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Schull v. Maryland Casualty Co.

United States District Court, D. Montana, Helena Division

March 22, 2019

BILLIEJ. SCHULL, et al., Plaintiffs,
v.
MARYLAND CASUALTY COMPANY, a Maryland Corp; and DOES A - Z, Defendants.

          OPINION AND ORDER

          CHARLES C. LOVELL SENIOR UNITED STATEST DISTRICT JUDGE

         Defendant Maryland Casualty Company (Maryland Casualty or MCC), now known as Zurich American Insurance Company, successor by merger to Maryland Casualty as of December 31, 2015[1], has moved under Fed. R. Civ. Pro. 12(b)(6) to dismiss all but one of the claims[2] asserted against it in the Eighth Amended Complaint With More Definite Statement based on the statute of limitations.

         The twenty-nine plaintiffs named in the complaint are all represented by the same attorneys. Plaintiffs' counsel concedes that Maryland Casualty's motion is well taken as to Plaintiffs Randy J. Carlson and George P. Williams. Plaintiffs' counsel also concedes that Maryland Casualty's motion is well taken as to the survival claims brought by personal representatives on behalf of the estates of Richard G. Davidson, Donald A. Johnson and Eddie E. Eggers, but opposes the motion as to their wrongful death claims and as to all claims raised by the remaining plaintiffs.[3] (Doc. 55 at 5).

         PROCEDURAL BACKGROUND

         Twenty-four of the plaintiffs in this case were employed by W.R. Grace (Grace) in Libby, Montana. Five of the plaintiffs are "non-worker spouses or children of Grace workers who were [allegedly] exposed to asbestos carried home on Grace workers' clothing." (Doc. 55 at 5). Maryland Casualty was "Grace's primary general liability insurer and workers' compensation carrier from 1962 to 1973." (Doc. 46 at 6).

         Grace filed for bankruptcy in the United States Bankruptcy Court for the District of Delaware (Delaware Bankruptcy Court) on April 2, 2001. Watson v. BNSFRy. Co., 405 P.3d 634, ¶ 5 (Mont. 2017). On April 2, 2001, the Delaware Bankruptcy Court granted Grace's request for a temporary restraining order enjoining the prosecution or commencement of certain actions. (Doc. 46-1). On May 3, 2001, the Delaware Bankruptcy Court granted Grace's motion for preliminary injunction staying and enjoining all actions, including cases filed or pending in any court against Maryland Casualty, pending a final judgment in the adversary proceeding in bankruptcy court. (Doc. 46-3)

         Plaintiffs Schull, Denning, Fiebelkorn, Mack, Fredenberg, Benoit, and Troyer filed a complaint against Maryland Casualty in the Circuit Court for Baltimore City, Maryland (Baltimore case) on June 6, 2001. Plaintiff Johnson was added to the Baltimore case on July 25, 2001, and Plaintiff LeCount was added on December 13, 2001.[4]

         Plaintiffs filed the instant case in the Montana First Judicial District Court, Lewis and Clark County, on November 19, 2001. (Doc. 5 at 15). The only defendant named in Plaintiffs' initial complaint was the State of Montana. (Doc. 6 at 5). Plaintiffs filed an amended complaint adding Maryland Casualty on March 22, 2002. (Doc. 7). There is nothing in the state court record indicating that either the amended complaint or the second amended complaint, which was filed on July 11, 2002, were served on Maryland Casualty. (Doc. 5).

         On January 22, 2002, the Delaware Bankruptcy Court modified its "May 3, 2001 Injunction for the express purpose of 'reinstating] the bar against the commencement of new actions against Affiliated Entities."' Watson, 405 P.3d at ¶ 20. In its January 22, 2002, Order, the Bankruptcy Court stated: "Any additional Actions that are filed and served upon Affiliated Entities are, upon completion of service, stayed and enjoined pending a final judgment in this adversary proceeding or further order of this Court;." (46-4 at 5).

