Exeter Hospital, Inc. v. Kwiatkowski et al
ORDER denying 95 Motion for Reconsideration re 94 Order on Motion to Dismiss. So Ordered by Judge Steven J. McAuliffe.(lat)
UNITED STATES DISTRICT COURT
DISTRICT OF NEW HAMPSHIRE
Exeter Hospital, Inc.,
Case No. 14-cv-009-SM
Opinion No. 2016 DNH 090
The American Registry of
and Triage Staffing, Inc.,
O R D E R
By order dated October 31, 2016 (document no. 94), the
court granted motions to dismiss filed by The American Registry
of Radiologic Technologists (“ARRT”) and Triage Staffing, and
dismissed counts 73 and 74 of Exeter Hospital’s Third Amended
Count 73 sought statutory contribution from ARRT and Triage
pursuant to N.H. Rev. Stat. Ann. (“RSA”) 507:7.
But, the court
concluded that the complaint’s factual allegations “fall well
short of plausibly asserting a factual basis for viable
negligence, negligent infliction of emotional distress, or
intentional infliction of emotional distress claims by each of
the 188 individual negative results claimants against either
ARRT or Triage.”
Id. at 12-13.
The court also found that,
because count 74 is derivative of count 73, “it too fails to
state a viable cause of action against Triage for contractual
indemnification of the sums Exeter Hospital paid in settlement
to the negative results claimants.”
Id. at 13.
Nevertheless, the court afforded Exeter Hospital the
opportunity to “file an amended complaint that adequately and
plausibly sets forth factual allegations sufficient to state a
viable basis to recover against ARRT and/or Triage for
settlements made to one or more of the 188 negative results
Exeter Hospital has not availed itself of that
Instead, it moves the court to reconsider its
dismissal of count 74, to vacate (in part) its order of October
31, and to reinstate its contractual indemnification claim
That motion is denied.
In count 74 of the Third Amended Complaint, Exeter Hospital
alleges that, pursuant to a staffing agreement between Triage
and AHSA (an organization of which Exeter Hospital is a member),
Triage is contractually obligated to defend and indemnify Exeter
Hospital against the claims advanced by the negative results
See Third Amended Complaint at paras. 973-77.
also AHSA Group Staffing Services Program Standard Agency
Staffing Agreement (document no. 66-1) at para. 7(c)(i).
“negative results claimants” are 188 people who were potentially
exposed to the Hepatitis-C virus at Exeter Hospital, tested
negative for the disease, but nevertheless threatened to bring
some sort of negligence or emotional distress claims against the
Importantly, however, “none of the patients who
tested negative ever filed a lawsuit” against Exeter Hospital.
Third Amended Complaint at para 951, n.2.
Still, says Exeter
Hospital, because it gave Triage notice of those potential
claims and because it subsequently settled those potential
claims for a “reasonable” amount, Triage is obligated to
reimburse it for that sum, plus reasonable attorney’s fees
incurred in the process of effecting those settlements.
Exeter Hospital says that in dismissing its contractual
indemnification claim for failure to state a viable cause of
action, the court misapprehended “the legal distinction - in the
context of contractual indemnity - between ‘actual liability’
and ‘potential liability.’”
(document no. 95) at 2.
Plaintiff’s Motion to Reconsider
And, says the hospital, because it
“plausibly alleged ‘potential liability’” with respect to the
negative results claimants, “Triage’s contractual duties to
defend and indemnify” were triggered.
But, as the court
held in its prior order, Exeter Hospital did not plausibly
allege that it had any “potential liability” to the negative
Rather than alleging a plausible instance of at least
possible exposure to Hepatitis-C for each of the
negative results claimants, the amended complaint
suggests that Exeter Hospital (laudably) tested those
patients out of an abundance of caution and,
ultimately, settled their claims despite the fact that
there may have been no legal obligation to do so (or,
at a minimum, without requiring those claimants to
demonstrate that they had, indeed, suffered legally
compensable emotional distress). Of course,
independent of any legal obligation the hospital may
have had to compensate the negative results claimants,
one can imagine many reasons that might have motivated
the hospital to settle those claims quickly and out of
Order Dated October 31, 2016 (document no. 94) at 9 (emphasis in
See also Id. at 7-8 (“[T]he Third Amended Complaint
fails to adequately allege that each of the 188 negative results
claimants was adequately exposed to the Hepatitis-C virus to
have a reasonable fear of developing the illness.”) (emphasis in
Consequently, if, as Exeter Hospital claims, Triage’s
contractual duty to defend and indemnify is triggered upon the
hospital’s plausible allegation of “potential liability” to the
negative results claimants, that condition was not met in this
Exeter Hospital’s Third Amended Complaint fails to
plausibly allege that any of the negative results claimants had
a viable, legally cognizable, and trial-worthy claim against the
In other words, the hospital had no “potential
liability” to the negative results claimants because their
claims were entirely without legal merit.1
Moreover, even if Exeter Hospital were correct in asserting
that Triage’s obligation to indemnify was triggered merely by
the hospital’s broad invocation of “potential liability” to the
negative results claimants (regardless of how meritless or even
frivolous those claims might have been), its argument still
According to the hospital, once it notified Triage of
its “potential liability” to the negative results claimants,
Triage became obligated to indemnify the hospital to the extent
its subsequent settlement with those claimants was “reasonable.”
