EMJ Corporation et al v. Hudson Specialty Insurance Company et al

Filing 136

MEMORANDUM OPINION re 135 Order on Motion for Summary Judgment,,, Order on Motion to Bifurcate. Signed by Senior Judge Glen H. Davidson on 8/26/14. (tab)

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF MISSISSIPPI

DELTA DIVISION

EMJ CORPORATION and
WESTCHESTER FIRE INSURANCE COMPANY
v.

PLAINTIFFS

CIVIL ACTION NO.2: ll-cv-00228-GHD-JMV

HUDSON SPECIALTY INSURANCE COMPANY

DEFENDANT

MEMORANDUM OPINION DENYING PLAINTIFFS' MOTION FOR PARTIAL

SUMMARY JUDGMENT ON INSURED STATUS, PLAINTIFFS' MOTION FOR PARTIAL

SUMMARY JUDGMENT ON PRIORITY OF COVERAGE, DEFENDANT'S SECOND

MOTION FOR SUMMARY JUDGMENT, AND

DEFENDANT'S MOTION TO BIFURCATE TRIAL

Presently before the Court in this declaratory judgment action are Plaintiffs' motion for
partial summary judgment on insured status [78], Defendant's second motion for summary
judgment [96], Plaintiffs' motion for partial summary judgment on priority of coverage [98], and
Defendant's motion to bifurcate trial [120].' Upon due consideration of the parties' motions,
responses, replies, corresponding briefs, exhibits, and authorities, the Court finds that the four
motions should be denied. Genuine disputes of material fact still exist that preclude the granting
of summary judgment, and bifurcation of the trial on Plaintiffs' bad faith/punitive damages claim
is not warranted.
Summary judgment "should be rendered if the pleadings, the discovery and disclosure
materials on file, and any affidavits show that there is no genuine dispute as to any material fact
and that the movant is entitled to judgment as a matter of law." Celotex Corp. v. Catrett, 477
U.S. 317, 322, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986). See FED. R. Cry. P. 56(a); Weaver v.

I Also pending are the following motions, which will be ruled on at a later date: Plaintiffs' motion to
permit use of depositions from prior underlying litigation as evidence [100], Defendant's motion to strike proposed
expert testimony [104], Plaintiffs' motion in limine to exclude evidence [118], Defendant's motion in limine to
exclude undesignated testimony and untimely designated testimony [122], and Defendant's motion in limine to
exclude Dr. Stan Smith [124].

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CCA Indus., Inc., 529 F.3d 335, 339 (5th Cir. 2008). The rule "mandates the entry of summary
judgment, after adequate time for discovery and upon motion, against a party who fails to make a
sufficient showing to establish the existence of an element essential to that party's case, and on
which that party will bear the burden of proof at trial." Celotex Corp., 477 U.S. at 322, 106 S.
Ct. 2548.
The party moving for summary judgment bears the initial responsibility of informing the
Court of the basis for its motion and identifying those portions of the record it believes
demonstrate the absence of a genuine dispute of material fact. See id. at 323, 106 S. Ct. 2548.
Under Rule 56(a), the burden then shifts to the nonmovant to "go beyond the pleadings and by ..
. affidavits, or by the 'depositions, answers to interrogatories, and admissions on file,' designate
'specific facts showing that there is a genuine issue for trial.' " Id. at 324, 106 S. Ct. 2548;

Littlefield v. Forney Indep. Sch. Dist., 268 F.3d 275, 282 (5th Cir. 2001); Willis v. Roche
Biomedical Labs., Inc., 61 F.3d 313,315 (5th Cir. 1995).
Where the parties dispute the facts, the Court must view the facts and draw reasonable
inferences in the light most favorable to the plaintiff. Scott v. Harris, 550 U.S. 372, 378, 127 S.
Ct. 1769, 167 L. Ed. 2d 686 (2007) (internal citations omitted). "However, a nonmovant may
not overcome the summary judgment standard with conclusional allegations, unsupported
assertions, or presentation of only a scintilla of evidence." McClure v. Boles, 490 F. App'x 666,
667 (5th Cir. 2012) (per curiam) (citing Hathaway v. Bazany, 507 F.3d 312,319 (5th Cir. 2007)).
On or about February 15, 2005, EMJ Corporation ("EM]") and Contract Steel
Construction, Inc. ("Contract Steel") entered into a subcontractor agreement for the execution of
work on a JC Penney Project in Southaven, Mississippi (the "Project"). EMJ was the general
contractor on the Project. Contract Steel was the subcontractor, performing, in relevant part, the

