Opinion
No. IP 00-0076-C-M/S
July 1, 2003
John Scott Hoff, Nolan Law Group, Chicago, IL., John A Young, John A Young Associates, Indianapolis, IN, Rex M Joseph Jr, Indianapolis, IN, Stephen M Koers, Skiles Hansen Cook Detrude, Indianapolis, IN, Scott E Shockley, Defur Voran Hanley Radcliff Reed, Muncie, Mark A Voigtmann Baker Daniels, Indianapolis, IN.
ORDER ON THIRD PARTY DEFENDANT'S MOTION FOR SUMMARY JUDGMENT
This cause is before the Court on a motion for summary judgment filed by the third party defendant, Ravi R. Talwar ("Talwar"), on the claims brought against him by the third party plaintiff, RTW Industries, Inc., doing business as Indiana Bridge Division ("RTW" and "Indiana Bridge" respectively). This suit originally involved a declaratory judgment filed by Advanced Ground Systems Engineering, Inc. ("AGSE") against United Airlines, Inc. ("UAL") and other parties including RTW, seeking indemnification for the failure of welds on a UAL tail work dock and gantry structure. The Court held in favor of AGSE on its declaratory judgment claim holding that RTW had contractual obligations to defend and to indemnify AGSE with respect to UAL's claims against AGSE. On January 30, 2002, RTW filed for declaratory judgment that Talwar had a contractual or common law duty to defend or indemnify it against any damages potentially owed by Indiana Bridge.
In the instant motion, Talwar alleges that he is entitled to summary judgment for two reasons. First, Talwar avers that he owes no duty to indemnify RTW pursuant to an August 19, 1997, Stock Purchase Agreement (the "stock agreement") by which Talwar sold all of his shares in RTW to Indiana Bridge, Inc. ("IBI"), an Illinois corporation. Second, Talwar alleges that he owes RTW no common law duty to indemnify it against the losses described in this suit.
For the reasons stated herein, the Court GRANTS Talwar's motion for summary judgment.
I. BACKGROUND
Third party plaintiff RTW is a fabricator of structural steel for construction. Talwar Aff. ¶ 4. On May 14, 1987, Talwar and a partner, Terry Warner, incorporated RTW under the laws of the State of Indiana. Id. ¶ 3., Exh. 2. On the same day, RTW filed with the Indiana Secretary of State for the assumed business name "Indiana Bridge Company." Id. RTW or its predecessors have been doing business from the same location since 1903. Id. ¶ 4.
In 1993, RTW entered into certain agreements with Advanced Ground Systems Engineering, Inc. ("AGSE"), to perform welds on steel components to be utilized in platforms at the United Airlines-Indianapolis Airport Authority facility at Indianapolis International Airport. Id. ¶ 5.
In 1996, Talwar was the President, CEO and sole shareholder of RTW. Id. ¶ 6. That year Robert Smith ("Smith"), an Illinois businessman, contacted Talwar regarding the purchase of RTW's stock. Id.; Smith Aff. ¶ 3. Smith and Talwar negotiated the terms and conditions of the transaction, pursuant to which Oak Brook Management Corp., an Illinois corporation, or its assigns, would acquire Talwar's stock in RTW. Talwar Aff. ¶ 7.
On August 6, 1997, Smith, as President and sole shareholder, formed Indiana Bridge, Inc., under the laws of the State of Illinois. Id.; Smith Aff. ¶ 5. Apparently, IBI was designated to or received an assignment from Oak Brook Management Corp. to close the transaction as purchaser of Talwar's stock in RTW. Talwar Aff. ¶ 7.
On August 19, 1997, the stock agreement was executed between IBI and Talwar for the purchase of Talwar's stock in RTW. Id. ¶ 8; Smith Aff. ¶ 6; Third Party Compl. Exh. D. The stock agreement states, in pertinent part:
8. Indemnification.
A. Seller shall defend, indemnify and hold the Purchaser Group harmless of, from and against any and all Claims incurred or sustained by the Purchaser Group or the Company, or any of them, arising from or relating to:
* * *
(2) the operation of the Business by the Company prior to the date of this Agreement;
* * *
(5) personal injuries sustained by any person, including, without limitation, any of the Company's current or former employees, independent contractors or agents, or any property damage incurred, which relates in any manner whatsoever to the operation of the Business prior to the date of this Agreement;
* * *
(10) the actual or alleged breach or violation by the Company of any Contract, Lease, Union Contract or other agreement or understanding with any person or entity arising or accruing prior to the date of this Agreement.
