In Evanston Ins. Co. v. MGA Entm't Inc., 2:12-cv-05654-DOC-RNB (C.D. Cal. Oct. 12, 2012), 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 attorneys’ fees prescribed by Federal Rule of Civil Procedure 54(d)(2)(B). In so holding, the court rejected Evanston’s argument that its cause of action did not accrue until it entered a settlement agreement with its insured regarding payment of attorneys’ 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 attorneys fees by May 5, 2011. MGA did so, and ultimately was awarded attorneys’ fees and costs.
Evanston was twice held to owe MGA a duty to defend, first, in another action in June 2009 and again in February 2012. Following the June 2009 ruling, Evanston agreed to participate in the defense of the underlying litigation and to pay some of MGA’s fees. 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 attorneys’ fees and costs. Later in 2012, Evanston filed a complaint against Mattel seeking attorneys fees, seeking a declaration that it was entitled to fees, and seeking a declaration that Mattel should be required to pay into the 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, that rule requires a party seeking attorneys’ 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. Describing Evanston’s conduct at “stubborn,” the court declined to allow Evanston to benefit from its deliberate failure to pay its insured until the eve of trial on MGA’s bad faith claim. 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.”
The court readily disposed of the remaining claims, holding that both were premised on the subrogation claim and therefore should be dismissed.