Tucker v. Cascade General, Inc. et al
Filing
367
OPINION and ORDER - The United States' request for Indemnification of the United States Pursuant to its Contracts with Cascade 364 is DENIED. Within 10 days, Tucker shall submit to the court an appropriate form of judgment in this matter. IT IS SO ORDERED. DATED this 10th day of February, 2015, by United States Magistrate Judge John V. Acosta. (peg)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
PORTLAND DIVISION
3:09-cv-1491-AC
PHILIP TUCKER,
Plaintiffs,
OPINION AND ORDER
v.
CASCADE GENERAL, INC., an Oregon
corporation, and UNITED STATES OF
AMERICA,
Defendant.
ACOSTA, Magistrate Judge:
Philip Tucker ("Tucker") brought a negligence action against Cascade General, Inc.
1
("Cascade") and the United States to recover damages for personal injmy to Tucker. Tucker
sustained permanent and life-altering injuries aboard the dredge ESSA YONS, a public vessel
1
At one time, Tucker and his wife, Toni Hotten, were plaintiffs in this case. Hotten
brought a claim for loss of consortium against Cascade General, Inc. ("Cascade"), and the
United States. Hotten settled her claim with Cascade and dismissed her claim against the United
States.
Page l - OPINION AND ORDER
owned by the United States, when a hatch cover from the upper pump room fell through the
hatch opening and struck him in the head while he was working below in the lower pump room.
The United States and Cascade filed cross-claims against each other.
Prior to trial,
Tucker settled his claim against Cascade, and Cascade's cross-claims against the United States
were dismissed, with prejudice. The court deferred ruling on the United States' contractual
indemnification cross-claims against Cascade.
Following a nine-day court trial of Tucker's case against the United States, the court
found the United States was 50% responsible for the harm to Tucker and, accordingly, obligated
to pay that share of his resulting damages ($2,077, I 87 for economic damages; $8,000,000 for
pain and suffering and loss of enjoyment).
Prior to an entiy of Judgment' in this case, and pursuant to its deferred cross-claims
against Cascade, the United States now seeks indemnification from Cascade, up to the limit of
$300,000 per contract, for the total sum of $600,000, to reduce the amount the United States
owes Tucker. Cascade's settlement with Tucker included a provision that Tucker would "accept
the risk ... [ot] setoffs occasioned by the United States' cross-claims against Cascade []."
(Def.'s Ex. 555.)
The parties agree that pursuant to Tucker's Settlement Agreement with
Cascade, the amount, if any, owed to the United States under Cascade's contractual indemnity
provisions will directly reduce the amount of damages owed by the United States to Tucker set
forth in this court's findings of Fact and Conclusions of Law.
2
Final Judgment has not yet been entered, pending resolution of the issue at hand.
Page 2 - OPINION AND ORDER
Background3
The Army Corps of Engineers ("Corps") and Cascade entered into two contracts, the
Repower Contract and the Maintenance and Repair Contract ("M&R Contract"), for work on the
ESSA YONS; both Contracts were in effect during the relevant time period.
The Repower
Contract generally involved replacing engines on the ESSA YONS. The M&R Contract was a
five-year contract lo perform annual maintenance on the dredge.
The two Contracts were
executed al separate times and covered different, but overlapping time periods.
The M&R
Contract was executed in June 2003, by the Corps' Portland Office for a base amount of
$4,097,725. The Repower Contract was let by the Corps' Philadelphia Contracting Division in
2006, for a base amount of$11,633,778.
Both Contracts included an indemnity clause:
(c) 'Indemnification.' The Contractor indemnifies the Government and the vessel
and its owners against all claims, demands, or causes of actions to which the
Government, the vessel or its owner(s) might be subject as a result of damage or
injury (including death) to the property or person of anyone other than the
Government or its employees, or the vessel or its owner, arising in whole or in
part from the negligence or other wrongful act of the Contractor or its agents or
employees, or any subcontractor, or its agents or employees.
(1) The Contractor's obligation to indemnify under this paragraph shall not
exceed the sum of $300,000 as a consequence of any single occurrence with
respect to any one vessel.
3
The Background section summarizes only the facts relevant to the indemnification issue.
The parties and the court are familiar with the extensive factual and procedural history of this
case; it has been recounted many times previously and will not be restated here. Additionally,
with the exception of the United States' Trial Exhibit 555, all referenced exhibits were
previously admitted by the court. The United States' Trial Exhibit 555 is admitted for the limited
purpose of indemnification. Finally, while the parties vigorously dispute the legal issues with
regard to the indemnification question, they do not dispute the facts relevant to indemnification.
