Opinion
21-CV-00227-DC-RCG
09-08-2023
JOSEPH YOUNG, Plaintiff, v. LG CHEM LTD., Defendant/Third-Party Plaintiff, v. TALL CITY VAPOR WORKS, LLC and D&A DISTRIBUTION, LLC d/b/a STRICTLY E-CIG Third-Party Defendants.
REPORT AND RECOMMENDATION OF THE U.S. MAGISTRATE JUDGE
RONALD C. GRIFFIN UNITED STATES MAGISTRATE JUDGE
BEFORE THE COURT is Defendant/Third-Party Plaintiff LG Chem, LTD.'s (“LG Chem”) Motion to Dismiss Third-Party Defendant D&A Distribution d/b/a Strictly E-Cig's Counter-Claim for Failure to State a Claim (Doc. 56) and Third-Party Defendant/Third-Party Plaintiff D&A Distribution, LLC d/b/a Strictly E-Cig's (“D&A Distribution”) Response in Opposition (Doc. 58). This case is before the Court through a Standing Order pursuant to 28 U.S.C. § 636 and Appendix C of the Local Court Rules for the Assignment of Duties to United States Magistrate Judges. After due consideration, the Court RECOMMENDS that LG Chem's Motion to Dismiss be GRANTED. (Doc. 56).
All page number citations are to CM/ECF generated pagination unless otherwise noted.
I. Background
On November 23, 2021, Plaintiff Joseph Young (“Plaintiff”) filed his Complaint against Defendants LG Chem America, Inc. and LG Chem in this Court based on diversity jurisdiction. (Doc. 1). Plaintiff's Complaint stems from allegations that on March 4, 2020, a spare 18650 lithium-ion battery for Plaintiff's vape exploded while in his pocket. Id. at 3. After suffering injuries Plaintiff brought suit against Defendants for strict liability based on products liability and negligence.
Defendants LG Chem America, Inc. and LG Chem filed their first Motion to Dismiss for Lack of Personal Jurisdiction on December 15, 2021 (Doc. 5), however in lieu of a response, Plaintiff filed a Stipulation of Dismissal, dismissing Defendant LG Chem America, Inc. and leaving LG Chem as the sole defendant (Docs. 8, 9). As a result, Defendants' first Motion to Dismiss was denied as moot. See Text Order dated January 21, 2022. Thereafter, on March 7, 2022 Defendant LG Chem filed its Second Motion to Dismiss Plaintiff's Complaint for Lack of Personal Jurisdiction. (Doc. 10). The Court ultimately denied LG Chem's Motion to Dismiss and ruled that it could properly exercise personal jurisdiction over LG Chem. (Docs. 25, 27).
Thereafter, the Court entered a scheduling order to guide the course of this case to trial. (Doc. 37). Shortly after LG Chem filed its Third-Party Complaint against Tall City Vapor Works, LLC and D&A Distribution seeking contribution and apportionment in the case Plaintiff recovers damages from LG Chem. (Doc. 38). LG Chem subsequently amended its Complaint. (Doc. 42). In Response to LG Chem's Third-Party Amended Complaint, D&A Distribution filed an Answer and Counterclaims against LG Chem for both common law indemnity and statutory indemnity under Tex. Civ. Prac. & Rem. Code section 82.002. (Doc. 51).
On June 13, 2023, LG Chem filed the instant Motion to Dismiss asking the Court to dismiss both of D&A Distribution's indemnity counterclaims for failure to state a claim. (Doc. 56). D&A Distribution filed its Response in Opposition on July 11, 2023 and LG Chem filed its Amended Reply on July 18, 2023. (Docs. 58, 60).
II. Standard of Review
Federal Rule of Civil Procedure 12(b)(6) authorizes dismissal of a complaint for “failure to state a claim upon which relief can be granted.” When considering a Rule 12(b)(6) motion to dismiss, a court must “accept the complaint's well-pleaded facts as true and view them in the light most favorable to the plaintiff.” Johnson v. Johnson, 385 F.3d 503, 529 (5th Cir. 2004). Federal Rule of Civil Procedure 8 requires that a pleading contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” FED. R. CIV. P. 8(a)(2). Thus, to survive a Rule 12(b)(6) motion to dismiss, the plaintiff must plead “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “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). A complaint need not include detailed facts to survive a Rule 12(b)(6) motion to dismiss. See Twombly, 550 U.S. at 555-56. However, a plaintiff must do more than recite the formulaic elements of a cause of action. See id. at 556-57. Additionally, the Court is not bound to accept as true a legal conclusion couched as a factual allegation in the complaint. See Iqbal, 556 U.S. at 678. Thus, although all reasonable inferences will be resolved in favor of the plaintiff, the plaintiff must plead “specific facts, not mere conclusory allegations.” Tuchman v. DSC Commc'ns Corp., 14 F.3d 1061, 1067 (5th Cir. 1994).