         The Bankruptcy Court clarified the application of its injunction as to affiliated entities again on June 20, 2002, when it denied a motion made by Carole Gerard. (Doc. 46-5). Gerard sought clarification of the Bankruptcy Court's injunction to allow her to proceed with a civil suit against Maryland Casualty filed in Baltimore, Maryland. Gerard continued to pursue her civil suit after the Bankruptcy Court denied her motion, resulting in a contempt order being entered against Gerard's counsel. (Doc, 55-4). Gerard was represented by Jon L. Heberling and McGarvey, Heberling, Sullivan & McGarvey, P.C. on May 24, 2004, when the Bankruptcy Court entered its contempt order. (Doc. 55-4 at 2). Shortly after the contempt order was issued, Mr. Heberling, who represented Plaintiffs in the instant case until recently, filed a notice of dismissal without prejudice of their case against Maryland Casualty and a No. of other defendants.[5]

         The Delaware Bankruptcy Court's injunction was lifted on February 3, 2014. Watson, 405 P.3d at ii 21. Plaintiffs filed their Seventh Amended Complaint on June 6, 2014. (Doc. 13). The Eighth Amended Complaint was filed on May 8, 2017. (Doc. 14). Maryland Casualty executed an acknowledgment and waiver of service on June 1, 2017, (Doc. l at ii 7), and removed the case to federal courtonJune30, 2017. (Doc. 1).

         LEGAL STANDARD FOR MOTION TO DISMISS

         When determining a motion to dismiss under Rule 12(b)(6), this Court accepts all factual allegations and reasonable inferences as true and construes them in the light most favorable to the nonmoving party, but does not consider conclusory allegations of law and unwarranted inferences. Adams v. Johnson, 355 F.3d 1179, 1183 (9th Cir.2004) (citing Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir.2001)). To survive a 12(b)(6) motion to dismiss, a plaintiff must allege sufficient facts to state a "claim to relief that is plausible on its face." Bell Atl. Corp, v. Twombly, 550 U.S. 544, 570 (2007). "When a motion to dismiss is based on the running of the statute of limitations, it can be granted only if the assertions of the complaint, read with the required liberality, would not permit the plaintiff to prove that the statute was tolled." Cervantes v. City of San Diego, 5 F.3d 1273, 1275 (9th Cir.1993) (quoting Jablon v. Dean Witter & Co., 614 F.2d 677, 682 (9th Cir. 1980)).

         Although a court is generally limited to considering the contents of the complaint when deciding a Rule 12(b)(6) motion, "a court may properly look beyond the complaint to matters of public record and doing so does not convert a Rule 12(b)(6) motion to one for summary judgment." Mack v. S. Bay Beer Distributors, Inc., 798 F.2d 1279, 1282 (9th Cir.1986), abrogated on a different issue by Astoria Fed. Sav. and Loan v. Solimino, 501 U.S. 104, 107 (1991). The history of this case, which Plaintiffs originally filed in state court against the State of Montana in November of 2001, is unusually complex and involves documents filed in state court, which have been incorporated into this case, and various orders entered by the United States Bankruptcy Court for the District of Delaware. Both parties have cited orders entered by the Delaware Bankruptcy Court and this Court takes judicial notice of those orders in deciding Maryland Casualty's motion to dismiss.

         DISCUSSION

         The Court's analysis of the statute of limitations issues raised by the parties begins with the following basic principles. This Court applies the state law of the forum state when deciding substantive issues in cases, like this, in which its jurisdiction is based on diversity of citizenship. Erie R. Co. v. Tompkins, 304 U.S. 64, 73 (1938). The Court therefore looks to Montana law to determine the statute of limitations and related issues raised by the parties. Cervantes, 5 F.3d at 1275.

         Montana's general tort limitations period is three years and applies to Plaintiffs' bad faith and negligence claims. Mont. Code Ann. § 27-2-204(1) (2017).[6] In Montana, "a claim or cause of action accrues when all elements of the claim or cause exist or have occurred, the right to maintain an action on the claim or cause is complete, and a court or other agency is authorized to accept jurisdiction of the action." Mont. Code Ann. 27-2-102(a) (2017). The statute of limitations for a wrongful death action is also three years in Montana, unless the wrongful death results from homicide. Mont. Code Ann. § 27-2-204(2) (2017). Wrongful death claims accrue at the time of decedent's death. Carroll v. W.R.Grace & Co., 830 P.2d 1253, 1255 (Mont. 1992).

