UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
LONE MOUNTAIN PROCESSING,
INCORPORATED,
Plaintiff-Appellant,
v.
No. 02-2392
BOWSER-MORNER, INCORPORATED;
BOWSER-MORNER ASSOCIATES,
INCORPORATED,
Defendants-Appellees.
Appeal from the United States District Court
for the Western District of Virginia, at Big Stone Gap.
Glen M. Williams, Senior District Judge.
(CA-00-93-2)
Argued: December 5, 2003
Decided: April 8, 2004
Before NIEMEYER and TRAXLER, Circuit Judges, and
Richard D. BENNETT, United States District Judge for the
District of Maryland, sitting by designation.
Affirmed in part, reversed in part, and remanded by unpublished opin-
ion. District Judge Bennett wrote the opinion, in which Judge Nie-
meyer joined. Judge Traxler wrote a separate opinion concurring in
part and dissenting in part.
COUNSEL
ARGUED: Frank Kenneth Friedman, WOODS, ROGERS &
HAZLEGROVE, P.L.C., Roanoke, Virginia, for Appellant. Stephan
2 LONE MOUNTAIN PROCESSING v. BOWSER-MORNER
Forrest Andrews, WRIGHT, ROBINSON, OSTHIMER & TATUM,
Richmond, Virginia, for Appellees. ON BRIEF: Francis H. Casola,
Daniel C. Summerlin, WOODS, ROGERS & HAZLEGROVE,
P.L.C., Roanoke, Virginia, for Appellant. Noelle L. Shaw-Bell, David
M. Brink, WRIGHT, ROBINSON, OSTHIMER & TATUM, Rich-
mond, Virginia, for Appellees.
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
OPINION
BENNETT, District Judge:
I.
Procedural History
On May 26, 2000, Lone Mountain Processing, Inc. ("Lone Moun-
tain"), which operates a coal preparation facility in St. Charles, Vir-
ginia, filed a two-count complaint against Bowser-Morner, Inc.;
Bowser-Morner Associates, Inc. ("Bowser-Morner"), an engineering
design firm in Dayton, Ohio, alleging breach of contract and negli-
gence in connection with a November 1, 1991 contract between the
parties. Pursuant to that contract, Bowser-Morner was to design a coal
slurry impoundment for Lone Mountain’s facility. On October 24,
2000, Lone Mountain filed an amended complaint, adding a third
count for contractual indemnification. In its answer to the amended
complaint, Bowser-Morner asserted the affirmative defense of the
statute of limitations. Subsequently, Bowser-Morner moved to dis-
miss the amended complaint.
The District Court subsequently converted Bowser-Morner’s
motion to dismiss into a motion for summary judgment. Lone Moun-
tain then filed its own motion for summary judgment. The District
Court limited discovery to the issue of statute of limitations. The
LONE MOUNTAIN PROCESSING v. BOWSER-MORNER 3
motions, both based upon affidavits, were briefed and argued in
August of 2001. In February of 2002, the District Judge dismissed
both motions without prejudice, advising that the motions should be
re-filed based upon additional discovery that had been taken in the
interim. In July of 2002, Lone Mountain filed a motion for partial
summary judgment on the issue of statute of limitations and repose.1
Bowser-Morner also filed a motion for summary judgment.
The District Court, in a September 13, 2002 memorandum opinion,
granted Bowser-Morner’s motion for summary judgment and denied
Lone Mountain’s partial motion for summary judgment. The court
found that Lone Mountain was time-barred from bringing this action
pursuant to a contract statute of limitations, referencing Virginia stat-
utory law applying a five-year limitations period for a written con-
tract.
Pursuant to Rule 59(e) of the Federal Rules of Civil Procedure,
Lone Mountain moved to alter or amend its judgment, noting that the
District Court had ruled that all claims were controlled by the contract
statute of limitations and had not addressed the additional claims of
negligence, breach of warranty and contractual indemnification. By
memorandum opinion dated November 1, 2002, the District Court
denied Lone Mountain’s motion to alter or amend its September 13,
2002 decision. The District Court reiterated its position on the negli-
gence and breach of warranty claims as set forth in its earlier order.
