United States District Court,

S.D. Texas, Houston Division.

Catlin Specialty Insurance, Company, Plaintiff,

v.

L.A. Contractors, Ltd., Defendant.

CIVIL ACTION NO. H-14-261

|

Signed July 25, 2016

 

 

MEMORANDUM, RECOMMENDATION & ORDER

NANCY K. JOHNSON, U.S. MAGISTRATE JUDGE

*1 Pending before the court1 are Defendant L.A. Contractors, LTD., (“LAC”)’s Motion to Dismiss (Doc. 102), Motions for Summary Judgment (Docs. 73, 101) and Plaintiff Catlin Specialty Insurance Company (“Catlin”)’s Cross-Motions for Partial Summary Judgment (Docs. 86, 104, 105). The court has considered the motions, the responses, all other relevant filings, and the applicable law. For the reasons set forth below, the court RECOMMENDS that LAC’s motions be DENIED and Catlin’s motions be GRANTED.

 

 

1. Case Background

This insurance case centers around LAC’s alleged indemnity obligation related to a settlement between Catlin and the estate of an employee of LAC.

 

 

1. Factual History

LAC was a trucking company that provided transportation services related to the oil and gas industry.2 Wolverine Construction, Inc., (“Wolverine”) was a construction company that performed work for Shell Oil Company in connection with an oil and gas lease in Dimmit County, Texas.3

 

Wolverine and LAC signed a Master Service Agreement (“MSA”) dated June 1, 2010.4 The MSA included mutual indemnity provisions.5 LAC promised that:

[LAC] shall protect, defend (including attorney’s fees, costs, expert fees, deposition costs and other expenses of litigation), indemnify and hold harmless [Wolverine] and its subsidiaries, affiliates … and employees from and against all claims, demands, and causes of action asserted by [LAC] and its subsidiaries, affiliated companies, … employees and its/their contractors employees, invitees and agents that arise out of or are related to this agreement regardless of the fault or negligent [sic], sole or concurrent of any indemnified party, that result in personal injury (including bodily injury), illness, death or property loss or damage, or any civil fines or penalties imposed by any governmental agency, officer, or court of law.6

As part of its indemnity agreement, LAC additionally agreed to obtain worker’s compensation, general commercial liability and automobile insurance in the amount of at least one million dollars, and to list Wolverine and its directors, officers, and agents as additional insureds, except in the case of worker’s compensation, for work performed by LAC on Wolverine’s behalf.7 Under the MSA, LAC supplied and transported construction materials and aggregate to Wolverine, who constructed well pad sites and built private roads.8

 

On February 15, 2011, Wolverine obtained insurance through Liberty Mutual.9 In addition to its contract with Liberty Mutual, Wolverine obtained an excess liability policy with Catlin.10 Wolverine’s policy with Catlin was scheduled to run for the period between February 15, 2011, and February 15, 2012.11

 

*2 On April 15, 2011, the estate of an employee of LAC brought a claim against Wolverine in Zapata County, Texas, alleging that the employee died as the result of a workplace injury related to an automobile.12 On September 27, 2011, Wolverine contacted LAC to formally request and demand indemnity for the lawsuit based on the MSA.13 LAC refused to defend and indemnify Wolverine in the state court action.14

 

In July 2013, Wolverine entered into a settlement with the decedent’s estate.15 In connection with the settlement, Catlin paid more than the jurisdictional minimum on behalf of Wolverine and pursuant to the terms of Wolverine’s insurance policy.16

 

 

1. Procedural History

Catlin filed this lawsuit on February 4, 2014, alleging a right to contractual indemnity and breach of contract against LAC.17

 

LAC filed its first motion for summary judgment based on subrogation on April 13, 2015.18 Catlin filed a response and cross-motion for partial summary judgment on May 11, 2015.19

 

On October 9, 2015, this court issued a memorandum and recommendation denying LAC’s motion and granting Catlin’s cross-motion.20 The district court adopted the memorandum and recommendation on November 3, 2015.21

 

On December 15, 2015, LAC filed a second motion for Summary Judgment on grounds independent of its previous motion.22 On January 19, 2016, Catlin filed a response and cross-motion for partial summary judgment on two of LAC’s defenses.23 On April 14, 2016, the court signed an order extending the deadline to file dispositive motions to June 17, 2016.24 On May 31, 2016, LAC filed an amended motion for summary judgment based on its previous December 15, 2015, motion.25

 

On June 3, 2016, the 49th District Court of Zapata County, Texas issued an order granting a partial summary judgment in a related case in state court.26 The court in that case granted a motion for partial summary judgment holding that Hallmark Specialty Insurance Company (“Hallmark”) did not owe a defense or indemnity to LAC based on Catlin’s claims.27 On June 16, 2016, Defendant filed a motion to dismiss based on the state court’s order.28

 

On June 17, 2016, Catlin responded to LAC’s motion for summary judgment, filed an amended motion for partial summary judgment, and filed a third motion for summary judgment on LAC’s remaining affirmative defenses.29 On July 6, 2016, Catlin responded to LAC’s motion to dismiss.30

 

*3 Also July 6, LAC filed its response to Plaintiff’s third motion for summary judgment.31 The next day, Catlin filed an amended response to LAC’s motion to dismiss.32 On July 8, 2016, Catlin filed a reply in support of its amended second and third motions for summary judgment.33

 

 

1. Legal Standard
2. Dismissal Standard

Pursuant to Rule 12(b)(6), dismissal of an action is appropriate whenever the complaint, on its face, fails to state a claim upon which relief can be granted. When considering a motion to dismiss, the court should construe the allegations in the complaint favorably to the pleader and accept as true all well-pleaded facts. Sullivan v. Leor Energy, LLC, 600 F.3d 542, 546 (5th Cir. 2010).

 

A complaint need not contain “detailed factual allegations” but must include sufficient facts to indicate the plausibility of the claims asserted, raising the “right to relief above the speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007); see also Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Plausibility means that the factual content “allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678. A plaintiff must provide “more than labels and conclusions” or “a formulaic recitation of the elements of a cause of action.” Twombly, 550 U.S. at 555. In other words, the factual allegations must allow for an inference of “more than a sheer possibility that a defendant has acted unlawfully.” Iqbal, 556 U.S. at 678.