Page 3 - OPINION AND ORDER
(2) The indemnity includes, without limitation, suits, actions, claims, costs, or
demands of any kind, resulting from death, personal injury, or property damage
occurring during the period of performance of work on the vessel or within 90
days after redelivery of the vessel. For any claim, etc., made after 90 days, the
rights of the parties shall be as determined by other provisions of this agreement
and by law. The indemnity does apply to death occurring after 90 days where the
injury was received during the period covered by the indemnity.
(Def.'s Trial Ex. 507 at 104-06; Trial Ex. 508 at USOl375-77.).) At the time of the accident,
Tucker was working on the ESSA YONS under the M&R Contract.
Josh Economides was
aboard the ship pursuant to the Repower Contract.
Discussion
The United States contends Cascade's contractual indemnity obligation to the United
States totals $600,000, i.e., $300,000 under each of the two Contracts.
As such, Tucker's
Judgment against the United States must be reduced by $600,000. According to the United
States, the indemnification provisions in the contracts between the United States and Cascade are
clear, complete, and unambiguous on their face. Conversely, Tucker argues the indemnification
provisions do not require Cascade to indemnify the United States for claims arising from the
United States' own negligence. Alternatively, if the United States is entitled to indemnification
under one of the Contracts, its recovery is limited to $300,000 for a single occurrence on the
ESSAYONS.
The parties agree the indemnification decision in this case is controlled by the Supreme
Court's ruling in United States v. Seckinger, 397. U.S. 203 (1970). In Seckinger, the Supreme
Court considered an indemnification claim by the United States against a contractor. In that case,
the United States brought suit against the contractor for indemnity after the injured party received
Page 4 - OPINION AND ORDER
a judgment against the United States. Id. at 204-06. The indemnification clause al issue in
Seckinger provided:
11. PERMITS AND RESPONSIBILITY FOR WORK, ETC. The Contractor
shall, without additional expense to the Government, obtain all licenses and
permits required for the prosecution of the work. He shall be responsible for all
damages to persons or property that occur as a result of his fault or negligence in
connection with the prosecution of the work. He shall also be responsible for all
materials delivered and work performed until completion and final acceptance,
except for any completed unit thereof which theretofore may have been finally
accepted.
Id. at 884 n.9. The Court determined this provision did not include indemnification for the
United Stales' own negligence.
"In short, if the United States expects lo shift the ultimate
responsibility for its negligence to its various contractors, the mutual intention of the parties to
this effect should appear with clarity from the face of the contract." Id. at 885. Under that
standard, the contract provision in Seckinger did not encompass indemnification for the United
States' negligence. Id. at 885-86.
Although the Court cited a clause recommended by the American Institute of Architects
("AIA") as an example of a valid indemnity provision, it explicitly stated the example was used
for illustrative purposes only and was not an attempt lo identify the specific language required to
shin ultimate liability to the indemnitor. Id. at 213 n.17. The Court declined to hold that a
provision "intended to encompass indemnification for the indemnitee's negligence must include
an 'indemnif)' and hold harmless' clause or that it must explicitly state that indemnification
extends to injuries occasioned by the indemnitee's negligence."
Id.
Instead, the Court
emphasized that "[c]onlract interpretation is largely an individualized process, with the
Page 5 - OPINION AND ORDER
conclusion in a particular case turning on the particular language used against the background of
other indicia oflhe parties' intention." Id.
Relying upon several Circuit Courts of Appeal cases that came after the decision in
Seckinger,4 the United States insists the indemnity clause in the Cascade Contracts is sufficient to
encompass responsibility for the injuries lo Tucker resulting from the United States' negligence
here. First, the United States cites to a decision by the Fourth Circuit in United States v. Hollis,
424 F.2d 188 (4th Cir. 1970), and argues the indemnity clause in that case "is nearly identical" to
the provision in the Cascade Contracts. The provision stated, in relevant part:
The Contractor indemnifies and holds harmless the Government ... against all
suits ... (including, without limitation, ... personal injury ... ) to which the
Government ... may be subject or put by reason of damage or injury ... to the
property or person of anyone other than the Government, its agencies,
inslnnnentalities and personnel ... arising or resulting in whole or in part from
the fault, negligence, wrongful acl or wrongful omission of the Contractor, or any
subcontractor, his or their servants, agents or employees; . . . . Such indemnity
shall include, without limitation, suits, actions, claims, costs or demands of any
kind whatsoever, resulting from ... personal injury ... occurring during the
period of work on the vessel ....
