2020 WL 6059872

United States District Court, N.D. New York.
VANGUARD GRAPHICS LLC D/B/A VANGUARD PRINTING, and KOURSA, INC., Plaintiffs,
v.
TOTAL PRESS SALES & SERVICE, LLC, Defendant.
TOTAL PRESS SALES & SERVICE, LLC, Third-Party Plaintiff,
v.
BRITTON SERVICES, INC., TRANS AMERICAN TRUCKING SERVICE, INC., TRUE NORTH EXPRESS, INC., BLUE HAWK CARRIER, INC., and KML CARRIERS, LLC, Third-Party Defendants.
Case No. 3:18-CV-55 (NAM/ML)
|
Filed 10/13/2020
Attorneys and Law Firms
APPEARANCES:
BOND SCHOENECK & KING, PLLC, Brendan M. Sheehan, Esq., Thomas R. Smith, Esq., One Lincoln Center, 110 W. Fayette St., Syracuse, NY 13202, Attorneys for Vanguard Graphics LLC d/b/a Vanguard Printing and Koursa, Inc.
WILSON ELSER MOSKOWITZ EDELMAN & DICKER, LLP, Andrew S. Holland, Esq., Peter A. Lauricella, Esq., 200 Great Oaks Blvd., Suite 228, Albany, NY 12203, Attorneys for Total Press Sales & Service, LLC
HURWITZ, FINE LAW FIRM, Steven E. Peiper, Esq., 1300 Liberty Building, 424 Main Street, Buffalo, NY 14202, Attorneys for Britton Services, Inc.
HILL, RIVKINS LAW FIRM, Marc I. Kunkin, Esq., John J. Sullivan, Esq., 45 Broadway, Suite 1500, New York, NY 10006, Attorneys for Trans American Trucking Service, Inc.

MEMORANDUM-DECISION AND ORDER
Norman A. Mordue Senior U.S. District Judge

I. INTRODUCTION
*1 Plaintiffs Vanguard Graphics LLC d/b/a Vanguard Printing and Koursa, Inc. (collectively, the “Plaintiffs”) bring this action under the Carmack Amendment, 49 U.S.C. § 14706, and state common law, asserting claims arising from damage to a printing press. (Dkt. No. 1). Now before the Court are motions for summary judgment by Defendant Total Press (Dkt. No. 55), Third-Party Defendant Trans American (Dkt. No. 56), and Third-Party Defendant Britton Services (Dkt. No. 62). For the reasons that follow, the motions are granted in part and denied in part.

II. BACKGROUND

A. Procedural History
Plaintiffs commenced this action in January 2018, asserting at least six claims against Defendant Total Press for alleged breach of contract and negligence stemming from damage to a printing press that Plaintiffs had recently purchased. (Dkt. No. 1). Defendant Total Press then filed a Third-Party Complaint against several Third-Party Defendants seeking indemnification and contribution for the Plaintiffs’ damages. (Dkt. No. 15). At the close of discovery, several of the parties filed motions for summary judgment, which are now before the Court. (Dkt. Nos. 55, 56, 62).1

B. Record Before the Court2
In 2014, Plaintiff Koursa, Inc. entered into an agreement to purchase a Heidelberg Sunday 4000 printing press (the “Press”) from a seller located in Denmark. (Dkt. No. 70, ¶ 1). Koursa paid approximately $900,000 for the Press, which was 13 years old. (Id., ¶ 3). On December 22, 2014, Koursa entered into an agreement (the “Services Agreement”) with Defendant Total Press to transport the Press to the United States. (Id., ¶ 4; see also Dkt. No. 1, pp. 19–31). Under the Services Agreement, Total Press was responsible for dismantling the Press in Denmark, transporting it to the United States, and installing it at a site to be designated by Koursa. (See Dkt. No. 1, pp. 19–20, Services Agreement, ¶ 1(e)).

The Services Agreement established a payment schedule which required Koursa to make certain payments when specific project milestones were achieved. (Dkt. No. 1, pp. 20–21, Services Agreement, ¶ 3(b)). Koursa and Total Press agreed that “time [was] of the essence,” and that Total Press would “prosecute the Services and Commissioning diligently to … complete the Services and Commissioning in the time provided for in this Agreement and in the most expeditious manner consistent with the interest of Koursa.” (Id., p. 23, Services Agreement, ¶ 8(c)).

The Services Agreement further provided that: “Total Press assumes all liability for loss to property at the Current Site and at Koursa’s Site due to Total Press’, its employees, agents or subcontractors actions or negligence during the performance of Services and Commissioning periods; except to the extent that such claims arise out of negligence or legal fault of Aller [ (the seller) ] at the Current Site or Koursa at Koursa’s Site or that of their respective employees or subcontractors.” (Id., pp. 22–23, Services Agreement, ¶ 8(b)).

*2 After Total Press had dismantled and prepared the Press for shipping, Koursa advised Total Press that circumstances had changed and the Press would need to be stored for an unknown period of time prior to it being installed at the new location. (Dkt. No. 70, ¶ 6). The Press was stored by Third-Party Defendant Trans American Trucking Services in New Jersey. (Id., ¶ 7). At the time the storage site was selected, the parties did not know how long the Press would need to be stored there. (Id., ¶ 8). On or about March 13, 2015, Koursa and Total Press amended the original contract to address the storage of the Press and the change in circumstances. (Id., ¶ 9; see also Dkt. No. 1, pp. 33–36 (“Amended Services Agreement”)). The Amended Services Agreement defined “Services” to include “Total Press’ (i) loading of the Equipment onto storage trucks at the US Port; (ii) transporting the Equipment from the US Port to the Storage Site; (iii) storage of the Equipment at the Storage Site; (iv) loading of the Equipment onto trucks at the Storage Site; and (v) transporting the Equipment to Koursa’s Site, including all freight and services costs, in accordance with this Amendment.” (Dkt. No. 1, p. 33, Amended Services Agreement, ¶ 1(b)).

On or about June 22, 2016, Koursa and Total Press further amended the Services Agreement to designate the Vanguard facility in Ithaca, New York as the site for installation of the Press. (Dkt. No. 70, ¶ 10; see also Dkt. No. 1, pp. 38–43 (“Second Amended Services Agreement”)). The Second Amended Services Agreement also assigned Koursa’s interest in the agreement to Vanguard Printing. (Id.; see also Dkt. No. 1, p. 40, Second Amended Services Agreement, ¶ 4). The Second Amended Services Agreement defined the “Services” as “Total Press’ (i) loading of the Equipment onto trucks at the Storage Site; (ii) transporting the Equipment from the Storage Site to the Koursa Site; … [and] (v) the turn-key completion of the rigging and installation of the Equipment at the Koursa Site, including all freight and Services costs ….” (Dkt. No. 1, p. 38, Second Amended Services Agreement, ¶ 1(b)).

In June 2016, Total Press entered into an agreement with Third-Party Defendant Britton Services, Inc. (“Britton”) to assist with unloading and installing the Press at the Vanguard facility. (Dkt. No. 62-1, ¶¶ 3–5; Dkt. No. 68-2, ¶¶ 3–5). In late July 2016, the Press was transported from the storage location in New Jersey to the Vanguard facility in Ithaca. (Dkt. No. 70, ¶ 11). On July 30, 2016, as Britton was offloading the equipment in Ithaca, a portion of the Press (known as unit #3 or the magenta unit) fell to the ground after Britton’s employees placed it on wooden blocks, one of which failed to hold the weight of the Press and broke apart. (Id., ¶ 15; see also Dkt. No. 62-1, ¶¶ 10–11; Dkt. No. 55-7, pp. 138–39; Dkt. No. 55-5, p. 52).

On August 6, 2016, Nicholas Karabots, the principal owner of Koursa and then part-owner of Vanguard, sent an e-mail to Jeffrey Vargo of Total Press stating that:
Word from Vanguard is that there was a significant amount of damage to some of the press components during the move from NJ to Vanguard’s plant … and the off loading and placement of the equipment in the plant itself.
I have no idea at this point as to the extent of the damage and will leave it to Vanguard and Total Press to define …. [T]his note is meant only to put Total Press and its insurers on notice.
(Dkt. No. 61-1, p. 1). Mr. Vargo replied on the same day with the following response:
I want to acknowledge that we are aware of this situation and take full responsibility. This is exactly why I went to the NJ facility to over see the loading of the last trucks.
[A Total Press employee] will be at Vanguard Monday am to determine what action is necessary, to properly and quickly remedy the issue. We will document the issue as well as the actions taken.
(Id.).

Due to the dispute over the repair and damages to the Press, Total Press did not have the funds to continue paying progress payments to Britton. (Dkt. No. 62-1, ¶ 14; Dkt. No. 68-2, ¶ 14). Total Press did not issue appropriately earned progress payments to Britton as it was obligated to do under the terms of the contract. (Dkt. No. 62-1, ¶ 15; Dkt. No. 68-2, ¶ 15). When Total Press “failed to respond to Britton’s repeated requests for late and insufficient progress payments, Britton left the jobsite in mid-September 2016.” (Dkt. No. 62-1, ¶ 16; Dkt. No. 68-2, ¶ 16).

*3 In January 2018, Vanguard and Koursa filed this action against Total Press seeking damages for alleged breach of contract. (Dkt. No. 1). Specifically, Vanguard alleges that the damages to the Press during the offloading in Ithaca delayed installation of the Press until May 2017. (See Dkt. No. 70, p. 14, ¶ 45). Vanguard claims that as a result, it had to pay to repair the Press and lost printing contracts. (See generally Dkt. No. 70, pp. 14–21, ¶¶ 42–91). Total Press then filed a Third-Party Complaint seeking contribution and indemnification from various subcontractors involved in the transport, storage, and installation of the Press. (Dkt. No. 15).

III. STANDARD OF REVIEW
Under Federal Rule of Civil Procedure 56(a), summary judgment may be granted only if all the submissions, taken together, “show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247–48 (1986). The moving party bears the initial burden of demonstrating “the absence of a genuine issue of material fact.” Celotex, 477 U.S. at 323. A fact is “material” if it “might affect the outcome of the suit under the governing law,” and is genuinely in dispute “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson, 477 U.S. at 248; see also Jeffreys v. City of New York, 426 F.3d 549, 553 (2d Cir. 2005) (citing Anderson).

