Wanda Bunch, Resp. v. Nationwide Mutual Insurance, Et Ano., Pets'.

1 r
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
)
WANDA BUNCH, on behalf of herself ) No. 69600-9-1
and others similarly situated, )
) DIVISION ONE
Respondent, )
)
v. )
)
NATIONWIDE MUTUAL INSURANCE ) UNPUBLISHED
COMPANY; and DEPOSITORS )
INSURANCE COMPANY, ) FILED: February 3.2014
)
Appellants. )
)
Cox, J. — The priority of action doctrine generally requires that the forum
that first gains jurisdiction over a matter retains exclusive authority over it.1 Here,
the U.S. District Court for the Western District of Washington gained jurisdiction
over the Consumer Protection Act ("CPA"), chapter 19.86 RCW, claim by Wanda
Bunch against Nationwide Mutual Insurance Company and Depositors Insurance
Company (collectively "Nationwide"). That federal court dismissed without
prejudice only the request for CPA injunctive relief. Thereafter, Bunch filed this
second state action, seeking CPA injunctive relief. Because the trial court did not
properly exercise its discretion by denying Nationwide's motion to stay this action
1 State ex rel. Evergreen Freedom Found, v. Wash. Educ. Ass'n, 111 Wn.
App. 586, 606, 49 P.3d 894 (2002) (citing City of Yakima v. Int'l Ass'n of Fire
Fighters. AFL-CIO. Local 469, 117 Wash. 2d 655, 675, 818 P.2d 1076 (1991);
Sherwin v. Arveson. 96 Wash. 2d 77, 80, 633 P.2d 1335 (1981)), review denied,
148Wn.2d 1020(2003).
No. 69600-9-1/2
on the basis of the priority of action doctrine, we reverse and remand with
instructions.
In 2011, Bunch's tenant told her that there was water damage in Bunch's
house. At the time, Bunch had homeowner's insurance with Nationwide. It
denied her insurance claim for this water damage.
In 2012, Bunch commenced a putative class action against Nationwide in
state court. She asserted, among other claims, that Nationwide violated the CPA
by relying on ambiguous language in its homeowner's insurance policies to deny
coverage to her and other policyholders. She requested injunctive and other
equitable relief along with actual and treble damages.
Nationwide removed the action to federal district court. The court
concluded that it lacked "Article III jurisdiction" with respect to Bunch's request for
CPA injunctive relief. It dismissed the "CPA injunction claim" without prejudice.
It appears this decision was based on the fact that Bunch was no longer a policy
holder. The federal district court retained jurisdiction to decide whether liability
exists under the CPA and to determine what relief, other than injunctive relief, is
warranted if liability exists.
One day after the district court dismissed the request for CPA injunctive
relief, Bunch commenced this second action against Nationwide in superior
court. She asserted a request for CPA injunctive relief based on the same
factual allegations stated in her complaint in her first action.
Nationwide moved to stay these proceedings, pending the resolution of
the CPA claim in federal district court. It argued that a stay was necessary under
No. 69600-9-1/3
the priority of action doctrine because the actions in state and federal court had
identical subject matter, parties, and relief.
The court denied Nationwide's motion. We granted discretionary review.
PRIORITY OF ACTION
Nationwide argues that the trial court abused its discretion when it denied
the motion to stay proceedings in state court pending the outcome of
proceedings in federal court. Specifically, it argues that the priority of action
doctrine requires a stay in this case. We agree.
This court generally reviews a lower court's determination on a motion to
stay proceedings for abuse ofdiscretion.2 But a decision denying such a motion
based on the priority of action doctrine is a legal determination that we review de
novo.3
Under the priority of action doctrine, "'the court which first gains jurisdiction
of a cause retains the exclusive authority to deal with the action until the
controversy is resolved.'"4 This rule applies where two actions share "identity"5
of certain elements. Generally, courts look to whether the actions share identity
of (1) subject matter, (2) parties, and (3) relief.6
2 King v. Olympic Pipeline Co., 104 Wash. App. 338, 348, 16 P.3d 45 (2000).
3 Evergreen Freedom Found., 111 Wn. App. at 605.
4 City of Yakima, 117 Wn.2d at 675 (quoting Sherwin, 96 Wn.2d at 80).
5 Id.
jd, (citing Sherwin, 96 Wn.2d at 80).
