Employers Insurance Company of Wausau v. Dan Walker Associates, Inc.

IN THE UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF TENNESSEE

WESTERN DIVISION

)

EMPLOYERS INSURANCE COMPANY )

OF WAUSAU, )

)

Plaintiff, )

)

v. ) No. 22-cv-2530

)

DAN WALKER ASSOCIATES, )

INCORPORATED, et al., )

)

Defendants. )

ORDER GRANTING TIMBER STEEL, LLC’S MOTION TO DISMISS

A&T BUILDERS, LLC’S THIRD-PARTY COMPLAINT FOR

FAILURE TO STATE A CLAIM

Before the Court is Timber Steel, LLC’s (“Timber Steel”)

Motion to Dismiss for Failure to State a Claim, filed July 3,

2023. (ECF No. 114.) Timber Steel seeks dismissal of Defendant

A&T Builders, LLC’s, (“A&T”) June 6, 2023 Third-Party Complaint.

(ECF No. 108.) A&T filed a response in opposition to Timber

Steel’s Motion on July 31, 2023, and Timber Steel replied to the

response on August 14, 2023. (ECF No. 117, 122.) For the

following reasons, the Motion to Dismiss is GRANTED.

I. Background

This suit arises from the partial collapse of a building in

Memphis, Tennessee (“the Property”). (ECF No. 1 at 4-5.)1 Some

1 The facts in this Order are from the Third-Party Complaint

and are found only for purposes of deciding the Motion to

Dismiss.

time in 2018, a portion of the roof of a one-story, concrete and

steel frame commercial structure collapsed during inclement

weather. (Id. at 4.) The owner at the time engaged contractor

Dan Walker Associates, Inc. (“Dan Walker”) to repair the damage.

(Id.) Dan Walker, in turn, hired a number of subcontractors to

provide materials, engineering and design services, and other

needed support. (Id. at 4-5.) The work was completed in April

2020. (Id. at 4.)

On February 28, 2021, the roof again partially collapsed

due to the weather. (Id. at 5.) The collapsed portion was the

same part of the roof that had been repaired. (Id.) Plaintiff

Employers Insurance Company of Wausau, acting as subrogee for

its insured, brought this suit against Dan Walker, A&T, and

other parties engaged in the repair work. (Id. at 1-3.)

Plaintiff brought claims for breach of express warranty,

negligence, negligence per se, and professional negligence.

(Id. at 6-18.) Dan Walker, in turn, brought crossclaims against

A&T under theories of express contractual indemnity, implied

indemnity, and contribution. (ECF No. 12 at 27-30.) On October

31, 2022, the Court issued an order dismissing Timber Steel as a

defendant, pursuant to Plaintiff’s Notice of Voluntary

Dismissal. (ECF No. 34.)

A&T answered Plaintiff’s complaint and Dan Walker’s

crossclaims on December 14, 2022. (ECF Nos. 48, 49.) On

February 16, 2023, A&T moved to amend its pleadings to file

various crossclaims and counterclaims. (ECF No. 76.) It also

moved to file a third-party claim against Timber Steel. (Id.)

The Court granted A&T’s motion in part and denied it in part.

(ECF No. 112.) As relevant here, it granted A&T’s request to

file a third-party indemnity complaint against Timber Steel.

(Id. at 15.) The Court issued that order on June 27, 2023.

However, A&T had already filed its Third-Party Complaint against

Timber Steel on June 6, 2023. (ECF No. 108.)

In its Third-Party Complaint, brought pursuant to Fed. R.

Civ. P. 14(a), A&T alleges that Dan Walker served as the general

contractor to repair the Property. (Id. at 3, ¶ 9.) Dan Walker

retained A&T to repair the Property’s steel components, and the

Property owner retained Stability Engineering, LLC (“Stability”)

to provide structural engineering design services. (Id. at 3-4,

¶¶ 10-11.) A&T, in turn, retained Timber Steel to “detail,

fabricate, and/or manufacture the steel materials and/or

components” pursuant to Stability’s designs, “including but not

limited to the columns, rafters, beams, clips, plates, splices,

washers, bolts and nuts.” (Id. at 4, ¶¶ 14.) A&T alleges that

the Property collapse was caused by “faulty, flawed, or

defective steel materials or components” that Timber Steel made.

