Opinion
No. 23099-6-III
Filed: May 19, 2005 UNPUBLISHED OPINION
Appeal from Superior Court of Chelan County. Docket No: 03-2-00828-6. Judgment or order under review. Date filed: 05/14/2004. Judge signing: Hon. Ted W Jr Small.
Counsel for Appellant(s), Steven Craig Lacy, Attorney at Law, PO Box 7132, East Wenatchee, WA 98802-0132.
Stewart Robert Smith, Attorney at Law, 222 Eastmont Ave, PO Box 7132, East Wenatchee, WA 98802-0132.
Counsel for Respondent(s), Neil Alan Caulkins, Attorney at Law, PO Box 2262, Wenatchee, WA 98807-2262.
Steve Douglas Smith, Attorney at Law, PO Box 19, Wenatchee, WA 98807-0019
Res judicata bars the relitigation of claims that were or could have been litigated in an earlier suit. Former Wenatchee police officer Kenneth D. Britt was injured in the line of duty and filed multiple lawsuits against the City. Here, he asserts bad faith and Consumer Protection Act violations in a tort action for unwarranted litigation. The trial court dismissed the claims because they were or could have been asserted in an earlier breach of contract action based on the same dispute. We agree with that decision and affirm.
FACTS
Sergeant Kenneth D. Britt was a police officer for the City of Wenatchee. He was injured in an automobile accident while on duty. The other driver's insurance company paid Sergeant Britt the policy limit of $100,000. Sergeant Britt also received workers' compensation benefits from the Department of Labor and Industries (LI) in the amount of $142,582.63. As part of its collective bargaining agreement with the Wenatchee Police Guild, the City of Wenatchee provided Guild members with underinsured motorist (UIM) coverage up to $300,000.
9.10 Insured and Underinsured Motorists Coverage. The City will, either through self-insurance or purchase policies, provide the benefit of uninsured and underinsured motorist coverage for all bargaining unit members up to the limits of $300,000.
Clerk's Papers (CP) at 166.
Sergeant Britt filed a request with the City for underinsured motorist coverage in the amount of $300,000. The City responded that LI had posted a lien against any sums payable to Sergeant Britt. The City also thought it should be able to offset LI benefits received by Sergeant Britt against the UIM benefit, based on its status as an LI premium-paying employer. Sergeant Britt's lawyer insisted, to no avail, that the LI lien and payments did not affect the City's liability.
The dispute went to arbitration pursuant to the collective bargaining agreement. The arbitrator fixed Sergeant Britt's comparative fault at 30 percent. He offset the recovery from the other driver's insurance company, ordered the City to pay Sergeant Britt $204,408, and included the LI benefits. The arbitrator concluded that the parties intended the UIM benefits to parallel those available through an outside insurer — that is, as prescribed by Washington law. And insurers cannot offset LI payments from UIM benefits. The arbitrator's decision is final and binds both parties.
The City paid Sergeant Britt $59,000. This was the amount of his award in excess of the LI lien. The City put the remainder into the superior court registry and successfully petitioned for review of the arbitration order. The Guild did not answer or counterclaim. Instead five months later it filed a separate action on behalf of Sergeant Britt. The Guild sought (1) to compel immediate payment of the arbitration award and (2) to challenge the amount of the award. The Guild also alleged that, by placing the disputed funds in the registry of the court, the City unlawfully withheld payment from Sergeant Britt and 'breached its good faith obligations as an insurer.' CP at 348.
The court agreed with the arbitrator, refused to offset the LI payments, and affirmed the arbitration award. The City then promptly released the funds from the court registry and paid the judgment of $204,408. Sergeant Britt now sues the City on his own behalf. He claims that the City's appeal of the arbitration order was unwarranted litigation. And, by placing the funds in the registry of the court pending judicial review instead of paying him immediately, the City deprived him of the use of the funds. He contends this constituted insurance bad faith, violated the Consumer Protection Act, and caused him emotional distress. The superior court ruled Sergeant Britt's claims were barred by res judicata because of the Guild's action and granted the City's motion for summary judgment.
DISCUSSION Res Judicata
'Res judicata refers to 'the preclusive effect of judgments, including the relitigation of claims and issues that were litigated, or might have been litigated, in a prior action." Loveridge v. Fred Meyer, Inc., 125 Wn.2d 759, 763, 887 P.2d 898 (1995) (quoting Philip A. Trautman, Claim and Issue Preclusion in Civil Litigation in Washington, 60 Wash. L. Rev. 805, 805 (1985)). This safeguards the need for finality when actions are settled. Schoeman v. N.Y. Life Ins. Co., 106 Wn.2d 855, 862, 726 P.2d 1 (1986). Whether res judicata bars an action is a question of law that we review de novo. Kuhlman v. Thomas, 78 Wn. App. 115, 120, 897 P.2d 365 (1995).
An action is barred by the doctrine of res judicata when the issue was or could have been raised in earlier litigation in which there was identity of (a) subject matter, (b) cause of action, (c) persons and parties, and (d) quality of persons. Schoeman, 106 Wn.2d at 858. Among the factors we consider are: (1) whether both proceedings arise out of the same facts, (2) whether the proceedings involve substantially the same evidence, and (3) whether the rights and interests established in the first proceeding would be impaired or destroyed by completing the second proceeding. Kelly-Hansen v. Kelly-Hansen, 87 Wn. App. 320, 330, 941 P.2d 1108 (1997). Two additional factors are (4) whether the parties are the same in both actions, and (5) whether the two suits involve infringement of the same right. Kuhlman, 78 Wn. App. at 120, 122.
