Woodfield v. Bowman

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_______________________________________
No. 98-30780
_______________________________________
VIRGINIA WOODFIELD, et al.,
Plaintiffs,
NATIONWIDE MUTUAL INSURANCE CO.,
Plaintiff-Third Party Defendant-Appellant,
versus
CHARLIE BOWMAN, et al.,
Defendants,
PLANET INSURANCE CO.,
Defendant-Third Party Plaintiff-Appellee.
_________________________________________________
Appeal from the United States District Court
for the Eastern District of Louisiana
_________________________________________________
October 19, 1999
Before JONES and WIENER, Circuit Judges, and LITTLE, Chief District
Judge*
WIENER, Circuit Judge:
In this diversity case, arising from a multi-vehicle highway
accident, Third-party Defendant-Appellant Nationwide Mutual
Insurance Co. (“Nationwide”) appeals the judgment of the district
court holding it liable to Third-party Plaintiff-Appellee Planet
*
District Judge of the Western District of Louisiana, sitting
by designation.
1
Insurance Co. (“Planet”), which had settled with parties who were
covered by the uninsured motorist (“UM”) provisions of policies
issued by Nationwide. In this appeal, Nationwide challenges the
jury’s determination of liability and the quantum of the trial
court’s judgment, which exceeds the sum paid in settlement by
Planet. We affirm.
I.
Facts and Proceedings
The pile-up that led to this lawsuit occurred on Interstate 10
in St. Tammany Parish, Louisiana. Because of road construction,
Plaintiff Virginia Woodfield, driving in a van with her minor
daughter, Plaintiff Kimberly Woodfield (the “Woodfields”), merged
to the left lane and came to a complete stop. Several vehicles
back, Defendant Wilson Scott (“Scott”), an employee of Defendant
Lane Trucking (“Lane”), was driving a tractor trailer in the left
lane of the same highway, and was slowing down as he approached the
construction area when he was passed on his right by Defendant
Charlie Bowman (“Bowman”). Immediately after passing Scott, Bowman
zipped into the left lane, directly ahead of Scott, and was rear-
ended. This caused Bowman to rear-end the vehicle ahead of him,
driven by Celine Nederveld (not a party to the lawsuit), and she in
turn rear-ended the Woodfields’ van.
The Woodfields initially sued (1) Bowman, (2) Bowman’s
insurer, Allstate Insurance Co. (“Allstate”), (3) Scott, (4) Lane,
2
and (5) Lane’s Insurer, Planet. The Woodfields amended their
complaint to add their uninsured motorist carrier, Nationwide, as
another defendant. The Woodfields subsequently settled with Bowman
and Allstate for $10,000 (the Allstate policy limit) and dismissed
them from the suit. The Woodfields also settled with Scott, Lane,
and Planet for $400,000. An integral part of that settlement
agreement is an assignment to Planet of the Woodfields’ right,
title, and interest in any and all claims against Nationwide in the
subject litigation for the injuries sustained by Virginia
Woodfield. In implementation of that assignment, Planet filed a
third-party complaint against Nationwide.
By consent of the parties, the case was tried to a jury before
a magistrate judge. In the liability stage of the Planet-
Nationwide portion of the litigation, the jury found Bowman 100% at
fault for the accident and exonerated Scott from any liability. In
the damages stage, the jury found that the Woodfields had suffered
damages totalling $589,973.86. As Bowman, the sole tortfeasor,
was insured only for $10,000, Nationwide was held liable under the
UM provision of the policies that it had issued to the Woodfields,
and a judgment was entered in favor of Planet, the Woodfields’
putative assignee, but was limited to the $400,000 that Planet had
paid the Woodfields in settlement.
At the request of both parties, the magistrate judge vacated
that judgment and allowed additional arguments regarding offset,
3
subrogation, contribution, and insurance coverage relative to the
quantum of the judgment. The court again concluded that Planet
could not recover more than the $400,000 settlement amount and
allowed Nationwide a $48,870.44 offset,1 producing a net judgment
for Planet of $351,129.56 plus interest and costs.
Both parties again filed post-trial motions: Planet sought to
recover the full $589,973.86 amount assessed by the jury, less any
offset; Nationwide requested a new trial and other relief. No
longer limiting Planet’s recovery to the amount that it had paid
the Woodfields, the court reinstated the judgment in the amount
awarded by the jury but reduced it to $422,365.86 and deducted the
offset of $48,870.44, to produce a final judgment of $373,495.242
which Nationwide now appeals.
