Nationwide Mut. Ins. Co. v. Liberatore

• Decision Date: 12 May 2005
• Docket Number: No. 04-15744.,04-15744.
• Citation: 408 F.3d 1158
• Parties: NATIONWIDE MUTUAL INSURANCE COMPANY, Plaintiff-Appellant, v. William John LIBERATORE; United States of America; Dollar Rent-A-Car Systems, Inc.; Sheri Leann Ivey, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

408 F.3d 1158

NATIONWIDE MUTUAL INSURANCE COMPANY, Plaintiff-Appellant, v. William John LIBERATORE; United States of America; Dollar Rent-A-Car Systems, Inc.; Sheri Leann Ivey, Defendants-Appellees.

No. 04-15744.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted April 13, 2005.

Filed May 12, 2005.

Ralph E. Laird, Auburn, CA, for the plaintiff-appellant.

Kristi C. Kapetan, Assistant United States Attorney, Fresno, CA, for the defendants-appellees.

Appeal from the United States District Court for the Eastern District of California; Lawrence J. O'Neill, Magistrate Judge, Presiding. D.C. No. CV-03-05903-LJO.

Before: NOONAN, THOMPSON, and RYMER, Circuit Judges.

THOMPSON, Senior Circuit Judge:

Nationwide Mutual Insurance Company appeals the district court's summary judgment in this insurance coverage dispute involving the United States government.¹ Underlying the coverage dispute is a state tort action arising out of an auto accident. The defendant driver, William John Liberatore, was insured by Nationwide, and at the time of the accident was an active duty member of the armed services of the United States. Under the terms of the Federal Tort Claims Act (FTCA), 28 U.S.C. §§ 1346(b), 2671-2680 (2004), because Liberatore was a federal employee, the federal government would have responsibility for indemnifying him if, at the time of the accident, he were acting within the scope of his employment. The district court determined that Liberatore was not acting within the scope of his employment, leaving Nationwide to indemnify Liberatore for any damages awarded in the underlying action. We have jurisdiction under 28 U.S.C. § 1291, and we affirm.

I FACTS AND PROCEEDINGS

On the morning of July 18, 2001, Liberatore, a Command Master Chief in the United States Navy, flew from Norfolk, Virginia to Los Angeles, California. Liberatore was traveling from his permanent duty station in Norfolk on temporary additional detached duty (TAD) travel orders which authorized him to travel via Los Angeles to Naval Air Weapons Station China Lake and Naval Air Weapons Station Point Mugu, and then to a Command Career Counselor Symposium in Nashville, Tennessee. According to the officer who authorized the TAD orders, Liberatore's travel to the bases in California was intended to achieve two purposes: first, to permit him to meet with his counterpart at the Pacific Fleet Airborne Early Warning Wing; and second, to permit him to visit and to consider accepting orders for his next permanent duty assignment to either China Lake or Point Mugu.

Although Liberatore's travel orders referenced the locations of his travel, the orders did not impose specific restrictions on his travel or activities. According to the authorizing officer, the orders implicitly contemplated that Liberatore would enjoy periods of liberty (i.e., free time) when he was not engaged in fulfilling the duties specified in his orders.

Liberatore understood that he would have some free time during his trip, and accordingly planned that upon his arrival in Los Angeles he would drive to Bakersfield, California, to meet a friend, Sheri Ivey. He intended to drive himself and Ivey to China Lake the next day, then to return Ivey to her home in Bakersfield. Thereafter, he planned to visit Point Mugu, as well as another unspecified base further north, and finally if time permitted, the Naval Air Station in San Diego.

According to this plan, upon his arrival in Los Angeles, Liberatore picked up a rental car from Dollar Rent-A-Car pursuant to a prearranged, pre-paid reservation made by his command. He left the airport and drove to Ivey's home in Bakersfield. Ivey was not home when he arrived, so he drove to a nearby Veterans of Foreign Wars post and drank three beers while he waited for her to come home. Liberatore then picked Ivey up, and together they decided to drive to State Line, Nevada to gamble and to spend the night.

On the way to State Line, Liberatore bought a twelve-pack of beer at a convenience store. Both Liberatore and Ivey drank beer in the car during the trip. They had been driving for about an hour when they came upon a traffic backup on the freeway caused by an earlier accident. Liberatore did not notice that traffic had stopped until it was too late for him to prevent his car from rear-ending a large truck. Liberatore suffered minor injuries from the accident, but Ivey suffered multiple, serious injuries. Liberatore was arrested at the scene of the accident for driving while under the influence, and was later convicted of that offense. Liberatore did not visit the military sites he had intended, nor did he inform his superiors of the accident.

