David Trahan v. Morton International, Inc. , 493 F. App'x 571 ( 2012 )


Menu:
  •      Case: 11-31116     Document: 00512017154         Page: 1     Date Filed: 10/11/2012
    IN THE UNITED STATES COURT OF APPEALS
    FOR THE FIFTH CIRCUIT  United States Court of Appeals
    Fifth Circuit
    FILED
    October 11, 2012
    No. 11-31116                        Lyle W. Cayce
    Clerk
    DAVID S. TRAHAN; et al,
    Plaintiffs
    MORTON SALT, INCORPORATED, formerly known as Morton
    International, Incorporated,
    Defendant-Third-Party Plaintiff-Appellant,
    v.
    SCOTT EQUIPMENT COMPANY, L.L.C.; LIBERTY MUTUAL FIRE
    INSURANCE COMPANY,
    Third-Party Defendants-Appellees
    Appeal from the United States District Court
    for the Western District of Louisiana
    6:09-CV-1157
    Before DAVIS, DENNIS, and HAYNES, Circuit Judges.
    W. EUGENE DAVIS, Circuit Judge:*
    This is a contract dispute between the operator of a salt mine, Morton Salt,
    Inc. (“Morton”), its equipment service contractor, Scott Equipment Company,
    *
    Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
    be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
    R. 47.5.4.
    Case: 11-31116   Document: 00512017154      Page: 2   Date Filed: 10/11/2012
    No. 11-31116
    L.L.C. (“Scott”), and Scott’s insurance carrier, Liberty Mutual Fire Insurance
    Company (“Liberty”). The district court granted summary judgment in favor of
    Liberty, finding that Liberty’s insurance policy did not extend coverage to
    Morton. The district court also granted summary judgment in favor of Scott,
    finding that Scott was not contractually obligated to obtain insurance on behalf
    of Morton and was therefore not liable to Morton for failure to add Morton as an
    additional-insured under Scott’s insurance policy. Because Morton has created
    a genuine issue of material fact as to the terms of its oral agreement with Scott,
    we VACATE the district court’s summary judgment in favor of Scott. However,
    because the plain language of Liberty’s insurance policy does not extend
    coverage to Morton, we AFFIRM the district court’s summary judgment in favor
    of Liberty.
    I.
    Morton operates the Weeks Island salt mine in South Louisiana. Since the
    early 1990s, Morton has contracted with Scott to provide maintenance and
    repair services for Morton’s equipment at the Weeks Island facility. From 2000
    to 2005, Morton and Scott’s business relationship was governed by a Master
    Service Agreement (“MSA”) executed each year. In that time period, each MSA
    contained identical terms and conditions, one of which was a provision obligating
    Scott to maintain a comprehensive general liability (“CGL”) policy and to name
    Morton as an additional-insured. In 2005, Morton discontinued its practice of
    using MSAs. Instead, Morton instituted a policy of issuing a purchase order for
    the desired work and providing an “individual service contract” for each service
    call. The terms and provisions in the individual service contracts were
    substantially identical to the terms previously contained in the MSA, including
    the insurance provisions discussed above. Because Morton concluded that “the
    precise scope of repair and maintenance work is generally unknown until each
    job is completed,” Morton’s practice was to send the individual service contract
    2
    Case: 11-31116   Document: 00512017154      Page: 3   Date Filed: 10/11/2012
    No. 11-31116
    to Scott after each job was completed. Although each service contract required
    Scott to sign and return the document to Morton, Scott never did so. However,
    Morton never complained to Scott about its failure to sign and return the
    contracts.
    This arrangement between Morton and Scott continued unquestioned until
    December 2008, when the underlying accident giving rise to this litigation
    occurred. On December 9, 2008, Scott’s employee, David Trahan, responded to
    a call from Morton to perform maintenance work on Morton’s equipment. During
    the course of his work on a scaling machine in Morton’s salt mine, he was
    injured. Trahan asserted a claim for workers’ compensation benefits against
    Scott’s insurance provider and filed a separate tort action against Morton. In
    response, Morton filed a third-party demand against Scott seeking a declaratory
    judgment that Scott was responsible for any damages visited upon Morton.
