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Cardona v. Kreamer/Lac Vieux Desert Band of Chippewa Indians (7/30/10)

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The Supreme Court has issued this opinion to clear up a point of confusion about service of process in Mexico.

The Lac Vieux Band filed an action in Maricopa County against Mexican nationals. Service in a foreign country, under Rule 4.2(i), must be made according to the Hague Service Convention where it applies; where it doesn’t service is basically by letters rogatory or by the foreign country’s rules, including personal or mail service if it’s legal or by other legal means permitted by the trial court. Mexico is a signatory to the Hague Convention. But the trial judge, on the Band’s ex parte motion, allowed service by a shotgun combination of mail, email, and Fedex (and then approved service despite the Band’s not receiving return receipts or delivery confirmation). The defendants, for reasons not made clear in the opinion (presumably they have assets in this country) appeared to contest jurisdiction and service. The trial court denied their Motion to Dismiss; the Court of Appeals denied special-action review; the Supreme Court accepted it on the service issue.

Parties to the Convention designate a central authority for service of process which, when requested, makes the service; in Mexico this is the Ministry of Foreign Affairs. The Convention also permits certain alternative service methods – through diplomatic channels and by direct personal service –  but allows parties to opt out of those, which Mexico did when it joined the treaty. The problem is that when Mexico filed its joinder the Dutch, with whom such things are filed, asked it for an English or French translation to send out to other countries, and the resulting English translation contains a mistake – it suggests that only direct service through diplomatic channels (rather than all direct service) is forbidden.  This opinion holds that the Spanish version, not the English, controls.

(It could be argued that the original document should have been in French or English – and that the English translation is therefore the operative version – since those are the languages recognized by the Hague treaties of which the Service Convention is a part. That may be what the Dutch were politely trying to tell the Mexicans. Our Supreme Court relied on a U.S. Supreme Court case (Todok, 1930) holding that “for a treaty ratified in French, the French text, not the English translation, controlled.” It isn’t clear why that supports using a language – Spanish – that was not the language of ratification and is not one of the treaty’s official languages rather than a language that was and is. However, the court mostly relied upon a recent law review article from which it appears to have taken the idea that since the Mexican President and Senate dealt with the matter in Spanish, and since the Mexicans had sniffed that the English translation was merely a “courtesy,” that’s that.)

The Band then argued that it was entitled to use a loophole in the treaty: it doesn’t apply when the defendant’s address is unknown. But the Supreme Court simply remanded that for determination by trial court. The purpose of the opinion was to clarify the requirements for Mexican service, not to resolve the case. In fact, the purpose of the opinion seems to have been to adopt a Minnesota law review article as the law of Arizona. The upside of doing that is that its author evidently knew a lot more about international treaties than anyone involved in this case; that is also the downside. 

(link to opinion)

Ramsey v. Yavapai Family Advocacy Center (CA1 7/13/10)

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Otherwise undistinguished, this opinion is notable for its decision not to create a new duty.

Ramsey’s wife reported that he had sexually assaulted their child. After an investigation, a grand jury indicted him but the State dismissed the charges when its own expert’s report was iffy. Ramsey then sued everyone in sight for most of the torts you’ve ever heard of. The trial court granted the defendants summary judgment, mostly based on §13-3620J, which gives immunity to people who report child abuse. The Court of Appeals affirms.

Ramsey argued that the statute violates equal-protection and abrogates his right to sue. But he hadn’t raised the equal-protection argument until he moved for reconsideration of the summary judgment. He hadn’t mentioned the abrogation argument except perhaps at oral argument and he didn’t put a transcript of that in the record. So the Court of Appeals did not consider the constitutional arguments.

Under the statute, a person who reports it must “reasonably believe” that abuse occurred. The court said that that requirement does not apply to those who participate in the investigation, e.g., experts who examine the child and express their opinions.

The counselor who did report had reasonable belief because the mother told her and because the child said her father touched her “inappropriately.” The court also held – and this seems to be the principal legal aspect of the case – that a counselor or therapist owes no duty to an alleged sex offender.

