Unified Sch. Dist. 467 v. Leland A. Gray Architects, LLC

• Decision Date: 30 June 2015
• Docket Number: Case No. 14–1025–RDR.
• Parties: UNIFIED SCHOOL DISTRICT 467, Wichita County, Kansas, Plaintiff, v. LELAND A. GRAY ARCHITECTS, LLC, Defendant, Custom Construction & Design, Inc., Defendant/Third–Party Plaintiff, v. Refrigeration Supplies Distributor, Inc. ; Mitsubishi Electric and Electronics USA, Inc., Third–Party Defendants.
• Court: U.S. District Court — District of Kansas

112 F.Supp.3d 1223

UNIFIED SCHOOL DISTRICT 467, Wichita County, Kansas, Plaintiff,

v.LELAND A. GRAY ARCHITECTS, LLC, Defendant,Custom Construction & Design, Inc., Defendant/Third–Party Plaintiff,

v.Refrigeration Supplies Distributor, Inc. ; Mitsubishi Electric and Electronics USA, Inc., Third–Party Defendants.

Case No. 14–1025–RDR.

United States District Court, D. Kansas.

Signed June 30, 2015.

Randall D. Grisell, Doering & Grisell, P.A., Garden City, KS, Wyatt A. Hoch, Foulston Siefkin LLP, Wichita, KS, for Plaintiff.

Michael J. Tubbesing, Franke Schultz & Mullen, PC, Kansas City, MO, for Third Party Plaintiff.

Charles L. Perschon, Prince Yeates & Geldzahler, Salt Lake City, UT, Christopher A. McElgunn, Michael L. Baumberger, Klenda Austerman LLC, Wichita, KS, Michael J. Tubbesing, Franke Schultz & Mullen, PC, Kansas City, MO, for Defendant.

Arthur S. Chalmers, Hite, Fanning & Honeyman, LLP, Jessica M. Burtin, Kenneth R. Lang, Matthew K. Holcomb, Hinkle Law Firm LLC, Wichita, KS, David Joseph Welder, Michael G. Norris, Norris & Keplinger, LLC, Overland Park, KS, Haylie D. Treas, James A. Jennings, Jennings Teague, PC, Oklahoma City, OK, for Third Party Defendants.

MEMORANDUM AND ORDER

RICHARD D. ROGERS, District Judge.

This matter is presently before the court upon the motion of third-party defendant Mitsubishi Electric and Electronics USA, Inc.'s (MEUS) motion to dismiss. Having carefully reviewed the arguments of the parties, the court is now prepared to rule.

I.

This action arises from renovation and construction projects undertaken by Unified School District 467 (USD 467) in June 2009. Specifically, USD 467 sought to install heating and cooling units (HVAC systems) in their senior and junior high school building and the elementary school. USD 467 sought bids for the construction of the all-purpose room for the senior and junior high. Prior to seeking bids, USD 467 retained Leland A. Gray Architects, LLC to provide professional architectural and design services for the multiple projects. On December 3, 2009, USD 467 entered into a contract with Custom Construction & Design, Inc. (CC & D) to serve as its general contractor.

CC & D entered into a contract with Refrigeration Supplies Distributor, Inc. (RSD) to purchase the HVAC equipment that was ultimately installed in the school district's buildings. RSD specified HVAC equipment from MEUS for the buildings. MEUS sold the equipment to RSD. The HVAC installations occurred at some point after August 23, 2010. Problems began to occur in 2010 and throughout 2011. According to CC & D, a representative from RSD visited the school district on ten separate occasions from October 13, 2010 through May 24, 2013 to inspect the installed HVAC systems. CC & D further alleges that a MEUS representative inspected the HVAC system on May 21, 2012. USD 467 had an engineering firm investigate the HVAC system in November 2012. This investigation purportedly revealed many deficiencies. The school district represents that it was forced to hire a separate entity to correct the alleged design and construction defects associated with the HVAC system.

II.

USD 467 initially filed its lawsuit against Gray Architects and CC & D on October 7, 2013 in state court. The school district's claims against CC & D include (1) breach of contract; (2) breach of warranty; (3) breach of implied warranty; and (4) negligence. The case was removed to this court on January 17, 2014. On September 12, 2014, CC & D filed a motion to join additional parties, which was granted on October 6, 2014. CC & D filed its Third–Party Complaint against MEUS and RSD on October 7, 2014.

In its motion to dismiss, MEUS contends that CC & D's claims against it fail to state a claim upon which relief can be granted. Specifically, MEUS argues that (1) CC & D's breach of implied warranty claim fails because there is no liability for breach of implied warranties to a remote seller of a product for pure economic loss where there is no privity of contract; and (2) CC & D's tort-based claims sound in comparative implied indemnity and negligence, and are either barred by the statute of limitations or fail to state a claim.

III.

