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Schreyer v. Universal Underwriters Ins. Co.: US District Court : WORKERS COMPENSATION | TORT | FRANCHISE - franchisor had no duty to franchisee's employee

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
DEREK LEE SCHREYER,
Plaintiff,
UNIVERSAL UNDERWRITERS
INSURANCE COMPANY,
Intervenor Plaintiff,
v.
BANDAG, INC.,
Defendant.
BANDAG, INC.,
Third-Party Plaintiff,
v.
TIRE ASSOCIATES WAREHOUSE, INC.,
a/k/a Tire Associates,
Third-Party Defendant.
Case No. 05-CV-1235 (PJS/JJG)
ORDER GRANTING DEFENDANTS
MOTION FOR SUMMARY JUDGMENT
Harry A. Sieben, Jr., SIEBEN GROSE VON HOLTUM & CAREY, LTD., for
plaintiff.
Lawrence M. Baill and Steven Theesfeld, YOST & BAILL, LLP, for intervenor
plaintiff.
Hal A. Shillingstad and Andrea Kiehl, FLYNN GASKINS & BENNETT, LLP,
for defendant/third-party plaintiff.
Jo Ann Strauss and Michael D. Barrett, COUSINEAU MCGUIRE
CHARTERED, for third-party defendant.
1Bandag labeled its claim against Tire Associates a cross-claim. As Tire Associates is
not Bandags codefendant, Bandags pleading is actually a third-party complaint. Compare Fed.
R. Civ. P. 13(g) with Fed. R. Civ. P. 14.
-2-
Defendant Bandag, Inc. (Bandag) is the holder of a patent on a method for retreading
tires. Through franchise agreements, Bandag licenses others to use its patented method. Thirdparty
defendant Tire Associates Warehouse, Inc. (Tire Associates) is one of those Bandag
franchisees.
On April 22, 2004, while working for Tire Associates, plaintiff Derek Schreyer was
injured when a tire being retreaded exploded. Schreyer cannot sue Tire Associates because of
the exclusive-remedy feature of the workers compensation law, Minn. Stat. 176.031, so
Schreyer instead brings a claim of negligence against Bandag. Intervenor plaintiff Universal
Underwriters Insurance Company, which paid Schreyers workers compensation claim, brings a
subrogation claim against Bandag. Bandag, in turn, brings a third-party complaint for
contribution or indemnity against Tire Associates.1
This matter is before the Court on Bandags motion for summary judgment on Schreyers
and Universals claims. For the reasons set forth below, the motion is granted. In light of the
Courts disposition of Bandags motion, the Court will dismiss without prejudice Bandags claim
against Tire Associates.
I. BACKGROUND
A. Retreading
The franchise agreement between Bandag and Tire Associates gives Tire Associates the
right to use Bandags patented method to retread tires. Retreading a tire is a multi-step process
that involves inspecting the tire, removing the old tread, making necessary repairs, and affixing
-3-
new tread. After new tread is affixed, the tire must be heat cured. If the tire is a bias-ply tire, it
is sent to a curing-rim station, at which special curing rims and flanges are placed on the tire and
the tire is inflated using compressed air. According to Bandags safety guidelines, the air line
used to inflate tires during the curing-rim process is supposed to be regulated for pressure at no
higher than 10 psi. Shillingstad Aff. Ex. L at 1; id. Ex. I; Ortiz Dep. 13.
Some, but not all, of the equipment that Bandag franchisees use to retread tires is
supplied by Bandag. The compressed-air system used by Tire Associates during the curing-rim
operation including the air-pressure regulator and gauge is not made or sold by Bandag.
Warrant Dep. 110.
B. The Accident
On the day Schreyer was injured, his supervisor was absent and Schreyer was the head
of the shop. Schreyer Dep. 31. Toward the end of the day, Schreyer went to the curing-rim
station to help another employee finish work on some tires. Schreyer was walking up to the
station to remove the compressed-air line from a tire when the tire exploded, injuring him.
Schreyer does not know how long the tire had been attached to the hose when he approached it.
After the accident, an independent measurement found that the air line was dispensing at 110 psi
eleven times the 10 psi recommended by Bandag. Tire Associates later determined that the
pressure regulator had failed.
C. The Relationship Between Bandag and Tire Associates
Tire Associates has been a Bandag franchisee for over thirty years. Warrant Dep. 15.
