*

This order and judgment is not binding precedent, except under the

doctrines of law of the case, res judicata, and collateral estoppel. The court

generally disfavors the citation of orders and judgments; nevertheless, an order

and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.

**The Honorable Claire V. Eagan, United States District Judge for the

Northern District of Oklahoma, sitting by designation.

FILED

United States Court of Appeals

Tenth Circuit

June 24, 2010

Elisabeth A. Shumaker

Clerk of Court

UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

UNITED RENTALS NORTHWEST,

INC.,

Plaintiff - Appellant,

v.

YEAROUT MECHANICAL, INC.,

Defendant - Appellee.

No. 08-2225

(D.C. No. 1:08-CV-00050-RLP-CG)

(D.N.M.)

ORDER AND JUDGMENT*

Before HENRY and O’BRIEN, Circuit Judges, and EAGAN,

** District Judge.

Plaintiff - Appellant United Rentals Northwest, Inc. (United Rentals)

appeals the district court’s decision to grant Defendant - Appellee Yearout

Mechanical, Inc.,’s (Yearout) motion to dismiss. The district court ruled that

United Rentals could not seek indemnification from Yearout because the

indemnification provision contained in the parties’ equipment rental agreement
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was unenforceable under N.M. STAT. ANN. § 56-7-1. We certified a question of

law to the New Mexico Supreme Court and, based on the answer to the certified

question, we affirm the decision of the district court.

Background

United Rentals is an equipment rental company based in Oregon, and

Yearout operates a mechanical contracting service in New Mexico. Yearout

rented a scissor lift from United Rentals on March 1, 2006, and used the scissor

lift to perform duct work at the Eclipse Aviation Hanger at the Albuquerque

International Airport. The rental agreement, referred to as the “Rental Out

Contract,” included an indemnification provision:

INDEMNITY/HOLD HARMLESS. TO THE FULLEST EXTENT

PERMITTED BY LAW, CUSTOMER AGREES TO INDEMNIFY,

DEFEND AND HOLD [UNITED RENTALS] HARMLESS FROM

AND AGAINST ANY AND ALL LIABILITY, CLAIM, LOSS,

DAMAGE OR COSTS (INCLUDING, BUT NOT LIMITED TO,

ATTORNEYS’ FEES, LOSS OF PROFIT, BUSINESS

INTERRUPTION OR OTHER SPECIAL OR CONSEQUENTIAL

DAMAGES, DAMAGES RELATING TO BODILY INJURY,

DAMAGES RELATING TO WRONGFUL DEATH) CAUSED BY

OR IN ANY WAY ARISING OUT OF OR RELATED TO THE

OPERATION, USE, MAINTENANCE, INSTRUCTION,

POSSESSION, TRANSPORTATION, OWNERSHIP OR RENTAL

OF THE EQUIPMENT, INCLUDING WHENEVER SUCH

LIABILITY, CLAIM, LOSS, DAMAGE OR COST IS FOUNDED,

IN WHOLE OR IN PART, UPON ANY NEGLIGENT OR

GROSSLY NEGLIGENT ACT OR OMISSION OF [UNITED

RENTALS] OR THE PROVISION OF ANY ALLEGEDLY

DEFECTIVE PRODUCT BY [UNITED RENTALS]. THIS

INDEMNITY PROVISION APPLIES TO ANY CLAIMS

ASSERTED AGAINST [UNITED RENTALS] BASED UPON

STRICT OR PRODUCT LIABILITY CAUSES OF ACTION OR
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BREACH OF WARRANTY.

Appellant’s App. at 24. On April 1, 2006, two Yearout employees were killed in

an accident when the scissor lift fell over. The personal representatives of the

deceased employees sued United Rentals and JLG, Industries, Inc., the

manufacturer of the scissor lift, under theories of strict liability, negligence, loss

of consortium, and negligent infliction of emotional distress. United Rentals

settled the claims against it for an undisclosed amount.

United Rentals filed this lawsuit seeking indemnification from Yearout

pursuant to the indemnification provision of the Rental Out Contract. Yearout

filed a motion to dismiss the lawsuit asserting that the indemnification provision

was unenforceable under § 56-7-1. Yearout argued that the rental agreement was

a construction contract within the meaning of § 56-7-1 and was unenforceable

under New Mexico law. United Rentals responded that § 56-7-1 did not apply to

equipment leases, even for construction equipment, because such agreements do

not relate to the construction, maintenance, or alteration of real property. The

district court determined that the indemnification provision was unenforceable

under § 56-7-1, and granted the motion to dismiss.

Standard of Review

We review a district court’s decision to grant a motion to dismiss de novo. 

Christy Sports, LLC v. Deer Valley Resort Co., Ltd., 555 F.3d 1188, 1191 (10th

Cir. 2009). This is a diversity case arising out of New Mexico and we must apply
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the substantive law of New Mexico. See Pompa v. American Family Mut. Ins.

Co., 520 F.3d 1139, 1143 (10th Cir. 2008). This Court reviews a district court’s

construction of a state statute under a de novo standard of review. Breaux v.

American Family Mut. Ins. Co., 554 F.3d 854, 863 (10th Cir. 2009). 

Discussion

United Rentals challenges the district court’s decision that the

indemnification agreement in the Rental Out Contract was unenforceable under §

56-7-1. First, United Rentals argues that an equipment lease does not relate to the

construction, alteration, repair, or maintenance of real property and the Rental

Out Contract is not similar to the other types of agreements listed in § 56-7-1(E).

