Demente v. GEICO General Insurance Company et al
Filing
35
MEMORANDUM OPINION AND ORDER by District Judge James O. Browning denying Defendant Derica Dunn-Gross' Second Motion to Dismiss for Insufficient Process 12 ; and granting Defendant GEICO General Insurance Company's Motion to Dismiss with Pr ejudice Under Rule 12(b) and Memorandum in Support Thereof 13 . Plaintiff James Demente has until September 25, 2017 to perfect service of process on Defendant Derica Dunn-Gross. Demente's Unfair Insurance Practice Claims, N.M. Stat. Ann. § ; § 59a-16-1 to 30, against GEICO Insurance and Dunn-Gross are dismissed with prejudice. GEICO Insurance shall also, within ten days of the date of this Memorandum Opinion and Order, show cause why the Court should not dismiss this case for lack of subject-matter jurisdiction. (mnb)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW MEXICO
JAMES O. DEMENTE,
Plaintiff,
vs.
No. CIV 17-0321 JB/JHR
GEICO GENERAL INSURANCE
COMPANY; VICTORIA DILUCENTE;
ANTHONY DILUCENTE; and- DERICA
DUNN-GROSS,
Defendants.
MEMORANDUM OPINION AND ORDER
THIS MATTER comes before the Court on: (i) Defendant Derica Dunn-Gross’ Second
Motion to Dismiss for Insufficient Process, filed April 18, 2017 (Doc. 12) (“Service of Process
MTD”); and (ii) Defendant GEICO General Insurance Company’s Motion to Dismiss with
Prejudice Under Rule 12(b) and Memorandum in Support Thereof, filed April 21, 2017
(Doc. 13)(“MTD”). The Court held a hearing on July 27, 2017. The primary issues are:
(i) whether the Court should dismiss Plaintiff James Demente’s claims against Defendant Derica
Dunn-Gross, because Demente’s summons on Dunn-Gross lacked the United States District
Court of New Mexico’s name, the time within which Dunn-Gross must appear and defend, the
Clerk of the Court’s signature, and the District of New Mexico’s seal; and (ii) whether
Demente’s settlement with Defendants Victoria Dilucente and Anthony Dilucente precludes
Demente’s claims under the Unfair Insurance Practice Act (“UIPA”), N.M. Stat. Ann. §§ 59a-161 to 30, against GEICO Insurance. The Court concludes that Demente’s summons on DunnGross was defective under rule 4(a) of the Federal Rules of Civil Procedure. Nevertheless, the
Court, in its discretion, may grant a party additional time to effect proper service and the Court
does so here. The Court also concludes that, under Hovet v. Allstate Ins. Co., 2004-NMSC-010,
¶ 26, 89 P.3d 69, 76-77, Demente’s UIPA claim is precluded. The Court, therefore, grants the
MTD.
FACTUAL BACKGROUND
The Court takes the facts from the Complaint for Damages Resulting from Personal
Injury, Insurance Bad Faith, Violations of the New Mexico Unfair Trade Practices Act and
Punitive Damages, filed May 13, 2016, in Demente v. Dilucente, D-1329-CV-2016-00743,
(Thirteenth Judicial District Court, County of Sandoval, State of New Mexico), filed in federal
court on March 8, 2017 (Doc. 1)(“Complaint”). As the Court must, it accepts the Complaint’s
factual allegations as true for the purposes of a motion to dismiss. See Ashcroft v. Iqbal, 556
U.S. 662, 678 (2009); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). The Court may
also consider facts judicially noticed on a motion to dismiss without converting the motion into
one for summary judgment. See Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 322
(2007)(“[C]ourts must consider the complaint in its entirety, as well as . . . matters of which a
court may take judicial notice.”); S.E.C. v. Goldstone, 952 F. Supp. 2d 1060, 1191 (D.N.M.
2013)(Browning, J.).
On August 7, 2014, Demente was driving his vehicle in Rio Rancho, New Mexico. See
Complaint ¶ 6, at 2. As he approached NM 528 from Sara Road, the intersection’s light changed
from green to yellow. See Complaint ¶ 7, at 2. Demente attempted to clear the intersection
before the light turned red, but, before he could, A. Dilucente turned his 1993 Ford vehicle in
front of Demente. See Complaint ¶¶ 3, 8, at 1-2. The two cars collided. See Complaint ¶ 8, at 2.
At the scene, A. Dilucente accepted responsibility for driver inattention and failure to yield the
right of way. See Complaint ¶ 10, at 2.
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Subsequently, Demente attempted several times to resolve an insurance claim against V.
Dilucente -- the 1993 Ford vehicle’s owner. See Complaint ¶¶ 2, 12, at 1-2. GEICO Insurance -V. Dilucente’s insurance provider -- covers $100,000.00 per occurrence in property damage and
bodily injury for an accident involving V. Dilucente’s vehicle. See Complaint ¶ 22, at 4.
GEICO Insurance made several different requests for Demente’s medical records and for other
information to evaluate Demente’s claim. See Complaint ¶ 13, 23 at 3-4. Demente promptly
and accurately responded to each GEICO Insurance request. See Complaint ¶ 13, at 3.
PROCEDURAL BACKGROUND
Demente filed his complaint in the Thirteenth Judicial District Court, County of
Sandoval, State of New Mexico. See Complaint ¶ 1, at 1. Demente sued the Dilucentes for
negligence, and he sued GEICO Insurance and its agent, Dunn-Gross, under the UIPA. See
Complaint ¶¶ 17-24, at 3-5.1 GEICO Insurance moved to bifurcate the action and stay the suit as
to it pursuant to Martinez v. Reid, 2002-NMSC-015, ¶ 29, 46 P.3d 1237, 1244. See Defendant
Geico General Insurance Company’s Unopposed Motion to Bifurcate and Stay, filed August 24,
2016, in Demente v. Dilucente, D-1329-CV-2016-00743 (Thirteenth Judicial District Court,
County of Sandoval, State of New Mexico), filed in federal court on April 5, 2017
(Doc. 11)(“Stay and Bifurcation Motion”). The state court granted the Stay and Bifurcation
Motion which would remain in effect until the underlying negligence cause of action against the
Dilucentes was resolved. See Order Granting Defendant Geico General Insurance Company’s
Unopposed Motion to Bifurcate and Stay, filed September 7, 2016, in Demente v. Dilucente, D1
When listing his UIPA claim, Demente cites N.M. Stat. Ann. § 52-12-7(D)-(E) and not
the UIPA. See Complaint ¶ 24, at 4-5. N.M. Stat. Ann. § 52-12-7(D)-(E) does not exist,
however, and the Complaint quotes the UIPA. See Complaint ¶ 23, at 4; N.M. Stat. Ann. § 59A12-20. Demente, moreover, cites the UIPA when responding to the MTD and treats his claim as
a UIPA claim. See MTD Response at 5. The Court, therefore, concludes that Demente alleges a
UIPA claim.
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1329-CV-2016-00743 (Thirteenth Judicial District Court, County of Sandoval, State of New
Mexico), filed in federal court on April 5, 2017 (Doc. 11).
Dunn-Gross subsequently moved to dismiss Demente’s claim for insufficiency of service
of process. See Defendant Derica Dunn-Gross’s Motion to Dismiss for Insufficiency of Service
of Process, filed November 14, 2016, in Demente v. Dilucente, D-1329-CV-2016-00743
(Thirteenth Judicial District Court, County of Sandoval, State of New Mexico), filed in federal
court on April 5, 2017 (Doc. 11)(“Dunn-Gross MTD”). Dunn-Gross argues that, under the New
Mexico Rules of Civil Procedure, Demente failed to properly serve her, because: (i) Demente did
not serve her at a location where she was found after she had refused to accept service
personally; (ii) Demente did not serve her at her home; (iii) Demente did not mail her a copy of
the summons and complaint via first class mail to her home or to her workplace; and
(iv) Demente’s attempt to serve her through an executive secretary at GEICO Insurance was
insufficient, because GEICO Insurance’s executive secretary was not authorized to accept
service on Dunn-Gross’ behalf. See Dunn-Gross MTD at 3.
After Dunn-Gross filed the Dunn-Gross MTD, Demente settled his negligence claims
against the Dilucentes. See MTD ¶ 6, at 2. The state court dismissed those claims with
prejudice, but left unresolved those “claims filed against Geico General Insurance Company in
relation to . . . insurance bad faith, unfair trade practices, unfair insurance practices, and punitive
damages.” Stipulated Order of Partial Dismissal With Prejudice at 1, filed February 24, 2017, in
Demente v. Dilucente, D-1329-CV-2016-00743 (Thirteenth Judicial District Court, County of
Sandoval, State of New Mexico), filed in federal court on April 5, 2017 (Doc. 11)(“State
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Order”). GEICO Insurance subsequently removed the case to federal court. See Notice of
Removal at 1, filed March 8, 2017 (Doc. 1)(“Notice of Removal”).2
1.
Service of Process MTD.
Dunn-Gross argues that Demente’s attempt to serve her after removal is defective, so the
Court lacks personal jurisdiction over her. See Service of Process MTD at 3. She contends that
the summons is defective in five ways. See Service of Process MTD at 3-4. First, the summons
did not contain the federal court’s name.
See Service of Process MTD at 3-4 (citing
Fed. R. Civ. P. 4(a)(1)(A); Fed. R. Civ. P. 12(b)(4)). Second, the summons does not refer to the
2
GEICO Insurance removed on the basis of diversity jurisdiction. See Notice of Removal
at 1.
The Court notes, however, that the Notice of Removal does not allege Dunn-Gross’
citizenship. See Notice of Removal ¶ 7, at 2. GEICO Insurance implies that it need not
demonstrate Dunn-Gross’ citizenship for diversity purposes, because she has not received proper
service, so she is no longer a party. See Notice of Removal ¶ 11, at 2 (“As Defendant has
accepted service and is the only remaining Defendant in the matter. . .”). As an initial matter,
that a defendant has moved to dismiss for lack of proper service does not mean that the
defendant is not a party for diversity jurisdiction purposes. Rule 12(b)(4)’s language
demonstrates that only a party may move for insufficient process. See Fed. R. Civ.
P. 12(b)(4)(“[A] party may assert the following defenses by motion: . . . insufficient process”).
Thus, Dunn-Gross is and remains a party until the Court dismisses her as a party. Moreover, as
explained below, the Court does not dismiss Dunn-Gross as a party for lack of proper service.
Accordingly, GEICO Insurance, as the moving party, must demonstrate that 28 U.S.C. § 1332(a)
is satisfied. See Middleton v. Stephenson, 749 F.3d 1197, 1200 (10th Cir. 2014).
The Court notes that the parties have not contested diversity. The Court also notes that
the Complaint alleges that Dunn-Gross is a resident of California. See Complaint ¶ 5, at 2. Such
an allegation, however, does not satisfy the diversity jurisdiction requirements absent additional
evidence. See Siloam Springs Hotel, LLC v. Century Sur. Co., 781 F.3d 1233, 1238 (10th Cir.
2015). Although Dunn-Gross return of service documentation suggests that Dunn-Gross
residence may be in Texas, see Return at 1-3, filed May 16, 2017 (Doc. 17-8), the Court cannot
consider that evidence for diversity jurisdiction purposes either, U.S. for Use & Benefit of
General Rock & Sand Corporation v. Chuska Development Corporation, 55 F.3d 1491, 1496
(10th Cir. 1995)(“[J]urisdiction must be determined from the face of the pleading and not from
returns of service of process or lack thereof.”).
