Brewer Environmental Industries, LLC et al v. Matson Terminals, Inc. et al
Filing
101
ORDER GRANTING 75 SEABRIGHT INSURANCE COMPANY'S MOTION FOR SUMMARY JUDGMENT OR, IN THE ALTERNATIVE, PARTIAL SUMMARY JUDGMENT OF DEFENDANTS' LIABILITY: "On the basis of the foregoing, SeaBright's Motion for Summary Judgment or , in the Alternative, Partial Summary Judgment of Defendants' Liability, filed February 8, 2012, is HEREBY GRANTED. The Court DIRECTS the Clerk's Office to enter judgment in favor of SeaBright and against Matson. Signed by JUDGE LESLIE E. KOBAYASHI on May 31, 2012. (bbb, )CERTIFICATE OF SERVICEParticipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications were served by first class mail on the date of this docket entry
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
SEABRIGHT INSURANCE COMPANY,
)
)
Plaintiff,
)
)
vs.
)
)
MATSON TERMINALS, INC.,
)
MATSON NAVIGATION COMPANY,
)
INC.,
)
)
)
Defendants.
_____________________________ )
CIVIL NO. 10-00221 LEK-KSC
ORDER GRANTING SEABRIGHT INSURANCE COMPANY’S
MOTION FOR SUMMARY JUDGMENT OR, IN THE ALTERNATIVE,
PARTIAL SUMMARY JUDGMENT OF DEFENDANTS’ LIABILITY
Before the Court is Plaintiff SeaBright Insurance
Company’s (“SeaBright”) Motion for Summary Judgment or, in the
Alternative, Partial Summary Judgment of Defendants’ Liability
(“Motion”), filed on February 8, 2012.
[Dkt. no. 75.]
Defendants Matson Navigation Company, Inc. and Matson Terminals,
Inc. (collectively, “Matson”) filed their memorandum in
opposition on April 9, 2012 [dkt. no. 87], and SeaBright filed
its reply on April 16, 2012 [dkt. no. 89].
for hearing on April 30, 2012.
This matter came on
Appearing on behalf of SeaBright
were Mark M. Murakami, Esq. and Marc A. Centor, Esq., and
appearing on behalf of Matson was Brett Tobin, Esq.
After
careful consideration of the Motion, supporting and opposing
memoranda, and the arguments of counsel, SeaBright’s Motion is
HEREBY GRANTED for the reasons set forth below, and SeaBright’s
request for reasonable attorneys’ fees and costs is HEREBY
GRANTED pursuant to Hawai‘i Revised Statutes § 607-14.
BACKGROUND
On November 10, 2004, longshorman Kyle Soares suffered
an aggravation and worsening of a pre-existing degenerative disc
disease of his lower back while working for and employed by
SeaBright’s insured, Brewer Environmental Industries, LLC
(“Brewer”).
[Motion, Decl. of Richard C. Wootton in Supp. of
Motion (“Wootton Decl.”), Exh. B (Decision & Order Awarding
Benefits, dated June 13, 2008 (“ALJ Order”)) at 4.]
The injury
occurred in the course and scope of Mr. Soares’s employment as a
covered employee under § 902(3) of the Longshore and Harbor
Workers’ Compensation Act, 33 U.S.C. § 901 et seq. (“LHWCA”).
[ALJ Order at 1, 4; First Amended Complaint at ¶ 5.]
Brewer was covered under a SeaBright insurance policy
for claims brought by its employees under the LHWCA, and
SeaBright initiated payment of compensation benefits to
Mr. Soares for medical expenses associated with his injury.
[Motion, Decl. of Steven Wiper in Supp. of Pltf.’s Motion for
Summary Jdgmt. (“Wiper Decl.”), Exh. A (Notice of Final Payment
or Suspension of Compensation Payment).]
SeaBright alleges that
the policy contractually required it to provide legal
representation to Brewer in any legal action arising from a claim
for compensation made by an employee of Brewer.
2
[First Amended
Complaint at ¶ 6; Wiper Decl. at ¶ 4, Exh. B (Workers
Compensation and Employers Liability Insurance Policy).]
Brewer and Matson entered into the Asset Purchase
Agreement (“Agreement”) effective January 31, 2005, whereby
Brewer agreed to sell and Matson agreed to purchase HT&T
Stevedoring, a business providing stevedoring services on the
island of Hawai‘i.
[Pltf.’s Concise Statement of Material Facts
in Supp. of Motion for Summary Jdgmt. (“SeaBright’s CSMF”) at
¶ 1; Wootton Decl. at ¶ 2, Exh. A (Agreement).]
Paragraph 5.3 of
the Agreement, also referred to as the “Indemnity Clause,”
provides:
[Brewer] shall indemnify, defend, and hold
harmless [Matson] from and against any and all
loss, damage, penalty, claim, cost and expense and
any other liability whatsoever (including, without
limitation, reasonabl[e] attorneys’ fees, charges
and costs) incurred by [Matson] by reason of any
claim, demand, or litigation relating to the
Property Employees which arise from any act,
omission, occurrence or matters that take place
before the Cut-off Time. [Matson] shall
indemnify, defend and hold harmless [Brewer] from
and against any and all loss, damage, claim, cost
and expense and any other liability whatsoever
(including, without limitation, reasonable
attorneys’ fees, charges and costs) incurred by
[Brewer] by reason of any claim, demand or
litigation relating to the Property Employees
which arise from any act, omission, occurrence or
matters that take place after the Cut-off Time.
[Agreement at ¶ 5.3.]
The Agreement defines the “Cut-off Time”
as January 31, 2005 at 11:59 p.m., and Mr. Soares was designated
a “Property Employee” in Schedule 1.27 of the Agreement.
3
[SeaBright’s CSMF at ¶¶ 3-4, 8; Agreement at ¶¶ 1.6, 1.11, 1.27.]
On or around January 31, 2005, Mr. Soares became a Matson
employee.
[SeaBright’s CSMF at ¶ 10; Agreement at ¶ 5.2.]
During his employment with Matson, Mr. Soares suffered
a worsening of his lower back degenerative disc disease.
[SeaBright’s CSMF at ¶ 11; ALJ Order at 7-9.]
On June 10, 2005,
he filed a claim for compensation under the LHWCA against Brewer
and SeaBright for his November 10, 2004 injury.
CSMF at ¶ 12; Wiper Decl. at ¶ 3.]
[SeaBright’s
On February 21, 2006, he
filed a second claim for compensation against Matson for
“cumulative trauma.”
[SeaBright’s CSMF at ¶ 14; Wootton Decl.,
Exh. C (letter dated 2/22/06 from Preston Easley to R.
Bruininks).]
Brewer tendered the defense and indemnity for
Mr. Soares’s “cumulative trauma” claims to Matson on June 5,
2006.
[SeaBright’s CSMF at ¶ 15; Wootton Decl., Exh. D (tender
letter).]
Matson refused to acknowledge liability, and SeaBright
paid compensation, medical benefits, and the costs and fees of
defending Brewer.
[SeaBright’s CSMF at ¶¶ 17, 24; Wootton Decl.
at ¶ 5; Wiper Decl. at ¶ 4.]
Following a full hearing before the Office of Workers’
Compensation Programs, Administrative Law Judge (“ALJ”) Gerald
Etchingham held that Mr. Soares’s back injury worsened as a
result of his employment with Matson and that Matson was the
4
“last responsible employer” pursuant to the LHWCA.
CSMF at ¶¶ 18-20; ALJ Order at 2-3, 24-28.]
[SeaBright’s
Brewer and Matson
both disputed full liability for Mr. Soares’s claims before the
ALJ.
