Hanover American Insurance Company v. Tattooed Millionaire Entertainment, LLC

IN THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF TENNESSEE

WESTERN DIVISION

HANOVER AMERICAN INSURANCE )

COMPANY, )

)

Plaintiff, )

) Case No. 2:20-cv-02834-cgc

v. )

)

TATTOOED MILLIONAIRE )

ENTERTAINMENT, LLC, )

CHRISTOPHER C. BROWN, AND JOHN )

FALLS, )

)

Defendants.

ORDER GRANTING IN PART AND DENYING IN PART HANOVER’S SUMMARY

JUDGMENT MOTION AND GRANTING JOHN FALLS’ SUMMARY JUDGMENT

MOTION

Before the Court are two Summary Judgment Motions: (1) Plaintiff Hanover American

Insurance Company’s (“Hanover’s”) Motion for Summary Judgment (the “Hanover MSJ”),

filed on July 10, 2023 (ECF No. 100); and (2) John Falls’ (“Falls’”) Motion for Summary

Judgment as to Hanover (the “Falls MSJ”), filed on July 14, 2023. (ECF No. 107.) Because

both parties incorporate their Summary Judgment Motions in their replies to the other Parties’

Motions for Summary Judgment, and because arguments in each of the Motions are heavily

intertwined, the Court considers both Motions together.

Falls filed his Response to the Hanover MSJ on August 7, 2023. (ECF No. 122.)

Christopher C. Brown (“Brown”) and Tattooed Millionaire Entertainment, LLC (“TME”)

(collectively, “Brown/TME”) filed their Response to the Hanover MSJ on August 7, 2023.

(ECF No. 120.) Malcom Brown Futhey, III, Futhey Law Firm PLC, and Park Morris

(collectively, “Intervenors”) filed their Response to the Hanover MSJ on August 7, 2023. (ECF

No. 121.) Hanover filed its Reply to all three Responses on August 18, 2023. (ECF No. 124.)

For the reasons discussed below, Hanover’s MSJ is GRANTED IN PART and DENIED IN

PART.

Hanover filed its Response to the Falls MSJ on August 11, 2023. (ECF No. 123.) Falls

filed its Reply on August 25, 2023. (ECF No. 125.) For the reasons discussed below, Falls’

MSJ is GRANTED.

I. BACKGROUND

The instant case is an interpleader action arising out of a jury trial in Hanover Am. Ins.

Co. v Tattooed Millionaire Entertainment, LLC, No. 2:16-cv-02817-JPM-tmp (W.D. Tenn.

2016) (“Hanover I”). (ECF No. 1 at PageID 2.) In Hanover I, a jury trial was held on “insurance

claims submitted to Hanover [by Defendants in the instant case] in connection with a 2015 arson

fire and alleged theft at the House of Blues recording studio located on Rayner Street in

Memphis, Tennessee.” (ECF No. 101-1 at PageID 1405.) The Hanover I jury held that (1)

Christopher C. Brown (“Brown”) and Tattooed Millionaire Entertainment, LLC (“TME”) were

indistinguishable; and (2) Brown/TME made material misrepresentations with the intent to

deceive and committed unlawful insurance acts during the claims process, and thus Hanover

was entitled to recover the advance payments made to Brown/TME. (See Hanover I, ECF No.

312.) The Hanover I jury also held that Falls did not make material misrepresentations or

commit unlawful insurance acts, and thus awarded him the maximum amount covered by his

policy: $2.5 million in Business Personal Property (“BPP”) and an additional $250,0001 in

Business Income (“BI”). Id.

After the jury trial concluded, this Court granted Hanover’s Rule 50(b) motion for

judgment notwithstanding the verdict and entered an amended judgment denying Falls’

recovery. The Sixth Circuit, however, reversed the post-trial ruling and remanded with

instructions to reinstate the jury verdict as to Falls, which this Court did. See Hanover Am. Ins.

Co. v. Tattooed Millionaire Entertainment, LLC, 974 F.3d 767 (6th Cir. 2020) (Hanover 6th Cir.

