Draggin' Y Cattle Co. v. Addink

• Decision Date: 03 May 2016
• Docket Number: No. DA 15–0354.,DA 15–0354.
• Parties: DRAGGIN' Y CATTLE COMPANY, INC. ; and Roger and Carrie Peters, Plaintiffs, Appellees, and Cross–Appellants, v. Larry ADDINK; and Junkermier, Clark, Campanella, Stevens, P.C., Defendants and Appellees, and New York Marine and General Insurance Company, Intervenor and Appellant.
• Court: Montana Supreme Court

383 Mont. 243

371 P.3d 970

2016 MT 98

DRAGGIN' Y CATTLE COMPANY, INC. ; and Roger and Carrie Peters, Plaintiffs, Appellees, and Cross–Appellants

v.Larry ADDINK; and Junkermier, Clark, Campanella, Stevens, P.C., Defendants and AppelleesandNew York Marine and General Insurance Company, Intervenor and Appellant.

No. DA 15–0354.

Supreme Court of Montana.

May 3, 2016.

OPINION AND ORDER

¶ 1 New York Marine and General Insurance Company appeals the order of the Eighteenth Judicial District Court, Gallatin County, denying its motion for discovery regarding the reasonableness of the stipulated settlement between Roger and Carrie Peters and Draggin' Y Cattle Company, Inc., (collectively Peters) and Junkermier, Clark, Campanella, Stevens, P.C., and Larry Addink (collectively Junkermier). Peters cross-appeal the District Court's dismissal of their cross-claim seeking a declaration that New York Marine is liable to pay the stipulated settlement. While the parties raise multiple issues on appeal, we restate the dispositive issue as follows:

Whether New York Marine timely raised its disqualification claim, and if so, whether the claim should be considered on the merits because the judge did not disclose circumstances that could potentially cause the judge's impartiality to be reasonably questioned.

¶ 2 We remand for further proceedings.

PROCEDURAL AND FACTUAL BACKGROUND

¶ 3 This matter has been before this Court on a previous occasion. Draggin' Y Cattle Co. v. Addink, 2013 MT 319, 372 Mont. 334, 312 P.3d 451

(hereafter Draggin' Y I ). Because the underlying suit's background facts are delineated in Draggin' Y I, we restate the facts only briefly.

¶ 4 In January 2011, Peters filed a complaint against Junkermier alleging multiple counts stemming from tax services Junkermier performed for Peters. Junkermier tendered the defense to New York Marine, which insured Junkermier under a professional liability policy. Thereafter, New York Marine defended Junkermier subject to a reservation of rights.

¶ 5 Junkermier eventually moved for summary judgment in the underlying action on the ground that Peters's claims were barred by the statute of limitations. The District Court granted Junkermier's motion for summary judgment in December 2012 and Peters appealed. In Draggin' Y I, we concluded that Peters's claims were timely filed. Draggin' Y I, ¶ 51. Accordingly, we reversed the District Court's order granting Junkermier summary judgment and remanded for further proceedings. Draggin' Y I, ¶ 51.

¶ 6 On remand, Peters filed a motion for substitution of district court judge pursuant to § 3–1–804(12), MCA

. Judge Huss assumed jurisdiction in December 2013. Litigation continued for nearly a year and then on November 13, 2014, Peters and Junkermier entered into a settlement agreement and stipulation for entry of judgment without New York Marine's participation. Shortly thereafter, the District Court issued an order scheduling a hearing on the stipulated settlement's reasonableness.¹

¶ 7 Prior to the hearing, New York Marine filed a motion to intervene and request for stay, discovery, and status conference. On December 15, 2014, the District Court granted New York Marine's motion to intervene but denied its motions for additional discovery and to stay the reasonableness hearing. The court held the reasonableness hearing that same day. At the hearing, Peters filed a cross-claim seeking a declaration that New York Marine was liable to pay the stipulated settlement under the insurance contract.

¶ 8 On March 5, 2015, the District Court entered findings of fact, conclusions of law, and an order finding that the stipulated settlement amount was reasonable. On May 6, 2015, the court entered judgment in the amount of $10,000,000 in Peters's favor and further ordered that Junkermier was not liable for the stipulated settlement. The court dismissed Peters's cross-claims on June 5, 2015, on the ground that the federal district court retained jurisdiction over all claims filed by New York Marine in the federal court. New York Marine appeals the District Court's order denying its motion for discovery on the reasonableness of the settlement. Peters cross-appeal the June 5 order of dismissal.