Id. at 189. The court in Hollis determined while the contract provision "did not include a 'hold
harmless' clause, the indemnity provision itself was clear and explicit and staled the contractor's
obligation to indemnify the Govemmenl for any liability caused 'in whole or in part' by the
4
The United States also cites to the Second Circuit's decision in Shenker v. United States,
322 F.2d 622 (2d Cir. 1963), the Third Circuit's decision in Beloit Power Systems v. Hess Oil
Virgin Islands, 757 F.2d 1427 (3d Cir. 1985), and the Ninth Circuit's decision in United States v.
San Francisco Elevator Company, 512 F.2d 23 (9th Cir. 1975). The decision in Shenker
predates the Supreme Court's decision in Seckinger and the United States offers no explanation
for its applicability here. The dispute in Beloit involved private parties and, again, there is no
explanation or analysis by the United States for its relevance in this litigation. Finally, in San
Francisco Elevator, the United States' right to indemnification against the contractor was not in
dispute.
Page 6 - OPINION AND ORDER
provision did not
contractor." Id at 191. The statement by the Fourth Circuit in Hollis that the
e of the cited
include a hold harmless clause appears to be in error. Indeed, the first sentenc
clause states:
"Contractor indemnifies and holds harmless the Government."
Id. at 189
n.2 (D.S.C. 1989)
(emphasis added); see also Pickett v. United States, 724 F. Supp. 390, 394
a "hold harmless"
("The opinion incorrectly states that the contract provision 'did not include
uishable from the
clause.""). Tims, the indemnification clause in the Cascade Contracts is disting
provision in Hollis
provision in Hollis based upon the hold harmless language. Moreover, the
resulting from .
also provided indemnity "without limitation" for claims "of any kind whatsoever,
broad language is
. . personal injury ... occurring during the period of work on the vessel." Such
424 F.2d at 190
not present in the indemnification clause of the Cascade Contracts. See Hollis,
(provision is "admittedly broad").
States, 599
Next, the United States cites the Second Circuit's decision in Gibbs v. United
provided, in part:
F.2d 36 (2d Cir. 1979). In Gibbs, the court interpreted an indemnity clause that
all
The contractor shall save harmless and indemnify the Postal Service ... from
received or
claims ... resulting from any personal injury or property damage
to
sustained by any person ... attributable to any work performed under or related
, cause of
this contract, regardless of whether such claims, loss, damage, actions
or
actions, expense and/or liability may be attributable to the fault, failure
negligence of the contractor.
ed the parties'
599 F.2d at 40. That court held this language clearly and unequivocally express
the comt found in
intent to require the contractor to indemnify the Postal Service even where, as
Gibbs, the contractor was not in any way negligent. The Second Circuit slated:
as
First, the clause contains the terms, "save harmless and indemnify," which
ification
Justice Brennan indicated, do help show an intent to encompass indemn
to
for the indemnitee's negligence. Second, the clause obligates the contractor
injury
indemnify the government for "all claims ... resulting from any personal
Page 7 - OPINION AND ORDER
... growing out of ... any work performed under or related lo this contract ... ,"
which on its face covers the plaintiffs claim here. There are no express
exceptions to the broad language.
Id. Unlike the indemnification provision in the Cascade Contracts, the clause in Gibbs had both
the express "save harmless" language and explicitly stated indemnification will be required for
"any loss" sustained by "any person" and "regardless of whether" liability was attributable to the
contractor.
The third case relied upon by the United States is the Seventh Circuit's decision in Gillen
Company v. United States, 825 F.2d 1155 (7th Cir. 1987). In Gillen, the disputed contract stated:
The Contractor indemnifies and holds harmless the Government ... against all
suits, actions, claims, ... to which the Govemment ... may be subject or put by
reason of damage or injury ... [to] any one other than the Govemment, ... arising
or resulting in whole or in part from the fault, negligence, wrongful act or
wrongful omission of the Contractor .... Such indemnity shall include, without
limitation, suits, actions, claims, costs or demands of any kind whatsoever,
resulting from death, personal h1jury or properly damage occurring during the
period of performance of work on the vessel or within sixty (60) days after
redelivery of the vessel ....
Id. at 1155-56. The court held the provision was unambiguous on its face. Id. at 1157. First, the
clause clearly stated plaintiff agreed lo indemnify and hold harmless defendant against all suits
arising from the total or partial negligence of the contractor. Additionally, the contract also
provided "the indemnity includes any loss without limitation of any kind whatsoever." Id.
Because the provision explicitly applies to "all suits," it would inappropriate for the court to
restrict that interpretation to "all suits, except those brought by the contractor." Id. Thus, the
provision in Gillen included somewhat broader language than the clause presently before the
court.
