Myrtis Faye Terrell sued Raymond De-Conna and the DeConna Ice Cream Co. in an effort to recover under a Mississippi state law loss of consortium theory for injuries to her husband. She also sued United States Fidelity & Guaranty Co., seeking a declaration as to the insurance coverage applicable to DeConna and the ice cream company. The district court held that, under federal rules of issue preclusion, an earlier judgment in a suit brought by Myrtis Faye’s husband, Ronald, against DeConna and the ice cream company barred Myrtis Faye from litigating the theories of liability which she had alleged against those two defendants. The earlier litigation had adjudged the DeConna Ice Cream Company not liable, while holding Raymond DeConna liable for negligence but not gross negligence.
After trial on damages only, the district court entered judgment for Myrtis Faye against Raymond DeConna for $35,000. After a separate bench trial on the insurance coverage issues, the district court found that the only policy which might have covered the judgment against Raymond had been exhausted by Ronald Terrell’s earlier recovery.
Myrtis Faye now appeals from the judgment for the defendant ice cream company and the declaratory judgment regarding insurance coverage. She contends that the district court impermissibly relied upon the doctrine of issue preclusion with respect to both judgments. She also contends that the district court erred by denying her a jury trial on the insurance coverage issues, and that the court’s reading of the insurance contracts was erroneous.
We find that the district court correctly applied issue preclusion to the claims against the ice cream company, and that the preclusion issues are moot with respect to the insurance coverage action because the court did not invoke issue or claim preclusion when disposing of that suit. We further find that Myrtis Faye had no right to a jury trial on her insurance coverage claims because the cause of action underlying the declaratory action was equitable. Finally, we find no error in the district court’s construction of the insurance contracts. We therefore affirm the judgment of the district court.
I
Raymond DeConna was driving to college when he fell asleep at the wheel and collided with Ronald Terrell. The van which DeConna was driving at the time had apparently been used in connection with the family ice cream business — the DeCon-na Ice Cream Co., Inc. — and the van’s ownership has been a matter of dispute. Ronald sued Raymond DeConna and the ice cream company, and the cause was heard by a federal court sitting in diversity. De-Conna confessed negligence, but was absolved of gross negligence, and Ronald obtained a judgment against him in excess of
Myrtis Faye Terrell thereafter filed this suit for loss of consortium, again naming both Raymond DeConna and DeConna Ice Cream as defendants. Myrtis Faye also named United States Fidelity & Guaranty Co. as a defendant, seeking a judicial declaration that the accident injuring her husband was covered by policies not exhausted by the prior litigation. Myrtis Faye filed her suit in Mississippi state court, but the defendants removed to federal court.
The defendants sought to bar relitigation of issues decided in the prior suit. The district court, applying federal principles of issue preclusion, precluded relitigation of DeConna’s liability and the ice cream company’s liability.
The court severed the insurance coverage claims pursuant to F.R.Civ.P. 42(b), and set them for separate trial. The court denied Myrtis Terrell’s request for a jury trial on the claims against the insurance company. After a bench trial, the court decided that the only insurance policy which might have applied to Myrtis Faye’s recovery from Raymond was the individual policy of Vincent DeConna, Raymond’s brother, but that the coverage limits of Vincent’s policy had already been exhausted. The insurance coverage dispute turned in substantial part upon the ownership of the van driven by DeConna. The court heard evidence about the van’s ownership, and eventually resolved the issue in accord with the findings made in the prior litigation. The parties dispute whether the court did, or could, rely on issue preclusion grounds for its resolution of the ownership question.
After trial on the damages issue only, judgment for $35,000 in damages was entered against Raymond DeConna. Judgment was entered in favor of the ice cream company.
To summarize, the procedural history of Myrtis Faye’s suit in the district court was as follows. The district court first found the DeConna Ice Cream Co. not liable, and Raymond DeConna liable for negligence but not gross negligence, on grounds of issue preclusion and without holding any trial. The district court then severed the insurance coverage and damages suits. The insurance coverage suit was tried to the bench, despite Myrtis Faye’s jury demand. The damages issue was tried separately. Because of the district court’s findings with respect to issue preclusion, there was never any trial in Myrtis Faye’s suit on the issues dispositive of her allegations of liability against the ice cream company.
