STEPHANI W. HUMRICKHOUSE, Bankruptcy Judge.
The matter before the court is the district court's remand after appeal of this court's order allowing summary judgment for third-party defendant Curenton Concrete Works, Inc. ("Curenton") against Weaver Cooke Construction, LLC ("Weaver Cooke") on Weaver Cooke's contractual indemnity claim. For the reasons outlined below, on remand, Curenton's motion for summary judgment on this claim will be allowed.
New Bern Riverfront Development, LLC ("New Bern") is the owner and developer of SkySail Luxury Condominiums ("SkySail Project") in New Bern, North Carolina. Weaver Cooke served as the SkySail Project's general contractor, and Curenton as the subcontractor who placed and finished the concrete on the elevated slabs (i.e. the balconies) and the parking deck. New Bern filed a state court action against Weaver Cooke and others in March 2009, and filed a petition for relief under Chapter 11 of the Bankruptcy Code in November 2009. The state court action was removed to the United States District Court for the Eastern District of North Carolina, and subsequently transferred to this court.
With leave of court, Weaver Cooke filed its second third-party complaint on June 14, 2012, asserting claims of negligence, contractual indemnity, and breach of express warranty against many of the subcontractors hired during construction of the SkySail Project, including Curenton. In December 2013, many third-party defendants, including Curenton as well as third-party defendant Stock Building Supply ("Stock Supply"), filed motions for summary judgment on Weaver-Cooke's claims. Curenton filed its motion on December 20, 2013, seeking summary judgment with respect to all of Weaver Cooke's claims against it (D.E. 687, 690). The court ruled on these motions by entering groups of orders pertaining to each of these three primary claims, and, with respect to its order on contractual indemnity, designated the Stock Supply order as the "lead order." On August 22, 2014, the court entered an order granting summary judgment in favor of Stock Supply on the indemnity claim, which was Weaver Cooke's only remaining claim against Stock.
The court subsequently entered orders on summary judgment for other third-party defendants (collectively, the "Related Orders"), including Curenton, allowing summary judgment in whole or part on many of the same bases as in the Stock Indemnity Order. That order, and the Related Orders, were certified as final by both this court and the district court for purposes of appeal. In an order entered on August 12, 2016, the district court affirmed the Stock Indemnity Order in part, reversed in part, and remanded for further proceedings. (D.E. 1326, the "District Court Stock Indemnity Order") The district court decided the appeals of the Related Orders on a similar basis, including Weaver Cooke's appeal of this court's order allowing summary judgment for Curenton on the indemnity claim.
On May 16, 2017, this court held a status conference to consider the parameters of the matter on remand. The parties collectively agreed that counsel for Stock Supply and Weaver Cooke would take the lead in presenting the primary arguments pertaining to the indemnity issue in a subsequent hearing, after which the court would enter an order resolving the matter on remand as between Weaver Cooke and Stock Supply. Weaver Cooke and Stock Supply presented their arguments in a hearing on July 19, 2017, together with arguments on the closely related matter of Stock Supply's motion to exclude the testimony and expert report of Mr. Barbour (the "Barbour Report").
On September 29, 2017, this court entered its Order on Remand Regarding Stock Building Supply Motion for Summary Judgment on Indemnity Claim and Allowing Motion to Exclude Expert Report (the "Stock Indemnity Remand Order)". The court again allowed summary judgment for Stock Supply. (DE 1406). The court excluded Mr. Barbour's report on Daubert grounds, concluding that as to Stock Supply, "[a]t most, the report includes Stock Supply's products and installation as a possible source, and a possible cause, of water intrusion. It establishes no more than that." Id. at 20. Further, the court held that even if the Barbour Report
Id. Finally, the court granted summary judgment to Stock Supply on the alternative ground of Weaver Cooke's contributory negligence vis-a-vis Stock Supply, holding that permitting Weaver Cooke to require Stock Supply to indemnify it "for damages for which Weaver Cooke indisputably was partially responsible would ignore both the language and purpose of §22B-1; indeed, it would be as if the statute, and the public policy it seeks to protect, did not exist." Id. at 23. Weaver Cooke sought to appeal this order, but the court declined to certify it as final, and the appeal was dismissed by the district court.
After entry of the Stock Indemnity Remand Order, the court granted to Curenton and similarly situated parties the opportunity to file short briefs addressing the extent to which the reasoning in that order applied to their particular fact set. Unfortunately, most of the briefs advanced one-size-fits-all "me too" arguments without acknowledging pertinent differences in what the party actually argued in its motion for summary judgment (as opposed to what Stock Supply argued), and without focusing on the existence or lack of undisputed facts that could establish that Weaver Cooke was contributorily negligent or had failed to show proximate cause as to them.
