Capital Environmental Services v. North River Insurance Company

Filing

UNPUBLISHED AUTHORED OPINION filed. Originating case number: 1:10-cv-00792-TSE-TCB Copies to all parties and the district court/agency. [998884786].. [11-1326]

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UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 11-1326

CAPITOL ENVIRONMENTAL SERVICES, INCORPORATED,
Plaintiff - Appellant,
v.
NORTH RIVER INSURANCE COMPANY,
Defendant - Appellee.

Appeal from the United States District Court for the Eastern
District of Virginia, at Alexandria.
T. S. Ellis, III, Senior
District Judge. (1:10-cv-00792-TSE-TCB)
Argued:

May 17, 2012

Before NIEMEYER and
Senior Circuit Judge.

Decided:
GREGORY,

Circuit

Judges,

Affirmed by unpublished opinion.
Judge
opinion, in which Judge Niemeyer joined.

June 28, 2012
and

Gregory

HAMILTON, 1

wrote

the

ARGUED:
Stephen Anthony Horvath, BANCROFT, MCGAVIN, HORVATH &
JUDKINS, PC, Fairfax, Virginia, for Appellant.
Margaret F.
Catalano, CARROLL, MCNULTY & KULL, LLC, Basking Ridge, New
Jersey, for Appellee.
ON BRIEF:
Melissa H. Katz, Wesley D.
Allen, BANCROFT, MCGAVIN, HORVATH & JUDKINS, PC, Fairfax,
Virginia, for Appellant. Heather E. Simpson, CARROLL, MCNULTY &
1

Because Senior Judge Hamilton did not participate in oral
argument due to illness, this decision is filed by a quorum of
the panel, pursuant to 28 U.S.C. § 46(d).

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KULL, LLC, Basking Ridge, New Jersey; Craig J. Franco, ODIN,
FELDMAN & PITTLEMAN, PC, Fairfax, Virginia, for Appellee.
Unpublished opinions are not binding precedent in this circuit.

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GREGORY, Circuit Judge:
Capitol

Environmental

Services,

Inc.

(“Capitol”)

argues

that the district court erred in granting summary judgment in
favor

of

The

North

River

Insurance

Company

(“North

River”)

because the settlement agreement between Capitol and Earth Tech,
Inc.

(“Earth

Tech”)

included

the

contractual

dismissed as moot by the Florida state courts.

indemnity

claim

We disagree.

We

hold that because Capitol could never be held liable for any
damages to Earth Tech on a theory of contractual indemnity after
Earth Tech was made whole on its breach of contract claim, North
River has no duty to indemnify Capitol for the damages covered
by the settlement agreement.

I.
Capitol is a waste-disposal company that had been hired as
a contractor by St. Marks Refinery for waste disposal.

Capitol

in

provide

turn

hired

Earth

Tech

as

a

subcontractor

to

hazardous-waste transportation and disposal services.

Capitol

also subcontracted with Freehold Cartage, Inc. (“FCI”) to pick
up and transport waste from St. Marks Refinery to the disposal
facility.
On

September

25,

2002,

as

FCI

employee

Peter

Blash

was

backing a semi-tractor-trailer into the St. Marks Refinery, his
tractor-trailer lay across Virginia State Road 363, and Annette
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Carey collided into the tractor-trailer, resulting in injuries
to her and her husband.
center

line

of

the

The tractor-trailer was angled over the

road

so

that

its

headlights

pointed

in

Carey’s lane, which caused a glare that distracted her from the
trailer

ahead

providing

in

her

lane.

Earth

Tech

was

responsible

flagmen

to

direct

traffic

at

the

site.

for

Several

witnesses testified that an Earth Tech flagman “jumped” in front
of

her

vehicle,

causing

her

to

swerve

and

hit

the

tractor-

trailer.
Carey filed suit in state court in Florida against Peter
Blash, FCI, and Earth Tech for her injuries and her husband’s
loss of consortium.

Earth Tech and FCI each paid $250,000 in

2006 to extinguish their respective liabilities in the action.
Earth

Tech

filed

a

third-party

complaint

against

Capitol,

alleging, inter alia, breach of contract, contractual indemnity,
and common-law indemnity.
On March 29, 2007, the Second Judicial Circuit for Wakulla
County, Florida, granted Earth Tech’s motion for partial summary
judgment

against

Capitol,

holding

that

Capitol

breached

the

subcontract because it failed to purchase adequate insurance to
cover Earth Tech’s subcontract work.

The court subsequently

granted Capitol’s motion for summary judgment on the common-law
indemnity charge but denied it as to the contractual indemnity
claim.

The

trial

court

sua

sponte
4

severed

the

contractual

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indemnity claim, and the breach of contract claim went to a jury
to determine damages.

The jury awarded $585,525 to Earth Tech

on February 6, 2008, for the breach of contract claim.
On

July

13,

2007,

Capitol

filed

a

declaratory

judgment

action against North River in the United States District Court
for

the

Eastern

indemnification
Capitol.

District

according

of

Virginia

to

North

seeking

River’s

defense

policy

and

held

by

The district court found that it would be premature to

award summary judgment on the indemnification claim because the
record was “insufficiently developed” because Florida courts had
“not yet ruled on whether Capitol breached its duty to indemnify
Earth Tech.”

