concluding that summary judgment is appropriate when the evidence could not lead the trier of fact to find for the nonmoving party
How later courts described this case
- concluding that summary judgment is appropriate when the evidence could not lead the trier of fact to find for the nonmoving party
- requiring courts to exercise exclusionary power with precision
- “Read naturally, the word ‘any’ has an expansive meaning, that is, ‘one or some indiscriminately of whatever kind.’”
- “When the terms in a contract are unambiguous, courts will not in effect create a new contract by finding an intent not expressed in the clear language employed by the parties.”
Written by the judges who cited it.
The opinion
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
DIAMOND TRANSPORTATION
LOGISTICS, INC.,
:
Plaintiff,
Case No. 2:19-cv-5448
Judge Sarah D. Morrison
v.
Magistrate Judge Chelsey M.
Vascura
THE KROGER CO., INC., et al., :
Defendants.
OPINION AND ORDER
On December 13, 2015, Hardeep Singh lost control of his tractor-trailer,
killing three travelers on a Missouri highway. Pursuant to a written agreement
between Plaintiff Diamond Transportation Logistics, Inc. and Defendant The
Kroger Co., Inc., Diamond had arranged for that truck to haul a load of Kroger
cargo from Arizona to Indiana. The decedents’ family brought suit against Diamond,
Kroger, and others. Both Diamond and Kroger settled before trial. This action
arises out of the companies’ efforts to minimize their losses.
The case is presently before the Court on four motions for summary judgment
on Diamond’s claims against Kroger (ECF Nos. 157, 173) and Kroger’s
counterclaims against Diamond (ECF Nos. 158, 174), and one motion to strike
expert testimony (ECF No. 175).
For the reasons set forth below:
• Kroger’s Motion to Strike is GRANTED;
• Summary judgment is GRANTED to Kroger on Counts One, Two, and
Five, and Counterclaims One and Two; and
• Summary judgment is GRANTED to Diamond on Counterclaims Three,
Four, and Five.
I. FACTUAL BACKGROUND
Kroger, a family of grocery stores and supermarkets, engaged Diamond, a
trucking company, to transport goods across the country. (2010 Transportation
Agreement1, PAGEID # 14.) A Non-Dedicated Contract Carrier Transportation
Agreement (the “Transportation Agreement”) governs their relationship.2 (Id.)
During the relevant timeframe, Diamond was doing $17–20 million in business for
Kroger each year. (Cole Dep. 1, ECF No. 142, 41:24–42:6.)
A. The December 13, 2015 accident
On December 13, 2015, a Diamond truck3 hauling Kroger goods crossed the
median on I-44 near Rolla, Missouri, and struck a minivan carrying a medical
1 The 2010 Transportation Agreement is attached to Diamond’s Complaint as
Exhibit A. (ECF No. 1-1, PAGEID # 14–42.)
2 Relevant provisions of the Transportation Agreement are discussed in
Section IV, infra.
3 The driver, Hardeep Singh, was employed by AK Freight, Inc. (Atwal 2021
Dep., ECF No. 160, 36:17.) The truck was registered to H&A Transportation, but
was leased to AK Freight. (Id., 30:6–8.) Diamond owned the trailer, and coordinated
the load’s transport. (ECF No. 143-1, PAGEID # 2407. See also ECF No. 152-3,
PAGEID # 3808.)
doctor, her veterinarian husband, and her mother. (See ECF No. 154, PAGEID
# 4100.) All three were killed as a result of the accident. (See ECF No. 182-4.)
Late that evening, Diamond notified Kroger that an accident had occurred.
(ECF No. 154, PAGEID # 4093.) The next morning, a Kroger logistics claims
administrator responded:
I hope no one was hurt in this accident.
I will need pictures of this load.
Copy of the [Bill of Lading]
Packing list
(Id., PAGEID # 4092.) The response from Diamond pertained only to the cargo. (Id.,
PAGEID # 4091.)
B. The Missouri Litigation
Ten days later, Diamond received notice that the decedents’ family planned
to file suit for wrongful death. (ECF No. 152-1, PAGEID # 3740–42.) Diamond’s
auto liability insurance carrier, Granite State Insurance Co., was given similar
notice. (Id., PAGEID # 3743–44.)
The family’s lawsuit was filed on March 15, 2016, in Phelps County, Missouri
(the “Missouri Litigation”). (ECF No. 150-1, PAGEID # 3374.) Within days,
Diamond entered into an Agreement to Limit Recovery Under Missouri Statute
Section 537.065, under which the plaintiffs agreed not to proceed against Diamond’s
personal assets in exchange for the full limits of the Granite policy. (ECF No. 14-1,
PAGEID # 2359–76.)
Sixteen months went by. Then, on July 12, 2017, the plaintiffs filed an
amended complaint, adding Kroger as a defendant. (ECF No. 150-1, PAGEID
# 3389–3407.) The amended complaint alleged that Kroger was negligent and
reckless in its retention, selection, and hiring of Diamond. (Id.)
The first time Kroger learned that the December 13, 2015 accident resulted
in fatalities was when it was served with the amended complaint. (Cole Dep. 2, ECF
No. 153, PAGEID # 3876.)
C. Kroger demands indemnification from Diamond
Kroger believed that, under the terms of the Transportation Agreement4, it
was entitled to indemnity and a defense from Diamond. (See ECF No. 144-1,
PAGEID # 2468.) It also believed, for the same reason, that Diamond had procured
insurance covering Kroger. (See id.) Accordingly, on September 8, 2017, Kroger’s
counsel, Attorney David A. Dick, sent a letter to Diamond’s counsel in the Missouri
Litigation “formal[ly] demand[ing] insurance coverage and indemnity arising out of
the December 13, 2015 collision[.]” (Id.) Kroger simultaneously filed a cross-claim in
the Missouri Litigation demanding indemnification and contribution from Diamond.
(ECF No. 156.)
By November, Diamond had not taken any action to indemnify Kroger or
take up its defense. Although the surrounding details are unclear, Diamond
executed an Indemnity Agreement dated November 22, 2017, in which it agreed to
indemnify and hold Kroger harmless from “any claim or liability arising from” the
4 By this time, a new Transportation Agreement had been signed by Diamond
and Kroger. (2016 Transportation Agreement, ECF No. 27-1.) The 2010 and 2016
Transportation Agreements are virtually identical.
December 13, 2015 accident. (Indemnity Agreement, PAGEID # 51.) Beyond signing
and returning the Agreement, Diamond took no action at that time.
On June 1, 2018, Kroger, through Attorney Dick, sent another demand letter,
this time attaching bills for attorney fees accrued to-date. (ECF No. 145-1, PAGEID
# 2759.)
D. Kroger withholds payment for Diamond’s services
Having received no response from Diamond, Kroger began to discuss
alternative loss mitigation strategies in July 2018. (Cole Dep. 1, 47:10–13.) “[R]ight
around the end of July, beginning of August[,]” Kroger withheld Diamond’s
payments, relying on the set-off provisions of the Transportation Agreement. (Id.,
47:22–48:5.) The set-off was in effect for all Diamond services rendered after July
15, 2018. (Id., 79:17–20.) Michael Cole, the Kroger Operations Manager responsible
for the Diamond relationship, was directed “not to reach out to” Diamond about the
withholding. (Id., 48:13–17.)
