Court Opinion

ID: 2709492
Source: CourtListenerOpinion
Date Created: 2014-08-05 15:16:34.124654+00
Date Added: 2024-06-11T10:01:26.682915
License: Public Domain

In the

United States Court of Appeals
               For the Seventh Circuit

No. 12-2673

S AMUEL L ARGE,
                                                             Plaintiff,
                                 v.

M OBILE T OOL INTERNATIONAL, INC.,
MTI INSULATED P RODUCTS, INC.,
TECO, INC., AND OCET, INC.,
                                                         Defendants.

M OBILE T OOL INTERNATIONAL, INC.,
AND MTI INSULATED P RODUCTS, INC .,

                                 Third-Party Plaintiffs-Appellees,

                                 v.

D AVIS H. E LLIOT C OMPANY, INC.,

                               Third-Party Defendant-Appellant.

             Appeal from the United States District Court
      for the Northern District of Indiana, Fort Wayne Division.
        No. 1:02-CV-00177-WCL-RBC—William C. Lee, Judge.

       A RGUED A PRIL 23, 2013—D ECIDED JULY 29, 2013
2                                              No. 12-2673

   Before R IPPLE and H AMILTON, Circuit Judges, and
S TADTMUELLER, District Judge. 
   S TADTMUELLER, District Judge. On June 19, 2000,
Samuel Large was injured while operating a bucket
truck, which his employer, Davis H. Elliot Company
(Elliot) had leased from TECO, Inc. (TECO), the manu-
facturer of the truck. Mr. Large thereafter sued TECO;
TECO’s successor-in-interest, appellee Mobile Tool, Inc.
(Mobile); and several other related parties. Mobile then
filed a third-party complaint against Elliot, seeking
defense and indemnification against Mr. Large’s com-
plaint, pursuant to the lease contract between Elliot and
TECO, which Mobile had assumed by purchasing TECO
and its assets. Eventually, after the district court denied
Mobile’s first request for summary judgment on the
defense and indemnification issue, Mobile settled with
Mr. Large without Elliot’s participation. That settle-
ment left Mobile’s third-party complaint against Elliot
as the only outstanding issue. However, after a change
in controlling law, Mobile filed a second request for
summary judgment, which the district court granted,
holding Elliot responsible to defend and indemnify
Mobile against Mr. Large’s claims. Elliot timely appealed
the district court’s summary judgment ruling. For the
reasons set forth below, we affirm.


 The Honorable J.P. Stadtmueller of the Eastern District of
Wisconsin, sitting by designation.
No. 12-2673                                              3

                     I. Background
  Elliot is a Virginia corporation that provides electrical
construction and maintenance services. In connection
with their business, Elliot owns, leases, and rents a
number of bucket trucks. In 1996, Elliot entered
into one such lease (the Lease) with TECO, an Indiana
corporation. Pursuant to the terms of the Lease, Elliot
agreed to release, indemnify and hold TECO harmless
from and against
   (a) Any and all liability, loss, damage, expense, causes
   of action, suits, claims or judgments arising from
   injury to person or property resulting from or based
   upon the actual or alleged use, operation, delivery
   or transportation of the Vehicle or its location or
   condition, and shall at its own cost and expense,
   defend any and all such suits which may be
   brought against [TECO], either alone or in conjunc-
   tion with others upon any such liability or claims
   and shall pay and discharge any and all judgments
   and fines that may be recovered against [TECO] in
   any such action or actions; provided, however, that
   [TECO] shall give [Elliot] written notice of any
   such claim or demand.
   (b) Any and all losses, damages, costs and expenses
   incurred by [TECO] or [its] insurance agency
   because of (1) injury or damage sustained by any
   occupant of said Vehicle, including without limita-
   tion [Elliot], his employees, agents, or representa-
   tives, or (2) loss or damage to cargo or property owned
   by or in the possession of [Elliot], his employees,
   agents or representatives.
4                                               No. 12-2673

    (c) All loss, damage, cost and expense resulting
    from [Elliot’s] violation of any term of this agreement
    or breach of [Elliot’s] warranties as expressed herein.
    (d) Loss or damage to the Vehicle during the
    rental period for any reason.
  In 1999, Mobile acquired a number of TECO’s assets,
including the Lease in question. Mobile then began to
send out a form invoice (the Invoice) to Elliot each
month. The invoice contained a separate indemnifica-
tion clause, providing that
    [Elliot] acknowledges that serious injury or death
    may occur to persons using or near personnel lifting
    units which are improperly operated or maintained.
    [Elliot] by accepting delivery of a serviced unit and/or
    parts supplied hereunder, thereby acknowledges
    possession of all service and maintenance manuals
    for that unit or units. [Elliot] expressly warrants,
    covenants and agrees that (i) all persons using or
    servicing the unit or units described therein shall
    be adequately and thoroughly instructed in the
    proper use and maintenance of said units and shall
    be provided with copies of service and maintenance
    manuals, which shall be readily accessible to said
    persons at all times, one copy of which shall be
    kept with the unit, and (ii) the units will at all times
    be used as directed by [Mobile] in the manuals or
    elsewhere. [Elliot] shall require that the agreement
    in the preceding sentence shall be included in any
    agreement for the sale or use by other persons of
    any one or all of the units and/or parts described in
No. 12-2673                                                 5