Decision); (Hanover I, ECF No. 104-8.) The Sixth Circuit opinion outlined that “Hanover

clearly accepted at trial [in Hanover I] that Falls had at least an arguable property interest:

Barkman testified at trial that the payment for BPP under the Falls policy would go to Falls and

Brown jointly.” Hanover 6th Cir. Decision at 790-1. The Sixth Circuit also pointed out that

“Hanover could have objected and requested a jury instruction as to whether Brown’s

misbehavior could void Falls’ policy. It could have requested that the verdict for Hanover I be

structured to tie the issues together. It did neither,” but instead tried to address the issue on

appeal. Id. at 788. “Behavior of this sort, sometimes called ‘lying in the weeds’ or

‘sandbagging,’ should be strongly discouraged.” Ibid.

In the instant case (“Hanover II”) Hanover filed its Complaint for interpleader and

declaratory relief on November 16, 2020. (ECF No. 1.) Hanover claims that the $2.5 million

BPP insurance awarded to Falls is subject to multiple competing claims. (Id. at PageID 3.)

Hanover’s Complaint seeks a declaration that the $2.5 million BPP award is null and void as a

matter of Tennessee public policy, or in the alternative, asks the Court to resolve the various

1 This sum was additional to the $250,000 advance payment which Mr. Falls received from Hanover before

Hanover I action was initiated.

competing claims to the BPP insurance proceeds and declare to whom, and in what amount,

those funds should be paid. (Id. at PageID 6-10.)

Since the action has been filed, both Falls and Brown/TME filed Answers and

Counterclaims asserting that they are entitled to the BPP insurance proceeds. (ECF Nos. 70,

78.) Falls also filed an Intervenor Complaint asserting a claim for attorneys’ fees against

Brown/TME if Brown/TME is found to be entitled to the disputed funds. (ECF No. 62.)

II. LEGAL STANDARD

A. Summary Judgment

The Federal Rules of Civil Procedure mandate the entry of summary judgment where

“no genuine dispute as to any material fact” exists and “the movant is entitled to a judgment as

a matter of law.” FED. R. CIV. P. 56(a). An issue of fact is “genuine” if it provides a basis for

a “rational trier of fact to find for the non-moving party.” Matsushita Elec. Indus. Co. v. Zenith

Radio Corp., 475 U.S. 574, 587 (1986) (citing First National Bank of Arizona v. Cities Service

Co., 391 U.S. 253, 289 (1968)). “The reviewing court must assess the available proof to

determine whether there is a genuine factual issue that justifies a trial.” Bell v. U.S., 355 F.3d

387, 392 (6th Cir. 2004) (citing Matsushita, 475 U.S. at 587.). “In doing so, the court must

view the facts and all the inferences drawn from such facts in the light most favorable to the

nonmoving party.” Id. (citing 60 Ivy Corp. v. Alexander, 822 F.2d 1432, 1435 (6th Cir. 1987).

The summary judgment movant bears the initial burden of demonstrating the absence

of any genuine issue of material fact. Adickes v. S.H. Kress & Co., 398 U.S. 144, 158 (1970).

“Once the moving party has met its burden of production, the nonmoving party cannot rest on

its pleadings, but must present significant probative evidence . . . to defeat the motion for

summary judgment.” Copeland v. Machulis, 57 F.3d 476, 479 (6th Cir. 1995) (citing Anderson

v. Liberty Lobby, Inc., 477 U.S. 242, 248-49; LaPointe v. UAW, Local 600, 8 F.3d 376, 378

(6th Cir. 1993)). “The mere existence of a scintilla of evidence to support [the nonmovant’s]

position will be insufficient; there must be evidence on which the jury could reasonably find for

the [nonmovant].” Id. (citing Anderson, 477 U.S. at 252). Furthermore, “[a] properly supported

motion for summary judgment will not be defeated by conclusory allegations, speculation and

unsubstantiated assertions.” Bradley v. Wal-Mart Stores East, LP, 587 F. App’x 863, 866 (6th

Cir. 2014) (citing Lujan v. Nat’l Wildlife Fed’n, 497 U.S. 871, 888 (1990)).

