OneBeacon America Insurance Co v. Dorothy Barnett

Case: 18-60224 Document: 00514853697 Page: 1 Date Filed: 02/27/2019
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
No. 18-60224
Fifth Circuit
FILED
February 27, 2019
ONEBEACON AMERICA INSURANCE COMPANY, Lyle W. Cayce
Clerk
Plaintiff - Appellee
v.
DOROTHY L. BARNETT, Individually, and as Wrongful Death Beneficiary
of Howard Barnett, Deceased, and on Behalf of all Wrongful Death
Beneficiaries of Howard Barnett, Deceased,
Defendant - Appellant
_____________________________________
DOROTHY L. BARNETT, individually, and as wrongful death beneficiary of
Howard Barnett, deceased, and on behalf of all wrongful death beneficiaries
of Howard Barnett, deceased,
Plaintiff - Appellant
v.
MISSISSIPPI VALLEY SILICA COMPANY,
Defendant
ONEBEACON AMERICA INSURANCE COMPANY, formerly known as
Commercial Union Insurance Company and OneBeacon America Insurance
Company, formerly known as Commercial Union Insurance Company as
successor in interest to Columbia Casualty Company,
Garnishee – Appellee
Case: 18-60224 Document: 00514853697 Page: 2 Date Filed: 02/27/2019
No. 18-60224
Appeal from the United States District Court
for the Southern District of Mississippi,
USDC No. 3:14-CV-41
USDC No. 3:14-CV-125
Before SMITH, BARKSDALE, and HO, Circuit Judges.
PER CURIAM: *
Dorothy L. Barnett, individually, and as wrongful death beneficiary of
Howard Barnett, deceased, and on behalf of all wrongful death beneficiaries of
Howard Barnett, deceased (Barnett), challenges the summary judgment
awarded OneBeacon American Insurance Company, asserting: collateral
estoppel does not bar her claim; and, genuine disputes of material fact exist
regarding coverage under OneBeacon’s insurance policies. VACATED and
REMANDED.
I.
In 2011, Barnett filed a wrongful-death action in Mississippi state court
against multiple defendants, including Mississippi Valley Silica Company
(MVSC), alleging her husband contracted and died of silicosis—a lung disease
caused by inhaling silica dust—while he was employed from 1957-88 by
Mississippi Steel & Iron in Jackson, Mississippi. In 2012, a jury found in favor
of Barnett, and against MVSC and two other defendants on her negligent-
failure-to-warn claim, and awarded her $1,095,000 in compensatory and
punitive damages.
* Pursuant to 5th Cir. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5th Cir.
R. 47.5.4.
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MVSC, however, had ceased operating in 1978, and took bankruptcy in
1998; functionally, MVSC exists only through its insurance carriers. MVSC
carried different insurance policies with different companies throughout its
operating period, and, in addition to OneBeacon, Barnett has sought to collect
her judgment against six other previous insurers for MVSC. (Those six other
insurers are not parties to this action).
Columbia Casualty Company, now OneBeacon, admits it issued
insurance policies to MVSC from 1958-67. Only one of those policies, however,
has been located (for 1962-63); the others are lost.
OneBeacon filed a petition for declaratory judgment in Louisiana state
court in August 2013 against MVSC, seeking a declaration that its policies
issued to MVSC do not provide coverage for Barnett’s Mississippi-state-court
judgment. (The Louisiana state court had personal jurisdiction because MVSC
was incorporated in Louisiana; therefore OneBeacon filed the action there.)
OneBeacon insists the Louisiana court thoroughly “reviewed the law and the
evidence”, but Barnett contends the proceeding was functionally a default
judgment and MVSC was never represented.