With respect to the contractual indemnification claim, the District
Judge reiterated his holding that there was "no apparent need to
address an issue that is, in the minds-eye of this court, constitutionally
moot." (JA 2059). This appeal follows.
II.
Facts
Lone Mountain operates a coal preparation plant in St. Charles,
Virginia where it cleans coal in preparation for shipment. On Novem-
ber 5, 1991, Lone Mountain entered into a contract (the "Contract")
1
The District Court subsequently did not address the statute of repose
issue.
4 LONE MOUNTAIN PROCESSING v. BOWSER-MORNER
with Bowser-Morner, an engineering design firm, for engineering and
design services related to a coal slurry impoundment adjacent to the
coal preparation plant. Pursuant to the Contract, Bowser-Morner
agreed to design the structure in accordance with federal regulations
established by the United States Department of Mine Safety and
Health Administration ("MSHA"), and state regulations established
by the Commonwealth of Virginia’s Division of Mined Land Recla-
mation ("DMLR"). While Bowser-Morner was not responsible for
securing the necessary permits, it was required to answer questions by
federal and state regulators during a review of the design.
The Contract provided that any lack of conformance to regulatory
standards was to be corrected by Bowser-Morner at no cost to Lone
Mountain. The record of this case indicates that a representative of
Bowser-Morner acknowledged that Bowser-Morner had an obligation
to answer questions raised by federal and state regulators. (JA 1127-
28).
After a lengthy period of regulatory review during the permitting
process and after initial federal and state approval of the design, the
Bowser-Morner design of the coal slurry was approved on March 20,
1995. Consequently, on March 24, 1995, Bowser-Morner issued what
it termed its final payment order to Lone Mountain. Under the Con-
tract, "upon acceptance and approval of the work," Lone Mountain
was to retain (10%) and forward the remainder of payment within fif-
teen days of approval and acceptance. On April 25, 1995, Lone
Mountain paid Bowser-Morner’s payment order, not exercising any
right of retainage.2
The question of the completion of the contract is vigorously con-
tested by the parties. Following the acceptance and approval of the
design plan, the parties had interactions in August, October, and
November of 1995, the legal effect of which are contested by Lone
Mountain and Bowser-Morner. In August of 1995, at Lone Moun-
tain’s request, Bowser-Morner provided Lone Mountain with a
2
Lone Mountain did not pay for one line-item listed on the invoice,
charges of $2,850 for "[a]nswers to questions generated by the state of
Virginia in their 10-29-92 comments," because it deemed the item to be
"work not authorized." (JA 371, 375).
LONE MOUNTAIN PROCESSING v. BOWSER-MORNER 5
hydraulics analysis with respect to alternative locations for the
impoundment pipe. In October of 1995, representatives of Bowser-
Morner visited the impoundment site. In November of 1995, in
response to Lone Mountain’s request, Bowser-Morner provided a fea-
sibility study for control of cracking concrete in the area of the pipe.
While the ramifications of the above three events in the latter part
of 1995 generate a dispute among the parties, it is undisputed that on
June 5, 1996, upon filling the impoundment designed by Bowser-
Morner with coal slurry, a pipe collapsed allowing contaminated
water to escape and leak. This fracturing and cracking along the west-
ern wall of the slurry impoundment resulted in the leaking of contam-
inated water in violation of the National Pollutant Discharge
Elimination System permit issued to Lone Mountain. See 33 U.S.C.
§§ 1311, 1319.
Subsequently, on August 9, 1996, water flowed through a collapsed
wall of the slurry impoundment into an abandoned coal mine. DMLR
ordered Lone Mountain to suspend operations until repairs could be
made. After performing those repairs, Lone Mountain was allowed to
restart its operations on August 16, 1996. One month later, on or
about September 20, 1996, Lone Mountain discovered another leak in
the slurry impoundment in the western wall. On or about October 9,
1996, Lone Mountain discovered yet another leak in the impound-
ment.
On or about October 24, 1996, a massive leak resulted in the slurry
impoundment allowing approximately three thousand gallons of con-
taminated water per minute to flow into Gin Creek. This contami-
nated water flowed approximately eleven miles into the Powell River,
causing the pool elevation in the impoundment to drop by three feet
and contaminating and destroying an estimated eleven thousand fish.
