USF Holland LLC v. Worldwide Transportation Shipping Corp.
Filing
57
MEMORANDUM AND ORDER denying 47 Plaintiff's Motion for Summary Judgment. It is further ordered that 49 Defendant's Motion for Summary Judgment is granted in part and denied in part. The motion is granted with respect to plaintiff's claim for attorney fees and expenses incurred in litigating this action, and defendant is granted judgment on that claim. The motion is otherwise denied. Signed by District Judge Holly L. Teeter on 09/14/2018. (ses)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
USF HOLLAND LLC,
)
)
Plaintiff,
)
)
v.
)
)
WORLDWIDE TRANSPORTATION
)
SHIPPING CORP.,
)
)
Defendant.
)
)
_______________________________________)
Case No. 17-2232-JWL
MEMORANDUM AND ORDER
This matter comes before the Court on the parties’ cross-motions for summary
judgment. As more fully set forth below, the Court concludes that a question of fact
remains for trial concerning whether the parties’ contract applies to the job from which the
suit arose; but that if the contract does apply, plaintiff may not seek its attorney fees and
expenses incurred in litigating this action. Accordingly, plaintiff’s motion (Doc. # 47) is
denied, and defendant’s motion (Doc. # 49) is granted in part and denied in part.
I.
Background
The following facts are undisputed. Plaintiff USF Holland LLC is a transportation
company specializing in “less than truckload” shipping.
Defendant Worldwide
Transportation Shipping Corp. is a cartage service that provided pickup and delivery
services for Holland upon request. On June 25, 2014, the parties executed the written
contract on which the present suit is founded.
On September 17, 2014, defendant performed pickup and delivery services
originating at plaintiff’s terminal in McCook, Illinois. Defendant’s driver was hospitalized
a few weeks after performing that job, and he subsequently died. The driver’s next of kin
proceeded to file a workers’ compensation claim under Illinois law against defendant and
plaintiff, based on the allegation that the driver’s injury was sustained while performing
the job for plaintiff, and that claim remains pending. Defendant submitted the matter to its
liability insurer, but the insurer denied coverage, and in March 2018, an Illinois state court
ruled in the insurer’s favor on the basis that the policy covered Iowa but did not cover
Illinois.
In the present action, based on diversity jurisdiction, plaintiff alleges that defendant,
in failing to provide a defense and indemnification of plaintiff for the workers’
compensation claim, breached (a) a provision in the parties’ contract requiring defendant
to obtain insurance and (b) a provision requiring defendant to indemnify plaintiff. Plaintiff
seeks as damages its attorney fees and expenses incurred in defending the workers’
compensation claim and in litigating the present enforcement action. Plaintiff also seeks a
declaratory judgment and specific performance with respect to the indemnification
provision.
II.
Summary Judgment Standards
2
Summary judgment is appropriate if the moving party demonstrates that there is “no
genuine dispute as to any material fact” and that it is “entitled to a judgment as a matter of
law.” Fed. R. Civ. P. 56(a). In applying this standard, the court views the evidence and all
reasonable inferences therefrom in the light most favorable to the nonmoving party. Burke
v. Utah Transit Auth. & Local 382, 462 F.3d 1253, 1258 (10th Cir. 2006). An issue of fact
is “genuine” if “the evidence allows a reasonable jury to resolve the issue either way.”
Haynes v. Level 3 Communications, LLC, 456 F.3d 1215, 1219 (10th Cir. 2006). A fact is
“material” when “it is essential to the proper disposition of the claim.” Id.
The moving party bears the initial burden of demonstrating an absence of a genuine
issue of material fact and entitlement to judgment as a matter of law. Thom v. Bristol-Myers
Squibb Co., 353 F.3d 848, 851 (10th Cir. 2003) (citing Celotex Corp. v. Catrett, 477 U.S.
317, 322-23 (1986)). In attempting to meet that standard, a movant that does not bear the
ultimate burden of persuasion at trial need not negate the other party’s claim; rather, the
movant need simply point out to the court a lack of evidence for the other party on an
essential element of that party’s claim. Id. (citing Celotex, 477 U.S. at 325).
