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STATE OF MINNESOTA IN COURT OF APPEALS A09-1617 Master Blaster, Inc., Respondent, vs. Doug Dammann, et al., Appellants. Filed April 13, 2010 Affirmed Stoneburner, Judge Washington County District Court File No. 82CV083447 William M. Hart, Michael D. Hutchens, Damon L. Highly, Nicole L. Brand, Meagher & Geer, P.L.L.P., Minneapolis, Minnesota (for respondent) Blake W. Duerre, David M. Reddan, Paul E.D. Darsow, Arthur, Chapman, Kettering, Smetak & Pikala, P.A., Minneapolis, Minnesota (for appellants) Considered and decided by Peterson, Presiding Judge; Klaphake, Judge; and Stoneburner, Judge. SYLLABUS 1. An indemnitor who is vouched, by means of a tender of defense, into an action

asserting damages against the indemnitee solely on the basis of the indemnitee`s vicarious liability for the indemnitor`s acts, may be bound by the findings in that action on any issue where (1) there is no conflict of interest between indemnitor and indemnitee; (2) the indemnitee adequately represented the indemnitor`s interests in the action; and

(3) procedural differences between the forums of the underlying and indemnity actions do not prejudice the indemnitor. 2. Appropriate vouching does not violate an indemnitor`s due-process rights, even

when the forum state of the underlying action lacks personal jurisdiction over the indemnitor. OPINION STONEBURNER, Judge In this common-law indemnity action involving the practice of vouching, appellant indemnitor challenges summary judgment granted to respondent indemnitee, binding indemnitor to the verdict in a South Dakota action from which indemnitor was dismissed for lack of personal jurisdiction. Indemnitor asserts that: (1) an inherent conflict of interest between indemnitor and indemnitee precluded indemnitor`s acceptance of indemnitee`s tender of defense of the South Dakota action and therefore precludes application of vouching; (2) indemnitor`s interests were inadequately represented in the South Dakota action, depriving it of a full and fair opportunity to be heard; (3) binding indemnitor to the South Dakota judgment violates its due-process rights because South Dakota lacks personal jurisdiction over indemnitor; and (4) summary judgment was inappropriate on the issue of indemnitor`s breach of implied warranty of fitness because indemnitor provided only services and has no impliedwarranty liability.

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FACTS In October 1999, Supreme Pork, Inc., a South Dakota corporation that owns feed and hog operations in eastern South Dakota and western Minnesota, bought two commercial-grade pressure washers from respondent Master Blaster, Inc., a South Dakota corporation owned by Paul Miersma, to be installed at Supreme Pork`s hog facility near Lake Benton, Minnesota. The pressure washers were manufactured by All American Pressure Washers. Master Blaster installed the pressure washers in the southeast corner of the pressure-washer room of the hog facility. A pressure washer generates tremendous heat and requires a flue vent to release hot gases through the attic space above the ceiling and out of the roof of the building in which it is installed. Master Blaster hired appellant Pipestone Plumbing & Heating, Inc. (Pipestone), a Minnesota corporation owned by appellant Doug Dammann, to supply and install flue vents for the pressure washers installed by Master Blaster. On site, Pipestone fabricated some venting components necessary for installation of the flues. The contract between Master Blaster and Pipestone was oral. Approximately two years after the pressure washers were installed, one of the pressure washers froze. Master Blaster removed that pressure washer from the site, repaired it in Master Blaster`s shop, and returned it to the hog facility, where it was reconnected by Supreme Pork. A few days later, a fire erupted in the pressure-washer room. The fire originated in the southeast corner of the room, in the attic space directly above the pressure washers.

