Whiting IN City of v. Whitney Bailey Cox Magnani LLC

Filing 80

OPINION AND ORDER The court GRANTS in part 50 WBCMs motion for summary judgment as to Count II (negligence), as outlined in this order, and as to Count V (indemnity) and otherwise DENIES in part the 50 motion for summary judgment. The court DENI ES 72 WBCMs Motion to Strike as moot; and ORDERS the parties to file a joint status report regarding their willingness toengage in a settlement conference before a Magistrate Judge by April 9, 2018. A trial date will be set under a separate order. Signed by Senior Judge James T Moody on 3/20/18. (kjp)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA
HAMMOND DIVISION
CITY OF WHITING, INDIANA.,
Plaintiff,
v.
WHITNEY, BAILEY, COX, &
MAGNANI, LLC,
Defendant.

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No. 2:14 CV 440

OPINION and ORDER
This matter is before the court on defendant’s motion for summary judgment
(DE # 50) and defendant’s motion to strike (DE # 72). For the reasons stated below, the
motion for summary judgment will be granted in part and denied in part. The motion
to strike will be denied.
I.

BACKGROUND1
Plaintiff, City of Whiting, Indiana (the “City”), is located along Lake Michigan.

(DE # 29 ¶ 7.) The City undertook a project to redevelop 26 acres of waterfront property
along the lake. (DE # 69-2 ¶ 3.) This was called the Whiting Lakefront Park Project (the
“Project”). (DE # 29 ¶ 5.) In 2009, the City hired an engineering firm, American
Structurepoint, Inc. (“Structurepoint”) to be the consultant for the Project. (Id. ¶ 8.) This
hiring was established by the terms of the Prime Agreement. (DE # 29-1.)

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In the summary that follows, the court refers only to undisputed facts, or, if
there is a dispute, notes that it exists. This summary provides an overview. Additional
relevant undisputed facts will be referred to in the analysis that follows.

In 2010, Structurepoint subcontracted with defendant, Whitney, Bailey, Cox &
Magnani, LLC (“WBCM”), for marine engineering services on the Project. (DE # 29-2,
the “Subcontract.”) WBCM’s services included designing a rock revetment that would
be built along the lake for the purpose of shoreline protection. (See DE ## 29 ¶ 23; 29-1
at 16.) According to the City, the revetment failed three times: (1) October 31, 2012,
(2) July 28, 2014, and (3) October 31, 2014. (DE # 51-2 at 3.) The City contends these
failures resulted in damage to its property located on the site of the Project and costs to
repair and reinforce the revetment itself. (Id. at 3–5.) Specifically, the City asserts it was
forced to incur expenses related to a walking pathway, landscaping and greenery, and a
gazebo. (Id.) There was also damage to existing trees. (DE # 69-5 at 3.) Moreover, the
City says it was forced to tear down the existing “Gun Club” structure, which it had
intended to convert into a restaurant. (DE ## 51-2 at 5; 69-3 at 3–5.)
In addition to the issues with the revetment, the City also contends that it
authorized construction of a breakwater arm (the “breakwater”) based upon a
recommendation from WBCM that such a structure would decrease sedimentation and
lower the cost of maintenance dredging. (DE # 29 ¶¶ 36–38.) However, the completed
breakwater has not resulted in any decrease in sedimentation or any decrease in the
cost of maintenance dredging, according to the City. (Id. ¶ 86.) It also claims WBCM
failed to adequately design the breakwater, resulting in additional damages. (Id. ¶ 89.)
On October 30, 2014, the City and Structurepoint entered into an Assignment
Agreement, whereby Structurepoint assigned the Subcontract to the City along with

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“any and all rights, interests, property, claims, demands, causes of action and choses in
action, arising out of contract or tort, which [Structurepoint] may have against WBCM
relating to the [Subcontract] and/or the Revetment Failures.” (DE # 29-3 ¶ 2.) The
Assignment Agreement also grants the City “the sole and exclusive right to pursue both
its own claims and the claims of [Structurepoint] against WBCM relating to the
Revetment Failures and/or WBCM’s breach of the [Subcontract], or negligent
performance of the [Subcontract] or any other failure to perform its obligations on the
[Project]. (Id.)
On October 30, 2014, contemporaneous with the execution of the Assignment,
the City and Structurepoint also entered into an agreement titled “Common Interest
Agreement and Tolling Agreement” (the “Tolling Agreement”). (DE # 69-2 at 5–13.) The
Tolling Agreement stated that “nothing contained in the Assignment Agreement . . .
releases [Structurepoint] of or from any duty or liability . . . to [the City] under the
[Prime] Agreement” and that Structurepoint’s “obligations under the [Prime]
Agreement shall remain in full force and effect[.]” (DE # 69-2 ¶ L.) Structurepoint and
the City then agreed to toll the statute of limitations on any potential claims one might
have against the other, for a certain period of time, in order to allow the parties to
achieve a “common interest” and “joint defense.” (Id. ¶ 13.)
The City has since terminated the Tolling Agreement and has filed a separate suit
against Structurepoint. (DE # 69-2 ¶ 10.) That case remained pending as of July 11, 2017.
(See id. at ¶ 10, p. 4.)

