Safeway Inc. v. PDX, Inc. et al
Filing
31
Memorandum Opinion and Order denying 14 Motion for Summary Judgment filed by Safeway Inc.; granting 17 Motion for Summary Judgment filed by PDX, Inc. Summarizing, (1) the court is denying Safeway's motion for summary judgment, and (2) the court is granting PDX's motion for summary judgment, except as to the issue of whether the insurance company must intervene as the real party-in-interest before the defense litigation expenses incurred through DWT can be awarded. The co urt is withholding at this time entry of a final judgment to give the parties an opportunity to provide the court briefing on their respective positions on the need for the insurance company to intervene and appropriate steps to be taken by the court from this point forward as to the litigation expenses incurred through DWT. (See order for specifics.) (Ordered by Judge John McBryde on 4/1/2015) (mdf)
NORTHERN DlSTInCT OF TEXAS
FILED
IN THE UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF TEXl:S..
FORT WORTH DIVISION
CLERK, U.S. DISTRICT COURT
_
§
Plaintiff,
VS.
PDX,
Defendant.
I
D~puty
§
§
§
§
§
INC.,
3 I 2015
, By _ _-;::-
§
SAFEWAY INC.,
..
NO. 4:14-CV-683-A
§
§
MEMORANDUM OPINION
and
ORDER
Before the court for consideration and decision are crossmotions for summary judgment, one filed by plaintiff, Safeway,
Inc.
("Safeway"), seeking summary adjudications in its favor as
to relief it sought by its complaint against defendant, PDX, Inc.
("PDX"), and denying the relief sought by "PDX" in its
counterclaim against Safeway, and the other filed by PDX seeking
summary adjudications against Safeway as to the relief Safeway
sought against PDX, and in PDX's favor as to its counterclaim
against Safeway.
After having considered both motions, the
entire record in the above-captioned action, and pertinent legal
authorities, the court has concluded that Safeway's motion should
be denied and PDX's motion should be granted.
I
___ ..-1
I .
Background
A.
Nature of the Controversy
The outcome of both motions for summary jUdgment turn on the
legal effect under Texas law of an indemnification provision
contained in an agreement entered into between Safeway and PDX in
June 2006 titled "Keystone Indemnity Agreement"
("KIA").
The
claims with respect to which PDX seeks indemnification from
Safeway pursuant to the KIA are being asserted against PDX by
Kathleen Hardin ("Ms. Hardin") and Dane Hardin (collectively "the
Hardins"), as plaintiffs, against PDX and several other parties
in litigation pending in the Superior Court of the State of
California, County of Alameda, as Case No. RGl1600291, styled
"Kathleen Hardin and Dane Hardin, Plaintiffs, vs. Palo Alto
Medical Foundation, Inc., et al., Defendants"
("California
Action") .
B.
Claims Against PDX in the California Action
The Hardins alleged in the California Action that Ms. Hardin
had a serious adverse reaction to medicine she purchased at one
of Safeway's retail stores in California.
They complained that
Ms. Hardin did not receive when she purchased the medicine a
sufficient warning of the medicine's potential side effects,
including the adverse reactions she suffered; and, they alleged
2
that PDX bears responsibilitYI along with others
l
for Ms.
Hardin/s failure to receive adequate warning of the side effects.
In the California Action
l
the Hardins alleged products
liability and negligence causes of action against PDX based on
PDX/s participation in the process by which informational
material Safeway gave Ms. Hardin when she purchased the medicine
was created. 1
against PDX
I
In their products liability cause of action
the Hardins alleged:
72. The software program created designed
produced distributed and licensed for use to
retailers/licensees by Defendant[] PDX . . . was
defective in design in so far as it was designed and
modified to print monographs that automatically omitted
warnings of serious risks pertaining to the drug the
monograph accompanied including in this case
Lamotrigine.
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73. The said defects in design caused Plaintiff
to sustain the herein described injuries and damages.
74. As a direct result of the defective software
Plaintiff KATHLEEN HARDIN was caused to suffer the
injuries described herein.