If the movant carries this initial burden, the nonmovant may not simply rest upon
the pleadings but must “bring forward specific facts showing a genuine issue for trial as to
those dispositive matters for which he or she carries the burden of proof.” Garrison v.
Gambro, Inc., 428 F.3d 933, 935 (10th Cir. 2005). To accomplish this, sufficient evidence
pertinent to the material issue “must be identified by reference to an affidavit, a deposition
transcript, or a specific exhibit incorporated therein.” Diaz v. Paul J. Kennedy Law Firm,
289 F.3d 671, 675 (10th Cir. 2002).
3
Finally, the court notes that summary judgment is not a “disfavored procedural
shortcut;” rather, it is an important procedure “designed to secure the just, speedy and
inexpensive determination of every action.” Celotex, 477 U.S. at 327 (quoting Fed. R. Civ.
P. 1).
III.
Scope of the Contract
It is undisputed that defendant has not defended plaintiff or agreed to indemnify
plaintiff with respect to the workers’ compensation claim and that defendant failed to
procure insurance that covers that claim. On the basis of those facts, plaintiff seeks
summary judgment on its claims for breach of the insurance (¶ 6) and indemnification (¶
10) provisions of the parties’ contract. Defendant seeks summary judgment on those
claims for breach of contract on the basis of its argument that the terms of the written
contract do not apply to the particular job from which the workers’ compensation claim
arose. Specifically, defendant argues that the contract applies only to pickup and delivery
services requested by the manager of plaintiff’s Rock Island terminal. In this case, the
relevant pickup occurred at plaintiff’s McCook terminal, and plaintiff does not dispute that
that service was not requested by the Rock Island manager. Thus, the case turns on whether
the contract applies to services other than those requested by the Rock Island manager. If
it does, defendant does not dispute that it has breached the contract, and plaintiff is entitled
to summary judgment on the issue of liability; if it does not, there is no breach as a matter
of law, and defendant is entitled to summary judgment, including with respect to plaintiff’s
equitable claims, which depend on the existence of a contractual obligation.
4
The Tenth Circuit recently summarized Kansas law1 concerning the interpretation
of a contract as follows:
Under Kansas law, the primary rule in interpreting written contracts is to
ascertain the intent of the parties. Furthermore, unambiguous contracts are
enforced according to their plain, general, and common meaning in order to
ensure the intentions of the parties are enforced. The intent of the parties is
determined from the four corners of an unambiguous instrument,
harmonizing the language therein if possible. Ambiguity does not appear
unless it is genuinely uncertain which of two or more meanings is the proper
meaning. A contract is ambiguous if it contains provisions or language of
doubtful or conflicting meaning, as gleaned from a natural and reasonable
interpretation of its language. Courts should not strain to create an ambiguity
where, in common sense, there is none. Finally, a court should consider
extrinsic or parol evidence only after it has concluded that the plain language
of the contract is ambiguous.
See Lincoln v. BNSF Railway Co., __ F.3d __, 2018 WL 3945875, at *9-10 (10th Cir. Aug.
17, 2018) (footnote and internal quotations and citations omitted).
The contract’s insurance and indemnification provisions are not limited to any
particular jobs or services requested by plaintiff or performed by defendant: the insurance
provision (¶ 6) provides in relevant part that defendant “will procure and maintain”
worker’s compensation insurance “in accordance with statutory requirements of
jurisdiction [sic] where work is being performed;” the indemnification provision (¶ 10) on
its face applies to “any liabilities, claims or demands . . . by . . . persons supplied by
[defendant] . . . for injuries or damages claimed under workers’ compensation or similar
acts.” The introductory paragraphs of the contract contain the following provision: “The
terms of this Agreement shall apply to all Services provided by [defendant].” The term
The parties agree that plaintiff’s claims are governed by Kansas law in accord with
the contract’s choice-of-law provision.