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Also on October 30, 2014, the City filed a complaint against WBCM in Lake
County Superior Court in Indiana. (DE # 5.) WBCM then removed the case to this court.
(DE # 1.) The City later filed an amended complaint (DE # 10) and a second amended
complaint (DE # 29). The second amended complaint, filed April 20, 2016, contains the
following six claims: (1) breach of contract (via assignment), (2) negligence, (3) breach of
contract (third-party beneficiary), (4) breach of warranty (via assignment), (5) indemnity
(via assignment), and (6) breach of contract (via assignment) (regarding the
breakwater). (DE # 29 at 6–10.)
On May 12, 2017, WBCM filed its motion seeking summary judgment on all
claims against it. (DE # 50.) The City responded to the motion on July 12, 2017. (DE
# 69.) Along with its response brief, the City attached a copy of the Tolling Agreement.
(DE # 69-2 at 5–13.) The City relies on the Tolling Agreement in support of its
indemnity claim. (DE # 69 at 24–25.)
On April 26, 2017, WBCM filed its reply brief to the motion for summary
judgment (DE # 71) and also filed a motion to strike the Tolling Agreement from the
City’s response (DE # 72). The City responded to the motion to strike (DE # 76), and
WBCM filed a reply in support of the motion (DE # 78). Thus, both motions are fully
briefed and ripe for review.
II.

LEGAL STANDARD
Federal Rule of Civil Procedure 56 requires the entry of summary judgment, after

adequate time for discovery, against a party “who fails to make a showing sufficient to
establish the existence of an element essential to that party’s case, and on which that
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party will bear the burden of proof at trial.” Celotex Corp. v. Catrett, 477 U.S. 317, 322
(1986). “[S]ummary judgment is appropriate—in fact, is mandated—where there are no
disputed issues of material fact and the movant must prevail as a matter of law. In other
words, the record must reveal that no reasonable jury could find for the non-moving
party.” Dempsey v. Atchison, Topeka, & Santa Fe Ry. Co., 16 F.3d 832, 836 (7th Cir. 1994)
(internal citations and quotation marks omitted).
The moving party bears the initial burden of demonstrating that these
requirements have been met. Carmichael v. Village of Palatine, Ill., 605 F.3d 451, 460 (7th
Cir. 2010). “[T]he burden on the moving party may be discharged by ‘showing’—that is,
pointing out to the district court—that there is an absence of evidence to support the
nonmoving party’s case.” Celotex, 477 U.S. at 325. Once the moving party has met its
burden, the non-moving party must identify specific facts establishing that there is a
genuine issue of fact for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986);
Palmer v. Marion Cty., 327 F.3d 588, 595 (7th Cir. 2003) (citing Celotex, 477 U.S. at 324). In
doing so, the non-moving party cannot rest on the pleadings alone, but must present
fresh proof in support of its position. Anderson, 477 U.S. at 248; Donovan v. City of
Milwaukee, 17 F.3d 944, 947 (7th Cir. 1994). In viewing the facts presented on a motion
for summary judgment, the court must construe all facts in a light most favorable to the
non-moving party and draw all reasonable inferences in favor of that party. Chmiel v. JC
Penney Life Ins. Co., 158 F.3d 966 (7th Cir. 1998).

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III.

DISCUSSION
A.

Count II: Negligence Claim

In its motion, WBCM argues the City’s negligence claim should be dismissed
under the economic loss doctrine. (DE # 51 at 5.) Specifically, Indiana’s “economic loss
rule” precludes tort liability for purely economic loss.2 Indianapolis-Marion Cty. Pub.
Library v. Charlier Clark & Linard, P.C., 929 N.E.2d 722, 727 (Ind. 2010) (hereinafter
“IMPCL”). “Rather these losses are viewed as disappointed contractual or commercial
expectations.” Gunkel v. Renovations, Inc., 822 N.E.2d 150, 154 (Ind. 2005). This means
that when a plaintiff buys an inferior product, and then that product does not perform
its generally intended function, he cannot sue in tort for the product’s diminution in
value, incidental and consequential losses as lost profits, rental expense, or lost time. Id.
“Economic loss” also includes “[d]amage to the product itself, including costs of its
repair or reconstruction.” Id. On the other hand, the economic loss rule does not shield a
defendant from tort liability when “the defect causes personal injury or damages to
property other than the product . . . itself.” IMPCL, 929 N.E.2d at 726.
Tort claims related to construction are subject to the economic loss doctrine.
Gunkel, 822 N.E.2d at 155. However, in that context it can be more challenging to define

