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Jacobs Engineering Group Inc. v. ConAgra Foods, Inc.

Supreme Court of Nebraska

September 14, 2018

Jacobs Engineering Group Inc., appellee.
v.
ConAgra Foods, Inc., appellant.

         1. Actions: Parties: Standing. Whether a party who commences an action has standing and is therefore the real party in interest presents a jurisdictional issue.

         2. Judgments: Jurisdiction: Appeal and Error. When a jurisdictional question does not involve a factual dispute, determination of a jurisdictional issue is a matter of law which requires an appellate court to reach a conclusion independent from the trial court's; however, when a determination rests on factual findings, a trial court's decision on the issue will be upheld unless the factual findings concerning jurisdiction are clearly incorrect.

         3. Directed Verdict: Appeal and Error. In reviewing a trial court's ruling on a motion for directed verdict, an appellate court must treat the motion as an admission of the truth of all competent evidence submitted on behalf of the party against whom the motion is directed; such being the case, the party against whom the motion is directed is entitled to have every controverted fact resolved in its favor and to have the benefit of every inference which can reasonably be deduced from the evidence.

         4. Directed Verdict: Evidence. A directed verdict is proper at the close of all the evidence only when reasonable minds cannot differ and can draw but one conclusion from the evidence, that is, when an issue should be decided as a matter of law.

         5. Judgments: Appeal and Error. An appellate court reviews a denial of a motion to alter or amend the judgment for an abuse of discretion.

         6. Motions for New Trial: Appeal and Error. An appellate court reviews a trial court's ruling on a motion for a new trial for an abuse of discretion.

         7. Contracts. Contract interpretation presents a question of law.

         [301 Neb. 39] 8. Jury Instructions. Whether the jury instructions given by a trial court are correct is a question of law.

         9. Judgments: Appeal and Error. An appellate court independently reviews questions of law decided by a lower court.

         10. Verdicts: Appeal and Error. When reviewing a jury verdict, the appellate court considers the evidence and resolves evidentiary conflicts in favor of the successful party.

         11. Verdicts: Juries: Appeal and Error. A jury verdict may not be set aside unless clearly wrong, and it is sufficient if there is competent evidence presented to the jury upon which it could find for the successful party.

         12. Actions: Parties: Standing. The focus of the real party in interest inquiry is whether the party has standing to sue due to some real interest in the cause of action, or a legal or equitable right, title, or interest in the subject matter of controversy.

         13. Standing: Jurisdiction: Parties. Standing refers to whether a party had, at the commencement of the litigation, a personal stake in the outcome of the litigation that would warrant a court's or tribunal's exercising its jurisdiction and remedial powers on the party's behalf.

         14. Actions: Parties: Jurisdiction: Standing. The question of whether a party who commences an action has standing and is therefore the real party in interest is jurisdictional. Because the requirement of standing is fundamental to a court's exercise of jurisdiction, either a litigant or a court can raise the question of standing at any time.

         15. Standing. The stage of the litigation in which a party claims that its opponent lacks standing affects how a court should dispose of the claim.

         16. Standing: Pleadings: Pretrial Procedure. In resolving a facial challenge, a court will review the pleadings to determine whether there are sufficient allegations to establish the plaintiff's standing.

         17. Motions to Dismiss: Jurisdiction: Pleadings: Appeal and Error. An appellate court reviews a trial court's decision on a motion to dismiss for lack of subject matter jurisdiction based on a facial attack on the pleadings de novo.

18. ___: ___: ___: ___. Where the trial court's decision on a motion to dismiss for lack of subject matter jurisdiction is based on a factual challenge, the court's factual findings are reviewed under the clearly erroneous standard.

         19. Insurance: Contracts: Words and Phrases. An indemnity contract is a chose in action because it confers a right to bring a legal action to recover a sum of money from or out of the contract.

         20. Liability: Damages. Indemnification is available when one party is compelled to pay money which in justice another ought to pay or has agreed to pay.

         [301 Neb. 40] 21. Pleadings: Evidence: Words and Phrases. A judicial admission is a formal act done in the course of judicial proceedings which is a substitute for evidence, thereby waiving or dispensing with the production of evidence by conceding for the purpose of litigation that the proposition of fact alleged by the opponent is true.

         22. Jurisdiction. While parties cannot confer subject matter jurisdiction upon a judicial tribunal by either acquiescence or consent, nor may subject matter jurisdiction created by waiver, estoppel, consent, or conduct of the parties, such does not prevent a party from conclusively admitting the truth of an underlying fact required to establish subject matter jurisdiction by judicial admission.

