Northwest Airlines, Inc. v. Professional Aircraft Line Service
Filing
68
MEMORANDUM OPINION AND ORDER granting Creditor Northwest Airlines' 48 Motion for Summary Judgment; denying Garnishee Westchester Fire Insurance Company's 54 Motion for Summary Judgment (Written Opinion). Signed by Judge John R. Tunheim on March 25, 2013. (DML)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
NORTHWEST AIRLINES, INC.,
Civil No. 11-368 (JRT/TNL)
Creditor,
v.
PROFESSIONAL AIRCRAFT LINE
SERVICE,
Debtor,
v.
MEMORANDUM OPINION
AND ORDER ON
SUMMARY JUDGMENT
MOTIONS
WESTCHESTER FIRE INSURANCE
COMPANY,
Garnishee.
Steven P. Zabel, LEONARD STREET AND DEINARD, P.A., 150 South
Fifth Street, Suite 2300, Minneapolis, MN, 55402, for creditor Northwest
Airlines, Inc.
Robert W. Vaccaro, GASKINS, BENNETT, BIRRELL, SCHUPP, LLP,
333 South Seventh Street, Suite 2900, Minneapolis, MN, 55402, for
garnishee Westchester Fire Insurance Company.
Northwest Airlines, Inc. (“NWA”) brought this garnishment action seeking
recovery from garnishee Westchester Fire Insurance Company (“Westchester”). NWA
seeks to recover proceeds from an insurance policy that Westchester issued to the
Professional Aircraft Line Service (“PALS”).
PALS was an aircraft maintenance
company that negligently handled an NWA aircraft. NWA secured a default judgment
KCUMF
against PALS in state court based on the incident. NWA bases this garnishment action
on the default judgment against PALS.
The parties have both moved for summary judgment. For the reasons explained
below, the Court will grant summary judgment to NWA and deny summary judgment to
PALS.
BACKGROUND
I.
THE PARTIES
NWA was a commercial air carrier. PALS was an aircraft maintenance company
providing on-call aircraft maintenance services at Las Vegas McCarran International
Airport (“LAS”), and was owned and operated by Phil Mendez. On May 1, 2000, NWA
and PALS entered into a contract in which PALS agreed to provide NWA with aviation
services and maintenance at LAS. (First Aff. of Robert W. Vaccaro, Ex. A, Feb. 22,
2011, Docket No. 5.) Westchester is an insurance company from whom PALS purchased
an Airport Owners and Operators General Liability Policy. (Id., Ex. B.)
II.
THE PERMIT
PALS entered into an agreement with Clark County to operate at LAS by way of a
Temporary Operating Permit (“permit”) dated January 30, 2001. The permit provided, in
relevant part:
The county shall have the right to require PALS to increase the type or
amount of coverage required, and that such insurance coverage would
include, but not be limited to:
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a) Commercial General Liability: On an “occurrence” basis,
coverages must include Premises Operations, Products and
Completed Operations, Personal & Advertising Injury,
$5 million ($5,000,000) “per occurrence, per location”; Fire
Damage, on any one fire fifty thousand dollars ($50,000).
(Fourth Aff. of Robert W. Vaccaro, Ex. A at 51, July 31, 2012, Docket No. 57.)
III.
THE ACCIDENT
On February 6, 2002, PALS’ employees moving an NWA aircraft at LAS failed to
ensure that the brakes were adequately pressurized, causing a collision that resulted in
more than $10 million in physical damage and loss of use of the aircraft. (First Aff. of
Steven P. Zabel, Ex. 10 at Nos. 3-13, Feb. 28, 2011, Docket No. 9.)
IV.
THE ORDINANCE
All aircraft maintenance companies operating at LAS are required to maintain
hangarkeepers liability insurance. This requirement is set forth in an Ordinance in the
Clark County Code (“Ordinance”), which provides, in relevant part:
Each operator1 not otherwise providing insurance as hereinafter set forth
pursuant to an existing agreement with Clark County, Nevada, shall, at its
1
At the time this action was commenced, the relevant portion of Clark County Ordinance
§ 20.10.020 read, “[e]ach permitee not otherwise providing insurance. . . .” In 2011, the
Ordinance was amended, and now reads, “[e]ach operator not otherwise providing insurance.
