Emory University, Inc. v. Neurocare, Inc.

985 F.3d 1337

• Court: Court of Appeals for the Eleventh Circuit
• Decided: January 25, 2021
• Docket: 19-14160
• Status: Published

Opinion

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[PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT ________________________

No. 19-14160 ________________________

D.C. Docket No. 1:17-cv-01721-SCJ

EMORY UNIVERSITY, INC., d.b.a. Emory University Hospital, THE EMORY CLINIC, INC., Plaintiffs-Appellants,

versus

NEUROCARE, INC.,

Defendant-Appellee.

__________________________

Appeal from the United States District Court for the Northern District of Georgia _________________________

(January 25, 2021)

Before WILSON, NEWSOM, and ANDERSON, Circuit Judges. USCA11 Case: 19-14160 Date Filed: 01/25/2021 Page: 2 of 27

ANDERSON, Circuit Judge:

We consider two discrete issues under Georgia law pertaining to an

indemnification obligation arising from a tragic death at a sleep disorder treatment

and diagnostics lab. Emory University, Inc. (“Emory University”) seeks

indemnification from Neurocare, Inc. (“Neurocare”), the lab services provider

whose technologists were found by a jury to be 60 percent at fault for the death of

Brandon Harris. The first issue is whether Emory University is entitled to

indemnification from Neurocare for this 60 percent liability incurred due to the

negligence of Neurocare’s technologists. Emory University asserts this right to

indemnity pursuant to the services contract as an “affiliate” of its wholly, indirectly

owned grandchild corporation, the express indemnitee and the hospital, Wesley

Woods Center of Emory University, Inc. (“Wesley Woods”). The second issue is

whether Emory University, even if it would otherwise be entitled to contractual or

common law indemnification, is barred from indemnity because it failed to assert

its distinct and separate corporate existence as a defense to liability in the

underlying wrongful death action. This second issue requires us to consider a line

of Georgia case law holding that indemnification is barred if the would-be

indemnitee had, but failed to assert, in the underlying suit a “defense available

which would have defeated the action.” GAF Corp. v. Tolar Constr. Co., 246 Ga.

411, 411, 271 S.E.2d 811, 812 (1980) (citation omitted).

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After careful review, and with the benefit of oral argument, we vacate the

district court’s grant of summary judgment in Neurocare’s favor and remand. We

conclude that Emory University is an “affiliate” of Wesley Woods, and that the

indemnification bar doctrine does not operate in the unique facts of this case.

I. BACKGROUND

A. The Parties, the Agreement, and the Amendment

A group of entities bearing the “Emory” name provided sleep disorder

diagnostic and treatment services. The most superior entity is Emory University,

which wholly owns and controls Emory Healthcare, Inc., which, in turn, wholly

owns and controls Wesley Woods. Emory University also wholly owns and

controls The Emory Clinic, Inc. (the “Emory Clinic”). Emory University Hospital

is an operating division of Emory University.

In June 2005, Emory University entered into a Sleep Diagnostic Services

Agreement (the “Agreement”) with Neurocare. Neurocare doing business as the

Center for Sleep Diagnostics, defined as “CONTRACTOR,” agreed “to provide

certain sleep diagnostic services to and under the direction of HOSPITAL,”

defined as Emory University doing business as Emory University Hospital.

Neurocare agreed to operate the Emory Sleep Lab located at Emory University

Hospital by, among other things, staffing technologists to conduct sleep studies,

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educating and training physicians and staff regarding the sleep lab, and preparing

sleep reports for physicians’ analysis.

Section 9.1 of the Agreement is an indemnification provision that reads,

CONTRACTOR agrees to indemnify, defend, save and hold harmless forever HOSPITAL, its subsidiaries and affiliates, successors and assigns, and its officers, directors, trustees, employees and agents from and against any and all liability, loss, damage, claim, cause of action, cost or expense (including reasonable attorney’s fees actually incurred and Court costs), that is caused directly or indirectly by or as a result of any intentional or negligent act or omission to act by CONTRACTOR or its agents or employees providing service pursuant to this Agreement. This section shall survive any expiration or termination of this Agreement.

Section 9.3 reserves the right of each party to seek any common law

indemnification or contribution, in addition to the contractual basis in Section 9.1.

In May 2006, the parties executed an amendment to the Agreement (the

“Amendment,” and together with the Agreement, the “Amended Agreement”) in

light of the Emory Sleep Lab moving from Emory University Hospital to Wesley

Woods. The Amendment states,

[T]he contracting party in the Agreement, stated as “Emory University, Inc., d/b/a Emory University Hospital (“HOSPITAL”) and the Emory Clinic, Inc. (“CLINIC”)”, is hereby deleted and replaced with the following language: “Wesley Woods Center of Emory University, Inc. d/b/a Wesley Woods Geriatric Hospital (“HOSPITAL”) and the Emory Clinic, Inc. (“CLINIC”) and Emory University, Inc. d/b/a Emory University Hospital (“EMORY”).