Doc. 30
1
Ex. A at 18-19
1
~~
causes of action against PDX
72-73. 2
I
And
I
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in their negligence
they alleged:
76. At all times herein mentioned Defendant[]
PDX . . . owed a duty of reasonable care to Plaintiff
KATHLEEN HARDIN and assumed a duty of care by
I
'The papers in this action indicate that when the California Action was filed Safeway was a
defendant, and that Safeway was dismissed based on a limitations defense.
2The "Doc. _ " references are to the numbers assigned to the referenced items on the clerk's
docket in this Case No.4: 14-CV-683-A.
3
undertaking to render services to Safeway of a kind
that Defendant[] . . . should have recognized as
necessary for the protection of third persons
including Plaintiff KATHLEEN HARDIN.
l
77. Defendant[] . . . breached [its] duty of
reasonable care to Plaintiff by failing to provide
reasonable and adequate warnings regarding Plaintiff/s
prescription for Lamictal/Lamotrigine.
If Defendant[]
PDX . . . had not intentionally modified the software
to allow Safeway to distribute abbreviated drug
monographs that automatically omitted warnings of
serious risks then Plaintiff would not have taken the
medication and would not have sustained the injuries
and damages described herein.
l
78.
Defendant[] PDX['s] . . . actions were taken
with malice oppression and fraud in that Defendant[]
PDX . . . intentionally modified the software to allow
the distribution of five-section monographs that
automatically omitted warnings of serious risks when
Defendant[] PDX . . . knew and expressly stated in the
2006 Agreement that eight-section monographs should be
distributed to enable consumers to avoid harm.
Said
conduct was despicable and in willful and conscious
disregard for the rights and safety of others
including Plaintiff herein.
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79. As a direct and proximate cause of the
negligent conduct by Defendants SafewaYI . . . PDX [and
others Ms. Hardin sustained and will continue to
sustain the injuries and damages described herein.
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Id. at 19-20
c.
1
"
76-79.
Potentially Pertinent Provisions of the KIA
PDX is in the business of developing and licensing computer
software to be used by pharmacies in the fulfillment of
prescriptions for medication.
Safeway is a customer of PDX
a user of the PDX pharmacy system
4
l
which permits a pharmacy
1
and
1
such
as Safeway, to print and deliver a Patient Education Monograph to
its customers when it fills a prescription.
The KIA was entered
into between PDX and Safeway (which was referred to in the KIA as
"Customer") to put in writing understandings between them
concerning information Safeway would provide to its prescription
medicine customers by a monograph prepared through software
provided by PDX.
PDX's standard monograph software program created monographs
that had eight paragraphs, three of which were entitled
"Overdose," "Before Using," and "Additional Info," respectively.
The main sUbject matter of the KIA, as recited in the document,
was a modification by PDX of the software program for Safeway so
that Safeway would have the ability to omit those three
paragraphs from the monographs it supplied to its customers.
The
KIA recited that PDX was in a position to require its software to
accomplish Safeway's desires.
The substantive parts of the KIA
were entered into in the context of those recitations.
Included
in the substantive parts was the following:
1.
Upon execution of this Agreement PDX will
provide, in a commercially reasonable amount of time,
programming written in the PDX programming language to
execute on the most current update for the 4.6.05
released version of the PDX Pharmacy System software
that will create output to meet the requirements
5
provided by CUSTOMER and agreed to by PDX for the PDX
Pharmacy Management system software (the "Program") . .
Doc. 16 at 3,
~
1.
The indemnification provision of the KIA that is at the
heart of the controversy between Safeway and PDX in this action
reads as follows:
3.
CUSTOMER hereby expressly waives any claims
against PDX with respect to such Program and the use of
such and further agrees to indemnify and hold PDX
harmless from any and all loss, damage, or expense (or
claims of damage or liability) asserted against PDX
arising from CUSTOMER's use of the Program, including,
without limitation, claims that the Program or the
purpose for which this Program is used by CUSTOMER
constitutes a violation of the Title VI, SEC. 601,
EFFECTIVE MEDICATION GUIDES provisions of Pub. Law 104180. Such indemnification to include, without
limitation, reasonable attorney fees, salaries of PDX
employees or executives called to testify or provide
depositions, travel and accommodation costs for PDX
employees or executives called to testify or give
depositions and reasonable legal costs incurred by PDX
due to such claims.
