Opinion
CIVIL 3:21-CV-00551
03-25-2022
PENNSYLVANIA NATIONAL MUTUAL CASUALTY INSURANCE CO., Plaintiff, v. TIDEWATER EQUIPMENT COMPANY & MID-STATE FORESTRY EQUIPMENT, LLC Defendants.
Mariani, Judge.
REPORT AND RECOMMENDATION
Martin C. Carlson, United States Magistrate Judge
I. Introduction
This diversity case has been referred to us for consideration of motions to dismiss filed by both defendants. The plaintiff, Pennsylvania National Mutual Casualty Insurance Co. (PA National), has filed a claim in subrogation to the rights of its insured, Andrew Krompasky, against the defendants Tidewater Equipment Company (Tidewater) and Mid-State Forestry Equipment, LLC (Mid-State) alleging Krompasky suffered property damage of more than $100,000 after a skidder he purchased from Mid-State caught fire. PA National alleges that the fire occurred due to improper service work performed by Tidewater and/or Mid-State and seeks damages under theories of contract and tort under Pennsylvania law. For the reasons that follow, we recommend the defendant Mid-State's motion to dismiss be granted and defendant Tidewater's motion to dismiss be denied.
II. Factual Background
The facts of this case are relatively straightforward. The plaintiff is a Pennsylvania-based insurance provider that provided the insurance coverage to Andrew Krompasky in connection with his 2013 Tigercat skidder, model 610C that he purchased from Mid-State in January 2020. (Doc. 11, ¶¶ 1, 2, 12). According to the plaintiff, Defendant Tidewater, a South Carolina corporation engaged in the business of designing, manufacturing, marketing, selling, distributing, servicing, and/or repairing skidder machines, performed service and/or repair work on the subject skidder on or about October 31, 2019. (Id. at ¶¶ 3, 4, 9). Tidewater subsequently sold the skidder to Defendant Mid-State, a Tennessee corporation engaged in the business of marketing, selling, distributing, servicing, and/or repairing skidder machines. (Id. at ¶¶ 5, 6, 10). After purchasing the machine from Tidewater, the plaintiff alleges that Mid-State performed further service and/or repair work on the skidder prior to Krompasky purchasing the machine from Mid-State on January 16, 2020. (Id. at ¶¶ 11, 12). Just two weeks later, on January 30, 2020, the skidder caught fire while in use in Jefferson Township, Pennsylvania and suffered significant damages. (Id. at ¶¶ 13, 16). An investigation into the cause of the fire revealed that the fire occurred due to an oil leak in the engine and that the oil leak had occurred because of improper service work that had been performed on the skidder. (Id. at ¶¶ 14, 15). The plaintiff insurer made payments in excess of $100,000 to Krompasky pursuant to his policy and is now seeking an action in subrogation for these payments. (Id. at ¶ 16, 17).
PA National filed a complaint in federal court based on diversity of citizenship under 28 U.S.C. § 1332(a)(1). (Doc. 1). After Tidewater filed a motion to dismiss, PA National filed an amended complaint as a matter of course which has become the operative complaint in this case. (Doc. 11). Defendants Mid-State and Tidewater subsequently filed motions to dismiss the amended complaint for failure to state a claim upon which relief can be granted. (Docs. 12, 14). The motions have been fully briefed and are ripe for disposition. (Docs. 13, 15, 16, 17, 18, 19). For the following reasons, we recommend Mid-State's motion to dismiss be granted and Tidewater's motion to dismiss be denied.
II. Discussion
A. Motion to Dismiss - Standard of Review
A motion to dismiss tests the legal sufficiency of a complaint. It is proper for the court to dismiss a complaint in accordance with Rule 12(b)(6) of the Federal Rules of Civil Procedure only if the complaint fails to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). With respect to this benchmark standard for the legal sufficiency of a complaint, the United States Court of Appeals for the Third Circuit has aptly noted the evolving standards governing pleading practice in federal court, stating that:
Standards of pleading have been in the forefront of jurisprudence in recent years. Beginning with the Supreme Court's opinion in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), continuing with our opinion in Phillips [v. County of Allegheny, 515 F.3d 224, 230 (3d Cir. 2008)], and culminating recently with the Supreme Court's decision in Ashcroft v. Iqbal, BU.S.B, 129 S.Ct. 1937 (2009), pleading standards have seemingly shifted from simple notice pleading to a more heightened form of pleading, requiring a plaintiff to plead more than the possibility of relief to survive a motion to dismiss.Fowler v. UPMC Shadyside, 578 F.3d 203, 209-10 (3d Cir. 2009).
