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EMJ Corp. v. Hudson Specialty Ins. Co.

United States District Court, N.D. Mississippi, Delta Division

March 11, 2015


Page 645

For EMJ Corporation, Westchester Fire Insurance Company, Plaintiffs: John B. Howell, III, Mark D. Jicka, LEAD ATTORNEYS, Caroline K. Ivanov, WATKINS & EAGER, Jackson, MS; Robert M. Kallam, LEAD ATTORNEY, PRO HAC VICE, PREIS PLC, Lafayette, LA; Robert L. Shannon, Jr., LEAD ATTORNEY, PRO HAC VICE, HALL BOOTH SMITH, PC, Atlanta, GA.

For Hudson Specialty Insurance Company, Defendants: Louis G. Baine, III, LEAD ATTORNEY, George M. Street, Jr., PAGE, KRUGER & HOLLAND, Jackson, MS; Thurman L. Boykin, PAGE, KRUGER & HOLLAND, P.A., Jackson, MS.

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Presently before the Court are a motion for judgment notwithstanding the verdict or alternatively for new trial [168] filed by Defendant Hudson Specialty Insurance Company, as well as a motion for further relief [165] filed by Plaintiffs EMJ Corporation and Westchester Fire Insurance Company. Upon due consideration, the

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Court finds that Defendant's motion for judgment notwithstanding the verdict or alternatively for new trial [168] should be granted in part and denied in part and Plaintiffs' motion for further relief [165] should be denied in its entirety, as set forth below.

A. Federal Rule of Civil Procedure 59 Standard

Both Defendant's motion for judgment notwithstanding the verdict or alternatively for a new trial [168], as well as Plaintiffs' motion for further relief [165], constitute motions to alter or amend the Court's judgment (and in Defendant's motion, alternatively, for a new trial) under Rule 59 of the Federal Rules of Civil Procedure. See Komolafe v. Dewease, 87 F.App'x 385, 2004 WL 304198, at *1 (5th Cir. 2004) (per curiam) (citing Teal v. Eagle Fleet, Inc., 933 F.2d 341, 347 n.3 (5th Cir. 1991) (post-judgment motion for new trial and/or for relief from judgment was properly considered under Rule 59 because it was filed within the requisite Rule 59 time period)); see also Heck v. Triche, 775 F.3d 265, 276-77 (5th Cir. 2014) (citing Osterneck v. Ernst & Whinney, 489 U.S. 169, 176, 109 S.Ct. 987, 103 L.Ed.2d 146 & n.3, 489 U.S. 169, 109 S.Ct. 987, 103 L.Ed.2d 146 (1989) ( " a postjudgment motion for discretionary or mandatory prejudgment interest is a Rule 59(e) motion" )).

" Rule 59(e) was added to the Federal Rules of Civil Procedure in 1946. Its draftsmen had a clear and narrow aim. According to the accompanying Advisory Committee Report, the Rule was adopted to 'mak[e] clear that the district court possesses the power' to rectify its own mistakes in the period immediately following the entry of judgment." White v. N.H. Dep't of Emp't Sec., 455 U.S. 445, 450, 102 S.Ct. 1162, 71 L.Ed.2d 325 (1982) (quoting Fed.R.Civ.P. 59 advisory committee's note on 1946 am., 5 F.R.D. 433, 476 (1946)). In reconsidering its judgment pursuant to Rule 59(e), the Court reconsiders matters properly encompassed in its decision on the merits. See id. at 451, 102 S.Ct. 1162. Rule 59(e) " 'may not be used to relitigate old matters, or to raise arguments or present evidence that could have been raised prior to the entry of judgment.'" Exxon Shipping Co. v. Baker, 554 U.S. 471, 485 n.5, 128 S.Ct. 2605, 171 L.Ed.2d 570 (quoting 11 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 2810.1 (2d ed. 1995) (footnotes omitted)).

