Schuler et al v. Battelle Energy Alliance, LLC
Filing
56
MEMORANDUM DECISION AND ORDER. Defendant's Motion for Summary Judgment (Dkt. 15 ) is DENIED. Plaintiffs' Motion for Leave to File Amended Complaint (Dkt. 22 ) is GRANTED. Plaintiffs shall file the proposed First Amended Complaint within ten (10) days of this Order. Signed by Judge Candy W. Dale. (alw)
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF IDAHO
AARON SCHULER and PAMELA
SCHULER, husband and wife,
Plaintiffs,
Case No. 4:18-CV-00234-CWD
MEMORANDUM DECISION AND
ORDER (DKT 15; DKT 22)
v.
BATTELLE ENERGY ALLIANCE,
LLC,
Defendant.
INTRODUCTION
Pending before the Court is Battelle Energy Alliance, LLC’s Motion for Summary
Judgment. (Dkt. 15.) Also pending before the Court is Aaron and Pamela Schuler’s
Motion for Leave to File Amended Complaint. (Dkt. 22.) The motions are fully briefed,
and oral argument was held on the motions on May 30, 2019. For the following reasons,
the Court will deny the Motion for Summary Judgment and will grant the Motion for
Leave to Amend.
MEMORANDUM DECISION AND ORDER – 1
FACTUAL BACKGROUND
On June 14, 2017, Aaron Schuler arrived at the Idaho National Laboratory (INL)
site in Idaho Falls, Idaho, to make a delivery via a long-haul semi-truck. (Dkt. 1 at 2.)
Schuler was making the delivery to INL’s Advanced Test Reactor Complex (ATR
Complex). Id. The ATR Complex is a nuclear reactor designed to test nuclear fuels for
the United States Navy. Id. Schuler sustained serious injuries while making the delivery.
1.
Entities involved in the facts of this case
The contractual relationship between the entities responsible for managing and
operating the ATR Complex is relevant to the legal issues before the Court. The United
States Department of Energy (DOE) owns the INL. (Dkt. 33 at 12.) The INL, located
near Scolville, Idaho, is comprised of several facilities, including the ATR Complex. Id.
There are two DOE administrative offices with responsibilities related to the ATR
Complex, the Office of the Deputy Administrator for Naval Reactors (Naval Reactors),
and the Office of the Assistant Secretary for Nuclear Energy (Nuclear Energy). Id.
Defendant Battelle Energy Alliance, LLC (BEA), is a Delaware limited liability
company with its principal place of business in Idaho Falls. Id. BEA is a private
contractor for the DOE. Id. BEA contracted with the DOE’s Nuclear Energy office to
carry out the Nuclear Energy office’s day-to-day operation and maintenance
responsibilities with respect to the ATR Complex. Id. at 13; Dkt. 34 at 4; 8.
MEMORANDUM DECISION AND ORDER – 2
Another entity, Bechtel Marine Propulsion Corporation (Bechtel), contracted with
the Naval Reactors office to carry out other responsibilities related to the ATR Complex.1
(Dkt. 33 at 13.) Under its contract with the Naval Reactors office, Bechtel designed
experiments and purchased certain supplies for the experiments, including “in-pile tubes”
(IPTs), which are used in a pressurized water experiment to test nuclear fuel and
materials under various conditions. Id. at 12-13; Dkt. 34 at 4-5. Schuler was delivering
one of these IPTs on the day of the incident. Pursuant to a purchase order with GE
Hitachi Nuclear Energy (GE Hitachi), Bechtel purchased ten (10) IPTs. (Dkt. 33 at 14.)
Under the purchase order, Hitachi, the seller, agreed to supply the IPTs to Bechtel, the
buyer, and deliver them to the ATR Complex in exchange for a payment of
approximately $4,500,000. Id. The IPT Schuler was delivering, number 28 (IPT 28), was
valued at $450,000. Id.
Hitachi contracted with a third party manufacturer, Vigor Works, LLC, to make
the large pipes, including IPT 28. Id. When the manufacture of IPT 28 was complete,
Hitachi contracted with Combined Transport Logistics Group, Inc. (CTL), to transport
the IPT from the manufacturing plant to the ATR Complex. Id. In turn, CTL contracted
with Cardmoore Trucking Limited Partnership (Cardmoore) to provide a driver for the
semi-trailer truck used to pick up and deliver IPT 28 to the ATR Complex. Id. Cardmoore
assigned its employee, Schuler, to be the driver of the semi-trailer truck. Id. Cardmoore
The parties dispute whether Bechtel’s contract with the DOE included management and
operation of an Idaho facility. (See Statement of Material Facts in Support of Plaintiffs’ Response to
Defendant’s Motion for Summary Judgment, Dkt. 43 at 7; see Statement of Uncontested Facts in Support
of Motion for Summary Judgment (Defendant), Dkt. 19 at 2-3.)
1
MEMORANDUM DECISION AND ORDER – 3
instructed Schuler to deliver IPT 28 to the ATR Complex. Hitachi paid CTL $4,300 to
deliver IPT 28 to the site. Id.
The contractual relationship between the entities is illustrated in the following
chart:
(Dkt. 33 at 15.)
2.
