United States District Court, W.D. Louisiana,

Monroe Division.

Harvey L. HAMMOND, et ux

v.

CAPPAERT MANUFACTURED HOUSING, INC. et al.

.

 

Sept. 5, 2006.

 

MEMORANDUM RULING AND ORDER

HAYES.

Before the undersigned Magistrate Judge, on reference from the District Court, is a Motion to Assess Attorney Fees  (Doc. # 15) filed by plaintiffs Harvey L. Hammond, Jr. and Cynthia L. Hammond (collectively “the Hammonds”) against defendant Cappaert Manufactured Housing, Inc. (“Cappaert”). For the reasons stated below, the Motion to Assess Attorney’s Fees is hereby GRANTED, and Cappaert is ordered to pay the plaintiff’s attorney fees in the amount of $1,580.00 (7.9 hours at $200.00 per hour).

 

 

As this is not one of the motions excepted in 28 U.S.C. §  636(b)(1)(A), nor dispositive of any claim on the merits within the meaning of Rule 72 of the Federal Rules of Civil Procedure, this ruling is issue under the authority thereof, and in accordance with the standing order of this court. Any appeal must be made to the district judge in accordance with Rule 72(a) and L.R. 74.1(W).

 

BACKGROUND

 

The Hammonds filed suit against Cappaert and Harvest Investment Corp. on May 29, 2006, in the Fourth Judicial District Court for the Parish of Ouachita, State of Louisiana, seeking to recover damages for alleged manufacturing defects in a mobile home sold by Harvest and manufactured by Cappaert, and for the defendants’ failure to repair the defects. On April 26, 2006, pursuant to 28 U.S.C. §  1441, Cappaert removed the case to this Court, claiming that the Hammonds’ state law claims were pre-empted by the Carmack Amendment to the Interstate Commerce Act, 49 U.S.C. §  14706, and the National Manufactured Housing Construction and Safety Standards Act (“NMHCSSA” or “the Act”), 42 U.S.C. §  5401 et seq. This Court found that it lacked subject matter jurisdiction over the case and remanded the case to state court for further proceedings. Subsequently, the Hammonds filed this motion seeking the assessment of attorney’s fees against the Cappaert based on alleged improper removal.

 

 

At the time of removal, co-defendant Harvest had not been served and thus did not join in the Notice of Removal. See Miranti v. Lee, 3 F.3d 925, 929 (5th Cir.1993).

 

LAW AND ANALYSIS

 

When a court remands a case, “ ‘[t]here is no automatic entitlement to an award of attorney’s fees. Indeed, the clear language of the statute [28 U.S.C. 1447(c) ] makes such an award discretionary. Lee v. Advanced Fresh Concepts Corp., 76 Fed.Appx. 523, 524 (5th Cir.2003) (quoting Valdes v. Wal-Mart Stores, Inc., 199 F.3d 290, 292 (5th Cir.2000)). “A court should not award fees when “ ‘the defendant had objectively reasonable grounds to believe the removal was legally proper’ at the time of removal.” Id. (citing Valdes, 199 F.3d at 293).

 

Upon examining Cappaert’s basis for removal of this case, it is evident to this Court that the Hammonds are entitled to an award of attorney’s fees. Cappaert first asserted as grounds for removal that the Hammonds’ state law claims were pre-empted by the Carmack Amendment to the Interstate Commerce Act, 49 U.S.C. §  14706. As this Court noted in its ruling remanding this case to state court, the Carmack Amendment provides for removal of claims arising from losses or damage to goods in interstate transportation, even when those claims are couched in state law terms. See, Beneficial Nat’l Bank v. Anderson, 539 U.S. 1 (2003); Hoskins v. Beckins Van Lines, 434 F.3d 769 (5th Cir.2003). However, nowhere in their petition do the Hammonds allege any loss or damage incurred during or caused by interstate transport, nor have they included any allegations against the motor carrier who transported the home. Rather, their claims are based on alleged manufacturing defects in a mobile home that Cappaert manufactured and Cappaert’s alleged failure to repair the defects after being given notice. As is obvious from the language of the statute, the Carmack Amendment only governs shippers’ claims to recover damages from a carrier for losses occurring during the transportation of cargo in interstate commerce; Nat’l Hispanic Circus, Inc. v. Rex Trucking, 414 F.3d 546,549 (5th Cir.2005); 49 U.S.C. §  14706(a)(1). Furthermore, as the Hammonds point out, all of the cases that Cappaert cites in support of its argument that the Hammonds’ claims are removable based on the Carmack Amendment involve claims against carriers and damage resulting from transportation of the goods. Therefore, Cappaert had no objectively reasonable basis for believing that removal was proper under the Carmack Amendment.

