### FILED U.S. COURT OF APPEALS ELEVENTH CIRCUIT February 5, 2004 THOMAS K. KAHN CLERK [PUBLISH] IN THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH

CIRCUIT

________________________ No. 03-11688

________________________ D. C. Docket No. 99-01319-CV-S-N COLONIAL LIFE & ACCIDENT INSURANCE

COMPANY, a

nd COLONIAL COMPANIES, INC., Plaintiffs-Appe llants,

versus HARTFORD FIRE INSURANCE COMPANY, TWIN CITY FIRE INSURANCE COMPANY, et al., Defendants-Appe llees.

________________________ Appeal from the United States District Court for th e Midd le Dis trict of Ala bama

_________________________ (February 5, 200

4) Before ANDE

RSON, BLAC

K and HILL, C

ircuit Judges. BLACK, Circuit Judge:1 Although the distr ict court certif

ied only the b

reach of the en

hanced duty

of good faith conflict of laws question, “[w]hen a court of appeals has jurisdiction on interlocutory appeal pursuant to 28 U.S.C.

§ 1292(b), the sco

pe of appellate r

eview is not limited t

o the precise question certified by the district court because the district court’s order, not the ce rtified question, is brought before the court.” Aldridge v. Lily-Tulip, Inc. Salary Retirement Plan Benefits Comm ., 40 F.3d 1202, 1207 ( 11th Cir. 1994). We c hoose to address th

e remedy qu

estion even thoug

h it was not specifica

lly mentioned

in the district cour

t’s interlocutory

order. We choose

not to address Colonial’ s additional claims that the district c

ourt erred in re

stricting its bad f

aith claim to a breach of the enhanced duty of good fa ith claim, and in holding, as a matter of law, there could not be bad faith failure to settle.

2 The Parker White lawsuit was filed by an independent representative ag ainst Colonial seeking damag

es for mental ang

uish, sickness, illn

ess, physica

l harm, lost commissio

ns, and lost 2 Colonial Life & A

ccident Insurance

Company, and Colonial Com panies, Inc. (collective

ly Colonial) appe

al the district cour

t’s order partia

lly dismissin

g their lawsuit against Hartford Fire Insurance Company, Twin City Fire Insurance Company, a

nd Hartford Casua

lty Insurance Company (col lectively Har

tford). The district court dism

issed Colonial’s br

each of enhanced dut

y of good faith cl

aim solely because S outh Carolina classi fies the breach of

good faith and fair d

ealing as a tort, and held Alabama law controls the remedy in contract claims even though South Carolina controls the substantive claims. We reverse. 1 I. BACKGROUND Colonial sued Hartf

ord for breach of c

ontract, breach of the enhanced duty of good faith, negli gence, and bad faith, in a cross-claim and third par ty complaint. These claims

arose out of a rese

rvation of rights def

ense provided by H

artford and Hartford’s fa

ilure to settle the P arker White la wsuit. 2benefits. 3

While this case w

as pending, the Ala

bama Suprem

e Court, in response

to a certified question in a related case, held that a claim of breach of the enhanced duty of good faith sou nds in contract. Twin City Fire Ins. Co. v. Colonial Life & Accident Ins. Co. , 839 So. 2d 614, 616 ( Ala. 2002). Foll

owing briefs by the parties, the district court conducted a hearing to discuss the impact of Twin City on this case. Subsequen tly, the dist rict court issued an order dismis sing Colo nial’s claim for breach of the enhanced duty of good faith. The court held that under Alabama choice of law provisions a nd the decision in Twin City , Colonial’s breach of the enhanced duty

of good faith claim

sounds in contract and is governed by South Carolina contr

act law. Beca

use South Carolina r

ecognizes the brea

ch of the duty of good faith a

nd fair dealing as a

tort claim, r

ather than a contra

ct claim, the district court dism

issed Colonial’s c

laim for brea

ch of the enhanced dut

y of good faith. The district court also found that, while Colonial’s contract claims are governed by South Carolina substantive l aw, in the event contract liability exists, the remedy is governed by Alabam a law. The district court’s interlocutory order certified the foll

owing holding for im

mediate appea

l: In sum, this is what the court concludes. Alabama law m andates that Colonial’s “enhanced dut y” claims be construed as cont ract claims. Because they are contract claims, South Carolina law governs. W hen4

the court looks to South Carolina contract law, these clai

ms do not exist as contract claims. Under South Carolina law, the claims are construed as tort claims. If the court were then to apply Alabam a law to these tort claims, this avails Colonial nothing because under Alabama law, no such tort clai ms exist. See Twin City, sup ra . Therefore, put

ting aside term

inological problem

s, counts two and fou

r of the cross-claim and third party complaint [breach of the enhanced duty of good faith a

