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Fucich Contracting, Inc. v. Shread-Kuyrkendall and Associates, Inc.

United States District Court, E.D. Louisiana

December 17, 2019

FUCICH CONTRACTING, INC.
v.
SHREAD-KUYRKENDALL AND ASSOCIATES, INC., et al.

         SECTION M (4)

          ORDER & REASONS

          BARRY W. ASHE UNITED STATES DISTRICT JUDGE.

         Before the Court are two motions to dismiss filed by third-party defendant Timken Gears and Services, Inc., doing business as Philadelphia Gear (“Philadelphia Gear”).[1] Third-party plaintiff Shread-Kuyrkendall and Associates, Inc. (“SKA”) opposes both motions, [2] and Philadelphia Gear replies in support of its motions.[3] On October 24, 2019, the Court heard oral argument.[4] Having considered the parties' memoranda, the arguments at the hearing, the record, and the applicable law, the Court issues this Order and Reasons granting both motions.

         I. BACKGROUND

         On or about December 22, 2016, Fucich Contracting, Inc. (“FCI”) entered into a construction contract with St. Bernard Parish Government (“the Parish”) to be the general contractor for the public works improvement project known as the Lake Borgne Basin Levee District Pump Station #1 & #4 Pump Upgrade (“the Project”).[5] The general scope of work for the Project consisted of replacing the engines and right angle gear reducers that drive four backup storm water drainage pumps.[6] As the engineer for the Project, SKA prepared the design, bidding documents, and contract documents for the Project.[7]

         Philadelphia Gear (operating under the name Western Gear) manufactured the pumps' original right angle gear reducers, which were manufactured, purchased, and installed in approximately 1968, and which rotate counterclockwise.[8] During the design development stage of the Project, SKA communicated multiple times with Philadelphia Gear regarding the possible replacement or refurbishing of the existing right angle gear reducers.[9] The parties also discussed potential engines to be used for the Project. Philadelphia Gear provided SKA with the original drawings of the existing gear reducers, along with a specification for a factory overhaul of the gear reducers, to which SKA made minor modifications.[10] SKA used these documents for the design of the Project and included them in the contract documents.

         FCI also communicated directly with Philadelphia Gear during its preparation of the bid for the Project.[11] Philadelphia Gear submitted a proposal for the gear reducer overhaul to FCI, which FCI used for its successful bid.[12] The proposal contemplated repairing and upgrading the right angle gear reducers but not reversing their input shaft rotation.[13]

         On or before March 9, 2017, FCI submitted a proposal to Project engineer SKA for a prospective replacement engine: the Caterpillar 3512C land engine, an engine that FCI says it believed was specified in its contract with the Parish.[14] On March 9, 2017, SKA issued a response to FCI's engine proposal. The response instructed FCI to “make corrections noted, ” which were handwritten on the bottom of the page: “(1) Contractor to verify conformity of outputs to final design. (2) Contractor responsible to coordinate system final design with plans and specifications.”[15] On March 21, 2017, SKA also approved FCI's proposal from Philadelphia Gear for overhaul of the right angle gear reducers, with the same two conditions.[16] Despite the fact that the drive shaft of the Caterpillar 3512C land engine rotates counterclockwise (and is thus incompatible with the counterclockwise rotation of the existing right angle gear reducers), FCI proceeded to purchase Caterpillar 3512C land engines. FCI also removed the right angle gear reducers and sent them to Philadelphia Gear for the factory overhaul. The factory overhaul requested by FCI maintained the existing counterclockwise rotation.[17] On October 26, 2017, approximately ten months after beginning work on the Project, FCI discovered the rotational conflict between the engines' drive shafts and the gear reducers' input shafts upon attempting to install one of the Caterpillar 3512C land engines. The next day, FCI notified SKA of the problem in writing. FCI has since refused to move forward with the Project absent a change order that would pay FCI for the now increased cost of remediating the rotational conflict.[18]

