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UNITED STATES COURT OF APPEALS

TENTH CIRCUIT


SHIRLEY FAYANN HENSLIN d/b/a CAR TRANSPORTATION CO.,

Plaintiff-Appellant,

v.

KENNEDY TRANSPORTATION SERVICES d/b/a KENNEDY & ASSOCIATES INSURANCE SERVICES, and TWICKENHAM INSURANCE CO.,

Defendants-Appellees.



No. 96-6102, 96-6285

(D.C. No. Civ-95-0939-M)

(W.D. of Okla.)


ORDER AND JUDGMENT(*)


Before ANDERSON, BALDOCK, and EBEL, Circuit Judges.


Plaintiff-Appellant Shirley Fayann Henslin, a motor carrier, sued Kennedy Transportation Services, an insurance broker, and Twickenham Insurance Co., for a declaration of insurance coverage. Jurisdiction was not based on diversity, but rather on a purported implied right of action under the Interstate Commerce Act ("ICA"), 49 U.S.C. § 10101 et seq., that encompassed tort claims against insurance carriers. Kennedy did not appear, and the district court entered default judgment against it in the amount of $628,651.27. After some discovery, the district court then granted summary judgment for Twickenham and dismissed the case against it.

The district court concluded that summary judgment was appropriate because there is no implied right of action under the ICA and because Henslin had not created a genuine issue as to whether Twickenham had insured Henslin or was otherwise liable for Henslin's claim. After a subsequent motion by Twickenham's counsel, the district court awarded the defendant attorney fees under Oklahoma law and, alternatively, under 28 U.S.C. § 2202, which allows attorney fees under certain circumstances in declaratory actions. Henslin now appeals the dismissal for lack of jurisdiction, the summary judgment, and the attorney fees award. The attorney fees appeal is under docket number 96-6285, whereas the summary judgment and jurisdictional appeals are under docket number 96-6102. We have jurisdiction under 28 U.S.C. § 1291.

Although we believe the district court had federal question jurisdiction over Henslin's complaint, we agree with the district court that Henslin has no right of action under the statutes she invokes, and even if such a right of action existed, she would have no claim for relief based on the undisputed facts of this case. Thus, we affirm the dismissal of Henslin's complaint on the merits. Because the prevailing party in an action in tort against an insurance company is entitled to attorney fees under Oklahoma law, we also affirm the grant of attorney fees in favor of Twickenham.

BACKGROUND

Henslin, who does business as Car Transportation Co., is an interstate motor carrier. Various federal laws require motor carriers to carry insurance and file certificates reflecting coverage with what was formerly the Interstate Commerce Commission ("ICC"), and has been renamed the Surface Transportation Board. Henslin attempted to purchase insurance from a broker named Steven Kennedy, who is apparently affiliated with a brokerage company named Kennedy Transportation Services or Kennedy & Associates Insurance Services. The Certificate of Insurance given to Henslin by Kennedy referenced Twickenham as the insurance carrier, although Twickenham never issued insurance for Henslin and had never issued or authorized a certificate of insurance for Henslin.

Henslin filed unspecified claims with Twickenham, and Twickenham denied coverage on the grounds that it had never sold insurance to Henslin. Henslin then sued Twickenham and Kennedy in two other jurisdictions, but those claims were apparently dismissed for a lack of personal jurisdiction over Twickenham, although at least one of the claims may have been dismissed on the merits.(1)

Henslin then commenced this action in the Western District of Oklahoma, seeking a declaration of insurance coverage. Henslin claimed that the ICA, which requires motor carriers to carry insurance, 49 U.S.C. § 10921, creates an implied right of action against insurance companies that deny coverage, and that this right of action encompasses tort-like remedies in situations where the insurance company has not actually issued an insurance policy, but is named on a Certificate of Insurance, even if the certificate is fraudulent or unauthorized. In addition, Henslin sued Twickenham under Oklahoma tort law, arguing that Twickenham injured Henslin by failing to honor the policy purchased from Kennedy.

On summary judgment, the court noted that it was undisputed that: (1) Twickenham never issued a policy of insurance to Henslin, and Henslin never paid premiums; (2) there is no evidence that Twickenham ever committed an intentional or negligent act regarding Henslin; (3) the certificate at issue was created as part of a fraudulent enterprise involving Steven Kennedy, Howard Stokes and Richard Miller, in which Twickenham was not involved; (4) the certificate was rejected by the ICC within five days of its filing; and (5) that any injury to Henslin was caused by the intervening acts of third persons, and thus Twickenham could not be held liable in tort.