The withholding did not go unnoticed for long. On August 15, 2018,
Diamond’s billing department emailed Kroger, advising that they had not been paid
in three weeks and asking when the next payment was scheduled. (ECF No. 142-1,
PAGEID # 2206.) Diamond’s President, Dave Atwal, emailed Mr. Cole directly on
August 23:
Michael,
Can you help me figure out what is going with my payment from
Kroger I have tried to call Cass [the payment platform] but have not
got any answers. Also I have been working with Lynda in your office
past two weeks to get answer but haven’t gotten any answers. Lynda
has all the details on the last payments and what is due now. I would
really appreciate help on this asap.
(Id., PAGEID # 2208 (reproduced as written).) Mr. Cole did not immediately
respond. On August 24, Mr. Atwal sent another email:
Michael,
I waited until end of the day to hear from you. I haven’t heard
anything yet. I haven’t gotten paid over a month without answer.
Lynda keeps on telling me that she is trying to get answer. I feel like
Lynda is just putting me off. Sorry but I will not be able to accept any
more tenders after this weekend. Once again sorry it just too much
money not to get paid on. Sorry for any inconvenience I may have
caused with this matter.
(Id., PAGEID # 2209 (reproduced as written).) Mr. Cole responded that night:
Dave,
We have been trying to get our bid complete and I was planning to look
into this Monday. Completely understand your position, until we can
get this fixed.
(Id., PAGEID # 2210.)
Mr. Atwal emailed again the following Monday, August 27, asking for an
update. (Id., PAGEID # 2212.) On Tuesday, August 28, 2018, Mr. Cole responded:
Dave,
I believe we have found the issue and we should have a payment
coming your way at the end of this week. We will continue to track the
status and advise when the payment should arrive on your end.
Through Lynda’s work the past couple of weeks, we have discovered an
issue with the routing of payments that we believe is now cleared up.
(Id., PAGEID # 2213.) Mr. Atwal thanked Mr. Cole, only to email again on August
30 and September 4, inquiring as to the status of payment. (Id., PAGEID # 2213–
16.)
The mystery was solved later on September 4, when Attorney Dick sent a
third demand letter to Diamond’s counsel, which reiterated Kroger’s position and
revealed that Kroger was withholding payment to Diamond “pending further
resolution of this matter.” (ECF No. 145-1, PAGEID # 2763.)
In total, Kroger withheld $1,767,383.16. (Id., PAGEID # 2173.)
E. Granite refuses to cover Kroger in the Missouri Litigation
On October 12, 2018, AIG Claims Inc., the claims administrator on
Diamond’s Granite policy, sent a letter to Attorney Dick. (ECF No. 152-3, PAGEID
# 3819–20.) Therein, the claims adjuster concluded:
. . . Kroger is not an insured under the policy issued to Diamond
Transportation Logistics. In addition, the defense costs sought are not
covered by the policy issued to Diamond Transportation Logistics; the
indemnification agreement entered into by Diamond Transportation is
not binding on AIG; and AIG is not responsible for, nor will it pay, any
defense costs incurred by Kroger, as a result of said agreement between
Kroger and Diamond Transportation. Furthermore, the policy limits
were exhausted by a settlement payment issued in this loss.
(Id.)
F. Diamond agrees to take on Kroger’s defense
The previous day, Diamond’s counsel sent Attorney Dick a letter stating:
Pursuant to the Non-Dedicated Contract Carrier Transportation
Agreement between [Kroger] and Diamond effective January 13, 2010
Diamond hereby agrees to defend, hold harmless and indemnify
Kroger in the above matter. To that end we have made arrangements
to retain Francis X. Duda of Anderson & Gilbert, L.C. of St. Louis,
Missouri to defend Kroger. Mr. Duda is AV rated and he and his firm
are very skilled defense attorneys with a broad range of experience in
trucking matters.
We understand that Kroger contends that it has previously tendered
its defense and that the tender(s) were not accepted by Diamond.
Diamond is now accepting the tender. We are advised that there is
neither a trial date nor apparently a trial setting date in the matter.
As a result, Kroger will not suffer any prejudice by the change in
counsel at this time.
(ECF No. 145-1, PAGEID # 2764.) Attorney Dick responded, noting Kroger’s
disagreement with the statement in your letter that Kroger has not
been prejudiced by Diamond’s failure to respond for more than a year.
Kroger has paid my firm’s legal expenses. Our firm has handled the
defense of this case throughout, including dozens of conversations with
potential witnesses and extensive efforts to respond to plaintiff’s
burdensome discovery requests. Kroger’s corporate designee deposition
on more than 20 topics is scheduled for October 25. The parties have
scheduled mediation for November 12, 2018. There is no practical way
for an attorney who has not been involved in this case to protect
Kroger’s interests at the deposition and mediation.
. . .
Accordingly, Kroger plans to continue its defense as previous, and
Kroger reserves all rights against Diamond under the parties’ contract
and otherwise.
(Id., PAGEID # 2766–67.) Diamond’s counsel returned a “demand[ ] that [Kroger]
cancel the mediation scheduled for November 12, 2018 to allow the carrier and/or
Diamond to ‘get up to speed’ and attend and participate[.]” (Id., PAGEID # 2768.)
G. Kroger settles with the Missouri Litigation plaintiffs
The mediation went forward as scheduled, and Kroger resolved all claims
against it in the Missouri Litigation for roughly $2.3 million.5
II. PROCEDURAL BACKGROUND
Now three years old, this litigation has involved many parties, claims, and
issues. A brief recitation of its history is helpful.
5 The exact amount of the settlement is unknown. Deposition testimony
places it anywhere from $2.2 to 2.4 million. (Quast Dep., ECF No. 145, 104:1–2;
Cole Dep. 2, PAGEID # 3943; Wulfeck Dep., ECF No. 146, 85:3.)
In December 2019, Diamond filed a four-count Complaint against Kroger,
Granite, AIG, and G.M. Lawrence Insurance Brokerage (the brokerage firm that
Diamond used to procure the Granite policy). (Compl., ECF No. 1.) Within six
months, Diamond voluntarily dismissed its claims against AIG and G.M. Lawrence.
(ECF No. 45.) But both Kroger (Countercl., ECF No. 27) and Granite (ECF No. 57)
filed counterclaims against Diamond.
Kroger also filed a crossclaim against Granite and a third-party complaint
rejoining G.M. Lawrence. (ECF No. 75.) The Court later dismissed Kroger’s third-
party complaint (ECF No. 118), and Kroger voluntarily dismissed its crossclaim
(ECF No. 186).
After briefing their summary judgment motions, Diamond, Kroger, and
Granite participated in mediation. (ECF No. 195.) Diamond and Granite were able
to resolve their claims and counterclaims. (ECF No. 203.) Diamond and Kroger were
not. Diamond’s claims against Kroger, and Kroger’s counterclaims against
Diamond, remain.
As to Diamond’s Complaint: Diamond moves for summary judgment on
Count One (Breach of Contract) (ECF No. 157); and Kroger moves for summary
judgment on Counts One, Two (Fraud), and Five (Unjust Enrichment) (ECF No.
173).6
6 Counts Three and Four are no longer before the Court. Count Three was
against AIG and Granite. (Compl., ¶¶ 48–54.) Count Four was against G.M.
Lawrence. (Id., ¶¶ 55–62.)
As to Kroger’s Counterclaim: Kroger moves for summary judgment on
Counterclaims One (Breach of Contract—Failure to Indemnify and Defend), Two
(Breach of Contract—Failure to Procure Insurance Coverage), Three (Breach of
Contract—Failure to Comply with Applicable Laws), and Five (Fraudulent
Misrepresentation) (ECF No. 174); and Diamond moves for summary judgment on
Counterclaims One, Two, Three, Four (Fraudulent Inducement), and Five (ECF No.