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Neither party includes a choice of law analysis in its brief. However, each party
predominantly cites to cases interpreting Indiana law, and Indiana—as the location of
the Project—has the most significant contacts to the subject matter of the litigation. See
Am. Family Mut. Ins. Co. v. Williams, 839 F. Supp. 579, 582 (S.D. Ind. 1993) (“When a
federal court hears a case in diversity . . . it applies the choice-of-law rules of the forum
state . . . [and] in contract actions, Indiana’s choice of law rules require that the law of
the state with the most significant contacts to the subject matter of the litigation be
applied.”). Therefore, the court will apply Indiana law.
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the “defective product” vis-à-vis “other property” since a building or a larger
construction project is not a “good” or a “product” in the traditional sense of the word.
See id. In the case at hand, the City agrees that the economic loss doctrine applies to its
negligence claim and concedes that it can only recover on that claim for damages to
property other than defective product itself. (DE # 69 at 16.) But, the parties disagree as
to what constitutes the “product” and, conversely, what constitutes “other property.”
WBCM defines the product broadly, as the entire Project. (DE # 51 at 7.)
Accordingly, it argues that damages to any aspect of the lakefront park are barred
under the economic loss doctrine. On the other hand, the City notes that the Prime
Agreement separates the larger Project into several uniquely numbered projects. (DE
# 29-1 at 1–2, 7.) The revetment, as a form of shoreline protection, was a component of
Project No. 1. (See id.) Since the revetment was the defective item in this case, the City
argues that Project No. 1 is the relevant “product” and that anything listed under a
differently numbered project should be considered other property. (DE # 69 at 17.)
In two relevant cases, the Supreme Court of Indiana has helped to clarify what
constitutes a product in the construction context. In IMPCL, the Public Library in the
City of Indianapolis brought suit against engineering subcontractors alleging that they
provided defective design and inspection services during construction of an
underground parking garage built as part of a renovation project of the entire library
facility. 929 N.E.2d at 731. The Indiana Supreme Court explained that “the ‘product’ is
the product purchased by the plaintiff, not the product furnished by the defendant.” Id.
There, the Library “purchased a complete renovation and expansion of all the

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components of its facility as part of a single, highly-integrated transaction.” Id. “The
Library did not purchase a blueprint from the Defendants, concrete from the materials
supplier, and inspection services . . . in isolation.” Id. Since the entire library facility was
the product, any damages resulting from the subcontractors’ services was to the
product itself, and not to other property. Id. at 732.
WBCM tries to distinguish IMPCL by saying that it only involved the
construction of a single structure/building, unlike the case at hand. (DE # 69 at 17.)
However, WBCM provides no legal support for this distinction between a single
structure and a larger facility. What matters is what the City purchased—not its
size—and, here, the City purchased an entire lakefront park—even if that park was
divided into sub-projects by the Prime Agreement. Just as the defective garage in
IMPCL was purchased as part of the greater library facility, the defective revetment in
this case was purchased as an integral part of the greater lakefront project. Accordingly,
the court concludes that the “product” here is the entire Project.
The other relevant decision from the Supreme Court of Indiana is Gunkel. In
Gunkel, the court held consistently with IMPCL that the relevant “product” is the
product that is purchased by the plaintiff. 822 N.E.2d at 155. But the court also made the
distinction that “property acquired separately from the defective good or service is
‘other property,’ whether or not it is, or is intended to be, incorporated into the same
physical object.” Id. In that case, the Gunkels contracted for the construction of a home
with one contractor, and then six months later contracted with another company for the
installation of a stone façade, which ultimately failed and caused damage to the home.