The franchise agreement that was in force at the time of the accident states:
The relationship of the parties is that of franchisor and franchisee,
and seller and buyer only, and [Tire Associates] acknowledges that
2The parties dispute whether the franchise agreement gives Bandag the right to require
Tire Associates to repair or replace non-Bandag equipment. For the purposes of Bandags
motion, the Court assumes that Bandag had the right to insist that Tire Associates repair or
replace all defective equipment, whether or not the equipment was manufactured by Bandag.
-4-
this Agreement does not create a fiduciary relationship between
[Tire Associates] and BANDAG. The parties are independent
contractors, and exercise sole control over their businesses at their
own risk.
Shillingstad Aff. Ex. A V. Consistent with the parties status as two independent contractors,
Tire Associates hires, assigns work to, supervises, disciplines, and fires its own employees; in
short, it decides who will do what work and under what circumstances. Willaert Dep. 64-65.
Tire Associates also has its own written safety program in place, which includes safety
guidelines for compressed air systems. Warrant Dep. 30, 32-33. These guidelines provide that
safety devices on compressed-air systems must be checked frequently and that air compressors
must be equipped with pressure-relief valves and gauges. Shillingstad Aff. Ex. G. Tire
Associates also instructs its employees to check pressure gauges from time to time to ensure that
air pressure is properly regulated. Willaert Dep. 67.
Although Tire Associates maintains control over its day-to-day operations, the franchise
agreement gives Bandag certain rights to monitor what its franchisees are doing with its patented
process and to maintain quality control across franchisees. The agreement requires Tire
Associates to maintain Bandag-supplied equipment in proper working order. Shillingstad Aff.
Ex. A III(d). Moreover, the agreement (at least as plaintiff reads it2) requires Tire Associates
to replace or repair any equipment whether or not supplied by Bandag that Bandag
determines is unsafe. Id. III(e); Warrant Dep. 71. The agreement also gives Bandag the right
to inspect Tire Associates business records and premises and samples of retreaded tires. Id.
3Schreyer correctly notes that Bandag visits franchisees up to four times per year; the
MEP audit is done only once per year, however. Bertotti Dep. 34.
-5-
IV. Finally, Bandag provides its franchisees training at its facility in Muscatine, Iowa, as well
as instruction manuals and other written materials. Bertotti Dep. 104. As part of the training,
Bandag teaches its franchisees that the compressed-air line used during the curing-rim operation
should be regulated at no more than 10 psi. Ortiz Dep. 13. Bandag does not provide any other
advice or instruction on the setup of its franchisees compressed-air systems. Ortiz Dep. 13.
Once a year, Bandag conducts a day-long inspection known as a Manufacturing
Excellence Program (MEP) audit.3 Bertotti Dep. 34. The purpose of this audit is to ensure
consistent quality among Bandag franchisees as well as to check safety practices. Bertotti
Dep. 152. As part of the audit, Bandag inspectors use a preprinted safety checklist. At the top of
the list, the form states, Do not operate specified equipment when any of the following
conditions are present. Shillingstad Aff. Ex. I. Following that statement is a list of twenty or so
items; after each item, the inspector can check OK or Not OK. Id. Included on the list is the
following item: Airline used to inflate curing rim is not regulated to 10 psi. Set and lock
regulator at 10 psi maximum. Id.
John Bertotti is a Bandag employee who conducts MEP audits. In checking the curingrim
station during an MEP audit, Bertottis practice is to check the reading on the gauge on the
compressed-air line to make certain that it is set at 10 psi. Bertotti Dep. 50. Bertotti does not
undertake the more arduous task of ensuring that the gauge is accurate. Instead, he verbally
reminds the manager to check the accuracy of the gauge with a master gauge. Bertotti Dep. 50-
51.
4The Federal Rules of Civil Procedure were amended effective December 1, 2007. The
amendments are stylistic only, however, and the Court therefore quotes from the amended Rules.
See Fed. R. Civ. P. 56 advisory committees note on 2007 amendments.
-6-
In August 2003 eight months before the accident that injured Schreyer Bertotti
conducted the annual MEP audit at Tire Associates. Warrant Dep. 38. Bertotti filled out the
safety checklist, but did not check either OK or Not OK after the item referring to the
curing-rim air line. Anderson Dep. 102-03. Schreyer now contends that Bertotti failed properly
to inspect the curing-rim air line and that, had he done so, he would have discovered that the
regulator was defective, he would have warned Tire Associates of the defect, Tire Associates
would have repaired the regulator, and Schreyer would not have been injured.
