Opinion
NO. 2018-CA-000874-MR
08-30-2019
R.J. CORMAN DERAILMENT SERVICES, LLC, AND R.J. CORMAN RAILROAD GROUP, LLC APPELLANTS v. THE CENTER FOR TOXICOLOGY AND ENVIRONMENTAL HEALTH, LLC APPELLEE
BRIEFS FOR APPELLANTS: William R. Garmer Jerome P. Prather John E. Norman Lexington, Kentucky BRIEF FOR APPELLEE: Samuel D. Hinkle IV Douglas C. Ballantine Christopher E. Schaefer Emily P. Mattingly Louisville, Kentucky
NOT TO BE PUBLISHED APPEAL FROM JEFFERSON CIRCUIT COURT
HONORABLE SUSAN SCHULTZ GIBSON, JUDGE
ACTION NO. 13-CI-005306 OPINION
AFFIRMING
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BEFORE: DIXON, SPALDING, AND TAYLOR, JUDGES. DIXON, JUDGE: R.J. Corman Derailment Services, LLC, and R.J. Corman Railroad Group, LLC, (collectively "Corman") appeal from the Jefferson Circuit Court's orders granting summary judgment in favor of The Center for Toxicology and Environmental Health, LLC, ("CTEH") and denying Corman leave to file an amended cross-claim to allege it was entitled to subrogation under Illinois rather than Kentucky law. After a careful review of the record, we affirm.
The facts and procedure of the underlying action are complex; we will only recite those pertinent to the issues on appeal.
On or about October 29, 2012, a CSX Railroad, Inc., ("CSX") train derailed while traveling on tracks owned by Paducah & Louisville Railway ("P&L") near West Point, Kentucky. Pursuant to a Derailment and Related Services Agreement executed in 2008, P&L contacted Corman who dispatched its employees, Leonard Carrillo and Gregory Powers, to the scene to untangle the cars. Because a car containing butadiene—a highly flammable, heavier than air compound—was breached, CSX hired CTEH to provide air monitoring services. A CTEH technician tested the air near the site of the mangled metal and signaled that the area was safe. Tragically however, shortly after Carrillo began operating his torch, a flash fire erupted, severely injuring both Carrillo and Powers.
Corman's employees worked from a facility in Illinois and, therefore, it purchased a workers' compensation insurance policy that provided Illinois coverage. Corman paid to Carrillo and Powers workers' compensation benefits pursuant to the Illinois Workers' Compensation Act, both directly—meeting its deductible of $500,000 under its workers' compensation insurance policy—and indirectly through payments from its workers' compensation insurance carrier, New Hampshire Insurance Company ("NHI"), totaling more than $834,000.
In October 2013, Carrillo and Powers filed suit in Jefferson Circuit Court against P&L, CSX, CTEH, and others for negligence. In March 2015, P&L and CSX's third-party complaints were filed against Corman for apportionment of liability, as well as indemnity.
In April 2015, counsel for NHI emailed Corman a letter discussing the potential benefits and pitfalls of pursuing subrogation claims under Illinois versus Kentucky law. In May 2015, Corman filed counterclaims and cross-claims against P&L, CSX, and CTEH for indemnity. In its cross-claim against CTEH, Corman admitted "[v]enue is proper in this Court because some or all of the torts alleged in Plaintiffs' Complaint occurred in Jefferson County, Kentucky." While no mention was made concerning the applicability of Illinois law, Corman's prayer for relief requested "[c]redit or offset against any damages claimed by or awarded to the Plaintiffs to the extent that R. J. Corman and/or any third party, collateral source, or other entity has made payments and/or is responsible for making payments to or on behalf of the Plaintiffs, including, but not limited to, any Workers' Compensation benefits paid or payable to the Plaintiffs under KRS Chapter 342." (footnote added).
Kentucky Revised Statutes.
