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Liberty Insurance Underwriters, Inc. v. Beaufurn, LLC

United States District Court, M.D. North Carolina

September 23, 2019

LIBERTY INSURANCE UNDERWRITERS, INC., an Illinois corporation, Plaintiff,
v.
BEAUFURN, LLC, a North Carolina limited liability company; and DOES 1–10, Defendants.

          MEMORANDUM OPINION AND ORDER

          OSTEEN, JR., DISTRICT JUDGE.

         Currently before the court are two motions for summary judgment. (Docs. 63, 65.) Plaintiff Liberty Insurance Underwriters, Inc., has moved for partial summary judgment on the issue of whether certain insurance and indemnification provisions are included in the underlying contracts between The Cheesecake Factory, Inc. (“TCF”) and Defendant Beaufurn, LLC (“Beaufurn”). Plaintiff argues that TCF’s terms were accepted and should govern each contract. Defendant Beaufurn has also moved for summary judgment and argues that all claims against it should be dismissed. Beaufurn contends that its order acknowledgments expressly rejected TCF’s terms, which thus did not become part of the relevant contracts. For the reasons set forth herein, this court finds that each motion should be granted in part and denied in part.

         I. FACTUAL & PROCEDURAL BACKGROUND

         On June 14, 2013, Janet Kinzler was injured when she fell from a high top chair while seated at a high top table with some colleagues at a TCF restaurant in Maryland. (First Am. Compl. (“Am. Compl.”) (Doc. 52) ¶ 11.) TCF regularly purchases barstools from Beaufurn for use in its “restaurants across the country, including in its location at 7002 Arundel Mills Circle, Hanover, Maryland.” (Denise Hall Declaration (Doc. 63-1) ¶ 4.) The chair from which Kinzler fell was “designed, manufactured and/or distributed by Beaufurn.” (Am. Compl. (Doc. 52) ¶ 11.) TCF investigated the incident, concluded that Kinzler’s injuries were most likely caused by her own actions, and returned the subject chair to service in its restaurant. (William Ivar Bongaerts Deposition (Doc. 63-5) at 24; Cook Dep. (Doc. 63-4) at 2.)

         On March 18, 2014, Kinzler sued TCF in federal court in the Western District of Pennsylvania, alleging that TCF was negligent by “utilizing chairs that were unstable and subject to overturning” and by maintaining and failing to warn customers of slippery floors in its restaurant. (Kinzler v. The Cheesecake Factory, Inc. Am. Compl. (Doc. 52-2) ¶ 35.) Plaintiff alleged damages in an amount greater than $75, 000.00. (See Am. Compl. (Doc. 52-2).) TCF requested that Beaufurn defend TCF against Kinzler’s claim and indemnify TCF for any resulting damages, pursuant to the terms of the purchase order for the subject chair. (Am. Compl. (Doc. 52) ¶ 19–20; TCF Demand Letter to Beaufurn (Doc. 52-3).) Beaufurn apparently passed this demand along to The Cincinnati Insurance Company (“CIC”), its primary and umbrella insurer. (Am. Compl. (Doc. 52) ¶¶ 21–22.) Neither CIC nor Beaufurn agreed to defend or indemnify TCF in the Kinzler lawsuit. (Id. ¶¶ 21–24.)

         TCF, Plaintiff (TCF’s primary insurer), and ACE American Insurance Company (TCF’s excess insurer), subsequently settled the Kinzler action for the total “sum of $4, 375, 000, of which LIU [Liberty Insurance Underwriters] paid the sum of $3, 558, 284.39, TCF paid $316, 715.61 and ACE American paid $500, 000.” (Id. ¶ 29.) Plaintiff now seeks to recover from Beaufurn the following amounts: (1) $61, 554.56 in defense costs paid directly by Plaintiff, (2) $183, 284.39 in defense costs paid by TCF, which Plaintiff alleges “eroded TCF’s self-insured retention under the ACE” policy, causing this policy to be depleted faster and causing spillover into Plaintiff’s policy, and (3) $3, 558, 284.39, the Kinzler settlement amount paid directly by Plaintiff. (Id. ¶¶ 31, 45.)

         Plaintiff originally brought suit in California state court. Defendants then removed the case to federal court in the Central District of California. (See generally Notice of Removal (Doc. 1).) Defendants moved to transfer the case to this district; that motion was granted by Judge Fernando M. Olguin November 30, 2016. (See Venue Order (Doc. 34).)