Fed.R.Civ.P. 8(a)(2) provides that a complaint must contain "a short and plain statement of the claim showing that the pleader is entitled to relief." The complaint must give the defendant adequate notice of what the plaintiff's claim is and the grounds of that claim. Swierkiewicz v. Sorema N.A., 534 U.S. 506, 512, 122 S.Ct. 992, 152 L.Ed.2d 1 (2002). This simplified notice pleading rule is justified because of the liberal discovery rules and availability of summary judgment to dispose of unmeritorious claims. Id.

"In reviewing a motion to dismiss, this court must look for plausibility in the complaint....Under this standard, a complaint must include ‘enough facts to state a claim to relief that is plausible on its face.’ " Corder v. Lewis Palmer Sch. Dist. No. 38, 566 F.3d 1219, 1223–24 (10th Cir.2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (clarifying and affirming Twombly's probability standard). Allegations that raise the specter of mere speculation are not enough. Corder, 566 F.3d at 1223–24. The court must assume that all allegations in the complaint are true. Iqbal, 556 U.S. at 678, 129 S.Ct. 1937. "The issue in resolving a motion such as this is ‘not whether [the] plaintiff will ultimately prevail, but whether the claimant is entitled to offer evidence to support the claims.’ " Bean v. Norman, 2010 WL 420057 at *2 (D.Kan. Jan. 29, 2010) (quoting Swierkiewicz, 534 U.S. at 511, 122 S.Ct. 992 ). The Tenth Circuit utilizes a two-step process when analyzing a motion to dismiss. Hall v. Witteman, 584 F.3d 859, 863 (10th Cir.2009). First, the court must identify conclusory allegations not entitled to the assumption of truth. Id. Second, the court must determine whether the remaining factual allegations plausibly suggest the plaintiff is entitled to relief. Id.

The court notes that counsel for CC & D relies upon Conley v. Gibson, 355 U.S. 41, 45–46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957), and cases citing it in support of its argument that dismissal is appropriate only when it appears beyond doubt that plaintiff can prove no set of facts that would entitled it to legal relief. As noted by the review of the law set out above, it may be time for counsel to update his briefs. Conley is no longer valid. The Supreme Court made clear in Twombly that the Conley standard has "earned it retirement." Twombly, 550 U.S. at 562–563, 127 S.Ct. 1955. Twombly makes clear that a plaintiff must plead "more than labels and conclusions," and "[f]actual allegations must be enough to raise a right to relief above the speculative level." Id. at 555, 127 S.Ct. 1955. Rule 8(a) requires that there must be "enough facts to state a claim to relief that is plausible on its face." Id. at 570, 127 S.Ct. 1955.

IV.

MEUS initially contends that CC & D's breach of implied warranty claims should be dismissed because a remote product seller is not liable to a downstream, non-privity purchaser for mere economic loss in the absence of personal injury. In making this argument, MEUS points out that CC & D has not pleaded any privity of contract between it and MEUS.

The law in Kansas is clear. "[I]mplied warranties of fitness and merchantability are not extended to a remote seller or manufacturer of an allegedly defective product, which is not inherently dangerous, for only economic loss suffered by a buyer who is not in contractual privity with the remote seller or manufacturer." Professional Lens Plan, Inc. v. Polaris Leasing Corp., 234 Kan. 742, 675 P.2d 887, 898–99 (1984).

CC & D attempts to avoid the holding of Professional Lens by making two claims: (1) MEUS was not a remote seller of the heating and cooling systems because it was involved in the manufacture, design, installation and service of the units for the school project; and (2) MEUS was in privity with it because RSD was an authorized dealer for MEUS.

In making the former argument, plaintiff relies upon Ritchie Sand, Inc. v. Eagle Iron Works, 1989 WL 31408 (D.Kan. Mar. 14, 1989) for support. Ritchie Sand asserted several claims against Eagle Iron Works, including breach of implied warranties, arising from the construction of a sand plant. Ritchie Sand contacted Eagle Iron about the design of the plant, including an underplant conveyor system. Eagle Iron designed the plant and Ritchie Sand purchased it through an Eagle Iron distributor. Ritchie Sand never paid Eagle Iron for its design or engineering services. The charge was incorporated within the cost of the sand plant. Ritchie Sand then erected the plant with the equipment manufactured by Eagle Iron and other defendants and the aid of several local contractors. Ritchie Sand's claims against Eagle Iron were limited to the underplant conveyor system. Eagle Iron sought summary judgment on the implied warranty claims because it was not in privity with Ritchie Sand. Judge Crow denied summary judgment to Eagle Iron, finding that material issues of fact remained regarding the existence of an agreement between Richie Sand and Eagle Iron to provide certain design services. Ritchie Sand, 1989 WL 31408 at *8. Judge Crow found it unnecessary to reach the issue of privity between Ritchie Sand and Eagle Iron because Ritchie Sand's claims against Eagle Iron were based on a purported service contract with Eagle Iron. Id. at *9. The court found that this was not a case where the claims were based on goods passing through a chain of distributors or where a remote seller/manufacturer allegedly sold defective products through a distributor to an ultimate...