Boggs v. Lewis

• Decision Date: 15 December 1988
• Docket Number: No. 87-4073,87-4073
• Citation: 863 F.2d 662
• Parties: Sheila BOGGS, now known as Sheila Mayes, Plaintiff-Appellant, v. Nancy LEWIS; Safeco Insurance Companies, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 662

863 F.2d 662

57 USLW 2380

Sheila BOGGS, now known as Sheila Mayes, Plaintiff-Appellant, v. Nancy LEWIS; Safeco Insurance Companies, Defendants-Appellees.

No. 87-4073.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Oct. 5, 1988.

Decided Dec. 15, 1988.

Edward G. Beaudett, Knight, Dahood, McLean & Everett, Anaconda, Mont., for plaintiff-appellant.

P. Keith Keller, Keller, Reynolds, Drake, Sternahgen & Johnson, P.C., Helena, Mont., Shelton C. Williams, Williams Law Firm, P.C., Missoula, Mont., for defendants-appellees.

Appeal from the United States District Court for the District of Montana.

Before FLETCHER, BOOCHEVER and TROTT, Circuit Judges.

FLETCHER, Circuit Judge:

This case arises out of an automobile collision between cars driven by Sheila Boggs-Mayes (Boggs) and Nancy Lewis (Lewis). Boggs sued Lewis for negligence and sued Lewis' insurer, Safeco Insurance Company ("Safeco"), for its bad faith refusal to settle a claim in violation of Montana Code Annotated (M.C.A.) Sec. 33-18-201(6), which imposes liability on insurers who "neglect to attempt in good faith to effectuate proper, fair, and equitable settlements of claims in which liability has become reasonably clear." The jury awarded zero damages against Lewis. The district court then granted Safeco's motion for summary judgment. Boggs appeals on a number of grounds. We have jurisdiction pursuant to 28 U.S.C. Sec. 1291. We affirm.

I

On July 7, 1981, Boggs' and Lewis' vehicles collided in Butte, Montana. Lewis has always conceded that she was responsible for the accident.

Boggs filed suit against Lewis and Safeco in state court in Montana on January 26, 1984. Boggs and Lewis are both citizens of Montana. Safeco is an out-of-state corporation.

Safeco removed the entire case to the United States District Court for the District of Montana pursuant to 28 U.S.C. Sec. 1441(c). The district court then granted the defendants' motion for separate trials, although the court ordered that both claims would be tried back-to-back before the same jury.

Over two years later, Boggs filed a motion to remand the claim against Lewis. The motion was denied on October 30, 1986.

The jury awarded Boggs zero damages in her claim against Lewis. The court denied Boggs' motion for a new trial. The court then granted Safeco's motion for summary judgment.

The principal factual dispute during the trial pertained to the cause of Boggs' many physical and psychological problems. Boggs claims that her problems are the result of the July 7 collision. She introduced supporting medical testimony at trial. Lewis introduced evidence suggesting that the physical impact of the collision was minimal and that Boggs suffered from her current ailments prior to the collision.

II

Boggs contends that the district court erred in removing her case under 28 U.S.C. Sec. 1441(c). Section 1441(c) permits removal of an entire case where the removable claim is separate and independent from the otherwise non-removable claims. Boggs argues that her negligence claim against Lewis and her bad faith claim against Safeco are not "separate" because they allege a single wrong--the failure to provide compensation for the injuries she suffered. Further, she argues that these claims are not independent because a bad faith claim can only succeed if liability for the underlying tort is first established.

This court reviews a district court's determination of subject matter jurisdiction de novo. Carpenters Southern California Administration Corp. v. Majestic Housing, 743 F.2d 1341, 1343 (9th Cir.1984). This court strictly construes the removal statute against removal jurisdiction. Takeda v. Northwestern National Life Insurance Co., 765 F.2d 815, 818 (9th Cir.1985). In assessing whether a plaintiff's claims were properly removable under Sec. 1441(c), we look to the plaintiff's pleadings. American Fire & Casualty Co. v. Finn, 341 U.S. 6, 14, 71 S.Ct. 534, 540, 95 L.Ed. 702 (1950).