If the moving party meets this burden, the nonmoving party must “set out specific facts showing a genuine issue for trial.” Anderson, 477 U.S. at 248, 250; see also Celotex, 477 U.S. at 323–24. Further, “[w]hen no rational jury could find in favor of the nonmoving party because the evidence to support its case is so slight, there is no genuine issue of material fact and the grant of summary judgment is proper.” Gallo v. Prudential Residential Servs., Ltd. P’ship, 22 F.3d 1219, 1223–24 (2d Cir. 1994) (citing Dister v. Continental Grp., Inc., 859 F.2d 1108, 1114 (2d Cir. 1988)). “When ruling on a summary judgment motion, the district court must construe the facts in the light most favorable to the nonmoving party and must resolve all ambiguities and draw all reasonable inferences against the movant.” Dallas Aerospace, Inc. v. CIS Air Corp., 352 F.3d 775, 780 (2d Cir. 2003). “Conclusory allegations or denials are ordinarily not sufficient to defeat a motion for summary judgment when the moving party has set out a documentary case.” Scott v. Coughlin, 344 F.3d 282, 287 (2d Cir. 2003). To that end, “sworn statements are more than mere conclusory allegations subject to disregard [ ]; they are specific and detailed allegations of fact, made under penalty of perjury, and should be treated as evidence in deciding a summary judgment motion.” Id. at 289 (citing Colon v. Coughlin, 58 F.3d 865, 872 (2d Cir. 1995)).

IV. DISCUSSION
Before the Court are three motions for summary judgment. (Dkt. Nos. 55, 56, 62). The Court will address each in turn.

A. Total Press’s Motion for Summary Judgment
Total Press seeks summary judgment on all of Plaintiffs’ asserted claims under the Carmack Amendment and state common law. (Dkt. Nos. 55, 74). Plaintiffs oppose the motion. (Dkt. No. 70).

1. Carmack Amendment Claim
First, Total Press argues that Plaintiffs’ Carmack Amendment claim “must be dismissed as Total Press acted as a broker,” and the Carmack Amendment to the Interstate Commerce Act of 1887, 49 U.S.C. § 14706(d), only governs the liability of carriers for loss or damage to goods transported in interstate commerce. (Dkt. No. 55-2, pp. 4–5). Total Press asserts that it never “owned or leased a vehicle that transported even one iota of the subject press, nor did Total Press employ any person who was responsible for the transportation of the press.” (Id., p. 5). Total Press asserts that it simply “arranged for the transportation of the press through carriers such as KML Carriers and True North Express.” (Id.).

*4 In response, Plaintiffs assert that Total Press is subject to the Carmack Amendment because it agreed to transport the Press in accordance with the Services Agreement. (See Dkt. No. 70-1, pp. 12–15). Plaintiffs claim that Total Press agreed to provide “door-to-door” service which included “turn-key completion of dismantling and loading the Equipment into containers at the current site, transporting the Equipment from the Current Site to the Koursa Site and the rigging and installation of the Equipment at Koursa’s Site, including all freight and Services Costs.” (Id., p. 14). Plaintiffs claim that “Total Press thus bound itself to transport the Press and qualified as a ‘carrier’ under the Carmack Amendment[,] but, [a]t the very least questions of fact exist which preclude this Court from finding as a matter of law that Total Press acted as a ‘broker’ with respect to the Press.” (Id.).

Under the Carmack Amendment, “a carrier is liable for damages incurred during a shipment of goods, whereas a broker—someone who merely arranges for transportation—is not liable.” Tryg Ins. v. C.H. Robinson, Worldwide, Inc., 767 F. App’x 284, 285 (3d Cir. 2019). Specifically, a “carrier” is liable for “the actual loss or injury to the property” for damage caused during the transportation. 49 U.S.C. § 14706(a)(1). A “motor carrier” is defined as “a person providing commercial motor vehicle … transportation for compensation,” 49 U.S.C. § 13102(14), whereas a “broker” is “a person, other than a motor carrier or an employee or agent of a motor carrier, that as a principal or agent sells, offers for sale, negotiates for, or holds itself out by solicitation, advertisement, or otherwise as selling, providing, or arranging for, transportation by motor carrier for compensation,” 49 U.S.C. § 13102(2). Notably, “transportation” is defined as “services related to [the movement of property], including arranging for, receipt, delivery …, transfer in transit, … handling, … and interchange of property.” 49 U.S.C. § 13102(23)(B). The implementing regulation provides that:
Motor carriers, or persons who are employees or bona fide agents of carriers, are not brokers within the meaning of this section when they arrange or offer to arrange the transportation of shipments which they are authorized to transport and which they have accepted and legally bound themselves to transport.
See 49 C.F.R. § 371.2(a).

In deciding whether an entity acted as a carrier or a broker, courts “look to how the party acted during the ‘specific transaction’ at issue, which includes ‘the understanding among the parties involved [and] consideration of how the entity held itself out.’ ” Louis M. Marson Jr., Inc. v. Alliance Shippers, Inc., 438 F. Supp. 3d 326, 331 (E.D. Pa. 2020) (citations omitted). And “[b]ecause the analysis of whether defendant is a carrier or a broker is fact specific, it may not be appropriate for summary judgment.” Id. at 332 (citing Essex Ins. Co. v. Barrett Moving & Storage, Inc., 885 F.3d 1292, 1302 (11th Cir. 2018) (“This is necessarily a case-specific analysis, and as a result, summary judgment might not be appropriate in many cases.”)).

Here, the record shows that Plaintiffs hired Total Press to disassemble the Press in Denmark, transport it to a designated site in the United States, and then reassemble it at a location of Total Press’s choosing. (Dkt. No. 1, pp. 19–31, Services Agreement). Pursuant to the Services Agreement, Total Press took general responsibility for coordinating the transportation of the Press to the United States, regardless of whether it actually moved it itself. (Id., p. 19 (Total Press agreed to “transport the [Press] to the premises designated by Koursa”)). Thus, Total Press appears to have held itself out as a carrier by agreeing to transport the Press. Further, the record shows that Jeffrey Vargo, Total Press’s owner and President, understood that Total Press’s contractual obligations included transportation of the Press. (Dkt. No. 55-7, pp. 24–25, 48–49). This included Total Press’s hiring of Weiss-Rohlig and other companies to assist with the shipping and transportation process. (Id., pp. 44, 254–58). Mr. Vargo also stated that he had a role in coordinating the sequence of trucks and Press components from the storage facility in New Jersey to the installation site in Ithaca. (Id., p. 118).

*5 On the other hand, Mr. Vargo also stated that the transportation was accomplished through the use of “common carriers” at all phases of the transportation between Europe and the United States. (Dkt. No. 55-7, pp. 55–57, 74–75). Mr. Vargo stated that Total Press hired a shipping firm, Weiss-Rohlig, to arrange the transatlantic shipping and acceptance of the Press when it arrived at port in New Jersey. (Id., pp. 45–46). It is undisputed that Total Press did not, itself, transport the Press from Denmark to New Jersey, or from there to Ithaca. (See Dkt. No. 1, Services Agreement, ¶ 8(j); see also Dkt. No. 55-7, pp. 55–57). Rather, Total Press hired various shipping firms to do so, thereby appearing to act more as a broker than a carrier. (See id.). Moreover, the Services Agreement appears to exclude Total Press from liability for damage during transport by limiting Total Press’s liability for damages or loss to property “at the Current Site [in Denmark] and at Koursa’s Site due to Total Press’, its employees, agents or subcontractors’ actions or negligence ….” (Dkt. No. 1, pp. 22–23, Services Agreement, ¶ 8(b)).

Considering the record as a whole, the Court cannot determine as a matter of law whether Total Press acted as a carrier or a broker. The record shows that material issues of fact remain as to Total Press’s precise role in the transportation of the Press and the parties’ understanding of the Services Agreement. Accordingly, Plaintiffs’ Carmack Amendment claim cannot be dismissed at this time. See Alliance Shippers, Inc., 438 F. Supp. at 330–34 (denying summary judgment on the plaintiff’s Carmack Amendment claim where issues of fact precluded the court from determining whether the defendant was a broker or a carrier as a matter of law); Ciotola v. Star Transp. & Trucking, LLC, No. 19-CV-753, 2020 WL 4934592, at *12–14, 2020 U.S. Dist. LEXIS 152963, at *35–39 (M.D. Pa. Aug. 24, 2020) (denying summary judgment on the plaintiff’s Carmack Amendment claim and noting that state law claims could be preempted if the defendant was a carrier); Nipponkoa Ins. Co., Ltd. v. C.H. Robinson Worldwide, Inc., No. 09-CV-2365, 2011 WL 671747, at *5–8, 2011 U.S. Dist. LEXIS 17752, at *15–26 (S.D.N.Y. Feb. 18, 2011) (collecting cases and denying summary judgment on the plaintiff’s Carmack Amendment claim where issues of fact existed as to the defendant’s status as a broker or carrier).3

2. Common Law Claims4
Total Press also moves to dismiss each of Plaintiffs’ claims under Pennsylvania common law, (Dkt. No. 55-2, pp. 6–16), and Plaintiffs oppose Total Press’s arguments, (Dkt. No. 70-1, pp. 15–30).

a. Breach of Contract
Total Press argues that Plaintiffs’ breach of contract claim should be dismissed “because they cannot establish their own performance under the contract.” (Dkt. No. 55-2, p. 11). Specifically, Total Press asserts that Plaintiffs breached the Services Agreement by failing to make timely payments, and “[s]uch material breaches excused Total Press from performing any further obligations under the contract.” (Id., p. 12). Total Press states that Plaintiffs “unilaterally elected to make only a partial payment with regard to one of the scheduled payments,” and their “failures to timely or completely meet their payment obligations are material breaches of the contract and constitute failures … under the Services Agreement.” (Id., p. 11). Total Press claims that Plaintiffs also “failed in their obligation to provide a clear and safe construction area in that they failed to move preexisting equipment within the site to accommodate the installation of the subject press and failed to complete railings on the mezzanine in contravention of OSHA requirements.” (Id.).

*6 In response, Plaintiffs assert that their performance is not an essential element of a breach of contract claim under Pennsylvania law, and even if it was, “Total Press’ argument that Plaintiffs failed to perform under the Services Agreement is meritless.” (Dkt. No. 70-1, p. 25). Plaintiffs further claim that they made all necessary payments to Total Press before discovering the damage to the Press, and because of that damage, Total Press was unable to fully complete certain milestones. (Id., p. 26).

Under Pennsylvania law, to establish a claim for breach of contract, a complaining party “must prove the following elements: (1) the existence of a contract, including its essential terms; (2) a breach of a duty imposed by the contract; and (3) resulting damages.” Dempsey v. Bucknell Univ., 76 F. Supp. 3d 565, 585 (M.D. Pa. 2015) (citing Lackner v. Glosser, 892 A.2d 21, 30 (Pa. Super. Ct. 2006)). And generally, “[a] material breach by one party to a contract entitles the non-breaching party to suspend performance.” Widmer Eng’g, Inc. v. Dufalla, 837 A.2d 459, 467 (Pa. Super. Ct. 2003). “If a breach constitutes a material failure of performance, then the non-breaching party is discharged from all liability under the contract.” Id. Whether a breach is material is an issue of fact unless the question “admits only one reasonable answer.” Norfolk S. Ry. Co. v. Basell USA Inc., 512 F.3d 86, 92 (3d Cir. 2008).

