ANITA B. BRODY, District Judge.
Plaintiff New Hampshire Insurance Co. ("NHIC"), as subrogee of WHYY, Inc., ("WHYY") brought a state-court action against Defendant Dielectric Communications, Inc. (n/k/a SPX Communication Technology) ("SPX"),
Plaintiff NHIC is incorporated in the Commonwealth of Pennsylvania and has its principal place of business in New York. Defendant SPX is incorporated in Delaware and has its principal place of business in North Carolina. NHIC, as subrogee of WHYY, brings this action for negligence and breach of contract against
On September 20, 2002, WHYY contracted with SPX, which agreed to deliver and install a transmitter antenna as part of WHYY's larger FM antenna system. Doc. No. 1, Ex. A ("Complaint"); Doc. No. 3, Ex. A ("Contract"). SPX was negligent and careless in installing the defective transmitter antenna and breached its contract by improperly installing an already defective transmitter antenna and then failing to maintain replacement parts. Complaint ¶¶ 15-17. The improper installation and defects damaged the transmitter antenna and other components of the FM antenna system. Complaint ¶¶ 15-16.
Under WHYY's insurance policy, NHIC paid $177,573.00 to repair and replace the damaged components of the FM antenna system. Complaint ¶ 8.
A motion to dismiss should be granted under Rule 12(b)(6) if the moving party "under any reasonable reading of the complaint... may be entitled to relief." Kerchner v. Obama, 612 F.3d 204, 207 (3d Cir.2010) (internal quotation marks omitted). The complaint must allege facts sufficient to "raise a right to relief above the speculative level." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009). Rather, "a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Id. (internal quotation marks omitted). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id.
In deciding a motion to dismiss under Rule 12(b)(6), a court must "accept all factual allegations in the complaint as true and view them in the light most favorable to the plaintiff." Buck v. Hampton Twp. Sch. Dist., 452 F.3d 256, 260 (3d Cir.2006). This "assumption of truth" is "inapplicable to legal conclusions." Iqbal, 129 S.Ct. at 1949-50.
Generally, on a motion to dismiss, a court is restricted to consider only the pleadings in the complaint. When, however, a document integral to or relied upon in the complaint is included, the court may also consider that document. In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir.1997). Furthermore, a court may consider an undisputedly authentic document that a defendant attaches as an exhibit to a motion to dismiss if the plaintiff's claims are based on the document. "Otherwise, a plaintiff with a legally deficient claim could survive a motion to dismiss simply by failing to attach a dispositive document on which it relied." Pension Benefit Guar. Corp. v. White Consol. Indus., 998 F.2d 1192, 1196 (3d Cir. 1993).
The contract provided that it be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania. Contract ¶ 12(h).
In deciding state law issues, the state law as interpreted by the state's highest court controls. Fed. Home Loan Mortg. Corp. v. Scottsdale Ins. Co., 316 F.3d 431, 443 (3d Cir.2003). When the state's highest court has not addressed the matter in question, a federal court must predict how the state's highest court would resolve the issue. Orson, Inc. v. Miramax Film Corp., 79 F.3d 1358, 1373 n. 15 (3d Cir.1996). If the state's highest court has not discussed the issue, a district court may consider the decisions of state intermediate appellate courts. Paolella v. Browning-Ferris, Inc., 158 F.3d 183, 189 (3d Cir.1998). A Third Circuit Court of Appeals opinion on the issue controls.
SPX argues that NHIC's negligence claim should be dismissed under the (1) economic loss doctrine and under the (2) gist of the action doctrine. Mot. Dismiss 4.
Under Pennsylvania's economic loss doctrine, no cause of action exists for negligence that results solely in economic damages unaccompanied by physical or property damage. Sovereign Bank v. BJ's Wholesale Club, Inc., 533 F.3d 162, 175 (3d Cir.2008) (citing Adams v. Copper Beach Townhome Cmtys., L.P., 816 A.2d 301, 305 (Pa.Super.2003)). This is based upon the need to restrict foreseeability and limit liability. See Adams, 816 A.2d at 307. The economic loss doctrine stems from the admiralty products liability case East River S.S. Corp. v. Transamerica Delaval, Inc., 476 U.S. 858, 106 S.Ct. 2295, 90 L.Ed.2d 865 (1986). In East River, the plaintiff chartered a supertanker, and the tanker's turbines malfunctioned. Plaintiff sued the turbine manufacturer in tort, but the only alleged damage was to the turbines themselves. In ruling against the plaintiff, the Supreme Court reasoned that damage to a product itself does not mirror a products-liability claim. "[T]he injury suffered — the failure of the product to function properly — is the essence of a warranty action, through which a contracting party can seek to recoup the benefit of its bargain." Id. at 867-68, 106 S.Ct. 2295. The Third Circuit has "predicted that the Pennsylvania Supreme Court would adopt the version of the economic loss doctrine that the United States Supreme Court developed in East River S.S. Corp." Bohler-Uddeholm Am., Inc. v. Ellwood Group, Inc., 247 F.3d 79, 103 n. 10 (3d Cir.2001).
Here, two commercial parties signed a contract for the delivery and installation of an FM transmitter antenna.
SPX counters that "any alleged damage to `other components of the antenna system' constitutes an injury to the product itself, the FM antenna system supplied under the Contract." Reply Mem. Supp. Mot. Dismiss 5 ("Reply"). According to SPX, the FM antenna system would not function without all of the components that were damaged, so the FM antenna system represents an "integrated product." Reply 5. The integrated product rule states that different components integrated into one product do not constitute "other property" for the purposes of the economic loss doctrine. See Sea-Land Serv., Inc. v. Gen. Elec. Co., 134 F.3d 149, 154 (3d Cir. 1998). Therefore, the other components of the antenna system were not "other property" for the purposes of the economic loss doctrine but rather part of the originally bargained-for product itself.
