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Liberty Corporate Capital Ltd. v. Club Exclusive, Inc.

United States District Court, N.D. Alabama, Eastern Division

July 25, 2018

LIBERTY CORPORATE CAPITAL LIMITED, Plaintiff/Counterclaim Defendant,
CLUB EXCLUSIVE, INC., Defendant/Counterclaim Plaintiff.



         I. Procedural Background

         Plaintiff/Counterclaim Defendant Liberty Corporate Capital Limited (“Liberty”) initiated this insurance action on May 13, 2016. (Doc. 1). Liberty sued Defendant/Counterclaim Plaintiff Club Exclusive, Inc. (“Club Exclusive”) for a declaratory judgment of its rights and obligations under a commercial insurance policy (the “Policy”) issued to Club Exclusive. Id. Club Exclusive answered Liberty's complaint and counterclaimed against Liberty on June 22, 2016. (Doc. 12).[1]

         On October 17, 2016, Liberty filed a Motion for Summary Judgment (doc. 36) (the “Rule 56 Motion”) as to all remaining claims and counterclaims. Club Exclusive failed to respond to the Rule 56 Motion. On June 26, 2017, the Court granted the Rule 56 Motion, entered a declaratory judgment in favor of Liberty, and dismissed the entire action with prejudice. (Docs. 38, 39).

         Subsequently, Club Exclusive moved to set aside that Rule 56 judgment in accordance with the excusable neglect standard under Fed.R.Civ.P. 60(b). (Doc. 40). On November 21, 2017, the Court granted Club Exclusive's request for post-judgment relief. (Doc. 43). As a result, the Court's prior summary judgment opinion (doc. 38) and final judgment order (doc. 39) were vacated.

         Club Exclusive filed its opposition to the Rule 56 Motion (doc. 44) on December 12, 2017. Liberty followed with a Partial Motion To Strike Antineeka White's Affidavit (doc. 45) (the “Partial Strike Motion”) on January 4, 2018, and a reply in support of its Rule 56 Motion (doc. 46) on January 5, 2018.[2]

         Club Exclusive opposed the Partial Strike Motion on January 31, 2018. (Doc. 47). Finally, on February 5, 2018, Liberty filed its reply. (Doc. 48). Thus, the Rule 56 and Partial Strike Motions are now ripe for disposition.[3] For those reasons explained below, Liberty's Rule 56 Motion is due to be granted in part and otherwise denied. Liberty's Partial Strike Motion is due to be granted.

         II. Factual Background[4]

         A. Club Exclusive's Formation

         Club Exclusive is an Alabama corporation formed on October 5, 2011. AF No. 1.[5] Antineekia White (“Ms. White”) acted as the incorporator and is Club Exclusive's owner, director, and president. AF No. 2. Club Exclusive is a distinct and separate entity from Ms. White. AF No. 3.1. Ms. White understood that by incorporating Club Exclusive, there would be a legal difference between her and it and that she could potentially be protected from legal liability. AF No. 3.2.

         B. The Property

         On June 23, 2012, Ms. White purchased approximately 13 acres of land in rural Alabama from Bruce Hutchinson for $2, 000. AF No. 4.1. This property was located at 3479 Barclay Road, Alpine, Alabama 35014 (the “Property”). AF No. 4.2. Ms. White personally owned the Property. AF No. 4.3.

         Ms. White built a commercial building (the “Building”) on the Property using her personal funds. AF No. 5. Ms. White did not take out a loan to assist in paying for the construction of the Building and paid for the construction with unencumbered funds. AF No. 6.

         Ms. White also purchased the contents of the Building with her personal funds. AF No. 7.1. She never transferred the ownership of such contents to Club Exclusive. AF No. 7.2.

         C. The Lease

         On April 30, 2012, Ms. White leased the Property to Club Exclusive (the “Lease”). AF No. 8. The Lease's three-year term expired on the last day of April 2015, and Club Exclusive did not renew the Lease pursuant to its terms. AF No. 9. The Lease expressly states that in the event Club Exclusive continued to occupy the Property after the Lease's term expired, “whether with or against the consent of [Ms. White], such tenancies shall be a tenancy at sufferance and in no event a tenancy from month to month, or from year to year.” AF No. 10.

