Holtec Int'l v. ARC Machs., Inc.

• Citation: 492 F.Supp.3d 430
• Decision Date: 05 October 2020
• Docket Number: Civil Action No. 17-397
• Parties: HOLTEC INTERNATIONAL and Holtec Manufacturing Division, Inc., Plaintiffs, v. ARC MACHINES, INC., and John Does 1-10, Defendants.
• Court: U.S. District Court — Western District of Pennsylvania

492 F.Supp.3d 430

HOLTEC INTERNATIONAL and Holtec Manufacturing Division, Inc., Plaintiffs,

v.ARC MACHINES, INC., and John Does 1-10, Defendants.

Civil Action No. 17-397

United States District Court, W.D. Pennsylvania.

Filed October 5, 2020

Matthew Benjamin Weisberg, David A. Berlin, Weisberg Law, Morton, PA, for Plaintiffs.

Caroline Marino, Pro Hac Vice, Thomas K. Richards, Leader & Berkon LLP, New York, NY, Julie Nord Friedman, Rawle & Henderson, LLP, Pittsburgh, PA, for Defendants.

Re: ECF No. 136

OPINION AND ORDER

MAUREEN P. KELLY, UNITED STATES MAGISTRATE JUDGE

Plaintiffs Holtec International and Holtec Manufacturing Division, Inc. (collectively, "Holtec") bring this action against ARC Machines, Inc. ("AMI"), alleging claims for breach of contract, promissory estoppel, unjust enrichment, breach of warranty and negligence. Holtec's claims arise out of AMI's sale, installation, and failure to repair two defective made-to-order welding power supply systems.

Presently before the Court is AMI's renewed Motion to Dismiss or, in the Alternative, Motion for Summary Judgment, ECF No. 136. For the reasons that follow, the motion for summary judgment is denied and the motion to dismiss is granted in part and denied in part.

I. FACTUAL AND PROCEDURAL BACKGROUND

The following facts derive from the pleadings to date and, at this stage of the litigation, are construed in a light most favorable to Holtec.

Holtec is a global supplier of equipment for the energy industry with a manufacturing facility in Pennsylvania. In 2012, Holtec contracted with officials at the Chernobyl nuclear facility to manufacture and supply double-walled canisters for nuclear fuel storage. Holtec's contract specified welding processes that required the purchase of a new welding system. Holtec contracted with Pandjiris, Inc. for the system at a cost of $709,260. At Holtec's request, Pandjiris incorporated two AMI Hot Wire TIG Welding Packages supplied at a cost of $407,610 and agreed to supply mounting and integration of the AMI power supply systems. ECF No. 95 ¶¶ 10, 17.

The Pandjiris and AMI equipment was installed in January 2013. Almost immediately, the AMI power systems experienced electrical faults that caused Holtec to suffer prolonged manufacturing delays. By 2015, Holtec completed welding for only 20 of the 330 canisters it had contracted to supply for the Chernobyl nuclear facility. Throughout this period, AMI attempted repairs to its equipment. After each repair, AMI assured Holtec that all faults were cured. Holtec alleges that with each repair, AMI issued a new warranty, as reflected in invoices that include as a "comment" the term "**WARRANTY**". Id. ¶¶ 24-29, 34-36.

Pandjiris agreed that AMI's equipment failed to perform but refused to refund the purchase price for AMI's welding products. In July 2015, AMI personnel conceded that it could not identify or fix any defects. In September 2015, AMI informed Holtec that the equipment was no longer under warranty and Holtec would have to pay for any additional repairs. Id. ¶¶ 40, 42.

By January 2016, Holtec demanded a refund for the AMI equipment and replaced the AMI components with equipment from a different manufacturer at cost of $ $785,317. Within 11 days, the new equipment was installed and Holtec commenced welding operations without incident or further delay. Id. ¶¶ 43, 49.

In January 2017, Holtec initiated this action in the United States District Court for the District of New Jersey against Pandjiris and AMI. The district court transferred this case to the United States District Court for the Western District of Pennsylvania. ECF No. 22. Holtec filed an Amended Complaint alleging breach of contract and warranty claims against Pandjiris and alleging these same claims against AMI as a third-party beneficiary to the Pandjiris-AMI contract. ECF No. 51. Pandjiris responded with a Motion to Dismiss or in the Alternative Motion to Stay based on the terms of arbitration agreement between Holtec and Pandjiris. ECF No. 52. AMI moved to dismiss the Amended Complaint for failure to plead facts sufficient to state a claim. ECF No. 55. On November 3, 2017, the Court granted Pandjiris’ Motion to Dismiss and/or Stay and referred all claims between Holtec and Pandjiris to arbitration. AMI's Motion to Dismiss was denied without prejudice to be refiled once the stay was lifted. ECF No. 58.