Henslin now appeals. In addition to her claim under the ICA, Henslin now argues for the first time that the McCarran-Ferguson Act and the Declaratory Judgment Act confer jurisdiction over her claims against Twickenham. Additionally, she maintains that she has created a genuine issue of material fact, because she included an affidavit and a copy of the certificate in the record. Finally, she appeals the attorney fees award.

DISCUSSION

Standard of Review

We review de novo the district court's dismissal of Henslin's complaint for lack of jurisdiction. Urban v. Jefferson County Sch. Dist., 89 F.3d 720, 724 (10th Cir. 1996). We also review de novo the district court's grant of summary judgment on the merits. Kaul v. Stephan, 83 F.3d 1208, 1212 (10th Cir. 1996). We review an attorney fees award for abuse of discretion. Aguinaga v. United Food and Commercial Workers Int'l Union, 993 F.2d 1480, 1481 (10th Cir. 1993). However, the legal basis for such an award is reviewed de novo. Id.

I.

Henslin's Failure to State a Claim

Henslin asserts that the Interstate Commerce Act created an implied right of action that allows insured motor carriers to sue their insurers when they deny coverage. This is a federal question, and thus the district court had jurisdiction under 28 U.S.C. § 1331. See Cardtoons, L.C. v. Major League Baseball Players Ass'n, 95 F.3d 959, 964 (10th Cir. 1996). However, dismissal of a complaint that alleges a federal claim is justified only if the claim is "'so attenuated and unsubstantial as to be absolutely devoid of merit' or 'frivolous.'" Id. (quoting Baker v. Carr, 369 U.S. 186, 199 (1962)). Although Henslin's claim is without merit, we believe it does assert a claim grounded in a federal question under the ICA. Accordingly, we believe the district court erred in dismissing the claim for lack of jurisdiction.

Nonetheless, the district court properly dismissed the claim because there is no implied right of action under the ICA in this situation. That statute requires motor carriers to have cargo and liability insurance in order to operate as a common carrier, and to file a certificate reflecting coverage with the ICC. 49 U.S.C. § 10921. The statute does not say anything about coverage disputes between carriers and insurance companies. Id.

Henslin seems to believe it is obvious that this statute creates a right of action in its favor, and thus has not bothered to cite any case law on implied rights of action. However: (1) the statute does not indicate Congressional intent to create a right of action; (2) Henslin has not pointed to anything in the legislative history reflecting a desire to create a right of action; (3) it would not frustrate the purposes of the statute to not imply a cause of action; and (4) state law remedies are entirely adequate. Thus, there is no implied right of action. See Transamerica Mortgage Advisors, Inc. v. Lewis, 444 U.S. 11, 15-16 (1979); Touche Ross & Co. v. Redington, 442 U.S. 560, 575-76 (1979).

Henslin did not raise below her claims regarding the McCarran-Ferguson Act and the Declaratory Judgment Act, both of which she now contends confer jurisdiction over her claims. Thus, those claims have been waived. See In re Walker, 959 F.2d 894, 896 (10th Cir. 1992). In any event, neither statute creates a right of action in this situation. The McCarran-Ferguson Act, 15 U.S.C. § 1012(b), merely provides that a federal law will not preempt a state law enacted "for the purpose of regulating the business of insurance," unless the federal statute "specifically relates to the business of insurance." The ICA does not deal with relations between carriers and their insurance companies, and thus there is no preemption issue in this case. Accordingly, the McCarran-Ferguson Act does not help Henslin. Barnett Bank v. Nelson, 116 S. Ct. 1103, 1106 (1996), the case on which Henslin relies, also is not instructive here, because it deals only with the question of when a federal statute "specifically relates to the business of insurance" within the meaning of the statute. Even though the ICA may relate to the business of insurance to the extent it requires carriers to obtain insurance, it does not conflict with any state laws dealing with insurance coverage claims, and thus does not preempt any state law claims Henslin may have against Twickenham. Moreover, even assuming the ICA does have some preemptive effect, as discussed above, Henslin has provided no indication why the statute would create an implied right of action that would encompass her claims.