nd bad faith] m

ust be dismissed be

cause they do not exist as contract

claims in South C arolina or as tort c laims in Alabama. II. DISMISSAL OF THE BREACH OF THE ENHANCED DUTY OF GOOD FAITH CLAIM A. Alabama Choice of L aw “A federal

court in a diversity

case is required to

apply the laws,

including principles of conflict of laws, of the state in which the federal court sits.” O’Neal v. Kennamer , 958 F.2d 1044, 1046 ( 11th Cir. 1992). T his case was brought

in the Midd le Dis trict of Ala bama, a nd th e dist rict c ourt d id no t err i n app lying Alaba ma choice of law rules. B. Application of South Car olina Substantive Law Alabama applies the traditional doctrines of lex loci contractus to contract claims and lex loci delicti to tort claims. The doctrine of lex loci contractus governs the valid ity, interpretation, and construction of th e contract. Cherry, Bekaert & Holland v. Brown , 582 So. 2d 502, 506 (Ala. 1991). The doctrine states that “a contract is governed by the laws of the state where it is made e xcept where5

the parties have legally contracted with reference to the laws of another jurisdiction.” Id. The doctrine of lex loci delicti , on the other hand, requires the court to “determine the substantive rights of an injured party according to the law of the state where the injury occurred.” Fitts v. Minnesot a Mining & M

fg. Co. , 581 So. 2d 819, 820 (Ala. 1991). The breach of the enhanc ed duty of good faith s ounds in contract

. Twin City , 839 So. 2d at 616. The doctrine of lex loci contractus , therefore, a pplies to Colonial’s breac

h of the enhanced duty

of good faith claim

. The parties ag

ree the insurance contrac

ts at issue were m

ade in South Carolina

, and thus, South Carolina law appli

es to any contra

ct claims. T

he district court did not err in finding Colonial’s b

reach of the enhanced duty of good fai th claim should be decided under Sout h Carolina law. C. Breach of the Enhanc ed Duty of Good Fait

h In Alabama,

insurers have an enh

anced duty of good faith to defend their insured under a reserv ation of rights. L & S Roofing Supply Co. v. St. Paul Fire & Marine Ins. Co. , 521 So. 2d 1298, 1303– 04 (Ala. 1987). S outh Carolina does not have a cause of ac

tion identical to Ala

bama’s breach of the enhanced duty of good faith under L & S Roofi

ng , but has a simil

ar cause of action

for breach of the duty of good faith and fai r dealing. See Trimper v. Nationw ide Ins. Co. , 540 F. Supp.3 The breach of th e duty of g

ood faith and fair

dealing and bad

faith are not sep

arate causes of action in South Carolina. Ocean Winds Co uncil of Co-Owners, Inc. v. Auto-Owne rs Ins. Co. , 241 F. Supp. 2d 572, 577 (D.S.C. 2002). 6 1188, 1193 n.2 (D.S .C. 1982) (explai ning that insurers have

an enhanced duty

to act in good faith and th

at South Carolina c ourts have impose d a duty of good fai

th and fair dealing).A breach of the dut y of good faith and

fair dealing is a to

rt in South Carolina. 3 Tadlock Painting Co. v. Maryland Cas. C o. , 473 S.E.2d 52, 54–55 (S.C. 1996). The district court

dismissed the br

each of enhanced dut

y claim be

cause South Carolina characterizes a breach of the duty of good faith and fair dealing as a tort claim rather than a contract claim. W e have never addressed whether a claim should be di smissed because another state char

acterizes the cla

im differently. In a related case, Twin City Fire In s. Co. v. Colonial

Life & A ccident Ins. Co. , Civ. A. No. 99-D-935-N (M.D. Ala.Aug. 16, 2002), however, District Judge Ira De Ment faced the same issue and reached a different conclusion than the district court in this case. As in the matter sub judice , Hartford argued that Colonial had no cause o f action because the claim is classified as a contrac t in Alabama and a

tort in South Carolin

a. In rejecti

ng this argument,

Judge De Ment held:7

Twin City dra

ws attention to the f

act that South Carolina treats the claim as tortious rather than contractual. . . . [T]he court notes that Twin City has n

ot offered any

persuasive reason w

hy this fact should matter. Conflicts rules frequently dictate the application of laws that are different–bot

h in form and subst

ance–from the

laws of the forum state. These dif

ferences lend signi

ficance to conflic

ts analyses, but they do not permit Twin City’s logical contortions. There is no Catch 22 for one simple reason: the court’s application of Alabama’s choice of law rules entails th at it is con cerned sol ely with Alaba ma’s characterization of the claim. Whether South Carolina bases an analogous cause of ac

