Zurich American Insurance Company v. Scott, Murphy & Daniel, LLC

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF TENNESSEE

AT WINCHESTER

ZURICH AMERICAN INSURANCE )

COMPANY, itself, and as assignee of ) Case No. 4:22-cv-29

BROWN-FORMAN CORPORATION )

) Judge Travis R. McDonough

Plaintiff, )

) Magistrate Judge Susan K. Lee

v. )

)

SCOTT, MURPHY & DANIEL, LLC, )

)

Defendant/Third-Party Plaintiff,

)

MESSER INDUSTRIAL BUILDERS )

LLC, MCMAHAN CONSTRUCTION, )

INC., and UNITED STRUCTURES OF )

AMERICA, INC., )

)

Third-Party Defendants

)

MESSER INDUSTRIAL BUILDERS, )

LLC, ) Case No. 4:22-cv-30

)

Plaintiff/Counter-Defendant, ) Judge Travis R. McDonough

)

v. ) Magistrate Judge Susan K. Lee

)

SCOTT, MURPHY & DANIEL, LLC, )

)

Defendant/Counter-Plaintiff/Third-

)

Party Plaintiff

)

v. )

)

MCMAHAN CONSTRUCTION, INC., )

and UNITED STRUCTURES OF

)

AMERICA, INC.,

)

Third-Party Defendants )

)

MEMORANDUM OPINION

Before the Court is Third-Party Defendant United Structures of America, Inc.’s (“USA”)

motion to dismiss Defendant/Counter-Plaintiff/Third-Party Plaintiff Scott, Murphy & Daniel,

LLC’s (“SMD”) third-party complaint against it. (Doc. 38.)1 For the following reasons, the

Court will GRANT the motion (id.).

I. BACKGROUND2

A. Initial Complaint

In 2016, Brown-Forman Corporation (“Brown-Forman”) contracted with

Plaintiff/Counter-Defendant Messer Industrial Builders, LLC (“Messer”) to provide general

contracting services on a project to improve its facilities in Lynchburg, Tennessee. (Doc. 1, at

2.) Messer subcontracted with SMD to provide “all labor, materials, equipment and

supervision.” (Id.) The project reached substantial completion “on or around November 2018.”

(Id. at 3.)

At some point after work ended, leaks formed inside the prefabricated warehouse roof.

(Id.) Messer and Brown-Forman executed a settlement agreement regarding the project on April

5, 2022. (Id. at 4.) As part of the settlement, Brown-Forman assigned its rights against the

responsible parties to Messer and Messer’s insurance company, Plaintiff Zurich American

Insurance Company (“Zurich”). Pursuant to its subcontract with Messer, SMD is responsible for

non-conforming work. (Id.)

1 Because the Court consolidated this matter (Docs. 18, 22), it cites docket numbers from Case

No. 4:22-cv-29 unless otherwise noted.

2 The Court described the facts underlying this dispute in its January 3, 2024 memorandum

opinion. (See Doc. 47, at 2–4.) Section I.A is unchanged from that opinion.

Zurich filed its action against SMD on August 22, 2022 (Doc. 1), and Messer filed its

action against SMD on August 24, 2022 (Doc. 1 in Case No. 4:22-cv-30). Both allege claims

against SMD for: (1) breach of contract and (2) breach of warranty. (Doc. 1, at 5–7; Doc. 1 in

Case No. 4:22-cv-30, at 5–7.) Zurich also alleges a demand-for-contribution claim against SMD

under Tennessee Code Annotated § 29-11-102. (Doc. 1, at 7.) The Court consolidated these

cases for both discovery (Doc. 18), as well as for dispositive motions and trial (Doc. 22).