    These allegations are based on the provisions in the Morton and Scott service
    contract, in which Scott allegedly agreed to add Morton as an additional-insured
    on its policy. Morton alleged that to the extent that Scott failed to provide this
    insurance protection to Morton, Scott breached its contract with Morton.
    Morton settled Trahan’s tort claim and thereafter amended its third party
    complaint to add Scott’s insurer, Liberty, as a party. Morton sought
    reimbursement for its payments to Trahan based on Morton’s purported status
    as an additional-insured under the Liberty CGL policy issued to Scott. Morton
    relied upon a Blanket Additional Insured Endorsement in Liberty’s policy,
    providing that coverage extended to “any person or organizations for whom
    [Scott] ha[s] agreed in writing to provide liability insurance.”
    Morton, Scott, and Liberty filed cross-motions for summary judgment.
    Morton and Scott’s summary judgment dispute centered on Morton’s allegations
    that Scott breached its obligation to procure insurance for Morton. The district
    court granted Scott’s motion on the basis that Scott and Morton’s course of
    3
    Case: 11-31116       Document: 00512017154         Page: 4     Date Filed: 10/11/2012
    No. 11-31116
    dealings did not bind Scott to contract provisions in the service contracts that
    were unsigned and consistently sent to Scott after the work had been performed.
    The district court also granted Liberty’s motion, agreeing with Liberty that the
    additional-insured endorsement was not triggered because Scott never agreed
    “in writing” to procure insurance for Morton, as required by the Liberty policy.
    II.
    We review the district court’s summary judgment de novo, applying the
    same standards as the district court. Burge v. Parish of St. Tammany, 
    187 F.3d 452
    , 464 (5th Cir.1999). Summary judgment is appropriate if “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). When reviewing
    a grant of summary judgment, we construe all facts and inferences in the light
    most favorable to the non-moving party, here Morton. Burge, 
    187 F.3d at 465
    .
    III.
    A.
    Morton argues first that the district court erred in granting Scott’s motion
    for summary judgment because a genuine issue of material fact was created
    regarding whether it had a contract with Scott obligating Scott to name Morton
    as an additional-insured.1 Morton argues that the service contract’s terms and
    conditions supplemented the oral contract in which Morton engaged Scott to
    perform maintenance on salt mine equipment. To support its argument, Morton
    points to one of the provisions in the service contract that states,
    “[c]ommencement of the Work . . . shall constitute [Scott]’s unqualified
    acceptance of, and agreement to be bound by, the terms and conditions [of the
    service contract].” Morton asserts that Scott received hundreds of such service
    1
    Counsel for Scott has expressly declined to argue that Morton’s claim is barred by the
    Louisiana Oilfield Anti-Indemnity Act (“LOAIA”), LA. REV. STAT. ANN. § 9:2780 (2012). We
    therefore express no opinion on the applicability of the LOAIA to this case.
    4
    Case: 11-31116    Document: 00512017154      Page: 5    Date Filed: 10/11/2012
    No. 11-31116
    contracts and yet never objected to their terms or conditions. Moreover, Morton
    points out that at Morton’s request, Scott even furnished Morton a certificate of
    insurance that reflected the coverage Liberty afforded Scott.
    Scott, however, asserts that no evidence was presented that it ever
    affirmatively agreed to the terms in the service contract which was issued after
    Trahan’s injury. Scott also relies on a provision on the front of the contract which
    provides for Scott to indicate its acceptance by “signing and returning” a copy.
    In this connection, Scott relies upon Louisiana Civil Code article 1947 to argue
    that because the contract contemplated acceptance by signing, the contract’s
    terms cannot apply unless it is signed. See id. (“When in the absence of a legal
    requirement, the parties have contemplated a certain form, it is presumed that
    they do not intend to be bound until the contract is executed in that form.”).
    The district court considered this evidence and concluded that if two
    parties orally agree to contract, one of the parties may not supply a written form
    thereafter and then rely on its terms without the assent of the other party. In its
    oral reasons for judgment, the district court stated that there could be no
    contract under the written terms in this circumstance as a matter of law and
    dismissed Morton’s contract claim.