Facts related to the delivery of IPT 28
The ATR Complex is a high security site. (Dkt. 1 at 2.) The ATR itself is a nuclear
reactor. (Dkt. 34 at 2.) The only entrance to the site is through a vehicle inspection bay.
All vehicles are subject to an onsite inspection in the bay prior to entering the ATR
MEMORANDUM DECISION AND ORDER – 4
Complex. (Dkt. 1. At 2.) The security guards who perform onsite inspections of vehicles
entering the complex are employed by BEA. Id.; Dkt. 33 at 15. When Schuler arrived at
the inspection bay, the BEA security guards instructed him to pull his semi-truck
completely into the inspection bay. (Dkt. 1 at 2.) However, the truck Schuler was driving
had a 53-foot flatbed and was too long to fit entirely within the bay. Id. BEA guards
instructed Schuler to drive the truck forward into the bay as far as possible to fit the
majority of the truck into the bay for inspection. Id.
The entrance to the inspection bay is protected by an in-ground retractable vehicle
security barrier that can be raised by the security guards to prevent vehicles from entering
the bay. Id. Once Schuler moved the truck into the bay, the security guards ordered
Schuler to exit the truck and to open the engine hood, all doors, all tool bins, and all other
enclosures on the truck. Schuler complied and was then told to stand near the rear of his
trailer while the guards performed an inspection of the truck, including its enclosures. Id.
Once the inspection was complete, the guards instructed Schuler to close the previously
opened areas, including the engine hood. Id. at 4.
To close the engine hood, Schuler had to stand directly in the front and in the
center of the open hood. Id. Because the semi-truck was pulled as far as possible into the
inspection bay, closing the hood required Schuler to stand between the vehicle security
barrier and the front of the semi-truck. Id. The space between the security barrier and the
semi-truck was approximately 18 inches wide. (Dkt. 37-7 at 10.) While Schuler was
working on closing the engine hood, one of the BEA guards lowered the security barrier
behind Schuler. Id. at 11. As the security barrier lowered, it crushed Schuler’s leg. (Dkt. 1
MEMORANDUM DECISION AND ORDER – 5
at 4; Dkt. 37-7 at 11-12.) Schuler cried out, and once the BEA security guard realized
what had happened, he raised the barrier and called for medical care. Id.
3.
BEA’s investigation of the delivery incident
On July 17, 2017, BEA issued a Root Cause Analysis Report regarding the
delivery incident. (Dkt. 34 at 6; Dkt. 37-7 at 7.) In the report, BEA concluded that the
incident was caused by (1) the negligent actions of the BEA security guard; (2) BEA’s
negligent training and supervision of the security guard; and (3) BEA’s negligent failure
to maintain and repair the wedge barrier. (Dkt. 34 at 6-7; see Dec. Scott J. Smith, Exhibit
G, Root Cause Analysis Report, Dkt. 37-7 at 1-39.)
PROCEDURAL BACKGROUND
As a result of this incident, Schuler filed a complaint against BEA alleging three
claims: (1) BEA security guards’ negligence resulted in Schuler’s severe and permanent
physical injuries, mental anguish, loss of enjoyment of life, past and future pain and
suffering, past and future medical expenses, lost wages, and reduced wage-earning
capacity. (Dkt. 1 at 5); (2) BEA had a duty to entrust the retraction of the wedge barrier to
a properly trained, experienced employee capable of lowering the wedge in a manner that
would not injure other persons, and BEA breached the duty (Id. at 5-6); (3) BEA
breached its duty to properly supervise its employees through negligent supervision; and
(4) due to the personal injury of Aaron Schuler, his wife, Pamela, suffered a loss of
consortium. (Id. at 6.)
MEMORANDUM DECISION AND ORDER – 6
BEA filed an answer denying each of the Schulers’ claims. (Dkt. 5.) BEA’s
answer also set forth six affirmative defenses, including: contributory and comparative
negligence on the part of Aaron Schuler; res judicata and collateral estoppel; Idaho’s
statutory employer doctrine; Plaintiff’s failure to name necessary and indispensable
parties, including his employer; lack of subject matter and personal jurisdiction over the
claims; and waiver, estoppel, and laches. (Dkt. 5 at 5-7.) BEA then filed the present
motion for summary judgment. (Dkt. 15.) In its motion, BEA argues, because Aaron
Schuler received worker’s compensation benefits, and because BEA is a statutory
employer of Aaron Schuler, BEA bears no third-party liability as the worker’s
compensation benefits were Aaron Schuler’s sole and exclusive remedy for the injuries
he sustained in the incident. (Dkt. 16 at 1.)
After BEA filed its motion for summary judgment, the Schulers filed a motion for
leave to file an amended complaint. (Dkt. 22.) Therein, the Schulers seek permission to
add two new causes of action based in negligence and one new factual allegation. Id. at 3.
The motion also seeks permission to amend the complaint to remove Pamela Schuler as a
plaintiff and to remove the claim for loss of consortium, because Ms. Schuler passed
away after the filing of the complaint. Id. In response, BEA does not contest the motion
as to the removal of Pamela Schuler, but argues the remainder of the motion is futile as
the new causes of action would not save the complaint against BEA’s statutory employer
defense. In reply, Schuler argues that the statutory employer defense does not defeat the
claims in his complaint or in the proposed amended complaint.
MEMORANDUM DECISION AND ORDER – 7
STANDARD OF LAW
1.
