RPM Freight Sys. v. K1 Express, Inc.

691 F.Supp.3d 804

RPM FREIGHT SYSTEMS, LLC, Plaintiff, v. K1 EXPRESS, INC., Defendant.

Case No. 21-cv-11964

United States District Court, E.D. Michigan, Southern Division

Signed September 8, 2023

Ahmad Christopher Chamseddine, Anthony A. Agosta, Clark Hill PLC, Detroit, MI, Jordan S. Bolton, Stuart M. Schwartz, Taft Stettinius & Hollister LLP, Southfield, MI, for Plaintiff.

Michele A. Chapnick, Gregory, Meyer & Chapnick, PC, Troy, MI, Scott Wing, Leahy, Eisenberg, & Fraenkel, Ltd., Chicago, IL, for Defendant.

OPINION AND ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT (ECF No. 21) AND GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION FOR SUMMARY JUDGMENT (ECF No. 50)

F. Kay Behm, United States District Judge

I. INTRODUCTION

This matter is before the court on cross motions for summary judgment: Plaintiff RPM Freight Systems, LLC's ("RPM") motion for summary judgment (ECF No. 21), filed on June 6, 2022, and Defendant K1 Express, Inc.'s ("K1") motion for summary judgment (ECF No. 50), filed on January 16, 2023. RPM filed their initial Complaint on August 24, 2021, after a fire on K1's truck destroyed a number of vehicles being transported pursuant to a contract between the two parties. (ECF No. 1). RPM originally brought three counts against K1: breach of contract/defense and indemnification (Count I), declaratory relief (Count II), and unjust enrichment/common law indemnification (Count III). (ECF No. 1). On November 21, 2021, K1 filed a motion to dismiss counts II and III of RPM's complaint, arguing that RPM's claim for a declaratory judgment was redundant with the damages sought for breach of contract and the claim for unjust enrichment arose out of the same express contractual relationship. (See ECF No. 11, 12). District Judge Nancy G. Edmunds granted K1's motion on January 12, 2022. (ECF No. 16). Likewise, only Count I for breach of contract/defense and indemnification remains.

This case was reassigned to the undersigned on February 6, 2023. The court held a hearing on these motions on July 12, 2023, and both parties participated in oral argument. (See ECF No. 55). For the reasons stated below, the court GRANTS IN PART AND DENIES IN PART RPM's motion and GRANTS IN PART AND DENIES IN PART K1's motion.

II. FACTUAL BACKGROUND

RPM is a freight broker that arranges freight and finished vehicle transportation and often acts as an "intermediary between clients and carriers to ensure secure transportation of various types of cargo." (ECF No. 21, PageID.152). K1 is a carrier who transports various types of cargo, including vehicles. Id. On July 15, 2016, RPM and K1 entered into a written Broker-Carrier Agreement wherein K1 would "perform transportation of shipments that [RPM] has obtained under its arrangements with its Customers." (ECF No. 21-2, PageID.168, "Broker-Carrier Agreement"). On September 16, 2019, the parties signed a Rate Confirmation in which K1 agreed to transport seven 2019 Tesla vehicles (the "subject vehicles") from Tesla's factory in Fremont, California to Tesla dealerships in Lyndhurst, Ohio and Wexford, Pennsylvania. (ECF No. 23, PageID.234; see also ECF No. 21-3, "Rate Confirmation"). The parties subsequently signed a Bill of Lading for the subject vehicles on September 24, 2019. (ECF No. 21-4, "Bill of Lading").

On September 24, 2019, K1's driver, Reginaldo Alcantara, picked up the subject vehicles in Fremont, California. (ECF No. 21, PageID.154). The vehicles were loaded onto Alcantara's truck and were secured without issue. (ECF No. 50, PageID.773). Later that day, however, the tractor-trailer carrying the vehicles caught fire while in transit, completely destroying the subject vehicles. (ECF No. 21, PageID.154). As a result, Tesla sought reimbursement in the amount of $337,000, which RPM paid on December 24, 2019. Id.; See also ECF No. 21-7, Tesla Payment.

On November 19, 2019, K1 submitted a claim to their insurer, Great American Insurance Company, for the damaged vehicles. (ECF No. 50, PageID.767). K1 argues "at all relevant times, they were insured under an automobile liability policy, subject to a limit of $1,000,000.00, and a motor truck cargo liability policy, with a limit of $250,000.00 per occurrence." Id. Great American conducted an investigation and denied liability on K1's behalf, stating that "the damage was caused by inherent vice or nature of the good involved, i.e., the source of the fire was a vehicle being transported." (ECF No. 50-9, PageID.824, Great American Determination Letter). K1 denied RPM's demand to defend or indemnify them for the $337,000 damage to the subject vehicles. (ECF No. 1, PageID.4).

