Wada et al v. Aloha King, LLC et al
Filing
135
ORDER GRANTING DEFENDANTS ABSO AND STERLINGBACKCHECK'S MOTION TO DISMISS THE FIRST AMENDED COMPLAINT FILED JULY 21, 2015 (ECF No. 99 ) WITH LEAVE TO AMENDandGRANTING, IN PART, AND DENYING, IN PART, CROSS-DEFENDANTS ABSO AND STERLINGBACKCHECK'S MOTION TO DISMISS TOTAL STORAGE SOLUTIONS' CROSSCLAIMS FILED ON AUGUST 7, 2015 (ECF No. 100 ) WITH LEAVE TO AMENDandDENYING CROSS-DEFENDANTS ABSO AND STERLINGBACKCHECK'S MOTION TO DISMISS TNT SELF STORAGE MANAGEMENT, INC.'S CROSSCLAIMS FILED ON AUGUST 10, 2015 (ECF No. 101 )andDENYING CROSS-DEFENDANTS ABSO AND STERLINGBACKCHECK'S MOTION TO DISMISS ALOHA KING, LLC'S CROSSCLAIMS FILED ON SEPTEMBE R 16, 2015 (ECF No. 120 ) Signed by JUDGE HELEN GILLMOR on 12/23/2015. (afc)WRITTEN ORDER follows hearing held November 20, 2015 on aforesaid motions. MINUTES of hearing: doc no. 133 . Plaintiffs are given leave to amend their First Amended Complaint on or before February 10, 2016. TSS Staffing Agent given leave to amend Crossclaim on or before February 10, 2016. CERTIFICATE OF SERVICEParticipants registered to receive elect ronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications were served by first class mail on the date of this docket entry
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
MAHO WADA; MASAHIRO WADA,
Plaintiffs,
vs.
ALOHA KING, LLC; TOTAL STORAGE
SOLUTIONS; TNT SELF STORAGE
MANAGEMENT, INC.; ABSO;
STERLINGBACKCHECK; DOE
DEFENDANTS 1-20,
Defendants.
______________________________
ALOHA KING, LLC,
Cross-Claimant,
vs.
TNT SELF STORAGE MANAGEMENT,
INC.; TOTAL STORAGE SOLUTIONS;
ABSO; STERLINGBACKCHECK,
CrossDefendants.
______________________________
TOTAL STORAGE SOLUTIONS,
Cross-Claimant,
vs.
ALOHA KING, LLC; ABSO;
STERLINGBACKCHECK,
CrossDefendants.
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CIVIL NO. 14-00275 HG-BMK
______________________________
TNT SELF STORAGE MANAGEMENT,
INC.,
Cross-Claimant,
vs.
ALOHA KING, LLC; ABSO;
STERLINGBACKCHECK,
CrossDefendants.
______________________________
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ORDER GRANTING DEFENDANTS ABSO AND STERLINGBACKCHECK’S MOTION
TO DISMISS THE FIRST AMENDED COMPLAINT FILED JULY 21, 2015
(ECF No. 99) WITH LEAVE TO AMEND
and
GRANTING, IN PART, AND DENYING, IN PART, CROSS-DEFENDANTS ABSO
AND STERLINGBACKCHECK’S MOTION TO DISMISS TOTAL STORAGE
SOLUTIONS’ CROSSCLAIMS FILED ON AUGUST 7, 2015 (ECF No. 100)
WITH LEAVE TO AMEND
and
DENYING CROSS-DEFENDANTS ABSO AND STERLINGBACKCHECK’S MOTION
TO DISMISS TNT SELF STORAGE MANAGEMENT, INC.’S CROSSCLAIMS
FILED ON AUGUST 10, 2015 (ECF No. 101)
and
DENYING CROSS-DEFENDANTS ABSO AND STERLINGBACKCHECK’S MOTION
TO DISMISS ALOHA KING, LLC’S CROSSCLAIMS FILED ON SEPTEMBER
16, 2015 (ECF No. 120)
Plaintiff Masahiro Wada claims that in 2009 he rented a
storage unit at a Honolulu storage facility owned by Defendant
2
Aloha King, LLC.
Plaintiff Masahiro Wada alleges that his
fifteen year-old daughter, Plaintiff Maho Wada, was sexually
assaulted by Dale McShane, the manager of Defendant Aloha
King, LLC’s storage facility.
Plaintiffs assert that Defendant TNT Self Storage
Management, Inc. managed the storage facility for Defendant
Aloha King, LLC, and contracted with Defendant Total Storage
Solutions for the facility’s personnel and staffing matters.
Plaintiffs assert that Defendant Total Storage Solutions
contracted for Defendant Abso to conduct a background check on
Dale McShane, but Defendant Abso did not disclose that McShane
had a criminal record and was a registered sex offender.
PLAINTIFFS’ FIRST AMENDED COMPLAINT
On July 21, 2015, the Plaintiffs filed a First Amended
Complaint (ECF No. 73), naming the following Defendants:
(1)
Defendant Aloha King, LLC, as the owner of the
storage facility, (“Aloha King”);
(2)
Defendant TNT Self-Storage Management, Inc., as the
manager/operator of the storage facility, (“TNT
Management”);
(3)
Defendant Total Storage Solutions, as the personnel
and staffing agent for the storage facility, (“TSS
Staffing Agent”);
(4)
Defendant Abso, as acquired by Defendant
SterlingBackcheck, as the contractor who performed
3
the background check on Dale McShane, (“Abso” or
“Abso/SterlingBackcheck”).
CROSSCLAIMS AGAINST DEFENDANTS ABSO/STERLINGBACKCHECK
There are three separate Crossclaims filed against CrossDefendants Abso/SterlingBackcheck.
1.
TSS Staffing Agent’s Crossclaim (ECF No. 87)
Cross-Claimant TSS Staffing Agent filed a Crossclaim
against Cross-Defendants Abso/SterlingBackcheck with the
following causes of action:
Count I:
Count II:
Count III:
Count IV:
Breach of Contract against Defendant Abso
Negligence against Defendant Abso
Indemnification and Contribution against
Defendant Abso
Indemnification and Contribution
against Defendant SterlingBackcheck
(Cross-Claimant TSS Staffing Agent’s Crossclaim, ECF No. 87).
2.
TNT Management’s Crossclaim (ECF No. 89-1)
Cross-Claimant TNT Management filed a Crossclaim against
Cross-Defendants Abso/SterlingBackcheck for contribution and
indemnification.
(Defendant TNT Management’s Crossclaim, ECF
4
No. 89-1).
3.
Aloha King’s Crossclaim (ECF No. 109-1)
Cross-Claimant Aloha King has also filed a Crossclaim
against Cross-Defendants Abso/SterlingBackcheck for
contribution and indemnification.
(Defendant Aloha King’s
Crossclaim, ECF No. 109-1).
FOUR MOTIONS BEFORE THE COURT
Defendants/Cross-Defendants Abso/SterlingBackcheck have
filed the following four Motions before the Court:
1.
Defendants Abso/SterlingBackcheck’s Motion to
Dismiss the Plaintiffs’ First Amended Complaint (ECF
No. 99)
Defendants Abso/SterlingBackcheck have filed a Motion to
Dismiss the First Amended Complaint filed by Plaintiffs.
Defendants Abso/SterlingBackcheck assert in their Motion to
Dismiss that Plaintiffs’ claims are preempted by the Fair
Credit Reporting Act.
Defendants Abso/SterlingBackcheck argue
that Plaintiffs have failed to state a claim under the Fair
Credit Reporting Act.
Defendants Abso/SterlingBackcheck argue that, even if the
claims are not preempted, Plaintiffs’ claims are barred by the
applicable statutes of limitations and Plaintiffs have not
5
otherwise stated a claim upon which relief may be granted.
Defendants Abso/SterlingBackcheck’s Motion to Dismiss the
Plaintiffs’ First Amended Complaint (ECF No. 99) is GRANTED
WITH LEAVE TO AMEND.
2.
Cross-Defendants Abso/SterlingBackcheck’s Motion to
Dismiss TSS Staffing Agent’s Crossclaim (ECF No.
100)
Cross-Defendants Abso/SterlingBackcheck assert in their
Motion that Cross-Claimant TSS Staffing Agent’s claims for
breach of contract, negligence, indemnification, and
contribution are preempted by the Fair Credit Reporting Act.
Cross-Defendants Abso/SterlingBackcheck assert that the
allegations in TSS Staffing Agent’s Crossclaim do not state a
claim pursuant to the Fair Credit Reporting Act.
Cross-Defendants Abso/SterlingBackcheck argue that, even
if the claims are not preempted, TSS Staffing Agent has not
provided sufficient allegations to state a claim upon which
relief can be granted.
Cross-Defendants
Abso/SterlingBackcheck also assert that TSS Staffing Agent’s
claims are barred by the applicable statutes of limitations.
Cross-Defendants Abso/SterlingBackcheck also argue that
TSS Staffing Agent’s tort claims are barred by the economic
loss doctrine.