. . .” Clark County, Nev., Code of Ordinances § 20.10.020 (2011). Though the law has been
amended since this case was commenced, the outcome of the case is not affected by the
amendment, so the Court will cite the current version of the statute. See Interstate Power Co. v.
Nobles Cnty. Bd. of Comm’rs, 617 N.W.2d 566, 576 (Minn. 2000); see also McCelland v.
McClelland, 393 N.W.2d 224, 226-27 (Minn. App. 1986) (finding that “a court is to apply the
law in effect at the time it renders its decision, unless doing so would alter rights that had
matured or become unconditional, would impose new and unanticipated obligations on a party,
or would work some other injustice due to the nature and identity of the parties.”).
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own expense, keep in force insurance of the following types and in not less
than the following amounts, issued by a company or companies of sound
and adequate financial responsibility, insuring itself against all liabilities for
accidents arising out of or in connection with the insured’s use and
occupancy of and/or operations at the airport . . . :
(a) Aircraft liability insurance and/or comprehensive
commercial aviation general public liability insurance for
claims of property damage, bodily injury, or death allegedly
resulting from the operator’s activities into, on, and leaving
any part of the McCarran International Airport or Airport
System, in an amount not less than one hundred fifty
million dollars, per occurrence.
...
(c) Hangarkeepers liability insurance in an amount adequate to
cover any non-owned property in the care, custody and
control of the operator on the airport, but in any event in an
amount not less than five million dollars, combined single
limit.
Clark County, Nev., Code of Ordinances § 20.10.020 (2011).2 The term “operator,” as it
is used in the Ordinance, means “each air transportation company, aviation support
provider, governmental agency, other airport tenant(s), or user(s) that uses the airport
facilities regardless if the use is for commercial aviation or private aviation purposes.”
Id. at § 20.10.005.
V.
THE POLICY
The policy issued to PALS by Westchester provided liability insurance with limits
of $5 million for each occurrence. (First Vaccaro Aff., Ex. B at 3.) The policy’s period
2
The
Clark
County
Code
of
Ordinances
is
available
http://library.municode.com/index.aspx?clientId=16214&stateId=28&stateName=Nevada.
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at
was from April 18, 2001 to April 18, 2002. It included the following conditions in the
event of occurrence, offense, or claim of suit:
a. You must see to it that we are notified as soon as practicable of an
“occurrence” or an offense which may result in a claim. . . .
b. If a claim is made or “suit” is brought against any insured, you must:
(1)
Immediately record the specifics of the claim or “suit” and
the date received; and
(2) Notify us as soon as practicable.
You must see to it that we receive written notice of the claim or
“suit” as soon as practicable.
c. You and any other involved insured must:
(1)
Immediately send us copies of any demands, notices,
summonses or legal papers received in connection with the
claim or “suit”;
. . .
(3) Cooperate with us in the investigation, settlement or
defense of the claim or “suit”; and
(4) Assist us, upon our request, in the enforcement of any right
against any person or organizations . . .
....
No person or organization has a right under this policy:
....
b. To sue us on this policy unless all of its terms have been fully complied
with.
(First Vaccaro Aff., Ex. B at 19-20.)
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VI.
THE MINNESOTA LITIGATION
On November 4, 2003, NWA’s insurer, Global Aerospace, Inc., first notified
Westchester of the accident by a facsimile sent to ACE USA (“ACE”), Westchester’s
claims handler.
(First Vaccaro Aff., Ex. C.)
ACE then attempted to secure the
cooperation of PALS’ principal, Phil Mendez, with respect to defense of the claim, but
ACE was ultimately unsuccessful.