On appeal, Myrtis contends that the requisite mutuality of parties is lacking, and so issue preclusion does not apply; that the ownership of the van was not fully litigated in the prior suit, and so should have been fully litigated in the second suit; that her demand for a jury trial on the claims for declaratory relief was improperly denied; and that the district court erred in its construction of the insurance contracts.
II
At oral argument it developed that there was some ambiguity about what issues had actually been raised on appeal. We therefore begin by clarifying that matter. Myr-tis Faye’s notice of appeal sought review only of the insurance coverage judgment and the judgment for DeConna Ice Cream. No appeal was taken from the judgment against Raymond DeConna, and Raymond DeConna is therefore not a party to this appeal. Although Myrtis Faye’s brief is devoted almost exclusively to analysis relevant only to the insurance coverage dispute, and although Myrtis Faye’s repeated request for relief — included in both her summary of argument and her conclusion, as well as in the text of her brief — asks only that this court remand the insurance coverage issues for a jury trial, some of her arguments about issue preclusion could be applied to the district court’s judgment in favor of the ice cream company. We therefore address the merits of Myrtis
Ill
We begin with the appeal from the district court’s order barring relitigation of the issues relevant to the ice cream company’s liability. Two of Myrtis Faye’s arguments appear applicable to that order. First, Myrtis Faye contends that the company waived the preclusion defense by failing to plead it. Second, she contends that there is insufficient mutuality of parties to justify the defensive use of issue preclusion by a non-party.
The waiver argument is without merit. The defendants specifically raised the defense of issue preclusion by a motion to dismiss. That motion was sufficient to raise the defense, and there was therefore no waiver.
See, e.g., American Furniture Co., Inc. v. International Accommodations Supply,
With respect to the mutuality issue, Myrtis Faye contends that under Mississippi law “the issues in a loss of consortium case were to be determined wholly independent of any adjudication in the suit brought by the injured spouse, even to the extent that a loss of consortium action may be brought whether or not the injured spouse sues.” The Fifth Circuit, however, has made clear that when a federal court renders a decision in a diversity case, the decision’s preclusive effect is measured by federal principles of preclusion.
AerojetGeneral Corp. v. Askew,
Under the federal rules of issue preclusion, a party is prevented from relitigating issues provided:
(1) that the issue at stake be identical to the one involved in the prior litigation;
(2) that the issue has been actually litigated in the prior litigation; and
(3) that the determination of the issue in the prior litigation has been a critical and necessary part of the judgment in that earlier action.
Wehling v. Columbia Broadcasting System,
Complete identity of parties in the two suits is not required. A preclusion defense, subject to certain conditions, may be invoked by a non-party against a party to the prior suit, and, in limited instances, against a non-party by a party to the prior suit.
See, e.g., Parklane Hosiery v. Shore,
A spousal claim for loss of consortium predicated upon an accident that formed the basis for an earlier suit by the injured spouse has been recognized by some courts as one such exception. There is no case directly on point from this Circuit. The general federal rule regarding the use of issue or claim preclusion against a non-party states that
First, a nonparty who has succeeded to a party’s interest in property is bound by any prior judgments against that party- Second, a nonparty who controlled the original suit will be bound by the resulting judgment_ Third, federal courts will bind a nonparty whose interests were represented adequately by a party in the original suit.
Freeman v. Lester Coggins Trucking Co.,
Virtual representation does not exist between two plaintiffs merely because they raise similar claims and employ the same counsel. Nor will these two elements in combination with a familial relationship between the plaintiffs suffice to establish virtual representation for issue preclusion purposes.
Freeman,
This court has repeatedly indicated that the “virtual representation” exception to the mutuality requirement “demands the existence of an express or implied legal relationship in which parties to the first suit are accountable to nonparties who file a subsequent suit raising identical issues.”
Freeman,
The
Southwest Airlines
test cannot be the end of our inquiry, however, for although there is no relevant relation between the legal
parties,
there is a relationship between their interests, and more importantly, there is a legal, rather than simply factual relationship between their
claims:
in particular, Myrtis Faye’s claim is derivative from Ronald’s.