Motion for Summary Judgment
Summary judgment is appropriate when the evidence, viewed in the light most
favorable to the non-moving party, demonstrates “there is no genuine issue of any
material fact and that the movant 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); Galen v. County of Los
Angeles, 477 F.3d 652, 658 (9th Cir. 2007). Evidence includes “the pleadings,
depositions, answers to interrogatories, and admissions on file, together with the
affidavits….” DeVries v. DeLaval, Inc., 2006 WL 1582179, at *5 (D. Idaho June 1,
2006), report and recommendation adopted, 2006 WL 2325176 (D. Idaho Aug. 9, 2006).
The moving party initially bears the burden to show no material fact is in dispute
and a favorable judgment is due as a matter of law. Celotex, 477 U.S. at 323. If the
moving party meets this initial burden, the non-moving party must identify facts showing
a genuine issue for trial to defeat the motion for summary judgment. Cline v. Indus.
Maint. Eng’g & Contracting Co., 200 F.3d 1223, 1229 (9th Cir. 2000). The Court must
enter summary judgment if the nonmoving party “fails to make a showing sufficient to
establish the existence of an element essential to that party’s case, and on which that
party will bear the burden of proof at trial.” Celotex Corp. v. Catrett, 477 U.S. 317, 322
(1986).
MEMORANDUM DECISION AND ORDER – 8
ANALYSIS
1.
Idaho Worker’s Compensation Act
This motion requires the Court to consider the Idaho Workers Compensation Act
(Act).2 In general, the Act provides employees a remedy for injuries sustained in the
course of employment. I.C. § 72-201; Robison v. Bateman-Hall, Inc., 76 P.3d 951, 953
(Idaho 2003). While providing relief to injured employees, the Act also limits employer
liability. I.C. § 72-209(1); I.C. § 72-211. The Act’s remedy for injured employees is
referred to as the “exclusive remedy rule.” Robison at 953. Under the rule, worker’s
compensation payments are provided “to the exclusion of every other remedy,
proceeding, or compensation, except as is otherwise provided in the worker’s
compensation scheme.” Kolar v. Cassia County Idaho, 127 P.3d 962, 967-68 (Idaho
2005).
However, Idaho Code Section 72-223 provides that an individual who receives
workers compensation benefits under the Act is not precluded from brining an action in
tort for damages against a third party that is not the individual’s employer. Id. Section 72223(1) reads:
The right to compensation under this law shall not be affected by the fact that
the injury, occupational disease or death is caused under circumstances
creating in some person other than the employer a legal liability to pay
damages therefor, such person so liable being referred to as the third party.
2
BEA argues that Idaho state law applies in this case. (See Dkt. 16 at 3-5.) Schuler does not
challenge BEA’s choice of law argument at this time. (Dkt. 33 at 3.) Therefore, for purposes of analyzing
the motion for summary judgment, the Court will apply Idaho state law as it is applicable to the claims
and defenses in this matter.
MEMORANDUM DECISION AND ORDER – 9
I.C. § 72-223(1) (emphasis added).
The Act defines an “employer” as:
Any person who has expressly or impliedly hired or contracted the services
of another. It includes contractors and subcontractors. It includes the owner
or lessee of premises, or other person who is virtually the proprietor or
operator of the business there carried on, but who, by reason of there being
an independent contractor or for any other reason, is not the direct employer
of the workers there employed.
I.C. § 72-102(12)(a); Robison, 76 P.3d at 955.
The Idaho Supreme Court has “developed significant case law to help give the
term [employer] meaning” in the context of negligence claims against third parties.
Robison at 954. The resultant expanded definition is termed “statutory employer” and is
“designed to prevent an employer from avoiding liability” under the worker’s
compensation statute “by subcontracting the work to others who may be irresponsible and
not insure their employees.” Id. (internal citations omitted) (citing Harpole v. State, 958
P.2d 594, 597 (Idaho 1998).
To this end, the Supreme Court of Idaho has determined that the parties who are
“employers” for purposes of worker’s compensation benefits under Idaho Code Section
72-102 are “the same parties deemed immune from third-party tort liability” under Idaho
Code Section 72-223. Robison at 955. In Robison, the court noted that, had the legislature
intended any broader immunity for third parties, it could have used language distinct
from that supplied in Section 72-102. Id. Therefore, under the Act, “an employee may
have more than one employer: the employer who directly hired the employee and a
MEMORANDUM DECISION AND ORDER – 10
person or entity who, by statute, is also held to be the employer for the purposes of
worker’s compensation.” Blake v. Starr, 203 P.3d 1246, 1248 (Idaho 2009).
This legal framework defines statutory employees in two specific categories: (1) a
category one statutory employer “means any person who has expressly or impliedly hired
or contracted the services of another. It includes contractors and subcontractors;” and (2)
a category two statutory employer, who is “the owner or lessee of premises, or other
person who is virtually the proprietor or operator of the business there carried on, but
who, by reason of there being an independent contractor or for any other reason, is not
the direct employer of the workmen there employed.” Id.; Kolar v. Cassia Cty. Idaho,
127 P.3d 962, 968 (Idaho 2005).
In this case, BEA argues it is both a category one and category two statutory
employer of Schuler, and is thus immune from third party liability. In response, Schuler
argues BEA is not a statutory employer under either category. Alternatively, Schuler
asserts that, even if BEA is a statutory employer, because one of the underlying contracts
was for goods and not services, the Act’s statutory employer defense does not apply.