 

 

1. Summary Judgment Standard

Summary judgment is warranted when the evidence reveals that no genuine dispute exists regarding any material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Brown v. City of Houston, Tex., 337 F.3d 539, 540-41 (5th Cir. 2003). A material fact is a fact that is identified by applicable substantive law as critical to the outcome of the suit. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Ameristar Jet Charter, Inc. v. Signal Composites, Inc., 271 F.3d 624, 626 (5th Cir. 2001). To be genuine, the dispute regarding a material fact must be supported by evidence such that a reasonable jury could resolve the issue in favor of either party. Anderson, 477 U.S. at 250; Piazza’s Seafood World, LLC v. Odom, 448 F.3d 744, 752 (5th Cir. 2006).

 

The movant must inform the court of the basis for the summary judgment motion and must point to relevant excerpts from pleadings, depositions, answers to interrogatories, admissions, or affidavits that demonstrate the absence of genuine factual issues. Celotex Corp., 477 U.S. at 323; Topalian v. Ehrman, 954 F.2d 1125, 1131 (5th Cir. 1992). If the moving party can show an absence of record evidence in support of one or more elements of the case for which the nonmoving party bears the burden, the movant will be entitled to summary judgment. Celotex Corp., 477 U.S. at 322. However, if the party opposing summary judgment responds with evidence in support of each challenged element, the case must be resolved at trial. Id. at 324.

 

*4 When considering the evidence, “[d]oubts are to be resolved in favor of the nonmoving party, and any reasonable inferences are to be drawn in favor of that party.” Evans v. City of Houston, 246 F.3d 344, 348 (5th Cir. 2001); see also Boston Old Colony Ins. Co. v. Tiner Assocs. Inc., 288 F.3d 222, 227 (5th Cir. 2002). The court should not “weigh evidence, assess credibility, or determine the most reasonable inference to be drawn from the evidence.” Honore v. Douglas, 833 F.2d 565, 567 (5th Cir. 1987).

 

However, the nonmoving party must show more than “some metaphysical doubt as to the material facts.” Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 587 (1986). Conclusory allegations, unsubstantiated assertions, improbable inferences, unsupported speculation, or only a scintilla of evidence will not carry this burden. Brown, 337 F.3d at 541; Ramsey v. City of Henderson, Tex., 286 F.3d 264, 269 (5th Cir. 2002).

 

In the absence of summary judgment evidence that an actual controversy exists, the court cannot assume that the nonmoving party can or will prove the necessary facts at trial. Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994). The court must grant summary judgment if, after an adequate period of discovery, the nonmovant fails “to make a showing sufficient to establish the existence of an element essential to that party’s case, and on which that party will bear the burden of proof at trial.” Celotex Corp., 477 U.S. at 322.

 

“[U]nsubstantiated assertions are not competent summary judgment evidence.” Ragas v. Tenn. Gas Pipeline Co., 136 F.3d 455, 458 (5th Cir. 1998)(citing Celotex, 477 U.S. at 324). Furthermore, it is not incumbent on the court to search the record for triable issues. Id. The duty to identify evidence and its connection to the issues raised falls squarely on the party opposing summary judgment. Id. Under the Federal Rules, the court need only consider cited materials in deciding whether a party’s evidence satisfies that party’s summary judgment burden. Fed. R. Civ. Proc. 56(c)(3).

 

 

III. Analysis

LAC argues that the court should dismiss or abate this proceeding based on res judicata or collateral estoppel, and in the alternative argues that the court must find as a matter of law that the MSA’s indemnity agreement does not meet the express negligence test and is void under the Texas Oilfield Anti-Indemnity Act (“TOAIA”). In its cross-motion, Catlin responds that the MSA is not covered under the TOAIA and that LAC’s affirmative defenses should be dismissed as a matter of law. The court will consider the parties’ arguments in turn.

 

 

1. LAC’s Motion to Dismiss

LAC argues that Catlin’s suit should be dismissed, or, in the alternative, abated under res judicata or collateral estoppel because of the state court’s June 2016 order granting Hallmark’s Cross-Motion for Summary Judgment against Catlin. Catlin responds that it has no controversy with Hallmark and that the order is therefore an advisory opinion, and that there is no final order as required under either res judicata or collateral estoppel.

 

Res judicata bars the relitigation of claims that could have or were previously brought in a prior suit. Davis v. Dallas Area Rapid Transit, 383 F.3d 309, 312-13 (5th Cir. 2004). In order for a claim to be barred, “(1) the parties in both the prior suit and current suit must be identical; (2) a court of competent jurisdiction must have rendered the prior judgment; (3) the prior judgment must have been final and on the merits; and (4) the plaintiff must raise the same cause of action in both suits.” Id. at 313 (quoting Howe v. Vaughan, 913 F.2d 1138, 1143-44 (5th Cir. 1990)).

 

*5 The doctrine of collateral estoppel, or issue preclusion, bars the litigation of an issue that has been raised and litigated in a previous lawsuit. See Test Masters Educ. Servs., Inc. v. Singh, 428 F.3d 559, 572 (5th Cir. 2005). The following elements must be satisfied in order to preclude an issue under principles of collateral estoppel: “(1) the issue at stake is identical to the one involved in the earlier action; (2) the issue was actually litigated in the prior action; and (3) the determination of the issue in the prior action was a necessary part of the judgment in that action.” Id. at 572. Collateral estoppel may apply even when the actual claims and subject matter of the suit differ. Next Level Commc’ns LP v. DSC Commc’ns Corp., 179 F.3d 244, 250 (5th Cir. 1999).

 

LAC admits in its motion that the June 2016 order is not a final judgment, instead arguing that it will be final “in the near future.”34 It is therefore not disputed by the parties that there is no final judgment. In the absence of a final judgment, res judicata and collateral estoppel do not apply.

