Cohen v. Steve's Franchise Co., Inc., 90-2070

• Decision Date: 06 February 1991
• Docket Number: No. 90-2070,90-2070
• Citation: 927 F.2d 26
• Parties: David L. COHEN, Plaintiff, Appellee, v. STEVE'S FRANCHISE CO., INC., and Steve's Ice Cream, Inc., Defendants, Appellants, v. Paul CURRY and Philip Katz, Trustees of C & K Investment Trust, Third-Party Defendants, Appellees. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 26

927 F.2d 26

David L. COHEN, Plaintiff, Appellee, v. STEVE'S FRANCHISE CO., INC., and Steve's Ice Cream, Inc., Defendants, Appellants, v. Paul CURRY and Philip Katz, Trustees of C & K Investment

Trust, Third-Party Defendants, Appellees.

No. 90-2070.

United States Court of Appeals First Circuit.

Heard Feb. 6, 1991.

Decided Feb. 28, 1991.

Francis X. Kiley with whom Linehan, Gallagher and Mahoney, was on brief, Boston, Mass., for defendants-appellants.

Jason G. Yarvitz, Wakefield, Mass., with whom Law Office of William J. Dignan, was on brief, Quincy, Mass., for third-party defendants, appellees.

Before CAMPBELL, and SELYA, Circuit Judges, and BOWNES, Senior Circuit Judge.

LEVIN H. CAMPBELL, Circuit Judge.

The original plaintiff in this diversity case, David Cohen, sustained personal injuries in a fire while he was employed at a Steve's Ice Cream booth in Faneuil Hall Marketplace in Boston. Cohen sought damages from, inter alia, defendant Steve's Franchise Co., Inc. and Steve's Ice Cream, Inc., (collectively, "Steve's"), as well as others allegedly involved in the manufacture and distribution of a certain flammable orange extract that allegedly caused the fire. The plaintiff thereafter settled his claim against Steve's for one hundred thousand dollars. Seeking indemnity, Steve's brought a third-party complaint against Paul Curry and Philip Katz, Trustees of Cohen's employer, C & K Investment Trust ("C & K"), which at the time of the accident had been managing the Steve's Ice Cream booth in Faneuil Hall pursuant to a franchise agreement with Steve's. The franchise agreement contained indemnification provisions running from C & K to Steve's, and, based on these, Steve's moved for summary judgment in its favor. C & K opposed the motion and filed its own motion for partial summary judgment. Steve's now appeals from the district court's denial of its motion for summary judgment and its allowance of C & K's partial motion for summary judgment. The district court held that "plaintiff's claims do not fall into the category of claims which would obligate C & K to indemnify Steve's." Applying Massachusetts contract law, we find that Steve's is entitled to indemnification under the franchise agreement, and therefore reverse.

Facts

The essential facts are not disputed. The original plaintiff, Cohen, was injured on October 22, 1985, while he was making a chocolate ice cream at the Steve's Ice Cream Faneuil Hall booth. He was melting chocolate on an electric burner when a bottle of the orange extract, stored on a shelf above the electric burner, leaked onto Cohen and onto the burner. The extract ignited; the flame backed up to the extract in the container and Cohen also caught on fire. As a result of his severe burns, Cohen was hospitalized for more than two weeks.

On August 13, 1982, Steve's had entered into a franchise agreement with Curry and Katz, who were represented by and had the advice of an attorney at the time they executed the agreement. Under Massachusetts law, we presume that Curry and Katz understood and intended the plain meaning of the agreement's language under all the circumstances. See Minassian v. Ogden Suffolk Downs, Inc., 400 Mass. 490, 509 N.E.2d 1190, 1192 (1987) ("In a business context such as this, there is far less reason to designate such agreements as unconscionable than in the typical consumer transaction."). Katz testified at his deposition that a management agreement was executed with Steve's Franchise Co., Inc. for a one year term ending in December, 1983, after which date C & K managed the franchise. Katz identified the signatures of himself and Curry on the franchise agreement as well as their initials on the specific page of the indemnification provision. Under the franchise agreement, the parties agreed that C & K would indemnify Steve's for any liability occurring

by reason of any claimed act or omission by FRANCHISEE, his employees or agents, or by reason of any act or omission occurring on the premises, or by reason of any act or omission with respect to the business or operation of the STEVE'S ICE CREAM STORE,.... ¹

Parties' Positions on Appeal

To support its holding that C & K was not obligated to indemnify Steve's, the district court provided little analysis. We may assume, however, that it was persuaded by the same considerations C & K now advances on appeal, to wit, that an exception should be implied to C & K's otherwise comprehensive agreement to indemnify Steve's, where, as here, the injuries sought to be indemnified stemmed from Steve's own fault. Thus C & K asserts, and Steve's does not dispute, that C & K was obligated under the franchise agreement to "comply strictly" with Steve's standards and specifications with respect to operation of the booth. Steve's specified the ingredients and methods for preparing the products, as well as all other services, supplies and materials used at the store, including the flammable extract which gave rise to plaintiff's claim. C & K also submits, and Steve's likewise concedes for purposes of the summary judgment motions, that Steve's exercised the lion's share of operational control over those aspects of the business operation that resulted in the plaintiff's injuries--"that the claimed negligent acts were those of Steve's, in its selection of containers and labeling of the product, and in its layout design of the store itself."

Steve's position on appeal is that, while the foregoing facts may well be so, they do not, under Massachusetts law, justify an exception to the broad indemnification provision in the franchise agreement. Steve's contends that, as a matter of law, the provision entitles it to be indemnified by C & K for plaintiff's recovery against it. Steve's, therefore, seeks reversal of the judgment below.

Construction of the Indemnification Provisions

In Massachusetts, "[c]ontracts of indemnity are to be fairly and reasonably construed in order to ascertain the intention of the parties and to effectuate the purpose sought to be accomplished." Shea v. Bay State Gas Co., 383 Mass. 218, 418 N.E.2d 597, 600 (1981) (citations omitted). Moreover, "something less than an express reference in the contract to losses from the indemnitee's negligence as indemnifiable will suffice to make them so if the intent otherwise sufficiently appears from language and circumstances." Id. (citations omitted). In Shea, the Massachusetts Supreme Judicial Court, in order to avoid construing a "contractual liability" clause to constitute surplusage, held that the clause at issue provided the indemnitee with indemnification against its own concurrent negligence.

In Speers v. H.P. Hood, Inc., 22 Mass.App.Ct. 598, 495 N.E.2d 880, 882, rev. denied, 398 Mass. 1105, 498 N.E.2d 125 (1986), the ...