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PAR Electrical Contractors, Inc. v. BlueLine Rental LLC

United States District Court, E.D. Washington

January 26, 2017

PAR ELECTRICAL CONTRACTORS, INC. and OLD REPUBLIC INSURANCE COMPANY, Plaintiff,
v.
BLUELINE RENTAL LLC; PLATINUM EQUITY, LLC; and SANDRA HOYE, as Personal Representative for the Estate of Conor J. Finnerty, and for C.F., a Minor and M.F., a Minor, Defendants.

          ORDER GRANTING PAR AND BLUELINE'S MOTION FOR SUMMARY JUDGMENT AND DENYING OLD REPUBLIC'S MOTION FOR SUMMARY JUDGMENT

          Thomas O. Rice Chief United States District Judge

         BEFORE THE COURT is PAR Electrical Contractors Inc.'s Motion for Summary Judgment (ECF No. 21) and Old Republic Insurance Company and BlueLine Rental, LLC's cross Motions for Summary Judgment (ECF Nos. 25; 36). The Court has reviewed the record and files herein, and is fully informed.

         BACKGROUND[1]

         The instant suit arises out of an unfortunate driving accident resulting in the death of Mr. Conor J. Finnerty. ECF No. 1 at ¶ 3.20. While the issue of liability is being addressed in a separate suit (i.e. the underlying suit), see Hoye v. BlueLine Rental LLC, et al, 2:15-cv-00330-TOR, ECF No. 1 (E.D. Wash. 2015), the parties to this suit are seeking declaratory judgments to determine which party is ultimately responsible for the defense and potential indemnification of BlueLine Rental, LLC (“BlueLine”) as the sole defendant in the underlying suit.

         On the day of the accident, Mr. Finnerty was driving a 2003 Mack truck loaded with gravel within the scope of his employment (and at the direction of his supervisor) as an employee of PAR Electric Contractors, Inc. (“PAR”). ECF No. 1 at ¶¶ 3.17-3.18. While Mr. Finnerty was driving the truck to a construction site in Washington, Mr. Finnerty failed to negotiate a turn, the truck tipped on its side and slid into the Snake River. ECF No. 1 at ¶¶ 3.18-3.21. PAR rented the truck from BlueLine at its facility in Post Falls, Idaho, and signed a rental agreement (“Rental Agreement”) drafted by BlueLine. ECF No. 1 at ¶ 3.1.

         The Rental Agreement included an indemnity provision whereby PAR agreed to indemnify BlueLine for certain damages. ECF Nos. 1 at ¶ 3.1; 1-4 at ¶ 12 (Rental Agreement). According to the terms of the Rental Agreement, PAR had to obtain Commercial General Liability and Automobile Liability insurance policies naming BlueLine as an Additional Insured and Payee. ECF No 1-4 at ¶ 10. PAR obtained such insurance through Old Republic Insurance Company (“Old Republic”), naming BlueLine as an “additional insured” (“AI”) on the insurance policy (“policy”).

         The Washington Department of Labor and Industries and the Washington State Patrol investigated the accident. ECF Nos. 26 at ¶¶ 12-13; 40 at 2-3. According to the Washington State Patrol, there were numerous pre-collision mechanical problems with the truck, including “inadequate brakes for safe stopping, ” “brakes out of service, ” “Clamp or Roto type brake out-of-adjustment, ” and “CMV manufactured after 10/29/94 has an automatic airbrake adjustment system that fails to compensate for wear.” ECF Nos. 26 at ¶ 13; 40 at ¶ 13. The Department of Labor and Industries' “Inspection Summary” contained the following

[T]his is not a safety and health violation, as it is the CDL holder[']s responsibility to make sure his or her brakes are adjusted properly, [and] I believe this accident was due to the driver not checking his slack adjusters before descending grade to make sure his brakes were adjusted properly, causing him to gain speed and [lose] control of the dump truck.

ECF No. 34 at 5.

         Sandra Hoye, as Personal Representative for the Estate of Mr. Finnerty, and for C.F., a minor, and M.F., a minor, brought suit against BlueLine and Platinum Equity, LLC (“Platinum”), alleging BlueLine was negligent in maintaining the truck brakes. No. 2:15-CV-0330-TOR. While the suit was pending, PAR and Old Republic filed this action, seeking declaratory judgments that they owe no duty to defend or indemnify BlueLine in the underlying action under the indemnity provision of the Rental Agreement and under the terms of the insurance policy, respectively, and have filed motions for summary judgment on these points. ECF Nos. 1; 21; 25. BlueLine and Ms. Hoye challenge the requests, and BlueLine submitted its own Motion for Summary Judgment (ECF No. 36) requesting the Court to declare that Old Republic does have a duty to defend and indemnify BlueLine in the underlying lawsuit. ECF Nos. 32; 33; 34; 36.

         For the reasons discussed below, the Court GRANTS PAR's Motion for Summary Judgment (ECF No. 21), DENIES Old Republic's Motion for Summary Judgment (ECF No. 25), and GRANTS BlueLine's Motion for Summary Judgment (ECF No. 36).

