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Direct Enterprises, Inc. v. Sensient Colors LLC

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

April 23, 2018

DIRECT ENTERPRISES, INC., OLYMPUS SEED TREATMENT FORMULATOR, INC., Plaintiffs,
v.
SENSIENT COLORS LLC, SPECTRA COLORANTS, INC., Defendants. SENSIENT COLORS LLC, Third Party Plaintiff,
v.
SPECTRA COLORANTS, INC., Third Party Defendant.

          FINDINGS OF FACT AND CONCLUSIONS OF LAW PURSUANT TO FEDERAL RULE OF CIVIL PROCEDURE 52

          Hon. Jane Magnus-Stinson, Chief Judge

         Following the stipulated dismissal of many claims in this action, Third-Party Plaintiff Sensient Colors, LLC (“Sensient”) and Third-Party Defendant Spectra Colorants, Inc. (“Spectra”) seek to resolve the issue of whether Spectra owes Sensient a contractual duty to defend in the instant suit. The parties have agreed to resolve this claim pursuant to Federal Rule of Civil Procedure 52(a), under which the action is tried on the facts to the Court without a jury. Fed. R. Civ. P. 52(a). The parties have submitted stipulated proposed findings of fact, [Filing No. 282], as well as their proposed conclusions of law, [Filing No. 283; Filing No. 284]. The claim is therefore ripe for the Court's resolution, and the Court sets forth below its findings of fact and conclusions of law.

         I.

         Findings of Fact

         Plaintiffs Direct Enterprises, Inc. (“DEI”) and Olympus Seed Treatment Formulator, Inc. (“Olympus”) are in the business of creating made-to-order seed treatments, which are mixtures of fungicides, insecticides, polymers, and colorants that farmers apply to seeds before planting. Spectra is a manufacturer of colorants, and Sensient sells seed treatment components. Olympus purchased colorants from Sensient, and those colorants were manufactured by Spectra. Spectra knew that Sensient was selling the colorants to a third-party end-user but was never informed of the identity of that end-user. Sensient's orders of colorants from Spectra were done pursuant to purchase orders, which all contained the following term:

9. INDEMNITY. Seller shall defend and save buyer harmless against all damages, liabilities, claims, losses, costs, expenses, penalties, or fines. including reasonable attorney fees, arising out of our resulting in any way from any actual or alleged defect in the goods or sendees purchased hereunder or from any act or omissions of seller, its agents, employees, or subcontractors with respect to such goods or services. Seller agrees to reimburse buyer for any losses or expense incurred or suffered by buyer, including reasonable attorneys1 fees, for seller's failure to timely perform any of its obligations hereunder.

         The purchase order does not define the terms “arising out of or “resulting in any way from, ” and there are no other references to the duty to defend in that document.

         II.

         Conclusions of Law

         In its Third-Party Complaint, Sensient seeks declaratory relief against Spectra, asking the Court to determine whether, and if so, to what extent Spectra is obligated under the terms of the purchase orders to defend Sensient and/or to reimburse Sensient for defense costs related to defending this action.[1] The parties agree that, pursuant to the terms of the parties' purchase orders, Missouri law governs this dispute.

         Written contracts must be construed as a whole in light of the object, nature, and purpose of the agreement. Wilshire Const. v. Union Elec. Co., 463 S.W.2d 903, 906 (Mo. 1971). If a contract's terms are clear and unambiguous, courts enforce the contract according to the plain meaning of its words. Util. Serv. & Maint., Inc. v. Noranda Aluminum, Inc., 163 S.W.3d 910, 913 (Mo. 2005); see also Contract Freighters, Inc. v. J.B. Hunt Transp., 245 F.3d 660, 663 (8th Cir. 2001). It is well-settled that “though they may be contained in a single contractual provision, a duty to defend is independent of a duty to indemnify.” Travelers Indem. Co. v. S.M. Wilson & Co., 2005 WL 3143779, at *2 (E.D. Mo. Nov. 23, 2005) (citing Burns & McDonnell Eng'g Co., Inc. v. Torson Const. Co., Inc., 834 S.W.2d 755, 758 (Mo.Ct.App.1992) (duty to defend is independent of duty to indemnify)).

         In the insurance context, “[t]he duty to defend is broader than the duty to indemnify.” McCormack Baron Mgmt. Servs., Inc. v. Am. Guarantee & Liab. Ins. Co., 989 S.W.2d 168, 170 (Mo. 1999). The duty to defend arises “whenever there is a potential or possible liability to pay based on the facts at the outset of the case and is not [dependent] on the probable liability to pay based on the facts ascertained through trial.” Id. The existence of the duty is determined by comparing the language of the agreement with the allegations in the complaint. Id. The complaint need only allege facts that give rise to a claim “potentially” within the agreement's coverage in order to trigger a duty to defend. McCormack, 989 S.W.2d at 170-71; see also Shapiro Sales Co. v. Alcoa, Inc., 2006 WL 2228987, at *2 (E.D. Mo. Aug. 3, 2006) (“A party has the duty to defend claims falling within the scope of an agreement even though ultimately it may not be obligated to indemnify an indemnitee.”).

         The indemnitee “need only prove that one claim is covered to invoke [the indemnitor's] duty to defend all claims.” United Fire & Cas. Co. v. Realty Title Co., 2007 WL 428068, at *2 (W.D. Mo. Feb. 2, 2007) (citing Universal Underwriters Ins. Co. v. Lou Fusz Automotive Network, Inc., 300 F.Supp.2d 888, 893 (E.D. Mo. 2004) (“The insurer's duty to defend arises when there is a potential liability set forth in the complaint ... [e]ven if some claims in the complaint are not covered, the presence of insured claims triggers a duty to defend.”)); see also Lampert v. State Farm Fire & Cas. Co., 85 S.W.3d 90, 94 (Mo.Ct.App. 2002) (finding that the existence of one potentially covered claim gave rise to a duty to defend, “even though claims beyond the coverage, such as the fraud claim, may also be present”).

         The Court notes that the duty-to-defend legal standard described above has largely been expounded in the insurance law context. Here, no insurance policy is at issue, but rather a contractually assumed duty to defend. At least regarding how the duty to defend is triggered, courts applying Missouri law appear to invoke the standard articulated in the insurance context, although with no explanation as to the differing contexts. See, e.g.,Cravens v. Smith, 610 F.3d 1019, 1028 (8th Cir. 2010) (applying standards articulated in insurance ...


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