NCH Corporation and RPG Innovations, LLC v. ESI/Employee Solutions, LP

• Court: Court of Appeals of Texas
• Decided: May 11, 2022
• Docket: 05-21-00466-CV
• Status: Published

Opinion

REVERSE and RENDER; REMAND and Opinion Filed May 11, 2022

S In The Court of Appeals Fifth District of Texas at Dallas No. 05-21-00466-CV

NCH CORPORATION AND RPG INNOVATIONS, LLC, Appellants V. ESI/EMPLOYEE SOLUTIONS, LP AND EMPLOYEE SOLUTIONS ARLINGTON, LLC, Appellees

On Appeal from the 366th Judicial District Court Collin County, Texas Trial Court Cause No. 366-04977-2018

MEMORANDUM OPINION Before Justices Schenck, Molberg, and Smith Opinion by Justice Smith

This appeal comes before us on competing motions for summary judgment

regarding the enforceability of an indemnity agreement between appellants NCH

Corporation and RPG Innovations, LLC, and appellees ESI/Employee Solutions, LP

(ES) and Employee Solutions Arlington, LLC (ES Arlington). For the reasons

discussed below, we reverse the trial court’s judgment ordering appellants to

indemnify appellees. Factual and Procedural Background

ES provides industrial custom staffing services in Texas, and is the parent

company of eight LLCs, including ES Arlington. ES is also ES Arlington’s sole

member. NCH is the parent company of RPG, and RPG produces, sources, and

distributes retail products.

On August 29, 2008, ES Arlington and RPG entered into an agreement for

supplemental staffing.1 Timothy Price began working for ES Arlington on

September 20, 2017, and was assigned to work as a general worker at RPG’s

warehouse. At the time Price was assigned to RPG, he was neither a certified forklift

operator, nor certified by the Occupational Safety and Health Administration

(OSHA) under its Powered Industrial Truck Standard, which required site-specific

training and instruction.

ES Arlington’s safety coordinator scheduled Price for forklift certification

testing on September 28; however, Price failed the certification test because he hit a

rack and broke a pallet. Despite failing the test, on October 2, Price operated a

forklift without supervision. While he was placing pallets in the warehouse, he

stepped off the forklift while it was still in motion and suffered severe injuries. He

required multiple surgeries during his month-long hospital stay, plus extensive pain

management and physical therapy.

1 It is undisputed that ES Arlington and RPG were parties to the staffing agreement. However, the parties dispute whether ES and NCH were bound by the agreement. Based upon our disposition discussed below, it is not necessary for us to resolve this issue on appeal. –2– In 2019, Price sued ES Arlington, RPG, and other entities related to RPG, and

asserted negligence claims against each party. During litigation, Price learned he

was covered under RPG’s workers’ compensation policy and was subsequently paid

benefits under that policy. As a result, Price nonsuited his claims against RPG.

ES brought this suit against appellants on September 24, 2018, prior to Price

filing his negligence suit, and sought declaratory relief as to whether appellants were

obligated to indemnify, defend, and hold ES harmless for any claims and obligations

arising out of Price’s injury on October 2, 2017. ES also alleged appellants breached

the August 2008 staffing contract by refusing to indemnify, defend, and hold ES

harmless. ES Arlington joined ES’s suit against appellants on January 13, 2021.

Through competing motions for summary judgment and subsequent

responses, the parties disputed whether the indemnity agreement was enforceable.

Appellants argued that it was not because appellees were seeking indemnification

for their own negligence and the agreement did not comply with the express

negligence test. Appellees argued that the express negligence test did not apply

because they were not seeking indemnification for their own negligence. They

asserted that Price’s pleadings and the undisputed evidence demonstrated that RPG

was the sole cause of Price’s alleged injuries.