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installation of a steel stairway, which was designed and constructed by another entity. With
regard to requisite liability insurance coverage, the subcontractor agreement provides in relevant
part:
[Contract Steel] shall maintain, at its own cost, such insurance as
will protect it and [EMJ] from ... any claim for bodily injury, ...
both physical and loss of use, which may arise from the Work or
any performance under the [s ]ubcontract, whether such work or
performance are by [Contract Steel] or its officers, agents,
subcontractors, suppliers, employees[,] or those with whom it
controls for any part of the Work ... , This indemnification shall
only be applicable to the conduct attributable to [Contract Steel] or
anyone directly or indirectly employed, contracted[,] or supervised
by [Contract Steel] or by anyone for whose acts [Contract Steel]
may be liable.
Subcontractor Agreement [1-1] at 2, 1[ 5.

In accordance with the subcontractor agreement,

Contract Steel took out insurance policies, including one from Hudson Specialty Insurance
Company ("Hudson Specialty"). In relevant part, the Hudson Specialty Policy provides that an
insured under the policy includes:
[a]ny person or organization for whom you [Contract Steel] have
agreed in writing prior to any "occurrence" or ""offense" to provide
insurance such as is afforded by this policy, but only with respect
to operations performed by you [Contract Steel] or on your behalf,
or facilities owned or used by you [Contract Steel].
Hudson Specialty Policy [1-4] at 22, Part III(2)(f).
Thereafter, Contract Steel installed a steel stairway at the Project and tendered the
installation of the stairway to EMJ, which accepted it. Approximately two weeks later, JC
Penney apparently engaged Professional Services Industries, Inc. to inspect an entrance canopy
at the construction site. John Meeker, an employee of Professional Services Industries, Inc., was
assigned the job. In the course of conducting the inspection, Meeker fell while descending the

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steel stairway previously installed by Contract Steel. Meeker sustained injuries that rendered
him a paraplegic.
On or about April 24, 2008, Meeker and his wife sued Contract Steel, EMJ, and others in

the Circuit Court of Desoto County in an action styled John Meeker et al. v.

J.c. Penney Corp.,

Inc., et al., Civil Action No. CV2008-0148, seeking damages for Meeker's personal injuries.
Apparently, the claims asserted included allegations that the steps, as installed, were too steep to
be safely navigated and lacked an anti-slip surface application. The state-court judge dismissed
the claims by the Meekers against Contract Steel, as well as a cross-claim by EMJ against
Contract Steel for indemnity.

In his opinion, the state-court judge explained that under

Mississippi law once a contractor or owner accepts the work of a subcontractor or contractor,
liability for injuries related to the work accepted shifts to the party accepting the work, regardless
of the subcontractor's negligent performance of the contract. Consequently, the state-court judge
held that Contract Steel owed no duty to Meeker; only EMJ could owe such a duty to Meeker.
The state-court judge further found that that the responsibility for applying a non-slip coating to
the steps was outside the scope of Contract Steel's contractual obligations; thus, Contract Steel
was found to have no liability to Meeker on that basis, as well. According to Plaintiffs, the
Meekers' remaining allegation in the underlying state-court litigation was one for unspecified
"independent" or "sole" negligence of EMJ.

This Court notes that the state-court judge

expressly reserved ruling on whether EMJ might nevertheless allocate fault to Contract Steel at
the state-court trial. After Contract Steel was dismissed from the state-court case, the state-court
judge stayed the proceeding pending EMJ's appeal of the state-court rulings to the Mississippi
Court of Appeals.