158).
III. MOTION TO STRIKE
The Court will first address Kroger’s Motion to Strike the Testimony and
Expert Report of Ted L. Perryman. (ECF No. 175.) The admissibility of expert
testimony is governed by Federal Rule of Evidence 702:
A witness who is qualified as an expert by knowledge, skill, experience,
training, or education may testify in the form of an opinion or
otherwise if:
(a) the expert’s scientific, technical, or other specialized knowledge
will help the trier of fact to understand the evidence or to
determine a fact in issue;
(b) the testimony is based on sufficient facts or data;
(c) the testimony is the product of reliable principles and methods;
and
(d) the expert has reliably applied the principles and methods to the
facts of the case.
The Rule incorporates the Supreme Court’s instruction in Daubert v. Merrell Dow
Pharma., Inc., 509 U.S. 579 (1993) and Kumho Tire Co., Ltd. v. Carmichael, 526
U.S. 137 (1999). See Fed. R. Evid. 702 advisory committee’s notes to 2000 and 2011
amendments. This Court serves as a “gatekeeper,” tasked with “ensuring that an
expert’s testimony both rests on a reliable foundation and is relevant to the task at
hand.” Daubert, 509 U.S. at 597. Courts are afforded “considerable leeway” in
determining whether to admit expert opinion testimony and how to test its
reliability and relevance to the case at bar. Kumho Tire, 526 U.S. at 152.
Nonetheless, the Federal Rules of Evidence provide a “permissive backdrop,”
favoring the admission of expert opinion testimony. Daubert, 509 U.S. at 588–89.
The proponent of the expert testimony bears the burden of proving its admissibility.
See Fed. R. Evid. 104(a); Sigler v. Am. Honda Motor Co., 532 F.3d 469, 478 (6th Cir.
2008).
In support of its motions, Diamond offers the expert report and opinion
testimony of Ted L. Perryman, an attorney licensed to practice in Missouri and
Illinois. (Perryman Report, ECF No. 157-1, PAGEID # 4339.) After reviewing
materials relevant to the Missouri Litigation, Attorney Perryman opined:
a. To the extent Kroger paid plaintiff any settlement money, it did not
do so on the basis of Diamond’s negligence or fault. As explained in
[the Report and Analysis (id., PAGEID # 4349)], Kroger was not
vicariously liable for Diamond’s negligence. It was neither alleged
nor was any evidence adduced to suggest otherwise.
b. To the extent Kroger paid plaintiffs any settlement money, it did
not do so based upon the negligent selection of Diamond as a “motor
carrier”. There is no evidence that suggests that Diamond was not a
competent and careful motor carrier when selected by Kroger.
c. To the extent Kroger paid plaintiff any settlement money, it did so
on its own negligence and not that of Diamond.
d. Diamond was not serving as broker under the applicable Federal
regulations with regard to the load transported for Kroger which
was involved in the accident which was the subject of the Missouri
Case.
(Id., PAGEID # 4340.)
Kroger argues that Attorney Perryman’s testimony is comprised of legal
conclusions that are not helpful to a jury and invade the province of the judge and
jury, and so must be stricken. The Court agrees.
The Sixth Circuit “requir[es] exclusion of expert testimony that expresses a
legal conclusion.” Berry v. City of Detroit, 25 F.3d 1342, 1354 (6th Cir. 1994)
(adopting the holding of Hygh v. Jacobs, 961 F.2d 359, 364 (2d Cir. 1992)). “Expert
testimony on the law is excluded because the trial judge does not need the judgment
of witnesses.” U.S. v. Zipkin, 729 F.2d 384, 387 (6th Cir. 1984). “[A]ttorneys as
expert witnesses present unique challenges” because their qualifications and
experience tend to make them ‘experts’ in an area off-limits for testimony. Stryker
Corp. v. XL Ins. Am., No. 1:17-cv-66, 2020 WL 13443035, at *1 (W.D. Mich. July 22,
2020) (citing Hyland v. HomeServices of Am., Inc., 771 F.3d 310, 322 (6th Cir.
2014)).
In the first two sentences of opinion a., the first sentence of opinion b., and
opinions c. and d., Attorney Perryman uses “specialized legal terminology” to render
conclusory opinions on Kroger’s liability in tort and Diamond’s performance under
the Transportation Agreement. Babb v. Maryville Anesthesiologists P.C., 942 F.3d
308, 317 (6th Cir. 2019). In other words, those portions of Attorney Perryman’s
testimony are impermissible legal conclusions. They are properly excluded. See id.
at 316 (requiring courts to exercise exclusionary power with precision).
That leaves the final sentences of opinions a. and b. There, Attorney
Perryman opines as to the existence or absence of relevant evidence. But a jury
would be fully competent to form the same, or different, conclusions. These
sentences do nothing to “assist the trier of fact to understand or determine a fact in
issue.” Daubert, 509 U.S. at 592. They are also properly excluded.
Kroger’s Motion to Strike (ECF No. 175) is GRANTED.
IV. MOTIONS FOR SUMMARY JUDGMENT
Summary judgment is appropriate when “there is no genuine dispute as to
any material fact and the movant is entitled to judgment as a matter of law.” Fed.
R. Civ. P. 56(a). The movant has the burden of establishing there are no genuine
issues of material fact, which may be achieved by demonstrating the nonmoving
party lacks evidence to support an essential element of its claim. Celotex Corp. v.
Catrett, 477 U.S. 317, 322–23 (1986); Barnhart v. Pickrel, Schaeffer & Ebeling Co.,
12 F.3d 1382, 1388–89 (6th Cir. 1993). The burden then shifts to the nonmoving
party to “set forth specific facts showing that there is a genuine issue for trial.”
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986) (quoting Fed. R. Civ. P.
56). When evaluating a motion for summary judgment, the evidence must be viewed
in the light most favorable to the nonmoving party. Adickes v. S.H. Kress & Co., 398
U.S. 144, 157 (1970).
A genuine issue exists if the nonmoving party can present “significant
probative evidence” to show that “there is [more than] some metaphysical doubt as
to the material facts.” Moore v. Philip Morris Cos., 8 F.3d 335, 339–40 (6th Cir.
1993). In other words, “the evidence is such that a reasonable jury could return a
verdict for the nonmoving party.” Anderson, 477 U.S. at 248. See also Matsushita
Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (concluding that
summary judgment is appropriate when the evidence could not lead the trier of fact
to find for the nonmoving party).
The Court begins its discussion by noting that this case was, stated
generously, inefficiently argued. Over the course of twelve briefs on four7 motions,
two general arguments are repeated—in many instances, truly copied and pasted—
six times. Because the briefing fails to provide a useful framework for analysis, the
Court will analyze the arguments on a claim-by-claim basis, rather than motion-by-
motion.
A. Diamond’s Claims
1. Breach of Contract
Count One of Diamond’s Complaint alleges that Kroger breached the
Transportation Agreement when it “refus[ed] to permit Diamond to defend Kroger
and subsequently settl[ed] the [Missouri Litigation], without any participation from
Diamond” and used the “improperly withheld funds” to do so. (Compl., ¶¶ 29–32.)
The claim implicates both Diamond’s indemnification obligations and Kroger’s set-
off rights.
7 Even though the Complaint and Counterclaim allege mirror-image claims,
Diamond and Kroger each filed two motions for summary judgment. As a result, the
Court had before it four different statements of the facts, four recitations of the
elements of an Ohio breach of contract claim, and far too much paper—all before a
single response was filed. Less would have been more.
