Opinion
8:00CV41
February 11, 2002
MEMORANDUM AND ORDER
This matter is before the court on defendant's motion for summary judgment, Filing No. 43; motion in limine, Filing No. 45; appeal of the magistrate's order, Filing Nos. 56 and 57; and objection to exhibit list, Filing No. 59. Plaintiff contends that defendant (1) was negligent, and (2) breached the contract between the two parties. Filing Nos. 17, 56. Plaintiff requests substantial damages for this alleged breach. Defendant denies these allegations. I have carefully reviewed the record, briefs, and relevant case law, and I conclude that defendant's motion for summary judgment should be granted.
Facts
Plaintiff is an Iowa corporation doing business in Council Bluffs, Iowa. Plaintiff sells new and used cars. The defendant is a Nebraska corporation located in Omaha, Nebraska, and is in the business of providing security services. Plaintiff hired defendant to provide security services. Filing No. 17, Ex. A. On August 6, 1999, and into August 7, 1999, there was a severe rainstorm, in fact the worst storm on record since the meteorologic records have been kept in this area. Exhibit 3 at 2-3. One of the lots located on the premises of the plaintiff was in a low-lying area. This lot contained numerous cars. The lot was flooded by the storm and substantial damage occurred to approximately 92 of plaintiff's vehicles.
Defendant had a security guard on duty each night except Sunday from 9:00 p.m. until 3:30 a.m. On the evening of August 6, 1999, Eddie Klotz was the security guard on duty at plaintiff's dealership. Although there is some dispute as to Klotz' exact duties, it appears he had some responsibility for making rounds to each lot and counting cars on the lot. On the night in question, Klotz left his job approximately thirty minutes early. Ex. 7, Klotz Depo. 59:16-60:13. Additionally, plaintiff contends that Klotz failed to walk through the lot, thereby missing the rising water. Further, plaintiff alleges that Klotz failed to call any emergency numbers to advise of rising waters.
Plaintiff initially sued defendant in state court. This suit was then removed by the defendants to federal court on the basis of diversity jurisdiction. Plaintiff in its amended complaint alleges breach of contract and negligence on the part of the defendant. Defendant denies these allegations and contends that no cause of action exists against it. Plaintiff requests damages to compensate for its losses.
Summary Judgment A. Standard of Review
Pursuant to Rule 56(c) of the Federal Rules of Civil Procedure, the court grants summary judgment 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 judgment as a matter of law. Fed.R.Civ.P. 56(c). The court's function at the summary judgment stage is not to weigh the evidence and determine the truth of the matter; rather, the court must determine whether a genuine issue exists for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). "If no rational trier of fact could find for the nonmoving party, then summary judgment is appropriate." McCormack v. Citibank, N.A., 100 F.3d 532, 537 (8th Cir. 1996). The Eighth Circuit has recognized that primarily legal issues and particularly questions of contract interpretation are issues amenable to summary disposition. See, e.g., Mansker v. TMG Life Ins. Co., 54 F.3d 1322, 1326 (8th Cir. 1995); Mumford v. Godfried, 52 F.3d 756, 759 (8th Cir. 1995); and Crain v. Board of Police Comm'r, 920 F.2d 1402, 1405-06 (8th Cir. 1990).
If the moving party meets the initial burden of establishing the nonexistence of a genuine issue, then the burden shifts to the opposing party to produce evidence of the existence of a genuine issue for trial. Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). The nonmoving party may not rest upon mere allegations or denials, but must set forth specific facts showing that there is a genuine issue for trial. Anderson, 477 U.S. at 256; Krenik v. County of LaSueur, 47 F.3d 953, 957 (8th Cir. 1995).
B. Choice of Law
I must first determine what law applies in this diversity case. Plaintiff contends that Iowa law is applicable, while defendant argues that Nebraska law is the correct choice. I have reviewed the contract in this case, and there is no choice of law provision. Filing No. 17, Ex. A. I must follow the choice-of-law rules from Nebraska to determine which state's substantive law is applicable. Birnstill v. Home Savings, 907 F.2d 795, 797 (8th Cir. 1990); Klaxon Co. v. Stentor Electric, 313 U.S. 487, 496 (1941). Nebraska law tells me that the state with the most significant relationship to the transaction and occurrence and to the parties is applicable. Powell v. American Charter Federal Savings Loan, 514 N.W.2d 326, 331-32 (Neb. 1994). The relevant factors to consider include: (1) the place of contracting; (2) the place of any negotiations that occurred; (3) the place of performance; (4) the location of the subject matter; and (5) the residence of the parties. Id., citing Restatement (Second) of Conflict of Laws, § 188 (1971).
