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BNSF Railway Co. v. Toltz, King, Duvall, Anderson and Associates, Inc.

United States District Court, D. Montana, Missoula Division

April 5, 2017

BNSF RAILWAY CO., Plaintiff and Counter Defendant,


          Dana L. Christensen, Chief District Judge

         Before the Court are a number of motions, including Defendant TKDA's Motion for Partial Summary Judgment Regarding Application of Montana Law (Doc. 24); Plaintiff BNSF's Cross Motion for Partial Summary Judgment Striking TKDA's Defense Under Montana Code Annotated § 28-2-2111 (Doc. 34); and Defendant TKDA's Motion for Partial Summary Judgment Regarding Invalidity of Indemnity and Release of Claims Provisions (Doc. 42).[1] This Order resolves all of these motions. For the reasons explained below, Defendant TKDA's motion for partial summary judgment regarding the application of Montana law is granted, Plaintiff BNSF's motion striking TKDA's affirmative defense under Montana Code Annotated § 28-2-2111 is denied, and TKDA's motion regarding the invalidity of the indemnity and release of claims provisions is denied.

         Background and Procedural History

         Stated simply, this case involves TKDA's alleged duty to indemnify BNSF for claims arising out of an accident that occurred in 2011 involving a BNSF employee who was injured while working on a fuel unloading dock at the BNSF railroad yard in Whitefish, Montana. On August 23, 2001, BNSF and TKDA entered into a non-exclusive contract in which TKDA agreed to provide engineering services necessary for the completion of work defined by BNSF (hereafter referred to as the “2001 Agreement”). (Doc. 27-1). Pursuant to the 2001 Agreement, TKDA was to indemnify and hold BNSF harmless for “any claims arising from the performance of th[e] Agreement.” The contract also included the following choice of law provision: “All questions arising under this Agreement shall be decided according to the laws of the State in which the work is performed.” (Doc. 27-1 at 11.) The 2001 Agreement was renewed in 2003, 2004, 2005, 2006, 2008, and January 21, 2009, which was the final renewal of the 2001 Agreement. (Docs. 39-1, 39-2, 39-3, 39-4, 39-5, 39-6.)

         In 2002, pursuant to the 2001 Agreement, TKDA agreed to engineer a fuel unloading facility at the BNSF railway yard in Whitefish, Montana. TKDA contracted to provide an elevated walkway for top-unloading tank cars with retractable gangways and new fuel unloading arms at the two tank car unloading locations. TKDA purchased supply equipment for the two gangway platforms from Safe I. These platforms were designed to allow BNSF employees to access the tops of tank cars and had an integrated fall protection system that would retract with the walkway in order to provide a safety barrier.

         On October 6, 2009, BNSF and TKDA entered into another contract for services which stated that TKDA was to “release Railroad from any claims arising from the performance of th[e] Agreement” and “[t]he Indemnification obligation assumed by consultant shall include any claims, suits or judgments brought against Railroad under the Federal Employer's Liability Act” (hereafter referred to as the “2009 Agreement”). (Doc. 35-2.) The choice of law provision in the 2009 Agreement stated: “All questions arising under this Agreement shall be decided according to the laws of the State of Texas.” The 2009 Agreement also explained that, “Railroad and Consultant agree that all existing prior or contemporaneous written or oral agreements between the two firms that cover the same general service work in the same locations(s) as this Agreement shall be superseded and canceled by this Agreement.” (Doc. 35-2 at 21.)

         On July 19, 2013, Terry Fox (“Fox”), a BNSF employee, sustained injuries after falling off of a tank car while attempting to remove fuel at the Whitefish, Montana fuel unloading facility. Fox filed suit against BNSF in Montana state district court claiming that the gangway platform engineered by TKDA retracted and knocked him off of the tank car. Fox asserted that BNSF had a non-delegable duty to provide a safe work place and that Fox's injuries were caused by the negligence of BNSF and its employees. BNSF tendered the lawsuit to TKDA and demanded that TKDA indemnify and defend BNSF in the litigation. TKDA did not respond to the requests by BNSF to defend and indemnify Fox's claims.

         BNSF filed its Complaint against TKDA in this case on February 16, 2016, alleging multiple claims, including breach of contract, breach of the duty of good faith and fair dealing, and further seeking a declaration that TKDA violated Montana's statutory right for indemnification. On March 22, 2016, TKDA filed its answer, denying all allegations and contending that BNSF's claims are barred by Montana and Minnesota statutory law regarding indemnity and claims handling procedures, among sixteen additional affirmative defenses. Further, TKDA filed a counterclaim against BNSF seeking a declaratory judgment from the Court regarding the indemnity and release of claim provisions within the contract, and filed a third-party complaint against the Safe Harbor Defendants alleging negligence. The parties then filed the motions described above.

         Legal Standard

         A party is entitled to summary judgment if it can demonstrate that “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). Summary judgment is warranted where the documentary evidence produced by the parties permits only one conclusion. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251 (1986). Only disputes over facts that might affect the outcome of the lawsuit will preclude entry of summary judgment; factual disputes that are irrelevant or unnecessary to the outcome are not considered. Id. at 248. In ruling on a motion for summary judgment, a court must view the evidence “in the light most favorable to the opposing party.” Tolan v. Cotton, 134 S.Ct. 1861, 1866 (2014) (quoting Adickes v. S.H. Kress & Co., 398 U.S. 144, 157 (1970)). “[T]he evidence of the nonmovant is to be believed, and all justifiable inferences are to be drawn in his favor.” Id. at 1863 (quoting Anderson, 477 U.S. at 255).

