Appendix — Global Divers & Contractors, Inc. v. Leevac Corp.
Supreme Court brief1993
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IN UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 92-4419
GLOBAL DIVERS & CONTRACTORS, INC.,
Plaintiff-Appellant,
VERSUS
LEEVAC CORPORATION, et al.,
Defendants-Appellees.
Appeal from the United States District Court
for the Western District of Louisiana
(CV88-1884)
Before REAVLEY, SMITH, and EMILIO M. GARZA,
Circuit Judges.
JERRY E. SMITH, Circuit Judge:”
Global Divers and Contractors, Inc. ("Global")
contracted with Leevac Shipyards, Inc. ("Leevac"), to
* Local Rule 47.5.1 provides: "The publication of
opinions that have no precedential value and merely decide
particular cases on the basis of well-settled principles of law
imposes needless expense on the public and burdens on the
legal profession.” Pursuant to that rule, the court has
determined that this opinion should not be published.
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convert a vessel owned by Global. A fire damaged the
vessel while Leevac was converting it. Global sued Leevac
for the resulting damages. The district court granted
summary judgment to Leevac, finding that Global had
agreed in the contract, to release Leevac from any liability
Leevac might have incurred. We affirm.
a
In 1987, Global purchased the M/V WESTERN
NARROWS, intending to convert it into a diving saturation
vessel. In early 1988, Global started negotiations with
Leevac about converting the vessel. These negotiations
culminated in the signing of two documents on March 4,
1988: a Master Service Contract and a Work Order.
Paragraph 9.B. of the Master Service Contract states
as follows:
: B. COMPANY [Global] agrees to release,
protect, indemnify, defend and hold
CONTRACTOR [Leevac] harmless from and
against all liability, claims, demands and causes of
action of every kind and character, including the cost
of the defense thereof, for loss of or damage to
property of the CONTRACTOR [sic: COMPANY]
and its invitees, howsoever caused and even though
caused by the negligence of the indemnified party,
its invitees or anyone for whom they may be acting.
In addition, the parties defined the word "property" in
paragraph 21.B. as follows:
B. The term "property" as used herein
shall mean all property (real or personal),
equipment, material or supplies belonging to or
leased by a party or its invitees.
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On April 28, 1988, a fire broke out on the
WESTERN NARROWS extensively damaging the vessel.
In July, Global filed suit against Leevac and its insurers,
alleging breach of contract and negligence in converting the
WESTERN NARROWS.
Leevac moved for partial summary judgment in
March 1991, arguing that the word "property" in paragraph
9.B. included the WESTERN NARROWS and thus that
Global had\ agreed to release Leevac from any liability for
damage Leevac might have caused to the vessel. The
district court granted Leevac’s motion, finding that
"property" was not an ambiguous term, refusing to resort to
parol evidence, and holding that the word "property"
included the WESTERN NARROWS. The court absolved
- Leevac and its insurers from all liability.
Il.
We review the district court’s grant of summary
judgment de novo. Edmundson v. Amoco Prod. Co., 924
F.2d 79, 82 (Sth Cir. 1991). As did the district court, we
look first to the language of the agreement into which the
two parties entered. Paragraph 9.B of the Master Service
Contract states that Global "agrees to release, protect,
indemnify, defend and hold [Leevac] harmless from and
against all liability, claims, demands and causes of action . . .
for . . . damage to property of [Global] . . . howsoever
caused and even though caused by the negligence of the
indemnified party ...." (Emphasis added.) Paragraph 21.B
then defines "property" as "all property (real or personal),
equipment, material or supplies belonging to or leased by a
party or its invitees.”
Since the Work Order contains a choice-of-law
provision designating Louisiana’s as the applicable law, and
since that law does not conflict with maritime law, we
construe the parties’ agreement accordingly. See Stoot v.
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Fluor Drilling Servs., 851 F.2d 1514, 1517 (Sth Cir. 1988).
Article 2046 of the Louisiana Civil Code instructs us that
"[w]hen the words of a contract are clear and explicit and
lead to no absurd consequences, no further interpretation
may be made in search of the parties’ intent." In
interpreting contracts under Louisiana law, we repeatedly
have declared that when the words of a contract are
unambiguous, we shall not look beyond the agreement’s
four corners to interpret it. Godchaux v. Conveying
Techniques, Inc., 846 F.2d 306, 315 (Sth Cir. 1988). See
also Davis v. Huskipower Outdoor Equip. Corp., 936 F.2d
193, 196 (Sth Cir. 1991); Investors Assocs. Ltd. v. B.F.
Trappey’s Sons, Inc., 500 So. 2d 909, 912 (La. App. 3d Cir.),
writ denied, 502 So. 2d 116 (La. 1987); Thomas v. Knight,
457 So. 2d 1207, 1209 (La. App. ist Cir. 1984).
Following these principles of interpretation, we
proceed to examine the language of the contract. First, the
Master Service Contract states that Global agrees to release
and indemnify Leevac against any claims for damage to
Global’s "property." The contract then defines property as
“all property (real or personal)... .”
We find no ambiguity in this language. The plain
meaning of the language is obvious. The parties’ use of the
word "property" in paragraph 9.B includes the vessel in
question. We find that this must be so when another
paragraph in the contract expands on the parties’ meaning
by defining "property" so broadly as to include all "real or
personal" property.
Global asserts that by the word "property" it meant
only equipment and supplies used to work on the
WESTERN NARROWS, not the vessel itself. This
argument fails in light of the broad definition of "property"
in paragraph 21.B. If “property” meant only equipment and
supplies, surely the parties would not have agreed to include
real property in their agreement. We hold that the word
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“property” in paragraph 9.B includes the WESTERN
NARROWS.
By finding that the term "property" in paragraph 9.B
of the Master Service Contract includes the WESTERN
NARROWS, we must conclude that Global has no claim for
negligence against Leevac because, in paragraph 9.B, Global
has agreed to indemnify Leevac against any damage it may
have caused to the WESTERN NARROWS. Since Leevac
is not liable to Global, neither are Leevac’s insurers liable
to Global.
Based upon our review of the plain meaning of the
parties’ agreement, we AFFIRM the grant of summary
judgment.
1 In Todd Shipyards Corp. v. Turbine Serv
Inc., 674 F.2d 401, 423 (Sth Cir.), cert. denied, 459 U.S.
1036 (1982), we stated that the ship KATRIN was
"indisputably property other than the Insured’s work
product... .”
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IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 92-4419
GLOBAL DIVERS & CONTRACTORS, INC.
Plaintiff-Appellant,
versus
LEEVAC CORPORATION, ET AL.,
Defendants-Appellees.
Appeal from the United States District Court for the
Western District of Louisiana
ON PETITION FOR REHEARING
( February 15, 1993 )
Before REAVLEY, SMITH and EMILIO M. GARZA,
Circuit Judges.
PER CURIAM:
IT IS ORDERED that the petition for rehearing
filed in above entitled and numbered cause be and the same
is hereby DENIED.
ENTERED FOR THE COURT:
J. Smith
United States Circuit Judge
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UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF LOUISIANA
| LAFAYETTE-OPELOUSAS DIVISION
GLOBAL DIVERS AND * CIVIL ACTION
CONTRACTORS, INC. *
a
VERSUS * NO. CV88-1884
a”
. LEEVAC CORPORATION, *
LEEVAC SHIPYARDS, * SECTION "0"
INC., BOSTON OLD *
COLONY INSURANCE ‘*
COMPANY AND LLOYDS * JUDGE SCOTT
OF LONDON AND *
INSTITUTE COMPANIES *
KEKE SEESEESESE
JUDGMENT
This matter having been considered by the Court on
the Motions for Summary Judgment and/or for Entry of
Final Judgment of defendants and the Court having ruled in
favor of defendant and against plaintiffs on said Motions,
accordingly:
IT IS ORDERED, ADJUDGED AND DECREED
that there be judgment in favor of defendants, Leevac
Corporation, Leevac Shipyards, Inc., The Boston Old
Colony Insurance Company, and National Employers
Mutual General Insurance Association, Limited, Chancellor
Insurance Company, Ltd., Certain Underwriters at Lloyds,
: London appearing by and through their nominee, Bryan
Jeffrey Hopwood and Certain Institute of London
Underwriting Companies subscribing to that certain policy
of insurance evidenced by policy number GCM-13263 and
eT TS PROMS Ce SME To Wrenner a eae cre CPt rein eee ee Te eS ee
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against plaintiff, Global Divers & Contractors, Inc.
dismissing all claims of Global Divers & Contractors, Inc.,
with prejudice, at plaintiff ’s costs.
Alexandria, Louisiana, this 19th day of March, 1992.
Norman S. Scott
UNITED STATES DISTRICT JUDGE
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IN THE UNITED STATES DISTRICT COURT FOR
WESTERN DISTRICT OF LOUISIANA
LAFAYETTE DIVISION
GLOBAL DIVERS & : CIVIL ACTION
CONTRACTORS, INC.
-Vs- : NO. 88-1884
LEEVAC CORPORATION, : JUDGE SCOTT
ET AL :
RULING
Before the court are Motions for Summary
Judgment filed on behalf of Leevac Corporation, (Leevac),
its uninsured interests, Boston Old Colony Insurance
Company (Boston) and National Employer’s Mutual
General Insurance Association Limited and Chancellor
Insurance Company, Limited and Certain Underwriters at
Lloyd’s, London appearing by and through their Nominee,
Bryan Geoffrey Hopwood, and Certain Institute of London
Underwriting Companies, subscribing to that certain policy
of insurance evidenced by Policy No. GCM 13263
(Lloyd’s).
Global Divers & Contractors, Inc. (Global) sued
Leevac and its insurers to recover damages sustained by fire
of a Global survey vessel, the M/V WESTERN
NARROWS, which was undergoing a conversion at
Leevac’s shipyard. Global also filed suit against Boston and
Lloyd’s pursuant to the Louisiana Direct Action Statute,
LSH-R:S. 22:611. Global alleges that Boston had two
insurance policies in effect which cover this loss: a Ship
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Repairer’s Legal Liability policy and a Builder’s Risk Policy.
Additionally, Global alleges that Lloyd’s carried an excess
policy which also covers the loss. In the alternative, Global
asserts that Leevac was contractually liable for not providin
such policies.
MOTION FOR SUMMARY JUDGMENT ON BEHALF
OF LEEVAC’S INSURED INTERESTS
Leevac’s Motion for Summary Judgment is based
exclusively on the indemnity/release clause contained in
Section 9B of the Master Service Contract (contract)
executed by Global and Leevac in anticipation of the
vessel’s conversion. The provision reads as follows:
Company agrees to release, protect,
indemnify, defend and hold CONTRACTOR
harmless from and against all liability, claims,
demands and causes of action of every kind
and character, including the cost of the
defense thereof, for loss of or damage to
property to the COMPANY and its invitees,
howsoever caused and even though caused
by the negligence of the indemnified party,
its invitees or anyone for whom they may be
action.
Master Service Contract, Section 9B.
In its Ruling of March 14, 1991, this court held that
the term "property" as used in Section 9B of the Agreement
included the M/V WESTERN NARROWS. This section
requires us to grant Leévac’s motion for summary judgment,
dismissing it from all liability in this case.
We realize that this is a harsh, but unavoidable
result. Even taking into account the rationale in Ogea v.
Loffland Bros. Co., 622 F.2d 186 (Sth Cir. 1980), Global’s
All
claims must fail. Ogea compels us to view the contract as a
whole, rather than focus only on the release/indemnity
provision, to properly determine the contractual
responsibilities of the parties. As this court ruled on March
14, 1991, this reading incudes [sic: includes] not only the
insurance provisions contained in Section 8 of the contract,
but the Work Order executed between the parties as well.
Under Ogea, if Leevac has not met its obligations under the
insurance provisions, it may not invoke protection under the
release/indemnity clause of its agreement.
We first note that the contract is awkward at best
and uncommonly ill-conceived. Many of the provisions have
little or no application to the work for which Global
contracted, and only the most strained reading makes some
provisions relevant. The insurance provision is an excellent
example. It calls for seven different types of insurance, the
first five of which are third party policies: worker's
compensation, employer’s liability, maritime employer’s
liability, comprehensive general liability and automobile
liability insurance.’
There is absolutely no reason why Global should
require Leevac to carry policies such as automobile liability
insurance, and to name Global as an additional named
insured. Such coverage has nothing whatsoever to do with
the conversion of the M/V WESTERN NARROWS, and
makes no sense in the context of the contract.
BOSTON’S MOTION FOR S$ Y MENT
. The last two listed are first party policies, P&I
insurance and hull insurance, and only require
Leevac to insure vessels used, possessed or
controlled by Leevac to perform services pursuant to
the contract. Any attempt to apply these to Global's
property is wholly without merit.
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Boston had two policies in effect with Leevac which
are at issue in this case, a Ship Repairer’s Legal Liability
policy and a Builder’s Risk policy. Boston has moved the
court for summary judgment, asserting that the Global loss
was not covered under either policy, and that it should be
dismissed as a party to this case as a matter of law. In the
alternative, Boston seeks summary dismissal of Global’s
claims against it on the basis that no applicable law grants
Global any right of action against Leevac’s insurers.
Direct Action Issue
We will first address Boston’s argument on the
applicability of the Louisiana Direct Action statute.
Boston’s argument with respect to the Builder’s Risk policy
is unnecessary, since for reasons hereinbelow set out we
find that Boston has no liability for Global’s loss under this
policy.
Boston asserts that it cannot be sued directly by
Global for the loss of the M/V WESTERN NARROWS
under its Ship Repairer’s Legal Liability policy because the
Louisiana Direct Action Statute, LSA-R.S. 22:655, is not
applicable to ocean marine insurance. We do not agree
with this conclusion.
While it is true that LSA-R.S. 22:611 provides that
the Louisiana Insurance Code "shall apply to insurance
other than ocean marine and foreign trade insurances", we
are bound by Coleman v. Jahncke Service. Inc., 341 F.2d
956 (Sth Cir. 1965). In Coleman, the Fifth Circuit held that
ocean marine insurances such as hull insurance were also
public liability policies, subject to the Code, and therefore
subject to the direct action statute. The court held that the
direct action statute, by its terms, applies to every "policy or
contract of liability insurance,” and based its opinion on the
holding Cushing v. Maryland Cas. Co., 198 F.2d 536 (Sth
Cir. 1952) reh. den’d 198 F.2d 1021, reversed on other
OE LR Ee ee ee Oe eg ee Se en Se re ee eed
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grounds, Maryland Casualty Company v. Cushing, supra.
