Petition for Writ of Certiorari — National Loss Control Service Corp. v. Canipe

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WOY 23 1984

NO. ALEXANDER L. STEVAS,

GLERK

IN THE SUPREME COURT OF THE UNITED

STATES

OCTOBER TERM, 1984

NATIONAL LOSS CONTROL SERVICE CORPORATION,

PETITIONER

Vv.

BILLY CANIPE,

RESPONDENT

ON WRIT OF CERTIORARI TO THE UNITED

STATES COURT OF APPEALS FOR

THE FIFTH CIRCUIT

PETITION FOR CERTIORARI

Walter W. Thompson

Post Office Box 848

Clarksdale, Mississippi 38614

(601) 627-9601

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TABLE OF CONTENTS

TABLE OF AUTHORITIES

QUESTIONS PRESENTED FOR REVIEW

LIST OF ALL PARTIES

CITATIONS TO OPINIONS BELOW

STATEMENT OF JURISDICTIONAL

GROUNDS

STATUTES AND REGULATIONS

STATEMENT OF THE CASE

ARGUMENT

CERTIFICATE

PROOF OF SERVICE - AFFIDAVIT

APPENDIX

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TABLE OF AUTHORITIES

I. CASES PAGE

Bazdar vs. Koppers Company, Inc.

(N. D. OH, 1981)

ee Se >, ee 44

Byrd vs. Fieldcrest Mills,

496 F.4d 1323

Peeueen Circuit, 1974)... .. cc ccces . 34

Cochran vs. International Harvester

Company (W.D. KY, 1975)

RUG FF. SUPP. SIG. wr wcccrsvvvsvees . 44

Craighead vs. United States

(Tenth Circuit, 1970)

NS re »

Davis vs. United States

(D. C. Neb., 1975)

395 F. Supp. 793, Affirmed

(C. A. Eighth Neb. 536 F. 2d 758). 46

Bes

Otto vs. Specialties, Inc,

(N. D. Miss., 1974)

306 F. Supp. 124605... 05 e6eeneeenee’ 4l,

Russell vs. Bartley, 494 F. 2d 334

(SERCH CUNGUEE, LITE) oko «408 4400 ee as

Secretary of Labor vs. Grayson

Lumber Company, Inc.

OSAHRC Docket No. 793, p. 14,

LOTS, 3 GCSRC £29465 6c ddcianatnsednean 50,

Skidmore vs. Travelers Insurance

Company (Fifth Circuit, 1973)

463 F 2G, 2G ec imsisceavaseenwenteas 24,

II. STATUTES

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Occupational Safety and Health Act

of 1970, Section 2 et seq., 29 U.S.

C.A. Section 651-678 et seq......... Ge 426

United States Congressional and

Administrative News, 1970,

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(a) QUESTIONS PRESENTED FOR REVIEW:

National Loss Control Service

Corporation, hereinafter "National Loss",

is a national corporation engaged in

a business of helping other companies

-improve work place safety. During the

applicable period of this case, National

Loss had entered into an agreement with

Kraft, Inc. to provide safety inspections

and related accident prevention services

at various Kraft plants throughout the

country. In September of 1979, National

Loss inspectors conducted a thorough four

(4) day search of the Kraft Plant in

Memphis, Tennessee, concentrating on

detecting violations of OSHA regulations.

In January 3l, 1980, Respondent, Billy

Canipe, was injured while cleaning a

flake roll machine while it was still

running. Canipe filed suit against

National Loss on the theory that National

Loss, in its inspection of the Kraft Plant,

negligently failed to find certain

violations of OSHA regulations related to

the automatic flake roll machine, and to

have Kraft correct these violations, which

failure resulted in Plaintiff's injury.

The United States District Court

for the Northern District of Mississippi,

Honorable William C,. Keady, granted

Summary Judgment on behalf of National

Loss on the ground that National Loss

violated no duty owed to Canipe.

The Un’ ted States Court of

Appeals for the Fifth Circuit, reversed

the District Court holding in essence

that National Loss could be held liable

for failing to detect the OSHA violations

of Kraft.

Thus, the question presented

for review in this Petition for Certiorari

is whether, under the facts and circunm-

stances of this case, National Loss may be

liable for Kraft's violation of OSHA

regulations, contrary to language of the

Occupational Safety and Health Act of

1970, contrary to cases from The United

States Court of Appeals for the Sixth

Circuit, as well as prior cases of the

United States Court of Appeals for the

Fifth Circuit and other cases from other

circuits throughout the nation? Peti-

tioner submits that a clarification of the

effects, if any, of the statutes and regu-

lations and rules of the Occupational Safety

and Health Act of 1970 upon private civil

litigation against non-employers is of

paramount importance!

(b) A LIST OF ALL PARTIES:

All parties appear in the

caption of the case; however, it should

be noted that Petitioner National Loss

Control Service Corporation, is a

subsidiary of Kemper Insurance Companies,

which includes the followinc:

(1) Lumbermen's Mutual

Insurance Company;

(2) American Motorists

Insurance Company;

(3) American Manufacturers

Mutual Insurance Company;

(4) American Protection

Insurance Company;

(5) National Loss Control

Service Corporation; and

(6) Federal Kemper Insurance

Company.

BELOW:

The relevant opinions on this

Appeal are the following:

(1) The opinion of the United

States District Court for the Northern

District of Mississippi, Honorable

William C. Keady, District Judge, granting

Petitioner's Motion for Summary Judgment,

being Canipe vs. National Loss Control

Service Corporation, 566 F. Supp. 521

(N.D. Miss. 1983) and the opinion of the

United States Court of Appeals for the

Fifth Circuit reversing the District Court's

Opinion, being Canipe vs. National Loss

Control Service Corporation, (Fifth Cir-

cuit, 1984) 736 F. 2d 1055.)

(@ STATEMENT OF

JURISDICTIONAL GROUNDS:

The cause of action herein

was Originally filed by Plaintiff, Canipe,

against Defendant, National Loss, in the

United States District Court for the

Northern District of Mississippi, based

on diversity of citizenship between the

parties. However, the United States Court

of Appeals for the Fifth Circuit entered

its Judgment on July 23, 1984, reversing

the Summary Judgment granted by the

United States District Court for the

Northern District of Mississippi, on the

grounds that allegations of negligence

for failure to detect OSHA violations

could be the basis for a cause of action

against National Loss. The United States

Court of Appeals for the Fifth Circuit

subsequently denied the Petition for

Rehearing of National Loss on August 24,

1984. Thus, Petitioner, National Loss,

prosecutes this Appeal for an interpreta-

tion of the conditions or circumstances,

if any, upon which the standards of

the Occupational Safety and Health

Administration may be used as a basis

action

In a cause of

of or evidence

against a non-employer party. Therefore,

this is a highly significant issue in-

volving interpretation of United Statutes

and Regulations, and the rulings of the

Fifth Circuit Court of Appeals has so far

departed from the accepted and usual course

of judicial proceedings as to require the

granting of this Writ. Thus this appeal

falls within the jurisdiction of this

Court for review on appeal.

( e) THE APPLICABLE STATUTES

AND REGULATIONS:

The specific statutes concerned

herein are the Occupational Safety and

Health Act of 1970, Section 2 et seq., 29

U.S.C.A. Section 651-678, especially

Section 653 (b) (4) of the Act which

provides that:

"Nothing in this chapter shall

be construed to supersede or

in any manner affect any

Workmen's Compensation Law or

to enlarge or diminish or

affect in any manner common law

or statutory rights, duties or

liabilities of employers and

employees under any law of

respect to injuries, diseases

or death of employees arising

out of or in the course of,

employment,"

The specific regulation in-

volved herein is 29 C.F.R. Section 1910.

which states:

"(a) Machine Guarding -

(1) Types of guarding.

One or more methods of machine

guarding shall be provided

to protect the operator and

other employees in the machine

area from hazards such as those

created by point of operation,

in-going nick-points, rotating

parts, flying chips and sparks.

Examples of guarding methods

are - barrier guards, two-hand

tripping devices, electronic

safety devises, etc.

(b) General requirements are

machine guards.

Guards shall be affixed in the

machine where possible and

secured elsewhere if for any

reason attachment to the machine

is not possible,"

In addition, reference will be

made to other portions of the Occupational

Safety and Health Administration Act, the

regulations of the Occupational Safety

and Health Administration, Congressional

hearings and other opinions in an effort

to obtain the intent and proper interpreta-

tion of the above statutes as related to

t he ma tt er at bar.

STATEMENT OF THE CASE:

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Canipe was and is an adult

resident citizen of Memphis, Shelby

County, Tennessee. National Loss is a

corporation chartered under the laws of

the State of Illinois, but was and is

qualified and registered to do business

in both the states of Tennessee and

Mississippi.

National Loss is a national

corporation engaged in the busines. of

helping other companies improve work

place safety. On November 9 1978

> 7 7

National Loss entered into an "Agreement

for Services” with Kraft wherein National

Loss was to provide "...Loss Control

Services, on a request basis as approved

and initiated by Kraft's directors of

safety and security or other authorized

employees." This contract commenced on

January 1, 1979, and terminated on

January 1, 1980. Subsequently on

January 11, 1980, National Loss and

Kraft entered into another modified agree-

ment effective January 1, 1980, and ending

December 31, 1980. The contract between

the two parties, national in scope, was

intended to establish only the general

framework for National Loss' provision

of services to the various Kraft Plants

around the country. The primary purpose

of this contract, therefore, was to set

the hourly rates for the various services

that National Loss could provide to

10.

Kraft Plants. The service to be performed

at a particular plant was to be determined

",..On a request basis as approved and

initiated by Kraft's directors of safety

and security or other authorized employees."

Under the arrangement between National Loss

and Kraft Plant in Memphis, Tennessee,

National Loss was requested to make

guarterly physical hazard surveys and loss

experience analyses. These services

consisted of two basic functions:

(1) Analysis of previous

accidents of the plant in order to

determine loss patterns for concentrated

study; and

(2) Walk-through inspections

to determine physical hazards by observing

the physical layout condition of the plant.

Loss analysis is an attempt, after in-

juries occur, to determine the cause and

likelihood of recurrence. Walk-through

inspection is a procedure whereby the

inspectors walk through the general

traffic pattern of the plant and observe

any physical hazards that might be readily

observable or within a reasonable distance

of the inspectors. These were the only

type of services requested by Kraft for

quarterly inspections. Kraft never re-

quested NATLSCO to perform a job safety

analysis of any employee position; neither

did it reguest an inspection of the plant's

operating practices or procedures. Only

if an inspector fortuitously observed an

unsafe practice or procedure would Kraft

expect National Loss to investigate and

bring the unsafe practice to the attention

of Kraft's management in the form of a

recommended change,

Further, as part of its own

ongoing safety program, Kraft had a

monthly safety inspection made by its

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Own people, published its own handbook

titled "Kraft's Minimum Safety Standards

For Industrial Field Division" as well as

a plant safety rules and procedures

handbook which was given to all employees,

including Canipe.

Again, NATLSCO was never re-

quested, pursuant to the contract, to

perform an investigation or survey of any

kind of procedures, including the clean-out

procedures of the automatic flake roll

machine. The automatic flake roll machine

was used to change liquid fat and chemicals

into a flaky type chemical. Since it was

an automatic machine, Canipe's primary

function as an assistant operator was to

run a single product until that en

run was completed. Then Canipe was to

clean the machine and prepare it to run

whatever product was next scheduled. If

there was no product change-over during

his particular shift, then he might not

‘13.

clean the machine during his shift at all.

At other times, he might clean it one

time or at most twice during his shift.

It would almost be a matter of chance if

someone walking through the facility would

see the automatic flake roll machine being

cleaned out.

There was no evidence that anyone

from National Loss ever observed any clean-

out procedure of the automatic flake roll

machine; especially there is no evidence

that an automatic flake roll machine was

kept running while being cleaned. Again,

National Loss was never requested to

inspect the clean-out procedure of the

automatic flake roll machine,

At approximately 5:00 a.m. on

January 31, 1980, just prior to switching

products, Canipe caught his shirt sleeve

on a large pin at the end of the auger,

which pulled him into the machine and

14,

amputated his right arm.

Since there had never been a

previous accident involving the flake

roll machines, no loss experience

analysis was ever performed prior to that

time. More importantly, according to

Kraft's own managers, Kraft never re-

linguished its responsibility for main-

taining a safe work environment to

National Loss. Kraft, with its own

personnel, maintained an on-going safety

program. The head of this safety program

was Jack Hansen, Corporate Safety Director

for Kraft, whose responsibility it was to

prepare and implement practices and pro-

cedures for the safety program of all

Kraft employees, including those of the

Kraft Plant in Memphis, Tennessee. Mr.

