LINDA SELLERS v. STEPHAN KURDILLA and DANIEL STROUD
Supreme Court No. S-15685
THE SUPREME COURT OF THE STATE OF ALASKA
August 12, 2016
Opinion No. 7116
Superior Court No. 4FA-14-01376 CI
Notice: This opinion is subject to correction before publication in the PACIFIC REPORTER. Readers are requested to bring errors to the attention of the Clerk of the Appellate Courts, 303 K Street, Anchorage, Alaska 99501, phone (907) 264-0608, fax (907) 264-0878, email corrections@akcourts.us.
Appearances: Sandra K. Wilson, Stepovich & Vacura Law Office, Fairbanks, for Petitioner. Reilly Cosgrove and Michael C. Kramer, Kramer and Associates, Fairbanks, for Respondents.
Before: Stowers, Chief Justice, Fabe, Winfree, Maassen, and Bolger, Justices.
MAASSEN, Justice.
I. INTRODUCTION
Several men were in a car that rear-ended the plaintiff’s vehicle. The plaintiff sued the car’s owner, believing he had been driving. The car’s owner moved to dismiss the lawsuit on the basis of an affidavit from a second man, who claimed he was driving at the time of the accident. The plaintiff amended her complaint to name both men. The second man then moved to dismiss the claim against him, arguing that under
We granted review. We conclude that the plaintiff’s amended complaint met the requirements for relation back under
II. FACTS AND PROCEEDINGS
A. Facts
Linda Sellers’s car was rear-ended by a Dodge Durango on January 4, 2010. The Durango carried at least three men, including the owner, Stephan Kurdilla, and Daniel Stroud. Sellers later attested by affidavit that the Durango’s driver approached her vehicle, identified himself as Stephan Kurdilla, and gave her an insurance identification card with Kurdilla’s name on it. She attested that she copied down the information from the card. Her passenger, Bonnie Largen, affirmed in her affidavit that she saw the Durango’s driver hand Sellers an insurance identification card, heard Sellers identify the driver as Kurdilla, and saw her copy down the information from the card. The police did not respond to the scene of the accident but
In June 2010, attorney Michael Stepovich notified State Farm that he represented Sellers “in regard to injuries she sustained in a rear-ending by your insured“; in his letter he named Kurdilla as “Your Insured.” State Farm replied on July 30, this time identifying “Our Insured” as Stroud. Its next two letters identified Kurdilla as its insured; its next two named Stroud; and the two after that again named Kurdilla. All in all, State Farm identified Kurdilla as its insured eleven times and Stroud four times in its correspondence with Stepovich.
B. Proceedings
On January 4, 2012, the last day before the statute of limitations expired, Sellers filed a complaint naming Kurdilla as the defendant and alleging that he had been driving the Durango at the time of the accident.1 Sellers had difficulty locating Kurdilla for service of process, and State Farm declined to accept service on his behalf. On April 6, 2012, Sellers filed an affidavit of due diligence and a motion for leave to serve Kurdilla by publication, which the court granted on April 16. Sellers published the required notice four times in May and sent a certified copy to Fort Wainwright, where Kurdilla had been stationed. Eventually Kurdilla was served at Fort Bragg, North Carolina, on May 11, 2012.
Michael Kramer, the attorney State Farm retained to represent Kurdilla, later attested by affidavit that Kurdilla called him on May 16, 2012, and told him that Stroud was the driver and that he (Kurdilla) had called Stepovich earlier that day with Stroud’s contact information. Stepovich, however, disputes having received such a call from Kurdilla; he contends that it was not until a few months later, when Kurdilla filed a motion to dismiss the case, that Sellers first had notice that Stroud claimed to be the driver.
Kramer filed his entry of appearance on Kurdilla’s behalf on June 1. On August 16 Kurdilla filed a motion to dismiss supported by a two-line affidavit from Stroud asserting that he, Stroud, had been driving at the time of the accident. Sellers opposed the motion to dismiss and filed an amended complaint that added “and/or Daniel Stroud” to the allegations of driver negligence. Sellers also moved for a continuance pursuant to
Stroud, also represented by Kramer, then filed a motion to dismiss the new claim against him on the grounds that Kurdilla’s phone call to Stepovich, together with State Farm’s letters, had put Sellers on early notice that Stroud was actually the driver and that the statute of limitations on a claim against him had now expired. Stroud also directly disputed Sellers’s description of the relevant events by attesting in a supporting affidavit that at the time of the collision both he and Kurdilla approached Sellers’s car, that Kurdilla “gave her his insurance card and clearly identified himself as the owner of the vehicle, and [that] [Stroud] clearly identified [him]self as the driver of the vehicle.”
