Simmons, Inc. v. Pinkerton's, Inc.

• Decision Date: 28 May 1985
• Docket Number: No. 84-1524,84-1524
• Parties: 18 Fed. R. Evid. Serv. 128 SIMMONS, INC., a corporation, Plaintiff-Appellee, v. PINKERTON'S, INC., a corporation and National Surety Corporation, a corporation, Defendants-Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 591

762 F.2d 591

18 Fed. R. Evid. Serv. 128

SIMMONS, INC., a corporation, Plaintiff-Appellee, v. PINKERTON'S, INC., a corporation and National Surety

Corporation, a corporation, Defendants-Appellants.

No. 84-1524.

United States Court of Appeals,

Seventh Circuit.

Argued Dec. 7, 1984.

Decided May 28, 1985.

James D. McQuillan, Spangler, Jennings, Spangler & Dougherty, P.C., Merrillville, Ind., for defendants-appellants.

James D. Steiner, Robins, Zelle, Larson & Kaplan, Minneapolis, Minn., for plaintiff-appellee.

Before CUDAHY and POSNER, Circuit Judges, and SWYGERT, Senior Circuit Judge.

CUDAHY, Circuit Judge.

Defendants-appellants Pinkerton's, Inc. and National Surety Corporation appeal a judgment against them in an action for property damages arising out of a fire at a warehouse owned by plaintiff-appellee Simmons, Inc. The jury returned a verdict in favor of Simmons and assessed damages in the amount of $971,012.65. We affirm.

I.

Simmons, a manufacturer of residential and commercial bedding, owned a warehouse in Munster, Indiana, which it used as a regional distribution center for its products. In order to protect the warehouse, Simmons entered into a contract with defendant Pinkerton's, a national company providing investigative and security services, under which Pinkerton's agreed to provide uniformed guard protection for the warehouse 24 hours a day, 7 days a week. The contract provided that Pinkerton's would "ensure a professional, reliable and efficient effort to protect its clients' property and personnel against security hazards." In addition, Pinkerton's explicitly accepted liability for all acts of negligence, fraud or dishonesty on the part of its security employees in the performance of their duties, but disclaimed any other liability. Pinkerton's also represented that its employees were trained both in security and in fire protection.

About July 18, 1978, Pinkerton's hired William Hayne for the position of security guard. Hayne apparently lied in several instances on his employment application, but the deceptions went undetected since Pinkerton's failed to check Hayne's references and other sources of information about him, in contravention of its own policy and procedure manuals. Pinkerton's also neglected to give Hayne certain types of training, including fire protection training, which its manuals indicated were mandatory for security guards.

On September 25th, 1978, William Hayne reported for work at the Simmons warehouse at 3:00 p.m. The security guard on duty ordinarily makes rounds at designated security points throughout the Simmons warehouse and periodic checks of fire reporting equipment, but because the main door controlling access to a loading dock at the warehouse was broken and fixed in an open position, Hayne had been ordered to remain at a guard desk near the loading dock. At 4:30 p.m., all Simmons' employees left the warehouse. At about 5:45 p.m., an office cleaning person, Ms. Anna Benedict, reported for work. Hayne and Benedict were the only people present in the loading dock area of the warehouse, and they spent some time talking in an office near the loading dock, where Benedict was working. About 6:00 p.m., Hayne left his station and went to get a drink from some vending machines adjoining a storage area in a different part of the warehouse. He then returned to the loading dock area. A few minutes later, he offered to get a soft drink for Benedict, and then went back to the vending machines to do so. He came back, gave Benedict the drink, and started back to his post. According to Hayne's testimony, he then discovered a fire in progress. Hayne attempted to put the fire out with several cannister fire extinguishers but was unsuccessful. A reel fire hose was available in the area, but Hayne was not trained to use the hose and was unable to operate it properly. The Munster Fire Department arrived and contained the fire, but not before damage to the building and extensive damage to the bedding occurred.

The Chief of the Munster Fire Department determined that the fire originated on or near a wooden partition that separated stored rows of bedding. Because the point of origin was 12 inches above the floor in an area where there was no apparent source of ignition, and in light of other suspicious circumstances, the Munster Fire Chief requested the Indiana Fire Marshal's Office to investigate whether Hayne might have accidentally or intentionally started the fire. An investigator from that office concluded that the fire was of incendiary origin and was most likely set by Hayne as an "attention getter." Pinkerton's requested that Hayne take a polygraph examination, which was performed in Chicago. The results of this examination were inconclusive. Subsequently, Hayne agreed to take a second polygraph examination in Indiana, but did not do so. Nevertheless, when an investigator later asked Hayne whether he had taken and passed the second test, Hayne falsely stated that he had.