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The Amendment also states, “In the event of a conflict between the terms of this

Amendment and the terms of the Agreement, the terms of this Amendment shall

govern. Except as set forth in this Amendment, all other provisions of the

Agreement shall remain unchanged and in full force and effect.”

The effect of the Amendment was as follows. The HOSPITAL—which was

the named indemnitee in the original Agreement—was Emory University doing

business as Emory University Hospital. When the Emory Sleep Lab was moved

from Emory University Hospital to Wesley Woods Geriatric Hospital, the

Amendment substituted Wesley Woods as the HOSPITAL. Thus, the named

indemnitee of the indemnification obligation in the Amended Agreement became

Wesley Woods. This meant that the Amended Agreement now provided that

Neurocare, which remained the CONTRACTOR and indemnitor, was obligated to

provide indemnification for Wesley Woods and its “subsidiaries and affiliates,

successors and assigns, and its officers, directors, trustees, employees and agents,”

for the same sorts of losses as in the original Agreement—those “caused directly or

indirectly by or as a result of any intentional or negligent act or omission to act by”

Neurocare “or its agents or employees providing service.”

B. The Underlying State Court Wrongful Death Action

In April 2011, several of the “Emory” entities and Neurocare were sued by

the administratrix of the estate of Brandon Harris in state court in DeKalb County,

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Georgia, for the alleged wrongful death of Mr. Harris during a sleep study at the

Emory Sleep Lab in January 2010. In particular, the defendants included Wesley

Woods doing business as Emory School of Medicine, the Emory Clinic, the Emory

Sleep Center, and Neurocare and its sleep technologists that worked in the lab, as

well as other entities and individuals, such as lab doctors.

This state case proceeded to trial in September 2015 but not before certain

parties were dismissed or otherwise removed from the case. Primarily, Emory

University entered the case on behalf of Wesley Woods and the other “Emory”

entities, except for the Emory Clinic. It is undisputed that, despite not being

formally dismissed, Wesley Woods had been replaced at trial by Emory

University, its grandparent corporation—that is, the corporation that wholly owned

and controlled Wesley Woods’s parent corporation, which wholly owned and

controlled Wesley Woods. It is undisputed that Emory University did not draw the

distinction between itself and Wesley Woods at trial. Emory University says it

proceeded as such as part of a trial strategy—i.e., in light of the well-known

“Emory” name and the potential for a negative reaction from jurors who might not

look favorably on Emory University’s using its separate corporate form as a way to

avoid responsibility for the death.

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In addition, Neurocare settled with the plaintiff before trial and, despite not

being formally dismissed as defendants, Neurocare and its sleep technologists did

not appear at or participate in trial and were considered to be nonparties.

On September 25, 2015, the jury returned a verdict in favor of the plaintiff.

The jury, in part, apportioned 60 percent of the fault to “Neurocare/sleep

technologists” as “nonparties.” 1 The jury also indicated on the verdict form: “We

find Emory liable for the negligence if any, of Neurocare/sleep technologists.”

In light of the jury verdict, the trial court entered judgment, which read in

relevant part,

The jury further assessed fault against Nonparties Neurocare/sleep technologists and assigned fault of 60% . . . .

By special interrogatory, the jury found Defendant Emory University, Inc., d/b/a Emory University Hospital liable for the negligence of the Nonparties Neurocare/sleep technologists.

Pursuant to the jury’s allocation of fault, judgment is entered in favor of the Plaintiff . . . and against Emory University, Inc., d/b/a/ Emory University Hospital in the amount of $12,305,570.64, together with post-judgment interest in the respective amount and court costs.

After this judgment was entered, Emory University and the Emory Clinic

settled with the plaintiff. The trial court entered a consent order dismissing with

1 The verdict form also allocated fault to others not at issue in this appeal. It indicated that one percent of fault was attributed to a doctor, and 39 percent of fault was attributed to “Emergency medical technicians” as “nonparties.”

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prejudice the state plaintiff’s claims against Emory University doing business as

Emory University Hospital, the Emory Clinic, and the remaining doctor

defendants.

While post-trial motions were briefed and filed, Emory University and the

Emory Clinic filed crossclaims against Neurocare to recover for the settlement

payment, including claims for contractual and common law indemnification. The

claims were voluntarily dismissed without prejudice on May 2, 2017.

C. Proceedings Before the District Court

Emory University and the Emory Clinic filed suit against Neurocare in

federal district court on May 12, 2017. The complaint included Emory

University’s claims for contractual and common law indemnification. Emory

University alleged that its indemnification rights were triggered because the

settlement payment with the plaintiff in the underlying suit was made due to the

judgment against it, and the judgment was based solely on “the derivative and

active negligence of Neurocare and its employee sleep technologists.” The

complaint also included an attorney’s fees and expenses claim.