 

Similarly, although Catlin does not brief the issue of abatement, it is not applicable. A district court may enter a permanent stay when parallel suits in different courts have the same parties and the same issues. Stewart v. Western Heritage Ins. Co., 438 F.3d 488, 491 (5th Cir. 2006) (discussing the standard in Colardo River Water Conservation Dist. v. United States, 424 U.S. 800 (1976)). A district court may only choose to abstain from a case under “exceptional circumstances.” Colorado River, 424 U.S. at 813. Here, although the issues in the state court may be the same, the parties are different, and so abatement is not required. The court therefore RECOMMENDS that LAC’s Motion to Dismiss or Abate be DENIED.

 

 

1. LAC’s Motion for Summary Judgment

LAC argues that the indemnity provision of the MSA is void under the express negligence test and because it violates the Texas Oilfield Anti-Indemnity Act (“TOAIA”).

 

 

1. Express Negligence Doctrine

LAC first argues that the indemnity provision of the MSA is void under the express negligence doctrine. Catlin responds that the MSA meets the necessary requirements of the doctrine.

 

To be enforceable, an indemnity agreement must meet the requirements of the express negligence doctrine. Dresser Indus., Inc. v. Page Petroleum, Inc., 853 S.W.2d 505, 509 (Tex. 1993). The doctrine states that a party releasing claims based on its own negligence must specifically state the intent of the parties in the four corners of the contract. Storage & Processors, Inc. v. Reyes, 134 S.W.3d 190, (Tex. 2004).

 

LAC argues that the indemnity provision is fatally vague because it states “regardless of the fault or negligent, sole or concurrent of any indemnified party ….”35 LAC argues that the MSA’s use of “negligent” instead of “negligence” makes the sentence vague and ambiguous and that the use of the term “regardless” did not state a specific intent to indemnify a party against its negligence.

 

The court does not find the use of the term “negligent” instead of “negligence” to be ambiguous; there is only one reasonable interpretation and the intent of the parties is clear regardless of a scrivener’s error. See Lawyers Title Ins. Corp. v. Doubletree Partners, L.P., 739 F.3d 848, 858-59 (5th Cir. 2014) (holding that a contract is ambiguous only if the contract “is susceptible to two or more reasonable interpretations”). Nor is LAC correct that “regardless” fails to state a specific intent supported by Texas law. In Enserch Corp. v. Parker, 794 S.W.2d 2 (Tex. 1990), the Supreme Court of Texas found that language stating “regardless of whether such claims are founded in whole or in part upon alleged negligence of [contractor]” was sufficient to meet the express negligence test. Id. at 8. The court finds that the MSA meets the express negligence test.

 

 

2. The TOAIA

*6 LAC next argues that the MSA is void under the provisions of the TOAIA. The TOAIA was enacted because of inequity in certain contractor indemnity agreements. Tex. Civ. Prac. & Rem. Code 127.002. To address this issue, the Texas Legislature codified under the TOAIA that “certain agreements that provide for indemnification of a negligent indemnitee are against the public policy of this state.” Id. The TOAIA accordingly states that an agreement “contained in, collateral to, or affecting an agreement pertaining to a well for oil, gas, or water … is void if it purports to indemnify a person against loss or liability” when that damage is based in whole or in part on the indemnitee’s own negligence and arises from personal injury, death, or property injury. Id. § 127.003.

 

LAC contends that the indemnity is void under Section 127.003 of the TOAIA. LAC argues that the TOAIA applies to the MSA because Section 127.001 states that the TOAIA applies to an agreement concerning the rendering of well or mine services or performing “an act collateral” to well or mine services. See Tex. Civ. Prac. & Rem. Code 127.001. LAC contends that the work it did under the MSA was work collateral to the rendering of oil or mine services. It argues that the provision does not fall within the safe harbor provision of Section 127.005 because LAC did not agree in writing that the indemnity obligation would be supported by liability coverage.

 

Catlin responds that the MSA is not covered under the TOAIA because LAC is not a “certain contractor” and because there is a requirement for a “close nexus” to well drilling or mining for the TOAIA to apply. See In re Complaint of John E. Graham & Sons, 210 F.3d 333, 340 (5th Cir. 2000) (stating that an agreement must bear a close nexus to a well or mine for the TOAIA to apply). Catlin contends that the underlying incident involving the decedent was related to the transportation and delivery of cattle guards, not oil production. Catlin argues that even if the TOAIA applies, the safe harbor provision is satisfied.

 

The TOAIA defines “well or mine service” to include constructing or otherwise rendering services in connection with a structure intended for use in producing a mineral, but does not include related services involving pipelines or facilities. Tex. Civ. Prac. & Rem. Code 127.001(4). The Fifth Circuit recognized that the Supreme Court of Texas has not considered the definition of a “well or mine service,” but, based on the holdings in Texas appellate courts, found that the service must bear a close nexus with production activities for the TOAIA to apply. In re John E. Graham, 210 F.3d at 339-40.

 

In considering the legislature’s expansion of the act to include “otherwise rendering services,” the Fifth Circuit noted that the listed services “are directed toward the goal of obtaining or maintaining production from a well.” Id. at 343. The court accordingly found that “otherwise rendering services in connection with a well” required a close nexus to a well and actions directed towards obtaining or maintaining production from a well. Id.

 

LAC relies on Dennis v. Fluid Crane and Construction, Inc., 823 F. Supp. 2d 415, (E.D. La. 2011), for the proposition that courts have considered and rejected the “close nexus” requirement. See id. at 419. However, that Louisiana district court case involves a rejection of the Fifth Circuit’s holding in In re John E. Graham, describing the requirement as “dicta.” See Dennis, 823 F. Supp. 2d at 419. The court does not agree: although the court in Dennis stated that In re John E. Graham did not “directly address the types of work to which the TOAIA applies,” the Fifth Circuit explicitly states: “We hold that a contractor is ‘otherwise rendering services in connection with a well’ if the services called for by the contract bear a close nexus to a well and are directed toward the goal of obtaining or maintaining production from a well.” Compare In re John Graham, 210 F.3d at 343 with Dennis, 823 F. Supp.2d at 419 (stating that the defendant’s argument was not persuasive because “defendant merely cites to dicta”). This court is bound by the holding of the Fifth Circuit, and accordingly finds that a close nexus to services directed at obtaining or maintaining production must apply. Finding that a close nexus must apply, the court next turns to whether a nexus exists in this case.

