MEMORANDUM AND ORDER

MARK L. WOLF, District Judge.

Plaintiffs Partners Healthcare System, Inc. and The General Hospital Corporation (collectively "Partners") sued defendants Fisher Scientific Company LLC ("Fisher") and Copeland Corporation LLC ("Copeland") in the Superior Court for the Commonwealth of Massachusetts. Partners alleges that the compressor in a freezer it purchased from Fisher failed and, as a result, biological samples were destroyed. It further alleges that Copeland manufactured the failed compressor. Copeland removed the case to this court pursuant to 28 U.S.C. § 1446. Partners settled with Fisher and dismissed the claims against it. Copeland then filed a Third-Party Complaint against Fisher seeking indemnity.

On February 3, 2016, Fisher filed a Motion to Dismiss Pursuant to Federal Rule of Civil Procedure 12(b)(6) and/or 12(c) (the "Motion to Dismiss"). In her May 16, 2016 Report and Recommendation, the Magistrate Judge recommended denying the Motion to Dismiss. The Report and Recommendation concludes that Copeland has pled sufficient facts to maintain a claim for implied-in-fact indemnity under admittedly applicable North Carolina law. On May 31, 2016, Fisher filed an objection to the Report and Recommendation. On June 9, 2016, Copeland replied to Fisher's objection.

The court has considered the Magistrate Judge's Report and Recommendation, and the submissions of the parties on the motion and objection. This court has reviewed de novo the questions of law and the issues to which Fisher has objected. See Fed. R. Civ. P. 27(c). The court finds the Report and Recommendation to be thorough, thoughtful, and persuasive. The Report and Recommendation is, therefore, being adopted.

In view of the foregoing, it is hereby ORDERED that:

1. The Magistrate Judge's attached Report and Recommendation (Docket No. 55) is ADOPTED and INCORPORATED pursuant to 28 U.S.C. § 636.

2. For the reasons stated in the Report and Recommendation, the Motion to Dismiss Pursuant to Fed. R. Civ. P. 12(b)(6) and/or 12(c) (Docket No. 30) is DENIED, in part. The Third-Party Complaint (Docket No. 27) is dismissed without prejudice to an amendment to add the proper parties to the alleged indemnification agreement, which shall be filed within 21 days of this Order.

3. This case is RETURNED to the Magistrate Judge for future pretrial proceedings.

UNITED STATES DISTRICT COURT DISTRICT OF MASSACHUSETTS

REPORT AND RECOMMENDATION ON THIRD-PARTY DEFENDANT FISHER SCIENTIFIC COMPANY, LLC'S MOTION TO DISMISS PURSUANT TO FED. R. CIV. P. 12(b)(6) AND/OR 12(c) (#30).

KELLEY, U.S.M.J.

I. Introduction.

In their second amended complaint, Partners Healthcare System, Inc. and The General Hospital Corporation (collectively "Partners") allege that a scientific freezer they purchased from Fisher Scientific Company, LLC stopped working due to a compressor failure causing Partners to lose valuable biological samples. (#7 at 20 ¶¶ 7, 9-10.) It is further alleged that Copeland Corporation, LLC manufactured the component compressor that allegedly failed. (#7 at 20 ¶¶ 5, 8.) Partners brought claims against Copeland and Fisher as co-defendants. (#7 at 20.) Fisher settled the four claims alleged against it, and on December 4, 2015, Partners dismissed those claims leaving Copeland as the sole remaining defendant. (#26.) Nineteen days later Copeland filed a third-party complaint (#27) against Fisher alleging that it was entitled to indemnification from Fisher for any loss, damage, or injury to third parties caused by products sold by Fisher that incorporated Copeland compressors. (#27 ¶ 16.) Fisher has moved to dismiss that third-party complaint. (#30.)

II. The Facts.

As of February 1, 2011, companies "associated with" Copeland and Fisher1 entered into an agreement ("the Agreement"), whereby Copeland would sell Fisher compressors for incorporation into products produced by Fisher, including "Ultra Low Temperature Freezers" like the one purchased by Partners. (#30-1 ¶ 52; #27 ¶ 5.) According to the allegations of the third-party complaint, "[g]iven the relative discrepancy between the price that Fisher paid Copeland for each compressor and the potential liability that could arise out of the failure of a compressor in Fisher's applications, Copeland was unwilling to sell its compressors to Fisher unless Fisher agreed to assume all liability that might arise out of the failure of a Copeland compressor." (#27 ¶ 4.) To address Copeland's concerns, attached to the Agreement was an exhibit entitled Emerson Climate Technologies, Inc. OEM/Return/Warranty Guidelines for Copeland Brand Products — Limited Warranty ("the Exhibit"). (#30-1, Exh. 1, Agreement, Exh 1.)

