THE SUPREME COURT OF THE
FEDERATED STATES OF MICRONESIA
Cite as Semens vs. Continental Airlines, Inc. (I),
2 FSM Intrm. 131 (Pon. 1985)
[2 FSM Intrm. 131]
CONTINENTAL AIR LINES, INC.,
AIR MICRONESIA, INC.,
UNITED MICRONESIA DEVELOPMENT ASSOCIATION,
& MARTIN ENTERPRISES, INC.,
CIVIL NO. 1984-017
Before Edward C. King
December 10, 1985
For the Plaintiff: James H. Grizzard
P.O. Box 330 CHRB
Saipan, CNMI 96950
For Defendants: Traylor T. Mercer
(Continental Air Lines, Carlsmith, Wichman, Case,
Inc. and Air Micronesia, Mukai and Ichiki
Inc.) Fourth Floor, Bank of America Building
P.O. Box BF
Agana, Guam 96910
[2 FSM Intrm. 132]
For the Defendant: Michael A. White
P.O. Box 222 - Capitol Hill
Saipan, CNMI 96950
For the Defendants: Fredrick L. Ramp
(Martin Enterprises) Attorney-at-Law
Stovall, Spradlin, Ramp,
Armstrong & Israel
P.O. Box 1480
Kolonia, Pohnpei 96941
* * * *
Conflict of laws
Where the plaintiff is a Pohnpei resident, one of the defendants, a party to the contract at issue, is a corporation having its principal place of business in Pohnpei, and where the contract at issue governs work to be conducted in Pohnpei, and the injury which has brought the clause under consideration occurred in Pohnpei, the indemnification clause should be interpreted, and the issues of tort liability determined, in accordance with the law of Pohnpei. Semens v. Continental Air Lines, Inc., 2 FSM Intrm. 131, 137 (Pon. 1985).
The Micronesian constitutional convention anticipated that judges in the new constitutional court system would find it necessary to draw on experience and decisions of courts in other nations to develop a common law of the Federated States of Micronesia. The framers recognized the desirability of such a search and amended the earlier draft of the provision to be sure to leave it open to the constitutional courts to do so. Nonetheless, judges now are not to consider the relationship between the common law of the United States and the legal system here in the same way that relationship was viewed prior to self-government. Semens v. Continental Air Lines, Inc., 2 FSM Intrm. 131, 139 (Pon. 1985).
Custom and tradition
Even where the parties have not asserted that any principle of custom or tradition applies, the Court has an obligation of its own to consider custom and tradition. Semens v. Continental Air Lines, Inc., 2 FSM Intrm. 131, 140 (Pon. 1985).
Custom and tradition
Where the business activities which gave rise to the lawsuit are not of a local or traditional nature, and the work setting and the work itself are of a markedly nonlocal, international character, the Court need not conduct an intense search for applicable customary laws and traditional rules when none have been brought to its attention by the parties. Semens v. Continental Air
[2 FSM Intrm. 133]
Lines, Inc., 2 FSM Intrm. 131, 140 (Pon. 1985).
Judicial Guidance Clause;
Precedent; Contracts; Torts
Common law decisions of the United States are an appropriate source of guidance for this Court for contract and tort issues unresolved by statutes, decisions of constitutional courts here, or custom and tradition within the Federated States of Micronesia. Review of decisions of courts of the United States, and any other jurisdictions, must proceed however against the background of "pertinent aspects of Micronesian society and culture." Semens v. Continental Air Lines, Inc., 2 FSM Intrm. 131, 142 (Pon. 1985).
Roughly stated, the general principle is that one person may be liable in tort to another only if the first intentionally or negligently violates a duty owed to the other, and the other is injured as a result. Semens v. Continental Air Lines, Inc., 2 FSM Intrm. 131, 142 (Pon. 1985).
Where the plaintiff-employee seeking damages for injuries sustained while working does not, either in his complaint or elsewhere, point to any particular act or omission by the defendant-employer, who had been stripped of any supervision and control over the activities of the plaintiff before the injury, that defendant cannot be held responsible for any wrongful direction or lack of direction at the scene which might have led to the alleged injury. Semens v. Continental Air Lines, Inc., 2 FSM Intrm. 131, 144 (Pon. 1985).
An employer who assigns employees to work under the supervision of another is not legally responsible to the assigned employees for injuries caused by failure of the other employer to provide labor-saving or safety equipment where the hazards known to the employer were equally obvious to the assigned employees. Semens v. Continental Air Lines, Inc., 2 FSM Intrm. 131, 144 (Pon. 1985).
Where it is undisputed that the original employer had no right to control the workplace or the employee's actions at the time the plaintiff-employee was injured, exercised no actual control over the manner of work, knew nothing which would have increased the plaintiff's knowledge of the risk he was facing, and did nothing to cause the injury, the Court may conclude as a matter of law that the defendant is not liable for plaintiff's injuries. Semens v. Continental Air Lines, Inc., 2 FSM Intrm. 131, 144 (Pon. 1985).
