United States Brass Corp. v. Dormont Manufacturing Co. , 242 F. App'x 575 ( 2007 )

F I L E D
United States Court of Appeals
Tenth Circuit
UNITED STATES CO URT O F APPEALS
August 2, 2007
FO R TH E TENTH CIRCUIT Elisabeth A. Shumaker
Clerk of Court
UNITED STA TES BRA SS
CORPO RATION, now known as
ZURN PEX, INC., a D elaw are
corporation,
No. 06-1197
Plaintiff-Appellant, (D.C. No. 05-CV -862-W YD-CB S)
(D . Colo.)
v.
D O RM ON T M A N U FA CTU RING
COM PANY, a Pennsylvania
corporation,
Defendant-Appellee.
OR D ER AND JUDGM ENT *
Before H E N RY, B AL DOC K , and M U RPH Y, Circuit Judges.
Plaintiff United States Brass Corporation (USB) appeals from the district
court’s order granting summary judgment in favor of defendant Dormont
M anufacturing Company (Dormont) on USB’s claims for contractual and common
*
After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist the determination of
this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is
therefore ordered submitted without oral argument. This order and judgment is
not binding precedent, except under the doctrines of law of the case, res judicata,
and collateral estoppel. It may be cited, however, for its persuasive value
consistent w ith Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
law indemnity. The district court’s jurisdiction arose under 28 U.S.C. § 1332(a),
and our jurisdiction is pursuant to 28 U.S.C. § 1291. W e affirm the summary
judgment order concerning the contractual indemnity for the same reason as the
district court, and also affirm summary judgment on the common law indemnity
claim, but for a different reason.
I
Background
USB sued Dormont for contractual and common law indemnity for money it
paid in a pre-trial settlement to Claire Long and Allstate Insurance Company
(A llstate) in their law suit in which they alleged personal injury and property
damage arising from an explosion at a home in Nederland, Colorado. Dormont
also settled with M s. Long and Allstate prior to trial. According to USB, the
explosion was caused by a defect in a stainless steel nut-by-nut connector (flex
connector) manufactured by Dormont and distributed by USB, which allowed
propane to leak and then ignite when M s. Long turned on a vacuum cleaner.
As to USB’s claim for contractual indemnity, the district court concluded
that the parties’ purchase agreement did not clearly and unambiguously
demonstrate an intent to indemnify. 1 W ith respect to the common law indemnity
claim, the court concluded that because U SB was sued as a joint tortfeasor,
1
Dormont filed a motion to dismiss, which the district court converted to a
motion for summary judgment.
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Colorado’s Uniform Contribution Among Tortfeasors Act (the Act), Colo. Rev.
Stat. § 13-50.5-101, et seq., precluded its claim.
II
Standard of Review
W e review the district court’s grant of summary judgment de
novo, applying the same legal standard used by the district court.
Summary judgment is appropriate “if the pleadings, depositions,
answers to interrogatories, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to any
material fact and that the moving party is entitled to judgment as a
matter of law.” Fed. R. Civ. P. 56(c). W hen applying this standard,
we view the evidence and draw reasonable inferences therefrom in
the light most favorable to the nonmoving party.
Simms v. Okla. ex rel. Dep’t of M ental Health & Substance Abuse Servs.,
165 F.3d 1321, 1326 (10th Cir. 1999) (citations omitted).
Further, “[w]e are free to affirm a district court decision on any grounds for
which there is a record sufficient to permit conclusions of law, even grounds not
relied upon by the district court.” United States v. Sandoval, 29 F.3d 537, 542 n.6
(10th Cir. 1994) (quotations omitted).
III
Contractual Indem nity
The parties’ purchase agreement required Dormont, among other things, to
manufacture the flex connectors and stamp them w ith USB’s name. Relevant
here, the agreement stated: “Quality control procedures will be agreed upon and
documented. Defective product to be returned [to Dormont] and credited upon
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mutual agreement of cause. Dormont M anufacturing accepts all obligations
associated with being the manufacturer of the product.” Aplt. App. at 10. USB
claims that Dormont’s willingness to “accept all obligations associated with being
the manufacturer” of the flex connectors created an indemnity contract.