Here, the parties dispute their respective obligations under the Services Agreement, especially after the Press was damaged during the unloading process. Notably, Vanguard’s former Vice President of Manufacturing, William Post, testified that employees from Total Press and Britton Services were present in Ithaca during the unloading process, during which he stated much of the alleged damage occurred, and that Total Press and its agents caused damage to the press through their improper care. (Dkt. No. 55-6, pp. 65–73, 99–110). Mr. Post also testified that he did not know why Total Press and Britton stopped working on the reassembly of the Press, (Dkt. No. 55-6, pp. 90, 116–17), but he claimed that “the stoppage of work by Britton was due primarily, if not exclusively, to the lack of payment by Total Press; the other alleged issues did not prevent Britton from continuing to work on the Press installation.” (Dkt. No. 70-5, ¶ 3). And because Britton stopped its installation work, Mr. Post stated that Plaintiffs had to hire a new company to install the Press after it had been repaired. (Id., pp. 88–90).

On the other hand, Total Press asserts that “payment was necessary to allow [Britton] to continue to conduct the work that was required to meet the contract obligation.” (Dkt. No. 74, p. 13). Total Press argues that “the damage itself did not breach the contract as it was not irreparable and could have been remedied within the allotted time frame.” (Id.). Total Press further claims that Plaintiffs’ missed payments made it impossible for Total Press’s subcontract with Britton to continue with the installation of the Press and forced Britton to cease its efforts to repair the Press. (Id., p. 14). Mr. Vargo testified that Plaintiffs were “never current” in their installment payments under the contract, and that after the damage occurred during the unloading process, Plaintiffs would not allow Total Press to assess the extent of the damage. (Dkt. No. 55-7, pp. 250–53, 289–91). He stated that Total Press and Britton both withdrew from the job in mid-September 2016, which he attributed directly to Vanguard’s alleged “nonpayment.” (Id., pp. 292, 316). Mr. Vargo also testified that, before Total Press and Britton stopped work and left the jobsite, there were disagreements between Total Press and Plaintiffs about the repair process and how the project would continue. (Id., pp. 310–12). Mr. Vargo stated that, despite the damage to the Press, “it was manageable and our idea at the time was … to take responsibility through … Britton and through Weiss-Rohlig.” (Id., p. 319). Mr. Vargo stated that “no matter who [Vanguard] hired was to fix whatever happened and for us to finish our commitment …. [a]nd that’s what we were not allowed to do.” (Id.).

*7 On this record, it is clear that the parties offer vastly different versions of events regarding their understanding of the Services Agreement and their performance of its terms. After carefully reviewing the evidence cited by the parties, the Court finds that there are issues of fact as to whether the parties’ actions materially breached the contract, which necessarily creates further questions as to their obligations to continue performance. Weighing this evidence is a task reserved for the trier of fact. Accordingly, Total Press’s motion for summary judgment on Plaintiffs’ breach of contract claim must be denied. See Alliance Shippers, 438 F. Supp. 3d at 335–37 (allowing Carmack Amendment and breach of contract claims to proceed as alternative theories for trial where issues of fact regarding the parties’ obligations and roles precluded the court from making findings as a matter of law).

b. Tort Claims
Plaintiffs assert a number of negligence-based tort claims against Total Press, including a claim for negligent hiring, retention, and supervision of its subcontractors—namely Britton. (Dkt. No. 1, pp. 13–15). Total Press argues that these claims “lack merit” and are otherwise duplicative of each other. (Dkt. No. 55-2, pp. 8–11). In response, Plaintiffs contend that Total Press “has not met its burden of establishing that it is entitled to summary judgment with respect to Plaintiffs’ negligence-based causes of action.” (Dkt. No. 70-1, pp. 21–24).

Under Pennsylvania law, in order to establish a cause of action for negligence, the plaintiff must prove the following elements: (1) a duty or obligation recognized by law; (2) a breach of that duty; (3) a causal connection between the conduct and the resulting injury; and (4) actual damages. Nw. Mut. Life Ins. Co. v. Babayan, 430 F.3d 121, 139 (3d Cir. 2005). However, Pennsylvania law also recognizes the “gist of the action doctrine,” which “foreclose[s] tort claims: (1) arising solely from the contractual relationship between the parties; (2) when the alleged duties breached were grounded in the contract itself; (3) where any liability stems from the contract; and (4) when the tort claim essentially duplicates the breach of contract claim or where the success of the tort claim is dependent on the success of the breach of contract claim.” Reardon v. Allegheny Coll., 926 A.2d 477, 486 (Pa. Super. 2007) (citing Hart v. Arnold, 884 A.2d 316, 340 (Pa. Super. 2005)). “The critical conceptual distinction between a breach of contract claim and a tort claim is that the former arises out of ‘breaches of duties imposed by mutual consensus agreements between particular individuals,’ while the latter arises out of ‘breaches of duties imposed by law as a matter of social policy.’ ” Id. at 486–87 (citations omitted). Simply put, “[t]he gist of the action doctrine precludes tort claims where the true gravamen, or gist, of the claim sounds in contract.” Apple Am. Grp., LLC v. GBC Design, Inc., 294 F. Supp. 3d 414, 420 (W.D. Pa. 2018).

Here, the Court finds that Plaintiffs’ negligence claims simply recharacterize their breach of contract claim, which is the gist of the action in this case. Specifically, the duties alleged by Plaintiffs exist only by way of the parties’ various Services Agreements to provide “turn-key” delivery of the Press from Denmark. (See generally Dkt. No. 1, pp. 19–43). Plaintiffs allege that “Total Press owed Plaintiffs a duty of reasonable care in the loading, storage, transportation, unloading, and re-assembly of the Press,” but that duty was spelled out in the Services Agreement. (Id., p. 13). Accordingly, Plaintiffs’ negligence claims (Dkt. No. 1, pp. 13–14, Complaint, Causes of Action Four and Five) are duplicative and must be dismissed. See Williams v. Hilton Grp. PLC, 261 F. Supp. 2d 324, 327–30 (W.D. Pa. 2003) (dismissing the plaintiffs’ tort claims where the disputed “conduct occurred mostly during performance of the [parties’] agreement”); Canters Deli Las Vegas, LLC v. FreedomPay, Inc., No. 19-CV-3030, 2020 WL 2494701, at *10–11, 2020 U.S. Dist. LEXIS 84867, at *25–30 (E.D. Pa. May 14, 2020) (dismissing the plaintiff’s tort claims based on the gist of the action doctrine “[b]ecause the duty breached [was] one contractually created by the parties”).

c. Strict Liability Claim
*8 Total Press further asserts that Plaintiffs’ common law strict liability claim fails because “Total Press was not a common carrier,” and “the common law rule [is] only applicable to common carriers, which Total Press is not.” (Dkt. No. 55-2, pp. 12–13). In response, Plaintiffs assert that “Total Press did act as a ‘carrier’ with respect to the Press” and “Total Press effectively agreed to a strict liability standard under the Services Agreement.” (Dkt. No. 70-1, p. 28).

As noted above, there are material issues of fact as to whether Total Press acted as a carrier for purposes of Plaintiffs’ Carmack Amendment claim. That finding applies equally to Plaintiffs’ strict liability claim. In any event, if a jury found that Total Press was a carrier, then Plaintiffs’ strict liability claim would be duplicative of its Carmack Amendment claim. Conversely, if a jury found that Total Press was not a carrier, then Plaintiff’s strict liability claim would otherwise be covered under Plaintiffs’ breach of contract claim. Indeed, Plaintiffs state that “Total Press effectively agreed to a strict liability standard under the Services Agreement, which expressly states that ‘Total Press assumes all liability for loss to property at the Current Site and at Koursa’s Site due to Total Press’, its employees, agent or subcontractors actions or negligence during the performance of Services and Commissioning periods.’ ” (Dkt. No. 70-1, p. 28). Accordingly, Plaintiffs’ strict liability claim (Dkt. No. 1, pp. 12–13, Complaint, Cause of Action Three) is duplicative and must be dismissed.

d. Bailment Claim
Total Press also argues that Plaintiffs’ bailment claim must be dismissed because it is duplicative of their breach of contract claim. (Dkt. No. 55-2, pp. 13–14). Total Press states that its “obligation was to provide plaintiffs with a functional press by November 9, 2016,” and it “was in the process of meeting that obligation when plaintiffs’ breaches and non-payment made further progress impossible.” (Dkt. No. 74, p. 15). In response, Plaintiffs assert that their bailment claim should survive if the breach of contract claim is dismissed. (Dkt. No. 70-1, pp. 29–30).

Reviewing the Complaint, it is clear that Plaintiffs’ claims for breach of contract and bailment are both premised on Total Press’s alleged failures to meet is contractual obligations under the parties’ Services Agreement. As discussed above, Plaintiffs’ breach of contract claim is at the heart of this case and will proceed to trial. Accordingly, Plaintiffs’ bailment cause of action (Dkt. No. 1, pp. 15–16, Complaint, Cause of Action Six) is duplicative and must be dismissed.

e. Nature of the Damages5
*9 Total Press claims that “Plaintiffs have failed to set forth a prima facie case for lost profits or lost labor costs,” and that the evidence presented of “lost profits is the epitome of speculative.” (Dkt. No. 55-2, pp. 7–8). In response, Plaintiffs assert that their consequential damages can be measured by specific printing work they claim to have lost due to Total Press’s alleged breach of contract. (Dkt. No. 70-1, pp. 15–21). Plaintiffs claim that “Total Press was on notice that damage to, or delay of, the Press would result in Plaintiffs incurring lost profits.” (Id., p. 15).

Under Pennsylvania law, the general rule for determining lost profits in a suit for breach of contract “permits recovery of lost profits when there is evidence to establish them with reasonable certainty, there is evidence to show that they were the proximate consequence of the wrong, and [that] they were reasonably foreseeable.” Quinn v. Bupp, 955 A.2d 1014, 1021 (Pa. Super. Ct. 2008) (internal quotations omitted). Lost profits amount to the difference between that which the plaintiff actually earned and that which the plaintiff would have earned absent the defendant’s breach. Smith v. Penbridge Assocs., 655 A.2d 1015, 1021 (Pa. Super. Ct. 1995). Mere uncertainty regarding the damage amount does not bar recovery when it is clear that damages resulted from the defendant’s conduct. Id.

