Telecom Network Specialists v. Engineering Network International CA2/7 ( 2015 )

Filed 4/27/15 Telecom Network Specialists v. Engineering Network International CA2/7
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SEVEN
TELECOM NETWORK SPECIALISTS, B250559
INC.,
(Los Angeles County
Cross-complainant and Appellant, Super. Ct. Nos. BC349267, BC354230)
v.
ENGINEERING NETWORK
INTERNATIONAL, INC. et al,
Cross-defendants and Respondents.
APPEAL from a judgment and order of the Superior Court of Los Angeles
County, John Shepard Wiley, Jr., Judge. Reversed.
Sheppard, Mullin, Richter & Hampton, Ronald J. Holland, Ellen M. Bronchetti,
and Karin Dougan Vogel for Cross-complainant and Appellant.
Lewis Brisbois Bisgaard & Smith, Jeffry A. Miller, Jeffrey S. Ranen and Lann G.
McIntyre for Cross-defendant and Respondent Kineticom, Inc.
Hurt & Berry and Jeffrey W. Hurt for Cross-defendants and Respondents
Ritesync, Inc. and Dataworkforce, L.P.
Young Zinn & Bate, David H. Bate and Harry A. Zinn for Cross-defendant and
Respondent Orin USA, Inc.
Armstrong The Law Firm and Richard L. Armstrong for Cross-defendant and
Respondent Datalogix Texas, Inc.
Connor & Sargent and Stephen P. Connor for Cross-defendant and Respondent
Engineering Network International, Inc.
Krafchak & Lynch and Stephanie L. Krafchak for Cross-defendant and
Respondent Multipoint Wireless, LLC.
__________________________
Appellant Telecom Network Services (TNS) contracted with numerous staffing
agencies to provide technicians who installed and tested telecommunications equipment
for TNS’s customers. In 2006, a staffing agent technician filed a wage and hour class
action against TNS for failure to pay overtime and violations of meal and rest break
requirements. The complaint alleged TNS qualified as an employer of every technician
who had serviced its clients, including technicians who were hired and paid by a staffing
agency.
TNS filed cross-complaints against its staffing agencies for indemnity and breach
of contract. TNS alleged that its master services agreement (MSA) with each staffing
agency contained an indemnity provision that applied to the claims at issue in the
underlying wage and hour litigation. TNS alternatively alleged that the staffing agencies
had breached the MSA by failing to pay their employees overtime and comply with meal
and rest period requirements, thereby causing the wage and hour action to be filed.
Seven staffing agencies filed motions for summary judgment arguing that the
MSA’s indemnity provision did not apply to wage and hour claims. They further
asserted that TNS’s breach of contract claim should be dismissed because it was
duplicative of the indemnity claim. The trial court granted the motions and entered
judgment in favor of the staffing agencies. We reverse, concluding that the staffing
agencies failed to demonstrate they are entitled to judgment on TNS’s contract claim.
2
FACTUAL AND PROCEDURAL BACKGROUND
A. Summary of TNS’s Master Services Agreement
TNS installs and tests cellular phone telecommunications equipment for its
customers. TNS retains the technicians who service its customers either by hiring them
directly or through staffing agencies that locate and hire technical personnel. TNS
requires every staffing agency to sign an MSA that sets forth the terms and conditions of
their labor agreement.1
Section 2 of the MSA describes the “scope of the agreement”: “From time to time
TNS may request that [the staffing agency] provide services necessary for the installation
and testing of TNS customers at various sites and locations within . . . the United States.
The services requested will be described . . . in [TNS’s] Resource Request . . . . [and are]
referred to herein as the ‘Work.’”
Section 5 describes the parties’ payment obligations, which require TNS to pay the
staffing agency a pre-set hourly rate for each hour of the technician’s labor. The staffing
agency technician must enter his or her time into TNS’s “Trinity” timekeeping system.
The staffing agency then submits an invoice to TNS accompanied by “copies of the time
sheets . . . approved by the TNS’s designated Site Manager.” The staffing agency is
“solely responsible and liable for compensating” the technicians. It is also required to
maintain “complete and accurate records of all . . . work” performed by its technicians,
withhold applicable state and federal taxes and “comply with . . . all [other] applicable
federal, state, county and local laws . . . in its performance of all Work . . . including . . .
laws relating to labor standards.”
Section 8 of the MSA is an indemnification provision stating that the staffing
agency will “defend, indemnify and hold harmless TNS [and its customers and agents]
from and against an[y] and all liability, damages, losses, claims [etc.] . . . of every nature
and kind by reason of injury to or death of any person or damage to or destruction of
1 For the purposes of appeal, the parties agree that every MSA that TNS entered into
with a staffing agency contained the same material terms and conditions.
3
property arising out of or incidental to or in any way resulting from the acts or omission
of [the staffing agency and its agents] in the performance of the Work, except that the
staffing agency shall not be responsible for any such losses . . . caused by the sole
negligence or willful misconduct of TNS . . . and TNS shall defend, indemnify and hold
harmless [the staffing agency] therefore.”
The MSA also includes a choice-of-law clause providing that the agreement “shall
be governed and construed under the laws of the state of Texas.”
B. Summary of the Litigation
On June 27, 2006, plaintiff Lorenzo Benton filed a class action complaint (the
Benton action) against TNS and the staffing agency that hired him alleging violations of
California wage and hour laws, including: failure to pay overtime (Labor Code, §§ 510,
1194; Cal. Code Regs., tit. 8, § 11040, subd. (3)); failure to provide adequate meal and
rest breaks (§§ 226.7, 512; Cal. Code Regs., tit. 8, § 11040, subds. (11) & (12)); failure to
furnish accurate wage statements and maintain accurate payroll records (§§ 226, 226.3,
1174, 1174.5; Cal. Code Regs., tit. 8, § 11040, subd. (7)); and unfair business practices.
(Bus. & Prof. Code, § 17200.)