As a result of the leaks and release of contaminated water into the
Powell River, which had been designated by the government as a crit-
ical habit area, Lone Mountain pled guilty to a two-count information
charging it with negligent discharge of a pollutant in violation of 33
U.S.C. §§ 1311, 1319(c)(1)(A) (negligent discharge of a pollutant). In
addition, Lone Mountain was required to pay the National Fish and
Wildlife Foundation the sum of $15,000. Pursuant to the plea agree-
6 LONE MOUNTAIN PROCESSING v. BOWSER-MORNER
ment with the government, Lone Mountain was fined a total of
$85,000 and was ordered to pay restitution in the amount $1,510,000.
III.
We review a grant of summary judgment de novo. Perini Corp. v.
Perini Constr., Inc., 915 F.2d 121, 123 (4th Cir. 1990). Summary
judgment is appropriate when "the record taken as a whole could not
lead a rational trier of fact to find for the non-moving party." Mat-
sushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587
(1986). "And, in evaluating a motion for summary judgment, the
court must view the record in the light most favorable to the nonmov-
ing party." Perini Corp., 915 F.2d at 123.
When sitting in diversity, a federal court must apply the choice of
law rules of the forum state, in this case Virginia. Klaxon Co. v. Sten-
tor Elec. Mfg. Co., 313 U.S. 487, 496 (1941). Under Virginia law, the
parties’ choice of law will be enforced if it is "reasonably related to
the purpose of the agreement." Hooper v. Musolino, 234 Va. 558,
566, 364 S.E.2d 207, 211 (1988)(citing Tate v. Hain, 181 Va. 402,
410, 25 S.E.2d 321, 324 (1943); C.I.T. Corporation v. Guy, 170 Va.
16, 22, 195 S.E. 659, 661 (1938)). Section 13 of the instant Contract
provides that Virginia law governs disputes between the parties aris-
ing from the agreement. (JA 183). Thus, as the present parties agree,
Virginia law governs the pending matters.
IV.
The District Court found that Lone Mountain’s breach of contract,
warranty and negligence claims were time-barred under the applicable
statute of limitations. We agree.
A.
Breach of Contract/Warranty Count
Lone Mountain’s complaint brought one count for breach of con-
tract, claiming that Bowser-Morner breached its obligations under the
Contract by providing defective design services. (JA 29). As noted by
LONE MOUNTAIN PROCESSING v. BOWSER-MORNER 7
Lone Mountain, the Contract "contained warranties which are inte-
grally related to Lone Mountain’s contract claim." (Appellant’s Brief
at 51). Indeed, the Contract’s "Warranty" provision provided that
Bowser-Morner would provide services "free from defects." (JA 162).
Thus, the "warranty" cited by Lone Mountain simply is another provi-
sion of the Contract, and as such, any breach thereof necessarily
arises simultaneously with any other design-defect claim asserted
under the Contract. See, e.g., Federal Reserve Bank v. Wright, 392 F.
Supp. 1126, 1129-31 (E.D. Va. 1975) (applying Virginia’s five-year
statute of limitations for contract claims to a claim for breach of war-
ranty involving alleged defective designs by architects, and holding
that the claim arose on the date upon which the architects delivered
the defective designs); McCloskey & Co. v. Wright, 363 F. Supp. 223,
225-26 (E.D. Va. 1973) (same).
Under section 8.01-246(2) of the Virginia Code, the statute of limi-
tations period applicable to claims on a written contract is five years.
The statute of limitations for a design-defect claim based upon a con-
tract commences at the time the defect or condition causing the
breach occurs, and not when it is discovered, regardless of the diffi-
culty in ascertaining the existence of the claim. Virginia Military
Institute v. King, 217 Va. 751, 759, 232 S.E.2d 895, 900 (1977) (here-
inafter VMI)(citing Housing Authority v. Laburnum Corp., 195 Va.
827, 838, 80 S.E.2d 574, 580-81 (1954)); see also Va. Code Ann.
§ 8.01-230 ("the right of action shall be deemed to accrue and the pre-
scribed limitation period shall begin to run from . . . when the breach
of contract occurs in actions ex contractu and not when the resulting
damage is discovered . . . .").
