Waleski v. Montgomery, McCracken, Walker & Rhoads, LLP (In re Tronox Inc.)

• Decision Date: 21 February 2020
• Docket Number: Adv. Pro. No. 19-01087 (MEW),Case No. 09-10156 (MEW)
• Citation: 616 B.R. 280
• Parties: IN RE TRONOX INCORPORATED, et al., Debtor. Stanley Waleski, on his own behalf and on behalf of all others similarly situated, Plaintiff, v. Montgomery, McCracken, Walker & Rhoads, LLP, et al., Defendants.
• Court: U.S. Bankruptcy Court — Southern District of New York

616 B.R. 280

IN RE TRONOX INCORPORATED, et al., Debtor.Stanley Waleski, on his own behalf and on behalf of all others similarly situated, Plaintiff,

v.Montgomery, McCracken, Walker & Rhoads, LLP, et al., Defendants.

Case No. 09-10156 (MEW)

Adv. Pro. No. 19-01087 (MEW)

United States Bankruptcy Court, S.D. New York.

Signed February 21, 2020

OTTERBOURG, P.C., New York, NY, Co-Counsel for Plaintiff By: Richard C. Haddad, Esq. Gabriela S. Leon, Esq.

WHITEFORD, TAYLOR & PRESTON LLP, Pittsburgh, PA, Co-Counsel for Plaintiff By: Scott M. Hare, Esq.

KELLER LENKNER LLC, Co-Counsel for Plaintiff By: Ashley Keller, Esq. Travis Lenkner, Esq. Seth A. Meyer, Esq.

THOMPSON HINE, LLP, New York, NY and Cincinnati, OH, Counsel for Defendants By: Barry M. Kazan, Esq. Robert P. Johnson, Esq. Emily G. Montion, Esq.

MEMORANDUM DECISION DISMISSING AMENDED COMPLAINT AS BARRED BY THE STATUTE OF LIMITATIONS

MICHAEL E. WILES, UNITED STATES BANKRUPTCY JUDGE

Plaintiff Stanley Waleski,(the "Plaintiff") has filed suit on his own behalf and on behalf of a purported class of persons (the "Avoca Plaintiffs") who claim they were injured by exposures to chemicals that were released from a plant in Avoca, Pennsylvania. Plaintiff alleges that Montgomery, McCracken, Walker & Rhoads, LLP ("MMWR") committed legal malpractice in its representation of Mr. Waleski and the Avoca Plaintiffs during the bankruptcy cases of Tronox Incorporated and its affiliates ("Tronox" or "Tronox Debtors") and that as a result the Avoca Plaintiffs' recoveries were less than they should have been. Two individual defendants were named in the original Complaint but have since been dropped from the action.

The case was filed in the Court of Common Pleas in Luzerne County, Pennsylvania. It was removed from the Pennsylvania state court to the District Court for Middle District of Pennsylvania. Plaintiff filed a motion to remand the case to the state court, and the defendants filed a motion to transfer the case to the Southern District of New York. The Pennsylvania District Court granted the transfer motion but declined to decide the remand motion so that it could instead be resolved by this Court following the transfer. This Court later issued its Memorandum Decision Denying Plaintiffs' Motion for Remand or Abstention , dated July 18, 2019 [ECF No. 16]. On that same day the Court entered an Order that denied Plaintiff's motion for remand and/or abstention.

Prior to the transfer of the case the defendants had filed a motion to dismiss the complaint for failure to state a cause of action. Among the arguments asserted by the defendants was that Plaintiff's claims are barred by the applicable statute of limitations. The orders entered by the District Court in Pennsylvania had stayed further action on the motion to dismiss; after the transfer the parties did not take further action to obtain a hearing on the motion, and the prior stay remained in place. However, Plaintiff filed a separate motion seeking permission to file an amended complaint. MMWR opposed the motion to amend, arguing that an amendment would be futile because the proposed amended complaint could not survive a motion to dismiss. In its opposition papers MMWR reiterated its argument that the claims are time-barred.

At a hearing on December 5, 2019, the parties agreed that Pennsylvania statutes of limitation govern the asserted claims. They also agreed that the statute of limitations for the assertion of a negligence claim in Pennsylvania is two years and that the statute of limitations for the assertion of a breach of contract claim is four years. See 42 Pa. Cons. Stat. §§ 5524(7), 5525(a)(8). Plaintiff agreed that if the tort statute of limitations governs the claims then this action is untimely and must be dismissed. However, Plaintiff argued that the four-year contractual statute of limitations applies and that the action was filed less than four years after the contractual claims accrued. MMWR argued that under Pennsylvania's "gist of the action" rule the claims should be treated as tort claims (not contract claims) and that the action was untimely under any theory because the original complaint was filed more than four years after any claims accrued.