The parties filed cross-motions for summary judgment. Neurocare sought

summary judgment arguing, inter alia, that Emory University was not entitled to

indemnity because it is not an “affiliate” of Wesley Woods; and even if it were, the

indemnification bar doctrine applies because Emory University failed to assert its

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enterprise liability defense—i.e., its defense that its separate corporate status

shielded it from the vicarious liability, which Wesley Woods incurred on the basis

of its ultimate authority and control of the Emory Sleep Lab and its technologist.2

The district court denied Emory University and the Emory Clinic’s motion

and granted Neurocare’s motion, entering judgment in its favor.3 Relying on

Emergency Professionals of Atlanta, P.C. v. Watson, 288 Ga. App. 473, 654

S.E.2d 434 (2007), and U.S. Lawns, Inc. v. Cutting Edge Landscaping, LLC, 311

Ga. App. 674, 716 S.E.2d 779 (2011), the district court concluded that Emory

University had failed to present evidence indicating that it would have still been

held liable in the underlying state case had it asserted a so-called “enterprise

2 All parties on appeal assume that Emory University’s liability flows through the vicarious liability of Wesley Woods for the 60 percent liability at issue. See Appellants’ Br. at 27 (describing “the central question in this case” as “whether Emory University’s decision to undertake Wesley Woods’ liability was a legitimate ‘defense strategy’ that prevents the operation of the Indemnification Bar”); Appellee’s Br. at 41 (“Emory University’s contractual indemnification claim hinges on whether it was Wesley Woods’s ‘affiliate’ under the Amended [Agreement].”), 49–50 (“As it concedes, Emory University decided not to recognize the formal distinction between it and Wesley Woods for purposes of the defense of this matter, which in turn, allowed Emory University (not Wesley Woods) to be exposed to liability. . . . In this way, Emory University’s liability arose out of its own decision to ignore its corporate form, not from any negligence of Neurocare.” (citation omitted) (internal quotation marks omitted)). 3 The district court also entered summary judgment against the Emory Clinic on the Emory Clinic’s breach of contract claim based on a Medical Director Agreement between Neurocare and the Emory Clinic, which allegedly required Neurocare to maintain professional liability insurance for one of the lab doctors who was also an underlying defendant. The Emory Clinic does not challenge this decision. Any such claim by the Emory Clinic is deemed abandoned. See Access Now, Inc. v. Sw. Airlines Co., 385 F.3d 1324, 1330 (11th Cir. 2004) (“[A] legal claim or argument that has not been briefed before the court is deemed abandoned and its merits will not be addressed.”).

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liability defense,” embracing its distinct corporate existence from, and lack of

responsibility for the actions of, Wesley Woods. Thus, assuming it had otherwise

established a right to indemnity, Emory University could not recover for

indemnification based on the underlying liability because a valid defense to

liability existed that had not been asserted. Emory University timely appealed.

II. DISCUSSION

Emory University argues it is entitled to indemnification and that the so-

called “indemnification bar” does not operate against it. This requires us to

consider (A) whether Emory University has a contractual right to indemnity as an

“affiliate” in the Amended Agreement, and (B) whether the indemnification bar

doctrine precludes indemnification.

A. Emory University is an “Affiliate” of Wesley Woods

Section 9.1 of the Agreement and the Amendment provide that Neurocare

“agrees to indemnify” Wesley Woods and its “affiliates” for liability and losses

“caused directly or indirectly by or as a result of any intentional or negligent act or

omission to act by” Neurocare. The parties dispute whether Emory University’s

relationship with Wesley Woods makes Emory University an “affiliate” under the

Agreement, as read with the Amendment, requiring indemnification.

It is undisputed that the word “affiliate” is not defined in the Amended

Agreement and that Georgia law governs its interpretation. “Under Georgia law,

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words in a contract generally bear their usual and common meaning and the usual

and common meaning of a word may be supplied by common dictionaries.” King

v. GenOn Energy Holdings, Inc., 323 Ga. App. 451, 455, 747 S.E.2d 15, 17 (2013)

(quoting Global Ship Sys. v. Cont’l Cas. Co., 292 Ga. App. 214, 215–216(1), 663

S.E.2d 826 (2008)); see Ga. Code Ann. § 13-2-2(2) (“Words generally bear their

usual and common signification . . . .”); see, e.g., Salinas v. Atlanta Gas Light Co.,

347 Ga. App. 480, 483, 819 S.E.2d 903, 906 (2018) (“[T]he arbitration clause at

issue expressly applied to GNG and its ‘affiliates,’ but affiliate is not defined

therein. We therefore look for the ‘usual and common signification’ of the word.”

(quoting Ga. Code Ann. § 13-2-2 (2))).

