Weeks Marine, Inc. v. Standard Concrete Prod, Inc. ( 2014 )

Case: 12-20610 Document: 00512471527 Page: 1 Date Filed: 12/16/2013
REVISED December 16, 2013
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
No. 12-20610 FILED
December 6, 2013
Lyle W. Cayce
WEEKS MARINE, INCORPORATED, Clerk
Plaintiff-Appellant
v.
STANDARD CONCRETE PRODUCTS, INCORPORATED,
Defendant-Appellee
Appeal from the United States District Court
for the Southern District of Texas
Before DAVIS and JONES, Circuit Judges, and MILAZZO, District Judge. ∗
JONES, Circuit Judge:
This case revolves around the terms of an indemnity agreement between
Weeks Marine, Inc. (“Weeks Marine”) and Standard Concrete Products, Inc.
(“Standard Concrete”). In 2011, John Johnson, Jr., (“Johnson”) filed suit in
Alabama state court against several entities, including Weeks Marine and
Standard Concrete, for the injuries that he allegedly sustained when he fell
from his crane while working on the I-10 Mississippi River Bridge fender
replacement and reconditioning project (“the Project”). 1 In the present case,
∗
District Judge of the Eastern District of Louisiana, sitting by designation.
1 The underlying litigation is styled John Johnson, Jr., et ux. v. Hesler Industries, Inc.,
et al., Circuit Court of Mobile County, Alabama, Civil Action No. 2011-900374.
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Weeks Marine, the general contractor on the Project, seeks a declaration that
Standard Concrete, Johnson’s employer, is contractually obliged to defend and
indemnify it in the underlying state court action. Because the indemnity
agreement is not applicable to the underlying suit, we affirm the judgment in
favor of Standard Concrete. 2
BACKGROUND
Shortly after Weeks Marine was selected as general contractor for the
Project, it accepted Standard Concrete’s bid for the manufacture of pre-cast
concrete fender modules. The parties executed a contract, which consists of
two documents: Purchase Order No. 161845 (“Purchase Order”) and the
Additional Terms and Conditions (“Additional Terms”). The present dispute
involves the following provisions from the contract:
Description of Material (Purchase Order): Seller (Standard
Concrete) shall furnish all supervision, equipment, forms,
materials, labor, supplies, fabrication, coatings, quality control,
etc. to provide pre-cast fender modules.
Paragraph 2 (Purchase Order): Inserts: Buyer (Weeks Marine)
to provide all inserts for shear keys and whalers and lift hardware.
Seller (Standard Concrete) to install lift hardware to facilitate
lifting and handling.
Paragraph 10 (Purchase Order): Property and Personal
Liability: Seller (Standard Concrete) shall save harmless and
indemnify Buyer (Weeks Marine) from and against all claims,
suits (including counsel fees and other expenses), judgments and
awards stemming from any damage to property or injury
(including death) to persons (including any damage or injury to the
property or the person of any employee of either Buyer or Seller
2 Accordingly, we do not reach Weeks Marine’s argument that the agreement is
enforceable under Texas’s fair notice requirements for indemnity agreements. Cf. Coastal
Mart. Inc. v. Southwestern Bell Telephone Co., 154 S.W.3d 839, 843 (Tex. App. Corpus Christi
2005) (providing that the determining the scope of coverage is the “starting point” for
resolving an indemnity dispute).
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which may be caused or alleged to have been caused in whole or in
part by, or which may occur or be alleged to have occurred in
connection with the execution of this Purchase Order by Seller
(Standard Concrete), or the use of the items furnished hereunder,
excepting Buyer’s (Weeks Marine) sole negligence.
Paragraph 4 (Additional Terms): Indemnification will be limited
to actual damages relating to workmanship of Seller’s (Standard
Concrete) product. In no event is Seller (Standard Concrete) liable
for indirect or consequential damages. Total damages are limited
to $500,000.00.
