Hardie-Tynes Co. v. SKF U.S. Inc.
| Decision Date | 27 December 2022 |
| Docket Number | 2:16-cv-1417-LCB |
| Parties | HARDIE-TYNES CO., INC., Plaintiff, v. SKF USA, INC., Defendant. |
| Court | U.S. District Court — Northern District of Alabama |
This case involves a dispute surrounding the construction of the Matlacha Bridge in Lee County, Florida. Prior orders of the Court laid out this case's factual background in great detail. Thus, the Court will not devote substantial time to a recitation of those background facts but will reference them when necessary. The trial was split into three phases with the goal of conserving the time and resources of the Court and the parties. As more fully discussed in previous orders and filings, see, e.g., (Docs. 166 and 171), Phase I of the trial was held to determine whose terms and conditions applied to the underlying transaction. The resolution of Phase I was to determine whether Phase II was necessary, and the resolution of Phase II will determine the plaintiff's burden of proof on its common law indemnity claim in Phase III. Phase III will also encompass the trial of the plaintiff's remaining claims.
Hardie-Tynes (“HT”) alleged four counts in its amended complaint: (1) breach of contractual indemnity clause; (2) common law indemnity; (3) breach of warranty; and (4) fraudulent suppression. (Doc. 50). After Phase I of trial the Court found in favor of SKF on Count 1 when it determined that HT's breach of contractual indemnity claim must fail because neither party's terms and conditions controlled the underlying transaction. The Court also found in favor of SKF on Count III insofar as that count alleged a breach of any written warranties contained in HT's terms and conditions.[1]Thus, Counts 2, 4, and a portion of Count 3 remain.
Phase II of these proceedings was to determine “whether SKF made an effective/appropriate acceptance of [HT]'s tender of defense and indemnity.” (Doc. 171 at 1). As originally envisioned by the parties and the Court, Phase II would be necessary only if HT's terms and conditions controlled to the exclusion of SKF's. However, given the holding in Phase I, the parties found themselves at a disagreement about whether Phase II was necessary. The Court ultimately found that it was and set Phase II for trial. Even though the Court determined that neither party's terms and conditions applied, Phase II was still necessary because of HT's common law indemnity claim.
As will be discussed below, a Court deciding a common law indemnity claim must make various findings, one of which is whether an alleged indemnitor, like SKF, refused to participate in the settlement or prosecution of a case involving its alleged indemnitee, like HT, despite being notified by the indemnitee that it intended to settle. This is because an indemnitee's burden of proof for a common law indemnity claim is dependent on the answer to that question. Thus, the question of whether SKF effectively and appropriately accepted HT's tender of defense and indemnity was still relevant even in the absence of a valid contractual indemnity clause.
At the bench trial of Phase II, the Court heard testimony from Charles Debardeleben, HT's president and general counsel. The parties also offered several exhibits that were admitted into evidence, and many other facts were not in dispute. The evidence revealed that HT was hired by Archer Western (“AW”), the general contractor for the Matlacha Bridge Project, to supply structural steel and machinery for the project. As part of its work on the project, HT purchased two bearings from SKF for the purpose of raising and lowering a leaf of the bridge. According to AW, the project was delayed because of a loud noise emanating from the bridge during the raising and lowering of the leaf. AW believed that SKF's bearings were to blame and sued HT[2] in a Florida state court for, among other things, failing to provide SKF bearings and installation services that were free from defects and fit for their intended purposes.
