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Mize v. Liberty Mutual

United States District Court,

W.D. Oklahoma.

Richard D. MIZE, individually, Plaintiff,

v.

LIBERTY MUTUAL INSURANCE COMPANY, and United Parcel Service, Inc., Defendants.

No. CIV 04-1705-M.

June 29, 2005.

ORDER

 

MILESLAGRANGE, J.

Pending before the Court is Defendants’ Motion to Dismiss, Motion for Summary Judgment, or In the Alternative Bifurcate Liberty Mutual Insurance Company. The issues raised have been fully briefed and the matter is now ripe for determination. [FN1] For the reasons that follow, Defendants’ Motion will be denied.

FN1. For purposes of this order, the Court applies federal procedural law and the substantive law of the State of Oklahoma. Boyd Rosene and Assocs. v. Kansas Mun. Gas Agency, 174 F.3d 1115, 1118 (10th Cir.1999) (citing Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938)).

I. Background

This negligence action arises out of a traffic accident that occurred in Oklahoma County, Oklahoma. Plaintiff Richard Mize (“Mize”) alleges that on May 30, 2003, William Sorrels, an employee of Defendant United Parcel Service, Inc. (“UPS”), negligently operated his “1996 Grumman truck” while acting within the course and scope of his employment with UPS, thereby causing a collision with Mize’s pickup truck. Mize alleges that he incurred significant property damage to his truck, and that he suffered physical and emotional injuries to his person. He instituted this action against UPS and Defendant Liberty Mutual Insurance Company (“LMIC”), UPS’s licensed insurer, to recover compensatory and punitive damages for his losses.

Defendants move the Court to dismiss LMIC from this action or to grant summary judgment in its favor; in the alternative, Defendants move the Court to permit the case to proceed to trial against UPS only, and to prohibit any reference to LMIC or the fact that UPS is insured, with LMIC waiving its right to a jury trial and agreeing to be “bound by the determination of the jury in the trial of the plaintiff’s claims against UPS as though it had participated reserving, however, its appeal rights as though it had been a participant in the trial.” Mot. to Dismiss at 2. Defendants advance two grounds in support of their motion to dismiss or for summary judgment. First, they argue that Mize fails (in his Amended Complaint) to allege facts sufficient to establish LMIC’s liability for negligence. Second, they argue that LMIC is not a property party to this action under Oklahoma statutory law. Defendants request a bifurcated trial on the ground that UPS will be prejudiced if the jury is made aware that the company has liability insurance.

II. Legal Standards for Motions to Dismiss and Motions for Summary Judgment

Motions to dismiss a complaint for failure to state a claim should be granted “only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations.” Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984)

(citing Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)). In reviewing such motions, “[a]ll well-pleaded facts, as distinguished from conclusory allegations, must be taken as true.” Ruiz v. McDonnell, 299 F.3d 1173, 1181 (10th Cir.2002) (quoting Swanson v. Bixler, 750 F.2d 810, 813 (10th Cir.1984)). Further, the court must “view all reasonable inferences in favor of the plaintiff, and the pleadings must be liberally construed.” Id. The question confronting the court when deciding a Rule 12(b)(6) motion is not whether the plaintiff should prevail, “but whether the plaintiff is entitled to offer evidence to support her claims.” Id.

Under Fed.R.Civ.P. 56(c), summary judgment is appropriate if “there is no genuine issue as to any material fact and … the moving party is entitled to a judgment as a matter of law.” Fed.R.Civ.P. 56(c). The moving party bears the initial burden of demonstrating the absence of a genuine issue of material fact. Reed v. Bennett, 312 F.3d 1190, 1194 (10th Cir.2002).

III. Discussion

A. Sufficiency of Factual Allegations

The Court first determines whether Mize has alleged facts sufficient to state a claim against LMIC. In his Amended Complaint, Mize alleges that

Liberty Mutual is an insurance company organized and created under the laws of Massachusetts and authorized to conduct business within the State of Oklahoma. Liberty Mutual is the licensed insurance carrier for UPS. UPS is an “Authorized for Hire” “Interstate” motor carrier bearing USDOT Nos. 21800 and 24796. Pursuant to 47 O.S. § 230.30, Liberty Mutual is a proper party Defendant in this matter.

