Redland Insurance v. Shelter General Insurance Companies

United States Court of Appeals
FOR THE EIGHTH CIRCUIT

No. 96-4003

Redland Insurance Company, as
*
Assignee of Charlene Harvell* and
Lonnie Joe Harvell, *
*
Appellant, *
* Appeal from the United
States
v. * District Court for the
* Eastern District of
Arkansas.
Shelter General Insurance Companies,
*
Robert McAdams, Douglas G. Voyles,
*
*
Appellees. *

Submitted: May 21, 1997

Filed: August 15, 1997

Before MURPHY, HEANEY, and MAGILL, Circuit Judges.

HEANEY, Circuit Judge.

This is an action brought by an insurance company to
collect on an underlying judgment for which its insured
was one of three tortfeasors jointly and severally
liable. The district court, faced with cross motions for
summary judgment, dismissed the complaint for failing to
state a claim. Although the court properly concluded
that the

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plaintiff failed to state a claim under its novel
assignment theory, an alternative cause of action in the
complaint is broad enough to state a claim on which
relief could be granted. Therefore, the court should not
have dismissed the complaint in its entirety. We reverse
in part and remand with instructions for the court to
permit the lawsuit to proceed on the plaintiff’s
alternative contribution theory.

I.

A jury awarded Charlene and Lonnie Joe Harvell
$500,000 for injuries Charlene Harvell sustained in a
collision between the Harvells’ car and a tractor-
trailer. According to the jury’s findings, the judgment
totaling $509,895.11 with interest and costs was the
joint and several obligation of three tortfeasors:
Douglas G. Voyles, the driver of the tractor-trailer;
Robert McAdams, the owner of the tractor-trailer; and CDS
Transport, Inc. (“CDS”), which had leased both the
services of Voyles and the tractor-trailer from McAdams.

Redland Insurance Company (“Redland”) insured CDS and
Shelter General Insurance Company (“Shelter”) insured
McAdams. Neither policy, however, covered the vehicle
involved in the accident. Nonetheless, both Redland and
Shelter were conditionally obligated for the judgment as
a result of a federally-mandated MCS-90 endorsement each
insurance company provided as part of its policy. In the

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endorsement, the insurance company agreed to pay “any
final judgment recovered against the insured for public
liability resulting from negligence in the operation,
maintenance or use” of any of its insured’s motor
vehicles in interstate commerce. The insured, in turn,
agreed to reimburse the insurance company for all sums
paid under the endorsement that the company would not
have been required to pay absent the endorsement.

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 After judgment was entered for the Harvells, Redland
approached Shelter to discuss apportionment of the
judgment. Shelter took the position that it had no
obligation to contribute toward paying the judgment.
Redland entered an agreement with the Harvells in which
it paid the Harvells $505,782.21, an amount virtually
equal to the entire judgment, in return for a purported
assignment of the judgment from the Harvells. According
to the agreement, the Harvells released Redland and CDS,
but no other party, from any liability as a result of the
accident.

Redland then initiated this lawsuit in federal
district court against Shelter, McAdams, and Voyles.
Redland’s complaint alleges two causes of action. In the
first, Redland broadly asserts:

A dispute and actual controversy has arisen and
now exists between Plaintiff and Shelter
concerning their respective rights, duties,
obligations and privileges under the Shelter
policy of insurance with regard to the Harvell
action. The controversy poses an issue for
judicial determination involving the substantial
rights of the parties.

(Jt. App. Tab 2 at 7 (Pl.’s Compl. at ¶ 18).) In a
second cause of action, Redland claims that, as
“assignee” of the Harvells, it is entitled to recover the
entire $509,895.11 from Shelter for the final judgment
rendered against McAdams. (Id. at 8 (Pl.’s Compl. at ¶
21.)

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 In its answer, Shelter admitted the material facts
alleged in Redland’s complaint and asserted, among other
defenses, that the complaint failed to allege facts on
which the court could grant Redland relief. In its
subsequent motion for summary judgment, Shelter argues
that as an insurance company, not a member of the general
public, Redland cannot recover against Shelter under the
MCS-90 endorsement in Shelter’s policy with McAdams.
Moreover, according to Shelter, the money Redland paid to
the Harvells fully satisfied the Harvells’ judgment
against CDS which Redland was

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obligated to pay under the terms of the MCS-90
endorsement in its policy with CDS. Redland filed a
cross-motion for summary judgment, reasserting its theory
that, as the Harvells’ assignee, it had the right to
enforce the judgment against any of the defendants,
including McAdams, and that Shelter agreed to satisfy any
judgment against McAdams by virtue of its MCS-90
endorsement. In plain language: Each insurance company
asserted that the other was responsible for 100% of the
$509,895.11 judgment.