1. District court proceedings
The district court denied Kurdilla’s motion to dismiss, finding that there was a question of material fact as to whether he had been driving the Durango. But the court granted Stroud’s motion to dismiss the claim against him, finding that State Farm’s first letter to Sellers in January 2010 — one of the four that identified Stroud as the company’s insured — should “have put [Sellers] on notice of a duty to investigate as to a possible second driver, and that would be sufficient for the statute of limitations argument that’s being made in
The claim against Kurdilla proceeded to trial. Kurdilla presented testimony — his own, Stroud’s, and that of another passenger in the car — that Stroud, not he, was driving at the time of the accident, and the jury returned a defense verdict. Sellers appealed to the superior court, arguing that the district court erred by dismissing her claim against Stroud and by denying her motion for a
2. Superior court appeal
On appeal, the superior court analyzed
The superior court declined to resolve another of Sellers’s arguments — that the Servicemembers Civil Relief Act tolled the statute of limitations with respect to Stroud while Kurdilla, a member of the armed services, was deployed overseas — because the argument was raised for the first time on appeal. But the superior court did reverse and remand the district court’s denial of Sellers’s
3. Supreme court petition
Sellers filed a petition asking us to review the district and superior courts’ holdings on the issues of identity of interest and relation back under
III. STANDARDS OF REVIEW
“We exercise our ‘independent judgment when interpreting the
As for the applicable standard of review for decisions whether amendments relate back under
denial of a motion to amend a complaint under an abuse of discretion standard.”3 This describes the standard of review for
We review factual findings for clear error.8
IV. DISCUSSION
The full text of
Whenever the claim or defense asserted in the amended pleading arose out of the conduct, transaction or occurrence set forth or attempted to be set forth in the original pleading, the amendment relates back to the date of the original pleading. An amendment changing the party against whom a claim is asserted relates back if the foregoing provision is satisfied and, within the period provided by
Rule 4(j) for service of the summons and complaint, that party (1) has received such notice of the institution of the action that the party will not be prejudiced in maintaining a defense on the merits, and (2) knew or should have known that, but for a mistake concerning the identity of the proper party, the action would have been brought against the party.
In this opinion we must decide whether the rule (1) permits the relation back of an amendment that adds — rather than merely substitutes — a defendant; (2) allows a plaintiff with a mistaken belief about the defendant’s identity to amend her complaint regardless of whether she was on “inquiry notice” that her initial choice of whom to sue might be mistaken; (3) allows the period provided “for service of the summons and complaint” to be expanded by an order allowing service by publication; and (4) allows “notice of the institution of the action” to be imputed from an insurer to a permissive driver who is an insured by definition. We also address whether our interpretation of the rule comports with due process.
A. Alaska Civil Rule 15(c) Permits Relation Back Of An Amendment Adding A Defendant.
The second sentence of
party against whom a claim is asserted” for purposes of relation back under
An important purpose of
Requiring a plaintiff to “substitute” rather than “add” a defendant gives the new party no additional protections;15 it conceivably only benefits the timely-served defendant, who under Stroud’s interpretation must be dismissed in order for a new defendant to be named. But
this case — harm the plaintiff who made an honest mistake. Professors Wright and Miller write that “there is no justification for a restrictive interpretation of the word ‘changing’ that would require a plaintiff to choose among defendants. Too narrow a reading of the rule might result in the release of a party who ultimately might have proven to be liable . . . .”16 Here, Stroud’s assertion that he was the driver directly contradicted Sellers’s evidence that it was Kurdilla. Sellers could not safely substitute one name for the other in the face of the conflicting evidence. Pending further discovery, her only immediate option was to name both men, as she did in her amended complaint, alleging that either Kurdilla or Stroud was liable as the driver.17
Considering the policies underlying
B. A Plaintiff On “Inquiry Notice” May Still Make A True Mistake About The Identity Of The Proper Party.
The district court dismissed Sellers’s claim against Stroud as time-barred after finding that the letters in which State Farm identified Stroud as “Our Insured” “would have put [Sellers] on notice of a duty to investigate as to a possible second driver.” The superior court did not address the issue of mistake, resolving Sellers’s appeal on notice grounds instead; but Stroud argues in his response to Sellers’s petition
for review that Sellers made a conscious choice to sue only Kurdilla and that the district court’s finding of inquiry notice supports this conclusion. We disagree.
