DEBORAH DAVIS, ASHLEY LEWOS, and HEIDI KUNKEL, Plaintiffs, v. PROTECTION ONE ALARM MONITORING, INC., Defendant.
Civil Action No. 03-40195-FDS
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS
2005 U.S. Dist. LEXIS 40288
November 2, 2005, Decided
November 2, 2005, Filed
CASE SUMMARY
PROCEDURAL POSTURE: Plaintiff bank employees sought recovery from defendant alarm company for personal injuries that were allegedly sustained in the course of a robbery. They commenced the action in Worcester Superior Court (Massachusetts); the alarm company removed it under 28 U.S.C.S. § 1441(a), asserting diversity jurisdiction under 28 U.S.C.S. § 1332(a). The alarm company sought leave to file a third-party complaint against the bank under Fed. R. Civ. P. 14(a).
OVERVIEW: The alarm company argued that it was entitled to contractual and common law indemnification from the bank; that, if it was liable, it was entitled to the bank's contribution; and that the bank breached the contract. The court denied the motion. Two of the employees received workers' compensation benefits, releasing the insurer of all common law claims, the third waived her common law right. Thus, the alarm company could not receive contribution from the bank, which was not liable to the employees. Likewise, the alarm company could not receive common law indemnification because such recovery had to stem from an express or implied contract of indemnity. The contract contained an indemnity clause. However, because there was no indication that the employees had property in the bank's custody, and no connection between such property and their injuries, there could be no claim based on an express contract for indemnification. Moreover, the clause governed any indemnification agreement and there was no reason to imply anything more. Finally, because there was no indemnification right, the alarm company's breach of contract claim was left standing alone and was not allowed by Rule 14.
OUTCOME: The court denied the alarm company's motion for leave to file the third-party complaint against the bank.
SAYLOR, J.
This is an action by three bank employees to recover for personal injuries allegedly sustained in the course of a robbery of the bank. The defendant, Protection One Alarm Monitoring, Inc., sells and services burglar alarms. The three plaintiffs, all employees of Commerce Bank at the time, contend that the defendant [*2] negligently designed, installed, and monitored the alarm system, and that those failures were the proximate cause of their injuries.
Defendant Protection One has moved for leave to file a third-party complaint against the bank for contribution, indemnification, and breach of contract pursuant to Fed. R. Civ. P. 14(a). Based on the facts asserted in the proposed third-party complaint and supporting materials, the Court concludes there is no basis upon which the bank can be held liable in whole or in part for plaintiffs' claims against defendant. Accordingly, for the reasons stated below, the motion will be denied.
I. Factual Background
Plaintiffs Deborah Davis, Ashley Lewos, and Heidi Kunkel were all employees of the Commerce Bank branch at 11 Park Avenue in Worcester, Massachusetts. On the morning of March 8, 2002, the three plaintiffs were opening the branch for business when the bank was robbed at gunpoint. The gunman apparently entered the bank though a back door that was protected by a "premises alarm." A premises alarm is triggered only when someone attempts to enter or exit the premises after business hours. Plaintiffs [*3] had apparently disarmed the back-door alarm when they prepared to open the bank for business March 8. The robbery took place shortly thereafter.
Plaintiffs commenced this action in Worcester Superior Court, alleging various injuries resulting from the negligent design, monitoring, and installation of the alarm system. n1 Protection One removed the case to this Court pursuant to 28 U.S.C. § 1441(a), asserting diversity jurisdiction under 28 U.S.C. § 1332(a).
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n1 The bank's alarm system was initially installed and monitored by Sonitrol of Central Massachusetts; Protection One is the successor to Sonitrol.
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Defendant has filed a motion for leave to file a third-party complaint against Commerce Bank pursuant to Rule 14(a). Defendant contends that (1) it is entitled to indemnification from Commerce Bank under the express or implied terms of its installation and monitoring contract; (2) it is entitled to indemnification as a matter of Massachusetts common law; (3) if liable [*4] to plaintiffs, it is entitled to contribution from Commerce Bank; and (4) Commerce Bank breached its contract with defendant. Commerce Bank, which was granted leave to intervene to oppose the motion, opposes on the grounds that the proposed third-party complaint fails to state a claim upon which relief can be granted, and is therefore futile.
II. Legal Analysis
HN1A defendant may serve a third-party complaint on a non-party "who is or may be liable to the third-party plaintiff for all or part of the plaintiff's claim." Fed. R. Civ. P. 14(a). The defendant may file such a complaint as a matter of right within ten days after serving the original answer. Id. Beyond that point, however, the defendant must obtain leave of court. Id. Whether to grant that leave is a decision "left to the informed discretion of the district court, which should allow impleader on any colorable claim of derivative liability that will not unduly delay or otherwise prejudice the ongoing proceedings." Lehman v. Revolution Portfolio, L.L.C., 166 F.3d 389, 393 (1st Cir. 1999).
Although this standard is fairly "liberal," id., the court [*5] need not grant leave if the claim is futile. National Gypsum Co. v. Continental Brands Corp., 895 F. Supp. 328, 344 (D. Mass. 1995); see also Kopan v. George Washington Univ., 67 F.R.D. 36, 37-38 (D.D.C. 1975) ("Among the factors which must be considered in exercising this discretion [is] . . . the merit or substance of the third party complaint . . . ."); Fed. R. Civ. P. 14 Advisory Committee Notes to 1963 amendment (the rule, as amended, "preserves the value of a preliminary screening[] through the leave procedure," giving the court "discretion to strike the third-party claim if it is obviously unmeritorious"). For the reasons that follow, Protection One's proposed claims against Commerce Bank for contribution and indemnification would be futile, and therefore the motion for leave will be denied with respect to those claims. The request to file a breach of contract claim, which will also be denied, will be addressed separately.
A. Contribution
HN2By statute, "where two or more persons become jointly liable in tort for the same injury to person or property, there shall be a right of contribution [*6] among them." Mass. Gen. Laws ch. 231B, § 1(a). As interpreted by the Massachusetts Supreme Judicial Court, "the language of this statute requires that the potential contributor be directly liable to the plaintiff." Liberty Mutual Ins. Co. v. Westerlind, 374 Mass. 524, 526, 373 N.E.2d 957 (1978); accord Correia v. Firestone Tire & Rubber Co., 388 Mass. 342, 346, 446 N.E.2d 1033 (1983).
Plaintiffs Davis and Lewos both filed claims and received benefits under the Massachusetts Workers' Compensation Statute. Their actions "constitute a release to the insurer of all claims or demands at common law, if any, arising from the injur[ies]." Mass. Gen. Laws. ch. 152, § 23. As a result, Commerce Bank cannot be directly liable to plaintiffs Davis and Lewos. Accordingly, Protection One cannot obtain contribution from Commerce Bank for any potential liability arising from those claims. See Westerlind, 374 Mass. at 526.
Unlike her co-plaintiffs, Kunkel did not file a workers' compensation claim. However, HN3an employee is held to have waived her right of action at common law for any injury compensable under the worker's compensation statute unless, at [*7] the time of her hiring, she gave her employer written notice that she was preserving her common law rights. Mass. Gen. Laws ch. 152, § 24. Protection One has not alleged that Kunkel gave such notice to Commerce Bank. Accordingly, because Kunkel's injury is compensable under the workers' compensation statute and because she is deemed to have waived her right to recovery at common law, Commerce Bank cannot be directly liable to her for her personal injuries. Therefore, Protection One may not obtain contribution from Commerce Bank as to Kunkel's claims. See Westerlind, 374 Mass. at 526.
B. Common-Law Indemnification
Protection One also asserts a common-law right to indemnification from Commerce Bank on the grounds that its own liability, if any, is derivative of the fault of Commerce Bank. HN4A common-law right to indemnification may exist "where there is a great disparity in the fault of the parties." Araujo v. Woods Hole, 693 F.2d 1, 2 (1st Cir. 1982). However, the workers' compensation statute abrogated such common-law claims by third-party plaintiffs against employers. See, e.g., Decker v. Black and Decker Manuf. Co., 389 Mass. 35, 42-43, 449 N.E.2d 641 (1983) [*8] (upholding constitutionality of worker's compensation statute in light of its "abrogation [of] the common law right of indemnity"); see also Roy v. Star Chopper Co., 584 F.2d 1124, 1132 n.5 (1st Cir. 1978) (under Massachusetts law, "no claim for noncontractual indemnity will lie in an action against an employer"). The right of a third-party plaintiff "to recover indemnity from an employer who has paid workers' compensation benefits to an injured employee must stem, if at all, from an express or implied contract of indemnity." Decker, 389 Mass. at 37. Thus, Protection One's common-law indemnification claim is likewise futile.
C. Contractual Indemnification
Protection One contends that the installation and monitoring contract provides expressly -- or in the alternative, impliedly -- for indemnity from personal injury claims. The Court will address each claim in turn.
1. Express Contractual Indemnification
In Whittle v. Pagani Bros. Construction Co., the SJC adopted the "majority rule" that HN5an express indemnity contract is enforceable against an employer covered by the workers' compensation statute. 383 Mass. 796, 799-800, 422 N.E.2d 779 (1981). [*9] Here, the contract for alarm installation and monitoring services contains the following provision:
15. Third Party Indemnification. When you [i.e., Commerce Bank] have property belonging to others in your custody in the ordinary course of business, or the [alarm system] protects property of third parties, you agree to and shall indemnify, defend, and hold us [i.e, Protection One], our employees and agents harmless against all claims brought by such parties. This provision shall apply to all claims regardless of cause or theory of liability.
Under Massachusetts law, HN6"indemnification provisions are to be read without any bias for the indemnitor or against the indemnitee." Herson v. New Boston Garden Corp., 40 Mass. App. Ct. 779, 782, 667 N.E.2d 907 (1996). n2 Thus, "they are to be interpreted like any other contract, with attention to language, background, and purpose." Id. Interpreting a written contract "presents a question of law for the court, except to the extent disputed facts bear upon such interpretation." USM Corp. v. Arthur D. Little Sys., Inc., 28 Mass. App. Ct. 108, 116, 546 N.E.2d 888 (1989); see also Lumber Mutual Insurance Co. v. Zoltek Corp., 419 Mass. 704, 707, 647 N.E.2d 395 (1995) [*10] ("The interpretation of a written contract or lease is a question of law, not of fact.").
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n2 Compare 11 RICHARD A. LORD, WILLISTON ON CONTRACTS § 32:20 (4th ed. 1999) (noting that exculpatory clauses, including indemnification clauses, are generally "not favored" and as a result are construed "strictly against the party seeking the benefit of the clause").
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In interpreting the contract, the court seeks to "give effect to the parties' intentions and construe the language to give it reasonable meaning wherever possible." Shea v. Bay State Gas Co., 383 Mass. 218, 224-225, 418 N.E.2d 597 (1981). The court must interpret "the contract as a whole, in a reasonable and practical way," USM Corp., 28 Mass. App. Ct. at 116, giving meaning to every word or phrase to the extent possible, Baybank Middlesex v. 1200 Beacon Properties, Inc., 760 F. Supp. 957, 963 (D. Mass. 1991). In this task, the court is guided by "justice [and] common sense." Kotler v. Spaulding, 24 Mass. App. Ct. 515, 517, 510 N.E.2d 770 (1987). [*11]
The first sentence of Paragraph 15 states, "When you have property belonging to others in your custody in the ordinary course of business, or the [alarm system] protects property of third parties, you agree to and shall indemnify, defend, and hold us, our employees and agents harmless against all claims brought by such parties." (emphasis added). There does not appear to be any dispute that the bank had property belonging to others in its custody in the ordinary course of business (e.g., property of bank customers held in safe deposit boxes), and that the alarm system protected (at least in part) that property. From that point, however, the parties' arguments diverge.
Protection One asserts that Paragraph 15 requires indemnification for any claim brought by a third party, regardless of whether that party has property in the bank's possession, or for that matter regardless of the nature of the claim. Under this theory, the requirement of holding "property belonging to others" simply creates a condition that, once satisfied, opens the door to a broad indemnity against all claims, even those that have no relation to the property. n3 In other words, Protection One contends [*12] that there is no connection between the property requirement and the indemnity. Commerce Bank, on the other hand, argues that this clause requires indemnification only for property-damage claims brought by third parties with property in the bank's possession. The Court need not entirely resolve this dispute in order to reach a decision in this matter.
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n3 Protection One contends that the second sentence of Paragraph 15, which states, "This provision shall apply to all claims regardless of cause or theory of liability," supports such a broad reading. That sentence, however, simply indicates that the claims that are indemnifiable under the first sentence (i.e., "all claims brought by such parties") are not limited to claims arising out of a particular cause or brought under a particular theory of liability.
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As an initial matter, Protection One's position is not supported by the actual language of the contract. The provision, by its plain language, does not apply to claims brought by any party, but rather by "such [*13] parties" whose property is in the bank's "custody in the ordinary course of business" or is otherwise protected by the bank's alarm system. Thus, in order to trigger the indemnity provision, the plaintiff must, at a minimum, have some property held by the bank. Protection One's proposed third-party complaint does not allege that the plaintiffs had any property in the bank's custody, nor is there any basis for the Court to assume that they did. n4
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n4 It is also highly doubtful whether the bank employees-at least while acting in their capacities as employees, as opposed to acting as bank customers-are "third parties" within the meaning of the paragraph.
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Protection One's position is also unsupported by logic or common sense. What is the purpose of the "property belonging to others" requirement, if it has no connection of any kind to the indemnity obligation? It is easy to see why the parties would agree that the bank would indemnify the alarm company against claims for property loss brought by customers who place [*14] property in the custody of the bank (e.g., those who put valuable jewelry in safe deposit boxes). n5 It is also at least conceivable (although the Court reaches no conclusion) that personal injury claims brought by such customers, who are coming and going on the premises to store or retrieve their property, should be subject to the indemnity provision. But there is no obvious reason why personal injury claims of bank employees should be subject to indemnity because unrelated persons are storing unrelated property on the premises of the bank.
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n5 At a minimum, the bank would be in a much better position than the alarm company to assess, and insure against, that risk.
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Moreover, Protection One's position would lead to absurd results. Consider, for example, a bank customer with property in a safe deposit box who also has a home alarm system from Protection One. Under the theory espoused by Protection One, that customer would be a "third party" within the meaning of the first sentence of Paragraph 15, and the bank [*15] would be required to indemnify "all claims" brought against Protection One by "such parties." Under that theory, the bank would be required to indemnify Protection One against a suit by the customer arising out of a failure of his home alarm system-or, indeed, a suit alleging that a Protection One van driver ran him over in a grocery store parking lot. Such a result is obviously untenable.
In short, any sensible construction of the indemnification provision requires some nexus between the injury and the property protected by the bank. The Court does not need to decide the nature of that nexus. Because there is no indication that the plaintiffs had property in the bank's custody, and consequently, no indication of any connection between plaintiffs' property and the personal injuries at issue, there can be no claim based on an express contract for indemnification.
2. Implied Contractual Indemnification
Protection One also asserts an implied contractual right to indemnification. n6 HN7A contractual right to indemnification will be implied only in two circumstances: "first, when there are unique special factors demonstrating that the parties intended that the putative indemnitor [*16] bear the ultimate liability, or second, when there is a generally recognized special relationship between the parties." Fireside Motors , Inc. v. Nissan Motor Corp., 395 Mass. 366, 375, 479 N.E.2d 1386 (citations and internal quotation marks omitted).
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n6 By and large, it appears that HN8Massachusetts courts have "assumed without deciding that [the court] would recognize a right to indemnification based on an implied contract to indemnify." Decker 389 Mass. at 38; accord, Westerlind, 374 Mass. at 526; Fireside Motors, Inc. v. Nissan Motor Corp., 395 Mass. 366, 374, 479 N.E.2d 1386 (1985). This Court will do the same.
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Protection One does not contend that there is an implied contract for indemnification in the manner contemplated by Fireside Motors. For example, it does not assert the existence of any "special relationship" beyond the standard sales and service agreement between the parties. Instead, Protection One argues that Paragraph 15 specifically entitles it to indemnification, and that to the extent [*17] Paragraph 15 is ambiguous, its language should be construed to provide an implied right of indemnification.
Regardless of defendant's theory, it is well-established that HN9the "law will not imply a contract where there is an existing express contract covering the same subject matter." Zarum v. Brass Mill Materials Corp., 334 Mass. 81, 85, 134 N.E.2d 141 (1956); see also, 11 RICHARD A. LORD, WILLISTON ON CONTRACTS § 31:7 (4th ed. 1999) ("Implied covenants are inapplicable when a contract contains express provisions on that particular issue."). Although the parties dispute the meaning of the words, they agree that indemnification is governed expressly by Paragraph 15. Accordingly, that provision, construed in light of the entire agreement, governs any indemnification arrangement between the parties, and there is no reason to imply an additional indemnification provision.
If that were not enough, the contract contains an unambiguous merger clause, limiting the agreement between the parties to the terms contained in the writing. Paragraph 21 of the contract states in relevant part:
21. Entire Agreement. This contract together with any related schedules represents the [*18] entire agreement of the parties. . . . It is mutually understood and agreed that any representation, promise, condition, inducement or warranty, express or implied, not included in writing in this Contract shall not be binding upon any party and that the Contract may not be altered, modified or otherwise changed at any time except with the consent of each of the parties hereto, and in the form of a written addendum to this Contract.
This language is clear and unambiguous, and therefore bars a finding of an implied contract for indemnification. See Fireside Motors, 395 Mass. at 374-75. As a result, any claim alleging an implied contract for indemnification would also be futile.
D. Breach of Contract Claim
Finally, Protection One requests leave to file a separate third-party complaint alleging breach of contract by Commerce Bank. Protection One essentially contends that Commerce Bank breached the agreement by failing to test the alarm system at least monthly. Protection One's motion did not seek leave to file a breach-of-contract claim; defendant moved only "for leave, as a third-party plaintiff, to cause to be served . . . a Summons and Third-Party Complaint [*19] alleging claims for indemnification and contribution." Nor did defendant's proposed third-party complaint assert a breach of contract claim. This issue was raised for the first time in Protection One's memorandum in support of its motion. This defect aside, Protection One cannot, under the circumstances, raise an independent breach of contract claim pursuant to Rule 14.
HN10The purpose of Rule 14 is to enable the defendant "to transfer to the third-party defendant the liability asserted against him by the original plaintiff." 6 CHARLES ALAN WRIGHT, ARTHUR R. MILLER & MARY KAY KANE, FEDERAL PRACTICE AND PROCEDURE § 1446 (2d ed. 1990). As a result, Rule 14(a) "does not allow the defendant to assert a separate and independent claim even though the claim arises out of the same general set of facts as the main claim." United States v. Olavarrieta, 812 F.2d 640, 643 (11th Cir. 1987). Rather, the Rule permits claims against a third party "only if that third person's liability . . . is in some way dependent upon the outcome of the main claim." Id. See also Owen Equipment & Erection Co. v. Kroger, 437 U.S. 365, 376, 98 S. Ct. 2396, 57 L. Ed. 2d 274 (1978) ("A third-party complaint depends [*20] at least in part upon the resolution of the primary lawsuit. Its relation to the original complaint is thus not mere factual similarity but logical dependence.") (citation omitted).
HN11A court, exercising its supplemental jurisdiction, may allow an independent contract claim in connection with a third-party complaint that otherwise meets the Rule 14 requirements. Here, however, the Court has determined that the contribution and indemnification claims are without merit. That leaves Protection One's breach of contract claim standing alone. In no way does this claim depend on the outcome of the negligence action; whether Protection One is entitled to any relief on the contract claim is wholly independent of its liability to the plaintiffs for negligence.
Finally, and in any event, the breach of contract claim appears to be without any basis on its merits. The contract claim is simply a claim for indemnification dressed up in different language; the claimed "damages" arising out of the alleged breach are the amounts, if any, owed by Protection One to the plaintiffs for their personal injury claims and the costs of defending those claims. Permitting such a claim to go forward would eviscerate [*21] the principles of common-law and contractual indemnification outlined above. n7 Accordingly, Protection One has failed to state any appropriate ground for maintaining a third-party complaint against Commerce Bank, and its motion for leave to file such a complaint should be denied.
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n7 The fact that Protection One cannot seek indemnity based on the bank's alleged failure to test the alarm system at least monthly does not mean, of course, that it cannot raise that failure as a defense in order to avoid liability on the underlying claim.
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Conclusion
For the reasons stated in the foregoing memorandum, defendant's assented-to motion for leave to file a third-party complaint is DENIED.
So Ordered.
F. Dennis Saylor IV
United States District Judge
Dated: November 2, 2005