Cont'l Motors, Inc. v. Jewell Aircraft, Inc.

• Decision Date: 01 October 2013
• Docket Number: CIVIL ACTION 12-0221-WS-C
• Parties: CONTINENTAL MOTORS, INC., Plaintiff, v. JEWELL AIRCRAFT, INC., et al., Defendants.
• Court: U.S. District Court — Southern District of Alabama

CONTINENTAL MOTORS, INC., Plaintiff, v. JEWELL AIRCRAFT, INC., et al., Defendants.

CIVIL ACTION 12-0221-WS-C

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF ALABAMA SOUTHERN DIVISION

DONE: October 1, 2013

ORDER

This matter comes before the Court on defendant Jewell Aircraft, Inc.'s Motion for Summary Judgment (doc. 91). The Motion has been extensively briefed and is now ripe for disposition.

I. Background.¹

The factual and procedural history of this litigation has been recounted at length in previous orders. At the risk of redundancy, the Court summarizes the relevant background facts and circumstances as follows: In November 2006, a small airplane crashed near Bardstown, Kentucky, seriously injuring its occupants. Approximately 18 months earlier, Jewell Aircraft, Inc. and/or other persons or entities had overhauled the aircraft's engine, during which process they had installed a magneto manufactured by Continental Motors, Inc.²

The injured occupants of the aircraft filed a lawsuit (the "Crouch Action") against Continental in Kentucky in 2007. The Crouch plaintiffs attributed the crash to defects in the magneto's design, manufacture and/or installation. In February 2010, a federal court in Kentucky transferred the Crouch Action to this District Court, where it was styled Larry Crouch, et al. v. Teledyne Continental Motors, Inc., Civil No. 10-0072-KD-N. (The Crouch plaintiffs' claims against Jewell Aircraft remained pending in federal court in Kentucky.) The Crouch Action culminated in a three-week trial in the summer of 2011, at the conclusion of which the jury found in Continental's favor and against the Crouch plaintiffs on all remaining claims and causes of action. Following the trial and verdict, Continental petitioned Judge DuBose for an award of more than $2 million in attorney's fees and costs of defense it had incurred in the Crouch Action. She denied the motion, reasoning that the Crouch plaintiffs had not conducted themselves in a manner that was "tantamount to bad faith" so as to trigger the narrow fee-shifting provisions of 28 U.S.C. § 1927. (Civil Action 10-0072, doc. 411, at 3.)³

Undeterred, Continental initiated separate fee litigation against Jewell Aircraft, Inc. and two other defendants in state court, seeking recovery of defense costs and attorney's fees incurred in the Crouch Action on a breach of contract theory. The factual underpinnings of this litigation lie in a certain Product Support Agreement (the "Agreement") entered into between Jewell Aircraft and Continental as of January 1, 2005. The Agreement's effect was to designate Jewell Aircraft as a "TCM Piston Aircraft Engine and Parts Distributor and Service Provider." (Doc. 92, Exh. A, ¶ 1.) Of critical importance to plaintiff's claims here is Paragraph 21 of the Agreement, which provides in relevant part as follows:

"Distributor agrees to secure, to pay premiums on, and to furnish a Certificate of Insurance evidencing a Comprehensive General Liability Policy, including Products Liability, naming TCM as an additional insured with respect to, and only to the extent of, Distributor's indemnity obligations to TCM as set forth in this Agreement .... Distributor agrees to indemnify and hold TCM harmless from and against all claims, demands, obligations and liabilities, including injuries to, and death of, persons and loss or damage to property by whomsoever owned, to the extent that such claims, demands, obligations or liabilities have resulted from or arisen out of any act or omission of Distributor, its officers, agents, representatives, servants, or employees. With respect to any part sold or distributed by Distributor that is not a TCM part, Distributor agrees to defend and indemnify TCM for product liability or tort claims arising from the failure of such part."

(Doc. 92, Exh. A, ¶ 21.) Continental maintains in this lawsuit that Jewell Aircraft is in violation of its contractual obligations under Paragraph 21.