In reply, BEA concedes that, if the contract was a contract for goods, the statutory
employer defense would not apply. However, BEA asserts that, although the contract
involved the purchase of a good –the IPT’s from GE Hitachi– the IPT purchase was part
and parcel of a larger services contract. Therefore, as a threshold inquiry, the Court will
determine if the contract at issue was a contract for the sale of goods.
MEMORANDUM DECISION AND ORDER – 11
2.
The contract between Bechtel and GE Hitachi was a contract for services.
The issue of whether a contract is for goods or services is a question of law. See
Fox v. Mountain W. Elec., Inc., 52 P.3d 848, 855 (Idaho 2002). Under Idaho law, when
contracts provide both goods and services, courts consider “whether their predominant
factor, their thrust, their purpose, reasonably stated, is the rendition of service, with goods
incidentally involved (e.g., contract with artist for painting) or is a transaction of sale,
with labor incidentally involved (e.g., installation of a water heater in a bathroom).” Id.
This “predominant factor” test requires courts to consider contracts in their entirety. Id.
When a party is more concerned with the goods and less concerned with servicebased aspects of the contract, such as who will install the goods, the predominant factor
of the contract is the goods. Pittsley v. Houser, 875 P.2d 232, 234 (Idaho Ct. App. 1994).
On the other hand, where the goods provided are “merely incidental” to services such as
design, testing, and installation, the predominant factor of the contract is the services. Fox
at 855.
Here, Schuler asserts that, because BEA is relying on a chain of contracts and
subcontracts, BEA has the burden to prove that every contract in the chain was a contract
for services. (Dkt. 33 at 6.) Schuler argues that BEA cannot prove that the contract
between Bechtel and GE Hitachi was a contract for services. Schuler asserts that the IPTs
were clearly goods, and any services provided under the contract for the IPTs, such as
delivery and inspection, were incidental to the goods provided to Bechtel. (Dkt. 50 at 5.)
In response, BEA asserts that the services related to the manufacture of the IPTs, such as
GE Hitachi’s inspections and certifications, were the predominant factors of the contract.
MEMORANDUM DECISION AND ORDER – 12
A close review of the entirety of the contract between Bechtel and GE Hitachi
shows that the thrust of the agreement was the provision of services. Notably, the
agreement contains two parts, the first is Purchase Order No. 3015656, the second is the
“Atomic Power Laboratory Requirements Document.” (Dkt. 41-2.)
A review of Purchase Order No. 3015656 provides the following information: (1)
GE Hitachi is identified as the supplier and Bechtel is identified as the buyer; (2)
shipping terms are identified, including that the method of shipping was “Seller’s
Choice;” (3) GE Hitachi was to supply a lot of ten IPTs, including IPT 28, to Bechtel for
the fixed price of $4,571,933; (4) each IPT had a different delivery date; and (5) GE
Hitachi was required to include a complete packing list with each IPT shipment. (Dkt. 412 at 2.)
The “Atomic Power Laboratory Requirements Document” was expressly included
as “part of purchase order 3015656.” 3 Id. at 3. The parties do not dispute that the
Requirements Document is part of the purchase order. The Requirements Document first
includes a list of documents that the parties agreed are also included in the purchase
order. Id. According to the contract, Bechtel made the majority of these documents
available to GE Hitachi via citation within the Requirements Document to Bechtel-run
website. Id. at 4. These documents included items such as specification drawings
prepared by Bechtel and/or the DOE, the DOE’s general provisions for “Fixed Price
3
Bechtel Marine Propulsion Corporation assumed responsibility for the management and
operation of the Bettis Atomic Power Laboratory for the DOE on February 1, 2009. (Dkt. 41-2 at 3.) All
references to Bettis in the requirements document mean Bechtel. Id. For purposes of this analysis, the
Court will use Bechtel.
MEMORANDUM DECISION AND ORDER – 13
Orders,” a “Seller Property Certification Data” form, and a form providing “Instructions
for Seller’s Preparation of Submittals,” including a “Request for Engineering Change”
form. Id. The documents included also a “Laboratory Procurement Quality Assurance
Requirements” form. Id.
The Requirements Document further included a statement of work, pricing terms,
general contracting terms, authorization and approvals terms, invoicing and payment
terms, delivery terms, transportation requirements, certifications requirements,
agreements related to government furnished property (GFP), inspection and quality
assurance requirements, correspondence requirements, identification of key personnel,
and cancellation terms. Id. at 5-15. It is these terms and requirements that BEA asserts
show that, although the purchase order was for ten IPTs, the thrust and predominant
factor of the agreement as a whole were the services GE Hitachi provided to Bechtel, and
up the contracting chain, to the DOE.
BEA asserts that, “GE Hitachi is not a retail parts outlet, it is a world-leading
provider of advanced reactor technology and nuclear services” and that Bechtel
contracted with GE Hitachi for those services. (Dkt. 50 at 5.) BEA advances that the title
of the contract –purchase order– does not trump the fact that the agreement “clearly
contemplates the acquisition of services through the use of ‘purchase orders’” like
Purchase Order No. 3015656. Id. at 6.
