mitchell v. jtvt

7ermont Superior Court
Filed 04/05/24
Lamoille Unit

VERMONT SUPERIOR COURT CIVIL DIVISION
Lamoille Unit Case No. 22-CV-03530
154 Main Street
Hyde Park VT 05655
802-888-3887
www.vermontjudiciary.org

Mariah Mitchell v.TVT, LLC

ENTRY REGARDING MOTION
Title: Motion to Dismiss; Motion Third-Party Complaint; for Leave to File a Surreply
(Motion: 3; 4)
Filer: Gillian A. Woolf; Gary Michael Burt
Filed Date: February 13, 2024; March 29, 2024

The motion is DENIED.

Third-Party Defendant Mountain Village School, LLC ("School") seeks to dismiss the third-
party complaint filed against it for breach of contract by Defendant and Third-Party Plaintiff JIVT,
LLC ("Landowner"). School's motion is built on two theories. First, School contends that a
decision by the Vermont District Federal Court on a parallel Declaratory Judgment action has

preclusive effect on the present claims. Second, School contends that Landowner's claims are
insufficient and premature. For the reasons laid out below, the Court finds that Landowner has
established a sufficient showing to survive a motion to dismiss, but that the claims, which survive

ate narrowly focused within a limited range.! Third-Party Defendant School's Motion to Dismiss is

Denied."

Factual and Procedural Background

For the purposes of the present motion, the facts have been well-established by the parties'

pleadings as well as the decision of the Federal Court to which this Court may take judicial notice
without converting the present motion to dismiss into a motion for summary judgment. Sxsfon v.

Purzycki, 2022 VT 56, q 20. The Court will also take notice of the parties' commercial lease that was

1
Plaintiff Mariah Mitchell consented to the joinder of School and the third-party complaint but took no position on
the present motion.

2
Landowner's motion to file a sur-reply is Granted.

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attached to the third-party complaint. Davis v. Am. Legion, 2014 VT 134, ¶ 13 (“Where pleadings rely
upon outside documents those documents merge into the pleadings and the court may properly
consider them under a Rule 12(b)(6) motion to dismiss.”) (quoting Kaplan v. Morgan Stanley & Co.,
2009 VT 78 ¶ 10 n.4 (mem.)) (internal quotations omitted).

In 2015, Landowner leased a commercial building and grounds at 192 Thomas Lane in
Stowe, Vermont. This agreement was memorialized by the parties in a Commercial Lease
Agreement (the “Lease”). It is not clear from the copy of the Lease filed with the Court how much
of Landowner’s property was turned over to School’s control and possession. The Lease refers to
an Attachment A that is not included in the filings. The Lease also states in section A of the Recitals
and again at section 24 that Landowner would be retaining portions of the property and would be
actively developing the property during the course of School’s occupancy. Under section 5.2 of the
Lease, Landowner was responsible for “. . . grounds maintenance, and other such services.” Exhibit
A to Third-Party Complaint at 4–5.

The Lease also contains a provision requiring School to obtain liability insurance and to have
Landowner named as an additional insured. This clause reads:

11. Insurance. Lessee covenants and agrees that it will procure and maintain at all
times at Lessee’s sole cost insurance in such amounts and with such coverage as are
necessary or advisable to protect against loss arising from damages, hazards, and
liabilities pertaining to or resulting from Lessee’s use and occupancy of the Leased
Property. Such insurance coverage shall include, but not be limited to, fire and
casualty coverage for all Leasehold Improvements; comprehensive general public
liability insurance to cover any and all liabilities for bodily injury or death to any
person or persons, and damage or destruction of property; so-called Dram Shop
liability insurance, if applicable, and such other liability and damage insurance in such
amounts as are necessary or advisable to the full reasonable satisfaction of Lessor,
for incidents, events, or omissions occurring in the Leased Property or in connection
with use of the related facilities and areas appurtenant thereto. Lessee shall name
Lessor as an additional insured under all policies required herein, and shall provide
Lessor with copies of all insurance policies upon request and at least annually, and
more frequently in the event of any changes in coverage or conditions.