Page 8 - OPINION AND ORDER
Turning now to the indemnification clause in the Cascade Contracts, the relevant
language states Cascade "indemnifies the Government ... against all claims, demands, or causes
of actions ... arising in whole or in part from the negligence ... of [Cascade] .... " Under the
circumstances of this case, and the controlling precedent, the court finds the provision in the
Cascade Contracts does not extend indemnification for the negligence oflhe United Slates. The
court's finding is grounded in the reasons set forth below.
As the parties contend and the court agrees, the decision here is controlled by the
Supreme Court's analysis and holding in Seckinger.
Prior to undertaking the contract
construction in that case, the Court noted "general principles that have evolved concerning the
interpretation of contractual provisions." 397 U.S. at 884. The Court first relied upon the maxim
that the contract should be construed most strongly against the drafter, which in both Seckinger
and here is the United States. There are alternative interpretations for the indemnification clause
al issue in this case.
Indeed, the United States and Tucker each insist their respective
interpretations of the indemnification provision are plausible based upon the express language of
the clause, yet they reach opposing conclusions as to the meaning. See, e.g., Conrad v. Ace
Property & Casualty Insumnce Company, 532 F.3d 1000, 1005 (9th Cir. 2008) (clause is
ambiguous if "on its face" il is susceptible to two or more interpretations, both of which are
reasonable.)' Thus, any ambiguity here will be resolved in favor of Tucker.
5
Although ambiguities are construed against the drafter, "a strict application should not
trump the plain, clear language such that a strained or forced construction results." Conmd v.
Ace Property & Casualty Insurance Co., 532 F.3d 1000, 1005 (9th Cir. 2008) (quotations,
ellipses and citation omitted).
Page 9 - OPINION AND ORDER
Next, the Court announced a bright line rule with respect to indemnification for the
indemnitee's own negligence: The court must be firmly convinced that such an interpretation
reflects the intention of the parties. Id. at 885 (emphasis added). "[I]f the United States expects
to shift the ultimate responsibility for its negligence to its various contractors, the mutual
intention of the parties to this effect should appear with clarity from the face of the contract." Id.
Historically, courts have been reluctant "to cast the burden of negligent actions upon those who
were not actually at fault." Id. This is especially relevant in cases where there exists a disparity
in bargaining power and economic resources. Id. The Court expressly cited the example of "the
United States and particular government contractors." Id.
The court notes the Cascade Contracts were awarded pursuant to a solicitation process in
which the United States set the terms of the award. (Def.s' Trial Ex. 508, 509.) Moreover, the
express terms of the contract do not convey with clal'ity a mutual intent of the parties to shift the
burden of the United States' own negligence to Cascade. Unlike the cases relied upon by the
United States, the indemnification provision does not include "hold harmless" language and,
instead uses only the term "indemnifies." The term "hold harmless" means "to absolve (another
party) from any responsibility for damage or other liability arising from the transaction." Black's
Law Dictionary 800 (9th ed. 2009). The term "indemnify" means "to reimburse (another) for a
loss suffered because of a third party's or one's own act or default." Black's Law Dictionary 837
(9th ed. 2009). Thus, while this court is aware of the Supreme Court's statement in Seckinger
that neither "hold harmless" language nor an express extension of indemnification disclaimer is
conclusive, the presence of either in a contract would provide evidence of a mutual intent of the
parties to indemnify the United States for its own negligence.
Page 10 - OPINION AND ORDER
Additionally, there is no language that explicitly states the indemnification extends to
iqjuries occasioned by the United States' own negligence. While an express term is not required
under Seckinger, this court must be convinced that the terms of the clause allow for that clear
interpretation. Here, the United States relies upon the "arising in whole or in part from the
negligence ... of [Cascade]" language as an explicit intention by the parties to encompass the
United States' liability as well as Cascade's. The court cannot agree.
The common sense
interpretation of that term, when considered in the context of the entire provision, is that Cascade
agreed to indemnify the United States for harm caused by Cascade's negligence even if Cascade
was not the sole cause of the injury. In other words, Cascade would be liable for its harm even if
it were only partially responsible.
