The Flag January - February 2020
Vol. 76, No. 1
W. Dudley McCarter
W. Dudley McCarter, a former president of The Missouri Bar, is a partner in the St. Louis law firm of Behr, McCarter & Potter, P.C.
INSURANCE COMPANY SUBJECT TO JURISDICTION IN MISSOURI FOR BAD FAITH CLAIM
“Key Insurance Company filed a petition for writ of prohibition directing the circuit court to dismiss, for lack of personal jurisdiction, claims filed against it by Josiah Wright and Phillip Nash.”2 “Nash alleges Key committed the tort of bad faith refusal to settle in Missouri, bringing Key within the purview of Missouri’s long-arm statute and establishing the requisite minimum contacts necessary to satisfy due process.”3
“Key Insurance Company is an insurance company incorporated under laws of the state of Kansas.”4
Key issued an insurance policy to Kansas City, Kansas, resident, Takesha Nash (Takesha). The insurance policy covered her 2002 Kia Optima. Takesha’s father, Phillip Nash (Nash), was involved in a motor vehicle collision with Josiah Wright in Jackson County, Missouri, while driving Takesha’s Optima. Soon after the collision, Wright’s counsel informed Key of the collision, and Key denied coverage. Wright sued Nash in Jackson County. Wright and Nash agreed to submit their dispute to arbitration in Jackson County. The arbitrator awarded Wright $4.5 million in damages. The circuit court then confirmed Wright’s arbitration award as a final judgment.5
“…Wright [then] filed a lawsuit against Key and Nash in the Jackson County circuit court seeking to collect insurance proceeds from Takesha’s Key insurance policy. Nash filed a cross-claim against Key, alleging Key committed the tort of bad faith refusal to settle and breached its contractual duty to defend him. Key filed a motion to dismiss Wright and Nash’s claims for lack of personal jurisdiction, which the circuit court overruled.6
“This Court issued a preliminary writ of prohibition,”7 which was quashed in State ex rel. Key Insurance Co. v. Roldan.
“Specific jurisdiction over a foreign corporation exists when the underlying lawsuit arises from the corporation’s contacts with Missouri. State ex rel. PPG Indus., Inc. v. McShane, 560 S.W.3d 888, 891 (Mo. banc 2018).”8
“Nash’s cross-claim alleges the tort of bad faith refusal to settle against Key. In Missouri, bad faith refusal to settle is a tort action. Scottsdale Ins. Co. v. Addison Ins. Co., 448 S.W.3d 818, 829 (Mo. banc 2014).”9
“For jurisdictional purposes, Nash has satisfactorily pleaded that Key committed the tort of bad faith refusal to settle in Missouri. Because Key is alleged to have committed a tort in Missouri, its conduct falls within the purview of Missouri’s long-arm statute.”10
‘“ …Missouri courts may still assert personal jurisdiction over non-domiciliary defendant corporation without violating due process if that entity has at least one contact with this state and the cause of action being pursued arises out of that contact.’ Cedar Crest Apartments, [LLC v. Grate], 577 S.W.3d at 494 [(Mo. banc 2019)].”11
“Key has the requisite minimum contacts with Missouri. Key’s alleged tortious behavior of bad faith refusal to settle is a contact contemplated by Missouri’s long-arm statute.”12 “…Missouri’s long-arm statute reaches as far as the Due Process Clause lets it reach without violating the constitution. Although Key’s alleged tort may be its only contact with this state, it is within the bounds of due process to allow Missouri courts to exercise personal jurisdiction over it.”13
In his dissent, Judge Wilson stated that there were insufficient contacts with Missouri to support personal jurisdiction over Key because there was no substantial connection between Missouri and Key (a non-resident) as required by due process.
NO JURISDICTION IF DEFENDANT SERVED AFTER SUMMONS EXPIRED
In New LLC v. Bauer,
Mike Bauer (“Bauer”) appeals from a judgment denying his Rule 74.06(b)(4) motion to set aside a default judgment entered in favor of New LLC as void for want of personal and subject matter jurisdiction. Because Bauer sustained his burden to establish that the summons relied on to effect service of process on him had expired and had not been extended, the trial court lacked personal jurisdiction to enter a default judgment.14
“On April 20, 2017 New LLC filed a petition alleging that it had been hired by Bauer to perform stucco work on property Bauer owned in Kansas City, Missouri (‘real property’), and that Bauer had refused to pay $26,295, the outstanding balance owed for the work.”15
“New LLC filed a motion to appoint Earl Clayton Ruhl (‘Ruhl’) as special process server.”16 “On June 28, 2017, New LLC filed a request for an alias summons, which was issued on June 29, 2017.”17 “On August 30, 2017, New LLC filed a return of the summons,”18 signed by Ruhl.
