Canipe v. National Loss Control Service Corp.

• Citation: 736 F.2d 1055
• Decision Date: 23 July 1984
• Docket Number: No. 83-4346,83-4346
• Parties: Billy CANIPE, Plaintiff-Appellant, v. NATIONAL LOSS CONTROL SERVICE CORPORATION, Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

Page 1055

736 F.2d 1055

Billy CANIPE, Plaintiff-Appellant, v. NATIONAL LOSS CONTROL SERVICE CORPORATION, Defendant-Appellee.

No. 83-4346.

United States Court of Appeals Fifth Circuit.

July 23, 1984.

Rehearing Denied Aug. 24, 1984.

Merkel & Cocke, Charles M. Merkel, John H. Cocke, Clarksdale, Miss., Todd & Deal, Memphis, Tenn., Lloyd Anthony Deal, Memphis, Tenn., for plaintiff-appellant.

Walter W. Thompson, Clarksdale, Miss., for defendant-appellee.

Appeal from the United States District Court for the Northern District of Mississippi.

Before WISDOM, REAVLEY, and HIGGINBOTHAM, Circuit Judges.

WISDOM, Circuit Judge:

This diversity action involves the applicability of the principles of section 324A of the American Law Institute's Restatement (Second) of Torts (1965) to a tort case subject to Tennessee law. Section 324A deals with the liability of an actor, rendering services to one person, for failure to exercise reasonable care to protect a third person.

Billy Canipe sues to recover for a severe personal injury that he sustained at work. The defendant, National Loss Control Service Corporation (National Loss), had contracted with the plaintiff's employer (Kraft, Inc.) to provide safety inspections and related accident-prevention services at the plant in which the plaintiff worked. Canipe alleges that the defendant performed its contractual duties negligently, and that this negligence was a proximate cause of the plaintiff's injury. After a long period of discovery, the district court ruled that the plaintiff had presented no genuine issue of material fact, and therefore granted the defendant's motion for summary judgment. Canipe v. National Loss Control Service Corp., N.D.Miss.1983, 566 F.Supp. 521. Because of the thoroughness and thoughtfulness of the district court's opinion, we are hesitant to overturn the court's decision. Nevertheless, we have concluded that the decision rests upon an erroneous legal premise. Accordingly, we affirm in part, reverse in part, and remand.

I.

Summary judgment is appropriate, of course, only when the movant has demonstrated the lack of any genuine issue of material fact. In reviewing a grant of summary judgment for the defendant, we must examine the record in the light most favorable to the plaintiff and draw all reasonable inferences in the plaintiff's favor. See, e.g., Gulf Mississippi Marine Corp. v. George Engine Co., 5 Cir.1983, 697 F.2d 668, 670-71. Viewed from that perspective, the facts of this case are as follows.

The defendant is a national corporation engaged in the business of helping other companies improve workplace safety. National Loss entered into its contractual relationship with Kraft in January 1978. ¹ The contract between these two parties was national in scope and was intended to establish only the general framework for National Loss's provision of services to the various Kraft plants around the country. The primary purpose of this contract, therefore, was to set the hourly rates for the various services that National Loss could provide to Kraft plants. The service to be performed at a particular plant was to be determined on a "by request" basis. Under the arrangement between National Loss and Kraft's Humko ² plant in Memphis, Tennessee, National Loss agreed to conduct quarterly safety inspections of the plant and to provide the plant management with loss experience analyses. ³ Humko plant management, in addition to contracting for these services, conducted its own periodic safety inspections of the plant.

On July 5, 1979, Kraft's Corporate Safety Manager, Jack Hansen, sent the following memorandum to all of Kraft's safety managers:

"Attached for your information is a copy of an OSHA-Gram from the National Safety News. It explains the change in OSHA's position on defining a serious violation. This new definition will probably result in our locations receiving more serious violations and higher penalties. Obviously, the answer is to survey all of our respective locations to make sure that the locations do not have any OSHA violations."

On July 10, Allen Jamison, who was the Kraft official in charge of coordinating safety inspections at the Humko plant, wrote to the National Loss manager of the Kraft account. That letter states in pertinent part:

"In reference to Jack Hansen's memo of July 5, 1979[,] explaining the change in OSHA's position on defining a serious violation, I would like to request that your Loss Control people during their third quarter visit concentrate more on an OSHA type inspection, and if any serious violations are observed, to include them in the recommendation section. The third quarter is the only quarter that we would like the format changed."

