UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF INDIANA

HAMMOND DIVISION

CITY OF WHITING, INDIANA., )

)

Plaintiff, )

)

v. ) No. 2:14 CV 440

)

WHITNEY, BAILEY, COX, & )

MAGNANI, LLC, )

)

Defendant. )

OPINION and ORDER

This matter is before the court on defendant’s motion for summary judgment

(DE # 50) and defendant’s motion to strike (DE # 72). For the reasons stated below, the

motion for summary judgment will be granted in part and denied in part. The motion

to strike will be denied.

I. BACKGROUND1

Plaintiff, City of Whiting, Indiana (the “City”), is located along Lake Michigan.

(DE # 29 ¶ 7.) The City undertook a project to redevelop 26 acres of waterfront property

along the lake. (DE # 69-2 ¶ 3.) This was called the Whiting Lakefront Park Project (the

“Project”). (DE # 29 ¶ 5.) In 2009, the City hired an engineering firm, American

Structurepoint, Inc. (“Structurepoint”) to be the consultant for the Project. (Id. ¶ 8.) This

hiring was established by the terms of the Prime Agreement. (DE # 29-1.)

1

 In the summary that follows, the court refers only to undisputed facts, or, if

there is a dispute, notes that it exists. This summary provides an overview. Additional

relevant undisputed facts will be referred to in the analysis that follows.
In 2010, Structurepoint subcontracted with defendant, Whitney, Bailey, Cox &

Magnani, LLC (“WBCM”), for marine engineering services on the Project. (DE # 29-2,

the “Subcontract.”) WBCM’s services included designing a rock revetment that would

be built along the lake for the purpose of shoreline protection. (See DE ## 29 ¶ 23; 29-1

at 16.) According to the City, the revetment failed three times: (1) October 31, 2012,

(2) July 28, 2014, and (3) October 31, 2014. (DE # 51-2 at 3.) The City contends these

failures resulted in damage to its property located on the site of the Project and costs to

repair and reinforce the revetment itself. (Id. at 3–5.) Specifically, the City asserts it was

forced to incur expenses related to a walking pathway, landscaping and greenery, and a

gazebo. (Id.) There was also damage to existing trees. (DE # 69-5 at 3.) Moreover, the

City says it was forced to tear down the existing “Gun Club” structure, which it had

intended to convert into a restaurant. (DE ## 51-2 at 5; 69-3 at 3–5.)

In addition to the issues with the revetment, the City also contends that it

authorized construction of a breakwater arm (the “breakwater”) based upon a

recommendation from WBCM that such a structure would decrease sedimentation and

lower the cost of maintenance dredging. (DE # 29 ¶¶ 36–38.) However, the completed

breakwater has not resulted in any decrease in sedimentation or any decrease in the

cost of maintenance dredging, according to the City. (Id. ¶ 86.) It also claims WBCM

failed to adequately design the breakwater, resulting in additional damages. (Id. ¶ 89.)

On October 30, 2014, the City and Structurepoint entered into an Assignment

Agreement, whereby Structurepoint assigned the Subcontract to the City along with

2
“any and all rights, interests, property, claims, demands, causes of action and choses in

action, arising out of contract or tort, which [Structurepoint] may have against WBCM

relating to the [Subcontract] and/or the Revetment Failures.” (DE # 29-3 ¶ 2.) The

Assignment Agreement also grants the City “the sole and exclusive right to pursue both

its own claims and the claims of [Structurepoint] against WBCM relating to the

Revetment Failures and/or WBCM’s breach of the [Subcontract], or negligent

performance of the [Subcontract] or any other failure to perform its obligations on the

[Project]. (Id.)

On October 30, 2014, contemporaneous with the execution of the Assignment,

the City and Structurepoint also entered into an agreement titled “Common Interest

Agreement and Tolling Agreement” (the “Tolling Agreement”). (DE # 69-2 at 5–13.) The

Tolling Agreement stated that “nothing contained in the Assignment Agreement . . .

releases [Structurepoint] of or from any duty or liability . . . to [the City] under the

[Prime] Agreement” and that Structurepoint’s “obligations under the [Prime]

Agreement shall remain in full force and effect[.]” (DE # 69-2 ¶ L.) Structurepoint and

the City then agreed to toll the statute of limitations on any potential claims one might

have against the other, for a certain period of time, in order to allow the parties to

achieve a “common interest” and “joint defense.” (Id. ¶ 13.)

The City has since terminated the Tolling Agreement and has filed a separate suit

against Structurepoint. (DE # 69-2 ¶ 10.) That case remained pending as of July 11, 2017.