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Id. at 151. The court held that the economic loss rule precluded tort recovery for damage
to the home, as it was other property as compared to the independently acquired
defective product. Id. at 156.
In the case at hand, the defective good or service—the revetment—was not
purchased separately from the rest of the Project. In fact, the City admits the revetment
was a component of the Prime Agreement. (See DE # 69 at 6.) Any items, like the
revetment, that were purchased as part of the Project are not “other property” and
recovery for damages to those items is barred by the economic loss doctrine.
However, any items that the City acquired separately from the Project would be
considered “other property.” Based on the evidence before the court, of the items the
City lists as being damaged by the revetment failures, only (1) the existing trees and
(2) the existing Gun Club structure were not purchased as part of the Project (the Gun
Club renovation is a part of the Project, but not the pre-existing building itself). (See DE
## 29-1 at 21; 69-3 at 3; 69-5 at 3.) Therefore, the City could potentially recover damages
to those items through its negligence claim. To the extent the City alleges damages to
those or any other pre-existing items3, the negligence claim would be exempt from the
economic loss doctrine. As to all other damages, the City’s negligence claim is barred by
the economic loss doctrine and summary judgment is appropriate.

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It is not clear from the record if the alleged damages to items such as walking
pathways, landscaping and greenery, and the gazebo were damages to the pre-existing
versions of those structures or if they were damages to the renovated structures that
were purchased as part of the Project. (See DE # 51-2 at 4–5.)
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B.

Counts I, IV, and VI: Claims Based on Assignment

In the Assignment Agreement dated October 30, 2014, Structurepoint assigned
the Subcontract to the City along with “any and all rights, interests, property, claims,
demands, causes of action and choses in action, arising out of contract or tort, which
[Structurepoint] may have against WBCM relating to the [Subcontract] and/or the
Revetment Failures.” (DE # 29-3 ¶ 2.) “In construing assignment agreements, the
general rules of contract interpretation apply.” Boswell v. Lyon, 401 N.E.2d 735, 741 (Inc
Ct. App. 1980). “This means that if the language of the agreement is plain and clear, its
interpretation is a matter of law.” Id. “The court will look to the contract language as
expressing the intent of the parties.” Id.
The City brings Counts I, IV, and VI, for breach of contract and breach of
warranty, on the basis of the Assignment Agreement. WBCM argues that it is entitled to
summary judgment on these counts because Structurepoint had no valid claims against
WBCM, prior to the assignment, that it could have legally assigned to the City. (DE # 51
at 10.) An assignee acquires only those rights possessed by the assignor. Simon Prop.
Grp. L.P. v. Brandt Constr. Inc., 830 N.E.2d 981, 992 (Ind. Ct. App. 2005). In other words,
the City cannot assert claims against WBCM that it purportedly received from
Structurepoint, if Structurepoint never held such claims to begin with.
In order for Structurepoint to have had a claim against WBCM, prior to the
assignment, it must have incurred some damages; yet, WBCM says the City has failed
to establish any such damages exist. (See id. at 13.) In its response, the City still makes
no effort to provide evidence of any damages incurred by Structurepoint. (See DE # 69

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at 19.) Nevertheless, the City argues Structurepoint’s damages are actually irrelevant for
the purposes of Counts I, IV, and VI. (Id.) That is because, the City says it is not relying
on the assignment of claims, but rather, it is relying on the assignment of rights and
interests. (Id.) According to the City, it doesn’t matter that Structurepoint potentially had
no claims against WBCM, because it has its own claims against WBCM based on the
rights assigned to it by Structurepoint.
Specifically, under the Subcontract, Structurepoint had the right to engineering
services performed by WBCM “in a manner consistent with that degree of care and skill
ordinarily exercised by members of the same profession currently practicing under
similar circumstances at the same time and in the same or similar locality.” (DE # 29-2 at
1.) According to the City, that right to workmanlike performance became the City’s
right and can form the basis of its own breach of contract and breach of warranty claims
against WBCM, irrespective of Structurepoint’s damages. (DE # 69 at 20.)
As stated by the Indiana Court of Appeals, “virtually all contract rights” are
assignable. Essex v. Ryan, 446 N.E.2d 368, 374 (Ind. Ct. App. 1983). “[The] right is to be
distinguished from the remedy, a cause of action, for the violation of the right.” Id. at
374. In Essex, the defendant also argued that the assignor “had no cause of action
[against the defendant] to assign, either in tort or in contract.” Id. Yet, the court found
that an assignment of “any and all rights” could transfer a right to workmanlike
performance to the assignee. Id. As such, the court said the assignee was “entitled to go
to trial to prove their cause of action . . . for breach of contract” against the defendant
based on the assigned right. Id. at 375.