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Cross-Defendants Abso/SterlingBackcheck’s Motion to
Dismiss the Crossclaims filed by Cross-Claimant TSS Staffing
Agent (ECF No. 100) is GRANTED, IN PART, AND DENIED, IN PART,
WITH LEAVE TO AMEND.
3.
Cross-Defendants Abso/SterlingBackcheck’s Motion to
Dismiss the Crossclaim filed by TNT Management (ECF
No. 101)
Cross-Defendants Abso/SterlingBackcheck filed a Motion to
Dismiss TNT Management’s Crossclaim for indemnification and
contribution.
Cross-Defendants argue that TNT Management’s
Crossclaim does not contain sufficient facts to state a claim.
They also argue that TNT Management’s claims are barred by the
economic loss rule.
Cross-Defendants Abso/SterlingBackcheck’s Motion to
Dismiss the Crossclaims filed by Cross-Claimants TNT
Management (ECF No. 101) is DENIED.
4.
Cross-Defendants Abso/SterlingBackcheck’s Motion to
Dismiss the Crossclaims filed by Aloha King (ECF No.
120)
Cross-Defendants Abso/SterlingBackcheck filed a Motion to
Dismiss Aloha King’s Crossclaim for indemnification and
contribution.
Cross-Defendants argue there are insufficient
allegations in the Crossclaim to state a claim for either
7
indemnification or contribution.
Cross-Defendants Abso/SterlingBackcheck’s Motion to
Dismiss Crossclaim filed by Aloha King (ECF No. 120) is
DENIED.
PROCEDURAL HISTORY
On June 17, 2014, Plaintiffs Maho and Masahiro Wada filed
a Complaint against Defendants Aloha King, LLC (“Aloha King”);
Aloha Island-King, LLC; Total Storage Solutions (“TSS Staffing
Agent”); TNT Self Storage Management, Inc. (“TNT Management”),
and Doe Defendants 1-20.
(ECF No. 1).
On September 17, 2014, Plaintiffs filed a Notice of
Dismissal Without Prejudice as to Defendant Aloha-Island King,
LLC.
(ECF No. 16).
On March 17, 2015, Defendant TNT Management filed a
Motion for Leave to File a Third-Party Complaint.
(ECF No.
49).
On May 12, 2015, the Magistrate Judge issued an Order
Granting Defendant TNT Management’s Motion for Leave to File
Third-Party Complaint.
(ECF No. 55).
On May 26, 2015, TNT Management, as a Third-Party
Plaintiff, filed a Third-Party Complaint against Defendants
8
Abso/SterlingBackcheck (“Abso” or “Abso/SterlingBackcheck”).
(ECF No. 56).
On July 6, 2015, the Magistrate Judge approved a
Stipulation among Plaintiffs and Defendants to permit
Plaintiffs to file an Amended Complaint.
(ECF No. 62).
On July 21, 2015, Plaintiffs filed a FIRST AMENDED
COMPLAINT, adding Abso/SterlingBackcheck as Defendants.
(ECF
No. 73).
On August 7, 2015, Cross-Claimant TSS Staffing Agent
filed a Crossclaim against Cross-Defendants
Abso/SterlingBackcheck.
(ECF No. 87).
On August 10, 2015, Cross-Claimant TNT Management filed a
Crossclaim against Cross-Defendants Aloha King and
Abso/SterlingBackcheck.
(ECF No. 89).
On September 4, 2015, Third-Party Plaintiff TNT
Management filed a Notice of Dismissal Without Prejudice of
its Third-Party Complaint against Third-Party Defendants
Abso/SterlingBackcheck.
(ECF No. 98).
On September 8, 2015, Defendants Abso/SterlingBackcheck
filed a Motion to Dismiss Plaintiffs’ First Amended Complaint.
(ECF No. 99).
On the same date, Abso/SterlingBackcheck, as CrossDefendants, filed a Motion to Dismiss Cross-Claimant TSS
9
Staffing Agent’s Crossclaims Filed August 7, 2015.
(ECF No.
100).
They also filed Cross-Defendants Abso/SterlingBackcheck’s
Motion to Dismiss Cross-Claimant TNT Management’s Crossclaims
Filed August 10, 2015.
(ECF No. 101).
On September 16, 2015, Cross-Claimant Aloha King filed
Crossclaims against Defendants Abso/SterlingBackcheck, CrossDefendant TNT Management, and Cross-Defendant TSS Staffing
Agent.
(ECF No. 109).
On September 23, 2015, Plaintiffs filed their Memorandum
in Opposition to Defendants Abso/SterlingBackcheck’s Motion to
Dismiss their First Amended Complaint.
(ECF No. 112).
On the same date, Cross-Claimant TNT Management filed its
Memorandum in Opposition to Cross-Defendants
Abso/SterlingBackcheck’s Motion to Dismiss its Crossclaim.
(ECF No. 113).
Also on September 23, 2015, Cross-Claimant TSS Staffing
Agent filed its Memorandum in Opposition to Cross-Defendants
Abso/SterlingBackcheck’s Motion to Dismiss its Crossclaim.
(ECF No. 114).
On October 7, 2015, Cross-Defendants
Abso/SterlingBackcheck filed their Reply in Support of their
Motion to Dismiss Plaintiffs’ First Amended Complaint.
10
(ECF
No. 117).
Cross-Defendants Abso/SterlingBackcheck also filed
their Reply in Support of their Motion to Dismiss CrossClaimant TNT Management’s Crossclaim (ECF No. 118) and their
Reply in Support of their Motion to Dismiss Cross-Claimant TSS
Staffing Agent’s Crossclaim.
(ECF No. 119).
On the same date, Cross-Defendants Abso/SterlingBackcheck
filed a Motion to Dismiss Cross-Claimant Aloha King’s
Crossclaim. (ECF No. 120).
On October 15, 2015, Defendants/Cross-Defendants
Abso/SterlingBackcheck sent a letter requesting that the
hearing on their four Motions set for November 16, 2015, be
continued.
(ECF No. 124).
On October 16, 2015, the Court granted the request and
set the hearing for November 20, 2015.
(ECF No. 125).
On October 27, 2015, Cross-Claimant Aloha King filed an
Ex Parte Motion for Extension of Time to File its Memorandum
in Opposition to Cross-Defendants Abso/SterlingBackcheck’s
Motion to Dismiss its Crossclaim.
(ECF No. 126).
On October 28, 2015, Cross-Defendants
Abso/SterlingBackcheck filed a Statement of Position Regarding
Aloha King’s Ex Parte Motion.
(ECF No. 127).
On the same date, the Court granted Cross-Claimant Aloha
King’s Motion for Extension of Time and provided Cross-
11
Defendants Abso/SterlingBackcheck with additional time to file
their Reply.
(ECF No. 128).
On October 30, 2015, Cross-Claimant Aloha King filed its
Memorandum in Opposition to Cross-Defendants
Abso/SterlingBackcheck’s Motion to Dismiss its Crossclaim.
(ECF No. 129).
On November 12, 2015, Cross-Defendants
Abso/SterlingBackcheck filed their Reply Memorandum in Support
of their Motion to Dismiss Cross-Claimant Aloha King’s
Crossclaim.
(ECF No. 132).
On November 20, 2015, the Court held a hearing on
Defendants/Cross-Defendants Abso/SterlingBackcheck’s four
Motions to Dismiss (ECF Nos. 99, 100, 101, and 120).
BACKGROUND
PLAINTIFFS’ FIRST AMENDED COMPLAINT (ECF No. 73)
The central claim in the First Amended Complaint involves
allegations that in 2009, Plaintiff Masahiro Wada’s fifteen
year-old daughter, Plaintiff Maho Wada, was sexually assaulted
by Dale McShane, the manager of a storage facility located in
Honolulu.
Plaintiffs’ First Amended Complaint asserts negligence
claims against the numerous entities that owned, managed, and
12
contracted with the storage facility, claiming that they knew
or should have known about Dale McShane’s prior criminal
history and registration as a sex offender.
Allegations Regarding Dale McShane’s Prior Criminal History
The First Amended Complaint states that on January 14,
1985, McShane was convicted of attempted rape in the third
degree and burglary in the first degree.
(First Amended
Complaint at ¶ 12, ECF No. 73).
Plaintiffs assert McShane is and has been a registered
sex offender.
(Id. at ¶ 22).
Defendants’ Relationship to the Storage Facility and the
Employment of Dale McShane:
The First Amended Complaint alleges the following:
The storage facility at issue, Aloha Island Self Storage,
is owned by Defendant Aloha King, LLC (“Aloha King”).
(First
Amended Complaint at ¶ 7, ECF No. 73).
In February 2006, Defendant Aloha King contracted with
Defendant TNT Self Storage Management, Inc. (“TNT Management”)
to manage the storage facility.
(Id. at ¶ 13, ECF No. 73).
Defendant TNT Management contracted with Defendant Total
Storage Solutions (“TSS Staffing Agent”), for its personnel
13
and staffing matters related to its operation of the storage
facility.
(Id. at ¶¶ 7, 13).