The operative second amended complaint, which named only TNS as a defendant,
sought to represent a class “consist[ing] of all persons who provided skilled technical
labor for the benefit of TNS’s [c]ustomers through TNS where the work was performed
in California within . . . [the c]lass period . . . .” The complaint alleged that every
technician “hired to perform work for TNS’s [c]ustomers, either directly or through
[staffing agencies], were TNS’s employees, regardless of whether they may have also
been the employees of the [staffing agencies].” The complaint further alleged that
“[n]either TNS nor its agents paid overtime” or “had any policy of providing meal breaks
[or rest] breaks to the workers as required by California law.”
In November of 2007, TNS filed substantially identical cross-complaints against
every staffing agency that had provided a technician who fell within the “class of workers
4
defined in the Benton action.”2 Each cross-complaint asserted that the MSA required the
staffing agency to compensate its technicians for overtime and to comply with all federal
and state labor laws “in its performance of the Work” for TNS. The cross-complaint
further alleged that “the damages asserted [in] the [Benton action] arose out of [the
staffing agency’s] performance of its obligations under the [MSA].”
TNS alleged three causes of action: express indemnity, implied indemnity and
breach of contract. The express indemnity claim alleged that section 8 of the MSA
required each staffing agency to defend and indemnify TNS against the wage and hour
claims at issue in the underlying Benton action. The equitable indemnity claim alleged
that even if the Benton claims did not fall within section 8 of the MSA, TNS was
nonetheless entitled to “apportionment of liability and contribution from” each staffing
agency for any damages the Benton class might recover.3
TNS’s contract claim alleged each staffing agency had “breached” the MSA by
“failing to comply with the provisions of all applicable federal and state laws . . . in
connection with the work performed under the [MSA].” TNS contended that the Benton
action had been filed “as a direct and proximate result” of the staffing agency’s breach
and that the damages sought in that underlying action were likewise “attributable to [the]
breach.”
C. Respondents’ Motions for Summary Judgment
1. Summary of the respondents’ motions for summary judgment or, in the
alternative, summary adjudication
Seven staffing agencies (Ritesync, Multipoint Wireless, Datalogix,
Dataworkforce, Kineticom, Orin and Engineering Network International) (collectively
respondents) filed motions for summary judgment, or alternatively summary
2
TNS originally filed cross-complaints against 43 staffing companies. (See Benton
v. Telecom Network Specialists, Inc. (2013) 220 Cal. App. 4th 701, 706 fn. 1 (Benton).)
However, this appeal involves only seven of those 43 agencies.
3
The cross-complaint also included a claim for declaratory relief requesting a
judicial declaration regarding TNS’s right to indemnification.
5
adjudication, arguing that TNS could not prevail on any of the claims set forth in its
cross-complaints. The respondents argued that TNS’s express indemnity claim failed
because the MSA only required them to defend and indemnify claims arising from
“injury to or death of any person or damage to or destruction of physical property.” In
the respondents’ view, this language made clear that the indemnity provision only applied
to claims for bodily injuries and property damage, not statutory wage and hour claims.
The respondents also argued that TNS had failed to state a claim for equitable indemnity
because Texas law does not permit such a claim where the alleged duty to indemnify
arises solely from a contractual relationship.
The respondents presented two reasons why they were entitled to judgment on
TNS’s contract claim. First, they argued that TNS could not establish it had been
damaged by any purported breach of the MSA because the Benton action was based
solely on “TNS’s [own] actions” rather than any act or omission of any staffing agency.
Second, respondents argued that the contract claim should be dismissed because it was
merely “a restated claim for indemnity.” As explained by one respondent: “Because
TNS’s indemnification obligations are spelled out in express language in the
indemnification provision of the [MSA], that provision governs [the staffing agency’s]
liability and TNS cannot state a claim independent of that provision.”
2. TNS’s opposition and separate motion for summary adjudication
In opposition, TNS argued that the MSA’s indemnity provision extended to any
claim seeking compensation for an “injury” arising from the labor services that
respondents had agreed to perform for TNS. According to TNS, the ordinary legal
definition of the word “injury” necessarily encompassed violations of statutory wage and
hour requirements. TNS contended that, contrary to respondents’ assertions, the MSA’s
indemnity provision did not include any language suggesting the term “injury” was
limited to “bodily” injuries.
TNS also argued that respondents had failed to demonstrate they were entitled to
judgment on the equitable indemnity claim. Although TNS acknowledged the MSA’s
6
Texas choice-of-law provision, it asserted that California law governed “[a]pplicability of
[e]quitable [i]ndemnity” because “equitable indemnity is non-contractual in nature.
Instead, equitable indemnity rests on equitable principles and thus does not implicate the
‘Governing Law’ provision contained in the MSA.” TNS further argued that California
law recognized a claim for equitable indemnity when “two parties in a contractual
relationship were both responsible for injuring a third party.” It did not address whether
Texas law recognized a similar form of equitable indemnity.
On the breach of contract claim, TNS argued that respondents had failed to
introduce any evidence showing that they did not breach the MSA or that the Benton
action was not filed as a result of that breach. TNS explained that the mere fact the
Benton plaintiffs had chosen not to name the staffing agencies in the underlying wage
and hour litigation was insufficient to show that respondents had actually complied with
their obligations under the MSA. TNS also argued that its breach of contract claim was
not duplicative of its indemnity claim because it was based on different provision of the
MSA.
In addition to its opposition, TNS filed its own motion seeking summary
adjudication of its indemnity claims. TNS’s motion presented essentially the same
arguments it had set forth in its opposition to the respondents’ motions for summary
judgment. First, TNS argued that the word “injury” in the MSA’s indemnity provision
should be interpreted to “encompass[] the alleged violation of the putative [Benton] class
members’ legal rights under applicable California wage and hour laws.” Second, TNS
argued that even if the indemnity provision did not apply, it was entitled to equitable
indemnity under California law: “Plaintiffs in the Benton Action seek to hold TNS
jointly and severally liable as the joint employer of the putative class members for alleged
wage and hour violations involving, inter alia, . . . the payment of overtime and meal/rest
period compensation to the putative class members who were provided to TNS by each
[respondent] . . . . If TNS is ultimately found liable as the joint employer of these
individuals, equity dictates that it is entitled to indemnity from each of the [respondents],
7
whose responsibility it was to compensate and employ their workers in accordance with
California law.”
