United States District Court, D. Kansas
MEMORANDUM AND ORDER
D. Mitchell U.S. Magistrate Judge
matter comes before the court on Plaintiff's Motion for
Attorneys' Fees and Costs, and Order for Second Mediation
(ECF No. 15). Plaintiff Arnold Long seeks an award of fees
and expenses and an order directing a second mediation
because he contends that Defendant American Family Mutual
Insurance Company, S.I. did not act in good faith when it
sent only its attorney to mediation and that attorney lacked
the authority to meet Mr. Long's settlement demand. For
the reasons stated below, the court finds that there is
insufficient information to determine whether American
Family's representative had full settlement authority to
meet any reasonable settlement demand by Mr. Long. However,
the court grants Mr. Long's motion and awards the
requested sanctions because American Family has not met its
burden to show that it meaningfully participated in mediation
when it sent only its attorney of record to attend the
Long's complaint alleges that he purchased a property
insurance policy from American Family that provided $224, 100
for dwelling coverage and $224, 100 for personal property
coverage. (ECF No. 1 ¶ 6.) After a grease fire caused
significant damage to Mr. Long's home and personal
property, he made a claim for the policy limits.
(Id. ¶ 10.) At the time, Mr. Long was in the
process of purchasing the home from his brother pursuant to a
contract for deed. (Id. ¶ 7.) American Family
tendered payment to Mr. Long's brother for property
damage to the house, but it denied coverage for Mr.
Long's personal property on the basis that Mr. Long lied
on his policy application by failing to disclose that he had
a 20-year-old conviction for possession of marijuana.
(Id. ¶ 12.) American Family's answer also
asserts other policy exclusions. Mr. Long asserts a breach of
contract claim and also seeks an award of attorneys' fees
and costs pursuant to Kan. Stat. Ann. § 40-256.
(Id. ¶ 19.)
scheduling order required the parties to mediate by November
1, 2019. (ECF No. 10, at 3.) The parties scheduled mediation
with Timothy J. Finnerty on September 20, 2019. In advance of
the mediation, Mr. Finnerty reminded the parties that both
they “and their counsel with authority to settle the
case will be present unless specifically released from that
obligation by the parties' agreement.” (ECF No.
15-1, at 2.) He further reminded the parties that D. Kan.
Rule 16.3 applies to mediation of cases pending in federal
district court in the District of Kansas. (Id.) The
parties met at Mr. Finnerty's office. Mr. Long attended
personally along with counsel and a law clerk working at
counsel's firm. No. representative of American Family
attended in person other than its counsel of record.
According to Mr. Long, defense counsel only had authority to
settle the case for $20, 000, which was far less than Mr.
Long's demand of $320, 000. Mr. Long argues that defense
counsel lacked full settlement authority and that sending
only counsel to mediation was insufficient.
Family contends that defense counsel had full settlement
authority because $20, 000 represents significantly more than
the value of the case. American Family points to various
policy exclusions to argue that the policy is void, including
the “concealment or fraud” exclusion. American
Family notes that the contract for deed between Mr. Long and
his brother provided a purchase price of $225, 000 for the
property, which, according to American Family, was assessed
by the county taxing authority as having a value of only $33,
000. American Family also states that the contract for deed
provides for repaying the $225, 000 in monthly installments
of $800, which would result in a 23-year repayment period.
American Family also disputes Mr. Long's property damage
calculation. The insurer appears to suggest that Mr.
Long's 22-page non-exhaustive list of personal property
destroyed in the fire is not credible. The list includes
losses for, among other things, 100 pairs of jeans valued at
$8, 000, 40 pairs of dress pants and 40 dress shirts valued
at $4, 000, 50 hooded sweatshirts valued at $2, 000, 45 tank
tops valued at $1, 575, and 48 washcloths valued at $600.
(ECF No. 16, at 4.)
scheduling order requires mediation, a party that fails to
comply with D. Kan. Rule 16.3 may face sanctions under
Fed.R.Civ.P. 16(f). See D. Kan. Rule 16.3(c)(5)
(providing for sanctions under Fed.R.Civ.P. 16(f));
Fed.R.Civ.P. 16(f)(1)(C) (providing for sanctions for failing
to obey a scheduling order); Turner v. Young, 205
F.R.D. 592, 595 (D. Kan. 2002) (finding that failing to send
a representative with settlement authority exhibits “a
lack of good faith, and could warrant sanctions under
Fed.R.Civ.P. 16(f)”); see also Reed v.
Bennett, 312 F.3d 1190, 1195 (10th Cir. 2002) (“A
district court undoubtedly has discretion to sanction a party
for failing to prosecute or defend a case, or for failing to
comply with local or federal procedural rules.”). Mr.
