Boucher v. Graphic Packaging International Inc.

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
June 5, 2008
No. 07-30617 Charles R. Fulbruge III
Clerk
THOMAS BOUCHER
Plaintiff - Appellant
v.
GRAPHIC PACKAGING INTERNATIONAL INC
Defendant - Third Party Plaintiff -
Appellee - Appellant
v.
HYDROVAC SERVICES INC; ZURICH AMERICAN INSURANCE CO
Third Party Defendants - Appellees
Appeals from the United States District Court
for the Western District of Louisiana
USDC No. 3:05-CV-37
Before JONES, Chief Judge, and WIENER and CLEMENT, Circuit Judges.
PER CURIAM:*
*
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 R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.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.
No. 07-30617
Thomas Boucher, an employee of Hydrovac Services, Inc. (“Hydrovac”),
was seriously injured while cleaning a tank at a Graphic Packaging
International (“GPI”) plant. Boucher sued GPI, alleging negligence and strict
liability. GPI filed third-party complaints against Hydrovac and Zurich
American Insurance (“Zurich”), Hydrovac’s insurer. The district court held that
(1) GPI and Hydrovac did not have a valid indemnity agreement at the time of
the accident and (2) Zurich did not have a duty to defend GPI because GPI was
immune from Boucher’s suit under Louisiana worker’s compensation law. For
the reasons stated below, we reverse in part, affirm in part and remand for
further proceedings.
I. FACTS AND PROCEEDINGS
On October 17, 2004, Hydrovac began cleaning equipment at GPI’s West
Monroe plant. Boucher fell over forty feet while cleaning a tank on October 19,
2004 and was seriously injured.
The GPI purchase order for the October 17, 2004 job was not issued until
October 21, 2004. Although GPI had contracted with Hydrovac regularly since
1999, there was no master agreement between GPI and Hydrovac at the time of
Boucher’s injury. Each job Hydrovac completed for GPI was conducted under
the terms of a separate purchase order issued by GPI. Frequently, the purchase
orders would not be issued until Hydrovac had already completed a job.
The October 21, 2004 purchase order contained an indemnification
provision which stated that Hydrovac would indemnify GPI for any injuries
caused by its employees on the job, except for those injuries caused by GPI’s sole
negligence. The purchase order also stated that GPI was the statutory employer
of Hydrovac’s employees under Louisiana worker’s compensation law.
Boucher filed suit against GPI in state court on December 1, 2004. GPI
removed the case to federal court on January 3, 2005 on diversity grounds. On
November 7, 2005, GPI filed a third-party complaint with leave of the court
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against Hydrovac. On February 15, 2006, GPI filed a third-party complaint with
leave of the court against Zurich. All of the parties filed motions for summary
judgment. The district court granted GPI’s motion for summary judgment
against Boucher and held that GPI was Boucher’s statutory employer at the time
of the accident. The district court granted Hydrovac’s and Zurich’s motions for
summary judgment against GPI and held that Hydrovac and Zurich did not have
an obligation to indemnify or defend GPI. Boucher and GPI appeal.
II. STANDARD OF REVIEW
We review the district court’s grant of summary judgment de novo. Sudo
Props., Inc. v. Terrebonne Parish Consol. Gov’t, 503 F.3d 371, 376 (5th Cir. 2007).
Louisiana worker’s compensation law must be construed liberally in favor of the
worker, Landreneau v. Liberty Mut. Ins. Co., 309 So. 2d 283, 284 (La. 1975), but
it is still subject to the rule that a law that is “clear and unambiguous . . . shall
be applied as written . . . .” LA. CIV. CODE ANN. art. 9; Adams v. Cajun Disposal,
Inc., 691 So. 2d 296, 299 (La. App. 1st Cir. 1997).
Under the Louisiana Civil Code, “[t]he words of a contract must be given
their generally prevailing meaning.” LA. CIV. CODE ANN. art. 2047. “A contract
of indemnity whereby the indemnitee is indemnified against the consequences
of his own negligence is strictly construed . . . .” Perkins v. Rubicon, Inc., 563 So.
2d 258, 259 (La. 1990).
