Ferris Ave. Realty, LLC v. Huhtamaki, Inc.

• Decision Date: 25 February 2015
• Docket Number: No. 2013–344–Appeal.,2013–344–Appeal.
• Parties: FERRIS AVENUE REALTY, LLC v. HUHTAMAKI, INC., et al.
• Court: Rhode Island Supreme Court

110 A.3d 267

FERRIS AVENUE REALTY, LLC

v.HUHTAMAKI, INC., et al.

No. 2013–344–Appeal.

Supreme Court of Rhode Island.

Feb. 25, 2015.

Michael T. Eskey, Esq., for Plaintiff.

Stephen J. Darmody, Pro Hac Vice, for Defendant.

Present: SUTTELL, C.J., GOLDBERG, FLAHERTY, ROBINSON, and INDEGLIA, JJ.

OPINION

Justice ROBINSON, for the Court.

This case arose from the refusal of the defendant Huhtamaki, Inc. (Huhtamaki) to indemnify the plaintiff, Ferris Avenue Realty, LLC (Ferris), after Ferris incurred certain costs related to the cleanup of hazardous substances. After a thirteen-day trial, the jury found in favor of Ferris. On appeal, Huhtamaki argues that the trial justice erred in: (1) construing an indemnity agreement executed by the parties; (2) admitting certain testimony from Ferris's expert witness; (3) admitting allegedly spoliated evidence; (4) instructing the jury; and (5) permitting Ferris to rely upon what Huhtamaki contends was “a pyramid of inferences” as it sought to prove its case.

For the reasons set forth in this opinion, we affirm the judgment of the Superior Court.

IFacts and Travel

On May 22, 2003, Ferris purchased from Huhtamaki approximately twenty-two acres of property located in East Providence (the Property). At the time of that purchase, the parties executed a document entitled “Indemnity Agreement Regarding Hazardous Materials” (the Indemnity Agreement).¹ Simply put, the Indemnity Agreement provided that, upon the occurrence of certain conditions, Huhtamaki would reimburse Ferris for environmental cleanup costs.

Thereafter, in 2005, Ferris sought to build a residential complex on a section of the Property referred to by both parties as Parcel A.² Accordingly, the firm of Vanasse, Hangen, Brustlin, Inc. (VHB) was hired to inspect the entire Property, including Parcel A. In the course of its inspection, VHB conducted soil and groundwater testing on samples taken from Parcel A. Analysis of those samples revealed that Parcel A's soil and groundwater were contaminated with hazardous substances in amounts that violated the minimum quality standards established and enforced by the Rhode Island Department of Environmental Management (DEM). Specifically, VHB discovered in the samples certain chlorinated industrial solvents including “1, 1, 1–trichloroethane” (TCA) and “tetrachloroethylene” (PCE).³

On December 19, 2005, after finding the just-referenced hazardous substances in the soil and groundwater samples taken from Parcel A, VHB submitted a plan to DEM, in which it reported the presence of hazardous substances on Parcel A and proposed a remediation plan; that proposed plan included excavating the contaminated soil. Very shortly after that plan was submitted, on December 21, 2005, DEM sent a missive entitled “Letter of Responsibility”⁴ to both Ferris and Huhtamaki.⁵ That letter indicated, inter alia, that hazardous substances, including PCE, had been found on the Property.

On January 30, 2006, over a month after the Letter of Responsibility was sent, Ferris began excavating the affected soil from Parcel A; the process of excavation continued until February 10, 2006. Shortly thereafter, in a letter dated February 14, 2006, Ferris advised Huhtamaki that it was “being notified herein, pursuant to Section 6 of the Indemnity Agreement, of the claim or demand by RIDEM and the fact that [Ferris] has and will incur costs and expenses for which you [Huhtamaki] are responsible under the terms of the Indemnity Agreement.” Huhtamaki responded in a letter dated March 10, 2006, in which it refused to indemnify Ferris on the ground that the latter company had “failed to provide notice with reasonable promptness,” which Huhtamaki contended was required by the Indemnity Agreement. After Huhtamaki's refusal, Ferris filed a complaint in the Superior Court for Providence County, on April 16, 2007, thereby commencing the present litigation. Huhtamaki answered in due course and asserted several counterclaims.

AFerris's Motion for Partial Summary Judgment

On October 22, 2010, after both parties had engaged in substantial discovery, Ferris moved for partial summary judgment, seeking a favorable ruling as to what it characterized as the “validity and enforceability of the Indemnity Agreement;” in due course, that motion was granted. The trial justice⁶ rejected Huhtamaki's contention that it could not possibly be liable to Ferris because, under Huhtamaki's interpretation of the Indemnity Agreement, Ferris was entitled to assert a claim for indemnification only in connection with third-party actions.

