Big Dutchman, Inc. v. Midwest Livestock Sys., Inc.
| Decision Date | 28 February 2013 |
| Docket Number | Case No. 1:12–CV–288. |
| Citation | 927 F.Supp.2d 467 |
| Parties | BIG DUTCHMAN, INC., Plaintiff, v. MIDWEST LIVESTOCK SYSTEMS, INC., Defendant. |
| Court | U.S. District Court — Western District of Michigan |
OPINION TEXT STARTS HERE
Dean F. Pacific, Robert Michael Azzi, Warner Norcross & Judd LLP, Grand Rapids, MI, for Plaintiff.
William M. Bremer, Bremer & Nelson LLP, Grand Rapids, MI, for Defendant.
Plaintiff, Big Dutchman, Inc., has sued Defendant, Midwest Livestock Systems, Inc., alleging that Midwest breached an agreement to indemnify Big Dutchman for claims relating to allegedly rusting brackets on A-frame layer chicken cages. Midwest has now moved for summary judgment pursuant to Federal Rule of Civil Procedure 56(a), arguing that it is entitled to judgment as a matter of law on Big Dutchman's claim.
For the following reasons, the Court will grant Midwest's motion and dismiss Big Dutchman's Complaint with prejudice.
Big Dutchman is a Michigan corporation that designs, manufactures, and sells poultry and swine production equipment, including A-frame layer cage systems used to house chickens. (Compl. ¶ 2.) Midwest is a Nebraska corporation engaged in the sale and installation of livestock facilities and equipment and was a customer of Big Dutchman at least through August 31, 2005. ( Prior to 2005, Midwest purchased A-frame cage systems, model number PT420N, from Big Dutchman. After adding additional components to these cage systems, Midwest installed them for its customers. The unmodified cage systems consisted of various parts, including support brackets, legs, and cross arms.
In 2005, Big Dutchman and Midwest had a dispute concerning Big Dutchman A-frame cages that Midwest had installed for its customers. Around that time, several Midwest customers complained to Midwest that brackets on their cage systems were rusting so badly that they could no longer support the attached truss rods, which threatened the structural integrity of the cages. (Rayzel Dep. at 16, 88–89, Def.'s Br. Supp. Mot. Ex. B; Fuller Dep. at 17–19, Def.'s Br. Supp. Mot. Ex. C.) In turn, Midwest conveyed these complaints to Big Dutchman. Big Dutchman and Midwest disagreed about the cause of the excessive rusting. Midwest asserted that the rusting was due to a manufacturing defect—holes drilled in the brackets after they were galvanized left ungalvanized portions exposed to corrosive salt and ammonia from chicken excrement. (Rayzel Dep. at 105–06.) Big Dutchman, on the other hand, contended that the rusting was caused by water dripping from “drinkers” that Midwest had installed on the cages. ( Id. at 106; Letter to Fuller and George from Rayzel of 10/5/11 at 2, Def.'s Br. Supp. Ex. F.)
Fremont Farms of Iowa and Center Fresh Egg Farm LLP were two of Midwest's complaining customers. Midwest installed Fremont's cages no later than October 2002, (Rayzel Dep. at 58–59), and the cage systems at Center Fresh were four to five years older than Fremont's cages. (Mem. from Walcott to Rayzel of 1/19/12, Def.'s Br. Supp. Mot. Summ. J. Ex. H.) Thus, at their time of their complaints, Big Dutchman's one-year limited warranty on Fremont's and Center Fresh's cages had expired. (Rayzel Dep. at 115.)
In February 2006, after many months of negotiations, Big Dutchman and Midwest entered into a Settlement Agreement and Release (Settlement Agreement) that resolved their dispute concerning the rusting bracket claims of Midwest's customers, including Fremont and Center Fresh. Pursuant to the Settlement Agreement, Big Dutchman agreed to provide parts to retrofit Midwest's customers' cages and Midwest agreed to indemnify Big Dutchman for rusting bracket claims by Midwest's customers. The Settlement Agreement states, in relevant part, as follows:
Big Dutchman has sold goods on open account to [Midwest], and asserts a balance owed on such account for goods invoiced through August 31, 2005 in the amount of $297,697. [Midwest] denies that it is indebted to Big Dutchman in this amount, and asserts that Big Dutchman is responsible for claims by [Midwest] or its customers related to allegedly rusting brackets on certain A-frame cages sold by Big Dutchman to [Midwest] (the “Rusting Bracket Claims”)....
....
2) Rusting Bracket Claims. [Midwest] has provided Big Dutchman with a list ... of [Midwest] customers, some of which are allegedly experiencing problems with rusting brackets. Big Dutchman will provide, at no cost to [Midwest], 321,480 Truss Rod Supports, part number 38–02–V226 ... for the retrofitting of [Midwest] customers' chicken houses.... In consideration of this agreed upon resolution of the Rusting Bracket Claims, [Midwest] agrees to indemnify Big Dutchman and hold it harmless against any Rusting Bracket Claims asserted by any MLS customer.
