On May 5, 2016, the Fifth Circuit forecasted whether a non-contractual indemnity claim under Mississippi law should be premised on agency or tort theory. In David v. World Marine, L.L.C., No. 15-30464, 2016 WL 2609791, 2016 U.S. App. LEXIS 8362 (5th Cir. May 5, 2016), plaintiffs filed suit against defendant Signal International, LLC and Signal International, Inc. (hereinafter collectively, “Signal”) and others for claims related to plaintiffs’ recruitment and treatment as H2-B visa workers. Prior to the suit, Signal contracted with a third party to recruit skilled workers from India to come to the United States on H2-B temporary work visas, and that entity hired co-defendant, Burnett, to work as an immigration attorney for Signal and process the work visas. Signal also appointed co-defendant Dewan as its agent for recruiting workers. After the workers became aggrieved about unsanitary living conditions and the state of their work visas, they sued Signal, Burnett, and Dewan. Signal filed cross-claims for indemnity, among other things, against Bennett and Dewan. The jury found against Signal on its indemnity claims and awarded plaintiffs over $14 million in damages against Signal, Burnett, and Dewan.
Defendant Signal contended on appeal that the jury should have been instructed on an agency-based theory of indemnity under Mississippi law rather than the tort-based theory on which it was instructed. The Fifth Circuit found that Mississippi case law had not expressly addressed whether an agent had a duty to indemnify its principal for actions exceeding its authority but that Mississippi cases were instructive.
The court determined that the district court properly instructed the jury on the tort-based indemnity theory because Mississippi law supported finding Signal to be tortfeasors who did not fit under the state’s narrow exception for passive negligence. Notably, the Court refused Signal’s request to adopt the Restatement because it determined, when making an Erie-guess, federal courts were tasked with forecasting, not creating, state law. Additionally, the Court noted that it was important to recognize first that non-contractual indemnity is available and second that, federal courts, applying Mississippi law, will not give an instruction for non-contractual indemnity based on agency theory to a party who appears to have actively or affirmatively participated in the wrong.