BEA cites a case from the Northern District of Indiana, Bamcor LLC v. Jupiter
Aluminum Corp., as support for its argument. 767 F.Supp.2d 959 (N.D. Ind. 2011). That
case centered on a contract dispute where a company agreed to refurnish and rebuild an
MEMORANDUM DECISION AND ORDER – 14
industrial machine’s gearbox. Id. There, the court found that, although the contract, also a
purchase order, referred to the parties as a buyer and a seller, the contract stated that its
purpose was for “rebuilding certain equipment.” Id. at 972. The price specifically
included labor, equipment, and materials that the company agreed to provide. Id. The
court noted that “activities such as mounting, setting, removing, reassembling, reworking,
cleaning, replacing, and fitting the equipment” indicated the company was providing a
service, and any parts the company had to purchase to complete the service-based tasks
were incidental to rebuilding the gearbox.
BEA asserts that the purchase order in this case is similarly a contract for services.
BEA points to the Statement of Work, which provides terms similar to those found in the
Bamcor purchase order: “Seller [GE Hitachi] shall furnish the necessary labor,
supervisions, services, tools, equipment, and materials (except as otherwise specified)
and do all things necessary to accomplish the entire workscope … which is called for by
the purchase order and order specifications.” (Dkt. 41-2 at 4.)
The entire workscope is set forth in the Requirements Document within a table. Id.
at 13-14. The table contains four columns: Purchase Order Period; Date by Which
Obligation is Due; Total Amount of Obligation; and General Work to be Performed. Id.
at 13. According to the table, a percentage of the total purchase order amount was to be
paid to GE Hitachi at the close of nine distinct purchase order periods. Id. at 13-14. In
turn, GE Hitachi was to perform the work on each of the IPTs in stages, culminating with
the final shipment of all IPTs by the ninth purchase order period. Id. The nature of the
work in each purchase order period included: receiving and inspecting the government
MEMORANDUM DECISION AND ORDER – 15
furnished metal and beginning fabrication; completion of “deep hole drilling” of the
metal; completion of IFP welding and assembly, completion of IPT testing, partial
shipment of items, and final shipment of items. Id. at 14.
The following language, which appears in the Requirements Document after the
purchase order periods table, provides support for BEA’s argument that the thrust of the
agreement between Bechtel and GE Hitachi was the provision of services. The agreement
provides: “Seller is not obligated to provide services for any purchase order period after
the first unless and until written notification is received from [Bechtel] of an increase in
availability of funds.” Dkt. 41-2 at 15 (emphasis added).
The Requirements Document provides also that the purchase order “is placed
pursuant to [Bechtel’s] Prime Contract with the Department of Energy.” Id. In line with
that contractual structure, the purchase order provides that Bechtel would review and
approve any “approval request” or request for an “engineering change” submitted by GE
Hitachi, but that, GE Hitachi was still obligated to maintain the schedule to meet the
completion date and delivery dates for the IPTs. Id. at 5.
As noted above, the Requirements Document contains invoice and payment terms
as well. Id. at 6. These terms include that GE Hitachi was to submit a separate invoice for
each purchase order showing the shipment destination. Id. The terms include also that
Bechtel would issue checks to “Sellers” on Wednesdays, but only for delivered and
completed items, and payments could be withheld should GE Hitachi fail to deliver any
data or test reports and certifications required by the purchase order. Id. Further, the
terms include that, if GE Hitachi delivered “less than the total purchase order quantity,”
MEMORANDUM DECISION AND ORDER – 16
payment could be made for acceptable product delivered based on unit pricing. Id. As a
part of the payment schedule, the purchase order includes a progress schedule that
indicates the percent total of the purchase order price as a weighted percentage of each
stage of the item manufacture. Id. at 7. The percent totals were divided as follows: 5
percent for the receipt and inspection of the GFE; 25 percent for the completion of deep
hole drilling of the GFE material; 60 percent for completion of the assembling and
welding, per each line item; 5 percent for completion of testing; and 5% for final
shipment of each item. Id.
Finally, the Requirements Document provides additional terms for delivery. Id. It
states that the seller must complete the scope of work in its entirety by July 5, 2018, and
make deliveries as specified of each of the ITPs to the ART Complex in Scoville, Idaho.
It required that the Bechtel purchase order number appear on the outside of all shipping
containers, and that GE Hitachi’s packing slip had to identify the item number for each
item delivered. Id. at 7-8.
At this juncture of the analysis, it is important to note that GE Hitachi was not the
only entity involved in the manufacture of the IPTs described in Purchase Order No.
3015656. As set forth in the facts above, GE Hitachi hired a subcontractor, Vigor Works,
LLC, to manufacture the IPTs. (Dkt. 33 at 15.) The Court has not been provided with the
agreement between GE Hitachi and Vigor Works. However, because Schuler has not
raised that agreement in the context of the determination of whether any of the contracts
at issue were for the provision of goods, the Court will assume for purposes of BEA’s
motion for summary judgment that Vigor Works was providing services to GE Hitachi.