II.
Analysis
A. Standards of Review
Questions of law such as the interpretation of a statute or a
contract, legal conclusions of the district court, and choice of
1
The following amounts were offset: $10,000.00 for
Allstate’s settlement payment to the Woodfields, $28,433.06 for
Nationwide’s payments for medical bills, $1,437.38 for Nationwide’s
payments for property damage, and $9,000.00 for Nationwide’s
settlement payment to Kimberly and John Woodfield.
2
The magistrate judge granted Nationwide’s motion to alter or
amend the judgment only in respect to the date used in calculating
legal interest.
4
law are subject to de novo review.3 Findings of fact are reviewed
for clear error.4 The decision to grant or deny a motion for a new
trial will be disturbed only for abuse of discretion or
misapprehension of the law.5
B. Issues
Nationwide first argues that the court erred in concluding
that the Woodfields validly assigned Planet their rights against
Nationwide. Second, Nationwide asserts that the Woodfields waived
their right to recover under the UM provisions of the policies by
failing to obtain Nationwide’s consent to settle. Nationwide then
argues that, in the event we should determine that the assignment
was valid and that coverage was not waived, we should apply
Louisiana law, which prohibits “stacking” of UM policy limits, and
cap Nationwide’s liability at $100,000, the limit of one policy.
Alternatively, Nationwide would have us subtract $22,365.86 from
Planet’s judgment, that being the amount by which the final
judgment against Nationwide (before offset) exceeds the $400,000
that Planet paid in settlement. Finally, Nationwide argues that
the jury clearly erred in finding Bowman 100% liable and seeks
reversal of the verdict or a new trial on liability.
3
E.g., Pearlman v. Pioneer Ltd. Partnership, 918 F.2d 1244(5th Cir. 1990).
4
See, e.g., Bolding v. C.I.R., 117 F.3d 270, 273 (5th Cir.
1997).
5
Mitchell v. Lone Star Ammunition, Inc., 913 F.2d 242, 252
(5th Cir. 1990).
5
Planet counters by insisting, first, that under controlling
law, the Woodfields’ assignment was valid and, second, that
Nationwide waived its right to insist on its consent as a condition
to settlement, both by failing to raise the defense in a timely
manner and by denying UM coverage. With respect to the amount of
the judgment, Planet argues that Mississippi law, which permits
stacking, should govern interpretation and application of the terms
of the policy. Planet also argues that the jury verdict, and not
the settlement amount, was the proper measure of damages because,
under Louisiana law, the purchaser of litigious rights, who is a
conventional —— as opposed to an equitable —— subrogee, is entitled
to all rights of the original obligee.6 Finally, Planet asks us to
affirm the jury verdict and the lower court’s denial of
Nationwide’s motion for a new trial.
C. Assignment of Rights in the Lawsuit
First, we conclude that the Woodfields’ assignment of rights
to Planet is a valid sale of litigious rights, i.e., the
plaintiff’s rights in a filed lawsuit, and that the assignment
incorporates a conventional subrogation. The issue of
6
See La. Civ. Code art. 1827, cmt. (d) (expressly overruling
cases which limited the subrogee’s recovery to the amount he
actually paid the obligee); id. art. 2652 (establishing that
litigious rights may be assigned and that assignee steps into shoes
of assignor as to all rights, including right to recover more than
amount paid for the litigious rights unless the obligor timely
offers to acquire these rights from the assignee for the price paid
and ceases to contest or defend against the claim).
6
assignability of these rights is governed by Louisiana law7 which
provides that litigious rights are rights in an already-filed
personal injury suit and are “real” rights, not “strictly personal”
rights,8
heritable and freely assignable.9 In the instant case, the
Woodfields assigned Planet their rights to recover in a lawsuit
already pending against Nationwide; they did not purport to assign
their UM coverage as such. Thus, the assignment was valid under
the scheme of Louisiana’s Civil Code, and Planet stepped into the
shoes of the Woodfields for the purposes of this lawsuit.10 In
addition, the Woodfields accomplished the assignment to Planet
through express language in a written settlement agreement as part
7
In diversity cases, federal courts apply the law of the
forum state, here, Louisiana. See Erie R.R. Co. v. Tompkins, 304
U.S. 64 (1938); Klaxton Co. v. Stentor Elec. Manuf. Co., 313 U.S.