B. USA’s Bankruptcy Proceeding3

On January 11, 2022, USA filed a voluntary petition for Chapter 11 Bankruptcy in the

United States Bankruptcy Court for the Southern District of Texas. Chapter 11 Subchapter V

Voluntary Petition, In Re United Structures of Am., Inc. & Green Head LLC (hereinafter “USA

Bankruptcy Proceeding”), No. 22-30104, (S.D. Tex. Jan. 11, 2022), Doc. 1. The bankruptcy

court discharged USA’s debt on October 26, 2022, ordering:

Except as otherwise expressly provided in the Plan or in this Confirmation Order,

(a) the Debtor shall be discharged from any debt to the fullest extent provided by

11 U.S.C. § 1141(d); and (b) holders of any discharged claims against the Debtor

are enjoined from enforcing any such claim to the fullest extent provided by 11

U.S.C. § 524(a).

Order Confirming Chapter 11 Plan, USA Bankruptcy Proceeding, Doc. 96, at 9. This order was

served on USA’s creditors—including SMD—on October 28, 2022. Order Confirming First

Amended Subchapter V Plan of Liquidation, USA Bankruptcy Proceeding, Doc. 98, at 11. On

3 While USA’s bankruptcy proceeding is not detailed in SMD’s third-party complaint (see

generally Doc. 27), the Court may consider matters outside of the pleadings in conjunction with

a motion to dismiss without converting it into a motion for summary judgment if the outside

materials are “integral to the complaint, are public records, or are otherwise appropriate for the

taking of judicial notice.” Wyser-Pratte Mgmt. Co. v. Telxon Corp., 413 F.3d 553, 560 (6th Cir.

2005) (citations omitted). Here, USA’s bankruptcy proceeding is public record, and, therefore,

the Court takes judicial notice of the proceeding.

March 24, 2023, SMD moved the bankruptcy court for relief from the automatic stay4, Amended

Motion for Relief from Stay, USA Bankruptcy Proceeding, Doc. 130, which the bankruptcy court

granted on April 14, 2023. Order Granting Amended Motion for Relief from Stay, USA

Bankruptcy Proceeding, Doc. 133.

C. Procedural History

On April 24, 2023, SMD moved this Court to file an amended answer asserting a

counterclaim and third-party claims. (Doc. 23.) This Court granted that motion (Doc. 25), and,

on May 23, 2023, SMD filed amended answers asserting a counterclaim and third-party claims in

both actions. (Doc. 27; Doc. 25 in Case No. 4:22-cv-30.) In its amended answers, SMD asserted

a counterclaim against Messer for indemnity and contribution. (Doc. 27, at 4.) It also filed a

third-party complaint, asserting a claim against Third-Party Defendant McMahan Construction,

Inc. (“McMahan”) for indemnity and contribution and a claim against USA for breach of

contract and indemnity. (Id. at 4–6.) SMD alleged the following in support of its counterclaim

and third-party complaint:

 On or around November 15, 2016, Messer contracted with Brown-Forman

to design, engineer, and provide general contracting services for the

process, bottling and facilities expansion and site modification to the Tract

II site in Lynchburg, Tennessee (“Project”).

 On or around July 7, 2016, SMD contracted with USA, Inc. for the

procurement of the pre-engineered metal building and materials to be

erected and installed pursuant to Project plans.

 Messer contracted with McMahan to complete the erection and installation

of the pre-engineered metal building and materials. Upon information and

belief, Messer and McMahan executed an agreement setting forth the

terms of the relationship and scope of work.

 Beginning in 2019, Brown-Forman started reporting leaks from the roof of

the Project.

4 The automatic stay, which is further discussed in Section III, is a mechanism contained in 11

U.S.C. § 362 that stops all proceedings against a debtor during the pendency of its bankruptcy.

 Pursuant to its contract [with] Brown-Forman, Messer had the obligation

to design and complete work on the project consistent with approved

submittals to Brown-Forman.

 Either th[r]ough its poor design or lack of good professional practices and

workmanlike efforts, Messer provided Brown-Forman with a completed

Project that leaked.

 McMahan’s work on the Project also failed to comply with professional

practices, standards and workmanlike efforts, which resulted in the Project

having leaks.

 Alternatively, USA, Inc. manufactured a pre-engineered metal building

and components that failed to comply with the requirement and

specifications set forth in the Project plans.

