Opinion ID: 18796
Heading Depth: 2
Heading Rank: 3

Heading: Assignment of Rights in the Lawsuit

Text: First, we conclude that the Woodfields’ assignment of rights to Planet is a valid sale of litigious rights, i.e., the plaintiff’s rights in a filed lawsuit, and that the assignment incorporates a conventional subrogation. The issue of 6 See La. Civ. Code art. 1827, cmt. (d) (expressly overruling cases which limited the subrogee’s recovery to the amount he actually paid the obligee); id. art. 2652 (establishing that litigious rights may be assigned and that assignee steps into shoes of assignor as to all rights, including right to recover more than amount paid for the litigious rights unless the obligor timely offers to acquire these rights from the assignee for the price paid and ceases to contest or defend against the claim). 6 assignability of these rights is governed by Louisiana law7 which provides that litigious rights are rights in an already-filed personal injury suit and are “real” rights, not “strictly personal” rights,8 heritable and freely assignable.9 In the instant case, the Woodfields assigned Planet their rights to recover in a lawsuit already pending against Nationwide; they did not purport to assign their UM coverage as such. Thus, the assignment was valid under the scheme of Louisiana’s Civil Code, and Planet stepped into the shoes of the Woodfields for the purposes of this lawsuit.10 In addition, the Woodfields accomplished the assignment to Planet through express language in a written settlement agreement as part 7 In diversity cases, federal courts apply the law of the forum state, here, Louisiana. See Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938); Klaxton Co. v. Stentor Elec. Manuf. Co., 313 U.S. 487 (1941). 8 La. Civ. Code art. 2642 & cmts. (providing that all rights are assignable except those which are strictly personal). 9 See La. Civ. Code art. 2652 (“Sale of litigious rights”). Article 2652 specifically provides: “When a litigious right is assigned, the debtor may extinguish his obligation by paying to the assignee the price the assignee paid for the assignment....” The article affirms the Louisiana litigious rights doctrine under which such rights are freely heritable and assignable. See also Nathan v. Touro Infirmary, 512 So.2d 352, 354-55 (La. 1987) (holding that Louisiana legislatively overruled common law rule that tort action abates on death of victim); Guirdy v. Theriot, 377 So.2d 319, 32324 (La. 1979) (noting “significant difference between inheriting an instituted action and inheriting the right to institute an action”). 10 Rather than formally moving to be substituted as the PartyPlaintiff, Planet filed a third-party complaint again Nationwide. 7 of the consideration for the $400,000 paid by Planet; therefore, the type of subrogation that resulted is conventional (or contractual) rather than legal (or equitable).11 Nationwide asks us to follow the Louisiana Court of Appeal’s holding in Constans v. Choctaw Transport, Inc.12 to the effect that conventional subrogation of a personal injury claim is not permitted.13 We decline this invitation. We have recently confirmed our recognition of the Louisiana Supreme Court’s distinction between a personal injury claim that is the subject of an extant lawsuit, which is heritable and assignable, and a claim that is merely an inchoate personal injury cause of action that has not yet been sued on, which is strictly personal and not heritable or assignable.14 As Constans conflicts with our precedent, we 11 See La. Civ. Code art. 1827 (providing that conventional subrogation is subject to the rules governing assignment of rights). “‘Conventional’ subrogation occurs when an obligee receives performance from a third person and in express terms subrogates that person to the rights of the obligee, even without the obligor’s consent. ‘Legal’ subrogation takes place by operation of law in favor of an obligor who pays a debt he owes with others and who has recourse against those others as a result of the payment. Wilhite v. Schendle, 92 F.3d 372, 376 (5th Cir. 1996) (citations omitted) (construing Louisiana law). 12 712 So.2d 885 (La. App. 1997), writ denied, 716 So.2d 892 (La. 1998) (allowing contribution under legal subrogation theory). 13 Id. at 895. 