Ayotte v. American Economy Insurance Company

Filing 115

ORDER denying 105 Motion to Vacate 88 Order on Motion for Protective Order. Signed by Judge Donald W. Molloy on 10/2/2014. (dle)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MONTANA
BUTTE DIVISION

SCOTT AYOTTE,

CV 09–57–BU–DWM
Plaintiff,
ORDER

vs.
AMERICAN ECONOMY INSURANCE
COMPANY,
Defendant.

This matter comes before the Court on remand from an appeal of this
Court’s order denying Plaintiff Scott Ayotte’s (“Plaintiff”) motion to vacate an
order granting summary judgment. On December 10, 2010, Judge Cebull adopted
the September 23, 2010 findings and recommendations of United States
Magistrate Judge Ostby, which determined that Defendant American Economy
Insurance Company (“American Economy”) owed no duty to provide Plaintiff
with Ridley1 payments because the insured’s underlying liability to Plaintiff was

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Ridley v. Guaranty Natl. Ins. Co., 951 P.2d 987 (Mont. 1997) (holding that prior
to settlement or judgment of a tort claim, an insurer has an obligation to pay medical expenses
incurred by an injured third-party tort victim when the liability of its insured is reasonably clear).

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not reasonably clear as a matter of law. (Doc. 88.) Plaintiff timely appealed that
order to the Ninth Circuit. While the appeal was pending, Plaintiff settled with the
insured, moved to dismiss the appeal as moot, and requested that the Ninth Circuit
vacate the district court’s summary judgment order. The Ninth Circuit dismissed
the appeal as moot but declined to vacate the order and instead remanded to the
district court to consider whether vacatur was appropriate.
On remand, this Court denied Plaintiff’s motion to vacate, determining the
case was not rendered moot by “happenstance.” (Doc. 100.) Plaintiff appealed
that determination and the Ninth Circuit once again remanded the vacatur
question, this time on the ground that the district court applied the incorrect
standard, requiring it apply the standard set forth in American Games v. Trade
Products, Inc., 142 F.3d 1164 (9th Cir. 1998) to determine if vacatur is
appropriate. (Doc. 103.) After the Ninth Circuit mandate was filed, Plaintiff once
again moved to vacate the summary judgment order. (Doc. 105.) This Court
heard argument on Plaintiff’s motion on October 1, 2014. Having considered the
American Games standard, vacatur is not appropriate.
ANALYSIS
American Games sets out various matters that the Court should consider in
determining whether vacatur is appropriate, including “the consequences and
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attendant hardships of dismissal or refusal to dismiss,” the “competing values of
finality of judgment and right to relitigation of unreviewed disputes,” the “motives
of the party whose voluntary action mooted the case,” and the public policy
against allowing a losing party to “buy an eraser for the public record.” 142 F.3d
at 1168, 1170; see also Ringsby Truck Lines, Inc. v. W. Conference of Teamsters,
686 F.2d 720, 722 (9th Cir. 1982) (outlining the “equitable balancing test”).
“[T]he touchstone of vacatur is equity.” Dilley v. Gunn, 64 F.3d 1365, 1370 (9th
Cir. 1995).
A.

Consequences and Attendant Hardships
First, this Court must consider “the consequences and attendant hardships of

dismissal or refusal to dismiss.” American Games, 142 F.3d at 1168. The parties
agree that Judge Cebull’s order was not subjected to appellate review and that
such review is now not possible. As made clear during the hearing on this matter,
Plaintiff’s collateral action for statutory bad faith is going to proceed whether or
not vacatur is granted here. According to Plaintiff, the claims alleged in Ayotte v.
American Economy Insurance Co., CV 12-61-M-DWM, are in no way dependent
on the claims adjudicated in the December 2010 summary judgment order. By his
own account, it would seem the consequence to Plaintiff of vacatur or non-vacatur
is negligible. To the contrary, vacating the December 2010 order has the potential
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to reopen issues the have been previously decided in American Economy’s favor,
possibly requiring American Economy to relitigate a matter that has been briefed
multiple times. The resulting hardship to both American Economy and the judicial
economy of this Court weighs against vacatur.
B.

Competing Values
Second, this Court must consider the “competing values of finality of

judgment and right to relitigation of unreviewed disputes.” American Games, 142
F.3d at 1168. In the absence of vacatur, the December 2010 order’s ruling that the
insured’s liability to Plaintiff was not reasonably clear as a matter of law and that
Plaintiff’s common law bad faith claims necessarily fail remains unreviewable.
However, when the question of whether all Plaintiff’s claims were mooted by the
settlement was raised at the Ninth Circuit, Plaintiff insisted that they were. It was
American Economy that argued that Plaintiff’s bad faith claims should be
reviewed. In arguing that all of his claims were moot, Plaintiff sent a message that
the matter in its entirety was done and settled. Plaintiff’s voluntary argument
against review in the first instance persuades this Court to value finality of
judgment over the right to relitigation.
C.

Motives
Third, this Court must consider the “motives of the party whose voluntary
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action mooted the case.” American Games, 142 F.3d at 1168. “[I]f the district
court determines that the appellant did not intend to avoid appellate review and to
have the district court’s order vacated, that factor may weigh equitably in favor of
vacating the order.” Id. (citing Dilley, 64 F.3d at 1372 n. 6). American Economy
insists that even if the facts surrounding the settlement itself are not cause for
concern, Plaintiff has taken actions to avoid the preclusive effect of Judge
Cebull’s order on the Plaintiff’s collateral lawsuit against American Economy.
(Doc. 109 at 23.) The Court has a similar concern. Had Plaintiff argued that the
settlement did not moot all of his claims and requested that the Ninth Circuit
address those remaining claims and the Ninth Circuit chose not to do so, it would
be hard to argue that Plaintiff had insincere motives. Instead, Plaintiff insisted the
all his claims were moot while at the same time asking the Ninth Circuit to vacate
the December 2010 order. Although it does not appear that the prospect of
vacating the order was the primary motive for the settlement, it “presented a
possible bonus” of having the December 2010 order vacated in light of Plaintiff’s
pending collateral suit. American Games, 142 F.3d at 1170. A bonus Plaintiff
acted to take advantage of when he chose not to pursue appellate review.
D.

Public Policy
Finally, this Court must consider the public policy against allowing a losing
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party to “buy an eraser for the public record.” American Games, 142 F.3d at 1170.
In American Games, the intervenor-appellants “caution[ed] that vacatur may be
used by litigants to manipulate the common law to suit themselves. They
describe[d] the paradigm of such abuse as insurers who ‘buy and bury’ decisions
unfavorably interpreting standard form policy language widely used by the
industry.” Id. Although the fact scenario contemplated in American Games is that
of an insurance company with an eye on future litigation, the purpose behind this
public policy concern is applicable here. Public policy cautions against allowing a
losing party to use a motion to vacate to potentially benefit itself in a future case.
If the December 2010 order is vacated it could “bury” a ruling that may adversely
affect Plaintiff in the collateral proceeding currently before this Court. Such a
result is discouraged by public policy and weighs against granting vacatur.
CONCLUSION
Finding the American Games “equitable balancing test” weighs against
vacatur, IT IS ORDERED that Plaintiff’s motion (Doc. 105) is DENIED.
Dated this 2nd day of October, 2014.

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