Opinions of the United
2009 Decisions States Court of Appeals
for the Third Circuit
1-12-2009
Amer Intl Ins v. Lampe Gmbh
Precedential or Non-Precedential: Non-Precedential
Docket No. 07-4052
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NOT PRECEDENTIAL
IN THE UNITED STATES COURT
OF APPEALS
FOR THE THIRD CIRCUIT
NO. 07-4052
AMERICAN INTERNATIONAL INSURANCE
COMPANY OF PUERTO RICO
v.
LAMPE GMBH; ZUMRO INC.
American International Insurance
Company of Puerto Rico,
Appellant
On Appeal From the United States
District Court
For the District of the Virgin Islands
(D.C. Civil Action No. 03-cv-00069)
District Judge: Hon. Raymond L. Finch
Argued December 8, 2008
BEFORE: FISHER, JORDAN and
STAPLETON, Circuit Judges
(Opinion Filed January 12, 2009)
Andrew C. Simpson (Argued)
5025 Anchor Way, Gallows Way - Suite One
Christiansted
St. Croix, USVI 00820
Attorney for Appellant
Bruce P. Bennett (Argued)
Hunter, Cole & Bennett
1138 King Street - Suite 301
Christiansted
St. Croix, USVI 00820
Attorney for Appellee LAMPE GMBH
James L. Hymes, III (Argued)
Hymes & Zebedee
10 Norre Gade - 3rd Floor
P.O. Box 990
Charlotte Amalie
St. Thomas, USVI 00804
Attorney for Appellee ZUMRO INC.
OPINION OF THE COURT
STAPLETON, Circuit Judge:
I.
On April 21, 2001, Patrick Richards, an employee of a maintenance subcontractor
at Hovensa, LLC’s (“Hovensa”) refinery on St. Croix, United States Virgin Islands, was
seriously injured when struck by a sewer plug that had dislodged from a storm sewer line.
Richards sued Hovensa and a Hovensa subcontractor, and the case was defended by
2
Hovensa’s insurer, American International Insurance Company of Puerto Rico
(“AIICO”). This suit was settled on March 14, 2003, by a settlement agreement that
released all of Richards’ “past, present or future claims” against the defendants, but
expressly reserved and assigned to AIICO “all claims” that Richards might have against
manufacturers or distributors of “all equipment that may have caused or contributed to his
injuries.” App. at 80. This reservation and assignment approach was chosen by AIICO
“to preserve [its] options to pursue all or a portion of the settlement it was paying.”
Appellant’s Br. at 6.1
On April 22, 2003, AIICO brought this diversity action against Lampe, GMBH
(“Lampe”) and Zumro, Inc. (“Zumro”), asserting subrogated, product liability claims as
Hovensa’s insurer. Four years later and shortly before the scheduled trial, on June 19,
2007, AIICO amended its complaint to assert claims for “indemnification or
contribution.” The amended complaint alleged that the “assignment of Patrick Richards’
claims against . . . Lampe and Zumro precluded [him] from asserting any claims [against
them] as AIICO controlled those claims.” App. at 34.
1
As AIICO’s brief further explains:
When drafting a release, lawyers retained by the insurer to defend an
insured need to keep as many options open for the insurer as possible
because the corporate decisions within the insurance company as to
whether, and how, to attempt to recoup a settlement often are not made by
the lawyer or claims adjuster negotiating the settlement.
Appellant’s Br. at 14.
3
Lampe and Zumro moved for summary judgment asserting, inter alia, that AIICO
could not satisfy all elements of its claims for contribution and indemnity because its
settlement had not discharged their liability to Richards. In response, AIICO insisted that
it was entitled to recover because it had allowed the statute of limitations to run on
Richards’ assigned claims against Lampe and Zumro. The District Court granted
summary judgment for Lampe and Zumro.
II.
The District Court began its analysis be referencing our recent discussion
regarding its task in determining the applicable law in diversity cases now that there is a
Supreme Court of the Virgin Islands:
Going forward, now that the Virgin Islands has established an
insular appellate court and will begin developing indigenous
jurisprudence, the District Court, when exercising jurisdiction
over cases requiring the application of Virgin Islands law,
will be required to predict how the Supreme Court of the
Virgin Islands would decide an issue of territorial law, and
should seek guidance from Superior Court decisions in
undertaking this endeavor. As noted above, however, the
District Court will not be bound by Superior Court decisions.
See Houbigant, Inc. v. Federal Ins. Co., 374 F.3d 192, 199
(3d Cir. 2004) (district court sitting in diversity is not bound
by state trial court rulings).
