Certain Underwriters at Lloyds London v. Corporate Pines Realty Corp.

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit

FILED
October 5, 2009

No. 09-20017 Charles R. Fulbruge III
Clerk

CERTAIN UNDERWRITERS AT LLOYDS LONDON,

Plaintiff - Appellee
v.

CORPORATE PINES REALTY CORP,

Defendant - Appellant

Appeals from the United States District Court
for the Southern District of Texas
No. 4:06-CV-3361

Before KING, DAVIS, and BENAVIDES, Circuit Judges.
PER CURIAM:*
Corporate Pines Realty Corp. appeals an adverse judgment in this
declaratory judgment action brought by its commercial real estate insurer,
Certain Underwriters at Lloyds London. Corporate Pines raises twelve points
of error on appeal; we address each point in turn. Finding no reversible error,
we affirm.

*
Pursuant to 5TH CIR . R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR .
R. 47.5.4.
 No. 09-20017

I. First Point of Error: Subject Matter Jurisdiction
Corporate Pines first claims that the amount in controversy is not in
excess of $75,000, as required by 28 U.S.C. § 1332(a). In a declaratory judgment
action seeking a declaration of nonliability, the amount in controversy is the
insurer’s potential liability and other items. Hartford Ins. Group v. Lou-Con
Inc., 293 F.3d 908, 912 (5th Cir. 2002). Certain Underwriters initiated this
action only after receiving letters from Corporate Pines demanding first
$88,471.94 and then $95,451.94. The potential liability therefore exceeded the
minimum amount in controversy, and the district court properly exercised
diversity jurisdiction.
II. Second Point of Error: Referral to a Magistrate Judge
Corporate Pines argues that the district court erred in denying its motion,
on the day of trial, to withdraw its consent to refer the case to a magistrate
judge. A referral to a magistrate judge may be set aside for “good cause shown
. . . or under extraordinary circumstances.” 28 U.S.C. § 636(c)(4). A district
court’s denial of leave to withdraw consent to trial before a magistrate judge is
reviewed for abuse of discretion. See Lyn-Lea Travel Corp. v. Am. Airlines, Inc.,
283 F.3d 282, 292 (5th Cir. 2002). Factors to consider in making this
determination include:
[U]ndue delay, inconvenience to the court and witnesses, prejudice
to the parties, whether the movant is acting pro se, whether consent
was voluntary and uncoerced, whether the motion is made in good
faith or is dilatory and contrived, the possibility of bias or prejudice
on the part of the magistrate, and whether the interests of justice
would best be served by holding a party to his consent.
Carter v. Sea Land Servs., Inc., 816 F.2d 1018, 1021 (5th Cir. 1987) (internal
citations omitted). The magistrate judge below found that Corporate Pines had
presented “no reason for withdrawal of the consent other than it no longer
consents.” On appeal, Corporate Pines has not shown that any of the factors

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listed in Carter justified withdrawal of the referral on the morning of trial. The
magistrate judge acted within her discretion in denying withdrawal of the
referral.
III. Third Point of Error: Discovery Sanctions
Corporate Pines next contends that the district court incorrectly prevented
it from introducing evidence of business income loss as a sanction for discovery
abuse. A decision to award sanctions under Federal Rule of Civil Procedure 37
is reviewed for abuse of discretion. Brinkmann v. Dallas County Deputy Sheriff
Abner, 813 F.2d 744, 749 (5th Cir. 1987). Among the sanctions contemplated by
Rule 37 for violating a discovery order is “prohibiting the disobedient party from
supporting or opposing designated claims or defenses, or from introducing
designated matters in evidence.” F ED. R. C IV. P. 37(b)(2)(A)(ii).
Corporate Pines claimed lost rental income from a tenant of one of the
insured buildings. During discovery, Certain Underwriters requested
documents (including the lease) substantiating the alleged landlord–tenant
relationship and noticed the deposition of the alleged tenant. When both
Corporate Pines’s counsel and the alleged tenant failed to appear at a scheduled
deposition, Certain Underwriters filed a motion to compel, which the district
court granted. The tenant appeared at the subsequent deposition, but testified
that she could not locate the requested documents and that Corporate Pines’s
counsel had instructed her to attend the deposition without the documents.
Given Corporate Pines’s instructions to its witness to violate a court order, we
conclude that the district court did not abuse its discretion in excluding evidence
of Corporate Pines’s claimed business income loss.
IV. Fourth Point of Error: Substitution of Counsel of Record
Corporate Pines next claims that the district court erred in permitting
substitution of Certain Underwriters’ counsel of record because the substitution
was dilatory and served only to increase the ultimate award of attorney’s fees.

