DANA L. CHRISTENSEN, District Judge.
Before the Court are a number of motions, including Defendant TKDA's Motion for Partial Summary Judgment Regarding Application of Montana Law (Doc. 24); Plaintiff BNSF's Cross Motion for Partial Summary Judgment Striking TKDA's Defense Under Montana Code Annotated § 28-2-2111 (Doc. 34); and Defendant TKDA's Motion for Partial Summary Judgment Regarding Invalidity of Indemnity and Release of Claims Provisions (Doc. 42).
Stated simply, this case involves TKDA's alleged duty to indemnify BNSF for claims arising out of an accident that occurred in 2011 involving a BNSF employee who was injured while working on a fuel unloading dock at the BNSF railroad yard in Whitefish, Montana. On August 23, 2001, BNSF and TKDA entered into a non-exclusive contract in which TKDA agreed to provide engineering services necessary for the completion of work defined by BNSF (hereafter referred to as the "2001 Agreement"). (Doc. 27-1). Pursuant to the 2001 Agreement, TKDA was to indemnify and hold BNSF harmless for "any claims arising from the performance of th[e] Agreement." The contract also included the following choice of law provision: "All questions arising under this Agreement shall be decided according to the laws of the State in which the work is performed." (Doc. 27-1 at 11.) The 2001 Agreement was renewed in 2003, 2004, 2005, 2006, 2008, and January 21, 2009, which was the final renewal of the 2001 Agreement. (Docs. 39-1, 39-2, 39-3, 39-4, 39-5, 39-6.)
In 2002, pursuant to the 2001 Agreement, TKDA agreed to engineer a fuel unloading facility at the BNSF railway yard in Whitefish, Montana. TKDA contracted to provide an elevated walkway for top-unloading tank cars with retractable gangways and new fuel unloading arms at the two tank car unloading locations. TKDA purchased supply equipment for the two gangway platforms from Safe I. These platforms were designed to allow BNSF employees to access the tops of tank cars and had an integrated fall protection system that would retract with the walkway in order to provide a safety barrier.
On October 6, 2009, BNSF and TKDA entered into another contract for services which stated that TKDA was to "release Railroad from any claims arising from the performance of th[e] Agreement" and "[t]he Indemnification obligation assumed by consultant shall include any claims, suits or judgments brought against Railroad under the Federal Employer's Liability Act" (hereafter referred to as the "2009 Agreement"). (Doc. 35-2.) The choice of law provision in the 2009 Agreement stated: "All questions arising under this Agreement shall be decided according to the laws of the State of Texas." The 2009 Agreement also explained that, "Railroad and Consultant agree that all existing prior or contemporaneous written or oral agreements between the two firms that cover the same general service work in the same locations(s) as this Agreement shall be superseded and canceled by this Agreement." (Doc. 35-2 at 21.)
On July 19, 2013, Terry Fox ("Fox"), a BNSF employee, sustained injuries after falling off of a tank car while attempting to remove fuel at the Whitefish, Montana fuel unloading facility. Fox filed suit against BNSF in Montana state district court claiming that the gangway platform engineered by TKDA retracted and knocked him off of the tank car. Fox asserted that BNSF had a non-delegable duty to provide a safe work place and that Fox's injuries were caused by the negligence of BNSF and its employees. BNSF tendered the lawsuit to TKDA and demanded that TKDA indemnify and defend BNSF in the litigation. TKDA did not respond to the requests by BNSF to defend and indemnify Fox's claims.
BNSF filed its Complaint against TKDA in this case on February 16, 2016, alleging multiple claims, including breach of contract, breach of the duty of good faith and fair dealing, and further seeking a declaration that TKDA violated Montana's statutory right for indemnification. On March 22, 2016, TKDA filed its answer, denying all allegations and contending that BNSF's claims are barred by Montana and Minnesota statutory law regarding indemnity and claims handling procedures, among sixteen additional affirmative defenses. Further, TKDA filed a counterclaim against BNSF seeking a declaratory judgment from the Court regarding the indemnity and release of claim provisions within the contract, and filed a third-party complaint against the Safe Harbor Defendants alleging negligence. The parties then filed the motions described above.