Relying on Ruhl’s summary in his return of service, New LLC filed a motion for default judgment on September 20, 2017. New LLC argued that Bauer made a concerted effort to avoid and refuse Ruhl’s attempts at service on August 17, 2017, and that pursuant to Rule 54.20(f), the refusal of service constituted valid service of process.19
“The trial court entered a default judgment on October 3, 2017, in favor of New LLC and against Bauer in the amount of $26,295, plus the costs of the action, attorney fees in the amount of $1,324, and post-judgment interest at the statutory rate (‘default judgment’).”20
On July 7, 2018, Bauer filed a motion to set aside the default judgment (“motion to set aside”) pursuant to Rule 74.06(b)(4). Bauer argued that the default judgment was void because it was entered without personal jurisdiction. Bauer argued that the June 29, 2017 summons expired on July 30, 2017, thirty days after it was issued.21
A judgment is void under Rule 74.06(b)(4) only if the trial court lacked subject matter jurisdiction, lacked personal jurisdiction over the defendant, or entered the judgment in a manner inconsistent with due process. Forsyth Fin. Grp., LLC v. Hayes, 351 S.W.3d 738, 740 (Mo. App. W.D. 2011). A party may seek relief from a void judgment pursuant to Rule 74.06(b) at any time.22
‘“[P]ersonal jurisdiction refers . . . to the power of a court to require a person to respond to a legal proceeding that may affect the person’s rights or interests.’ J.C.W. ex rel. Webb v. Wyciskalla, 275 S.W.3d 249 (Mo. banc 2009).”23 ‘“Service of process is predicate to the trial court’s jurisdiction to adjudicate the rights of the defendant, and when the requirements for manner of the service are not met, the court lacks the power to adjudicate.’ Scholz v. Schenk, 489 S.W.3d 306, 309 (Mo. App. E.D. 2016)….”24
“A summons is not perpetually effective after its issuance. Rule 54.21 requires that the person receiving a summons must serve the summons and make return of service ‘promptly.”’25
‘“Process not served within 30 days becomes functus officio and confers no authority thereafter, unless the court extends the time.’ Orange v. Harrington, 649 S.W.2d 930, 934 (Mo. App E.D. 1983)….”26
Bauer’s refusal of service of the June 29, 2017 alias summons occurred on August 17, 2017, and thus more than thirty days and less than ninety days after issuance of the summons. The trial court possessed the authority pursuant to Rule 54.21 to extend the effectiveness of the June 29, 2017 summons from thirty days to ninety days. However, unless the trial court in fact exercised this authority, Ruhl’s attempts to serve Bauer on August 17, 2017, were pursuant to a summons that had no legal effect.27
SPOLIATION IS THE INTENTIONAL DESTRUCTION OF EVIDENCE
“Tribus, LLC (‘Tribus’) appeals from the trial court’s entry of judgment for Greater Metro., Inc. (‘Greater Metro’), in which it rejected Tribus’ breach-of-contract claim against Greater Metro and granted Greater Metro’s breach-of-contract counterclaim against Tribus.”28 The judgment was affirmed in Tribus v. Greater Metro, Inc.
