Benson v. Casa de Capri Enters., LLC

JACOB BENSON, an individual; JOSEPH BENSON; DEBORAH BENSON, husband and wife; K. B., a minor, by and through Jacob Benson, guardian ad litem, Plaintiffs-Appellants, v. CASA DE CAPRI ENTERPRISES, LLC, an Arizona limited liability company; UNKNOWN PARTIES, named as John Does 1-20; ABC Corporations I-X; XYZ Partnerships I-X, Defendants-Appellees, CONTINUING CARE RISK RETENTION GROUP, INC., Garnishee, Real-party-in-interest-Appellee.

JACOB BENSON, an individual; JOSEPH BENSON; DEBORAH BENSON, husband and wife; K. B., a minor, by and through Jacob Benson, guardian ad litem, Plaintiffs-Appellants, v. CASA DE CAPRI ENTERPRISES, LLC, an Arizona limited liability company; UNKNOWN PARTIES, named as John Does 1-20; ABC Corporations I-X; XYZ Partnerships I-X, Defendants-Appellees, CONTINUING CARE RISK RETENTION GROUP, INC., Garnishee, Real-party-in-interest-Appellee.

No. 19-16686

United States Court of Appeals, Ninth Circuit

March 17, 2022

NOT FOR PUBLICATION

Argued and Submitted October 5, 2020

Submission Withdrawn November 23, 2020

Resubmitted January 31, 2022 Pasadena, California

Appeal from the United States District Court No. 2:18-cv-00006-DWL for the District of Arizona Dominic Lanza, District Judge Presiding

Before: KLEINFELD, HURWITZ, and BRESS, Circuit Judges.

ORDER

The court's disposition filed on February 2, 2022, is hereby amended. An amended disposition is filed concurrently with this order. With this amended disposition, the panel has voted to deny the petition for panel rehearing. See Dkt. 63. No subsequent petitions for panel rehearing or rehearing en banc shall be permitted.

AMENDED MEMORANDUM ^[*]

Appellants ("the Bensons"), appeal a district court order granting a motion by Continuing Care Risk Retention Group ("CCRRG") to compel arbitration, and dismissing the action without prejudice. We have jurisdiction under 9 U.S.C. § 16 and 28 U.S.C. § 1291. Reviewing de novo, Shroyer v. New Cingular Wireless Servs., Inc., 498 F.3d 976, 981 (9th Cir. 2007), we reverse.

After the Bensons obtained a $1.5 million judgment against Casa de Capri Enterprises, CCRRG's insured, the Bensons sought a writ of garnishment against CCRRG. The district court determined that because the Bensons were seeking to avail themselves of the benefits of Casa de Capri's insurance policy with CCRRG, they were also bound by the policy's arbitration clause under Arizona's doctrine of direct benefits estoppel.

After oral argument, we certified two unresolved questions of Arizona law to the Arizona Supreme Court:

1) In a garnishment action by a judgment creditor against the judgment debtor's insurer claiming that coverage is owed under an insurance policy, where the judgment creditor is not proceeding on an assignment of rights, can the insurer invoke the doctrine of direct benefits estoppel to bind the judgment creditor to the terms of the insurance contract?

2) If yes, does direct benefits estoppel also bind the judgment creditor to the arbitration clause contained in the insurance policy?

Benson v. Casa de Capri Enterps., LLC, 980 F.3d 1328, 1333 (9th Cir. 2020).

The Arizona Supreme Court granted our request for certification. On January 20, 2022, it issued a decision holding that "[t]he common law doctrine of direct benefits estoppel cannot be invoked in a garnishment action to bind the judgment creditor to the terms of the contract because applying the doctrine in this context would contravene Arizona's statutory garnishment scheme." Benson v. Casa de Capri Enterps., LLC, 502 P.3d 461, 463 (Ariz. 2022). The court reasoned that garnishment proceedings in Arizona must "adhere to prescribed statutory procedures," which "include[] the statutory requirement that the trial court-not an arbitrator-resolve all factual and legal issues." Id. at 465. Accordingly, "[a]llowing the arbitration clause to control in a garnishment proceeding would undermine the legislature's intent that the trial court decide the issues of law and fact." Id. Based on its answer to this question, the court declined to reach the second certified question. Id. at 466.

The Arizona Supreme Court's decision confirms that the district court erred in granting CCRRG's motion to compel arbitration under the doctrine of direct benefits estoppel. This result does not conflict with our decision in Labertew v. Langemeier, 846 F.3d 1028 (9th Cir. 2017), as CCRRG contends. Although the Arizona Supreme Court in Benson invoked procedural rules governing garnishment in explaining its conclusion, whether the doctrine of direct benefits estoppel applies is a substantive question of state law. Cf. Benson, 502 P.3d at 465 (explaining that while the Bensons "must prove that the insurer was obligated to insure the loss under the insurance agreement," "...