Where it is shown that the party seeking indemnification drafted the contract language, had greater bargaining power than the other party, had greater control over the work activities, or had a considerably larger stake and expectation of profits from the endeavor, the courts become increasingly
[2 FSM Intrm. 134]
insistent upon ever more precise language in the indemnity clause as a condition to a finding that a non-negligent indemnitor is required by the clause to bear the burden of the indemnitee's negligence. Semens v. Continental Air Lines, Inc., 2 FSM Intrm. 131, 146 (Pon. 1985).
Where there is ambiguity within a contractual clause and there are various reasonable and practical alternative constructions available, it is necessary to employ rules of interpretation.Semens v. Continental Air Lines, Inc., 2 FSM Intrm. 131, 147 (Pon. 1985).
The purpose of the common law rules of interpretation is to assist in reaching an objective interpretation, determining the meaning which reasonably intelligent people, knowing the circumstances, would place upon the words. Semens v. Continental Air Lines, Inc., 2 FSM Intrm. 131, 148 (Pon. 1985).
A message of the Judicial Guidance Clause is that a court, when interpreting a contract, may not simply assume that reasonably intelligent Micronesians will perceive the same meaning as would reasonably intelligent Americans. Courts may not blind themselves to the pertinent aspects of Micronesian society, such as less facility in the English language, less exposure to business concepts, and paucity of legal resources, which might cause a reasonably intelligent Micronesian to perceive a meaning differently than would a person from some other nation. Semens v. Continental Air Lines, Inc., 2 FSM Intrm. 131, 149 (Pon. 1985).
Where there was no clear statement in the contractual indemnification clause that the indemnitee was to be protected against its own negligence, a reasonably intelligent FSM citizen aware of the general circumstances of the parties would not have perceived the English words used would require that the non-negligent party who had no control over, and relatively little economic stake in the work, must indemnify the major contractor against negligence of that major contractor.Semens v. Continental Air Lines, Inc., 2 FSM Intrm. 131, 149 (Pon. 1985).
* * * *
EDWARD C. KING, Chief Justice:
Benter Semens, a resident of Pohnpei and a citizen of the Federated States of Micronesia, seeks compensation for injuries allegedly suffered by him on July 28, 1982 at the Pohnpei airport while, as a member of a "ground handling" crew furnished by Martin Enterprises, Inc. pursuant to an agreement with United Micronesia Development Association, he was attempting to assist in unloading cargo from an airplane bearing the markings of Continental Air Lines, Inc. and Air Micronesia, Inc.
[2 FSM Intrm. 135]
Semens has named all four of the above corporations as defendants. He contends that all were negligent and that his injuries were a consequence of that negligence.
Martin and UMDA have filed motions for summary judgment, each contending that the record establishes conclusively that the movant had not been negligent in any way that caused injury to Semens. Martin also contends that actions of the other parties had deprived Martin of any control it might otherwise have had over Semens' work. UMDA claims never to have had any control over the work of ground handling crews.
The other three defendants assert that Martin contractually agreed to protect, or indemnify, them from any liability to Benter Semens or any other persons hired by Martin to carry out the ground handling operations for Continental and Air Micronesia flights at the Pohnpei airport. This indemnification obligation, they contend, protects even a party whose own negligence caused the injury. They rely upon Section 5.01 of a "Ground Handling Agreement," dated November 1, 1980, between UMDA and Martin, whereby Martin assumed responsibility for loading and unloading baggage and cargo for Continental and Air Micronesia flights in Pohnpei.
There are three ground handling agreements, running in a chain from Continental to Air Micronesia to UMDA to Martin. They all have similar language. There is a nearly identical clause in each, under the heading "indemnification," whereby the party assuming ground handling obligations makes certain agreements concerning liability to its own employees.
Continental and Air Micronesia claim protection as third party beneficiaries of the indemnification clause in the agreement between UMDA and Martin. Air Micronesia claims a right of indemnity under its agreement with UMDA too and Continental asserts that it is a third party beneficiary of that indemnification clause.
The effect of these indemnification clauses is before the Court on Martin's and UMDA's motions, and cross-motions of the other parties, for summary judgment.
Based upon the considerations set forth in this opinion, I find that the record establishes that neither Martin nor UMDA in any way caused the injury to Benter Semens. Therefore the claims of Mr. Semens against them must be dismissed. I also conclude that the indemnification clauses do not require a non-negligent indemnitor to protect against liability for the negligence of the indemnitee. Therefore summary judgment is granted Martin and UMDA as to the indemnity claims made against them.
Two basic issues, one factual and one legal, must be addressed
[2 FSM Intrm. 136]
initially. Resolution of those issues forms the foundation for the balance of this opinion.
A. Right of Control
Continental and Air Micronesia argue that there is a triable issue of fact as to whether Martin had relinquished control of the ground handling crew which it supplied. This convention is grounded on the facts that Semens, as supervisor of the crew, generally directed the crew and assigned them to the cargo areas of aircraft. They point out that Mr. Semens, in his deposition, admitted he was directing the crew members in handling the cargo when the notorious container was being moved.
All of that is beside the point. While there is within the record support for those contentions, the germane and dispositive factor is not whether or whom Semens was supervising but who was supervising him. On that crucial point there is no apparent disagreement.
