McCollough v. Minnesota Lawyers Mutual Insurance Company et al

Filing 84

FINDINGS AND RECOMMENDATIONS. IT IS RECOMMENDED that 66 MOTION for Summary Judgment filed by Minnesota Lawyers Mutual Insurance Company be GRANTED IN PART and DENIED IN PART. IT IS FURTHER RECOMMENDED that 69 MOTION for Summary Judgment filed by Timothy McCollough be DENIED. Objections to F&R due by 3/25/2013 Signed by Magistrate Carolyn S Ostby on 3/6/2013. (JDH, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MONTANA
BILLINGS DIVISION
TIMOTHY McCOLLOUGH,

CV 09-95-BLG-RFC-CSO

Plaintiff,
FINDINGS AND
RECOMMENDATIONS OF
UNITED STATES
MAGISTRATE JUDGE

vs.
MINNESOTA LAWYERS
MUTUAL INSURANCE
COMPANY and JOHN DOES I
and II,
Defendant.

Plaintiff Timothy McCollough (“McCollough”) filed this insurance
bad faith action against Defendant Minnesota Lawyers Mutual
Insurance Company (“MLM”) after he prevailed in his lawsuit against
MLM’s insured, Johnson, Rodenburg & Lauinger (“JRL”). See Cmplt.
(Dkt. 4) at 2-5. Jurisdiction is based on diversity.
This order addresses MLM’s pending Motion for Summary
Judgment (Dkt. 66) and McCollough’s Cross Motion for Partial
Summary Judgment (Dkt. 69).

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I.

PERTINENT BACKGROUND
In December 2007, McCollough sued JRL and CACV of Colorado,

LLC (“CACV”), alleging violations of the Fair Debt Collection Practices
Act (“FDCPA”), Montana’s Unfair Trade Practices and Consumer
Protection Act, abuse of process, and malicious prosecution.
McCollough v. Johnson, Rodenberg & Lauinger, CV 07-166-BLG-CSO
(“underlying JRL case”) (Final Pretrial Order, Dkt. 140, at 4).
McCollough settled with CACV during discovery, id. (Notice of
Dismissal, Dkt. 5, at 1).
JRL was insured under an MLM professional liability policy. Dkt.
68 at ¶ 19. MLM’s first notice of McCollough’s claim against JRL was
the federal court complaint; no prior claim had been submitted to
MLM. Dkt. 68 at 6, ¶ 16. JRL’s insurance policy with MLM provides,
in relevant part:
WE[, MLM,] have the exclusive right to investigate, negotiate and
defend CLAIMS seeking DAMAGES against the INSURED for
which this policy provides coverage. The INSURED may not
negotiate or agree to a settlement of any CLAIM without OUR
prior consent. There is no coverage under this policy to pay any
part of a settlement of a claim made without our consent.
WE will not settle a CLAIM without the written consent of the
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INSURED. If the INSURED refuses to consent to any settlement
recommended by US and elects to contest the CLAIM or continue
legal proceedings, then OUR liability for the CLAIM will not
exceed the amount for which the CLAIM could have been settled
within the applicable limit including CLAIM EXPENSE incurred
with OUR consent to the date of such refusal. The INSURED
must cooperate with US in the investigation and defense without
charge by the INSURED or reimbursement of the INSURED’s
expenses, subject to the Supplementary Payment Provision of this
Policy.
Dkt. 27-1 at 7 (“Defense and Settlement” section of relevant insurance
contract) (emphasis in original). The second paragraph of the abovequoted language is known in the insurance industry as the “hammer
clause.” Dkt. 75 at ¶ 66. MLM can invoke the hammer clause if it
negotiates settlement terms it proposes to accept, but the insured
refuses to consent. Id.
In the underlying JRL case, the parties engaged in settlement
negotiations in September 2008. Dkt. 74-8 at 2. McCollough demanded
$900,000 to settle his claims; MLM offered $20,000. Neither side
submitted any further firm offers to settle. Dkt 68-4 (Depo. John
Heenan) at 18.
On January 8, 2009, this Court granted McCollough’s motion for
partial summary judgment, finding JRL liable under the FDCPA. See
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Dkt. 96 (underlying case). In March 2009, JRL’s defense counsel
suggested to McCollough’s counsel that the defense “could probably
discuss” settlement in the “$50,000 range” (Dkt. 74-13 at 2), but
McCollough’s lawyer, John Heenan, was not “interested in the
slightest” because his “attorneys’ fees at [that] point [were] $69,000.”
Dkt. 68-4 at 19 (Heenan Depo.). No further settlement discussions are
reported by either party.
In April 2009, a jury found in McCollough’s favor on the
remaining claims. Dkt. 68-2 at 2-4. Pursuant to the jury’s verdict, the
clerk entered judgment in McCollough’s favor for $301,000 in damages
and $107,770.17 in attorney’s fees and costs. Dkt. 184 (underlying
case). The judgment was affirmed on appeal. Dkt. 211 (underlying
case).
II.

