LTV Steel Co., Inc. v. Northwest Engineering & Const., Inc., 94-1658

• Citation: 41 F.3d 332
• Decision Date: 30 November 1994
• Docket Number: No. 94-1658,94-1658
• Parties: LTV STEEL COMPANY, INC., Plaintiff-Appellant, v. NORTHWEST ENGINEERING & CONSTRUCTION, INC., and J. Hilding Johnson, a division of Northwest Engineering & Construction, Inc., Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

Page 332

41 F.3d 332

LTV STEEL COMPANY, INC., Plaintiff-Appellant, v. NORTHWEST ENGINEERING & CONSTRUCTION, INC., and J. Hilding

Johnson, a division of Northwest Engineering &

Construction, Inc., Defendants-Appellees.

No. 94-1658.

United States Court of Appeals, Seventh Circuit.

Argued Oct. 25, 1994.

Decided Nov. 30, 1994.

Anthony DeBonis, Jr. (argued), Terrance L. Smith, Smith & DeBonis, East Chicago, IN, for plaintiff-appellant.

Robert P. Forszt (argued), Fred M. Stults, Jr., Stults, Custer, Kutansky & McClean, Gary, IN, for defendants-appellees.

Before CUDAHY, ESCHBACH, and EASTERBROOK, Circuit Judges.

ESCHBACH, Circuit Judge.

LTV Steel Company, Inc., ("LTV") brought an action against Northwest Engineering & Construction and J. Hilding Johnson ("Northwest") in federal court under 28 U.S.C. Sec. 1332 (diversity) to collect funds owed on an indemnity agreement. LTV appeals the district court's grant of Northwest's motion for summary judgment and denial of LTV's partial motion for summary judgment, 845 F.Supp. 1295. For the reasons below, we affirm.

I.

LTV is a New Jersey corporation with its principal place of business in Cleveland, Ohio. Northwest is an Indiana corporation. On May 17, 1990, LTV entered into a contract with Northwest for the provision of labor, materials, supervision, and equipment in the performance of general maintenance repairs at LTV's Indiana Harbor Works as directed by LTV's maintenance staff. The contract, which consisted of LTV's standard purchase order form and several attached pages, contained the following clause:

12. Personal Injury, Death and Property Damage--By its acceptance of this order, Seller expressly agrees to defend, indemnify and save harmless Buyer (as used in this Clause, "Buyer" means and includes LTV Steel Company and, as appropriate its subsidiaries and affiliates) from and against any and all liability, loss, damages, costs and expenses (including attorneys' fees), claims, suits and demands for any loss or damage to property or injuries to persons, including death, sustained by Buyer, its employees or its customers, or by Seller or its employees, or by any other party, arising out of the performance of any work or the furnishing of, or claimed defects in, any goods furnished by Seller under this order. Seller further expressly agrees that it is the intent hereof that Seller shall assume all risk of such loss, damage or injuries, and shall absolve and indemnify Buyer therefrom, whether or not such loss, damages, or injuries are due to the sole or joint negligence of Buyer or its employees.

LTV and Northwest both agree that the last sentence of this clause obligated Northwest to indemnify LTV against harm arising from LTV's sole negligence.

On May 22, 1990, LTV's maintenance staff asked Northwest to repair and replace wearplates in the coal hopper of a blast furnace at LTV's plant. The next day, Northwest sent a crew of its employees including ironworker Edward J. Ellch ("Ellch"), to complete this task. While performing welding and inner arching activities in the coal hopper, Ellch, overcome by either the fumes or a lack of oxygen, became unconscious and fell ten to twelve feet to the surface of the hopper floor and was injured. On August 6, 1990, Ellch filed suit against LTV in federal district court to recover for the injuries resulting from his fall. Relying upon the indemnification provision of its contract with Northwest, LTV requested on July 24, 1991, and again on August 16, 1991, that Northwest defend against Ellch's suit. Northwest refused on both occasions. Eventually, after incurring legal fees in excess of $24,000, LTV settled with Ellch for $72,500 in an agreement that denied any liability on the part of LTV.

On October 27, 1992, LTV brought suit in federal district court seeking enforcement of its indemnity provision with Northwest and recovery of all settlement costs and attorney's fees incurred in defending Ellch's suit. Northwest answered with the affirmative defense that the indemnity provision was void under Sec. 26-2-5-1 of the Indiana Code because it purported to indemnify LTV against its sole negligence in a construction or design contract. The parties filed cross motions for summary judgment, with LTV's motion limited to the issue of liability. On February 24, 1994, the district court denied LTV's motion for partial summary judgment and granted Northwest's motion for summary judgment. LTV filed a timely notice of appeal pursuant to 28 U.S.C. Sec. 1291.

II.

