Bryan v. State Farm Mutual Automobile Insurance

⁵⁸⁹ LAWRENCE F. RODOWSKY (Retired, Specially Assigned), J. In this motor tort case, the defense is nonmutual issue preclusion. The issue on this appeal centers on the finality of the termination of a prior judicial proceeding. The plaintiffs-appellants are one of the drivers, Brenton Bryan (Brenton), and his three passengers, his wife, Denise Bryan (Denise), and his two children, Taeysha Bryan (Taeysha) and Tashera Davis (Tashera), collectively, the Plaintiffs. They allege that the accident was caused by a phantom driver.

The defendant-appellee is State Farm Mutual Automobile Insurance Company (State Farm), the uninsured motorists coverage carrier of the vehicle operated by Brenton. The Circuit Court for Montgomery County entered summary judgment in favor of State Farm by applying nonmutual preclusion on the issue of liability. For the reasons that follow, we shall affirm in part and reverse in part. Facts and Procedural History The motor vehicle accident took place in Freeport, New York on May 29, 2006.

In the case before us, the Plaintiffs allege that a phantom vehicle changed lanes and cut off the Plaintiffs’ vehicle. This maneuver, Plaintiffs assert, caused their vehicle to collide with two other vehicles. One of these vehicles was being driven by Juan Chevez, whose wife, Ines Chevez, was a passenger in the car. Juan and Ines Chevez (the Chevezes) filed suit against Brenton in the Civil Court of the City of New York, County of Queens, alleging that Brenton’s negligence caused the accident.

The Chevezes’ suit was tried to a jury, commencing on December 13, 2010. The Chevezes and Brenton were respectively represented by counsel. The issue of damages was bifurcated from liability. Juan Chevez described the happening of the accident, and Brenton and Denise testified in the defense case.

Following the arguments of counsel, only liability was submitted to the jury. The jury returned a verdict on two special interrogatories. To the first, “[W]as the defen ⁵⁹⁰ dant, Brenton Bryan, negligent in the operation of his motor vehicle on May 29, 2006?”, the jury unanimously responded, ‘Tes.” To the second question, “[W]as the negligence of the defendant, Brenton Bryan, a substantial factor in bringing about the accident on May 29, 2006?”, the jury unanimously replied, “Yes.” The parties returned to court the next day and advised, on the record, that the case was settled for the payment of $15,000 to each of the Chevezes, who would provide a general release and a “Stipulation of Discontinuance.” The trial judge questioned each of the Chevezes to assure that they understood the terms of the settlement. Whereupon, the court had the jurors return to the courtroom and thanked them for their service.

The record before us also contains an “Extract of Minutes,” certified by the New York court’s clerk which reads: “On Dec. 13, 2010 this case was tried with a Jury in Part 101 ... and a Verdict was rendered therein in favor of the Plaintiff[s, ie., the Chevezes] on liability. After this verdict, the parties settled the matter in the amount of $30,000.00.” On February 5, 2009, the Plaintiffs had filed a complaint in the Circuit Court for Prince George's County against State Farm for uninsured motorist benefits arising out of the May 2006 accident. The case was transferred to the Circuit Court for Montgomery County on January 28, 2010. State Farm moved for summary judgment, arguing that the 2010 jury verdict in New York on the issue of liability collaterally estopped the Plaintiffs from pursuing their suit against State Farm.

Following a hearing on April 21, 2011, the circuit court entered summary judgment in favor of State Farm. The circuit court reasoned: “The principal behind the defense [of issue preclusion] has been satisfied in this case and that the New York jury determined adversely to this Plaintiff the exact same issue that’s in question in this case, and accordingly, I grant the defendant’s motion.” ⁵⁹¹ State Farm’s motion sought summary judgment against all of the Plaintiffs, and the docket entry of judgment records that that motion was granted. The Plaintiffs timely appealed to this Court. Standard of Review The standard by which we review a trial court’s granting of a motion for summary judgment is one of legal correctness.