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Corporate Pines did not object to substitution at the time; to the contrary,
counsel was substituted pursuant to an agreed motion. Because Corporate Pines
failed to raise this issue below, any objection on appeal has been waived. See AG
Acceptance Corp. v. Veigel, 564 F.3d 695, 700 n.3 (5th Cir. 2009); Vela v. City of
Houston, 276 F.3d 659, 678 (5th Cir. 2001) (“[O]n appeal, we do not address
issues that were not raised in the lower court.”).
V. Fifth Point of Error: Demand for Jury Trial
Corporate Pines next claims that the district court erred in denying its
untimely demand for jury trial. Denial of an untimely motion for jury trial is
reviewed for abuse of discretion. See Pinemont Bank v. Belk, 722 F.2d 232, 238
(5th Cir. 1984). A party may demand a jury trial for any issue triable as of right
“no later than 10 days after the last pleading directed to the issue is served . . . .”
F ED. R. C IV. P. 38(b)(1). When a jury demand is untimely or improperly made,
the court may, on motion, “order a jury trial on any issue for which a jury might
have been demanded.” F ED. R. C IV. P. 39(b). A court should “grant a motion for
jury trial under [Rule 39(b)] ‘in the absence of strong and compelling reasons to
the contrary.’” Pinemont Bank, 722 F.2d at 236 (quoting Cox v. C.H. Masland
& Sons, Inc., 607 F.2d 138, 144 (5th Cir. 1979)).
Certain Underwriters filed its complaint in October 2006. Corporate Pines
filed its initial answer in November 2006 and did not request jury trial.
Corporate Pines filed a proposed case management plan in January 2007; to the
seventeenth item, which reads, “State whether a jury demand has been made
and if it was made on time,” Corporate Pines answered, “No.” Corporate Pines
then filed an amended answer in July 2007, adding new counterclaims. The
amended answer was not accompanied by a jury demand. Corporate Pines then
filed a jury demand in January 2008, without requesting leave of the court.
Certain Underwriters moved to strike the jury demand on the grounds that it
would be “substantially unfair and prejudicial” and would needlessly extend the

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duration of trial by at least half. The court granted Certain Underwriters’
motion after a hearing on the record in February 2008; Corporate Pines has not
provided that record for review. The district court had set a deadline for the
joint pretrial order and scheduled the docket call for March 2008.
We lack a transcript of the hearing on the motion to strike that would
enable us to determine whether Corporate Pines presented any persuasive
reasons for its untimely filing. No explanation, persuasive or otherwise, is
evident from either the record or Corporate Pines’s brief. When a party “offer[s]
no viable reasons for . . . delay . . . we assume the delay resulted from mere
inadvertence.” Farias v. Bexar County Bd. of Trs. for Mental Health Retardation
Servs., 925 F.2d 866, 873 (5th Cir. 1991). Inadvertence alone does not relieve a
party from waiver of the right to jury trial. Id. This, coupled with the lack of
any indication prior to January 2008 that Corporate Pines would demand a jury
trial, prevents us from concluding that the district court abused its discretion in
striking the untimely jury demand.
VI. Sixth Point of Error: Finding of No Damages
Corporate Pines objects to the district court’s factual finding that it
suffered no damages covered under its policy with Certain Underwriters.
Following a bench trial, factual findings are reviewed for clear error. United
States v. McFerrin, 570 F.3d 672, 675 (5th Cir. 2009). The party objecting to
factual findings bears the burden of providing a transcript of the trial record:
If the appellant intends to urge on appeal that a finding or
conclusion is unsupported by the evidence or is contrary to the
evidence, the appellant must include in the record a transcript of all
evidence relevant to that finding or conclusion.
F ED. R. A PP. P. 10(b)(2). Corporate Pines has not produced a transcript in its
appeal, and we conclude that it has waived its objections to the district court’s
factual findings. See Richardson v. Henry, 902 F.2d 414, 416 (5th Cir. 1990)
(“The failure of an appellant to provide a transcript is a proper ground for