Hansen was and is a professional safety

engineer, who has taught and lectured on

safety engineering at the University

15.

level and has been an expert witness with

respect to safety engineering. Mr. Hansen

was in the position of Corporate Safety

Director for Kraft in January of 1980,

At the same time, Kraft also employed

Allen Jamison as a personnel and safety

administrator specifically in charge of

the Kraft Plant in Memphis, Tennessee, to

be an assistant to Jack Hansen. With

respect to the Kraft Plant in Memphis,

Tennessee Hansen and Jamison were the

torporate officers who would have made

requests to National Loss for specific

types of safety inspections during the

term of the contract agreement between

National Loss and Kraft.

On July 5, 1979, Jack Hansen of

Kraft noted in the National Safety News

published February, 1977, that OSHA's

definition of what constituted a serious

violation had become stricter and carried

16.

more severe penalities. Based on this,

Jack Hansen sent a memo to all of Kraft's

safety managers in the United States re-

questing that they survey Kraft's locations

for possible OSHA violations under these

new guidelines. As a result, on July 10,

1979, Allen Jamison requested National

Loss during a third quarter visit to

concentrate on an OSHA type inspection

and to note the violations and make the

recommendations accordingly. fThus,

during the days of September 1l, 12, 13

and 14, 1979, National Loss conducted the

requested, simulated OSHA survey of the

Kraft Plant in Memphis, Tennessee. The

report to Kraft from that survey covered

some 44 pages of recommendations and

conclusions.

Shortly thereafter, on October

29, 1979, Tennessee OSHA made an in-

spection of the Plant. Tennessee OSHA

17.

cited two violations, none of which had

any connection with the automatic flake

roll machine in any manner.

Then, on January 31, 1980,

Plaintiff had his accident in which he

lost his arm. On February 12, 1980, after

the injury to Canipe, Tennessee OSHA re-

turned because of the accident and cited

Kraft under a "catch-all general duty

violation" on the automatic flake roll

machine, Kraft was not cited for any

"physical hazard violations". [In July

of 1980, the Kraft Plant in Memphis,

Tennessee, was sold to another company

called Whitco so that the September 1979,

inspection was the last made of the Kraft

Plant in Memphis, Tennessee, by National

LOSS.

Based on the foregoing facts, the

United States District Court for the

Northern District of Mississippi granted

18.

Summary Judgment in favor of National

Loss holding that National Loss had

breached no duty owed to Canipe under

Tennessee negligence law. Plaintiff

Canipe appealed the District Court's

ruling. The United States Court of

Appeals for the Fifth Circuit reversed,

holding that Canipe had"...pointed to

evidence in the record that negligence

by National Loss in its inspection for

physical hazards and OSHA sjjolations

. . . . | .

proximately caused his injury." The

evidence the Fifth Circuit relied on

was an affidavit from a Safety Engineer

who examined the plant and machines in

question in 1983, two years after the

plant with the flake roll machines had

been sold by Kraft. This Safety Engineer

claimed to have found a number of physical

hazards related to the automatic flake

roll machines which constituted violations

19.

of OSHA regulations. Thus, the Fifth

Circuit determined such was grounds to

find that National Loss might have failed

to find physical hazards which constituted

OSHA violations that proximately caused

Plaintiff's injuries and thus reversed

the District Court.

On Petition for Rehearing,

National Loss attempted to argue to the

Court of Appeals that its holding amounted

to allowing a private civil cause of action

against the non-employer third party based

upon alleged violation of OSHA standards,

contrary to the intent of Congress in

enacting the Occupational Safety and Health

Act of 1970 and the many cases deciding

this very issue. Accordingly, given the

magnitude of the case, National Loss seeks

this Writ of Certerori.

(g) ARGUMENTS:

20.

OSHA VIOLATIONS AND THIRD PARTIES

The Court of Appeals for the

Fifth Circuit held in essence that if

National Loss negligently failed to

observe violations of OSHA standards by

Kraft at Kraft's Memphis Plant, and if

such negligence is considered the proximate

cause of the injury sustained by Canipe,

then National Loss would be liable for

failing to detect such violations of OSHA

regulations! In reaching this incredible

conclusion, the Court of Appeals apparently

ignored a number of legal and factual

roadblocks, each of which Petitioner will

discuss in detail.

Apparently, the Court of Appeals

is of the opinion that National Loss had

an absolute duty under its contract with

Kraft to check every single OSHA violation

in the Kraft Plant! Petitioner does not

know how the Court of Appeals arrived at

this decision since there is absolutely

21.

no evidence that such a duty was ever

imposed upon National Loss when considering

the intention of either party based on the

language of the contract. Indeed, to the

contrary, when Tennessee OSHA inspected

the Kraft Plant less than two months later,

Tennessee OSHA cited Kraft for two viola-

tions, none of which had any connection

with the automatic flake roll machine in

any manner. Yet, it would seem that if

National Loss had an absolute duty to detect

every single OSHA violation in the Kraft

Plant, then Kraft should have, under its

contract with National Loss, required

National Loss to pay Kraft's fines to

Tennessee OSHA. This did not occur

because National Loss did not have a

contractual duty to protect every single

OSHA violation in the Kraft Plant! Yet,

the Fifth Circuit must necessarily be

holding that National Loss owes an absolute

duty, not only to Kraft, but also to

Canipe, to detect every single OSHA

violation; otherwise, how can it be said

that a failure to detect a violation

constitutes a breach of duty owed to

Canipe through Kraft, which proximately

caused Canipe'’s injury!

Perhaps recognizing the

difficulty in this argument, the Fifth

Circuit then moved in mysterious ways its

conclusions to reach, That is the Fifth

Circuit holds that "...a jury could

egitmately infer that Kraft delegated

to National Loss its duty to identify

OSHA violations at the Humko Plant, and

that Kraft relied on National Loss to

identify OSHA violations at that plant.”

(id at 1064). The difficulty with such

a conclusion by the Fifth Circuit is that

it is contrary to the express intent of

the act and interpretations of the act

23.

—_—_——_ ——- —

prior to this time. In particular, a

very important case with regard to the

issue Of delegation and reliance is

Skidmore vs. Travelers Insurance Company

(Fifth Circuit, 1973)483 F. 2d 267, in

which the Fifth Circuit held:

"The complaint in this case

rests on the theory that

the Occupational Safety and

Health Act of 1970, U.S.C.

Sections 651-678, carries

an implied private remedy

against executive officers

of an employer guilty of

violating the Act. For

the reasons stated in the

opinion of the District

Court we hold that the Act

does not create such an

implied remedy. See 356 F.

Suppl. 670". id at 67.

The Skidmore case was a suit by

an employee against the executive officers

of an employer seeking recovery of civil

damages for the employer's failure to

comply with the Occupational Safety and

jealth Act. In its Opinion, the District

Judge held:

24.

"While the statute imposes a

duty on employers, and enforces

that duty by criminal sanctions

and by creating a right to

injunctive relief, it does not

mention any private civil

remedy against the employer

for damages suffered by an

employee as a result of the

violation of the Act. Ordered

to review and brief its legis-

lative history, counsel has

been unable to indicate to the

Court any material in the

statute's legislative course

tending to create the slightest

implication that Congress intended

to create a duty to respond to

the individual employee in

damages.

The Act indicates a contrary

intention, neither to limit nor

to expand the duty of employers;

for 29 U.S.C.A. Section 653(b) (4),

recites:

‘Nothing in this chapter shall

be construed to supersede or in

any manner affect any Workmen's

Compensation Law or to enlarge

or diminish or affect in any

other manner the common law or

statutory rights, duties or

liabilities of employers and

employees under any law with

respect to injuries, diseases

or death of employees arising

out of or in the course of,

employment. '

While courts have sometimes

y +

divined an implicit right to

damages from a statute creating

a duty expressly enforced in

some other way, and this Court

itself reached a similar result

with respect to the Fair Labor

Standards Act, civil liability

does not necessarily or in-

evitably result from the

violation of a statutory duty

made enforceable in some other

manner... id at 671.

But we may pretermit the issue

of the employer's liability,

for this suit seeks to assert

the individual liability of

executive officers. The Act

in terms applies only to

"employers". Nothing in it

purports to impose any duty on

any employees of an employer,

executive or otherwise.

No case has been cited stretching

an implication to this degree.

Imposition of a duty on an

employer does not create liability

for performance of that duty on

officers or other employees of

the employer.

The Senate Report that accompanied

the bill to the floor for passage

provided that the purpose of the

bill was to "reduce the number

and severity of work related

injuries and illnesses, which

despite current efforts of

employers and government, are

resulting in ever increasing

human misery and economic loss."

26.

United States Congressional and

Administrative News, 1970, Page

5177. From the very wording of

the statute and all of the

legislative reports, it is clear

that OSHA applies only to

"employers".

The statute provides the duty

of the employer shall be to

provide for safe job sites by

furnishing places of employment

free from recognized hazards that

might cause death or serious harm

to employees. Neither statutory

provision nor legislative history

has been cited to support the

chimerical proposition that

Congress intended either to

create a duty on other employees

of the same employer (even though

they are executives) or to give

injured workers a private civil

remedy against other employees,

albeit executives.

Absent precedent for such an

interpretation with respect

to any other statute, absent any

language in OSHA even remotely

susceptible of construction as

creating a civil cause of action

against executive officers, and

absenteven a title of legislative

history to justify such an in-

terpretation, the notion that

OSHA creates a right must be

rejected. Hence the motion to

dismiss is granted." (Emphasis

added) (E.D. LA.1973, 356 F.Supp.

670 at 671-2.)"

Applying the Skidmore case to

the case at bar, the most important point

is that Skidmore held that an employee

could not maintain an action against a

non-employer (even executives of the

employer) in spite of the fact that such

executives had been delegated the

responsibility for performing the employer's

duty of maintaining the work place in

accordance with the regulations of OSHA. .

Further, it can't be denied that the

employee in that case would certainly have

relied upon these executives. Yet, in

spite of the strength of the factors of

delegation and reliance in the Skidmore

case, both the District Court and the

Fifth Circuit specifically ruled that such

a cause of action could not be maintained.

Now, in the case at bar, the Fifth Circuit

is apparently changing that ruling without

specifically overruling Skidmore or any of

the cases following Skidmore. That is,

in the case at bar, the Fifth Circuit is

holding that Canipe can maintain a cause

of action against National Loss on the

basis that Kraft delegated to National

Loss part of its duties for maintaining

a work environment free of OSHA violations.

This is a direct contradiction to the

holding in Skidmore. Further, the

evidence including Plaintiff's own testi-

mony in deposition, clearly shows that

the plaintiff did not rely upon National

Loss to make certain that Kraft complied

with OSHA standards. Thus, Canipe's

action against National Loss is even less

tenuous than the employee's action

against executives of the company in

Skidmore. In Skidmore, there was at least

a delegation to and reliance on the

executives officers by the employer as

opposed to the situation in the case at

29.

bar, where there is nothing in the

agreement between National Loss and Kraft

that Kraft had ever delegated any responsi-

bility for safety to National Loss. Indeed,

to the contrary, testimony by personnel from

both Kraft and National Loss shows that there

was no intention by either of the parties

to delegate responsibility for safety

from Kraft to National Loss. Further, as

a practical matter, the Skidmore case

its OSHA responsibilities to another.

To allow such delegation would

certainly alter the intent of OSHA in

lacing the responsibility for maintaining

the work place in accordance with OSHA

tandards solely upon the employer. Further,

f Kraft had intended to delegate respon-

sibility for compliance of OSHA standards

to National Loss, then necessarily Kraft

would have also had to delegate to

30.

National Loss some authority for making

changes. Instead, the clear evidence is

that all National Loss had the authority

to do was to make recommendations upon

which Kraft could then act or not act as

Kraft saw fit. Thus, there was no

discretionary authority on the part of

National Loss to make any changes to

affect the plant - only to provide recom-

mendations, which cannot be considered

to have been a delegation of responsibili-

ties. Therefore, clearly, under the

Skidmore case and its progeny, there is

no cause of action under OSHA against

National Loss.

The subsequent case of Jeter

vs. St. Regis Paper Company, 507 F. 2d

973 (Fifth Circuit, 1975), concerned an

action brought by an employee of an *n-

dependent painting contractor against St.

Regis Paper Company, the owner of a

31.

chemical silo, for injuries sustained

when the employee fell from a scaffold

while painting the silo. With respect

to the claim that OSHA created a federal

cause of action, the Fifth Circuit there

held:

"Assuming without deciding

that St. Regis may have

violated requirements of

OSHA regulations promulgated

thereunder by the Secretary

of Labor, we affirm the trial

court's charge and hold that

no cause of action for such

violations can be implied

under OSHA to run in favor of

a person who was not an em-

ployee of the violator against

whom the recovery is sought.