Colorado substantive law applies in this diversity case. See Blanke v.
Alexander, 152 F.3d 1224, 1228 (10th Cir. 1998) (holding that “[a] federal court
sitting in diversity must apply the law of the forum state.”). Under Colorado law ,
the inquiry is whether the intent to indemnify was expressed clearly and
unambiguously in the purchase agreement. Pub. Serv. Co. of Colo. v. United
Cable Television of Jeffco, Inc., 829 P.2d 1280, 1284 (Colo. 1992). W hile it is
true that the parties do not need to use the words “indemnity” or “indemnify,”
Williams v. White M ountain Constr. Co., 749 P.2d 423, 426 (Colo. 1988), we
agree with Dormont that the sentence “Dormont . . . accepts all obligations
associated with being the manufacturer of the product,” could have different
meanings when considered in the context of the paragraph in w hich it appears,
and therefore does not clearly and unambiguously express an intention to
indemnify. Nor does the purchase agreement contain any language the Colorado
courts have found adequate to manifest an intention to indemnify, such as (1) a
provision requiring Dormont to hold USB harmless from and against claims,
liabilities, causes of action, legal proceedings, or costs of defense or (2) a clause
requiring Dormont to maintain general liability insurance. See e.g., Pub. Serv.
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Co. of Colo., 829 P.2d at 1283; see also W illiams, 749 P.2d at 426 (reasoning that
although “it is inappropriate to construe statements so narrowly as to deprive
them of any meaning, yet the burden of indemnity is so onerous that we hesitate
to impose it unless the language used requires such a result.”).
W e also reject USB’s argument that disputed facts concerning its intent
precluded summary judgment.
Interpretation of a written contract is generally a question of law for
the court. . . . It is only where the terms of an agreement are
ambiguous or are used in some special or technical sense not
apparent from the contractual document itself that the court may look
beyond the four corners of the agreement in order to determine the
meaning intended by the parties. It is axiomatic that in the absence
of an ambiguity a written contract cannot be varied by extrinsic
evidence.
W hether an ambiguity exists is also a question of law. W hen
an ambiguity is found to exist and cannot be resolved by reference to
other contractual provisions, extrinsic evidence must be considered
by the trial court in order to determine the mutual intent of the
parties at the time of contracting.
Pepcol M fg. Co. v. Denver Union Corp., 687 P.2d 1310, 1313-14 (Colo. 1984)
(citations omitted). Therefore, extrinsic evidence of intent is not admissible in a
case where the court properly determines as a matter of law that an agreement is
unambiguous. Cf. Jones v. Dressel, 623 P.2d 370, 376, 378 (Colo. 1981)
(holding that w hether an exculpatory agreement is valid is a question of law,
including whether the agreement expresses the parties’ intention in clear and
unambiguous language).
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The district court’s conclusion that the purchase agreement did not create
an indemnity contract was correct as a matter of Colorado law and there were no
material facts in dispute. Thus, we affirm the court’s order for summary
judgment in favor of Dormont on USB’s claim for contractual indemnity.
IV
Common Law Indem nity
Again, we apply controlling state law in this diversity case. Blanke,
152 F.3d at 1228. In Brochner v. Western Ins. Co., 724 P.2d 1293, 1298 n.6
(Colo. 1986), the Colorado Supreme Court stated that it was reserving judgment
as to the viability of an indemnity claim “in situations where the party seeking
indemnity is vicariously liable or is w ithout fault.” USB argues that the majority
of courts that have addressed the issue have recognized a right of indemnity by a
downstream defendant in a products liability case against the manufacturer of the
defective product, and the only reason why the “Colorado appellate courts have
not recognized this exception because they have not yet addressed it.” Aplt.