In that regard, the record from the Louisiana proceeding shows
OneBeacon requested the court verify no answer was filed by MVSC, and a
preliminary default was entered in mid-September 2013. OneBeacon’s
attorney moved for declaratory judgment, and offered into evidence, inter alia,
the affidavits of Fitzgerald (the OneBeacon account manager handling
Barnett’s claim) and Simmonds (an underwriter for one of OneBeacon’s
predecessor companies, who had knowledge of the types of policies issued
during the relevant time period)—the evidence in the summary-judgment
record at hand. OneBeacon then briefly explained its position: MVSC did not
purchase products-hazard coverage, as discussed infra.
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The Louisiana court ruled from the bench in favor of OneBeacon, and
granted the declaratory judgment. Barnett insists she was never provided any
notice for, nor joined in, the Louisiana declaratory action by OneBeacon
against MVSC.
In district court in January 2014, OneBeacon filed against Barnett the
complaint for declaratory judgment in this action, seeking “enforc[ement] [of]
the Louisiana state court judgment ruling that the policies issued by
OneBeacon to [MVSC] do not provide coverage for the claims asserted by
Barnett . . . ”. Later that month, Barnett filed in Mississippi state court a writ
of garnishment against OneBeacon, which it removed to district court, and
consolidated with its pending declaratory action.
OneBeacon moved for summary judgment, seeking a declaration of its
liability and a dismissal of Barnett’s garnishment claim. The district court
granted summary judgment in favor of OneBeacon, concluding: Barnett was
collaterally estopped by the Louisiana state court judgment; but, even on the
merits, OneBeacon’s policies for MVSC did not provide coverage for her
Mississippi-state-court judgment.
II.
Barnett challenges the district court’s sua sponte application of collateral
estoppel, which was based on the Louisiana state-court judgment in favor of
OneBeacon against MVSC. In the district court’s, in the alternative, granting
summary judgment for OneBeacon on the merits regarding coverage vel non,
the court stated it “finds itself in lockstep with the Louisiana state court, and
. . . the policies issued by OneBeacon to [MVSC] do not provide coverage for the
judgment rendered in favor of Barnett against [MVSC] by the Mississippi state
court”. Barnett contends summary judgment on that basis is improper,
asserting: there are genuine disputes of material fact regarding OneBeacon’s
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lost policies; and, as a matter of law, the language of the above-referenced 1962-
63 policy is ambiguous.
A summary judgment is reviewed de novo, “applying the same criteria”
employed by the district court. E.g., Norman v. Apache Corp., 19 F.3d 1017,
1021 (5th Cir. 1994) (citations omitted). All reasonable inferences must be
drawn in favor of the nonmovant, but “a party cannot defeat summary
judgment with conclusory allegations, unsubstantiated assertions, or only a
scintilla of evidence”. Turner v. Baylor Richardson Med. Ctr., 476 F.3d 337,
343 (5th Cir. 2007) (internal quotation marks and citation omitted).
Summary judgment is appropriate where “there is no genuine dispute
[of] material fact”, and “movant is entitled to judgment as a matter of law”.
Fed. R. Civ. P. 56(a). A fact is “material” if it “might affect the outcome of the
suit under the governing law”, thereby “preclud[ing] the entry of summary
judgment”. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A
“dispute about a material fact is ‘genuine[]’ . . . if the evidence is such that a
reasonable jury could return a verdict for the nonmoving party”. Id.For the reasons that follow, this action is remanded for trial, but with
our panel’s retaining jurisdiction. As the parties conceded at oral argument,
no jury demand was made; therefore, this matter is to be tried by the court
(bench trial).
A.
This court reviews de novo, as a question of law, both the preclusive effect
of a prior judgment, Test Masters Educ. Serv., Inc., v. Singh, 428 F.3d 559, 571
(5th Cir. 2005), and the application of collateral estoppel, United States v.
Brackett, 113 F.3d 1396, 1398 (5th Cir. 1997).
Although, as a general rule, collateral estoppel must be pleaded as an
affirmative defense, the district court raised collateral estoppel sua sponte.