Edwards v. Hovensa, 497 F.3d 355, 361-62 (3d Cir. 2007).
Looking to a decision of the Superior Court of the Virgin Islands as a relevant
“‘datum’ for ascertaining territorial law,” the District Court first turned to 1 V.I.C. § 4,
which provides as follows:
4
“[t]he rules of common law, as expressed in the restatements of law
approved by the American Law Institute, and to the extent not so expressed,
as generally understood and applied in the United States, shall be the rules
of decision in the courts of the Virgin Islands in cases to which they apply,
in the absence of local laws to the contrary.
The District Court then predicted that the Supreme Court of the Virgin Islands,
based on this statute, would find the controlling law in Sections 22, 23 and 24 of
Restatement (Third) of Torts, which provide in relevant part (emphasis added):
§ 22. Indemnity
(a) When two or more persons are or may be liable for the same
harm and one of them discharges the liability of another in whole or in part
by settlement or discharge of judgment, the person discharging the liability
is entitled to recover indemnity in the amount paid to the plaintiff, plus
reasonable legal expenses, if:
....
(2) the indemnitee
(i) was not liable except vicariously for the tort of the
indemnitor, or
(ii) was not liable except as a seller of a product supplied to
the indemnitee by the indemnitor and the indemnitee was not
independently culpable.
***
§ 23. Contribution
(a) When two or more persons are or may be liable for the same
harm and one of them discharges the liability of another by settlement or
discharge of judgment, the person discharging the liability is entitled to
recover contribution from the other, unless the other previously had a valid
settlement and release from the plaintiff.
(b) A person entitled to recover contribution may recover no more
than the amount paid to the plaintiff in excess of the person’s comparative
share of responsibility.
(c) A person who has a right of indemnity against another person
5
under § 22 does not have a right of contribution against that person and is
not subject to liability for contribution to that person.
***
§ 24. Definition and Effect of Settlement
(a) A settlement is a legally enforceable agreement in which a
claimant agrees not to seek recovery outside the agreement for specified
injuries or claims from some or all of the persons who might be liable for
those injuries or claims.
(b) Persons released from liability by the terms of a settlement are
relieved of further liability to the claimant for the injuries or claims covered
by the agreement, but the agreement does not discharge any other person
from liability.
The District Court concluded (1) that under this governing law “a condition for
recovery of either indemnity or contribution is that the liability of the non-settling
tortfeasor be discharged ‘by settlement or judgment’” and (2) that the only settlement or
judgment before it was a settlement that not only did not discharge Lampe and Zumro
from liability to Richards but, indeed, expressly preserved and assigned to AIICO
Richards’ claims against them. The Court held that the requirement of “a discharge by
settlement” as used in the Restatement (Third) was not satisfied in the situation in which
“a settling defendant with an assigned interest in the injured party’s causes of action
against non-settling tortfeasors, unilaterally allows the expiration of the statute of
limitations on such causes of action.” App. at 7.
III.
As we have noted, the District Court looked for guidance to a decision of the
6
Superior Court of the Virgin Islands in a similar case involving the elements of indemnity
and contribution claims under Virgin Islands law. It indicated that it found the reasoning
of that case, In re: Kelvin Manbodh Asbestos Litigation Series, 2006 WL 1084317 (V.I.
Super. Ct.), to be persuasive. The Superior Court there held that Sections 22-24 of the
Restatement (Third) of Torts represented the law of the Virgin Islands because (a) for
purposes of 1 V.I.C. § 4 there is no contrary “local law,” and (b) those sections, unlike the
corresponding sections of the Restatements (First) and (Second), accurately state the
current, majority view of the common law in the United States.
While we too are impressed with the thoughtful and thorough opinion of the
Superior Court, we have no occasion here to review its conclusion that 1 V.I.C. § 4,
requires application of Sections 22-24 of the Restatement (Third) to claims for
contribution or indemnity.2 AIICO accepts that those Sections of the Restatement (Third)
state the controlling law of the Virgin Islands. It insists, however, that the District Court
misapplied that law.
IV.
AIICO correctly insists that the purpose of the indemnity and contribution rules set
2
As the Superior Court jurisprudence demonstrates, there are a number of areas
regarding the construction of 1 V.I.C. § 4 that are still open for debate. For a thorough
and insightful review of this jurisprudence, see the earliest opinion of the Superior Court
in the Manbodh litigation, 2005 WL 3487838 (2005) (applying 1 V.I.C. § 4 in the context
of failure to warn causes of action predicated on both negligence and strict liability and
the sophisticated intermediary defense).
