DeBORAH K. CHASANOW, District Judge.
Presently pending and ready for resolution in this contract dispute is a motion to dismiss filed by third-party defendant TOLK, Inc. ("Tolk"). (ECF No. 52). The issues are fully briefed and the court now rules pursuant to Local Rule 105.6, no hearing being deemed necessary. For the reasons that follow, the motion will be granted in part and denied in part.
The background of this case was set forth in detail in a prior opinion, National Labor College, Inc. v. Hillier Group Architecture New Jersey, Inc., 739 F.Supp.2d 821 (D.Md. 2010), and will be repeated here only to the extent necessary to frame the relevant issues.
On August 30, 2003, Plaintiff National Labor College, Inc. ("Plaintiff"), entered into a contract with Defendant The Hillier Group Architecture, New Jersey, Inc. ("Hillier"), pursuant to which Hillier was to prepare architectural and engineering design documents ("A/E Documents") for the construction of a two-story, multipurpose building on Plaintiff's campus ("the Project"). Hillier subsequently contracted with Tolk to provide the mechanical, electrical, and plumbing design ("MEP design"), which was incorporated into the A/E Documents. Construction of the Project was scheduled to be completed by no later than December 8, 2005. Due to alleged defects in the A/E Documents (including the MEP design), and slow and inadequate responses to problems, completion was delayed by approximately ten months, resulting in economic damages to Plaintiff.
Plaintiff commenced this action against Hillier and Tolk on July 27, 2009, alleging (1) negligence against Hillier, (2) negligence against Tolk, (3) breach of contract against Hillier, (4) breach of contract against Tolk (under a third-party beneficiary theory), and (5) common law indemnification against Hillier. Both defendants moved to dismiss. By a memorandum opinion and order issued September 14, 2010, the court granted in part and denied in part Hillier's motion and granted Tolk's motion in full. As relevant here, the court found that "the economic loss rule applie[d] to preclude Plaintiff's tort/negligence cause of action against Tolk," National Labor College, 739 F.Supp.2d at 834, and that because Plaintiff was an incidental, rather than intended, beneficiary of the Tolk/Hillier contract, a breach of contract claim under a thirdparty beneficiary theory could not be sustained, id. at 835-36. The only surviving claims were Plaintiff's breach of contract and/or negligence claims against Hillier.
Hillier answered the complaint on January 10, 2011, and a scheduling order was issued. Following multiple consent motions for modification of the scheduling order, Hillier filed a thirdparty complaint against Tolk on August 29, 2011. (ECF No. 41). The third-party complaint recites that "a large portion of the damages suffered by [Plaintiff], as alleged in its complaint, [was] caused by [Tolk's] actions, errors and omissions on the Project work." (Id. at ¶ 14). Thus, Hillier claims entitlement to "contractual indemnity (express and implied), common law indemnity, and contribution for all damages that [Plaintiff] seeks against Hillier." (Id. at ¶ 15).
In response, Tolk filed the pending motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). (ECF No. 52). Hillier has opposed that motion (ECF No. 53), and Tolk has filed a reply (ECF No. 54).
The purpose of a motion to dismiss under Rule 12(b)(6) is to test the sufficiency of the complaint. Presley v. City of Charlottesville, 464 F.3d 480, 483 (4
At this stage, the court must consider all well-pleaded allegations in a complaint as true, Albright v. Oliver, 510 U.S. 266, 268 (1994), and must construe all factual allegations in the light most favorable to the plaintiff, see Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 783 (4
In the instant motion, Tolk argues, inter alia, that Hillier's third-party complaint is time-barred. The statute of limitations is an affirmative defense that a party typically must raise in a pleading under Fed.R.Civ.P. 8(c) and is not usually an appropriate ground for dismissal. See Eniola v. Leasecomm Corp., 214 F.Supp.2d 520, 525 (D.Md. 2002); Gray v. Metts, 203 F.Supp.2d 426, 428 (D.Md. 2002). Nevertheless, dismissal may be proper "when the face of the complaint clearly reveals the existence of a meritorious affirmative defense." Brooks v. City of Winston-Salem, N.C., 85 F.3d 178, 181 (4
Tolk argues that dismissal of the third-party complaint is warranted for essentially four reasons: (1) Hillier failed to seek leave prior to filing the third-party complaint; (2) Hillier's claims are time-barred; (3) Hillier failed to plead satisfaction of a condition precedent to filing suit; and (4) Hillier failed to state a claim upon which relief may be granted. Each of these arguments will be addressed, in turn.