A party is entitled to summary judgment if it can demonstrate that "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). Summary judgment is warranted where the documentary evidence produced by the parties permits only one conclusion. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251 (1986). Only disputes over facts that might affect the outcome of the lawsuit will preclude entry of summary judgment; factual disputes that are irrelevant or unnecessary to the outcome are not considered. Id. at 248. In ruling on a motion for summary judgment, a court must view the evidence "in the light most favorable to the opposing party." Tolan v. Cotton, 134 S.Ct. 1861, 1866 (2014) (quoting Adickes v. S.H. Kress & Co., 398 U.S. 144, 157 (1970)). "[T]he evidence of the nonmovant is to be believed, and all justifiable inferences are to be drawn in his favor." Id. at 1863 (quoting Anderson, 477 U.S. at 255).
"[W]hen parties submit cross-motions for summary judgment, each motion must be considered on its own merits." Fair Hous. Council of Riverside Co., Inc. v. Riverside Two, 249 F.3d 1132, 1136 (9th Cir. 2001) (citations omitted). "The court must rule on each party's motion on an individual and separate basis, determining, for each side, whether a judgment may be entered in accordance with the Rule 56 standard." Id. (quoting Charles Alan Wright et al., Federal Practice and Procedure vol. 10A, § 2720 (3d ed. West 2014)). "In fulfilling its duty to review each cross-motion separately, the court must review the evidence submitted in support of each cross-motion." Id.
The parties do not dispute that the TKDA's design work on the Whitefish fuel unloading dock occurred in 2002 and is therefore subject to the 2001 Agreement. However, the parties do contest the applicability of the 2009 Agreement which impacts the Court's analysis on the choice of law issue, that is, does Montana or Texas law govern this dispute. Further, both parties contend that judicial admissions and judicial estoppel favor their respective positions. The Court analyzes each motion for summary judgment based on the agreements, underlying facts, and applicable law.
Significant briefing by the parties is dedicated to the representations each have made in various filings, arguing that these representations constitute admissions which the parties are now estopped from denying. For example, TKDA argues that BNSF is estopped from arguing that the work at issue was performed in a state other than Montana or that another state's law applies because BNSF expressly alleged in its preliminary pretrial statement that Montana law should apply. TKDA also argues that in BNSF's preliminary pretrial statement, BNSF admitted to the place where the project work was performed and that the Court should consider this statement a judicial admission. BNSF contends that because TKDA selectively quoted BNSF's representations in its preliminary pretrial statement that judicial estoppel does not apply. Further, BNSF alleges that TKDA is itself judicially estopped from taking the position that the 2009 Agreement was not a renewal of the 2001 Agreement because TKDA admitted that it was a renewal in its preliminary pretrial statement.
Judicial estoppel "is an equitable doctrine invoked by a court at its discretion." United States v. Liquidators of European Fed. Credit Bank, 630 F.3d 1139, 1148 (9th Cir. 2011). It "prevents a party from prevailing in one phase of a case on an argument and then relying on a contradictory argument to prevail in another phase." Zedner v. United States, 547 U.S. 489, 504 (2006). "Judicial estoppel not only bars inconsistent positions taken in the same litigation, but bars litigants from making incompatible statements in two different cases." United Nat. Ins. Co. v. Spectrum Worldwide, Inc., 555 F.3d 772, 778 (9th Cir. 2009) (internal citations and quotations omitted). To determine whether to apply the doctrine, a district court typically considers: "(1) whether a party's later position is clearly inconsistent with its original position; (2) whether the party has successfully persuaded the court of the earlier position; and (3) whether allowing the inconsistent position would allow the party to derive an unfair advantage or impose an unfair detriment on the opposing party." Liquidators of European Fed. Credit Bank, 630 F.3d at 1148 (internal citations and quotations omitted).
