Kohl's Dep't Stores v. W/s Alfred Rd. Properties Ltd. Liab. Co.

• Decision Date: 10 February 2011
• Docket Number: DOCKET NO. cv -08-391
• Parties: KOHL'S DEPARTMENT STORES, Plaintiff v. W/S ALFRED ROAD PROPERTIES LIMITED LIABILITY COMPANY And S.W.COLE ENGINEERING, INC., Defendants
• Court: Maine Supreme Court

KOHL'S DEPARTMENT STORES, Plaintiff v. W/S ALFRED ROAD PROPERTIES LIMITED LIABILITY COMPANY And S.W.COLE ENGINEERING, INC., Defendants

DOCKET NO. cv-08-391

Supreme Judicial Court of Maine

Date: February 10, 2011

ORDER ON MOTIONS FOR SUMMARY JUDGMENT

Defendant/cross-claim defendant S.W. Cole Engineering, Inc. has filed a motion for partial summary judgment on counts I and II of defendant/cross-claim plaintiff W/S Alfred Road Properties, LLC's cross-claim. S.W. Cole asks the court to determine that pursuant to the contract between S.W. Cole and Alfred, Alfred's recovery on its cross-claim is limited to the greater of $50,000.00 or the fees accrued by S.W. Cole under the contract. S.W. Cole argues that Alfred is not entitled to equitable contribution or indemnity. S.W. Cole also asserts that the limitation on liability clause in the contract is enforceable against Alfred, notwithstanding the indemnity provision of the contract.

Defendant/cross-claim plaintiff Alfred has filed a cross motion for partial summary judgment on counts I and II of its cross-claim. Alfred also filed a motion for partial summary judgment on count III of its cross-claim. Alfred alleges that S.W. Cole breached its contractual obligation to procure insurance by failing to obtain additional insurance and by obtaining a "wasting" or "eroding" insurance policy.¹

Factual Background

On October 2, 2002, Alfred entered into a Ground Lease Agreement with Kohl's Department Stores, Inc. for a retail department store in Biddeford, Maine. (Cross-Cl. Def.'s Supp. S.M.F. ("S.W. Cole's S.M.F.") ¶ 1.) The Ground Lease Agreement obligates Alfred to provide construction of Kohl's' building pad, including "[c]ompaction of the building area of Tenant's Tract." (S.W. Cole's S.M.F. ¶ 2.) Before Alfred executed the Ground Lease Agreement, it retained S.W. Cole to perform the geotechnical engineering services necessary for the preparation of the building pad area, which was ultimately leased to Kohl's. (S.W. Cole's S.M.F. ¶ 3.) At this time, S.W. Cole was working on four projects for Alfred's affiliated companies. (Cross-Cl. PL's S. Add'l M.F. ("Alfred's S.A.M.F.") ¶ 14.)²

On August 28, 2002, John Corbett, who was a project manager for Alfred on the Kohl's project and was involved in the contract negotiations with S.W. Cole, signed a proposal, previously signed by S.W. Cole on August 15, 2002 (the "August 2002 agreement"). (S.W. Cole's S.M.F. ¶ 4, as qualified by Cross-Cl. PL's Opp. S.M.F. ("Alfred's Opp. S.M.F.") ¶ 4; see also Alfred's S.A.M.F. ¶ 7, as qualified by Cross-Cl. Def.'s Rep. to PL's S.A.M.F. ("S.W. Cole's R.S.M.F.") ¶ 7.) The August 2002 agreementincluded S.W. Cole's standard contractual "Terms and Conditions."³ (S.W. Cole's S.M.F. ¶ 4.)

The standard Terms and Conditions provided for a limitation on liability and for indemnification. Article 8 of the Terms and Conditions of the August 2002 agreement provides:

Limitation of Liability

Client expressly agrees that to the fullest extent permitted by law, its maximum aggregate recovery for claims against [S.W. Cole] and all of its employees, concerning [S.W. Cole's] services, including for negligence or breach of this agreement shall be either $50,000, or [S.W. Cole's] fee, whichever is greater. Client further expressly agrees that unless otherwise mutually agreed to in writing by both parties, all subsequent work performed by [S.W. Cole] on behalf of Client concerning the property covered by this agreement will be pursuant to an addendum to this agreement. This Limitation of Liability clause will extend to, and applies to, all subsequent work performed by [S.W. Cole] for Client for this property.

In the event that the Client does not wish to limit [S.W. Cole's] liability for this work, or subsequent work done under this project number, to the greater of $50,000 or [S.W. Cole's] services, [S.W. Cole] may agree to a higher limitation of liability if the parties mutually agree in writing to an increase in [S.W. Cole's] fee because of the higher risk [S.W. Cole] may assume.

(S.W. Cole's S.M.F. ¶ 5, Ex. B.) Article 10 of the Terms and Conditions provides:

Indemnification Hold Harmless

[S.W. Cole] agrees to indemnify and hold Client, its directors, shareholders, employees, and assigns harmless for all claims, damages and causes of action, to the extent such claims, damages and causes of action are based on or arise out of [S.W. Cole's] negligent acts, errors or omissions.

Client agrees to indemnify and hold [S.W. Cole], its directors, shareholders, employees, and assigns harmless for all claims, damages and causes of action, against [S.W. Cole] related to the performance of theservices in this Agreement, unless such claims are based on or arise out of [S.W. Cole's] negligent acts or omissions.

