MHG HOTELS, LLC v. STUDIO 78, LLC et al

Filing 183

Entry on Third Party Defendant SBI Engineers PLLCs Motion for Summary Judgment (ECF No. 163) - For the reasons explained above, SBIs motion for summary judgment ECF No. 163 is granted in part. Studio 78's claims for breach of professional standard of care and for breach of contract relating to the ceiling heights are dismissed on the merits with prejudice. The motion is otherwise denied. ***SEE ENTRY FOR ADDITIONAL INFORMATION*** Signed by Judge James R. Sweeney II on 3/19/2020. (JDC)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION
MHG HOTELS, LLC,

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Plaintiff,
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v.
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STUDIO 78, LLC,
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Defendant.
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STUDIO 78, LLC,
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HOTELS OF SPEEDWAY, LLC,
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Counter Claimants, )
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v.
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MHG HOTELS, LLC,
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HOTELS OF SPEEDWAY, LLC,
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HORIZON BANK,
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STUDIO 78, LLC,
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Counter Defend)
ants.
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STUDIO 78, LLC,
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Third Party Plain- )
tiff,
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v.
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SBI ENGINEERS PLLC,
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Third Party Defend- )
ant.
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No. 1:18-cv-01199-JRS-TAB

Entry on Third Party Defendant SBI Engineers PLLC’s
Motion for Summary Judgment (ECF No. 163)
This case arises from the design and construction of a Marriott Courtyard Hotel
in Indianapolis. 1 Plaintiff MHG Hotels, LLC contracted Studio 78, LLC to provide
design professional services, and Studio 78, in turn, contracted SBI Engineers PLLC
to provide “stamped engineering drawings including structural, mechanical[,] plumbing and electrical design” for the hotel. (ECF No. 107-2.) MHG alleges claims against
Studio 78, and Studio 78 alleges third-party claims against SBI for breach of contract,
breach of professional standard of care, and common-law indemnity. (ECF No. 107
at 5–7.) SBI now moves for summary judgment on Studio 78’s third-party claims.
(ECF No. 163.) For the reasons set forth below, that motion is granted in part, and
Studio 78’s claims for breach of professional standard of care and for breach of contract relating to the ceiling heights are dismissed on the merits with prejudice. The
motion is otherwise denied.
Summary Judgment Standard
Federal Rule of Civil Procedure 56 provides that the Court “shall grant summary
judgment if the movant shows that there is no genuine dispute as to any material
fact and the movant is entitled to judgment as a matter of law.” The Rule “imposes
an initial burden of production on the party moving for summary judgment to inform
the district court why a trial is not necessary.” Modrowski v. Pigatto, 712 F.3d 1166,
1168 (7th Cir. 2013). That initial burden consists of “either: (1) showing that there is

The case previously involved claims arising from the construction of a Florida hotel, as well, but
those claims have since been severed and transferred to the Southern District of Florida. (ECF No.
170.)
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an absence of evidence supporting an essential element of the non-moving party’s
claim; or (2) presenting affirmative evidence that negates an essential element of the
non-moving party’s claim.” Hummel v. St. Joseph Cty. Bd. of Comm’rs, 817 F.3d 1010,
1016 (7th Cir. 2016) (citing Modrowski, 712 F.3d at 1169). If the moving party discharges its initial burden, the burden shifts to the non-moving party to either “offer[ ]
evidence that would allow a reasonable trier of fact to find in that party’s favor on the
issue,” id. (citations and quotation marks omitted), or “show[ ] that the materials
cited do not establish the absence . . . of a genuine dispute,” Fed. R. Civ. P. 56(c)(1)(B).
Breach of Contract
Defendant SBI moves for summary judgment, contending that the uncontroverted
evidence negates an essential element of Studio 78’s breach-of-contract claim—
namely, breach. (SBI’s Mem. 8, ECF No. 165.) SBI’s argument is twofold.
First, SBI contends that MHG’s claims (from which Studio 78’s third-party claims
derive) fall outside the scope of SBI’s agreement with Studio 78. In support, SBI cites
the affidavit of Jason McGlohon and MHG’s sworn interrogatory answers. See Fed.
R. Civ. P. 56(c)(1)(A) (“A party asserting that a fact cannot be . . . genuinely disputed
must support the assertion by: (A) citing to particular parts of materials in the record,
including . . . affidavits, . . . interrogatory answers, or other materials”). Specifically,
SBI points to (1) MHG’s contention that Studio 78 provided architect drawings with
inconsistent heights among rooms on the same floor and (2) McGlohon’s testimony
that SBI had nothing to do with those drawings.