The district court responded by dismissing the case
for failing to state a claim and denying all pending
motions, including those for summary judgment, as moot.
The court expressed strong concern about Redland’s legal
maneuvering:

[T]he insurance carrier for one joint
tortfeasor, by “buying” the judgment from the
Harvells, is attempting to collect from the
other joint tortfeasors (or their insurance
carriers) 100% of the judgment which it has
paid.

. . . .

Redland is attempting to use its “assignment” as
a novel means of avoiding the . . . contribution
statute. Instead of recovering an equitable and
proportionate share of the judgment, Redland
seeks to place the entire burden on its joint
tortfeasors. If the Court were to allow such an
end run, the law of contribution would be
subsumed. Such a holding would undercut the
essential purpose of contribution among joint
tortfeasors, which is to provide an equitable

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 means of spreading the loss on the basis of
proportionate responsibility.

(Redland Ins. Co. v. Shelter Gen. Ins. Cos., No. J-C-95-
261, slip op. at 2 (E.D. Ark. Sept. 16, 1996).) The
court dismissed the case without prejudice to Redland’s
right to file an action for contribution.

Redland filed a motion for reconsideration and an
alternative motion for leave to file an amended
complaint. The district court denied Redland’s motion
for

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reconsideration reiterating its position that “Redland
may file a suit for contribution against the other joint
tortfeasors, but it may not ‘buy’ the debt from the
plaintiff in order to collect the full amount of the
judgment from the other joint tortfeasors.” (Redland
Ins. Co. v. Shelter Gen. Ins. Cos., No. J-C-95-261 (E.D.
Ark. Oct. 15, 1996).) This appeal follows.

II
.
Redland asserts that the district court erred in its
ruling because its complaint both states a claim for
relief based on the Harvells’ assignment of their
judgment to Redland and states a claim for contribution.
With respect to the former, we disagree. Redland offers
no authority for its theory that it can step into the
shoes of the Harvells to collect 100% of the judgment
from the remaining joint tortfeasors in the underlying
action thereby avoiding its responsibility as the
endorsing insurance carrier for the third joint
tortfeasor. We agree with the district court that
Redland is attempting to use its “assignment” to avoid
paying its equitable share of the loss and that the
courts must not allow such an end run on the law of
contribution. Therefore, we affirm the district court’s
dismissal of that portion of the complaint that asserts
a cause of action based on the Harvells’ assignment of
their judgment to Redland.
Although it was the focus of neither party’s
attention nor interest before the district court,
Redland’s complaint states an alternative cause of action
which does not rely on mention of its purported
assignment of the judgment. As its first cause of

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action, Redland asks the court to determine the parties’
“respective rights, duties, obligations and privileges
under the Shelter policy of insurance with regard to the
Harvell action.” Although Redland could have been more
precise, the complaint sufficiently states a claim for
contribution. According to the Federal Rules of Civil
Procedure, a pleading setting forth a claim for relief
requires only “a short, plain statement of the claim
showing that the pleader is entitled to relief.” Fed. R.
Civ. P. 8(a). Moreover, “[a]ll pleadings shall be so
construed so as to do substantial justice.”

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Fed. R. Civ. P. 8(f). Redland alleged facts in its
complaint that put the defendants on notice that Redland
had paid the Harvells a substantial sum of money related
to their judgment against Voyles, McAdams, and CDS and
that the company was seeking reimbursement from the other
joint tortfeasors. The court should have recognized that
Redland’s complaint gave the other parties “fair notice
of the nature and basis or grounds for a claim, and a
general indication of the type of litigation involved.”
See Oglala Sioux Tribe of Indians v. Andrus, 603 F.2d
707, 714 (8th Cir. 1979). That is all the federal rules
require.

Because Redland’s complaint states an alternative
claim for contribution, the dismissal of its claim based
on its alleged assignment does not defeat the entire
complaint. The federal rules provide: “When one or more
statements are made in the alternative and one of them if
made independently would be sufficient, the pleading is
not made insufficient by the insufficiency of one or more
of the alternative statements.” Fed. R. Civ. P. 8(e)(2).
Our decision today should not be construed as any sort of
comment on the merits of Redland’s action for
contribution. We merely hold that the complaint is
sufficient to state a cause of action for contribution
and that the district court should permit the parties to
proceed to the merits of that action.

III.

We affirm in part and reverse in part with
instructions to the district court to permit the parties
to proceed in Redland’s action for contribution.

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A true copy.

Attest.

CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.

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