Allstate Insurance Company v. Scarbrough

Filing 225

ORDER denying 192 Motion for Partial Summary Judgment. Signed by District Judge Michael P. Mills on 5/16/2017. (lpm)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF MISSISSIPPI
OXFORD DIVISION
ALLSTATE INSURANCE COMPANY

PLAINTIFF

v.

Civil Action No.: 3:15-cv-00114-MPM-RP

JOHN ROBERT SCARBROUGH

DEFENDANT
ORDER

Currently before the Court is John Scarbrough’s (“John”) Motion for Partial Summary
Judgment [192]. Rachel and Kimberly Holloway (collectively “the Holloways”) have filed a
response in opposition, to which John filed his reply. The Court has given due consideration to
the parties’ submissions, in conjunction with relevant authorities and evidence, and is now
prepared to rule.
Background
Due to the parties’ extensive motion practice, the Court has set forth multiple times the
facts and procedural maneuvers that have led this action to its current posture. For the sake of
brevity, the Court will refrain from again reciting the facts in their entirety and will instead
provide only those relevant to this motion.
The action pending before this Court commenced when Allstate Insurance Company
(“Allstate”) filed its complaint, wherein it requested that the Court issue a declaratory judgment
that two insurance policies it issued to Robert and Denise Scarbrough did not provide coverage
when John—Robert and Denise’s son—was involved in an automobile accident. At the time of
that accident, the Holloways were passengers in John’s truck. They allegedly suffered multiple
injuries and ultimately filed suit against John in state court. Originally, Allstate was not named
as a defendant in the state court action.

1

Once Allstate filed its declaratory judgment complaint in this Court, the Holloways filed
multiple counterclaims against Allstate, crossclaims against John, and a third party complaint
against multiple other parties. Those claims mirror the claims they originally filed in state court,
creating a parallel track in both state and federal court.
The present motion concerns the Holloways’ crossclaims against John. Although stated
in a convoluted manner, the Holloways assert that John engaged in fraud and other wrongful
conduct in order to conceal the existence of the Allstate policies. The Holloways’ claims are
essentially based upon a single affidavit that John signed. In the affidavit, John stated under oath
that he was unaware of any other insurance that may be available outside of his GEICO liability
policy. Specifically, the affidavit was a letter that John received from a GEICO agent which
stated:
We are writing you at this time to determine whether you or any other member of
your household had excess or umbrella coverage or any other automobile
insurance policy. Please check one response.
Yes _________
No _________
John checked “No”, signed the letter, got it notarized, and returned it to GEICO,
complying with the instructions he received. The Holloways assert that his parents’ Allstate
policies were available to John and, thus, his affidavit indicating that he was unaware of any
other applicable insurance was false and part of a fraudulent scheme to hide the existence of
those policies from them. In the present motion, John argues that the Holloways have not and
cannot provide sufficient evidence to support their fraud claims and that the claims should
therefore be dismissed.
Summary Judgment Standard
Summary judgment is proper “if the movant shows that there is no genuine dispute as to
any material fact and the movant is entitled to judgment as a matter of law.” FED. R. CIV. P.
2

56(a). A genuine dispute of material fact exists “if the evidence is such that a reasonable jury
could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). At the summary judgment stage, the court must
“draw all reasonable inferences in favor of the nonmoving party, and it may not make credibility
determinations or weigh the evidence.” Reeves v. Sanderson Plumbing Prods., 530 U.S. 133,
150, 120 S.Ct. 2097, 147 L.Ed.2d 105 (2000). Once the moving party shows there is no genuine
dispute as to any material fact, the nonmoving party “must come forward with specific facts
showing a genuine factual issue for trial.” Harris ex rel. Harris v. Pontotoc Cty. Sch. Dist., 635
F.3d 685, 690 (5th Cir. 2011). “[A] party cannot defeat summary judgment with conclusory
allegations, unsubstantiated assertions, or ‘only a scintilla of evidence.’” Turner v. Baylor
Richardson Med. Ctr., 476 F.3d 337, 343 (5th Cir. 2007) (quoting Little v. Liquid Air Corp., 37
F.3d 1069, 1075 (5th Cir. 1994)). However, “[s]ummary judgment is [] improper where the
court merely believes it unlikely that the non-moving party will prevail at trial.” U.S v. Miss.
Dep’t of Pub. Safety, 309 F.Supp.2d 837, 840 (S.D. Miss. 2004) (citing Nat’l Screen Serv. Corp.
v. Poster Exch., Inc., 305 F.2d 647, 651 (5th Cir. 1962)).
Discussion
The Court, as in many of its prior orders in this action, begins its analysis with the
choice-of-law clause contained in the Allstate policies, which provide that “any and all claims or
disputes in any way related to this policy shall be governed by the laws of Georgia.”1 In its
previous orders, the Court has conducted a choice-of-law analysis and ultimately held that
Georgia law should govern, in accordance with the policy language.