The Black’s Law Dictionary definition of “affiliate” has been adopted by the

Georgia Court of Appeals as supplying the usual and common meaning of the

term. See King, 323 Ga. App. at 455, 747 S.E.2d at 18; Harkins v. CA 14th Inv’rs,

Ltd., 247 Ga. App. 549, 550, 544 S.E.2d 744, 746 (2001). Black’s Law Dictionary

defined “affiliate” at the time the Agreement and Amendment were executed as a

“corporation that is related to another corporation by shareholdings or other means

of control; a subsidiary, parent, or sibling corporation.” Affiliate, Black’s Law

Dictionary (8th ed. 2004). The definition is the same in the current version of the

Dictionary. See Affiliate, Black’s Law Dictionary (11th ed. 2019). In particular,

in King v. GenOn Energy Holdings, Inc., the Georgia Court of Appeals found that

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the usual and common meaning of “affiliate” was supplied by the same definition,

then in the seventh edition of Black’s Law Dictionary, and held that there was an

affiliate relationship between a company and another, of which it owned 50

percent. 323 Ga. App. at 455, 747 S.E.2d at 18. “The two companies were thus

related, associated and in close connection based on this common ownership.” Id.

Even clearer than in King, the relationship at issue in our case clearly fits the

Black’s Law Dictionary definition of affiliate: Emory University owns 100 percent

of the entity that owns 100 percent of Wesley Woods. Thus, Black’s Law

Dictionary’s requirement of a relationship by way of “shareholdings or other

means of control” covers Emory University’s full ownership and control of Wesley

Woods. Indeed, the express reference to “parent,” when read with the

shareholding and control aspects of the definition, quite clearly includes the

grandparent-grandchild relationship at issue. Emory University is, therefore,

Wesley Woods’s affiliate.

Any further ambiguity in the term “affiliate,” as Neurocare argues is present,

is not with respect to the relationship in this case and is not a reason to impart any

alternate meaning than the one in Black’s Law Dictionary and King. Specifically,

Neurocare cites Salinas v. Atlanta Gas Light Co., a case in which the Georgia

Court of Appeals found the term—with respect to an indirect corporate

relationship—to be ambiguous in light of 20 varying definitions in the Georgia

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Code and differences among the Black’s Law Dictionary definition and other

courts’ interpretations. 347 Ga. App. 480, 483, 819 S.E.2d 903, 906 (2018). The

Salinas court held that Atlanta Gas Light Company and Georgia Natural Gas were

not affiliates. Id. at 485, 819 S.E.2d at 908. AGL Resources Inc. owned 100

percent of both Atlanta Gas Light and Georgia Natural Gas Company, which in

turn owned 85 percent of Georgia Natural Gas. Id. at 484, 819 S.E.2d at 907. This

indirect relationship between Atlanta Gas Light and Georgia Natural Gas was

insufficient as compared to a sibling relationship, said the court, which would have

brought the relationship within available definitions. Id. Given the ambiguity, the

contract had to be construed against the drafting party, which required adopting a

reading of the term “affiliate” that excluded Atlanta Gas Light.

Importantly, the Salinas court distinguished King by stating it was a case in

which the Georgia Court of Appeals “found the meaning of ‘affiliate’

unambiguous in [a] certain setting[]” and was distinguishable because it addressed

whether “the term ‘affiliate’ applied to a parent corporation and a corporation

owned in part by a subsidiary of the parent corporation, i.e., a grandchild

corporation.” Id. at 484 n.4, 819 S.E.2d at 907 n.4 (citing King, 323 Ga. App. at

455, 747 S.E.2d at 18). Thus, in distinguishing King, Salinas emphasized that

“affiliate” is not ambiguous as to grandparent-grandchild corporate relationships

and more generally when considering a direct lineage of ownership and control.

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Salinas, therefore, only further supports the conclusion that Emory University is an

affiliate.

Indeed, when read together, King and Salinas and the definitions examined

in those cases are united in their treatment of a relationship like the one between

Emory University and Wesley Woods. Both cases looked to Black’s Law

Dictionary, which clearly indicates a grandparent is an affiliate of a grandchild.

And while the Salinas found ambiguity due to various other definitions of the term,

those definitions largely support the same conclusion that Emory University is

Wesley Woods’s affiliate. That is, in each of the definitions that the Salinas court

examined, an affiliate included an entity exercising sufficient direct or indirect

ownership or control over the other entity. See Salinas, 347 Ga. App. at 483–84,

819 S.E.2d at 906–07 (“[Ga. Code Ann.] §§ 7-1-4 (a corporation or similar

organization is an ‘affiliate’ of a financial institution if, inter alia, the financial

institution controls the election of a majority of directors, trustees, or other persons

exercising similar functions at the corporation, or where the financial institution or

its shareholders own or control 50 percent of the shares of the corporation, or

where the corporation owns or controls 50 percent of the financial institution); 14-