The ALJ ordered Matson to reimburse SeaBright and Brewer
for compensation and medical expenses paid to Mr. Soares for the
time period after he began working for Matson on January 31,
2005.
[SeaBright’s CSMF at ¶ 21; ALJ Order at 28.]
Matson
appealed the ALJ Order to the Department of Labor Benefits Review
Panel, but the ALJ Order was affirmed.
[SeaBright’s CSMF at
¶ 23; Wootton Decl. at ¶¶ 6-7, Exh. E (Decision and Order dated
May 20, 2009).]
SeaBright alleges that it has paid in excess of
$140,000 in legal fees and costs in defense of Brewer in
connection with Mr. Soares’s claims.
Wiper Decl. at ¶¶ 4-5, Exh. B.]
[SeaBright’s CSMF at ¶ 24;
Matson continues to refuse to
reimburse SeaBright for the legal fees and costs it incurred in
defending Brewer.
[Motion at 2.]
SeaBright and Brewer filed their original Complaint on
August 16, 2010, asserting claims for breach of contract and
equitable indemnity.
On April 28, 2011, this Court granted in
part and denied in part Matson’s Motion for Judgment on the
Pleadings, dismissing with prejudice the breach of contract claim
as to SeaBright and Brewer, and the equitable indemnity claim as
to Brewer.
[Dkt. no. 46; Brewer Envtl. Indus., LLC v. Matson
5
Terminals, Inc., Civ. No. 10-00221 LEK-KSC, 2011 WL 1637323 (D.
Hawai‘i Apr. 28, 2011).]
The Court granted SeaBright leave to
amend its Complaint to clearly articulate a claim for equitable
subrogation.
[Id.]
SeaBright filed its First Amended Complaint on May 20,
2011.
[Dkt. no. 49.]
In its First Cause of Action (“Equitable
Subrogation”), SeaBright alleges that, under its insurance policy
with Brewer, it is contractually required to pay all attorneys’
fees and costs incurred by Brewer in connection with Mr. Soares’s
claim.
SeaBright alleges that it is subrogated to the rights and
claims of Brewer against Matson for all attorneys’ fees and costs
expended on behalf of Brewer, for which Brewer would have been
entitled to recover from Matson.
[Id. at ¶¶ 20-21.]
In its Second Cause of Action (“Equitable Indemnity”),
SeaBright alleges that, as a result of Matson’s failure and
refusal to pay Mr. Soares’s compensation and to accept the tender
of Brewer’s defense, SeaBright expended legal fees and costs on
behalf of Brewer in connection with Mr. Soares’s claims and
continues to expend significant legal fees and costs asserting
this claim against Matson.
[Id. at ¶¶ 24-25.]
On June 17, 2011, Matson filed its Motion for Judgment
on the Pleadings or for Summary Judgment.
[Dkt. no. 55.]
That
motion came on for hearing before the Court on September 29,
2011.
In its October 31, 2011 order granting in part and denying
6
in part that motion, the Court granted summary judgment as to
SeaBright’s Equitable Indemnity claim, but denied summary
judgment as to Equitable Subrogation.
[Dkt. no. 69; SeaBright
Ins. Co. v. Matson Terminals, Inc., Civ. No. 10-00221 LEK-KSC,
2011 WL 5239614 (D. Hawai‘i Oct. 31, 2011).]
I.
SeaBright’s Motion
SeaBright moves for summary judgement or partial
summary judgment on the grounds that: (1) Matson agreed to
indemnify Brewer against Mr. Soares’s claims; (2) SeaBright has a
right of equitable subrogation against Matson; and (3) Matson
owes SeaBright the cost of Brewer’s defense against Mr. Soares’s
claim and the fees and costs associated with the present action.
A.
Contract Interpretation
As an initial matter, SeaBright sets forth basic
principles of contract interpretation.
at 7-8.]
[Mem. in Supp. of Motion
SeaBright states that contract interpretation is a
matter of law that is appropriate for summary judgment.
[Id. at
7 (citing Reed & Martin, Inc. v. City & Cnty. of Honolulu, 50
Haw. 347, 348-49, 440 P.2d 526, 527 (1968); United States ex rel.
Int’l Bus. Mach. Corp. v. Hartford Fire Ins. Co., 112 F. Supp. 2d
1023, 1033 (D. Hawai‘i 2000)).]
SeaBright argues that summary
judgment is appropriate in the present case, because the parties
do not dispute either the terms of the Agreement or the language
of the Indemnity Clause.
[Id. at 8 (citing Cont’l Ins. Co. v.
7
Metro-Goldwyn-Mayer, Inc., 107 F.3d 1344, 1346 (9th Cir. 1997)).]
B.
Matson’s Indemnification of Brewer
SeaBright next asserts that Matson agreed to indemnify
Brewer against Mr. Soares’s claim.
SeaBright argues that the
Agreement “unambiguously demonstrates that Matson agreed to
indemnify Brewer against any and all expense or liability –
‘including, without limitation, reasonable attorneys’ fees,
charges, and costs’ - incurred by Brewer as a result of any
claims ‘relating to the Property Employees which arise from any
act, omission, occurrence or matters that take place after the
Cut-off Time.’”
[Id. (quoting Agreement at ¶ 5.3) (SeaBright’s
emphasis omitted).]
SeaBright contends that the ALJ’s
determination that Matson was responsible for Mr. Soares’s
disability benefits and medical expenses eliminates any issue of
material fact as to whether Mr. Soares aggravated his back after
the cut-off time and establishes that the aggravation of the
injury was the “occurrence” that forced SeaBright to defend
Brewer against Mr. Soares’s LHWCA claim.
SeaBright argues that
the ALJ’s findings also confirm that Matson is obligated to
reimburse SeaBright for the cost of defending Matson against
Mr. Soares’s claim.
1.
Interpretation of the Indemnity Clause
SeaBright argues that the Indemnity Clause must be
interpreted consistent with the entire agreement.
8
It argues that
the “cardinal rule” in contract interpretation “‘is to ascertain
the intention of the parties and to give effect to that intention
if it can be done consistently with legal principles and this
intention will be gathered not from particular words and phrases
but from the whole context of the agreement.’”
[Id. at 9
(quoting Hawaiian Pineapple Co. v. Saito, 24 Haw. 787, 797 (Haw.
1919) (SeaBright’s emphasis omitted))].
SeaBright argues that
the Indemnity Clause cannot be read without reference to the
definition of “Property Employees” in Paragraph 1.27.1
It
further argues that, because the Indemnity Clause governs the
handling of “claim[s], demand[s] or litigation relating to the
Property Employees,” the Court must consider the nature of the
Property Employees and the law governing their potential claims
when construing the meaning of the Indemnity Clause.
2.
[Id. at 9.]
Indemnity Clause in Relation to the LHWCA
SeaBright predicts that Matson will argue that, because
Mr. Soares initially injured his back during his employment with
Brewer, Matson was under no obligation to indemnify or defend
Brewer.
SeaBright takes the position that, because the Indemnity
Clause specifically refers to potential claims from stevedores,
it must be read in relation to the LHWCA.
1
Specifically,
The Agreement defines “Property Employees” as “those
employees of Seller hired by Purchaser listed on Schedule 1.27
together with a list of their titles, annual compensation,
accrued vacation and annual benefits as of the Closing.”
[Agreement at ¶ 1.27.]
9
SeaBright argues that “any claim that a stevedore brings against
his employer for a work-related injury must be under the
Longshore Act.”
