United States Court of Appeals
For the First Circuit
Nos. 04-2365, 04-2366
REED & REED, INC.; ST. PAUL FIRE AND MARINE
INSURANCE COMPANY,
Plaintiffs, Appellees/Cross-Appellants,
v.
WEEKS MARINE, INC.,
Defendant, Appellant/Cross-Appellee.
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MAINE
[Hon. D. Brock Hornby, U.S. District Judge]
Before
Boudin, Chief Judge,
Torruella and Dyk,* Circuit Judges.
Leonard W. Langer with whom Marshall J. Tinkle and Tompkins,
Clough, Hirshon & Langer, P.A. were on brief for defendant.
David J. Perkins with whom Perkins Olson, P.A. was on brief
for plaintiffs.
December 19, 2005
*
Of the Federal Circuit, sitting by designation.
BOUDIN, Chief Judge. During a construction project, a
barge owned by one project subcontractor, Weeks Marine, Inc.
("Weeks"), collided with underwater railways located on the
property of another project subcontractor, Reed & Reed, Inc.
("Reed"). The ultimate question on this appeal is whether a damage
claim against Weeks by Reed and its insurer is barred by a so-
called waiver-of-subrogation provision embedded in the complex
contractual scheme governing the project.
In 1998, Bath Iron Works ("BIW") and Clark Builders of
Maine ("Clark") entered into a construction contract ("BIW-Clark
contract") to build a land-level transfer facility for BIW on the
Kennebec River. Clark subcontracted with Atkinson Construction
("Atkinson"), which in turn subcontracted work separately to
Callahan Brothers ("Callahan") and Weeks. Callahan--a union-labor
affiliate of Reed--entered into a subcontract with Reed, engaging
Reed to construct marine railway tracks ("ways") in a riverside
yard owned by Reed across the river from the main BIW facility.
Callahan intended to use the Reed ways to move a number
of large concrete blocks (called "landing grids"), weighing about
400 tons each, into the Kennebec River for transport by Weeks to
the main construction site for use as dry-dock supports. Callahan
also separately leased from Reed the yard in which the ways were to
be built. Thus, Callahan could manufacture the grids at Reed's
yard and transport them to the river via the constructed ways.
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Weeks would then pick up the grids from the river end of the ways
and transport them across the river by barge.
After the ways were completed in the summer of 2000, the
barge transports commenced. During one of the transports,
occurring on October 11, 2000, the Weeks barge damaged the
submerged ways; the ways, although part of the leased yard,
remained Reed's property and were available for future use by Reed
in its own right. The damage was repaired, and the transfers
continued. In due course, the damage caused by Weeks to Reed's
ways was reimbursed by Reed's property insurer, St. Paul Fire and
Marine ("St. Paul").
Reed and St. Paul then brought suit in district court
against Weeks, and after a bench trial, the court found Weeks
liable for negligence, awarding Reed and St. Paul $298,100 in
damages--the amount the court found necessary to restore the ways
to their pre-collision condition. Weeks now appeals from the
judgment; Reed cross-appeals (an unnecessary step) to support the
judgment on alternative grounds not adopted by the district court.
In the district court, much of the controversy centered
around a waiver-of-subrogation clause invoked by Weeks as barring
recovery by Reed (and therefore by St. Paul as the subrogee
standing in Reed's shoes). The clause was contained in Exhibit E
to the Atkinson-Callahan contract and provided as follows:
10. Waiver of Subrogation - To the extent that
a loss is covered by insurance in force, and
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recovery is made for such loss, the BIW and
Contractor and Subcontractor's [sic] hereby
mutually release each other from liability and
waive all rights of subrogation and all rights
of recovery against each other for any loss
insured against under their respective
policies (including extended coverage), no
matter how caused, it being understood that
the damaged party will look solely to its
insurer for reimbursement. BIW shall require
all Subcontractors to similarly waive their
rights of subrogation in each of their
respective construction contracts with respect
to the work.
Exhibit E, obscurely drafted in the tradition of
insurance policies and related documents, described a BIW-
controlled insurance regime for subcontractors on the project but
also contemplated that some subcontractors might not be covered by
this regime and imposed separate requirements upon them. It is
unclear whether the waiver provision, placed between provisions
directed at the two different groups, applied to both groups or
only the former.
