Anthony & Sylvan Pools Corp. v. Outdoor Sports Gear, Inc. ( 2020 )

NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS APR 22 2020
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
ANTHONY & SYLVAN POOLS No. 18-55775
CORPORATION 18-55867
Plaintiff-counter- D.C. No. 2:16-cv-06658-R-E
defendant-Appellee-Cross-Appellant,
v. MEMORANDUM*
OUTDOOR SPORTS GEAR, INC.
Defendant-counter-claimant-
Appellant-Cross-Appellee.
Appeal from the United States District Court
for the Central District of California
Manuel L. Real, District Judge, Presiding
Argued and Submitted December 10, 2019
Pasadena, California
Before: WARDLAW and LEE, Circuit Judges, and KENNELLY,** District Judge.
Anthony & Sylvan Pools Corp. (“A&S”) and Outdoor Sports Gear, Inc.
(“OSG”) cross-appeal the district court’s rulings on the parties’ breach of contract
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
**
The Honorable Matthew F. Kennelly, United States District Judge for
the Northern District of Illinois, sitting by designation.
and declaratory judgment claims. As the parties are familiar with the facts, we do
not recount them here. We have jurisdiction under 28 U.S.C. § 1291. We review
de novo the district court’s legal conclusions, including its interpretation of a
contract. United States v. 1.377 Acres of Land, 352 F.3d 1259, 1264 (9th Cir.
2003). We affirm in part, reverse in part, and remand.
1. The district court concluded, applying California law as dictated in the
Asset Purchase Agreement (APA), that OSG breached the APA by failing to
indemnify A&S for costs incurred in connection with the Nash, 1 Baeza, 2 and
Flood3 lawsuits. Under Section 2.03(b) of the APA, A&S is responsible for only
“liabilities . . . whether . . . absolute or contingent” including “wrongful death,
personal injury, physical property damages or any other injury, damage, or harm
[that] occur[ed] after the Closing Time.” Conversely, OSG is responsible for any
such injuries that “occur[red]” prior to closing.
Because the asbestos exposures in Nash, Baeza, and Flood began and ended
before the Closing Time as defined in the APA, the district court properly
1
Nash v. Alpha Beta Co., et al., Case No. BC450726 (L.A. Cty. Super. Ct.)
(“Nash”).
2
Baeza v. Amcord Inc., et al., Case No. BC537791 (L.A. Cty. Super. Ct.)
(“Baeza”).
3
Flood v. Anthony & Sylvan Corp., et al., Index No.: 190077/2017 (N.Y.
Sup. Ct.) (“Flood”).
2
concluded that OSG was liable for the damages for personal injuries at issue in
those suits.
However, the district court erred by also allocating liability for the remaining
claims in those actions to OSG. The APA makes clear that A&S is responsible for
“wrongful death . . . [that] occur[ed] after Closing Time.” Categorizing the
wrongful death claim as a contingent liability renders superfluous the APA’s
separate, specific reference to such claims. See Boghos v. Certain Underwriters at
Lloyd’s of London, 36 Cal. 4th 495, 503 (2005) (California “disfavor[s]
constructions of contractual provisions that would render other provisions
surplusage”). Additionally, the relevant injury for the wrongful death claim is “for
the loss of companionship and for other losses suffered as a result of [the]
decedent’s death.” Quiroz v. Seventh Ave. Ctr., 140 Cal. App. 4th 1256, 1263
(2006). In the Flood matter, the wrongful death occurred after the Closing Time,
and accordingly, A&S bears the liability.
A&S is also responsible for the damages arising from the loss of consortium
claims in the Nash and Baeza matters. Loss of consortium is a stand-alone
personal injury, separate from the spouse’s injury. See Leonard v. John Crane,
Inc., 206 Cal. App. 4th 1274, 1279 (2012) (“While the cause of action is triggered
by the spouse’s injury, ‘a loss of consortium claim is separate and distinct.’”)
(citation omitted). Section 2.03(b)(iii) of the APA allocates to A&S liability for
3
any “personal injury” that occurs after the Closing Time. Here, the loss of
consortium (i.e., when the spouse could no longer fulfill spousal functions)
occurred after the Closing Time. See id. California courts have conceived of the
injuries relevant for loss of consortium and wrongful death claims as separate from
the underlying injuries since long before the parties entered into the APA. See, e.g,
Rodriguez v. Bethlehem Steel Corp., 12 Cal. 3d 382, 405–06, (1974); Fiske v.
Wilkie, 67 Cal. App. 2d 440, 444 (1945).
2. The district court did not clearly err in determining that A&S was not
required to maintain asbestos-related coverage under Section 10.07 of the APA.