II. ANALYSIS
A. Standard of Review
Summary judgment is appropriate if the pleadings, the discovery and disclosure
materials on file, and any affidavits show that there is no genuine issue as to any material fact
and that the movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c).4 A dispute
over a fact is material only if its resolution might affect the outcome of the suit under the
governing substantive law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A
dispute over a fact is genuine only if the evidence is such that a reasonable jury could return a
verdict for either party. Ohio Cas. Ins. Co. v. Union Pac. R.R., 469 F.3d 1158, 1162 (8th Cir.
2006). In considering a motion for summary judgment, a court must assume that the nonmoving
partys evidence is true. Taylor v. White, 321 F.3d 710, 715 (8th Cir. 2003).
-7-
B. Bandags Motion
To prevail on his negligence claim, Schreyer must establish that Bandag owed him a
legal duty of care, that Bandag breached that duty, and that the breach proximately caused harm
to him. Nickelson v. Mall of Am. Co., 593 N.W.2d 723, 725 (Minn. Ct. App. 1999). Bandag
moves for summary judgment on the sole ground that it did not owe a duty of care to Schreyer.
Before addressing Bandags motion, the Court notes that it is curious that Bandag did not
also move for summary judgment on the issue of causation, for there is no evidence in the record
that would permit a jury to find that any breach of any duty by Bandag caused harm to Schreyer.
Recall that Bertottis annual inspection occurred eight months before Schreyer was injured.
There is no evidence that the regulator was malfunctioning at that time, and thus no evidence
that, even if Bertotti had examined the regulator as closely as possible, he would have found
something wrong with it. It appears, from the evidence submitted to the Court, that the parties
simply do not know when the regulator began malfunctioning. Schreyer, of course, has the
burden of proof on causation, and thus this absence of evidence would appear to be fatal to his
case.
As noted, though, Bandag has moved for summary judgment only on the ground that
Bandag did not owe Schreyer a duty in the first place. Bandags confidence in this argument is
understandable. After all, Schreyer worked for Tire Associates, not Bandag. Bandag did not
hire Schreyer, did not assign tasks to Schreyer, did not supervise Schreyer, and had no right to
discipline or fire Schreyer. Moreover, the equipment that injured Schreyer was not made by
Bandag or sold by Bandag. On first glance, it is difficult to understand how Bandag could be
-8-
liable for an injury caused to someone who was not its employee by a faulty air-pressure
regulator that was not its product.
Schreyer nevertheless argues that Bandag owed him a duty of care with respect to this
regulator and that Bandag breached its duty when Bertotti failed to discover or warn of a defect
in the regulator during his August 2003 inspection. The parties arguments focus on two
possible sources of a duty of care: first, that Bandag retained sufficient control of Tire
Associates overall operations so as to give rise to a general duty of care; and second, that
Bandag voluntarily assumed a particular duty of care by inspecting the air-line regulator that
malfunctioned. The Court examines each of these theories in turn.
1. Retained Control
Although Tire Associates is a franchisee of Bandag, the parties contract defines Tire
Associates as an independent contractor, and both Schreyer and Bandag analyze Bandags
potential liability under case law that defines when someone who retains an independent
contractor can be held liable for injuries suffered by the employees of that independent
contractor. These arguments are rather ill-suited to the circumstances of this case. Unlike, say, a
general contractor who hires a subcontractor to wire a new home for electricity, or the owner of
an office building who hires an independent contractor to keep the building clean, Bandag did
not really employ Tire Associates to do anything for Bandag. Instead, it sold Tire Associates a
license to use a particular method for retreading tires.
In any event, even if Bandag could be deemed to have retained or employed Tire
Associates, Bandag does not owe a general duty of care to all Tire Associates employees. As a
general matter, Minnesota courts do not impose liability on the employer of an independent
5Schreyer argues that Bandag retained control over Tire Associates operations and is
therefore subject to vicarious liability. In Sutherland, the Minnesota Supreme Court applied the
same retention-of-control analysis to both the issue of direct liability and the issue of vicarious
liability. Regardless of whether the nature of Bandags liability is direct or vicarious, therefore,
Schreyer must establish that Bandag retained sufficient control to subject it to liability.
-9-
contractor for injuries suffered by the independent contractors employees. Sutherland v.
Barton, 570 N.W.2d 1, 5 (Minn. 1997). Minnesota courts recognize an exception when the
employer of an independent contractor retains detailed control over a project and then fails to
exercise reasonably careful supervision over that project.5 Id. Of course, just about everyone
who employs an independent contractor retains some control over the work to be done by that
contractor. Thus, to ensure that the exception does not swallow the rule, Minnesota courts have
made clear that, [f]or liability to attach, the [employer of an independent contractor] must retain
control over the operative detail of the work. Id. (quoting Restatement (Second) of Torts
414 cmt. a (1965)).