D. The Trial Court Ruling
Prior to the hearing on the parties’ cross-motions, the trial court issued a tentative
order granting the respondents’ motions for summary judgment and denying TNS’s
motion for summary adjudication. The tentative order explained that the “most important
issue” was whether “in the context of the [MSA], ‘injury’ means ‘bodily injury’ or
‘injury of any kind.’” The court explained that the MSA’s inclusion of the phrase “or
death to any person” immediately after the words “injury to” indicated that the term
injury was intended to mean “bodily injury and not any injury.” The court reasoned that
interpreting the term injury to mean “‘any injury’ . . . would make the word ‘death’
redundant, for death IS an injury – the most severe injury of all.” The court further
concluded that the only interpretation that “avoid[ed] rendering the word ‘death’ mere
surplusage” was to define injury as “bodily injury,” explaining: “There is a tradition and
familiar distinction in tort law between a suit for bodily injury and a suit for wrongful
death. In a bodily injury case, the plaintiff is the injury victim – a living person. But in a
wrongful death case, the injury has killed the victim, so the plaintiffs are the decedent’s
next of kin, who bring a ‘wrongful death case instead of an ‘injury’ case. The drafters of
this standard indemnity clause meant the indemnity to cover bodily injury cases: slip and
falls and such. The drafters wanted the indemnity to apply (1) whether the bodily injury
case were direct injury actions by the injury victims themselves or (2) whether the next-
of-kin filed wrongful death claims after a fatal injury. This context makes sense of the
words. It shows that the drafter had mind and meant to express.”
On the issue of equitable indemnity, the trial court noted that TNS had
“concede[d]” there is “no such cause of action under Texas law.” Instead, TNS had
argued only that its claim was governed by California law and that California recognized
a claim for equitable indemnity where contracting parties were jointly liable to a third
party as a result of their contractual relationship. The trial court found that Texas law
8
governed the issue and that respondents were therefore entitled to judgment. The court’s
tentative order did not reference TNS’s breach of contract claim.
At the hearing, the parties presented argument on two primary issues: whether the
MSA’s indemnity provision extended to all forms of injury rather than just bodily injuries
and whether California or Texas law governed the equitable indemnity claim. After
hearing argument, the court adopted its tentative order as its final order and granted the
respondents’ motions for summary judgment. The court also addressed TNS’s breach of
contract claim, stating: “I can’t see that there is any breach of contract issue that’s
separate, really from this indemnity discussion. So I would, on the cross motions, grant
those cross motions.” The court subsequently entered a judgment in favor of the seven
respondents.
Following judgment, the court awarded respondents’ attorney’s fees pursuant to a
“prevailing parties” provision in the MSA. TNS appealed the judgment and the order
awarding attorney’s fees.4
DISCUSSION
A. Standards Governing Summary Judgment
“A defendant is entitled to summary judgment if the record establishes as a matter
of law that none of the plaintiff’s asserted causes of action can prevail. [Citation.]”
(Molko v. Holy Spirit Assn. (1988) 46 Cal. 3d 1092, 1107.) Generally, “the party moving
for summary judgment bears an initial burden of production to make a prima facie
showing of the nonexistence of any triable issue of material fact; if he carries his burden
of production, he causes a shift, and the opposing party is then subjected to a burden of
production of his own to make a prima facie showing of the existence of a triable issue of
material fact.” (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal. 4th 826, 850.)
4 Several months after the trial court entered judgment in favor of respondents, we
issued Benton, supra, 220 Cal. App. 4th 701, which reversed the trial court’s prior order
denying certification of the wage and hour claims in the Benton action and remanded the
matter for further proceedings.
9
To satisfy this burden, the moving defendant must show that at least one of the
elements of the cause of action has not been established by the plaintiff and cannot
reasonably be established, or must establish the elements of a complete defense to the
cause of action. (§ 437c, subds. (o), (p)(2); State of California v. Allstate Ins. Co. (2009)
45 Cal. 4th 1008, 1017 (Allstate).) “If, and only if, the moving party carries that burden,
the burden of production shifts to the opposing party to make a prima facie showing of
the existence of a triable issue of material fact. [Citation.] ‘A prima facie showing is one
that is sufficient to support the position of the party in question. [Citation.]’” (Roger H.
Proulx & Co. v. Crest-Liners, Inc. (2012) 98 Cal. App. 4th 182, 194.) “‘The same
standards apply to motions for summary adjudication.’ [Citation.]” (Multani v. Witkin &
Neal (2013) 215 Cal. App. 4th 1428, 1443.)
We review a trial court’s order granting a motion for summary judgment or
summary adjudication “de novo, liberally construing the evidence in support of the party
opposing summary judgment and resolving doubts concerning the evidence in favor of
that party.” (Allstate, supra, 45 Cal.4th at pp. 1017-1018.)
B. Respondents Are Entitled to Summary Adjudication of the Indemnity
Claims5
1. The MSA’s indemnity provision does not extend to wage and hour claims
TNS argues that the trial court erred in concluding that the MSA’s indemnity
provision does not extend to the statutory wage and hour claims at issue in the Benton
action. The parties do not dispute that the MSA’s choice-of-law provision requires us to
apply Texas law in interpreting the meaning of the contract.
5 Respondents contend that, on appeal, we should rely on the allegations in the first
amended Benton complaint rather than allegations in the operative second amended
Benton complaint. Respondents have not identified any differences between the first and
second Benton amended complaints that materially affect the issues in this appeal.