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Studio 78, in response, points to those same sworn interrogatory answers to show
that MHG’s claims also involve aspects of the project that—drawing all inferences in
favor of Studio 78, the non-movant—fall within the scope of the “structural, mechanical[,] plumbing and electrical design” that SBI agreed to provide. See Fed. R. Civ. P.
56(c)(1)(A) (“A party asserting that a fact . . . is genuinely disputed must support the
assertion by: (A) citing to particular parts of materials in the record, including . . .
affidavits, . . . interrogatory answers, or other materials”). For example, MHG states
in its interrogatory answers that Studio 78 is liable for the need “to add exhaust vents
at elevator shaft which were not noted on plans,” for “framing and drywall necessary
on 2nd floor related to drain issues,” for “relocation of AHU units due to plans not
having a method of removing condensation,” for “[i]nclusion of necessary columns at
front vestibule not noted on plans,” for “[a]dditional columns in back of hotel not noted
on plans,” for “[r]einstallation of exposed gas pipe due to design error,” and for “[r]edesign and installation by HVAC company for rooms 312 and 412 due to VTAC not
appearing on plans.” (ECF No. 164-4 at 7–9.) Perhaps these claims do not, in fact,
fall within the scope of SBI’s “structural, mechanical[,] plumbing and electrical design,” but SBI’s motion does not address them. SBI has shown that there is no genuine dispute with respect to the ceiling-height claims, but Studio 78’s response
“show[s] that the materials cited do not establish the absence . . . of a genuine dispute”
with respect to the remaining breach-of-contract claims. Fed. R. Civ. P. 56(c)(1)(B).
Second, SBI contends that it is entitled to summary judgment because the undisputed evidence shows that SBI agreed to provide stamped and permitted drawings

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and did, in fact, provide stamped and permitted drawings. Studio 78 responds that
summary judgment is not warranted because the evidence does not establish that the
drawings met the standards of acceptable engineering practice. “In a contract for
work services, there is a duty to perform work skillfully, carefully, diligently, and in
a workmanlike manner; failure to carry out that duty may constitute either a breach
of contract or negligence.” Farah, LLC v. Architura Corp., 952 N.E.2d 328, 336 (Ind.
Ct. App. 2011). Moreover, under Indiana law, applying a professional engineer’s seal
to drawings “attests that: . . . the work meets standards of acceptable engineering
practice,” IND. CODE § 25-31-1-16(b)(4), and “there is implied in every contract between an architect and his employer an agreement that plans and specifications prepared by the architect will be suitable for the purpose for which they are prepared,”
Greenhaven Corp. v. Hutchcraft & Assocs., Inc., 463 N.E.2d 283, 285 (Ind. Ct. App.
1984); see also Himmel Corp. v. Stade, 367 N.E.2d 411, 414–15 (Ill. App. Ct. 1977)
(“Architects and engineers represent themselves to be competent in the preparation
of plans and specifications necessary to the construction of suitable structures . . . and
where they fail to use reasonable care to produce a satisfactory structure in compliance therewith, they may be sued for breach of an implied contract term[.]”); Sams
Hotel Grp., LLC v. Environs, Inc., No. 1:09-cv-930-TWP-TAB, 2012 WL 3139765, at
*8 (S.D. Ind. Aug. 1, 2012) (holding that design professional breached contract’s implied agreement that the plans be suitable for the purposes for which they were pre-