The third-party complaint was filed more than fourteen days after Hillier filed its original answer to Plaintiff's complaint. Thus, pursuant to Fed.R.Civ.P. 14(a)(1), Hillier was required to obtain leave to file it, which it failed to do. According to Tolk, this omission is "fatal" because it "takes away [the] [c]ourt's discretion" to grant or deny leave. (ECF No. 54, at 5-6).
While the language of Rule 14(a)(1) is mandatory — i.e., it provides that "the third-party plaintiff must, by motion, obtain the court's leave if it files the third-party complaint more than 14 days after serving its original answer" — the failure to file a motion for leave does not deprive the court of discretion. A third-party complaint filed without leave more than fourteen days after the original answer "is subject to a motion to strike or vacate under Rule 14(a)(4), which provides that `any party may move to strike the third-party claim, to sever it, or to try it separately.'" 6 Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure § 1454 (3d ed. 2010); see also Sullivan v. Limerick Golf Club, Inc., Civ. No. 06-4680, 2008 WL 2502133, at *1 (E.D.Pa. June 23, 2008). In considering such a motion, the court has "discretion to strike the third-party claim `if it is obviously unmeritorious and can only delay or prejudice disposition of plaintiff's claim." Id.; see also Evans v. Allen-Williams Corp., Civ. A. No. 1988-75, 1997 WL 195449, at *3 n. 3 (D.Vi. Mar. 7, 1997). As this language suggests, it is potential prejudice to the plaintiff in the underlying suit, not to the third-party defendant, that is the primary consideration in this analysis. See, e.g., Con-Tech Sales Defined Ben. Trust v. Cockerham, 715 F.Supp. 701, 703 (E.D.Pa. 1989) ("In exercising its discretion [on a motion for leave to file a third-party complaint], the court should consider (1) the possible prejudice to the plaintiff; (2) complication of issues at trial; (3) probability of trial delay; and (4) timeliness of the motion to implead."). Indeed, this is necessarily so because "the thirdparty defendant is not, at the time application for leave is made, a party." Pantano v. Clark Equipment Co., 139 F.R.D. 40, 42 (S.D.N.Y. 1991) (quoting Hensley v. United States, 45 F.R.D. 352, 353 (D.Mont. 1968) (internal marks omitted)).
In its reply papers, Tolk suggests, in passing, that the third-party complaint is "futile and should therefore be stricken" (ECF No. 54, at 6), but it has not specifically moved to strike or sever pursuant to Rule 14(a)(4), and it points to no support for the proposition that dismissal is proper under Rule 12(b)(6). Even if it were subject to dismissal, however, the practical effect would be that Hillier would simply be permitted to re-file it attached to a motion for leave. Such a motion must be "liberally allowed, if it will prevent duplication of suits based on closely related matters," Shaw v. Dawson Geophysical Co., 657 F.Supp.2d 740, 743 n. 2 (S.D.W.Va. 2009) (quoting Dishong v. Peabody Corp., 219 F.R.D. 382, 385 (E.D.Va. 2003)), and there is a persuasive argument that it should be allowed in this case. More importantly, Plaintiff has not indicated any objection to the third-party complaint — to the contrary, it has consented to multiple requests for modification of the schedule, at least one of which contemplated impleading Tolk. Accordingly, the third-party complaint will not be dismissed due to Hillier's failure to file a motion for leave.
The Tolk/Hillier contract contains a choice of law provision, which recites, in relevant part, "[t]his agreement shall be governed and interpreted in all respects under the laws of the State of Virginia." (ECF No. 13-2, at 5). Consequently, according to Tolk, the agreement is subject to Virginia's statute of repose for improvers of real property, which provides:
Va. Code Ann. § 8.01-250. Asserting that Hillier filed its third-party complaint "more than five years after the performance or furnishing of [its] services and construction," Tolk argues that Hillier's "indemnity and contribution claims are . . . barred by the Virginia [s]tatute of [r]epose." (ECF No. 52-1, at 12).