The Occupational Safety and

Health Act of 1970 imposes

a duty on employers and

provides for enforcement of

that duty by criminal sanctions,

Civil penalties recoverable by

the United States for deposit

into the Treasurey of the United

States and, under certain

circumstances, injunction of

the violation of the duty by

a district court, acting upon

application of the Secretary

of Labor. See 29 U.S.C.A.

Sections 662, 666. Congress

has set up a comprehensive

system for the promulgation

and enforcement of regulations

and standards under OSHA. No-

where in the language of the

Act, in its legislative

history, or in the statutory

declaration of purpose and

policy in the Act itself is

there the slightest implication

that Congress considered OSHA

creating a private right of

action for violation of its

terms. See 1970 U. S. Code

Congressional and Administrative

News, Pages 5177-5241; 29 U.S.C.A.

Section 651. The only provision

in the statute which addresses

itself to a private remedy

clearly indicates that Congress

did not intend OSHA to create a

new action for damages in favor

of employees. Section 653(b) (4)

of the Act provides that

‘Nothing in this chapter shall

be construed to supersede or in

any manner affect any Workmen's

Compensation Law or to enlarge

or diminish or affect in any

manner common law or statutory

rights, duties or liabilities

of employers and employees under

any law of respect to injuries

and employees under any law of

respect to injuries, diseases

or death of employees arising

out of or in the course of,

employment. '

It seems clear that Congress did

not intend OSHA to create a new

private cause of action, but, on

the contrary, intended private

rights to be unaffected thereby.

The provisions for enforcement

of OSHA and the regulations

promulgated thereunder are

sufficiently comprehensive to

make such a private right of

action unnecessary to effectuate

the congressional policy

underpinning the substantine

provisions of the statute.

(Citations Omitted)

We have been unable to find a

single case wherein a Court has

found such a private right of

action created by OSHA. Although

the results are not yet conclu-

Sive as to the litigation of

private claims formed by this

relatively new act, the Courts

so far have been unanimous in

their rejection of contingent

Similiar to the one made by

Jeter. This Court has previously

rejected any private right by

an employee against the executive

officers of the employer.

Skidmore vs. Travelers Insurance

Company, 356 Supp. 670 (E.D. La.),

affirmed, 483 F. 2d 67 (Fifth

Circuit). The Fourth Circuit has

refused to imply an action against

the employer itself, where State

Workmen's Compensation was the

exclusive remedy of the injured

party. Byrd vs. Fieldcrest Mills,

496 F. 2d 1323 (Fourth Circuit,

1974). The Sixth Circuit has

34,

Ls a eae

refused an employee-against-

employer action, as well as

an action by the employee

against the supervising

engineer, who was not his

employer. Russell vs. Bartley,

494 F. 2d 334 (Sixth Circuit,

1974). See also Hare vs.

Federal Compress and Warehousé

Company, 359 F., Supp. 214 (N.

D. Miss. 1973); Dekie vs.

Todd, 132 Ga. App. 156, 207 S.

——_

E. 2d 654 (1974).

Although the facts here do not

call upon us to decide defini-

tively whether OSHA may create

a private right of action by an

employee against his employer,

we perceive no base upon which

to posit a claim on behalf of

Jeter, a non-employee, against

St. Regis. St. Regis owes no

duty to Jeter under OSHA. There

being no duty, there can be no ~

breach, The district court

was correct in not submitting

this theory of action to the

jury." id at 996-997 (Emphasis

added).

It is of further noteworthy

interest that in the Jeter case, the

plaintiff claimed that St. Regis was

negligent in the performance of its safety

engineering responsibilities. The Fifth

Circuit also noted that the evidence does not

c }

<: eid 7, on Sabai - iris

support such a charge.

Next, also in the “ifth Circuit,

came the case of Melerine vs. Avondale

—— ~~

Shipyards, Inc. (Fifth Circuit, 1981) 659 F.

2d 706, in which an employee of an indepen-

dent contractor engaged to outfit a ship

sued the employer of a crane operator for

injuries sustained when the contractor's

employee was aiding the crane operator

in making a lift. In Melerine, the Fifth

Circuit specifically held:

"In a negligenceaction,

regulations promulgated under

the Occupational Safety and

Health Act of 1970, 29 U.S.C.

Section 651-678 (1976) ("OSHA"),

provide evidence of the standard

of care exacted of employers but

they neither create an implied

cause of action nor establish

negligence per se. While they

are evidence of a general standard

of care due employees, they

establish no standard of care due

third persons. Therefore, in

this negligence action, we reject

the argument that the failure

a third party that was not the

plaintiff's employer to follow

OSHA regulations as establishing

that third party's negligence.

Because we accept the trial

judge's conclusion based on the

36.

oe i tte nee ale: Ma linet miata ie

other claims of negligence

and because there are no

other factual disputes, we

affirm the judgment denying

recovery." (Emphasis added)

id at 707.

Interestingly, in the Melerine

case, the defendant was actively involved

in the activities which directly caused

injury to the plaintiff, that is, moving

the crane boom, On the other hand, in

the case at bar, National Loss was not

involved in any activity which directly

led to the injury to Canipe. Yet, the

Fifth Circuit held in Melerine that OSHA

standards could not be used to complain of

alleged negligence of a third party; whereas,

in the case at bar, the Fifth Circuit,

without specifically saying so, seems to

overturn or reverse Melerine by saying

that National Loss, a third party, can be

held responsible for Kraft's violation of

OSHA regulations. National Loss submits

that on this basis alone, the opinion of

37.

this panel of the Fifth Circuit should be

reversed and summary judgment granted

by the District Court affirmed.

Additionally, as can be seen

from the Jeter case, not only is the Fifth

Circuit split within itself, it is also

at odds with a number of other cases that

were cited in the Jeter case. The opinion

of the Fifth Circuit is contrary to the

Sixth Circuit case of Russell vs. Bartley

. (Sixtn Circuit 1974) 494 F. 2d 334 which, if

| Tennessee law is to be applied, would be

the proper authority to look to insofar

as its interpretation of OSHA regulations

as applied to a third party is concerned.

In this event the Russell case becomes

; very important. In Russell the plaintiff

rs injured in the course and scope of his

employment with the Bartley and Bart

partnerships, allegedly as a result of

failure of his employer to comply with

38.

provisions of OSHA. Subsequently,

plaintiff filed an Amended Complaint

bringing Howard K. Bell, Consulting

Engineers, Inc. (Bell) in the suit

as an additional defendant. Bell had

acted as a supervising engineer and

designed the plans and specifications

on the project in which claimant was

injured. Plaintiff alleged that Bell's

negligence was a joint concurring cause

of the injury. In denying plaintiff's

cause of action, the Sixth Circuit

stated:

"However, nowhere in the

statute or in the record of

the debate on the Act in

Congress is there any mention

of a private civil remedy

against anyone for damages

suffered by an employee

because of a violation of the

Act (id at 335)...With respect

to Bartley and Barton, there

is no legislative history or

case law to support appellant's

proposition that OSHA created

a private civil remedy and

the clear language of

Section 653(b) (4) of the

Act specifically evidences

39.

Congressional intention to

the contrary." id at 335-336.

Clearly the United States Court

of Appeals for the Sixth Circuit is of the

opinion that OSHA standards or regulations

cannot be the basis for a cause of action

against a third party not responsible for

implementing those regulations. That is,

in the Russell case, Bell was an engineer

;

who designed the project and was therefore

concerned with safety engineering, but he

was not responsible for implementing the

safety regulations for plaintiff's

employer and thus could not be responsible

for the plaintiff's injury. A similiar

situation exists in the case at bar in

that National Loss was hired only to do a

pre-OSHA inspection, and was not expected

to implement any procedures to correct any

violations of OSHA discovéred.

At this point, petitioner would

submit that no better analysis of the cases

40.

and statutes conceming the rights and actions

under OSHA has been made than the decision

of Judge Keady, the District Court below,

in the case of Otto vs. Specialties, Ines,

(N.D. Miss. 1974) 386 F. Supp. 1240, in

which the Court held:

"The avowed purpose of OSHA,

as stated in the initial

section of the Act, is to

"assure so far as possible

every working man and woman

in the nation safe and

healthful working conditions...'

a9 U. 8. C. Section 631).

In achieving this goal, OSHA

mandates the promulgation of

the safety and health standards

by the Secretary of Labor which

have the force of law. See 29

U. S&S. C. Sections 654, 655.

Violation of the standard is

punishable by specified

criminal and civil penalties

of considerable severity.

29 U. S. C. Section 666. Nowhere

in the Act or in its legislative

history can be found any in-

dication that Congress intended

to allow additional civil

actions instituted by aggrieved

employees injured through

violations of OSHA standards.

Indeed, Section 29 U. S. C.

Sections 653(b) (4) strongly

implies that Congress intended

41,

teat

no such remedy should be

made available...

Although the recent passage

of this legislation militates

against the existence of a

large body of case law on this

subject, several cases do shed

substantial light on our

question, In each, the Court

found that Congress intended

not to create, and did not create,

any civil cause of action for

violations of OSHA regulations,

(The Court goes on to discuss

the cases of Skidmore vs.

Travelers, supra, Hare vs.

Federal Warehouse and Compress

Company, 359 F. Supp. 214(N.D.

Miss. 1973), and Russell vs.

Bartlett, Supra) id at 1242 ...

Further, Mississippi's Negligence

Law is well-developed and avail-

able for Otto's use. No useful

purpose related to Congressional

policy goals would be served by

tacking on yet another enforce-

ment vehicle. We thus conclude

that OSHA permits no civil actions

for damages for remedy alleged

violations of OSHA safety

standards. id at 1243........

Otto's alternative contention,

that violation of OSHA standards

may be taken into account in this

action as evidence under

Mississippi negligence law,

involves more subtle considerations

of federalism, For although it

42.

is clear that Specialties is

correct in its major premise,

i.e., that no federal civil

remedies can be had by a private

litigant under OSHA, the effect

of OSHA on the Mississippi common

law of torts is another more

perplexing matter...

In ruling on this common law

aspect of Specialities motion,

we apply Mississippi law in the

manner in which we believe it

would be applied by the courts

of that state. We are thus

placed in the position of

prophesying the effect the

Supreme Court of Mississippi

would choose to give to the

federal decisions construing the

Occupational Safety and Health

Act. In applying a common law

doctrine justified by a judicial

desire to assist the Legislature

in achieving its policy goals,

how is a state court affected

by determinations by the federal

courts that a particular

congressional scheme needs and

desires no judicial assistance

of this type? id at 1244...

We believe the Supreme Court of

Mississippi, if faced with this

question, would recognize as we

do, that what is at stake here

is a question of judicial

buttressing of legislative

goals. We believe that with

this recognition would come a

realization that, before the

judiciary undertakes to

a3.

supplement legislatively de-

signed sanctions, it should

first inquire whether any sup-

plementation was foreseen or is

needed. Such an inquiry into

OSHA has been made by the federal

courts, which have concluded that

no private civil remedy is needed

to fulfill the goal established

by Congress in its adoption of

the statutes. That this deter-

mination was made in the context

of a federal civil remedy and not

within the framework of the neg-

ligent per se doctine is to us

irrevelant, since both concepts

share a common raison d'etre -

a judicial addition to statutory

penalities thought to be inade-

quate to the purposes the legi-

Sslative branch sought to promote.

We concede that the Mississippi

Courts need not be bound in this

matter by the federal determina-

tion of OSHA's purpose and effect.

We believe, however, that the

Supreme Court of Mississipi would

be persuaded by the logic of those

opinions to refuse to permit the

utilization of OSHA safety

standards in this case, either as

conclusive proof or evidence of

negligence by Specialities."

id at 1244-1245.

This position taken in the Otto

---——-- —s

case was subsequently fortified by the

Opinion of the Fifth Circuit in Melerine,

It is apparently only the opinion

44,

by this particular panel of the Fifth

Circuit Court of Appeals, which cites no

authority for its position, that so

radically departs from the concensus of

other courts which have considered this

issue.

It is for this reason that the

petitioner feels it absolutely necessary

to have clarification of this issue

by the Supreme Court of the United States

in order to avoid further disagreement

among Circuit Courts of Appeal of the

United States on this Issue! Other cases

speaking to this issue which support the

petitioner's position in this case are:

Cochran vs. International Harvester Company,

(W.D. KY, 1975) 408 F, Supp. 598;

Johnson vs. Koppers Company, Inc.

(N. D. OH, 1981) 524 F, Supp. 1182;

Bazdar Vs. Koppers Company, Inc.

N. D. OH, 1981) 524 F. Supp. 1194.

45.