On October 1, 2004, NWA served PALS with a summons and complaint in
Minnesota state court, seeking to recover for the damages that NWA incurred as a result
of the accident. (First Zabel Aff., Ex. 10 at 3.) On November 15, 2004, NWA/Global
Aerospace’s counsel advised ACE that NWA had brought a claim against PALS in
Minnesota state court. (Id., Ex. 13.) NWA/Global Aerospace’s counsel demanded that,
as PALS’ insurer, Westchester immediately tender the $5 million limit of the policy.
(Id.) On November 24, 2004, ACE advised PALS that Westchester was denying PALS
coverage due to PALS’ failure to provide any notice of the claims, and its failure to
cooperate pursuant to the terms of the policy. (First Vaccaro Aff., Ex. D.)
When PALS failed to respond to NWA’s suit, NWA moved for a default judgment
on December 31, 2004. On January 10, 2005, the Minnesota state court granted NWA’s
motion for a default judgment against PALS in the amount of $10,635,412.67. (First
Zabel Aff., Ex. 15.)
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VII.
THE NEVADA LITIGATION
On November 22, 2005, Westchester commenced an action in United States
District Court for the District of Nevada, seeking a declaration that it had no obligation to
provide coverage to PALS for the accident. (First Zabel Aff., Ex. 16.) NWA intervened
as a plaintiff, stating that “[a] default in the declaratory judgment action [against PALS]
would be fatal to [NWA’s] interest in collecting the insurance proceeds.” (First Vaccaro
Aff., Ex. G at 4.) The district court granted NWA’s motion to intervene on March 27,
2006. Subsequently, the court granted Westchester’s motion for default judgment against
PALS based on the repeated failure of Mendez to appear at his deposition. (Id., Ex. G at
4-5.)
Based on the default judgment, the court granted Westchester’s claim for a
declaratory judgment, finding that Westchester had no insurance obligations for the
damage to NWA’s plane. The court also denied NWA’s motion for leave to file an
intervenor answer. (Id., Ex. G at 10-11.)
On appeal from the grant of default judgment to Westchester, the Ninth Circuit
vacated the default judgment and remanded, finding it would be inappropriate to extend
the consequences of Mendez’s default to NWA because NWA was not responsible for
Mendez’s conduct.
Westchester Fire Ins. Co. v. Mendez, 585 F.3d 1183, 1189-90
(9th Cir. 2009).
On remand, the district court held that Westchester was entitled to judgment
against PALS, but declined to address NWA’s compulsory insurance arguments as to
NWA’s direct right to obtain reimbursement from Westchester for its loss. Westchester
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Fire Ins. Co. v. Mendez, Civ. No. 2:05-1417, 2010 WL 2694960, at *6 (D. Nev. July 1,
2010). The district court stated that:
The compulsory insurance doctrine, like the third party beneficiary theory,
is a direct claim that NWA theoretically could bring against Westchester,
but it has nothing to do with whether Westchester owes any duty to
Mendez. The claim exceeds the scope of NWA’s intervention. Thus,
Westchester’s motion to strike is granted as to NWA’s argument under the
compulsory insurance doctrine, without prejudice to NWA raising this
argument as a direct claim against Westchester in other litigation.
Id. Westchester then moved to correct the order to include NWA in the default judgment.
(First Zabel Aff., Ex. 19.) The district court denied that motion on August 30, 2010. (Id.,
Ex. 20.)
VIII. THE PRESENT ACTION
On December 16, 2010, NWA filed a garnishment action against Westchester in
Minnesota state court, seeking to garnish the proceeds of the policy. (Notice of Removal,
Ex. A, Part 1 at 2, Feb. 15, 2011, Docket No. 1.) On December 21, 2010, NWA sent the
garnishment summons and pleadings to Westchester by certified mail to 1325 Avenue of
the Americas, New York, New York 10019. (Supp. Aff. of Steven P. Zabel, Ex. 8 at 3840, Aug. 16, 2012, Docket No. 61.) NWA obtained the aforementioned address from
ACE Group’s website, which is Westchester’s parent company.