Bandag had nothing resembling detailed control over the operative detail of the work
done by employees of Tire Associates. Bandag did not interview, screen, hire, schedule, assign
work to, supervise, pay, discipline, or fire any of those employees. Bandag did not instruct Tire
Associates whether to hire one employee or one hundred; whether to retread one tire per day or
one thousand; whether to stay open only an hour each day or instead to provide twenty-four hour
service. Bandag simply sold Tire Associates a license to use a patented process, and Bandag
maintained limited inspection and quality-control rights to ensure that neither Tire Associates
nor any other franchisee damaged the value of its patent.
Schreyer argues that because Bandag had the right to inspect Tire Associates for safety
violations, and to insist that Tire Associates correct them, it retained control of Tire Associates
-10-
work. But the right to conduct periodic inspections and require the replacement of defective
equipment is not the same as having detailed control over the operative detail of day-to-day
work. See Sutherland, 570 N.W.2d at 6 (independent contractor, not employer, determined how
to perform the specific task that caused the injury, thus the employer was not liable under the
retained-control theory); Lee v. N. States Power Co., No. C8-90-636, 1991 WL 15395, at * 1
(Minn. Ct. App. Feb. 12, 1991) (employers right to require compliance with safety codes, and
employers actions enforcing safety, did not subject employer to liability under retained-control
theory because the employer had no right to exercise control over day-to-day manner in which
work was performed or the way in which safety requirements were implemented). Instead, for
an employer to have a duty of care under the retained-control theory, the employer must retain
enough control to be able to prevent the risks created by the contractors work. Lee, 1991 WL
15395, at *1.
In this case, Bandag clearly did not have that kind of control over Tire Associates. It was
Tire Associates, and not Bandag, that purchased the compressed-air system, that set up the
compressed-air system, and that worked with the compressed-air system on a daily basis. Tire
Associates fully understood the need to inspect the system regularly and to immediately repair
any malfunctioning equipment. Indeed, Tire Associates developed and imposed its own safety
standards with respect to the use of compressed air. By contrast, Bandag audited Tire Associates
once per year and made less formal visits up to three times per year. Given that Bandag was not
even present at Tire Associates 361 out of 365 days each year, and given that Bandag inspected
the equipment at Tire Associates only once per year, Bandag was plainly in no position to
prevent risks to the employees of Tire Associates created by malfunctioning equipment. The
-11-
bottom line is that Bandag did not exercise detailed control over the operative detail of the
day-to-day work being done at Tire Associates, and thus Bandag did not owe a general duty of
care to Schreyer or the other employees of Tire Associates.
2. Voluntary Assumption of Duty
Schreyer next argues that, even if Bandag did not retain a sufficient degree of control
over Tire Associates to give rise to a general duty of care to Tires Associates employees,
Bandag voluntarily assumed a specific duty of care to those employees by conducting annual
safety inspections. In Cracraft v. City of St. Louis Park, 279 N.W.2d 801 (Minn. 1979), the
Minnesota Supreme Court identified several factors relevant to the question of whether an
inspection creates a voluntarily assumed duty of care, including: (1) whether the inspector had
actual knowledge of the dangerous condition, (2) whether the inspectors actions increased the
risk of harm, and (3) whether other persons reasonably relied on the inspectors representations
and conduct.
Of course, reliance on the inspection in general is not sufficient.
Instead, the reasonable reliance must be based on specific actions
or representations which cause the persons to forego other
alternatives of protecting themselves.
Id. at 807; see also Williams v. Harris, 518 N.W.2d 864, 868 (Minn. Ct. App. 1994) (liability for
voluntarily assuming a duty arises only if the defendants conduct leads others to rely on such
assumption of duty and to refrain from taking more direct action to protect themselves).
Although Cracraft involved the specific question of a municipalitys liability for fire-code
inspections, the Minnesota Court of Appeals has applied Cracraft to the issue of whether a
private inspector has voluntarily assumed a duty. See In re Norwest Bank Fire Cases, 410
-12-
N.W.2d 875, 878 (Minn. Ct. App. 1987) (citing Cracraft as creating a general rule limiting the
liability of inspectors).
