Entergy Mississippi, Inc. v. Burdette Gin Company

Citation: Not availableDocket: 97-CA-00481-SCT

Court: Mississippi Supreme Court; March 23, 1997; Mississippi; State Supreme Court

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On July 5, 1988, workers Percy Harper and Perry Butler sustained injuries from electrical shock while repainting a seed house for Burdette Gin Company, due to their scaffold contacting uninsulated overhead power lines maintained by Entergy Mississippi, Inc. The workers subsequently filed a lawsuit against Entergy in the Washington County Circuit Court. Entergy had an Agreement for Service with Burdette Gin, which included an indemnity clause requiring the customer to avoid violations of Mississippi's "8-Foot Statute" regarding safety around high voltage lines. This clause mandated that Burdette Gin indemnify Entergy against claims resulting from any such violations.

Entergy sought to enforce this indemnity provision through a third-party claim against Burdette Gin, which responded by claiming the clause was unconscionable and void as a matter of public policy. Burdette Gin also filed a motion for summary judgment to dismiss Entergy's claim, while Entergy countered with a cross-motion for partial summary judgment, arguing that the indemnity clause was enforceable and consistent with Mississippi law. The Mississippi Public Service Commission had previously approved this indemnity clause in multiple orders from 1971 to 1990, with no objections filed. The trial resulted in a judgment affirming the enforceability of the indemnity clause.

On August 12, 1994, Judge Gray Evans granted Burdette Gin's summary judgment motion, dismissing it from the case with prejudice, and denied Entergy's cross-motion. A final judgment was entered on March 24, 1997, approving a settlement between Entergy and Harper and Butler, and ruled that Entergy could not recover anything from Burdette Gin due to the summary judgment. Entergy appealed on April 9, 1997, contesting the circuit court's jurisdiction and its summary judgment ruling that found the indemnity clause unconscionable and void as a matter of public policy.

The standard of review for jurisdictional issues is de novo, as established in Wright v. White, and the same standard applies to summary judgment, requiring evidence to be viewed favorably for the non-movant. The circuit court possessed pendent jurisdiction to hear claims related to the indemnity agreement since they arose from the same transaction as the principal claim.

Entergy argues that the Mississippi Public Service Commission (MPSC) approval of the indemnity clause protects it from being deemed void due to public policy. The MPSC, established to uphold public utility regulations, acts on behalf of the public, and its administrative rules carry legal weight. Entergy contends that the circuit court's ruling undermines state law and MPSC authority; however, the MPSC's approval did not constitute a use of its rule-making power in this instance.

The MPSC's approval of Entergy's indemnity clause is deemed beyond its authority as it contravenes Mississippi law regarding the utility's duty to protect the public. Upholding this clause poses a risk by allowing Entergy to evade liability for negligence related to power line maintenance. The standard of care required of electricity distributors is exceptionally high, necessitating all reasonable measures to ensure public safety, particularly when human life is at stake. Previous rulings emphasize that utilities cannot escape liability for negligence, even with safety statutes in place, which are intended to safeguard workers rather than absolve utilities of their responsibilities. The general legal principle prohibits public utilities from contracting out of liability for their own negligence. The indemnity clause in question undermines Mississippi's public policy that mandates utilities to maintain the highest standard of care. Entergy's references to cases supporting broader indemnity clauses are not applicable, as those involved private contracts not influenced by public safety concerns.

Release from negligence contracts between public service companies and their customers are rendered void due to public policy considerations aimed at discouraging negligence and preventing exploitation of customers. This is particularly relevant when customers have limited choices for services, increasing the risk of overreaching by utilities. Courts in various jurisdictions have deemed indemnity clauses in such contracts void as they conflict with the utility's obligation to exercise a high standard of care.

The lower court's conclusion that the indemnity agreement was unconscionable is contested by Entergy, which argues that unconscionability principles do not apply to regulated contracts and claims a lack of evidence for such. Conversely, Burdette Gin asserts that the Michigan Public Service Commission (MPSC) failed to protect the public interest when approving Entergy's service agreement, supporting the circuit court's ruling.