After careful review of the record, the Court finds that Plaintiffs have presented sufficient evidence to show that they had several printing contracts or potential projects that were disrupted or lost due to the delays resulting from the alleged damage to the Press. (See Dkt. No. 70-1, pp. 15–21). Specifically, Plaintiffs allege that the Services Agreement required Total Press to transport and install the Press by early November 2016. (Id., p. 18). Plaintiffs allege total damages of $3,000,662, which includes certain consequential damages based on lost business income, lost labor savings, and delay costs. (Dkt. No. 74-2, p. 5; see also Dkt. No. 70, ¶¶ 44–78).6 Plaintiffs claim that they would have run commercial printing jobs between September 2016 and May 2017, but they were unable to take on new projects due to Total Press’s alleged breach. (Dkt. No. 70-1, p. 18). Indeed, Mr. Post testified that Vanguard would have lost printing business from several weekly magazine publications due to the delayed installation of the Press. (See Dkt. No. 55-6, pp. 154–61). And Plaintiffs’ claims regarding lost printing work are supported by declarations from officials at companies that intended to award them printing contracts. (See Dkt. Nos. 70-3, 70-4).

Based on this evidence, Plaintiffs have at least raised a material issue of fact as to whether the alleged installation delays caused by damages to the Press resulted in recoverable lost profits. (See generally Dkt. No. 70, ¶¶ 44–78). Therefore, summary judgment is not appropriate on the issue of damages. See Short v. Conn. Cmty. Bank, N.A., No. 09-CV-1955, 2012 WL 1057302, at *14–17, 2012 U.S. Dist. LEXIS 42617, at *47–56 (D. Conn. Mar. 28, 2012) (“This Court concludes that triable issues exist with respect to the availability of both categories of damages based on the Plaintiffs’ claims. Summary judgment excluding such damages from the jury’s consideration is therefore not proper.”).

B. Trans American’s Motion for Summary Judgment
*10 Next, Third-Party Defendant Trans American moves for summary judgment on each of Total Press’s third-party claims. (See Dkt. Nos. 56, 63, 73). Total Press opposes the motion. (Dkt. No. 69). Total Press’s Third-Party Complaint asserts four causes of action against Trans American: (1) contractual indemnification/contribution; (2) breach of contract; (3) common law indemnification/contribution; and (4) a Carmack Amendment claim. (See generally Dkt. No. 15).

1. Contract and Common Law Claims
Trans American asserts that Total Press’s “contractual claims should fail, as there is no contract between Total Press and Trans American.” (Dkt. No. 63, p. 3). Trans American further contends that Total Press’s common law indemnification claim also fails “as the parties did not deal with each other and there is no relationship between the parties to create such an obligation.” (Id.). In response, Total Press argues that there is evidence that certain components of the Press were damaged while it was being stored by Trans American. (See Dkt. No. 69, pp. 3–4; see also Dkt. No. 55-6, pp. 93–100).

Generally, “[t]o establish a claim for common-law indemnification, ‘the one seeking indemnity must prove not only that it was not guilty of any negligence beyond the statutory liability but must also prove that the proposed indemnitor was guilty of some negligence that contributed to the causation of the accident.’ ” Aktas v. JMC Dev. Co., Inc., 877 F. Supp. 2d 1, 31 (N.D.N.Y. 2012) (quoting Perri v. Gilbert Johnson Enters., Ltd., 14 A.D.3d 681, 684–85 (2d Dep’t 2005)). Unlike indemnification, contribution generally operates to apportion liability among tort-feasors regardless of the underlying theory of liability. McDermott v. New York, 50 N.Y.2d 211, 216 (1980). “Where a party is held liable at least partially because of its own negligence, contribution against other culpable tort-feasors is the only available remedy.” Glaser v. M. Fortunoff of Westbury Corp., 71 N.Y.2d 643, 646 (1988).

Here, there is no evidence of any enforceable contract between Total Press and Trans American. (See Dkt. No. 56-24, ¶ 27; Dkt. No. 69-2, ¶ 27). Thus, Total Press’s claims for breach of contract and/or contractual indemnification/contribution (Dkt. No. 15, Third-Party Complaint, Causes of Action 2 and 7) must be dismissed. See Roberts v. Karimi, 251 F.3d 404, 407 (2d Cir. 2001) (stating that “a plaintiff in a breach of contract case must prove … that an enforceable contract existed”).

Furthermore, Total Press cannot sustain a claim for common law indemnification and contribution because it has adduced no evidence of negligence by Trans American. The parties agree that Trans American was only involved in the storage and over-the-road carriage of a few flatbed tractor-trailer loads. (See Dkt. No. 56-24, ¶¶ 4, 29; Dkt. No. 69-2, ¶¶ 4, 29). It is also undisputed that the Press remained in storage for over one year, even though it was not prepared for long-term warehousing. (See Dkt. No. 56-24, ¶¶ 14, 22; Dkt. No. 69-2, ¶¶ 14, 22; see also Dkt. No. 55-7, p. 260). Total Press contends that the Press was damaged while it was kept in storage, but the basis for that theory is that damages (i.e. frozen heat exchangers) occurred due to a lack of preparation for long-term storage, not because of any negligence by Trans American. (See Dkt. No. 56-24, ¶¶ 24–25; Dkt. No. 69-2, ¶¶ 24–25; see also Dkt. No. 55-6, pp. 93–100).

Total Press has presented no evidence that Trans American was responsible for preparing the Press for long-term storage. And Total Press has not presented any evidence that the Press was damaged during loading or transport by Trans American. (See Dkt. No. 56-24, ¶ 30–31; Dkt. No. 69-2, ¶¶ 30–31). Indeed, Mr. Vargo stated that he was present at the Trans American warehousing facility when the Press components were loaded for shipment to Ithaca, and that he did not recall having any concerns about how the equipment was loaded. (Dkt. No. 55-7, p. 266). He also stated that he was not aware of any service that trans American was retained to perform, but failed to provide. (Id., pp. 274–75). Notably, all of the delivery receipts for Trans American’s loads were signed by Plaintiffs without exception, (see Dkt. No. 56-24, ¶ 32; Dkt. No. 69-2, ¶ 32; see also Dkt. No. 56-18), and Vanguard’s William Post also testified that he was not aware of any specific damages to the Press that could be attributed to Trans American, (see Dkt. No. 55-6, pp. 130–31).

*11 Based on the undisputed facts, Total Press has failed to present any evidence linking Trans American to the alleged breach of duties and damages involved in this case. Accordingly, Total Press’s common law indemnification and contribution claim against Trans American (Dkt. No. 15, Third-Party Complaint, Cause of Action 12) is dismissed.7

2. The Carmack Amendment
Trans American also moves for summary judgment on Total Press’s Carmack Amendment claims. (Dkt. No. 63, pp. 8–9). In response, Total Press concedes that the Carmack Amendment is not applicable against Trans American because the Carmack Amendment “governs liability of a carrier to the person entitled to recover under the receipt or bill of lading” and “Total Press is not a party to the Bill of Lading.” (Dkt. No. 69, p. 5). Accordingly, Total Press’s Carmack Amendment Claim (Dkt. No. 15, Third-Party Complaint, Cause of Action 17) is dismissed.

C. Britton Services’ Motion for Summary Judgment
Third-Party Defendant Britton Services Inc. (“Britton”) also moves for summary judgment on Total Press’s Third-Party Complaint. (Dkt. No. 62). Total Press opposes the motion. (Dkt. No. 69). Total Press asserts causes of action against Britton for: (1) contractual indemnification/contribution; (2) breach of contract; (3) common law indemnification [and] contribution; and (4) a Carmack Amendment claim. (See generally Dkt. No. 15).

1. Contract Indemnification and Contribution
Britton argues that Total Press’s claim for contractual indemnification should be dismissed “because the operative contract is silent on the issue of indemnification.” (Dkt. No. 62-2, pp. 9–10). Britton states that “the only contract between Total Press and Britton is the June 2, 2016 writing,” which “reveals that there is utterly no reference to contractual indemnification by Britton or Total Press.” (Id., p. 10). Total Press does not respond to Britton’s argument with regard to contractual indemnification (see generally Dkt. No. 68), and therefore the Court finds that Total Press has abandoned this claim. See, e.g., Taylor v. City of N.Y., 269 F. Supp. 2d 68, 75 (E.D.N.Y. 2003) (“Federal courts may deem a claim abandoned when a party moves for summary judgment on one ground and the party opposing summary judgment fails to address the argument in any way.”). Accordingly, Total Press’s contractual indemnification and contribution claim (Dkt. No. 15, Third-Party Complaint, Cause of Action 1) is dismissed.

2. Breach of Contract
Britton also asserts that Total Press’s breach of contract claim should be dismissed because “Total Press’ failure to issue timely progress payments precluded Britton from completing its work at the project and there is no other evidence that Britton ever breached the contract.” (Dkt. No. 62-2, pp. 10–12). Britton asserts that “there is utterly no evidence that Britton breached any aspect of its contractual obligations to Total Press (or Vanguard for that matter).” (Id., p. 10). As for the “pause” of work on September 12, 2016, Britton claims the “only reason Britton left the jobsite was due to weeks of Total Press’ failure to make timely progress payments.” (Id., pp. 11–12). Britton contends that its failure to continue work was justified based on “Total Press’ repeated failures to honor its own contractual obligations” and “repudiation of the contract.” (Id., p. 12).

*12 In response, Total Press asserts that its failure to make timely payments resulted from Vanguard’s failure to comply with its contractual obligations to Total Press. (Dkt. No. 68, pp. 3–4). Total Press contends that its breach of contract claim against Britton must “rise and fall” with Vanguard’s contract claims against Total Press because there is no breach alleged by [Vanguard] that is attributable solely to the actions of Total Press,” and its “liability in this matter is entirely based upon the action of other parties, including Britton, who was the party responsible for unloading and installation of the [Press].” (Id., p. 4).

Here, Britton’s role in causing the damage to the Press is squarely at issue. The record shows that Britton’s representatives acknowledged responsibility for the damage while their crew was unloading the Press in Ithaca. (See Dkt. No. 70, ¶ 15). Britton’s Lead Pipefitter, Andrew Lawson, testified that the damage to “the magenta unit” occurred when Britton employees lowered the unit onto wooden blocks that “exploded” while the unit was resting on them. (Dkt. No. 55-5, p. 52). Lawson described the damage as an “accident,” and noted that Britton had obtained the blocks specifically for this project. (Id., p. 53). None of the parties dispute that the damage to the Press during the unloading process was at least a partial cause for the delays and missed payments that are central to Plaintiffs’ claims and alleged damages. And as discussed above, the record presents issues of fact as to the parties’ responsibility for the damage to the Press and their breaches of contractual obligations. Because there is evidence intertwining Britton with these disputed issues, summary judgment is not appropriate on Total Press’s third-party breach of contract claim against Britton.