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dismissal of the appeal. Accordingly, the appeal as to the sufficiency of the
evidence will be dismissed.” (internal citations omitted)).
An appellate court may, in its discretion, choose to address the appeal
rather than dismiss, but “the scope of . . . review is necessarily limited.” Coats
v. Pierre, 890 F.2d 728, 731 (5th Cir. 1989). Even on a limited record, however,
Corporate Pines has failed to identify any error, clear or otherwise, that the
district court committed in making its factual determinations. To the contrary,
the district court’s opinion reflects a careful evaluation of the documentary and
testimonial evidence presented. Although we overrule this point of error because
Corporate Pines has failed to provide a trial transcript and has thus waived its
objection, we see no error in the record provided.
VII. Seventh Point of Error: Attorney’s Fees
Following the bench trial, the district court awarded Certain Underwriters
$170,000 in attorney’s fees incurred in pursuing the declaratory judgment
action. Corporate Pines objects to this award on the ground that the attorney’s
fees were not reasonable and necessary in light of Certain Underwriters’
potential liability on the insurance policy. “‘The district court’s determination
of attorney’s fees is reviewed for abuse of discretion, and the findings of fact
supporting the award are reviewed for clear error.’” Tyler v. Union Oil Co. of
Cal., 304 F.3d 379, 390 (5th Cir. 2002) (quoting Shipes v. Trinity Indus., 987
F.2d 311, 319 (5th Cir. 1993)). Certain Underwriters submitted 260 pages of
legal bills detailing the work performed and the hours spent performing it.
Given this documentation, we conclude that the district court did not abuse its
discretion in calculating the amount of the attorney’s fee award. In addition, at
one point in the litigation, Corporate Pines had counterclaimed for a total of
$467,887.94; it cannot now argue that Certain Underwriters had only nominal
potential liability on the policy.

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VIII. Eighth Point of Error: Expert Testimony
Corporate Pines argues that the district court erred in admitting a report
by Certain Underwriters’ expert appraiser. The district court relied on the
expert report in assigning the insured buildings a value of $2,100,000, exclusive
of the underlying realty. Because Corporate Pines carried only $750,000 of
insurance under the policy, this finding triggered an underinsurance clause
reducing Corporate Pines’s coverage to 44.6%. Corporate Pines contends the
report is unreliable per se because it contains the words “estimates,” “opinions,”
and “assumptions.”
Corporate Pines cites Texas Rule of Evidence 702 and two decisions of the
Texas Supreme Court. These citations are inapposite, as a federal court sitting
in diversity applies the Federal Rules of Evidence in matters relating to expert
testimony. Mathis v. Exxon Corp., 302 F.3d 448, 459 (5th Cir. 2002). Under the
Federal Rules of Evidence, a party claiming error must show that “a substantial
right of the party is affected, and . . . a timely objection or motion to strike
appears of record, stating the specific ground of objection . . . .” F ED. R. E VID .
103(a)(1). Because Corporate Pines has failed to provide a transcript, we can
identify no objection to the proffer of the expert report. We therefore review its
admission for plain error. See Foradori v. Harris, 523 F.3d 477, 508 (5th Cir.
2008). Plain error “requires a clear or obvious error that affects substantial
rights.” DeCorte v. Jordan, 497 F.3d 433, 441 (5th Cir. 2007). If an appellant
demonstrates plain error, relief is discretionary with the court, and will usually
be “accorded only when failure to do so would seriously affect the fairness,
integrity, or public reputation of judicial proceedings.” Id.
Corporate Pines fails to demonstrate that its substantial rights were
affected by admission of the report. The district court found that Corporate
Pines had suffered no damage that was covered under the policy. The appraisal
and corresponding activation of the underinsurance clause therefore did not

