Unpublished Disposition, 893 F.2d 1338 (9th Cir. 1986)

Ernestine Campbell brought suit in the state court of California against State Farm Mutual Automobile Insurance Company (State Farm) alleging breach of State Farm's statutory duties as an insurer and the intentional infliction of emotional distress. State Farm removed to the federal district court, which made findings of fact and granted summary judgment in favor of State Farm. Campbell appealed. We affirm the judgment of the district court.

PROCEEDINGS

On September 28, 1984 the automobile of Campbell was damaged by a vehicle owned by Democrito Echiverri, who was insured by State Farm. On January 4, 1985 Campbell submitted a claim against State Farm for damages caused by Echiverri. State Farm denied the claim stating that the accident had been caused by an unknown person who had stolen Echiverri's car.

On August 21, 1985 Campbell sued Echiverri in a small claims court for the sum of $1,500 for damages to her car. On October 30, 1985 she obtained judgment in this amount. Without acknowledging the validity of her claim, State Farm on November 12, 1985 paid Campbell the amount of the judgment.

On October 27, 1986 Campbell brought the present suit, which was removed to the federal court by State Farm. On State Farm's motion for summary judgment, the district court found that the jurisdictional amount was satisfied and the facts stated above. The court observed that in California a third party claimant cannot bring suit against an insurer for bad faith until the action between the third party and the claimant is concluded with a final determination of the action by a judgment, admission or stipulation of the liability of the insurer. Parry v. 20th Century Ins. Co., 198 Cal. App. 3d 1207, 1217-1218, 244 Cal. Rptr. 367, 374 (1988). The court also observed that under California law there can be no cause of action for intentional infliction of emotional distress if there has been no final determination of the insurer's liability. Williams v. Transport Indem. Co., 157 Cal. App. 3d 953, 960, 203 Cal.Reptr. 868, 871 (1984). Finally, the district court noted that under California law a small claims judgment does not constitute a final determination of an action because in a small claims court there are no attorneys, pleadings, legal rules of evidence, juries, or formal findings. See Pace v. Hillcrest Motor Co., 101 Cal. App. 3d 476, 479, 161 Cal. Rptr. 662-663 (1980) (cause of action for malicious prosecution cannot be granted on institution of a small claims proceeding); see also Mackinder v. OSCA Dev. Co., 151 Cal. App. 3d 728, 735, 198 Cal. Rptr. 864, 869 (1984) (small claims judgment not given res judicata effect because record silent on reason for the judgment).

The district court accordingly held that there had been no final determination of the insurer's liability and so gave judgment to State Farm. Campbell appealed.

ANALYSIS

Since the decision of the district court the Supreme Court of California has overruled its earlier precedents permitting tort actions against insurance companies for breach of their statutory duty promptly and fairly to settle actions against insurers by third parties. Moradi-Shalal v. Fireman's Fund Ins. Companies, 46 Cal. 3d 287, 250 Cal. Rptr. 116, 758 P.2d 58 (1988). The Supreme Court of California, however, did permit the continued prosecution of such actions as were pending at the time of the Moradi-Shalal decision. Campbell's case falls within that class. But within that class of cases, the Supreme Court expressly restated the rule already announced by the California Court of Appeals that a condition precedent to the liability of an insurer was a conclusive judicial determination of the insured's liability. Moradi-Shala, supra, 46 Cal. 3d at 306, 311, 313, 250 Cal. Rptr. at 128, 129, 133.

We agree with the district court that under California law a small claims judgment would not necessarily be a conclusive judicial determination. The California Supreme Court has held, that a small claims judgment only has limited res judicata effect and does not operate to bar subsequent proceedings on different causes of action. See Sanderson v. Niemann, 17 Cal. 2d 563, 110 P.2d 1025 (en banc) (1941); see also Perez v. City of San Bruno, 27 Cal. 3d 875, 168 Cal. Rptr. 114 (en banc) (1980) (no res judicata effect where the loosing party appeals). Accordingly, a small claims judgment cannot be a conclusive judicial determination of liability as required by Moradi-Shalal.

The judgment of the district court is AFFIRMED.