Although Count One alleges only a breach of the Transportation Agreement,
the Indemnity Agreement is so intertwined with the parties’ arguments that it is
helpful and efficient to discuss both.
Under Ohio8 law, a breach-of-contract claim requires the plaintiff to prove
that (i) a contract existed, (ii) the defendant “fail[ed] without legal excuse . . . to
perform when performance [was] due,” and (iii) the plaintiff was damaged by that
failure. Lucarell v. Nationwide Mut. Ins. Co., 97 N.E.3d 458, 469 (Ohio 2018). The
parties here dispute who performed, who failed to perform, and whether there was
any legal excuse.
The Court begins by interpreting the relevant contracts. “Under Ohio law,
the interpretation of written contract terms, including the determination of whether
those terms are ambiguous, is a matter of law for initial determination by the
court.” Savedoff v. Access Grp., Inc., 524 F.3d 754, 763 (6th Cir. 2008). “[A] contract
is ‘unambiguous’ if a reviewing court ‘can give a definite legal meaning’ to the
contract’s terms.” United States v. Ohio, 787 F.3d 350, 353 (6th Cir. 2015) (quoting
Westfield Ins. Co. v. Galatis, 797 N.E.2d 1256, 1261 (Ohio 2003)). Where a contract’s
terms are not ambiguous, the interpreting court must apply the plain language of
the contract. Savedoff, 524 F.3d at 763. The court must presume that interpreting
8 This case is before the Court on diversity jurisdiction. See 28 U.S.C. § 1332.
“[F]ederal courts sitting in diversity apply the substantive law of the forum state
and federal procedural law.” Biegas v. Quickway Carriers, Inc., 573 F.3d 365, 374
(6th Cir. 2009) (citing, inter alia, Erie R. Co. v. Tompkins, 304 U.S. 64 (1939)). The
Transportation Agreement provides that it will be governed by Ohio law.
(Transportation Agreement, § 20.1.) Without specific reference to the
Transportation Agreement, both parties apply Ohio law in their motion papers.
Accordingly, the Court will apply Ohio substantive law in its analysis.
the plain language will give rise to the parties’ intent. Id. Only where a contract is
ambiguous may the court look to extrinsic evidence to ascertain the parties’ intent.
Id.; Ohio, 787 F.3d at 354.
Here, neither the Transportation Agreement nor the Indemnity Agreement
are ambiguous. They can only be interpreted to possess one legal meaning. The
Court is thus bound to apply the plain language of the contracts.
(a) Diamond is obligated under the Transportation
Agreement to indemnify and defend9 Kroger in the
Missouri Litigation.
Both the Transportation Agreement and the Indemnity Agreement contain
language requiring Diamond to indemnify Kroger in certain circumstances.
Schedule C of the Transportation Agreement provides, in relevant part, that
Diamond:
does hereby expressly agree to indemnify, defend and hold harmless
[Kroger], its affiliates and subsidiaries and their respective directors,
officers, employees, agents, successors and assigns (“Indemnitees”)
from and against any and all suits, actions, liabilities, judgments,
claims, demands, or costs or expenses of any kind (including attorney’s
fees) resulting from (i) damage or injury (including death) to the
property or person of anyone, whomsoever they may be, arising or
resulting at any time or place from any operations hereafter performed
either by [Diamond], its agents, employees or subcontractors in
performing services for Kroger or (ii) the negligence, willful misconduct
or violation of law by [Diamond], its agents, employees or
subcontractors except to the extent that such liability is caused by the
sole negligence or willful misconduct of Kroger.
9 Although the duty to indemnify and the duty to defend are legally distinct,
the parties do not argue that any difference applies or is of consequence.
Accordingly, the Court discusses the duties as though they are one under the
Transportation Agreement.
(2010 Transportation Agreement, PAGEID # 29.) The Missouri Litigation falls
squarely within the bounds of clause (i)—the plaintiffs sought compensation for
three deaths arising and resulting from operations performed by Diamond (and its
agents and subcontractors) in hauling Kroger goods.
The Indemnity Agreement scarcely requires interpretation. In that
document,10 signed November 22, 2017, Diamond agreed to indemnify Kroger as to
“any claim or liability arising from” the “December 13, 2015 collision involving
[Diamond] and resulting in the death of 3 persons in Phelps County, Missouri.”
(Indemnity Agreement.) But see, Section IV.A.1.(a)(1), infra.
Diamond argues that Kroger is, nonetheless, not entitled to indemnification
for three reasons: (1) The indemnification provisions are void as against public
policy; (2) When strictly construed against Kroger, the Transportation Agreement
does not allow Kroger indemnity for its own negligence; and (3) The indemnification
provisions do not comport with Ohio common law of indemnity. While Diamond is
correct that the Indemnity Agreement cannot protect Kroger from its own
negligence, Schedule C of the Transportation Agreement requires Diamond to
indemnify Kroger in the Missouri Litigation.
10 Diamond suggests that the Indemnity Agreement is invalid for lack of
consideration. (ECF No. 157, 11 n.1.) The question is “adverted to in a perfunctory
manner” and is “unaccompanied by [any] effort at developed argumentation.”
McPherson v. Kelsey, 125 F.3d 989, 995–96 (6th Cir. 1997). Accordingly, any
argument that the Indemnity Agreement is void for want of consideration is deemed
waived. Id.
(1) The Indemnity Agreement is void to the
extent it protects Kroger from its own
negligence.
Diamond first argues that Schedule C and the Indemnity Agreement are void
as against public policy. On December 9, 2015, the Ohio General Assembly passed
House Bill 71, enacting Ohio Revised Code § 2305.52. 2015 Ohio Laws File 33 (H.B.
71). The statute, which went into effect on March 23, 2016, provides, in part:
[A] provision, clause, covenant, or agreement contained in, collateral
to, or affecting a motor carrier transportation contract that purports to
indemnify, defend, or hold harmless, or has the effect of indemnifying,
defending, or holding harmless, the promise from or against any
liability for loss or damage resulting from the negligence or intentional
acts or omissions of the promise is void as against public policy.
Ohio Rev. Code § 2305.52(A).
In Diamond’s view, Ohio Rev. Code § 2305.52(A) bars Kroger from seeking
indemnification for its own negligence under either the Transportation Agreement
or the Indemnity Agreement. Kroger argues in response that the Transportation
Agreement pre-dates the statute’s effective date and is, accordingly, unimpacted by
it. The Court agrees with Kroger.
More than forty years ago, the Ohio Supreme Court discussed the retroactive,
versus prospective, effect of the then-recently-enacted § 2305.31—another anti-
indemnification statute. Jennyo v. Warner & Swasey Co., 385 N.E.2d 630 (Ohio
1979) (per curiam). The court there explained, and held, as follows:
R.C. 1.48 provides that “[a] statute is presumed to be prospective in its
operation unless expressly made retrospective.” Additional weight
must be accorded this interpretive mandate from the General
Assembly where contractual obligations might be impaired by
retroactive change to substantive law. Section 28, Article II of the Ohio
Constitution.
There is no express language in R.C. 2305.31 indicating that the
statute was intended to retroactively invalidate indemnity provisions
in contracts lawfully formed. At the time this contract was entered into
by the parties and fully executed by appellant . . ., there existed no
legislative or judicial declaration that such provisions contravened the
public policy of this state. A contract thus conforming to public policy
when made is not normally rendered unlawful by a subsequent change
in state policy. Accordingly, this court finds, in compliance with R.C.
