Bowen Eng'g Corp. v. Pac. Indem. Co.

• Decision Date: 07 July 2015
• Docket Number: No. 4:15CV32 RLW,4:15CV32 RLW
• Court: U.S. District Court — Eastern District of Missouri
• Parties: BOWEN ENGINEERING CORPORATION, et al., Plaintiffs, v. PACIFIC INDEMNITY CO., et al., Defendants.

BOWEN ENGINEERING CORPORATION, et al., Plaintiffs, v. PACIFIC INDEMNITY CO., et al., Defendants.

No. 4:15CV32 RLW

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MISSOURI EASTERN DIVISION

July 7, 2015

MEMORANDUM AND ORDER

This matter is before the Court on Third Party Defendant Walters Metal Fabrication, Inc.'s ("Walters") Motion to Dismiss Third Party Complaint (ECF No. 77). Also pending is Bowen Engineering Corporation's ("Bowen") Motion for Reconsideration (ECF No. 79). The motions are fully briefed and ready for disposition.

Background

This case stems from a biofuels construction project in Hugoton, Kansas. The "Hugoton Biomass Ethanol and Cogen Plant Project" was owned and operated by Abengoa Bioenergy Biomass of Kansas ("Abengoa") and Abener Teyma Hugoton, GP ("Abener"). (Bowen's First Amended Complaint ("FAC") ¶¶ 1,3, ECF No. 62) Abener also acted as the contractor on the project,¹ awarding two contracts to Defendant Scott Process Systems, Inc. ("SPSI") "for the supply, fabrication, assembly, and delivery of process pipe rack and equipment modules." (Notice of Removal Ex. 1 p. 13, ECF No. 1-1) To fulfill this contract, SPSI contracted with Walters "for supply, fabrication, assembly and delivery of the pipe rack and equipment modules, exclusive of piping supply and fabrication." (Id.) Walters then entered into an AssemblyServices Agreement with Bowen for "the final assembly of the pipe rack and equipment modules." (Id.) Bowen claims that Walters failed to pay it according to the terms of the Assembly Service Agreement and filed a mechanic's lien in the Stevens County District Court on November 5, 2013 pursuant to K.S.A. 60-1103. (Id. at p. 35) SPSI disputed Bowen's claim and subsequently filed a Release of Lien Bond, secured by Pacific Indemnity Co. ("Pacific"). (Id. at p. 48)

On June 16, 2014, Bowen filed a Petition for Damages and Foreclosure of Mechanic's Lien through Recovery against Lien Surety Bonds in Kansas state court against SPSI, Pacific, and Walters. (Id. at pp. 2-11) SPSI removed the action to the United States District Court for the District of Kansas on July 22, 2014. (Notice of Removal, ECF No. 1) SPSI and Pacific subsequently filed a Motion for Judgment on the Pleadings.² (Mot. to Dismiss, ECF No. 29) Walters settled with Bowen, and pursuant to the agreement, Walters assigned its claims against SPSI to Bowen. (Mot. for Extension of Time ¶ 2, ECF No. 55; Settlement Agreement, ECF No. 62-1) Bowen then filed its First Amended Complaint on December 9, 2014. (FAC, ECF No. 62) On December 23, 2014, Defendants SPSI and Pacific filed a third party complaint against Walters, seeking contractual indemnification, equitable indemnification, and offset amounts. (Third Party Compl., ECF No. 65) The complaint additionally alleges breach of contract relating to purchase orders and projects. (Id.) The District Court of Kansas granted Defendant's Motion for Judgment on the Pleadings on January 6, 2015. (Mem. and Order, ECF No. 66) The court also transferred the action to the Eastern District of Missouri pursuant to a forum selection clause in the Assembly Services Agreement. (Id. at pp. 8-15)

Defendant Walters' Motion to Dismiss

A complaint must be dismissed under Federal Rule 12(b)(6) for failure to state a claim upon which relief can be granted if the complaint fails to plead "enough facts to state a claim to relief that is plausible on its face." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007) (abrogating the "no set of facts" standard set forth in Conley v. Gibson, 355 U.S. 41, 45-46 (1957)). While the Court cautioned that the holding does not require a heightened fact pleading of specifics, "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." Id. at 555. In other words, "[f]actual allegations must be enough to raise a right to relief above the speculative level . . . ." Id. This standard "simply calls for enough fact to raise a reasonable expectation that discovery will reveal evidence of [the claim]." Id. at 556.

