Airborne Am., Inc. v. Kenway Composites

• Decision Date: 16 August 2021
• Docket Number: Case No.: 20-CV-2208 JLS (WVG)
• Citation: 554 F.Supp.3d 1066
• Parties: AIRBORNE AMERICA, INC., a Nevada corporation, Plaintiff, v. KENWAY COMPOSITES, a Maine corporation; CPK Manufacturing, LLC, a Delaware limited liability company; Kenway Corporation, a Maine corporation; Creative Pultrusions, a Pennsylvania corporation; Hill & Smith Holdings, PLC, a United Kingdom public limited company; Kenneth G. Priest II, an individual; Susan Priest, an individual; Michael Priest, an individual; Terry Priest, an individual; Ian Kopp, an individual; Gemini Insurance Company, a Delaware corporation; Berkley Insurance Company, a Delaware corporation; and Does 1-100, inclusive, Defendants.
• Court: U.S. District Court — Southern District of California

554 F.Supp.3d 1066

AIRBORNE AMERICA, INC., a Nevada corporation, Plaintiff,

v.KENWAY COMPOSITES, a Maine corporation; CPK Manufacturing, LLC, a Delaware limited liability company; Kenway Corporation, a Maine corporation; Creative Pultrusions, a Pennsylvania corporation; Hill & Smith Holdings, PLC, a United Kingdom public limited company; Kenneth G. Priest II, an individual; Susan Priest, an individual; Michael Priest, an individual; Terry Priest, an individual; Ian Kopp, an individual; Gemini Insurance Company, a Delaware corporation; Berkley Insurance Company, a Delaware corporation; and Does 1-100, inclusive, Defendants.

Case No.: 20-CV-2208 JLS (WVG)

United States District Court, S.D. California.

Signed August 16, 2021

Bryan Charles Vess, Bryan C. Vess APC, San Diego, CA, for Plaintiff.

Anthony Scott Chalifoux, Balestreri Potocki & Holmes, APC, San Diego, CA, for Defendants Kenway Composites, CPK Manufacturing, LLC, Creative Pultrusions, Hill & Smith Holdings, PLC.

Anthony Scott Chalifoux, Balestreri Potocki & Holmes, APC, San Diego, CA, Kirk Retz, Retz & Aldover, LLP, Palos Verdes Estates, CA, for Defendants Kenway Corporation, Kennth G. Priest, II, Susan Priest, Michael Priest, Ian Kopp.

Kirk Retz, Retz & Aldover, LLP, Palos Verdes Estates, CA, for Defendant Terry Priest.

ORDER GRANTING DEFENDANTS GEMINI INSURANCE COMPANY AND BERKLEY INSURANCE COMPANY'S MOTION TO DISMISS PLAINTIFF'S COMPLAINT

(ECF No. 8)

Janis L. Sammartino, United States District Judge

Presently before the Court is Defendants Gemini Insurance Company ("Gemini") and Berkley Insurance Company's ("Berkley") (collectively, "Defendants") Motion to Dismiss Plaintiff's Complaint ("Mot.," ECF No. 8), as well as Plaintiff Airborne America, Inc.’s ("Plaintiff") Opposition thereto ("Opp'n," ECF No. 10) and Defendants’ Reply in support thereof ("Reply," ECF No. 13). The Court took the matter under submission without oral argument pursuant to Civil Local Rule 7.1(d)(1). See ECF No. 15. Having carefully reviewed Plaintiff's Complaint ("Compl.," ECF No. 1-4), the Parties’ arguments, and the law, the Court GRANTS Defendants’ Motion.

BACKGROUND¹

This action arises out of Plaintiff's "catastrophic loss of a[n over $45,000,000] investment into a business that barely opened its doors before being forced to close in 2017." Compl. ¶ 1. Plaintiff invested in developing an indoor skydiving facility in downtown San Diego (the "Project"). Id. ¶ 3(a). Aerolab, LLC ("Aerolab") designed the Project, which consisted of two wind tunnels in a 10,000 square foot building. Id. ¶¶ 26–27. Each tunnel contained, among other things, a clear tube with a skydiving platform, a large fan, and four turning vanes designed to direct the air inside the tunnel and support the skydivers. Id. ¶¶ 27–30. The large fan had a 2,700-pound nose cone assembly, which was designed to smooth and direct the airflow. Id. ¶ 3 n.2. Aerolab hired numerous subcontractors to construct the Project, one being Kenway Corporation ("Kenway").² Id. ¶ 11. Gemini issued Kenway an insurance policy with a policy limit of $1,000,000. Id. ¶ 75; Mot. at 1. Berkley is Gemini's manager and is defending Kenway in a separate negligence action. Compl. ¶¶ 18, 35.

Kenway's responsibilities in the Project included manufacturing the turning vanes and the large fan's nose cone. Id. ¶¶ 30–31. Together, Aerolab and Kenway installed the turning vanes. Id. ¶ 32. On December 7, 2016, the turning vanes in Wind Tunnel One exploded, which shut down the Project for several months. Id. ¶¶ 32–33. Kenway allegedly admitted to Defendants that it should have continued to analyze the buckling of the turning vanes, and that the "buckling, combined with the inherent design flaw of the blind leading edge joint[, led] to the catastrophic failure." Id. ¶ 35 (emphasis omitted).

