Palla v. L M Sports, Inc. et al

Filing 142

ORDER signed by District Judge John A. Mendez on 10/18/18 GRANTING 52 L M Sports' Motion for Summary Judgment on the express contractual indemnity and declaratory relief claims. (Kastilahn, A)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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MANISHA PALLA,

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No.

Plaintiff,
v.
L M SPORTS, INC. dba LAKESIDE
MARINA and dba ACTION
WATERSPORTS OF TAHOE; LT
LEASING, INC.; PAUL GARCIA;
and DOES 1 through 50,
inclusive,

ORDER GRANTING THIRD-PARTY
PLAINTIFFS’ MOTION FOR SUMMARY
JUDGMENT ON EXPRESS CONTRACTUAL
INDEMNITY CLAIM

Defendants.

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2:16-cv-02865-JAM-EFB

IN THE MATER OF THE COMPLAINT
OF LT LEASING, INC.; L M
SPORTS, INC. DBA LAKESIDE
MARINA AND DBA ACTION
WATERSPORTS OF LAKE TAHOE AND
ACTION WATERSPORTS AT LAKE
TAHOE AND DBA ACTION
WATERSPORTS; TAMARA HASSETT,
INDVIDUALLY; AND ROBERT
HASSETT, INDIVIDUALLY
Plaintiffs-in-Limitation,

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LT LEASING, INC.; L M SPORTS,
INC. dba LAKESIDE MARINA and
dba ACTION WATERSPORTS and
dba ACTION WATERSPORTS AT
LAKE TAHOE; TAMARA HASSETT,
individually, and ROBERT
HASSETT, individually

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Third-Party Plaintiffs,
v.
EVAN BOTWIN, REGAN ROBERTS,
SEAN O’Dea, EFE ӦZYURT, and
NICHOLAS CARSCADDEN,

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Cross-Defendants

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AND RELATED THIRD-PARTY
ACTION.

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I.

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INTRODUCTION AND PROCEDURAL BACKGROUND

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L M Sports and L T Leasing (collectively “L M Sports”) are

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defendants in a negligence suit that was filed by Manisha Palla

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(“Palla”)—a woman who was injured while using boating and tubing

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equipment leased from L M Sports.

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stand as Third-Party Plaintiffs, seeking indemnification from

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Evan Botwin, Sean O’Dea, and Nicholas Carscadden (“Third-Party

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Defendants”) based on a rental agreement the Third-Party

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Defendants signed.

ECF No. 1.

L M Sports also

ECF No. 17.

After Palla filed her negligence suit against L M Sports,

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and Paul Garcia, ECF No. 1, L M Sports filed a Complaint for

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Exoneration or Limitation of Liability.

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ECF No. 1.

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23.

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See Case No. 2:17-cv-41,

The Court consolidated these two actions.

ECF No.

L M Sports then filed a third-party complaint against Evan
Botwin, Nicholas Carscadden, Sean O’Dea, Efe Ӧzyurt, and Regan
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Roberts (“Third-Party Defendants”).

Case No. 2:16-cv-02865, ECF

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No. 17.

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boat involved in this incident and were on the boat when the

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accident occurred.

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settlement with L M Sports, ECF No. 86, and a default was entered

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against Efe Ӧzyurt.

These individuals signed the rental agreement for the

Regan Roberts subsequently entered into a

ECF No. 51.

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A motion and cross-motions for summary judgment were filed

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by L M Sports and Third-Party Defendants and a hearing on these

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motions was held on September 18, 2018.

At the hearing, this

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Court granted Third-Party Defendants’ cross-motions for summary

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judgment on L M Sports’ negligence/equitable indemnity claim.

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The Court also found that the cause of action for contribution

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was not ripe and denied all parties’ motions/cross-motions on

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this claim.

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Defendants’ cross-motions for summary judgment on L M Sports’

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express contractual indemnity claim, finding that none of the

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Third-Party Defendants had shown they were entitled to judgment

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as a matter of law.