         In June 2012, Club Exclusive applied for a liquor license. AF No. 11. In the liquor license application, Club Exclusive is correctly identified as leasing the Property from Ms. White. AF No. 12. Ms. White signed the liquor license application on behalf of Club Exclusive, thereby attesting to the truthfulness of the responses given within the application in reference to the “lease/property ownership.” AF No. 13.

         D. The Application and the Policy

         On April 4, 2014, Club Exclusive submitted an application for insurance for the Property (the “Application”). AF No. 14. Club Exclusive is the only one listed as an applicant. AF No. 15. In the Application's section inquiring into Club Exclusive's interest in the Property, Club Exclusive specifically marked “owner” instead of “tenant.” AF No. 16.

         Ms. White provided the information contained in the Application and signed the Application. AF No. 17.1. At the time she signed the Application, the information had been filled out. AF No. 17.2. The Application explicitly states that “the undersigned is an authorized representative of the Applicant and represents that reasonable inquiry has been made to obtain the answers to questions on this application.” AF No. 17.3. “He/she represents that the answers are true, correct and complete to the best of his/her knowledge.” AF No. 17.4.

         Based on the information included in the Application, Liberty subscribed to Policy (No. SMF 26514), which was issued to “Club Exclusive, Inc.” through Southern Insurance Underwriters, Inc. (“SIU”). AF No. 18. “SIU is a managing general agent for Liberty with regard to the Policy and generally subscribes to policies on behalf of Liberty subject to certain conditions.” (Doc. 36-5 at 2 ¶ 4).[6] The Policy provided certain commercial property insurance coverage to real and business personal property located on the Property for the period of October 28, 2014, to October 28, 2015, subject to the Policy's terms, limits, conditions, and exclusions. AF No. 18. Club Exclusive is the only Named Insured listed in the Policy. AF No. 19.1. No other person or entity is listed as a Named Insured, Additional Insured, or any other type of insured. AF No. 19.2.

         E. The Fire

         Sometime between July 14, 2015, and July 16, 2015 (after the Lease had expired), a fire burned the Building and its contents (the “Loss” or “Fire”). AF No. 20. In furtherance of its claim for the Loss, Club Exclusive submitted a Sworn Statement in Proof of Loss (the “Proof of Loss”) and attached a separate Statement of Loss in support. AF No. 21.

         Through the Proof of Loss and Statement of Loss, Club Exclusive made a claim for $549, 000 in alleged damage to the Building, for $151, 975.03 in alleged damage to business personal property in the Building (the “BPP”), and $24, 033.49 for debris removal (collectively known as the “Claim”). AF No. 22.

         F. The DJ Action

         On May 13, 2016, Liberty filed this declaratory judgment action (the “DJ Action”) seeking a declaration that it owes no duty or obligation to Club Exclusive under the Policy. AF No. 23.1. In the DJ Action, Liberty argues, among other things, that the Policy is void because Club Exclusive misrepresented material facts in the Application, and because Club Exclusive did not have an insurable interest in the Property, Building, or the BPP. AF No. 23.2.

         On June 22, 2016, Club Exclusive filed its answer, counterclaim complaint against Liberty, and crossclaim complaint against Mr. Duesenberg and Ms. Washburn. AF No. 24. In the counterclaim complaint, Club Exclusive asserts causes of action against Liberty for breach of contract, bad faith failure to investigate, bad faith failure to pay a valid claim, and negligent hiring. AF No. 25.1. The negligent hiring claim is based on the alleged wrongful acts Club Exclusive asserts against Mr. Duesenberg and Ms. White in the crossclaims. AF No. 25.2.

         On August 19, 2016, Mr. Duesenberg filed a Motion To Dismiss Club Exclusive's crossclaims against him. AF No. 26. On August 22, 2016, Ms. Washburn filed a Motion To Dismiss Club Exclusive's crossclaims against her. AF No. 27. As mentioned in the procedural history section, the Court granted both Motions To Dismiss on October 24, 2016. Consequently, the Court dismissed Mr. Duesenberg and Ms. Washburn from this action. (Doc. 37 at 12).