(Supp. Zabel Aff.,
Ex. 12 at 60.) On January 20, 2011, NWA’s counsel resent the garnishment summons
and pleadings to Westchester’s correct address in Pennsylvania, and Westchester
received the summons on January 25, 2011.
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Westchester removed to this Court on February 15, 2011. NWA then moved the
Court to vacate Westchester’s discharge of its retention obligations, for leave to initiate
an ancillary garnishment proceeding, to join Westchester as a party to this action, and for
leave to file a supplemental complaint against Westchester. This Court granted NWA’s
motions in their entirety. (Order, July 18, 2011, Docket No. 17.)
ANALYSIS
I.
STANDARD OF REVIEW
Summary judgment is appropriate where there are no genuine issues of material
fact and the moving party can demonstrate that it 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,
and a dispute is genuine if the evidence is such that it could lead a reasonable jury to
return a verdict for either party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986). A court considering a motion for summary judgment must view the facts in the
light most favorable to the non-moving party and give that party the benefit of all
reasonable inferences that can be drawn from those facts. Matsushita Elec. Indus. Co. v.
Zenith Radio Corp., 475 U.S. 574, 587 (1986). Summary judgment is appropriate if the
nonmoving party “fails to make a showing sufficient to establish the existence of an
element essential to that party’s case, and on which that party will bear the burden of
proof at trial.” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). “To defeat a motion
for summary judgment, a party may not rest upon allegations, but must produce probative
evidence sufficient to demonstrate a genuine issue [of material fact] for trial.” Davenport
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v. Univ. of Ark. Bd. of Trs., 553 F.3d 1110, 1113 (8th Cir. 2009) (citing Anderson, 477
U.S. at 247-49).
II.
CHOICE OF LAW ANALYSIS
As an initial matter, the Court must determine whether Nevada law or Minnesota
law governs the substantive issues of this case. In diversity cases, the Court applies the
forum state’s choice-of-law analysis to determine which state’s substantive law will
govern. Schwan’s Sales Enters., Inc. v. SIG Pack, Inc., 476 F.3d 594, 595-96 (8th Cir.
2007). Under Minnesota law, courts do not conduct a choice of law analysis unless it is
first “‘determine[d] that a conflict exists between the laws’” of the different states that
might govern the issues. Best Buy Stores, L.P. v. Developers Diversified Realty Corp.,
715 F. Supp. 2d 871, 875 (D. Minn. 2010) (quoting Nodak Mut. Ins. Co. v. Am. Family
Mut. Ins. Co., 604 N.W.2d 91, 93-94 (Minn. 2000)). “A conflict exists if the choice of
one forum’s law over the other will determine the outcome of the case.” Nodak, 604
N.W.2d at 94. If the Court concludes that there is no actual conflict between the laws of
two states, the inquiry proceeds no further and the Court applies the law of the forum.
Best Buy Stores, 715 F. Supp. 2d at 875-76.
Westchester maintains that Nevada law governs the compulsory insurance
doctrine issues before the Court.3 The Nevada Supreme Court has not addressed the
compulsory insurance doctrine questions that are at issue in this case. When a state’s
3
Westchester concedes that the res judicata analysis is the same under both Nevada law
and Minnesota law, and thus no conflict exists as to that issue.
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highest court has not addressed the precise question of state law at issue, a federal court
must decide what the highest state court would probably hold were it to decide the issue.
TNT Speed & Sport Center, Inc., v. American Ins. Co., 114 F.3d 731, 734 (8th Cir. 1997).
Therefore, this Court must predict how the Nevada Supreme Court would rule if it were
to decide the issues.4
Nevada law in this area is similar to Minnesota law in almost all respects. First,
both states have codified the compulsory insurance doctrine as it relates to automobile
insurance.5 Most courts that have addressed the issue speak of the doctrine in broad
terms, focusing on the injured party rather than the type of insurance at issue.6 As such,
this Court held that, under Minnesota law, the doctrine applies broadly to other insurance
4
In determining how a state supreme court “would probably hold if it were presented
with this issue, it [i]s entirely proper for the district court to consider relevant precedents from
other jurisdictions.” TNT Speed & Sport Ctr., 114 F.3d at 734; see also Nelson Distrib., Inc. v.