(See id. at ¶ 10, p. 4.)

3
Also on October 30, 2014, the City filed a complaint against WBCM in Lake

County Superior Court in Indiana. (DE # 5.) WBCM then removed the case to this court.

(DE # 1.) The City later filed an amended complaint (DE # 10) and a second amended

complaint (DE # 29). The second amended complaint, filed April 20, 2016, contains the

following six claims: (1) breach of contract (via assignment), (2) negligence, (3) breach of

contract (third-party beneficiary), (4) breach of warranty (via assignment), (5) indemnity

(via assignment), and (6) breach of contract (via assignment) (regarding the

breakwater). (DE # 29 at 6–10.)

On May 12, 2017, WBCM filed its motion seeking summary judgment on all

claims against it. (DE # 50.) The City responded to the motion on July 12, 2017. (DE

# 69.) Along with its response brief, the City attached a copy of the Tolling Agreement.

(DE # 69-2 at 5–13.) The City relies on the Tolling Agreement in support of its

indemnity claim. (DE # 69 at 24–25.)

On April 26, 2017, WBCM filed its reply brief to the motion for summary

judgment (DE # 71) and also filed a motion to strike the Tolling Agreement from the

City’s response (DE # 72). The City responded to the motion to strike (DE # 76), and

WBCM filed a reply in support of the motion (DE # 78). Thus, both motions are fully

briefed and ripe for review.

II. LEGAL STANDARD

Federal Rule of Civil Procedure 56 requires the entry of summary judgment, after

adequate time for discovery, against a party “who fails to make a showing sufficient to

establish the existence of an element essential to that party’s case, and on which that

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party will bear the burden of proof at trial.” Celotex Corp. v. Catrett, 477 U.S. 317, 322

(1986). “[S]ummary judgment is appropriate—in fact, is mandated—where there are no

disputed issues of material fact and the movant must prevail as a matter of law. In other

words, the record must reveal that no reasonable jury could find for the non-moving

party.” Dempsey v. Atchison, Topeka, & Santa Fe Ry. Co., 16 F.3d 832, 836 (7th Cir. 1994)

(internal citations and quotation marks omitted).

The moving party bears the initial burden of demonstrating that these

requirements have been met. Carmichael v. Village of Palatine, Ill., 605 F.3d 451, 460 (7th

Cir. 2010). “[T]he burden on the moving party may be discharged by ‘showing’—that is,

pointing out to the district court—that there is an absence of evidence to support the

nonmoving party’s case.” Celotex, 477 U.S. at 325. Once the moving party has met its

burden, the non-moving party must identify specific facts establishing that there is a

genuine issue of fact for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986);

Palmer v. Marion Cty., 327 F.3d 588, 595 (7th Cir. 2003) (citing Celotex, 477 U.S. at 324). In

doing so, the non-moving party cannot rest on the pleadings alone, but must present

fresh proof in support of its position. Anderson, 477 U.S. at 248; Donovan v. City of

Milwaukee, 17 F.3d 944, 947 (7th Cir. 1994). In viewing the facts presented on a motion

for summary judgment, the court must construe all facts in a light most favorable to the

non-moving party and draw all reasonable inferences in favor of that party. Chmiel v. JC

Penney Life Ins. Co., 158 F.3d 966 (7th Cir. 1998).

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III. DISCUSSION

A. Count II: Negligence Claim

In its motion, WBCM argues the City’s negligence claim should be dismissed

under the economic loss doctrine. (DE # 51 at 5.) Specifically, Indiana’s “economic loss

rule” precludes tort liability for purely economic loss.2Indianapolis-Marion Cty. Pub.

Library v. Charlier Clark & Linard, P.C., 929 N.E.2d 722, 727 (Ind. 2010) (hereinafter

“IMPCL”). “Rather these losses are viewed as disappointed contractual or commercial

expectations.” Gunkel v. Renovations, Inc., 822 N.E.2d 150, 154 (Ind. 2005). This means

that when a plaintiff buys an inferior product, and then that product does not perform

its generally intended function, he cannot sue in tort for the product’s diminution in

value, incidental and consequential losses as lost profits, rental expense, or lost time. Id.

“Economic loss” also includes “[d]amage to the product itself, including costs of its

repair or reconstruction.” Id. On the other hand, the economic loss rule does not shield a

defendant from tort liability when “the defect causes personal injury or damages to

property other than the product . . . itself.” IMPCL, 929 N.E.2d at 726. 

Tort claims related to construction are subject to the economic loss doctrine.