(Id. at 4-5, ¶¶ 18-19.)

A&T alleges a single count of indemnification against

Timber Steel, asserting that Timber Steel “negligently detailed,

fabricated and/or manufactured the steel materials and

components,” causing the building collapse that is the subject

of this suit. (Id. at 7, ¶ 31.) A&T asserts that Timber

Steel’s materials “weakened the structural integrity of the

subject property’s [sic] causing excessive deflection of a

supporting beam that resulted in lateral movement.” (Id. at 7,

¶ 28.) A&T maintains that Timber Steel breached its

non-delegable duty to exercise reasonable care in manufacturing

the parts at issue and to make sure that its work was performed

“without flaws, defect or errors, and in a good and workmanlike

manner.” (Id. at 8, ¶¶ 34-35.) A&T argues that, if it is found

liable to any party in the instant suit, Timber Steel is liable

to A&T. (Id. at 8, ¶ 33.)

Timber Steel now moves to dismiss A&T’s Third-Party

Complaint for failure to state a claim under Federal Rule of

Civil Procedure 12(b)(6). (ECF No. 114.) Timber Steel argues

that A&T has failed to allege facts demonstrating an express or

an implied indemnification contract between the two parties and

that A&T’s indemnification claim fails. (ECF No. 114-1 at 2.)

On July 31, 2023, A&T filed a response to Timber Steel’s

motion, arguing that it had pled facts sufficient to give Timber

Steel notice that it sought to raise an indemnity claim under

Federal Rule of Civil Procedure 8(a). (ECF No. 117 at 3.) A&T

concedes that it did not have an express indemnification

contract with Timber Steel, but argues that it is entitled to

indemnification based on its contract for Timber Steel’s

services. (Id. at 4-5.) A&T argues that Timber Steel breached

its contract with A&T and engaged in tortious conduct in

performing the contract. (Id. at 5.) A&T argues that the

contractual relationship imposed an implied indemnity

obligation. (Id.)

Timber Steel replied to A&T’s response on August 14, 2023.

(ECF No. 22.)

II. Jurisdiction and Choice of Law

The Court has diversity jurisdiction under 28 U.S.C. § 1332

because there is complete diversity among the parties. A

corporation is a citizen of its state of incorporation and the

state in which it has its principal place of business. Roberts

v. Mars Petcare US, Inc., 874 F.3d 953, 956 (6th Cir. 2017). “A

limited liability company . . . has the citizenship of its

members and sub-members.” Akno 1010 Mkt. St. St. Louis Mo. LLC

v. Pourtaghi, 43 F.4th 624, 626 (6th Cir. 2022). Plaintiff is a

corporation organized under the laws of Wisconsin and with its

principal place of business in Massachusetts. (ECF No. 1 at 1.)

Defendant Dan Walker is incorporated and has its principal place

of business in Tennessee. (Id. at 2.)

Defendants A&T, Stability, and Geotechnology, LLC

(“Geotechnology”) are limited liability companies. (ECF Nos.

97-99.) Based on the disclosures of the parties, A&T is a

citizen of Arkansas, Stability of North Carolina and Georgia,

and Geotechnology of Delaware and Florida. (ECF Nos. 96-99.)

Pierre Coiron, an individual defendant, is a citizen of North

Carolina. (ECF No. 1 at 3.) There is complete diversity between

Plaintiff and Defendants. Because Plaintiff seeks $1.6 million

in damages, the amount-in-controversy threshold is also

satisfied. (ECF No. 1 at 19.) The Court has diversity

jurisdiction.

The Court also has or would have jurisdiction over existing

counterclaims and crossclaims and those proposed to be added. 28

U.S.C. § 1367; see also Cowley v. Equifax Info. Servs., LLC, No.

2:18-cv-02846, 2019 U.S. Dist. LEXIS 181601, at *3-4, *9 (W.D.