The first relevant provision of the Exhibit states:

Id. The Exhibit further provides, in capitalized, bold print:

Id.

When sued by Partners for the alleged failure of a Copeland compressor incorporated in a Fisher freezer, Copeland sought indemnification from Fisher under the terms of the Agreement.

Fisher argues that the Agreement does not provide that it must indemnify Copeland. Conversely, Copeland contends that it has alleged indemnification implied-in-fact based on the Agreement and Exhibit.

III. The Law — Rule 12(b)(6).3

A Rule 12(b)(6) motion to dismiss challenges a party's complaint for failing to state a claim. In deciding such a motion, a court must "`accept as true all well-pleaded facts set forth in the complaint and draw all reasonable inferences therefrom in the pleader's favor.'" Haley v. City of Boston, 657 F.3d 39, 46 (1st Cir. 2011) (quoting Artuso v. Vertex Pharm., Inc., 637 F.3d 1, 5 (1st Cir.2011)). When considering a motion to dismiss, a court "may augment these facts and inferences with data points gleaned from documents incorporated by reference into the complaint, matters of public record, and facts susceptible to judicial notice." Haley, 657 F.3d at 46 (citing In re Colonial Mortg. Bankers Corp., 324 F.3d 12, 15 (1st Cir. 2003)).

In order to survive a motion to dismiss under Rule 12(b)(6), the plaintiff must provide "enough facts to state a claim to relief that is plausible on its face." See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). The "obligation to provide the grounds of [the plaintiff's] entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Id. at 555 (quotation marks and alteration omitted). The "[f]actual allegations must be enough to raise a right to relief above the speculative level," and to cross the "line from conceivable to plausible." Id. at 555, 570.

"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." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 556). However, the court is "`not bound to accept as true a legal conclusion couched as a factual allegation.'" Id. at 678 (quoting Twombly, 550 U.S. at 555). Simply put, the court should assume that well-pleaded facts are genuine and then determine whether such facts state a plausible claim for relief. Id. at 679.

IV. Discussion.

The parties agree that, pursuant to the terms of the Agreement, North Carolina law governs the dispute. (#30-1, Exh. 1 ¶ 9; #36 at 1 n. 1) Under North Carolina law, a right to indemnity can be premised upon: "(1) an express contract; (2) a contract implied-in-fact; or (3) equitable concepts arising from the tort theory of indemnity, often referred to as a contract implied-in-law." Kaleel Builders Inc. v. Ashby, 161 N.C. App. 34, 38, 587 S.E.2d 470, 474 (2003); Smith v. Waverly Partners, LLC, No. 3:10-CV-28, 2011 WL 1655592, at *7 (W.D.N.C. Apr. 29, 2011). Here, Copeland claims it has adequately alleged a right to indemnification from Fisher based on a contract implied-in-fact. (#36 at 5.)

The Court of Appeals of North Carolina has explained that "[a] right of indemnity implied-in-fact stems from the existence of a binding contract between two parties that necessarily implies the right. The implication is derived from the relationship between the parties, circumstances of the parties' conduct, and that the creation of the indemnitor/indemnitee relationship is derivative of the contracting parties' intended agreement." Kaleel Builders, 161 N.C. App. at 38, 587 S.E.2d at 474; Smith, No. 3:10-CV-28, 2011 WL 1655592, at *8. When determining whether a contact implied-in-fact exists between two parties, courts examine "their relationship and its surrounding circumstances." Kaleel Builders, 161 N.C. App. at 40, 587 S.E.2d at 475. Here, the relevant factors cut both ways.