1.48, that R.C. 2305.31 does not apply retroactively so as to invalidate
an indemnification agreement lawfully entered into prior to the
effective date of the legislation.
Jennyo, 385 N.E.2d at 631.
Jennyo neatly applies in the present circumstance. Section 2305.52 contains
“no express language” indicating retroactive effect. The Transportation Agreement
was “entered into by the parties and fully executed” before the statute’s effective
date and is, accordingly, unaffected by the statute.11 The Indemnity Agreement, on
the other hand, was executed after the statute went into effect and is void to the
extent it serves to indemnify Kroger for its own negligence.
(2) Even when strictly construed, the
Transportation Agreement requires Diamond
to indemnify Kroger in the Missouri
Litigation.
Diamond next argues that the Transportation Agreement must be strictly
construed against Kroger as the drafter and, when so construed, does not entitle
Kroger to indemnity in the Missouri Litigation. The Court will assume that
11 The 2010 Transportation Agreement was effective as of January 13, 2010.
(2010 Transportation Agreement, PAGEID # 14, 24.) The 2016 Transportation
Agreement was effective as of January 15, 2016. (2016 Transportation Agreement,
PAGEID # 1041, 1053.)
Schedule C should be strictly construed. Even when doing so, Diamond’s argument
fails.
Schedule C provides two broad circumstances in which Diamond must
indemnify Kroger. Under clause (i), Diamond must indemnify Kroger for:
damage or injury (including death) to the property or person of anyone,
whomsoever they may be, arising or resulting at any time or place
from any operations hereafter performed either by [Diamond], its
agents, employees or subcontractors in performing services for
Kroger[.]
It requires indemnity for injury to any one, arising any time and any place, from
any operation performed by Diamond for Kroger. The repeated use of that one small
word—“any”—evidences the parties’ intent to make the clause broadly applicable.
Cf. United States v. Gonzales, 520 U.S. 1, 5 (1997) (“Read naturally, the word ‘any’
has an expansive meaning, that is, ‘one or some indiscriminately of whatever
kind.’”).
Under clause (ii), Diamond must indemnify Kroger for:
the negligence, willful misconduct or violation of law by [Diamond], its
agents, employees or subcontractors except to the extent that such
liability is caused by the sole negligence or willful misconduct
of Kroger.
Diamond essentially argues that the bolded language applies to both clauses (i) and
(ii), exempting Diamond from indemnifying Kroger for its own negligence in any
instance. But, to accept Diamond’s argument, the Court would have to do more than
just strictly construe Schedule C—it would have to re-write it. The Court will not.
Shifrin v. Forest City Enters., Inc., 597 N.E.2d 499, 501 (Ohio 1992) (“When the
terms in a contract are unambiguous, courts will not in effect create a new contract
by finding an intent not expressed in the clear language employed by the parties.”);
Glaspell v. Ohio Edison Co., 505 N.E.2d 264, 267 (Ohio 1987) (“[E]ven a strict
construction [of an indemnification clause] would require that all the words used be
taken in their ordinary and popular sense.”).
In context, the “sole negligence” carve-out is clearly specific to clause (ii).
Neither punctuation nor language signal an intent for the carve-out to stand apart
from the words that come immediately before it. Just the opposite: The parallelism
between the first half of clause (ii) and the carve-out—each referencing negligence,
followed by willful misconduct—signals that the clause was intended to be read as
one, and that the carve-out modifies only the language in clause (ii).
What’s more, even if it did apply to clause (i), the carve-out only applies to
instances of Kroger’s “sole negligence.” Diamond argues that the claims against
Kroger in the Missouri Litigation were for its “sole negligence.” In doing so, it
emphasizes that negligent retention is not a claim of vicarious liability—by which
the retained party’s negligence would be imputed to the retaining party—but
instead focuses on the direct negligence of the retaining party. While that may be
true, see Evans v. Akron Gen. Med. Ctr., 170 N.E.3d 1, 4–5 (Ohio 2020), it does not
win Diamond the day. “Sole” means only, independent, or exclusive.12 Sole
12 Merriam-Webster.com defines “sole” as:
1 a: being the only one
b: having no sharer
2: functioning independently and without assistance or
interference
3: belonging exclusively or otherwise limited to one usually
specified individual, unit, or group . . .
negligence, therefore, references the negligence of one party. The claims asserted
against Kroger in the Missouri Litigation were in the vein of concurrent liability,
requiring the negligence of two or more parties. Lehrner v. Safeco Inc./Am. States
Ins. Co., 872 N.E.2d 295, 305 (Ohio Ct. App. 2007) (explaining that negligent
retention “can provide the basis for a cause of action in and of itself” but that
“plaintiffs . . . cannot maintain such a claim without demonstrating that their
injuries were caused by” the retained party’s own negligence). See also Concurrent
Negligence, Black’s Law Dictionary (11th ed. 2019) (“The negligence of two or more
parties acting independently but causing the same damage.”).
In sum, even when strictly construed, the plain language of Schedule C
requires that Diamond indemnify Kroger for the claims asserted against it in the
Missouri Litigation.
Sole, MERRIAM-WEBSTER.COM DICTIONARY, https://www.merriam-
webster.com/dictionary/sole (last visited Dec. 19, 2022). And Dictionary.com
provides:
1. being the only one; only
2. being the only one of the kind; unsurpassed; unique; matchless;
3. belonging or pertaining to one individual or group to the exclusion of
all others; exclusive
4. functioning automatically or with independent power . . .
Sole, DICTIONARY.COM, https://www.dictionary.com/browse/sole (last visited Dec. 19,
2022).
Diamond asserts that “[s]everal of the definitions of ‘sole’ in Black’s Law
Dictionary are ‘separate’ and ‘opposite of joint.’” (ECF No. 157, 14.) Black’s Law
Dictionary (11th ed. 2019) defines “sole-actor doctrine,” “sole and separate use,”
“sole and unconditional owner,” “sole arbitrator,” “sole cause,” “sole corporation,”
“sole custody,” “sole discretion,” sole practitioner,” “sole proprietorship,” “sole selling
agency,” “sole-source rule,” and “sole use”—but it does not define “sole.” Relevant
here (and cutting against Diamond’s position), “sole cause” is defined as “[t]he only
cause that, from a legal view-point, produces an event or injury.” Sole Cause,
Black’s Law Dictionary (11th ed. 2019).
(3) The Transportation Agreement expresses a
clear intent to abrogate the common law on
indemnification for voluntary settlements.
Finally, Diamond argues that Kroger is not entitled to indemnification for its
voluntary settlement of the Missouri Litigation because Kroger fails to meet the
relevant requirements under Ohio law. Nearly eighty years ago, the Ohio Supreme
Court held:
the fact of voluntary payment does not negative the right to indemnity.
However, the one seeking indemnity, after making voluntary
settlement, must prove [(1)] that he has given proper and timely notice
to the one from whom it is sought, [(2)] that he was legally liable to
respond and [(3)] that the settlement effected was fair and reasonable.
Globe Indem. Co. v. Schmitt, 53 N.E.2d 790, 794 (Ohio 1944). Thus, an indemnitee
may be entitled to indemnification from an indemnitor, even when the indemnitee
voluntary settled claims without the indemnitor’s involvement—but only if three
requirements are met.
The court recently confirmed that the Globe requirements may be abrogated
by the parties to a contract, but required that the language of the contract “evinces
a clear intent” to do so. Wildcat Drilling LLC v. Discovery Oil & Gas LLC, 173
N.E.3d 1156, 1161 (Ohio 2020); Total Quality Logistics LLC v. JK&R Express LLC
(“JK&R I”), 173 N.E.3d 1168, 1172 (Ohio 2020). “[N]o talismanic or magical
language is required in order to abrogate the common law through a contract.
