Unpublished Disposition, 920 F.2d 936 (9th Cir. 1989)

MEMORANDUM^** 

BACKGROUND

On January 24, 1986, Plaintiff Jeri Lynn Muse, while riding a bicycle, collided with an automobile driven by Evelyn Foulkner in San Diego, California. Foulkner had automobile liability insurance with Allstate Insurance Company ("Allstate"). Her insurance policy had a limit of $15,000 per person per accident.

On June 16, 1986, an attorney for Muse requested that Allstate advance payments of policies benefits to compensate Muse for the "multi-level back surgery" she would require as a result of her accident with Foulkner. A week later, Allstate received an initial medical report from Muse's attorney describing her back injuries. The report detailed her history of back problems since the accident, but did not make a final prognosis.

On July 21, 1986, Allstate received medical bills from Muse amounting to $1,594 and a more detailed medical report. The next day, Allstate offered Muse $15,000, the limit under Foulkner's policy, in full settlement of her bodily injury claim.

Muse rejected the offer. Muse later sued the insured, Foulkner, in state court. On April 22, 1988, Muse and the insured Foulkner filed a stipulated judgment awarding Muse $181,000 for her injuries. The judgment was entered by the court on July 6, 1988. The stipulated judgment was signed by Muse and Foulkner, and their respective attorneys. Muse also agreed not to execute the judgment against Foulkner and to share with Foulkner any recovery in subsequent bad faith litigation against Allstate. Allstate did not sign the stipulated judgment or either of the related agreements.

On September 16, 1988, Muse filed a bad faith action under Cal.Ins.Code Sec. 790.03 against Allstate in a California Superior Court for failure to pay promptly the proceeds due under the Foulkner policy. Allstate removed the action to federal court. On September 8, 1989, the district court granted summary judgment in favor of Allstate on the ground that the action was barred by Moradi-Shalal v. Fireman's Fund Insurance Co., 46 Cal. 3d 287, 250 Cal. Rptr. 116, 758 P.2d 58 (1988). Muse filed a timely notice of appeal from that order.

DISCUSSION

We review a grant of summary judgment de novo. Kruso v. International Tel. & Tel. Corp., 872 F.2d 1416, 1421 (9th Cir. 1989), cert. denied, 110 S. Ct. 3217 (1990). "Viewing the evidence in the light most favorable to the nonmoving party, we must determine whether there are any genuine issues of material fact and whether the district court correctly applied the substantive law." Judie v. Hamilton, 872 F.2d 919, 920 (9th Cir. 1989).

In 1988, the California Supreme Court abolished the cause of action against an insurer for bad faith refusal to settle a claim based on Cal.Ins.Code Sec. 790.03. Moradi-Shalal v. Fireman's Fund Ins. Co., 46 Cal. 3d 287, 304-05, 250 Cal. Rptr. 116, 126-27, 758 P.2d 58 (1988). In doing so, the Court overruled its 1978 decision, Royal Globe Insurance Co. v. Superior Court, 23 Cal. 3d 880, 153 Cal. Rptr. 842, 592 P.2d 329 (1979), which established the Sec. 790.03 cause of action. In fairness to plaintiffs who had "Royal Globe" suits pending, however, the Court allowed actions filed before Moradi-Shalal became effective to continue if the plaintiff obtained a "final judicial determination" of the insured's liability before filing suit. 46 Cal. 3d at 313, 250 Cal. Rptr. at 133.

In this case, Muse entered into a stipulated judgment with the insured, Foulkner, before bringing its "Royal Globe" action against Allstate. The district court granted summary judgment in favor of Allstate because it found "that the stipulated judgment does not constitute a final judicial determination of liability" as required by Moradi-Shalal. Muse v. Allstate Ins. Co., No. CV-88-1879-JLI (S.D. Cal. Sept. 8, 1989) (order granting summary judgment). We agree.

In Moradi-Shalal, the California Supreme Court held that previously filed "Royal Globe" lawsuits could be maintained only if such suits were based on a "conclusive judicial determination of the insured's liability," not on a settlement of the third party's claim against the insured. 46 Cal. 3d at 306, 250 Cal. Rptr. at 127. Recently, the Court clarified its holding by ruling that a stipulated judgment "constitutes a final judicial determination as required by Moradi-Shalal" if it is entitled to collateral estoppel effect against the insurer. California State Auto Ass'n Inter-Ins. Bureau v. Superior Court (Cooper), 50 Cal. 3d 658, 665-6, 268 Cal. Rptr. 284, 288, 788 P.2d 1156 (1990). The Cooper Court noted that its ruling was limited to cases where "the insurer both participated in the settlement and signed the stipulation." 50 Cal. 3d at 665-6 n. 5, 268 Cal. Rptr. at 288 n. 5.

Here the stipulated judgment is insufficient to support Muse's bad faith action against Allstate. The stipulated judgment itself states that only Muse and the insured Foulkner have agreed to the stipulation: "It is hereby stipulated between the plaintiff JERI LYN MUSE and defendant EVELYN JEAN FOULKNER, by themselves and their respective counsel...." Moreover, no signature on the stipulated judgment purports to represent Allstate.

Although Thomas Byron signed the stipulated judgment as "Attorney for Defendant Evelyn Jean Foulkner," Muse argues that Byron actually represented Allstate. There is no evidence to support Muse's argument. In fact, there are two letters in the record from Byron to Muse where Byron states that his client is Foulkner, not Allstate. The judgment therefore does not satisfy the Cooper requirements that the insurer participate in the proceeding and sign the stipulation. Thus, plaintiff's action is barred under Moradi-Shalal.

AFFIRMED