Brewer Envtl. Indus. v. Matson Terminals Inc. And
| Decision Date | 28 April 2011 |
| Docket Number | CIVIL NO. 10-00221 LEK-KSC |
| Parties | BREWER ENVIRONMENTAL INDUSTRIES, LLC dba BEI LLC, BEI HOLDINGS, INC., BREWER ENVIRONMENTAL INDUSTRIES HOLDINGS, INC. and SEABRIGHT INSURANCE COMPANY, Plaintiffs, v. MATSON TERMINALS, INC. and MATSON NAVIGATION COMPANY, INC., Defendants. |
| Court | U.S. District Court — District of Hawaii |
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS'
Before the Court is Defendants Matson Terminals, Inc.'s ("Matson") and Matson Navigation Company, Inc.'s (collectively, "Defendants") Motion for Judgment on the Pleadings or for Summary Judgment ("Motion"), filed on January 24, 2011. Plaintiffs Brewer Environmental Industries, LLC, doing business as BEI LLC, BEI Holdings, Inc., Brewer Environmental Industries Holdings, Inc. (collectively, "Brewer"), and Seabright Insurance Company ("Seabright") (all collectively, "Plaintiffs"), filed their memorandum in opposition to the Motion on March 7, 2011. Defendants filed their reply on March 11, 2011. This matter cameon for hearing on April 4, 2011. Richard Wooten, Esq., appeared by telephone on behalf of Plaintiffs. John Lacy, Esq., appeared on behalf of Defendants. After careful consideration of the Motion, supporting and opposing memoranda, and the arguments of counsel, the Court HEREBY GRANTS IN PART AND DENIES IN PART Defendants' Motion for the reasons set forth below.
On November 10, 2004, non-party Kyle Soares injured his back while working for Brewer as a longshoreman. [Complaint at 1 6.] Soares' injury occurred in the course and scope of his employment as a covered employee under the Longshore and Harbor Workers' Compensation Act, 33 U.S.C. § 901 et seq. ("LHWCA"). [Id. at 1 6 (citing 33 U.S.C. § 902(3)).] At the time of the injury, Brewer was covered by Seabright under a workers' compensation insurance policy1 ("Insurance Policy") for claims brought by its employees under the LHWCA. [Id. at 1 7.] Following a medical release by his treating physician, Soares returned to work on January 3, 2005. [Id. at 1 15.]
On January 31, 2005, Brewer and Defendants entered intoan Asset Purchase Agreement2 ("Agreement") whereby Brewer agreed to sell and Defendants agreed to purchase HT&T Stevedoring, a business providing stevedoring services on the island of Hawai"i. [Id. at ¶ 10.] The Agreement contains an indemnity provision which provides, in relevant part:
Purchaser shall indemnify, defend, and hold harmless Seller from and against any and all loss, damage, claim, cost and expense and any other liability whatsoever (including, without limitation, reasonable attorneys' fees, charges and costs) incurred by Seller by reason of any claim, demand or litigation relating to the Property Employees which arise from any act, omission, occurrence or matters that take place after the Cut-off Time.
[Agreement at ¶ 5.3.] The "Cut-off Time" for the Agreement was January 31, 2005 at 11:59 p.m. [Agreement at 1, ¶¶ 1.11, 1.5.] As a "Property Employee", Soares became Defendants' employee effective February 1, 2005. [Id. at ¶¶ 1.27, 5.2.]
On June 10, 2005, Soares filed a claim with the Office of Workers' Compensation Programs, United States Department of Labor ("OWCP"), for compensation under the LHWCA against Brewer and Seabright for his November 10, 2004 injury. [Complaint at ¶ 16.] In accordance with the Insurance Policy, Seabright timely paid Soares his compensation benefits and covered his medical expenses. [Id. at ¶ 7.]
On February 21, 2006, Soares filed a second claim with the OWCP for compensation against Defendants for "cumulative trauma". [Id. at ¶ 16.] Plaintiffs tendered the defense and indemnity for Soares' "cumulative trauma" claims to Defendants on June 5, 2006, but Defendants refused to acknowledge liability. Seabright paid for Soares' compensation benefits and medical expenses, and covered the attorneys' fees and costs of defending Brewer. [Id. at ¶¶ 17-18.]
United States Department of Labor Administrative Law Judge ("ALJ") Gerald Etchingham held a hearing on the "cumulative trauma" claim on November 29, 3007. On June 13, 2008, ALJ Etchingham issued his Decision and Order Awarding Benefits ("Administrative Order").3 [Admin. Order at 1-2.] ALJ Etchingham concluded that Soares' back injury worsened as a result of his work for Defendants, and that Defendants were liable as the last responsible employer. As a result, ALJ Etchingham ordered Defendants to pay all disability compensation and medical benefits due to Soares. He further ordered Defendants to reimburse Plaintiffs for compensation and medical expenses paid by Seabright to Soares for the time period after he began working for Defendants on February 1, 2005. The issue of attorneys' fees was not before ALJ Etchingham and he did not ruleon the matter. [Id. at 27-28.]
