Court Opinion

ID: 169572
Source: CourtListenerOpinion
Date Created: 2010-08-14 17:32:20+00
Date Added: 2024-06-11T17:25:02.732882
License: Public Domain

F I L E D
                                                                 United States Court of Appeals
                                                                         Tenth Circuit
                       UNITED STATES CO URT O F APPEALS
                                                                        August 2, 2007
                             FO R TH E TENTH CIRCUIT                 Elisabeth A. Shumaker
                                                                         Clerk of Court

    UNITED STA TES BRA SS
    CORPO RATION, now known as
    ZURN PEX, INC., a D elaw are
    corporation,
                                                           No. 06-1197
              Plaintiff-Appellant,              (D.C. No. 05-CV -862-W YD-CB S)
                                                            (D . Colo.)
     v.

    D O RM ON T M A N U FA CTU RING
    COM PANY, a Pennsylvania
    corporation,

              Defendant-Appellee.

                              OR D ER AND JUDGM ENT *

Before H E N RY, B AL DOC K , and M U RPH Y, Circuit Judges.

          Plaintiff United States Brass Corporation (USB) appeals from the district

court’s order granting summary judgment in favor of defendant Dormont

M anufacturing Company (Dormont) on USB’s claims for contractual and common

*
       After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist the determination of
this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is
therefore ordered submitted without oral argument. This order and judgment is
not binding precedent, except under the doctrines of law of the case, res judicata,
and collateral estoppel. It may be cited, however, for its persuasive value
consistent w ith Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
law indemnity. The district court’s jurisdiction arose under 28 U.S.C. § 1332(a),

and our jurisdiction is pursuant to 28 U.S.C. § 1291. W e affirm the summary

judgment order concerning the contractual indemnity for the same reason as the

district court, and also affirm summary judgment on the common law indemnity

claim, but for a different reason.

                                          I

                                     Background

      USB sued Dormont for contractual and common law indemnity for money it

paid in a pre-trial settlement to Claire Long and Allstate Insurance Company

(A llstate) in their law suit in which they alleged personal injury and property

damage arising from an explosion at a home in Nederland, Colorado. Dormont

also settled with M s. Long and Allstate prior to trial. According to USB, the

explosion was caused by a defect in a stainless steel nut-by-nut connector (flex

connector) manufactured by Dormont and distributed by USB, which allowed

propane to leak and then ignite when M s. Long turned on a vacuum cleaner.

      As to USB’s claim for contractual indemnity, the district court concluded

that the parties’ purchase agreement did not clearly and unambiguously

demonstrate an intent to indemnify. 1 W ith respect to the common law indemnity

claim, the court concluded that because U SB was sued as a joint tortfeasor,

1
      Dormont filed a motion to dismiss, which the district court converted to a
motion for summary judgment.

                                          -2-
Colorado’s Uniform Contribution Among Tortfeasors Act (the Act), Colo. Rev.

Stat. § 13-50.5-101, et seq., precluded its claim.

                                          II

                               Standard of Review

             W e review the district court’s grant of summary judgment de
      novo, applying the same legal standard used by the district court.
      Summary judgment is appropriate “if the pleadings, depositions,
      answers to interrogatories, and admissions on file, together with the
      affidavits, if any, show that there is no genuine issue as to any
      material fact and that the moving party is entitled to judgment as a
      matter of law.” Fed. R. Civ. P. 56(c). W hen applying this standard,
      we view the evidence and draw reasonable inferences therefrom in
      the light most favorable to the nonmoving party.

Simms v. Okla. ex rel. Dep’t of M ental Health & Substance Abuse Servs.,

165 F.3d 1321, 1326 (10th Cir. 1999) (citations omitted).

      Further, “[w]e are free to affirm a district court decision on any grounds for

which there is a record sufficient to permit conclusions of law, even grounds not

relied upon by the district court.” United States v. Sandoval, 29 F.3d 537, 542 n.6

(10th Cir. 1994) (quotations omitted).