On July 26, 2019, Holtec moved to lift the stay because arbitration proceedings against Pandjiris were complete. ECF No. 70. AMI opposed the motion on collateral estoppel grounds, arguing that the arbitration award in Pandjiris's favor resolved all claims against AMI. ECF Nos. 72 and 81. The arbitrators concluded that "Holtec failed to meet its burden of proving that the problems Holtec encountered with the operation of the AMI welding equipment were attributable to a defect in materials or workmanship in the equipment manufactured by Pandjiris or in any materials or components of the equipment described in the Quotation that were manufactured by others. We do not find that Holtec proved its right to damages on any theory of liability." ECF No. 74-1.

Holtec argues that the arbitration and ruling are not as broad as AMI represents. Holtec states it was precluded from engaging in AMI-related discovery or presenting evidence regarding AMI's conduct because AMI was not a party to the arbitration proceeding. ECF Nos. 75 and 78.

The Court granted Holtec's Motion to Lift the Stay, ECF No. 82, and with leave of Court, Holtec filed its Second Amended Complaint against AMI and John Does 1-10. Holtec identifies the John Doe defendants as unknown AMI agents, servants, or employees. ECF Nos. 94, 95.

AMI responded to the Second Amended Complaint with the pending Motion to Dismiss. AMI contends that Holtec again fails to plead any of the requisite elements of its claims and that newly alleged negligence claims are barred by the economic loss doctrine and the applicable statute of limitations. Alternatively, AMI contends that it is entitled to summary judgment in its favor as to all claims asserted against it because collateral estoppel bars relitigation of issues decided at arbitration.

The Court ordered the parties to file supplemental briefs addressing potential conflicts of law as to Holtec's various state law claims. The parties requested and were granted a brief stay of proceedings to pursue ultimately unsuccessful alternative dispute resolution proceedings. The parties then filed conflict of law analyses, and Holtec sought leave to file a third amended complaint to add professional negligence claims against individual AMI employees. The Court denied leave to amend, finding the proposed amendments futile as barred by applicable Pennsylvania law. AMI renewed its Motion to Dismiss or, in the Alternative, Summary Judgment, and Holtec renewed its previously filed responses at ECF Nos. 106, 107, 108, 112, 113, 118, and 139. AMI's motion is now ripe for consideration.

II. STANDARD OF REVIEW

A. Motion to Dismiss

Federal courts must dismiss cases that fail to state a claim upon which relief can be granted. Fed. R. Civ. P. 12(b)(6). Complaints therefore must allege facts "sufficient to show that the plaintiff has a ‘plausible claim for relief.’ " Fowler v. UPMC Shadyside, 578 F.3d 203, 211 (3d Cir. 2009) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 679, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) ). When determining whether dismissal is appropriate, the Court must: "(1) identify[ ] the elements of the claim, (2) review[ ] the complaint to strike conclusory allegations, and then (3) look[ ] at the well-pleaded components of the complaint and evaluat[e] whether all of the elements identified in part one of the inquiry are sufficiently alleged." Malleus v. George, 641 F.3d 560, 563 (3d Cir. 2011). The Court "accept[s] all factual allegations as true, construe[s] the complaint in the light most favorable to the plaintiff, and determine[s] whether, under any reasonable reading of the complaint, the plaintiff may be entitled to relief." Blanyar v. Genova Prods. Inc., 861 F.3d 426, 431 (3d Cir. 2017) (citation omitted). The Court may consider "only the complaint, exhibits attached to the complaint, matters of public record, as well as undisputedly authentic documents if the complainant's claims are based upon [those] documents." Hartig Drug Co. Inc. v. Senju Pharm. Co. Ltd., 836 F.3d 261, 268 (3d Cir. 2016) (quoting Mayer v. Belichick, 605 F.3d 223, 230 (3d Cir. 2010) ).

B. Motion for Summary Judgment

Summary judgment may be granted only "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). Pursuant to Rule 56, the Court should enter summary judgment against the party "who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). A motion for summary judgment will be denied only when there is a genuine issue of material fact, if the evidence is such that a reasonable jury could return a verdict for the non-moving party. McGreevy v. Stroup, 413 F.3d 359, 363 (3d Cir. 2005). The mere existence of some disputed facts cannot defeat a motion for summary judgment. Anderson v. Liberty Lobby, 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

In determining whether the dispute is genuine, the court's function is not to weigh the evidence, to determine the truth of the matter, or to evaluate credibility. The court is only to determine whether the evidence is such that a reasonable jury could return a verdict for the non-moving party. McGreevy, 413 F.3d at 363 ; Simpson v. Kay Jewelers, 142 F.3d 639, 643 n.3 (3d Cir. 1998) (citing Fuentes v. Perskie, 32 F.3d 759, 762 n.1 (3d Cir. 1994) ). In evaluating the evidence, the court must interpret the facts in the light...