Melick & Porter Achieves Appellate Victory On Multimillion-Dollar Contractual Indemnification Claim

May 2023 • Source: Melick & Porter

In an appeal handled by the appellate team of michael Byrne, Bob Powers, & Michael Mazurczak of Melick & Porter, the Massachusetts Appeals Court recognized that a literal interpretation of an overly broad contractual indemnification provision would lead to “absurd results,” and ruled that a business consultant who provided financial and marketing services to the owner of a parking garage was not obligated to indemnify the owner for a multimillion-dollar verdict arising out of negligent security.  In K.W. v. LAZ Parking Limited, LLC, 102 Mass. App. Ct. 1115 (2023), the Court affirmed a judgment holding that the parties could not have intended for the indemnification provision to apply, notwithstanding its expansive language.

The case arose out of a rape which occurred in a downtown Boston parking garage adjacent to a hotel.  The plaintiff, K.W., filed a negligent security action against the entities which owned and managed the garage, as well as LAZ Parking, which acted as a consultant to the garage manager (JPA I).  After a trial, the jury found the owner and manager liable and awarded the plaintiff $4 million in damages.  LAZ was not found to have been negligent.

Under their agreement, LAZ provided JPA I with advice on financial issues, staffing, equipment and pricing, but was not involved in the day-to-day operations of the garage.  Both LAZ and JPA I agreed that LAZ played no role in security matters.  Nevertheless, the contract included an indemnification provision which called for LAZ to indemnify JPA I for “any and all liability … arising from … injuries to persons … that arise from the conduct or actions of the servants, agents or employees of any person.”  Claiming that the provision broadly applied to any liability connected to the operation of the garage, JPA I sought indemnity from LAZ.  The Superior Court ruled that the provision could not plausibly be interpreted to apply as written, and concluded that the parties did not intend for it to apply to a claim arising out of garage security.  JPA I appealed, and the Appeals Court affirmed. 

Noting that a literal reading of the provision “would require LAZ to indemnify JPA I for losses having nothing to do with the garage whatsoever,” and that such a sweeping obligation could not be reconciled with the limited consulting services LAZ provided to assist JPA I in the management of the garage, the Appeals Court ruled that the agreement was ambiguous.  Thus, the Court looked to the context of the contract as a whole, the history of the relationship, and the testimony of the parties to determine their shared intent.  Based on this evidence – including the fact that JPA I had never sought indemnity from LAZ for any prior claim, and had not even notified LAZ of a prior sexual assault committed in the garage by the same assailant twelve days before the attack on K.W. – the Court concluded that the contractual indemnification provision was not intended to apply.

The decision demonstrates that the language of a contract cannot always be taken at face value, and underscores the importance of carefully drafted risk-shifting provisions.  If you have questions about contractual indemnification issues or negligent security liability, Melick & Porter’s experienced attorneys are always available to help.

Court Reinstates Independent Contractor Exception for Uber Drivers

May 2023 • Source: John H. Shaffery, Poole Shaffery

Proposition 22 was approved by voters in California in November 2020. It exempted app-based drivers from a 2019 state law known as AB5 that makes it difficult to classify workers as independent contractors rather than employees. It allows app-based transportation services to classify drivers as independent contractors as long as they are paid a minimum wage while transporting passengers and receive expense reimbursements and healthcare subsidies. For hundreds of thousands of drivers, Proposition 22 awarded independent contractor status but took away protections requiring gig workers across many industries to be classified as employees with stronger benefits such as a minimum wage, overtime and workers’ compensation in case of injury.

On March 13, 2023, the California Court of Appeals reversed a 2021 lower court ruling that struck down Proposition 22 on the basis that it violated the state constitution because it limited the legislature's power to include gig drivers within the scope of California workers' compensation law. The appeals court disagreed with that opinion and mostly upheld the provisions of Proposition 22, except for a provision enabling gig workers to join unions. The appeals court severed provisions of Proposition 22 restricting the California Legislature’s ability to authorize collective bargaining over drivers’ compensation, benefits, or working conditions and create rules singling out or otherwise putting unequal regulatory burdens upon app-based drivers.

Proposition 22 has remained in effect throughout the appeals process, and ride-sharing apps, including Uber and Lyft, can continue to treat their drivers as independent contractors. This represents a major victory for such companies because independent contractors do not receive the same legal protections as employees and can be up to 30% cheaper. Immediately after the Court of Appeals decision upholding Proposition 22, shares of Uber and Lyft rose by nearly 5%. However, the ruling is expected to be appealed to the California Supreme Court, so it remains to be seen how the ongoing Proposition 22 saga will develop.

Stand Tall – Don’t Fall: OSHA Launches New Program to Prevent Falls

May 2023 • Source: Stephanie Bendeck, Melick & Porter

The Department of Labor’s Occupational Safety and Health Administration (OSHA) announced a new program which took effect on May 1, 2023, to identify and reduce falls while working at heights. The National Emphasis Program (NEP) is designed to “reduce or eliminate injuries and fatalities associated with falls while working at heights in all industries.”