Accordingly, for purposes of clarity, we will refer to the allegations in the current
operative pleading in the Benton action, which is the second amended complaint.
10
“[W]here [a] contract is in writing and the doubt as to its meaning arises from the
language the parties used, and not from extrinsic matters . . ., the question as to what the
parties meant is [a question of law] for the court.” (Dallas Hotel Co. v. Lackey
(Tx.Ct.App. 1947) 203 S.W.2d 557, 561; Nalle v. Taco Bell Corp. (Tx.Ct.App. 1996) 914
S.W.2d 685, 687 [“The meaning of language used in a contract is a question of law”].)
“In construing a written contract, the primary concern of the court is to ascertain the true
intentions of the parties as expressed in the instrument. To achieve this objective, courts
should examine and consider the entire writing in an effort to harmonize and give effect
to all the provisions of the contract so that none will be rendered meaningless. Contract
terms are given their plain, ordinary, and generally accepted meanings unless the contract
itself shows them to be used in a technical or different sense.” (Valence Operating Co. v.
Dorsett (Tex. 2005) 164 S.W.3d 656, 662; see also Associated Indem. Corp. v. Cat
Contracting, Inc. (Tex. 1998) 964 S.W.2d 276, 284 [indemnity agreements are
“construed under the normal rules of contract construction”].)
Under Texas law, “indemnity agreements are strictly construed” against the party
seeking indemnity. (Webb v. Lawson-Avila Const., Inc. (Tx.Ct.App. 1995) 911 S.W.2d
457, 461.) Moreover, where uncertainty exists “the contract language will be construed
strictly against the party who drafted it since the drafter is responsible for the language
used.” (Southern Disposal, Inc. v. City of Blossom (Tex.Ct.App. 2005) 165 S.W.3d 887,
896.)
The disputed provision of the MSA states that the respondents will indemnify TNS
for all claims and losses of any kind “by reason of injury to or death of any person or
damage to or destruction of property” that arises out of any act or omission of the
respondents and their agents “in the performance of the Work, except that the staffing
agency shall not be responsible for any such losses . . . caused by the sole negligence or
willful misconduct of TNS.” TNS argues that because the word “injury” is not modified
or limited by any accompanying term, we should construe the word in accordance with
its ordinary meaning. (See Nat’l Union Fire Ins. Co. v. Crocker (Tex. 2008) 246 S.W.3d
603, 606 [courts must give “words their plain meaning, without inserting additional
11
provisions into the contract”].) TNS further contends that the ordinary legal meaning of
“injury” is “[t]he violation of another’s legal right, for which the law provides a remedy”
(Black’s Law Dictionary (9th ed. 2010) p. 856 (Black’s)), which necessarily encompasses
the wage and hour violations alleged in the Benton action.
TNS’s proposed interpretation effectively isolates the word “injury” from the
remainder of the indemnity provision. When interpreting a contract, however, “[w]e
must look at all of the contract’s parts together and be ‘particularly wary of isolating from
its surroundings or considering apart from other provisions a single phrase, sentence, or
section of a contract.’” (State Farm Life Ins. Co. v. Beaston (Tex. 1995) 907 S.W.2d 430,
433; see also Coker v. Coker (Tex. 1983) 650 S.W.2d 391, 393 (Coker) [“No single
provision taken alone will be given controlling effect; rather, all the provisions must be
considered with reference to the whole instrument”].) In this case, additional language in
the indemnity provision supports the trial court’s conclusion that the term “injury” was
not, as TNS suggests, intended to extend to every conceivable form of legal injury, but
rather was limited to physical or bodily injuries.
First, as the trial court noted, the words “injury to” are immediately followed by
the phrase “or death of any person.” Death is a form of physical or bodily injury.
(Cf. Black’s, supra, at p. 856 [defining “bodily injury” and “physical injury” to mean
““[p]hysical damage to a person’s body”].) Traditionally, the common law did not
provide a civil remedy for actions that resulted in the death of another, reasoning that an
“damages” from physical injury “‘stop with the period of the [injured party’s] existence.’
[Citation.]” (Marmon v. Mustang (1968) 430 S.W.2d 182, 185, fn. 2.) As with virtually
every jurisdiction, Texas has adopted a wrongful death statute that “chang[es] this
common law rule” and provides recovery for surviving spouses, children and parents.
(Moreno v. Sterling Drug (Tex. 1990) 787 S.W.2d 348, 356.) The fact that the term
“injury” is accompanied by a reference to a specialized form of physical injury suggests
that “injury” was not meant to apply to all conceivable forms of injury, but rather to
bodily or physical harm. Although we have found no California or Texas decision
interpreting this specific phrase, our conclusion is in accord with other jurisdictions that
12
have considered the issue. (See Northwest General Hosp. v. Yee (Wis. 1983) 339
N.W.2d 583, 586 [“Since the words ‘injury’ and ‘death’ are used together, we conclude
that the legislature intended injury to refer to those injuries involving actual bodily harm,
and not simply to any legally recognized injury”]; Dhanda v. Tri M, Ltd. (Mass.App.Ct.
1987) 512 N.E.2d 1141, 1143 [statutory “language” permitting “damages” for
“‘negligence resulting in death or in injury to person’ . . . suggests physical harm, rather
than economic loss”].)
Second, interpreting the term “injury” to encompass every conceivable form of
legal injury, as opposed to merely bodily injury, would effectively render meaningless
other portions of the indemnity provision. (See Coker, supra, 650 S.W.2d at p. 393
[court should select interpretation that “give[s] effect to all the provisions of the contract
so that none will be rendered meaningless”] [emphasis in original].) The indemnity
provision states that it applies to claims and liability involving “injury to or death of any
person or damage to or destruction of property.” If, as TNS contends, the term “injury”
actually intended to refer to any form of legal injury there would have been no need for
the parties to include separate references to “death” and “damage or destruction of
property,” which are also forms of legal injury. (See generally Baleares Link Exp., S.L. v.