First, the overwhelming weight of the expert testimony at trial showed that
asbestos insurance was not available in 1996, and the district court found A&S’s
expert more credible than OSG’s expert. And, although the district court’s trial
order includes “one sentence” where it misstates the question at trial, “in our
judgment[,] the order,” taken as a whole, “indicates that the court had [the] correct
[question] in mind.” United States v. Duhart, 496 F.2d 941, 943 (9th Cir. 1974).
3. The district court properly denied declaratory relief to OSG concerning
Section 10.07 of the APA. Because A&S was not required to maintain asbestos
coverage, OSG cannot show that it either has suffered in the past, or will suffer in
the future, the sort of harm that would make the controversy over the meaning of
Section 10.07 “sufficient[ly] immedia[te] . . . to warrant the issuance of a
4
declaratory judgment.” Principal Life Ins. Co. v. Robinson, 394 F.3d 665, 671 (9th
Cir. 2005).
4. Finally, the district court did not err in denying A&S’s request for
attorney’s fees incurred in this action under Section 12.01 of the APA. Section
12.01 provides that OSG “shall indemnify and hold harmless” A&S “from and
against . . . any and all loss, damage . . . , liability, claims, cost and expense,
including reasonable attorney’s . . . fees . . . arising out of or in connection with . . .
any failure of [OSG] to pay, perform or discharge any of the Excluded Liabilities.”
“Generally, an indemnification provision [such as this one] allows one party to
recover costs incurred defending actions by third parties, not attorney fees incurred
in an action between the parties to the contract.” Alki Partners, LP v. DB Fund
Servs., LLC, 4 Cal. App. 5th 574, 600 (2016). Because the indemnification
provision in Section 12.01 is the “extent of the contract’s provision for attorney
fees,” A&S “is not entitled to attorney fees incurred in prosecuting this action.”
Cont’l Heller Corp. v. Amtech Mech. Servs., Inc., 53 Cal. App. 4th 500, 508
(1997).
AFFIRMED IN PART; REVERSED IN PART; REMANDED.
5
FILED
Anthony & Sylvan Pools Corp. v. Outdoor Sports Gear, Inc., No. 18-55775
APR 22 2020
WARDLAW, Circuit Judge, concurring in part and dissenting in part: MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
I respectfully dissent from the majority’s allocation of liability to A&S for the
wrongful death claim in Flood and for the loss of consortium claims in Nash and
Baeza.
Because the contract holds A&S liable only for injuries occurring after Closing
Time, when the injuries occurred is the critical determination for assessing liability
between A&S and OSG. However, the question of when the injuries at issue in
Nash, Baeza, and Flood “occurred” is complicated by the unusual nature of
asbestos-related injuries: after inhaling asbestos—either once or on multiple
occasions—many decades may pass before any harm becomes manifest. See
Armstrong World Indus., Inc. v. Aetna Cas. & Sur. Co., 45 Cal. App. 4th 1, 46–47
(1996) (regarding the latency period when subclinical changes to the lungs
resulting from asbestos exposure may occur).
Under California law “as it existed at the time of contracting,” Hess v. Ford
Motor Co., 27 Cal. 4th 516, 524 (2002), an asbestos-related injury is deemed to
have occurred at the time of initial exposure. The year before the parties signed
the APA, the California Supreme Court announced that the “continuous injury
trigger” rule applies in asbestos-related cases. See Montrose Chem. Corp. v.
Admiral Ins. Co., 10 Cal. 4th 645, 685 (1995). This rule recognizes that an
6
asbestos-related injury is “continuous” from the moment of first exposure, id. at
689, and therefore is deemed to “occur[] upon exposure and continue[] until
death,” Armstrong, 45 Cal. App. 4th at 47.
Although the plaintiff in Flood did not die until after Closing Time, his
wrongful death was contingent upon the underlying asbestos-exposure, which
occurred before Closing Time. Thus, OSG should be liable for the wrongful death
claim here. Similarly, although the loss of consortium claims at issue in Nash and
Baeza, did not arise until the marital relationship no longer existed, the loss of
consortium was also contingent upon an injury that occurred at the moment of
exposure to asbestos, i.e. pre-Closing.4 Therefore, under the terms of the APA,
OSG is liable for the claims at issue in Nash, Baeza, and Flood. I would therefore
affirm the district court’s judgment in full.
4
OSG suggests that Leonard v. John Crane, Inc., 206 Cal. App. 4th 1274
(2012), and Vanhooser v. Superior Court, 206 Cal. App. 4th 921 (2012) control
this case. Because those decisions issued a decade-and-a-half after the APA was
signed, they are irrelevant as to the “mutual intention of the parties as it existed at
the time of contracting.” Hess, 27 Cal. 4th at 524.
7