The significance of the parties' admissions turns on the issue of which agreement governs this dispute—is it the 2001 Agreement, or the 2009 Agreement? In its preliminary pretrial statement, BNSF said the following:
(Doc. 18 at 6.) In its brief for partial summary judgment, TKDA omitted the language that BNSF preserved its ability to argue that Texas law applies if the 2009 Agreement was found to be a renewal of the 2001 Agreement. Therefore, BNSF was not unequivocally stating that Montana law applied; Montana law applied only if the 2001 Agreement was the contract interpreting the conduct at issue. Therefore, BNSF is not precluded from arguing that Texas law applies if the Court determines the 2009 Agreement is the correct contract to interpret the conduct at issue here.
TKDA further contends that because BNSF made the judicial admission that the subject work was performed in Montana and that the parties' contract requires Montana law to govern the interpretation of the 2001 Agreement in its preliminary pretrial statement, the Court should take notice of this statement. Factual assertions in pleadings and pretrial orders, unless amended, constitute judicial admissions. Am. Title Ins. Co. v. Lacelaw Corp., 861 F.2d 224, 226 (9th Cir. 1988). The Court agrees that BNSF admitted the work at issue was performed by TKDA in Montana, and thus under the 2001 Agreement Montana law would apply. Therefore, the Court finds that BNSF is bound by this judicial admission.
With these judicial admissions in mind, the Court must first determine whether the choice of law provision in the 2001 Agreement or the 2009 Agreement governs this case. The Court has subject matter jurisdiction over this case due to the diversity of the parties under 28 U.S.C. § 1332, and therefore must apply state substantive law to the state law claims. Mason and Dixon Intermodal, Inc. v. Lapmaster Intern. LLC, 632 F.3d 1056, 1060 (9th Cir. 2011). Again, the parties disagree as to which state's substantive law should apply. TKDA contends Montana law applies, while BNSF agrees that the claims should be decided under Montana law if the Court finds that the 2001 Agreement applies but also argues that the claims should be decided under Texas law if the 2009 Agreement is the governing contract.
First and foremost, the Court must determine which agreement applies. Since the conduct at issue—TKDA's installment of the fuel unloading dock in 2002—falls under the 2001 Agreement, the issue is whether the 2009 Agreement was a new contract or a renewal of the 2001 Agreement. If it is a renewal, then the 2009 Agreement is the proper contract to govern the issues in this case.
The 2001 Agreement, which was executed on August 23, 2001, is the first contract between BNSF and TKDA. The parties entered into renewal agreements in 2003, 2004, 2005, 2006, 2008, and January 21, 2009. The confusion in the parties briefing is the difference between the January 21, 2009 renewal agreement and the October 6, 2009 contract. BNSF claims that when TKDA stated in its Answer that "[b]etween 2003 and 2009 the BNSF Contract was renewed by the parties," TKDA admitted that the 2009 Agreement renewed the 2001 Agreement; thus, TKDA should now be estopped from asserting a different position in its briefing. (Doc. 4 at 10.) BNSF contends that TKDA's position that the 2009 Agreement is a renewal and governs the issues in this case is contrary to TKDA's argument in its motion for partial summary judgment that the 2001 Agreement is the applicable contract. TKDA cleared this up in its reply brief by explaining that the "2009" it referred to was the January 21, 2009 renewal and not the October 6, 2009 contract. TKDA maintains that the 2009 Agreement is not in any way a renewal of the 2001 Agreement. (Doc. 38 at 6.) BNSF concedes this point. (Doc. 45 at 12.) The Court agrees with TKDA that it was not taking inconsistent positions, and that the "2009" it referred to when it stated "[b]etween 2003 to 2009" was in reference to the renewal agreements and not the 2009 Agreement executed on October 6, 2009. Thus, because there is no dispute that the 2009 Agreement was a separate and distinct contract, the Court concludes that the 2001 Agreement applies to the conduct at issue in this case.
