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Morden v. XL Specialty Insurance Co.

United States District Court, D. Utah, Central Division

February 2, 2017

JAMES MORDEN, et al., Plaintiffs,


          Clark Waddoups United States District Judge.

         Plaintiffs James, Jenalyn, and Wade Morden (collectively, the Mordens) have moved the court to alter or amend the judgment in this case under Federal Rule of Civil Procedure 59(e), (Dkt. No. 96). The Mordens bring this motion following the court's orders granting summary judgment on the Mordens' bad faith and breach of fiduciary duty claims, (see Dkt. No. 80), and granting Defendant XL Specialty Insurance Co.'s (XL's) motion to voluntarily dismiss its remaining counterclaim and denying the Mordens' motion to amend their complaint, (see Dkt. No. 92).

         On January 11, 2017, the court heard oral argument on the Mordens' motion. Upon careful consideration of the parties' filings and arguments, relevant case law, and the record in this case, the court DENIES the Mordens' motion to alter or amend the judgment, (Dkt. No. 96).


         The court has previously detailed the factual background of this case in its orders on summary judgment and on XL's motion to voluntarily dismiss/the Mordens' motion to amend. (Dkt. Nos. 80 & 92.) Thus, the court only recounts the background relevant to the Mordens' present motion to alter the judgment.

         On March 27, 2014, the Mordens commenced this action against XL asserting two unlabeled claims for relief. (See Dkt. No. 2, pp. 5-8.) The “First Claim for Relief” alleged XL owed a number of duties under an insurance policy issued to the insureds, including “a duty to pay valid claims against its insureds timely” and “a duty to refrain from actions that would injure its insureds' ability to obtain the benefits of the insurance contract.” (Id. at 5-6.) The claim further stated “XL negligently and in bad faith breached the duties it owed” to the insureds by, among other things, failing to pay the Mordens' claim against the insureds and failing to pay an arbitration award[1] entered against the insureds and assigned to the Mordens. (Id. at 6-7.) The claim also alleged damages as a “direct and proximate result of XL's breaches of the duties it owed.” (Id. at 7.) The complaint sought $5, 434, 730 in damages--the amount of the arbitration award--as well as general and consequential damages in an amount to be determined at trial. (See Id. at 8.) The amount of damages prayed for would only have been available as a bad faith claim in tort and not available as a contract claim because of the $1, 000, 000 policy limit. (See Id. at 4.)

         In answering the complaint, XL contended various affirmative defenses and policy exclusions barred coverage of the Mordens' claim. (See Dkt. No. 12.) XL also filed a counterclaim for declaratory judgment that the policy did not cover the Mordens' claims and that XL did not act in bad faith in refusing to extend coverage for, or to settle, the Mordens' claims. (Id. at 20-22.)

         The Mordens sought partial summary judgment on eight of XL's affirmative defenses and on XL's declaratory judgment counterclaim involving the interrelated wrongful acts exclusion. In turn, XL sought judgment that it had not acted in bad faith or breached its fiduciary duties in denying the Mordens' claim. After a substantial summary judgment process, including lengthy oral argument and supplemental briefing, (see Dkt. Nos. 25, 30, 46, 50, 53, 67, 70, 71, 72, 76, 77, 78, 79), the court issued a memorandum decision and order granting the Mordens' motion for summary judgment on XL's counterclaim based on the interrelated wrongful acts exclusion. (See Dkt. No. 80.) But the court also found that, irrespective of whether there was coverage under the policy, XL did not act in bad faith or breach its fiduciary duties in concluding that the Mordens' claim was not covered. (See id.)

         With the Mordens' bad faith claims resolved, XL sought to dismiss its remaining counterclaim for declaratory judgment. (Dkt. No. 81.) The Mordens opposed dismissal of the counterclaim and moved to amend the complaint to add a claim that XL was contractually obligated to indemnify the insureds up to the policy limit of $1, 000, 000. (Dkt. Nos. 82 & 85.) Ultimately, the court concluded that XL was entitled to voluntarily dismiss its counterclaim and that the Mordens had not demonstrated good cause to amend the complaint in the circumstances. (See Dkt. No. 92.) The court clerk entered final judgment in XL's favor as to the Mordens' bad faith and breach of fiduciary duty claims, and in the Mordens' favor as to XL's counterclaim regarding the interrelated wrongful acts provision. (Dkt. No. 93.) The Mordens' motion for Rule 59(e) relief from judgment followed. (Dkt. No. 96.)


         “Grounds for granting a Rule 59(e) motion include ‘(1) an intervening change in the controlling law, (2) new evidence previously unavailable, and (3) the need to correct clear error or prevent manifest injustice.'” Somerlott v. Cherokee Nation Distributors, Inc., 686 F.3d 1144, 1153 (10th Cir. 2012) (quoting Servants of Paraclete v. Does, 204 F.3d 1005, 1012 (10th Cir. 2000)). Absent one of these “highly unusual circumstances, ” the court should not grant a Rule 59(e) motion. See Devon Energy Prod. Co. v. Mosaic Potash Carlsbad, Inc., 693 F.3d 1195, 1212 (10th Cir. 2012) (quoting McDowell v. Calderon, 197 F.3d 1253, 1255 (9th Cir. 1999)). Whether to grant or deny Rule 59(e) relief is committed to the court's sound discretion. See Barber ex rel. Barber v. Colo. Dep't of Revenue, 562 F.3d 1222, 1228 (10th Cir. 2009) (noting the appellate court will affirm a trial court's decision on a Rule 59(e) motion unless the court has “a definite and firm conviction that the lower court made a clear error of judgment or exceeded the bounds of permissible choice in the circumstances” (quoting Phelps v. Hamilton, 122 F.3d 1309, 1324 (10th Cir. 1997))).

         “Rule 59(e) relief is appropriate only where ‘the court has misapprehended the facts, a party's position, or the controlling law.'” Barber, 562 F.3d at 1228 (quoting Servants of Paraclete, 204 F.3d at 1012). “A motion to reconsider is not a second chance for the losing party to make its strongest case or to dress up arguments that previously failed.” Voelkel v. Gen. Motors Corp., 846 F.Supp. 1482, 1483 (D. Kan.), aff'd, 43 F.3d 1484 (10th Cir. 1994). Furthermore, unless extraordinary circumstances exist, a party may not seek Rule 59(e) relief on grounds available to the party on prior motions. See Servants of Paraclete, 204 F.3d at 1012. “A party may not use Rule 59(e) to raise legal arguments that it could and should have raised before the court issued its judgment.” Servants of Paraclete, Inc. v. Great Am. Ins. Co., 866 F.Supp. 1560, 1581 (D.N.M. 1994) (citing Steele v. Young, 11 F.3d 1518, 1520 n. 1 (10th Cir. 1993) (“Rule 59(e) cannot be used to expand a judgment to encompass new issues which could have been raised prior to issuance of the judgment.”)).

         The Mordens contend the court must alter the judgment to correct the clear error the court committed in overlooking the Mordens' breach of contract claim, as well as the manifest injustice that arises from the court's determination that all claims in this case have been resolved, precluding the Mordens from fully litigating their contract claim. (See Dkt. No. 96, p. 4.) The Mordens point the court to their original complaint and emphasize that, when viewed under appropriate notice pleading principles, the complaint sufficiently stated the elements of a breach of contract claim and put XL on notice of such a claim. (See Id. at 4-7.)

         On review of the record, the court finds no obvious factual or legal error in its resolution of the issues in this case. Nor does the court find it overlooked or misapprehended the ...

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