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Appalachian Regional Healthcare, Inc. v. U.S. Nursing Corp.

United States District Court, E.D. Kentucky, Southern Division, Pikeville

December 4, 2018




         This matter is before the Court on Appalachian Regional Healthcare, Inc.'s motion to alter the judgment in this action to add prejudgment interest (DE 349) and its motion for attorney's fees (DE 350).

         Appalachian Regional Healthcare, Inc. provides medical services in Eastern Kentucky, including at its hospital located in Whitesburg, Kentucky. U.S. Nursing Corporation is a staffing agency that provided nurses to Appalachian Regional on a temporary basis when Appalachian Regional was short-staffed. The staffing agreement between the parties required U.S. Nursing to indemnify Appalachian Regional from "any and all liability or damage that arises from . . . the negligent or intentional act or omission" of U.S. Nursing or its employees. (DE 52-1, Staffing Agreement, § D(15)).

         A patient at the Whitesburg facility, Ralph Profitt, and his wife asserted a claim in Kentucky state court against Appalachian Regional and U.S. Nursing, alleging that he was injured while he was a patient. Appalachian Regional incurred legal fees and costs of $823, 522.71 in defending the claim and ultimately paid the Profitts $2 million to settle it. U.S. Nursing refused to indemnify Appalachian Regional for those amounts, which caused Appalachian Regional to bring a claim against U.S. Nursing in this Court for breach of the indemnification provision of the staffing agreement.

         After a trial, a jury found that a U.S. Nursing employee - Nurse Constance Foote - was negligent in performing certain acts in treating Profitt, meaning that U.S. Nursing's indemnification obligations were triggered. In a second phase of the trial, the jury determined that Nurse Foote's negligent acts caused Appalachian Regional to spend sums to settle and defend the Profitts' claims against it. The jury further determined that the $2 million that Appalachian Regional paid to settle the Profitts' claims was reasonable and that the $823, 522.71 Appalachian Regional paid in attorney's fees and costs to defend the Profitts' claims against it was reasonable. The Court then entered a judgment (DE 338) ordering that Appalachian Regional was entitled to recover from U.S. Nursing Corporation a total of $2, 823, 522.71.

         With the first motion now under consideration, Appalachian Regional asks the Court to alter the judgment to include an award of pre-judgment interest. In a diversity case, state law governs awards of prejudgment interest. Jack Henry & Associates, Inc. v. BSC, Inc., 487 Fed.Appx. 246, 260 (6th Cir. 2012) (internal quotation marks omitted) (quoting Estate of Riddle v. S. Farm Bureau Life Ins. Co., 421 F.3d 400, 409 (6th Cir.2005)).

         The “longstanding rule” in Kentucky “is that prejudgment interest is awarded as a matter of right on a liquidated demand, and is a matter within the discretion of the trial court or jury on unliquidated demands.” 3D Enterprises Contracting Corp. v. Louisville and Jefferson County Metropolitan Sewer Dist., 174 S.W.3d 440, 450 (Ky. 2005) (citing Nucor Corp. v. General Electric Co., 812 S.W.2d 136, 141 (Ky. 1991)). “Precisely when the amount involved qualifies as ‘liquidated' is not always clear, but in general ‘liquidated' means ‘made certain or fixed by agreement of parties or by operation of law. Common examples are a bill or note past due, an amount due on an open account, or an unpaid fixed contract price.'” Nucor Corp., 812 S.W.2d at 141 (quotations and citation omitted).

         In determining whether a claim is liquidated or unliquidated, “one must look at the nature of the underlying claim, not the final award.” 3D Enterprises, 174 S.W.3d at 450.

         “Liquidated claims are ‘of such a nature that the amount is capable of ascertainment by mere computation, can be established with reasonable certainty, can be ascertained in accordance with fixed rules of evidence and known standards of value, or can be determined by reference to well-established market values.'” Id. (quoting 22 Am.Jur.2d Damages § 469 (2004)).

         In contrast, an unliquidated damages claim is one that has “not been determined or calculated” and “not yet reduced to a certainty in respect to amount.” Ford Contracting, Inc. v. Kentucky Transp. Cabinet, 429 S.W.3d 397, 414 (Ky. Ct. App. 2014) (quoting Nucor Corp., 812 S.W.2d at 141).

         Judgment was entered in Appalachian Regional's favor on its claim that U.S. Nursing breached the staffing agreement by failing to indemnify it for the costs it incurred in defending and settling the Profitt litigation. The amount that Appalachian Regional paid to settle the Profitts' claim and the attorney's fees it incurred in that action were fixed and ascertainable on April 1, 2016, the date of the settlement. Judge Amul Thapar (who originally presided over this case), however, ruled that Appalachian Regional must prove its defense and settlement costs were reasonable (DE 77, Opinion at 7.) In other words, Appalachian Regional's claim was for the reasonable amounts it expended to defend and settle the Profitts' claims.

         In support of its motion for prejudgment interest, Appalachian Regional cites several cases in other jurisdictions holding that a claim may be deemed liquidated even where the jury must determine the reasonableness of the damages. Numerous cases also hold the opposite.

         For example, Appalachian Regional cites the Tenth Circuit's decision in Neustrom v. Union Pac. F. Co., 156 F.3d 1057 (10th Cir. 1998) in which the court rejected under Kansas law an argument that a claim was not liquidated until the court determined the reasonableness of the settlement. More recently, however, the Tenth Circuit held that, under Oklahoma law, attorney fees are “subject to a reasonableness determination by the fact finder” and, thus, “are not liquidated as required under Oklahoma law for an award of prejudgment interest.” Yousuf v. Cohlmia, 741 F.3d 31, 48 (10th Cir. 2014). See also Flood Control Dist. of Maricopa Cty. v. Paloma Inv. Ltd. P'ship, 279 P.3d 1191, 1211 (Ariz.Ct.App. 2012) (stating “attorneys' fees spent defending the underlying litigation are not liquidated and subject to prejudgment interest because they are subject to a reasonableness determination by the trial court.”); Pierce Couch Hendrickson Baysinger & Green v. Freede, 936 P.2d 906, 914 (Okla. 1987) (“[T]he expenses in the present case were subject to the fact-finders determination of reasonableness. Thus, they were not liquidated and not subject to prejudgment interest.”); Tri-M Erectors, Inc. v. Donald M. Drake Co., 618 P.2d 1341, 1346 (Wash.Ct.App. 1980) (“A claim is unliquidated if the principal must be arrived at by a determination of reasonableness.”).

         While cases from other jurisdictions are instructive, ultimately this Court must predict whether Kentucky courts would find Appalachian Regional's claims to be liquidated. Hines v. Joy Mfg. Co., 850 F.2d 1146, 1150 (6th Cir. 1988). Because U.S. Nursing disputed the reasonableness of the amounts Appalachian Regional paid to settle and defend the Profitts' claim, Kentucky courts would likely find Appalachian Regional's claims not liquidated. “When the amount of a claim can be ascertained readily by reference to a formula in the contract and none of the facts is in dispute or when the amount of the claim itself is not disputed, the claim is liquidated.” Bituminous Cas. Corp. v. Lynn, 503 F.2d 636, 646 (6th Cir. 1974) (applying Kentucky law). ...

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