         23. Pretrial Procedure: Pleadings. A general denial is not effective where an answer contains specific admissions of facts alleged.

         24. Actions: Parties: Intent. The primary purpose of the real party in interest requirement is to protect the defendant from the risk of multiple litigation.

         25. Insurance: Damages. Under the collateral source rule, the fact that the party seeking recovery has been wholly or partially indemnified for a loss by insurance or otherwise cannot be set up by the wrongdoer in mitigation of damages.

         26. Circumstantial Evidence: Proof. Circumstantial evidence is not inherently less probative than direct evidence, and a fact proved by circumstantial evidence is nonetheless a proven fact.

         27. Evidence: Proof. A finder of fact may draw reasonable inferences from the facts and circumstances proved.

         28. Contracts: Words and Phrases. An indemnity agreement is a contract to be construed according to the principles generally applied in construction or interpretation of other contracts.

         29. Contracts. A contract must receive a reasonable construction and must be construed as a whole, and if possible, effect must be given to every part of the contract.

         30. Workers' Compensation: Liability: Contracts. When an employer, liable to an employee under the Nebraska Workers' Compensation Act, agrees to indemnify a third party for a loss sustained as the result of the third party's payment to the indemnitor's employee, the employer's exclusion from liability accorded by the act does not preclude the third party's action to enforce the indemnity agreement with the indemnitor-employer

         31. Jury Instructions: Pleadings: Evidence. A litigant is entitled to have the jury instructed upon only those theories of the case which are presented by the pleadings and which are supported by competent evidence.

         32. Jury Instructions: Appeal and Error. If the instructions given, which are taken as a whole, correctly state the law, are not misleading, and [301 Neb. 41] adequately cover the issues submissible to a jury, there is no prejudicial error concerning the instructions and necessitating a reversal.

         33. Verdicts: Appeal and Error. Where a party has sustained the burden and expense of trial and has succeeded in securing a verdict on the facts in issue, that party has the right to keep the benefit of the verdict unless there is prejudicial error in the proceedings by which it was secured.

         34. Negligence. A party is only answerable for the natural, probable, reasonable, and proximate consequences of his acts; and where some new efficient cause intervenes, not set in motion by him, and not connected with but independent of his acts and not flowing therefrom, and not reasonably in the nature of things to be contemplated or foreseen by him, and produced the injury, it is the dominant cause.

         35. ___. Because the extent of foreseeable risk depends on the specific facts of the case, courts should leave such determinations to the trier of fact unless no reasonable person could differ on the matter.

         36. Verdicts: Appeal and Error. A civil verdict will not be set aside where evidence is in conflict or where reasonable minds may reach different conclusions or inferences, as it is within the jury's province to decide issues of fact.

         37. Negligence: Liability. Where separate and independent acts of negligence by different persons combine to produce a single injury, each participant is liable for the damage, although one of them alone could not have caused the result.

         38. Damages: Appeal and Error. The amount of damages to be awarded is a determination solely for the fact finder, and the fact finder's decision will not be disturbed on appeal if it is supported by the evidence and bears a reasonable relationship to the elements of the damages proved.

         39. Verdicts: Remittitur. Where a verdict is excessive, but not so much as to indicate passion or prejudice on the part of the jury, the error may be corrected by remittitur, if the excess can be estimated with reasonable certainty.

         40. Remittitur: Appeal and Error. An appellate court should order remittitur only when the award is contrary to all reason.

          Appeal from the District Court for Douglas County: Gary B. Randall, Judge. Affirmed.

          Christopher Landau, PC, of Kirkland & Ellis, L.L.P., William F. Hargens and Lauren R. Goodman, of McGrath, North, Mullin & Kratz, P.C., L.L.O., and on brief, Jeremy M. Feigenbaum, for appellant.

         [301 Neb. 42] Stephen B. Kinnaird and Sarah G. Besnoff, of Paul Hastings. L.L.P., Gilbert S. Keteltas, Robert G. Abrams, and Thomas E. Hogan, of Baker Hostetler, L.L.P., and Shawn D. Renner and Andre R. Barry, of Cline, Williams, Wright, Johnson & Oldfather, L.L.P, for appellee.

          Heavican, C.J., Miller-Lerman, Cassel, Stacy, Kelch, and Funke, JJ.

          FUNKE, J.

         This case arises out of an explosion at a ConAgra Foods, Inc. (ConAgra), plant in Garner, North Carolina, which killed 3 ConAgra employees and injured more than 60 others. When dozens of employees sued Jacobs Engineering Group Inc. (Jacobs), Jacobs sought contractual indemnification from ConAgra, but ConAgra declined, and Jacobs defended against and settled the claims.

