Assoc.D Auto. Inc v. Acceptance Indem. Ins. Co.

• Citation: 705 F.Supp.2d 714
• Decision Date: 31 March 2010
• Docket Number: Civil Action No. H-09-2374.
• Parties: ASSOCIATED AUTOMOTIVE INC., Plaintiff,v.ACCEPTANCE INDEMNITY INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Southern District of Texas

705 F.Supp.2d 714

ASSOCIATED AUTOMOTIVE INC., Plaintiff,v.ACCEPTANCE INDEMNITY INSURANCE COMPANY, Defendant.

Civil Action No. H-09-2374.

United States District Court,

S.D. Texas,

Houston Division.

March 31, 2010.

COPYRIGHT MATERIAL OMITTED

Patrick Kevin Leyendecker, Moriarty Leyendecker Erben PC, Houston, TX, for Plaintiff.

George T. Jackson, Burck Lapidus et al, Houston, TX, for Defendant.

MEMORANDUM AND ORDER

NANCY F. ATLAS, District Judge.

Pending before the Court are cross motions for summary judgment filed by Plaintiff and Defendant in this insurance-coverage dispute. Defendant Acceptance Indemnity Insurance Company (“Acceptance”) filed a Motion for Summary judgment [Doc. # 12] (“Motion”). Plaintiff Associated Automotive, Inc. (“AAI”) filed a Cross Motion for Summary Judgment and Response to Defendant's Motion for Summary Judgment [Doc. # 13] (“Cross Motion”). The motions are fully briefed and ripe for decision.¹ After carefully considering the parties' submissions, applicable legal authorities, and all pertinent matters of record, the Court denies Acceptance's Motion and grants in part and denies in part AAI's Cross Motion.

I. FACTUAL BACKGROUND

This is the second lawsuit filed in this Court arising from a state court action filed against AAI by a worker injured on its premises in 2003. The parties to the current litigation were previously before the Court in Acceptance Indemnity Insurance Company v. Melvin Maltez, et al., Civil Action No. 4:04-2222 (“First Coverage Lawsuit”), a declaratory judgment action filed by Acceptance, an insurer, against inter alia, AAI, its insured. ² The following factual background is not in dispute.

During the relevant time, AAI was a Houston corporation that performed a variety of services including selling, storing and repairing automobiles. AAI was incorporated by Cal Enderli, Sr. in 1989. Enderli, Sr.'s son, Cal Enderli, Jr., created another business in May 2003, AAI Automated Salvage (“Salvage”), which operated out of the same premises as AAI. Salvage performed similar services to AAI, but was primarily engaged in the business of dismantling automobiles for parts. AAI was insured by Acceptance.

Melvin Maltez was employed on the shared premises of AAI and Salvage. In previous litigation, the parties disputed which entity actually employed him. In August 2003, Maltez was injured on the job while dismantling an automobile with a torch. Maltez subsequently filed a lawsuit against AAI, Enderli, Sr., and Enderli, Jr. d/b/a Salvage, in state court in Harris County, Texas (“ Maltez Lawsuit”).³

On June 8, 2004, during the pendency of the state court action, Acceptance filed its declaratory judgment action in this Court seeking inter alia, a declaration that it had no duty to defend or indemnify AAI with regard to the Maltez Lawsuit. AAI filed its Original Answer on August 13, 2004, and subsequently, on December 20, 2004, filed an amended answer asserting counterclaims seeking declarations of coverage under the policy for the claims that were the subject of the Maltez Lawsuit.⁴ Holding that Maltez's claim was potentially within the scope of AAI's policy, the Court ordered Acceptance to provide a defense, and administratively closed the First Coverage Lawsuit pending the resolution of the underlying Maltez Lawsuit.

In November 20, 2006, the state court entered a jury verdict in Maltez's favor (“ Maltez Judgment”). Specifically, the state court rendered a judgment against Enderli, Jr. d/b/a Salvage in the amount of $150,000 in compensatory damages as well as over $200,000 in pre- and post-judgment interest, costs and fees.⁵ The state court also entered judgment on the jury's verdict that Salvage and AAI formed a single business enterprise, and specified that AAI was jointly and severally liable for the entire judgment.⁶ The judgment against AAI was based solely on the single business enterprise theory. Under Texas law, AAI had until December 20, 2006, to file an appeal of the state court's judgment. See Tex.R.App. P. 26.1 (notice of appeal must be filed within 30 days after the judgment is signed).

On December 1, 2006, midway through the 30 day appeal period, the Texas Supreme Court granted a petition for review in SSP Partners v. Gladstrong Investments (USA) Corp. 2006 Tex. LEXIS 1182 (Tex. Dec. 1, 2006). On December 13, 2006, AAI requested that Acceptance file an appeal of the state court judgment on AAI's behalf, arguing that there was “legally insufficient evidence to support the joint enterprise finding.” ⁷ Acceptance, through its designated counsel, did not file an appeal, and the Maltez Judgment became final and binding on AAI on December 20, 2006. See Tex.R.App. P. 26.1; Tex.R. Civ. P. 329b. Subsequently, on November 2008, the Texas Supreme Court issued its opinion in SSP Partners, invalidating the single business enterprise theory of liability. SSP Partners v. Gladstrong Investments (USA) Corp., 275 S.W.3d 444, 456 (Tex.2008).

