Cintas Corp. No. 2 v. Becker Property Services LLC
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At issue was whether a contract executed by Becker Property Services LLC and Cintas Corporation No. 2 containing indemnification and choice-of-law provisions entitled Cintas to indemnification for damages caused by its own negligence.
The parties agreed that Ohio’s law controlled the interpretation of their contract but disagreed over whether that provision should be enforced. The circuit court concluded that the contract did not require Becker to defend or indemnify Cintas for its own negligence under Wisconsin law, adding that, if Ohio law had applied instead, the indemnification provision would have been sufficient to require Becker to indemnify Cintas for its own negligence. The court of appeals reversed, holding that, even under Wisconsin law, the contract required Becker to defend and indemnify Cintas for its own negligence. The Supreme Court held (1) no public policy required the Court to preempt the parties’ agreement that Ohio law would control the contract; and (2) the contract’s indemnification agreement unambiguously required Becker to defend and indemnify Cintas even for its own negligence.
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2018 WI 81 SUPREME COURT CASE NO.: COMPLETE TITLE: OF WISCONSIN 2015AP2457 American Family Mutual Insurance Company, State Auto Insurance Company of Wisconsin, Property and Casualty Insurance Company of Hartford, Fay Walters and Farmers Insurance Exchange, Plaintiffs, H.O.L.I.E. of Greenfield Avenue, Inc., Dennis Kleinhans, Dorothy Grabowski, Virginia Werner, Mernlyn Goodrich, Theodore Kolodzyk, Judith Gorski, Linda Sutton , as the personal representative of the Estate of Mary Sutton and Alice Carey, Involuntary-Plaintiffs, v. Cintas Corporation No. 2, Defendant-Third-Party Plaintiff-Appellant-Cross-Respondent, The Travelers Indemnity Company of Connecticut, Defendant-Third-Party Plaintiff-Co-Appellant, v. Becker Property Services LLC, Third-Party Defendant-Respondent-Cross-AppellantPetitioner. REVIEW OF A DECISION OF THE COURT OF APPEALS Reported at 375 Wis. 2d 797, 899 N.W.2d 737 (2017 – Unpublished) OPINION FILED: SUBMITTED ON BRIEFS: ORAL ARGUMENT: SOURCE OF APPEAL: COURT: COUNTY: JUDGE: JUSTICES: CONCURRED: DISSENTED: NOT PARTICIPATING: ATTORNEYS: June 28, 2018 January 11, 2018 Circuit Milwaukee John J. DiMotto A.W. BRADLEY, J., dissents, joined by ABRAHAMSON, J. (opinion filed). For the defendant-respondent-cross-appellant-petitioner, there were briefs filed by Patryk Silver, Esq., Aaron R. Berndt, Esq., Joshua B. Cronin, Esq., and Borgelt, Powell, Peterson, and Frauen, S.C., Milwaukee. There was an oral argument by Patryk Silver, Esq. For the defendant-third-Party plaintiff-appellant-cross respondent, there was a brief filed by Jeffrey O. Milwaukee. Davis, Leila N. Sahar, and Lars E. Gulbrandsen, Quarles & Brady LLP, There was an oral argument by Lars E. Gulbrandsen. 2 2018 WI 81 NOTICE This opinion is subject to further editing and modification. The final version will appear in the bound volume of the official reports. No. 2015AP2457 (L.C. No. 2014CV3930) STATE OF WISCONSIN : IN SUPREME COURT American Family Mutual Insurance Company, State Auto Insurance Company of Wisconsin, Property and Casualty Insurance Company of Hartford, Fay Walters and Farmers Insurance Exchange, Plaintiffs, H.O.L.I.E. of Greenfield Avenue, Inc., Dennis Kleinhans, Dorothy Grabowski, Virginia Werner, Mernlyn Goodrich, Theodore Kolodzyk, Judith Gorski, Linda Sutton, as the personal representative of the Estate of Mary Sutton and Alice Carey, Involuntary-Plaintiffs, FILED v. Cintas Corporation No. 2, Defendant-Third-Party Plaintiff-Appellant-Cross-Respondent, The Travelers Indemnity Company of Connecticut, Defendant-Third-Party Plaintiff-Co-Appellant, v. Becker Property Services LLC, Third-Party JUN 28, 2018 Sheila T. Reiff Clerk of Supreme Court Defendant-Respondent-Cross-AppellantPetitioner. REVIEW of a decision of the Court of Appeals. ¶1 DANIEL KELLY, J. Becker Property Affirmed. Services LLC ("Becker") and Cintas Corporation No. 2 ("Cintas") executed a contract containing provisions. Cintas indemnification and choice-of-law A dispute arose over whether the contract entitles to indemnification negligence. for damages caused by its own To answer that question, we must also resolve a threshold dispute: As between Wisconsin and Ohio, which law provides the rule of decision? ¶2 and that We hold that Ohio's law governs the parties' contract, Becker must defend and indemnify damages caused by its own negligence. the court of appeals, but (as we Cintas, even for Consequently, we affirm discuss below) on other grounds.1 I. ¶3 A FACTUAL BACKGROUND AND PROCEDURAL HISTORY 2013 fire at Valentino Square (a senior living facility) caused approximately $900,000 in property damage after the facility's fire-suppression 1 sprinkler system allegedly This is a review of an unpublished decision of the court of appeals, American Family Mutual Insurance Co. v. Cintas Corp. No. 2, No. 2015AP2457, unpublished slip op. (Wis. Ct. App. Apr. 11, 2017), reversing an order of the Milwaukee County Circuit Court, the Honorable John J. DiMotto presiding. 2 No. failed. Valentino Square's owner had contracted with Becker to manage the property. Cintas2 with regular 2015AP2457 in 2012 inspections "Contract"). In that capacity, Becker had contracted The to perform of the certain services, fire-suppression fire-suppression system including system allegedly (the failed because water in the system accumulated, froze, and then burst the pipes. ¶4 Plaintiffs (the owner of Valentino Square, several tenants, and the property insurers) sued Cintas, claiming the fire-suppression system's pipes would not have burst but for Cintas's negligent performance of its duties, or its breach of the Contract's implied warranty that it would perform its duties in a workmanlike manner. Cintas tendered the defense of the matter to Becker pursuant to the Contract's indemnity clause. ¶5 When Becker rejected the tender, Cintas impleaded it as a third-party defendant. Cintas sought indemnification for any damages for which it may be held liable to the plaintiffs, the costs of defense (including attorney's fees), and the costs of enforcing the indemnification provision (including attorney's fees). ¶6 Cintas moved for summary judgment on its claim that Becker breached its obligation to defend and indemnify. Cintas asserted that Ohio law should provide the rule of decision by virtue of the Contract's choice-of-law provision. 