         On March 19, 2018, FCI filed suit against the Parish, SKA, and XL Specialty Insurance Co. (“XL”), SKA's insurer, seeking to recover unpaid contract balances owed to FCI for work performed on the Project and other damages.[19] FCI alleges that SKA was negligent in its design and management of the Project, including incorporating defective specifications into the contract documents.[20] The Parish asserts various counterclaims against FCI for breach of contract, tortious interference with contractual rights, and detrimental reliance, [21] as well as similar crossclaims against SKA and XL.[22] On April 26, 2019, SKA and XL filed a third-party demand against Philadelphia Gear.[23] On December 9, 2019, FCI filed a third-party demand against Philadelphia Gear.[24] The Parish has not asserted any claims against Philadelphia Gear.

         In its third-party demand, SKA alleges that the gear reducers manufactured by Philadelphia Gear turn in the opposite direction of the Caterpillar engines purchased by FCI for the Project and are thus “unreasonably dangerous in a reasonably anticipated use of the product.”[25] Specifically, it alleges that the gear reducers were unreasonably dangerous in design because there existed an alternative design which would have prevented the damages claimed in this suit, and that Philadelphia knew, or should have known, that the engines to which the gear reducers would be connected turned in the opposite direction. SKA denies it was negligent and denies it is liable to the Parish or any other party, but argues that if it is found liable, it is entitled to recover from Philadelphia Gear all damages claimed against SKA arising out of the rotational conflict. Furthermore, SKA alleges that it relied on Philadelphia Gear's words and conduct during the design phase of the Project, that it was justified in this reliance because Philadelphia Gear is an expert in highly specialized gears, such as those at issue, and that it used the specifications, drawings, and other materials provided by Philadelphia Gear in preparing and issuing the plans and specifications for bid on the Project.[26]

         II. PENDING MOTION

         A. Motion to Dismiss SKA's Products Liability Claim

         Philadelphia Gear argues that SKA's third-party demand fails to state a claim upon which relief can be granted because under the applicable comparative fault regime, Philadelphia Gear cannot be held liable for contribution or indemnity to SKA.[27] It argues that because there is no contractual relationship between SKA and Philadelphia Gear, and SKA has not alleged any intentional fault on the part of Philadelphia Gear, SKA's claims against Philadelphia Gear must sound in negligence and products liability, and therefore, comparative fault applies. Philadelphia Gear explains that the 1996 amendments to articles 2323 and 2324 of the Louisiana Civil Code abolished solidary liability among alleged joint tortfeasors and implemented a system of comparative fault for non-intentional torts. Philadelphia Gear asserts that under the principles of comparative fault, one tortfeasor cannot be held responsible for the fault of another tortfeasor, and that these principles apply to the Louisiana Product Liability Act (“LPLA”), which “establishes the exclusive theories of liability for manufacturers for damage caused by their products” in Louisiana.[28] Philadelphia Gear argues that because there are no allegations which would provide for solidary liability between SKA and Philadelphia Gear, and as a matter of law, SKA does not have a right under the LPLA or any theory of Louisiana tort law to seek damages from Philadelphia Gear, SKA's third-party demand fails. Philadelphia Gear maintains that even if a claim could exist under the LPLA, SKA has not sufficiently alleged that the overhauled gear reducers were either “unreasonably dangerous” or that the alleged damages arose from a “reasonably anticipated use of the product.”[29] Finally, Philadelphia Gear argues that SKA's claim for indemnity is based on SKA's alleged active or actual negligence, not technical, vicarious, constructive, or derivative negligence, and that tort indemnity is therefore unavailable to it.[30] Regardless, Philadelphia Gear adds, a claim for tort indemnity is premature until judgment against SKA is entered.[31]

