           Case: 15-10865   Date Filed: 11/10/2015   Page: 1 of 10


                                                          [DO NOT PUBLISH]

            IN THE UNITED STATES COURT OF APPEALS

                    FOR THE ELEVENTH CIRCUIT
                      ________________________

                             No. 15-10865
                       ________________________

                   D.C. Docket No. 1:12-cv-02578-JSA

GEORGIA OPERATORS SELF-INSURERS FUND,
                                                               Plaintiff-Appellee
                                                                Cross-Appellant,

                                  versus

PMA MANAGEMENT CORPORATION,
                                                           Defendant-Appellant
                                                               Cross-Appellee.
                       ________________________

               Appeals from the United States District Court
                   for the Northern District of Georgia
                      ________________________

                            (November 10, 2015)

Before HULL, WILSON, and ANDERSON, Circuit Judges.
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PER CURIAM:

      In this appeal and cross-appeal from a bench trial, 1 appellant PMA

Management Corporation questions the calculation of damages, as well as the

finding of fault. It also argues that the court abused its discretion when it allowed

the Cross-Appellant’s expert to testify. Cross-Appellant Georgia Operators Self-

Insurers Fund (“Georgia Operators”) argues that the court erred when it reduced

the damages award, dismissed the negligence and breach of fiduciary duty claims,

and declined to award attorneys’ fees. After thorough exploration at oral argument

and careful review of the briefs and relevant parts of the record, we conclude that

the opinion of the magistrate judge reflects a comprehensive understanding of, and

a fair and accurate resolution of, the several issues. Accordingly, the judgment of

the court below is affirmed in all respects. We discuss the several issues in turn.

             I. PMA’S CHALLENGE TO THE DAMAGE AWARD

      In the main appeal, PMA argues: (1) that the magistrate judge erred with

respect to its damages award. PMA argues that the magistrate judge failed to

apply the proper Georgia standard. It also argues that the evidence adduced by

Georgia Operators: (a) fails to establish that PMA’s mishandling of its contractual



1
      The bench trial was conducted by the magistrate judge with the consent of the parties.



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obligations caused Georgia Operators damages; and (b) fails to establish the

amount of damages awarded.

      We reject summarily PMA’s arguments with respect to causation.

Independent auditor Hosman found, and PMA representatives admitted as much in

internal memoranda, that PMA mishandled their contractual obligations, and that

this mishandling resulted in increased claims costs. The magistrate judge based his

finding of causation on the report and testimony of Hosman, the admissions of

PMA representatives in internal memoranda, the testimony of expert witness

McCoy, and simple common sense. The magistrate judge’s finding in this regard

is supported by ample record evidence. There is nothing speculative about the

finding or the evidence on which it is based.

      We also summarily reject PMA’s argument that the magistrate judge failed

to apply the proper standard under Georgia law with respect to the determination of

the amount of damages. The magistrate judge properly applied Georgia’s standard

that damages be estimated to a reasonable degree of certainty. Shepherd v. Aaron

Rents, Inc., 430 S.E.2d 67, 70 (Ga.App. 1993) (“The ability to estimate damages to

a reasonable degree of certainty is all that is required . . . and mere difficulty in

fixing the exact amount will not be an obstacle to an award.”).

      We also agree with the magistrate judge that the evidence adduced by

Georgia Operators and the magistrate judge’s findings, with respect to the amount


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of damages, satisfies Georgia’s reasonable certainty standard. There was ample

evidence of serious breaches of PMA’s contractual obligations with respect to

processing and settling the workmen’s compensation claims. Hosman’s report

concluded that: “The overall performance of PMA . . . fell significantly below

industry standards.” PMA representatives contemporaneously acknowledged the

accuracy of Hosman’s report, and expert witness McCoy found widespread

patterns of mishandling. McCoy examined in detail the 88 largest claims, which

represented more than 90 percent of the total dollars paid out in settlement of

claims, and identified such mishandling in 84 of those claims. Moreover, the

patterns of mishandling thus identified were of a nature that made it very probable

as a matter of common sense that similar mishandling was occurring in a similarly

large percentage of the balance of the claims which McCoy did not examine.

