JUNE 2006 BAD FAITH CASES COURT AWARDS $1.1 MILLION IN ATTORNEYS’ FEES & COSTS, & $403,553.34 IN INTEREST UNDER STATUTE, DESPITE CONTINGENT FEE ARRANGEMENT & PUNITIVE DAMAGES (Western District)

In Gallatin Fuels, Inc. v. Westchester Fire Insurance Company, the United States District Court for the Western District of Pennsylvania awarded Plaintiff attorney’s fees, costs, and interest under Pennsylvania’s bad faith statute, 42 Pa.C.S. § 8371.  Plaintiff’s counsel had the case on a contingent fee agreement, and the parties disagreed as to whether there could be a separate award of attorneys’ fees under section 8371 in contingency fee cases, and whether attorneys’ fees were needed to make Plaintiff whole in light of a multi-million dollar punitive damages award.  The parties stipulated, however, that in the event the Court were to award attorney’s, the sum due would be $1.1 Million.  Noting that the decision to award fees was discretionary, the court considered the purpose and rationale behind different damages, expressly separating punitive damages from other damage components.  The court remarked that punitive damages address only the goal of legal punishment, while attorney’s fees and costs are premised upon compensating a plaintiff for having to pay an attorney to get that to which the plaintiff was contractually entitled.  Thus, the court awarded the $1.1 Million for attorneys’ fees.  The court also determined that awarding interest was similarly appropriate, as Plaintiff was denied its money and the opportunity to accrue interest thereon for over three years, during which time Defendant was able to use the money for its own benefit without interest concerns.  It will be of interest to parties facing these issues to compare the discussion in this case, with the opinion in Jurinko v. Medical Protective Co., United States District Court for the Eastern District of PA, No. 03-CV-4053, 2006 U.S. Dist. LEXIS 42923 (E.D. Pa. June 23, 2006) (Rufe, J.) [Search “Jurinko” on this site]

Date of Decision:  June 2, 2006

Gallatin Fuels, Inc. v. Westchester Fire Ins. Co., United States District Court for the Western District of Pennsylvania, No. 02-2116, 2006 U.S. Dist. LEXIS 36033 (W. D. Pa. 2006) (Ambrose, C. J.)

 

This case was affirmed in part and reversed in part on appeal by the U. S. Court of Appeal for the Third Circuit.  See also September 2007 cases on this blog.