Everest Indem. Ins. Co. v. Jake's Fireworks, Inc.

Decision Date19 November 2020
Docket NumberCase No. 19-CV-2620-JAR-ADM
Citation501 F.Supp.3d 1158
Parties EVEREST INDEMNITY INSURANCE COMPANY, Plaintiff, v. JAKE'S FIREWORKS, INC. and Howard O. Harper, Defendants. Maxum Indemnity Company and James River Insurance Company, Intervenor Plaintiffs, v. Jake's Fireworks, Inc. and Howard O. Harper, Defendants.
CourtU.S. District Court — District of Kansas

Russell F. Watters, Timothy J. Wolf, Brown & James, PC, St. Louis, MO, for Plaintiff.

Christopher Charles Confer, Karl Kuckelman, Wallace Saunders Austin Brown & Enochs Chartered, Overland Park, KS, for Defendant Jake's Fireworks, Inc.

Brian D. Johnston, Johnson, Vorhees & Martucci, Springfield, MO, Roger A. Johnson, Johnson, Vorhees & Martucci, Joplin, MO, for Defendant Howard O. Harper.

MEMORANDUM AND ORDER

JULIE A. ROBINSON, CHIEF UNITED STATES DISTRICT JUDGE

This matter concerns whether Defendant Jake's Fireworks, Inc. ("Jake's") has insurance coverage for a state court lawsuit arising from a tragic accident on August 12, 2014, in which Defendant Howard Harper ("Harper") was grievously injured. Plaintiff Everest Indemnity Insurance Company ("Everest") filed this action seeking a declaratory judgment, pursuant to 28 U.S.C. § 2201 and Fed. R. Civ. P. 56, that a commercial general-liability insurance policy it issued to Jake's, Lone Star Management, LLC ("Lone Star"), and other entities does not provide liability coverage for Harper's bodily injury claim and lawsuit filed against Jake's in the District Court of Crawford County, Kansas. Excess insurers Maxum Indemnity Company ("Maxum") and James River Insurance Company ("James River") were granted leave to intervene in this action and also seek declaratory judgment that they are not liable under commercial excess liability policies issued to Jake's.

This case is now before the Court on Everest's Motion for Summary Judgment (Doc. 19), James River's Motion for Summary Judgment (Doc. 87), Jake's Motion for Summary Judgment (Doc. 90), Maxum's Motion for Summary Judgment (Doc. 92), Harper's Motion for Summary Judgment (Doc. 95), Jake's Motion for Leave to File a Sur-Reply to Plaintiff Everest Indemnity Company's Reply in Support of its Motion for Summary Judgment (Doc. 94), and Jake's Objections to the Magistrate Judge's Order Denying Jake's Motion for Leave to Amend its Currently Pending Amended Answer and Counter-Claim to Plaintiff Everest's Complaint for Declaratory Judgment and Motion for Leave to Amend its Amended Answer and Counter-Claim to Intervenor Plaintiff Maxum Indemnity Company's Complaint for Declaratory Judgment (Doc. 100). The motions are fully briefed, and the Court is prepared to rule. For the reasons explained in detail below, Everest's, Maxum's, and James River's motions for summary judgment are granted, Jake's and Harper's motions for summary judgment are denied, and judgment is entered in favor of the insurers. Jake's motion for leave to file a sur-reply and objections the magistrate judge's order are denied as moot.

I. Summary Judgment Standard

Summary judgment is appropriate if the moving party demonstrates "that there is no genuine dispute as to any material fact" and that it is "entitled to judgment as a matter of law."1 In applying this standard, the Court views the evidence and all reasonable inferences therefrom in the light most favorable to the nonmoving party.2 "There is no genuine [dispute] of material fact unless the evidence, construed in the light most favorable to the non-moving party, is such that a reasonable jury could return a verdict for the non-moving party."3 A fact is "material" if, under the applicable substantive law, it is "essential to the proper disposition of the claim."4 A dispute of fact is "genuine" if "there is sufficient evidence on each side so that a rational trier of fact could resolve the issue either way."5

The moving party initially must show the absence of a genuine dispute of material fact and entitlement to judgment as a matter of law.6 To prevail on a motion for summary judgment on a claim upon which the moving party also bears the burden of proof at trial, the moving party must demonstrate that "no reasonable trier of fact could find other than for the moving party."7 A movant who does not bear the ultimate burden of persuasion at trial need not negate the nonmovant's claim; rather, the movant need simply "point[ ] out to the court a lack of evidence for the nonmovant on an essential element of the nonmovant's claim."8