The Supreme Court of Virginia established the framework for ana-
lyzing design-defect claims in VMI and in Nelson v. Commonwealth
of Virginia, 235 Va. 228, 368 S.E.2d 239 (1988). In VMI, the plaintiff
sued defendant-architects for alleged professional negligence and
improper design work performed pursuant to a divisible contract.
VMI, 232 S.E.2d at 896. The VMI Court held that the plaintiff’s cause
of action for design-defects accrued when the allegedly defective
plans were finally approved. Id. at 900. "At that time, the architects
had a right to demand and received payment" for their design ser-
vices, and likewise, at that time, "if defects had been discovered, [the
plaintiff] could have initiated legal proceedings against the archi-
8 LONE MOUNTAIN PROCESSING v. BOWSER-MORNER
tects." Id. In so ruling, the court distinguished a situation in which the
"continuation of services" exception had been applied to an attorney-
client relationship, by emphasizing that in the present case, "when the
plans were approved the undertaking to furnish them ceased." Id.
Similar to the scenario in VMI, in Nelson, the plaintiff brought,
inter alia, design-defect claims against architects stemming from pro-
fessional services rendered pursuant to a divisible contract. Nelson,
368 S.E.2d at 241. The Nelson Court found that once the design plans
were accepted by the plaintiff, the architects’ duty to design the proj-
ect ended, thereby triggering the limitations period for design-defect
claims. Id. at 243. The court further noted that although a general
architect-owner relationship continued to exist thereafter, the archi-
tects’ design services effectively ended upon acceptance of the design
plans. Id.
The instant contractual design-defect claims accrued upon payment
by Lone Mountain, because such payment constituted "approval and
acceptance" of the designs. Under Section 4 of the Contract, "[u]pon
approval and acceptance of the work, [Lone Mountain] shall retain
ten percent (10%) and forward payment of the balance within fifteen
(15) days thereof." (JA 171). Thus, under the language of the Con-
tract, payment indicated approval and acceptance of the design plans.
Bowser-Morner issued its final payment order on March 24, 1995. In
reply, Lone Mountain tendered payment to Bowser-Morner on April
25, 1995, thereby indicating approval and acceptance of the work.
Accordingly, under applicable Virginia law, the District Judge cor-
rectly concluded that Lone Mountain’s contractual design-related
claims arose on April 25, 1995. See VMI, 232 S.E.2d at 900; Nelson,
368 S.E.2d at 243.
Relying on County School Board of Fairfax County v. A.A. Beiro
Construction Co., 223 Va. 161, 286 S.E.2d 232 (1982) and Suffolk
City School Board v. Conrad Brothers, Inc., 255 Va. 171, 495 S.E.2d
470 (1998), Lone Mountain urges the adoption of a "bright line"
dichotomy for the accrual of design-defect claims depending on
whether the design work is performed pursuant to a divisible or indi-
visible contract. We decline to establish such a rigid distinction.
In Beiro, the parties entered into an indivisible contract for the con-
struction of, inter alia, a school building roof. Beiro, 286 S.E.2d at
LONE MOUNTAIN PROCESSING v. BOWSER-MORNER 9
233. Defendant Beiro was a contractor who had retained the right to
correct any construction defects until the completion of the building
construction. Id. The court in Beiro found that the plaintiff’s claim for
defective construction accrued, "at the earliest," upon issuance of the
certificate of final payment in August 1973, and not upon the comple-
tion of construction in August 1972. Id.
Similar to the situation in Beiro, in Conrad Bros., the defendant-
contractor installed allegedly defective roofs in school buildings pur-
suant to an indivisible contract. Conrad Bros., 495 S.E.2d at 470.
Looking to the express terms of the construction contract at issue, the
court found that construction was completed upon the issuance of a
"final Certificate for Payment" regardless of the date construction was
completed or when the roofs were known to be defective. Id. at 471-
72. Thus, the submission of the "final Certificate for Payment" trig-
gered the applicable statute of limitations.
Both Beiro and Conrad Bros. looked to the acceptance of the con-
tracted work through the issuance of final certificates of payment as
triggers for the applicable statute of limitations for the construction
defect claims in question. Such holdings are consistent with the rul-
ings of VMI and Nelson, which involved divisible contracts and held
that design-defect claims arose at the time the corresponding design
plans were accepted.