In the present case, the Security Service Agreement ("Agreement") was entered into for the purpose of maintaining plaintiff's premisses in Iowa. Implementation of the Agreement occurred in Iowa. The loss occurred in Iowa. The breach, if any, occurred in Iowa. The defendant is located in Nebraska and the plaintiff is located in Iowa. The only significant connection to Nebraska is the location of the defendant. Based on the facts of this case, I find that the most significant relationship is with the state of Iowa. Thus, I conclude that Iowa law shall govern this case.
C. Negligence/Breach of Contract Claim s
Plaintiff has alleged that defendant was negligent in supervising and training its employees to be security guards and breached its contract with plaintiff in performing those services. Defendant argues that this claim is precluded by the language of the written contract. The contract states:
I note for the record that plaintiff's breach of contract claim appears to be a reiteration of the negligence cause of action.
Client shall indemnify and hold Pinkerton harmless for any loss, claim, demand, liability, cause of action including but not limited to injury or death to persons or damage or loss of property, whether or not well grounded, and whether or not any negligence, misconduct or breach of duty by Pinkerton's agents, servants, employees or personnel is alleged to have contributed thereto, in whole or in part.
Filing No. 17, Ex. A, V-b. Defendant contends that there is no evidence that it acted negligently, but even if it did, the clause in the Agreement prohibits an action for negligence. I will assume for purposes of this motion for summary judgment that the allegations claimed by the plaintiff are true: that Klotz left work thirty minutes early, failed to do a final check of the perimeter, and failed to notify anyone of the rising water.
Plaintiff argues that the negligence of defendant is gross and contends that Iowa has not determined specifically whether an exculpatory clause can immunize a party against its own gross negligence. Both parties look to a Nebraska case for guidance. New Light Co., Inc. v. Wells Fargo Alarm Services, 525 N.W.2d 25 (Neb. 1994). In New Light, the restaurant owner sued Wells Fargo for damages sustained in a fire because the way the fire alarm system was installed could render it inoperative. The owner alleged gross negligence or willful and wanton misconduct. The trial court granted Wells Fargo's motion for summary judgment based on the exculpatory clause in the agreement. On appeal, the Court of Appeals affirmed. 516 N.W.2d 260. The Supreme Court, however, determined that the clear language of the agreement referred only to negligence and did not exculpate gross negligence or willful or wanton misconduct, particularly where the clause violated public policy. Thus, a material fact existed for the trier of fact. 525 N.W.2d at 31. See also, Douglas W. Randall, Inc. v. AFA Protective Systems, Inc., 516 F. Supp. 1122, 1127 (E.D.Pa. 1981), aff'd, 688 F.2d 820 (3rd Cir. 1982) (burglary alarm improperly installed, so action for gross negligence permitted).
I note, however, that Iowa does not recognize gross negligence as a distinct cause of action. Frederick v. Western v. Western Union Telegraph Co., 179 N.W. 934, 935 (Iowa 1920) (gross negligence is just a degree of negligence); Unertl v. Bezanson, 414 N.W.2d 321, 326-27 (Iowa 1987) (same). Iowa law is clear. There is not a distinction between negligence and gross negligence under Iowa common law. Consequently, I find that "gross negligence" need not be specifically set forth in the Agreement, as it is included by the term "negligence."
However, even if I were to conclude that gross negligence must be expressly set forth in the exculpatory clause even under Iowa law, the facts of this case are not such, even if totally true, as to allow a jury to make a finding of gross negligence. The allegations in the case before me, if true, are of ordinary negligence. There simply are not any allegations that would rise to the level of willful and wanton behavior. See, e.g., New Light, supra; Thompson v. Bohlken, 312 N.W.2d 501, 504 (Iowa 1981) (discusses definition of gross negligence under co-employee statute).