PARTIES’ ARGUMENTS
A.

McCollough’s Arguments

McCollough alleges that MLM violated MCA §§ 33-18-201(1), (4),
and (6) of the Montana Insurance Code’s Unfair Trade Practices Act
(“MUTPA”). Dkt. 4 at ¶ 9. He seeks summary judgment only as to

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MLM’s liability under subsections (4) and (6), contending that fact
issues preclude summary judgment on his claim under subsection (1).
Dkt. 70 at 23.
In support of his motion, McCollough first argues that the
undisputed facts establish that MLM breached its duty to conduct a
reasonable investigation based upon all available information. Dkt. 70
at 6-7. McCollough next argues that the undisputed facts establish
that MLM failed to attempt in good faith to effectuate a prompt, fair
and equitable settlement of McCollough’s “clear liability claim.” Dkt.
70 at 12.
In response to MLM’s motion for summary judgment, McCollough
maintains that MLM’s position regarding federal supremacy is contrary
to Montana’s authority, under the McCarran-Ferguson Act, 15 U.S.C.
§§ 1011-1015, to regulate the business of insurance. Dkt. 70 at 26-29.
Finally, McCollough argues that genuine issues of material fact
preclude summary judgment on McCollough’s damages claim. Dkt. 70
at 29-31.

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B.

MLM’s Arguments

MLM moves for summary judgment on all issues. Dkt. 66 at 2.
MLM first argues that the Supremacy Clause of the United States
Constitution bars application of the MUTPA here. MLM contends that
McCollough is using the MUTPA to sanction it “as a proxy for the
dogged defense put up by its insured.” Dkt. 67 at 18. If this is
permitted, MLM argues that Montana law would be elevated so that it
controls the conduct of federal litigation – putting it in conflict with
Rule 11 of the Federal Rules of Civil Procedure and 28 U.S.C. § 1927.
Dkt. 67 at 17. MLM contends that all actions in the underlying suit
were made in the exercise of JRL’s right as a federal litigant to contest
McCollough’s allegations, and “Montana may not reach into the conduct
of the federal litigation to sanction the parties or the insurer funding
the party’s defense to sanction them for such conduct.” Dkt. 67 at 24.
Second, MLM argues that, as a matter of law, its investigation
was reasonable because it uncovered “all material and substantive facts
underlying McCollough’s claim[.]” Id.
Third, MLM argues that it was not in control of settlement in the