Here, there is a factual dispute as to what constitutes "other property" in terms of the damaged property and its alleged component parts. According to the contract's purchase order, WHYY bought an FM transmitter system from SPX. Yet at this stage of the litigation, it is impossible to distinguish between that transmitter system and the complaint's reference to a larger FM antenna system. Discovery is necessary to determine whether any lines can be drawn "between damage to `the product' and damage to `other property.'" 2-J Corp., 126 F.3d at 544. Therefore, I will deny without prejudice SPX's motion to dismiss NHIC's negligence claim under the economic loss doctrine.
Pennsylvania courts also apply the gist of the action doctrine to complaints in which the "plaintiff alleges that the defendant committed a tort in the course of carrying out a contractual agreement." Erie Ins. Exch. v. Abbott Furnace Co., 972 A.2d 1232, 1238 (Pa.Super.2009) (citing Pa. Mfrs.' Ass'n Ins. Co. v. L.B. Smith, Inc., 831 A.2d 1178, 1182 (Pa.Super.2003) (citation and quotation marks omitted)).
The gist of the action and the economic loss "doctrines are very closely related, and share the common purpose of maintaining the distinction between contract and tort law." Wilmington Fin., Inc. v. Am. One Fin., Inc., No. 06-5559, 2007 WL 2221424, at *2 n. 1 (E.D.Pa. July 31, 2007). But the economic loss doctrine is more applicable to this case. The economic loss doctrine "developed in the context of ... products liability ... cases where one party contracts for a product from another party and the product malfunctions." Bohler-Uddeholm Am., Inc., 247 F.3d at 104 n. 11. The gist of the action doctrine is more applicable to non-products liability cases in which the key question is the "duty owed between the parties," as opposed to the extent of the property damage. See Laura A. Wagner, Note, The Economic Loss Doctrine: A Recommendation for the Supreme Court of Pennsylvania, 72 U. Pitt. L. Rev. 825, 830 (2011). Here, WHYY signed a contract with SPX for the delivery and installation of a transmitter antenna that later malfunctioned. Therefore, this is contextually a products liability case and the gist of the action doctrine is inapplicable.
NHIC alleges that SPX breached its contract by failing to properly install the defective transmitter antenna and failing to retain replacement parts for the antenna
Under Pennsylvania law, the intent of the parties to a written contract is contained in the writing itself. See Duquesne Light Co. v. Westinghouse Elec. Corp., 66 F.3d 604, 613 (3d Cir.1995). So, as is the case here, when "the parties have reduced their agreement to writing, Pennsylvania courts presume that the parties' mutual intent can be ascertained by examining the writing." Id. Pennsylvania law requires the fact finder to interpret ambiguous contractual terms but the court to interpret unambiguous terms. Therefore, "`as a preliminary matter, courts must determine as a matter of law which category written contract terms fall into-clear or ambiguous.'" Am. Eagle Outfitters v. Lyle & Scott Ltd., 584 F.3d 575, 587 (3d Cir.2009) (citing Duquesne Light Co., 66 F.3d at 613). Based on "Pennsylvania's presumption that the writing conveys the parties' intent, [a] contract will be found ambiguous if, and only if, it is reasonably or fairly susceptible of different constructions." Duquesne Light Co., 66 F.3d at 613 (citations omitted) (internal quotation marks omitted). But "[a] contract is not ambiguous if the court can determine its meaning without any guide other than a knowledge of the simple facts on which, from the nature of the language in general, its meaning depends." Id.
Here, the warranty and limitation of liability provisions are unambiguous.
In its response to the motion to dismiss, NHIC attempts to cure the defective complaint by stating that the antenna "began to have problems as early as March 2009, and those problems then continued to worsen over time, ultimately completely manifesting themselves several months later." Opp'n Mot. Dismiss 7. But if the breach of contract can be traced to March 2009, NHIC needed to bring its claim by March 2010. And if NHIC did not ascertain the exact cause of the malfunction until late 2010 or early 2011, it should have stated so in its complaint.
The warranty, however, provides for more than just the five-year repair period. It also contains a provision that states: "Replacement parts available for fifteen years." Contract ¶ 9. In the body of the complaint, NHIC alleges that SPX breached its contract with WHYY "for failing to maintain replacement parts for the antenna system for a 15-year period." Contract ¶ 17. SPX counters that the warranty's preceding sentence explains that "[t]his warranty shall not apply to equipment or parts not manufactured by [SPX] and the warranty liability of [SPX] for such equipment and parts is limited to the warranty extended to [SPX] by the supplier." Contract ¶ 9. SPX is correct that based on a reasonable reading of that provision, it did not need to make replacement parts manufactured by other companies available to WHYY. But SPX had to make its replacement parts available for WHYY to purchase for fifteen years. Therefore, discovery is necessary to determine what parts were needed when, as well as which parts were available following the antenna's malfunction. Based on the need for discovery, I will deny SPX's motion to dismiss without prejudice the breach of contract claim, only as it relates to the warranty's replacement parts provision.
For the reasons set forth above, SPX's motion to dismiss is denied without prejudice to raise the remaining issues again at a later stage in the litigation.
AND NOW, this 25th day of June 2012, for the reasons set forth in the accompanying memorandum, it is
It is