Second, United Rentals states that the New Mexico legislature enacted an antiindemnification statute specifically concerning the enforceability of

indemnification agreements in equipment leases, N.M. STAT. ANN. § 56-7-3, and

argues that it would have been unnecessary to pass § 56-7-3 if leases of

construction equipment were covered by § 56-7-1. Lastly, United Rentals claims

that decisions from the highest courts of other states with similar antiindemnification statutes show that the majority of states do not treat equipment

leases as construction contracts under construction anti-indemnification statutes.

Under N.M. STAT. ANN. § 56-7-1 (2005):

[a] provision in a construction contract that requires one party to the

contract to indemnify, hold harmless, insure or defend the other party

to the contract, including the other party’s employees or agents,
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against liability, claims, damages, losses or expenses, including

attorney fees, arising out of bodily injury to persons or damage to

property caused by or resulting from, in whole or in part, the

negligence, act or omission of the indemnitee, its officers, employees

or agents, is void, unenforceable and against the public policy of the

state.

The statute defines a construction contract as:

a public, private, foreign or domestic contract or agreement relating

to construction, alteration, repair or maintenance of any real property

in New Mexico and includes agreements for architectural services,

demolition, design services, development, engineering services,

excavation or other improvement to real property, including

buildings, shafts, wells and structures, whether on, above or under

real property.

Id. at § 56-7-1(E). The plain language of the statute does not expressly include an

equipment lease within the definition of the term “construction contract.” Section

56-7-1 defines an agreement “relating to construction, alteration, repair or

maintenance of any real property in New Mexico” as a construction contract, and

it goes on to provide a list of specific examples of types of agreements that

constitute construction contracts under the statute. None of the specific examples

is or could be construed as a lease of construction equipment. We determined

that the resolution of this appeal turned on an important and unsettled question of

state law and submitted the following certified question to the New Mexico

Supreme Court:

Is a rental agreement for a scissor lift that was used to perform duct

work at an airport hanger at the time of an accident a “construction

contract” under N.M. Stat. § 56-7-1(E) (2005) such that a provision

in that agreement that “requires one party to the contract to
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indemnify, hold harmless, insure or defend the other party to the

contract, including the other party’s employees or agents, against

liability, claims, damages, losses or expenses, including attorney

fees, arising out of bodily injury to persons or damage to property

caused by or resulting from, in whole or in part, the negligence, act

or omission of the indemnitee, its officers, employees or agents is

void, unenforceable and against the public policy of the state.” Id. at

§ 56-7-1(A).

United Rentals Northwest, Inc. v. Yearout Mechanical, Inc., 573 F.3d 997, 1000

(10th Cir. 2009).

The New Mexico Supreme Court determined that a rental agreement for

construction equipment falls within § 56-7-1 and an indemnification agreement in

such a rental agreement is unenforceable under New Mexico law. That court

construed § 56-7-1 as a broad limitation on the enforceability of an

indemnification agreement in any contract “relating to” construction. United

Rentals Northwest, Inc. v. Yearout Mechanical, Inc., No. 31,860, slip op. at 4

(N.M. June 17, 2010). However, the plain language of § 56-7-1 is susceptible to

more than one reasonable interpretation, and it was not clear if the statute was

intended to apply to rental agreements for construction equipment. The New

Mexico Supreme Court considered the legislative purpose behind the enactment

of New Mexico’s anti-indemnification statutes, and found that the legislature

“overrode competing public policies favoring the freedom to contract” and

recognized that holding wrongdoers liable for their own behavior served an

important deterrent function. Id. at 7. The court found no meaningful distinction
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between a rental agreement for construction equipment and an ordinary

construction contract, and found that § 56-7-1 does apply to a lease of

construction equipment. The New Mexico Supreme Court considered United

Rentals’ argument concerning the subsequent enactment of § 56-7-3 and judicial

decisions from other states with similar anti-indemnification statutes. Since § 56-

7-1 includes rental agreements for construction equipment, the court treated § 56-

7-3 as an extension of New Mexico’s anti-indemnification policy to all types of

rental agreements, not just leases of construction and mining equipment, and this

did not affect the clear legislative intent to include lease agreements for

construction equipment within the scope of § 56-7-1. Id. at 8-11. The New

Mexico Supreme Court also considered judicial decisions from other states and

acknowledged that some state courts have interpreted their own antiindemnification statutes more narrowly, but held that such a narrow interpretation

would be inconsistent with the intent of New Mexico Legislature when it enacted

§ 56-7-1. Id. at 11-12.

Based on the New Mexico Supreme Court’s answer to the certified

question, we find that the district court’s decision to grant Yearout’s motion to

dismiss should be affirmed. The Rental Out Contract is clearly a rental agreement

for construction equipment and falls within the scope of § 56-7-1, as this statute

was interpreted by New Mexico Supreme Court in answer to this Court’s certified

question. United Rentals raised each of its arguments concerning statutory
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interpretation before the New Mexico Supreme Court, and those arguments were

rejected as grounds to exclude an indemnification agreement contained within a

lease of construction equipment from the scope of § 56-7-1. Thus, there are no

issues remaining for resolution in this appeal following the New Mexico Supreme

Court’s answer to this Court’s certified question, and the indemnification

agreement in the Rental Out Contract is unenforceable under New Mexico law.

Therefore, we AFFIRM the judgment of the district court.

Entered for the Court

Claire V. Eagan

District Judge