Stewart-Warner Indus. Balancers, a Div. of Stewart Warner Corp., 808 F. Supp. 684, 687
(D. Minn. 1992) (“In making this determination, a federal court also may consider restatements
of law, law review commentaries, and decisions from other jurisdictions on the ‘majority’ rule.’”
(quoting Grantham & Mann, Inc. v. Am. Safety Prod., Inc., 831 F.2d 596, 608 (6th Cir. 1987))).
5
See Nev. Rev. Stat. § 485.3091(5)(a); Minn. Stat. §§ 65B.41, et seq.
6
See Nimeth v. Felling, 165 N.W.2d 237, 239 (Minn. 1969) (discussing the insurance
statute at issue and the compulsory insurance doctrine in general in separate paragraphs); Royal
Indem. Co. v. Olmstead, 193 F.2d 451, 453 (9th Cir.1951) (“Hence, it has been held that in cases
involving compulsory insurance the insurer cannot urge lack of cooperation by the insured as a
defense in a suit brought by an injured member of the public within the class sought to be
protected by statute.”); Blanke v. Alexander, 152 F.3d 1224, 1230 (10th Cir.1998) (“[U]nder
statutes requiring and controlling compulsory insurance, a direct or joint right is created in favor
of the injured person against both the insured and the insurer.”) (internal quotation marks
omitted); Van Horn v. Atlantic Mut. Ins. Co., 641 A.2d 195, 203 (Md. 1994) (“Attempts by
insurance companies, purporting to exercise contract rights, to avoid the public policy of
compulsory motor vehicle insurance with mandated coverages, have repeatedly been rejected
. . .”).
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contexts, and the fact that the doctrine was adopted in Minnesota’s motor vehicle code
does not limit the doctrine only to the automobile insurance context. Northwest Airlines,
Inc. v. Prof’l Aircraft Line Serv., Civ. No. 11-368, 2011 WL 2837677, at *5-6 (D. Minn.
July 18, 2011).
Westchester argues that Nevada, unlike Minnesota, would not apply the doctrine
outside the scope of automobile insurance. However, Westchester is unable to point to
any Nevada law indicating that the Nevada Supreme Court would not apply the
compulsory doctrine outside the scope of automobile insurance, nor has the Court found
any such law.
On the contrary, the Nevada district court cited favorably to cases
applying the compulsory insurance doctrine outside the motor vehicle context.
Westchester Fire Ins., 2010 WL 2694960, at *5 (citing Great Am. Ins. Co. v. Brad
Movers, Inc., 382 N.E.2d 623, 627 (Ill. Ct. App. 1978) (finding that compulsory
insurance in warehouseman’s insurance policy protected the public against negligent
warehouse operators and disfavored use of contract defenses against innocent third
parties)).
The Court finds that there is no conflict between Nevada law and Minnesota law
on the issue of compulsory insurance. Because no conflict exists between Nevada and
Minnesota law, the Court will apply Minnesota law, the law of the forum, to the issues
before the Court.
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III.
THE COMPULSORY INSURANCE DOCTRINE
Under Minnesota law, “a judgment creditor can obtain only those rights that the
judgment debtor had against the garnishee.” Poor Richards, Inc. v. Chas. Olson & Sons
& Wheel Serv. Co., 380 N.W.2d 225, 228 (Minn. Ct. App. 1986) (citing Gilbert v.
Pioneer Nat’l Bank of Duluth, 288 N.W. 153, 154 (Minn. 1939)). Westchester argues
that because the Nevada district court held that PALS lost its rights under the policy for
failing to comply with policy conditions, NWA’s right to collect insurance proceeds as a
judgment creditor has also been lost. However, “[t]he insurer on a compulsory insurance
liability policy may be held liable to one injured by the insured notwithstanding the fact
that the insured himself has lost his rights under the policy by failure to comply with its
terms and conditions.” Nimeth, 165 N.W.2d at 239; see also Transamerican Ins. Co. v.
