend amounts to an order to pay benefits under HRS section 431:10-242; whether the outstanding indemnity determination prevents resolution of the current fee dispute; and whether the federal or local rules prevent a court from ruling on attorney's fees prior to an entry of final judgment. Finally, in considering whether the total fees requested are reasonable, the Court must assess the relevant factors against the figure that results from multiplying the requested hourly rate by the total hours billed.

         I. Hanohano is Entitled to an Award of Reasonable Attorneys' Fees

         Hanohano seeks $57, 249.19 in attorneys' fees pursuant to HRS section 431:10-242. That provision states that "where an insurer has contested its liability under a policy and is ordered by the courts to pay benefits under the policy, the policyholder... shall be awarded reasonable attorney's fees and the costs of suit, in addition to the benefits under the policy." State Farm argues that Hanohano's Motion is premature and not ripe for review because: (1) the Court has not yet entered judgment in this case; and (2) the Order did not resolve the question of whether State Farm has a duty to indemnify Hanohano for the claims asserted in the Underlying Lawsuit. For the reasons set forth below, this Court finds that Hanohano's request is ripe for review and that Hanohano is entitled to an award of reasonable attorneys' fees under HRS section 431:10-242.

         A. An Order to Defend Amounts to an Order to Pay Benefits under HRS section 431:10-242

         This is a diversity action. See ECF No. 1. Federal courts entertaining state diversity actions are required to interpret and apply governing state law, including statutes. Farmers Ins. Exch. v. Law Offices of Conrado Joe Sayas, Jr., 250 F.3d 1234, 1236 (9th Cir. 2001). With respect to the payment of attorney's fees, Hawaii courts follow the "American Rule" which provides that, in the absence of a contract or statute, each party is responsible for paying his or her attorney's fees. Schefke v. Reliable Collection Agency, Ltd., 96 Haw. 408, 444, 32 P.3d 52, 88 (2001). Because HRS section 431:10-242 expressly provides for the award of attorney's fees in contested insurance coverage cases, that statute controls here. Thus, as a threshold matter, this Court must determine whether the order that State Farm must defend Hanohano in the Underlying Lawsuit amounts to an order "to pay benefits" requiring an award of reasonable attorney's fees under the statute.

         The Hawaii Supreme Court in Commerce & Indus. Ins. Co. v. Bank of Hawaii, 73 Haw. 322, 328, 832 P.2d 733, 737 (1992) interpreted HRS section 431:10-242 as requiring an insurer to pay its insured's reasonable attorney's fees and costs after the insurer unsuccessfully contested its duty to defend. In affirming the Circuit Court's judgment in favor of the insured, the Hawaii Supreme Court held that because the insurer contested its duty to defend and lost, the insured "was also entitled to reasonable attorney's fees and costs" under HRS section 431:10-242. Commerce, 73 Haw. at 329, 832 P.2d at 737; see also, Allstate Ins. Co. v. Leong, No. Civ. 09-00217 SOM/KSC, 2010 WL 3210753, at *2 (D. Haw. Aug. 13, 2010) (noting that when a trial court orders an insurer to continue to pay the costs of defending an insured in a suit, the trial court is ordering the insurer to pay policy benefits). Insofar as the Court ordered that State Farm has a duty to defend Hanohano against all claims in the Underlying Lawsuit, HRS section 431:10-242 entitles Hanohano to recover reasonable attorney's fees.

         B. The Outstanding Indemnity Determination Does Not Prevent Resolution of the Motion

         This Court disagrees with State Farm's claim that the Motion is premature because the issue of indemnity is still outstanding. Under the specific circumstances of this case, State Farm's reliance on Gemini Ins. Co. v. Kukuiula Development Co. (Hawaii), LLC., Inc., 2013 WL 1103338, at *1 (D. Haw. 2013) ("Gemini") is misplaced. In Gemini, the Court denied as premature a motion for attorney's fees and costs where the underlying suits were fully settled and summary judgment was scheduled on the only remaining issue of indemnity. Id . The Court emphasized both the pending adjudication on indemnity, and Local Rule 54.3(a), in finding the motion premature. Id . Here, by contrast, the Underlying Lawsuit has not yet been resolved and is not set for trial until December 5, 2016. See Dinnan v. Hanohano, CV 14-00286 DKW-RLP (ECF. No. 46); see also, Reply Mem. in Supp. of Hanohano's Mot., at 3 (April 8, 2016) (ECF. No. 54). Consequently, unlike Gemini, where there was no more factual development necessary for the Court to resolve the insurer's duty to indemnify, here the issue of indemnity cannot be decided until judgment is finally entered in the Underlying Lawsuit. With trial of the Underlying Lawsuit so far off (not including appeals), the potential for delay in resolving this Motion is far greater than in Gemini. The Court is persuaded that this matter is closer to the situation in Weight v. USAA Cas. Ins. Co., 782 F.Supp.2d 1114 (D. Haw. 2011), cited by Hanohano in his Reply. See ECF No. 54 at 4. In Weight, as with the present case, the Court found a duty to ...


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