The trial court granted appellees’ first amended motion for summary

judgment on March 23, 2021, and denied appellants’ motion for summary judgment

on March 24, 2021. The trial court ordered appellants to indemnify appellees for all

–3– attorney’s fees, expenses, jury verdicts, arbitration awards, or settlement agreements

incurred by appellees in Price’s suit. The trial court further ordered appellants to

indemnify appellees for medical and wage indemnity benefits paid pursuant to an

employee benefit plan and for any and all future costs arising out of the October 2

injury. This appeal followed.

Summary Judgment Standard of Review

We review a summary judgment de novo. Trial v. Dragon, 593 S.W.3d 313,

316 (Tex. 2019). A traditional motion for summary judgment requires the moving

party to show that no genuine issue of material fact exists and that it is entitled to

judgment as a matter of law. TEX. R. CIV. P. 166a(c); Lujan v. Navistar, Inc., 555

S.W.3d 79, 84 (Tex. 2018). If the movant carries this burden, the burden shifts to

the nonmovant to raise a genuine issue of material fact. Lujan, 555 S.W.3d at 84.

We take evidence favorable to the nonmovant as true, and we indulge every

reasonable inference and resolve any doubts in the nonmovant’s favor. Ortiz v. State

Farm Lloyds, 589 S.W.3d 127, 131 (Tex. 2019).

When we review cross-motions for summary judgment, where the trial court

has granted one motion and denied the other, we determine all questions presented

in both motions and render the judgment the trial court should have rendered.

Odyssey 2020 Acad., Inc. v. Galveston Cent. Appraisal Dist., 624 S.W.3d 535, 540

(Tex. 2021).

–4– Express Negligence Test

In their first issue, appellants argue the trial court erred in ordering them to

indemnify appellees because the indemnity provision does not meet the express

negligence test and is therefore unenforceable. Appellees respond they were not

seeking indemnification for their own negligence and, therefore, the express

negligence test does not apply.

In Ethyl Corp. v. Daniel Construction Co., the Supreme Court of Texas

adopted the express negligence test for determining whether the parties to an

indemnity contract intended to indemnify the indemnitee from its own negligence.

725 S.W.2d 705, 706, 708 (Tex. 1987). The express negligence test provides that

such intent of the parties must be expressed in specific terms and must be stated

within the four corners of the contract. Id. at 708. The parties agree that the

indemnity agreement at issue here does not meet the requirements of the express

negligence test. However, the parties disagree as to whether appellees are seeking

indemnification from their own negligence or from appellants’ negligence and, thus,

whether the express negligence test should apply at all.

Appellants argue that Price has clearly made a claim of negligence against

appellees and, thus, at least in part, appellees are seeking indemnity for their own

negligence. “Indemnitees seeking indemnity for the consequences of their own

negligence which proximately causes injury jointly and concurrently with the

–5– indemnitor’s negligence must also meet the express negligence test.” Ethyl, 725

S.W.2d at 708.

Appellees maintain that the factual basis for the incident is the exact factual

scenario contemplated by the parties in the indemnity agreement—RPG instructed

Price to operate the forklift when he was not certified to do so, and he was injured

as a result. Appellees also argue that they could not have provided RPG with an

employee who was pre-certified by OSHA because OSHA required that certification

be completed on the job site; thus, regardless of Price’s legal allegations, they could

not and were not negligent in causing his injuries.

The indemnity agreement defined “Client” as “Retail Products Group – NCH

Corporation” and “Employee Solutions” as ES Arlington. It provided in relevant

part:

Client will provide suitable work environment for the employees provided by Employee Solutions in compliance with all state and federal laws governing occupational health and safety (29 CFR 1920- 1926). Client agrees that the employees provided by Employee Solutions will not operate any powered motor vehicle for Client unless previously certified to meet OSHA’s Powered Industrial Truck Standard . . . and if employee does so, Client accepts full responsibility for actions of or actions by instruction of, its employees or supervisors. Client hereby agrees to indemnify, defend and hold harmless Employee Solutions from and against all claims, suits, expenses, attorney fees, obligations and liabilities based upon or arising out of, any bodily injury . . . arising therefrom, unless otherwise agreed to in writing by Employee Solutions.

(emphasis added).