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judgment on this express contractual indemnity claim was taken

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under submission and the Court requested the parties to file

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supplemental briefs addressing the Third-Party Defendants’

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standing to raise the issue of whether gross negligence

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invalidates an indemnity clause when Palla had only alleged

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ordinary negligence against L M Sports.

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O’Dea were also tasked with explaining why they should be allowed

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to join Botwin’s argument when they failed to raise the issue of

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gross negligence in their summary judgment opposition briefs.

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See id.

ECF No. 133.

The Court denied the Third-Party

See id.

L M Sports’ motion for summary

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Id.

Carscadden and

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For the following reasons, this Court finds that Third-Party

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Defendants, as parties to the contract, have standing to

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challenge the scope and validity of the indemnity agreement.1

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But this Court also finds that as a matter of law, public policy

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does not prohibit L M Sports from enforcing its indemnity clause

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against Third-Party Defendants in this action even if L M Sports

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is shown to have acted with gross negligence.

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II.

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A.

Standing

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1.

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OPINION

Legal Standard

The “case or controversy” requirement of Article III

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mandates that parties appearing before federal courts have

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standing.

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(1992).

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that was caused by the accused, and may be redressed by the

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court.

Lujan v. Defenders of Wildlife, 504 U.S. 555, 574

To have standing, a party must claim an injury in fact

Id. at 560–61.

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An injury in fact is “an invasion of a legally protected

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interest which is concrete and particularized, and (b) actual or

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imminent, not conjectural or hypothetical.”

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(internal citations and quotations omitted).

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must be more than a generalized grievance.

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2.

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Id. at 560
The claimed injury
Id. at 575.

Analysis

Third-Party Defendants have standing to raise the issue of
The Court finds that O’Dea and Carscadden may retroactively
join the gross negligence argument raised in Botwin’s summary
judgment opposition to avoid inconsistent results among parties
similarly situated. Star Ins. Co. v. Iron Horse Tools, Inc., No.
CV 16-48 BLG-SPW-TJC, 2018 WL 3079493 at *4-5 (D. Mont. Feb. 7,
2018)
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L M Sports’ gross negligence.

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Carscadden, argues that L M Sports is attempting to apply an

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indemnity clause that is void as a matter of public policy.

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Botwin Supp. at 1, ECF No. 134.

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is found to be enforceable, the Third-Party Defendants may be

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responsible for paying L M Sports’ costs—a clear “wallet

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injury.”

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551 U.S. 587, 621 (2007).

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is the cause of Third-Party Defendants’ claimed injury, and this

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Botwin, now joined by O’Dea and

If L M Sports’ indemnity clause

See Hein v. Freedom from Religion Foundation, Inc.,
The attempt to enforce this provision

Court—if appropriate—has the power to redress it.
L M Sports must prove coverage. Third-Party Defendants

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denial of coverage as well as the possibility of injury give

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them standing to contest this indemnity clause. While Palla has

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not specifically pled a cause of action for gross negligence

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against L M Sports, the Court finds that the issue of Third-

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Party Defendants’ standing to challenge the indemnity clause is

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not dependent on Palla’s personal injury complaint. As Third-

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Party Defendants, Botwin, O’Dea and Carscadden had no ability to

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control Palla’s causes of action against L M Sports. Third-Party

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Defendants have denied L M Sports claim for express contractual

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indemnity and L M Sports has failed to present a compelling

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reason for why this Court should deny parties to a contract an

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opportunity to challenge that contract’s reach.

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the Court finds that Third Party Defendants have standing to

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challenge the scope of the indemnity contract’s coverage.

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B.

Accordingly,

Express Contractual Indemnity Claim

To defeat L M Sports’ motion for summary judgment on the
express contractual indemnity claim, Third Party Defendants must
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either raise a genuine dispute of material fact or demonstrate

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why L M Sports is not entitled to judgment as a matter of law.

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See Fed. R. Civ. P. 56(a). Third-Party Defendants maintain that

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that the question of L M Sports’ gross negligence is a triable

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issue of fact that precludes summary judgment.