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underlying action, and therefore the duty to effect a fair settlement is
inapplicable. Dkt. 67 at 25. MLM states that the consent clause in the
subject insurance contract leaves the decision to settle with the insured
– therefore, MLM cannot be liable for JRL’s decision not to settle. Dkt.
67 at 26-27. Additionally, MLM argues that a prompt, fair and
equitable settlement could never have been reached in this case
because McCollough refused to offer less than $900,000 in the
settlement negotiations, and was instead seeking vindication and an
apology from JRL. Dkt. 67 at 27-28.
Finally, MLM argues that the element of causation is absent in
this case. MLM argues that the source of McCollough’s emotional
distress, the only claimed damages in this case, stems from his
perceptions of wrongdoing by JRL, and not from the process of
resolving his claims against them. Dkt. 67 at 29.
III. SUMMARY JUDGMENT STANDARD
Fed. R. Civ. P. 56(a) requires the court to grant summary
judgment if the movant shows that there is no genuine dispute as to
any material fact and the movant is entitled to judgment as a matter of

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law. The movant bears the initial responsibility of informing the court
of the basis for its motion, and identifying those portions of the
pleadings, depositions, answers to interrogatories, and admissions on
file, together with the affidavits, which it believes demonstrate the
absence of a genuine issue of material fact. Celotex Corp. v. Catrett,
477 U.S. 317, 323 (1986). Where the parties file cross-motions for
summary judgment, the court must consider each party’s evidence,
regardless under which motion the evidence is offered. Las Vegas
Sands, LLC v. Nehme, 632 F.3d 526, 532 (9th Cir. 2011).
Entry of summary judgment is appropriate “against a party who
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., 477 U.S. at 322. A moving
party without the ultimate burden of persuasion at trial has both the
initial burden of production and the ultimate burden of persuasion on a
motion for summary judgment. Nissan Fire & Marine Ins. Co. v. Fritz
Companies, Inc., 210 F.3d 1099, 1102 (9th Cir. 2000). If the moving
party meets its initial burden, the burden then shifts to the opposing

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party to establish a genuine issue as to any material fact. Matsushita
Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986).
The purpose of summary judgment is to pierce the pleadings and
to assess the proof to see whether there is a genuine need for trial. Id.
at 587 (quotation omitted). In resolving a summary judgment motion,
the evidence of the opposing party is to be believed, Anderson, 477 U.S.
at 255, and all reasonable inferences that may be drawn from the facts
placed before the Court must be drawn in favor of the opposing party,
Matsushita, 475 U.S. at 587 (citation omitted).
IV.

DISCUSSION
As here applicable, Montana law creates an independent cause of

action by McCollough, as a third-party claimant, against an insurer
such as MLM for alleged damages caused by the insurer’s violation of
subsections (1), (4), and (6). Redies v. Attorneys Liability Protection
Soc., 150 P.3d 930, 937 (Mont. 2007). These subsections provide that
an insurer may not:
(1)

misrepresent pertinent facts or insurance policy provisions
relating to coverage at issue;

...

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(4)

refuse to pay claims without conducting a reasonable
investigation based on all available information;

...
(6)

neglect to attempt in good faith to effectuate prompt, fair,
and equitable settlements of claims in which liability has
become reasonably clear.

...
MCA § 33-18-201. Whether an insurer violated these provisions is a
separate issue from the issues in the underlying tort claim. Peterson v.
St. Paul Fire and Marine Ins. Co., 239 P.3d 904, 911 (Mont. 2010)
(citing Graf v. Continental Western Ins. Co., 89 P.3d 22, 25-26 (Mont.
2004)).
A.

MLM’s Motion For Summary Judgment Based on the
Supremacy Clause

The Court first addresses MLM’s contention that the Supremacy
Clause preempts and bars all of McCollough’s claims. The Supremacy
Clause states that the “Constitution, and the Laws of the United States
... shall be the supreme Law of the Land ... .” U.S. Const. Art. VI, para.
2. The Supremacy Clause invalidates state laws that interfere with, or
are contrary to, federal law. Engine Mfrs. Ass’n v. S. Coast Air Quality
Mgmt. Dist., 498 F.3d 1031, 1039 (9th Cir. 2007). Federal preemption