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affect Corporate Pines’s claim—44.6% of zero is the same as 100% of zero—and
this point of error is rendered moot. Furthermore, the record reveals that the
expert possessed ample qualifications and prepared the report in accordance
with industry standards. Corporate Pines declined to present its own expert,
instead relying on the opinion of its owner as to the value of the buildings. We
cannot conclude that the district court committed plain error in admitting the
expert report and finding the buildings to have a value of $2.1 million.
IX. Ninth Point of Error: Denial of Counterclaims
Corporate Pines next assigns error to the district court’s denial of its
counterclaims under Texas insurance law. To have a bad faith claim under
either the Texas Insurance Code or Texas common law, the insured must have
a claim covered under an insurance policy. Progressive County Mut. Ins. Co. v.
Boyd, 177 S.W.3d 919, 922 (Tex. 2005) (per curiam). The district court concluded
that because Corporate Pines’s claims were not covered under its policy, Certain
Underwriters could not have acted in bad faith in denying those claims.
Corporate Pines has not identified any error in this reasoning, nor has it cited
any contrary authority. Furthermore, having neglected to produce a trial
transcript or provide citations to the record, Corporate Pines has waived its
objections to the factual predicate underlying the district court’s determination.
X. Tenth Point of Error: Finding of Failure to Comply with the Policy
In its tenth point of error, Corporate Pines repeats its argument that the
district court erred in finding that it had underinsured the buildings, resulting
in a proportionate reduction of coverage under the policy. Corporate Pines
claims the district court incorrectly added the value of the real estate to the
value of the buildings in arriving at a value of $2.1 million. The district court’s
opinion, however, stated its finding very clearly to the contrary: “The Court
credits [the] cash value of the buildings as $2,100,000”(emphasis added). More
importantly, the district court’s valuation of the buildings has no impact on

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Corporate Pines because there is no claim covered under the policy. This point
of error is therefore moot.
XI. Eleventh Point of Error: Finding of No Vandalism Damage
In eight cursory lines, Corporate Pines claims that the finding of no
vandalism damage is against the great weight and preponderance of the
evidence. Corporate Pines has not provided a transcript of the record, so we can
conduct only a limited review of this claim. See Coats, 890 F.2d at 731. On a
challenge to the sufficiency of the evidence, we will reverse only if no reasonable
mind could support the factfinder’s conclusions. McBeth v. Carpenter, 565 F.3d
171, 176 (5th Cir. 2009). The district court’s opinion carefully articulates the
conduct of the representatives of both Corporate Pines and Certain Underwriters
leading to this suit. We cannot say that the district court’s conclusion is
unreasonable.
XII. Twelfth Point of Error: Failure to Cooperate with Claim
Investigation
The Statement of the Issues Presented for Review in Corporate Pines’s
brief lists as its twelfth point of error that “[t]he District Court erred in finding
that Defendant failed to cooperate with the claim investigation.” This argument
is not addressed further in Corporate Pines’s brief, and we therefore find this
issue waived. See Sanders v. Unum Life Ins. Co. of Am., 553 F.3d 922, 927 (5th
Cir. 2008) (“[M]ere reference to [an issue] in the opening brief constitutes a
waiver.”).
XIII. Conclusion
Finding Corporate Pines’s twelve points of error without merit, we
AFFIRM the judgment of the district court. Any further pursuit of this case in
this court will risk sanctions. The mandate shall issue forthwith.

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