B. Claim Preclusion/Res Judicata

“Claim preclusion refers to the effect of a judgment in foreclosing litigation of a matter

that never has been litigated, because of a determination that is should have been advanced in

an earlier suit.” Migra v. Warren City School Dist. Bd. of Educ., 465 U.S. 75, 77 n.1 (1984)

(citing Restatement (Second) of Judgements, Introductory Note before ch. 3 (1982)); accord

Heyliger v. State University and Community College System of Tennessee, 126 F.3d 849 (6th

Cir. 1997). As this Court previously clarified, in diversity cases, federal law incorporates the

rules of preclusion applied by the forum state, with limited exceptions. (ECF No. 67 at PageID

1023); See Semtek Int’l, Inc. v. Lockheed Martin Corp., 531 U.S. 497, 508–09 (2001) (citations

omitted). But even if that was not the case, due to similarity of the federal and state standards

for claim preclusion the application of either ends in the same result. Compare Rawe v. Liberty

Mut. Fire Ins. Co., 462 F.3d 521, 528 (6th Cir. 2006) (holding that the four elements of claim

preclusion are: “(1) a final decision on the merits by a court of competent jurisdiction; (2) a

subsequent action between the same parties or their privies; (3) an issue in the subsequent action

which was litigated or which could have been litigated in the prior action; and (4) an identity of

the causes of action.”) (quoting Kane v. Magna Mixer Co., 71 F.3d 555, 560 (6th Cir. 1995)

with Jackson v. Smith, 387 S.W.3d 486, 491 (Tenn. 2012). Tennessee state law states that claim

preclusion applies where the movant shows:

(1) [T]hat the underlying judgment was rendered by a court of

competent jurisdiction, (2) that the same parties or their privies

were involved in both suits, (3) that the same claim or cause of

action was asserted in both suits, and (4) that the underlying

judgment was final and on the merits.

Jackson, 387 S.W.3d at 491.

III. ANALYSIS

Before addressing the Hanover MSJ, the Court first looks to the preliminary issue of

claim preclusion raised by the Falls MSJ. Because claim preclusion “may serve as a complete

bar to relitigation, thus extinguishing the right of action against the same defendant, regardless

of the merits of the claim,” determination of this issue is a necessary predicate to the others

before the Court. Creech v. Addington, 281 S.W.3d 363, 376 (Tenn. 2009).

A. Claim Preclusion

Hanover fails to present any arguments referencing the actual elements of claim

preclusion. (See ECF No. 123 (“Because that critical omission defeats Falls’ preclusion

argument, Hanover will not burden the Court with any detailed discussion of the traditional

preclusion elements.”).) Hanover argues, as a preliminary matter, that the “Sixth Circuit

specifically preserved … ‘the disposition of the funds’ [issues] that have been raised in this

interpleader action.” (Id. at PageID 3964.) Although the Court agrees that the Sixth Circuit

preserved the interpleader action, the Sixth Circuit’s Opinion does not preserve Hanover’s

ability to challenge Falls’ right to portions of the BPP award. The Sixth Circuit specifically

states that “the public-policy argument. . . even if accepted, does not mean that Falls takes

nothing of the $2,500,00 BPP award. Falls had property interest in the ‘gear,’ in the form of

his leasehold with unlimited renewal options.” Hanover 6th Cir. Decision at 790. Hanover

seems to conflate the two separate causes of action for which it filed: (1) the declaratory

judgment; and (2) the interpleader action. The Sixth Circuit decision appears to preserve only

the latter of the two. This Court therefore intends to hear arguments of all Parties pertaining to

the disposition of funds during the scheduled trial date.

Hanover also argues that the Court should deny the Falls MSJ as it denied Falls’ Rule

12 Motion to Dismiss on Issue Preclusion, because the Court’s Order stated that the “Sixth

Circuit’s opinion regarding the interpleading action indicates that the public policy question

was not decided and was not necessary for the judgment.” (ECF No. 123 at PageID 3959; ECF

No. 67 at PageID 1025.) The public policy question, however, pertains to Brown/TME’s ability

to recover, not Falls’. Brown/TME may yet convince this Court that they should be the sole, or

at least partial, payee of the BPP proceeds. If so, Hanover will be able to pursue its public

policy argument against Brown/TME. The Courts earlier decision to deny Falls’ Motion to

Dismiss took place over two years ago, before it became clear to this Court that Hanover’s

declaratory judgment cause of action attempts to relitigate an issue decided by the jury in

Hanover I. (ECF. No. 67.) Since this Court’s decision on issue preclusion, the docket in this

case has significantly matured, and the arguments asserted by Hanover in countless motions

make it clear that Hanover is trying to get an impermissible second bite at the apple when it

comes to Falls.

