* This order and judgment is not binding precedent, e xcept under the

doctrines of law of the case, res judicata, and col lateral estoppel. The court generally disfavors the citation of orders and judg ments; nevertheless, an order and judgment may be cited under the terms and condi tions of 10th Cir. R. 36.3.

** The Honorable Arthur L. Alarcón, Circuit Judge, Uni ted States Court of Appeals for the Ninth Circuit, sitting by designati on. 

## F I L E D United States Court of Appeals Tenth Circuit 

### NOV 7 2000 

### PATRICK FISHER Clerk 

### UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

FALCON BELTING, INC., an Oklahoma corporation, Plaintiff-Appellant,

v. RTP COMPANY, a Minnesota corporation, also known as RTP INTERNATIONALS, INC., and MILLER WASTE MILLS, a Minnesota corporation, Defendants-Appellees. No. 99-6236 (D.C. No. CIV-96-2011-T) (W. Dist. Okla.)



### ORDER AND JUDGMENT *

Before SEYMOUR , Chief Judge, ALARCÓN , ** and BALDOCK, Circuit Judges.

Falcon Belting, Inc. (Falcon), a manufacturer of pl astic conveyor belts, brought this diversity action against Miller Waste Mills, Inc., d/b/a RTP Company1 The district court concluded that under Oklahoma’s choice-of-law rules,

Minnesota law applies to the first two issues. Fal con does not assert this ruling as error on appeal.

2 We have jurisdiction over this appeal because the district court issued a Fed. R. Civ. P. 54(b) certification. -2- (RTP), a manufacturer of plastic pellets used in th e production of molded plastic equipment, alleging claims for breach of express an d implied warranty, fraud, misrepresentation, negligence, contribution, indemn ity, and punitive damages. Falcon had purchased plastic pellets from RTP for u se in the manufacture of a food processing belt for Frito Lay, Inc. The belt ultimately failed, resulting in the loss of thousands of bags of Frito Lay chips. Afte r Falcon and its insurer settled with Frito Lay, Falcon brought this action to recov er amounts expended in the settlement and additional damages. The district co urt granted summary judgment for RTP, holding that Falcon’s tort claims were bar red under Minnesota’s economic loss statute, that the terms of sale inclu ded a term barring Falcon’s recovery of consequential damages, 1 and that Falcon was not entitled to indemnification or contribution. We reverse and re mand for further proceedings. 2 We turn first to the district court’s determination that Falcon’s tort claims were barred by the state’s economic loss doctrine. Under Minnesota law:

Economic loss that arises from a sale of goods thatis due to damage to tangible property other than the goods so ld may be recovered in tort as well as in contract, but econo mic loss that arises from a sale of goods between parties who are each m erchants in goods of the kind is not recoverable in tort.-3-

M INN
. S TAT
. ANN
. § 604.10 (a) (West 2000). The district court ruled that although Falcon was not an actual dealer in the pla stics supplied by RTP, it was nonetheless a merchant in goods of the kind on the basis of its specialized knowledge in the purchase and use of plastics. The court then held that because Falcon and RTP were both merchants in goods of the kind, Falcon’s claim for damages to property other than the plastic pellets was barred by the Minnesota statute. In so holding, the court relied on Regents of the Univ. of Minn. v. Chief Indus., Inc. , 106 F.3d 1409 (8th Cir. 1997). There, the Eighth Circuit addressed the circumstances in which a party is considered to be a merchant in goods of the kind under Minnesota law, and construed that defini tion broadly to include both those who deal in the goods and those with speciali zed knowledge of the goods. Id. at 1411. The dissent in Regents disagreed with the majority’s broad construction, pointing to language in state case law to the effect that parties are merchants in goods of the kind only where the parti es to the sale are dealers in the same goods. Id. at 1413 (Lay, Circuit Judge, dissenting). Two events occurred while the instant case was pend ing on appeal which are relevant to the district court’s holding that F alcon’s tort claims are barred. First, in 1998, the Minnesota legislature amended s ection 604.10 by adding subsection (e), which states that “[t]his section s hall not be interpreted to bar tort causes of action based upon fraud or fraudulent or intentional misrepresentation-4-

or limit remedies for those actions.” M INN
. S TAT
. ANN
. § 604.10 (e) (West 2000). The legislature further provided that subsection (e ) was intended to clarify, rather than to change, the original intent of section 604. 10, see 1998 Minn. Laws 1st Sp., c. 2, § 2, and that subsection (e) was applica ble to actions pending on or commenced on or after April 23, 1998, id. § 4. Falcon’s tort claims were pending appeal on April 23, 1998, and its complaint states claims of fraud and misrepresentation. Accordingly, under the operatio n of section 604.10 (e), those tort claims are not barred. Moreover, in Jennie-O Foods, Inc. v. Safe-Glo Prods. Corp. , 582 N.W.2d 576 (Minn. Ct. App. 1998), the Minnesota Court of Appeals rejected the broad construction of “merchants in goods of the kind” ad opted by the majority in Regents and instead found “persuasive . . . the well-reaso ned dissent,” drawing on Lloyd F. Smith Co. v. Den-Tal-Ez, Inc. , 491 N.W.2d 11 (Minn. 1992). Jennie-O Foods , 582 N.W.2d at 579. In so doing, the Minnesota court expressly disapproved of holding that a party is a merchant i n goods of the kind on the basis of specialized knowledge. See id. at 578-79. The district court’s conclusion that Falcon was a merchant in goods of the kind so as to bar its tort claims is contrary
to Jennie-O Foods . “In the absence of a state supreme court ruling, a federal court must follow an intermediate state court decision un less other authority convinces the federal court that the state supreme court woul d decide otherwise.” See-5-

