Federated Rural Elec. v. R.D. Moody & Associates

Decision Date02 November 2006
Docket NumberNo. 05-17184.,05-17184.
Citation468 F.3d 1322
PartiesFEDERATED RURAL ELECTRIC INSURANCE EXCHANGE, Plaintiff-Appellee, Cross-Appellant, v. R.D. MOODY & ASSOCIATES, INC. and MasTec North America, Inc., Defendants-Appellants, Cross-Appellees.
CourtU.S. Court of Appeals — Eleventh Circuit

Jerry A. Lumley, Lumley & Howell, LLP, Macon, GA, for Defendants-Appellants, Cross-Appellees.

D. Gregory Michell, J. Matthew Maguire, Jr., Balch & Bingham, LLP, Atlanta, GA, Hugh B. McNatt, McNatt & Greene, Vidalia, GA, for Plaintiff-Appellee, Cross-Appellant.

Appeals from the United States District Court for the Middle District of Georgia.

Before BLACK and HULL, Circuit Judges, and CONWAY,* District Judge.

PER CURIAM:

Plaintiff Federated Rural Electric Insurance Exchange ("Federated") and Defendants MasTec North America, Inc. ("MasTec") and R.D. Moody & Associates, Inc. ("Moody") appeal a summary judgment ruling issued in this subrogation case. Federated challenges the district court's determination that Federated's subrogation claim is barred, at least in part, by the Florida Insurance Guaranty Association Act ("FIGA"), Fla. Stat. §§ 631.50-.70. In turn, Moody and MasTec appeal the district court's suggestion that FIGA may not preclude Federated from recovering the portion of Federated's damages that exceeds the amount of Moody and MasTec's liability insurance coverage. We conclude that Georgia law controls this dispute and the district court erred in applying Florida law.

I. BACKGROUND

This lawsuit arises from an electrical accident that occurred in Washington County, Georgia. In May 2000, Thomas Smith was seriously injured when he contacted a downed power line owned by Washington Electric Membership Corporation ("WEMC"), a Georgia corporation, and constructed by Moody, a now-dissolved Florida corporation. MasTec, also a Florida company, is Moody's successor-in-interest by virtue of a merger that occurred in 1998.

Ultimately, Smith succumbed to his injuries. His surviving spouse brought a personal injury/wrongful death suit against WEMC and an engineering firm. Eventually, that case settled. Federated, WEMC's insurer, paid Smith's widow $6,500,000; the engineering firm paid $500,000. Moody did not participate in the settlement.

In July 2003, WEMC commenced the present action seeking indemnity and contribution from Moody and MasTec, on the asserted basis that Moody negligently constructed the power lines and utility poles involved in the accident. In early April 2005, Federated was substituted, by consent, for WEMC as the plaintiff in this suit, based on the fact that WEMC had assigned to Federated the former's right to seek recovery against Moody and MasTec. A few days following Federated's substitution, Moody and MasTec filed papers raising FIGA as a defense. Essentially, Moody and MasTec took the position that because Federated is a member of FIGA, and Moody and MasTec's insurer, Reliance Insurance Company ("Reliance"), is both a FIGA member and insolvent, Fla. Stat. § 631.54 bars Federated's claims. Section 631.54(3)(b) provides that "[m]ember insurers shall have no right of subrogation, contribution, indemnification, or otherwise, sought directly or indirectly through a third party, against the insured of any insolvent member."1 It is undisputed that both Federated and Reliance are FIGA members.

Thereafter, Moody and MasTec filed a motion for summary judgment, which included the FIGA argument. Federated countered that Georgia, not Florida, law applied and that its subrogation claim was permitted under Georgia law. Alternatively, Federated asserted that if Florida law did control, Moody and MasTec had waived the FIGA defense by not raising it in a timely manner.

The district court entered an order granting MasTec and Moody's motion for summary judgment on the basis of the FIGA defense. See Federated Rural Elec. Ins. Exch. v. R.D. Moody & Assocs., Inc., 391 F.Supp.2d 1228 (M.D.Ga.2005). After acknowledging that he was bound to apply Georgia's choice of law rules in this diversity case, the district judge proceeded to discuss those rules. Id. at 1230-31. Then, without explicitly stating why Florida law applied, the district court determined that Federated's subrogation claim was a "covered claim" under FIGA and it was barred by Fla. Stat. § 631.54(3)(b). Id. at 1231-32. The district court also found that FIGA and Georgia's counterpart law, the Georgia Insurers Insolvency Pool Act, O.C.G.A. §§ 33-36-1 to -19 ("GIIP"), did not differ in any way that application of FIGA would violate Georgia public policy. Id. at 1232. In fact, the district court stated: "Georgia's insolvency statute contains its own choice of law provision which provides that the sole recovery for claims other than those for workers' compensation or destruction of property `shall be under the insolvency fund or its equivalent of the state of residence of the insured.'" Id. (quoting O.C.G.A. § 33-36-10(a)(3)). "In this case," stated the district court, "that would be the State of Florida." Id. The district court thus concluded that FIGA prevented Federated from suing Moody and MasTec. Id. The court also determined that any claim by Federated against the insolvency pool itself would be time-barred under Florida's one-year statute of limitations applicable to such claims. Id.

