Weeks Marine, Inc. v. Standard Concrete Products, Inc. , 737 F.3d 365 ( 2013 )


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  •      Case: 12-20610        Document: 00512463761           Page: 1      Date Filed: 12/06/2013
    IN THE UNITED STATES COURT OF APPEALS
    FOR THE FIFTH CIRCUIT
    No. 12-20610
    WEEKS MARINE, INCORPORATED,
    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,
    Weeks Marine, the general contractor on the Project, seeks a declaration that
    ∗
    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.
    Case: 12-20610       Document: 00512463761         Page: 2    Date Filed: 12/06/2013
    No. 12-20610
    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
    which may be caused or alleged to have been caused in whole or in
    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).
    2
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    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
    the state court action. When Standard Concrete concluded that it had no duty
    3
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    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.,
    
    662 S.W.2d 951
    , 952-953 (Tex. 1983).        The primary concern of contract
    4
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    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).
    Paragraph 10 of the Purchase Order requires Standard Concrete to “save
    harmless and indemnify Buyer (Weeks Marine) from and against all . . . suits
    5
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    (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
    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
    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.
    6
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    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
    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
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    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
    that Standard Concrete must “furnish all supervision, equipment, forms,
    materials, labor, supplies, fabrication, costings, quality control, etc.,” the
    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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    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
    corner modules used to form them) as part of Standard Concrete’s
    responsibility to load the concrete fender modules onto Weeks Marine’s barges
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    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
    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.,
    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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    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.
    11