GE Engine Services-Dallas, LP (Tx.Ct.App. 2011) 335 S.W.3d 833, 838 [describing
“property damage” as a “type of injury”]; Ruiz v. Guerra (Tex.Ct.App. 2009) 293 S.W.3d
706, 716 [describing death as “distinct” form of injury].) Interpreting the term “injury” to
mean “bodily injury,” in contrast, gives separate and distinct meaning to both “death” and
“damage or destruction of property.” Interpreted in such a manner, the indemnity
provision applies to three categories of claims: physical injury, wrongful death (see Rose
v. Doctors Hosp. (Tex. 1990) 801 S.W.2d 841, 845 [claim for personal injury is distinct
from a statutory claim for wrongful death]) and property damage.
Finally, the trial court’s decision to adopt a narrower interpretation of the term
“injury” accords with the principles that an indemnity agreement must be strictly
construed against an indemnitee and that uncertainties in contractual language should be
resolved against the party who drafted the document. There is no dispute that TNS is
13
both the party seeking indemnification and the party who drafted the MSA, which the
staffing agencies were required to sign as a condition of doing business with TNS. As
both the drafter and beneficiary of the indemnity provision, TNS could have included
more precise language clarifying that the provision did in fact apply to all forms of legal
injury, including those resulting from the staffing agency’s failure to comply with labor
requirements.
2. Texas law does not recognize equitable indemnity based on a
contractual relationship
TNS also argues that the trial court erred in concluding that its equitable indemnity
claim is precluded under Texas law. Although TNS does not challenge the applicability
of Texas law,6 it contends that Texas permits a claim for equitable indemnity where two
parties are jointly liable to a third party as the result of a contractual relationship between
them. According to TNS, that is the situation here because the the MSA “make[s] [the]
[r]espondents responsible for the purported labor violations alleged [in the Benton
action].”
Under Texas law, the availability of equitable indemnity (known as “common
law” indemnity) “is extremely limited. [Citations.] Common law indemnity survives in
Texas only in products liability actions to protect an innocent retailer in the chain of
distribution and in negligence actions to protect a defendant whose liability is purely
vicarious in nature. [Citation.] Vicarious liability is liability placed upon one party for
the conduct of another, based solely upon the relationship between the two.” (Affordable
Power, L.P. v. Buckeye Ventures, Inc. (Tex.Ct.App. 2011) 347 S.W.3d 825, 833.)
In Astra Oil Co., Inc. v. Diamond Shamrock Refining Co., L.P. (Tex.Ct.App.
2002) 89 S.W.3d 702 (Astra Oil), the court held that a contractual relationship is
insufficient to support a claim for common law indemnity under Texas law. The plaintiff
in Astra Oil leased a cargo vessel from a third party to transport the plaintiff’s oil.
6 In the trial court proceedings, TNS argued that California law, rather than Texas
law, governed its equitable indemnity claim. The trial court rejected the argument and
applied Texas law. TNS has not appealed that portion of the trial court’s ruling.
14
Plaintiff then entered into a separate contract for the sale of its oil with defendant. Under
this sales contract, the defendant ensured the safety of the marine terminal where the oil
was to be delivered. While the oil was being off loaded, the hull of the leased cargo
vessel sustained damage. The third-party vessel owner sued plaintiff, who then filed “a
claim for the vicarious liability incurred as a result of [the defendant’s] breach of its
contract with [plaintiff].” (Id. at p. 706.) In support, plaintiff relied on prior Texas
decisions holding that “common law indemnity is recoverable by a defendant who,
through no act of his own, has been made to pay for the negligence of another defendant
based solely on the relationship between the two defendants.” (Ibid.)
The court rejected the indemnity claim, stating: “[Plaintiff] fails to show that the
relationship between [defendant] and itself is the type of relationship that imposes
vicarious liability. In [the cases plaintiff cites], the relationship between the two
defendants was an employer and employee relationship. In the case before us, [plaintiff]
and [defendant] had a contractual relationship. [Plaintiff] cites no authority to support a
finding of vicarious liability based solely on a contractual relationship. Under the facts of
this case, [plaintiff] has not established a relationship to support its vicarious liability
theory or to show it is entitled to common-law indemnity.” (Astra Oil, supra, 89 S.W.3d
at p. 706.) The court also noted that plaintiff appeared to have “confuse[d] its causes of
action,” explaining that if defendant had “breached its contract” by failing to “‘to
provide safe berth for the [third-party cargo vessel],’” plaintiff “must pursue a breach of
contract . . . cause of action.” (Id. at p. 706, fn. 2.)
In American Alloy Steel, Inc. v. Armco, Inc. (Tex.Ct.App. 1989) 777 S.W.2d 173
(American Alloy), the plaintiff brought a similar indemnity claim against a steel plate
supplier. Plaintiff entered into a purchase agreement with defendant for a steel plate,
which plaintiff then sold to a third party. The third-party buyer subsequently alleged that
the plate was defective. Plaintiff agreed to replace the plate and then sued defendant for
common law indemnity and various related claims. The issue presented on appeal was
“whether . . . an implied obligation of indemnity ar[o]se out of the contractual
relationship between the two companies[.]” (Id. at p. 175.) The court concluded that
15
plaintiff could not pursue such a claim, explaining that Texas law only recognized
implied or common law indemnity in cases “arising out of a tort” or involving “agency or
surety principles.”7 (Ibid.) In contrast, the plaintiff and the defendant were merely
“parties to a contract with the freedom to negotiate its terms, keeping in mind their
individual needs and circumstances.” (Id. at pp. 175-176.)
As in Astra Oil and American Alloy, TNS’s equitable indemnity claim is based
solely on its contractual relationship with respondents. The Benton action asserts claims
against TNS for failure to comply with overtime and rest and meal break provisions.
