934 F.3d 419
5th Cir.2019Background
- Capsco Industries subcontracted Ground Control to install utility lines on a Biloxi casino; the subcontract was voided because neither party had required certificates of responsibility.
- Ground Control sued in Mississippi state court seeking payment for labor and materials; the Mississippi Supreme Court permitted recovery on unjust enrichment/quantum meruit theories.
- Capsco’s insurers (Greenwich and Indian Harbor) filed a federal declaratory-judgment action seeking a declaration they owed no defense or indemnity; proceedings were stayed pending the state litigation.
- After the state court entered final judgment (award reduced by remittitur to about $199,096, accepted), the district court held insurers had no duty to defend and later no duty to indemnify; final judgment for insurers.
- Ground Control appealed as to Greenwich (no indemnity claim against Indian Harbor) and raised jurisdictional and bias challenges; the Fifth Circuit affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Duty to indemnify under Greenwich policy | Ground Control: payments for labor/supplies included repair of physical property and thus constituted "property damage" caused by an "occurrence" covered by policy | Greenwich: recovery was for economic loss (value of labor/materials under quantum meruit), not physical "property damage" or loss of use, so policy does not apply | No duty to indemnify — recovery was for purely economic loss, not covered "property damage" |
| Which law controls | Ground Control: implicitly contested elements; argued claims should be evaluated based on facts showing physical repair | Insurers: Alabama substantive law governs coverage questions in this diversity action | Alabama law applies; court interprets policy per Alabama law |
| Diversity and subject-matter jurisdiction | Ground Control initially moved to dismiss for lack of diversity | Insurers provided amended complaint and affidavits showing Ground Control members were Alabama citizens when suit was filed | Diversity jurisdiction existed; Fifth Circuit took judicial notice of citizenship |
| Personal jurisdiction challenge | Ground Control: district court lacked personal jurisdiction over Capsco (argued Capsco was a necessary party) | Insurers: Capsco made a general appearance in district court and thus waived personal-jurisdiction defense | Personal-jurisdiction challenge denied as waived by Capsco’s appearance |
Key Cases Cited
- Ground Control, LLC v. Capsco Indus., Inc., 120 So. 3d 365 (Miss. 2013) (state supreme court remanding on quantum meruit/unjust enrichment)
- Ground Control, LLC v. Capsco Indus., Inc., 214 So. 3d 232 (Miss. 2017) (state supreme court ordering remittitur or new trial)
- American States Ins. Co. v. Martin, 662 So. 2d 245 (Ala. 1995) (purely economic losses are not "property damage" under similar liability policy)
- Frank Crain Auctioneers, Inc. v. Delchamps, 797 So. 2d 470 (Ala. Civ. App. 2000) (definition and application of quantum meruit under Alabama law)
- Alabama Hosp. Ass’n Tr. v. Mut. Assurance Soc’y of Ala., 538 So. 2d 1209 (Ala. 1989) (insured bears burden to prove coverage exists)
- Grupo Dataflux v. Atlas Global Group, L.P., 541 U.S. 567 (U.S. 2004) (citizenship for diversity jurisdiction is determined at the time of filing)
- Settlement Funding, L.L.C. v. Rapid Settlements, Ltd., 851 F.3d 530 (5th Cir. 2017) (LLC citizenship is determined by citizenship of each member)