2-1110 (1) (‘“Affiliate” means a person that directly, or indirectly through one or

more intermediaries, controls or is controlled by or is under common control with a

specified person.’); 18-2-71(1) (B) (‘Affiliate’ has multiple definitions, including

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‘[a] corporation 20 percent or more of whose outstanding voting securities are

directly or indirectly owned, controlled, or held with power to vote by the debtor or

a person who directly or indirectly owns, controls, or holds with power to vote 20

percent or more of the outstanding voting securities of the debtor[.] . . .’).”). The

other definitions of “affiliate” in the Georgia Code referenced, but not examined or

quoted, in Salinas also support the holding that the control and ownership of the

type in this case makes Emory University an affiliate of Wesley Woods. In fact,

nearly all use virtually the same language in defining an affiliate as an entity or

person that “controls, is controlled by, or is under common control” or is

“controlling, controlled by, or under common control” with another, sometimes

specifying that either direct or indirect control can qualify. 4 Thus, even using the

same definitions as the Salinas court, we must conclude there is no ambiguity in

the term with respect to Emory University’s inclusion. 5

4 See Ga. Code Ann. §§ 3-6-21.3(a)(1); 7-6A-2(2); 14-2-140 (adopting by direct citation the definition in § 14-2-1110); 14-2-624 (same); 14-2-1131 (same); 33-1-25(b)(1); 33-13-1(1); 33-23-46(a)(1); 33-36-3(1); 33-38-4(2); 46-3-171(2.1); 46-4-152(1); 48-8-2; 46-3-62(1). Another definition, not using this common language, embodies the same ownership and control concepts. See id. § 26-4-119(c)(1) (defining “affiliate” in a pharmacy statute as a person which, “either directly or indirectly through one or more intermediaries,” has “an investment or ownership interest in a pharmacy,” “[s]hares common ownership with a pharmacy,” or has “as an investor or ownership interest holder a pharmacy”). 5 The out-of-jurisdiction cases cited in Salinas do not create ambiguity in the meaning of the term “affiliate” requiring a construction that would exclude Emory University. See 347 Ga. App. at 484, 819 S.E.2d at 907.

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Neurocare’s argument that Emory University is not an affiliate because the

meaning of the term is “a subordinate, subsidiary, or member,” or “closely

associated with another typically in a dependent or subordinate position,” is

unpersuasive and contradicted by the weight of the authorities. First, the plain

language of the Amended Agreement contemplates the difference between

“affiliates” and the terms Neurocare uses by distinguishing and separating

“subsidiaries” from “affiliates” of Wesley Woods as eligible for indemnification.

Next, Neurocare quotes definitions from the American Heritage and Merriam-

Webster dictionaries in support of the argument that an affiliate is a subordinate,

but we are not writing on a clean slate with the term “affiliate” in Georgia. The

term has been the subject of several Georgia opinions, which have never used the

narrower definitions Neurocare cites to exclude a grandparent corporation. Indeed,

the Georgia Court of Appeals has only referenced Black’s Law Dictionary in

determining the meaning of the term “affiliate,” not any other dictionary. See

King, 323 Ga. App. at 455, 747 S.E.2d at 18 (citing Black’s Law Dictionary’s

definition of “affiliate” and no other dictionary); Salinas, 347 Ga. App. at 484, 819

S.E.2d at 907 (same); Harkins, 247 Ga. App. at 550, 544 S.E.2d at 746 (same).

Furthermore, the Georgia Code’s various definitions of the term almost always

include a “two-way” definition by defining an affiliate as either an entity that (a)

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“controls” another or (b) “is controlled by” another. See Salinas, 347 Ga. App. at

483–84, 819 S.E.2d at 906–07; supra note 4.

In addition, other courts, including our predecessor court, have rejected

similar “one-way” or “downstream” definitions of “affiliate” that exclude the

corporate parent or superior entities. See Braun v. Ins. Co. of N. Am., 488 F.2d

1066, 1067 (5th Cir. 1974) (“[T]he appellant contends that affiliate cannot refer to

an associate with a superior status. Alleging the existence of ambiguity regarding

the use of the word affiliate, the appellant asserts that the Court must construe the

contract provision most favorably to the assured. . . . We neither accept the

appellant’s viewpoint that the policy provision was ambiguous nor adopt the

appellant’s restrictive downstream definition of the word affiliate.”); Securus

Techs. Inc. v. Glob. Tel*Link Corp., 676 F. App’x 996, 999 (Fed. Cir. 2017)

(“Securus further contends that the plain, ordinary, and generally accepted

meaning of ‘affiliate’ does not include a corporate parent. . . . That argument does

not stand up against a review of the authorities pertinent to the [relevant contract],

. . . [including] the contemporaneous edition of Black’s Law Dictionary . . . .”).