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WBCM does not dispute the court’s conclusion in Essex, but attempts to
distinguish the case by pointing out that Essex did not involve a chain of contracts
commonly found on a construction project, unlike the case at hand. (DE # 69 at 11.)
WBCM also notes the City agreed to “forego” legal action against Structurepoint in
exchange for the assigned rights. (DE # 69 at 11.) There was no similar agreement to
forego suit in Essex against the assignee. However, the court does not see how these
facts would have any effect on the Essex court’s conclusion that an assignee may bring
suit based on his assigned rights.
WBCM cites no case law in its attempt to distinguish Essex and the court sees no
language in the Essex decision itself which would support such a distinction. Without a
reason to draw a distinction, the court will follow the holding of Essex and will allow
the City to bring suit based on any rights assigned to it in the assignment agreement.4
In a footnote in its reply, WBCM also argues that Structurepoint's assignment of
rights should be invalidated because WBCM did not provide its consent. The consent
clause in the Prime Agreement states “[n]either the client [(the City)] nor the consultant
[(Structurepoint)] shall assign his interest in the agreement without the written consent
of the other.” (DE # 29-2 at 13.) This clause does not, on its terms, apply to WBCM,
which was not a party to the Prime Agreement. Rather, WBCM’s connection to the

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Although the City may bring suit based on the rights assigned to it, generally,
the court reaches no conclusions as to which specific rights may support claims against
WBCM. WBCM did not challenge any of the specific rights, in its briefs, and so the court
need not address it at this time. The court also reaches no conclusions as to whether the
assignment of rights allows the City to sue WBCM for actions that occurred before the
date of the assignment. The parties did not brief that issue.
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Prime Agreement comes from a clause in the Subcontract which states that WBCM
“shall be obligated to the applicable provisions . . . of the [Prime Agreement].” (DE #
29-2 at 3.)
Nevertheless, WBCM does not point to any language in the agreements which
would indicate that the consent clause of the Prime Agreement was intended to be one
of these “applicable provisions” which would apply to WBCM. Moreover, the
Subcontract purports to give additional obligations to WBCM, rather than to provide
additional rights to WBCM. Therefore, WBCM cannot use the consent clause of the
Prime Agreement to invalidate the assignment.
For the foregoing reasons, summary judgment is denied as to these claims.
C.

Count V: Indemnity Claim

In the Subcontract, WBCM and Structurepoint mutually agreed “to indemnify
and hold each other harmless from any and all damages, liabilities or costs . . . arising
from their own negligent acts, errors or omissions, or willful misconduct in the
performance of their services under [the Subcontract].” (DE # 29-2 at 3.) In other words,
Structurepoint was given the right to pursue a claim against WBCM for indemnification
if it was ever held liable or paid damages due to WBCM’s acts or omissions. After the
Assignment Agreement, the City now has the sole right to pursue Structurepoint’s
claims against WBCM. (DE # 29-3 at 3.) Thus, in its second amended complaint, the City
asserts an indemnity claim against WBCM. (DE # 29 at 9.) It alleges that “[p]ursuant to
the terms of the Subcontract and the Assignment Agreement, WBCM is obligated to

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indemnify and hold harmless the City for any and all damages or liabilities arising out
of WBCM’s performance under the Subcontract.” (Id. ¶ 74.)
WBCM moves for summary judgment on this claim on the grounds that
Structurepoint has no liability to the City, meaning there is nothing for WBCM to
indemnify. (DE # 51 at 13.) Under Indiana law, the duty to indemnify is only triggered
when either (1) the indemnitee pays a claim, or (2) the indemnitee’s liability in an
underlying claim becomes fixed and established. Henthorne v. Legacy Healthcare, Inc., 764
N.E.2d 751, 758 (Ind. Ct. App. 2002) (quoting 42 C.J.S. Indemnity § 22 (1991)). As to the
first Henthorne factor, WBCM asserts Structurepoint has not paid any damages for
claims. (DE # 51 at 14.) The City does not dispute this. (See DE # 69.)
As to the second Henthorne factor, no liability has been established as to
Structurepoint as of yet. (See DE # 51 at 14–15.) In addition, WBCM contends that no
liability can be fixed against Structurepoint moving forward. (Id.) The Assignment
Agreement provides that “[Structurepoint] has proposed and [the City] has consented
to pursue direct legal action against WBCM to recover [the City’s] loss and damage and
forego taking legal action against [Structurepoint] as further set forth in his Agreement.”
(DE # 29-3 at 3 (emphasis added).) Forego legal action in this context means to waive
one’s right to take legal action. See Lafayette Car Wash, Inc. v. Boes, 282 N.E.2d 837, 839
(Ind. 1972), r’hng denied (“Waiver is the intentional relinquishment of a known right; an
election by one to forego some advantage he might have insisted upon.”) In other
words, if the City truly has waived its right to pursue legal action against