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occurs when: (1) Congress enacts a statute that explicitly pre-empts
state law; (2) state law actually conflicts with federal law; or (3) federal
law occupies a legislative field to such an extent that it is reasonable to
conclude that Congress left no room for state regulation in that field.
Id.
Citing no authority specifically so holding, MLM contends that
the federal procedural devices designed to curtail abusive litigation,
Rule 11 and 28 U.S.C. § 1927, preempt the MUTPA when parties
litigate in federal court. The Court concludes in this context that,
under the federal preemption standard set forth above, these
procedural rules do not preempt substantive Montana law regulating
the business of insurance.
The “central purpose of Rule 11 is to deter baseless filings in
district court and thus, consistent with the Rules Enabling Act’s grant
of authority, streamline the administration and procedure of the
federal courts.” Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 393
(1990). “Rule 11 imposes a duty on attorneys to certify that ... any
papers filed with the court are well grounded in fact, [and] legally

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tenable....” Id. Similarly, the purpose of 28 U.S.C. § 1927 is “the
deterrence of intentional and unnecessary delay in the proceedings.”
Zuk v. E. Pennsylvania Psychiatric Inst. of the Med. Coll. of
Pennsylvania, 103 F.3d 294, 297 (3d Cir. 1996) (quoting Beatrice Foods
v. New England Printing, 899 F.2d 1171, 1177 (Fed. Cir. 1990)). The
statute, by its terms, applies exclusively to attorneys. Navarro v.
General Nutrition Corp., 2004 WL 2648373 * 20 (N.D. Cal. 2004).
The purposes behind the regulation of attorney conduct in Rule 11
and 28 U.S.C. 1927 differ significantly from the purpose of the MUTPA,
which is “to regulate trade practices in the business of insurance in
accordance with the intent of congress as expressed in [the McCarranFerguson Act.]” MCA § 33-18-101. Thus, the Court cannot find express
preemption, conflict preemption, or field preemption. See, e.g., U.S.
Express Lines Ltd. v. Higgins, 281 F.3d 383, 393 (3d Cir. 2002) (finding
that Rule 11 does not preempt state law claims for abuse of process
claims or “similar torts providing relief for misconduct in federal
litigation”). See generally 19 Fed. Prac. & Proc. Juris. § 4515 (2d ed.).
Furthermore, the McCarran-Ferguson Act provides that “[n]o Act

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of Congress shall be construed to invalidate, impair, or supersede any
law enacted by any State for the purpose of regulating the business of
insurance, or which imposes a fee or tax upon such business, unless
such Act specifically relates to the business of insurance.” 15 U.S.C. §
1012(b). The McCarran-Ferguson Act “establishes a form of inverse
preemption that prevents a federal law of general applicability from
inadvertently impairing state laws regulating the business of
insurance.” Ojo v. Farmers Group, Inc., 565 F.3d 1175, 1179 (9th Cir.
2009) (citing Humana Inc. v. Forsyth, 525 U.S. 299, 306–07 (1999)).
Rule 11 and 28 U.S.C. 1927, federal rules of generally applicability,
cannot impair, and thus do not preempt, the MUTPA.
The Court concludes here that the MUTPA is not preempted by
Rule 11 or 28 U.S.C. § 1927, and MLM is not entitled to summary
judgment on this basis.
B.

Cross Motions for Summary Judgment on
McCollough’s Claim that MLM Violated its Duty to
Investigate

Under the MUTPA, an insurer may not “refuse to pay claims
without conducting a reasonable investigation based on all available

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information[.]” MCA § 33-18-201(4). Determining whether an insurer’s
investigation was reasonable involves an analysis of all information
available to the insurer when it denied the claim. Lorang v. Fortis Ins.
Co., 192 P.3d 186, 203 (Mont. 2008). Reasonableness is generally a
question of fact for the jury to resolve; however, questions of fact may
be determined as a matter of law on summary judgment if reasonable
minds could reach but one conclusion on the issue. Id. at 214.
As noted above, MLM did not receive notice of McCollough’s claim
against JRL until the underlying action was filed. MLM was therefore
unable to conduct any investigation prior to the underlying lawsuit. A
similar situation was presented in Madden v. Attorneys Liability
Protection Society, Inc., 29 Mont. Fed. Rep. 33 (D. Mont. 2001), aff’d,
2003 WL 245223 (9th Cir. (Mont.) 2003) (unpublished).1 Although
counsel retained by the insurer investigated Madden’s claim, Madden

