Opinion
Docket No. 23254
Filed March 23, 1998 Reversed. See Martin v. Hoblit, 133 Idaho 372, August 24, 1999. Petition for rehearing September 13, 1999. Rehearing denied November 3, 1999.
Appeal from the District Court of the First Judicial District, State of Idaho, Benewah County. Hon. Craig C. Kosonen, District Judge.
Order dismissing appellant's claim, reversed.
McFadden Law Offices, St. Maries, for appellant.
Quane, Smith, Howard Hull, Boise, for respondent
This is an appeal from a decision of the district court dismissing plaintiffs' claim for failure to timely serve the defendant within six months as required by Idaho Rule of Civil Procedure 4(a)(2). The court ruled that plaintiffs had failed to demonstrate "good cause" for noncompliance with Rule 4(a)(2). We disagree.
I.
BACKGROUND
On May 4, 1995, the Martins filed their complaint, alleging that Hoblit's negligent operation of his vehicle resulted in personal injuries to Gerald Martin. Service of the complaint on Hoblit, however, was not then attempted.
On May 22, the Martins' counsel, Cathleen McFadden, spoke by telephone with Dan Villarreal, a litigation supervisor employed by Hoblit's insurance carrier. McFadden informed Villarreal that she had not yet served Hoblit and did not intend to do so "until such time as we are unable to reach an agreement on the settlement of this claim." Villarreal wrote back confirming their conversation and stated, "We look forward to working with you towards an amicable resolution."
On June 9, Mary Pierce, a claims representative from an independent adjusting firm, wrote to McFadden to inform her that the adjusting firm was now handling the claim for Hoblit's insurer. Additionally, this letter states: "A review of the file indicates that you do not intend to serve our insured [Hoblit] in the hopes that we can reach an amicable resolution. If this should change, please let me know so we may take the proper steps . . . . Once you have had the opportunity to discuss the claim with Mr. Martin, hopefully, we will be able to work toward an amicable resolution."
On September 28, the claims representative again wrote McFadden, advising that she had received and reviewed McFadden's correspondence of September 19, transmitting additional documentation regarding Gerald Martin's injury. The claims adjuster's letter goes on to note that she was reviewing the complete medical documentation, as supplemented by that recently received, that the total of medical bills thus far was $1,120.52, and that McFadden should submit all the medical bills as it appeared that the adjuster's documentation was incomplete. The letter closes with the statement, "after I have had a chance to review the complete file, I will be back in touch with your office."
On October 19, with settlement negotiations still pending, the Martins' counsel wrote to the adjuster advising that the summons and complaint had been forwarded for service on Hoblit as the six-month time limitation was rapidly approaching. This letter also inquired as to policy limits and asked, "can we settle this without incurring more legal fees?" On October 31, the claims adjuster wrote to McFadden in reply to the October 19 letter, requesting that McFadden provide proof of service if the complaint had been served. The letter advised that, after completion of a review of the medical documentation in the file, the adjuster had determined there was currently insufficient documentation to properly evaluate Martin's injury claim. The adjuster further noted that she did not feel "this was a policy limits case," i.e. $15,000/30,000.
On October 24, McFadden delivered the summons and complaint to the Bonner County Sheriff, directing him to serve Hoblit. However, the sheriff was unable to serve Hoblit, as he was no longer living in Bonner County. McFadden was notified on October 30 that Hoblit was no longer residing anywhere in the state of Idaho, but was now working in Seattle.
McFadden spoke with the claims adjustment company by telephone the next day, asking if the company would accept service on behalf of Hoblit. McFadden was informed that the company would contact her and answer this question at a later time. The six-month period of limitation for service of summons and complaint, I.R.C.P. 4(a)(2), expired on November 4, 1995.