¶ 9 On appeal, New York Marine asserts for the first time that Judge Huss erred by not disclosing an apparent conflict of interest. New York Marine claims that the alleged conflict stems from a complaint that a former court reporter filed against Judge Huss in February 2014. In October 2014— during the pendency of this case—Judge Huss individually entered into a stipulation and confession of judgment. The Office of the Court Administrator (OCA) had been paying for Judge Huss's defense and Judge Huss allegedly entered into the stipulated settlement without the OCA's participation or knowledge. On November 17, 2014—four days after Peters and Junkermier entered into their stipulated settlement—the OCA filed a complaint against Judge Huss in a Helena district court seeking a declaration that it had no duty to defend or indemnify him. In its complaint, the OCA specifically contested the stipulated settlement amount's reasonableness. Judge Huss did not disclose the stipulated settlement or his dispute with the OCA to the parties in the case at issue. Judge Huss resigned effective January 1, 2016.

STANDARD OF REVIEW

¶ 10 We recently adopted a standard of review for analyzing judicial disqualification under the Montana Code of Judicial Conduct. State v. Dunsmore, 2015 MT 108, ¶ 10, 378 Mont. 514, 347 P.3d 1220

. Our “inquiry into disqualification requires an objective examination of the circumstances surrounding” potential judicial disqualification and “an accurate interpretation” of the Montana Code of Judicial Conduct. Dunsmore, ¶ 10. Accordingly, we review judicial disqualification questions de novo, “determining whether the lower court's decision not to recuse was correct under the Montana Code of Judicial Conduct.” Dunsmore, ¶ 10.

DISCUSSION

¶ 11 Whether New York Marine timely raised its disqualification claim, and if so, whether the claim should be considered on the merits because the judge did not disclose circumstances that could potentially cause the judge's impartiality to be reasonably questioned.

¶ 12 On appeal, New York Marine asserts that Judge Huss's potential conflict of interest raises reasonable questions regarding his impartiality. New York Marine contends that the “undeniable parallels between Judge Huss' interests in the litigation he was (and still is) defending in his personal capacity and [Peters's] interests in not permitting [New York Marine] to meaningfully challenge the stipulated settlement” create “an apparent and significant conflict of interest.” As such, New York Marine claims that Judge Huss was required, at a minimum, to disclose his apparent conflict of interest to the parties under the Montana Code of Judicial Conduct. New York Marine accordingly asserts that Judge Huss erred by failing to disclose the potential grounds for disqualification. Finally, New York Marine claims that the issue is properly before this Court on appeal because it “only became aware of the facts giving rise to Judge Huss' potential bias in May 2015, when it discovered that Judge Huss had submitted a letter of resignation (dated April 21, 2015 and effective January 1, 2016) and investigated the circumstances behind that resignation.”

¶ 13 Peters counter that the issue is not properly before this Court because New York Marine raises it for the first time on appeal. Peters contend that the information regarding the potential conflict of interest is not in the record and that New York Marine may not address additional matters on appeal because it is bound by the record before the District Court. Accordingly, Peters urge this Court to “strike all such material” concerning the potential conflict of interest. They assert further that New York Marine had the opportunity to raise the issue in the District Court because the judgment did not become final until Judge Huss entered the order dismissing Peters's cross-claims on June 5, 2015—a month after New York Marine claims that it discovered the information on which it bases its disqualification argument. Finally, Peters claim that Judge Huss's “personal experience” does not require disqualification under the Montana Code of Judicial Conduct. Peters assert that under New York Marine's “formulation, a judge who is in a car accident should not preside over a car accident case, because there may be an ‘appearance of impropriety’ based on the judge's personal experience.”

¶ 14 New York Marine requests that we take judicial notice of a number of exhibits —which are attached to its opening brief on appeal—regarding Judge Huss's stipulated settlement and the ensuing dispute with the OCA. The OCA's complaint for declaratory judgment against Judge Huss is a record of a court of this state of which we take judicial notice. M. R. Evid. 202(b)(6), (d)

. See

Farmers Plant Aid, Inc. v. Fedder, 2000 MT 87, ¶¶ 26–27, 299 Mont. 206, 999 P.2d 315 (concluding that M. R. Evid. 202(b)(6) allows a court to take judicial notice of proceedings in other cases). The complaint alleges sufficient facts to inform our inquiry for purposes of this Opinion.

¶ 15 It is well established that we generally do not consider issues raised for the first time on appeal. Pilgeram v. GreenPoint Mortg. Funding, Inc., 2013 MT 354, ¶ 20, 373 Mont. 1, 313 P.3d 839

(citations omitted). This Court, however, reserves the power to consider an issue raised for the first time on appeal if the issue “affects the substantial rights of a litigant.” Cottrill v. Cottrill Sodding Serv., 229 Mont. 40, 42, 744 P.2d 895, 896 (1987) (quoting In the Matter of N.B., 190 Mont. 319, 323, 620 P.2d 1228, 1231 (1980)

) (internal quotations omitted). Accord

State v. Carter, 2005 MT 87, ¶ 13, 326 Mont. 427, 114 P.3d 1001 ; Eastman v. Atl. Richfield Co., 237 Mont. 332, 337, 777 P.2d 862, 865 (1989). “It is...