;

Another important result of

the Opinion of the Fifth Circuit in this

cause would be to make U. S. Government

Inspectors of OSHA also liable for their

negligent failure to find violations of

OSHA regulations which later cause in-

jury to employees. In the case at bar,

as noted, after the September 1979 in-

spection by employees of National Loss,

OSHA made an inspection of the plant in

October and also failed to find the

violation relied upon by plaintiff. Under

the Opinion by the Fifth Circuit in this

case, it would appear that the OSHA

inspectors could also be held liable for

negligent inspections!! Yet, every

authority on this issue has held that

the government inspectors could not be

liable, (See Davis vs. United States,

(D. C. Neb. 1975) 395 F. Supp. 793,

Affirmed (C. A. Eighth Neb. 536 F. 2d 758;

46.

—

Fisher vs. United States (Third Circuit,

—-—. ee eee

— + ee ee

States (Tenth Circuit, 1970) 423 F. 2d 664;

Jeffries vs. United States (Ninth Circuit,

Lara, S77 -%, 26 52.

If OSHA inspectors who inspected

the Kraft Plant after inspection by National

Loss cannot be held liable for negligent

inspection, then certainly National Loss

should not be held liable for negligent

inspection under their contract with

Kraft. That is, National Loss' contract

with Kraft did not require National Loss

do anything more than what was expected

Of an OSHA inspector. Since OSHA did not

find any violations in its October in-

spection related to the automatic flake

roll machine, then, to that extent, National

Loss certainly performed its part of the

contract. And since there were no breach

of duty by National Loss under its contract

47.

with Kraft, there can be no breach of

any alleged duty owed to Canipe.

Finally, National Loss shows

that the violations of OSHA regulations

that plaintiff claimed National ——

failed to detect were not "violations"

at all. In particular, the primary

alleged violation was that there was a

hinged dust cover on the automatic flake

roll machine which could be opened to

atTow access to the machine and that there

were no warning signs on the machine,

Accepting these facts, the question is

whether these facts, as a matter of law,

constituted violations of OSHA safety

standards. In order to more fully evaluate

this issue, it is important to recall that

this was an "automatic" flake roll machine

which did not require an operator to

manually operate the machine so that there

were no hazards created at the point of

48.

operation. Thus, there was no need for

an operator to lift the dust cover for

access to the machine while the goods

were being processed. Indeed, the Fifth

Circuit states as much in its Opinion find-

ing that Canipe only needed to gain access

to the machine whenever production of that

machine shifted from one product to an-

other in order to clean the machine,

Therefore, it is clear that the Fifth

Circuit's reliance on 29 C. F. R. Section

1910.,212 simply does not apply to this

machine since there were no hazards created

by any "point of operation, in-going nick

points, rotating parts, flying chips and

sparks" while the chemicals are being

processed. Therefore, the only real issue

is whether there needs to be a "permanently"

affixed guard when maintenance is being

performed in order to comply with OSHA

standards. Tt should first be noted that

49.

Section 1910.212 does not require that

the guards be "permanently" affixed to

the machine even where “affixed" guards

are required. But more importantly,

OSHA standards do not require any guards

under 1910.212 where only maintenance

operations are to be performed. As

support for this position, National Loss

cites the case of Secretary of Labor vs.

—— —— ee

Grayson Lumber Company, Inc., OSAHRC

Docket No. 793, P 14, 1973, 1 OSHC 1234,

In Grayson an issue was raised as to

whether a mechanical apparatus should

have been guarded under Section 1910,219.

The Commission held:

"According to Item 12 of the

Citation, violation of 29 CFR

1910.219 existed because re-

spondent had not guarded an

exposed mechanical transmission

apparatus. The evidence is

that such apparatus was unguarded,

but the only employees affected

thereby are maintenance personnel

while performing maintenance

duties on the apparatus. According

to the compliance officer,

50.

——— —s

respondent should erect guard

rails to thereby abate the

alleged violations. Were we

to accept this proposition then

we must necessarily conclude

that maintenance operations

could not be performed on the

apparatus. We did not conceive

the standards to be so broad,

Accordingly, vacation is proper

period." Id. at 1235 (Emphasis

Added).

Applying the Grayson case to

the case at bar, if the dust cover or any

guard were permanently affixed to the

machine, so that it could not be removed,

then as in Grayson, Canipe could not have

performed his job of cleaning out the

machine or doing other maintenance work

on it. Therefore, .ecasonably, some method

such as "hinges" or other means, was

necessary to allow Canipe access to the

machine for purposes of cleaning and

maintenance. Clearly, under the Grayson

case, a dust cover is not a violation of

OSHA standards, particularly given the

automatic nature of this machine.

Sl.

Similiarly, warning signs were not re-

guired under the OSHA regulations either.

Indeed, the only real violation of OSHA

standards in this case are the violations

of the "General Duty Cause" by Kraft for

allegedly failing to properly instruct

Canipe as to written procedures or methods

to be used during the cleaning of the auger.

These are procedural violations and as

the Fifth Circuit noted, only physical

hazard violations are an issue here,

As further support for the position

taken by National Loss, it is very important

to note again that Tennessee OSHA inspected

this plant on October 20, 1979, approximately

one month after the inspection by National

Loss which was approximately three (3)

months before Canipe's accident and found

no violations related to the automatic

flake roll machine.

EVEN MORE IMPORTANTLY, SUBSEQUENT

TO CANIPE'S INJURY, ON FEBRUARY 12, 1980,

52.

; |

TENNESSEE OSHA MADE ANOTHER INSPECTION

SPECIFICALLY TARGETING THE AUTOM \TIC FLAKE

ROLL MACHINE. IN THAT INSPECTION, THE

ONLY VIOLATIONS FOUND BY TENNESSEE OSHA

WAS THE GENERAL DUTY VIOLATION BASED ON

THE FOLLOWING GROUNDS:

A. Written procedures or methods

to be used during the cleaning of the auger

machine system on five (5) flaking machines

were not provided. The machines were located

in the warehouse packaging area.

B. Employees were not trained in

safe procedures or methods to be used during

the cleaning of the auger systems on the

flaking machines located in the warehouse

packaging area. (See Exhibits, pages 81;

Exhibits "8" and "9").

According to Jack Hansen, Kraft's in-house

safety engineer, the automatic flake roll

machine in question did not come under

OSHA standards since it was "an automatic

atv lehva eins RU %

machine". Therefore, if Mr. Hansen did

not consider that the automatic flake

roll machine fell under OSHA standards,

Kraft certainly would not have requested

National Loss to inspect the machines for

physical hazards or for procedural hazards

in a pre-OSHA inspection. Moreover, given

the fact that the two (2) OSHA inspections,

the inspections by National Loss and

Kraft's own safety engineer all conclude

that there were no physical hazard associated

with the automatic flake roll machine or

the injury to Canipe, the undisputed facts

and the law simply fail to support claimant's

allegations. Again, this is a question of

undisputed facts eabtlen to the standards

of OSHA, and OSHA itself found no "physical

hazards" violations within one (1) month

after injury to the plaintiff.

With respect to the location of

the on-off switches and the emergency

»54.

teh hgh bee

‘

switch-off violations claimed by plaintiff,

petitioner submits that OSHA merely re-

quires "identification of disconnecting

means of motors and appliances". That is,

OSHA only requires identification of

switches as to their function. OSHA does

not require the switches be located within

a certain distance from the machine it

controls. Also, since the machine here

involved was an automatic machine, it

would not required by OSHA that the machine

have an emergency switch-off. More

importantly, on page 21 of their 44 page

General Recommendations, National Loss

noted that ..."a number of disconnect

breaker switches and power disconnect boxes

were not clearly marked as to their function."

Thus, National Loss fulfilled its duty

by recommending these switches be marked

as to function in order to avoid a physical

hazard OSHA violation.

55.

86 Sa an RE Nee SEC ode easily WE

Therefore,National Loss submits

that it did eyerything it contracted to

do in advising Kraft as to any violations

of OSHA standards with respect to physical

hazards, including Kraft's failure to

identify the function of electrical

switches. Kraft's failure to subsequently

carry out National Loss" recommendation,

certainly cannot make National Loss

responsible!

In conclusion, National Loss

reiterates that the Court of Appeals for

the Fifth Circuit erred in allowing Canipe

to maintain a cause of action based on

violations of OSHA regulations, even

when all prior authorities who have spoken

to this issue have said that no such

claims can be made against third parties.

In addition, the undisputed facts show

that the alleged OSHA violation the

plaintiff claims National Loss failed

56.

to detect were not OSHA violations at all

and cannot be the basis for this cause of

action,

Finally, it is earnestly sub-

mitted that the proximate cause of in-

juries to Canipe was the improper

procedure used by him in cleaning out the

automatic flake roll machine. National

Loss had no obligation to inspect or make

recommendations as to procedures in this

pre-OSHA inspection and it is unquestionable

that National Loss never observed any

cleaning or maintenance procedures being

performed. This is fully supported by the

inspection of Tennessee OSHA in citing

Kraft for violation of the procedural

failures one month after the accident.

WHEREFORE, PREMISES CONSIDERED,

petitioner, National Loss, respectfully

requests the Court to reverse the

Judgment of the United States Court of

57.

Rais

Appeal for the Fifth Circuit and to affirm

the Summary Judgment of the District Court

entered herein.

Respectfully submitted,

WALTER W. THOMPSO

ATTORNEY FOR PETITIONER

P. O. BOX 848

CLARKSDALE, MISSISSIPPI 38614

(601) 627-9601

CERTIFICATE

THIS IS TO CERTIFY that I,

Walter W. Thompson, have this day personally

delivered, a true and correct copy of the

above and foregoing Petition for Certiorari

to the Honorable John H. Cocke, one of the

attorneys for Respondent at his business

office at 30 Delta Avenue, Clarksdale,

Mississippi 38614.

58.

This the 22nd day of November,

1984.

ALTER W. THOMPSO

PROOF OF SERVICE - AFFIDAVIT

— + ——

Subscribed and sworn to before

me, at Clarksdale, Coahoma County, Missis-

sippi, this 22nd day of November, 1984.

papfica—

Lape thy ce Lite clea!

My Commission Expires:

5-15-85

59.

APPENDIX

PAGE

Opinion of the Court of

Appeals for the Fifth

Circuit dated July 23, 1984,

Canipe v. National Loss

Control Service Corporation

(Fifth Cir. 1984) 736 F. 2d

Order of the Court of

Appeals for the Fifth Circuit

dated August 24, 1984, denying

Petition for Rehearing filed

by Petitioner herein......... APP 35-A

Memorandum Opinion

dated May 27, 1983, of the

United States District Court

for the Northern District of

Mississippi granting Summary

Judgment for Petitioner

60,

UNITED STATES COURT OF APPEALS

FIFTH CIRCUIT

BILLY CANIPE

VERSUS

NATIONAL LOSS CONTROL

SERVICE CORPORATION

736 F. 2d

JULY 23,

PLAINTIFF-APPELLANT

DEFENDANT~-APPELLEE

1055

1984

Appeal from the United States District

Court for the Northern District of Missis-

sippi.

Before, WISDOM, REAVLEY, and HIGGIN-

BOTHAM, Circuit Judges.

WISDOM, Circuit Judge:

This diversity action involves the ap-

plication of the principles of section 324A

of the American Law Institute's Restatement

(Second) of Torts, (1965) to a tort case

Subject to Tennessee law. Section 324A

deals with the liability of an actor, ren-

dering services to one person, for failure

to exercise reasonable care to protect a

third person.

Billy Canipe sues to recover for a

severe personal injury that he sustained

at work. The defendant, National Loss Con-

trol Service Corporation (Nation Loss), had

APP 1

contracted with the plaintiff's employer

(Kraft, Inc.) to provide safety inspections

and related accident-prevention services

at the plant in which the plaintiff worked.

Canipe alleges that the defendant performed

its contractual duties negligently, and

that this negligence was a proximate cause

of the plaintiff's injury. After a long

period of discovery, the district court

ruled that the plaintiff had presented no

genuine issue of material fact, and there-

fore granted the defendant's motion for

summary judgment. Canipe v. National Loss

Control Service Corp., N.D. Miss. 1983, 566

F. Supp. 521. Because of the thoroughness

and thoughtfulness of the district court's

Opinion, we are hesitant to overturn the

court's decision. Nevertheless, we have

concluded that the decision rests upon an

erroneous legal premise. Accordingly, we

affirm in part, reverse in part, and remand.

APP 2

Summary judgment is appropriate, of

course, Only when the movant has demonstrat-

ed the lack of any genuine issue of materi-

al fact. In reviewing a grant of summary

judgment for the defendant, we must examine

the record in the light most favorable to

the plaintiff and draw all reasonable in-

ferences in the plaintiff's favor. See,

e.g., Gulf Mississippi Marine Corp. v.

George Engine Co., 5 Cir. 1983, 697 F. 2d

668, 670-71. Viewed from that perspective,

the facts ef this case are as follows.

