Republic Servs. Procurement Inc. v. TrueBlue Inc.

Republic Services Procurement Incorporated, Plaintiff, v. TrueBlue Incorporated, Defendant.

No. CV-19-00300-PHX-JJT

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA

September 10, 2019

ORDER

At issue is Plaintiff Republic Services Procurement Incorporated's Motion for Partial Judgment on the Pleadings (Doc. 25, Mot.), to which Defendant TrueBlue Incorporated filed a Response (Doc. 26, Resp.), and Plaintiff filed a Reply (Doc. 28, Reply). The Court heard oral argument on the Motion on May 14, 2019 (Doc. 32, Tr.).

I. BACKGROUND

On February 20, 2011, Plaintiff and Defendant entered into a National Temporary Labor Services Agreement (the "Agreement") whereby Defendant would provide temporary laborers at facilities affiliated with Plaintiff. (Doc. 1-1, Compl. ¶ 6.) The Agreement includes the following provision:

[Defendant] agrees to defend, hold harmless and unconditionally indemnify [Plaintiff], [and Plaintiff's] Affiliates . . . from and against all direct and indirect losses, claims, demands, actions, causes of action, liabilities, suits, debts, costs, expenses . . ., penalties, fines, assessments and damages (collectively, "Losses") [Plaintiff] may at any time suffer or sustain or become liable for by reason of any accidents, damages, violations, injuries, illness or diseases . . . either to the employees or property or both of [Defendant] or [Plaintiff] . . . in any manner caused by, resulting or arising from or related to: . . . Losses asserted against [Plaintiff] by or on behalf of [Defendant's] Personnel . . . where such Losses are caused in whole or in part by any actions of any third party or of [Defendant's] Personnel; provided, however, that [Defendant] shall have no obligation to defend, hold harmless, and indemnify for any Losses that are caused solely by the negligent actions or failures to act or strict liability of [Plaintiff] unless such Losses relate to a claim against [Plaintiff] that if made against [Defendant] would have been covered by workers' compensation insurance, even if the claimant alleges that the Losses are caused by the negligent actions . . . of [Plaintiff].

(Mot. Ex. 1 at 11-12.) The Agreement also provides that it "may be modified or supplemented by the parties only if done in writing and signed by an authorized representative of each party." (Mot. Ex. 1 at 13.)

On August 17, 2015, Karen Newsuan, a laborer working under the Agreement, was seriously injured at a Plaintiff-affiliated facility (the "Newsuan Injury"). (Compl. ¶¶ 13-14.) Also on August 17, 2015, an authorized representative of Plaintiff at that facility signed a work ticket (the "Work Ticket") providing that Plaintiff "shall comply with all applicable laws relating to health and safety." (Resp. at 3-4.) The Work Ticket further stated that Plaintiff would hold harmless Labor Ready, a subsidiary of Defendant, "from any claims and all liability, caused or alleged to have been caused by [Plaintiff's] breach of this agreement." (Resp. at 4.) Neither Labor Ready nor Defendant signed the Work Ticket. (Tr. at 15.)

On August 18, 2015, Plaintiff tendered its defense concerning the Newsuan Injury to Defendant and requested immediate defense and indemnification pursuant to the Agreement. (Compl. ¶ 15.) Defendant refused to defend or indemnify Plaintiff. (Compl. ¶ 16.) On August 8, 2017, Newsuan filed a complaint against Plaintiff for her personal injuries (the "Newsuan Action"). (Compl. ¶ 18.) Plaintiff again requested that Defendant defend and indemnify Plaintiff. (Compl. ¶ 20.) Defendant again refused. (Compl. ¶¶ 21-22.) Newsuan also filed a workers' compensation claim against Defendant. (Doc. 12, Countercl. ¶ 37.) Defendant paid workers' compensation benefits to Newsuan for her work-related injuries. (Countercl. ¶ 39.)

On December 17, 2018, Plaintiff filed suit against Defendant in Arizona state court. Defendant then removed the action to this Court. (Doc. 1.) In the Complaint, Plaintiff raises three claims against Defendant: (1) breach of duty to defend and breach of expresscontractual indemnity ("Count One"); (2) breach of contractual obligation to procure insurance for Plaintiff and its affiliates ("Count Two"); and (3) declaratory relief ("Count Three"). (Compl. ¶¶ 32-33, 38, 44.) Defendant filed a Counterclaim raising claims for subrogation and breach of the covenant of good faith and fair dealing. (Countercl. ¶¶ 49, 55.) Plaintiff now moves for partial judgment on the pleadings as to Count One and Count Three of the Complaint and Defendant's counterclaims. (Mot. at 2.) Defendant voluntarily dismissed its subrogation counterclaim but still maintains that Plaintiff breached the covenant of good faith and fair dealing. (Resp. at 17.)

