Unpublished Disposition, 902 F.2d 42 (9th Cir. 1987)

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U.S. Court of Appeals for the Ninth Circuit - 902 F.2d 42 (9th Cir. 1987)

Nathaniel WEBB; Roche Juneau, Plaintiffs-Appellants,v.TOM BROWN DRILLING, INC., Defendant-Appellee.

No. 89-35229.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted March 8, 1990.Decided May 2, 1990.

Before JAMES R. BROWNING, ALARCON and RYMER, Circuit Judges.


Webb and Juneau filed workers' compensation claims against Tom Brown Drilling, Inc. ("Tom Brown") and the Montana State Insurance Fund ("Fund") for injuries that arose in an automobile accident that occurred in November 1981. Appellants were injured in Montana while returning home from their North Dakota job site in a car driven by their assistant crew boss. On December 15, 1981, the Fund denied appellants' claims because the appellants' place of employment was in the state of North Dakota and, therefore, Montana did not have jurisdiction over their claims. Further, the Fund held that appellants were not in the course and scope of their employment when the accident occurred. The appellants voluntarily dismissed their Montana petition and pursued their claims in North Dakota. The North Dakota Fund also denied their claims finding that the appellants were not within the scope and course of their employment when the accident occurred. Having been denied a workers' compensation remedy, the appellants filed a diversity action in the District Court for the District of Montana against Tom Brown, alleging vicarious liability for their injuries under a theory of respondeat superior. As this action began to progress towards trial, and some forty months after its original denial of benefits, the Montana Fund informed the appellants that it had reversed its earlier decision, and was now prepared to accept liability for the appellants' injuries. As a result, the district court dismissed the appellants' case because of the exclusive remedy clause of the Montana workers' compensation law. Mont.Code Ann. Sec. 39-71-411. The appellants appealed to this court. On January 5, 1987, this court vacated the district court's order and remanded the case back to the district court. This court held that before dismissal would be appropriate, the district court must establish "finally and conclusively" whether the Montana Fund was prepared to pay workers' compensation benefits to the appellants. Thereafter, the Montana Fund clearly indicated that it was accepting jurisdiction over the appellants' claims and was prepared to pay compensation and medical benefits to the appellants. The appellants have also stipulated to this effect. The district court subsequently dismissed the appellants' claims holding that because the exclusive remedy provision of the Montana workers' compensation law precluded a common-law negligence claim, the appellants' complaint failed to state a cause of action upon which relief could be granted. The district court rejected the appellants' arguments that Tom Brown was precluded from asserting the defense of exclusivity based on theories of waiver and estoppel. We affirm.

We review a dismissal for failure to state a claim pursuant to Fed. R. Civ. P. 12(b) (6) de novo. Kruso v. International Tel. & Tel. Corp., 872 F.2d 1416, 1421 (9th Cir. 1989).

The appellants first argue that the statutory presumption of equitable estoppel, contained in Mont.Code Ann. Sec. 26-1-601(1) (1985), arose when they first filed workers' compensation claims in Montana. After the Fund initially denied the appellants' claims, appellants filed petitions for hearing in the Montana Workers' Compensation Court seeking an order awarding benefits under the Montana Act. At that time, representatives of both the Montana Fund and Tom Brown argued that Montana did not have jurisdiction over the claims under its workers' compensation laws. Appellants, relying on these representations, voluntarily dismissed their Montana petitions and pursued their claims in North Dakota. Therefore, the appellants argue, since Tom Brown argued that the Montana Act did not cover their claims, Tom Brown is now estopped from raising the workers' compensation exclusivity defense.

Section 26-1-601(1) of the Montana Code states as follows:

List of conclusive presumptions. The following presumptions are conclusive:

(1) the truth of a declaration, act, or omission of a party, as against that party in any litigation arising out of such declaration, act, or omission, whenever he has, by such declaration, act, or omission, intentionally led another to believe a particular thing true and to act upon such belief....

The Supreme Court of Montana has interpreted the predecessor to this statute as setting forth the basic principle of equitable estoppel. Sun Dial Land Co. v. Gold Creek Ranches, 198 Mont. 247, 645 P.2d 936, 939-40 (1982); Reiter v. Yellowstone County, 627 P.2d 845, 850 (Mont.1981); Farmers State Bank of Victor v. Johnson, 188 Mont. 55, 610 P.2d 1172, 1176 (1980). Under Montana law, six elements have been held essential to find an equitable estoppel:

1. There must be conduct--acts, language, or silence--amounting to a representation or a concealment of material facts. 2. These facts must be known to the party estopped at the time of his said conduct, or at least the circumstances must be such that knowledge of them is necessarily imputed to him. 3. The truth concerning these facts must be unknown to the other party claiming the benefit of the estoppel, at the time when it was acted upon by him. 4. The conduct must be done with the intention, or at least with the expectation, that it will be acted upon by the other party, or under such circumstances that it is both natural and probable that it will be so acted upon.... 5. The conduct must be relied upon by the other party, and, thus relying, he must be led to act upon it. 6. He must in fact act upon it in such a manner as to change his position for the worse; in other words, he must so act that he would suffer a loss if he were compelled to surrender or forego or alter what he has done by reason of the first party being permitted to repudiate his conduct and to assert rights inconsistent with it.