2 Becker filed Cintas is incorporated in Ohio and has its principal place of business in Ohio. 3 No. 2015AP2457 a cross-motion for summary judgment, arguing that the Contract does not require it to defend or indemnify Cintas for its own negligence. Specifically, it argued that under Wisconsin law, contracts purporting to indemnify a party for its own negligence require a heightened level of clarity to be enforceable (the "strict construction" rule).3 According to Becker, the strict construction of indemnification provisions is a public policy important enough to defeat the Contract's choice-of-law clause. ¶7 Becker's. The circuit court denied Cintas's motion and granted It agreed that the strict-construction rule embodied a public policy so important that the parties cannot be allowed to contract around it. It then concluded that the Contract's indemnification clause did not satisfy that rule. Contract "does not have any specific It said the and express statement . . . to the effect that Cintas gets coverage for its own negligent acts," and it does not convey that "the purpose and unmistakable intent of the parties in entering into the contract was for no other reason than to cover losses occasioned by the indemnitee's own negligence." that, if Ohio law had applied 3 However, the court added instead, the indemnification Spivey v. Great Atl. & Pac. Tea Co., 79 Wis. 2d 58, 63, 255 N.W.2d 469 (1977) (stating that "[t]he general rule accepted in this state and elsewhere is that an indemnification agreement will not be construed to cover an indemnitee for his own negligent acts absent a specific and express statement in the agreement to that effect," and also establishing that "where the indemnitor, . . . is itself free of negligence, the obligation to indemnify an indemnitee for its own negligence must be clearly and unequivocally expressed in the agreement"). 4 No. provision would have indemnify Cintas been for its sufficient own to require negligence. 2015AP2457 Becker Consequently, to the circuit court dismissed Cintas's third-party complaint against Becker. ¶8 The court of appeals reversed. It held that, even under Wisconsin law, the Contract required Becker to defend and indemnify Cintas for its own negligence and for the breach of implied warranty claim.4 We granted Becker's timely petition for review, and now affirm. II. ¶9 STANDARD OF REVIEW The circuit court decided this matter on cross-motions for summary judgment. We review the disposition of such motions de novo, applying the same methodology the circuit courts apply. Green Spring N.W.2d 816 Farms (1987); v. see Kersten, also 136 Borek Wis. 2d 304, Cranberry 315, Marsh, Inc. 401 v. Jackson Cty., 2010 WI 95, ¶11, 328 Wis. 2d 613, 785 N.W.2d 615 ("We review the grant of a motion for summary judgment de novo, . . . ."). First, we "examine the pleadings to determine whether for a claim relief Farms, 136 Wis. 2d at 315. been stated, the been Id. the depositions, stated." Green Spring Then, "[i]f a claim for relief has inquiry . . . shifts issues exist." pleadings, has to whether any factual Summary judgment is appropriate only "if answers to interrogatories, and admissions on file, together with the affidavits, if any, show 4 The court of appeals did not address the choice-of-law question. 5 No. 2015AP2457 that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Wis. Stat. L.P. v. § 802.08(2) Wis. Gas (2015-16); Co., 2003 see WI 38, also ¶11, Columbia 261 Propane, Wis. 2d 70, 661 N.W.2d 776 (citing Wis. Stat. § 802.08(2) (2001-02)). ¶10 The only dispute interpretation of a contract. which we review de novo. 2003 WI 15, before us is the proper This presents a question of law, Deminsky v. Arlington Plastics Mach., ¶15, 259 Wis. 2d 587, 657 N.W.2d 411 ("Interpretation of a contract is a question of law which this court reviews de novo."); see also Drinkwater v. Am. Family Mut. Ins. Co., 2006 WI 56, ¶14, 290 Wis. 2d 642, 714 N.W.2d 568 ("This choice-of-law determination is a question of law subject to independent 2004 appellate WI App 118, ¶6, review."); 274 Beilfuss Wis. 2d 500, v. 685 Huffy Corp., N.W.2d 373 ("Whether . . . the choice of forum clause and choice of law clause are enforceable requires interpretation of the employment agreement. Interpretation of a contract is a question of law which this court reviews de novo."). 6 No. III. ¶11 Before we can 2015AP2457 DISCUSSION determine the enforceability of the Contract's indemnification provision, we must know which state's law to apply. the parties' interpretation Therefore, we begin with whether we must honor agreement of their that Ohio's Contract. We law will controls then the determine whether the Contract requires indemnification for Cintas's own negligence and the breach of implied warranty claim. A. ¶12 Choice of Law The parties agree that the Contract subjects itself to Ohio's law;5 they disagree over whether we should enforce that provision. Becker says doing so would obviate and bring to naught one of Wisconsin's important public policies, viz., the strict construction of indemnification promises.6 Cintas says a rule of construction cannot embody a public policy so important that it could nullify the parties' choice of controlling law. For the following reasons, we agree with Cintas. ¶13 There is no doubt that, generally speaking, parties are free to choose the law governing their contracts. Jefferis 5 The Contract says, in part: "The rights and obligations of the parties contained herein shall be governed by the laws of the State of Ohio, excluding any choice of law rules which may direct the application of the laws of another jurisdiction." 6 "In cases where the damage results solely from the negligence of the indemnitee, and the indemnitee seeks recovery from the indemnitor, this court and the overwhelming majority of other state courts apply the rule that the indemnity contracts will be strictly construed." Algrem v. Nowlan, 37 Wis. 2d 70, 76, 154 N.W.2d 217 (1967). 