Id. at 3,
~
3
(emphasis added).3
Other provisions of the KIA
that are potentially pertinent to issues raised by the parties in
3The reference in the indemnification provision to "Title VI, Sec. 601, Effective Medication
Guides provisions of Pub. Law 104-180" is to legislation mentioned in the KIA that required members of
the healthcare industry to develop regulations concerning oral and written prescription information for
consumers. Doc. 16 at 2-3. The wording of the KIA indicates that PDX's standard monograph software,
before modification to satisfy Safeway's desires, was intended to assist in compliance with the regulatory
requirements, which were commonly known as the "Keystone Criteria." Id.
6
this action are as follows:
5.
This Agreement is governed by the laws of the
State of Texas without giving application to the
conflicts of laws provisions thereof.
6.
This Agreement constitutes the entire
Agreement between the parties concerning the subject
matter hereof. No amendment, modification, extension
or cancellation of this Agreement shall be binding on
the parties unless mutually agreed to and executed in
writing by each of the parties.
* * * * *
8.
In any legal action on or concerning this
Agreement, the prevailing party shall be awarded its
reasonable attorneys' fees, costs and necessary
disbursements, to be paid by the non-prevailing party.
Id. at 4,
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5-6, 8.
The parties are in agreement that Texas law governs the
interpretation and application of the KIA.
D.
Relief Sought by Safeway's Complaint
Safeway filed its complaint for declaratory jUdgment on
August 21, 2014.
It alleged that PDX had demanded that Safeway
indemnify and defend PDX for the negligence and strict liability
claims made against PDX in the California Action.
Safeway
requested that the court enter declaratory jUdgment that (1) the
indemnity provision in the KIA does not satisfy requirements
under Texas law that would obligate Safeway to defend PDX for the
claims asserted against PDX in the California Action or to
indemnify PDX for those claims, and (2) Safeway is entitled to
7
recover from PDX Safeway's reasonable and necessary attorney's
fees.
E.
PDX's Counterclaim
PDX filed its counterclaim against Safeway on September 29,
2014, asserting a breach of contract cause of action against
Safeway based on Safeway's refusal to provide the indemnification
that PDX contends it should receive pursuant to the KIA
indemnification provision, and requesting specific performance by
Safeway of its KIA indemnification obligations, declaratory
relief regarding the rights and duties of the parties under the
KIA, and recovery of attorney's fees.
II.
The Grounds of Each of the Motions
A.
Safeway's Motion
Safeway asserted that it is entitled to summary judgment on
its request for declaratory relief because, when Texas law is
applied, the indemnity provision in the KIA does not obligate
Safeway to indemnify PDX for claims resulting from PDX's own
negligence or based on strict liability or for potential punitive
damages.
The focus of Safeway's arguments in support of its
motion is the rule of Texas law that an indemnity provision will
not require the indemnitor to provide indemnification to the
indemnitee for losses reSUlting from the negligence or strict
8
liability of the indemnitee unless the indemnification provision
expressly so provides.
Alternatively, Safeway argues that even
if that were not so, PDX would not be entitled to indemnification
for the claims asserted against it by the Hardins in the
California Action because those claims do not arise out of
Safeway's use of
~the
Program" referenced in the indemnity
provision, but, instead, are claims arising out of PDX's own
conduct, including PDX's programming, marketing, and sale of the
software it provided to Safeway.
Safeway maintained that the indemnity provision in the KIA
should not extend to punitive damages because, Safeway argued,
indemnity for punitive damages should be against public policy,
and for the added reason that Safeway is of the belief that the
express negligence doctrine would have to be satisfied as to the
underlying cause of action against PDX for there to be an
indemnity obligation related to the punitive damages claim
against PDX.
Safeway includes in its motion for summary judgment a
request for a ruling that it is entitled to recover its
reasonable attorney's fees and costs.
B.