Tenn. Oct. 21, 2019) (exercising supplemental jurisdiction over

counterclaim); Butler v. Rigsby, No. 96-2453, 1997 U.S. Dist.

LEXIS 16375, at *3 (E.D. La. Oct. 16, 1997) (“It is well

established that supplemental jurisdiction extends to

cross-claims properly asserted under Rule 13(g) of the Federal

Rules of Civil Procedure.”).

State substantive law applies to state law claims brought

in federal court. Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78

(1938). Where, as here, there is no dispute that a certain

state’s substantive law applies, the Court will not conduct a

choice of law analysis sua sponte. See GBJ Corp. v. E. Ohio

Paving Co., 139 F.3d 1080, 1085 (6th Cir. 1998). Although

whether a party may amend its pleading in federal court is a

procedural matter governed by federal law, the parties agree in

their respective motions and memoranda that, where state law is

relevant, the law of Tennessee applies. (ECF No. 79 at 1-2; No.

81-1 at 5-7; No. 89 at 3.) The Court will apply Tennessee

substantive law.

III. Standard of Review

Federal Rule of Civil Procedure 14 provides that 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.” The proposed third-party

plaintiff must “obtain the court’s leave if it files the

third-party complaint more than 14 days after serving its

original answer.” Fed. R. Civ. P. 14(a).

Under Rule 12(b)(6), a defendant may move to dismiss a

complaint for “failure to state a claim upon which relief can be

granted.” Fed. R. Civ. P. 12(b)(6). A motion to dismiss permits

“a defendant to test whether, as a matter of law, the plaintiff

is entitled to legal relief even if everything alleged in the

complaint is true.” Mayer v. Mylod, 988 F.2d 635, 638 (6th Cir.

1993). A motion to dismiss tests only whether the plaintiff has

pled a cognizable claim and allows the court to dismiss

meritless cases that would waste judicial resources and result

in unnecessary discovery. See Brown v. City of Memphis, 440 F.

Supp. 2d 868, 872 (W.D. Tenn. 2006).

“To survive a motion to dismiss, the plaintiff must allege

facts that, if accepted as true, are sufficient to state a claim

to relief that is plausible on its face.” Cooper Butt ex rel.

Q.T.R. v. Barr, 954 F.3d 901, 904 (6th Cir. 2020) (citing Bell

Atl. Corp. v. Twombly, 550 U.S. 544 (2007)). A claim is

plausible on its face if “the plaintiff pleads factual content

that allows the court to draw the reasonable inference that the

defendant is liable for the misconduct alleged.” Ashcroft v.

Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at

556). “[The] plaintiff’s obligation to provide the grounds of

his entitlement to relief requires more than labels and

conclusions, and a formulaic recitation of a cause of action’s

elements will not do.” Twombly, 550 U.S. at 544. The court

considers the plaintiff’s complaint in the light most favorable

to the plaintiff. Ryan v. Blackwell, 979 F.3d 519, 525 (6th Cir.

2020) (citing Ziegler v. IBP Hog Mkt., Inc., 249 F.3d 509, 512

(6th Cir. 2001)). The court accepts as true all factual

allegations, but does not accept legal conclusions or

unwarranted facts. Theile v. Michigan, 891 F.3d 240, 243 (6th

Cir. 2018).

IV. Analysis

Under Tennessee law, “[i]ndemnity obligations are either

express or implied.” Winter v. Smith, 914 S.W.2d 527, 541 (Tenn.

Ct. App. 1995). “Express indemnity obligations arise from the

contracts between the parties, and implied indemnity

obligations, whether called equitable or contractual, are

imposed by law without the consent or agreement of the parties.”

Id. at 541-42. Indemnity may be implied by the relationship

between parties. See Stiver Mktg., Inc. v. Performance Bus.

Forms, Inc., No. 01-A-01-9108-CH-00276, 1991 Tenn. App. LEXIS

930, at *8 (Tenn. Ct. App. 1991) (stating principal may have

indemnity from agent for whose acts principal has been held

liable); Wharton Transp. Co. v. Bridges, 606 S.W.2d 521, 528

(Tenn. 1980) (holding that employers held liable for employee’s

acts through respondeat superior may recover in indemnity from

employee).