As Hillier observes, however, neither Plaintiff nor it seeks to "recover for any injury to property . . . or for bodily injury or wrongful death, arising out of the defective and unsafe condition of any improvement to real property, nor . . . for contribution or indemnity for damages sustained as a result of such injury[.]" (ECF No. 53, at 8 (quoting § 8.01-250)). See School Bd. of the City of Norfolk v. U.S. Gypsum Co., 360 S.E.2d 325, 328 (Va. 1987) ("Code § 8.01-250 is a redefinition of the substantive rights and obligations of the parties to any litigation `arising out of the defective and unsafe condition of an improvement to real property.'"). Indeed, the losses allegedly sustained by Plaintiff were purely economic, as they resulted from delay in the completion of construction and the cost of correcting the deficient design. Moreover, § 8.01-250 "applies to `those who furnish ordinary building materials, which are incorporated into construction work outside the control of their manufacturers or suppliers.'" Baker v. Poolservice Co., 636 S.E.2d 360, 367 (Va. 2006) (quoting Luebbers v. Fort Wayne Plastics, Inc., 498 S.E.2d 911, 913 (Va. 1998)). In other words, the statute was intended to place a limitation on products liability actions. See Jordan v. Sandwell, Inc., 189 F.Supp.2d 406, 413-14 (W.D.Va. 2002) ("chart[ing] the scope of § 8.01-250"). Because the instant case is not a such an action, § 8.01-250 has no application.
Tolk further challenges the timeliness of the underlying complaint. Pursuant to Rule 14(a)(2)(C), a third-party defendant "may assert against the plaintiff any defense that the third-party plaintiff has to the plaintiff's claim[.]" Here, Tolk "asserts that Plaintiff's claims against Hillier are barred by the Maryland [s]tatute of [l]imitations" found at Md. Code Ann., Cts. & Jud. Proc. § 5-101. (ECF No. 52-1, at 12). Not surprisingly, Hillier whole-heartedly agrees, but argues that, "until those claims are dismissed, [it] is still exposed to potential liability, and thus is able to maintain its claims against [Tolk]." (ECF No. 53, at 9).
As the third-party defendant, it is unquestionably true that Tolk has the right to invoke a limitations defense that Hillier might raise. The problem is that the defense must be "assert[ed] against the plaintiff," not the third-party plaintiff. Fed.R.Civ.P. 14(a)(2)(C); see F & D Property Co. v. Alkire, 385 F.2d 97, 100 (10
The Tolk/Hillier contract provides, with respect to any claims that might be raised by Hillier:
(ECF No. 13-2, at 6). According to Tolk, this language "clearly mandates a condition precedent to be satisfied prior to Hillier bringing a claim against [Tolk]," and because "Hillier does not plead that it ever satisfied this condition precedent," its third-party complaint should be dismissed. (ECF No. 52-1, at 14).
Tolk bases its argument on Federal Rule of Civil Procedure 9(c), which provides that "[i]n pleading conditions precedent, it suffices to allege generally that all conditions precedent have occurred or been performed. But when denying that a condition precedent has occurred or been performed, a party must do so with particularity." This rule, however, "does not expressly require that performance of conditions be pled, it merely sets forth the manner in which such pleadings should be made." Kiernan v. Zurich Companies, 150 F.3d 1120, 1123 (9th Cir. 1998) (citing 2 James Wm. Moore, Moore's Federal Practice, § 9.04[1] (3d ed. 1997)); see also Mendez v. Bank of America Home Loans Servicing, LP, 840 F.Supp.2d 639, 647-48 (E.D.N.Y. 2012) (citing Kiernan for the same proposition); Kapahu v. BAC Home Loans Serv., L.P., Civ. No. 10-00097 JMS/BMK, 2010 WL 2734774, at *4 (D.Haw. July 8, 2010) (same). Indeed, "the reference in Rule 9(c) to conditions precedent simply distinguishes what suffices when an allegation of performance is made from what satisfies when performance is denied." Shim v. PNC Bank, N.A., No. 10-00156, 2010 WL 3566733, at *2 (D.Haw. Sept. 14, 2010).