 

Regarding Cappaert’s other basis for removal, the NMHCSSA, 42 U.S .C. §  5401 et. seq., this Court is again unable to discern any objectively reasonable basis on Cappaert’s part for believing that removal was proper. First of all, Cappaert cites absolutely no support for the notion that removal was proper under the NMHCSSA other than that mobile homes and the materials used to construct them are transported in interstate commerce and that the standards mobile homes must meet are federally instituted. However, as this Court noted in its ruling remanding this case to state court, the NMHCSAA would be a basis for removal of this case only if the Act completely pre-empted the Hammonds’ redhibitory cause of action. Complete preemption requires a defendant to show the following:

(1) the statute contains a civil enforcement provision that creates a cause of action that both replaces and protects the analogous area of state law; (2) there is a specific jurisdictional grant to the federal courts for enforcement of the right; and (3) there is a clear Congressional intent that [the federal cause of action be exclusive].

 

Hoskins, 343 F.3d at 775. It is not surprising that Cappaert failed to cite any support for the idea that the Hammonds’ redhibitory cause of action was completely pre-empted by the NMHCSSA because even a cursory examination of the language of the Act and relevant case law indicates that such an argument is meritless.

 

First, the NMHCSSA creates causes of action only in favor of the United States government, through the U.S. Attorney or the Attorney General, 42 U.S.C. §  5411(a), and distributors and dealers of manufactured homes. 42 U.S.C. §  5214(b). Accordingly, it is clear from the face of the Act that the NMHCSSA creates no cause of action for private purchasers such as the Hammonds. Second, the language of the NMHCSSA indicates that the Act only vests federal district courts with jurisdiction over claims filed by the federal government or distributors or dealers of manufacturer homes, not private purchasers such as the Hammonds. See 42 U.S.C. § §  5409(c) (“Compliance with [the NMHCSSA] … does not exempt any person from any liability under common law.”) and 5414(g) ( “Nothing in this section shall limit the rights of the purchaser or any other person under any contract or applicable law.”). Third, this Court found that it was clear that Congress did not intend for the NMHCSAA to be the exclusive means of asserting a claim against producers of manufactured homes in light of the Act’s savings clause, which states that “compliance with any Federal manufactured home construction or safety standard issue under this chapter does not exempt any person from any liability under common law,” 42 U.S.C. §  5409(c), and the fact that several courts have interpreted this clause as preserving a plaintiff’s right to pursue state tort and contract claims in state court. See Choate v. Champion Home Builders Co., 222 F.3d 788 (10th Cir.2000); Hart v. Fleetwood Homes of Texas, Inc., 1998 U.S. Dist. LEXIS 16318 (N.D.Tex. Oct. 14, 1998); Richard v. Fleetwood Homes Enterprises, Inc., 4 F.Supp.2d 650 (E.D.Tex.1998).

 

Therefore, in light of the aforementioned authority, Cappaert had no objectively reasonable basis for believing that removal of this case was proper under the NMHCSSA. Cappaert argues that the language in this Court’s ruling that the NMHCSSA is not a basis for removal because the Act does not completely pre-empt the Hammonds’ claims indicates that there was a genuine issue as to whether this case was removable pursuant to the NMHCSSA. However, the Court’s use of the word “completely” is merely indicative of the threshold requirement for removal pursuant to preemption under the NMHCSSA rather than any level of doubt as to whether removal under the Act was proper in this case. Thus, because Cappaert had no objectively reasonable basis to believe that removal of this case was proper under the Carmack Amendment or the NMHCSSA, the Hammonds are entitled to an award of attorney’s fees pursuant to 28 U.S.C. 1447(c).