B. Claim Preclusion

Claim preclusion requires the movant to meet four key elements. First, the movant must

show that “the underlying judgment was rendered by a court of competent jurisdiction.”

Jackson, 287 S.W.3d at 491. There is no dispute that this Court had competent jurisdiction over

Hanover I proceedings, so the first element of claim preclusion is met.

The second element requires the movant to show that “the same parties or their privies

were involved in both suits.” Ibid. Hanover I included the following parties: Hanover, Falls,

Brown, TME and Daniel Mott. See Hanover I. The instant action includes all those parties

with exception of Daniel Mott. As such, the Court holds that the second element of claim

preclusion is met.

The third element of claim preclusion requires “that the same claim or cause of action

was asserted in both suits.” Jackson, 287 S.W.3d at 491. “A ‘party's failure to plead a

compulsory counterclaim forever bars that party from raising the claim in another action.’”

Bauman v. Bank of America, N.A., 808 F.3d 1097, 1101 (6th Cir. 2015) (quoting Sanders v.

First Nat'l Bank & Trust Co. in Great Bend, 936 F.2d 273, 277 (6th Cir. 1991)). As the Falls

MSJ points out, “Hanover had an opportunity to raise all arguments as to why Falls would have

been precluded from any recovery of BPP” during Hanover I. (ECF No. 107-1 at PageID 2795.)

The Sixth Circuit also pointed out that Hanover “could have requested that the verdict form

[from the Hanover I trial] be structured so as to tie the issues [of Brown’s misbehavior and

Falls’ policy] together[,]” but failed to do so. Hanover 6th Cir. Decision at 788.

In its Answer to Counterclaim of Daniel R. Mott and John Falls for Hanover I, Hanover

lists two defenses which show that the claim against Falls’ recovery should have been brought

in that action. (See ECF 107-5.) The Eleventh Affirmative Defense argues that TME’s

negligence should bar Falls’ recovery, while the Seventeenth Affirmative Defense argues that

Falls recovery is precluded “to the extent [Falls’] claimed losses are not covered as an insurable

interest.” (Id at PageID 2861-2.) As shown by Hanover’s own filings, they should have raised

the issue of Falls’ ability to recover the BPP proceeds in Hanover I. Furthermore, it is not the

purview of this Court to allow the Parties to relitigate issues already decided by the jury. The

jury in Hanover I awarded John Falls the BPP proceeds. (See Hanover I, ECF No. 312.)

Although the Court will determine the portion of the BPP to which Falls is entitled during the

trial for the instant case, the Hanover I jury decision precludes Hanover from arguing that Falls

is not entitled to any of the BPP insurance proceeds. The Court therefore holds that the third

element of claim preclusion is met.

The fourth and final element of claim preclusion requires the movant to show “that the

underlying judgment was final and on the merits.” Jackson, 387 S.W.3d at 491. The judgment

entered in Hanover I was final after the jury trial and subsequent appeal to the Sixth Circuit

concluded. As such the fourth element of claim preclusion is met.

Claim preclusion, as granted here, prevents Hanover from asserting claims or arguments

against Falls regarding his interests in BPP, but it does not prevent Hanover from pursuing

claims and arguments against TME/Brown.

C. The Hanover MSJ

Based on the analysis above, Hanover is precluded from asserting claims or arguments

against Falls regarding his interest in BPP. The Court therefore does not address any arguments

in the Hanover MSJ pertaining to Falls as they are rendered moot. The Court does, however,

address the arguments presented in Hanover’s MSJ pertaining to Brown/TME, and Intervenors.

a. The Public Policy Argument Against Brown/TME

Hanover argues that “payment of the BPP insurance proceeds to Brown/TME would

violate Tennessee public policy.” (ECF No. 100 at PageID 1397.) Hanover argues that the jury

trial in Hanover I established that “Brown/TME falsified documents and submitted fake

invoices, phony receipts, and doctored bank account statements in connection with the

insurance claims at issue.” (ECF No. 100-1 at PageID 1414.) Hanover further argues that in

Hanover I, Brown admitted to falsifying vendor information on the theft claim for Studio B and

John Falls.” (Ibid.) Hanover asserts that “forcing Hanover to pay Brown[/TME] (the confessed

ringleader of the fraudulent scheme) the BPP insurance proceeds is an unjust result that would

violate long-recognized public policy of Tennessee.” (Ibid.)