In sum, the term “affiliate” in Section 9.1 of the Agreement embodies the

term’s well-established common meaning. That common meaning includes a

superior, grandparent corporation. In light of Emory University’s direct control

and entire ownership of Wesley Woods’s parent, which directly controls and owns

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Wesley Woods, Emory University is Wesley Woods’s affiliate. And because

Emory University was found liable due to the fault of Neurocare, Emory

University has a right to indemnity pursuant to the Amended Agreement.6

B. The Indemnification Bar Does Not Apply Here

The district court allowed Neurocare to avoid its indemnification

obligation—pursuant to both the Amended Agreement and the common law—

because Emory University did not assert its “enterprise liability” defense in the

underlying litigation. Emory University concedes that, as a distinct corporate

entity from Wesley Woods, it could have avoided liability with this defense, but as

part of a litigation strategy, it did not assert the defense. However, Emory

University’s assertion of the defense would have protected only Emory University;

it would not have protected Wesley Woods and, most significantly, it would not

6 Although also challenged by Neurocare, Emory University has established a common law indemnification claim because the underlying state judgment was entered against it as a result of the negligence of Neurocare and its agents. See Cutting Edge, 311 Ga. App. at 676, 716 S.E.2d at 782–83 (“The duty to indemnify may arise by operation of law, independently of contract. If a person is compelled to pay damages because of negligence imputed to him as the result of a tort committed by another, he may maintain an action for indemnity against the person whose wrong has thus been imputed to him.” (quoting Nguyen v. Lumbermens Mut. Cas. Co., 261 Ga. App. 553, 557(2), 583 S.E.2d 220 (2003))). In light of our conclusion with respect to contractual indemnity, we need not discuss common law indemnity in more detail. However, with respect to the claims for both common law and contractual indemnification, we reject Neurocare’s argument that Emory University was found by the jury to be directly liable for its own negligence. Neurocare’s argument is squarely contradicted by the plain language of both the underlying jury verdict and judgment—i.e., Emory University was found liable for the negligence of Neurocare’s sleep technologists. Although the one percent fault allocated to the Emory Clinic’s employee, Dr. Schulman, may have represented direct liability for his own negligent failure to supervise, that is not an issue on appeal.

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have provided any protection at all for Neurocare. Because both Wesley Woods

and Emory University have a right to indemnity from Neurocare, Emory

University’s assertion of the defense would simply have meant that Neurocare’s

indemnification obligation would have run to Wesley Woods instead of to Emory

University for the underlying liability. Of course, we know that Wesley Woods is

Neurocare’s express or named indemnitee pursuant to the Amended Agreement,

and it is clear that Wesley Woods would be similarly entitled to both contractual

and common law indemnification, like Emory University is now. Thus, Neurocare

suffered no adverse impact at all from Emory University’s strategic decision to

enter the case and replace Wesley Woods. Having suffered no adverse impact,

Neurocare cannot in this indemnification case now claim a benefit from the

strategic trial decision in the underlying case.

Under the unique circumstances of this case, we do not believe that the

“indemnification bar” under Georgia law operates. The bar is a narrow exception

to an otherwise proven claim for indemnification based in a string of Georgia

cases, starting with GAF Corp. v. Tolar Constr. Co., 246 Ga. 411, 411, 271 S.E.2d

811, 812 (1980). Those cases hold that generally, a would-be indemnitor is not

obligated to pay for liability arising from an action in which the would-be

indemnitee had available to it a defense that would have eviscerated the underlying

action, it having been held liable when it should not have been.

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We read these cases as only applying to the scenario in which the underlying

defense is a complete defense in that it would have defeated the underlying

action—that is, the entire action and any liability arising therefrom for which the

indemnitor would then be liable. See GAF, 246 Ga. at 411, 271 S.E.2d at 812

(“[N]o indemnification or contribution can be recovered by the party cast against a

third party if the party cast had a defense available which would have defeated the

action but failed to assert it.” (emphasis added) (quoting Jones v. Wright, 258

So.2d 195, 197–98 (La. Ct. App. 1972) (“As a complete defense was available to

third party plaintiffs and this they failed to assert, they are not entitled to either

indemnification or contribution from the third party defendants.” (emphasis

added)))); U.S. Lawns, Inc. v. Cutting Edge Landscaping, LLC, 311 Ga. App. 674,

676, 716 S.E.2d 779, 782 (2011) (“At the summary judgment stage, the relevant

question is whether the evidence demands a finding that the indemnitee had a

defense to the underlying tort action that would have defeated liability.” (emphasis

added)); Emergency Pros. of Atlanta, P.C. v. Watson, 288 Ga. App. 473, 476, 654

S.E.2d 434, 437 (2007) (“[N]o indemnification or contribution can be recovered by

the alleged tortfeasor from a third party if the alleged tortfeasor had a defense

available which would have defeated the action but failed to assert it.” (emphasis

added)); Foster v. Nix, 173 Ga. App. 720, 727, 327 S.E.2d 833, 839 (1985) (“We

recognize that no indemnification may be recovered if the party had a defense

20 USCA11 Case: 19-14160 Date Filed: 01/25/2021 Page: 21 of 27

which would have defeated the action but failed to assert it.” (emphasis added)).