Gunkel, 822 N.E.2d at 155. However, in that context it can be more challenging to define

2

 Neither party includes a choice of law analysis in its brief. However, each party

predominantly cites to cases interpreting Indiana law, and Indiana—as the location of

the Project—has the most significant contacts to the subject matter of the litigation. See

Am. Family Mut. Ins. Co. v. Williams, 839 F. Supp. 579, 582 (S.D. Ind. 1993) (“When a

federal court hears a case in diversity . . . it applies the choice-of-law rules of the forum

state . . . [and] in contract actions, Indiana’s choice of law rules require that the law of

the state with the most significant contacts to the subject matter of the litigation be

applied.”). Therefore, the court will apply Indiana law.

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the “defective product” vis-à-vis “other property” since a building or a larger

construction project is not a “good” or a “product” in the traditional sense of the word.

See id. In the case at hand, the City agrees that the economic loss doctrine applies to its

negligence claim and concedes that it can only recover on that claim for damages to

property other than defective product itself. (DE # 69 at 16.) But, the parties disagree as

to what constitutes the “product” and, conversely, what constitutes “other property.”

WBCM defines the product broadly, as the entire Project. (DE # 51 at 7.)

Accordingly, it argues that damages to any aspect of the lakefront park are barred

under the economic loss doctrine. On the other hand, the City notes that the Prime

Agreement separates the larger Project into several uniquely numbered projects. (DE

# 29-1 at 1–2, 7.) The revetment, as a form of shoreline protection, was a component of

Project No. 1. (See id.) Since the revetment was the defective item in this case, the City

argues that Project No. 1 is the relevant “product” and that anything listed under a

differently numbered project should be considered other property. (DE # 69 at 17.)

In two relevant cases, the Supreme Court of Indiana has helped to clarify what

constitutes a product in the construction context. In IMPCL, the Public Library in the

City of Indianapolis brought suit against engineering subcontractors alleging that they

provided defective design and inspection services during construction of an

underground parking garage built as part of a renovation project of the entire library

facility. 929 N.E.2d at 731. The Indiana Supreme Court explained that “the ‘product’ is

the product purchased by the plaintiff, not the product furnished by the defendant.” Id.

There, the Library “purchased a complete renovation and expansion of all the

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components of its facility as part of a single, highly-integrated transaction.” Id. “The

Library did not purchase a blueprint from the Defendants, concrete from the materials

supplier, and inspection services . . . in isolation.” Id. Since the entire library facility was

the product, any damages resulting from the subcontractors’ services was to the

product itself, and not to other property. Id. at 732.

WBCM tries to distinguish IMPCL by saying that it only involved the

construction of a single structure/building, unlike the case at hand. (DE # 69 at 17.)

However, WBCM provides no legal support for this distinction between a single

structure and a larger facility. What matters is what the City purchased—not its

size—and, here, the City purchased an entire lakefront park—even if that park was

divided into sub-projects by the Prime Agreement. Just as the defective garage in

IMPCL was purchased as part of the greater library facility, the defective revetment in

this case was purchased as an integral part of the greater lakefront project. Accordingly,

the court concludes that the “product” here is the entire Project.

The other relevant decision from the Supreme Court of Indiana is Gunkel. In

Gunkel, the court held consistently with IMPCL that the relevant “product” is the

product that is purchased by the plaintiff. 822 N.E.2d at 155. But the court also made the

distinction that “property acquired separately from the defective good or service is

‘other property,’ whether or not it is, or is intended to be, incorporated into the same

physical object.” Id. In that case, the Gunkels contracted for the construction of a home

with one contractor, and then six months later contracted with another company for the

installation of a stone façade, which ultimately failed and caused damage to the home.

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Id. at 151. The court held that the economic loss rule precluded tort recovery for damage

to the home, as it was other property as compared to the independently acquired

defective product. Id. at 156.

In the case at hand, the defective good or service—the revetment—was not

purchased separately from the rest of the Project. In fact, the City admits the revetment

was a component of the Prime Agreement. (See DE # 69 at 6.) Any items, like the

revetment, that were purchased as part of the Project are not “other property” and

recovery for damages to those items is barred by the economic loss doctrine. 

However, any items that the City acquired separately from the Project would be

considered “other property.” Based on the evidence before the court, of the items the

City lists as being damaged by the revetment failures, only (1) the existing trees and

(2) the existing Gun Club structure were not purchased as part of the Project (the Gun

Club renovation is a part of the Project, but not the pre-existing building itself). (See DE

## 29-1 at 21; 69-3 at 3; 69-5 at 3.) Therefore, the City could potentially recover damages

to those items through its negligence claim. To the extent the City alleges damages to

those or any other pre-existing items3, the negligence claim would be exempt from the

economic loss doctrine. As to all other damages, the City’s negligence claim is barred by

the economic loss doctrine and summary judgment is appropriate.

