Platte Anchor Bolt, Inc. v. Ihi, Inc.

• Decision Date: 19 April 2004
• Docket Number: No. C-03-2984 VRW.,C-03-2984 VRW.
• Citation: 352 F.Supp.2d 1048
• Parties: PLATTE ANCHOR BOLT, INC, Plaintiff, v. IHI, INC, et al Defendants. IHI, Inc, Cross-Claimant, v. Park-Ohio Structural Hardware, LLC, et al, Cross-Defendants. IHI, Inc, Counter-Claimant, v. Platte Anchor Bolt, Inc, Counter-Defendant.
• Court: U.S. District Court — Northern District of California

352 F.Supp.2d 1048

PLATTE ANCHOR BOLT, INC, Plaintiff, v. IHI, INC, et al Defendants.

IHI, Inc, Cross-Claimant, v. Park-Ohio Structural Hardware, LLC, et al, Cross-Defendants.

IHI, Inc, Counter-Claimant, v. Platte Anchor Bolt, Inc, Counter-Defendant.

No. C-03-2984 VRW.

United States District Court, N.D. California.

April 19, 2004.

COPYRIGHT MATERIAL OMITTED

Andrew Joel Van Ornum, Watt, Tieder, Hoffar & Fitzgerald, LLP, San Francisco, CA, Jeffrey Brian Wilkinson, Lawrence Allen Wagner, Stewart Sokol & Gray, LLC, Portland, OR, for Plaintiff.

Julie E. Grey, Farella Braun & Martel, LLP, Jeffrey R. Williams, Morgenstein & Jubelirer LLP, San Francisco, CA, Todd B. Gary, Morales & Gary Pleasant Hill, CA, Richard David Corona, Esq., The Corona Firm, LLP, La Mesa, CA, Ramiro Morales, Morales & Gary, Pleasant Hill, CA, Steven S. Miyake, Law Office of Steven S. Miyake, San Francisco, CA, for Defendants.

Julie E. Grey, Scott B. Douglass, Esq., Farella Braun & Martel LLP, San Francisco, CA, for claimant.

ORDER

WALKER, District Judge.

This case concerns responsibility for the installation of defective bolts resulting in the delay of a bridge construction project. Defendant and cross-claimant IHI, Inc (IHI) is a subcontractor for that project and has filed a cross-claim against its co-defendant SLSB, LLC dba St Louis Screw & Bolt and Haydon Bolts, Inc (collectively, SLSB), the supplier of the bolts. SLSB now moves the court to: (1) dismiss one of IHI's cross-claims pursuant to FRCP 12(b)(6); and (2) strike IHI's prayer for attorney fees pursuant to FRCP 12(f). SLSB seeks to dismiss the cross-complaint's third claim for negligence on the ground that this claim is not independent from the contract between the parties, does not arise from intentional misconduct and claim economic injury that is not recoverable on a tort theory under Seely v. White Motor Co., 63 Cal.2d 9, 45 Cal.Rptr. 17, 403 P.2d 145 (1965). For the reasons stated below, both of SLSB's motions are DENIED (Docs. 72-74).

I

A

The following facts are taken largely from IHI's amended cross-claim (Doc # 49). The State of California Transportation Department's general contractor (referred to by the parties as the Joint Venture) recently undertook construction of the Carquinez Straights Bridge Project (the Project). See First Am Compl (FAC; Doc # 7) at 4 ¶ 5.1. IHI is and was a subcontractor for the Project. Id. On or about April 9, 2001, IHI solicited plaintiff Platte Anchor Bolt, Inc (Platte) for high strength bolts for use in construction of the Project. IHI Am Cross-Claim (Doc # 49) at 5 ¶ 12. On or about December 19, 2002, IHI sent Platte a purchase order for Project materials, including the bolts. Id. at 5 ¶ 13. On that same date, Platte sent SLSB a purchase order for the requested bolts. Id. at 5 ¶ 14. That purchase order was "made for the direct and intended benefit of IHI." Id. The bolts were manufactured from December 2002 through January 2003, and were delivered to the Project site in January or February 2003. Id. Several of the bolts subsequently broke upon installation. Id. at 5 ¶ 15.

After some of the bolts broke, the Joint Venture rejected all the bolts and notified SLSB of the failure and rejection. Id. SLSB then recalled all the bolts. Id. at 5 ¶ 16. SLSB stated that it had discovered that certain aspects of the "hot galvanizing process" used in manufacturing the bolts were not performed properly and, as a result, the bolts were defective. Id. at 5-6 ¶ 16. The Joint Venture then notified IHI that damages for removal, replacement and delays in the project would be greater than $640,000. Id. at 6 ¶ 19. The Joint Venture has assessed IHI more than $640,000 in backcharges. Id.

B

Platte filed the original complaint in this action on June 26, 2003, naming IHI, SLSB, Park-Ohio Structural Hardware (Park-Ohio) and FCI Constructors (FCI) as defendants. Doc # 1. Platte filed its first amended complaint on August 11, 2003. Doc # 7. On September 2, 2003, IHI filed a cross-claim against SLSB, FCI and Park-Ohio. Doc # 18. IHI filed an amended cross-claim on October 1, 2003. Doc # 49.