TNS’s cross-complaints, in turn, allege that the respondents must indemnify it for any
liability incurred in the Benton action because the MSA obligated each staffing agency to
ensure compliance with overtime provisions and other labor code requirements. Astra
Oil and American Alloy demonstrate that, under Texas law, the contractual relationship
between TNS and respondents is not sufficient to support a claim for equitable indemnity.
C. Respondents Failed to Satisfy their Initial Burden of Production on TNS’s
Breach of Contract claim
TNS argues that the trial court erred in entering judgment on its contract claim,
which alleges that respondents breached the MSA by failing to pay their technicians
overtime or adopt a valid meal and rest break policy, thereby causing the Benton
plaintiffs to file a class action against TNS. The claim further contends that any liability
TNS ultimately incurs in the Benton action constitutes a form of damages resulting from
the respondents’ failure to discharge its contractual obligations.
To prevail on this claim at the summary judgment phase, the respondents were
required to make a prima facie evidentiary showing that TNS cannot establish an element
of the claim, or otherwise demonstrate a complete defense to the claim. (Aguilar, supra,
25 Cal.4th at p. 854 [fn. omitted].) The trial court’s written order granting summary
judgment does not explain why it dismissed the breach of contract claim. We will
7
TNS has never argued that the staffing agencies are its agents. Indeed, the cross-
complaints (and the MSA) specifically assert that TNS’s contractual relationship with its
staffing agencies “does not create any . . . agency . . . relationship.”
16
therefore independently review each ground set forth in the memoranda respondents filed
in support of their motions for summary judgment.
1. TNS’s breach of contract claim is not duplicative of its indemnity claim
In the trial court, the respondents argued that TNS’s contract claim failed as a
matter of law because it was a “restated claim for indemnity.”8 Respondents reiterate this
argument again on appeal, asserting that “a trial court has discretion to ‘ferret out’
artfully pleaded affirmative claims that are, in fact, actual claims for indemnity” and that
“TNS’s breach of contract theory is nothing more than a claim for indemnity in disguise.”
Respondents contend that “[t]he obligations of each party are spelled out in the express
indemnity language in the MSAs and that provision governs the potential liability of the
staffing companies. . . . TNS cannot state a claim independent of that provision.”
We do not agree that TNS’s breach of contract claim is merely “duplicative” of its
claim for express indemnity. As respondents acknowledge, TNS’s express indemnity
claim asserts that section 8 of the MSA imposes a duty on the respondents to defend TNS
in the Benton action and indemnify it for any losses incurred as a result of that action.
TNS’s breach of contract claim, in contrast, is predicated on separate contractual
obligations set forth in the MSA. In particular, TNS contends that respondents breached
section 5, subdivision (h), of the MSA, which states that the staffing agency “shall be
solely responsible and liable for compensate[ing]” the technicians that service TNS’s
clients. TNS further contends that the respondents breached section 14 of the MSA,
which requires the staffing agency to “comply with the provisions of all applicable
federal, state, county and local laws . . . in its performance of all Work . . . including . . .
laws relating to labor standards.” Given that the breach of contract claim is not
predicated on the same contractual provision as its indemnity claim, we fail to see how it
can be construed as a “duplicative” claim.
8 Although the trial court’s written order does not address TNS’s contract claim, its
statements at the summary judgment hearing suggest it agreed that the claim was merely
duplicative of the indemnity claims, explaining “I don’t see . . . any breach of contract
issue that’s separate . . . from this indemnity discussion.”
17
We also reject respondents’ suggestion that “TNS cannot state a [contract] claim
independent of . . . [t]he obligations . . . spelled out in the express indemnity [provision].”
The indemnity provision merely describes the types of claims for which respondents owe
TNS a duty to indemnify. Nothing in the indemnity provision suggests that respondents
may breach other contractual obligations set forth elsewhere in the MSA. Under the
respondents’ theory, if TNS is ultimately required to pay the Benton plaintiffs for
overtime that was improperly withheld from them by staffing agencies, TNS will have no
legal remedy against the staffing agencies despite the MSA’s express requirement that
each staffing agency is “solely responsible and liable for compensating” those
individuals.
The only legal authority respondents cite in support of their assertion that a trial
court may dismiss “disguised” indemnity claims involve application of Code of Civil
Procedure section 877.6, which governs the effect of a settlement between a plaintiff and
a joint tortfeasor. For example, in Cal-Jones Properties v. Evans Pacific Corp. (1989)
216 Cal. App. 3d 324―discussed at length in the respondents’ brief―a home purchaser
filed a fraud action alleging that the seller and real estate broker had knowingly
misrepresented the size of the property. The seller filed a cross-complaint against the real
estate agent for breach of fiduciary duty, equitable indemnity and contribution asserting
that the agent had violated its legal obligations by failing to advise the seller of the true
size of the home. The real estate agent reached a settlement with the buyer that was
contingent upon a judicial determination of good faith and dismissal of the seller’s cross-
claims under section 877.6. The seller opposed the motion on the ground that his claim
for breach of fiduciary duty was “separate and distinct” (id. at p. 327) from his claim
indemnity and contribution claims “and therefore should not be barred by respondents’
good faith settlement. [¶] The trial court ruled that the settlement was made in good faith
and that the breach of fiduciary duty claim was barred because it was nothing more than
an alternative means of pleading indemnity.” (Ibid.)
The appellate court affirmed, explaining that “Section 877.6 provides that a good
faith settlement bars other joint tortfeasors from any further claims of indemnity or
18
contribution against the settling tortfeasor. . . ‘based on comparative negligence or
comparative fault.’ [¶] The purpose of this statute is to bar claims against a settling
tortfeasor and thereby promote settlement. [Citation.] Allowing a joint tortfeasor to
bring an affirmative claim for damages that is actually an artfully pleaded claim for
indemnity would contravene the purpose of the statute. . . . Few joint tortfeasors would be
willing to settle with plaintiffs if they knew another tortfeasor could bring an action on
the same issues by merely cloaking claims of indemnity in affirmative language.