The instant Contract was not divisible into distinct design, con-
struction or supervision phases because it provided for only one
"phase"—the design of the coal slurry impoundment structure. Thus,
the Contract simply provided for the execution and delivery of the
design plan. Once the completed design plan for the impoundment
structure was "approved and accepted" by Lone Mountain, the under-
taking to furnish it ceased to exist, thus triggering the accrual of
design-defect related claims. VMI, 232 S.E.2d at 900; see also Fed-
eral Reserve Bank v. Wright, 392 F. Supp. 1126 at 1131 (holding that
design-defect claims accrued at "the date upon which the architects
delivered the defective plans" regardless of when the alleged defect
was ascertainable); McCloskey & Co. v. Wright, 363 F. Supp. 223 at
226 (holding that a design-defect breach of warranty or contract claim
arose "at the time the architects tendered allegedly defective plans to
10 LONE MOUNTAIN PROCESSING v. BOWSER-MORNER
the government" regardless of when the alleged defect was ascertain-
able).
Nonetheless, Lone Mountain also asserts that the parties’ Contract
consisted of an undertaking requiring a "continuation of services,"
whereby full performance did not occur upon acceptance of the
design plan but rather occurred once any post-acceptance services
were completed.3 According to Lone Mountain, such reasoning is in
accord with the application of the "continuing services" doctrine in
Virginia professional negligence cases involving physicians, attor-
neys, and accountants. See, e.g., Farley v. Goode, 219 Va. 969, 252
S.E.2d 594 (1979) (physician); McCormick v. Romans, 214 Va. 144,
198 S.E.2d 651 (1973)(attorney); Boone v. C. Arthur Weaver Co., 235
Va. 157, 365 S.E.2d 764 (1988) (accountant).
Lone Mountain’s assertion is unpersuasive, however. Unlike the
patient or client relationships created in the medical, legal, and
accounting professions, architectural design professionals do not rou-
tinely create confidential or fiduciary client relationships entailing
inherent, ongoing duties of care. Moreover, the submission of reme-
dial measures or advice does not alter the fact that design-defect
claims generally arise at the date when the design initially is accepted
by a purchaser, especially when acceptance is pursuant to the terms
of a written contract. See VMI, 232 S.E.2d at 897, 900 (finding that
design-defect claims accrued upon acceptance of design plans despite
defendant-architects subsequent corrective design drawings, advice,
and site visits). Indeed, to hold otherwise would contravene the pur-
pose of the statute of limitations, in that any remedial work or advice
subsequent to design acceptance automatically would re-start the limi-
tations clock in design-defect cases. See Lavery v. Automation Man-
agement Consultants, Inc., 234 Va. 145, 148, 360 S.E.2d 336, 338
(1987) (stating that under Virginia law, "a statute of limitations is
designed to compel the exercise of a right to sue within a reasonable
time; to suppress fraudulent and stale claims; to prevent surprise; to
3
Three interactions following design acceptance specifically are refer-
enced by Lone Mountain as evincing "continuing services": (1) the
hydraulics analysis in August, 1995; (2) the site visit by Bowser-Morner
representatives in October, 1995; and (3) the feasibility study in Novem-
ber, 1995.
LONE MOUNTAIN PROCESSING v. BOWSER-MORNER 11
guard against lost evidence; to keep facts from becoming obscure; and
to prevent witnesses from disappearing"). Ultimately, therefore, Lone
Mountain cannot overcome the fact that under the Contract, payment
constituted "approval and acceptance" of the design plans, which in
turn triggered the limitations period for related design-defect claims.
B.
