Heckart v. Viking Exploration, Inc., 79-2284

• Decision Date: 18 March 1982
• Docket Number: No. 79-2284,79-2284
• Citation: 673 F.2d 309
• Parties: Gerald HECKART and Donald L. Bynon, guardians of Wilfred L. Baker, Plaintiffs, v. VIKING EXPLORATION, INC., Defendant, Third-Party Plaintiff, and Appellant, v. SUPERIOR DRILLING, INC., a corporation, and Kenai Drilling, Ltd., a Delaware corporation, Third-Party Defendants and Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 309

673 F.2d 309

Gerald HECKART and Donald L. Bynon, guardians of Wilfred L.

Baker, Plaintiffs, v. VIKING EXPLORATION, INC., Defendant, Third-Party Plaintiff, and Appellant, v. SUPERIOR DRILLING, INC., a corporation, and Kenai Drilling,

Ltd., a Delaware corporation, Third-Party

Defendants and Appellees.

No. 79-2284.

United States Court of Appeals Tenth Circuit.

March 18, 1982.

W. W. Reeves of Vlastos & Reeves, Casper, Wyo., for Viking exploration, inc.

R. Patrick Dixon of Murane & Bostwick, Casper, Wyo. (R. R. Bostwick and James W. Owens of Murane & Bostwick, Casper, Wyo., with him on the brief), for Superior Drilling, Inc., and Kenai Drilling, Ltd.

Before SETH, Chief Judge, HOLLOWAY and LOGAN, Circuit Judges.

LOGAN, Circuit Judge.

Viking Exploration, Inc. (Viking) brought this third-party action against Superior Drilling, Inc. (Superior) ¹, seeking indemnity for any sums Viking would have to pay as the result of a personal injury suit one of Superior's employees brought in federal court against Viking. Viking then settled the personal injury suit and sought to recover the amount of its settlement. The trial court ruled that Viking was not entitled to indemnity. When Viking appealed, we remanded for further proceedings in light of subsequent Wyoming Supreme Court decisions interpreting applicable Wyoming law. Upon remand the trial court again denied relief. In this second appeal Viking contends that contrary to the trial court's holding, Wyoming law does not bar its indemnity action. To resolve the issues on appeal we must consider an indemnity provision in the contract between the parties, a Wyoming statute limiting the validity of indemnity contracts, and Wyoming law on other issues affecting indemnity.

In December 1973 the two parties entered into a contract calling for Superior to drill an oil well on a Wyoming lease Viking held. Superior began drilling activities immediately. On February 16, 1974, Viking told Superior to plug and abandon the well. That afternoon, while in the process of plugging the well, Wilfred Baker, one of Superior's crew members, was badly injured when struck by heavy machinery set in motion by another crew member's catching his sleeve on a lever. Baker sued Viking, his complaint asserting that Viking was liable because it was the master having the right to control the negligent employee (respondeat superior) and because Viking was itself negligent in several respects including failing to provide a safe work place, permitting unsafe equipment on the site, and selecting an incompetent operator to conduct the drilling operations. Baker also sued two of Superior's officers, but did not sue Superior itself because Wyoming's worker's compensation law bars employer liability. Relying on a provision for indemnity in the contract between the parties, Viking requested that Superior assume its defense. When Superior refused, Viking brought this third-party claim for indemnity based upon contractual and common law theories.

Superior's two officers settled with Baker for $50,000. Baker, who had sued Viking for $2,520,000, then offered to settle with Viking for another $50,000. When Viking informed Superior of Baker's settlement offer, Superior responded that it considered the $50,000 offer as reasonable and that if Viking refused to settle for that sum, in a subsequent indemnity claim Superior would argue that Viking had inadequately protected Superior's interests. ² Viking then accepted Baker's $50,000 settlement offer.

In its third-party complaint against Superior, Viking relies upon the indemnity clause in its contract with Superior, the contract clause requiring Superior to perform in a workmanlike manner, common law rights of indemnity, and rights of contribution based on comparative fault. The trial court held that Wyo.Stat.Ann. § 30-28.3 (current version at Wyo.Stat.Ann. § 30-1-131) entirely voids the contractual commitments and that Superior is not liable for the damages resulting from its employee's injury on either a common law indemnity or contribution theory because Wyoming's Worker's Compensation Act provides a complete bar. ³

In the first appeal we remanded for further consideration in light of Pan American Petroleum Corp. v. Maddux Well Service, 586 P.2d 1220, 1223-24 (Wyo.1978), and Mountain Fuel Supply Co. v. Emerson, 578 P.2d 1351, 1358 (Wyo.1978). See Baker v. Viking Exploration, Inc., No. 78-1344 (10th Cir. June 14, 1979). On remand the trial court expressed its uncertainty about how to proceed but, after an in-chambers discussion with the attorneys for both sides, issued an order dismissing Viking's claims. The court concluded that Viking had voluntarily settled its claim with Baker, and it declined to disturb the voluntary settlement. This second appeal followed. We now remand again, but this time we will give the trial court more specific guidance.

