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Carlson v. Versicherungs-Aktiengesellschaft

Supreme Court of Nebraska

March 7, 2014

CAROLYN CARLSON AND RICHARD CARLSON, APPELLANTS,
v.
ALLIANZ VERSICHERUNGS-AKTIENGESELLSCHAFT AND DOES 1 THROUGH 50, INCLUSIVE, APPELLEES

Page 265

[Copyrighted Material Omitted]

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Appeal from the District Court for Lancaster County: ROBERT R. OTTE, Judge.

Thomas G. Sundvold, of Sundvold Law Firm, P.C., L.L.O., and Raymond D. McElfish, of McElfish Law Firm, P.C., L.L.O., for appellants.

Kyle Wallor and Sarah F. Macdissi, of Lamson, Dugan & Murray, L.L.P., for appellee Allianz Versicherungs-Aktiengesellschaft.

HEAVICAN, C.J., WRIGHT, CONNOLLY, STEPHAN, McCORMACK, and CASSEL, JJ. MILLER-LERMAN, J., participating on briefs.

OPINION

Page 267

[287 Neb. 630] Cassel, J.

I. INTRODUCTION

Twenty months after the district court dismissed the appellants' declaratory judgment action against an insurance company for failure to join a necessary party, the appellants filed a complaint to vacate the judgment. The district court sustained the insurance company's motion to dismiss the complaint. Because we conclude that (1) the time for exercise of the district court's inherent power to vacate its judgment had expired, (2) the court lacked jurisdiction to vacate its judgment under Neb. Rev. Stat. § 25-2001(4) (Reissue 2008) due to insufficient service of process on the insurance company, and (3) the court did not err in declining to exercise its equitable power to vacate where the appellants had an adequate remedy at law, we affirm.

II. BACKGROUND

1. Underlying Lawsuit and Bankruptcy Stay

In February 2005, the appellants, Carolyn Carlson and Richard Carlson, were involved in a rollover collision while driving their Chrysler PT Cruiser. The back of Carolyn's seat collapsed during the rollover, and she suffered a cervical fracture and paralysis from the neck down. The Carlsons filed a products liability action against Daimler-Chrysler Corporation in the district court for Lancaster County, Nebraska.

In April 2009, prior to the scheduled trial date, Chrysler LLC sought chapter

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11 bankruptcy protection. The bankruptcy court imposed an automatic stay, which stayed the Carlsons' suit.

In May 2009, the Carlsons sought the bankruptcy court's relief from the automatic stay. In their motion, they alleged that the state court proceeding was not connected to and would not interfere with the bankruptcy case and that litigation in the Nebraska state court would not prejudice the interests of [287 Neb. 631] other creditors and interested parties. Old Carco LLC and its affiliated debtors and debtors in possession filed an objection. (Daimler-Chrysler Corporation and Old Carco LLC, formerly known as Chrysler LLC, will be referred to as " Chrysler" in this opinion.) They alleged, among other things, that they did not have " 'first-dollar' insurance coverage with respect to costs incurred defending against [the Carlsons'] specific claim" and that Chrysler's estate would be depleted by the litigation of the lawsuit. The bankruptcy court denied the Carlsons' motion.

2. Suit Against Allianz

Allianz Versicherungs-Aktiengesellschaft (Allianz), a foreign insurance company, provided insurance to Chrysler. On February 22, 2010, the Carlsons filed a complaint for declaratory relief against Allianz. This suit was also filed in the district court for Lancaster County, Nebraska. The Carlsons alleged that Allianz was an excess insurer obligated to " drop down" and provide " first dollar coverage" to Chrysler because Chrysler, which was partially self-insured, had become insolvent. The Carlsons alleged that Allianz had an immediate duty to defend Chrysler in the underlying products liability action. They requested judicial determination of the duties and obligations of Allianz. The Carlsons filed a praecipe directing the clerk of the court to issue summons for service of process on Allianz in Munich, Germany. Because Allianz is a German entity, the district court entered an order authorizing a service company to effect service of process on Allianz in Germany. Allianz was thereafter served in Germany.

Allianz filed a motion to dismiss pursuant to Neb. Ct. R. Pldg. § 6-1112(b)(6) (failure to state claim) and (7) (failure to join necessary party). Allianz argued that Chrysler was a necessary party, but the Carlsons disagreed. The district court overruled the motion. The court reasoned that it could not, as a matter of law, exclude the possibility that the insurance policy contained terms and conditions whereby Chrysler would not be a necessary party to the underlying accident.

[287 Neb. 632] 3. Bankruptcy Confirmation Order and Plan Injunction

On April 23, 2010, the bankruptcy court entered an order confirming a second amended joint plan of liquidation of debtors and debtors in possession, as modified. The confirmation order, which had an effective date of April 30, stated in part:

30. . . . In addition, as of the Effective Date, the injunction imposed by Section III.E.4 of the Plan (the " Plan Injunction" ) will be deemed modified solely to the extent necessary to (a) permit Tort Claimants to commence, pursue or continue litigation to pursue applicable insurance, including litigation against the Debtors' insurers, if any (" Insurance Litigation" ); and (b) in connection therewith, to name one or more of the Debtors as nominal defendants, with the naming of such nominal defendants and such Insurance Litigation being solely ...

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