7 No. 2015AP2457 v. Austin, 182 Wis. 203, 205, 196 N.W. 238 (1923) ("That parties to a contract may expressly or impliedly agree that the law of a jurisdiction . . . shall there is a caveat: "important public applicable if is beyond question."). But They may not use their freedom to escape policies the disregarded." control of a parties['] Bush v. state choice Nat'l whose of Sch. law law would provision Studios, be were Inc., 139 Wis. 2d 635, 642, 407 N.W.2d 883 (1987). ¶14 of Therefore, our task is to decide whether our practice strictly construing indemnification provisions embodies public policy so important that parties may not avoid it. a While we have previously said that "[a] precise delineation of those policies which are sufficiently important to warrant overriding a contractual choice of law stipulation is not possible,"7 we have at least described some of the characteristics by which we might recognize them. type of contract They are policies that "make a particular contract enforceable," or provision unenforceable," that or that "make a "protect particular a weaker party against the unfair exercise of superior bargaining power by another party." Id. at 643. Courts (not necessarily ours) have seen those characteristics in, for example, usury laws, unconscionability doctrines, fair dealership laws, prohibitions 7 Bush v. Nat'l Sch. Studios, Inc., 139 Wis. 2d 635, 643, 407 N.W.2d 883 (1987). 8 No. on covenants not to compete, and statutes of frauds. 2015AP2457 Id. at 643 & n.1.8 ¶15 Our strict characteristics choice-of-law construction indicative of provision. a The rule contains policy rule that does none should not of the trump address a the enforceability of a type of contract, or a type of contract provision. And it applies relative bargaining power. without respect to the parties' The rule's function is simply to ensure the parties actually intended for the indemnitee to be indemnified not just for the negligence of others for which it might be responsible, but for the indemnitee's own negligence as well. See, e.g., Hastreiter v. Karau Bldgs., Inc., 57 Wis. 2d 746, 748, 205 N.W.2d 162 (1973) ("The rule relied on by the tenant [i.e., strict agreements that indemnify negligence] is rule a of construction the of indemnitees construction. indemnification for The their purpose of own the construction of an agreement is to ascertain the intent of the parties."). As such, this is a rule of caution, not prohibition. ¶16 If a cautionary rule of construction were enough to nullify a choice-of-law provision, we would unnecessarily impair 8 See also Kellogg v. Larkin, 3 Pin. 123, 137 (1851) ("Contracts against public policy are divided, by MR. STORY, into seven classes, as follows: 1. Contracts in restraint of trade; 2. Contracts in restraint of marriage; 3. Marriage brokerage contracts; 4. Wagers and gaming; 5. Contracts to offend against the laws and public duty; 6. Usury, and 7. Trading with an enemy."). 9 No. 2015AP2457 "certainty and predictability in contractual relations." See Bush, 139 Wis. 2d at 642; see also Thurner Heat Treating Co. v. Memco, Inc., 252 Wis. 16, 24, 30 N.W.2d 228 (1947) ("It is the policy of specific the and law not material only to encourage provisions in a the embodiment contract, but in of the interest of certainty and fair dealing, to require a plain and fair statement of terms."). Every law, whether statutory or common, is——at some level——an embodiment of policy. Because spotting the "important" public policies amongst all the rest is an inexact endeavor, we do well to keep that category narrowly focused. If it were to expand beyond its essential kernel, certainty and predictability in contractual relations would erode in like measure because parties would find it increasingly difficult to know which provisions or contracts a court might preempt. our Expanding the "important" category far enough to reach rule contract of strict provision caveat. And that construction potentially would would subject leave parties make to the virtually public perennially whether we will honor their choice-of-law decisions. any policy wondering We decline Becker's invitation to do so, and hold that our practice of strictly construing important that it indemnification will defeat a provisions contract's is not so choice-of-law provision. ¶17 We should not honor the choice-of-law provision, Becker said, for the additional reason that doing so would allow Cintas to escape Wisconsin's public policy that indemnification provisions of this sort must be conspicuous. 10 Even if Becker is No. 2015AP2457 right about the conspicuousness requirement (a subject we do not address), it provided no argument capable of invoking the "important public policy" exception to the rule that choice-oflaw clauses are enforceable. Because every state law embodies a public policy, it is in the very nature of choice-of-law clauses that they substitute one state's policies for another. still we enforce them. And Under this exception, it is only when such clauses obviate an "important public policy" that we set them aside. requirement Becker not requirement say so important we do not allow parties to contract around them. It to join rises conspicuousness are policies be) the of public it why ranks workaday (if did the from the elites that provided no argument, no examples, no analogies——it did not even call this policy "important," much less provide a basis upon which we could declare it to be so. We will not develop an argument on Becker's behalf when Becker itself has chosen not to advance one. See Clean Wis., Inc. v. Pub. Serv. Comm'n of Wis., 2005 WI 93, ¶180 n.40, 282 Wis. 2d 250, 700 N.W.2d 768 ("We will not address undeveloped arguments."). ¶18 Becker also argued that we should not enforce the choice-of-law provision because it is not conspicuous (that is, the provision is not set apart from the rest of the contract through a larger font, emphasis, or other mechanism designed to call a party's attention to it). proposition, obviates a conspicuous, but law then asserts that the that It cites no authority for the if requires the part choice-of-law 11 choice-of-law of the provision provision contract must to be itself be No. conspicuous. It says this must be so because 2015AP2457 "[t]he conspicuousness rule derives from the public policy requirement that the signer of a contract be unmistakably informed of the rights and duties unequivocally at issue, communicates in to language the that clearly and the nature and signer significance of the document being signed." however, does not follow from the The conclusion, premise. A conspicuous choice-of-law provision tells a contracting party nothing more about its indemnification choice-of-law provision. obligations than an inconspicuous It could