Although the AJA indemnification clause contained the language "in whole or in part by
any negligent act ... of the Contractor" it also included a "hold harmless" term and an explicit
statement that indemnification extended to acts of the indemnitee. Without something more,
such as a hold harmless term or language to cover "any acts" or "any reason" or "damages of any
kind," the United States' reliance here on the phrase "arising in whole or in part" falls short of
encompassing the United States' own negligence. Moreover, the clause under consideration
provides indemnity for "all claims" arising from the wrongful conduct of the contractor, not
indemnity "for any and all claims." The "all claims" language in the Cascade Contracts means
all claims attributable to Cascade and not "all claims" by whomever caused. Compare Hollis,
424 F.2d at 189 ("Contractor indemnifies and holds harmless the Government ... against all
suits" and indemnity provided "without limitation" for claims "of any kind whatsoever, resulting
from ... personal injury ... occurring during the period of work on the vessel"); Gibbs, 599 F.2d
Page 11 - OPINION AND ORDER
at 40 ("save harmless clause" and explicit indemnification regardless of whether such claims may
be attributable to the fault of the contractor); Gillen 825 F.2d at 1155-56 (clause included the
express "hold harmless" language and explicitly stated indemnification will be required for "any
loss" without limitation); see also Smith v. United States, 497 F.2d 500, 508 (5th Cir. 1974)
("The contractor shall assume all liability, and hold and save the government ... harmless for
any and all claims for personal injuries ... or other claims arising out of or in connection with
... the contract.")
Finally, there are two additional reasons that support the court's interpretation of the
contract language in this case.
First, comparative negligence has long been a principle of
maritime law. Nortl1folk Shipbuilding & Drydock Co1p. v. Garris, 532 U.S. 811, 815 (200 I) ("a
century ago the maritime law exchanged the common law's rule of contributory negligence for
one of comparative negligence"); Pope & Talbot, Inc. v. Hawn, 346 U.S. 406, 409 (1953)
(admiralty's comparative negligence rule barred application of state contributory negligence
rule); Socony-Vac1111111 Oil Co. v. Smith, 305 U.S. 424, 431 (1939) ("Any rule of assmnption of
risk in admiralty, whatever its scope, must be applied in conjunction with the established
admiralty doctrine of comparative negligence and in harmony with it."). The indemnification
clause in the Cascade Contracts entitles the United States to recover from Cascade that portion of
the judgment awarded to a plaintiff, as against the United States, that corresponds to Cascade's
percentage of negligence contributing to a plaintiffs injuries.
This provision then is in
accordance with the maritime notion of comparative negligence/fault.
Second, under the particular circumstances of this case, the court is not convinced the
parties intended to place the responsibility for the United States' negligent conduct on Cascade's
Page 12 - OPINION AND ORDER
sjde of the ledger. Specifically, the court found the United States liable for an unsafe condition
on the ESSA YONS, the existence of which predates both of the Cascade Contracts at issue. In
addition, the United States created, maintained and controlled the hazard that injured Tucker. To
shift the liability for this pre-existing condition onto the contractor is particularly onerous and,
under the existing precedent, requires a clear and unequivocal expression of mutual intent.
lvloreover, the court's decision here comports with the Ninth Circuit's continued reluctance "to
cast the burden of negligent actions upon those who were not actually at fault." United States v.
English, 521 F.2d 63, 67 (9th Cir. 1975);6 United Stales v. Contract 1\Ianage111ent, Inc., 912 F.2d
I 045, I 049 (9th Cir. 1990) ("We refuse to construe special paragraph 29 to give the government
a benefit for which it did not expressly bargain, especially in light of our continued concern over
the public policy ramifications of allowing the government to shift the burden of its negligent
acts to its economically weaker contractors.").
The decision in Seckinger was issued over thirty years before the Cascade Contracts.
Certainly, the United States, as the drafter of those Contracts, could have included more explicit
terms to require indemnification for its own negligence. As in Seckinger, the court finds this
intention was not "clearly and unequivocally" manifested in the indemnification clause of the
Cascade Contracts.
397 U.S. at 215-16 (Court's decision preserves "the principle that
indemnification for the indemnitee's own negligence must be clearly and unequivocally indicated
6
In United States v. English, 521 F.2d 63 (9th Cir.1975), the Ninth Circuit held the
government was not entitled to indemnification by the contractor for the government's negligent
acts. Id. at 67. The provision at issue stated the contractor would be "responsible for all
damages to person or property that occur as a result of his fault of (sic) negligence" and would "
hold and save the government ... free and harmless from liability of any nature occasioned by
his operations." Id.
Page 13 - OPINION AND ORDER
as the intention of the parties is preserved intact.") Accordingly, Cascade is responsible only for
the harm it caused the United States and not for harm the United States imposed upon itself.
Conclusion
Based upon the foregoing, the United States' request for Indemnification of the United
States Pursuant to its Contracts with Cascade (doc. #364) is DENIED. Within IO days, Tucker
shall submit to the court an appropriate form of judgment in this matter.
IT IS SO ORDERED
DA TED this/afafon•ebruary, 2015
Unit\ d States Magistrate Judge
\,,
Page 14 - OPINION AND ORDER
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