Sawyer v. USAA Ins. Co.

• Decision Date: 08 March 2012
• Docket Number: No. CIV 11–0523 JB/CG.,CIV 11–0523 JB/CG.
• Citation: 839 F.Supp.2d 1189
• Parties: Constance A. SAWYER, Plaintiff, v. USAA INSURANCE COMPANY, Blue Cross Blue Shield Association, Blue Cross Blue Shield of Kansas City, Blue Cross Blue Shield of New Mexico, and Nueterra Healthcare, Defendants.
• Court: U.S. District Court — District of New Mexico

839 F.Supp.2d 1189

Constance A. SAWYER, Plaintiff,

v.USAA INSURANCE COMPANY, Blue Cross Blue Shield Association, Blue Cross Blue Shield of Kansas City, Blue Cross Blue Shield of New Mexico, and Nueterra Healthcare, Defendants.

No. CIV 11–0523 JB/CG.

United States District Court, D. New Mexico.

March 8, 2012.

Daniel R. Lindsey, Clovis, NM, for Plaintiff.

Andrew G. Schultz, Rodey, Dickason, Sloan, Akin & Robb, P.A., Albuquerque, NM, for Defendant United Services Automobile Association.

Jeff L. Martin, Randy S. Bartell, Montgomery & Andrews, P.A., Albuquerque, NM, for Defendants Blue Cross Blue

Shield Association, Blue Cross Blue Shield of Kansas City, and Blue Cross Blue Shield of New Mexico.

Teresa L. Shulda, Foulston Siefkin, LLP, Wichita, KS, for Defendant Nueterra Healthcare.

MEMORANDUM OPINION AND ORDER

JAMES O. BROWNING, District Judge.

THIS MATTER comes before the Court on: (i) the United Services Automobile Association's Motion to Set Aside Default Judgment, filed July 13, 2011 (Doc. 10)(“United Services Motion”); (ii) the Motion to Set Aside Default Judgment Against Defendants Blue Cross and Blue Shield of Kansas City, filed July 13, 2011 (Doc. 11)(“BCBSKC Motion”); (iii) the Motion to Set Aside Default Judgment Against Defendant Blue Cross and Blue Shield Association, filed July 14, 2011 (Doc. 14)(“BCBSA Motion”); and (iv) Plaintiff Constance A. Sawyer's Motion to Remand, filed August 4, 2011 (Doc. 28)(“Sawyer Motion”). The Court held a hearing on February 9, 2012. The primary issues are: (i) whether the Court should set aside the default judgment entered in the Ninth Judicial District, Roosevelt County, State of New Mexico against Defendants USAA Insurance Company, Blue Cross Blue Shield Association (“BCBS Association”), and Blue Cross Blue Shield of Kansas City (“BCBS Kansas City”), because they never received service of process; (ii) whether the Court should set aside the default judgment because the Defendants have meritorious defenses; (iii) whether the Court should set aside the default judgment against USAA Insurance ¹ because the state court lacked personal jurisdiction over United Services Automobile Association (“United Services”); (iv) whether the motions to set aside the default judgment are timely; and (v) whether the Court should remand the case for lack of subject matter jurisdiction. The Court will deny the Sawyer Motion and will grant the: (i) United Services Motion; (ii) BCBSKC Motion; and (iii) BCBSA Motion. The Defendants removed this case while post-judgment motions could still be filed. Accordingly, there is a case or controversy for the Court to resolve, and the Court has subject-matter jurisdiction over the case. Because none of the Defendants were properly served, the default judgment entered against them is void.

FACTUAL BACKGROUND

On June 7, 2007, Sawyer was in a motor vehicle accident. See Verified Complaint for Damages for Breach of Contract, Insurance Bad Faith, Violation of the Insurance Code, and Breach of Fiduciary Duties ¶ 14, at 4 (dated May 24, 2010), filed June 14, 2011 (Doc. 1–1)(“Complaint”). She was severely injured and incurred substantial medical expenses. See Complaint ¶ 14, at 4. Sawyer has a number of outstanding medical bills related to the injuries she suffered in the accident, and full and final settlement against the driver's insurance has been completed “at maximum liability payments per accident.” Complaint ¶¶ 15–16, at 4.

PROCEDURAL BACKGROUND

On May 24, 2010, Sawyer filed her Complaint in state court, Sawyer v. USAA Insurance Co., D–911–CV–201000101.²See Doc. 1–1. She alleges that she paid insurance premiums to USAA Insurance and Blue Cross Blue Shield, ³ and that those companies accepted payment. See Complaint ¶¶ 17, 19, at 4. She asserts that, when she contacted USAA Insurance, BCBS Association, and BCBS Kansas City, they refused to tender the amounts owed under her policies. See Complaint ¶¶ 18, 20, at 4. She contends that the Defendants breached their duty to act in good faith in the performance of the contract. See Complaint ¶ 21, at 4–5. The Complaint contains four counts: (i) breach of contact; (ii) insurance bad faith; (iii) violations of the Unfair Insurance Practices Act, N.M.S.A.1984, § 59A–16–20; and (iv) a request for punitive damages. See Complaint at 5–9.