Ramsey argued that people acted with malice, which would destroy the qualified privilege. The court interpreted acting with “malice” to mean doing something that the actor knows to be wrong. There was no evidence of that.

As for defendant YFAC itself, it was only the place where part of the investigation had taken place; none of its employees participated. There was no evidence that it breached a duty to Ramsey.

(link to opinion)

McReynolds v. American Commerce Insurance Co. (CA1 7/13/10)

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Insurance lawyers will be writing to their companies about this one. It concerns the handling of multiple claims in excess of the policy limits.

ACIC’s insured caused an accident that injured McReynolds. The policy limit was $25,000. His claim was big; even his hospital lien was over $40,000. ACIC tendered the limit but he rejected it because ACIC put the hospital’s name on the check.  He sued the insured and made an OJ for the policy limit; ACIC provided a defense and responded to the OJ with an interpleader naming McReynolds, the hospital, and AHCCCS. When the hospital released its lien and AHCCCS defaulted, the interpleader was dismissed. McReynolds obtained an excess verdict at trial (over $400,000), took an assignment of the insured’s rights, and sued ACIC for bad faith based on its failure to accept the OJ.

The trial court granted summary judgment for ACIC; the Court of Appeals affirms.

McReynolds argued that ACIC should have “managed” its policy limit by settling his claim, leaving its insured exposed only to the much-smaller hospital lien. The court disagrees, holding that when an insurer is faced with multiple claims in excess of the policy limit its obligation is satisfied by promptly and in good faith interpleading its limits, so long as it also provides its insured a defense. The court specifically recognizes the victim’s claim and the medical liens as separate claims.

The court rejects other theories for paying multiple claims. The “first-in-time” rule doesn’t apply here because McReynolds’ injury and medical bills were at the same time. Courts that had said its a jury question for a bad-faith action didn’t address the interpleader angle.

“Promptly” means, when there is an OJ,  within the time for responding to it. In so holding the court clarifies that Rules 6(a) (last day on a Sunday/holiday) and 6(e) (extra days for mail) apply to responses to OJs.

And “good faith?” What a bad-faith interpleader would be is not explained. The court proudly says that its holding creates a “safe harbor”; our courts have once again produced a “safe harbor” with uncharted rocks and shoals.

The opinion also requires that the carrier actually pay the money into court. Rule 22 doesn’t require doing so until the time of discharge (and it is easier for all concerned that money never actually pass through the court’s hands); why the rule is different for insurance carriers is also unexplained.

The court regards this as an issue of first impression but the impression for years has been that interpleader is the safe thing for a carrier to do in this situation. The case will in any event be cited for the interpleader as “safe harbor”idea and its rules for getting there.

That’s unfortunate because the court comments, albeit very much in passing, on the other side of the coin. It quotes and agrees with a Kansas case that interpleader is but one of at least three ways of dealing with the situation: alert all claimants and get mutual agreement; pay the claims as they come (though this opinion has already thrown doubt on that); or interplead the policy limit.

A climate in which carriers probably must file interpleaders and claimants must file lawsuits to trigger them – which this opinion could further – is not necessarily good for either. McReynolds’ argument was legally wrong but hardly unreasonable; ACIC would have greatly reduced its insured’s exposure by paying him. What if it had? How is it bad faith to settle a $400,000 claim and expose the insured to only $40,000? What if one claim were 20 or 30 or 50 times larger than the other rather than merely 10? Interpleader should be for the tough calls. Carriers are already afraid that if they can’t settle with everyone – including every passenger and passerby and person who hasn’t made a claim yet but might someday –  then they can’t settle with anyone. That causes delayed compensation and higher claims costs even when the company knows perfectly well that one claim is huge and the others are peanuts. The attitude that making no decision is safest hardly needs to be reinforced; instead, carriers should be assured that they may settle multiple claims in objectively reasonable ways even if that exhausts the policy. That not paying claims need be a safe-harbor is a sign that not all is well in bad-faith land.

(link to opinion)