In their response, Brown/TME argue that although the jury in Hanover I found that there

were “misrepresentations in the filing of [Brown’s] claim for the fire and theft losses to Studio

A[,]” the jury also found “that there was no misrepresentation and no fraud by John Falls in

filing a claim for losses suffered by Studio B” at issue here, and thus Hanover’s argument is

precluded. (ECF No. 120 at PageID 3414.)

The Federal Rules of Civil Procedure mandate the entry of summary judgment where

“no genuine dispute as to any material fact” exists and “the movant is entitled to a judgment as

a matter of law.” FED. R. CIV. P. 56(a). An issue of fact is “genuine” if it provides a basis for

a “rational trier of fact to find for the non-moving party.” Matsushita, 475 U.S. at 587 (citation

omitted). Here, the parties present conflicting facts regarding the issue of whether the fraud

committed by Brown/TME in submitting their claims to Hanover extended to claims filed for

Studio B. In ruling on a motion for Summary Judgment, “the court must view the facts and all

the inferences drawn from such facts in the light most favorable to the nonmoving party.” Bell,

355 F.3d at 392. Construing the preceding facts in way most favorable to Brown/TME,

Hanover’s MSJ on whether payment of the BPP insurance proceeds to Brown/TME would

violate Tennessee public policy is DENIED.

b. Intervenor Complaint

Hanover argues that “[t]he Court should also award Hanover summary judgment on the

intervenor complaint filed by counsel for Falls on their own behalf[,]” because “intervenor

complaint asserts a claim for attorneys’ fees against Brown/TME.” (ECF No. 100-1 at PageID

1416.) Hanover concedes, however, that such summary judgment should be granted only “if

the Court declares that Brown/TME is not entitled to the BPP insurance proceeds.” (Ibid.)

Given the Court’s holding above, this argument is rendered moot. The Court therefore will not

address the response or reply arguments on this matter. (See ECF Nos. 121, 124.) Hanover’s

MSJ as to the intervenor complaint is DENIED.

c. Brown/TME’s Counterclaim for Conversion

Finally, Hanover asserts that it “is entitled to summary judgment on Brown/TMEs

counterclaim for conversion,” because: (1) “the undisputed evidence in this case demonstrates

that Coastal Technology Services (“CTS”)—not Hanover—moved certain equipment out of the

damaged building in Memphis to a warehouse in Florida pursuant to CTS’s contract with

Brown/TME[;]” and (2)”Brown/TME’s counterclaim for conversion is barred by the doctrine

of res judicata/claim preclusion.” (Id. at PageID1397-8.) Brown/TME argue that the Court has

already addressed this issue when it granted in part and denied in part Hanover’s Partial Motion

to Dismiss. (ECF No. 94.) In its reply, Hanover argues that Brown/TME “do not present any

opposition to Hanover’s argument that conversion claim is barred by preclusion because it could

have and should have been asserted in the RICO action[,]” and thus the Court should grant

Hanover’s MSJ and dismiss the conversion claim with prejudice. (ECF No. 124 at PageID

3981.)

The evidence submitted by Hanover, including the declaration of CTS representative

Eric Malee, CTS’s Agreement with TME, Equipment Condition Reports from CTS, the Writ of

Execution from the Middle District of Florida, and the declaration of Hanover representative

Gary Barkman all indicate that Hanover was not involved with the removal of Brown/TME’s

property. (ECF Nos. 100-10, 100-11.) Further, Brown/TME do not dispute—or even address—

any of this evidence. Therefore, Brown has not raised a genuine issue for trial regarding

Hanover’s alleged conversion.