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pared). Thus, though the evidence establishes that SBI delivered stamped and permitted drawings, the evidence does not address the contract’s implied terms and
therefore does not negate the element of breach.
In its reply, SBI contends that Studio 78 has not adduced sufficient evidence to
support its claims. But SBI’s motion for summary judgment contended that the undisputed evidence negated an essential element of Studio 78’s claim; it did not contend that Studio 78 could not adduce evidence to support its claims. To the extent
SBI may have intended to move for summary judgment on that basis, SBI did not
discharge its initial burden to show the absence of evidence, so the burden never
shifted to Studio 78 to muster its own evidence in opposition. See Celotex Corp. v.
Catrett, 477 U.S. 317, 329–33 (1986) (Brennan, J., dissenting) (explaining the burdenshifting procedures for summary judgment); id. at 332 (“a party who moves for summary judgment on the ground that the nonmoving party has no evidence must affirmatively show the absence of evidence in the record”).
Accordingly, SBI is entitled to summary judgment only on Studio 78’s breach-ofcontract claims relating to the ceiling heights.
Breach of Professional Standard of Care
Studio 78 alleges claims against SBI for breach of professional standard of care.
SBI contends that it is entitled to summary judgment on those claims because they
are barred by the economic loss doctrine. Studio 78 does not contest that the claims
at issue here are for economic losses. Under Indiana law, “there is no liability in tort

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to the owner of a major construction project for pure economic loss caused unintentionally by contractors, subcontractors, engineers, design professionals, or others engaged in the project with whom the project owner, whether or not technically in privity of contract, is connected through a network or chain of contracts.” IndianapolisMarion Cty. Pub. Library v. Charlier Clark & Linard, P.C., 929 N.E.2d 722, 740 (Ind.
2010). Studio 78 relies on a related decision issued by the Indiana Court of Appeals
just one day earlier, Indianapolis-Marion County Public Library v. Charlier Clark &
Linard, P.C., 929 N.E.2d 838 (Ind. Ct. App. 2010) (recognizing a claim for breach of
professional standard of care as independent of an indemnity claim), to argue that
the economic loss rule applies only to general negligence, not to a claim for breach of
professional standard of care. (Resp. Br. 11, ECF No. 166.) But the Court of Appeals
did not address the economic loss doctrine. To the extent Studio 78 intends to allege
a tort claim—regardless of the variety of tort—Indiana law as set forth by the Indiana
Supreme Court one day later clearly bars recovery in tort for economic loss in a case
such as this. See Indianapolis-Marion Cty. Pub. Library, 929 N.E.2d at 740 (“In this
situation, application of the economic loss rule encourages a subcontractor to protect
itself from risks, holds the parties to the terms of their bargain, enforces their expectancy interests, and maintains the boundary between contract and tort law.”). To the
extent Studio 78’s breach-of-professional-standard-of-care claim sounds in contract,
it does not appear to be distinct from Studio 78’s breach-of-contract claim. SBI is
therefore entitled to summary judgment on Studio 78’s claim for breach of professional standard of care.

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Common-law Indemnity
Because Studio 78’s underlying liability to MHG, if any, has not yet been adjudicated, the Court declines at this time to determine whether such liability would support a claim for common-law indemnity. SBI’s motion for summary judgment on Studio 78’s common-law indemnity claim is denied without prejudice to refiling upon
further development of the factual record regarding MHG’s underlying claims.
Conclusion
For the reasons explained above, SBI’s motion for summary judgment (ECF No.
163) is granted in part. Studio 78’s claims for breach of professional standard of
care and for breach of contract relating to the ceiling heights are dismissed on the
merits with prejudice. The motion is otherwise denied.
SO ORDERED.

Date: 3/19/2020

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Distribution:
Renee Lynn Day
BRYCE DOWNEY & LENKOV LLC
[e-mail]
Eric Michael Douthit
CHURCH CHURCH HITTLE & ANTRIM (Noblesville)
[e-mail]
Storrs W. Downey
BRYCEDOWNEY LLC
[e-mail]
Rebecca Hoyt Fischer
LADERER & FISCHER P.C.
[e-mail]
Jessica Berman Jackler
BRYCE DOWNEY & LENKOV LLC
[e-mail]
Jeffrey E. Kehl
BRYCE DOWNEY & LENKOV LLC
[e-mail]
William Earl Kelley, Jr.
DREWRY SIMMONS VORNEHM, LLP (Carmel)
[e-mail]
Andrew M. Lehmann
SCHUCKIT & ASSOCIATES P.C.
[e-mail]
Gregory A. Schrage
CHURCH CHURCH HITTLE & ANTRIM (Fishers)
[e-mail]
Marc A. W. Stearns
DREWRY SIMMONS VORNEHM, LLP (Carmel)
[e-mail]

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