In considering whether a complaint fails to state a claim upon which relief may be granted, the court must accept as true all allegations in the complaint and all reasonable inferences that can be drawn therefrom are to be construed in the light most favorable to the plaintiff. Jordan v. Fox, Rothschild, O'Brien & Frankel, Inc., 20 F.3d 1250, 1261 (3d Cir. 1994). However, a court “need not credit a complaint's bald assertions or legal conclusions when deciding a motion to dismiss.” Morse v. Lower Merion Sch. Dist., 132 F.3d 902, 906 (3d Cir. 1997). Additionally, a court need not “assume that a . . . plaintiff can prove facts that the . . . plaintiff has not alleged.” Associated Gen. Contractors of Cal. v. California State Council of Carpenters, 459 U.S. 519, 526 (1983). As the Supreme Court held in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), in order to state a valid cause of action, a plaintiff must provide some factual grounds for relief which “requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of actions will not do.” Id. at 555. “Factual allegations must be enough to raise a right to relief above the speculative level.” Id.
In keeping with the principles of Twombly, the Supreme Court has underscored that a trial court must assess whether a complaint states facts upon which relief can be granted when ruling on a motion to dismiss. In Ashcroft v. Iqbal, 556 U.S. 662 (2009), the Supreme Court held that, when considering a motion to dismiss, a court should “begin by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth.” Id. at 679. According to the Supreme Court, “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Id. at 678. Rather, in conducting a review of the adequacy of a complaint, the Supreme Court has advised trial courts that they must:
[B]egin by identifying pleadings that because they are no more than conclusions are not entitled to the assumption of truth. While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations. When 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. at 679.
Thus, following Twombly and Iqbal, a well-pleaded complaint must contain more than mere legal labels and conclusions; it must recite factual allegations sufficient to raise the plaintiff's claimed right to relief beyond the level of mere speculation. As the United States Court of Appeals for the Third Circuit has stated:
[A]fter Iqbal, when presented with a motion to dismiss for failure to state a claim, district courts should conduct a two-part analysis. First, the factual and legal elements of a claim should be separated. The District Court must accept all of the complaint's well-pleaded facts as true, but may disregard any legal conclusions. Second, a District Court must then determine whether the facts alleged in the complaint are sufficient to show that the plaintiff has a “plausible claim for relief.” In other words, a complaint must do more than allege the plaintiff's entitlement to relief. A complaint has to “show” such an entitlement with its facts.Fowler, 578 F.3d at 210-11.
As the Court of Appeals has observed:
The Supreme Court in Twombly set forth the “plausibility” standard for overcoming a motion to dismiss and refined this approach in Iqbal. The plausibility standard requires the complaint to allege “enough facts to state a claim to relief that is plausible on its face.” Twombly, 550 U.S. at 570, 127 S.Ct. 1955. A complaint satisfies the plausibility standard when the factual pleadings “allow[ ] the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 129 S.Ct. at 1949 (citing Twombly, 550 U.S. at 556, 127 S.Ct. 1955). This standard requires showing “more than a sheer possibility that a defendant has acted unlawfully.” Id. A complaint which pleads facts “merely consistent with” a defendant's liability, [ ] “stops short of the line between possibility and plausibility of ‘entitlement of relief.'”Burtch v. Milberg Factors, Inc., 662 F.3d 212, 220-21 (3d Cir. 2011), cert. denied, 132 S.Ct. 1861 (2012).
In practice, consideration of the legal sufficiency of a complaint entails a three-step analysis:
First, the court must “tak[e] note of the elements a plaintiff must plead to state a claim.” Iqbal, 129 S.Ct. at 1947. Second, the court should
identify allegations that, “because they are no more than conclusions, are not entitled to the assumption of truth.” Id. at 1950. Finally, “where there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement for relief.”Santiago v. Warminster Twp., 629 F.3d 121, 130 (3d Cir. 2010) (quoting Iqbal, 129 S.Ct. at 1950).
In considering a motion to dismiss, the court generally relies on the complaint, attached exhibits, and matters of public record. Sands v. McCormick, 502 F.3d 263, 268 (3d Cir. 2007). The court may also consider “undisputedly authentic document[s] that a defendant attached as an exhibit to a motion to dismiss if the plaintiff's claims are based on the [attached] documents.” Pension Benefit Guar. Corp. v. White Consol. Indus., 998 F.2d 1192, 1196 (3d Cir. 1993). Moreover, “documents whose contents are alleged in the complaint and whose authenticity no party questions, but which are not physically attached to the pleading, may be considered.” Pryor v. Nat'l Collegiate Athletic Ass'n, 288 F.3d 548, 560 (3d Cir. 2002); see also U.S. Express Lines, Ltd. v. Higgins, 281 F.3d 382, 388 (3d Cir. 2002) (holding that “[a]lthough a district court may not consider matters extraneous to the pleadings, a document integral to or explicitly relied upon in the complaint may be considered without converting the motion to dismiss in one for summary judgment”). However, the court may not rely on other parts of the record in determining a motion to dismiss, or when determining whether a proposed amended complaint is futile because it fails to state a claim upon which relief may be granted. Jordan v. Fox, Rothschild, O'Brien & Frankel, 20 F.3d 1250, 1261 (3d Cir. 1994).