Unconscionability involves a lack of meaningful choice for one party and terms overly favorable to the other. A provision must reasonably relate to the business's risks and needs to be considered conscionable. Burdette Gin argues that the indemnity clause is procedurally unconscionable, characterized by a lack of knowledge and voluntariness. Indicators of procedural unconscionability include insufficient understanding of the contract's terms due to complex language or print, and significant disparities in bargaining power that leave the weaker party unable to negotiate better terms or avoid contracting altogether.

Entergy argues that Burdette Gin did not prove unconscionability because Burdette Gin's manager, being a skilled businessman, signed the contract willingly. Citing *York v. Georgia-Pacific Corp.*, Entergy contends that procedural unconscionability is not applicable to experienced businesspersons. However, the *York* case differs significantly as the complaining party drafted the contract terms. Burdette Gin counters that its president, Rex A. Morgan, is primarily a farmer and lacks the legal acumen of Entergy's attorneys, suggesting an imbalance in business knowledge. The court notes insufficient evidence on the comparative sophistication of the parties but acknowledges that Entergy likely has the advantage.

Regarding the lack of voluntariness, the court finds that Burdette Gin had no alternative suppliers since Entergy is the sole electricity provider, undermining the voluntary nature of the agreement. Evidence indicates Entergy does not negotiate service terms, further supporting the notion that the indemnity clause is procedurally unconscionable as it resembles a contract of adhesion. The court concludes that the indemnity clause is unenforceable due to this unconscionability.

To disprove Burdette Gin's claims, Entergy must demonstrate that the indemnity provision relates reasonably to the business risks involved. Entergy argues that the clause aligns with Burdette Gin's existing legal obligations under the eight-foot statute, aimed at preventing worker injuries. However, the court clarifies that the statute's purpose is to protect workers rather than exempt Entergy from liability for its own negligence. Given the potential for joint liability in accidents, it is unreasonable for Entergy, with its superior bargaining power, to impose the indemnity clause unilaterally on Burdette Gin.

The Washington County Circuit Court properly exercised subject matter jurisdiction in addressing issues of unconscionability and public policy, supported by pendent jurisdiction and Mississippi Rules of Civil Procedure. Mississippi public policy mandates that utilities must take significant care in safeguarding the public from electrical hazards. The trial court ruled the indemnity clause void due to its potential to shield Entergy from negligence in maintaining electrical lines. Additionally, the clause was deemed procedurally unconscionable because Entergy's monopolistic stance impeded Burdette Gin’s ability to negotiate the service agreement voluntarily. The court found undisputed material facts justified granting summary judgment in favor of Burdette Gin, leading to an affirmation of the lower court's ruling.

Justice Mills dissented, arguing that the majority opinion overlooked essential facts, particularly regarding the actions of the original plaintiffs, Harper and Butler, who operated a scaffold under power lines. Mills questioned whether the indemnity clause influenced their behavior and highlighted that the responsibility for preventing the accident extended to the workers, the management of Burdette Gin, and Entergy itself. He cautioned against the court imposing its interpretation of public policy when the Mississippi Public Service Commission is tasked with determining such policies concerning public utilities.

The indemnity clause between Burdette Gin Company and Entergy is deemed sound under Mississippi law and public policy. Mississippi regulations permit electricity providers to implement "Service Policies" approved by the Public Service Commission, aimed at ensuring safe and effective electric service. The specific "Agreement for Service" signed by Burdette Gin on August 23, 1971, includes a provision acknowledging the "8-Foot Statute," which prohibits encroachments near high voltage lines. Burdette Gin agrees not to violate this statute and to indemnify Entergy for any claims resulting from such violations. The agreement does not grant Entergy immunity but encourages Burdette Gin's management to act responsibly to prevent accidents. Entergy is noted to have fulfilled its duty by warning Burdette Gin about potential dangers related to power lines. The ruling supports holding Burdette Gin accountable to its indemnity commitment, reinforcing the legality of similar indemnity agreements as established in the case of Heritage Cablevision v. New Albany Electric Power System.