3

 It is not clear from the record if the alleged damages to items such as walking

pathways, landscaping and greenery, and the gazebo were damages to the pre-existing

versions of those structures or if they were damages to the renovated structures that

were purchased as part of the Project. (See DE # 51-2 at 4–5.)

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B. Counts I, IV, and VI: Claims Based on Assignment

In the Assignment Agreement dated October 30, 2014, Structurepoint assigned

the Subcontract to the City along with “any and all rights, interests, property, claims,

demands, causes of action and choses in action, arising out of contract or tort, which

[Structurepoint] may have against WBCM relating to the [Subcontract] and/or the

Revetment Failures.” (DE # 29-3 ¶ 2.) “In construing assignment agreements, the

general rules of contract interpretation apply.” Boswell v. Lyon, 401 N.E.2d 735, 741 (Inc

Ct. App. 1980). “This means that if the language of the agreement is plain and clear, its

interpretation is a matter of law.” Id. “The court will look to the contract language as

expressing the intent of the parties.” Id.

The City brings Counts I, IV, and VI, for breach of contract and breach of

warranty, on the basis of the Assignment Agreement. WBCM argues that it is entitled to

summary judgment on these counts because Structurepoint had no valid claims against

WBCM, prior to the assignment, that it could have legally assigned to the City. (DE # 51

at 10.) An assignee acquires only those rights possessed by the assignor. Simon Prop.

Grp. L.P. v. Brandt Constr. Inc., 830 N.E.2d 981, 992 (Ind. Ct. App. 2005). In other words,

the City cannot assert claims against WBCM that it purportedly received from

Structurepoint, if Structurepoint never held such claims to begin with.

In order for Structurepoint to have had a claim against WBCM, prior to the

assignment, it must have incurred some damages; yet, WBCM says the City has failed

to establish any such damages exist. (See id. at 13.) In its response, the City still makes

no effort to provide evidence of any damages incurred by Structurepoint. (See DE # 69

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at 19.) Nevertheless, the City argues Structurepoint’s damages are actually irrelevant for

the purposes of Counts I, IV, and VI. (Id.) That is because, the City says it is not relying

on the assignment of claims, but rather, it is relying on the assignment of rights and

interests. (Id.) According to the City, it doesn’t matter that Structurepoint potentially had

no claims against WBCM, because it has its own claims against WBCM based on the

rights assigned to it by Structurepoint.

Specifically, under the Subcontract, Structurepoint had the right to engineering

services performed by WBCM “in a manner consistent with that degree of care and skill

ordinarily exercised by members of the same profession currently practicing under

similar circumstances at the same time and in the same or similar locality.” (DE # 29-2 at

1.) According to the City, that right to workmanlike performance became the City’s

right and can form the basis of its own breach of contract and breach of warranty claims

against WBCM, irrespective of Structurepoint’s damages. (DE # 69 at 20.)

As stated by the Indiana Court of Appeals, “virtually all contract rights” are

assignable. Essex v. Ryan, 446 N.E.2d 368, 374 (Ind. Ct. App. 1983). “[The] right is to be

distinguished from the remedy, a cause of action, for the violation of the right.” Id. at

374. In Essex, the defendant also argued that the assignor “had no cause of action

[against the defendant] to assign, either in tort or in contract.” Id. Yet, the court found

that an assignment of “any and all rights” could transfer a right to workmanlike

performance to the assignee. Id. As such, the court said the assignee was “entitled to go

to trial to prove their cause of action . . . for breach of contract” against the defendant

based on the assigned right. Id. at 375.

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WBCM does not dispute the court’s conclusion in Essex, but attempts to

distinguish the case by pointing out that Essex did not involve a chain of contracts

commonly found on a construction project, unlike the case at hand. (DE # 69 at 11.)

WBCM also notes the City agreed to “forego” legal action against Structurepoint in

exchange for the assigned rights. (DE # 69 at 11.) There was no similar agreement to

forego suit in Essex against the assignee. However, the court does not see how these

facts would have any effect on the Essex court’s conclusion that an assignee may bring

suit based on his assigned rights. 