B. The Defendant Mid-State Forestry Equipment, LLC's Motion to Dismiss Counts I, III, and IV Of Plaintiff's Amended Complaint Should Be Granted.
In its motion to dismiss, Mid-State argues that the Court should dismiss Counts I, III and IV of the plaintiff's amended complaint. It avers that Count I for breach of contract is displaced by its claims for breach of implied warranty under Count II and thus should be dismissed as duplicative. Mid-State further argues that the plaintiff's claims for property damage sound only in warranty, not in tort, and thus Counts III and IV for negligence and strict liability fail to state a claim for which relief can be granted. For the reasons set forth below, we agree with the defendant and recommend Counts I, III, and IV of the plaintiff's amended complaint against Mid-State be dismissed.
1. Count I for Breach of Contract is Duplicative of Count II and Has Been Conceded by the Plaintiff
Mid-State first argues that the plaintiff's breach of contract claim is completely subsumed within its claims for breach of warranty, and thus is barred by the principles of construction of the UCC, specifically UCC 1-103 which states, “[u]nless displaced by the particular provisions of this Act, the principles of law and equity, including the law merchant and the law relative to capacity to contract, principal and agent, estoppel, fraud, misrepresentation, duress, coercion, mistake, bankruptcy, or other validating or invalidating cause shall supplement its provisions.” U.C.C. § 1-103.
The Third Circuit Court of Appeals has held that, as a general rule, “the UCC does not displace the common law of tort as it affects parties in their commercial dealings except insofar as reliance on the common law would thwart the purposes of the Code.” New Jersey Bank, N. A. v. Bradford Sec. Operations, Inc., 690 F.2d 339, 345-46 (3d Cir. 1982). Mid-State points us to multiple cases in which courts in our circuit have found common law breach of contract claims displaced by UCC provisions where the contract claims rest on the same allegations as the warranty claims and there is no allegation of the existence of a contractual obligation apart from the warranties; for example, where, like in this case, the only breach alleged is the provision of a defective product. See e.g. Pansini v. Trane Co., No. CV 17-3948, 2019 WL 2409740 at *2 (E.D. Pa. June 7, 2019); Cooper-Booth Transportation Co., L.P. v. Daimler Trucks of N. Am., LLC, No. 5:17-CV-3884, 2018 WL 1940527, at *4 (E.D. Pa. Apr. 24, 2018); Pro-Spec Painting, Inc. v. Sherwin-Williams Co., No. CV 16-2373 (JBS/AMD), 2017 WL 2106123, at *6 (D.N.J. May 15, 2017); Baynes v. George E. Mason Funeral Home, Inc., No. 3:09-CV-153, 2011 WL 2181469, at *9 (W.D. Pa. June 2, 2011).
Not only do we agree that the plaintiff's claim for breach of contract is displaced by the breach of warranty claims under the UCC, the plaintiff also has not disputed this portion of the defendant's motion in its reply brief. As the failure to brief an opposition to portions of a motion to dismiss can result in a presumed waiver of that claim, see, e.g. Jacobs v. Mayorkas, No. CV 21-0165, 2021 WL 1979436, at *1 (E.D. Pa. May 18, 2021) (“As for the Acting Chief of Staff position, Plaintiff waives this claim by failing to respond to Defendant's arguments that it is untimely and unexhausted”); Cook v. W. Homestead Police Dep't, 2017 WL 1550190, at *3 (W.D. Pa. May 1, 2017) (“Plaintiffs' failure to respond at all to [Defendants] arguments for dismissal . . . will be read as a concession of those arguments, if not a waiver of those issues”); Celestial Cmty. Dev. Corp. v. City of Phila., 901 F.Supp.2d 566, 578 (E.D. Pa. 2012) (“To put it simply: plaintiffs who fail to brief their opposition to portions of motions to dismiss do so at the risk of having those parts of the motions to dismiss granted as uncontested”), we find that the plaintiff has conceded this argument by failing to respond to it in its reply brief. Accordingly, we recommend that Count I for breach of contract be dismissed.
2. Counts III and IV for Negligence and Strict Liability Are Barred By the Economic Loss Doctrine
Mid-State next argues that the plaintiff has failed to state tort claims for negligence and strict liability because, as the plaintiff has only alleged damage to the property itself, its only cause of action sounds in warranty. Under Pennsylvania law, the economic loss doctrine “‘prohibits plaintiffs from recovering in tort economic losses to which their entitlement flows only from a contract.'” Werwinski v. Ford Motor Co., 286 F.3d 661, 671 (3d Cir. 2002) (quoting Duquesne Light Co. v. Westinghouse Elec. Corp., 66 F.3d 604, 618 (3d Cir. 1995)). It is “designed to . . . establish clear boundaries between tort and contract law.” Id. at 680. Accordingly, where a “plaintiff's only alleged damage is a diminution in the value of a product plaintiff has purchased, Pennsylvania law says that plaintiff's redress comes from the law of contract, not the law of tort.” Martin v. Ford Motor Co., 765 F.Supp.2d 673, 684 (E.D. Pa. 2011) (citation omitted).