Schmidt v. Proctor & Gamble, 227 Mont. 171, 741 P.2d 382, 384 (1987).

The appellants argue that since attorney William Dunn conducted both Tom Brown's and the Fund's defense to their claims, his representations that their claims were not covered under the Montana Act, are attributable to Tom Brown. Consequently, the district court erred in treating Tom Brown and the Fund as separate entities for purposes of equitable estoppel. As an agent of both clients, Dunn's argument is properly attributed to both Tom Brown and the Fund. However, only the Fund had the authority to determine coverage or non-coverage under the Montana Act. Tom Brown could only argue that the Act did not apply to the appellants' claims. This argument did not amount to a representation of a material fact. All Tom Brown did was to "exercise its right to challenge a questionable workers' compensation claim." The Fund, not Tom Brown, made the representation of fact when it decided that the Montana Act did not apply to the appellants' claims. The first element of estoppel, as listed above, is not present in this case. Therefore the doctrine does not serve to preclude Tom Brown's assertion of the exclusive remedy defense.1 

The appellants next argue that Tom Brown waived its workers' compensation exclusivity defense. "Waiver is the voluntary, intentional relinquishment of a right." McGregor v. Mommer, 714 P.2d 536 (Mont.1986). Waiver applies only to existing rights. Panorama Residential Protective Ass'n v. Panorama Corp., 28 Wash. App. 923, 627 P.2d 121, 127-28 (1981). Tom Brown's right to assert the defense of exclusivity first arose when the Fund accepted coverage over the appellants' claims. At that time, Tom Brown promptly asserted its right. Therefore, the district court properly ruled that Tom Brown did not waive its right to assert the exclusivity defense.

The appellants next argue that the doctrines of quasi-estoppel and judicial estoppel preclude Tom Brown from asserting the defense of exclusivity. "Quasi estoppel differs from other forms of estoppel in that it appeals to the conscience of the court to prevent injustice by precluding a party from asserting a right inconsistent with a position previously taken by him, and does not require ignorance or reliance as essential elements." Donaldson v. LeNore, 112 Ariz. 199, 540 P.2d 671, 674 (1975). The party pleading quasi-estoppel must prove that the estopped party had full knowledge of the facts. Id. Tom Brown has not asserted a right inconsistent with a position previously taken. Tom Brown had the right to assert non-coverage when initially challenging the appellants' claims. Losing that challenge, Tom Brown then had the right to assert the defense of exclusivity. The two positions taken by Tom Brown relate to two distinct issues. Therefore, the doctrine of quasi-estoppel does not apply to the facts of this case.

Judicial estoppel arises when a party makes a factual assertion in a legal proceeding that directly contradicts an earlier assertion made in the same proceeding or a prior one. Rowland v. Klies, 223 Mont. 360, 726 P.2d 310, 315 (1986); see generally Note, Judicial Estoppel: The Refurbishing of a Judicial Shield, 55 Geo. Wash. L. Rev. 409, 410-12 (1987). "The object is to safeguard the administration of justice by placing a restraint upon the tendency to reckless and false swearing and thereby preserve the public confidence in the purity and efficiency of judicial proceedings." Melton v. Anderson, 32 Tenn.App. 335, 339, 222 S.W.2d 666, 669 (1948). As stated above, Tom Brown did not make an assertion that directly contradicted an earlier assertion. Further, Tom Brown's conduct did not mislead the court and thus did not affect the integrity of the judicial process. Therefore, the doctrine of judicial estoppel does not apply to this case.



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


As the district court stated: " [A] separate question has been raised as to whether the Fund itself should be estopped from accepting coverage in such a belated fashion." Mont.Code Ann. Sec. 39-71-606 (1985) requires an insurer to accept or deny a workers' compensation claim within thirty days of receipt of the claim. The Fund initially denied the claim within the statutory period, but subsequently, some 40 months later, reversed itself and accepted liability. If the Fund were indeed estopped, the appellants would be without a workers' compensation remedy, and therefore would be able to pursue a common law tort remedy. An answer to this question would also address this court's concern over the policy implications of a decision that would encourage "state workers' compensation funds to deny liability initially to wait and see if the claimant would sue for negligence, and only then, on the eve of a negligence trial, make a new decision to accept liability in order to limit the exposure of the employer-defendant." Webb v. Tom Brown, Inc., 807 F.2d 783, 785 n. 1 (9th Cir. 1987). Since the Fund is not a party to this action, the district court properly concluded that this issue was outside the scope of its jurisdiction