Jencap Insurance Services, Inc., formerly known as M.J. Kelly of Arkansas, Inc. v. Toni Frazier Insurance Agency, LLC

United States Court of Appeals
For the Eighth Circuit
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No. 24-2671
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Jencap Insurance Services, Inc., formerly known as M.J. Kelly of Arkansas, Inc.,
lllllllllllllllllllllPlaintiff - Appellant,
v.
Toni Frazier Insurance Agency, LLC,
lllllllllllllllllllllDefendant - Appellee.
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Appeal from United States District Court
for the Eastern District of Arkansas - Central
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Submitted: June 11, 2025
Filed: August 18, 2025
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Before COLLOTON, Chief Judge, ARNOLD and GRUENDER, Circuit Judges.
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COLLOTON, Chief Judge.
Jencap Insurance Services, Inc., formerly known as M.J. Kelly of Arkansas,
Inc., sued Toni Frazier Insurance Agency, LLC for contribution as a joint tortfeasor.
The district court* granted Frazier’s motion to dismiss on the ground that M.J. Kelly’s
*The Honorable Brian S. Miller, United States District Judge for the Eastern
District of Arkansas.

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claim was collaterally estopped by a prior judgment in state court on the same issue.
M.J. Kelly appeals, and we affirm.
Toni Frazier Insurance Agency submitted an application for insurance coverage
on behalf of Heritage Hospitality, Inc., for a motel owned by Heritage in Brinkley,
Arkansas. M.J. Kelly, a producing agent, processed the application and issued a
policy to Heritage on behalf of Penn-Star Insurance Company.
After an inspection of the motel premises, M.J. Kelly informed Heritage that
it must make remedial repairs by a certain date to retain insurance coverage. Due to
Heritage’s alleged failure to complete the repairs before the deadline, Penn-Star and
M.J. Kelly canceled Heritage’s insurance policy. Heritage received contradictory
communications from Frazier and believed that the policy remained in effect. About
two weeks later, Heritage’s motel caught fire and burned down. Heritage submitted
a claim for its fire loss to Penn-Star. Penn-Star denied the claim because it
determined that the policy had been canceled.
Heritage sued Frazier, M.J. Kelly, and Penn-Star in the Arkansas circuit court,
alleging that the defendants were jointly liable for the property damage sustained in
the fire. M.J. Kelly and Frazier asserted cross-claims against each other for
contribution as joint tortfeasors under the Uniform Contribution Among Tortfeasors
Act. See Ark. Code Ann. § 16-61-201 et seq. The court concluded that M.J. Kelly
was not a tortfeasor and thus granted summary judgment for M.J. Kelly on both
Heritage’s claim and Frazier’s contribution cross-claim. The court concluded that (1)
M.J. Kelly acted exclusively as Penn-Star’s agent and owed no duty to Heritage, and
(2) because M.J. Kelly was not a tortfeasor, it could not be a joint tortfeasor. The
court dismissed M.J. Kelly from the case.
Heritage appealed the summary judgment ruling to the Arkansas Court of
Appeals. The court dismissed the appeal without prejudice for lack of a final
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judgment, because Heritage had claims pending against Frazier and Penn-Star in the
circuit court. See Ark. R. Civ. P. 54(b).
The case proceeded in Arkansas circuit court. Two years later, Penn-Star filed
a third-party complaint against M.J. Kelly, see Ark. R. Civ. P. 14, but the court
compelled arbitration of Penn-Star’s complaint and reaffirmed that M.J. Kelly
remained dismissed from the case. M.J. Kelly, facing a possible appeal of the
favorable summary judgment order and the third-party complaint in arbitration, then
participated in settlement negotiations with Heritage and Penn-Star. Heritage settled
its claims against M.J. Kelly, Penn-Star, and Frazier in exchange for $5.25 million.
M.J. Kelly paid $5 million, and Penn-Star paid the remaining $250,000. Heritage
moved to dismiss its claims against all defendants pursuant to the settlement
agreement, and the district court dismissed all claims with prejudice.
M.J. Kelly then filed this action in the district court seeking contribution from
Frazier as a joint tortfeasor under the Uniform Contribution Among Tortfeasors Act.
See Ark. Code Ann. § 16-61-201 et seq. The court ruled that M.J. Kelly was
precluded from relitigating whether it was a joint tortfeasor with Frazier, and
dismissed the complaint with prejudice. See Fed. R. Civ. P. 12(b)(6). We review a
district court’s dismissal for failure to state a claim de novo. Kelly v. City of Omaha,
813 F.3d 1070, 1075 (8th Cir. 2016).
Where our jurisdiction is premised on diversity of citizenship, collateral
estoppel is determined according to state law. Nanninga v. Three Rivers Elec. Coop.,
236 F.3d 902, 906 (8th Cir. 2000). Issue preclusion applies in Arkansas where (1) the
issue sought to be precluded is the same as that involved in the prior litigation; (2) the
issue was actually litigated; (3) the issue was determined by a valid and final
judgment; and (4) the determination was essential to the judgment. Craven v. Fulton
Sanitation Serv., Inc., 206 S.W.3d 842, 844 (Ark. 2005). The party against whom
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collateral estoppel is asserted must have had a full and fair opportunity to litigate the
issue in the prior proceeding. Id.
We conclude that M.J. Kelly is precluded from relitigating whether it is a
tortfeasor. The state circuit court granted summary judgment for M.J. Kelly on the
ground that M.J. Kelly was not a tortfeasor. The summary judgment order became
final when the state court dismissed all remaining claims with prejudice after the
parties reached a settlement agreement that included no reservations.
The Arkansas Supreme Court addressed a comparable situation in Winkler v.
Bethell, 210 S.W.3d 117 (Ark. 2005), where a non-final order granting summary
judgment for certain defendants became final after the plaintiff dismissed the
remaining defendants without prejudice. Id. at 121-22. The nonsuit in Winkler, like
the settlement agreement here, did not address the merits of the remaining claims, but
each development resolved all remaining claims and resulted in a final judgment.
This case is unlike Shaw v. Destiny Industries, Inc., 76 S.W.3d 905 (Ark. Ct. App.
2002), where collateral estoppel did not apply because a summary judgment order
resolved only a portion of claims against one defendant who remained a party to the
case. Id. at 908-09; see Winkler, 210 S.W.2d at 120-21. Here, the state court ruled
that M.J. Kelly was not a tortfeasor, resolved all claims involving M.J. Kelly, and
dismissed M.J. Kelly from the case. The state court’s summary judgment order, now
embodied in a final judgment, precludes relitigation of the tortfeasor issue, and M.J.
Kelly’s contribution claim necessarily fails.
The judgment of the district court is affirmed.
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