Implied indemnity may be imposed “when the obligation [to

indemnify] is a necessary element of the parties’ relationship.”

Winter, 914 S.W.2d at 541. It may, for example, be based on a

contractual relationship in which the contract does not include

an indemnification clause, but contains an implicit right of

indemnification. Time & Sec. Mgmt., Inc. v. Pittway Corp., 422

F.Supp.2d 907, 914 (W.D. Tenn. 2006) (collecting Tennessee

cases). Even if the contract between the parties does not

address indemnification, “an obligation may be imposed where the

party from whom indemnity is sought breached a contract or

engaged in tortious conduct in performance of contract

obligations.” Id.

Alternately, under traditional Tennessee law, implied

indemnity may be imposed “when justice and fairness demand that

the burden of paying for the loss be shifted to the party whose

fault or responsibility is qualitatively different from the

other parties.” Winter, 914 S.W.2d at 542. That has sometimes

been referred to as “common law indemnity” or “implied-in-law

indemnity.” CMH Mfg., Inc. v. US GreenFiber, LLC, No. 3:12-273,

2013 WL 3324292, at *6 (E.D. Tenn. July 1, 2013).

A&T does not assert that it had an indemnification contract

with Timber Steel. (See generally ECF No. 108.) It can only

prevail under a theory of implied indemnity. Winter, 914 S.W.2d

at 541. A&T does not say whether indemnification should be

implied as a necessary element of the parties’ legal

relationship, or under broad principles of justice and fairness.

Id. at 541-42. A&T’s indemnity claim survives, however, so long

as the Third-Party Complaint contains facts sufficient “to

sustain a recovery on any legal theory, even though it may not

be the theory suggested . . . by the pleader.” Leach v. Taylor,

124 S.W.3d 87, 92 (Tenn. 2004) (emphasis, internal quotation

marks omitted) (explaining that complaints in tort actions

should be read “with a generous eye”); see also Scheid v. Fanny

Farmer Candy Shops, Inc., 859 F.2d 434, 436 (6th Cir. 1988)

(holding that a “complaint must contain either direct or

inferential allegations . . . to sustain a recovery under some

viable legal theory”). As long as the Third-Party Complaint

contains sufficient facts which, taken together and drawing all

inferences in favor of A&T as the non-movant, states a claim

under some recognized theory of indemnity, Timber Steel’s motion

must be denied.

A&T alleged that it “retained” Timber Steel to “detail,

fabricate and/or manufacture the materials and/or components

required and called for in the Stability design” plans. (ECF

No. 108 at 4, ¶ 14.) In its original complaint -– which A&T

incorporated into its Third-Party Complaint in its entirety --

Plaintiff Employers Insurance Company of Wausau alleged that A&T

“retained Timber Steel to perform as a steel erection

contractor.” (Id. at 6, ¶ 24; ECF No. 108-1 at 4, ¶ 17.) Thus,

although Timber Steel argues that A&T failed to plead the

existence of a contractual relationship sufficiently, A&T’s

allegations are sufficient to infer there was a contract between

A&T and Timber Steel. (ECF No. 122 at 3-4); see Ryan, 979 F.3d

at 525 (explaining that, in resolving a motion to dismiss, the

court must consider the complaint in the light most favorable to

the plaintiff).

Nonetheless, the right to indemnity is not implied in every

contractual relationship. Striver Mktg., 1991 WL 254564, at *4;

Time & Sec. Mgmt., 422 F.Supp.2d at 914 (stating that an

indemnity obligation “may be imposed” based on a breach of

contract) (emphasis added). A&T has failed to allege facts

showing any “unique special factors indicating the parties’

intent that the party from whom indemnity is sought be

ultimately liable,” or otherwise describe why the “conduct of

the parties or . . . nature of their relationship” warrants the

imposition of indemnity. Striver Mktg., 1991 WL 25464 at *4.