Am. Compl. at ¶ 2. The statute cited in Mize’s Amended Complaint is part of the Oklahoma Motor Carrier Act of 1995, Okla. Stat. tit. 47, § 230.21 et seq., and provides in relevant part:

No license shall be issued by the Commission to any carrier until after the carrier shall have filed with the Commission a liability insurance policy or bond covering public liability and property damage, issued by some insurance or bonding company or insurance carrier authorized pursuant to this section and which has complied with all of the requirements of the Commission, which bond or policy shall be approved by the Commission, and shall be in a sum and amount as fixed by a proper order of the Commission; and the liability and property damage insurance policy or bond shall bind the obligor thereunder to make compensation for injuries to, or death of, persons, and loss or damage to property, resulting from the operation of any carrier for which the carrier is legally liable . A copy of the policy or bond shall be filed with the Commission, and, after judgment against the carrier for any damage, the injured party may maintain an action upon the policy or bond to recover the same, and shall be a proper party to maintain such action.

Okla. Stat. tit. 47, § 230.30(A) (emphasis added).

Accepting the well-pleaded factual allegations in the Amended Complaint as true, and viewing all reasonable inferences drawn from those allegations in Mize’s favor, the Court finds that LMIC should not be dismissed from this action. The Oklahoma Supreme Court has long held that Okla. Stat. tit. 47, § 230.30, formerly Okla. Stat. tit. 47, § 169, creates a direct cause of action by a person injured by operation of a motor carrier against the motor carrier’s insurer, provided of course that the motor carrier is required to be insured under the statute. See Enders v. Longmire, 179 Okla. 633, 67 P.2d 12, 14 (Okla.1937); see also Daigle v. Hamilton, 782 P.2d 1379, 1381 (Okla.1989) (citing Enders, 67 P.2d at 14); Blanke v. Alexander, 152 F.3d 1224, 1230 (10th Cir.1998) (quoting Daigle, 782 P.2d at 1381). To state a claim against an insurer under § 230.30, a plaintiff need only allege that: (1) he suffered injury; (2) the injury occurred by operation of a motor carrier; and (3) the motor carrier was required to be and was in fact insured pursuant to § 230 .30. Mize alleges that he suffered injury by operation of a motor carrier (UPS), and he impliedly alleges that UPS was required to be and was in fact insured by LMIC pursuant to § 230.30. The Court finds these allegations sufficient to state a claim against LMIC under § 230.30.

B. Proper Party

The Court next addresses Defendants’ argument that LMIC is not a proper party to this action. Defendants acknowledge that § 230.30 creates a direct cause of action against insurers, but they argue that the statute “is not applicable to every vehicle operating as a motor carrier in the [S]tate of Oklahoma.” Mot. to Dismiss at 4. More specifically, Defendants argue that § 230.30 gives rise to a direct action against an insurer only when the vehicle allegedly involved in the harm-causing incident weighs in excess of 26,000 pounds. As the basis for their argument, Defendants rely on Okla. Stat. tit. 47, § 230.24. That section provides, in pertinent part:

The Corporation Commission is hereby vested with power and authority, and it shall be its duty:

To supervise and regulate every motor carrier whether operating between fixed termini or over a regular route or otherwise and not operating exclusively within the limits of an incorporated city or town in this state and all private carriers operating vehicles having a gross registered weight of greater than 26,000 pounds and not operating exclusively within the limits of an incorporated city or town in this state.

Okla. Stat. tit. 47, § 230.24(A)(1). Defendants interpret this section to foreclose the Corporation Commission from regulating, and hence creating a direct cause of action against the insurers of, motor carriers operating vehicles that weigh 26,000 pounds or less. Because the “1996 Grumman truck” involved in the accident in this case weighs less than 26,000 pounds, Defendants argue that no direct cause of action against LMIC exists under § 230.30(A).

The Court finds Defendants’ interpretation of the statute erroneous. The wording and structure of § 230.24(A)(1) make clear that the Oklahoma Legislature intended to and did separately describe the two types of “carriers” subject to Corporation Commission regulation: “every motor carrier” is subject to regulation, “whether operating between fixed termini or over a regular route or otherwise and not operating exclusively within the limits of an incorporated city or town in [the State of Oklahoma]”; whereas “private carriers” are subject to regulation only to the extent that they operate “vehicles having a gross registered weight of greater than 26,000 pounds and [do not operate] exclusively within the limits of an incorporated city or town in [the State of Oklahoma].” Okla. Stat. tit. 47, § 230.24(A)(1). Surely, the lack of punctuation that would separate the “motor carriers” from the “private carriers” that are subject to Corporation Commission regulation does nothing to enhance the clarity of the provision, but neither does it render reasonable Defendants’ distorted reading of the statute. “Plain meaning controls statutory interpretation.” United States v. Williams, 376 F.3d 1048, 1052 (10th Cir.2004). And the Court finds the plain meaning of § 230.24(A)(1) compels the conclusion that only “private carriers” are subject to the 26,000-pound limitation. Accepting as true Mize’s allegation that UPS is a “motor carrier,” and noting that Defendants have submitted no evidence to contradict that allegation, the Court finds that § 230.24(A)(1) is irrelevant for purposes of assessing LMIC’s potential liability in this action. [FN2]