On November 7, McFadden filed an affidavit for an order directing personal service outside the state, or for publication in lieu of personal service; personal service was contemplated to be in Mount Vernon, Washington. The district court granted the order on November 9. On November 20, the Skaggit County Sheriff discovered that Hoblit's address in Mount Vernon was simply a mailbox address, and was not able to determine where Hoblit actually resided.
McFadden wrote the insurance adjuster on November 28, requesting an actual address where service could be perfected. On December 4, the insurance adjuster mailed a response to McFadden, stating that the matter had been referred to the insurer's defense counsel. Soon thereafter McFadden conferred with defense counsel, and asked if counsel would accept service on behalf of Hoblit. Defense counsel stated that he was not authorized to accept service.
On December 14, defense counsel appeared and filed a motion to dismiss the claim for failure to serve the summons and complaint upon Hoblit within six months of the filing of the complaint. The district court granted the motion, and the Martins timely appealed.
The record does not reflect whether or how Hoblit ever received actual notice of the summons and complaint. A registered mailing was returned, marked "ATTEMPTED NOT KNOWN." McFadden's affidavit states she was advised by defense counsel that if his motion to dismiss failed, he would probably accept service or would advise her of defendant's whereabouts so that personal service could be made.
II.
STANDARD OF REVIEW
The version of Idaho Rule of Civil Procedure 4(a)(2) in effect on the day the complaint was filed provides as follows:
If service of the summons and complaint is not made upon a defendant within six (6) months after the filing of the complaint and the party on whose behalf such service was required cannot show good cause why such service was not made within that period, the action shall be dismissed as to that defendant without prejudice upon the court's own initiative without notice to such party or upon motion.
I.R.C.P. 4(a)(2) (1994) (emphasis added).
Recently, in Sammis v. Magnetek, Inc., 130 Idaho 342, 941 P.2d 314 (1997), the Idaho Supreme Court enunciated the standard of review applicable to cases involving this rule: "[T]he determination of whether good cause exists is a factual one. Because this is a factual determination, the appropriate standard of review is the same as that used to review an order granting summary judgment." 941 P.2d at 318 (citation omitted). Thus, when reviewing the trial court's decision that the plaintiff failed to establish good cause under the rule, the appellate court must liberally construe the record in the light most favorable to the nonmoving party and must draw all reasonable inferences in that party's favor. Telford v. Neibaur, 98.2 ISCR 66 (January 16, 1998); Sammis, 941 P.2d at 318.
At the time it rendered its decision, the district court did not have the benefit of the Idaho Supreme Court's decisions in Sammis v. Magnetek, Inc., or Telford v. Neibaur.
III.
ANALYSIS
The complaint was filed on May 4, 1995; thus, under I.R.C.P. 4(a)(2), the Martins had until November 4, 1995 to serve the complaint on Hoblit. This six-month interval is also the relevant period of time upon which to focus in determining whether the Martins demonstrated good cause for failure to timely serve Hoblit. Sammis, 941 P.2d at 318. Rule 4(a)(2) imposes the burden of demonstrating good cause on the party who failed to effect timely service and requires the trial court to dismiss the action if this burden is not met. Id.
Additionally, the fact that the underlying statute of limitations has run on the Martin's claim, and thus is a bar to refiling the action, is not a factor to be considered in determining whether good cause exists. Sammis, 941 P.2d at 319.
A. Diligent Attempts To Effect Service
In Sammis, the Court noted that: "Although the Sammises are correct in asserting that a court may consider a party's diligent attempts to effect service, the Sammises did not meet their burden of establishing good cause given the dearth of specific information regarding attempts at service." 941 P.2d at 319 (emphasis added). Specifically, the Court noted that the Sammises" effort to demonstrate diligence failed because any events which occurred outside the six-month time frame for service were "irrelevant." Id.
However, in this case there is information regarding events and attempts at service during the relevant six-month time period. McFadden first attempted service on October 24 by delivering the summons and complaint to the Bonner County Sheriff. McFadden was then informed by the sheriff on October 30 that Hoblit was no longer residing in Idaho. The next day when McFadden telephoned the adjusting firm's representative to inquire whether service would be accepted on behalf of Hoblit, she was informed that the company could not answer the question at this time, but that they would "get back to her."