         Beaufurn has moved for summary judgment. (See Doc. 63.) Beaufurn argues that the purchase orders and order acknowledgments contained conflicting insurance and indemnification provisions and that each expressly limited acceptance to its own terms.[1] Therefore, under Uniform Commercial Code (“UCC”) 2-207, the insurance and indemnification terms in the purchase orders “were not part of the contract, so Beaufurn could not have breached those terms.” (Def.’s Mem. of Law in Supp. of Mot. for Summ. J. (“Def.’s Mem.”) (Doc. 64) at 13–14.) Plaintiff has moved for partial summary judgment. (See Pl.’s Mot. for Partial Summ. J. (Doc. 65).) Plaintiff argues that the purchase orders were offers to purchase the subject chairs, that Beaufurn’s order acknowledgments were valid acceptances not expressly conditioned on Plaintiff’s acceptance of any additional terms, and that therefore the insurance and indemnification provisions in the purchase orders govern the relevant contracts. (See Pl.’s Mem. of Law in Supp. of Mot. for Partial Summ. J. (“Pl.’s Mem.”) (Doc. 66) at 15–20.) Plaintiff requests summary judgment on the issue of whether “the terms and conditions of TCF’s purchase orders controlled the contract for the sale of goods” and an order “precluding Beaufurn from invoking its terms and conditions as a defense to Plaintiff’s claims.” (Pl.’s Mot. for Partial Summ. J. (Doc. 65) at 2.)

         II. GOVERNING LAW

         The parties agree that choice of law is immaterial to this case because both North Carolina and California have adopted the relevant UCC provision without change. (Compare Def.’s Mem. (Doc. 64) at 10, with Pl.’s Mem. (Doc. 66) at 13.) Though the ultimate result may be the same regardless of the law chosen, a proper choice-of-law analysis is still required.

         A federal district court sitting in diversity applies the choice-of-law rules of the forum. See Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496–97 (1941). When either party is granted transfer under 28 U.S.C. § 1404(a), [2] however, the transferee court applies the choice-of-law rules of the transferor court. Piper Aircraft Co. v. Reyno, 454 U.S. 235, 243 n.8 (1981); see also Ferens v. John Deere Co., 494 U.S. 516, 519 (1990) (superseded by statute on other grounds); Volvo Constr. Equip. N. Am., Inc. v. CLM Equip. Co., 386 F.3d 581, 600 (4th Cir. 2004). The rule in Piper and Ferens for Section 1404(a) and choice-of-law is inapplicable in cases governed by valid forum selection clauses. See Atl. Marine Constr. Co. v. U.S. Dist. Ct. for W. Dist. of Tex., 571 U.S. 49, 65-66 (2013). As will be discussed infra, TCF and Beaufurn had conflicting forum selection clauses that were “knocked out” under California’s “battle of the forms provision.” (See Venue Order (Doc. 34) at 6-7.) Therefore, in this case, there was no valid forum selection clause, (see id.), and the matter was transferred to this court under Section 1404(a), (id. at 14–15). In light of these facts, the court concludes that California’s choice-of-law rules apply.

         California has adopted the governmental interest test for most of its conflict-of-laws issues. See, e.g., Reich v. Purcell, 67 Cal.2d 551, 555–56 (1967). Under that approach, courts “must search to find the proper law to apply based upon the interests of the litigants and the involved states.” Offshore Rental Co. v. Cont'l Oil Co., 22 Cal.3d 157, 161 (1978), holding modified by I.J. Weinrot & Son, Inc. v. Jackson, 40 Cal.3d 327 (1985). The first step in the governmental interest test is to determine if there is, in fact, a true conflict[3] between California law and foreign law. Washington Mut. Bank v. Superior Court, 24 Cal.4th 906, 919 (2001). When there is “no material difference [between two laws], there is no choice-of-law problem and the court may proceed to apply California law.” Frontier Oil Corp. v. RLI Ins. Co., 153 Cal.App.4th 1436, 1465, as modified (Sept. 5, 2007).

         As stated above, both California and North Carolina have adopted the UCC in its entirety, to include Section 2-207, the most relevant provision in this case. Comparison of the two states’ UCC 2-207 provisions reveal that there is no “material difference” between them. Compare Cal. Com. Code § 2207, with N.C. Gen. Stat. § 25-2-207. For that reason, this court will specifically apply Cal. Com. Code § 2207, Frontier Oil Corp., 153 Cal.App.4th at 1465, [4] and thus adopt the parties’ stipulation “that California law applies to the substantive contractual issues.” (See Venue Order (Doc. 34) at 5.)

         III. STANDARD OF REVIEW

         In reviewing a motion for summary judgment, this court must determine whether there remains a “genuine dispute as to any material fact.” Fed.R.Civ.P. 56(a). “Once a defendant makes a properly supported motion for summary judgment, the burden shifts to the plaintiff to set forth specific facts showing that there is a genuine issue for trial.” Sylvia Dev. Corp. v. Calvert Cty., 48 F.3d 810, 817 (4th Cir. 1995). “On summary judgment the inferences to be drawn from the underlying facts . . . must be viewed in the light most favorable to the party opposing the motion.” United States v. Diebold, Inc., 369 U.S. 654, 654 (1962) (per curiam). If there is no genuine dispute about any fact material to the moving party’s claim, then “the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a).

         A factual dispute is genuine when “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); see also First Nat’l Bank of Ariz. v. Cities Serv. Co., 391 U.S. 253, 289–90 (1968) (stating that a dispute is not genuine for summary judgment purposes when one party rests solely on allegations in the pleadings and does not produce any evidence to refute alternative arguments). This court must look to substantive law to determine which facts are material - only those facts “that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment.” Anderson, 477 U.S. at 247.

