Opinion ID: 768108
Heading Depth: 1
Heading Rank: 2

Heading: The Indemnification Award

Text: 9 A lessee's obligation to indemnify a railroad under a track lease agreement is a contractual duty and not a duty arising under the common law of tort. Burlington Northern, Inc. v. Bellaire Corp., 921 F.2d 760, 763 (8th Cir. 1990) (quoting Burlington Northern, Inc. v. Hughes Brothers, Inc., 671 F.2d 279, 284 (8th Cir. 1982)). Thus, to recover under the indemnity agreement, BN need not prove that Farmers Union was negligent. See Bellaire, 921 F.2d at 763. Rather, BN must establish, in accordance with the terms of the agreement, that an act or omission by Farmers Union caused or contributed to cause the accident in which Cahill was injured. See id. (interpreting a similar indemnity agreement); Missouri Pac. R. Co. v. International Paper Co., 618 F.2d 492, 496 (8th Cir. 1980). 10 The district court found that the FLIX car was one of the two cars that had been delivered to Farmers Union a few days prior to the accident. The court also found that Farmers Union's failure to notify BN of this car's defective brakes constituted an act or omission that contributed to Cahill's injury, thereby triggering the indemnity clause. We review the district court's factual findings for clear error, see Consol. Elec. & Mech., Inc. v. Biggs Gen. Contracting, Inc., 167 F.3d 432, 434 (8th Cir. 1999), and its interpretation of the indemnity clause, which is governed by North Dakota law, de novo, see Burlington Northern I, 114 F.3d at 707. 11 Farmers Union first argues that the district court erred in finding that the FLIX car was one of the cars that Farmers Union had handled prior to the accident. Although there exists conflicting evidence regarding the origin of the FLIX car, we cannot say that the court's conclusion is clearly erroneous, as it is supported by the testimony of the three individuals most knowledgeable of the Cahill accident. Most notably, Roy, the only person who saw both the defective car received by Farmers Union and the car involved in the Cahill accident, testified that he was certain that the troublesome car on both occasions was the FLIX car. In addition, Cahill stated that the FLIX car was already loaded when he and Roy came to work on April 13 and thus that the FLIX car must have been one of the cars that they had received from Farmers Union. Finally, Roy's and Cahill's supervisor, Mike Guderjahn, testified that, based on the amount of time that it takes to load a car and how long Cahill and Roy had been at work on April 13, the FLIX car had to have been loaded prior to that day. 12 Farmers Union asserts that these individuals' testimony is rendered incredible by certain business records of Farmland Industries, an unrelated third party, that suggest that the FLIX car may have been one of the cars delivered directly to Rolla Grain. We conclude, however, that although they are not insignificant, these records do not so compellingly cast into doubt the unequivocal testimony of Roy, Cahill, and Guderjahn as to render clearly erroneous the district court's findings regarding the FLIX car. See First Nat'l Bank, Sioux Falls v. First Nat'l Bank, South Dakota, 153 F.3d 885, 890 (8th Cir. 1998) (Where there are two permissible views of the evidence, the factfinder's choice between them cannot be clearly erroneous.) (quoting Anderson v. City of Bessemer City, 470 U.S. 564, 574 (1985)). 13 Farmers Union next argues that, even if the FLIX car had passed through its control, it had no duty under the terms of the lease agreement to notify BN of the defective brake and therefore its failure to do so did not constitute an act or omission under the indemnity clause. We disagree. The primary purpose of an indemnity clause such as is at issue here is to indemnify a railroad when its lessee's act or omission causes the railroad to violate its non-delegable duty to furnish a safe workplace under the Federal Employers' Liability Act (FELA), 45 U.S.C. §§ 51 et seq. See Bellaire, 921 F.2d at 763; Hughes Brothers, 671 F.2d at 284. Accordingly, the inquiry into whether an act or omission has occurred does not focus primarily on the lessee's duties to the railroad, but rather on the railroad's duty to provide a safe workplace. See Bellaire, 921 F.2d at 763 (The phrase 'act or omission' includes any act or omission which constitutes a violation of the railroad's duty to provide a safe workplace, and thus, subjects it to liability under FELA.) (quoting Hughes Brothers, 671 F.2d at 284). Farmers Union is therefore chargeable with an act or omission under the indemnity agreement if through its action or inaction it jeopardizes the safety of the work environment for which BN is responsible and, in so doing, exposes BN to potential liability under FELA. See Bellaire, 921 F.2d at 763. 14 BN has a duty under the Federal Safety Appliance Act (FSAA) to ensure that the cars used on its tracks are equipped with properly functioning brakes, see 45 U.S.C. § 11, and its failure to do so creates an unsafe workplace in violation of FELA, see Grogg v. Missouri Pac. R. Co., 841 F.2d 210, 212 (8th Cir. 1988). Farmers Union, accordingly, has a duty under the indemnity clause to assist BN in ensuring that all cars on its tracks are equipped with effective brakes. By failing to notify BN of the FLIX car's defective brake, Farmers Union breached this duty and exposed BN to possible liability under FELA. Thus, an act or omission has occurred. 3 See Bellaire, 921 F.2d at 764 (finding that lessee had duty under indemnity clause to tighten car's brakes or determine why it rolled while its brake was set, and that its failure to do so was an act or omission). 15 Farmers Union also contends that even if its failure to notify BN of the defective brake constituted an act or omission, this act or omission did not cause Cahill's injury and thus did not trigger the indemnity clause. We again disagree. Because causation under an indemnity agreement such as this is not based on principles of negligence, BN is not required to show that Farmers Union's failure to notify BN of the FLIX car's faulty brake was the proximate cause of Cahill's accident, but only that it caused or contributed to cause the accident. See Bellaire, 921 F.2d at 763. In Bellaire, we held that a lessee who knew that a car's brake was either not set or not functioning properly but who failed to take any action to remedy the situation was the cause of a fatal accident that occurred the following day. See id. at 764. The same can be said of this case: Farmers Union knew that the FLIX car's brake was defective but yet took no action to rectify the problem, even though a simple notification to BN could have led to the repairing of the brake, the decommissioning of the car, or the taking of other corrective action, the default of which resulted in Cahill's injuries. We therefore conclude that the district court properly found that Farmers Union's failure to notify BN of the FLIX car's defective brake caused or contributed to cause the Cahill accident and that Farmers Union is thus required to indemnify BN under the terms of the indemnity clause.
