Acuity Mut. Ins. Co. v. T&R Pavement Markings, Inc.

• Decision Date: 21 June 2011
• Docket Number: 1:10-cv-00239-SEB-WGH
• Parties: Acuity Mutual Insurance Co., Assignee of Shelly and Sands, Inc., Plaintiff, v. T&R Pavement Markings, Inc., and Highway Technologies, Inc., as Successor In Interest to T&R Pavement Markings, Inc., Defendants.
• Court: U.S. District Court — Southern District of Indiana

Acuity Mutual Insurance Co. Assignee of Shelly and Sands, Inc., Plaintiff, v. T&R Pavement Markings, Inc. and Highway Technologies, Inc., as Successor In Interest to T&R Pavement Markings, Inc., Defendants.

1:10-cv-00239-SEB-WGH

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF INDIANA INDIANAPOLIS DIVISION

Date: June 21, 2011

ORDER

This cause is before the Court on motions for summary judgment [Docket Nos. 43, 45, 54] filed on behalf of all three parties, Defendant T&R Pavement Markings, Inc. ("T&R"), Defendant Highway Technologies, Inc. ("HTI"), and Plaintiff Acuity Mutual Insurance Company ("Acuity"). For the reasons detailed herein, T&R is dismissed from this lawsuit and, thus, its motion [Docket No. 43] is DENIED AS MOOT, HTI's motion is DENIED, and Acuity's motion is GRANTED.

Factual Background

In 2006, the Indiana Department of Transportation chose Shelly and Sands, Inc. ("Shelly") as the general contractor to perform certain construction work on I-465. Shellyentered into subcontracts with both Schutt-Lookabill, Co., Inc. ("Schutt") and T&R.¹ HTI Ex. 20, Exs. A, C. Pursuant to the contract between Shelly and Schutt (the "Schutt Contract"), Schutt performed bridge patching and joint repair work on the I-465 project. Pursuant to the contract between Shelly and T&R (the "T&R Contract"), T&R provided barricades, signs, and other materials necessary to warn motorists traveling through the construction area of the existence of work being done there. Both contracts contained a "Coordination" provision that read as follows: "Subcontractor shall coordinate his operations with all other trades having work in the same area of the project." HTI Ex. 20, Exs. A, C.

At times, in order to perform its work on the Shelly project, Schutt needed more signs and barricades than T&R had given to Shelly. Kennedy Aff. ¶ 6. When such shortages occurred on various projects, Schutt obtained the additional barricades and signs from T&R. Kennedy Aff. ¶ 7. Schutt and T&R entered into a purchase agreement that covered the additional signage but their purchase agreement contained no indemnity provision. T&R Br. at 3. Schutt President (and former Vice-President) Edward Kennedy testified that "the sole reason that Schutt asked T&R to provide its required barricades and signage was because T&R was already working on the I-465 project as an approved subcontractor for Shelly under [the T&R Contract] and would be present on the jobsite inthat capacity." Kennedy Aff. ¶ 8.

This lawsuit arose out of the unfortunate death of Jason Soots, a former T&R employee, as a result of injuries he sustained after falling from a trailer while moving signs from one Schutt work location to another. HTI Br. at 2; T&R Br. at 4; Acuity Br. at 4-5. Mr. Soots's wife, Rose, brought a wrongful death claim against Shelly and Schutt in the Marion County Superior Court No. 11, Cause # 49D11-0803-CT-010479 (the "Underlying Litigation"). The jury in the Underlying Litigation entered a verdict assigning the following percentages of fault that contributed to Soots's death as follows: Soots (20%); Shelly (41%); and Schutt (39%). A $4,182,000 judgment was entered in favor of the Soots estate.

According to the Schutt Contract, Schutt agreed to indemnify Shelly. HTI Ex. 20, Ex. C. Thus, Acuity (Schutt's insurer) paid the sum of $2,460,000 to obtain a release of the judgment against Shelly. Shelly assigned "to Acuity all of its rights to indemnification against T&R contained in the T&R Contract and more specifically set forth in paragraph 27 of the T&R Contract as it relates to Soots and the Underlying Litigation." HTI Ex. 20, Ex. B.

The T&R Contract contained the following indemnity provision:

(A) To the fullest extent permitted by law, [T&R] shall indemnify and hold harmless [Shelly] and all its agents and employees from and against all claims, damages, losses and expenses including attorneys' fees arising out of or resulting from [T&R's] performance under this Subcontract and [T&R] shall defend [Shelly] against any claim, damages, suits, losses or expenses including, but not limited to, those that are (1)attributable to bodily injury, sickness, disease, death or injury to or destruction of tangible property (including the work itself) including the loss of use resulting therefrom and/or (2) caused in whole or in part by negligent act or omission of [T&R] may be responsible, regardless of whether such is caused in part or in full by a party indemnified hereunder. This indemnity clause specifically applies to negligence claims and indemnifies [Shelly] even for [Shelly's] own negligence unless the claim, damage, loss or expense arises solely and only from conduct or negligence by [Shelly].

