Winstead v. State Farm Mutual Automobile Insurance Co.
669 F. App'x 910
9th Cir.2016Background
- Plaintiffs Alyssa Winstead and Lisa Patton sued State Farm; district court granted State Farm’s Rule 12(b)(6) motion to dismiss and declined to remand; plaintiffs appealed.
- Winstead alleged violations of Montana’s Unfair Trade Practices Act (UTPA) based on State Farm’s reliance on Montana’s collateral source statute when making a settlement offer.
- The collateral source statute, Mont. Code Ann. § 27-1-308, can reduce a plaintiff’s recovery by amounts paid from collateral sources that lack subrogation rights.
- Winstead argued State Farm improperly used the statute to lower its settlement offer and sought declaratory and monetary relief under the UTPA.
- The district court dismissed for failure to state a claim and declined to remand under federal abstention doctrines; plaintiffs appealed jurisdictional and merits rulings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether federal court should remand/abstain (Brillhart/Pullman) | Remand/abstention appropriate due to state-law issues | No abstention; federal court may decide claims joined with declaratory relief | District court did not abuse discretion in declining to abstain/remand |
| Article III justiciability for declaratory relief | There is no justiciable controversy | There is an actual, immediate controversy suitable for declaratory relief | Court: justiciability requirements satisfied |
| Whether State Farm’s consideration of collateral source statute violated UTPA | Considering the statute in settlement negotiations is unlawful and violated UTPA | Reliance on the collateral source statute during settlement negotiations is permissible | Dismissal on merits correct; Winstead fails to state a UTPA claim |
| Standing to challenge constitutionality of Montana’s collateral source statute | Plaintiff can challenge the statute’s constitutionality | Plaintiff lacks standing because statute does not apply to settlements | Winstead lacks standing to mount a constitutional challenge |
Key Cases Cited
- Kahle v. Gonzales, 487 F.3d 697 (9th Cir. 2007) (standard of review for Rule 12(b)(6) dismissals)
- Gov’t Emps. Ins. Co. v. Dizol, 133 F.3d 1220 (9th Cir. 1998) (abstention and remand standards)
- United Nat’l Ins. Co. v. R&D Latex Corp., 242 F.3d 1102 (9th Cir. 2001) (declining remand when other claims accompany declaratory relief)
- Colorado River Water Conservation Dist. v. United States, 424 U.S. 800 (U.S. 1976) (abstention principles)
- Maryland Cas. Co. v. Pac. Coal & Oil Co., 312 U.S. 270 (U.S. 1941) (requirements for declaratory judgment justiciability)
- Miller v. State Farm Mut. Auto. Ins. Co., 155 P.3d 1278 (Mont. 2007) (insurer may consider collateral source reduction in settlement offers)
- Holmgren v. State Farm Mut. Auto. Ins. Co., 976 F.2d 573 (9th Cir. 1992) (bad faith where insurer exploited claimant’s urgent need to force low settlement)
- Babbitt v. United Farm Workers Nat. Union, 442 U.S. 289 (U.S. 1979) (standing; realistic danger of sustaining direct injury required)