Jacob Benson v. Casa De Capri Enterprises ( 2022 )

UNITED STATES COURT OF APPEALS FILED
FOR THE NINTH CIRCUIT MAR 17 2022
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
JACOB BENSON, an individual; JOSEPH No. 19-16686
BENSON; DEBORAH BENSON, husband
and wife; K. B., a minor, by and through D.C. No. 2:18-cv-00006-DWL
Jacob Benson, guardian ad litem, District of Arizona,
Phoenix
Plaintiffs-Appellants,
ORDER
v.
CASA DE CAPRI ENTERPRISES, LLC, an
Arizona limited liability company;
UNKNOWN PARTIES, named as John Does
1-20; ABC Corporations I-X; XYZ
Partnerships I-X,
Defendants-Appellees,
CONTINUING CARE RISK RETENTION
GROUP, INC., Garnishee,
Real-party-in-interest-
Appellee.
Before: KLEINFELD, HURWITZ, and BRESS, Circuit Judges.
The court’s disposition filed on February 2, 2022, is hereby amended. An
amended disposition is filed concurrently with this order. With this amended
disposition, the panel has voted to deny the petition for panel rehearing. See Dkt.
63. No subsequent petitions for panel rehearing or rehearing en banc shall be
permitted.
NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS MAR 17 2022
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
JACOB BENSON, an individual; JOSEPH No. 19-16686
BENSON; DEBORAH BENSON, husband
and wife; K. B., a minor, by and through D.C. No. 2:18-cv-00006-DWL
Jacob Benson, guardian ad litem,
Plaintiffs-Appellants, AMENDED MEMORANDUM*
v.
CASA DE CAPRI ENTERPRISES, LLC, an
Arizona limited liability company;
UNKNOWN PARTIES, named as John Does
1-20; ABC Corporations I-X; XYZ
Partnerships I-X,
Defendants-Appellees,
CONTINUING CARE RISK RETENTION
GROUP, INC., Garnishee,
Real-party-in-interest-
Appellee.
Appeal from the United States District Court
for the District of Arizona
Dominic Lanza, District Judge, Presiding
Argued and Submitted October 5, 2020
Submission Withdrawn November 23, 2020
Resubmitted January 31, 2022
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
Pasadena, California
Before: KLEINFELD, HURWITZ, and BRESS, Circuit Judges.
Appellants (“the Bensons”), appeal a district court order granting a motion by
Continuing Care Risk Retention Group (“CCRRG”) to compel arbitration, and
dismissing the action without prejudice. We have jurisdiction under 9 U.S.C. § 16and 28 U.S.C. § 1291. Reviewing de novo, Shroyer v. New Cingular Wireless Servs.,
Inc., 498 F.3d 976, 981 (9th Cir. 2007), we reverse.
After the Bensons obtained a $1.5 million judgment against Casa de Capri
Enterprises, CCRRG’s insured, the Bensons sought a writ of garnishment against
CCRRG. The district court determined that because the Bensons were seeking to
avail themselves of the benefits of Casa de Capri’s insurance policy with CCRRG,
they were also bound by the policy’s arbitration clause under Arizona’s doctrine of
direct benefits estoppel.
After oral argument, we certified two unresolved questions of Arizona law to
the Arizona Supreme Court:
1) In a garnishment action by a judgment creditor against the judgment
debtor’s insurer claiming that coverage is owed under an insurance
policy, where the judgment creditor is not proceeding on an
assignment of rights, can the insurer invoke the doctrine of direct
benefits estoppel to bind the judgment creditor to the terms of the
insurance contract?
2) If yes, does direct benefits estoppel also bind the judgment creditor
to the arbitration clause contained in the insurance policy?
2
Benson v. Casa de Capri Enterps., LLC, 980 F.3d 1328, 1333 (9th Cir. 2020).
The Arizona Supreme Court granted our request for certification. On January
20, 2022, it issued a decision holding that “[t]he common law doctrine of direct
benefits estoppel cannot be invoked in a garnishment action to bind the judgment
creditor to the terms of the contract because applying the doctrine in this context
would contravene Arizona’s statutory garnishment scheme.” Benson v. Casa de
Capri Enterps., LLC, 502 P.3d 461, 463 (Ariz. 2022). The court reasoned that
garnishment proceedings in Arizona must “adhere to prescribed statutory
procedures,” which “include[] the statutory requirement that the trial court—not an
arbitrator—resolve all factual and legal issues.” Id. at 465. Accordingly,
“[a]llowing the arbitration clause to control in a garnishment proceeding would
undermine the legislature’s intent that the trial court decide the issues of law and
fact.” Id. Based on its answer to this question, the court declined to reach the second
certified question. Id. at 466.
The Arizona Supreme Court’s decision confirms that the district court erred
in granting CCRRG’s motion to compel arbitration under the doctrine of direct
benefits estoppel. This result does not conflict with our decision in Labertew v.
Langemeier, 846 F.3d 1028 (9th Cir. 2017), as CCRRG contends. Although the
Arizona Supreme Court in Benson invoked procedural rules governing garnishment
in explaining its conclusion, whether the doctrine of direct benefits estoppel applies
3
is a substantive question of state law. Cf. Benson, 502 P.3d at 465 (explaining that
while the Bensons “must prove that the insurer was obligated to insure the loss under
the insurance agreement,” “[t]his does not mean that the Bensons are bound by or
effectively parties to the insurance contract” under state law).
Under Labertew, the Federal Rules of Civil Procedure govern in this removed
action. See Labertew, 846 F.3d at 1034. Labertew thus forecloses CCRRG’s
alternative argument that this case should be dismissed because the Bensons
allegedly failed to comply with Arizona garnishment procedures by not filing an
objection to CCRRG’s answer within ten days. See id.
For the foregoing reasons, we reverse the district court’s judgment and
remand for proceedings consistent with this decision.1
REVERSED AND REMANDED.
1
CCRRG alternatively argues that the Liability Risk Retention Act of 1986 (LLRA)
preempts state law governing the operation of risk retention groups, and apparently
by extension precludes Arizona from limiting arbitration provisions in insurance
policies provided by a risk retention group. The district court did not address this
argument and the Bensons argue that CCRRG did not adequately raise it below. We
leave these matters to the district court in the first instance, with the benefit of the
Arizona Supreme Court’s new guidance.
4