As the plaintiff has pointed out, the Pennsylvania Supreme Court has adopted a “reasoned approach” to the economic loss doctrine. Recognizing that “Pennsylvania has long recognized that purely economic losses are recoverable in a variety of tort actions, ” Bilt-Rite Contractors, Inc. v. The Architectural Studio, 866 A.2d 270, 288 (Pa. 2005), the Pennsylvania approach turns not on whether the damages sought are purely economic, but rather, “the source of the duty plaintiff claims the defendant owed.” Id. On this score:
[T]he question of whether the plaintiff may maintain an action in tort for purely economic loss turns on the determination of the source of the duty plaintiff claims the defendant owed. A breach of a duty which arises under the provisions of a contract between the parties must be redressed under contract, and a tort action will not lie. A breach of duty arising independently of any contract duties between the parties, however, may support a tort action.Dittman v. UPMC, 649 Pa. 496, 522 (Pa. 2018) (quoting Bilt-Rite at 287-88).
The plaintiff points us to several cases in our circuit where courts have held that a common law duty existed separate from the contract and thus the claims in tort were not barred by the economic loss doctrine. For example, in Amig v. Cty. Of Juniata, 432 F.Supp.3d 481 (M.D. Pa. 2020), this Court applied Pennsylvania's reasoned approach to the economic loss doctrine in a case involving an inmate who suffered discipline after a defective drug test incorrectly identified her urine as positive for suboxone and methamphetamines. The District Court summarized, “the central question in the application of the economic loss doctrine under Dittman now seems to be whether a duty between the parties was created by a contract, as opposed to in tort.” Amig, 432 F.Supp.3d at 488. The court held:
There is no contract whatsoever alleged between Plaintiff and [Defendant]. Plaintiff did not purchase the allegedly defective product from [Defendant], nor are there allegations of any agreement between the two parties. Accordingly, Plaintiff may turn to tort remedies to recover for her harms and, under Dittman, we find that Plaintiff's claim is not barred by the economic loss doctrine.Id. at 488-89. Similarly, in In re Wawa, Inc. Data Security Litigation, No. CV 19-6019, 2021 WL 1818494, at *4 (E.D. Pa. May 6, 2021), a data security incident resulted in hackers obtaining customer payment card information from Wawa's point-of-sale systems and effected financial institutions sued Wawa for damages arising from the notification, investigation and cancelling of customer payment cards. Although Wawa argued that any losses resulting from the data breach raised a contractual issue, and thus tort liability was barred under the economic loss doctrine, the court found that there existed an independent duty on companies to reasonably secure their payment systems. Notably in this case, the plaintiffs had not asserted any claim for breach of contract, and they sought, “economic damages via their negligence claim based on their allegations that Wawa violated a duty to protect sensitive payment card information that was independent of any potential contractual relationship that existed.” In re Wawa, Inc. Data Sec. Litig., No. CV 19-6019, 2021 WL 1818494, at *5 (E.D. Pa. May 6, 2021).
Here, as we construe it the plaintiff's amended complaint does not assert any recognized duty on Mid-State beyond the warranties owed in any contract for the sale of goods. The allegations in the plaintiff's complaint demonstrate that, not only is the plaintiff seeking only economic damages for “damages to Krompasky's property” (Doc. 11, ¶ 40, 49), but any breach of duty alleged by the plaintiff arises under the contract for the sale of the skidder. The plaintiff's assertion in its reply that Mid-State had a “duty of care to sell the skidder free from defective condition, ” (Doc 16-1, at 6), a duty to provide a safe product to its consumers, (Id. at 8), and a duty to exercise reasonable care in inspecting and servicing the skidder, (Id.), are encompassed by Mid-State's contractual duties under the implied warranty of merchantability and the implied warranty of fitness for a particular purpose under 13 PA. C.S.A. ¶¶ 2-314(c), and 2-315. And the plaintiff's argument that “the sale of the skidder, and the contractual relationship that was created there, is merely the vehicle, or mechanism, which established the relationship between the parties, during which the tort was committed, ” is not supported by law or by the plaintiff's complaint, which alleges four independent causes of action based on the contract between the parties. Since, “[a] breach of a duty which arises under the provisions of a contract between the parties must be redressed under contract, ” Dittman at 522, we recommend the defendant Mid-State's motion to dismiss Counts III and IV of the plaintiff's amended complaint be granted.