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alleged acts constitute ordinary or gross negligence, the Court

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finds that the indemnity agreement at issue in this case is

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still enforceable against Third-Party Defendants.

Botwin Supp. at

However, even if this Court were to assume that L M Sports’

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Third-Party Defendants do not cite to any authority that

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holds that an indemnity clause covering a party’s gross

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negligence is void as a matter of public policy.

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points out, both Royal Insurance Co. v. Southwest Marine, 194 F.

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3d 1009, 1016 (9th Cir. 1999) and City of Santa Barbara v.

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Super. Ct., 41 Cal. 4th 747, 751 (2007) were cases in which

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exculpatory clauses or releases were invalidated for purporting

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to cover gross negligence.

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not involve a true indemnity agreement as in the instant case.

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See Opp’n at 2-3.

As L M Sports

These cases did

Exculpatory clauses serve as a complete release of

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liability; they keep a claimant from coming to the courts, and

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being made whole.

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762.

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financial responsibility, i.e. it determines which party to a

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contract will ultimately bear the risk of injury to a third

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party.

In re Oil Spill, 841 F. Supp.2d. 988, 998 (E.D. La

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2012).

While gross negligence may invalidate contractual

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releases, indemnity clauses can cover gross negligence for

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compensatory damages (which are the only damages alleged in the

See City of Santa Barbara, 41 Cal. 45th at

In contrast, an indemnity clause merely reallocates

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instant case). Id.

Although In re Oil Spill is not controlling

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authority, the case is instructive and no party has cited any

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binding precedent which holds that indemnity clauses covering

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gross negligence must be invalidated as a matter of public

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policy.

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recognizes that “this issue creates tension between two

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policies: freedom of contract, which weighs in favor of

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enforcing the indemnity, and a reluctance to encourage grossly

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negligent behavior, which weighs against enforcing the

Like the Court in In re Oil Spill, this Court

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indemnity.”

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L M Sports argument to be more persuasive.

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concerns are of less importance here because this indemnity

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clause does not leave the injured party without recourse, but

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merely shifts the source of compensation.

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Defendants should not be permitted to escape their contractual

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liability to indemnify L M Sports for Palla’s injuries,

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regardless of the degree of negligence.

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Id. at 1000.

In the instant case, the Court finds
Public policy

Third-Party

Because this Court finds that, as a matter of law, the

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indemnity clause in this case covers alleged acts of negligence

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and gross negligence there is no genuine dispute of material

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fact and the Court must now only determine whether L M Sports is

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entitled to judgment as a matter of law.

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56(a).

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See Fed. R. Civ. P.

As discussed during the September 18th motions hearing, the

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indemnity clause’s language is clear and unambiguous.

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indemnity clause is only ambiguous if, when viewed in the light

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of the instrument as a whole, it “is reasonably susceptible of

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more than one application to material facts.”
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An

Best Buy Stores,

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L.P. v. Manteca Lifestyle Center, LLC, 859 F. Supp. 2d 1138, 1147

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(E.D. Cal. 2012) (quoting Dore v. Arnold Worldwide, Inc., 39 Cal.

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4th 384, 391 (2006)).

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At the hearing, this Court explained that it was not

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persuaded by any of the Third-Party Defendants’ alternative

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interpretations of this contract.

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unambiguous terms of the contract created a no-fault indemnity

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clause that covered all signatories to the contract.

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O’Dea, and Carscadden all signed the contract.

That position stands.

The

Botwin,

See Rental

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Agreement at 1.

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and the Court finds that L M Sports’ motion for summary judgment

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on the express contractual indemnity claim must be granted.

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They are therefore bound by its express terms

The Court also grants L M Sports’ motion for summary

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judgment on the declaratory relief claim to the extent L M

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Sports seeks to include such relief in the judgment concerning

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the express contractual indemnity claim.

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III.

ORDER

For the reasons set forth above, the Court GRANTS L M

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Sports’ motion for summary judgment on the express contractual

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indemnity and declaratory relief claims.

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IT IS SO ORDERED.
Dated: October 18, 2018

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