The defendant is a national corpora-

tion engaged in the business of helping

other companies improve workplace safety.

National Loss entered into its contractual

relationship with Kraft in January 1978. |

es The contracts between Kraft and Nation-

al Loss were each for a one-year term. The

parties renewed their original agreement,

without substantial modification, every

year between 1978 and 1982.

APP 3

The contract between these two parties was

national in scope and was intended to es-

tablish only the general framework for Na-

tional Loss's provision of services to the

various Kraft plants around the country.

The primary purpose of this contract,

therefore, was to set the hourly rates for

the various services that National Loss

could provide to Kraft plants. The service

to be performed at a particular plant was

to be determined on a “by request” basis.

Under the arrangement between National

- te i 2 " us hie

Loss and Kraft's Humko” plant in Memphis,

Tennessee,» National Loss agreed to conduct

juarterly sdfety inspections of the plant

and to provide the plant management with

’ 3 4

loss experience analyses. Humko plant

2. Humko Products is a divison of Kraft.

3. Loss experience analyses are retrospec-

tive analyses of previous accidents. The

objective of these analyses is to identify

safety problems by noting statistical

trends in, for example, the locations or

types of injuries experienced at the plant.

APP 4

management, in addition to contracting for

these services, conducted its own periodic

safety inspections of the plant.

On July 5, 1979, Kraft's Corporate Safe-

ty Manager, Jack Hansen, sent the follow-

ing memorandum to all of Kraft's safety

managers:

"Attached for your information is a

copy Of an OSHA-Gram from the National

Safety News. It explains the change

in OSHA's position on defining a seri-

ous violation. This new definition

will probably result in our locations

receviing more serious violations and

higher penalties. Obviously, the an-

Swer is to survey all of our respective

locations to make sure that the loca-

tions do not have any OSHA violations."

On July 10, Allen Jamison, who was the

Kraft official in charge of coordinating

safety inspections at the Humko plant,

wrote to the National Loss manager of the

Kraft account. That letter states in per-

tinent part:

APP 5

"In reference to Jack Hansen's memo

of July 5, 1979[,] explaining the

change in OSHA's position on defining

a serious violation, I would like to

request that your Loss Control people

during their third quarter visit con-

centrate more on an OSHA type inspec-.

tion, and if any serious violations

are observed, to include them in the

recommendation section. The third

guarter is the only quarter that we

would like the format changed."

During their next visit to the Humko

plant, which occurred in Septeinber 1979,

the National Loss inspectors conducted a

thorough four-day search of the plant, con-

centrating on detecting violations of OSHA

regulations. The two inspectors later

sent plant management a detailed, forty-

four page report on the violations they

had discovered.

Canipe worked at the Humko plant as

Assistant Operator of two machines known

as “flake roll machines", which are capable

of producing different types of flaky chem-

ical products. As a part of his duties,

APP 6

he was required to clean each machine when-

ever production on that machine shifted

from one product to another. To clean the

machine, he had to lift a transparent plas-

tic dust cover and then use an air hose to

force out of the machine's auger trough

any matter remaining in the trough. Can-

ipe contends that he was taught a method

of cleaning the machine while the auger

was in motion. On January 31, 1980, while

cleaning one of the machines in this man-

ner, Canipe caught his shirt sleeve on a

large pin at the end of the auger. He was

pulled into the machine and his right arm

waS amputated.

Canipe sued National Loss on November

20, 1981. He based his primary theory of

recovery upon section 324A of the Restate-

ment (Second) of Torts (1965) which states:

"One who undertakes, gratuitously or

APP 7

for consideration, to render services

to another which should recognize as

necessary for the protection of a

third person or his things, is subject

to liability to the third person for

physical him resulting from his fail-

ure to exercise reasonable care to

protect his undertaking if

"(a) his failure to exercise rea-

sonable care increases the risk of

Such harm, or

"(b) he has undertaken to perform a

duty owed by the other to the third

person, or

"(c) the harm is suffered because

of reliance by the other or the third

person upon the undertaking."

On April 28, 1983, the district court

granted the defendant's motion for summa-

ry judgment on the ground that Tennessee

law did not recognize the applicability of

4. Canipe also seeks to recover based on

the alleged breach by National Loss of the

contract between it and Kraft. Canipe's

argument here is that he was a third-party

beneficiary of this contract. The district

court ruled that, as a matter of Tennessee

law, the plaintiff could not recover on

this theory. Our reversal of the district

court's holding on § 324A renders it un-

necessary to address the correctness of

the court's holding on the breach-of-con-

tract argument.

APP 8

of section 324A under Tennessee law, but

granted summary judgment for the defendant

nonetheless, holding that the plaintiff

had not presented any facts that would

justify applying section 324A. The plain-

tiff appeals that decision.

If.

National Loss contends that the district

court erred in holding that section 324A

provides a valid basis for recovery under

Tennessee law. National Loss also contends

that, if Tennessee law does recognize sec-

tion 324A, the district court was correct

in holding that Canipe's allegations do not

implicate section 324A. Canipe argues that

the court correctly held the principies un-

derlying section 324A are cognizable in

Tennessee, but that it incorrectly concluded

that the plaintiff had not alleged facts

sufficient to warrant recovery under sec-

tion 324A. We agree with the plaintiff on

APP 9

both parts of his argument.

The district court's holding that sec-

tion 324A states Tennessee law rested upon

the decision of the Court of Appeals for

the Sixth Circuit in Neal v. Bergland, 6

Cir. 1981, 646 F. 2d 1178, aff'd sub nom.

Sioce v. Neal, 13963,——U.&5.——, 103 S&S. Ct.

1089, 75 L. Ed. 2d 67. The plaintiff in

Neal had bought a prefabricated home in

Tennessee that had been inspected by an

employee of the United States Farmers Home

Administration. Although the inspector

had noted no problems with the house, it

later turned out to be defective. The

plaintiff sued various federal officials

in Tennessee state court, and the defendants

removed the action to federal district

court. The district court dismissed the

complaint. The Court of Appeals reversed,

holding that the plaintiff had stated a

APP 10

a cause of action under the Federal Tort

Claims Act (FTCA), 28 U.S.C. §§ 2671 et.

seq. (1982). The Court's perceived basis

for the plaintiff's potential recovery

against the government was the principle

"that one undertakes to act, even though

jratuitously, is requited to act carefully

and with the exercise of due care and will

be liable for injuries proximately caused

by failure to use such care.” 646 F. 2d

at 1181-82.”

>». The Court referred to § 323 of the Re-

Statement (Second) of Torts (1965) as an

expression of this principle. Section 323

States:

"One who undertakes, gratuitously or for

consideration, to render services to an-

Other which he should recognize as nec-

essary for the protection of the other

person or things, is subject to liabil-

ity to the other for physical harm re-

Sulting from his failure to exercise

reasonable care to perform his under-

taking, if

"(a) his failure to exercise such care

increases the risk of such harm, or

"(b) the harm is suffered because of

the other's reliance upon the under-

taking.”

APP 11

Sections 323 and 324A are often cited to-

gether as expressions of the same basic

1178 & N. 39, 1193; Restatement (Second)

of Torts § 324A comment a (1965).

APP 12

[1] We place little weight upon the

Neal decision. The Court there did not

State explicitly that it was applying Ten-

nessee law, and it does not discuss any

Tennessee cases.° Nonetheless, it is rea-

sonably well recognized that the federal

government is liable under the FTCA only

if the applicable state law would place

liability upon a private actor in like cir-

cumstances. See U.S.C. § 1345(b) (1982);

id. § 2674; see also, e.g., United Scottish

Insurance Co. v. United States, 9 Cir. 1980,

614 F. 2d 188, 193. We conclude, therefore,

that the district court was correct in de-

Ciding that the Neal Court was "attempting

6. In reviewing the Neal decision, the

Supreme Court noted this deficiency in the

Opinion of the Court of Appeals. See Block

v. Neal, U.S. at——-n. 3, 103 S. Ct. at

1092 n. 3, 75 L.Ed. 2d at 73 n. 3. Because

the government had not appealed that part

of the Court of Appeals' opinion, however,

the Supreme Court did not evaluate its

validity. See id. —U.S. at —, 103. S.

Ct. at 1092, 75 L. Ed. 24 at 73.

APP 13

to make an educated Erie guess" as to

Tennessee law.

[2] Furthermore, our independent re-

view of Tennessee case law convinces us

that Tennessee has adopted the principle

of section 324A. The leading decision is

1975, 519 S.W2d 782. In that case, the

state had ice an independent contractor

to construct an interstate highway. The

plaintiff£s' son was killed when he drove his

Car into a contruction barricade erected by

the construction company. The plaintiffs

alleged that the company was negligent in

that it did not adequately mark the barri-

cade so as to warn oncoming traffic. The

trial court dismissed the suit, but the Ten-

nessee suncene Court reversed. In holding

that the contractor could be liable for his

negligence despite the existence of its

contractual relationship with the state and

APP 14

adie ae ae

despite the state's inspection of the work

in question several days before the acci-

dent, the supreme court reasoned:

"In our opinion, if an independent con-

tractor is guilty of negligence in per-

forming his work in such a way that it

could reasonably be forseen that the

Owner or third parties would probably

Sustain personal injuries or property

damage as a result of the negligent

condition, then the independent con-

tractor should not, as a matter of law,

be discharged merely because his work

has been accepted and delivered to the

Owner."

519 S.W. 2d at 788. Two cases involving

Similar facts and reaching essentially the

same holding are Broome v. Parkview, Inc.,

1962, 49 Tenn. App. 725, 359 S.W. 2d 566,

568, and De Ark v. Nashville Stone Setting

Corp., 1955, 38 Tenn. App. 678, 279 S.W. 2a

518, 521. See also Nidiffer v. Clinchfiled

Railroad Co., Tenn. Ct. App. 1980, 600 S.

W. 2d 242, holding that a volunteer who

undertakes to act is " ‘subject to the duty

APP 15

ee ee

wr AL

of acting carefully, if he acts at all' ".

Id. at 246 (quoting Glanzer v. Shepard,

1922, 233 N.Y. 236, 135 N.E. 275, 276}.

Although none of these cases refers to

section 324A explicitly, they all embody

e basic theory of liability underlying

ction 324A. And, we have found no state

decision that runs counter to the principle

Sup

We consider it marginally relevant that

ve of Tennessee's sister states have

Opted section 324A. See Gray v. Charles

ck Mach. Corp., S. D. Ga. 1980, 495 PF.

DD. 290, 292 (citing Huggins v. Aetna

sulty & Sur. Co., 1980, 245 Ga. 248, 248,

4S. E. 2d 191, 192); Glover v. Silent

Hoist & Crane Co., .. &.. te eres aee.

Sst

Supp. 457, 469-60 (discussing United

ates Fidelity & Guar. Co. v. Jones, Ala.

78, 356 So. 2d 596, 597-98); Raymer v.

United States, W. D. Ky. 1978, 455 F. Supp.

16!

5, 167 (citing Haddad v. Louisville Gas

Elec. Co., Ky. 1970, 449 S. W. 2d 916);

ller v. Aetna Casulty : Ser. Co.,. 8. BD.

Ss. 1974, 369 F. Supp. 967, 968; Quail

Hollow East v. Donald J. Scholz Co., 1980,

B.G. ABD. SIG, 200 GS. EB. 20 Va, 15

view denied, 301 Riles Sats: Ste Be Ms

454.

APP 16

of section 324A eg In Mosely v. United

States. E. D. Tenn. 1978, 456 F. Supp. 671,

the court addressed the liability of the

federal government under the FTCA for the

death of a mineworker. The plaintiff alleged

that government inspectors were negligent

in not detecting the dangerous condition

that led to the accident causing the worker's

death. The district court concluded that

Tennessee had adopted sections 323 and 324A

of the Restatement, and granted summary

juegment for the government. We cannot

give the Mosley decision much credence. In

reaching its conclusion concerning sections

323 and 324A, the opinion does not discuss

any Tennessee cases, let alone the ones

8. The same is true of Tennessee statutory

law. See Tenn.Code Ann. § 29-34-104

(Michie 1980);

"Privity not required. In ail cases

of injury for personal injury or pro-

perty damage brought on account of

negligence, strict liability or breach

of warranty,...privity shall not be a

requirement to maintain said action."

App 17

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; Mosley address State v. Clymer, 1943,

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tiff must prove (1) that the defendant un-

dertook to provide services for another

that the defendant should recognize as

necessary for the protection of the person

Or property of the plaintiff, (2) that the

defendant performed its undertaking negli-

gently, and that this negligence was the

proximate cause of the plaintiff's injury,

and (3) that the situation among the parties

exemplifies one of the three subsections

of section 324A. The parties do not dis-

pute the applicability of the first element

to the instant case. Summary judgment for

the defendant was appropriate, therefore,

only if the defendant established beyond

genuine dispute that the facts of this case

do not implicate the second and third ele-

ments. We find that National Loss has not

carried this burden.

