Baser v. State Farm Mutual Automobile Insurance ( 2014 )

FILED
United States Court of Appeals
UNITED STATES COURT OF APPEALS Tenth Circuit
FOR THE TENTH CIRCUIT March 31, 2014
Elisabeth A. Shumaker
Clerk of Court
RICKY N. BASER,
Plaintiff - Appellant,
v. No. 13-5036
(D.C. No. 4:12-CV-00315-GKF-TLW)
STATE FARM MUTUAL (N.D. Okla.)
AUTOMOBILE INSURANCE CO.,
Defendant - Appellee.
ORDER AND JUDGMENT*
Before PHILLIPS, Circuit Judge, PORFILIO, Senior Circuit Judge, and
BALDOCK, Circuit Judge.
Ricky N. Baser brought this declaratory judgment action against State Farm
Mutual Automobile Insurance Company, seeking to establish the availability of
coverage for Silas Jones, who is insured by State Farm but not a party to this suit.
Mr. Baser was injured in a car accident with Mr. Jones and is suing him in Oklahoma
*
After examining the briefs and appellate record, this panel has determined
unanimously to grant the parties’ request for a decision on the briefs without oral
argument. See Fed. R. App. P. 34(f); 10th Cir. R. 34.1(G). The case is therefore
ordered submitted without oral argument. This order and judgment is not binding
precedent, except under the doctrines of law of the case, res judicata, and collateral
estoppel. It may be cited, however, for its persuasive value consistent with Federal
Rule of Appellate Procedure 32.1 and Tenth Circuit Rule 32.1.
state court. Significantly, Mr. Baser has not yet obtained a judgment against
Mr. Jones and is not party to Mr. Jones’s insurance contract with State Farm. In this
suit, Mr. Baser alleges that State Farm has tendered the limits of Mr. Jones’s primary
coverage but that State Farm disputes that it should now pay more. According to the
Complaint, State Farm believes that Mr. Baser’s own underinsured motorist (UM)
policy (with a different insurer) should next fulfill any potential judgment, rather
than Mr. Jones’s secondary umbrella policy with State Farm.
On State Farm’s motion, the district court dismissed Mr. Baser’s claim under
Federal Rule of Civil Procedure 12(b)(6) for want of an actual controversy. To grant
relief under the Declaratory Judgment Act, 28 U.S.C. § 2201(a), there must be an
“actual controversy” that is justiciable under Article III of the Constitution.
MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007). But here, the court
ruled, Article III’s requirements were not satisfied, as is generally true in cases where
a non-party to an insurance contract attempts to bring a direct action against an
insurance company:
“With respect to the obligation to pay any judgment, the same is not yet
in existence, may never be in existence and in any event such obligation
is between the insured and the Defendant. The only way Plaintiff, once
possessed of the judgment, can come at the Defendant is indirectly on
the basis of a right of the insured against its insurer through the device
of garnishment. The only parties between whom an actual controversy
presently exists with respect to eventual liability to Plaintiff are the
Defendant and its insured. The best that can be said on this point is that
Plaintiff’s claim is potential and contingent.”
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Aplt. App., Tab 6 at 3 (quoting Cross v. Occidental Fire & Casualty Co.,
347 F. Supp. 342, 343-44 (W.D. Okla. 1972)). Put another way, the court recognized
that a plaintiff in Mr. Baser’s position “‘has no legally cognizable or protectable
interest in the controversy and he will not have one unless and until he should
succeed in the negligence action, for it is only at that point that [the insurance
company] may have a legal obligation to pay.’” Id. (quoting Knight ex rel. Ellis v.
Miller, 195 P.3d 372, 375 (Okla. 2008)).
We review de novo the district court’s dismissal under Rule 12(b)(6), Burnett
v. Mortgage Elec. Registration Sys., Inc., 706 F.3d 1231, 1235 (10th Cir. 2013), and
agree that Mr. Baser has failed to allege an actual controversy between himself and
State Farm. Mr. Baser simply seeks a hypothetical determination that Mr. Jones’s
umbrella policy would be triggered if he prevails in the pending state action and if he
is awarded damages in excess of Mr. Jones’s primary coverage. But hypothetical
disagreements about the law are not enough to invoke the jurisdiction of federal
courts. See Columbian Fin. Corp. v. BancInsure, Inc., 650 F.3d 1372, 1376
(10th Cir. 2011) (“It is not the role of federal courts to resolve abstract issues of
law.”). Rather, we require “a real and substantial controversy admitting of specific
relief through a decree of a conclusive character, as distinguished from an opinion
advising what the law would be upon a hypothetical state of facts.” Id. (emphasis
and quotation omitted); see id. (requiring a “‘substantial controversy . . . of sufficient
immediacy and reality to warrant the issuance of a declaratory judgment’” (quoting
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MedImmune, Inc., 549 U.S. at 127)). Mr. Baser fails to allege an actual controversy
because this direct action against State Farm is predicated entirely upon such
hypothetical facts. See Gray v. N.M. Military Inst., 249 F.2d 28, 30 (10th Cir. 1957)
(holding that before a tort-claimant can establish the liability of an insurer for a tort,
he must first establish the tort: “The most that can be said is that, as between the
Insurer and the tort-claimant, there exists the makings of a potential controversy in
the future.”).
Mr. Baser cites Maryland Casualty Co. v. Pacific Coal & Oil Co., 312 U.S.
270 (1941), as authority for allowing an injured non-party to an insurance contract to
seek declaratory relief without a judgment on the underlying tort claims. But
Maryland allowed no such thing; rather, in Maryland, an insurance company filed a
declaratory judgment action seeking a determination that it was not liable to defend
or indemnify its own insured for a car accident involving another person, who the
company joined in the lawsuit. Id. at 272. In that case, the Court concluded there
was an actual controversy between the insurance company and the injured person, but
only because the injured person would not be bound by a judgment of non-coverage
and could seek to relitigate the issue in state court if he were not made a party. See
id. at 274. While these are “good reason[s] for permitting the joinder of persons in
Plaintiff’s position by an insurer seeking declaratory relief,” Cross, 347 F. Supp.
at 344, none of them are present in a case like this, in which the injured person sues
the insurance company for a determination of liability. Indeed, absent a statutory
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directive, we are unaware of any case in which a court found that an actual
controversy existed under analogous facts.
Mr. Baser also argues that his case is not like other direct actions involving
non-parties to an insurance contract. Quoting Tuck v. United Services Automobile
Ass’n, 859 F.2d 842, 847 (10th Cir. 1988), Mr. Baser seems to contend that because
the liability he seeks to impose could not be imposed against Mr. Jones, his action is
not a direct action. Aplt. Br. at 6. We disagree. Unlike the plaintiffs in Tuck, we
believe Mr. Baser is “seeking to impose liability on [State Farm] for the negligence
of [its insured].” 859 F.2d at 847. The only unique thing here is that Mr. Jones’s
negligence and any resulting damages have yet to be determined. Accordingly, the
alleged controversy between Mr. Baser and State Farm is far from “definite and
concrete.” MedImmune, Inc., 549 U.S. at 127 (internal quotation marks omitted).
We have evaluated the balance of Mr. Baser’s arguments, as well as the
relevant legal authorities, the record on appeal, and the parties’ appellate materials,
and we agree with the district court’s concise and accurate analysis dismissing this
case for lack of an actual controversy. We therefore affirm for substantially the same
reasons stated in the district court’s order dated March 6, 2013. We deny Mr. Baser’s
motion to certify questions to the Oklahoma Supreme Court.
Entered for the Court
Gregory A. Phillips
Circuit Judge
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