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New York Marine and General Insurance Co. v. Junkermier, Clark, Campanella, Stevens, P.C.

United States District Court, D. Montana, Great Falls Division

January 13, 2020

NEW YORK MARINE AND GENERAL INSURANCE COMPANY, Plaintiff,
v.
JUNKERMIER, CLARK, CAMPANELLA, STEVENS, P.C., DRAGGIN' Y CATTLE COMPANY INC., and ROGER and CARRIE PETERS, individuals, Defendants. DRAGGIN' Y CATTLE COMPANY, INC., and ROGER and CARRIE PETERS, individuals, Plaintiffs,
v.
JUNKERMIER, CLARK, CAMPANELLA, STEVENS, P.C., Defendant/Third-Party Plaintiff
v.
NEW YORK MARINE AND GENERAL INSURANCE COMPANY, Intervenor/Third-Party Defendant.

          CONSOLIDATED ORDER

          Brian Morris United States District Court Judge

         Introduction

         The Court has a No. of motions in this litigation currently pending before it. This order addresses the motion of Draggin' Y Cattle Company (“Draggin' Y”), Roger and Carrie Peters (“the Peterses”) and Junkermier, Clark, Campanella, Stevens, P.C.'s (“JCCS”) to request entry of judgment pursuant to the reasonableness order (Doc. 392). It also addresses New York Marine and General Insurance Company's (“NYM”) Motion to Dismiss (Doc. 377). The order also addresses the motion of Draggin' Y and the Peterses to join and/or substitute as third-party plaintiffs, and for leave to assert third-party bad faith claims against NYM (Doc. 393).

         Request for Entry of Judgment Pursuant to the Reasonableness Order (Doc. 392)

         Draggin' Y, the Peterses, and JCCS filed a motion asking this Court to enter the stipulated judgment that the Montana district court approved as fair and reasonable. (Doc. 392.) The parties dedicate most of their briefing to the topic of whether this Court has the authority to enter the state court judgment. They dedicate little time explaining why the Court should enter the judgment now rather than at the end of this case or some other time. The arguments about entering the judgment now rather than later are best summarized as follows: “No judgment, no settlement. And if there is no settlement, then there is no case here.” (Doc. 407 at 3.)

         The Court will deny the parties' motion for now because the settlement does not require an entry of the stipulated judgment to bind the parties. The settlement contemplates the approval of the settlement as fair and reasonable and the entry of judgment as two separate events. and requires only approval to bind the parties. The settlement agreement states that the parties agree to “request . . . a hearing to approve the stipulated judgment as fair and reasonable and to enter judgment for the amount of that stipulated judgment.” (Doc. 340-3 at 5.) The settlement agreement then says in the very next sentence that if “the Court does not approve the Stipulation for Entry of Judgment, then the parties stipulate that they will jointly move to have the Lawsuit rescheduled for trial.” (Id. at 6 (emphasis added).); see Draggin' Y Cattle Co., Inc. v. Junkermier, Clark, Campanella, Stevens, P.C., 439 P.3d 935, 946 (Mont. 2019) (“The parties . . . stipulated that the settlement would not bind them unless the District Court approved it as ‘fair and reasonable.'” (emphasis added)).

         The Montana district court that approved the settlement as fair and reasonable read the settlement agreement in the same way as this Court. The Montana district court issued three orders, two of which are relevant here. First, the district court approved the settlement as fair and reasonable. (Doc. 340-14 at 17.) As a part of this order, the Montana district court determined that the Peterses, Draggin' Y, and JCCS were “bound by the terms of their settlement.” (Id.) Second, the district court ordered that a separate judgment would be entered against JCCS. (Id.) These separate orders contemplate approval and entry as distinct events and bind the parties to the settlement agreement upon approval of the settlement amount as fair and reasonable.