Third Party Compl., Exh. D, Purchase From Ravi R. Talwar of Common Stock of RTW Indus., Inc. and Ind. Corp., by Ind. Bridge, Inc., and Ill. Corp., Aug. 19, 1997, § 8 ("Stock Agreement"). The stock agreement defined "Seller" as Talwar, id. at 1, "Purchaser" as IBI, id., "Company" as RTW, id. § 11. ¶ D., and "Claims" as "all suits, actions, losses, claims, damages, liabilities, penalties and other costs or expenses, including, without limitation, reasonable attorneys' fees and costs, at law or in equity, now existing or hereafter arising, liquidated or unliquidated, known or unknown, foreseeable or unforeseeable, insured or uninsured." Id. § 11. ¶C.
The stock agreement also provides that it "will be binding upon, inure to the benefit of and will be enforceable by Seller and Purchaser, and their respective heirs, if applicable, legal representatives, successors and permitted assigns, if any, and no other person or entity will be deemed a third-party beneficiary of this Agreement." Id. § 12. ¶ C. Furthermore, the stock agreement states that The Company has continuously maintained in full force and effect product liability and casualty insurance coverage since it commenced operation of the Business without gap of time in coverage. All of the Company's Insurance Policies are and have been continuously maintained in full force and effect, and all premiums, retention amounts and other expenses related thereto due with respect to all periods ending through and including the date of this Agreement, have been fully and timely paid, and the Company has not received, nor does the Company anticipate the issuance of, any delinquency notice with respect to any amounts due relative to any of the Company's Insurance Policies.
Id. § 3. ¶ W.
On or about May 13, 1999, there was partial collapse of the work platform built by RTW as subcontractor for AGSE, for UAL and for the Indianapolis Airport Authority. On January 18, 2000, AGSE filed the original declaratory judgment claim in this suit seeking a contractual defense indemnity and hold harmless from RTW. Compl. for Decl. J.
On January 30, 2002, RTW filed a third party complaint for declaratory judgment against Talwar, alleging that pursuant to the stock agreement Talwar had a duty to indemnify RTW in defending claims by AGSE. Third Party Compl. ¶ 15.
On March 19, 2002, this Court issued an Order holding that under California law, defendant RTW had a contractual obligation to defend and indemnify AGSE with respect to UAL's claims against AGSE. Order on Mot. for Partial Summ. J., Mar. 19, 2002, at 5.
Talwar moved for summary judgment on RTW's declaratory judgment action on March 21, 2002.
II. SUMMARY JUDGMENT STANDARD
Summary judgment is granted "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the 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). An issue is genuine only if the evidence is such that a reasonable jury could return a verdict for the opposing party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A disputed fact is material only if it might affect the outcome of the suit in light of the substantive law. See id. The moving party has the initial burden to show the absence of genuine issues of material fact. See Wollin v. Gondert, 192 F.3d 616, 620 (7th Cir. 1999); Schroeder v. Barth, Inc., 969 F.2d 421, 423 (7th Cir. 1992). This burden does not entail producing evidence to negate claims on which the opposing party has the burden of proof. See Green v. Whiteco Indus., Inc., 17 F.3d 199, 201 n. 3 (7th Cir. 1994). The party opposing a summary judgment motion bears an affirmative burden of presenting evidence that a disputed issue of material fact exists. See Wollin, 192 F.3d at 621.
When considering a summary judgment motion, a court must draw all reasonable inferences "in the light most favorable" to the opposing party. Id. at 621; Thomas Betts Corp. v. Panduit Corp., 138 F.3d 277, 291 (7th Cir. 1998); Spraying Sys. Co. v. Delavan, Inc., 975 F.2d 387, 392 (7th Cir. 1992). If a reasonable fact finder could find for the opposing party, then summary judgment is inappropriate. Stop-N-Go of Madison, Inc. v. Uno-Ven Co., 184 F.3d 672, 677 (7th Cir. 1999); Shields Enters., Inc. v. First Chi. Corp., 975 F.2d 1290, 1294 (7th Cir. 1992). When the standard embraced in Rule 56(c) is met, summary judgment is mandatory. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Thomas Betts Corp., 138 F.3d at 291; Shields Enters., Inc., 975 F.2d at 1294.
III. DISCUSSION
RTW argues that the clear meaning of the stock agreement evidences that RTW is a third party beneficiary of that agreement. Therefore, Talwar should indemnify RTW for its defense against AGSE. In addition, IBI has assigned its rights under the stock agreement to RTW. Therefore, Talwar owes RTW a duty to indemnify it in this case as assignee of IBI.