–6– As stated above, the trial court ordered appellants to indemnify appellees for

all attorney’s fees, expenses, judgments, and other costs incurred in Price’s pending

suit and also for medical and wage indemnity benefits paid pursuant to “Employee

Solutions Employee Injury Benefit Plan.” As to whether the express negligence test

applies when a party seeks indemnification for attorney’s fees and costs incurred in

an underlying lawsuit, we find Fisk Electric Co. v. Constructors & Assocs. Inc., 888

S.W.2d 813 (Tex. 1994), to be instructive. In Fisk, the supreme court held that the

determination of whether an indemnitee was seeking indemnity from its own

negligence or the indemnitor’s negligence did not depend on the outcome of the

underlying suit but, instead, was established as a matter of law from the pleadings.

Fisk Elec. Co., 888 S.W.2d at 815. “Without an express reference in the

indemnification provision to claims based upon negligence, there is no indemnity

for defense costs incurred in connection with a negligence claim irrespective of

whether the claim is ultimately proved.” Id. at 815–16.

Here, Price brought suit against ES Arlington alleging it was negligent in

evaluating or failing to evaluate Price’s lack of experience, qualifications,

knowledge, expertise, certifications, and licensure in the operation of forklifts and

in referring and sending Price to work at RPG when it knew or should have known

that Price was not qualified, licensed, or certified to operate a forklift in general, and

a standup forklift, in particular. Additionally, Price alleged in his third amended

petition that ES Arlington did not tell him that the position at RPG was for a

–7– “reachlift” operator. He assumed the position was for a “sitdown” forklift operator.

Price claimed he never represented to ES Arlington that he was qualified or had

experience in operating a reach forklift; he advised ES Arlington that he had

experience as a sitdown forklift operator. Price further alleged that ES Arlington led

RPG to believe that Price was qualified by creating and perpetuating a false narrative

regarding his qualifications. Price also asserted that ES Arlington was negligent in

terminating its employee benefit plan, not assuring Price received the medical care

to which he was entitled, not notifying Price that he was covered under RPG’s

workers’ compensation plan, not ensuring RPG knew Price was covered, and not

ensuring RPG notified him of the coverage.

These specific claims are clearly claims of negligence against ES Arlington,

not RPG. Appellees urge us to focus on the facts regarding the origin of the

damages, rather than on the legal theories alleged by Price and cite to English v. BGP

Int’l, Inc., 174 S.W.3d 366, 372–375 (Tex. App.—Houston [14th Dist.] 2005, no

pet.), for support. But the facts that show the origin of the damages alleged by Price

are facts relating to both RPG’s and ES Arlington’s conduct. Price does not allege

that his injury occurred solely because RPG instructed him to drive the forklift when

he was not certified. While that is certainly part of the equation, Price also asserts

that, prior to RPG instructing Price to operate the forklift when he was not OSHA

certified, ES Arlington did not properly evaluate his qualifications, told RPG he had

experience as a reachlift operator when he did not, never told Price he was being

–8– sent for a reachlift operator position, and sent Price to RPG knowing he was not

qualified. These factual assertions relate directly to ES Arlington’s activities prior

to Price working at RPG and form the basis of Price’s suit against ES Arlington. See

MRO Sw., Inc. v. Target Corp., No. 04-07-00078-CV, 2007 WL 4403912, at *3

(Tex. App.—San Antonio, pet. denied) (mem. op.) (relying on proposition in English

to focus on the facts alleged in determining whether a duty to defend arises under an

indemnity agreement and concluding that the facts alleged claims arising out of

indemnitee’s activities, not indemnitor’s). Therefore, we reject appellees’ argument

that the express negligence test does not apply to the attorney’s fees, expenses, and

other costs incurred in defending against Price’s suit. See Gilbane Bldg. Co. v.