Following the state court's judgment, and on Acceptance's motion, this Court lifted the stay and reactivated the First Coverage Lawsuit on January 26, 2007. On February 16, 2007, the Court issued a revised docket control order that imposed a March 30, 2007, deadline for amendments to pleadings, “other than bad faith or extra-contractual claims.” ⁸ AAI did not amend its counter claims against Acceptance to add a claim for breach of contract based on Acceptance's failure to file an appeal of the Maltez Judgment. After several motions and a jury verdict, the Court held in the First Coverage Lawsuit that AAI was not entitled to indemnity from Acceptance, and entered a corresponding Final Judgment.⁹

Following an unsuccessful appeal to the Fifth Circuit, AAI filed the instant lawsuit, raising, for the first time, a claim that Acceptance breached its insurance contract by failing to appeal the Maltez Judgment on AAI's behalf. Acceptance counters that AAI's claim is barred by res judicata or waiver, and, in any event, Acceptance had no duty to appeal the state court judgment under Texas law. The parties have cross-moved for summary judgment.

II. THE SUMMARY JUDGMENT STANDARD

Rule 56 of the Federal Rules of Civil Procedure mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a sufficient showing of the existence of an element essential to the party's case, and on which that party will bear the burden at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir.1994) ( en banc ); see also Baton Rouge Oil and Chem. Workers Union v. ExxonMobil Corp., 289 F.3d 373, 375 (5th Cir.2002). Summary judgment “should be rendered if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(c); Celotex, 477 U.S. at 322-23, 106 S.Ct. 2548; Weaver v. CCA Indus., Inc., 529 F.3d 335, 339 (5th Cir.2008).

For summary judgment, the initial burden falls on the movant to identify areas essential to the non-movant's claim in which there is an “absence of a genuine issue of material fact.” Lincoln Gen. Ins. Co. v. Reyna, 401 F.3d 347, 349 (5th Cir.2005). The moving party, however, need not negate the elements of the non-movant's case. See Boudreaux v. Swift Transp. Co., 402 F.3d 536, 540 (5th Cir.2005). The moving party may meet its burden by pointing out “ ‘the absence of evidence supporting the nonmoving party's case.’ ” Duffy v. Leading Edge Products, Inc., 44 F.3d 308, 312 (5th Cir.1995) (quoting Skotak v. Tenneco Resins, Inc., 953 F.2d 909, 913 (5th Cir.1992)).

If the moving party meets its initial burden, the non-movant must go beyond the pleadings and designate specific facts showing that there is a genuine issue of material fact for trial. Littlefield v. Forney Indep. Sch. Dist., 268 F.3d 275, 282 (5th Cir.2001) (internal citation omitted). “An issue is material if its resolution could affect the outcome of the action. A dispute as to a material fact is genuine if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” DIRECTV Inc. v. Robson, 420 F.3d 532, 536 (5th Cir.2005) (internal citations omitted).

In deciding whether a genuine and material fact issue has been created, the court reviews the facts and inferences to be drawn from them in the light most favorable to the nonmoving party. Reaves Brokerage Co. v. Sunbelt Fruit & Vegetable Co., 336 F.3d 410, 412 (5th Cir.2003). A genuine issue of material fact exists when the evidence is such that a reasonable jury could return a verdict for the non-movant. Tamez v. Manthey, 589 F.3d 764, 769 (5th Cir.2009) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)).

The non-movant's burden is not met by mere reliance on the allegations or denials in the non-movant's pleadings. See Diamond Offshore Co. v. A & B Builders, Inc., 302 F.3d 531, 545 n. 13 (5th Cir.2002). Likewise, “conclusory allegations” or “unsubstantiated assertions” do not meet the non-movant's burden. Delta & Pine Land Co. v. Nationwide Agribusiness Ins. Co., 530 F.3d 395, 399 (5th Cir.2008). Instead, the nonmoving party must present specific facts which show “the existence of a genuine issue concerning every essential component of its case.” Am. Eagle Airlines, Inc. v. Air Line Pilots Ass'n, Int'l, 343 F.3d 401, 405 (5th Cir.2003) (citation and internal quotation marks omitted). In the absence of any proof, the court will not assume that the non-movant could or would prove the necessary facts. Little, 37 F.3d at 1075 (citing Lujan v. Nat'l Wildlife Fed'n, 497 U.S. 871, 888, 110 S.Ct. 3177, 111 L.Ed.2d 695 (1990)).

The Court may make no credibility determinations or weigh any evidence, and must disregard all evidence favorable to the moving party that the...