Pilgrim's Pride v. Simmons Mill

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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No. 03-1934
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Laura Applewhite Miller, *
Individually and as Administratrix *
of the Estate of Bill Denver *
Applewhite, Deceased, *
*
Plaintiff, *
*
v. *
*
Pilgrim's Pride Corporation, * Appeal from the United States
* District Court for the
Defendant. * Western District of Arkansas.
-------------------------------- *
Pilgrim's Pride Corporation, *
*
Third Party Plaintiff - Appellant, *
*
v. *
*
Simmons Mill Elevator Erection, Inc., *
*
Third Party Defendant - Appellee. *
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Submitted: December 19, 2003

Filed: April 29, 2004
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Before MELLOY, MCMILLIAN, and BOWMAN, Circuit Judges.
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BOWMAN, Circuit Judge.

In this indemnification action, Pilgrim's Pride Corporation ("PPC") appeals the
dismissal of its third-party complaint against Simmons Mill Elevator Erection, Inc.
("Simmons"). We affirm.

This dispute stems from the death of Bill Applewhite, a Simmons employee
and a resident of Texas. Pilgrim's Pride hired Simmons to build and install a salt bin
on top of a feed mill at a PPC facility in Hope, Arkansas. The parties did not execute
a written agreement of any kind to govern their relationship. While working on this
project, Applewhite apparently fell from the top of the feed mill when an adjacent
roof on which he was standing gave way. After the accident, Simmons, a Texas
corporation, fulfilled its statutory obligations to Applewhite's heirs under the Texas
workers compensation laws. His heirs then sued PPC alleging that Applewhite's
death was caused by negligence on the part of PPC. In turn, PPC filed a third-party
complaint against Simmons seeking indemnification. Eventually, PPC settled the suit
with Applewhite's heirs and Simmons moved to dismiss PPC's third-party claim. The
District Court1 determined that Texas law should govern PPC's claim and that Texas
law prohibited such an indemnification action except where the parties had a pre-
existing written agreement that required one party to indemnify the other. Therefore,
the District Court granted Simmons' motion to dismiss the claim. On appeal, PPC
urges that the District Court erred when it concluded that Texas law applied and when
it concluded that Texas and Arkansas law forbade the indemnification suit. We
affirm.

We review a district court's order granting a defendant's motion to dismiss
de novo. Casazza v. Kiser, 313 F.3d 414, 418 (8th Cir. 2002). As does a district
court, we view the allegations in the complaint as true and we view the facts in the

1
The Honorable Harry F. Barnes, United States District Judge for the Western
District of Arkansas.

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light most favorable to the plaintiff. We will affirm the dismissal of the complaint
only if it appears that the plaintiff can prove no set of facts that entitle him to
recovery. Id.

A district court applies the law of the forum state when exercising its diversity
jurisdiction. Klaxon Co. v. Stento Elec. Man. Co., 313 U.S. 487, 496 (1941). In this
case, the parties agree that Arkansas' choice of law doctrines govern the matter, but
disagree as to the outcome of the application. For its part, the District Court applied
the five-factor balancing test that the Arkansas Supreme Court has adopted, see
Williams v. Carr, 565 S.W.2d 400, 404 (Ark. 1978), and held that Texas law applied.
We agree that Texas law governs the merits of this suit.

The Arkansas Supreme Court has adopted Professor Robert A. Leflar's five-
factor approach to deciding choice-of-law questions. Wallis v. Mrs. Smith's Pie Co.,
550 S.W.2d 453, 456 (Ark. 1977). Arkansas has not, however, altogether discarded
the more traditional approach represented by the lex loci delicti rule. Gomez v. ITT
Educ. Servs., Inc., 71 S.W.3d 542, 546 (Ark. 2002) (noting that "the adoption of the
Leflar factors in Wallis and subsequent cases appears to be merely a softening of
what previously had been a rigid formulaic application of the former rule of law").
Accordingly, we must consider the lex loci delicti rule within the framework of the
five Leflar factors: "(1) predictability of results; (2) maintenance of interstate and
international order; (3) simplification of the judicial task; (4) advancement of the
forum's governmental interests; and (5) application of the better rule of law." Id.
(citations omitted). In our view, the question of which State's law should be applied
turns on the fourth factor.

The first of the five Leflar factors is predictability of results. The Gomez court
explained that this factor is primarily aimed at avoiding forum shopping and ensuring
uniform results. Id. at 547. In Hughes v. Wal-Mart Stores, Inc., 250 F.3d 618, 620
(8th Cir. 2001), we noted that under Arkansas law, predictability is ordinarily not a

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crucial concern when the suit arises out of an accident. Because this suit does stem
from an accident and because the laws of Texas and Arkansas would yield
substantially the same result, this factor does not weigh heavily in the balance.

The second and third factors, maintenance of interstate and international order
and simplification of the judicial task, are not at issue here. Parties are unlikely to
seek out Arkansas to undertake tortious behavior and thereby upset interstate order
based on whether Arkansas or Texas law applies in this case. See Gomez 71 S.W.3d
at 547. As for simplification of the judicial task, application of either State's laws will
not simplify our task and, by their very nature, federal courts regularly apply the laws
of foreign jurisdictions, which relegates this factor to a minor concern at most.
Hughes, 250 F.3d at 620.

