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Court Denies Insurer's Claim for Attorney Fees Per FRCP's 14-Days Rule

November 16, 2012 | Posted in : Defense Fees / Costs

In Evanston Ins. Co. v. MGA Entertainment Inc., the Central District of California dismissed Evanston Insurance Company’s subrogation claim against Mattel in the long-running trade secrets dispute between Mattel and Evanston’s insured, MGA Entertainment Inc., concluding that because an insurer stands in the shoes of its insured with respect to subrogation, Evanston was bound by the 14-day time limit on seeking attorney fees prescribed by Federal Rule of Civil Procedure 54(d)(2)(B).  In so holding, the court rejected Evanston’s argument that it’s insured regarding payment of attorney fees.

MGA tendered defense of the underlying litigation to Evanston in October 2007.  Following the April 21, 2011 jury verdict in the underlying litigation, the court ordered the parties to file any motions seeking attorney fees by May 5, 2011.  MGA did so, and ultimately was awarded attorney fees and costs. 

Following the February 2012 decision, in March 2012 Evanston and MGA entered into a settlement agreement to resolve Evanston’s obligations to its insured for attorney fees and costs.  Later 2012, Evanston filed a complaint against Mattel seeking attorney fees, seeking a declaration that it was entitled to fees, and seeking a declaration that Mattel should be required to pay into court or into escrow a fee award.

The court dismissed Evanston’s claim for fees in light of the plain language of Rule 54(d)(2) (B).  In particular, the rule requires a party seeking fees to file a motion for fees within fourteen (14) days of entry of judgment, in the absence of a statute or order providing otherwise.  Because Evanston stood in the shoes of its insured MGA, and MGA was required to have filed any motion for fees by May 5, 2011, Evanston was required to do the same. 

The court rejected Evanston’s argument that its cause of action for fees did not accrue until its March 2012 settlement agreement with MGA, an argument it seemed to find disingenuous.  In particular, the court noted that Evanston had deliberately refused to pay its insured until after it was twice held to owe a duty to defend.  Moreover, Evanston’s position would undermine the reasonable expectations of insureds and, as the court explained, would have the undesirable consequence of incentivizing insurers to defend their insureds until the insurer is confident that it can recover its expenses from the insured’s opponent in the underlying litigation.