O'Leary v. Liberty Mut. Ins. Co.

• Decision Date: 27 September 1990
• Docket Number: No. 90-1344,90-1344
• Citation: 923 F.2d 1062
• Parties: O'LEARY, Robert and O'Leary, Patricia, h/w, Appellants, v. LIBERTY MUTUAL INSURANCE CO., Appellee. . Submitted Under Third Circuit Rule 12(6)
• Court: U.S. Court of Appeals — Third Circuit

Page 1062

923 F.2d 1062

O'LEARY, Robert and O'Leary, Patricia, h/w, Appellants, v. LIBERTY MUTUAL INSURANCE CO., Appellee.

No. 90-1344.

United States Court of Appeals, Third Circuit.

Submitted Under Third Circuit Rule 12(6)

Sept. 27, 1990.

Decided Jan. 22, 1991.

Jerome J. Verlin, Verlin & Verlin, Bala Cynwyd, Pa., for appellants.

Lawrence W. Robinson, Thompson & Pennell, Philadelphia, Pa., for appellee.

Before SLOVITER, BECKER and WEIS, Circuit Judges.

OPINION OF THE COURT

BECKER, Circuit Judge.

Pursuing a claim under his employer's underinsured motorist coverage for injuries sustained in an accident occurring in the course of his employment, Robert O'Leary ("O'Leary") petitioned a state court to compel Liberty Mutual Insurance Co. ("Liberty Mutual") to appoint an arbitrator. The state court denied the petition on the ground that workmen's compensation is the exclusive remedy for injured employees by reason of Sec. 303(a) of the Pennsylvania Workmen's Compensation Act. O'Leary and his wife Patricia ("the O'Learys") then brought the instant diversity action in the district court seeking damages under the same policy. The district court granted summary judgment for Liberty Mutual, in light of the state court's order, on grounds of res judicata and collateral estoppel. The O'Learys appealed. Although we will affirm the district court's collateral estoppel determination, the appeal raises intricate questions regarding the applicability of that doctrine, and of the impact thereon of Sec. 28(2)(b) of the Restatement (Second) of Judgments, which concerns the effect of an intervening change in the law.

I. FACTS AND PROCEDURAL HISTORY

On April 24, 1986, while driving a vehicle owned by his employer, Perloff Brothers Inc. ("Perloff"), during the course of his employment, O'Leary was injured in a motor vehicle accident caused solely by the negligence of the other driver. Because his damages exceeded the coverage limits of the other driver's insurance policy, O'Leary made an underinsured motorist claim against Perloff's insurance carrier, Liberty Mutual. ¹ When Liberty Mutual denied coverage, O'Leary made a demand for arbitration and selected an arbitrator pursuant to the requirements of the policy. ² In its answer to O'Leary's petition, Liberty Mutual asserted that it was immune from liability to provide underinsured motorist benefits because, under Pennsylvania law, workmen's compensation is the exclusive remedy available for employees injured during the course and scope of their employment. See Pennsylvania Workmen's Compensation Act Sec. 303(a), 77 Pa.Stat.Ann. Sec. 481(a) (Purdon 1990). ³ Thus, Liberty Mutual argued, O'Leary's claim for coverage under Perloff's policy was barred as a matter of law and his petition to compel arbitration should be dismissed. The Court of Common Pleas agreed and entered an order denying O'Leary's petition, stating:

When Liberty Mutual failed to select its arbitrator, O'Leary filed a Petition to Compel Appointment of Arbitrator pursuant to 42 Pa.Cons.Stat.Ann. Sec. 7305 (Purdon 1982) in the Court of Common Pleas of Montgomery County, Pennsylvania.

And now, this 9th day of May, 1989, after review of the briefs, precedents and statutes and after oral argument from both counsel, it is ordered that plaintiff's petition to compel appointment of arbitrators is hereby denied inasmuch as we find this court has jurisdiction herein and that plaintiff's instant claim for underinsured motorist benefits brought against the defendant, plaintiff's employer's insurer, for injuries sustained by plaintiff while in the course and scope of his employment is not within the ambit of the subject arbitration provision as such claim is contrary to Section 303(a) of the Pennsylvania Workmen's Compensation Act, 77 P.S. Sec. 481(a) and therefore is barred by the Exclusive Remedy Doctrine. (See as instructive: Rocca v. Pennsylvania General Insurance Co., 358 Pa.Super. 67, 516 A.2d 772 (1986); Lewis v. School District Of Philadelphia; Pa. , 578 A.2d 862 (1988); Wagner v. National Indemnity Company, 492 Pa. 154, 422 A.2d 1061 (1980).

O'Leary v. Liberty Mutual Insurance Co., No. 89-1512 (Court of Common Pleas, Montgomery County, Pa., May 9, 1989) [hereinafter Order of May 9, 1989] (emphasis added).