Courts must liberally construe the complaint in the light most favorable to the plaintiff and accept the factual allegations as true. See Id. at 555; see also Schaaf v. Residential Funding Corp., 517 F.3d 544, 549 (8th Cir. 2008) (stating that in a motion to dismiss, courts accept as true all factual allegations in the complaint); Eckert v. Titan Tire Corp., 514 F.3d 801, 806 (8th Cir. 2008) (explaining that courts should liberally construe the complaint in the light most favorable to the plaintiff). Further a court should not dismiss the complaint simply because the court is doubtful that the plaintiff will be able to prove all of the necessary factual allegations. Twombly, 550 U.S. at 556 (citations omitted). However, "[w]here the allegations show on the face of the complaint there is some insuperable bar to relief, dismissal under Rule 12(b)(6) is appropriate." Benton v. Merrill Lynch & Co., 524 F.3d 866, 870 (8th Cir. 2008) (citation omitted). Courts "'are not bound to accept as true a legal conclusion couched as a factual allegation.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 555).When considering a motion to dismiss, a court can "begin by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth." Id. at 679. Legal conclusions must be supported by factual allegations to survive a motion to dismiss. Id.

Here, third party Defendant Walters argues that SPSI and Pacific failed to state a claim for contractual indemnification or equitable indemnification. Walters does not address the other counts in the Third Party Complaint, and Counts III through VIII remain pending. SPSI and Pacific filed a response in opposition asserting that their Third Party Complaint states a claim for indemnification. Walters did not file a reply brief, and the time for doing so has expired.

Walters first asserts that Defendants are unable to state a claim for contractual indemnification because the agreement upon which Defendants rely is between SPSI and Abener, not SPSI and Walters. The relevant provision in the Contract for Modularization/Racks between SPSI and Abener states:

If, at any time, Abener Teyma Hugoton shall receive notice of a claim against Contractor for which a lien of any type could be established or for which, if valid, Abener Teyma Hugoton, its partners, Owner, their respective employees and/or their sureties might become liable, and if such claim in any way relates to, or arises out of, the Goods and/or Supply thereof . . .

. . . [and] [i]n the event that any such lien referred to in the preceding paragraph shall be filed or recorded, or in the event Abener Teyma Hugoton, its partners, Owner, their respective employees and/or their sureties might become directly liable for a claim . . . . [and] if Contractor shall have been fully paid, Contractor shall pay the amount of such deficiency, or the amount required to satisfy such lien, levy, garnishment or attachment or to pay such claim and Abener Teyma Hugoton's cost and expenses in connection therewith to Abener Teyma Hugoton on demand.

(Third Party Compl., Ex. 1 § 3.15, ECF No. 65-1)

SPSI and Pacific maintain that the Purchase Order Agreement between Walters and SPSI obligates Walters to pay any lien because the Purchase Order Agreement incorporates the aforementioned contract provision. The Purchase Order Agreement states that "[b]oth Partiesagree that the terms and conditions of the Prime Contracts apply to each Party's scope of work. In the event of conflict between any of the Prime Contract Terms and this Agreement, this Agreement shall take priority." (Third Party Compl., Ex. 2 § 4, ECF No. 65-2) However, Walters argues that § 3.15 does not refer to the scope of work and only applies to claims or liens for which Abener may become liable.

The Court finds that, at this stage of the litigation, SPSI and Pacific have stated a plausible claim for relief. While Walters argues that only the provisions defining scope³ were incorporated in the Purchase Order Agreement, the Defendants assert that the incorporation clause encompasses all "terms and conditions" and applies to Walters' scope of work, not just provision defining "scope." Walters does not contradict this interpretation in a reply brief. Without undergoing a complete contract analysis, the Court finds that, at the motion to dismiss stage, to interpret otherwise could render the "terms and conditions of the Prime Contract" language meaningless. See Women's Care Specialists, LLC v. Troupin, 408 S.W.3d 310, 319 (Mo. Ct. App. 2013) (citations omitted) (noting that courts must give effect to the plain and ordinary meaning of the words in a contract, consider the document as a whole, and construe each term to avoid an effect that renders other terms meaningless). Courts prefer construction that gives a reasonable meaning to all of the provisions of an agreement over one that leaves some provisions without "'function or sense.'" Id. (quoting Stacey v. Redford, 226 S.W.3d 913, 917 (Mo. Ct. App. 2007)).

Here, Defendants SPSI and Pacific have alleged that the terms and conditions obligate Walters to indemnify SPSI if Bowen prevails on its claim for recovery of the lien. Theincorporation of § 3.15 indicates that Walters, having been fully paid, could be responsible for the lien amount. Thus, the Court finds that dismissal of Defendants' contractual indemnity claim is not warranted.

With regard to equitable indemnification, the Court finds that Defendants have stated a claim sufficient to survive Walters' motion to dismiss. In addition to contractual indemnity, Missouri recognizes common law indemnity. Beeler v. Martin, 306 S.W.3d 108, 111 (Mo. Ct. App. 2010). Equitable indemnification requires a showing of: "(1) 'the discharge of an obligation by [Defenda...