Bard Water District v. James Davey and Associates, Inc. et al

Filing 69

ORDER denying 65 Motion to Dismiss Third-Party complaint. Signed by Judge Jeffrey T. Miller on 11/30/2017. (jpp)

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UNITED STATES DISTRICT COURT

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SOUTHERN DISTRICT OF CALIFORNIA

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BARD WATER DISTRICT,

Case No.: 13cv2727 JM (PCL)
Plaintiff,

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ORDER DENYING MOTION TO
DISMISS THIRD-PARTY
COMPLAINT

v.
JAMES DAVEY AND ASSOCIATES,
INC., an Arizona corporation; JAMES
DAVEY; and DOES 1 through 50,

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Defendants.

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JAMES DAVEY AND ASSOCIATES,
INC., an Arizona corporation,
Third-Party Plaintiff,

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v.
GEORGE CAIRO ENGINEERING,
INC., an Arizona corporation; and ROES
1 through 10, inclusive,
Third-Party Defendants.

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Third-Party Defendant George Cairo Engineering, Inc. (“GCE”) moves the court to

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dismiss the third-party complaint of Third-Party Plaintiff James Davey and Associates, Inc.

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(“JDA”) pursuant to Federal Rule of Civil Procedure 12(b)(6). (Doc. No. 65.) JDA
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opposes the motion. (Doc. No. 66.) The court finds the matter suitable for decision without

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oral argument pursuant to Civil Local Rule 7.1(d)(1) and, for the following reasons, denies

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GCE’s motion.

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BACKGROUND

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On November 13, 2013, Plaintiff Bard Water District (“Plaintiff”) filed suit against

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JDA. (Doc. No. 1.) The remaining claim at issue from Plaintiff’s operative third amended

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complaint (“TAC”) is for breach of fiduciary duty. (Doc. No. 26.) The cause of action

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arose from JDA’s work as engineer for Plaintiff on a canal-improvement construction

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project in Imperial County (“Canal Project”). Specifically, Plaintiff alleges:

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29.

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their principal, to act with utmost good faith and in the best

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interests of Plaintiff by failing to perform duties, responsibilities

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and obligations of Project Engineer memorialized in the Contract

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for the Canal Project; namely, by failing to ensure that the

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general contractor complied with its requirements by unilaterally

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waiving, without plaintiff’s knowledge or consent, necessary

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testing and inspection requirements, including necessary

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inspections and tests to ensure that the beds of the irrigation

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ditches were properly compacted and otherwise prepared to

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receive concrete ditch lining.

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30.

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Plaintiff the fact of such breaches until, at the earliest, the week

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commencing November 15, 2009.

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[JDA] breached their fiduciary duty owed to Plaintiff, as

Thereafter, [JDA] failed to disclose and concealed form

(Doc. No. 26 ¶¶ 29–30.)

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On August 4, 2017, JDA filed a third-party complaint against GCE and ROES 1

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through 10, inclusive. (Doc. No. 63.) In its complaint, JDA asserts one cause of action for

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equitable indemnity. JDA alleges that GCE is the successor entity to Davey Cairo

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Engineering, Inc. (“DCE”). JDA further alleges that DCE acted as the civil engineer of
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record on the Canal Project, and that “Plaintiff’s damages as alleged in its [TAC] were

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proximately caused by” GCE. In sum, JDA argues that “[i]f Plaintiff can prove its claims,

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then some or all of these claims ultimately arise from the actions, inactions, breach of duty,

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work, materials, or services of Third-Party Defendants.”

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GCE filed the instant motion to dismiss on September 20, 2017. (Doc. No. 65.)

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LEGAL STANDARDS

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A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) challenges the

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legal sufficiency of the pleadings. To overcome such a motion, the complaint must contain

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“enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v.