Even if that was not the case, Brown/TME’s claim for conversion is barred by claim

preclusion/res judicata in light of their RICO case filed several months before the filing of the

claim in the instant action. See Brown v. Hanover Am. Ins. Co., Inc., No. 2:20-cv-02415-JPM-

cgc (W.D. Tenn. Oct. 27, 2020) (“RICO Action”). As the Court outlined above, for claim

preclusion to apply, the movant has to show that: (1) the underlying judgment was rendered by

a court of competent jurisdiction; (2) the same parties were involved in both suits, (3) the same

claim was or should have been asserted in both suits; and (4) the underlying judgment was final

and on the merits. See Jackson, 387 S.W.3d at 491. The RICO Action was decided by this

Court, and affirmed by the Sixth Circuit, thus both elements one (1) and four (4) have been met.

(See RICO Action, ECF Nos. 51-2, 58; Brown v. Hanover Am. Ins. Co., 2022 WL 1100461

(6th Cir. Apr. 13, 2022). Both Brown/TME and Hanover have been parties to both actions, thus

the second element has also been met.

The key question then becomes if the conversion claim was or should have been asserted

in both suits. The RICO complaint alleged that “[b]y assuming possession of the gear and

equipment and transporting it out-of-state, [CTS/Hanover have] stolen or converted the personal

property and deprived Brown, TME and Mott of its use and possession.” (RICO Action, ECF

No. 1 ¶ 40.) Brown/TME further sought “compensatory damages for the value of the musical

instruments, gear and recording equipment at the time it was converted or stolen by the

Defendants[,]” in the RICO Action. (Id. a 24.) The complaint in the RICO Action therefore

appears to have already asserted conversion claims against Hanover.

Even if that was not strictly true, Brown/TME should have asserted those charges in the

RICO Action. “[A] claim's compulsory status depends on whether (1) the claim arises out of

the same transaction or occurrence that is the subject matter of the opposing party's claim; and

(2) the claim is one that the party ‘has’ at the time that the party is to file his responsive

pleading.” Bauman, 808 F.3d at 1101 (quoting Kane v. Magna Mixer Co., 71 F.3d 555, 562

(6th Cir. 1995)). Here, unlike in the denied motion to dismiss, the counterclaim arises out of

the same transaction or occurrence as the RICO Action. Both the RICO claims and the instant

conversion counterclaim stem from the events pertaining to removal of Brown/TME’s

equipment by CTS to Florida. The situation is therefore fundamentally different than when this

Court ruled on Hanover’s Partial Motion to Dismiss.2 Furthermore, the record clearly shows

that Brown/TME were aware of the claim for conversion during the RICO Action, as their

complaint repeatedly refers to conversion of their equipment and asks the Court to grant relief

for such conversion. The third element of claim preclusion is therefore met.

For the reasons explained above, the Court GRANTS summary judgment for Hanover

as to Brown/TME’s counterclaim for conversion.

D. Result of the Instant Order on the Outstanding Motions

2 There, the Court held that the counterclaims did not arise out of the same transaction or occurrence as

Hanover I because “[t]he Original Action was brought to recover insurance payments that Hanover

paid to TME/Brown based on allegedly falsified documentation following an arson fire of a recording

studio[,]” while the “counterclaim for conversion in the instant action relates to Hanover’s alleged

conversion of personal property[.]” (ECF No. 94 at PageID 1372-3.)

As a result of the holdings in this Order the following outstanding motions are

MOOTED: (1) Hannover’s Motion to Exclude Testimony of John Falls’ Proffered Expert

Robert Vance (ECF No. 102); (2) Hannover’s Motion to Exclude Testimony of John Falls’

Proffered Expert Pete Matthews (ECF No. 103); and (3) Falls’ Motion in Limine Prohibiting

Hanover from Challenging Falls’ Business Income (ECF No. 104).

IV. CONCLUSION

For the foregoing reasons, John Falls’ Motion for Summary Judgment as to Hanover is

GRANTED, Hanover’s Motion for Summary Judgment is GRANTED IN PART and

DENIED IN PART. TME/Brown’s counterclaim for conversion is DISMISSED WITH

PREJUDICE. Hanover’s Motions to Exclude Testimony of John Falls’ Proffered Experts

Robert Vance and Pete Mathews are MOOTED. Falls’ Motion in Limine Prohibiting Hanover

from Challenging Falls’ Business Income is MOOTED.

SO ORDERED, this 23rd day of October, 2023.

/s/ Jon P. McCalla

JON P. McCALLA

UNITED STATES DISTRICT JUDGE