Even greater confusion attended the question whether
Exhibit E, whatever its meaning as to covered parties, applied to
Reed at all. It was not attached to the Callahan-Reed contract,
nor was it specifically mentioned in that contract. Weeks,
however, asserted that Exhibit E bound Reed because of language in
the Callahan-Reed contract that stated, inter alia, that
the GENERAL CONTRACT documents are
incorporated in this agreement by this
reference, with the same force and effect as
if same were set forth at length herein; and
that the SUBCONTRACTOR will be bound by any
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and all contract documents insofar as they
relate in any part or in any way, directly or
indirectly, to the work covered by this
agreement.1
Whether Exhibit E constituted one of the "general contract
documents" was disputed.
Following a bench trial, the district court made a number
of findings that strongly suggested that the waiver provision would
apply to Reed for any damage that occurred to Reed's property in
the course of its work under the Callahan-Reed contract. However,
the district court also concluded that the damage had occurred
after Reed had completed its basic work (construction of the ways),
and that the waiver provision had no effect on Reed's rights as a
property owner to collect from Weeks for damage later caused by
Weeks to Reed's property.
On appeal, Weeks urges that the district court read the
waiver provision too narrowly. Reed not only defends the district
court's rationale for deciding in Reed's favor, but also argues
that it (Reed) was never bound by Exhibit E at all, or, if it was,
that the waiver provision did not apply because Reed was not part
1
A companion provision in the Callahan-Reed contract stated:
Except as modified by this Subcontract, Subcontractor
agrees to adhere to and be bound to the Contractor by all
of the provisions of the General Contract and to the
contract documents affecting subcontractor's work
hereunder, and, insofar as its work is concerned, to
assume towards the Contractor all of the duties,
obligations and liabilities that the Contractor assumes
toward the Owner.
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of the BIW-controlled insurance program (and--Reed asserts--the
waiver applied only to such participants). Weeks contests these
propositions and, among other assertions, argues that Callahan and
Reed are alter egos.
It is uncertain whether this tangled dispute, with its
idiosyncratic documentation, has a "right" answer in any meaningful
sense, and given the litigation expenses, it is a mystery why it
was not settled. Still, it must now be decided. As to
construction of contract language, our review is plenary, Principal
Mut. Life Ins. Co. v. Racal-Datacom, Inc., 233 F.3d 1, 3 (1st Cir.
2000), but as to application, some deference is due to the
factfinder, Bolton v. Taylor, 367 F.3d 5, 7-8 (1st Cir. 2004).
In our view, the principle embodied in the district
court's reading of the waiver provision is correct and its
application to these facts, although a close call, should be
sustained. For the purposes of analysis, we assume arguendo that
Exhibit E was incorporated into the Callahan-Reed contract so far
as it might be applicable to the present dispute.2
2
The district court found that the "general contract" referred
to in the Callahan-Reed contract is the Atkinson-Callahan contract
(rather than the BIW-Clark contract), and that Exhibit E was
incorporated as a whole into this contract. The district court did
not address the separate Reed claim that even if Exhibit E does
apply, it applies only to subcontractors enrolled in the BIW-
sponsored insurance program--an issue not easily resolved on this
record.
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Even if Exhibit E applied to Reed, however, it waived
Reed's rights against Weeks only insofar as they were within the
scope of the provision. In delineating the scope of the waiver
provision, the district court held that the waiver would apply only
to claims related to Reed's work under the Callahan-Reed contract.
It stressed that the contract by its explicit terms incorporated
provisions associated with the general contract only so far as they
"relate[d]" to or "affect[ed]" Reed's "work" for Callahan.
Weeks' broadest argument to the contrary is that the
waiver provision blocks any claims by Reed against Weeks (at least
so far as they are covered by insurance); but this ignores the
"related"/"affected" language. Weeks claims, in its reply brief,
that the "related to" language does not modify or delimit the
incorporation of the "general contract" to which Exhibit E is an
annex; but a careful reading of the Callahan-Reed contract
indicates otherwise.
Weeks' argument turns upon the fact that the
incorporation provisions quoted above (see note 1 above and
accompanying text) use the related/affected phrases to qualify
"contract documents," and Weeks says that this does not include the
"general contract" itself. Yet this distinction is debatable as
grammar and artificial in substance. Furthermore, the phrase
"insofar as its [Reed's] work is concerned" in the closing sentence
of the second incorporation provision (note 1, above) is clearly
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addressed to the "duties, obligations and liabilities" imposed
pursuant to the general contract.
Weeks' argument also proves too much. Suppose that two
years after Reed had finished all association with the BIW project,
a Weeks barge in the middle of the river slipped loose and
eventually drifted into Reed's ways, damaging them again. It could
hardly be thought that such an incident was covered by a waiver
clause framed to govern work that Reed had long completed. Thus,
at most, the waiver provision applies to claims by Reed related to
or arising out of the work that Reed contracted to perform under
the Callahan-Reed contract.
