Gibbs v. Air Canada
810 F.2d 1529, 7 Fed. R. Serv. 3d 295 (1987)
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Rule of Law:
An indemnification agreement does not cover an employee's wrongful act if it occurs outside the scope of services defined in the contract. Furthermore, an indemnitee cannot recover for a loss caused by its own wrongful conduct unless the contract expresses an intent to provide such indemnification in clear and unequivocal terms.
Facts:
- On August 16, 1971, Aircraft Services, Inc. entered into a contract with Air Canada to provide ramp services at Miami International Airport.
- The contract contained a clause where Aircraft Services agreed to indemnify Air Canada for damages caused by the negligence or willful misconduct of its employees 'in furnishing or omitting to furnish services under this Agreement.'
- On March 6, 1980, Johnnie Sorey, an Aircraft Services employee, transported a container with $790,870.23 worth of precious metal from Air Canada's warehouse to its terminal ramp.
- After Sorey unloaded the container onto the ramp, his duties with regard to that shipment were complete.
- Security for cargo on the ramp was the responsibility of Air Canada.
- P.J. Morris, the Air Canada Ramp Supervisor, knew the shipment was valuable but did not guard it or assign anyone else to, as he was occupied with another flight.
- While the ramp was unguarded, Sorey reloaded the container onto his truck and stole it.
Procedural Posture:
- Gibbs sued Air Canada in U.S. District Court for gross negligence and willful misconduct following the theft of a precious metal shipment.
- After Air Canada failed to answer the complaint, the clerk of court entered a default against it.
- The district court granted a default judgment against Air Canada on the issue of liability and later, after a trial on damages, for the full value of the shipment.
- Air Canada's motion to set aside the default judgment on liability for excusable neglect was denied, with the court finding Air Canada guilty of gross negligence and willful misconduct.
- Air Canada filed a third-party complaint against Aircraft Services, seeking contractual indemnification.
- At the close of evidence in the indemnification trial, the district court granted a directed verdict in favor of Air Canada, ordering Aircraft Services to indemnify it.
- Aircraft Services appealed the directed verdict to the U.S. Court of Appeals for the Eleventh Circuit. Air Canada cross-appealed the denial of its motion to set aside the default judgment.
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Issue:
Does a contract requiring a service provider to indemnify an airline for damages caused by the provider's employee's 'willful misconduct... in furnishing services' apply to a theft committed by the employee after services were complete, and can the airline recover if its own gross negligence was a legal cause of the loss?
Opinions:
Majority - Johnson, Circuit Judge
No. The indemnification provision does not apply because the employee's theft occurred after he had completed his contractual duties, and Air Canada cannot be indemnified because its own gross negligence was a legal cause of the loss and the contract does not clearly provide for indemnification under such circumstances. The court reasoned that the contract language 'in furnishing or omitting to furnish services' limits Aircraft Services' liability to acts committed during the performance of its contractual obligations. Sorey's theft occurred after he had finished his work, so it fell outside the scope of the indemnity clause. Additionally, under well-established Florida law, an agreement to indemnify a party for its own wrongful acts must be expressed in 'clear and unequivocal terms.' A prior default judgment established that Air Canada's own gross negligence and willful misconduct were a legal cause of the loss. The court held that Air Canada was bound by this finding and that the contract's general language did not meet the 'clear and unequivocal' standard required to indemnify Air Canada for its own fault.
Analysis:
This decision reinforces two significant principles of contract and indemnity law. First, it highlights the judiciary's strict interpretation of an indemnitor's liability, confining it to the precise scope of services defined in the contract. Second, it strongly affirms the public policy disfavoring indemnification for one's own negligence, requiring express, unambiguous language to overcome this presumption. The court's ruling on the preclusive effect of a default judgment in this indemnity context is also notable, establishing that an indemnitee who relies on a judgment for its claim cannot disavow the underlying factual findings of its own fault, even if those findings were not fully litigated.