The bar operates to relieve the indemnitor from payment and liability that should

never have existed.

Being a limited exception to indemnification, the bar does not extend to this

case—a scenario in which, had the defense in question been asserted in the

underlying action to protect Emory University, Neurocare’s indemnification

obligation would remain, and Neurocare would remain obligated to indemnify

Wesley Woods. The available defense would not have defeated the whole liability,

just that of a particular defendant, Emory University. Assertion of the available

defense would have had a net zero effect on the indemnitor, Neurocare. Neurocare

has offered no authority for the proposition that the indemnification bar doctrine

should operate in a situation where the indemnitee fails to assert a defense that

would have had no effect at all on the indemnitor’s obligation.

In other words, the defense which Emory University could have asserted, its

enterprise liability defense, would have had absolutely no effect on Neurocare’s

indemnity obligation given Wesley Woods’s continuing presence, even in the

absence of Emory University. Therefore, Emory University’s strategic move did

not increase Neurocare’s indemnification obligation; it remained because

Neurocare’s obligation to Wesley Woods remained. Nor did the move harm

Neurocare by, for example, precluding it from asserting its own defense in the

21 USCA11 Case: 19-14160 Date Filed: 01/25/2021 Page: 22 of 27

underlying action to prevent a jury finding that Neurocare and its sleep

technologists were at fault.

Neurocare argues that the voluntary payment doctrine, a part of an

indemnification claim, requires us to focus on Emory University’s voluntary

assumption of the underlying litigation and voluntary payment through settlement.

Neurocare cites Progressive Electrical Services, Inc. v. Task Force Construction,

Inc., for the proposition that the voluntary payment doctrine is “not a defense” but

rather places the burden on the party seeking indemnification to prove “a legal

compulsion to pay.” 327 Ga. App. 608, 618, 760 S.E.2d 621, 629 (2014) (first

quoting John K. Larkins, Jr., Georgia Contracts: Law and Litigation § 10:18 (2d

ed. 2013); then quoting GAF Corp., 246 Ga. at 412, 271 S.E.2d at 811) (citing Ga.

Code Ann. § 13-1-13)). In addition to the plain language of the indemnification

bar case law focusing on “complete defenses” which would have “defeated the

action,” the purpose of indemnification and equitable considerations undermine

Neurocare’s interpretation of the indemnification bar in this context.

The purpose of indemnification is the “reimbursement, restitution, or

compensation . . . for loss, damage, or liability in tort”; that is, indemnity ensures

that payment rests with “the party who is primarily liable for reimbursement of

expenditures paid to a third party for injuries resulting from a violation of a

common-law duty” by that primary party. Old Republic Nat’l Ins. Co. v. Panella,

22 USCA11 Case: 19-14160 Date Filed: 01/25/2021 Page: 23 of 27

319 Ga. App. 274, 276, 734 S.E.2d 523, 526 (2012) (footnotes omitted) (first

quoting Travelers Ins. Co. v. Ga. Power Co., 51 Ga. App. 579, 181 S.E. 111, 114

(1935); then quoting Indemnity, Black’s Law Dictionary (7th ed. 1999)). The

purpose is thus focused on avoiding unjust enrichment by way of attribution of

liability and the requirement to pay to the actual party at fault. See Barrios v. La.

Constr. Materials Co., 465 F.2d 1157, 1167 (5th Cir. 1972) (“The basis of

[indemnification] is not freedom from negligence of the indemnitee, but the

primary fault of the indemnitor.” (citation omitted)).

Georgia courts have suggested that a suit for indemnity implicates equitable

principles. See City of Atlanta v. Benator, 310 Ga. App. 597, 608, 714 S.E.2d 109,

118 (2011) (labeling a common law indemnity claim as a claim for “equitable or

common law indemnity”); Wilson v. Dodge Trucks, Inc., 238 Ga. 636, 637, 235

S.E.2d 142, 144 (1977) (describing “the general law on contribution and

indemnity” as based in “principles of law and equity”); see also Magnum Marine

v. Kenosha Auto Transp. Corp., 481 F.2d 933, 935 (5th Cir. 1973) (“The right [to

indemnification] is equitable in nature . . . .”). These equitable principles include

restitution and unjust enrichment, the bases for indemnity. See Panella, 319 Ga.

App. at 276, 734 S.E.2d at 526; see also Greyhound Lines, Inc. v. Cobb Cty., Ga.,

681 F.2d 1327, 1332 n.8 (11th Cir. 1982) (“[E]quity first used contribution and

indemnity to correct unjust enrichment. For instance, a party who had been

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required to satisfy a tort claim because his agent had injured someone could bring

an action against the agent on a theory of unjust enrichment. In this manner,

justice was done between the parties.”) (citing 1 George E. Palmer, The Law of

Restitution § 1.5(d) (1978)); Restatement (Second) of Torts § 886B cmt. c (Am. L.