As such, the Court will not enter final judgment until it is satisfied that it has subjectmatter jurisdiction. The Court orders, thus, that, within ten days of the date of this Memorandum
Opinion and Order, GEICO Insurance shall show cause why the Court should not remand this
action to the Thirteenth Judicial District, County of Sandoval, State of New Mexico, for lack of
jurisdiction.
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Federal Rules of Civil Procedure. See Service of Process MTD at 4. Third, it does not contain
the time that Dunn-Gross needs to appear to defend herself. See Service of Process MTD at 4.
Fourth, the summons does not bear the District of New Mexico’s seal. See Service of Process
MTD at 4. Fifth, and finally, the Clerk of the Court did not sign the summons. See Service of
Process MTD at 4.
Dunn-Gross also argues that the Court should dismiss the Complaint, because DunnGross was not served within ninety days of the Complaint’s filing. See Service of Process MTD
at 4 (citing Fed. R. Civ. P. 4(m)). According to Dunn-Gross, Demente first attempted to serve
Dunn-Gross five months after he filed the Complaint -- albeit, while the Complaint was pending
in state court -- and then attempted to serve Dunn-Gross once the case was removed to federal
court -- eleven months after he filed his Complaint. See Service of Process MTD at 4. DunnGross concludes that Demente has not shown good cause for his delay in serving Dunn-Gross, so
the Court should dismiss the Complaint. See Service of Process MTD at 4-5.
2.
MTD.
GEICO Insurance argues that the Court should dismiss the UIPA claims, because, under
Hovet v. Allstate, 2004-NMSC-010, ¶ 26, 89 P.3d 69, 76-77, a third party claimant does not have
a cause of action under N.M. Stat. Ann. 59A-16-20 “unless and until there has been a judicial
determination of the insured’s fault.” MTD at 4. According to GEICO Insurance, Hovet v.
Allstate precludes Demente’s claim, because “the parties settled.” MTD at 4 (citing Hovet v.
Allstate, 2004-NMSC-010, ¶ 26, 89 P.3d at 76-77). Moreover, according to GEICO Insurance,
the claim is precluded, because Demente stipulated to dismissal of those claims before a judicial
determination of A. Dilucente’s fault. See MTD at 5.
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3.
MTD Response.
Demente responds to the MTD. See Plaintiff’s Response to Defendant’s Geico’s Motion
to Dismiss with Prejudice Under Rule 12(b) and Request that Defendant be Compelled to
Comply with the Terms of the Order it Submitted on September 7, 2016 for Bifurcation and Stay
in the Thirteenth Judicial District Court (Document No. 13) at 1, filed May 12, 2017
(Doc. 15)(“MTD Response”). Demente argues that GEICO Insurance is liable under N.M. Stat.
Ann. § 59A-16-20, which requires insurers to “attempt in good faith to effectuate prompt, fair
and equitable settlements of an insured’s claims in which liability has become reasonably clear.”
MTD Response at 5 (citing N.M. Stat. Ann. § 59A-16-20(E)). Demente contends that he has a
statutory right to sue for damages if an insurer violates N.M. Stat. Ann. § 59A-16-20(E). See
MTD Response at 5-6 (citing N.M. Stat. Ann. § 59A-16-30).
Demente adds that these laws’
purposes are to “protect[] innocent accident victims from financial hardship.” MTD Response at
7-8 (citing Estep v. State Farm Mutual Automobile Insurance Co., 1985-NMSC-069, ¶ 17, 703
P.2d 882, 887).
Demente concedes that a “third-party claimant will not even have an action under Section
59A-16-20(E), unless and until there has been a judicial determination of the insured’s fault and
the amount of damages awarded in the underlying negligence action.” MTD Response at 9. He
argues, however, that the Court should enforce GEICO Insurance’s Stay and Bifurcation motion.
See MTD Response at 10. Demente argues that, by enforcing that Stay and Bifurcation motion,
GEICO Insurance will remain liable under N.M. Stat. Ann. § 59A-16-20(E).
See MTD
Response at 10-12. Demente concludes that GEICO Insurance’s attorney should be sanctioned
or, at least, “chastised” for their “frivolous defense.” MTD Response at 12.
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4.
Service of Process MTD Response.
Demente also responds to Dunn-Gross’ Service of Process MTD.
See Plaintiff’s
Response to Defendant Dunn-Gross’ Motion to Dismiss for Insufficient Process (Document No.
12), filed May 16, 2017 (Doc. 17)(“Service of Process MTD Response”). Demente argues that
Dunn-Gross was aware of the lawsuit “as early as March, 2016,” and was served not once, but
four different times before GEICO Insurance removed the case to federal court. Service of
Process MTD Response at 1. He argues that the process served on Dunn-Gross satisfies the New
Mexico Rules of Civil Procedure. See Service of Process Response at 5 (citing N.M. Rules Ann.
1-004). First, he argues that process was proper, because it included the court’s name, where he
brought the action, the county, the docket number, the names of the parties, and the names of the
person to whom process is directed. See Service of Process Response at 5 (citing N.M. Rules
Ann. 1-004(A)-(B)). Second, he argues that service was made by mail and in person upon
someone who was authorized to accept service. See Service of Process Response at 5. Third,
Demente argues that he served Dunn-Gross several times “at her usual place of abode.” Service
of Process MTD Response at 6. He contends that, because Dunn-Gross has a “mobile lifestyle
and can be found in multiple locations,” serving her in many locations satisfies New Mexico’s
service of process rules. Service of Process MTD Response at 6. Demente concludes that DunnGross “has been dodging service,” and he asks the Court to deny the Service of Process MTD
and award fees. Service of Process MTD Response at 6.
5.
MTD Reply.
GEICO Insurance replies. See Reply in Support of Motion to Dismiss with Prejudice
Under Rule 12(b)(6), filed May 23, 2017 (Doc. 18)(“MTD Reply”). It reiterates its argument
that Demente’s UIPA claims fail, because there was no judicial determination of fault in the
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underlying negligence case against the Dilucentes. See Reply at 2-4. GEICO Insurance also
argues that its payment of the entire available policy limit does not amount to a judicial fault
determination. See Reply at 5. It concludes that Hovet v. Allstate Inc. Co., 2004-NMSC-010,
¶ 26 89 P.3d 69, 76-77 dictates that the Court should dismiss the Complaint. See Reply at 6.
6. Service of Process Reply.
Dunn-Gross replies. See Defendant Derica Dunn-Gross’ Reply in Support of Her Second
Motion to Dismiss for Insufficient Process, filed June 9, 2017 (Doc. 20)(“Service of Process
Reply”). Dunn-Gross argues that Demente did not respond to any of her arguments. See Service
of Process Reply at 1. She contends that there is no dispute that Demente attempted to serve her
on March 31, 2017, but that the summons did not comply with the Federal Rules of Civil
Procedure. See Service of Process Reply at 1-2. She adds that Demente did not argue that there
was good cause for an extension under rule 4(m), so the Court should not allow Demente to
amend his summons. See Service of Process Reply at 2-3. Dunn-Gross concludes that, for the
foregoing reasons, the Court should dismiss Demente’s Complaint. See Service of Process
Reply at 3.
7.
The Hearing.
The Court held a hearing. See Draft Transcript of Motion Proceedings (taken July 27,
2017)(“Tr.”).3 Dunn-Gross first argued that service on her was improper. See Tr. at 3:5-12
(Lewis). She argued that, while the case was still pending in state court, service “was attempted
at [Dunn-Gross’] place of employment in Richardson, Texas,” Tr. at 3:10-11 (Lewis), and, in
response to that service, Dunn-Gross filed a motion “point[ing] out the defects” in service, Tr. at
3:18-19 (Lewis). According to Dunn-Gross, the New Mexico rules allow for service of process
3
The Court’s citations to the hearing transcript refer to the court reporter’s original,
unedited version. Any final transcript may contain slightly different page and/or line numbers.
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on a person’s place of employment, “but only after two other attempts or kinds of service have
been attempted.” Tr. at 3:24-4:3 (Lewis). Dunn-Gross then argues that the service attempted at
her place of employment was also defective, because it was served on a Laura Hernandez -- a
GEICO Insurance executive secretary -- who was not authorized to accept service for DunnGross; according to Dunn-Gross, Hernandez told the process server that she was not authorized
to accept for Dunn-Gross. See Tr. at 4:11-24 (Lewis).
Dunn-Gross also argued that the attempt to serve her after the case was removed to
federal court is also defective. See Tr. at 5:11-13 (Lewis). Dunn-Gross conceded that she was
served the second time at her home, see Tr. at 5:10-11 (Lewis), but contended that this service
was defective, because the summons did not “put her on notice in any way, shape, or form that
the matter is pending in this court,” Tr. at 6:1-3 (Lewis). Dunn-Gross pressed, however, that
“notice is not simply the test. Because that’s essentially what plaintiff argues in the response.”
Tr. at 6:5-7 (Lewis).
Instead, Dunn-Gross argued, “technical compliance with rule 4 is
required.” Tr. at 6:8-9 (Lewis). Dunn-Gross also contended that the service of process’ timing
is defective, see Tr. at 7:11-13 (Lewis), but she conceded that “maybe the removal complicates
that somewhat,” Tr. at 7:13-14 (Lewis).
Despite those arguments, Dunn-Gross conceded that “the court[] has discretion to give
plaintiff a time period in which to effect proper service,” Tr. at 10:5-7 (Lewis), and agreed that
she did not have an issue with the Court setting a time for Demente to serve Dunn-Gross, see Tr.
at 10:16-11:1 (Lewis)(“[If] the court in its discretion wants to give a reasonable time period for
them to effect proper service, . . . that’s certainly allowable and I wouldn’t object to that.”).
Dunn-Gross suggested twenty or twenty-one days as a reasonable time frame. See Tr. at 11:5-7
(Lewis).
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Demente asserted that service of process was properly executed, but did not see “any
reason to waste more time on this.” Tr. at 11:21-22 (Lyle). Demente proposed a sixty day
window to re-execute proper service. See Tr. at 11:25-12:1 (Lyle). The Court, accordingly gave
the “plaintiff 60 days” to properly serve Dunn-Gross. Tr. at 13:15-17 (Court).
GEICO Insurance then argued the MTD. See Tr. at 14:5 (Singer). It reiterated its
argument that the Court should dismiss Demente’s UIPA claim, because “plaintiff has failed to
obtain a judicial determination of liability.” Tr. at 14:8-10 (Singer). GEICO Insurance contends
that the State Order dismissing Demente’s negligence claims against the Dilucentes did not
“indicate[] that a determination of liability or fault had been reached.” Tr. at 15:12-15 (Singer).
According to GEICO Insurance, Demente’s “claim did not become ripe nor will they ever do so
because plaintiff chose to settle rather than litigate his claims.” Tr. at 16:1-3 (Singer). DunnGross added that, although she had not yet been served, “as a practical effect, your ruling on this
would have the same [ef]fect on her.” Tr. at 18:25-19:3 (Lewis).
The Court asked whether there was “any way to settle with a judicial determination or do
you have to go to a jury trial.”
Tr. at 22:8-10 (Court).
Dunn-Gross mused that it was
“conceivable,” but expressed that she is not sure why an “insurance company would agree to do
that.” Tr. at 22:13-16 (Lewis). She argued that an insurance company’s motivation for settling
would be to “avoid this very kind of claim.” Tr. at 22:16-20 (Lewis). She argued that, for the
Stay and Bifurcation Motion to have the effect of keeping the UIPA claims alive, the State Order
dismissing the negligence claims would need explicit language to that effect. See Tr. at 23:1624:1(Lewis).