III. DISCUSSION
We reverse the district court’s finding that GPI was Boucher’s statutory
employer at the time of his accident. Louisiana law requires that the statutory
employer be designated by written agreement, and there was no written
agreement between GPI and Hydrovac on the date the accident occurred. We
affirm the district court’s finding that there was no indemnity contract between
Hydrovac and GPI at the time of the accident because there was no written
agreement between them, and Louisiana law does not permit us to infer the
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No. 07-30617
existence of a contract of indemnity from the parties’ course of dealing; and, we
also hold that Zurich has no indemnity obligation under its policy. We affirm the
district court’s finding that Zurich has no duty to defend GPI against Boucher’s
suit, but on different grounds than those relied on by the district court; and, we
also hold that neither does Hydrovac owe a duty to defend GPI.
A. GPI is not Boucher’s statutory employer
GPI claims that it is immune from Boucher’s tort claims under the
exclusive remedy provisions of Louisiana worker’s compensation law. See LA.
REV. STAT. ANN. § 23:1032. GPI claims that at the time of the accident, it was
Boucher’s “statutory employer” under section 23:1061(A) of the Louisiana
Revised Statutes.
GPI’s claim fails because there was no written contract between GPI and
Hydrovac when Boucher fell on October 19, 2004. Section 23:1061(A)(3)
provides that “a statutory employer relationship shall not exist between the
principal and the contractor’s employees . . . unless there is a written contract
between the principal and a contractor which is the employee’s immediate
employer . . . which recognizes the principal as a statutory employer.” Under
Louisiana law, GPI was the “principal” and Hydrovac was the “contractor” at the
time of Boucher’s fall. LA. REV. STAT. ANN. § 23:1061(A)(1).
The purchase order for the job Hydrovac began on October 17, 2004
included a provision designating GPI as the statutory employer. However, the
purchase order was not issued until October 21, 2004, two days after Boucher’s
October 19, 2004 accident. At the time of Boucher’s accident, there was no
written contract between GPI and Hydrovac.
GPI argues that the October 21, 2004 purchase order was in effect at the
time of Boucher’s accident because the purchase order stated that performance
constituted acceptance. The record does not support this argument. While
Hydrovac’s decision to begin work on October 17, 2004 is evidence that some
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No. 07-30617
kind of agreement existed between Hydrovac and GPI on that date, the only
written agreement in the record regarding the October 17, 2004 job is the
purchase order. The purchase order was not issued by GPI until October 21,
2004 and therefore could not be accepted by Hydrovac until that date at the
earliest. Because section 23:1061(A)(3) requires a written contract to create
statutory employer status, we hold that GPI was not Boucher’s statutory
employer at the time of the accident. See Ernest v. Petroleum Serv. Corp., 868
So. 2d 96, 99 (La. Ct. App. 2003).
B. Hydrovac and Zurich have no obligation to indemnify GPI
GPI also argues that the October 21, 2004 purchase order obliges
Hydrovac to indemnify it for Boucher’s injury. The third page of the purchase
order states: “Seller shall indemnify . . . Buyer . . . against any and all . . . claims
. . . arising out of the performance of any services by . . . Seller for Buyer
resulting in injuries to . . . any person . . . occasioned by acts or omissions of
Seller . . . whether or not negligent, except when due to the sole negligence of
Buyer.” GPI argues that the October 21, 2004 written contract was
unequivocally accepted by Hydrovac when it started work on October 17, 2004.
We reject this argument because, as discussed above, the written contract did
not come into existence until October 21, 2004 and could not have been accepted
before that date.
GPI also argues that its relationship with Hydrovac was governed by an
oral agreement reached in 1999 between Jeff Touzet of GPI and Jeff Noe of
Hydrovac, under which Hydrovac agreed that all work done for GPI would be
governed by the terms of the standard purchase order form, which included an
indemnification clause. GPI points to the existence of a 2003 certificate of
insurance from Zurich to corroborate this claim. GPI also notes that all of its
prior dealings with Hydrovac have been governed by the same purchase order
and that Hydrovac has never objected to the indemnification clause. Hydrovac
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No. 07-30617
argues that GPI, which has the burden to establish the existence of the oral
contract, failed to do so. Hydrovac notes that GPI’s corporate representative
admitted that there was no master agreement in place between GPI and
Hydrovac in 2004, and that if they did not have a master agreement in place,
then the terms and conditions of their purchase order would not apply to work
that was done prior to the issuance of the purchase order. Hydrovac further
argues that Louisiana law does not permit this Court to imply the existence of
an indemnity contract from the parties’ course of dealing.