Why is OSHA so interested in fall protection? The “duty to have fall protection” standard is one of the most frequently violated OSHA standards. It should be no surprise that falls continue to be the leading cause of death for all workers. Across all industries in 2021 according to a comparison of the Bureau of Labor Statistics (BLS) and OSHA Information System data, there were 5,190 work fatalities, 850 of which were fatal falls (including slips and trips), and 680 of which were fatal falls to a lower level. In 2021 in the construction industry alone, there were 986 total fatalities, 390 of which were fatal falls (including slips and trips) and 378 of which were fatal falls to lower levels. The 3.6 fatal occupational injury rate in 2021 represented the highest annual rate since 2016. Work-related fatalities due to falls, slips, and trips increased 5.6% in 2021 according to the BLS.

What does this NEP mean for the construction industry? All construction inspections related to falls will be conducted pursuant to this NEP. OSHA announced that it will increase targeted enforcement and outreach activities because falls remain the leading cause of fatalities and serious injuries in all industries.

The construction industry is not the only industry affected by this NEP. The NEP affects all industries and will target the following activities: (1) roof top mechanical work/maintenance; (2) utility line work/maintenance; (3) arborist/tree trimming; (4) holiday light installation; (5) road sign maintenance/billboards; (6) power washing of buildings not connected to painting; (7) gutter cleaning; (8) chimney cleaning; (9) window cleaning; (10) communication towers. For other non-construction activities where a worker is observed working from a height, an inspection may be initiated upon approval by area office management. If an inspection is not warranted after entering the site and observing work activities, the Compliance Safety and Health Officer (CSHO) will conduct an outreach activity on fall protection and exit the site.

Given OSHA's increased focus on enforcement and the safety risks associated with falls from heights, it is critical that employers have an effective system in place to identify and protect their workers from potential hazards that could lead to fall-related injuries and fatalities.

A link to the OSHA Instruction, Directive Number CPL 03-00-025, can be found here:

https://www.osha.gov/sites/default/files/enforcement/directives/CPL_03-00-025.pdf

If you need assistance with an OSHA matter, please feel free to contact Stephanie Bendeck. She can be reached at [email protected], 617-502-9680.

Washington Supreme Court Forges New Path in Combating Implicit Racial Bias: Risks and Opportunities for Civil Defendants

May 2023  • Joseph Hogan, Scheer.Law PLLC

How can courts address racial bias when that bias is unintentional?  A white woman causes a car accident.  A Black woman is injured and sues.  The defendant admits liability but makes no offer to compensate the plaintiff before trial.  Her attorney argues the plaintiff’s lay witnesses were coached; her chiropractor is biased; and the plaintiff is financially motivated.  The plaintiff asks for $3,500,000.  The jury awards $10,000.  Did racial bias, implicit or express, affect the verdict?  If so, what should be done about it? 

In the groundbreaking opinion in Henderson v. Thompson, the Washington Supreme Court charted a new course in examining implicit bias in civil cases.  The Court outlined a new procedure for considering when to declare a mistrial due to implicit bias.  Under the new ruling, the trial court must decide whether an “objective observer” could view race as a factor in the verdict.  The objective observer is one “who is aware that implicit, institutional, and unconscious biases, in addition to purposeful discrimination, have influenced jury verdicts in Washington State.”  If a proponent of a new trial makes a prima facia showing, a hearing must be held.  The party seeking to preserve the verdict bears the burden to prove that race was not a factor.  If it cannot, a new trial must be held.  In the case of Henderson v. Thompson, a majority of the Court determined a prima facia case was met.

The ruling drew praise; but also concern.  The Court has been on a campaign to eradicate implicit bias.  But the aspects of the defense that were identified as calling for implicit bias are typical for many civil cases.  The Plaintiff was described as “combative” under cross examination.  The defense counsel highlighted the Plaintiff’s financial motive.  Lay witnesses were described as having bias.  Seasoned civil attorneys may be scratching their heads why these common arguments create grounds for a new trial.

The application of the new ruling is yet to be seen, but nothing limits its use to plaintiffs.  Close observers are keen to see what deference trial courts are given.  What is clear is that there is a new battlefield for overturning unfavorable verdicts—both for plaintiffs and defendants.  To be ready for that battlefield, civil attorneys must be or become familiar with the history and literature surrounding implicit bias.  Strong advocates should prepare such motions in any civil case regardless of the race of their client.  Attorneys should consider addressing racial bias throughout trial to Henderson-proof a favorable verdict.

Will other states follow Washington’s lead?  Only time will tell.  But savvy litigators in states with liberal supreme courts should consider making similar arguments.  And attorneys and claims professionals everywhere can look to Washington State to see what the future might hold for efforts to eradicate implicit bias.

The slip opinion in Henderson v. Thompson, No,. 97672-4 (Oct. 20, 2022) can be found here.