ERIC F. MELGREN, District Judge.
Sunflower Electric Power Corporation ("Sunflower") filed a lawsuit against M&S Steel, Inc. ("M&S") and Global Power Generation Service Corporation of Florida d/b/a/Global Power Generation Services ("GPGS") relating to the failure of a turbine used at Sunflower's Garden City, Kansas, facility. Sunflower's Complaint alleges various claims against each Defendant for breaches of contract, breaches of warranties, and negligence. M&S filed a four-count crossclaim against GPGS that seeks indemnification for all expenses, costs, and attorney fees associated with the present action and for any damages that may be awarded to Sunflower in this action. GPGS filed a motion to dismiss Counts I and II of M&S's crossclaim alleging that the indemnity provision in the parties' subcontract is unenforceable as it violates both K.S.A. § 16-121 and Kansas public policy. Because M&S has sufficiently pleaded Counts I and II, the Court denies GPGS's motion to dismiss Counts I and II of M&S's crossclaim (Doc. 21). The Court denies M&S's motion for leave to supplement its response in opposition to GPGS's motion to dismiss (Doc. 59) as moot.
Effective September 17, 2014, M&S entered into a Master Service Agreement ("MSA") with Sunflower to perform work on an item of "personal property"—a General Electric Company, MS7001, Frame 7, combustion turbine, S/N 248854 ("turbine")—at Sunflower's facility in Garden City, Kansas. M&S and GPGS entered a subcontract on October 30, 2014, whereunder GPGS agreed to perform certain work on the turbine under the MSA.
The subcontract stated that the subcontractor "shall furnish the labor, materials, tools, implements, design services, and/or other work and apparatus necessary to perform and complete to Contractor's satisfaction and the Owner's [Sunflower] specifications the work described in attached Exhibit B (the "Subcontract Work")." Exhibit B states, in part:
The subcontract contained an indemnity provision and certain insurance requirements. These provisions provide, in part:
The MSA, entered between Sunflower and M&S, defines the scope of the agreement as an agreement "for the provision of furnishing qualified labor, experienced supervision, specialized tools, equipment, and material as may be necessary to perform services (Services) to Sunflower by Supplier as outlined in the specifications set forth in Exhibit B." The specifications attached to the MSA state that "[i]t is the intent and purpose of these specifications to describe in detail the S4 TURBINE COMBUSTION INSPECTION and GENERATOR TESTING. The inspection will include a combustion area inspection, generator testing and various technical information letters (TIL) inspections." The unit is described as "a General Electric Co., MS7001, Frame 7, combustion turbine S/N 248854 . . . designed to use natural gas and fuel oil. Over the past years the only fuel source has been natural gas."
M&S and GPGS performed work on the turbine pursuant to the MSA from approximately November 3, 2014, to December 6, 2014, which included work on transition pieces, bolts, and lockplates. Sunflower alleges that on August 6, 2015, the turbine suffered a catastrophic and sudden failure, and that the subsequent visual inspection revealed that transition pieces had failed, were no longer attached, were loose, or were missing a bolt and lockplate. M&S alleges that GPGS's responsibilities under the subcontract included oversight, quality control, technical compliance, inspection, and supervision of the work performed on the turbine, that GPGS was the technical consultant and supervisory oversight for the work performed on the transition pieces, bolts, and lockplates, and that GPGS inspected the work performed on the transition pieces, bolts, and lockplates before the turbine returned to service.
In Count I, M&S alleges that GPGS was contractually obligated to indemnify, hold harmless, defend, and insure M&S from the claims and allegations asserted by Sunflower, and that GPGS breached the subcontract by failing and refusing to accept M&S's demands and tenders, failing and refusing to indemnify and hold harmless M&S against Sunflower's claims, failing to defend and/or provide a defense to M&S against Sunflower's claims, and failing to name M&S as an additional insured or provide M&S with insurance for at least three years after completion of the work complained of by Sunflower. In Count II, M&S alleges that separate and apart from the subcontract, GPGS understood that it was to provide technical oversight, quality control, technical compliance, inspection, and supervision of the work complained of by Sunflower in its Complaint, of which GPGS knew M&S was relying on GPGS to perform, and that M&S is expressly and impliedly entitled to indemnification from GPGS.
GPGS filed a motion to dismiss arguing that Counts I and II of M&S's crossclaim rely on provisions of a subcontract between M&S and GPGS that are against public policy, void, and unenforceable pursuant to K.S.A. § 16-121 and Kansas common law. Accordingly, GPGS argues, these Counts fail to state a claim upon which relief can be granted and should be dismissed.
