MasterTech Services, Inc. v. NAES Corporation

Filing 50

ORDER granting 39 Defendants Motion for Partial Summary Judgment. Plaintiffs claims for breach of duty of good faith and fair dealing (Claim 5) and indemnification (Claim 6) are DISMISSED WITH PREJUDICE; This action shall proceed on Plaintiffs r emaining claims against Defendant and Defendants counterclaims against Plaintiff and Counterclaim-Defendant; and The Final Trial Preparation Conference remains set for August 29, 2014, with a five-day jury trial to begin on September 15, 2014, by Judge William J. Martinez on 3/27/2014.(evana, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge William J. Martínez
Civil Action No. 12-cv-2872-WJM-MJW
MASTERTECH SERVICES, INC., a Colorado corporation
Plaintiff,
v.
NAES CORPORATION, a Washington corporation,
Defendant/Counterclaim-Plaintiff,
v.
COOLING TOWER DEPOT, INC., a Nevada corporation,
Counterclaim-Defendant.

ORDER GRANTING DEFENDANT’S
MOTION FOR PARTIAL SUMMARY JUDGMENT

Plaintiff Mastertech Services, Inc. (“Plaintiff”) brings this action against NAES
Corporation (“Defendant”). Before the Court is Defendant’s Motion for Partial Summary
Judgment (the “Motion”). (ECF No. 39.) For the following reasons, the Motion is
granted.
I. BACKGROUND
Plaintiff is a building contractor that builds field-erected industrial cooling towers
around the United States. (ECF No. 3 ¶ 1.) Defendant outsources its employees to
work with businesses such as Plaintiff. (Id. ¶ 2.)

In June 2011, Plaintiff and Defendant entered into a Contract for Staffing
Services (the “Contract”) in which Defendant provided temporary workers to work on
Plaintiff’s project sites. (ECF No. 39-1.) The Contract provided that Texas law shall
apply. (Id. ¶ 17.) The Contract also provided that Defendant was required to maintain
workers’ compensation coverage. (ECF No. 39-1 ¶ 8.)
On April 27, 2012, two of Defendant’s employees were involved in an automobile
accident while driving one of Plaintiff’s vehicles (the “Accident”). (ECF Nos. 43-6 ¶ 4, 43
at 2.) Defendants’ employees submitted workers’ compensation claims to Defendant.
(ECF No. 43-4 at P-15.) Although Defendant’s third-party administrator, ESIS, began to
administer the claims, ESIS ultimately denied the claims. (ECF No. 44 at 4.) The
employees subsequently filed workers’ compensation lawsuits against Plaintiff in
Arkansas. (ECF Nos. 43 at 7, 43-6 ¶¶ 3-4.) Defendant has refused to defend or
indemnify Plaintiff from the workers’ compensation claims and the pending litigation in
Arkansas. (Id. ¶ 19.)
On these facts, Plaintiff filed this action against Defendant on August 14, 2013.
(ECF No 3.) Plaintiff alleges six claims for relief: (1) declaratory judgment; (2) fraudulent
inducement and intentional misrepresentation; (3) negligent misrepresentation; (4) breach
of contract; (5) breach of duty of good faith and fair dealing; and (6) indemnification. (Id.
¶¶ 48-74.) Defendant answered the Complaint on November 21, 2012, and asserted
counterclaims against Plaintiff and Cooling Tower Depot, Inc. (“Counterclaim-Defendant”),
Plaintiff’s parent company and alleged alter ego. (ECF No. At 16-27.)