7
forth in the Restatement (Third) is to avoid one party having to shoulder all financial
responsibility for a negligent act if another’s tortious act caused or contributed to the
injury. AIICO also correctly insists that the purpose of the “discharge by settlement or
judgment” requirement is to accomplish this primary objective while assuring that the
party required to shoulder that burden will not have “to pay twice for the same injury.”
Appellant’s Br. at 8. AIICO then concludes that, because the Restatement is a statement
of common law principles and not a statute,3 any situation which ultimately results in the
injured party being unable to sue the indemnitor or contributor is a “discharge by
settlement or judgment.”4 We are not persuaded that the Supreme Court of the Virgin
3
AIICO argues that it is inappropriate to treat the Restatement as a statute and that
strictly adhering to the plain meaning of the language is akin to legislative construction
and is unduly restrictive. In AIICO’s view, it is the purpose of the provision that should
be paramount. We do not disagree either with the obvious point that the Restatement is
not a statute or with the idea that policy purposes of the Restatement should be vindicated
in judicial decisions. We do disagree, however, that looking at the plain language of the
Restatement is at odds with its sound application as a body of common law rules. As
more fully described herein, certainty and finality are important purposes of the provision
in question and are far better served by applying the provision according to its terms.
Finally, as to AIICO’s additional argument that differences between the Restatement
(Second) and the Restatement (Third) on this point work an injustice here because they
amount, in essence, to an ex post facto application of a new law, we refer AIICO to its
own accurate assertion that we are dealing with common law developments, not statutory
enactments. The Restatement (Third) was published in 1999 and highlighted for the
public the evolving view of the requirements for indemnification and contribution. We
perceive no unfairness in applying that common law to AIICO.
4
In its summary judgment brief before the District Court, AIICO, for example, adopted
an alternative approach to satisfying the discharge by settlement requirement:
To the extent that the defendants are not satisfied that the assignment itself
did not protect them, AIICO, as assignee of Patrick Richards, expressly and
8
Islands would interpret “discharge by settlement or judgment” in this manner.
Since 1999, the Restatement (Third) has clearly and unambiguously required a
“discharge by settlement or judgment,” and we predict that the Virgin Islands Supreme
Court will give the Restatement its plain meaning. AIICO’s reading of Sections 22
through 24 effectively removes the concept of a “discharge by settlement or judgment”
altogether from the text of the Restatement. We would be reluctant to predict that the
Virgin Islands Supreme Court would accept the invitation to so alter the text even if we
were persuaded that that concept served no purpose beyond precluding double liability.
But, in any event, we are not so persuaded. The linkage of the required discharge with
the act of settlement or the entry of judgment and, accordingly, with a writing that effects
the relevant discharge by operation of law achieves a clarity and certainty that would
otherwise be lacking. Lampe’s and Zumro’s liability to Richards, for example, was not
extinguished at the time of the settlement; those claims remained viable until whatever
point in time AIICO ultimately decided it was not in its own best interest to press them.
In addition to this temporal uncertainty, accepting AIICO’s invitation to amend the
Restatement would predictably lead to additional litigation between tortfeasors over
which extinguishments or cessations of liability are sufficient to qualify a tortfeasor for
without reservation waives and discharges any claims that Patrick Richards
has or had against either Lampe or Zumro.
Appellant’s Br. at 23.
9
indemnity or contribution.
Contrary to AIICO’s suggestion, we do not view Comment b to Section 22 as
rendering “discharge by settlement or judgment” fortuitous surplusage. That Comment
reads in relevant part:
[A]n indemnitee must extinguish the liability of the indemnitor to collect
indemnity. The indemnitee may do so either by a settlement with the
plaintiff that by its terms or by application of law discharges the indemnitor
from liability or by satisfaction of judgment that by operation of law
discharges the indemnitor from liability. See § 16, Comment d (discharge
of another tortfeasor’s liability when both tortfeasors are treated as a single
party and one settles). . . .
While this Comment does contemplate the sufficiency of a settlement agreement
that extinguishes the liability of the indemnitor “by application of law” as well as “by its
terms,” its purpose is not to sever the connection between the required discharge and a
settlement agreement. Its purpose, as indicated by the citation, is to address situations
where two parties are regarded as one under the Restatement, as for example where an
employer is vicariously liable for the tort of an employee and the two are treated as one.
See Section 7, Comment j; Section 16d, Comment d. We find Comment b entirely
consistent with the insistence of Section 22 that there be a settlement agreement or
judgment that effects the discharge by operation of law.
V.
We will affirm the judgment of the District Court.
10