Right-Now Recycling, Inc. v. Ford Motor Credit Co.

Decision Date23 March 2016
Docket NumberCase No. 15-3621
PartiesRIGHT-NOW RECYCLING, INC., Plaintiff, v. FORD MOTOR CREDIT COMPANY, LLC, Cross-Claim Defendant-Appellee, CITY OF BLUE ASH, OHIO, Cross-Claim Plaintiff-Appellant.
CourtU.S. Court of Appeals — Sixth Circuit

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION

File Name: 16a0165n.06

ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF OHIO

BEFORE: SILER, CLAY, and KETHLEDGE, Circuit Judges.

SILER, Circuit Judge. Right-Now Recycling, Inc. ("Right-Now") sued Ford Motor Credit Company, LLC ("Ford Credit") and the City of Blue Ash, Ohio ("the City"), seeking damages related to the seizing of a pair of Right-Now's work trucks by the City and the release of the trucks to Ford Credit. After the district court granted summary judgment to Ford Credit on Right-Now's claims against it and denied summary judgment to the City on Right-Now's due process claim against it, the City settled with Right-Now.

The City and Ford Credit, cross-claim parties in the underlying suit, now dispute which of them should foot the bill for the City's settlement with Right-Now. Specifically, the City appeals the district court's denial of summary judgment to the City and grant of summary judgment to Ford Credit on the City's indemnification claims against Ford Credit. For the following reasons, we AFFIRM.

FACTUAL BACKGROUND AND PROCEDURAL HISTORY

Right-Now Recycling, Inc. acquired from Ford Credit two work trucks pursuant to retail installment contracts that provided that "[y]ou will be in default if ... [y]our vehicle is seized by any local, state, or federal authority and is not promptly and unconditionally returned to you." After Right-Now was implicated in criminal activity involving receipt of stolen property, the City searched Right-Now's premises and seized the trucks.

Although the City initially retained possession of the trucks as the criminal investigation unfolded, it ultimately decided to release the trucks to Ford Credit. Accordingly, Ford Credit executed (1) two seized property releases that conditioned the trucks' release on Ford Credit's acknowledgment that if it returned the trucks to Right-Now, Ford Credit could lose its innocent-owner rights for the trucks, and (2) two hold harmless agreements (the "Agreements") that "Ford Motor Credit agrees to indemnify and hold [the City] harmless for any liability or claim made against [the City] arising out of [the City's] releasing of this vehicle to [Ford Credit]."

After the City transferred the trucks to Ford Credit in 2011, Right-Now requested the return of the trucks. However, because the City had not "promptly and unconditionally returned" the seized trucks or otherwise released its rights, Ford Credit held Right-Now in default of the installment contracts. To preserve its innocent-owner rights, Ford Credit refused to return the trucks unless they were unconditionally released by the City. Subsequently, the City disclaimed any further interest in the trucks, after which Ford Credit relinquished the trucks to Right-Now.

Following removal of its state court suit against Ford Credit for breach of contract and unjust enrichment, Right-Now filed an amended complaint including the City as a defendant,and claiming that the City had violated Right-Now's due process rights by "seizing and depriving Right-Now of items that were not used in criminal activity and transferring seized property of Right-Now without providing Right-Now notice and a reasonable opportunity to be heard." The City filed cross-claims against Ford Credit, asserting that Right-Now's action fell within the indemnification language in the Agreements.

The district court granted summary judgment to Right-Now on its due process claim against the city, to Ford Credit on both Right-Now and the City's claims against it, and denied summary judgment on the City's cross-claims against Ford Credit. Regarding the City's indemnification-related claims against Ford Credit, the district court held that Ford Credit had no duty to indemnify the City because the City's constitutional violation (i.e., its failure to provide Right-Now with notice and an opportunity to be heard) "occurred before the trucks were released, and Ford's obligation to indemnify was not triggered until after the trucks were released." The City subsequently settled with Right-Now, and this appeal followed.

STANDARD OF REVIEW

This court reviews a district court's grant or denial of summary judgment de novo. Vill. of Grafton v. Rural Lorain Cnty. Water Auth., 419 F.3d 562, 565 (6th Cir. 2005).