II. LEGAL STANDARD

Federal Rule of Civil Procedure 12(c) permits a party to move for judgment on the pleadings "[a]fter the pleadings are closed but within such time as not to delay the trial." In reviewing a Rule 12(c) motion, "all factual allegations in the complaint [must be accepted] as true and construe[d] . . . in the light most favorable to the non-moving party." Fleming v. Pickard, 581 F.3d 922, 925 (9th Cir. 2009).

A motion for judgment on the pleadings should only be granted if "the moving party clearly establishes on the face of the pleadings that no material issue of fact remains to be resolved and that it is entitled to judgment as a matter of law." Hal Roach Studios, Inc. v. Richard Feiner & Co., Inc., 896 F.2d 1542, 1550 (9th Cir. 1989). "Interpretation of a contract is a matter of law," United States v. King Features Entm't, Inc., 843 F.2d 394, 398 (9th Cir. 1988), and thus is susceptible to a motion for judgment on the pleadings. Judgment on the pleadings under Rule 12(c) is warranted "only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations." Deveraturda v. Globe Aviation Sec. Servs., 454 F.3d 1043, 1046 (9th Cir. 2006) (internal citations omitted).

A Rule 12(c) motion is functionally identical to a Rule 12(b)(6) motion to dismiss for failure to state a claim, and the same legal standard applies to both motions. Dworkin v. Hustler Magazine, Inc., 867 F.2d 1188, 1192 (9th Cir. 1989). Specifically, a complaint—or in this instance, a counterclaim—must include "only 'a short and plain statement of theclaim showing that the pleader is entitled to relief,' in order to 'give the defendant fair notice of what the . . . claim is and the grounds upon which it rests.'" Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)); see also Fed. R. Civ. P. 8(a). A dismissal for failure to state a claim can be based on either (1) the lack of a cognizable legal theory or (2) insufficient facts to support a cognizable legal claim. Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990). "While a complaint attacked by a Rule 12(b)(6) motion does not need detailed factual allegations, a plaintiff's obligation to provide the 'grounds' of his 'entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly, 550 U.S. at 555 (citations omitted). The complaint must thus contain "sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570).

III. ANALYSIS

Plaintiff argues that Defendant "owes and has breached its duty to defend," (Reply at 3), and further argues that "the Agreement created a broad and clear indemnity obligation for claims such as [the Newsuan Action]." (Mot. at 8.) Defendant, however, argues that the "Work Ticket modified and/or supplemented the Agreement," (Resp. at 6), such that Defendant "has no duty to defend or indemnify [Plaintiff]." (Resp. at 8.) Defendant further argues that "even under the terms of the Agreement, [Defendant] does not have a duty to defend or indemnify [Plaintiff]." (Resp. at 9.)

A. The Work Ticket did not Modify the Agreement.

Under Arizona law,¹ "a general principle of contract law is that where parties bind themselves by a lawful contract and the terms of the contract are clear and unambiguous, a court must give effect to the contract as written." Estes Co. v. Aztec Const. Inc., 677 P.2d 939, 941 (Ariz. Ct. App. 1983). The mere fact that parties disagree about the meaning of a contract does not make it ambiguous. Shanks v. Davey Tree Surgery Co., 845 P.2d 483 (Ariz. Ct. App. 1992). Rather, a contract is ambiguous "only if the language can reasonablybe construed in more than one sense and the construction cannot be determined within the four corners of the instrument." J.D. Land Co. v. Killian, 762 P.2d 124, 126 (Ariz. Ct. App. 1988). Moreover, when interpreting a contract, the Court "presume[s] that the parties intended to give the words employed their ordinary meaning." Tucker v. Byler, 558 P.2d 732, 735 (Ariz. Ct. App. 1976).

Here, the Agreement's modification provision is clear: "The Agreement may be modified or supplemented by the parties only if done in writing and signed by an authorized representative of each party." (Mot. Ex. 1 at 13. (emphasis added).) Although an authorized representative of Plaintiff signed the Work Ticket, neither Labor Ready nor Defendant signed the Work Ticket. (Tr. at 14-15.) In accordance with the general principles of contract law, the Court finds that the Work Ticket failed to modify the Agreement because it was not "signed by an authorized representative of each party." Therefore, the terms of the Agreement control.

B. The Newsuan Action Falls Within the Scope of the Agreement.

Pursuant to the Agreement,

[Defendant] shall have no obligation to defend, hold harmless, and indemnify for any Losses that are caused solely by the negligent actions or failures to act or strict liability of [Plaintiff] unless such Losses relate to a claim against [Plaintiff] that if made against [Defenda

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