(Id. at 3–4.)

On November 3, 2023, McMahan filed a motion to dismiss SMD’s third-party complaint

against it, arguing that the statute of repose provided in Tennessee Code Annotated § 28-3-202

barred SMD’s third-party complaint. (Doc. 36, at 4.) On November 14, 2023, USA filed a

motion to dismiss SMD’s third-party complaint against it, arguing that the same statute of repose

barred SMD’s third-party complaint and that SMD did not properly serve USA. (Doc. 38, at 6ؘ–

11.)

On January 3, 2024, the Court granted McMahan’s motion to dismiss, finding that the

statute of repose provided in Tennessee Code Annotated § 28-3-202 barred SMD’s third-party

complaint against it. (Doc. 47, at 13–14.) Although, the Court found that SMD had not properly

served USA, the Court denied USA’s motion to dismiss on this ground and, instead, extended the

service deadline for good cause. (Id. at 9.) The opinion also stated that, because USA had not

yet been properly served, the Court lacked jurisdiction to dismiss USA from the case, even

though it noted that the statute of repose provided in Tennessee Code Annotated § 28-3-202

likely also barred SMD’s third-party complaint against USA. (Id. at 9 n.2, 14.) Therefore, the

Court denied USA’s motion to dismiss and ordered that, should SMD properly effectuate

service, SMD shall file briefing stating why its third-party complaint against USA is not also

barred by the statute of repose provided in Tennessee Code Annotated § 28-3-202. (Id. at 14.)

USA waived service on February 14, 2024 (Doc. 51), and SMD filed its supplemental briefing

on March 1, 2024. (Doc. 52.) USA’s motion to dismiss is ripe for the Court’s review.

II. STANDARD OF REVIEW

According to Rule 8 of the Federal Rules of Civil Procedure, a plaintiff’s complaint must

contain “a short and plain statement of the claim showing that the pleader is entitled to relief.”

Fed. R. Civ. P. 8(a)(2). Though the statement need not contain detailed factual allegations, it

must contain “factual content that allows the court to draw the reasonable inference that the

defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

Rule 8 “demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation.”

Id.

A defendant may obtain dismissal of a claim that fails to satisfy Rule 8 by filing a motion

pursuant to Rule 12(b)(6). On a Rule 12(b)(6) motion, the Court considers not whether the

plaintiff will ultimately prevail, but whether the facts permit the court to infer “more than the

mere possibility of misconduct.” Id. at 679. For purposes of this determination, the Court

construes the complaint in the light most favorable to the plaintiff and assumes the veracity of all

well-pleaded factual allegations in the complaint. Thurman v. Pfizer, Inc., 484 F.3d 855, 859

(6th Cir. 2007). This assumption of veracity, however, does not extend to bare assertions of

legal conclusions, Iqbal, 556 U.S. at 679, nor is the Court “bound to accept as true a legal

conclusion couched as a factual allegation,” Papasan v. Allain, 478 U.S. 265, 286 (1986).

After sorting the factual allegations from the legal conclusions, the Court next considers

whether the factual allegations, if true, would support a claim entitling the plaintiff to relief.

Thurman, 484 F.3d at 859. This factual matter must “state a claim to relief that is plausible on its

face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). Plausibility “is not akin to a

‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted

unlawfully.” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 556). “[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)).

III. ANALYSIS

As discussed in the Court’s January 3, 2024 memorandum opinion, Tennessee Code

Annotated § 28-3-202 creates a four-year statute of repose, and substantial completion of the

project underlying this dispute occurred “on or around November 2018.” (Doc. 1, at 3; Doc. 47,

at 9.) SMD filed its third-party complaint on May 23, 2023. (Doc. 27.) Therefore, unless the

statute of repose provided in Tennessee Code Annotated § 28-3-202 was tolled, SMD’s third-

party complaint against USA is barred.5

SMD argues that USA’s bankruptcy tolled the statute of repose contained in Tennessee