Demente rejoined that “[w]hat makes this situation unique is that GEICO . . . set the rules
as to how things would happen. GEICO . . . drafted the orders that were approved in the state
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district court.” Tr. at 26:4-9 (Lyle). He contended that this situation is “not addressed in any
New Mexico case law,” and, therefore, that New Mexico precedent does not bind the Court. Tr.
at 26:10-13. According to Demente, GEICO Insurance’s low settlement offer is exactly why the
“Insurance Practices Act” exists. Tr. at 29:7-8 (Lyle). Demente also argued that the Court could
hold an evidentiary hearing on whether there was fault, so that the claims could proceed against
GEICO Insurance. See Tr. at 29:21-30:8 (Lyle). Demente conceded again, as he did in his MTD
Response, see MTD Response at 9, that there must be a judicial determination of fault before a
plaintiff may proceed on an UIPA claim, see Tr. at 30:18 (Lyle), but reiterated that GEICO
Insurance’s control over the State Order dismissing Demente’s claims allows Demente to
proceed with his UIPA claim, see Tr. at 30:21-31:5 (Lyle). Demente also argued that New
Mexico caselaw does not bind the Court, because GEICO Insurance had settled for the policy
limits. See Tr. 33:13-18 (Lyle). Responding to whether the Court should dismiss Dunn-Gross
on the same grounds if the Court dismisses GEICO Insurance, Demente noted that “it would
seem to make se[nse], but there may be some other considerations.” Tr. at 41:15-16 (Lyle). The
Court concluded by signaling its inclination to dismiss the UIPA claims. See Tr. at 43:2-4
(Court).
LAW REGARDING RULE 12(B)(6)
Rule 12(b)(6) of the Federal Rules of Civil Procedure authorizes a court to dismiss a
complaint for “failure to state a claim upon which relief can be granted.” Fed. R. Civ. P.
12(b)(6). “The nature of a Rule 12(b)(6) motion tests the sufficiency of the allegations within
the four corners of the complaint after taking those allegations as true.” Mobley v. McCormick,
40 F.3d 337, 340 (10th Cir. 1994). The Complaint’s sufficiency is a question of law, and, when
considering a rule 12(b)(6) motion, a court must accept as true all well-pled factual allegations in
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the complaint, view those allegations in the light most favorable to the nonmoving party, and
draw all reasonable inferences in the plaintiff’s favor. See Tellabs, Inc. v. Makor Issues &
Rights, Ltd., 551 U.S. 308, 322 (2007)(“[O]nly if a reasonable person could not draw . . . an
inference [of plausibility] from the alleged facts would the defendant prevail on a motion to
dismiss.”); Smith v. United States, 561 F.3d 1090, 1098 (10th Cir. 2009)(“[F]or purposes of
resolving a Rule 12(b)(6) motion, we accept as true all well-pled factual allegations in a
complaint and view these allegations in the light most favorable to the plaintiff.”)(citing Moore
v. Guthrie, 438 F.3d 1036, 1039 (10th Cir. 2006)).
A complaint need not set forth detailed factual allegations, yet a “pleading that offers
labels and conclusions or a formulaic recitation of the elements of a cause of action” is
insufficient. Ashcroft v. Iqbal, 556 U.S. at 678 (2009)(citing Bell Atl. Corp. v. Twombly, 550
U.S. at 555). “Threadbare recitals of the elements of a cause of action, supported by mere
conclusory statements, do not suffice.” Ashcroft v. Iqbal, 556 U.S. at 678. “Factual allegations
must be enough to raise a right to relief above the speculative level, on the assumption that all
the allegations in the complaint are true (even if doubtful in fact).” Bell Atl. Corp. v. Twombly,
550 U.S. at 555.
To survive a motion to dismiss, a plaintiff’s complaint must contain sufficient facts that,
if assumed to be true, state a claim to relief that is plausible on its face. See Bell Atl. Corp. v.
Twombly, 550 U.S. at 570; Mink v. Knox, 613 F.3d 995, 1000 (10th Cir. 2010). “A claim has
facial plausibility when the pleaded factual content allows the court to draw the reasonable
inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. at
678 (citing Bell Atl. Corp. v. Twombly, 550 U.S. at 556). “Thus, the mere metaphysical
possibility that some plaintiff could prove some set of facts in support of the pleaded claims is
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insufficient; the complainant must give the court reason to believe that this plaintiff has a
reasonable likelihood of mustering factual support for these claims.” Ridge at Red Hawk, LLC
v. Schneider, 493 F.3d 1174, 1177 (10th Cir. 2007)(emphasis omitted). The United States Court
of Appeals for the Tenth Circuit has stated:
“[P]lausibility” in this context must refer to the scope of the allegations in a
complaint: if they are so general that they encompass a wide swath of conduct,
much of it innocent, then the plaintiffs “have not nudged their claims across the
line from conceivable to plausible.” The allegations must be enough that, if
assumed to be true, the plaintiff plausibly (not just speculatively) has a claim for
relief.
Robbins v. Oklahoma, 519 F.3d 1242, 1247 (10th Cir. 2008)(citations omitted)(quoting Bell Atl.
Corp. v. Twombly, 550 U.S. at 570). See Gallegos v. Bernalillo Cty. Board of Cty. Comm’rs, __
F. Supp. 3d __, 2017 WL 4402422, at *9 (D.N.M. 2017)(Browning, J.).
“When a party presents matters outside of the pleadings for consideration, as a general
rule ‘the court must either exclude the material or treat the motion as one for summary
judgment.’” Brokers’ Choice of America, Inc. v. NBC Universal, Inc., 861 F.3d 1081, 1103
(10th Cir. 2017)(quoting Alexander v. Oklahoma, 382 F.3d 1206, 1214 (10th Cir. 2004)). There
are three limited exceptions to this general principle: (i) documents that the complaint
incorporates by reference, see Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322
(2007); (ii) “documents referred to in the complaint if the documents are central to the plaintiff’s
claim and the parties do not dispute the documents’ authenticity,” Jacobsen v. Deseret Book Co.,
287 F.3d at 941; and (iii) “matters of which a court may take judicial notice,” Tellabs, Inc. v.
Makor Issues & Rights, Ltd. 551 U.S. at 322. See also Brokers’ Choice of America, Inc. v. NBC
Universal, Inc., 861 F.3d at 1103 (holding that the district court did not err by reviewing a
seminar recording and a TV episode on a rule 12(b)(6) motion, which were “attached to or
referenced in the amended complaint,” central to the plaintiff’s claim, and “undisputed as to their
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accuracy and authenticity”). “[T]he court is permitted to take judicial notice of its own files and
records, as well as facts which are a matter of public record.” Van Woudenberg v. Gibson, 211
F.3d 560, 568 (10th Cir. 2000), abrogated on other grounds by McGregor v. Gibson, 248 F.3d
946, 955 (10th Cir. 2001).
In Gee v. Pacheco, 627 F.3d 1178 (10th Cir. 2010), the defendants “supported their
motion with numerous documents, and the district court cited portions of those motions in
granting the [motion to dismiss].” 627 F.3d at 1186. The Tenth Circuit held that “[s]uch
reliance was improper” and that, even if “the district court did not err initially in reviewing the
materials, the court improperly relied on them to refute Mr. Gee’s factual assertions and
effectively convert the motion to one for summary judgment.” 627 F.3d at 1186-87. In other
cases, the Tenth Circuit has emphasized that, “[b]ecause the district court considered facts
outside of the complaint, however, it is clear that the district court dismissed the claim under
Rule 56(c) and not Rule 12(b)(6).” Nard v. City of Okla. City, 153 F. App’x 529, 534 n.4 (10th
Cir. 2005)(unpublished).4
In Douglas v. Norton, 167 F. App’x 698 (10th Cir.
2006)(unpublished), the Tenth Circuit addressed an untimely filed charge with the Equal
Employment Opportunity Commission -- which the Tenth Circuit analogized to a statute of
4
Nard v. City of Okla. City is an unpublished Tenth Circuit opinion, but the Court can
rely on an unpublished Tenth Circuit opinion to the extent its reasoned analysis is persuasive in
the case before it. See 10th Cir. R. 32.1(A), 28 U.S.C. (“Unpublished opinions are not
precedential, but may be cited for their persuasive value.”). The Tenth Circuit has stated: “In this
circuit, unpublished orders are not binding precedent, . . . and . . . citation to unpublished
opinions is not favored. . . . However, if an unpublished opinion . . . has persuasive value with
respect to a material issue in a case and would assist the court in its disposition, we allow a
citation to that decision.” United States v. Austin, 426 F.3d 1266, 1274 (10th Cir. 2005). The
Court concludes that Nard v. City of Okla. City, Smyers v. County of Atchison, Kan., Palzer v.
Cox Oklahoma Telecom, LLC, and Douglas v. Norton have persuasive value with respect to a
material issue, and will assist the Court in its preparation of this Memorandum Opinion and
Order.
- 15 -
limitations -- and concluded that, because the requirement was not jurisdictional, the district
court should have analyzed the question under rule 12(b)(6), and “because the district court
considered evidentiary materials outside of Douglas’ complaint, it should have treated Norton’s
motion as a motion for summary judgment.” 167 F. App’x at 704-05.
The Court has previously ruled that, when a plaintiff references and summarizes
statements from defendants in a complaint for the purpose of refuting the statements the Court
cannot rely on documents the defendants attach to a motion to dismiss which contain their unredacted statements. See Mocek v. City of Albuquerque, No. Civ. 11-1009, 2013 WL 312881, at
*50-51 (D.N.M. Jan. 14, 2013)(Browning, J.). The Court reasoned that the statements were
neither incorporated by reference nor central to the plaintiff’s allegations in the complaint,
because the plaintiff cited the statements only to attack their reliability and truthfulness. See
2013 WL 312881, at *50-51. The Court has also previously ruled that, when determining
whether to toll a statute of limitations in an action alleging fraud and seeking subrogation from a
defendant, the Court may not use interviews and letters attached to a motion to dismiss, which
show that a plaintiff was aware of the defendant’s alleged fraud before the statutory period
expired. See Great Am. Co. v. Crabtree, No. 11-1129, 2012 WL 3656500, at *3, *22-23
(D.N.M. Aug. 23, 2012)(Browning, J.). The Court determined that the documents did not fall
within any of the Tenth Circuit’s exceptions to the general rule that a complaint must rest on the
sufficiency of its contents alone, as the complaint did not incorporate the documents by reference
or refer to the documents. See 2012 WL 3656500, at *22-23; Mocek v. City of Albuquerque,
2013 WL 312881, at *50 (refusing to consider statements that were not “central to [the
plaintiff’s] claims”).
- 16 -
On the other hand, in a securities class action, the Court has ruled that a defendant’s
operating certification, to which plaintiffs refer in their complaint, and which is central to
whether the plaintiffs’ adequately alleged a loss, falls within an exception to the general rule, so
the Court may consider the operating certification when ruling on the defendant’s motion to
dismiss without converting the motion into one for summary judgment.
See Genesee Cty.
Emps.’ Retirement Sys. v. Thornburg Mortg. Secs. Trust 2006–3, 825 F. Supp. 2d 1082, 1150-51
(D.N.M. 2011)(Browning, J.); Mata v. Anderson, 760 F. Supp. 2d 1068, 1101 (D.N.M.
2009)(Browning, J.)(relying on documents outside of the complaint because they were
“documents that a court can appropriately view as either part of the public record, or as
documents upon which the Complaint relies, and the authenticity of which is not in dispute”);
S.E.C. v. Goldstone, 952 F. Supp. 2d 1060, 1217-18 (D.N.M. 2013)(Browning, J.)(considering,
on a motion to dismiss, electronic mail transmissions referenced in the complaint as “documents
referred to in the complaint,” which are “central to the plaintiff’s claim” and whose authenticity
the plaintiff did not challenge).