487 (1941).
8
La. Civ. Code art. 2642 & cmts. (providing that all rights
are assignable except those which are strictly personal).
9
See La. Civ. Code art. 2652 (“Sale of litigious rights”).
Article 2652 specifically provides: “When a litigious right is
assigned, the debtor may extinguish his obligation by paying to the
assignee the price the assignee paid for the assignment....” The
article affirms the Louisiana litigious rights doctrine under which
such rights are freely heritable and assignable. See also Nathan
v. Touro Infirmary, 512 So.2d 352, 354-55 (La. 1987) (holding that
Louisiana legislatively overruled common law rule that tort action
abates on death of victim); Guirdy v. Theriot, 377 So.2d 319, 323-
24 (La. 1979) (noting “significant difference between inheriting an
instituted action and inheriting the right to institute an
action”).
10
Rather than formally moving to be substituted as the Party-
Plaintiff, Planet filed a third-party complaint again Nationwide.
7
of the consideration for the $400,000 paid by Planet; therefore,
the type of subrogation that resulted is conventional (or
contractual) rather than legal (or equitable).11
Nationwide asks us to follow the Louisiana Court of Appeal’s
holding in Constans v. Choctaw Transport, Inc.12 to the effect that
conventional subrogation of a personal injury claim is not
permitted.13 We decline this invitation. We have recently
confirmed our recognition of the Louisiana Supreme Court’s
distinction between a personal injury claim that is the subject of
an extant lawsuit, which is heritable and assignable, and a claim
that is merely an inchoate personal injury cause of action that has
not yet been sued on, which is strictly personal and not heritable
or assignable.14 As Constans conflicts with our precedent, we
11
See La. Civ. Code art. 1827 (providing that conventional
subrogation is subject to the rules governing assignment of
rights). “‘Conventional’ subrogation occurs when an obligee
receives performance from a third person and in express terms
subrogates that person to the rights of the obligee, even without
the obligor’s consent. ‘Legal’ subrogation takes place by
operation of law in favor of an obligor who pays a debt he owes
with others and who has recourse against those others as a result
of the payment. Wilhite v. Schendle, 92 F.3d 372, 376 (5th Cir.
1996) (citations omitted) (construing Louisiana law).
12
712 So.2d 885 (La. App. 1997), writ denied, 716 So.2d 892(La. 1998) (allowing contribution under legal subrogation theory).
13
Id. at 895.
14
In re Pembo, 32 F.3d 566 (unpublished table decision), No.
94-30036, slip op. at 4 (5th Cir. July 28, 1994) (according to 5th
Cir. Rule 47.5.3, “[u]npublished opinions issued before January 1,
1996, are precedent”); see also Parich v. State Farm Mutual Auto.
Ins. Co., 919 F.2d 906, 917 & n.3 (5th Cir. 1990) (applying
Louisiana law on assignment of rights but finding assignment
8
decline to follow it.15 And, as Louisiana law is clear that the
express assignment of a cause of action for which suit has been
instituted is valid, we do not need to reach Planet’s alternative
recovery theories of legal subrogation and unjust enrichment.
Nationwide next argues that under the terms of the UM policies
themselves the assignment was invalid because the Woodfields failed
to obtain the insurer’s consent to settle. We hold, however, that
Nationwide waived its right to assert this affirmative defense
under the consent-to-settle clause of the insurance policy by
invalid as suit had not been filed).
15
As often noted, we are a strict stare decisis court: One
panel of this court cannot disregard, much less overrule, the
decision of a prior panel, even on decisions involving
interpretation of state law. Only supervening contrary decisions
of the state’s highest court or the supervening enactment of a
controlling statute will render our decisions clearly wrong and
thus no longer precedential. FDIC v. Abraham, 137 F.3d 264, 267-68
(5th Cir. 1998). Therefore, we will not ignore our own prior
decisions to apply the rule of Constans which, after all, was
decided by one of five intermediate Louisiana appellate courts
only, particularly in the face of two state supreme court decisions
contra. We emphasize the narrowness of our holding in this case:
We do not establish a general rule that conventional subrogation
results from every sale of litigious rights. In this case, the
deliberate wording of the Woodfield-Planet settlement agreement,
specifying that the objects of the assignment are the assignors’
right, title, and interest in the lawsuit makes clear that the
subrogation is conventional; in the absence of a specific
settlement contract or assignment instrument, however, the sale of
a litigious right would still result in subrogation —— albeit
possibly legal rather than conventional —— of the purchaser to the
rights of the seller,. Any conclusion we might reach on that
question would be dicta. In the context of the Louisiana concept
of litigious rights, what is crucial is not the label applied to
the type of subrogation but the fact that the assignment is of an
interest in an existing lawsuit, as distinguished from an inchoate
right to sue.