In contrast, Talwar argues that the plain language of the stock agreement does not evidence an intent by Talwar and IBI to make RTW a third party beneficiary. Specifically, the contract delineates the instances in which a party may be a third party beneficiary and RTW is not such a party. Furthermore, the language of the contract is clear that the indemnification clause applies only to IBI, not RTW. Finally, Talwar asserts that IBI's assignment to RTW is untimely because it was made almost five years after the stock agreement was executed and over three years after the platform collapsed. Moreover, it was made over two years after RTW's demand that Talwar indemnify it in relation to the original suit, six months after RTW commenced this third party action, three months after the Court ruled that RTW was to indemnify AGSE, and three months after Talwar filed his motion for summary judgment. Talwar asserts that IBI's assignment unilaterally and retroactively modified Talwar's rights, duties and responsibilities, which is impermissible under the stock agreement and Indiana law. Moreover, the purported assignment is either void, impermissible under federal procedural law, or is the basis for estoppel.
The primary issues in this case turn on interpretation of the stock agreement. The parties do not dispute that Indiana law would apply to interpretation of the stock agreement. Under Indiana law, the Court's primary objective is to ascertain the parties' mutual intent at the time they entered into the contract and to effectuate that intent. See First Fed. Savings Bank v. Key Markets, 559 N.E.2d 600, 603-04 (Ind. 1990). To that end, the Court must rely upon the express language of the contract, see Ethyl Corp. v. Forcum-Lannom Assocs., 433 N.E.2d 1214, 1217 (Ind.Ct.App. 1982), except where that language is ambiguous. See Jenkins v. King, 65 N.E.2d 121, 123 (Ind. 1946). Words, paragraphs, and sections are to be construed in light of the meaning of the entire document. See Key Markets, 559 N.E.2d at 604.
In this case, the stock agreement is unambiguous in its terms: RTW is not a third party beneficiary of the contract between Talwar and IBI. RTW may only sue under the stock agreement as a third party beneficiary if it can show: "(1) A clear intent by the actual parties to the contract to benefit the third party; (2) A duty imposed on one of the contracting parties in favor of the third party; and (3) Performance of the contract terms is necessary to render the third party a direct benefit intended by the parties to the contract." Luhnow v. Horn, 760 N.E.2d 621, (Ind.Ct.App. 2001) (citing NN Investors Life Ins. Co. v. Crossley, 580 N.E.2d 307, 309 (Ind.Ct.App. 1991)). Intent to benefit the third party is the controlling factor. See id.
In the instant case, the stock agreement's indemnification clause provides that "[Talwar] shall defend, indemnify an hold [IBI] harmless of, from and against" claims against IBI or RTW that arise or relate to business of RTW prior to the date of the stock agreement. Third Party Compl., Exh. D, Stock Agreement, § 8. This language clearly does not apply to RTW. Moreover, the clause does not evidence an intent by the parties to benefit RTW. The sole beneficiary designated by the clause is IBI.
RTW claims that the indemnification clause's reference to RTW is evidence of the parties' intent to benefit the company. Specifically, RTW points to the types of claims for which Talwar agreed to indemnify IBI: Talwar shall indemnify IBI "of, from and against any and all Claims incurred or sustained by the Purchaser Group or the Company or any of them. . . ." Id. § 8. But, these are just the types of claims for which Talwar would indemnify IBI; the language does not create a duty on Talwar's part to indemnify RTW for claims against it, Talwar must only indemnify IBI for claims against RTW for which IBI is held responsible. There is no evidence that IBI, in this instance, is being held responsible for AGSE's claims against RTW.
RTW also argues that the stock agreement manifests an intention to directly benefit RTW because it ensures the continued operation of the company for approximately two years after the parties signed the agreement. In other words, RTW argues that the stock agreement is, in part, a contract for the benefit of RTW. RTW's Br. in Opp'n, at 9 (citing Freigy v. Gargaro Co., 60 N.E.2d 288, 292 (Ind. 1945)). The Court agrees with RTW that the stock agreement has provisions in it that benefit RTW. See, e.g., Third Party Compl., Exh. D, §§ 6.A. 6.B. But, those provisions do not create a duty upon Talwar to indemnify RTW against claims brought against it. Those provisions provide for the security of both IBI and Talwar that RTW will remain an ongoing concern for a minimum period of time. RTW is benefitted indirectly; however, it is not benefitted with rights of indemnification.