LAW REGARDING JUDICIAL NOTICE OF DOCUMENTS WHEN RULING ON A
MOTION TO DISMISS
Rule 201 of the Federal Rules of Evidence allows a court to, at any stage of the
proceeding, take notice of “adjudicative” facts that fall into one of two categories: (i) facts that
are “generally known within the territorial jurisdiction of the trial court”; or (ii) facts that are
“capable of accurate and ready determination by resort to sources whose accuracy cannot
reasonably be questioned.” Fed. R. Evid. 201(b), (f). “Adjudicative facts are simply the facts of
the particular case.” United States v. Wolny, 133 F.3d 758, 764 (10th Cir. 1998)(quoting
Advisory Committee Notes to rule 201). A court has discretion to take judicial notice of such
facts, regardless whether requested. See Fed. R. Evid. 201(c). On the other hand, if a party
- 17 -
requests that the court take judicial notice of certain facts, and supplies the necessary information
to the court, judicial notice is mandatory. See Fed. R. Evid. 201(d). Also, if the parties timely
request an opportunity to be heard, the Court must grant such an opportunity “as to the propriety
of taking judicial notice and the tenor of the matter noticed.” Fed. R. Evid. 201(e). That judicial
notice may be taken during any stage of the judicial proceeding includes the motion to dismiss
stage. See 21 B C. Wright & K. Graham, Jr., Fed. Prac. & Proc. Evid. § 5110, at 294 & n.17 (2d
ed. 2005). Moreover, while ordinarily a motion to dismiss must be converted to a motion for
summary judgment when the court considers matters outside the complaint, see Fed. R. Civ. P.
12(d), matters that are judicially noticeable do not have that effect, see Duprey v. Twelfth
Judicial Dist. Court, No. 08–0756, 2009 WL 2482171, at *7 (D.N.M. July 27,
2009)(Browning, J.)(citing Grynberg v. Koch Gateway Pipeline Co., 390 F.3d 1276, 1279 n.1
(10th Cir. 2004)). Also, when considering a motion to dismiss, “the court is permitted to take
judicial notice of its own files and records, as well as facts which are a matter of public record.”
Van Woudenberg v. Gibson, 211 F.3d 560, 568 (10th Cir. 2000), abrogated on other grounds by,
McGregor v. Gibson, 248 F.3d 946, 955 (10th Cir. 2001). The documents judicially noticed,
however, should not be considered for the truth of the matters asserted therein. See Tal v.
Hogan, 453 F.3d 1244, 1265 n.24 (10th Cir. 2006). The Court has previously judicially noticed
news publications and public filings with the Securities and Exchange Commission. See S.E.C.
v. Goldstone, 952 F. Supp. 2d at 1219-20; In re Thornburg Mortg., Inc. Securities Litig., 2009
WL 5851089, at *3-4.
See also Gallegos v. Bernalillo Cty. Bd. of Cty. Comm’rs,
__ F. Supp. 3d __, 2017 WL 4402422, at *18-19 (D.N.M. 2017)(Browning, J.)(ruling that the
Court may take judicial notice of state court orders); A.M ex rel. Youngers v. New Mexico Dep’t
of Health, 117 F. Supp. 3d 1220, 1232 n.6 (D.N.M. 2015)(Browning, J.).
- 18 -
LAW REGARDING SERVICE OF PROCESS
Under rule 4(a) the contents of a summons must include:
(A)
name the court and the parties;
(B)
be directed to the defendant;
(C)
state the name and address of the plaintiff’s attorney or -- if
unrepresented -- of the plaintiff;
(D)
state the time within which the defendant must appear and defend;
(E)
notify the defendant that a failure to appear and defend will result in a
default judgment against the defendant for the relief demanded in the
complaint;
(F)
be signed by the clerk; and
(G)
bear the court’s seal.
Fed. R. Civ. P. 4(a)(1)(A)-(G)
Rule 4(m) provides:
If a defendant is not served within 90 days after the complaint is filed, the court -on motion or on its own after notice to the plaintiff -- must dismiss the action
without prejudice against that defendant or order that service be made within a
specific time. But, if the plaintiff shows good cause for the failure, the court must
extend the time for service for an appropriate period.
Fed. R. Civ. P. 4(m). The burden of establishing service’s validity is on the plaintiff. See
F.D.I.C. v. Oaklawn Apartments, 959 F.2d 170, 174 (10th Cir. 1992). In 1993, Congress
amended former rule 4(m) and “broaden[ed] the district court’s discretion [to permit untimely
service of process] by allowing it to extend the time for service even when the plaintiff has not
shown good cause.” Espinoza v. United States, 52 F.3d 838, 840-41 (10th Cir. 1995).
“A district court abuses its discretion [in deciding whether to dismiss a case for untimely
service of process] if its decision is arbitrary, capricious, or whimsical.” Smyers v. County of
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Atchison, Kan., 336 F. App’x 819, 820-21 (10th Cir. 2009)(unpublished). Further, “[a] district
court that does not exercise its discretion, or makes a decision without providing reasons, abuses
that discretion.” ARW Exploration Corp. v. Aguirre, 45 F.3d 1455, 1459 (10th Cir. 1995).
Thus, Tenth Circuit district courts now employs a two-step analysis for determining
whether an extension of time should be granted when a summons and complaint has not been
timely served. First, the plaintiff is entitled to a mandatory extension of time if the plaintiff can
demonstrate good cause for failing to timely effect service. See Espinoza v. United States, 52
F.3d at 841. “The good cause provision of Rule 4[(m)] should be read narrowly to protect only
those plaintiffs who have been meticulous in their efforts to comply with the Rule.” Despain v.
Salt Lake Area Metro Gang Unit, 13 F.3d 1436, 1438 (10th Cir. 1994). “[I]nadvertence or
negligence alone do not constitute ‘good cause’ for failure of timely service. Mistake of counsel
or ignorance of the rules also usually do not suffice.” In re Kirkland, 86 F.3d 172, 176 (10th Cir.
1996). Avoiding or evading service of process, however, may constitute “good cause,” requiring
a mandatory extension of time in which to serve. Hendry v. Schneider, 116 F.3d 446, 449 (10th
Cir. 1997).
Second, if the plaintiff fails to show good cause, the court still must exercise its
discretion, and either dismiss the case without prejudice or extend the time for service. See
Espinoza v. United States, 52 F.3d at 842. In making its determination whether to grant a
permissive extension, the Court may consider several factors, including whether the applicable
statute of limitations would bar the re-filed action and other policy considerations. See Espinoza
v. United States, 52 F.3d at 841-42.
The new subdivision explicitly provides that the court shall allow additional time
if there is good cause for the plaintiff’s failure to effect service in the prescribed
[90] days, and authorizes the court to relieve a plaintiff of the consequences of an
application of this subdivision even if there is no good cause shown. Such relief
- 20 -
formerly was afforded in some cases, partly in reliance on Rule 6(b). Relief may
be justified, for example, if the applicable statute of limitations would bar the
refiled action, or if the defendant is evading service or conceals a defect in
attempted service.
Fed. R. Civ. P. 4(m) Advisory Committee’s note (1993 Amendment). The Court has previously
granted a permissive extension of time to effect service of process when the party to be served
had a copy of the complaint, had actual notice of the lawsuit, had attempted to avoid proper
service, and was not prejudiced by late service of the original complaint. See Salazar v. City of
Albuquerque, 278 F.R.D. 623, 628 (D.N.M. 2011)(Browning, J.). See also Mata v. Anderson,
760 F. Supp. 2d 1068, 1098 (D.N.M. 2009)(Browning, J.)(ruling that it would extend the time
for service of process, because “[t]he delay was not inordinate, prejudicial, or intentional, and the
First Amended Complaint has been served.”).
LAW REGARDING THE UIPA
The New Mexico Legislature passed the UIPA, N.M. Stat. Ann. § 59A-16-20, “to
regulate trade practices in the insurance business and related businesses,” including “practices in
this state which constitute unfair methods of competition or unfair or deceptive acts or
practices.”
N.M. Stat. Ann. § 59A-16-2.
N.M. Stat. Ann. § 59A-16-4 proscribes certain
misrepresentations that relate to insurance transactions, including “misrepresent[ing] the
benefits, advantages, conditions or terms of any policy.” N.M. Stat. Ann. § 59A-16-4. N.M.
Stat. Ann. § 59A-16-5 forbids “untrue, deceptive or misleading” advertisements that relate to
insurance. N.M. Stat. Ann. § 59A-16-5. N.M. Stat. Ann. § 59A-16-8 makes actionable certain
falsifications of insurance records and the circulation of “any false statement of the financial
condition of an insurer.” Various provisions in the UIPA proscribe discrimination in relation to
insurance transactions. See, e.g., N.M. Stat. Ann. §§ 59A-16-11 to - 13.2. N.M. Stat. Ann.
§ 59A-16-19 prohibits anti-competitive insurance practices “resulting or tending to result in
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unreasonable restraint of, or monopoly in, the business of insurance.” N.M. Stat. Ann. § 59A16-19.
The UIPA imposes liability for a laundry list of unfair insurance claims practices,
including the following:
A.
misrepresenting to insureds pertinent facts or policy provisions relating to
coverages at issue;
B.
failing to acknowledge and act reasonably promptly upon communications
with respect to claims from insureds arising under policies;
C.
failing to adopt and implement reasonable standards for the prompt
investigation and processing of insureds’ claims arising under policies;
D.
failing to affirm or deny coverage of claims of insureds within a
reasonable time after proof of loss requirements under the policy have
been completed and submitted by the insured;
E.
not attempting in good faith to effectuate prompt, fair and equitable
settlements of an insured’s claims in which liability has become
reasonably clear;
F.
failing to settle all catastrophic claims within a ninety-day period after the
assignment of a catastrophic claim number when a catastrophic loss has
been declared;
G.
compelling insureds to institute litigation to recover amounts due under
policy by offering substantially less than the amounts ultimately recovered
in actions brought by such insureds when such insureds have made claims
for amounts reasonably similar to amounts ultimately recovered;
H.
attempting to settle a claim by an insured for less than the amount to
which a reasonable person would have believed he was entitled by
reference to written or printed advertising material accompanying or made
part of an application;
I.
attempting to settle claims on the basis of an application that was altered
without notice to, or knowledge or consent of, the insured, his
representative, agent or broker;
J.
failing, after payment of a claim, to inform insureds or beneficiaries, upon
request by them, of the coverage under which payment has been made;
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K.
making known to insureds or claimants a practice of insurer of appealing
from arbitration awards in favor of insureds or claimants for the purpose
of compelling them to accept settlements or compromises less than the
amount awarded in arbitration;
L.
delaying the investigation or payment of claims by requiring an insured,
claimant or the physician of either to submit a preliminary claim report
and then requiring the subsequent submission of formal proof of loss
forms, both of which submissions contain substantially the same
information;
M.
failing to settle an insured’s claims promptly where liability has become
apparent under one portion of the policy coverage in order to influence
settlement under other portions of the policy coverage;
N.
failing to promptly provide an insured a reasonable explanation of the
basis relied on in the policy in relation to the facts or applicable law for
denial of a claim or for the offer of a compromise settlement; or
O.
violating a provision of the Domestic Abuse Insurance Protection Act.