For the trial justice to be able to pass upon Ferris's right (vel non ) to assert a claim for indemnification for voluntarily incurred cleanup costs (as opposed to a claim for those cleanup costs that might be required by a third party like DEM), he was required to determine which part of Section 6 of the Indemnity Agreement applied—i.e., did Section 6(c) or Section 6(a) control? Ferris argued that Section 6(c) clearly constituted a vehicle for it to assert indemnification claims against Huhtamaki with respect to the cleanup costs incurred by Ferris in January and February of 2006. Section 6(c) reads in pertinent part as follows:

“6. Procedure. All claims for indemnification by a party under this Agreement shall be asserted and resolved as follows:

“* * *

“(c) If [Ferris] should have a claim against [Huhtamaki] hereunder which does not involve a claim or demand being asserted against or sought to be collected from it by a third party, [Ferris] shall send a Claim Notice with respect to such claim to [Huhtamaki]. If [Huhtamaki] disputes such claim, such dispute shall be resolved by litigation in an appropriate court of competent jurisdiction.” (Emphasis added.)

On the basis of this language, Ferris argued that the Indemnity Agreement sets forth a procedure for Ferris to bring a claim for indemnification on its own behalf.

By contrast, Huhtamaki stoutly maintained that, pursuant to the Indemnity Agreement, Ferris was authorized to assert a claim for indemnification only in connection with actions initiated against it by a third party pursuant to Section 6(a) of the Indemnity Agreement.

After asserting that Section 6(a) rather than Section 6(c) applied,⁷ Huhtamaki (in both its memorandum in opposition to Ferris's motion for partial summary judgment and in its counterclaim for breach of contract) contended that, even if Ferris could recover under the Indemnity Agreement for claims not associated with third parties, Ferris had not complied with the requisite “Claim Notice” provisions contained in Section 6(a). Section 6(a) reads, in pertinent part, as follows:

“(a) In the event that any claim or demand for which [Huhtamaki] would be liable to [Ferris] * * * is asserted against or sought to be collected from [Ferris] by a third party, [Ferris] shall with reasonable promptness give notice (the ‘Claim Notice’) to [Huhtamaki] of such claim or demand, specifying the nature of and specific basis for such claim or demand and the amount or the estimated amount thereof to the extent then feasible * * *. [Huhtamaki] shall not be obligated to indemnify [Ferris] under this Agreement with respect to any such claim or demand if [Ferris] fails to notify the [Huhtamaki] thereof in accordance with the provisions of this Agreement, and, as a result of such failure, [Huhtamaki's] ability to defend against the claim or demand is materially prejudiced. [Huhtamaki] shall have ten (10) days from the delivery or mailing of the Claim Notice (the ‘Notice Period’) to notify [Ferris] (i) whether or not it disputes the liability * * * and (ii) whether or not it desires * * * to defend [Ferris] against such claim or demand * * *.” (Emphasis added.)

Referencing the just-mentioned provision, Huhtamaki argued that, because Ferris sent the February 14, 2006 “Claim Notice” letter after it had excavated the soil in question, Ferris had not complied with the “reasonable promptness” requirement contained in Section 6(a). Huhtamaki added that it was “prejudiced” in that it did not have the opportunity to clarify with DEM what actions were required on the property to “protect the public health.”

With respect to the notice issue, Ferris contended that, because Section 6(c) states that Ferris is required simply to give “Claim Notice” to Huhtamaki, the “reasonable promptness” requirement embodied in Section 6(a) was not applicable. Ferris further argued that, even if Section 6(a) applied, there had de facto been reasonably prompt notice because Huhtamaki had received DEM's Letter of Responsibility at a point in time before the process of removing the contaminated soil began.

As previously indicated, the trial justice granted Ferris's motion for partial summary judgment with respect to the issue of whether the Indemnity Agreement provided Ferris with a right to seek indemnification for its own claims (as opposed to a claim for those cleanup costs that might be required by a third party).⁸ The trial justice's lengthy decision dated February 18, 2011 grapples in a scholarly manner with the competing contentions of the parties as to that issue. Relevant to our analysis here, he held that Section 6(c), rather than Section 6(a), controlled—because he viewed Section 6(c) as expressly setting out the procedure for Ferris to initiate its own claims for indemnification against Huhtamaki.

In addressing Huhtamaki's breach of contract counterclaim (in which Huhtamaki alleged that Ferris had breached the Indemnity Agreement by failing to provide the requisite “Claim Notice”), the trial justice found that the “reasonable promptness” requirement was not embodied in Section 6(c). The trial justice then determined that “the February 14, 2006 letter from [Ferris] to [Huhtamaki] fulfilled the notice requirements as specified by Section 6(c) of the Indemnity Agreement * * *.”

Thereafter, Huhtamaki moved for reconsideration. The trial justice ultimately denied Huhtamaki's motion for reconsideration, but he nonetheless...