         In addition, “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment.” Id. Ultimately, “there is no issue for trial unless there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party.” Anderson, 477 U.S. at 249.

         IV. LAW OF THE CASE DOCTRINE

         A. Prior Venue Order & Arguments

         Judge Olguin, in his order transferring this case to the Middle District of North Carolina, thoroughly analyzed the parties’ competing forms under UCC 2-207. Judge Olguin concluded that “neither TCF nor Beaufurn provided specific and unequivocal assent to the other parties’ additional terms and conditions” and that these additional terms were thus “trimmed” from the contract. (Venue Order (Doc. 34) at 7.)

         Beaufurn argues that, under the “law-of-the-case doctrine, ” Judge Olguin’s analysis should control and apply with equal force to the insurance and indemnification provisions that are the subject of the motions for summary judgment. (Def.’s Resp. in Opp’n to Pl.’s Mot. for Partial Summ. J. (“Def.’s Resp.”) (Doc. 67) at 6–9.) Specifically, Beaufurn argues that “the California federal court explicitly held that all terms in conflict between the parties’ two agreements were not part of the final contract” and that this holding should govern unless it is “clearly erroneous.” (Id.)

         Plaintiff argues that Judge Olguin’s venue order is not the law of the case. First, Plaintiff asserts that the analysis of the forum selection and insurance/indemnification provisions is substantively different. (Pl.’s Reply to Def.’s Resp. to Pl.’s Mot. for Partial Summ. J. (“Pl.’s Reply”) (Doc. 70) at 2–3.) Second, Plaintiff argues that this court has already rejected the California order as the law of the case because this court permitted Plaintiff to amend the complaint despite Defendants’ argument that amendment was futile in light of Judge Olguin’s order. (See Id. at 3.) Third, Plaintiff contends that new evidence has now surfaced. (See Id. at 4–5.) Specifically, Plaintiff argues that the record before Judge Olguin may have suggested that Beaufurn initiated each transaction by sending inventory sheets that constituted offers to sell. However, Plaintiff argues that the deposition of Kathy Daywalt (“Daywalt”), Beaufurn’s office manager responsible for the TCF relationship, revealed new material facts relating to the parties’ course of dealing - because Daywalt testified that these inventory spreadsheets did not contain price or other forward-looking information, these sheets were not offers and the fact that Judge Olguin may have interpreted them as offers justifies a new analysis of the substantive issues. (See Pl.’s Reply (Doc. 70) at 4–5.)

         Applying the law-of-the-case doctrine is a threshold issue in this matter. If Judge Olguin’s analysis governs this court’s decision on summary judgment, then this court can only conclude that the conflicting insurance and indemnification provisions drop out of the contracts. If, however, there is a valid reason not to apply some or all of Judge Olguin’s analysis, then this court must conduct its own independent examination of the relevant contractual provisions.

         B. Legal Framework

         “When a court decides upon a rule of law, that decision should continue to govern the same issues in subsequent stages of the same case.” Arizona v. California, 460 U.S. 605, 618 (1983). And the Supreme Court has clearly explained “that the doctrine applies as much [and sometimes with even greater force] to the decisions of a coordinate court in the same case as to a court’s own decisions” or those of the immediate appellate court. Christianson v. Colt Indus. Operating Corp., 486 U.S. 800, 816 (1988). The law of the case “doctrine does not preclude [a transferee court’s] reconsideration of previously decided issues in extraordinary circumstances such as where: (1) new evidence is available; (2) a supervening new law has been announced; or (3) the earlier decision was clearly erroneous and would create manifest injustice.” In re City of Philadelphia Litigation, 158 F.3d 711, 718 (3d Cir. 1998); see also Arizona v. California, 460 U.S. at 618 n.8 (“[I]t is not improper for a court to depart from a prior holding if convinced that it is clearly erroneous and would work a manifest injustice.”); Sejman v. Warner-Lambert Co., 845 F.2d 66, 69 (4th Cir. 1988). The fact that a transferor court did not adequately explain its decision to apply a certain legal rule does not, by itself, render the law of the case inapplicable in future proceedings. Christianson, 486 U.S. at 817.

         C. Analysis

         Here, Judge Olguin of the Central District of California ruled that neither party had clearly assented to the terms in the other party’s boilerplate form, that the case fell under UCC 2-207(3), and that, under that rule, the conflicting forum selection provisions dropped out of the contracts. (Venue Order (Doc. 34) at 7.)

         Judge Olguin’s determination that this case falls within UCC 2-207(3) is equally applicable to whether any of the competing insurance or indemnification provisions became part of the contracts. First, Judge Olguin’s decision to disregard the dueling form provisions and apply UCC 2-207(3) is exactly the type of legal rule that constitutes the law of the case. This decision was a necessary and integral step to reaching the ultimate transfer decision; it was not dicta and thus should apply with full force in later stages of the case barring any extraordinary circumstance. See City of Philadelphia Litigation, 158 F.3d at 718–20 (stating that, where a ...


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