WBCM cites no case law in its attempt to distinguish Essex and the court sees no

language in the Essex decision itself which would support such a distinction. Without a

reason to draw a distinction, the court will follow the holding of Essex and will allow

the City to bring suit based on any rights assigned to it in the assignment agreement.4

In a footnote in its reply, WBCM also argues that Structurepoint's assignment of

rights should be invalidated because WBCM did not provide its consent. The consent

clause in the Prime Agreement states “[n]either the client [(the City)] nor the consultant

[(Structurepoint)] shall assign his interest in the agreement without the written consent

of the other.” (DE # 29-2 at 13.) This clause does not, on its terms, apply to WBCM,

which was not a party to the Prime Agreement. Rather, WBCM’s connection to the

4

 Although the City may bring suit based on the rights assigned to it, generally,

the court reaches no conclusions as to which specific rights may support claims against

WBCM. WBCM did not challenge any of the specific rights, in its briefs, and so the court

need not address it at this time. The court also reaches no conclusions as to whether the

assignment of rights allows the City to sue WBCM for actions that occurred before the

date of the assignment. The parties did not brief that issue.

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Prime Agreement comes from a clause in the Subcontract which states that WBCM

“shall be obligated to the applicable provisions . . . of the [Prime Agreement].” (DE #

29-2 at 3.) 

Nevertheless, WBCM does not point to any language in the agreements which

would indicate that the consent clause of the Prime Agreement was intended to be one

of these “applicable provisions” which would apply to WBCM. Moreover, the

Subcontract purports to give additional obligations to WBCM, rather than to provide

additional rights to WBCM. Therefore, WBCM cannot use the consent clause of the

Prime Agreement to invalidate the assignment.

For the foregoing reasons, summary judgment is denied as to these claims.

C. Count V: Indemnity Claim

In the Subcontract, WBCM and Structurepoint mutually agreed “to indemnify

and hold each other harmless from any and all damages, liabilities or costs . . . arising

from their own negligent acts, errors or omissions, or willful misconduct in the

performance of their services under [the Subcontract].” (DE # 29-2 at 3.) In other words,

Structurepoint was given the right to pursue a claim against WBCM for indemnification

if it was ever held liable or paid damages due to WBCM’s acts or omissions. After the

Assignment Agreement, the City now has the sole right to pursue Structurepoint’s

claims against WBCM. (DE # 29-3 at 3.) Thus, in its second amended complaint, the City

asserts an indemnity claim against WBCM. (DE # 29 at 9.) It alleges that “[p]ursuant to

the terms of the Subcontract and the Assignment Agreement, WBCM is obligated to

13
indemnify and hold harmless the City for any and all damages or liabilities arising out

of WBCM’s performance under the Subcontract.” (Id. ¶ 74.)

WBCM moves for summary judgment on this claim on the grounds that

Structurepoint has no liability to the City, meaning there is nothing for WBCM to

indemnify. (DE # 51 at 13.) Under Indiana law, the duty to indemnify is only triggered

when either (1) the indemnitee pays a claim, or (2) the indemnitee’s liability in an

underlying claim becomes fixed and established. Henthorne v. Legacy Healthcare, Inc., 764

N.E.2d 751, 758 (Ind. Ct. App. 2002) (quoting 42 C.J.S. Indemnity § 22 (1991)). As to the

first Henthorne factor, WBCM asserts Structurepoint has not paid any damages for

claims. (DE # 51 at 14.) The City does not dispute this. (See DE # 69.)

As to the second Henthorne factor, no liability has been established as to

Structurepoint as of yet. (See DE # 51 at 14–15.) In addition, WBCM contends that no

liability can be fixed against Structurepoint moving forward. (Id.) The Assignment

Agreement provides that “[Structurepoint] has proposed and [the City] has consented

to pursue direct legal action against WBCM to recover [the City’s] loss and damage and

forego taking legal action against [Structurepoint] as further set forth in his Agreement.”

(DE # 29-3 at 3 (emphasis added).) Forego legal action in this context means to waive

one’s right to take legal action. See Lafayette Car Wash, Inc. v. Boes, 282 N.E.2d 837, 839

(Ind. 1972), r’hng denied (“Waiver is the intentional relinquishment of a known right; an

election by one to forego some advantage he might have insisted upon.”) In other

words, if the City truly has waived its right to pursue legal action against

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Structurepoint, Structurepoint can never be found liable to the City. Without fixed

liability, the indemnity claim would fail.