Paragraph 6 (Additional Terms): It is mutually agreed that any
provision in the purchase order which would modify, conflict with,
or contradict any of these terms and conditions, shall be deemed to
be null and void.
On March 10, 2009, seven months after the parties executed the contract,
Johnson sustained the alleged injuries that form the basis of the underlying
suit. In his state court pleadings, Johnson alleges that he fell from a “corner
module” or “steel module” that was designed by Modjeski & Masters, Inc.,
manufactured by Helser Industries, Inc., and contracted for by Weeks Marine.
The complaint describes the incident as occurring in the following manner:
[Johnson] was attempting to disassemble the corner module
(hereinafter “corner module” or “steel module”) by lifting it away
from a concrete form using a crane. Mr. Johnson placed two eye-
hooks in pre-drilled holes in the top of the steel module. However,
the eye-hooks could not be secured from the top. Instead, Mr.
Johnson had to secure the eye-hooks to the module by placing a
nut on the eye-hooks from the underside. Unlike in other locations
on that and other modules, there were no pre-welded nuts on the
underside of the holes in the corner module where the eye-hooks
were placed. When Mr. Johnson attempted to secure the eye-hook
to the corner module, he fell approximately fourteen feet to the
ground.
After Weeks Marine was served with Johnson’s complaint, it sent
demand letters to Standard Concrete, seeking defense and indemnification in
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the state court action. When Standard Concrete concluded that it had no duty
to defend or indemnify, Weeks Marine sought declaratory relief in federal
court, and Standard Concrete counter-claimed. Cross-motions for summary
judgment were filed. The district court referred the motions to a magistrate
judge, who issued a Report and Recommendation (“Report”), concluding that
the court should grant Standard Concrete’s motion for exoneration from
defense or indemnification. The district court adopted the magistrate judge’s
Report and dismissed the case. Weeks Marine filed a timely appeal.
STANDARD OF REVIEW
We review the district court’s grant of summary judgment de novo,
applying the same standards as the district court. St. Paul Surplus Lines Ins.
Co. v. Settoon Towing, L.L.C. (In re Settoon Towing, L.L.C.), 720 F.3d 268, 275
(5th Cir. 2013). Summary judgment is appropriate when “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(a). We must view
all facts and evidence in the light most favorable to the non-moving party when
considering a motion for summary judgment. Dameware Dev., L.L.C. v. Am.
Gen. Life Ins. Co., 688 F.3d 203, 206-07 (5th Cir. 2012) (citation omitted). The
interpretation of a contractual indemnity provision is a question of law that is
also reviewed de novo. Becker v. Tidewater, Inc., 586 F.3d 358, 369 (5th Cir.
2009).
Under the Purchase Order’s choice of law provision, disputes between
Weeks Marine and Standard Concrete must be resolved under Texas law.
Such choice-of-law provisions are unquestionably enforceable, DeSantis v.
Wackenhunt Corp., 793 S.W.2d 670, 677-78 (Tex. 1990)); Restatement (Second)
of Conflict of Laws § 187.
Texas courts apply general contract law principles when construing
indemnity agreements. Ideal Lease Service, Inc. v. Amoco Production Co.,
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662 S.W.2d 951, 952-953 (Tex. 1983). The primary concern of contract
interpretation under Texas law is to ascertain the true intentions of the parties
as expressed in the instrument. J.M. Davidson, Inc. v. Webster, 128 S.W.3d
223, 229 (Tex. 2003). Texas courts examine the entire contract in an effort to
harmonize and give effect to all provisions so that none is rendered
meaningless. Id.
Under Texas law, the duties to defend and indemnify “are distinct and
separate duties” and “enjoy a degree of independence from each other.” D.R.
Horton-Texas, Ltd. v. Markel Int’l Ins. Co., 300 S.W.3d 740, 743-44 (Tex. 2009).