                                         III

                              Contractual Indem nity

      The parties’ purchase agreement required Dormont, among other things, to

manufacture the flex connectors and stamp them w ith USB’s name. Relevant

here, the agreement stated: “Quality control procedures will be agreed upon and

documented. Defective product to be returned [to Dormont] and credited upon

                                          -3-
mutual agreement of cause. Dormont M anufacturing accepts all obligations

associated with being the manufacturer of the product.” Aplt. App. at 10. USB

claims that Dormont’s willingness to “accept all obligations associated with being

the manufacturer” of the flex connectors created an indemnity contract.

      Colorado substantive law applies in this diversity case. See Blanke v.

Alexander, 152 F.3d 1224, 1228 (10th Cir. 1998) (holding that “[a] federal court

sitting in diversity must apply the law of the forum state.”). Under Colorado law ,

the inquiry is whether the intent to indemnify was expressed clearly and

unambiguously in the purchase agreement. Pub. Serv. Co. of Colo. v. United

Cable Television of Jeffco, Inc., 829 P.2d 1280, 1284 (Colo. 1992). W hile it is

true that the parties do not need to use the words “indemnity” or “indemnify,”

Williams v. White M ountain Constr. Co., 749 P.2d 423, 426 (Colo. 1988), we

agree with Dormont that the sentence “Dormont . . . accepts all obligations

associated with being the manufacturer of the product,” could have different

meanings when considered in the context of the paragraph in w hich it appears,

and therefore does not clearly and unambiguously express an intention to

indemnify. Nor does the purchase agreement contain any language the Colorado

courts have found adequate to manifest an intention to indemnify, such as (1) a

provision requiring Dormont to hold USB harmless from and against claims,

liabilities, causes of action, legal proceedings, or costs of defense or (2) a clause

requiring Dormont to maintain general liability insurance. See e.g., Pub. Serv.

                                          -4-
Co. of Colo., 829 P.2d at 1283; see also W illiams, 749 P.2d at 426 (reasoning that

although “it is inappropriate to construe statements so narrowly as to deprive

them of any meaning, yet the burden of indemnity is so onerous that we hesitate

to impose it unless the language used requires such a result.”).

      W e also reject USB’s argument that disputed facts concerning its intent

precluded summary judgment.

      Interpretation of a written contract is generally a question of law for
      the court. . . . It is only where the terms of an agreement are
      ambiguous or are used in some special or technical sense not
      apparent from the contractual document itself that the court may look
      beyond the four corners of the agreement in order to determine the
      meaning intended by the parties. It is axiomatic that in the absence
      of an ambiguity a written contract cannot be varied by extrinsic
      evidence.

             W hether an ambiguity exists is also a question of law. W hen
      an ambiguity is found to exist and cannot be resolved by reference to
      other contractual provisions, extrinsic evidence must be considered
      by the trial court in order to determine the mutual intent of the
      parties at the time of contracting.

Pepcol M fg. Co. v. Denver Union Corp., 687 P.2d 1310, 1313-14 (Colo. 1984)

(citations omitted). Therefore, extrinsic evidence of intent is not admissible in a

case where the court properly determines as a matter of law that an agreement is

unambiguous. Cf. Jones v. Dressel, 623 P.2d 370, 376, 378 (Colo. 1981)

(holding that w hether an exculpatory agreement is valid is a question of law,

including whether the agreement expresses the parties’ intention in clear and

unambiguous language).

                                         -5-
      The district court’s conclusion that the purchase agreement did not create

an indemnity contract was correct as a matter of Colorado law and there were no

material facts in dispute. Thus, we affirm the court’s order for summary

judgment in favor of Dormont on USB’s claim for contractual indemnity.

                                          IV

                              Common Law Indem nity

      Again, we apply controlling state law in this diversity case. Blanke,

152 F.3d at 1228. In Brochner v. Western Ins. Co., 724 P.2d 1293, 1298 n.6

(Colo. 1986), the Colorado Supreme Court stated that it was reserving judgment

as to the viability of an indemnity claim “in situations where the party seeking

indemnity is vicariously liable or is w ithout fault.” USB argues that the majority

of courts that have addressed the issue have recognized a right of indemnity by a

downstream defendant in a products liability case against the manufacturer of the

defective product, and the only reason why the “Colorado appellate courts have

not recognized this exception because they have not yet addressed it.” Aplt.