         Notably, the same counsel who filed the motion claiming “[n]o judgment, no settlement” have their names listed on the very same page in which the Montana district court determined that the parties were bound by the settlement agreement before that district court entered the stipulated judgment. (Doc. 340-14 at 17.) It seems reasonable to expect counsel to keep track of what happened in state court. This representation proves particularly troubling when counsel first made their “no judgment, no settlement” argument in their reply brief. At that point, counsel had read and reviewed the response brief filed by NYM. NYM had not disclosed the state court decision stating that the parties were bound by the settlement. This failure by NYM likely triggered the obligation of counsel to disclose the adverse state court decision or at minimum prohibited counsel from making the “no judgment, no settlement” argument. See Mont. Rules of Prof'l Conduct Rule 3.3(a)(2) (“A lawyer shall not knowingly . . . fail to disclose to the tribunal legal authority in the controlling jurisdiction known to the lawyer to be directly adverse to the position of the client and not disclosed by opposing counsel.”) The Court does not suggest that the parties committed a violation of Montana's Rules of Professional Conduct, but counsel must do better moving forward.

         The parties make other arguments related to the Federal Rules of Civil Procedure, claiming that certain rules require entry of the state court judgment. None of those rules require the Court to enter the state court judgment now. For this reason and because the settlement agreement binds the parties even without entry of the judgment, the Court denies for now the parties motion to enter the state court stipulated judgment.

         NYM's Motion to Dismiss (Doc. 377)

         NYM moved to dismiss JCCS's claims against NYM in the removed action under Federal Rules of Civil Procedure 12(b)(1) and (6). NYM makes two arguments in support of its motion. First, they argue that JCCS lacks “standing” to bring claims against NYM because they have assigned all rights to these claims to Draggin' Y and the Peterses. Second, they argue that the statute of limitations bars JCCS's UTPA claims.

         Legal Standard

         Defendants can bring a Rule 12(b)(1) defense in two separate ways. Defendants can make a “factual” attack, which contests the truth of plaintiff's factual allegations. See Leite v. Crane Co., 749 F.3d 1117, 1121 (9th Cir. 2014). Alternatively, defendants can make a “facial” attack, which contests whether plaintiff's allegations are sufficient on their face to invoke federal jurisdiction. See Id. Here, we have a facial attack. Under a facial attack, the Court acts just as it would under a motion to dismiss under Rule 12(b)(6). The Court must accept plaintiff's allegations as true and draw all reasonable inferences in plaintiff's favor. See id.; Snyder & Assocs. Acquisitions LLC v. United States, 859 F.3d 1152, 1156 (9th Cir. 2017) (same).

         JCCS's Standing to Bring Claims

         NYM claims that JCCS cannot bring its breach of contract claim and UTPA claim because it assigned all rights to bring these claims to Draggin' Y and the Peterses. (Doc. 377 at 19-21.) JCCS does not dispute that it assigned all rights to bring these claims to Draggin' Y and the Peterses. JCCS instead argues that Federal Rule of Civil Procedure 17(a)(3) (“Rule 17”) allows the case to move forward as long as Draggin' Y and the Peterses have joined or are substituted into JCCS claims. (Doc. 397 at 10-11.)

         Federal Rule of Civil Procedure 17(a)(3) states that a court cannot dismiss a case “for failure to prosecute in the name of the real party in interest until, after an objection, a reasonable time has been allowed for the real party in interest to ratify, join, or be substituted into the action.” At minimum, Rule 17 applies when parties have made a an “understandable” error in naming the real party in interest. Jones v. Las Vegas Metro. Police Dep't, 873 F.3d 1123, 1128 (9th Cir. 2017) (quoting Goodman v. United States, 298 F.3d 1048, 1053-54 (9th Cir. 2002)). Parties must “hardly [provide] the best excuse” for their error in naming the proper party to receive relief under Rule 17, but the excuse must nonetheless be reasonable. Id.

         Here, the Court will grant JCCS relief under Rule 17 because its error proves reasonable. As NYM explained in its own motion to dismiss, JCCS attempted to bring its breach of contract claims and UTPA claims on May 10, 2019, in the state court action, later removed and consolidated with the federal action. (Doc. 378 at 16.) The Montana district court did not approve the stipulated judgment-which as discussed in more detail below acts as the date that the parties' settlement agreement went into effect and thus the date that JCCS assigned its rights to Draggin' Y and the Peterses-until June 17, 2019. (Id.) Thus, at the time that JCCS filed its motion to bring claims in the removed action, JCCS remained the real party in interest.

         Then, “without any notice” to either party, the Montana district court granted JCCS motion to bring its breach of contract claims and UTPA claims in that court. (Id. at 17.) The district court did not consult JCCS or any of the parties on whether JCCS remained the real party in interest now that the stipulated judgment had been approved. (See id.) This Court will not punish JCCS because the Montana ...


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