Austin Farm Ctr., Inc., 354 N.W.2d 503, 507 (Minn. Ct. App. 1984). The compulsory
insurance doctrine is therefore an exception to the general rule that an injured third-party
plaintiff suing an insurance company is subject to the same defenses that the insurer has
against the insured. Royal Indem., 193 F.2d at 453 (“Hence, it has been held that in cases
involving compulsory insurance the insurer cannot urge lack of cooperation by the
insured as a defense in a suit brought by an injured member of the public within the class
sought to be protected by statute.”).
There are two elements that must be met in order for the compulsory insurance
doctrine to apply: (1) the insurance policy at issue must have been purchased to comply
with the requirements of a statute; and (2) the plaintiff must be an injured member of the
public within the class protected by the statute. Id.; Nimeth, 165 N.W.2d at 239.
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A.
Compliance with the requirements of Clark County Ordinance
§ 20.10.020
The Court must first determine whether PALS purchased the hangarkeepers
liability policy from Westchester in order to satisfy the requirements of Clark County
Ordinance § 20.10.020. Royal Indem., 193 F.2d at 453; Nimeth, 165 N.W.2d at 239.
Clark County Ordinance § 20.10.020 requires that each operator at LAS keep certain
types of insurance, including hangarkeepers liability insurance in an amount not less than
$5 million. “Operator” is defined in the Ordinance as “each. . . aviation support provider,
. . . other airport tenant(s), or user(s) that uses the airport facilities regardless if the use is
for commercial aviation or private aviation purposes.”
Clark County Ordinance §
20.10.005. The Court finds that, as an on-call aircraft maintenance servicer and user of
the airport facilities, PALS was an operator at LAS, and was therefore required to keep
insurance in the types and amounts prescribed by the Ordinance.
Before describing the particular types of insurance each operator is required to
carry, the Ordinance provides, “Each operator not otherwise providing insurance as
hereinafter set forth pursuant to an existing agreement with Clark County, Nevada,
shall [obtain the following types of insurance policies].” Id. at § 20.10.020 (emphasis
added). Westchester argues that PALS had already entered into an agreement with Clark
County by way of its permit, and thus PALS was exempted from the requirements of the
Ordinance.
The Court finds that the above language exempts operators from its requirements
with respect to a particular type of insurance only to the extent that those operators are
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subject to county agreements that require them to obtain that type of insurance. Parties
with agreements that are silent as to hangarkeepers liability insurance, for example, are
not exempted from the Ordinance’s requirements regarding hangarkeepers liability
insurance. Because the agreement between PALS and Clark County did not require
PALS to obtain hangarkeepers coverage, PALS was bound to comply with the provisions
of the Ordinance. This interpretation is supported by the record. In addition to the
hangarkeepers liability policy, PALS purchased Commercial General Liability coverage
of $5 million per occurrence. Yet, the Ordinance required that operators purchase CGL
coverage of not less than $150 million per occurrence. The discrepancy is explained by
the fact that the permit required PALS to purchase CGL insurance, thereby exempting
PALS from the CGL requirements in the Ordinance. Because the Ordinance required
PALS to purchase hangarkeepers liability insurance, the Court finds that the Ordinance
was compulsory upon PALS.
B.
The Class Sought to be Protected by the Ordinance
Next, the Court must consider whether NWA is within the class of persons
protected by Clark County Ordinance § 20.10.020. Royal Indem., 193 F.2d at 454. The
Ordinance provides that insurance must be purchased on “non-owned property in the
care, custody and control” of operators at LAS. As “non-owned property in the care,
custody and control of” PALS, an operator at LAS, NWA’s airplanes are within the class
of items sought to be protected by the Ordinance. As such, NWA is within the class of
members of the public protected by the Ordinance.