By contrast, the intervening complaint filed by NHI the following day for subrogation from the Defendants for amounts it paid to Plaintiffs for workers' compensation benefits was pled under Illinois law, making no mention of Kentucky law. Numbered paragraph 6 of NHI's complaint states, "[t]he Plaintiffs made claims upon the Intervening Plaintiff for benefits payable pursuant to the workers' compensation law of Illinois and pursuant to the policy of insurance mentioned above." Numbered paragraph 8 of NHI's complaint further states, "[p]ursuant to the previsions [sic] of 820 ILCS 305/5(b) of the Illinois Codes, this Intervening Complaint is allowed to recover from the Defendants all sums not to exceed the indemnity and medical benefits paid and payable to or for the benefit of the Plaintiffs under the workers' compensation law of Illinois."
Illinois Compiled Statutes.
In November 2016, Plaintiffs CSX, P&L, and CTEH reached a confidential settlement agreement regarding all claims amongst themselves. NHI also resolved Plaintiffs' workers' compensation claims, waived its subrogation lien, and dismissed its intervening complaint over Corman's objection.
In May 2017, Corman filed a cross-claim against NHI asserting various claims, including breach of contract, bad faith, and others. Pertinent to this appeal, numbered paragraph 8 of Corman's cross-claim states, "[u]nder Kentucky law, Corman had a right to subrogation for all amounts it paid as workers' compensation benefits from the parties primarily liable for the injuries to Powers and Carrillo: CTEH, CSX, and P&L." NHI moved to dismiss Corman's cross-claim. On February 7, 2018, the trial court entered an opinion and order finding Corman could not maintain a breach of contract action against NHI because "neither [NHI] nor Corman are entitled to recovery under KRS 342.700(1)."
In the wake of the trial court's order finding Corman was not entitled to recovery under KRS 342.700(1), CTEH moved for summary judgment on the claims filed against it by Corman. While this motion for summary judgment was pending, Corman sought leave to file an amended cross-claim, the purpose of which was purportedly "to more specifically describe the relationship among [NHI], Lexington Insurance Co. (RJ Corman's general liability carrier), and AIG, at the time of the secret settlement agreement at issue in this claim." However, in the contents of its amended cross-claim, Corman asserted that it was pursuing its workers' compensation subrogation claim under Illinois law rather than Kentucky law. Due to Corman's undue delay in proposing this amendment and the substantial prejudice it would cause to CTEH, the trial court denied Corman's motion to amend its cross-claim. In the same order, the trial court granted CTEH summary judgment, finding Kentucky law both governed and extinguished Corman's subrogation claim. Corman moved the trial court to reconsider its order claiming it believed the trial court did not read its reply brief before entering its order. The trial court denied Corman's motion to reconsider. This appeal followed.
On appeal, Corman raises three arguments: the trial court erred in (1) its suggestion the "law of the case" was that Kentucky subrogation law applied to Corman's claims against CTEH; (2) finding Corman had not alleged that Illinois law applied to its claims; and (3) denying Corman's motion for leave to file an amended cross-claim. We will address each issue, in turn.
Corman's first two arguments allege that the trial court erred in its grant of summary judgment to CTEH. The standard of review of a trial court's grant of summary judgment is well-settled. Summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, stipulations, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." CR 56.03. It is well-established that a party responding to a properly supported summary judgment motion cannot merely rest on the allegations in his pleadings. Continental Casualty Co. v. Belknap Hardware & Mfg. Co., 281 S.W.2d 914, 916 (Ky. 1955). "[S]peculation and supposition are insufficient to justify a submission of a case to the jury, and . . . the question should be taken from the jury when the evidence is so unsatisfactory as to require a resort to surmise and speculation." O'Bryan v. Cave, 202 S.W.3d 585, 588 (Ky. 2006) (citation omitted). "'Belief' is not evidence and does not create an issue of material fact." Humana of Kentucky, Inc. v. Seitz, 796 S.W.2d 1, 3 (Ky. 1990); see also Haugh v. City of Louisville, 242 S.W.3d 683, 686 (Ky. App. 2007) ("A party's subjective beliefs about the nature of the evidence is not the sort of affirmative proof required to avoid summary judgment."). Furthermore, the party opposing summary judgment "cannot rely on the hope that the trier of fact will disbelieve the movant's denial of a disputed fact, but must present affirmative evidence in order to defeat a properly supported motion for summary judgment." Steelvest, Inc. v. Scansteel Serv. Ctr., Inc., 807 S.W.2d 476, 481 (Ky. 1991) (internal citations and quotation marks omitted). "[T]he proper function of summary judgment is to terminate litigation when, as a matter of law, it appears it would be impossible for the respondent to produce evidence at trial warranting judgment in his favor." Steelvest, 807 S.W.2d at 480.