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Supreme Pork notified Master Blaster, Pipestone, All American Pressure Washers, and LB White, the manufacturer of a space heater that was located in the pressure-washer room at the time of the fire, that Supreme Pork had retained an expert fire investigator, Chris Rallis, to investigate the cause of the fire and to schedule site inspections. Before the site inspections, Pipestone hired fire investigator Terry Parks, All American hired fire investigator Richard Cox, and LB White hired fire investigator Dr. Robert Schroeder. On April 18, 2002, Dammann, Miersma, and all of the fire investigators except Cox convened at the hog facility to inspect the site. Cox inspected the site the next day. At the time of the April inspections, most of the hog facility`s buildings had been removed from the site and the only room available for inspection was the pressurewasher room. Master Blaster later retained fire investigator Jeffrey Washinger, who inspected the site in August 2002.1 In January 2004, Supreme Pork sued Master Blaster in South Dakota for its fire loss, alleging negligence and breach of implied warranty. Both claims specifically referenced the venting system as the cause of the fire. The recitation of facts in the complaint, reflecting the opinion of Supreme Pork`s fire investigator, stated that investigation of the fire revealed that Master Blaster failed to properly install the vents in a manner so as to maintain proper separation between heat from the flue gases and the materials that formed in the building. The use of the washers allowed the expulsion of these gases in a manner and duration that lowered the ignition temperature of the building
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By the time Washinger inspected the site, the pressure-washer room had also been removed, but Washinger reviewed photographs and the physical evidence that had been retained. He discussed the fire with Rallis and reviewed Rallis`s preliminary report. 4

materials to a point where they became heated to a smoldering ignition state. This condition progressed to a free-burning fire during the early morning hours of March 21, 2002. In May 2004, Master Blaster brought a third-party claim against Pipestone in the South Dakota action, seeking indemnity. In June 2005, Pipestone was dismissed from the South Dakota action for lack of personal jurisdiction. Master Blaster immediately tendered its defense of the action to Pipestone and Pipestone`s insurer, asserting common-law indemnity against Pipestone in the event of a judgment against Master Blaster for Pipestone`s acts. Pipestone refused this tender and two subsequent tenders. Pipestone also refused to allow Master Blaster to depose Pipestone`s fire investigator, Terry Parks, in preparation for the South Dakota action. At trial, Supreme Pork argued that Master Blaster was vicariously liable for Pipestone`s negligence and breach of implied warranty. Supreme Pork did not assert any claims that Master Blaster was directly responsible for the fire. Supreme Pork`s expert, Chris Rallis, testified that, in his opinion, there was only one source of heat capable of generating the ignition for this fire: the vent stacks for the pressure washers. Rallis blamed the fire solely on improper installation of the flue vents too close to cellulose insulation, due to Pipestone`s failure to secure its flimsy, field-constructed attic shields. Master Blaster extensively cross-examined Rallis in an attempt to undermine his qualifications and his opinions. Supreme Pork also called Dr. Schroeder, who had initially been retained by LB White. Dr. Schroeder agreed with Rallis that the fire was caused by the heat in the flue igniting the cellulose insulation, which he described as nothing more than ground-up 5

newspapers. He opined that the Pipestone-fabricated attic shields were not approved, designed, or manufactured for the intended purpose of preventing the hot flue from coming into contact with the combustible cellulose insulation. Dr. Schroeder testified that Pipestone`s shields were substantially inferior to shields made by the manufacturer of the flues that Pipestone installed. Master Blaster extensively cross-examined Dr. Schroeder about his opinion, mistakes in his initial report, and the possible causes of the fire that he had not explored. Master Blaster called two experts: Terry Kern and Richard Cox, who both testified that based on the available evidence, the cause of the fire could not be determined. Kern disagreed with Dr. Schroeder`s characterization of Pipestone`s shields as flimsy, testifying that the 28-gauge steel used should be sufficient to prevent the insulation from coming into contact with the hot pipes. Kern testified that other potential fire causes were not satisfactorily eliminated. Cox also testified that the shields were perfectly adequate for the job, and that there was no evidence of improper installation. Both Kern and Cox testified that there was a good possibility that the fire had an electrical cause-- an opinion shared by the chief of the fire department that responded to the fire. Master Blaster did not call Washinger, who stated in his deposition that he had no basis on which to disagree with Rallis and Dr. Schroeder, because all of the hog-facility buildings, including the pressure-washer room, had been removed by the time he visited the site. But Supreme Pork read Washinger`s deposition testimony into the record. The jury was instructed that Pipestone was the agent of Master Blaster for the purpose of installing flue vents at the hog facility, that both had a duty to use reasonable 6