The district court granted summary judgment in favor of Hydrovac and
found that indemnity contracts cannot be implied from the parties’ course of
dealing under Louisiana law. The district court also found that GPI failed to
establish the existence of an oral contract of indemnity, in part because Touzet
could not remember crucial details of the 1999 meeting, and Noe, who could have
confirmed or disputed the agreement, had passed away.
The district court cited Freeman v. Witco Corp. for the proposition that a
contract of indemnity cannot be implied from the parties’ course of dealing or
commencement of performance. 108 F. Supp. 2d 643, 646 (E.D. La. 2000).
Freeman involved an employee who was injured in an explosion while working
for a contractor at the principal’s plant. Id. at 644. About a week after the
explosion, the principal sent the contractor the purchase order, which included
an indemnification clause. Id. at 644–45. The contractor refused to indemnify
the principal and the principal filed suit, claiming that the contractor implied its
consent to the purchase order by beginning performance, and that the
contractor’s consent to indemnify was implied by the parties’ course of dealing.
Id. at 645. The district court found that, under Louisiana law, contracts of
indemnity are strictly construed and that a “contract to indemnify the offeror for
its own negligence may not be implied, but must be unequivocally expressed”
and that therefore, “the ‘course of dealing’ concept has no place in interpreting
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contracts which purport to indemnify the offeror for its own negligence.” Id. at
646. The Freeman court also found, in the alternative, that the parties’ prior
course of dealing did not indicate a consent by the contractor to indemnify the
principal for the principal’s own negligence because although the parties
regularly contracted together using a standard purchase order form, the page
including the indemnification clause was not always faxed to the contractor with
the rest of the form. Id. at 647.
Freeman relied on Perkins v. Rubicon, Inc., 563 So. 2d 258, 259 (La. 1990).
Id. at 645. Perkins states that a “contract of indemnity whereby the indemnitee
is indemnified against the consequences of his own negligence is strictly
construed, and such a contract will not be construed to indemnify an indemnitee
against losses resulting to him through his own negligent acts unless such an
intention is expressed in unequivocal terms.” 563 So. 2d at 259. In an earlier
case discussing indemnity contracts, the Louisiana Supreme Court stated that
this presumption against indemnification only applies when “a contractual
provision to indemnify against the indemnitee’s negligence liability is still in
doubt after a careful reading of the contract as a whole.” Sovereign Ins. Co. v.
Texas Pipe Line Co., 488 So. 2d 982, 985 (La. 1986). The court held, however,
that “[w]hen there is doubt as to indemnification against an indemnitee’s own
negligence liability[,] . . . usage, custom or equity may not be used to interpret
a contract expansively in favor of the indemnitee.”1 Id. The court went on to
provide the rationale for this rule:
1
Article 2055 of the Louisiana Civil Code defines equity and usage as follows:
Equity . . . is based on the principles that no one is allowed to take unfair
advantage of another and that no one is allowed to enrich himself unjustly at
the expense of another.
Usage . . . is a practice regularly observed in affairs of a nature identical
or similar to the object of a contract subject to interpretation.
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[This presumption] is derived from the principles of equity. To
impose on a person an obligation to indemnify another against the
indemnitee’s own negligence without the obligor’s unambiguous
consent is contrary to the principles of equity. Because of the
obligor’s lack of ability to evaluate, predict, or control the risk which
may be created by the indemnitee’s future conduct, enforcement of
such a provision without clear evidence that the risk was bargained
for and accepted may allow one to take unfair advantage of another
and unjustly enrich himself at the other’s expense. Moreover, such
an injustice may encourage antisocial acts and a relaxation of
vigilance toward the rights of others by relieving the wrongdoer of
liability for his conduct.
Id. at 986 (internal citations omitted).
Neither Perkins nor Sovereign Insurance directly address the question
here, because they both involved the interpretation of existing indemnity
contracts. We have to determine whether we may imply the existence of an
indemnity contract from the parties’ course of dealing. Accordingly, we must
make an Erie guess as to how the Louisiana Supreme Court would answer this
question.
