Hooters of Augusta, Inc. v. American Global Ins.

• Decision Date: 23 July 2003
• Docket Number: No. CV102-061.,CV102-061.
• Parties: HOOTERS OF AUGUSTA, INC.; and Sam Nicholson, and all other persons or entities similarly situated, Plaintiffs, v. AMERICAN GLOBAL INSURANCE COMPANY; and Zurich Insurance Company, Defendants.
• Court: U.S. District Court — Southern District of Georgia

Page 1365

272 F.Supp.2d 1365

HOOTERS OF AUGUSTA, INC.; and Sam Nicholson, and all other persons or entities similarly situated, Plaintiffs, v. AMERICAN GLOBAL INSURANCE COMPANY; and Zurich Insurance Company, Defendants.

No. CV102-061.

United States District Court, S.D. Georgia, Augusta Division.

July 23, 2003.

COPYRIGHT MATERIAL OMITTED

David Michael Brown, Smith, Gambrell & Russell, Atlanta, GA, Ziva P. Bruckner, Capers, Dunbar, Sanders & Bruckner, Augusta, GA, for Plaintiff Hooters of Augusta, Inc.

Harry D. Revell, Burnside, Wall, Daniel, Ellison & Revell, Augusta, GA, for Plaintiff Sam Nicholson and all other persons.

John C. Bonnie and Paul L. Weisbecker, Weinberg, Wheeler, Hudgins, Gunn & Dial, LLC, Atlanta, GA, for Defendant American Global Ins. Co.

H. Wilson Haynes, Jr., Wilhelmi Haynes, LLC, Augusta, GA, Arthur H. Glaser and Mark B. Bullman, Self, Glaser & Davis, LLP, Atlanta, GA, for Defendant Zurich Ins. Co.

ORDER

BOWEN, Chief Judge.

Presently before the Court are three motions for summary judgment: (1) a motion by Sam Nicholson ("Nicholson") (Doc. No. 44); (2) a motion by Hooters of Augusta, Inc. ("Hooters") (Doc. No. 54); and (3) a joint motion by American General Insurance Company ("AGIC") and Zurich Insurance Company ("Zurich"). (Doc. No. 58.) For reasons stated more fully below, the Court GRANTS IN PART and DENIES IN PART Nicholson's and Hooters' motions for summary judgment. Further, the Court GRANTS IN PART and DENIES IN PART AGIC and Zurich's (collectively "the Insurers") joint motion for summary judgment.

I. BACKGROUND

A. Procedural History

1. The Underlying Suit

On June 23, 1995, Sam Nicholson, the lead plaintiff in a class action,¹ brought suit pursuant to the Telephone Consumer Protection Act ("the TCPA"), 47 U.S.C.A. § 227 (West 2001), in the Superior Court of Richmond County. (Doc. No. 1.) In this suit, the plaintiffs alleged that Hooters of Augusta used co-defendant Value-Fax of Augusta ("Value-Fax") to send unsolicited facsimile ("fax") advertisements to fax machines in Georgia. (Id.) On March 21, 2001, a jury verdict was returned against Hooters. (Id.) Thereafter, on April 25, 2001, the trial judge entered judgment against Hooters in the amount of $11,889,000. (Id.) After the judgment was entered, Hooters filed for Chapter 11 bankruptcy in the United States Bankruptcy Court for the Northern District of Georgia. (Id.)

Hooters subsequently appealed the verdict and judgment of the state court (Doc. No. 61 at 4); however, the appeal became moot on May 29, 2002 when, according to AGIC and Zurich, Hooters and Nicholson entered into a settlement agreement for $9,000,000. (Id. at 4-5.) The $9,000,000 settlement amount is approximately $3,000,000 lower than the amount awarded Nicholson's class on April 25, 2001. (Doc. No. 1 at 3.) The consideration for this reduction was Hooters' promise to do the following: (1) file a declaratory judgment action against AGIC and Zurich; (2) assign its claims against the insurance carriers to Nicholson upon request; and (3) discontinue the appeal of the state court judgment. (Doc. No. 62 at 6-7.) The Superior Court approved the settlement. (Id. at 7.)

Following the settlement between Hooters and Nicholson, one of the three interested insurance companies, New Hampshire Insurance Company ("New Hampshire"), settled with Nicholson for $1,000,000. (Id. at 8.) New Hampshire's settlement with Nicholson occurred before the conclusion of a declaratory judgment action involving New Hampshire. (Id.) According to AGIC and Zurich, New Hampshire's policy was the primary policy. (Id. at 9.)