Even so narrowed, it is a close question whether the
incident is sufficiently tied to Reed's contracted-for work to come
within the waiver provision. The district court found as follows:
By October 11, 2000, Reed & Reed had
completed the ways and therefore completed the
work covered by its subcontract with Callahan.
Reed & Reed's claim in this lawsuit stems not
from any injury it suffered as a subcontractor
building the ways, but from an injury it
suffered as property owner.
After Reed completed its work, the district court stated, it was
merely a property owner renting its yard and ways to Callahan and
"Reed did not waive its right as a property owner to recover for
damage negligently inflicted upon its property" by Weeks.
In Weeks' favor is Maine case law supporting a generous
reading of waiver-of-subrogation clauses in the interest of
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avoiding litigation--a central aim of such clauses. See, e.g.,
Reliance Nat'l Indem. v. Knowles Indus. Servs., Corp., 868 A.2d
220, 225-27 (Me. 2005); Willis Realty Assocs. v. Cimino Constr.
Co., 623 A.2d 1287, 1288 (Me. 1993). This is reinforced by some
language in the incorporation clauses that extends all contract
provisions to Reed "insofar as they relate in any part or in any
way, directly or indirectly, to the work covered by" the Callahan-
Reed contract.
Yet what that "work" encompassed remains in dispute.
According to Reed, its work was to construct the ways. According
to Weeks, even though Reed had completed its basic task of building
the ways well before the October 11 accident, it had ongoing
ancillary duties (e.g., to repair defects in its work found within
one year), and--Weeks argues--Reed's own conduct after it had
completed construction shows that its "work" had not been completed
at the time of the accident.
The contract language itself is not especially helpful to
Weeks. Nearly all of the items listed in the scope of work clause
clearly deal with the construction and general setup of the ways;
none directly references any sort of post-construction duties. The
duty-to-repair-defects provision does extend beyond the completion
of the ways, but it is a limited, contingent obligation, and the
district court's findings as to the cause of the accident attribute
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it to Weeks' negligent operations, not to any defect in the
original construction.
This brings us to Weeks' claim that Reed's actual conduct
showed that its work extended beyond the completion of the ways.
"The parties to an agreement know best what they meant,"
Restatement (Second) of Contracts § 202 cmt. g (1981), and thus the
parties' subsequent course of performance may be instructive in
contract interpretation. Id. § 202(4). But much of Reed's post-
construction conduct, such as sending construction details to
Atkinson and permitting Atkinson to shorten one of the ways (both
completed prior to the October 11 incident), could as easily be
taken to demarcate the completion of Reed's own work.
Weeks argues that Reed was involved in more substantial
post-construction activities, such as monitoring the loading of the
grids and assisting Weeks in the loading process. The record is
far from clear as to whether Reed in fact took part in such
activities. Given the deference due to the factfinder, we accept
the district court's characterization.
In sum, by the time of the accident, Reed had completed
the ways and merely permitted the use of its ways for the launching
of the concrete blocks. This latter engagement was not done in the
performance of the Callahan-Reed contract; there is nothing
whatsoever in that contract about such an obligation. Reed's ways
were made available to Callahan for launching the grids or for any
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other purpose by virtue of Callahan's separate lease of the yard
from Reed--a lease that (as the district court pointed out)
contains no waiver-of-subrogation clause.
The outcome admittedly turns on formalities: the formal
corporate separation of two close affiliates--Callahan and Reed--
and the formal separation of Reed's construction work for Callahan
from its lease of its property to Callahan. These separations, in
turn, derived in part from the irrelevant fact that Reed was a non-
union contractor; otherwise, Reed might have contracted directly
with Atkinson to build the ways and launch the grids.
Weeks contests the respect given to the formal separation
between Callahan and Reed, arguing that two passages in its post-
trial brief to the district court raised a veil-piercing claim.
These passages--which contain only passing references to the
possibility that Reed and Callahan may not be independent entities-
-do not represent a developed argument. The veil-piercing argument
is thus unavailable on appeal. Daigle v. Me. Med. Ctr., Inc., 14
F.3d 684, 687 (1st Cir. 1994).
Finally, focusing upon the Callahan-Reed lease, Weeks
argues that the lease required Callahan, not Weeks, to indemnify
Reed for any damage to the yard (including the ways), and did not
give Reed a right of action against anyone other than Callahan. On
the contrary, Reed was not obliged to collect from Callahan, and
the lease did not surrender potential Reed claims against third
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parties. As the owner, Reed was free (so far as the lease was
concerned) to sue anyone who negligently damaged its yard or ways.
Affirmed.
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