See, e.g., Heat & Power Corp. v. Air Products & Chemicals, Inc., 320 Md. 584, 591 , 578 A.2d 1202, 1206 (1990). “If no material facts are placed in genuine dispute, this Court must determine whether the Circuit Court correctly entered summary judgment as a matter of law.” Anderson v. Council of Gables, 404 Md. 560, 571 , 948 A.2d 11, 18 (2008). Our review is further limited to the basis relied upon by the trial court. See, e.g., Warner v. German, 100 Md.App. 512, 517 , 642 A.2d 239, 242 (1994) (“when analyzing the lower court’s decision, we ordinarily are confined to the basis relied on by that court and may not otherwise explain its conclusion by introducing new legal theories”); Sadler v. Dimensions Healthcare Corp., 378 Md. 509, 536 , 836 A.2d 655, 671 (2003). Choice of Law State Farm’s argument rests on the jury verdict at a bifurcated trial in a New York court and on the minute, or docket entry, describing the ultimate resolution of the proceeding.

No party to the instant matter has raised an issue of choice of law, much less asked this Court to take judicial notice of New York law. Under these circumstances, we shall decide the issue as if the special verdict, finding Brenton liable for the May 29, 2006 accident, were rendered in a Maryland circuit court at a trial in which the issue of liability had been bifurcated, followed by a settlement resulting in a docket entry of voluntary dismissal with prejudice. See Maryland Code (1974, 2006 Repl.Vol.), § 10-504 of the Courts and Judicial Proceedings Article; Pulte Home Corp. v. Parex, Inc., 174 Md.App. 681, 758 , 923 A.2d 971, 1014-15 (2007). ⁵⁹² Elements of Issue Preclusion The purpose of collateral estoppel is to “ ‘avoid the expense and vexation of multiple lawsuits, conserve judicial resources, and foster reliance on judicial action by minimizing the possibilities of inconsistent decisions.’ ” Colandrea v. Wilde Lake Cmty. Ass’n, 361 Md. 371, 387 , 761 A.2d 899, 907 (2000) (quoting Murray Int’l Freight Corp. v. Graham, 315 Md. 543, 547 , 555 A.2d 502, 503-04 (1989)).

Maryland courts follow a four-part test to determine if a party is collaterally estopped from bringing a claim: “ T. Was the issue decided in the prior adjudication identical with the one presented in the action in question? “ ‘2. Was there a final judgment on the merits? “‘3. Was the party against whom the plea is asserted a party or in privity with a party to the prior adjudication? “ ‘4. Was the party against whom the plea is asserted given a fair opportunity to be heard on the issue?’ ” Id. at 391, 761 A.2d at 909 (quoting Washington Suburban Sanitary Comm’n v. TKU Assocs., 281 Md. 1, 18-19 , 376 A.2d 505, 514 (1977)).

There is no contention here that elements 1, 3 and 4 have not been met as to Brenton. We are concerned in this case only with the requirement for a final judgment on the merits. The Court of Appeals has frequently referred to the second element as a “valid and final” judgment. See, e.g., Colandrea, 361 Md. at 387 , 761 A.2d at 907 (“‘A common and well-established articulation of the doctrine is that “when an issue of fact or law is actually litigated and determined by a valid and final judgment, and the determination is essential to the judgment, the determination is conclusive in a subsequent action between the parties, whether on the same or a different claim.” ’ ”) (quoting Janes v. State, 350 Md. 284, 295 , 711 A.2d 1319, 1324 (1998)); Gibson v. State, 328 Md. 687, 693 , 616 A.2d 877, 880 (1992) (“The collateral estoppel doctrines operates to a preclusive end, so that when an issue of ultimate fact has been determined once by a valid and final judgment, the issue cannot be litigated again between the same parties in a future ⁵⁹³ action.”); Welsh v. Gerber Products, Inc, 315 Md. 510, 516 , 555 A.2d 486, 489 (1989) (same); Cousins v. State, 277 Md. 383, 398 , 354 A.2d 825, 834 (1976) (same).

Two Rules The positions of the parties may be stated quite simply. Plaintiffs contend that issue preclusion requires a final judgment and that a jury verdict is not a final judgment. State Farm contends that there has been a trial and a determination within a judicial system of the issue of liability and that, by virtue of the settlement and termination of the proceeding, that factual determination is beyond modification by a court. The Plaintiffs’ position is supported by the traditional statement of the requirements for res judicata.

