Cargill, Inc. v. Degesch Am., Inc., Civil Action No. 11–2036.

• Decision Date: 21 June 2012
• Docket Number: Civil Action No. 11–2036.
• Parties: CARGILL, INC., Cargill International SA, Amlin Corporate Insurance, Chartis Europe, HDI-Gerling NV, Minnetonka Insurance, and Tokio Marine & Nichido Fire, for and on behalf of all Subscribing Cargo Insurers, and The Steamship Mutual Underwriting Association (Bermuda) Limited v. DEGESCH AMERICA, INC., Detia Degesch GMBH, and D & D Holdings, Inc.
• Court: U.S. District Court — Eastern District of Louisiana

875 F.Supp.2d 667

CARGILL, INC., Cargill International SA, Amlin Corporate Insurance, Chartis Europe, HDI-Gerling NV, Minnetonka Insurance, and Tokio Marine & Nichido Fire, for and on behalf of all Subscribing Cargo Insurers, and The Steamship Mutual Underwriting Association (Bermuda) Limited

v.DEGESCH AMERICA, INC., Detia Degesch GMBH, and D & D Holdings, Inc.

Civil Action No. 11–2036.

United States District Court,

E.D. Louisiana.

June 21, 2012.

John F. Fay, Jr., Christina P. Fay, Craig R. Nelson, Fay, Nelson & Fay, LLC, New Orleans, LA, for Cargill, Inc., Cargill International SA, Amlin Corporate Insurance, Chartis Europe, HDI-gerling NV, Minnetonka Insurance, and Tokio Marine & Nichido Fire, for and on behalf of all Subscribing Cargo Insurers, and The Steamship Mutual Underwriting Association (Bermuda) Limited.

Henry A. King, Michael L. Vincenzo, King, Krebs & Jurgens, PLLC, New Orleans, LA, C. Michael Decamps, Douglas A. Winegardner, Sands Anderson, Richmond, VA, for Degesch America, Inc., Detia Section: R Degesch GMBH, and D & D Holdings, Inc.

ORDER AND REASONS

SARAH S. VANCE, District Judge.

Defendants Degesch America, Inc. and D & D Holdings, Inc. (collectively, “Degesch”) move the Court to dismiss under Federal Rule of Civil Procedure 12(b)(6) plaintiffs' products liability, fraudulent misrepresentation, negligent misrepresentation, and unfair trade practices claims. For the following reasons, defendants' motion is GRANTED with respect to plaintiffs' products liability, fraudulent misrepresentation, and unfair trade practices claims, and DENIED with respect to plaintiffs' negligent misrepresentation claim.

I. BACKGROUND

This case arises out of a fire aboard the vessel M/V MARIA V. Plaintiffs Cargill International SA (CISA) and Cargill Inc. (collectively, “Cargill plaintiffs”) contend that they were the owners, buyers, sellers, consignees, successors in title, and/or shippers of 59,691.878 metric tons of yellow corn loaded aboard the vessel at the Westwego, Louisiana export grain elevator. ¹ Plaintiffs Amlin Corporate Insurance, Chartis Europe, HDI–Gerling NV, Minnetonka Insurance Co., and Tokio Marine & Nichido Fire insured the cargo, and plaintiff The Steamship Mutual Underwriting Association (Bermuda) Limited insured the Cargill plaintiffs' legal liability.²

Plaintiffs allege that, pursuant to a grain sales contract dated April 15, 2010, Cargill sold 60,000 metric tons of yellow corn to CISA, which CISA then sold to a Syrian buyer.³ The Cargill–CISA contract called for Cargill to deliver the cargo in accordance with CISA's final documentary instructions, which required a fumigation certificate demonstrating that the vessel's holds were fumigated at 60 grams of phosphide per one thousand cubic feet of each hold space.⁴ Cargill then contracted with defendant Degesch America for the sale of fumigant and provision of fumigation services for Cargill's grain shipment.⁵ Degesch America agreed to fumigate the holds of the vessel using a “Subsurface Trench–In Method” and the distribution of phosphide called for in the Cargill–CISA contract.⁶

On August 19, 2010, after the grain was loaded aboard the vessel at a berth by Cargill's export grain elevator in Westwego, Louisiana, Degesch fumigated the corn with the fumigant Phostoxin in all seven of the vessel's cargo holds. ⁷ Degesch issued a Fumigation Certificate and a Statement of Fumigant Application Compliance certifying that all cargo holds were fumigated in accordance with Federal Grain Inspection Service (FGIS) rules using the Subsurface Trench–In Method, with 60 grams of Aluminum Phosphide per 1000 cubic meters of hold space.⁸

Allegedly in reliance on these representations, the vessel's crew closed and secured the cargo hatch covers, and Cargill permitted the M/V MARIA V to depart for the destination port in Syria.⁹ Shortly into the journey down the Mississippi River, a series of explosions erupted in each of the vessel's seven cargo holds over the course of two hours,¹⁰ requiring the crew to seek safe harbor. The vessel's classification society then allegedly ordered the corn removed while the vessel underwent investigation, during which time the Syrian purchaser renounced its contract for the purchase of the corn.¹¹