Defendant TNT Management is
owned by the same individual that owns Defendant TSS Staffing
Agent.
(Id. at ¶ 13).
In June 2008, Defendant TSS Staffing Agent entered into a
contract with Defendant Abso (“Abso” or
“Abso/SterlingBackcheck”) to perform employment and background
screening services for the employees of the storage facility.
(Id. at ¶ 14).
In November 2008, TNT Management hired Dale McShane as
manager for the storage facility.
(Id. at ¶¶ 7, 15).
Defendant TSS Staffing Agent requested a background report on
McShane from Defendant Abso.
(Id. at ¶ 15).
Defendant Abso
provided a background report for McShane, dated February 5,
2009, and the report stated that “McShane had a clear County
Criminal record and National Sex Offender record.”
(Id.)
Defendant SterlingBackcheck acquired Abso in 2010 and is
a successor to Defendant Abso’s liabilities.
(Id. at ¶ 10).
The First Amended Complaint’s Sexual Assault Allegations
In May 2009, Plaintiff Masahiro Wada rented a storage
unit at the storage facility.
7, 16, ECF No. 73).
(First Amended Complaint at ¶¶
Plaintiff Masahiro Wada frequented the
storage facility and respected and trusted the storage
14
facility’s manager, Dale McShane.
(Id. at ¶ 17).
Plaintiff
Masahiro Wada brought his fifteen year-old daughter, Plaintiff
Maho Wada, to the storage facility in August 2009, and when he
was out of sight, Plaintiff Maho Wada was kissed by McShane.
(Id. at ¶ 20).
On September 11, 2009, McShane drove Plaintiff Maho Wada
from the storage facility to her home.
(Id. at ¶ 21).
While
McShane was driving Plaintiff Maho Wada home, he pulled the
car over, kissed Maho Wada, stuck his tongue in her mouth, and
touched her arms and inner thigh.
(Id.)
Plaintiffs’ First Amended Complaint names the following
Defendants:
(1)
Defendant Aloha King, LLC, as the owner of the
storage facility, (“Aloha King”);
(2)
Defendant TNT Self-Storage Management, Inc., as the
manager/operator of the storage facility, (“TNT
Management”);
(3)
Defendant Total Storage Solutions, as the personnel
and staffing agent for the storage facility, (“TSS
Staffing Agent”);
(4)
Defendant Abso, as acquired by Defendant
SterlingBackcheck, as the contractor who performed
the background check on Dale McShane, (“Abso” or
“Abso/SterlingBackcheck”).
(First Amended Complaint, ECF No. 73).
Plaintiffs’ First Amended Complaint (ECF No. 73) contains
the following causes of action against each of the Defendants:
15
Count I:
Count II:
Count III:
Count IV:
Count V:
Count VI:
Negligent Hiring
Negligent Control
Negligence/Negligent Promotion
Negligent Failure to Warn
Negligent Investigation/Negligent Failure
to Investigate
Respondeat Superior
Count VII:
Negligent Infliction of Emotional Distress
Count VIII:
Loss of Consortium
Count IX:
Punitive Damages
(First Amended Complaint at pp. 9-17, ECF No. 73).
Plaintiffs’ counsel agreed at the hearing to dismiss
Count VIII for loss of consortium.
Count VIII in the First
Amended Complaint for Loss of Consortium is DISMISSED WITH
PREJUDICE.
CROSSCLAIMS AGAINST CROSS-DEFENDANTS ABSO/STERLINGBACKCHECK
There are three Crossclaims filed against CrossDefendants Abso/SterlingBackcheck.
1.
Cross-Claimant TSS Staffing Agent’s Crossclaim
Against Cross-Defendants Abso/SterlingBackcheck (ECF
No. 87)
TSS Staffing Agent, as a co-Defendant, has filed a
16
Crossclaim against Cross-Defendants Abso/SterlingBackcheck.
(TSS Staffing Agent’s Crossclaim, ECF No. 87).
Cross-Claimant TSS Staffing Agent asserts in its
Crossclaim that Plaintiffs Masahiro and Maho Wada filed a
police report on September 19, 2009, alleging improper conduct
by Dale McShane.
(Id. at ¶ 5).
Cross-Claimant TSS Staffing
Agent asserts that after it was notified of the police report,
it requested that Cross-Defendant Abso prepare another
background report for Dale McShane.
(Id. at ¶ 6).
Cross-
Claimant TSS Staffing Agent alleges that Cross-Defendant Abso
provided another background report on Dale McShane on
September 23, 2009, and it stated that Dale McShane was a
registered Sex Offender for Attempted Rape in the 3rd Degree
from an offense that occurred in Hawaii on January 14, 1985.
(Id.)
Cross-Claimant TSS Staffing Agent asserts claims for
breach of contract, negligence, and indemnification and
contribution against Cross-Defendants Abso/SterlingBackcheck
for failing to properly perform the background check on
McShane.
2.
(Id. at pp. 4-7).
Cross-Claimant TNT Management’s Crossclaim Against
Cross-Defendants Abso and SterlingBackcheck (ECF No.
89-1)
17
Cross-Claimant TNT Management has filed a Crossclaim in
which it seeks indemnification and contribution from CrossDefendants Abso/SterlingBackcheck as a result of Abso’s
failure to accurately perform the background check.
(TNT
Management’s Crossclaim at pp. 3-6, ECF No. 89-1).
3.
Cross-Claimant Aloha King’s Crossclaim Against
Cross-Defendants Abso/SterlingBackcheck (ECF No.
109-1)
Cross-Claimant Aloha King also alleges claims for
indemnification and contribution against Cross-Defendants
Abso/SterlingBackcheck for Abso’s failure to conduct a proper
background check for Dale McShane.
(Aloha King’s Crossclaim
at ¶¶ 1-3, 7, ECF No. 109-1).
DEFENDANTS/CROSS-DEFENDANTS ABSO/STERLINGBACKCHECK’S FOUR
MOTIONS TO DISMISS
Defendants/Cross-Defendants Abso/SterlingBackcheck have
filed four motions.
Defendants/Cross-Defendants seek to
dismiss Plaintiffs’ First Amended Complaint and the three
Crossclaims filed by Cross-Claimants TSS Staffing Agent, TNT
Management, and Aloha King.
18
Defendants/Cross-Defendants Abso/SterlingBackcheck argue
that the negligence claims in the First Amended Complaint and
TSS Staffing Agent’s Crossclaim are preempted by the federal
Fair Credit Reporting Act.
Defendants/Cross-Defendants
Abso/Sterling Backcheck argue that the claims in the First
Amended Complaint and TSS Staffing Agent’s Crossclaim are
otherwise barred by the applicable statutes of limitations.
Defendants/Cross-Defendants Abso/SterlingBackcheck also
seek to dismiss the First Amended Complaint and all three
Crossclaims for failure to state a claim upon which relief can
be granted.
LEGAL STANDARDS
A Court must dismiss a complaint as a matter of law
pursuant to Federal Rule of Civil Procedure 12(b)(6) where it
fails “to state a claim upon which relief can be granted.”
Rule (8)(a)(2) of the Federal Rules of Civil Procedure
requires “a short and plain statement of the claim showing
that the pleader is entitled to relief.”
When considering a
Rule 12(b)(6) motion to dismiss, the Court must presume all
allegations of material fact to be true and draw all
reasonable inferences in favor of the non-moving party.
Pareto v. F.D.I.C., 139 F.3d 696, 699 (9th Cir. 1998).
19
Conclusory allegations of law and unwarranted inferences are
insufficient to defeat a motion to dismiss.
Id. at 699.
The
Court need not accept as true allegations that contradict
matters properly subject to judicial notice or allegations
contradicting the exhibits attached to the complaint.
Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th
Cir. 2001).
In Bell Atl. Corp. v. Twombly, the United States Supreme
Court addressed the pleading standards under the Federal Rules
of Civil Procedure in the anti-trust context.
(2007).
550 U.S. 544
The Supreme Court stated that Rule 8 of the Federal
Rules of Civil Procedure “requires more than labels and
conclusions, and a formulaic recitation of the elements of a
cause of action,” and that “[f]actual allegations must be
enough to raise a right to relief above the speculative
level.”
Id. at 555.
Most recently, in Ashcroft v. Iqbal, the Supreme Court
clarified that the principles announced in Twombly are
applicable in all civil cases.
129 S.Ct. 1937 (2009).
The
Court stated that “the pleading standard Rule 8 announces does
not require ‘detailed factual allegations,’ but it demands
more than an unadorned, the-defendant-unlawfully-harmed-meaccusation.”
Id. at 1949 (citing Twombly, 550 U.S. at 555).
20
To survive a motion to dismiss, a complaint must contain
sufficient factual matter, accepted as true, to state a claim
to relief that is plausible on its face.
Twombly, 550 U.S. at 570).
Id. (quoting
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.
U.S. at 556).
Id. (citing Twombly, 550
The plausibility standard is not akin to a
“probability requirement,” but it asks for more than a sheer
possibility that a defendant has acted unlawfully.
