7 F.4th 301
5th Cir.2021Background
- Sanchez (owner) and Crescent (prime contractor) executed an MSA under which Crescent would furnish and pay all labor, warrant compliance with applicable law (including the FLSA), and indemnify Sanchez for breaches of that obligation (MSA §14.2).
- Kevin Langen worked on Sanchez sites as a Crescent subcontractor and later sued Sanchez under the FLSA for misclassification and unpaid overtime.
- Sanchez promptly sought indemnification from Crescent; Crescent denied any duty to defend or indemnify. Sanchez settled confidentially with Langen; Crescent was refused access to settlement terms.
- Sanchez sued Crescent for breach of the MSA and indemnification; both parties moved for summary judgment. The district court granted summary judgment to Crescent, finding no evidence Crescent violated the FLSA and that Sanchez failed to follow indemnity/consent procedures.
- The Fifth Circuit reversed and remanded, holding (1) the pleadings were sufficient to encompass multiple MSA provisions but §14.2 (the FLSA-specific indemnity) controls over more general provisions, (2) genuine fact issues exist about whether Langen was an employee (FLSA status) and thus whether Crescent breached §14.2, and (3) the notice/consent clause (§11.10.3) is a covenant (not a condition precedent) and there is a material fact question whether Crescent unreasonably withheld consent.
Issues
| Issue | Plaintiff's Argument (Sanchez) | Defendant's Argument (Crescent) | Held |
|---|---|---|---|
| Scope of breach / pleading sufficiency | Third‑party complaint adequately alleged breach of multiple MSA provisions tied to FLSA noncompliance | Complaint only tied to §14.2; specific FLSA provision controls and other general provisions cannot expand remedy | Pleading was sufficient to give notice, but §14.2 (specific FLSA indemnity) governs and displaces more general provisions |
| Whether Crescent breached §14.2 (did FLSA violation occur?) | Material fact disputes under the economic‑reality factors show Langen may have been an employee; summary judgment inappropriate | Langen was Crescent’s independent contractor (and alternatively HCE exemption may apply); no FLSA violation, so no indemnity duty | Reversed summary judgment; material fact issues exist about employee status and whether Crescent breached §14.2 — remand for fact finding |
| Effect of Sanchez’s settlement without providing terms to Crescent | §11.10.3 is a covenant, not a condition precedent; Crescent may have unreasonably withheld consent (it repeatedly denied liability) | Sanchez failed to give Crescent notice or an opportunity to consent, so indemnity is barred | §11.10.3 construed as a covenant (not a condition precedent); factual dispute remains whether Crescent unreasonably withheld consent — remand |
| District court award of fees to Crescent | (Implicit) Award premised on prevailing judgment; Sanchez challenges underlying rulings | Crescent awarded fees as prevailing party | Judgment reversed and remanded (underlying summary judgment reversed), so fee award cannot stand without further proceedings |
Key Cases Cited
- Anderson v. Liberty Lobby, 477 U.S. 242 (summary judgment standard)
- McLane Foodservice, Inc. v. Table Rock Rest., 736 F.3d 375 (contract interpretation reviewed de novo)
- Pathfinder Oil & Gas, Inc. v. Great W. Drilling, Ltd., 574 S.W.3d 882 (Tex.) (specific contract provision controls over general)
- Criswell v. European Crossroads Shopping Ctr., Ltd., 792 S.W.2d 945 (Tex.) (conditional language and covenant/condition distinction)
- PAJ, Inc. v. Hanover Ins. Co., 243 S.W.3d 630 (Tex.) (conditions not favored; construe as covenant when reasonable)
- Parrish v. Premier Directional Drilling, L.P., 917 F.3d 369 (5th Cir.) (economic‑reality factors for worker status)
- Faludi v. U.S. Shale Sols., L.L.C., 936 F.3d 215 (5th Cir.) (discussion of FLSA highly compensated employee exemption)
- Cleere Drilling Co. v. Dominion Expl. & Prod., Inc., 351 F.3d 642 (5th Cir.) (actual knowledge can negate fair‑notice defense to indemnity)