   this instrument, which agreement shall be written
   for the benefit of [Elliot] and [Mobile] alike.
   [Mobile] shall in no way be liable for any losses, costs,
   forfeiture, or damages including loss of profits, liability
   of Buyer to its customer or third persons, liability of
   [Mobile] to its customers, employees or third-persons
   and incidental or consequential damages whether
   direct or indirect arising from or contributed to by
   the failure of [Elliot] to comply with the requirements
   of the preceding grammatical paragraph, unless
   due solely to the fault or negligence of [Mobile], even
   though there may also have been some contribution
   thereto by fault or negligence of [Mobile], its agents,
   employees and contractors, and [Elliot] agrees to
   hold [Mobile] harmless and indemnify [Mobile] from
   any and all claims or causes of action, damages, judg-
   ments or from whatever other causes, arising in con-
   nection with the use or maintenance of the units or
   any of them and arising from or contributed by the
   failure of the Buyer to comply adequately with
   the terms of the preceding grammatical paragraph.
  Shortly after Mobile’s acquisition of the Lease, on
June 19, 2000, Mr. Large was injured while operating a
bucket truck covered by the Lease and Invoice. Mr. Large
sued TECO and Mobile (as well as other related parties),
for negligent design and manufacture, product liability,
and breach of express and implied warranties.
  On April 7, 2004, Mobile filed a third-party complaint
against Elliot, requesting that Elliot be required to
provide defense and indemnification to Mobile under
6                                              No. 12-2673

the terms of the Lease. Mobile also alleged breach of
contract against Elliot, due to Elliot’s failures to defend
Mobile and to provide insurance to TECO. The
district court denied Elliot’s motion to dismiss the third-
party complaint on February 22, 2005. Later in 2005,
Mobile and Elliot filed cross motions for summary judg-
ment, both of which the district court denied on Decem-
ber 15, 2006.
  Given Elliot’s refusal to defend or indemnify,
Mobile eventually settled with Mr. Large. Elliot did not
participate in the negotiation of the settlement.
Pursuant to the settlement, the district court dismissed
Mr. Large’s action against Mobile, TECO, and the other
related parties, leaving open only Mobile’s third-party
complaint against Elliot.
  Due to intervening changes in Virginia law (which
controls in this diversity case), Mobile and Elliot
requested and were granted an opportunity to again
brief motions for summary judgment on Mobile’s
request for defense and indemnification.
  This time around, the district court agreed with
Mobile, and held that Elliot was required to defend
and indemnify Mobile pursuant to the terms of the
Lease. In so deciding, the district court ruled that the
indemnification language in the Invoice did not
supersede the indemnification language in the terms of
the original Lease. Thus, according to the district court,
the terms of the Lease controlled, requiring Elliot to
defend and indemnify Mobile.
 Given Elliot’s obligation to defend and indemnify
Mobile, which Elliot failed to respect, the district court
No. 12-2673                                             7

granted judgment in satisfaction of Mobile’s claims in
the amount of $4,325,903.00, plus interest. It later
docked that amount by $94,619.51, which was
attributable to attorney fees Mobile had spent to
defend against a sanctions issue.
  Thus, on December 1, 2011, the district court entered
final judgment on the third-party complaint in favor of
Mobile, awarding $4,231,283.49. Elliot timely appealed
the judgment, which is now before us.

                     II. Discussion
  Elliot makes only one primary argument on appeal:
that the district court erred in concluding that the
Lease—as opposed to the later Invoice—controlled,
requiring Elliot to defend and indemnify Mobile. Elliot
asserts that the Invoice superseded the terms of
the Lease, thus eliminating Elliot’s duty to defend
and indemnify except in the case that Elliot violated its
obligations under the terms of the Invoice by failing
to either adequately train Mr. Large in the use of the
bucket truck or to provide him with copies of the truck’s
operation and maintenance manuals. After reviewing
Elliot’s arguments, we find them to be unconvincing,
and therefore affirm the district court’s ruling.

