Kody Malloy Smith v. State ( 2008 )

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
NO. 03-08-00124-CV
In re Stonebridge Life Insurance Company
ORIGINAL PROCEEDING FROM COMAL COUNTY
OPINION
Stonebridge Life Insurance Company seeks a writ of mandamus directing the district
court to vacate its order denying its motion to consolidate eleven lawsuits filed against it by real
party in interest Lawrence A. Stoepler and order the district court to grant its motion. Under the
unique circumstances presented here, we conditionally grant the requested relief.
Based on the record in this proceeding, Mr. Stoepler, apparently in response to direct-
mail solicitations from various credit-card companies, made several separate purchases of accidental
death and dismemberment insurance coverage from Stonebridge or its predecessor between 1993 and
2000. Stoepler ultimately came to hold eleven separately-issued certificates of coverage, which he
characterizes as eleven separate insurance policies. Stonebridge states in its briefing that the eleven
certificates represent coverage under three group policies it issued.1 In November 2005, Stoepler
1
Although the certificates are in the record, the policies are not. The certificates reflect
policy numbers that can be interpreted as referring to three group policies, but could also be
interpreted otherwise. The various references to policy numbers are not conclusive on their face and
there is no evidence in the record explaining or demonstrating how it is that only three group policies
are involved.
was involved in an automobile accident and, on February 14, 2006, his left hand and wrist were
surgically amputated. Attributing the amputation to injuries he sustained in the automobile accident,
Stoepler submitted eleven claims with Stonebridge corresponding to each of his certificates of
coverage. Copies of the eleven certificates of coverage in the record each reflect the promise of
benefits for the loss of one hand as a result of a covered injury within 90 or 120 days “after the date
of an accident which caused such injury.” Exclusions from coverage included “injury that . . . does
not directly and independently of all other causes create a loss.” Stonebridge denied coverage,
attributing at least some of the injury leading to Stoepler’s full-hand amputation to a February 2004
chain-saw accident that had cost Stoepler his left thumb and index finger.
In response to Stonebridge’s denial of coverage, Stoepler’s counsel sent Stonebridge
a single DTPA demand letter, covering all eleven certificates, asserting violations of the DTPA and
insurance code and stating that Stoepler “has sustained economic damages in the amount of
$565,000.00, damages for mental anguish in the amount of $50,000.00, and attorney’s fees of
$900.00 reasonably incurred by my client in the assertion of this claim, for a total amount of
$590,900.00.” (Emphasis added). Stonebridge responded with a single letter addressing the policy
provisions applicable to the various certificates in three groups and denying the policy benefits under
each certificate for the same reason – that the amputation was not within 90 or 120 days of the
accident causing injury. Subsequently, Stoepler filed eleven separate lawsuits against
We note that each of the certificates provides that the insured person can only qualify for
coverage under one certificate per policy. In denying coverage, Stonebridge did not refer to
duplicative coverage in regard to any of Stoepler’s claims under the eleven certificates. This
discrepancy is unexplained in the record.
2
Stonebridge—corresponding to the eleven certificates of coverage. Each of the eleven petitions
alleged—in materially identical pleadings—that Stonebridge, by denying benefits, breached the
insurance policy, committed unfair claims settlement practices, and breached the duty of good faith
and fair dealing, entitling Stoepler to damages and attorney’s fees. Each petition treated the
certificate of insurance it references as the policy of insurance. With each petition, Stoepler also
filed a written stipulation that “the total amount in controversy in this suit does not exceed $75,000.”
During the hearing on Stonebridge’s motion to consolidate, Stoepler’s counsel acknowledged that
this strategy was intended to prevent Stonebridge from removing the matter to federal court.2 At the
conclusion of the hearing, the district court, although observing that the strategy was “awkward” and
“an unusual way to handle things,” concluded there was “no impediment in the rules to prevent it,”
and denied Stonebridge’s motion to consolidate.
Texas trial courts have broad discretion regarding the severance and consolidation
of cases—but that discretion is not unlimited. See Pierce v. Reynolds, 329 S.W.2d 76, 77-78
(Tex. 1959); Dalisa, Inc. v. Bradford, 81 S.W.3d 876, 879 (Tex. App.—Austin 2002, no pet.). One
well-established limitation on that discretion is the single-action rule, or the rule against splitting
claims. See Pierce, 329 S.W.2d at 77-78; Eastland County v. Davisson, 13 S.W.2d 673, 675-76
(Tex. Comm’n App. 1929, judgm’t adopted). Purposes served by this rule include “preventing
vexatious and oppressive litigation . . . where a single suit would suffice.” Davisson, 13 S.W.2d at
676; see also id. (adding that multiple suits for breach of the same contract “would not result in any
2
Stonebridge likewise acknowledged that it intended to remove the suits if it succeeded in
consolidating them.