C. The Defendant Tidewater Equipment's Motion to Dismiss Should Be Denied
Defendant Tidewater has also submitted a motion to dismiss Counts V and VI of the plaintiff's amended complaint alleging both that the plaintiff has not pled facts sufficient to state a claim for negligence and strict liability and, alternatively, that these claims in tort fail under the economic loss doctrine. Tidewater also argues that the amended complaint should be dismissed in its entirety because the plaintiff failed to join the manufacturer of the skidder, Tigercat, as a necessary party to the litigation. For the reasons set forth below, we recommend Tidewater's motion to dismiss be denied.
1. The Plaintiff's Has Stated A Claim Against Tidewater That Is Plausible On Its Face.
The plaintiff has alleged claims of negligence and strict liability against Tidewater for repairs made to the skidder prior to its sale to Mid-State. In its motion to dismiss, Tidewater argues that the plaintiff has not pled facts sufficient to state a claim for negligence or strict liability because the amended complaint does not allege exactly what work Tidewater performed or whether there is any causal relationship to establish a claim for negligence. They also argue that the strict liability claim fails because the amended complaint does not allege any manufacturing or design defect, but rather claims the fire was a result of improper service work performed on the skidder.
As to the negligence claim, as a federal court exercising diversity jurisdiction in this case, we are obliged to apply the substantive law of Pennsylvania to this dispute. Chamberlain v. Giampapa, 210 F.3d 154, 158 (3d. Cir. 2000). Under Pennsylvania law, the plaintiff states a negligence claim against the defendant only if the plaintiff presents facts which establish all of the elements for a negligence cause of action, which requires proof of the following four essential elements as part of any claim: (1) a duty on the part of the defendant to conform to a certain standard of conduct with respect to the plaintiff; (2) a breach of that duty by the defendant; (3) a causal connection between the defendant's conduct and the injury suffered by the plaintiff; and (4) actual loss or damage suffered by the plaintiff. Schmoyer by Schmoyer v. Mexico Forge, 437 Pa.Super. 159, 649 A.2d 705, 707 (Pa. Super. 1994).
Accepting all allegations in the complaint as true and construing all reasonable inferences in the light most favorable to the plaintiff, Jordan, 20 F.3d at 1261, we find that the plaintiff has adequately stated a claim of negligence in its amended complaint. The plaintiff's amended complaint states that both Tidewater and Mid-State separately performed service and/or repair work on the skidder prior to Krompasky ultimately purchasing the skidder from Mid-State. (Doc. 11, ¶¶ 9-11). A fire broke out within the skidder on January 30, 2020, and an investigation revealed the fire occurred due to an oil leak which resulted from improper service work performed on the skidder. (Doc. 11, ¶¶ 13-15). As a result of the fire, Krompasky sustained significant damage to his property. (Doc 11, ¶ 16).
These facts as alleged sufficiently support the plaintiff's claim of negligence against Tidewater at this stage of the litigation. First, it is not necessary in the pleading stage that the plaintiff be able to show exactly what repair work to the vehicle caused the fire as the defendant asserts. “[A] complaint attacked by a . . . motion to dismiss does not need detailed factual allegations.” Marques v. Colvin, No. 3:16-CV-04961 (BRM), 2021 WL 1220994, at *4 (D.N.J. Mar. 31, 2021) (quoting Twombly at 555). The plaintiff need only allege enough facts “to raise a right to relief above the speculative level.” Twombly at 555. Thus, at this stage, it is enough to state that the fire resulted from repair work and that Tidewater performed repair work on the vehicle prior to selling it to Mid-State. Further, the plaintiff need not prove which of the defendants performed the repair work that allegedly resulted in the fire. As the plaintiff points out, it is entitled to plead alternative theories of liability and relief at the pleadings stage of litigation. As this Court has explained:
[P]arties may plead for relief under alternative theories. Pleadings under alternative theories may be plausible, and thus sufficient to withstand a motion to dismiss, even if one or both theories of recovery both ultimately fail, either because the ultimate fact-finder is unconvinced that either theory has been proven or because the proof of one theory necessarily excludes recovery under the alternative theory. Such alternative pleadings are common, encouraged, and employed as a matter of general practice in modern civil litigation.Forrester Lincoln Mercury, Inc. v. Ford Motor Co., No. 1:11-CV-1136, 2012 WL 1642760, at *6 (M.D. Pa. May 10, 2012). Thus, at this stage, it is sufficient for the plaintiff to plead that the allegedly negligent service performed by either Tidewater or Mid-State caused the fire.
