United States Court of Appeals
Fifth Circuit
F I L E D
UNITED STATES COURT OF APPEALS
FIFTH CIRCUIT September 18, 2006
Charles R. Fulbruge III
Clerk
No. 05-10468
FOULSTON SIEFKIN LLP, formerly known as Foulston & Siefkin LLP;
HARVEY R. SORENSON,
Plaintiffs-Appellees-Cross Appellants,
versus
WELLS FARGO BANK OF TEXAS N.A., Trustee of the Eleanor Pierce
Stevens Irrevocable Gift Trust,
Defendant-Appellant-Cross Appellees.
Appeals from the United States District Court
for the Northern District of Texas
Before SMITH, BARKSDALE, and DENNIS, Circuit Judges.
RHESA HAWKINS BARKSDALE, Circuit Judge:
Wells Fargo Bank of Texas N.A., trustee of the Eleanor Pierce
Stevens Trust, appeals the summary judgment awarding Harvey R.
Sorenson reimbursement for fees and expenses he claims he incurred,
but admits he did not pay, as a defendant in state-court litigation
regarding his serving as trustee for the Trust. Sorenson and his
law firm, Foulston Siefkin LLP (Siefkin), cross–appeal the amount
awarded.
Primarily at issue is application of the word “reimbursement”
as employed in the Trust. The judgment is VACATED; judgment is
RENDERED for Wells Fargo.
I.
Sorenson, a partner at Siefkin in Wichita, Kansas, created and
drafted the Trust in 1989, with a debenture from Marshall
Petroleum, Inc., paying $50,000 interest per month. Sorenson was
the first trustee. Stevens, then 85 years old, signed the Trust in
Dallas, Texas. She was the designated primary beneficiary for ten
years, to be followed by her son, J. Howard Marshall, III.
Sorenson remained the trustee until resigning in 1996. That
year, Marshall III sued Sorenson and Siefkin in Texas state court
(Texas action), raising various breach-of-fiduciary-
duty/mismanagement claims regarding the Trust, as well as other
claims regarding his father’s (Marshall II) estate. Sorenson and
Siefkin retained a law firm in Texas to represent them in the Texas
action. A partial summary judgment was awarded Sorenson and
Siefkin in 1999, dismissing all claims relating to the Trust and
Stevens’ estate. In 2001, judgment was awarded Sorenson and
Siefkin on the remaining claims.
Sorenson and Siefkin had approximately $1.5 million in charged
fees and expenses in the Texas action. Siefkin’s liability
insurance paid all of them beyond the deductible ($250,000), which
Siefkin paid.
In turn, Sorenson and Siefkin requested payment from Wells
Fargo, the current trustee of the Trust, for those fees and
expenses. Wells Fargo refused and filed this action in Texas state
court, seeking a declaration under TEX. CIV. PRAC. & REM. CODE §
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37.001 that Trust assets could not be used to pay those fees and
expenses.
Invoking diversity jurisdiction, Sorenson and Siefkin removed
this action to federal court, and counter-claimed for negligence
and breach of contract or violation of the Trust. They requested
approximately $1.3 million from Wells Fargo for the fees and
expenses from the Texas action.
The district court realigned the parties, making Sorenson and
Siefkin the plaintiffs and Wells Fargo the defendant. After cross-
motions for summary judgment were filed, the district court held:
(1) Sorenson was entitled to reimbursement of fees and expenses he
incurred before he received the partial summary judgment in 1999 in
the Texas action; (2) the collateral-source rule, which bars
reduction of an award merely because a third party pays an incurred
liability, applied to this action; (3) Sorenson was not entitled to
recover any fees or expenses incurred after the 1999 partial
summary judgment, absent showing special circumstances warranting
recovery, because that ruling extinguished all claims relating to
the Trust; and (4) Siefkin had no right to subrogation because it
was jointly and severally liable for Sorenson’s fees and expenses.
Instead of proceeding with a jury trial, Sorenson stipulated
he is owed $225,000 if he cannot recover fees or expenses incurred
after the partial summary–judgment, and the parties reserved the
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right to appeal adverse rulings by the district court.
Accordingly, a final judgment was entered in March 2005.
II.
Wells Fargo claims the district court erred: by granting
Sorenson, and denying it, summary judgment on Sorenson’s
reimbursement claim; and by applying the collateral source rule.
Sorenson and Siefkin maintain the court erred by denying recovery
for fees and expenses incurred after the partial summary judgment.
Siefkin also contends it is entitled to equitable subrogation for
fees and expenses incurred by Sorenson but paid by Siefkin.
Because the district court erred in allowing Sorenson any recovery,
we need not address the other issues.
A summary judgment pursuant to Federal Rule of Civil Procedure
56 is reviewed de novo. E.g., Todd v. AIG Life Ins. Co., 47 F.3d
1448, 1451 (5th Cir. 1995). Such judgment is proper “if the
pleadings, depositions, answers to interrogatories, and admissions
on file, together with the affidavits, if any, show that there is
no genuine issue as to any material fact and that the moving party
is entitled to a judgment as a matter of law”. FED. R. CIV. P.
