Travelers Ins. Co. v. Riggs

• Decision Date: 08 February 1982
• Docket Number: No. 81-1070,81-1070
• Citation: 671 F.2d 810
• Parties: 10 Fed. R. Evid. Serv. 212 TRAVELERS INSURANCE COMPANY, Appellant, v. Harry L. RIGGS, Jr.; Mabel V. Reid, Appellees.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 810

671 F.2d 810

10 Fed. R. Evid. Serv. 212

TRAVELERS INSURANCE COMPANY, Appellant, v. Harry L. RIGGS, Jr.; Mabel V. Reid, Appellees.

No. 81-1070.

United States Court of Appeals Fourth Circuit.

Argued Oct. 5, 1981.

Decided Feb. 8, 1982.

Theresa E. Mulholland (William O. Snead, III, Carr, Jordan, Coyne & Savits, Fairfax, Va., on brief), for appellant.

C. Torrence Armstrong, Fairfax, Va. (Boothe, Prichard & Dudley, Fairfax, Va., Daniel W. Donahue, Womble, Carlyle, Sandridge & Rice, Winston-Salem, N.C., on brief), for appellee Riggs.

Russell V. Palmore, Jr., Richmond, Va. (Mays, Valentine, Davenport & Moore, Richmond, Va., on brief), for appellee Reid.

Before WINTER, Chief Judge, and PHILLIPS and CHAPMAN, Circuit Judges.

JAMES DICKSON PHILLIPS, Circuit Judge:

After paying a property damage claim arising from an airplane's crash into the home of its insured, Travelers Insurance Company (Travelers) brought this diversity action, as subrogee, against the owner of the plane and the estate of its deceased pilot. A jury found for the defendants, and Travelers appealed, assigning as error the district court's order compelling its substitution for the insured as the named plaintiff; the court's refusal, following Virginia law, to give a res ipsa loquitur instruction; its refusal to find the pilot negligent per se when he arguably violated a federal regulation requiring planes to fly above a certain height; and various evidentiary rulings. Finding no prejudicial error, we affirm the judgment.

I

In November 1977, Joseph Reid was piloting an airplane owned by Harry Riggs from Columbus, Ohio to the Washington, D.C. area. After he had missed two approaches to the Dulles International Airport, the control tower gave him a heading to return toward Columbus. Soon after, the plane crashed into a townhouse owned by John and Veronica Frankenstein and insured by Travelers. Reid died as a result. Travelers paid the Frankensteins $26,997.99 for their loss, under a $100 deductible homeowners policy. This subrogation action was then commenced against Riggs and Reid's estate in the name of the Frankensteins as plaintiffs by counsel retained by Travelers. The plaintiffs sought by their prayer for relief to recover the sum of $26,997.99, the exact amount paid by Travelers.

During pretrial maneuvers, the district court, over Travelers' objection, granted the defendants' motion under Rule 17, Fed.R.Civ.P., to substitute Travelers for its insureds as sole plaintiff on the basis that it was the real party in interest by virtue of its total subrogation. Travelers then moved, two weeks before trial, to add the Frankensteins as plaintiffs and to increase the amount claimed by $710.60 (the amount of the deductible plus the difference between the replacement cost and the amount paid by Travelers for a damaged rug). Responding to Travelers' motion, the court suggested two options: (1) Travelers could sue for the total amount in its own name for the use and benefit of the Frankensteins, or (2) the Frankensteins could intervene in their own right. Travelers declined to pursue either option and stood on its objection to its substitution as sole party plaintiff.

At the ensuing jury trial the sole issue litigated was whether the crash was caused by the pilot's or owner's negligence or by some other cause. It was a typical battle of the experts; both sides offered the testimony of aviation experts who opined as to possible causes of the crash. Travelers also offered the testimony of eyewitnesses who suggested that the plane may have been flying below the minimum level set by federal regulations. The jury found for the defendants and the court refused to grant Travelers' motion for judgment n.o.v. This appeal followed.

II

A

Travelers first contends that the district court erred in requiring the substitution of Travelers as sole named plaintiff in the action. For reasons that follow, we hold that in the end, no prejudicial error resulted from the district court's action.

It is apparent that the court originally treated the case as one involving total subrogation because the original claim was only for the amount paid by Travelers and did not include the deductible amount under the policy. On this basis the court must have considered that, under general subrogation and real party in interest principles, Travelers was the only real party in interest. It was apparently on this perception that the challenged substitution ruling was made. This ruling was technically in error because the proper focus of inquiry in application of these principles is not upon the amount claimed in the ad damnum clause but upon whether the insured has any uncompensated claim for which it may seek recovery. If the insured does have such a claim, it is a real party in interest in whose sole name the action may be prosecuted under general principles of subrogation. See, e.g., United States v. Aetna Casualty & Surety Co., 338 U.S. 366, 381, 70 S.Ct. 207, 215, 94 L.Ed. 171 (1949). Here, the Frankensteins as insureds did have such a claim-for the uncompensated deductible amount-and were accordingly, under general principles, real parties in interest who could not properly be displaced as parties plaintiff by the substitution of their partially subrogated insurer as sole named plaintiff.

