Johnston v. McCargar ( 2022 )

IN THE COURT OF APPEALS OF IOWA
No. 21-2003
Filed December 21, 2022
JOSEPH JOHNSTON,
Plaintiff-Appellee,
vs.
HOLLIE McCARGAR,
Defendant-Appellant,
and
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY,
Defendant.
________________________________________________________________
Appeal from the Iowa District Court for Polk County, Celene Gogerty, Judge.
A motorist sued for negligence appeals the denial of her motion to dismiss
for untimely service of the petition. AFFIRMED.
Elizabeth A. Culhane and Sarah M. Dempsey (until withdrawal) of Fraser
Stryker PC LLO, Omaha, Nebraska, for appellant.
Jason D. Walke of Walke Law, LLC, West Des Moines, for appellee.
Considered by Bower, C.J., Tabor, J., and Scott, S.J.*
*Senior judge assigned by order pursuant to Iowa Code section 602.9206
(2022).
2
TABOR, Judge.
In this interlocutory appeal, we must decide if good cause existed to extend
the deadline to serve Joseph Johnston’s petition on defendant Hollie McCargar.
McCargar contends the district court erred in finding that Johnston’s settlement
negotiations with her insurer justified an extension. After examining all the facts
surrounding Johnston’s failure to serve McCargar within ninety days, we find
“understandable mitigating circumstances” amounting to good cause. Rucker v.
Taylor, 828 N.W.2d 595, 603 (Iowa 2013) (citation omitted). We thus affirm the
denial of McCargar’s motion to dismiss.1
I. Facts and Prior Proceedings
Johnston and McCargar were involved in a motor vehicle accident in early
May 2019. According to Johnston, he was waiting for a stoplight to change when
McCargar’s vehicle rear-ended him. After the collision, Johnston reported neck,
shoulder, and back pain. In a lawsuit filed on April 29, 2021, Johnston alleged that
McCargar’s negligence caused the accident.
Johnston had until July 28 to serve McCargar with original notice of the suit.
See Iowa R. Civ. P. 1.302(5) (setting ninety-day deadline). He anticipated he
would not be able to complete service by that date. Instead, on July 14, his
attorney, Jason Walke, sought an extension of forty-five days. Walke asserted that
he was “in active discussions with the insurance company for the tort Defendant
to try to resolve this matter.” Walke continued: “A short amount of additional time
1 The other defendant is State Farm Mutual Auto Insurance Co. (State Farm),
Johnston’s insurer. State Farm took no position on the motion to dismiss and is
not a party to this appeal.
3
is needed in order to complete (either by settlement or a failure to reach a
settlement) those discussions.” On July 16, the court granted the request, setting
a new service deadline of September 10. Johnston served McCargar with the
petition on August 25.
But McCargar insisted that service was too late. On September 14, she
moved to dismiss the suit under rule 1.302(5). See Iowa R. Civ. P. 1.421(1).
Johnston resisted dismissal, alleging he had good cause to extend the
deadline. As evidence of that good cause, attorney Walke recounted his
communication with representatives of GEICO Casualty Co. (GEICO), McCargar’s
insurer, between spring and fall of 2021. First, in March, Walke asked the original
claims examiner for copies of any records concerning his client. In May, soon after
he filed Johnston’s petition, Walke received notice that GEICO had reassigned the
case to claims examiner Kiki Bell. Walke told Bell he would “send a settlement
packet to GEICO before serving the lawsuit” on McCargar. According to Walke,
Bell agreed to that approach.
But as spring gave way to summer, Walke realized he could not assemble
the settlement packet before the ninety-day service deadline. In the resistance,
he explained that a family health crisis and a support staff departure from his solo
law practice contributed to the delay. So, two weeks before the ninety-day
deadline, Walke sought and received the extension until September 10.
Walke recalled that the same day he filed the extension request, July 14,
he left Bell a voicemail detailing his difficulties in finishing the settlement packet
4
and sharing his intent to seek more time to serve McCargar.2 In the message,
Walke also asked Bell to send photographs of the vehicles involved in the accident.
