2012-406, Joanne Gray & a. v. Leisure Life Industries a/k/a Leisure Life Industries, Inc. a/k/a Leisure Life Industries, LLC & a.

No. 2012-406 Rockingham

and Jonathan Gray. The defendants also appeal the trial court’s order denying ___________________________ indemnity filed by the plaintiffs, JoAnne Gray, Jeffrey Gray, Jeffrey J. Gray, THE SUPREME COURT OF NEW HAMPSHIRE

and granting the cross-motion for entry of final judgment on the issue of the Superior Court (McHugh, J.) denying their motion for summary judgment page is: http://www.courts.state.nh.us/supreme. Apparel Group, Inc. (Knothe) (collectively, the defendants), appeal an order of a.m. on the morning of their release. The direct address of the court's home Industries, Inc. a/k/a Leisure Life Industries, LLC (Leisure Life) and Knothe reporter@courts.state.nh.us. Opinions are available on the Internet by 9:00 BASSETT, J. The defendants, Leisure Life Industries a/k/a Leisure Life

of Atlanta, Georgia (Michael J. Goldman on the brief), for the defendants. Gormley on the brief and orally), and Hawkins Parnell Thackston & Young LLP, Hoefle, Phoenix, Gormley & Roberts, P.A., of Portsmouth (Lawrence B.

and Mr. Stein orally), for the plaintiffs. The Stein Law Firm, PLLC, of Concord (Robert A. Stein & a. on the brief,

to press. Errors may be reported by E-mail at the following address: Opinion Issued: October 1, 2013

editorial errors in order that corrections may be made before the opinion goes Hampshire, One Charles Doe Drive, Concord, New Hampshire 03301, of any Readers are requested to notify the Reporter, Supreme Court of New

well as formal revision before publication in the New Hampshire Reports. NOTICE: This opinion is subject to motions for rehearing under Rule 22 as against them for five million dollars. Orvis settled the claims against it for one

p. 2 involved in the sale and manufacture of the wood stove settled the claims

trial, all parties except Leisure Life settled with the plaintiffs. The parties On September 13, 2010, immediately prior to the scheduled start of the

Orvis.

participated in settlement discussions, they did not offer to indemnify or defend should “assume the indemnity and defense of Orvis.” Although the defendants that it was entitled to indemnification and, therefore, that the defendants

the plaintiffs. In January 2010, Orvis sent a letter to the defendants asserting

attorney’s fees that it had incurred in defending against the claims asserted by Orvis. In addition, Orvis asserted that it was entitled to recover the costs and plaintiffs, including the amount of any judgment against, or settlement by,

contribution from the defendants for any damages it ultimately owed to the

simply a ‘pass-through’ entity.” As a result, Orvis sought indemnity or

involvement in the design and manufacturing of the robe” and that it “was defendants for indemnification and contribution. Orvis claimed that it “had no In 2009, Orvis successfully moved to add third-party claims against the

denied the motion. purchase did not support holding Knothe liable as a successor. The trial court the same entity that manufactured the robe, and the circumstances of the

argued that it was not liable for the plaintiffs’ injuries because it was no longer

division of Knothe at the time Mrs. Gray sustained her injuries. Leisure Life asserting that Leisure Life was purchased by Knothe in 2004 and was a In 2008, Leisure Life moved for summary judgment against the plaintiffs,

upon the liability of the defendants.

asserted claims of direct liability as well as a strict liability claim premised counts sounding in negligence and strict liability. As to Orvis, the plaintiffs the plaintiffs asserted numerous claims in connection with the robe, including

the manufacture and sale of the wood stove. With respect to the defendants,

with other parties involved either in the design and distribution of the robe or In the fall of 2007, the plaintiffs sued the defendants and Orvis along

caught fire. As result, she was severely burned and suffered extensive injuries.