         In opposition, SKA argues that many of Philadelphia Gear's arguments regarding the LPLA are substantive defenses, which may not be used to attack a complaint on a motion to dismiss.[32] It maintains that it has sufficiently alleged that the right angle gear reducers manufactured by Philadelphia Gear were “unreasonably dangerous” in their “reasonably anticipated use” because it alleges that Philadelphia Gear communicated regularly with SKA during the design phase, that the gear reducers turned in an incompatible direction from the engines, and that an alternative design (i.e., turning in a compatible direction) was available.[33]SKA adds that its allegations meet the definition of “claimant” in the LPLA, which includes any “entity who asserts a claim under [the LPLA] against the manufacturer of a product or his insurer for damage caused by the product.”[34] SKA also argues that the tort principles of comparative fault do not preclude its LPLA claim because “legal principles other than tort principles apply” to the LPLA, referencing the LPLA's provision that a product may be “unreasonably dangerous because of nonconformity to express warranty, ” and its allowance of certain redhibition claims.[35] It asserts that the LPLA is sui generis and is not necessarily governed by tort principles, and that these tort concepts should not be imported into this case, which is dominated by contractual obligations.[36]SKA adds that Philadelphia Gear's proposition that a claim for tort indemnity is premature at this stage is based on a contractual indemnity case, and therefore, does not apply.[37] It concludes by requesting leave to amend or supplement its third-party demand if the Court deems its allegations insufficient.

         In reply, Philadelphia Gear responds that tort principles apply to SKA's LPLA claims, which Philadelphia Gear argues are simply affirmative defenses to the claims brought against SKA by FCI and the Parish, and therefore, should be dismissed as a third-party demand against Philadelphia Gear.[38] It maintains that SKA's third-party demand does not allege any defect in the gear reducers themselves, but rather alleges that a problem arose when the gear reducers were connected to other components of the Project, and thus the flaw is in SKA's design, or FCI's execution of the Project.[39] Philadelphia Gear adds that, because it was responsible for only one component of the Project, it could not reasonably have anticipated that SKA, as the design engineer, and FCI, as the contractor, would not have ensured that all components of the Project were compatible.

         B. Motion to Dismiss SKA's Detrimental Reliance Claim

         Philadelphia Gear argues that SKA's third-party demand is also defective on the grounds that it fails to state a detrimental reliance claim.[40] Philadelphia Gear argues that SKA has not met the requisites for detrimental reliance because (1) SKA does not allege that Philadelphia Gear represented that the existing gear reducers would be operational with new engines rotating in a counterclockwise direction, but rather admits that Philadelphia Gear provided accurate drawings showing the rotational direction of the existing gear reducers; (2) SKA does not allege that it had no other alternative means of determining the rotation of the existing engines and gear reducers; and (3) this Court has already found that the actual rotation could be found in the contract documents which SKA prepared.[41] As SKA cannot show that Philadelphia Gear misled it, and SKA had actual knowledge of the matters of which it complains, Philadelphia Gear argues any claim for detrimental reliance is without merit.

         SKA responds that it has sufficiently alleged the three elements of detrimental reliance: (1) it alleges that Philadelphia Gear provided specifications for the gear reducers without noting the existing rotation, visited the site, and reviewed SKA's draft specifications (“a representation by conduct or word”); (2) it alleges that engineers commonly rely on such specifications by manufacturers and that Philadelphia Gear is an expert in this field (“justifiable reliance”); and (3) it alleges that it used the materials from Philadelphia Gear in preparing its design for the Project (“change in position to one's detriment because of the reliance”).[42] SKA adds that Philadelphia Gear's assertion in its first motion to dismiss[43] that tort law governs the allegations in the third-party demand is incorrect because detrimental reliance does not sound in tort.[44]

         In reply, Philadelphia Gear argues that the first element of a detrimental reliance claim has not been met because, even if SKA's allegations are true, SKA could not reasonably rely on the specifications provided and reviewed by Philadelphia Gear during the bid process as public bid law precludes the specification of a particular brand of product in a government bid, and thus, the sample specifications were only “gratuitous.”[45] Philadelphia Gear asserts that SKA has not met the second element because professional statutory standards governing the practice of engineering preclude SKA and its design engineer from relying on any party in preparing specifications and contract documents.[46] Philadelphia Gear maintains that SKA has not met the third element because it has admitted, and this Court has held, that the contract documents reflected the actual rotation of the existing gears, and so any alleged omission in Philadelphia Gear's specifications upon which SKA may have relied is “moot.”[47] Finally, Philadelphia Gear asserts that because detrimental reliance requires that the relevant information be unavailable from any other source, and SKA has failed to plead that they could not otherwise obtain the information, this claim is not viable.[48]