“Tribus is a custom software developer headquartered in St. Louis, Missouri, that builds digital tools, including websites and customer management relationship software (‘CRM’), and markets them to real estate brokerages. Greater Metro is a residential real estate brokerage company.”29 “Tribus and Greater Metro executed a Consulting, Product Development & Licensing Agreement (‘Contract’), which provided Tribus would create, design, and deploy a custom company website for Greater Metro….”30
After months of difficulty with the website, “Greater Metro became concerned that continuing working with Tribus would cause it embarrassment and to lose agents. Greater Metro notified Tribus it was ‘not going to be moving forward with Tribus websites….’ Then, Greater Metro sent a formal notice terminating the Contract….”31
“Tribus filed a petition against Greater Metro … in St. Charles County Circuit Court, seeking payment for Greater Metro’s ‘past due amounts’ under the Contract.”32 “Greater Metro filed its answer, affirmative defenses, and counterclaim for breach of contract against Tribus…. Greater Metro claimed Tribus breached the Contract by failing to timely provide functional agent websites….”33
At trial, “Tribus moved for an adverse inference against Greater Metro, asserting Greater Metro failed to comply with the trial court’s order to produce communications between its staff and agents.”34
Tribus argued Greater Metro engaged in the spoliation of evidence by failing to preserve all emails between its staff and agents during the parties’ relationship and asked the trial court to infer those emails would show the agents were satisfied with their websites. Greater Metro argued it produced all correspondence between its staff and agents it had in its possession.35
“In its judgment, the trial court found for Greater Metro on both Tribus’ claim for breach of contract and Greater Metro’s counterclaim for breach of contract and awarded Greater Metro $20,760.80 in damages.”36 “The trial court found the company website ‘was in fact never completed at all’ and the agent websites were … not functional for their intended purpose.”37 “The trial court also denied Tribus’ motion for adverse inference, concluding Tribus failed to prove Greater Metro intentionally participated in the spoliation of evidence.”38
“…Tribus argues the trial court ‘erroneously declared or erroneously applied the law’ in denying its motion for adverse inference because Greater Metro ‘failed to search for, preserve, or produce’ communications with its agents, despite having a duty to do so.”39
“Spoliation is the intentional act of destruction or significant altercation of evidence.” Hill v. SSM Health Care St. Louis, 563 S.W.3d 757, 761 (Mo. App E.D. 2018)…. “Spoliation may also be the concealment or suppression of relevant evidence or the failure to determine whether certain evidence exits.” Ball v. Allied Physicians Grp., L.L.C., 548 S.W.3d 373, 386 (Mo. App. E.D. 2018) (citing Marmaduke v. CBL & Assoc. Mgmt., 521 S.W.3d 257, 269 (Mo. App. E.D. 2017)). Spoliators are subject to an adverse evidentiary inference where they are held “to admit that the destroyed evidence would have been unfavorable to their position.” Schneider v. G. Guilliams, Inc., 976 S.W.2d 522, 526 (Mo. App. E.D. 1998).
The burden is on the party seeking the benefit of the doctrine of spoliation “to prove the opponent destroyed, altered, concealed, or suppressed the evidence at issue under circumstances manifesting fraud, deceit, or bad faith.” Ball, 548 S.W.3d at 386 (citing Marmaduke, 521 S.W.3d at 269)…. “[A] party’s failure to adequately explain missing evidence[ ] may give rise to an adverse inference.” Marmaduke, 521 S.W.3d at 269. In addition, “[a]n inference of fraud and a desire to suppress the truth may be established if the alleged spoliator had a duty or should have recognized a duty to preserve the evidence.” Hill, 563 S.W.3d at 761 (citing Marmaduke, 521 S.W.3d at 269). “Simple negligence” in failing to preserve documents, however, “is not sufficient to apply the adverse inference rule.” Freight House Lofts Condo Ass’n v. VSI Meter Servs., Inc., 402 S.W.3d 586, 595 (Mo. App. W.D. 2013).40
“Circumstances similar to Marmaduke, which would have been sufficient to grant an adverse inference, do not exist here. Tribus sent no letter to Greater Metro formally notifying Greater Metro of its claim before it filed its lawsuit in July 2014.”41 “The evidence fails to show facts from which the trial court had to infer Greater Metro should have recognized a duty to preserve all emails between its staff and agents.”42
We further find Tribus presented no evidence that Greater Metro intentionally destroyed communications between its staff and agents. Tribus argues Greater Metro’s failure to issue a litigation hold regarding all Tribus-related emails exchanged between its agents and staff is evidence that Greater Metro engaged in fraudulent, deceitful, and bad faith behavior. However, Tribus cites to no case — and we find no case — that holds a failure to issue a litigation hold indicates fraud, deceit, or bad faith by an alleged spoliator. Tribus relies solely on the fact that Greater Metro could not produce all emails between its staff and agents as evidence that Greater Metro must have intentionally destroyed them. But “[t]he failure to produce . . . evidence, in and of itself, in not sufficient to warrant” application of the spoliation doctrine. Freight House Lofts Condo Assoc., 402 S.W.3d at 596. Accordingly, the trial court did not erroneously apply the law in denying Tribus’ motion for adverse inference.43
TEACHER WHO PHYSICALLY RESTRAINED A DISRUPTIVE STUDENT WAS ENTITLED TO OFFICIAL IMMUNITY
Israel Mariano (“Mariano”), a student at Independence Academy, filed a negligence suit against Relator, Carlos Alsup (“Alsup”), an in-school suspension teacher. Mariano sued Alsup in his individual capacity for the personal injuries Mariano sustained when Alsup physically restrained him and broke his arm. Alsup filed for a motion for summary judgment, claiming he was entitled to official immunity, but the circuit court overruled the motion.44
The Supreme Court issued a permanent writ of prohibition in State of Missouri ex rel. Alsup v. Kanatzar.