Long moves for sanctions on two grounds: (1) he contends that
defense counsel lacked meaningful settlement authority under
D. Kan. Rule 16.3 and Turner v. Young, 205 F.R.D.
592, 595 (D. Kan. 2002); and (2) he also argues that defense
counsel's participation alone was insufficient under
Inter-Ocean Seafood Trader, Inc. v. RF Int'l,
Ltd., No. 12-2268-KGG, 2013 WL 441065, at *2 (D. Kan.
Feb. 5, 2013). The court addresses each of these issues.
Whether Defense Counsel Had Adequate Settlement
Rule 16.3(c)(2) governs participants who are required to
attend mediation. It requires (among other things) each
“party or its representative with settlement
authority” to attend the mediation along with the
party's attorney responsible for resolution of the case.
D. Kan. Rule 16.3(c)(2). In Turner v. Young, the
Honorable James P. O'Hara, United States Magistrate
Judge, decided that the requirement to send a party
representative with settlement authority extends to a
mediation session facilitated by a private mediator. 205
F.R.D. at 593-95. Thus, the law in this district is clearly
established that American Family was required to send a party
representative with settlement authority to the court-ordered
mediation in this case. But that is where the facts of this
case depart from those in Turner.
Turner, defense counsel sent a letter to
plaintiff's counsel in advance of the mediation
requesting permission for the claims handler with settlement
authority to participate in the mediation by telephone.
Id. at 593. Plaintiff's counsel objected, and
the parties had no further dialogue about this in advance of
the mediation. Id. Defense counsel came to mediation
with Scott Glow, a claims handler who had $20, 000 in
settlement authority. Id. at 593-94. As the
mediation proceeded, Glow called Tony Sarchet, a claims
representative at the home office, to clarify the scope of
Glow's settlement authority. Id. at 594. When
the parties reached an impasse that day, Plaintiff's last
demand was $32, 500 and the defendant's final offer was
$20, 000. Id. Magistrate Judge O'Hara explained
that “attendance” under the local rule
“means to appear in person and participate directly,
not to stand by or participate by phone”; that “a
person with settlement authority does not need to pick up the
phone to call anyone else to find out whether he or she can
go any higher or lower”; and that a person with
settlement authority is “the” decisionmaker
“who has authority to meet the other party's
demand, even if he or she chooses not to do so.”
Id. at 595. Magistrate Judge O'Hara determined
“Glow is a paradigm example of the type of person who
does not have the required settlement authority”
because he had to call Sarchet to clarify the scope of his
settlement authority; thus, Sarchet was the person with the
required settlement authority and the defendant should have
sent him to the mediation. Id. at 595.
plaintiff contends that sanctions are warranted under
Turner because defense counsel's limited $20,
000 in settlement authority was not full, meaningful
authority to settle a $320, 000 claim. The court disagrees.
The court's decision in Turner did not turn on
whether Glow's $20, 000 in settlement authority was
adequate compared to the plaintiff's $32, 500 demand. To
the contrary, in Turner, the defendant insurer had
already decided that the most it was willing to offer to
settle the plaintiff's claims was $25, 000. Id.
at 595. So, it would not have mattered even if the defendant
insurer had sent Sarchet to personally attend the mediation
because he also would not have had authority to meet the
plaintiff's $32, 000 demand. Yet the court still
determined that Sarchet was “the” decisionmaker
with full, meaningful settlement authority-but this was
because Glow had to pick up the phone to call Sarchet to
clarify the scope of his settlement authority. Thus, the
court's determination of the relevant decisionmaker
rested on the inability to make decisions without checking
with someone else. 205 F.R.D. at 595; see also,
e.g., Inter-Ocean Seafood Trader, 2013 WL
441065, at *2 (finding that a representative did not have
full settlement authority when he needed to communicate with
the court rejects plaintiff's reliance on the court's
statement in Turner to the effect that settlement
authority means “authority to meet the other
party's demand.” Id. at 595. For the
reasons set forth above, the undersigned understands that
statement from Turner to be dicta. But even though
that statement may have been dicta in Turner,
authority to meet the other party's demand could
be a relevant factor in an appropriate case. But a plaintiff
seeking sanctions on the basis of the party representative
having inadequate settlement authority must, at a minimum,
demonstrate that the plaintiff's settlement demand was
reasonable and that the defendant's settlement offer was
unreasonable. Here, Mr. Long has not presented any evidence
suggesting that his $320, 000 demand was reasonable or that
American Family's $20, 000 offer was unreasonable. On the
other hand, American Family provides at least some minimal
basis for its settlement offer, which Mr. Long addresses only
by generally disputing the applicability of the policy
exclusions. But, even setting aside whether any policy
exclusions apply, the record is insufficient for the court to
determine that plaintiff's $320, 00 settlement demand is
reasonable. So, based on the record, the court cannot find
that defense counsel lacked full, meaningful settlement
authority solely because he only had $20, 000 in settlement
authority. The court therefore declines to award sanctions
Defense Counsel as ...