Farmers Ins. Exch. v. Rnk Inc.

• Decision Date: 21 January 2011
• Docket Number: No. 09–2524.,09–2524.
• Citation: 632 F.3d 777
• Parties: FARMERS INSURANCE EXCHANGE, Plaintiff, Appellee,v.RNK, INC., d/b/a RNK Telecom, Defendant, Appellant,Ripple Communications, Inc., Defendant, Appellee.
• Court: U.S. Court of Appeals — First Circuit

632 F.3d 777

FARMERS INSURANCE EXCHANGE, Plaintiff, Appellee,

v.RNK, INC., d/b/a RNK Telecom, Defendant, Appellant,Ripple Communications, Inc., Defendant, Appellee.

No. 09–2524.

United States Court of Appeals, First Circuit.

Heard Sept. 10, 2010.Decided Jan. 21, 2011.

Andre Sansoucy, with whom Richard J. Shea, Kathryn M. Auger, and Melick, Porter & Shea, LLP, were on brief for appellant.Roger D. Matthews, with whom Denner Pellegrino, LLP, was on joint brief for defendant-appellee Ripple Communications, Inc.Steven J. Bolotin, with whom Christa Arcos and Morrison Mahoney, LLP, were on joint brief for plaintiff-appellee Farmers Insurance Exchange.Before LYNCH, Chief Judge, TORRUELLA and HOWARD, Circuit Judges.TORRUELLA, Circuit Judge.

In this appeal, based on diversity jurisdiction, appellant-defendant RNK, Inc., d/b/a RNK Telecom (“RNK”) challenges the district court's decision to grant summary judgment on its indemnification claim in favor of appellee-plaintiff Farmers Insurance Exchange (“Farmers”) and appellee-defendant Ripple Communications, Inc. (“Ripple”) (collectively, “Appellees”). Specifically, RNK avers that Ripple has a duty to indemnify RNK against claims asserted by Jane Doe in a civil action brought by her in the United States District Court for the Southern District of New York (the “Doe Lawsuit”).

Ripple and Farmers (Ripple's insurer) jointly moved for summary judgment requesting that the district court summarily dismiss RNK's indemnification claim and enter a declaration stating that they have no duty or obligation to indemnify or otherwise hold harmless RNK against any claim, cost or expense incurred by RNK in its defense of the Doe Lawsuit. The district court granted summary judgment in Appellees' favor and RNK now appeals. After careful consideration, we affirm the district court's judgment.

I. Facts and Procedural History

Because this appeal is from a grant of summary judgment, we view the record in the light most favorable to the party against whom summary judgment entered (here, RNK), “indulging all reasonable inferences in that party's favor.” Fiacco v. Sigma Alpha Epsilon Fraternity, 528 F.3d 94, 98 (1st Cir.2008); Den Norske Bank AS v. First Nat'l Bank of Boston, 75 F.3d 49, 53 (1st Cir.1996).

RNK, a Massachusetts corporation, is a telephone company that provides services to the public as a Competitive Local Exchange Carrier (“CLEC”). Ripple is a Nevada corporation that provides conferencing services. One of Ripple's services allows people to meet and confer through live telephone chat lines. Farmers is a California company that issued a general liability insurance policy to Ripple.

In 1999, Ripple and RNK entered into a written agreement (the “Agreement”) whereby RNK agreed that Ripple would locate and install at RNK's premises certain electronic equipment necessary for Ripple to provide conferencing services to its customers. In order for Ripple's chat lines to function, a call had to travel over RNK's network and through Ripple's proprietary hardware and software (to which RNK's lines were attached). RNK was obligated under the Agreement to assign telephone numbers to Ripple's conferencing lines and to notify Ripple's customers any time that RNK for some reason decided to block calls.

Paragraphs one, three and ten of the Agreement state as follows:

1. Customer Equipment[.] RNK shall arrange for the assignment of the telephone numbers and arrange [for Ripple] to co-locate at [Ripple]'s expense certain electronic Equipment, acceptable to RNK in accordance with the terms of this Agreement. [Ripple] shall use the Equipment installed at RNK's premises to provide information to its customers. At the termination of the Agreement, [Ripple] will, at its sole cost and expense, remove the Equipment from RNK's premises. It is understood and agreed that [Ripple] co-locates any and all of its Equipment at RNK's offices at its sole risk, and that RNK assumes no liability whatsoever for such Equipment's operation, maintenance, security or condition.

....

3. Indemnification and Insurance[.] Customer [Ripple] hereby agrees to indemnify RNK and hold harmless from and against all damage claims associated with any equipment of customers [Ripple]. Customer [Ripple] further agrees that [it] shall maintain a blanket $1,000,000 general liability insurance policy reasonably satisfactory to RNK. RNK shall not have any liability for any loss or damage related to the Customers' [Ripple's] equipment. Customers' [RNK's] casualty and fire insurance policies apply only to RNK's facilities. Customer [Ripple] will be responsible for insuring own equipment.¹

....