         According to Michael Evans (“Mr. Evans”), the claims counsel for the managing agency for Liberty (doc. 36-4 at 3 ¶ 2), [7] “[a]t no point in time has [Ms.] Washburn been an employee or agent of Liberty in any capacity.” (Id. at 4 ¶ 4). Club Exclusive has attempted to dispute this agency-related fact through Ms. White's affidavit (doc. 44-1), the admissibility of which the Court analyzes below.

         III. Standards

         A. Summary Judgment

         Summary judgment is proper only when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed. R . Civ. P. 56(a). All reasonable doubts about the facts and all justifiable inferences are resolved in favor of the non-movant See Fitzpatrick v. City of Atlanta, 2 F.3d 1112, 1115 (11th Cir. 1993) (instructing that “district court should resolve all reasonable doubts about the facts in favor of the non-movant, and draw all justifiable inferences in his [or its] favor” (internal quotation marks omitted) (quoting United States v. Four Parcels of Real Property, 941 F.2d 1428, 1438 (11th Cir. 2006) (en banc))). A dispute is genuine “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). When, such as here, the moving party is the plaintiff, satisfying this initial Rule 56 burden means “affirmatively . . . support[ing] its motion with credible evidence …. [and] show[ing] that, on all the essential elements of its case on which it bears the burden of proof at trial, no reasonable jury could find for the non-moving party.” Fitzpatrick, 2 F.3d at 1115 (emphasis in original) (citations and internal quotation marks omitted) (quoting Four Parcels, 941 F.2d at 1438). Only “[o]nce the moving party has properly supported its motion for summary judgment, [does] the burden shift[] to the nonmoving party to ‘come forward with specific facts showing that there is a genuine issue for trial.'” International Stamp Art, Inc. v. U.S. Postal Serv., 456 F.3d 1270, 1274 (11th Cir. 2006) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986)).

         B. Evidentiary Rulings

         “All evidentiary decisions are reviewed under an abuse-of-discretion standard” without regard to the type of proof challenged. General Elec. Co. v. Joiner, 522 U.S. 136, 141 (1997); id. at 143 (concluding that the Eleventh Circuit Court of Appeals committed reversible error “[i]n applying an overly ‘stringent' review to [the district court's experts' testimony] ruling [because] it failed to give the trial court the deference that is the hallmark of abuse-of-discretion review”). “An abuse of discretion can occur where the district court applies the wrong law, follows the wrong procedure, bases its decision on clearly erroneous facts, or commits a clear error in judgment.” United States v. Estelan, 156 Fed.Appx. 185, 196 (11th Cir. 2005) (citing United States v. Brown, 415 F.3d 1257, 1266 (11th Cir. 2005)).

         Moreover, as the Eleventh Circuit has made clear, not every incorrect evidentiary ruling constitutes reversible error:

Auto-Owners' second argument is that it is entitled to a new trial on the basis of what it describes as a number of erroneous evidentiary rulings by the district court. Evidentiary rulings are also reviewed under an abuse of discretion standard. Finch v. City of Vernon, 877 F.2d 1497, 1504 (11th Cir. 1989). Moreover, even if Auto-Owners can show that certain errors were committed, the errors must have affected “substantial rights” in order to provide the basis for a new trial. See Fed. R. Evid. 103(a). “Error in the admission or exclusion of evidence is harmless if it does not affect the substantial rights of the parties.” Perry, 734 F.2d at 1446. See also Allstate Insurance Co. v. James, 845 F.2d 315, 319 (11th Cir. 1988).

Haygood v. Auto-Owners Ins. Co., 995 F.2d 1512, 1515 (11th Cir. 1993). Therefore, even the existence of many evidentiary errors does not guarantee that the party appealing will receive a new trial. Instead, such erroneous rulings by a district court must “affect the substantial rights of the parties” for reversible error to occur. Id.

         IV. Analysis

         A. Liberty's Partial Strike Motion

         Liberty seeks to strike part of Ms. White's affidavit (doc. 44-1) offered in opposition to its Rule 56 Motion. (Doc. 45 at 3-4).[3] Ms. White provided this affidavit “to supplement [her] Examination Under Oath of April 19, 2016.” (Doc. 44-1 at 2 ¶ 2). Liberty contests portions of paragraphs 4 and 5 of her affidavit. There, Ms. White states:

4. The agent of Liberty, Marian Washburn indicated that after the business, Club Exclusive was operational, the insurance would be switched to another type of policy of insurance.
5. After completing my Application for Commercial Insurance on April 4, 2014, Liberty's agent, Marian Washburn asked that I fax a copy of the deed to the land Club Exclusive was to be built on, to her office. I complied with her request.