Inst. 1979) (“The basis for indemnity is restitution, and the concept that one person

is unjustly enriched at the expense of another when the other discharges liability

that it should be his responsibility to pay.”).

Furthermore, the voluntary payment doctrine, which Neurocare urges, has

been analogized to section 13-1-13 of the Georgia Code (codifying a more

generally applicable voluntary payment doctrine). See Progressive Elec. Servs,

Inc., 327 Ga. App at 617–18, 760 S.E.2d at 628–29. And Georgia courts have

construed section 13-1-13 “in conjunction with . . . equitable principles.” See Gulf

Life Ins. Co. v. Folsom, 256 Ga. 400, 402, 349 S.E.2d 368, 370–71 (1986)

(discussing section 13-1-13 in the context of a claim for money had and received,

which “is founded on the equitable principle that no one ought to unjustly enrich

himself at the expense of another”); D & H Const. Co. v. City of Woodstock, 284

Ga. App. 314, 316, 643 S.E.2d 826, 829 (2007) (“[T]he Supreme Court of Georgia

held that the voluntary payment doctrine codified in OCGA § 13–1–13 must be

read in conjunction with other equitable principles.”).

24 USCA11 Case: 19-14160 Date Filed: 01/25/2021 Page: 25 of 27

With the equitable goal of indemnification to attribute the underlying

liability to the proper party at fault by avoiding unjust enrichment and achieving

restitution, Neurocare cannot avoid indemnification based on any voluntariness of

Emory University’s entry in the underlying case. If the bar applied in this case,

Neurocare, not Emory University, would be unjustly enriched because Neurocare

would avoid the liability for its own negligence by passing it along to Emory

University, something it could not have done with Wesley Woods. The

enrichment of Neurocare at the expense of Emory University is not a proper

application of the indemnification bar. The bar was rooted in protection of the

indemnitor from payment that could have been avoided altogether; Neurocare

would not have been protected had Emory University asserted the defense at issue.

Instead, Neurocare’s indemnity obligation to pay would have been just shifted to

an affiliate, not eliminated.

The unjust nature of the result Neurocare urges is apparent from the notable

difference between the indemnification bar case law and the present case. The

Georgia cases addressing the indemnification bar largely involved some

carelessness on the part of the would-be indemnitee in failing to assert the

available underlying defense, with adverse consequences flowing to the

indemnitor. See GAF, 246 Ga. at 411, 271 S.E.2d at 812 (“[T]here is no question

here of Tolar’s having inadvertently waived its statute of limitation defense.”);

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Cutting Edge, 311 Ga. App. at 678, 716 S.E.2d at 784 (considering a failure to

timely answer and default and subsequent settlement); Watson, 288 Ga. App. at

476, 654 S.E.2d at 437 (considering a payment made pursuant to a default

judgment). In the present case, the enterprise liability defense was not asserted,

not because of any carelessness on Emory University’s part, but because Emory

University affirmatively chose to litigate on behalf of its wholly owned and

controlled subsidiary as a trial strategy. Having made the strategic decision to

defend its corporate grandchild, and having imposed no adverse consequences on

Neurocare, there is nothing in the case law involving indemnification or the

indemnification bar doctrine, or the purposes underlying that case law, that

indicates that Neurocare should be relieved of the indemnification obligation it

undertook. As noted above, even if Emory University had asserted its enterprise

liability defense as Neurocare urges, Neurocare nevertheless would have had the

same indemnification obligation to Wesley Woods. Emory University’s litigation

strategy did not affect Neurocare’s indemnity obligation. Cf. Med. Staffing

Network, Inc. v. Connors, 313 Ga. App. 645, 652, 722 S.E.2d 370, 376 (2012)

(“[T]he hospital focused its defense on minimizing the proportion of fault

attributed to Ogburn, [and] Medical Staffing identified no legal precedent that such

a defense strategy constitutes a waiver of a complete defense such that the

hospital’s liability to the Rowlands could be deemed a voluntary payment.”).

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Applying the Georgia case law to the unique facts of this case, we conclude

that the indemnification bar does not bar Emory University from recovering on its

indemnification claims.

III. CONCLUSION

For the foregoing reasons, we vacate the district court’s grant of summary of

summary judgment in favor of Neurocare and remand the case for further

proceedings not inconsistent with this opinion. 7

VACATED and REMANDED.

7 Emory University suggests that our decision, adopting as we do the gist of Emory University’s position, also means that its own cross-motion for summary judgment should be granted. However, that issue was not adequately briefed, and we prefer that the district court address it in the first instance in the light of our decision in this appeal. But because our decision does knock down the pillar on which the district court’s decision with respect to attorney’s fees rested, that decision is vacated and should be reconsidered on remand.