1
5
“Services” is not defined in the four-page contract (which contains signature blocks on
page four). A paragraph titled “BACKGROUND” after the introductory paragraphs states
as follows: “[Plaintiff] requires the services of [defendant] with respect to the tasks
specified as per the Statement of Work attached hereto (‘SOW’).” Paragraph 1 of the
contract, titled “Statement of Work,” states as follows: “[Defendant] agrees to perform the
services listed in any SOW issued hereunder by [plaintiff] and accepted by [defendant].”
Attached to the four-page contract is a one-page statement of confidentiality, labeled
Exhibit A (with “Page 5” at the bottom), containing a separate signature block; and a onepage “Statement of Work” (on “Page 6”), with another signature block.
Only one
Statement of Work (SOW) is included in the six-page document that the parties have
stipulated represents the contract that they executed, and neither party has submitted
evidence that there was any other SOW issued under this contract. The SOW includes the
following provision:
2.
Scope of Services
A.
Description of Services: Provide pickup and delivery services
as requested by Rock Island terminal manager
The Court concludes that the contract is ambiguous with respect to the scope of its
terms, as each party’s interpretation is a reasonable one based on the language of the
contract. As defendant argues, the SOW refers only to services requested by the Rock
Island manager in its “Description of Services,” and that is the only provision purporting
to describe or define the “Services” to which the contract applies. In the main portion of
the contract, defendant agrees only to provide services listed in “any” SOW issued
thereunder, and the only SOW is limited to particular jobs; thus, in this contract, defendant
6
only agreed to perform particular jobs (those requested by the Rock Island manager), and
it is reasonable to interpret the contract to mean that its provisions apply only to jobs
undertaken in an SOW.2 This interpretation does not foreclose plaintiff’s interpretation,
however, because the SOW does not clearly indicate that it is defining the word “Services”
for all purposes as used in the main portion of the contract, which contains no definition of
the word and which does not limit its applicability to specific jobs listed in SOWs.
Plaintiff’s interpretation is also reasonable. The contract expressly provides that its
terms apply to “all Services” provided by defendant to plaintiff. The terms of the contract
do not apply to “the Services”, which would have suggested a special meaning for that
word, and “Services” is not specifically defined in the contract; thus, it is reasonable to
interpret the scope provision to refer to all services provided by defendant, in accordance
with its plain meaning. The contract may refer to “any” SOW to allow for the possibility
that no SOWs are issued. Contrary to defendant’s argument, this interpretation does not
make the SOW’s reference to specific jobs a nullity, as the parties may have intended an
SOW to set forth any special or additional terms (such as specific pricing) that govern the
particular jobs to which the SOW applies. Thus, as plaintiff argues, it is reasonable to
2
Defendant also argues in its reply brief that the contract should be construed
against plaintiff as drafter, but the Court does not ordinarily consider arguments raised for
the first time in a reply brief. See U.S. Fire Ins. Co. v. Bunge N. Am., Inc., 2006 WL
1007099, at *3 n.5 (D. Kan. Apr. 14, 2006) (citing Minshall v. McGraw Hill Broadcasting
Co., 323 F.3d 1273, 1288 (10th Cir. 2003)). Moreover, the Court would ordinarily wait to
apply that rule of construction until after it considers whether the parties’ intent may be
determined from the facts. See First Nat’l Bank of Olathe v. Clark, 226 Kan. 619, 623
(1979). Thus, because the Court concludes that a question of fact remains concerning the
parties’ intent, the Court would not apply that rule until after trial in this case.
7
interpret the contract as applying to all work performed by defendant for plaintiff, with
SOWs issued to set out additional terms, instead of interpreting the contract to apply only
to particular jobs. This reasonable interpretation, however, does not make the contract
unambiguous, as the only services that defendant agrees to perform under the contract are
limited in the only SOW to those requested by a particular manager.
Because the Court concludes that the contract is ambiguous in relevant part, it may
consider extrinsic evidence to determine the parties’ intent (which ultimately governs).