N.M. Stat. Ann. § 59A-16-20. N.M. Stat. Ann. § 59A-16-30 provides a cause of action for UIPA
violations and allows attorney’s fees for prevailing parties. See N.M. Stat. Ann. § 59A-16-30.
The Honorable Bruce D. Black, United States District Judge for the District of New Mexico, has
concluded that a plaintiff failed to plausibly plead a UIPA claim:
Dr. Yumukoglu alleges generally that Provident’s conduct “violates one or more
of the provisions of Section 59A-16-20 NMSA 1978 (1984),” the section of the
New Mexico Unfair Insurance Practices Act that prohibits unfair claims practices.
Dr. Yumukoglu does not specify which of the fifteen provisions of this section he
feels Provident has violated, and after a review of the statute, the Court cannot
perceive which subsection could have been violated under the fact alleged. At the
very least, Dr. Yumukoglu has failed to comply with the pleading requirements of
Federal Rule of Civil Procedure 8(a)(2). Rule 8(a)(2) requires that a civil
complaint set forth “a short and plain statement of the claim showing that the
pleader is entitled to relief.” Here, it is not clear either what Dr. Yumukoglu is
claiming or to what relief he is entitled under § 56A-16-20. Dr. Yumukoglu’s
claim appears, like his claim for breach of the duty of good faith and fair dealing,
to be based on Provident’s alleged bad faith in terminating his disability benefits.
As discussed above, the Court finds that Provident’s decision to terminate Dr.
Yumukoglu’s benefits did not amount to bad faith. Provident’s motion for
summary judgment on Plaintiff’s claim for statutory violation is granted.
- 23 -
Yumukoglu v. Provident Life & Accident Ins. Co., 131 F. Supp. 2d 1215, 1227 (D.N.M.
2001)(Black, J.)(footnote omitted)(citations omitted). The Court has previously found that a
plaintiff failed to state a claim under rule 12(b)(6) when the complaint did not contain even “a
formulaic recitation of the elements of a cause of action” under the UIPA. Estate of Gonzales v.
AAA Life Ins. Co., No. CIV 11-0486, 2012 WL 1132332, at *7 (D.N.M. March 28,
2012)(Browning, J.)(citing Bell Atl. Corp. v. Twombly, 550 U.S. at 555).
LAW REGARDING DIVERSITY JURISDICTION AND ERIE
Under Erie Railroad Co. v. Tompkins, 304 U.S. 64 (1983)(“Erie”), a federal district court
sitting in diversity applies “state law with the objective of obtaining the result that would be
reached in state court.” Butt v. Bank of Am., N.A., 477 F.3d 1171, 1179 (10th Cir. 2007).
Accord Mem. Hosp. v. Healthcare Realty Trust Inc., 509 F.3d 1225, 1229 (10th Cir. 2007). The
Court has held that if a district court exercising diversity jurisdiction cannot find a Supreme
Court of New Mexico “opinion that [governs] a particular area of substantive law . . . [the district
court] must . . . predict how the Supreme Court of New Mexico would [rule].” Guidance
Endodontics, LLC v. Dentsply Int’l., Inc., 708 F. Supp. 2d 1209, 1224-25 (D.N.M.
2010)(Browning, J.). “Just as a court engaging in statutory interpretation must always begin
with the statute’s text, a court formulating an Erie prediction should look first to the words of the
state supreme court.”
Peña v. Greffet, 110 F. Supp. 3d 1103, 1132 (D.N.M.
2015)(Browning, J.).5 If the Court finds only an opinion from the Court of Appeals of New
5
In performing its Erie-mandated duty to predict what a state supreme court would do if
faced with a case, see Comm’r v. Estate of Bosch, 387 U.S. 456 (1987), a federal court may
sometimes contradict the state supreme court’s own precedent if the federal court concludes that
the state supreme court would, given the opportunity, overrule its earlier holding, see Anderson
Living Trust v. WPX Energy Prod., LLC, 27 F. Supp. 3d at 1247 n.30. Courts should,
obviously, be reticent to formulate an Erie prediction that conflicts with state-court precedent;
even if the prediction turns out to be correct, such predictions produce disparate results between
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Mexico, while “certainly [the Court] may and will consider the Court of Appeal[s’] decision in
making its determination, the Court is not bound by the Court of Appeal[s’] decision in the same
way that it would be bound by a Supreme Court decision.” Mosley v. Titus, 762 F. Supp. 2d
1298, 1332 (D.N.M. 2010)(Browning, J.)(noting that, where the only opinion on point is “from
the Court of Appeals, [] the Court’s task, as a federal district court sitting in this district, is to
predict what the Supreme Court of New Mexico would do if the case were presented to
it”)(citing Wade v. EMCASCO Ins. Co., 483 F.3d 657, 666 (10th Cir. 2007)(explaining that,
“[w]here no controlling state decision exists, the federal court must attempt to predict what the
state’s highest court would do,” and that, “[i]n doing so, it may seek guidance from decisions
rendered by lower courts in the relevant state”)).6 The Court may also rely on Tenth Circuit
cases filed in state and federal courts, as the old state supreme court precedent usually binds state
trial courts. The factors to which a federal court should look before making an Erie prediction
that a state supreme court will overrule its prior precedent vary depending upon the case, but
some consistent ones include: (i) the age of the state supreme court decision from which the
federal court is considering departing -- the younger the state case is, the less likely it is that
departure is warranted; (ii) the amount of doctrinal reliance that the state courts -- especially the
state supreme court -- have placed on the state decision from which the federal court is
considering departing; (iii) apparent shifts away from the doctrine that the state decision
articulates, especially if the state supreme court has explicitly called an older case’s holding into
question; (iv) changes in the composition of the state supreme court, especially if mostly
dissenting justices from the earlier state decision remain on the court; and (v) the decision’s
patent illogic or its inapplicability to modern times. See Peña v. Greffet, 110 F. Supp. 3d at 1132
n.17. In short, a state supreme court case that a federal court Erie predicts will be overruled is
likely to be very old, neglected by subsequent state-court cases -- perhaps because it is in a dusty
corner of the common law which does not get much attention or have much application -- and
clearly wrong.
6
The Supreme Court of the United States of America has addressed what the federal
courts may use when there is not a decision on point from the state’s highest court:
The highest state court is the final authority on state law, but it is still the duty of
the federal courts, where the state law supplies the rule of decision, to ascertain
and apply that law even though it has not been expounded by the highest court of
the State. An intermediate state court in declaring and applying the state law is
acting as an organ of the State and its determination, in the absence of more
- 25 -
decisions interpreting New Mexico law. See Anderson Living Trust v. WPX Energy Prod.,
LLC, 27 F. Supp. 3d at 1243 & n.30.7 Ultimately, “the Court’s task is to predict what the state
convincing evidence of what the state law is, should be followed by a federal
court in deciding a state question. We have declared that principle in West v.
American Telephone and Telegraph Co., 311 U.S. 223 (1940), decided this day.
It is true that in that case an intermediate appellate court of the State had
determined the immediate question as between the same parties in a prior suit, and
the highest state court had refused to review the lower court’s decision, but we set
forth the broader principle as applicable to the decision of an intermediate court,
in the absence of a decision by the highest court, whether the question is one of
statute or common law.
. . . We have held that the decision of the Supreme Court upon the construction of
a state statute should be followed in the absence of an expression of a
countervailing view by the State’s highest court, and we think that the decisions
of the Court of Chancery [the New Jersey trial court] are entitled to like respect as
announcing the law of the State.
....
The question has practical aspects of great importance in the proper
administration of justice in the federal courts. It is inadmissible that there should
be one rule of state law for litigants in the state courts and another rule for
litigants who bring the same question before the federal courts owing to the
circumstance of diversity of citizenship. In the absence of any contrary showing,
the rule [set forth by two New Jersey trial courts, but no appellate courts] appears
to be the one which would be applied in litigation in the state court, and whether
believed to be sound or unsound, it should have been followed by the Circuit
Court of Appeals.
Fid. Union Trust Co. v. Field, 311 U.S. 169, 177-80 (1940)(footnotes and citations omitted).
The Supreme Court has softened this position over the years; federal courts are no longer bound
by state trial or intermediate court opinions, but “should attribute [them] some weight . . . where
the highest court of the State has not spoken on the point.” Comm’r v. Estate of Bosch, 387 U.S.
at 465 (citing King v. Order of United Commercial Travelers, 333 U.S. 153, 159 (1948)). See
17A James Wm. Moore et al., Moore’s Federal Practice § 124.20 (3d ed.
1999)(“Moore’s”)(“Decisions of intermediate state appellate courts usually must be
followed . . . [and] federal courts should give some weight to state trial courts
decisions.”)(emphasis and title case omitted).
7
In determining the proper weight to accord Tenth Circuit precedent interpreting New
Mexico law, the Court must balance the need for uniformity between federal court and state
court interpretations of state law with the need for uniformity among federal judges. If the Court
- 26 -
adheres too rigidly to Tenth Circuit case law, ignoring changes undergone by a state’s law in the
ensuing years, then parties litigating state-law claims will be subject to a different body of
substantive law, depending on whether they litigate in state court or federal court. This result
frustrates the purpose of Erie, which held that federal courts must apply state court
interpretations of state law, rather than their own, in part so that parties achieve a consistent
result regardless of the forum. This consideration pulls the Court toward according Tenth Circuit
precedent less weight, and according state court decisions issued in the ensuing years more
weight. On the other hand, when the state law is unclear, it is desirable for there to at least be
uniformity among federal judges as to its proper interpretation. Otherwise, different federal
judges within the same circuit -- or even the same district, as district courts’ decisions are not
binding, even upon themselves -- would be free to adopt differing interpretations of a state’s law.
This consideration pulls the Court towards a stronger respect for vertical stare decisis, because a
Tenth Circuit decision on point -- regardless whether it accurately reflects state law -- at least
provides consistency at the federal level, so long as federal district judges are required to follow
it.
The Court must decide how to weigh Tenth Circuit case law against more-recent state
court decisions, choosing a point on the spectrum between the two extremes: rigidly adhering to
Tenth Circuit precedent unless there is intervening case law directly on point from the state’s
highest court, on one end; and independently interpreting the state law, regarding the Tenth
Circuit precedent as no more than persuasive authority, on the other. In striking this balance, the
Court notes that it is generally more concerned about systemic inconsistency between the federal
courts and the state courts than it is about inconsistency among federal judges. Judges, even
those within a jurisdiction with ostensibly identical governing law, sometimes interpret and
apply the law differently from one another; this inconsistency is part and parcel of a commonlaw judicial system. More importantly, litigants seeking to use forum selection to gain a
substantive legal advantage cannot easily manipulate such inconsistency: cases are assigned
randomly to district judges in this and many federal districts; and, regardless, litigants cannot
know for certain how a given judge will interpret the state law, even if they could determine the
identity of the judge pre-filing or pre-removal. All litigants know in advance is that whomever
federal district judge they are assigned will look to the entirety of the state’s common law in
making his or her determination -- the same as a state judge would. Systemic inconsistency
between the federal courts and state courts, on the other hand, not only threatens the principles of
federalism, but litigants may more easily manipulate the inconsistency. When the Tenth Circuit
issues an opinion interpreting state law, and the state courts subsequently shift away from that
interpretation, litigants -- if the district courts strictly adhere to the Tenth Circuit opinion -- have
a definite substantive advantage in choosing the federal forum over the state forum, or vice
versa.