[Id. at 10 (SeaBright’s emphasis omitted)
(citing Ne. Marine Terminal Co., Inc. v. Caputo, 432 U.S. 249,
254 n.4 (1977); Victory Carriers, Inc. v. Law, 404 U.S. 202, 213
n.12 (1971)).]
According to SeaBright, because Mr. Soares is a
“stevedore” as defined in the Agreement, the Agreement must be
read in relation to the LHWCA.
3.
[Id.]
Compensable Injury in a
LHWCA Cumulative Trauma Case
SeaBright next argues that the “last responsible
employer rule,” also known as the “aggravation rule,” applies to
all LHWCA claims and “requires that the last liable employer pay
the full compensation owing the injured employee, regardless of
prior injuries or harmful exposures.”
[Id. at 11.]
SeaBright
contends that Matson, Mr. Soares’s employer at the time of the
aggravated injury, is responsible for the entire claim.
SeaBright notes that the Ninth Circuit has stated that
“‘the [last responsible employer] rule generally holds the
claimant’s last employer liable for all of the compensation due
the claimant, even though prior employers of the claimant may
have contributed to the claimant’s disability.’” [Mem. in Supp.
of Motion at 11 (quoting Found. Constructors, Inc. v. Dir.,
Office of Workers Comp. Programs, 950 F.2d 621, 623 (9th Cir.
1991) (SeaBright’s emphasis omitted).]
10
According to SeaBright,
there can be only one “compensable injury” under this rule, even
if the last injury is only an aggravation of a previously
existing injury.
[Id. at 11-12.]
SeaBright further contends
that the last responsible employer rule is well settled
throughout the country and applies regardless of the claimant’s
length of employment with the last employer.
[Id. at 12-13
(citing Metro. Stevedore Co. v. Crescent Wharf & Warehouse Co.,
339 F.3d 1102 (9th Cir. 2003) (holding that the hearings officer
correctly determined that the plaintiff was the last responsible
employer, even though claimant had been employed only for one day
and was scheduled for surgery prior to employment with the
plaintiff)).]
In reference to the ALJ Order, SeaBright argues that
“the only compensable injury to Mr. Soares was the aggravation of
his back problem at BIS/Matson through his last date of
employment in May 2005.”
omitted).]
[Id. at 12 (SeaBright’s emphasis
It argues that Mr. Soares’s claim against Brewer
arose from the aggravation of the back injury that occurred while
Matson employed Mr. Soares.
4.
[Id.]
Matson’s Interpretation of the Indemnity Clause
SeaBright argues that the last responsible employer
rule is “such an integral part of the Longshore Act
jurisprudence” that Matson, as an employer of longshoremen,
cannot “plausibly argu[e] that the Indemnity Clause should be
11
read without reference to that rule.”
[Id. at 13.]
SeaBright
states that “‘Hawaii courts have long expressed disapproval of
interpreting a contract such that any provision be rendered
meaningless.’”
[Id. (quoting Nautilus Ins. Co. v. K. Smith
Builders, Ltd., 725 F. Supp. 2d 1219, 1229 (D. Hawai‘i 2010)).]
SeaBright argues that, if it cannot enforce the Indemnity Clause,
the Indemnity Clause would be rendered meaningless.
[Id. at 13-
14.]
SeaBright quotes this Court’s order of October 31,
2011: “It defies logic and equity to provide Matson the windfall
of avoiding any responsibility for the cost of defense (i.e., its
share of the attorneys’ fees), when it has been found liable for
part of the compensation awarded to Mr. Soares.”
[Id. at 14
(quoting Order Granting in Part and Denying in Part Def.’s Motion
for Summary Jdgmt. at 34).]
SeaBright argues that the Court
“overlook[ed] one point: Matson was found liable not for part but
for the entire compensation award to Mr. Soares” and argues that
equity requires that the Court give effect to the Indemnity
Clause.
C.
[Id. (emphasis in original).]
SeaBright’s Right of Equitable Subrogation
Against Matson for Breach of the Agreement
SeaBright argues that, under the doctrine of equitable
subrogation, it steps into Brewer’s shoes to enforce the terms of
the Agreement.
[Id. at 14 (citing Peters v. Weatherwax, 69 Haw.
12
21, 28 (1987)).]
The Hawai‘i Supreme Court has recognized that
“an insurer, having paid a loss or claim to or for its own
insured, becomes equitably subrogated to the rights of the
insured against the third-party who is responsible for the loss.”
[Id. (citing State Farm Fire & Cas. Co. v. Pac. Rent-All, Inc.,
90 Hawai‘i 315, 328 (1999)).]
SeaBright argues that it is entitled to equitable
subrogation because: (1) SeaBright paid Brewer’s attorneys’ fees
and costs for defending against Mr. Soares’s claim; (2) SeaBright
was required to pay those fees and costs pursuant to the policy;
and (3) SeaBright’s rights to recovery are greater than Matson’s
refusal to pay, because Matson was found liable for Mr. Soares’s
injury and refused to defend or indemnify Brewer.
D.
[Id. at 15.]
SeaBright’s Recovery of its Expenses for Defending
Brewer and Fees and Costs Incurred Bringing this Claim
Finally, SeaBright seeks to recover from Matson the
attorneys’ fees and costs it expended in defending Brewer and the
fees and costs incurred in prosecuting the present action.
SeaBright argues that, because it paid all of Brewer’s defense
costs and the ALJ determined that Matson was liable for all of
Mr. Soares’s compensation and medical benefits, it is subrogated
to all of Brewer’s rights under the Agreement.
[Id. at 16
(citing Peters, 69 Haw. at 28 (“When subrogation occurs, the
substitute is put in all respects in the place of the party to
whose rights he is subrogated.”)).]
13
It argues that the Indemnity
Clause provides that, since SeaBright is subrogee to Brewer’s
full rights under the Agreement, Matson owes SeaBright
reimbursement for attorneys’ fees and costs expended in its
defense of Brewer.
[Id.]
SeaBright also requests that this Court award it its
fees and costs associated with the present action.
SeaBright
invokes Paragraph 12.14 of the Agreement, which provides that
“the ‘prevailing party’ in any dispute relating to the sale of
the Business ‘shall be reimbursed for all reasonable costs
incurred in connection therewith, including, without limitation,
reasonable attorneys’ fees and costs.’”
Agreement at ¶ 12.14).]
[Id. at 16 (quoting
According to SeaBright, it steps into
Matson’s shoes and should be able to recover its expenses
incurred in enforcing the Agreement under Paragraph 12.14.
[Id.
at 16-17.]
II.
Matson’s Opposition
A.
Inapplicability of the Indemnity Clause to this Case
Matson first argues that the present action does not
implicate the Indemnity Clause in the Agreement.
Matson argues
that, “absent an ambiguity, the contract terms should be
interpreted according to their plain, ordinary, and accepted
sense in common speech.”
[Mem. in Opp. at 10 (quoting Koga Eng’g
& Constr., Inc. v. State, 122 Hawai‘i 60, 72, 222 P.3d 979, 991
(2010)).]
Matson takes the position that “[e]ither the terms of
14
the [Agreement] are unambiguous, in which case there is no need
to seek out external sources to give them meaning; or the terms
are ambiguous, but the only credible external source points in
exactly the opposite direction Seabright is asking the Court to
go in.”
[Id.]
Matson offers the declaration of Gary J. North,
former president of Matson, which states that “there was never
any intent to incorporate the provisions of the LHWCA into the
[Agreement]” and that “there was never any intent that the [last
responsible employer rule] would have any bearing on how the
[Agreement] was to apply.”
[Id. at 10-11 (citing Mem. in Opp.,
Decl. of Gary J. North at ¶¶ 2-3).]