 

 

Cappaert also asserts that the fact that the Court stayed the remand for fifteen days to allow the parties the opportunity to appeal indicates that there was a genuine issue as to whether removal was proper; however, the remand was stayed pursuant to Rule 72(a) and L.R. 74.1(W), which hold that the order of a magistrate judge is non-dispositive and therefore carries with it a ten day period for appeals.

 

Compensable Hours and Total Award

 

The Hammonds’ have submitted an affidavit from their attorney, Fred A. Pharis, stating that his normal hourly rate for redhibition/warranty/defect claims is $200.00. Mr. Pharis further asserts that he spent 7.9 hours on the motion to remand this case to state court. Cappaert does not dispute the reasonableness of the hours or the hourly rate, and this court has reviewed both and finds that they are indeed reasonable.

 

Thus, the Hammonds’ Motion for Attorney’s Fees is GRANTED, and Cappaert is hereby ORDERED to pay the plaintiff’s attorney’s fees in the amount of $1,580.00.

United States District Court,E.D. California.

CLARENDON NATIONAL INSURANCE COMPANY, a New Jersey Corporation, Plaintiff,

v.

INSURANCE COMPANY OF THE WEST, a Texas Corporation, et al., Defendants.

Insurance Company of the West, Counter-Claimant,

v.

Clarendon National Insurance Company, Counter-Defendant.

 

Sept. 11, 2006.

 

 

 

ORDER DETERMINING THE PERTINENT PREJUDGMENT INTEREST RATE

 

ORDER DIRECTING THE PARTIES TO FILE A JOINT PROPOSED FINAL ORDER AND JUDGMENT DECLARING THE PARTIES’ RIGHTS AND OBLIGATIONS NO LATER THAN SEPTEMBER 20, 2006

 

SANDRA M. SNYDER, Magistrate Judge.

On August 23, 2006, the parties submitted a joint proposed final order; on August 29, 2006, the parties submitted letter briefs concerning the one disputed matter involved in the proposed final order, namely, the pertinent rate of prejudgment interest.

 

 

I. Prejudgment Interest Rate

 

Clarendon alleged in the first amended complaint (FAC) that it had paid money to defend and settle the Moore action; the Clarendon policy did not cover the loss; the ICW policy covered the loss; and therefore Clarendon was entitled to recoup the entire amount from ICW under the “law of equitable subrogation and equitable indemnity.” (FAC ¶ ¶  2-3.)

 

The basis of the Court’s ruling was that ICW’s policy provided coverage and Clarendon’s did not (except for coverage under the ICC endorsement that ran to third parties only and thus was not implicated in this dispute between insurers). The Court so concluded because the ICW policy specifically described the truck, while the Clarendon policy did not. (Judge Coyle’s order of June 30, 2000 p. 14.) It rejected ICW’s contention that Clarendon was required to provide primary coverage and a defense for H & G, G & P, and their agents and contractors and employees pursuant to the MCS-90 attached to Clarendon’s policy for H & G; indeed, it concluded, consistent with Canal Ins. Co. v. First General Ins. Co ., 889 F.2d 604 (5th Cir.1989), that where the policy itself does not provide coverage except to third-party members of the public through operation of the ICC endorsement, the policy provides no coverage for purposes of disputes among insurers over ultimate liability. (Id. pp. 14-17.) Judge Coyle expressly decided that “as against ICW, the Clarendon policy provides no coverage.” (Order p. 18.) Judge Coyle further concluded that where an insurer’s liability arises only from a governmentally required filing, the insurer is entitled to indemnity for defense fees from the insurer whose policy provides coverage. (Id. p. 18.) Because H & G’s liability arose from the MCS-90 only, then Clarendon was entitled to reimbursement from ICW for the cost of defending H & G. (Id.) With respect to reimbursement, the authority relied on by Judge Coyle stands for the proposition that where ICW has a duty to defend a party under its policy, and Clarendon did not but provided a defense pursuant to the endorsement, ICW must reimburse Clarendon for its costs of defense and settlement. Canal, 889 F.2d at 612.