(quoting Twombly, 550 U.S. at 556).
Id.
Where a complaint pleads
facts that are “merely consistent with” a defendant’s
liability, it “stops short of the line between possibility and
plausibility of ‘entitlement to relief.’”
Id. (quoting
Twombly, 550 U.S. at 557).
The complaint “must contain sufficient allegations of
underlying facts to give fair notice and to enable the
opposing party to defend itself effectively” and “must
plausibly suggest an entitlement to relief, such that it is
not unfair to require the opposing party to be subjected to
the expense of discovery and continued litigation.”
AE ex
rel. Hernandez v. Cnty of Tulare, 666 F.3d 631, 637 (9th Cir.
2012) (internal quotations omitted).
21
ANALYSIS
I.
The Fair Credit Reporting Act Does Not Preempt the Causes
of Action Brought in Plaintiffs’ First Amended Complaint
(ECF No. 73) and TSS Staffing Agent’s Crossclaim (ECF No.
87)
A.
Preemption Pursuant to 15 U.S.C. § 1681h(e) of the
Fair Credit Reporting Act
Defendants/Cross-Defendants Abso/SterlingBackcheck
contend that the negligence claims in Plaintiffs’ First
Amended Complaint and the Crossclaim filed by Cross-Claimant
TSS Staffing Agent are preempted by Section 1681h(e) of The
Fair Credit Reporting Act (“FCRA”), 15 U.S.C. § 1681h(e).
Section 1681h(e) of the Fair Credit Reporting Act states:
[N]o consumer may bring any action or proceeding in
the nature of defamation, invasion of privacy, or
negligence with respect to the reporting of
information against any consumer reporting agency
... based on information disclosed ... except as to
false information furnished with malice or willful
intent to injure such consumer.
15 U.S.C. § 1681h(e).
Section 1681h(e) preempts state law claims for negligence
to the extent such claims are based on disclosure of certain
types of information in an individual’s consumer report
furnished by a consumer reporting agency.
Cisneros v. Trans
Union, LLC, 293 F.Supp.2d 1167, 1176-77 (D. Haw. 2003);
Subhani v. JPMorgan Chase Bank, 2012 WL 1980416, *3 (N.D. Cal.
June 1, 2012).
22
A “consumer reporting agency” is defined under the Fair
Credit Reporting Act as:
[A]ny person which, for monetary fees, dues, or on a
cooperative nonprofit basis regularly engages in
whole or in part in the practice of assembling or
evaluating consumer credit information or other
information on consumers for the purpose of
furnishing consumer reports to third parties, which
uses any means of facility of interstate commerce
for the purpose of preparing or furnishing consumer
reports.
15 U.S.C. § 1681a(f).
A consumer reporting agency prepares a “consumer report”
for a “consumer.”
The term “consumer report” as used in the
Fair Credit Reporting Act has a broad definition.
The Act
defines “consumer report” as:
[A]ny written, oral, or other communication of any
information by a consumer reporting agency bearing
on a consumer’s credit worthiness, credit standing,
credit capacity, character, general reputation,
personal characteristics, or mode of living which is
used or expected to be used or collected in whole or
in part for the purpose of serving as a factor in
establishing the consumer’s eligibility for—
(A) credit or insurance to be used primarily
for personal, family, or household
purposes;
(B) employment purposes; or
(C) any other purpose authorized under section
1681b of this title.
15 U.S.C. § 1681a(d)(1) (emphasis added).
The majority of cases that arise under the Fair Credit
Reporting Act involve a specific type of consumer report,
namely a credit report.
Salazar v. Golden State Warriors, 124
23
F.Supp.2d 1155, 1158 (N.D. Cal. 2000).
Employee background checks are another main type of
“consumer report” under the Fair Credit Reporting Act.
A
background check constitutes a “consumer report” for purposes
of the Fair Credit Reporting Act when it is performed for the
purpose of evaluating a “consumer” for employment, promotion,
reassignment or retention as an employee.
15 U.S.C. §
1681a(h); Johnson v. Sherwin-Williams Co., 2015 WL 4730197, *3
(N.D. Ohio Aug. 10, 2015).
The Fair Credit Reporting Act defines a “consumer” as “an
individual.”
15 U.S.C. § 1681a(c).
The “consumer” in a Fair
Credit Reporting Act claim is the individual for whom a
consumer report has been sought.
Ross v. Federal Deposit
Insurance Corporation, 625 F.3d 808, 814 (4th Cir. 2010);
Woods v. Protection One Alarm Monitoring, Inc., 628 F.Supp.2d
1173, 1180 (E.D. Cal. 2007); Johnson, 2015 WL 4730197 at *2.
The “consumer” is not the employer who requested a
consumer report in order to evaluate the prospective
employee’s background for employment purposes.
15 U.S.C. §
1681a(c) (defining “consumer” as an “individual”);
Johnson,
2015 WL 4730197 at *3.
B.
Plaintiffs’ and Cross-Claimant TSS Staffing Agent’s
24
Negligence Claims Are Not Preempted Pursuant to 15
U.S.C. § 1681h(e) of the Fair Credit Reporting Act
Defendants/Cross-Claimants Abso/SterlingBackcheck assert
that the state law negligence claims filed by Plaintiffs
Masahiro and Maho Wada and Cross-Claimant TSS Staffing Agent
are preempted pursuant to 15 U.S.C. § 1681h(e) of the federal
Fair Credit Reporting Act.
Section 1681h(e) preempts negligence causes of action
brought by a “consumer” against a “consumer reporting agency”
for inaccurate information in his “consumer report.”
Here, Defendant Abso is the “consumer reporting agency”
who prepared a “consumer report” when it conducted a
background check on Dale McShane.
15 U.S.C. § 1681a(f); 15
U.S.C. § 1681a(d)(1); 15 U.S.C. § 1681a(h).
The “consumer” at issue is Dale McShane.
McShane is the
individual for whom an evaluation was made into his character,
general reputation, or personal characteristics in
establishing the “consumer’s” eligibility for employment.
15
U.S.C. § 1681a(d)(1); Ross, 625 F.3d 808, 814 (4th Cir. 2010);
Woods, 628 F.Supp.2d at 1180; Johnson, 2015 WL 4730197, at *3.
McShane has not filed any claims and is not a party to
these proceedings.
25
1.
Plaintiffs’ Negligence Claims are Not Preempted
Plaintiffs Masahiro Wada and Maho Wada are not
“consumers” for purposes of the preemption provision found in
Section 1681h(e) of the Fair Credit Reporting Act.
§ 1681h(e).
15 U.S.C.
Section 1681a(d)(1) explicitly provides that a
consumer report is conducted for purposes of evaluating the
“consumer’s” eligibility for credit, insurance, or employment.
Defendant Abso never prepared a “consumer report” that
evaluated Plaintiffs.
Plaintiffs Masahiro and Maho Wada’s
claims that Defendant Abso was negligent in performing its
background check of Dale McShane are not subject to preemption
pursuant to 15 U.S.C. § 1681h(e).
2.
Cross-Claimant TSS Staffing Agent’s Negligence
Claims are Not Preempted
The negligence claims of Cross-Claimant TSS Staffing
Agent are also not preempted pursuant to the Fair Credit
Reporting Act.
Cross-Claimant TSS Staffing Agent is not a
“consumer” for purposes of Section 1681a(e) of the Fair Credit
Reporting Act.
A business entity is not a an “individual” and
therefore not a “consumer” for purposes of the Fair Credit
Reporting Act.
15 U.S.C. § 1681a(c) (defining “consumer” as
26
an “individual”);
Apodaca v. Discover Financial Srvs., 417
F.Supp.2d 1220, 1228 (D. N.M. Mar. 2, 2006).
The definition of a “consumer” in the Fair Credit Report
Act was intended to limit the Act’s preemption provisions to
claims filed by individuals who were the subject of a consumer
report.
Antwerp Diamond Exchange of America, Inc. v. Better
Business Bureau of Maricopa County, Inc., 637 P.2d 733, 739
(Ariz. 1981).
Business entities, such as Cross-Claimant TSS Staffing
Agent, are not consumers who have had a consumer report
furnished on their behalf under the Act.
The Federal Credit
Reporting Act is clear that a “consumer report” is conducted
for an individual and evaluates the individual’s personal
characteristics.
15 U.S.C. § 1681a(d)(1)(A)-(B).
Nothing in the Fair Credit Reporting Act indicates that a
“consumer” is a business entity.
Plaintiffs have not pointed
to any cases that have found a business entity to be a
“consumer” pursuant to the Fair Credit Reporting Act.
The state law claims in Plaintiffs’ First Amended
Complaint and Cross-Claimant TSS Staffing Agent’s Crossclaim
are not preempted by Section 15 U.S.C. § 1681h(e) of the Fair
Credit Reporting Act.
II.
Plaintiffs Have Stated Claims For Negligence Against
27
Defendants Abso/SterlingBackcheck
In the First Amended Complaint, Plaintiffs assert a
number of state law negligence causes of action against
Defendants Abso, and against Defendant SterlingBackcheck based
on its acquisition of Defendant Abso.