Thus, through the instant lawsuit, Acuity seeks to enforce the rights to indemnification it claims it possesses against T&R.

Legal Analysis

Summary judgment is appropriate when the record shows that there is "no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). In deciding whether genuine issues of material fact exist, the court construes all facts in a light most favorable to the non-moving party and draws all reasonable inferences in favor of the non-moving party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). Because the parties have filed cross-motions for summary judgment, we stress that the same Rule 56 standards apply, and our review of the record requires us to draw all inferences in favor of the party against whom a particular issue in the motion under consideration is asserted. See O'Regan v. Arbitration Forums, Inc., 246 F.3d 975, 983 (7th Cir. 2001) (citing Hendricks-Robinson v. Excel Corp., 154 F.3d 685, 692 (7th Cir. 1998)).

The parties agree on all of the facts as well as the ultimate legal issues currently pending before the Court: (1) whether T&R is a suable entity in light of its merger with HTI; (2) whether the indemnification provision in the contract between Shelly and Sands, Inc. ("Shelly") and T&R requires T&R (or its successor in interest, HTI) to indemnify Shelly for any portion of the verdict entered in favor of the Soots estate; and (3) whether T&R is excused from indemnification because "the claim damage, loss or expense" for which Acuity seeks to recover "arises solely and only from conduct or negligence by [Shelly]." We consider each of these issues below.

I. The Effect of the T&R/HTI Merger on T&R's Capacity to be Sued

T&R maintains that, as a result of its merger with HTI (as evidenced by the certificate of merger signed August 27, 2007 and designated as evidence by HTI), it is not a legal entity that can be sued pursuant to Fed. R. Civ. P. 17(b) and Indiana law.² In support, T&R cites IND. CODE 23-1-40-6, which provides:

Sec. 6. (a) When a merger takes effect:

(1) every other corporation party to the merger merges into the surviving corporation and the separate existence of every corporation except the surviving corporation ceases;

(2) the title to all real estate and other property owned by each corporation party to the merger is vested in the surviving corporation without reversion or impairment;(3) the surviving corporation has all liabilities of each corporation party to the merger;

(4) a proceeding pending against any corporation party to the merger may be continued as if the merger did not occur or the surviving corporation may be substituted in the proceeding for the corporation whose existence ceased;

(5) the articles of incorporation of the surviving corporation are amended to the extent provided in the plan of merger; and

(6) the shares of each corporation party to the merger that are to be converted into shares, obligations, or other securities of the surviving or any other corporation or into cash or other property are converted and the former holders of the shares are entitled only to the rights provided in the articles of merger or to their rights under IC 23-1-44.

(b) When a share exchange takes effect, the shares of each acquired corporation are exchanged as provided in the plan and the former holders of the shares are entitled only to the exchange rights provided in the articles of share exchange or to their rights under IC 23-1-44.

c) After a merger or share exchange takes effect as provided in this section, any terms of the plan of merger or plan of share exchange that are not included in the articles of incorporation shall be considered to be contract rights only, and not part of the governing documents of the corporation.

IND. CODE 23-1-40-6. Furthermore, T&R points out that it is well-settled under Indiana law that, following a merger, the new corporation (in this case, HTI) assumes liability for the obligations of the now non-existent corporation. See Knightstown Lake Property Owners Ass'n, Inc. v. Big Blue River Conservancy Dist., 383 N.E.2d 361, 366 (Ind. App. 1978); Yantiss v. Osborn, 102 Ind. App. 249, 254 (Ind. App. 1935); Cleveland, C., C & St. L.R. Co v. Prewitt, 33 N.E. 367 (Ind. 1893). HTI does not dispute T&R's position.

Acuity requests, however, that the Court refrain from dismissing T&R "until suchtime as Acuity is able to ascertain that the dismissal of T&R will not affect its right to collect any judgment entered in favor of Acuity from any insurance company that issued a policy to T&R prior to the effective date of the merger." Acuity Br. at 18-19. It maintains that T&R is a properly named party because there is no supportive authority for the proposition that a merged corporation cannot be sued for a debt created during the non-surviving corporation's existence. Furthermore, Acuity asserts that if T&R is now truly non-existent, then it will not be harmed by remaining a named defendant, whereas Acuity might be harmed if it is unable to collect its judgment against the surviving corporation, HTI. Acuity Br. at 18.

We find Acuity's position in this regard needlessly cautious and...