    We disagree. The district court is correct that no written contract is
    created in such a situation. A party may not supply a written contract after the
    contract has been performed and then claim that the parties are bound by its
    terms. However, when an enforceable oral contract is perfected between the
    parties, but they disagree on its terms, writings between the parties may be
    relevant in discerning the terms of the oral contract.
    Though Scott adamantly denies the existence of any contract whatsoever,
    its position is untenable. In Louisiana, “A contract is formed by the consent of
    the parties established through offer and acceptance.” LA. CIV. CODE art. 1927.
    Moreover, “offer and acceptance may be made orally, in writing, or by action or
    5
    Case: 11-31116    Document: 00512017154      Page: 6   Date Filed: 10/11/2012
    No. 11-31116
    inaction that under the circumstances is clearly indicative of consent.” Id. “A
    medium or a manner of acceptance is reasonable if it is the one used in making
    the offer or one customary in similar transactions at the time and place the offer
    is received.” Id. art. 1936. “When an offeror invites an offeree to accept by
    performance and, according to usage or the nature or the terms of the contract,
    it is contemplated that the performance will be completed if commenced, a
    contract is formed when the offeree begins the requested performance.” Id. art.
    1939.
    Under these principles, the record in this case clearly establishes the
    existence of a contract. Morton issued a service request to Scott; Scott complied
    and completed the requested service in exchange for monetary compensation,
    which Morton paid. A contract was thus formed. See, e.g., VVP Am., Inc. v.
    Design Build Dev. Servs., Inc., 
    951 So.2d 461
    , 467 (La. Ct. App. 2d 2007)
    (recognizing a contract under similar circumstances).
    Though we can be sure of the existence of a contract, its terms are
    uncertain. “Louisiana Civil Code article 2045 defines interpretation of a contract
    as ‘the determination of the common intent of the parties.’” Odyssea Vessels, Inc.,
    v. A & B Indus. of Morgan City, Inc., 
    94 So.3d 182
    , 190 (La. Ct. App. 1st 2012).
    When the words and provisions of a contract are clear, “no further interpretation
    may be made in search of the parties’ intent.” LA. CIV. CODE art. 2046. However,
    “A doubtful provision must be interpreted in light of the nature of the contract,
    equity, usages, the conduct of the parties before and after the formation of the
    contract, and of other contracts of a like nature between the same parties.” 
    Id.
    art. 2053. Louisiana courts have not hesitated to consider evidence of past
    dealings between parties when attempting to reconstruct the parties’ mutual
    intent. See, e.g., Rogers v. Restructure Petroleum Mktg. Servs., 
    811 So.2d 1154
    ,
    1159 (La. Ct. App. 3d 2002); Charles v. Wiegand, 
    401 So.2d 1003
    , 1005 (La. Ct.
    App. 4th 1981). However, this inquiry is inevitably a question of fact not
    6
    Case: 11-31116     Document: 00512017154       Page: 7    Date Filed: 10/11/2012
    No. 11-31116
    appropriate for summary judgment. Kemp v. Hudnall, 
    423 So.2d 1260
    , 1261 (La.
    Ct. App. 1st 1982) (“Our Supreme Court [has] stated . . . that the terms of a
    particular contract are a question of fact.” (citing Turregano v. Barnett, 
    53 So. 884
     (1910))); see Ham Marine, Inc. v. Dresser Indus., Inc., 
    72 F.3d 454
    , 461 (5th
    Cir. 1995). In its role as factfinder, a trial court is free to give appropriate weight
    to evidence that a party impliedly assented to terms by not objecting over a
    period of years, or to any other relevant facts.
    Particularly instructive is Jefferson Parish School Board v. Rowley Co.,
    
    305 So.2d 658
     (La. Ct. App. 4th 1975). In that case, a Louisiana court considered
    a similar factual situation. The defendant, Rowley, bid on the mass installation
    of equipment at a public school. 