Under Hawaii law, a
successful negligence claim must satisfy the following four
elements:
(1)
a duty, or obligation, recognized by the law,
requiring the actor to conform to a certain standard
of conduct, for the protection of others against
unreasonable risks;
(2)
a failure on the actor’s part to conform to the
standard required;
(3)
a reasonably close causal connection between the
conduct and the resulting injury; and,
(4)
actual loss or damage resulting to the interests of
another.
Ono v. Applegate, 612 P.2d 533, 538-39 (Haw. 1980).
A.
Duty of Care
A prerequisite to any negligence action is the existence
of a duty owed by the defendant to the plaintiff.
Maguire v.
Hilton Hotels Corp., 899 P.2d 393, 395 (Haw. 1995).
Hawaii state law imposes a duty to control the conduct of
another in order to protect a third party when a special
relationship exists.
Lee v. Corregedore, 925 P.2d 324, 329
28
(Haw. 1996); Hanakahi v. United States, 325 F.Supp.2d 1125,
1131 (D. Haw. 2002).
1.
Special Relationship
Hawaii law follows the Restatement (Second) of Torts §§
315, 319, which provide:
Section 315
There is no duty to control the conduct of a third
person as to prevent him from causing harm to
another unless:
(a) a special relationship exists between the
actor and the third person which imposes a
duty upon the actor to control the third
person’s conduct, or
(b)
a special relation exists between the actor
and the other which gives to the other a
right to protection.
Restatement (Second) of Torts § 315.
Section 319
One who takes charge of a third person whom
or should know to be likely to cause bodily
others if not controlled is under a duty to
reasonable care to control the third person
prevent him from doing such harm.
he knows
harm to
exercise
to
Restatement (Second) of Torts § 319; see Seibel v.
City of Honolulu, 602 P.2d 532, 536 (Haw. 1979).
Here, the First Amended Complaint contains numerous
allegations that Defendant Abso owed Plaintiffs a duty of care
because it knew or should have known that Dale McShane was
29
likely to cause harm to patrons of the storage facility based
on his criminal history and registration as a sex offender.
(First Amended Complaint at ¶¶ 22, 26, 28-29, 35, 38, 45, ECF
No. 73).
Plaintiffs’ First Amended Complaint asserts “[g]iven
Defendants’ actual or constructive knowledge of McShane’s
status as a convicted felon and registered sex offender and/or
Defendants’ actual or constructive knowledge that McShane had
a sexual and or otherwise inappropriate interest in children
visiting the Storage Facility, Defendants had a duty to warn
Masahiro and other parents not to let their children be alone
with McShane.”
(Id. at ¶ 45).
A special relationship exists between Defendant Abso and
Dale McShane as they agreed to assess his criminal background
in order to evaluate any threat he may pose to patrons of the
storage facility.
There are allegations that Defendant Abso
knew or should have known that Dale McShane posed a risk to
the patrons of the storage facility based on his felony
conviction and registered sex offender status.
Defendant Abso had a responsibility to exercise
reasonable care in performing its background check services
based on the special relationship found in Restatement
(Second) of Torts §§ 315, 319.
30
2.
Foreseeability
Once the existence of a special relationship is
established, the determination of whether there is a duty
turns upon whether the actions of the third party are
reasonably foreseeable.
MacGuire, 899 P.2d at 399.
Evidence of prior criminal acts by the third party is
probative of the foreseeability of harm, but such proof is not
a prerequisite to a finding of foreseeability.
Id.
The test
for determining foreseeability is based on the totality of the
circumstances.
Id.
Here, the totality of the circumstances supports finding
that Defendant Abso owed a duty of care to Plaintiffs.
Storage facilities are accessible by patrons at nearly any
time during the day or night and they contain small and
confined spaces.
It is reasonably foreseeable that a
registered sex offender working as a manager at a storage
facility could foreseeably pose a threat to any patron,
regardless of age.
There are specific allegations that Defendant Abso knew
or should have known that Dale McShane had previously
committed criminal acts and that his behavior posed a threat
to patrons of the storage facility.
31
The incidents of prior
criminal acts by Dale McShane is probative of the
foreseeability of harm.
Maguire, 899 P.2d at 399.
The Hawaii Supreme Court has found that the duty provided
by the special relationship in Restatement (Second) of Torts §
319 is not extended to the general public when the police
department releases a criminal from custody because there is
not sufficient foreseeability to the potential victim.
Ruf v.
Honolulu Police Dept., 972 P.2d 1081, 1095-96 (Haw. 1999).
Unlike in Ruf, the Plaintiffs here do not seek a duty of
care to the entire general public.
The Plaintiffs correctly
assert that Defendant Abso owed a duty to the patrons of the
storage facility as reasonably foreseeable victims.
Other jurisdictions have found a duty of care based on
similar allegations.
In Doe v. Hartz, 52 F.Supp.2d 1027, 1074
(N.D. Iowa 1999), the plaintiff filed a negligence claim
against the church that employed a priest she alleged had
molested her.
The District Court for the Northern District of
Iowa held that the church had a duty of care to the plaintiff
pursuant to Restatement (Second) of Torts § 319.
74.
Id. at 1073-
The District Court ruled that there were sufficient
allegations for plaintiff to state a claim for negligence
based on her assertion that the church defendants knew of the
priest’s mental defect that rendered him unable to control his
32
sexual behavior toward women and girls such that he posed a
threat to parishoners.
Id. at 1072-74.
State courts have also found a duty of care pursuant to
Restatement (Second) of Torts § 319 when there are allegations
that an employer or its agent knew of the threat a person it
controlled posed to its patrons.
See C.J.C. v. Corporation of
Catholic Bishop of Yakima, 985 P.2d 262, 273, 276 (Wash. 1999)
(en banc) (finding plaintiff stated a negligence claim against
church elders who knew the priest had sexually abused children
in the past and did not prevent his contact with children);
Delk v. Columbia/HCA Healthcare Corp., 523 S.E.2d 826, 832
(Va. 2000) (finding plaintiff stated a claim against a
hospital for failure to protect her from sexual assault
committed by another patient).
3.
Duty of Care Pursuant to Haw. Rev. Stat. § 6571.8
A duty of care may also be found in Haw. Rev. Stat. §
657-1.8.
Haw. Rev. Stat. § 657-1.8 provides a basis for a
cause of action against a legal entity for sexual abuse of a
minor that occurred under its control.
See Roe v. Ram, Civ.
No. 14-00027LEK-RLP, 2014 WL 4276647, *3 (D. Haw. Aug. 29,
2014).
Haw. Rev. Stat. § 657-1.8(b)(2) provides that a plaintiff
33
may recover for damages against a legal entity when the abuser
and the victim were engaged in an activity over which the
legal entity had a degree of responsibility or control.
Plaintiffs have sufficiently alleged a duty of care.
Plaintiffs claim Defendant Abso had a responsibility to the
patrons of the storage facility to conduct accurate background
checks for the employees of the storage facility.
Plaintiffs
have alleged that potential harm to the patrons of the storage
facility was reasonably foreseeable as Defendant Abso, and
Defendant SterlingBackcheck as its successor, knew or should
have known that Dale McShane posed a threat to patrons of the
storage facility.
B.
Breach of Duty and Legal Causation
The elements of breach of duty and causation are
questions of fact.
336.
Maguire, 899 P.2d at 395; Lee, 925 P.2d at
The trier of fact must examine if there was a failure on
the defendant’s part to exercise reasonable care under their
prevailing duty based on the foreseeable range of danger.
Knodie v. Waikiki Gateway Hotel, Inc., 742 P.2d 377, 385 (Haw.
1987) (citing Bidar v. Amfac, Inc., 669 P.2d 154, 159 (Haw.
1983)).
1.
Allegations of Breach of Duty and Legal
34
Causation
The First Amended Complaint alleges that Defendants
Abso/SterlingBackcheck breached the duties of care owed to
Plaintiffs because they “knew or should have known that
McShane was a convicted felon and a registered sex offender
prior to the above-referenced incidents when McShane kissed
and touched Maho.”
(First Amended Complaint at ¶¶ 22, ECF No.
73).
Plaintiffs allege the duties of care were breached when
Defendant Abso failed to identify McShane as a convicted felon
and registered sex offender in the background check it
conducted.
(Id. at ¶ 51-52).
Plaintiffs assert that
Defendants Abso/SterlingBackcheck’s breach of the duty of care
caused Plaintiffs’ harm.
2.
(Id. at ¶¶ 39, 43, 47, 53, 62-63).
Disclosure of Convictions Pursuant to Haw. Rev.
Stat. § 378-2.5
Defendants Abso/SterlingBackcheck claim they could not
have breached any duty because they were prevented from
disclosing McShane’s 1985 criminal conviction pursuant to Haw.
Rev. Stat. § 378-2.5(c).
Haw. Rev. Stat. § 378-2.5 provides that an employer may
inquire about and consider an individual’s criminal conviction
35
record for a period that does not exceed the most recent ten
years when making employment decisions.