APP 19

[3] To determine-whether the. record

contains facts indicating that National

Loss performed its undertaking negligently,

a0 first necessary to ascertain the

scope of the undertaking, for the scope

of the defendant's undertaking determines

the scope of its duty. See Blessing v.

United States, E. D. Pa. 1978, 447 F. Supp.

1160, 1189-90; Fireman's Fund American

Insurance Co. v. Coleman, Ala. 1980, 394

So. 2d 334, 349 (Jones, J., concurring in

the result); Evans v. Otis Elevator Co.,

1961, 403 Pa. 13, 19, 168 A. 2d 573, 576.

One of the parties’ principal disputes on

appeal concerns the scope of National Loss's

undertaking. Canipe contends that National

Loss contracted to inspect and evaluate

work practices and procedures. He argues,

therefore, that National Loss was negligent

for not recognizing the unsafe nature of

the cleaning procedure taught to the plain-

APP 20

tiff. The district court held, and the de-

fendant asserts on appeal, that the con-

tract made the defendant responsible only

for inspecting for physical hazards.

We find it unnecessary to resolve this

dispute. Accepting the defendant's charac-

terization of its contractural obligations,

we find that the record contains facts that

at least establish as a genuine issue

whether the defendant performed these ob-

ligations negligently. The parties agree

that National Loss was obligated to inspect

for physical hazards, and that in September

1979 its agents were looking specifically

for violations of OSHA regulations. Can-

ipe has pointed to evidence by National

Loss in its inspection for physical hazards

and OSHA violations proximately caused his

injury. First, the depositions of the two

inspectors who conducted the September 1979

Survey indicate clearly that they examined

APP 21

the two flakes roll machines the plaintiff

operated. Second, the plaintiff submitted

an affidavit by Dr. Louis B. Trucks, an

expert in safety engineering, listing a

number of physical hazards in the flake

rolle machines. Dr. Trucks found that the

machines were inadequately guarded and did

not contain adequate warnings, that the on-

off switch was located on a different level

and 30 feet away from the machines, and that

the machines did not contain an emergency

switch-off for workers who find themselves

in peril. In Dr. Truck's opinion, some of

these hazards constituted violations of

OSHA regulations.” All of these facts

9. See generally 29 C.F.R. § 1910.212

(1983):

"(a) Machine guarding-(1) Types of

guarding shall be provided to protect

the operator and other employees in the

machine area from hazards such as those

created by point of operation, ingoing

nip points, rotating parts, flying chips

and sparks. Examples of guarding meth-

ods are-barrier guards, two hand trip-

ping devices, electronic safety devices,

APP 22

etc.

"(b) General requirements for machine

guards. Guards shall be affixed to the

machine where possible and secured else-

where if for any reason attachments to

the machine is not possible.

APP 23

Support the plaintiff's allegation of

negligence on the part of the defendant.

Similarly, the record contains evi-

dence that the alleged negligence was the

proximate cause of the plaintiff's injury.

Allen Jamison, the Kraft official in charge

of coordinating safety policy at the Humko

plant, stated in his deposition that Kraft

would remedy any OSHA violations uncovered

by the National Loss inspectors regardless

whether the renedies were cost justified.

It cannot be disputed that Canipe might

not have been injured had National Loss

detected, and Kraft remedied, the physical

hazards that Dr. Trucks identified in the

flake roll machines. There was, therefore,

at least a genuine issue as to whether

the defendant negligently performed its

contractural undertaking and whether this

negligence proximately cavsed the plaintiff's

injury.

APP 24

{4] The district court correctly de-

termined that subsection (a) of section 324A

does not apply to this case. This subsec-

tion requires some change in conditions that

increases the risk of harm to the plaintiff

over the level of risk that existed before

the defendant became involved. See Stacy

v. Aetna Casulty & Surety Co., 5 Cir. 1973,

484 F. 2d 289, 293 n. 4; Blessing v. United

States, E.D. Pa. 1978, 447 F. Supp. 1160,

1197 n. 53. A failure to detect a hazardous

condition does not by itself implicate sub-

section (a).

{5,6] The district court erred, how-

ever, by taking an unduly narrow approach

to subsections (b) and (c). Implicit in the

district court's treatment of subsection (b)

is the assumption that this subsection ap-

Plies only if Kraft had delegated entirely

"the responsibility to provide its employees,

including plaintiff, with a safe working

APP 26

environment." 9 566 F. Supp. at 527. Sim-

ilarly, the district court's discussion of

subsection (c) apparently assumes that Kraft's

reliance on National Loss must have been

wholesale-that is, preclusive of Kraft's

undertaking any similar safety services it-

self-for subsection (c) to apply. See id.

at 528.

Such a restrictive approach to subsec-

tions (b) and (c) is not supported by the

relevant cases. Subsection (b) comes into

play as long as the party who owes the

plaintiff a duty of care has delegated to

the defendant any particular part of that

10. The district court cited Overstreet v.

Norman, 1957, 44 Tenn. App. 343, 314 S.W.

2d 47, for the proposition that, under Ten-

nessee law, an employer cannot delegate its

duty to provide a safe working place for its

employees. We agree with the plaintiff that

Overstreet is inapposite here. That deci-

Sion establishes only that an employer can-

not avoid liability by delegating its duty

to another party; it does not create an

immunity for other parties who contract to

provide safety services.

APP 27

duty.!! See Davis v. Liberty Mutual In-

surance Co., 5 Cir. 1976, 525 F. 2d 1204,

1208. In Hill v. James Walker Memorial

Hospital, 4 Cir. 1969, 407 F. 2d 1036, for

example, a hospital hired the Orkin Exter-

minating Company to rid the hospital of

rats. The plaintiff, a patient at the hos-

pital, suffered from a fall caused by her

becoming frightened when a rat ran across

her feet. In holding Orkin liable under

section 324A (b) for the plaintiff's injury,

the court reasoned:

"It is clear that the defendant hos-

pital was under a legal duty to exer-

cise reasonale care in regard to the

safety of its patients, and that under

its contract with Orkin, the latter

had undertaken to perform a certain

11. See also Tillman v. Travelers Indem.

Co., 5 Cir. 1975, 506 F. 2d 917, 921; Stacy

v. Aetna Casualty & Sur. Co., 5 Cir. 1973,

484 F. 2d 289, 294; Blessing v. United

States, E. D. Pa. 1978, 447 F. Supp.- 1160,

1193-94; Nelson v. Union Wire Rope Corp.,

1964, 31 -I11. 2d 69, 199 N.E. 2d 769,

780; Evans v. Otis Elevator Co., 1961, 403

wi. tas Pee Be 26 S736

App 28

aspect of this duty in the hospital's

behalf. The above-quoted section

[324A(b)] squarely covers the instant

COGQ. 26"

407 F. 2d at 1042 (emphasis added).

The district court relied on language

in Stacy v- Aetna Casulty & Surety Co., 5

Cir. 1973, 484 F. 2d 289, to the effect

that a "systemwide assupption of [the em-

ployer's] duty to discover latent hazards",

id, at 294, is prerequisite to the appli-

cation of subsection (b). See 566 F. Supp.

at 528. This reliance was misplaced. Of

Critical importance to the Court in Stacy

was the fact that the defendant was not

specifically obligated to inspect, and had

not inspected, the room in which the plain-

tiff was injured.

"Because no representative of Aetna, /

at any time prior to Stacy's accident,

conducted an actual inspection of [the

employer's] ice storage room or of the

ice conveyor system, Stacy's case is

immediately distinguishable from the

situation where an inspecting workman's

compensation carrier undertakes, but

APP 29

negligently performs, an inspection of

the injury-producing instrumentality.

"On the facts of the present case,

[therefore,] Aetna's liability must

find support in proof that it undertook

an inspection program which obligated

it to seek out and report safety de-

fects anywher in [the employer's] pro-

cessing facility...."

484 F, 2d at 293 (citations omitted; empha-

Sis added). Stacy's reference to "system-

wide assumption" of duty, therefore, is in-

applicable to any situation in which the

plaintiff's injury arises within the speci-

fically defined scope of the defendant's un-

dertaking. In such situations, liability

under section 324A (b) may result if an em-

ployer has delegated any part of its duty

to discover and remedy unsafe working condi-

tions. See id. at 294.:

[7] Similarly, an employer's partial

reliance on the defendant's undertaking will

suffice to trigger subsection (c}. An em-

ployer need not forsake completely a par-

APP 30

ticular aspect of its safety program. The

reliance element of subsection (c) is satis-

fied if, in relying on the defendant's un-

dertaking, the employer "neglect[s] or re-

duce[s}]" its own safety program. Bussey v.

Travelers Insurance Co., 5 Cir. 1981 (per

Curiam) (Summary calendar), 643 F. 2d 1075,

1078. '2

{8]) The record in the present case

contains evidence from which a jury could

legitimately infer that Kraft delegated to

National Loss its duty to identify OSHA

violations at the Humko plant, and that

Kraft relied on National Logs to identify

OSHA violations at that plant. On July 5,

1979, Kraft's Corporate Safety Director,

Jack Hansen, sent a memorandum to all of

12. Accord Tillman v. Travelers Indem. Co.,

5 Cir. 1975, 506 F. 2d 917, 9213; Stacy, 484

F. 2d at 295; Hill v. United States Fidelity

& Guar. Co., 5 Cir. 1970, 428 F. 2d 112,

120; Heinrich v. Goodyear Tire and Rubbber

Co., D. Md. 1982, 532 F. Supp. 1348, 1356;

see Fireman's Fund Am. Ins. Co. v. Coleman,

Ala. 1980, 394 So. 2d 334, 338-39.

APP 31

Kraft's safety managers instructing them to

ensure that there were no OSHA violations

at Kraft plants. Five years later, Allen

Jamison wrote to National Loss to request

13 These

the simulated OSHA insepction.

facts themselves imply delegation and re-

liance. In addition, Jamison stated in

his deposition that Kraft had not itself

inspected the Humko plant for OSHA viola-

tions, '4 and there is nothing in the re-

cord to show that the Humko plant kept any

safety experts on its payroll.

The nature of the defendant's business

and of its contractual relationship with

Kraft is also significant. Many of the

cases dealing with the section 324A involve

13. The report generated from this inspec-

tion states that "(t]he purpose of the sur-

vey was to identify problem areas requiring

corrective action necessary to bring the

Operations into compliance with Federal

Standards.” Supp. Record, exh. P-4,at 1.

14. Deposition of Allen Jamison, at 57-58

(filed July 2, 1982).

App 32

the employer's workmen's compensation or

liability carrier, who performed inspections

to reduce the loss experience of its insured

and accordingly to benefit itself by reduc-

ing the claims it had to pay. In the case

before us the defendant is not an insurer

at all. It is a company that holds itself

Out as an expert in safety services and that

provides those services for a fee. Kraft

hired the defendants specifically to find

work hazards. These facts, in combination

with those noted in the preceding paragraph,

establish as a genuine dispute the applica-

bility of section 324A (b) and (c). We

must therefore reject the district court's

conclusion to the contrary.

Lite

We affirm the holding of the district

court that the principles embodied in sec-

tion 324A are valid law in Tennessee; we

APP 33

reverse the holding that section 324A can-

not apply to the facts indicated by the

record. The defendant had not carried its

burden of demonstrating the lack of any

genuine issue of material fact concerning

the applicability of section 324A. The

record contains evidence that would support

a jury finding that the denfendant performed

its undertaking negligently, that such neg-

ligence proximately caused the plaintiff's

injury, and that Kraft either (1) delegated

to the defendant part of Kraft's duty to

maintain a safe workplace, or (2) relied

at least partly on the defendants to dis-

cover unsafe working conditions. The grant

of summary judgment in favor of the defen-

dant was erroneous.

The decision of the district court is

AFFIRMED IN PART, REVERSED IN PART, and

REMAMDED.

APP 34

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 83-4346

BILLY CANIPE,

Plaintiff-Appellant,

versus,

NATIONAL LOSS CONTROL SERVICE CORPORATION,

Defendant-—Appellee.

Appeal from the United States District

Court for the

Northern District of Mississippi

ON PETITION FOR REHEARING

( August 24, 1984 )

Before WISDOM, REAVLEY and ee

Circuit Judges.

PER CURIAM:

IT IS ORDERED that the petition for

rehearing filed in the above entitled and

numbered cause be and the same is hereby

denied.

