MB&R Piping Contractors, Inc. v. Borough of East Brady v. Gibson-Thomas Engineering Co., Inc.
78 C.D. 2016
| Pa. Commw. Ct. | Jan 12, 2017Background
- Borough of East Brady contracted with Gibson-Thomas Engineering (Gibson) to design and manage a wastewater treatment Project; the contract included a broad indemnity clause (including "reasonable attorney’s fees").
- Borough separately contracted with MB&R to construct the Project; disputes led Gibson to advise termination of MB&R’s contract and the Borough did so.
- MB&R sued the Borough for breach of contract and Prompt Payment Act damages; Borough filed a third-party complaint against Gibson seeking indemnification for any liability to MB&R.
- Trial court denied Gibson’s summary judgment and related motions, allowed the Borough’s contractual indemnity claim to proceed to the jury, and denied severance; jury found Borough liable to MB&R and that Borough’s liability arose out of Gibson’s work.
- Trial court entered judgment for MB&R (including Act interest, penalties, and MB&R attorney’s fees) and then entered judgment against Gibson for indemnification including the Borough’s attorney’s fees; appellate court affirmed indemnity liability but vacated and remanded as to the Borough’s attorney’s fees allocation.
Issues
| Issue | Borough's Argument | Gibson's Argument | Held |
|---|---|---|---|
| Whether the indemnity clause required clear & unequivocal language under Perry-Ruzzi before shifting liability | Clause covers liabilities "arising out of or in connection with" Gibson’s performance; Borough seeks contractual indemnity for Gibson-caused liabilities | Clause is broadly worded and fails Ruzzi’s clear-and-unequivocal requirement to indemnify indemnitee for its liabilities | Court: Ruzzi inapplicable here because Borough sought indemnity for liabilities that arose from Gibson’s own performance; clause covered liabilities "arising out of or in connection with" Gibson’s work, so indemnity allowed |
| Whether Borough adequately pled a contractual indemnity claim | Third-party complaint attached the written Agreement with indemnity clause and alleged Gibson caused the injuries and is "required to indemnify" Borough | Gibson argued Borough never pleaded a contract-based indemnity claim specifically | Court: Pleading was sufficient—facts and attached Agreement gave Gibson notice that indemnification (including fees) was sought |
| Ripeness/joinder: Whether indemnity claim was premature before Borough paid MB&R or obtained judgment | Joinder proper to determine liability now and avoid multiple suits; right to recover payment accrues after payment, but entitlement can be adjudicated | Gibson argued indemnity claim was not ripe because Borough had not yet paid MB&R or incurred indemnity obligation | Court: Joinder was proper to determine liability; adjudicating indemnity liability before payment is permissible to resolve underlying responsibility |
| Award of Borough attorney’s fees: entitlement and allocation between defense of MB&R claim vs. pursuing indemnification | Agreement expressly includes attorney’s fees within indemnity; Borough entitled to reasonable fees incurred defending underlying claim | Gibson argued Borough did not plead fees, presented no evidence at trial, and that many fees related to indemnity pursuit (not defense) and thus are not recoverable | Court: Borough entitled to recover fees under the contract, but the trial court erred by awarding all fees without allocating fees incurred defending MB&R (recoverable) versus fees spent pursuing indemnity (not recoverable); vacated and remanded for allocation |
Key Cases Cited
- Ruzzi v. Butler Petroleum Co., 588 A.2d 1 (Pa. 1991) (requiring clear and unequivocal language to indemnify indemnitee for its own negligence)
- Perry v. Payne, 66 A. 553 (Pa. 1907) (early formulation of rule that indemnity for indemnitee’s negligence must be express)
- Deskiewicz v. Zenith Radio Corp., 561 A.2d 33 (Pa. Super. 1989) (distinguishes indemnity for indemnitor’s active negligence vs. insuring indemnitee)
- Chester Carriers, Inc. v. National Union Fire Ins. Co. of Pittsburgh, 767 A.2d 555 (Pa. Super. 2001) (right to enforce indemnity accrues after indemnitee pays the claim)
- Lane v. Commonwealth, 954 A.2d 615 (Pa. Super. 2008) (contract interpretation is a question of law for the court)
- Boiler Engineering & Supply Co. v. General Controls, Inc., 277 A.2d 812 (Pa. 1971) (only fees spent defending the underlying action are recoverable; fees spent on indemnity litigation are not)