         The Montana Supreme Court began using the discovery doctrine to toll the statute of limitations long before the Montana Legislature adopted the discovery doctrine by statute in 1987. See Wilson v. Brandt, 406 P.3d 452, ¶¶ 16 - 17 (Mont. 2017) (discussing history of discovery doctrine). "The doctrine was based on equitable considerations of 'giving full scope to the statute of limitations on the one hand and according a reasonable measure of justice to the plaintiff on the other."' Id. at ¶ 16 (quoting Grey v. Silver Bow Cnty., 425 P.2d 819, 821 (Mont, 1967).

         The Montana Supreme Court recognizes the doctrine of equitable tolling, which "arrests the running of statutes of limitation while the claimant reasonably and in good faith pursues one of several possible legal remedies." Sorenson v. Massey-Ferguson, Inc., 927 P.2d 1030, 1032 (Mont. 1996). A plaintiff seeking application of the equitable tolling doctrine "must first show a reasonable and good faith pursuit of one of several possible remedies and then demonstrate the [following] three criteria ... have been satisfied: (1) the defendant was notified timely within the statute of limitations by the filing of the first claim; (2) the defendant's ability to gather evidence for defense of the second claim was not prejudiced; and (3) the plaintiff reasonably and in good faith filed the second claim." Lozeau v. Geico Indemnity Co., 207 P.3d 316, ¶ 14 (Mont. 2009).

         Montana law protects injured parties who are prohibited from filing suit by an injunction or court order. When an injunction or court order stays the commencement of an action, the time during which that order is in place "is not part of the time limited for the commencement of the action." Mont. Code. Ann. 27-2-406 (2017). In other words, the limitation period is tolled while an injunction or court order prohibits a party from filing a civil suit.

         In considering issues relating to the statute of limitations in Montana, this Court must keep in mind that the Montana Rules of Civil Procedure allow plaintiffs far more time to serve a filed complaint than the Federal Rules. A plaintiff has three years to accomplish service of process under Mont. R. Civ. P. 4(t) while a plaintiff in most cases has only 90 days to serve a filed complaint under Fed.R.Civ.P. 4(m).

         APPLICATION & ANALYSIS

         Accrual Dates for Individual Plaintiffs

         The Montana Supreme Court considered the accrual date for asbestosis related claims in Orr v. State, 106 P.3d 100 (Mont. 2004). After noting the lack of dispute as to the fact that "asbestosis can take years to manifest," the Court held that plaintiffs' negligence claims against the State accrued when Plaintiffs' asbestosis related diseases manifested. Id. at ¶ 72. The Montana Supreme Court reasoned that the provisions of "Montana's statutory version of the discovery rule" are "instructive on the question of when a Montana cause of action accrues." Id. at ¶ 76. The Court noted that Montana and other states adopted the discovery doctrine "because it fairly allows injured plaintiffs to seek relief for long-dormant injuries caused by tortious conduct that occurred much earlier." Id. at ¶ 73. The parties in this case appear to agree that the negligence and bad faith claims accrued when the particular plaintiff making the claim was diagnosed with asbestosis and that the wrongful death claims accrued at death.

         The following information is drawn from the second attachment to the Eighth Amended Complaint With More Definite Statement. (Doc. 40-2).

         1. Plaintiff Schull's negligence and bad faith claims accrued when he was diagnosed, on August 26, 1998.

         2. Plaintiff Denning's negligence and bad claims accrued on July 22, 1998 and his wrongful death claim accrued on June 8, 2004.

         3. Plaintiff Fiebelkorn's negligence and bad faith claims accrued when he was diagnosed, on July 28, 1998.

         4. Plaintiff Mack's negligence and bad faith claims accrued when he was diagnosed, on July 28, 1998.

         5. Plaintiff Fredenberg's negligence and bad faith claims accrued when he was diagnosed, on July 28, 1998.

         6. Plaintiff Johnson's negligence and bad faith claims accrued on November 9, 1981 and his wrongful ...


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