The investigation concluded that the fumigant was applied in piles on the surface of the cargo rather than applied uniformly subsurface, as required by defendants' own Application Manual, FGIS regulations, and the terms of the contract.¹² The investigation found that the piling method caused the fumigant to create phosphine gas at an unsafe rate, and the gas eventually combusted within the head space of each cargo hold.¹³ One of the surveyors suggested that impurities or diphosphine in the fumigant may have caused the explosions.¹⁴ Plaintiffs allege that the explosions resultedin extensive monetary losses exceeding $14 million.¹⁵

In their amended complaint,¹⁶ plaintiffs presented claims for negligence in defendants' manufacture and/or application of the fumigant; negligent misrepresentation in defendants' false certification of the fumigation method used; fraudulent misrepresentation based on the same false certification; breach of contract or warranty; violation of the Louisiana Unfair Trade Practices and Consumer Protection Act (LUTPA); and strict products liability.¹⁷ Defendants contend that plaintiffs have failed to state a claim as to the products liability, misrepresentation, and unfair trade practices claims, and they moved for dismissal of those claims. ¹⁸ Plaintiffs opposed the motion.¹⁹

The Court heard oral argument on defendants' motion to dismiss and requested additional briefing on the choice of law analysis.²⁰ The parties agree that general maritime law applies to these claims.²¹

II. STANDARD

To survive a Rule 12(b)(6) motion to dismiss, the plaintiffs must plead enough facts “to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 547, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). A claim is facially plausible when the plaintiff pleads facts that allow the court to “draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 129 S.Ct. at 1949;Hale v. King, 642 F.3d 492, 499 (5th Cir.2011). A court must accept all well-pleaded facts as true and must draw all reasonable inferences in favor of the plaintiff. Lormand v. U.S. Unwired, Inc., 565 F.3d 228, 232–33 (5th Cir.2009); Baker v. Putnal, 75 F.3d 190, 196 (5th Cir.1996). But the Court is not bound to accept as true legal conclusions couched as factual allegations. Iqbal, 129 S.Ct. at 1949–50.

A legally sufficient complaint must establish more than a “sheer possibility” that plaintiffs' claim is true. Id. It need not contain detailed factual allegations, but it must go beyond labels, legal conclusions, or formulaic recitations of the elements of a cause of action. Twombly, 550 U.S. at 555, 127 S.Ct. 1955. In other words, the face of the complaint must contain enough factual matter to raise a reasonable expectation that discovery will reveal evidence of each element of the plaintiffs' claim. Lormand, 565 F.3d at 255–57. If there are insufficient factual allegations to raise a right to relief above the speculative level, Twombly, 550 U.S. at 555, 127 S.Ct. 1955, or if it is apparent from the face of the complaint that there is an insuperable bar to relief, Jones v. Bock, 549 U.S. 199, 215, 127 S.Ct. 910, 166 L.Ed.2d 798 (2007); Carbe v. Lappin, 492 F.3d 325, 328 n. 9 (5th Cir.2007), the claim must be dismissed.

III. DISCUSSIONA. Products Liability Claim

Plaintiffs' products liability claim alleges that the fumigant used was unsafe for its intended use because of “impurities and/or diphosphine” present within the fumigant, and that defendants negligently failed to warn of these impurities. Plaintiffs' theory appears to be grounded in the suggestion of one of the surveyors that this defect caused or contributed to the explosions. Defendants claim that this “slim reed” is the sort of conclusory allegation that fails to satisfy the Rule 8 “plausibility” standard explained in Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) and Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009).

Courts recognize the doctrine of strict products liability as part of the federal maritime law, see E. River S.S. Corp. v. Transamerica Delaval, 476 U.S. 858, 865, 106 S.Ct. 2295, 90 L.Ed.2d 865 (1986); Vickers v. Chiles Drilling Co., 822 F.2d 535, 538 (5th Cir.1987), and generally embrace § 402 of the Restatement (Second) of Torts as “the best expression of the [doctrine of strict liability] as it is generally applied.” In re Parker Drilling, 2006 WL 285602, at *2, 2006 U.S. Dist. LEXIS 4332, at *12 (E.D.La.2006) (quoting Ocean Barge Transp. v. Hess Oil Virgin Islands, 726 F.2d 121, 123 (3rd Cir.1984) (collecting cases)). The Restatement provides:

(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.

Restatement (Second) of Torts § 402A.

In this case, further expression of the principles of strict products liability is unnecessary, since plaintiffs have plainly failed to state a claim that is plausible on its face. Plaintiffs base their allegation solely on the opinions of a surveyor unnamed in the complaint. There is no indication of what the impurities might be, how they might have caused the explosions, the basis upon which the surveyor formed his theory, or his qualifications for so doing. There is...