Unpublished Disposition, 876 F.2d 897 (9th Cir. 1989)

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U.S. Court of Appeals for the Ninth Circuit - 876 F.2d 897 (9th Cir. 1989)

Jose ORTIZ, Luz Ortiz, Salvador Ortiz, Martha Ortiz,Plaintiffs-Appellants,v.REPUBLIC INSURANCE CO., Republic Insurance Group, Blue RidgeInsurance Co., Republic Financial Services, Inc.,Defendants-Appellees.

No. 87-2709.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Dec. 12, 1988.Decided June 8, 1989.

Before HUG and KOZINSKI, Circuit Judges, WILLIAM P. GRAY,*  District Judge.


This appeal challenges the propriety of a summary judgment order in favor of the Republic Insurance Company ("Republic") on an insurance liability issue. Republic sought summary judgment on the basis of releases signed by the insureds, Jose, Luz, Salvador, and Martha Ortiz. In contesting the motion, the Ortizes argued that the releases were the product of economic duress and consequently were invalid. Because we find that the Ortizes presented a genuine issue of material fact concerning economic duress, we reverse the summary judgment and remand for further proceedings.

We review de novo the district court's grant of summary judgment, viewing the evidence in the light most favorable to the nonmoving party to determine whether the district court correctly applied substantive law and whether any issue of material fact was raised before the trial court. Liberty Bank v. Travelers Indemnity Co., No. 87-4240, slip op. at 3066 (9th Cir., Mar. 29, 1989). We look to "the pleadings, affidavits, depositions, and other evidence available at the time the motion was made" in deciding whether a factual dispute existed. Jewel Companies v. Payless Drug Stores Northwest, Inc., 741 F.2d 1555, 1559 (9th Cir. 1984). In this diversity action, we apply California state law to the substantive issues raised on appeal. Ah Moo v. A.G. Becker Paribas, Inc., 857 F.2d 615, 620 (9th Cir. 1988).

The core argument raised by Republic in its summary judgment motion involved liability releases signed by the Ortizes. Republic contended that the agreements, styled "Full Release of all Claims," settled any and all claims the Ortizes could have brought against Republic in connection to damage inflicted by flood to their homes.

In opposition to the summary judgment motion, the Ortizes argued that the releases arose out of economic duress. In California, a release of claims may be invalidated when the release is the product of economic duress. Rich and Whillock, Inc. v. Ashton Development, Inc., 204 Cal. Rptr. 86 (Cal.App.1984). The doctrine applies when the releasee commits a wrongful act sufficiently coercive to compel the releasor to sign the release. Id. at 89. A bad faith threat to breach a contract or withhold payments may constitute a wrongful act for purposes of the doctrine. Id.

The Ortizes' opposition to summary judgment raised genuine issues of fact about duress and bad faith. They claimed that they lived in substantially damaged homes for approximately sixteen months before receiving a settlement offer from Republic. They contended that Republic did not send out an inspector to investigate the damage until January, 1985, one year after they filed their claim in January, 1984. They pointed to a series of letters received during 1984 in which Republic repeatedly threatened to close their files unless highly detailed repair receipts and invoices were received. When Republic did submit a settlement proposal, it offered only a fraction of what Republic itself estimated was the Ortizes' potential recovery amount.

We hold that the Ortizes introduced sufficient factual evidence to put bad faith and economic duress at issue in the case. These questions properly should go to the trier of fact for resolution.



The Honorable William P. Gray, Senior United States District Judge for the Central District of California, sitting by designation


This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as provided by 9th Cir.R. 36-3