Following removal to this District Court on diversity grounds, this Court entered a series of rulings (including Orders dated July 30, 2012 (doc. 23) and November 28, 2012 (doc. 47)) whose combined effect was to pare down the triable claims. At present, the remaining causes of action joined herein consist of two Alabama common-law claims against Jewell Aircraft. Count I sounds in breach of contract and alleges that Jewell Aircraft "breached the Produc[t] Support Agreement by and through [its] failure and/or refusal to indemnify, defend and hold [Continental] harmless in regards to the [Crouch] Plaintiffs' claims against [Continental], including the appeal of the [Crouch] Action." (Doc. 1-1, ¶ 50.) Count II is styled as "Breach of Agreement to Procure Insurance" and alleges that Jewell Aircraft failed to obtain, provide and/or procure insurance coverage for the benefit of Continental, despite agreeing to do so in the Product Support Agreement. (Id., ¶¶ 53-55.)⁴ An important limitation on these claims pursuant to the July 30 Order is that they remain viable only insofar as Continental "seek[s] indemnity ofattorney's fees and defense costs incurred by plaintiff in defending against the negligent installation cause of action in the underlying case." (Doc. 23, at 28.)⁵

For its part, Jewell Aircraft brought a Counterclaim (doc. 24) against Continental. This Counterclaim rests on paragraph 40 of the subject Product Support Agreement, which reads as follows: "In the event of a litigation ... between TCM and Distributor, the non-prevailing party, as determined by the court or arbitrator, shall pay to the prevailing party all costs and reasonable attorney's fees incurred by the prevailing party" in that litigation. (Doc. 24, at 12.) Jewell Aircraft maintains that if this Court enters summary judgment in its favor, then Jewell Aircraft will be a "prevailing party" entitled to recover its attorney's fees and costs in this fee litigation.⁶

As this litigation lurched forward and a host of discovery disputes (mostly relating to the determination of damages) emerged, Jewell Aircraft took the unconventional step of filing a Rule56 Motion focused on liability issues (not the damages issues threatening to bog down these proceedings) nearly two months before the discovery deadline, and nearly three months before the dispositive motions deadline. This development prompted Magistrate Judge Cassady to enter an Order (doc. 107) on May 3, 2013, memorializing the present state of affairs with respect to discovery and damages issues while recognizing that "it makes sense to resolve the [summary judgment] motion without simultaneously continuing to wage a potentially needless discovery war." (Doc. 107, at 8.) The May 3 Order therefore stayed all discovery "until, if necessary, the undersigned conducts a supplemental Rule 16 scheduling conference with parties following a ruling on the pending summary judgment motion." (Id. at 10.)

Jewell Aircraft's Motion for Summary Judgment identifies no fewer than eight grounds for relief, all of which the parties have briefed. Those asserted grounds are as follows: (1) Continental failed to make timely demand on Jewell Aircraft; (2) the Agreement does not apply because Jewell Aircraft has never been found to have caused the Crouch Plaintiffs' injuries; (3) attorney's fees and expenses are not reimbursable under the Agreement; (4) the Agreement does not apply to vicarious liability claims; (5) Continental should be estopped from arguing that there are any covered vicarious liability claims; (6) Continental has not proved that it incurred fees and costs in defending the negligent installation claim; (7) Continental is not entitled to fees and costs predating any demand to Jewell Aircraft or postdating dismissal of the negligent installation claim; and (8) Jewell Aircraft is a prevailing party entitled to its attorney's fees and costs under Paragraph 40 of the Agreement. The Court will consider these issues sequentially.

II. Summary Judgment Standard.

Summary judgment should be granted only "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Rule 56(a), Fed.R.Civ.P. The party seeking summary judgment bears "the initial burden to show the district court, by reference to materials on file, that there are no genuine issues of material fact that should be decided at trial." Clark v. Coats & Clark, Inc., 929 F.2d 604, 608 (11^th Cir. 1991). Once the moving party has satisfied its responsibility, the burden shifts to the non-movant to show the existence of a genuine issue of material fact. Id. "If the nonmoving party fails to make 'a sufficient showing on an essential element of her case with respect to which she has the burden of proof,' the moving party is entitled to summary judgment." Id. (quoting Celotex Corp. v. Catrett, 477 U.S. 317 (1986)) (footnote omitted). "In reviewing whether the nonmoving partyhas met its burden, the court must stop short of weighing the evidence and making credibility determinations of the truth of the matter. Instead, the evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor." Tipton v. Bergrohr GMBH-Siegen, 965 F.2d 994, 999 (11^th Cir. 1992) (internal citations and quotations omitted). "Summary judgment is justified only for those cases devoid of any need for factual determinations." Offshore Aviation v. Transcon Lines, Inc., 831 F.2d 1013, 1016 (11^th Cir. 1987) (citation omitted).

III. The Demand Issue.

As discussed supra, Paragraph 21 of the Product Support Agreement contains the subject indemnity provision. Although Paragraph 21 does not provide that Continental must adhere to any specific procedure to trigger Jewell Aircraft's indemnity obligations under the Agreement, Jewell Aircraft nonetheless argues that it is entitled to summary judgment under applicable law because Continental "never made a demand on JA to defend or indemnify." (Doc. 92, at 5....