be far and away the most conspicuous part of the contract and still it would merely tell the parties which state's law will control the contract. Its conspicuousness would hold no hint as to whether the selected state's laws are more or less favorable with respect to any given part of the contract. ¶19 We have never held that a contract's choice-of-law provision must be conspicuous, and we see no reason to do so today. Therefore, we will determine the enforceability and meaning of the Contract's indemnification provision using the law of the State of Ohio. 12 No. B. ¶20 Becker indemnification ambiguous.9 2015AP2457 Indemnification argues that, provision is even under Ohio unenforceable law, because it the is The Contract says, in relevant part: Purchaser [Becker], at its own expense, shall defend, indemnify and hold harmless Seller [Cintas] from any claim, charge, liability, or damage arising out of any goods or services provided by Seller hereunder, including any failure of the goods or services to function as intended. Purchaser acknowledges that Seller shall have no liability or responsibility for any loss or damage to persons or property resulting from any fire or equipment malfunction. Becker says this language does not plainly state that Becker must indemnify Cintas for damages arising from Cintas's own negligence. ¶21 Ohio says the purpose of scrutinizing a contract is to find and apply the parties' intent: "The cardinal purpose for judicial examination of any written instrument is to ascertain and give effect to the intent of the parties." Foster Wheeler Enviresponse, Inc. v. Franklin Cty. Convention Facilities Auth., 678 N.E.2d 519, 526 (Ohio 1997). "The intent of the parties to a contract is presumed to reside in the language they chose to 9 "Language is ambiguous if it is reasonably susceptible of two or more constructions." McClorey v. Hamilton Cty. Bd. of Elections, 720 N.E.2d 954, 957 (Ohio Ct. App. 1998). "A contract 'does not become ambiguous by reason of the fact that in its operation it will work a hardship upon one of the parties thereto.'" Foster Wheeler Enviresponse, Inc. v. Franklin Cty. Convention Facilities Auth., 678 N.E.2d 519, 526-27 (Ohio 1997) (quoting Ohio Crane Co. v. Hicks, 143 N.E. 388, 389 (Ohio 1924) (per curiam)). 13 No. employ in the agreement." 2015AP2457 Id. (quoted source omitted); see also Worth v. Aetna Cas. & Sur. Co., 513 N.E.2d 253, 256 (Ohio 1987) ("The nature of an indemnity relationship is determined by the intent of the parties as expressed by the language used."). In applying that language, "common words appearing in a written instrument are to be given their plain and ordinary meaning unless manifest absurdity results or unless some other meaning is clearly intended from the face or overall contents of the instrument." Alexander v. Buckeye Pipe Line Co., 374 N.E.2d 146, 150 (Ohio 1978). ¶22 With respect to any alleged ambiguity in contractual language, the rule in Ohio is that "quoties in verbis nulla est ambiguitas ibi nulla expositia contra verba fienda est." Lawler v. source Burt, 7 omitted). Ohio St. 340, 349–50 (Ohio 1857) (quoted That is to say, "[i]n the absence of ambiguity, no exposition shall be made which is opposed to the express words of the instrument." Herbert Broom, A Selection of Legal Maxims, Classified and Illustrated 176 (1845); Alexander, 374 N.E.2d at 150 ("[W]here the terms in an existing contract are clear and unambiguous, this court cannot in effect create a new contract by finding an intent not expressed in the clear language employed by the parties."). ¶23 The ambiguous. Contract's indemnification provision is not To the contrary, any greater explicitness regarding its coverage of Cintas's own negligence would come at the cost of the provision's broad scope. The duty to defend and indemnify applies to "any claim, charge, liability, or damage 14 No. arising out [Cintas]." of any goods or (Emphasis added.) of no exceptions. services provided 2015AP2457 by Seller The term "any," of course, admits And that term describes both the nature of the attempt to hold Cintas liable (claims, charges, etc.), as well as the source of harm (goods or services). the latter, the Contract even repeats With respect to itself for clarity, stating that the duty to defend and indemnify "include[es] any failure of the goods or services to function as intended." The "goods and services" to which this phrase refers, of course, are those supplied by Cintas. The indemnification provision left no possible misunderstanding about the effect of its language. same paragraph goes on to say that "Purchaser The [Becker] acknowledges that Seller [Cintas] shall have no liability or responsibility for any loss or damage to persons or property resulting from any fire or equipment malfunction." have no such liability or responsibility Cintas would because of the immediately preceding sentence, which made that loss or damage Becker's responsibility. ¶24 own We could not say this language does not cover Cintas's negligence Contract. without doing considerable damage to the First, we would need to remove the term "any" each time it appears in the indemnification provision to create the possibility that some claims or causes of damage might not be included. that the But that would still leave Becker's acknowledgement effect of the indemnification language would leave Cintas free of any responsibility for damage or loss consequent upon a fire or equipment malfunction. 15 Therefore, Becker's No. preferred reading would require elimination sentence containing that acknowledgment. to eliminate provision over just so half it of the could of 2015AP2457 the entire In sum, we would need Contract's plausibly be indemnification called ambiguous. Neither logic nor Ohio's law requires us to excise language for the purpose of creating an ambiguity that could then be exploited by one of the parties to the Contract. ¶25 Nonetheless, Becker says other contractual provisions, read in conjunction with the indemnification language, make the duty to defend and indemnify ambiguous.10 Specifically, it calls our attention to the language on the first page of the Contract promising that "[a]ll work performed will be according to NFPA, State, and City Fire Department requirements and is guaranteed, insured and done by licensed personnel." (Emphasis added.) Neither a guaranty nor a promise of insurance means anything, it reasons, if the indemnification provision shields Cintas from any and all responsibility for the goods and services it provides. ¶26 This argument has some superficial attractiveness, but it ultimately cannot bear the weight Becker assigns it. 10 Becker We understand Becker's argument as encouraging us to respect Ohio's recognition that "[a] fundamental principle of contract construction requires that the document be read as a whole." Monsler v. Cincinnati Cas. Co., 598 N.E.2d 1203, 1209 (Ohio Ct. App. 1991); see also McClorey, 720 N.E.2d at 956 ("In the construction of a written contract, it will be read as a whole, and the intent of each part will be gathered from a consideration of the whole."). We agree that Ohio's law requires us to read the Contract as a whole. 