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Our court has recognized two instances in which such a sua sponte ruling is
permissible: “both actions were brought in courts of the same district”,
Trammell Crow Residential Co. v. Am. Prot. Ins. Co., 574 F. App’x 513, 522
(5th Cir. 2014) (citations omitted); or, “‘all of the relevant facts are contained
in the record and . . . uncontroverted’”, Mowbray v. Cameron Cty., 274 F.3d
269, 281 (5th Cir. 2001) (quoting Am. Furniture Co., Inc. v. Int’l
Accommodations Supply, 721 F.2d 478, 482 (5th Cir. Unit A 1981)). Because
the Louisiana state-court proceeding and the action at hand were obviously not
“brought . . . in . . . the same district”, Trammel, 574 F. App’x at 522, and
because, as explained infra, relevant facts contained in the record are far from
“uncontroverted”, Mowbray, 274 F.3d at 281, the district court erred in sua
sponte applying collateral estoppel.
In addition, both parties agree on appeal that collateral estoppel does not
bar Barnett’s claim. In that regard, we also conclude on the merits of collateral
estoppel vel non that its application would be improper under both Mississippi
and Louisiana law. We also review the district court’s applying Mississippi
collateral-estoppel law to a Louisiana-state-court judgment, in contravention
of the Supreme Court’s decision in Kremer v. Chemical Construction
Corporation, 456 U.S. 461 (1982).
As noted, the district court applied Mississippi collateral-estoppel rules,
although Barnett contends Louisiana law applies to that issue. Although
ultimately we conclude collateral estoppel would be inapplicable under either
State’s law, the choice of Mississippi law in determining the preclusive effect
of a Louisiana-state-court judgment was arguably in error. “Rather, [28 U.S.C.
§ 1738 (State and territorial statutes and judicial proceedings; full faith and
credit)] . . . commands a federal court to accept the rules chosen by the State
from which the judgment is taken.” Kremer, 456 U.S. at 482 (emphasis added)
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(citations omitted); see also Cox v. Nueces Cty., Tex., 839 F.3d 418, 420–21 (5th
Cir. 2016); Thompson v. Dall. City Att’y’s Office, 913 F.3d 464, 468 (5th Cir.
2019).
Moreover, we are satisfied the collateral-estoppel holding under
Mississippi law constitutes error. In Mississippi, “[c]ollateral estoppel applies
where three elements are present: ‘(1) the issue involved in the second suit
was identical to the one involved in the previous suit; (2) the issue was actually
litigated in the prior action; and, (3) the resolution of the issue was necessary
to the prior judgment’”. Evans v. Sharpley, 607 So. 2d 1210, 1213 (Miss. 1992)
(quoting In the Interest of K.M.G., 500 So. 2d 994, 997 (Miss. 1987)). The
district court grounded its holding in the erroneous conclusion that Barnett
was “in privity” with MVSC, a party in the Louisiana declaratory-action.
As noted, Barnett was not a party to the Louisiana-state-court action by
OneBeacon against MVSC. Unlike American Furniture, where the court also
sua sponte raised collateral estoppel based on a prior Louisiana state-court
judgment, American Furniture was a party to the prior state-court litigation,
and directly litigated the relevant issues; therefore, “[i]t may not later pursue
its position in the federal court diversity suit . . . ”. Am. Furniture, 721 F.2d at
482. Because Barnett was not a party to the Louisiana state-court action, she
is not bound by the prior judgment, nor does it preclude her bringing this
action. Taylor v. Sturgell, 553 U.S. 880, 884 (2008) (“It is a principle of general
application in . . . jurisprudence that one is not bound by a judgment in
personam in a litigation in which he is not designated as a party or to which
he has not been made a party by service of process.” (internal quotation marks
omitted) (quoting Hansberry v. Lee, 311 U.S. 32, 40 (1940))); 18A Wright &
Miller, Federal Practice & Procedure § 4449 & n.22 (3d ed. 2017).
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And, as also noted, Barnett was not “in privity” with one of the original
parties under Mississippi law. She was not within the “chain of sale” of
MVSC’s purchase of insurance, Little v. V & G Welding Supply, Inc., 704 So.