We have interpreted
We have held that there was no “true mistake” for purposes of
defendants although knowing their respective identities” and that the plaintiffs “offered no evidence that they made a mistake regarding the [new parties’] identities.”24
In contrast to the plaintiffs’ deliberate choices about whom to sue in Siemion, the U.S. Supreme Court has noted that a plaintiff “might know that the prospective defendant exists but nonetheless harbor a misunderstanding about his status or role in the events” and “mistakenly choose to sue a different defendant based on that misimpression.”25 The Supreme Court held that such a “deliberate but mistaken choice” would not necessarily disqualify a plaintiff from satisfying
The district court in this case found only that Sellers was “on notice of a
driver and named Kurdilla regardless. There was no finding that Sellers was not “mistaken as to the identity of the proper parties,”29 as she claimed to be. A plaintiff on inquiry notice can make a mistake; indeed, it is the nature of mistake that a party has missed a chance to discover the truth.30 “The reasonableness of the mistake is not itself at issue.”31
events at issue.32 But if the plaintiff has made a true mistake about the defendant’s identity,
In this case, Sellers sued Kurdilla because she believed he was the driver. She named him as the driver in the crash report and in her complaint. The district court’s finding that Sellers was on notice to inquire into whether Stroud was the driver instead does not change the fact that she premised her complaint on a mistake about the driver’s identity. Because Sellers made a “mistake concerning the identity of the proper party,” we must resolve whether
C. State Farm Knew Of The Litigation Within The Rule 15(c) Notice Period.
The district court in this case did not decide whether Stroud had imputed notice of Sellers’s lawsuit within the time allowed by
address the issue, holding that the period for service of the summons and complaint was 120 days because “[t]he trial court in this case did not find good cause” to extend the
As explained below, we conclude that Stroud had imputed notice of the litigation well within 120 days of the filing of the complaint; nonetheless, we first explain why we disagree with the superior court’s calculation of the applicable period for service. Contrary to Stroud’s argument on appeal, West no longer defines the notice period for purposes of
for service but allows the court to “establish a new deadline” if it “finds good cause why service has not been made.” The 2005 amendment to
It is true, as the superior court observed, that the district court in this case did not make an explicit good cause finding in support of a new deadline under
complete.39 We necessarily infer that the district court had good cause to issue its order.40
This reading is consistent with West, in which we concluded that
appointed attorney, on May 16 that the complaint was mistaken because Stroud had been the driver. These events occurred within the time allowed by
In any event, we conclude that service of process on Kurdilla is not determinative in this case because State Farm, which insured both him and Stroud, had notice of the suit and of Sellers’s alleged mistake much earlier. Kramer’s affidavit of April 23, 2013, filed in support of a motion for costs related to a motion to compel, asserted that he had “been lead attorney in [this case] since its inception [on] January 4, 2012.” An invoice Kramer’s law firm sent State Farm, filed after trial in support of a motion for attorney’s fees, reflected that on January 26, 2012, one of the firm’s attorneys received a phone call from a State Farm representative, researched court records, and reviewed Sellers’s complaint; the next day Kramer also reviewed the complaint, researched “statute of limitations issues” regarding “[REDACTED],” and spoke to the State Farm representative assigned to Sellers’s insurance claim. The records show that over the next few weeks Kramer received State Farm’s claim file and prepared to defend the claim. This evidence is more than sufficient for us to conclude that State Farm had notice of Sellers’s suit and her alleged mistake within the time allowed for service on Kurdilla.
D. Notice Of The Litigation Is Fairly Imputed From State Farm To Stroud Because Of Their Identity Of Interest.
We next address whether State Farm’s timely notice of the litigation may be fairly imputed to Stroud. For deciding whether amendments relate back under
the same attorney retained by existing parties to the action, (2) through no fault of the plaintiff the defendant’s true identity was unknown at the time of pleading, and (3) the new party defendant is not prejudiced by the amended complaint,
In Phillips v. Gieringer the plaintiff was involved in a car accident with a driver who was insured under his father’s State Farm policy.45 The plaintiff mistakenly sued the father “but described the ‘defendant’ in her complaint as the driver of the motor vehicle and directed all her claims against the driver.”46 We noted that “a ‘business operation’ or other private relationship may also give rise to an identity of interest” and reaffirmed that the doctrine’s primary objective was to avoid prejudice to the new party.47 We then determined that State Farm, because of service on the father, had notice of the litigation and shared an identity of interest with the driver.48 We imputed notice of the suit to the driver through State Farm because “[i]n
presumption of notice “may be rebutted if the insured can show that its interests conflict with the insurance company.”50
Sellers argues that the issue of imputed notice in her case is governed by Phillips because in both cases the original defendant and the actual driver were represented by the same insurance company.51 Stroud counters that Phillips addresses co-insureds, not permissive drivers who are insured by definition, and besides that his interests were adverse to those of both Kurdilla and State Farm. Stroud also relies on the superior court’s finding that Sellers abandoned on appeal the issue of whether Stroud and State Farm shared an identity of interest.