MEMORANDUM DECISION AND ORDER – 17
Yet, the existence of the agreement between GE Hitachi and Vigor Works for the
manufacture of the IPTs does lend weight to BEA’s assertion that the thrust of the
agreement between Bechtel and GE Hitachi was for the provision of services. In its
contract with the DOE, Bechtel agreed to design experiments to be conducted at the ATR
Complex, and to procure all materials necessary to conduct the experiments. IPTs were
one of the necessary materials. However, as is evidenced by Purchase Order No. 3015656
and the Requirements Document, the IPTs supplied for the experiments differed—
depending on their intended use. As such, Bechtel ordered the IPTs from GE Hitachi
according to the needs dictated by the experiments it designed, as well as according to the
DOE’s regulations and requirements for manufacture of materials to be used at nuclear
facilities.
Bechtel relied on GE Hitachi’s expertise as a provider of “advanced reactor
technology and nuclear services” to ensure that the manufacture of the IPTS (by Vigor
Works) conformed with Bechtel’s specifications and DOE regulations. Thus, GE Hitachi
was responsible for inspecting material provided by the government for the IPTs, and
testing the IPTs and providing certifications to Bechtel and DOE. GE Hitachi was also
required to obtain approval for any changes or deviations from the specifications
provided by BEA and the DOE. The entire process of completing an IPT could take a
year or more. (See Purchase Order No. 3015656, Dkt. 41-2 at 2.)
Considering the contract as a whole, although the predominant factor of Purchase
Order No. 3015656 is the provision of ten IPTs, the predominant factor of the
Requirements Document, which the purchase order expressly incorporates, is the
MEMORANDUM DECISION AND ORDER – 18
provision of GE Hitachi’s services during the IPT manufacturing process. The
Requirements Document colors the nature of the relationship between Bechtel and GE
Hitachi. Although the IPTs themselves were important and the ultimate goal of the
contract, the duties GE Hitachi had under the agreement show that its involvement was
centered on the provision of advanced nuclear technology services. Therefore, the Court
finds that the contract between Bechtel and GE Hitachi was a contract for services. As
such, the Court will address the issue of whether BEA is a statutory employer of Aaron
Schuler.
3.
BEA is not a category one statutory employer of Schuler.
Here, BEA argues it is a category one statutory employer of Aaron Schuler. To
qualify as a category one statutory employer, BEA “must be liable to pay worker’s
compensation benefits if the direct employer” did not. Fuhriman v. State, Dep’t of
Transp., 153 P.3d 480, 485 (2007). A party is liable as a statutory employer “for payment
of worker’s compensation to an employee of its contractor whenever a contractor is liable
to its employee under the Worker’s Compensation Laws.” Id. As a statutory of the
contractor’s employees, the same party is also the “employer” of the contractor’s
subcontractor’s employees. Id. (citing Venters v. Sorrento Delaware, Inc., 108 P.3d 392,
396 (Idaho 2005).
When there is no direct or indirect contractual or employment relationship
between an entity and an injured employer, there is not a statutory employer relationship.
Struhs v. Prot. Techs., Inc., 1992 P.2d 164, 169 (1999). Put another way, where an
employer indirectly employs a party through a succession of service contracts, it is the
MEMORANDUM DECISION AND ORDER – 19
statutory employer. Id. at 720. However, the inverse is also true: where a party has “no
contractual employment relationship” with the injured party, it is not a statutory
employer. Id. Thus, to determine whether BEA was a statutory employer of Schuler, the
Court must determine whether BEA indirectly employed Schuler through the chain of
service contracts that led to Schuler delivering IPT 28 to the ATR Complex.
The chain of contracts is as follows: Schuler was employed by Cardmoore;
Cardmoore contracted with the transportation company CTL to provide Schuler as a
driver; CTL was hired by GE Hitachi to transport the pipe; GE Hitachi was hired by
Bechtel to supply the pipe (and GE Hitachi contracted with Vigor Works to manufacture
the pipe); Bechtel was hired by the DOE’s Naval Reactors office to design experiments
and procure any necessary equipment; and the DOE funded and managed its Naval
Reactors office. This is where the contract chain ended for the procurement of IPT 28
delivered by Schuler.
BEA asserts that, because there is an unbroken chain of service agreements
between the DOE and Schuler, the DOE4 qualifies as a statutory employer of Schuler
under Idaho law. Id. at 10. BEA then argues that, because DOE is a statutory employer of
Schuler, BEA “shares DOE’s status as a statutory employer for purposes of the personal
injury claims asserted by Plaintiff.” Id. To support this argument, BEA points to Idaho
Code Section 72-209(3).
4
Notably, Plaintiff is not suing DOE, but instead, BEA, which contracted with DOE to manage
the ATR Complex.
MEMORANDUM DECISION AND ORDER – 20
Idaho Code Section 72-209(3) extends the worker’s compensation law’s
exemption from liability from employers “to the employer’s surety, and to all officers,
agents, servants and employees of the employer or surety.” I.C. § 72-209(3). BEA asserts
that, because it is an agent of the DOE, and the DOE is a statutory employer of Schuler,
the worker’s compensation law exemption extends to BEA. BEA also cites two Idaho
cases to support its assertion, Blake v. Starr, 203 P.3d 1246 (Idaho 2009), and Kolar v.
Cassia County Idaho, 127 P.3d 962 (Idaho 2005).