Reply Br. at 7.

      For its part, Dormont argues that the only exception recognized thus far by

the Colorado courts is where a party sued as a joint tortfeasor is not negligent (at

fault), but is liable only under a theory of vicarious liability, such as an

employer/employee or principal/agent relationship. Serna v. Kingston

Enterprises, 72 P.3d 376, 380 (Colo. App. 2003); Johnson Realty v. Bender,

                                          -6-
39 P.3d 1215, 1218 (Colo. App. 2001). The district court agreed with Dormont

and held that because U SB had not been sued as a joint tortfeasor under a theory

of vicarious liability, it could not state a claim for indemnity under Colorado law.

      The linchpin of USB’s argument is the Restatement (Second) of Torts

§ 886B (1979), which was cited by the Colorado Supreme Court in Brochner,

724 P.2d 1298 n.5, to explain the tension between claims for common law

indemnity and statutory provisions for contribution. According to U SB, it has a

right of indemnification because “[Dormont] supplied a defective chattel . . . as a

result of which both [USB and Dormont] were liable to the third person, and

[USB] innocently or negligently failed to discover the defect.” Restatement

(Second) of Torts § 886B(2)(d) (1979).

      W hile w e agree that the principle set forth in § 886B appears to be what

the Colorado Supreme Court had in mind when it reserved judgment as to the

viability of an indemnity claim in situations w here the party seeking indemnity is

without fault, U SB cannot state an indemnity claim for a different reason.

Section 886B has been replaced by the Restatement (Third) of Torts:

Apportionment of Liability § 22 (2000). M ore to the point, to obtain indemnity

under either §§ 886B or 22, USB was required, among others things, to have

discharged Dormont’s liability.

      (1) If two persons are liable in tort to a third person for the same
      harm and one of them discharges the liability of both, he is entitled

                                         -7-
      to indemnity from the other if the other would be unjustly enriched at
      his expense by the discharge of the liability.

Restatement (Second) of Torts § 886B(1) (1979).

      (a) W hen two or more persons are or may be liable for the same harm and
      one of them discharges the liability of another in whole or in part by
      settlement or discharge of judgment, the person discharging the liability is
      entitled to recover indemnity in the amount paid to the plaintiff, plus
      reasonable legal expenses. . . .

Restatement (Third) of Torts: Apportionment of Liability § 22(a) (2000).

      The Restatement further explains that

      [e]xcept when a contract for indemnity provides otherwise . . . an
      indemnitee must extinguish the liability of the indemnitor to collect
      indemnity. The indemnitee may do so either by a settlement with the
      plaintiff that by its terms or by application of law discharges the
      indemnitor from liability or by satisfaction of judgment that by
      operation of law discharges the indemnitor from liability.

Id., § 22 cmt. b.

      USB admits that it did not extinguish Dormont’s liability when it settled

w ith M s. Long and A llstate because Dormont thereafter entered into its own

settlement agreement: “U SB settled with M s. Long before trial . . . and with

Allstate . . . . Dormont also settled with the underlying plaintiffs.” Aplt. Br. at 3.

Further, although USB alleges that it “settled in good faith” with M s. Long and

Allstate, Aplt. App. at 24, the amended complaint is devoid of any allegation that

this settlement extinguished Dormont’s liability. Therefore, even if USB was

without fault, its settlement did not extinguish Dormont’s liability and it cannot

recover in indemnity. AVCP Reg’l Hous. Auth. v. R.A. Vranckaert Co., Inc.,

                                          -8-
47 P.3d 650, 657-59 (Alaska 2002) (applying Restatement (Third) of Torts:

Apportionment of Liability § 22(a) (2000)); M oore Excavating, Inc. v.

Consolidated Supply Co., 63 P.3d 592, 595-96 (Or. App. 2003) (same).

      Therefore, we affirm the district court’s order for summary judgment in

favor of Dormont on USB’s claim for common law indemnity, albeit for a

different reason.

      The judgment of the district court is AFFIRMED.

                                                   Entered for the Court

                                                   M ichael R. M urphy
                                                   Circuit Judge

                                        -9-