The Cushing court held that "[t]here is no indication in Sec.
655 that the Louisiana legislature intended to deny the right
of direct action to persons covered by marine policies, while
extending it to all others." Id. at 538.
We find that the definition of "ocean marine
insurance" enacted under the Louisiana Insurance Guaranty
Association ("LIGA") legislation at LRS-R.S. 22:1379(9)
should not be superimposed on the entire insurance code.
Delaune v. St. Marine Transp. Co., 749 F. Supp. 1463 (E.D.
La. 1990). We hold that Global did have a right of direct
action under LSA-R.S. 22:655 with respect to the Ship
Repairer’s Legal Liability policy.
irer’ iability Poli
Boston predicates its position with respect to the
Ship Repairer’s Legal Liability policy on Leevac’s dismissal.
Its policy contains a clause which essentially provides that
no liability will attach under the policy until a final judgment
has been rendered against the assured (Leevac) or until
Boston has consented to liability. Since the effect of this
ruling is to dismiss Leevac as a defendant, Boston’s motion
is granted with respect to the Ship Repairer’s Legal Liability
policy.
We must additionally note that the dismissal of
Boston in this matter is not wholly dependent on the "no-
action" clause of the policy. In Olympic Towing
Corporation v. Nebel Towing Company, 419 F.2d 230, 237,
240, 241 (Sth Cir. 1969), the court, citing Hidalgo v. Dupuy,
122 So.2d 639, 644-645 (La. App. 1960), held that the
Direct Action Statute simply voids any policy clause which
conditions the rights of an injured person on a judgment ‘
against the insured. Id. at 644-645. On rehearing, the Fifth
Circuit reaffirmed its holding on this issue, stressing the
point that it is the underlying liability of the assured, not the
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liability of the insurer, which is to be determined. 419 F.2d
at 241.
But even if we were to read out the "no action"
clause, Boston would still not be liable, since it can only be
liable to the extent its assured is liable. And as we already
know, Leevac released and indemnified Global for property
damage, in paragraph 9B of the Agreement. We cannot
hold Leevac’s insurers liable if Global released Leevac itself
from liability.
Indeed designating Global as an additional named
insured would not have put Global in any different position
than it is now. Since the Ship Repairer’s Legal Liability
Policy is a third party policy, if Global had been named as
an additional insured, Global only would have been covered
for its liability as to third parties, not for its own first party
claims. Thus, the fact that Leevac did not secure
endorsement making Global a named insured is irrelevant,
and Ogea is not decisive.
Builder’s Risk Policy
Boston has also asserted that the Builder’s Risk
policy in effect at the time of the fire did not cover the
M/V WESTERN NARROWS. While it is true that the
policy in question was an “open” policy in that various
projects could be readily added to the policy, Global’s
explanation of the manner in which this is accomplished is
misieadingly simplistic. The policy itself, a copy of which is
attached to Boston’s Motion for Summary Judgement as
Exhibit B, contains a page entitled "American Institute,
Builder’s Risk Clauses." Lines 12 through 16 describe the
subject matter of the policy, being the hull, etc.
"incorporated in or allocated to Hull No. ATTACHED type
ATTACHED", and coverage is specifically limited "to the
extent only that the cost of any of the foregoing is included
in the Agreed Value." The obvious reading of this form is
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that a covered vessel must be specifically described on an
endorsement and the parties must establish an initial value.
Additionally, the deposition of Irwin Cucullu, a
representative of Laurence Eustis Insurance Agency, Inc.,
cited by Global, plainly states that the policy provides
automatic coverage for new construction, but Mr. Cucullu
set out a very different procedure for coverage on existing
vessels with an existing value. Mr. Cucullu verifies in his
deposition that an initial value of the vessel would have to
be established and a premium would have to be negotiated
and paid before work is started. The evidence in the record
reflects that these conditions had not be fulfilled.
The fact that the Certificate of Insurance annexed
to the contract indicated that the M/V WESTERN
NARROWS was covered by Boston’s Policy No. HB 740082
for Builder’s Risk is irrelevant with respect to Boston’s
liability. A Certificate of Insurance cannot create or expand
the terms of any insurance at issue. The Certificate merely
indicates that a policy is in existence and provides some
information about the policy. Atlas Assur. Co. v. Harper,
Robinson Ship Co., 508 F.2d 1381, 1386 (9th Cir. 1975),
quoting I. Arnould, Marine Insurance, at p. 138. We hold
that Boston has no liability with respect to the loss in
question under its Builder’s Risk policy.
LLOYD’S MOTION FOR SUMMARY JUDGMENT
Lloyd’s argues that if Leevac is not liable because of
the indemnity provision, then Boston and Lloyd’s cannot be
liable to Global for its loss. Lloyd’s policy is undoubtedly an
"excess" policy, requiring that underlying coverage be
effective. Since Leevac and Boston are not liable because
of the release/indemnity provision, and the Builder’s Risk
policy was not effective, we must also hold that Lloyd’s has
no liability under its policy.
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MOTION FOR PARTIAL SUMMARY JUDGMENT ON
BEHALF OF LEEVAC’S UNINSURED INTERESTS
Leevac’s uninsured interests seek a determination
that Leevac had satisfied its contractual obligations to
Global "by providing Ship Repairer’s Legal Liability
Insurance" and that it was under no obligation to provide
Builder’s Risk insurance.
First, as stated hereinabove, Leevac has satisfied its
contractual obligations to Global with the Ship Repairer’s
Legal Liability policy at issue.
The other issue is whether or not Leevac was
contractually obligated to furnish Builder’s Risk insurance
for the conversion. Builder’s Risk insurance is not
mentioned in the Work Order, nor is it enumerated as
required insurance under Section 8 of the contract. It is
only mentioned in the Certificate of Insurance attached to
the contract.
Section 8B mandates that each insurance “required
hereunder” be endorsed to Global as an additional named
insured. There is no such necessity, however, for the
policies listed on the Certificate of Insurance. So, since
Builder’s Risk was not a required insurance, there was no
obligation on Leevac’s part to have the policy endorsed to
Global as an additional named insured. And, since Builder’s
Risk is a first party insurance rather than a third party
insurance, Leevac’s purchase of Builder’s Risk insurance on
the M/V WESTERN NARROWS would not have
necessarily benefitted Global. Had the policy been
endorsed to insure Leevac against loss of the hull of the
M/V WESTERN NARROWS, Global could not have made
a claim on such first party insurance under the Louisiana
Direct Action Statute. And, since Global had the
release/indemnity provision in Section 9B, Global could not
have forced Leevac to make a claim on the policy. We hold
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that Leevac’s failure to list the hull of the M/V WESTERN
NARROWS or to have Global listed as an additional
named insured on its Builder’s Risk policy does not
constitute liability under the contract.
If Global had wanted its hull insured with Builder’s
Risk hull insurance, it should have required it be named as
an additional named insured under such first party
insurance. If Global had wanted its hull to be insured
under a Ship Repairer’s Legal Liability policy, it should not
have agreed to release/indemnify Leevac in the same
contract. “Release” and "indemnity" preclude "liability". The
failure in this case is not in Leevac’s conduct under the
contract but in Global’s failure to protect itself.
GLOBAL’S CONTRACTUAL CLAIMS
In its opposition to the foregoing motions, Global
asserts that it may still maintain its breach of contract claims
against Leevac for its obligations to (i) convert the vessel;
(2) perform its task in a workmanlike manner; (3) comply
with OSHA regulations; (4) comply with industry standards,
and (5) obtain insurance.
As set out hereinabove, Global did, in fact, obtain
the required insurance. As for the other claims, even
Global admits that the indemnification provision of
paragraph 10B specifically covers contractual claims, as
opposed to paragraph 9B which covers property claims.
Global Divers & Contractors, Inc.’’ Memorandum in
Opposition to Motions for Summary Judgment, p.13. In
light of paragraph 10B, we hold the Leevac is completely
indemnified by Global with respect to all contract claims.
Accordingly, the motions of Leevac’s insured
interests and uninsured interests as well as the motions of
Boston and Lloyd’s are hereby GRANTED.
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DONE AND SIGNED at Alexandria, Louisiana,
this 24th day of February, 1992.
Nauman S. Scott
UNITED STATES DISTRICT JUDGE
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THE UNITED STATES DISTRICT COURT FOR
THE WESTERN DISTRICT OF LOUISIANA
LAFAYETTE DIVISION
et ee eS eee re ren
,
GLOBAL DIVERS & : Civil Action
CONTRACTORS, INC.,
VS. ” No. 88-1884
LEEVAC CORPORATION, : JUDGE SCOTT
ET AL
~-—<-—-s = ee weeneneneaeneeee =
RULING
Before the court is Global Divers & Contractors,
Inc.’s (Global) Motion for Relief from the court’s August 9,
1991 Ruling and/or to withdraw stipulation.
TN AKO tal diet ek IL ele Sa
Global sued Leevac Corporation (Leevac) and its
insurers to recover damages sustained by fire of a Global
survey vessel, the M/V WESTERN NARROWS, that was
undergoing a conversion at Leevac’s shipyard.
In the joint Pretrial Stipulations filed by counsel on
May 16, 1990, plaintiff, for the first time in this litigation,
raised the issue of punitive damages, to which defendants
objected as not timely. After extensive and deliberate
; negotiations, in June, 1990 all counsel agreed to amend the
Pretrial Stipulations to reflect that Leevac and its insurers
conceded negligence with respect to the fire and subsequent
damage to the M/V WESTERN NARROWS, in return for
Global’s withdrawal of claims for punitive damages arising
from their conduct in causing the damage. By letter dated-
May 24, 1990, counsel for Global acknowledged his
oT. ee
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responsibility to prepare the amendment to the Pretrial
Order and represented that he would do so.
On August 9, 1991 this court rendered a Ruling
which reaffirmed its prior ruling that the term "property" in
Section 9B of the Master Service Agreement included the
M/V WESTERN NARROWS. This ruling effectively
eliminated Global’s claim for negligence against Leevac
because Global had indemnified Leevac. Since LSA-C.C.
art. 2004 excludes indemnity provisions with respect to
intentional or gross fault, all Global had left were it punitive
damage claims which it had just stipulated away. (This
Ruling does not address Global’s other claims against
Leevac, such as breach of contract with respect to insurance
coverage.)
Global failed to prepare the amendment to the
pretrial order as required by its counsel’s letter of May 24,
1990, so that the agreed stipulation is not of record. Within
days after the August 9, 1991 Ruling, defendants and the
court received a letter from Global withdrawing its
stipulations and effectively breathing new life into its
punitive damage claim. The questions is: can such
withdrawal be allowed over the objection of Leevac?
This is not a stipulation of fact which is now known
to be untrue or a motion to include in the Pretrial Order
punitive damages not previously raised, which would be
subject to an entirely different review. See McFadden v.
Sanchez, 710 F.2d 907 (2nd Cir. 1983). In fact, all the cases
cited by Global are instances where a court is asked to
include causes or evidence which should have been obvious
to all parties from the beginning. Plaintiff herein seeks to
exclude a stipulation to which it previously agreed.
Fed. R. Civ. P. 16(e) allows for modification of a
pretrial order "only to prevent manifest injustice". An
extensive discussion of amendments to pretrial orders is
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contained in Christenson, The Pre-Trial Order, 29 F.R.D.
191 (1961). This discourse points out that these orders
should be respected because they govern the pattern of the
trial and that "too-easy modification" encourages
carelessness. It points out that agreements made by counsel
and incorporated into the pretrial order are binding in
character, and that if the court cannot rely on the
admissions of counsel, the pretrial conference has no
validity. Id. at 373. The seminar also reviews "a variety of
opinion as to the trial court’s discretion to order
modification and amendments of the pre-trial orders-under
particular circumstances arising from the discovery of new
facts and issues after the pre-trial hearing.” Id. at 371-372,
(Emphasis added.) Provision is also made for admissions of
counsel which were obtained through "fraud or over-
reaching.” Id. at 373. The case at bar contains no such
: extenuating circumstances. Rather, Global is asking to
amend based solely on the ground that it miscalculated what
the court’s ruling would be, and lost at the wagering table.
In effect, it seeks to renege on its bet. If the rules and
cases charge this court to base its decision on "avoiding
injustice,” our only result can be to rule that the June, 1990
Stipulations stand as they are. To rule otherwise would be
an injustice to Leevac.
Plaintiff seeks to distance itself from the agreed
upon stipulations by asserting (1) that the amendments were
inchoate and that there was no "final revision” and (2) that
there was a "misunderstood agreement between counsel
what claims and damages were to be withdrawn by Global."
Global’s memorandum, page 4. This contention is not
supported by the record.
By letter of May 24, 1990, Global offered to agree
to the three amendments, which were clearly set out. By
letter of June 5, 1990, Global agreed to modify its
stipulations withdrawing "any claims for punitive damages."
The paragraph was carefully crafted, and set out, indented
A22
and single spaced, in quotation marks. The language was
clear. If there was a misunderstanding on Global’s part, any
such ambiguities are to be construed against the drafter,
Global. The three stipulations were accepted verbatim by
defendants in correspondence dated June 7, 1990. All that
was remaining was Global’s agreed obligation to include
them in the record. It would be unfair at this point to allow
Global to retreat from its agreement.
It should be pointed out that these stipulations were
in effect for fourteen months before Global attempted to
withdraw them. Not only did Global sit back and allow
Leevac to rely on them, but allowed the court to rely on
them as well, before anyone received notice of Global's
intentions. (See Ruling, August 9, 1991, footnote 1.) It
would be patently unfair to force both defendants and the
court to turn the clock back and re-do the past 14 months
because Global decided to change its mind. United States
v. State of Texas, 523 F.Supp. 703, 714 (E.D. Tex. 1981°
Global’s motion for relief from the court’s August 9,
1991 Ruling is without merit. We cannot consider
reformation of the contract at issue in this case; parol
evidence is inadmissible when the language of the contract
is Clear. Texaco, Inc. v. Newton ith Charitable
Trust, 471 So.2d 877, 881 (La. App. Ct. 2d Cir. 1985).
Accordingly, Global’s Motion for relief from the
court’s August 9, 1991 Ruling and/or to withdraw proposed
stipulations is hereby DENIED.
DONE AND SIGNED at Alexandria, Louisiana,
this 11th day of October, 1991.