 

Both parties here agree that California law governs the rate of interest. ICW asserts that the liability it has towards Clarendon is a non-contractual liability in the nature of equitable contribution, and therefore the rate of interest due to Clarendon is the non-contractual interest measure of seven per cent set by Cal. Const., Art. 15, §  1, which sets forth a basic limit of seven per cent interest on any account after demand.

 

An equitable contribution claim carries a seven per cent interest rate. Equitable contribution is a loss-sharing procedure among several insurers who insure the same risk at the same level (e.g., all primary insurers), and one pays the entire loss. Croskey & Heesman, Cal. Practice Guide, Insurance Litigation §  8:65.1 p. 8-23 (2005). A claim for equitable contribution is independent of the contract or the basis for the insured’s right; the insurer pursuing an equitable contribution claim does not stand in the shoes of the insured but rather has a separate claim against the other insurers on the risk. Fireman’s Fund Ins. Co. v. Maryland Cas. Co., 65 Cal.App.4th 1293-94 (1998).

 

Equitable indemnity, on the other hand, is a loss-shifting procedure in which one party pays a debt for which another is primarily liable and which in equity and good conscience should have been paid by the latter party. United Services Auto. Ass’n v. Alaska Ins. Co., 94 Cal.App.4th 638, 644-45 (2001).

 

Likewise, equitable subrogation permits a party who has been required to satisfy a loss created by a third party’s wrongful act to step into the shoes of the loser and pursue recovery from the responsible wrongdoer; in the context of insurance, it means that the paying insurer may be placed in the shoes of the insured and may pursue recovery from third parties responsible to the insured for the loss for which the insurer was liable and paid. Id. at 645. As now applied the doctrine of equitable subrogation is broad enough to include every instance in which one person, not acting as a mere volunteer or intruder, pays a debt for which another is primarily liable, and which in equity and good conscience should have been discharged by the latter. Hartford Cas. Ins. Co. v. Mt Hawley Ins. Co., 123 Cal.App.4th 278, 287. The elements of equitable subrogation have been described generally as 1) payment was made by the subrogee to protect his own interest, 2) he did not act as a volunteer; 3) the debt paid was one for which he was not primarily liable; 4) the entire debt must have been paid; 5) subrogation must not work any injustice to the rights of others. Employers Mut. Liability Ins. Co. of Wisconsin v. Pacific Indemnity Co., 167 Cal.App.2d 369, 376 (1959). The elements of an insurer’s cause of action for equitable subrogation are: (1) the insured has suffered a loss for which the party to be charged is liable; (2) the insurer has compensated for the loss; (3) the insured has existing, assignable causes of action against the party to be charged, which the insured could have pursued had the insurer not compensated the loss; (4) the insurer has suffered damages caused by the act or omission which triggers the liability of the party to be charged; (5) justice requires that the loss be shifted entirely from the insurer to the party to be charged; and (6) the insurer’s damages are in a stated sum, which is usually the amount paid to the insured. United Services Auto. Ass’n v. Alaska Ins. Co ., 94 Cal.App.4th 638, 645-46 (citing Gulf Ins. Co. v. TIG Ins. Co. (2001) 86 Cal.App.4th 422, 432 [103 Cal.Rptr.2d 305].)

 

Here, the subrogee (Clarendon) who pays the obligation of the principal debtor (ICW) to the subrogor (the creditor or claimant, and here ICW’s insured, on whose behalf the payments were made) is equitably subrogated to the claimant or subrogor and succeeds to the subrogor’s rights against the obligor.  Hartford Cas. Ins. v. Mt. Hawley Ins., Co., 123 Cal.App.4th 278, 287 (2004). Subrogation rights are purely derivative. United Services Auto. Ass’n v. Alaska Ins. Co., 94 Cal.App.4th 638, 645.