No. 69600-9-1/4
While the general rule looks to these three elements, these elements are
not to be applied inflexibly.7 Rather, courts have looked beyond these elements
and to the policy behind the doctrine.8 This was seen in State ex rel. Evergreen
Freedom Foundation v. Washington Education Ass'n, where Division Two of this
court stated that the underlying purpose of the three elements is to determine
whether the "identity" of the actions is "such that a decision in one tribunal would
bar proceedings in the other tribunal because of res judicata."9
In Evergreen Freedom Foundation, the foundation argued that the priority
of action doctrine did not apply to bar its claim in superior court.10 There, the
foundation pursued its claims administratively but also sought to bring these
claims in superior court.11 The trial court denied the foundation's motion to
amend its complaint to include allegations made to the agency because the
allegations would violate the priority of action rule.12
On appeal, Division Two agreed with the trial court.13 Division Two
explained that it was undisputed that the first two elements were identical— the
7 Am. Mobile Homes of Wash.. Inc. v. Seattle-First Nat'l Bank, 115 Wash. 2d
307, 321, 796 P.2d 1276 (1990).
8 See, e.g., id; Evergreen Freedom Found., 111 Wn. App. at 607.
9111 Wash. App. 586, 607, 49 P.3d 894 (2002) (citing Citv of Yakima. 117
Wn.2d at 675)).
10 jd, at 606-09.
11 ]dL at 595-96.
12 jcL
13 Id. at 609.
No. 69600-9-1/5
subject matter and parties.14 Thus, the issue was whether the third element,
identity of relief, was met.15 The foundation argued that there was not an identity
of relief because the administrative agency could only levy fines up to $2,500
while the court could "levy fines far in excess of that amount."16
In determining that there was identity of relief, the court relied on "the
policy behind the priority of action doctrine, the ability to apply res judicata to a
later action in superior court."17 The court concluded that the elements of res
judicata were met, and the priority of action rule applied.18
The generic term "res judicata" may include both res judicata or claim
preclusion and collateral estoppel or issue preclusion.19 Because "res judicata"
is a general term, a court may look to both claim and issue preclusion to
determine whether there is an "identity" ofthe actions.20
14 jd, at 607.
15 Id.
16 Id.
17 jd
18 ]U at 607-09.
19 See 9 David E. Breskin, Washington Practice: Civil Procedure
Forms and Commentary § 8.79 (3d ed. 2013) ("The general term res judicata
encompasses claim preclusion (often itself called res judicata) and issue
preclusion also known as collateral estoppel.").
20 See, e.g., Evergreen Freedom Found., 111 Wn. App. at 607 (looking to
the elements of res judicata to determine whether the priority of action doctrine
should apply).
No. 69600-9-1/6
"Res judicata [or claim preclusion] precludes a later lawsuit when the
second lawsuit has identical subject matter, cause of action, persons and parties,
and the quality of the persons for or against whom the claim is made."21
Collateral estoppel or issue preclusion precludes relitigation of an issue in
a subsequent proceeding where the following elements are met: "(1) the issue
decided in the earlier proceeding was identical to the issue presented in the later
proceeding; (2) the earlier proceeding ended in a judgment on the merits; (3) the
party against whom issue preclusion is asserted was a party to, or in privity with
a party to, the earlier proceeding; and (4) application of issue preclusion does not
work an injustice on the party against whom it is applied."22
"Broadly stated, preclusion rules developed under the rubric of res judicata
and collateral estoppel are designed to prevent repetitive litigation of the same
matters."23 Similarly, the priority of action doctrine prevents a courtfrom
interfering with the authority of another court of competent jurisdiction.24 It
prevents "'unseemly, expensive, and dangerous conflicts of jurisdiction and of
process.'"25
21 Id\
22 Ullerv v. Fulleton, 162 Wash. App. 596, 602, 256 P.3d 406, review denied,
173Wn.2d 1003 (2011).
2314A Karl B. Tegland, Washington Practice: Civil Procedure § 35.21
(2d ed. 2013).