Because Hillier was not required to plead that it satisfied a condition precedent prior to filing suit, its third-party complaint is not subject to dismissal on that basis. If Tolk wishes to raise failure to satisfy a condition precedent as an affirmative defense, it is free to do so in a subsequent pleading and/or motion. Under the circumstances of this case, however — given that both Tolk and Hillier were initially named as defendants in Plaintiff's complaint — any suggestion that Tolk was not on notice that Hillier might assert a right to indemnity and/or contribution strains credulity. See Recreonics Corp. v. Aqua Pools, Inc., 638 F.Supp. 754, 758 (D.S.C. 1986) ("[T]o require plaintiff in the present case to plead fulfillment of the condition precedent would be to exalt form over substance, and would, indeed, be a hollow requirement").
Tolk's arguments that the third-party complaint fails to state a claim for relief are more substantive. Tolk contends that "Hillier has not and cannot plead any contract provision, unique circumstances or special relationship that would give rise to a claim for express or implied contractual indemnity under Virginia law," and that "Hillier cannot maintain a common law indemnity or contribution claim against [Tolk] because Plaintiff does not have an enforceable cause of action against [Tolk]." (ECF No. 52-1, at 2). Hillier counters that a limitation of liability clause in the Tolk/Hillier agreement "is clear enough to provide Hillier with a claim for express indemnification[,] or at least a claim for implied indemnification," and, under Maryland law, that its common law indemnity claim should not be dismissed because Hillier's "liability is passive or secondary, while [Tolk's] negligence is active in nature." (ECF No. 53, at 6-7).
The parties agree that Virginia law applies to Hillier's claim for express or implied contractual indemnification, which is based on the following provision of the Tolk/Hillier agreement:
(ECF No. 13-2, at 5). According to Hillier, "this language clearly contemplates that [Tolk] intended to limit its liability to Hillier in the event Hillier suffered any `loss' as a result of `an error or omission of [Tolk].'" (Id.).
While the clause would appear to limit Tolk's liability for an indemnification claim, it clearly is not an express agreement to indemnify. Indeed, the Tolk/Hillier contract does not mention indemnity, nor does it include any "hold harmless" language typically associated with such a provision. See TransDulles Ctr., Inc. v. USX Corp., 976 F.2d 219, 228 (4th Cir. 1992) (finding no express agreement to indemnify where the "contract . . . [did] not mention indemnity"); Hanover Ins. Co. v. Corrpro Companies, Inc., 312 F.Supp.2d 816, 821 (E.D.Va. 2004) ("if the parties desired to create an indemnitorindemnitee relationship, they could have done so expressly in the contract").
Although an implied right to indemnity may arise from a contract under Virginia law, "only unique factors or a special relationship between the parties give rise to such a right." TransDulles Ctr., 976 F.2d at 228. Hillier has not alleged that it had such a relationship with Tolk, and it appears that "no unique relationship existed beyond the fact of the contract itself." Dacotah Mktg. and Research, L.L.C. v. Versatility, Inc., 21 F.Supp.2d 570, 580 (E.D.Va. 1998). Because "the ordinary commercial contract between the parties here `supplies no basis to find an implied contract for indemnification,'" Clark Constr. Group Inc. v. Allglass Systems, Inc., No. Civ.A. DKC2002-1590, 2004 WL 1778862, at *14 (D.Md. Aug. 6, 2004) (quoting TransDulles Ctr., 976 F.2d at 228), Hillier's claim for contractual indemnification cannot be sustained.
While the parties apparently disagree as to whether Virginia or Maryland law governs Hillier's common law indemnification claim, the outcome is the same in either event. In Virginia, a party may recover for equitable indemnification where that party is "without personal fault, [but] nevertheless legally liable for damages caused by the negligence of another." Carr v. Home Ins. Co., 463 S.E.2d 457, 458 (Va. 1995); see also Hanover Ins. Co., 312 F.Supp.2d at 821. In other words, "[i]f a defendant is guilty of active negligence, he may not obtain indemnification from any other defendant." Level 3 Communications, LLC v. Webb, Inc., No. 3:12cv82-DJN, 2012 WL 2199262, at *3 (E.D.Va. June 14, 2012) (quoting Philip Morris, Inc. v. Emerson, 368 S.E.2d 268, 285 (Va. 1988)). Similarly, in Maryland, "a defendant may seek indemnification only when its liability is passive or secondary, which liability is rooted in the concept of imputed or constructive fault." Pyramid Condominium Ass'n v. Morgan, 606 F.Supp. 592, 596 (D.Md. 1985).