The Court further notes that district courts may be in a better position than the Tenth
Circuit to be responsive to changes in state law. Tenth Circuit decisions interpreting a particular
state’s law on a specific issue are further apart in time than the collective district courts’
decisions are. More importantly, the Tenth Circuit does not typically address such issues with
the frequency that the state’s courts themselves do. As such, Tenth Circuit precedent can lag
behind state law developments -- developments that the district courts may be nimble enough to
perceive and adopt. Additionally, much of the benefit of having a consistent Tenth Circuit-wide
interpretation of a particular state’s law is wasted. Other than Oklahoma, every state
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encompassed by the Tenth Circuit contains only one federal judicial district, and there is
relatively little need for federal judges in Wyoming and Kansas to have a uniform body of New
Mexico law to which to look. Last, the Court notes, respectfully, that district courts may be in a
better position than the Tenth Circuit to develop expertise on the state law of the state in which
they sit. Every federal judicial district in the nation, except the District of Wyoming, covers at
most one state. It is perhaps a more workable design for each district court to keep track of legal
developments in the state law of its own state(s) than it is for the Tenth Circuit to monitor
separate legal developments in eight states. The Tenth Circuit used to follow this rationale in
applying a clearly erroneous standard of review to district judge decisions of state law with no
controlling state Supreme Court precedent. See Weiss v. United States, 787 F.2d 518, 525 (10th
Cir. 1986); See Rawson v. Sears, Roebuck, & Co., 822 F.2d 908, 923 (10th Cir. 1987)(McKay,
J., dissenting)(collecting cases). Since the mid-1980s, however, the Tenth Circuit has abandoned
that rationale and applied a de novo standard of review to district judge decisions applying state
law with no governing state Supreme Court precedent. See Rawson v. Sears, Roebuck, & Co.,
822 F.2d at 908. See also id. at 923 (McKay, J., dissenting)(noting that the majority had
abandoned the “sanctified” clearly-erroneous standard or, the “so-called local-judge rule” in its
analysis). The Court regrets the Tenth Circuit’s retreat from the clearly erroneous standard.
Having outlined the relevant considerations, the Court thinks the proper stance on vertical
stare decisis in the context of federal court interpretations of state law is as follows: the Tenth
Circuit’s cases are binding as to their precise holding -- what the state law was on the day the
opinion was published -- but lack the positive precedential force that its cases interpreting a
federal statute or the Constitution of the United States of America possess. A district court
considering a state law issue after the publication of a Tenth Circuit opinion on point may not
come to a contrary conclusion based only on state court cases available to and considered by the
Tenth Circuit, but it may come to such a conclusion based on intervening state court cases.
When interpreting state law, the Tenth Circuit does not and cannot issue a case holding
that x is the law in New Mexico; it holds that the proper interpretation of New Mexico law, at the
time the opinion is released, is x. Its holdings are descriptive, not prescriptive -- interpretive, not
normative. Because federal judicial opinions lack independent substantive force on state law
issues, but possess such force regarding federal law issues, the Court thinks the following is not
an unfair summary of the judicial interpretive process: (i) when interpreting federal law, the
federal appellate courts consider the existing body of law, and then issue a holding that both
reflects and influences the body of law; that holding subsequently becomes a part of the body of
law; but (ii) when interpreting state law, the federal appellate courts consider the existing body of
law, and then issue a holding that only reflects the body of law; that holding does not
subsequently become a part of the body of law. The federal district courts are bound to conclude
that the Tenth Circuit’s reflection of the then-existing body of law was accurate. The question is
whether they should build a doctrine atop the case and use the existence of the Tenth Circuit’s
case to avoid any responsibility to independently consider the whole body of state law that exists
when the time comes that diversity litigants raise the issue in their courtrooms. Giving such
effect to the Tenth Circuit’s interpretations of state law is at tension with Erie, giving
independent substantive effect to federal judicial decisions -- i.e., applying federal law -- in a
case brought in diversity.
The purpose of Erie is well-known and simple, and the Court should not complicate it
beyond recognition: it is that the same substantive law governs litigants’ cases regardless
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whether they are brought in a federal or state forum. For simplicity’s sake, most courts have
settled on the formulation that “the federal court must attempt to predict how the states’ highest
court would rule if confronted with the issue.” Moore’s § 124.22[3] (citing Comm’r v. Estate of
Bosch, 387 U.S. at 465 (“[A]n intermediate appellate state court [decision] is a datum for
ascertaining state law which is not to be disregarded by a federal court unless it is convinced by
other persuasive data that the highest court of the state would decide otherwise.”)(citation and
internal quotation marks omitted). This may not be the most precise formulation if the goal is to
ensure identical outcomes in state and federal court -- the Honorable Milton I. Shadur, United
States District Judge, looks to state procedural rules to determine in which state appellate circuit
the suit would have been filed were it not in federal court, and then applies the state law as that
circuit court interprets it, see Abbott Laboratories v. Granite State Ins. Co., 573 F. Supp. 193,
196-200 (N.D. Ill. 1983)(noting that the approach of predicting the state supreme court’s
holdings will often lead to litigants obtaining a different result in federal court than they would in
state court, where only the law of the circuit in which they filed -- and certainly not nonexistent,
speculative state supreme court law -- governs) -- but it is a workable solution that has achieved
consensus. See Allstate Ins. Co. v. Menards, Inc., 285 F.3d 630, 637 (7th Cir. 2002)(“[W]e
adhere today to the general rule, articulated and applied throughout the United States, that, in
determining the content of state law, the federal courts must assume the perspective of the
highest court in that state and attempt to ascertain the governing substantive law on the point in
question.”). This formulation, built out of ease-of-use, does not relieve courts of their Supreme
Court-mandated obligation to consider state appellate and trial court decisions. To the contrary,
even non-judicial writings by influential authors, statements by state supreme court justices, the
closeness of the vote on a prior case addressing the issue, and personnel changes on the
court -- considerations that would never inform a federal court’s analysis of federal law -- may
validly come into play. The question is whether the district courts must abdicate, across-theboard, the “would decide” aspect of the Erie analysis to their parent appellate courts when the
Court of Appeals has declared an interpretation of state law.
The Erie doctrine results in federal cases that interpret state law withering with time.
While cases interpreting federal law become more powerful over time -- forming the
groundwork for doctrines, growing upward from one application (Congress may create a national
bank) to many (Congress may set quotas on wheat-growing for personal consumption),
expanding outward from the general (states must grant criminal jury trials) to the specific (the
jury need not be twelve people, nor must it be unanimous) -- federal cases interpreting state law
often become stale. New state court cases -- even when not directly rebuking the federal court’s
statement of law -- alter the common-law legal landscape with their dicta, their insinuations, and
their tone. The Supreme Court, which picks its cases sparingly and for maximum effect, almost
never grants certiorari to resolve issues of state law.
The Court’s views on Erie, of course, mean little if the Tenth Circuit does not agree. In
Wankier v. Crown Equipment Corp., the Tenth Circuit said that,
[w]here no controlling state decision exists, the federal court must attempt to
predict what the state’s highest court would do. In performing this ventriloquial
function, however, the federal court is bound by ordinary principles of stare
decisis. Thus, when a panel of this Court has rendered a decision interpreting
state law, that interpretation is binding on district courts in this circuit, and on
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subsequent panels of this Court, unless an intervening decision of the state’s
highest court has resolved the issue.
Wankier v. Crown Equip. Corp., 353 F.3d 862, 866 (10th Cir. 2003)(McConnell, J.). From this
passage, it seems clear the Tenth Circuit permits a district court to deviate from its view of state
law only on the basis of a subsequent case “of the state’s highest court.” The American Heritage
Dictionary of the English Language 1402 (William Morris ed., New College ed. 1976)(defining
“unless” as “[e]xcept on the condition that; except under the circumstances that”). A more
aggressive reading of the passage -- namely the requirement that the intervening case “resolv[e]
the issue” -- might additionally compel the determination that any intervening case law must
definitively and directly contradict the Tenth Circuit interpretation in order to be considered
“intervening.”
It is difficult to know whether Judge McConnell’s limitation of “intervening decision” to
cases from the highest state court was an oversight or intentional. Most of the Tenth Circuit’s
previous formulations of this rule have defined intervening decisions inclusively as all
subsequent decisions of “that state’s courts,” a term which seems to include trial and
intermediate appellate courts. Even Koch v. Koch Industries, Inc., 203 F.3d 1202, 1231 (10th
Cir. 2000), the primary authority upon which Wankier v. Crown Equipment Corp. relies, uses the
more inclusive definition. In fact, Wankier v. Crown Equipment Corp. quotes its relevant
passage:
In the absence of intervening Utah authority indicating that a plaintiff is not
required to prove a safer, feasible alternative design, we are bound to follow the
rule of Allen [v. Minnstar, Inc., 8 F.3d 1470 (10th Cir. 1993), a Tenth Circuit case
interpreting an issue of Utah law], as was the district court. “Following the
doctrine of stare decisis, one panel of this court must follow a prior panel’s
interpretation of state law, absent a supervening declaration to the contrary by that
state’s courts or an intervening change in the state’s law.” Koch v. Koch Indus.,
Inc., 203 F.3d at 1231.
Wankier v. Crown Equip. Corp., 353 F.3d at 867.
Whether the decision to limit the intervening authority a district court can consider was
intentional or not, the Tenth Circuit has picked it up and run with it. In Kokins v. Teleflex, Inc.,
the Tenth Circuit, quoting Wankier v. Crown Equipment Corp., refused to consider an opinion
from the Court of Appeals of Colorado holding directly the opposite of an earlier Tenth Circuit
interpretation of Colorado law. See Kokins v. Teleflex, Inc., 621 F.3d 1290, 1297 (10th Cir.
2010)(Holmes, J.)(“[T]he Colorado Court of Appeals decided Biosera[, Inc. v. Forma Scientific,
Inc., 941 P.2d 284 (Colo. Ct. App. 1998)], so it is not an ‘intervening decision of the state’s
highest court.’”)(emphasis in original)(quoting Wankier v. Crown Equip. Corp., 353 F.3d at
866).
The Tenth Circuit has set forth a stringent restriction on its district courts’ ability to
independently administer the Erie doctrine. More importantly, the Tenth Circuit’s view may be
at tension with the above-quoted Supreme Court precedent, as well as its own prior case law.
Moore’s lists the Tenth Circuit as having been, at one time, a “court[ that] hold[s] that a prior
federal appellate decision [interpreting state law] is persuasive.” Moore’s § 124.22[4] (citing
- 30 -
supreme court would do.” Wade v. EMCASCO Ins. Co., 483 F.3d at 666. Accord Mosley v.
Titus, 762 F. Supp. 2d at 1332 (citation omitted); Rimbert v. Eli Lilly & Co., 577 F. Supp. 2d
1174, 1188-89 (D.N.M. 2008)(Browning, J.)(quoting Wade v. EMCASCO Ins. Co., 483 F.3d at
665-66).
ANALYSIS
The Court concludes that Demente’s summons to Dunn-Gross is defective, because it
does not bear the district court’s name and seal, the Clerk of Court’s signature, and the time
within which Dunn-Gross must appear and defend herself. Although the summons is defective,
the Court, in its discretion and pursuant to the parties’ agreement, grants Demente sixty days to
properly serve Dunn-Gross.
The Court also concludes that, because Demente settled his
negligence claims against the Dilucentes with no judicial fault determination, Demente has no
UIPA cause of action against GEICO Insurance or Dunn-Gross.8 The Court therefore dismisses
his UIPA claim.
I.
DEMENTE’S SERVICE OF PROCESS ON DUNN-GROSS IS DEFECTIVE, BUT
THE COURT GRANTS HIM AN ADDITIONAL SIXTY DAYS TO PERFECT IT.