RPM and K1 now both independently argue they are entitled to summary judgment as to Count I of RPM's complaint for breach of contract pursuant to Fed. R. Civ. P. 56 because there are no remaining questions of material fact. (ECF No. 21, PageID.144; ECF No. 50, PageID.757).

III. LEGAL STANDARD

A motion for summary judgment must be granted 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(c). Where parties have filed cross-motions for summary judgment, the court "must evaluate each motion on its own merits and view all facts and inferences in the light most favorable to the nonmoving party." Hensley v. Gassman, 693 F.3d 681, 686 (6th Cir. 2012) (citing Wiley v. United States, 20 F.3d 222, 224 (6th Cir. 1994)). The moving party has the initial burden of demonstrating the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 324, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). If the moving party meets this burden, the burden then shifts to the nonmoving party to "produce evidence that results in a conflict of material fact to be resolved by a jury." Cox. v. Kentucky Dep't of Transp., 53 F.3d 146, 150 (6th Cir. 1995). "The mere existence of a scintilla of evidence in support of the [nonmoving party]'s position will be insufficient; there must be evidence on which the jury could reasonably find for the [nonmoving party]." Id. (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)).

IV. ANALYSIS

In their complaint, RPM argues that K1 breached the parties' contract by refusing to indemnify RPM for the damage to the subject vehicles and by failing to procure the required insurance coverages or name RPM as an additional insured on their insurance policies. (ECF No. 1, PageID.4-5). Under Michigan law, "a party asserting a breach of contract must establish by a preponderance of the evidence that (1) there was a contract (2) which the other party breached (3) thereby resulting in damages to the party claiming breach." Miller-Davis Co. v. Ahrens Const., Inc., 495 Mich. 161, 178, 848 N.W.2d 95 (2014). The parties do not contest that the Broker-Carrier Agreement, Rate Confirmation, and Bill of Lading formed a valid contract between the parties for the transport of the subject vehicles. (See ECF No. 53, PageID.1172). Rather, the key dispute is whether K1's actions were in breach of this contract. The arguments raised in the parties' competing motions for summary judgment can be distilled down to three main questions: (1) is RPM's claim for breach of contract barred by the voluntary payment doctrine?; (2) is there a question of fact remaining as to whether K1 breached the contract by failing to indemnify RPM?; and (3) is there a question of fact remaining as to whether K1 breached the contract by failing to procure the required insurance coverage? The court will address each of these questions in turn.

A. Voluntary Payment Doctrine

As an initial matter, K1 argues that RPM lacks standing to advance their contractual indemnity claim because it is barred by the "voluntary payment doctrine." (ECF No. 50, PageID.777). Specifically, K1 argues that RPM was under "no contractual obligation to indemnify Tesla for the subject loss," and, therefore, their decision to pay was driven not by a legal obligation, but by "the nature of the business relationship between the parties." Id., PageID.780. RPM disagrees, arguing the voluntary payment doctrine does not apply, because they were "legally obligated to pay Tesla pursuant to the Tesla agreement." (ECF No. 53, PageID. 1160).

Under Michigan law, the voluntary payment doctrine provides, "where money has been voluntarily paid with full knowledge of the facts, it cannot be recovered on the ground that the payment was made under a misapprehension of the legal rights and obligations of the person paying." Montgomery Ward & Co. v. Williams, 330 Mich. 275, 285, 47 N.W.2d 607 (1951); see also Pingree v. Mut. Gas. Co., 107 Mich. 156, 157, 65 N.W. 6 (1895); Slavik v. Baskin L. Firm., No. 311905, 2013 WL 6921530, at *2 (Mich. Ct. App. Dec. 26, 2013). Michigan law further defines a "volunteer" as "one who intrudes himself into a matter which does not concern him, or one who pays the debt of another without request, when he is not legally or morally bound to do so, and when he has no interest to protect in making such payment." Esurance Prop. & Cas. Ins. Co. v. Michigan Assigned Claims Plan, 507 Mich. 498, 511, 968 N.W.2d 482 (2021) (citing Detroit Auto. Inter. Ins. Exch. v. Detroit Mut. Auto. Ins. Co., 337 Mich. 50, 54 (1953)); see also Home-Owners Ins. Co. v. AMCO Ins. Co., No. 357273, 2023 WL 327855, at *8 (Mich. Ct. App. Jan. 19, 2023) ("Logically then, an insurer who has at least an arguable duty to pay is clearly not a volunteer."). This definition was initially applied to an equitable subrogation claim in Esurance Prop. & Cas. Ins. Co., but other courts in this district have since utilized the definition in cases involving the voluntary payment doctrine. See Taybron v. Liberty Mut. Pers. Ins. Co., No. 20-10925, 2022 WL 1598585, at *3 (E.D. Mich. May 19, 2022) (holding "an insurer who has an 'arguable duty to pay' under a policy is 'protecting its own...