Finally, Henslin claims that the Declaratory Judgment Act, 28 U.S.C. § 2201, provides a cause of action. That statute "does not confer jurisdiction on the federal courts . . . ." Cardtoons, 95 F.3d at 964. Rather, a declaratory judgment plaintiff only obtains jurisdiction "if the potential suit by the declaratory judgment defendant would arise under federal law." Id. There is no "potential suit" by Twickenham and, in any event, Henslin has not shown that such an action would be within either the diversity or federal question jurisdiction of the federal courts. Accordingly, the Declaratory Judgment Act does not provide a cause of action for Henslin's claims.

Thus, the district court properly dismissed Henslin's complaint for failure to state a claim.

II.

No Genuine Issue of Material Fact

The district court alternately concluded that, even if a proper claim were stated, Henslin has not shown a genuine issue of material fact sufficient to survive summary judgment. We agree. It is undisputed that Henslin never paid premiums on an insurance policy issued by Twickenham, and never in fact was covered by such a policy. Further, Henslin has not disputed Twickenham's evidence that the certificate identifying Twickenham as Henslin's insurer was produced as part of a fraudulent scheme orchestrated by Kennedy, Miller and Stokes, in which Twickenham took no part. Finally, Henslin has not suggested how the intervening acts of those people would not defeat any claim against Twickenham, even if Twickenham had acted in some way with regard to Henslin.

Henslin points to the certificate itself, which the ICC undisputedly rejected within five days of receipt, and Stokes's pleading the Fifth Amendment at his deposition, in support of its contention that summary judgment was improper. Henslin has not shown how this evidence is material or relates in any way to its claim. Thus, the district court properly granted summary judgment in favor of Twickenham.

III.

Finally, Henslin appeals the district court's award of attorney fees in favor of Twickenham. The district court awarded attorney fees on two alternative theories: (1) an Oklahoma statute allowing for attorney fees, 36 Okla. Stat. § 3629(B); and (2) a federal statute allowing "necessary or proper relief" against the losing party in a declaratory proceeding, 28 U.S.C. § 2202.

Although this was not a diversity action, the district court exercised supplemental jurisdiction over Henslin's state law tort claim.(2) Oklahoma law provides, "It shall be the duty of an insurer, receiving proof of loss, to submit a written offer of settlement or rejection of the claim to any insured . . . . Upon a judgment rendered to either party, costs and attorney fees shall be allowable to the prevailing party." 36 Okla. Stat. § 3629(B) (1990). The Oklahoma statute defines a "prevailing party" as "the insurer in those cases where judgment does not exceed written offer of settlement." Id. Here, the district court ruled that Twickenham properly rejected Henslin's claim for coverage. As a result, the judgment did not exceed Twickenham's offer of settlement (the rejection of Henslin's claim), and Twickenham was the prevailing party under the statute. Therefore, the district court properly awarded attorney fees to Twickenham under the state law applicable to the supplemental claim.(3)

CONCLUSION

For the foregoing reasons, the order dismissing Henslin's complaint and awarding attorney fees in favor of Twickenham is AFFIRMED.

ENTERED FOR THE COURT

David M. Ebel

Circuit Judge


FOOTNOTES
Click footnote number to return to corresponding location in the text.

*. This order and judgment is not binding precedent, except under the doctrines of law of the case, res judicata, and collateral estoppel. This court generally disfavors the citation of orders and judgments; nevertheless, an order and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.


1.Henslin claims in its attorney fees brief that the two actions were dismissed for lack of jurisdiction, but the district court order on the merits quotes the unpublished Arkansas federal district court opinion, which seems to be a merits-based opinion regarding the lack of an implied right of action under the relevant statutes. This dispute is not at issue, however, because Twickenham has not claimed that the prior judgments are res judicata.

2.Although the district court never specifically ruled that it had supplemental jurisdiction over the tort cause of action, the district court did grant summary judgment on the issue relying on Oklahoma law. Thus, the district court sub silentio must have exercised supplemental jurisdiction over the state law claim. Under the Judicial Improvements Act of 1990, 28 U.S.C. § 1367 (1993), such an exercise of supplemental jurisdiction was proper because the tort claim was so related to the ICA claim that it formed part of the same case or controversy as the federal question cause of action.

3.Twickenham also argues that the fees were proper under the "bad faith" exception to the American rule and under the declaratory judgment statute. However, because we affirm on other grounds, we need not address those issue on appeal.


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