There are no genuine issues of material fact and the dispute primarily concerns a question of interpreting a statute and applying it to a specific set of facts. Thus, the issue was properly resolved on a motion for summary judgment. Fed.R.Civ.Proc. 56(c). The district court's grant of a motion for summary judgment, and the underlying interpretation of the statute in arriving at its decision, is reviewed de novo. United States v. B & W Investment Properties, 38 F.3d 362, 366 (7th Cir.1994); Colip v. Clare, 26 F.3d 712, 714 (7th Cir.1994).

A.

The principal question on appeal is whether Sec. 26-2-5-1 of the Indiana Code applies to the contract between LTV and Northwest and therefore operates to relieve Northwest of its obligation to indemnify LTV. The statute provides as follows:

All provisions, clauses, covenants, or agreements contained in, collateral to, or affecting any construction or design contract except those pertaining to highway contracts, which purport to indemnify the promisee against liability for:

(1) Death or bodily injury to persons;

(2) Injury to property;

(3) Design defects; or

(4) Any other loss, damage or expense arising under either (1), (2) or (3);

from the sole negligence or wilful misconduct of the promisee or the promisee's agents, servants or independent contractors who are directly responsible to the promisee, are against public policy and are void and unenforceable.

LTV admits that the clause in its contract with Northwest indemnified LTV against liability arising from its sole negligence, but it argues that this statute does not apply to its contract with Northwest because it was not a "construction or design contract." Rather, it characterizes its contract as a "maintenance or repair contract," which LTV contends, under rules of statutory interpretation and principles of public policy, is separate and distinct from a construction or design contract. Thus, LTV concludes, the indemnity provision in its contract with Northwest is not covered by the statute.

It is not clear from the statute whether work which might be characterized as "maintenance" or "repair" is covered by the phrase "construction contract." Although there is no published legislative history of Indiana statutes, see McMunn v. Hertz Equipment Rental Corp., 791 F.2d 88, 92 (7th Cir.1986), Indiana courts have had occasion to interpret the meaning and purpose of I.C. Sec. 26-2-5-1. In a diversity case, our principal guide in interpreting and applying a state statute is the decisions of that state's courts. See United States v. Thirty-Seven Photographs, 402 U.S. 363, 369, 91 S.Ct. 1400, 1404-05, 28 L.Ed.2d 822 (1971); DeGrand v. Motors Insurance Corp., 903 F.2d 1100, 1103 (7th Cir.1990); Waldron v. McAtee, 723 F.2d 1348, 1352 (7th Cir.1983). In the absence of a decision by the highest state court, "[d]ecisions of intermediate appellate state courts generally control unless there are persuasive indications that the highest state court would decide the issue differently." L.S. Heath & Son v. AT & T Information Systems, 9 F.3d 561, 574 (7th Cir.1993) (citing Hicks v. Feiock, 485 U.S. 624, 630 n. 3, 108 S.Ct. 1423, 1428 n. 3, 99 L.Ed.2d 721 (1988)).

In Fort Wayne Cablevision v. Indiana & Michigan Electric Co., 443 N.E.2d 863 (Ind.Ct.App.1983), the Indiana Court of Appeals concluded that the purpose of the statute was to increase safety at construction sites. Id., at 869-70; Accord Ogilvie v. Steele by Steele, 452 N.E.2d 167, 169-70 (Ind.Ct.App.1983). Prior to the statute, subcontractors were subject to the "pernicious effects of these clauses," whereby general contractors managed to shift the financial risks of liability onto subcontractors. Id. This reduced the general contractors' incentive to maintain worker safety, thus increasing the risks of accidents on a construction site. Id., at 870, (quoting Davis v. Commonwealth Edison Co., 61 Ill.2d 494, 336 N.E.2d 881, 884 (1975)); McMunn, 791 F.2d at 92. Restricting the use of indemnity provisions in such situations serves to protect workers in the industry as well as the public at large from the dangers associated with construction work. Id.

The Fort Wayne Cablevision court discussed two factors in determining that a contract to give a license to a cable company to attach cable wires to utility poles was not a construction contract within the meaning of I.C. Sec. 26-2-5-1. First, in view of "the realities of the contract," does "it require[ ] strained usage and interpretation in order to consider it to be a construction contract." Id., 443 N.E.2d at 869. In performing this examination, the court recognized that, although the language of the contract is important, "labels will not control over substance." Id. Where the contract is not ambiguous, we should give effect to the plain and ordinary meaning of the language used. Id. Second, considering the statute's purpose to prevent the dangerous tendency in the construction industry to shift risks and thereby reduce safety for both workers and the public, is the contract "the kind the legislature intended to regulate by IC 26-2-5-1." Id.

Under the first consideration, we do not think it requires "strained usage and interpretation" in order to consider LTV's contract with Northwest to be a construction contract. The contract established an open-ended framework for LTV to use Northwest for such projects and at such times as became necessary. It consisted of a standard purchase order and...