Montana courts do not engage in a choice of law analysis unless there is "an actual conflict between [the different states] with respect to the contract and tort claims." Masters Grp. Int'l, Inc. v. Comerica Bank, 352 P.3d 1101 (Mont. 2015). The 2001 Agreement's choice of law provision states, "All questions arising under this Agreement shall be decided according to the laws of the State in which the work is performed." TKDA contends that performance under the 2001 Agreement occurred in both Montana and Minnesota. Consequently, if there was a dispute, the Court must examine whether there is an actual conflict between Montana and Minnesota law as to the enforceability of the indemnity provisions in the 2001 Agreement. However, as TKDA explains, there is no conflict between Montana law and Minnesota law regarding the enforceability of the indemnity provision. Because the Court previously determined that BNSF is bound by its judicial admission that the work at issue was performed by TKDA in Montana, the choice of law analysis is straightforward. The work was done pursuant to the 2001 Agreement, the majority of the work was performed in Whitefish, Montana, and, therefore, the law of Montana, as the forum state, applies.
Since Montana law applies, the Court must now determine if TKDA can assert an affirmative defense under Montana Code Annotated § 28-2-2111. BNSF argues that Montana Code Annotated § 28-2-2111 is not applicable here if the 2001 Agreement was not renewed after 2003, because the statute is only applicable to contracts that were entered into or renewed on or after July 1, 2003. (Doc. 35 at 13.) Both parties agree that the statute applies to construction contracts only if those contracts are entered into or renewed on or after July 1, 2003.
Hence, the issue is whether the 2001 Agreement was renewed in 2003, 2004, 2005, 2006, 2008, and 2009. "The whole of a contract is to be taken together so as to give effect to every part if reasonably practicable, each clause helping to interpret the other." Mont. Code Ann § 28-3-202.
Richards v. JTL Grp., Inc., 212 P.3d 264, 269 (Mont. 2009.) The Montana Supreme Court has also found that, "[t]he word `renewed' or `renewal,' as applied to promissory notes in commercial and legal parlance, means something more than the substitution of another obligation for the old one. It means to re-establish a particular contract for another period of time, to restore to its former condition an obligation on which the time of payment has been extended." Parchen v. Chessman, 164 P. 531, 532 (Mont. 1917).
The plain language of the 2001 Agreement states that each year the contract could be renewed subject to a new rates and compensation schedule:
(Doc. 27-1 at 11-12.) TKDA asserts that these provisions contemplate subsequent renewals of the 2001 Agreement subject to new payment rates. (Doc. 40 at 6-7.) BNSF contends that the use of the term "renewal" in these paragraphs has no actual impact on whether the 2001 Agreement was extended or terminated. The Court disagrees. When examined in its ordinary sense, the term "renewed" here means that each year the parties could renegotiate rates and compensation. This clearly anticipates the mutual agreement of the parties to renew the contract every year, subject to certain slight modifications.
Furthermore, the supplemental agreements all expressly reference and reincorporate the 2001 Agreement as the "Original Contract." The supplements in 2003, 2004, 2005, 2006, 2008, and January 21, 2009, consisted of cover pages titled "Supplement Original," and included additional language as "revisions" to the 2001 Agreement. (Docs. 39-1, 39-2, 39-3, 39-4, 39-5, 39-6.) The revisions consisted of updated payment provisions. The last paragraph of each supplemental agreement states that "the `Original Contract' shall continue in full force and effect." Thus, the Court finds that there is no genuine issue of material fact that the 2003, 2004, 2005, 2006, 2008, and January 21, 2009 agreements were renewals of the 2001 Agreement.
Consequently, TKDA's affirmative defense under Montana Code Annotated § 28-2-2111 will not be stricken. However, as explained in the last section of this Order, this holding is an "empty victory" in that the statute cannot be applied retroactively to work performed before the statute's effective date.
The usual principles of contract interpretation apply in this case. It is wellestablished in Montana that the "construction and interpretation of a contract is a question of law" for the court to decide. Corporate Air v. Edwards Jet Center, 190 P.3d 1111, 1120 (Mont. 2008). When "the language of an agreement is clear and unambiguous, and as a result, susceptible to only one interpretation, the court's duty is to apply the language as written." Rich v. Ellingson, 174 P.3d 491, 495 (Mont. 2007). The court is to "`give effect to the mutual intention of the parties as it existed at the time of contracting, so far as the same is ascertainable and lawful.'" Corporate Air, 190 P.3d at 1120 (quoting Mont. Code Ann. § 28-3-301). To that end, the court must read the contract as a whole, giving "effect to every part if reasonably practicable, each clause helping to interpret the other." K&R Partnership v. City of Whitefish, 189 P.3d 593, 600 (Mont. 2008) (quoting Mont. Code Ann. § 28-3-202). If the terms of a contract are clear, "the court must determine the intent of the parties from the wording of the contract alone." Rich, 174 P.3d at 495.