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substantial benefit to the plaintiff, but the same would work a serious inconvenience and hardship
upon the defendants”). A trial court abuses its discretion—and is subject to correction by
mandamus—by severing a single cause of action into two or more parts. See In Re El Paso County
Hosp. Dist., 979 S.W.2d 10, 12 (Tex. App.—El Paso 1998, no pet.); Ryland Group, Inc. v. White,
723 S.W.2d 160, 161-63 (Tex. App.—Houston [1st Dist.] 1986, no writ).3 A trial court also abuses
its discretion by severing a cause that is so interwoven with the remaining action as to involve the
same facts and issues. See Dalisa, 81 S.W.3d at 879-80.
We view the failure to consolidate the eleven lawsuits here, which are pursuing
essentially eleven pieces of a single claim for a single injury, as analogous to a trial court’s improper
severance of a single lawsuit into eleven separate suits. The difference here being that Stoepler
unilaterally severed the claims at the time of filing rather than filing one suit and then obtaining a
severance. Whether the claim is split at the time of filing or after filing, the effect is the same from
the standpoint of the single-action rule. One might argue, applying the concept that a plaintiff is
master of his claim, that the plaintiff should be permitted to pursue his claim in eleven pieces if he
chooses and rely on principles of collateral estoppel and res judicata to protect defendants. However,
at least where a split claim is filed as separate suits before the same court, it is incumbent on the trial
court, when requested, to apply the single-action rule and avoid adjudicating a single action in
piecemeal fashion – whether this means declining to sever a single action or consolidating an
already-split action.
3
A “cause of action” consists of a plaintiff’s primary right to relief and the defendant’s act
or omission that violates that right. Jones v. Ray, 886 S.W.2d 817, 821 (Tex. App.—Houston
[1st Dist.] 1994, no writ).
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As his DTPA demand letter reveals, each of Stoepler’s lawsuits are components of
a single claim based on a single cause of action, with common facts and issues relating to
Stonebridge’s denial of benefits under an unknown number of policies, but based on materially
identical policy provisions. The policy language implicated by each suit is essentially the same.
Stonebridge’s denials of benefits are based on the same events and grounds and, thus, are identical.
The legal and factual issues of whether Stonebridge breached the relevant insurance policy, acted
in bad faith, or violated the DTPA will be identical in each lawsuit. Likewise, any extracontractual
damages Stoepler seeks would be common to all of his lawsuits.
Stoepler acknowledged below that “the contracts do deal with the same subject matter
[and] . . . have the same parties,” and that Stonebridge relied on “the same reason each time” in
denying his claims. He adds that he has agreed to consolidate the actions for discovery purposes and
that he “has informed the trial court, and hereby stipulates, that a joint trial of Mr. Stoepler’s lawsuits
where separate judgments would be entered would also be appropriate.” Nonetheless, Stoepler urges
that his eleven suits constitute separate causes of action because they are founded on “11 separate
agreements, 11 separate contracts.” To the contrary, Stoepler’s claim arises from a single set of
events (the loss of his hand), a single claim on materially identical language in multiple certificates
of insurance, underwritten by a single carrier. Stoepler concedes that if the carrier is wrong about
the availability of policy benefits and if it is found to have acted in bad faith, it has not done so
eleven different times here and would not be subject to eleven different liability findings and eleven
independent damages awards. At some point in this litigation, these “claims” will have to be
handled and adjudicated in some joint fashion. This is because these claims are, in reality, a single
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action and should be litigated as a single action. Even if Stoepler’s breach-of-contract cause of
action is divisible among separate policies, that is not true of his claims for extra-contractual
damages, which are founded on a single set of acts by Stonebridge in denying policy benefits for a
single injury.
We must conclude on this record that Stoepler’s pursuit of this his claim as eleven
separate suits amounts to claim-splitting and is a violation of the single action rule. The district
court’s refusal to consolidate Stoepler’s eleven lawsuits therefore constitutes an abuse of discretion.
We conditionally grant Stonebridge’s petition for writ of mandamus and direct the district court to
vacate its order denying Stonebridge’s motion to consolidate and consolidate the eleven suits in
question. The writ will issue only if the district court fails to take appropriate action in accordance
with this opinion. We express no opinion regarding implications of this proceeding, if any, for
removal or concerning the ultimate merits of the parties’ claims or defenses.
____________________________________________
Bob Pemberton, Justice
Before Chief Justice Law, Justices Pemberton and Waldrop
Filed: March 21, 2008
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