3. Common Law Indemnification and Contribution
Britton further moves to dismiss Total Press’s common law indemnification and contribution claims on the basis that “Total Press did not supervise the means and methods of Britton’s actions on the jobsite, and surely Britton employees were not the employees of Total Press.” (Dkt. No. 62-2, p. 14). Britton asserts that “there is no basis to conclude Vanguard’s claims of negligence against Total Press incorporate the independent action of Britton,” and “the only remaining claim against Total Press is Vanguard’s allegation that Total Press’ failure to deliver the Press pursuant to the terms of the contract is a material breach of the agreement.” (Id.). In response, Total Press argues that “Britton’s motion to dismiss the common law indemnification and contribution causes of action should not be granted unless Total Press’s motion with regard to [Vanguard’s] claims of liability against Total Press are also granted as [Vanguard’s] claims are based entirely on the action of Britton and other third-parties.” (Dkt. No. 68, pp. 4–5).

As with Total Press’s third-party claim for breach of contract, there are issues of fact regarding Britton’s role in the damage to the Press (see Dkt. No. 70, ¶ 15), as well as the materiality and consequences of the parties’ actions and alleged defaults under the Services Agreement. Accordingly, summary judgment is not appropriate on Total Press’s third-party claims for indemnification and contribution against Britton.

4. The Carmack Amendment
Finally, Britton moves for summary judgment on Total Press’s Carmack Amendment claim. (Dkt. No. 62-2, p. 15). Because Total Press failed to respond to Britton’s motion on this claim, the Court deems this claim abandoned. (See generally Dkt. No. 68). Accordingly, Total Press’s Carmack Amendment claim (Dkt. No. 15, Third-Party Complaint, Cause of Action 16) is dismissed.

V. CONCLUSION
*13 Wherefore, it is hereby

ORDERED that Total Press’s Motion for Summary Judgment (Dkt. No. 55) is GRANTED as to Plaintiffs’ Third, Fourth, Fifth, and Sixth Causes of Action, but is otherwise DENIED; and it is further

ORDERED that Plaintiffs’ First and Second Causes of Action shall proceed to trial; and it is further

ORDERED that Trans American’s Motion for Summary Judgment (Dkt. Nos. 56, 63) is GRANTED; and it is further

ORDERED that Trans American is dismissed from this action; and it is further

ORDERED that Britton’s Motion for Summary Judgment (Dkt. No. 62) is GRANTED as to Total Press’s First and Sixteenth Third-Party Causes of Action, but is otherwise DENIED; and it is further

ORDERED that Total Press’s Sixth and Eleventh Third-Party Causes of Action against Britton shall proceed to trial; and it is further

ORDERED that the Clerk of the Court is directed to confer with the remaining parties to schedule a status conference in preparation for trial.

IT IS SO ORDERED.

All Citations
Slip Copy, 2020 WL 6059872

Footnotes

1
The case was reassigned to the undersigned on July 30, 2020. (Dkt. No. 78).

2
The facts have been drawn from the parties’ statements and counterstatements of material fact, (Dkt. Nos. 55-1, 61, 62-1, 68-2, 69-2, 70), and the parties’ attached exhibits, depositions, and declarations (see generally Dkt. Nos. 55–56, 62, 68–69, 73–74).

3
Total Press also argues that if it is subject to the Carmack Amendment, the Court must find that Plaintiffs’ damages are limited to actual loss. (Dkt. No. 55-2, pp. 5–6). Because the applicability of the Carmack Amendment cannot be determined as a matter of law, the Court does not reach this issue. The Court further notes that Plaintiffs’ Carmack Amendment claim would preempt their state law causes of action if a jury found that Total Press was a carrier. See Alliance Shippers, Inc., 438 F. Supp. at 336–37 (noting that the plaintiffs’ Carmack Amendment and state law claims could only proceed as alternative theories of liability).

4
The Services Agreement includes a choice of law provision that states: “This Agreement shall be governed by and interpreted and enforced in accordance with the laws of the Commonwealth of Pennsylvania.” (Dkt. No. 1, p. 28, Services Agreement, ¶ 14). Although Total Press does not concede that Pennsylvania law applies with regard to consequential damages, “courts will generally enforce choice-of-law clauses,” because “contracts should be interpreted so as to effectuate the parties’ intent.” See AEI Life LLC v. Lincoln Benefit Life Co., 892 F.3d 126, 132 (2d Cir. 2018) (citations omitted). Given the clear language of the contract, the Court will apply Pennsylvania law in interpreting the Services Agreement between Plaintiffs and Total Press.

5
The choice of law provision within the Services Agreement requires the Court to apply Pennsylvania law as to damages. (See Dkt. No. 1, p. 28 (“This Agreement shall be governed by and interpreted and enforced in accordance with the laws of the Commonwealth of Pennsylvania.”)). Indeed, “New York Courts routinely refer to the Second Restatement [of Conflict of Laws] as authority for conflict-of-law principles governing contracts,” and rely upon the “rule that where the parties have validly chosen a state’s law to govern the interpretation of their contract, that same law will determine the award of prejudgment interest.” Granite Ridge Energy, LLC v. Allianz Global Risk U.S. Ins. Co., 979 F. Supp. 2d 385, 392–93 (S.D.N.Y. 2013). The Restatement declares that “where parties have validly chosen a state’s law to govern their contractual rights and duties, that same state’s substantive law will govern the measure of recovery for breach of contract.” Id. at 392 (citing The Restatement (Second) of Conflict of Laws §§ 187, 207).

6
The Court notes that Total Press failed to respond to Plaintiffs’ factual assertions in the Counterstatement of Material Facts. (See Dkt. No. 70, pp. 6–23; Dkt. No. 74).

7
Although certain damages may have occurred while the Press was being stored, Plaintiffs do not appear to seek losses from Total Press for those specific components (i.e. heat exchangers). (See Dkt. No. 1). Thus, because those components are not relevant to the losses identified by Plaintiffs, Total Press may not pursue a third-party claim for their alleged destruction, especially where there is no contract or other evidence indicating that Total Press and Trans American had any contractual relationship whatsoever.

2020 WL 5816888

United States District Court, N.D. California.
UNDERWRITERS AT LLOYD’S SUBSCRIBING TO COVER NOTE B1526MACAR1800089, Plaintiff,
v.
ABAXIS, INC., et al., Defendants.
Case No. 19-cv-02945-PJH
|
09/30/2020

PHYLLIS J. HAMILTON, United States District Judge

ORDER GRANTING MOTION TO DISMISS Re: Dkt. No. 87
*1 Before the court is cross-defendant’s C.H. Robinson Worldwide Inc.’s (“CHR” or “cross-defendant”) motion to dismiss. The matter is fully briefed and suitable for decision without oral argument. Having read the parties’ papers and carefully considered their arguments and the relevant legal authority, and good cause appearing, the court rules as follows.

BACKGROUND
The underlying complaint in this action was filed by plaintiff Underwriters at Lloyd’s Subscribing to Cover Note B1526MACAR1800089 (“Underwriters” or “plaintiff”) on May 29, 2019. Dkt. 1. As alleged in the operative Second Amended Complaint (“SAC”), plaintiff is a group of insurers who insured a shipment that was damaged en route to Covetrus Inc. and its corporate predecessor Henry Schein Animal Health and Butler Animal Health Supply, LLC (collectively, “Schein”). Dkt. 28, ¶ 3. The SAC alleges the following claims: (1) breach of contract under the Carmack Amendment against TCSL, Inc. (“TCSL”) and CHR; (2) breach of bailment obligations against TCSL; (3) negligence/gross negligence against TCSL; (4) breach of contract against Abaxis and Zoetis; (5) negligence/gross negligence against Abaxis and Zoetis; and (6) misdelivery against Abaxis and Zoetis.

On August 16, 2019, defendants Abaxis, Inc. (“Abaxis”) and Zoetis, Inc. (“Zoetis” and together with Abaxis, “defendants”) filed a motion to dismiss the SAC. Dkt. 31. Prior to the court’s order on the motion, plaintiff voluntarily dismissed its claims against both TCSL and CHR, (Dkts. 35, 38), and the court denied defendants’ motion to dismiss on November 20, 2019, (Dkt. 40). Defendants Abaxis and Zoetis then filed an answer and crossclaim against TCSL and CHR, (Dkt. 42), to which CHR filed a motion to dismiss, (Dkt. 56), and the court granted on April 6, 2020, (Dkt. 63). On April 27, 2020, defendants filed an amended crossclaim, (Dkt. 66), as well as a motion for leave to file a second amended crossclaim to add new claims against TCSL and CHR, (Dkt. 67). The court granted the motion, (Dkt. 81), and defendants filed the second amended crossclaim, (“SACC”) on June 16, 2020, (Dkt. 82).

According to the SAC, in 2018, Schein contracted with defendant Abaxis1 to provide a consignment of pharmaceutical products from Abaxis, located in Union City, California to Schein, located in Columbus, Ohio. SAC ¶ 9. On or after August 16, 2018, Abaxis tendered shipment of the pharmaceutical products to defendant TCSL. Id. ¶ 9. Defendant (and now cross-defendant) CHR agreed to be responsible for transporting the shipment, issued a bill of lading covering the shipment, managed all communication between Schein and TCSL, and took responsibility for TSCL’s performance. Id. ¶ 16.

The shipment was required to be maintained at a temperature of between 2 and 8 degrees Celsius (between 36.5 and 46.4 degrees Fahrenheit) and failure to maintain the proper temperature would render the pharmaceutical products unsafe and unusable. Id. ¶ 11. As part of its contract with Schein, Abaxis agreed to verify that the carrier to which Abaxis tendered the shipment was aware that the shipment needed to maintained at the requisite temperatures, that the carrier was capable of transporting at the requisite temperature range, and that the carrier in fact set the transportation apparatus at the appropriate temperature. Id. ¶ 32.

*2 Plaintiff alleges that defendant TCSL did not pre-chill its trailer to the proper temperature, did not activate its refrigeration equipment until a day after it received the shipment, and turned off the refrigeration equipment a day prior to delivery. Id. ¶¶ 17–19. The pharmaceutical products were severely damaged as a result of the exposure to higher temperatures resulting in damage of approximately $600,000. Id. ¶ 20. Schein sought payment under its insurance contract, which plaintiff paid to Schein. Id. ¶ 21.