(Settlement Agreement, Compl. Ex. 1 (italics added).) 1
Five years later, in the Spring of 2011, Fremont noticed a different rusting problem with its cages—this time the legs and cross arms. (Fuller Dep. at 20–21.) Similar to the brackets in 2006, the legs and cross arms attached to the brackets were rusted to an extent that severely compromised the structural integrity of the cages. ( Id. at 28.) The rusting was limited to the areas where Midwest had installed the drinker feeders. (Letter of 10/5/11 from Rayzel to Fuller and George at 2, Def.'s Br. Supp. Mot. Summ. J. Ex. F.) Fremont initially notified Midwest about the rusting parts, but subsequently contacted Big Dutchman and demanded that it fix the problem.2 (Fuller Dep. at 28.) Big Dutchman conducted a site review and determined that the rusting legs and cross arms were part of the same problem that gave rise to the earlier rusting bracket claims. Although Big Dutchman knew that it was not legally obligated on its warranty for the rusting legs and cross arms on Fremont's cages, (Rayzel 10/5/11 Letter at 3 ()), Big Dutchman agreed to provide Fremont splint-like parts that could be bolted over the severely rusted legs and cross arms. (Rayzel Dep. at 128–29.)
In September 2011, Big Dutchman and Fremont began to negotiate a settlement of Fremont's 2011 claim concerning rusting parts. Thereafter, Big Dutchman's counsel notified Midwest of Fremont's 2011 rusting parts claim and demanded that Midwest indemnify Big Dutchman under the Settlement Agreement. Midwest did not respond. Ultimately, Big Dutchman agreed to provide Fremont total consideration of $300,000 in parts and related expenses to settle Fremont's claim. Big Dutchman sent a proposed settlement agreement to Fremont that referenced “continued problems with the A–Frame cages relating to rusting brackets.” (1st Draft Settlement Agreement, Def.'s Br. Supp. Mot. Summ. J. Ex. D.) However, Fremont objected to Big Dutchman's characterization of the issue as “rusting brackets” and replaced the “rusting brackets” language with “rusting legs and crossarms.” Big Dutchman then sent Fremont a revised draft that also referred to “rusting brackets,” but Fremont also struck that language from the draft. (2d Draft Settlement Agreement, Def.'s Br. Supp. Mot. Summ. J. Ex. E.) The agreement Big Dutchman and Fremont ultimately signed refers to “rusting A–Frame cages” and omits any reference to “rusting brackets.” (Compl. Ex. 4.)
Center Fresh also made a claim to Big Dutchman in 2011 for rusting cage parts. Big Dutchman notified Midwest that it intended to settle Center Fresh's claim and demanded that Midwest indemnify it pursuant to the Settlement Agreement. Midwest did not respond. Thereafter, Big Dutchman settled Center Fresh's claim for a sum of $90,000, allowing Center Fresh the option to receive cash or to apply the settlement amount toward purchases from Big Dutchman. (Letter Agreement between Big Dutchman and Center Fresh, Def.'s Br. Supp. Mot. Summ. J. Ex. K.)
Summary judgment is appropriate if there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law. Fed.R.Civ.P. 56. Material facts are facts which are defined by substantive law and are necessary to apply the law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). A dispute is genuine if a reasonable jury could return judgment for the non-moving party. Id.
The court must draw all inferences in a light most favorable to the non-moving party, but may grant summary judgment when “the record taken as a whole could not lead a rational trier of fact to find for the non-moving party.” Agristor Fin. Corp. v. Van Sickle, 967 F.2d 233, 236 (6th Cir.1992) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986)).
In its sole claim, Big Dutchman alleges that Midwest breached its obligation under the Settlement Agreement to indemnify Big Dutchman for the claims Fremont and Center Fresh made in 2011 concerning rusting cage parts. Midwest contends that it is entitled to summary judgment because Fremont's and Center Fresh's 2011 claims do not trigger the indemnification provision of the Settlement Agreementand, in any event, Big Dutchman's decisions to settle the Fremont and Center Fresh claims were unreasonable as a matter of law.
Contractual indemnity agreements are enforceable to the same extent as other contracts. Hubbell, Roth & Clark, Inc. v. Jay Dee Contractors, Inc., 249 Mich.App. 288, 291, 642 N.W.2d 700, 702 (2001) (per curiam). The scope of an indemnitor's obligation to indemnify is determined from the language of the contract. See Grand Trunk W. R.R., Inc. v. Auto Warehousing Co., 262 Mich.App. 345, 351, 686 N.W.2d 756, 761 (2004). Contracts should be construed to give effect to the intentions of the parties and to give a reasonable meaning to all provisions....
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