Negligence Count
Under Virginia law, the contract statute of limitations applies to an
action to recover for professional negligence, regardless of whether a
claim is framed as a tort. See, e.g., Boone, 365 S.E.2d at 766 (holding
that the contract statute of limitations applied to an action to recover
for the professional negligence of an accountant, despite the fact that
the claim was framed as a tort); VMI, 232 S.E.2d at 899-900 (holding
that the contract statute of limitations applied to an action to recover
for the professional negligence of an architect, despite the fact that the
claim was framed in tort); Oleyar v. Kerr, 217 Va. 88, 90, 225 S.E.2d
398, 400 (1976)(holding that the contract statute of limitations applied
to an action to recover for the professional negligence of an attorney,
despite the fact that the claim was framed in tort). Such a "result fol-
lows from the distinction between duties assumed pursuant to an
agreement and duties imposed by general law." Boone, 365 S.E.2d at
766. Thus, "[b]ecause there would be no duty from [the professional]
to the client in the absence of a contract, the contract statute of limita-
tions applie[s] to the client’s action for negligence." Id. (citing Ole-
yar, 225 S.E.2d at 399; VMI, 232 S.E.2d at 899-900). Therefore, as
Lone Mountain’s negligence claim stems from its contract with
Bowser-Morner for professional design services, the applicable period
of limitations for the negligence claim also is five years from the date
the design plans were accepted. See, e.g., Nelson, 368 S.E.2d at 248.
C.
Lone Mountain’s design-defect claims stemming from the Contract
accrued on the date the corresponding design plans were accepted,
April 25, 1995. Because Lone Mountain filed its complaint on May
26, 2000, the District Court correctly concluded that its breach of con-
tract, warranty, and negligence claims were time-barred under Virgin-
12 LONE MOUNTAIN PROCESSING v. BOWSER-MORNER
ia’s five-year limitations period. Accordingly, we affirm the grant of
summary judgment to Bowser-Morner on Lone Mountain’s breach of
contract, warranty, and negligence claims.
V.
The District Court also found that Lone Mountain’s contractual
indemnification claim was time-barred under the Virginia statute of
limitations for contract claims. Under the "Indemnity" provision of
the Contract, Bowser-Morner agreed to "indemnify, hold harmless
and defend [Lone Mountain] from any and all liability, claims,
demands, suits, expenses and judgments arising out of" the Purchase
Order or Bowser-Morner’s contractual work. (JA 162, ¶ 8). We dis-
agree with the District Court’s conclusion that the indemnity claim
filed by Lone Mountain under the above provision was time-barred.
As previously noted, section 8.01-246(2) of the Virginia Code pro-
vides a five-year statute of limitations for claims on a written contract.
Virginia Code section 8.01-230 establishes the accrual date of actions
for which a limitation period is prescribed. In pertinent part, section
8.01-230 provides:
In every action for which a limitation period is prescribed,
the right of action shall be deemed to accrue and the pre-
scribed limitation period shall begin to run from . . . when
the breach of contract occurs in actions ex contractu and not
when the resulting damage is discovered, except . . . where
otherwise provided under . . . § 8.01-249 . . . . Va. Code
Ann. § 8.01-230.
Thus, Virginia Code section 8.01-230 explicitly excludes claims
under section 8.01-249 from the general statute of limitations accrual
date for contracts.
Under section 8.01-249(5) of the Virginia Code, a cause of action
for "contribution or for indemnification" accrues "when the contrib-
utee or the indemnitee has paid or discharged the obligation." Accord-
ingly, by the plain terms of the statutory language, a claim for
indemnification does not accrue until the indemnitee has suffered a
LONE MOUNTAIN PROCESSING v. BOWSER-MORNER 13
loss. See Indus. Dev. Auth. v. Bd. of Supervisors, 263 Va. 349, 353,
559 S.E.2d 621, 623 (2002)(citing Vaughn, Inc. v. Beck, 262 Va. 673,
677, 554 S.E.2d 88, 90 (2001)) ("When the language of a statute is
clear and unambiguous, [appellate courts] are bound by the plain
meaning of that language.").
The rule espoused in section 8.01-249(5) reflects the view that the
"accrual of a cause of action for indemnity . . . is better linked to a
time at which the indemnitee is injured, not the time at which the
original plaintiff was injured." In re Fela Asbestos Litig., 638 F. Supp.
107, 113 (W.D. Va. 1986), rev’d on other grounds sub nom., Wingo
v. Celotex Corp., 834 F.2d 375 (4th Cir. 1987); see also 41 Am Jur
2d, Indemnity § 43 (2003)("A cause of action on a contract indemni-
fying against loss or damage does not arise until the indemnitee has
actually incurred loss."). This Court adopted identical reasoning in
Walker Manufacturing Co. v. Dickerson, Inc., 619 F.2d 305 (4th Cir.