Haw. Rev. Stat. §§
378-2.5(a), (c).
Defendants Abso/SterlingBackcheck have not pointed to any
provision in Haw. Rev. Stat. § 378-2.5 that prohibits the
disclosure of a person’s requirement to register as a sex
offender.
To the contrary, Haw. Rev. Stat. § 846E-1 et seq.
requires public disclosure of information about covered sex
offenders, such as Dale McShane.
Haw. Rev. Stat. §§ 846E-1,
2(a), 3(e)–(g).
There are sufficient facts as pled in the First Amended
Complaint that Defendants Abso/SterlingBackcheck breached
their duty of care and caused harm to Plaintiffs.
Plaintiffs allege that Defendants Abso/SterlingBackcheck
knew that McShane was a registered sex offender and that he
posed a threat to patrons of the storage facility but failed
to control Dale McShane or otherwise protect potential victims
such as Plaintiffs.
There are sufficient facts for a trier of fact to find
that the potential harm to patrons of the storage facility was
reasonably foreseeable.
C.
Injury
36
The First Amended Complaint contains sufficient facts
that Plaintiffs Masahiro and Maho Wada were injured as a
result of Defendants Abso/SterlingBackcheck’s negligence.
(First Amended Complaint at ¶¶ 39, 43, 47, 53, 62-63, 65, ECF
No. 73).
D.
Statute of Limitations
Defendants Abso/SterlingBackcheck assert that Plaintiffs’
claims are barred pursuant to the statute of limitations for
tort claims found in Haw. Rev. Stat. § 657-7.
Haw. Rev. Stat. § 657-7 provides, in relevant part, that
“[a]ctions for the recovery of compensation for damage or
injury to persons or property shall be instituted within two
years after the cause of action accrued, and not after[.]”
Pursuant to Haw. Rev. Stat. § 657-7, a tort claim accrues
when the plaintiff discovers, or through the use of reasonable
diligence should have discovered, the negligent act, the
damage, and the causal connection between the two.
Yamaguchi
v. Queen’s Med. Ctr., 648 P.2d 689, 693-94 (Haw. 1982).
Plaintiffs have not provided sufficient facts to
demonstrate when they discovered the negligent act, the
damage, and the causal connection between the two.
Id.
Plaintiffs are given leave to amend the First Amended
37
Complaint to include sufficient facts to establish that their
causes of action in Counts I-VII were filed within the
applicable statute of limitations.1
Plaintiffs’ counsel agreed at the hearing to dismiss
Count VIII for loss of consortium.
Defendants Abso and SterlingBackcheck’s Motion to Dismiss
the First Amended Complaint Filed on July 21, 2015 (ECF No.
99) is GRANTED WITH LEAVE TO AMEND.
Count VIII in the First Amended Complaint for Loss of
Consortium is DISMISSED WITH PREJUDICE.
III.
Cross-Claimants TSS Staffing Agent, TNT Management,
and Aloha King’s Crossclaims Against CrossDefendants Abso/SterlingBackcheck
Crossclaims are affirmative claims for relief filed by
one party against a coparty.
Moore’s Fed. Practice § 13.60
(3d. 2014).
Pursuant to Federal Rule of Civil Procedure 13(g), a
pleading may state as a crossclaim any claim by one party
against a coparty if the claim arises out of the transaction
or occurrence that is the subject matter of the original
action or of a counterclaim, or if the claim relates to any
1
Count IX for punitive damages is a request for relief
and not a cause of action.
38
property that is the subject matter of the original action.
The crossclaim may include a claim that the coparty is or may
be liable to the cross-claimant for all or part of a claim
asserted in the action against the cross-claimant.
Fed. R.
Civ. P. 13(g).
In considering whether to dismiss a crossclaim, the Court
must accept the allegations of the crossclaim as true,
construe the pleadings in the light most favorable to the
pleading party, and resolve all doubts in the pleader’s favor.
Independent Living Center of So. Cal. V. City of Los Angeles,
Cal., 973 F.Supp.2d 1139, 1146 (C.D. Cal. 2013).
Dismissal
for failure to state a claim can be warranted based on either
a lack of cognizable legal theory or the absence of factual
support for a cognizable legal theory.
Mendiondo v. Centinela
Hosp. Med. Ctr., 521 F.3d 1097, 1104 (9th Cir. 2008).
A.
Cross-Claimant TSS Staffing Agent’s Crossclaim
Against Cross-Defendants Abso/SterlingBackcheck (ECF
No. 87)
Cross-Claimant TSS Staffing Agent filed a Crossclaim
against Cross-Defendants Abso/SterlingBackcheck with the
following causes of action:
Count I:
Count II:
Breach of Contract against Defendant Abso
Negligence against Defendant Abso
39
Count III:
Count IV:
Indemnification and Contribution against
Defendant Abso
Indemnification and Contribution
against Defendant SterlingBackcheck.
(Cross-Claimant TSS Staffing Agent’s Crossclaim, ECF No. 87).
Count I:
Cross-Claimant TSS Staffing Agent’s Breach of
Contract Claim Against Cross-Defendant Abso
Cross-Claimant TSS Staffing Agent has filed a breach of
contract claim against Cross-Defendant Abso.
The Court takes notice that there was a contract entered
into between Cross-Claimant TSS Staffing Agent and Abso
asserts that the “Agreement shall be governed by and construed
in accordance with the laws of the State of California.”
(See “Application and Agreement” entered into by CrossClaimant TSS Staffing Agent and Cross-Defendant Abso on June
4, 2008, attached as Ex. A to Cross-Defendants
Abso/SterlingBackcheck’s Motion to Dismiss Cross-Claimant TSS
Staffing Agent’s Crossclaims, ECF No. 100-3).
A breach of contract claim under California law requires
the plaintiff to provide sufficient allegations that a
contract existed between the parties, that the plaintiff
performed under the contract, and that the defendant failed to
perform an obligation under the contract, which caused damage
40
to the plaintiff.
Ersa Grae Corp. v. Fluor Corp., 1 Cal. App.
4th 613, 624-25 (Cal. Ct. App. 1991); Cal. Civ. Jury
Instructions § 10.85.
1.
Factual Allegations
Cross-Claimant TSS Staffing Agent’s Crossclaim alleges
that in June 2008 it entered into a contract with Defendant
Abso to provide employment and background screening services.
(Cross-Claimant TSS Staffing Agent’s Crossclaim at ¶ 3, ECF
No. 87).
Cross-Claimant TSS Staffing Agent states that in November
2008, it hired Dale McShane and requested a background report
from Cross-Defendant Abso pursuant to their June 2008
contract.
(Id. at ¶ 4).
Cross-Claimant TSS Staffing Agent
alleges that on February 5, 2009, it received the background
report on Dale McShane provided by Cross-Defendant Abso.
(Id.)
Cross-Claimant TSS Staffing Agent asserts that the
background report indicated that McShane had a “clear County
Criminal record and National Sex Offender record.”
(Id.)
Cross-Claimant TSS Staffing Agent’s Crossclaim asserts that
Cross-Defendant Abso failed to provide an accurate background
check for McShane because it did not notify the Cross-Claimant
TSS Staffing Agent that McShane had a prior criminal record
41
and was a registered sex offender.
(Id. at ¶¶ 6-7).
Cross-Claimant TSS Staffing Agent alleges that “Defendant
ABSO breached the contract with [Cross-Claimant TSS Staffing
Agent] in failing to provide a complete and accurate
background check on Dale McShane.”
(Id. at ¶ 9).
Cross-
Claimant TSS Staffing Agent asserts that it has suffered
injuries as a result of Cross-Defendant Abso’s failure to
comply with the terms of the contract.
2.
(Id. at ¶¶ 7, 10-11).
Statute of Limitations
Cross-Defendant Abso asserts that Cross-Claimant TSS
Staffing Agent’s breach of contract claim is barred by the
applicable statute of limitations.
Crossclaims for affirmative relief are subject to the
operation of applicable statutes of limitations.
3 Moore’s
Fed. Practice § 13.93; NanoLogix, Inc. V. Novak, 2015 WL
1400656, at *9 (N.D. Ohio Mar. 26, 2015) (finding that a
crossclaim filed pursuant to Fed. R. Civ. P. 13 was subject to
the state’s one-year statute of limitations for malpractice
claims).
California has a four-year statute of limitations for
breach of written contract claims.
337.
42
Cal. Civ. Proc. Code §
Pursuant to California law, a cause of action for breach
of contract accrues at the time of the breach, which then
starts the limitations period running.
Whorton v. Dillingham,
202 Cal.App.3d 447, 456 (Cal. Ct. App. 1988).
Here, Cross-Claimant TSS Staffing Agent asserts that it
entered into a contract with Cross-Defendant Abso in June 2008
and received background reports from Defendant Abso on
February 5, 2009 and September 23, 2009.
(Cross-Claimant TSS
Staffing Agent’s Crossclaims at ¶¶ 3, 4, 6, ECF No. 87).