While the ground handling agreement, dated November 1, 1980, contemplates an agreement whereby Martin would provide the ground handling services such as loading and unloading of baggage, air freight and mail, it was not long before the nature of the arrangement changed into something quite different.
Unchallenged depositions, affidavits and exhibits convincingly show that Martin was effectively stripped of control over the manner in which the ground handling work was to be carried out by Benter Semens and his crew. This occurred at a meeting held in April or May of 1981 when Thomas Utley, General Manager of UMDA, and Alex Luzama, the Eastern District Regional Service Supervisor and Regional Station Manager in Pohnpei for Air Micronesia, met with Peter Christian, Martin's General Manager, and instructed him that, because of what they considered unsatisfactory service in the past, the crews furnished by Martin were to report to the Air Micronesia city ticket office and then serve under the supervision and direction of Air Micronesia's station manager and other employees. After the meeting, this arrangement was confirmed by a May 12, 1981 letter from Utley to Christian.
It also apparently is not disputed that the ground handling procedures were being carried out in the manner described above on July 28, 1982, the day that Semens allegedly was injured.
Continental and Air Micronesia at page 7 of their memorandum apparently concede the truth of Mr. Semens' deposition testimony that, the day of the alleged injury, he was the forklift operator when the crew was having trouble unloading a piece of cargo. James Gilmar, the Air Micronesia station manager, told Semens to hurry the operation. Semens then jumped up into the plane to assist in the effort to move the cargo. It is also uncontradicted that neither Peter Christian nor any other supervisory personnel connected with Martin was at the airport when the injury is alleged to have occurred.
[2 FSM Intrm. 137]
Continental's assertion, then, that Semens was the foreman of the crew, does not alter the fact that the work of Semens himself at the time he was allegedly injured was controlled and directed by persons unaffiliated with Martin. These facts which are not in dispute mandate the conclusion that Martin had neither control over, nor the right to control the work of Benter Semens at the time he alleges he was injured.
There is also no suggestion of any fact which, viewed most favorably to the opponents of UMDA's motion for summary judgment, would permit a conclusion that UMDA had control of the work activities of Benter Semens, or that Mr. Semens was an employee of UMDA, on July 28, 1982.
B. Judicial Guidance Clause
The other basic issue was alluded to by Martin but not addressed by the other parties. There are here choice of law, as opposed to conflict of law, issues. The plaintiff is a resident of Pohnpei. One of the defendants, a party to the ground handling agreement at issue, is a corporation having its principal place of business in Pohnpei. Moreover, the UMDA-Martin agreement governs work to be conducted in Pohnpei and the injury which has brought the clause under consideration occurred in Pohnpei. Thus, it is clear that the indemnification clause should be interpreted, and the issues of tort liability determined, in accordance with the law of Pohnpei, not that of another jurisdiction.
A problem remains though. This is the first case presented to this Court requiring interpretation of a contract. This Court's Appellate Division has considered only one tort liability case and then merely followed the assumptions of the parties at the trial level rather than spell out guidelines for such cases. Ray v. Electrical Contracting Corp., 2 FSM Intrm. 21 (App. 1985). No pertinent rulings of the Pohnpei Supreme Court have been brought to this Court's attention. No provisions of the FSM or Pohnpei State Constitution, statutes or court rules resolve the contractual or negligence issues here. It is necessary therefore to determine the source from which we should draw the rules to be applied by this Court to solve issues such as this as they arise in Pohnpei.
The Constitution does not mandate a particular source of law, only prescribing that, "Court decisions shall be consistent with this Constitution, Micronesian customs and traditions, and the social and geographical configuration of Micronesia." FSM Const. art. XI, § 11.
The Report of the Constitutional Convention's Committee on General Provisions, which reported out this Judicial Guidance Provision, says, in part:
Your Committee is of the opinion that the Constitution should provide future judges with guidelines for decision making. Generally the courts follow the logic and results which have been arrived at by the court when previously considering similar fact situations. However, in a period
[2 FSM Intrm. 138]
of transition from one judicial system to another, it is unclear what previous decisions and reasoning the judges should be following...The intent and purpose of this provision is that future Micronesian courts base their decisions not on what has been done in the past but on a new basis which will allow the consideration of the pertinent aspects of Micronesian society and culture.
The failure to include such a provision in the Constitution may cause the courts to follow the decisions of past Trust Territory cases or various foreign decisions which have dealt with similar interpretive or legal questions. This may be undesirable since much of the reasoning utilized in these various courts may not be relevant here in Micronesia. Micronesia is an island nation scattered over a large expanse of ocean. Customary and traditional values are an important part of our society and lifestyle. It is important that this Constitution be interpreted in light of our customs and traditions. Without such assurance in the Constitution, the words we use may be interpreted to mean other than what we have intended.
The wording "total social and physical 1 configuration of Micronesian life" means that the courts shall consider cases on the basis of pertinent aspects of Micronesian society and geography rather than considering those aspects of some outside and possibly quite different society.
. . . in the past the courts in the Trust Territory have copied to a great extent English common law which the Committee feels is not always a relevant basis for decision here in Micronesia. . .
The future interpretation of the Constitution will profoundly influence the effect that document will have on future generations of Micronesians. Your Committee urges that the Convention take action which will insure that Micronesian lifestyle, customs and traditions shall have paramount importance in such interpretations.
