Emory Univ., Inc. v. Neurocare, Inc., 19-14160

• Citation: 985 F.3d 1337
• Decision Date: 25 January 2021
• Docket Number: No. 19-14160,19-14160
• Parties: EMORY UNIVERSITY, INC., d.b.a. Emory University Hospital, The Emory Clinic, Inc., Plaintiffs-Appellants, v. NEUROCARE, INC., Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (11th Circuit)

985 F.3d 1337

EMORY UNIVERSITY, INC., d.b.a. Emory University Hospital, The Emory Clinic, Inc., Plaintiffs-Appellants,

v.NEUROCARE, INC., Defendant-Appellee.

No. 19-14160

United States Court of Appeals, Eleventh Circuit.

January 25, 2021

Robert P. Marcovitch, Philip Michael Freed, AT, Lewis Brisbois Bisgaard & Smith, LLP, ATLANTA, GA, Hunter S. Allen, Jr., Simuel F. Doster, Jr., Allen McCain & O'Mahony, PC, ATLANTA, GA, R. Brent Cooper, Diana L. Faust, Law Office of Cooper & Scully, PC, DALLAS, TX, Gary Russell McCain, Counsel, Bendin Sumrall & Ladner, LLC, ATLANTA, GA, for Plaintiffs - Appellants.

Jeffrey Scott Bazinet, Jonathan C. Peters, Peters & Monyak, LLP, ATLANTA, GA, Henry D. Fellows, Jr., Michael Coleman Gretchen, Fellows LaBriola, LLP, ATLANTA, GA, for Defendant - Appellee.

Before WILSON, NEWSOM, and ANDERSON, Circuit Judges.

ANDERSON, Circuit Judge:

We consider two discrete issues under Georgia law pertaining to an indemnification obligation arising from a tragic death at a sleep disorder treatment and diagnostics lab. Emory University, Inc. ("Emory University") seeks indemnification from Neurocare, Inc. ("Neurocare"), the lab services provider whose technologists were found by a jury to be 60 percent at fault for the death of Brandon Harris. The first issue is whether Emory University is entitled to indemnification from Neurocare for this 60 percent liability incurred due to the negligence of Neurocare's technologists. Emory University asserts this right to indemnity pursuant to the services contract as an "affiliate" of its wholly, indirectly owned grandchild corporation, the express indemnitee and the hospital, Wesley Woods Center of Emory University, Inc. ("Wesley Woods"). The second issue is whether Emory University, even if it would otherwise be entitled to contractual or common law indemnification, is barred from indemnity because it failed to assert its distinct and separate corporate existence as a defense to liability in the underlying wrongful death action. This second issue requires us to consider a line of Georgia case law holding that indemnification is barred if the would-be indemnitee had, but failed to assert, in the underlying suit a "defense available which would have defeated the action." GAF Corp. v. Tolar Constr. Co., 246 Ga. 411, 411, 271 S.E.2d 811, 812 (1980) (citation omitted).

After careful review, and with the benefit of oral argument, we vacate the district court's grant of summary judgment in Neurocare's favor and remand. We conclude that Emory University is an "affiliate" of Wesley Woods, and that the indemnification bar doctrine does not operate in the unique facts of this case.

I. BACKGROUND

A. The Parties, the Agreement, and the Amendment

A group of entities bearing the "Emory" name provided sleep disorder diagnostic and treatment services. The most superior entity is Emory University, which wholly owns and controls Emory Healthcare, Inc., which, in turn, wholly owns and controls Wesley Woods. Emory University also wholly owns and controls The Emory Clinic, Inc. (the "Emory Clinic"). Emory University Hospital is an operating division of Emory University.

In June 2005, Emory University entered into a Sleep Diagnostic Services Agreement (the "Agreement") with Neurocare. Neurocare doing business as the Center for Sleep Diagnostics, defined as "CONTRACTOR," agreed "to provide certain sleep diagnostic services to and under the direction of HOSPITAL," defined as Emory University doing business as Emory University Hospital. Neurocare agreed to operate the Emory Sleep Lab located at Emory University Hospital by, among other things, staffing technologists to conduct sleep studies, educating and training physicians and staff regarding the sleep lab, and preparing sleep reports for physicians’ analysis.

Section 9.1 of the Agreement is an indemnification provision that reads,

CONTRACTOR agrees to indemnify, defend, save and hold harmless forever HOSPITAL, its subsidiaries and affiliates, successors and assigns, and its officers, directors, trustees, employees and agents from and against any and all liability, loss, damage, claim, cause of action, cost or expense (including reasonable attorney's fees actually incurred and Court costs), that is caused directly or indirectly by or as a result of any intentional or negligent act or omission to act by CONTRACTOR or its agents or employees providing service pursuant to this Agreement. This section shall survive any expiration or termination of this Agreement.