According to the Complaint, "Defendants have failed and refuse to reimburse Plaintiffs in full for the compensation, medical expenses, and benefits it paid after Soares began working for Defendants in 2005[,]" as well as for the legal fees and costs incurred in defending Brewer against Soares' claims. [Complaint at ¶ 20.] Both parties now appear to agree, however, that Defendants reimbursed Seabright for the "post-January 31, 2005 benefits" provided by Seabright to Soares.4 [Mem. in Opp. at 2; Mem. in Supp. of Motion at 5.]
On April 16, 2010, Plaintiffs filed their Complaint asserting two causes of action. Plaintiffs' first claim alleges that Defendants breached Paragraph 5.3 of the Agreement by failing to defend and indemnify Plaintiffs. Plaintiffs' second claim alleges that they are entitled to equitable indemnity. Under both claims, Plaintiffs seek: (1) payment of $1,700.00 in LHWCA compensation and medical benefits, including interest; and(2) $139,527.04 in attorneys' fees and costs. [Complaint at ¶¶ 21-32.]
In the instant Motion, Defendants request judgment on the pleadings or, in the alternative, summary judgment. Defendants argue that: (1) Plaintiffs lack standing; (2) the LHWCA, as the exclusive remedy in this case, does not provide for the recovery of attorneys' fees and court costs; and (3) the American Rule bars the recovery of attorneys' fees and expenses.
In their Memorandum in Opposition to the Motion, Plaintiffs refute Defendants' standing argument, contending that Seabright has standing as both an intended third-party beneficiary and an assignee under the Agreement. Plaintiffs then rebut Defendants' claim that the LHWCA provides the exclusive remedy in this case, arguing that the exclusive remedy provision applies to tort liability but not contract claims. Finally, Plaintiffs argue that they are entitled to reimbursement for their expenditures, including attorneys' fees and costs, under the doctrines of equitable indemnity and equitable subrogation.
In their Reply, Defendants refute Plaintiffs' arguments that Seabright is a third-party beneficiary and assignee under the Agreement and contend that Plaintiffs' equitable claims are barred by the LHWCA or otherwise inapplicable.
"When a contract is a maritime one, and the dispute is not inherently local, federal law controls the contract interpretation." Norfolk S. Ry. Co. v. Kirby, 543 U.S. 14, 22-23 (2004) (citing Kossick v. United Fruit Co., 365 U.S. 731, 735, 81 S. Ct. 886 (1961)). Where a maritime contract's interpretation implicates local interests, however, it "beckon[s] interpretation by state law." Id. at 27 (citing Kossick, 365 U.S. at 735, 81 S. Ct. 886). As explained by the Ninth Circuit:
[A] contractual claim gives rise to Section 1333 admiralty jurisdiction when the underlying contract is "maritime in nature." Norfolk S. Ry. Co. v. James N. Kirby, 543 U.S. 14, 26, 125 S. Ct. 385, 160 L. Ed.2d 283 (2004). To make this determination, we must examine a contract to determine "whether the principal objective of a contract is maritime commerce." Id. at 25, 125 S. Ct. 385. In adopting this framework, the Supreme Court rejected the longstanding "spatial approach" to determining the maritime nature of contracts. Id. at 24-25, 125 S. Ct. 385. The Court instead held that a "conceptual approach" was needed because modern maritime commerce "is often inseparable from some land-based obligations." Id. at 25, 125 S. Ct. 385. The conceptual approach acknowledges this modern reality by examining whether the contract references "maritime service or maritime transactions." Id. at 24, 125 S. Ct. 385 (quoting N. Pac. S.S. Co. v. Hall Brothers Marine Ry. & Shipbuilding Co., 24 9 U.S. 119, 125, 39 S. Ct. 221, 63 L. Ed. 510 (1919)).
ProShipLine Inc. v. Aspen Infrastructures Ltd., 609 F.3d 960, 967 (9th Cir. 2010).
Where a court finds that a contract is a maritime one, the court must then determine whether the parties' dispute is inherently local. As explained by the Supreme Court in Norfolk Southern Railway:
[N]ot "every term in every maritime contract can only be controlled by some federally defined admiralty rule." Wilburn Boat Co. v. Fireman's Fund Ins. Co., 348 U.S. 310, 313, 75 S. Ct. 368, 99 L. Ed. 337 (1955) (). A maritime contract's interpretation may so implicate local interests as to beckon interpretation by state law.... [W]hen state interests cannot be accommodated without defeating a federal interest... then federal substantive law should govern.
543 U.S. at 27 (some citations omitted).
The instant case involves two contracts: a contract for the sale of a stevedoring business and a workers' compensation insurance policy issued to a stevedoring company. The first contract, the Agreement, is fundamentally "maritime in nature." It concerns the sale of a company that is in the business of loading and unloading vessels in a port. See Simon v. Intercontinental Transp. (ICT) B.V., 882 F.2d 1435, 1443 (9th Cir. ...
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