1. Sellers did not abandon her claim that Stroud and State Farm share an identity of interest.
The superior court noted in Sellers’s appeal that an identity of interest presumably existed between Stroud and State Farm, but that “[o]n appeal, Sellers abandoned her argument” and “focused entirely on an identity of interest between Stroud and Kurdilla.” We review de novo whether a party has waived a claim on appeal.52 We conclude that Sellers did not waive this issue.
Sellers’s brief on appeal in the superior court argued that her case was “factually analogous” to Phillips. She explained that Phillips held that notice could be imputed to the driver “because both parties were represented by the same counsel and covered by the same insurance carrier.” She then argued that notice could be imputed in her case because “both Kurdilla and Stroud were covered by State Farm” and were
represented by the same attorney. We acknowledge that Sellers could have clarified her argument by stating that notice was imputed through State Farm, but we believe she adequately briefed her claim by identifying the relevant holding in Phillips and the corresponding circumstances in her own case. Our conclusion is bolstered by Stroud’s response to Sellers’s brief, in which he argued that “State Farm never had an identity of interest with Stroud such that notice of the suit against Kurdilla to State Farm should be imputed to Stroud.”
2. Stroud and State Farm share an identity of interest.
Sellers’s circumstances are very close to those in Phillips. Her complaint described the defendant as the driver but named the car owner; both the owner and the driver were covered by the same insurance policy; and the trial court granted leave to amend the complaint and add the driver but refused to allow the amendment to relate back. The only salient difference between the cases is that Stroud was a permissive driver under Kurdilla’s insurance policy rather than a named insured. Stroud contends that “the only relationship between State Farm and Stroud is a contractual obligation to Kurdilla to defend any permissive driver” and that this difference from Phillips is determinative.
Stroud understates State Farm’s obligation to him. Under
evident in this record, State Farm owed Stroud the same
Stroud argues that imputing notice to a permissive driver is unfair because the insurance company does not have the same “contact information and an ongoing business relationship” with “a random driver,” making it less likely that the insurer’s actual notice will reach the insured. That consideration does not affect this case, where State Farm identified Stroud as “Our Insured” on January 11, 2010 — within days of the accident — and where the attorney State Farm hired spoke to Stroud by phone within the
Stroud next argues that we should not impute notice of the litigation to him through State Farm because his interests were adverse to the insurer’s.55 According to Stroud, State Farm’s primary obligation was to represent “its paying customer, Kurdilla.” Stroud contends that State Farm “had no duty to defend Stroud until after Sellers attempted to name him as a defendant” and that he “was not being defended by State Farm” during the statute of limitations or service periods.
Stroud cites no authority in support of these arguments. As already noted, an auto insurer is required by statute to “insure the person named [in the policy] and every other person using the vehicle.”56 A “paying customer” is not entitled to preferential treatment: An insurer owes all its insureds a duty of good faith and fair
dealing, and it cannot defend one at the expense of another.57 Potential conflicts between insureds are routinely handled by the assignment of different adjusters and different defense counsel.58 And the insurer’s obligation begins before the insured is named as a defendant in a lawsuit and even if suit is never filed. The insurer is required to promptly investigate insurance claims and offer equitable settlements when liability is reasonably clear.59 These duties, beginning when the insurer first received notice of the claim, were the same whether Kurdilla or Stroud was the driver.60
In short, Stroud has not shown that his interests were adverse to those of State Farm, nor has he rebutted the presumption from Phillips that he and his insurer share an identity of interest. State Farm’s actual notice of the litigation in January 2012 is therefore imputed to Stroud.61
E. Imputing Notice To Stroud Does Not Violate Due Process.
Finally, Stroud argues that imputing notice to him through State Farm violates due process under the federal and Alaska constitutions.
It is true that the failure to provide a new party with adequate, timely notice of litigation “might raise a question of procedural
Procedural due process under Alaska’s constitution “‘requires notice and opportunity for hearing appropriate to the nature of the case.’ Parties must have notice of the subject of proceedings that concern them ‘so that they will have a reasonable opportunity to be heard.‘”64
unless undue prejudice is shown, due process is satisfied if the requirements of
The only prejudice Stroud alleges is that more than two and a half years passed between the accident and Sellers’s amendment adding him as a defendant. But we have already concluded that having received the same notice as Kurdilla, who was timely served, Stroud had fair notice of the litigation such that his rights will not be prejudiced. We therefore conclude that due process is satisfied.
V. CONCLUSION
Sellers’s amended complaint relates back to the date she filed her original complaint. Accordingly, we REVERSE the dismissal of Sellers’s claim against Stroud and REMAND to the superior court with instructions to remand to the district court for further proceedings.66
MAASSEN
Justice