       On the basis of such evidence, the magistrate judge inferred that the proven

patterns of mishandling impacted not only the lost time claims particularly

scrutinized by McCoy, but also impacted PMA’s overall handling of the claims in

the account. We conclude that his inference is amply supported by Hosman’s

findings, by admissions of PMA representatives in internal memoranda, by

McCoy’s findings, and by common sense.2


2
        Thus, we reject PMA’s argument that Georgia Operators was required to prove the
precise damage resulting from each of the more than 3,500 claims involved. We agree with the


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       Because Georgia Operators had proved systemic deficiencies in PMA’s

overall performance with respect to the claims in this account, the magistrate judge

accepted as the starting point for considering damages the extraordinary spike

during the years 2007 through 2010 in the cost of claims per $100 of payroll. The

spike with respect to the cost of claims during 2007 through 2010 was stark as

compared to the historical cost of claims (reasonably calculated based on the most

recent years, 2000 through 2006), and as compared to the cost of claims

immediately thereafter in 2011 through 2013 (when measures had been put in

place to remedy the deficiencies in PMA’s performance). The increase in the cost

of claims for 2007 through 2010 – over and above what would have been expected

had the historical rate of claim cost persisted through those years – was

approximately $3 million.

       The magistrate judge found that the spike in the cost of the 2007 through

2010 claims was caused in major part by PMA’s deficient performance. The

magistrate judge carefully examined other possible causes that might have driven

up the cost of claims, but found, after careful analysis, that such other causes did

not play a substantial role in increasing claims costs during the spike period.



magistrate judge that such a requirement would be wasteful of judicial resources, and would be
virtually impossible (as was admitted by PMA representatives in internal memoranda). Neither
Georgia law nor any ruling of Judge Evans required the method of proof urged by PMA.



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Nevertheless, the magistrate judge made an adjustment from the approximately $3

million spike figure by excluding all 2007 claims from the analysis, thus reducing

the spike figure to approximately $2.3 million. The magistrate judge found that

this adjustment “would likely understate plaintiff’s damages” and would likely

“more than account[] for” the impact of such other causes. However, the

magistrate judge found that this adjustment resulted in a “more conservative and

more reliable” estimate of Georgia Operators’ damages.

      After careful review, we cannot conclude that the magistrate judge’s

findings are clearly erroneous. We also conclude that the magistrate judge’s

estimate of Georgia Operators’ damages satisfies the Georgia standard of

reasonable certainty. The magistrate judge’s findings are supported by substantial

evidence. Ample evidence supports the findings that PMA’s deficient practices

were widespread and infected its overall performance. The magistrate judge’s use

of the extraordinary spike in claims costs as a starting point is supported by the fact

that the spike occurred in precisely the same time frame during which Hosman and

McCoy identified patterns of PMA’s mishandling problems. Moreover, as soon as

PMA’s performance problems were remedied, the claims costs dropped back to

approximately the historical rate which preceded the spike. Ample record

evidence, as well as common sense, supports the magistrate judge’s finding that

PMA’s performance deficiencies were a major cause of the sudden and


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extraordinary spike in claims costs. Ample evidence and common sense also

support the magistrate judge’s finding that other possible causes did not play a

substantial role in increasing claims costs during the spike period, and were

appropriately accounted for by the adjustment made by the magistrate judge to the

spike figure. 3 For the foregoing reasons, we are satisfied that the damage award

found by the magistrate judge falls well within Georgia’s standard of reasonable

certainty.