 

*7 The parties dispute whether there is a close nexus to oil production activities. LAC argues that the MSA is covered under the TOAIA because private roads and well pads are necessary infrastructure that supports and are necessary for oil production. Catlin responds that LAC merely purchased and delivered aggregate and did not actually construct roads or well pad sites, and notes that the decedent’s death involved the building of a cattle guard, and was therefore unrelated to oil production. The MSA, not the specific incident involving the death of one of LAC’s employees, controls whether the TOAIA applies. See Tex. Civ. Prac. & Rem. Code 127.003. The MSA does not specifically outline the work LAC was to perform on Wolverine’s behalf, but according to LAC’s former general partner, LAC at the time of the agreement was a trucking company that transported equipment and materials, and Wolverine was a construction company that was a contractor of Shell Oil.36

 

The court finds the MSA is not an agreement “contained in, collateral to, or affecting an agreement pertaining to a well … or to a mine.” See Tex. Civ. Prac. & Rem. Code 127.003. In Coastal Transport Co. v. Crown Central Petroleum Corp., 20 S.W.3d 119 (Tex.App.—Houston [14th Dist.] (2000)), a Texas Court of Appeals considered whether an agreement between Crown Central Petroleum (“Crown Central”), a petroleum company, and a transportation company was void under the TOAIA. Id. at 127. The court noted that the act applied to contracts for services involved in the drilling or servicing of wells, and found that Crown Central was involved in refining, supplying, and transportation of petroleum, and was therefore not involved in the drilling or servicing of wells, so the TOAIA did not apply. Id. Here, Wolverine is a construction company and is similarly not connected to the drilling or servicing of wells. Because there is no close nexus between obtaining or maintaining production from a well, the MSA is not an agreement under the TOAIA. See In re John E. Graham, 210 F.3d at 343.

 

Finding that the TOAIA does not apply to the MSA, the court need not consider whether the safe harbor provision of the TOAIA applies. Similarly, the court need not consider LAC’s argument in the alternative that Catlin’s recovery should be capped at a million dollars, the listed minimum insurance coverage under the MSA. The court accordingly RECOMMENDS that LAC’s motion for summary judgment be DENIED.

 

 

1. Catlin’s Motion for Summary Judgment

Catlin moves for partial summary judgment on all of LAC’s remaining affirmative defenses.

 

 

1. Evidentiary Issues

Before considering the merits of Catlin’s motion, the court addresses LAC’s objections to Catlin’s summary judgment evidence.

 

LAC objects to the declaration of Shelby Thomas, (“Thomas”) a claims examiner who was assigned to the underlying state court lawsuit. LAC specifically objects to Thomas’ declaration that “Demand was made on [LAC] to defend and indemnity (sic) [Wolverine] in connection with the Zapata Lawsuit.”37 Thomas further declares that “LAC refused to defend and indemnify Wolverine in the connection with the Zapata lawsuit.”38 LAC characterizes Thomas’ statement in paragraph 3 as a legal conclusion without supporting facts, and objects to paragraph 4 as a conclusory statement about legal duties. The court does not read these paragraphs as legal conclusions: Thomas was an employee of Catlin and has first-hand knowledge that demand was made and that LAC refused to indemnify Catlin. As Thomas merely states factual information within her personal knowledge, LAC’s objection to these statements is OVERRULED.

 

LAC also objects to Plaintiff’s Exhibit 105-9, which is an expert report regarding the reasonableness of the state court settlement and for the reasonableness of Catlin’s attorneys’ fees and costs prepared by one of Catlin’s expert witnesses. LAC objects to the report on the grounds that it is hearsay. The report is not sworn or authenticated by the expert, nor is it presented in the form of an affidavit. See Duplantis v. Shell Offshore, Inc., 948 F.2d 187, 191 (5th Cir. 1991). The court therefore SUSTAINS LAC’s objection.

 

 

2. Catlin’s Partial Motion for Summary Judgment

*8 Catlin moves for partial summary judgment on each of LAC’s remaining affirmative defenses. LAC responds that the court should deny Catlin’s motion only regarding LAC’s defense that the payment made in the settlement was unreasonable or unnecessary. LAC argues the court should deny Catlin’s motion regarding this defense because Catlin has not presented any competent summary judgment evidence establishing the reasonableness of the settlement. Catlin replies that LAC, not Catlin, has the ultimate burden of proving affirmative defenses, and cannot present evidence supporting its defense.

 

A plaintiff may move for summary judgment on a defendant’s affirmative defenses rather than filing a motion to strike. U.S. ex rel. King v. Solvay S.A., 304 F.R.D. 507, 510 (S.D. Tex. 2015). If the defendant has the ultimate burden of proving an affirmative defense, a plaintiff may satisfy its burden by showing the absence of evidence for an essential element of the defense. Hewlett Custom Home Design, Inc. v. Frontier Custom Builders, Inc., 2013 WL 1194754, at *5 (S.D. Tex. Mar. 21, 2013).

 

Catlin moves for summary judgment on LAC’s affirmative defense under the theory that LAC cannot establish as a matter of law that the settlement was unreasonable. Catlin relies on Amerada Hess Corp. v. Wood Group Production Technology, 30 S.W.3d 5 (Tex. App. —Houston [14th Dist.] 2000), which states that issues regarding the reasonableness of a settlement “are questions upon which the trier of fact must be guided solely by expert testimony.” Id. at 11. Catlin notes that while it has designated an expert witness for this purpose, LAC has not done so and the deadline to do so has now passed.39

 

LAC responds only that Catlin has not presented any credible summary judgment evidence that the settlement was reasonable. As explained above, Catlin need not present evidence but may show an absence of evidence for an essential element of LAC’s defense. Here, LAC asserts that the settlement was unreasonable, but has not designated an expert to address the issue. Catlin is correct that LAC cannot present any evidence to a potential jury. LAC does not attempt to contest Catlin’s motion regarding its other affirmative defenses. Because Catlin has shown that LAC cannot establish its affirmative defenses as a matter of law, the court RECOMMENDS that Catlin’s motion be GRANTED with respect to LAC’s affirmative defenses and that all remaining affirmative defenses be DISMISSED.