14 In re Pembo, 32 F.3d 566 (unpublished table decision), No. 94-30036, slip op. at 4 (5th Cir. July 28, 1994) (according to 5th Cir. Rule 47.5.3, “[u]npublished opinions issued before January 1, 1996, are precedent”); see also Parich v. State Farm Mutual Auto. Ins. Co., 919 F.2d 906, 917 & n.3 (5th Cir. 1990) (applying Louisiana law on assignment of rights but finding assignment 8 decline to follow it.15 And, as Louisiana law is clear that the express assignment of a cause of action for which suit has been instituted is valid, we do not need to reach Planet’s alternative recovery theories of legal subrogation and unjust enrichment. Nationwide next argues that under the terms of the UM policies themselves the assignment was invalid because the Woodfields failed to obtain the insurer’s consent to settle. We hold, however, that Nationwide waived its right to assert this affirmative defense under the consent-to-settle clause of the insurance policy by invalid as suit had not been filed). 15 As often noted, we are a strict stare decisis court: One panel of this court cannot disregard, much less overrule, the decision of a prior panel, even on decisions involving interpretation of state law. Only supervening contrary decisions of the state’s highest court or the supervening enactment of a controlling statute will render our decisions clearly wrong and thus no longer precedential. FDIC v. Abraham, 137 F.3d 264, 267-68 (5th Cir. 1998). Therefore, we will not ignore our own prior decisions to apply the rule of Constans which, after all, was decided by one of five intermediate Louisiana appellate courts only, particularly in the face of two state supreme court decisions contra. We emphasize the narrowness of our holding in this case: We do not establish a general rule that conventional subrogation results from every sale of litigious rights. In this case, the deliberate wording of the Woodfield-Planet settlement agreement, specifying that the objects of the assignment are the assignors’ right, title, and interest in the lawsuit makes clear that the subrogation is conventional; in the absence of a specific settlement contract or assignment instrument, however, the sale of a litigious right would still result in subrogation —— albeit possibly legal rather than conventional —— of the purchaser to the rights of the seller,. Any conclusion we might reach on that question would be dicta. In the context of the Louisiana concept of litigious rights, what is crucial is not the label applied to the type of subrogation but the fact that the assignment is of an interest in an existing lawsuit, as distinguished from an inchoate right to sue. 9 failing to plead it adequately. As a preliminary matter, we note that under the choice of law provisions of Louisiana, the forum state,16 issues concerning the terms of an insurance policy are governed by Mississippi law. The Louisiana Civil Code’s generally applicable choice of law article specifies that “an issue in a case having contacts with other states is governed by the law of the state whose policies would be most seriously impaired if its law were not applied to the case.”17 Specifically regarding contracts, the Code instructs courts to assess the strength of the relevant policies of the involved states in light of the place of negotiation, formation, and performance of the contract as well as the location of the object of the contract.18 Applying these principles, Louisiana courts generally choose the law of the state in which the insurance policy in question was issued to govern the interpretation of the terms of the policy.19 In the instant case, these principles lead us to conclude that Mississippi law governs the policy terms. The Woodfields’ Nationwide policies were issued in 16 Federal courts apply the choice of law provisions of the forum state, here, Louisiana. Duhon v. Union Pac. Resources Co., 43 F.3d 1011, 1013 (5th Cir. 1995). 17 La. Civ. Code art. 3515. 18 Id. art. 3537. 19 Anderson v. Oliver, 705 So.2d 301, 305-06 (La. App. 1998) (relying on Louisiana Civil Code choice of law articles); Holcomb v. Universal Ins. Co., 640 So.2d 718, 722 (La. App. 1998). 10 Mississippi, to Mississippi residents, covering vehicles principally garaged in Mississippi. In contrast, the only contact between the Nationwide policies and Louisiana is the situs of the accident on a highway in Louisiana. Mississippi has a more substantial interest in uniform application of its laws governing insurance contracts than Louisiana has in providing an insurance remedy to an out-of-state resident who happens to sustain injury while transitorily within the state’s borders. Nationwide nevertheless contends that the Louisiana Insurance Code establishes a presumption that courts should apply Louisiana law to matters concerning UM policies.20 In Anderson v. Oliver,21 however, the only Louisiana appellate court to consider the precise question specifically disapproved of the suggestion that the UM statute includes a choice of law presumption, even though that court would have reached the same result, applying Louisiana law under the traditional “interest analysis” codified in the above-referenced conflict of laws statutes.22 Therefore, under the choice of law provisions of the forum state of Louisiana, we apply Mississippi law to interpret the terms of the UM policies at issue. We begin our substantive analysis by observing that the parties do not dispute that (1) consent-to-settle provisions are 20 See Trautman v. Poor, 685 So.2d 516, 521 (La. App. 1996). 