Appeal from the United States District Court for the District of Arizona James A. Teilborg, District Judge, Presiding D.C. No. CV-05-2670-JAT
The opinion of the court was delivered by: Judge Trager
Argued and Submitted November 1, 2010-San Francisco, California
Before: Arthur L. Alarcin and Pamela Ann Rymer, Circuit Judges, and David G. Trager, District Judge*fn1
Defendants Pacific Indemnity Co. and Federal Insurance Co. (collectively "defendants") appeal the district court's denial of their request for expert witness fees and double costs pursuant to Arizona Rule of Civil Procedure 68 ("Arizona Rule 68"). The district court found that Arizona Rule 68 did not apply because it conflicts with Federal Rule of Civil Procedure 68 ("Federal Rule 68"), under which defendants are not entitled to recover costs because judgment was entered in their favor. This court has jurisdiction under 28 U.S.C. § 1291. For the following reasons, the district court's decision is affirmed.*fn2
Facts and Procedural History
Defendants' request for expert witness fees and double costs arises out of a breach of contract and bad faith action brought by plaintiffs Mark H. Goldberg, Sherry R. Goldberg and the MH & SR Goldberg Family Trust (collectively "plaintiffs") against defendants for refusing to raze and rebuild the Goldbergs' home in response to plaintiffs' insurance claim that the house intermittently reeked of urine, and that the smell could not be eliminated using traditional remediation measures. Plaintiffs' complaint alleges that their raze and rebuild demand was required under the "all risk" insurance policy that defendants issued for the Goldbergs' house, and that defendants acted in bad faith by, inter alia, failing to conduct an adequate investigation of plaintiffs' claim.
On July 6, 2007, defendants made an offer of judgment "pursuant to Rule 68 of the Federal Rules of Civil Procedure" in the amount of $1.25 million. Plaintiffs did not respond to defendants' offer, causing the offer to lapse ten days later. On February 20, 2008, the district court granted defendants' motion for summary judgment on plaintiffs' bad faith claim, but denied their motion for summary judgment on plaintiffs' breach of contract claim. Plaintiffs' breach of contract claim then proceeded to trial on August 27, 2008. After a thirteen-day jury trial, the jury issued a verdict in favor of defendants.
On May 13, 2009, the district court awarded defendants nearly $3 million in attorneys' fees under Arizona law. The district court, however, denied defendants' request for reasonable expert witness fees and double costs under Arizona Rule of Civil Procedure 68, finding instead that Federal Rule 68 ...