Sovereign Insurance forbids us to rely on “usage, custom or equity” when
interpreting a doubtful indemnity contract, but it does not mention whether it
is proper to look to the parties’ course of dealing. However, Article 2053 of the
Louisiana Civil Code defines usage, equity and “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,” which is closely analogous to “course of dealing,” as
rules used to interpret doubtful contract provisions. Although the concepts of
usage, custom and equity are distinct from the parties’ course of dealing, we do
not regard them as different enough to change the analysis in Sovereign
Insurance. We hold that under the logic of Sovereign Insurance, the Louisiana
Supreme Court would extend the presumption against indemnification to
situations where a party is attempting to establish the existence of an indemnity
contract through the parties’ course of dealing. If Louisiana law does not permit
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courts to rely on usage to expand the scope of an indemnity contract where there
is doubt as to its coverage, then a fortiori we may not rely on the parties’ course
of dealing to establish the existence of an indemnity contract in the first
instance.
We affirm the district court’s finding that there was no contract of
indemnity between GPI and Hydrovac at the time of Boucher’s accident. GPI’s
corporate representative admitted that there was no master agreement between
GPI and Hydrovac at the time of the accident. Under these circumstances, there
is clearly doubt as to whether an indemnity contract was included in the
agreement to start work on October 17, 2004. Applying our Erie-derived rule
against relying on usage to establish indemnity contracts, we hold that there
was no indemnity contract between GPI and Hydrovac when Boucher’s accident
occurred.
Furthermore, we hold that Zurich does not have an obligation to indemnify
GPI in the underlying lawsuit according to its policy. Despite GPI’s insistence
that it qualifies as an additional insured under the liability policy Zurich issued
to Hydrovac, the unambiguous language of the Additional Insured Endorsement
requires a written contract or agreement between Hydrovac and GPI. Here,
though, as we have already discussed, there was no such contract or agreement
in place at the time the accident occurred. GPI and Hydrovac had not yet entered
into a master agreement, and the purchase order covering Hydrovac’s work in
question was not issued until October 21, 2004. Accordingly, there was no
written contract providing GPI with additional-insured status. Under these
circumstances, Zurich does not have a duty to indemnify GPI.
C. Hydrovac and Zurich have no duty to defend GPI
We also hold that Hydrovac does not owe GPI a duty to defend it in the
present lawsuit. This dispute involves an alleged indemnification contract.
Under Louisiana law,
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[a]n indemnity agreement is a specialized form of contract which is
distinguishable from a liability insurance policy. A cause of action
under a liability insurance policy accrues when the liability
attaches. However, an insurer’s duty to defend arises whenever the
pleadings against the insured disclose a possibility of liability under
the policy. On the other hand, an indemnity agreement does not
render the indemnitor liable until the indemnitee actually makes
payment or sustains loss. Therefore, a cause of action for
indemnification for cost of defense does not arise until the lawsuit
is concluded and defense costs are paid. The allegations of the
complaint against the indemnitee are irrelevant to the indemnitor’s
obligation to pay. Rather, it is the terms of the indemnity agreement
which govern the obligations of the parties.
Meloy v. Conoco, Inc., 504 So. 2d 833, 839 (La. 1987) (internal citations and
footnote omitted); see also Am. Home Assurance Co. v. Chevron, USA, Inc., 400
F.3d 265, 271–72 (5th Cir. 2005) (“Under Louisiana law, a cause of action for
indemnification for cost of defense does not arise until the [original] lawsuit is
concluded and defense costs paid.” (internal quotations omitted)). Because there
is no valid contract of indemnity between Hydrovac and GPI, there can be no
obligation for Hydrovac to indemnify GPI for the cost of defending itself against
Boucher’s lawsuit.
Furthermore, we hold that Zurich does not owe a duty to defend GPI in the
underlying lawsuit according to its policy for the reasons described above for
indemnity.
IV. CONCLUSION
We REVERSE the district court’s judgment that GPI was Boucher’s
statutory employer at the time of Boucher’s accident. We AFFIRM the district
court’s judgment that there was no indemnity contract between GPI and
Hydrovac at the time of Boucher’s accident; and, we also hold that Zurich has no
indemnity obligation under its policy. We AFFIRM the district court’s judgment
that Zurich does not owe a duty to defend GPI against Boucher’s suit; and, we
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also hold that neither does Hydrovac owe such a duty to GPI. We REMAND this
case for further proceedings consistent with this opinion.
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