the robe when she added a piece of firewood to her wood stove and the robe the manufacturer, Leisure Life. On January 9, 2005, Mrs. Gray was wearing Company (Orvis) for his wife, JoAnne Gray. Orvis had purchased the robe from

about December 3, 1996, Jeffrey Gray purchased a robe from The Orvis

The trial court found, or the record supports, the following facts. On or

claim.

court’s denial of summary judgment with respect to the plaintiffs’ indemnity their motion for summary judgment on successor liability. We reverse the trial the nonmoving party and, if no genuine issue of material fact exists, we

p. 3 consider the evidence in the light most favorable to each party in its capacity as When “reviewing the trial court’s summary judgment rulings, we

Leisure Life.

argue that the trial court erred in finding Knothe liable as a successor to costs and that, therefore, the award must be set aside. Finally, the defendants contend that there is no basis for the trial court’s award of attorney’s fees and

summary judgment for the plaintiffs on the issue of indemnity. They further On appeal, the defendants argue that the trial court erred in granting

$298,811.73 in attorney’s fees and costs. This appeal followed.

incurred up until the time of settlement” and awarded the plaintiffs

motion. Relying on Morrissette v. Sears, Roebuck & Co., 114 N.H. 384 (1974),

were “entitled to reimbursement of [Orvis’s] defense costs and attorney[’s] fees

a written order denying the defendants’ motion and granting the plaintiffs’ and filed a cross-motion for the entry of final judgment. The trial court issued the plaintiffs from recovering on the indemnity claim. The plaintiffs objected

plaintiffs had prevailed on the issue of indemnity, the court found that they prevails he shall receive court costs and reasonable attorney fees.” Since the parties elect to litigate the issue of insurance coverage,” and that “if the insured

the jury’s finding that the defendants were not liable to the plaintiffs precluded Thereafter, the defendants moved for summary judgment, arguing that

On January 30, 2012, the jury returned a verdict in the defendants’ favor.

court found that this claim was “akin to a claim for similar fees in cases where 3 With respect to the plaintiffs’ claim for attorney’s fees and costs, the

settlement payment to the plaintiffs.

until after the trial on the plaintiffs’ underlying claims against the defendants.

based upon the defendants’ implied obligation to indemnify Orvis for its

defendants objected. The trial court deferred its ultimate ruling on the motion assignees of Orvis’s right to indemnity, were entitled to enforce that right. The defendants had an implied duty to indemnify Orvis, and, that the plaintiffs, as

had satisfied their burden and, as a result, awarded them one million dollars potential liability at the time of settlement. The court ruled that the plaintiffs indemnity under the law,” and that the plaintiffs had to prove only Orvis’s

judgment against the defendants on the indemnity claim. They argued that the The plaintiffs, as Orvis’s assignees, subsequently moved for summary

plaintiffs’ claims against the defendants.

the court found that “the verdict had no impact upon [the plaintiffs’] right to

that Orvis had against the defendants. The settlement did not extinguish the million dollars and assigned to the plaintiffs “any and all rights to indemnity” p. 4 Id. (quotation omitted). indemnitee’s freedom from fault in bringing about the dangerous condition.”

agree to protections beyond those afforded by the doctrines of implied or

of [the] indemnitee’s liability in the underlying action and, conversely, the

great freedom to allocate indemnification responsibilities as they see fit, and to

tort actions in that it is based upon “the fault of the indemnitor as the source

Hamilton v. Volkswagen of America, 125 N.H. 561, 563 (1984) (quotation to indemnify exists; or (3) where there is an express duty to indemnify. P.3d 268, 274 (Nev. 2011). “[E]xpress indemnity allows contracting parties equitable considerations,” Reyburn Lawn Designers v. Plaster Dev’t Co., 255 injured party for injuries caused by active fault of another.” Morrissette, 114 such circumstances is akin to the rationale for finding a right of indemnity in strictly, id., and indemnity arising from an express contract “is not subject to contract for indemnity. See id. We construe express indemnity agreements breach of a nondelegable duty of the indemnitee. Jaswell Drill Corp., 129 N.H. circumstances, the right to indemnity is determined by the specific terms of the indemnity, see Kessler v. Gleich, 161 N.H. 104, 108 (2010). Under such N.H. at 563, which arises when there is an express contract providing for The third situation involves an express duty to indemnify, Hamilton, 125