Rather, the focus is on the parties’ intent, as expressed by the language the parties
chose to use in their contract.” Wildcat, 173 N.E.3d at 1161. Ohio courts have
treated a clear intent to abrogate any of the Globe requirements as intent to
abrogate all of the Globe requirements. See Total Quality Logistics, L.L.C. v. JK&R
Express, L.L.C. (“JK&R II”), — N.E.3d —, 2022 WL 16739229, at *7 (Ohio Ct. App.
Nov. 7, 2022) (concluding that the parties’ broker-carrier agreement evinced a clear
intent to abrogate Globe in part because its terms required carrier to indemnify
broker for payments it made without legal obligation).
Here, the parties do not dispute that Diamond had proper and timely notice
of Kroger’s claim for indemnification. Diamond instead asserts that Kroger fails to
prove that it was legally liable in the Missouri Litigation or that its settlement was
fair and reasonable. Kroger argues that it is not required to do so, because the
Transportation Agreement expresses the parties’ clear intent that Globe does not
apply.13 The Court agrees with Kroger.
Section 7 of the Transportation Agreement provides that Diamond “will
indemnify, defend and save harmless [Kroger] . . . from and against any and all
suits, actions, liabilities, judgments, claims, demands, or costs or expenses of any
kind as outlined in Schedule C.” Schedule C similarly requires Diamond to
“indemnify, defend and hold harmless [Kroger] . . . from and against any and all
suits, actions, liabilities, judgments, claims, demands, or costs or expenses of any
kind” resulting from an indemnifiable event. As Kroger points out, this language
obligates Diamond to indemnify and defend regardless of whether Kroger is
13 In reply, Diamond regurgitates its argument about the applicability of
Globe, citing no additional authority. (ECF No. 188, 8–9.) Beyond baldly declaring
that “nothing in any of the relevant contract provisions . . . express a clear intent to
abrogate the common law rules,” Diamond makes no effort to analyze the language
of the Transportation Agreement. (Id.) But that effort is what the law requires. See
JK&R I, 173 N.E.3d at 1173 (noting that “the analysis . . . must begin with a review
of the parties’ contract”).
ultimately found to be liable, and in advance of any finding of liability. Rather,
Diamond must indemnify Kroger from “any and all . . . claims, demands, or costs or
expenses of any kind[.]” The indemnification obligation is therefore triggered by the
filing of a claim, the delivery of a demand, or the accrual of a cost or expense. That
the Globe requirements are not explicitly referenced makes no difference. JK&R II,
2022 WL 16739229, at *4. The language of the Transportation Agreement expresses
Diamond’s and Kroger’s clear intent to step away from the common-law framework.
(b) Kroger was not required to accept Diamond’s late-
stage offer to take over its defense.
Having concluded that Diamond was obligated under the Transportation
Agreement to indemnify and defend Kroger in the Missouri Litigation, the Court
next considers whether Kroger’s October 19, 2018 refusal to accept Diamond’s offer
to defend constitutes a breach. Nothing in the Transportation Agreement obligated
Kroger to accept Diamond’s offer—its refusal cannot, therefore, form the basis of a
breach. See also Section IV.B.1.(a) (discussing whether Diamond’s offer constitutes
performance in light of the attendant circumstances), infra.
(c) The Transportation Agreement permitted Kroger to
withhold the funds.
The final component of Count One pertains to Kroger’s decision to withhold
payment to Diamond for services rendered during the pendency of the Missouri
Litigation. Paragraph 2.4 of the Transportation Agreement provides:
[Kroger] shall have the right to set off against any amounts payable to
[Diamond] any claims [Kroger] may have with [Diamond], provided
[Kroger] has previously . . . given prior written notice of any other
claim against [Diamond] . . . as to which [Diamond] has not paid,
declined or offered a compromise of settlement within sixty (60) days.
(Transportation Agreement, PAGEID # 15.)
Kroger first demanded indemnity from Diamond on September 8, 2017.
When, after ten months, Kroger was still waiting for Diamond to take up its cause,
Kroger demanded indemnity again—this time, attaching substantiation of attorney
fees expended to-date. Two months later, Kroger decided to withhold funds for
Diamond’s services. Kroger acted within its rights under Paragraph 2.4.
Diamond argues for the opposite conclusion. In its view, Kroger’s actions
were improper, notwithstanding Paragraph 2.4, because there was no “definite
amount owed.” Diamond cites to a 1938 Ohio Supreme Court case discussing Ohio’s
common law principles of set-off for support. In Witham v. S. Side Bldg. & Loan
Ass’n of Lima, 15 N.E.2d 149, 150 (Ohio 1938), the court stated:
It is that right which exists between two parties, each of whom under
an independent contract owes a definite amount to the other, to set off
their respective debts by way of mutual deduction.
Here, the competing obligations—indemnity and payment for services—do not arise
under independent contracts. The principle is, accordingly, inapposite. See Monroe
Retails, Inc. v. RBS Citizens, N.A., 589 F.3d 274, 285 (6th Cir. 2009) (citing Pruitt v.
LGR Trucking, Inc., 774 N.E.2d 273, 277–78 (Ohio Ct. App. 2002)).
Kroger did not breach the Transportation Agreement. Summary judgment is
GRANTED to Kroger on Count One of the Complaint.
2. Fraud
Diamond’s Count Two alleges that, on two occasions, Kroger fraudulently
induced Diamond to perform services for which Kroger had no intention of paying.
(Compl., ¶¶ 33–47.) Kroger is entitled to summary judgment as to both.
Under Ohio law, the elements of fraud are:
(1) a representation (or concealment of a fact when there is a duty to
disclose) (2) that is material to the transaction at hand, (3) made
falsely, with knowledge of its falsity or with such utter disregard and
recklessness as to whether it is true or false that knowledge may be
inferred, and (4) with intent to mislead another into relying upon it,
(5) justifiable reliance, and (6) resulting injury proximately caused by
the reliance.
Volbers-Klarich v. Middletown Mgmt., Inc., 929 N.E.d2d 434, 440 (Ohio 2010)
(citation omitted). Fraud in the inducement relates to the facts surrounding an
agreement’s execution, rather than the nature or purpose of the agreement itself.
Haller v. Borror Corp., 552 N.E.2d 207, 210 (Ohio 1990).
In its first allegation of fraud, Diamond purports that Kroger fraudulently
induced it to sign the Indemnity Agreement by representing in November 2017 that
Kroger would cease doing business with Diamond if the Agreement was not
returned executed. Diamond alleges that the representation was false because
Kroger had no intention of paying Diamond for the services later rendered. The
record makes clear, however, that Kroger continued to use Diamond’s services to
haul Kroger goods and, until late-Summer 2018, those services were paid-for. In
fact, between November 22, 2017, and July 15, 2018, Kroger paid Diamond nearly
$10 million for services rendered. (Atwal 2021 Dep., ECF No. 160, 102:21–103:7.)
The record further reflects that the decision to withhold payment from Diamond
was not made until late-Summer 2018. The third element of fraud—falsity of the
representation—is plainly missing.