On February 24, 2011, the Clerk of the District Court of the Ninth Judicial District of the State of New Mexico certified that “it appears from the return made by Chris Quinn[, the person who served the Complaint], that the process was served on Defendant USAA Insurance Company by mailing the same to USAA Insurance Company, c/o Superintendent of Insurance for the Dept. of Ins. For the State of NM.” Sawyer v. USAA Ins. Co., Case No. D–0911–CV–0201000101, Certificate as to the State of the Record and Non–Appearance at 11–13 (dated February 24, 2011), filed June 14, 2011 (Doc. 1–1)(“State Certificate”). The Clerk certified process as to BCBS Association and BCBS Kansas City as well. See State Certificate at 1–2. Sawyer moved for default judgment the same day as the entry of the State Certificate. See Application for Entry of Default Judgment (dated February 24, 2011), filed June 14, 2011 (Doc. 1–1)(“Default Judgment Application”). Sawyer asserted that no “Defendant has filed an Answer to the Complaint, and the time for filing an Answer has expired” and requested that “default be entered against each Defendant.” Default Judgment Application at 2. She represented that the Defendants had been served “as indicated by the Return of Service.” Default Judgment Application at 1.

On May 5, 2011, the Honorable Drew Douglas Tatum, District Court Judge for the Ninth Judicial District, Roosevelt County, State of New Mexico, held a hearing on the Default Judgment Application. See Sawyer v. USAA Ins. Co., Case No. D–0911–CV–0201000101, Transcript of Hearing at 3:1–9 (May 5, 2011)(Judge Tatum) (“Default Judgment Tr.”). At the hearing, Sawyer stated that no Defendant had entered an appearance and that notice of the hearing was sent to the Superintendent of Insurance.⁴See Default Judgment Tr. at 3:21–4:2 (Collins). Judge Tatum stated that he was surprised that no Defendant entered an appearance, because the Defendants are national companies. See Default Judgment Tr. at 4:3–7 (Judge Tatum). Judge Tatum indicated that it would grant default judgment against all the Defendants except for Defendant Nueterra Healthcare, because there were questions whether service was made on Nueterra Healthcare. See Default Judgment Tr. at 8:13–9:6 (Judge Tatum). On May 11, 2011, Judge Tatum entered a default judgment. See Sawyer v. USAA Ins. Co., Case No. D–0911–CV–0201000101, Default Judgment on the Pleadings (dated May 11, 2011), filed June 14, 2011 (Doc. 1–1)(“Default Judgment”). In his Default Judgment, Judge Tatum found that service of process was duly and properly made and entered judgment as follows: (i) $100,000.00 against USAA Insurance for breach of contract; (ii) $300,000.00 against USAA Insurance for violations of the Unfair Practices Act; (iii) $500,000.00 against USAA Insurance as punitive damages; (iv) $85,625.01 against BCBS Association, BCBS Kansas City, and Blue Cross Blue Shield of New Mexico (“BCBS New Mexico”) jointly and severally for breach of contract; (v) $256,875.63 against BCBS Association, BCBS Kansas City, and BCBS New Mexico jointly and severally for violations of the Unfair Practices Act; and (vi) $428,126.05 against BCBS Association, BCBS Kansas City, and BCBS New Mexico jointly and severally as punitive damages. Default Judgment at 1–3. On June 6, 2011, Sawyer filed Plaintiff's Unopposed Motion to Vacate and Set Aside Default Judgment and to Dismiss Without Prejudice Claims Against Blue Cross Blue Shield of New Mexico (dated June 6, 2011), filed June 14, 2011 (Doc. 1–1)(“BCBS New Mexico Default Set Aside”). Sawyer stated that, since the entry of the Default Judgment, she received a document stating that BCBS New Mexico was a division of Health Care Service Corporation and that a search of its database revealed she “was not, is not, and has never been a member.” BCBS New Mexico Default Set Aside at 36. Sawyer represented that Health Care Service Corporation denied that it received proper service, and that there is “good cause and sufficient ‘other reason’ to justify setting aside and vacation of the judgment against” BCBS New Mexico. BCBS New Mexico Default Set Aside at 36. Judge Tatum entered an order setting aside the default judgment against BCBS New Mexico the same day. See Sawyer v. USAA Ins. Co., Case No. D–0911–CV–0201000101, Order Vacating and Setting Aside Default Judgment Dismissing Without Prejudice Plaintiff's Claims Against Blue Cross Blue Shield of New Mexico (dated June 6, 2011), filed June 14, 2011 (Doc. 1–1).

On June 14, 2011, the Defendants filed their Notice of Removal. See Doc. 1. The Defendants assert that BCBS Kansas City is an independent licensee of BCBS Association. See Notice of Removal ¶ 2, at 2. They contend that removal is timely, because they removed within thirty days of becoming aware of the litigation, in conformance with 28 U.S.C. § 1446(b). See Notice of Removal ¶ 7, at 3. They argue that the one-year time limit for removal, set forth in 28 U.S.C. § 1446(b), is expressly limited to diversity removals. See Notice of Removal ¶ 8, at 4. The Defendants assert that the federal proceeding is not an appeal, but a continuation of the state proceedings, and that the Default Judgment is not a final judgment, because the Complaint also sought costs. See Notice of Removal ¶ 9, at 4.

BCBS Kansas City asserts that it is only authorized to transact insurance in Missouri and Kansas, and not in New Mexico, and that it is an “unauthorized” insurer under N.M.S.A.1978, § 59A–5–11(H). Noticeof Removal ¶¶ 11–12, at 4–5. It argues that, for service of process upon the Superintendent of Insurance to be lawful, Sawyer must have delivered two copies of the Complaint...