The accident spawned two related lawsuits: an underlying civil action filed by Ivey alleging negligence claims against Liberatore, Dollar, and the United States, Ivey v. United States, et al., No. CV-F-02-6138 (E.D.Cal. Feb. 5, 2004); and the declaratory judgment action at issue in this appeal filed by Nationwide against Liberatore, the United States, Dollar, and Ivey, Nationwide Mutual Ins. Co. v. Liberatore, et al., No. CV-F-03-5903 (E.D.Cal. Feb. 5, 2004). The cases were not consolidated, but were assigned as related cases to be heard, with the parties' consent, by a magistrate judge. See 28 U.S.C. § 636(c).

In the Ivey case, the United States filed a motion for summary judgment in which the government argued that Liberatore was not acting within the scope of his employment at the time of the accident, and therefore the Federal Tort Claims Act wavier of sovereign immunity from suit for personal injuries caused by an employee of the United States government did not apply. In the Nationwide case, the United States filed a motion to dismiss the complaint for failure to articulate a basis for federal subject-matter jurisdiction, and Nationwide filed a motion for summary judgment. Nationwide argued Liberatore had been acting within the scope of his employment when the accident occurred and, consequently, Nationwide's insurance coverage did not apply. The parties to both actions agreed that the scope of employment question was the central issue in both cases, and therefore agreed to coordinated consideration of the motions for dismissal and for summary judgment.

In the Ivey case, the district court granted the government's motion for summary judgment and remanded Ivey's remaining claims, against Dollar and Liberatore, to state court. This judgment was not appealed. On the same day, by separate order in the Nationwide case, the district court denied the government's motion to dismiss for lack of subject-matter jurisdiction and denied Nationwide's motion for summary judgment. The court concluded that Liberatore was not acting "in the line of duty" when the accident occurred and therefore his negligence could not properly be attributed to the government. Judgment was entered against Nationwide, and it appeals.

II DISCUSSION

A. Subject-Matter Jurisdiction

We begin by addressing the government's contention that the district court lacked subject matter jurisdiction because Nationwide's complaint inadequately pled federal subject matter jurisdiction. The existence of subject-matter jurisdiction is a question of law which we review de novo. Principal Life Ins. Co. v. Robinson, 394 F.3d 665, 669 (9th Cir.2004).

In its complaint, Nationwide expressly sought relief under the Federal Declaratory Judgment Act, 28 U.S.C. §§ 2201-2202 (2004). Because the Declaratory Judgment Act does not by itself confer federal subject-matter jurisdiction, Nationwide was required to plead an independent basis for federal jurisdiction. It did not. Nevertheless, Nationwide's complaint expressly states that resolution of its claims would require the federal court to apply the Federal Tort Claims Act, a clear indication that Nationwide's complaint presented a federal question giving rise to federal subject-matter jurisdiction. Although Nationwide should have specified the existence of jurisdiction under 28 U.S.C. § 1331, its failure to do so in this case amounted to no more than inartful pleading, an error that "does not in itself constitute an actual defect of federal jurisdiction." Jacobs v. Patent Enforcement Fund, Inc., 230 F.3d 565, 568 n. 3 (2d Cir.2000).² Because the existence of federal subject-matter jurisdiction, predicated on federal question jurisdiction, was clear, the district court did not err by denying the government's motion to dismiss.

B. Issue Preclusion

The government also argues that because the identical issue of Liberatore's scope of employment was litigated in the Ivey case (in which Nationwide was not a party), Nationwide is bound by the decision in the Ivey case that resolved that issue against the position Nationwide asserts in this case. We reject this interpretation of our law of issue preclusion.

We addressed a similar argument in Orion Tire Corp. v. Goodyear Tire & Rubber Co., 268 F.3d 1133 (9th Cir.2001). In Orion Tire, the appellee argued that the appeal was barred by claim preclusion based upon a judgment post-dating the judgment on appeal. Id. at 1135. We rejected the appellee's position, noting the fundamental difference between the preclusive effect of a district court judgment upon a future action and its effect upon an action that predates the relevant judgment. Id. at 1135-36. Although a district court judgment carries preclusive effect going forward, it cannot operate to bar direct review of an extant judgment. Id. at 1136. To conclude otherwise would

turn[] res judicata on its head. The doctrine is founded on the principle that "[a] judgment merely voidable because based upon an erroneous view of the law is not open to collateral attack, but can be corrected only by a direct review and not by bringing another action upon the same cause." To permit another action upon the same cause to displace the direct review of the first judgment would be to invert the doctrine's precepts.

Id. (qu...