Insurance Defense Blog

Bell Atlantic v Twombly -- the death of notice pleading?

Ted Frank at Point of Law was early to recognize the import of the May 21, 2007 decision in Bell Atlantic v. Twombly, 127 S.Ct. 1955 (2007).  A longer look at the decision was taken in Dodson, Pleading Standards After Bell Atlantic Corp. v. Twombly, 93 Va. L. Rev. In Brief 121 (July 9, 2007), which gives a thorough overview and will convince you that it is worth your while to read the decision.  (Thanks to the SW Virginia Law Blog for the link to the Dodson article.)

It does now appear that the decision will have a major effect on notice pleading rules.  As of today, the decision had already been cited around 470 times.  Its effect is not going to be limited to antitrust cases.  Essentially, where the previous standard was that "a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief", under Twombly a complaint must present enough facts to state a claim that is plausible on its face. 

Defense counsel are going to have to rethink the cost benefit analysis of when it makes sense to file Rule 12(b)(6) motions.  There is more of a chance of success now in light of Twombly.   In particular, fraud claims and conspiracy claims that are pled without sufficient supporting facts should be candidates for a Twombly motion.  Also claims for punitive damages that are not supported by plausible factual allegations should be attacked at the outset of the litigation with a Twombly motion. 

Surprisingly, the first decision from the D.C. Court of Appeals to cite Twombly did so in the context of a motion to strike affirmative defenses and counterclaims under Rule 12(f).  See Franco v. National Capital Revitalization Corp., No. 06-CV-645 (July 12, 2007). As that opinion suggests, Twombly may also require changes in the way that affirmative defenses, counterclaims, and cross-claims are pled.

The 30 day period for judicial review of a MD WCC award is not extended by three days for mailing

In Chance v. WMATA, No. 240 (In the Court of Special Appeals of Maryland, April 4, 2007), the Court held that the 30 day period to file a petition for judicial review under LE Section 9-737 starts running from the date of the mailing of the Commission's order, and that the 30 day period is NOT extended by Md. Rule 1-203(c)(which provides for a three-day extension to a presribed period within which a party has a right to act when the period commences after service upon the party).

Further, the opinion states that the 30 day period is in the nature of a statute of limitations and thus subject to waiver by failure of a party to raise it in the proper manner. Id., at n. 6.

In short, in a Md WCC matter, the losing party gets 30 days to file the petition for judicial review, and no extra 3 days for mailing. And if the other side makes that mistake and you don't raise it properly, the defense is waived.

Maryland allows named driver exclusion in commercial auto policy

The Maryland Court of Appeals has issued an opinion that holds that a named driver exclusion endorsement is not prohibited by Maryland law in a commercial automobile liability policy.  This opinion is discussed in the relatively new Maryland Injury Law Blog.  I am sure I will be a regular reader of Miller & Zois' blog.

I previously wrote here about the intermediate appellate court's opinion in this matter.  Because it found that the named driver exclusion endorsement is valid in the context of a commercial auto policy, the Court of Appeals did not address the second issue that it had before it, namely, "whether a declaratory judgment that there is no coverage for a particular claim, entered in an action between the insurance company and its insured, binds a person who (1) has filed a claim against the insured, but (2) was not a party to that action." 

Privilege and Insurer-Insured Communications Under Maryland Law

The Defense Line has an article entitled "Insurer-Insured Communications and the Scope of Maryland's Attorney-Client Privilege."   Such communications can be privileged if (1) the dominant purpose of the communication was for the insured's defense, and (2) the insured had a reasonable expectation of privacy.

When can a rearender be the proximate cause of a suicide nine years later?

In Sindler v. Litman, No. 1838, Sept. Term, 2004 (Court of Special Appeals of Maryland, Dec. 2, 2005), the plaintiffs originally brought an action for personal injuries based on a motor vehicle accident that occurred on Dec. 7, 1994.  It was a rear-end accident, in which the plaintiff's Cadillac had about $6000 in damages, and the plaintiff was seen but not admitted at a hospital afterwards.

The action was filed in 1997, and in the Court's words, "the pre-trial process was very lengthy" and the case was not tried until September, 2004. However, prior to trial, in July, 2004, the plaintiff driver committed suicide. Two weeks later, her husband filed an amended complaint to include wrongful death and survival claims. The trial court entered summary judgment in favor of the defendants with respect to the wrongful death claim.

The jury returned a verdict for the plaintiff with respect to the survival and loss of consortium claims. Then the trial court granted the defendants' motion to dismiss the entire case based on discovery violations.

On appeal, the Court affirmed the trial court's rulings.

The Court adopted the general rule, and held that “one may not recover damages in negligence for the suicide of another. The act of suicide is generally considered to be a deliberate, intentional, and intervening act which precludes a finding that a given defendant is, in fact, responsible for the decedent’s death.”

While there are exceptions, here, the plaintiff's psychiatric expert did not opine that the decedent was insane or otherwise was in a mental state such that she did not realize the nature and risk of her act of suicide or that she had an uncontrollable impulse or anything sufficiently close to the Restatement test to create a jury question.