During their next visit to the Humko plant, which occurred in September 1979, the National Loss inspectors conducted a thorough four-day search of the plant, concentrating on detecting violations of OSHA regulations. The two inspectors later sent plant management a detailed, forty-four page report on the violations they had discovered.

Canipe worked at the Humko plant as Assistant Operator of two machines known as "flake roll machines", which are capable of producing different types of flaky chemical products. As a part of his duties, he was required to clean each machine whenever production on that machine shifted from one product to another. To clean the machine, he had to lift a transparent plastic dust cover and then use an air hose to force out of the machine's auger trough any matter remaining in the trough. Canipe contends that he was taught a method of cleaning the machine while the auger was in motion. On January 31, 1980, while cleaning one of the machines in this manner, Canipe caught his shirt sleeve on a large pin at the end of the auger. He was pulled into the machine and his right arm was amputated.

Canipe sued National Loss on November 20, 1981. He based his primary theory of recovery upon section 324A of the Restatement (Second) of Torts (1965) which states:

"One who undertakes, gratuitously or for consideration, to render services to another which he should recognize as necessary for the protection of a third person or his things, is subject to liability to the third person for physical harm resulting from his failure to exercise reasonable care to protect his undertaking, if

"(a) his failure to exercise reasonable care increases the risk of such harm, or

"(b) he has undertaken to perform a duty owed by the other to the third person, or

"(c) the harm is suffered because of reliance by the other or the third person upon the undertaking." ⁴

On April 28, 1983, the district court granted the defendant's motion for summary judgment on the ground that Tennessee law did not recognize the applicability of the principles underlying section 324A. The plaintiff moved for reconsideration. The court then reversed its position on the applicability of section 324A under Tennessee law, but granted summary judgment for the defendant nonetheless, holding that the plaintiff had not presented any facts that would justify applying section 324A. The plaintiff appeals that decision.

II.

National Loss contends that the district court erred in holding that section 324A provides a valid basis for recovery under Tennessee law. National Loss also contends that, if Tennessee law does recognize section 324A, the district court was correct in holding that Canipe's allegations do not implicate section 324A. Canipe argues that the court correctly held the principles underlying section 324A are cognizable in Tennessee, but that it incorrectly concluded that the plaintiff had not alleged facts sufficient to warrant recovery under section 324A. We agree with the plaintiff on both parts of his argument.

A.

The district court's holding that section 324A states Tennessee law rested upon the decision of the Court of Appeals for the Sixth Circuit in Neal v. Bergland, 6 Cir.1981, 646 F.2d 1178, aff'd sub nom. Block v. Neal, 1983, 460 U.S. 289, 103 S.Ct. 1089, 75 L.Ed.2d 67. The plaintiff in Neal had bought a prefabricated home in Tennessee that had been inspected by an employee of the United States Farmers Home Administration. Although the inspector had noted no problems with the house, it later turned out to be defective. The plaintiff sued various federal officials in Tennessee state court, and the defendants removed the action to federal district court. The district court dismissed the complaint. The Court of Appeals reversed, holding that the plaintiff had stated a cause of action under the Federal Tort Claims Act (FTCA), 28 U.S.C. Secs. 2671 et seq. (1982). The Court's perceived basis for the plaintiff's potential recovery against the government was the principle "that one who undertakes to act, even though gratuitously, is required to act carefully and with the exercise of due care and will be liable for injuries proximately caused by failure to use such care". 646 F.2d at 1181-82. ⁵

We place little weight upon the Neal decision. The Court there did not state explicitly that it was applying Tennessee law, and it does not discuss any Tennessee cases. ⁶ Nonetheless, it is reasonably well recognized that the federal government is liable under the FTCA only if the applicable state law would place liability upon a private actor in like circumstances. See 28 U.S.C. Sec. 1346(b) (1982); id. Sec. 2674; see also, e.g., United Scottish Insurance Co. v. United States, 9 Cir.1980, 614 F.2d 188, 193. We conclude, therefore, that the district court was correct in deciding that the Neal Court was "attempting to make an educated Erie guess" as to Tennessee law.

Furthermore, our independent review of Tennessee case law convinces us that Tennessee has adopted the principle of section 324A. The leading decision is Johnson v. Oman Construction Co., Tenn.1975, 519 S.W.2d 782. In that case, the state had hired an independent contractor to construct an interstate highway. The plaintiffs' son was killed...