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Structurepoint, Structurepoint can never be found liable to the City. Without fixed
liability, the indemnity claim would fail.
The City does not dispute that Structurepoint has not paid any damages or that
the term “forego” means “waive.” (See DE # 69.) Instead, the City’s argument is based
on the Tolling Agreement, signed by the City and Structurepoint on the same day they
signed the Assignment Agreement. (Id. at 24.) The Tolling Agreement states that
“nothing contained in the Assignment Agreement . . . releases [Structurepoint] of or
from any duty or liability . . . to [the City] under the [Prime] Agreement” and that
Structurepoint’s “obligations under the [Prime] Agreement shall remain in full force
and effect[.]” (DE # 69-2 ¶ L (emphasis added).) The parties also agreed to toll the
statute of limitations on “the [p]arties’ claims or potential causes of action against the
other.” (Id. ¶ 13.) This language implies the City intended to preserve claims against
Structurepoint, rather than to waive them. This intent is also demonstrated by the City’s
currently pending suit against Structurepoint. (See 69-2 at ¶ 10, p. 4.) If the City can
bring suit against Structurepoint, that means liability could become fixed in the future,
and the indemnity claim would survive.
However, in its reply (DE # 71) and in a separate motion to strike (DE # 72),
WBCM asks the court to disregard the Tolling Agreement. Generally, the court would
consider the Tolling Agreement when interpreting the Assignment Agreement, as the
two agreements were signed the same day. Ruth v. First Fed. Sav. & Loan Ass’n of LaPorte
Cty., 492 N.E.2d 1105, 1107 (Ind. Ct. App. 1986) (“[I]n the absence of anything to
indicate a contrary intention, writings executed at the same time and relating to the
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same transaction or subject-matter are construed together in determining the
contract.”). But, WBCM insists the two agreements should not be read in conjunction, in
this instance, due to the Assignment Agreement’s integration clause. (DE # 71 at 12–13.)
The integration clause states as follows:
This Assignment Agreement reflects the entire agreement
between the Parties with respect to the assignment of claims
hereinabove described. Those statements, promises or
inducements made by or on behalf of the Parties that are not
contained herein shall not be binding.
(DE #29-3 ¶ 10.) The inclusion of an integration clause, WBCM argues, means the
parties intended the Assignment Agreement to stand on its own as a completely
integrated document that would not be bound by any other agreements, such as the
Tolling Agreement.
Still, an integration clause “does not control the question of whether a writing
was intended to be completely integrated.” Franklin v. White, 493 N.E.2d 161, 166 (Ind.
1986). An integration clause is “only some evidence” of the parties’ intentions. Id. The
court should consider the integration clause, but also any other relevant evidence on the
question of integration, including the Tolling Agreement itself. See id. at 167 (“[T]he
preliminary question of integration . . . requires the court to hear all relevant evidence,
parol or written.”).
The City and Structurepoint are both entities experienced in business and
negotiations, rather than unsophisticated parties. This level of experience means the
court should give more weight to the parties’ decision to include an integration clause
in the Assignment Agreement, since experienced parties would, presumably, not have
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negotiated an integration clause if they did not actually intend the agreement to be fully
integrated. See Franklin, 493 N.E.2d at 166 (“However, where two sophisticated parties
engage in extensive preliminary negotiations, an integration clause may, in fact, reflect
their mutual intention to abandon preliminary negotiations in favor of a complete and
final statement of the terms of their agreement.”). On the other hand, the fact that the
language of the Tolling Agreement directly references the Assignment Agreement and
the fact it was signed the same day as the Assignment Agreement both strongly suggest
that the parties intended the Tolling Agreement to carry weight as language modifying
the Assignment Agreement. This apparent contradiction between the integration clause
and the language of the Tolling Agreement leaves the court with an obscured view of
the parties’ intentions.
WBCM, in its motion to strike, seems to initially argue that this contradiction
between the integration clause and the Tolling Agreement is a reason why the Tolling
Agreement should be excluded as parol evidence. (See DE # 72.) Yet ultimately, in its
reply to its own motion to strike, WBCM acknowledges that there is a way to
harmonize the Tolling and Assignment Agreements, allowing them to both be read
without any contradiction. (DE # 78 at 6.) According to WBCM in its reply, “[t]he
purpose of the Assignment Agreement is clear: to assign Structurepoint’s claims against
WBCM to the City, where both the City and Structurepoint agreed that WBCM was
solely to blame for the City’s alleged damages, and Structurepoint’s liability to the City
was purely vicarious.” (Id.) “The agreement to forego/waive legal action against
Structurepoint, then, can be read to relate only to the City’s claim[s] against
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Structurepoint for vicarious liability arising from WBCM’s alleged negligence or
breaches.” (Id.) “In this same vein, the Tolling Agreement preserves the City’s rights
and claims against Structurepoint—where Structurepoint is potentially liable for
Structurepoint’s own acts or omissions causing damage to the City.” (Id.)
Essentially, WBCM’s theory of harmonization is another way of saying the
integration clause applies only partially with regards to the assigned claims, i.e., those
claims arising from WBCM’s negligence or breaches. This interpretation is consistent
with the language of the integration clause itself, which merely says the “Assignment
Agreement reflects the entire agreement . . . with respect to the assignment of claims.” (DE
#29-3 ¶ 10 (emphasis added).) According to this partial integration theory, the
integration would not apply to claims against Structurepoint based on its own acts or
omissions, which is why the City would be able to reserve those claims via the Tolling
Agreement, without running afoul of the Assignment Agreement’s waiver provision.
WBCM’s theory of harmonizing the Assignment and Tolling Agreements is
consistent with all of the relevant evidence and the language of the two agreements.
Therefore, the court adopts WBCM’s theory of harmonization. Consequently, the court
need not strike the Tolling Agreement as parol evidence.5