 

 

1. Conclusion

Based on the foregoing, the court RECOMMENDS that LAC’s motion to dismiss be DENIED, its motion for summary judgment be DENIED and Catlin’s Partial Motion for Summary Judgment be GRANTED. If this recommendation is adopted, all of LAC’s affirmative defenses will be DISMISSED as a matter of law.

 

The Clerk shall send copies of this Memorandum and Recommendation to the respective parties who have fourteen days from the receipt thereof to file written objections thereto pursuant to Federal Rule of Civil Procedure 72(b) and General Order 2002-13. Failure to file written objections within the time period mentioned shall bar an aggrieved party from attacking the factual findings and legal conclusions on appeal.

 

The original of any written objections shall be filed with the United States District Clerk electronically. Copies of such objections shall be mailed to opposing parties and to the chambers of the undersigned, 515 Rusk, Suite 7019, Houston, Texas 77002.

 

SIGNED in Houston, Texas, this 25th day of July, 2016.

 

All Citations

Slip Copy, 2016 WL 4276131

 

 

Footnotes

1

This case was referred to the undersigned magistrate judge pursuant to 28 U.S.C. § 636(b)(1)(A) and (B), the Cost and Delay Reduction Plan under the Civil Justice Reform Act, and Federal Rule of Civil Procedure 72. Doc. 24.

2

See Doc. 101-1, Ex. A to Def.’s 2nd Am. Mot. for Summ. J., Aff. of Gonzalez ¶¶ 4-5.

3

See id. ¶ 5.

4

See Doc. 1-3, Ex. 3 to Pl.’s Compl., Master Service Agreement p. 4.

5

See id.

6

Id.

7

Id.

8

See Doc. 101-1, Ex. A to Def.’s 2nd Am. Mot. for Summ. J., Aff. of Gonzalez ¶ 12.

9

See Doc. 1-2, Ex. 2 to Pl.’s Compl., Liberty Mutual Insurance Policy p. 2.

10

See Doc. 1-1, Ex. 1 to Pl.’s Compl., Catlin Excess Insurance Agreement p. 2.

11

See id. p. 18.

12

See Doc. 105-3, Ex. 3 to Pl.’s 3rd Mot. for Partial Summ. J., Original Pet. filed in the 293rd District Court on Apr. 15, 2011.

13

See Doc. 105-4, Ex. 4 to Pl.’s 3rd Mot. for Partial Summ. J., Letter Requesting Indemnity dated Sept. 27, 2011.

14

See Doc. 105-2, Ex. 2 to Pl.’s 3rd Mot. for Partial Summ. J., Decl. of Thomas ¶ 4.

15

See Doc. 1, Pl.’s Compl. p. 4.

16

See id.

17

See id. p. 1.

18

See Doc. 40, Def.’s Mot. for Summ. J.

19

See Doc. 44, Pl.’s Cross-Mot. for Partial Summ. J.

20

See Doc. 63, Mem. and Recommendation dated Oct. 9, 2015.

21

See Doc. 67, Order dated Nov. 3, 2015.

22

See Doc. 73, Def.’s 2nd Mot. for Summ. J.

23

See Doc. 86, Pl.’s Cross-Mot. for Summ. J.

24

See Doc. 100, Order dated Apr. 14, 2016.

25

See Doc. 101, Def.’s Am. 2nd Mot. for Summ. J.

26

See Doc. 102-5, Ex. E to Def.’s Mot. to Dismiss, Order for Partial Summ. J.

27

See id.

28

See Doc. 102, Def.’s Mot. to Dismiss.

29

See Doc. 103, Pl.’s Resp. to Def.’s Mot. for Summ. J.; Doc. 104, Pl.’s Am. Mot. for Partial Summ. J.; Doc. 105, P’s 3rd Mot. for Partial Summ. J.

30

See Doc. 106, Pl.’s Resp. to Def.’s Mot. to Dismiss.

31

See Doc. 107, Def.’s Resp. to Pl.’s 3rd Mot. for Summ. J.; Doc. 108, Def.’s Reply to P’s Am. Mot. for Partial Summ. J.

32

See Doc. 109, Pl.’s Am. Resp. to Def.’s Mot. to Dismiss.

33

See Doc. 110, Pl.,’s Reply in Support of its Am. Mot. for Partial Summ. J.; Doc. 111, Pl.’s Reply in Support of its 3rd Mot. for Partial Summ. J.

34

See Doc. 102, Def.’s Mot. to Dismiss pp. 4-5.

35

See Doc. 1-3, Ex. 3 to Pl.’s Compl., Master Service Agreement p. 4.

36

See Doc. 101-1, Ex. A to Def.’s 2nd Am. Mot. for Summ. J., Aff. of Gonzalez ¶¶ 4-5.

37

See Doc. 105-2, Ex. 2 to Pl.’s 3rd Mot. for Summ. J., Decl. of Thomas ¶ 3.

38

See id. ¶ 4.

39

The deadline for an expert witness list was December 1, 2015. See Order dated May 15, 2015, extending deadlines.

United States District Court,

E.D. Missouri, Southeastern Division.

Ronald Calzone, Plaintiff,

v.

Chris Koster, et al., Defendants.

Case No.4:15–cv–869 SNLJ

|

Signed 07/28/2016

Attorneys and Law Firms

David Roland, Mexico, MO, for Plaintiff.

Deborah Bell Yates, Attorney General of Missouri, St. Louis, MO, James R. Layton, Attorney General of Missouri, Jefferson City, MO, for Defendant.