Ideally, once she discovered that Hoblit had moved out of state, McFadden should have immediately requested an extension of time under I.R.C.P. 6(b)(1) before the expiration of the six-month time period.
In both Telford and Sammis, service was not even attempted during the six-month period prescribed by Rule 4(a)(2). In Telford, the respondent was served eighteen months after the filing of the complaint, and in Sammis, the respondents were served roughly a year after the filing of the amended complaint. Here, by contrast, McFadden at least attempted service within the rule's time frame, which service would have been timely had not Hoblit permanently removed himself from the state of Idaho. Additionally, it appears that the reason for McFadden's delay in attempting service was because of ongoing attempts at settlement of the claim. This is addressed below.
B. Settlement Negotiations.
McFadden deferred attempting to serve Hoblit in favor of negotiating directly with Hoblit's insurer (or its representative). When it appeared that negotiations were either stalled or could not be finalized before the running of the six-month limitations period, McFadden took action to serve Hoblit with the complaint.
In both Sammis and Telford, the Idaho Supreme Court left open the question of whether settlement negotiations are a proper factor to consider when determining whether good cause exists for failure to effect timely service. Therefore, we must address whether the Martins' ongoing attempts to settle the claim, as well as conduct and correspondence from Hoblit's insurer and its adjuster, should be considered in the good cause analysis.
In Sammis, the Idaho Supreme Court did not resolve this question because it was irrelevant; the settlement negotiations in that case occurred after the expiration of the Rule 4(a)(2) six-month period. See 941 P.2d at 320. Additionally, in Telford, the question of whether settlement negotiations should be a factor was also irrelevant because the record did not reflect whether the plaintiff had engaged in any settlement negotiations prior to the expiration of the six-month period.
A number of federal courts have addressed the issue of whether ongoing settlement negotiations can be considered in a Rule 4 "good cause" analysis. Some hold that settlement negotiations can, in the proper circumstances, factor into the "good cause" requirement. See, e.g., The Bank of Casa Verde v. Bronson, 167 F.R.D. 370, 371-72 (S.D.N.Y. 1996); Heiser v. Association of Apartment Owners of Polo Beach Club, 848 F. Supp. 1482, 1488 (D.Haw. 1993); Assad v. Liberty Chevrolet, Inc., 124 F.R.D. 31 (D.R.I. 1989); see also, Armando Gambino v. Village of Oakbrook, 164 F.R.D 271 (M.D. Fla. 1995) (finding that plaintiff's continued attempts to settle the case, up to three days before the deadline for service, was a factor to be evaluated as part of the "good cause" analysis); and Mendez v. Elliot, 45 F.3d 75, (4th Cir. 1995) (implicitly acknowledging that good faith settlement negotiations can be a proper consideration in evaluating good cause).
The analogous federal rule was previously Federal Rule of Civil Procedure 4(j); however, effective December 1, 1993, Federal Rule 4(j) was edited slightly and renumbered as Rule 4(m). Because Idaho's Rule 4(a)(2) is identical in all material respects to the analogous federal rule, we will look to rulings on the scope of the federal rule for additional guidance in interpreting the Idaho rule. Compton v. Compton, 101 Idaho 328, 334, 612 P.2d 1175, 1181 (1980).
In The Bank of Casa Verde v. Bronson, in finding that there was "good cause," the court stated that it was integral to its decision that the plaintiff had filed an application for an extension of the time for service before the expiration of the service period. However, we decline to place such paramount importance upon an attorney's failure to move under I.R.C.P. 6(b) for an extension of time as we look at the "totality of the circumstances" in analyzing whether good cause existed. See Telford, 98.2 ISCR at 68.