Besides allowing a court to alter or amend its judgment, Rule 59 further allows a court to " on motion, grant a new trial on all or some of the issues--and to any party-- . . . after a jury trial, for any reason for which a new trial has heretofore been granted in an action at law in federal court. . . ." Fed.R.Civ.P. 59(a)(1)(A). " A district court has discretion to grant a new trial under Rule 59(a) of the Federal Rules of Civil Procedure when it is necessary to do so 'to prevent an injustice.'" Jones v. Ruiz, 478 F.App'x 834, 835 (5th Cir. 2012) (per curiam) (quoting United States v. Flores, 981 F.2d 231, 237 (5th Cir. 1993)). Although Rule 59(a) does not state appropriate grounds for a new trial, " [a] new trial may be appropriate if the verdict is against the weight of the evidence, the amount awarded is excessive, or the trial was unfair or marred by prejudicial error." Scott v. Monsanto Co., 868 F.2d 786, 789 (5th Cir. 1989) (citation omitted). " Courts do not grant new trials unless it is reasonably clear that prejudicial error has crept into the record or that substantial justice has not been done, and the burden of showing harmful error rests on the party seeking the new trial." Sibley v. Lemaire, 184 F.3d 481, 487 (5th Cir. 1999).

B. Factual and Procedural Background

On or about February 15, 2005, EMJ Corporation (" EMJ" ) and Contract Steel

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Construction, Inc. (" CSC" ) entered into a subcontractor agreement (the " Subcontract Agreement" ) for the execution of work on a JC Penney Project in Southaven, Mississippi (the " Project" ). EMJ was the general contractor on the Project. CSC was the subcontractor, performing, in relevant part, the installation of a steel stairway, which was designed and constructed by another entity. With regard to requisite liability insurance coverage, the Subcontract Agreement provides in relevant part:

[CSC] 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 [subcontract, whether such work or performance are by [CSC] 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 [CSC] or anyone directly or indirectly employed, contracted[,] or supervised by [CSC] or by anyone for whose acts [CSC] may be liable.

Subcontract Agreement [1-1] at 2 ¶ 5. In accordance with the Subcontract Agreement, CSC took out insurance policies, including one from Hudson Specialty Insurance Company (" Hudson Specialty" ), Policy No. CSPI-UM-00507 (the " Hudson Policy" ). In relevant part, the Hudson Policy provides that an insured under the policy includes

[a]ny person or organization for whom you [CSC] 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 [CSC] or on your behalf, or facilities owned or used by you [CSC].

Hudson Policy [1-4] at 22, § III(2)(f).

Thereafter, CSC 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 steel stairway previously installed by CSC. Meeker sustained injuries that rendered him a paraplegic.

On or about April 24, 2008, Meeker and his wife sued CSC, 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 CSC, as well as a cross-claim by EMJ against CSC 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 CSC owed no duty to Meeker and that 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 CSC's contractual obligations; thus, CSC was found to have

Page 649

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 CSC at the state-court trial. After CSC 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 CSC. See EMJ Corp. v. Contract Steel Constr., Inc., 81 So.3d 295, 299-300 (Miss.Ct.App. 2012). Subsequently, the Meekers' claims against EMJ were settled and the state case dismissed.

The nature of the settlement is set forth in the stipulated facts of the Pretrial Order [145] and is summarized as follows. On October 21, 2012, the Meekers settled their claims against EMJ for the total amount of $5,000,000. Pretrial Order [145] at 9, ¶ 9(a)(14). Of the $5,000,000 settlement in the underlying state-court litigation, $1,000,000 was paid by Zurich American Insurance Company, under whose commercial liability insurance policy EMJ was a named insured, and $4,000,000 was paid by Westchester, under whose commercial umbrella liability policy EMJ was a named insured. Id. at 9-10, ¶ 9(a)(15). The Zurich American Insurance Company policy had a $1,000,000 per-occurrence limit. Id. at 9-10, ¶ 9(a)(16).

On November 28, 2011, Plaintiffs EMJ and Westchester Fire Insurance Company (" Westchester" ) (collectively, " Plaintiffs" ) filed this action for a declaratory judgment against Hudson Specialty in this Court.[1] Plaintiffs sought a declaration of the rights and obligations of all persons interested under the Hudson 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. Diversity jurisdiction existed in this case, as Plaintiffs and Hudson Specialty were completely diverse and the amount in controversy exceeded the jurisdictional threshold. The parties agreed that Mississippi law governed the action.