Capitol Envt’l Servs., Inc. v. North River Ins.

Co., 536 F. Supp. 2d 633, 645-46 (E.D. Va. 2008).

The court

noted, “North River has a duty to indemnify Capitol in the Earth
Tech

action

only

if

Capitol

demonstrates

that

it

was

found

liable to Earth Tech for bodily injury actually covered by the
North River policy.”

Id. at 645.

Accordingly, the court said,

if Capitol’s liability arose out of Earth Tech’s negligence,
that would give rise to Capitol’s liability to Earth Tech only
under a breach of contract theory, which in turn would not be
covered by North River’s policy.

Id.

The parties agreed in a joint stipulation that the Florida
court

was

the

appropriate

forum

to

resolve

the

remaining

contractual indemnity claim between Earth Tech and Capitol, but
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that in the event that the Florida court did not consider the
indemnity claim, the parties would return to Virginia federal
court to resolve the issue.
Capitol

sought

indemnity

claim

denied.

The

in

a
the

court

trial

for

Florida

dismissed

the

court,

the

severed

which

the

contractual

contractual
trial

court

indemnification

claim as moot, finding that any damages that would be awarded to
Earth Tech on this claim would be duplicative of the damages
awarded for breach of contract.
On

May

28,

2008,

the

Circuit

Court

of

Wakulla

County,

Florida, entered final judgment on the breach of contract claim
in

favor

of

Earth

district

court

judgment,

but

Tech,

of

and

appeal

added

Capitol

in

appealed

Florida,

prejudgment

to

which

interest

the

first

affirmed

to

the

bringing the total final judgment to $889,152.72.

the

damages,

On November

30, 2009, the first district court of appeal affirmed the trial
court’s decision that the contractual indemnity claim was moot.
Neither

Capitol

nor

Earth

Tech

sought

appeal

to

the

Florida

Supreme Court.
In August 2010, Capitol and Earth Tech entered a settlement
agreement, in which Capitol agreed to pay $769,087,68 to Earth
Tech

according

to

a

payment

schedule

in

satisfaction

of

the

judgment and “all claims and counterclaims asserted, or which
could have been asserted.”
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On

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July

16,

2010,

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Capitol

filed

a

second

declaratory

judgment action against North River in the eastern district of
Virginia, which action forms the basis for the instant appeal.
The district court denied Capitol’s motion for summary judgment
and granted North River’s on March 15, 2011, holding that North
River has no duty to indemnify Capitol.

The court found that

the dismissal of the contractual indemnity claim on mootness
grounds constituted an adjudication on the merits under Florida
law

and

that

litigating
legally

Earth

the

Tech

issue

obligated

is

precluded

again.

to

pay

As

by

Earth

such,
Tech

res

judicata

Capitol
under

never

the

from

became

contractual

indemnity theory, and accordingly North River had no duty of
indemnification.
settlement

The

agreement

court

between

further

Capitol

determined

and

Earth

that

Tech

did

the
not

encompass the contractual indemnity claim because that claim had
already been extinguished according to a final decision of the
Florida state courts.
Capitol filed a notice of appeal to this Court.

II.
On
between

appeal,

Capitol

Capitol

and

argues
Earth

that
Tech

the

settlement

includes

the

agreement
dismissed

contractual indemnity claim and that North River must indemnify
Capitol

for

this

claim

according
7

to

its

insurance

policy.

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Reviewing de novo the district court’s grant of summary judgment
for North River, see Higgins v. E.I. Dupont de Nemours & Co.,
863 F.2d 1162, 1167 (4th Cir. 1988), we affirm.
North River’s policy covers “those sums that the insured
becomes legally obligated to pay as damages because of ‘bodily
injury’

or

‘property

damage.’”

includes a carve out:

J.A.

243.

The

. . .

also

North River is not obligated to pay for

damages assumed in a contract or agreement.
exception

policy

to

the

exception:

[t]hat

the

insured

contract or agreement.”

there

would

is

have

J.A. 243.

But there is an

coverage

in

the

for

absence

“damages
of

the

The settlement agreement

between Capitol and Earth Tech is an assumption of liability by
Capitol,
absence

and
of

Capitol).

Capitol

the

would

agreement

have

(due

to

had

that

the

liability

court

judgment

in

the

against

The parties agree that the judgment against Capitol

for breach of contract is not covered by the North River policy.
The

only

question

that

remains

agreement

between

Capitol

and

is

whether

Earth

Tech

the

settlement

included

the

contractual indemnity claim, which could be covered by the North
River policy.
Capitol argues that because the settlement agreement covers
“all claims and counterclaims asserted, or which could have been
asserted” in the Earth Tech and Capitol law suit, the agreement
necessarily covers the claim for contractual indemnity despite
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the fact that the state appeals court had ordered judgment for
$889,152.72 on the breach of contract claim.

Capitol’s argument

is unconvincing.
First, the judgment for $889,152.72 made Earth Tech whole
for its injury.

