Casillas v. Bayer Corporation

Background

Bayer Healthcare LLC and Linoleum Sales Co. Inc. dba Anderson Commercial Flooring had a Master Services Agreement governing Anderson’s flooring installation and repair services for Bayer. The agreement contained several indemnification provisions. Among other things, Anderson agreed to indemnify Bayer for losses related to claims that Bayer was an employer or joint employer of people performing services under the agreement. The agreement also required a party seeking indemnification to give written notice, allowed the indemnifying party to control the defense and settlement, and restricted voluntary payments or expenses without the indemnifying party’s prior written consent.

On January 23, 2023, Ben Casillas, Jr., and Saul Sanchez, Anderson employees, were injured in a fire at Bayer’s West Berkeley Manufacturing Facility. Casillas later died from his injuries. Plaintiffs and their families sued Bayer. Bayer later filed a third-party complaint against Anderson seeking express indemnity under the agreement. Anderson answered and asserted two counterclaims against Bayer: express indemnity and equitable indemnity.

Express Indemnity Counterclaim

Anderson alleged that Bayer breached the agreement by failing to follow the indemnification procedures, including the requirement to provide prompt notice. Anderson argued that this breach entitled it to express indemnity from Bayer under the agreement’s provision requiring Bayer to indemnify Anderson for losses arising from Bayer’s breach.

The court applied the standard for dismissal under Federal Rule of Civil Procedure 12(b)(6), which asks whether the pleading states a legally sufficient claim supported by enough facts. The court assumed the truth of Anderson’s factual allegations but did not accept unsupported legal conclusions.

Under California law, a breach-of-contract claim requires a contract, performance or an excuse for nonperformance, a breach, and resulting damages. The court assumed, without deciding, that the agreement was valid and that Anderson performed its obligations. It concluded, however, that Anderson had not alleged damages resulting from Bayer’s allegedly late notice. According to the court, Bayer’s failure to follow the notice requirements might provide a defense to Bayer’s indemnity claim, but it did not entitle Anderson to recover damages.

The court also concluded that Anderson was not responsible for Bayer’s defense costs and fees incurred before Bayer requested indemnification on June 13, 2023, because the agreement required prior written consent for such expenses. As a result, Anderson had not plausibly alleged damages caused by the allegedly late request. The court dismissed the express indemnity counterclaim.

Equitable Indemnity Counterclaim

Anderson’s second counterclaim sought equitable indemnity for injuries, damages, or other harm allegedly caused by Bayer’s negligence or other tortious conduct. The court held that California law precludes an equitable indemnity claim when the parties have an express contractual indemnity agreement. Because the Master Services Agreement contained contractual indemnification provisions, the court dismissed Anderson’s equitable indemnity counterclaim with prejudice.

Disposition

The court granted Bayer Healthcare LLC’s motion to dismiss Anderson’s counterclaims. It dismissed both counterclaims with prejudice because both indemnification claims failed and amendment would be futile. The opinion states that Bayer Healthcare LLC was the appropriately named defendant even though some filings identified the defendant as Bayer Corporation.