         III. LAW & ANALYSIS

         A. Rule 12(b)(6) Standard

         The Federal Rules of Civil Procedure require a complaint to contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). Rule 8 “does not require ‘detailed factual allegations,' but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). The statement of the claim must “‘give the defendant fair notice of what the ... claim is and the grounds upon which it rests.'” Twombly, 550 U.S. at 555 (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). A pleading does not comply with Rule 8 if it offers “labels and conclusions, ” “a formulaic recitation of the elements of a cause of action, ” or “‘naked assertion[s]' devoid of ‘further factual enhancement.'” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 555-57).

         Rule 12(b)(6) of the Federal Rules of Civil Procedure permits a party to move to dismiss for “failure to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 570). A claim is plausible on the face of the complaint “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (quoting Twombly, 550 U.S. at 556). Plausibility does not equate to probability, but rather “it asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. (citing Twombly, 550 U.S. at 556). “Where a complaint pleads facts that are ‘merely consistent with' a defendant's liability, it ‘stops short of the line between possibility and plausibility of “entitlement to relief.”'” Id. (quoting Twombly, 550 U.S. at 557). Thus, if the facts pleaded in the complaint “do not permit the court to infer more than a mere possibility of misconduct, the complaint has alleged - but it has not ‘show[n]' - ‘that the pleader is entitled to relief.'” Id. at 679 (quoting Fed.R.Civ.P. 8(a)(2)).

         In considering a Rule 12(b)(6) motion to dismiss for failure to state a claim, a court employs the two-pronged approach utilized in Twombly. The court “can choose to begin by identifying pleadings that, because they are no more than conclusions [unsupported by factual allegations], are not entitled to the assumption of truth.” Iqbal, 556 U.S. at 679. However, “[w]hen there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief.” Id. Motions to dismiss are disfavored and rarely granted. Turner v. Pleasant, 663 F.3d 770, 775 (5th Cir. 2011) (citing Harrington v. State Farm Fire & Cas. Co., 563 F.3d 141, 147 (5th Cir. 2009)).

         A court's review of a Rule 12(b)(6) motion to dismiss “is limited to the complaint, any documents attached to the complaint, and any documents attached to the motion to dismiss that are central to the claim and referenced by the complaint.” Lone Star Fund V (U.S.), L.P. v. Barclays Bank PLC, 594 F.3d 383, 387 (5th Cir. 2010) (citing Collins v. Morgan Stanley Dean Witter, 224 F.3d 496, 498-99 (5th Cir. 2000)). A court may also take judicial notice of certain matters, including public records and government websites. Dorsey v. Portfolio Equities, Inc., 540 F.3d 333, 338 (5th Cir. 2007); see also Kitty Hawk Aircargo, Inc. v. Chao., 418 F.3d 453, 457 (5th Cir. 2005). Thus, in weighing a Rule 12(b)(6) motion, district courts primarily look to the allegations found in the complaint, but courts may also consider “documents incorporated into the complaint by reference or integral to the claim, items subject to judicial notice, matters of public record, orders, items appearing in the record of the case, and exhibits attached to the complaint whose authenticity is unquestioned.” Meyers v. Textron, Inc., 540 Fed.Appx. 408, 409 (5th Cir. 2013) (citing Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322 (2007)).

