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Yearta v. Amusements of America, Inc.

United States District Court, W.D. Tennessee, Western Division

January 6, 2020

EDWARD ALAN YEARTA, Plaintiff,
v.
AMUSEMENTS OF AMERICA, INC.; DELTA FAIR, INC.; UNIVERSAL FAIRS, LLC; and BELLE CITY AMUSEMENTS, INC., Defendants.

          ORDER

          SAMUEL H. MAYS, JR. UNITED STATES DISTRICT JUDGE.

         Before the Court are three motions. The first is Cross-Defendant Belle City Amusements, Inc.'s (“Belle City”) January 4, 2019 Motion for Summary Judgment. (ECF No. 101.) Amusements of America, Inc. (“AOA”) and Delta Fair, Inc. have brought crossclaims against Belle City for indemnity and defense. Belle City seeks summary judgment on those crossclaims on the ground that Belle City's contract with AOA does not obligate it to indemnify or defend AOA and Delta Fair for their losses in this litigation. AOA and Delta Fair responded on February 1, 2019. (ECF No. 103.) Belle City replied on February 15, 2019. (ECF No. 104.)

         The second motion is AOA and Delta Fair's January 18, 2019 Motion to Dismiss. (ECF No. 102.) AOA and Delta Fair seek the voluntary dismissal without prejudice of their crossclaims against Belle City. Belle City responded on February 15, 2019. (ECF No. 105.) AOA and Delta Fair replied on February 28, 2019. (ECF No. 108.)

         The third motion is AOA and Delta Fair's April 17, 2019 Motion to Substitute Liberty Corporate Capital, Ltd. (ECF No. 113.) AOA and Delta Fair seek to substitute their insurer, Liberty Corporate Capital, Ltd. (“Liberty”), in their place. They ask that, if the Court substitutes Liberty, it also grant Liberty leave to amend the crossclaims against Belle City and add new claims against ACE American Insurance Company (“ACE”), Belle City's insurer, which is not currently a party to this suit. Belle City responded on May 1, 2019. (ECF No. 115.) AOA and Delta Fair replied on May 15, 2019. (ECF No. 118.)

         For the following reasons, Belle City's Motion for Summary Judgment is DENIED. AOA and Delta Fair's Motion to Dismiss is DENIED. AOA and Delta Fair's Motion to Substitute is GRANTED IN PART and DENIED IN PART.

         I. Background

         This suit began as a tort case but has become an indemnity dispute. It arises from the electrocution of Edward Alan Yearta at the Delta Fair & Music Festival (the “Fair”) in Memphis, Tennessee on August 30, 2016. (ECF No. 103-1 ¶ 2.) The Fair was a large event that included several promoters, contractors, and vendors. Three of those companies are currently parties to this lawsuit: (1) Delta Fair, the entity that hosted the Fair; (2) AOA, a provider and operator of amusement park rides that contracted with Delta Fair to provide rides for the Fair; and (3) Belle City, a provider and operator of amusement park rides that subcontracted with AOA to provide certain rides for the Fair. (Id. ¶¶ 9, 14, 20.)

         On August 30, 2016, Yearta was setting up a ride at the Fair, the Alpine Bob. (Id. ¶¶ 2-3.) Yearta was an employee of Prime Time Amusements, a non-party contractor at the Fair. (Id. ¶ 3.) At the same time Yearta was setting up the Alpine Bob, AOA employees were setting up an AOA-owned ride, the Ring of Fire. (Id. ¶ 4.) The Alpine Bob and the Ring of Fire were both plugged into a generator owned by Belle City. (Id. ¶¶ 3-4.) As AOA employees were constructing the Ring of Fire, the ride collided with an overhead power line. (Id. ¶ 5.) Electricity from the power line flowed through the Ring of Fire, through Belle City's generator, through the Alpine Bob, and into Yearta. (Id.) Yearta was injured. (Id. ¶ 2.)

         Yearta filed a Complaint on February 21, 2017, which he amended on June 2, 2017. (ECF Nos. 1, 25.) Yearta alleged that AOA, Delta Fair, Belle City, and Universal Fairs, LLC (collectively, the “Defendants”) negligently caused his injuries. (ECF No. 25 ¶¶ 46-59.) At an October 24, 2018 mediation, Yearta agreed to settle his claims against the Defendants. (ECF No. 103-1 ¶ 26.) A settlement agreement releasing Yearta's claims was executed on December 6, 2018. (ECF No. 104-1 ¶ 29.) The settlement agreement gave Yearta the right to purchase an annuity funded by the settlement proceeds. (Id. ¶ 35.) That annuity was funded on or around December 27, 2018. (Id.) Liberty, AOA and Delta Fair's insurer, paid the entire $2, 075, 000 settlement amount. (Id. ¶ 33.) The Court dismissed Yearta's claims on April 3, 2019. (ECF No. 112.)