PDX's Motion
PDX noted in its brief in support of its motion for summary
judgment that it was added as a party defendant in the California
9
Action "based solely on the fact that PDX created and provided
the Program to Safeway allowing it to print and provide Mrs.
Hardin with the Short Version Monograph," Doc. 18 at 24, and,
that the summary judgment record establishes that:
Safeway requested, and PDX agreed to perform, a
single act with a specified result--give Safeway the
capability to elect to print a five-paragraph Monograph
instead of having the software automatically print an
eight-paragraph one.
PDX performed exactly as Safeway
requested by providing the code for download that
Safeway could elect to install, and thereby giving
Safeway the print capability it specifically requested.
When Safeway chose to install the software, the Program
performed exactly as the parties intended.
Id. at 30 (footnotes omitted).
PDX added that:
There are no allegations by the Hardins or
Safeway, and also no evidence anywhere, that the
Program provided to and used by Safeway malfunctioned
or failed, in any way. No one alleges, and there is no
evidence that the Program did not perform precisely as
Safeway requested. No one alleges, and there is no
evidence, that PDX's coding of the Program was
negligent or that the Program performed the task
requested by Safeway in a negligent manner. The
evidence is instead that the Pharmacy System, as
modified by the Program, did precisely as Safeway had
requested.
It is PDX's undertaking to give Safeway the
print functionality it requested, and not the care with
which that work was carried out, that is the basis of
the Hardins' complaints.
Id. at 31 (footnotes omitted) .
Based on the facts it recited in its brief, PDX took the
position that the express negligence doctrine established by
Ethyl, Corp. simply does not apply to the KIA's indemnification
10
provision.
Alternatively, PDX took the position that even if
that doctrine did apply, the KIA indemnification provision
complied with it because the provision, when considered in
context with the other provisions of the KIA, clearly and
unambiguously demonstrated the parties' intent that Safeway would
indemnify PDX for the very conduct about which the Hardins
complained as to PDX in the California Action.
PDX argued in its
brief that the parties made clear in the KIA their "intent that
Safeway agreed to indemnify PDX for claims exactly like those
pending against PDX in the California Litigation."
Id. at 43.
PDX requested by its motion that the court declare that the
indemnity provision in the KIA is an enforceable agreement, that
Safeway has breached its indemnification obligation to PDX as to
the claims made against PDX by the Hardins in the California
Action, and that the court grant specific performance, ordering
Safeway to perform its indemnity obligations.
In addition, PDX
moved that the court award it recovery of its attorney's fees and
expenses pursuant to the provisions of the KIA.
III.
Analysis
A.
Pertinent Summary Judgment principles
Rule 56(a) of the Federal Rules of civil Procedure provides
that the court shall grant summary jUdgment on a claim or defense
11
if there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.
Fed. R. civ.
P. 56(a); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247
(1986).
The movant bears the initial burden of pointing out to
the court that there is no genuine dispute as to any material
fact.
Celotex Corp. v. Catrett, 477 U.S. 317, 323, 325 (1986).
The movant can discharge this burden by pointing out the absence
of evidence supporting one or more essential elements of the
nonmoving party's claim, "since a complete failure of proof
concerning an essential element of the nonmoving party's case
necessarily renders all other facts immaterial."
Id. at 323.
Once the movant has carried its burden under Rule 56(a), the
nonmoving party must identify evidence in the record that creates
a genuine dispute as to each of the challenged elements of its
case.
Id. at 324; see also Fed. R. Civ. P. 56(c)
("A party
asserting that a fact . . . is genuinely disputed must support
the assertion by . . . citing to particular parts of materials in
the record
.").
If the evidence identified could not lead
a rational trier of fact to find in favor of the nonmoving party
as to each essential element of the nonmoving party's case, there
is no genuine dispute for trial and summary judgment is
appropriate.
Matsushita Elec. Indus. Co. v. zenith Radio Corp.,
475 U.S. 574, 587, 597 (1986).
12
B.
The Texas Express Negligence and Related strict Liability
Express Intent Rules
The express negligence doctrine as it pertains to indemnity
agreements was adopted in Texas by the Texas Supreme Court in
Ethyl Corp. v. Daniel Constr. Co., 725 S.W.2d 70S, 706, 708 (Tex.
