Continental Motors, Inc. v. Jewell Aircraft, Inc.
1:12-cv-00221
S.D. Ala.Oct 3, 2013Background
- In 2006 an airplane crash led to the Crouch Action against Continental; plaintiffs alleged defects including negligent installation of a magneto that had been overhauled/installed by Jewell entities.
- Continental prevailed at trial in the Crouch Action; its post-trial request for fees against the Crouch plaintiffs was denied and affirmed on appeal.
- Continental sued Jewell Aircraft under a 2005 Product Support Agreement (Paragraph 21) seeking contractual indemnity and insurance procurement for defense costs and attorneys’ fees incurred defending the negligent-installation claim in the Crouch Action.
- Paragraph 21 requires Distributor (Jewell) to "indemnify and hold TCM harmless … to the extent that such claims … have resulted from or arisen out of any act or omission of Distributor, its officers, agents, representatives, servants, or employees." Paragraph 34(b) prescribes notice mechanics.
- Jewell moved for summary judgment on multiple grounds (demand/notice, scope of Paragraph 21, whether fees are recoverable absent specific "defend" language or an underlying judgment/settlement, vicarious-liability coverage, judicial estoppel, temporal limits, and entitlement to fees-on-fees).
- The court denied summary judgment on most grounds, holding: no Alabama demand-formality requirement; contractual indemnity can include defense costs/attorney fees without explicit "defend" language; vicarious-liability (negligent-installation) claims fell within Paragraph 21; judicial estoppel did not apply because Continental was not successful in asserting the contrary position in the prior case; but Jewell’s obligation terminated after the district court granted judgment as a matter of law to Continental on the negligent-installation claim (Aug. 4, 2011), so fees incurred after that date are not recoverable.
Issues
| Issue | Plaintiff's Argument (Continental) | Defendant's Argument (Jewell) | Held |
|---|---|---|---|
| Was a written demand to Jewell required to trigger indemnity? | Alabama requires notice (satisfied); no separate formal demand prerequisite. | No demand was made to Jewell (letters went to JJA), so indemnity never triggered. | Demand-formality not required under Alabama; Jewell failed to show the law imposes a separate demand rule. Summary judgment denied on this ground. |
| Was notice/demand timely and compliant with contract notice clause? | Actual notice occurred; no prejudice from any delay. | Notices did not strictly follow ¶34(b) and were untimely. | Paragraph 34(b) inapplicable or not shown to be violated; Jewell failed to show prejudice from any delay; summary judgment denied. |
| Does Paragraph 21 require a judgment or settlement (or a finding of Jewell fault) before indemnity for defense costs? | Paragraph 21 obligates Jewell to indemnify for claims arising from Jewell’s acts; indemnity for defense costs is available without judgment/settlement. | Indemnity requires a finding of liability (or settlement) or a finding that Jewell caused the injury. | Court rejected Jewell’s reliance on Steed and Rountree; under Alabama law and persuasive authority, indemnity for defense costs may be owed without a money judgment or settlement. Summary judgment denied. |
| Does Paragraph 21 include attorneys’ fees/defense costs despite lacking the word "defend"; does it cover vicarious-liability claims; is judicial estoppel applicable? | "Indemnify and hold harmless" presumes inclusion of reasonable defense costs/fees (Stone and other Alabama authority); ¶21’s plain text covers claims arising from acts/omissions of Distributor, including vicarious-liability/negligent-installation claims; Continental’s inconsistent prior position was rejected by the Crouch court, so judicial estoppel fails. | Omission of the word "defend" excludes defense costs; ¶21 does not reach vicarious liability claims; Continental previously took the opposite position and should be estopped. | Court held Stone and Alabama law support recovery of attorney’s fees as part of indemnity even without the word "defend"; ¶21’s plain language covers vicarious-liability claims such as negligent installation; judicial estoppel inapplicable because Continental was not successful on the prior inconsistent position. Summary judgment denied on these points. |
Key Cases Cited
- Stone Bldg. Co. v. Star Elec. Contractors, Inc., 796 So.2d 1076 (Ala. 2000) (Alabama Supreme Court recognizing that an indemnity to "save harmless" includes defense costs and attorney fees)
- Burkes Mechanical, Inc. v. Ft. James-Pennington, Inc., 908 So.2d 905 (Ala. 2004) (indemnitee must timely notify indemnitor; untimely notice without shown prejudice is not a defense)
- Holcim (US), Inc. v. Ohio Cas. Ins. Co., 38 So.3d 722 (Ala. 2009) (contracts, including indemnity agreements, construed as written to effect parties’ intent)
- Rountree Transport & Rigging, Inc. v. National R.R. Passenger Corp., 286 F.3d 1233 (11th Cir. 2002) (applied Florida law; relied on specific clause language limiting indemnity to instances of indemnitor’s negligence)
- Steed v. Cent. of Ga. Ry. Corp., 529 F.2d 833 (5th Cir. 1976) (federal decisions addressing preconditions to contractual indemnity under other jurisdictions)
- E.C. Ernst, Inc. v. Manhattan Constr. Co. of Tex., 551 F.2d 1026 (5th Cir. 1977) (presumption that indemnity agreements include attorney’s fees absent explicit exclusion)
- Shannon v. Kaiser Aluminum & Chem. Corp., 749 F.2d 689 (11th Cir. 1985) (indemnitee entitled to recover reasonable attorney’s fees under indemnity agreement regardless of suit outcome)