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Tovar Snow Professionals v. All Seasons General Contracting, LLC

United States District Court, S.D. Indiana, Indianapolis Division

July 11, 2017



          Debra McVicker Lynch United States Magistrate Judge.

         This is a breach of contract case. Both parties have moved for summary judgment. The dispute is about whether under the “Standard Subcontractor Service Agreement, ” All Seasons General Contracting, LLC (the subcontractor) is liable to Tovar Snow Professionals for $159, 515.26 that Tovar paid to a third party based on a claim that snow removal and salt de-icing work performed by All Seasons at a General Motors plant resulted in damages to car parts. Tovar also seeks to recover attorneys' fees, costs, and expenses. As explained below, the court finds that genuine disputes of material fact prevent summary judgment for either party.

         Summary Judgment Standard

         Summary judgment is appropriate when “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). Substantive law determines the facts that are material. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A genuine issue of material fact exists if “there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party.” Id., 477 U.S. at 249. The court construes the evidence in the light most favorable to the nonmoving party and draws all reasonable inference from the evidence in favor of the nonmoving party. Zerante v. DeLuca, 555 F.3d 582, 584 (7th Cir. 2009). When evaluating cross-motions for summary judgment, therefore, the court construes the evidence and its reasonable inferences in favor of the party against which the particular motion under consideration is made. Metro Life Ins. Co. v. Johnson, 297 F.3d 558, 561-62 (7th Cir. 2002). “[I]f genuine doubts remain and a reasonable fact-finder could find for the party opposing the motion, summary judgment is inappropriate.” Olayan v. Holder, 2011 WL 6300615 at *5 (S.D. Ind. Dec. 15, 2011).

         To evaluate the parties' cross-motions, the court first sets forth below those facts about which there is no genuine dispute. These undisputed facts describe the parties' business relationship, explain the work provided by All Seasons at the GM plant, and describe the nature and context of the claim for which Tovar seeks indemnification. The court will address in the Analysis section of this order relevant disputed issues of material fact for which one side or the other is entitled to have the evidence construed in its favor.

         Undisputed Material Facts

         Plaintiff Tovar Snow Professionals, Inc. (“Tovar”) provides snow and ice removal services for commercial clients. (Affidavit of Ronald Wilson, Dkt. 49-1, ¶ 3).[1] Defendant All Seasons General Contracting, LLC (“All Seasons”) also is in the business of providing snow and ice removal services (as well as other general contracting services for residential and commercial buildings). (Id., ¶ 7; Rhees Dep., p. 12, line 8 to p. 13, line 21).[2] Tovar was hired by a facilities management company named Caravan Facilities Management, LLC to provide snow and ice removal services at a General Motors facility in Marion, Indiana. (Wilson Aff, ¶ 6). That facility manufactures automobile parts. Tovar subcontracted the snow and ice removal work to All Seasons, and Tovar and All Seasons entered into an agreement titled Standard Subcontractor Service Agreement. (Id., ¶¶ 7, 10). Tovar and All Seasons had not previously worked together. (Rhees Dep., p. 19, lines 4-15). Under the Service Agreement, All Seasons agreed to provide snow and ice removal services at the Marion facility for the period November 1, 2012, through April 15, 2013. (Wilson Aff., 11). The parties do not dispute the contents of the Service Agreement; its relevant provisions will be addressed in the Analysis section of this order.

         After entering into the Service Agreement but before beginning any work at the GM facility, the owner of All Seasons (Lucas Rhees) and other All Seasons crew members met with a representative from Caravan (the facilities manager) at the GM facility. They attended a safety meeting. Mr. Rhees asked a Caravan representative where to push snow and where to salt at the facility, but the Caravan representative did not know the answers to the questions. (Rhees Dep., p. 21, line 16 to p. 24, line 11). Caravan had, however, given instructions to Tovar, and Tovar passed them along to All Seasons. (Wilson Dep., p. 48, lines 9-14).[3] All Seasons was instructed by Tovar that GM had a “zero tolerance” policy regarding the presence of snow and ice in the parking lots and drive lanes. (Wilson Dep., p. 47, lines 3-21, and p. 48, lines 15-21; Rhees Aff., ¶ 7; Plaintiff's Dep. Exh. 3, Dkt. 49-2 at pp. 36-37).