Chocktaw, Inc. v. Wichner,
This distinction is reflected in the
Restatement (Second) of Judgments
(1982), which forms the basis for the doctrine developed from
Southwest Airlines.
The rationale of the exceptions discussed in
Southwest Airlines
derives from
Restatement
§§ 30, 31, 34, and 39-41.
See Hardy v. Johns-Manville Sales Corp.,
In § 48(2), the Restatement speaks to exactly the point at issue here, and announces an issue preclusive bar against the spouse bringing the second suit:
When a person with a family relationship to one suffering personal injury has a claim for loss to himself resulting from the injury, the determination of issues in an action by the injured person to recover for his injuries is preclusive against the family member, unless the judgment was based on a defense that is unavailable against the family member in the second action.
This rule applies issue preclusion to the derivative claims of the second spouse, but does not speak of claim preclusion. The difference will, of course, be important in instances when the first spouse was victorious on the issues litigated, or when the second spouse asserts theories of liability not litigated in the first case.
The commentary of Professor Wright and his colleagues sheds additional light on the matter. They state that
The traditional rule has been that even after the injured spouse has lost an action to recover for personal injuries, theother spouse may maintain an action for loss of consortium free from any claim or issue preclusion. Modem decisions, however, have increasingly adopted the view that loss by the injured spouse establishes issue preclusion in a subsequent action by the other for loss of consortium. A small number of decisions have gone one step further to rale that a claim for loss of consortium can be pursued only if it is joined in the action brought by the injured spouse. As to claims for loss of consortium, this mandatory party joinder response may be the best method of avoiding unnecessary duplicate litigation.
Wright, Miller & Cooper, 18 Federal Practice and Procedure § 4459 at 525-26.
We find that the Restatement rule appropriately reflects the principles underlying the federal law of issue preclusion. Although close family relationships will not alone suffice to establish privity between successive parties for purposes of issue or claim preclusion, the relevant considerations differ when, as in this case but unlike in Freeman, the successor plaintiff's claims are also derivative from the first plaintiffs claims. In that instance, we will apply the Restatement rule, and permit the twice-sued defendant to raise issue preclusive defenses in the subsequent suit by a spouse raising derivative claims.
Finally, because Myrtis Faye apparently seeks to rely on the Mississippi law of issue preclusion, we note that there is no tension here between, on the one hand, Aerojet's rule requiring that federal decisions in diversity cases be given preclusive effect according to federal rules of preclusion, and, on the other hand, the rule of
Erie v. Tompkins,
Some commentators have suggested that application of the
Aerojet
rule may have to be tempered by a sensitivity to substantive policy concerns underlying the distinctions in state claim preclusion doctrine.
See
Wright, Miller & Cooper, 18A
Federal Practice and Procedure
§ 4472 at 732-34. This case might first appear to raise problems of this sort, since Mississippi has apparently held that because the personal injury and loss of consortium claims of two spouses are distinct, a subsequent loss of consortium suit is not subject under Mississippi law to any preclusive bar — whether issue preclusive or claim preclusive — resulting from the injured spouse’s prior suit.
Palmer v. Clarksdale Hospital,
Nonetheless, even were we not bound, as we are, to follow
Aerojet,
we see no conflict between
Erie
and our application of federal claim preclusion rules in this case. First, the federal rules of preclusion are themselves sensitive to the substantive distinctions of state law, as they of course must be. Our discussion above, which makes reference to the state law relationships between the parties and their claims, makes this sensitivity clear. Thus, although we apply federal rather than Mississippi principles of preclusion, those principles direct us back to Mississippi law for
Moreover, Mississippi’s substantive distinctions are preserved along lines articulated by the First Circuit in
Roy v. Jasper Corp.,
In this case, Myrtis Faye sought to hold the ice cream company liable only on the basis of theories already fully litigated in Ronald’s earlier suit: negligent entrustment and agency. Both issues were determined adversely to Ronald, and both were essential to the first court’s order entering judgment for the ice cream company against Ronald. The second district court so found, and Myrtis Faye has nowhere argued to the contrary. We therefore uphold the district court judgment determining that the ice cream company is not liable to Myrtis Faye.