The 2001 Agreement contains the following indemnity provisions:
TKDA first contends that these provisions are invalid because under Montana Code Annotated § 28-2-702 any contract provision that directly or indirectly exempts a party from responsibility for their own willful or negligent conduct is void as a matter of public policy. Next, TKDA similarly contends that under § 28-2-2111 a construction contract provision which requires one party to indemnify the other for damages or losses caused by the "the negligence, recklessness, or intentional misconduct of the other party" violates public policy. BNSF argues that these two statutes do not apply to the 2001 Agreement. The Court will analyze each theory individually.
Montana Code Annotated § 28-2-702 states:
The parties do not dispute the application of this statute at the time the contract was enacted in 2001, but BNSF contends that the statute does not render the indemnity provision in the 2001 Agreement invalid and unenforceable.
In its opening brief, TKDA asserts that under § 28-2-702 a contract may not exempt a party from liability for their negligent acts. TKDA cites to two leading cases in this area: Miller v. Fallon County, 721 P.2d 342 (Mont. 1986) and Spath v. Dillon Enterprises, Inc., 97 F.Supp.2d 1215 (D. Mont. 1999). In Miller, Linda Miller was injured in a vehicle accident when her husband, Cecil Miller, was driving. 721 P.2d at 343. Cecil was an independent truck driver and contracted with PreFab Transit Co. to deliver mobile home frames. Linda sued Fallon County, her husband, Davis Transport, Inc., and PreFab for negligence. PreFab Transit Co. filed a motion for summary judgment arguing that in its contract with Linda Miller—a contract that PreFab had her sign in order to ride with her husband in the truck—she had signed a release form that absolved PreFab from any liability. The waiver stated in pertinent part:
Id. at 345-346. The Montana Supreme Court interpreted § 28-2-702 in Miller and found that the statute "is interpreted to mean that no person or corporation may contract to exempt himself or itself from responsibility for his, its or its employee's: (1) fraud; (2) willful injury to the property or person of another; (3) negligent or willful violation of law." Id. at 346. Thus, "pursuant to the clear and unambiguous language of § 28-2-702, MCA, an entity cannot contractually exculpate itself from liability for willful or negligent violations of legal duties, whether they be rooted in statutes or case law." Id. Consequently, the Court found PreFab's release clause unenforceable.
In Spath, United States District Court Judge Donald W. Molloy found that Miller v. Fallon County controlled the disposition. 97 F.Supp.2d at 1216. Before embarking on a fatal white water rafting trip organized and run by the defendant, Robert Spath signed a "participant agreement" that released the company, Dillon Enterprises, from any liability. The participant agreement stated:
Id. at 1217. On cross-motions for summary judgment, Judge Molloy looked to Miller and found that Montana law prohibits exculpatory provisions contained in contracts. Id. Thus, the release provision in the contract was invalid and unenforceable under Montana Code Annotated § 28-2-702 because it purported to exculpate the defendant from all liability for its own negligence. Id. at 1218.
BNSF contends that § 28-2-702 applies only to exculpatory clauses and not indemnification agreements. For support, BNSF relies on Safeco Ins. Co. Of Am. V. Liss, 16 P.3d 399 (Mont. 2000), Haynes v. County of Missoula, 517 P.2d 370 (Mont. 1973), and Ryan Mercantile Co. v. Great Northern Railway Co., 294 F.2d 629 (9th Cir. 1961), for the proposition that indemnity provisions are typically enforceable. The Safeco Court noted that § 28-2-702 was adopted verbatim from California law, and that California similarly held that its statute was not applicable to indemnity agreements. Safeco, 16 P.3d at 404. In Haynes, the Montana Supreme Court distinguished exculpatory clauses, releases, and disclaimers of liability from indemnity agreements because "the former den[ies] the victim any redress by cancelling liability altogether, while the latter leave[s] liability unimpaired but shift[s] the ultimate incidence of the loss to others." Haynes, 517 P.2d at 377. Thus, "[u]nlike exculpatory clauses and releases, ordinarily `contracts of indemnity purporting to relieve one from the results of his failure to exercise ordinary care are not contrary to public policy.'" Id.