Demente’s service of process on Dunn-Gross was not perfected before removal, nor was
it proper after removal. “Where service is effected prior to removal to federal court, we look to
state law to determine if service was perfected.” Palzer v. Cox Okla. Telecom, LLC, 671 F.
App’x 1026, 1028 (10th Cir. 2016)(unpublished). Under the New Mexico rules, service of
process on an individual’s place of business is proper only if service of process has first been
State Farm Mut. Auto. Ins. Co. v. Travelers Indem. Co., 433 F.2d 311, 312 (10th Cir. 1970)).
Still, the Court is bound to abide by the Tenth Circuit’s interpretation of Erie.
8
Although Dunn-Gross has not moved to dismiss on these grounds, the Court, after
reviewing the relevant caselaw, dismisses her sua sponte. See McKinney v. State of Okl., Dep’t
of Human Services, 925 F.2d 363, 365 (10th Cir. 1991).
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attempted on the individual personally and on the person’s usual place of abode. See N.M. Rules
Ann. § 1-004(F)(3). On information that Dunn-Gross could be served through the New Mexico
State Superintendent of Insurance, Demente first attempted to serve Dunn-Gross through the
Superintendent. See Service of Process Response at 3. After the Superintendent rejected service
on Dunn-Gross’ behalf, Demente next attempted to serve Dunn-Gross at two different GEICO
Insurance offices. See Service of Process Response at 3. Demente did not serve Dunn-Gross
personally, but another GEICO Insurance employee instead. See Service of Process Response at
3; Return of Service at 1 (dated October 12, 2016), filed May 16, 2017 (Doc. 17-5). Because
Demente did not first attempt to serve Dunn-Gross at her usual place of abode before serving
Dunn-Gross at her work through another GEICO Insurance employee, Demente did not properly
perfect service of process under the New Mexico rules. See N.M. Rules Ann. § 1-004(F)(3).
After the case had been removed to federal court, Demente attempted, one more time, to
serve Dunn-Gross -- this time at her home. See Service of Process Response at 4. Because the
case had been removed, Demente received a fresh chance at properly serving Dunn-Gross. See
28 U.S.C. § 1448.
In all cases removed from any State court to any district court of the United States
in which any one or more of the defendants has not been served with process or in
which the service has not been perfected prior to removal, or in which process
served proves to be defective, such process or service may be completed or new
process issued in the same manner as in cases originally filed in such district court
28 U.S.C. § 1448. Dunn-Gross contends that Demente’s attempt to serve her after removal fails
under rule 4(m), because Demente attempted service eleven months after he filed the original
complaint. See Service of Process MTD at 4; Fed. R. Civ. P. 4(m) (requiring service to occur
within ninety days of the complaint).
Under 28 U.S.C. § 1448, however, Demente receives
another ninety days to serve Dunn-Gross starting from the removal date. See 28 U.S.C. § 1448;
- 32 -
Wallace v. Microsoft Corp., 596 F.3d 703, 706 (10th Cir. 2010)(“Taken together, Mr. Wallace
argues that, once his case was removed, he then had 120 days in which to effect service. We
agree.”).9 Demente thus served Dunn-Gross within rule 4(m)’s time frame, because he served
her on April 3, 2017, which is within ninety days of March 8, 2017 -- the removal date. See
Removal Notice at 1; MTD Response at 4; Service of Process Return at 2 (dated April 3, 2017),
filed May 16, 2017 (Doc. 17-8)(“Service of Process Return”).10
Although Demente served Dunn-Gross within rule 4(m)’s time frame, his summons is
defective under rule 4(a). See Fed. R. Civ. P. 4(a). Rule 4(a) requires the summons to have the
Court’s name, the Clerk of the Court’s signature, the Court’s seal, and the time within which the
defendant must appear and defend. See Fed. R. Civ. P. 4(a)(1)(A), (D), (F)-(G). Demente’s
summons does not satisfy those requirements. See Summons at 1, filed April 18, 2017 (Doc. 121)(“Summons”). Instead, it appears as if Demente used the state-court summons as the federalcourt summons. See Summons at 1-2. The Summons has the state court’s name and seal, the
state Clerk of Court’s signature, and it does not state the time within which the Dunn-Gross must
appear and defend. See Summons at 1-2. Such defects are not technical deficiencies that the
Court may overlook, but instead render service of process defective. See Cloyd v. Arthur
Anderson & Co., 151 F.R.D. 407, 409 (D. Utah 1993)(Winder, C.J.)(concluding that a summons
lacking the Court’s seal and the Clerk of Court’s signature rendered the summons “void” and
collecting cases). Thus, although Demente served Dunn-Gross within ninety days of removal,
9
The 120-day period for service under rule 4(m) was amended to ninety days in 2015.
See Fed. R. Civ. P. 4(m) (2015 amendment).
10
The Service of Process Response asserts that Demente served Dunn-Gross on March
31, 2017, see MTD Response at 4 (citing Service of Process Return at 2), but the Service of
Process Return is dated April 3, 2017, see Service of Process Return at 2. The Court will use the
Service of Process Return date.
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the service of process is defective, and Demente did not attempt to serve Dunn-Gross again
before rule 4(m)’s ninety days elapsed. See Service of Process Response at 4.
Although service of process is defective, the Court, in its discretion, may grant a party
additional time to perfect that process, even without the party showing good cause.
See
Espinoza v. United States, 52 F.3d at 840-41. In making its determination whether to grant a
permissive extension, the Court may consider several factors, including whether the applicable
statute of limitations would bar the re-filed action and other policy considerations, and whether
the party effecting service is representing herself pro se. See Espinoza v. United States, 52 F.3d
at 841-42.
The Court has previously granted a permissive extension of time to effect service of
process when the party to be served had a copy of the complaint, had actual notice of the lawsuit,
had attempted to avoid proper service, and was not prejudiced by late service of the original
complaint.
See Salazar v. City of Albuquerque, 278 F.R.D. 623, 628 (D.N.M.
2011)(Browning, J.).
See also Mata v. Anderson, 760 F. Supp. 2d 1068, 1098 (D.N.M.
2009)(Browning, J.)(ruling that it would extend the time for service of process, because “[t]he
delay was not inordinate, prejudicial, or intentional, and the First Amended Complaint has been
served.”).
Here, the Court grants Demente sixty days from July 27, 2017 -- the hearing date -- to
properly effect service. Dunn-Gross agreed that extending the time frame to effect service was
appropriate, see Tr. at 10:16-11:1 (Lewis), and also agreed to a sixty day extension, see Tr. at
12:15 (Lewis). The Court independently concludes that a permissive extension is appropriate for
four reasons. First, Dunn-Gross had notice of the lawsuit within rule 4(m)’s time limit. Second,
the sixty-day extension ultimately extends the time in which Demente had to effect service by
- 34 -
only 120 days total. Third, and finally, Demente attempted service of process several times, but
had some difficulty locating Dunn-Gross. Fourth, Dunn-Gross does not oppose an extension.
Accordingly, Demente has until September 25, 2017 to effect service of process.
II.
THE COURT DISMISSES THE UIPA CLAIM, BECAUSE THE CASE SETTLED
WITHOUT A JUDICIAL FAULT DETERMINATION.
The Court dismisses Demente’s UIPA claims against GEICO Insurance and Dunn-Gross.
In relevant part, an insurer is liable under the UIPA for:
B.
failing to acknowledge and act reasonably promptly upon communications
with respect to claims from insureds arising under policies;
C.
failing to adopt and implement reasonable standards for the prompt
investigation and processing of insureds’ claims arising under policies;
....
E.
not attempting in good faith to effectuate prompt, fair and equitable
settlements of an insured’s claims in which liability has become
reasonably clear;
....
M.
failing to settle an insured’s claims promptly where liability has become
apparent under one portion of the policy coverage in order to influence
settlement under other portions of the policy coverage;
N.
failing to promptly provide an insured a reasonable explanation of the
basis relied on in the policy in relation to the facts or applicable law for
denial of a claim or for the offer of a compromise settlement.
N.M. Stat. Ann. § 59A-16-20(B)-(C), (E), (M)-(N). An automobile accident victim does not
have a cause of action against a tortfeasor’s insurer “unless and until there has been a judicial
determination of the insured’s fault and the amount of damages awarded in the underlying
negligence action.”
Hovet v. Allstate Ins. Co., 2004-NMSC-010, ¶ 26, 89 P.3d at 76-77.
Moreover, “[t]hose electing to settle their claims without a judicial determination of liability
waive any claims under the Insurance Code for unfair settlement practices.” Hovet v. Allstate
- 35 -
Ins. Co., 2004-NMSC-010, ¶ 26, 89 P.3d at 77. The Supreme Court of New Mexico reasoned:
“If we were to allow a third-party claimant who settles to later bring a claim against the
insurance company for not settling, we would needlessly encourage serial litigation and frustrate
the policy reasons, like finality, that encourage settlement.” Hovet v. Allstate Ins. Co., 2004NMSC-010, ¶ 26, 89 P.3d at 77.11 Since Hovet v. Allstate Ins. Co., the Supreme Court of New
Mexico has tacitly re-approved its holding. See Jolley v. Assoc. Electric & Gas Ins., 2010NMSC-029, ¶¶ 18-19, 237 P.3d 738, 742-43.
11
The Supreme Court of New Mexico’s holding in Hovet v. Allstate Ins. Co. -- at first
glance -- surprised the Court. It, on an initial reading, appears conservative. It is not at all
intuitive that an insurance carrier should be able to negotiate in bad faith with a car accident
victim, and then, on the eve of trial, settle, thereby insulating itself from the statutorily enacted
remedy under the UIPA. Most other jurisdictions, however, do not even recognize a third-party
private cause of action against insurance carriers for bad-faith settlement negotiations and some
do not recognize a private cause of action at all. See, e.g., Moradi-Shalal v. Fireman’s Fund Ins.
Cos., 758 P.2d 58, 68 (Cal. 1988)(ruling that private parties do not have a cause of action against
an insurer for bad-faith settlement practices); Yassin v. Certified Grocers of Illinois, Inc., 551
N.E.2d 1319, 1322 (Ill. 1990)(“[T]he remedy embodied in section 155 of the Insurance Code
does not extend to third parties.”); Bates v. Allied Mut. Ins. Co., 467 N.W.2d 255, 258 (Iowa
1991); Herring v. Herring, 844 P.2d 487, 494 (Wyo. 1992); Allstate Ins. Co. v. Watson, 876
S.W.2d 145, 150 (Tex. 1994)(ruling that third-party claimants do not have standing to sue
insurers for bad-faith settlement practices); Tank v. State Farm Fire & Cas. Co., 715 P.2d 1133,
1140 (Wash. 1986). But see Yanting Zhang v. Superior Court, 304 P.3d 163, 166 (Cal.
2013)(holding that insureds may sue insurers under California’s Unfair Competition Law for
conduct that would amount to a UIPA claim, notwithstanding Moradi-Shalal v. Fireman’s Fund
Ins. Cos.); State ex rel. State Farm Fire & Cas. Co. v. Madden, 451 S.E.2d 721, 725 (W.Va.
1994)(holding that third-party victims may sue insurance companies even without a judicial
determination of fault). A dominant rationale for such a holding is that the duty to bargain in
good faith arises from a contractual relationship and such a relationship does not exist between a
third-party victim and the tortfeasor’s insurance company. See Torres v. Nev. Direct Ins. Co.,
353 P.3d 1203, 1211 (Nev. 2015)(“Third-party claimants do not have a contractual relationship
with insurers and thus have no standing to claim bad faith.”). Thus, absent an express statutory
directive to the contrary, the courts have been hesitant to extend that cause of action to thirdparty victims. See Torres v. Nev. Direct Ins. Co., 353 P.3d at 1211. Given this backdrop, the
Supreme Court of New Mexico’s holding no longer appears so conservative, as it bucks the even
more conservative trend to bar these claims entirely.