The older authorities equate finality for purposes of appealability with finality for the purpose of res judicata, including claim preclusion, and thus do not give res judicata effect to a jury verdict. 2 Freeman on Judgments § 251 (3d ed. 1881), states: “No question becomes Res Judicata until it is settled by a final judgment. For this reason, the verdict of a jury is not admissible as evidence to create an estoppel, before it has received the sanction of the court, by passing into a judgment. Until then, it is liable to be made nugatory by an order arresting judgment or granting a new trial.” (Emphasis in original). In Oklahoma City v. McMaster, 196 U.S. 529, 533 , 25 S.Ct. 324, 325 , 49 L.Ed. 587 (1905), the Supreme Court said: “Without a judgment the plea of res judicata has no foundation; and neither the verdict of a jury nor the findings of a court, even though in a prior action, upon the precise point involved in a subsequent action and between the same parties, constitute a bar.

In other words, the thing adjudged must be by a judgment. A verdict, or finding of the court alone, is not sufficient. The reason stated is, that the judgment is the bar and not the preliminary determination of the court or jury. It may be that the verdict was set aside, or the finding of facts amended, reconsidered, or ⁵⁹⁴ themselves set aside or a new trial granted.

The judgment alone is the foundation for the bar.” State Farm’s position is supported by what appears to be the majority of the more modern precedents and authorities. No one has directed us to any Maryland appellate decision that addresses the precise issue before us, and we have found none. In 18A C. Wright, A. Miller & E. Cooper, Federal Practice and Procedure § 4434, at 110 (2002), the authors summarize that “[rjecent decisions have relaxed traditional views of the finality requirement by applying issue preclusion to matters resolved by preliminary rulings or to determinations of liability that have not yet been completed by an award of damages or other relief.” (Footnote omitted). They describe as “the leading modern case” Lummus Co. v. Commonwealth Oil Refining Co., 297 F.2d 80 (2d Cir.1961), cert. denied, 368 U.S. 986 , 82 S.Ct. 601 , 7 L.Ed.2d 524 (1962).

In that case, the parties were apparently in a race to the courthouse over the arbitrability of their contract dispute. In the initial case, the First Circuit, on an interlocutory appeal from an injunction, found that there was no substantial issue of misrepresentation in the formation of the contract. In the trailing ease, the Second Circuit held that the issue of a misrepresentation that might vitiate the contract was conclusively decided by the First Circuit, even though there was no final judgment in the earlier case. Judge Friendly, writing for the court, said: ‘Whether a judgment, not ‘final’ in the sense of 28 U.S.C. § 1291 [for purposes of appeal], ought nevertheless be considered ‘final’ in the sense of precluding further litigation of the same issue, turns upon such factors as the nature of the decision (i.e., that it was not avowedly tentative), the adequacy of the hearing, and the opportunity for review. ‘Finality’ in the context here relevant may mean little more than that the litigation of a particular issue has reached ⁵⁹⁵ such a stage that a court sees no really good reason for permitting it to be litigated again.” 297 F.2d at 89 (footnote omitted).

Two decades later, the American Law Institute adopted Judge Friendly’s position in Restatement (Second) of Judgments § 13. It reads: “Requirement of finality—The rules of res judicata are applicable only when a final judgment is rendered. However, for purposes of issue preclusion (as distinguished from merger and bar), ‘final judgment’ includes any prior adjudication of an issue in another action that is determined to be sufficiently firm to be accorded conclusive effect.” The “[ejriteria for determining finality in the application of issue preclusion” are set forth in Comment g to § 13. (Italics omitted).

They are: “The requirement of finality of judgment is interpreted strictly, as indicated in Comment a, when bar or merger is at stake. This is natural when it is considered that the effect of a judgment as bar or merger is to ‘extinguish’ a claim, and, when there is merger, to create a new claim based on the judgment itself. See § 17(1), (2). Usually there is no occasion to interpret finality less strictly when the question is one of issue preclusion, that is, when the question is whether decision of a given issue in an action may be carried over to a second action in which it is again being litigated.

