Liberty Ins. Corp. v. LSP Prods. Grp., Inc.

• Decision Date: 03 January 2022
• Docket Number: Case No. 1:20-cv-12814
• Citation: 582 F.Supp.3d 496
• Parties: LIBERTY INSURANCE CORPORATION and the Cincinnati Insurance Company, as Subrogees of the Insureds as listed on Schedule A, Plaintiffs, v. LSP PRODUCTS GROUP, INC., Defendant.
• Court: U.S. District Court — Eastern District of Michigan

582 F.Supp.3d 496

LIBERTY INSURANCE CORPORATION and the Cincinnati Insurance Company, as Subrogees of the Insureds as listed on Schedule A, Plaintiffs,

v.LSP PRODUCTS GROUP, INC., Defendant.

Case No. 1:20-cv-12814

United States District Court, E.D. Michigan, Northern Division.

Signed January 3, 2022

John M. McManus, McManus Law, Royal Oak, MI, Gregory Dolsky, Law Offices of Robert A. Stutman PC, Fort Washington, PA, for Plaintiff Liberty Insurance Corporation.

Patrick E. Sweeney, Rhoades McKee PC, Grand Rapids, MI, for Defendant.

OPINION AND ORDER GRANTING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

THOMAS L. LUDINGTON, United States District Judge

This matter is before this Court upon a motion for summary judgment from Defendant LSP Products Group, Inc., contesting the claims of Plaintiff Cincinnati Insurance Company ("Cincinnati"). ECF No. 18. For the reasons stated hereafter, Defendant's Motion will be granted, all Cincinnati's claims against Defendant will be dismissed, and all Liberty's claims will remain.

I.

This case involves damage to buildings on two separate parcels of real property, allegedly caused by the failure of toilet-water supply lines that Defendant manufactured and sold. ECF No. 18 at PageID.538. This Court previously summarized the background of this case as follows:

This lawsuit is advanced by two separate insurance companies: Liberty Insurance Corporation and The Cincinnati Insurance Company. They allegedly paid their insureds under separate insurance contracts for the failure of two separate and discrete toilet supply lines, which were manufactured and purchased at different times, installed by different installers at unique real properties owned by two separate insureds in two different counties. See Schedule A to the Complaint, attached here as Exhibit 1. Plaintiff Liberty Insurance Corporation ("Liberty") alleges that its insured Marilyn Lewis ("Lewis") suffered a loss on July 15, 2016 in Southfield, Oakland County, Michigan, and that Liberty Insurance Corporation paid Lewis's claim in the amount of $24,720.65. Plaintiff, The Cincinnati Insurance Company ("Cincinnati") alleges that its insured Riverfront Medical Realty, LLC ("Riverfront"), suffered a loss on August 22, 2016 in Saginaw, Saginaw County, Michigan, and that Cincinnati paid Riverfront's claim in the amount of $296,456.61.

Liberty Ins. v. LSP Prod. Grp. , No. 1:20-CV-12814, 2021 WL 2024897, at *2 (E.D. Mich. May 21, 2021) (quoting ECF No. 9 at PageID.163–64).

A.

On April 12, 2018, Plaintiffs sued Defendant in the First Judicial District Court of Nevada. ECF No. 19 at PageID.680; see Allstate Fire and Cas. Ins. v. LSP Prods. Grp. , No. 18 TRT 00015 1B (Nev. 1st Dist. Ct. filed Apr. 12, 2018). On August 6, 2018, the court granted Defendant's motion to dismiss for forum non conveniens, dismissing the case without prejudice and allowing the 97 insureds to refile their claims "in the states where the alleged harm occurred." ECF No. 19-1 at PageID.724–32 (granting Defendant's motion "on the condition that the defendant waive any jurisdiction, statute of limitations, and forum non conveniens arguments, as to the claims asserted in the plaintiffs’ Complaint, .... but the defendant is not required to waive ... on any claims not asserted in plaintiffs’ Complaint in this case"). On Plaintiffs’ appeal, the Nevada Supreme Court upheld the conditions of the Nevada district court's order. Allstate Fire & Cas. Ins. v. LSP Prod. Grp. , 464 P.3d 123 (Nev. 2020) (unpublished table decision).

On September 16, 2020, Plaintiffs refiled their civil action in the Tenth Circuit Court of Michigan. ECF No. 1 at PageID.1; see Liberty Ins. v. LSP Prods. Grp. , 20-042811-NP (Mich. 10th Cir. Ct. filed Sept. 16, 2020). In Michigan, Plaintiff Cincinnati again alleges that the "plastic coupling nuts" on the water supply lines were defective and has therefore raised five claims: four tort claims and one contract claim for breach of implied warranty, each seeking the amount paid to Riverfront. ECF No. 18 at PageID.538–39; ECF No. 19 at PagID.679. Cincinnati's four tort claims are (1) negligent design; (2) negligent manufacture; (3) negligent failure to warn or instruct; and (4) willful disregard of a known defect creating a substantial likelihood of injury. ECF No. 18 at PageID.541.