Matson offers three reasons why the term “occurrence”
in Paragraph 5.3 of the Agreement was not meant to reference the
last responsible employer rule:
(1) neither the [last responsible employer
rule] nor the statute it was design to apply
to, the LHWCA, are even mentioned in the
[Agreement] nor is there any reason for
reading them in; (2) the Administrative Law
Judge rendered his decision entirely in the
context of the [last responsible employer
rule] and the LHWCA and never even mentioned
the [Agreement] let alone based any part of
his ruling on it; and (3) the [last
responsible employer rule] serves a distinct
purpose which expressly alters the common
speech concept of “injury” to create
efficiency in adjudicating workers’
compensation claims not to define the
separate contract rights of parties with
respect to indemnity or fee-shifting.
[Id. at 11.]
Matson expands on each of these points in turn.
15
1.
Non-incorporation of the LHWCA or
the Last Responsible Employer Rule
Matson agrees with SeaBright that the intent of the
parties to a contract must be gathered from the context of the
agreement, but argues that SeaBright ignores this principle.
It
argues that the parties did not intend to incorporate the LHWCA
or the last responsible employer rule into the Agreement for any
purpose, including indemnification.
[Id. at 12.]
First, Matson points out that SeaBright “takes the
position that the entire contract must be viewed as a whole but
then it immediately seeks to apply a legal doctrine which appears
nowhere in that entire document.”
[Id.]
Specifically, Matson
points to Paragraph 2.4.2, which mentions longshore claims and
provides that “[a]ny injuries or claims for personal injury or
property damage arising prior to the Closing Date, even if not
filed until after the Closing Date, including longshore and
workers compensation claims shall remain the responsibility of
the Seller.”
[Id. at 13 (quoting Agreement at ¶ 2.4.2).]
Matson argues that: Mr. Soares suffered injury prior to
the Closing Date; all of Mr. Soares’s subsequent symptoms were
caused by the initial injury; and Mr. Soares’s claim against
Matson listed an injury date that included time prior to the
Closing Date.
[Id.]
Matson contends that Paragraph 2.4.2
mandates that Brewer is responsible for Mr. Soares’s injury, and
16
Paragraph 2.4.2 should supersede Paragraph 5.3, because it
specifically mentions longshore claims, and “‘specific terms and
exact terms are given greater weight than general language.’”
[Id. at 14 (quoting PDM Strocal, Inc. v. Fireman’s Fund Ins. Co.,
73 Fed. Appx. 915, 917 (9th Cir. 2003)).]
Second, Matson argues that Paragraph 12.8 explicitly
bars SeaBright’s claim.
Paragraph 12.8 states:
Nothing in this Agreement, express or
implied, is intended to confer upon any
person, other than the Parties and their
respective heirs, executors, personal
representatives, successors and assigns, any
rights or remedies under or by reason of this
Agreement. Nor is anything in this Agreement
intended to relieve or discharge the
obligation or liability of any third person
to any Party, nor shall any provision herein
be construed so as to give any third person
any right of subrogation or action over
against any Party.
[Id. at 14 (quoting Agreement at ¶ 12.8) (SeaBright’s emphasis
omitted).]
Matson argues that this paragraph demonstrates that:
(1) the Agreement was not intended to relieve SeaBright of its
preexisting obligation to defend Brewer; and (2) the Agreement
forbids third parties from asserting subrogation claims.
[Id. at
14-15.]
Third, Matson argues that SeaBright misconstrues
Schedule 1.27, which lists all employees, including stevedores.2
2
Schedule 1.27, titled “Property Employees,” is attached to
the Agreement and ostensibly lists the employees in an
(continued...)
17
It argues that SeaBright provides no authority in support of its
position that the inclusion of stevedores necessarily mandates
the incorporation of the LHWCA.
[Id. at 15-16.]
Employees
listed in Schedule 1.27 could have claims wholly unrelated to the
LHWCA.
Matson argues that there is no justification for imposing
the provisions of the LHWCA on the Agreement. [Id. at 16-17.]
2.
Inapplicability of the LHWCA and
the Last Responsible Employer Rule
Matson takes the position that, “even if Seabright were
right that the LHWCA must be incorporated into the [Agreement],
then the bar on fee-shifting as between employers and insurers
would be incorporated too and would serve to prevent the type of
relief Seabright is seeking.”
[Id. at 17-18.]
Matson reiterates
that, if the court finds the term “occurrence” to be free of
ambiguity, it must interpret the term according to its plain,
ordinary, and accepted sense in common speech.
[Id. at 18
(quoting Koga Eng’g & Constr., Inc., 122 Hawai‘i at 72, 222 P.3d
at 991).]
Even assuming there were such ambiguity, Matson argues
that there is no evidence that the parties intended to
incorporate the last responsible employer rule.
[Id.]
Matson also discusses Foundation Constructors, Inc. v.
Director, Office of Workers Compensation Programs, 950 F.2d 621
(9th Cir. 1991), and the “aggravation rule.”
2
(...continued)
organizational chart.
[Agreement at pg. 41.]
18
[Mem. in Opp. at
19.]
Matson argues that this rule is problematic for two
reasons.
First, there is little difference between the natural
progression of an injury and the “aggravation” of an injury.
[Id. at 19-20.]
The last responsible employer rule is designed
to promote efficiency, not fairness.
[Id. at 20 (citing Found.
Constructors, Inc., 950 F.2d at 623).]
Matson argues that there
is “no equitable justification for basing a shifting of
attorneys’ fees on such an at times arbitrary doctrine . . . .”
[Id.]
Matson contends that it is inequitable “to find that an
employer who has already paid more than its share - along with
its own attorneys’ fees - must also pay for another party’s
attorneys’ fees based solely on a finding of responsibility under
the arbitrary by design [last responsible employer rule].”
[Id.
at 21.]
The second reason Matson takes issue with the
“aggravation rule” is that the terms “natural progression” and
“aggravation” contemplate a later injury.
Matson posits that the
later injury should also be an “occurrence” and questions
whether, under this principle, SeaBright could have recovered
from Brewer, if Brewer had been found liable for the injury.
Matson asserts that the Agreement should not incorporate the last
responsible employer rule or the LHWCA, thus defeating
SeaBright’s remaining claim.
B.
[Id. at 21-22.]
Factual Dispute Regarding Equitable Subrogation
19
Second, Matson argues that, even assuming that Brewer
was entitled to indemnity under the Agreement, it failed to abide
by the terms of the Agreement.
Matson points to Paragraph 12.19,
which provides that, within ten days after notice to an
indemnified party of a claim for which indemnification may be
sought, “Indemnitee shall give written notice of such legal
action to the other Party (“Indemnitor”) . . . .
If the
Indemnitee fails to give such notice then, if and to the extent
the Indemnitor is prejudiced thereby, the obligations of the
Indemnitor to indemnify, defend and hold harmless the Indemnitee
shall abate.”
[Id. at 23 (quoting Agreement at ¶ 12.19).]
Matson argues that Brewer failed to tender defense of any claim
to Matson until almost a year after Mr. Soares had filed his
first claim.
[Id. at 24.]
According to Matson, Brewer’s failure
to tender the defense in accordance with Paragraph 12.19 deprived
Matson of its opportunity to assume control of the legal action.
Matson claims that disregard of Paragraph 12.19 would put it “in
the impossible position of having to blindly accept to pay a
year’s worth of attorneys’ fees all while giving up its right to
contest responsibility in a matter in which the claimant himself
was insisting that Brewer was at fault.”
[Id.]
Matson argues that, “‘since legal subrogation is
equitable in nature, the right will not be enforced unless the
rights of the party seeking it are greater than the rights of
20
others.’”