16 No. believes that, if the indemnification provision 2015AP2457 really does excuse Cintas from responsibility for its own negligence, then the promise of guaranteed work must be illusory. However, neither provision negates or makes the other ambiguous because the Contract actually does contain a guaranty. It provides that "[c]laims for defective goods or negligent services must be made within thirty (30) days after delivery and Purchaser's exclusive remedy shall be, at Seller's option, replacement of the defective goods or remedying of any negligence in services or credit or refund of the purchase price paid." authority for the proposition that a Becker offers no limited guaranty is necessarily inconsistent with an indemnification provision that covers the indemnitee's readily-apparent own reason negligence. that the Nor two is there provisions any cannot comfortably coincide in the same contract. And if they can co- exist, we must give effect to both terms. German Fire Ins. Co. v. Roost, 45 N.E. 1097, 1099 (Ohio 1897) ("[N]o provision [of a contract] is to be wholly disregarded because [it is] inconsistent with other provisions, unless no other reasonable construction is possible, . . . . If reasonable effect can be given to both, then both are to be retained."). ¶27 is The Contract's promise that all work would be insured similarly incapable of calling provision's meaning into question. the indemnification Buying an insurance policy does not create exposure to liability otherwise disclaimed. Nor could Cintas's representation that it has such a policy create in Becker a contract-based expectation that Cintas would accept 17 No. liability for the risks covered by the policy. which party indemnify will Cintas, shoulder the the With respect to responsibility representation that 2015AP2457 to Cintas defend and carries an insurance policy is, at most, a nebulous suggestion that an insurance company is available to discharge that duty. In contrast, the Contract's indemnification provision is a specific and explicit mandate that Becker must accept that responsibility to defend and indemnify Cintas. So conflict between the insurance and indemnification its Contract's even if there representation provision (and were a regarding we do believe there is), the specific provision would control. not See Marusa v. Erie Ins. Co., 991 N.E.2d 232, 235 (Ohio 2013) ("When faced with provisions that are arguably in conflict, we apply the more specific provision."); German Fire Ins. Co., 45 N.E. at 1099 ("[A] special provision will be held to override a general provision only where the two cannot stand together. If reasonable effect can be given to both, then both are to be retained."). ¶28 The ambiguous. Contract's indemnification provision is not Therefore, we hold that it plainly requires Becker to defend and indemnify Cintas in the underlying action, even with respect to Cintas's own negligence. 18 No. 2015AP2457 * ¶29 Ohio's indemnification law as agreements it specifically confirms our relates conclusion.11 courts examine such agreements just like any other. to Ohio Portsmouth Ins. Agency v. Med. Mut. Of Ohio, 934 N.E.2d 940, 944 (Ohio Ct. App. 2009) ("Indemnity agreements must be interpreted in the same manner as other contracts."). the extent they do not And they are enforceable to contradict Ohio's public policy. Glaspell v. Ohio Edison Co., 505 N.E.2d 264, 266 (Ohio 1987) ("[A]bsent specified public policy exceptions, the law of Ohio generally allows enforcement of indemnity agreements."). But the public policy exceptions are to be narrowly applied: In a free and democratic society, freedom of contract is the general rule; public-policy limits are the exception. The doctrine does not grant courts a roving commission to police the terms of agreements and must be cautiously applied lest the exception swallow the rule. The Ohio Supreme Court has repeatedly admonished the courts against the loose application of "public policy" to invalidate agreements, even in the context of ordinary contracts between private parties . . . . 11 Becker argued that an indemnification provision that indemnifies an indemnitee for its own negligence must be conspicuous under Wisconsin's law, citing Wis. Stat. § 401.201(2)(f) (2015-16) and Deminsky v. Arlington Plastics Machinery, 2003 WI 15, 259 Wis. 2d 587, 657 N.W.2d 411. However, it offered no similar argument with respect to Ohio's law. We generally do not address arguments the parties have not made, and we see no reason to depart from that tradition here. See Clean Wis., Inc. v. Pub. Serv. Comm'n of Wis., 2005 WI 93, ¶180 n.40, 282 Wis. 2d 250, 700 N.W.2d 768 ("We will not address undeveloped arguments."). 19 No. 2015AP2457 Stickovich v. City of Cleveland, 757 N.E.2d 50, 59 (Ohio Ct. App. 2001). The parties have not identified, nor have we found, any public policy forbidding indemnification provisions in the type of contract between Cintas and Becker.12 ¶30 Indemnification agreements covering own negligence are enforceable as well. the indemnitee's However, Ohio has a rule of strict construction similar to our own: alleged that the agreement protects an "Where it is indemnitee from the financial consequences of his own negligence, the greater weight of authority, particularly in Ohio, would construe the words of such an agreement most narrowly." The rule applies disparate when bargaining the power conditions on the other. Glaspell, 505 N.E.2d at 266. contracting that one can parties impose have such inequitable See Coulter v. Dayton Power & Light Co., 731 N.E.2d 1172, 1175 (Ohio Ct. App. 1999) ("[T]he rule of narrowly construing this type of indemnification agreement had been developed to protect a contracting party in a disparately weaker bargaining position from the stronger party's attempt to impose wholly inequitable burdens upon the weaker party."). ¶31 "when The strict construction rule does not apply, however, such burden of indemnification was assented context of free and understanding negotiation." 