1987).
The Ethyl Corp. indemnity agreement provided that the
indemnitor indemnified and held harmless the indemnitee against
loss or damage as a result of "operations growing out of the
performance of this contract and caused by the negligence or
carelessness of [indemnitor, indemnitor's employees],
Subcontractors, and agents or licensees."
Id. at 707.
The Court
said that it adopted "the express negligence test for determining
whether the parties to an indemnity contract intend to exculpate
the indemnitee from the consequences of its own negligence."
at 706.
In the course of doing so, the Court rejected the "clear
and unequivocal language" test it previously had applied.
707-708.
Id.
Id. at
The goal in adopting the new test was to cut through
the ambiguity of many indemnity provisions.
Id. at 708.
In Ethyl Corp., the Court also adopted a "four corners" rule
for determining compliance with the express negligence test by
saying that " [u]nder the doctrine of express negligence, the
intent of the parties must be specifically stated within the four
corners of the contract."
Id.
(emphasis added).
The Court
denied Ethyl Corp.'s indemnity claim on the ground that the
13
indemnity provision in question failed to meet the express
negligence test.
Id.
Since the Ethyl Corp. decision, the Texas Supreme Court has
adhered to the express negligence doctrine.
See,~,
Fisk
Elec. Co. v. Constructors & Assoc., 888 S.W.2d 813, 814-15 (Tex.
1994) i Dresser Indus.,
Inc. v. Page Petroleum, Inc., 853 S.W.2d
50S, 508-09 (Tex. 1993) i Atlantic Richfield Co. v. Petroleum
Pers., Inc., 768 S.W.2d 724, 725-26 (Tex. 1989) i Berry v. Dodson,
Nunley & Taylor, P.C., 729 S.W.2d 690, 691 (Tex. 1987).
In some of its post-Ethyl Corp. decisions, the Texas Supreme
Court has elaborated on the purpose of the express negligence
doctrine.
For example, in Atlantic Richfield Co., 768 S.W.2d at
726, the Court said that "[t]he purpose behind the adoption of
the express negligence rule is to require scriveners to make it
clear when the intent of the parties is to exculpate an
indemnitee from the indemnitee's own negligence."
In Enserch
Corp. v. Parker, 794 S.W.2d 2, 8 (Tex. 1990), the Court, after
noting that under Ethyl Corp.,
"a party seeking indemnity from
the consequences of its own negligence must express that intent
in specific terms within the four corners of the contract," id.
at 8, upheld an indemnity provision on the ground that "the
contract as a whole is sufficient to define the parties' intent
14
that [the indemnitor] indemnify [the indemnitee] for the
consequences of [the indemnitee's] own negligence," id.
In Fisk Elec. Co., the Court explained that:
The express negligence test was established by
this Court in Ethyl in order "to cut through the
ambiguity" of indemnity provisions, thereby reducing
the need for satellite litigation regarding
interpretation of indemnity clauses. Ethyl, 725 S.W.2d
at 708.
Parties seeking to indemnify themselves for
their own negligence must express that intent in
specific terms.
Id.
In Gulf Coast Masonry, Inc. v.
Owens-Illinois, Inc., 739 S.W.2d 239 (Tex. 1987), we
held that indemnity provisions that do not state the
intent of the parties within the four corners of the
instrument are unenforceable as a matter of law.
888 S.W.2d at 814.
The Court added in Fisk Elec. Co. that "[t]he
express negligence requirement is not an affirmative defense but
a rule of contract interpretation" and that "[i]ssues of contract
interpretation are determinable as a matter of law," id.,
explaining that:
The purpose of the express negligence rule "is to
require scriveners to make it clear when the intent of
the parties is to exculpate an indemnitee for the
indemnitee's own negligence." Atlantic Richfield Co.
v. Petroleum Personnel, Inc., 768 S.W.2d 724, 726 (Tex.
1989). Either the indemnity agreement is clear and
enforceable or it is not.
Such a determination should
not depend on the outcome of the underlying suit, but
should be established as a matter of law from the
pleadings.
