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United Parcel Service, Inc. v. Air Transport International LLC

United States District Court, Sixth Circuit

May 20, 2013

UNITED PARCEL SERVICE, INC., et al., Plaintiffs,


CHARLES R. SIMPSON, III, Senior District Judge.

This matter is before the court pursuant to a motion by plaintiffs United Parcel Service, Inc., United Parcel Service Co., United Parcel Service General Services Co., and UPS Worldwide Forwarding, Inc. ("UPS Worldwide") (collectively, "UPS" or the "UPS Plaintiffs") to dismiss defendant Air Transport International LLC's ("ATI") amended counterclaim (DN 21).

The basis for this action between UPS and ATI is an underlying action brought by plaintiffs Gary and Peggy DeVaco in the Pennsylvania Court of Common Pleas against each of the UPS Plaintiffs except UPS Worldwide (the "DeVaco Action"). In the DeVacos' complaint in that action, they allege that Gary DeVaco was employed as a mechanic by ATI, which had contracted to transport some of UPS's overflow of packaging and cargo. Supposedly, Mr. DeVaco and another ATI employee were waiting in an ATI truck for the arrival of an ATI aircraft when jet blast from a taxiing UPS Boeing 747 flipped the truck onto its side and pushed it several feet, injuring Mr. DeVaco. The DeVacos brought a litany of claims against the UPS Plaintiffs based on that alleged incident.

UPS filed this action in Jefferson County, Kentucky, Circuit Court seeking to require ATI to indemnify and defend UPS in the DeVaco Action pursuant to an indemnification provision of a Cargo Aircraft Charter Agreement ("CACA") that was signed by UPS Worldwide and ATI. According to UPS's complaint in this action, ATI initially agreed to defend UPS in the DeVaco Action. However, after the expiration of the time for discovery in the DeVaco Action, ATI informed UPS that it was revoking its agreement to defend UPS in the action. The UPS Plaintiffs brought claims against ATI for a declaratory judgment and for breach of contract. ATI removed the case to this court pursuant to its diversity jurisdiction and filed an answer and counterclaim. After the UPS Plaintiffs moved to dismiss the counterclaim, ATI filed an amended counterclaim.

In the amended counterclaim, ATI states that it initially retained a law firm to defend the UPS Plaintiffs that were sued in the DeVaco action, although it never agreed to indemnify UPS. However, ATI alleges, during discovery in the DeVaco Action it learned several facts about the accident in which Mr. DeVaco was injured that convinced ATI that it had no duty to defend or indemnify the UPS Plaintiffs. In particular, ATI states that it learned that UPS employees directed Mr. DeVaco and his co-worker to park the ATI vehicle they were driving in a particular area, which, unbeknownst to Mr. DeVaco and his co-worker, was a jet blast hazard; that UPS had not installed blast fences to prevent jet blast, nor had they posted signs indicating the area was a jet blast area; that UPS employees did not survey the area where Mr. DeVaco was sitting in the ATI vehicle and did not clear the area of people or vehicles when the UPS Boeing 747 landed; that UPS employees saw the ATI vehicle violently shaking, but did not communicate that to the flight crew, nor did they stop the plane and demand that a tug be used to pull the plane into its parked position so that it would not generate jet blast; and that the captain of the Boeing 747, a UPS employee, was unaware of the dimensions of jet blast hazard area behind his plane, did not properly assess whether the jet blast hazard area behind his plane was clear while the plane was taxiing, and inappropriately increased engine throttles during his final turn. ATI claims that UPS management was aware of the jet blast hazard conditions from a history of complaints about jet blast incidents, but made no changes to their operations, instead willfully ignoring the jet blast hazard risk and disregarding the safety of workers. After ATI became aware of those alleged facts, it notified UPS that it had no obligation to defend or indemnify UPS in the DeVaco Action, withdrew its defense, and requested that UPS indemnify ATI pursuant to the CACA for certain losses it had incurred.

ATI brings three causes of action against UPS based on the factual allegations in its amended counterclaim. In Count I, ATI seeks a declaratory judgment that it has no duty to defend and indemnify UPS and that UPS is obligated to indemnify ATI. In Count II, ATI brings a claim for breach of the CACA, based on UPS Worldwide's failure to indemnify ATI for "consequential damages" relating to the incident in which Mr. DeVaco was injured, including damages to ATI's property, the costs relating to the interruption of ATI's business, the expenses ATI paid relating to Mr. DeVaco's injuries, and the legal fees ATI had previously spent defending UPS in the DeVaco Action before ATI determined that it had no duty to defend UPS. And, in Count III, ATI claimed that if it was not entitled to recover the damages for breach of contract set forth under Count II, then it was entitled to recover for unjust enrichment the amounts it paid for UPS's defense in the DeVaco Action.