Kentucky Rules of Civil Procedure.
An appellate court's role in reviewing an award of summary judgment is to determine whether the trial court erred in finding no genuine issue of material fact exists and that the moving party was entitled to judgment as a matter of law. Scifres v. Kraft, 916 S.W.2d 779, 781 (Ky. App. 1996). A grant of summary judgment is reviewed de novo because factual findings are not at issue. Pinkston v. Audubon Area Community Serv., Inc., 210 S.W.3d 188, 189 (Ky. App. 2006) (citing Blevins v. Moran, 12 S.W.3d 698 (Ky. App. 2000)).
Herein, because the trial court granted summary judgment to CTEH, we review the facts in a light most favorable to Corman and resolve all doubts in its favor. Applying the Steelvest standard, we agree with the trial court that there was no genuine issue of material fact, and Corman and did not, and indeed could not, carry its burden. Therefore, we conclude that summary judgment was properly granted to CTEH.
Corman first argues that the trial court erred in its suggestion that Kentucky subrogation law was the "law of the case" applicable to Corman's claims against CTEH. Corman asserts that the trial court "made a fundamental error when it concluded, on summary judgment, that Kentucky law rather than Illinois law applied to R.J. Corman's workers' compensation subrogation claims." Corman alleges that the trial court suggested in its memorandum and order denying Corman's motion to reconsider that it was bound by the law of the case doctrine to its prior statement that "neither New Hampshire nor R.J. Corman are entitled to recovery under KRS 342.700(1)." In its order the trial court stated:
As a general rule, "[t]he doctrine of law of the case establishes a presumption that a ruling made at one stage of a lawsuit will be adhered to throughout the lawsuit. Hallahan v. The [Courier-Journal, 138 S.W.3d 699, 706] (Ky. App. 2004). However, a judge does have the discretionary authority to reconsider a ruling. Ibid.
"Generally, a judge may reexamine an earlier ruling and rescind it if he [or she] has a reasonable conviction that it was wrong and it would not cause undue prejudice to the party that benefited from it." Ibid. Moreover, "[i]t is well established that a trial court may reconsider and grant summary judgment to a party subsequent to an earlier denial." Ibid.
While it is true that under CR 54.02 the trial court retains broad discretion to revisit its interlocutory rulings at any time prior to the entry of a final judgment[, that] discretion is properly invoked only when there is a bona fide reason for it, i.e., a reason the court has not already considered. See Tax Ease Lien Investments 1, LLC v. Brown, 340 S.W.3d 99 (Ky. App. 2011); Bank of Danville v. Farmers National Bank of Danville, 602 S.W.2d 160 (Ky. 1980). Otherwise a motion to reconsider amounts to no more than badgering the court, a practice that could well be deemed a violation of Civil Rule 11.