indemnitee’s liability is derivative or imputed by law”; (2) where an implied duty

active fault on his part, has been compelled by a legal obligation to pay an at 346. The rationale for finding an implied agreement to indemnify under

under contract negligently and, as a result, causes harm to a third party in primarily liable.” Coco, 159 N.H. at 519 (quotation omitted); see also agreement to indemnify may exist when an indemnitor performs a service strictly construed.” Hamilton, 125 N.H. at 564. Nonetheless, an implied (1987). “[I]ndemnity agreements are rarely to be implied and always to be indemnify. See Jaswell Drill Corp. v. General Motors Corp., 129 N.H. 341, 346 The second situation occurs where there is an implied agreement to

Hampshire, the right to indemnity has historically existed: (1) “where the N.H. at 387 (quotation and brackets omitted). We begin by reviewing the law pertaining to indemnity. In New

agree. at 387. This situation typically occurs in tort actions “where one who, without Greenland v. Ford Motor Co., 115 N.H. 564, 571 (1975); Morrissette, 114 N.H.

“where one is legally required to pay an obligation for which another is omitted). In the first situation, we have said that the right to indemnity arises Coco v. Jaskunas, 159 N.H. 515, 518 (2009) (quotation omitted). determine whether the moving party is entitled to judgment as a matter of law.”

that they were required to indemnify the plaintiffs, as assignees of Orvis. We We first address the defendants’ claim that the trial court erred in ruling p. 5 5

the indemnitor from liability.” Restatement (Third) of Torts: Apportionment of from liability or by satisfaction of judgment that by operation of law discharges plaintiff that by its terms or by application of law discharges the indemnitor Restatement (Third) of Torts: Apportionment of Liability, Reporters’ Note § 22

restitution appropriate.” AVCP Reg. Housing Auth. v. R.A. Vranckaert, 47 P.3d

McCullough v. Company, 90 N.H. 409, 412 (1939) (quotation omitted),

conduct. the other, unless the payor is barred by the wrongful nature of his comment b at 277. “Indemnification exists to prevent unjust enrichment; such

extinguish the liability of the indemnitor . . . either by a settlement with the only if the indemnitee provided the indemnitor with protection from liability.” Liability, Reporters’ Note § 22 comment b at 276-77. However, “[t]his [is] true 6 p. 5 50, 658 (Alaska 2002); see Restatement (Third) of Torts: Apportionment of that should be the first party’s responsibility to pay,” Oates, 503 N.E.2d at 59. benefit to the indemnitor by fully discharging the indemnitor’s liability, making The theory behind this principle “is that the indemnitee has provided a

Liability § 22 comment b at 272.

have been discharged by the other, is entitled to indemnity from

principles of restitution. See Pulte v. Parex, 942 A.2d 722, 730-31 (Md. 2008); provided by contract, in order to seek indemnity, “an indemnitee must been described as an equitable right implied by law, which is based upon Apportionment of Liability § 22, at 272 (2000). Thus, unless otherwise that Orvis’s liability is derivative of the defendants’. This form of indemnity has 99 N.H. 292, 293-94 (19 p. 5 54); see also Restatement (Third) of Torts: unjustly enriched at the expense of another when the other discharges liability superseded by statute on other grounds, as stated in Gagne v. Greenhouses,

means reimbursement, Stanley v. Kelley, 90 N.H. 210, 214 (1939) (“Indemnity

owed by him but which as between himself and another should A person who, in whole or in part, has discharged a duty which is

In other words:

that a right of indemnity exists in this case, it arises under the first scenario in imports reimbursement.”), and is based upon “the concept that one party is