III. Discussion
A. Common Law Indemnity
In Texas, “under the common law, a person is entitled to indemnity for products liability only if his liability is entirely vicarious and he is not himself independently culpable. The indemnitor must be liable or potentially liable for the product defect, and his liability must be adjudicated or admitted.” GMC v. Hudiburg Chevrolet, Inc., 199 S.W.3d 249, 254 (Tex. 2006) (internal citations omitted). D&A Distribution's pleading contains one sentence regarding its counterclaim for common law indemnity: “Third Party Defendant/Counter Plaintiff D & A is a purported distributor of the allegedly defective battery cells and seeks common law indemnity from the battery cells' manufacturer.” (Doc. 51 at 12).
LG Chem argues dismissal is appropriate under Rule 12(b)(6) because “D & A Distribution has not pled any facts supporting a claim for common law indemnity against LG Chem.” (Doc. 51 at 4). Further, “D&A Distribution does not allege existence of a contractual relationship, that its liability is ‘entirely vicarious,' or that it is the mere conduit for a defective product and not independently culpable.” Id. Conversely, D&A Distribution, whilst citing cases that exclusively predate Iqbal and Twombly, argues that it “plead[ed] sufficient facts in its Original Answer and Counterclaim to show a cause of action for common law indemnity,” since “[a]ll that both the Texas and Federal Rules require is a plain statement providing fair notice of the claimant's claims.” (Doc. 58 at 6) (citing TEX. R. CIV. P. 45(b); FED R. CIV. P. 8(a)).
Here, D&A Distribution's single sentence does not contain the requisite facts to adequately state a claim for common law indemnity. (See Doc. 51 at 12). D&A Distribution fails to allege it is either (1) in a contractual relationship with LG Chem; (2) that its liability is “entirely vicarious”; or (3) that it is not independently culpable. Hudiburg Chevrolet, 199 S.W.3d at 254. D&A Distribution's common law indemnity counterclaim is pleaded in a single sentence that even taken in a light most favorable to D&A Distribution does not meet muster under Rule 12(b)(6). Accordingly, the Court RECOMMENDS that LG Chem's Motion to Dismiss be GRANTED as it relates to D&A Distribution's counterclaim for common law indemnification. (Doc. 56).
B. Statutory Indemnity
By design, “[s]ection 82.002 of the Texas Civil Practice and Remedies Code creates ‘a new, distinct statutory duty' of indemnification because it is, by its terms, ‘in addition to any duty to indemnify established by law, contract, or otherwise.' ” Hudiburg Chevrolet, 199 S.W.3d at 255 (quoting first Fitzgerald v. Advanced Spine Fixation Sys., Inc., 996 S.W.2d 864, 866 (Tex. 1999), then Tex. Civ. Prac. & Rem. Code § 82.002(e)(2)). Section 82.002(a) states:
A manufacturer shall indemnify and hold harmless a seller against loss arising out of a products liability action, except for any loss caused by the seller's negligence, intentional misconduct, or other act or omission, such as negligently modifying or altering the product, for which the seller is independently liable.
The Texas Supreme Court has summarized this section to “require[] a manufacturer to indemnify an innocent seller for certain damages and litigation expenses arising out of a products liability action, but require[] sellers to bear the damages and expenses for losses they cause.” Meritor Auto., Inc. v. Ruan Leasing Co., 44 S.W.3d 86, 88 Tex. 2001) (citing Fitzgerald v. Advanced Spine Fixation Sys., Inc., 996 S.W.2d 864, 867 (Tex. 1999)). Importantly, “[t]he duty to indemnify is triggered by the injured claimant's pleadings.” Hudiburg Chevrolet, 199 S.W.3d at 255.
LG Chem argues dismissal of D&A Distribution's counter claim is warranted because, D&A Distribution “is not being sued for products liability and, therefore, can have no loss arising out of a product liability action. The statute's plain language makes the point clear.” (Doc. 51 at 5). LG Chem further points out that it is the sole party bringing a claim against D&A Distribution, and its claim is based on contribution and apportionment, not products liability. Id. (citing Doc. 42 at 8). D&A Distribution counters that LG Chem's duty to indemnify D&A Distribution is triggered by Plaintiff Joseph Young's claims in his Complaint. (Doc. 58 at 3). D&A Distribution also alleges LG Chem's contribution and indemnity claims “based solely on D&A's own negligence are part of the underlying products liability action.” Id.
Here, the issue on the table is whether LG Chem's claims for apportionment and contribution against D&A Distribution is properly included as part of the “loss arising out of a products liability action,” placing a duty on LG Chem to indemnify D&A Distribution.