Cross-Claimant TSS Staffing Agent did not file its breach of
contract claim until August 7, 2015, more than four years
after it alleges Defendant Abso failed to provide accurate
background reports for Dale McShane.
Under California law, an important exception to the
general rule of accrual to begin the statute of limitations
period is the “discovery rule,” which postpones accrual of a
cause of action until the plaintiff discovers, or has reason
to discover, the cause of action.
Fox v. Ethicon Endo-
Surgery, Inc., 110 P.3d 914, 920 (Cal. 2005).
A plaintiff has
reason to discover a cause of action when he or she “has
reason at least to suspect a factual basis for its elements.”
Norgart v. Upjohn Co., 981 P.2d 79, 88 (Cal. 1999).
Cross-Claimant TSS Staffing Agent has not provided
43
sufficient facts in its Crossclaim to show the time and manner
of discovery of the alleged breach of contract and/or has not
explained its inability to have made earlier discovery despite
reasonable diligence.
Fox, 110 P.3d at 920.
Cross-Defendants Abso/SterlingBackcheck’s Motion to
Dismiss (ECF No. 100) as to Count I for breach of contract in
Cross-Claimant TSS Staffing Agent’s Crossclaim is GRANTED WITH
LEAVE TO AMEND.
Count II:
Cross-Claimant TSS Staffing Agent’s
Negligence Claim against CrossDefendant Abso
Cross-Claimant TSS Staffing Agent has filed a Crossclaim
for negligence against Cross-Defendant Abso.
To state a negligence claim under Hawaii law, the
pleading must contain sufficient allegations to state a duty
of care, a breach of the duty, causation, and injury.
Ono,
612 P.2d at 538-39.
Cross-Claimant TSS Staffing Agent has not provided
sufficient facts to establish a duty of care necessary for a
negligence cause of action.
Cross-Claimant TSS Staffing Agent’s Crossclaim asserts
44
that “Defendant ABSO owed a duty of care to advise it of any
limitations in its ability to research and investigate
background checks.
Defendant ABSO owed a duty of care in its
investigation and preparation of the background check report
requested and eventually provided to [Cross-Claimant TSS
Staffing Agent] on Dale McShane.”
(Cross-Claimant TSS
Staffing Agent’s Crossclaim at ¶ 13, ECF No. 87).
Cross-Claimant TSS Staffing Agent has not provided
sufficient facts to establish a duty of care owed by Defendant
Abso that could be recognized outside of the terms of their
contractual relationship.
See Hawaii Motorsports Inv., Inc.
v. Clayton Group Srvs, Inc., 693 F.Supp.2d 1192, 1196 (D. Haw.
2010); cf. Blair v. Ing, 21 P.3d 452, 464, n.10 (Haw. 2001)
(finding that the plaintiff could proceed on either a
negligence theory or a breach of contract theory because there
was a separate duty of care that was owed to the plaintiff
outside of the parties’ contractual relationship).
Cross-Defendants Abso/SterlingBackcheck’s Motion to
Dismiss (ECF No. 100) as to Count II for negligence in CrossClaimant TSS Staffing Agent’s Crossclaim is GRANTED WITH LEAVE
TO AMEND.
Counts III and IV:
Cross-Claimant TSS Staffing Agent’s
Contribution and Indemnity Claims
against Cross-Defendants
45
Abso/SterlingBackcheck
Indemnification can be imposed when “two persons are
liable in tort to a third person for the same harm and one of
them discharges the liability of both.”
of Torts § 886B(1).
Restatement (Second)
Under those circumstances, the party is
entitled to indemnity from the other if the other would be
unjustly enriched at his expense by the discharge of the
liability.
Id.
Contribution is found pursuant to Hawaii statutory law
when there is liability among joint tortfeasors.
Haw. Rev.
Stat. § 663-12; Restatement (Second) of Torts § 886A(1).
Cross-Claimant TSS Staffing Agent has sufficiently
alleged indemnification and contribution claims as joint
tortfeasors against Cross-Defendants Abso/SterlingBackcheck.
(TSS Staffing Agent’s Crossclaim at ¶¶ 18-22, ECF No. 87).
1.
Fed. R. Civ. P. 13(g)
Fed. R. Civ. P. 13(g) provides that a crossclaim can be
brought if the party against whom it is asserted “is or may be
liable to the crossclaimant for all or part” of plaintiff’s
claim.
Fed. R. Civ. P. 13(g) (emphasis added).
Contrary to Cross-Defendants Abso/SterlingBackcheck’s
arguments in their Motion to Dismiss, the crossclaim provision
46
in Federal Rule of Civil Procedure 13(g) does not require that
the indemnification or contribution claims be mature at the
time of pleading.
6 Wright, Miller & Kane § 1431 at pp. 281.
The Tenth Circuit Court of Appeals explained in
Providential Development Co. v. U.S. Steel Co., that:
[Federal Rule of Civil Procedure 13(g)] expressly
authorizes the inclusion in such cross-claim a claim
that the party against whom it is asserted “is or may
be liable to the cross-claimant for all of part of a
claim asserted in the action against the crossclaimant.” The rule is not limited by text or
purpose to definite or matured claims or causes of
action. It is broad enough to include a claim of a
contingent nature, the ultimate outcome of which
depends upon the determination of other features or
issues in the case. The rule is remedial in nature,
intended to promote the expeditious and economical
adjudication in a single action of the entire subject
matter arising from one set of facts; and it should
be liberally construed to achieve that commendable
objective.
236 F.2d, 277, 281 (10th Cir. 1956).
A crossclaim can be contingent upon the ultimate
adjudication of the crossclaimant’s liability to plaintiff.
Glens Falls Indem. Co. v. U.S. ex rel. and to use of
Westinghouse Elec. Supply Co., 229 F.2d 370, 372-74 (9th Cir.
1955).
Cross-Claimant TSS Staffing Agent has stated claims for
indemnification and contribution based on its allegations that
it may be found liable for injuries to Plaintiffs and that
Cross-Defendants Abso/SterlingBackcheck are responsible for
47
the injuries.
(Cross-Claimant TSS Staffing Agent’s
Crossclaims at ¶¶ 18-19, 21-22, ECF No. 87).
2.
The Economic Loss Rule
Cross-Defendants Abso/SterlingBackcheck assert that the
indemnification and contribution claims contained in the
Cross-Claims filed by Cross-Claimant TSS Staffing Agent are
barred by the economic loss rule.
Under Hawaii law, the so-called “economic loss rule”
applies to bar recovery in product liability cases for pure
economic loss in actions stemming from injury only to the
product itself.
State of Hawaii ex rel. Bronster v. U.S.
Steel Corp., 919 P.2d 294, 307 (Haw. 1996); Haw. Rev. Stat. §
663-1.2; see SCD RMA, LLC v. Farsighted Enterprises, 591
F.Supp.2d 1141, 1148 (D. Haw. 2008).
The Hawaii Supreme Court has recognized exceptions to the
economic loss rule and found that it does not apply when a
defective product causes personal injury or damage to “other
property.”
Association of Apartment Owners of Newtown Meadows
ex rel. its Bd. Of Directors v. Venture 15, Inc., 167 P.3d
225, 286-88 (Haw. 2007); Kawamata Farms, Inc. v. United Agri
Prods., 948 P.2d 1055, 1095 (Haw. 1997).
A court evaluating the applicability of the economic loss
48
rule must analyze the object of the bargain between the
parties in order to determine what constitutes “the product”
and what constitutes “other property.”
Windward Aviation,
Inc. v. Rolls-Royce Corp., Civ. No. 10-00542 ACK-BMK, 2011 WL
2670180, *6 (D. Haw. July 6, 2011).
Here, Cross-Defendants Abso/SterlingBackcheck have not
established that the rule barring tort claims for purely
economic losses applies.
Cross-Claimant TSS Staffing Agent’s
Crossclaim is predicated on the original personal injury
claims asserted by Plaintiffs, and Plaintiffs’ claims are not
exclusively for economic loss.
See Options Center for
Independent Living v. G & V Development Co., 229 F.R.D. 149,
152 (C.D. Ill. 2005) (finding the state law rule barring tort
claims for purely economic losses did not preclude a
crossclaim for professional malpractice which was premised on
the complaint’s claims for non-economic injuries).
Cross-Claimant TSS Staffing Agent’s indemnification and
contribution claims are seeking damages as joint tortfeasors
and these claims directly relate to Plaintiffs’ personal
injuries.
rule.
Such injuries are not subject to the economic loss
Association of Apartment Owners of Newtown Meadows ex
rel. its Bd. Of Directors, 167 P.3d at 286-88; Kawamata Farms,
Inc., 948 P.2d at 1095.
49
Cross-Defendants Abso/SterlingBackcheck’s Motion to
Dismiss (ECF No. 100) as to Cross-Claimant TSS Staffing
Agent’s Crossclaim for indemnification and contribution is
DENIED.
B.