The City does not dispute that Structurepoint has not paid any damages or that

the term “forego” means “waive.” (See DE # 69.) Instead, the City’s argument is based

on the Tolling Agreement, signed by the City and Structurepoint on the same day they

signed the Assignment Agreement. (Id. at 24.) The Tolling Agreement states that

“nothing contained in the Assignment Agreement . . . releases [Structurepoint] of or

from any duty or liability . . . to [the City] under the [Prime] Agreement” and that

Structurepoint’s “obligations under the [Prime] Agreement shall remain in full force

and effect[.]” (DE # 69-2 ¶ L (emphasis added).) The parties also agreed to toll the

statute of limitations on “the [p]arties’ claims or potential causes of action against the

other.” (Id. ¶ 13.) This language implies the City intended to preserve claims against

Structurepoint, rather than to waive them. This intent is also demonstrated by the City’s

currently pending suit against Structurepoint. (See 69-2 at ¶ 10, p. 4.) If the City can

bring suit against Structurepoint, that means liability could become fixed in the future,

and the indemnity claim would survive.

However, in its reply (DE # 71) and in a separate motion to strike (DE # 72),

WBCM asks the court to disregard the Tolling Agreement. Generally, the court would

consider the Tolling Agreement when interpreting the Assignment Agreement, as the

two agreements were signed the same day. Ruth v. First Fed. Sav. & Loan Ass’n of LaPorte

Cty., 492 N.E.2d 1105, 1107 (Ind. Ct. App. 1986) (“[I]n the absence of anything to

indicate a contrary intention, writings executed at the same time and relating to the

15
same transaction or subject-matter are construed together in determining the

contract.”). But, WBCM insists the two agreements should not be read in conjunction, in

this instance, due to the Assignment Agreement’s integration clause. (DE # 71 at 12–13.) 

The integration clause states as follows:

This Assignment Agreement reflects the entire agreement

between the Parties with respect to the assignment of claims

hereinabove described. Those statements, promises or

inducements made by or on behalf of the Parties that are not

contained herein shall not be binding. 

(DE #29-3 ¶ 10.) The inclusion of an integration clause, WBCM argues, means the

parties intended the Assignment Agreement to stand on its own as a completely

integrated document that would not be bound by any other agreements, such as the

Tolling Agreement.

Still, an integration clause “does not control the question of whether a writing

was intended to be completely integrated.” Franklin v. White, 493 N.E.2d 161, 166 (Ind.

1986). An integration clause is “only some evidence” of the parties’ intentions. Id. The

court should consider the integration clause, but also any other relevant evidence on the

question of integration, including the Tolling Agreement itself. See id. at 167 (“[T]he

preliminary question of integration . . . requires the court to hear all relevant evidence,

parol or written.”).

The City and Structurepoint are both entities experienced in business and

negotiations, rather than unsophisticated parties. This level of experience means the

court should give more weight to the parties’ decision to include an integration clause

in the Assignment Agreement, since experienced parties would, presumably, not have

16
negotiated an integration clause if they did not actually intend the agreement to be fully

integrated. See Franklin, 493 N.E.2d at 166 (“However, where two sophisticated parties

engage in extensive preliminary negotiations, an integration clause may, in fact, reflect

their mutual intention to abandon preliminary negotiations in favor of a complete and

final statement of the terms of their agreement.”). On the other hand, the fact that the

language of the Tolling Agreement directly references the Assignment Agreement and

the fact it was signed the same day as the Assignment Agreement both strongly suggest

that the parties intended the Tolling Agreement to carry weight as language modifying

the Assignment Agreement. This apparent contradiction between the integration clause

and the language of the Tolling Agreement leaves the court with an obscured view of

the parties’ intentions.

WBCM, in its motion to strike, seems to initially argue that this contradiction

between the integration clause and the Tolling Agreement is a reason why the Tolling

Agreement should be excluded as parol evidence. (See DE # 72.) Yet ultimately, in its

reply to its own motion to strike, WBCM acknowledges that there is a way to

harmonize the Tolling and Assignment Agreements, allowing them to both be read

without any contradiction. (DE # 78 at 6.) According to WBCM in its reply, “[t]he

purpose of the Assignment Agreement is clear: to assign Structurepoint’s claims against

WBCM to the City, where both the City and Structurepoint agreed that WBCM was

solely to blame for the City’s alleged damages, and Structurepoint’s liability to the City

was purely vicarious.” (Id.) “The agreement to forego/waive legal action against

Structurepoint, then, can be read to relate only to the City’s claim[s] against

17
Structurepoint for vicarious liability arising from WBCM’s alleged negligence or

breaches.” (Id.) “In this same vein, the Tolling Agreement preserves the City’s rights

and claims against Structurepoint—where Structurepoint is potentially liable for

Structurepoint’s own acts or omissions causing damage to the City.” (Id.) 