9
failing to plead it adequately.
As a preliminary matter, we note that under the choice of law
provisions of Louisiana, the forum state,16 issues concerning the
terms of an insurance policy are governed by Mississippi law. The
Louisiana Civil Code’s generally applicable choice of law article
specifies that “an issue in a case having contacts with other
states is governed by the law of the state whose policies would be
most seriously impaired if its law were not applied to the case.”17
Specifically regarding contracts, the Code instructs courts to
assess the strength of the relevant policies of the involved states
in light of the place of negotiation, formation, and performance of
the contract as well as the location of the object of the
contract.18 Applying these principles, Louisiana courts generally
choose the law of the state in which the insurance policy in
question was issued to govern the interpretation of the terms of
the policy.19 In the instant case, these principles lead us to
conclude that Mississippi law governs the policy terms.
The Woodfields’ Nationwide policies were issued in
16
Federal courts apply the choice of law provisions of the
forum state, here, Louisiana. Duhon v. Union Pac. Resources Co.,
43 F.3d 1011, 1013 (5th Cir. 1995).
17
La. Civ. Code art. 3515.
18
Id. art. 3537.
19
Anderson v. Oliver, 705 So.2d 301, 305-06 (La. App. 1998)
(relying on Louisiana Civil Code choice of law articles); Holcomb
v. Universal Ins. Co., 640 So.2d 718, 722 (La. App. 1998).
10
Mississippi, to Mississippi residents, covering vehicles
principally garaged in Mississippi. In contrast, the only contact
between the Nationwide policies and Louisiana is the situs of the
accident on a highway in Louisiana. Mississippi has a more
substantial interest in uniform application of its laws governing
insurance contracts than Louisiana has in providing an insurance
remedy to an out-of-state resident who happens to sustain injury
while transitorily within the state’s borders. Nationwide
nevertheless contends that the Louisiana Insurance Code establishes
a presumption that courts should apply Louisiana law to matters
concerning UM policies.20 In Anderson v. Oliver,21 however, the only
Louisiana appellate court to consider the precise question
specifically disapproved of the suggestion that the UM statute
includes a choice of law presumption, even though that court would
have reached the same result, applying Louisiana law under the
traditional “interest analysis” codified in the above-referenced
conflict of laws statutes.22 Therefore, under the choice of law
provisions of the forum state of Louisiana, we apply Mississippi
law to interpret the terms of the UM policies at issue.
We begin our substantive analysis by observing that the
parties do not dispute that (1) consent-to-settle provisions are
20
See Trautman v. Poor, 685 So.2d 516, 521 (La. App. 1996).
21
705 So.2d 301 (La. App. 1998).
22
Id. at 305.
11
enforceable under Mississippi law,23 (2) the Nationwide policies at
issue contain such clauses, requiring the insured to obtain written
consent of the insurer to settle any action brought against a
potentially liable party, or (3) the Woodfields failed to obtain
Nationwide’s consent to settle with Planet, Allstate, and their
respective insureds. Planet nevertheless contends, first, that
Nationwide waived the right to assert its consent-to-settle defense
by failing to plead it; and, second, that Nationwide is estopped
from asserting this defense by its denial of coverage. As we agree
that Nationwide failed to plead this defense and thus waived it, we
do not reach the res nova Mississippi law question whether an
insurer that denies coverage is estopped to assert its rights under
the policy clause requiring the insured to obtain the insurer’s
consent to settle. We thus avoid “the always-dangerous undertaking
of predicting what [Mississippi] courts would hold if the issue
were presented squarely to them.”24
Nationwide asserts that it did plead the consent-to-settle
affirmative defense. It points to its “Fourth Defense” to Planet’s
third-party complaint: “The claims, demands and causes of action
asserted by Wilson Scott, Lane Trucking Company, Inc. and Planet
Insurance Company are barred, or alternatively, reduced, by the
23
See, e.g., St. Paul Property & Liab. Ins. Co. v. Nance, 577
So.2d 1238, 1242 (Miss. 1991); United States Fidelity & Guar. Co.
v. Hillman, 367 So.2d 914, 921 (Miss. 1979).