A&T does not, for example, provide a factual basis for believing

Timber Steel’s materials were defective or explain why Timber

Steel should be liable for any alleged defects. The speculative

allegation that Timber Steel is responsible for A&T’s conduct

is, without more, a bare legal conclusion that does not suffice

to state a claim under Rule 12(b)(6). Twombly, 550 U.S. at 544

(holding that a “plaintiff’s obligation to provide the grounds

of his entitlement to relief requires more than labels and

conclusions”).2 A&T has failed to show that indemnification was

2 A&T argues that Fed. R. Civ. Proc. 8(a) requires only that

it “alleg[e] sufficient facts to give Timber Steel notice that

A&T seeks indemnification.” (ECF No. 117 at 3.) That

understates Plaintiff’s burden at the pleading stage. Although

a complaint “does not need detailed factual allegations,” it

must contain specific factual allegations to “give the defendant

fair notice of what the . . . claim is and the grounds upon

which it rests.” Twombly, 550 U.S. at 555 (internal quotation

a necessary part of its contractual relationship with Timber

Steel, although the contract itself was silent on

indemnification.

A&T has also failed to plead facts showing that it has any

other legal relationship with Timber Steel –- such as a

principal/agent relationship or an employer/employee

relationship -– that confers an indemnity obligation. Striver

Mktg., 1991 WL 254564, at *3; Wharton Transp. Co., 6060 S.W.2d

at 528. At least one court has held that buyers and sellers -–

such as A&T and Timber Steel -- do not have a legal relationship

that implies an indemnity obligation. First Nat. Bank of Chi.

v. Cumberland Bend Invs, L.P., No. M2000-00001-COA-R3-CV, 2002

WL 31835693, at *3 (Tenn. Ct. App. Dec. 19, 2002). A&T does not

argue to the contrary.

A&T’s case is not comparable to those where courts have

imposed indemnity based on principles of justice and fairness.3

marks, citations omitted) (emphasis added). Plaintiff is

required to allege specific facts rather than mere “labels and

conclusions.” Id.

3 Federal district courts differ about whether Tennessee law

still recognizes claims for indemnity based on justice and

fairness following the Tennessee Supreme Court’s decision in

Owens v. Truckstops of America, 915 S.W.2d 420, 430 (Tenn.

1996). See, e.g. CMH Mfg., Inc., 2013 WL 3324292, at *7;

Siegel-Robert, Inc. v. United Inventory Servs., Inc., No.

07-1206, 2008 U.S. Dist. LEXIS 128990, at *7 (W.D. Tenn. Oct.

14, 2008); but see AutoZone v. Glidden Co., 737 F.Supp.2d 936,

945 (W.D. Tenn. 2010). The Court need not decide the effect of

Owens on indemnification claims based on justice and fairness

In cases where a third-party plaintiff has successfully stated a

claim for implied indemnification, that party has pled specific

facts showing that the indemnitee’s conduct “resulted in . . .

the lawsuits which [the third-party plaintiff] was forced to

defend.” Pullman Standard, Inc. v. Abex Corp., 693 S.W.2d 336,

339 (Tenn. 1985). In Pullman Standard, for example, Pullman

Standard, Inc. was sued after a railroad car that it

manufactured was involved in a train derailment. 693 S.W.2d at

337. Pullman sought indemnification from Abex Corporation, the

manufacturer and designer of the wheels on the Pullman railroad

cars. Id. Pullman alleged that after the derailment, a federal

investigation “drew the conclusion that the cause of the initial

derailment and train wreck was the failure of a wheel”

manufactured by Abex. Id. Pullman also alleged that Abex knew

that its wheel “fracture[d] and fail[ed] under normal railroad

operating procedures,” but “nevertheless deceived” Pullman about

the wheel’s effectiveness. Id. at 340. The Supreme Court of

Tennessee found these allegations sufficient to state an

indemnification claim. A&T’s allegations are far from this

level of specificity.