A. Standard of Review and Choice of Law
  We review the district judge’s interpretation of the
parties’ contracts de novo. Elusta v. City of Chicago, 696
8                                               No. 12-2673

F.3d 690, 693 (7th Cir. 2012) (citing Thomas v. General
Motors Acceptance Corp., 288 F.3d 305, 307 (7th Cir. 2002)).
  Furthermore, in interpreting the parties’ contracts, we
must apply Virginia law. The district court did so
correctly applying the Indiana’s choice-of-law jurispru-
dence. Erie v. Tompkins, 304 U.S. 64, 78 (“Except in
matters governed by the Federal Constitution or by acts
of Congress, the law to be applied in any case is the
law of the state.”). Indiana law compels use of the
“most intimate contacts” test to determine which state’s
law applies in contract actions. See, e.g., Kentucky Nat’l
Ins. Co. v. Empire Fire and Marine Ins. Co., 919 N.E.2d 565,
575 (Ind. Ct. App. 2010) (citing Schaffert by Schaffert v.
Jackson Nat’l Life Ins. Co., 687 N.E.2d 230, 232 (Ind. Ct.
App. 1997)). In applying the most intimate contacts
test, courts must consider the following factors: “(1) the
place of contracting, (2) the place of negotiation, (3) the
place of performance, (4) the location of the subject
matter of the contract, and (5) the domicil, residence,
nationality, place of incorporation and place of business
of the parties,” giving the greatest weight to the fourth
of those factors. Kentucky Nat’l Ins. Co., 919 N.E.2d at
575 (citing Employers Ins. of Wausau v. Recticel Foam Corp.,
716 N.E.2d 1015, 1024–25 (Ind. Ct. App. 1999); Eby v.
York–Division, Borg–Warner, 455 N.E.2d 623, 626 (Ind. Ct.
App. 1983); R ESTATEMENT (SECOND) OF C ONFLICT OF
L AWS § 188 (1971)). We find that each one of those
factors is either inapposite or favors application of
Virginia law. At least one party (Elliot) was incorporated
in and operated from Virginia during contracting, negotia-
tion, and performance. More importantly, the bucket
No. 12-2673                                              9

truck and the occurrence of the accident were both
located in Virginia, meaning that the most important
factor—location of the subject matter of the con-
tract—clearly favors application of Virginia law.
Therefore, the Court determines that Virginia’s body of
contract law should apply here.

B. The original Lease controls, requiring Elliot to
   defend and indemnify Mobile against Mr. Large’s
   claims
  Elliot spends much of the space in its briefs elucidating
the meaning of the Invoice’s indemnity provisions. But
that line of argument misses the forest for the trees.
Indeed, we need not concern ourselves with the
meaning of the Invoice’s indemnity provision at all if
we determine that the much broader indemnity pro-
visions in the original Lease remained in effect at the
time of Mr. Large’s accident. In fact, Elliot does not
even suggest that it would not be liable if we were to
determine that the Lease provision remained in effect.
Nor could it—the Lease’s indemnity provision is very
broad, clearly requiring Elliot to defend and indemnify
Mobile against claims like Mr. Large’s. Thus, Elliot’s
entire argument rests upon an exceedingly shaky founda-
tion. For Elliot to prevail, we must first find that the
Invoice’s indemnity provision superseded the Lease’s
indemnity provision, such that only the Invoice
would be operational.
  To begin, there can be no dispute that Lease’s terms
remained in effect at the time of Mr. Large’s accident,
10                                                No. 12-2673

although those terms may have been varied slightly by
the Invoice. Parties are free to abrogate, change, modify,
or substitute a primary contract with their mutual
assent; in such a case, the original contract will
remain in force, except to the extent modified by any
new agreement. See, e.g., 17A Am. Jur. 2d Contracts § 500;
Restatement (Second) of Contracts § 279 (1981); Amchem
Prods., Inc. v. Newport New Circuit Court Asbestos Cases,
563 S.E.2d 739, 743–44 (2002) (finding that a letter sent
after the initial contract modified the original contract’s
terms). The parties need not manifest their assent in
written form, but may instead manifest their mutual
assent through their acts. See, e.g. 17 Am. Jur. 2d
Contracts § 34; Restatement (Second) of Contracts
§§ 19, 279 (1981); Wells v. Weston, 326 S.E.2d 672, 676 (Va.
1985) (meeting of the minds can be established by a non-
written manifestation of mutual assent). Thus, here,
where the Invoice contained reference to the parties’
initial Lease contract (listed as Contract 2208) and
Elliot continued to uphold its obligations under the
initial Lease even after receiving a number of copies of
the Invoice, we are obliged to find that the parties
mutually assented to maintain their original contract,
but with the modifications to the Lease’s terms as set
forth in the Invoice.1 In other words, the Lease’s terms