ENTERED FOR THE COURT:

_/s/ Thomas M. Reavley

United States Circuit Judge

APP 34A

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF

MISSISSIPPI DELTA DIVISION

BILLY CANIPE, )

Plaintiff, )

Vv. -) CIVIL ACTION

NATIONAL LOSS ) NO. DC 81-192-

CONTROL SERVICE WK-O

CORPORATION,

Defendant. )

MEMORANDUM OPINION

In this diversity action,

plaintiff, Billy Canipe, a Tennes-

see citizen, sues National Loss Con-

trol Service Corporation (NATLSCO), an

Tllinois corporation qualified to do

business in Mississippi, for personal

injuries allegedly suffered as a re-

sult of NATLSCO's negligence and

breach of contract. The court has

APP 35

before it defendant's motion for

summary judgment.

Plaintiff was an employee of the

Kraft-Humko plant in Memphis, Tennes-

see, wt.:re he was the operator of a

machine known as a flake roll machine.

As a part of his job duties, plaintiff

was required to perform a clean out

procedure on the flake roll machine

that required him to lift a plastic

dust cover and clean material from the

machine's auger trough when converting

from one product to another. This

procedure required plainciff to place

his hand into the auger trough and,

using an air hose, to blow the product

down to the bottom of the trough.

Plaintiff alleges that the procedure

which he had been taught allowed him

to clean the trough while the auger

1The court hereby withdraws its Memo-

randum Order of April 28, 1983, and

substitutes this opinion in its place.

ADD W646

was in motion. On the date of his in-

jury, the plaintiff was cleaning the

auger trough when his shirt sleeve

caught on a large pin on the end of

the auger which pulled him into the

auger trough. As a result of the in-

jury, plaintiff's right arm was pulled

off above the elbow and, alithough

later reattached by surgeons, his arm

remains basically useless at the pres-

ent time.

Plaintiff relies upon two the-

ories for recovery. First, plaintiff

argues that he is entitled to recovery

under the tort theory embodied in Sec-

tion 324A of the RESTATEMENT (SECOND)

OF TORTS. Second, plaintiff contends

he is entitled to recovery under a

third-party beneficiary contract the-

ory. Moreover, plaintiff stoutly

maintains that on either theory he has

raised issues of fact which mandate

are De

the denial of summary judgment to the

defendant.

Before determining whether plain-

tiff is entitled to recovery under any

theory, we must consider what state

law applies to this action. Plaintiff

argues that under the center of grav-

ity rule, the contacts predominate in

favor of application of Mississippi

law. Defendant, however, argues that

the law of Tennessee applies.

It is well settled that in feder-

al diversity cases the choice of law

is determined by conflict of law prin-

ciples recognized by the forum state.

Johnson v. Knight, 459 F. Supp. 962,

967 (N.D. Miss., 1978). Under the

applicable Mississippi conflict of law

principles, Tennessee law will apply

to both a contract and tort theory of

recovery. Under the tort theory,

Tennessee law would apply since the

alleged tortious acts and injury oc-

ADD 2R

curred in Memphis, Tennessee.

Browning v. Shackleford, 196 So.2d 365

(Miss., 1967). Under a contract

theory, Tennessee law would also ap-

ply. Plaintiff was a resident of

Tennessee at the time of his injury

and the alleged contract was entered

into and performed in Tennessee. The

only relation this suit has to the

State of Mississippi is that defendant

is qualified and licensed to do busi-

ness in the state and that plaintiff

chose to file his lawsuit here.

Therefore, the law of Tennessee will

apply. See Johnson v. Knight, 459 F.

Supp. 962, (N.D. Miss., 1978).

I. Recognition of Section 324A in

Tennessee

Plaintiff's tort theory of recov-

ery relies on Section 324A of the RE-

STATEMENT (SECOND) OF TORTS, which

states:

APP 39

One who undertakes, gratu-

itously or for c isideration,

to render services to another

which he should recognize as

necessary for the protection

of a third person or his things,

is subject to liability to the

third person for physical harm

resulting from his failure to

exercise reasonable care to per-

form his undertaking, if

(a) his failure to exercise rea-

sonable care increases the risk

of such harm; or

(b) he has undertaken to perform

a duty owed by the other to the

third person; or

of reliance of the other or the

third person upon the undertak-

ing.

RESTATEMENT (SECOND) OF TORTS, Section

324A. In Mosley ¥. United States, 456

FP. Supp. 671 (B.D. Tenn., 1978), a

federal district court, applying Ten-

nessee law, stated:

It does not appear that Ten-

nessee has ever applied this

rule [324A]; the plaintiff

cited no authority reflecting

the adoption by Tennessee of

either of the foregoing ver-

sions of it, and this Court

| | APP 40

is aware of none. Where Ten-

essee law is applicable, as

here, there can be no recov-

ery under a legal theory

which does not appear to

exist in this state.

Id. at 675. Plaintiff relies, how-

ever, on Neal v. Bergland, 646 F. 2d

1178 (6th Cir. 1981), for its proposi-

tion that Section 324A would be ap-

plied by the Tennessee Supreme Court

if it were presented with the issue.

The Neal litigation, originally

filed in the Circuit Court of Roane

County, Tennessee, was removed upon

application of defendant Bergland, the

then Secretary of Agriculture, to the

United States District Court for the

Eastern District of Tennessee. 646

F.2d at 1179. The suit was brought as

a direct action against the Secretary

of Agriculture asserting that Title V

of the Housing Act of 1949, 42 U.S.C.

Section 1471 et seg., and the regula-

tions issued thereunder, 7 C.F.R. Sec-

APP 41

tion 1802.71 et seq., create an obli-

gation on the part of the Farmers Home

Administration (FmHA) to supervise,

inspect or warrant the construction of

houses built with FmHA financing. Id.

Holding that no such duty was created

under the federal laws, the district

court dismissed the federal defen-

Gants, and remanded the case to state

cofrt as to the nonfederal defendants.

Neal v. Bergland, 489 F. Supp. 512,

516 (E.D. Tenn., 1980). On appeal,

the Sixth Circuit reversed because of:

the principle expressed in

Section 323 of the Restate-

ment (Second) of Torts (1965)

that one who undertakes to act,

even though gratuitously, is

required to act carefully and

with the exercise of due care

and will be liable for injuries

proximately caused by failure

to use such care.

Neal v. Bergland, 646 F.2d. 1178,

1181-82 (6th Cir. 1981). Although we

might be inclined to agree with the

APP 42

conclusion reached in Cross Brothers

——E

Meat Packers vs. United States, 533 F.

Supp. 1319 (E.D. Pa., 1982), that the

Sixth Circuit in Neal was applying

federal law rather than Tennessee

state law, nevertheless the Supreme

Court in Block v. Neal, U.S. ’

75 L. Ed.2d 67 (1983), appears to have

indicated a contrary interpretation.

The Court in Neal characterized the

action as one falling under the Feder-

al Tort Claims Act, 28 U.S.C. Section

1346(b), 2671-2680. Id. at 73. Be-

cause of this characterization, the

Supreme Court assumed the Sixth Cir-

cuit was applying Tennessee law when

discussing the Good Samaritan rule em-

bodied in Section 323 of the Restate-

ment, 7 stating in footnote three:

“although the Court made this assump-

tion, its decision was actually decid-

ed on other grounds. The question

presented to the court in Neal was

APP 43

The Court of Appeals found

that respondent stated a

claim against the United

States under the common law

Good Samaritan doctrine

which is described in Sec-

tion 323 of the Restatement

(Second) of Torts (1965).

However, the court did not

expressly find that Tennes-

see law recognizes this doc-

trine, see 28 U.S.C. Section

1346 (b), and would apply it

to a private person respon-

sible for similar negligence.

Id. at n.3. In view of the Supreme

Court's interpretation, we must assume

the Sixth Circuit was attempting to

make an educated Erie guess of Tennes-

see state law in Neal. This being the

case, the contlicting holdings of the

district court in Mosley and the Sixth

Circuit in Neal must be resolved in

favor of the appellate court opinion.

Indeed, if we were writing on a clean

2 whether the claim was exempted by

Section 323 of the Restatement (Sec-

ond) of Torts (1965). However, the

court did not expressly find that

Tennessee law recognizes this doc-

trine, see 28 U.S.C.

APP 44

slate, the progressive pringiples of

Section 324A would be favored by us.

Therefore, we hold that if the Tennes-

see Supreme Court were presented with

the question, it would apply the Good

Samaritan rule embodied in Section 323

and Section 324A of the RESTATEMENT

(SECOND) OF TORTS. Because we so

hold, we must now determine whether

plaintiff has presented an issue of

material fact under Section 324A re-

guiring resolution by a jury.

II. Any Factual Issue(s)?

— ——- - = ——

Section 324A of the RESTATEMENT

(SECOND) OF TORTS states:

one who undertakes gratu-

itously or for considera-

tion, to render services to

another which he should

recognize as necessary for

the protection of a third

person or his things, is

subject to liability to

the third person for

physical harm resulting

from his failure to exer-

cise reasonable care to per-

form his undertaking, if

APP 45

(a) his failure to exercise

reasonable care increases the

risk of such harm; or

(b) he has undertaken to

perform a duty owed by the

other to the third person; or

cause of reliance of the

other or the third person

upon the undertaking.

Id. In order to present a factual

issue to defeat the motion for summary

judgment, plaintiff must submit, by

affidavit, deposition or other dis-

covery material, some evidence that

defendant's actions fall into category

(a), (b), or (c) of Section 324A.

Viewing the evidence in the light most

favorable to plaintiff, we are com-

pelled to conclude no material factual

question remains for the trier of

fact.

APP 46

——

A. The Obligation and Performance of

NATLSCO

On November 9, 1978, Kraft, Inc.

of Glenview, Illinois (Kraft), entered

into an “Agreement for Services" with

National Loss Control Service Corpora-

tion (NATLSCO). The agreement pro-

vided that NATLSCO would "provide Loss

Control services on a request basis as

approved and initiated by Kraft's

Director of Safety and Security or

other authorized employee." Though

specifying the rate of compensation

for any services rendered, the agree-

ment made no mention of what services

would actually be performed. Pursuant

to discussions between NATLSCO and

Kraft personnel, a service directive

was issued by R. D. Mulder, NATLSCO's

account coordinator, to the service

representatives working on the Kraft

account. The service directive also

stated that auditing of programs,

APP 47

physical inspections, etc. would be

performed for Kraft on a request

basis.

According to the deposition of

Allen Jamison, Kraft's manager of Ad-

ministrative Service for Industrial

Foods Division, NATLSCO was requested

to make quarterly physical hazard sur-

veys and loss experience analyses at

the plant in question. These services

consisted of two basic functions:

(1) analysis of previous accidents at

the plant in order to determine loss

patterns for concentrated study and

(2) walk-through inspections to de-

termine physical hazards by observing

the physical layout and condition of

the plant.

As explained by Jamison, loss

analysis is retrospective. After in-

juries occur, the consultant attempts

to determine the cause and its likeli-

hood of recurrence. The walk-through

APP 48

inspection is a proceeding of the in-

spectors through the general traffic

patterns of the plant, observing any

physical hazards that might be ies

a reasonable distance of the inspec-

tors. These were the only types of

services requested by Kraft for quar-

terly inspections. Kraft did not re-

quest NATLSCO to perform a job safety

analysis of any employee position;

neither did it request an inspection

of the plant's operating practices or

procedures. Jamison stated, in his

deposition testimony, that only if an

inspector fortuitously observed an un-

safe practice or procedure would Kraft

expect NATLSCO's inspector to investi-

gate and bring the unsafe practice to

the attention of Kraft's management in

the form of a recommended change.

This understanding was held not

only by Jamison, but by Jack Hansen,

Kraft's corporate safety manager.

APP 49

These two Kraft representatives testi-

fied consistently thac NATLSCO was

never called upon to perform a survey

or inspection of operating practices

or procedures involving equipment at

the plant.> Since there had never

before been an accident involving the

flake roll machines, no loss exper-

lence analysis was performed as to

them.

That NATLSCO was not requested to in-

spect Kraft's operating practices and

procedures was confirmed by Russell

Mulder, NATLSCO's account representa-

3while we are cognizant of the admoni-

tion in Rule 56 against granting summary

judgment in suits in which a witness'

credibility or veracity is at stake, we

do not believe this is such a case. The

depositions of Jamison, Hansen, Burger,

Mulder, and Currie were taken at plain-

tiff's request. Throughout each deposi-

tion, the testimony was consistent. Al-

though plaintiff's counsel attempted to

elicit contradictory responses within

each deposition, as well as among the

five, the depositions taken as a whole

evidence no inconsistencies and do not

raise an issue of credibliity or ver-

acity.

APP 50

tive, John W. Burger and Martin B.

Currie, both NATLSCO inspectors for

the Kraft account. It was their un-

contradicted testimony that NATLSCO

inspectors did not, nor were they re-

quested to, survey the plant safety

practices and procedures. Again, it

is undisputed that only if the inspec-

tor happened to observe an unsafe pro-

cedure would he be required to investi-

gate and report the situation to Kraft.