56(c). All evidence is viewed in the light most favorable to the
non-movant. E.g., Kee v. City of Rowlett, 247 F.3d 206, 210 (5th
Cir.), cert. denied, 534 U.S. 892 (2001). A party opposing summary
judgment must provide specific facts showing the existence of a
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genuine issue for trial; it may not rest on the pleadings. E.g.,
Ragas v. Tenn. Gas Pipeline Co., 136 F.3d 455, 458 (5th Cir. 1998).
The parties agree Kansas law, which governs the Trust terms
and provisions, applies to this diversity action. Pursuant to that
law, “all provisions [of the Trust must be construed] together and
in harmony with each other rather than by critical analysis of a
single or isolated provision”. Metro. Life Ins. Co. v. Strnad, 876
P.2d 1362, 1371 (Kan. 1994).
The applicable Trust language states: if the trustee is sued
on Trust-related issues and
is adjudicated or is otherwise demonstrated,
to the satisfaction of the court in which such
suit is instituted, to be free from liability
... [the] Trustee shall be entitled to
reimbursement out of the trust estate for all
reasonable costs and expenses, including
attorneys’ fees, incurred in resisting such
suit.
(Emphasis added.) Sorenson was sued in his capacity as trustee and
adjudicated not liable.
The linchpin for this appeal is Sorenson’s not having paid
anything “in resisting” the Texas action (other than minimal
expenses, mostly related to travel, for which he was reimbursed by
Siefkin). At issue, therefore, is whether, under Kansas law,
Sorenson may be reimbursed for fees and expenses incurred, even
though he paid none. (Sorenson and Siefkin were both defendants in
the Texas action. Siefkin does not claim Sorenson owes it money
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for its paying the fees and expenses. Nor does Sorenson, as a
partner in Siefkin, claim an undivided interest in the money used
to pay them.)
The Trust does not define “reimburse” or “incur”, and there is
no Kansas law directly on point. The district court relied on
Hephner v. Traders Ins. Co., 864 P.2d 674 (Kan. 1993), in granting
Sorenson summary judgment. Hephner, however, involved the Kansas
Automobile Injury Reparations Act (KAIRA), KAN. STAT. ANN. § 40-3101.
In Hephner, a young child, cared for by her grandparents after her
mother was killed in an automobile accident, sought payment from an
insurer for that care, pursuant to the KAIRA. It entitled her to
money for services her mother would have provided had she not died.
Hephner, 864 P.2d at 676.
The child’s grandfather documented charging his granddaughter
$25 per day for “daily care 24 hours a day, 7 days a week”. Id. at
679. Although the grandfather did not intend to collect any money
from his granddaughter unless she recovered insurance benefits
under the KAIRA, the court held: “she ... incurred an obligation
to pay him as evidenced by the [$25 per day] invoice”; and such
liability can be incurred even if payment is deferred. Id.
Hephner was also partly based on the KAIRA’s underlying legislative
intent; the court noted the legislature could not have intended to
allow reimbursement for victims financially able to employ private
care but not for those dependent on their families for care (and
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thus, as with the young child in Hephner, owed money, if at all,
for that care, only upon collection of insurance benefits). Id. at
680. In addition, to the extent Hephner involved an ambiguous
insurance contract, such contracts are interpreted liberally to
benefit the insured. O'Bryan v. Columbia Ins. Group, 56 P.3d 789,
792 (Kan. 2002).
The district court also discussed the definition of
“incurred”, citing dictionaries and case law from various
jurisdictions for the proposition that liability can be incurred
even if payment is never made. Assuming arguendo that is correct,
the Trust entitles the trustee only to reimbursement for incurred
liabilities. It does not dictate payment for them. Sorenson, the
drafter of the Trust, used the word reimbursement, not payment.
Black’s Law Dictionary defines “reimbursement” as “repayment”
or “indemnification”. BLACK’S LAW DICTIONARY 1312 (8th ed. 2004).
Similarly, when Sorenson drafted the Trust in 1989, Black’s defined
“reimburse” as “[t]o pay back, to make restoration, to repay that
expended; to indemnify, or make whole”. BLACK’S LAW DICTIONARY 1157
(5th ed. 1979).
Sorenson and Siefkin counter with the American Heritage
Dictionary’s second definition of “reimburse”: “To pay back or
compensate (another party) for money spent or losses incurred”.
THE AMERICAN HERITAGE DICTIONARY (4th ed. 2000). Even accepting that
definition, Sorenson would not be entitled to reimbursement.
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Moreover, as stated in United States v. Upton, “[r]eimbursement
necessarily implies that something has been paid which requires
compensation for money spent”. 91 F.3d 677, 682 & n.8 (5th Cir.
1996) (citing WEBSTER’S II NEW RIVERSIDE UNIVERSITY DICTIONARY 991 (1984)),
cert. denied, 520 U.S. 1228 (1997). Because Sorenson is not out
any money, and never will be, there is nothing “to pay [him] back
or compensate [him] for”, even if he did incur expenses at some
point.
To hold otherwise would be to allow Sorenson, a lawyer, to
claim he drafted the Trust’s “reimbursement” clause with the
understanding it might allow him, in effect, to receive a windfall
if he prevailed in an action against him in his capacity as
trustee. That cannot be the law.
III.
For the foregoing reasons, the judgment is VACATED; judgment
is RENDERED for Wells Fargo.
VACATED and RENDERED
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