         The only claims remaining are AOA and Delta Fair's crossclaims against Belle City. AOA filed its crossclaim on June 16, 2017 and filed an amended crossclaim on July 14, 2017. (ECF Nos. 31, 42.) Delta Fair filed its crossclaim on September 4, 2018. (ECF No. 96.) AOA and Delta Fair seek indemnity and defense from Belle City for their losses in this litigation pursuant to a July 24, 2016 Independent Attraction Contract (“IAC”) between AOA and Belle City that set out the terms of Belle City's subcontracting engagement with AOA. (ECF No. 42-2.) AOA drafted the IAC. (ECF No. 103-1 ¶ 19.) The IAC obligated Belle City to provide eight rides at the Fair.[1] (ECF No. 42-2 ¶ 3.) The IAC's indemnity clause states:

SUBCONTRACTOR [Belle City] further agrees to indemnify and defend AMUSEMENTS OF AMERICA, VIVONA FAMILY ENTERTAINMENT, DELTA FAIR INC., AGRICENTER INTERNATIONAL, SHELBY COUNTY GOVERNMENT and its officers, employees, agents and other subcontractors for, and to hold AMUSEMENTS OF AMERICA, VIVONA FAMILY ENTERTAINMENT, DELTA FAIR INC., AGRICENTER INTERNATIONAL, SHELBY COUNTY GOVERNMENT and its officers, employees, agents and other subcontractors harmless against, any and all injuries, claims, losses or liabilities which result from any acts or omissions of SUBCONTRACTOR or of any [of] SUBCONTRACTOR'S employees, agents or subcontractors in connection with the engagements hereunder or which may otherwise arise in connection with the SUBCONTRACTOR'S engagement hereunder.

(Id. ¶ 17.) The IAC's choice-of-law clause states that the “agreement shall be deemed made in the State of New Jersey and shall be construed in accordance with the laws of New Jersey.” (Id. ¶ 21.)

         II. Jurisdiction and Choice of Law

         The Court has found that it has diversity jurisdiction over this action. (ECF No. 112 at 4-5.) Following the Court's April 3, 2019 dismissal of Yearta, the Court retains supplemental jurisdiction over the indemnity crossclaims pursuant to 28 U.S.C. § 1367. See 6 Charles A. Wright et al., Federal Practice and Procedure § 1433 (3d ed. 2019) (noting that “crossclaims under Rule 13(g) fall within the ancillary jurisdiction of the court” as codified in 28 U.S.C. § 1367 “and need not present independent grounds of federal jurisdiction”); see also Progressive Cas. Ins. Co. v. Belmont Bancorp, 199 F.R.D. 219, 223 (S.D. Ohio 2001) (“If a cross-claim is brought under the ‘same core of facts' as the original complaint, a court needs no further basis for jurisdiction.”) (quoting Lasa Per L'Industria Del Marmo Societa v. Alexander, 414 F.2d 143, 146 (6th Cir. 1969)); Coleman v. Casey Cty. Bd. of Educ., 686 F.2d 428, 430 (6th Cir. 1982) (“[T]he federal court may adjudicate a cross-claim because of its relationship to the main action for which federal jurisdiction is proper.”).

         State substantive law applies to state law claims in federal court. See Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78-80 (1938). When there is no dispute that a certain state's substantive law applies, the court need not conduct a choice-of-law analysis sua sponte. See GBJ Corp. v. E. Ohio Paving Co., 139 F.3d 1080, 1085 (6th Cir. 1998). The parties agree in their respective memoranda that New Jersey substantive law governs AOA and Delta Fair's crossclaims under the IAC, which contains a choice-of-law clause selecting New Jersey law. (ECF No. 101-1 at 7; ECF No. 103 at 12.) The Court applies New Jersey law to AOA and Delta Fair's crossclaims.

         III. Standard for Summary Judgment

         Under Federal Rule of Civil Procedure 56, a court must grant a party's motion for summary judgment “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). The moving party must show that the nonmoving party, having had sufficient opportunity for discovery, lacks evidence to support an essential element of its case. See Fed.R.Civ.P. 56(c)(1); Peeples v. City of Detroit, 891 F.3d 622, 630 (6th Cir. 2018).

         When confronted with a properly supported motion for summary judgment, the nonmoving party must set forth specific facts showing that there is a genuine dispute for trial. See Fed.R.Civ.P. 56(c). “A genuine dispute exists when the plaintiff presents significant probative evidence on which a reasonable jury could return a verdict for her.” EEOC v. Ford Motor Co., 782 F.3d 753, 760 (6th Cir. 2015) (en banc) (internal quotation marks and citation omitted). The nonmoving party must do more than simply “‘show that there is some metaphysical doubt as to the material facts.'” Lossia v. Flagstar Bancorp, Inc., 895 F.3d 423, 428 (6th Cir. 2018) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986)).