Section 9.3 reserves the right of each party to seek any common law indemnification or contribution, in addition to the contractual basis in Section 9.1.

In May 2006, the parties executed an amendment to the Agreement (the "Amendment," and together with the Agreement, the "Amended Agreement") in light of the Emory Sleep Lab moving from Emory University Hospital to Wesley Woods. The Amendment states,

[T]he contracting party in the Agreement, stated as "Emory University, Inc., d/b/a Emory University Hospital ("HOSPITAL") and the Emory Clinic, Inc. ("CLINIC")", is hereby deleted and replaced with the following language: "Wesley Woods Center of Emory University, Inc. d/b/a Wesley Woods Geriatric Hospital ("HOSPITAL") and the Emory Clinic, Inc. ("CLINIC") and Emory University, Inc. d/b/a Emory University Hospital ("EMORY").

The Amendment also states, "In the event of a conflict between the terms of this Amendment and the terms of the Agreement, the terms of this Amendment shall govern. Except as set forth in this Amendment, all other provisions of the Agreement shall remain unchanged and in full force and effect."

The effect of the Amendment was as follows. The HOSPITAL—which was the named indemnitee in the original Agreement—was Emory University doing business as Emory University Hospital. When the Emory Sleep Lab was moved from Emory University Hospital to Wesley Woods Geriatric Hospital, the Amendment substituted Wesley Woods as the HOSPITAL. Thus, the named indemnitee of the indemnification obligation in the Amended Agreement became Wesley Woods. This meant that the Amended Agreement now provided that Neurocare, which remained the CONTRACTOR and indemnitor, was obligated to provide indemnification for Wesley Woods and its "subsidiaries and affiliates, successors and assigns, and its officers, directors, trustees, employees and agents," for the same sorts of losses as in the original Agreement—those "caused directly or indirectly by or as a result of any intentional or negligent act or omission to act by" Neurocare "or its agents or employees providing service."

B. The Underlying State Court Wrongful Death Action

In April 2011, several of the "Emory" entities and Neurocare were sued by the administratrix of the estate of Brandon Harris in state court in DeKalb County, Georgia, for the alleged wrongful death of Mr. Harris during a sleep study at the Emory Sleep Lab in January 2010. In particular, the defendants included Wesley Woods doing business as Emory School of Medicine, the Emory Clinic, the Emory Sleep Center, and Neurocare and its sleep technologists that worked in the lab, as well as other entities and individuals, such as lab doctors.

This state case proceeded to trial in September 2015 but not before certain parties were dismissed or otherwise removed from the case. Primarily, Emory University entered the case on behalf of Wesley Woods and the other "Emory" entities, except for the Emory Clinic. It is undisputed that, despite not being formally dismissed, Wesley Woods had been replaced at trial by Emory University, its grandparent corporation—that is, the corporation that wholly owned and controlled Wesley Woods's parent corporation, which wholly owned and controlled Wesley Woods. It is undisputed that Emory University did not draw the distinction between itself and Wesley Woods at trial. Emory University says it proceeded as such as part of a trial strategy—i.e., in light of the well-known "Emory" name and the potential for a negative reaction from jurors who might not look favorably on Emory University's using its separate corporate form as a way to avoid responsibility for the death.

In addition, Neurocare settled with the plaintiff before trial and, despite not being formally dismissed as defendants, Neurocare and its sleep technologists did not appear at or participate in trial and were considered to be nonparties.

On September 25, 2015, the jury returned a verdict in favor of the plaintiff. The jury, in part, apportioned 60 percent of the fault to "Neurocare/sleep technologists" as "nonparties."¹ The jury also indicated on the verdict form: "We find Emory liable for the negligence if any, of Neurocare/sleep technologists."

In light of the jury verdict, the trial court entered judgment, which read in relevant part,

The jury further assessed fault against Nonparties Neurocare/sleep technologists and assigned fault of 60% ....

By special interrogatory, the jury found Defendant Emory University, Inc., d/b/a Emory University Hospital liable for the negligence of the Nonparties Neurocare/sleep technologists.

Pursuant to the jury's allocation of fault, judgment is entered in favor of the Plaintiff ... and against Emory University, Inc., d/b/a/ Emory University Hospital in the amount of $12,305,570.64, together with post-judgment interest in the respective amount and court costs.

After this judgment was entered, Emory University and the Emory Clinic settled with the plaintiff. The trial court entered a consent order dismissing with prejudice the state plaintiff's claims against Emory University doing business as Emory University Hospital, the Emory Clinic, and the remaining doctor defendants.

While post-trial motions were briefed and filed, Emory University and the Emory Clinic filed crossclaims against Neurocare to recover for the settlement payment, including claims for contractual and common law indemnification. The claims were voluntarily dismissed without prejudice on May 2, 2017.

C. ...