The “duty to defend” is the broader of the two. Northfield Ins. Co. v. Loving
Home Care, Inc., 363 F.3d 523, 528 (5th Cir. 2004). It is “circumscribed by the
eight-corners doctrine,” so that it is determined solely by the language of the
indemnity provision and the allegations in the third-party pleadings. Gilbane
Bldg. Co. v. Admiral Ins. Co., 664 F.3d 589, 594 (5th Cir. 2011). Moreover, the
court must review the third-party pleadings “without regard to the truth or
falsity of those allegations.” GuideOne Elite Ins. Co. v. Fielder Rd. Baptist
Church, 197 S.W.3d 305, 308 (Tex. 2006). The duty to indemnify, by contrast,
“is triggered by the actual facts that establish liability in the underlying
lawsuit.” Guar. Nat’l Ins. Co. v. Azrock Indus. Inc., 211 F.3d 239, 243 (5th Cir.
2000).
DISCUSSION
Duty to Defend
Applying the eight-corners rule here, the indemnity agreement and
Johnson’s pleadings govern whether Standard Concrete owes Weeks Marine a
defense. If Johnson’s factual allegations potentially support a claim covered
by the indemnity agreement, then Standard Concrete’s duty to defend is
invoked. GuideOne Elite Ins. Co., 197 S.W.3d at 310 (citation omitted).
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Paragraph 10 of the Purchase Order requires Standard Concrete to “save
harmless and indemnify Buyer (Weeks Marine) from and against all . . . suits
(including counsel fees and other expenses).” Paragraph 4 of the Additional
Terms, however, limits indemnification to “actual damages relating to the
workmanship of Seller’s (Standard Concrete) product.” Since the Additional
Terms also provide that any term in the Purchase Order modified by one of the
Additional Terms is “null and void,” the limiting language in the Additional
Terms controls. 3 Thus, the indemnity agreement, read as a whole, does not
require Standard Concrete to defend Weeks Marine in suits where the claim
for damages is unrelated the workmanship of Standard Concrete’s product.
In the underlying complaint, Johnson alleges that he fell and was injured
while “attempting to disassemble the corner module.” According to Johnson’s
complaint, the module was designed, manufactured and contracted for by
companies other than Standard Concrete. Johnson asserts that that he was
unable to secure eye-hooks to the pre-drilled holes on the top of the corner
module, and as a result, he resorted to placing a nut on the eye-hooks from the
underside. He further claims that the corner module lacked a pre-welded nut
on the underside, preventing him from simply securing the eye-hooks to the
module from the topside.
The Fifth Circuit has characterized a defect in workmanship as a defect
in the way some part of a product is constructed. U.S. Industries, Inc. v. Aetna
Cas. & Sur. Co., 690 F.2d 459, 462-63 (5th Cir. 1982) (citation omitted).
Workmanship relates to the quality of a product, and does not include damage
to a product caused by negligence when the product is used during the
construction process. Id. Johnson’s complaint, however, attributes his
3 Further, both sides agree that Paragraph 4’s words “indemnification will be limited
to” refers to the indemnification agreement as a whole, not just the duty to indemnify.
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accident to the construction process used by him and his crew. Alternatively,
Johnson alleges a defect in the corner module, but the module is not a Standard
Concrete product. The steel modules are a component that Standard Concrete
used to make its product; they are not the product itself. Standard Concrete’s
products are the pre-cast concrete fender modules. The common usage of
“product” distinguishes this term from components, tools, and equipment used
in the manufacturing process. See BLACK’S LAW DICTIONARY 1328 (9th ed.
2009) (defining “product” as “something that is distributed commercially for
use or consumption”). As Standard Concrete did not distribute steel modules
for consumption or use, Johnson has not stated a claim related to the
workmanship of Standard Concrete’s product. Thus, Standard Concrete has
no duty to defend Weeks Marine in the underlying action.
In reaching this conclusion, we considered Weeks Marine’s arguments
for finding a duty to defend, but found them unpersuasive. First, Weeks
Marine contends that because the “Description of Materials” provision of the
Purchase Order required Standard Concrete to provide metal forms, these
forms constitute Standard Concrete’s product under the indemnity agreement.