(S.W. Cole's S.M.F. ¶ 6, Ex. B.)

Pursuant to Article 8 of the August 2002 agreement, Mr. Corbett worked with S.W. Cole to negotiate an additional fee and to increase S.W. Cole's "professional liability" coverage to $3 million. (Alfred's S.A.M.F. ¶¶ 20-22, as qualified by S.W. Cole's R.S.M.F. ¶¶ 20-22.) Article 4 of the August 2002 agreement provides:

Insurance

[S.W. Cole] maintains worker's compensation insurance of a form and in the amount required by state law. [S.W. Cole] maintains general liability, automobile liability and professional liability coverage. Certificates for insurance coverage will be provided to the Client upon request and [S.W. Cole] will promptly notify the Client of any impending change in coverage. [S.W. Cole] shall comply with the Client's reasonable requests for special endorsements, additional limits, additional coverage, et al., providing these are available to [S.W. Cole], and Client renumerates [sic] [S.W. Cole] for the cost thereof.

(Alfred's S.A.M.F. ¶ 12.) Ultimately, Mr. Corbett and S.W. Cole agreed that S.W. Cole would increase its professional liability coverage to $3 million, in exchange for an additional fee. (Alfred's S.A.M.F. ¶¶ 19, 21-22, as qualified by S.W. Cole's R.S.M.F. ¶¶ 19, 21-22.) Alfred paid the additional fee on March 31, 2003. (Alfred's S.A.M.F. ¶ 24.)

Construction of the Kohl's store began in March 2004. (S.W. Cole's S.M.F. ¶ 7, Ex. C) In the summer of 2006, Kohl's, through its agent, JGI Eastern, Inc., observed cracks in the elevated concrete floor slab. (S.W. Cole's S.M.F. ¶ 8, as qualified by Alfred's Opp. S.M.F. ¶ 8.) At some point, Kohl's determined that differential settlement of the store occurred. (S.W. Cole's S.M.F. ¶ 9.) Shortly after being made aware of potential problems with the Kohl's project in early September 2006, Alfred, through an affiliate, requested that S.W. Cole list proposals and contract documents issued for the project after being made aware of the potential problem with settling in order to compare thelist with the affiliate's file for the Kohl's project. (Alfred's S.A.M.F. ¶¶ 2, 4, as qualified by S.W. Cole's R.S.M.F. ¶¶ 2, 4.) Alfred also requested that S.W. Cole gather the documents defining the scope of S.W. Cole's work and liability for that work. (Id.) In response to the request, S.W. Cole faxed a list of the documents. (Alfred's S.A.M.F. ¶¶ 5-6, as qualified by S.W. Cole's R.S.M.F. ¶¶ 5-6.) The list of documents included several letters written after the August 2002 agreement, which Mr. Corbett had received on behalf of Alfred, dated August 15, 2002, September 13, 2002, January 9, 2003, January 22, 2003, and February 11, 2003 (collectively, "the letters"). (Alfred's S.A.M.F. ¶ 1, Exs. 47, 51, 54, 55 and 56.)

On July 3, 2008, Kohl's filed an eleven-count complaint against Alfred and S.W. Cole. Essentially, Kohl's alleges negligence (against S.W. Cole only), breach of contract, breach of the duty of good faith and fair dealing, negligent misrepresentation, and intentional misrepresentation, and seeks damages, including punitive damages. Alfred filed a cross-claim against S.W. Cole and alleges equitable contribution and/or indemnification (count I), breach of contractual indemnification (count II), and breach of contractual insurance procurement (count III). S.W. Cole filed a cross-claim against Alfred and alleges equitable contribution and indemnification (count I) and contractual indemnification (count II).

S.W. Cole claims that Alfred's claims for equitable contribution and/or indemnification fail as a matter of law. S.W. Cole also asserts that the unambiguous terms of the parties' contract limit S.W. Cole's liability for all claims by Alfred, including Alfred's claims for indemnification and contribution. Alfred claims that the Article 8 limitation does not apply to S.W. Cole's duty to indemnify Alfred for third-party claims arising from S.W. Cole's negligent acts. Alfred also argues that S.W. Cole breached itscontractual duty to procure additional insurance and by purchasing a "wasting" or "eroding" insurance policy.

DISCUSSION

I. Standard of Review

Summary judgment should be granted if there is no genuine dispute as to any material fact and a party is entitled to judgment as a matter of law. M.R. Civ. P. 56(c). In considering a motion for summary judgment, the court should consider the facts in the light most favorable to the nonmoving party, and the court is required to consider only the portions of the record referred to and the material facts set forth in the parties' Rule 56(h) statements. See, e.g., Johnson v. McNeil 2002 ME 99, ¶ 8, 800 A.2d 702, 704. A contested fact is "material" if it could potentially affect the outcome of the case. Inkel v. Livingston, 2005 ME 42, ¶ 4, 869 A.2d 745, 747. "A genuine issue of material fact exists when there is sufficient evidence to require a fact-finder to choose between competing versions of the truth at trial." Id. When the facts offered by a party in opposition to summary judgment would not, if offered at trial, be sufficient to withstand a motion for judgment as a matter of law, summary judgment should be granted. Rodrigue v. Rodrigue, 1997 ME 99, ¶ 8, 694 A.2d 924, 926.

II. Count I:...