The trial court's language clearly acknowledges that the law of the case doctrine operates as a presumption and that it has the discretion to revisit prior rulings when a bona fide reason, not previously considered, is presented. It is also clear from its language that the trial court considered whether Kentucky or Illinois law applied to the workers' compensation subrogation claims. Thus, the trial court did not rely upon "the law of the case" doctrine in reaching its decision. Moreover, while noting Corman had never argued that Illinois law should apply to this action until after the court had ruled against it on the basis of Kentucky law, the court nevertheless analyzed the issues pursuant to choice of law considerations. It was based upon this analysis that the trial court ruled against Corman rather than pursuant to "law of the case" doctrine, as will be subsequently addressed.
Moore v. Commonwealth, 357 S.W.3d 470, 496-97 (Ky. 2011), as modified on denial of reh'g (Nov. 23, 2011).
The Court does note that it did not reference Corman's reply in its previous Memorandum and Order. The Court has reviewed the reply and has provided it due consideration. The Court has also reviewed and provided due consideration to the parties' briefs and arguments with respect to the present motion. The Court is not persuaded by the arguments of Corman that a reconsideration of the prior ruling is warranted.
Corman next contends that the trial court erred when it found Corman had not alleged that Illinois law applied to its claims. Corman neither pled nor proved the law of Illinois regarding its subrogation rights. "[T]he law of a sister state, if relied upon, must be both plead and proven." Employer's Liability Corp. v. Webb, 283 Ky. 115, 140 S.W.2d 825, 826 (1940). In its cross-claims and counterclaims against CTEH, Corman did not mention the application of Illinois law but, rather, pled for relief under Kentucky law. The choice of law issue was brought to Corman's attention by NHI's counsel prior to Corman's decision to pursue relief from the Defendants under Kentucky law. The day after Corman filed its cross-claim against CTEH, NHI filed its intervening complaint pleading Illinois law for its subrogation claim. Corman had ample time and opportunity to amend its claims to plead and prove applicability of Illinois law prior to the trial court's decision to apply Kentucky law as originally pled by Corman.
In an effort to claim it pled Illinois law, Corman refers to numbered paragraph 1 of its cross-claim against NHI, which states it was "responsible to Powers and Carrillo under the workers' compensation laws of the State of Illinois." However, numbered paragraph 8 of the same cross-claim also states, "[u]nder Kentucky law, Corman had a right to subrogation for all amounts it paid as workers' compensation benefits from the parties primarily liable for the injuries to Powers and Carrillo: CTEH, CSX, and P&L." The trial court found that it was not until Corman sought to amend its cross-claims against NHI that it first attempted to plead that Illinois law was applicable to its subrogation claims. The record reflects that Corman's only prior assertion that the calculation of its subrogation claim should have been made under Illinois law, rather than Kentucky law, was in its response to CTEH's motion for summary judgment, filed only nine days prior to its request for leave to file its amended cross-claim. Therefore, any error in the trial court's finding regarding the timing of when Corman belatedly asserted applicability of Illinois law, as opposed to Kentucky law, to its subrogation claim was harmless.
Corman also asserts that "[t]here never has been a full choice of law analysis in this case, because the issue was never briefed except on R.J. Corman's motion to reconsider following the Court's order granting summary judgment to CTEH." This contention is disingenuous at best. While it is true that Corman's choice of law argument was not presented until well after its initial claims for subrogation were asserted, it is not true that Corman was deprived of a "full choice of law analysis." Review of the record indicates that the trial court applied Kentucky law to the subrogation claims in its February 7, 2018, order with full knowledge that the workers' compensation benefits were paid pursuant to the Illinois Workers' Compensation Act. The choice of law issue was raised by NHI in its reply in support of its motion to dismiss Corman's claims against it. Nothing prevented Corman from seeking permission from the court to file a sur-reply concerning its choice of law argument at that time. The trial court was briefed on Corman's choice of law argument thereafter in its response to CTEH's motion for summary judgment. The trial court's subsequent order denying Corman's motion to amend its cross-claim and granting CTEH's motion for summary judgment further analyzed the choice of law applicable to the subrogation claims. Corman then presented further argument concerning choice of law in its motion to reconsider the trial court's order, which was again addressed in the trial court's order denying reconsideration.