Code Annotated § 28-3-202. (Doc. 52, at 2.) Under 11 U.S.C. § 362(a)(1), a bankruptcy petition

automatically stays:

the commencement or continuation . . . of a judicial . . . proceeding against the

debtor that was or could have been commenced before the commencement of the

5 In opposing McMahan and USA’s motions to dismiss, SMD argued that Tennessee Code

Annotated § 28-1-114(a) creates an exception to the statute of repose contained in Tennessee

Code Annotated § 28-3-202. (Doc. 41, at 2; Doc. 44, at 7.) The Court rejected that argument in

its January 3, 2024 memorandum opinion. (Doc. 47, at 10–14.) In doing so, the Court noted

that, while Tennessee Code Annotated § 28-1-114(a)’s language provides that it applies to “the

applicable statute of limitations or any statutory limitation of time,” the Tennessee Supreme

Court has stated that, ‘“for another part of the code’ to create an exception to a statute of

repose[,] it must ‘specifically referenc[e] the particular statute of repose.”’ (Id. at 12 (quoting

Calaway ex rel. Calaway v. Schucker, 193 S.W.3d 509, 516 (Tenn. 2005).) Tennessee Code

case under this title, or to recover a claim against the debtor that arose before the

commencement of the case under this title.

This automatic stay lasts until the earliest of: (1) “the time the case is closed”; (2) “the time the

case is dismissed”; or (3) “if the case is a case . . . under chapter . . . 11 . . . the time a discharge

is granted or denied.” And, under 11 U.S.C. § 108(c):

[I]f applicable nonbankruptcy law . . . fixes a period for commencing or

continuing a civil action in a court other than a bankruptcy court on a claim

Annotated § 28-1-114(a) does not specifically reference the statute of repose contained in

Tennessee Code Annotated § 28-3-202. Therefore, the Court concluded that Tennessee Code

Annotated § 28-1-114(a) did not except the statute of repose contained in Tennessee Code

Annotated § 28-3-202. (Doc. 47, at 13–14.)

SMD filed a notice of supplemental authority in which it attached a Tennessee Court of Appeals

case decided on March 6, 2024, where the court held that Tennessee Code Annotated § 28-1-

114(a) created an exception to the statute of repose contained in Tennessee Code Annotated §

28-3-202. See Fountains Germantown Holdings, LLC v. Doster Constr. Co., Inc., No. 20-0482-

III(I) (Tenn. Ct. App. Mar. 6, 2024); (Docs. 55; 55-1.) That court, however, did not apply the

test outlines in Calaway; rather, it differentiated Calaway by reasoning that the statute of repose

provided in Tennessee Code Annotated § 28-3-202 “does not contain the same absolute bar

language” as the medical-malpractice statute of repose at issue in Calaway, and it also noted that

Calaway did not address the interplay of Tennessee Code Annotated § 28-1-114(a) with a statute

of repose. (Doc. 55-1, at 8–9.) It further reasoned that “[a] plain reading of [Tennesssee Code

Annotated] leads to the conclusion that it applies ‘to any statutory limitation of time, however

characterized,” which includes a statute of repose. (Id. at 9.)

This Court is unpersuaded by this non-binding authority. First, while Calaway did not address

the interplay of Tennessee Code Annotated § 28-1-114(a) and a statute of repose, it created

specific circumstances in which the legislature can except a statute of repose. The language

contained in the medical-malpractice statute of repose in Calaway, which provides that “in no

event” shall an action be brought after the statute-of-repose period, differs little, if any, from the

statute of repose contained in Tennessee Code Annotated § 28-3-202, which provides that an

action “must” be brought within the statute-of-repose period. 193 S.W.3d at 516. This minimal

difference is not enough to abandon the test provided in Calaway. Second, while the language

contained in Tennessee Code Annotated § 28-1-114(a) could be read to intend to reach a statute

of repose, as this court noted in its January 3, 2024 opinion, this is not the path established by the

Tennessee Supreme Court. (Doc. 47, at 12.) Nor is the test articulated in Calaway divorced

from the plain-reading standard of textual interpretation, as Calaway applied this same standard.