Id. at 7. Following the execution of the Lease, School purchased an insurance policy through the
Markel Insurance Company. It is not clear if this policy or any other policies were presented to
Landowner and what if any approval Landowner gave to the policies.

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22-CV-03530 Mariah Mitchell v. JTVT, LLC
On November 1, 2019, a pine tree growing on the property fell on Mariah Mitchell, a
teacher at School. It is not clear from the parties’ pleadings if the tree that fell on Mitchell was
located on the leased portion of the premises or on property controlled exclusively by Landowner.
Mitchell filed the present negligence action against Landowner.

In December 2022, Landowner filed a declaratory judgment action against School and
Markel Insurance seeking a ruling that Markel was obligated under the terms of its policy to
indemnify and defend Landowner in the Mitchell negligence action. Markel removed this action to
federal district court on diversity jurisdiction grounds, where the parties adopted a discovery
schedule and conducted briefing on the preliminary issue of jurisdiction under 28 U.S.C. § 1332.

On November 16, 2023, the federal court issued a preliminary decision on this issue of
jurisdiction. In that decision, Judge Crawford dismissed School from the action on the basis that it
was a nominal party to the declaratory judgment action. Judge Crawford also re-affirmed the
diversity jurisdiction of the Court. JTVT, LLC v. Markel Insurance Co., Order on Motion to Dismiss,
Motion to Remand and Motion to Stay Discovery, 2:23-cv-42, at 7 (D.Vt. Nov. 16, 2023). The express
terms of the November 16, 2023 decision marks it as an interim order and not a final decision on
the merits. Id. at 8 (“The next step in this case will be the substantive motions for summary
judgment on the coverage issue following completion of discovery.”). In reaching the conclusion
regarding jurisdiction and dismissal of School, however, the Court does make a series of findings
and legal conclusions to which School cites in its present motion. Judge Crawford’s analysis centers
on whether Landowner can state a claim against School in state court that would make it more than
a nominal party to the declaratory judgment action. Id. at 5. The decision then notes that School
has not been named as a defendant in Mitchell’s negligence action (as of November 2023) and
cannot be named as one because (1) there was no allegation that School acted in a negligent manner
in regard to grounds maintenance; (2) no claim was filed within the statute of limitations; and (3)
even if she had, Mitchell’s employment relationship with School would yield an exclusive remedy
under workers’ compensation, not tort, law. Id. at 5, 6 (citing 12 V.S.A. § 512 and 21 V.S.A. § 622).

Given the federal court’s determination that there were no valid, direct liability claim against
School, the federal court, then looked to whether there was an active claim by Landowner against
School. The federal court found that no such claim was pending and that for purposes of the
federal court’s jurisdictional analysis none could be pending. Specifically, Judge Crawford found
that the policy itself concerned the term an “additional insured,” which courts have traditionally
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interpreted to extend coverage for vicarious liability, not for the additional insured’s own negligence.
Id. at 5. Judge Crawford also found that Landowners’ claims for breach of contract against School
had not been filed at the time the federal court was reviewing the matter and fell outside of the
deadlines within the discovery calendar set for the declaratory judgment action. Given these
findings, Judge Crawford determined that Landowner had no basis to maintain an action against
School within the scope of the declaratory judgment, and by extension, it had no place in the action
as anything other than a nominal party which was insufficient to defeat Markel’s claim of diversity
for purpose of on-going federal court jurisdiction. Id. at 7, 8.

