Johnston v. McCargar

• Court: Court of Appeals of Iowa
• Decided: December 21, 2022
• Docket: 21-2003
• Status: Published

Opinion

IN THE COURT OF APPEALS OF IOWA

No. 21-2003 Filed December 21, 2022

JOSEPH JOHNSTON, Plaintiff-Appellee,

vs.

HOLLIE McCARGAR, Defendant-Appellant,

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant. ________________________________________________________________

Appeal from the Iowa District Court for Polk County, Celene Gogerty, Judge.

A motorist sued for negligence appeals the denial of her motion to dismiss

for untimely service of the petition. AFFIRMED.

Elizabeth A. Culhane and Sarah M. Dempsey (until withdrawal) of Fraser

Stryker PC LLO, Omaha, Nebraska, for appellant.

Jason D. Walke of Walke Law, LLC, West Des Moines, for appellee.

Considered by Bower, C.J., Tabor, J., and Scott, S.J.*

*Senior judge assigned by order pursuant to Iowa Code section 602.9206

(2022). 2

TABOR, Judge.

In this interlocutory appeal, we must decide if good cause existed to extend

the deadline to serve Joseph Johnston’s petition on defendant Hollie McCargar.

McCargar contends the district court erred in finding that Johnston’s settlement

negotiations with her insurer justified an extension. After examining all the facts

surrounding Johnston’s failure to serve McCargar within ninety days, we find

“understandable mitigating circumstances” amounting to good cause. Rucker v.

Taylor, 828 N.W.2d 595, 603 (Iowa 2013) (citation omitted). We thus affirm the

denial of McCargar’s motion to dismiss.1

I. Facts and Prior Proceedings

Johnston and McCargar were involved in a motor vehicle accident in early

May 2019. According to Johnston, he was waiting for a stoplight to change when

McCargar’s vehicle rear-ended him. After the collision, Johnston reported neck,

shoulder, and back pain. In a lawsuit filed on April 29, 2021, Johnston alleged that

McCargar’s negligence caused the accident.

Johnston had until July 28 to serve McCargar with original notice of the suit.

See Iowa R. Civ. P. 1.302(5) (setting ninety-day deadline). He anticipated he

would not be able to complete service by that date. Instead, on July 14, his

attorney, Jason Walke, sought an extension of forty-five days. Walke asserted that

he was “in active discussions with the insurance company for the tort Defendant

to try to resolve this matter.” Walke continued: “A short amount of additional time

1 The other defendant is State Farm Mutual Auto Insurance Co. (State Farm), Johnston’s insurer. State Farm took no position on the motion to dismiss and is not a party to this appeal. 3

is needed in order to complete (either by settlement or a failure to reach a

settlement) those discussions.” On July 16, the court granted the request, setting

a new service deadline of September 10. Johnston served McCargar with the

petition on August 25.

But McCargar insisted that service was too late. On September 14, she

moved to dismiss the suit under rule 1.302(5). See Iowa R. Civ. P. 1.421(1).

Johnston resisted dismissal, alleging he had good cause to extend the

deadline. As evidence of that good cause, attorney Walke recounted his

communication with representatives of GEICO Casualty Co. (GEICO), McCargar’s

insurer, between spring and fall of 2021. First, in March, Walke asked the original

claims examiner for copies of any records concerning his client. In May, soon after

he filed Johnston’s petition, Walke received notice that GEICO had reassigned the

case to claims examiner Kiki Bell. Walke told Bell he would “send a settlement

packet to GEICO before serving the lawsuit” on McCargar. According to Walke,

Bell agreed to that approach.

But as spring gave way to summer, Walke realized he could not assemble

the settlement packet before the ninety-day service deadline. In the resistance,

he explained that a family health crisis and a support staff departure from his solo

law practice contributed to the delay. So, two weeks before the ninety-day

deadline, Walke sought and received the extension until September 10.