UPS now moves to dismiss ATI's amended counterclaim for failure to state a claim. Upon a motion to dismiss for failure to state a claim, a court "must construe the complaint in the light most favorable to plaintiffs" and "accept all well-pled factual allegations as true." League of United Latin Am. Citizens v. Bredesen, 500 F.3d 523, 527 (6th Cir. 2007). To survive a motion to dismiss, the "complaint must contain either direct or inferential allegations respecting all material elements" of the offense. In re Travel Agent Comm'n Antitrust Litig., 583 F.3d 896, 902 (6th Cir. 2009) (internal question marks omitted). The complaint's "factual allegations must be enough to raise a right to relief above the speculative level" and must "state a claim to relief that is plausible on its face." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 570 (2007). Rule 8 requires "more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A plaintiff must provide more than "labels and conclusions, " Twombly, 550 U.S. at 555, or "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements." Iqbal, 556 U.S. at 678. Accordingly, a court considering a motion to dismiss can begin "by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth." Id. at 679. After doing so, the court should determine whether the remaining well-pled factual allegations, assumed to be true, "plausibly give rise to an entitlement to relief." Id.

UPS argues that it has no obligation under the CACA to indemnify ATI for anything resulting from the actions alleged in the complaint. "Kentucky law provides that [t]he nature of an indemnitor's liability under an indemnity contract shall be determined by the provisions of the indemnity agreement itself.'" Thompson v. The Budd Co., 199 F.3d 799, 807 (6th Cir. 1999) (quoting United States Fidelity & Guar. Co. v. Napier Elec. & Const. Co., Inc., 571 S.W.2d 644, 646 (Ky. Ct. App. 1978)).

Section 1.4 of the CACA sets forth UPS's duty to indemnify ATI:

UPS hereby agrees to indemnify, defend, and release and hold harmless [ATI] and its officers, directors, agents and employees against any and all liabilities, claims, demands, suits, judgments, damages and losses, including the reasonable costs, expenses and legal fees in connection therewith or incident thereto, arising out of death or injury to any person whomsoever, including but not limited to employees of [ATI] or UPS, or arising out of loss of, damage to or destruction of any property whatsoever, including but not limited to cargo, the Aircraft and other property of [ATI] or third parties, to the extent caused by or arising out of or in any way connected with the UPS performance of services hereunder or its possession, use or maintenance of Aircraft utilized to provide such services, excluding however injury or damage caused by the willful misconduct or gross negligence of [ATI] or its subcontractors.

UPS argues that ATI's claim for indemnification fails because none of the actions ATI alleges were undertaken by UPS employees constituted services under the CACA. In that regard, the UPS Plaintiffs contend that the meaning of "UPS performance of services hereunder" extends only to the performance of certain actions listed in Sections 2.0-2.3 of the CACA, which is entitled "OBLIGATIONS OF UPS." Section 2.1 sets out UPS's obligation to pay ATI for its services. Section 2.2 states that UPS was required to "arrange and pay for certain operational expenses incurred during the operation" contemplated under the CACA, including fuel, landing fees and navigational/overflight fees, "All Aircraft handling, including aircraft marshalling, airstart, ground power units, push back of aircraft, stairs, deicing and cleaning of aircraft lavatories, " loading and unloading of cargo from Aircraft, and Aircraft parking fees. Finally, Section 2.3 required UPS to pay for certain damages to Aircraft.

In response, ATI argues that the UPS Plaintiffs are wrong that the term "services" in the indemnification clause relates only to the obligations of UPS set forth in Sections 2.0-2.3. ATI notes that the term "services" is not defined in the contract, and argues that "[b]y examining the entire contract, the parties intended the term services' to have a broader interpretation than just UPS's payment obligations under Section 2[] of the Agreement."

However, the court agrees with UPS that the use of the term "services" in the indemnity provision unambiguously refers only to the explicit obligations of UPS that are set forth in Sections 2.0-2.3. Specifically, the indemnity provision uses the phrase "services hereunder, " clearly referring to the services UPS was required to perform under the CACA. And Sections 2.0-2.3 are the only section of the CACA setting forth anything that could reasonably be called services that UPS was required to undertake. Indeed, while ATI contends that the language of the "entire contract" somehow requires a broader interpretation of the term "services, " ATI points to no specific language in the contract to support that argument, nor does it indicate what exactly a "broader interpretation" would encompass. The court rejects ATI's attempt to impose a nebulous meaning upon the term "services" based upon unspecified language in the "entire contract."

Having determined that the use of the phrase "services hereunder" in the indemnity provision means those obligations of UPS detailed in Sections 2.0-2.3 of the CACA, the court turns to the question of whether any of the actions ATI alleges that UPS employees undertook constitute the "performance of services." Many of the listed obligations in Sections 2.0-2.3 relate to UPS's obligation to pay ATI, and are clearly inapplicable to the allegations in ATI's complaint. The only non-payment related obligations are set forth in Section 2.2, which required UPS to arrange certain operations. Within those obligations, ATI identifies subsection 2.2(c), which states that UPS was required to arrange "[a]ll Aircraft handling, including aircraft marshalling, airstart, ground power units, push back ...

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