The leading case interpreting Sec. 1441(c) remains American Fire & Casualty Co. v. Finn, 341 U.S. 6, 71 S.Ct. 534, 95 L.Ed. 702 (1951). In Finn, the Court held that the plaintiff's claims against two insurance companies and an insurance agent were not "separate" because these claims alleged "a single wrong." The Court reached this conclusion in part because "[t]he allegations [in the complaint against the first defendant] involve substantially the same facts and transactions as do the allegations [in the complaint against the other defendants]." Id. at 16, 71 S.Ct. at 541. By contrast, Boggs' claims against Lewis and Safeco involve substantially different facts and transactions. Unlike the negligence claim against Lewis, the claim against Safeco "primarily involves the insurer's conduct and other events occurring after the automobile accident." Bailey v. Scholler, 630 F.Supp. 337, 339 (D.Mont.1986) (holding that a plaintiff's negligence claim against a driver and her bad faith claim against the driver's insurer under M.C.A. Sec. 33-18-201(6) are separate and independent for purposes of 28 U.S.C. Sec. 1441(c)).

In Finn, the Supreme Court also based its finding of "a single wrong" on the fact that the plaintiff sought the same relief from each of the defendants, "compensation for the loss on the property." Finn, 341 U.S. at 14, 71 S.Ct. at 540. Unlike the plaintiff in Finn, Boggs seeks markedly different relief in each of her claims. In her negligence claim against Lewis, Boggs seeks compensatory damages for the medical expenses and loss of wages and earning capacity that allegedly resulted from injuries she suffered during the collision. In her bad faith claim against Safeco, Boggs seeks compensatory damages for the emotional distress inflicted on her by reason of Safeco's refusal to act in good faith and punitive damages for this refusal. Because Boggs' claims involve substantially different transactions and different relief, we conclude that these laims are separate for purposes of Sec. 1441(c). ¹

We also conclude that Boggs' claims are "independent" for purposes of Sec. 1441(c). Boggs argues that Fode v. Farmers Insurance Exchange, 719 P.2d 414 (Mont.1986), establishes that under Montana law a bad faith insurance claim is dependent on the underlying tort claim. In Fode, the Montana Supreme Court held that a bad faith case may not proceed beyond filing "until the liability issues of the underlying cases have been determined either by settlement or judgment." Id. at 417. While state law "is relevant in diversity cases in determining the nature of the claims to which the federal [separate and independent] test is applied," 14A Wright & Miller, Federal Practice & Procedure, Sec. 3724, p. 396-97, Fode cannot control this case since it was decided well after the removal of Boggs' action. With a limited exception involving indispensable parties, the clear rule is that, if removal was proper at the time of removal, federal jurisdiction is not defeated by later changes in the law or developments in the suit. Lopez v. General Motors Corp., 697 F.2d 1328, 1332 (9th Cir.1983); Watkins v. Grover, 508 F.2d 920, 921 (9th Cir.1974).

The controlling case at the time of removal was Klaudt v. Flink, 202 Mont. 247, 658 P.2d 1065 (1983). In Klaudt, the Montana Supreme Court held that a bad faith claim under M.C.A. Sec. 33-18-201(6) may proceed before, after, or jointly with the underlying negligence claim. In reaching this holding, the court reasoned that the two claims involve different issues and thus a plaintiff's failure to prove one of the claims does not preclude her success with the other:

We see no problems with contrary findings in the two actions, the doctrine of res judicata, collateral estoppel, or the like because different issues are involved in the two cases. The issue in the action against the insurer for violation of the insurance code is simply an action to determine whether or not the insurer violated its duty of fair dealing in settlement negotiations with the claimant, while the action to determine the ultimate liability of the driver rests on considerations of negligence and comparative negligence.

The obligation to negotiate in good faith and to promptly settle claims does not mean that liability has been determined. Section 33-18-201(6) states that the insurer's obligation arises when liability has become "reasonably clear." In evaluating the insurance case, the jury must determine whether the insured negotiated in good faith given the facts that it then had. This consideration is separate and apart from the jury's consideration of the merits of any given action.

Klaudt, 658 P.2d at 1068.

At the time Boggs' case was removed, Montana law thus treated a negligence claim against a driver and a bad faith claim against that driver's insurer as independent. See Bailey, 630 F.Supp. at 339 (reaching same conclusion). Compare Moore v. United Services Auto Association, 819 F.2d 101, 104 (5th Cir.1987) (in holding that tort and bad faith claims are independent under Mississippi law, the court relied on a Mississippi case suggesting that a plaintiff's failure to obtain a directed verdict on policy liability normally bars submission of his bad faith claim to the jury).

III

Boggs next argues that, even if removal was initially proper, the district court should have remanded the negligence claim against Lewis. According to Boggs, the district court abused its discretion by failing to remand the negligence claim because a remand would have served the interests of fundamental fairness and judicial economy. 28 U.S.C. Sec. 1441(c) states that after removal of an action "the district court may determine all issues therein, or, in its discretion, may remand all matters not otherwise within its original jurisdiction." In its order denying Boggs' motion to remand the negligence claim, the district court cited judicial economy as its reason for choosing not "to split this action between state and federal court...