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Thompson v. Catlin Insurance Company (UK) Ltd.

Supreme Court of Colorado, En Banc

December 10, 2018

Mark L. Thompson and Rosalin Rogers, Petitioners
Catlin Insurance Company (UK) Ltd. Respondent

          Certiorari to the Colorado Court of Appeals Court of Appeals Case No. 15CA964

          Attorneys for Petitioners: Sherman & Howard L.L.C. Christopher R. Mosley Christopher M. Jackson Denver, Colorado

          Attorneys for Respondent: Gordon & Rees LLP John R. Mann Denver, Colorado

          Attorney for Amicus Curiae Colorado Trial Lawyers Association: The Gold Law Firm, LLC Michael J. Rosenberg Greenwood Village, Colorado

          Attorneys for Amicus Curiae United Policyholders: Colorado Insurance Law Center Damian J. Arguello Westminster, Colorado


          HOOD JUSTICE

         ¶1 At issue in this case are insurance proceeds owed to Petitioners Rosalin Rogers and Mark Thompson because of a botched property investment orchestrated by their broker-dealer, United Securities Alliance. Some ten years into this seemingly interminable litigation, no one now questions that United's insurer, Respondent Catlin Insurance, must pay Petitioners under a professional liability insurance policy that Catlin issued. Rather, it is the amount of the debt that has occupied several Colorado courts for much of the last decade.

         ¶2 The court of appeals has grappled with Catlin's debt to Petitioners on four separate occasions. At the end of round four, a division of the court of appeals upheld the district court's determination of attorney fees and costs that Catlin may deduct from the liability limit under Catlin's policy. Thompson v. United Sec. All., Inc. (Thompson IV), 2016 COA 128, ¶ 27, ___ P.3d___ . It is this decision in Thompson IV about fees and costs that we now review.

         ¶3 We first address whether the Thompson IV division erred when it upheld the district court's decision to consider new evidence on remand from Thompson v. United Securities Alliance, Inc. (Thompson III), No. 13CA2037, (Colo.App. Oct. 16, 2014). Because the Thompson IV division reasonably construed the mandate issued by the Thompson III division, we perceive no error.

         ¶4 Our second task is to decide whether the Thompson IV division erred when it held that there was no legal basis for awarding prejudgment interest in a garnishment proceeding. We conclude that the division did err and that Petitioners are entitled to prejudgment interest.

         ¶5 Accordingly, as to the first issue, we affirm the judgment of the court of appeals. As to the second, we reverse and remand for further proceedings consistent with this opinion.

         I. Facts and Procedural History

         ¶6 Petitioners, through United, invested in a warehouse property only to learn that (1) the warehouse was, in Petitioners' estimation, "obsolete"; (2) the seller had purchased the warehouse only three years earlier for significantly less than Petitioners paid; and (3) the subtenant was not credit-worthy. After Petitioners' investment tanked, they commenced arbitration against United. In two separate arbitration proceedings, the panels each ruled in favor of Petitioners and awarded damages. Petitioners then went to district court to confirm the award. Once confirmed, Petitioners began the arduous journey toward claiming insurance proceeds from United's insurance company, Catlin.

         ¶7 To receive the proceeds, Petitioners filed a writ of garnishment against Catlin. Catlin responded by arguing that United's insurance policy with Catlin didn't cover the underlying claim at issue. The district court disagreed and found coverage. Catlin then asserted that the insurance policy allowed it to deduct from the policy's liability limit "reasonable and necessary fees and costs" incurred in its defense of United. No one disputes this. To prove their costs and fees, Catlin submitted invoices that were heavily redacted, apparently out of a concern that their disclosure might adversely affect another, unrelated case. However, the district court was unable to make heads or tails out of the redacted invoices. Flummoxed, it found that Catlin could deduct nothing from the policy's $1 million limit. Catlin appealed.

          ¶8 A division of the court of appeals upheld the judgment as to insurance coverage, but reversed the district court on fees and costs. The division reasoned that even the redacted invoices demonstrated that Catlin had incurred at least some reasonable fees and costs. Catlin then claimed a total of roughly $550, 000 in fees and costs. As a result, Catlin paid Petitioners about $450, 000-the undisputed amount left over after Catlin deducted from the $1 million policy limit its claimed attorney fees and costs-with the validity of the $550, 000 deduction to be determined on remand in district court.