Lowell Staats Mining Co. v. Pioneer Uravan, Inc. , 878 F.2d 1259. 1269 (10th Cir. 1989). We are not persuaded the Minnesota Supreme Court would decide this issue differently than the Minnesota Court of Appea ls did in Jennie-O Foods , particularly given the supreme court’s prior opinio n in Den-Tal-Ez . Accordingly, we reverse the grant of summary judgment on this is sue. We address the following issues briefly in the even t that they may be relevant on remand. First, we deal with Falcon’s a rgument that a limitation on consequential damages was unconscionable under M INN
. S TAT
. ANN
. § 336.2-719 because it was not part of the original contract. This provision was contained in an acknowledgment form sent by RTP after Falcon had ordered goods, and in invoices shipped with the goods. The district court rejected Falcon’s argument upon concluding Falcon had offered no evidence thatthis provision was not presented at the time of contract formation. Our r eview of the record indicates to the contrary that Falcon supported its argument bel ow that RTP was attempting to limit remedies after the contract had been made, see App. vol. II, at 337, by pointing to evidence from Falcon’s president that t he limitation provision was contrary to RTP’s previous advisements, see id . at 358. In view of this evidence, as well as evidence that the contract was formed by a course of dealing and the undisputed fact that the limitation was sent to Fal con after it had ordered goods, we believe that a fact issue exists as to the time of contract formation and thus as3 We note that Falcon’s claim that the limitation of remedies was not part of the contract presents a variation of the battle of the forms addressed in the Uniform Commercial Code at M INN
. S TAT
. ANN
. § 336.2-207 (West 2000). Under that provision, additional terms contained in a wri tten confirmation become part of a contract between merchants unless “[t]hey mate rially alter it.” Id. § 336.2- 207(2)(b); see also TRWL Fin. Est. v. Select Int’l, Inc. , 527 N.W.2d 573, 578-79 (Minn. Ct. App. 1995). Minnesota law provides thatwhether an additional term materially alters an agreement is a question of fac t to be resolved on a case-bycase basis, and that an agreement is materially alt ered “if an addition would ‘result in surprise or hardship if incorporated wit hout express awareness by the other party.’” Id. at 579.

4 The district court applied Oklahoma law to Falcon’ s claims for indemnity and/or contribution. Falcon argues on appeal that the court erred in failing to -6- to whether the limitation was part of the original contract. 3 Summary judgment was therefore not proper on this issue. In addition, the district court held that Falcon wa s not entitled to either contribution or indemnification. The court’s rulin g was based on two grounds: its conclusion that Falcon’s tort claims were barred; a nd its conclusion that because Falcon had denied liability in its settlement with Frito Lay, it could not make the requisite showing that it and RTP were jointly and severally liable. In so doing, the court focused only on Falcon’s claim for contri bution and did not specifically address its claim for indemnification. Because Falcon’s tort claims may now go forward und er Minnesota law, the first basis for the district court’s ruling is no l onger valid. Moreover, Oklahoma law allows a party to make a claim for contribution while at the same time denying all liability. 4 See Stotts v. Church of Jesus Christ of Latter Day Saints ,apply Minnesota law, while RTP contends that Falcon has waived this argument

by failing to properly present it below. As we dis cuss above, we are convinced that summary judgment was improper under the law of either state. -7- 882 P.2d 1106, 1107-08 (Okla. Ct. App. 1994). In a ddition the Minnesota Supreme Court “has, on equitable principles, allowe d contribution in certain cases despite the absence of common liability.” Blomgren v. Marshall Mgmt. Servs., Inc. , 483 N.W.2d 504, 506 n.2 (Minn. Ct. App. 1992) (ci ting Lambertson v. Cincinnati Corp. , 257 N.W.2d 679, 688 (Minn. 1977). Consequently, we are not persuaded that a party’s unadjudicated denial of li ability contained in a settlement agreement is a sufficient basis for denying that pa rty’s claim for contribution on summary judgment under either Oklahoma or Minnesotalaw. We also conclude that summary judgment was not prop er on Falcon’s indemnification claim. In Oklahoma, “[a] right to implied indemnity may arise out of a contractual or a special relationship betw een parties and from equitable considerations

. ” Daugherty v. Farmers Coop. Ass’n , 790 P.2d 1118, 1120 (Okla. Ct. App. 1989).

While Oklahoma does not have a statutorily unrestri cted right of contribution among joint tort feasors, it does r ecognize a lenient exception granting a right of indemnity when one wh o is only constructively liable to an injured party and who i s in no manner responsible for harm is compelled to pay damages be cause of the tortious act of another. Cent. Nat’l Bank of Poteau v. McDaniel , 734 P.2d 1314, 1316 (Okla. Ct. App.-8-

1986). Minnesota law is to the same effect. See Rice Lake Contracting Corp. v. Rust Env’t & Infrastructure, Inc. , 616 N.W.2d 288, 291 (Minn. Ct. App. 2000) (“A right of indemnity arises when a party seeking indemnity has incurred liability due to a breach of a duty owed to it by t he one sought to be charged, and such a duty may arise by reason of a contractual ob ligation.”); Blomgren , 483 N.W.2d at 506 (“A claimant may recover indemnity . . . [w]here the one seeking indemnity has incurred liability because of a breac h of duty owed to him by the one sought to be charged.”). Here, a contractual r elationship existed between Falcon and RTP, and Falcon contends that it paid da mages for harm caused by RTP’s breach. These allegations, which find some s upport in the record, are sufficient to survive summary judgment at this stag e in the proceedings. We REVERSE and REMAND for further proceedings in light of this order and judgment. ENTERED FOR THE COURT
Stephanie K. Seymour Chief Judge