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Carter v. Youngsville II Housing LLLP

United States District Court, W.D. Louisiana, Lafayette Division

May 25, 2018

Youngsville II Housing LLLP et al

         By Consent of the Parties



         Before the Court is a Motion for Summary Judgment filed by Youngsville II Housing LLLP (“Youngsville”) and Morrow Realty Company (“Morrow Realty”) (collectively “Defendants”) [Rec. Doc. 65], an Opposition Memorandum filed by Page Properties & Construction LLC (“Page”) [Rec. Doc. 99], an Opposition Memorandum filed by United Fire and Casualty Company (“United Fire”) [Rec. Doc. 106], and Defendants' Reply thereto [Rec. Docs. 109 and 110]; as well as a Cross Motion for Summary Judgment filed by Page [Rec. Doc. 86], Defendants' Response in Opposition to the Cross Motion [Rec. Doc. 96], Page's Reply thereto [Rec. 103], an Opposition Memorandum filed by Bob Morrow Construction Company (“BMCC”) [Rec. Doc. 108][1], and Page's Reply to BMCC's Opposition [Rec. Doc. 120]. For the following reasons, Defendants' motion will be granted in part and denied in part and Page's Cross Motion will be denied.

         I. Background

         This action involves a personal injury claim by Plaintiff, Beverly J. Carter (“Carter”), that was initiated in the Fifteenth Judicial District Court, Parish of Lafayette, Louisiana. The case was removed to this Court on October 26, 2016. R. 1. Carter alleges she sustained physical injuries as a result of stepping on a nail in a flower bed on the premises of her apartment building, the Somerset Apartments in Youngsville, Louisiana. Plaintiff alleges that her injury occurred on July 15, 2015. R. 1-2.

         The Somerset Apartments in Youngsville, Louisiana, are owned by Youngsville, an Alabama limited liability limited partnership, and managed on behalf of Youngsville by Morrow Realty, an Alabama corporation. Plaintiff alleges that she sustained injuries on July 15, 2013, when she stepped on a rusty nail negligently left on the premises of the Somerset Apartments by Page, an Alabama limited liability company.[2] R. 1-2; R. 11 at ¶ 6. Page was the subcontractor of BMCC. R. 65-4, Exh B. BMCC was the general contractor that contracted with Youngsville for construction, roofing and renovation work at the Somerset Apartments. Id., Exh. A. Page was the subcontractor that performed the work at the Somerset Apartment contracted by BMCC. Id., Exh B; Exh C, R. 65-5, Admission Nos. 3, 4. Certificates of Substantial Completion for the work at issue are dated December 22, 2013; January 10, 2014; April 18, 2014; July 22, 2014. R. 65-4, Exh. D.

         The Subcontracts between Page and BMCC identifies BMCC as “Contractor, ” Page as “Subcontractor, ” and Youngsville as “Owner” (the “Subcontracts”).[3] R. 65-4, Exh B, p. 1. The Subcontracts refer to the “Prime Contract” between Youngsville and BMCC dated August 28, 2013, and identify the “Project” as “the Renovations to Somerset Apartments.” Id. United Fire was the general liability insurer of Page. Pursuant to the Subcontracts, Page was required to carry Completed Operations insurance coverage in the amount of $1 Million per occurrence, and to maintain said coverage for three (3) years after completion of the work. Id. § 9.1 at p. 9. Page was also required to name Youngsville as an Additional Insured, and to maintain Completed Operations coverage for Youngsville for that duration. Id. Page's insurance coverage was to apply as primary and non-contributory before any other coverage provided to the Additional Insureds. Id. Further, pursuant to the Subcontracts, Page's insurer, United Fire, was obligated to waive subrogation against Youngsville. Id. § 9.6 at p. 10. In addition, the Subcontracts also provided in pertinent part, “Subcontractor [Page] shall defend, indemnify and hold harmless the Owner [Youngsville], Contractor [BMCC], . . . and agents and employees of any of them [Morrow Realty] from and against claims . . . arising out of or resulting from performance of [Page's] work under this Subcontract. . . attributable to bodily injury . . . caused in whole or in part by the negligent acts or omissions of [Page] . . . regardless of whether or not such claim . . . is caused in part by a party indemnified.” Id., § 11.1 at p. 11. Finally, the Subcontracts provided that they are governed by the laws of the state of Alabama. Id., § 5.2 at p. 4.

         Prior to the removal of this litigation, Defendants filed a Third Party Demand against Page in the Fifteenth Judicial District Court proceeding. The Third Party Demand makes claims of additional insured status under a general liability policy, and contractual indemnity pursuant to the Subcontract agreements between Page and BMCC. R. 65-4.

         Subsequent to the removal of this litigation, Youngsville, Morrow Realty and Ironside filed a Cross-Claim against United Fire. The Cross-Claim also made demands for additional insured status and indemnity demands. BMCC filed a Cross-Claim naming Page and United Fire, making similar demands for additional insured status and indemnity demands.