5

In its motion to strike, WBCM also argues the Tolling Agreement should be
excluded based on equity because WBCM has been prejudiced by the City’s selective
use of privilege to withhold the Tolling Agreement until it was included along with the
response brief. (DE # 72 at 5–6.) However, because the court will ultimately rule in
WBCM’s favor on the indemnity claim, there is no prejudice against WBCM.
Accordingly, the court will deny the motion (DE # 72) as moot.
18

Returning to the issue of indemnity, the City acknowledges that WBCM is only
obligated to indemnify Structurepoint for liabilities arising out of WBCM’s performance
under the Subcontract. (See DE # 29 ¶ 74.). But, in the Assignment Agreement, the City
has specifically waived its claims against Structurepoint based on WBCM’s
performance. It does not matter that the City reserved its other claims against
Structurepoint, via the Tolling Agreement, because WBCM is not obligated to
indemnify the parties for liabilities arising from those claims. Therefore, for the
purposes of the second Henthorne factor, Structurepoint’s liability will never become
fixed. Thus, the City cannot support its indemnity claim and summary judgment is
appropriate on the claim.
D.

Count III: Breach of Contract Claim Based on Third-Party Beneficiary

The City brings a breach of contract claim on the basis that it is a third-party
beneficiary of the Subcontract. (DE # 29 at 8.) To enforce a claim by virtue of being a
third-party beneficiary, a plaintiff must show: “(1) [a] clear intent by the actual parties
to the contract to benefit the third party; (2) [a] duty imposed on one of the contracting
parties in favor of the third party; and (3) [p]erformance of the contract terms is
necessary to render the third party a direct benefit intended by the parties to the
contract.” Lunhow v. Horn, 760 N.E.2d 621, 628 (Ind. Ct. App. 2001) (emphasis omitted)
(quoting NN Investors Life Ins. Co. v. Crossley, 580 N.E.2d 307, 309 (Ind. Ct. App. 1991)).
The controlling factor is the contracting parties’ intent that the third party be a direct
beneficiary. Id.

19

Regarding intent, the Subcontract states from the outset that the services
performed by WBCM “shall assist [Structurepoint] under its Professional Services
Agreement with City of Whiting, Indiana (Prime Agreement) for the PROJECT: Whiting
Lakefront Park.” (DE # 29-2 at 1 (underlining in original).) “Intent may be shown by
naming a specific third party.” St. Paul Fire & Marine Ins. Co. V. Pearson Constr. Co., 547
N.E.2d 853, 856 (Ind. Ct. App. 1989). In St. Paul, the court concluded that the parties’
contract demonstrated intent to benefit a third-party where that third-party was
referred to by name as the party for whom the work was being done. Id. at 856–57. In
the case at hand, the Subcontract similarly demonstrates intent to benefit the City
because the City is referred to by name as the party for whom WBCM’s engineering
services are being performed.6
In addition to merely naming the City, the Subcontract purports to incorporate
the entire Prime Agreement between the City and Structurepoint. (DE # 29-2 at 2, ¶ 5.6.)
The Subcontract then provides further details regarding the incorporation of the Prime
Agreement, stating “[WBCM] shall be obligated to the applicable provisions (including
but not limited to indemnification, insurance, dispute resolution, and ownership of
documents) of Structurepoint’s [Prime] Agreement with City of Whiting.” (Id. at 3,

6

In its reply, WBCM attempts to distinguish St. Paul on the basis that the
contract in that case contained clear language conferring a direct benefit of a warranty
to the third-party beneficiary. (DE # 71 at 5–6 (citing St. Paul, 547 N.E.2d at 857.).)
WBCM is correct that the contract in St. Paul contained specific language regarding a
warranty, but the Court of Appeals of Indiana made its determination as to intent before
considering the warranty language. The court only discussed the warranty language
later in its opinion, when it examined the duty requirement.
20