Following this incident, Kenway and its officers³ allegedly schemed to enrich themselves by selling Kenway's assets to Hill & Smith ("Hill") and its subsidiary, Creative Pultrusions ("Creative").⁴ Id. ¶¶ 36–37. As part of the asset purchase agreement, Hill and Creative would manufacture new turning vanes for the Project, while Kenway would retain liability for the turning vanes’ design. Id. ¶ 41. Additionally, Kenway would process the liability claim for the turning vane failure with Berkley. Id.

Plaintiff claims that Kenway "made a secret insurance claim to pay for replacement turning vanes and subsequently planned to secretly pocket the money." Id. ¶ 37. Mr. Kopp and Mr. Priest, officers of Kenway, allegedly swore under oath to Defendants that the turning vane incident was "the result of Kenway's (and no one else's) ‘errors and omissions.’ " Id. ¶ 45. Subsequently, Defendants paid Kenway $470,000 on its insurance claim related to the turning vane incident. See id. ¶ 46.

Kenway in turn planned to use the insurance payout to hire Creative on a fixed price contract to manufacture replacement turning vanes for the Project. Id. ¶¶ 41, 45–46; see also Mot. at 4. As a result of Defendants’ payment, Kenway released the remainder of the $1,000,000 policy, and Kenway excused Defendants from any further liability to Kenway related to the turning vane incident. Compl. ¶¶ 44, 47. Kenway allegedly further attempted to limit it and Defendants’ exposure for the turning vane incident by presenting Plaintiff with an agreement stating that Kenway would be released from any further claims resulting from the design or failure of the turning vanes. Id. ¶¶ 48, 51. The release stated, in part:

"[Plaintiff] acknowledges that Kenway Corporation is fulfilling all its warranty obligations associated with the Airborne San Diego original turning vane failure by its design, testing and supply of these modified replacement vanes at Kenway Corporation's costs. In exchange for the design, testing and supply of these replacement vanes, [Plaintiff] releases Kenway from any additional present or future claims, damages, or liabilities of any kind relating to the failure or to the design of the vanes."

Id. ¶ 51 (emphasis omitted).

Plaintiff claims that Defendants raised concerns to Kenway about the release because it was " ‘narrow’ and did not include ‘typical’ release language." Id. ¶ 53. But Kenway informed Defendants it desired to balance "thorough protection" against "provoking litigation." Id. ¶ 54. Kenway allegedly represented to Plaintiff that Defendants "w[ould] NOT allow [Kenway] to start the warranty replacement process without this documentation in place." Id. ¶ 55 (emphasis in original). On March 6, 2017, Plaintiff signed the release, allegedly without knowledge any company but Kenway would be working on the Project. Id. ¶ 57–58. On June 12, 2017, the Project experienced a further catastrophic setback. The nose cone in Tunnel One, designed and manufactured by Kenway and Aerolab, blew apart. Id. ¶¶ 60–61. Plaintiff alleges that the nose cone weighed three times its intended weight. Id. ¶ 60. This incident occurred "only days" after rebalancing work had been done in Tunnel One. Id. ¶ 64. According to Plaintiff, it would have been much more careful about the rebalancing had it known that Kenway had admitted to Defendants that "its design and manufacturing work on the [P]roject had been negligent." Id. ¶ 63.

The nose cone incident proved to be the Project's "knockout blow." Id. ¶ 66. Plaintiff learned it would cost an additional $4,500,000 to $7,000,000 to repair the damage. Id. By August 2017, Plaintiff closed its doors and defaulted on its loans. Id. ¶¶ 68–69.

Plaintiff filed this action in the Superior Court of California, County of San Diego, on September 21, 2020. See ECF No. 1 ("Not. of Removal") at 1. Plaintiff's Complaint alleges two claims against Defendants: (1) intentionally fraudulent transfer in violation of California Civil Code § 3439.10 and 14 Maine Revised Statutes § 3571 et seq. ; and (2) common-law fraudulent transfer.⁵ See generally Compl. On November 12, 2020, Kenway and Creative removed to this Court, based on diversity jurisdiction.⁶ See generally Not. of Removal. Defendant filed the instant Motion on December 7, 2020. See ECF No. 8.

LEGAL STANDARD

Federal Rule of Civil Procedure 12(b)(6) permits a party to raise by motion the defense that the complaint "fail[s] to state a claim upon which relief can be granted," generally referred to as a motion to dismiss. The Court evaluates whether a complaint states a cognizable legal theory and sufficient facts in light of Federal Rule of Civil Procedure 8(a), which requires a "short and plain statement of the claim showing that the pleader is entitled to relief." Although Rule 8 "does not require ‘detailed factual allegations,’ ... it [does] demand more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). In other words, "a plaintiff's obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly , 550 U.S. at 555, 127 S.Ct. 1955 (citing Papasan v. Allain , 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986) ). A complaint will not suffice "if it tenders ‘naked assertion[s]’ devoid of ‘further factual enhancement.’ " Iqbal , 556 U.S. at 677, 129 S.Ct. 1937 (citing Twombly , 550 U.S. at 557, 127 S.Ct. 1955 ).

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.’ " Id. (quoting Twombly , 550 U.S. at 570, 127 S.Ct. 1955 ); see also Fed. R. Civ. P. 12(b)(6). A claim is facially plausible when the facts pled "allow the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal , 556 U.S. at 677, 129 S.Ct. 1937 (citing Twombly , 550 U.S. at 556, 127 S.Ct. 1955 ). That is not to...