24
Stephens v. State Farm Mutual Auto. Ins. Co., 508 F.2d 1363,
1366 (5th Cir. 1975).
12
doctrines of accord and satisfaction, transaction and compromise,
waiver and/or release.” The district court, in its May 6, 1998
Order and Reasons in response to the parties’ cross-motions to
vacate the judgment, held that such “boilerplate” defensive
pleading is insufficient under Federal Rule of Civil Procedure 8(c)
to apprise Planet of Nationwide’s affirmative defense under the
specific consent-to-settle provision of the insurance policy, and
thus Nationwide waived the defense. We agree.
An insured’s failure to obtain the insurer’s consent to settle
is an affirmative defense under Mississippi law.25 The Federal
Rules require an affirmative defense to be pleaded; failure to
plead such a defense constitutes waiver.26 An affirmative defense
is subject to the same pleading requirements as is the complaint.27
Even though the aim of the relaxed notice pleading standards of
Federal Rule of Civil Procedure 8 is to prevent parties from being
defaulted for committing technical errors,28 a defendant
nevertheless must plead an affirmative defense with enough
25
See, e.g., Hillman, 367 So.2d at 916 (noting that any action
by insured that prejudices subrogation rights of insurer is an
affirmative defense which must be pleaded).
26
Trinity Carton Co. v. Falstaff Brewing Corp., 767 F.2d 184,
194 (5th Cir. 1985).
27
See Fed. R. Civ. P. 8(e) (requiring all pleadings to be
“simple, concise, and direct”).
28
Ingraham v. United States, 808 F.2d 1075, 1079 (5th Cir.
1987) (noting that technical failure to comply with rule 8(c) is
not fatal).
13
specificity or factual particularity to give the plaintiff “fair
notice” of the defense that is being advanced.29 We acknowledge
that in some cases, merely pleading the name of the affirmative
defense —— as Nationwide contends it did —— may be sufficient.30
In the instant case, however, Nationwide’s baldly “naming” the
broad affirmative defenses of “accord and satisfaction” and “waiver
and/or release” falls well short of the minimum particulars needed
to identify the affirmative defense in question and thus notify
Planet of Nationwide’s intention to rely on the specific,
contractual defense of requiring the Woodfields to obtain the
insurer’s consent before settling with Planet.
The “fair notice” pleading requirement is met if the defendant
“sufficiently articulated the defense so that the plaintiff was not
a victim of unfair surprise.”31 In prior cases, we have employed
a fact-specific analysis in deciding whether the plaintiff was
29
“Although absolute specificity in pleading is not required,
fair notice of the affirmative defense is.” Automated Med. Labs.
v. Armour Pharm. Co., 629 F.2d 1118, 1122 (5th Cir. 1980) (citing
Rule 8(c)); see also Ingraham, 808 F.2d at 1079 (“A defendant
should not be permitted to ‘lie behind a log’ and ambush a
plaintiff with an unexpected defense.”).
30
American Motorists Ins. Co. v. Napoli, 166 F.2d 24, 26 (5th
Cir. 1948) (holding, in negligence action arising from car
collision, that pleading “contributory negligence” without
extensive factual allegations is sufficient); cf. Home Ins. Co. v.
Matthews, 998 F.2d 305, 309 (5th Cir. 1993) (noting that improper
labeling of defense was not prejudice where defensive pleading set
out detailed facts and where state law itself was unclear on
distinction between “waiver” and “estoppel”).
31
Matthews, 998 F.2d at 309 (citing Bull’s Corner Restaurant
v. Director, FEMA, 759 F.2d 500, 502 (5th Cir. 1985)).
14
unfairly surprised.32 For example, in Trinity Carton Corp. v.
