Routh v. Travelers Casualty Insurance Company of America et al
OPINION AND ORDER DENYING 10 Motion to Bifurcate Signed by Judge Susan P. Watters on 9/14/2017. (AMC)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MONTANA
SEP 14 2017
Clerk, U S District Court
District Of Montana
BRADLEY D. ROUTH,
OPINION AND ORDER
INSURANCE COMPANY OF
AMERICA, and John Does 1-5,
Before the Court is Defendant Travelers Casualty Insurance Company of
America's motion to bifurcate count one and stay counts two and three. (Doc. 10).
For the foregoing reasons, the Court DENIES the motion.
On November 11, 2013, a vehicle in which Bradley Routh was a passenger
was rear-ended by an uninsured motorist. (Doc. 7 at ifif 4-6). The vehicle in which
Routh was a passenger was insured by a policy (the Policy) that contained
uninsured motorist coverage. (Doc. 7 at if 9). Travelers issued the Policy. (Doc. 7
at if 9). Routh sought uninsured motorist benefits from Travelers under the Policy.
(Doc. 7 if 10). Travelers refused to provide uninsured motorist benefits to Routh.
(Doc. 7 at if 10). Routh filed a complaint against Travelers. (Docs. 6 and 7).
Count one of the complaint requests a declaratory judgment that Travelers "must
adjust his claim and pay him benefits pursuant to the uninsured motorist policy at
issue." (Doc. 7 at if 16). Count two of the complaint alleges Travelers committed
bad faith in its investigation and settlement of Routh' s claim in violation of Mont.
Code Ann.§ 33-18-201(4) and (6). (Doc. 7 at ifif 17-20). Count three of the
complaint alleges Travelers committed common law bad faith in its investigation
and settlement ofRouth's claim. (Doc. 7 at iii! 21-22). Travelers does not dispute
the uninsured motorist was liable for the accident or that the Policy provides
uninsured motorist coverage. (Doc. 2 at if 7 and Doc. 11 at 3). Instead, Travelers
disputes whether Routh was injured in the accident. (Doc. 11 at 3).
The parties dispute which rule governs the motion to bifurcate. Routh
argues Federal Rule of Civil Procedure 42(b) controls. Under Rule 42(b), the court
may bifurcate claims for convenience, to avoid prejudice, or to expedite and
economize. Travelers argues Montana Code Annotated§ 33-18-242(6)(a)
controls. Under§ 33-18-242(6)(a), an insured may file an action for bad faith
together with any other cause of action the insured has against the insurer. The
actions may be bifurcated for trial "where justice so requires." Mont. Code Ann. §
Federal courts apply state substantive law and federal procedure law to
diversity cases. Goldberg v. Pacific Indem. Co., 627 F.3d 752, 755 (9th Cir. 2010)
(citing Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938)). But the line between
procedural and substantive law is often hazy. Erie, 304 U.S. at 92 (Reed, J.,
concurring). A state procedural rule, though undeniably "procedural" in the
ordinary sense of the term, may exist to influence substantive outcomes. Shady
Grove Orthopedic Associates, P.A. v. Allstate Ins. Co., 559 U.S. 393, 419-420
(2010) (Stevens, J., concurring) (citation omitted). Thus, when a State chooses to
use a traditionally procedural vehicle as a means of defining the scope of
substantive rights or remedies, federal courts must recognize and respect that
choice. Shady Grove, 559 U.S. at 420 (Stevens, J., concurring).
In Shady Grove, Justice Stevens formulated a two-step framework to
negotiate this "thorny area." 559 U.S. at 421 (Stevens, J., concurring). Justice
Stevens' concurrence controls the Shady Grove plurality because it concurred in the
judgment on the narrowest grounds. See Marks v. United States, 430 U.S. 188, 193
( 1977) (When "no single rationale explaining the result enjoys the assent of five
justices, the holding of the Court may be viewed as that position taken by those
Members who concurred in the judgments on the narrowest grounds."); Baumann
v. Chase Inv. Services Corp., 747 F.3d 1117, 1124 (9th Cir. 2014) (applying
Justice Stevens' concurrence).
The first step is determining whether the federal rule and state law conflict.
To do so, the Court considers whether the federal rule is "sufficiently broad to
control the issue before the court, thereby leaving no room for the operation of
seemingly conflicting state law." Shady Grove, 559 U.S. at 421 (Stevens, J.,
concurring) (internal quotations and citation omitted). If a "direct collision" exists,
the federal rule and state law conflict. Shady Grove, 559 U.S. at 422 (Stevens, J.,
concurring). The federal rule controls unless it violates the Rules Enabling Act.
Shady Grove, 559 U.S. at 422 (Stevens, J., concurring).