 

 

MEMORANDUM and ORDER

STEPHEN N. LIMBAUGH, JR., UNITED STATES DISTRICT JUDGE

*1 Plaintiff Ronald Calzone brings this lawsuit against defendants Chris Koster, in his official capacity as Attorney General for the State of Missouri, J. Bret Johnson, in his official capacity as Superintendent of the Missouri State Highway Patrol, and Jeremiah W. Nixon, in his official capacity as Governor of the State of Missouri. Plaintiff claims that § 304.230 RSMo is unconstitutional. The parties have filed cross motions for summary judgment.

 

 

1. Factual Background

The facts of this matter are uncontested except where indicated.

 

Plaintiff Calzone was pulled over by a member of the Missouri State Highway Patrol and detained for more than an hour because the officer did not recognize the truck or the markings displayed on the vehicle Calzone was driving. At the time, plaintiff was driving a dump truck that he uses to support his cattle and horse ranch. The truck has Missouri-issued 54,000 lb. local commercial vehicle license plates, and plaintiff has a valid Missouri-issued commercial driver’s license. Plaintiff’s “local” license plates mean that his truck’s operations are limited to within fifty miles of his home, and his truck is subject to biannual inspections made at inspection stations authorized by the Missouri State Highway Patrol.

 

On June 3, 2013, plaintiff took his truck for a successful inspection and also secured his annual registration for the truck, and he also took the truck out to gather gravel for use in his daughter’s chicken coop. At 12:45 p.m. that same day, Corporal J.L. Keathley of the Missouri State Highway Patrol saw Calzone driving on U.S. Highway 63 in Phelps County, Missouri, and pulled him over. The bed of plaintiff’s truck was empty at that time, and it was well within the applicable height, length, and width restrictions for the road on which he was traveling.

 

Corporal Keathley told plaintiff that he pulled him over because he “did not recognize the truck or the markings displayed on the vehicle.” Keathley asked to inspect the truck, as he intended to perform a Level II inspection under the North American Standard Inspection (“NASI”) program, but plaintiff refused and told him he believed the stop was unconstitutional. Keathley then explained that § 304.230 RSMo authorizes the Missouri State Highway Patrol officers to stop commercial vehicles and inspect them whether or not the officer has probable cause to believe a law is being violated. Plaintiff still refused to consent to inspection. Keathley sought and received approval to conduct a motor fuel tax evasion check to see if plaintiff was using dyed motor fuel based on plaintiff’s statement to Keathley that he (plaintiff) was “a hard-headed constitutionalist.” The test showed that plaintiff was not using illegal dyed fuel. Plaintiff says he consented to the test only because Keathley told plaintiff that refusing the test would have “serious consequences with the state and the Internal Revenue Service.” Keathley issued plaintiff a citation for refusal to submit to a commercial motor vehicle inspection and then allowed plaintiff to resume driving at 1:56 p.m.

 

*2 The Phelps County prosecutor initially pursued a conviction against plaintiff for refusing to submit to the commercial motor vehicle inspection, but the prosecution was terminated by nolle prosequi on April 4, 2014.

 

Plaintiff filed this lawsuit against defendants on June 3, 2015, bringing two counts:

Count I is for a declaratory judgment that § 304.230 RSMo is unconstitutional under the Fourth Amendment, Fourteenth Amendment, and Mo. Const. Art. I, § 15.

Count II is for a declaratory judgment that Corporal Keathley violated plaintiff’s rights under the Fourth and Fourteenth Amendments by applying § 304.230 RSMo to seize plaintiff on June 3, 2013.

The parties have filed cross-motions for summary judgment. Notably, plaintiff now states that he challenges the constitutionality of only subsections 1, 2, and 7 of § 304.230.

 

 

1. Legal Standard

Pursuant to Federal Rule of Civil Procedure 56(a), a district court may grant a motion for summary judgment if all of the information before the court demonstrates that “there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law.” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).

 

 

III. The Challenged Statute and Related Statutes

Section 304.230 is titled “Enforcement of load laws—commercial vehicle inspectors, powers.” Plaintiff challenges the constitutionality of §§ 304.230.1, 304.230.2, and 304.230.7 (the “Challenged Subsections”).

 

Section 304.230.1 authorizes members of the Missouri state highway patrol to “conduct random roadside examinations or inspections” and to require a driver to “stop, drive, or otherwise move” a vehicle “to a location to determine compliance with sections 304.170 to 304.230,” explicitly stating that this authority exists “with or without probable cause to believe that the size or weight [of the vehicle] is in excess of that permitted by sections 304.170 to 304.230.”1

 

Section 304.230.2 states that “any highway patrol officer is hereby given the power to stop any such conveyance or vehicle as above described upon the public highway for the purpose of determining whether such vehicle is loaded in excess of the provisions of sections 304.170 to 304.230.”

 

Section 304.230.7 states that the

superintendent may also appoint members of the patrol who are certified under the commercial vehicle safety alliance with the power to conduct commercial motor vehicle and driver inspections and to require the operator of any commercial vehicle to stop and submit to said inspections to determine compliance with commercial vehicle laws, rules, and regulations, compliance with the provisions of sections 303.024 and 303.025, and to submit to a cargo inspection when reasonable grounds exist to cause belief that a vehicle is transporting hazardous materials as defined by Title 49 of the Code of Federal Regulations.

Notably, the Missouri State Highway Patrol participates in the commercial vehicle safety alliance (“CVSA”) referred to in Subsection 7 of the statute. The CVSA sets the standards in association with the goal to promote commercial vehicle safety and security through uniformity, compatibility, and reciprocity of commercial vehicle inspections and enforcement throughout North America. The CVSA, along with the Federal Motor Carrier Safety Administration, administers the North American Standard Inspection (“NASI”) program. Missouri state troopers performing random searches of commercial vehicles do so in accordance with the procedures stated in the NASI program. Here, Corporal Keathley is a Commercial Vehicle enforcement trooper who is certified to conduct such inspections for the Missouri Highway Patrol. Critically, Subsection 7 is distinguishable from Subsections 1 and 2 because any Missouri Highway Patrol officer may conduct a stop under Subsections 1 and 2, but only certified officers (such as Corporal Keathley) may conduct stops and inspections under Subsection 7.

