Liberty Ins. Underwriters, Inc. v. Beaufurn, LLC, 1:16CV1377
| Decision Date | 23 September 2019 |
| Docket Number | 1:16CV1377 |
| Citation | 406 F.Supp.3d 498 |
| Court | U.S. District Court — Middle District of North Carolina |
| Parties | LIBERTY INSURANCE UNDERWRITERS, INC., an Illinois corporation, Plaintiff, v. BEAUFURN, LLC, a North Carolina limited liability company; and Does 1–10, Defendants. |
David H. Waters, Richard J. Finn, Burnham Brown, Rohit A. Sabnis, Oakland, CA, Justin Matthew Osborn, Yates, McLamb & Weyher, LLP, Raleigh, NC, for Plaintiff.
Danica J. Brustkern, Paul H. James, Theodore R. Cercos, Lincoln Gustafson and Cercos LLP, San Diego, CA, Adam L. White, Deborah J. Bowers, Kenneth Kyre, Jr., Pinto Coates Kyre & Bowers, PLLC, Greensboro, NC, for Defendants.
Currently before the court are two motions for summary judgment. (Docs. 63, 65.) Plaintiff Liberty Insurance Underwriters, Inc., has moved for partial summary judgment on the issue of whether certain insurance and indemnification provisions are included in the underlying contracts between The Cheesecake Factory, Inc. ("TCF") and Defendant Beaufurn, LLC ("Beaufurn"). Plaintiff argues that TCF's terms were accepted and should govern each contract. Defendant Beaufurn has also moved for summary judgment and argues that all claims against it should be dismissed. Beaufurn contends that its order acknowledgments expressly rejected TCF's terms, which thus did not become part of the relevant contracts. For the reasons set forth herein, this court finds that each motion should be granted in part and denied in part.
On June 14, 2013, Janet Kinzler was injured when she fell from a high top chair while seated at a high top table with some colleagues at a TCF restaurant in Maryland. (First Am. Compl. ("Am. Compl.") (Doc. 52) ¶ 11.) TCF regularly purchases barstools from Beaufurn for use in its "restaurants across the country, including in its location at 7002 Arundel Mills Circle, Hanover, Maryland." (Denise Hall Declaration (Doc. 63-1) ¶ 4.) The chair from which Kinzler fell was "designed, manufactured and/or distributed by Beaufurn." (Am. Compl. (Doc. 52) ¶ 11.) TCF investigated the incident, concluded that Kinzler's injuries were most likely caused by her own actions, and returned the subject chair to service in its restaurant. (William Ivar Bongaerts Deposition (Doc. 63-5) at 24; Cook Dep. (Doc. 63-4) at 2.)
On March 18, 2014, Kinzler sued TCF in federal court in the Western District of Pennsylvania, alleging that TCF was negligent by "utilizing chairs that were unstable and subject to overturning" and by maintaining and failing to warn customers of slippery floors in its restaurant. (Kinzler v. The Cheesecake Factory, Inc. Am. Compl. (Doc. 52-2) ¶ 35.) Plaintiff alleged damages in an amount greater than $75,000.00. TCF requested that Beaufurn defend TCF against Kinzler's claim and indemnify TCF for any resulting damages, pursuant to the terms of the purchase order for the subject chair. Beaufurn apparently passed this demand along to The Cincinnati Insurance Company ("CIC"), its primary and umbrella insurer. (Am. Compl. (Doc. 52) ¶¶ 21–22.)
Neither CIC nor Beaufurn agreed to defend or indemnify TCF in the Kinzler lawsuit. (Id. ¶¶ 21–24.)
TCF, Plaintiff (TCF's primary insurer), and ACE American Insurance Company (TCF's excess insurer), subsequently settled the Kinzler action for the total "sum of $4,375,000, of which LIU [Liberty Insurance Underwriters] paid the sum of $3,558,284.39, TCF paid $316,715.61 and ACE American paid $500,000." (Id. ¶ 29.) Plaintiff now seeks to recover from Beaufurn the following amounts: (1) $61,554.56 in defense costs paid directly by Plaintiff, (2) $183,284.39 in defense costs paid by TCF, which Plaintiff alleges "eroded TCF's self-insured retention under the ACE" policy, causing this policy to be depleted faster and causing spillover into Plaintiff's policy, and (3) $3,558,284.39, the Kinzler settlement amount paid directly by Plaintiff. (Id. ¶¶ 31, 45.)
Plaintiff originally brought suit in California state court. Defendants then removed the case to federal court in the Central District of California. (See generally Notice of Removal (Doc. 1).) Defendants moved to transfer the case to this district; that motion was granted by Judge Fernando M. Olguin November 30, 2016. (See Venue Order (Doc. 34).)