The Iowa courts have held that under ordinary circumstances parties may execute contracts that exempt others from liability for their negligent conduct. Farmers Elevator Co. v. Chicago, R.I. P.R.R., 260 Iowa 478, 483, 149 N.W.2d 867, 870 (1967) (affirming agreement that absolved railroad from liability for damage to elevator scale by operation of the trains, although railroad held liable under statute); Bashford v. Slater, 250 Iowa 857, 865, 96 N.W.2d 904, 909 (1959) (upholding agreement releasing racing association from liability sustained by spectators and other persons). In general, it is not against public policy to contract to exempt a party from liability. Weik v. Ace Rents Inc., 249 Iowa 510, 515, 87 N.W.2d 314, 317 (1958); Northern Natural Gas Co. v. Roth Packing Co., 323 F.2d 922, 928 (8th Cir. 1963). However, the intention to preclude liability for negligence must be strictly construed, particularly where there is active negligence. Sears, Roebuck Co. v. Poling, 248 Iowa 582, 588, 81 N.W.2d 462, 465 (1957); Evans v. Howard R. Green Co., 231 N.W.2d 907, 916-17 (Iowa 1975).
I must also consider whether there is a public policy in Iowa that would prohibit such a disclaimer of negligence. The term "public policy" is not capable of an exact definition under Iowa law. Walker v. American Family Mut. Ins. Co., 340 N.W.2d 599, 601 (Iowa 1983). The court has stated that: "a court ought not enforce a contract which tends to be injurious to the public or contrary to the public good." Id. at 601. However, the court has stated that it will not "curtail the liberty to contract by enabling parties to escape their valid contractual obligation on the ground of public policy unless the preservation of the general public welfare imperatively so demands." Tschirgi v. Merchants Nat'l Bank, 253 Iowa 682, 690, 113 N.W.2d 226, 231 (1962). The court has further stated: "we have repeatedly held that contracts exempting a party from its own negligence are enforceable, and are not contrary to public policy." Huber v. Hovey, 501 N.W.2d 53, 55 (Iowa 1993).
I conclude that the exculpatory clause is clear and unequivocally provides that negligence, even of defendant's employees, shall be indemnified by the plaintiff. The insurance and indemnification provision of the Agreement is clear in terms of the allocation of rights and responsibilities. Further, a thorough review of the Agreement shows that plaintiff intended to abrogate itself of liability under this Agreement, and the Agreement further shows that the purpose of the contract was to prevent theft. A short summary of the relevant provisions in this Agreement as I have set forth below is helpful to an understanding that the defendant intended to limit its liability and to prevent theft.
First, under the Agreement Pinkerton is required to maintain and provide workers' compensation, general liability and automobile liability, including professional liability, false arrest, unlawful detention, wrongful entry and slander. Filing No. 17, Ex. A, Art. V-a. Further, the Agreement states that,
Pinkerton is not an insurer and the rates being paid for service is for a security officer service designed to deter certain risks of loss, which rates are not related to the value of the personal or real property protected. All amounts being charged by Pinkerton are insufficient to guarantee that no loss will occur, and Pinkerton makes no guarantee, implied or otherwise, that no loss will occur or that the service supplied will avert or prevent occurrences or losses which, the service is designed to help detect or avert.Id. at V-b. That section of V-b is then followed by the indemnification language previously cited in this opinion. Section V-c states that the client must assume all risk of loss or physical damage to its property as a result of any casualty and that the client waives any right to subrogation or recovery against Pinkerton for any loss due to any such risks. The Agreement also states that "under no circumstances will Pinkerton be responsible for the theft or other loss of Client's property not directly attributable to security officer thefts." Id. at V-e.
This clause arguably prohibits recovery in this case; however, I need not reach that issue in view of my findings herein.