Essentially, WBCM’s theory of harmonization is another way of saying the

integration clause applies only partially with regards to the assigned claims, i.e., those

claims arising from WBCM’s negligence or breaches. This interpretation is consistent

with the language of the integration clause itself, which merely says the “Assignment

Agreement reflects the entire agreement . . . with respect to the assignment of claims.” (DE

#29-3 ¶ 10 (emphasis added).) According to this partial integration theory, the

integration would not apply to claims against Structurepoint based on its own acts or

omissions, which is why the City would be able to reserve those claims via the Tolling

Agreement, without running afoul of the Assignment Agreement’s waiver provision. 

WBCM’s theory of harmonizing the Assignment and Tolling Agreements is

consistent with all of the relevant evidence and the language of the two agreements.

Therefore, the court adopts WBCM’s theory of harmonization. Consequently, the court

need not strike the Tolling Agreement as parol evidence.5

5

 In its motion to strike, WBCM also argues the Tolling Agreement should be

excluded based on equity because WBCM has been prejudiced by the City’s selective

use of privilege to withhold the Tolling Agreement until it was included along with the

response brief. (DE # 72 at 5–6.) However, because the court will ultimately rule in

WBCM’s favor on the indemnity claim, there is no prejudice against WBCM.

Accordingly, the court will deny the motion (DE # 72) as moot.

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Returning to the issue of indemnity, the City acknowledges that WBCM is only

obligated to indemnify Structurepoint for liabilities arising out of WBCM’s performance

under the Subcontract. (See DE # 29 ¶ 74.). But, in the Assignment Agreement, the City

has specifically waived its claims against Structurepoint based on WBCM’s

performance. It does not matter that the City reserved its other claims against

Structurepoint, via the Tolling Agreement, because WBCM is not obligated to

indemnify the parties for liabilities arising from those claims. Therefore, for the

purposes of the second Henthorne factor, Structurepoint’s liability will never become

fixed. Thus, the City cannot support its indemnity claim and summary judgment is

appropriate on the claim.

D. Count III: Breach of Contract Claim Based on Third-Party Beneficiary

The City brings a breach of contract claim on the basis that it is a third-party

beneficiary of the Subcontract. (DE # 29 at 8.) To enforce a claim by virtue of being a

third-party beneficiary, a plaintiff must show: “(1) [a] clear intent by the actual parties

to the contract to benefit the third party; (2) [a] duty imposed on one of the contracting

parties in favor of the third party; and (3) [p]erformance of the contract terms is

necessary to render the third party a direct benefit intended by the parties to the

contract.” Lunhow v. Horn, 760 N.E.2d 621, 628 (Ind. Ct. App. 2001) (emphasis omitted)

(quoting NN Investors Life Ins. Co. v. Crossley, 580 N.E.2d 307, 309 (Ind. Ct. App. 1991)).

The controlling factor is the contracting parties’ intent that the third party be a direct

beneficiary. Id.

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Regarding intent, the Subcontract states from the outset that the services

performed by WBCM “shall assist [Structurepoint] under its Professional Services

Agreement with City of Whiting, Indiana (Prime Agreement) for the PROJECT: Whiting

Lakefront Park.” (DE # 29-2 at 1 (underlining in original).) “Intent may be shown by

naming a specific third party.” St. Paul Fire & Marine Ins. Co. V. Pearson Constr. Co., 547

N.E.2d 853, 856 (Ind. Ct. App. 1989). In St. Paul, the court concluded that the parties’

contract demonstrated intent to benefit a third-party where that third-party was

referred to by name as the party for whom the work was being done. Id. at 856–57. In

the case at hand, the Subcontract similarly demonstrates intent to benefit the City

because the City is referred to by name as the party for whom WBCM’s engineering

services are being performed.6

In addition to merely naming the City, the Subcontract purports to incorporate

the entire Prime Agreement between the City and Structurepoint. (DE # 29-2 at 2, ¶ 5.6.)

The Subcontract then provides further details regarding the incorporation of the Prime

Agreement, stating “[WBCM] shall be obligated to the applicable provisions (including

but not limited to indemnification, insurance, dispute resolution, and ownership of

documents) of Structurepoint’s [Prime] Agreement with City of Whiting.” (Id. at 3,

6

 In its reply, WBCM attempts to distinguish St. Paul on the basis that the

contract in that case contained clear language conferring a direct benefit of a warranty

to the third-party beneficiary. (DE # 71 at 5–6 (citing St. Paul, 547 N.E.2d at 857.).)

WBCM is correct that the contract in St. Paul contained specific language regarding a

warranty, but the Court of Appeals of Indiana made its determination as to intent before

considering the warranty language. The court only discussed the warranty language

later in its opinion, when it examined the duty requirement.

