Csx Transp., Inc. v. City of Garden City

Decision Date27 March 2003
Docket NumberNo. 02-12261.,02-12261.
Citation325 F.3d 1236
PartiesCSX TRANSPORTATION, INC., National Railroad Passenger Corporation, Plaintiffs-Cross-Defendants-Appellants, v. The CITY OF GARDEN CITY, Defendant-Third-Party Plaintiff-Appellee, v. ARCO Inc., Third-Party Defendant-Cross-Claimant-Appellee.
CourtU.S. Court of Appeals — Eleventh Circuit

Amy R. Snell, James W. Purcell, Fulcher, Hagler, Reed, Hanks & Harper, Augusta, GA, for Plaintiffs-Cross-Defendants-Appellants.

Christopher L. Ray, Patrick T. O'Connor, Oliver, Maner & Gray, LLP, Edward R. Stabell, III, Brennan, Harris & Rominger, Savannah, GA, for City of Garden City and ARCO, Inc.

Appeal from the United States District Court for the Southern District of Georgia.

Before ANDERSON, BIRCH and BARKETT, Circuit Judges.

BIRCH, Circuit Judge:

CERTIFICATION FROM THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT TO THE SUPREME COURT OF GEORGIA, PURSUANT TO O.C.G.A. § 15-2-9. TO THE SUPREME COURT OF GEORGIA AND ITS HONORABLE JUSTICES:

In this case we must determine under what circumstances, if any, a Georgia municipality may contractually indemnify a private party for loss, damage, or liability arising in connection with a public works project involving the private party's land. The district court granted summary judgment in favor of a municipality that had entered into such an agreement on the ground that it was ultra vires. Because the resolution of this appeal turns on questions of first impression under Georgia law, we certify it to the Supreme Court of Georgia for review. Questions CERTIFIED.

I. BACKGROUND

The facts of this case, which are not in dispute, were succinctly stated in our earlier opinion, CSX Transp., Inc. v. City of Garden City, 235 F.3d 1325, 1326 (11th Cir.2000) ("CSX I"):

In 1996, the City of Garden City, Georgia (Garden City or the City) decided to install water and sewer lines along the public rights-of-way that ran across, under, and parallel to CSX Transportation, Inc.'s (CSX) railroad tracks. The City contracted with CSX to use CSX's rights-of-ways and agreed to indemnify CSX for any damages arising out of the City's use of the rights-of-way. Under the contract, the City agreed to maintain insurance to cover the indemnity obligations it had assumed.

Garden City employed ARCO, Inc. as the general contractor for this project which employed CARLCO Trucking, Inc. as a sub-contractor. On October 9, 1997, a CARLCO employee drove a tractor-trailer truck to the City's work site to remove equipment. As he crossed CSX's tracks, his truck stalled on the tracks where it was hit by a National Railroad Passenger Corporation (Amtrak) passenger train. CSX paid damages to passengers on the train and sued Garden City for indemnification under their agreement. Garden City filed a third-party claim against its contractor, ARCO.

The City moved for summary judgment, claiming that the indemnity agreement was void for a number of reasons. The district court granted the motion, concluding that the agreement constituted an impermissible waiver of the City's sovereign immunity in the absence of any evidence that the City had liability insurance that would cover the indemnity claim. Id. at 1329. On appeal, CSX1 moved to supplement the record "to show that Garden City participates in the Georgia Interlocal Risk Management Agency (GIRMA) fund." Id. at 1330. We observed that the indemnification agreement, "in effect, required the City to waive its sovereign immunity vis-a-vis CSX in connection with any claims against CSX arising out of the City's construction project," id. at 1329, but that "Georgia law ... forbids a city from waiving its sovereign immunity unless it has insurance to fund any liability it might thereby incur." Id. Relying on our "inherent equitable power to allow supplementation of the appellate record if it is in the interests of justice," we granted the motion. Id. at 1330, 1331. Expressing no opinion in the outcome, we "remand[ed] the case to the district court so that it [could] consider [the City's participation in the GIRMA fund] before determining whether Garden City effectively waived its immunity by its agreement to indemnify CSX." Id. at 1331.