As noted above, a manufacturer's duty to indemnify is triggered by the injured claimant's pleadings. Hudiburg Chevrolet, 199 S.W.3d at 255. However, joinder of the seller as a party to litigation is not necessary. Id. at 257. Neither is it necessary for a plaintiff's pleadings to allege the seller sold a manufacturer's product before a duty to indemnify arises. United Medical Supply Co., Inc. v. Ansell Healthcare Prods., Inc., 476 S.W.3d 84, 90 (Tex. App.-Dallas 2015, pet. denied) (citing Hudiburg Chevrolet, 199 S.W.3d at 257).
The Court ultimately draws its conclusion from the Texas Supreme Court case Meritor Auto., Inc. v. Ruan Leasing Co., 44 S.W.3d 86 (Tex. 2001). In Meritor, the Texas Supreme Court undertook a thorough analysis of section 82.002(a)'s language in deciding whether “the seller's reasonable cost to defend an unsuccessful negligence claim, asserted independently of the products liability claim, is properly included as part of the ‘loss arising out of a products liability action,' so that it is within the manufacturer's indemnity duty.” Meritor, 44 S.W.3d at 87 (citing § 82.002(a)). Meritor stems from a truck driver attempting to open the hood of his leased freightliner truck-whilst pulling the handle to open the hood, the handle broke and plaintiff fell. Id. at 87. The plaintiff initially brought a products liability claim against the manufacturers of the truck and the hood. Id. Plaintiff also joined the truck's owner to the lawsuit. Id. Later, the plaintiff amended his complaint to add an allegation that the truck's owner was “independently negligent in failing to maintain the hood.” Id. The truck's owner then filed a cross claim against the truck's manufacturers seeking indemnification under section 82.002(a) for all damages and expenses. Meritor, 44 S.W.3d at 87. At the summary judgment stage, the trial court granted the truck owner's motion and reimbursed him for attorney's fees and expenses in defending the plaintiff's negligence claim. Id. The manufacturers appealed the trial court's summary judgment decision and ultimately the case ended up at the Texas Supreme Court for a determination of the scope of the truck manufacturers' statutory indemnity obligation.
The Texas Supreme Court concluded that section 82.002(a)'s language suggests courts “are to include all direct allegations against the seller that relate to plaintiff's injury as part of the ‘products liability action' and that we exclude only those losses ‘caused by' the seller.” Id. at 90. Problematically for D&A Distribution, Plaintiffs Complaint is devoid of direct allegations that D&A Distribution sold Plaintiff LG Chem's product. (See Doc. 1). As the case law stands currently, this is fatal to D&A Distribution's counterclaim for statutory indemnity, since the plaintiff's allegations trigger a manufacturer's indemnity obligation. See United Medical Supply, 476 S.W.3d at 90 (“Because it is the plaintiff's allegations that are controlling, a manufacturer must indemnify a seller if a plaintiff alleges the seller sold the manufacturer's product, even if it is subsequently determined the seller did not sell the particular product that caused the plaintiff's alleged injuries.”) (citing Fitzgerald, 996 S.W.2d at 867). Further, Plaintiff does not plead any direct claims against D&A Distribution. Thus, D&A Distribution's counterclaim for statutory indemnity fails to state a claim upon which relief can be granted, as LG Chem's third-party claims for contribution and apportionment do not constitute a “loss arising out of a products liability action,” as required by section 82.002(a).
Accordingly, the Court RECOMMENDS that LG Chem's Motion to Dismiss be GRANTED as it relates to D&A Distribution's counterclaim for statutory indemnification. (Doc. 56).
IV. Conclusion
For the foregoing reasons, the Court finds D&A Distribution failed to state a claim upon which relief could be granted. Therefore, the Court RECOMMENDS that LG Chem's Motion to Dismiss be GRANTED. (Doc. 56).
Instructions for Service and Notice of Right to Appeal/Object
In the event that a party has not been served by the Clerk with this Report and Recommendation electronically, pursuant to the CM/ECF procedures of this District, the Clerk is ORDERED to mail such party a copy of this Report and Recommendation by certified mail. Pursuant to 28 U.S.C. § 636(b)(1), any party who desires to object to this report must serve and file written objections within fourteen (14) days after being served with a copy. A party filing objections must specifically identify those findings, conclusions, or recommendations to which objections are being made; the District Judge need not consider frivolous, conclusive, or general objections. Such party shall file the objections with the Clerk of the Court and serve the objections on all other parties. A party's failure to file such objections to the proposed findings, conclusions, and recommendations contained in this report shall bar the party from a de novo determination by the District Judge. Additionally, a party's failure to file written objections to the proposed findings, conclusions, and recommendations contained in this report within fourteen (14) days after being served with a copy shall bar that party, except upon grounds of plain error, from attacking on appeal the unobjected-to proposed factual findings and legal conclusions accepted by the District Judge. Douglass v. United Servs. Auto. Ass'n, 79 F.3d 1415, 1428-29 (5th Cir. 1996).