Arch Chemicals, Inc. v. Radiator Specialty Co., 07-1339-HU

• Decision Date: 28 July 2010
• Docket Number: No. 07-1339-HU,07-1339-HU
• Citation: 727 F.Supp.2d 997
• Parties: ARCH CHEMICALS, INC., a Virginia corporation, and Lexington Insurance Co., Plaintiffs v. RADIATOR SPECIALTY COMPANY, a North Carolina corporation, Defendant.
• Court: U.S. District Court — District of Oregon

727 F.Supp.2d 997

ARCH CHEMICALS, INC., a Virginia corporation, and Lexington Insurance Co., Plaintiffs

v.RADIATOR SPECIALTY COMPANY, a North Carolina corporation, Defendant.

No. 07-1339-HU.

United States District Court, D. Oregon.

July 28, 2010.

M. Robert Smith, Joseph Rohner IV, Dennis N. Freed, Ryan J. McClellan, Smith Freed & Eberhard, Portland, OR, Thomas D. Allen, Amber E. Tuggle, Shawn D. Scott, Earl W. Gunn, Mark R. Johnson, Laura Voght, Weinberg, Wheeler, Hudgins, Gunn & Dial, Atlanta, GA, for plaintiffs.

William G. Earle, Paul R. Xochihua, Jonathan Henderson, Davis Rothwell Earle & Xochihua, Portland, OR, Daniel F. Mullin, John A. McHugh, Mullin Law Group, Seattle, WA, for defendant.

OPINION AND ORDER

HUBEL, United States Magistrate Judge:

This is an action by Arch Chemicals, Inc. (Arch) and its insurer, Lexington Insurance Company (Lexington) against Radiator Specialty Company (RSC), asserting claims for common law indemnity and contribution. Plaintiffs seek recovery of amounts paid in settlement of a lawsuit against Arch brought by members of the Davidson family. The matters before the court are RSC's motions for partial summary judgment on the issues of indemnity and contribution (doc. # 240, 245).

Standards

Summary judgment is appropriate "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 a judgment as a matter of law." Fed.R.Civ.P. 56(c). Summary judgment is not proper if material factual issues exist for trial. Warren v. City of Carlsbad, 58 F.3d 439, 441 (9th Cir.1995). On a motion for summary judgment, the court must view the evidence in the light most favorable to the non-movant and must draw all reasonable inferences in the non-movant's favor. Clicks Billiards Inc. v. Sixshooters Inc., 251 F.3d 1252, 1257 (9th Cir.2001). The court may not make credibility determinations or weigh the evidence. Lytle v. Household Mfg., Inc., 494 U.S. 545, 554-55, 110 S.Ct. 1331, 108 L.Ed.2d 504 (1990).

Discussion

A. Indemnity

RSC seeks a ruling that indemnity is not a valid claim under the facts of this case as a matter of law. RSC also seeks a ruling that even if plaintiffs could prove a successful indemnity claim, they still could not recover their attorney's fees and costs because they never tendered Arch's defense to RSC.

A party seeking indemnity must plead and prove three elements: 1) plaintiff has discharged a legal obligation owed to a third party; 2) defendant was also liable to the third party; and 3) as between plaintiff and defendant, the obligation ought to be discharged by the latter, in that plaintiff's liability was "secondary" or its fault merely "passive," while that of the defendant was "active" or "primary." Fulton Ins. v. White Motor Corp., 261 Or. 206, 210, 493 P.2d 138 (1972), superseded in part on otherpleading grounds, Waddill v. Anchor Hocking, Inc., 330 Or. 376, 8 P.3d 200 (2000). See also id. at 211, 493 P.2d 138 (indemnity complaint must include facts which, if proved, would establish each party's liability to the injured party, and that the plaintiff's liability was not based on conduct which ought to bar its recovery). The three-part test is well established. See, e.g., Owings v. Rose, 262 Or. 247, 252 (1972), Scott v. Francis, 314 Or. 329, 332, 838 P.2d 596 (1992), Stovall v. State ex rel. Oregon Dept. of Transp., 324 Or. 92, 127, 922 P.2d 646 (1996), Moore Excavating, Inc. v. Consolidated Supply Co., 186 Or.App. 324, 328-29, 63 P.3d 592 (2003), Stanley Contracting, Inc. v. City of Carlton, 2006 WL 2045470 at *2 (D.Or. July 17, 2006)(King), Mayorga v. Costco Wholesale Corp., 2007 WL 204017 at *8-9 (D.Or. Jan. 24, 2007); Gunderson, Inc. v. Davis-Frost, Inc., 2007 WL 3171619 at *1 (D.Or. Oct. 24, 2007).

RSC asserts that plaintiffs cannot satisfy all three elements under either of their two theories of the case: 1) that EB-1 was the sole cause of the fire, when it escaped from its container and was ignited by an external ignition source such as a static electrical spark (referred to as the "spark theory"); or 2) that EB-1 and Sock It combined to cause the accident (referred to as the "combination" or "commingling" theory). RSC argues that the spark theory precludes plaintiffs from proving the first element of common law indemnity, because Arch could have no liability under this theory to the Davidson family. The combination theory precludes plaintiffs from proving the third element of an indemnity claim, according to RSC.