1980), when we held that a claim for indemnity based on a breach of
implied warranty was not barred even though the direct action of the
original plaintiff was time-barred. Id. at 308-10; see also Premier
Corp. v. Economic Research Analysts, Inc., 578 F.2d 551, 553-54 (4th
Cir. 1978). Other courts routinely apply similar reasoning regarding
the accrual of indemnity claims. See, e.g., Burlington N. R.R. v. Hyun-
dai Merchant Marine Co., 63 F.3d 1227, 1230 (3rd Cir. 1995) (stating
the general rule that an indemnity claim does not accrue until the
indemnitee suffers a loss); Central Wash. Refrigeration, Inc. v. Bar-
bee, 133 Wn.2d 509, 517, 946 P.2d 760, 764 (1997) (stating that
"[i]ndemnity actions are distinct, separate causes of action from the
underlying wrong and are governed by separate statutes of limita-
tions" and citing supporting cases from various jurisdictions in a foot-
note).
Faced with the patent impact of the controlling statutory language
regarding the accrual of indemnification claims and the fact that dam-
age resulting from the design plan first occurred after the impound-
ment failure in June of 1996, Bowser-Morner contends that Lone
Mountain suffered a "loss" triggering an indemnity claim simply by
incurring the initial contractual expense of paying for the design plan
in 1995. Bowser-Morner’s reasoning, however, flies in the face of tra-
ditional notions of indemnity reimbursement and loss. Both this Court
and the Supreme Court of Virginia have characterized indemnity as
14 LONE MOUNTAIN PROCESSING v. BOWSER-MORNER
a promise to reimburse for a loss sustained. See Uptagrafft v. United
States, 315 F.2d 200, 203 (4th Cir.), cert. denied, 375 U.S. 818 (1963)
(stating that indemnity is a right "generally based upon contract,"
which "means compensation for loss already sustained"); First Vir-
ginia Bank-Colonial v. Baker, 225 Va. 72, 77, 301 S.E.2d 8, 11
(1983) (stating that "a contract of indemnity is a bilateral agreement
between an indemnitor and an indemnitee in which the indemnitor
promises to reimburse his indemnitee for loss suffered or to save him
harmless from liability"). Logically, the act of originally paying to
obtain an underlying contractual service does not constitute a loss
arising out of the contractual work performed for which an indem-
nitee can be reimbursed. Indeed, under Bowser-Morner’s reasoning,
Lone Mountain would have been entitled to a full refund of the con-
tractual costs as an indemnitee even if it did not suffer any harm or
loss from Bowser-Morner’s contractual performance. Quite simply,
such a theory is untenable.
Plainly, therefore, Lone Mountain did not suffer damages sufficient
to trigger the provisions of Virginia Code section 8.01-249(5) prior
to the impoundment failure in June of 1996. At that time, Lone Moun-
tain suffered a loss "arising out of" Bowser-Morner’s design work
performed under the Contract. Thus, at the time of the impoundment
failures, Lone Mountain suffered a loss as a contractual indemnitee,
thereby commencing the five-year statute of limitations period for
contract claims. Accordingly, by filing a contractual indemnification
claim in its amended complaint on October 24, 2000, Lone Mountain
brought its action within five years of any indemnitee loss and, there-
fore, its indemnification claim was timely.
VI.
For the reasons set forth above, we affirm the District Court’s deci-
sion that Lone Mountain’s breach of contract, warranty and negli-
gence claims were time-barred under Virginia’s five-year statute of
limitations, but reverse the District Court’s determination that Lone
Mountain’s contractual indemnification claim was time-barred.
Accordingly, we remand the contractual indemnification claim to the
District Court to permit said claim to proceed on the merits.
AFFIRMED IN PART, REVERSED
IN PART, AND REMANDED
LONE MOUNTAIN PROCESSING v. BOWSER-MORNER 15
TRAXLER, Circuit Judge, concurring and dissenting:
I concur in the majority’s determination that Lone Mountain’s
indemnification claim accrued no earlier than June 1996 and that its
indemnification claim, therefore, is not barred by the applicable stat-
ute of limitations. I also believe, however, that Lone Mountain’s
breach of contract and professional negligence claims were timely
filed. Accordingly, I respectfully dissent from the majority’s affir-
mance of the dismissal of those claims.
