IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
April 10, 2008
No. 06-30554 Charles R. Fulbruge III
Clerk
SHERRI G LEHMANN
Plaintiff-Appellant-Cross-Appellee
v.
GE GLOBAL INSURANCE HOLDING CORP; COREGIS INSURANCE
COMPANY; INTERNATIONAL INSURANCE COMPANY
Defendants-Appellees-Cross-Appellants
Appeal from the United States District Court
for the Eastern District of Louisiana
USDC No. 2:04-CV-2630
Before DeMOSS, DENNIS, and OWEN, Circuit Judges.
DENNIS, Circuit Judge:
Plaintiff-appellant Sherri Lehmann was injured when the car she was
driving collided with a dump truck being operated by an employee of St.
Tammany Parish, Louisiana (“the Parish”). She filed her first suit in a state
court solely against the Parish and obtained a judgment in the amount of
$784,607.42. She was unable to collect on the judgment, however, because
neither the state nor the Parish appropriated funds for its payment. Article XII,
section 10 of the 1974 Louisiana Constitution provides that a judgment against
the state, a state agency, or a political subdivision is not exigible or payable
except from funds appropriated therefor by the legislature or by the political
No. 06-30554
subdivision against which the judgment is rendered. Lehmann then brought
this her second suit in state court under the Louisiana direct action statute, La.
Rev. Stat. § 22:655, to collect on the judgment solely against the Parish’s liability
insurers, GE Global Insurance Holding Corporation, Coregis Insurance
Company, and International Insurance Company (collectively, “GE”).1 GE
removed this case to the United States District Court for the Eastern District of
Louisiana and asserted defenses based on the joinder provisions of the state
direct action statute, res judicata, prescription, and insurance policy terms and
conditions. After a bench trial based on the pleadings, exhibits, and briefs, the
district court rejected the res judicata and prescription defenses, but dismissed
Lehmann’s suit with prejudice because of her failure to join the insured, the
Parish, as provided for by the direct action statute. Lehmann timely appealed,
and GE cross-appealed. We reach the same result as the district court but for
different reasons. The direct action statute does not require that Lehmann’s suit
against the insurer, GE, be dismissed simply because she did not join the
insured, the Parish, in this suit; but Lehmann’s action against GE prescribed
when she failed to file suit within one year after the judgment in her first suit
became final; when the judgment in her first suit became final and definitive,
interruption of prescription by that suit ceased and prescription therefore ran
for more than one year and expired prior to the untimely filing of her second
suit. Accordingly, because the one-year liberative prescription for delictual
actions ran on her action, we AFFIRM on that basis the district court’s dismissal
of her suit and pretermit consideration of GE’s other defenses.
1
More precisely, International Insurance Company issued the policy of liability
insurance to the Parish. Coregis Insurance Company then became a successor in interest to
International Insurance Company’s liabilities under the Parish’s policy. Coregis Insurance
Company is a wholly owned subsidiary of GE Global Insurance Holding Corporation.
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I. FACTUAL AND PROCEDURAL BACKGROUND
On August 26, 1991, Lehmann, a Louisiana resident, was injured when
her motor vehicle collided with a dump truck owned by the Parish that was
being operated by one of its employees. On August 27, 1992, Lehmann timely
filed suit in Louisiana state court against the Parish and Gallagher Basset
Services, the alleged insurer of the Parish, to recover for her injuries. She
subsequently dismissed Gallagher Basset Services after learning that it was not
the Parish’s insurer. In 1997, Lehmann discovered that GE had issued a policy
of automobile liability insurance to the Parish under which GE was obliged to
defend and indemnify the Parish in respect to her accident. Nevertheless,
Lehmann deliberately did not join GE as a defendant, because GE, as a private
corporation, could have demanded a jury trial on her claim, whereas the Parish,
as a political subdivision, could not;2 Lehmann and her counsel thought it would
be to her advantage to pursue her claim only against the Parish in order to have
it decided exclusively by a judge, rather than have a jury decide the same claim
against the insurer in the same proceeding. On August 21, 2001, six days before
the case went to trial, GE received notice of Lehmann’s state court lawsuit
against the Parish. GE did not intervene or undertake to defend the Parish, and
2
Louisiana Revised Statute section 13:5105 provides: “No suit against a political
subdivision of the state shall be tried by jury.” However, in Jones v. City of Kenner, 338 So.