Weeks Marine may have prevailed under this theory had the indemnity
agreement consisted only of Paragraph 10 of the Purchase Order, which
covered all claims stemming from the execution of the Purchase Order.
However, the parties modified Paragraph 10 with an additional term that
requires indemnification only with respect to claims related to the
workmanship of Standard Concrete’s product. As explained immediately
above, the product subject to indemnification under the indemnity agreement
is the concrete fenders, not the forms that Standard Concrete used in making
them.
Second, Weeks Marine invokes Fresh Coat, Inc. v. K-2, Inc., 318 S.W.3d
893 (Tex. 2010), where the Texas Supreme Court held that synthetic stucco
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components, collectively referred to as EIFS, were a “product.” Fresh Coat,
318 S.W.3d at 897. In so holding, the court rejected the definition of product
put forth by K-2, the manufacturer of EIFS, which argued that EIFS was no
longer a product once it was installed on the walls of homes. Id. The court
held instead that a product within the meaning of Texas’s products liability
statute is “something distributed or otherwise placed, for any commercial
purpose, into the stream of commerce for use or consumption.” Id.
Fresh Coat’s definition of “product,” however, offers Weeks Marine no
relief. In order to enter the steam of commerce, a product must be released in
some manner to the consuming public. Armstrong Rubber Co., v. Urquidez,
570 S.W.2d 374, 376-77 (Tex. 1978) (“The defective tire . . . always remained
within the industrial testing process. Accordingly, the tire never entered the
stream of commerce.”); Thate v. Texas & Pacific Rwy. Co., 595 S.W.2d 591, 599
(Tex. Civ. App.—Dallas 1980, no writ) (noting that defendant-railroad never
released a railroad car used in defendant’s business to an ordinary user or
consumer). 4 Here, there is no fact issue as to whether Standard Concrete
placed the steel forms into the stream of commerce. The Purchase Order
demonstrates that the concrete fender modules are the product that Standard
Concrete made for a commercial purpose. The document provides that
Standard Concrete is to sell Weeks Marine a specified number of these modules
at a certain price. Although it is true that the Purchase Order also indicates
4 See also Gardner v. Chevron U.S.A., Inc., 675 F.2d 658, 661 (5th Cir. 1982) (holding
that defendant was not liable because it was not engaged in business of selling the product
at issue); Dunn v. Penrod Drilling Co., 660 F. Supp. 757, 769 (S.D. Tex. 1987) (stating that
Penrod employees at all times maintained control over a rig and there was no evidence that
Penrod ever released the rig to the consuming public); FFE Transp. Servs., Inc. v. Fulgham,
154 S.W.3d 84, 89 (Tex. 2004) (noting that FFE was the end user and consumer of a trailer
used to transport its own cargo and never released that allegedly defective product to an
ordinary user or consumer); Hernandez v. So. Pac. Transp. Co., 641 S.W.2d 947, 952 (Tex.
App.—Corpus Christi 1982, no writ) (finding no evidence that the defendant-railroad
released stanchions it used in its business into the stream of commerce).
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that Standard Concrete must “furnish all supervision, equipment, forms,
materials, labor, supplies, fabrication, costings, quality control, etc.,” the
purpose of these provisions is clearly stated: “. . . to provide pre-cast fender
modules.” Further, the Purchase Order indicates that Standard Concrete is to
load the finished concrete modules onto Weeks Marine’s barges, but nowhere
does it say that Standard Concrete must load any steel forms for shipping or
otherwise distribute the forms into the stream of commerce. In sum, Fresh
Coats shows only that Standard Concrete could have been liable for any defects
in its concrete fenders even though the fenders are ultimately components of
the bridge project. However, it does not extend Standard Concrete’s duty to
defend against claims allegedly caused by the steel forms that, unlike EIFS in
Fresh Coats or the concrete modules here, are not distributed commercially by
the indemnitor.