I

We first focus upon the indemnity provision in the contract between the parties. It provides, in section 18.10, as follows:

"Indemnity by Contractor: Contractor agrees to protect, indemnify and save harmless the Owner from and against all claims, demands, and causes of action in favor of Contractor's employees or third parties on account of personal injuries or death or on account of property damages (other than property damages as in this Par. 18 specifically provided for) arising out of the work to be performed by Contractor hereunder and resulting from the negligent acts or omissions of Contractor, Contractor's agents, employees, and subcontractors."

That provision at least requires Superior to indemnify Viking for any claim made by a Superior employee because of an accident resulting solely from the negligence of Superior or its employees. If it is read more broadly to indemnify against an accident in which Viking's negligence ⁴ was the sole or a concurrent cause, it is invalid under Wyoming law. Mountain Fuel Supply held that Wyo.Stat.Ann. § 30-28.3 (1975) ⁵ makes unenforceable any oil and gas drilling contract to the extent it "seeks to indemnify the indemnitee for his own negligence-regardless of the character of that negligence." 578 P.2d at 1358.

Superior asserts that even if Viking settled the case not because of its own negligence but because it feared it would be found vicariously liable, section 30-28.3 still bars indemnity. As we have explained before,

"A crucial difference exists between liability as master (respondeat superior) and direct liability. Respondeat superior is a doctrine of vicarious liability based upon public policy-the notion that the person who benefits by the acts of the servant must pay for wrongs committed by the servant; the one held liable as master need not be at fault in any way. See Holmes, The History of Agency, 4 Harv.L.Rev. 345 (1882)."

McClelland v. Facteau, 610 F.2d 693, 695 (10th Cir. 1979). Superior relies upon Reding v. Texaco, Inc., 598 F.2d 513, 520-21 (9th Cir. 1979), which interprets the Wyoming statute as voiding an indemnity agreement when the indemnitee, though not negligent, is liable under the doctrine of respondeat superior. We do not agree with that construction of the statute. While subsection (ii) of the statute precludes indemnity from accidents in operations "carried on at the direction or under the supervision of the indemnitee ... or in accordance with methods and means specified by the indemnitee," the act's preamble reads as follows:

"AN ACT invalidating, as against public policy, provisions for indemnity in certain contracts where there is negligence attributable to the indemnitee, and providing an exemption thereto."

1969 Wyo.Sess.Laws ch. 46, § 1 (emphasis added). Despite Reding's view to the contrary, we think "attributable to" was intended to mean the negligence "of" the indemnitee. Construing the statute to preclude indemnity only when the indemnitee was negligent is more consistent with the Wyoming Supreme Court's opinion in Mountain Fuel Supply. See 578 P.2d at 1357. Such a reading is also consistent with the Wyoming legislature's amendment to the statute in 1977, when it added the following words to the end of subsection (ii): "to the extent that such contract of indemnity by its terms purports to relieve the indemnitee from loss or liability for his own negligence." 1977 Wyo.Sess.Laws ch. 145, § 2. We think the amendment clarified rather than changed the law.

A problem in the instant case is that Baker's complaint against Viking asserted one theory of recovery (vicarious liability) on which Viking would be entitled to indemnity under the agreement, and several theories based upon the negligence of Viking, which would be outside the contractual provision as it is permitted to operate under Wyoming law. Because the case was settled, the grounds, if any, on which Viking was liable were never judicially determined.

The view of Superior, apparently accepted by the trial court, is that since Viking settled a suit based in part on a theory for which no indemnity is proper, the settlement must be regarded as having discharged Viking's own liability for which no indemnity is proper against Superior. If we upheld this view we would discourage settlements, because no defendant would be entitled to indemnity if it settled a case in which a plaintiff asserted a theory not covered by the indemnity agreement.

Viking, on the other hand, appears to take the position that since one of the theories asserted against it is covered by the indemnity agreement, Superior's refusal to defend permits Viking to settle the case and to hold Superior for the full amount of the settlement even if Viking principally feared liability on a ground not covered by the indemnity provision. If we upheld this view an indemnitor denying liability would have to assume the defense even though some of the plaintiff's theories were clearly not covered by the agreement-an onerous burden fraught with the possibility of conflict of interest. See Waite v. Aetna Cas....