Even if judgment were somehow awarded against

Capitol under the contractual indemnity theory, Capitol would
owe no amount of money under such a theory because Earth Tech
has already recovered the full amount of its injury.

At the

time

legally

of

the

obligated

agreement,

pay

to

settlement

Tech

Earth

Capitol

damages

was

under

not

the

contractual

indemnity theory.

Capitol is not now -- nor will it ever be --

legally

to

obligated

pay

damages

to

Earth

Tech

under

the

contractual indemnity theory.

In any case, there has never been

a

under

judgment

against

Capitol

the

contractual

court

decision

indemnity

theory.
Second,

the

Florida

state

that

the

contractual indemnity claim was moot was a final judgment on the
merits, and therefore the claim could not be reasserted against
Capitol.

Florida Rule of Civil Procedure 1.420(b) states that

any involuntary dismissal “other than a dismissal for lack of
jurisdiction

or

for

improper

venue

or

for

lack

of

an

indispensable party, operates as an adjudication on the merits.”
One Florida appellate court has observed that “[t]he reluctance
of

the

Florida

courts

to

decide
9

moot

questions

is

based

on

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policy reasons, not lack of jurisdiction.”

Merkle v. Jacoby,

912 So. 2d 593, 594 (Fla. Dist. Ct. App. 2d Dist. 2005) (citing
Cook v. City of Jacksonville, 823 So. 2d 86 (Fla. 2002).

Under

Florida law, even if a case would otherwise be moot, a court may
nonetheless

consider

the

exceptions applies:

merits

when

one

of

three

policy

“(i) when questions raised are of great

public importance, (ii) when the questions raised are likely to
recur,

or

affect

(iii)

the

rights

determined.”
v.

State,

when
of

the

collateral

a

party

legal

consequences

from

the

flow

issue

that

to

be

J.A. 445 (district court opinion) (citing Godwin

593

So.

2d

211,

212

(Fla.

1992)).

The

Florida

appellate court in Merkle reasoned that because the mootness
rule in Florida is policy-based, dismissal on mootness grounds
is not jurisdictional for purposes of Rule 1.420(b).

See also

Semtek Intern. Inc. v. Lockheed Martin Corp., 513 U.S. 497, 501503 (2001) (discussing the history of the federal counterpart,
Rule 41(b)); Allie v. Ionata, 503 So. 2d 1237, 1241 (Fla. 1987)
(same) (holding that “[a] judgment on the merits precluding the
relitigation of the same cause of action is one based on the
legal rights and liabilities of the parties, as distinguished
from

one

based

contentions,
procedure.”).

or

on
on

technical

mere

matters

Therefore,

under

10

or

dilatory

of

form

Florida

or

objections
of

law

practice
the

or
or

mootness

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judgment was a valid and final decision on the merits at the
time of the settlement agreement between Capitol and Earth Tech.
No court has ever held that Capitol is liable to Earth Tech
for damages under a theory of contractual indemnity.

Because

the indemnity claim against Capitol had been dismissed as moot
and the settlement agreement did not resurrect it, Capitol was
not legally obligated to pay Earth Tech damages for indemnity.
The

North

River

policy

covers

“legally obligated to pay.”

only

claims

which

Capitol

is

Therefore, North River does not

have a duty to indemnify Capitol under the insurance policy.
The district court was correct to conclude that “the settlement,
which

purported

Capitol,

cannot

to

settle

be

said

all
to

claims

have

between

encompassed

Earth

Tech

and

the

breach

of

contractual indemnity claim because, at the time the settlement
was consummated, that covered claim was already extinguished.” 2
J.A. 446-47.

2

Capitol also argues that the district court erred in
concluding that res judicata barred it from considering whether
Capitol was liable to Earth Tech under the contractual indemnity
claim. But neither res judicata nor claim preclusion can apply
under Florida law when, as here, the parties to the prior and
subsequent proceedings are not the same.
E.C. v. Katz, 731
So.2d 1268, 1270 (Fla. 1999) (deciding that there is no doctrine
of non-mutual collateral estoppel in Florida, contrary to
federal law).
“[U]nless both parties are bound by the prior
judgment, neither may use it in a subsequent action.” Stogniew
v. McQueen, 656 So.2d 917, 919 (Fla. 1995); Massey v. David, 831
So. 2d 226, 233 (Fla. App. 1st Dist. 2002). Nor does Florida’s
privity exception apply on these facts. See Sentry Ins. v. FCCI
(Continued)
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For the foregoing reasons, we affirm the district court’s
grant of summary judgment for North River.
AFFIRMED

Mut. Life Ins. Co., 745 So.2d 349, 350 (Fla. 4th Dist. Ct. App.
(1999)) (applying res judicata where parties are not identical
because the insurance company’s and the insured’s “interests
were not antagonistic”).
Therefore, the Florida state court
decision that Earth Tech’s contractual indemnity claim was moot
does not bind Capitol in its instant litigation for indemnity by
North River.
Nevertheless, this is a pyrrhic victory for Capitol
because, as already stated, under no circumstances can Capitol
be liable for damages to Earth Tech under the theory of
contractual indemnification after Earth Tech was made whole by
the award of damages on the breach of contract claim.

12