tion in tort, contra

ct, or statutory

law is irrelevant. Ala

bama recogniz

es the duty as ar

ising in contract, t

hus requiring refere

nce to South Carolina

law to determ

ine the scope of that duty. There is persuasi

ve authority suppor

ting this conclusion. I

n Waddoups v. Amalgamated Sugar C

o. , 54 P.3d 1054, 1059–61 (Utah 2002), the Supreme Court of Utah noted that und

er Idaho law, w

rongful termina

tion in violation of public policy is a contr

act-based cause of

action, and under U

tah law, the sam

e cause of action is tort-based . The court em ployed Utah choi

ce of law analy

sis to find Idaho law applicable to t

he wrongful term

ination claim,

and then dismisse

d the action because the wrongf

ul termination c

laim pled under Utah law did not sta te a claim under Idaho law. The court did not dism iss the action becaus e the cause of acti on was characteri

zed differently

in the two states, but because plaintif fs pled the wrongful termination cl aim under Utah law. Id; see also Backar v. Western States Producing Co. , 382 F. Supp. 1170, 1174–75 (W.D. T

ex. 1974) (holding tha

t the4 The district court cited In re Korean Air Lines Disaster of Sept. 1, 1983 , 117 F.3d 1477

(D.C. Cir. 1997), for the proposition that even in heart wrenching circumstances, there is nothing unusual about a ch

oice of law provi

sion precluding

claims in one foru

m that are availa

ble in another forum. T

hat case, howev

er, dealt with a c

ase where the c

ause of action wa

s available in one forum and not in

the other. Hartf

ord cites Thompson v. Acceptance Insurance Co. , 689 So. 2d 89 (Ala. Civ. App. 1996), but similarly, that case deals with a cause of action not recog nized in the other jurisdi

ction. In this c

ase, the cause o

f action, though

named differen

tly, is availa

ble in South Carolina, but as a tort claim rather than a contract claim. 8 law of the controll

ing state, New Y

ork, would determ

ine whether an inte

rest in oil leases was classified realty or personal, regardless of the fact the forum state, Texas, classified the i nterest differently). Additionally, t

he Restateme

nt (Second) of Conf

lict of Laws lea

ds us to Judge De Ment’s conclusion. It provide s that choice of law rules “do not themselves dete

rmine the right

s and liabilities of th

e parties, but rat

her guide decision as to which l

ocal law rule wi

ll be applied to deter

mine these righ

ts and duties.” Restate

ment (Second)

of Conflict of La

ws § 2 cmt. a(

3) (1971). The Restatement further provides “[t]he classification and interpretation of local law concepts and term

s are determ

ined in accordance

with the law that g

overns the issue involved.” Re statement (Second) of Conflict of Laws § 7(3) (1971 ). We agree with Judge De Ment’s holding that whether S outh Carolina classifies the bre

ach of the duty of

good faith as a tort is

irrelevant. 4 Colonial may or may not ha

ve pled sufficient f

acts for a South Ca

rolina breach of the

duty of5 If the district court finds that Colonial pled sufficient facts for a breach of the duty of good faith claim, Hartford’s conduct should be measured by South Carolina’s “simple” duty of good fai th a nd n ot A lab ama ’s “ enh ance d” d uty.

6 Jones states: It is a principle of law, admitted by all courts, that the lex loci contractus must govern as to the validity, interpretation, and construction of th

e contract. But

the remedy

to enforce it, or

to recover damages for its breach, must be pursued according to the law of the forum w

here the suit is bro

ught. 18 Ala. at 250. Macey

provides “[t]he lex loci controls the validity and construction of the contract but the lex fori operates on the remedy to enforce it.” 30 So. 2d at 669. 9 good faith claim in its complaint and the pretrial order. 5 The district court erred, however, in dism

issing the claim

solely because South Carolina clas sifies the breach of good faith and fair dealing as a to rt. III. REMEDY The district court

also held that, whi

le South Carolina la

w will govern any claims arising

under contract law

, Alabama la

w will govern the r

emedy in the

event liabi lity ex ists . The d istri ct cou rt cit ed two older decis ions of the Alaba ma Supreme Court, Jones v. Jones , 18 Ala. 248, 250 ( Ala. 1850) and Macey v. Crum , 30 So. 2d 666, 669 (Al

a. 1947), to support this conclusion. 6 More recently

, however, the A

labama Supre

me Court has he

ld the law of the state governing the

substantive law m

ust be applied when c onsidering the damages resulting from a breach of contract. Shelter Mut. Ins. Co. v. Barton , 822 So. 2d 1149, 1158 (Al

a. 2001). The co

urt held, “[b] ecause we have he ld that the10

Shelter policy

must be construe

d in accordance wi

th Missouri law, w

e likewise hold that Missouri law must be applied when considering the damages that resulted from a breach of that contract.” Id. We hold, pursuant to Shelter Mutual

, that any remedy for a claim sounding in contract should also be decided under South Carolina law. IV. CONCLUSION We reverse and remand for the district court to determine whether Colonial pled a Sout h Carolina breach of th e duty of goo d faith and fair dealin g claim. We also reverse the di strict court’s hol ding that Alabam

a law will control

the remedy in any contract claims. REVERSED AND REMANDED.