2d 606, 607 (La. 1976), the Louisiana Supreme Court held that in a case brought against both
a governmental and non-governmental defendant, section 13:5105 does not prohibit a jury trial
on the claims brought against the non-governmental defendant “despite any identity or
substantial similarity of the issues against both [the governmental and non-governmental
defendants].” See also Scurria v. Madison Parish Police Jury, 566 So. 2d 1077, 1080 (La. Ct.
App. 1990) (“It is well-settled that La. R. S. 13:5105 which prohibits jury trials against the
state, state agency, or a political subdivision, does not apply to the liability carrier of a political
subdivision even when it is joined in the same action and there exists identity or substantial
similarity of issues against both parties.”); David W. Robertson, Tort Liability of Governmental
Units in Louisiana, 64 TUL. L. REV.857, 883 (1990) (“[W]hen a governmental defendant invokes
its bench trial right and there is a codefendant in the case, either the plaintiff or the
codefendant may demand a jury trial of the issues between those two parties.”).
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the Parish did not call upon it to do so. The case was tried by a state court judge
on August 27, 29, and 30, 2001.
On April 16, 2002, the state court rendered judgment in favor of Lehmann
and against the Parish in the amount of $784,606.04, along with interest from
the date of judicial demand until paid and all costs (which the court set at
$6,172.09). The Louisiana First Circuit Court of Appeal affirmed the trial court
judgment on July 2, 2003. The Parish allowed the judgment to become final
without applying to the appeals court for rehearing or to the Louisiana Supreme
Court for a writ of certiorari. Lehmann was unable to collect on the judgment,
however, because the Parish did not appropriate the funds necessary to make it
legally exigible and payable. See LA. CONST. art. XII, § 10(c); LA. REV. STAT. §
13:5109.3
On August 23, 2004, over one year after her judgment against the Parish
had become final, Lehmann filed this lawsuit in Louisiana state court against
GE seeking to recover the damages owed to her under the judgment. She
contends that GE is responsible for payment of her judgment as a result of the
coverage provided by the insurance policy that was in effect at the time of her
motor vehicle collision. On September 22, 2004, GE removed the lawsuit to the
United States District Court for the Eastern District of Louisiana. In its answer,
GE pleaded the affirmative defense of nonjoinder of an indispensable party,
arguing that the Parish was indispensable to the case pursuant to Louisiana’s
direct action statute, as well as the defenses of res judicata and prescription,
among others. Lehmann then moved for leave to amend her complaint in order
3
It is worth noting that the court below speculated that the Parish is unwilling to pay
the judgment “because it failed to comply with the notice requirements of its insurance
contract with [GE] and, as such, would not be reimbursed by [GE].”
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to join the Parish as a party, but her motion was denied by the magistrate
judge.4
After the district court denied the parties’ cross-motions for summary
judgment,5 the parties agreed on March 13, 2006, to a bench trial in which
adjudication would be based solely on submitted pleadings, briefs, and exhibits.
GE did not challenge any of Lehmann’s factual allegations, but instead asserted
the following legal defenses: (1) that the claims had prescribed, (2) that the
claims were barred by res judicata, (3) that the claims were barred by the terms
of the Parish’s insurance policy, and (4) that Lehmann failed to comply with
Louisiana’s direct action statute because she did not succeed in joining the
Parish as a party. The district court rejected the first three arguments advanced
by GE, but concluded that the direct action statute did not permit Lehmann to
sue the insurer alone in this instance. The district court therefore rendered
judgment in favor of GE and dismissed Lehmann’s claims with prejudice.