Later that day, Bell did just that.
Also in the resistance, Walke noted that he sent the settlement packet to
Bell on August 11.3 Six days later, Bell acknowledged its receipt. She wrote:
“Once we’ve completed our evaluation, we’ll contact you to discuss the resolution
of your client’s claim.” Bell followed up with a settlement offer the next day. After
further negotiation by phone, on August 23, Walke rejected GEICO’s offer as “not
even close” to Johnston’s accident expenses. Then two days later, McCargar
received service of the petition.
As Walke further details in the resistance, Bell contacted him again one
week after the suit was served on McCargar. After some phone tag, Walke and
Bell resumed settlement talks with GEICO increasing its offer.
McCargar replied to the resistance, contending the question before the
court was whether the GEICO representative “implicitly or affirmatively agreed”
that Johnston did not have to serve its insured within ninety days of filing suit. She
also attached an affidavit from Bell avowing that she “did not agree, verbally or in
writing, to an extension for the deadline” for serving the petition.
2 McCargar asserts “there is no evidence” that Walke told Bell he was going to ask
for an extension of the service deadline. But the district court was entitled to
consider Walke’s professional statement in the pleadings that he did so. See, e.g.,
State v. Brewer, 247 N.W.2d 205, 212 (Iowa 1976) (explaining a professional
statement “is a technique, used as a matter of convenience . . . , to establish a
record of matters peculiarly within the knowledge of an attorney” that “has the
effect of an affidavit”).
3 Apparently crossing in the mail, a letter sent by Bell on August 12 asked the
status of Johnston’s settlement demand.
5
The district court denied McCargar’s motion to dismiss, noting that Walke
“was actively negotiating with the insurance company prior to serving the petition.”
McCargar successfully sought interlocutory review and a stay of the proceedings
pending this appeal.
II. Scope and Standard of Review
We review the district court’s denial of McCargar’s motion to dismiss for
correction of legal error. See Rucker, 828 N.W.2d at 598. While the pleadings
ordinarily form the boundaries of material to be evaluated in deciding a motion to
dismiss, when the motion is based on failure to provide timely service, a court may
consider facts outside the pleadings. Id. at 598–99. So long as the district court’s
findings of fact are supported by substantial evidence, they are binding on appeal.
Id. at 599 (differentiating fact-findings from legal conclusions or application of legal
principles, which are not binding on review).
III. Analysis
McCargar contends the district court erred in extending time for service and
in denying her motion to dismiss premised on Rule 1.302(5). That rule sets out
both the ninety-day service deadline and how it may be extended:
If service of the original notice is not made upon the
defendant. . . within 90 days after filing the petition, the court, upon
motion or its own initiative after notice to the party filing the petition,
shall dismiss the action without prejudice as to that defendant . . . .
If the party filing the papers shows good cause for the failure of
service, the court shall extend the time for service for an appropriate
period.
Iowa R. Civ. P. 1.302(5).
McCargar moved to dismiss the action because Johnston did not serve her
notice until 118 days after filing suit. Relying on Rucker, the district court refused
6
to dismiss the action, finding that ongoing settlement negotiations between Walke
and Bell constituted good cause for allowing more time to complete service. See
828 N.W.2d at 601. McCargar contests the court’s good-cause finding. Citing
Antolik v. McMahon, she insists that Johnston’s “desire to engage in settlement
discussions” did not justify extending the service deadline. See 744 N.W.2d 82,
85 (Iowa 2007). In Antolik, the supreme court relied on the principle that
“[s]ettlement negotiations, even if done in good faith, do not constitute . . . good
cause for delaying service.” Id. (quoting Henry v. Shober, 566 N.W.2d 190, 193
(Iowa 1997)).