         When considering whether to grant summary judgment, the court should “consider the evidence in the light most favorable to the non-moving party and draw all reasonable inferences in that party's favor.” McKay v. Federspiel, 823 F.3d 862, 866 (6th Cir. 2016). “Summary judgment is appropriate where reasonable minds could not disagree as to the conclusion to be drawn from the evidence.” FDIC v. Jeff Miller Stables, 573 F.3d 289, 299 (6th Cir. 2009). Although summary judgment must be used carefully, it “is an integral part of the Federal Rules as a whole, which are designed to secure the just, speedy, and inexpensive determination of every action[, ] rather than a disfavored procedural shortcut.” Id. at 294 (quotation marks and citations omitted).

         IV. Analysis

         A. AOA and Delta Fair's Motion to Substitute

         AOA and Delta Fair move to substitute their insurer Liberty in their place in this litigation. (ECF No. 113.) As an alternative request for relief, Liberty moves to intervene under Rule 24 of the Federal Rules of Civil Procedure. (Id.) AOA and Delta Fair also request that, if the Court grants their motion to substitute Liberty, it also grant Liberty leave to amend the crossclaims against Belle City and add new claims against ACE. (Id.) Belle City does not oppose AOA and Delta Fair's request to substitute Liberty. (ECF No. 115 at 1.) Belle City does oppose AOA and Delta Fair's request that the Court grant Liberty leave to amend. (Id.)

         1. Substitution of Liberty for AOA and Delta Fair

         Federal Rule of Civil Procedure 25(c) provides for the substitution of parties when a transfer of interest has occurred after a suit is filed. See 7C Charles Alan Wright et al., Federal Practice and Procedure § 1958 (3d ed. 2019). Rule 25(c) states:

If an interest is transferred, the action may be continued by or against the original party unless the court, on motion, orders the transferee to be substituted in the action or joined with the original party. The motion must be served as provided in Rule 25(a)(3).

Fed. R. Civ. P. 25(c). Rule 25 “is merely a procedural device designed to facilitate the conduct of a case, and does not affect the substantive rights of the parties or the transferee.” Iron Workers Local No. 25 Pension Fund v. Watson Wyatt & Co., No. 04-cv-40243, 2008 WL 1924884, at *1 (E.D. Mich. Apr. 30, 2008) (citing 6 James Wm. Moore et al., Moore's Federal Practice § 25.32 (3d ed. 2010)). It “does not require that parties be substituted or joined after an interest has been transferred.” The Charter Oak Fire Ins. Co. v. SSR, Inc., No. 11-cv-0118, 2015 WL 10890126, at *4 (E.D. Ky. July 13, 2015). “An order of joinder is merely a discretionary determination by the trial court that the transferee's presence would facilitate the conduct of the litigation.” 7C Wright et al., supra, § 1958.

         In a diversity case, the substantive law of the forum state determines the real party in interest. See Certain Interested Underwriters at Lloyd's v. Layne, 26 F.3d 39, 42-43 (6th Cir. 1994) (“[T]he real party in interest is the person who is entitled to enforce the right asserted under governing substantive law. . . . Of course, the governing substantive law in diversity actions is state law.”) (citations omitted). In Tennessee, “upon payment of a loss, an insurance carrier becomes the real party in interest with respect to its subrogation claim.” Solectron USA, Inc. ex rel. Fidelity & Deposit Co. of Md. v. FedEx Ground Package Sys., Inc., 520 F.Supp.2d 904, 911 (W.D. Tenn. 2007) (quoting Kentucky Nat'l Ins. Co. v. Gardner, 6 S.W.3d 493, 499 (Tenn. Ct. App. 1999)). “Immediately upon the payment of [a claim], ” insurance companies are “subrogated to the rights of their insureds, ” and are “the real plaintiffs in interest.” Id. (quoting Nat'l Cordova Corp. v. City of Memphis, 380 S.W.2d 793, 796-97 (Tenn. 1964)).

         Liberty paid the entire settlement between Yearta and the Defendants. (ECF No. 104-1 ¶ 33.) It is now the real party in interest as to AOA and Delta Fair's indemnity crossclaims against Belle City.[2] The Court grants AOA and Delta Fair's request to substitute Liberty and directs the Court Clerk to alter the case caption accordingly.

         Because the Court grants AOA and Delta Fair's motion to substitute Liberty, it need not consider Liberty's alternative request to intervene under Rule 24. (See ECF No. 113-1 at 14-17.) Substitution is the appropriate remedy here. See Ray Capital, Inc. v. M/V Newlead Castellano, No. 16-cv-0093, 2017 WL 4079082, at *5 (S.D. Ga. Sept. 13, 2017) (noting that a “motion to intervene [] based on a transfer of one or more of the Defendants' interests” is “more properly considered a motion to substitute pursuant to Rule 25(c)”). The Motion to Substitute is GRANTED as to the substitution of Liberty.

         2. ...


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