 

 

1. Discussion

*3 The parties have moved for summary judgment on both Counts I and II.

 

 

304. Count I: Constitutionality of §§ 304.230.1, 304.230.2, 304.230.7

Plaintiff’s Count I claims that the Challenged Subsections are facially invalid, which requires plaintiff to establish that no set of circumstances exists under which the statute would be valid. United States v. Salerno, 481 U.S. 739, 745 (1987). Here, plaintiff contends the statute is invalid because it allows suspicionless searches and seizures in violation of the Fourth Amendment.

 

The Fourth Amendment of the United States Constitution prohibits unreasonable searches and seizures both in private and commercial contexts, but the business owner’s expectation of privacy is “different from, and indeed less than, a similar expectation in an individual’s home.” New York v. Burger, 482 U.S. 691, 700 (1987) (citing Donovan v. Dewey, 452 U.S. 594, 598–99 (1981)). “This expectation is particularly attenuated in commercial property employed in ‘closely regulated’ industries.” Id. Indeed, “[c]ertain industries have such a history of government oversight that no reasonable expectation of privacy…could exist for a proprietor over the stock of such an enterprise.” Id. (quoting Marshall v. Barlow’s, Inc., 436 U.S. 307, 313 (1978) (internal citation omitted)). Such “closely regulated” industries include liquor sales, firearms dealing, mining, and running an automobile junkyard. See id. (automobile junkyards); Donovan, 452 U.S. at 606 (mines); Colonnade Corp. v. United States, 397 U.S. 72 (1970) (liquor); United States v. Biswell, 406 U.S. 311 (1972). In such closely regulated industries, warrantless searches are constitutional if three criteria are met:

(1) “there must be a ‘substantial’ government interest that informs the regulatory scheme pursuant to which the inspection is made”;

(2) “the warrantless inspections must be necessary to further the regulatory scheme”; and

(3) “the statute’s inspection program, in terms of the certainty and regularity of its application, must provide a constitutionally adequate substitute for a warrant…In other words, the regulatory statute must perform the two basic functions of a warrant: it must advise the owner of the commercial premises that the search is being made pursuant to the law and has a properly defined scope, and it must limit the discretion of the inspecting officers.”

Burger, 482 U.S. at 702–03 (internal quotations and citations omitted).

 

Defendants contend that commercial trucking is a closely-regulated industry and that the Burger three-part test thus applies. Indeed, at least the First, Fifth, Sixth, Eighth, Ninth, and Tenth Circuits have concluded that commercial trucking is a closely—or pervasively-regulated industry. United States v. Maldonado, 356 F.3d 130, 135 (1st Cir. 2004); United States v. Castelo, 415 F.3d 407, 410 (5th Cir. 2005); United States v. Fort, 248 F.3d 475, 480 (5th Cir. 2001); United States v. Dominguez-Prieto, 923 F.2d 464, 468 (6th Cir.1991); United States v. Mendoza-Gonzalez, 363 F.3d 788, 794 (8th Cir. 2004); United States v. Delgado, 545 F.3d 1195, 1201 (9th Cir. 2008); United States v. Mitchell, 518 F.3d 740, 751 (10th Cir. 2008).

 

*4 Those cases, however, predate the United States Supreme Court’s pronouncement in City of Los Angeles v. Patel, 135 S.Ct. 2443, 2454–55 (2015), that the “closely regulated industry” label is a “narrow exception” and holding that the hotel industry did not constitute such an industry. The Court emphasized that in 45 years, it “has identified only four industries that have such a history of government oversight that no reasonable expectation of privacy could exist,” and that “[s]imply listing these industries refutes petitioner’s argument that hotels should be counted among them.” Id. at 2454 (internal quotation omitted).

 

Plaintiff suggests that the trucking industry—despite the significant number of Circuit Courts declaring otherwise—is not closely regulated to the extent required by Burger. However, the Eighth Circuit has repeatedly held that the commercial trucking industry does constitute a “closely-regulated industry,” and this Court is bound by that determination. See United States v. Ruiz, 569 F.3d 355, 356–57 (8th Cir. 2009);United States v. Mendoza-Gonzalez, 363 F.3d 788, 794 (8th Cir. 2004); United States v. Knight, 306 F.3d 534, 535 (8th Cir. 2002); United States v. Parker, 587 F.3d 871, 878 (8th Cir. 2009). Notably, unlike the hotel industry addressed in Patel, the trucking industry is more closely tied to concerns regarding public safety due to the shared use of roadways between large commercial trucks and smaller private vehicles. The Court will not now deviate from Eighth Circuit precedent.

 

It is also relevant that the Eighth Circuit has upheld similar statutes in Arkansas and Iowa. Ruiz, 569 F.3d at 356–57; Mendoza-Gonzalez, 363 F.3d at 794. Moreover, the Ninth Circuit, interpreting the Missouri statute in a criminal matter, has upheld § 304.230 RSMo as constitutional on its face. Delgado, 545 F.3d at 1203.

 

Before proceeding with the Burger test, the Court addresses plaintiff’s contention that he is not a participant in the “commercial trucking industry” and therefore is not subject to close regulation or the any lowered expectation of privacy. Although plaintiff was not a long-haul common carrier as are many of the litigants involved in the above cases, the fact that plaintiff was driving his dump trunk (and not a tractor-trailer filled with goods for sale) is not relevant to the statute or to the officers who enforce it. Plaintiff admits he held a “commercial” driver’s license and that his truck was similarly registered for “local commercial” use. Section 302.010 RSMo defines “commercial motor vehicle” as “a motor vehicle designed or regularly used for carrying freight and merchandise….” Regardless of to what use plaintiff put the dump truck, the dump truck was “designed” for carrying freight and was in fact registered as a “commercial” vehicle. Plaintiff was therefore on notice that he could be randomly stopped and inspected, just as any other commercial driver would be.