2d 1336, 1339 (Miss. 1997), was not connected by a prior attorney-client
relationship, Claiborne v. Ocwen Loan Servicing, LLC, 194 So. 3d 877, 880
(Miss. Ct. App. 2015), and did not “stand in mutual or successive relationship
to the same [r]ights of property”, Clement v. R.L. Burns Corp., 373 So. 2d 790,
794 (Miss. 1979) (internal quotation marks and citation omitted).
Similarly, Barnett did not “control” the action by OneBeacon against
MVSC, and it is extremely unlikely—to say the least—her “interests were
represented adequately by a party in the original suit”: MVSC did not even
appear. Sw. Airlines Co. v. Tex. Int’l Airlines, Inc., 546 F.2d 84, 95 (5th Cir.
1977) (citations omitted); see also Montana v. United States, 440 U.S. 147, 164
n.11 (1979). As such, we agree with the parties that Mississippi collateral
estoppel does not bar Barnett’s claim.
Finally, and in accordance with the Court’s decision in Kremer, we
further conclude Barnett’s claim is not precluded under Louisiana law. See
Kremer, 456 U.S. at 482. In Louisiana, a party is collaterally estopped if “[a]
judgment in favor of either the plaintiff or the defendant is conclusive, in any
subsequent action between them, with respect to any issue actually litigated
and determined if its determination was essential to [the] judgment”. La. Stat.
Ann. § 13:4231(3) (1991). Barnett does not have an “identity” with one of the
original parties under Louisiana law, because “a privy is defined as ‘one who
. . . has acquired an interest in the subject matter affected by the judgment
through or under one of the parties, as by inheritance, succession, purchase or
assignment’”. Alpine Meadows, L.C. v. Winkler, 154 So. 3d 747, 757–58 (La.
Ct. App. 2014) (quoting Five N Co., L.L.C. v. Stewart, 850 So. 2d 51, 61 (La. Ct.
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App. 2003)), writ denied, 169 So. 3d 357 (La. 2015). Barnett falls within none
of those four categories; accordingly, her claim is also not barred by Louisiana
collateral-estoppel rules.
B.
As noted, the district court, in the alternative, granted summary
judgment for OneBeacon on the merits of coverage, concluding MVSC did not
purchase products-hazard coverage and, therefore, Barnett’s Mississippi-state-
court tort judgment was not covered under the policies. Because genuine
disputes of material fact and issues of law exist regarding coverage, the
summary judgment on the merits is vacated and this matter is remanded to
district court for the above-described bench trial.
1.
The district court did not evaluate the weight of the lost policies, instead
focusing solely on the weight and relevance of the 1962-63 “rediscovered”
policy. In instances where the district court did not explicitly address an issue
on summary judgment in the first instance, our court has found it “advisable
to vacate the district court’s grant of summary judgment with regard to the
issue and remand it for further consideration . . . [with] no opinion on the
merits of the issue”. Auclair v. Sher, 63 F.3d 407, 410 (5th Cir. 1995) (footnote
omitted); accord Firefighters’ Ret. Sys. v. EisnerAmper, L.L.P., 898 F.3d 553,
561 (5th Cir. 2018) (remanding for consideration of issue not addressed by
district court).
The district court’s sole treatment of the missing policies is in its
discussing Simmonds’ affidavit, in which he stated he had “personal knowledge
of . . . the types of policies and their terms in existence during the period 1957
to 1987”. But, Simmonds’ statement does not directly address the absence of
the other policies and how to determine their terms and conditions of coverage.
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The parties also dispute whether “products-hazard” coverage was
purchased. According to the 1962-63 policy, an injury falls within the
“products-hazard” if, after goods or products are manufactured by the named
insured, the “accident occurs after possession of such goods or products has
been relinquished to others by the named insured”, and “the accident occurs
away from premises . . . controlled by the named insured”.