Id. at 815.
In Houston Lighting & Power Co. v. Atchinson, Topeka & Santa
Fe Ry. Co., 890 S.W.2d 455 (Tex. 1994), the Texas Supreme Court
15
applied the principle of the express negligence doctrine to a
case where the liability of the indemnitee to the third party was
based on the indemnitee's strict liability to the third party.
The Court adopted what it referred to as an uexpress intent
rule," id. at 458-59, holding that uparties to an indemnity
agreement must expressly state their intent to cover strict
liability claims in specific terms," id. at 459.
C.
The Court Has Concluded That the Indemnity Provision in the
KIA Satisfies the Texas Express Negligence and Related
Strict Liability Express Intent Rules
Safeway and PDX could not have made it any clearer within
the four corners of the KIA that the indemnity provision in the
KIA was intended to cover claims against PDX of exactly the kind
the Hardins are making against PDX in the California Action.
The
claims of the Hardins against PDX arose directly from Safeway's
use of the PDX Pharmacy Management system software, which is
referred to in the indemnity provision as "the Program."
The
most likely ways PDX could be held liable for Safeway's use of
the Program would be based on claims of negligence or strict
product liability on the part of PDX.
within the four corners of
the KIA, the KIA indemnity provision necessarily expressed a
contemplation by the parties that Safeway's obligation to
indemnify PDX included claims based on PDX's own negligence and
16
strict liability.
If the indemnity provision were to be given
any other interpretation, it would be rendered meaningless.
The theories of liability alleged by the Hardins against PDX
in the California Action are based on precisely those
circumstances that were contemplated by the indemnification
provision.
See supra at 3-4.
The introduction in the opposition
of the Hardins to a special motion to strike that PDX filed in
the California Action makes clear that the theories of recovery
asserted by the Hardins against PDX are directly, and solely,
related to the decision of Safeway to elect to use the
modification of PDX's software program, stating:
Plaintiffs' claims [against PDX] are premised on the
fact that PDX knowingly risked the health and safety of
prescription medicine consumers, including Plaintiff,
Kathleen Hardin, by collaborating with Safeway to
provide to Safeway pharmacy customers five section drug
monographs, which were deficient according to the Food
and Drug Administration ("FDA").
Doc. 19 at 062.
Safeway argues that the word "negligence" and the words
"strict liability" would have to be used in the indemnity
provision to satisfy the Texas requirements.
disagrees.
The court
Apropos here is language used by a Texas court of
appeals in Banzhaf v. ADT Sec. Sys. Sw, Inc.:
The express negligence doctrine does not require
that the indemnity provision use the specific word
"negligence." The test is whether the parties made it
clear in the agreement that it was their intent to
17
provide for indemnification of the indemnitee's own
negligent acts.
28 S.W.3d 180, 189 (Tex. App.--Eastland 2000, pet. denied)
(citation omitted).
The indemnity provision in the KIA passes
the test because "the parties made it clear in the agreement that
it was their intent to provide for indemnification of the
indemnitee's own negligent acts."
Id. at 189.
Obviously Safeway and PDX both recognized when they entered
into the KIA that the decision of Safeway to eliminate the three
paragraphs from the monographs it prepared by use of the Program
could lead to liability on the part of PDX under theories of
negligence and strict liability.
PDX's agreement to allow
Safeway to create through use of PDX software monographs for
Safeway's customers that did not contain those paragraphs created
the need for PDX to require that the indemnity provision be
included in the KIA.
Those were the very risks to which the KIA
exposed PDX that the indemnity provision was intended to cover.
Safeway has not presented the court with any authority that
would cause the court to think that punitive damage claims
against PDX based on the conduct of PDX described in the
California Action would not be within the scope of the indemnity
provision.
The court concludes that they would be.
Therefore, Safeway's motion for summary jUdgment should be
denied, and PDX's motion should be granted as to its request for
18
a declaration that the indemnification provision causes Safeway
to be obligated to indemnify and hold PDX harmless from any and
all loss, damage, or expense related to the claims asserted by
the Hardins against PDX in the California Action.