 

Plaintiff similarly suggests that because Subsections 1 and 2 apply broadly to any vehicles, and not just commercial vehicles,2 that they are unconstitutional. Plaintiff, however, is admittedly a commercial driver who was driving a registered commercial vehicle at the time he was stopped by Corporal Keathley. Plaintiff therefore lacks standing to seek redress as though he had not been driving a commercial vehicle. See Hollingsworth v. Perry, 133 S. Ct. 2652, 2662 (2013) (“To have standing, a litigant must seek relief for an injury that affects him in a personal and individual way.”).

 

*5 The Court will analyze each of the Burger test’s three prongs individually.

 

1. Does the regulatory scheme advance a substantial governmental interest? Defendants identify Missouri’s interest as being in the safety of those traveling on its highways and minimizing the destructive impact of overweight vehicles on those highways. As the Missouri Supreme Court has held, “[t]hese are legitimate governmental concerns that are worthy of significant weight in a Fourth Amendment analysis.” State v. Rodriguez, 877 S.W.2d 106, 109 (Mo. banc 1994) (upholding permanent vehicle checkpoints and noting that “[a]s we have said, commercial operators of motor vehicles have low expectations of privacy. The state’s interest in highway preservation and safety are high.”). Indeed, in cases involving similar Arkansas and Iowa statutes, the Eighth Circuit has held that warrantless inspections of commercial trucks advance a substantial governmental interest. Ruiz, 569 F.3d at 357.

 

2. Are the warrantless inspections necessary to further the regulatory scheme? The language used by the Burger court contemplates inspections of premises such as a junkyard at issue in that case, but the question necessarily includes (for cases like this) whether suspicion-less stops are necessary to further the regulatory scheme. Defendants maintain that warrantless stops and inspections are necessary because the industry is mobile and surprise is an important component of an effective inspection regime. Unannounced inspections are essential to deterrence. See, e.g., Burger, 482 U.S. at 710. The Fifth Circuit points out that some commercial vehicle problems may not be immediately apparent to an officer, holding that “[b]ecause of the transitory nature of the commercial trucking industry, we conclude that the need for warrantless stops and inspections is even more compelling than the warrantless inspections of automobile junkyards upheld in Burger.” Fort, 248 F.3d at 481. Again, as the Eighth Circuit has already held, warrantless inspections of commercial trucks are necessary. Ruiz, 569 F.3d at 357.
3. Are the rules governing inspections constitutionally adequate substitutes for a warrant? A warrant, of course, provides notice of a search, limits the time, place, and scope of the search, and limits discretion of inspecting officers. Defendants argue, and other courts agree,3 that the statute and its incorporated CVSA and NASI program standards are an adequate substitute for a warrant. Its reach is limited to commercial vehicles, and commercial vehicle operators are on notice of the inspection authority set forth by the statute. The CVSA administers the North American Standard Inspection (“NASI”) program, which sets standards for safety and uniformity and specifies what the officers must inspect at each level. As the Eighth Circuit held, the “North American Standard Inspection Program for commercial vehicles…adequately limits officer discretion and provides notice to truckers of the possibility of a roadside inspection.” Mendoza-Gonzalez, 363 F.3d at 794. Although the statute “does not designate specific times during which enforcement officers may conduct inspections, as the Sixth Circuit held, ‘[s]uch a limitation would, of course, render the entire inspection scheme unworkable and meaningless. Trucks operate twenty-four hours a day and the officers must, necessarily, have the authority to conduct these administrative inspections at any time.’ ” Ruiz, 569 F.3d at 357 (quoting Dominguez-Preito, 923 F.2d at 470).

 

*6 The Challenged Subsections therefore withstand plaintiff’s constitutional challenge under the Burger test.

 

 

304. Count II: Application of § 304.230 RSMo to Plaintiff

Plaintiff’s complaint clearly states that he seeks a declaratory judgment that Corporal Keathley violated plaintiff’s rights under the Fourth and Fourteenth Amendments by applying § 304.230 RSMo to stop plaintiff on June 3, 2013. Plaintiff specifically complains that his seizure—which lasted longer than one hour—is certainly not justified or acceptable even to the extent courts have held that the Fourth Amendment might permit limited suspicionless seizures of vehicles and/or persons. Plaintiff suggests that although § 304.230 RSMo might be used to justify checkpoints or roadblocks (which result in temporary stops), that statute cannot permit suspicionless seizures performed by roving officers.

 

Plaintiff seeks to bring this claim under 42 U.S.C. § 1983, which provides that an individual may bring a lawsuit against a “person” who, under color of state law, deprives the individual of federal rights. State officials acting in their official capacities are not “persons” capable of being sued under 42 U.S.C. § 1983. See Mayorga v. Missouri, 442 F.3d 1128, 1130 n.2 (8th Cir. 2006). Plaintiff named as defendants the governor, the attorney general, and superintendent of the highway patrol in their official capacities; thus, even accepting all factual allegations as true, plaintiff has not named the proper party (Corporal Keathley) to this action, and defendants’ motion for judgment on the pleadings will be granted.

 

Accordingly,

 

IT IS HEREBY ORDERED that defendants’ motion for summary judgment on Count I and judgment on the pleadings in Count II (#10) is GRANTED.

 

IT IS FURTHER ORDERED that plaintiff’s motion for summary judgment (#14) is DENIED.

 

IT IS FINALLY ORDERED that the parties’ joint motion for amendment of the case management order (#26) is DENIED as moot.

 

All Citations

Slip Copy, 2016 WL 4036898

 

 

Footnotes

1

Sections 304.170 to 304.230 RSMo relate to size and weight limits imposed on commercial vehicles.

2

For example, plaintiff notes that § 304.170, which is referred to in Subsections 1 and 2, explicitly mentions recreational vehicles, which typically would not constitute a commercial vehicle.

3

Parker, 587 F.3d at 878–79 (“we have recognized that the NASIP procedures provide both the adequate notice and limited discretion required under the Burger analysis”); Mendoza-Gonzalez, 363 F.3d at 794; Delgado, 545 F.3d at 1203.