We conclude that any prejudice from this technical error was cured by the court's subsequent action giving Travelers the option of having its insureds joined with it as co-plaintiffs by intervention. The ultimate effect of this option, if taken, would have been to force Travelers' joinder with its insureds as co-plaintiffs. Under the law of this circuit, that was the limit of its entitlement as a partially subrogated insurer. For, though not universally followed in the federal courts, ¹ and though subject indeed to criticism in this circuit, ² it is nevertheless the rule of this circuit that in a partial subrogation situation where the action is brought in the name of the insured as real party in interest, the partially subrogated insurer may also, if feasible, be involuntarily joined as a party plaintiff upon motion of the defendant. See Virginia Electric & Power Co. v. Westinghouse Electric Corp., 485 F.2d 78 (4th Cir. 1973); Ward v. Franklin Equipment Co., 50 F.R.D. 93 (E.D.Va.1970); Pinewood Gin Co. v. Carolina Power & Light Co., 41 F.R.D. 221 (D.S.C.1966). Since, in effect, the district court offered Travelers an option at least this favorable to its perceived interest, we cannot find prejudicial error in its overall action. That Travelers declined to take what was offered cannot of course be charged as error to the court.

B

Travelers contends, however, that under Erie and its progeny, this general circuit rule of involuntary joinder cannot be applied in this diversity case because of directly conflicting provisions of Virginia statutory law. Specifically, Va.Code § 38.1-31.2 (1981) allows an insurer who has either fully or partially paid an insured loss to sue either in its own name or that of its insured; and Va.Code § 8.01-5(B) (1977) forbids the involuntary joinder of an insurer that has elected under the former provision to sue in the name of its insured.

We do not think that this state rule prohibiting involuntary joinder of a subrogated insurer is binding in this federal diversity litigation. Even if the rule followed in this circuit is not one derived directly from Fed.R.Civ.P. 19, so that, under Hanna v. Plumer, 380 U.S. 460, 85 S.Ct. 1136, 14 L.Ed.2d 8 (1965), it must be applied, we nevertheless think that faced with a "relatively unguided Erie choice," id. at 471, 85 S.Ct. at 1144, the proper choice is the federal rule.

Rules governing the joinder of named parties in litigation in no way affect "the primary conduct and affairs of (a state's) citizens," id. at 476, 85 S.Ct. at 1146 (Harlan, J., concurring). The general rule has therefore been that questions of joinder in diversity cases are appropriately determined by federal law. Provident Tradesmens Bank & Trust Co. v. Patterson, 390 U.S. 102, 125 n.22, 88 S.Ct. 733, 746 n.22, 19 L.Ed.2d 936 (1968). The policy concern that undoubtedly underlies the Virginia rule-to avoid the prejudice that in conventional wisdom is assumed to afflict all insurance companies in jury trials-is clearly a legitimate one. But it has only to do with the conduct of litigation, and the resulting rule cannot be considered outcome-determinative in the sense of Guaranty Trust Co. v York, 326 U.S. 99, 65 S.Ct. 1464, 89 L.Ed. 2079 (1945). Since choice of the federal rule is not in this sense outcome-determinative, any encouragement it lends to the limited forum shopping that is possible for defendants is simply of the kind that attends any federal rule of procedure thought by litigants to provide tactical advantage. Erie and its progeny have never required choice of the state rule to avoid federal forum choices on that basis.

Finally, in making an Erie choice of law not dictated by a specific federal rule of procedure, there must be weighed against the policies underlying a state rule asserted as controlling under Erie any countervailing federal policies respecting the litigation process. Byrd v. Blue Ridge Rural Electric Cooperative, 356 U.S. 525, 78 S.Ct. 893, 2 L.Ed.2d 953 (1958). Here there are such policies, preeminently the policy that in federal litigation "(t)he pleadings should be made to reveal and assert the actual interest of the plaintiff, and to indicate the interests of any others in the claim." United States v. Aetna Casualty & Surety Co., 338 U.S. 366, 382, 70 S.Ct. 207, 216, 94 L.Ed. 171 (1949). This bespeaks an approach which abjures concealed or fictional issues and parties in interest and attempts to avoid unfair prejudice by jury voir dire, cautionary instructions, and other corrective measures rather than by a concealment of interests that is likely to be ineffectual in any event. See, e.g., Public Service Co. v....