To address the matter on remand, the court examines the initial pleadings, its original orders, and the issues addressed therein with respect to Curenton. The claims asserted by Weaver Cooke against Curenton in its third-party complaint (D.E. 345) arise out of Curenton's alleged failure to properly place concrete in balcony forms (which were set and marked by other parties), such that the balconies did not achieve the proper slope for water drainage and are susceptible to ponding due to the lack of a smooth and even surface, resulting in damage from water intrusion. Weaver Cooke Mem. in Resp. to Mot. for Sum. J. (D.E. 749) at 5-7, 28-32. Among other things, Curenton argued in its motion for summary judgment that Weaver Cooke failed to put forth evidence necessary to create a genuine issue of material fact as to whether Curenton breached any duty owed by it to Weaver Cooke, resulting in damages. Curenton Mem. in Supp. of Mot. for Sum. J. (D.E. 690) at 25-29. Curenton also advanced the argument that the language of the indemnity provision excluding damages to "the Work" precluded the contractual indemnity claim. Id. at 17-18. And, in its reply to Weaver Cooke's response memorandum, Currenton noted that it had incorporated the arguments of other parties
On August 25, 2014, the court entered an order allowing summary judgment for Curenton on both the negligence and breach of warranty claims, concluding that both were barred by the statute of limitations. D.E. 901 (the "Curenton SOL Order). That order, which was subsequently affirmed by the district court (D.E. 1320), includes an extensive recap of the evidentiary record with regard to Weaver Cooke's allegations and claims against Curenton. D.E. 901 at 7-10, 12-13. It provides, in part:
Id. at 7-8. That order went on to discuss the nature and extent of Weaver Cooke's awareness of the water intrusion through the sliding glass balcony doors, as the issues before the court in that order hinged on whether such defects would have been latent, when they were or should have been discovered, etc. The court concluded that Weaver Cooke was aware of the water intrusion and its potential causes during 2008 and certainly no later than the spring of 2009, such that its claims against Curenton were time-barred. Id. at 8-10.
With regard to Weaver Cooke's contractual indemnity claim, the court entered an order on September 26, 2014, allowing Curenton's motion for summary judgment on the same grounds set forth in the Stock Indemnity Order. (D.E. 957 (the "Curenton Indemnity Order")) The court applied the same reasoning it used in granting summary judgment to Stock Supply: Namely, that certain portions of the subcontracts between Weaver Cooke and the related parties ran afoul of N.C. Gen. Stat. § 22B-1 and had to be excised from the agreements. Pursuant to that blue penciling, the court interpreted the contracts to permit Weaver Cooke to seek indemnification from Curenton only if Weaver Cooke could establish that Curenton was solely responsible for the alleged damages, rather than responsible "in part," which Weaver Cooke was unable to do. In addition, the court noted that while Curenton had not, on its own behalf, specifically articulated contributory negligence as a basis for summary judgment, "evidence that would support that argument is set out in its memorandum in the context of its breach of express warranty discussion."
On appeal of the Curenton Indemnity Order, the district court affirmed in part, reversed in part, and remanded for the same reasons it set forth in its order regarding Stock Supply. (D.E. 1327) This court reviewed those reasons in its Stock Indemnity Remand Order:
Stock Indemnity Remand Order (D.E. 1406) at 8-9 (construing District Court Stock Indemnity Order). Like several of the district court's other dispositions on appeal, its Curenton order included a footnote acknowledging that the parties had brought to its attention an issue that remained unresolved in the proceedings before this court.
D.E. 1327 at 1 n.1.
In both of its supplemental memoranda (D.E. 1407, 1510), Curenton argued that the court should, on remand, enter summary judgment for it based upon the contributory negligence analysis as set forth in the Stock Indemnity Remand Order, D.E. 1407 at 4, D.E. 1510 at 4-7. In addition, Curenton contends the court could enter summary judgment as to the indemnity claim on the alternate basis of proximate cause, which Curenton cites in its first supplemental response, or on the "alternate theory" referenced in the footnote to the District Court Curenton Indemnity Order, which Curenton offers to further address at some future time if the court wishes. D.E. 1407 at 4, D.E. 1510 at 7. In its responsive memoranda, Weaver Cooke argues that Curenton "did not raise Weaver Cooke's alleged contributory negligence in support of Curenton's motion for summary judgment on Weaver Cooke's indemnity claim," and further has failed to put forward "its own specific evidence which establishes as a matter of law that Weaver Cooke was contributorily negligent with respect to the installation of the balconies." D.E. 1422 at 5-8, D.E. 1522 at 6-7. Weaver Cooke also maintains that at this juncture, Curenton should be limited to the argument it advanced in its initial motion and argued on appeal — that there was no evidence of a breach of duty by Curenton — and is precluded from conflating that position with the "lack of proximate cause" argument discussed in the Stock Indemnity Remand Order. D.E. 1422 at 10-13, D.E. 1522 at 4-6.