Falstaff Brewing Corp.,33 we held that the defendant waived his
defenses of failure of consideration and failure to agree on all
essential terms by not raising them until several months after the
jury’s verdict. Finding no justification for the delay in raising
the defenses, we noted that “[the defendant] necessarily was put on
notice by the very nature of the suit that these matters of
affirmative defense would be relevant to, if not potentially
controlling of, the determination of liability.”34
Likewise, we discern no justification here for Nationwide’s
having waited until after the trial to inject into the dispute its
rights under the explicit contractual provision requiring the
insured to obtain consent to settle. Nationwide, itself an
insurance company, was put on notice of the potential need to
assert its consent-to-settle defense by the very nature of the
32
See, e.g., Ingraham, 808 F.2d at 1079 (noting that failure
to plead statutory limit on medical malpractice liability
prejudiced plaintiffs who would have offered additional proof of
damages or pleaded other theories of recovery with more vigor had
they know of the defense); Marine Overseas Servs., Inc. v.
Crossecean Shipping Co., 791 F.2d 1227, 1233 (5th Cir. 1986)
(noting that although defense of agency relationship was not
pleaded, parties were well aware it was an issue); Bull’s Corner
Restaurant, 759 F.2d at 502 (finding statutory exclusion adequately
pleaded where facts recited in complaint related to the exclusion
even if it was not mentioned by name); Automated Med. Labs., 629
F.2d at 1122 (holding that pleading statute of frauds for first
time in one sentence of pre-trial memorandum was inadequate).
33
767 F.2d 184 (5th Cir. 1985).
34
Id. at 194.
15
instant third-party complaint, which arose only because of a
settlement agreement between another insurer (Planet) and
Nationwide’s own insureds (the Woodfields). Nationwide had already
been added to the suit as a defendant by the time of the Planet-
Woodfield settlement and the filing of Planet’s subsequent third-
party complaint.
In addition, Nationwide’s post-trial, post-hoc suggestion that
the consent to settle provision was “exactly” what it meant by
pleading the “Fourth Defense” rings hollow, to say the least. Not
until after the June 1996 trial, during a second round of post-
trial pleadings, did Nationwide advance such a connection. True,
Nationwide had mentioned the consent-to-settle clause of the policy
during the first round of post-trial motions, in which both parties
requested reconsideration of the amount of the judgment in light of
offset, subrogation, indemnity, and contribution issues. But even
though Nationwide relied on the consent-to-settle clause in that
memorandum to the court on those specific issues, at no time did it
imply, much less assert, that it had previously pleaded it as an
affirmative defense; neither did it mention the “Fourth Defense” at
that time. In ruling on those motions, the district court
correctly observed that “this issue had not been raised for the
first time until the current memoranda were filed with the court.
The issue does not appear well framed in the pre-trial order and it
would seem that such an issue should be framed as an affirmative
16
defense in Nationwide’s answer, which, in fact, it was not.”
After entry of that order, Nationwide again requested post-
judgment relief. Faced with the magistrate judge’s conclusion that
it had not pleaded the affirmative defense, Nationwide proffered
the general, non-contractual “Fourth Defense” to support its
assertion of having adequately pleaded the specific, contractually
based consent-to-settle defense. We cannot credit such a re-
characterization to reverse the jury’s determination of liability.35
Accordingly, we affirm the district court’s ruling that by failing
to plead it, Nationwide waived the right to assert a defense under
the consent-to-settle clause of the policies, and that the
Woodfields validly settled and assigned their litigious rights
against Nationwide to Planet.
D. Quantum of Damages
We now address Nationwide’s concern with the amount of the
judgment rendered against it. First, Nationwide contends that we
should apply Louisiana law (which does not permit stacking) and cap
its liability at $100,000, the limit of UM coverage under one
35
“A busy district court need not allow itself to be imposed
upon by the presentation of theories seriatim.” Freeman v.
Continental Gin Co., 381 F.2d 459, 469 (5th Cir. 1967) (disallowing
untimely amended pleading); see also Union Planters Nat’l Leasing
Inc., 687 F.2d 117, 121 (5th Cir. 1982) (denying request to amend
answer and noting that “concerns of finality in litigation become
more compelling [when] the litigant has had the benefit of a day in
court”).
17
policy.36 Planet counters that the district court was correct in
applying Mississippi law, under which “stacking” of policies is
allowed. Second, Nationwide argues under Constans that, as Planet
is a subrogee to the rights of the Woodfields, it cannot recover
more than the amount of the settlement, or $400,000. Planet
counters by asking us to uphold the full amount of the judgment
even though, as adjusted by the court, it exceeds the settlement
amount by $22,365.86. We affirm the district court’s decision on
both points.