In this case, all three Cracraft factors demonstrate that Bandag did not voluntarily
assume a duty to Tire Associates or its employees:
First, there is no evidence that Bertotti actually knew of any malfunction or other
dangerous condition affecting the air-pressure regulator used during the curing-rim operation.
Indeed, as described above, there is no evidence that the regulator was defective when Bertotti
looked at it (eight months before Schreyer was injured).
Second, even assuming that Bertotti failed to detect a malfunction, this failure did not, by
itself, increase the risk of harm that existed before Bertotti looked at the gauge on the regulator.
An inspector who simply fails to detect a preexisting danger does not increase the risk of harm.
See Norwest, 410 N.W.2d at 879.
Third, there is no evidence that Tire Associates, or any of its employees, reasonably
relied on specific actions or representations of Bandag. Although it is true that several Tire
Associates employees testified that they relied on Bertottis inspections in a general way,
Cracraft requires more. Under Cracraft, Bandag must have taken specific actions or made
specific representations which caused Tire Associates not to take its own measures to ensure that
its compressed-air system was working properly.
There is no such evidence in this case. To the contrary, Bertotti testified that, to check
air pressure at the curing-rim station, he simply looked at the gauge, and he did not
independently test whether the gauge was accurate. Bertotti Dep. 50-51. The safety checklist
corroborates Bertottis testimony. Had Bertotti found a problem, he would have checked a space
6Although David Willaert, a shareholder and then-general manager of Tire Associates,
testified that Tire Associates relied on Bandag to check the functioning of the regulator, Willaert
merely said that he believe[d] Bertotti checked the regulator with an independent gauge.
Willaert Dep. 71. Willaert admitted that he had never seen Bertotti perform such a test, id., and
he did not testify that Bertotti ever told him that he would or had checked the functioning of the
regulator.
-13-
advising Tire Associates to [s]et and lock regulator at 10 psi maximum. This is a reference to
the setting of the regulator (which can be assessed by a quick look at the gauge), and not to the
functioning of the regulator (which can be assessed only by checking the regulator with a master
gauge). Moreover, after his August 2003 audit, Bertotti checked neither OK nor Not OK on
the line referring to the setting of the curing-rim air-pressure regulator. Clearly, then, nothing
Bertotti said or did could have induced Tire Associates to fail to check its own air-compression
system from time to time.6
It is likewise clear that nothing that Bertotti said or did in fact caused Tire Associates to
fail to monitor its own equipment. To the contrary, Tire Associates developed its own safety
standards with respect to the use of compressed air. These standards mandated that safety
devices on compressed-air systems be checked frequently and that air compressors be equipped
with pressure-relief valves and gauges. Shillingstad Aff. Ex. G; Warrant Dep. 32-33. Tire
Associates employees were also informed of the danger of using compressed air. Willaert
Dep. 67. The safety standards implemented by Tire Associates conclusively rebut any
suggestion that Tire Associates believed that, because Bandag looked at its air-pressure gauges
once per year, Tire Associates did not need to worry about those gauges or other safety devices.
For these reasons, the Court concludes that, by conducting an annual audit of the
equipment at Tire Associates, Bandag did not voluntarily assume a duty to ensure that the air7At
times, Schreyer suggests that Bandag could be liable for failing to advise Tire
Associates about design defects in the regulator. This contention is completely without merit;
there is absolutely no evidence that Bandag undertook any duty to advise Tire Associates with
respect to the selection of non-Bandag equipment.
-14-
pressure regulator at the curing-rim station functioned correctly. Bandag therefore cannot be
held liable to Schreyer.7
ORDER
Based on the foregoing, and on all of the files, records, and proceedings herein, IT IS
HEREBY ORDERED THAT:
1. Defendant Bandag, Inc.s motion for summary judgment [Docket No. 141] is
GRANTED.
2. Plaintiff Derek Schreyers second amended complaint [Docket No. 68] is
DISMISSED WITH PREJUDICE AND ON THE MERITS.
3. Intervenor Plaintiff Universal Underwriter Insurance Companys second amended
complaint in intervention [Docket No. 76] is DISMISSED WITH PREJUDICE
AND ON THE MERITS.
4. Third-party plaintiff Bandag, Inc.s complaint against third-party defendant Tire
Associates Warehouse, Inc. [Docket Nos. 89, 90] is DISMISSED WITHOUT
PREJUDICE.
LET JUDGMENT BE ENTERED ACCORDINGLY.
Dated: December 5, 2007 s/Patrick J. Schiltz
Patrick J. Schiltz
United States District Judge
 

 
 
 

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