[Id. at 25 (quoting State Farm Fire & Cas. Co., 90
Hawai‘i at 329 n.8, 978 P.2d at 767 n.8).]
Matson urges the
Court to deny summary judgment because, as there is no showing
that Matson was at fault, SeaBright fails to establish that its
rights are greater than Matson’s.
C.
[Id.]
Insufficient Basis for SeaBright to
Seek its Fees in the Present Case
Third, Matson argues that, although the Agreement can
provide for the recovery of attorneys’ fees, such recovery is not
appropriate in the present action.
Matson argues that Paragraph
12.14 is inapplicable to the present dispute, which does not
relate to any “transaction” contemplated by the Agreement.
“Transaction” is defined by the Agreement as “collectively the
transactions contemplated in this Agreement.”
(quoting Agreement at ¶ 1.31).]
[Id. at 26
Rather, Matson takes the
position that the term “transaction” “relate[s] to the actual
sale of the business and the transfer of various leases, titles,
and deeds, not any dispute over workers’ compensation claims.”
Matson therefore requests that the Court deny SeaBright’s
[Id.]
request for attorneys’ fees and costs.
III. SeaBright’s Reply
A.
Non-ambiguity of the Indemnity Clause
SeaBright first argues that it is not asking the Court
to read the LHWCA into the Agreement.
21
Rather, it relies on the
“binding factual finding from the ALJ that Mr. Soares’ claim
arose from an ‘act, omission, occurrence or matter’ that took
place after Matson purchased the stevedoring operation from
Brewer.”
[Reply at 3.]
It argues that the Indemnity Clause is
clear and unambiguous, and that the ALJ already determined that
Mr. Soares’s claim arose from an “act, omission, occurrence or
matters” after the cut-off date.
Matson was afforded a full and
fair opportunity to litigate the factual issues before the ALJ
and cannot now re-litigate the issue of when Mr. Soares
aggravated his injury.
[Id. at 3 (citing Hagens v. United Fruit
Co., 135 F.2d 842 (2d Cir. 1943)).]
B.
The LHWCA’s Effect on the Application
of the Indemnity Clause to this Case
SeaBright next argues that, although the LHWCA and the
last responsible employer rule should not be read specially into
the Agreement, they “affect the application of the Indemnity
Clause, because Mr. Soares’ claim was a Longshore claim.”
at 4.]
[Id.
SeaBright cites state and federal cases for the
proposition that the laws existing at the “‘time and place of the
making of a contract, and where it is to be performed, enter into
and form a part of it, as if they were expressly referred to or
incorporated in its terms.’”
[Id. (some citations omitted)
(quoting Home Bldg. & Loan Ass’n v. Blaisdell, 290 U.S. 398, 42930 (1934)).]
SeaBright contends that the LHWCA and the last
responsible employer rule were in force at the time that the
22
parties executed the Agreement and thus become a part of the
Agreement.
SeaBright argues that the terms of the Indemnity Clause
are unambiguous and the evidence Matson offers should be
disregarded.
[Id. at 5.]
Matson’s argument that the parties did
not intend to apply the LHWCA to the Agreement is irrelevant,
insofar as it asks the Court to disregard laws that would
otherwise apply to the Agreement.
[Id.]
SeaBright concludes
that the LHWCA informs the Court as to which “act, omission,
occurrence or matters” gave rise to Mr. Soares’s claim and guided
the ALJ Order in SeaBright’s favor.
C.
[Id.]
Matson’s Ancillary Arguments
As to Matson’s argument that Paragraph 2.4.2 precludes
equitable subrogation, SeaBright argues that it paid Mr. Soares’s
compensation benefits during his employment with Brewer and is
now only seeking expenses incurred as a result of Mr. Soares’s
cumulative trauma claim that arose during his employment with
Matson.
SeaBright says that the ALJ Order conclusively
determined that the cumulative trauma occurred after the cut-off
date and was not Brewer’s responsibility.
[Id. at 6.]
Second, as to Matson’s argument that Paragraph 12.8
also bars SeaBright’s equitable subrogation claim, SeaBright
argues that this Court has already ruled on this very issue in
conjunction with Matson’s motion for judgment on the pleadings or
23
for summary judgment.
SeaBright argues that the Court’s ruling
in its October 31, 2011 order established the “law of the case”
and cannot be reexamined.
Hawai‘i 123, 128 (2002)).]
[Id. (citing Ditto v. McCurdy, 98
Even if the Court were to reexamine
this issue, SeaBright argues that, as its right to equitable
subrogation arises from equitable principles, Matson’s arguments
would still fail.
[Id. at 6-7.]
Third, as to Matson’s argument that Schedule 1.27 does
not incorporate the LHWCA or the last responsible employer rule,
SeaBright repeats its argument that such laws apply to contracts,
whether or not it was “intended” by the parties.
[Id. at 7.]
Fourth, as to Matson’s passing implication that the
ALJ’s declining to consider the contractual indemnity issue
constitutes a decision on that issue, SeaBright argues that the
ALJ passed on considering that issue because it did not have
jurisdiction to decide questions of contractual indemnity.
[Id.
(citing Temp. Empl. Servs. v. Trinity Marine Group, Inc., 261
F.3d 456, 465 (5th Cir. 2001) (holding that the ALJ “lacked
authority to adjudicate the parties’ contractual dispute in this
case”)).]
It contends that Matson’s argument is disingenuous,
and it cites to portions of the transcript of proceedings before
the ALJ in which Matson’s counsel agreed that “the ALJ cannot
interpret insurance contracts.”
[Id. at 8 n.3 (quoting Mem. in
Opp., Decl. of Counsel, Exh. C (Transcript, Nov. 29, 2007) at
24
38:8-12).]
D.
SeaBright’s Right to Enforce the Indemnity Clause
In response to Matson’s argument that a factual dispute
regarding Brewer’s notice to Matson under Paragraph 12.19 of the
Agreement precludes summary judgment, SeaBright argues that
Matson and SeaBright received notice of Mr. Soares’s claim at the
same time, so Matson cannot argue that it was prejudiced by
untimely notice.
[Id. at 8.]
SeaBright points to a letter dated
February 22, 2006, in which Matson and Brewer received formal
notice of Mr. Soares’s claim simultaneously.
[Id. (citing
Wootton Decl., Exh. C).]
SeaBright takes issue with Matson’s implicit position
that it intends to prove at trial that it would have accepted the
tender of Matson’s defense, and that it would have defended
Brewer better than Brewer defended itself.
[Id. at 9.]
SeaBright argues that Matson has not provided any facts in
support of this position.
E.
SeaBright’s Claim for Fees Incurred in this Matter
Finally, SeaBright argues that, with regard to the
claim for attorneys’ fees and costs associated with the present
action, its present suit to enforce the Indemnity Clause relates
directly to the “transaction” at issue.
[Id.]
SeaBright cites
to Continental Heller Corp. v. AmTech Mechanical Services, Inc.,
53 Cal. App. 4th 500 (1997), for the proposition that attorneys’
25
fees may be recovered in an action to enforce a contractual
indemnity agreement.
[Id.]
According to SeaBright, the
attorneys’ fees provision in the Agreement is broadly worded and
allows the prevailing party to recover fees and costs in any
dispute “relating to the Transaction.”
[Id.]
SeaBright argues
that the present suit to enforce the Indemnity Clause is related
to the “transaction,” as the Indemnity Clause only exists as an
element of the “transaction” and operates in reference to the
cut-off time when the “transaction” closed.
IV.
[Id.]