The SACC alleges facts beyond those in the SAC. According to the SACC, CHR hired TCSL to transport a separate load of products from Abaxis than the shipment to Schein and, at all times, CHR managed, supervised, and took responsibility for TCSL’s conduct. SACC ¶ 14. On August 16, 2018, TCSL’s employee arrived at Abaxis’s warehouse and wrongfully took possession of the shipment in question, claiming to be authorized to do so without any such authorization. Id. ¶ 16. The employee signed and initialed the bill of lading on behalf of the intended shipper, FedEx Custom Critical, (id. ¶ 18), and in reliance on the employee’s representations, Abaxis allowed him to load the shipment onto his truck and depart, (id. ¶ 19). Abaxis alleges that it confirmed the refrigeration unit on this employee’s truck was turned on and operating at the requisite temperature before allowing him to load and take the shipment. Id. ¶ 24.

Defendants Abaxis and Zoetis bring six claims against both TCSL and CHR: (1) negligence; (2) conversion; (3) negligent misrepresentation; (4) negligent interference with prospective economic advantage; (5) equitable indemnification; and (6) contribution. CHR moves to dismiss the crossclaim pursuant to Rules 12(b)(1) and 12(b)(6). Dkt. 87.

DISCUSSION

A. Legal Standard

1. Rule 12(b)(1)
A federal court may dismiss an action under Federal Rule of Civil Procedure 12(b)(1) for lack of federal subject matter jurisdiction. Fed. R. Civ. P. 12(b)(1). Because “[a] federal court is presumed to lack jurisdiction in a particular case unless the contrary affirmatively appears,” the burden to prove its existence “rests on the party asserting federal subject matter jurisdiction.” Pac. Bell Internet Servs. v. Recording Indus. Ass’n of Am., Inc., 2003 WL 22862662, at *3 (N.D. Cal. Nov. 26, 2003) (quoting Gen. Atomic Co. v. United Nuclear Corp., 655 F.2d 968, 969 (9th Cir. 1981); and citing Cal. ex rel. Younger v. Andrus, 608 F.2d 1247, 1249 (9th Cir. 1979)). A jurisdictional challenge may be facial or factual. Safe Air for Everyone v. Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004) (citing White v. Lee, 227 F.3d 1214, 1242 (9th Cir. 2000)). When the attack is facial, the court determines whether the allegations contained in the complaint are sufficient on their face to invoke federal jurisdiction. Id. Where the attack is factual, however, “the court need not presume the truthfulness of the plaintiff’s allegations.” Id.

When resolving a factual dispute about its federal subject matter jurisdiction, a court may review extrinsic evidence beyond the complaint without converting a motion to dismiss into one for summary judgment. McCarthy v. United States, 850 F.2d 558, 560 (9th Cir. 1988) (holding that a court “may review any evidence, such as affidavits and testimony, to resolve factual disputes concerning the existence of jurisdiction”); see also Land v. Dollar, 330 U.S. 731, 735 n.4 (1947) (“[W]hen a question of the District Court’s jurisdiction is raised…the court may inquire by affidavits or otherwise, into the facts as they exist.”). “Once the moving party has converted the motion to dismiss into a factual motion by presenting affidavits or other evidence properly brought before the court, the party opposing the motion must furnish affidavits or other evidence necessary to satisfy its burden of establishing subject matter jurisdiction.” Safe Air for Everyone, 373 F.3d at 1039.

2. Rule 12(b)(6)
*3 A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) tests for the legal sufficiency of the claims alleged in the complaint. Ileto v. Glock, 349 F.3d 1191, 1199–1200 (9th Cir. 2003). Under Federal Rule of Civil Procedure 8, which requires that a complaint include a “short and plain statement of the claim showing that the pleader is entitled to relief,” Fed. R. Civ. P. 8(a)(2), a complaint may be dismissed under Rule 12(b)(6) if the plaintiff fails to state a cognizable legal theory, or has not alleged sufficient facts to support a cognizable legal theory. Somers v. Apple, Inc., 729 F.3d 953, 959 (9th Cir. 2013).

While the court is to accept as true all the factual allegations in the complaint, legally conclusory statements, not supported by actual factual allegations, need not be accepted. Ashcroft v. Iqbal, 556 U.S. 662, 678–79 (2009). The complaint must proffer sufficient facts to state a claim for relief that is plausible on its face. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 558–59 (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.” Iqbal, 556 U.S. at 678. “[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged—but it has not ‘show[n]’—‘that the pleader is entitled to relief.’ ” Id. at 679 (quoting Fed. R. Civ. P. 8(a)(2)). Where dismissal is warranted, it is generally without prejudice, unless it is clear the complaint cannot be saved by any amendment. Sparling v. Daou, 411 F.3d 1006, 1013 (9th Cir. 2005).

For claims that sound in fraud, the complaint must also meet the heightened pleading standard of Federal Rule of Civil Procedure 9(b). See Kearns v. Ford Motor Co., 567 F.3d 1120, 1125 (9th Cir. 2009). Rule 9(b) requires a party alleging fraud or mistake to state with particularity the circumstances constituting fraud or mistake. “To satisfy Rule 9(b)’s particularity requirement, the complaint must include an account of the time, place, and specific content of the false representations as well as the identities of the parties to the misrepresentations.” Depot, Inc. v. Caring for Montanans, Inc., 915 F.3d 643, 668 (9th Cir. 2019) (internal quotation marks omitted). In other words, “[a]verments of fraud must be accompanied by ‘the who, what, when, where, and how’ of the misconduct charged.” Kearns, 567 F.3d at 1124. The party alleging fraud must also offer “an explanation as to why the statement or omission complained of was false or misleading.” In re GlenFed, Inc. Sec. Litig., 42 F.3d 1541, 1548 (9th Cir. 1994) (en banc), superseded by statute on other grounds as stated in SEC v. Todd, 642 F.3d 1207, 1216 (9th Cir. 2011).

B. Analysis
The underlying events in this case are relatively straightforward, but the procedural questions presented here are decidedly more complex. This court previously dismissed Abaxis and Zoetis’s crossclaim against CHR for failure to state a claim. Dkt. 63 at 9. The original crossclaim alleged only two claims—equitable indemnity and contribution—based on the theory that CHR and TSCL were jointly liable with Abaxis and Zoetis to plaintiff for the breach of contract claim asserted against only Abaxis and Zoetis. See Dkt. 42, ¶¶ 8– 14, 22–28. In their SACC, in addition to the equitable indemnity and contribution claims, defendants allege four new causes of action against each of CHR and TCSL: negligence, conversion, negligent misrepresentation, and negligent interference with prospective economic advantage. In its motion to dismiss, CHR renews its argument that defendants cannot assert equitable indemnity or contribution against it. Mtn. at 8–11. CHR also advances three arguments applicable to all four tort claims asserted for the first time in the SACC: that TCSL is the alleged wrongdoer, economic loss doctrine bars recovery, and the court lacks subject matter jurisdiction. Id. at 11–14. The court addresses subject matter jurisdiction first.

1. Subject Matter Jurisdiction
*4 CHR asserts that the court does not have subject matter jurisdiction over defendants’ crossclaim. According to CHR, both TCSL and Abaxis are citizens of California, there is no complete diversity of citizenship, and thus no subject matter jurisdiction over the crossclaim. Id. at 14. In response, defendants argue that if a Rule 13 crossclaim arises out of the same subject matter as the original action, involves the same persons and issues, and the court has subject matter jurisdiction over the original action, then no independent basis for jurisdiction for the crossclaim need be alleged. Opp. at 24 (citing Glens Falls Indem. Co. v. United States ex rel. & to Use of Westinghouse Elec. Supply Co., 229 F.2d 370, 374 (9th Cir. 1955)).

All parties agree that because Abaxis and Zoetis’s crossclaim, as currently alleged, does not maintain complete diversity between defendants (Abaxis is a California citizen) and cross-defendants (TCSL is a California citizen), the court cannot exercise original jurisdiction over the crossclaim pursuant to title 28 U.S.C. § 1332.2 In order to exercise jurisdiction over the crossclaim, defendants must demonstrate that the court should exercise its discretion and assert jurisdiction pursuant to the supplemental jurisdiction statute.

The supplemental jurisdiction statute provides that
Except as provided in subsections (b) and (c) or as expressly provided otherwise by Federal statute, in any civil action of which the district courts have original jurisdiction, the district courts shall have supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution. Such supplemental jurisdiction shall include claims that involve the joinder or intervention of additional parties.
28 U.S.C. § 1367(a). Supplemental jurisdiction “is a doctrine of discretion, not of plaintiff’s right.” United Mine Workers of Am. v. Gibbs, 383 U.S. 715, 726 (1966). Supplemental jurisdiction “may be exercised when federal and state claims have a ‘common nucleus of operative fact’ and would ordinarily be expected to [be tried] all in one judicial proceeding.” Osborn v. Haley, 549 U.S. 225, 245 (2007) (alteration in original) (quoting Gibbs, 383 U.S. at 725)).

There does not appear to be any dispute that court has original jurisdiction over the underlying action between plaintiff Underwriters and defendants Abaxis and Zoetis. According to the SAC, Underwriters is incorporated and has its principal place of business in the United Kingdom, (SAC ¶ 3), Abaxis is incorporated and has its principal place of business in California, (id. ¶ 5), and Zoetis is incorporated in Delaware and has its principal place of business in New Jersey, (id. ¶ 6). The amount in controversy is at least $600,000, (id. ¶ 88), and, therefore, the original action meets the requirements for diversity jurisdiction, 28 U.S.C. § 1332.

At this point in the analysis, the court requested, (Dkt. 94), and the parties filed supplemental briefing3 on two questions: whether CHR was properly named as cross-defendant under Rule 13(g) and whether the court could exercise supplemental jurisdiction. Those questions directly implicate section 1367(b), which precludes supplemental jurisdiction “over claims by plaintiffs against persons made parties under Rule 14, 19, 20, or 24 of the Federal Rules of Civil Procedure…when exercising supplemental jurisdiction over such claims would be inconsistent with the jurisdictional requirements of section 1332.” 28 U.S.C. § 1367(b).

a. Whether CHR Was Properly Joined Pursuant to Rule 13(g)
*5 The court’s request for supplemental briefing pointed out that defendants’ crossclaim against CHR may not have been properly within the scope of Rule 13(g) because, at the time defendants filed their crossclaim, CHR had been dismissed from the case and was no longer a “coparty” as required to assert a crossclaim. Dkt. 94 at 3. If CHR should have been joined (or re-joined as it were) to this action by a different Federal Rule of Civil Procedure, then such a fact would potentially implicate title 28 U.S.C. § 1367(b), which prohibits supplemental jurisdiction over parties added by Rules 14, 19, or 20 and where, as here, original jurisdiction rests on the diversity jurisdiction statute, § 1332.