SCREP No. 34, II J. of Micro. Con. Con. 821-22.
[2 FSM Intrm. 139]
The Judicial Guidance Clause
was intended to have pervasive effect on the decision making of the Court.
This clause was the effort by the drafters to assure that judges would
recognize that the Constitution represents the aspirations of the People of
Micronesia to exercise "our inherent sovereignty," to "affirm our common wish to
live together in peace and harmony, to preserve the heritage of the past" and
"to protect the promise of the future," by becoming "the proud guardian of our
own islands; now and forever." < U>FSM Const. preamble.
The framers of the Constitution had learned from experience that judges trained in other places might often assume that what is good for their home states in the United States is also the right approach for Micronesians. The convention anticipated that judges in the new constitutional court system would find it necessary to draw on the experience and decisions of courts in other nations to develop a common law of the Federated States of Micronesia. They recognized the desirability of such a search and amended the earlier draft of the provision to be sure to leave it open to the constitutional courts to draw principles from other nations. 2 Nonetheless, the Judicial Guidance Clause manifests a strong and deeply felt sense that judges functioning under the Constitution are not to consider the relationship between the common law of the United States and the legal system here in the same way that relationship was viewed by the Trust Territory High Court.
The clause places affirmative obligations upon an FSM Supreme Court justice in every case that comes before this Court. Our decision making must be grounded upon a "new basis which will allow the consideration of the pertinent aspects of Micronesian society and culture." SCREP No. 34, supra, at 822.
We have followed this instruction in interpreting constitutional provisions bearing upon criminal proceedings and have concluded that we may not simply adopt interpretations of similar words in other constitutions to determine the meaning of this Constitution without "independently considering suitability of that reasoning for the Federated States of Micronesia." Alaphonso v. FSM, 1 FSM Intrm. 209, 213 (App. 1982).
In the context of the disputes here concerning the meaning of a contractual provision and possible liability for negligence, I consider the Judicial Guidance Clause to impose the following requirements on the Court's analytic method. First, in the unlikely event that a constitutional provision bears upon the case, that provision would prevail over any other source of law. Second, any applicable Micronesian custom or tradition would be considered and the Court's decision must be consistent therewith. If there is no directly applicable constitutional provision, custom or tradition, or if those sources are insufficient to resolve all issues in the case, then the Court may look to the law of other nations. Any approach drawn from those
[2 FSM Intrm. 140]
other sources, however, must be consistent with the letter and spirit of the Constitution as well as principles of, and values inherent in, Micronesian custom and tradition. Even then, the approach selected for the common law of the Federated States of Micronesia should reflect sensitive consideration of the "pertinent aspects of Micronesian society and culture," including Micronesian values and the realities of life here in general and the nation-building aspirations set forth in the Preamble of the Constitution in particular.
With these principles in mind, we may move toward analysis of the rights of the parties in this case.
Aside from the Judicial Guidance Clause itself, I find no constitutional provision applicable to this case.
The parties have not asserted that any principle of custom or tradition applies. Yet, as already noted, the Court has an obligation of its own to consider custom and tradition. In determining whether Micronesian custom or tradition likely applies to a contract or tort issue, a court may consider the nature of any activities which gave rise to the dispute, the parties and their relationship, and the contract itself. If these indicate that principles of Micronesian customary law or tradition may well affect the rights or duties of the parties, then the search for customary law and traditional rules should be intensified.3
This is not such a case. The business activities which gave rise to this lawsuit are not of a local or traditional nature. While there may have been traditional arrangements whereby one party agreed to handle or move goods for another, the setting and items handled by the parties to this arrangement are of a markedly nonlocal, international character. The work is done at the Pohnpei airport. The goods handled are baggage and freight typically engaged in international travel.
Three of the four defendants have their principal place of business outside of Pohnpei, indeed outside of the Federated States of Micronesia. The agreements are all part of an arrangement employed to expedite air travel on routes extending almost daily through five jurisdictions: Hawaii, a state in the United States; the Republic of the Marshall Islands; the Federated States of Micronesia; the United States Territory of Guam; and the United States Commonwealth of the Northern Mariana Islands.
Finally, the contract reveals no intention that Micronesian custom or
[2 FSM Intrm. 141]
tradition was to serve as the guide for interpretation of the indemnification clause. The ground handling agreement makes no reference to custom or tradition. The agreement is written in English only, not in Pohnpeian or any other language indigenous to Micronesia.
Based upon these factors, I conclude that there is no applicable Micronesian custom or tradition. Analysis may proceed to legal principles developed elsewhere.
All parties point to common law decisions of courts in the United States. I accept those authorities as a proper frame of reference for several reasons.
First, attorneys are officers of the Court, charged with responsibility for asserting the rights of their clients. Judges have a duty to consider those sources of rights and legal principles pointed out by attorneys on behalf of their clients. Second, discussions on the floor of the constitutional convention reflect the expectation of the constitutional delegates that this Court would indeed look to the common law of the United States and Trust Territory decisions in developing a common law of the Federated States of Micronesia. I J. of Micro. Con. Con. 419-21.
