Labertew v. Langemeier, No. 14-15879 (9th Cir. 2017)
Annotate this CasePlaintiffs Marcus Labertew, his wife, and John and Jennifer McDermott filed suit against Fred R. Auzenne and Loral Langemeier in state court, claiming that Auzenne and Langemeier defrauded Marcus Labertew and John McDermott. The parties settled the case with a Damron agreement. Plaintiffs dismissed their case pursuant to the agreement, and Langemeier stipulated to a $1.5 million judgment against her, a covenant not to execute against her personally and an assignment by her to plaintiffs of her rights against her liability insurers Chartis and 21st Century. Plaintiffs then applied in state court for writs of garnishment against the insurers, and the insurers removed to federal district court. The district court concluded that it had jurisdiction, and that pursuant to Federal Rule of Civil Procedure 69, Arizona garnishment law applied. In this case, because the Labertews and the McDermotts had missed their ten day window for objecting, the garnishment failed, and under Arizona law the garnishees were discharged. The court concluded that, under Swanson v. Liberty National Insurance Co., the district court had jurisdiction over the garnishment proceeding because it is a separate and independent civil action from the suit by the Labertews and McDermotts against Langemeier. The court also concluded that not only is there no federal judgment in this case upon which to execute, but there is also no state judgment against the insurance companies that could be registered and enforced in federal court. The court explained that this is a civil action in which plaintiffs are seeking to obtain, for the first time, a judgment establishing the liability of the insurance companies. Finally, the court concluded that the district court has discretion under Rule 81(c)(2) to order repleading. Accordingly, the court reversed, vacated, and remanded.
Court Description: Removal / Garnishment. The panel vacated the district court’s judgment discharging insurers, and remanded for further proceedings in a garnishment proceeding arising out of an insurance settlement and assignment. In the underlying settlement, the plaintiffs and defendant stipulated to a judgment against the defendant for $1.5 million, and defendant assigned to the plaintiffs her rights against her liability insurers. Plaintiffs applied in state court for writs of garnishment against the insurers. The insurers LABERTEW V. LANGEMEIER 3 removed the state garnishment proceedings to federal district court. The district court, pursuant to Fed. R. Civ. P. 69, applied Arizona garnishment law, and held that because the plaintiffs missed their ten day window for objecting, the garnishment failed and the garnishees/insurers were discharged. The panel held that the garnishment proceeding was removable, and the district court had jurisdiction. The panel held that under Swanson v. Liberty National Insurance Co., 353 F.2d 12 (9th Cir. 1965), the garnishment proceeding against the insurers, for purposes of removal, was a separate and independent civil action from the suit by the plaintiffs in the underlying action; and as such, it was removable. The panel held that there was no federal judgment in this case upon which to execute. The panel noted that the only judgment was in the Superior Court of the State of Arizona. The panel further held that the necessary predicate for application of Fed. R. Civ. P. 69 was a judgment in the federal district court in which execution was sought. The panel also held that there was no state judgment against the insurance companies that could be registered and enforced in federal court. The panel held that the district court had discretion under Fed. R. Civ. P. 81(c)(2) to order repleading. The panel held that the Arizona laws for garnishment proceedings, were, upon removal, supplanted by the federal rules. The panel also held that the district court may order repleading because this case was in substance a claim by the insureds’ assignee against the insurers for breaching their obligations under their 4 LABERTEW V. LANGEMEIER insurance policies, and the claims in the state court pleadings were no longer at issue.
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