We also find that the plaintiff has adequately stated a claim for strict liability against Tidewater. As this Court has summarized:
The doctrine of strict products liability has been developed over time to protect consumers from the dangers inherent in a modern capitalist society, and in Webb v. Zern, 220 A.2d 853 (Pa. 1966), Section 402A of the Restatement (Second) of Torts was adopted as the law of strict products liability in Pennsylvania. Section 402A, providing such consumer protections, states in part:
(1) One who sells any product in a defective condition unreasonably dangerous to the user or consumer or to his property is subject to liability for physical harm thereby caused to the ultimate user or consumer, or to his property, if (a) the seller is engaged in the business of selling such a product, and (b) it is expected to and does reach the user
or consumer without substantial change in the condition in which it is sold.
(2) The rule stated in Subsection (1) applies although (a) the seller has exercised all possible care in the preparation and sale of his product, and (b) the user or consumer has not bought the product from or entered into any contractual relation with the seller.
Restatement (Second) of Torts, § 402A. Noticeably, at the heart of a Section 402A claim resides a requirement that the defendant has sold a product that is defective. See Francioni v. Gibsonia Truck Corp., 372 A.2d 736, 739 (Pa. 1977) (“[e]ngagement in the business of ‘selling' (leasing) products is, of course, a basic requirement of the rule”).Fala v. Pennsylvania CVS Pharmacy, LLC, No. CV 3:19-1132, 2021 WL 4478242, at *3 (M.D. Pa. Sept. 30, 2021). The plaintiff has sufficiently alleged that Tidewater is engaged in the business of selling skidders and that it sold a product that was defective. Under one plausible theory of the plaintiff's amended complaint, the plaintiff alleges that Defendant Tidewater sold a defective and unreasonably dangerous skidder to Mid-State when it sold the skidder after making repairs which would ultimately cause the oil leak that led to the fire. Further, the complaint alleges that the defective condition in which Tidewater sold the skidder to Mid-State was unknowable, and thus Tidewater knew or should have known that Mid-State would sell the skidder to the consumer without substantial change in the condition in which it was sold. At this early stage of the litigation, these averments are enough to raise the plaintiff's claimed right to relief beyond the level of mere speculation and adequately state a claim of strict liability.
Accordingly, at this early stage of the litigation where we must simply assess the sufficiency of the pleadings, we find the plaintiff's amended complaint has stated facts which raise its right to relief above a speculative level as to its negligence and strict liability claims against Tidewater.
2. The Plaintiff's Tort Claims Are Not Barred By The Economic Loss Doctrine.
Further, the plaintiff's tort claims against Tidewater are not barred by the economic loss doctrine under Pennsylvania law. As we previously discussed in the context of Mid-State's motion to dismiss, “[a] breach of a duty which arises under the provisions of a contract between the parties must be redressed under contract, and a tort action will not lie. A breach of duty arising independently of any contract duties between the parties, however, may support a tort action.” Dittman, 649 Pa. at 522. Although the plaintiff's amended complaint does not allege that any contractual agreement or privity existed between Tidewater and Krompasky, we acknowledge that, “recovery for breach of implied warranty in Pennsylvania is not dependant [sic] on the existence of privity of contract.” Steffy v. Home Depot, Inc., No. 1:06-CV-02227, 2009 WL 1444276, at *3 (M.D. Pa. May 21, 2009) (citing Goodman v. PPG Industries, Inc., 849 A.2d 1239, 1245 (Pa.Super.Ct.2004) (“Specifically, our Supreme Court has long held that, for breach of the implied warranty of merchantability, anyone injured by the defective product may sue, and anyone in the distributive chain may be sued”); Kassab v. Central Soya, 432 Pa. 217, 246 A.2d 848 (Pa.1968); Spagnol Enterprises Inc. v. Digital Equipment Corp., 390 Pa.Super. 372, 568 A.2d 948, 952 (Pa.Super.Ct.1989)). Thus, the fact that the plaintiff did not contract directly with Tidewater for the sale of the skidder does not necessarily preclude the plaintiff from pursuing a cause of action against Tidewater for the same implied warranties under the contract for which it has alleged contractual claims against Mid-State, since Tidewater is directly in the distribution chain which led to Krompasky's purchase.
Notably, however, the plaintiff has not alleged any such contractual claims against Tidewater and we decline to read any additional causes of action into the plaintiff's amended complaint. Thus, although we find the plaintiff may only seek recovery under contract against Mid-State, the plaintiff alleges only causes of action in tort against Tidewater. This fact pattern is more in line with the holdings in Amig and Wawa, where no contract existed between the parties, or where the plaintiff had not alleged any cause of action in contract against the defendant. On this score, dismissing the plaintiff's tort claims against Tidewater under the economic loss doctrine would effectively deprive the plaintiff of any claim against Tidewater, an outcome which is not contemplated by the economic loss doctrine as applied in Pennsylvania, which seeks only to “establish clear boundaries between tort and contract law, ” Werwinski at 671, but “recognize[s] that purely economic losses are recoverable in a variety of tort actions, ” Bilt-Rite at 288.