Filing Fees in U.S. District Court, District of Maryland

The fee schedule, revised as of 9/19/2005.

Hurricane Related Coverage Litigation in Maryland

Today's Washington Post reported on Maryland residents who still have not recovered from Hurricane Isabel and who are involved in a class action lawsuit against FEMA and a number of insurers.

Hurricane victims who have disputed insurance claims with FEMA and their private insurers have banded together and created an interesting website.

There have been a couple of class actions filed in Maryland arising out of Hurricane Isabel. One, the "Howell" suit, concerns the method of calculating losses. A copy of the complaint is available here.

Another class action, the "Moffett" suit, was filed in June, 2005 against FEMA and a number of insurers. A copy of the complaint is available here.

Named Driver Exclusion Is Void In Commercial Auto Policies

In Zelinski v. Townsend, the Maryland Court of Special Appeals said that the named driver exclusion is void in a commercial auto policy. 

Interestingly, Harleysville, which was the insurer, had filed a declaratory judgment action in the U.S. District Court for the District of Maryland, to establish that it had no duty to defend or indemnify, based on the named driver exclusion.  The declaratory judgment action resulted in a finding that Harleysville was relieved of any obligation to defend or indemnify claims arising out of the accident in question.  However, the claimants in the underlying tort action were not made a party to the declaratory judgment action.

Meanwhile, in the underlying tort suit, there was a three day jury trial which resulted in a $6 million verdict.  The tort claimants then had a writ of garnishment issued against Harleysville Ins. Co.

Harleysville moved to dismiss the writ of garnishment, on the grounds that it had already received a judgment stating that it had no duty to defend or indemnify that claim.  The trial court granted Harleysville's motion.

On appeal, the Court of Special Appeals found that the trial court erred in dismissing the writ of garnishment, stating as follows:

It is well settled that, in a declaratory judgment action
initiated by an insurance company that seeks to be “relieved of
any duty to defend or indemnify” its insured against claims
arising out of an accident caused by the insured’s negligence,
the insured is not in privity with a victim of the insured’s
negligence. Therefore, because appellants were not parties to
the federal declaratory judgment action, there is no merit in the argument that the writ of garnishment was properly quashed on the ground of either res judicata or collateral estoppel.

The opinion does not give any details about the timing of these events, but it seems to be a very strange result , assuming that the judgment in the DJ action was handed down before the judgment in the underlying tort action.  Without doing any legal research, here is my seat of the pants view: 

Maryland is not a direct action state, and a third party tort claimant cannot bring suit directly against a tortfeasor's insurer until the claimant has received a judgment and it has gone unsatisfied.  Therefore, it seems to me that the claimants had no rights to, or interest in, the Harleysville policy until they had secured a judgment, and that they were not necessary parties to the DJ action. 

Further, after Harleysville had obtained a judgment in the DJ action that it had no obligation to defend or indemnify Townsend, the at-fault driver, he then had no right or interest in the Harleysville policy, and the claimants by taking a judgment against Townsend could not accede to rights to the policy greater than the rights that Townsend had. 

Or, to put it another way, the claimants cannot file a writ of garnishment against nonexistent insurance coverage.  A writ of garnishment can only attach property rights of the judgment debtor as they exist at the time the judgment is entered, and Townsend had no rights in that policy.

Instead of going through that kind of analysis, the Court simply rejects the notion that the federal court's judgment had a res judicata or collateral estoppel effect against the claimants.  I think that is missing the real issue.

Now, it may be that the trial court granted the motion to dismiss the writ of garnishment on res judicata or collateral estoppel grounds, although the opinion does not say that directly.  Further, it may be that the Court of Special Appeals regarded the motion to dismiss as a motion for summary judgment, because extraneous matters were considered, and that it could not affirm on grounds other than those considered by the trial court -- although the opinion does not say that either. Alternatively, it may be that the judgment in the DJ action was entered subsequent in time to the verdict in the underlying tort action -- but as I already pointed out, the opinion does not disclose the timing of these events either.

In the Maryland Daily Record, dated July 13, the lead counsel for the tort claimants is quoted as saying that "The most important part of this case in the long run is the very first part of the decision", which is what is discussed above.   That may be true, if it were possible to figure out what the Court of Special Appeals really decided here.   

I think in practice the decision will be easily distinguished.

Harleysville has a difficult decision to make as far as whether to file a petition for cert. to the Court of Appeals on this.  On one hand, they prevailed in a DJ action concerning coverage, and it must really stick in their craw to have that result disregarded by the Court of Special Appeals in such an offhand manner.  On the other hand, the Court of Special Appeals persuasively shows that the limited driver exclusion is void in a commercial motor vehicle policy.  Harleysville would be in the position of arguing to the Court of Appeals that the federal court's judgment should be determinative of the coverage question, even though it was (perhaps) wrongly decided and against the public policy of Maryland.  The result could be an even worse precedent.