As to the breach of contract claim, the majority concludes Lone
Mountain accepted and approved the plans for the coal slurry
impoundment in April 1995 when it made the final payment to
Bowser-Morner and that, under Virginia law, all of Lone Mountain’s
design-defect claims accrued at that time. I agree that a design-defect
claim accrues under Virginia law when the plans are approved. See
Comptroller ex rel. Virginia Military Inst. v. King, 232 S.E.2d 895,
900 (Va. 1977) ("We cannot escape the conclusion that V.M.I. has
alleged a cause of action for improper design which accrued when the
plans were finally approved." (emphasis added)); see also Nelson v.
Commonwealth, 368 S.E.2d 239, 247 (Va. 1988). In this case, how-
ever, I do not believe that approval occurred upon payment by Lone
Mountain.
The contract between Lone Mountain and Bowser-Morner condi-
tions Lone Mountain’s obligation to pay upon its "approval and
acceptance of the work." J.A. 171. If this were the only relevant con-
tractual provision, then I might agree that, under VMI and Nelson,
Lone Mountain’s design claims accrued upon payment. The payment
clause, however, must be considered along with the clauses defining
Bowser-Morner’s obligations under the contract. See, e.g., Berry v.
Klinger, 300 S.E.2d 792, 796 (Va. 1983) ("The court must give effect
to all of the language of a contract if its parts can be read together
without conflict. Where possible, meaning must be given to every
clause. The contract must be read as a single document. Its meaning
is to be gathered from all its associated parts assembled as the unitary
expression of the agreement of the parties."). Bowser-Morner was
obligated under the contract to design the slurry impoundment "in
accordance with all MSHA requirements and memoranda as well as
with the Commonwealth of Virginia criteria," J.A. 161 (emphasis
16 LONE MOUNTAIN PROCESSING v. BOWSER-MORNER
added), and to answer questions that arose during the federal and state
permitting processes. Thus, the contract required Bowser-Morner to
do more than simply deliver plans that satisfied Lone Mountain’s par-
ticular business needs—the plans also had to comply with significant
state and federal regulatory requirements.
In my view, the presence of these complex regulatory permitting
schemes and Bowser-Morner’s contractual obligation to deliver plans
that conformed with all regulatory requirements distinguishes this
case from King and Nelson. In King and Nelson, the defendant’s con-
tractual obligation was to deliver plans that suited the client’s particu-
lar business needs, and the client was fully capable of determining the
suitability of the plans. Thus, the client’s approval of the plans signi-
fied that the contractual obligation to provide plans had been fulfilled.
In this case, however, while Lone Mountain was capable of reviewing
the plans to determine whether they satisfied its specific business
needs, it did not have the expertise to know whether Bowser-
Morner’s plans complied with the complex regulatory requirements.
That determination could be made only upon approval of the plans by
the appropriate state and federal agencies. Thus, while Lone Moun-
tain’s payment may have indicated that the plans met its specific busi-
ness needs, the payment and approval by Lone Mountain cannot be
viewed as an indication that the plans conformed with state regula-
tions, as required by the contract.
Accordingly, I would hold that Lone Mountain’s design-defect
claims did not accrue until November 17, 1995, when the plans were
approved by Virginia’s Division of Mined Land Reclamation and
Bowser-Morner’s final obligation under the contract was fulfilled.*
Lone Mountain’s complaint, filed in May 2000, was thus timely under
the applicable five-year statute of limitations. From this conclusion it
follows that Lone Mountain’s professional negligence claims were
also timely filed. See, e.g., Oleyar v. Kerr, 225 S.E.2d 398, 400 (Va.
1976) (explaining that a professional malpractice claim, "while
sounding in tort, is an action for breach of contract and thus governed
*This analysis makes it unnecessary for me to consider the signifi-
cance of the actions with regard to the impoundment that Bowser-Morner
took after the April 1995 payment or whether Lone Mountain’s claim
could be considered timely under the "continuing services" doctrine.
LONE MOUNTAIN PROCESSING v. BOWSER-MORNER 17
by the statute of limitations applicable to contracts"). I therefore dis-
sent from the conclusion that Lone Mountain’s breach of contract and
professional negligence claims were not timely filed.