10. Customer Conduct[.] Customer [Ripple] shall abide by all State and Federal regulations applicable to its operation. If they do not, RNK may terminate this agreement if the violation continues for over seven days after notice to the Customer [Ripple]. Customer [Ripple] shall be responsible for all marketing and content and will hold RNK harmless from all claims arising from such.

(Emphasis added). Paragraphs three and ten of the Agreement (quoted above) were based on a standard sample agreement provided by Ripple.

On October 16, 1998, the New York Public Service Commission (“NYPSC”), which has jurisdiction under New York law to regulate CLECs such as RNK, issued an order (the “Regulatory Order”) providing that all CLECs that had chat lines on their networks had to immediately either designate existing chat line central office codes as blockable or transfer these chat lines to specific central office codes that were already designated as blockable codes.² A major consideration in adopting this order was the desire to protect minors by providing end-users the ability to block the completion of telephonic communications.

In 2005, Jane Doe, a minor acting through her adoptive father, brought the Doe Lawsuit in the United States District Court for the Southern District of New York against RNK alleging that RNK violated the Regulatory Order by not assigning blockable telephone numbers to chat lines and that, as a result, she was improperly able to gain access to a chat line through which she met several individuals who—after convincing her to contact them in person—sexually assaulted her.³ Jane Doe claimed in the Doe Lawsuit that RNK's violation of the Regulatory Order was the proximate cause of the injuries she sustained. As a result of the incident involving Jane Doe, the NYPSC issued an order on October 20, 2004 stating that it appeared that RNK had violated the Regulatory Order and directing RNK to show cause as to why the NYPSC should not proceed against RNK with a penalty action. In response to the NYPSC's order to show cause and during the course of the Doe Lawsuit, RNK admitted that it failed to comply with the Regulatory Order. RNK's insurer settled the Doe Lawsuit and then, in the name of RNK, sought indemnity from Ripple and Farmers (Ripple's insurer) for its costs of defense and settlement of the Doe Lawsuit. RNK's claim for indemnification was and continues to be based on its contention that the indemnity provisions of the Agreement require indemnification from the claims asserted by Jane Doe in the Doe Lawsuit.

Farmers filed the underlying declaratory judgment action against both Ripple and RNK seeking a ruling that it has no duty to defend or indemnify RNK in connection with the Doe Lawsuit. The parties then filed the following claims: (1) RNK filed a cross-claim against Ripple seeking a determination that Ripple owes a duty to indemnify RNK against Doe's claims, (2) Ripple filed a counterclaim against Farmers seeking a declaratory judgment that Farmers has an obligation to defend or indemnify it against RNK, and (3) Ripple filed a cross-claim against RNK seeking a declaratory judgment that Ripple has no contractual, common law or other obligation of indemnity, contribution or other duty toward RNK.

On April 30, 2009, all parties moved for summary judgment on the issue of whether Ripple has a duty to indemnify RNK against the claims asserted by Jane Doe in the Doe Lawsuit. After concluding that Ripple is not contractually obligated under the Agreement to indemnify RNK against such claims, the district court issued an order on September 29, 2009 denying RNK's motion for summary judgment and granting Appellees' joint motion for summary judgment. On October 13, 2009, the district court entered a judgment dismissing all other claims as moot. RNK now appeals this judgment and the order that granted Appellees' joint motion for summary judgment.

II. Standard of Review

Summary judgment is appropriate when the record shows that “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a).⁴ “A dispute is genuine if the evidence about the fact is such that a reasonable jury could resolve the point in the favor of the non-moving party. A fact is material if it has the potential of determining the outcome of the litigation.” Rodríguez–Rivera v. Federico Trilla Reg'l Hosp., 532 F.3d 28, 30 (1st Cir.2008) (internal quotation marks and citations omitted).

We review de novo the grant of a motion for summary judgment. GTE Wireless, Inc. v. Cellexis Int'l, Inc., 341 F.3d 1, 4 (1st Cir.2003). We will reverse only if, after reviewing the facts and making all inferences in favor of the party against whom summary judgment entered (here, RNK), “the evidence on record is sufficiently open-ended to permit a rational factfinder to resolve the issue in favor of either side.” Maymí v. P.R. Ports Auth., 515 F.3d 20, 25 (1st Cir.2008) (internal quotation marks and citations omitted).

III. Discussion

RNK contends, first, that the district court erred in finding that Ripple is not obligated to indemnify RNK against the claims asserted by Jane Doe in the Doe Lawsuit. Specifically, RNK alleges that the district court erred when it failed to conclude that paragraphs three and ten of the...