Corman argues that Illinois subrogation law applies because the Plaintiffs' employment contracts arose in Illinois. Corman cites Employer'sLiability Corp. v. Webb, 283 Ky. 115, 140 S.W.2d 825 (1940), for the proposition that "workers' compensation subrogation is controlled by the law of the state where the employment contract arose." Corman also relies on Harris Corp. v. Comair, Inc. 712 F.2d 1069, 1072 (6th Cir. 1983). However, the trial court cited and followed Reichwein v. Jackson Purchase Energy Corp., 397 S.W.3d 413, 416 (Ky. App. 2012), which takes a different approach to the choice of law analysis than Webb and Harris. The trial court's decision to apply Reichwein and Kentucky law was within its discretion.
In Reichwein, another panel of our court held:
[t]he initial question is whether the trial court properly applied Kentucky law or, as the estate argues, Minnesota law should have been applied because Andrew was a Minnesota resident who entered into an employment contract in Minnesota with a Minnesota employer. The estate alleges that under Minnesota law, its claims would not be precluded by provisions similar to those in Kentucky's Workers' Compensation Act.
Citing Harris Corp. v. Comair, Inc. 712 F.2d 1069, 1072 (6th Cir.1983), an action for indemnity, and non-published federal law, the estate argues that where the employment contract was entered into in a state other than Kentucky, the laws of that state are implicitly incorporated into that agreement and control. It contends that under Kentucky's choice of law test, Minnesota has the most significant relationship to the transaction and the parties. Lewis v. American Family Ins. Group, 555 S.W.2d 579, 581 (Ky. 1977).
In an unpublished opinion, this Court rejected an identical argument. Because no published case directly
addresses the issue and the case aptly sets forth the law, we quote and reaffirm its reasoning:
If this were a contract action, [Appellant] would be correct that the law of the state with the greatest interest in the outcome of the litigation should be applied. See Breeding v. Massachusetts Indemnity & Life Ins. Co., 633 S.W.2d 717 (Ky. 1982). However, as a tort action, Kentucky case law clearly holds that any significant contact with Kentucky is sufficient to allow an application of Kentucky law. See Foster v. Leggett, 484 S.W.2d 827 (Ky. 1972) (holding that the fact a Kentucky resident was killed in an automobile accident which occurred in Ohio was enough contact to justify the application of Kentucky law, even though the accident was in Ohio and the tortfeasor was an Ohio resident.) As this is an action in tort, "[w]hen the Court has jurisdiction of the parties its primary responsibility is to follow its own substantive law." See Foster, 484 S.W.2d at 829. Further, our Supreme Court has stated that "[l]aws unique to other jurisdictions, e.g., regarding statutes of limitations, interspousal immunity, worker's compensation, and comparative or contributory negligence, should not bind and define the public policy of Kentucky." United States Fidelity & Guaranty Co. v. Preston, 26 S.W.3d 145, 147-148 (Ky. 2000).
Petronis v. Churchill Downs, Inc., 2007 WL 1520018, *2 (Ky. App. 2007) (2005-CA-001925-MR).
In Petronis, this Court held that although the injured employee was domiciled in New York, her employment agreement was entered into in that state, and she was covered by workers' compensation in New York, the occurrence of her injury in Kentucky was sufficient contact for the Kentucky court to apply Kentucky law, including the exclusive remedy provisions of KRS
342.690(1). Id. at *3. We reach the same conclusion in this case. Andrew's fatal injury occurred in Kentucky and, therefore, under Kentucky's choice of law rules applicable to tort actions, Kentucky law applies.Id. at 416-17 (emphasis added). Because the instant action—and more specifically, Corman's claim against CTEH—arises in tort which occurred in Kentucky, and Corman neither pled nor proved the applicability of Illinois law to its subrogation claim, we cannot say the trial court erred in its application of Kentucky law to the subrogation claim.