See Plaintiff’s Motion to Reconsider at 4 (“In order for an
indemnitee who has paid a settlement to recover from an
indemnitor for breach of the duties triggered by ‘potential
liability,’ an indemnitor must show: (1) the fact situation of
the original claim is covered by the contract or indemnity, and
Parenthetically, the court notes that Exeter Hospital’s
indemnification argument is made entirely in the abstract. That
is, the hospital does not point to, or rely upon, any specific
language in the indemnification agreement. Instead, it relies
entirely on general principles of indemnification law in support
of its claim that Triage is liable for the settlement sums the
hospital paid to the negative results claimants.
(2) the settlement is reasonable.”) (citation and internal
And, says the hospital, assessing the
“reasonableness” of that settlement is a factual question that
involves consideration of just two factors: the likelihood that
the negative results claimants would have prevailed at trial
(and, if so, in what amount), balanced against the likelihood
that Exeter Hospital would have prevailed at trial.
Id. at 4
(citing Trim v. Clark Equipment Co., 274 N.W.2d 33, 36 (Mich.
In support of that position, Exeter Hospital also relies
upon the court of appeals’ opinion in Fashion House, Inc. v.
K Mart Corp, 892 F.2d 1076 (1st Cir. 1989) (applying Michigan
law and relying upon Clark Equipment).
There the circuit noted:
In this case, the indemnity clause is written in such
broad, sweeping language as to make it highly probable
that the parties never meant to make actual, as
opposed to reasonably perceived, liability a
prerequisite to indemnification. In addition, the
record makes manifest that the putative indemnitor,
FHI, had notice of the trademark owner’s action
against K mart, but declined to defend it. In such
circumstances, the general rule in both New York and
Michigan is that the indemnitor will be bound by any
reasonable, good faith settlement the indemnitee might
thereafter make. For our purposes, this means that an
indemnitee, like K mart, may recover based on its
The parties’ indemnification agreement
“laws of the State of Michigan apply to all
encompassed by this Agreement.” AHSA Group
Program Standard Agency Staffing Agreement,
provides that the
at para. 7(a).
potential liability and need not demonstrate actual
liability by proving the elements of the underlying
claim against it. In fine, the indemnitee must show
only that the fact situation of the original claim is
covered by the contract of indemnity and that the
settlement is reasonable.
Fashion House, 892 F.2d at 1094 (citations and internal
punctuation omitted) (emphasis in original).
Turning to the
means by which the “reasonableness” of the indemnitee’s
settlement is measured, the court observed:
The reasonableness of the settlement consists of two
components which are interrelated. The fact finder
must look at the amount paid in settlement of the
claim in light of the risk of exposure. The risk of
exposure is the probable amount of a judgment if the
original plaintiff were to prevail at trial, balanced
against the possibility that the original defendant
would have prevailed. If the amount of the settlement
is reasonable in light of the fact finder’s analysis
of these factors, the indemnitee will have cleared
Id. at 1094 (1st Cir. 1989) (quoting Clark Equipment Co., 274
N.W.2d at 36-37) (emphasis supplied).
So, even assuming Triage’s contractual obligation to
indemnify Exeter Hospital was triggered by the demands made by
the negative results claimants, the question would arise as to
whether the hospital’s settlement with those claimants was
That, says Exeter Hospital, is an issue that can
only be resolved by a jury, applying the two-factor balancing
test described above.
Consequently, the argument goes, the
court erred in dismissing the hospital’s indemnification claim.