(If the second action is on the same claim, preclusion is an instance of direct estoppel; if it is on a different claim, preclusion is an instance of collateral estoppel. See § 17, Comment c.) But to hold invariably that that kind of carry-over is not to be permitted until a final judgment in the strict sense has been reached in the first action can involve hardship—either needless duplication of effort and expense in the second action to decide the same issue, or, alternatively, postponement of decision of the issue in the second action for a possibly lengthy period of time until the first action has gone to a complete finish. In particular circumstances the wisest course is to regard the ⁵⁹⁶ prior decision of the issue as final for the purpose of issue preclusion without awaiting the end judgment. See Illustrations 1-3.

Before doing so, the court should determine that the decision to be carried over was adequately deliberated and firm, even if not final in the sense of forming a basis for a judgment already entered. Thus preclusion should be refused if the decision was avowedly tentative. On the other hand, that the parties were fully heard, that the court supported its decision with a reasoned opinion, that the decision was subject to appeal or was in fact reviewed on appeal, are factors supporting the conclusion that the decision is final for the purpose of preclusion. The test of finality, however, is whether the conclusion in question is procedurally definite and not whether the court might have had doubts in reaching the decision.” Illustration 3 to § 13 is strongly analogous to the case before us. “3.

In a jurisdiction that permits ‘split’ trials (a trial of liability followed, if liability is found, by a separate trial to ascertain the damages), the jury in a negligence case finds for the plaintiff A as to liability, the defendant B having denied his own negligence and pleaded contributory negligence on the part of A. Under the law of the jurisdiction, B cannot appeal at this point as there is no judgment that qualifies as final for that purpose; an appealable judgment would be reached later, when, in the second phase of trial, another jury assessed the damages. But prior to the second phase, the jury’s verdict as to liability may be held conclusive as to the issues of A’s and B’s negligence in any other action between them in which the same issues appear.” Although Illustration 3 hypothesizes a mutual issue preclusion, while, in the case before us, State Farm argues for a nonmutual issue preclusion, the distinction has no bearing on finality, as an element of issue preclusion. In mutual and nonmutual issue preclusion, the doctrine is applied in the current proceeding against the party in the prior proceeding who suffered an adverse determination of the issue. In either ⁵⁹⁷ case, if the degree of finality required to trigger the doctrine is satisfied in a mutual setting, it should be sufficient in a nonmutual setting.

The Court of Appeals recognized nonmutual issue preclusion in 1968 in Pat Perusse Realty Co. v. Lingo, 249 Md. 33 , 238 A.2d 100 (1968). Since that time, at least one case has arisen in the Court of Appeals involving whether nonmutual defensive issue preclusion was available following a litigation settlement, namely, Welsh v. Gerber Products, Inc., 315 Md. 510 , 555 A.2d 486 (1989). 1 The prior litigation was an automobile accident case in which the plaintiffs included an infant passenger. The parties settled for the adverse operator’s automobile liability policy limits, without any relevant pretrial rulings. The plaintiffs announced in open court that the settlement was without prejudice to rights against other persons or entities.

Because there was an infant plaintiff, the settling insurer insisted that a judgment be entered for the amount of the settlement. This was done, and the judgment was marked “ ‘PAID AND SATISFIED.’ ” In the second suit, the infant plaintiff sued the manufacturer of the car seat in which he was riding at the time of the accident. The manufacturer asserted that the prior consent judgment precluded the infant plaintiff on the issue of satisfaction of the claim. The Court of Appeals held that it “accepted] the modern view that litigation of the issue of damages is not precluded by the entry of a consent judgment unless that issue was actually litigated, or the parties intended preclusion of that issue.” Id. at 522 , 555 A.2d at 492 (emphasis added).

In Welsh , the issue had not been litigated, so it was necessary to determine the intent of the parties. In the case before us, the issue of liability was actually litigated, and that is the extent of the issue preclusion sought by State Farm. ⁵⁹⁸ Acceptance of the modern approach to issue preclusion on facts analogous to those in the case before us is illustrated by a number of cases from various courts. Sandoval v. Superior Court of Kings County, 140 Cal. App.3d 932 , 190 Cal.Rptr. 29 (1983), was the second of two product liability suits against a manufacturer of a cotton picking machine.

In the earlier suit, the injured plaintiff obtained a verdict and judgment in the trial court, and the parties settled during the pendency of the defendant’s appeal. Their agreement provided that the settlement was not to be construed as an admission of