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On August 14, 2013, Defendant filed a Motion for Partial Summary Judgment on
Plaintiff’s fifth claim (breach of good faith and fair dealing) and sixth claim
(indemnification). (ECF No. 39.) On September 4, 2013, Plaintiff and CounterclaimDefendant filed a joint Response to Defendant’s Motion. (ECF No. 43.) On September
18, 2013, Defendant filed its Reply Brief in Support of its Motion. (ECF No. 44.) On
September 30, 2013, Plaintiff and Counterclaim-Defendant filed a joint Response to
Defendant’s Additional Material Facts. (ECF No. 45.)
The Motion is now ripe for resolution.
II. STANDARD OF REVIEW
Summary judgment is appropriate only if there is no genuine issue of material
fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P.
56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Henderson v. Inter-Chem
Coal Co., Inc., 41 F.3d 567, 569 (10th Cir. 1994). Whether there is a genuine dispute
as to a material fact depends upon whether the evidence presents a sufficient
disagreement to require submission to a jury or conversely, is so one-sided that one
party must prevail as a matter of law. Anderson v. Liberty Lobby, 477 U.S. 242, 248-49
(1986); Stone v. Autoliv ASP, Inc., 210 F.3d 1132 (10th Cir. 2000); Carey v. U.S. Postal
Serv., 812 F.2d 621, 623 (10th Cir. 1987).
A fact is “material” if it pertains to an element of a claim or defense; a factual
dispute is “genuine” if the evidence is so contradictory that if the matter went to trial, a
reasonable party could return a verdict for either party. Anderson, 477 U.S. at 248. The

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Court must resolve factual ambiguities against the moving party, thus favoring the right
to a trial. Houston v. Nat’l Gen. Ins. Co., 817 F.2d 83, 85 (10th Cir. 1987).
III. ANALYSIS
Defendant moves for summary judgment on Plaintiff’s claims for breach of duty
of good faith and fair dealing and indemnification. (ECF No. 39 at 1.) The parties agree
that, for purposes of this Motion, Texas law applies. (ECF No. 43 at 10 n.1.)
A.

Duty of Good Faith and Fair Dealing
“Texas law does not recognize a common law duty of good faith and fair dealing

in most contracts or business transactions.” Cent. Sav. & Loan Ass’n v. Stemmons Nw.
Bank, N.A., 848 S.W.2d 232, 239 (Tex. App. 1992). A duty of good faith and fair
dealing may arise, however, “as a result of a special relationship between the parties
governed or created by a contract.” Arnold v. Nat’l Cnty. Mut. Fire Ins. Co., 725 S.W.2d
165, 167 (Tex. 1987). One such special relationship exists between an insurer and an
insured. See id.
Plaintiff argues that Defendant’s contractual obligation to provide workers’
compensation insurance created a special relationship between Defendant and Plaintiff
as insurer and insured. (ECF No. 43 at 15-16 (citing ECF No. 39-1 ¶ 8).) Defendant
contends that it did not act as an insurer by introducing evidence that Defendant was not
self-insured, (see ECF No. 44-2 at 16:18-22), that it maintained its workers’
compensation policy through a formal insurance company, (id. at 18:23), and a third-party
administrator handled its workers’ compensation claims processing. (Id. 18:23-24.)

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These facts show that Defendant does not have the same duty of good faith and fair
dealing as that imposed upon a formal insurance company. But cf. E-Z Mart Stores, Inc.
v. Hale, 883 S.W.2d 695, 700 (Tex. App. 1994) (finding that an employer that self-insured
its employees assumed the role of a workers’ compensation company and placed itself
under the same duty of good faith and fair dealing as that imposed on a formal insurance
company). Therefore, the Court finds that there is not a special relationship between the
parties, and that Defendant does not owe Plaintiff a duty of good faith and fair dealing.
Accordingly, Plaintiff’s motion for summary judgment on Plaintiff’s claim for duty
of good faith and fair dealing is granted.
B.

Indemnification
Plaintiff seeks indemnification for the expenses it has incurred in defending the

workers’ compensation lawsuits filed as a result of the Accident. (ECF No. 43-6 ¶¶ 3, 4,
6, 7.) Defendant moves for summary judgment on Plaintiff’s claim for indemnification on
the grounds that the Contract contains no express or implied indemnification language,
which is required under Texas law. (ECF No. 39 at 8-9 (citing UMC, Inc. v. Coonrod
Elec. Co., 667 S.W.2d 549, 554 (Tex. App. 1983) (“The right to indemnity and the
obligation to indemnify generally spring from contract, express or implied, which
contract determines the extent of the right to be indemnified, and in the absence of an
express or implied contract a right to indemnity does not exist.”).)
Plaintiff argues that its cause of action for indemnification is valid for two reasons:
(1) Defendant was contractually obligated to provide workers’ compensation insurance;