On April 28, 2016 Mariano was reluctant to go to school and refused to get on the school bus at his home. Mariano’s mother called Independence Academy to inform them that Mariano refused to get on the bus and that she would bring him to school in her own vehicle. When she arrived at Independence Academy, Mariano’s mother physically struggled to get him into the school. Once inside the school, Mariano’s mother turned him over to Alsup and another staff member, who took hold of him. In the course of physically restraining him, Alsup broke Mariano’s arm. At the time of the incident, Alsup was employed as an in-school suspension teacher at Independence Academy, an alternative school operated by the Independence School District (“District”).45
“‘Immunity’ connotes not only immunity from judgment but also immunity from suit.” State ex rel. Mo. Dep’t of Agric v. McHenry, 687 S.W.2d 178, 181 (Mo. banc 1985).”46
Two types of immunity often are confused when suit is brought against a governmental official. Southers v. City of Farmington, 263 S.W.3d 603, 610 (Mo. banc 2008). Broadly speaking, sovereign immunity protects governmental entities from tort liability and can be invoked when a governmental official is sued only in his or her official capacity. See id. Official immunity, on the other hand, protects public officials sued in their individual capacities “from liability for alleged acts of negligence committed during the course of their official duties for performance of discretionary acts.” Id.
At issue here is the doctrine of official immunity, which this Court has long held protects a public official from liability if that official acts within the course of his official duties and without malice. Id. at 610 & n.7 (citing Reed v. Conway, 20 Mo. 22, 52 (1854)). The purpose of this doctrine is to allow public officials to “make judgments affecting the public safety and welfare” without “[t]he fear of personal liability.” Green v. Denison,738 S.W.2d 861, 865 (Mo. banc 1987), overruled on other grounds by Davis v. Lambert-St. Louis Int’l Airport, 193 S.W.3d 760, 765 n.8 (Mo. banc 2006). This is because, “[i]f an officer is to be put in fear of financial loss at every exercise of his official functions, . . . the interest of the public will inevitably suffer . . .” Smith v. Berryman, 199 S.W. 165, 167 (Mo. banc 1917).47
Courts applying the doctrine of official immunity must be cautious not to construe it “too narrowly lest they frustrate the need for relieving public servants of the threat of burdensome litigation.” Kanagawa [v. State ex rel. Freeman, 685 S.W.2d 831, 826 (Mo. banc 1985)]. There is, however, a narrow exception to the application of the official immunity doctrine — i.e., when a public officer fails to perform a ministerial duty required of him by law, he may be personally liable for the damages caused. Knox County. v. Hunolt, 19 S.W. 628, 630 (Mo. 1892). This narrow exception, therefore, focuses on the nature of ministerial act.48
“[T]he central question is whether there is any room whatsoever for variation in when and how a particular task can be done. If so, that task — by definition — is not ministerial. See, e.g., State ex rel. Clarke v. West, 198 S.W. 1111, 1113 (Mo. banc 1917)….”49
“Determining the need to restrain a school-age child — let alone determining and employing the proper means and manner to accomplish that restraint — are about as far from the sort of clerical or ministerial acts that can be compelled by writ of mandamus as one can imagine.”50
Here, … Alsup was required to make a rapid series of difficult decisions concerning whether and how to restrain Mariano for the safety of that child and everyone else nearby. Alsup had the authority and, perhaps, even the duty to act, but when, where, and how he was to act were open to him. Official immunity was created to protect him from claims he acted negligently under such circumstances, and the narrow exception to that immunity for clerical or ministerial acts does not come close to applying.51
1 W. Dudley McCarter, a former president of The Missouri Bar, is a partner in the St. Louis law firm of Behr, McCarter & Potter, P.C.
2 State ex rel. Key Insurance Co. v. Roldan, No. SC97623, 2019 WL 5558334 (Mo. banc Oct. 29, 2019).
3 Id. at *1.
8 Id. at *2.
10 Id. at *3.
12 Id. at *4.
14 New LLC v. Bauer, No. WD82325, 586 S.W.3d 889 (Mo. App. W.D. 2019).
28 Tribus v. Greater Metro, Inc., No. ED107460, 2019 WL 6121171 (Mo. App. W.D. Nov. 19, 2019).
29 Id. at *1.
31 Id. at *3.
32 Id. at *4.
36 Id. at *5.
39 Id. at *6.
41 Id. at *8.
44 State of Missouri ex rel. Alsup v. Kanatzar, No. SC97427 (Mo. banc 2019).