24 Am. Mobile Homes of Wash.. 115 Wn.2d at 316-17.
25 \± (quoting Sherwin, 96 Wn.2d at 80).
No. 69600-9-1/7
Here, it is undisputed that the actions in federal court and state court have
identical parties, Bunch and Nationwide, and identical subject matter, the CPA.
The dispute centers on whether there is an identify of relief sought in each court.
In federal court, Bunch seeks damages for the alleged CPA violation. In state
court, she seeks injunctive relief for the alleged CPA violation. Thus, the issue is
whether this disparity of relief does not necessarily preclude application of the
priority of action doctrine to stay Bunch's state court action.26
Because the state and federal actions are both predicated on the same
alleged CPA violation, we look to collateral estoppel or issue preclusion
principles to determine whether the priority of action doctrine applies.
The claim in both actions was brought pursuant to RCW 19.86.090, the
CPA's citizen suit provision. This statute provides that "'[a]ny person who is
injured in his or her business or property' by a violation of the act may bring a
civil suit for injunctive relief, damages, attorney fees and costs, and treble
damages."27 "To prevail in a private CPA claim, the plaintiff must prove (1) an
unfair or deceptive act or practice, (2) occurring in trade or commerce, (3)
affecting the public interest, (4) injury to a person's business or property, and (5)
causation."28 The "injury" element of a CPA claim is distinct from "damages" or
26 See Evergreen Freedom Found., 111 Wn. App. at 607 (concluding that
the priority of action doctrine applied despite a "disparity" in the type of relief
available in two separate actions).
27 Panag v. Farmers Ins. Co. of Wash., 166 Wash. 2d 27, 37, 204 P.3d 885(2009) (alteration in original) (quoting RCW 19.86.090).
28 jcL (citing Hangman Ridge Training Stables, Inc. v. Safeco Title Ins. Co..
105 Wash. 2d 778, 784, 719 P.2d 531 (1986)).
No. 69600-9-1/8
other types of remedies.29 A plaintiff mustfirst establish a CPA violation before a
court may order any CPA remedies.30
Here, while it is clear that Bunch's first and second complaints do not seek
identical relief, their allegations related to the CPA violation are identical. Bunch
asserted in her first action, which Nationwide removed to federal court, that
Nationwide violated the CPA:
In all instances, Nationwide engaged in the same pattern of unfair
and deceptive conduct pursuant to a common insurance policy and
interpretation thereof. Nationwide's acts were and are unfair and
deceptive acts or practices in trade and commerce that affect the
public interest. Bunch and Class members were directly and
proximately injured by Nationwide's conduct.1311
Bunch then claimed that she was entitled to the following relief: (1) "injunctive
relief requested herein under RCW 19.86.090"; (2) "other declaratory and
equitable relief (e.g., restitution and disgorgement) requested herein as may be
necessary to restore to any person in interest, any money which may have been
acquired by means of unfair practices"; and (3) "statutory actual and treble
damages and other relief, such as attorneys' fees and costs."32 The federal court
29 id at 58.
30 See RCW 19.86.090; see also 16 David K. DeWolf, Washington
Practice: Consumer Protection Act Remedies § 8.10 (3d ed. 2013) ("Upon
proof of a violation of the CPA, the plaintiff may receive remedies including
actual damages, treble damages (up to a maximum of $25,000), attorney's fees,
and statutory costs.... In addition to the recovery of damages, a plaintiff may
also ask the court to enjoin future violations.") (emphasis added).
31 Clerk's Papers at 33.
32 Id. at 33-34.
No. 69600-9-1/9
dismissed the first of these, the request for CPA injunctive relief, without
prejudice.
Following this dismissal, Bunch commenced this action. She again
asserted that Nationwide violated the CPA using almost identical language from
her first action. But in this action she only claimed that she was entitled to
"injunctive relief requested herein under RCW 19.86.090."33
Before either court may grant Bunch relief, one of the two must first decide
whether Nationwide violated the CPA and is liable.34 Accordingly, under
collateral estoppel principles, that court's determination of liability will bar
relitigation of this issue in the other court, assuming that the other collateral
estoppel requirements are met.