Third, courts within the Trust Territory of the Pacific Islands have for the past 40 years looked to the common law of the United States as a guide for the resolution of disputes here. For many of those years, courts were required by statute to look to that source. 1 F.S.M.C. 203, but see FSM v. Rauzi, 2 FSM Intrm. 8 (Pon. 1985). The common law of the United States is now a familiar source of guidance here.
Fourth, as this Court's Appellate Division has noted:
"Common law" is a label identifying a widespread historical legal process tracing its origins back to medieval England. This is a trial and error process in that common law judges base current decisions upon earlier precedents but, where those precedents are at odds with current accepted notions of social justice, the judges are free to modify or overrule earlier precedent. This system is now employed by numerous independent sovereignties throughout the world including Great Britain, the United States, India and nations in Africa and throughout the Pacific.
Alaphonso v. FSM, 1 FSM Intrm. 209, 220 (App. 1982).
By linking ours to that long-established and widely used system of justice, we draw on the experience, insights and improvements gained through hundreds of years of application in numerous cultural contexts. Moreover, our system of justice thereby becomes more recognizable and predictable. Hence, it is more familiar to other nations in this part of the world and less threatening to potential investors. This in turn creates a better climate for
[2 FSM Intrm. 142]
economic development, an important goal of this new nation.
I conclude then that common law decisions of the United States are an appropriate source of guidance for this Court for contract and tort issues unresolved by statutes, decisions of constitutional courts here, or custom and tradition within the Federated States of Micronesia. Review of decisions of courts of the United States, and any other jurisdictions, must proceed however against the background of "pertinent aspects of Micronesian society and culture."
The Court has jurisdiction of this case by virtue of the diversity of citizenship among the parties.
Under tort law of the United States, as well as in practically every other established system of justice, liability is based upon fault. 4 W. Keeton, D. Dobbs, R. Keeton, D. Owen, Prosser and Keeton on Torts 535 (5th ed. 1984). Roughly stated, the general principle is that one person may be liable in tort to another only if the first intentionally or negligently violates a duty owed to the other, and the other is injured as a result. We must consider here whether either Martin or UMDA has breached such a duty to Mr. Semens.
1. Martin - Mr. Semens does not, either in his complaint or elsewhere, point to any particular act or omission of Martin which he claims caused the injury.
Moreover, I have already concluded in this opinion that Martin had been stripped of any supervision and control over the activities of Benter Semens and the other workers supplied by Martin for ground handling activities. Accordingly, Martin could not be held responsible for any wrongful direction or lack of direction at the scene which might have led to the alleged injury.
[2 FSM Intrm. 143]
Semens points to no existing principle in the common law elsewhere, nor any which he contends should be established in the common law of the Federated States of Micronesia, which would justify liability on the basis of Martin's actions. He does not, for example, suggest that Martin should be liable to Semens for any injury incurred in the course of employment simply because he was on Martin's payroll.
Instead, Semens says that Martin should be held liable because of failure to act. He argues that Martin knew or should have known that the supervisors to whom Martin was relinquishing control were conducting operations without standard labor-saving or safety equipment, and that the lack of mechanical devices to assist in unloading cargo could result in injury to any member of the crew. I know of no authority, and plaintiff cites none, for the proposition that an employer who assigns employees to work under the supervision of another is legally responsible to the assigned employees for injuries caused by failure of the other employer to provide labor-saving or safety equipment.
I would not reject out of hand the idea that an assigning employer should be required to warn the employees assigned of hazards known to the employer which would not be apparent to the employees. In this case though, the work to be done, and the hazards, would have been equally as obvious to the employees as to Martin. Cargo and baggage had to be moved. Before the employees began moving the cargo and baggage, they could see, as well as could Martin, what steps would be necessary to carry out the work. The failure of Martin simply to confirm to them that which they could see with their own eyes could hardly be seen as a breach of any obligation that Martin might have to them.
The deposition and affidavit of Peter Christian indicate that Martin was aware that better and safer cargo handling equipment was available elsewhere. Arguably, Martin might have known that members of the crew were being exposed no more risk than were employees in other places carrying out similar duties. Even so, I see no basis for holding Martin legally liable for failing to warn Semens of the hazards.
There is no apparent causal connection between Martin's conduct and the plaintiff's injuries. If Martin had told the employees that mechanical cargo-moving devices were available elsewhere, this would not have changed the risk to which they were exposed. The hard fact is that Benter Semens and his colleagues did not have the equipment here. Knowledge of potentially helpful equipment in other places might have increased their comprehension of the relative degree of risk they were facing, but it would not have increased their knowledge of the actual risk. With or without knowledge of other equipment, their dilemma was the same: should they quit the job, or proceed to attempt to move and handle the cargo with the equipment available to them at the time?
There is no suggestion that if Martin had disclosed that better equipment was available, Benter Semens could have somehow forced Continental
[2 FSM Intrm. 144]
to make that equipment available to him and his crew, or that he would have refused to work. There is also no contention that Martin had the capacity or obligation to force or persuade the other defendants to get better equipment. Indeed Peter Christian's deposition and affidavit indicate that Martin had made such attempts, unsuccessfully.