Put another
way, PDX is entitled to a declaration that the indemnity
provision in the KIA applies to the claims that are being made by
the Hardins against PDX, and Safeway is obligated to provide
indemnification to PDX as to the claims being made against it by
the Hardins pursuant to such indemnity provision.
The court is not ordering specific performance as requested
by PDX because the court considers such an order inappropriate in
a case such as this.
Presumably Safeway will honor its
indemnification obligations now that they have been jUdicially
established by this court (unless, of course, Safeway is
successful in an appeal from this court's declaratory rulings
against it).
If Safeway fails to comply with this court's
declarations, PDX will be at liberty to file another breach-ofcontract suit against Safeway, and will have the use of this
court's rUlings by way of claim or issue preclusion.
D.
The Request of PDX for Recovery of Litigation Expenses
PDX has requested recovery of litigation expenses pursuant
to the KIA.
Its request for attorney's fees and litigation
expenses incurred in enforcing the indemnity provision is based
19
on paragraph 8 of the KIA, which provides that "[i]n any legal
action on or concerning this Agreement, the prevailing party
shall be awarded its reasonable attorneys' fees, costs and
necessary disbursements, to be paid by the non-prevailing party.H
Doc. 16 at 4,
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8.
PDX is the prevailing party.
PDX has established in the summary judgment record through
the affidavit of Mack Ed Swindle ("Swindle H) that it has incurred
reasonable and necessary litigation expenses of $61,739.31 in
connection with this action through January 31, 2015, and that it
anticipates that it will incur an additional $27,935.80 in
reasonable and necessary litigation expenses in connection with
this action from February 1, 2015 through entry of a final
summary judgment by this court, for a total of $89,675.11.
Doc. 19 at 0491,
~
60. 4
Safeway's response to PDX's request for recovery of
litigation expenses incurred in this action is limited to the
contention that the request "should be denied because the Court
should determine that PDX is not the prevailing party.H
at 2.
Doc. 23
The court is satisfied that PDX has provided credible,
undisputed evidence supporting its claim for reasonable and
4The Swindle affidavit also estimates that PDX will incur an additional $35,000 as reasonable
and necessary litigation expenses through the Fifth Circuit Court of Appeals. Doc. 19 at 0491, ~ 60.
This court "does not have a practice of awarding fees anticipated to be incurred in an appeal, and is not
doing so in this instance.
20
necessary litigation expenses incurred in connection with this
action in the amount of $89,675.11.
Therefore, the court is
ordering that PDX have recovery from Safeway of that amount.
PDX also seeks recovery from Safeway pursuant to the KIA
indemnification provision of reasonable and necessary litigation
expenses incurred in the defense of PDX in the California Action.
The indemnification provision specifically contemplates that PDX
will have such a recovery from Safeway.
The defense litigation expenses have two components,
litigation expenses incurred in defense of the California Action
through Swindle's law firm and defense expenses incurred through
the firm of Davis Wright Tremaine, LLP
(~DWT").
Swindle's
affidavit establishes that PDX has incurred through Swindle's
firm $138,615.25 as reasonable and necessary litigation expenses
in the defense of PDX in the California Action through
January 31, 2015.
Id. at 0495,
~
85.
The court is satisfied
that PDX has provided credible, undisputed evidence supporting
its claim for reasonable and necessary litigation expenses
incurred in connection with the defense of PDX through Swindle's
firm in the California Action in the amount of $138,615.25.
Therefore, the court is ordering that PDX have recovery from
Safeway of that additional amount of litigation expenses, for a
21
total monetary recovery by PDX from Safeway of $228,290.36
($138,615.25 + $89,675.11
= $228,290.36).
The second aspect of PDX's request for recovery of defense
litigation expenses pertains to expenses incurred in the defense
of PDX in the California Action through DWT.
Through the
affidavit of Thomas R. Burke ("Burke"), PDX has established that
the reasonable and necessary litigation expenses incurred in the
defense of PDX in the California Action through the firm of DWT
through February 11, 2015, is $760,537.70.
, 24.