Lehmann then took this timely appeal of the district court’s judgment. GE
subsequently cross-appealed the district court’s rejection of its other defenses.
4
It is not clear from the magistrate judge’s order of January 18, 2005, why Lehmann’s
motion for leave to amend her complaint was denied. The district court, however, later stated
that the motion was denied because “allowing [Lehmann] to amend her complaint would
unduly prejudice the Defendants.” To the extent that Lehmann’s briefing could be construed
as a specific challenge to the magistrate judge’s denial of leave to amend, we conclude that this
argument is not properly before us because Lehmann failed to appeal the magistrate judge’s
order to the district court. See Rittenhouse v. Mabry, 832 F.2d 1380, 1387 (5th Cir. 1987),
superseded on other grounds by statute as recognized in Kekko v. K & B Louisiana Corp., 716
So. 2d 682, 683 (Miss. Ct. App. 1998); United States v. Renfro, 620 F.2d 497, 500 (5th Cir.
1980); see also FED. R. CIV. P. 72(a).
5
Among the issues upon which GE moved for summary judgment were its res judicata
and prescription defenses.
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II. STANDARD OF REVIEW
“‘The standard of review for a bench trial is well established: findings of
fact are reviewed for clear error and legal issues are reviewed de novo.’” In re
Mid-South Towing Co., 418 F.3d 526, 531 (5th Cir. 2005) (quoting Kona Tech.
Corp. v. S. Pac. Transp. Co., 225 F.3d 595, 601 (5th Cir. 2000)); see also FED. R.
CIV. P. 52(a).6
III. DISCUSSION
A.
Lehmann argues that the district court erred when it concluded that she
had not complied with the joinder procedures of Louisiana’s direct action statute
because none of the enumerated exceptions in section 655(B)(1)(a)-(f) were
6
We note that the district court initially rejected GE’s prescription defense, among
others, on a motion for summary judgment. GE then re-urged the prescription defense at the
bench trial, whereupon the district court rejected it again for the reasons provided in its ruling
on the motion for summary judgment. Because GE appealed only the district court’s judgment
and order of reasons rendered after the bench trial, we use the standard of review for a bench
trial in reviewing the district court’s findings and conclusions on GE’s prescription defense.
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present, and thus dismissed her suit with prejudice.7 We agree. In McAvey v.
Lee, 260 F.3d 359 (5th Cir. 2001), we held that section 655(B)(1):
consists of three complementary elements: (1) the injured
plaintiff’s substantive right against the insurer, which accrues
derivatively with his substantive right against the insured
tortfeasor; (2) the injured plaintiff’s direct action or remedy
against the insurer; and (3) the procedural requirements, set
forth in the provision ending with subparagraphs (a)-(e) of section
7
The direct action statute reads, in relevant part:
A. No policy or contract of liability insurance shall be issued or delivered in
this state, unless it contains provisions to the effect that the insolvency or
bankruptcy of the insured shall not release the insurer from the payment of
damages for injuries sustained or loss occasioned during the existence of the
policy, and any judgment which may be rendered against the insured for
which the insurer is liable which shall have become executory, shall be
deemed prima facie evidence of the insolvency of the insured, and an action
may thereafter be maintained within the terms and limits of the policy by the
injured person, or his or her survivors, mentioned in Civil Code Art. 2315.1,
or heirs against the insurer.