The second step is determining whether the federal rule violates the Rules
Enabling Act. A federal rule violates the Rules Enabling Act if it abridges,
enlarges, or modifies any substantive right. Shady Grove, 559 U.S. at 422 (Stevens,
J., concurring) (citing 28 U.S.C. 2072(b)). The inquiry is not always simple
because "it is difficult to conceive of any rule of procedure that cannot have a
significant effect on the outcome of a case." Shady Grove, 559 U.S. at 422
(Stevens, J., concurring) (internal quotation and citation omitted). Almost "any rule
can be said to have substantive effects affecting society's distribution of risks and
rewards." Shady Grove, 559 U.S. at 422 (Stevens, J., concurring) (internal
quotation and citation omitted). Because "one can often argue the state rule was
really some part of the State's definition of its right or remedies," the bar for
finding a Rules Enabling Act violation "is a high one." Shady Grove, 559 U.S. at
422 (Stevens, J., concurring). The mere possibility that a federal rule would alter a
state-created right is not sufficient, there must be little doubt. Shady Grove, 559
U.S. at 422 (Stevens, J., concurring).
Here, there is not a "direct collision" between Rule 42(b) and§ 33-18242(6)(a). Under the federal rule, bifurcation is appropriate for convenience, to
avoid prejudice, or to expedite and economize. Under the Montana law,
bifurcation is appropriate where justice requires. The Montana Supreme Court has
interpreted§ 33-18-242(6)(a)'s use of"where justice so requires" to include
convenience, fairness to the parties, and the interests of judicial economy. Malta
Public School Dist. A and 14 v. Montana Seventeenth Judicial Dist. Court, Phillips
County, 938 P.2d 1335, 1338 (Mont. 1997). Thus, under either rule, the Court
considers the same factors. For the purpose of appellate review, the Court will
apply Rule 42(b ).
Rule 42(b) confers broad discretion on the Court to bifurcate trials.
Hangarter v. Provident Life and Acc. Ins. Co., 373 F.3d 998, 1021 (9th Cir. 2004).
Travelers argues count one should be bifurcated from counts two and three
because it will be prejudiced if it has to defend the bad faith claims before liability
for the accident has been determined, citing Fode v. Farmers Ins. Exch., 719 P.2d
414 (Mont. 1986) and Palmer by Diacon v. Farmers Ins. Exch., 861 P.2d 895
(Mont. 1993). The Court disagrees.
In Fode and Palmer, the Montana Supreme Court expressed concern that an
insurer may suffer prejudice when it is forced to simultaneously defend bad faith in
its handling of the underlying accident and liability for the underlying accident.
Fode, 719 P.2d at 417; Palmer, 861 P.2d at 905-906. The Montana Supreme
Court's concern was that discovery of the insurer's file in the bad faith claim
would raise difficult work-product and attorney-client problems that affected the
underlying liability issue. Fode, 719 P.2d at 417; Palmer, 861 P.2d at 905-906.
The concern expressed in Fode and Palmer is not present here because
liability is not a contested issue. Travelers' answer states "Travelers does not
dispute that fault for the motor vehicle accident at issue rests with the driver of the
vehicle that rear-ended the vehicle in which Mr. Routh was riding as a passenger."
(Doc. 2 at if 7). Travelers brief states "Travelers does not dispute either that fault
for the motor vehicle accident at issue rests with the uninsured driver or that [the
Policy] includes UM Coverage." (Doc. 11 at 3). According to Travelers, all that
remains to be tried in count one is "the extent to which Mr. Routh suffered injury
in the motor vehicle accident on November 11, 2013." (Doc. 11 at 2). Although
Travelers argues liability includes damages, its position is contrary to well
established Montana law. See Henricksen v. State, 84 P.3d 38, 45-46 (Mont. 2004)
(affirming district court's bifurcation of issue of liability from issue of damages).
Fode and Palmer do not support bifurcation because the Montana Supreme Court's
concern-that an insurer may suffer prejudice when it is forced to simultaneously
contest bad faith in its handling of the underlying accident and liability for the
underlying accident- is not present here when liability for the underlying accident
has been admitted.
Judicial economy and convenience also do not support bifurcation. Under
all three counts, Routh may be entitled to damages for physical injuries suffered in
the accident. See Mont. Code Ann.§ 33-18-242(1) and (4) (providing an insurer is
liable for "actual damages" proximately caused by its bad faith); see also Estate of
Gleason v. Central United Life Ins. Co., 350 P.3d 349, 356-358 (Mont. 2015)
(explaining breach of the insurance contract and bad faith may give rise to similar
compensatory damages). Furthermore, as Travelers concedes, the remaining issue
to be tried in count one is whether Routh suffered physical injuries in the accident.
Whether Routh suffered physical injuries in the accident is also relevant to whether
Travelers acted in bad faith. Whether Routh suffered physical injuries in the
accident will depend on the same evidence and the same witnesses. Judicial
economy and convenience weigh in favor of hearing evidence and testimony that is
relevant to all three counts in one trial.
Travelers' motion to bifurcate count one and stay counts two and three (Doc.
10) is DENIED.
DATED this /f'-fl-aay of September, 2017.
United States District Judge
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