Diamond further alleges that Kroger fraudulently represented in August
2018 that unpaid invoices were held up due to “an accounting problem on Kroger’s
part that would be rectified.” (Compl., ¶ 38.) To be sure, Mr. Cole stated in an
August 28, 2018 email to Mr. Atwal that Kroger “should have a payment coming
your way at the end of th[e] week” after his team “discovered an issue with the
routing of payments[.]” But whether this statement was made falsely does not much
matter, because Diamond stopped receiving loads from Kroger days before it was
made. On Friday, August 24, Mr. Atwal emailed Mr. Cole, advising that Diamond
“will not be able to accept any more tenders after this weekend.” The evidence
reflects as much—Diamond did not accept any future Kroger loads. (Cole Dep. 1,
74:9–11.) In other words, Diamond did not rely on Mr. Cole’s August 28, 2018
statement to its detriment.
Diamond argues in response that it was actually Kroger’s failure to disclose
its intention to withhold payment that constituted a fraud. (ECF No. 178, 19.) While
Kroger’s decision to keep Diamond in the dark on its plan to withhold payment may
have contributed to the mess the parties find themselves in now, it had no duty to
disclose its intentions. See Blon v. Bank One, Akron, N.A., 519 N.E.2d 363, 367
(Ohio 1988) (discussing those “certain circumstances” giving rise to a duty to speak
and finding that parties to a transaction “stand[ing] at arm’s length” do not owe one
another such a duty). Accordingly, it does not rise to the level of fraud.
Summary judgment is GRANTED to Kroger on Count Two of the Complaint.
3. Unjust Enrichment
In Count Five, Diamond alleges that Kroger was unjustly enriched by the
fracas surrounding the Missouri Litigation. Kroger moves for summary judgment.
Under Ohio law, “[u]njust enrichment operates in the absence of an express contract
to prevent a party from retaining money or benefits that in justice and equity
belong to another.” Robins v. Glob. Fitness Holdings, LLC, 838 F. Supp. 2d 631, 646
(N.D. Ohio 2012) (internal quotation and citation omitted) (original alterations
omitted). The unjust enrichment claim arises out of a “quasi-contract implied by the
court.” Gascho v. Glob. Fitness Holdings, LLC, 863 F. Supp. 2d 677, 699 (S.D. Ohio
2012) (Smith, J.) (internal quotation and citation omitted). But “Ohio law does not
allow parties to seek damages under quasi-contractual theories of recovery . . . when
a contract governs the relationship.” Id. (internal quotations and citations omitted).
In other words, “a plaintiff may not recover under the theory of unjust enrichment
when an express contract covers the same subject.” Bihn v. Fifth Third Mortg. Co.,
980 F. Supp. 2d 892, 904 (S.D. Ohio 2013) (Rose, J.). Here, the Transportation
Agreement governs. Diamond concedes as much. (ECF No. 178, 21.) Accordingly, its
unjust enrichment claim fails as a matter of law.
Summary judgment is GRANTED to Kroger on Count Five of the Complaint.
B. Kroger’s Counterclaims
The Court now turns to Kroger’s Counterclaims asserted against Diamond.
1. Breach of Contract — Indemnify and Defend
Kroger first alleges that Diamond breached the Transportation Agreement by
failing to indemnify and defend it in the Missouri Litigation. (Countercl., ¶¶ 29–34.)
The Court has already concluded that Diamond was obligated under the
Transportation Agreement to do so. See Section IV.A.1.(a), supra. The question
remaining is whether Diamond’s October 11, 2018 offer to take over Kroger’s
defense constitutes performance.
Kroger argues that Diamond’s offer was not really performance, but was
instead a “sham” offer. To support its position, Kroger notes that:
• Kroger was the only defendant remaining in the Missouri Litigation
(and had been for some time);
• Kroger’s corporate representative was to be deposed in two-weeks’
time, and mediation was set for two weeks thereafter;
• Kroger’s counsel had represented its interests in the Missouri
Litigation for more than a year; and
• Kroger had been demanding that Diamond defend it for more than a
year without any response.
In Kroger’s view, Diamond repudiated the Transportation Agreement by failing to
respond and then making an unreasonable offer to take over Kroger’s defense on the
eve of critically important milestones in the litigation. Diamond argues that it
offered to take over Kroger’s defense as soon as it became clear that Granite would
not; and that it did not “refuse” to defend Kroger so much as it failed to deliver “a
timely response” to Kroger’s demands for defense. It further argues that, because
the Missouri Litigation was not yet set for trial, Kroger would not have been
prejudiced by changing counsel in October 2018.
Kroger cites to Bakos v. Insura Prop. & Cas. Ins. Co., 709 N.E.2d 175 (Ohio
Ct. App. 1997) and Bank One NA v. Echo Acceptance Corp., 380 F. App’x 513 (6th
Cir. 2010) to support the position that it was permitted to settle the Missouri
Litigation without Diamond’s involvement. In both cases, the defendant-indemnitor
expressly refused to indemnify the plaintiff-indemnitee, and the courts determined
that such refusal released the plaintiff-indemnitee from its further obligations
under the respective contracts. Diamond argues that Bakos and Bank One are
inapplicable because Diamond never expressly refused to indemnify Kroger.
Diamond cites no legal authority whatsoever.
On the facts now before it, the Court finds that Diamond constructively
refused to indemnify and defend Kroger. Accordingly, Bakos and Bank One are
applicable and persuasive.14
The Amended Complaint, naming Kroger as a defendant, was filed in the
Missouri Litigation on July 12, 2017. As of that filing, Diamond was obligated under
the Transportation Agreement to indemnify and defend Kroger. Kroger sent its first
demand letter to Diamond on September 8, 2017. Kroger filed its cross-claim
demanding indemnification that same day. Diamond neither responded nor took
any action to indemnify or take up Kroger’s defense.
Two months later, Kroger demanded that Diamond sign and return the
Indemnity Agreement. Diamond did so on November 22, 2017—but still took no
action to indemnify or take up Kroger’s defense.
Seven months passed. On June 1, 2018, Kroger sent another letter
demanding indemnification and defense from Diamond, this time attaching
attorney fees accrued to-date. Diamond neither responded nor took any action.
14 Ohio law also imposes an implied duty on contracting parties to perform
within a reasonable time. See Morton Bldgs., Inc. v. Correct Custom Drywall, Inc.,
No. 06AP-851, 2007 WL 1641155, at *3 (Ohio Ct. App. 2007). Although the parties
do not argue this theory, it is equally applicable and supports the Court’s finding
that Diamond’s failure to respond to Kroger’s requests to indemnify and defend was
a breach of the Transportation Agreement.
Three more months passed. On September 4, 2018, Kroger wrote a third
letter demanding indemnification, revealing that it had been withholding payment
for Diamond’s services.
Finally, on October 11, 2018, Diamond, through counsel, agreed to take on
Kroger’s defense in the Missouri Litigation. To that point, Kroger had been actively
defending itself in the case. Kroger had also delivered three demand letters, filed a
cross-claim, and obtained a specific, supplemental Indemnity Agreement, all
asserting a right to indemnification from Diamond. Kroger’s corporate
representative was set to be deposed on October 25, 2018, and a mediation was
scheduled to take place on November 12. The same counsel, Attorney David Dick,
had been representing Kroger continuously for the preceding fifteen months.
It is disingenuous (at best) to cast Diamond’s prolonged silence as a mere
‘delayed response’ to Kroger’s repeated requests for the attention due under the
Transportation Agreement. To suggest that changing counsel at that crucial
juncture would not have impaired Kroger’s prospects in the litigation is similarly
outlandish. No reasonable jury could find that Diamond’s October 11, 2018 offer
constituted performance. Diamond was, instead, in breach.
