U.S. v. J & D Enterprises of Duluth

• Decision Date: 05 February 1997
• Docket Number: Civ. No. 5-95-298 (PAM/RLE).
• Citation: 955 F.Supp. 1153
• Parties: UNITED STATES of America, Plaintiff, v. J & D ENTERPRISES OF DULUTH, Defendant.
• Court: U.S. District Court — District of Minnesota

955 F.Supp. 1153

UNITED STATES of America, Plaintiff, v. J & D ENTERPRISES OF DULUTH, Defendant.

Civ. No. 5-95-298 (PAM/RLE).

United States District Court, D. Minnesota, Fifth Division.

February 5, 1997.

Friedrich A.P. Siekert, Asst. U.S. Atty., Minneapolis, MN, for U.S.

Carrie C. Green, Minneapolis, MN, for J & D Enterprises of Duluth.

ORDER

ERICKSON, United States Magistrate Judge.

I. Introduction

This matter came before the undersigned United States Magistrate Judge pursuant to a general assignment, made in accordance with the provisions of Title 28 U.S.C. § 636(b)(1)(A), upon the Motion of the Defendant J & D Enterprises of Duluth, Inc. ("J & D") for an Order granting it leave to serve a Summons and Third-Party Complaint upon the City of St. Paul, Minnesota ("St.Paul").

A Hearing on the Motion was conducted on May 30, 1996,¹ at which time the Government appeared by Friedrich A.P. Siekert, Assistant United States Attorney, and J & D appeared by Carrie C. Green, Esq.

For reasons which follow, we deny the Motion.

II. Factual Background

In this action, the Government seeks to impose civil penalties against J & D for alleged violations of Sections 112 and 114 of the Clean Air Act. See, Title 42 U.S.C. §§ 7412 and 7414. The alleged violations occurred in connection with the demolition of an abandoned warehouse, that was owned by St. Paul, and that was located at 923 Shepard Road in St. Paul.

By way of additional background, on May 26, 1987, St. Paul condemned the warehouse in order to facilitate a proposed expansion of Shepard Road, and the City decided to have the warehouse demolished. After a potential bidder complained about the presence of asbestos, St. Paul inspected the site and obtained samples to determine the presence of asbestos-containing materials. Testing revealed that certain ceiling panels contained asbestos at a "hazardous level." Based upon this testing, St. Paul revised its bid specifications to require, among other things, the removal of the asbestos prior to the start of demolition. Among the five bids that were received by St. Paul, for the demolition of the warehouse, J & D's lump sum bid of $18,420, which included $2,200 for the removal of asbestos, was determined to be the lowest. In August of 1991, St. Paul contracted with J & D to raze the warehouse and, on September 18, 1991, J & D commenced the demolition process.

According to the Government, in demolishing the warehouse, J & D violated a number of the Federal regulations which govern the removal of asbestos. Specifically, the Complaint alleges that J & D failed to provide sufficient notice of the contemplated demolition,² that it submitted a deficient notice of the demolition after the razing had began,³ that it failed to remove all of the "Regulated Asbestos Containing Materials (`RACM')" before the demolition was undertaken,⁴ that it failed to adequately wet the RACM when it was stripped from the warehouse,⁵ and that it failed to ensure that the RACM remained wet until it was collected and contained.⁶ In addition, the Government alleges that J & D violated Section 114 of the Act, Title 42 U.S.C. § 7414, when it submitted inaccurate answers in response to a formal Request for Information. For relief, the Government seeks civil penalties for each violation, in an amount of up to $25,000 for each day of violation, together with a permanent injunction that would require J & D to fully comply with any pertinent asbestos regulations.

In the Motion before us, J & D seeks leave from the Court to serve and file a Third-Party Complaint against St. Paul. In the proposed Third-Party Complaint, J & D seeks indemnity for all of the civil penalties that may be assessed in this action, and that arise from the demolition of the warehouse. J & D bases its indemnity claim on each of the following theories: breach of contract, breach of an implied warranty, and negligent misrepresentation. Specifically, the proposed Third-Party Complaint alleges that the contract between St. Paul and J & D delegated the notification and asbestos removal responsibilities to St. Paul; that St. Paul, as the owner of the warehouse, breached its implied warranty of site access; and lastly, that St. Paul negligently misrepresented the scope of the work that was required under the demolition contract.

III. Discussion

A. Standard of Review. Rule 14(a), Federal Rules of Civil Procedure, provides the procedural mechanism by which a party may assert a Third-Party claim. Rule 14(a) states, in relevant part:

At any time after commencement of the action a defending party, as a third-party plaintiff, may cause a summons and complaint to be served upon a person not a party to the action who is or may be liable to the third-party plaintiff for all or part of the plaintiff's claim against third-party plaintiff. The third-party plaintiff need not obtain leave to make the service if the third-party plaintiff files the third-party complaint not later than 10 days after serving the original answer. Otherwise, the third-party plaintiff must obtain leave on motion upon notice to all parties to the action.