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Westchester argues that the compulsory insurance doctrine is not designed to
protect sophisticated parties like NWA. Westchester provides no case law, and the Court
has found none, to support the proposition that the level of sophistication of an injured
party affects whether the compulsory insurance doctrine can be invoked. The Court finds
that NWA is within the class sought to be protected by Clark County Ordinance
§ 20.10.020, despite the fact that it is also a sophisticated party that was in a contractual
relationship with PALS at the time of the accident. See Dave Ostrem Imports, Inc. v.
Globe Am. Cas./GRE Ins. Group, 586 N.W.2d 366, 367, 368 (Iowa 1998) (allowing a
corporation that suffered property damage to recover policy proceeds from an insurer
based on the compulsory insurance doctrine articulated in Royal Indem.).
Next, Westchester argues that in enacting the Ordinance, Clark County was
protecting its own interests, not enacting a statute to protect parties like NWA. That the
Ordinance provides a benefit to Clark County does not negate the fact that the Ordinance
also protects injured third parties such as NWA. Indeed, courts have generally utilized
broad and sweeping language when describing the requirement that a plaintiff be within
the class sought to be protected by the statute, focusing on the injured party in general.
See, e.g., Northwest, 2011 WL 2837677, at *6 (finding that the doctrine is designed to
protect victims of accidents like NWA); Kolencik v. Progressive Preferred Ins. Co.,
No. 1:04-CV-3507, 2006 WL 738715, at *4 (N.D. Ga. Mar. 17, 2006) (“The purpose of
this insurance ‘is not for the benefit of the insured. . . but for the sole benefit of those who
may have a cause of action for damages for the negligence of the [insured].’” (internal
quotation marks omitted)).
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Because Clark County Ordinance § 20.10.020 required PALS to purchase the
hangarkeeper’s liability insurance policy, and because NWA is within the class of
members of the public sought to be protected by the Ordinance, the Court finds that the
compulsory insurance doctrine allows NWA to recover policy proceeds from Westchester
despite the fact that PALS defaulted on the insurance contract.
IV.
RES JUDICATA
Next, the Court must decide if NWA is barred from bringing this claim against
Westchester because of the doctrine of res judicata. The test to determine if res judicata
bars a claim consists of four parts: (1) the earlier claim involved the same set of factual
circumstances; (2) the earlier claim involved the same parties or their privies; (3) there
was a final judgment on the merits; and (4) the estopped party had a full and fair
opportunity to litigate the matter. Hauschildt v. Beckingham, 686 N.W.2d 829, 840
(Minn. 2004). “All four prongs must be met for res judicata to apply.” Id.
It is clear that the federal litigation in Nevada involved the same set of factual
circumstances and the same parties as the present action. Therefore, the Court focuses on
the third and fourth elements of the test: whether the Nevada declaratory judgment was
binding and final as applied to NWA, and whether NWA could have litigated this claim
during the federal litigation in Nevada district court.
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A.
Finality of the Nevada Declaratory Judgment
It is well established that dismissal without prejudice does not operate as an
adjudication on the merits, and thus does not implicate res judicata principles. Cooter &
Gell v. Hartmax Corp., 496 U.S. 384, 396 (1990).
On remand from the Ninth Circuit, the Nevada court refused to rule on the
portions of NWA’s claims that discussed the compulsory insurance doctrine, and
dismissed “NWA’s arguments under the doctrine without prejudice to NWA raising the
argument as a direct claim against Westchester in other litigation.” Westchester Fire Ins.,
2010 WL 2694960, at *6. The district court unequivocally held that no part of its opinion
delineated the rights between NWA and Westchester, because for the court to do so
would exceed the scope of NWA’s intervention. Id. The court made clear that it was
limiting the relief it was granting only to Westchester, and that its decision had “nothing
to do with” whether NWA could recover on a compulsory insurance or third-party
beneficiary-type claim. Id. Additionally, the court denied Westchester’s Motion to
include NWA in the default judgment. (First Zabel Aff., Ex. 19.)
The Court therefore finds that the Nevada declaratory judgment was not final as
applied to NWA.