    Id.
     at 660–61. Its bid provided that it would
    complete the project in accord with an attached contract document. Id. at 661.
    One of the contractual provisions obligated Rowley to obtain insurance on behalf
    of the school. Id. at 662. The plaintiff, the Jefferson Parish School Board, never
    signed the contract. Id. at 661. Instead, the school board issued a signed
    purchase order which did not mention the terms of Rowley’s contract. Id. Not
    long thereafter, a fire ignited and damaged much of the equipment. Id. The
    school board argued that Rowley’s bid controlled and that Rowley should have
    obtained insurance to cover the equipment. Id. at 662. Rowley, relying in part
    on its past dealings with the school board, argued that the school board’s
    purchase order controlled and that the purchase order did not contemplate any
    terms in another document. Id. The trial court granted summary judgment in
    favor of Rowley. Id. at 660.
    A Louisiana appellate court reversed. Id. at 663. It first identified the
    “controlling issue” as whether there was a contract that provided for risk of loss
    in the circumstances before it. Id. at 661. The court then acknowledged the
    conflicting arguments of the parties, including arguments pointing to failures to
    act and past dealings. Id. at 662. The court concluded:
    7
    Case: 11-31116    Document: 00512017154     Page: 8   Date Filed: 10/11/2012
    No. 11-31116
    The resolution of this question involves a consideration of the
    weight and sufficiency of the testimony of the parties as well as the
    disputed documents. This is not the province of motion for summary
    judgment but is a matter for consideration on the merits. Motion for
    summary judgment should not be used as a substitute for a trial on
    the merits. This is especially true where opinion or intent are
    involved. Summary judgment being improperly granted, we must
    remand for further proceedings.
    Id. at 663 (citations omitted).
    The same principles apply to this case. Questions of fact have been
    presented regarding the terms of the contract the parties agreed to be bound by.
    These issues of fact must be presented to a factfinder on remand.
    B.
    Morton argues next that the district court erred in granting Liberty’s
    motion for summary judgment. Morton claims coverage under the CGL
    insurance policy issued by Liberty to Scott. A provision of that policy specifies
    that those parties insured include “any person or organization for whom [Scott]
    ha[s] agreed in writing to provide liability insurance.” Here Morton argues that
    its contract with Scott incorporated or adopted the terms found in the written
    service contract. Morton contends that its course of dealing with Scott sufficed
    to bind the parties to the written but unsigned service contract, and that this
    nexus is sufficient to satisfy the “agreement in writing” requirement for coverage
    under the Liberty insurance policy.
    We disagree. First, as discussed above, there was no written agreement
    between the parties. Second, the Liberty policy’s plain language is unambiguous
    and clearly provides that insurance coverage only extends to Morton in the event
    that Scott “agree[s] in writing” to name Morton as an additional-insured. Even
    if a factfinder ultimately finds that Morton implicitly agreed to the written
    contract’s terms, it did not agree in writing. “When the words of a contract are
    clear and explicit and lead to no absurd consequences, no further interpretation
    8
    Case: 11-31116    Document: 00512017154       Page: 9   Date Filed: 10/11/2012
    No. 11-31116
    may be made in search of the parties’ intent.” LA. CIV. CODE art. 2046. Anything
    other than written acceptance falls outside the clear terms of the policy. See, e.g.,
    Jessop v. City of Alexandria, 
    871 So.2d 1140
    , 1145 (La. Ct. App. 3d 2004) (citing
    with approval U.S. Fire Ins. Co. v. Hartford Ins. Co., 
    726 N.E.2d 126
    , 129 (Ill. Ct.
    App. 2000)) (holding that an additional-insured endorsement that applies
    “because of a written contract” requires the agreement to be memorialized in
    writing and not by oral agreement). The district court correctly granted
    summary judgment in favor of Liberty.
    IV.
    For the reasons stated above, we AFFIRM the district court order granting
    summary judgment in favor of Liberty and VACATE the district court order
    granting summary judgment in favor of Scott and REMAND this case to the
    district court for further proceedings consistent with this opinion.
    AFFIRMED in part, VACATED and REMANDED in part.
    9