(“[r]estitution is the basis for indemnity”). In its most basic sense, indemnity Oates v. Diamond Shamrock Corp., p. 5 503 N.E.2d 58, 59 (Mass. App. Ct. 1987) Center, 722 A.2d 332, 339 (D.C. 1998) (“Indemnity is a form of restitution.”); equitable indemnity.” Prince v. Pacific Gas & Elec. Co., 202 P.3d 1115, 1120 restitution” (quotation and brackets omitted)); District of Col. v. Wash. Hosp. see also Prince, 202 P.3d at 1124 (explaining that “the basis for indemnity is

contracted to indemnify Orvis. The parties agree, as do we, that to the extent Here, the plaintiffs make no claim that the defendants expressly

(Cal. 2009) (quotations and brackets omitted). a common liability to an injured party.” 41 Am. Jur. 2d Indemnity § 3 (200 p. 5 5). p. 6 payment made by each or any of jointly or severally liable tortfeasors who share

is the primary cause of the injured party’s harm,” contribution “is partial

settlement payment to the [underlying] plaintiff.” C & E Services, Inc., 601 F. In such a case, the indemnitor “has not been unjustly enriched by the I. In all actions, the court shall: tortfeasor who has been compelled to pay it, to another whose act of negligence among claimants and tortfeasors, provides, in pertinent part: plaintiff. Indeed, according to the Restatement, “[n]o case has permitted of RSA 507:7-d to :7-i). RSA 507:7-e, governing apportionment of damages Consulting Eng’rs, 153 N.H. 793, 798 (2006) (discussing the legislative history tortfeasors. See RSA 507:7-d to :7-i (2010); see also DeBenedetto v. CLD injuries. See Morrissette, 114 N.H. at 387; Restatement (Third) of Torts: statutory framework for apportionment of liability and damages among must then prove that the indemnitor was primarily liable for the plaintiff’s These principles are consistent with, and reflected in, our comprehensive by settlement or judgment, in order to obtain indemnification, the indemnitee Once an indemnitee has discharged the liability of the indemnitor, either

to underlying plaintiff “before the settlement and remains” so after settlement). Restatement (Third) of Torts: Apportionment of Liability, Reporters’ Note § 22 because, whereas indemnity shifts “the entire burden of loss from one the plaintiff.”). In this way, indemnity is distinguished from contribution after settlement, the indemnitor remained potentially liable to the underlying seeking indemnity must prove that the indemnitor would have been liable to in which the indemnitor has been required to indemnify the indemnitee when, Apportionment of Liability, Reporters’ Note § 22 comment c at 277 (“A person Significantly, the plaintiffs have not cited, nor are we aware of, any cases

comment b at 277; see C & E Services, Inc., 601 F. Supp. 2d at 277. unfairness that needs rectification” because indemnitor was potentially liable noncontractual indemnity against a person still liable to the plaintiff.”

Supp. 2d at 277. the indemnitor from any future liability.” C & E Services, Inc. v. Ashland Inc., enrichment occurs only when the indemnitee’s payment to the victim protected

potentially liable “to the party with whom the indemnitee settled, there is no Services, Inc., 601 F. Supp. 2d at 277 (stating that if indemnitor remains Apportionment of Liability, Reporters’ Note § 22 comment b at 277; C & E while he was still liable to the plaintiff.” Restatement (Third) of Torts: basic principles of restitution to make a person pay noncontractual indemnity 601 F. Supp. 2d 262, 277 (D.D.C. 2009). “It would . . . be unfair under the liability to the plaintiffs. See RSA 507:7-h. Since Orvis’s settlement did not

p. 7 amount of consideration paid, it did not extinguish the defendants’ potential

have reduced the amount of any judgment against the defendants by the Although, as the plaintiffs point out, their settlement with Orvis would

and the risk of a substantial adverse verdict.