12 to in a Glaspell, 505 Ohio does not allow indemnification agreements in construction contracts, employment contracts, or illegal contracts. See Worth v. Aetna Cas. & Sur. Co., 513 N.E.2d 253, 257 (Ohio 1987); Glaspell v. Ohio Edison Co., 505 N.E.2d 264, 266 (Ohio 1987) (citing cases). 20 No. N.E.2d at 266. That context typically is present contracting parties are capable business entities. 267 ("The parties enterprises of possess high a in the sufficient degree case size of before and 2015AP2457 us quality when the See id. at are commercial to presumably as sophistication in matters of contract."); Prudential Ins. Co. of Am. v. Corp. Circle, Ltd., 658 N.E.2d 1066, 1069 (Ohio Ct. App. 1995) ("While clauses limiting the liability of the drafter are ordinarily strictly construed, such strict construction need not be applied in the interpretation of an exculpation or indemnification agreement entered into between business entities in a context of free and understanding negotiation." (emphasis omitted)). ¶32 does We think Becker is sufficiently sophisticated that it not fall within the category construction rule is meant to protect. of parties the strict Although the record does not disclose a great deal about Becker, the Contract discloses that it manages at least ten apartment complexes in southeastern Wisconsin. Managing that number of properties requires at least some familiarity with matters of contract. It also suggests that Becker is in a position to intelligently negotiate the economic terms of its contracts without being overborne by its counterparties. ¶33 entitled However, even if we were to conclude that Becker is to the protection offered by the rule of strict construction, the Contract's indemnification provision more than adequately expresses the intention 21 that Cintas would be No. indemnified for its own negligence. Ohio's 2015AP2457 Supreme Court described this rule as follows: "Such an interpretation should not be given a contract that would make the appellant responsible for the consequence of a negligent act of the appellee unless no other meaning can be ascribed to it. If a doubt existed as to its meaning, the court would resolve that doubt against the contention that the contract was intended to indemnify appellee against its own negligence. Every presumption is against such intention." George H. Dingledy Lumber Co. v. Erie R. Co., 131 N.E. 723, 725 (Ohio 1921) (quoting Mitchell v. S. Ry. Co., 74 S.W. 216, 217 (Ky. Ct. App. 1903)). Ohio law does not, however, "require that contracts purporting to hold an indemnitee harmless for its own negligence contain express language to that effect." Coulter, 731 N.E.2d at 1174. ¶34 In this case, the same characteristics that make the Contract's indemnification demonstrate it satisfies construction rule. provision the Interpreting unambiguous requirements the of Contract the to also strict not cover Cintas's own negligence would require a wholesale revision to so much language that we would be essentially reconstructing the agreement on behalf of Becker to avoid a conclusion favorable to Cintas. "[N]o other meaning can be ascribed to" the indemnification provision than the one we have described. See George H. Dingledy Lumber Co., 131 N.E. at 725 (quoted source omitted). Nor is there any "doubt . . . as to its meaning." See id. 22 No. IV. ¶35 2015AP2457 CONCLUSION The parties agreed that Ohio law would control the Contract, and no public policy requires us to preempt their agreement. unambiguously The requires Contract's Becker to indemnification defend and agreement indemnify Cintas even for its own negligence, and this is true regardless of whether we apply Ohio's rule of strict construction. Therefore, we affirm the decision of the court of appeals. By the Court.—The decision affirmed. 23 of the court of appeals is No. ¶36 ANN WALSH BRADLEY, J. performed will be . . . insured." 2015AP2457.awb (dissenting). "All work This language is on the first page of the contract between Cintas and Becker, in bold type. reasonable person reading this that it means what it says. majority's view, this contract language would But not the majority. unequivocal language is think In the transformed mean only that Cintas "carries an insurance policy." A to Majority op., ¶27. ¶37 majority Rather instead than giving enforces a effect to this language, the provision set liability-shifting forth in the finest of fine print. The effect is that, yes, Cintas's work is "insured," but not by Cintas. liability-shifting indemnity provision Cintas's own negligence onto Becker. appears in miniscule type as part foists Instead, the liability for The indemnity provision of an identically-styled laundry list that cannot be easily read without a magnifying glass. ¶38 The general rule of law in Wisconsin (as well as in Ohio) is that an indemnification provision will not be construed to cover an indemnitee for its own negligent acts unless there is a clearly expressed statement to that effect. Spivey v. Great Atlantic & Pac. Tea Co., 79 Wis. 2d 58, 63, 255 N.W.2d 469 (1977); N.E. see George Dingledy 723, 725 (Ohio 1921). Lumber Co. v. Erie R. Co., 131 Likewise, Wisconsin's strong public policy is that such agreements must be conspicuous lest they be deemed unconscionable. See Deminsky v. Arlington Plastics Machinery, 2003 WI 15, ¶¶26-27, 259 Wis. 2d 587, 657 N.W.2d 411. 