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Twombly, 550 U.S. 544, 570 (2007). “A claim has facial plausibility when the plaintiff

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pleads factual content that allows the court to draw the reasonable inference that

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the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678

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(2009). Facts merely consistent with a defendant’s liability are insufficient to survive a

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motion to dismiss because they establish only that the allegations are possible rather than

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plausible. Id. at 678–79. The court must accept as true the facts alleged in a well-pled

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complaint, but mere legal conclusions are not entitled to an assumption of truth. Id. The

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court must construe the pleading in the light most favorable to the non-moving

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party. Concha v. London, 62 F.3d 1493, 1500 (9th Cir. 1995).

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DISCUSSION

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GCE argues that JDA cannot indemnify GCE for Plaintiff’s claim for breach of

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fiduciary duty and, even if JDA were entitled to indemnify GCE, its claim is premature.

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The court addresses each argument in turn.

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I.

Plaintiff’s Breach of Fiduciary Duty Claim Does Not Preclude Equitable

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Indemnity

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GCE argues that JDA’s indemnity claim fails as a matter of law because the

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underlying allegations against JDA “arise from an intentional act or tort.” (Doc. No. 65 at

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5.) The court disagrees for two reasons.

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First, the underlying allegations in Plaintiff’s claim against JDA for breach of

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fiduciary duty do not necessarily arise from an intentional tort. While Plaintiff does claim

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that JDA “failed to disclose and concealed from Plaintiff the fact of such breaches,” those

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breaches are for allegedly failing to perform certain Project Engineer obligations and

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failing to ensure that the general contractor complied with its requirements. (Doc. No. 26

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¶¶ 29–30.)

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concealment, JDA is not precluded from seeking equitable indemnity from GCE.

Because the breaches alleged by Plaintiff are not solely for fraudulent

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Second, even if Plaintiff’s claim against JDA includes intentional concealment, JDA

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would still be able to seek equitable indemnity for any damages attributable to negligent or

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willful misconduct. See Allen v. Sundean, 137 Cal. App. 3d 216, 227 (1982) (concluding

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that a defendant was entitled to equitable indemnity for damages attributable to its willful

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misconduct, but not for damages attributable to its fraudulent concealment). Furthermore,

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as GCE notes in its reply, while an “intentional tortfeasor is barred from seeking partial

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indemnity from a negligent tortfeasor,” an “intentional tortfeasor is entitled to seek

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indemnity from a concurrent intentional tortfeasor.” Res-Care Inc. v. Roto-Rooter Servs.

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Co., 753 F. Supp. 2d 970, 978 (N.D. Cal. 2010) (citing Allen v. Sundean, 137 Cal. App. 3d

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at 227; Baird v. Jones, 21 Cal. App. 4th 684, 688 (1993)) (emphasis added).

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II.

JDA’s Claim for Equitable Indemnity Is Not Premature

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GCE also argues that JDA’s claim for equitable indemnity is premature because JDA

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has not yet suffered loss through payment of the underlying claim. However, the cases

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cited by GCE to support its argument address when a cause of action for equitable

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indemnity accrues for statute of limitation purposes, not when a party may bring an

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equitable indemnity claim against a third party. California law recognizes that “a tort

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defendant may file a cross-complaint against a third party when the defendant properly

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alleges entitlement to indemnity from such a party, should the plaintiff prevail on the

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original complaint.” Postley v. Harvey, 153 Cal. App. 3d 280, 285 (1984) (citations

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omitted); see also People ex rel. Dep’t of Transportation v. Superior Court, 26 Cal. 3d 744,

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759 (1980) (“the fact that a defendant is permitted under a third party procedure to bring a
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declaratory cross-complaint in the original tort action does not alter the general rule that,

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for statute of limitations purposes, the defendant’s indemnity action does not accrue until

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he has suffered actual loss through payment.”). In sum, JDA may assert a claim for

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equitable indemnity against GCE even though the cause of action for that claim has not yet

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accrued. JDA’s claim for equitable indemnity is not premature.

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CONCLUSION
For the foregoing reasons, the court denies GCE’s motion to dismiss JDA’s thirdparty complaint.
IT IS SO ORDERED.

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DATED: November 30, 2017
JEFFREY T. MILLER
United States District Judge

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