There is some dispute as to whether the Post Instructions, Filing No. 17, are part of the Agreement. The Agreement section entitled "Scope of Service" states: "The conduct and scope of responsibility of all security officers assigned to Client's facility shall be governed by policy, rules and post instructions mutually agreed to by both parties and made a part of this service agreement. This data may be revised and supplemented at any time in writing upon mutual agreement of both parties." Id. at III-b. However, another section of the Agreement entitled "Termination and Rights" states: "The entire agreement of the parties is expressed herein and no understandings, agreements, purchase orders, work orders or other documents shall modify the terms and conditions of this Agreement. Pinkerton expressly limits acceptance to the terms and conditions herein . . . ." Id. at VII-d. Further, the Agreement states: "No modification to the terms and conditions of this Schedule of Security Service shall be binding on Pinkerton unless approved in writing by an authorized Pinkerton representative." Id. at VII-e. However, the Post Instructions are attached to the Amended Complaint, Filing No. 17. For purposes of this motion, I will assume that the Post Instructions are a part of this Service Agreement.
Under the section of the Post Instructions entitled "REASON FOR COVERAGE," the Agreement states: "To provide a high state of visibility in an attempt to prevent thefts and vandalism of any kind." Under the section entitled "EMERGENCY TELEPHONE NUMBERS" the Agreement reads: "In the event of theft, vandalism or trespassers, the Police will be called along with a Tim O'Neill Official and Captain Fifield." The section entitled "GENERAL DUTIES" requires the security guard to make a complete count of all vehicles on the premises and requires that the guard "look for any signs of theft or vandalism of the vehicles." Id. at Filing No. 17, Post Instructions, p. 8. Thereafter, there is a requirement to do clock patrols, although the testimony from the defendant is that there no longer exist any clocks to do such patrols. Then, there is a requirement to do a final count of all vehicles. Id. If the count is short, the guard must do an incident report. The Agreement then states: "You are to challenge anyone taking a vehicle off the property after hours. If there are any questions regarding the vehicle being taken, you must call the client to get authorization. REMEMBER OUR PURPOSE IS TO TRY TO STOP THEFT! REMEMBER-ALWAYS KEEP A HIGH PROFILE, OF VISIBILITY AND A SHARP EYE FOR ANY POSSIBLE THEFTS." Id.
The next section of the Post Instructions deals with "DAILY ACTIVITY REPORTS (DAR)." Guards are required to do daily reports which include information relevant for the owner. In general, the report must include who was on the premises, security issues, deliveries and car counts. "Safety and fire hazards" are to also be reported. However, "safety and fire hazards" are not defined in the Post Instructions or in the Agreement. Next, there is a section entitled "INCIDENT REPORTS." A guard is required to fill out an incident report for thefts, vandalism, accidents, if the police are called, or if the fire station is called. Id. at 11. There is no mention of incident reports for flooding or other casualty issues. After a very thorough review of the Service Agreement and the Post Instructions, it is very clear that there is no provision that the security guards watch for and report flooding. The Agreement is clearly intended to prevent theft. There is no duty set forth in the Agreement or the Post Instructions that would give notice to the defendant that it is charged with observing flooding and that it would be required to take affirmative action and make notification of the same. Consequently, assuming Klotz did leave thirty minutes early on the night in question and assuming that he did not make all of his required rounds, I conclude that he had no affirmative duty under this Agreement to protect against such occurrences. In the New Light case relied upon by the plaintiff, the contract in question was designed to deter fire and ultimately protect the public. In the case at hand, the Agreement was designed to deter theft, not detect floods, and the Agreement is between two private commercial parties.
In summary, I find no affirmative duty in the Agreement that requires the security guard to report flooding to any emergency personnel. The Agreement and the Post Instructions clearly focused on theft prevention. In any event, the indemnification clause is enforceable under Iowa law. Further, I find no public policy in the state of Iowa that would render this clause inoperable. Thus, this case is distinguishable from the New Light case. Further, I find that no gross negligence/negligence distinction need be made under Iowa law in this case, but even if a distinction exists, the allegations as framed by the plaintiff do not begin to rise to a level required to assert gross negligence. The allegations and evidence simply would not permit me to instruct a jury on gross negligence. Accordingly, for all of these reasons, I conclude that defendant's motion for summary judgment should be granted and this case dismissed. As a result, all other pending motions shall be denied as moot.
THEREFORE, IT IS ORDERED, ADJUDGED AND DECREED THAT:
1. Defendant's motion for summary judgment, Filing No. 43, should be and hereby is granted;
2. Filing Nos. 45, 57, and 59 are hereby denied as moot; and
3. A separate judgment shall be entered in accordance with this memorandum and order.