(Doc. 44-1 at 2 ¶¶ 4-5 (emphasis added)).[4]

         Liberty contends that Ms. White's passing references to Ms. Washburn as Liberty's agent are conclusory as they are offered “without providing a sufficient basis to support such statements or establish[ing] [Ms. White's] personal knowledge of [such facts].” (Doc. 45 at 3). Rule 56(c)(4) provides:

(4) Affidavits or Declarations. An affidavit or declaration used to support or oppose a motion must be made on personal knowledge, set out facts that would be admissible in evidence, and show that the affiant or declarant is competent to testify on the matters stated.

Fed. R. Civ. P. 56(c)(4) (emphasis added).

         Liberty cites to several Eleventh Circuit cases which confirm that striking and/or disregarding conclusory information contained in a non-compliant Rule 56(c)(4) affidavit is appropriate. (See Doc. 45 at 5 (citing collection of cases)); see also, e.g., Rogers v. Evans, 792 F.2d 1052, 1062 n.9 (11th Cir. 1986) (finding “proper” district court's striking of an affidavit “phrased in conclusory terms without citing facts”); Evans v. Books-A-Million, 762 F.3d 1288, 1295 (11th Cir. 2014) (affirming district court's decision to strike certain statements as “conclusory and speculative”); id. (“Evans'[s] affidavit did not provide specific, supporting facts regarding, for example, the amount of other employees' salaries compared to hers, the details of other employees' financial advancement, or Mr. Dickson's job performance, duties and evaluations.”); Neibert v. Computer Scis. Corp., 621 Fed.Appx. 585, 593 (11th Cir. 2015) (agreeing with district court's determination that declaration was “wholly insubstantial” and finding that “the[] bare assertions” contained within it failed to “give[] rise to a genuine dispute of material fact”); cf. Evers v. Gen. Motors Corp., 770 F.2d 984, 986 (11th Cir. 1985) (agreeing with the Ninth and D.C. Circuits “that Rules 703 and 705 do not alter the requirement of Fed.R.Civ.P. 56[(c)(4)] that an affidavit must set forth specific facts in order to have any probative value”) (emphasis added).[5]

         Consistent with the foregoing authorities, Liberty argues:

Ms. White provides no basis for her statement that Ms. Washburn was Liberty's agent. (see generally Doc. 44-1). She does not explain how she would, or could, know that Ms. Washburn is Liberty's agent. She does not identify any other specific facts indicating Ms. Washburn was acting on Liberty's behalf. Rather, she makes a passing, conclusory statement that Ms. Washburn is Liberty's agent. Such unsupported and speculative statements are in direct contradiction to those allowed under Rule 56(c)(4). Rather, they are the type of unsupported and non-probative conclusory claims addressed in Rule 56(e) and should be stricken from evidence.

(Doc. 45 at 5-6).

         Club Exclusive's opposition to the Partial Strike Motion makes no effort to address any of the cases cited by Liberty. (See generally Doc. 47). Instead, after a brief introduction, Club Exclusive discusses the various types of agents that can arise under Alabama insurance law-general, special, soliciting, and independent (or broker). (Doc. 47 at 3-7).

         In an effort to show that Ms. White “may offer her conclusion or opinion that Marian Washburn was an [a]gent of Liberty[.]” (doc. 47 at 8 (emphasis omitted)), Club Exclusive only briefly mentions Fed.R.Civ.P. 56(c)(4). Id. Club Exclusive spends a substantial amount of time addressing the meaning of Fed.R.Evid. 701 (opinion testimony by lay witnesses) and Fed.R.Evid. 104 (preliminary questions including establishing an adequate foundation). (Doc. 47 at 8-10).

         Club Exclusive also references portions of Ms. White's multiple oral examinations reflecting that she worked with Ms. Washburn to obtain the Policy.[6](Doc. 47 at 12-13). More specifically, Club Exclusive relies upon the ...

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