The Court further concludes, however, that the evidence submitted by the parties is not so
one-sided as to allow the Court to resolve the issue at this stage as a matter of law. Plaintiff
has provided evidence that the parties intended for a single contract---this contract---to
cover all jobs performed by defendant. For example, plaintiff’s controller testified that it
was plaintiff’s policy to require all work by a delivery contractor to be performed under
written contracts, specifically to make sure that the contractor had assumed insurance and
indemnification obligations.
Plaintiff also cites an email in which the Rock Island manager told the controller
that defendant was ready for a job---a job at an Iowa terminal---because defendant had now
executed the contract. Plaintiff argues that the email provides further evidence that this
contract was intended to cover jobs other than those at the terminal in Rock Island, Illinois.
On the other hand, the email is not particularly helpful, however, because it does not
foreclose the possibility that the Rock Island manager requested that Iowa job---indeed, the
only evidence submitted concerning who requested that job is the email itself, in which the
Rock Island manager stated that that job will be requested. Plaintiff also cites the stipulated
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fact that defendant performed services for plaintiff in 2014 at seven different terminals.
That fact does not necessarily favor plaintiff’s interpretation, however, as the SOW refers
not to the site of the pickup but to the requesting manager, and there is no evidence to
establish that defendant performed jobs requested by managers other than the Rock Island
manager. Moreover, as defendant argues, even if jobs were requested by other managers,
that fact does not foreclose the possibility that such jobs were performed without a written
contract (as defendant agues the parties intended).
Defendant has not offered any direct evidence of its intent in executing the contract.
Defendant argues that each of plaintiff’s terminal managers had discretion to enter into his
or her own contracts with delivery contractors such as defendant, but the evidence on which
it relies does not support that argument. Defendant cites to the deposition of plaintiff’s
controller, but the controller made clear in his testimony that a written contract was
required for any job and that plaintiff intended that one contract be executed to cover all
jobs by a particular contractor. Defendant also notes that the parties’ subsequent contracts
executed in 2015 and 2017 are different from the 2014 contract and are not limited to
particular jobs, but that different language does not necessarily mean that the parties
intended to broaden the scope of their written contracts in 2015; to the contrary, those
contracts arguably provide evidence that the parties’ practice was for one contract to cover
all jobs. In support of its argument that the parties did operate sometimes without a written
contract, defendant notes that there were gaps between the effective terms of the parties’
contracts. Such gaps are not relevant, however, without evidence that defendant actually
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performed jobs for plaintiff during those gaps, and defendant has provided no such
evidence.
Defendant has provided evidence that it performed work for plaintiff prior to the
execution of the contract on June 25, 2014, which fact would support its argument that the
parties did operate without a written contract on occasion (which in turn supports the
argument that the parties did not necessarily intend the written contract to apply to all work
by defendant for plaintiff). The person who executed the contract for defendant testified
that defendant provided services for plaintiff beginning in April 2014. Defendant has not
supported that testimony with documentation, and plaintiff has provided its own evidence
that no jobs were performed before the execution of the contract. The Court does not weigh
the evidence at this stage, however, and this factual dispute remains for trial.
Accordingly, the Court concludes that the parties’ contract is subject to differing
reasonable interpretations and that the parties’ intent cannot be determined as a matter of
law under the governing summary judgment standards. Therefore, the Court denies
defendant’s motion for summary judgment to the extent based on its argument concerning
the scope of the insurance and indemnification provisions of the contract.
IV.
Breach of the Insurance Provision
Defendant seeks summary judgment on an alternative basis with respect to
plaintiff’s claim for breach of the insurance provision. Defendant argues that because the
underlying workers’ compensation claim has not been resolved, plaintiff’s damages (if
any) may not yet be ascertained. The Court rejects this argument. Plaintiff also seeks as
10
damages any fees and expenses that it has incurred in defending the workers’ compensation
claim, which damages would have resulted from defendant’s failure to obtain insurance to
cover that defense (assuming that that failure constitutes a breach of contract). In its reply
brief, defendant has not addressed those damages claimed by plaintiff. The case cited by
defendant, Ostrom v. Farm Bureau Financial Services, 2018 WL 2683968 (D. Kan. June
5, 2018), may be distinguished. In that case, the plaintiff was also the claimant on the
underlying claim, and was not arguing that the defendant should have obtained insurance
to defend him (the situation in the present case). See id. at *2-4. Moreover, the court’s
ruling in Ostrom turned on an issue of exhaustion that is not present here, and the court did
not address any damages that had already been incurred. See id. In the present case,
plaintiff has already incurred damages relating to the underlying claim, which damages
may be ascertained at this time.3 The Court therefore denies defendant’s motion for
summary judgment with respect to the issue of liability.