___Nauman S. Scott
UNITED STATES DISTRICT JUDGE
tara ip nih \iRanties We enka wide arana et aind. 379 ales makin Meme BE! OR Metre
A23
THE UNITED STATES DISTRICT COURT FOR
THE WESTERN DISTRICT OF LOUISIANA
LAFAYETTE-OPELOUSAS DIVISION
GLOBAL DIVERS & : Civil Action
CONTRACTORS, INC., :
: No. 88-1884-0
Vs. ;
: JUDGE SCOTT
LEEVAC CORPORATION, :
ET AL. ;
RULING
Before the court is plaintiff Global Divers &
Contractors Inc.’s (Global) Motion to Reconsider our
Ruling of March 14, 1991 (copy attached). In that Ruling,
we held that the term "property," as used in Section 9B of
the "knock-for-knock" indemnity clause of the Master
Service Agreement between Global and defendant Leevac
Corporation (Leevac), was unambiguous and included the
vessel the M/V WESTERN NARROWS.
Although we determined that Section 9B’s use of
“property” was unambiguous, and therefore excluded parol
evidence to explain or contradict the meaning of the term,
we then supported our holding that "property" included the
M/V WESTERN NARROWS with evidence culled from
the contract negotiations between Global and Leevac.
Specifically, we stated that "the negotiations which led to
the creation of the "knock-for-knock" indemnity and release
provisions demonstrate that the parties intended "property,"
as used in Section 9B, to include the M/V WESTERN
NARROWS." Ruling of March 14, 1991 at 7. Clearly, this
was an impermissible use of parol evidence. However,
because we used parol evidence despite having excluded it,
Global now contends that we should consider a plethora of
A24
additional parol evidence which, in Global’s opinion,
demonstrates that the parties never intended "property" to
include the M/V WESTERN NARROWS.
We must decline Global’s attempt to capitalize on
our erroneous use of parol evidence because, even without
the above quoted passage, which we now withdraw as
support for our holding that the parties intended "property"
to include the M/V WESTERN NARROWS, we still
conclude that "property" included the M/V WESTERN
NARROWS because there is no other way to interpret the
contract documents without rendering meaningless other
parts of the instrument. Section 21B of the Master Service
Agreement defines "property" to "mean all property (real or
personal), equipment, material or supplies belonging to a
party or its invitees." If we were now to exclude the M/V
WESTERN NARROWS from the definition of property,
we would have to either ignore or rewrite Section 21B of
the Master Service Agreement. We find no basis to do so.
Alternatively, Global asserts that we overlooked the
fact that Louisiana law does not permit indemnity clauses
seeking to release a party in advance for gross negligence.
The first sentence of Civil Code article 2004 provides that
"[a}ny clause is null that, in advance, excludes or limits the
liavility of one party for intentional or gross fault that
causes damage to the other party." La. Civ. Code art. 2004.
Thus, it is clear from the first sentence of article 2004 that
Louisiana law will not permit such clauses. However, the
fact remains in this instance that Global relinquished any
claim it may have had alleging that Leevac was grossly
negligent in causing the fire when it entered into a
stipulation absolving Leevac of any such gross fault.’ As
. The Second Cause of Action of Global’s sole
complaint against Leevac stated in Paragraph XII:
(continued...)
1(...continued)
"The aforementioned fire damage to the M/V
WESTERN NARROWS was caused by the
recklessness, carelessness and negligence of Leevac .
..." The Third Cause of Action stated in Paragraph
XVII: "The bad faith refusal of defendants to
provide insurance coverage for the damages
sustained by Global gives rise to punitive damages
and/or attorney fees under applicable law . . . ."
Although the prayer for relief requested "punitive
damage and/or penalties and atiorney fees be
awarded in an amount determined by the court,” it is
questionable whether either of these allegations or
the prayer for relief can be interpreted as raising a
claim for punitive damages based on Leevac’s fault
in causing the fire even under the liberal notice
pleading requirements prevailing in federal court.
However, despite the possibility that Global
failed to properly plead a claim of gross negligence
against Leevac for causing the fire, Global ultimately
raised such a claim in the proposed Joint Pretrial
Stipulations of May 1990. There, Global stated that
defendants were liable to plaintiff for "punitive
damages for . . . gross negligence . . . for the
conversion of the M/V WESTERN NARROWS to
a diving support vessel to be known as then
GLOBAL 1000," and that the "damage caused to the
plaintiff was due to the willful and wanton negligent
conduct of Leevac."
At this point, Leevac filed a Motion to
Strike Global's claim for punitive damages for
. Leevac’s fault in causing the fire and to strike the
: predicate allegations of gross negligence and willful,
(continued...)
:
»
'(...continued)
wanton misconduct. However, the Court never
ruled on this motion because Leevac and Global
thereafter entered into the stipulation mentioned in
the text. The stipulation stated in relevant part:
10. Leevac Shipyards and its Shiprepairer
Liability insurers stipulate that the
fire and subsequent damage to the
M/V WESTERN NARROWS which
occurred on or about April 28 and
29, 1988 was caused by the
negligence and fault of Leevac
Shipyards and/or its employees and/or
persons for whom Leevac Shipyards
was responsible.
12. Global withdraws any claims for
punitive damages and exemplary
damages against Leevac Shipyards,
Inc., Leevac Corporation and its
liability insurers concerning the
conduct of Leevac arising out of the
fire and damage to the M/V
WESTERN NARROWS, but
reserves all claims for statutory
penalties and attorneys’ fees against
Leevac and its insurers asserted as
the Third and Fourth Cause of
Action in the original complaint.
Thus, there is no doubt that Global waived
any claim it may have had against Leevac for
punitive damages for Leevac’s fault in causing the
fire. Because punitive damages cannot be awarded
(continued...)
| 7
ia
;
A27
such, Leevac’s alleged gross negligence in causing the fire is
not at issue in this case. Therefore, the first sentence of
article 2004 does not prevent operation of the indemnity
clause relieving Leevac of liability for the damage caused to
the M/V WESTERN NARROWS.
Finally, Global asserts that even without a claim of
gross negligence, the indemnity clause is nonetheless void
because the second sentence of Civil Code article 2004
nullifies any clause which, "in advance, excludes or limits the
liability of one party for causing physical injury to the other
party.” La. Civ. Code art. 2004. As support for this
contention, Global points to Ramirez v. Fair Grounds
Corp., 575 So.2d 811 (La. 1991).
In Ramirez, the plaintiff, a licensed racehorse
trainer, was injured in a stable accident at the Fair Grounds
in New Orleans. The plaintiff filed suit alleging that the
Fair Grounds was strictly liable for his injuries pursuant to
Civil Code articles 2317 and 2322. Thereafter, the
defendant filed a motion for summary judgment based on a
release agreement signed by plaintiff approximately four
months before the accident. The agreement purportedly
1(...continued)
without a finding of gross negligence, see Miles v.
Melrose, 882 F.2d 976, 989 (Sth Cir. 1989), the
obvious conclusion is that this stipulation absolved
Leevac of any allegations of gross negligence in
causing the fire when the claim for punitive damages
was withdrawn. The fact that Global may have
reserved its claim for punitive damages for Leevac’s
alleged failure to provide insurance coverage does
not affect the operation of the indemnity clause
because a bad faith breach of a contractual term is
not tortious fault. Thus, it does not trigger the first
sentence of article 2004.
A28
released, indemnified, and held the Fair Grounds harmless
from any and all liability for the plaintiff's injuries. Finding
that the agreement was not barred by article 2004, the lower
courts agreed with defendant and dismissed plaintiff's suit.
The Louisiana Supreme Court reversed. Although
the redactor’s comments to article 2004 clearly indicated
that the article was not intended to apply to indemnity or
hold harmless agreements,” the Louisiana Supreme Court
held that article 2004 “is clear and unambiguous," and
therefore must be “applied as written." Id. at 813. Based
on this literal approach, the Louisiana Supreme Court
- concluded that the release agreement was null because it,
"in advance, exclude[d] the liability of the Fair Grounds for
causing physical injury to Ramirez." Id.
Adopting the "applied as written" approach of the
Louisiana Supreme Court, we find that the second sentence
of article 2004 focuses on the term "physical injury." Black’s
Law Dictionary defines “physical injury" as "bodily harm or
hurt, excluding mental distress, fright, or emotional
disturbance." (Emphasis added.) Black’s Law Dictionary
1147 (6th ed. 1990). Similarly, the term "physical" is
individually defined as "relating or pertaining to the body, as
distinguished from the mind or soul or the emotions." Id.
Given these definitions, a literal interpretation
mandates the conclusion that article 2004 does not by its
own terms nullify indemnity clauses which, in advance,
exclude or limit liability for property damage as
distinguished from physical, bodily damage. We hold
tl
Comment (e) to article 2004 states that the article
“does not govern ‘indemnity’ clauses, "hold harmless’
agreements, or other agreements where the parties
allocate between themselves the risk of potential
liability towards third persons."
|
A29
therefore that the indemnity clause at issue in this case is as
unaffected by the second sentence of article 2004 as it is
unaffected by the first sentence of the article.
Accordingly, we DENY Global’s Motion to
Reconsider.
DONE AND SIGNED at Alexandria, Louisiana this
%h day of August, 1991.
__Nauman S. Scott
UNITED STATES DISTRICT JUDGE
A30
IN THE UNITED STATES DISTRICT COURT FOR
THE WESTERN DISTRICT OF LOUISIANA
LAFAYETTE-OPELOUSAS DIVISION
GLOBAL DIVERS &
CONTRACTORS, INC. : CIVIL ACTION
-V8- : NO. 88-1884-0
LEEVAC CORPORATION,
ET AL : JUDGE SCOTT
Before the court are three Motions. The first is
defendant Leevac Corporation’s (Leevac) Motion for Partial
Summary Judgment. The second is plaintiff Global Divers
and Contractors, Inc.’s (Global) Motion to Reconsider
Judge Shaw’s Ruling of March 31, 1989 (copy attached) in
which Judge Shaw denied Global’s Motion for Partial
Summary Judgment. The third is Global’s Appeal of
Magistrate Ivan Lemelle’s Ruling of September 6, 1990.
Global sued Leevac and its insurers to recover
damages sustained through fire by a Global survey vessel,
the M/V WESTERN NARROWS, that was undergoing a
conversion at Leevac’s shipyard. The casualty occurred on
April 28, 1988.
The pivotal issue in this case, and the subject of the
three motions now pending before the court, concerns the
meaning of the term "property" in the "knock-for-knock"
release and indemnity provisions of the Global-Leevac
Master Service Agreement signed on March 4, 1988.
Leevac contends that "property" includes the M/V
A31
not include the vessel. The Master Service Agreement
provided in Sections 9A and B:
9.A. CONTRACTOR [Leevac] agrees to
release, protect, indemnify, defend and hold
COMPANY [Global] harmless from and
against all liability, claims, demands and
causes of action of every kind and character,
including the cost of defense thereof, for loss
of or damage to property of the
CONTRACTOR and its invitees, howsoever
caused and even though caused by the
negligence of the indemnified party, its
invitees or anyone for whom they may be
acting.
9.B. COMPANY agrees to release, protect,
indemnify, defend and hold CONTRACTOR
harmless from and against all liability, claims,
demands and causes of action of every kind and
character, including the cost of defense thereof, for
loss of or damage to property of the COMPANY
and its invitees, howsoever caused and even though
caused by the negligence of the indemnified party,
its invitees or anyone for whom they may be acting.
In its Motion for Partial Summary Judgment, Leevac
contends that there is no ambiguity with regard to the
definition of "property," and therefore, parol evidence as to
the meaning of this term should be excluded. Citing the
Ruling of March 31, 1989, Global asserts that this court has
already held "property" to be ambiguous. Global also
contends that the parol evidence rule does not govern the
question presented by Leevac’s motion in any event.
Contrary to Global’s assertion, this court has never
decided whether the language in the release and indemnity
provision is ambiguous or unambiguous. The Ruling of
reed
A32
March 31, 1989 stated: "Even if the language in paragraph
9B is ambiguous, which it is not necessary for this court to
decide at this time, a genuine issue of material fact exists,
among other things, as to the intentions of the parties
regarding paragraph 9B." Ruling of March 31, 1989 at 3
(emphasis added). Thus, the question of ambiguity remains
open.
As to the merits of Leevac’s Motion for Summary
Judgement, we must first define the scope and nature of the
"contract" in question. Specifically, what document or
documents form the “contract,” and is the "contract" a
maritime contract governed by federal law or an ordinary
contract subject to state law?
A master service agreement becomes binding only
upon issuance of a work order. Matte v. Zapata Offshore
Co., 784 F.2d 628, 630 (Sth Cir. 1986); Page v. Gulf Oil
Corp., 775 F.2d 1311, 1315 (Sth Cir. 1985) (master service
agreement not a binding contract but "merely sets out the
rules of the game in the event that the parties decide to
play ball.”). Thus, we must include the Work Order in our
determination.
Similarly, where insurance procurement clauses
require, as here, that the indemnitor be named as an
additional named insured under the indemnitee’s policies,
Judge Shaw’s statement that there is "a genuine
issue of material fact . . . as to the intentions of the
parties regarding paragraph 9B" is predicated on the
conflicting testimony of Messrs. Burke and Burrell.
Because consideration of parol evidence requires
first a finding of ambiguity, Judge Shaw's statement
could give rise to the belief that the ambiguity issue
had been settled. Clearly, however, no such decision
has been made.
A33
the insurance provisions must be considered in interpreting
the indemnity provisions. Ogea v. Loffland Bros. Co., 622
F.2d 186, 189 (Sth Cir. 1980). Thus, we hold that we must
examine not only the Master Service Agreement but also
the Work Order and Insurance Certificates in construing
the meaning of the release and indemnity provisions in
sections 9A & B of the Master Service Agreement.
Ordinarily, a contract for the repair and conversion
of a vessel is a maritime contract subject to federal law.
Alcoa Steamship Co. v. Charles Ferran & Co., 383 F.2d 46,
50 (5th Cir. 1967). The interpretation of an indemnity
clause in a maritime contract is also ordinarily governed by
federal maritime law rather than state law. Theriot v. Bay
Drilling Corp., 783 F.2d 527, 538-39 (Sth cir. 1986). The
applicability of state law is limited to those issues not
governed by maritime law and to the extent that state law is
not destructive to the uniformity sought under admiralty
law. Alcoa, 383 F.2d at 50.