The district court then discussed several Florida appellate opinions and concluded that it was "not entirely clear" whether FIGA barred Federated's subrogation claim in toto, or whether, instead, Federated could pursue that portion of its claim that exceeded the liability limits of the Reliance policy. Id. at 1232-33. Accordingly, the court granted Moody and MasTec's summary judgment motion "as to the applicability of FIGA," but also made findings pursuant to 28 U.S.C. § 1292(b) so that the parties could request interlocutory appellate review of the summary judgment order. Id. at 1233. This appeal ensued.

II. STANDARD OF REVIEW

Grants of summary judgment and choice of law determinations are both subject to de novo review. Brooks v. County Comm'n of Jefferson County, Ala., 446 F.3d 1160, 1161-62 (11th Cir.2006) (summary judgment); LaFarge Corp. v. Travelers Indem. Co., 118 F.3d 1511, 1514-15 (11th Cir.1997) (summary judgment involving choice of law ruling).

III. DISCUSSION
A. Choice of Law

This appeal turns on the choice-of-law issue: does Georgia substantive law control, or does Florida law apply?

In a case founded on diversity jurisdiction, the district court must apply the forum state's choice of law rules. McGow v. McCurry, 412 F.3d 1207, 1217 (11th Cir. 2005). Neither side disputes this proposition. In this case, the forum state is, of course, Georgia.

Under Georgia law,

[t]he traditional method of resolving choice-of-law issues is through a tripartite set of rules, which are lex loci contractus, lex loci delicti, and lex fori. Under the rule of lex loci contractus, the validity, nature, construction, and interpretation of a contract are governed by the substantive law of the state where the contract was made, except that where the contract is made in one state and is to be performed in another state, the substantive law of the state where the contract is performed will apply. General Elec. Credit Corp. v. Home Indem. Co., 168 Ga.App. 344, 349[], 309 S.E.2d 152[, 157] ([Ga.App.] 1983). Under the rule of lex loci delicti, tort cases are governed by the substantive law of the state where the tort was committed. Ohio Southern Express Co. v. Beeler, 110 Ga.App. 867, 868[], 140 S.E.2d 235[, 236] ([Ga.App.] 1965). Under the rule of lex fori, procedural or remedial questions are governed by the law of the forum, the state in which the action is brought. Menendez v. Perishable Distrib[s]., 254 Ga. 300, [302,] 329 S.E.2d 149[, 151] ([Ga.] 1985), [abrogated on other grounds by Posey v. Medical Center-West, Inc., 257 Ga. 55, 354 S.E.2d 417 (Ga.1987)].

Fed. Ins. Co. v. Nat'l Distrib. Co., Inc., 203 Ga.App. 763, 765, 417 S.E.2d 671, 673 (Ga. App.1992) (alterations added).

Since this case does not involve a procedural or remedial question, lex fori is not implicated. This narrows the choices to lex loci contractus and lex loci delicti.

Moody and MasTec urge application of the lex loci contractus rule based on the liability insurance policy issued by Reliance. Since that policy was delivered in Florida, it is considered "made" in that state. Fed. Ins. Co., 203 Ga.App. at 767, 417 S.E.2d at 674-75. We reject this argument. Federated's subrogation claim against Moody and MasTec cannot fairly be characterized as an action based on that insurance contract. While the policy might ultimately provide a source of funds to satisfy any judgment obtained against Moody and/or MasTec, Federated is not suing to recover for breach of that contract. Moreover, the terms of the Reliance policy are not in dispute, and this case does not otherwise involve the validity, nature, construction, or interpretation of that insurance contract.

The same can be said of the contracts between WEMC and Moody, under which Moody constructed the power line involved in the accident. Federated has not sued for breach of these contracts, either. Instead, Federated's subrogation claim seeks indemnity and contribution based on Moody's alleged negligence. Accordingly, the lex loci contractus doctrine does not apply.

We conclude that Federation's subrogation claim sounds in tort. To succeed on that claim, Federated must prove that Moody was negligent. A subrogation claim arising from a tort committed in Georgia is properly characterized as a tort claim for choice of law purposes, thereby mandating application of the lex loci delecti rule. Swain v. D & R Transp. Co., 735 F.Supp. 425, 427-28 (M.D.Ga.1990). Because the underlying tort occurred in Georgia, the substantive law of that state governs Federated's subrogation claim. The district court thus erred in applying Florida law.

B. Georgia Substantive Law

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