1

The Ninth Circuit stated that “in the absence of some event that
would put the insurer on notice of an insufficiency in the investigation
conducted by the competent counsel it retained to defend its insured,
that investigation is attributable to the insurer and fulfills its
obligation under Montana law.” Id. at ** 2 (quoting Ensey v. Colorado
Cas., 30 P.3d 350, 352 (Mont.2001).
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argued that the insurer was obligated to conduct an additional,
independent investigation. This Court rejected Madden’s argument,
concluding that in the absence of some triggering event or circumstance
that would put the insurer on notice that something was amiss in the
handling of the claim, the insurer did not have an independent duty to
investigate. Id. at 34. “To hold otherwise, and to establish a duty on
the part of the carrier to second-guess an informed opinion that a case
is defensible, puts the carrier at odds with the insured, and in bed with
the claimant.” Id.; see also Ensey v. Colorado Cas., 30 P.3d at 352
(attorney retained by insurer can act on insurer’s behalf to fulfill
obligations under Section 33-18-201).
This reasoning is supported by other authorities. One treatise
explained:
Not only would it be pointless for an insurer to attempt to
duplicate the investigation that defense counsel does (e.g., trying
to interview a witness after counsel has deposed the witness), but
(a) an insurer could not effectively duplicate counsel’s
investigation even if the insurer tried (since, e.g., the insurer
cannot subpoena witnesses or documents), and (b) it is counsel,
not the insurer, who has the knowledge and expertise to
determine what the insured’s legal defenses are and how the facts
impact on those defenses.

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1 Insurance Claims and Disputes 5th § 2:5.
McCollough has not raised an issue of fact whether MLM should
have been aware of alleged insufficiency of counsel’s investigation. To
the contrary, Mr. Heenan testified as follows:
Q. During the JRL case, did the Bohyer, Simpson firm and the
other lawyers that were involved before them, did they request
and conduct a reasonable and independent discovery of your
claims?
A. I don’t know. That’s a loaded question, I think. What was
their reasonable inquiry into my claims? I mean, they deposed
my client; they served written discovery; they had access to our
claims.
Q. Let’s put it another way, John. Was there any facts about
your claim that were withheld from Bohyer and Simpson in the
Johnson, Rodenburg case?
A. No, sir.
Q. So their efforts at discovery and investigation uncovered all of
the material substantive information bearing on your claim?
A. There were no surprises at trial.
Q. I’d like you to answer my question, John. If you would, please.
[Question read back]
A. Yes. There were no surprises at trial.
Dkt. 68-4 at 20-21. Thus, McCollough’s counsel during the underlying
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trial acknowledged that defense counsel’s investigation uncovered all of
the material substantive information bearing on McCollough’s claim.
Based on the holding in Madden, therefore, the Court concludes that
MLM is entitled to summary judgment on McCollough’s failure to
investigate claim. Accordingly, McCollough’s cross motion on this issue
should be denied.
C.

Cross Motions for Summary Judgment on
McCollough’s Claim for Failure to Attempt to
Effectuate Settlement
1.