SeaBright’s Objections to Declarations
In conjunction with its reply memorandum, SeaBright
filed an objection to two declarations submitted by Matson in
support of its memorandum in opposition.
[SeaBright’s Objections
to the Declarations of Gary J. North and Peter W. Burns (dkt. no.
89-1).]
SeaBright argues that the declarations contradict the
unambiguous terms of the Agreement and that Gary North and Peter
Burns lack qualifications to put forward the legal conclusions
contained in their respective declarations.
[Id.]
DISCUSSION
I.
Recovery of Legal Fees and Costs SeaBright
Incurred in Connection with Mr. Soares’s Claim
A.
The Indemnity Clause
The Court first considers SeaBright’s argument that the
Court must construe the Indemnity Clause as properly requiring
26
Matson to indemnify Brewer with regard to Mr. Soares’s claim.
Conversely, Matson contends that the Indemnity Clause is
inapplicable in this case and that SeaBright’s interpretation
does not comport with the law regarding contract interpretation.
In construing the Agreement, the Court applies Hawai‘i
contract law principles.
See, e.g., Metzler Contracting Co., LLC
v. Stephens, Civ. No. 07-00261 HG-LEK, 2007 WL 1977732, at *3 (D.
Hawai‘i July 3, 2007).
“[C]ourts should not draw inferences from
a contract regarding the parties’ intent when the contract is
definite and unambiguous.”
State Farm Fire & Cas. Co. v. Pac.
Rent-All, Inc., 90 Hawai‘i 315, 324, 978 P.2d 753, 762 (1999).
The “court’s principal objective is to ascertain and effectuate
the intention of the parties as manifested by the contract in its
entirety.
If there is any doubt, the interpretation which most
reasonably reflects the intent of the parties must be chosen.”
Brown v. KFC Nat’l Mgmt. Co., 82 Hawai‘i 226, 240, 921 P.2d 146,
160 (1996) (quoting Univ. of Haw. Prof’l Assembly v. Univ. of
Haw., 66 Haw. 214, 219, 659 P.2d 720, 724 (1983)).
The Indemnity Clause requires that Matson:
indemnify, defend and hold harmless [BREWER]
from and against any and all loss, damage,
claim, cost and expense and any other
liability whatsoever (including, without
limitation, reasonable attorneys’ fees,
charges and costs) incurred by [BREWER] by
reason of any claim, demand or litigation
relating to the Property Employees which
arise from any act, omission, occurrence or
matters that take place after the Cut-off
27
Time.
[Agreement at ¶ 5.3 (alteration added).]
The question is whether
Mr. Soares’s claim arose before the cut-off time, so as to
implicate Brewer’s/SeaBright’s liability, or after the cut-off
time, so as to implicate Matson’s liability.
The Court is instructed by the Ninth Circuit’s decision
in Foundation Constructors, Inc. v. Director, Office of Workers
Compensation Programs, 950 F.2d 621 (9th Cir. 1991).
In that
case, the Ninth Circuit considered a factually similar situation,
where an employer appealed the Department of Labor Benefits
Review Board’s determination that the employer was liable for a
claimant’s disability compensation under the LHWCA.
The claimant
suffered an injury causing back pain during his employment with a
previous employer.
Six months after the claimant’s company was
acquired by a new owner, the claimant’s doctor determined that
his back condition had deteriorated to the point that claimant
was unable to work.
Id. at 622.
The claimant filed a claim for
benefits under the LHWCA against the later employer.
The
administrative judge determined that, under the “last responsible
employer” rule, the employer was totally liable for the
claimant’s claim, even though it only employed the claimant for
six months.
Id. at 623.
On appeal, the Ninth Circuit considered the applicable
test under the last responsible employer rule and determined that
28
the “two-injury rule” for cumulative trauma injury should apply.
The Ninth Circuit stated:
If the disability resulted from the natural
progression of a prior injury and would have
occurred notwithstanding the subsequent
injury, then the prior injury is compensable
and accordingly, the prior employer is
responsible. If, on the other hand, the
subsequent injury aggravated, accelerated or
combined with claimant’s prior injury, thus
resulting in claimant’s disability, then the
subsequent injury is compensable injury, and
the subsequent employer is responsible.
Id. at 624 (quoting Kelaita v. Dir., Office of Workers Comp.
Programs, 799 F.2d 1308, 1311 (9th Cir. 1986)).
The court upheld
the Benefits Review Board’s ruling, holding that “substantial
evidence existed to support the ALJ’s finding that Vanover’s back
injury was aggravated by his employment with Foundation.”
Id.
Similarly, in the present case, Mr. Soares brought a
claim against his employers under the LHWCA, alleging injury
initially occurring during his employment with Brewer, but
worsening during his employment with Matson.
The ALJ reviewed
the testimony of Mr. Soares’s doctors and the parties’ expert
witnesses and determined that, in applying the “two injury test”
under the “last responsible employer” rule, “Brewer has shown by
a preponderance of the evidence that Claimant’s work activities
from January to May 2005 permanently aggravated or worsened his
lower back condition, even if only a small amount . . . .
This
finding is supported by the medical records and credible record-
29
keeping . . . .”
[ALJ Order at 26.]
The ALJ weighed the
extensive evidence presented by both parties and concluded that
Matson “is liable for all of Claimant’s disability and medical
expenses/benefits from May 21, 2005 and continuing.”
[Id. at
27.]
Based on the ALJ’s carefully reasoned Order, the Court
agrees that Matson is indeed the last responsible employer.
Mr. Soares filed his claim under the LHWCA, thus incorporating
its legal nuances, including the last responsible employer rule.
The Court will not disturb the ALJ’s finding, based on
substantial evidence, that Mr. Soares’s back injury incurred
during his employment with Matson was not a “natural
progression,” but rather an aggravation or acceleration of his
previous injury.
Furthermore, the Court determines that Matson’s
responsibilities as Mr. Soares’s “last responsible employer”
apply to the Indemnity Clause.
Matson agreed to indemnify Brewer
against all expenses, including reasonable attorneys’ fees and
costs, that arise “by reason of any claim, demand or litigation
relating to the Property Employees which arise from any act,
omission, occurrence or matters that take place after the Cut-off
Time.”
[Agreement at ¶ 5.3.]
The ALJ determined that
Mr. Soares’s injury arose during his employment with Matson, even
though the initial injury occurred during his employment with
30
Brewer.
The Court sees no compelling reason to divorce the ALJ’s
determination of liability for Mr. Soares’s injury from the
Indemnity Clause in the Agreement.
Nor is the Court compelled by
Matson’s argument that Paragraphs 12.8 and 2.4.2 bar the
indemnification specifically contemplated in Paragraph 5.3.
Accordingly, the Court CONCLUDES that, because Mr. Soares’s claim
arose from an “act, omission, occurrence or matter” that occurred
after Matson purchased the stevedoring operation from Brewer,
Brewer would be able to enforce the Indemnity Clause against
Matson.
B.
Equitable Subrogation
Given that the Agreement permits Brewer to recover its
attorneys’ fees and costs from Matson, SeaBright argues that,
under the doctrine of equitable subrogation, it steps into
Brewer’s shoes to enforce the Indemnity Clause against Matson.
Equitable subrogation has been defined as “a legal
fiction, which permits a party who satisfies another’s obligation
to recover from the party ‘primarily liable’ for the extinguished
obligation.”
In re Hamada, 291 F.3d 645, 649 (9th Cir. 2002)
(quoting In re Air Crash Disaster, 86 F.3d 498, 549 (6th Cir.
1996)).
“The right of ‘legal’ or ‘equitable’ subrogation arose
as a ‘creature of equity’ and ‘is enforced solely for the purpose
of accomplishing the ends of substantial justice.’”