Keystone Structural Concrete, Ltd., 263 S.W.3d 291, 296–98 (Tex. App.—Houston

[1st Dist.] 2007, no pet.) (rejecting indemnitee’s argument that the express

negligence test did not apply because it was not seeking to be indemnified for its

own negligence, even though it was the only party sued, and that it, instead, was

seeking to be indemnified for the indemnitor’s negligence, which it could establish

was the cause of the injury).

To the extent appellees are seeking indemnification from costs other than

those attributed to defending against Price’s negligence suit against ES Arlington,

such as the medical and wage indemnity benefits, appellees failed to conclusively

establish that such costs were not based on their own negligence and that the

indemnification agreement was enforceable. See Lowe v. Republic Am. Life Ins. Co.,

–9– No. 05-98-02114-CV, 2002 WL 1139941, at *3 (Tex. App.—Dallas May 31, 2002,

pet. denied) (mem. op.) (concluding summary judgment evidence did not establish

whether indemnitee settled suit based on its own negligence or that of the

indemnitors’ sub-agents and, thus, indemnitee did not establish it was entitled to

judgment as a matter of law because the indemnity provision would not apply if

settlement was based on its own negligence). In fact, neither party offered summary

judgment evidence as to when or why these benefits were paid or whether ES or ES

Arlington paid them. There is no evidence in the summary judgment record that the

medical and wage indemnity benefits were paid in conjunction with the underlying

suit, which like the attorney’s fees and other costs incurred in the underlying suit

would require application of the express negligence test. Therefore, appellants

likewise failed to establish they were entitled to summary judgment as a matter of

law on appellees’ indemnification claims regarding the medical and wage indemnity

benefits.

We conclude that the trial court erred in granting summary judgment in favor

of appellees and erred in ordering appellants to indemnify appellees for medical and

wage indemnity benefits and all attorney’s fees, expenses, judgments, and other

costs incurred in Price’s pending suit as identified in paragraphs (a) through (e) in

the trial court’s June 17, 2021 order. We further conclude that the trial court erred

in denying appellants’ motion for summary judgment in that appellants conclusively

established that the express negligence test applied and was not met as to appellees’

–10– claims for indemnification of attorney’s fees, expenses, and other costs incurred in

Price’s lawsuit. We sustain appellants’ first issue on appeal.

Based on our disposition of appellants’ first issue, it is unnecessary for us to

review appellants’ alternative issue regarding whether appellees met their summary

judgment burden to conclusively establish the amount of damages and the proper

parties to the indemnity agreement. See TEX. R. APP. P. 47.1.

Conclusion

We reverse the trial court’s orders granting appellees’ first amended motion

for summary judgment and denying appellants’ motion for summary judgment. We

render judgment in favor of appellants and order that appellees take nothing as to

their claims for indemnification of attorney’s fees, expenses, and other costs incurred

in Price’s lawsuit. As to appellees’ remaining indemnification claims, we remand

to the trial court for further proceedings consistent with this opinion.

/Craig Smith/ CRAIG SMITH JUSTICE

210466F.P05

–11– S Court of Appeals Fifth District of Texas at Dallas JUDGMENT

NCH CORPORATION AND RPG On Appeal from the 366th Judicial INNOVATIONS, LLC, Appellants District Court, Collin County, Texas Trial Court Cause No. 366-04977- No. 05-21-00466-CV V. 2018. Opinion delivered by Justice Smith. ESI/EMPLOYEE SOLUTIONS, LP Justices Schenck and Molberg AND EMPLOYEE SOLUTIONS participating. ARLINGTON, LLC, Appellees

In accordance with this Court’s opinion of this date, the judgment of the trial court is REVERSED, and a take-nothing judgment is RENDERED against appellees ESI/EMPLOYEE SOLUTIONS, LP AND EMPLOYEE SOLUTIONS ARLINGTON, LLC as to their claims for indemnification of attorney’s fees, expenses, and other costs incurred in the underlying lawsuit. Appellees’ remaining claims are REMANDED to the trial court for further proceedings consistent with this opinion.

It is ORDERED that each party bear its own costs of this appeal.

Judgment entered this 11th day of May 2022.

–12–