DISCUSSION
I. Ford Credit Did Not Breach the Agreements

The Agreements between Ford Credit and the City state as follows:

Ford Motor Credit agrees to indemnify and hold [the City] harmless for any liability or claim made against [the City] arising out of [the City's] releasing of this vehicle to [Ford Credit1].
Anything contained herein to the contrary notwithstanding, the liability of Ford Motor Credit to [the City] hereunder shall be limited to the value of the vehicle released to Ford Motor Credit or its agent.

The City argues that, given the Agreements' "any liability or claim" language, Ford Credit's "indemnification obligations were triggered when Right-Now made a demand for a legal remedy."2 However, the district court properly determined that Right-Now's constitutional claim did not "aris[e] out of [the City's] releasing" of the trucks to Ford Credit, but instead arose "from the failure of the City to give notice to Right-Now prior to release[.]"

A. The City Violated Right-Now's Constitutional Rights

To make out its municipal liability claim, Right-Now needed to establish that an official City policy was responsible for the alleged due process violation. Monell v. Dep't of Soc. Servs., 436 U.S. 658, 691 (1978). On this point, the district court observed that "Right-Now's claim is not based on . . . a single decision, but an official written policy," and "there is no dispute that [the City's] Policy 19.002 . . . controls the circumstances presented in this case." Importantly, the policy does not require the City to provide the owner with notice or the opportunity to be heard before releasing seized property to a lien holder. Accordingly, the district court concluded that a "straightforward execution of the City's official policy . . . encouraged unconstitutional behavior."

Upon settling with Right-Now, the City abandoned its challenge to the district court's ruling that it violated Right-Now's due process rights by failing to give Right-Now notice and an opportunity to be heard. Cf. Clemente v. Vaslo, 679 F.3d 482, 497 (6th Cir. 2012) ("Plaintiffs here made no mention of municipal liability in their opening brief, even though they were clearly onnotice that the district court decided the municipal liability issue against them and that it was a proper issue for appeal. Their claims are thus abandoned."); United States v. Johnson, 440 F.3d 832, 845-46 (6th Cir. 2006) ("[A]n appellant abandons all issues not raised and argued in its initial brief on appeal." (quoting United States v. Still, 102 F.3d 118, 122 n.7 (5th Cir. 1996))). Accordingly, we will take the City's constitutional violation as a given in our analysis of the City's claims against Ford Credit.

B. The Agreements Do Not Cover the City's Constitutional Violation

The district court held that the Agreements did not obligate Ford Credit to indemnify the City because the City's liability arose from its own unconstitutional actions that preceded the release. We agree.

As a matter of Ohio law, "indemnity agreement[s] must be strictly construed and any ambiguity must be decided against the indemnitee," Hydro-Dyne, Inc. v. Ecodyne Corp., 812 F.2d 1407, at *8 (6th Cir. 1987) (quoting Linkowski v. General Tire & Rubber Co., 371 N.E.2d 553, 556-57 (Ohio Ct. App. 1977)).

Under the plain language of the Agreements, Ford Credit was obligated to indemnify the City only for claims and liability "arising out of [the City's] releasing of this vehicle to [Ford Credit]." According to the City, "Right-Now's claims, however characterized or pled, were solely premised on the release of the Trucks." The City, however, misses the point. The sole claim Right-Now asserted against the City was a procedural due process claim that "relate[d] only to the City's alleged failure to provide notice and a reasonable opportunity to be heard." "Thus, the injury that stem[med] from [the City's] denial of due process is not the . . . property that was taken from the plaintiff, but the fact that it was taken without sufficient process." Bowlby v. City of Aberdeen, 681 F.3d 215, 222 (5th Cir. 2012) (citing Nasierowski Bros.Investment Co. v. City of Sterling Heights, 949 F.2d 890, 894 (6th Cir. 1991)). Even if the deprivation technically occurred at the release of the trucks, see Zinermon v. Burch, 494 U.S. 113, 125-26 (1990), "the due process injury"—the crux of Right-now's claim—occurred "at the time the process [wa]s denied." Bowlby, 681 F.3d at 222 (emphasis added).

Even under the City's broad interpretation of "arising out of"—i.e., "flowing from, having its origin in, or growing out of," see Westfield Ins. Co. v. Factfinder Mktg. Research, Inc., 860...

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