1

This language is taken from the automobile liability policy. However, the umbrella policy
contains essentially the same language, stating that “the laws of Georgia shall govern any and all
claims or disputes in any way related to this policy.”
3

The same analysis should, in the Court’s view, be applied to the claims now at issue. The
choice-of-law clause’s broad language provides that Georgia law shall govern all claims “in any
way related to” the policies. These claims are related to the policies, as the Holloways certainly
would not have filed their fraud claims against John for allegedly hiding the policies if the
policies did not exist. Therefore, the Court will apply Georgia law, despite the parties’ failure to
raise the issue in their briefs.
The present motion concerns Counts I, IV, and V of the Holloways’ crossclaim complaint
against John. The Court notes that the Holloways’ crossclaim complaint, like many of their
filings with the Court, is somewhat unclear. In fact, it contains multiple redundant allegations
against John. However, it does appear, based upon the Court’s review, that the Holloways’ main
allegation is that John intentionally, or with reckless indifference, lied about the existence of his
parents’ Allstate policies in an attempt to prevent the Holloways from becoming aware of them
and obtaining compensation for their alleged injuries.
In his motion, John avers that “[t]he Holloways fail to present, possess, or put forth any
evidence whatsoever which would even suggest that [John] knew of an applicable insurance
policy besides the liability policy he maintained with GEICO.” In their response, the Holloways
make multiple irrelevant arguments, such as arguing whether the automobile liability policy
provides coverage—an issue that has already been decided by this Court. However, at the end of
their response, they aver that, viewing the evidence in the light most favorable to them, the fact
that John “signed a form and the information contained therein was false, the statement was
made under oath, and the statement was notarized[]” is sufficient to create a genuine dispute of
material fact and thwart summary judgment.

4

Under Georgia law, “[i]n order to prove fraud, the plaintiff must establish five elements:
(1) a false representation by a defendant, (2) scienter, (3) intention to induce the plaintiff to act or
refrain from acting, (4) justifiable reliance by plaintiff, and (5) damage to plaintiff.” Engelman
v. Kessler, 797 S.E.2d 160, 166 (Ga. Ct. App. 2017) (citing Sun Nurseries, Inc. v. Lake Erman,
LLC, 730 S.E.2d 556, 561 (Ga. Ct. App. 2012)).2 “With regard to the element of scienter, ‘the
gist of an action for damages in tort based on the falsity of representations is that they must have
involved actual moral guilt.’” GLW Int’l Corp. v. Yao, 532 S.E.2d 151, 155 (Ga. Ct. App. 2000)
(quoting Bennett v. Clark, 385 S.E.2d 780, 781 (Ga. Ct. App. 1989)).
John first avers that the Holloways cannot establish the first element of fraud because
they cannot show that the affidavit he signed was false, as it has not yet been determined whether
or not the umbrella policy provides coverage. The Court has previously held that the
determination as to whether or not John was a resident of his parents’ household at the time of
the accident—the critical issue to determine whether the umbrella policy is applicable—will be
decided by a jury. On this point, presuming that the jury finds that he was not a resident of his
parents’ household at the time of the accident, John states that “its [sic] entirely possible that the
Holloways cannot even prove the most basic element of a fraud claim—that the statement was
false.”
Additionally, John argues that “even if [John’s] statement that no one in his household
had umbrella coverage proves to be false, there is absolutely no way whatsoever that the

2

These elements are nearly identical to Mississippi’s fraud elements. Under Mississippi law,
“[t]o prevail on a claim of fraud, a party must show the following elements: (a) a material and
false representation, (b) which is known by the speaker to be false, (c) and which is intentionally
made to induce the hearer to act in reliance thereon, and (d) the hearer does act to his detriment
in reasonable reliance on the false representation, and (e) the hearer consequently suffers an
injury based on such reliance.” Soni v. Dhaliwal, 203 So.3d 628, 634 (Miss. Ct. App. 2016)
(quoting Braidfoot v. William Carey Coll., 793 So.2d 642, 652 (Miss. Ct. App. 2000)).
5