Therefore, a trial court must have the discretion to ferret out those claims that are in fact
claims for indemnity.” (Id. at pp. 327-328.) The court then analyzed the basis for the
seller’s breach of fiduciary duty claim and concluded that “[a]lthough labeled . . . as a
breach of fiduciary duty cause of action, it was in effect simply an indemnity action” and
therefore precluded under section 877.6.
The other cases on which respondents rely―Gackstetter v. Frawley (2006)
135 Cal. App. 4th 1257 (Gackstetter) and Norco Delivery Service v. Owens Corning
Fiberglass (1998) 64 Cal. App. 4th 955 (Norco)―apply Cal-Jones’s holding that
“[f]ollowing a good faith determination [under section 877.6], the judge . . . may dismiss
disguised or artfully pleaded claims for indemnity or contribution - - i.e., causes of action
purporting to state direct claims but which, in fact, seek only to recover derivative
damages.” (Norco, supra, 64 Cal.App.4th at 964 [citing Cal-Jones]; Gackstetter, supra,
135 Cal.App.4th at p. 1274 [“a party may not avoid a section 877.6 motion by providing
different labels for what are in reality indemnity or contribution claims”] [citing Cal-
Jones].) In both cases, the courts considered whether one joint tortfeasor’s claim against
another joint tortfeasor who had entered into a good faith settlement with the plaintiff in
the underlying action was, in effect, a claim for indemnification and therefore precluded
under section 877.6.
The rule set forth in Cal-Jones, Gackstetter and Norco Delivery applies only when
there has been a good faith settlement determination under section 877.6. Respondents
have provided no explanation why the rule should be applied outside that context.
19
2. TNS’s contract claim is not barred based on the fact that the Benton
complaint does not reference respondents’ conduct
The respondents also argue that TNS cannot prevail on its contract claim because
it has not been sued “based on any policy or practice” of a staffing agency. Rather, the
Benton action seeks “damages arising out of TNS’s [own] failure to comply with all
laws, regulations, codes or other legal directives in the performance of the work.” Stated
more simply, respondents contend TNS cannot demonstrate it was damaged by
respondents alleged breach of the MSA because “none of the staffing companies’ policies
or practices were the subject of the Benton plaintiffs’ complaint.”
This argument misstates the nature of TNS’s breach of contract claim. In the
Benton action, plaintiffs allege that TNS was the joint employer of every technician who
performed services for TNS, including those technicians who were hired and paid by a
staffing agency. The Benton plaintiffs further contend that because TNS was a joint
employer, it is directly liable to the technicians for unpaid overtime and failure to adopt a
meal and rest period provisions regardless of whether another joint employer might also
be liable for those statutory violations. (See generally Martinez v. Combs (2010) 49
Cal. 4th 35, 59 [definition of employer “reach[es] situations in which multiple entities
control different aspects of the employment relationship, as when one entity, which hires
and pays workers, places them with other entities that supervise the work”].) In its cross-
claim for breach of contract, TNS claims that, under the terms of the MSA, the staffing
agencies were responsible for fulfilling the statutory duties at issue in the Benton action.
Thus, according to TNS, if it is ultimately found liable to the Benton plaintiffs as their
joint employer, it may seek contract damages against respondents for failing to discharge
their duties under the MSA. The mere fact that the Benton plaintiffs elected to seek
recovery for the alleged wage and hour violations from TNS, rather than the staffing
20
agencies, does not preclude TNS from pursuing a contract claim against the staffing
agencies.9
3. Respondents have forfeited additional arguments raised in support of
summary judgment
Respondents raise two additional arguments in support of the trial court’s decision
to dismiss TNS’s breach of contract claim. First, respondents assert that although section
7 of the MSA “obligated [TNS] to control the Work site,” the “undisputed evidence
showed that TNS . . . seldom visited the worksite and had little interaction with the
workers.” According to respondents, “TNS’s admitted and undisputed failure to properly
supervise and manage the workers and the worksite materially beached its own
contractual obligations, precluding recovery on a breach of contract theory.”
The record shows that respondents did not raise this argument in the opening
memoranda filed in support of their motions for summary judgment. The only two
arguments respondents initially raised in the trial court were that: (1) the contract claim
should be dismissed because it was duplicative of the indemnity claim; and (2) TNS
could not prevail on its contract claim because the Benton action was based on TNS’s
own allegedly illegal practices and policies, and not those of its staffing agencies. It was
only after TNS addressed those arguments in its opposition brief that respondents raised
the issue of TNS’s purported failure to properly supervise the work sites in its reply brief.
9 Respondents also argue that TNS cannot satisfy the damages element of its
contract claim because the form of damages it seeks to recover―the attorney’s fees
incurred in defending against the Benton action―are not available in a contract action.
Respondents cite no authority addressing whether attorney’s fees qualify as a form of
contract damages when the defendant’s breach causes a third-party lawsuit to be filed
against the plaintiff. For the purposes of this appeal, however, we need not decide that
issue. TNS’s cross-complaints make clear that it has alleged two types of damages: the
fees it has incurred in defending against the Benton action and any liability it ultimately
incurs in that action. Even if respondents are correct that TNS cannot recover its
attorney’s fees incurred in the Benton action, they have provided no argument explaining
why it is precluded from recovering as damages any liability it ultimately incurs in that
action that is the result of respondents’ breach of the MSA.
21
Principles of fairness preclude parties from raising arguments for the first time in a
reply brief. (See generally American Drug Stores, Inc. v. Stroh (1992) 10 Cal. App. 4th
1446, 1453 [“Points raised for the first time in a reply brief will ordinarily not be
considered, because such consideration would deprive the respondent of an opportunity
to counter the argument”].) Although this rule is most commonly applied to arguments
first raised in an appellate reply brief, the rule may also be applied to briefing and
argument in the trial court. (See St. Mary v. Superior Court (2014) 223 Cal. App. 4th 762,
783; Plenger v. Alza Corp. (1992) 11 Cal. App. 4th 349, 362 at fn. 8 [trial court should
only permit party moving for summary judgment to include “additional . . . matter[s]” in
its reply brief in “exceptional cases”].)