But the supreme court revisited that principle in Rucker and “erased any
bright line previously indicating settlement negotiations can never constitute good
cause for a delay in service.” Feldhacker v. West, No. 12-2003, 2013 WL 3855694,
at *5 (Iowa Ct. App. July 24, 2013). Rucker explained that although settlement
negotiations have not historically constituted good cause for delaying service,
instances exist in which dismissal against that backdrop would be unfair. See
Rucker, 828 N.W.2d at 603. The court explained the good-cause standard
“considers all the surrounding circumstances, including circumstances that would
make it inequitable for a defendant to successfully move to dismiss.” Id. at 601.
The facts here resemble those in Rucker.4 For starters, McCargar
emphasizes that GEICO did not agree to extend the service deadline and points
4 In some ways, the facts here suggest a greater inequity were we to reverse the
district court. For instance, in Rucker, plaintiff’s counsel did not serve original
notice on the defendants until receiving a reminder from the district court
administrator six days after the ninety-day period had expired. 828 N.W.2d at 597.
By contrast, Walke took a proactive approach and obtained an extension two
weeks before the original deadline.
7
to Bell’s affidavit confirming that she entered no such agreement. But Rucker
rejects the notion that a plaintiff is required to offer “proof of an enforceable contract
before good-faith settlement negotiations can support a finding of good cause.” Id.
at 603. Rather, it is enough if counsel communicates a “plan to purposely delay
service of process” to defendant’s insurance representative. Id. And with
knowledge of that plan, the insurer continues to negotiate with the attorney. Id.
Like plaintiff’s counsel in Rucker, Walke informed Bell after filing the petition
that he planned to deliver “a settlement packet to GEICO before serving the
lawsuit” on McCargar. She agreed to that approach. When Walke realized he
would not be able to present his offer to GEICO within the ninety days, he both
(1) informed Bell and (2) asked for a forty-five day extension for service, which the
court granted. We find it significant that Walke asked for that extension two weeks
before the ninety days expired. Had the court denied his request, he would still
have had time to serve McCargar within the original timeframe. Instead, the court
issued an order with a new deadline, which Walke met.5
And like the insurance representative in Rucker, Bell continued to negotiate
with Walke, even after knowing that he had obtained an extension of time to serve
McCargar. Those ongoing communications6 reinforced Walke’s expectation that
5 We realize the court’s initial grant of more time for service was not a final order
and could be reconsidered when deciding a motion to dismiss. See Carroll v.
Martir, 610 N.W.2d 850, 857 (Iowa 2000). But it also seems reasonable for Walke
to rely on that court order in conducting the ongoing negotiations with Bell.
6 McCargar argues the exchanges between Bell and Walke before the ninety days
elapsed were not settlement communications as defined in Iowa Rule of Evidence
5.408(a)(1). We do not find that argument convincing. Even if that rule defined
settlement communications for evidentiary purposes, we do not believe that
Rucker contemplates such a narrow definition.
8
he did not have to comply with the original service deadline. See Rucker, 828
N.W.2d at 603. Bell was not obliged to endorse Walke’s plan to delay service.
See id. Yet, her conduct in continuing to negotiate with knowledge that the court
had set a new deadline for service made it “understandable” that Johnston did not
serve McCargar within the original ninety days. See id. As the district court found,
it was inequitable for McCargar to seek a dismissal under these circumstances.
Two further points. First, as noted in Rucker, the purpose of rule 1.302(5)
is “to move cases along in the court system once they have been filed.” Id. at 600.
Our holding today does not undermine that purpose. Walke sought an extension
two weeks before the original deadline and served the petition two weeks before
the extended deadline, as soon as negotiations appeared to break down. This
case did not languish on the docket after being filed. See id. at 604 (explaining
the federal analog to rule 1.302(5) was intended as “a useful tool for docket
management, not an instrument of oppression” (citation omitted)). Second, Iowa
courts prefer to decide cases on their merits. See Rucker, 828 N.W.2d at 603
(“Because the substantive rights of a plaintiff can be at stake through the
application of a statute of limitations, it is important that the good-cause standard
under rule 1.302(5) not be applied too narrowly.”). Today’s result reinforces that
preference.
AFFIRMED.