         B. Analysis

         Under Federal Rule of Civil Procedure 14, a “defending party may, as third-party plaintiff, serve a summons and complaint on a nonparty who is or may be liable to it for all or part of the claim against it.” Fed.R.Civ.P. 14(a)(1). A third-party plaintiff may not, however, implead a third-party defendant “merely because [the third-party defendant] may be liable to the plaintiff.” Owen Equip. & Erection Co. v. Kroger, 437 U.S. 365, 368 n.3 (1978) (emphasis in original). A third-party demand is improper when it “amounts to no more than a mere offer of a party to the plaintiff.” Smallwood ex rel. T.M. v. New Orleans City, 2015 WL 5883802, at *5 (E.D. La. Oct. 8, 2015) (citing advisory committee's notes on 1946 amendment to Rule 14). A third-party claim must be secondary or derivative of the main claim and “the original defendant must be able to demonstrate a basis for the third-party defendant's liability to the defendant (also known as the third-party plaintiff).” USAA Gen. Indem. Co. v. Scott, 2016 WL 8711678, at *2 (E.D. La. July 29, 2016) (quoting McCain v. Clearview Dodge Sales, Inc., 574 F.2d 848, 849-50 (5th Cir. 1978)) (internal quotation marks omitted); see also Hanover Ins. Co. v. Superior Lab. Servs., Inc., 316 F.R.D. 179, 182 (E.D. La. 2016) (citations omitted).

         A third-party plaintiff must base its third-party claim on “indemnity, subrogation, contribution, express or implied warranty, or some other theory” of secondary or derivative liability. Martco Ltd. P'ship v. Bruks Inc., 430 Fed.Appx. 332, 334 (5th Cir. 2011) (quoting 6 Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice & Procedure § 1446, at 415-20 (3d ed. 2010)). If a right to relief does not exist under the applicable substantive law, the third-party claim must be dismissed. Id. at 335. State substantive law determines whether the right to contribution or indemnity exists. Smallwood, 2015 WL 5883802, at *4 (citing Gen. Dynamics Corp. v. Adams, 340 F.2d 271, 279 (5th Cir. 1965)).

         1. Products Liability Claim and Comparative Fault

         SKA argues that if it is found liable to any party in this matter, it is entitled to recover from Philadelphia Gear all damages arising out of the rotational conflict caused by the design of the gear reducers that Philadelphia Gear manufactured.[49] The LPLA “establishes the exclusive theories of liability for manufacturers for damage caused by their products” in Louisiana, and so this products liability claim arises under the LPLA. La. R.S. 9:2800.52. Third-party tort claims for contribution or indemnification, however, are “nearly extinct in Louisiana.” Smallwood, 2015 WL 5883802, at *4 (citing Beauregard v. State ex rel. DOTD, 21 So.3d 442, 443 (La.App. 2009). This is because the 1996 amendments to articles 2323 and 2324 of the Louisiana Civil Code eliminated solidary liability among non-intentional tortfeasors and implemented a system of comparative fault. Dumas v. State ex rel. Dep't of Culture, Recreation & Tourism, 828 So.2d 530, 535 (La. 2002).

         Article 2323 provides in pertinent part:

A. In any action for damages where a person suffers injury, death, or loss, the degree or percentage of fault of all persons causing or contributing to the injury, death, or loss shall be determined …. If a person suffers injury, death, or loss as the result partly of his own negligence and partly as a result of the fault of another person or persons, the amount of damages recoverable shall be reduced in proportion to the degree or percentage of negligence attributable to the person suffering the injury, death, or loss.
B. The provisions of Paragraph A shall apply to any claim for recovery of damages for injury, death, or loss asserted under any law or legal doctrine or theory of liability, regardless of the basis of liability.
C. Notwithstanding the provisions of Paragraphs A and B, if a person suffers injury, death, or loss as a result partly of his own negligence and partly as a result of the fault of an intentional tortfeasor, his claim for recovery of damages shall not be reduced.

La. Civ. Code art. 2323. And article 2424 provides in pertinent part:

A. He who conspires with another person to commit an intentional or willful act is answerable, in solido, with that person, for the damage caused by such act.
B. If liability is not solidary pursuant to Paragraph A, then liability for damages caused by two or more persons shall be a joint and divisible obligation. A joint tortfeasor shall not be liable for more than his degree of fault and shall not be solidarily liable with any other person for damages attributable to the fault of ...

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