That court affirmed the state court's granting of summary judgment to

Contract Steel, holding in accordance with the Desoto County Circuit Court judge that

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[t]he general rule is well established that an independent contractor
is not liable for injuries occurring to a third person after the
contractor has completed the work and turned it over to the owner
or employer and it has been accepted by him, even though the
injury results from the contractor's failure properly to carry out his
contract. When the work is finished by the contractor and accepted
by the employer, the latter is substituted as the party responsible
for existing defects, and the same rule is applied to subcontractors,
so as to relieve them from liability to the original employer where
their work has been finished and accepted by the original
contractor.
EMJ Corp. v. Contract Steel Constr.• Inc., 81 So. 3d 295, 299-300 (Miss. Ct. App. 2012)

(emphases added). Subsequently, the Meekers' claims against EMJ were settled and the state
case dismissed.
Meanwhile, on November 28, 201\, Plaintiffs EMJ and Westchester Fire Insurance
Company ("Westchester") (collectively, "Plaintiffs") filed this action against Hudson Specialty
in this Court? The parties agree that Mississippi law governs in this declaratory judgment action
based on diversity jurisdiction. Plaintiffs seek a declaration of the rights and obligations of all
persons interested under the Hudson Specialty Policy, pursuant to Rule 57 of the Federal Rules
of Civil Procedure; the United States Declaratory Judgment Act, 28 U.S.C. § 2201; and
otherwise. Plaintiffs ask the Court to find, inter alia, that EMJ is owed coverage under the
Hudson Specialty Policy and that Hudson Specialty is the primary insurer. Hudson Specialty
seeks a determination that, inter alia, EMJ is not an additional insured. The parties have urged
their arguments in prior motions for summary judgment.
The Court has carefully considered the parties' arguments and concludes that a ruling on
any individual issue raised by the parties would require the Court to weigh evidence and make
credibility determinations which is clearly not the office of the Court in ruling on summary
2 Amerisure was also originally named as a defendant, but it has since been terminated from the case per
the mutual agreement of the parties.

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judgment motions. The Fifth Circuit has stated repeatedly: "The trial court may not weigh
evidence or make credibility determinations when considering a motion for summary judgment."

See, e.g., Comeaux v. Sutton, 496 F. App'x 368, 369 (5th Cir. 2012) (per curiam) (citing
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986)).
In the case sub judice, myriad disputes of fact exist that preclude summary judgment, including
but not limited to, whether there was an intentional act and a harm which was reasonably
foreseeable, as pertains to the issue of whether there is an "occurrence" to trigger coverage under
the Hudson Specialty Policy; if so, whether it was with respect to the "operations" of Contract
Steel; whether Westchester volunteered payment in the underlying state-court litigation; and
whether the Westchester Policy was a prorated policy or an excess policy. In view of the
numerous and often-overlapping and conflicting facts asserted as to these multiple issues, this
Court is of the opinion that a piecemeal ruling is not the proper course to take. Accordingly, the
Court finds that the proper course of action is to DENY Plaintiffs' motion for partial summary
judgment on insured status [78], Defendant's second motion for summary judgment [96], and
Plaintiffs' motion for partial summary judgment on priority of coverage [98]. This case shall
proceed to trial.
Lastly, the Court turns to Hudson Specialty's motion to bifurcate [120], wherein Hudson
Specialty requests a separate trial on Plaintiffs' bad faith/punitive damages claim. Since the
enactment of Mississippi Code § 11-1-65, the Court bifurcates the issue of punitive damages in a
diversity case wherein Mississippi law governs. Pursuant to that statute, only in the event of an
award of compensatory damages will the Court determine whether the matter of punitive
damages should be presented to the jury. See Union Carbide Corp. v. Nix, Jr., --- So. 3d ---,
2014 WL 2535241, at *13 (Miss. June 5, 2014) ("Punitive damages do not exist in a vacuum.

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Absent a valid claim for compensatory damages, there can be no claim for punitive damages.").

In no event will there be a separate trial with a different jury. Accordingly, Hudson Specialty's
motion to bifurcate and conduct a separate trial on Plaintiffs' bad faith/punitive damages claim
[120] is DENIED.
An order in accordance with this opinion shall issue this day.
THIS, the

,)../p

day of August, 2014.

SENIOR JUDGE

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