Walke recalled that the same day he filed the extension request, July 14,

he left Bell a voicemail detailing his difficulties in finishing the settlement packet 4

and sharing his intent to seek more time to serve McCargar.2 In the message,

Walke also asked Bell to send photographs of the vehicles involved in the accident.

Later that day, Bell did just that.

Also in the resistance, Walke noted that he sent the settlement packet to

Bell on August 11.3 Six days later, Bell acknowledged its receipt. She wrote:

“Once we’ve completed our evaluation, we’ll contact you to discuss the resolution

of your client’s claim.” Bell followed up with a settlement offer the next day. After

further negotiation by phone, on August 23, Walke rejected GEICO’s offer as “not

even close” to Johnston’s accident expenses. Then two days later, McCargar

received service of the petition.

As Walke further details in the resistance, Bell contacted him again one

week after the suit was served on McCargar. After some phone tag, Walke and

Bell resumed settlement talks with GEICO increasing its offer.

McCargar replied to the resistance, contending the question before the

court was whether the GEICO representative “implicitly or affirmatively agreed”

that Johnston did not have to serve its insured within ninety days of filing suit. She

also attached an affidavit from Bell avowing that she “did not agree, verbally or in

writing, to an extension for the deadline” for serving the petition.

2 McCargar asserts “there is no evidence” that Walke told Bell he was going to ask for an extension of the service deadline. But the district court was entitled to consider Walke’s professional statement in the pleadings that he did so. See, e.g., State v. Brewer, 247 N.W.2d 205, 212 (Iowa 1976) (explaining a professional statement “is a technique, used as a matter of convenience . . . , to establish a record of matters peculiarly within the knowledge of an attorney” that “has the effect of an affidavit”). 3 Apparently crossing in the mail, a letter sent by Bell on August 12 asked the

status of Johnston’s settlement demand. 5

The district court denied McCargar’s motion to dismiss, noting that Walke

“was actively negotiating with the insurance company prior to serving the petition.”

McCargar successfully sought interlocutory review and a stay of the proceedings

pending this appeal.

II. Scope and Standard of Review

We review the district court’s denial of McCargar’s motion to dismiss for

correction of legal error. See Rucker, 828 N.W.2d at 598. While the pleadings

ordinarily form the boundaries of material to be evaluated in deciding a motion to

dismiss, when the motion is based on failure to provide timely service, a court may

consider facts outside the pleadings. Id. at 598–99. So long as the district court’s

findings of fact are supported by substantial evidence, they are binding on appeal.

Id. at 599 (differentiating fact-findings from legal conclusions or application of legal

principles, which are not binding on review).

III. Analysis

McCargar contends the district court erred in extending time for service and

in denying her motion to dismiss premised on Rule 1.302(5). That rule sets out

both the ninety-day service deadline and how it may be extended:

If service of the original notice is not made upon the defendant. . . within 90 days after filing the petition, the court, upon motion or its own initiative after notice to the party filing the petition, shall dismiss the action without prejudice as to that defendant . . . . If the party filing the papers shows good cause for the failure of service, the court shall extend the time for service for an appropriate period.

Iowa R. Civ. P. 1.302(5).

McCargar moved to dismiss the action because Johnston did not serve her

notice until 118 days after filing suit. Relying on Rucker, the district court refused 6

to dismiss the action, finding that ongoing settlement negotiations between Walke

and Bell constituted good cause for allowing more time to complete service. See

828 N.W.2d at 601. McCargar contests the court’s good-cause finding. Citing

Antolik v. McMahon, she insists that Johnston’s “desire to engage in settlement

discussions” did not justify extending the service deadline. See 744 N.W.2d 82,

85 (Iowa 2007). In Antolik, the supreme court relied on the principle that

“[s]ettlement negotiations, even if done in good faith, do not constitute . . . good

cause for delaying service.” Id. (quoting Henry v. Shober, 566 N.W.2d 190, 193

(Iowa 1997)).