 

Because Clarendon and ICW did not insure the same risk at the same level, they were not both primarily liable, and thus the nature of the claim for reimbursement which Clarendon successfully brought in this Court was not an equitable contribution claim. It was more in the nature of equitable subrogation.

 

The right to which Clarendon has become subrogated is the right to coverage defined by the ICW policy. (Cmplt. p. 4, FAC p. 1.) It is thus a contractual right to which Clarendon has succeeded and which defines the obligation in question.

 

 

The FAC incorporated by reference all the allegations set forth in the initial complaint.

 

Hartford Accident & Indemnity Co. v. Sequoia Ins. Co., 211 Cal.App.3d 1285, 1306-07 (1989), which applied the seven per cent interest rate and which was cited by ICW, involved a contribution action where the dispute concerned which of multiple policies was primary and which was excess or secondary (p. 1297, 1301-02), and the parties conceded that the relevant statute was Cal. Civ.Code §  3287(a). The precise question of the applicable rate of prejudgment interest was not addressed, and the discussion of interest was in the context of the certainty of the sum due.

 

In North River Ins. Co. v. American Home Assurance Co, 210 Cal.App.3d 108, 116 (1989), also cited by ICW, the parties agreed that the prejudgment interest rate of seven per cent per annum applied pursuant to Cal. Civ.Code §  3287, which provided for prejudgment interest generally and specifically for every person entitled under a judgment to receive damages based on a cause of action in contract where the claim was unliquidated. Id. pp. 116-17. However, as Clarendon notes, this case, as well as Hartford Accident and Indemnity Co., predated the enactment of Cal. Civ.Code §  3289 in its present form, in which §  3289(b) provides that if a contract entered into after January 1, 1986, does not stipulate a legal rate of interest, the obligation shall bear interest at a rate of ten percent per annum after a breach. (Cal.Stats.1985, ch. 663, §  1.)

 

An action for breach of an insurance contract against an insurance company to recover policy benefits is an action to recover damages for breach of contract. Pilimai v. Farmers Ins. Exchange Co., 39 Cal.4th 133, 146 (2006). The California statutory rate of prejudgment interest chargeable after a breach of contract is ten per cent per annum. Cal. Civ.Code §  3289(b); Chiariello v. Ing Groep NV, 2006 WL 1889920 at(N.D.Cal. July 10, 2006).

 

In summary, even though equitable principles are involved in Clarendon’s recovery, the right to which Clarendon succeeded and which provides the basis of its recovery is the contractual obligation of ICW under its policy of insurance. Therefore, the Court concludes that pursuant to Cal. Civ.Code §  3289(b), the applicable rate of prejudgment interest is ten per cent per annum after the breach.

 

 

II. Submission of Joint Proposed Final Order

 

It is the Court’s understanding that the parties have agreed to all other matters involved in the form and content of a proposed final order, declaration of rights, and judgment.

 

The Court has reviewed the proposed final order submitted on August 23, 2006. The Court assumes that pursuant to the ruling stated above, the parties will be able to fill in all amounts that appear as blanks in the proposed order filed on August 23, 2006. Because the order is in fact a judgment as well, the document should be entitled as a final order and judgment and not merely a final order. Further, because the procedure for taxing costs is set forth in the pertinent federal and local rules, the Court prefers that the parties not specify, as they have presently done in paragraph number seven, the time for the Court’s determination of taxable costs.

 

Accordingly, the parties ARE DIRECTED to prepare a joint stipulated proposed final order and judgment consistent with the Court’s ruling with respect to the applicable prejudgment interest rate, and incorporating the matters mentioned in the previous paragraph. The parties should e-file the proposed order and judgment in PDF and also send it in Word or Word Perfect to the order box of the undersigned Magistrate Judge. The document should be submitted no later than September 20, 2006.

 

IT IS SO ORDERED.