         DISCUSSION

         A. Standard of Review

         Summary judgment may be granted to a moving party who demonstrates “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). The moving party bears the initial burden of demonstrating the absence of any genuine issues of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The burden then shifts to the non-moving party to identify specific facts showing there is a genuine issue of material fact. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986). “The mere existence of a scintilla of evidence in support of the plaintiff's position will be insufficient; there must be evidence on which the jury could reasonably find for the plaintiff.” Id. at 252. For purposes of summary judgment, “[i]f a party fails to properly support an assertion of fact or fails to properly address another party's assertion of fact as required by Rule 56(c), the court may . . . consider the fact undisputed.” Fed.R.Civ.P. 56(e)(2); see also L.R. 56.1(d).

         A fact is “material” if it might affect the outcome of the suit under the governing law. Liberty Lobby, 477 U.S. at 248. A dispute concerning any such fact is “genuine” only where the evidence is such that a reasonable trier-of-fact could find in favor of the non-moving party. Id. “[A] party opposing a properly supported motion for summary judgment may not rest upon the mere allegations or denials of his pleading, but must set forth specific facts showing that there is a genuine issue for trial.” Id. (internal quotation marks and alterations omitted); see also First Nat'l Bank of Ariz. v. Cities Serv. Co., 391 U.S. 253, 288-89 (1968) (holding that a party is only entitled to proceed to trial if it presents sufficient, probative evidence supporting the claimed factual dispute, rather than resting on mere allegations). Moreover, “[c]onclusory, speculative testimony in affidavits and moving papers is insufficient to raise genuine issues of fact and defeat summary judgment.” Soremekun v. Thrifty Payless, Inc., 509 F.3d 978, 984 (9th Cir. 2007); see also Nelson v. Pima Cmty. Coll., 83 F.3d 1075, 1081-82 (9th Cir. 1996) (“[M]ere allegation and speculation do not create a factual dispute for purposes of summary judgment.”).

         Finally, in ruling upon a summary judgment motion, a court must construe the facts, as well as all rational inferences therefrom, in the light most favorable to the non-moving party, Scott v. Harris, 550 U.S. 372, 378 (2007), and only evidence which would be admissible at trial may be considered, Orr v. Bank of Am., NT & SA, 285 F.3d 764, 773 (9th Cir. 2002). See Tolan v. Cotton, 134 S.Ct. 1861, 1863 (2014) (“[I]n ruling on a motion for summary judgment, the evidence of the nonmovant is to be believed, and all justifiable inferences are to be drawn in his favor.” (internal quotation marks and brackets omitted)).

         B. PAR's Motion for Summary Judgment

         PAR moves the court to grant summary judgment in its favor and enter an order that PAR is entitled to declaratory judgment that PAR owes no duty to defend or indemnify Defendant BlueLine in the underlying lawsuit. ECF No. 21. Specifically, PAR argues the indemnity provision found in the Rental Agreement is void per RCW 4.24.115 (and Idaho Code § 29-114 in the alternative) as to liability for claims arising from BlueLine's sole negligence; and asserts that BlueLine is solely negligent because the complaint in the underlying lawsuit does not claim PAR or its employees are negligent. ECF No. 21 at 2.

         BlueLine argues the indemnity provision does not fall under the purview of either statute, and as such is valid and applies to claims arising from BlueLine's sole negligence; and that even if the indemnity provision does not extend to sole negligence, there is a genuine issue of material fact as to whether PAR and its employees were also negligent (so the issue is not one of sole negligence). ECF No. 34 at 6.

         PAR argues Washington law should apply since there is no conflict between Idaho and Washington law on the point. ECF No. 21 at 7. BlueLine argues the laws do conflict on the issue, and asserts Idaho law should apply. ECF No. 34 at 6. For the reasons discussed below, the Court GRANTS PAR's Motion for Summary Judgment (ECF No. 21), as the indemnity provision does not expressly assign liability to PAR for BlueLine's negligence (whether sole or concurrent) as required by Washington and Idaho law to be effective, and the only potential liability for BlueLine in the underlying lawsuit is for its own negligence.

         1. Governing law

         “When a federal court sits in diversity, it must look to the forum state's choice of law rules to determine the controlling substantive law.” Patton v. Cox, 276 F.3d 493, 495 (9th Cir. 2002). In Washington (the forum state), courts determine the choice of law by determining: (1) whether there is an actual conflict of laws between the two proposed states, and if so, (2) whether the parties' choice of law is effective. Erwin v. Cotter Health Ctrs., 161 Wash.2d 676, 692 (2007). Washington courts will enforce a choice-of-law provision unless: (1) “without the provision, Washington law would apply” under section 188 of the Restatement; (2) “the chosen state's law violates a fundamental public policy of Washington”; and (3) “Washington's interest in the determination of the issue materially outweighs the chosen state's interest.” McKee v. AT&T Corp., 164 Wash.2d 372, 384 (2008).