Id. (quoting
Memphis & L.R.R. Co. v. Dow, 120 U.S. 287, 302 (1887)).
31
The Hawai‘i Supreme Court explained equitable
subrogation as follows:
[a]n insurer’s right to legal or equitable
subrogation arises only when certain
requirements are met. First, the insurer
must have paid the loss. The right extends
to the extent of the amount actually paid and
the amount paid must have been paid to the
insured.
In addition, the amount paid by the
insurer must result in the insured’s being
made “whole.” The general rule is that the
subrogated insurer is entitled to no
subrogation, or to reduced subrogation, if
the result of full subrogation would be to
cause the insured to be less than fully
compensated for the loss, although some cases
hold to the contrary. . . .
Courts have taken three approaches to
the issue of whether or not subrogation will
be allowed when the insured has not been
fully compensated. One approach is to find
that the insurer is entitled to the full
amount of its subrogation, whether or not its
insured is made whole. Another is to find
that the insurer is entitled to no
subrogation until the insured recovers his
entire loss, between the insurance payment
and the recovery from the tortfeasor. The
third approach is to hold that the court
should make an equitable distribution of any
recovery from the tortfeasor, in light of all
of the circumstances.
. . . .
The second requirement for the existence
of the right to legal subrogation is that the
insurer must not have merely volunteered to
pay the loss, but must have been required to
pay based upon[, for example, operation of
law or a] . . . contract of insurance. . . .
Finally, since legal subrogation is
32
equitable in nature, the right will not be
enforced unless the rights of the party
seeking it are greater than the rights of
others.
State Farm Fire & Cas. Co., 90 Hawai‘i at 329 n.8, 978 P.2d at
767 n.8 (quoting 4 R. Long The Law of Liability Insurance,
§ 23.02[2], at 23.8-13 (1998)).
In considering subrogation in the insurance context,
the Hawai‘i Supreme Court further stated that, because
subrogation involves “stepping into” the
shoes of another, when an insurer brings
an action against a tortfeasor based
upon its subrogation rights, the
insurer’s rights flow from the insured's
rights. The subrogated insurer, known
as the “subrogee,” can be subrogated to
and enforce only such rights as the
insured, known as the “subrogor,” has
against the party whose wrong caused the
loss. In a subrogation suit, a
tortfeasor may assert against the
insurer any defense which the tortfeasor
could have asserted against the insured.
The Law of Liability Insurance, supra,
§ 23.03[2], at 23-13 to 23-14. Therefore,
the general rule provides that an insured may
affect its insurer’s subrogation rights
because they are derivative, i.e., the
insurer’s subrogation rights rest upon the
viability of the insured’s claim against the
tortfeasor. Id. § 23.04[1], at 23-40.
Id. at 329, 978 P.2d at 767.
The Hawai‘i Supreme Court
continued:
Subrogation is a venerable creature of
equity jurisprudence, “so administered as to
secure real and essential justice without
regard to form[.]” H. Sheldon, The Law of
Subrogation § 1, at 2 (1882) (footnote
33
omitted). “It is broad enough to include
every instance in which one party pays a debt
for which another is primarily answerable,
and which, equity and good conscience, should
have been discharged by the latter[.]” Id.
(footnote omitted). It “is defined by
Sheldon to be ‘the substitution of another
person in the place of a creditor, so that
the person in whose favor it is exercised
succeeds to the rights of the creditor in
relation to the debt.’” Kapena v.
Kaleleonalani, 6 Haw. 579, 583 (1885). When
subrogation occurs, “[t]he substitute is put
in all respects in the place of the party to
whose rights he is subrogated.” Id. In
effect, he “steps into the shoes” of the
party. See Putnam v. Commissioner, 352 U.S.
82, 85, 77 S. Ct. 175, 176, 1 L.Ed.2d 144
(1956); A. Windt, Insurance Claims and
Disputes § 10.05, at 409 (1982); Black’s Law
Dictionary 1279 (5th ed. 1979).
. . . .
. . . Furthermore, “[a]lthough, as between
debtor and creditor, the debt may be
extinguished, yet, as between the person who
has paid the debt and the other parties, the
debt is kept alive [by the doctrine of
subrogation], so far as may be necessary to
preserve the securities.” H. Sheldon, supra,
§ 11, at 10 (footnote omitted).
Id. at 331, 978 P.2d at 769 (quoting Peters v. Weatherwax, 69
Haw. 21, 27, 29, 731 P.2d 157, 161, 162 (1987)).
The Court’s determination, then, requires a successive
three-part inquiry: (1) whether SeaBright fully paid a loss that
resulted in Brewer being made “whole”; (2) whether SeaBright was
required to pay the loss; and (3) whether SeaBright’s rights are
greater than Matson’s rights.
See id. at 329 n.8, 978 P.2d at
767 n.8.
34
First, there is no dispute that SeaBright paid Brewer’s
attorneys’ fees and costs incurred in defending against
Mr. Soares’s claim.
Second, there is also no dispute that
SeaBright was required to pay those attorneys’ fees and costs
pursuant to the insurance policy it issued to Brewer.
The parties dispute the third prong.
SeaBright argues
that its “rights to recover those attorneys’ fees and costs are
greater than Matson’s right to refuse to pay, as Matson was found
liable for Mr. Soares’ injury and refused to defend or indemnify
Brewer and SeaBright.”
[Mem. in Supp. of Motion at 15.]
Conversely, Matson argues that Brewer’s failure to give timely
notice of Mr. Soares’s claim extinguished any right to recovery.
[Mem. in Opp. at 23-25.]
Paragraph 12.19 of the Agreement
provides that, within ten days after receiving notification of
Mr. Soares’s claim, Brewer was to “give written notice of such
legal action to the other Party . . . .
If the Indemnitee fails
to give such notice then, if and to the extent the Indemnitor is
prejudiced thereby, the obligations of the Indemnitor to
indemnify, defend and hold harmless the Indemnitee shall abate.”
[Agreement at ¶ 12.19.]
Matson argues that it was prejudiced by
the untimely notice, because it lost the ability to control the
legal action and would be required to “blindly” pay attorneys’
fees.
[Mem. in Opp. at 24.]
The Court sees no merit to Matson’s argument that its
35
right to refuse to indemnify Brewer is greater than SeaBright’s
right to recover its attorneys’ fees and costs.
Brewer’s failure
to give notice to Matson within the ten-day period established in
Paragraph 12.19 did not result in any prejudice to Matson.
Matson presents no evidence that it was prejudiced by not being
able “to assume control of the litigation” (or, indeed, that it
even would have accepted the tender) and, at the hearing on the
present Motion, Matson could not offer any specifics as to this
alleged prejudice.
In fact, Matson greatly benefitted because
SeaBright protected Brewer’s interests during that litigation and
paid all of Brewer’s legal fees and costs.
Moreover, Matson’s
argument that it should not be required to pay attorneys’ fees
relating to an injury for which it was not determined liable
similarly fails, because the ALJ did find Matson liable for
Mr. Soares’s claim.
As the Court stated in its October 31, 2011
Order, “[i]t defies logic and equity to provide Matson the
windfall of avoiding any responsibility for the costs of defense
(i.e., its share of attorneys’ fees), when it has been found
liable for part of the compensation award to Mr. Soares.”
[Order
Granting in Part & Denying in Part Defs.’ Motion for Jdgmt. on
the Pleadings or for Summary Jdgmt. at 34.]
Accordingly, based
on the equities of the circumstances before the Court, the Court
finds that SeaBright’s right to recovery is greater than Matson’s
right to refuse to indemnify SeaBright.