B. (1) The injured person or his or her survivors or heirs mentioned in
Subsection A, at their option, shall have a right of direct action against the
insurer within the terms and limits of the policy; and, such action may be
brought against the insurer alone, or against both the insured and insurer
jointly and in solido, in the parish in which the accident or injury occurred or
in the parish in which an action could be brought against either the insured
or the insurer under the general rules of venue prescribed by Code of Civil
Procedure Art. 42 only. However, such action may be brought against the
insurer alone only when:
(a) The insured has been adjudged a bankrupt by a court of competent
jurisdiction or when proceedings to adjudge an insured a bankrupt have
been commenced before a court of competent jurisdiction;
(b) The insured is insolvent;
(c) Service of citation or other process cannot be made on the insured;
(d) When the cause of action is for damages as a result of an offense or
quasi-offense between children and their parents or between married
persons;
(e) When the insurer is an uninsured motorist carrier; or
(f) The insured is deceased.
LA. REV. STAT. § 22:655(A) & (B)(1).
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655(B)(1), which, in effect, provide the insurer a procedural
means to avoid defending a direct action alone, except in the
circumstances listed, by objecting to the non-joinder of the
insured.
Id. at 367.8 Stated another way, we concluded that the section 655(B)(1)(a)-(f)
provisions “merely added a procedural method by which the insurer can object
to the non-joinder of the insured (other than in the exceptional circumstances
listed)”; they “did not affect the plaintiff’s substantive and remedial rights under
the direct action statute . . . .” Id. at 370; see also Safford v. St. Tammany Parish
Fire Prot. Dist. No. 1, No. 02-0055, 2004 WL 32925, at *4 (E.D. La. Jan. 6, 2004)
(unpublished) (citing McAvey for the proposition that “defendant’s right to
demand joinder of its alleged assured is a procedural rather than substantive
right”). We specifically rejected the argument that the (a)-(f) provisions are “a
substantive condition precedent to the injured plaintiff’s right, remedy and
judgment against the insurer under the direct action statute.” McAvey, 260 F.3d
at 366; see also Montrell v. State Farm Mut. Auto. Ins. Co., 946 So. 2d 230, 233
n.2 (La. Ct. App. 2006) (citing with approval to this holding in McAvey). The
district court, which had not been apprised of McAvey by the parties, concluded
that Lehmann’s suit must be dismissed on the theory that an action against an
insurer alone pursuant to the direct action statute is only allowed when one of
the enumerated exceptions in section 655(B)(1)(a)-(f) are present. For the
reasons set forth in more detail in McAvey, the (a)-(f) provisions do not
necessarily or automatically compel such a result. Accordingly, the district
court’s dismissal of Lehmann’s suit on this ground was in error and is hereby
vacated. We need not remand this case to the district court, however, because
8
The provision for bringing an action solely against the insurer in the case of the death
of the insured was added as 22:655(B)(1)(f), 1992 LA. ACTS 584. See McAvey, 260 F.3d at 368
n.6.
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we conclude, based on the trial court record, that GE’s prescription defense must
be sustained for the reasons hereinafter set forth.
B.
Prescription is interrupted when the obligee commences action against the
obligor in a court of competent jurisdiction and venue. LA. CIV. CODE art. 3462.
Thus, Lehmann’s first suit, which was so commenced, interrupted prescription
on her action against the Parish. Further, it interrupted prescription on her
action against GE too, because under the direct action statute, liability insurers
and their insureds are classified as solidary obligors, and when prescription is
interrupted against a solidary obligor, the interruption is effective against all
solidary obligors and their successors. LA. CIV. CODE art. 3503.
Such interruption of prescription resulting from the filing of a suit in a
competent court and in the proper venue within the prescriptive period
continues as long as the suit is pending. LA. CIV. CODE art. 3463. In other
words, after being interrupted by the filing of such a suit, prescription is
continuously interrupted while the suit is pending. Id. at cmt. (b); see also
Louviere v. Shell Oil Co., 720 F.2d 1403 (5th Cir. 1983) (upon certification
holding in accordance with the decision of the Louisiana Supreme Court
interpreting Louisiana Civil Code articles pertaining to prescription); id. at 1407
(discussing Allstate Ins. Co. v. Theriot, 376 So. 2d 950 (La. 1979)). Accordingly,
Lehmann’s first suit interrupted prescription on her action against both the
Parish and GE until the judgment in that case became final on August 4, 2003,
when the delay expired for any party to apply to the Louisiana Supreme Court
for certiorari.