21 705 So.2d 301 (La. App. 1998). 22 Id. at 305. 11 enforceable under Mississippi law,23 (2) the Nationwide policies at issue contain such clauses, requiring the insured to obtain written consent of the insurer to settle any action brought against a potentially liable party, or (3) the Woodfields failed to obtain Nationwide’s consent to settle with Planet, Allstate, and their respective insureds. Planet nevertheless contends, first, that Nationwide waived the right to assert its consent-to-settle defense by failing to plead it; and, second, that Nationwide is estopped from asserting this defense by its denial of coverage. As we agree that Nationwide failed to plead this defense and thus waived it, we do not reach the res nova Mississippi law question whether an insurer that denies coverage is estopped to assert its rights under the policy clause requiring the insured to obtain the insurer’s consent to settle. We thus avoid “the always-dangerous undertaking of predicting what [Mississippi] courts would hold if the issue were presented squarely to them.”24 Nationwide asserts that it did plead the consent-to-settle affirmative defense. It points to its “Fourth Defense” to Planet’s third-party complaint: “The claims, demands and causes of action asserted by Wilson Scott, Lane Trucking Company, Inc. and Planet Insurance Company are barred, or alternatively, reduced, by the 23 See, e.g., St. Paul Property & Liab. Ins. Co. v. Nance, 577 So.2d 1238, 1242 (Miss. 1991); United States Fidelity & Guar. Co. v. Hillman, 367 So.2d 914, 921 (Miss. 1979). 24 Stephens v. State Farm Mutual Auto. Ins. Co., 508 F.2d 1363, 1366 (5th Cir. 1975). 12 doctrines of accord and satisfaction, transaction and compromise, waiver and/or release.” The district court, in its May 6, 1998 Order and Reasons in response to the parties’ cross-motions to vacate the judgment, held that such “boilerplate” defensive pleading is insufficient under Federal Rule of Civil Procedure 8(c) to apprise Planet of Nationwide’s affirmative defense under the specific consent-to-settle provision of the insurance policy, and thus Nationwide waived the defense. We agree. An insured’s failure to obtain the insurer’s consent to settle is an affirmative defense under Mississippi law.25 The Federal Rules require an affirmative defense to be pleaded; failure to plead such a defense constitutes waiver.26 An affirmative defense is subject to the same pleading requirements as is the complaint.27 Even though the aim of the relaxed notice pleading standards of Federal Rule of Civil Procedure 8 is to prevent parties from being defaulted for committing technical errors,28 a defendant nevertheless must plead an affirmative defense with enough 25 See, e.g., Hillman, 367 So.2d at 916 (noting that any action by insured that prejudices subrogation rights of insurer is an affirmative defense which must be pleaded). 26 Trinity Carton Co. v. Falstaff Brewing Corp., 767 F.2d 184, 194 (5th Cir. 1985). 27 See Fed. R. Civ. P. 8(e) (requiring all pleadings to be “simple, concise, and direct”). 28 Ingraham v. United States, 808 F.2d 1075, 1079 (5th Cir. 1987) (noting that technical failure to comply with rule 8(c) is not fatal). 13 specificity or factual particularity to give the plaintiff “fair notice” of the defense that is being advanced.29 We acknowledge that in some cases, merely pleading the name of the affirmative defense —— as Nationwide contends it did —— may be sufficient.30 In the instant case, however, Nationwide’s baldly “naming” the broad affirmative defenses of “accord and satisfaction” and “waiver and/or release” falls well short of the minimum particulars needed to identify the affirmative defense in question and thus notify Planet of Nationwide’s intention to rely on the specific, contractual defense of requiring the Woodfields to obtain the insurer’s consent before settling with Planet. The “fair notice” pleading requirement is met if the defendant “sufficiently articulated the defense so that the plaintiff was not a victim of unfair surprise.”31 In prior cases, we have employed a fact-specific analysis in deciding whether the plaintiff was 29 “Although absolute specificity in pleading is not required, fair notice of the affirmative defense is.” Automated Med. Labs. v. Armour Pharm. Co., 629 F.2d 1118, 1122 (5th Cir. 1980) (citing Rule 8(c)); see also Ingraham, 808 F.2d at 1079 (“A defendant should not be permitted to ‘lie behind a log’ and ambush a plaintiff with an unexpected defense.”). 