Corman's final argument is that the trial court erred in denying its motion for leave to file an amended cross-claim. Denial of a motion to amend under CR 15.01 is reviewed for an abuse of discretion. Graves v. Winer, 351 S.W.2d 193, 197 (Ky. 1961). Abuse of discretion occurs when the trial court's ruling is "arbitrary, unreasonable, unfair, or unsupported by sound legal principles." Commonwealth v. English, 993 S.W.2d 941, 945 (Ky. 1999). Mere doubt as to the correctness of a trial court's finding is insufficient to justify reversal. Moore v. Asente, 110 S.W.3d 336, 354 (Ky. 2003).
We discern no abuse of discretion in the trial court's denial of the motion to amend. As the trial court correctly concluded, Corman's subrogation right against CTEH is governed by Kentucky law, rather than Illinois law. Amendment would, therefore, have been futile. In addition, the claims raised in the amended cross-claim were vastly different from those raised initially—and they were untimely raised—therefore, permitting them to proceed would have resulted in undue prejudice to CTEH under the circumstances, considering the procedural posture of the case. CR 15.01 requires leave to amend be freely granted "when justice so requires." That simply was not the case in this action. We conclude that the trial court acted within its broad discretion in denying leave to file the amended counterclaim.
For the foregoing reasons, the judgment of the Jefferson Circuit Court is affirmed.
TAYLOR, JUDGE, CONCURS.
SPALDING, JUDGE, CONCURS IN RESULT ONLY AND FILES A SEPARATE OPINION. SPALDING, JUDGE, CONCURRING IN RESULT ONLY: I agree that the result of the Jefferson Circuit Court judgment in this matter was not in error. However, I believe that the Jefferson Circuit Court erred in its choice of law. It is my opinion the precedent of Employer's Liability Corporation v. Webb, 283 Ky. 115, 140 S.W.2d 825 (1940), is controlling and the proper choice of law would have been that of Illinois.
The facts in Webb are essentially the same as the facts in this action. An employee of a foreign employer was working in the Commonwealth of Kentucky. The employee was injured by the negligence of a third party. The highest court of Kentucky at that time endorsed the provision "[t]hat the insurer's right to subrogation is based on statutes, wherein the right is fixed." Id. at 827. In this matter, that would be Illinois as that is the law by which the compensation benefits were paid. There has been no decision from the Kentucky highest court since that time to ever change that rule of law. It may be argued that in cases such as Reichwein v. Jackson Purchase Energy Corporation, 397 S.W.3d 413 (Ky. App. 2012) that this precedent has not been followed recently by the courts of the Commonwealth. However, I do not believe until the Kentucky Supreme Court revisits the issue we are at liberty to ignore the precedent of Webb.
I do concur in the result in this matter as I am persuaded by the arguments of the appellee that appellant would not be entitled to indemnity against the Center for Toxicology and Environmental Health, LLC (CTEH). Under Illinois law, Section 5(b) of the Illinois Workers' Compensation Act states, in relevant part, as follows:
Where the injury or death for which compensation is payable under this Act was caused under circumstances creating a legal liability for damages on the part of some person other than his employer to pay damages, then legal proceedings may be taken against such other person to recover damages . . . . [H]owever, if the action against such other person is brought by the injured employee . . . and judgment is obtained and paid, or settlement is made with such other person . . . then from the amount received by such employee . . . there shall be paid to the
employer the amount of compensation paid . . . by him to such employee . . . .(Emphasis added).
From the Illinois statute, it appears there would be no recovery available against CTEH in this case. Hence, I would affirm the result of the Jefferson Circuit Court in its granting of summary judgment in favor of appellee. BRIEFS FOR APPELLANTS: William R. Garmer
Jerome P. Prather
John E. Norman
Lexington, Kentucky BRIEF FOR APPELLEE: Samuel D. Hinkle IV
Douglas C. Ballantine
Christopher E. Schaefer
Emily P. Mattingly
Louisville, Kentucky