In Blake v. Starr, a contractor hired a subcontractor to provide flagging services on
a construction site. 203 P.3d at 1247. An employee of the subcontractor was injured on
the jobsite when an employee of the contractor struck him with a frontend loader. Id. The
subcontractor provided worker’s compensation to its injured employer, and the Supreme
Court of Idaho found that the contractor was a statutory employer and thus not liable as a
third party. Id. at 1249. The court found also that the contractor’s immunity extended to
its employee who was operating the frontend loader pursuant to Idaho Code Section 72209(3). Id. at 1249-50.
The facts in this case are readily distinguishable from the facts in Blake. In Blake,
Section 72-209(3) applied to extend immunity directly from the contractor who hired the
subcontractor to its employee who was involved in working on the same project the
injured employee was hired to work on. Here, the contractual relationship between the
DOE and BEA did not involve the entities or the work performed in the contractual
relationship that resulted in the hire of Schuler to deliver IPT 28. BEA asks the Court to
extend the immunity of DOE as statutory employer to a separate and distinct contractual
MEMORANDUM DECISION AND ORDER – 21
relationship that the DOE had with BEA to manage the ATR Complex. The Court
declines to do so.
In Kolar, the injured worker was an employee of an engineering company that was
hired as an independent contractor by a county highway district to improve a road owned
by the United States Forest Service. Kolar v. Cassia Cty. Idaho, 127 P.3d 962, 965
(2005). The county had earlier agreed to provide the personnel, equipment, and
management necessary to maintain the road. Id. The employee of the engineering
company was injured when an employee of the county ran him over with a dump truck on
the road construction site. Id. The injured worker plaintiff argued that the county highway
district was not his statutory employer, because his own employer, the engineering firm,
was hired as an independent contractor. Id. at 968. Specifically, the injured worker
argued that, because Section 72-223 specifically names “contractors or subcontractors,”
the Act excludes “independent contractors” from statutory employer status. The worker
asserted that, because the county highway district hired his engineering firm as an
independent contractor, the highway district would not have been liable as a statutory
employer had the engineering company failed to pay worker’s compensation benefits. Id.
The Supreme Court of Idaho rejected Kolar’s argument, refusing to categorize the
county highway district as anything other than a statutory employer simply on the basis
of the type of contractor it hired. Id. The Court found the injured employer was the direct
employee of the engineering firm, which contracted directly with the county highway
district and, therefore, the county highway district was his statutory employer. Id. at 969.
The court explained:
MEMORANDUM DECISION AND ORDER – 22
At the time of his unfortunate injury, [the worker] was doing the work [the
engineering company] had contracted to do. Indeed, all of the work [the
engineering company] was obligated to do under its contract with the
[highway district] was work required under the main contract for the project.
Id.
In this case, all the work Schuler’s employer was obligated to do under its contract
with CTL was work required under the subcontract for the project between Bechtel and
GE Hitachi. This work was far removed from the work being performed by the BEA
security guard who lowered the gate at the ATR Complex and injured Schuler. Therefore,
there is no parallel between Kolar and this matter, and the Court finds BEA’s argument
unpersuasive.
For the foregoing reasons, the Court finds BEA was not a category one statutory
employer of Schuler.
4.
BEA is not a category two statutory employer of Schuler.
BEA argues it was also a category two statutory employer of Schuler. Pursuant to
Idaho Code Section 72-233, a party is a category two statutory employer if the party was
the owner or lessee of the premises where the incident occurred, or was “virtually the
proprietor or operator” of the business carried on there.
Category two statutory employers do not include parties who are “mere owners [or
lessees] of the premises.” Robison v. Bateman-Hall, Inc., 76 P.3d 951, 956 (2003).
Owners are not statutory employers unless:
[T]he owner is also the virtual proprietor or operator of the business there
carried on. To determine who is a virtual proprietor or operator, the Court
must consider whether the work being done pertains to the business, trade,
or occupation of the owner or proprietor and whether such business, trade, or
MEMORANDUM DECISION AND ORDER – 23
occupation is being carried on by it for pecuniary gain. Generally, to find a
business or person to be a statutory employer, the work being carried out by
the independent contractor on the owner or proprietor’s premises must have
been the type that could have been carried out by employees of the owner or
proprietor in the course of its usual trade or business. In short, “if a person is
normally equipped with manpower and tools to do a job and nevertheless
contracts it to another employer, he is the statutory employer of the second
employer’s employees.
Id. (quotations omitted.)
BEA argues that, as the contracted operator of the INL ATR Complex, BEA is
clearly a category two statutory employer of Schuler. However, as set forth above, the
statute indicates that, to be considered a statutory employer, the “work being carried out
by the independent contractor on the owner or proprietor’s premises must have been the
type that could have been carried out by employees of the owner or proprietor in the
course of its usual trade or business. I.C. § 72-233. To make a determination to this end,
the Court considers whether BEA is “normally equipped with manpower and tools” to
procure and deliver the pipes, “and nevertheless contract[ed]” it to Cardmoore. BEA
argues the job performed –the delivery– is part of the larger services contract, and that the
DOE was equipped with the manpower and tools to make the delivery itself. BEA asserts
that this fact is not disputed.