Reply Br. at 7.
For its part, Dormont argues that the only exception recognized thus far by
the Colorado courts is where a party sued as a joint tortfeasor is not negligent (at
fault), but is liable only under a theory of vicarious liability, such as an
employer/employee or principal/agent relationship. Serna v. Kingston
Enterprises, 72 P.3d 376, 380 (Colo. App. 2003); Johnson Realty v. Bender,
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39 P.3d 1215, 1218 (Colo. App. 2001). The district court agreed with Dormont
and held that because U SB had not been sued as a joint tortfeasor under a theory
of vicarious liability, it could not state a claim for indemnity under Colorado law.
The linchpin of USB’s argument is the Restatement (Second) of Torts
§ 886B (1979), which was cited by the Colorado Supreme Court in Brochner,
724 P.2d 1298 n.5, to explain the tension between claims for common law
indemnity and statutory provisions for contribution. According to U SB, it has a
right of indemnification because “[Dormont] supplied a defective chattel . . . as a
result of which both [USB and Dormont] were liable to the third person, and
[USB] innocently or negligently failed to discover the defect.” Restatement
(Second) of Torts § 886B(2)(d) (1979).
W hile w e agree that the principle set forth in § 886B appears to be what
the Colorado Supreme Court had in mind when it reserved judgment as to the
viability of an indemnity claim in situations w here the party seeking indemnity is
without fault, U SB cannot state an indemnity claim for a different reason.
Section 886B has been replaced by the Restatement (Third) of Torts:
Apportionment of Liability § 22 (2000). M ore to the point, to obtain indemnity
under either §§ 886B or 22, USB was required, among others things, to have
discharged Dormont’s liability.
(1) If two persons are liable in tort to a third person for the same
harm and one of them discharges the liability of both, he is entitled
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to indemnity from the other if the other would be unjustly enriched at
his expense by the discharge of the liability.
Restatement (Second) of Torts § 886B(1) (1979).
(a) W hen two or more persons are or may be liable for the same harm and
one of them discharges the liability of another in whole or in part by
settlement or discharge of judgment, the person discharging the liability is
entitled to recover indemnity in the amount paid to the plaintiff, plus
reasonable legal expenses. . . .
Restatement (Third) of Torts: Apportionment of Liability § 22(a) (2000).
The Restatement further explains that
[e]xcept when a contract for indemnity provides otherwise . . . an
indemnitee must extinguish the liability of the indemnitor to collect
indemnity. The indemnitee may do so either by a settlement with the
plaintiff that by its terms or by application of law discharges the
indemnitor from liability or by satisfaction of judgment that by
operation of law discharges the indemnitor from liability.
Id., § 22 cmt. b.
USB admits that it did not extinguish Dormont’s liability when it settled
w ith M s. Long and A llstate because Dormont thereafter entered into its own
settlement agreement: “U SB settled with M s. Long before trial . . . and with
Allstate . . . . Dormont also settled with the underlying plaintiffs.” Aplt. Br. at 3.
Further, although USB alleges that it “settled in good faith” with M s. Long and
Allstate, Aplt. App. at 24, the amended complaint is devoid of any allegation that
this settlement extinguished Dormont’s liability. Therefore, even if USB was
without fault, its settlement did not extinguish Dormont’s liability and it cannot
recover in indemnity. AVCP Reg’l Hous. Auth. v. R.A. Vranckaert Co., Inc.,
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47 P.3d 650, 657-59 (Alaska 2002) (applying Restatement (Third) of Torts:
Apportionment of Liability § 22(a) (2000)); M oore Excavating, Inc. v.
Consolidated Supply Co., 63 P.3d 592, 595-96 (Or. App. 2003) (same).
Therefore, we affirm the district court’s order for summary judgment in
favor of Dormont on USB’s claim for common law indemnity, albeit for a
different reason.
The judgment of the district court is AFFIRMED.
Entered for the Court
M ichael R. M urphy
Circuit Judge
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