MLM’s Motion

The MUTPA provides that an insurer may not “neglect to attempt
in good faith to effectuate prompt, fair, and equitable settlements of
claims in which liability has become reasonably clear[.]” MCA § 33-18201(6).
MLM argues that it cannot be liable under this subsection of the
MUTPA, and therefore it is entitled to summary judgment, because the
insurance policy granted JRL “the exclusive control over settlement.”
Dkt. 67 at 26. MLM cites Mutual Ins. Co., Ltd. v. Murphy, 630 F. Supp.
2d 158 (D. Mass 2009), for the legal proposition that when an insurer

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does not retain control over the defense or settlement of the claim, and
the insured never agrees to settle, the insurer does not have a duty to
effectuate prompt, fair, and equitable settlement. Dkt. 67 at 26 (citing
Murphy, 630 F. Supp. 2d at 170).
MLM’s reliance on Murphy is misplaced. The insurance policy at
issue in Murphy provided coverage only above a $50,000 “retention
amount,” and was a “hybrid” between a traditional insurance policy and
an excess indemnity policy. Murphy, 630 F. Supp. 2d at 165. Under
that policy, the insured had the duty to retain its own counsel for the
defense or settlement of a claim, and explicitly provided that the
insurer “shall not be called upon to assume charge of the settlement, or
the defense of any claim made, or suit brought, or proceeding instituted
against the insured.” Id. at 162. The policy did not contain a hammer
clause, but stated that no settlement could be made without the
insurer’s consent. Id.
Unlike the insurance policy in Murphy, which relieved the insurer
from the obligation to settle or defend a claim, the insurance policy at
issue here grants MLM the “exclusive right to investigate, negotiate

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and defend claims seeking damages against the insured...” Dkt. 27-1 at
7 (emphasis added). This fact is undisputed. See Dkt. 75 at ¶ 3. The
policy states that the insured “may not negotiate or agree to a
settlement of any CLAIM without [MLM’s] prior consent.” Dkt. 27-1 at
7. And while JRL also retained the right to withhold consent to a
settlement recommended by MLM, MLM had the right to invoke its
“hammer clause” to avoid liability beyond the amount for which MLM
would have settled. See id. Due to the important distinctions between
the insurance policy in this case and the policy at issue in Murphy, the
Murphy case does not support MLM’s position.
Furthermore, other courts have found that a consent-to-settle
provision similar to the one here “is immaterial to the question of
whether [the insurer] acted in bad faith in pursuing settlement
negotiations...” Insurance Co. of North America v. Medical Protective
Co., 768 F.2d 315, 319 (10th Cir. 1985). The Tenth Circuit stated that
“[i]t is common practice for an insurer to conduct settlement
negotiations in advance of obtaining the insured’s final consent to the
agreement. These negotiations must be conducted in good faith and

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without negligence, regardless of whether or not the insured eventually
will consent.” Id. (citation omitted); see also Bankr. Estate of Morris v.
COPIC Ins. Co., 192 P.3d 519, 526 (Colo. Ct. App. 2008) (“‘consent to
settle’ clause does not give an unqualified right to [the insured] to veto
settlement”).
The Court finds this authority persuasive, especially in light of
the provision giving MLM the exclusive right to negotiate McCollough’s
claims. Dkt 27-1 at 7. Thus, the Court is not persuaded by MLM’s
argument that the insurance policy, by its terms, relieves MLM from
control or responsibility over settlement. MLM’s motion for summary
judgment as to its liability under Section 33-18-201(6) should be
denied.
2.

McCollough’s Motion

McCollough also moves for summary judgment on his claim that
MLM neglected to attempt in good faith to effectuate prompt, fair, and
equitable settlements of claims in which liability has become
reasonably clear. “Reasonably clear” liability is established when it is
“clear enough” that reasonable people assessing the claim would agree