Simmons then brought this diversity action against Pinkerton's, and against the National Surety Corporation as surety for Pinkerton's. The complaint alleged that Pinkerton's was liable under several theories: breach of the contract to provide fire protection and security services, failure to use reasonable care in providing such services--particularly with respect to selecting, training and supervising security personnel--and statutory liability under the Indiana Detective Licensing Law. After trial the jury found in favor of Simmons and awarded it the amount of damages claimed. Pursuant to Simmons' post-trial motion, the trial court awarded prejudgment interest on the damages. Pinkerton's and National Surety raise several claims of error relating to the trial court's instructions to the jury, admission of evidence and award of prejudgment interest. We consider each of these claims separately.

II.

The defendants' first contention is that the trial court erred in instructing the jury that a violation of the Indiana Detective License Law, IND.CODE Sec. 25-30-1-1 et seq. (1982), constitutes negligence per se, when that statute is irrelevant to the issues in this case, and does not provide a standard of care creating a private cause of action for the plaintiff. Despite the objections of all the parties, the trial judge gave the jury Instruction No. 5 on the Indiana Detective License Law. The instruction quoted verbatim seven separate sections of that statute, including provisions relating to the short title of the act, the definitions of "licensee" and "private detective business," the requirements for a license, the grounds for denying, suspending or revoking a license, the requirement that a licensee obtain a surety bond and a provision entitling a licensee to employ unlicensed persons to assist it. The challenged instruction concluded with a statement that if the jury found from a preponderance of the evidence that the defendant violated "the provisions of the statute, such conduct would constitute negligence on the part of the defendant if done without excuse or justification," and should result in liability if it was the proximate cause of the damages.

The defendants argue, and we agree, that most if not all of the provisions of the Indiana Detective Law quoted in Instruction No. 5 are not relevant to any issue in this case. The bulk of the quoted provisions relate to requirements that licensees must meet in order to obtain and maintain a mandatory license. (The term "licensee" as used in the statute refers to detective businesses, such as Pinkerton's, not to their employees.) Yet there was no allegation that Pinkerton's had failed to qualify for or obtain a license, had or should have had its license revoked, had failed to obtain a surety bond or was similarly delinquent. Thus we do not see how the jury could have concluded that Pinkerton's had "violated" any of these provisions, or that such a violation proximately caused plaintiff's damages. There was no good reason for giving this portion of the instruction.

The only provision of the Indiana Detective Law that arguably was applicable to the issues in this case is section 25-30-1-11, which provides:

25-30-1-11. Employees of licensee; record; requisites--

(a) A licensee may employ, to assist him in his business as a private detective, as many unlicensed persons as may be necessary. Such a licensee is civilly responsible for the good conduct of each employee while he is acting on behalf of the licensee.

Simmons contends that this section creates a cause of action for damages caused by the wrongful conduct of security guards while on duty, and hence the instruction that referred to the section was proper. Pinkerton's, on the other hand, argues that including this section as part of the instruction was reversible error because the provision does not establish a statutory standard of care, the violation of which would constitute negligence.

In diversity cases state law determines the substance of jury instructions, while federal law governs the procedure in formulating the instructions and the manner in which they are given. E.g., Morris v. Getscher, 708 F.2d 1306, 1309 (8th Cir.1983); In re Air Crash Disaster Near Chicago, Ill., 701 F.2d 1189, 1199 (7th Cir.1983), cert. denied, --- U.S. ----, 104 S.Ct. 204, 78 L.Ed.2d 178 (1983). Thus our first task is to determine whether the instruction given accurately reflected Indiana substantive law. Since section 25-30-1-11 (relating to the good conduct of licensees' employees) is, for this purpose, the pertinent part of the statute, our initial focus is on the meaning of that provision. Unfortunately, our task is made more difficult by our inability to find any Indiana cases construing it. Indeed, the only relevant case that the parties have cited is Stewart Warner Corp. v. Burns International Security Services, Inc., 353 F.Supp. 1387 (N.D.Ill.1973), which interprets a similar provision of an...