Finally, Weeks Marine asserts that Paragraph 2 of the Purchase Order,
which requires Standard Concrete “to install lift hardware to facilitate lifting
and handling,” demonstrates that the metal forms are Standard Concrete’s
product. Although Weeks Marine’s brief is not entirely clear, it appears that
the contention here is that the workmanship of the steel forms is at issue in
the underlying litigation because Standard Concrete did not properly install
lift hardware on them as required. Weeks Marine thus states that Paragraph
2 obliged Standard Concrete “to install the specific hardware on the metal
forms necessary to lift and manipulate the metal forms during the process of
molding the pre-cast concrete modules.” Br. of Appellant at 17 (emphasis
added).
Contrary to Weeks Marine’s claim, Paragraph 2 does not specify that the
lift hardware must be installed on the steel forms. It is more reasonable to
interpret Paragraph 2 as requiring Standard Concrete to install lift hardware
on the finished pre-cast concrete fenders (after they are removed from the steel
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corner modules used to form them) as part of Standard Concrete’s
responsibility to load the concrete fender modules onto Weeks Marine’s barges
after completion. Assuming arguendo that these circumstances are consistent
with more than one fact and nothing shows that one is more probable than the
others, none of the facts can be inferred. Marshall Field Stores, Inc. v.
Gardiner, 859 S.W.2d 391, 400 (Tex. App—Houston [1st Dist.] 1993, writ
dism’d w.o.j.) (op. on mo. for rehearing). As Weeks Marine offers no evidence
supporting its interpretation of Paragraph 2, there is no triable issue of fact
based on the language of this provision. 5
Duty to Indemnify
Weeks Marine’s argument that Standard Concrete is required to hold
Weeks Marine harmless from any damages in the underlying litigation
depends on the premise that Johnson’s alleged injuries fall within the scope of
the indemnity agreement. For the reasons already discussed, we conclude that
the indemnity agreement does not cover the underlying state court action.
This, however, does not end our inquiry because unlike the duty to defend, the
duty to indemnify “is triggered by the actual facts that establish liability in the
underlying lawsuit.” Guar. Nat’l Ins. Co., 211 F.3d at 243. As a result, the
court may consider facts outside of those alleged in Johnson’s complaint to
determine the scope of Standard Concrete’s duty to indemnify. Gilbane Bldg.
Co., 664 F.3d at 594. Here, the magistrate judge’s Report noted that Weeks
Marine “submitted no evidence that Mr. Johnson’s injuries were caused by or
5 Standard Concrete offers a legitimate argument that Weeks Marine waived the
stream of commerce and lift hardware arguments by raising them for the first time on appeal
without appropriate justification. Indeed, the absence of discussion of these issues below
may explain the lack of factual meat on the bones of Weeks Marine’s arguments. Although
Weeks Marine did not address the waiver question in its reply brief, we nevertheless
entertained Appellant’s claims as to Fresh Coats and Paragraph 2 out of an abundance of
caution, and hold both to be unavailing.
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related to the workmanship of Standard Concrete’s product.” Weeks Marine,
Inc. v. Standard Concrete Products, Inc., No. 4:11-CV-03230, at 11 (S.D. Tex.,
filed on June 1, 2012). On appeal, Weeks Marine points to no facts that lead
us to conclude otherwise. Instead, it argues that it is premature, as a matter
of law, to dismiss its indemnification claim with prejudice. However, courts
have recognized that there are situations in which there is no duty to defend,
“and the same reasons that negate the duty to defend likewise negate any
possibility that the [indemnitor] will ever have a duty to indemnify.” Columbia
Cas. Co. v. Georgia & Florida RailNet, Inc., 542 F.3d 106, 111 (5th Cir. 2008)
(citation omitted). This is such a case.
CONCLUSION
Accordingly, we AFFIRM the district court’s judgment.
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