But the supreme court revisited that principle in Rucker and “erased any

bright line previously indicating settlement negotiations can never constitute good

cause for a delay in service.” Feldhacker v. West, No. 12-2003, 2013 WL 3855694,

at *5 (Iowa Ct. App. July 24, 2013). Rucker explained that although settlement

negotiations have not historically constituted good cause for delaying service,

instances exist in which dismissal against that backdrop would be unfair. See

Rucker, 828 N.W.2d at 603. The court explained the good-cause standard

“considers all the surrounding circumstances, including circumstances that would

make it inequitable for a defendant to successfully move to dismiss.” Id. at 601.

The facts here resemble those in Rucker.4 For starters, McCargar

emphasizes that GEICO did not agree to extend the service deadline and points

4 In some ways, the facts here suggest a greater inequity were we to reverse the district court. For instance, in Rucker, plaintiff’s counsel did not serve original notice on the defendants until receiving a reminder from the district court administrator six days after the ninety-day period had expired. 828 N.W.2d at 597. By contrast, Walke took a proactive approach and obtained an extension two weeks before the original deadline. 7

to Bell’s affidavit confirming that she entered no such agreement. But Rucker

rejects the notion that a plaintiff is required to offer “proof of an enforceable contract

before good-faith settlement negotiations can support a finding of good cause.” Id.

at 603. Rather, it is enough if counsel communicates a “plan to purposely delay

service of process” to defendant’s insurance representative. Id. And with

knowledge of that plan, the insurer continues to negotiate with the attorney. Id.

Like plaintiff’s counsel in Rucker, Walke informed Bell after filing the petition

that he planned to deliver “a settlement packet to GEICO before serving the

lawsuit” on McCargar. She agreed to that approach. When Walke realized he

would not be able to present his offer to GEICO within the ninety days, he both

(1) informed Bell and (2) asked for a forty-five day extension for service, which the

court granted. We find it significant that Walke asked for that extension two weeks

before the ninety days expired. Had the court denied his request, he would still

have had time to serve McCargar within the original timeframe. Instead, the court

issued an order with a new deadline, which Walke met.5

And like the insurance representative in Rucker, Bell continued to negotiate

with Walke, even after knowing that he had obtained an extension of time to serve

McCargar. Those ongoing communications6 reinforced Walke’s expectation that

5 We realize the court’s initial grant of more time for service was not a final order and could be reconsidered when deciding a motion to dismiss. See Carroll v. Martir, 610 N.W.2d 850, 857 (Iowa 2000). But it also seems reasonable for Walke to rely on that court order in conducting the ongoing negotiations with Bell. 6 McCargar argues the exchanges between Bell and Walke before the ninety days

elapsed were not settlement communications as defined in Iowa Rule of Evidence 5.408(a)(1). We do not find that argument convincing. Even if that rule defined settlement communications for evidentiary purposes, we do not believe that Rucker contemplates such a narrow definition. 8

he did not have to comply with the original service deadline. See Rucker, 828

N.W.2d at 603. Bell was not obliged to endorse Walke’s plan to delay service.

See id. Yet, her conduct in continuing to negotiate with knowledge that the court

had set a new deadline for service made it “understandable” that Johnston did not

serve McCargar within the original ninety days. See id. As the district court found,

it was inequitable for McCargar to seek a dismissal under these circumstances.

Two further points. First, as noted in Rucker, the purpose of rule 1.302(5)

is “to move cases along in the court system once they have been filed.” Id. at 600.

Our holding today does not undermine that purpose. Walke sought an extension

two weeks before the original deadline and served the petition two weeks before

the extended deadline, as soon as negotiations appeared to break down. This

case did not languish on the docket after being filed. See id. at 604 (explaining

the federal analog to rule 1.302(5) was intended as “a useful tool for docket

management, not an instrument of oppression” (citation omitted)). Second, Iowa

courts prefer to decide cases on their merits. See Rucker, 828 N.W.2d at 603

(“Because the substantive rights of a plaintiff can be at stake through the

application of a statute of limitations, it is important that the good-cause standard

under rule 1.302(5) not be applied too narrowly.”). Today’s result reinforces that

preference.

AFFIRMED.