1. Spark theory and element of legal obligation owed to third party

If plaintiffs prevail on their theory that RSC was solely liable for the Davidson accident, they cannot, as a matter of law, prove the first element of indemnity, that they discharged a legal obligation owed to the Davidsons. See Mayorga, 2007 WL 204017 at *9 (common law indemnity claim "cannot be sustained if the [party seeking indemnity] could not have been liable to the [injured] party for the legal obligation satisfied"); see also Irwin Yacht Sales Inc. v. Carver Boat Corp., 98 Or.App. 195, 198, 778 P.2d 982 (1989)(indemnitee not entitled to indemnity unless it is liable to the injured third party); Smith v. Urich, 151 Or.App. 40, 947 P.2d 1125 (1997)(indemnity claim failed for lack of evidence that plaintiff was negligent or caused third party's injuries).

Fulton is illustrative on this first element. There, the Oregon Supreme Court held that an indemnity claim could not be asserted because the complaint did not allege facts that would support a finding of plaintiffs' liability to the third party:

The complaint in this case adequately alleged that the accident was caused by defendants in furnishing a defective truck. It also adequately alleges that plaintiffs, on behalf of their insureds, paid the damage claims arising out of that accident. It fails, however, to allege facts showing that the owner and the operator of the truck [i.e., the Griffins] were ... liable for those damages-that is, that there was liability under law....

261 Or. at 211, 493 P.2d 138. RSC argues that the spark theory, that EB-1 alone was ignited by the spark, makes it impossible for Arch to have been liable to the Davidsons, thereby precluding plaintiffs from pleading and proving the first element of indemnity.

2. Combination theory and element of "passive" or "secondary" fault

RSC argues that any viable indemnity claim of plaintiffs would have to be based on the combination theory, that anexothermic reaction involving both EB-1 and Sock It caused the fire. This was the Davidsons' theory.

In the lawsuit they filed against Arch, the Davidsons alleged:

The fire that killed Lucien and Janesse Davidson, and injured Loran, Eyvette and Benjamin Davidson, was caused by the spontaneous exothermic reaction of the "Sock It" pool chlorination products with other common household products that were in the Davidson vehicle.

Vierra Declaration, Exhibit D ¶ 10. Arch alleged in the complaint in this case that the Davidson settlement "discharged a legal obligation it was alleged to owe to the Davidsons," Complaint ¶ 15 (emphasis added). RSC first points out that the allegation of a legal obligation that has been alleged against Arch by the Davidsons does not meet the requirement in Fulton, 261 Or. at 211, 493 P.2d 138, that probable liability is not enough for an indemnity claim; an indemnity claimant's liability must be established by a judgment or by pleading and proving facts establishing liability. The combination theory, if proven, could establish liability for both Arch and RSC.

Plaintiffs also have the burden of proving, under the combination theory, that their fault was the "passive" as compared to the "active" fault of RSC. ¹

In General Ins. Co. of Amer. v. P.S. Lord, 258 Or. 332, 336, 482 P.2d 709 (1971), the court held that the duty to indemnify "will be recognized in cases where community opinion would consider that in justice the responsibility should rest upon one rather than the other." The court identified, at one end of the scale, a party's vicarious liability for the negligence of another; clearly only one party's negligence was "active." At the other extreme, the court posed the example of a bus being driven negligently that was hit by a truck driven negligently, injuring the bus passenger; under such circumstances, neither the truck, nor the bus operator could secure indemnity from the other. Id.

The court held in P.S. Lord that the insurer of Colby Steel, which had manufactured and installed elevator equipment in a dock and warehouse, could not establish an indemnity claim against the company that had subcontracted to install the elevators after both were sued by the dock owner for negligence. Colby's insurer was not entitled to indemnity because Colby was an "active, positive and primary" participant in the acts or omissions which the owner contended proximately caused its loss.

In Piehl v. The Dalles General Hosp., 280 Or. 613, 619, 571 P.2d 149 (1977), a surgeon and a hospital were both sued for leaving a sponge in a patient, and the defendants asserted claims for indemnity against each other. The Oregon Supreme Court held that neither defendant was entitled to indemnity because there was evidence from which a jury could have found that the surgeon was actively negligent (as opposed to vicariously liable for the negligence of hospital employees responsible for counting sponges) in not discovering and removing the sponge. "Assuming the surgeon was personally negligent, so alsowere the nurses; and no reason exists to choose one or the others as more blameworthy." Id. at 621, 571 P.2d 149. See also Maurmann v. Del Morrow Const., 182 Or.App. 171, 178, 48 P.3d 185 (2002)("[I]ndemnity is inappropriate where the negligence of two tortfeasors without any legal relationship to one another combines to cause injury to a third party.")

In Smith, the Court of...