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In this case, there was no judicial fault determination; the parties stipulated to dismissal
of the negligence claims with prejudice. See State Order at 1 (dismissing with prejudice all
claims against the Dilucentes “on the grounds that all matters in controversy by and between the
parties have been resolved.”).12 Under Hovet v. Allstate Ins. Co., a victim of an automobile
accident may not sue, under the UIPA, the tortfeasor’s insurance company without a judicial
fault determination. See 2004-NMSC-010, ¶ 26, 89 P.3d at 76-77. Demente is an automobileaccident victim, so he may not sue the Dilucente’s insurance company -- GEICO Insurance -because there has been no judicial fault determination.
Demente also has no UIPA cause of action against Dunn-Gross. The statute provides a
cause of action against only insurers and their agents, see N.M. Stat. Ann. § 59A-16-30, and,
thus, Dunn-Gross may be liable only as GEICO Insurance’s agent. Hovet v. Allstate Ins. Co.’s
fault-determination requirement applies equally to insurers as it does to their agents. Hovet v.
Allstate Ins. Co, 2004-NMSC-010, ¶ 26, 89 P.3d at 404-05 (“Those electing to settle their claims
without a judicial determination of liability waive any claims under the Insurance Code for unfair
settlement practices.”)(emphasis added). See also Tr. at 41:15-16 (Lyle)(conceding that the
UIPA analysis is likely the same for GEICO Insurance and Dunn-Gross). Indeed, to hold
insurance agents liable, but not the insurer, makes no sense in light of the Supreme Court of New
Mexico’s rationale that allowing such UIPA claims after settlement “would needlessly encourage
12
The Court takes judicial notice of the State Order and its contents. See Fed. R. Evid.
201(b)(2); Pace v. Swerdlow, 519 F.3d 1067, 1072-73 (10th Cir. 2008)(ruling that a district court
could take judicial notice of “state court documents”); Gallegos v. Bernalillo Cty. Bd. of Cty.
Comm’rs, __ F. Supp. 3d __, 2017 WL 4402422, at *18-19 (ruling that the Court may take
judicial notice of state court orders). The State Order and its contents are “readily determinable,”
Fed. R. Evid. 201(b)(2), because it was filed with the Court, see Notice of State Court Filing,
filed April 5, 2017, (Doc. 11), and its source is one whose “accuracy cannot reasonably be
questioned,” Fed. R. Evid. 201(b)(2), as the document bears the state district court’s stamp and a
district judge’s signature, see State Order at 1-2. Also, no party disputes their authenticity.
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serial litigation and frustrate the policy reasons, like finality, that encourage settlement.” Hovet
v. Allstate Ins. Co, 2004-NMSC-010, ¶ 26, 89 P.3d at 405. Although barred from suing the
insurer, victims would be encouraged to pursue “serial litigation” against the insurer’s agent,
which, ultimately, targets the insurer’s funds. Hovet v. Allstate Ins. Co, 2004-NMSC-010, ¶ 26,
89 P.3d at 405.
Demente attempts to distinguish Hovet v. Allstate Ins. Co.’s fail. First, he contends that,
because GEICO Insurance exercised a great deal of control over drafting the motion staying and
bifurcating the state proceedings, Hovet v. Allstate Ins. Co. does not bind the Court. See Tr. at
26:4-5 (Lyle). The Court notes that, although GEICO Insurance may have drafted the Stay and
Bifurcation Motion, see Tr. at 26:6-9 (Lyle), Demente did not oppose that motion, see Stay and
Bifurcation Motion at 1. Notwithstanding that fact, the Court concludes that GEICO Insurance’s
control over that motion is immaterial. The Supreme Court of New Mexico’s language is
unequivocal: “Those electing to settle their claims without a judicial determination of liability
waive any claims under the Insurance Code for unfair settlement practices.” Hovet v. Allstate
Ins. Co., 2004-NMSC-010, ¶ 26, 89 P.3d at 77. Whether GEICO Insurance sought to stay the
bad-faith claims until the underlying negligence claims were resolved does not bear on whether a
settlement or a judicial determination of liability occurred.13
13
To the extent that Demente’s argument can be interpreted as one that GEICO
Insurance’s request for a bifurcation and stay waived any defense it had under Hovet v. Allstate
Ins. Co., such an argument fails, because the Court cannot soundly interpret a request for a stay
and bifurcation as a waiver of applicable defenses.
To the extent that Demente’s position can be interpreted as judicial estoppel or equitable
estoppel arguments, see Tr. at 29:12-18 (Lyle), the Court concludes that those arguments also
fail. For judicial estoppel to apply, GEICO Insurance must have assumed inconsistent positions
in legal proceedings. See Santa Fe Pacific Trust, Inc. v. City of Albuquerque, 2012-NMSC-028,
¶ 32, 285 P.3d 595, 604; Gallegos v. Pueblo of Tesuque, 2002-NMSC-012, ¶ 23, 46 P.3d 668,
677. Judicial estoppel fails as a defense, because there is no evidence that GEICO Insurance
took the position in front of a court that executing the settlement would allow the UIPA claim to
- 38 -
Second, Demente contends that the State Order lifting the stay and stating that the UIPA
claims “remain” means just what it says -- the UIPA claims remain. Tr. at 27:9-10 (Lyle). See
Tr. at 31:4-6 (Lyle)(arguing that the State Order “clearly contemplates continuation of the unfair
trade practices claims, and says okay, now we can move forward with those”). The Court
disagrees. That a claim “remains” does not mean that all defenses or arguments against that
claim are invalid. Such a sweeping interpretation equates remain with meritorious. The State
Order’s entire text, moreover, suggests that the term “remains” does not even have the limited
meaning that the settlement shall have no effect on the UIPA claim moving forward. Read in its
entirety, the State Order dismisses “all claims” against the Dilucentes and GEICO insurance,
except the UIPA claim. State Order at 1. Thus, the most plausible reading of “remains” is that
the parties have stipulated to the dismissal of some claims, but not the UIPA claim.
move forward. See Santa Fe Pacific Trust, Inc. v. City of Albuquerque, 2012-NMSC-028, ¶ 32,
285 P.3d at 604 (“The purpose of the doctrine of judicial estoppel is to stop a party from playing
fast and loose with the court during litigation. In this case, nothing in the record indicates that
the City intentionally attempted to mislead the Court of Appeals. . . .”). The only potential
representation to the New Mexico state court about the UIPA claims comes from the GEICO
Insurance-drafted State Order, but there is no language in there about the settlement agreement
or its potential impact on subsequent litigation. Additionally, as explained infra, the State
Order’s language that the UIPA claim “remains” cannot soundly be interpreted as a
representation from GEICO Insurance that the settlement shall have no effect on the UIPA claim
moving forward.
Equitable estoppel “precludes a litigant from asserting a claim or defense that might
otherwise be available to him against another party who has detrimentally altered his [or her]
position in reliance on the former’s misrepresentation or failure to disclose some material fact.”
Gallegos v. Pueblo of Tesuque, 2002-NMSC-012, ¶ 24, 46 P.3d at 677. (alterations in original).
This defense is inapplicable, because at issue is not a misrepresentation or failure to disclose
some material fact. Any misrepresentation or failure to disclose would be about the relevant law;
namely, Hovet v. Allstate Ins. Co.. Demente, however, knew of Hovet v. Allstate Ins. Co. before
he entered the settlement agreement. See Letter from James P. Lyle to Derica Dunn Gross at 1
(dated March 4, 2016), filed May 12, 2017 (Doc. 15-2)(citing Hovet v. Allstate Ins. Co. in a prelitigation letter to GEICO Insurance). Thus, Demente cannot have relied on a misrepresentation,
as he knew the law before heading into settlement negotiations. An argument premised on
unilateral mistake would fail for similar reasons.
- 39 -
Third, he argues that Hovet v. Allstate Ins. Co. is inapplicable, because the parties settled
for the full policy limit amount. See MTD Response at 10. Again, such a factual distinction
does not surmount Hovet v. Allstate Ins. Co.’s clear language that a judicial determination of
fault is required. Nevertheless, Demente persists that settling for the full policy amount is the
legal equivalent to a judicial determination of fault. See Tr. at 33:9-12 (Lyle). Demente’s
settlement cannot be a judicial determination of fault, however, because no judge was involved
in the settlement. Moreover, an insurance company can settle for the maximum policy amount
for reasons unrelated to fault. For example, settling for the full policy amount might be less
expensive than litigating the case to its completion; lawyers and other costs related to litigation
are expensive.14 The Court concludes, accordingly, that it should dismiss Demente’s UIPA
claim against GEICO Insurance and Dunn-Gross.15
IT IS ORDERED that: (i) Defendant Derica Dunn-Gross’ Second Motion to Dismiss for
Insufficient Process, filed April 18, 2017 (Doc. 12), is denied; and (ii) Defendant GEICO
General Insurance Company’s Motion to Dismiss with Prejudice Under Rule 12(b) and
Memorandum in Support Thereof, filed April 21, 2017 (Doc. 13), is granted. Plaintiff James
Demente has until September 25, 2017 to perfect service of process on Defendant Derica Dunn14
Demente also contends that the Court should hold an evidentiary hearing and determine
fault. See Tr. at 29:25-30:1. The statute outlines no such proceeding, see N.M. Stat. Ann.
§§ 59a-16-1 to 30, nor could it find any Supreme Court of New Mexico approving of such a
procedure. With no statute or court case endowing the Court with the power to hold an
evidentiary proceeding to determine fault, the Court declines to hold one. Moreover, Demente’s
proposed rule would allow third-party claimants to settle the underlying negligence or tort claims
and then pursue a judicial fault determination later, undermining Hovet v. Allstate Ins. Co.’s
rule. It is also unclear whether the Court could make a determination without a jury, if either
side wants one, and holding a trial to resolve a settled claim is exactly the type of excess
litigation that Hovet v. Allstate Ins. Co. sought to avoid.
15
Demente asks the Court to sanction or at least “chastise[]” GEICO Insurance for its
“frivolous defense.” MTD Response at 12. Because the Court concludes that GEICO
Insurance’s defense is meritorious, it declines to chastise or sanction GEICO Insurance.
- 40 -
Gross. Demente’s Unfair Insurance Practice Claims, N.M. Stat. Ann. §§ 59a-16-1 to 30, against
GEICO Insurance and Dunn-Gross are dismissed with prejudice. GEICO Insurance shall also,
within ten days of the date of this Memorandum Opinion and Order, show cause why the Court
should not dismiss this case for lack of subject-matter jurisdiction. See supra, at 5 n.2.
_______________________________
UNITED STATES DISTRICT JUDGE
Counsel:
James P. Lyle
Law Offices of James P. Lyle
Albuquerque, New Mexico
Attorneys for the Plaintiff
Donna L. Chapman
Jessica Singer
Chapman and Priest, P.C.
Albuquerque, New Mexico
Attorney for the Defendant GEICO General Insurance Co.
Kathleen M. Mixon
Doughty, Alcaraz, & deGraauw PA
Albuquerque, New Mexico
Attorney for the Defendants Victoria Dilucente and Anthony Dilucente
Daniel W. Lewis
Allen, Shepard, Lewis & Syra, P.A.
Albuquerque, New Mexico
Attorney for the Defendant Derica Dunn-Gross
- 41 -
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