IV
A. Issue Preclusion in the Coverage Suit
Myrtis Faye also contends that the district court improperly applied the doctrine of issue preclusion in order to decide ownership of the van for purposes of the insurance coverage litigation. In addition to arguing mutuality issues similar to those discussed above, Myrtis Faye contends that the ownership question was not essential to the judgment entered by the district court in her husband’s suit, and so has not been conclusively determined.
We find it unnecessary to deal with the merits of this argument, because the district court did not in fact rely upon preclusion considerations when adjudicating the van ownership issue in the insurance coverage litigation.
In footnote five of its opinion addressing Myrtis Faye’s insurance coverage claims, the district court concedes that the finding with respect to ownership was not essential to the judgment in the first litigation. The court goes on to say that it heard evidence with respect to the issue of ownership, and eventually rules in accordance with the first court’s suggestion — not because of issue preclusion, but rather because the second court agreed with the first. The preclusion issue would presumably become important only if the ownership issue should have been tried to a jury, since preclusion would then dispose of fact issues that might otherwise exist and necessitate a remand.
B. Jury Trial
The district court, relying on the test of
Ross v. Bernhard,
In order to apply these rules, we turn to Mississippi law in order to identify the non-declaratory antecedent to Myrtis Faye’s insurance coverage suit. In the recent case
V
Finally, Myrtis Faye contests the district court’s interpretation of the insurance contracts. The district court found that Florida law governed the meaning of the contracts, a conclusion apparently accepted by both parties.
Three policies were implicated by Myrtis Faye’s claim: a “master policy” listing Don DeConna, Louisa DeConna, John F. DeCon-na, DeConna Ice Cream Co., Inc., and De-Conna Leasing and Sales, Inc., as named insureds; an “individual policy” for Vincent DeConna; and an “excess indemnity policy.” The district court determined as a factual matter that the van was owned either by Raymond or Vincent DeConna, and not by any insured named in the master policy. The court then concluded as a matter of law that the master policy would not govern any judgment against Raymond for the injuries to Ronald. The court concluded that there was likewise no coverage under the excess policy, because the excess policy applied to liability covered by the master policy, but not to liability covered by Vincent's individual policy. Finally, the court concluded that even if Vincent’s individual policy covered the judgment against Raymond, the liability limits upon the policy had been exhausted by the judgment in favor of Ronald Terrell. The court therefore concluded that there was no applicable coverage.
Myrtis Faye’s arguments respecting interpretation of the contracts are wrapped up with, and difficult to disentangle from, her arguments about the ownership of the van. Separating the arguments as best we can, we find no error in the district court’s interpretation of the contracts.
First, insofar as Myrtis Faye challenges the district court’s findings with respect to van ownership, her arguments are without merit. Under Florida law, legal title alone is not determinative of ownership; rather, ownership is a factual issue to be resolved on the basis of the facts and circumstances of any given case.
See, e.g., McCall v. Garland,
Second, Myrtis Faye’s objections to the district court’s construction of the insurance contracts are likewise without merit. The district court found that Raymond De-Conna was not himself a named insured under the master policy, and that the van was not owned by a named insured because it was owned either by Raymond or Vincent — neither of whom was a named insured. As the insurance company points out in its brief, Myrtis Faye’s arguments pertinent to the master policy are based upon the wrong textual provision. The district court identified the correct provision, and we find no defect in its interpretation of the provision. Myrtis Faye’s efforts to bring the judgment within the policy by showing that Vincent was an officer of the corporation, and by assuming that he
Myrtis Faye’s attempts to benefit from the excess liability policy are likewise unsuccessful because she fails to explain how that policy can apply if the master policy does not. Finally, Myrtis Faye’s arguments about the individual policy of Vincent DeConna are not responsive to the district court’s conclusion that the coverage limits of that policy had been exhausted.
VI
For the reasons given, the judgment of the district court is, in all respects,
AFFIRMED.