Holloways can show that [John] had actual knowledge of the falsity of that statement, or that he
should have known it was false.” John emphasizes the fact that this litigation has been ongoing
for many years and that a resolution as to whether coverage exists is still not resolved. He argues
that this shows that there is no way that he could have known that another member of his
household had excess or umbrella coverage at the time he completed the affidavit, specifically
stating that “there is simply no way that a college student with no legal or insurance training
could be expected to have had knowledge of the alleged falsity of the statement. As both a
matter of law and of common sense, the Holloways cannot prove by clear and convincing
evidence that [John] knew the statement contained within the GEICO affidavit was false.”
In short, the Court is unpersuaded by John’s arguments. First, while it is true that it has
not yet been decided whether or not the statement was false, since that the issue of John’s
residence will be determined by a jury, the simple fact that a trial has not yet been held on that
issue does not make summary judgment appropriate. At this stage in the proceedings, the Court
must view the evidence provided in the light most favorable to the non-moving party. See Scott
v. Harris, 550 U.S. 372, 378, 127 S.Ct. 1769, 167 L.Ed.2d 686 (2007). Applying this standard, it
is conceivable that a jury could find that John was a member of his parents’ household, which
would result in his statement that no member of his household had umbrella coverage being
false. The Court also notes that John’s argument that it is “entirely possible” that the Holloways
cannot prove the first element of their claim is not sufficient to carry his summary judgment
burden. The Court rejects John’s first argument.
Now, the Court turns to John’s second argument—that even if the statement was false,
there was no way John could have known so at the time he completed the affidavit. While the
Court appreciates counsel’s attempt to emphasize the fact that litigation has been ongoing for

6

many years concerning this issue, it finds that, viewing the evidence in the light most favorable
to the Holloways, it is possible that John completed the affidavit with the intention of hiding his
parents’ policy. While this may or may not have been the case, “[a]t the summary judgment
stage, the Court’s function is not to resolve factual disputes but, rather, simply determine if such
disputes exist.” See Kinsella v. OfficeMax, Inc., 2017 WL 1274054, *4 (N.D. Miss. Apr. 3,
2017) (citing Kennett-Murray Corp. v. Bone, 622 F.2d 887, 892 (5th Cir. 1980)). The Court
finds that John’s intent when completing the affidavit is a question of fact that it cannot properly
decide now. Accordingly, the Court rejects this argument.
Ultimately, while the Holloways have not come forward with an overwhelming amount
of evidence in support of their claims, they are only required, at this stage in the proceedings, to
create a genuine issue of material fact. Additionally, “[a]lthough ‘fraud may not be presumed’
on a motion for summary judgment, ‘slight circumstances may be sufficient to carry conviction
of its existence’ under Georgia law.” Trust v. O’Connor, 2012 WL 12836517, *8 (N.D. Ga.
Sept. 28, 2012) (quoting Marshall v. York, 302 S.E.2d 711, 714 (Ga. Ct. App. 1983)). With this
precedent in mind, the Court finds that summary judgment should be denied.
The Court feels compelled to note that, in making this ruling, it has attempted to
diligently apply legal precedent to the issue cast by the Holloways’ crossclaim of fraud against
John, in hopes that a rational analysis would render a logical result. Relying on the foregoing
analysis, the Court finds that summary judgment cannot properly be granted in this case due to
the minor question of fact which the Holloways have created. However, it cannot ignore the
obvious reality that the issue raised is unlikely to gain any traction before a factfinder and,
frankly, is a distraction from the real issues to be determined in this cause. Nevertheless, the

7

Court will permit the Holloways to continue down this ill-advised, unwieldy path, despite the
glaring hurdles that they must overcome to prevail on this issue at trial.
Conclusion
As set forth above, summary judgment is only appropriate “if the movant shows that
there is no genuine dispute as to any material fact and the movant is entitled to judgment as a
matter of law.” FED. R. CIV. P. 56(a). Relying on the foregoing analysis, the Court finds that
genuine disputes of material fact remain, and summary judgment should be denied.
Accordingly, it is hereby ORDERED that John Scarbrough’s Motion for Partial
Summary Judgment [192] is DENIED.
SO ORDERED, this the 16th day of May, 2017.

/s/ MICHAEL P. MILLS
UNITED STATES DISTRICT JUDGE
NORTHERN DISTRICT OF MISSISSIPPI

8