Thus, although remedies under warranty may have been available to the plaintiff, since the plaintiff has not alleged any such contractual causes of action against Tidewater, Tidewater's motion to dismiss Counts V and VI of the plaintiff's amended complaint under the economic loss doctrine should be denied.
3. The Manufacturer Of The Skidder, Tigercat, Is Not A Necessary Party
Finally, Tidewater has moved to dismiss the plaintiff's claims on the grounds that it has failed to name the manufacturer of the skidder, Tigercat, a necessary and indispensable party under Rule 19 of the Federal Rules of Civil Procedure, as a defendant. Rule 12(b)(7) of the Federal Rules of Civil Procedure provides that a complaint should be dismissed for “failure to join a party under Rule 19.” Fed. R.Civ. P. 12(b)(7). A motion to dismiss based the alleged failure to join an indispensable party under Rule 19 necessarily involves both legal analysis and a careful, searching evaluation of the factual circumstances in a case. Accordingly:
In reviewing a Rule 12(b)(7) motion to dismiss, the court must accept all factual allegations in the complaint as true and draw all reasonable inferences in favor of the non-moving party. Pittsburgh Logistics Sys., Inc. v. C.R. England, Inc., 669 F.Supp.2d 613, 618 (W.D. Pa. 2009). A court making a Rule 19 determination may consider evidence outside the pleadings. Id. (citing Jurimex Kommerz Transit G.M.B.H. v. Case Corp., 201 F.R.D. 337, 339-40 (D. Del. 2001)). The moving party bears the burden of showing that a nonparty is both necessary and indispensable. Pittsburgh Logistics, 669 F.Supp.2d at 618 (citing Develcom Funding, LLC v. Am. Atl. Co., Civ. A. No. 09-1839, 2009 WL 2923064, *2 (D.N.J. Sept. 9, 2009)).State Auto. Mut. Ins. Co. v. Frameworkers.com, Inc., No. CIV.A. 11-3271, 2011 WL 3204838, at *2 (E.D. Pa. July 27, 2011).
With respect to the fact-specific inquiry called for by Rule 19, that rule, in turn, defines parties who must be joined in litigation in the following terms:
Under Rule 19(a), the joinder of parties is compulsory or “necessary” if their joinder is “feasible.” Specifically, the rule states in material part:
A person who is subject to service of process and whose joinder will not deprive the court of jurisdiction over the subject matter of the action shall be joined as a party in the action if (1) in the person's absence complete relief cannot be accorded among those already parties, or (2) the person claims an interest relating to the subject of the action and is so situated that the disposition of the action in the person's absence may (i) as a practical matter impair or impede the person's ability to protect that interest or (ii) leave any of the persons already parties subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations by reason of the claimed interest.
Courts treat clauses (1) and (2) in the disjunctive just as the rule phrases them. See Koppers, 158 F.3d at 175 (“As Rule 19(a) is stated in the disjunctive, if either subsection is satisfied, the absent party is a necessary party that should be joined if possible.”). Additionally, ..., a holding that joinder is compulsory under Rule 19(a) is a necessary predicate to a district court's discretionary determination under Rule 19(b) that it must dismiss a case because joinder is not feasible (i.e., will defeat diversity) and the party is indispensable to the just resolution of the controversy. See Janney Montgomery Scott, 11 F.3d at 405.Gen. Refractories Co. v. First State Ins. Co., 500 F.3d 306, 312-13 (3d Cir. 2007).
Yet, while Rule 19's definition of “necessary” parties defines the first step in any analysis of a motion to dismiss for failure to join “indispensable parties, ” there is a necessary second step to this analysis. In conducting this analysis:
[W]e first must determine whether the absent [non-joined parties] should be joined as “necessary” parties under Rule 19(a). If they should be joined, but their joinder is not feasible inasmuch as it would defeat diversity of citizenship ..., we next must determine whether the absent parties are “indispensable” under Rule 19(b). Should we answer this question in the affirmative, the action cannot go forward. Janney Montgomery Scott, 11 F.3d at 404 (citing Bank of Am. Nat'l Trust & Sav. Ass'n v. Hotel Rittenhouse Assocs., 844 F.2d 1050, 1053-54 (3d Cir. 1988)).
Put another way, [only] a finding of indispensability under Rule 19(b) necessitates dismissal for lack of subject matter jurisdiction. Under Rule 19(b), the four factors listed, though not exhaustive, are “the most important considerations” in determining whether a party is indispensable. Gardiner v. V.I. Water & Power Auth., 145 F.3d 635, 640 (3d Cir. 1998). These factors are: first, to what extent a judgment rendered in the person's absence might be prejudicial to the person or those already parties; second, the extent to which, by protective provisions in the judgment, by the shaping of relief, or other measures, the prejudice can be lessened or avoided; third, whether a judgment rendered in the person's absence will be adequate; fourth, whether the plaintiff will have an adequate remedy if the action is dismissed for non joinder. Fed.R.Civ.P. 19(b).Gen. Refractories Co., 500 F.3d at 312, 319.