              II. PMA’s CHALLENGE TO COSTNER’S TESTIMONY

       PMA’s second argument relates to the testimony of Georgia Operators long-

time actuary, Costner. There was no objection in the court below, and no

challenge on appeal, to the admissibility of the annual actuarial reports prepared by

Costner for Georgia Operators, nor to the admissibility of Costner’s testimony at

trial explaining the meaning of those actuarial reports. PMA objected in the court

below, and challenges on appeal, only the calculations to which Costner testified at

3
        In its first argument on cross-appeal, Georgia Operators argues that the magistrate judge
erred in reducing its damages by excluding consideration of the claims originating in 2007. We
reject Georgia Operators’ argument as being wholly without merit. Many of the 2007 claims
were handled and closed out prior to the end of the calendar year 2007, and before PMA took
over as successor third party administrator. With respect to those claims, of course, there could
have been no impact at all as a result of any mishandling by PMA. With respect to the balance
of the 2007 claims, as to which PMA’s mishandling might possibly have impacted, we cannot
conclude that the magistrate judge’s rationale was unreasonable. The relative role with respect
to these claims of PMA as opposed to the role of the predecessor third-party administrator, is
unclear. Moreover, it was not unreasonable for the magistrate judge to take into account the
impact that the other potential causes (urged by PMA and addressed by the magistrate judge)
may have had on costs during the spike time period.



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trial, which were based on the data already included in the actuarial reports. We

dispose of this argument summarily because we agree with the magistrate judge

that the testimony to which PMA objects constitutes simple mathematical

computations based upon the data that already existed in the annual actuarial

reports. As the magistrate judge noted, the court itself could do that basic

arithmetic on the basis of the data already extant in the actuarial reports.

                    III. GEORGIA OPERATORS’ CROSS-APPEAL

     A. Georgia Operators’ challenge to the district court’s holding that Georgia
Operators’ negligence and breach of fiduciary duty claims were barred by
Georgia’s Economic Loss Doctrine

      Judge Evans granted partial summary judgment on this issue, holding that

these claims were barred by the Economic Loss Doctrine. We cannot disagree

with Judge Evans’ conclusion that Georgia Operators’ claims fall squarely under

what PMA was obligated to do under express contractual provisions. The

damages Georgia Operators seeks are fully encompassed in its breach of contract

claim. We cannot disagree with Judge Evans’ interpretation of Georgia law with

respect to the Economic Loss Doctrine generally, or with respect to the exception

for negligent professional services. Accordingly, we agree with Judge Evans that

Georgia Operators’ negligence and breach of fiduciary duty claims were barred by

the Economic Loss Doctrine.

       B.    Georgia Operators’ challenge to the magistrate judge’s denial of
attorneys’ fees.
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      Finally, we cannot conclude that the magistrate judge erred in declining to

award attorneys’ fees to Georgia Operators. We agree with the magistrate judge

that the parties intended the indemnity clause to indemnify the indemnitee against

liability (including attorneys’ fees) to third parties – not to protect the parties to the

contract from legal actions between the contracting parties. This interpretation is

supported by the fact that the indemnity clause itself is expressly limited to losses

caused by PMA’s negligence or willful misconduct, and the fact that the

sophisticated parties here would have been familiar with the economic loss rule

and would have known that purely economic losses resulting from a breach of

contract would not be deemed a negligence claim that could trigger the indemnity

clause.

      Nor can we conclude that the magistrate judge abused his discretion in

declining to award attorneys’ fees on the basis of the alleged bad faith on the part

of PMA. Georgia’s statute, O.C.G.A. §13-6-11, permits, but does not mandate, an

award of attorneys’ fees where a defendant has acted in bad faith, in effect leaving

the award of fees to the discretion of the fact finder. Even assuming some bad

faith with respect to the August 2011 audit, we cannot conclude that the magistrate

judge abused his discretion in finding that PMA’s conduct in that discrete instance

did not taint PMA’s overall performance with bad faith such as to warrant any

award of attorneys’ fees.
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      For the foregoing reasons, the judgment of the court below is affirmed both

with respect to the main appeal and the cross-appeal.

      AFFIRMED.




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