Under Rule 12(b)(6), a party may move for dismissal of "a claim for relief in any pleading" that fails to state a claim upon which relief can be granted. Upon such motion, the Court must decide "whether the [pleading] contains `enough facts to state a claim to relief that is plausible on its face.'"
Kansas statutorily prohibits the inclusion of certain indemnification and insurance provisions in certain types of contracts.
With certain limitations, § 16-121 provides than "[a]n indemnification provision in a contract which requires the promisor to indemnify the promisee for the promisee's negligence or intentional acts or omissions is against public policy and is void and unenforceable."
Before the Court may find the indemnification and insurance provisions in the subcontract as void under § 16-121, it must first determine that the subcontract constitutes a "construction contract" as defined by the statute. It cannot do so at this stage in the proceedings.
GPGS asserts that the work described in the subcontract brings it within the purview of a "construction contract" because the subcontract specifically refers to "maintenance" and the turbine referenced in the subcontract "was a structure, appurtenance or other improvement to real property." GPGS cites no legal support for its statement that the turbine in question constitutes a structure, appurtenance, or other improvement to real property. Instead, it appears to arrive at this conclusion because the MSA states that the work will be performed at its Garden City, Kansas, facility "on a General Electric Co., MS7001, Frame 7, combustion turbine, S/N 248854, which was designed to use natural gas and fuel oil," and because the equipment required to perform the MSA includes forklifts, cranes, hoists, man lifts, and sky climbers, "which is indicative of the subject turbine's size and nature." GPGS argues that the characteristics of the "turbine set forth in the pleadings and exhibits thereto clearly establish that the subject turbine was not simply personal property . . . but rather was a structure, appurtenance, or other improvement to real property."
The minimal caselaw discussing § 16-121 provides little guidance to the Court, and each party merely offers conclusory assertions as to why the subcontract is or is not a construction contract subject to § 16-121(b). While certain facts may suggest that the turbine is not a piece of personal property and movable equipment as alleged by M&S, the pleadings are wholly devoid of facts sufficient to determine at this early stage that the turbine is a "structure, appurtenance, or other improvement to real property." Indeed, to find that the turbine is a structure, appurtenance or other improvement to real property, the Court must necessarily draw inferences in GPGS's favor and make conclusions based on facts not contained in the pleadings or attachments thereto. Construing the well-pleaded facts in the light most favorable to M&S, as the Court must, the Court cannot say, as a matter of law, that the turbine at issue here constitutes a structure, appurtenance or other improvement to real property.
Ultimately, whether the subcontract qualifies as a contract as defined in § 16-121 depends on facts not currently before the Court. M&S has alleged facts that, if true, suggest that the subcontract is not subject to § 16-121(b). Because the Court cannot conclude that the subcontract at issue here meets the definition of a construction contract under § 16-121(a)(1) and thus, subject to § 16-121(b), the Court denies GPGS's motion to dismiss on this basis.
GPGS also argues that the indemnification provision of the subcontract is unenforceable under Kansas common law. Specifically, it argues that the indemnification provision of the subcontract is unclear and equivocal, and therefore, as a matter of public policy, cannot be construed under Kansas law to indemnify M&S for M&S's own negligent acts.
M&S, however, does not appear to limit its claim for indemnification in Counts I and II to indemnification arising from M&S's alleged negligence. Indeed, Counts I and II appear to seek indemnification based on alleged wrongdoing attributable to GPGS. M&S alleges that the wrongful actions and damages alleged in Sunflower's Complaint, if true, relate to responsibilities assigned to GPGS under the subcontract, and that GPGS supplied the transition bolts and lockplates that Sunflower alleges failed. Sunflower's Complaint also alleges that GPGS breached numerous duties in the provision of its services under the subcontract. Because M&S seeks indemnification for actions and negligence allegedly attributable to GPGS, Counts I and II should not be dismissed for violating Kansas's public policy.
Further, even if Counts I and II merely sought indemnification for M&S's own negligent acts, dismissal of Counts I and II still would be improper at this stage. Under Kansas law, indemnification agreements where "one party agrees to indemnify another for the indemnitee's own negligence are disfavored and as such must be expressed in `clear and unequivocal language.'"
Assuming the well-pleaded facts to be true and construing them in the light most favorable to M&S, the Court cannot conclude at this stage that the indemnification provision violates either K.S.A. § 16-121 or Kansas public policy. Accordingly, the Court denies GPGS's motion to dismiss, and denies as moot M&S's motion to supplement its response to GPGS's motion to dismiss.