OneBeacon asserts such coverage was required to be purchased
separately; but, Barnett contends products-hazard coverage is part of the
general-liability policy unless expressly excluded. The burden of proof depends
on which construction is correct. Under both Louisiana and Mississippi law,
“the existence . . . of a contract is a question of fact” to be decided by the finder
of fact. Townsend v. Urie, 800 So. 2d 11, 15 (La. Ct. App.) (citation omitted),
writ denied, 797 So. 2d 674 (La. 2001); accord Hunt v. Coker, 741 So. 2d 1011,
1014 (Miss. Ct. App. 1999). An insurance policy’s being simply a contract, the
question whether MVSC purchased a separate form of products-hazard
exclusion would most closely resemble the factual determination for whether a
contract exists. More generally, a genuine dispute of material fact exists for
whether products-hazard was required to be purchased separately or operated
as an exclusion to coverage.
In Fitzgerald’s affidavit, he states MVSC “agreed during litigation that
it did not purchase [products-hazard] coverage from OneBeacon”. Because
OneBeacon asserts it is Barnett’s burden to prove coverage, it contends this
statement all but defeats her claim. Barnett, by contrast, notes Fitzgerald’s
statement is based solely on a joint stipulation in Scarborough v. Northern
Assurance Company of America, 718 F.2d 130 (5th Cir. 1983) (stipulation of
facts regarding the terms of a policy issued to MVSC by OneBeacon, before the
1962-63 policy was discovered), not on any first-hand knowledge of the lost
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policies; and, more to the point, that stipulation states “the policies of
insurance issued by Insurers to MVSC contained a products exclusion”,
potentially affecting the burden of proof. (emphasis added).
Finally, the parties dispute whether Barnett’s negligent-failure-to-warn
claim would qualify for coverage under the policy language. The parties also
apparently dispute whether negligent-failure-to-warn is a products-liability
injury, and therefore falls within the products-hazard, depending on which
State’s products-liability law would apply.
In short, there are genuine disputes of material fact and issues of law
regarding the lost policies, and the operation of products-hazard as either
separate coverage or an exclusion, that arguably affect these mixed questions
of law and fact. Without expressing an opinion on coverage under the missing
policies, the burden of proof, the nature of “products-hazard coverage” or
whether Barnett’s negligent-failure-to-warn claim qualifies, we remand for
evaluation by the district court of these, and other, issues at the bench trial.
2.
In addition, the parties dispute the interpretation of the “rediscovered”
1962-63 policy language. Under both Louisiana and Mississippi law,
determining “[w]hether or not ambiguity exists in an insurance policy is . . . a
question of law”. Smith v. Am. Family Life Assurance Co. of Columbus, 584
F.3d 212, 215 (5th Cir. 2009) (applying Louisiana law) (citation omitted);
Barden Miss. Gaming LLC d/b/a Fitzgerald’s Casino v. Great N. Ins., 576 F.3d
235, 238 (5th Cir. 2009) (applying Mississippi law).
Barnett contends her Mississippi-state-court tort judgment falls within
the 1962-63’s policy’s coverage under Coverage B “Bodily Injury Liability—
Except Automobile”, which shows a premium of $127.42, and a limit of liability
of $200,000 for “aggregate products”. Paragraph 6 of the policy “states ‘the
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limits of bodily injury liability . . . stated in the declaration as “aggregate
products” are respectively the total limits of the company’s liability for all
damages arising out of the products hazard’”. Barnett notes Item 3 on the
declarations page states “insurance afforded is only with respect to such . . . of
the following coverages as are indicated by a specific premium charge”; and,
because the “aggregate products” shows an advance premium of $127.42, it is
reasonable it qualifies for coverage under the language of Item 3, (particularly
since, under Coverage D on the declarations page, aggregate products for
“Property Damage Liability-Except Automobile” shows “Nil”).