Even Bunch agrees with this conclusion: "Bunch agrees that if either court
determined an issue relevant in both actions (such as whether Nationwide
engaged in an unfair or deceptive act or practice), the determination would have
collateral estoppel effect in the other action."35 Thus, the two actions share an
"identity" such that the priority of action doctrine should apply.36
Because the federal courtfirst gained jurisdiction of the issue whether
Nationwide violated the CPA, underthe priority of action doctrine, it retains the
33 \± at 7.
34 See RCW 19.86.090.
35 Respondent's Brief at 16 (first emphasis added).
36 See Evergreen Freedom Found., 111 Wn. App. at 607.
No. 69600-9-1/10
exclusive authority to determine this issue.37 Thus, the policy underlying this
doctrine requires that proceedings in this second action be stayed pending (a)
the determination that such violation caused injury to Bunch's business or
property, and (b) the determination of liability.38 Like Evergreen Freedom
Foundation, this outcome serves the priority of action doctrine's purpose.39 This
outcome prevents "'unseemly, expensive, and dangerous conflicts of jurisdiction
and of process.'"40
Bunch makes a number of arguments that the priority of action doctrine
does not apply in this case. None are persuasive.
Bunch argues that the two actions' request for relief do not have the
potential for "overlap." Nevertheless, this characterization does not preclude
application of the doctrine.
She contends that the "federal court has ruled [that] it is prohibitedfrom
granting the relief that Bunch seeks in state court." While the federal court
concluded that it lacked "Article III jurisdiction" with respect to injunctive relief
under the CPA, it retained jurisdiction over the remaining parts of her CPA claim,
including the determination of Nationwide's liability. As discussed previously in
37 Citv of Yakima, 117 Wn.2d at 675.
38 Panag, 166 Wn.2d at 37.
39 See Evergreen Freedom Foundation, 111 Wn. App. at 607.
40 Am. Mobile Homes of Wash., 115 Wn.2d at 317 (quoting Sherwin, 96
Wn.2d at 80).
10
No. 69600-9-1/11
this opinion, whether Nationwide violated the CPA is the threshold issue common
to both actions. Thus, the priority of action doctrine controls here.
Even if the two actions overlap to some extent, Bunch also asserts that
there is "no general rule that two actions cannot proceed simultaneously merely
because of an overlap, even a close one, in issues." She cites Trust Fund
Services v. Hevman and Travelers Indemnity Co. v. Madonna to support this
assertion.41 But those cases are not helpful because they do not address the
priority of action doctrine, which prevents two actions with the requisite identities
from proceeding simultaneously.
Bunch argues that the priority of action doctrine does not apply because
the federal court is "incompetent" to hear Bunch's injunction claim.42 She cites
Evergreen Freedom Foundation to argue that the priority of action doctrine does
not apply because of this "incompetency."43
There, Division Two of this court explained that agencies are
"institutionally incompetent to hear all claims."44 Thus, it explained that "a party
should not be precluded from bringing a lawsuit in a court of general jurisdiction
for a hearing of claims excluded at the agency level."45 On this point, Evergreen
41 Brief of Respondent at 9 (citing Trust Fund Servs. v. Hevman, 15 Wn.
App. 452, 454-55, 550 P.2d 547 (1976); Travelers Indem. Co. v. Madonna, 914
F.2d 1364, 1369 (9th Cir. 1990)).
42 Id at 10-11.
43 Id (citing Evergreen Freedom Found.. 111 Wn. App. at 608).
44
Evergreen Freedom Found.. 111 Wn. App. at 608.
45 Id.
11
No. 69600-9-1/12
Freedom Foundation is distinguishable because it addressed the competency of
an agency, which is not at issue here.46 Moreover, Division Two concluded that
the agency's incompetency in that case was not at issue because the agency
was "competent to adjudicate" the relevant issue.47 Similarly, the federal court in
this case is "competent" to determine whether Nationwide violated the CPA 48
The basis on which it dismissed the injunction claim was that it could not address
that form of relief. In sum, this argument is not persuasive.
Bunch argues that Nationwide "pivots" or wrongly focuses its analysis on
res judicata and collateral estoppel on appeal. Not so.