B.
Full and fair opportunity for litigation on the merits
The compulsory insurance doctrine arguments were put into issue by NWA on
remand, but the Nevada court refused to adjudicate them. Matters in issue in the first
proceeding but not decided on remand are not barred by res judicata. See Baker Grp.
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L.C. v. Burlington N. & Santa Fe Ry. Co., 228 F.3d 883, 887 (8th Cir. 2000) (“[A]
judgment is not res judicata as to any matters which a court expressly refused to
determine . . . or which it directed to be litigated in another forum or in another action.”
(internal quotation marks and emphasis omitted)).
The Court finds that NWA did not have a full and fair opportunity to litigate in the
Nevada action. As such, res judicata does not bar NWA’s claim.
V.
STATUTE OF LIMITATIONS
A.
Effective Service
Next, the Court must determine whether NWA’s action is barred by the statute of
limitations. Under Minn. R. Civ. P. 3.01, “[a] civil action is commenced against each
defendant (a) when the summons is served upon that defendant, or (b) at the date of
acknowledgement of service if service is made by mail . . .”
As a foreign insurance company, Westchester was required to appoint the
Minnesota Commissioner of Commerce as its attorney for service of process. Minn. Stat.
§ 60A.19, subd. 3.
Pursuant to section 60A.19, subdivision 4, service on an insurance
company shall be made in compliance with Minn. Stat. § 45.028, subd. 2, which provides
that, “[s]ervice of process under this section . . . is not effective unless: (1) the plaintiff
. . . sends notice of the service and a copy of the process by certified mail to the defendant
or respondent at the last known address.”
Minnesota courts have yet to define the scope of the “last known address”
requirement of Minn. Stat. § 45.028. However, in serving process, “all that is required is
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that plaintiff comply in good faith, based on the information he has been able to secure.”
Barth v. Nitke, 126 N.W.2d 452, 456 (Minn. 1964). “The law does not impose on
plaintiff an obligation to track down defendant if the address used was furnished by the
defendant himself.” Id.
The New York address that NWA originally mailed service to was essentially
furnished by Westchester itself, as it was listed as the current address for Westchester on
Westchester’s parent company’s website. As such, the Court finds NWA effectively
served Westchester on December 21, 2010, when NWA mailed service to Westchester’s
prior New York address.
B.
Applicable limitations period
Finally, the Court must decide whether service was effective within the applicable
statutory limitations period. NWA argues that the ten year limitations period set forth in
Minn. Stat. § 550.017 governs this action, while Westchester argues the six-year
limitations period set forth in Minn. Stat. § 541.058 governs this action.
NWA obtained a default judgment against PALS on January 10, 2005.
On
December 21, 2010, NWA successfully served Westchester. Thus, service was effective
within both the ten year limitation of Minn. Stat. § 550.01 and the six year limitation
7
Minn. Stat. § 550.01 provides, “[t]he party in whose favor a judgment is given, or the
assignee of such judgment, may proceed to enforce the same, at any time within ten years after
the entry thereof, in the manner provided by law.”
8
Minn. Stat. § 541.05 provides that actions “upon a contract or other obligation, express
or implied, as to which no other limitation is expressly prescribed” must be brought within six
years.
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period of Minn. Stat. § 541.05. It is therefore not necessary to determine which statute of
limitations period governed this action. The Court finds NWA’s claim is not time barred
by either statute.
ORDER
Based on the foregoing, all the files, records, and proceedings herein, IT IS
HEREBY ORDERED that:
1.
Creditor Northwest Airlines, Inc.’s Motion for Summary Judgment [Docket
No. 48] is GRANTED.
2.
Garnishee Westchester Fire Insurance Company’s Motion for Summary
Judgment [Docket No. 54] is DENIED.
LET JUDGMENT BE ENTERED ACCORDINGLY.
DATED: March 25, 2013
at Minneapolis, Minnesota.
____s/
____
JOHN R. TUNHEIM
United States District Judge
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