         All Seasons maintained a pile of salt on the premises for its work and used bobcat equipment with attached salt spreaders to salt the outside lots, drive lanes, and loading docks. Tovar supplied some of this equipment and All Seasons used some of its own equipment. (Rhees Dep., p. 27, line 15 to p. 28, line 10 and p. 29, lines 12-23).

         Large “containers” or “racks” were situated in at least one outside area of the GM facility, around which were driving lanes. The parties generally refer to these items as “racks” and the court will do so too. All Seasons salted the driving lanes around the racks. (Rhees Aff., ¶ 8). It had never been told not to use de-icing salts near the racks. (Rhees Aff., ¶ 6). Each rack is approximately 9 feet wide by 9 feet tall and is open on the sides. (Land Dep., p. 10, lines 8-19).[4] The racks were grouped in blocks and stacked three or four high. (Land Dep., p. 9, lines 7-13). They are used to, eventually, hold (or “contain”) car parts. A rack filled with car parts fits inside a railroad car for transport. (Datar Dep., p. 25, lines 16-22).[5]Though GM prefers to not store racks outside, there are times when it has too many racks at the Marion facility to store all of them inside. (Davis Dep., p. 14, lines 17-20; Land Dep., p. 18, lines 8-14).

         When car parts are ready to be loaded onto a rack, a rack is transported using a forklift by a GM employee from the outside lot to a loading dock area. (Davis Dep., p. 11, lines 1-23).[6] An “inside” GM forklift driver takes over from there. If a rack is wet, GM's general procedure required placing the rack on a ramp once brought inside to allow any moisture to drain off and for the rack to dry before parts are loaded onto it. (Vandermeir Dep., p. 40, line 10-13 and line 23 to p. 41, line 4).[7]

         In February 2013, GM's employees loaded car parts (mostly hood panels and some fenders) onto racks that had been brought from outside. (Davis Dep., p. 11, lines 20-23). As a general rule, GM personnel do not formally inspect racks when they are brought from outside and put in place for being loaded with parts at the end of the assembly line, although GM personnel “watch” to make sure that racks brought from outside are dry before loading them. (Vandermeir Dep., p. 12, line 24 to p. 13, line 4; lines; Land Dep., p. 19, lines 3-7). Parts, like hood panels, are inspected when they come off the line. (Vandermeir Dep., p. 11, line 15 to p. 12, line 14). If there were rust or corrosion on a part at that time, such a problem should be noticed. (Id.).

         The now-loaded racks were placed in box rail cars-an enclosed environment-and shipped to a GM facility in Arlington, Texas. (Land Dep., p. 34, lines 14-19). When the parts were received in Arlington, Texas, quality control inspectors at that facility discovered problems with the parts. About February 11, 2013, Arlington notified Marion of problems they encountered, which included salt found on parts and racks and the presence of heavy rust on parts. (Land Dep., p. 7, line 10 to p. 11, line 2; Land Dep. Ex. 1). The Marion facility began investigating the problem. The investigation was led by Anita Land, the Materials Packaging Coordinator at the Marion facility. She reviewed photographs of the parts damages sent by Arlington. (Id. at p. 8, lines 17-21). She looked around the Marion facility, inside and outside, and noticed what appeared to be chunks of de-icing residue of various sizes on the outside racks. (Id., p. 8, line 22 to p. 9, line 13). She reported in an email dated February 14, 2013, that the day before she and another GM employee (George Hensley) inspected racks then being stored outside and found that “salt was indeed sprayed into [racks].” (Dkt. 49-5 at p. 13). Ms. Land began formulating a plan to clean all racks at the Marion facility. (See Feb. 14, 2013 email).

         The Arlington plant issued formal “Quality Alert” documentation in mid-February 2013 which described and depicted (by photographs) what appeared to be salt found on parts and racks and the presence of heavy rust on parts. The Arlington plant had already begun “scrapping out” over 400 car hoods (Dkt. 49-5 at p. 12). GM turned to Caravan, its facilities manager at the Marion plant, to respond to the problem and rectify it. (See Feb. 14, 2013 email, Dkt. 49-5 at p. 12). According to an invoice sent by Caravan to Tovar, Caravan's employees began cleaning racks at the GM Marion facility as early as February 14, 2013. (See Dkt. 49-5 at p. 23). That work involved bringing racks into a steam booth at the plant that produces hot water, and cleaning the racks with soapy water. (Davis Dep., p. 43, lines 3-14).