As discussed previously in this opinion, whether the priority of action rule
applies is dependent on whether two actions share the same identity '"such that
a final adjudication of the case by the court in which it first became pending
would, as res judicata, be a bar to further proceedings in a court ofconcurrent
jurisdiction.'"49 Consequently, this issue requires consideration of res judicata
principles, which can include collateral estoppel.
Bunch contends that the federal action cannot bar her CPA injunction
request in state court based on res judicata orclaim preclusion. But, as
46 id
47 id
48 See, e.g.. Steele v. Extendicare Health Servs.. Inc.. 607 F. Supp. 2d
1226, 1230-34 (W.D. Wash. 2009).
49 Am. Mobile Homes of Wash., 115 Wn.2d at 320 (quoting Sherwin, 96
Wn.2d at 80).
50 See 9 Breskin, supra, at § 8.79.
12
No. 69600-9-1/13
discussed previously, collateral estoppel or issue preclusion more aptly applies to
this case. Under collateral estoppel, the federal action could bar the issue of
whether there was a CPA violation in the state action. This argument is not
helpful.
Bunch asserts that "no Washington court has ever held that the mere
possibility that collateral estoppel could apply as to some issues means that a
court must stay an action." "This test would be inconsistent with the test for the
priority-of-action [doctrine] on its face. The priority-of-action [doctrine] requires
'identity' of relief. Collateral estoppel clearly does not." But Bunch's argument is
based on too narrow of a reading of this doctrine's requirements and ignores the
policy underlying this doctrine.
Courts have generally looked at identity of subject matter, parties, and
relief.51 But, as discussed previously, courts have also looked beyond these
three elements.52 The doctrine is not to be applied inflexibly.
The policy supporting the priority of action doctrine and collateral estoppel
are similar—preventing repetitive litigation.53 Thus, Bunch's argument to the
contrary is not persuasive.
Finally, Bunch argues this court should not disturb the trial court's
discretion. She raises a number of equitable considerations to argue that the
51 Am. Mobile Homes of Wash., 115 Wn.2d at 320; Sherwin, 96 Wn.2d at
80.
52
Evergreen Freedom Found., 111 Wn. App. at 607.
53 See 14A Tegland, supra, at $ 35.21: Am. Mobile Homes of Wash.. 115
Wn.2dat317.
13
No. 69600-9-1/14
priority of action should not apply in this case. But our review of the court's
decision is de novo because the priority of action rule, a legal doctrine, underlies
the trial court's decision. Thus, we need not defer, in this case, to the trial court's
general broad exercise of discretion.
In any event, Bunch's equitable arguments in support of the trial court's
exercise of discretion in this case do not weigh in her favor.54
First, Bunch asserts that different standards for class certification exist for
her damages claim in federal court than her injunction claim in state court. She
contends that the state court was "entitled to conclude that there is no good
reason why Bunch should have to spend years trying to prove actual damages in
the federal courts and meet a higher class certification standard, when she would
be entitled to a quicker remedy, subject to a lesser burden of proof, and a lower
class certification standard, in state court." These arguments are not persuasive.
To begin with, Bunch does not have to wait until the federal court
determines damages to pursue injunctive relief in state court. Bunch may pursue
this relief if the federal court determines that Nationwide violated the CPA.
Additionally, Bunch fails to explain how a different class certification standard
would make the issue of whether Nationwide violated the CPA in the state and
federal actions any different.
Second, Bunch argues that "there is no risk of wasting judicial resources
or arriving at inconsistent results." But if two courts are simultaneously
considering the same issue—whether Nationwide violated the CPA—there is a
54 See Am. Mobile Homes of Wash.. 115 Wn.2d at 321.
14
t.
No. 69600-9-1/15
risk of the two courts arriving at inconsistent results. This would also be a waste
of judicial resources.
We reverse the order denying Nationwide's motion to stay. We remand
with instructions for the court to stay these proceedings until such time as the
federal district court determines (a) that a CPA violation caused injury to Bunch's
business or property, and (b) that Nationwide is liable for this violation.
l^xX.X
WE CONCUR: