Charmed Entm't, LLC v. Primeone Ins. Co.

OPINION AND ORDER DENYING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT [18] AND DENYING PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT [17]

LAURIE J. MICHELSON UNITED STATES DISTRICT JUDGE

After Charmed Entertainment LLC's commercial establishment was damaged in a fire, it asked its insurer, PrimeOne Insurance Company, to pay for its losses under the insurance policy. PrimeOne refused, claiming that Charmed made material misrepresentations when securing the policy. So Charmed sued for breach of contract in state court. (ECF No. 1-2, PageID.9-11.) PrimeOne then removed the case to federal court. (ECF No. 1, PageID.1-4.)

In time, PrimeOne moved for summary judgment, arguing that the Court should find its rescission of the insurance contract appropriate. (See ECF No. 18.) Charmed moved for partial summary judgment on the issue of rescission as well. (See ECF No. 17.) The Court finds these motions have been adequately briefed and will rule without hearing. See E.D. Mich. 7.1(f).

For the reasons discussed below, the Court finds that triable issues of fact remain as to whether Charmed's misrepresentations were material. So both motions will be denied.

I. Background

The undisputed facts, unless otherwise noted, are as follows.

Charmed Entertainment is a limited liability company that owned an adultentertainment establishment named Charmed that was located at 403 S. Dix Street in Detroit. (ECF No. 17-2, PageID.161.) Charmed Entertainment was comprised of two members, Red Lemon LLC, and Dauntless Ventures, LLC, that each owned a 50% stake in the company. (ECF No. 18, PageID.264.) Jeremy O'Neil is the sole member of Red Lemon, while Luigi Ceneri and Richard Geller are the only members of Dauntless Ventures. (Id.)

On January 29, 2019, Charmed applied for commercial insurance with PrimeOne through its agent, Tabak Insurance. (ECF No. 18-9, PageID.321.) That application was signed by Richard Geller-who says he gave the insurance agent permission to e-sign the application on his behalf. (Id.) In the application, Charmed represented to PrimeOne that its business owner had 15 years of prior experience in the industry. (ECF No. 18-9, PageID.321.) In a follow-up email to Charmed's insurance agent, the underwriter for Charmed's PrimeOne policy, Woody White, stated that the insurance application should contain specific details of the “insured's experience in either ownership and/or managing this kind of business to satisfy the New Venture underwriting criteria.” (ECF No. 18-10, PageID.330.) In response, a

representative from Tabak Insurance indicated that “the GM, Jeremy O'Neil (also a business partner) on behalf of the insured has successfully managed several similar businesses for a combined period of 15 years. Most recently Chix on Dix and Power Strip, with a successful track record of managing this type of operation.” (Id.) Charmed also represented in its application for insurance that it did not have any “bouncers, security guards or door persons on the premises.” (ECF No. 18-9, PageID.324.)

PrimeOne eventually issued the commercial policy, which included coverage for the building and Charmed's personal property. (See ECF No. 18-11, PageID.333-334.) Charmed's club opened sometime in March or April 2019. (ECF No. 17-2, PageID.162.) PrimeOne renewed the policy on January 31, 2020, after Charmed's insurance agent applied for renewal using the same answers regarding the insured's previous experience in the adult-entertainment industry and the lack of “bouncers, security guards, or door persons” on the premises. (See ECF No. 17-4, PageID.179, 182, 186.)

On March 19, 2020, Charmed's Dix street property caught fire. (ECF. No. 182, PageID.491-493.) The fire damaged the building and its contents. (Id.) Charmed timely submitted a claim to PrimeOne for the damages, losses, and expenses caused by the fire. (ECF No. 1-2, PageID.9; ECF No. 3, PageID.26.) After investigating, PrimeOne concluded that Charmed had materially misrepresented its answers to two questions in the insurance application and sent a letter rescinding the 2020 policy from its inception. (ECF No. 17-5, PageID.188-189.) Specifically, PrimeOne alleged

Charmed materially misrepresented O'Neil's prior experience successfully managing adult-entertainment establishments, and that it materially misrepresented the use of bouncers, security guards, or door persons on its premises. (See id.) PrimeOne rescinded the 2019 policy for the same reasons. (See ECF No. 17-6.)

In his deposition testimony, O'Neil admitted that he had no prior experience operating adult-entertainment businesses, nor did he have any prior experience in managing or operating a liquor-license establishment. (ECF No. 22-2, PageID.1467.) Additionally, O'Neil admitted that he never managed Chix on Dix, one of the clubs that Charmed's insurance agent represented O'Neil had 15 years of experience managing. (Id.) Charmed's other two owners both stated that they had no experience in the adult-entertainment industry either. (See ECF No. 22-3, PageID.69; ECF No. 22-4, PageID.1641.) But Charmed subsequently provided an affidavit from O'Neil stating that he was a “co-owner of the Flight Club gentlemen's club” for five years before purchasing Charmed, and although he had not operated the establishment, he “oversaw its financial books and records.” (ECF No. 17-2, PageID.161.) PrimeOne disputes the veracity of this prior experience, asserting that this affidavit directly contradicts O'Neil's earlier deposition testimony. (ECF No. 21, PageID.768.)

Charmed also provided affidavits from two managers of its establishment who purportedly each had over 10 years of prior experience managing other adult establishments. Daren Lee stated that he managed Charmed for a year, starting in January 2019, and that at the time he was hired, he had 10 years of prior experience managing other adult-entertainment clubs, including Chix on Dix. (ECF No. 17-9, PageID.255).

PrimeOne disputes that Lee was employed by Charmed on or around January 29, 2019, the date of the original application, or on January 30, 2019, the date when supplemental information was provided to the insurance underwriter by Charmed's agent. Instead, PrimeOne points to Charmed's financial records that show Lee was first paid in March 2019. (See ECF No. 21-12, PageID.881 (“The records produced indicate that the Plaintiff opened for business on March 10, 2019. The first end of day reports were run by Darren Lee. The March 10, 2019 activity is the first time Darren Lee appears in Plaintiff's financial records.”).)

Charmed also says it hired Robert Lee Brown as a manager in April 2019. Brown stated in his affidavit that he had 10 years of experience managing the Pantheon Club, another adult-entertainment establishment, before being hired by Charmed in April 2019. (ECF No. 17-10, PageID.258.) But Brown says nothing about how long he remained working at Charmed. According to a supplemental affidavit submitted by O'Neil, Brown remained a manager at Charmed until the March 2020 fire. (ECF No. 17-2, PageID.162.)

II. PrimeOne's Failure to Comply with the Rules

Before addressing the merits, a word on PrimeOne's failure to comply with this Court's case management requirements and the Federal Rules of Civil Procedure.

As Charmed aptly points out in its response brief, PrimeOne's motion for summary judgment is replete with citations to entire exhibits without pincites to specific record evidence to support its factual assertions-a clear violation of this Court's case management requirements. (See ECF No. 10, PageID.98 (stating that

“each statement of fact must be supported with a pincite to specific record evidence.”).) This also violated Federal Rule of Civil Procedure 56(c)(1), which provides that a party must support its assertion that a fact is or cannot be disputed by “citing to particular parts of materials in the record.” “A district court is not required to search the entire record to establish that it is bereft of a genuine issue of material fact.” Emerson v. Novartis Pharm. Corp., 446 Fed.Appx. 733, 736 (6th Cir. 2011) (internal citation, quotation marks, and alteration omitted). “‘[J]udges are not like pigs, hunting for truffles' that might be buried in the record.” Id. at 736 (citing United States v. Dunkel, 927 F.2d 955, 956 (7th Cir. 1991)); see also InterRoyal Corp. v. Sponseller, 889 F.2d 108, 111 (6th Cir. 1989) (noting that a district court is neither required to speculate on which portion of the record a party relies, nor is it obligated to “wade through” the record for specific facts).

Nonetheless, given the posture of this case, the Court has reviewed the record and will consider PrimeOne's motion. See Fed.R.Civ.P. 56(c)(3) (“The court need consider only the cited materials, but it may consider other materials in the record.”) (emphasis added). It trusts that future filings will be models of compliance.

III. Standard

Federal Rule of Civil Procedure 56 provides, “[t]he court shall grant 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.” When there are crossmotions for summary judgment, as there are here, the Court must consider each motion separately and take the facts in the light most favorable to the non-moving

party. See Ohio State Univ. v. Redbubble, Inc., 989 F.3d 435, 442 (6th Cir. 2021). And it is not necessarily the case that either party is entitled to summary judgment. See id. When considering PrimeOne's motion, the evidence is viewed in the light most favorable to Charmed and the initial (and ultimate) burden is on PrimeOne to show that it is entitled to judgment as a matter of law. See id. The...