In addition, the Loss Control Sur-

vey reports for December 12, 1978,

April 4, 1979, and June 26, 1979, in-

dicate that the actual performance of

NATLSCO inspectors conformed to the

common understanding of the purpose of

the quarterly inspections. These re-

ports state as each inspection's pur-

pose the performance of a loss exper-

ience analysis and physical hazard

survey. The results of the physical

APP 51

hazard surveys reveal the inspectors

were searching for unsafe conditions

of the plant and equipment, rather

than procedures used in operating the

equipment. For example, the December

12, 1978, survey report listed poor

housekeeping, cracked grinder guards,

unsecured gas bottles, and one

employee observed not wearing safety

glasses. To the extent failure to

wear safety glasses might be consider-

ed a practice or procedure, this nota-

tion indicates the scope of NATLSCO's

duty. The “practice” of employees

wearing safety glasses was not inves-

tigated on a plant-wide basis. Only

where the unsafe practice of not wear-

ing safety glasses was fortuitously

observed by the NATLSCO inspector did

he make such a notation and recommend-

ation to Kraft. This is entirely con-

sistent with the deposition testimony

of both NATLSCO employees and disin-

APP 52

terested Kraft personnel.

Only one inspection differed at

all from those described above. On

July 10, 1979, Kraft's Jamison wrote a

letter to NATLSCO's Mulder requesting

a change in the quarterly inspection

process. Due to perceived changes in

the Occupation Safety and Health Ad-

ministration's (OSHA) position on de-

fining “serious violations,” Jamison

requested NATLSCO to perform a simu-

lated OSHA inspection. This pre-OSHA

inspection was to be performed on a

one-time basis during the third quar-

ter of 1979. The specific purpose of

this inspection, according to Jamison,

was to have someone come in and play

"the devil's advocate” for what needed

to be done to pass an OSHA inspection.

In this instance, however, the inspec-

tion was limited to physical hazards

and only if an unsafe procedure was

observed did Kraft expect NATLSCO to

APP 53

comment on it.”

The pre-OSHA inspection took five

days and involved two NATLSCO inspec-

tors - Burger and Currie. According

to Jamison and Hansen, this inspection

was limited to a search for physical

conditions which would be considered

serious violations of OSHA regula-

tions. The deposition testimony of

Currie and Burger substantiates this

fact as does the September 1979 Loss

Control survey report completed fol-

lowing the inspection. That report

deals exclusively with physical condi-

tions observed by Burger and Currie

and considered in violation of OSHA

regulations.

Because it is uncontradicted that

the sole purpose of the September pre-

CSHA inspection was to identify physi-

cal hazards that violated OSHA regula-

tions, an overview of those regula-

tions is helpful. Pursuant to Section

APP 54

lil lalalime taal

6(a) of the Williams-Steiger Occupa-

tional Safety and Health Act of 1970,

84 Stat. 1593, the Secretary of Labor

promulgated occupational safety and

health regulations which, at the time

relevant to this suit, were codified

in 29 C.F.R. Section 1910. Subpart 0

of Section 1910, entitled "Machinery

and Machine Guarding," deals exclu-

Sively with physical conditions of

machinery, not practices or procedures

related thereto. Although this sub-

part most directly relates to the ac-

cident in question, various other reg-

ulations within 29 C.F.R. Section 1910

were utilized by NATLSCO to simulate

the OSHA inspection. See, e.g., 29

C.F.R. Section 1910.23 (guarding floor

and wall openings and holes); 29

C.F.R. Section 1910.25 (portable wood

ladders); 29 C.F.R. Section 1910.27

(fixed ladders); 29 C.F.R. Section

1910.37 (means of egress); 29 C.F.R.

APP 55

Section 1910.309 (national electric

code); 29 C.F.R. Section 1910.134(d)

(air quality); 29 C.F.R. Section

1910.15l(c) (eye washing facilities).

Each of these regulations pertain, as

do OSHA standards generally, to phys-

ical conditions, not operating proce-

dures.

Because of this uncontradicted

testimony, we conclude there is no

question as to NATLSCO's obligation

and performance as it relates to the

case sub judice. NATLSCO was re-

guested to and did perform loss exper-

ience analyses and physical hazard

surveys during 1979. No requests were

made for practice or procedure sur-

veys.

B. Application of Uncontradicted

Facts to Section 324A

Subparagraph (a) of Section 324A,

RESTATEMENT (SECOND) OF TORTS would

subject NATLSCO to liability if its

failure to exercise reasonable care

increases the risk of such harm."

Although plaintiff nominally alleges

NATLSCO's failure to indentify a po-

tential hazard in the procedure used

to clean the flake roll machine in-

creased the risk of harm to plaintiff,

this court is unpersuaded. To avail

himself to this provision of Section

324A, plaintiff must show some affir-

mative action by defendant such as

recommending the hazardous procedure.

Plaintiff has not even attempted such

a showing. Mere negligence in failing

to discover a danger, even if proved,

would not subject NATLSCO to liability

under Section 324A(a).

Under subparagraph (b), however,

mere negligence can subject a defen-

dant to liability. That section would

make NATLSCO liable for plaintiff's

injuries if it had "undertaken to per-

APP 57

form a duty owed by the other to the

third person," and was negligent in

the performance of such duty. Plain-

tiff alleges NATLSCO undertook to per-

form Kraft's duty to provide a safe

work environment and was negligent in

such performance, yet we find this

contention unavailing. Through the

uncontradicted depositions of Kraft's

Hansen and Jamison, as well as

NATLSCO's Burger, Currie and Mulder,

NATLSCO proved that Kraft, as the em-

ployer, did not relinquish, nor did

NATLSCO assume, the responsibility to

provide its employees, including

plaintiff, with a safe work environ-

ment. NATLSCO's activities were lim-

ited to inspections of physical con-

ditions, not operating procedures.

We emphasize that plaintiff presented

no affidavit or other evidentiary ma-

terial to rebut this evidence. For

this reason, it is clear NATLSCO did

APP 58

Fea me er

not undertake to assume or take over

Kraft's duty. Indeed, under Tennessee

law, Kraft’s duty to provide to em-

ployees, including plaintiff, with

safe working conditions was non-

delegable. Overstreet v. Norman, 314

S.W.2d 47 (Tenn. App. 1957). At most,

NATLSCO's inspections, made on Kraft's

request, merely parralleled the ongo-

ing independent safety inspections of

Kraft. As Jamison stated in his depo-

sition, Kraft used NATLSCO's recommen-

dations as a doctor's second opinion,

and this does not impose Section 324A

(b) liability. See Hill v. James

Walker Memorial Hospital, 402 F.2d

1036, 1042 (4th Circuit 1979) (actions

paralleling those of obligor and not

in substitution therefor, will not

subject actor to Section 324A liabil-

ity); Blessing v. United States, 447

F. Supp. 1160, 1195 (E.D. Pa. 1978)

(same).

APP 59

In this respect, the basic facts

in the instant case are similar to

those in Stacy v. Aetna Casualty &

Surety Co., 484 F.2d 289 (5th Cir.

1973). There Aetna conducted periodic

inspections of the employer's facility

pursuant to Aetna's workmen's compen-

sation insurance policy with Purnell,

the employer. The court of appeals

held that there was no evidence that

the employer delegated to Aetna,

either by contract or course of con-

duct, any part of its direct and pri-

mary duty to discover unsafe condi-

tions, and therefore, the case should

not have been presented to the jury.

Id. at 294. As the court stated in

Stacy, "“[p]roof that the insurer

assisted [the employer] in those par-

ticular areas of its operation where

the company felt it needed outside ad-

vice and recommendations falls far

APP 60

short of systemwide assumption of [the

employer's] duty to discover latent

hazards." Id. Here, as in Stacy, the

employer directed the outside consul-

tant to inspect a certain part of its

Operation. In Stacy the employer did

not request inspection of a partic-

ular area of the plant where an em-

ployee was subsequently injured. Id.

at n.5. In the case sub judice, Kraft

did not request, nor did NATLSCO per-

form, an inspection or survey of prac-

tices or procedures anywhere in the

plant. The legal result is the same:

plaintiff failed to place in issue the

question of the outside consultant's

assumption of the employer's duty to

discover latent hazards. Therefore,

NATLSCO may not be held liable under

subparagraph (b) of Section 324A.

Similarly, the court finds plain-

tiff failed to place at issue either

Kraft's or plaintiff's reliance on

APP 61

NATLSCO's undertaking. Subparagraph

NATLSCO to liability if "the harm is

suffered because of reliance of the

other or the third person upon the

undertaking." As noted above, Kraft

did not expect NATLSCO to perform

inspections or surveys of its prac-

tices and procedures, and therefore,

could not have relied on NATLSCO to

do so. The undisputed proof shows

that NATLSCO was instructed by Kraft

to inspect only physical conditions.

In addition, Jamison and Hansen testi-

fied that even NATLSCO's pecommnenda-

tions concerning physical conditions

were advisory only, and there was no

reliance by Kraft. There is no proof

in this case of actual reliance on

NATLSCO's inspections as required in

Stacy. 484 F.2d at 295. Nor has

plaintiff presented any evidence, by

affidavit or otherwise, that he relied

APP 62

on NATLSCO's inspections in his per-

formance of cleaning procedures.

Therefore, no question of fact is pre-

sented under Section 324A(c). Id.

In summary, plaintiff wholly

failed to present evidence which would

place NATLSCO's liability under Sec-

tion 324A of the RESTATEMENT (SECOND)

OF TORTS at issue. There is no proof

that NATLSCO contracted or undertook

to conduct inspections of practices or

procedures or that previous accidents

on the flake machine would have called

the cleaning procedures to its atten-

tion. Accordingly, NATLSCO cannot be

held liable under Section 324A. Id.

at 675.

III. Third Party Beneficiary Theory

In his memorandum briefs, plain-

tiff makes an oblique reference to re-

liance on a breach of contract theory

for recovery. Although plaintiff

makes no express mention of such a

theory in his complaint, even under

plaintiff's version of the facts, such

a theory would be unavailing. Because

plaintiff was not a party to the con-

tract between Kraft and NATLSCO, the

only conceivable theory upon which

plaintiff could rely would be that of

a third-party beneficiary to the con-

tract. Tennessee has long recognized

the doctrine that:

The beneficiary, though not

a party to the contract, may

maintain an action directly

in his own name against the

promisor, for such promise

upon sufficient considera-

tion for the benefit of the

third party.

Eidson v. Hardware Mutual Casualty

Company, 191 Tenn. 430, 439, 234

S.W.2d 836, 840 (1950). However, Ten-

nessee also recognizes the rule that

"an incidental beneficiary acquires no

rights against the promisor or the

APP 64

promisee by virtue of the contract."

Willard v. Claborn, 419 S.W.2d 168,

1970 (Tenn. 1967). In determining

what constitutes an incidental bene-

ficiary, the Tennessee courts have

held that the intent of the parties as

expressed by the plain language of the

contract controls. See, e.g., Willard

v. Claborn, 419 S.W.2d 168, 1970

(Tenn. 1967) (terms of contract must

indicate intent to benefit third per-

son); Rutherford County v. City of

Murfreesboro, 304 S.W.2d 635 (Tenn.

1957) (third party beneficiary status

determined by intent of. parties as

matter of construction of contract);

E. O. Bailey & Company v. Union Plant-

ers Title Guaranty Company, 232 S.W.2d

309 (Tenn. App. 1949) (controlling in-

tention is that expressed by language

of contract). As stated by the Ten-

nessee Supreme Court in Willard, "the

APP 65

terms of the contract itself or the

circumstances surrounding its execu-

tion [must] clearly indicate the con-

tract was intended to operate for the

benefit of some third person.” Id. at

170. In the case sub judice, nothing

appears in the contract between Kraft

and NATLSCO or in the circumstances

surrounding its execution to indicate

that the contract was entered into to

operate for the benefit of the plain-

tiff. Nor has the plaintiff presented

us with evidence to the contrary. The

contract was entered into for the ben-

efit of Kraft which was to receive

loss control services and help in

passing a Tennessee OSHA inspection.

The fact that Kraft's employees bene-

fited from the safer work environment

was merely incidental to the main pur-

pose of the contract. Therefore, even

if plaintiff had alleged a breach of

contract by NATLSCO in his complaint,

APP 66

plaintiff was merely an incidental

beneficiary of the contract and as

such obtained no rights against

NATLSCO.

Being convinced that no genuine

issue of material fact has been pre-

sented by plaintiff and as a matter of

law, the court sustains defendant's

motion for summary judgment.

Let an order issue accordingly.

This 27th day of May, 1983.

/s/ William C. Keady ee

United States District Judge

APP 67

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