Debardeleben testified that HT sent SKF a series of letters demanding that SKF defend and indemnify HT in the Florida litigation. The first letter, sent on August 15, 2016, from HT's attorney to SKF's assistant general counsel, informed SKF about AW's counterclaim in the amount of 1.7 million dollars. The letter referenced a clause contained in HT's terms and conditions requiring SKF to indemnify HT against AW's counterclaim. The letter stated HT's belief that AW's claims had “substantial merit,” that HT had little money and was unable to defend itself against AW's claims and demanded “that SKF take immediate steps to defend and indemnify [HT].” (HT Ex. 64).[3]The letter noted HT's response deadline in the Florida case and requested that SKF respond to the demand within 10 days. Id. The letter concluded by stating that HT would construe SKF's silence on the matter as an indication that SKF was refusing HT's request for defense and indemnification. Id. According to Debardeleben, SKF did not respond within that 10-day window.[4]
Debardeleben testified that HT sent SKF a second letter on September 6, 2016, in which it noted that, although SKF appeared to have turned the matter over to its insurer, that was not a sufficient response to HT's demand. Therefore, HT said, it had filed the present lawsuit against SKF in this Court. HT again asked SKF to accept its defense and indemnify it in the Florida case within seven days. HT concluded the letter by stating that if SKF failed to accept, HT would “likely have to ask Archer Western to consider an early mediation instead of protracted litigation.” (HT Ex. 67).
Over the next few weeks, the parties exchanged a series of emails and had discussions about mediating the case. Ultimately, HT, AW, and SKF mediated the case on October 28, 2016, but were unable to reach a resolution. However, and relevant here, SKF does not dispute that it attended the mediation. As part of its case during Phase II, HT introduced a series of slides from a Microsoft Power Point presentation that were shown during the mediation. (HT Ex. 73). The fifth slide from that presentation, entitled “Summary of Claim,” laid out a summary of the damages claimed by AW totaling nearly two million dollars. Id.
During the same time the parties were discussing mediation, there were also emails between them regarding HT's indemnity demand. In one email, counsel for SKF told HT that it would move to intervene in the Florida case and “provide a defense as to all claims related to SKF's work.” (SKF Ex. 31). In response, HT sent SKF a letter explaining that SKF's proposed intervention would not be the same as an unconditional acceptance of HT's defense and indemnification. (HT. Ex. 68). This was because intervention, according to HT, served the purpose of protecting SKF's interests, not necessarily HT's. The letter referenced statements by SKF's counsel as well as internal SKF emails, which were seen during mediation, suggesting that SKF might try to shift blame for AW's claims onto HT. Id. Therefore, HT did not consider SKF's proposal to be an acceptance of its demand to defend and indemnify it. According to Debardeleben, HT was unwilling to accept any defense or indemnity with a reservation of rights.
Further, HT's counsel expressed concern for how SKF could ethically represent HT's interests in the case with AW given that HT and SKF were adverse parties in this case, the complaint having been filed here a few months earlier. Id. HT then stated its belief that SKF had yet to fully and appropriately accept HT's demand for defense and indemnity. The letter concluded by informing SKF that HT intended “to move forward with pursuing a resolution with Archer Western” and requested a written response within three days should SKF reconsider its position and undertake an unconditional defense and indemnity to AW's allegations. Id. Debardeleben testified that SKF did not respond in any way. On November 30, 2016, HT filed a status report in this case (Doc. 18) informing the Court that it had reached a settlement with AW in the Florida case and was in the process of memorializing their agreement. SKF, being a party to this case, was served with a copy of that status report.
As will be discussed in more detail below, the Florida litigation between HT and AW was resolved with the entry of a consent judgment in favor of AW. Prior to entry of that judgment, HT and AW executed a Memorandum of Understanding (“MOU”). (SKF Ex. 40). The MOU provided, among other things, that any money recovered from SKF in this case would be paid to AW in satisfaction of the consent judgment. The MOU laid out a precise formula for how money was to be distributed in the event of any type of recovery. However, the MOU provided that HT would owe AW nothing relating to the consent judgment unless and until it recovered money from SKF. It is undisputed that HT has never made a payment to AW related to the Florida case.
The body of Alabama case law regarding common law indemnity in cases like this one is sparse. In Allstate Ins. Co. v. Amerisure Ins. Companies, the Alabama Supreme Court held:
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