Doc. 19 at 0302-03,
Giving effect to the statement made by Swindle in his
affidavit that in his opinion one percent of the litigation
expenses shown on the DWT billing statements were for discreet
services that did not advance PDX's defense in the California
Action, the court is reducing the $760,537.70 amount by one
percent ($7605.38), resulting in $752,932.33 as reasonable and
necessary litigation expenses incurred through DWT in the defense
of PDX in the California Action.
Safeway does not contest that
amount as being reasonable and necessary litigation expenses
incurred through DWT in the defense of PDX in the California
Action.
Therefore, the court finds, and declares, that
$752,932.33 represents reasonable and necessary attorney's fees
incurred through DWT in the defense of PDX in the California
Action through February 11, 2015.
22
The court has not concluded that it should order a recovery
by PDX from Safeway of the litigation expenses incurred through
DWT because the court has a concern that the insurance company
that paid those litigation expenses on behalf of PDX is the real
party-in-interest within the meaning of Rule 17(a) (3) of the
Federal Rules of Civil Procedure, who perhaps should intervene in
this action if it wishes to recover, by way of subrogation
through PDX, the legal expenses it incurred on behalf of PDX in
the defense of the California Action.
The court will hear from
the parties further on that sUbject before making a final
decision.
Swindle and Burke each states in his affidavit that he
cannot anticipate at this time how much additional litigation
expense will be required in the defense of PDX in the California
Action.
Id. at 0303, , 25, and 0495, , 85.
The court assumes
that the parties will be able to resolve by agreement
reasonableness and necessity for any future litigation expenses
incurred on behalf of PDX in defense of the California Action.
Of course, if they are not, PDX (and the intervening insurance
company, if applicable) will be entitled in a future action to
seek whatever additional litigation expense recovery is
appropriate under the indemnity provision of the KIA as well as
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any additional litigation expense covered by the KIA's
paragraph 8.
E.
Conclusion
Summarizing,
(1) the court is denying Safeway's motion for
summary jUdgment, and (2) the court is granting PDX's motion for
summary jUdgment, except as to the issue of whether the insurance
company must intervene as the real party-in-interest before the
defense litigation expenses incurred through DWT can be awarded.
The court is withholding at this time entry of a final jUdgment
to give the parties an opportunity to provide the court briefing
on their respective positions on the need for the insurance
company to intervene and appropriate steps to be taken by the
court from this point forward as to the litigation expenses
incurred through DWT.
IV.
Order
Consistent with the foregoing,
The court ORDERS that all relief sought by the motion for
summary jUdgment of Safeway be, and is hereby, denied;
The court further ORDERS that the relief sought by the
motion for summary jUdgment of PDX be, and is hereby, granted
except as to any request that PDX, rather than its liability
24
--------
insurer, be awarded the $752,932.33 in litigation expenses
incurred through DWT;
The court further ORDERS that by April 7, 2015, each party
file a document proposing to the court by way of appropriate
argument and citation of authority a solution to the issues
raised by the fact that PDX's liability insurance company, rather
than PDX itself, incurred the litigation expenses through DWT in
the defense of PDX in the California Action;
The court further ORDERS that PDX have and recover from
Safeway the amount of $228,290.36;
The court further ORDERS and DECLARES that PDX, through its
liability insurance carrier, has incurred reasonable and
necessary litigation expenses through DWT in the amount of
$752,932.33 in the defense of PDX in the California Action
through February 11, 2015, and that either PDX or its liability
insurer is entitled to recover that amount from Safeway;
The court further ORDERS and DECLARES that the indemnity
provision in the KIA is an enforceable agreement; and
The court further ORDERS and DECLARES that Safeway is
obligated pursuant to the indemnity provision of the KIA to
indemnify and hold PDX harmless from any and all loss, damage, or
expense (or claims of damage or liability) asserted against PDX
by the Hardins in the California Action, including, without
25
limitation, reasonable attorney fees, salaries of PDX employees
or executives called to testify or provide depositions, travel
and accommodation costs for PDX employees or executives called to
testify or give depositions, and reasonable legal costs incurred
by PDX due to such claims.
SIGNED March 31, 2015.
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