See 193 S.W.3d at 518 (“[O]ur analysis relies on the plain meaning of the terms employed by the

General Assembly to compose the statute.”).

Accordingly, this recently decided non-binding authority does not alter the Court’s analysis from

its January 3, 2024 memorandum opinion.

against the debtor . . . and such period has not expired before the date of the filing

of the petition, then such a period does not expire until the later of

(1) the end of such period, including any suspension of such period

occurring on or after the commencement of the case; or

(2) 30 days after notice of the termination or expiration of the stay

under section 362 . . . of this title, as the case may be, with respect

to such claim.

Applied to the present case, in sum, 11 U.S.C. § 108(c) provides that the period by which SMD

must file any action is tolled until the later of: (1) the end of the statute of repose contained in

Tennessee Code Annotated § 28-3-202, including any period of suspension; or (2) thirty days

after notice of the termination or expiration of the end of the automatic stay. See 11 U.S.C. §

108(c). Here, under either subsection, the statute-of-repose period provided in Tennessee Code

Annotated § 28-3-202 expired in November 2022. This renders SMD’s third-party complaint—

which was not filed until May 23, 2023—untimely.

A. Under 11 U.S.C. § 108(c)(1), the Statute-of-Repose Period Contained in

Tennessee Code Annotated § 28-3-202 Expired in November 2022

Because the later date governs, the Court must first establish when the statute-of-repose

period expired under 11 U.S.C. § 108(c)(1). This subsection provides that an action must be

brought by the end of a statute-of-repose period, “including any suspension of such period

occurring on or after the commencement of the case.” 11 U.S.C. § 108(c)(1). The Tennessee

Supreme Court has held that 11 U.S.C. § 108(c) does not, in and of itself, suspend the running of

a statute of limitation or a statute of repose, because “[t]he reference in Section 108(c)(1) to

‘suspension’ is not to the operation of bankruptcy law but to other federal or state statutes that

expressly provide for the suspension of deadlines.” Weaver v. Hamrick, 907 S.W.2d 385, 391

(Tenn. 1995). Therefore, some independent federal or Tennessee statute must provide the basis

for tolling the statute of repose provided in Tennessee Code Annotated § 28-3-202 during a

bankruptcy proceeding. See id. SMD argues that Tennessee Code Annotated § 28-1-109, a

statute providing that “[w]hen the commencement of an action is stayed by injunction, the time

of the continuance of the injunction is not to be counted,” does so. Tennessee courts have held

that Tennessee Code Annotated § 28-1-109 tolls a statute of limitation during a bankruptcy

proceeding. McCullough v. Vaughn, 538 S.W.3d 501, 506 (Tenn. Ct. App. 2017). However, no

Tennessee court has applied Tennessee Code Annotated § 28-1-109 to a statute of repose.

Therefore, to answer whether the statute of repose in Tennessee Code Annotated § 28-3-202 was

tolled during USA’s bankruptcy, the Court “essentially must attempt to place itself in the shoes

of the Tennessee Supreme Court by ‘predicting how that court would rule.”’ Williams v. BMW

of N. Am., LLC, 514 F. Supp. 3d 1036. 1044 (E.D. Tenn. 2021) (quoting Berrington v. Wal-Mart

Stores, Inc., 696 F.3d 604, 608 (6th Cir. 2012) (alterations omitted).

This Court finds that the Tennessee Supreme Court would hold that Tennessee Code

Annotated § 28-1-109 does not toll a statute of repose during a bankruptcy. This conclusion is

supported by important differences between a statute of repose and a statute of limitation.

Unlike a statute of limitation, a statute of repose “generally may not be tolled, even in cases of

extraordinary circumstances beyond a plaintiff’s control.” CTS Corp. v. Waldburger, 573 U.S. 1,

9 (2014) (citations omitted). Tennessee law has also noted this “absolute and unyielding nature”

of a statute of repose, Calaway ex rel. Calaway v. Schucker, 193 S.W.3d 509, 516 (Tenn. 2005),

and that a statute of repose can only be tolled in “exceedingly limited circumstances.” Mills v.

