Burlington N. R.R. v. Farmers Union Oil Co., 99-1664

• Decision Date: 13 December 1999
• Docket Number: No. 99-1664,99-1664
• Citation: 207 F.3d 526
• Parties: (8th Cir. 2000) BURLINGTON NORTHERN RAILROAD COMPANY, APPELLEE, v. FARMERS UNION OIL COMPANY OF ROLLA, A CORPORATION, APPELLANT. Submitted:
• Court: U.S. Court of Appeals — Eighth Circuit

Page 526

207 F.3d 526 (8th Cir. 2000)

BURLINGTON NORTHERN RAILROAD COMPANY, APPELLEE, v. FARMERS UNION OIL COMPANY OF ROLLA, A CORPORATION, APPELLANT.

No. 99-1664

UNITED STATES COURT OF APPEALS FOR THE EIGHTH CIRCUIT

Submitted: December 13, 1999

Decided: March 28, 2000

Appeal from the United States District Court for the District of North Dakota. [Copyrighted Material Omitted]

[Copyrighted Material Omitted] Before Wollman, Chief Judge, McMILLIAN, Circuit Judge, and Battey,¹ District Judge.

Wollman, Chief Judge.

Farmers Union Oil Company (Farmers Union) and Burlington Northern Railroad Company (BN) are parties to an industrial track lease agreement that contains an indemnity clause that requires Farmers Union to indemnify BN for certain losses that BN suffers. The district court² determined that this clause was triggered by an accident that occurred near Farmers Union's leased premises, and it therefore ordered Farmers Union to pay BN $200,000 in indemnity and $75,302.83 in attorney fees and costs. Farmers Union appeals, and we affirm.

I.

BN owns and operates railroad tracks near Rolla, North Dakota. Along a spur of these tracks, Rolla Cooperative Grain Elevator (Rolla Grain) maintains three grain storage units. Also along this spur, and immediately adjacent to Rolla Grain's facilities, Farmers Union operates a fertilizer plant. Both Farmers Union and Rolla Grain entered into track lease agreements with BN. The agreements contain identical indemnity clauses that provide:

Lessee also agrees to indemnify and hold harmless Lessor for loss, damage, injury or death from any act or omission of Lessee, Lessee's invitees, licensees, employees, or agents, to the person or property of the parties hereto and their employees and to the person or property of any other person or corporation while on or near said premises; and if any claim or liability, other than from fire, shall arise from the joint or concurring negligence of both parties hereto,it shall be borne by them equally.

At issue in this case is whether an accident that occurred near Farmers Union's leased premises on April 13, 1987, triggered the indemnity clause within Farmers Union's lease agreement.

Sometime between April 9 and April 12, 1987, Farmers Union received two railroad cars carrying fertilizer. While unloading the cars, Farmers Union employees noticed that the brake on one of the cars was sticking. The employees did not notify BN of the defect, but they did warn Fred Roy, a Rolla Grain employee, about the brake. Roy had come to Farmers Union to transport the two empty cars to Rolla Grain, where they would be loaded with grain, as was commonly done with cars received and emptied by Farmers Union. Roy transported and filled the two cars without incident. Shortly thereafter, BN delivered 26 or 27 empty cars to Rolla Grain. One or two of the cars were coupled on one end of the cars Roy had received from Farmers Union and the remainder were coupled on the other end.

The following Monday, Roy and Teddy Cahill, another Rolla Grain employee, began loading the empty cars that BN had delivered. To do so, Cahill positioned himself on the top of the cars, while Roy remained on the ground and rolled the cars forward once they were filled. After filling and moving one or two of the empty cars, Roy had difficulty with the brake on the next car, which was numbered FLIX12331 (the FLIX car). BN contends that this troublesome car was one of the two cars that Rolla Grain had received from Farmers Union and which Roy had filled a few days earlier. Farmers Union, in contrast, asserts that the FLIX car was one which BN had delivered directly to Rolla Grain. In any event, Roy asked Cahill to come down and help him release the brake. After doing so, and as he was attempting to resume his position atop the empty cars, Cahill slipped and fell under another car that Roy had started to roll down the tracks, suffering severe injuries as a result.

Cahill sued BN, claiming that it had supplied a defective car and that this car was a significant cause of his injuries. BN tendered defense of Cahill's suit to Farmers Union on the theory that its failure to notify BN of the faulty brake constituted an act or omission that triggered the lease's indemnity clause. BN also tendered defense to Rolla Grain. Both parties declined the tender. BN then settled with Cahill for $400,000 and sought $200,000 each from Farmers Union and Rolla Grain. Farmers Union refused to pay, whereupon BN instituted this diversity action.