         In determining which state's law would apply under section 188 of the Restatement, Washington courts weigh the relative importance of: (1) the place of contracting; (2) the place of contract negotiation; (3) the place of contract performance; (4) the location of the subject matter of the contract; and (5) the domicile, residence, or place of incorporation of the parties. Id. at 385 (holding that Washington law applies where “New York's only tie to this litigation is that it is the state of incorporation of [the defendant]”).

         Here, the Rental Agreement includes a choice of law provision that provides the Rental Agreement is “governed and construed by the laws of the state of Lessor's location on the Front.” ECF No. 1-4 at ¶ 17. The lessor's location on the front of the Rental Agreement is Post Falls, Idaho, where the parties entered into the agreement and where PAR took possession of the rental truck. ECF No. 1-4 at 2. The Rental Agreement lists “CENTRAL FERRY FIBER” as the “P.O. #.” ECF No. 1-4 at 2. This refers to the underlying construction contract between PAR and the Bonneville Power Administration for the construction of power line infrastructure in Washington. See ECF Nos. 21 at 4; 23-1. PAR is a Missouri corporation, and BlueLine is a Delaware corporation. ECF No. 1 at ¶¶ 1.1, 1.3. Although the accident and underlying construction project were in Washington, everything else involving the Rental Agreement (contract formation and performance) occurred in Post Falls, and neither party is a resident of Idaho or Washington. This leaves Idaho as the clear choice under Section 188 if Washington and Idaho law conflict. Thus, even without the choice of law contractual provision, Idaho law will apply if there is a conflict with Washington law.

         PAR argues that there is no conflict between Washington and Idaho law, and suggests Washington law, as the forum state, governs the Rental Agreement. ECF No. 21 at 8-9. BlueLine asserts that there are relevant differences between Idaho and Washington law that require applying Idaho law to the Rental Agreement. ECF No. 34 at 8. For the law material to the case at hand, Washington and Idaho law agree in the main, although Idaho case law often uses different phrases for the same concept. For the purposes of PAR's Motion for Summary Judgment, both Idaho and Washington law is considered, but the Court defers to Idaho law where the language differs.

         2. PAR has no duty to indemnify BlueLine

         Although “parties to a contract, such as a lease, may [generally] agree to limit liability for negligence[, ]” courts “look with disfavor on such attempts to limit liability and will strictly construe these provisions against the party relying on them.” Empire Lumber Co. v. Thermal-Dynamic Towers, Inc., 971 P.2d 1119, 1123 (Idaho 1998) (quoting Lee v. Sun Valley Co., 695 P.2d 361, 363 (Idaho 1984), and Anderson & Nafziger v. G.T. Newcomb, Inc., 595 P.2d 709, 712 (Idaho 1979)); Calkins v. Lorain Division of Koehring Co., 26 Wash.App. 206, 210 (1980) (“Ambiguous contracts are construed against the drafter . . . and ambiguous indemnity contracts are construed against the indemnitee . . . .”). Accordingly, “[c]ontract clauses purporting to exclude liability for negligence must speak clearly and directly to the particular conduct of the defendant which caused the harm at issue.” Empire Lumber, 971 P.2d at 1123 (quoting Anderson & Nafziger, 595 P.2d at 712); McDowell v. Austin Co., 105 Wash.2d 48, 52 (1985) (“[P]ublic policy disfavors allowing an indemnitee to contract away liability resulting from its own negligence, and courts will enforce such agreements only if expressed in clear terms.”); Northwest Airlines v. Hughes Air Corp., 104 Wash.2d 152, 155 (1985) (“Washington currently requires, as do some other states, that more specific language be used to evidence a clean and unequivocal intention to indemnify the indemnitee's own negligence”) (citations omitted). In other words, the drafter must use express language when shifting liability for one's negligence; general language exempting a party from a specific source of liability is not sufficient. See Empire Lumber, 971 P.2d at 1124; McDowell, 105 Wash.2d at 52; Calkins, 26 Wash.App. at 210 (“A contract providing indemnity for concurrent negligence will be strictly construed, with any doubts resolved in favor of the indemnitor.”).

         In Empire Lumber, two companies entered into a lease agreement for a warehouse for a specific term. Empire Lumber, 971 P.2d at 1121. The lease provided that, “[e]xcept for reasonable wear and tear and damage by fire or unavoidable casualty, Lessee will at all times preserve said premises in as good repair as they now are or may hereafter be put to . . . .” Id. at 1121. Before the term of the lease ended, the warehouse caught on fire, partially as a result of the negligence of the tenant. Id. at 1122. The Idaho Supreme Court reviewed the contractual language and held that “this particular exculpatory clause regarding who bears the risk of loss for fire does not excuse [the Lessee] from liability if its negligent actions caused the fire.” Id. at 1123. The Court reasoned that, despite the general language purporting to exclude the lessee from liability for fire damage without qualification, “[t]he lease language does not clearly indicate, as required by this Court's decision in Anderson & Nafziger, that the parties intended to release [the Lessee] from liability for its negligent acts.” Id. at 1124.

         Turning to the instant action, section 12 of the Rental Agreement between PAR (Customer) and BlueLine (Lessor) ...


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