“However, under admiralty law, where the parties
have included a choice of law clause, that state’s law will
govern unless the state has no substantial relationship to the
parties or the transaction or the state’s law conflicts with
the fundamental purposes of maritime law. Stoot v. Fluor
Drilling Services, Inc., 851 F.2d 1514, 1517 (5th Cir. 1989).
The Work Order, which incorporates by reference the
Master Service Agreement, provides that the contract shall
be governed by Louisiana law. We find no impediment to
the application of Louisiana law. Thus, we shall examine
this contract pursuant to Louisiana’s rules of contract
interpretation.
In Louisiana, the codal articles on contract require
that we determine the intent of the parties, as expressed in
the contract documents, without rendering any part of the
entire instrument meaningless. La. Civ. Code Arts. 2045,
2050 (West Supp. 1986); Massie v. Inexco Oil Co., 798 F.2d
A34
777 (Sth Cir. 1986). Where the words are clear, explicit,
and lead to no absurd consequences or violation of public
policy, "the meaning and intent of the parties must be
sought within the four corners of the instrument and cannot
be explained or contradicted by parol evidence." Texaco,
Inc. v. Newton and Rosa Smith Charitable Trust, 471 So.2d
877, 881 (La. App. Ct. 2d Cir. 1985). Additionally, words of
contract must be given their generally prevailing meaning.
Diefenthal v. Longue Vue Management Corp., 561 So.2d
44, 51 (La. 1990). However, when the terms of a written
contract are susceptible to more than one interpretation, or
there is ambiguity or uncertainty as to its provisions, or the
intent of the parties cannot be ascertained from the
language employed, parol evidence is admissible to clarify
the ambiguity and to reveal the intention of the parties. Id.
First, we hold that public policy is not a basis for
resort to parol evidence because Louisiana law recognizes
that exculpatory clauses relieving liability for a person’s own
negligence are not contrary to public policy. Farrell Const.
Co. v. Jefferson Parish, 693 F. Supp. 490, 493 (E.D. La.
1988). We also hold that there is no ambiguity regarding
the meaning of "property" as used in the release and
indemnity provisions of the Master Service Agreement.
Although the Master Service Agreement, the Work
Order, and the Insurance Certificates refer, at times,
explicitly to the "vessel," a distinction is drawn between the
vessel and other forms of property only in the Insurance
Certificates and then, solely for the purpose of denoting the
different layers of insurance. Additionally, Section 21B of
the Master Service Agreement defines property to "mean all
property (real of personal), equipment, material or supplies
belonging to or leased by a party or its invitees" (emphasis
added). Given this definition, as well as the "plain meaning"
of "property," we agree with Leevac’s assertion that
"property," as used in the release and indemnity provisions,
A35
is not an ambiguous term. Therefore, we hold that there is
no need to resort to parol evidence to clarify its meaning.
Although Leevac has not requested this court to
render a ruling on the interpretation of Section 9B, Global’s
Motion to Reconsider Judge Shaw’s Ruling of March 31,
1989 provides the opportunity to make an interpretation.
We hold that "property," as used in Section 9B, includes the
M/V WESTERN NARROWS.
At the outset of the negotiations, the Master Service
Agreement, a Global form document, did not include
Section 9B. Upon reviewing the proposed Master Service
Agreement, Leevac’s attorney, James G. Burke, objected to
the broad and all-inclusive indemnity and release language
now identified as Section 9A. However, Global refused to
withdraw that provision. The dispute was finally resolved
when Global agreed to Mr. Burke’s demand that Leevac be
afforded an identically broad and all-inclusive release and
indemnity provision now identified as Section 9B. An
examination of the Sections 9A and B reveals that they are
absolutely identical except for the identification of the
indemnitor and indemnitee. In light of the definition of
"property" in Section 21B of the Master Service Agreement,
we hold that the negotiations which led to the creation of
the "knock-for-knock" indemnity and release provisions
demonstrate that the parties intended "property," as used in
Section 9B, to include the M/V WESTERN NARROWS.
Our holding that "property" is not an ambiguous
term, and the conclusion that "property," as used in Section
9B, includes the M/V WESTERN NARROWS, moots
Global’s Appeal of Magistrate Lemelle’s Ruling of
September 6, 1990, and also requires this court to deny the
relief sought by Global in its Motion to Reconsider Judge
Shaw’s Ruling of March 31, 1989. We hasten to add,
however, that these conclusions doe not resolve whether
Leevac’s insurers are free of liability.
A36
DONE AND SIGNED at Alexandria, Louisiana this
14th day of March, 1991.
Nauman S. Scott
UNITED STATES DISTRICT JUDGE
A37
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF LOUISIANA
LAFAYETTE-OPELOUSAS DIVISION
GLOBAL DIVERS AND _ CIVIL ACTION NUMBER
CONTRACTORS, INC. 88-1884
VS. SECTION 0 -
JUDGE SHAW
LEEVAC CORPORATION,
ET AL. MAGISTRATE METHVIN
RULING
Now before this court is a motion for partial
summary judgment filed by plaintiff, Global Divers and
Contractors, Inc. ("Global") on the issue of liability alone.
Global and Leevac Shipyard, Inc. (Leevac) entered
into a Master Service Contract Agreement in which Leevac
agreed to convert the M/V Western Narrows from a
geophysical research vessel into a diving support and
construction vessel. Global owned the vessel. While the
vessel was at Leevac’s pursuant to the contractual
agreement for repair/conversion, the vessel caught fire and
burned. Global now moves for partial summary judgment
claiming that the damage to the M/V Western Narrows was
caused by the fault/negligence of Leevac and its insurers are
responsible to Global for this loss. The parties have briefed
the issues thoroughly and this court denies Global’s motion
for partial summary judgment for the following reasons.
Fed. R. Civ. P. 56 provides that a judgment shall be
rendered if "the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to
any material fact and that the moving party is entitled to
judgment as a matter of law."
A38
To state it succinctly, genuine issues of material fact
exist in this case. Paragraphs 9A and 9B of the Master
Service Contract Agreement are reciprocal indemnity
clauses between Leevac and Global. These provisions
provide:
9.A. CONTRACTOR agrees to release,
protect, indemnify, defend and hold
COMPANY harmless from and against all
liability, claims, demands and causes of action
of every kind and character, including the
cost of the defense thereof, for loss of or
damage to property of the CONTRACTOR
and its invitees, howsoever caused and even
though caused by the negligence of the
indemnified party, its invitees or anyone for
whom they may be acting.
B. COMPANY agrees to release, protect,
indemnify, defend and hold CONTRACTOR
harmless from and against ail liability, claims,
demands and causes of action of every kind
and character, including the cost of the
defense thereof, for loss or damage to
property of the COMPANY and its invitees,
howsoever caused and even though caused
by the negligence of the indemnified party,
its invitees or anyone for whom they may be
acting.
THE parties dispute what was intended by these
provisions. Global argues, based on several different
theories, that this indemnity provision does not operate to
keep Leevac from being liable for the fire (assuming for
purposes of this ruling that Leevac was in fact responsible
for the fire). They assert (1) the term "property" does not
include vessel, (2) the term "claims" does not include claims
by Global and (3) that the provision is against public policy.
New Zion Baptist Church v. Mecco, Inc., 478 So.2d 1364
A39
(La.App. 4th Cir. 1985). Global also makes a number of
arguments that logically they could not have intended this
clause to relieve Leevac from liability because that would
not make sense. In opposition to the motion for summary
judgment, Leevac and its insurers essentially argue that the
language of Paragraph 9B is not ambiguous, therefore parol
evidence should not be allowed. In re Cajun Electric Power
Co-Op., Inc., 791 F.2d 353 (Sth Cir. 1986).
Additionally, there are several issues concerning the
various insurance policies in effect and available that affect
the outcome of this case. Global relies primarily on the
testimony of Charles Burrell, Sales Manager and Secretary-
Treasurer of Leevac Shipyards, to support their argument
regarding the parties’ intentions. (Burrell depo. pp. 5-7).
Mr. Burrell did not intend the term "property" in paragraph
9B to include vessel. However, James Burke, Leevac’s
attorney, stated that he took "property" to mean vessels, dry
dock, machinery and equipment. (Burke depo. pp. 60-61).
Even if the language in Paragraph 9B is ambiguous, which it
is not necessary for this court to decide at this time, a
genuine issue of material fact exists, among other things, as
to the intentions of the parties regarding paragraph 9B.
Accordingly, the motion for partial summary judgment filed
by Global is DENIED.
Opelousas, Louisiana, March 31, 1989.
—John M. Shaw
JOHN M. SHAW
UNITED STATES DISTRICT JUDGE
A40
MASTER SERVICE CONTRACT
THIS AGREEMENT, made and entered into this 4th day
of March, 1988 by and between:
Global Divers and Contractors, Inc.
(hereinafter called "COMPANY")
and
LEEVAC SHIPYARD, INC.
(hereinafter called "CONTRACTOR")
WITNESSETH: THAT,
WHEREAS, COMPANY in the course of its
operations desires to purchase goods or services from
CONTRACTOR and
WHEREAS, CONTRACTOR, represents that it has
adequate equipment in good working order and fully trained
personnel capable of efficiently operating such equipment
and performing services for COMPANY
NOW, THEREFORE, in consideration of the
mutual promises and agreements herein contained, the
parties hereto mutually agree as follows:
1. This Contract shall, until canceled by either
party, control and govern all work performed by
CONTRACTOR for COMPANY under any subsequent
oral and/or written work order(s). Cancellation may be
effected by either party by giving the other party ten (10)
days prior notice. If CONTRACTOR gives notice of
termination, it shall not be effective until such time as
CONTRACTOR has satisfactorily completed all.work in
progress.
A41
The liabilities, obligations ard provisions set forth
herein shall also be effective between the parties and shall
govern and control as between the parties hereto, the
performance of all work performed by CONTRACTOR for
any company for whom COMPANY is simultaneously
working where CONTRACTOR pe-forms such work for
such company at or on the same vesel, work site, work
location, fixed platform or other locition as COMPANY is
operating and/or performing service: for such company.
2. This Contract does not obligate COMPANY to
order work and/or equipment or maerials from
CONTRACTOR, nor does it obligae CONTRACTOR to
accept such order, but it, together wth any applicable work
order, shall control and govern all work accepted by
CONTRACTOR and shall define the rights and obligations
of COMPANY and CONTRACTOR during the term
hereof.
3. Upon COMPANY notifyng CONTRACTOR of
the services and/or equipment desirel, CONTRACTOR
will, upon agreeing to provide same, commence furnishing
the same at the agreed upon time ard continue such
operations diligently and without dehy in a good
workmanlike manner and in strict conformity with the
specifications and requirements contained herein and such
work order.
4. CONTRACTOR agrees t) comply with all laws,
rules and regulations, federal, state and local, which are now
or may become applicable to operations covered by this
Contract and any work order issued n connection herewith.
If any of the terms hereof are in corflict with any applicable
rule, regulation, order or law of a stéte or federal regulatory
body, the terms of this Contract so ia conflict shall not
apply and the applicable state or federal rule, regulation,
order or law shall prevail.
A42
5. Neither COMPANY nor CONTRACTOR shall
be liable to the other for any delays or damages due,
occasioned or caused by reason of federal or state laws or
the rules, regulations or orders of any outside body or
official purporting to exercise authority or control respecting
the operations covered hereby, including the use of tools
and equipment, or due, occasioned or caused by strikes,
action of the elements, or causes beyond the control of the
parties affected hereby, and any delay due to the above
causes, or any of them, shall not itself be deemed to be a
breach of or failure to perform under this Contract.
6. COMPANY shall pay CONTRACTOR for the
work and/or equipment or materials furnished by
CONTRACTOR at the rate stipulated in the work orders
provided for herein, subject to the same being accepted by
COMPANY as fully complying with all the terms,
conditions, specifications and requirements of this Contract
and such work orders; provided, CONTRACTOR shall have
satisfied COMPANY that there are no liens or claims on or
against COMPANY or its property by reason of the
operations of CONTRACTOR hereunder.
7. Delivery tickets covering any materials or
supplies furnished by vendors for which COMPANY is
obligated to reimburse CONTRACTOR, shall be turned in
to COMPANY as received. The quantity, description and
condition of materials and supplies so furnished shall be
verified and checked by CONTRACTOR, and such delivery
tickets shall be properly certified as to receipt by
CONTRACTOR'S representative.
8. A. The CONTRACTOR will procure at its own
cost and expense, including the cost of all deductibles, and
continuously maintain in force, insurance in accordance with
COMPANY ’S Minimum insurance Requirements, and this
Article 8. The CONTRACTOR will, at the commencement
of this agreement, furnish COMPANY a certificate
A43
evidencing all policies and endorsements required to be
obtained by CONTRACTOR under this Article 8 and the
Minimum Insurance Requirements provision and if
requested by COMPANY, to furnish certified copies of all
such insurance policies. CONTRACTOR further agrees
that should CONTRACTOR fail to comply with any or all
of the terms of Article 8. CONTRACTOR will be liable to
COMPANY as an insurer with the terms of said insurance
to be equivalent to the terms of similar policies held by
either CONTRACTOR or COMPANY. CONTRACTOR
will be liable for all deductible amounts for all policies
specified herein.
B. Each insurance policy, except that of worker’s
compensation, required hereunder shall be endorsed to
name COMPANY and such other parties as may be
designated by COMPANY from time to time as additional
insured with no obligation to pay premiums or deductibles.
Said policies shall be primary under any insurances that may
be maintained by COMPANY. No "other insurance”
provision shall be applicable to COMPANY, its affiliated
and subsidiary companies or their underwriters by virtue of
having been named an additional assured under this policy.
C. Each insurance policy required hereunder shall
provide for waivers of subrogation-in favor of COMPANY
and COMPANY, its affiliated and subsidiary companies, or
any employee, agent or CONTRACTOR of COMPANY
and against any person, firm or corporation for whom
COMPANY may be acting.
D. The types of insurance and limits of liability
specified under the Minimum Insurance Requirements
provisions of this agreement shall not be deemed to
constitute a limitation of CONTRACTOR'S liability for
claims, undertakings or indemnities hereunder.
E. Minimum Insurance Requirements:
AG
All such insurance shall be carried in a company or
companies acceptable to COMPANY and shall be
maintained in full force and effect during the term of any
work performed under the terms of this Contract and work
orders, invoices or statements issued pursuant hereto, and
such insurance shall not be cancelled, altered or amended
without thirty (30) days prior written notice having been
furnished to COMPANY.