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on the issue of liability, and that the facts, circumstances, and
applicable law leave little room for objectively reasonable debate about
whether liability exists. Peterson, 239 P.3d 904, 913-14. Once liability
becomes reasonably clear, “it must then be determined whether the
insurer acted promptly and in good faith given its clear responsibility to
cover the claim. These determinations must be made in light of the
information the insurer possessed when it considered the underlying
claim.” Lorang, 192 P.3d at 205.
Here again, the fact that MLM was not called upon to consider
the claim until after the lawsuit was filed comes into play. While it is
clear that the insurer’s MUTPA duties survive the filing of the
litigation,2 it is also clear that the duties must be considered in light of
a litigant’s right to vigorous representation by defense counsel. See
Palmer by Diacon v. Farmers Ins. Exch., 861 P.2d 895, 914 (Mont. 1993)
(“if defending a questionable claim were actionable as bad faith, it
would impair the insurer’s right to a zealous defense and even its right

2

See Federated Mut. Ins. Co. v. Anderson, 991 P.2d 915 (Mont.
1999) (frivolous appeal on coverage may be offered in evidence to show
that the claim handling was malicious).
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of access to the courts”). In Peterson v. St. Paul Fire and Marine Ins.
Co., 239 P.3d 904 (Mont. 2010), the court further explained:
Under In Re Rules, [2 P.3d 806], we conclude that the District
Court did not err when it refused to determine as a matter of law
that [defense counsel] was [the insurer’s] agent, nor did it abuse
its discretion when it denied a jury instruction patterned on this
argument. However, In Re Rules makes it clear that an insurer
cannot simply foist its duties under the UTPA onto defense
counsel, and that defense counsel, in turn, is under an obligation
to consult with the insurer and should be held accountable for his
or her work. Accordingly, on remand a careful reading of our
decision in In Re Rules may provide some guidance to the parties
if they wish to propose an instruction clarifying for the jury the
relationship among [defense counsel, the insured, and the
insurer].
Id. at 918.
Difficult issues may arise at trial regarding what evidence should
be admitted and what jury instruction given. See EOTT Energy
Operating Limited Partnership v. Certain Underwriters At Lloyd’s of
London, 59 F. Supp. 2d 1072, 1076-1077 (D. Mont. 1999). But at this
stage, the Court must conclude that genuine issues of material fact
preclude summary judgment as to MLM’s liability under Section 33-18201(6).
During the mediation efforts in September 2008, McCollough
demanded $900,000 and MLM offered $20,000. After these initial
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attempts, the nature of the parties’ subsequent settlement efforts is
disputed. McCollough contends that “MLM knew McCollough’s offer to
settle at mediation for $900,000 was not only within policy limints, but
also a rational starting figure well within the realm of reason...” Dkt.
70 at 20. McCollough argues that MLM’s settlement offer of $20,000, a
sum less than McCollough’s attorneys’ fees, was unreasonable because
it “would all have gone to McCollough’s lawyer, leaving nothing for
McCollough himself.” Dkt. 70 at 21. Heenan explained in his
deposition that “[MLM] could have tried to make a settlement offer,
and if it was in the ballpark of reasonable, there’s no one that would
have been listening more closely than me.” Dkt. 68-4 at 22. Finally,
McCollough contends that “MLM did not re-evaluate McCollough’s
claim” after this Court’s order establishing liability under the FDCPA,
and instead “MLM consciously considered, and then rejected, the idea
of trying to determine what amounts were admittedly due.” Dkt. 70 at
21-22.
MLM disputes these facts. MLM argues that “settlement is a two
way street[,]” and McCollough “was opposed to any settlement that did

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not entail an admission of wrongdoing from JRL.” Dkt. 67 at 28. MLM
contends that McCollough declined to make a counteroffer or otherwise
negotiate after receiving MLM’s initial offer or after defense counsel
suggested a settlement of approximately $50,000. McCollough’s
counsel, it contends, “did not budge on his demand.” Dkt. 75 at ¶ 93.
McCollough may not agree with MLM’s actions in the underlying
case, but there remains a fact issue whether MLM attempted in good
faith to effectuate a prompt, fair, and equitable settlement of the claim.
See Lorang, 192 P.3d at 220 (summary judgment for plaintiff
inappropriate despite “the compelling nature of the evidence which
indicates bad faith by [the insurer], as well as the relative strength of
the [plaintiff’s] argument compared to that of [the insurer’s]”). Thus,
McCollough’s motion for summary judgment as to MLM’s liability
under Section 33-18-201(6) should be denied.
D.