Among other things, the amended cross-claim alleged causes of action against SLSB for breach of third party beneficiary contract, contractual indemnity, negligence and equitable indemnity. IHI Am Cross-Claim at 7-9 ¶¶ 21-39. IHI also included a prayer for attorney fees. Id. at Prayer, 10 ¶ 3. SLSB filed a motion to dismiss IHI's negligence cross-claim and a motion to strike IHI's prayer for attorney fees. Docs. 72-74. In connection with these motions, the court must consider two issues: (1) whether IHI's negligence cross-claim against SLSB should be dismissed; and (2) whether IHI's prayer for attorney fees should be stricken.

II

A

FRCP 12(b)(6) motions to dismiss essentially "test whether a cognizable claim has been pleaded in the complaint." Scheid v. Fanny Farmer Candy Shops, Inc., 859 F.2d 434, 436 (6th Cir.1988). FRCP 8(a), which states that plaintiff's pleadings must contain "a short and plain statement of the claim showing that the pleader is entitled to relief," provides the standard for judging whether such a cognizable claim exists. Lee v. City of Los Angeles, 250 F.3d 668, 679 (9th Cir.2001). This standard is a liberal one that does not require plaintiff to set forth all the factual details of its claim; rather, all that the standard requires is that plaintiff give defendant fair notice of the claim and the grounds for making that claim. Leatherman v. Tarrant County Narcotics Intell. & Coord. Unit, 507 U.S. 163, 168, 113 S.Ct. 1160, 122 L.Ed.2d 517 (1993) (citing Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)). To this end, plaintiff's complaint should set forth "either direct or inferential allegations with respect to all the material elements of the claim". Wittstock v. Van Sile, Inc., 330 F.3d 899, 902 (6th Cir.2003).

In federal diversity actions, the court must look to state law to determine whether the claim exists, but the manner in which such claims are raised is still governed by federal standards. Schwarzer, Tashima & Wagstaffe, California Practice Guide: Federal Civil Procedure before Trial § 8:23 (Rutter Group 2003); see also Hanna v. Plumer, 380 U.S. 460, 465, 85 S.Ct. 1136, 14 L.Ed.2d 8 (1965) (finding that procedural requirements in federal court are governed by federal law); Johnson v. Hondo, Inc., 125 F.3d 408, 417 (7th Cir.1997) (noting that pleading requirements in the federal courts are governed by federal rules and not by state rules); Taylor v. United States, 821 F.2d 1428, 1432 (9th Cir.1987) (finding that, despite the fact that state substantive law governs in suits under the Federal Tort Claims Act, the FRCP determine the manner and time in which affirmative defenses may be raised). Thus, the court should examine a complaint in such actions to determine whether plaintiff has pleaded direct or inferential allegations with respect to all material elements of the claim, as such claim is defined under state law.

Under Rule 12(b)(6), a complaint "should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of [its] claim which would entitle [it] to relief." Hughes v. Rowe, 449 U.S. 5, 9, 101 S.Ct. 173, 66 L.Ed.2d 163 (1980) (citing Haines v. Kerner, 404 U.S. 519, 520, 92 S.Ct. 594, 30 L.Ed.2d 652 (1972)); see also Conley, 355 U.S. at 45-46, 78 S.Ct. 99. All material allegations in the complaint must be taken as true and construed in the light most favorable to plaintiff. See In re Silicon Graphics Inc. Sec. Lit., 183 F.3d 970, 980 n. 10 (9th Cir.1999). Even if the court dismisses the complaint, "leave to amend should be granted unless * * * the pleading could not possibly be cured by the allegation of other facts." United States v. SmithKline Beecham, Inc., 245 F.3d 1048, 1052 (9th Cir.2001).

B

In its motion to dismiss, SLSB contends that IHI's negligence cross-claim should be dismissed for two reasons: (1) IHI's negligence claim is premised on SLSB's alleged failure to perform contractual obligations; and (2) IHI has sustained only economic loss. See Memo Mot Dism (Doc # 73) at 5:1-8:14. SLSB's arguments are based in large part upon the contention that, at bottom, this is a contract case and not a tort case.

California courts have drawn a distinction between the types of damages recoverable in tort and those recoverable in contract. In Seely, the California Supreme Court discussed the types of damages available in products liability actions brought under a strict liability tort theory and concluded that a consumer could not recover against a manufacturer for economic loss caused by the product. Seely, 63 Cal.2d at 18, 45 Cal.Rptr. 17, 403 P.2d 145. The Seely court also remarked that "[e]ven in actions for negligence, a manufacturer's liability is limited to damages for physical injuries[,] and there is no recovery for economic loss alone." Id.; see also North American Chemical Co. v. Los Angeles Cty. Superior Ct., 59 Cal.App.4th 764, 779, 69 Cal.Rptr.2d 466 (1997) (noting the application of Seely in negligence actions by California appellate courts). In a recent case involving homeowners' negligence claims against a manufacturer of component parts used in building the homes, a California appellate court applied the rule to uphold the trial court's decision to exclude evidence of economic damages. Casey v. Overhead Door Corp., 74 Cal.App.4th 112, 123-24, 87 Cal.Rptr.2d 603 (1999), overruled on other grounds by Jimenez v. San Diego Cty Superior Ct., 29 Cal.4th 473, 484, 127 Cal.Rptr.2d 614, 58 P.3d 450 (2002). The usual practice in California courts, therefore, is to preclude recovery in negligence actions based on a defective product unless the product has caused personal injury or physical damage to property. Sacramento Regional Transit Dist. v. Grumman Flxible, 158 Cal.App.3d 289, 293, 204 Cal.Rptr. 736 (1984); see Aas v. San Diego Cty....