The related doctrine of collateral estoppel prevents relitigation of an issue after the party estopped has had a full and fair opportunity to present its case. Hanson v. City of Snohomish, 121 Wn.2d 552, 561, 852 P.2d 295 (1993). 'The purpose of the doctrine is to promote the policy of ending disputes, to promote judicial economy and to prevent harassment of and inconvenience to litigants.' Id. (footnotes omitted). The doctrine bars relitigation of an issue that (1) is identical to an issue adjudicated in a prior litigation, (2) the prior adjudication ended in a final judgment, (3) the party against whom the issue is now raised was a party or in privity with a party to the prior adjudication, and (4) application of the doctrine would not work an injustice. Id. at 562.
Here, we have three prior actions in which the City contends the issues could have been raised: (1) the arbitration of the City's refusal to pay Sergeant Britt's UIM claim, (2) the City's action to vacate the arbitration award, and (3) the Guild's action to enforce the arbitration award. The current action is Sergeant Britt's action against the City for insurance bad faith and Consumer Protection Act violations.
Sergeant Britt contends the issues could not have been raised in any of the prior actions.
Sergeant Britt first contends the subject matter was different. The arbitration was insurance arbitration, not collective bargaining agreement arbitration. As such, he contends, the subject matter was limited to the facts of the accident — driver liability and damages. Consequently, the subject matter of the City's appeal of the arbitration order was also confined to the facts of the accident and the issues were limited to those raised by the City in its petition for review: whether the arbitrator exceeded his authority or acted arbitrarily and capriciously. The Guild was neither required nor permitted to raise the counterclaim that the City's pursuit of the appeal constituted bad faith and violated the Consumer Protection Act. Therefore, he argues, he is not precluded from raising this now. Neither was the Guild's separate action to compel compliance with the arbitration order the proper forum for Sergeant Britt's individual claims against the City in its capacity as an insurer. The Guild characterized the arbitration as a labor action. Accordingly, any bad faith allegation by the Guild over the City's seeking judicial review was in the context of a violation of the collective bargaining agreement. Sergeant Britt concludes from this that his claim for bad faith in violation of insurance law is different.
Sergeant Britt also argues that the quality of the parties was different both in the arbitration and the City's appeal. Although the City was nominally a party to the litigation, it stood in the shoes of the tortfeasor and was limited to the defenses and claims available to the uninsured motorist. None of these prior proceedings, Sergeant Britt contends, accommodated his current claims that the City committed insurance bad faith which violated the Consumer Protection Act.
The City responds that Sergeant Britt's bad faith claim is clearly precluded by prior litigation of the same subject matter between the same parties. The claim here is, in fact, the same claim raised by the Guild on Sergeant Britt's behalf in its action to compel immediate payment of the award. The City contends that Sergeant Britt cannot avoid dismissal for res judicata simply by recasting the arbitration as insurance arbitration instead of contract arbitration and then calling the alleged bad faith 'insurance bad faith' instead of 'contract bad faith.' The subject matter of the arbitration was a labor dispute requiring interpretation of the terms of the collective bargaining agreement. The parties were the City and Sergeant Britt as represented by the Guild. The City's obligations to Sergeant Britt under the UIM coverage provisions were at issue. Therefore, the City contends, its appeal of the arbitration order put before the court the City's duty to act in good faith. Thus, the City contends, the issues of bad faith and associated Consumer Protection Act claim were compulsory counterclaims that could and should have been raised.
Compulsory Counterclaim
A compulsory counterclaim is one that arises out of the same transaction or occurrence that is the subject matter of the opposing party's claim so long as the court has all necessary parties properly before it. CR 13(a). The failure to assert a compulsory counterclaim bars a later action on that claim. Schoeman, 106 Wn.2d at 863. CR 13(a) is construed broadly to avoid a multiplicity of suits. Schoeman, 106 Wn.2d at 864 (citing Warshawsky Co. v. Arcata Nat'l Corp., 552 F.2d 1257, 1261 (7th Cir. 1977); Annis v. Dewey County Bank, 335 F. Supp. 133, 137 (D.S.D. 1971)).
Sergeant Britt does not allege a different transaction or occurrence as the basis for his insurance claim. He complains here about the same conduct cited by the Guild as evidence of bad faith under the collective bargaining agreement. Applying the doctrine of res judicata, we conclude that Sergeant Britt's current allegation that the City's appeal of the arbitration was undertaken in bad faith is a claim that could and should have been litigated either in the City's appeal or in the Guild's separate action responding to the City's appeal. The current claim is, therefore, barred.
Sergeant Britt's unwarranted litigation claim is also barred by the principles of compulsory counterclaim.
In a civil action for damages, a counterclaim for damages may be litigated, in the principal action, for malicious prosecution on the ground that the action was instituted with knowledge that it was false and unfounded. RCW 4.24.350(1). It is a counterclaim, not an independent cause of action. See, e.g., Brin v. Stutzman, 89 Wn. App. 809, 819, 951 P.2d 291 (1998).
The conduct Sergeant Britt complains of is the City's seeking judicial review instead of paying over the arbitration award immediately. This, he contends, was unwarranted litigation. But unwarranted litigation is a claim that exists solely as a counterclaim in the challenged litigation. By definition, then, a claim of unwarranted litigation that was not brought as a counterclaim in the original action is barred.
We affirm the dismissal of the action.
A majority of the panel has determined that this opinion will not be printed in the Washington Appellate Reports but it will be filed for public record pursuant to RCW 2.06.040.
KATO, C.J. and BROWN, J., Concur.