At the conclusion of the December 5 hearing, the Court ruled that it appeared that Plaintiff was entitled to amend the original complaint as a matter of right and that the proposed amended complaint (the "Amended Complaint") therefore would be deemed to have been filed.¹ The Court also ruled that the pending motion to dismiss would be deemed to apply to the Amended Complaint and that the Court would first consider the statute of limitations defenses that had been asserted, without prejudice to the parties' rights (after a decision on the statute of limitations issues) to file further briefs to the extent other issues needed to be addressed. The Court allowed the parties to file supplemental briefs on the following issues:

(1) the applicability of the "gist of the action" doctrine to Plaintiff's claims, and the applicability of certain decisions on that subject that the Court had identified during the Hearing; and

(2) if a four-year contractual limitations period applies, the point at which the contractual claims accrued.

Thereafter, the parties submitted supplemental briefs on these issues.

Jurisdiction

As described above, the Court has previously ruled that the Court has jurisdiction under 28 U.S.C. § 1334 because Plaintiff's claims "arose in" the Tronox bankruptcy cases. The Court also held that mandatory abstention and permissive abstention theories did not call for the Court to decline to hear the case. Plaintiff has reserved his objections to those rulings but has not otherwise argued that the Court lacks Constitutional or statutory power to adjudicate this matter.

Applicable Pleading Standards

In reviewing a motion to dismiss a court must accept the factual allegations of the complaint as true and draw all reasonable inferences in a plaintiff's favor. Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) ; Bell Atlantic Corp. v. Twombly , 550 U.S. 544, 555-56, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ; E.E.O.C. v. Staten Island Sav. Bank , 207 F.3d 144, 148 (2d Cir. 2000). However, the factual allegations in a complaint must be supported by more than mere conclusory statements. Twombly , 550 U.S. at 555, 127 S.Ct. 1955. The allegations must be sufficient "to raise a right to relief above the speculative level" and provide more than a "formulaic recitation of the elements of a cause of action." Id. (citations omitted). "[O]nly a complaint that states a plausible claim for relief survives a motion to dismiss." Iqbal , 556 U.S. at 679 (citing Twombly , 550 U.S. at 556, 127 S.Ct. 1955 ).

"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." Id. at 678, 129 S.Ct. 1937 (citing Twombly , 550 U.S. at 556, 127 S.Ct. 1955 ). The plausibility standard is not akin to a " ‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id. "[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct," a complaint is insufficient under Fed. R. Civ. P. 8(a) because it has merely "alleged" but not "show[n] ... that the pleader is entitled to relief." Id. at 679, 129 S.Ct. 1937 ; see also id. at 682, 129 S.Ct. 1937 (allegations are rejected where there is an "obvious alternative explanation" for the conduct alleged that is more "likely") (internal quotation marks and citation omitted).

The Amended Complaint refers to a Contingent Fee Agreement that MMWR signed (a copy of which was attached to the original complaint and to the supplemental papers that MMWR filed) and to various other documents.² It is proper for the Court to consider those documents as part of the Amended Complaint in ruling on the motion to dismiss. See Grant v. County of Erie , 542 Fed. Appx. 21, 23 (2d Cir. 2013) ("In its review [of a Rule 12(b)(6) motion to dismiss], the court is entitled to consider facts alleged in the complaint and documents attached to it or incorporated in it by reference, documents "integral" to the complaint and relied upon in it, and facts of which judicial notice may properly be taken under Rule 201 of the Federal Rules of Evidence."); Rothman v. Gregor , 220 F.3d 81, 88-89 (2d. Cir. 2000) (noting that it is proper to consider documents that are quoted in or attached to the complaint or incorporated in it by reference, or that plaintiffs either possessed or knew about and upon which they relied in bringing suit); I. Meyer Pincus & Assocs., P.C. v. Oppenheimer & Co. , 936 F.2d 759, 762 (2d Cir. 1991) (noting that it is proper to consider a document upon which allegations are based, whether or not it is attached to the complaint). In this regard, if an allegation is belied by the terms of the documents, the documents are controlling. Id. ; see also Alexander v. Board of Education of City of New York , 648 Fed.Appx. 118 (2d Cir. 2016) (summary order) (dismissing complaint where documents contradicted allegations).

The Facts Alleged in the Amended Complaint

The Avoca Plaintiffs are 4362 individuals who claim they were poisoned or sickened by releases of toxic and carcinogenic chemicals, including creosote, from a plant in Avoca, Pennsylvania. Amended Complaint ¶ 1. They hired the Powell Law Group, P.C. (the "Powell Firm") during the early 2000s to pursue personal injury claims against Kerr-McGee Corporation and its affiliates, which had owned and operated the Avoca plant. Id. ¶ 35. Thereafter, certain Kerr-McGee entities transferred assets to a newly-formed company that the parties have referred to as "New Kerr-McGee," leaving certain assets (and tort liabilities) with the "Old" Kerr-McGee companies. Id. ¶ 44. The "Old" Kerr-McGee entities, now...