OneBeacon disagrees, pointing to the consolidated liability schedule
which shows apparently nothing was paid for “aggregate products” as the
advance premiums under Coverage B total $127.42, showing nothing for
“aggregate products”, which states only “Nil-See Endorsement”. When asked
at oral argument to explain the incongruity between the two pages, OneBeacon
admitted it did not know because “the record doesn’t indicate what that was”.
At best, it is unclear why the policy language shows a paid-premium for
“aggregate products” on the declarations page, but apparently not on the
consolidated-liability schedule, creating an ambiguity. None of OneBeacon’s
summary-judgment evidence addresses Barnett’s position regarding the
$200,000 limit of liability for “aggregate products”, or the meaning of
Paragraph 6 and its inclusion of “the products hazard”. Therefore, OneBeacon
has not met its burden to show, as a matter of law, the 1962-63 insurance policy
unambiguously precludes coverage.
Although, at the outset, we noted interpretation of an insurance policy
is a legal question, we go no further than stating the 1962-63 policy contains
ambiguities; nor do we express any opinion as to the potential outcome
stemming from those ambiguities. Under both Louisiana and Mississippi law,
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once a policy is determined to be ambiguous, or further fact-finding is
necessary to determine the effect of an ambiguity, a fact-finder must address
those questions. Westerfield v. LaFleur, 493 So. 2d 600, 605 (La. 1986)
(“[S]ummary judgment may not be rendered declaring lack of coverage unless
there is no reasonable interpretation of the policy, when applied to the
undisputed material facts . . ., under which coverage could be afforded.”
(citation omitted)); Luquette v. Allstate Ins. (Indem.) Co., 174 So. 3d 736, 745
(La. Ct. App.), writ denied, 180 So. 3d 300 (La. 2015); Clark v. State Farm Mut.
Auto. Ins., 725 So. 2d 779, 781 (Miss. 1998) (“The initial question of whether
the contract is ambiguous is a matter of law, but the subsequent interpretation
of the ambiguous contract presents a finding of fact.” (cleaned up and citations
omitted)); see also W. Line Consol. Sch. Dist. v. Cont’l Cas. Co., 632 F. Supp.
295, 301 (N.D. Miss. 1986). In the light of these ambiguities our court remands
this matter for evaluation at the bench trial of these, and other, issues
including choice of law and the interpretation of the ambiguous language.
C.
As noted, even though we remand this matter for trial, our panel retains
jurisdiction over this appeal. See, e.g., United States v. Arellano-Banuelos, 912
F.3d 862, 869 (5th Cir. 2019); Castillo v. City of Weslaco, 369 F.3d 504, 507 (5th
Cir. 2004); Royal Bank of Can. v. Trentham Corp., 665 F.2d 515, 519 (5th Cir.
Unit A 1981). In the interest of expediency, given this litigation began in state
court nearly eight years ago, and with this action’s being filed in mid-January
2014, the bench trial must be completed within 60 days from the date of this
opinion. See Royal Bank of Can., 665 F.2d at 519. The parties conceded at oral
argument that discovery is complete; it shall not be reopened on remand.
The district court’s findings of fact and conclusions of law, including
entry of judgment, must be filed within 30 days from the last day of trial. See
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id.; see also Fed. R. Civ. P. 52(a)(1); 58. The findings and conclusions should
include a conflict-of-laws analysis, as appropriate, given the lingering dispute
between the parties over whether Louisiana or Mississippi law governs.
Any post-trial motions must be filed within 28 days from judgment. See
Fed. R. Civ. P. 52(b); 59(b), (d), (e). All responses must be filed within 14 days;
and, an order ruling on a motion must be entered within 30 days of the motion’s
filing.
III.
For the foregoing reasons, the judgment is VACATED and this matter
REMANDED. We retain jurisdiction over this appeal. Therefore, and in
accordance with the above-imposed schedule’s ending with the entry of post-
trial rulings: after the trial transcript, district court’s findings, conclusions,
and final judgment, and post-trial rulings are entered in district court, the
district court clerk shall return this matter to this court for disposition by this
panel.
Upon receipt, a briefing schedule will be set.
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