Maryland Court of Appeals Holds That Failure To Renew Motion for Judgment At Close of All of the Evidence Nullifies A Party's Right to File a Motion for JNOV Following An Adverse Jury Verdict

In General Motors Corp. v. Seay, No. 66, Sept. Term 2004, the Court of Appeals of Maryland held that the terms of Maryland Rule 2-532(a) are mandatory and unambiguous.  Under that rule, a party may move for judgment notwithstanding the verdict ONLY if that party made a motion for judgment at the close of all the evidence and only on the grounds advanced in support of the earlier motion.  Thus, verdicts totaling $500,000.00 were reinstated.

Failure to renew the motion for judgment at the close of all of the evidence nullifies a party's right to file a motion for JNOV following an adverse jury verdict.

The problem was that although during the trial, GM made a motion for judgment at the close of the plaintiff's case-in-chief, and again at the close of its own case, it did not renew the motion following the presentation of rebuttal testimony by the plaintiff.

The Court of Appeals noted that the federal circuits are split regarding whether a motion or renewal of a motion for judgment at the close of all the evidence is a mere technicality or a prerequisite to a post-trial motion for judgment.

The Court remanded the case to the trial court, for resolution of plaintiff's undecided claim for punitive damages.  (However, one must wonder what chance the plaintiff has for punitive damages, where the trial court already granted a motion for JNOV.)

Maryland Court of Appeals Holds That Trial Judge Was Within His Discretion When Refusing To Allow Asbestos Defendant To Withdraw Deemed Admissions

In Wilson v. John Crane, Inc., the Maryland Court of Appeals held that:

"[T]he trial court, in disallowing Garlock leave to withdraw or amend certain admissions deemed to have been conclusively established by default, did not commit an abuse of its discretion. The trial court specifically found that petitioners would suffer prejudice if Garlock was allowed to withdraw or amend its admissions, as Garlock did not bring its motion to withdraw or amend until after discovery was closed and the trial was scheduled to begin within days."

In this case, the motion to withdraw the deemed admissions was made only days before the trial.  The plaintiff argued that withdrawal of the admissions would be unfairly prejudicial, because plaintiff had selected trial witnesses and had prepared experts in reliance on the admissions.

In making this ruling, the Court of Appeals referred to the elephantine mass of asbestos litigation and the case management problems this creates for the Maryland courts.

The Court was also unimpressed with the stated reasons for the defendant's failure to make a timely response to the requests for admissions:

Garlock was unable to provide the trial court with any legitimate excuse as to why it did not answer petitioners’ request for admissions within the temporal confines of Rule 2-424 (b). Affidavits were filed by Garlock’s counsel that suggested that its failure to respond was due to an oversight by both a paralegal who had the task of monitoring new filings in the eFiling system and the supervising attorney of that paralegal. In its memorandum in support of its motion to withdraw or amend its admissions, Garlock further casts some of the blame on the “blizzard of electronic filings” that the eFiling system has effected. We are not prepared at this time to find that a court has committed an abuse of its broad discretion in denying a party’s motion to withdraw or amend its admissions where that party’s only excuse as to why it did not timely respond to a request for admissions amounts to a plea that, because the particular attorney or firm has undertaken a large number of clients or cases, he or it cannot adequately control or oversee the proper responses to pleadings. Attorneys are required not to undertake representations unless they can adequately monitor the pleadings. This is no less so in asbestos litigation.

Comment:  It is certainly true that there is a blizzard of electronic filings in an asbestos case in the Circuit Court for Baltimore City.  There could easily be 3000-4000 electronic filings for any particular trial cluster between the time it becomes active to the date of trial, depending on the number of defendants.  Probably at least half of that email is generated in the last 4 months before trial.  At certain deadlines, there might be a new email every five minutes all day for a particular trial cluster.  A frequently sued defendant like Garlock may be involved in 12 trial clusters per year.  The argument based on the blizzard of electronic filings, in fairness, cannot be dismissed so easily.  There ought to be some sort of electronic coding or flagging of pleadings that are directed to a specific party. 

Another point is that the asbestos litigation in the Circuit Court for Baltimore City is still subject to the venerable "Case Management Order No. 1", which was signed way back in 1987.  Under that Case Management Order,  the time to respond to defendant-specific requests for admissions was enlarged from 30 days to 60 days.  The Court of Appeals doesn't mention the 60 day time period to respond, so maybe that portion of the Case Management Order has been amended at some point over the years (but I don't think so).

Anyway, assuming a 60 day period to respond, plus three extra days for service, here is how the chronology looked:

April 5, 2002 -- Requests for Admissions served.

Friday, June 7, 2002 -- Responses to requests for admissions due.

June 11, 2002 -- A couple of other defendants moved to withdraw or amend their deemed admissions, which motion was later granted by the trial court.

June 17, 2002 -- Garlock's motion to withdraw or amend deemed admissions filed.

June 24, 2003 -- Garlock's motion denied.

June 26, 2002 -- Start of trial.

In sum, the defendant here was only 10 days late in responding to the requests for admissions, which puts the plaintiff's claims of prejudice in a little better perspective.