But, because the claims advanced by the negative results
claimants (at least as described by the hospital in its Third
Amended Complaint) were facially meritless, Exeter Hospital bore
zero “risk of exposure” should the matter have proceeded to
In other words, the “possibility that the original
defendant [Exeter Hospital] would have prevailed,” Fashion
House, 892 F.2d at 1094, was one hundred percent.
solely on the language from Fashion House and Clark Equipment
upon which Exeter Hospital relies, one would be compelled to
conclude that its settlement of the meritless claims advanced by
the negative results claimants was not, as a matter of law,
Of course, the question unaddressed by either Fashion House
or Clark Equipment is whether, when assessing the
Approximately 25 years after issuing its decision in Trim
v. Clark Equipment, the Michigan Court of Appeals explained and
refined the holding in that case, noting that if the indemnitor
can conclusively demonstrate that the underlying suit against
its indemnitee “would have been successfully defended, [the
indemnitee] may not recover on the indemnity claim.” Grand
Trunk Western RR v. Auto Warehousing Co., 686 N.W.2d 756, 765
(Mich. App. 2004). So it is in this case, since Triage has
demonstrated that the underlying claims against Exeter Hospital
(as described in the Third Amended Complaint) lacked any legal
“reasonableness” of an indemnitee’s settlement of claims, the
finder of fact can take into account factors other than simply
the likelihood that the claimants would have prevailed at trial
- factors such as costs and attorney’s fees the indemnitee would
have incurred had it litigated even baseless claims; the
reputational injury the indemnitee may have suffered had it not
resolved those claims quickly and short of a full trial; or the
monetary value the indemnitee ascribed to resolving the claims
swiftly and without the uncertainty and administrative
disruption associated with litigation or a trial on the merits.
In other words, those courts did not address whether it might be
permissible for a jury to consider whether, in light of a wide
range of practical factors - some of which would be unique to
each case - a “reasonable person” in the position of the
indemnitee would have settled the claims, notwithstanding their
lack of legal merit.
Instead, the courts in both Fashion House and Clark
Equipment held that the relevant “reasonableness” inquiry is far
more limited and mechanical (that is, focusing strictly on the
probability that the claimants would have prevailed at trial
and, if so, how much they likely would have recovered).
Although Exeter Hospital seems to suggest that an evaluation of
the reasonableness of its settlement should involve
consideration of many relevant factors (i.e., a “totality of the
circumstances” inquiry), it has provided no helpful or
authoritative precedent or argument to support that view.
Stated slightly differently, Exeter Hospital invokes the
opinions in Fashion House and Clark Equipment to support its
claim that Triage is legally obligated to indemnify it for money
paid to settle legally baseless claims - claims that were
settled either for “nuisance value,” or for business reasons to
which Exeter Hospital ascribed a monetary value unrelated to
actual or potential legal liability.
But, neither Fashion House
nor Clark Equipment provides any support for that claim.
despite now having had two opportunities to identify
authoritative support for the proposition that costs or, at a
minimum, attorney’s fees expended to settle legally meritless
claims are recoverable from Triage under the indemnification
agreement, Exeter Hospital has failed to do so.
While it is
conceivable that viable arguments might support the hospital’s
position - the court offers no opinion on that issue - at this
juncture any such arguments are deemed to have been forfeited.
See generally Int’l Tape Co. v. Technicote, Inc., 2000 WL
33667076 at *3 (D.N.H. April 21, 2000) (discussing why courts
should be reluctant to embrace legal arguments that have not
been presented by the parties).
See also Coons v. Industrial
Knife Co., 620 F.3d 38, 44 (1st Cir. 2010) (“We have frequently
emphasized that judges are not obligated to do a party’s work
for him, searching sua sponte for issues that may be lurking in
the penumbra of the motion papers.
This is particularly true
where, as here, the undeveloped argument raises complexities
that defy an easy answer.”) (citations omitted).
Exeter Hospital’s continued reliance on the notion that it
has adequately alleged a viable indemnity claim against Triage,
because it has plausibly alleged “potential liability” to the
negative results claimants, is unpersuasive.
For the reasons
discussed in the court’s prior order, the hospital has not
adequately alleged that it had any potential liability to those
claimants, because their claims - at least as articulated in the
hospital’s Third Amended Complaint - are not viable, legally
cognizable causes of action.
Based upon the arguments advanced
in its papers, Exeter Hospital has not demonstrated that Triage
is contractually obligated to reimburse it for costs and/or fees
incurred to settle those facially meritless claims.
For the foregoing reasons, the relief sought in Exeter
Hospital’s motion to reconsider (document no. 95) is denied.
Steven J. McAuliffe
United States District Judge
May 5, 2017
Robert C. Dewhirst, Esq.
Elaine M. Michaud, Esq.
Jonathan A. Lax, Esq.
Joshua M. Wyatt, Esq.
Peter W. Mosseau, Esq.
James B. Lynch, Esq.
Mark A. Darling, Esq.
Meghan L. DesLauriers, Esq.
Daniella Massimilla, Esq.
Linda M. Smith, Esq.
William N. Smart, Esq.
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