We have already determined that under Louisiana’s choice of
law statutes, Mississippi law, not Louisiana’s, governs the
interpretation and application of policy terms.37 In a case decided
after the magistrate judge comprehensively addressed the stacking
question in the instant lawsuit, the Mississippi Supreme Court
explicitly held that courts may stack the UM limits of separate
policies, irrespective of the number and amount of premiums paid
for the policies.38 Nationwide issued two policies with UM coverage
to the Woodfields, one policy covering four vehicles and another
36
See La. Rev. Stat. § 22:1406(D)(1)(c)(i) (anti-stacking
statute).
37
La. Civ. Code arts. 3515, 3537.
38
United States Fidelity & Guar. Co. v. Ferguson, 698 So.2d
77, 79 (Miss. 1997) (“We now affirmatively declare that the public
policy of this State mandates stacking of UM coverage for every
vehicle covered under a policy....”). Ferguson was decided July
31, 1997. The magistrate court issued its order regarding stacking
on December 20, 1996.
18
covering a fifth. When stacked, the aggregate UM limit for all
five vehicles is $500,000, well above the final judgment
($422,365.86 gross; $351,129.56 net). As we conclude that there is
no merit in Nationwide’s argument against applying Mississippi law,
there is no basis for capping the damages at $100,000, the UM limit
of one policy.
In addition, we are satisfied that the district court did not
err in entering a judgment for an amount, prior to offset, higher
than the $400,000 settlement price that the Woodfields received
from Planet in consideration for assigning Planet their rights in
the lawsuit against Nationwide. Under the Louisiana law that
governs the sale of litigious rights and conventional subrogation,
the assignee/subrogee (Planet) may recover the full amount of the
debt, even if it is greater than the amount paid to the original
obligee (the Woodfields) unless the obligor timely acknowledges the
debt and requests to purchase those rights from the assignee for
the same price.39 Nationwide did neither here.
A review of the salient facts confirms that Nationwide is not
entitled to limit Planet’s judgment to the amount paid for the
assignment: The jury returned a verdict of $589,973.86, and the
court rendered a judgment in that amount; at the request of both
39
See La. Civ. Code art. 2652 (allowing debtor to extinguish
obligation by “redeeming” the lawsuit for the same amount the
assignee paid for it); Clement v. Sneed Bros., 116 So.2d 269 (La.
1959) (discussing exceptions to debtor’s right to redeem if debtor
is untimely in its request or continues to defend the suit).
19
parties, the court reconsidered the judgment and capped it at
$400,000, the amount of the settlement, then subtracted an offset
to Nationwide; the parties again sought modification, with Planet
repeating its objection to the amount of the judgment and moving to
reinstate the jury award; the court granted Planet’s motion but
reduced the judgment, first, by deducting the $50,000 awarded to
Mr. Woodfield for loss of consortium and, second, by deducting the
$117,608 awarded to Mrs. Woodfield for lost wages. The adjusted
amount, prior to offset, was $422,365.86. The offset to
Nationwide, which is not disputed, was $48,870.44,40 resulting in
a net judgment of $373,495.24. The magistrate judge reasoned that
as the amount of the judgment, after remittitur and offset, was
below the $400,000 settlement amount, no further adjustment was
required. Nationwide argues, however, that the starting point,
before offset, should be $400,000 and asks us to reduce the
judgment by $22,365.86. Importantly, Nationwide never attempted to
redeem the litigious right from Planet and never ceased defending
against the UM claim. Under these conditions, the law affords the
obligor no “cap.” We affirm the magistrate judge’s final ruling on
the amount of the judgment, albeit for different reasons.
We have already decided that in regards to the Woodfields’
assignment of rights to Planet under the settlement agreement, (1)
assignment-related issues are governed by the law of the forum
40
See supra note 1 (itemizing offset).
20
state (Louisiana), and (2) the comprehensive settlement agreement
includes a valid assignment of the Woodfields’ rights in the
existing lawsuit and a conventional subrogation to Planet.