         Jacobs sued ConAgra for indemnification in the district court for Douglas County. Following a 4-week trial, the jury awarded Jacobs the full amount of the settlement payments, $108.9 million, and the court entered judgment on the verdict. We affirm.

         I. BACKGROUND

         1. Contract Between

         Jacobs and ConAgra

         ConAgra, a food manufacturer, contracted with Jacobs, an engineering firm, in 2007 to provide engineering services. Jacobs' work under the contract was limited to work requested and approved by ConAgra in work orders. Section 10 of the parties' engineering agreement contained mutual indemnification provisions which provided that each party indemnify the other for "claims, losses, costs, penalties, damages and/ or expenses" to the extent caused by the indemnifying party's negligence or the negligence of others under that party's control. Section 10 provided the following relevant indemnification provisions:

[301 Neb. 43] 10.1 [Jacobs] shall indemnify . . . ConAgra . . . against each and every claim, loss, cost, penalty, damage, or expense . . . suffered or incurred by any third parties, employees of ConAgra and employees of [Jacobs], [Jacobs'] obligations hereunder shall be limited to the extent caused by the negligent acts, errors or omissions of [Jacobs], or anyone directly or indirectly employed by [Jacobs] or for whose acts [Jacobs] is otherwise liable. . . .
10.2 [Jacobs'] liability, however arising by reason of the performance of the services, is specifically limited as provided herein and ConAgra will indemnify and release [Jacobs] against all other claims, losses, costs, penalties, damages and/or expenses to the extent caused by the negligence of ConAgra and/or others under its control[.]

         In 2008, ConAgra planned to update the Garner plant's water heating system. ConAgra rejected Jacobs' proposal for the project as too expensive, but retained Jacobs to provide limited management and engineering support. Jacobs designated an onsite project manager, Donald Pottner, to assist with the project.

         2. Energy Systems Analysts and ConAgra's Safety Policies

         ConAgra hired Energy Systems Analysts (ESA), a high-efficiency water heater contractor, to design and install a 5-million Btu gas-fired water heater. ConAgra had previously engaged ESA to supply gas heat systems to plants in Iowa, Ohio, Pennsylvania, and Tennessee, and ConAgra had not experienced any safety issues with ESA.

         ConAgra contractually imposed safety requirements on ESA's work on the project. The contract required ESA to "abide by safety . . . rules at all times while on company property." ConAgra personnel were required to bring "[a]pparent violations" of the "Contractor Work Rules" "or unacceptable industry work practices ... to the attention of the contractor's representative for prompt correction."

         [301 Neb. 44] The contractor work rules required "practices differing from [ConAgra] policy ... to be reviewed by [ConAgra] before the implementation." The work rules placed responsibility for correction of "unacceptable conditions" on the '"controlling employer,' that is, the one in the best position to correct the situation or ensure its correction." ConAgra's management was required to report "[a]ny safety discrepancy observed ... to the appropriate Contractor representative for immediate correction" and to suspend work "immediately" in the case of danger until "safety concern(s) have been corrected, to the satisfaction of the Company."

         The contractor work rules made ConAgra responsible for ensuring that ESA prepared a "Safe Plan of Action" (SPA) for its commissioning of the water heater to identify risks and outline each step of the process in order to complete the work safely. ConAgra also had a "Fire Prevention Plan" which required "special care and handling" requirements for flammable gases that "pose a risk of catastrophic explosion if ignited." The fire prevention plan applied to all ConAgra facilities and set "procedures for controlling the hazards," required identification of "potential ignition sources," and only permitted the use or handling of natural gas "where vapors are prevented from reaching ignition sources."

         3. Garner Plant Water Heater Project

         ConAgra employee, Timothy Yost, was the engineering manager and supervisor at the Garner plant. ConAgra designated Yost as the individual responsible for the safety of all plant employees during the commissioning of the water heater. Yost was responsible for ensuring that ESA's plans complied with ConAgra standards and the contractor work rules. ConAgra's utility maintenance supervisor, John Puff, led the Garner plant's utilities department and was responsible for its natural gas facilities.

         ESA staff testified about the amount of control ConAgra exercised over the installation of the water heater. ESA's [301 Neb. 45] corporate designee testified that ConAgra had the final say on the project and controlled the schedule. He stated that Yost and Puff "were the decision-makers when it came to anything, even . . . when we were on site. If there was something that they didn't like, we'd obviously have to change it." He admitted that ConAgra did not provide directions of how the gas delivery system should be assembled.