         Caravan turned to its contracting partner, Tovar, about the problem. A meeting was held at the Marion plant on February 18, 2013. It was attended by representatives from General Motors (including the Marion facility manager, Terry Davis), Caravan, Tovar (Ronald Wilson and Chris Price), ), and All Seasons (Lucas Rhees). The damage to parts shipped from Marion to Arlington was discussed. The General Motors representatives stated that GM had concluded after its investigation that parts had become corroded because the racks used to transport them were contaminated with salt from de-icing the outside lots. (Wilson Dep., p. 74, lines 2-16). The problem was described as “severe, ” but the extent of damage was not addressed and no demand for payment was made. (Wilson Dep. p. 76, lines 17-25). After the meeting, Ronald Wilson (Tovar's representative at the meeting) inspected racks that were being stored outside. (Wilson Dep., p. 66, lines 2-7). He noticed salt on portions of the racks. (Id., p. 66, lines 13-17). Mr. Rhees of All Seasons did not, at that point or any other, similarly look at the racks stored outside.

         Caravan issued an invoice to Tovar dated March 28, 2013, in the sum of $159, 515.26 for the “[c]ost of salt corrosion on panels and salty racks.” (Dkt. 49-5, at pp. 21-33). Tovar received the invoice on or about its date. (Wilson Aff., ¶ 18). The amount consists of $140, 699.93 attributed to GM's “cost to recover damage to hoods” and $18, 815.33 attributed to Caravan's “labor costs associated with the damaged hoods.” (Caravan Invoice, Dkt. 49-5 at pp. 21-22). The GM portion was calculated by GM; about 1/3 of the costs are labeled as “est.” Neither Caravan nor Tovar questioned GM's calculation. (Wilson Dep., p. 78, lines 16-24 and p. 81, lines 8-15). The Caravan “labor costs” apparently are all attributed to cleaning racks at the Marion facility. That work (722 hours at $26.06 per hour) was done, according to the invoice, between February 14, 2017, and March 10, 2013. Tovar did not question the amount of the Caravan invoice. (Wilson Dep., p. 81, lines 8-15). Tovar paid the Caravan invoice in full. (Wilson Aff., ¶ 19). The record does not establish when Tovar paid the invoice.

         Against this factual background (and other evidence and inferences discussed below), the court now turns to the parties' arguments why each is entitled to judgment as a matter of law. The court explains why neither is so entitled.


         The parties' cross-motions for summary judgment require the court to determine whether there is any genuine dispute of material fact about whether All Seasons breached the Service Agreement. Tovar argues that the contract was breached because All Seasons was, as a matter of law, required to reimburse Tovar for paying Caravan's invoice under the indemnity provision of the Service Agreement. See Tovar opening brief, Dkt. 48, at p. 14 (“Tovar is Entitled to Indemnification from All Seasons for the Damage It Caused to GM's Property”) and at p. 18 (“All Seasons' refusal [to indemnify Tovar] is a breach of the indemnification provision as a matter of law.”) All Seasons argues that, as a matter of law, it did not breach the indemnification provision because Tovar did not provide proper written notice of the claim as required by the contract, and All Seasons was prejudiced by the lack of proper written notice.

         I. The Agreement, and its indemnification provision, is governed by Illinois law.

         The Service Agreement, at Section 9(C), contains a choice of law provision directing that it must be “interpreted, enforced and governed by and under the laws of the State of Illinois.” The parties agree that Illinois substantive law governs.

         II. The indemnification provision first describes “indemnity events” and then provides a notice procedure.

         The indemnification provision is lengthy, and it is worthwhile to include in this order the entire provision. It has two sections, A and B. Section A describes what constitutes an “Indemnity Event.” Section B describes a notice procedure in the event of “any demand, claim or action which would be the basis of a claim by Contractor [Tovar] under the provisions of” Section A. The indemnification provision of the contract reads:

3. Indemnity[8]
A. Subcontractor hereby agrees to defend, indemnify and hold harmless Contractor, its affiliates, and each of their respective officers, directors, shareholders, employees, and agents (each, an “indemnified party”) from and against any and all liability, loss, damage, cause of action, claim, cost and expense, including but not limited to, reasonable attorneys' fees and expenses, incurred as a result of or in connection with any of the following (each, an “indemnity event”), even if the negligence, gross negligence, or other tortuous conduct of one of the indemnified parties is a contributing, but not the sole, cause of the indemnity event: (a) any injury or death of persons whomsoever, including, but not limited to, officers, agents, employees or subcontractors of Contractor or Subcontractor or their respective subcontractors, loss or destruction of, or damage or delay to the property to whomsoever belonging, including the conversion thereof, arising from or relating to the performance of the Services; (b) Subcontractors' or its subcontractors' or their respective employees' or agents' or subcontractors negligence, willful misconduct or fraud, including but not limited to theft, embezzlement, defalcation or issuance of false or fraudulent receipts, reports or other documents; (c) Subcontractor's breach of or failure to perform Services; (d) any Hazardous Condition or other environmental contamination caused in whole or part by the acts or omissions of Subcontractor or its subcontractors or their respective employees or agents or sub-subcontractors; (e) Actions of Subcontractor or its subcontractors or their respective employees or agents or sub-contractors outside the scope of the authority granted under the Agreement; (f) subcontractor's or its subcontractor's use of equipment; (g) Subcontractor's failure to maintain insurance coverage required under this Agreement or to provide funds in satisfaction of any insurance deductible amount; or (h) claims made by third parties for services or labor provided or materials furnished to Subcontractor or its subcontractors, and (i) any breach of any other provision of this Agreement. Subcontractor shall also defend, indemnify and hold harmless the Indemnified parties in the foregoing manner with respect to the defense of claims and actions alleging that an Indemnified party's negligence, gross negligence or other tortuous conduct was or might have been the sole cause of the subject indemnity event, but Subcontractor's indemnification shall not extend to any judgment, award or settlement where it has been determined or agreed that the Indemnified party's negligence, gross negligence or other tortuous conduct was the sole cause of the Indemnity event or where the Indemnified party committed an intentional tort. Subcontractor's obligations under this Section 3.A shall not be limited in any way by any limitations on the amount or type of damages, compensations, or benefits payable by or for Contractor under workers' compensation acts, disability benefit acts, or other employee benefit acts and all such obligations shall survive any termination of this Agreement whether by expiration of time or otherwise.
B. Upon receipt of notice by Contractor of any demand, claim or action which would be the basis of a claim by Contractor under the provisions of Section 3.A above (an “indemnified claim”), Contractor shall provide written notice of such indemnified claim. So long as Subcontractor is not in default in the performance of its obligations under this Agreement, as between Contractor and subcontractor, Subcontractor shall retain primary responsibility for the conducting of any legal and/or administrative action or other proceeding regarding any such indemnified claim (and “indemnified claim proceeding”) and the defense (and any appropriate appeal) thereof. Legal counsel retained with respect to any indemnified claim proceeding shall be selected by Subcontractor, but shall be subject to the reasonable prior approval of Contractor. As between Contractor and Subcontractor, all costs incurred with respect to any indemnified claim proceeding (including, but not limited to, court cost and attorney's fees) shall be borne by Subcontractor, and Subcontractor's indemnification obligations set forth in Section 3.A above shall extend to all such costs. Nothing contained herein shall in anyway limit Contractor's right to participate and/or retain independent legal counsel, at Contractor's expense, with respect to any indemnified claim proceeding, but Contractor shall cooperate with Subcontractor and coordinate Contractor's participation and/or use of independent counsel in a matter not consistent with Subcontractor's positions and interests in such indemnified claim proceeding to the extent reasonably possible and not adverse to the interest of Contractor. Notwithstanding the foregoing, in the event Contractor determines, in Contractor's opinion, that there is a conflict of interest or other circumstance such Subcontractor's retained legal counsel cannot adequately represent Contractor's interests in any indemnified claim proceeding, Contractor shall have the right to retain independent legal counsel and Subcontractor's indemnification obligation set forth in section 3.A above shall extend to all costs incurred with respect to such separate representation. Subcontractor's obligation to conduct and undertake any required indemnified claim proceeding or the defense thereof, and to bear the costs incurred with respect thereof, shall apply even in the event that there is an ultimate adjudication or other determination of liability of the Indemnified party attributable to the negligence, gross negligence or other tortuous conduct of such Indemnified party.

         Thus, Section 3(A) lists nine events (described in subparagraphs 3(A)(a) through 3(A)(i))-each defined as an “indemnity event”-which trigger an obligation by All Seasons to indemnify and hold harmless Tovar. The indemnification extends to “any and all” “liability, loss, damage, cause of action, claim, cost and expense, including but not limited to reasonable attorneys' fees and expenses incurred as a result of or in connection with” an indemnity event.

         Tovar's summary judgment brief (Dkt. 48 at p. 16) contends that Indemnity Events (a), (b), (c), ...

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