1 No. ¶39 Whether it be under Wisconsin ambiguous provision cannot be enforced. cannot be invoked to circumvent or 2015AP2457.awb Ohio law, an Additionally, Ohio law important Wisconsin public policy considerations. Because the indemnification provision here and is both ambiguous unconscionably inconspicuous, the majority's application of Ohio law must fail. ¶40 Accordingly, I respectfully dissent. I ¶41 Becker Property Services contracted with Cintas to perform regular inspections of the fire-suppression system in a property Becker managed. Majority op., ¶3. The fire- suppression system allegedly failed and a fire in the property caused approximately $900,000 in damages. ¶42 Id. The property owner, several building tenants, and the property's insurers sued Cintas for negligence and breach of implied warranty. Id., ¶4. Pursuant to an indemnity provision in the contract, Cintas sought to have Becker indemnify Cintas for Cintas's own negligence. ¶43 Id. The majority first enforces a choice of law provision in the contract between Cintas and Becker that requires the use of Ohio law. concludes Id., ¶2. that the Second, applying Ohio law, it ultimately indemnity provision is enforceable. Id. Consequently, it determines that Becker must indemnify Cintas for Cintas's own negligence. II ¶44 At the outset, the majority missteps in framing what it refers to as the threshold question: 2 "As between Wisconsin No. and Ohio, which Majority op., ¶1. law provides rule of the decision?" The question, as framed, assumes that Ohio is qualified to be a contender. ¶45 the 2015AP2457.awb It is not. In framing the "threshold" issue in this fashion, the majority is able to avoid addressing the real threshold issues that would prove fatal to its conclusion. If the language of the contract is ambiguous, under either Wisconsin or Ohio law, the majority's language of conclusion the unambiguous, if cannot stand. liability-shifting it contravenes Next, indemnity important policy, Ohio law cannot be enforced. even if the provision is Wisconsin public An examination of these issues renders Ohio unqualified to even be in the ring. ¶46 it The majority errs in three significant ways. overlooks misconstruing a a Second, it nature, giving substantial promise disregards effect ambiguity the to a the Cintas's that in work is indemnity clause's liability-shifting First, contract, "insured." inconspicuous provision that appears in the middle of a block of text, that is so small as to be barely legible, and is not set off from the surrounding text or emphasized in any way. Third, it ignores important Wisconsin public policy considerations and erroneously applies Ohio law to this dispute. I address each in turn. A ¶47 The ambiguity "insured." majority created by errs first Cintas's when promise it that overlooks its work the is On the first page of the contract, in bold type is the statement: "All work performed will be according to NFPA, 3 No. 2015AP2457.awb State, and City Fire Department requirements and is guaranteed, insured and done by licensed personnel" (emphasis added). From this language, it is reasonable to conclude that the work is insured by the drafter of the contract, Cintas. ¶48 However, the contract also contains the indemnity provision, which states: Indemnity. Purchaser, at its own expense, shall defend, indemnify and hold harmless Seller from any claim, charge, liability, or damage arising out of any goods or services provided by Seller hereunder, including any failure of the goods or services to function as intended[.] Purchaser acknowledges that Seller shall have no liability or responsibility for any loss or damage to persons or property resulting from any fire or equipment malfunction. This provision shifts liability from Cintas to Becker, even in situations of Cintas's own negligence. ¶49 In Wisconsin, indemnification agreement the general will not be rule is construed that to cover "an an indemnitee for his own negligent acts absent a specific and express statement in the agreement to that effect." Wis. 2d at 63. construction. ¶50 Spivey, 79 Such indemnity agreements are subject to strict Id. The Spivey court explained the two ways in which an obligation to indemnify an indemnitee for its own negligence will be upheld: states that the (1) if the agreement clearly and unequivocally indemnitee is to be covered for losses occasioned by his own negligent acts; and (2) "if it is clear that the purpose and unmistakable intent of the parties in entering into the contract was for no other reason than to cover 4 No. losses occasioned by 2015AP2457.awb the indemnitee’s own negligence . . . ." Id. at 63-64. ¶51 is Similarly, as the majority provides, the rule in Ohio that if the liability-shifting indemnity provision is ambiguous, then the provision cannot be enforced: Such an interpretation should not be given a contract that would make the appellant responsible for the consequence of a negligent act of the appellee unless no other meaning can be ascribed to it. If a doubt existed as to its meaning, the court would resolve that doubt against the contention that the contract was intended to indemnify appellee against its own negligence. Every presumption is against such intention. Majority op., ¶33 (citing George H. Dingledy Lumber Co., 131 N.E. at 725). ¶52 Far from being clear and unequivocal, the contract in this case is contradictory and therefore ambiguous. type on the provision, first when page read of the contract together, are and the hopelessly The bold indemnity ambiguous regarding whose responsibility it is to provide insurance for Cintas's work. ¶53 To explain, the bold type on the first page says that Cintas's work is insured. this as meaning that A reasonable reader would interpret Cintas would insure its own work. A reasonable reader would not read this language as the majority does, to policy." ¶54 indicate merely that Cintas "carries an insurance See majority op., ¶27. However, the indemnity insured, but not by Cintas. clause says the work is The indemnity clause thus shifts liability for the work to Becker. 5 This of course conflicts with No. the exhortation that the work is "insured," 2015AP2457.awb rendering the contract as a whole irreconcilably ambiguous. ¶55 Under both Wisconsin and Ohio law, this requires construing the contract against Cintas. ambiguity The contract does not "clearly and unequivocally" provide that Becker is to indemnify Cintas Wis. 2d at 63. ascribed to it. 725. for its own negligence. See Spivey, 79 There is certainly another meaning that can be See George H. Dingledy Lumber Co., 131 N.E. at Accordingly, I determine that the indemnity provision, is unenforceable because it is ambiguous. B ¶56 In addition to being ambiguous, the indemnity provision is also inconspicuous pursuant to Wisconsin law. This court in Deminsky announced the bright line requirement that "indemnity contracts in which parties agree to indemnify the indemnitee for conspicuous. the indemnitee's 259 Wis. 2d 587, ¶28. own negligence" must be The issue in Deminsky arose in the context of the indemnitor's argument that the indemnity provision at inconspicuous. ¶57 The issue was unconscionable because it was Id., ¶26. standard for conspicuousness in contracts is set forth in Wis. Stat. § 401.201(2)(f).1 indemnity Id., ¶28. A term is "conspicuous" if any of the following apply: 1 At the time Deminsky was decided, this conspicuousness standard was set forth in Wis. Stat. § 401.201(10). This statute has since been renumbered to § 401.201(2)(f). See 2009 Wis. Act 320. 