Nguyen v. Lewis/Boyle, Inc., Civ. A. No. 94-0018 P.

• Decision Date: 04 October 1995
• Docket Number: Civ. A. No. 94-0018 P.
• Citation: 899 F. Supp. 58
• Parties: Loi NGUYEN and Hue Nguyen, v. LEWIS/BOYLE, INC. and Hyster Co. v. BOLIDEN METECH, INC.
• Court: U.S. District Court — District of Rhode Island

899 F. Supp. 58

Loi NGUYEN and Hue Nguyen, v. LEWIS/BOYLE, INC. and Hyster Co. v. BOLIDEN METECH, INC.

Civ. A. No. 94-0018 P.

United States District Court, D. Rhode Island.

October 4, 1995.

Thomas A. Tarro, III, Warwick, RI, for plaintiff.

Harry W. Asquith, Jr., Providence, RI, for Lewis/Boyle.

Mark T. Nugent, Providence, RI, for Hyster Co.

Andrew J. Murray, Robin-Lee Main, Providence, RI, for Boliden Metech.

MEMORANDUM AND ORDER

PETTINE, Senior District Judge.

In this personal injury action, plaintiff Loi Nguyen alleges that he suffered injury as the result of a forklift accident. Plaintiffs filed claims against Lewis/Boyle as the lessor of the forklift and Hyster as the manufacturer of the forklift. Lewis/Boyle has filed a third-party complaint for indemnification from the lessee of the forklift, Boliden.

The matter now before this Court is third-party plaintiff Lewis/Boyle's motion for summary judgment against third-party defendant Boliden. Lewis/Boyle seeks indemnification from Boliden for any liability Lewis/Boyle faces for the plaintiffs' injuries. For the reasons discussed below, the motion for summary judgment is granted for indemnification of Lewis/Boyle's potential liability under Count I. The motion for summary judgment is denied for indemnification under Counts II and V, because genuine disputes of material facts exist as to the intended coverage of the lease indemnification clause.

PROCEDURAL AND FACTUAL HISTORY

On July 28, 1993, an employee of Boliden, plaintiff Loi Nguyen, suffered injuries when a forklift driven by a co-worker ran over his leg. Loi Nguyen and his wife filed an action against Lewis/Boyle as the lessor of the forklift and Hyster Company as the manufacturer of the forklift. The plaintiffs allege that Lewis/Boyle is vicariously liable for the negligence of the forklift driver (Count I), that Lewis/Boyle was negligent in failing to maintain the forklift with proper safety equipment (Count II), and that Lewis/Boyle is liable under product liability laws for leasing a dangerous forklift (Count V).

Lewis/Boyle and Boliden had entered into a lease agreement which included an indemnity clause. According to the terms of the lease, lessee Boliden had agreed to indemnify lessor Lewis/Boyle for "all liability arising out of the use, maintenance, repair and/or delivery of the equipment." After plaintiffs brought their action, Lewis/Boyle initiated a third-party complaint against Boliden, relying upon the contractual indemnity clause contained in the lease. Boliden then filed a motion to dismiss, alleging that the indemnity clause was vague and therefore unenforceable. After a hearing held on the motion to dismiss before Magistrate Timothy Boudewyns, Magistrate Boudewyns recommended that the motion be denied. This Court adopted his recommendation on May 17, 1995.

Lewis/Boyle has now moved for summary judgment against Boliden, alleging that, pursuant to the lease indemnity clause, Lewis/Boyle has a right to indemnity from Boliden. Boliden argues that genuine disputes of material facts exist as to the intended scope of the lease indemnification clause. Magistrate Boudewyns has recommended that the motion be granted as to indemnification under Count I and denied as to the other counts. This Court adopts the result recommended by the magistrate but writes a separate order to clarify its reasoning.

STANDARD FOR SUMMARY JUDGMENT

A federal court may grant summary judgment in a civil action "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). To prevent summary judgment, the evidence, viewed in the light most favorable to the nonmoving party, must be sufficient to permit a rational factfinder to resolve the issue in favor of either side. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Mack v. Great Atl. & Pac. Tea Co., 871 F.2d 179, 181 (1st Cir. 1989).

APPLICABLE LAW IN THIS DISPUTE

In this case, third-party plaintiff Lewis/Boyle contends that Massachusetts substantive law applies because of a choice-of-law clause in its lease with third-party defendant Boliden. Boliden responds that it never knew of or bargained for the choice-of-law clause and that the clause was buried in fine print. Boliden argues that this Court must therefore disregard the choice of law clause and apply Rhode Island law. A federal court sitting in a diversity case must apply the law of the forum state, Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), including that state's choice of law rules. Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). Thus this decision must be based on Rhode Island's choice of law principles.