Once the movant has met its initial burden of showing the absence of a genuine dispute of material fact, the burden shifts to the nonmoving party to "set forth specific facts showing that there is a genuine issue for trial."9 The nonmoving party may not simply rest upon its pleadings to satisfy its burden.10 Rather, the nonmoving party must "set forth specific facts that would be admissible in evidence in the event of trial from which a rational trier of fact could find for the nonmovant."11 In setting forth these specific facts, the nonmovant must identify the facts "by reference to affidavits, deposition transcripts, or specific exhibits incorporated therein."12 If controverted, the facts are construed in the light most favorable to the non-movant.13 However, to successfully oppose summary judgment, the nonmovant must bring forward "more than a mere scintilla of evidence" in support of his position.14 A nonmovant "cannot create a genuine issue of material fact with unsupported, conclusory allegations."15 "Where, as here, the parties file cross-motions for summary judgment, [the court is] entitled to assume that no evidence needs to be considered other than that filed by the parties, but summary judgment is nevertheless inappropriate if disputes remain as to material facts."16

Finally, summary judgment is not a "disfavored procedural shortcut"; on the contrary, it is an important procedure "designed to secure the just, speedy and inexpensive determination of every action."17

II. Uncontroverted Facts

Guided by the foregoing framework, the Court turns to the parties' statements of fact, keeping in mind that factual disputes about immaterial matters are not relevant to a summary judgment determination; rather, immaterial facts and factual averments not supported by the record are omitted.18

A. Relationship Between Jake's, Lone Star, and Harper

Jake's and multiple other businesses, including Lone Star and Firework's Leasing, LLC ("Fireworks Leasing"), are owned and controlled by the Marietta Family. Jake's business involves the import, retail sale, and wholesale distribution of 1.4G consumer fireworks. Jake's corporate representative testified that the Marietta Family decided to form Lone Star for administrative efficiency in handling human resources functions for employees of Marietta-owned ventures. Thus, Lone Star was formed in November 2011 to employ the staff and "handle all the HR things, payroll, benefits, insurance, and then ... lease out the employees back to the Marietta entities."19 Lone Star has employees provided to work for Marietta-owned entities in several states across the country in addition to Kansas, including Washington, where Jake's operates a distribution center. Jake's corporate representative estimated in 2017 that Lone Star was leasing out approximately 200 workers in multiple states. Lone Star has never held itself out as a staffing agency to provide services to the general public.

On March 1, 2012, Jake's and Lone Star entered into a Staffing Services Agreement ("SSA").20 The initial term of the SSA was for a period of one year, but the agreement provided that it would automatically renew unless either party provided written notice of termination within thirty days preceding the anniversary of its commencement. The SSA provided that Jake's "wishes to contract with [Lone Star] for the providing [of] staff for management and services necessary to operate [Jake's] business. [Lone Star] is willing and able to provide such staff for services as may be required by [Jake's.]"21

Per the SSA, Lone Star was responsible for handling wages, salaries, fringe benefits, employment taxes or assessments, and other human resources functions for the staff it provided to Jake's, including the provision of "all require[d] worker's compensation insurance, employee benefit coverage or any other required insurance coverage for all individuals performing staffing services to [Jake's]."22 The SSA required that Jake's

pay [Lone Star] the sum of $1,000 per month plus the full amount of all gross wages, all employer contributions for employee benefit plans, social security, unemployment, Medicare and all contractor payments and salaries, if any, paid by [Lone Star] for all staff services provided to [Jake's] .... Additionally, [Jake's] shall pay monthly three percent (3%) of all gross wages of staff services used by [Jake's] for the supervision and management of staffing personnel provided.23

Under "Relationship of the Parties," the SSA provided that Lone Star was "an independent contractor and not an agent, representative or employee of [Jake's]."24 The SSA further provided that the "cost, number, duration, and function of staffing personnel provided by [Lone Star] and used by [Jake's] shall be determined by [Jake's] in its sole discretion and approval at all times."25

Before Lone Star was founded in 2011, Harper had been an employee of Jake's for several years. When Lone Star was formed, Harper became an employee of Lone Star and was leased back to Jake's under the terms of the SSA. Jake's corporate representative testified that Harper

was leased to Jake's, so ... control of all his work and whatever he did came through Jake's. He was an employee before Lone Star took over, and he was in the warehouse and production ... working for Jake's until it turned over. Nothing changed for those people except who wrote their paycheck and who covered their insurance. [W]hat they did, who supervised them, what functions they performed, same as
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    ...aff'd sub nom. United Cent. Bank v. KMWC 845, LLC , 800 F.3d 307 (7th Cir. 2015) ; see also Everest Indem. Ins. Co. v. Jake's Fireworks, Inc. , 501 F. Supp. 3d 1158, 1188 (D. Kan. 2020) (quoting United Cent. Bank , 957 F. Supp. 2d at 987–88 ).8 Celotex Corp. v. Catrett , 477 U.S. 317, 327, ......

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