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¶ 5.12.) Whether or not these attempts at incorporation are actually effective in

assigning duties or obligations to WBCM, it certainly evinces either intent or awareness

on the part of the parties that their actions would benefit the City. The Subcontract

further states that “each task” performed by WBCM “will be reviewed by the Owner”

(the City) at three levels of completion. (DE # 29-2 at 4, ¶ B.) Therefore, WBCM

performed all of its services under the Subcontract with the knowledge that its work

was for the benefit of the City and would be reviewed by the City.

Additionally, the subcontract does not contain a “no third-party beneficiary”

clause. (See DE # 29-2.) This fact, by itself, does not prove any intent to create a thirdparty beneficiary. But, it also demonstrates the absence of any affirmative intent to

avoid third-party beneficiary status.

For all of the preceding reasons, the court concludes the clear intent of the parties

was to benefit the City through the Subcontract.

For the second factor, the City must demonstrate the Subcontract placed a duty

on one of the contracting parties, in the City’s favor. For one, the Subcontract explicitly

“obligated [WBCM] to the applicable provisions [of the Prime Agreement] . . . including

. . . [provisions regarding] ownership of documents.” (DE # 29-2 at 3, ¶ 5.12.) The

provision of the Prime Agreement regarding document ownership states that final

construction documents prepared by [WBCM] “shall become property of [the City].”

(DE # 29-1 at 3, ¶ 10.) This is a clear and explicit duty placed on WBCM to transfer

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ownership of its documents to the City.7

This duty, on its own, is enough to satisfy this second prong and to ultimately

support a breach of contract claim based on a third-party beneficiary theory. Moreover,

through the incorporation clause, WBCM is also obligated to comply with other

"applicable provisions" of the Prime Agreement, with respect to the City of Whiting.

(DE # 29-2, at 3, 5.12) Nevertheless, the parties have made no effort to define which

additional obligations are "applicable," beyond those specifically listed. Therefore, for

now, the third-party beneficiary claim will move forward without consideration of

these potential additional duties.

The Subcontract also provides that WBCM has a duty to perform its services “in

a manner consistent with that degree of care and skill ordinarily exercised by members

of the same profession.” (DE # 29-2 at 1, ¶ 2.3.) Although the City is not explicitly

mentioned in the same paragraph as this duty, when it is read in the larger context of

the Subcontract, the only reasonable conclusion that can be drawn is that the

performance of this duty will result in a direct benefit to the City, as intended by the

parties. 

7

 WBCM argues that Indiana courts have taken a narrow view of incorporation

by reference and therefore the court should not accept the incorporation of duties

originating from the Prime Agreement. (DE # 51 at 21 (citing MPACT Constr. Grp. LLC

v. Superior Concrete Constructors, Inc., 802 N.E.2d 901, 909-10 (Ind. 2004)).) But, MPACT

does not actually stand for the notion that Indiana takes a narrow view of incorporation

by reference. See id. Rather, in MPACT, the Indiana Supreme Court simply recognizes

that language incorporating contract provisions (specifically incorporating arbitration

provisions, in that case) must be clear and explicit. Id. In that case, the incorporation

language was not explicit enough, but in the case at hand the explicit incorporation of

the Prime Agreement is sufficient. See id.; (see also DE # 29-2 at 2–3, ¶¶ 5.6, 5.12).

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Because the City will receive the direct benefit of the work to be done, and of any

additional duties (including the duty regarding ownership of documents), as intended

by the parties, the third factor of the third-party beneficiary test is satisfied. See St. Paul,

547 N.E.2d at 857 (finding the third factor satisfied where the third-party beneficiary

received a direct benefit of both the work to be done under the contract, and of an

additional duty).

Since the City has provided contract language in support of each of the factors of

the third-party beneficiary test, summary judgment will be denied on this claim.

IV. CONCLUSION 

For the foregoing reasons, the court

(1) GRANTS in part WBCM’s motion for summary judgment (DE # 50) as to

Count II (negligence), as outlined above, and as to Count V (indemnity); 

(2) Otherwise DENIES in part the motion for summary judgment (DE # 51);

(3) DENIES WBCM’s Motion to Strike (DE # 72) as moot; and

(4) ORDERS the parties to file a joint status report regarding their willingness to

engage in a settlement conference before a Magistrate Judge by April 9, 2018. A trial

date will be set under a separate order.

SO ORDERED.

Date: March 20, 2018

s/James T. Moody 

JUDGE JAMES T. MOODY

UNITED STATES DISTRICT COURT

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