         “[W]hen parties submit cross-motions for summary judgment, each motion must be considered on its own merits.” Fair Hous. Council of Riverside Co., Inc. v. Riverside Two, 249 F.3d 1132, 1136 (9th Cir. 2001) (citations omitted). “The court must rule on each party's motion on an individual and separate basis, determining, for each side, whether a judgment may be entered in accordance with the Rule 56 standard.” Id. (quoting Charles Alan Wright et al., Federal Practice and Procedure vol. 10A, § 2720 (3d ed. West 2014)). “In fulfilling its duty to review each cross-motion separately, the court must review the evidence submitted in support of each cross-motion.” Id.


         The parties do not dispute that the TKDA's design work on the Whitefish fuel unloading dock occurred in 2002 and is therefore subject to the 2001 Agreement. However, the parties do contest the applicability of the 2009 Agreement which impacts the Court's analysis on the choice of law issue, that is, does Montana or Texas law govern this dispute. Further, both parties contend that judicial admissions and judicial estoppel favor their respective positions. The Court analyzes each motion for summary judgment based on the agreements, underlying facts, and applicable law.[2]

         I. Judicial Estoppel and Judicial Admissions

         Significant briefing by the parties is dedicated to the representations each have made in various filings, arguing that these representations constitute admissions which the parties are now estopped from denying. For example, TKDA argues that BNSF is estopped from arguing that the work at issue was performed in a state other than Montana or that another state's law applies because BNSF expressly alleged in its preliminary pretrial statement that Montana law should apply. TKDA also argues that in BNSF's preliminary pretrial statement, BNSF admitted to the place where the project work was performed and that the Court should consider this statement a judicial admission. BNSF contends that because TKDA selectively quoted BNSF's representations in its preliminary pretrial statement that judicial estoppel does not apply. Further, BNSF alleges that TKDA is itself judicially estopped from taking the position that the 2009 Agreement was not a renewal of the 2001 Agreement because TKDA admitted that it was a renewal in its preliminary pretrial statement.

         Judicial estoppel “is an equitable doctrine invoked by a court at its discretion.” United States v. Liquidators of European Fed. Credit Bank, 630 F.3d 1139, 1148 (9th Cir. 2011). It “prevents a party from prevailing in one phase of a case on an argument and then relying on a contradictory argument to prevail in another phase.” Zedner v. United States, 547 U.S. 489, 504 (2006). “Judicial estoppel not only bars inconsistent positions taken in the same litigation, but bars litigants from making incompatible statements in two different cases.” United Nat. Ins. Co. v. Spectrum Worldwide, Inc., 555 F.3d 772, 778 (9th Cir. 2009) (internal citations and quotations omitted). To determine whether to apply the doctrine, a district court typically considers: “(1) whether a party's later position is clearly inconsistent with its original position; (2) whether the party has successfully persuaded the court of the earlier position; and (3) whether allowing the inconsistent position would allow the party to derive an unfair advantage or impose an unfair detriment on the opposing party.” Liquidators of European Fed. Credit Bank, 630 F.3d at 1148 (internal citations and quotations omitted).

         The significance of the parties' admissions turns on the issue of which agreement governs this dispute-is it the 2001 Agreement, or the 2009 Agreement? In its preliminary pretrial statement, BNSF said the following:

The contract between BNSF and TKDA specifically states the law where the work is performed shall decide all questions arising under the contract. Therefore, Montana law would govern interpretations of the 2001 contract. To the extent TKDA contends that the contract was renewed or modified by a 2009 agreement that alters the liabilities assumed by TKDA, then Texas law applies based on the parties' agreement in the 2009 contract. The parties have filed a Statement of Stipulated Facts.

(Doc. 18 at 6.) In its brief for partial summary judgment, TKDA omitted the language that BNSF preserved its ability to argue that Texas law applies if the 2009 Agreement was found to be a renewal of the 2001 Agreement. Therefore, BNSF was not unequivocally stating that Montana law applied; Montana law applied only if the 2001 Agreement was the contract interpreting the conduct at issue. Therefore, BNSF is not precluded from arguing that Texas law applies if the Court determines the 2009 Agreement is the correct contract to interpret the conduct at issue here.

         TKDA further contends that because BNSF made the judicial admission that the subject work was performed in Montana and that the parties' contract requires Montana law to govern the interpretation of the 2001 Agreement in its preliminary pretrial statement, the Court should take notice of this statement. Factual assertions in pleadings and pretrial orders, unless amended, constitute judicial admissions. Am. Title Ins. Co. v. Lacelaw Corp., 861 F.2d 224, 226 (9th Cir. 1988). The Court agrees that BNSF admitted the work at issue was performed by TKDA in Montana, and thus under the 2001 Agreement Montana law would apply. Therefore, the Court finds that BNSF is bound by this judicial admission.

         II. Partial Summary Judgment Regarding the Choice of Law Provisions

         With these judicial admissions in mind, the Court must first determine whether the choice of law provision in the 2001 Agreement or the 2009 Agreement governs this case. The Court has subject matter jurisdiction over this case due to the diversity of the parties under 28 U.S.C. § 1332, and therefore must apply state substantive law to the state law claims. Mason and Dixon Intermodal, Inc. v. Lapmaster Intern. LLC, 632 F.3d 1056, 1060 (9th Cir. 2011). Again, the parties disagree as to which state's substantive law should apply. TKDA contends Montana law applies, while BNSF agrees that the claims should be decided under Montana ...

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