The governing law makes clear that Rule 14(a) should be liberally construed in favor of impleading a third-party, see, United of Omaha Life Ins. Co. v. Reed, 649 F.Supp. 837 (D.Kan.1986), as its purpose is to avoid a circuity of actions and a multiplicity of suits, see, Dixon v. Northwestern National Bank, 275 F.Supp. 582 (D.Minn.1967), in order that all related claims may be disposed of in one action, id.; Patten v. Knutzen, 646 F.Supp. 427 (D.Colo.1986), and thereby simplify, and expedite, the litigation process. Blais Construction Co., Inc. v. Hanover Square Associates-I, 733 F.Supp. 149, 152 (N.D.N.Y. 1990); Waylander-Peterson Co. v. Great Northern Ry. Co., 201 F.2d 408 (8th Cir. 1953).

For a proper impleader to occur, the third-party plaintiff must implead a person against whom it can assert a claim of joint or secondary liability, that arises out of the plaintiff's claim against the third-party plaintiff. See, Erickson v. Erickson, 849 F.Supp. 453, 456 (S.D.W.Va.1994); Greene Line Mfg. Corp. v. Fibreboard Corp., 130 F.R.D. 397, 399 (N.D.Ind.1990). Otherwise stated, the third-party plaintiff must show that, if it is found to be liable to the plaintiff, then the third-party defendant is, or may be, liable to it. Resolution Trust Corp. v. Farmer, 836 F.Supp. 1123, 1129 (E.D.Pa.1993). However, Rule 14 does not itself provide a substantive theory of recovery, for an impleader is available only if there is an underlying substantive right to pursue a claim for relief against the third-party defendant. See, Kim v. Fujikawa, 871 F.2d 1427, 1434 (9th Cir.1989); Green v. United States Department of Labor, 775 F.2d 964, 971 n. 7 (8th Cir.1985); Ragusa v. City of Streator, 95 F.R.D. 527, 528 (N.D.Ill.1982) (impleader improper where governing substantive law did not allow for indemnity or contribution).

B. Legal Analysis. Given these precepts, J & D's proposed Third-Party Complaint is proper only if St. Paul "is or may be liable" to J & D for all, or part, of any civil penalties that J & D may be assessed in this action. By its proposed Third-Party Complaint, J & D alleges a right to indemnity from St. Paul. Whether a substantive claim may properly be pursued against a third-party, including one for indemnification, is a substantive rather than a procedural question.

While it is well-established that, in a diversity action, a Federal Court must apply State law in determining whether there is a substantive right to recovery, see, Leppala v. Sawbill Canoe Outfitters, Inc., 361 F.Supp. 409, 410 (D.Minn.1973), "[t]he fact that a case is brought in federal court on the basis of federal question jurisdiction does not mean that state law on indemnification or contribution is irrelevant." 3 J. Moore, Moore's Federal Practice ¶ 14.03[3] at 14-25. Indeed, State law governs the impleader determination where, as here, the Third-Party Complaint is not itself based upon Federal law. See, e.g., Kennedy v. Pennsylvania R.R., 282 F.2d 705, 709 (3rd Cir.1960) (in an action commenced under the Federal Employers' Liability Act, State law doctrine of comparative negligence governed the defendant's third-party complaint) Accordingly, whether St. Paul may be liable to J & D for the claims that have been alleged in the Government's Complaint, must be determined under Minnesota's law of indemnification.⁷

Under Minnesota law, "[i]ndemnity and contribution are both remedies based on equitable principles to secure restitution to one who has paid more than his just share of a liability." Hermeling v. Minnesota Fire & Cas. Co., 548 N.W.2d 270, 273 n. 1 (Minn. 1996), quoting White v. Johnson, 272 Minn. 363, 367, 137 N.W.2d 674, 677 (1965), overruled on other grounds, Tolbert v. Gerber Indus., Inc., 255 N.W.2d 362 (1977). In contrast to contribution, which allows one to recover a proportionate share from the other liable party, "[i]ndemnity is the right of one party held liable to another to shift the entire burden of liability to a third party also liable for the same harm." Nerenhausen v. Chicago, M., St. P. & Pac. R. Co., 479 F.Supp. 750, 756 (D.Minn.1979), citing Hendrickson v. Minnesota Power & Light Co., 258 Minn. 368, 371, 104 N.W.2d 843, 846-47 (1960), overruled on other grounds, Tolbert v. Gerber Indus., Inc., supra. Moreover, unlike contribution, "[i]ndemnity does not require common liability, but arises out of a contractual relationship, either express or implied by law, which requires one party to reimburse the other entirely." Hermeling v. Minnesota Fire & Cas. Co., supra at 273 n. 1.

Minnesota Courts recognize the right to indemnity among joint tortfeasors in four situations, only three of which depend upon an express contractual provision. Hendrickson v. Minnesota Power & Light Co., supra at 373, 104 N.W.2d 843, modified by Tolbert v. Gerber Indus., Inc., supra at 367. Therefore, absent...