1
  Elliot cites to Kennedy v. Kennedy, No. CL-2006-14898, 83 Va.
Cir. 439, 2011 WL 8947419, at *1–*2 (Oct. 12, 2011) for the
proposition that the Invoice should entirely supersede the
Lease. That case, however, is entirely inapplicable to this
                                                 (continued...)
No. 12-2673                                                  11

carried on past the issuance of the Invoice, but the
Invoice’s terms became subsumed in and thus modified
the Lease’s terms to some extent.
  The crux of the matter is how, precisely, or to what
extent the Invoice modified the terms of the Lease. More
specifically, we must determine whether the Invoice’s
indemnity provisions superseded the Lease’s indemnity
provisions. The Invoice provides that its terms “shall
control over any conflicting provisions in other docu-
ments.” In effect, however, that language is merely an
adoption of the well-worn principle of contract law that
the terms in a modification agreement will supersede
conflicting terms in the original agreement. See, e.g., 17A
Am. Jur. 2d Contracts § 500 (citing Acequia, Inc. v.
Prudential Ins. Co. of Am., 226 F.3d 798 (7th Cir. 2000)
(construing Idaho law)); 17A C.J.S. Contracts § 574 (citing
Hill v. Ricoh Americas Corp., 603 F.3d 766 (10th Cir. 2010);
McLemore v. Hyundai Motor Mfg. Alabama, LLC, 7 So. 3d

(...continued)
circumstance. In Kennedy, the court found that a new agreement
“completely covering the same subject-matter, but containing
terms which are inconsistent with those of the earlier contract”
entirely superseded the prior contract. Id. Here, on the other
hand, the Invoice did not “completely cover” the same
subject matter. Instead, it covered only a handful of terms
that had been previously settled upon in the more-extensive
Lease. Therefore, the Court cannot adopt Elliot’s argument
that the Invoice should be held to entirely supersede the
Lease. Instead, as discussed above, it is appropriate to treat
the Invoice as if it merely supplemented the Lease’s terms.
12                                              No. 12-2673

318 (Ala. 2008); Atlanta Integrity Mortg., Inc. v. Ben Hill
United Methodist Church, 650 S.E.2d 359 (Ga. 2007); Aon
Corp. v. Utley, 863 N.E.2d 701 (Ill. 1st Dist. 2006); Blair
Const., Inc. v. McBeth, 44 P.3d 1244 (Kan. 2002); Blumenstock
v. Gibson, 811 A.2d 1029 (Pa. Super. Ct. 2002); Midwest
Medical Supply Co., L.L.C. v. Wingert, 317 S.W.3d 530
(Tex. App. Dallas 2010); Durand v. HIMC Corp., 214 P.3d
189 (Wash App. Div. 2 2009)). So, then, the real question
that we are called upon to answer is whether the
Invoice’s indemnity provision conflicts with the Lease’s
indemnity provision, such that the Invoice’s provision
should control over the Lease’s provision.
  The two provisions do not conflict with one another,
and therefore the Lease’s indemnity provision re-
mained in effect at the time of Mr. Large’s accident.
Certainly, both provisions relate to Elliot’s duty to
defend and indemnify Mobile. The two provisions
differ, though, in that they appear to touch upon
separate occasions when the duty to defend and
indemnify arises. The Lease provision imposes a duty
when a claim arises from “the actual or alleged use,
operation, deliver, or transportation of the” bucket
truck. The Invoice provision, on the other hand, imposes
a duty when a claim arises from the failure to provide
maintenance or proper training. We find that these
two provisions actually harmonize very well with one
another, as opposed to conflicting. The original Lease
set forth a broad duty to defend and indemnify in situa-
tions arising primarily from use and operation of the
bucket truck; the Invoice expanded that duty further
to situations before use and operation—namely training
No. 12-2673                                               13

and maintenance. On the plain language of these provi-
sions, we must conclude that they do not conflict with
one another.
  This is particularly true given that “[w]hen two provi-
sions of a contract seemingly conflict, if, without discard-
ing either, they can be harmonized so as to effectuate
the intention of the parties as expressed in the contract
considered as a whole, this should be done. See, e.g.,
Plunkett v. Plunkett, 624 S.E.2d 39, 42 (Va. 2006); Hutchison
v. King, 145 S.E.2d 216, 220 (1965); Ames v. American
Nat’l Bank, 176 S.E. 204, 217 (Va. 1934). Here, reading the
two provisions as supplementing one another respects
their plain terms without doing violence to either, as is
also required by Virginia contract law. See, e.g., Ames,
176 S.E. at 217; Bridgestone/Firestone v. Prince William
Square Assocs., 463 S.E.2d 661, 664 (Va. 2008); D.C. McClain,
Inc. v. Arlington County, 452 S.E2d 659, 662 (Va. 1995).

                     III. Conclusion
  For these reasons, we conclude that the district court
was correct in determining that Elliot was required to
defend and indemnify Mobile against Mr. Large’s
claims, and accordingly we A FFIRM that decision.

                           7-29-13