         ¶9 On remand, the district court was still unable to decipher the redacted invoices. To come up with some calculation, as the court of appeals required, the district court simply extrapolated from Petitioners' attorney fees and costs in the two underlying arbitrations, which totaled $320, 000. Apparently deciding that what's good for the goose is good for the gander, the district court held that Catlin could likewise deduct $320, 000 from the policy limit. Catlin again appealed.

         ¶10 A division of the court of appeals again reversed, reasoning that the district court had failed to make sufficient findings of fact to support its determination. Thompson III, slip op. at 7-8. Specifically, the division couldn't determine how the district court correlated the Petitioners' attorney fees to Catlin's. Id. So, it remanded "for the district court to make a more specific determination of the reasonable costs and fees that Catlin may deduct." Id. at 11. The court of appeals also gave the more specific instructions at issue here:

The order is reversed and remanded with instructions to calculate the reasonable costs and fees that Catlin may deduct from the policy limit. In doing so, the court is directed to review the existing record, and from this record, calculate the amount of expenses that Catlin reasonably incurred in each of the [two] arbitrations; and to identify any factors and calculations used in making this calculation.

Id. at 15.

         ¶11 On remand, the district court ordered additional briefing. Catlin then radically altered the landscape of the case by finally submitting the unredacted invoices. Petitioners objected and moved to strike, claiming that submission of the unredacted invoices exceeded the scope of the Thompson III mandate. The district court denied the motion.

         ¶12 With decipherable invoices now in hand, the district court calculated Catlin's reasonable expenses. Of the some $550, 000 that Catlin requested, the district court found around $450, 000 reasonable and ordered Catlin to pay the remaining balance of approximately $100, 000. The district court did not require Catlin to pay pre- or post-judgment interest.

         ¶13 This time, Petitioners appealed. They argued that the district court exceeded "the existing record" mandate when it reviewed the unredacted invoices. Petitioners also contended that the district court erred in failing to order any prejudgment interest.

         ¶14 The Thompson IV division majority disagreed on both grounds. As to the first issue, the majority reasoned that the Thompson III division's mandate-when read in context-didn't preclude the district court from examining the unredacted invoices. Thompson IV, ¶ 12. Rather, given the specific factors that the previous division had presented the district court, the direction to look to the existing record "was merely a way to reassure the district court that it need not start from scratch but could instead perform the necessary factfinding and calculations based on the indisputably less-than-ideal evidence in the record." Id. at ¶ 21. Finally, the division unanimously held that there wasn't a legal basis for awarding Petitioners any prejudgment interest. Id. at ¶¶ 30-32.

         ¶15 But Judge Webb dissented as to the majority's ruling on the scope of the mandate. To him, the language of the Thompson III mandate was abundantly clear: The district court was only to look to "the existing record" and nothing else. Id. at ¶ 41 (Webb, J., dissenting). He also reasoned that the Thompson III mandate simply sought a better explanation from the district court, not better evidence. Id. at ¶ 48. Finally, Judge Webb considered the majority's conclusion unfair, as it gave Catlin a second chance to submit invoices after Catlin had made a tactical decision to submit only redacted ones. Id. at ¶¶ 52-53.

         ¶16 We granted certiorari.[1]

         II. Analysis

         ¶17 First, we address the mandate issue. We conclude that the Thompson IV division didn't err when it determined that the district court complied with the Thompson III mandate.

         ¶18 Second, we discuss prejudgment interest. We conclude that Petitioners are entitled to prejudgment interest.

         A. The Thompson III Mandate

         ¶19 Viewed in the broader context of this lengthy dispute, the Thompson IV division reasonably construed the Thompson III mandate. We reach this conclusion in four steps. First, we outline the standard of review. Second, we describe the mandate rule. Third, we note that the court of appeals is entitled to some discretion in reviewing its own mandate. Fourth, we consider some practical problems that would result from reversing the court of appeals in this case.

         1. ...

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