FN2. Even assuming, arguendo, that UPS were a “private carrier,” as that term is defined in Okla. Stat. tit. 47, § 230.23(9), and accepting as true Defendants’ assertion that the “1996 Grumman truck” weighs less than 26,000 pounds, the Court would not find that LMIC is immune from liability based on the weight restriction of § 230.24(A)(1). To do that, the Court would have to construe § 230.30 as a regulatory enactment of the Corporation Commission. Section § 230.30, however, is clearly an act of the Oklahoma Legislature that, like § 230.24, establishes the powers and duties of the Corporation Commission. See Okla. Stat. tit. 47, § 230.21 (historical and statutory notes) (setting out the purposes of the Motor Carrier Act of 1995). The Oklahoma Legislature has not restricted the scope of § 230.30(A) to a limited class of “carriers,” and Defendants’ attempt to manufacture such a restriction should be recognized and rejected for what it is.

For all of the above-stated reasons, the Court finds that Defendants’ motion to dismiss or for summary judgment should be denied.

C. Bifurcated Trial

Finally, the Court considers Defendants’ alternative request for a bifurcated trial, one in which only UPS would appear as a party defendant. Defendants make this request out of fear that UPS will be prejudiced at trial if the jury is apprised of the fact that the company has insurance.

In support of their prejudice argument, Defendants cite a single Oklahoma Supreme Court case, Tidmore v. Fullman, 646 P.2d 1278 (Okla.1982). In that case, the Oklahoma Supreme Court determined, among other things, that the trial court committed reversible error by permitting the plaintiff to reference the defendant’s insurance coverage at trial. 646 P.2d at 1281-82. In so ruling, the court emphasized the potential for undue prejudice that arises whenever a jury is advised that a defendant is protected by liability insurance. Id. at 1281 (citing Missouri, Kan. & Okla. Transit Lines, Inc. v. Baker, 393 P.2d 868, 869 (Okla.1964) and Redman v. McDaniel, 333 P.2d 500 (Okla.1958)). Key to the court’s ruling, however, was the fact that the plaintiff possessed no statutory entitlement to sue the defendant’s insurer:

[W]here the fact of liability insurance coverage is brought before the jury unnecessarily or forcefully where liability insurance coverage is not legislatively mandated and where the insurer has no direct liability to the claimant, such jury revelations are, as a matter of law, prejudicial, and if the insured is or might have been harmed thereby, reversible error.

646 P.2d at 1281 (emphasis added).

In the instant action, UPS is legislatively mandated under § 230.30(A) to maintain liability insurance coverage; and pursuant to the same section, LMIC is directly liable to Mize in the event that judgment is entered against UPS. Under these circumstances, and in accordance with Tidmore, the Court finds that Defendants’ claim of undue prejudice is unwarranted.

This conclusion is supported by a Tenth Circuit opinion addressing the identical question of prejudice at issue here. In Blanke, the plaintiffs commenced a negligence action against a motor carrier and its insurer pursuant to Okla. Stat. tit. 47, § 169, the predecessor to § 230.30. 152 F.3d at 1226-28. Before trial, the defendants moved in limine to exclude any references to the insurer on the grounds of relevance and prejudice. The district court denied the motion, noting that § 169 creates a direct cause of action against an insurer, and finding that, as a consequence, “the general rule against references to liability insurance does not apply.” Id. at 1228 (citing district court’s order). The case proceeded to trial and judgment was entered in the plaintiffs’ favor. Id. The defendants appealed, “strenuously argu[ing] that prejudicial error occurred when the district judge permitted the references to the existence of liability insurance and [the insurer’s] presence as a defendant.” Id. at 1229. The Tenth Circuit affirmed, distinguishing Tidmore, the case primarily relied upon by the defendants, id. at 1230, and holding that “Section 169 has been recognized as creating a right to a joint action by an injured party against a motor carrier and its insurer, … and in such actions the general rule against references to liability insurance does not apply.” Id. at 1231 (citation omitted). In reaching its decision, the court quoted Okla. Transp. Co. v. Claiborn, 434 P.2d 299 (Okla.1967) for the following proposition:

The Legislature, by authorizing the joinder as party defendants a motor carrier and its insurance carrier, in effect determined that when the liability insurance policy or bond is filed and the certificate of convenience or necessity is issued, no prejudice results from such joinder. Stated in another way, the Legislature by authorizing the joinder of the insurance carrier, has in effect determined that knowledge of insurance liability is not prejudicial to the right of the motor carrier or to its insurance carrier.