Federal Rule of Civil Procedure 13 provides that “[a] pleading may state as a crossclaim any claim by one party against a coparty….” Fed. R. Civ. P. 13(g). “Courts have consistently held that ‘[a] cross-claim cannot be asserted against a party who was dismissed from the action previous to the assertion of the cross-claim.’ ” In re Latex Glove Prod. Liab. Litig., 373 F. Supp. 2d 1205, 1207 (W.D. Wash. 2005) (alteration in original) (quoting Wake v. United States, 89 F.3d 53, 63 (2d Cir. 1996)); see also 6 Wright & Miller, Fed. Prac. & Proc., § 1431 (3d ed. 2020) (“[A] crossclaim may only be asserted against coparties in the action. No crossclaim may be brought against a person who has been eliminated or who has withdrawn from the action, since that person no longer is a party.” (footnotes omitted)). This rule applies here. Defendants could not assert a Rule 13(g) crossclaim against either TCSL or CHR, who were dismissed from the action by plaintiff prior to the filing of the crossclaim.

In their supplemental brief, defendants cite two cases as standing for the proposition that courts have held that crossclaims may be maintained against dismissed coparties despite their dismissal. Dkt. 99 at 3. Neither case applies here because in both cases, the crossclaim was asserted prior to the dismissal of the coparty. In United States v. United States Trust Co., 106 F.R.D. 474, 476 (D. Mass. 1985), one of the defendants had already crossclaimed against a separate defendant, who the plaintiff sought to dismiss in an amended complaint. In granting the motion for leave to amend, the court determined that it could retain jurisdiction over the already pleaded crossclaim despite the voluntary dismissal of the cross-defendant. Id. at 477. Similarly, in Adams v. NVR Homes, Inc., 135 F. Supp. 2d 675, 708 (D. Md. 2001), the district court determined that even though the plaintiffs removed a cross-defendant in an amended complaint, the cross-defendant was a proper party to an amended crossclaim because the crossclaim was “previously interposed”, i.e., already existing, against the cross-defendant before his subsequent dismissal by the plaintiffs.

Next, defendants argue that, if the court determines Rule 13(g) to be inapplicable, their claim should still proceed under Rule 14. Dkt. 99 at 5. A third-party claim under Rule 14 is appropriate “when the third party’s liability is in some way dependent on the outcome of the main claim and the third party’s liability is secondary or derivative. It is not sufficient that the third-party claim is a related claim; the claim must be derivatively based on the original plaintiff’s claim.” United States v. One 1977 Mercedes Benz, 450 SEL, VIN 11603302064538, 708 F.2d 444, 452 (9th Cir. 1983) (citations omitted); see Fed. R. Civ. P. 14(a) (“A defending party may, as third-party plaintiff, serve a summons and complaint on a nonparty who is or may be liable to it for all or part of the claim against it.”). Similar to Rule 13, the purpose of Rule 14 is to “promote judicial efficiency by eliminating the necessity for the defendant to bring a separate action against a third individual who may be secondarily or derivatively liable to the defendant for all or part of the plaintiff’s original claim.” Sw. Adm’rs, Inc. v. Rozay’s Transfer, 791 F.2d 769, 777 (9th Cir. 1986) (citation omitted).

*6 The court agrees with defendants’ general proposition that, if they can establish that CHR’s liability is in some way dependent on the outcome of the main claim and CHR’s liability is secondary or derivative of defendants’ liability, then Rule 14 is appropriate here.4 The allegations in the SACC pertain to the same common nucleus of operative fact as the SAC such that judicial economy would be served by trying the cases together. Further, Abaxis and Zoetis bring an equitable indemnity claim and a contribution claim, which are typical derivative claims in a third-party complaint. See Am. Zurich Ins. Co. v. Cooper Tire & Rubber Co., 512 F.3d 800, 805 (6th Cir. 2008) (“The third-party complaint is in the nature of an indemnity or contribution claim.”).

Rule 14’s derivative claim requirement implicates defendants’ newly alleged tort claims. Defendants argue their negligence, conversion, misrepresentation, and interference with prospective economic advantage claims are also dependent on the outcome of plaintiff’s claims. Dkt. 99 at 8. While these claims certainly implicate the same general fact pattern as plaintiff’s breach of contract claim, defendants cite no authority that the new tort claims establish CHR’s derivative liability to Abaxis and Zoetis for plaintiff’s breach of contract claim. Indeed, “Rule 14(a) does not allow a third-party complaint to be founded on a defendant’s independent cause of action against a third-party defendant, even though arising out of the same occurrence underlying plaintiff’s claim, because a third-party complaint must be founded on a third party’s actual or potential liability to the defendant for all or part of the plaintiff’s claim against the defendant. Am. Zurich Ins., 512 F.3d at 805 (citing United States v. Olavarrieta, 812 F.2d 640, 643 (11th Cir. 1987)); see also Gandy v. Shaklan-Brown, 2008 WL 4446708, at *2 (D. Ariz. Sept. 30, 2008) (denying motion to add third party complaint where defendant alleged third-party misrepresentation and fraud claims there were “transactionally related to the plaintiff’s claims” but find the claims were not wholly dependent on outcome of main claims). Thus, the viability of defendants’ third-party claim rises and falls on the viability of their equitable indemnity and contribution claims, addressed below.

b. Whether the Court Should Exercise Supplemental Jurisdiction
The court agrees with defendants that exercising supplemental jurisdiction is appropriate in this case. First, Abaxis and Zoetis’s claims derive from the same “common nucleus of operative fact,” Osborn, 549 U.S. at 245, as plaintiff’s claims in the SAC. CHR contends the original action involves only a contractual dispute between plaintiff and Abaxis, (Reply at 15), but this is an overly narrow view of the operative facts. The common nucleus of operative fact in both the original action and the crossclaim is the alleged mishandling of the shipment from Abaxis to Schein. The breach of contract claim is predicated on damage to that shipment as are defendants’ tort and indemnification claims.

*7 Having determined there is supplemental jurisdiction over defendants’ claims under section 1367(a), the court next considers whether section 1367(b) divests it of supplemental jurisdiction. The court finds persuasive Abaxis and Zoetis’s argument that the court can exercise supplemental jurisdiction.5 While the Ninth Circuit has not addressed the issue, several courts of appeal have held that section 1367(b)’s use of the term “claims by plaintiffs” only refers to the original plaintiffs and not defendants who then assert a crossclaim or third-party claim. Allstate Interiors & Exteriors, Inc. v. Stonestreet Const., LLC, 730 F.3d 67, 73 (1st Cir. 2013) (collecting cases). As explained by the Sixth Circuit, [t]he supplemental jurisdiction provision, 28 U.S.C. § 1367(b), states congressional intent to prevent original plaintiffs—but not defendants or third parties— from circumventing the requirements of diversity.” Grimes v. Mazda N. Am. Operations, 355 F.3d 566, 572 (6th Cir. 2004). Accordingly, because defendants Abaxis and Zoetis are not the original plaintiffs, section 1367(b) does not defeat supplemental jurisdiction in this case.

Finally, the court considers whether to decline to exercise supplemental jurisdiction pursuant to section 1367(c). Both CHR and plaintiff Underwriters argue that the court should decline to exercise supplemental jurisdiction over Abaxis and Zoetis’s claims. Underwriters contends that defendants’ claims would substantially predominate over its claim because their only remaining claim is a breach of contract claim involving interpretation of a written contract while defendants’ tort claims will be more complex and fact intensive. Dkt. 95 at 5. CHR joins in plaintiff’s arguments. Dkt. 98 at 7. Defendants respond that there is no concern that state law claims would predominate over federal claims because all remaining claims are state law claims. Dkt. 99 at 10.

The court finds that, as alleged, defendants’ claims would not predominate over plaintiff’s claim. While the breach of contract claim may not require a fact-intensive inquiry, it is plausible that the affirmative defenses raised by defendants will implicate similar facts as defendants’ third-party claims against CHR. See, e.g., SACC ¶ 97 (third party negligence). In sum, this court has supplemental jurisdiction over defendants’ claims, and proceeds to consider the merits of their equitable indemnification and contribution claims.

2. Fifth Claim—Equitable Indemnification
Abaxis and Zoetis’s fifth claim is for equitable indemnification. SACC ¶¶ 71–75. The doctrine of equitable indemnity “permit[s] a concurrent tortfeasor to obtain partial indemnity from other concurrent tortfeasors on a comparative fault basis.” Am. Motorcycle Ass’n v. Superior Ct., 20 Cal. 3d 578, 598 (1978). To assert equitable indemnity there must be a joint legal obligation to the injured party, i.e., “there can be no indemnity without liability.” Prince v. Pac. Gas. & Elec. Co., 45 Cal. 4th 1151, 1165 (2009) (citation omitted).

In its prior order granting CHR’s motion to dismiss, the court determined that the allegations in the SAC demonstrated that plaintiff Underwriters could only recover against defendants Abaxis and Zoetis for breach of contract. The court rested its conclusion on two observations. First, while plaintiff previously alleged a cause of action sounding in tort against defendants, the SAC voluntarily dismissed that cause of action and only alleged a breach of contract claim against Abaxis and Zoetis. Dkt. 63 at 7. Second, despite plaintiff’s factual allegations against defendants alleging that Abaxis was negligent and breached its duties to Schein, those allegations merely recast the alleged breach of contract as a breach of a legal duty of care. Id. The court applied the rule from Robinson Helicopter, 34 Cal. 4th at 991–92 (quoting Freeman & Mills, Inc. v. Belcher Oil Co. 11 Cal. 4th 85, 107 (1995) (Mosk, J., concurring in part)), that “courts will generally enforce the breach of a contractual promise through contract law, except when the actions that constitute the breach violate a social policy that merits the imposition of tort remedies.” In other words, even if plaintiff had not voluntarily dismissed its tort cause of action against defendants, plaintiff had not alleged a violation of a duty independent of the contract that would allow it to recover in tort. Dkt. 63 at 7.

*8 Assuming plaintiff could not state a tort claim against Abaxis, the question then became whether Abaxis could seek equitable indemnification against CHR. “California law does not permit apportionment of damages for breach of contract.” Stop Loss Ins. Brokers, Inc. v. Brown & Toland Med. Grp., 143 Cal. App. 4th 1036, 1040–42 & n.2 (Ct. App. 2006); see also Miller v. Sec. Life of Denver Ins. Co., 2012 WL 1029279, at *5 (N.D. Cal. Mar. 26, 2012) (“A claim for equitable indemnity requires a tort claim asserted by the original plaintiff against the proposed indemnitee on which to base joint and several liability, between the proposed indemnitor and indemnitee.”). The predicate for an equitable indemnification claim is that the proposed indemnitor and indemnitee are joint tortfeasors. See, e.g., Jocer Enters., Inc. v. Price, 183 Cal. App. 4th 559, 573 (Ct. App. 2010) (“[N]either traditional equitable indemnity nor implied contractual indemnity is available ‘in the absence of a joint legal obligation to the injured party.’ ” (quoting Prince, 45 Cal. 4th at 1160–61)). The court reasoned that if plaintiff could not bring a tort claim against Abaxis, then Abaxis could not be a tortfeasor, CHR could not be a joint tortfeasor with Abaxis, and Abaxis failed to state a claim for equitable indemnity. Dkt. 63 at 7–8.