         On June 3, 2009, ESA provided its written plan for commissioning the water heater, which Yost and Puff reviewed and found acceptable. On June 4, Pottner left the plant on a planned medical leave and was not expected to return, and he ultimately was not present during the commissioning of the water heater. ConAgra confirmed its personnel would supervise the commissioning and that Jacobs' services were not needed.

         Puff was responsible for determining the procedure to connect the new equipment to the plant's gas supply referred to as the "line-break" procedure. The written procedure required opening valves to purge gaslines at both the boiler and the hot water tank. The purpose of the purge was to remove any remaining mixture of air and natural gas in the line prior to firing the hot water heater. ConAgra identified explosion as a risk and specified completion of the line-break procedure as the method to control that risk.

         On June 4, 2009, as part of the line-break procedure, Puff instructed the crew to purge the line to the boiler with a hose leading outside, but he failed to provide the instruction to purge the line to the hot water tank. Puff stated that "[w]e just didn't get to it." Yost admitted the line to the hot water tank should have been purged before startup to prevent an explosive mixture.

         On June 5, 2009, at the direction of Yost, a ConAgra senior safety specialist inspected the pumproom where the new water heater was located. The report documented "[e]xposed wires" as possible ignition source hazards.

         Curt Poppe, an ESA employee, was assigned to commission the water heater. On June 9, 2009, Poppe arrived at the [301 Neb. 46] Garner plant and met with Yost to discuss the commission plan. Poppe's commissioning plan did not include purging air from the lines, and Puff did not provide the line-break procedure to Poppe. Yost and Puff did not train Poppe in ConAgra's contractor work rules or ensure that Poppe was certified as trained. In addition, no SPA was prepared for the project. ConAgra admitted that had an SPA been implemented, the explosion may have been prevented.

         ConAgra's policy and practice included supervising the work of contractors, and the utilities department did not allow contractors to work on utilities unsupervised. Puff assigned a ConAgra employee, Ethner "Buddy" Roberson, to supervise Poppe during commissioning. Roberson worked with Poppe throughout the morning and, with Puff's knowledge, brought unrated temporary lighting into the room. Roberson had not reviewed the fire prevention plan, was not aware that combustibles should not be released into a room with ignition sources, and did not know whether the lighting he strung in the pump-room was safe for a flammable atmosphere.

         When Poppe began the commission process, he had difficulty lighting the water heater. Over the next 3½ hours, Poppe repeatedly cracked the valve on the 3/8 -inch pilotline and placed a gas meter in front of the line as he released small streams of gas into the room. Poppe said he was '"bleeding the line.'" He attempted to light the water heater 32 times.

         Multiple ConAgra employees, including management, witnessed Poppe release gas into the room and were concerned about the presence of gas. A ConAgra utilities department employee smelled "[t]oo much gas" in the room and felt he was "in danger." He reported Poppe's unusual actions to Puff, who reported them to Yost.

         Yost, and later Puff, went into the room and smelled gas. Puff admitted he did not tell Poppe that the line had not been purged, even after Puff realized Poppe was struggling to light the heater.

         Puff was trained to purge lines outside; he had purged one of the lines outside on June 4, 2009. Puff "started smelling a lot [301 Neb. 47] of gas" and thought "pure gas" was coming through the line. Puff was concerned that Poppe was not using the correct meter to measure the presence of gas or was using the meter improperly. A ConAgra witness admitted that under the contractor work rules, if the gas meter malfunctioned, then the commission should have been stopped.

         There was evidence that Puff could have ordered an evacuation, but failed to do so. As the only designated plant emergency coordinator working that day, Puff controlled the decision to evacuate. An emergency evacuation plan stated that evacuation may be necessary in the face of "[i]mmediate or potential fire hazards" and could be completed within 3 minutes.

         Puff interrupted the commission process so that he and Poppe could walk outside to allow Poppe to calibrate the gas meter in fresh air. Puff then left the plant to pick up supplies for another project. Puff left Poppe with Roberson even though Puff testified that he did not believe Roberson was qualified to supervise clearing air from a gasline. Roberson thought something was wrong and went to the roof to try to locate an alternate purge point.

         Poppe returned to the pumproom and released gas by opening the cap on the 2-inch gas pipe. The room flooded with gas in less than 60 seconds. Puff admitted he '"should have stayed around a lot longer'" and had given the contractor '"more credit'" than he should have. When asked about Poppe's opening the cap on the gas pipe, Puff testified that if he had stayed, he "wouldn't have allowed that."

         The pumproom exploded. Two sections of the plant's roof collapsed, killing three ConAgra employees and inflicting serious injuries on others.

