U.S. Court of Appeals Decides Choice of Law Provision in Indemnification Third-Party Complaint After Explosion Seriously Injures Worker

Plaintiffs Lenny and Tracy Chapman filed a lawsuit against Hiland Partners GP Holdings LLC, et al. who owned and operated a natural gas plant in North Dakota. Missouri Basin offers trucking services to gas companies in North Dakota. Hiland entered into a Master Service Contract (Hiland MSC) with Missouri Basin in 2008 whereby Missouri Basin, as “Contractor,” agreed to perform various services for Hiland.

As part of the agreement, Missouri Basin agreed to “indemnify, defend and save harmless Hiland Group . . . from and against any and all claims, demands, judgments, defense costs, or suits . . . in any way, directly or indirectly, arising out of or related to the performance of this Contract.”  The Hiland MSC also included an Oklahoma choice-of-law provision.

On Oct. 18, 2011, Hiland requested Missouri Basin to remove water from condensation tanks at the Watford plant. Missouri Basin contacted B&B Heavy Haul LLC who sent the plaintiff Lenny Chapman to the gas plant. Chapman arrived shortly after midnight.  He and an employee of Hiland began connecting the tank to the B&B truck that Chapman was driving. An explosion occurred and Chapman was seriously injured.

Chapman and his wife Tracy filed a lawsuit against Hiland alleging negligence and loss of consortium. Hiland filed a third-party complaint against Missouri Basin and B&B contending it was contractually obligated to indemnify and defend Hiland. Missouri Basin filed a cross-claim against B&B seeking a defense and indemnification in which it claimed was required to indemnify Hiland.

B&B filed a motion for partial summary judgment, contending that B&B MSC did not require it to indemnify Missouri Basin or Hiland for Hiland’s negligence. On Sept. 10, 2014, the federal district court granted B&B’s motion, dismissing Hiland’s third-party complaint against B&B and Missouri Basin’s cross-claim against B&B. As for Hiland’s third-party complaint, the court concluded as a matter of law, that B&B had no legal duty under the B&B MSC to indemnify Hiland for its own negligence.

The court further found that even if the B&B MSC could be construed to require B&B to indemnify Hiland for its own negligence, the contract was void and unenforceable under state law. With regard to Missouri Basin’s cross-claim, the court concluded as a matter of law, that B&B had no legal obligation to indemnify Missouri Basin for any indemnification obligations Missouri Basin might have through Hiland.

On Oct. 1, 2014, the Chapmans entered into a “Confidential Release and Settlement Agreement and Addendum” (Settlement Agreement) with Hiland that settled their claims against Hiland for $10 million. Of that amount, $3 million was to be paid by Hiland and $7 million by Hiland’s insurers. As part of the settlement, Hiland assigned all of its indemnity claims against Missouri Basin to the Chapmans. The Chapmans filed an amended third-party complaint asserting, “As assignees of [Hiland],” the “right to pursue the Hiland Defendants’ indemnity claims against Missouri Basin arising from the Missouri Basin MSC.” The Chapmans sought a judgment “for all amounts that Hiland Defendants, or others on their behalf, have paid or will pay” to the Chapmans under the Settlement Agreement.

The Chapmans requested that the court reduce its judgment to a sum certain:  $10 million plus interest. Missouri Basin opposed the Chapmans’ motion, contending its indemnity obligation was limited to $3 million – the amount Hiland directly contributed to the settlement. The court granted the Chapmans’ motion and denied Missouri Basin’s motion, and issued an amended judgment the next day.

Missouri Basin appealed the district court’s grant of summary judgment to the Chapmans, asserting the district court erred in applying Oklahoma law rather North Dakota in construing that Hiland MSC.

The U.S. District Court for the 8th Circuit in reviewing this appeal found that the rulings by the federal district court were not in error.  In addition, the court decided that the district court had not abused its discretion in denying Missouri Basin’s Rule 59(e) motion to amend the order. For these and other reasons, the district court’s grant of summary judgment to the Chapmans on their third-party complaint and its order granting Chapmans’ Rule 59(e) motion and denying Missouri Basin’s Rule 59(e) motion are affirmed.

Chapman v. Missouri Basin Well Service, U.S. Court of Appeals for the 8th Circuit, Nos. 15-2103, 15-2396 (July 14, 2017).

Kreisman Law Offices has been handling truck crash cases, catastrophic injury lawsuits and construction site injury cases for individuals and families who have been harmed, injured or died as a result of the carelessness or negligence of another for more than 40 years in and around Chicago, Cook County and its surrounding areas, including New Lenox, Naperville, Morton Grove, Niles, Des Plaines, Deerfield,  Highland Park, Highwood, Homewood, Flossmoor, Bridgeview, Chicago (Canaryville, Bridgeport, Oakland, Lake Calumet, North Lawndale), Wheeling, Buffalo Grove and Vernon Hills, Ill.

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