In its current motion, CHR restates, essentially verbatim, the court’s prior order in support of its argument that defendants cannot state a claim against CHR for equitable indemnification or contribution. See Mtn. at 8–11. In response, defendants argue that an indemnitee sued in contract can assert claims for equitable indemnity. Opp. at 8. Defendants acknowledge that both an indemnitor and indemnitee must have some legal obligation to the plaintiff; however, they argue that, where an indemnitor’s tort results in harm to a third party, equitable indemnity does not require that the indemnitee also be sued in tort by the same third party. Id. at 10. In this case, defendants, as indemnitees, would be able to plead an equitable indemnity claim against CHR, as indemnitor, because CHR allegedly violated a legal duty to Schein and Schein sued defendants.

Defendants also distinguish Stop Loss’s holding, arguing that it does not rely on any determination concerning the tort liability of the indemnitee and its holding should be limited to situations when a tort obligation exists for the indemnitor. Id. at 10–11. Finally, defendants discuss at length a 2019 California Court of Appeal decision, PCAM, LLC v. Bally Total Fitness of California, Inc., 2019 WL 2265583 (Cal. Ct. App. May 28, 2019), which they contend stands for the proposition that a cross-claimant can recover on an equitable indemnity claim against a cross-defendant for a breach of contract claim. See id. 11–15.

The common law of equitable indemnification arose in the context of multiple tortfeasors. Fireman’s Fund Ins. Co. v. Haslam, 29 Cal. App. 4th 1347, 1353–54 (Ct. App. 1994) (“The common law equitable indemnity doctrine relates to the allocation of loss among multiple tortfeasors.” (citing Am. Motorcycle Ass’n, 20 Cal. 3d at 583, 592)). Further, the doctrine applies only among defendants who are jointly and severally liable to the plaintiff. BFGC Architects Planners, Inc. v. Forcum/Mackey Const., Inc. (“BFGC”), 119 Cal. App. 4th 848, 852 (Ct. App. 2004) (citing GEM Developers v. Hallcraft Homes of San Diego, Inc., 213 Cal. App. 3d 419, 430 (Ct. App. 1989)). To restate the court’s prior finding, contractual liability is not sufficient under California law to plead equitable indemnity. Dkt. 63 at 6. That point is evident from the discussion between the majority and concurring opinions in Stop Loss. As stated by the majority opinion, “California law does not permit equitable apportionment of damages for breach of contract….” Stop Loss, 143 Cal. App. 4th at 1041 n.2.

The Stop Loss concurring opinion cited the New Mexico Supreme Court’s opinion in In re Consolidated Vista Hills Litigation (“Amrep”), 893 P.2d 438 (N.M. 1995), where the court “permitted an indemnity claim by a building contractor against a materials supplier even though the two were not joint tortfeasors and the sole loss in question was economic.” Stop Loss, 143 Cal. App. 4th at 1053 (Pollak, J., concurring in the judgment). As described by the concurring opinion, Amrep modified the “common-law right to indemnification when an indemnitee has been adjudged liable for full damages on a third-party claim that was not susceptible under law to proration of fault among concurrent tortfeasors.” Id. (quoting Amrep, 893 P.2d at 448–49). The concurring opinion summarized the current state of New Mexico law: “After Amrep…a defendant liable in contract may seek proportional indemnity based on principles of comparative fault in the same way a defendant jointly and severally liable in tort can seek comparative contribution.” Id. (citation omitted).

*9 The critical point for purpose of this opinion, however, is not so much the current state of New Mexico law, but that the concurring opinion explicitly acknowledged that equitable apportionment of damages in contract actions is not the law in California:
[a]lthough there may be good reason to [extend equitable indemnification to contractual defendants], any fundamental change should come from our Supreme Court, or from the Legislature. Absent such a change, I agree with the majority that we must adhere to the rule that equitable indemnity may be obtained only from one who is jointly and severally liable to the injured party based on the commission of a tort.
Id. at 1054–55 (emphasis added); see also In re Med. Capital Sec. Litig., 842 F. Supp. 2d 1208, 1213 (C.D. Cal. 2012) (citing Stop Loss concurring opinion and stating “[i]t is extremely telling that even a proponent of an expansive equitable indemnification doctrine recognizes that there is presently no legal basis for such an extension”).

Defendants attempt to distinguish Stop Loss as only focusing its analysis on whether a tort obligation existed for the indemnitor and the Stop Loss court did not examine or discuss whether the indemnitee in question must have a tort duty. Opp. at 10. The district court in In re Medical Capital Securities Litigation, 842 F. Supp. 2d at 1213, rejected a similar argument, reasoning “[a]s the Stop Loss court made clear, both the party seeking indemnification and the party from which it seeks indemnification must be tortfeasors.”

Other courts have also rejected equitable indemnity claims based on an underlying breach of contract claim. See Zurich Am. Ins. Co. of Ill. v. VForce Inc., 2020 WL 2732046, at *9 (E.D. Cal. May 26, 2020); see also Tesoro Ref. & Mktg. Co. LLC v. Pac. Gas & Elec. Co., 2014 WL 4364393, at *7 (N.D. Cal. Aug. 29, 2014) (“Breach of that contractual duty—even if negligent—does not give rise to tort liability and cannot support a claim for equitable indemnity.”); Travelers Cas. & Sur. Co. of Am. v. Desert Gold Ventures, LLC, 2010 WL 5017798, at *15 (C.D. Cal. Nov. 19, 2010) (“[W]hatever losses [defendants] incur as a result of their breach of the [contract] are theirs alone, not subject to apportionment.”).

Defendants cite PCAM, LLC v. Bally Total Fitness of California, Inc., 2019 WL 2265583, as a case where the California Court of Appeal permitted an equitable indemnity claim against an indemnitor where the indemnitee was sued in contract. In that case, one of the defendants argued that, under Stop Loss, it could not be liable for equitable indemnification with respect to a settlement paid in a different case because it was a contract action, not a tort action. Id. at *18. The Court of Appeal stated that the cross-defendant’s “view of equitable indemnity is too constricted by far” and the underlying claim was based in tort. Id. at *18–19. Thus, “none of the damages [the defendant] sought to recover, including its settlement payment to [the plaintiff]…would have been incurred were it not for the alleged negligence…that caused [the plaintiff’s] injuries. Id. at *19.

PCAM does not call into question the rule from Stop Loss; rather, the PCAM court determined that Stop Loss did not apply on the facts presented because the plaintiff in that case had no contractual privity with any of the parties (he was attacked in a parking lot) and there was a basis for tort liability against the defendant. Id. at *18–19. The breach of contract claim arose afterword, relating to a settlement that resolved the underlying tort claim. Here, Schein and Abaxis were in contractual privity before the events in question took place and that relationship governs the rights and duties of the parties. For that reason, this case falls squarely within the Stop Loss rule and PCAM is inapplicable. Defendants cannot state a claim for equitable indemnity against CHR.

*10 For the foregoing reasons, CHR’s motion to dismiss Abaxis and Zoetis’s claim for equitable indemnity is GRANTED. Because California law prohibits the cause of action, the claim is DISMISSED WITH PREJUDICE.

3. Sixth Claim—Contribution
Defendants’ sixth claim is for contribution. California Civil Procedure of Code § 875(a) provides “[w]here a money judgment has been rendered jointly against two or more defendants in a tort action there shall be a right of contribution among them as hereinafter provided.” The right of contribution thus does not come into existence until the issuance of a judgment. Sullins v. Exxon/Mobil Corp., 729 F. Supp. 2d 1129, 1138 (N.D. Cal. 2010) (citing Coca–Cola Bottling Co. v. Lucky Stores, Inc., 11 Cal. App. 4th 1372, 1378 (Ct. App. 1992)). Of course, there has been no judgment in this case against Abaxis and Zoetis and this claim is premature. Further, as discussed, contribution requires defendants and CHR to be joint tortfeasors, which for the reasons previously discussed, they are not.

Defendants’ first through fourth claims relate to torts allegedly committed by TCSL’s employee in the scope of his employment and CHR directed TCSL. As discussed, defendants have not established that these tort claims are derivative of plaintiff’s breach of contract claim against defendants, as required by Rule 14. Therefore, these claims will also be dismissed without prejudice so that defendants may pursue them in an appropriate venue.

For the foregoing reasons, CHR’s motion to dismiss Abaxis and Zoetis’s first through fourth claims and sixth claim is GRANTED and the claims are DISMISSED WITHOUT PREJUDICE.

CONCLUSION
For the reasons stated, CHR’s motion to dismiss is GRANTED, defendants’ fifth claim for equitable indemnity is DISMISSED WITH PREJUDICE and all other claims are DISMISSED WITHOUT PREJUDICE. Because defendants have previously been permitted leave to amend the crossclaim (properly stated as a third-party complaint) and have not identified any further factual matter that would state a claim, further amendment would be futile. Thus, the dismissal is WITHOUT LEAVE TO AMEND.

IT IS SO ORDERED.

Dated: September 30, 2020

/s/ Phyllis J. Hamilton

PHYLLIS J. HAMILTON

United States District Judge
All Citations
Slip Copy, 2020 WL 5816888

Footnotes

1
At some later point in time, defendant Zoetis merged with Abaxis and plaintiff alleges that Zoetis has agreed to assume the liabilities of Abaxis. SAC ¶¶ 63–65.

2
The SACC only alleges jurisdiction on the basis of section 1332, (SACC ¶ 1), and the court is satisfied there is no federal question jurisdiction implicated by the crossclaim.

3
At the court’s invitation, plaintiff Underwriters also filed a supplemental brief. Dkt. 95.

4
Abaxis and Zoetis filed their original answer and crossclaim in the same document on December 4, 2019. Dkt. 42. The Clerk of Court’s office issued a summons for CHR, (Dkt. 44), and defendants filed an executed waiver of service on January 3, 2020, (Dkt. 47). This sequence of events underscores the fact that, had defendants’ action been properly labeled as a third-party complaint under Rule 14, defendants would have met the timing requirement of Rule 14(a)(1) and did not need the court’s leave to file the third- party complaint. At the same time, the fact that a summons and complaint was issued and served reinforces the court’s conclusion that, at the time of service, CHR was not a party to the case and could not have been subject to a Rule 13 crossclaim.

5
CHR concedes that section 1367(b) does not apply. Dkt. 98 at 6 n.1.