O'Leary did not appeal the state court order. Instead, the O'Learys filed the present action in the district court for the Eastern District of Pennsylvania seeking to recover underinsured motorist benefits from Liberty Mutual. In its answer, Liberty Mutual stated that, as a result of the decision of the Court of Common Pleas in the earlier proceeding to compel arbitration, the O'Learys' action should be dismissed as barred by the doctrines of res judicata (claim preclusion) and/or collateral estoppel (issue preclusion). Liberty Mutual then moved for summary judgment. The O'Learys replied that res judicata and collateral estoppel were inapplicable, although their memorandum of law analyzed the case only in terms of the standards governing collateral estoppel. The district court granted Liberty Mutual's motion for summary judgment, holding that the O'Learys' suit was both barred by res judicata and collaterally estopped. This appeal followed.

II. PRECLUSION

In determining whether the O'Learys' suit before the district court is barred by res judicata or collaterally estopped because of the judgment of the Court of Common Pleas, we must look to the law of the adjudicating state. Gregory v. Chehi, 843 F.2d 111, 116 (3d Cir.1988). Because

the underlying issues solely involve questions of law, our review is plenary.

A. Res Judicata

As the district court noted, Pennsylvania law prescribes four requirements for the invocation of res judicata. In particular, the two actions must share an identity of the: (1) thing sued upon or for; (2) cause of action; (3) persons and parties to the action; and (4) capacity of the parties to sue or be sued. McNasby v. Crown Cork & Seal Co., Inc., 888 F.2d 270, 276 (3d Cir.1989), cert. denied, --- U.S. ----, 110 S.Ct. 1783, 108 L.Ed.2d 784 (1990). It is not seriously in dispute that conditions (1), (3), and (4) are satisfied in this instance. Condition (2) is quite another matter.

The district court, in holding that the O'Learys' action was barred by res judicata, reasoned that the O'Learys were seeking "to obtain the same insurance coverage sought previously." By this, we take the district court to mean that the causes of action in the two suits were identical. We disagree. There is no bright-line test for determining when the causes of action in two suits are identical for res judicata purposes. We have, however, identified several criteria relevant to making such a determination. See United States v. Athlone Industries, Inc., 746 F.2d 977 (3d Cir.1984). These include:

(1) whether the acts complained of and the demand for relief are the same (that is, whether the wrong for which redress is sought is the same in both actions); (2) whether the theory of recovery is the same; (3) whether the witnesses and documents necessary at trial are the same (that is, whether the same evidence necessary to maintain the second action would have been sufficient to support the first); and (4) whether the material facts alleged are the same.

Id. at 984 (citations omitted).

We think it plain that none of these similarities exist with respect to the two causes of action at issue here. The wrongs for which the O'Learys sought redress are different in the two actions. In the Court of Common Pleas, O'Leary simply sought to force Liberty Mutual to arbitrate the underlying dispute, as it purportedly was obligated to do under the policy. In the present action, by contrast, the O'Learys directly seek an award of underinsured motorist benefits. The theories of recovery also differ in the two suits. O'Leary did not seek to recover damages in the first action. He only requested that the court compel Liberty Mutual to arbitrate. In the district court action, however, the O'Learys seek to recover underinsured motorist benefits on the theory that they are entitled to them under the terms of the policy.

No witnesses were necessary in the first action. O'Leary simply needed to produce the policy. In the present action, a variety of witnesses and documents would no doubt have been necessary to establish the amount payable to the O'Learys under the policy. Finally, the material facts alleged differ in the two suits. The only facts alleged in the first suit were that a policy of insurance existed between the parties and that it obligated Liberty Mutual to arbitrate O'Leary's claim. Obviously, many more facts, including, for example, the cause and extent of O'Leary's injuries, would have been necessary had the district court action proceeded to the merits. In sum, the criteria enunciated by Athlone Industries compel the conclusion that the causes of action in the two suits were not the same. The district court action thus was not barred by res judicata.

B. Collateral Estoppel

The district court ruled in the alternative that the O'Learys' action was collaterally estopped because the issue whether Sec. 303(a) of the Workmen's Compensation Act bars their claim for underinsured motorist benefits had in fact already been determined by the Court of Common Pleas. Under Pennsylvania law, which adopts the requirements of the Restatement (Second) of Judgments, a prior determination of a legal issue is conclusive in a subsequent action between the parties on the same or a different claim when (1) the issue was actually litigated; (2) the issue was determined by a valid and final judgment; and (3) the The issue was "actually litigated" notwithstanding O'Leary's assertion that he neither raised the issue in his petition to compel arbitration in the Court of Common Pleas nor addressed it in his brief. An issue is "actually litigated" when it "is properly raised, by the pleadings or otherwise, and is submitted for...