In this case, McFadden began serious, good faith attempts at settlement soon after filing the complaint, and continued work towards settlement throughout the six-month period. Representatives from the insurance company and its adjuster both expressed a desire in their correspondence to work with McFadden towards "an amicable resolution." Settlement negotiations with the insurance company and its adjusters were more than merely casual, and if successful, would have obviated the need for service on Hoblit.
Given the standard of review employed with a factual determination of whether good cause exists, this Court will liberally construe the record in the light most favorable to the Martins and draw all inferences in the Martins' favor. Sammis, 941 P.2d at 318. Viewed in this light, we find support for McFadden's position that the ongoing settlement negotiations, while not serving as a blanket excuse for lack of timely service, certainly help explain why counsel waited before beginning an earnest effort to effectuate personal service, and thus factor into a "good cause" analysis. Here, counsel did take steps which, under ordinary circumstances, would have resulted in timely service under Rule 4(a)(2) had not Hoblit left the state.
III.
CONCLUSION
As previously noted, the district court did not have the benefit of Sammis v. Magnetek, Inc., and Telford v. Neibaur, when it rendered its decision. We hold that under the "totality of the circumstances," the Martins have met their burden of demonstrating good cause for failure to timely serve the respondent based upon a mutually ongoing, serious attempt at settlement of the claim, coupled with a good-faith attempt at personal service prior to the expiration of the six-month limitation, thwarted only by Hoblit's removal from the state of Idaho.
Accordingly, the district court's decision dismissing the case is hereby reversed and the case remanded to the district court. Costs on appeal to appellant.
I write separately to emphasize that in my view, settlement discussions alone, where there is no evidence that the defendant misled the plaintiff or dissuaded the plaintiff from undertaking timely service, do not constitute good cause for non-compliance with Rule 4(a)(2). Although as the lead opinion points out, several cases from other jurisdictions have held that the participation in settlement negotiations excuses timely service, other decisions, which in my view are better reasoned, have rejected that notion. See Leonard v. Stuart-James Co., 742 F. Supp. 653, 662 (N. D. Ga. 1990); Healthcare Compare Corp. v. Super Solutions Corp., 151 F.R.D. 114 (D. Minn. 1993); State ex rel Charleston Area Medical Center, v. Kaufman, 475 S.E.2d 374, 380 (W.Va.App. 1996). As the court observed in Healthcare, if settlement negotiations alone were deemed good cause for failing to effectuate service, it would defeat the purpose of the rule, and "[p]laintiffs would have no incentive to comply with the 120 day limit if they could always find shelter from the rule by claiming they had begun negotiations in good faith." Healthcare, 151 F.R.D. at 116.
In the present case there is no evidence that John Hoblit or his insurance company enticed the Martins to forego service or led their attorney to believe that the time bar of Rule 4(a)(2) would not be raised if service were neglected. The best that can be said of the settlement discussions in this case is that, without excusing the lack of timely service, they help explain why the Martins' attorney waited until there remained only eleven days of the Rule 4(a)(2) time period before beginning her effort to serve the complaint.