         II. Contentions of the Parties

         Defendants contend that Youngsville, as Owner of the Somerset Apartments, and Morrow Realty, as the agent of the Owner managing the Somerset Apartments, are entitled to defense, indemnification and insurance coverage pursuant to the terms of the Subcontracts between BMCC, as General Contractor for Youngsville, and Page, for work performed on the premises which is alleged to be the source of the rusty nail that caused Plaintiff's injury. Defendants contend that they are intended third-party beneficiaries to the Subcontracts; that the Subcontracts provide primary and noncontributory insurance coverage to Youngsville, without subrogation; that Page agreed to defend and indemnify Youngsville and Morrow Realty from claims such as those asserted by Plaintiff in the instant case; and, that the Subcontracts are governed by Alabama law which does not prohibit the provisions for defense, indemnity and insurance coverage contained therein. Defendants submit that based on the foregoing, they are entitled to summary judgment as a matter of law.

         Page argues that Louisiana law applies to the Subcontracts. Specifically, Page contends that Louisiana's anti-indemnity statute, La. R.S. 9:2780.1, applies and voids, as against public policy, the insurance and indemnity requirements contained in the construction Subcontracts. Page contends that, while Paragraph 11.1 of the Subcontracts provides indemnity to the “owner” of the property, the owner is not adequately identified in the Subcontracts. R. 86-2, p. 6.

         As to Defendants' contentions that United Fire owes them a defense under the Policy, United Fire also argues that Louisiana law applies to the Subcontracts, and therefore, La. R.S. 9:2780.1 voids the additional insured provision of the Policy. Alternatively, United Fire contends that the allegations against Youngsville in Plaintiff's petition fail to “impute Page's fault to Youngsville” as required under the additional insured provision of the Policy. As to Defendants' contractual indemnity contentions, United Fire states that genuine issues of fact exist as to whether or not Plaintiff's claim arises out of Page's work.

         III. Summary Judgment Standard

         Summary judgment is appropriate “[i]f the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Fed.R.Civ.P.56(c). A genuine issue of fact exists only “[i]f the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248(1986).

         In determining whether the movant is entitled to summary judgment, the Court views facts in the light most favorable to the nonmovant and draws all reasonable inferences in his favor. Coleman v. Houston Indep. Sch. Dist., 113 F.3d 528 (5thCir.1997). “If the moving party meets the initial burden of showing that there is no genuine issue of material fact, the burden shifts to the non-moving party to produce evidence or designate specific facts showing the existence of a genuine issue for trial.” Engstrom v. First Nat'l Bank of Eagle Lake, 47 F.3d 1459, 1462 (5th Cir.1995). Once the burden shifts to the respondent, he must direct the attention of the court to evidence in the record and set forth specific facts sufficient to establish that there is a genuine issue of material fact requiring a trial. Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986). There must be sufficient evidence favoring the non-moving party to support a verdict for that party. Wood v. Houston Belt & Terminal Ry., 958 F.2d 95, 97 (5th Cir. 1992). “We do not ... in the absence of any proof, assume that the nonmoving party could or would prove the necessary facts.” Badon v. RJR Nabisco, Inc., 224 F.3d 382, 394 (5th Cir.2000).

         IV. Analysis

         The Subcontracts at issue in this matter contain an express choice-of-law provision which states, “This Subcontract shall be governed by the laws of the State of Alabama.” R. 65-4, § 5.2, p. 4. Defendants filed this motion moving the Court to find that Alabama law should govern the Subcontracts.[4] Page and United Fire argue that Louisiana law applies to the Subcontracts. R. 99. A federal court sitting in diversity applies the choice-of-law rules of the state in which it sits. Pioneer Exploration, L.L.C. v. Steadfast Ins. Co., 767 F.3d 503, 511 (5th Cir. 2014). Therefore, Louisiana choice-of-law rules apply in this case.

         A. Louisiana Choice of Law

         In Louisiana a choice-of-law provision is presumed valid. Barnett v. Am. Const. Hoist, Inc., 91 So.3d 345, 349 (La.App. 1 Cir. 2012). The party challenging a choice-of-law provision bears the burden of proving that the law chosen by the parties is invalid. Id. A choice-of-law provision is invalid if it violates the public policy of the state whose law would otherwise apply. La. Civ. Code Art. 3540; Sentilles v. Kwik-Kopy Corp., 652 So.2d 79, 81 (La. Ct. App. 1995). Furthermore, it is well established that where the parties stipulate the state law governing the contract, Louisiana conflict of laws principles require that the stipulation be given effect, unless there is statutory or jurisprudential law to the contrary or strong public policy considerations justifying the refusal to honor the contract as written. O'Bannon v. Moriah Technologies, Inc., 2018 WL 1561333, at *8 (La.App. 1 Cir., 2018).

         Page and United Fire argue that the choice-of-law provision in the Subcontracts violates Louisiana's public policy against a construction contract which protects the indemnitor/contractor that becomes obligated to pay for another's own fault-based liability, because Alabama does not have such an anti-indemnity law. R. 99. A state law does not violate another state's public policy merely because the two states have different laws. Cherokee Pump & Equip. Inc. v. Aurora Pump, 38 F.3d 246, 252 (5th Cir. 1994).

         The rule governing Louisiana's conflict of law analysis regarding an insurance policy is codified in Louisiana Civil Code articles 3515 and 3537. Article 3515 provides, in pertinent part, that “an issue in a case having contacts with other states is governed by the law of the state whose policies would be most seriously impaired if its law were not applied to that ...

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