The case with facts that provide the nearest parallel is Venters v. Sorrento
Delaware, Inc., 108 P.3d 392 (Idaho 2005). There, a cheese factory contracted with local
farmers to dispose of factory wastewater on their properties. Id. at 394. The cheese
factory contracted with a trucking company to transport the wastewater from the factory
site to the farmers. Id. In addition to the contract with the trucking company, the
MEMORANDUM DECISION AND ORDER – 24
cheesemaker contracted with the farmers to allow for the disposal of the wastewater on
their properties. Id. at 394-95. A truck driver, employed by the trucking company, was
injured while delivering wastewater to one of the farmers. Id. at 395. The injury occurred
on the farmer’s property. Id. At the time of his injury, the worker was covered by
worker’s compensation insurance from the trucking company, his direct employer, and he
received benefits thereunder. Id.
The estate of the truck driver sued the cheese factory and the farmer. Id. The
farmer filed a motion for summary judgment, asserting under category two, he was a
statutory employer of the truck driver. Id. The cheese factory also filed a motion for
summary judgment, asserting it was the truck driver’s statutory employer. Id. The court
held it was clear that, because the farmer was not engaged in the business of hauling
water for pecuniary gain, the farmer was not a category two statutory employer. Id. at
397.
Here, although the DOE, a mammoth government agency, may very well have had
the manpower and type of truck deliver IPT 28 to the ATR Complex, the DOE is not in
the delivery transportation business. Furthermore, BEA was even farther removed from
that type of activity, as it contracted with the DOE to manage and operate the ATR
Complex, and was in not involved with the design of nuclear experiments or the
procurement of materials to complete them. BEA was, quite simply, not in the trucking or
transportation business. This reasoning coincides with the Court’s analysis above
regarding BEA’s contractual separation from the parties contracting under the DOE’s
Naval Reactors office. To extend the DOE’s potential statutory employer immunity
MEMORANDUM DECISION AND ORDER – 25
through all branches of its operations at the ATR Complex would have ramifications not
intended by the Idaho Worker’s Compensation Act. For these and the foregoing reasons,
the Court finds BEA was not a category two statutory employer of Schuler.
5.
The corrections in Schuler’s proposed amended complaint are not futile.
Lastly, the Court will address Schuler’s motion for leave to amend his complaint.
Schuler seeks leave to amend his complaint in the following five ways: (1) to remove
Pamela Schuler as a plaintiff and her loss of consortium claim as a result of her recent
death; (2) to remove the allegation that Aaron Schuler was employed by Combined
Transport Logistics Group, Inc., because it was discovered that he was an employee of
Cardmoore Trucking Limited Partnership; (3) to add an allegation regarding the BEA
security guard negligently instructing Schuler about where to park his truck; (4) to add a
cause of action for negligent failure to train employees; and (5) to add a cause of action
for negligent maintenance and repair or the security barrier. (Dkt. 22-1 at 3.)
Federal Rule of Civil Procedure 15(a) governs pleading amendments prior to trial.
Rule 15 provides that the “court should freely give leave” to amend “when justice so
requires.” Fed. R. Civ. P. 15 (a). Courts in the Ninth Circuit apply this policy “with
extreme liberality.” Owens v. Kaiser Found. Health Plan, Inc., 244 F.3d 708, 712 (9th
Cir. 2001). Courts consider the following factors when deciding whether to permit leave
to amend:
In the absence of any apparent or declared reason—such as undue delay, bad
faith or dilatory motive on the part of the movant, repeated failure to cure
deficiencies by amendments previously allowed, undue prejudice to the
opposing party by virtue of allowance of the amendment, futility of
MEMORANDUM DECISION AND ORDER – 26
amendment, etc.—the leave sought should, as the rules require, be “freely
given.”
Foman v. Davis, 371 U.S. 178, 183 (1962).
Although all the Forman factors may be considered by the court, weighing
potential prejudice to the opposing party caused by any amendment carries the greatest
weight. Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003)
“Absent prejudice, or a strong showing of any of the remaining Foman factors, there
exists a presumption under Rule 15(a) in favor of granting leave to amend.” Id. (emphasis
in original).
In response to Schuler’s motion to amend his complaint, BEA does not argue the
proposed amendments would cause it prejudice. Instead, BEA asserts that the
amendments would be futile because, as explained above, BEA asserts Schuler’s claims
are defeated by the statutory employer doctrine. Yet, as the Court has explained,
Schuler’s claims are not so defeated. Further, the Court finds Schuler’s one new
allegation and two new causes of action are sufficiently related to the existing causes of
action as to not cause undue prejudice to BEA. For these reasons, the Court will grant
Schuler’s motion for leave to amend the complaint.
CONCLUSION
The Court will deny BEA’s motion for summary judgment because BEA was not
a category one or category two statutory employer of Schuler. The Court will also grant
Schuler’s motion for leave to file an amended complaint because the proposed
amendments are not futile and will not cause undue prejudice to BEA.
MEMORANDUM DECISION AND ORDER – 27
ORDER
NOW THEREFORE IT IS HEREBY ORDERED:
1)
Defendant’s Motion for Summary Judgment (Dkt. 15) is DENIED.
2)
Plaintiffs’ Motion for Leave to File Amended Complaint (Dkt. 22) is
GRANTED. Plaintiffs shall file the proposed First Amended Complaint
within ten (10) days of this Order.
June 12, 2019
MEMORANDUM DECISION AND ORDER – 28
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?