On remand, having fully considered the foregoing, the court will allow Curenton's motion on grounds that were discussed in the ECM Indemnity Remand Order and are equally applicable to Curenton: Namely, that Weaver Cooke's indemnity claim was precluded on grounds that the indemnity agreement excluded damages to the subject of the contract itself, i.e., "the Work." See ECM Indemnity Remand Order (D.E. 1568) at 13-15. Further, for the reasons set out below, the court concludes that Weaver Cooke's contributory negligence in connection with the sequencing that was necessary to achieve waterproofing of the exterior balcony doors precludes it, under N.C.G.S. § 22B-1, from seeking indemnity from Curenton.
As discussed earlier, Curenton is the subcontractor retained by Weaver Cooke to provide the labor involved in placing concrete slabs for several aspects of the SkySail project, but only Curenton's work on the concrete balconies is at issue here. With its contractual indemnity claim, "Weaver Cooke is seeking indemnity from Curenton, but only in the event Weaver Cooke becomes liable to plaintiff on account of Curenton's failure to perform as required under its Subcontract." D.E. 749 at 11. Plaintiff New Bern's claims regarding concrete work performed by Curenton "have been limited to the improper finishing and sloping of the balconies." Id. at 5. Weaver Cooke's "primary assertion is that Curenton failed to accurately achieve and uniformly achieve the elevations established on isolated concrete balcony forms, and otherwise failed to finish the concrete slabs so as to provide a smooth, even and uniform surface, free from undulations which may trap or repel water on the balconies." Id. at 6. More specifically, Weaver Cooke "presents a claim for Indemnity from Curenton for the cost of repair and correction of Curenton's Work in order for it to be free from defects and in conformance with the requirements of the Subcontract Documents, plus any other or consequential damages for which Weaver Cooke may be liable to the Plaintiff [New Bern]." Id. at 15 (emphasis added). For the following reasons, the court will again allow summary judgment for Curenton on the indemnity claim.
Curenton argued in its original motion for summary judgment that Weaver Cooke's indemnity claim must fail because it did "not seek indemnity for damages to tangible property other than the work of Curenton." D.E. 690 at 18. Under Curenton's interpretation, that "work" would include not only any alleged deficiencies in the concrete slabs themselves, but also any water intrusion damages Weaver Cooke attributed to its work, under the theory that the "work" in this context would include the SkySail project as a whole. Id. The court agrees.
The court discussed this same issue in the ECM Indemnity Remand Order, and in that context observed that the damages for which Weaver Cooke could be entitled to indemnity are limited by the terms of the subcontract. The language to which the court referred is identical to the language used in the Weaver Cooke-Curenton subcontract, and provides as follows:
D.E. 690-2 at 2.
Weaver Cooke has consistently argued that its indemnity obligation is not limited to only claims for "bodily injury, sickness, disease or death, or to injury to or destruction of tangible property (other than Subcontractor's Work itself)." As it did in the ECM Indemnity Remand Order, the court disagrees. To the extent that Weaver Cooke seeks to pursue any indemnity claim as to Curenton for "the cost of repair and correction of Curenton's Work in order for it to be free from defects and in conformance with the requirements of the Subcontract Documents," that claim is obviously, and entirely, precluded by the language of the subcontract that would give rise to such a claim in the first place. See also Waterproofing Specialties Order on Remand (D.E. 154) at 19-20.
Equally precluded here, though perhaps less obviously so, is any indemnity claim for related damages, such as water intrusion through the exterior doors and into the condominium interiors. As in the ECM Indemnity Remand Order (D.E. 1568) and the Randolph Stair Indemnity Remand Order (D.E. 1573), the court finds, based on the broader interpretation of "scope of work" used by the district court in its discussion of the economic loss rule, that any damage to these integrated areas also comes within the scope of Curenton's "Work." The economic loss rule obviously does not, itself, determine the parameters of whether the water intrusion damages Weaver Cooke attributes to Curenton are within, or outside, the scope of "the Work"; however, this court finds the district court's analysis of the rule, as applied to the factual and legal landscape of this proceeding, to be both informative and persuasive. The court sees no sound basis upon which it could conclude, using the district court's broader view, that the damages for which Weaver Cooke seeks contractual indemnity (and which must be based on a showing of negligence) are for damage outside the scope of Curenton's "Work." Summary judgment will be granted to Curenton on this basis.