Id. (quoting Claiborn, 434 P.2d at 303).

Based on the Tenth Circuit’s reasoning and result in Blanke, a case that is in many ways factually analogous to the case at bar, the Court finds that the Oklahoma Legislature has in essence created a presumption that a joint action against insurer and insured is a fair and proper procedure for litigating disputes falling within the scope of § 230.30(A). The Court finds nothing remarkable about the facts of this case that set it apart from any other case in which a joint action is the presumptively fair and proper litigation procedure, and the Court therefore declines to depart from that procedure here. Defendants’ motion for bifurcated trial will be denied.

IV. Conclusion

Accordingly, the Court finds that Defendants’ Motion to Dismiss, Motion for Summary Judgment, or In the Alternative Bifurcate Liberty Mutual Insurance Company [docket no. 19] should be, and now hereby is, DENIED in its entirety.

IT IS SO ORDERED.

 

Lexington Ins. Co. v Daybreak Express

United States District Court,

S.D. Texas, Houston Division.

LEXINGTON INSURANCE CO., Plaintiff,

v.

DAYBREAK EXPRESS, INC., Defendant.

No. Civ.A. H-05-0820.

June 24, 2005.

MEMORANDUM OPINION AND ORDER

 

LAKE, J.

Pending before the court is Plaintiff, Lexington Insurance Company, As Subrogee of Burr Computer Environments, Inc.’s Motion for Remand (Docket Entry No. 6). For the reasons discussed below, the court will grant the motion to remand.

I. Background

Plaintiff, Lexington Insurance Co., filed this suit in the 333rd Judicial District of Harris County, Texas. According to the original petition, defendant, Daybreak Express, Inc., agreed through an agent to pay Burr Computer Environments, Inc. $166,655 in order to settle claims for damage to “a load of sensitive electrical equipment” Daybreak had delivered to Burr. [FN1] Daybreak, however, “subsequently refused to fund the settlement.” [FN2] Lexington, which reimbursed Burr for its losses and became its subrogee, asserts a breach of contract claim based on Daybreak’s failure to honor the settlement agreement. [FN3] Lexington has not alleged any other cause of action.

FN1. Plaintiff’s Original Petition at p. 2, attached to Notice of Removal, Docket Entry No. 1.

FN2.

Id.

FN3. Id. at 3.

On March 15, 2005, Daybreak filed a notice of removal. Daybreak argues that this court has jurisdiction over the case because “it is a civil action pending in the State Court against a common carrier to recover damages for alleged delay, loss or injury to a shipment arising under” federal statute. [FN4]

FN4. Notice of Removal, Docket Entry No. 1, at ¶ 6.

II. Standard of Review

28 U.S.C. § 1447(c) provides two grounds for remand: (1) a defect in removal procedure and (2) lack of subject matter jurisdiction. Cuellar v. Crown Life Ins. Co., 116 F.Supp.2d 821, 825 (S.D.Tex.2000). Lexington seeks remand on the grounds that this court lacks subject matter jurisdiction.

The defendant may remove to federal court only state-court actions that originally could have been filed in federal court. Caterpillar Inc. v. Williams, 482 U.S. 386, 107 S.Ct. 2425, 2429, 96 L.Ed.2d 318 (1987). Absent diversity, removal is only appropriate for claims within the district courts’ federal question jurisdiction. 28 U.S.C. § 1331. Federal question jurisdiction extends to “all civil actions arising under the Constitution, laws, or treaties of the United States.” 28 U.S.C. § 1331. Generally, the presence or absence of federal-question jurisdiction is determined according to the “well-pleaded complaint rule,” which finds federal jurisdiction only when a federal question is presented on the face of the plaintiff’s properly pleaded complaint.

Caterpillar Inc., 107 S.Ct. at 2429. The “complete pre-emption” doctrine is an “independent corollary” to the well-pleaded complaint rule. Id. at 2430. It recognizes that a federal statute may have such preemptive force as to convert a claim purporting to be based on state law into one stating a federal claim for purposes of the well-pleaded complaint rule. Id.

When the jurisdiction of the court is challenged the party seeking to invoke federal jurisdiction has the burden of establishing the existence of subject matter jurisdiction. Estate of Martineau v. ARCO Chem. Co., 203 F.3d 904, 910 (5th Cir.2000). Removal jurisdiction “raises significant federalism concerns” and must therefore be strictly construed. Willy v. Coastal Corp., 855 F.2d 1160, 1164 (5th Cir.1988). Ambiguities or doubts are to be resolved against removal. Value Recovery Group, Inc. v. Hourani, 115 F.Supp.2d 761, 765 (S.D.Tex.2000).