These two related determinations regarding whether: first, joinder of party is “necessary” under Rule 19 and, second, whether that non-joined party is also “indispensable, ” compelling dismissal of an action, are governed by separate legal standards of review. Thus, to the extent that the court premises its decision on a Rule 19(a) determination that the absent party's joinder was “necessary, ” this conclusion of law is subject to plenary review. Janney Montgomery Scott, Inc. v. Shepard Niles, Inc., 11 F.3d 399, 404 (3d Cir. 1993). By contrast, the district court's Rule 19(b) determination that absent parties are indispensable, and dismissal is required because their joinder would destroy subject matter jurisdiction in diversity, rests in the sound discretion of the court and will be set aside only upon an abuse of discretion. Gen. Refractories Co., 500 F.3d at 312.
In our view, Tidewater errs when it suggests that the plaintiff's amended complaint should be dismissed for failure to join an indispensable party. At the outset, Tigercat is not necessary for the plaintiffs to be afforded full relief because it is the plaintiff's contention that the improper service work performed by Tidewater and/or Mid-State caused its injury. Tidewater alleges that, because Tigercat manufactured the ventilator, it will be impeded from protecting its interest if not joined in this case. However, in our view, the complaint does not allege that the ventilator was defective. It alleges that the ventilator was improperly repaired. Despite Tidewater's attempts to convert the plaintiff's theory in this case to one that alleges defective manufacture and design, Tigercat's interests would not be implicated in this case where the sole cause of loss alleged is one of improper service work performed by either Tidewater or Mid-State prior to their sale of the skidder. We are also not persuaded that Tidewater would be prejudiced by being forced to defend a product it did not manufacture or design. The plaintiff's theory of relief in this case requires a defense of the repair work performed on the skidder, which Tidewater is in a position to defend independently of the manufacturer. Thus, on the facts alleged in the amended complaint, Tigercat is not a necessary party to this action.
Further, even if we find Tigercat is a necessary party, the appropriate remedy is not dismissal of the case. “In determining whether a district court should have dismissed a case under Rule 19(b) for failure to join an indispensable party, we must make a preliminary determination that the non-joined party cannot be joined under Rule 19(a). Only if a party cannot be joined under Rule 19(a), does Rule 19(b) come into play.” Gardiner v. Virgin Islands Water & Power Auth., 145 F.3d 635, 640 (3d Cir. 1998) (citing Shetter v. Amerada Hess Corporation, 14 F.3d 934, 941 (3d Cir. 1994); Janney Montgomery Scott, Inc. v. Shepard Niles, Inc., 11 F.3d 399, 404 (3d Cir. 1993)). No. party argues that Tigercat cannot be joined to the instant action under Rule 19(a). Thus, even if we were to find that Tigercat is a necessary party to the litigation, the proper procedural step would not be to dismiss the action entirely. And, as the plaintiff suggests, if it is Tidewater's contention that the fire resulted from a manufacturing defect rather than improper service work, the most appropriate avenue would be for Tidewater to serve its own third-party complaint based on this theory. Thus, since we do not find Tigercat is a necessary and indispensable party that cannot be joined to this litigation, we recommend Tidewater's motion to dismiss the complaint on this score be denied.
III. Conclusion
Accordingly, for the foregoing reasons, IT IS RECOMMENDED THAT the defendant Mid-State's motion to dismiss Counts I, III, and IV of the amended complaint (Doc. 12), be GRANTED and that the defendant Tidewater's motion to dismiss Counts V and VI of the amended complaint be DENIED.
The parties are further placed on notice that pursuant to Local Rule 72.3:
Any party may object to a magistrate judge's proposed findings, recommendations or report addressing a motion or matter described in 28 U.S.C. § 636 (b)(1)(B) or making a recommendation for the disposition of a prisoner case or a habeas corpus petition within fourteen (14) days after being served with a copy thereof. Such party shall file with the clerk of court, and serve on the magistrate judge and all parties, written objections which shall specifically identify the portions of the proposed findings, recommendations or report to which objection is made and the basis for such objections. The briefing requirements set forth in Local Rule 72.2 shall apply. A judge shall make a de novo determination of those portions of the report or specified proposed findings or recommendations to which objection is made and may accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge. The judge, however, need conduct a new hearing only in his or her discretion or where required by law, and may consider the record developed before the magistrate judge, making his or her own determination on the basis of that record. The judge may also receive further evidence, recall witnesses or recommit the matter to the magistrate judge with instructions.