Rhode Island law recognizes choice of law contract clauses, with some limitations. In the 1937 case Owens v. Hagenbeck-Wallace Shows Co., the Rhode Island Supreme Court stated, "the right of parties to a contract to have their reciprocal duties and obligations under that contract governed by the law of some particular jurisdiction is limited to the selection or stipulation by them of the law of a jurisdiction which has a real relation to the contract." 58 R.I. 162, 174, 192 A. 158 (1937); see also Providence & Worcester R.R. Co. v. Sargent & Greenleaf, Inc., 802 F.Supp. 680, 684 (D.R.I.1992).

In this case, the only connection Massachusetts has to this contract is that Lewis/Boyle's principal place of business is in Waltham, Massachusetts. Third-Party Pl.'s Opp'n to Mot. to Dismiss at 4. Rhode Island courts have not specifically addressed whether a party's domicile in a state constitutes a "real relation" to a contract formed elsewhere. However, New Hampshire law analogously recognizes a contractual choice of law clause if the contract "bears any significant relationship to that jurisdiction." Allied Adjustment Service v. Heney, 125 N.H. 698, 484 A.2d 1189, 1191 (1984). In Ferrofluidics Corp. v. Advanced Vacuum Components, Inc., the First Circuit interpreted this New Hampshire rule, finding that "`a party's incorporation in a state is a contact sufficient to allow the parties to choose that state's law to govern their contract.'" 968 F.2d 1463, 1467-68 (1st Cir.1992) (citation omitted). The Restatement (2d) of Conflicts of Laws § 187, comment f, supports this position: "When the state of the chosen law has some substantial relationship to the parties or the contract, the parties will be held to have had a reasonable basis for their choice. This will be the case, for example, when this state is that ... where one of the parties is domiciled or has his principal place of business." Because this Court has no reason to believe Rhode Island would not follow the Restatement and the interpretation of New Hampshire's parallel provision, I find that Lewis/Boyle's domicile in Massachusetts constitutes a real relationship between the contract and the law chosen by the parties.

In addition, Rhode Island will not enforce a choice of law agreement if the agreement runs contrary to its own public policy. Owens, 58 R.I. at 174, 192 A. 158; see also Providence & Worcester R.R., 802 F.Supp. at 684. Other jurisdictions have interpreted this exception very narrowly. See, e.g., Tele-Save Merchandising Co. v. Consumers Distrib. Co., 814 F.2d 1120, 1123 (6th Cir.1987) (Ohio law); Massengale v. Transitron Elect. Corp., 385 F.2d 83, 85-87 (1st Cir.1967) (Massachusetts law); Aluminum Co. of Amer. v. Hully, 200 F.2d 257, 261 (8th Cir.1952) (Iowa law) In re Air Crash Disaster at Detroit Metro. Airport on Aug. 16, 1987, 757 F.Supp. 804, 808 (E.D.Mich.1989) (Michigan law). But see Elect. & Magneto Service Co. v. AMBAC Int'l Corp., 941 F.2d 660, 664 (8th Cir.1991) (Missouri law); Modern Computer Systems, Inc. v. Modern Banking Systems, Inc., 858 F.2d 1339, 1344 (8th Cir.1988) (Minnesota law). In this case, nothing indicates that Rhode Island has a strong policy interest in the interpretation of indemnity clauses. Nor is there any indication that Massachusetts law governing indemnity clauses offends Rhode Island's policy interests. Thus the narrow "public policy" exception is inapplicable.

Boliden asserts that it never knew of the choice of law provision, that it had not negotiated the clause, and that the clause was buried in fine print on the back of the lease. The Restatement (2d) of Conflicts of Law § 187, comment b, states: "A choice-of-law provision, like any other contractual provision, will not be given effect if the consent of one of the parties to its inclusion in the contract was obtained ... by mistake." The Restatement discusses factors to be considered in evaluating a claim of mistake, including whether the clause was in fine print, whether it was contained in an adhesion contract, and whether the mistaken party had an opportunity to bargain about its terms. Id. In Crellin Technologies Inc. v. Equipment-lease Corp., the First Circuit rejected a contractual choice-of-law provision under Rhode Island law. 18 F.3d 1, 6 n. 7 (1st Cir.1994). However, in that case the provision had appeared in only one draft of the contract, the non-drafting party never signed that draft, and the parties did not raise the issue. Id. The facts in the instant case are clearly distinguishable. The choice of law clause was in the final version of the lease, which Boliden's vice-president apparently signed. No evidence exists that the parties were in unequal bargaining positions or that the lease was a contract of adhesion. Although the clause was written in admittedly small print, the clause was headed by "GOVERNING LAW" in all capitals, and nothing indicates that Boliden did not have an opportunity to review the contract terms before signing the lease.

Therefore the choice-of-law clause in the lease is...