Wong, 155 S.W.3d 916, 920 (Tenn. 2005).

Consistent with this “absolute and unyielding nature,” as discussed in the Court’s January

3, 2024 memorandum opinion, the Tennessee Supreme Court has provided only two ways the

legislature can express its clear intent to toll a statute of repose: (1) in the language of the statute

that contains the statute of repose itself; or (2) in another part of the code specifically referencing

the particular statute of repose. (Doc. 47, at 11–12 (citing Calaway ex rel. Calaway, 193 S.W.3d

at 516).) Tennessee Code Annotated § 28-3-202 does not contain an exception for bankruptcy

proceedings, and Tennessee Code Annotated § 28-1-109 does not mention the specific statute of

repose contained in Tennessee Code Annotated § 28-3-202. Therefore, neither circumstance is

met, and Tennessee Code Annotated § 28-1-109 does not toll the statute of repose located in

Tennessee Code Annotated § 28-3-202. Because no tolling occurred, under 11 U.S.C.§

108(c)(1) the statute-of-repose period expired in November 2022—the same date on which the

statute-of repose period ended.

B. Under 11 U.S.C. § 108(c)(2), the Statute-of-Repose Period Contained in

Tennessee Code Annotated § 28-3-202 Also Expired in November 2022

Under 11 U.S.C. § 108(c)(2), a period to bring a claim lasts for thirty days following

notice of the termination of the automatic stay. Determining when thirty days elapsed following

notice of the end of the automatic stay necessarily requires determining when the automatic stay

ended. USA’s bankruptcy proceeding commenced on January 11, 2022, meaning the automatic

stay began on this date. The automatic stay lasted until the earliest of: (1) the time the

bankruptcy case closed; (2) the time the bankruptcy case was dismissed; or (3) because USA’s

bankruptcy case was a Chapter 11 proceeding, when the discharged is granted or denied. 11

U.S.C. § 362(a)(1). The automatic stay ended on October 26, 2022, when the bankruptcy court

discharged USA through the order confirming the Chapter 11 Plan. Order Confirming Chapter

11 Plan, USA Bankruptcy Proceeding, Doc. 96, at 9 (“Except as otherwise expressly provided in

the Plan or in this Confirmation Order, (a) the Debtor shall be discharged from any debt to the

fullest extent provided by 11 U.S.C. § 1141(d); and (b) holders of any discharged claims against

the Debtor are enjoined from enforcing any such claim to the fullest extent provided by 11

U.S.C. § 524(a).”). SMD was sent notice of USA’s discharge—the event that ended the

automatic stay—on October 28, 2022. Order Confirming First Amended Subchapter V Plan of

Liquidation, USA Bankruptcy Proceeding, Doc. 98, at 11. Therefore, the applicable period to

bring a claim ended thirty days after this notice: November 27, 2022.

Under 11 U.S.C. § 108(c), the latest date SMD could timely bring a claim was November

2022. SMD did not file its third-party complaint until May 23, 2023.6 (Doc. 27.) Therefore,

SMD’s third-party complaint against USA is barred by the statute of repose contained in

Tennessee Code Annotated § 28-3-202.

IV. CONCLUSION

For the above-stated reasons, the Court GRANTS USA’s motion to dismiss SMD’s

third-party complaint against it (Doc. 38). Because no claims remain against USA, it is

DISMISSED from this matter.

SO ORDERED.

/s/ Travis R. McDonough

TRAVIS R. MCDONOUGH

UNITED STATES DISTRICT JUDGE

6 The Court need not address SMD’s argument that its April 24, 2023 motion to file an amended

answer asserting third-party claims against McMahan and USA tolled the statute of repose (Doc.

52, at 7), because even if it did, SMD filed that motion after the statute-of-repose period

contained in Tennessee Code Annotated § 28-3-202 expired the prior November.