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and (2) Defendant had actual knowledge of the indemnity agreement’s existence. (ECF
No. 43 at 10-15.)
As to Plaintiff’s first argument, Plaintiff avers that indemnity agreement is
contained in Paragraph 8 of the Contract, which states:
8. Insurance: [Defendant] shall, prior to commencing work at a [Plaintiff] facility,
secure and maintain the following insurance coverage:




Employers Liability insurance with a limit of $500,000.00.
Workers’ Compensation insurance that meets statutory
requirements.
Commercial General Liability insurance with a single limit of
$1,000,000 to include:
a) Bodily injury and property damage
b) Contractual liability

Business Automobile Liability insurance with a minimum single limit of
$1,000,000 for bodily injury and property damage with respect to NSS’
vehicles whether owned and hired in the performance of the work.
(ECF No. 43 at 10-15 (citing ECF No. 39-1 ¶ 8).)
Plaintiff notes that this provision does not contain the appropriate “magic”
indemnity language, such as “indemnify, save, protect, save/hold harmless.” (ECF No.
43 at 11.) Instead, Plaintiff argues that the express language requiring Defendant, and
not Plaintiff, to provide workers’ compensation insurance “by its very nature
encompasses indemnifying [Plaintiff] for any costs it incurs in resolving claims that
should have been resolved by Defendant.” (Id. at 12.) The Court disagrees.
Paragraph 8 of the Contract merely obligates Defendant to maintain workers’
compensation insurance. (ECF No. 39-1 ¶ 8.) Not only does the paragraph not contain
the “magic words,” it does not contain any language expressly or impliedly obligating
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Defendant to protect Plaintiff against claims brought by third parties. See MG Bldg.
Materials, Ltd. v. Moses Lopez Custom Homes, Inc., 179 S.W.3d 51, 63 (Tex. App.
2005) (“An indemnity provision . . . obligates the indemnitor to protect the indemnitee
against claims brought by third parties.”) Therefore, the Court finds that the Contract
does not contain an indemnity agreement.
Plaintiff’s second argument is that the indemnity agreement did not need to be
conspicuous, because Defendant had actual knowledge of its existence and understood
that it was required to indemnify Plaintiff. (ECF No. 43 at 12-13.) Plaintiff cites a line of
cases holding that under Texas law, an indemnity agreement does not need to be
conspicuous if “the indemnitor possessed actual notice or knowledge of the indemnity
agreement.” Dresser Indus., Inc. v. Page Petroleum, Inc., 853 S.W.2d 505, 508 n.2
(Tex. 1993).
The flaw in Plaintiff’s argument is that it presumes that there was a valid
indemnity agreement. Plaintiff seems to ignore this detail and instead argues that
Paragraph 8 should be treated as an indemnity agreement because party
representatives presumed that it was an indemnity agreement. (ECF No. 43 at 7-9.)
The Court has already determined that the Contract does not contain an indemnity
agreement, therefore Plaintiff’s argument has no merit.
Furthermore, the Court may not look to the intent or knowledge of the parties in
these circumstances. “Parol evidence is not admissible to render a contract ambiguous,
which on its face, is capable of being given a definite certain legal meaning.” Sun Oil

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Co. v. Madeley, 626 S.W.2d 726, 732 (Tex. 1981) (citation omitted). Since the Contract
is not ambiguous, the Court “will give effect to the intention of the parties as expressed
or as is apparent in the [Contract].” Id.
Accordingly, Plaintiff’s motion for summary judgment on Plaintiff’s claim for
indemnification is granted.
IV. CONCLUSION
Accordingly, the Court ORDERS as follows:
1. Defendant’s Motion for Partial Summary Judgment (ECF No. 39) is
GRANTED;
2. Plaintiff’s claims for breach of duty of good faith and fair dealing (Claim 5)
and indemnification (Claim 6) are DISMISSED WITH PREJUDICE;
3. This action shall proceed on Plaintiff’s remaining claims against Defendant
and Defendant’s counterclaims against Plaintiff and Counterclaim-Defendant; and
4. The Final Trial Preparation Conference remains set for August 29, 2014, with
a five-day jury trial to begin on September 15, 2014.

Dated this 27th day of March, 2014.
BY THE COURT:

_______________________
William J. Martínez
United States District Judge

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