30 American Motorists Ins. Co. v. Napoli, 166 F.2d 24, 26 (5th Cir. 1948) (holding, in negligence action arising from car collision, that pleading “contributory negligence” without extensive factual allegations is sufficient); cf. Home Ins. Co. v. Matthews, 998 F.2d 305, 309 (5th Cir. 1993) (noting that improper labeling of defense was not prejudice where defensive pleading set out detailed facts and where state law itself was unclear on distinction between “waiver” and “estoppel”). 31 Matthews, 998 F.2d at 309 (citing Bull’s Corner Restaurant v. Director, FEMA, 759 F.2d 500, 502 (5th Cir. 1985)). 14 unfairly surprised.32 For example, in Trinity Carton Corp. v. Falstaff Brewing Corp.,33 we held that the defendant waived his defenses of failure of consideration and failure to agree on all essential terms by not raising them until several months after the jury’s verdict. Finding no justification for the delay in raising the defenses, we noted that “[the defendant] necessarily was put on notice by the very nature of the suit that these matters of affirmative defense would be relevant to, if not potentially controlling of, the determination of liability.”34 Likewise, we discern no justification here for Nationwide’s having waited until after the trial to inject into the dispute its rights under the explicit contractual provision requiring the insured to obtain consent to settle. Nationwide, itself an insurance company, was put on notice of the potential need to assert its consent-to-settle defense by the very nature of the 32 See, e.g., Ingraham, 808 F.2d at 1079 (noting that failure to plead statutory limit on medical malpractice liability prejudiced plaintiffs who would have offered additional proof of damages or pleaded other theories of recovery with more vigor had they know of the defense); Marine Overseas Servs., Inc. v. Crossecean Shipping Co., 791 F.2d 1227, 1233 (5th Cir. 1986) (noting that although defense of agency relationship was not pleaded, parties were well aware it was an issue); Bull’s Corner Restaurant, 759 F.2d at 502 (finding statutory exclusion adequately pleaded where facts recited in complaint related to the exclusion even if it was not mentioned by name); Automated Med. Labs., 629 F.2d at 1122 (holding that pleading statute of frauds for first time in one sentence of pre-trial memorandum was inadequate). 33 767 F.2d 184 (5th Cir. 1985). 34 Id. at 194. 15 instant third-party complaint, which arose only because of a settlement agreement between another insurer (Planet) and Nationwide’s own insureds (the Woodfields). Nationwide had already been added to the suit as a defendant by the time of the PlanetWoodfield settlement and the filing of Planet’s subsequent thirdparty complaint. In addition, Nationwide’s post-trial, post-hoc suggestion that the consent to settle provision was “exactly” what it meant by pleading the “Fourth Defense” rings hollow, to say the least. Not until after the June 1996 trial, during a second round of posttrial pleadings, did Nationwide advance such a connection. True, Nationwide had mentioned the consent-to-settle clause of the policy during the first round of post-trial motions, in which both parties requested reconsideration of the amount of the judgment in light of offset, subrogation, indemnity, and contribution issues. But even though Nationwide relied on the consent-to-settle clause in that memorandum to the court on those specific issues, at no time did it imply, much less assert, that it had previously pleaded it as an affirmative defense; neither did it mention the “Fourth Defense” at that time. In ruling on those motions, the district court correctly observed that “this issue had not been raised for the first time until the current memoranda were filed with the court. The issue does not appear well framed in the pre-trial order and it would seem that such an issue should be framed as an affirmative 16 defense in Nationwide’s answer, which, in fact, it was not.” After entry of that order, Nationwide again requested postjudgment relief. Faced with the magistrate judge’s conclusion that it had not pleaded the affirmative defense, Nationwide proffered the general, non-contractual “Fourth Defense” to support its assertion of having adequately pleaded the specific, contractually based consent-to-settle defense. We cannot credit such a recharacterization to reverse the jury’s determination of liability.35 Accordingly, we affirm the district court’s ruling that by failing to plead it, Nationwide waived the right to assert a defense under the consent-to-settle clause of the policies, and that the Woodfields validly settled and assigned their litigious rights against Nationwide to Planet.