16 We next must determine the amount of indemnification to which BN is entitled. See Bellaire, 921 F.2d at 763. The indemnity clause provides that if any claim or liability, other than from fire, shall arise from the joint or concurring negligence of both parties hereto, it shall be borne by them equally. In Bellaire, we interpreted this language to mean that, even if an indemnity clause has been triggered, a railroad may only recover one-half of its liability if 'the [lessee] can prove that the railroad was negligent and its negligence contributed to the injury.' See 921 F.2d at 763 (quoting Hughes Brothers, 671 F.2d at 284). The district court concluded that BN was entitled to $200,000 in indemnification from Farmers Union, reasoning that this amount was proper even if BN was negligent because it represents one-half of the $400,000 that BN paid to Cahill. We agree with the court's conclusion, but not its reasoning. 17 The district court overlooked the fact that BN had already received $200,000 in indemnification from Rolla Grain prior to the commencement of BN's action against Farmers Union. Thus, the loss for which Farmers Union has an obligation to indemnify BN under the terms of the indemnity clause is no longer $400,000, but rather $200,000. We therefore believe that $200,000 is the maximum amount of indemnification that BN can recover from Farmers Union and that it is this amount that is subject to a one-half reduction if BN negligently contributed to cause the Cahill accident. To hold otherwise would permit BN to receive full indemnification--$200,000 from both Farmers Union and Rolla Grain--even if it were found to be negligent, a result inconsistent with the terms of the indemnity clause and the reasoning of Bellaire. See 921 F.2d at 763. 18 That being said, we nonetheless affirm the district court's award of $200,000 because the record contains insufficient evidence to support a finding that BN was negligent. It is well established that we can affirm the district court on any ground supported by the record, even if not relied upon by the district court. See Dominium Management Serv., Inc. v. Nationwide Housing Group, 195 F.3d 358, 367 (8th Cir. 1999); Monterey Dev. Corp. v. Lawyer's Title Ins., Corp., 4 F.3d 605, 608 (8th Cir. 1993). Here, neither the joint statement of facts, the stipulated record, nor Farmers Union's separate offer of proof puts forth evidence that indicates any negligence by BN. 19 Farmers Union points to the fact that BN may have violated the FSAA by permitting Rolla Grain to use a car with a defective brake and argues that this fact demonstrates BN's negligence. Even assuming that BN violated the FSAA, however, a violation of this statute does not, by itself, support a finding of negligence. See Colorado Milling & Elevator Co. v. Terminal R. Ass'n of St. Louis, 350 F.2d 273, 276 (8th Cir. 1965) ([T]he ruling of the Supreme Court conclusively indicates that a violation of the [FSAA] does not imply that negligence . . . was involved.) (citing several Supreme Court cases). In Colorado Milling, for example, we held that a railroad was entitled to full indemnification even though it had violated the FSAA by allowing a lessee to use a car with a defective brake. See id. at 277. We reasoned that the FSAA violation alone was not sufficient evidence of the railroad's negligence and that the lessee had not presented other evidence of negligence: it had not shown that the railroad could have detected the defective brake by inspection or that the defect arose prior to the railroad's delivery of the car to the lessee. See id. Farmers Union has similarly failed to present such evidence, or any other evidence tending to establish negligence on behalf of BN. Cf. Deans v. CSX Transp., Inc., 152 F.3d 326, 330 (4th Cir. 1998) (granting summary judgment on plaintiff's FELA claim because plaintiff introduced no evidence that railroad had notice of car's defective brake prior to the accident, or that railroad's inspection of car would have revealed the defect). 20 We therefore conclude that the record contains insufficient evidence to support a finding that BN was negligent regarding the Cahill accident. As a result, BN is entitled to $200,000 in indemnification from Farmers Union.