On remand, the district court stated the issue as "whether the City is legally authorized to contractually waive its immunity by purchasing insurance to indemnify CSX against third party liability claims." R7-87 at 3-4. Finding that "CSX ha[d] pointed to no express authority for a contract enabling CSX to hold the City liable for negligence claims against CSX," id. at 7-8, "that the Georgia legislature was interested in permitting, contingent on the purchase of insurance, a way for injured members of the public to `sue city hall' for negligence damages ..., not contract-based damages, and most certainly not contract damages flowing from the `tort indemnification' of third parties like CSX," id. at 8 (footnote omitted), and that "contractual indemnification ... is a considered choice the Georgia legislature should make ... not a federal court sitting in diversity," id. at 9, the court concluded that the indemnification contract was ultra vires and granted summary judgment in favor of the City.2 Id. at 9. After certification pursuant to Rule 54(b) of the Federal Rules of Civil Procedure, CSX timely appealed.3

II. DISCUSSION

"This court reviews a grant of summary judgment de novo, applying the same standards as the district court." O'Ferrell v. United States, 253 F.3d 1257, 1265 (11th Cir.2001). Though the material facts are not in dispute here, we must determine whether the indemnification agreement is void ab initio as a matter of law. In accordance with Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), we review the district court's decision in light of Georgia law. "Where there is any doubt as to the application of state law, a federal court should certify the question to the state supreme court to avoid making unnecessary Erie `guesses' and to offer the state court the opportunity to interpret or change existing law." Mosher v. Speedstar Div. of AMCA Int'l, Inc., 52 F.3d 913, 916-17 (11th Cir.1995) (footnote omitted). Because this case presents a question of first impression under Georgia law, we seek guidance from the Supreme Court of Georgia and certify the questions set out below.

Georgia "[m]unicipalities are creatures of the legislature. They possess only such powers as are expressly delegated to them by the legislature. They possess no inherent powers." Koehler v. Massell, 229 Ga. 359, 191 S.E.2d 830, 833 (1972). As such, Georgia courts "have long acknowledged that municipal corporations have only limited power to enter into contracts." Precise v. City of Rossville, 261 Ga. 210, 403 S.E.2d 47, 49 (1991). While "[a] municipal corporation may bind itself by, and cannot abrogate, any contract which it has the right to make," Williams v. City Council of West Point, 68 Ga. 816, 816 (1882), it has no power to enter into a contract if it is not authorized by charter or by legislative grant. Barrett v. City of Atlanta, 145 Ga. 678, 89 S.E. 781, 782 (1916). There must be express or implied authority. See Forsyth County v. Childers, 240 Ga.App. 819, 525 S.E.2d 390, 392 (1999). "If a contract is beyond the power or competence of the local government, then the contract is termed ultra vires and is void." Precise, 403 S.E.2d at 49. Even "`complete performance of such contract on the part of [the other party] will not prevent the municipal corporation from pleading its want of power or the illegality of the contract.'" City of Warm Springs v. Bulloch, 212 Ga. 149, 91 S.E.2d 13, 14 (1956) (quoting City Council of Dawson v. Dawson Waterworks Co., 106 Ga. 696, 32 S.E. 907, 907 (1899)). Here, Garden City argues that the indemnification agreement is ultra vires and void on several grounds.

A. Void on Sovereign Immunity Ground

First, the City argues that the indemnity agreement constitutes an impermissible waiver of the municipality's sovereign immunity. "The common law doctrine of sovereign immunity, adopted by [Georgia] in 1784, protected governments at all levels from unconsented-to legal actions." Gilbert v. Richardson, 264 Ga. 744, 452 S.E.2d 476, 478 (1994) (footnote omitted). By statute, municipalities are clothed with immunity and shielded from "liab[ility] for failure to perform or for errors in performing their legislative or judicial powers." O.C.G.A. § 36-33-1(b) (2000).4 Thus, "[i]n Georgia a municipal corporation is not liable in damages for injuries arising from the exercise of a governmental function." Boone v. City of Columbus, 87 Ga.App. 701, 75 S.E.2d 338, 339 (1953). "The General Assembly may waive the immunity of counties, municipalities, and school districts by law." Ga. Const. art. IX, sec. II, para. IX. Relying on this provision, with two exceptions relating to the purchase of liability insurance, "the General Assembly... declares it is the public policy of the State of Georgia that there is no waiver of the sovereign immunity of municipal corporations of the state and such municipal corporations shall be immune from liability for damages." O.C.G.A. § 36-33-1(a). Generally, "a municipality cannot ratify the unlawful acts of its subordinate officials done in pursuance of its governmental functions so as to make itself liable for such acts." Boone, 75 S.E.2d at 340. Accordingly, "[a] municipal corporation shall not waive its immunity by the purchase of liability insurance, except as provided in Code Section 33-24-51, or unless the policy of insurance issued covers an occurrence for which the defense of sovereign immunity is available, and then only to the extent of the limits of such insurance policy." O.C.G.A. § 36-33-1(a).5

Since these two code sections are the only ones to waive municipal immunity, the more specific question we need answered is whether the validity of an agreement by a Georgia municipality to...

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