On October 20, 2020, Defendant filed a notice of removal to this Court under 28 U.S.C. § 1441(b). See generally ECF No. 1. In February 2021, Defendant filed a motion to sever and remand the claims of Plaintiff Liberty Insurance, which this Court denied in May 2021. ECF No. 9; Liberty Ins. , 2021 WL 2024897, at *2, in ECF No. 16.

In August 2021, Defendant filed a motion for summary judgment as to all Cincinnati's claims, which both parties have since fully briefed. ECF Nos. 18; 19; 20; 21.

B.

A motion for summary judgment should be granted 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). The movant has the initial burden of "identifying those portions of [the record that] it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett , 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The court must view the evidence and draw all reasonable inferences in favor of the nonmovant and determine "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 251–52, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ; see Lossia v. Flagstar Bancorp, Inc. , 895 F.3d 423, 428 (6th Cir. 2018).

The burden then shifts to the nonmovant, who must set out specific facts showing "a genuine issue for trial." Liberty Lobby , 477 U.S. at 250, 106 S.Ct. 2505 (citation omitted). The nonmovant must show more than "some metaphysical doubt as to material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). Indeed, the "mere existence of a scintilla of evidence" in support of the nonmovant does not establish a genuine issue of material fact. Liberty Lobby , 477 U.S. at 252, 106 S.Ct. 2505.

Summary judgment will be granted if the nonmovant "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. , 477 U.S. at 322, 106 S.Ct. 2548. But summary judgment will be denied "[i]f there are ... ‘genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party.’ " Hancock v. Dodson , 958 F.2d 1367, 1374 (6th Cir. 1992) (citation omitted).

In a diversity case like this, the court must apply "the substantive law of the state in which it sits," in this case of course, the law of the State of Michigan. BP Expl. & Oil Co. v. Maint. Servs., Inc. , 313 F.3d 936, 942 (6th Cir. 2002) ; see also Standard Fire Ins. v. Ford Motor Co. , 723 F.3d 690, 692–99 (6th Cir. 2013) (applying the lex locus delicti in an insurance subrogation action).

II.

Defendant claims that the economic-loss doctrine bars Cincinnati's four tort claims.

A.

Because "[t]he distinction between contract theory and tort theory can often be murky," Gary M. Victor, The Economic Loss Doctrine and Consumers , MICH. BAR J. , Sept. 2010, at 23, 23, "[c]ourts developed the economic-loss doctrine to keep a clear line between tort and contract law, two common-law areas that serve distinct purposes," Crossing at Eagle Pond Apartments, LLC v. Lubrizol Corp. , 790 F. App'x 775, 777 (6th Cir. 2019) (unpublished) [hereinafter Eagle Pond II ].

The point of the economic-loss doctrine, then, is to distinguish personal-injury claims from economic claims, not to altogether eliminate recovery for personal-injury claims. The economic-loss doctrine is relevant here, because it "responds to the reality that one of these two bodies of law (tort) is not subject to the party's negotiations whereas the other one (contract) is." Id. at 778.

Notably, "Michigan courts have broadened the economic-loss doctrine beyond the ‘paradigmatic’ case of a buyer who contracts with a seller for a poor product and then seeks to use tort law to obtain a refund of the purchase price." Id.

According to the economic-loss doctrine, "[w]he[n] a plaintiff seeks to recover for economic loss caused by a defective product purchased for commercial purposes, the exclusive remedy is provided by the UCC." Neibarger v. Universal Coops., Inc. , 439 Mich. 512, 486 N.W.2d 612, 618 (1992). In this way, "the effect of [ Neibarger ] is to make the U.C.C. dominant in product liability controversies that do not involve personal injury." Vincent A. Wellman, Assessing the Economic Loss Doctrine in Michigan: Making Sense Out of the Development of Law , 54 WAYNE L. REV. 791, 803–04 (2008) ("Whe[n] a product proves to be faulty after the parties have contracted for sale and the only losses are economic, the policy considerations supporting products liability in tort [do not] encourage[e] the design and production of safer products."). Indeed, the Michigan Court of Appeals has clarified at least twice that the doctrine applies to only commercial transactions for goods. See Farm Bureau Mut. v. Combustion Rsch. Corp. , 255 Mich.App. 715, 662 N.W.2d 439, 442–43 (2003) ; Quest Diagnostics, Inc. v. MCI WorldCom, Inc. , 254 Mich.App. 372, 656 N.W.2d 858, 864 (2002).

Bricking the wall between tort and contract, the economic-loss doctrine bars tort claims when "(1) the parties or others closely related to them had the opportunity to negotiate the terms of the sale of the good or product causing the injury, and (2) their economic expectations can be satisfied by contractual remedies." Quest Diagnostics , 656 N.W.2d at 863. Expansively, in Michigan, "[u]nlike some jurisdictions, the economic-loss...