The inherent unfairness of raising a new argument in a reply brief is particularly
pronounced in the context of a motion for summary judgment. As explained above, the
procedures governing summary judgment require the moving party to make a prima facie
evidentiary showing that the opposing party cannot establish an element of his or her
claim. The opposing party then has an opportunity to explain why the moving party has
failed to discharge this initial prima facie burden or alternatively respond with rebuttal
evidence demonstrating there is a triable issue of fact on the disputed issue. Where, as
here, the moving party raises an entirely new argument for the first time in a reply brief,
the opposing party is never permitted a chance to respond with his or her own counter
argument or rebuttal evidence. As explained by one court, “[w]here a remedy as drastic
as summary judgment is involved, due process requires a party be fully advised of the
issues to be addressed and be given adequate notice of what facts it must rebut in order to
prevail.” (San Diego Watercrafts, Inc. v. Wells Fargo Bank, N.A. (2002) 102
Cal. App. 4th 308, 316 [in ruling on motion for summary judgment, trial court erred in
relying on evidence moving party “submitted with its reply papers”].)
Even if respondents had properly raised this argument in the trial court, they have
failed to make a prima facie showing that TNS breached its material obligations under the
MSA. The respondents assert that TNS breached a provision of the MSA stating that
TNS’s designated site manager “shall be in control of the Worksite, and [the staffing
22
agency technicians] shall follow his directions at all times.” The only evidence they cite
in support of this contention is a declaration from a TNS project manager stating that he
normally emailed technicians a list of the jobs that needed to be completed each day and
then visited the sites after the technicians had left to check their work. According to the
project manager, “[b]esides sending out the email giving the workers their site lists, [he]
had little interaction with [the technicians] on a daily basis.” Respondents provide no
argument or analysis explaining why these statements are sufficient to demonstrate that
TNS was not “in control” of the work site within the meaning of the MSA. Respondents
assume, without explanation, that TNS could only “be in control” of the worksites by
having a supervisor present to oversee the work. Given the absence of any reasoned
analysis or citation to authority supporting this legal assumption, we disregard
respondent’s argument. (See People v. JTH Tax, Inc. (2013) 212 Cal. App. 4th 1219, 1260
[disregarding argument accompanied by “virtually no legal analysis”]; Nelson v.
Avondale Homeowners Assn. (2009) 172 Cal. App. 4th 857, 862 [conclusory statements do
not qualify as “cogent legal argument”].)
Respondents separately contend that the evidence TNS submitted in support of its
oppositions to the motions for summary judgment “establish[es] that the staffing
companies did in fact . . . pay for meal and rest breaks [and] overtime, thus defeating its
claim that the staffing companies breached the contract.” In support, respondents cite
declarations from two technicians who worked for respondent Dataworkforce stating that
they received overtime pay and were able to take meal and rest breaks. An additional
declaration from a technician who worked for respondent Ritesync states that he was
notified of California’s meal and rest period rules and was able to take breaks during his
workday.
In the trial court proceedings, respondents never argued that they were entitled to
judgment on TNS’s contract claim because the evidence demonstrated that they did pay
overtime and had adopted a valid meal and rest period policy. In fact, the record shows
that respondents specifically argued that the technician declarations described in the
23
preceding paragraph “were . . . not relevant to the case at hand” because the declarants
were not plaintiffs in the underlying Benton action.
When reviewing a ruling on a motion for summary judgment, “”[a]n argument or
theory will . . . not be considered if it is raised for the first time on appeal. [Citation.]
Specifically, in reviewing a summary judgment, the appellate court must consider only
those facts before the trial court, disregarding any new allegations on appeal. [Citation.]
Thus, possible theories that were not fully developed or factually presented to the trial
court cannot create a “triable issue” on appeal. [Citation.] ‘A party is not permitted to
change his position and adopt a new and different theory on appeal. To permit him to do
so would not only be unfair to the trial court, but manifestly unjust to the opposing
litigant.’ [Citation.]” (DiCola v. White Bros. Performance Products, Inc. (2008) 158
Cal. App. 4th 666, 676.)
D. The Trial Court’s Order Awarding Attorney’s Fees Must be Vacated
TNS has also appealed the trial court’s postjudgment order awarding respondents
the attorney’s fees they incurred in defending against TNS’s cross-claims. The court
concluded that respondents were entitled to fees pursuant to a provision in the MSA
stating that the “prevailing party” in any “dispute[] arising under or related to [the]
Agreement” shall be awarded its attorney’s fees. The court explained that respondents
qualified as “prevailing parties” because they had “fought off TNS’s invalid . . . suit.”
Because we reverse the court’s judgment in favor of respondents, we must also vacate the
attorney’s fees award that was predicated on that judgment.
DISPOSITION
The judgment is reversed and the order awarding respondents’ their attorney’s fees
is vacated. The matter is remanded to the trial court for further proceedings consistent
with this opinion. Upon remand, the court shall enter an order granting respondents
summary adjudication of TNS’s claims for express indemnity, equitable indemnity and
24
declaratory relief; 10 denying summary adjudication of TNS’s claim for breach of
contract; and denying TNS’s motion for summary adjudication. The parties shall bear
their own costs on appeal.
ZELON, J.
We concur:
PERLUSS, P. J.
FEUER, J.
10 Because we conclude respondents are entitled to summary adjudication on TNS’s
claims for express and equitable indemnity, they are also entitled to summary
adjudication of TNS’s declaratory relief claim, which seeks a judicial declaration that it is
“entitled to defense and indemnity from [the respondents].”

Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to
article VI, section 6 of the California Constitution.
25