Beaufurn has moved for summary judgment. (See Doc. 63.) Beaufurn argues that the purchase orders and order acknowledgments contained conflicting insurance and indemnification provisions and that each expressly limited acceptance to its own terms.1 Therefore, under Uniform Commercial Code {" UCC") 2-207, the insurance and indemnification terms in the purchase orders "were not part of the contract, so Beaufurn could not have breached those terms." (Def.'s Mem. of Law in Supp. of Mot. for Summ. J. ("Def.'s Mem.") (Doc. 64) at 13–14.) Plaintiff has moved for partial summary judgment. (See Pl.'s Mot. for Partial Summ. J. (Doc. 65).) Plaintiff argues that the purchase orders were offers to purchase the subject chairs, that Beaufurn's order acknowledgments were valid acceptances not expressly conditioned on Plaintiff's acceptance of any additional terms, and that therefore the insurance and indemnification provisions in the purchase orders govern the relevant contracts. (See Pl.'s Mem. of Law in Supp. of Mot. for Partial Summ. J. ("Pl.'s Mem.") (Doc. 66) at 15–20.) Plaintiff requests summary judgment on the issue of whether "the terms and conditions of TCF's purchase orders controlled the contract for the sale of goods" and an order "precluding Beaufurn from invoking its terms and conditions as a defense to Plaintiff's claims." (Pl.'s Mot. for Partial Summ. J. (Doc. 65) at 2.)
The parties agree that choice of law is immaterial to this case because both North Carolina and California have adopted the relevant UCC provision without change. (Compare Def.'s Mem. (Doc. 64) at 10, with Pl.'s Mem. (Doc. 66) at 13.) Though the ultimate result may be the same regardless of the law chosen, a proper choice-of-law analysis is still required.
A federal district court sitting in diversity applies the choice-of-law rules of the forum. See Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496–97, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). When either party is granted transfer under 28 U.S.C. § 1404(a),2 however, the transferee court applies the choice-of-law rules of the transferor court. Piper Aircraft Co. v. Reyno, 454 U.S. 235, 243 n.8, 102 S.Ct. 252, 70 L.Ed.2d 419 (1981) ; see also Ferens v. John Deere Co., 494 U.S. 516, 519, 110 S.Ct. 1274, 108 L.Ed.2d 443 (1990) (superseded by statute on other grounds); Volvo Constr. Equip. N. Am., Inc. v. CLM Equip. Co., 386 F.3d 581, 600 (4th Cir. 2004). The rule in Piper and Ferens for Section 1404(a) and choice-of-law is inapplicable in cases governed by valid forum selection clauses. See Atl. Marine Constr. Co. v. U.S. Dist. Ct. for W. Dist. of Tex., 571 U.S. 49, 65—66, 134 S.Ct. 568, 187 L.Ed.2d 487 (2013). As will be discussed infra, TCF and Beaufurn had conflicting forum selection clauses that were "knocked out" under California's "battle of the forms provision." (See Venue Order (Doc. 34) at 6-7.) Therefore, in this case, there was no valid forum selection clause, (see id. ), and the matter was transferred to this court under Section 1404(a), (id. at 14–15). In light of these facts, the court concludes that California's choice-of-law rules apply.
California has adopted the governmental interest test for most of its conflict-of-laws issues. See, e.g., Reich v. Purcell, 67 Cal. 2d 551, 555–56, 63 Cal.Rptr. 31, 432 P.2d 727 (1967). Under that approach, courts "must search to find the proper law to apply based upon the interests of the litigants and the involved states." Offshore Rental Co. v. Cont'l Oil Co., 22 Cal. 3d 157, 161, 148 Cal.Rptr. 867, 583 P.2d 721 (1978), holding modified by I.J. Weinrot & Son, Inc. v. Jackson, 40 Cal. 3d 327, 220 Cal.Rptr. 103, 708 P.2d 682 (1985). The first step in the governmental interest test is to determine if there is, in fact, a true conflict3 between California law and foreign law. Washington Mut. Bank v. Superior Court, 24 Cal. 4th 906, 919, 103 Cal.Rptr.2d 320, 15 P.3d 1071 (2001). When there is "no material difference [between two laws], there is no choice-of-law problem and the court may proceed to apply California law." Frontier Oil Corp. v. RLI Ins. Co., 153 Cal. App. 4th 1436, 1465, 63 Cal.Rptr.3d 816, as modified (Sept. 5, 2007).
As stated above, both California and North Carolina have adopted the UCC in its entirety, to include Section 2-207, the most relevant provision in this case. Comparison of the two states' UCC 2-207 provisions reveal that there is no "material difference" between them. Compare Cal. Com. Code § 2207, with N.C. Gen. Stat. § 25-2-207. For that reason, this court will specifically apply Cal. Com. Code § 2207, Frontier Oil Corp., 153 Cal. App. 4th at 1465, 63 Cal.Rptr.3d 816,4 and thus adopt the parties' stipulation "that California law applies to the substantive contractual issues." (See Venue Order (Doc. 34) at 5.)
In reviewing a motion for summary judgment, this court must determine whether there remains a "genuine dispute as to any material fact." Fed. R. Civ. P. 56(a). "Once a defendant makes a properly supported motion for summary judgment, the burden shifts to the plaintiff to set forth specific facts showing that there is a genuine issue for trial." Sylvia Dev. Corp. v. Calvert Cty., 48 F.3d 810, 817 (4th Cir. 1995). "On summary judgment the inferences to be drawn from the underlying facts ... must be viewed in the light most favorable to the party opposing the motion." United States v. Diebold, Inc., 369 U.S. 654, 654, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962) (per curiam). If there is no genuine dispute about any fact material to the moving pa...
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