On August 4, 2003, therefore, the interruption caused by Lehmann’s first
suit ceased, and prescription began to run anew on Lehmann’s action against
GE. Id. at 1408 (“The corollary is that all prescriptions begin to run anew only
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No. 06-30554
from the last day of interruption.”) (emphasis in original) (citing LA. CIV. CODE
art. 3466). Because Lehmann did not file her second suit until August 23, 2004,
she failed to interrupt prescription on her action again. Prescription ran for
more than one year unimpeded on her action, so that on August 5, 2004, her
action against GE became subject to the liberative prescription period of one
year that affects delictual actions.9 LA. CIV. CODE art. 3492. Thus, because her
action against GE had become prescribed, Lehmann’s second suit filed on August
23, 2004, could not revive the action or cause another period of prescription to
run.
The district court, nonetheless, concluded that the prescription of
Lehmann’s action against GE was governed by the ten-year prescription period
for revival of money judgments under La. Civil Code art. 3501 because the
underlying purpose of her suit is to enforce a money judgment. We cannot agree,
however, because the record in Lehmann’s state court suit that resulted in her
judgment against the Parish demonstrates that GE was not made a party to that
suit, that GE never submitted to the jurisdiction of the court in that case, and
that the state court judgment does not purport to adjudicate GE’s rights.
Consequently, the state court judgment does not satisfy the requisites of a valid
9
For purposes of prescription, the Louisiana courts classify an injured person’s action
against an insurer under the direct action statute consistently with an underlying delictual
action. See, e.g., Cacamo v. Liberty Mut. Fire Ins. Co., 764 So. 2d 41, 43 (La. 2000) (“[The
direct action statute] was enacted to give special rights to tort victims . . . .”); Reeves v. Global
Indem. Co. of New York, 168 So. 488, 489 (La. 1936) (“Act No. 55 of 1930, which gives the
plaintiff the right to proceed directly against the insurance carrier, expressly covers cases of
this kind, i.e., actions ex delicto.”); Hodges v. Republic W. Ins. Co., 921 So. 2d 175, 178 (La. Ct.
App. 2005) (“In this case, the Hodgeses’ claim against Gray is prescribed on the face of their
amended petition because it was filed after the one-year prescriptive period had passed.”);
Etienne v. Nat’l Auto. Ins. Co., 747 So. 2d 593, 596 (La. Ct. App. 1999) (“Here, suit was brought
against the insurer on February 8, 1995, within the applicable one-year prescriptive period.”);
Robertson v. First of Georgia Underwriters Co., 464 So. 2d 927, 928 (La. Ct. App. 1985) (“‘Direct
actions authorized by LSA-R.S. 22:655 are limited to tort liability only.’”) (quoting Champion
v. Panel ERA Mfg. Co., 410 So. 2d 1230, 1235 (La. Ct. App. 1982)).
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No. 06-30554
judgment insofar as to be enforceable against GE for purposes of this case. See
RESTATEMENT (SECOND) OF THE LAW OF JUDGMENTS introductory note and § 1
(1982). The plaintiff’s argument suggesting that the direct action statute
somehow authorizes her to enforce her judgment against GE without allowing
it to have its day in court is also misplaced. As noted above, the statute creates
substantive, remedial, and procedural rights, but it does not confer personal
jurisdiction or dispense with the requirement of adequate notice. See id.; id. at
§ 2; 15 WILLIAM SHELBY MCKENZIE & H. ALSTON JOHNSON, III, LOUISIANA CIVIL LAW
TREATISE, INSURANCE LAW & PRACTICE § 23 (3d ed. 2006).
IV. CONCLUSION
For these reasons, we AFFIRM the judgment of the district court.
11