         4. Explosion Investigation and Litigation

         The North Carolina Department of Labor conducted an investigation into the explosion and found multiple violations of North Carolina code. The department determined that [301 Neb. 48] ConAgra violated its duty to furnish conditions of employment "free from recognized hazards that were causing or likely to cause death or serious physical harm." The department found multiple life-threatening conditions occurred in the presence of ConAgra management, including ConAgra's failure to purge the 3-inch natural gasline used to supply gas to the vacuum pumproom and allowing the presence of numerous possible ignition sources while a natural gasline was being purged in an enclosed room.

         In contrast, the North Carolina Department of Labor found Jacobs performed no work that could have contributed to the accident, did not have knowledge of the hazardous condition, and did not have a scope of work that would have permitted knowledge of the hazardous condition. ConAgra "accepted what the authorities determined" and did not conduct a separate investigation.

         Thereafter, 67 individuals and ConAgra's property insurers filed several lawsuits against Jacobs and Pottner; the total settlement demands exceeded $507 million. Shortly after the first suit was filed, Jacobs requested contractual indemnity from ConAgra and ConAgra denied that request and did not participate in the settlements.

         A suit brought by seven ConAgra employees was the only case to go to trial. That case proceeded to trial in March 2012 before the Johnston County Civil Superior Court of North Carolina, case No. 09-CV-2330 (referred to as "Brockington"). Before trial, ConAgra's counsel wrote to Jacobs:

Based upon our understanding of the evidence in this case, and the fact that the plaintiffs' claim for punitive damages has survived Jacobs' motion for summary judgment, we believe there is a possibility of a significant jury verdict against Jacobs. As such, ConAgra requests that Jacobs take all reasonable steps to settle these claims.

         ConAgra stated that "settlement of plaintiffs' claims by Jacobs would be without prejudice as to any possible indemnity claim that Jacobs' [sic] may have as to ConAgra . . . ."

         [301 Neb. 49] During the Brockington trial, Pottner became ill partway through his testimony, was briefly hospitalized, and returned home to Wisconsin. The court initially declared Pottner unavailable, but later found that Pottner's counsel, who also represented Jacobs, misrepresented the nature or severity of Pottner's illness. The court struck the defendants' answers and confined the jury's deliberations to the issue of damages. The jury awarded the Brockington plaintiffs $14.6 million.

         The trial court later reinstated Jacobs' answer and granted Jacobs a new trial. Before the second trial, Jacobs settled the suit for $20 million. Jacobs then settled the remaining cases and continued to request indemnification from ConAgra, which ConAgra declined.

         Jacobs brought this action against ConAgra in January 2014. Jacobs claimed that it was entitled to the $108.9 million paid to settle the North Carolina cases. Jacobs requested only $17.7 million for the Brockington settlement, which represented the amount of the first verdict plus interest since the time of filing.

         Prior to trial, ConAgra filed motions to compel Jacobs to provide the amounts paid by Jacobs and Jacobs' insurers toward the settlements. The court overruled ConAgra's various motions and found ConAgra's arguments were not relevant to the "two substantive issues in this case," which it determined were as follows: "(1) whether the [e]xplosion was caused by the alleged negligence of ConAgra and/or others under its control in order to trigger the indemnity provision; and (2) whether the amount of the settlement payments were objectively reasonable."

         During the 19-day trial in March 2016, the jury received over 300 exhibits and heard testimony from eight live witnesses and 40 videotaped depositions. The jury returned a special verdict which (1) found that both ConAgra and ESA were negligent, (2) apportioned liability of 70 percent to ConAgra and 30 percent to ESA, and (3) found that ConAgra controlled ESA. The jury further found that Jacobs was not [301 Neb. 50] negligent, that Jacobs had settled the North Carolina lawsuits in good faith, and that the settlement amounts were objectively reasonable. The district court accepted the jury's verdict. ConAgra renewed its motion for directed verdict and moved for judgment notwithstanding the verdict, remittitur, and a new trial. The court denied the motions, ConAgra timely appealed, and we sustained ConAgra's request to bypass review by the Nebraska Court of Appeals.

         II. ASSIGNMENTS OF ERROR

         ConAgra assigns, restated, that the district court erred in failing to (1) grant ConAgra's motion for directed verdict or motion for new trial, because Jacobs failed to prove that it had standing as the real party in interest to assert its indemnification claim; (2) order a remittitur, because ConAgra did not waive its workers' compensation immunity; (3) grant ConAgra's motion for directed verdict or motion for new trial, because Jacobs did not establish that its '"losses'" were '"caused by the negligence of ConAgra and/or others under its control, '" as required by ...


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