6 No. 2015AP2457.awb 1. A heading in capitals equal to or greater in size than the surrounding text, or in contrasting type, font, or color to the surrounding text of the same or lesser size. 2. Language in the body of a record or display in larger type than the surrounding text, or in contrasting type, font, or color to the surrounding text of the same size, or set off from surrounding text of the same size by symbols or other marks that call attention to the language. § 401.201(2)(f). ¶58 Applying the statute's conspicuousness standard to the facts of this case, the indemnity provision here is undoubtedly inconspicuous. First, the font size is incredibly small. Counsel for Becker brought a magnifying glass with him to oral argument in this case to facilitate reading the provision, and with good reason.2 ¶59 Second, the entirety of the terms and conditions set forth in the contract look exactly the same. The indemnity provision is only one of seventeen identical-looking, fine-print sections contained on the eighth and ninth pages of the ninepage contract. The indemnity provision has no heading, capitalization, bolding, italics, or underlining of any kind. Nothing about the provision grabs the reader's attention in any 2 The inconspicuous nature of the indemnity provision is demonstrated by a glance at the terms and conditions section of the contract, which is included as an appendix to this dissent. I direct the reader's attention to the indemnity provision, which is paragraph ten in the list of 17 items, all of which are set forth in what Becker maintains is 4.5 point font. 7 No. way.3 2015AP2457.awb Accordingly, I determine that the indemnity provision is inconspicuous and therefore unenforceable under Wisconsin law. C ¶60 The preceding analysis of Deminsky's conspicuousness requirement informs my analysis of the choice of law provision. According to the choice of law provision, "The rights and obligations of the parties contained herein shall be governed by the laws of the State of Ohio, excluding any choice of law rules which may direct the application of the laws of another jurisdiction." ¶61 contract Wisconsin courts have acknowledged that parties to a may expressly agree that the law of a particular jurisdiction shall control their contractual relations. National N.W.2d 883 Sch. Studios, (1987) Inc., (citations 139 Wis. 2d 635, omitted). proposition is by no means unqualified. Bush v. 642, However, Id. 407 this Parties cannot agree to be bound by the law of a particular jurisdiction "at the expense of important public policies of a state whose law 3 In cases finding a contract provision to be conspicuous and enforceable there was some important characteristic to the provision that is lacking in this case. See Deminsky v. Arlington Plastics Machinery, 2003 WI 15, ¶29, 259 Wis. 2d 587, 657 N.W.2d 411 (highlighting the fact that the indemnity provision at issue had a heading in capital letters and bold print); Rainbow Country Rentals and Retail, Inc. v. Ameritech Publ'g, Inc., 2005 WI 153, ¶42, 286 Wis. 2d 170, 706 N.W.2d 95 (emphasizing the fact that the liquidated damages provision at issue contained a specific reference in capital letters to a paragraph placing a limitation on available remedies). 8 No. 2015AP2457.awb would be applicable if the parties choice of law provision were disregarded." ¶62 Id. In concluding that Ohio law applies, the majority addresses the choice of law provision without reference to the indemnity provision's conspicuity. Yet, before determining whether the choice of law provision applies, one must determine first if there is an "important public policy" at stake. See id. ¶63 the The majority refuses to address Becker's argument that indemnification Wisconsin law provision because "it respect to Ohio's law." must offered of Ohio law, initially scrutinized regarding the similar under argument with This analysis Rather than diving into the the majority Wisconsin's unconscionability shifting provisions. no conspicuous Majority op., ¶29 n.11. puts the cart before the horse. application be should important of instead public inconspicuous have policy liability- Such an analysis leads me to conclude that Ohio law does not apply to this dispute in the first instance. ¶64 The Bush court declined to provide an exhaustive list of public policies that would render a choice of law provision null. However, it specifically referenced laws "which make a particular contract "unconscionability justify Bush, doctrines," disregarding 139 provision a Wis. 2d at as unenforceable," sufficiently contract's choice 643, n.1. 643 of The such important law as to provision. bright line conspicuousness requirement announced in Deminsky is rooted in the doctrine of unconscionability. 9 See Deminsky, 259 No. 2015AP2457.awb Wis. 2d 587, ¶¶26-27; see also Yauger v. Skiing Enters., Inc., 206 Wis. 2d 76, 86-87, 557 N.W.2d 60 (1996). ¶65 An unconscionability doctrine is an "important public policy" identified by the Bush court. This policy would be circumvented if we gave effect to the choice of law provision.4 Therefore, the choice of law provision's selection of Ohio law is unenforceable.5 Accordingly, I determine that Wisconsin law applies.6 ¶66 For the foregoing reasons, I respectfully dissent. ¶67 I am authorized to state that Justice SHIRLEY S. ABRAHAMSON joins this dissent. 4 My research has revealed no Ohio case establishing a similar conspicuousness rule to that announced in Deminsky, 259 Wis. 2d 587. 5 Further, it would render Deminsky's conspicuousness requirement entirely toothless if a party could avoid the requirement by way of a choice of law provision that is itself inconspicuous. See Appendix, ¶15. 6 I further observe that the majority's analysis results in an opinion of limited value in either Wisconsin or Ohio. What is the precedential value of a Wisconsin court's interpretation of Ohio law? Its application appears to be limited to this specific situation——where a choice of law provision results in a Wisconsin court applying Ohio law. 10
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