¶ 5.12.) Whether or not these attempts at incorporation are actually effective in
assigning duties or obligations to WBCM, it certainly evinces either intent or awareness
on the part of the parties that their actions would benefit the City. The Subcontract
further states that “each task” performed by WBCM “will be reviewed by the Owner”
(the City) at three levels of completion. (DE # 29-2 at 4, ¶ B.) Therefore, WBCM
performed all of its services under the Subcontract with the knowledge that its work
was for the benefit of the City and would be reviewed by the City.
Additionally, the subcontract does not contain a “no third-party beneficiary”
clause. (See DE # 29-2.) This fact, by itself, does not prove any intent to create a thirdparty beneficiary. But, it also demonstrates the absence of any affirmative intent to
avoid third-party beneficiary status.
For all of the preceding reasons, the court concludes the clear intent of the parties
was to benefit the City through the Subcontract.
For the second factor, the City must demonstrate the Subcontract placed a duty
on one of the contracting parties, in the City’s favor. For one, the Subcontract explicitly
“obligated [WBCM] to the applicable provisions [of the Prime Agreement] . . . including
. . . [provisions regarding] ownership of documents.” (DE # 29-2 at 3, ¶ 5.12.) The
provision of the Prime Agreement regarding document ownership states that final
construction documents prepared by [WBCM] “shall become property of [the City].”
(DE # 29-1 at 3, ¶ 10.) This is a clear and explicit duty placed on WBCM to transfer

21

ownership of its documents to the City.7
This duty, on its own, is enough to satisfy this second prong and to ultimately
support a breach of contract claim based on a third-party beneficiary theory. Moreover,
through the incorporation clause, WBCM is also obligated to comply with other
"applicable provisions" of the Prime Agreement, with respect to the City of Whiting.
(DE # 29-2, at 3, 5.12) Nevertheless, the parties have made no effort to define which
additional obligations are "applicable," beyond those specifically listed. Therefore, for
now, the third-party beneficiary claim will move forward without consideration of
these potential additional duties.
The Subcontract also provides that WBCM has a duty to perform its services “in
a manner consistent with that degree of care and skill ordinarily exercised by members
of the same profession.” (DE # 29-2 at 1, ¶ 2.3.) Although the City is not explicitly
mentioned in the same paragraph as this duty, when it is read in the larger context of
the Subcontract, the only reasonable conclusion that can be drawn is that the
performance of this duty will result in a direct benefit to the City, as intended by the
parties.

7

WBCM argues that Indiana courts have taken a narrow view of incorporation
by reference and therefore the court should not accept the incorporation of duties
originating from the Prime Agreement. (DE # 51 at 21 (citing MPACT Constr. Grp. LLC
v. Superior Concrete Constructors, Inc., 802 N.E.2d 901, 909-10 (Ind. 2004)).) But, MPACT
does not actually stand for the notion that Indiana takes a narrow view of incorporation
by reference. See id. Rather, in MPACT, the Indiana Supreme Court simply recognizes
that language incorporating contract provisions (specifically incorporating arbitration
provisions, in that case) must be clear and explicit. Id. In that case, the incorporation
language was not explicit enough, but in the case at hand the explicit incorporation of
the Prime Agreement is sufficient. See id.; (see also DE # 29-2 at 2–3, ¶¶ 5.6, 5.12).
22

Because the City will receive the direct benefit of the work to be done, and of any
additional duties (including the duty regarding ownership of documents), as intended
by the parties, the third factor of the third-party beneficiary test is satisfied. See St. Paul,
547 N.E.2d at 857 (finding the third factor satisfied where the third-party beneficiary
received a direct benefit of both the work to be done under the contract, and of an
additional duty).
Since the City has provided contract language in support of each of the factors of
the third-party beneficiary test, summary judgment will be denied on this claim.
IV.

CONCLUSION
For the foregoing reasons, the court
(1) GRANTS in part WBCM’s motion for summary judgment (DE # 50) as to

Count II (negligence), as outlined above, and as to Count V (indemnity);
(2) Otherwise DENIES in part the motion for summary judgment (DE # 51);
(3) DENIES WBCM’s Motion to Strike (DE # 72) as moot; and
(4) ORDERS the parties to file a joint status report regarding their willingness to
engage in a settlement conference before a Magistrate Judge by April 9, 2018. A trial
date will be set under a separate order.
SO ORDERED.
Date: March 20, 2018
s/James T. Moody
JUDGE JAMES T. MOODY
UNITED STATES DISTRICT COURT

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