(1) Worker’s Compensation Insurance covering all
of the agents, servants and employees of
CONTRACTOR for all compensation and other
benefits required by applicable State and Federal
law or by governmental authority on account of
injury, death, sickness or disease. Such insurance
must include coverage for claims under the United
States Longshoremen’s and Harbor Workers’ Act
and be extended to cover operations on the Outer
Continental Shelf.
(2) Employer’s Liability Insurance, with the
“watercraft exclusion” deleted, in the minimum limits
of One Million Dollars ($1,000,000) per accident
covering injury or death to any employee which may
be outside the scope of the Workers’ Compensation
statute of the state in which the work is performed;
(3) Maritime Employer’s Liability Insurance with a
limit of One Million Dollars for each person
covering claims by the agents, servants or employees
of CONTRACTOR with respect to employer’s
liability, whether the claim arises under statute, such
as the Jones Act, under maritime law, or otherwise.
(4) Comprehensive General Liability Insurance,
with the "watercraft exclusion" deleted, with
minimum limits of One Million Doilars ($1,000,000)
for any one accident and One Million Dollars
A45
($1,000,000) for property damage, and shall include
coverage for the services to be performed and for
the obligations and liabilities assumed and
undertaken by CONTRACTOR under this
Agreement.
(5) Automobile Liability Insurance covering owned,
non-owned and hired automotive equipment with
minimum limits of One Million Dollars ($1,000,000)
for injury to or death of any one person, and One
Million Dollars ($1,000,000) combined single limit
bodily injury and property damage;
(6) Full form Protection and Indemnity insurance
on all vessels and floating equipment owned,
chartered, operated, managed or otherwise used,
possessed or controlled by CONTRACTOR. Such
Protection and Indemnity insurance shall be in an
amount equal to the value of any vessels, but not
less than One Million Dollars ($1,000,000), used by
CONTRACTOR to perform services pursuant to
this Contract, and shall include liability for injury or
death of master and members of the crew,
employees of Owner, passengers and third parties.
(7) Hull and Machinery insurance, in an amount
equal to the full value of each on vessel and item of
floating equipment owned, chartered, operated,
managed, or otherwise used, possessed or controlled
by CONTRACTOR to perform services pursuant to
this Contract. If Vessel is to be engaged in the
towage of other vessels, Tower’s Liability Insurance
shall be provided in an amount equal to the actual
value of the Vessel but not less than One Million
Dollars.
9. A. CONTRACTOR agrees to release, protect,
indemnify, defend and hold COMPANY harmless from and
A46
against all liability, claims, demands and causes of action of
every kind and character, including the cost of the defense
thereof, for loss of or damage to property of the
CONTRACTOR and its invitees, howsoever caused and
even though caused by the negligence of the indemnified
party, its invitees or anyone for whom they may be acting.
B. COMPANY agrees to release, protect,
indemnify, defend and hold CONTRACTOR harmless from
and against all liability, claims, demands and causes of action
of every kind and character, including cost of the defense
thereof, for loss of or damage to property of the
COMPANY and its invitees, howsoever caused and even
though caused by the negligence of the indemnified party,
its invitees or anyone for whom they may be acting.
10. A. CONTRACTOR agrees to fully protect,
indemnify, defend (including attorneys’ fees and
investigations, and hold harmless COMPANY, its officers,
directors, agents, servants and employees, and (hereinafter,
Indemnitees(s) from and against any and all claims, losses,
demands or suits and all liabilities of every kind and
character brought by or on behalf of CONTRACTOR and
its employees, agents and subcontractors, which may in any
manner arise from, or be incidental to, directly or indirectly,
failure or defect in CONTRACTOR'S products or services,
performance of the work or preparations therefor (including
transportation of personnel or material to or from any job
site, performance of this Agreement, or breach hereof) and
even though such claims, losses, demands or suits may have
been caused or contributed to by the joint or concurrent
negligence of third parties, COMPANY or other
indemnitee(s).
B. COMPANY agrees to fully protect, indemnify,
defend (including attorneys’ fees and investigations) and
hold harmless CONTRACTOR, its officers, directors,
agents, servants and employees, (hereinafter, Indemnitee(s)
A47
from and against any and all claims, losses, demands or suits
and all liabilities of every kind and character brought by or
on behalf of COMPANY and its employees, agents and
subcontractors or any Indemnitee which may in any manner
arise from, or be incidental to, directly or indirectly, failure
or defect in COMPANY ’S products or services,
performance of the work or preparations therefor (including
transportation of personnel or material to or from any job
site, performance of this Agreement, or breach hereof) and
even though such claims, losses, demands or suits may have
been caused or contributed to by the joint or concurrent
negligence of third parties, CONTRACTOR or other
Indemnitee(s).
11. CONTRACTOR shall report to COMPANY as
soon as practicable all accidents or occurrences resulting in
injuries to CONTRACTOR’S employees or third parties, or
damages to property of third parties, arising out of or during
the course of services for COMPANY by CONTRACTOR
or any subcontractor of CONTRACTOR, and, when
requested, shall furnish COMPANY with a copy of reports
made by CONTRACTOR to CONTRACTOR'S insurer or
to others of such accidents and occurrences.
12. CONTRACTOR agrees to pay all licenses and
fees levied or assessed on CONTRACTOR in connection
with or incident to the performance of work orders issued
pursuant to this contract by any governmental agency and
unemployment compensation insurance, old age benefits,
social security or any other taxes upon the wages
Contractor, its agents, employees and representatives.
13. In the event CONTRACTOR or its
subcontractors use any equipment, machinery, tools or other
items belonging to or furnished by COMPANY,
CONTRACTOR shall examine the same or cause the same
to examined prior to such use. CONTRACTOR shall
immediately notify COMPANY of any defects which are
A48
found in such equipment, machinery, tools or other items
furnished by or on behalf of COMPANY wherein such
defects would render such items unsuitable or unsafe for the
operations to be commenced. Should CONTRACTOR fail
to make such an examination or fail to report a defect in
such item or items, CONTRACTOR shall be deemed to
have assumed all risk and liability for any mishap which may
occur in operations conducted hereunder by any reason of
failure or defecis in such equipment, machinery, tools or
other items.
14. A. CONTRACTOR warrants that all work or
services provided hereunder shall be performed in a good
and workmanlike manner, in strict accordance with any
plans or specifications furnished, using skilled, competent
and experienced workmen and supervisors. Any portion of
the work found defective or unsuitable in the judgment of
Company, shall be removed, replaced or corrected by
Contractor without additional cost or risk to Company.
B. CONTRACTOR warrants that all goods.
products, materials, equipment, supplies or manufactured
articles furnished by Contractor in the performance of work
or services entering into or necessary to the construction or
completion of the work or services shall be of the best
quality for their respective purposes shall be complete,
operational and free from defect.
C. CONTRACTOR shall be an independent
contractor with respect to the performance of all work
hereunder, and neither CONTRACTOR nor anyone
employed by CONTRACTOR shall be deemed for any
purpose to be an employee, agent, servant or representative
of COMPANY in the performance of any work or services
or party thereof in any manner dealt with hereunder.
COMPANY shall have no direction or control of the
CONTRACTOR or its employees and agents Company
being interested only in the results to be obtained. The
A49
work contemplated herein shall meet the approval of
COMPANY and he subject to the general right of
inspection for COMPANY to secure the satisfactory
completion thereof. The actual performance and
superintendence of all work hereunder shall be by
CONTRACTOR, but COMPANY or its representatives
shall have unlimited access to the operations to determine
whether the work is being performed by CONTRACTOR in
accordance with ali provisions of this Contract and the work
order.
15. In addition to all other indemnifying provisions
contained herein, CONTRACTOR represents and warrants
that the use or construction of any and all tools and
equipment furnished by CONTRACTOR and used in the
work provided for herein does not infringe on any license or
patent which has been issued or applied for, and
CONTRACTOR agrees to indemnify and hold COMPANY
harmless from any and all claims, demands, and causes of
action of every kind and character in favor of or made by
any patentee, licensee or claimant of any right or priority to
such tool or equipment, or the use or construction thereof,
which may result from or arise out of furnishing or use of
any such tool or equipment by CONTRACTOR in
connection with the work under this Contract and
applicable work orders. .
16. In addition to all other indemnifying provisions
contained herein, CONTRACTOR agrees that it will
require all subcontractors engaged by it to provide insurance
and indemnity agreements affording COMPANY the same
protection as provided in the insurance and indemnity
agreements contained in this Contract.
17. In the event there is a conflict between the
provisions hereof and any papers or documents which may
have been executed or passed between the parties hereto in
connection with the subject matter hereof, it is understood
ASO
and agreed that the provisions hereof shall be controlling
except as specifically superceeded by any work order. It is
expressly understood and agreed by the parties hereto that
no provision of any delivery ticket, invoice or other
instrument used by CONTRACTOR in setting forth the
operations conducted hereunder shall supersede the
provisions of this Contract.
18. Time is expressly declared to be the essence in
this Contract. If either party hereto defaults in the
performance of this Contract, or work commenced under
work orders as provided for herein, the party has the option
to terminate this Contraci and the work order involved,
such termination shall be without prejudice to any other
rights which the terminating party may have.
19. No waiver by either party hereto of any of the
terms, provisions or conditions hereof shall be effective
unless said waiver shall be in writing and signed by an
authorized representative of such party.
20. This paragraph intentionally left blank.
21. A. The term "invitees" as used herein shall
mean the agents, Subcontractors employees, employees of
agents and/or subcontractors of, and invitees of a party
hereto. Employee status shall be determined solely by
payroll listings without regard to allegations of or judicial
findings of "borrowed servant" status or similar legal
theories.
B. The term "property" as used herein shall mean
all property (real or personal), equipment, material or
supplies belonging to or leased by a party or its invitees.
C. Except for Article 10 hereof, the term
"negligence" as used herein shall mean the sole, joint and/or
concurrent negligence of a party and shall also, include any
AS1
preexisting conditions, as well as any theory of recovery
based on strict liability, including, but no limited to,
unseaworthiness of a vessel, product liability, merchantability
or any other legal right or recovery.
D. The term "COMPANY" as used uuerein shall
mean the company and/or companies named in the first
paragraph of this Contract and all affiliated, subsidiary
and/or interrelated companies.
E. The term "CONTRACTOR" as used herein shall
mean the company named in the first paragraph of this
Contract and all affiliated, subsidiary and/or interrelated
companies.
22. Any provisions of this agreement or of any part
hereof which is void, prohibi» J or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective only
to the extent of such voidance, prohibition or
unenforceability without invalidating the remaining
provisions hereof, or affecting the validity or enforceability
of such provision in any other jurisdiction or the validity or
enforceability of this agreement as a whole.
23. In connection wita performance under this
agreement, Contractor will not discriminate against any
employee or agent for employment because of race, creed,
color, sex, age, national origin, religion or physical or mental
handicap whether with respect to employment, promotion,
demotion, termination or layoff, remuneration or otherwise.
Contractor shall be bound by and comply with applicable
provisions of statutes, ordinances, executive orders or other
laws, rules, regulations or orders of any Federal, State, local
or other duly constituted authority relating in any way to
nondiscrimination or ponsegregation, including but not
limited to compliance to the extent required with provisions
of Executive Orders 11246, 11458, 11701 and the
Vocational Rehabilitation Act of 1973.
A52
24. All notices to be given with respect to this
Contract and the applicable work orders shall be given to
COMPANY and to the CONTRACTOR, respectively, at
the addresses herein below show. All sums payable
hereunder to contract or shall be payable at the address
herein below shown unless otherwise specified herein or in
the applicable work order.
CONTRACTOR(S) | Leevac Shipyards, Inc.
P.O. Box 1190
Jennings, Louisiana 70546
COMPANY ‘(S) Global Divers and Contractors, Inc.
P.O. Box 10840
New Iberia, Louisiana 70560
IN WITNESS WHEREOF, the parties hereto have
executed this Contract upon the date above show in several
counterparts, each of which shall be considered as an
original.
CONTRACTOR(S)
LEEVAC SHIPYARDS, INC.
Witness:___ ME. Hill By:___Charles Burrell
COMPANYS)
GLOBAL DIVERS & CONTRACTORS,
INC.
Witness: M.E. Hill By:___ Peter J. Borne
Peter J. Borne
Secretary-Treasurer
A53
STATE OF LOUISIANA
PARISH OF IBERIA
WORK ORDER
FOR CONVERSION OF VESSEL
MV WESTERN NARROWS
OFFICIAL NUMBER 618316
This agreement made and entered into this 4th day
of March, 1988, by and between:
GLOBAL DIVERS AND
CONTRACTORS, INC., a Louisiana
corporation domiciled in the Parish of Iberia
whose mailing address is P.O. Box 10840,
New Iberia, Louisiana 70562-0840,
represented herein by its duly authorized
officer,
(hereinafter referred to as Company)
and
LEEVAC SHIPYARDS, INC. a Louisiana
corporation domiciled in the Parish of St.
Mary whose mailing address is P.O. Box
1190, Jennings, Louisiana, represented
herein by its duly authorized officer,
(hereinafter referred to as Contractor).
WITNESSETH
For the considerations, covenants and
undertakings hereinafter expressed, the parties do hereby
agree as follows:
AS4
1.
Global Divers & Contractors, Inc. and LEEVAC
Shipyards, Inc. are parties to that certain agreement dated
March 4, 1988, entitled Master Service Contract, and the
parties agree that this Work Order is issued and accepted
pursuant to and subject to all terms and conditions of said
Master Service Contract.
2.
MV Western Narrows is Vessel herein referred to
and bears the official number 618316 but may be referred to
herein or in plans and specifications as MV Global 1000.
>
Contractor hereby covenants and agrees with
Company to furnish all labor and materials for the repairs to
and conversion of Vessel, in accordance with the conditions
hereinafter set forth and in a good and workmanlike
manner in strict accordance with plans and specifications
furnished by Company and to deliver Vessel to Company,
free and clear from all claims or liens at CONTRACTOR’s
dock on the Mermentau River.
a
Work to be performed under this contract shall be
commenced promptly after delivery of the vessel to
contractor’s dock and diligently and expediently pursued
thereafter until, and completed in accordance with plans
and specifications including final clean up of the vessel.
The parties agree that time is of the essence in this
agreement.
ASS
Contractor hereby agrees to perform all work,
furnish all labor, tools, materials, appliances, scaffolding and
delivery of every description necessary to do and perform all
work required pursuant to this agreement, including all
contract documents annexed hereto and made part hereof
and deliver the same for payment as follows:
i. All work to be done on a time and material
basis. Hourly rate at $21.00 per hour for a 9
hour work day Monday thru Friday.
Overtime rate is $27.00 per hour after 9
work hours per day and weekends. A small
second shift is available at the same rate.
Material at cost (including freight) plus 10%.
No overtime shall be charged unless
specifically authorized in writing in advance
by Global.
y x Based on Vessel arriving at LEEVAC
Shipyard on 7 March 1988, the dry dock
should be available during the second or
third week of March.
3. Shorepower at $20.00 per day plus hookup
and unhook charge (about 8 hours).
4. Dry docking at $1200.00 which includes
initial setting of blocks. Shifting of blocks, if
required, based on man-hours required. No
lay day charge for dry dock as long as
LEEVAC is doing work on the Vessel while
on dock.
5. Ship repairers legal liability insurance
charged at 1.25% of total invoiced amount of
job.
AS6
Consumable items are items that are not
necessarily a part of the delivered Vessel but
are necessary to make the repairs or
conversion. These are normally items that
are requisitioned by shipyard workers from
the LEEVAC warehouse to perform their
jobs. Included as consumables are tape,
outfitting tips, light bulbs, grinding discs,
welding and cutting lens, flashlight batteries,
plastic vent tubing, visqueen, paint brushes,
dust masks, rollers, blasting hood lens,
welding blankets, rubber gloves, rain coats
(when applying Compound H), etc. subject
to approval of Company’s shipyard
representative. These are charged as
material costs.
Consumable items also included as material
costs are blasting sand, paint thinner, welding
rods and oxygen.
Payment Schedule:
Down Payment - at time of committing to
bring Vessel to LEEVAC Shipyard - $25,000
to purchase initial steel order. LEEVAC
will provide proof of purchase prior to
presenting any additional invoices.
Interim Payments - Every 2 weeks after
arrival of Vessel, LEEVAC will present
invoices for payment if labor and material
costs not previously invoiced. Payment due
to LEEVAC within 7 days of receipt of
invoice.
Global Divers responsible for all sales taxes,
if any.
AS7
10. Company representative will be given copies
of time sheets, material requisitions,
consumables and direct material costs on a
daily basis to approve costs expended from
previous day.
6.
6.1 All work herein specified, or otherwise required
pursuant to law or applicable U.S. Coast Guard and
American Bureau of Shipping Standards and regulations,
shall be done in the best marine manner and to the true
meaning and intent of the plans and specifications.
6.2 Contractor shall perform no additional work of
any kind which is not specified in the plans and
specifications unless a separate estimate in writing for same
before its commencement shall have been submitted by
Contractor and the consent of the Company obtained in
writing.
7.
7.1 WARRANTY: Contractor warrants that all
work will be done in a first class workmanlike manner, and
that all labor and installations made shall meet the
requirements and standards in the specifications, and all
materials intended for use and equipment used by Builder
shall be of the quality set forth in the specifications. All
component parts of the Vessel except those specified or
furnished by the Company, shall conform to the standards
of first class material for commercial ships of this class.
7.2. EQUIPMENT PURCHASED: Contractor
does not warrant any equipment purchased by it for
installation on the Vessel is free from manufacturer’s
defects, and specifically disclaims any warranties expressed
or implied, with respect to such equipment, but does hereby
AS8
extend the manufacturer’s warranty or guarantee, if any, to
the Company. Contractor will use its best efforts and will
cooperate with the Company in order to enforce any claims
for any manufacturer’s defects that may occur.
7.3. Contractor’s warranty shall extend only to those
defects which are reported in writing to the Warranty
Department of Contractor within six (6) months of re-
delivery of the Vessel. In the event that the Company
notifies Contractor of any defect covered under this
Warranty, Contractor will make repairs and/or replacement,
at its option, at the Contractor’s yard without expense to
Contractor for transporting the Vessel or any component
thereof to and from the yard; provided that if it is not
practical to have the Vessel return to the yard, Company
may, with the prior written consent of the Contractor, have
such repairs and/or r2placements made elsewhere and in
such event, Contractor shall pay the Company a sum
equivalent to the price the Contractor would charge for
removing such a defect at its yard, or failing agreement im
this regard, as is determined by arbitration hereunder,
limited to one hundred twenty percent (120%) of the
average cost to effect such repairs and/or replacement in
repair yards in the Gulf Coast Area of the United States of
America. Builder shall not unreasonably withhold its
consent to the making of repairs and replacements at other
yards.
7.4. The sole and exclusive remedy of the Compainy
for any such claim shall be the obligation of Contractor,
under and pursuant to this section, to repair and/or replace,
or cause to be repaired and/or replaced, any such defective
workmanship or installation of materials and equipment
provided such defects or breakdowns have not been caused
by the negligent operation or maintenance of the Vessel or
the Vessel’s equipment, after delivery, by those in charge of
the Vessel’s operations, or other parties not in the employ
of the Contractor. For breach of the warranty contained in
AS9
this Section, Contractor shall not be responsible for any sum
in excess of the cost of the repairs or replacement as
specified herein, it being specifically understood the
Contractor is not responsible for delay, demurrage, loss of
profits, loss of use or any other consequential damages.
Contractor does not warrant any painting done unless it can
be shown that the manufacturer’s instructions were not
followed during applications.
8.
The Global Project Coordinator for this project is
M.E. Hill and the Project Manager for this project is Larry
Bergman. M.E. Hill or Larry Bergman shall at any time
give notice that they are assigning new persons to act as
Coordinator on behalf of Global. Their responsibilities shall
include coordination of the activities of all parties engaged
in the performance of work and/or furnishing of materials
for the job site. Project Coordinator shall have the
authority to establish schedules for the delivery of materials,
performance of work, inspect, accept or reject workmanship
or materials, approve payment therefor and to require such
invoices, waivers of lien and other documentation as Project
Coordinator may deem necessary.
INSPECTION BY COMPANY’S REPRESENTATIVE.
Contractor will furnish and equip reasonable office space at
its yard for the duly authorized representative(s) of the
Company who shall have reasonable access to the work of
the Contractor. Company’s representative(s) shall promptly
inspect and accept ali workmanship and material which is in
conformance with this Agreement.
9.
_ If, during the progress of the work to be performed
hereunder, Contractor should become bankrupt, insolvent,
fail or refuse to pay laborers or suppliers of material, refuse
A60
or neglect to supply a sufficiency of material or of workmen
or fail to or refuse to follow the plans and specifications or
to comply with any part of this contract, then Company at
its option, shall have the right and power to enter upon the
Contractors premises and take possession of the Vessel and
may immediately terminate this contract, whereupon all
claims of Contractor hereunder shall cease and Company
may provide materials and workmen sufficient to complete
the said work after giving forty-eight (48) hours notice in
writing to Contractor at the address set forth hereinabove.
The expense of notice, cost of completing the various
works, together with all fees, charges, including attorneys’
fees, incident to the completion or enforcement of this
contract, shall be a charge and lien against Contractor and
may be deducted from the amount due or to become due to
him. Company shall not be liable or accountable to
Contractor in any way for the manner in which the work
was completed pursuant to this paragraph, nor shall the
exercise of any rights herein be construed as a substitute of
or a waiver of any of the legal rights of Company against
Contractor, arising out of this contract.
10.
10.1. Contractor shall comply with the applicable
provisions of Federal, State and local safety laws, codes and
other governmental and/or municipal regulations and shall
take all necessary precautions for the safety of employees,
visitors and all persons on or adjacent to the job site.
Contractor shall provide, erect and maintain proper warning
signals, lights, signs, barricades and all other necessary safety
precaution, on and along the work, as are required by the
conditions and the progress of the work for the protection
of the work, workmen and the public.
10.2. Contractor shall purchase and maintain with
solvent insurers adequate policies of liability insurance
which shall provide that Company shall be given at least ten
A61
(10) days notice in writing prior to cancellation. Said policy
shall be endorsed to waive subrogation against Company
and shall name Company as additional insured.
10.3. Contractor shall be responsible for payments
of all taxes and contributions due or payabie to his
employees, agents and/or subcontractors, under the Federal
Security Act and applicable state laws.
11.
The provisions of this agreement are severable such
that if any term or provision hereof is deemed to be invalid
or unenforceable the remainder of this agreement shall not
be affected thereby.
12.
ARBITRATION: In the event a dispute arises
hereunder between the parties, such dispute shall be
submitted to ABS Worldwide Technical Services
(ABSTECH) in New Orleans, Louisiana and request an
opinion. Both parties will be bound by the decision of the
ABSTECH representative provided both parties agree on
the specific individual designated by ABSTECH. The
Arbitrator shall determine which party or the proper
proportion which each party shall assume of the expenses or
arbitration, and the arbitration by the party or parties to
which such expenses are directed to be paid.
13.
APPLICABLE LAW: This Agreement shall be
governed by the laws of the State of Louisiana.
A62
14.
PATENTS: Company shall defend Contractor and
hold it harmless from claims of infringement of any patent
rights on account of designs, parts or equipment for the
vessel furnished by the Company.
Contractor shall defend Company and hold it
harmless from claims of infringement of any patent rights
arising from the use in the Vessel of designs, parts or
equipment supplied by Contractor.
A63
In witness whereof the parties have executed this
work order, at New Iberia, Louisiana,
on the date and date first above written.
WITNESSES: COMPANY:
GLOBAL DIVERS AND
CONTRACTORS, INC.
BY: Peter J. Borne
CONTRACTOR:
LEEVAC SHIPYARDS, INC.
BY: _ Charles Burrell
Leevac Shipyard, Inc. received check No. 9132 from
GLOBAL DIVERS AND CONTRACTORS, INC. in the
amount of Twenty-Five Thousand and No/100 Dollars
($25,000.00) as down payment on boat alterations on the
M/V Western Narrows (Global 1000).
LEEVAC SHIPYARD, INC.
Charles Burrell
Charles Burrell
March 4, 1988
Date
A64
GLOBAL DIVERS AND CONTRACTORS, INC.
AND THE SCANAV CORPORATION
NOTICE TO CONTRACTORS, AGENTS AND INSURANCE
COMPANIES:
Please Complete and Return this Form to:
CERTIFICATE OF INSURANCE
This is to certify that the following insurance policies, issued
by the following insurance company or companies are in full force
and effect. Said insurance company(ies) agree(s) that in the event
any ciianges are made in the policies which affect the interest
of Corporation and/or subsidiary and/or affiliated companies,
or in the event said policies are canceled or materially changed
written notice will be given to thirty (30) days prior to the ef-
fective date thereof.
Name of Insured: CARI CORP., LEEVAC ETAL
Address: P.O. Box 2607, Morgan City, LA 70381
Description of Insured Operations: Conversion 185’ supply vessel
M/V Western NARROWS to Diving Vessel
INSURANCE POLICIES IN FORCE
A. WORKMEN’S COMPENSATION Statutory
$500,000 Each Employee
EMPLOYER'S LIABILITY $500,000 Each Accident
CARRIER: Hartford Accident & Indemnity
Policy Term: 4/1/87 - 4/1/88
ADDRESS: P.O. Box 61267 Policy No.: 43WZVV3562
New Orleans, LA 70161
B. COMPREHENSIVE GENERAL LIABILITY:
Bodily Injury $500,000 Each Person
$500,000 Each Accident
Property Damage $500,000 Each Accident
CARRIER: Boston Old Colony Insurance Co.
Policy Term: 4/1/87 - 4/1/88
ADDRESS: P.O. Box 8870 Policy No. L2-98-86-86
A65
Metairie, LA 70011
C. COMPREHENSIVE AUTOMOBILE LIABILITY:
Bodily Injury Combined Single Limit 1,000,000 Each Person
$____ Each Accident
Property Damage $____ Each Accident
CARRIER: Liberty Mutual Insurance Co.
Policy Term: 4/1/87 - 4/1/88
ADDRESS: P.O. Box 9011 Policy No. ASI-391-064920-017
Tyler, TX 75711-9011
D. PROTECTION & INDEMNITY: Form of Coverage
American Institute Builder’s
Vessel: WESTERN NARROWS (Attach List) Risk Clauses
2/79 $ Each Accident
Policy Term 1/1/88-1/1/89 $1,000,000 Minimum P&I
Policy No. HB740082 As Declared to $7,500,000 any one
vessel.
CARRIER: Boston Old Colony Ins. Co. (MOAC)
ADDRESS: P.O. Box 8870, Metairie, LA 70011
Each Person
Builder’s Risk
E. HULL & MACHINERY - Vessel(s): WESTERN NARROWS
(Attach List)
CARRIER: Boston Old Colony Ins. Co. MOAC
Policy Term: 1/1/88-1/1/89 $ Each Person
ADDRESS: P.O. Box 8870 Policy No. HB740082 $____ Each
Accident
Metairie, LA 70011. As declared to $7,500,000 any one
vessel.
F. EXCESS LIABILITY: Form of Coverage ____. $10,000,000
A66
CARRIER: Lloyds of London & Institute COS.
Policy Term: 4/1/87-4/1/88
ADDRESS: 824 Gravier Street Policy No. GCM 12793
New Orleans, LA 70112
(;. AIRCRAFT LIABILITY: Form of Coverage
$ Each Person
CARRIER: Policy Term:
ADDRESS: Policy No.
H. SHIPREPAIRER’S LEGAL LIABILITY Poiicy Term:
1/1/88-89 Policy No. HB740084 $1,000,000
Carrier: Boston Old Colony Ins. Co., P.O. Box 8870,
Metairie, LA 70011 Combined Single Limit
A67
PLEASE ANSWER THE FOLLOWING QUESTIONS REGARD-
ING THE FOREGOING POLICIES. EACH QUESTION MUST
BE ANSWERED.
A. Worker’s Compensation and Employer’s Liability:
3
2.
3.
Does this policy contain:
(a) U.S. Longshoremen’s and Harbor Workers Compen-
sation Endorsement? (x) yes ( ) no
(b) Outer Continental Shelf Act Endorsement?
(x) yes ( )no
(c) Voluntary compensation Endorsement, including
Maritime Operations? (x) yes ( ) No
(d) Is coverage afforded for transportation, wages,
maintenance and cure? (x) yes ( ) no
Covered separately under P&I policy
Limits of Liability — Coverage B$ Each Person
$ Each Occurrence
(e) Provision that a claim “in rem” shall be treated as a
claim against the insured? (x) yes ( ) no
It is hereby certified that this policy is filed with the proper
authorities in the state(s) of: Louisiana
Has filing been made with U.S. Deputy Commissioner?
(X) yes ( ) No
B. Comprehensive General Liability:
l.
a
5.
If insured has contract with or subsidiaries containing “hold
harmless” agreement: does policy cover such assumed
liability? (X) yes () no
Does Policy cover:
(a) Contractual liability? (X) yes ( ) no
(b) Property damage resulting from blasting and explosion,
collapse and underground damage? (X) yes ( ) no
(c) Water craft owned and/or by the insured away
from insured premises? (X) yes ( ) no
9?
. Territory covered Continental U.S.:
(a) Does policy cover waters offshore of the USA?
(X) yes ( ) no
(b) If answer to (a) is “yes”, up to how many miles off-
shore? Unspecified
Are products/completed operations covered?(X) yes ( )no
Automobile Liability: 1. Does this policy cover:
A68
(a) All owned automobiles? (X) ves ( ) no
(b) Non-owned automobiles? (X) yes ( ) no
(c) Hired automobiles? (X) yes ( ) no
Protection and Indemnity including Wreck & Debris Removal:
1. What deductible applies? $15,000.00 Maximum
2. What are navigation limits? Trial trips up to 300 miles or
held covered.
Hull and Machinery:
1. What deductible applies? $15,000.00 Maximum
2. What are navigation limits? Trial trips up to 300 miles or
held covered.
3. Tf vessel is used as a drilling barge or drilling tender, does
policy cover:
(a) Drilling equipment and supplies on board?(X) yes ( ) no
(b) Damage resulting from blowout and cratering?
(X) yes ( ) no
Excess Liability:
1. Does the policy provide coverages in excess of the limits pro-
vided in B.C,D,E and G? (X) yes ( ) no
Aircraft Liability: Except Statutory Compensation
1. Does policy include extension of territorial limits to include
the Gulf of Mexico? (X) yes ( ) no
It is hereby certified that Contractors’ policies described in this cer-
tificate have been endorsed to waive any and all rights of subroga-
tion, whether created by law, equity, or contract, against its af-
filiated and subsidiary companies, or any officer, director, employee
agent, invitee or contractor or subcontractor of or against any per-
son, firm or corporation for whom may be acting. (X) yes ( ) no
It is hereby certified that the insurance policies have been en-
dorsed to name , its affiliated and subsidiary companies
as additional assureds with no obligation to pay premiums,
deductibles or liability for expenditures under any claim.
Except Workers Compensation (X) yes () no
It is hereby certified that the insurance policies provide that when-
ever any of the properties and/or liabilities at the time of loss
is covered by these insurances whether or not coverage is effected
by other insurance, prior, simultaneous or subsequent in date to
this policy and by whomsoever effected, this policy shall be consi-
dered primary, and in case of any loss, the limits stipulated herein
shall be exhausted prior to any other insurances’ participation.
A69
(X) yes () no
This certificate is to used to list such coverages as the policies
listed thereon provide, and does not reflect our insurance
requirements.
B. COMPREHENSIVE GENERAL LIABILITY Boston Oid
Colony Ins. Co. BY: signed
(Insurance Company) (Authorized Representative)
Date 2/26/88 Place New Orleans, LA
C. AUTOMOBILE COVERAGE Liberty Mutual Insurance Co.
BY:___signed
(Insurance Company) (Authorized Representative)
Date 2/26/88 Place New Orleans, LA
D. PROTECTION & INDEMNITY Boston Old Colony Ins. Co.
BY:___ signed
(Insurance Company) (Authorized Representative)
Date 2/26/88 Place New Orleans, LA
E. HULL & MACHINERY Boston Old Colony Ins. Co.
BY:____signed
(Insurance Company) (Authorized Representative)
Date 2/26/88 Place New Orleans, LA
F. EXCESS LIABILITY Lloyds of London & Institute Cos.
BY:___ signed
(Insurance Company) (Authorized Representative)
Date 2/26/88 Place New Orleans, LA
G. AIRCRAFT OR OTHER
BY:
(Insurance Company) (Authorized Representative)
Date Place
Producing Agent: Laurance Eustis Insurance Agency, Inc.
Address: 345 Baronne Street, New Orleans, LA 70112
Telephone No. 504-586-044
A70
KUTNER BUICK, INC.
v.
AMERICAN MOTORS CORPORATION
and American Motors Sales Corp.
Civ. A. No. 85-2400.
United States District Court, E.D.
Pennsylvania.
October 2, 1986
David Berger, H. Laddie Montague, Jr., Philadelphia, PA,
for plaintiff.
William J. Lehane, Philadelphia, PA., for American Motors
Corp. and American Motors Sales Corp.
MEMORANDUM
SCIRICA, District Judge.
*1 Nearly 160 years ago, the Pennsylvania Supreme
Court observed that few decisions are more perplexing than
whether parol evidence of parties’ intent is admissible to
interpret a written agreement. See Thompson v.
M’Clenachan, 17 Serv. & Rawle 110, 113 (Pa. 1827). The
cross-motions for summary judgment before me today prove
that this task has become no easier with the passage of
time.
Plaintiff, Kutner Buick, filed suit in April, 1985,
charging defendants, American Motors Sales Corp. ("AMC
Sales") and American Motors Corp. ("AMC") with breaching
an automobile franchise agreement by appointing a new
dealer in Northeast Philadelphia (Count I. [FN1]
Defendants move for summary judgment, arguing that a
fully integrated written agreement granted plaintiff a
A71
nonexclusive dealership territory. As a result, defendants
argue, extrinsic evidence of prior oral agreements or
negotiations is inadmissible to show the existence of a
material issue of disputed fact concerning the exclusivity
provision of the written contract. Thus, plaintiff maintains,
not only is parol evidence admissible, but it supports a grant
of summary judgment in its favor. Plaintiff further argues
that certain contract terms are ambiguous, thereby
rendering parole evidence admissible to interpret those
terms.
In reviewing a motion for summary judgment, I must
determine whether a material issue of disputed fact exists by
viewing the facts and inferences drawn from the facts in the
light most favorable to the nonmoving party. Fed.R.Civ.P.
56; Pollock v. American Tel. & Tel., 794 F. 2d 860, 864 (3d
Cir. 1986); Gans v. Mundy, 762 F.2d 338, 340 (ed Cir.), cert.
denied, 106 S. Ct. 537 (1985). I must further determine
whether the moving party is entitled to judgment as a
matter of law. Fed.R. Civ.P. 56; Pollock, supra, at 764;
Gans, supra, at 340. Based on these principles and for the
reasons stated below, I deny the cross-motions for summary
judgment.
This court’s jurisdiction is based on 28 U.S.C. s 1332, and
the case is governed by Pennsylvania law. In their written
contract, the parties stipulated that Pennsylvania law shall
govern any disputes concerning their agreement, and neither
party has contested the viability of this choice of law clause.
I concur. American Air Filter Co., Inc. v. McNichol, 527
F.2d 1297, 1299 n. 4 (3d Cir. 1975); Boase v. Lee Rubber &
Tire Corp., 437 F.2d 527 (3d Cir. 1970).
FACTS
In October, 1980, a Kutner Buick official contacted AMC
requesting an AMC dealership in Northeast Philadelphia.
AMC denied the request, explaining that another dealer
A72
(Matt Slapp) at Grant Avenue and Academy Road already
operated an AMC dealership about five miles from Kutner
Buick. When Slapp closed his AMC dealership in 1981,
Kutner Buick renewed its request for an AMC franchise.
Jules Kutner, owner of Kutner Buick, emphasized in the
negotiations with William Carroll, an AMC official, that
Kutner Buick would not accept the AMC franchise unless it
received territory protection ensuring that Kutner was the
sole AMC dealer in the Northeast Philadelphia market area.
AMC objected to Kutner’s request, explaining that it must
maintain two dealer points or trade areas in the Northeast
Philadelphia market: one known as "Philadelphia-
Northeast" and the other known as "Philadelphia-Academy."
Further oral negotiations followed in which the parties
apparently reached an understanding whereby AMC would
maintain two dealership locations in Northeast Philadelphia,
but nonetheless, assure Kutner some type of territory
protection from competition -- at least during the formative
years of Kutner’s AMC operation.
*2 This oral colloquy however, is not reflected in the
parties’ October, 1981 written contract. [FN2] Instead, the
writing includes a merger clause and provides that Kutner’s
franchise shall be nonexclusive and shall cover the
Philadelphia-Northeast area. Kutner explained that he
signed the agreement, notwithstanding the absence of any
territory protection, based on Carroll’s assurance that the
prior oral agreement of nonexclusivity would control.
Carroll and other AMC officials have confirmed the Carroll-
Kutner oral agreement, but defendants now attempt to
recast the conversation as Carroll’s expression of his
marketing strategy, not a promise to Kutner.
II. Application of the Parol Evidence Rule.
In construing a contract, my primary purpose is to
ascertain the intent of the parties. Mellon Bank, N.A. v.
Aetna Business Credit, 619 F.2d 1001, 1009 (3d Cir. 1980);
A73
Robert F. Felte, Inc. v. White, 451 Pa. 137, 143, 302 A.2d
347, 341 (1973); Z & L Lumber Co. of Atlasburg v.
Nordquist, ---- Pa. Super. ----, ----, 502 A.2d 697, 700 (1985).
In most cases, the strongest and oftentimes most reliable
indication of parties’ objective intent is the written
contractual agreement. Gianni v. Russell & Co., 281 Pa
320, 323, 126 A. 791, 792 (1924) (barring fraud or mistake,
writing is best and only evidence of agreement); Mellon
Bank, supra, at 1009 (sanctity of written word is paramount
in contract interpretation). The rule set forth in Gianni
operates on the premise that a written agreement merges all
prior negotiations into a final expression of the parties’
intent; thereby barring parol evidence that contradicts a
writing. Gianni, supra, at 323, 126 A. at 792. See also
Farnsworth, Contracts s 7.3, at 451 (1982).
Standing along therefore, the parol evidence rule would
bar plaintiff from contradicting the written contract by
evidence of a prior or contemporaneous agreement between
AMC’s Carroll and Kutner. Both parties are sophisticated
businessmen who understand the meaning of the agreement.
See Beckman v. Vassall-Dillworth Lincoln-Mercury, 321
Pa.Super. 428, 468 A.2d 784, 789 (1983). Moreover, the
agreement states in plain language that: (1) Kutner’s
market area is "Philadelphia-Northeast" (not Philadelphia-
Northeast" and "Philadelphia-Academy” as Kutner
requested) (defendants’ Exhibit "A," P 1); (2) the writing
embodies the complete agreement of the parties
(defendants’ Exhibit "A," P7, franchise provision P 29); and
(3) Kutner has a nonexclusive right to sell AMC products
(defendants’ Exhibit "A," franchise provision P 1). If parol
evidence of a contradictory oral agreement is inadmissible,
these written provisions clearly support defendants’ motion
for summary judgment.
The parol evidence rule however, includes its exceptions,
see Gianni, supra, at 323, 126 A. at 792, one of which
admits parol evidence if a party acknowledges a prior oral
A74
promise. This exception is limited to those cases in which
the proponent presents "clear, precise, and convincing
evidence" establishing that the party enforcing the contract
admitted or acknowledged that the writing does not express
the entire agreement between the parties. Scott v. Bryn
Mawr Arms, Inc., 454 Pa. 304, 308-11, 312 A.2d, 592, 594-95
(1973); Coal Operators Cas. Co. v. C.T. Easterby & Co.,
Inc. 440 Pa. 218, 224, 269 A.2d 671, 673 (1970); Dunn v.
Orloff, 420 Pa. 492, 496, 218 A.2d 314, 316, 317 (1966);
Boyd Estate, 394 Pa. 225, 233, 146 A.2d 816, 820 (1958);
Allinger v. Melvin, 315 Pa. 298, 304, 172 A. 712, 714 (1934);
Cohn v. McGurk, 330 Pa. Super. 333, 342, 479 A.2d 578,
582-83 (1984). [FN3] Thus, as a matter of law, I must
determine whether Kutner has properly invoked this
exception. Gianni, supra, at 324, 126 A.792; O’Brien v.
O’Brien, 362 Pa. 66, 71, 66 A.2d 309, 311 (1949).
*3 Clear and convincing evidence of an admission that a
writing is not the entire agreement of the parties must rest
on the testimony of the party seeking to enforce the
contract (i.e., AMC). Scott, supra, at 310, 312 A.2d at 595;
Dunn, supra, at 500-01, 218 A.2d at 319 (quoting Universal
Film Exchanges, Inc. v. Viking Theatre Corp., 400 Pa. 27,
30, 161 A.2d 610, 617 (1960)). Sworn testimony or
pleadings of an enforcing party or disinterested witnesses
admitting an incomplete writing satisfies the "clear and
convincing” requirement. Boyd Estate, supra, at 231, 232,
146 A.2d at 821. Similarly, a letter admitting a mistake in a
bond agreement and reflecting a contrary understanding
satisfies the evidentiary standard, Allinger, supra, at 304, 172
A. at 714-15. See also Coal Operators, supra, at 223-24,
269 A.2d at 674 (letter from corporate officer admitting
exclusive agency despite contractual provision stipulating
nonexclusivity); Yuhas,v. Schmidt, 434 Pa. 447, 457, 258
A.2d 616, 621 (1969) (admission made during trial
testimony). Testimony failing to clear constitute an
admission includes: (1) a letter prepared by one party’s
attorney and signed by the opposing party, Scott, supra, at
A75
310-11, 312 A.2d at 596; and (2) a statement admitting a
nonmaterial variance between the writing as the intent of
the parties, Dunn, supra, at 449, 218 A.2d at 320.
My examination of the depositions and exhibits in this
case reveals plaintiff has met its burden by clearly showing
defendants’ agents admitted a prior oral agreement not
embodies in the writing. Not only did AMC’s Carroll
acknowledge the existence of a prior oral agreement, he
confirmed the agreement in a letter to his supervisor. In
addition, another AMC official (McQuillan) said he and
Carroll discussed the oral pledge to Kutner.