In determining whether negligence is active or passive, courts typically look to the allegations in the plaintiff's complaint against the party seeking to implead the third-party defendant. See Philip Morris, 368 S.E.2d at 285. "If the alleged conduct attributed to the third-party plaintiff is active negligence, or if it is clear from the complaint that the third-party plaintiff's negligence would only arise from proof of active negligence, then there is no valid claim for indemnity." Richards v. Freeman, 179 F.Supp.2d 556, 560 (D.Md. 2002) (citing Kelly v. Fullwood Foods, Inc., 111 F.Supp.2d 712, 714 (D.Md. 2000); Pyramid Condominium, 606 F.Supp. at 596); see also Level 3 Communications, 2012 WL 2199262, at *3 ("a party is actively negligent when its conduct was the proximate cause of the underlying plaintiff's injury and where the nature of the legal liability is more than vicarious") (quoting Robert's Farm Equip., Inc. v. William Hackett Chains, Ltd., No. 1:10cv282, 2011 U.S. Dist. LEXIS 4851, at *19-20 (E.D.Va. Jan. 4, 2010)). Critically, for present purposes, it is not necessary that the third-party defendant be independently liable to the plaintiff; rather, "an equitable indemnification claim `is assertable . . . as long as there is an allegation of negligence on the part of another alleged joint tort feasor.'" Williams ex rel. Estate of Williams v. United States, 469 F.Supp.2d 339, 342 (E.D.Va. 2007) (quoting CSX Transp., Inc. v. Titan Am., LLC, No. LS-1717-1, 2004 WL 2999134, at *2 (Va. Cir. Ct. Nov. 2, 2004)).
According to Tolk, "[s]ince it is readily evident from the pleadings that Hillier was an active tortfeasor, [Hillier] cannot maintain a common law indemnity claim[.]" (ECF No. 54, at 12). Although it is undoubtedly true that Plaintiff's complaint alleges active negligence on the part of Hillier, so, too, does it allege active negligence on the part of Tolk. If the fact-finder were ultimately to determine that Plaintiff's damages were solely attributable to defects in the MEP design, for example, it might also find that Hillier's failure to discover those defects constituted passive negligence. See Williams, 469 F.Supp.2d at 343 ("Equitable indemnification has specifically been `allowed where the indemnitee has without fault or only through passive negligence failed to discover . .. a defect in products created or supplied by the [actively negligent] indemnitor.'" (quoting White v. Johns-Manville Corp., 662 F.2d 243, 249 (4
Maryland courts have expressly left open the question of whether — or when — the availability of indemnity turns only on allegations in the complaint, or includes facts found after a hearing involving the plaintiff and the tortfeasor seeking indemnity. Max's of Camden Yards v. A.C. Beverage, 172 Md.App. 139, 152 (2006). As the Eastern District of Virginia district court explained in Level 3 Communications, 2012 WL 2199262, at *4, "[a]t this stage of the litigation [i.e., the dismissal stage], it is sufficient that [the plaintiff] has alleged negligence claims against [the defendant/third-party plaintiff] and that [the defendant/third-party plaintiff], in turn, has alleged that [the third-party defendant] was the principle tortfeasor." See also Williams, 469 F.Supp.2d at 343 ("a determination of `active-passive' negligence is a question for the trier of fact and thus cannot be resolved" on a motion to dismiss). Those minimal requirements have been met here. Accordingly, Hillier's equitable indemnity claim is not subject to dismissal.
The "active/passive" negligence analysis applicable to equitable indemnity claims does not apply with respect to claims for contribution. In Virginia, the right of contribution is a creature of statute — specifically, Va. Code Ann. § 8.01-34, which provides that "[c]ontribution among wrongdoers may be enforced when the wrong results from negligence and involves no moral turpitude."
Although Plaintiff's complaint clearly contains allegations of liability as to both Hillier and Tolk — thereby supporting Hillier's equitable indemnity claim against Tolk — the court previously determined that Plaintiff does not have a right of action against Tolk directly. See National Labor College, 739 F.Supp.2d at 834, 835-36. Because there is no common liability between Tolk and Hillier for the injury allegedly suffered by Plaintiff, there can be no right of contribution.
For the foregoing reasons, Tolk's motion to dismiss will be granted in part and denied in part. A separate order will follow.