2. The Present Case

Hooters filed the instant action (CV102-061) pursuant to the terms of the settlement between it and Nicholson, on February 20, 2002 against (1) Zurich, (2) AGIC, and (3) Nicholson. (Doc. No. 1.) The case was thereafter removed by Zurich and AGIC from the Superior Court of Richmond County on April 19, 2002 based upon the diversity of the parties' citizenship and the amount in controversy. 28 U.S.C.A. § 1332 (West 1993). In its Notice of Removal (Doc. No. 1), AGIC and Zurich argued that "the Court should look beyond the pleadings and arrange the parties according to their sides in this dispute, and in doing so realign Defendant Nicholson as a party plaintiff." (Doc. No. 1 at 2.) Zurich and AGIC further argued that "Nicholson is simply a sham defendant named for no other purpose than to attempt to defeat diversity. Plaintiff makes no claim for relief against Nicholson whatsoever." (Id. at 3.) After a hearing was held on June 18, 2002 on Plaintiff's motion for remand, the Court agreed with AGIC and Zurich and "realigned Nicholson as a plaintiff, maintaining jurisdiction over the case." (Doc. No. 62 at 7.)

On June 28, 2002, this case was statistically closed so that the parties could mediate the dispute. (Doc. No. 41.) The mediation failed, and the case was re-opened on September 26, 2002. (Doc. No. 43.)

The plaintiffs primarily seek "a declaration that under the liability policies issued by American Global and Zurich, [Hooters] was entitled to coverage for payment of the judgment which resulted from the settlement between Hooters and Nicholson." (Doc. No. 62 at 7.)

B. The Insurance Policies

New Hampshire issued a commercial general liability policy to Hooters² with effective dates of January 1, 1995 to January 1, 1996 and coverage limits of $1 million per occurrence and $2 million in the aggregate. (Doc. No. 62 at 8.)

AGIC issued an umbrella liability policy with the same effective dates as New Hampshire's policy and coverage limits of $5 million per occurrence, in excess of New Hampshire's primary coverage. (Id. at 9.) AGIC claims that it denied coverage after investigating Nicholson's claims. (Id.)

Zurich issued an excess liability policy to Hooters with coverage of $15 million in excess of the primary coverage and AGIC's umbrella policy. (Id.) Zurich claims it investigated Nicholson's claims, determined no coverage was afforded Hooters, and denied the claim on June 7, 2001. (Id.)

Nicholson has explained the operation of the relevant policies as follows: "[T]he policy provisions set forth in the Global [AGIC] policy ... govern the determination of coverage with respect to the Zurich policy as it is `form following.' The Omnibus Endorsement which replaces the insuring agreement in the Zurich policy provides, in part, that `[e]xcept for the terms, definitions, conditions and exclusions of this policy, the coverage provided by this policy shall follow the insuring agreements, definitions, conditions and exclusions of the [AGIC] insurance policy....'" (Doc. No. 46 at 9 (citing Zurich Policy, Endorsement No. 5).) Thus, the parties have focused on the provisions in the AGIC policy. Further, in an appended schedule of underlying insurance, the AGIC policy refers to the New Hampshire policy by numerical reference (CPP3013761).

II. REQUIREMENTS FOR SUMMARY JUDGMENT

The Court should grant summary judgment only if "there is no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). Facts are "material" if they could affect the outcome of the suit under the governing substantive law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The Court must view the facts in the light most favorable to the non-moving party, Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986), and must draw "all justifiable inferences in [its] favor...." United States v. Four Parcels of Real Property, 941 F.2d 1428, 1437 (11th Cir.1991) (en banc) (internal quotation marks omitted).

The moving party has the initial burden of showing the Court, by reference to materials on file, the basis for the motion. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). How to carry this burden depends on who bears the burden of proof at trial. Fitzpatrick v. City of Atlanta, 2 F.3d 1112, 1115 (11th Cir.1993). If the movant bears the burden of proof at trial, that party "must show that, on all the essential elements of its case, ... no reasonable jury could find for the nonmoving party." Four Parcels, 941 F.2d at 1438. On the other hand, if the non-movant has the burden of proof at trial, the movant may carry the initial burden in one of two ways — by negating an essential element of the non-movant's case or by showing that there is no evidence to prove a fact necessary to the non-movant's case. See Clark v. Coats & Clark, Inc., 929 F.2d 604, 606-08 (11th Cir.1991) (explaining Adickes v. S.H. Kress & Co., 398 U.S. 144, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970) and Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)). Before the Court can evaluate the non-movant's response in opposition, it must first consider whether the movant has met its initial burden of showing that there are no genuine issues of material fact and that it is entitled to judgment as a matter of law. Jones v. City of Columbus, 120 F.3d 248, 254 (11th Cir.1997) (per curiam). A mere conclusory statement that the non-movant cannot meet the burden at trial is insufficient. Clark, 929 F.2d at 608.

If — and only if — the movant carries its initial burden, the non-movant may avoid summary judgment only by "demonstrat[ing] that there is indeed a material issue of fact that precludes summary judgment." Id. Again, how to carry this burden depends on who bears the burden of proof at trial. If the movant has the burden of proof at trial, the non-movant may avoid summary judgment only by coming forward with evidence from which a reasonable jury could find in its favor. Anderson, 477 U.S. at 249, 106 S.Ct. 2505. If the non-movant bears the burden of proof at trial, the non-movant must tailor its response to the method by which the movant carries its initial burden. If the movant presents evidence affirmatively negating...