In Ryan, the parties entered into a lease agreement providing that Ryan would "indemnify and save Great Northern harmless for any and all personal injuries, damages, claims, suits, costs and recoveries of every name and nature which may in any manner arise or grow out of the business conducted by Ryan on the leased premises. . . ." 294 F.2d at 631. A third party was injured on the premises and sued Great Northern, who tendered defense of the action to Ryan. Id. at 631-632. Ryan refused to defend and brought suit against Great Northern, arguing, among other things, that the lease agreement's indemnity clause was void as against public policy. Id. at 633-634. The Ninth Circuit disagreed and upheld the agreement, which clearly and unequivocally required Ryan to indemnify Great Northern. Id. at 634.
The Court agrees with BNSF that there is a difference between exculpatory clauses and indemnification agreements under Montana Code Annotated § 28-2-702. An exculpatory clause effectively denies recovery to an injured party by "cancelling liability altogether." This complete lack of redress underlies the public policy behind § 28-2-702. However, an indemnity clause simply shifts financial responsibility for a third party's loss from one entity to another. Hence, an indemnity provision of this nature is nothing more than a private contract of insurance.
Here, as in Haynes and Ryan Mercantile, the indemnity provisions do not cancel liability and preclude Mr. Fox from recovering for his injuries. BNSF and TKDA are two sophisticated business entities with equal bargaining power that have the contractual right to limit their respective remedies and liabilities. The two parties are free to allocate the risk of economic loss associated with TKDA's performance under the 2001 Agreement. Mr. Fox, as a third party, is able to obtain redress under the 2001 Agreement, but that redress is shifted from BNSF to TKDA. This shifting effect is not contrary to Montana public policy. Consequently, because there is no issue of material fact and the law permits only one conclusion, TKDA's motion for summary judgment that Montana Code Annotated § 28-2-702 invalidates the indemnity provisions in the 2001 Agreement is denied.
In the alternative, TKDA argues that if the indemnity provisions are valid under Montana Code Annotated § 28-2-702, they are not valid under Montana Code Annotated § 28-2-2111. Montana Code Annotated § 28-2-2111 was enacted on July 1, 2003, and addresses the enforceability of indemnity provisions in construction contracts. It reads as follows:
TKDA argues that the 2001 Agreement is a "construction contract" for purposes of § 28-2-2111, and that because the 2001 Agreement was renewed after 2003, the statute is enforceable. BNSF claims that the 2001 Agreement was never renewed and even if it was, the statute is not intended to impact work that had been done prior to the 2003 enactment date. BNSF cites to Montana House Bill 482's Fiscal Note and explains that when the Fiscal Note mentions past projects with latent defects, it did not indicate that the bill would have an impact on projects completed before this law took effect. (Doc. 35-1.) The Fiscal Note further stated that such contracts would not have coverage anyway due to completed operations exclusions in most policies. (Id.)
The Court has already determined that the 2001 Agreement was renewed under the 2003, 2004, 2005, 2006, 2008, and January 21, 2009 renewals. However, what is of most importance here is when the contractual work was performed. TKDA performed its work on the Whitefish fuel unloading dock in 2002—that fact is undisputed. Montana Code Annotated § 28-2-2111 does not indicate that it should retroactively impact a contractual indemnification agreement for work completed prior to 2003, and the Fiscal Note implies that completed work does not fall under the statute. Therefore, since the work at issue was performed prior to the statute's enactment, § 28-2-2111 is not triggered. TKDA's motion for summary judgment that Montana Code Annotated § 28-2-2111 invalidates the indemnity provisions in the 2001 Agreement is denied.
Accordingly, IT IS ORDERED that:
