MacGlashing v. Dunlop Equipment Co., Inc., s. 95-2051

Decision Date09 May 1996
Docket Number95-2207,Nos. 95-2051,s. 95-2051
Citation89 F.3d 932
PartiesCharles MacGLASHING and Sharlene MacGlashing, Plaintiffs, Appellees, v. DUNLOP EQUIPMENT COMPANY, INC., Defendant, Appellee. Restoration Preservation Masonry, Inc., Third-Party Defendant, Appellant. . Heard
CourtU.S. Court of Appeals — First Circuit

Robert P. Powers, Boston, MA, with whom Michael R. Byrne, Andre A. Sansoucy, and Melick & Porter were on brief, for Restoration Preservation Masonry, Inc., appellant.

Thomas G. Hoffman, Boston, MA, with whom Thomas M. Greene, Paul D. Hoffman, Greene & Hoffman, P.C. were on brief, for Charles MacGlashing and Sharlene MacGlashing, plaintiffs, appellees and Dunlop Equipment Company, Inc., defendant, appellee.

Before CYR, Circuit Judge, COFFIN and BOWNES, Senior Circuit Judges.

BOWNES, Senior Circuit Judge.

This appeal concerns the interpretation and enforceability of an indemnification clause in a lease between third-party defendant-appellant Restoration Preservation Masonry, Inc. ("RPM") and defendant-appellee RPM maintains that it has no obligation under the lease agreement to indemnify Dunlop for damages flowing from Charles MacGlashing's accident because Dunlop materially breached the agreement. It also challenges the scope of the indemnification clause. Discerning no error in the district court's summary judgment analysis, we affirm.

                Dunlop Equipment Company, Inc.  ("Dunlop").  Plaintiff-appellee Charles MacGlashing was injured when an elevated work platform leased by Dunlop to RPM collapsed while he and another employee of RPM were using it in their masonry work.   MacGlashing and his wife, residents of New Hampshire, brought a diversity action in tort against Dunlop, a Massachusetts corporation, in the district court of Massachusetts.   Dunlop sued RPM, invoking the lease indemnification clause.   Prior to trial the MacGlashings, with court approval, entered into a settlement agreement with Dunlop.   The issue on appeal is whether the MacGlashings, standing in the shoes of Dunlop, can collect the amount of the settlement from RPM under the indemnification clause of the lease between RPM and Dunlop.   This issue was decided in favor of the MacGlashings and Dunlop by summary judgment.   There is no question that Massachusetts law applies
                
I. BACKGROUND

Viewed in the light most favorable to RPM, the nonmoving party, the facts are as follows. RPM, a Massachusetts-based corporation, employed Charles MacGlashing as a brick mason until September 2, 1993, when he was involved in a work-related accident at The Longwood Towers located in Brookline, Massachusetts. In 1993, the Longwood Corporation ("Longwood"), owner of The Longwood Towers complex, commissioned RPM to conduct phase II of a renovation project at Longwood Towers. Like phase I, which had been completed a year earlier by NER, Inc. ("NER"), phase II involved removal and replacement of brick and stone at the top of three eight-story buildings located in the complex. RPM was formed by former employees of NER. Several of them, including RPM's president Paul Haven, had worked on phase I. During both phase I and II, mobile, elevated work platforms fitted with eight-foot outrigger devices, which extended off the main platform to expand its width, were utilized for stone and brick removal and to make certain setback portions of the buildings accessible. The outriggers were modifications to the original platform design.

On September 2, 1993, MacGlashing and a co-worker, James Proctor, were removing a piece of stone from the parapets of Building B when the work platform they were using collapsed. Both men fell eight stories to the ground. Proctor died from the injuries he sustained. MacGlashing, who was thirty-nine at the time, survived, but suffered injuries that hospitalized him for six months and left him partially paralyzed and in constant pain. These injuries included, inter alia, broken bones, internal and neurological damage, a ruptured aorta and bladder, a perforated colon, lung damage, and lacerations. MacGlashing incurred more than $800,000.00 in medical fees and expenses as a result of the accident. His future medical costs and net economic loss have been projected between $600,000.00 to $1.1 million and $1.1 million to $1.3 million, respectively. At trial, the parties agreed that the platform involved in the accident collapsed because it could not bear the weight placed on it, but disagreed about whether the platform had been defectively designed, used negligently, or negligently modified by Dunlop. Dunlop, whose business consists of supplying work platforms for sale or lease, provided the platforms employed in both phase I and II of the Longwood Towers renovation project. It executed a July 7, 1993, lease agreement to provide four platforms with RPM's president, Paul Haven, who had left NER to form RPM.

The lease agreement executed between RPM and Dunlop was a standard form contract and contained the following indemnification clause:

12. THE LESSEE HEREBY ABSOLVES THE LESSOR OF ANY RESPONSIBILITY OR OBLIGATION IN

THE EVENT OF ACCIDENT, REGARDLESS OF CAUSES OR CONSEQUENCES, AND THAT ANY COSTS, CLAIMS, COURT OR ATTORNEY'S FEES, OR LIABILITY RESULTING FROM THE USE OF DESCRIBED EQUIPMENT WILL BE INDEMNIFIED BY THE LESSEE REGARDLESS AGAINST WHOM THE CLAIMANT OR CLAIMANTS INSTITUTE ACTION.

II. PROCEEDINGS BELOW

The MacGlashings brought a federal diversity jurisdiction suit, see 28 U.S.C. § 1332(a), against Dunlop, seeking recovery on theories of negligence, product liability, and breach of warranty. They charged Dunlop with negligence in the design and modification of the work platforms leased to RPM, negligence in failing to inspect the platforms and repair defects and damage, and negligence in failing to warn and instruct RPM employees in the use of the platform. They also asserted that Dunlop breached the implied warranty that the work platforms were merchantable and fit for their intended use. The MacGlashings later amended their complaint to assert claims against Longwood under Mass. Gen. L. ch. 143, § 51. These claims are not relevant to this appeal.

Dunlop filed a third-party complaint against RPM, seeking indemnification pursuant to their lease agreement. RPM denied any indemnification responsibility and counterclaimed, alleging that Dunlop materially breached the lease agreement by providing defective and unreasonably dangerous equipment.

Each of the parties filed summary judgment motions before the magistrate judge. Dunlop and the MacGlashings moved for summary judgment on Dunlop's third-party complaint. They maintained that, under the indemnification clause contained in the lease agreement, RPM was obligated to indemnify Dunlop for any liability resulting from the use of the leased equipment and that Dunlop did not materially breach its obligations under that agreement. RPM contested this joint motion and filed its own motion for summary judgment on Dunlop's third-party claims. In both instances, it contested the enforceability of the lease agreement executed with Dunlop, claiming that Dunlop materially breached the implied warranties of merchantability and fitness for a particular purpose contained in the agreement by failing to test the load-bearing capacity of the work platforms and outriggers prior to delivery of them to the project site.

The case was assigned to a magistrate judge. In her report and recommendations, she first addressed RPM's summary judgment motion. The magistrate judge denied RPM's claim that the lease agreement it executed with Dunlop included an implied warranty of fitness for a particular purpose, under Mass. Gen. L. ch. 106, § 2-315, but agreed that it contained an implied warranty of merchantability, under Mass. Gen. L. ch. 106, § 2-314. The magistrate judge recommended that RPM's motion for summary judgment be denied because she found that genuine issues of material fact existed as to whether Dunlop breached its implied warranties.

Turning to the joint motions for summary judgment filed by Dunlop and the MacGlashings, the magistrate judge concluded that the record, viewed in RPM's favor, precluded a dismissal with prejudice, of RPM's counterclaim for breach. She recommended, however, that Dunlop and the MacGlashings' joint motion for summary judgment on Dunlop's third-party complaint be allowed. The magistrate judge found that, barring a determination that Dunlop materially breached the lease agreement, RPM was "obligated to indemnify Dunlop for any liability resulting from Charles MacGlashing's use of the leased equipment." She concluded that "whether Dunlop's conduct amounted to a material or serious breach of the contract" was an issue of fact for the jury. Each of the parties filed timely objections to the magistrate judge's report.

The district court issued an order accepting, in part, and modifying, in part, the Report and Recommendation of the magistrate judge. The district court agreed with the magistrate judge's determination that RPM's motion for summary judgment should be denied.

                While it also agreed that summary judgment in favor of Dunlop and the MacGlashings was appropriate on Dunlop's third-party complaint, the court rejected the magistrate judge's conclusion that RPM's obligation to indemnify Dunlop for damages arising from Charles MacGlashing's injuries could be relieved by a material breach by Dunlop.   The court held that, under Massachusetts law, a party's breach of an implied warranty was insufficient to invalidate a broadly worded indemnification clause
                

The district court scheduled a jury trial on the various claims asserted by the parties. Before the trial date arrived, however, the MacGlashing's entered into a settlement agreement with Dunlop, subject to court approval. The settlement contemplated satisfying the MacGlashings' suit for damages against Dunlop with a $750,000.00 cash payment--approximately 75 percent of the insurance coverage...

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