With the settlement negotiations thus relegated to this minor role, the only remaining factor for a Rule 4(a)(2) good cause analysis is the fact that the Martins did make an actual effort to effectuate service before the deadline. Eleven days before the deadline, the Martins' counsel delivered the complaint and summons to the sheriff for personal service on Hoblit. Whether this represents adequate diligence to constitute good cause under Rule 4(a)(2) is a close question, as evidenced by the fact that this case has prompted a separate opinion from each member of this Court. Most certainly, a cautious lawyer would not have waited so long before attempting service and would not have allowed the Rule 4(a)(2) time limit to expire without moving for an extension pursuant to I.R.C.P. 6(b). Nonetheless, bearing in mind the applicable standard of review announced by our Supreme Court, I conclude that the good cause standard is satisfied. In Sammis v. Magnetek, Inc., 130 Idaho 342, 346, 941 P.2d 314, 318 (1997), the Supreme Court said that when reviewing a trial court's finding that good cause had not been established under Rule 4(a)(2), "we must liberally construe the record in the light most favorable to the non-moving party and must draw all reasonable inferences in that party's favor." This standard was repeated in Telford v. Mart Produce, Inc., 98.2 ISCR 66 (Jan. 16, 1998). Thus, we must view the facts in the light most favorable to the Martins and draw all reasonable inferences in their favor. Here, the Martins' attorney did take action soon enough that service could have been completed within the allowed time if not for the fact that Hoblit had changed residences. While perhaps not setting a standard of diligence that we would wish to see emulated, the Martins' counsel took steps which, absent the unknown and unexpected circumstance of Hoblit's move to Washington state, likely would have resulted in timely service. Drawing all reasonable inferences in favor of the Martins, I conclude that good cause for the lack of timely service has been demonstrated and that the district court's dismissal of the Martins' claim was therefore erroneous.
I confess some uncertainty as to how to apply the standard of review announced in Sammis. The Court there said, "It is clear that the determination of whether good cause exists is a factual one," and, "because this is a factual determination the appropriate standard of review is the same as that used to review an order granting summary judgment." Sammis, 130 Idaho at 346, 941 P.2d at 318. There appears to be some inconsistency in these two statements, for it is axiomatic that a summary judgment motion is not an appropriate vehicle for resolution of factual issues; indeed, the existence of a genuine issue of fact precludes summary judgment. I.R.C.P. 56; Stansbury v. Blue Cross of Idaho Health Service, 128 Idaho 682, 918 P.2d 266 (1996); McKinley v. Lyco Enterprises, 111 Idaho 792, 727 P.2d 1220 (1986). I interpret the Supreme Court's adoption of this standard for motions to dismiss under I.R.C.P. 4(a)(2) to mean that the facts are to be construed, and close cases resolved, in favor of plaintiffs who are resisting a motion to dismiss.
I respectfully dissent.
The lead opinion in this case correctly sets forth what I view as the standard of review. This Court must liberally construe the record in the light most favorable to the Martins and must draw all reasonable inferences in their favor. The Martins, however, also have the burden of demonstrating good cause. The determination of whether good cause exists is a factual one for the district court. If the district court determines good cause has not been shown, the action shall be dismissed. See I.R.C.P. 4(a)(2); Telford v. Neibaur, ___ Idaho ___, 950 P.2d 1271 (1998); Sammis v. Magnetek, Inc., 130 Idaho 342, 941 P.2d 314 (1997).
The Martins were injured as a result of an automobile collision with Hoblit in May 1993. Apparently recognizing that any ongoing settlement negotiations did not toll the two-year statute of limitations, the Martins, through counsel, filed their complaint in May 1995. Negotiations continued after the complaint was filed. The Martins failed to serve Hoblit within the six months required by I.R.C.P. 4(a)(2), and the district court, finding that the Martins had failed to demonstrate good cause for noncompliance, dismissed the Martins' claim.
The Martins have failed to show that Hoblit expressly waived the mandatory period for service of process. Likewise, I find no convincing evidence that the Martins were misled or that any misrepresentations were made to them. The Martins' contention that service was believed to be a "mere formality" rings hollow. If that were true, service would not have been attempted in the panic of the expiration of the six-month period. Indeed, the Martins could have sought an extension for service through the relief provided in I.R.C.P. 6(b)(1), but did not do so even when it became apparent to them that service would be difficult to complete within the six-month period.
Ongoing settlement negotiations occur in almost every civil case. I agree with the concurrence of Chief Judge Lansing insofar as settlement negotiations alone do not satisfy "good cause." I am persuaded by the line of authority cited therein that to do so defeats the rule. Without considering settlement negotiations as a controlling factor, there remains no apparent reason for noncompliance with Rule 4(a)(2). I would affirm the district court's finding that the Martins failed to show good cause. Therefore, I dissent.