The facts of this case do not present a situation where "a master-servant or agency-type of relationship" exists between the parties, as was the case in McDonald v. Scarboro, 91 N.C. App. 13, 370 S.E.2d 680 (1988). Id. Instead, from all that appears, this was an arms-length transaction between sophisticated entities. North Carolina courts view such circumstances as weighing against interpreting a contract to imply more than that which is explicitly provided. See, e.g., Sony Ericsson Mobile Commc'ns USA, Inc. v. Agere Sys., Inc., 195 N.C. App. 577, 582, 672, S.E.2d 763, 767-768 (2009) ("Where, as here, the agreement was negotiated by sophisticated and well-counseled parties, courts are extremely reluctant to interpret an agreement as impliedly stating something which the parties have neglected to specifically include, and courts may not by construction add or excise terms, nor distort the meaning of those used and thereby make a new contract for the parties under the guise of interpreting the writing." (internal citations and quotation marks omitted)); Schenkel & Shultz, Inc. v. Hermon F. Fox & Associates, P.C., 180 N.C. App. 257, 267, 636 S.E.2d 835, 842 (2006), aff'd, 362 N.C. 269, 658 S.E.2d 918 (2008) ("[A] right of indemnity under a contract implied-in-fact is inappropriate where, as here, both parties are well equipped to negotiate and bargain for such provisions.").

On the other hand, Copeland has alleged "circumstances tending to show the existence of an indemnification agreement." Kaleel Builders, 161 N.C.App. at 40, 587 S.E.2d at 475. Specifically, Copeland alleges there was a "relative discrepancy between the price that Fisher paid Copeland for each compressor and the potential liability that could arise out of the failure of a compressor in Fisher's applications," (#27 ¶ 4), as well as Copeland's concomitant unwillingness "to sell its compressors to Fisher unless Fisher agreed to assume all liability that might arise out of the failure of a Copeland compressor." (#27 ¶ 4.) Copeland argues that "Fisher's agreement to indemnify Copeland was in recognition of this discrepancy." (#36 at 6.) These facts tend to show more than mere breach of contract or warranty; these allegations support "special circumstances from which such an agreement might be implied." Id., 161 N.C. App. at 38, 587 S.E.2d at 474; Smith, No. 3:10-CV-28, 2011 WL 1655592, at *8 ("To recover under a theory of contract implied-in-fact, a party must demonstrate circumstances indicating that the parties intended to establish an indemnitor-indeminitee relationship."); Carl v. State, 192 N.C. App. 544, 558, 665 S.E.2d 787, 798 (2008) ("[T]his Court has required a plaintiff to show special circumstances from which such an agreement might be implied.").

Further, Copeland notes that the provision in the Exhibit that Fisher "assumes all other responsibility for any loss, damage, or inquiry to persons or property arising out of, connected with, or resulting from the use of Goods, either alone or in combination with other products/components" is rendered meaningless if indemnification of Copeland by Fisher is not implied.4 In other words, "the creation of the indemnitor/indemnitee relationship is derivative of the contracting parties' intended agreement." Kaleel Builders, 161 N.C. App. at 38, 587 S.E.2d at 474. Fisher responds by noting that "[c]onspicuously absent from this sentence is any affirmative representation by Fisher that it will provide Copeland with any particular remedy, including indemnity." (#31 at 8) Query, then, what does the contractual provision mean? The Supreme Court of North Carolina has instructed that:

Ussery v. Branch Banking & Trust Co., 368 N.C. 325, 335-36, 777 S.E.2d 272, 279 (2015). Copeland's reading of the contractual provision is reasonable5 in the context of the Agreement as a whole and it gives meaning to the contractual provision. As such, the contractual provision constitutes a "circumstance[] tending to show the existence of an indemnification agreement." Kaleel Builders, 161 N.C. App. at 40, 587 S.E.2d at 475.

In sum, weighing all of the factors, Copeland has alleged "sufficient factual matter . . . to state a claim to relief that is plausible on its face." Guadalupe-Baez v. Pesquera, No. 14-2304, 2016 WL 1592690, at *3 (1st Cir. Apr. 20, 2016) (internal citations and quotation marks omitted).

V. Recommendation.

_____ For the reasons stated, I RECOMMEND that Third-Party Defendant Fisher Scientific Company, LLC's Motion to Dismiss Pursuant to Fed. R. Civ. P. 12(b)(6) and/or 12(c) (#30) be DENIED to the extent it seeks dismissal on the ground that Copeland is not entitled to implied indemnification from Fisher as a matter of law. I FURTHER RECOMMEND that the Motion to Dismiss be ALLOWED to the extent that it seeks dismissal because the parties to the Agreement are not named as parties in the third-party complaint, with leave being granted to Copeland to file an amended third-party complaint naming the proper parties.6