The fourth factor, advancement of the forum state's governmental interests, is
the crucial factor in this case. The traditional lex loci delicti rule is a reflection of an
older attitude, which held that forum states had an interest in retaining jurisdiction
over, and applying their laws to, suits arising from acts within their jurisdiction so as
to insure that injuries to their citizens were redressed. See, e.g., Int'l Paper Co. v.
Ouellette, 479 U.S. 481, 502 n.1 (1987) (opinion of Brennan, J., concurring).
Arkansas' adoption of the Leflar approach without discarding this traditional rule
shows that this interest is still applicable, but does not control the outcome.
Moreover, the adoption of the Leflar factors indicates that in this age of global
commerce, Arkansas' governmental interests are not fully defined by the narrower lex
loci delicti rule. As we already have noted, Applewhite was a resident of Texas and
was compensated under Texas's workers compensation law. If the deceased
employee were an Arkansas resident, the State of Arkansas would clearly have a
vested interest in the application of the whole of its workers compensation scheme
to the proceedings in order to fully vindicate the rationale behind its laws. As the
case exists now, we can see no state interest that would be advanced by applying

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Arkansas, as opposed to Texas, principles of indemnification.2 Rather, it is in
Arkansas's interest to have the case decided by applying Texas law in order to
vindicate Texas's interest in having its workers compensation scheme applied in a
uniform manner. This principle of comity thus guides our analysis of this factor and
weighs heavily in the balance. See Robert A. Leflar, Choice-Influencing
Considerations in Conflicts Law, 41 N.Y.U. L. Rev. 267, 287 (1966) (discussing
comity as a relevant consideration under the second factor, interstate order).

Finally, we have noted that the fifth factor, application of the better rule of law,
does not reflect a subjective judicial preference for one state's more or less elegant
law, but is aimed at avoiding the application of unfair or archaic laws. Hughes, 250
F.3d at 621. This is not a case where unfair or archaic laws are alleged to be at play.
Professor Robert A. Leflar, in his article, Choice-Influencing Considerations in
Conflicts Law, notes that this factor is also concerned with rejecting laws that would
undermine fair commercial transactions and frustrate the parties' intent. Leflar at
297–304. In this case, the parties declined to execute a written agreement of any type
and, consequently, this concern is absent here.

Application of the five-factor test thus leads us to sustain the District Court's
determination that Texas law should govern this case. This conclusion reflects our

2
In any event, the suit likely could not proceed even if we applied Arkansas
law. Like Texas, Arkansas has found exceptions to the exclusivity-of-remedy
provisions in its workers compensation laws. See Ark. Code Ann. § 11-9-105
(Michie 1987). Though not codified, these exceptions are the same as those allowed
under Texas law. Thus, the aggrieved third party must show an independent duty
"from which an obligation to indemnify might arise." Smith v. Paragould Light &
Water Comm'n, 793 S.W.2d 341, 342 (Ark. 1990). In the absence of a written
contract establishing such an obligation, the third party must point to a statute that
creates a duty to indemnify. See id. at 343; cf. Mosely Machinery Co. v. Gray Supply
Co., 833 S.W.2d 772, 774 (Ark. 1992). As we note infra, PPC has failed to identify
such a statute.

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judgment that Arkansas's state interest is best advanced by upholding principles of
comity, which require that Texas workers compensation law apply to the whole of the
case.

Having decided that Texas law should govern this case, we have little trouble
concluding that the District Court did not err when it granted Simmons's 12(b)(6)
motion to dismiss. The District Court held that section 417.004 of the Texas Labor
Code clearly prohibited this indemnification action by Pilgrim's Pride. Section
417.004 provides:

In an action for damages brought by an injured employee, a legal
beneficiary, or an insurance carrier against a third party liable to pay
damages for the injury or death under this chapter that results in a
judgment against the third party or a settlement by the third party, the
employer is not liable to the third party for reimbursement or damages
based on the judgment or settlement unless the employer executed,
before the injury or death occurred, a written agreement with the third
party to assume the liability.

Tex. Lab. Code § 417.004 (1996) (emphasis added). We agree with the District Court
that this provision's plain language forbids this type of indemnification suit absent a
pre-existing written agreement that so provides. On appeal, PPC urges that Texas
courts have allowed an exception to this general prohibition where the employer's
breach of a statutory duty caused the employee's injury. See Whiteco Metrocom, Inc.
v. Texas Utilities Elec. Co., 30 S.W.3d 421, 424 (Tex. App. 2000). We also agree
that there appears to be such an exception where a duty is created and defined by
statute and where the statute itself provides that the breaching party is responsible for
all damages caused by the breach. See id. at 424–25. In this case, not only has PPC
waived this argument by not presenting it in the District Court, see Heart of Am.
Grain Inspection Servs., Inc. v. Mo. Dept. of Agriculture, 123 F.3d 1098, 1105 (8th
Cir. 1997), it also has failed to point to any specific statutory duty that both creates

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and defines a duty and provides that the breaching party is responsible for all
damages caused by a breach of that duty. See Br. of Appellant at 24 (arguing that
OSHA statutory scheme creates general duty that supports indemnity action).
Because PPC's indemnification suit against Simmons is forbidden by Texas law, the
suit may not proceed.

For the reasons stated, the decision of the District Court is affirmed.
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