Cross-Claimant TNT Management’s Crossclaim against
Cross-Defendants Abso/SterlingBackcheck (ECF No. 891)
Cross-Defendants Abso/SterlingBackcheck filed a Motion to
Dismiss TNT Management’s Crossclaim for indemnification and
contribution.2
Cross-Defendants argue that TNT Management’s
Crossclaim does not contain sufficient facts to state a claim.
They also argue that TNT Management’s claims are barred by the
economic loss rule.
Cross-Claimant TNT Management has stated sufficient
allegations to state contribution and indemnification claims.
2
Cross-Defendants Abso/SterlingBackcheck argue in their
Motion to Dismiss Cross-Claimant TNT Management’s Crossclaim
that Cross-Claimant TNT Management has brought causes of
action for negligence and breach of contract. (CrossDefendants Abso/SterlingBackcheck’s Memorandum of Law in
Support of their Motion to Dismiss TNT Self Storage
Management’s Crossclaims at pp. 15-20, 22-30, ECF No. 101-1).
Cross-Defendants Abso/SterlingBackcheck are incorrect. CrossClaimant TNT Management’s Crossclaim does not contain claims
for negligence and breach of contract. (TNT Management’s
Crossclaims at pp. 2-4, ECF No. 89-1). TNT Management
conceded in its Opposition that it has not brought negligence
and breach of contract claims in its Crossclaim. (TNT
Management’s Opp. at p. 17, ECF No. 113).
50
Glens Falls Indem. Co., 229 F.2d at 372-74; see Cross-Claimant
TNT Management’s Crossclaim at ¶¶ 4-6, ECF No. 89-1.
Cross-Claimant TNT Management’s Crossclaim is not barred
by the economic loss rule.
Association of Apartment Owners of
Newtown Meadows ex rel. its Bd. Of Directors, 167 P.3d at 28688; Kawamata Farms, Inc., 948 P.2d at 1095.
Cross-Defendants Abso/SterlingBackcheck’s Motions to
Dismiss the Crossclaim filed by Cross-Claimants TNT Management
(ECF No. 101) is DENIED.
C.
Cross-Claimant Aloha King’s Crossclaim against
Cross-Defendants Abso/SterlingBackcheck (ECF No.
109-1)
Cross-Defendants Abso/SterlingBackcheck filed a Motion to
Dismiss Aloha King’s Crossclaim for indemnification and
contribution.
Cross-Defendants argue that Aloha King’s
Crossclaim does not contain sufficient facts to state a claim.
Cross-Claimant Aloha King has stated sufficient
allegations to state contribution and indemnification claims.
Glens Falls Indem. Co., 229 F.2d at 372-74; see Aloha King,
LLC’s Crossclaim at ¶¶ 1-3, 7, ECF No. 109-1.
Cross-Defendants Abso/SterlingBackcheck’s Motion to
Dismiss the Crossclaim filed by Cross-Claimant Aloha King (ECF
No. 120) is DENIED.
51
CONCLUSION
(1)
Defendants Abso/SterlingBackcheck’s Motion to
Dismiss the Plaintiffs’ Complaint (ECF No. 99) is
GRANTED WITH LEAVE TO AMEND.
(a)
(b)
Count VIII for Loss of Consortium is DISMISSED
WITH PREJUDICE.
(c)
(2)
Counts I-VII in the First Amended Complaint are
DISMISSED WITH LEAVE TO AMEND. Plaintiffs are
given leave to amend in order to provide
sufficient facts to support the extended accrual
of the statute of limitations for their tort
claims pursuant to Haw. Rev. Stat. § 657-7.
Plaintiffs are given leave to amend their First
Amended Complaint on or before February 10,
2016. Plaintiffs’ amended complaint must
conform to the rulings contained in this Order.
Cross-Defendants Abso/SterlingBackcheck’s Motion to
Dismiss the Crossclaim filed by Cross-Claimant TSS
Staffing Agent (ECF No. 100) is GRANTED, IN PART,
AND DENIED, IN PART, WITH LEAVE TO AMEND.
(a)
Count I for breach of contract is DISMISSED WITH
LEAVE TO AMEND. Cross-Claimant TSS Staffing
Agent is given leave to amend Count I for breach
of contract in its Crossclaim in order to
provide sufficient facts to support the extended
accrual of the statute of limitations under
California law.
(b)
Count II for negligence is DISMISSED WITH LEAVE
TO AMEND. Cross-Claimant TSS Staffing Agent is
given leave to amend to provide sufficient facts
to state a plausible negligence claim against
Cross-Defendants Abso/SterlingBackcheck.
(c)
Counts III and IV for indemnification and
contribution claims contain sufficient facts to
state a claim.
52
(d)
Cross-Claimant TSS Staffing Agent is given leave
to amend their Crossclaim on or before February
10, 2016. Cross-Claimant TSS Staffing Agent’s
amended crossclaim must conform to the rulings
contained in this Order.
(3)
Cross-Defendants Abso and SterlingBackcheck’s Motion
to Dismiss the Crossclaims filed by Cross-Claimant
TNT Self Storage Management, Inc. (ECF No. 101) is
DENIED.
(4)
Cross-Defendants Abso and SterlingBackcheck’s Motion
to Dismiss the Crossclaims filed by Cross-Claimant
Aloha King, LLC (ECF No. 120) is DENIED.
IT IS SO ORDERED.
DATED:
Honolulu, Hawaii, December 23, 2015.
Maho Wada; Masahiro Wada vs. Aloha King, LLC; Total Storage
Solutions; TNT Self Storage Management, Inc.; Asbo;
SterlingBackcheck; Doe Defendants 1-20; Cross-Claimant Aloha
King, LLC vs. Cross-Defendants TNT Self Storage Management,
Inc.; Total Storage Solutions; Abso; SterlingBackcheck; CrossClaimant Total Storage Solutions vs. Cross-Defendants Aloha
King, LLC; Abso; SterlingBackcheck; Cross-Claimant TNT Self
Storage Management, Inc. vs. Cross-Defendants Aloha King, LLC;
Abso; SterlingBackcheck; Civ. No. 14-00275 HG-BMK; ORDER
GRANTING DEFENDANTS ABSO AND STERLINGBACKCHECK’S MOTION TO
DISMISS THE FIRST AMENDED COMPLAINT FILED JULY 21, 2015 (ECF
No. 99) WITH LEAVE TO AMEND and GRANTING, IN PART, AND
DENYING, IN PART, CROSS DEFENDANTS ABSO AND
STERLINGBACKCHECK’S MOTION TO DISMISS TOTAL STORAGE SOLUTIONS’
CROSSCLAIMS FILED ON AUGUST 7, 2015 (ECF No. 100) WITH LEAVE
TO AMEND and DENYING CROSS DEFENDANTS ABSO AND
STERLINGBACKCHECK’S MOTION TO DISMISS TNT SELF STORAGE
MANAGEMENT, INC.’S CROSSCLAIMS FILED ON AUGUST 10, 2015 (ECF
No. 101) and DENYING CROSS DEFENDANTS ABSO AND
STERLINGBACKCHECK’S MOTION TO DISMISS ALOHA KING, LLC’S
CROSSCLAIMS FILED ON SEPTEMBER 16, 2015 (ECF No. 120)
53
/s/ Helen Gillmor
Helen Gillmor
United States District Judge
Maho Wada; Masahiro Wada vs. Aloha King, LLC; Total Storage
Solutions; TNT Self Storage Management, Inc.; Asbo;
SterlingBackcheck; Doe Defendants 1-20; Cross-Claimant Aloha
King, LLC vs. Cross-Defendants TNT Self Storage Management,
Inc.; Total Storage Solutions; Abso; SterlingBackcheck; CrossClaimant Total Storage Solutions vs. Cross-Defendants Aloha
King, LLC; Abso; SterlingBackcheck; Cross-Claimant TNT Self
Storage Management, Inc. vs. Cross-Defendants Aloha King, LLC;
Abso; SterlingBackcheck; Civ. No. 14-00275 HG-BMK; ORDER
GRANTING DEFENDANTS ABSO AND STERLINGBACKCHECK’S MOTION TO
DISMISS THE FIRST AMENDED COMPLAINT FILED JULY 21, 2015 (ECF
No. 99) WITH LEAVE TO AMEND and GRANTING, IN PART, AND
DENYING, IN PART, CROSS DEFENDANTS ABSO AND
STERLINGBACKCHECK’S MOTION TO DISMISS TOTAL STORAGE SOLUTIONS’
CROSSCLAIMS FILED ON AUGUST 7, 2015 (ECF No. 100) WITH LEAVE
TO AMEND and DENYING CROSS DEFENDANTS ABSO AND
STERLINGBACKCHECK’S MOTION TO DISMISS TNT SELF STORAGE
MANAGEMENT, INC.’S CROSSCLAIMS FILED ON AUGUST 10, 2015 (ECF
No. 101) and DENYING CROSS DEFENDANTS ABSO AND
STERLINGBACKCHECK’S MOTION TO DISMISS ALOHA KING, LLC’S
CROSSCLAIMS FILED ON SEPTEMBER 16, 2015 (ECF No. 120)
54
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