care under the circumstances to install the flue vents so that Supreme Pork`s property would not be damaged, and that an implied warranty of fitness for a particular purpose was breached if the flue vents were not fit for the particular purpose specified by Supreme Pork at the time of sale. The jury found that Pipestone was negligent and had breached an implied warranty of fitness for a particular purpose. The jury found that Pipestone`s conduct caused 95% of Supreme Pork`s damages, for which judgment was entered against Master Blaster. Master Blaster appealed to the South Dakota Supreme Court. Master Blaster then sued Pipestone in Minnesota for indemnity, including the costs of defense. The district court granted Master Blaster`s motion for summary judgment based on the common-law practice of vouching. But the issue of damages remained open until the South Dakota Supreme Court affirmed the South Dakota district court judgment.2 The district court then awarded Master Blaster damages that included indemnification for the South Dakota judgment, plus interest and the costs of defense and appeal in that action. This appeal by Pipestone followed, challenging the district court`s holding that Pipestone is bound by the South Dakota judgment on liability. ISSUES 1. Did the district court err in granting summary judgment to Master Blaster on its

indemnity claim against Pipestone under common-law vouching? 2. Did the district court err in holding Pipestone liable under a claim of breach of

implied warranty of fitness for a particular purpose?
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Supreme Pork, Inc. v. Master Blaster, Inc., 764 N.W.2d 474 (S.D. 2009). 7

ANALYSIS I. Standard of Review. On appeal from summary judgment we ask two questions: (1) whether there are any genuine issues of material fact and (2) whether the [district court] erred in [its] application of the law. State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990). We review both questions de novo. STAR Ctrs., Inc. v. Faegre & Benson, L.L.P., 644 N.W.2d 72, 77 (Minn. 2002). We review the evidence in the light most favorable to the party against whom judgment was granted. Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993). No genuine issue for trial exists [w]here the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party. DLH, Inc. v. Russ, 566 N.W.2d 60, 69 (Minn. 1997). Mere metaphysical doubt as to a factual issue which is not sufficiently probative with respect to an essential element of the nonmoving party`s case to permit reasonable persons to draw different conclusions does not create an issue of material fact for trial. Id. at 71. [T]he party resisting summary judgment must do more than rest on mere averments. Id. II. The common-law practice of "vouching" is recognized in Minnesota. The label vouching comes from the ancient practice of bringing a warrantor into an action by writ of voucher. State Bank of New Prague v. Am. Sur. Co. of N.Y., 206 Minn. 137, 145, 288 N.W. 7, 11 (1939). Tender of defense has long since replaced the writ of voucher. See id. at 146, 288 N.W. at 11 (stating that[p]arties responsible over

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are no longer vouched in as parties of record. Instead they are notified to defend, which long ago superceded the technical voucher . . . .). Under this practice, [i]f the person sued gives due notice of the pendency of the suit to the one who is responsible [by operation of law or by contract] and requests him to assume the defense, all the cases agree that the latter will be concluded by the judgment rendered if sued upon his obligation by the former. Id. (citation omitted). The term vouching, however, is still used to describe the process. Vouching helps to avoid duplicative litigation and the risk of inconsistent results in adjudicating indemnification claims. Universal Am. Barge Corp. v. J-Chem, Inc., 946 F.2d 1131, 1138 (5th Cir. 1991). An alleged indemnitor who is vouched into a court proceeding may be subject to having the prior determination used against the vouchee in the subsequent indemnification action even if the vouchee does not appear and defend in the first action. Id. at 1139. Generally, once the alleged indemnitor is vouched in, the vouchee must choose either to appear and defend or to decline the tender, though the vouchee must make this choice without the benefit of an authoritative determination of the primary defendant`s right of indemnification. If the vouchee declines, the vouchee loses certain prerogatives in any subsequent indemnification action brought by the primary defendant, and results of the primary lawsuit may be binding in the subsequent action. For example, the alleged indemnitor may not contest the validity of the primary defendant`s liability to the injured party. He may contest only whether notice was sufficient, whether he has a duty to indemnify, and whether the prior judgment was obtained by fraud or collusion. Id.

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In State Bank, the supreme court stated that [t]he practice of concluding a person responsible over by notice to defend, which has persisted as the law of the land for well nigh five centuries, if not longer, is not lacking in due process. 206 Minn. at 146, 288 N.W. at 11. The indemnitor is bound in such a case not by the contract of indemnity, except where it expressly so provides, nor by the judgment as a determination of the issue against him, but by estoppel in pais[3]. . . . The estoppel to claim a right to be heard on the original issues between [indemnitor and indemnitee] results from the refusal of [the indemnitor] to accept the tender of [the right to defend] when it was offered him and it was his duty to accept. Id. at 143

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