In AutoZone, AutoZone, Inc. contracted with The Glidden

Company (“Akzo Nobel”) to purchase exterior paints for its new

because, for the reasons described below, A&T has failed to

allege facts that would state an indemnification claim on that

basis.

stores, specifying that the paint should be purchased from BASF

Construction Chemicals, LLC (“BASF”). 737 F.Supp.2d at 940.

When the paint began cracking, peeling, and fading, AutoZone

sued Akzo Nobel for breach of contract. Id. Akzo Nobel sought

indemnification from BASF on the basis that BASF provided

defective products and was responsible for any damages that Akzo

Nobel owed AutoZone. Id. at 944. The court found that Akzo

Nobel had stated an indemnification claim because similar

problems developed with the paint at different stores in

different climates, suggesting that the problems “arose from

defects in the paint products rather than their application.”

Id. at 944 n.1. That permitted the court to infer that “justice

and fairness may demand that BASF indemnify Akzo Nobel for any

liability Akzo Nobel incurs based on BASF’s wrongdoing because

of their qualitatively different degrees of fault.” Id. at 945.

Unlike Akzo Nobel, A&T has pled no facts permitting the Court to

infer that justice and fairness require Timber Steel to

indemnify A&T.4

4 Akzo Nobel sought to amend its complaint to add an

indemnity claim against BASF after discovery had begun, and used

discovery to support its indemnification claim. AutoZone, 737

F.Supp.2d at 942. A&T has not had the benefit of discovery

here. Although this distinguishes AutoZone from the instant

case in some respects, it does not absolve A&T of its obligation

to plead sufficient factual matter to raise its right to relief

above a speculative level.

Although A&T’s Third-Party Complaint repeatedly describes

Timber Steel as negligent, those allegations are insufficient to

state an indemnification claim. (See, e.g., ECF No. 108 at 7,

¶ 31; 8, ¶ 33; 9, ¶¶ 36-37.) In the past, Tennessee courts have

imposed indemnification obligations when the indemnitor, through

“active” negligence, creates a hazardous condition or causes an

injury, and the indemnitee is liable only for “passive”

negligence, i.e., the “mere failure to remedy or discover the

negligence.” Barrett v. Red Food Stores, Inc., No.

01-A-01-9108-CV-00302, 1992 WL 33891, at *6 (Tenn. Ct. App. Feb.

26, 1992).

However, indemnification based on the active-passive

distinction has been abolished by the Tennessee Supreme Court.

In Owens, that court noted that it had previously adopted a

comparative fault system in which, when multiple tortfeasors

cause a single injury, liability is several and not joint. 915

S.W.2d at 430. Because “each tortfeasor will be liable only for

that proportion of the damages attributable to its fault,” there

would be no need for one tortfeasor to indemnify another. Id. at

430, 433-34. The court held that “there can be no claim for

indemnification based on active-passive negligence because that

distinction is subsumed into the doctrine of comparative fault.”

Id. at 434. A&T cannot plead facts establishing an

indemnification claim based on Timber Steel’s alleged

negligence.

A&T will have a full opportunity, should this matter

proceed to trial, to show that it was not negligent or that part

or all of any liability should be apportioned to other actors.

See Owens, 915 S.W.2d at 434. Under Tennessee law, A&T would not

be liable for any damages apportioned to others. Id. at 430.

A&T’s conclusory allegations that any damages it owes

Plaintiff are attributable to Timber Steel do not state an

indemnification claim under any legal theory. They do not

“raise [the] right to relief above the speculative level.”

Twombly, 550 U.S. at 555. Timber Steel’s Motion to Dismiss is

GRANTED. Having decided that A&T has failed to state an

indemnification claim under Rule 12(b)(6), the Court need not

reach the Rule 14 issues raised by the parties. (ECF No. 114-1

at 8-9; 117 at 5-9).

V. Conclusion

Timber Steel’s Motion to Dismiss (ECF No. 114) is GRANTED.

A&T’s Third-Party Complaint (ECF No. 108) is DISMISSED.

So ordered this 15th day of February, 2024.

/s/ Samuel H. Mays, Jr.

SAMUEL H. MAYS, JR.

UNITED STATES DISTRICT JUDGE