Finally, the affidavits and depositions of Alex Luzama and Peter Christian show that Martin was unaware of the particular cargo which Benter Semens was attempting to move when the injury allegedly occurred. No prior notice had been given to anybody at the Pohnpei airport that an especially large cargo container would be arriving on the day of the injury.
I also see no factual basis which could justify Continental's suggestion that Martin may have been negligent in selecting Mr. Semens as an employee.
In light of the undisputed facts that Martin had no control over the way the cargo was to be unloaded, had no knowledge of facts unknown to Benter Semens that would have affected the risk forced by him, and did nothing else to cause the injury, I conclude as a matter of law that Martin is not liable to Benter Semens.
2. UMDA - The same considerations which preclude liability of Martin benefit UMDA as well.
I have already concluded that UMDA exercised no control over the manner of work of the ground handling crews. Nothing in the record suggests that UMDA knew anything which would have increased Benter Semen's knowledge of the risk he was facing on July 28, 1982. Moreover, there is no indication of any kind of special relationship between UMDA and Semens, or the ground handling crew in general, which would have imposed a duty upon UMDA to warn Semens of any knowledge it did have.
Therefore, UMDA is entitled as a matter of law to summary judgment against Benter Semens.
B. The Indemnification Clause
The indemnification clause in the agreement between UMDA and Martin, dated November 1, 1980, reads as follows:
5.01 Contractor and its employees engaged in performing the services furnished hereunder shall under no circumstances be deemed to be the employees of Carriers or UMDA. Contractor assumes full responsibility for any and all liability to its employees on account of injury or death sustained in the performance of this Agreement. Each party with respect to its own employees, accept (sic) full and exclusive liability for maintaining workmen's compensation or employer's liability insurance.
[2 FSM Intrm. 145]
The other three defendants claim that even if judgments are awarded against them on grounds that their negligence caused the injuries, Martin is nevertheless required by the indemnification clause to reimburse them for the full amount of any judgment.
UMDA contends that the clause commits Martin to protect UMDA from any liability to Martin's employees in connection with the activities of those employees. Since I have concluded that UMDA is not liable to Mr. Semens, Martin has no duty here to indemnify UMDA. However, Continental and Air Micronesia insist that they are the carriers referred to in the Martin-UMDA indemnification clause and that, as third party beneficiaries, they are entitled to indemnification by Martin if they are held liable to Benter Semens.
The parties have pointed to numerous United States decisions considering claims of one party that another must hold the first harmless from liability caused by the first party's negligence.
Under those decisions, agreements purporting to exculpate a party against the consequences of that party's own negligence are disfavored, yet are not generally viewed as so contrary to the public interest that courts refuse to enforce them.Southern Pacific Co. v. Morrison-Knudsen Co., 338 P.2d 665 (Or. 1959); Indemnity Ins. Co. v. Koontz-Wagner Electric Co. , 233 F.2d 380 (7th Cir. 1956). 5
On the other hand, courts are traditionally skeptical of a claim that two parties agreed that one should protect the other against the other's negligence, and are reluctant to construe a contract to have that meaning, thereby casting the burden of negligent actions upon one not actually at fault, unless that meaning is very clearly expressed in the contract. Barrus v. Wilkinson, 398 P.2d 207, 208 (Utah 1965); Tyler v. Dowell, Inc., 274 F.2d 890 (10th Cir. 1960); Prosser and Keeton on Torts, supra, § 51 (5th ed. 1984).
The obvious purpose of this rule is to prevent injustice. A contracting party should be upon fair notice that under this agreement and through no fault of his own, a large and ruinous award of damages may be assessed against him solely by reason of negligence attributable to the opposite contracting party.
Chevron Oil Co. v. E.D. Walton Constr. Co., 517 F.2d 1119, 1122 (5th Cir. 1975).
[2 FSM Intrm. 146]
There is general agreement on the above principles, but the decisions display a wide range of results. Courts have held some clauses quite similar to the one under consideration here to manifest a clear and unequivocal intention that the indemnitor be required to protect against the indemnitee's own negligence. 6 Contrastingly, other courts have refused to protect indemnitees against their negligence in the face of language appreciably better calculated to protect. Smith v. Chevron Oil Co., 517 F.2d 1154 (5th Cir. 1975).
This seeming incongruity is explicable however. As a general proposition, where the party seeking indemnification drafted the contract language, 7 has considerably greater bargaining power than the other party, 8 has greater control over the work activities, 9 or has a considerably larger stake and expectation of profits from the endeavor, 10 the courts become increasingly insistent upon ever more pristine clarity in the language of the indemnification clause as a condition to a finding that a non-negligent indemnitor must bear the burden of the indemnitee's negligence.
These factors, choice of language, bargaining power, control over work activities and proportionality between potential profits and risks assumed, do not appear to be, and no party here contends them to be, reflective only of culturally-dictated values. It is not only because one has been reared in the United States that one can see the fairness of a rule that, if there are ambiguities in a contract, the unclear language should be construed more strictly against the party who wrote it.
[2 FSM Intrm. 147]
Similarly, most people in most societies surely would be wary of the suggestion that two parties had agreed that the one who had no control over the manner in which work is to be carried out will pay for damages flowing from acts or omissions of the party in control of the project.