The Court's interpretation of section 8 is supported by two other sections of the stock agreement. Section 12 specifically delineates that only certain parties may benefit from the stock agreement, and no others: "[The stock agreement] will be binding upon, inure to the benefit of and will be enforceable by Seller and Purchaser, and their respective heirs, if applicable, legal representatives, successors and permitted assigns, if any, and no other person or entity will be deemed a third-party beneficiary of this Agreement." Id. § 12, ¶ C (emphasis added). This clause is a clear expression of the parties' intent to exclude third parties as beneficiaries. In addition, section 3 of the stock agreement provides that RTW has product liability and casualty insurance. Id. § 3. ¶ W. This clause evidences the parties intent that RTW protect itself from potential claims against it.
RTW also asserts that it has received IBI's right to indemnification by assignment. Therefore, under section 12 of the stock agreement, RTW may assert IBI's right against Talwar. The Court finds that RTW's attempt to assert IBI's right to indemnification by assignment fails. First, the purported assignment makes no mention of the consideration paid by RTW for IBI's right of indemnification. An assignment must be supported by consideration. See Nickens v. Benson, 126 Ind. App. 284, 286-87, 132 N.E.2d 148, 149 (1956); Interstate Fin. Corp. v. Dodson, 105 Ind. App. 513, 12 N.E.2d 989, 991 (1938) (en banc) (citing Etna Trust Savings Co. v. Nackenhorst, 188 Ind. 621, 122 N.E. 421, 424 (1919)). Here, the agreement entered into by IBI and RTW on June 19, 2002, does not evidence any consideration paid or incurred by RTW in exchange for IBI's indemnity rights under the stock agreement. Therefore, the assignment is unenforceable for lack of consideration.
Second, even if the assignment was valid, "a valid assignment gives the assignee neither greater nor lesser rights than those held by the assignor." Pettit v. Pettit, 626 N.E.2d 444, 447-48 (Ind. 1993). See also Brown v. Ind. Nat'l Bank, 476 N.E.2d 888, 894 (Ind.Ct.App. 1985) ("The assignee takes no greater rights than those possessed by the assignor."); Interstate Fin. Corp., 12 N.E.2d at 991 ("Nothing can be claimed under . . . an assignment until conditions have arisen which would have enabled the assignor to assert a claim successfully in the absence of such assignment.") (emphasis in original). Here, at the time of the assignment, IBI had no claims against Talwar for indemnification because IBI has never been held liable to anyone for the acts of RTW. Therefore, RTW cannot bring a claim for indemnity in the instant case because the assignment cannot act to broaden Talwar's responsibilities vis-a-vis UAL's claims against AGSE and, subsequently, AGSE's claims against RTW.
Finally, even if the assignment was valid, the stock agreement provides that
If an Indemnified Party receives notice or knowledge of any Claim or potential Claim for which it believes it is entitled to indemnification by an Indemnitor, the Indemnified Party will, within ten (10) days after receipt of such notice or knowledge thereof, give the Indemnitor written notice of such Claim and promptly furnish the Indemnitor with all relevant information and copies of all pertinent documents relating to such Claim in the Indemnified Party's possession or control.
Third Party Compl., Exh. D, Stock Agreement, § 8, ¶ C. Here, it is undisputed that on or about May 22, 2002, RTW served notice upon Talwar that it expected indemnification from him for any claims arising from the platform failure. However, RTW received notice of the platform failure on or about June 21, 1999.
Clearly, at least as to the original notice, more than ten days had transpired between RTW's knowledge of a potential liability and its notice to Talwar.
In addition, at the time that RTW's obligations to AGSE became fixed, the date of this Court's Order, March 19, 2002, see Henthorne v. Legacy Healthcare, Inc., 764 N.E.2d 751, 757-68 (Ind.Ct.App. 2002), there was no assignment. Any subsequent assignment cannot act to obligate Talwar to indemnify RTW because it would materially alter his obligation under the stock agreement that on March 19, 2002, became fixed with respect to the UAL platform incident.
In summary, the Court finds that RTW is not a third party beneficiary of the stock agreement between IBI and Talwar. Furthermore, the assignment between IBI and RTW is unenforceable for lack of consideration. Even if the assignment were valid, RTW's notice to Talwar of the potential claim was untimely pursuant to the stock agreement, and at the time of the assignment, IBI had no right to indemnification from Talwar because it was not liable in the suit by AGSE against RTW. Therefore, the assignment could not obligate Talwar to indemnify RTW for claims arising from the UAL platform incident.
IV. CONCLUSION
For the foregoing reasons, the third party defendant's, Ravi R. Talwar, motion for summary judgment on the claims brought against him by the third party plaintiff, RTW Industries, Inc., d/b/a Indiana Bridge Division, is GRANTED.