Legal Analysis

To determine whether a complaint survives a motion to dismiss, the Court assumes the
factual allegations in the complaint are true. Colby v. Umbrella Inc., 2008 VT 20, ¶ 5. The Court will
only grant the motion if there are no facts or circumstances that would grant plaintiff relief. Id.
This is because the purpose of a motion to dismiss for failure to state a claim is “to test the law of
the claim, not the facts which support it.” Brigham v. State of Vermont, 2005 VT 105, ¶ 11 (quoting
Powers v. Office of Child Support, 173 Vt. 390, 395 (2002)). Courts rarely grant motions to dismiss for
failure to state a claim. Colby, 2008 VT 20, at ¶ 5; see also Kaplan v. Morgan Stanley & Co., Inc., 2009
VT 78, ¶ 7. Courts generally disfavor these motions. Bock v. Gold, 2008 VT 81, ¶ 4 (“Motions to
dismiss for failure to state a claim are disfavored and should be rarely granted.”). For these reasons,
a party seeking dismissal has a high burden to show that they are entitled to such an initial ruling.
Bock, 2008 VT 81 at ¶ 4.

As a preliminary matter, the Court’s analysis will begin with the comparison between the
various claims and potential liability between the parties. As noted above, Mitchell has made a claim
against Landowner alleging its negligence in maintaining the grounds of the property. Landowner
has denied liability and asserted several affirmative defenses. Mitchell has not and cannot maintain a
similar claim against School for the reasons aptly summarized in the federal court’s November 16,
2023 decision, and therefore this case does not involve allegations of vicarious liability against
Landowner or derivative liability against School.

Landowner’s sole claim against School centers on section 11 of the parties’ Lease. In that
provision there is language obligating School to obtain insurance coverage “to protect against loss
arising from damages, hazards, and liabilities pertaining to or resulting from Lessee’s use and

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occupancy of the Leased Property.” Exhibit A to Third-Party Complaint at 7.3 For purposes of the
present motion, the Court understands Landowner’s claim in its third-party complaint to include a
broader allegation than the coverage claim at issue in the declaratory judgment action pending in
federal court. Landowner’s breach of contract claim is that School was obligated to obtain insurance
coverage that would cover not only School’s specific actions, but the Landowner’s actions taken in
furtherance of School’s occupancy of its portion of the property. Under this theory advanced by
Landowner, School was obligated to obtain insurance that would not only cover Landowner for
vicarious liability purposes but would also insure against any claims made against Landowner for
activities arising from School’s use and occupancy of the property.

In essence, Landowner’s argument is that section 11 functions akin to an indemnification
clause in that it obligated School to procure a policy that would cover all activities on the premises
and arising from the activity of School. This would necessarily include having faculty and students
walking about the immediate campus. Whether section 11 ultimately supports such an
interpretation is not presently before the Court and will require additional discovery and briefing.

For purposes of the present motion, the Court will presume that Landowner can establish
that the purpose of this clause was for broader indemnification through an insurance policy that
would cover both School’s and Landowner’s actions regarding the use and occupancy of the
property for School’s use. The Court will also presume that the tree was located, and incident took
place, on the portion of the property that was leased to School. If such facts and purpose are
established, then it follows that the policy would have applied as the section would have sought shift
the risk from the Landowner to the user of the property, albeit through an insurance policy, rather
than through a straightforward indemnity clause. Nevertheless, such a shift in risk has been
recognized as a legal and proper allocation between parties. See Hamelin v. Simpson Paper (Vermont)
Co., 167 Vt. 17, 19–21 (1997) (upholding an indemnification clause that shifted the risk from
landowner to party using the property). If Landowner prevails on its factual theory, the right to an
insurance policy will also carry a right to defense costs under the duty to defend provisions of any
insurance contract. City of Burlington v. Nat’l Union Fire Ins. Co., 163 Vt. 124, 127 (1994) (holding that
a duty to defend arises when a claim is potentially covered by the policy). Given that the present

3 There is additional language in the section concerning “additional insured” and requiring School to provide copies

of any and all policies to Landowner for its approval. Id.

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negligence action has arisen and is being prosecuted against Landowner, then the risk of loss and
damages flowing from the alleged breach have begun and are accruing.