III. Analysis

Daybreak concedes that a federal claim does not appear on the face of the original petition, but argues that federal jurisdiction is nevertheless proper under the complete preemption doctrine. [FN5] Daybreak cites Hoskins v. Bekins Van Lines, 343 F.3d 769 (5th Cir.2003), where the Fifth Circuit applied this doctrine to conclude that a plaintiff’s state law claims against a common carrier for loss or damage to her personal property arose under federal law. [FN6] Id. at 771, 778. The court was persuaded that 49 U.S.C. § 14706–the Carmack Amendment to the federal Interstate Commerce Act–provides the exclusive cause of action for loss or damages to goods arising from the interstate transportation of those goods by a common carrier. Id. at 778. Daybreak suggests that this case falls squarely under Hoskins. [FN7]

FN5. Daybreak Express, Inc.’s Response to Plaintiff’s Motion to Remand, Docket Entry No. 7, pp. 1-3.

FN6. Id. at 3-6.

FN7. See id. at 8.

Daybreak’s reliance on Hoskins is misplaced. As the Hoskins court recognized, the Carmack Amendment’s preemptive effect derives from Congress’s purpose in enacting it: to provide a uniform, national remedy against common carriers, which were

being subjected to such a diversity of legislative and judicial holding that it was practically impossible for a shipper engaged in a business that extended beyond the confines of his own State, or for a carrier whose lines were extensive, to know, without considerable investigation and trouble, and even then oftentimes with but little certainty, what would be the carrier’s actual responsibility as to goods delivered to it for transportation from one State to another.

Id. at 776 (quoting Adams Express Co. v. Croninger, 226 U.S. 491, 33 S.Ct. 148, 57 L.Ed. 314 (1913)). The Carmack Amendment therefore supersedes the “special regulations and policies of particular States upon the subject of the carrier’s liability for loss or damage to interstate shipments.” Id. at 777 (quoting Missouri, K. & T.R. Co. of Tex. v. Harris, 234 U.S. 412, 34 S.Ct. 790, 58 L.Ed. 1377 (1914)). The Hoskins plaintiff’s state-law claims were properly construed as arising under the Carmack Amendment because the plaintiff sought to hold her carrier responsible for damage incurred in the shipment of property from Texas to Virginia.

In the present case, by contrast, Lexington does not seek to impose liability on Daybreak for damages arising from the interstate transport of property. Instead, Lexington seeks to enforce an agreement it alleges Daybreak entered into in order to settle claims for damages to a shipment of electrical equipment. Resolution of this contract claim does not turn on the rights and responsibilities of Daybreak as a carrier in interstate commerce. The point of the alleged settlement agreement was precisely that Lexington’s subrogor would not pursue the claims that may fall under the Carmack Amendment. [FN8] Because this is not a suit to recover for loss or damage to property against a carrier but rather one to enforce a settlement agreement, the case will be remanded to state court.

FN8. Daybreak asserts that “[e]very federal circuit now agrees that breach of contract claims are preempted” by the Carmack Amendment. Id. But Daybreak misses the subtlety evident in the quotation it chooses to support this claim:

[T]he Carmack Amendment was intended by Congress to create a national uniform policy regarding the liability of carriers under a bill of lading for goods lost or damaged in shipment. Allowing a shipper to bring common law breach of contract or negligence claims against a carrier for such loss or damage conflicts with this policy.

Shao v. Link Cargo (Taiwan) Ltd., 986 F.2d 700, 706 (4th Cir.1993) (emphasis added).

Lexington seeks to recover in contract not for loss or damage to the electrical equipment but rather for breach of Daybreak’s alleged promise to settle those claims for the specified sum. Daybreak’s remaining argument that this cannot be a suit for breach of a settlement agreement because no agreement was ever reached addresses the merits of the claim and is irrelevant to whether the complaint presents a federal question. See Daybreak Express, Inc.’s Response to Plaintiff’s Motion to Remand, Docket Entry No. 7., pp. 9-11.

IV. Order

For the reasons stated above, Plaintiff, Lexington Insurance Company, As Subrogee of Burr Computer Environments, Inc.’s Motion for Remand (Docket Entry No. 6) is GRANTED, and this action is REMANDED to the 333rd District Court of Harris County, Texas. The Clerk will provide a copy of this Memorandum Opinion and Order to the parties and to the District Clerk of Harris County, Texas.

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