I conclude that all the common law grounds referred to above for strictly construing an ambiguous indemnification clause against the indemnitee are consistent with Micronesian values and therefore should be adopted as part of the common law of the Federated States of Micronesia.
Continental seeks to avoid the effect of these rules of interpretation by arguing, correctly, that they are inapplicable unless there is ambiguity in the clause. However, Continental conceded in oral argument that the words "assumes full responsibility for any and all liability to its employees on account of injury or death sustained in the performance" could not be employed to require indemnification of Continental against liability for intentional misconduct by Continental toward Martin's employees carrying out their ground handling duties. Yet the literal language would yield such a result. Continental must be taken implicitly to have conceded that the clause is not without ambiguity.
There are other ambiguities. The word indemnification is used only in the title, not in the clause itself. Martin contends that the clause should not be read as a promise to indemnify UMDA and others against liability from their own negligence but merely as a promise by Martin that it will not attempt to pass along to UMDA or others an employer's normal responsibilities to its employees including liability to the employees for tortious acts of Martin or others under Martin's control.
I note an additional ambiguity. The word employee is nowhere defined within the ground handling agreements. That word apparently is interpreted by the parties here as meaning "people hired and paid by Martin." However under United States common law, the normal test for determining whether somebody is an employee in the context of tort liability is the degree of control exercised by the employer over the supposed employee. Rauzi v. FSM, 2 FSM Intrm. 8, 15 (Pon. 1985). If that was the meaning of the ground handling agreement, Benter Semens was not Martin's employee at the time of the accident and the indemnification clause was inapplicable.
Thus there is ambiguity within the clause and there are various reasonable and practical alternative constructions available. It is therefore necessary to employ rules of interpretation.
When the facts are considered in light of the interpretive principles mentioned above, it is apparent that each reason mentioned as justifying a narrow construction exists here.
First, UMDA admits that UMDA prepared the ground handling agreement, including the indemnification clause. The 1980 agreement between UMDA and Martin is a standard form contract used by UMDA for ground handling agreements
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throughout Micronesia. The indemnification clause is patterned on the ground handling agreements between Continental and Air Micronesia, and Air Micronesia and UMDA.
Secondly, there was substantial disparity in bargaining power between UMDA and Martin when the contract was entered into. UMDA stood as the sole source to Martin of the possibility of work in connection with the Continental and Air Micronesia operations. If negotiations had broken down, UMDA could have looked to other businesses on Pohnpei to perform the work. Martin would have been effectively barred from air transport operations in Micronesia.
Third, to interpret the clause as requiring Martin to bear the burden of all possible liability for injuries to the crew, even if caused by the negligence of UMDA, Air Micronesia, or Continental "does not appear to us to square with a realistic effort on the part of the parties to logically allocate as between them the risk of loss arising out of the work." Jones, 527 P.2d at 1119. The ground handling operation obviously forms only a small part of the air passenger and cargo activities of Continental, Air Micronesia and UMDA in Pohnpei. Martin was paid $39.35 per flight for furnishing a six person crew and a flatbed truck. Salaries for the workers and other expenses had to be paid by Martin out of that amount. I take judicial notice of the fact that no person can fly to or from Pohnpei for $39.35. Martin's was only a tiny part of the revenue realized by Continental and Air Micronesia from the persons and freight being brought to and from Pohnpei by each flight.
Fourth, as already discussed, Martin had no control over the work activities or the equipment to be used. Public policy considerations cry out against removing the ultimate responsibility for injury from the parties which control the operations and the quality of the workplace and its equipment. A key allegation of the plaintiff is that Continental and Air Micronesia do not acquire labor protecting equipment and devices that are routinely available to workers throughout the United States. If Continental and Air Micronesia could be indemnified against any legal responsibility they may have to furnish such equipment, it is difficult to perceive why they would do anything other than increase immediate profits by failing to obtain such equipment while imposing all of the risk for the absence of such equipment on other parties.
Plainly, under the common law principles applied by courts in the United States, the indemnification clause at issue under the circumstances of this case would be construed strictly against UMDA, Air Micronesia and Continental Airlines. The purpose of these common law rules of interpretation is to assist in reaching an objective interpretation, determining the meaning which reasonably intelligent people, knowing the circumstances, would place upon the words. Restatement of Contracts § 230 (1932); Hotchkiss v. National City Bank, 200 F. 287, 293-94 (S.D.N.Y. 1911) (L. Hand, J.), aff'd, 201 F. 644 (2d Cir. 1912), aff'd, 231 U.S. 50, 34 S. Ct. 20, 58 L. Ed. 115 (1913).
But that is not enough. A message of the Judicial Guidance Clause is that this Court may not simply assume that reasonably intelligent Micronesians
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will perceive the same meaning as would reasonably intelligent Americans. We may not blind ourselves to the pertinent aspects of Micronesian society, such as less facility in the English language, less exposure to business concepts, and paucity of legal resources, which might cause a reasonably intelligent Micronesian to perceive meaning differently than would a person from some other nation.