Therefore, under Louisiana Civil Code article 1827 (“Conventional
subrogation by obligee”), the district court was not prohibited
from rendering a judgment in an amount greater than the gross
settlement amount. Revision comment (d) to article 1827 specifies
that under conventional subrogation, the subrogee “is entitled to
recover the full amount of the debt from the obligor.”41 In
contrast, Louisiana law limits recovery under legal subrogation and
unjust enrichment —— theories of recovery we do not reach in this
appeal —— to the amount actually paid.42
The correctness of this result is buttressed by the Louisiana
doctrine of sale of litigious rights:43 When, in a pending lawsuit,
the original plaintiff transfers his position to another for a
specific sum of money, a defendant (such as Nationwide) has a right
either (1) to pay the transferee the same amount that the
transferee paid the obligee, thus extinguishing all claims and
cutting any future losses, or (2) to continue to defend the action
and gamble on doing better (or risk doing worse) than the
41
La. Civ. Code art. 1827, cmt. d.
42
Id. arts. 1830, 2298. And, as noted above, under article
2652, recovery is likewise limited but only if the obligor timely
acknowledges the obligations and offers to purchase the litigious
right for the same price as the assignee paid for it.
43
Id. art. 2652.
21
transferee’s valuation of the suit. Here, Nationwide continued to
defend and took the gamble of incurring a judgment in excess of
$400,000 —— and lost. We agree with the district court’s ultimate
refusal to limit Planet’s recovery to the settlement amount.
Nationwide nevertheless asks us to rely on Constans,44 this
time for the proposition that a subrogee is “limited to the lesser
of the amount paid in settlement or the virile portion of what is
determined actually to be owed.”45 We again decline to follow
Constans, not because its holding on this issue conflicts with our
own precedent but because the quoted language, read in context,
refers to legal, not conventional subrogation. Accordingly, while
that portion of Constans is a correct statement of the law in
general, its holding is inapplicable to the instant situation. The
final judgment, after offset, of $373,495.24, is affirmed.
E. Jury Verdict and New Trial
Finally, Nationwide contends that the jury committed clear
error in finding Bowman 100% liable for the accident and
exonerating Planet’s insureds, Scott and Lane. Nationwide asks us
to reverse the jury verdict on liability. We decline to encroach
on the province of the jury as finder of fact in the absence of
clear error or some indication that reasonable jurors could not
44
Constans v. Choctaw Transport, Inc., 712 So.2d 885 (La. App.
1997).
45
Id. at 895.
22
possibly have arrived at the verdict.46 Both parties presented
ample evidence, and we do not find reversible error in the jury’s
determination.
On the same basis, Nationwide moved for a new trial which the
district court denied. We are convinced that the court did not
abuse its discretion in denying that motion and, accordingly,
affirm.
III.
Conclusion
As should now be apparent from the foregoing analysis, we
conclude that the district court correctly entered judgment against
Nationwide based on the jury’s determination of liability under the
UM insurance provisions of the policies. The district court
correctly held that the Woodfields validly assigned Planet their
litigious rights against Nationwide as an element of the settlement
of all litigation between the Woodfields and Planet. Under the law
of the forum state (Louisiana), rights in an already-filed suit are
freely heritable and thus assignable. Furthermore, we decline to
find the assignment invalid for the Woodfields’ failure to obtain
the consent of their UM insurer, Nationwide, to settle the claim:
Nationwide failed adequately to plead that specific, contract-based
defense and thus waived it.
46
See Granberry v. O’Barr, 866 F.2d 112, 113 (5th Cir. 1988);
see also Coughlin v. Capitol Cement Co., 571 F.2d 290, 297 (5th
Cir. 1978).
23
We also affirm the district court’s entry of judgment in the
net amount of $373,495.24. We decline Nationwide’s invitation to
cap the gross amount of the judgment at $100,000, the limit of one
UM policy, by applying Louisiana’s anti-stacking law. Instead, we
hold that under the forum state’s choice of law provisions,
Mississippi law governs the interpretation of an insurance policy’s
terms and that Mississippi law specifically allows stacking of UM
policy limits. We also reject Nationwide’s argument that Planet’s
recovery is limited to the $400,000 it paid the Woodfields in the
settlement. Applying Louisiana law on sale of litigious rights and
assignment, we hold that Planet, as the Woodfields’ conventional
assignee and subrogee, is entitled to recover the full amount of
the final judgment. We find no error in the district court’s entry
of a gross judgment higher than the $400,000 settlement amount.
Finally, we hold that the jury did not commit reversible error
in finding the uninsured —— or underinsured —— motorist 100%
liable, and that the district court did not abuse its discretion in
denying Nationwide’s motion for a new trial on liability.
Therefore, the district court’s orders and judgments from which
Nationwide appeals are, in all respects,
AFFIRMED.
24