36
The Court therefore FINDS that SeaBright satisfies the
three-part test for equitable subrogation.
The Court CONCLUDES
that SeaBright stands in Brewer’s shoes with no greater or lesser
rights and, under Paragraph 5.3 of the Agreement, is entitled to
recover from Matson its attorneys’ fees and costs expended in
defending Brewer against Mr. Soares’s claim.
II.
Attorneys’ Fees and Costs in the Present Litigation
The Court next addresses SeaBright’s request for its
attorneys’ fees and costs incurred in connection with the
prosecution of the instant case.
SeaBright initially argues in its memoranda that the
terms of the Agreement provide the basis for the recovery of its
attorneys’ fees and costs.
Paragraph 12.14 of the Agreement
provides that, “[i]f any dispute between Seller and Purchaser,
relating to the Transaction, should result in litigation, the
prevailing party shall be reimbursed for all reasonable costs
incurred in connection therewith, including, without limitation,
reasonable attorneys’ fees and court costs.”
¶ 12.14.]
[Agreement at
“Transaction” is defined by the Agreement as
“collectively the transactions contemplated in this Agreement.”
[Agreement at ¶ 1.31.]
SeaBright contends that, because the
“Indemnity Clause only exists as an element of the Transaction”
and “the Indemnity Clause specifically operates in reference to
the Cut-Off Time when the transaction closed,” the suit to
37
enforce the Indemnity Clause must necessarily be “relat[ed] to
the Transaction.”
[Reply at 10.]
Conversely, Matson argues that the type of
“transaction” contemplated by the Agreement excludes the present
dispute over equitable subrogation.
Matson takes the position
that the term “transaction” “obviously relate[s] to the actual
sale of the business and the transfer of various leases, titles,
and deeds, not any dispute over workers’ compensation claims.”
[Mem. in Opp. at 26.]
The Court does not agree with SeaBright’s overly broad
interpretation of Paragraph 12.14.
In interpreting a contract,
it is well-settled that “courts should not
draw inferences from a contract regarding the
parties’ intent when the contract is definite
and unambiguous. In fact, contractual terms
should be interpreted according to their
plain, ordinary meaning and accepted use in
common speech. The court should look no
further than the four corners of the document
to determine whether an ambiguity exists.”
Williams v. Aona, 121 Hawai‘i 1, 15, 210 P.3d 501, 515 (2009)
(quoting United Pub. Workers, AFSCME, Local 646, AFL–CIO v.
Dawson Int’l, Inc., 113 Hawai‘i 127, 140, 149 P.3d 495, 508
(2006)).
SeaBright has not presented any evidence tending to
show an ambiguity or that the term “transaction” encompasses
anything more than the business transactions for which the
Agreement was created.
The Court is unwilling to stretch the
definition beyond its “plain, ordinary meaning and accepted use”
38
to include an insurer’s claim for equitable subrogation regarding
an employee’s workers-compensation claim.
Accordingly, SeaBright
cannot look to the Agreement as a basis for recovery of its
attorneys’ fees.
SeaBright, however, can seek an alternate basis for an
award of attorneys’ fees.
According to the Hawai‘i Supreme
Court, “[n]ormally, pursuant to the ‘American Rule,’ each party
is responsible for paying his or her own litigation expenses.
This general rule, however, is subject to a number of exceptions:
attorney’s fees are chargeable against the opposing party when so
authorized by statute, rule of court, agreement, stipulation, or
precedent.”
In re Water Use Permit Applications, 96 Hawai‘i 27,
29, 25 P.3d 802, 804 (2001) (citation and quotation marks
omitted).
Hawai‘i law provides a statutory basis for recovery of
attorneys’ fees in actions sounding in contract.
Hawai‘i Revised
Statutes § 607-14 provides, in pertinent part:
In all the courts, in all actions in the
nature of assumpsit and in all actions on a
promissory note or other contract in writing
that provides for an attorney’s fee, there
shall be taxed as attorneys’ fees, to be paid
by the losing party and to be included in the
sum for which execution may issue, a fee that
the court determines to be reasonable;
provided that the attorney representing the
prevailing party shall submit to the court an
affidavit stating the amount of time the
attorney spent on the action and the amount
39
of time the attorney is likely to spend to
obtain a final written judgment, or, if the
fee is not based on an hourly rate, the
amount of the agreed upon fee. The court
shall then tax attorneys’ fees, which the
court determines to be reasonable, to be paid
by the losing party; provided that this
amount shall not exceed twenty-five per cent
of the judgment.
“Assumpsit is a common law form of action which allows
for the recovery of damages for non-performance of a contract,
either express or implied, written or verbal, as well as quasi
contractual obligations.”
Leslie v. Estate of Tavares, 93
Hawai‘i 1, 5, 994 P.2d 1047, 1051 (2000) (citations omitted); see
also Blair v. Ing, 96 Hawai‘i 327, 332, 31 P.3d 184, 189 (2001).
“The determination of when an action is in the nature of
assumpsit should be based on whether the actual factual
allegations are such that historically the action would have been
brought in assumpsit.”
(citations omitted).
Leslie, 93 Hawai‘i at 5, 994 P.2d at 1052
In determining whether the character of the
action is in assumpsit, the court should examine “the facts and
issues raised in the complaint, the nature of the entire
grievance, and the relief sought.”
Id. at 6, 994 P.2d at 1052.
Although SeaBright had not previously briefed this
issue, at the hearing on the present motion, SeaBright agreed
with the Court’s suggestion that the present action sounds in
contract and thus permits recovery of attorneys’ fees under
Hawai‘i Revised Statutes § 607-14.
40
Matson took the position that
the award of attorneys’ fees under that section is discretionary.
The Court determines that the present action sounds in
contract.
At issue is the Agreement and the effect the Court
should give to the Indemnity Clause.
Both parties present
arguments regarding the correct interpretation of the Agreement
under Hawai‘i law and ask the Court to interpret the Indemnity
Clause.
The relief sought by the First Amended Complaint is the
recovery of attorneys’ fees as provided by the terms of the
Agreement.
The Court concludes that Hawai‘i Revised Statutes
§ 607-14 applies to this lawsuit for recovery of attorneys’ fees
and costs.
The Court therefore GRANTS SeaBright’s requests for
reasonable attorneys’ fees and costs incurred in the present
lawsuit.
The Court refers this matter to the magistrate judge to
prepare findings and recommendations regarding the amount of the
award.
CONCLUSION
On the basis of the foregoing, SeaBright’s Motion for
Summary Judgment or, in the Alternative, Partial Summary Judgment
of Defendants’ Liability, filed February 8, 2012, is HEREBY
GRANTED.
The Court DIRECTS the Clerk’s Office to enter judgment
in favor of SeaBright and against Matson.
//
//
//
41
The Court DIRECTS SeaBright to file documentation
supporting its request for attorneys’ fees and costs with the
Magistrate Judge by June 18, 2012.
Any opposition shall be filed
by July 2, 2012, and a reply shall be filed by July 9, 2012.
IT IS SO ORDERED.
DATED AT HONOLULU, HAWAII, May 31, 2012.
/S/ Leslie E. Kobayashi
Leslie E. Kobayashi
United States District Judge
SEABRIGHT INSURANCE COMPANY V. MATSON TERMINALS, INC., ET AL;
CIVIL NO 10-00221 LEK-KSC; ORDER GRANTING SEABRIGHT INSURANCE
COMPANY’S MOTION FOR SUMMARY JUDGMENT OR, IN THE ALTERNATIVE,
PARTIAL SUMMARY JUDGMENT OF DEFENDANTS’ LIABILITY
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