Sunday, July 12, 2015

Who's Covered Here? Round Two!

Hemond v. Frontier Communications of America, Inc., 2015 VT 67

By Andrew Delaney

Stop me if you’ve heard this one before . . . corporation gets sued along with some other codefendants, so it argues that the codefendants are really at fault and should foot the bill. If this sounds like the same summary we wrote last week, it’s because it’s pretty much the same case (in fact, it’s the exact same underlying case), with almost the same issues.

As we explained last week, indemnification is a fancy legal term that essentially means “pick up the tab.” Express indemnification means there’s an agreement ahead of time; implied indemnification applies when it’s “only fair” to make a particular entity foot the bill.

Plaintiff and his wife sued Frontier and a number of other entities after he “suffered a tragic electrocution injury while working on an electrical switch.” The switch that injured Mr. Hemond wasn’t properly installed or grounded by the time he was told to open it and he was injured severely by an electrical arc. So they sued for “negligence in the design, manufacture, installation, and construction of the Richford substation, and of the switch in particular.” Frontier owned the equipment. You can read about the factual basis here. Relevant to this particular appeal, Stantec Consulting, Inc. provided consulting services to Frontier in connection with the reconstruction of the Richford substation; Turner Electric Corporation manufactured the switch; and Graybar Electric Company distributed the switch. 
As we know from last week, after mediation, the Hemonds settled with all defendants except Frontier. Frontier then “filed cross-claims for implied indemnification against Stantec, Graybar, and Turner, and for express indemnification against Turner.” These defendants filed either for dismissal or summary judgment of Frontier’s claims. Stantec noted in its motion that Frontier employees were responsible for development and design and oversaw maintenance and safety at the substation. Stantec was hired after switch-related decisions were already made “to provide conceptual drawings to be used before the Public Service Board (PSB) showing whether the equipment fit within spatial requirements,” and it did so.

Frontier ordered the Turner switch through its local distributor, Graybar. A Frontier employee filled out the switch-specification sheet from Graybar and it was transmitted to Turner. Frontier’s design was the same as it had used on two other substations.

After hearing, the trial court treated the motions to dismiss as motions for summary judgment and granted summary judgment to Stantec and Turner on Frontier’s implied-indemnification claims in a written order. The trial court issued a subsequent order in favor of Graybar on Frontier's implied-indemnity claim, and in favor of Turner on Frontier's express-indemnity claim. See last week’s summary for a haphazard explanation of these legal concepts.

Frontier asked the trial court to reconsider, arguing that the trial court didn’t give it notice and an opportunity to respond before it converted the motions to dismiss to motions for summary judgment. The trial court basically said, “Okay, but so what? You didn’t challenge the only outside-the-pleadings fact the court used—that your engineer picked the switch.” Frontier also argued that the court screwed up the law on the express- and implied-indemnity claims, but the trial court disagreed. So Frontier appealed.

The SCOV reviews “a grant of summary judgment de novo, applying the same standard as the trial court.” This means that taking the evidence in the light most favorable to the party that didn’t ask for summary judgment, the SCOV asks whether that nonmoving party is entitled to judgment as a matter of law. Again, we covered this stuff last week.

Implied indemnity applies when it’s only fair to blame somebody else, more or less. It’s when a party is largely innocent and only on the hook because of a legal relationship. Like if I dug a huge hole on your property without you knowing about it and somebody falls in. That might be a situation where implied indemnity would apply.

The trial court “explained that for the Hemonds to prevail on their claims, it would have to find Frontier ‘at active fault—specifically for choosing the wrong switch’ and therefore Frontier could not seek implied indemnity.” The SCOV agrees that Frontier is not entitled to implied indemnity, but on different grounds. The SCOV reasons that there are no facts that could demonstrate vicarious liability through Stantec, Turner, or Graybar. Nor can Frontier demonstrate that it “was not primarily responsible for creating the dangerous condition that caused the accident.”

Frontier’s argument boils down to a those-guys-shoulda-told-us-it-was unsafe-so-it-ain’t-our-fault thing. However, the SCOV can’t see anywhere where Frontier delegated the making-the-property-safe duty to any of the other defendants. “The critical fact—undisputed by Frontier—is that Frontier retained responsibility for the safety of its equipment and its workplace, and that the injury was primarily caused by Frontier's own actions in choosing, and installing the switch.”

Thus, the SCOV reasons, whether Frontier knew the switch was safe or not doesn’t really matter in this context. Implied indemnity doesn’t escape summary judgment.

Frontier’s express indemnification argument stems from the purchase-and-sale agreement between Turner (manufacturer) and Graybar (distributor) in which Turner agrees to indemnify Graybar. Frontier argues that it’s a third-party beneficiary of that contract. The trial court disagreed.

The SCOV notes that whether a party may be classified as a third-party beneficiary is based on the original contracting parties’ intention—so it’s gonna take a look at the contract language. The SCOV reasons there’s no language (such as “and any subsequent purchaser”) to show that Graybar and Turner intended to benefit Frontier. The contract is clearly limited to Turner and Graybar. Frontier argues that Turner knew it was that customer; Frontier was listed on the purchase form; and Turner shipped the switch directly to Frontier. But none of this changes the contract language or shows that Graybar and Turner intended to make Frontier a beneficiary of the indemnity clause.

Frontier also argues that the trial court screwed up by converting Turner’s motion to dismiss to a motion for summary judgment without giving Frontier proper notice and an opportunity to respond. The SCOV acknowledges that the trial court shouldn’t’ve done that, but Frontier fails to demonstrate prejudice. First, the contract language is clear and Frontier isn’t a third-party beneficiary. And Frontier in fact provided more info in its motion to reconsider and that didn’t change anything, so, you know, it’s all good—no harm, no foul.

As a final note, there are a couple motions about the proper scope of the record on appeal. The first is a motion by Frontier to strike portions of the briefs and a supplemental record that reference post-summary judgment proceedings. The SCOV deftly disposes of this by noting that it didn’t need to get into any of that, so the motion is moot.

The second motion was filed by Stantec after oral argument so that it could point the SCOV to sections of its supplemental printed case to rebut some of Frontier’s rebuttal argument statements. Frontier opposed on the basis that “portions of the supplemental printed case were not before the trial court at the time the summary judgment motions were considered.” The SCOV reviews the record, notes that Stantec’s stuff got submitted in the summary-judgment proceedings, and grants the motion.

So there you have it again. Frontier isn't getting anybody to pick up this tab. 

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