This combination of standard common law principles of construction and pertinent aspect's of the "social configuration" of Micronesia, leads to the conclusion that the indemnification clause can not be given the construction sought by Continental and Air Micronesia. While the breadth of the indemnification language is sufficient to encompass liability for negligent as well as intentional misconduct of the indemnitee, the apparent focus of the clause is on Martin's responsibility while performing services under the contract. The clause makes no reference to saving the indemnitee harmless from the indemnitee's own negligence. Nor is there mention of the possibility that Martin might have no control over the actions of the person injured or the performance of the work.
Other courts have found the absence of direct statements fatal. Brogdon v. Southern Ry. Co., 384 F.2d 220, 223 (6th Cir. 1967)("It would have taken little time for a Southern Railway attorney to have added the words `including damage from indemnitee's own negligence' to the language of paragraph 4. Not finding such language (or any compelling inference), we decline to supply it."); Paoli v. Dave Hall, Inc., 462 A.2d 1094, 1098 (Del. Super. 1983) ("Not only must there be a reference to negligence ... but the allusion must further specify that it is the negligence of the purportedly protected party which is contemplated in the indemnity agreement."); Butters v. Consolidated Transfer & Warehouse Co., 510 P.2d 1269, 1274 (Kan. 1973) ("Language that is merely general, broad, and all-inclusive in indemnity agreement is not sufficient to impose liability for indemnitee's own negligence.")
Here there was no clear statement that the indemnitee was to be protected against its own negligence. I conclude that, without such a clear and direct statement, a reasonably intelligent FSM citizen aware of the general circumstances of the parties would not have perceived the words used to require indemnification under the circumstances of this case.
Benter Semens was not an employee of UMDA when he sustained his injuries and there is no theory under which he could be liable to Semens. Since Semens was not an employee of UMDA, the UMDA-Air Micronesia indemnification agreement is inapplicable.
Martin had no control over the work of the crew furnished to unload, the plane at Pohnpei on July 28, 1982. No act, nor failure to act, of Martin caused injury to Benter Semens.
If any party's wrongful action or omission caused injury to Semens, it
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would have been that of Air Micronesia or Continental. Martin's indemnity obligations do not extend to indemnification of any party from liability for its own negligence or wrongdoing.
The claims of Benter Semens against UMDA and Martin are dismissed and the cross-claims of Continental and Air Micronesia against UMDA and Martin must also be dismissed. Martin's and UMDA's motions for summary judgment are granted. The other motions for summary judgment are denied.
1. The word "physical" in the proposed language was changed to "geographical" in the final version of the clause. The style Committee proposed this change to avoid interpretation of the word as referring to other unintended meanings of physical "such as chemical properties and geology." SCREP No. 48, II J. of Micro. Con. Con. 875. (Back to opinion)
2. See I J. of Micro. Con. Con. 419-21 (Oct. 25, 1975 Sess.). (Back to opinion)
3. I leave for another day the question of whether an otherwise pertinent custom or tradition could be rendered inapplicable by a specific contractual provision or some other manifestation of intent of the parties that other sources of law be used to determine their rights. (Back to opinion)
4. There is "a sense of community within the law of tort. One cannot help but be impressed by the similarity of basic tort doctrine throughout the world. The pervasiveness of the fault principle is particularly revealing. The free market industrial west, the socialist bloc, and the developing nations each have systems of tort law that emphasize the role of fault. There are significant differences to be sure, but the common reliance on fault suggests shared notions of fairness and responsibility that transcend political or economic systems. The Encyclopedia will allow legal educators and policymakers throughout the world to incorporate a global perspective to what previously may have been viewed as only a local problem." T. Eaton, The International Encyclopedia of Comparative Law, Volume XI, on Torts, 14 Ga. J. Int'l & Comp. L. 433, 442 (1984). (Back to opinion)
5. Some earlier cases did hold clauses purporting to indemnify for the indemnitee's negligence void as contrary to public policy. See cases cited at footnote 16 of United States v. Seckinger, 397 U.S. 203, 212, 90 S. Ct. 880, 885, 25 L. Ed. 2d 224, 233 (1970). (Back to opinion)
6. Laudano v. General Motors Corp., 388 A.2d 842 (Conn. 1977). (Back to opinion)
7. Chevron Oil Co. v. E.D. Walton Constr. Co., 517 F.2d at 1122, "As drafter of the contract, Chevron could have provided a clear indication that the parties intended the result it argues for now." Back to opinion
9. Vinell Co. v. Pacific Elec. Ry. Co., 340 P.2d 604, 608 (Cal. 1959): "If an indemnitor ... is to be made responsible for the acts of an indemnitee over whose conduct it has no control, the language imposing such liability should do so expressly and unequivocally so that the contracting party is advised in definite terms of the liability to which it is exposed." (Back to opinion)
10. American Oil Co. v. Hart, 356 F.2d 657 (5th Cir. 1966): "It is simply inconceivable that it was within the contemplation of the parties that although wholly innocent of any negligent conduct ... the Independent Contractor for the slight sum of $40 agreed to take on itself -- and conversely spare Amoco of any pecuniary burden -- the legal consequences arising from Amoco's negligence in furnishing an unsafe place to work..." See also Jones v. Strom Constr. Co., 527 P.2d 1115, 1118-19 (Wash. 1974). (Back to opinion)