The district court granted summary judgment in favor of Farmers Union after finding that the Cahill accident did not occur "on or near" Farmers Union's property, as is required to trigger the indemnity clause. We reversed, finding that the accident did occur near the leased premises, and remanded for a determination as to whether the other predicates for triggering the indemnity clause--an "act or omission" by Farmers Union that caused Cahill's injury--had occurred. See Burlington Northern R. Co. v. Farmers Union Oil Co., 114 F.3d 705, 707 (8th Cir. 1997) (Burlington Northern I). Based on a written record submitted by the parties, the district court on remand concluded that an act or omission by Farmers Union had caused Cahill's injury. The court ordered Farmers Union to pay BN $200,000 in indemnity and $75,302.83 in attorney fees and costs. This appeal followed.

II. The Indemnification Award

A. BN's Right to Indemnification

A lessee's obligation to indemnify a railroad under a track lease agreement "is a contractual duty and not a duty arising under the common law of tort." Burlington Northern, Inc. v. Bellaire Corp., 921 F.2d 760, 763 (8th Cir. 1990) (quoting Burlington Northern, Inc. v. Hughes Brothers, Inc., 671 F.2d 279, 284 (8th Cir. 1982)). Thus, to recover under the indemnity agreement, BN need not prove that Farmers Union was negligent. See Bellaire, 921 F.2d at 763. Rather, BN must establish, in accordance with the terms of the agreement, that an "act or omission" by Farmers Union caused or contributed to cause the accident in which Cahill was injured. See id. (interpreting a similar indemnity agreement); Missouri Pac. R. Co. v. International Paper Co., 618 F.2d 492, 496 (8th Cir. 1980).

The district court found that the FLIX car was one of the two cars that had been delivered to Farmers Union a few days prior to the accident. The court also found that Farmers Union's failure to notify BN of this car's defective brakes constituted an act or omission that contributed to Cahill's injury, thereby triggering the indemnity clause. We review the district court's factual findings for clear error, see Consol. Elec. & Mech., Inc. v. Biggs Gen. Contracting, Inc., 167 F.3d 432, 434 (8th Cir. 1999), and its interpretation of the indemnity clause, which is governed by North Dakota law, de novo, see Burlington Northern I, 114 F.3d at 707.

Farmers Union first argues that the district court erred in finding that the FLIX car was one of the cars that Farmers Union had handled prior to the accident. Although there exists conflicting evidence regarding the origin of the FLIX car, we cannot say that the court's conclusion is clearly erroneous, as it is supported by the testimony of the three individuals most knowledgeable of the Cahill accident. Most notably, Roy, the only person who saw both the defective car received by Farmers Union and the car involved in the Cahill accident, testified that he was certain that the troublesome car on both occasions was the FLIX car. In addition, Cahill stated that the FLIX car was already loaded when he and Roy came to work on April 13 and thus that the FLIX car must have been one of the cars that they had received from Farmers Union. Finally, Roy's and Cahill's supervisor, Mike Guderjahn, testified that, based on the amount of time that it takes to load a car and how long Cahill and Roy had been at work on April 13, the FLIX car had to have been loaded prior to that day.

Farmers Union asserts that these individuals' testimony is rendered incredible by certain business records of Farmland Industries, an unrelated third party, that suggest that the FLIX car may have been one of the cars delivered directly to Rolla Grain. We conclude, however, that although they are not insignificant, these records do not so compellingly cast into doubt the unequivocal testimony of Roy, Cahill, and Guderjahn as to render clearly erroneous the district court's findings regarding the FLIX car. See First Nat'l Bank, Sioux Falls v. First Nat'l Bank, South Dakota, 153 F.3d 885, 890 (8th Cir. 1998) ("Where there are two permissible views of the evidence, the factfinder's choice between them cannot be clearly erroneous.") (quoting Anderson v. City of Bessemer City, 470 U.S. 564, 574 (1985)).

Farmers Union next argues that, even if the FLIX car had passed through its control, it had no duty under the terms of the lease agreement to notify BN of the defective brake and therefore its failure to do so did not constitute an act or omission under the indemnity clause. We disagree. The primary purpose of an indemnity clause such as is at issue here is to indemnify a railroad when its lessee's act or omission causes the railroad to violate its non-delegable duty to furnish a safe workplace under the Federal Employers' Liability Act (FELA), 45 U.S.C. §§ 51 et seq. See Bellaire, 921 F.2d at 763; Hughes Brothers, 671 F.2d at 284. Accordingly, the inquiry into whether an act or omission has occurred does not focus primarily on the lessee's duties to the railroad, but rather on the railroad's duty to provide a safe workplace. See Bellaire, 921 F.2d at 763 ("The phrase 'act or omission' includes any act or omission which constitutes a violation of the railroad's duty to provide a safe workplace, and thus, subjects it to liability under FELA.") (quoting Hughes Brothers, 671 F.2d at 284). Farmers Union is therefore chargeable with an act or omission under the...