Based on this analysis, Landowner’s motion to bring School into the present action under
V.R.C.P. 14(a) is a timely and appropriate claim as School, if Landowner’s theory is proven, would
be liable to Landowner for all or a part of any damages that Plaintiff Mitchell may recover as well as
Landowner’s present and actual legal costs to defend the present action. This combination of
current and potential liability is neither too tenuous, nor premature. Sett v. Haig’s, Inc., 164 Vt. 1, 8
(1995) (citing to the reporter’s notes for Rule 14 that emphasize that claims based on “indemnity,
subrogation, contribution, or warranty” are the common bases for third-party joinder).

Apart from the issues already addressed, School objects to being joined to the present action
based on the expiration of the present discovery/ADR schedule and the extensive discovery that has
already taken place. While these concerns are valid, they may be addressed through amendment to
the discovery schedule. The Court in this respect seeks to balance the three priorities at issue. First,
School’s right to fair and full discovery; second, Landowner’s right to have any legitimate third-party
claims joined (particularly in light of the federal court’s decision regarding the Markel insurance
policy); and for Mitchell to have a timely adjudication of her claims. The Court finds that allowing
School to have additional time to conduct any discovery it deems necessary will be the most time-
efficient approach to allow the entire litigation process to move forward in a timely manner.
V.R.C.P. 16.2 (noting that the Trial Court has the authority to modify the discovery schedule to
prevent manifest injustice and to determine the schedule to provide reasonable accommodation to
litigants).

Finally, School seeks to impose collateral estoppel from the federal district court’s
November 16, 2023 decision on the issue of whether School breached its obligations under section
11 of the Lease. As School notes, collateral estoppel, or issue preclusion, can apply even if a
decision is not final if the decision and the current issue meet the five elements of (1) same party; (2)
same issue; (3) final judgment on the merits for the issue; (4) full and fair opportunity to litigate the
issue; and (5) applying preclusion is fair. In re Tariff Filing of Cent. Vt. Pub. Serv. Corp, 172 Vt. 14, 20
(2001). The problem with applying issue preclusion in the present matter is that the issue is not the
same. In the federal court decision, the question was whether the language of the Markel policy was
reasonable interpreted by Markel. The Court indicated that Markel’s interpretation was generally
consistent with insurance jurisprudence. JTVT, LLC, 2:23-cv-42, at 5. While there is little to
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criticize or take issue within the federal court’s analysis, the question before this Court is different.
It is not a matter of interpreting the Markel policy, but it is a matter of interpreting the provisions of
section 11 of the Lease. If section 11 of the Lease required a broad policy that effectively covered
School and Landowner as co-insureds, then it is not immediately relevant what the Markel policy
said or how it is interpreted.4 For this reason, the federal court decision does not preclude or
prevent Landowner from making a claim under section 11 of the Lease and does not constitute a
final decision on School’s obligation to obtain an insurance policy that fully indemnified
Landowner’s work on the leased property. Even if the language of the November 16, 2023 decision
was read broadly, it does not by its express terms constitute a final decision on the merits. The
decision envisions further briefing and process before the question of coverage an interpretation is
definitively resolved. For these reasons, the Court denies School’s request to dismiss based on the
theory of claim preclusion.

ORDER

Based on the foregoing, Third-Party Defendant Mountain Valley School, LLC’s motion to
dismiss is Denied. The Court shall set this matter for a status conference to allow the parties to
address any changes or modifications to the present discovery schedule are necessary and whether
any portion of the third-party complaint should be resolved before any mediation or motion practice
regarding the primary claims in this matter.

Electronically signed on 4/3/2024 4:55 PM pursuant to V.R.E.F. 9(d)

__________________________________
Daniel Richardson
Superior Court Judge

4 Although it does become relevant if there is an affirmative defense that Landowner reviewed and approved the

Markel policy.

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