In seeking summary judgment on this claim under the insurance provision, plaintiff
argues that even if the provision applies only to jobs requested by the Rock Island manager,
it was still harmed by defendant’s failure to obtain insurance for those jobs. Specifically,
plaintiff argues that if defendant had obtained insurance to cover such jobs in Illinois, that
same insurance would also have covered the delivery job at issue here, which originated in
McCook, Illinois. The Court rejects this argument. Plaintiff has not shown as a matter of
3
Plaintiff also suggests that its claims for equitable relief distinguish the present
case from Ostrom. Defendant directs this argument only to planitiff’s claim for damages
for breach of the insurance provision, however, and as the pretrial order makes clear,
plaintiff’s equitable claims are based on the indemnification provision.
11
law that defendant was required to obtain insurance covering all jobs in a particular state,
as opposed to obtaining insurance only for jobs within the scope of the contract. For
instance, if the insurance obligation applied only to jobs requested by the Rock Island
manager, defendant could have fulfilled that obligation by procuring insurance coverage
for all such jobs, which insurance would not necessarily have covered other jobs performed
in the same state. Plaintiff is correct that the insurance provision requires coverage “in
accordance with statutory requirements of [the] jurisdiction where work is being
performed.” That reference to the jurisdiction (in this case Illinois), however, means only
that defendant must obtain insurance deemed sufficient by the jurisdiction for jobs within
the scope of the contract. Plaintiff has not shown that defendant could not have obtained
insurance sufficient under Illinois law that would cover only certain jobs (those requested
by the Rock Island manager). Thus, plaintiff cannot show as a matter of law that it was
harmed by defendant’s breach of the insurance provision even if that obligation did not
extend to the job at issue here. Accordingly, the Court denies plaintiff’s motion for
summary judgment in its entirety.
V.
Attorney Fees in the Present Action
Finally, defendant seeks summary judgment on plaintiff’s specific claim for
damages consisting of attorney fees and expenses incurred by plaintiff in litigating the
present enforcement action. Defendant argues that plaintiff lacks any basis for such an
award. In seeking an award of its fees incurred in this action, plaintiff relies on the
contract’s indemnification provision, which states as follows:
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10.
Indemnification: Contractor agrees to defend, indemnify and save
Customer harmless from any liabilities, claims or demands (including the
costs, expenses, and attorneys’ fees on account thereof) that may be made:
First, by anyone for injuries to persons or damage to property, including theft,
resulting from Contractor’s acts or omissions or those of persons supplied by
Contractor; or second, by Contractor or persons supplied by Contractor or by
any subcontractors used by Contractor for injuries or damages claimed under
workers’ compensation or similar acts. Contractor shall defend Customer
against any such liability, claim or demand, should Customer so request.
Customer agrees to notify Contractor of any written claims or demands made
against Customer for which Contractor is liable hereunder. In addition to
and not in lieu of any other defense and indemnity protections afforded
Customer under this Agreement, Company shall also defend and indemnify
Customer, its employees, officers, directors and agents, against any and all
co-employment claims to include, but not limited to, claims for workers’
compensation benefits, brought by contract employees or other personnel
supplied, used, provided or assigned by Company under this Agreement.
This provision does provide for the recovery of attorney fees, but it provides only for fees
incurred “on account [of]” third-party claims---claims by those injured by defendant’s acts
or omissions, and claims by persons supplied by defendant for damages under workers’
compensation acts---and not for fees incurred because of first-party claims between the two
parties to the contract.