In deposition testimony Carroll expressly admits an
unambiguous promise to accommodate Kutner’s request for
territory protection. Following Kutner’s demand that AMC
eliminate the Philadelphia-Academy dealer "point" so no
other dealer would operate in Northeast Philadelphia,
Carroll stated:
A. What I told Mr. Kutner is that if he brought to the
table the capacities and resources that he indicated he
would, that I thought it was only fair that we did not
franchise someone in the Academy point immediately and
that we would give him time to establish himself in the
marketplace and get his dealership operational and off the
ground.
... Q. Did you promise Mr. Kutner that you wouldn’t
appoint another dealer in the Academy area for a one-year
period?
A. My recollection is not a specific time frame. I have
had the occasion to review a letter that indicates that, that
was signed by me, which would lead me to believe that
that’s what I said. But on sheer recollection, there was not
a time frame involved. It was, Mr. Kutner, go do what you
got to do; we’re not going to go out and find somebody in
A76
Academy; you get your dealership up and running and we'll
take a look at how you’re doing and how you're penetrating
the market, and then we'll review it.
*4. (Plaintiff's Exhibit "C," Carroll dep. at 28-29).
Moreover, Carroll acknowledged that the oral agreement
was Omitted from the written contract as part of a tradeoff
between himself and Kutner for Kutner’s oral promise to
join an advertising association of AMC dealers and also
because of the parties’ mutual trusi.
Q. Now, your statement that you told me about te Mr.
Kutner, which I’m not going to repeat, but with respect to
his request, did you ever put anything in writing to him with
respect to his request, did you ever put anything in writing
to him with respect to not prospecting the Academy area
for a while?
A. I don’t believe so. Just like he didn’t put anything in
writing to me about becoming a member of the advertising
association.
You have to understand the tenure [sic] of the moment.
We were very pleased to have someone of Mr. Kutner’s
reputation interested in the franchise, the fact that we tried
to get additional grant opening advertising. There were may
other things he came to us with after the fact that we tried
to accommodate him in every way possible. We expected
him to be just a fantastic dealer for us, one of our top
dealers in the country. That’s what his track records said he
was capable of. Our relationship at that point in time was
very, very positive, and I believe full of mutual respect for
each otber’s position.
To this day I don’t thing Mr. Kutner and I have any
problem with each other’s work.
(Plaintiffs Exhibit "C," Carroll dep. at 30-31.)
A77
Q. What was Mr. Kutner’s reaction to the promise you
made to him?
Again I'm not going to recharacterize what you said.
Q. Yes
A. He indicated, after some additional discussions -- I
think this whole meeting took probably about an hour. At
the end of the meeting he indicated that he was satisfied
that we would act in good faith and I indicated the same
thing; and at that point in time I thought we were going to
be in a position to be able to put together the franchising of
Mr. Kutner as an AMC/Jeep/Renault dealer.
(Plaintiff's Exhibit "C,” Carroll dep. at 34-35).
Thus, the parties’ confidence in each other might explain
why they failed to incorporate the oral agreements into the
writing. See Yuhas, supra, at 457, 258 A.2d at 621.
Carroll’s recollection of the oral pledge tracks Kutner’s
version of why he signed the written agreement despite the
inclusion of provisions directly contrary to his goal of
exclusivity. Kutner explained his actions as follows:
Q. You eventually received a signed franchise agreement
from American Motors in 1981?
A. Yes, we did.
Q. Did you review the terms of that franchise agreement
when you received it?
A. Yes, I did.
Q. Did you have any problem with the way the franchise
agreement was written?
A. No, because of the assurance. I questioned Mr.
Carroll at great length as to the phraseology, and he assured
me that legally this is the way they had to do it, but I had
no problem; it was all cleared.
Q. Let me be clear on the timing. You questioned Mr.
Carroll at great length about the phraseology and the
franchise agreement itself.
A78
*S A. Because I didn’t want anything to happen like
happened.
Q. Why did you question him? What led you to
question him?
A. Because they both were not written out on the
franchise.
(Plaintiff's Exhibit "A," Kutner dep. at 28-29).
.. A. I questioned the designated point here.
Q. You were pointing to the page headed "Dealer
Facilities Reported."
A. That is correct.
Q. The designated point you questioned is "Philadelphia-
Northeast"?
A. That is correct.
Q. Why did you have a problem with it saying
"Philadelphia-Northeast"?
A. Because it didn’t include Academy.
Q. You took that up with Mr. Carroll?
A. Yes
Q. What did Mr. Carroll say?
A. He said that was the way they had to do it, but I was
protected. They had to do it that way.
Q. Did he tell you why they had to do it that way?
A. No, he didn’t give me the legal reasoning or any
other, but he said it had no bearing upon our agreement.
Q. You accepted that?
A. Certainly, particularly since I documented it so many
times with so many letters, and constantly everything I did.
(Plaintiff's Exhibit "A," Kutner dep. at 30-31). Kutner
therefore, signed the written contract only after Carroll gave
him oral assurance of territory protection. Carroll has
acknowledged as much, and as a result parol evidence is
admissible. See Cohn, supra, at 342, 479 A.2d at 582-83
(parol evidence admissible because: (1) the mortgage
contract was signed by party only upon oral presentation of
A79
opposing party; and (2) the opposing party admitted making
a prior oral representation).
The only open question in Carroll’s mind appears to be
how long the oral promise of an exclusive territory would
continue, not whether such a pledge was made. Carroll
stated:
A. ... what he asked for at that meeting was that his
initial request, as I recall, was that we do away with that
point [Academy], change the market plan to eliminate that
point. That’s not specifically what this says [referring to a
letter he wrote to his superior on the Kutner deal
(plaintiff's Exhibit "B" (P--9)]}, but I think what this says is
that we arrived at, at the end of the meeting. That we
would not eliminate the point, but that we wouldn’t
franchise someone.
Q. You advised Kutner that you discontinued dealer
prospecting in the Philadelphia-Academy trade area.
A. My recollection is not that I told him for a year. My
recollection--if this says that [referring to the letter], then
that’s obviously what I must have said. My recollection was
it was for an indeterminate period of time that would be
based on how long it took him to get established in the
marketplace and how weil he did penetrating the market.
I would say in my mind it was probably at least a year,
knowing what forces he was going to be up against to get
established.
(Plaintiff's Exhibit "C", Carroll dep. at 84-85 (bracketed
material supplied by the court). See also Plaintiff's Exhibit
"D," McQuillan dep. at 50) (Carroll discussed his promise
with Kutner, but no specific time was outlined, although "a
year’s time" was mentioned).
*6 Perhaps most importantly, Carroll confirmed the
existence of his promise to Kutner in an October 1981
A80
letter (discussed in the above passage) to his immediate
supervisor, Harlan Haywood, in which Carroll wrote:
... Kutner’s trade area for Buick encompasses both the
Phila-Northeast and Phila-Academy area. The dealer has
requested that the Zone not franchise another dealer in the
Phila-Academy trade area as he believes that they can
satisfactorily penetrate the combined markets. The Zone
has advised the dealer that the Zone would discontinue
dealer prospecting in the Phila-Academy trade area for a
year in order to give the dealer the opportunity to sell into
that market without competition from another American
Motors dealer located within the Phila-Academy area.
(Plaintiff's Exhibit "B" (P-9)).
Finally, the postagreement actions of Carroll and
McQuillan denying a request from another automobile
dealer to operate in competition with Kutner in the
Philadelphia-Academy area Corroborate Carroll’s promise of
territorial protection to Kutner. See Z & L Lumber Co. of
Atlasburg, supra, at __, 502 A.2d at 701 (conduct of parties
after contract formation indicative of true intent underlying
written agreement). Not only did McQuillan state that
Carroll informed him of his promise to Kutner (McQuillan
dep. at 50), he also acted consistent with Carroll’s promise.
After another automobile dealer, Potamkin, contacted AMC
in mid-1982 seeking a franchise in the Philadelphia-
Academy location, AMC denied the request based on its
exclusivity pledge to Kutner. McQuillan recalled the
transaction as follows:
Q. Let’s focus on Potamkin for a minute. Was there a
contact from Ed Reitz [of Potamkin] to you in the summer
of ’82, do you remember that?
A. Yes.
Q. What was that about?
A81
A. It would be very difficult for me to even put a month
on the contact, but it was some time in ’82 Ed Reitz called
me. It was shortly after the time that Potamkin had gone
into that Grant/Academy location and said they were
interested in our franchise. It think it was in the middle
part of ’82, some time and it was not a very long
conversation at all, but I said we weren’t interested in
franchising a dealer at the time.
Q. You got a call from Reitz, is that it?
A. Yes, I believe.
Q. Did you discuss this phone call with Bill Carroll?
A. Yes. I believe I mentioned it to Bill, that Potamkin
had called me.
Q. Do you remember what his reaction was?
A. If I recall, it was just a very brief conversation and he
agreed that we wouldn’t do anything, proceed any further
with Potamkin or any dealer.
Q. Do you remember the reason?
A. The reason?
Q. Yes.
A. Kutner was fairly new, well within his first year of
operation. We had agreed we wouldn’t solicit any dealers.
Q. That was the reason.
A. Yes.
(Plaintiffs Exhibit "D," McQuillan dep. at 81-82).
Carroll himself acknowledged AMC’s position with
respect to other possible franchises in Kutner’s territory:
Q. While you were zone manager at Philadelphia, did
you in fact, prospect for another agency dealer in the
Academy dealer point?
*7 A. No.
Q. Was that because of the promise that you made to
Mr. Kutner?
A. Yes.
A82
(Plaintiff's Exhibit "C", Carroll dep. at 34).
On more than one occasion, Carroll characterized his
arrangement with Kutner as a promise or a commitment,
and not an assertion of his marketing strategy.
Q. Were you aware that a representative from Potamkin
called McQuillan with respect to Potamkin filling the
Academy area?
A. No, I do not recall that, and McQuillan would not
have entertained it because of our commitment to Mr.
Kutner.
(Plaintiffs Exhibit "C," Carroll dep. at 55). See also id. at
29, 24-45 (accepting characterization of "promise" without
objection).
AMC did not grant a franchise to Potamkin until Carroll
departed as zone manager in 1983. Thus, as long as Carroll,
the man with whom Kutner negotiated, controlled AMC’s
Philadelphia operations, defendants honored the Carroll-
Kutner arrangement for territory protection in Northeast
Philadelphia.
Testimony from AMC officials clearly shows an admission
of an oral agreement between Carroll and Kutner. AMC’s
representations cannot be construed as mere explanations of
the corporation’s marketing plan. As a result, parol
evidence of the oral agreement is admissible. Based on the
depositions and exhibits, I conclude that the oral agreement
is admissible, and therefore, the written contract does not as
a matter of law dictate summary judgment for defendants.
Nor does the oral agreement entitle plaintiff to summary
judgment. If anything, the oral agreement gives rise to
material issue of disputed fact concerning the duration of
AMC’s promise to provide Kutner with territory protection
for his AMC franchise in the Philadelphia-Northeast area.
Officials representing both parties have varying recollections
concerning the time limits of the exclusivity promise.
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Kutner contends that the agreement was for the life of the
written agreement. AMC officials, such as Carroll and
McQuillan, say the agreement was for at least a year, but
possible for an indeterminate period.
If the agreement was for only one year, AMC would be
entitled to summary judgment because the oral pledge
would have expired before AMC awarded the Philadelphia-
Academy franchise to Potamkin in 1983. At that point, the
writing would have been the government document and, as
even Kutner acknowledged in his deposition, the written
contract limits Kutner to the area known as Philadelphia-
Northeast, not the entire Northeastern section of
Philadelphia. Nevertheless, if, as AMC officials admit is
possible, the oral agreement extended beyond one year,
AMC may very well have breached its promise to protect
Kutner’s territory. Thus, this disputed factual issue requires
a jury determination concerning the duration of the oral
agreement between the parties. Based on the available
evidence, a jury could reasonably infer that a material issue
of disputed fact exists. See Graham v. F.B. Leopoled Co.,
Inc., 779 F.2d 170, 173 (3d Cir.1985) (appropriate inquiry
on summary judgment motion is what jury could reasonably
infer). [FN4] Therefore, for the reasons stated above, I
deny the cross-motions for summary judgment on Count I of
plaintiff's complaint.
ORDER
*8 AND NOW, this 2 day of October, 1986, upon
consideration of the motion for partial summary judgment
of defendants American Motors Corporation and American
Motors Sales Corporation and the cross-motion for partial
summary judgment of plaintiff, Kutner Buick, Inc., it is
hereby ORDERED that pursuant to Fed.R.Civ.P. 56, both
motions are DENIED.
FNi. Counts I and III of plaintiffs complaint, neither
of which are at issue in this motion, relate to fraud
and a warranty dispute.
FN2. Because of a corporate restructuring within AMC,
the October 1981 contract was superseded by a
new agreement in January 1982. The reason for
the new contract is irrelevant to the issues raised
in the motions presented in this proceeding.
FN3. Federal courts applying Pennsylvania law have also
recognized this exception to the parole evidence
rule. See, e.g., Keystone Aeronautics Corp. v. R_J.
Enstrom Corp., 499 F.2d 146, 150 (3d Cir. 1974).
See also Contractor Utility Sales v. Certain-teed
Products, 638 F.2d 1061, 1081 (7th Cir. 1981).
FN4. Because I have concluded that defendant’s
acknowledgement of a prior oral agreement
permits the admission of parol evidence, I need not
address whether parol evidence could be admitted
to clarify any ambiguous terms. Nevertheless, as a
matter of law, I reject plaintiff's contention that
the contract provisions dealing with market area
and the nonexclusivity clause are ambiguous.
Contrary to plaintiff's claim that the market area
provision is ambiguous, Kutner’s deposition
demonstrates he understood the distinction
between the Philadelphia-Northeast and the
Philadelphia-Academy areas and he knew the
geographic region known as Northeast Philadelphia
is divided into these two ares for purposes of
franchise awards from AMC. (See Plaintiff's
Exhibit "C," Kutner dep. at 26 & 30-31).
Moreover, I conclude that plaintiff's alternative
' interpretation of the nonexclusivity provision is
|
A85
speculative and unsupported by any objective
evidence. Mellon Bank, Supra, at 1011. Plaintiff's
Suggested reading seeks to mischaracterize the
writing, Polish Amer. Mach. Corp. v. R.D. & D.
Corp., 760 F.2d 507, 513 (3d Cir. 1985), and is
without merit, especially in light of Kutner’s status
as an experienced and successful automobile dealer
acting on the advice of counsel.
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.