Weaver Cooke contends that Curenton cannot seek summary judgment on grounds of Weaver Cooke's contributory negligence because Curenton didn't specifically raise and articulate that argument in its initial motion for summary judgment, and maintains that the "Bankruptcy Court has already acknowledged that `Curenton [did] not specifically articulate[] contributory negligence as a basis for summary judgment . . .'" D.E. 1442 at 5, quoting D.E. 957 at 21. In fact, Curenton's argument, and the court's observation as to that issue, was more thorough:
D.E. 957 at 21. The question of whether Weaver Cooke was contributorily negligent was properly before the court when the Curenton Indemnity Order was entered, and it is properly before the court now.
In the Stock Indemnity Remand Order, the court held that Weaver Cooke was "precluded from seeking indemnification from Stock Supply based on its own undisputed contributory negligence." D.E. 1406 at 21. Curenton argues that the court's analysis in that order applies, and controls, here. In its initial supplemental memorandum filed after entry of the Stock Indemnity Remand Order, Curenton summed up its position quite succinctly:
D.E. 1407 at 4. Weaver Cooke, responding, argues that "a close review of Weaver Cooke's alleged negligence reveals important differences between Stock and Curenton." D.E. 1422 at 5. In particular, Weaver Cooke cites this court's emphasis on sequencing errors which led to, among other things, installation of the exterior sliding glass doors before (rather than after) application of the traffic coating to the concrete balconies. According to Weaver Cooke, those sequencing errors in no way relate to the work done by Curenton, because "Curenton is alleged to have created an improper slope on the balconies such that water drained toward the units instead of away from them." Id. at 5-6.
What Weaver Cooke asks the court to disregard, however, is evidence of record, discussed in the Stock Indemnity Remand Order and more recently in the Waterproofing Specialties Indemnity Remand Order (D.E. 1584), which establishes that as to the confluence of factors that resulted in water intrusion through the exterior doors, Weaver Cooke bears at least partial responsibility for those damages. Put another way, the water intrusion damages Weaver Cooke attributes to Curenton are the exact same water intrusion damages for which this court has specifically found that Weaver Cooke bears at least partial responsibility. D.E. 1406 at 21-23, D.E. 1584 at 17-19. This is precisely what N.C. Gen. Stat. § 22B-1 precludes. That statute provides that any promise or agreement in connection with a construction contract such as this one, wherein the promisor would purport to indemnify the promisee — here, Weaver Cooke — against "liability for . . . damages arising out of bodily injury to persons or damage to property proximately caused by or resulting from the negligence, in whole or in part, of the promisee, . . . is against public policy and is void and unenforceable." N.C. Gen. Stat. § 22B-1; see also D.E. 1406 at 22-23 (citing cases).
After taking into account the district court's more expansive reading of the indemnity statute, this court determined in the Stock Supply Indemnity Remand Order that "to the extent that Weaver Cooke bears responsibility (i.e. is contributorily negligent) for the damages for which it seeks indemnity from Stock Supply, § 22B-1 bars Weaver Cooke's recovery." D.E. 1406 at 22. Likewise here, Curenton has solidly established that Weaver Cooke bears at least partial responsibility for the very damages for which it would seek indemnity from Curenton. To permit Weaver Cooke to require Curenton to indemnify it "for damages for which Weaver Cooke indisputable was partially responsible would ignore both the language and purpose of § 22B-1; indeed, it would be as if the statute, and the public policy it seeks to protect, did not exist." Id. at 23. For those reasons, Weaver Cooke's indemnity claim is precluded, and the court will enter summary judgment for Curenton.
For the foregoing reasons, the court on remand concludes that Curenton's motion for summary judgment on the contractual indemnity claim is ALLOWED on grounds that Weaver Cooke's claim for damages pertains wholly and only to "the Work" performed by Curenton as defined within the parties' subcontract and the attachments thereto, and is for that reason excepted from recovery in indemnity. Further, Curenton's motion is ALLOWED on the alternative basis of Weaver Cooke's contributory negligence.
In the Related Orders, the district court cited the District Court Stock Indemnity Order and noted that in it, "the identical indemnification provisions were at issue, and this court held, among other things, neither N.C. Gen. Stat. § 22B-1 nor the contributing negligence of other parties precluded Weaver Cooke's indemnification claim against the subcontractor." See, e.g., Weaver Cooke Constr. LLC v. Curenton Concrete Works, Inc., Order at 1 n.1 (D.E. 1327).
Stock Indemnity Remand Order (D.E. 1406) at 22 n.10 (emphasis omitted).