MLM Motion for Summary Judgment on McCollough’s
Claim that it Misrepresented Facts

The MUTPA prohibits insurers from “misrepresent[ing] pertinent
facts or insurance policy provisions relating to coverages at issue.”
MCA § 33-18-201(1).
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Although MLM moves “for summary judgment on all issues in
this case...” (dkt 66 at 2), MLM does not address Section 33-18-201(1) in
its brief. And although McCollough addresses it in his responsive brief,
arguing that fact issues preclude summary judgment on this claim,
MLM’s reply brief again does not mention this issue. Thus, MLM has
failed to meet its initial burden under Rule 56, and is not entitled to
summary judgment on this claim.
E.

MLM’s Motion for Summary Judgment on Causation

Finally, MLM argues that it is entitled to summary judgment
because McCollough cannot prove that MLM’s activities caused his
alleged damages. MLM contends that McCollough’s deposition
testimony establishes that his anger and distress was directed at JRL
and the “righteous cause” of obtaining either an apology or a
vindicating jury verdict. MLM argues that “[n]one of these claims of
distress related to bad faith or the violations of MUTPA.” Dkt. 67 at 29.
Although McCollough’s response to an interrogatory succinctly
summarizes his claim for emotional distress damages against MLM,
MLM argues that a prior discovery response may not be used to

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contradict subsequent deposition testimony for the purpose of creating
a genuine issue of material fact. Dkt. 74 at 22-23.
As earlier noted, all reasonable inferences that may be drawn
from the facts placed before the Court must be drawn in favor of the
party opposing a summary judgment motion. Viewing the damages
evidence in favor of McCollough , the Court concludes that a genuine
issue exists for trial as to whether MLM’s activities caused McCollough
damages. For example, when asked at his deposition “what is the
emotional distress, and what caused it[,]” McCollough responded:
A: The fact that all this stuff hasn’t stopped, hasn’t been
corrected. And we’ve discussed what hasn’t been corrected.
Q: You’re talking about Johnson, Rodenburg’s activity?
A: I’m talking about Johnson, Rodenburg; I’m talking about
Minnesota Mutual [MLM]. The same greed that happened before
is still happening.
Dkt. 68-8 at 12 (Depo. McCollough excerpts) (formatting added).
In Jacobsen v. Allstate Ins. Co., 215 P.3d 649 (Mont. 2009), the
Montana Supreme Court clarified that where, as here, emotional
distress is claimed as an element of damage, the law does not set a
definite standard by which to calculate compensation. Id. at 663-64.
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The “heightened” standard of “serious or severe” distress does not apply
here. Under this standard, MLM has failed to demonstrate the absence
of a genuine issue of material fact as to the causation issue, and
therefore is not entitled to summary judgment on this basis.
V.

CONCLUSION
Based on the foregoing, IT IS RECOMMENDED that MLM’s

motion for summary judgment (Dkt. 66) be GRANTED IN PART and
DENIED IN PART. Specifically, it is recommended that MLM’s motion
be granted with respect to McCollough’s claim that it violated MCA §
33-18-201(4) and denied in all other respects. IT IS FURTHER
RECOMMENDED that McCollough’s cross motion for summary
judgment (Dkt. 69) be DENIED.
NOW, THEREFORE, IT IS ORDERED that the Clerk shall
serve a copy of the Findings and Recommendation of United States
Magistrate Judge upon the parties. The parties are advised that
pursuant to 28 U.S.C. § 636, any objections to the findings and
recommendation must be filed with the Clerk of Court and copies
served on opposing counsel within fourteen (14) days after service

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hereof, or objection is waived.
DATED this 6th day of March, 2013.
/s/ Carolyn S. Ostby
United States Magistrate Judge

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