This issue has been addressed by Kansas appellate courts only in one published
opinion, Chetopa State Bancshares, Inc. v. Fox, 6 Kan. App. 2d 326 (1981). In Chetopa,
the court noted that “indemnity contracts are not favorites of the law” and are strictly
construed, and it held that although attorney fees are recoverable if provided by contract,
“there must be express contractual language.” See id. at 332, 333. The court found such
express language in that case because the indemnity provision specifically authorized fees
arising from a breach of any covenant in the contract itself. See id. at 333.
13
Plaintiff cites an unpublished opinion from the Kansas Court of Appeals, GFSI
Canada Co. v. Fletcher Leisure Group, Inc., 2012 WL 2045293 (Kan. Ct. App. June 1,
2012) (unpub. op.). The court allowed a claim for fees incurred in the enforcement action
in that case, but the indemnification language at issue referred specifically to fees arising
from any breach under the agreement. See id. at *14-15.
Plaintiff also cites two cases decided under Kansas law by the Tenth Circuit. In
Missouri Pacific Railroad Co. v. Kansas Gas and Electric Co., 862 F.2d 796 (10th Cir.
1988), the court construed an indemnification provision to allow fees incurred in the
enforcement action itself. See id. at 801. In Neustrom v. Union Pacific Railroad Co., 156
F.3d 1057 (10th Cir. 1998), the court simply followed Missouri Pacific, with little analysis,
in allowing a claim of fees incurred in the enforcement action. See id. at 1067-68. In each
case, however, the indemnification provision specifically allowed for fees arising out of a
breach of the indemnification provision. See Missouri Pac., 862 F.2d at 797-98; Neustrom,
156 F.3d at 1061. Again, the indemnification provision in the present case refers only to
third-party claims and does not provide for fees incurred “on account [of]” any breach by
defendant of the indemnification provision or other provisions of the contact. Thus, the
Court is not compelled to reach the same result reached by the Kansas Court of Appeals
and the Tenth Circuit in those cases.
In Chetopa, the Kansas Court of Appeals held that “express contractual language”
is required for an award of fees in an enforcement action, and there is no such express
language here. As noted above, the indemnification provision in the parties’ contract refers
only to the third-party claims, and it does not provide for indemnity for first-party claims
14
or for any breach by defendant of the contract. The fees incurred by plaintiff in defending
the underlying workers’ compensation claim were incurred “on account [of]” that thirdparty claim. The fees incurred by plaintiff in this enforcement action have been incurred
because of defendant’s alleged failure to satisfy its obligations under the contract, not
because of the claim itself. See National Minority Supplier Dev. Council Bus. Consortium
Fund, Inc. v. First Nat’l Bank of Olathe, 83 F. Supp. 2d 1200, 1207 (D. Kan. 1999)
(rejecting claim for fees incurred in enforcement action because fees were not direct result
of indemnitor’s acts under the contract, but were only indirect result occasioned by decision
to seek enforcement). Because an award of attorney fees incurred in this enforcement
action is not authorized by express contractual language, as required under Kansas law,
plaintiff’s claim for such fees under the contract cannot stand. Plaintiff has not identified
any other basis for an award of fees in this case. Therefore, the Court grants defendant’s
motion for summary judgment on plaintiff’s claim for fees and expenses incurred in this
action.
IT IS THEREFORE ORDERED BY THE COURT THAT plaintiff’s motion for
summary judgment (Doc. # 47) is denied.
IT IS FURTHER ORDERED BY THE COURT THAT defendant’s motion for
summary judgment (Doc. # 49) is granted in part and denied in part. The motion is
granted with respect to plaintiff’s claim for attorney fees and expenses incurred in litigating
15
this action, and defendant is granted judgment on that claim. The motion is otherwise
denied.
IT IS SO ORDERED.
Dated this 14th day of September, 2018, in Kansas City, Kansas.
s/ John W. Lungstrum
John W. Lungstrum
United States District Judge
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