Summary judgment is GRANTED to Kroger on Counterclaim One.
2. Breach of Contract — Procure Insurance Coverage
Kroger next alleges that Diamond breached the Transportation Agreement by
failing to maintain auto liability insurance that covered Kroger as an additional
insured. (Countercl., ¶¶ 35–38.) Paragraph 8 of the Transportation Agreement
requires Diamond to
obtain and maintain during the term of this Agreement, policies of
insurance as outlined in Schedule D. Such policies shall not contain
exclusions for unattended shipments or for negligent, dishonest,
fraudulent or criminal acts.
(Transportation Agreement, ¶ 8.) Schedule C similarly provides that
[Diamond] will maintain at all times while providing services for
Kroger, at [Diamond’s] own cost and expense, insurance coverage of
the types and in such amounts as described in Schedule D with a
company that has an A.M. Best Co. rating of “A” or better. [Diamond]
may comply with the required “per occurrence” limit through a
combination of Primary and Excess Liability insurance policies. All
insurance must be primary and not excess or contributing with any
insurance or self-insurance maintained by Kroger. [Diamond] will
deliver to Kroger, prior to providing services, a Certificate of Insurance
including “The Kroger Co. and Kroger’s affiliates and subsidiaries” as
Additional Insured.
(Id., Schedule C.)
The relevant portion of Schedule D15 is reproduced below:
The Kroger Co. and/or Kroger’s affiliates and subsidiaries (“Kroger”) may require higher insurance
coverage limits and/or different coverages for certain product and service providers.
Underwritten by insurance companies rated A- or higher by A.M. Best
Cancellation Days Notice: Thirty (30) Days
Additional Insured: “The Kroger Co. and Kroger’s affiliates and subsidiaries”
Must be shown as additional wording on Certificate Holder Address:
Certificates: The Kroger Co. and Kroger’s affiliates and
“The Kroger Co. and Kroger’s affiliates and subsidiaries
subsidiaries and Subsidiaries are Additional Attn: Non-Dedicated Contract Carriers
Insureds”
“Primary and Non-Contributory” (except C/o Ebix BPO
Workers’s Compensation) PO Box 881639
Waiver of Subrogation in favor of The Kroger San Diego, CA 92168
Co.
Must be shown as additional wording on Certificate: All insurance policies excluding workers
compensation must be “primary & non-contributory”
* * *
Auto Liability
Any Auto Yes
Combined Single Limit (Bodily injury and 2,000,000 *Important!! This limit must be met.
property) Use of Excess or Umbrella Limits above Auto
Liability is acceptable, if such limits assist in
meeting the $2,000,000 Each Occurrence Limit.
Note: As it concerns Auto Liability, a combination of “All Owned Autos, Hired Autos & Non-Owned
Autos” OR “Schedules Autos, Hired Autos & Non-Owned Autos” is acceptable
(Id., Schedule D.)
Diamond’s auto liability insurance policy in effect at the time of the accident
was underwritten by Granite. After Kroger was named as a defendant in the
Missouri Litigation, Granite (through AIG) took the position that Kroger was not
covered under that policy—as an additional insured or otherwise. There is no
evidence before the Court as to how or why Kroger was not named as an additional
insured under the Granite policy. But ensuring that Kroger was so named was
15 The 2010 Transportation Agreement and 2016 Transportation Agreements
each contain a Schedule D. Though not identical, the two Schedule Ds are
substantially similar. (Compare PAGEID # 30 with PAGEID # 5552.) Neither party
argues that they contain different substantive terms. The reproduction here is
Schedule D of the 2010 Transportation Agreement.
Diamond’s express obligation under the plain language of the Transportation
Agreement. Diamond was, accordingly, in breach.16
Summary judgment is GRANTED to Kroger on Counterclaim Two.
3. Breach of Contract — Compliance with Laws
In Counterclaim Three, Kroger alleges that Diamond breached the
Transportation Agreement’s compliance-with-laws provision by brokering freight
loads without proper registration. (Countercl., ¶¶ 39–45. See also Transportation
Agreement, ¶¶ 11.1.1., 11.1.4.)
In response, Diamond argues that the arrangement made for the load
involved in the accident was exempt from the registration requirement. Under
federal transportation laws, a “person may provide interstate brokerage services as
a broker only if that person” is registered as a broker and has satisfied certain
financial security requirements. 49 U.S.C. § 14916(a). But “broker” is defined by
statute to exclude “a motor carrier.” 49 U.S.C. § 13102(2). Department of
Transportation regulations further clarify that “[m]otor carriers . . . are not brokers
. . . when they arrange . . . the transportation of shipments which they are
authorized to transport and which they have accepted and legally bound themselves
16 Diamond argues that it satisfied its contractual obligations, because the
Transportation Agreement “do[es] not require that Kroger be an additional insured.
[It] merely require[s] that Kroger be shown as an additional insured on certificates
of insurance.” (ECF No. 189, 4 (emphasis in original).) This argument is contrary to
the plain language of Schedule D. What’s more, it calls undesirable attention to the
mysterious provenance of the December 29, 2014 Certificate of Insurance that
Diamond provided to Kroger. (See Lawrence Dep., 103:3–25; ECF No. 147-1,
PAGEID # 3120.) In context, it necessitates a reminder to counsel of their obligation
to refrain from making frivolous arguments in signed filings. Fed. R. Civ. P. 11(b).
to transport.” 49 C.F.R. § 371.2(a). Kroger does not dispute that Diamond is a motor
carrier, or that it was authorized and legally bound to transport the accident-
involved load, and offers no reason why Diamond should otherwise be considered to
have breached the compliance-with-laws provision. Without evidence to support it,
Diamond is entitled to judgment on Counterclaim Three.
Summary judgment is GRANTED to Diamond on Counterclaim Three.
4. Fraud
In Counterclaim Four, Kroger alleges that Diamond fraudulently induced
Kroger into doing business by representing that it would indemnify and defend
Kroger and that it would procure insurance naming Kroger as an additional
insured. (Countercl., ¶¶ 46–55.) In Counterclaim Five, Kroger similarly alleges that
Diamond fraudulently misrepresented, vis-à-vis the Indemnity Agreement, that
Diamond would indemnify and defend it in the Missouri Litigation. (Id., ¶¶ 56–66.)
“Ohio law holds that breaching a contract does not create a tort claim.” Oak Rubber
Co. v. Bank One, N.A., 215 F. Supp. 2d 820, 830 (N.D. Ohio 2002). Having resolved
Counterclaims One and Two in Kroger’s favor, it cannot also recover on Four and
Five.
Summary judgment is GRANTED to Diamond on Counterclaims Four and
Five.
V. CONCLUSION
For the reasons set forth above, Kroger’s Motion to Strike Testimony is
GRANTED. As to the Motions for Summary Judgment:
• Summary judgment is GRANTED to Kroger on Counts One (Breach
of Contract), Two (Fraud), and Five (Unjust Enrichment) of the
Complaint;
• Summary judgment is GRANTED to Kroger on Counterclaims One
(Breach of Contract—Indemnify and Defend) and Two (Breach of
Contract—Procure Insurance Coverage); and
• Summary judgment is GRANTED to Diamond on Counterclaims
Three (Breach of Contract—Compliance with Laws), Four (Fraudulent
Inducement), and Five (Fraudulent Misrepresentation).
In a forthcoming order, the Court will set this matter for trial to determine
the amount of damages.
IT IS SO ORDERED.
/s/ Sarah D. Morrison
SARAH D. MORRISON
UNITED STATES DISTRICT JUDGE