defendants and, as a result, the defendants bore both the expense of defense defendants, the plaintiffs proceeded to trial on their liability claims against the liability claim. Indeed, after the settlement with Orvis and the stove

under the theories of direct liability asserted against them, including the strict plaintiffs, as assignees of Orvis) to obtain indemnity from the defendants. See several and not joint and he shall be liable only for the damages less than 50 percent at fault, then that party’s liability shall be rules of joint and several liability, except that if any party shall be

settlement states that “[t]his case has been settled as to all defendants except liability, but not that of the defendants. The trial court’s order addressing the fails because when Orvis settled with the plaintiffs, it extinguished its own Apportionment of Liability § 22, at 272. The defendants were therefore entitled Turning to this case, we conclude that the plaintiffs’ indemnity claim District of Col., 722 A.2d at 341-42; Restatement (Third) of Torts: then only to the extent that the amount paid in settlement was reasonable.” extinguishes the liability of the person from whom contribution is sought, and defendants, and the defendants remained potentially liable to the plaintiffs extinguish the defendants’ liability, there was no basis for Orvis (or the

(b) Enter judgment against each party liable on the basis of the percentage of actual fault.” Ocasio v. Fed. Express Corp., 162 N.H. 436, 446 defendants involved in personal injury lawsuits from damages exceeding their

a person who enters into a settlement with a claimant unless the settlement against it. In contrast, there was no release of liability running to the defendants, the plaintiffs released Orvis from all claims of liability asserted one million dollars and the assignment of Orvis’s indemnity rights against the Leisure Life Industries.” (Emphasis added.) In consideration for the receipt of of each of the parties; and current form, “an underlying purpose of the . . . amendment was to relieve against each defendant in accordance with the proportionate fault

contribution among tortfeasors, provides that “[c]ontribution is not available to (2011) (quotations omitted). In addition, RSA 507:7-f, II, addressing

plainly demonstrates that,” when the legislature amended the statute to its the amount of damages to be awarded to each claimant and (Emphasis added.) We have said that “[t]he legislative history of RSA 507:7-e (a) Instruct the jury to determine, or if there is no jury shall find,

attributable to him. p. 8 Reversed.

regarding successor liability. In light of our ruling, we need not address the defendants’ argument

awarding attorney’s fees and costs. 8

entitled to indemnification, we necessarily find that the trial court erred in Since we have found that the trial court erred in ruling that the plaintiffs were fees and costs based upon its ruling that they were entitled to indemnification.

action for indemnity where the original action settled, i.e., its burden to show which concerned an indemnitee’s burden of proof as to its own liability in an issue. Rather, we addressed the specific question presented for our review,

ruled that the plaintiffs were entitled to reimbursement of Orvis’s attorney’s DALIANIS, C.J., and CONBOY and LYNN, JJ., concurred. The plaintiffs argue that Morrissette compels a different result. We

defendant’s liability as to the original claimant, and we did not address that

Orvis’s attorney’s fees and costs to the plaintiffs. We agree. The trial court The defendants further argue that the trial court erred in awarding has to fail.”). plaintiff] had against both of them, [the indemnitee’s] claim for indemnification Morrissette, 114 N.H. at 387. and that it was not designed to settle the entire claim that the [underlying that it settled under legal compulsion, rather than as a mere volunteer. See

plaintiff was not entitled to indemnification because she failed to extinguish the disagree. In Morrissette, the defendant did not argue that the third-party to judgment, as a matter of law, on the indemnity claim. See United States

the settlement did not intend to relieve [the indemnitor] of any further liability C & E Services, Inc., 601 F. Supp. 2d at 278 (“Since it is indubitably clear that payment because plaintiff’s settlement did not extinguish liability of defendant); (plaintiff could not recover in common law indemnity for pre-trial settlement Brass Corp. v. Dormont Mfg. Co., 242 Fed. Appx. 575, 579 (10th Cir. 2007)