Plaintiffs sought a finding that EMJ was owed coverage as an additional insured under the Hudson Policy and that Hudson Specialty was the primary insurer. Hudson Specialty sought a determination that EMJ was not an additional insured under the Hudson Policy and that coverage did not exist under the Hudson Policy.

Trial commenced in the case sub judice on September 22, 2014. Due to the odd nature of this case, which presented several questions of law for the Court to answer, and only one question for the jury, the Court made detailed rulings which are incorporated herein by reference and made a part of this memorandum opinion. See Ct.'s Order Ruling on Matters of Law in the Case Sub Judice [157], In sum, the Court ruled that the pertinent Hudson Policy provisions were ambiguous in part and unambiguous in part. Specifically, the Court held the following: (1) based on the clear terms of the " additional insured" provision, CSC agreed in writing (that is, in the Subcontract Agreement) to provide insurance, such as this afforded by the Hudson Policy, to EMJ; (2) Meeker's fall, which is the subject of this litigation, was a bodily injury constituting an " occurrence" as defined under the Hudson Policy; (3) " the writing" (the Subcontract Agreement) was entered into prior to the " occurrence"

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(Meeker's fall); and (4) the phrase " but only with respect to operations performed by you or on your behalf, or facilities owned or used by you" was ambiguous and presented a question for the jury that would determine whether coverage for Meeker's injury was precluded under the Hudson Policy. The Court further held as a matter of law that the judgment of the Circuit Court of Desoto County, Mississippi be afforded full faith and credit and read to the jury the statements of that judgment which were essential to the judgment and thus binding on the case sub judice. The Court further held as a matter of law that if the jury found that the phrase " with respect to operations performed by you or on your behalf or facilities owned or used by you" applied to the circumstances of this case, no named exclusion barred coverage for Meeker's accident. Subsequently, the jury returned a verdict that the phrase " with respect to operations performed by you or on your behalf or facilities owned or used by you" did apply, and thus, that coverage was available to EMJ under the Hudson Policy for Meeker's accident. The Court's next task was to determine the amount of coverage afforded by the Hudson Policy for Meeker's accident.

As a threshold matter, the Court determined as a matter of law that Westchester paid the settlement in the underlying state-court litigation for Meeker's fall because it had a legal obligation to do so--not voluntarily--and that Westchester properly undertook the settlement. The Court further held that breach of duty or failure to settle within the policy limits was not at issue in this case, and that any claim that Hudson Specialty acted with bad faith in refusing to acknowledge EMJ's insured status was not supported by the proof. Finally, the Court held as a matter of law that based on the Hudson Policy terms, the Subcontract Agreement, and the Certificate of Liability Insurance issued by CSC to EMJ pursuant to the terms of the Subcontract Agreement, the Hudson Policy was a primary policy and the Westchester Policy was an excess policy, and as such, the Court ordered Hudson Specialty to fully reimburse Westchester for the $4,000,000 Westchester paid in settlement of the underlying state-court litigation.

These detailed rulings were necessarily expedited, given the curious posture of the case as a jury trial replete with legal questions and the parties' refusal to consent to a non-jury trial. The Court has used the opportunity provided by Rule 59 to carefully consider the parties' arguments and reexamine its rulings at trial and all authorities bearing on this matter. In so doing, the Court finds that its rulings were properly determined as a matter of law on the issue of coverage for EMJ under the Hudson Policy, but that the Court should reevaluate the amount of coverage available under the Hudson Policy and Westchester Policy for the subject accident.

C. Analysis and Discussion

Plaintiffs brought this declaratory judgment action, inter alia, to obtain a declaration from the Court that Westchester was entitled to contribution from Hudson Specialty for the amount Westchester paid on behalf of EMJ in the settlement of the underlying state-court litigation concerning Meeker's fall.

" Contribution is purely an equitable remedy. Its aim is the prevention of injustice, pure and simple." Williams v. Owen, 613 So.2d 829, 835 (Miss. 1993) (citations omitted). " [One who is compelled to satisfy, or pay more than his just share of such common burden or obligation, is entitled to contribution from the others to obtain from them payment of their respective shares." Celotex Corp. v. Campbell Roofing & Metal Works, Inc.,

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352 So.2d 1316, 1318 (Miss. ...

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