Cessna Finance Corporation v. Tri-County Builders Corporation et al
Filing
26
MEMORANDUM AND ORDER denying 14 Defendant's Motion for Leave to File Third-Party Complaint. It is further ordered that a Scheduling Conference is set for January 9, 2015 at 10:00 a.m. for the purpose of re-setting the Scheduling Order deadlines. The parties should submit a revised Report of Planning Conference on or before January 5, 2015. Signed by Magistrate Judge Teresa J. James on 12/15/2014. (byk)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
CESSNA FINANCE CORPORATION,
Plaintiff,
v.
TRI-COUNTY BUILDERS CORPORATION
and ROBERT L. CHILDERS,
Defendants.
)
)
)
)
)
)
)
)
)
)
Case No. 14-1124-JTM-TJJ
MEMORANDUM AND ORDER
In this removal action, Plaintiff Cessna Finance Corporation seeks to recover alleged
outstanding deficiencies due under a defaulted promissory note and security agreement executed
by Defendants for the finance of a Cessna Conquest Model 425 aircraft. This matter is presently
before the Court on Defendants’ Motion for Leave to File Third-Party Complaint (ECF No. 14).
Defendants Tri-County Builders and Robert L. Childers request leave to file a third-party
complaint, pursuant to Federal Rule of Civil Procedure 14(a)(1), that asserts a single claim of
“disparagement” against third-party defendant Cessna Aircraft Company (“Cessna Aircraft”), the
aircraft manufacturer. Defendants’ proposed “disparagement” claim is based upon Cessna
Aircraft Company’s issuance of supplemental aircraft inspection and maintenance requirements
that Defendants allege significantly diminished the aircraft’s resale value, and thereby increased
the amount of the deficiency damages sought by Plaintiff in this case. Plaintiff opposes the
motion, arguing that Defendants’ proposed disparagement claim is separate and distinct from the
underlying deficiency judgment action and does not fall within Rule 14, where the third-party’s
liability must be derivative of, or dependent on, the main claim. For the reasons set forth below,
the motion is denied.
I.
Legal Standard for Filing Third-Party Complaints
Federal Rule of Civil Procedure 14 governs the filing of a third-party complaint. Under
Rule 14(a)(1), a defending party may file a third-party complaint against a nonparty “who is or
may be liable to it for all or part of the claim against it.”1 The defendant must obtain leave of
court by motion if the third-party complaint is filed more than 14 days after serving its original
answer.2 Whether to grant a third-party complaint is within the sound discretion of the trial court;
but because Rule 14 is intended to “reduce the multiplicity of litigation,” courts should construe
it liberally.3
Rule 14, however, generally does not permit indiscriminate filing of all third-party
complaints.4 Secondary or derivative liability on the part of the proposed third-party defendant is
“crucial and central to properly invoking Rule 14,” and the third-party plaintiff must show “that
this critical element is met before the [c]ourt will allow the filing of a third-party complaint.”5
Liability is secondary or derivative where plaintiff’s success on its claims against defendant
establishes defendant’s right to relief against the proposed third-party defendant.6 A third-party
claim cannot simply be a related claim or one arising out of the same general background. 7
1
Fed. R. Civ. P. 14(a)(1).
2
Id.
3
Lansing Trade Grp., LLC v. OceanConnect, LLC, No. 12-2090-JTM-GLR, 2013 U.S. Dist.
LEXIS 3170, at *3–4 (D. Kan. Jan. 9, 2013).
4
Id. at 4. See also 6 Charles Alan Wright, Arthur R. Miller and Mary Kay Kane, Federal
Practice and Procedure § 1446 (3d ed. 2010) (“A third-party claim may be asserted under Rule 14(a)(1)
only when the third party’s liability is in some way dependent on the outcome of the main claim or when
the third party is secondarily liable to the defending party.”).
5
Lansing Trade Grp., 2013 U.S. Dist. LEXIS 3170, at 5–6.
6
See id. at 7.
7
Admin. Comm. of Wal-Mart Assocs. Health & Welfare Plan v. Willard, 216 F.R.D. 511, 513 (D.
Kan. 2003). See also 6 Charles Alan Wright, Arthur R. Miller and Mary Kay Kane, Federal Practice and
2
While secondary or derivative liability is generally a prerequisite to a proper third-party
complaint, it is not determinative. Even if derivative liability is found, the court must consider
the following factors in exercising its discretion to grant or deny a Rule 14 motion: (1) the
benefits of a single action versus prejudice to the other party and confusion; (2) the timeliness of
the request and prejudice to the plaintiff in delay; (3) whether the main case would unnecessarily
expand in scope; (4) whether impleading new parties would unduly delay or complicate the trial;
and (5) whether the third-party plaintiff’s motion states sufficient grounds for the court to
evaluate the propriety of the third-party complaints.8
II.
The Parties’ Arguments
Defendants assert in their two-page motion that if they are held liable to Plaintiff, then
they are entitled to “indemnification and/or contribution for Cessna Aircraft’s negligence
contributing to the loss alleged in the original Petition.” They argue an entitlement to indemnity
and/or contribution from Cessna Aircraft for its tortious act of “disparagement.” Defendants
allege that Cessna Aircraft implemented unwarranted aircraft maintenance requirements which
substantially diminished the resale value of the aircraft and increased the amount of deficiency
damages sought by Plaintiff against them. In their reply, Defendants argue that the Court should
permit the filing of the third-party complaint because Cessna Aircraft is closely related (a sister
company) to Plaintiff Cessna Finance and the interrelationship of the two corporations makes the
filing of a third-party complaint against Cessna Aircraft anything but an “indiscriminate” filing.
It also cites a 1983 case from the Southern District of New York, Old Republic Ins. Co. v.
Procedure § 1446 (3d ed. 2010) (“The mere fact that the alleged third-party claim arises from the same
transaction or set of facts as the original claim is not enough.).
8
Admin. Comm., 216 F.R.D. at 514.
3
Concast, Inc.,9 for the proposition that not all third-party claims need to be derivative of the
original claim.
Plaintiff opposes the motion, arguing that a third-party claim is not proper where it is
separate and independent from the claim alleged in the original complaint. Applying that
principle to these facts, Plaintiff claims that success on its main breach of contract claims will
not establish any right to relief by Defendants against the proposed third-party defendant. In
other words, Plaintiff argues that Defendants’ proposed claims against Cessna Aircraft are not
secondary to or derivative from Plaintiff’s contract deficiency action against Defendants.
Alternatively, Plaintiff argues that even if Defendants’ disparagement claim was derivative, the
factors considered in deciding Rule 14 motions weigh towards denial of the motion.
III.
Whether Defendants Should Be Granted Leave to File Their Proposed Third-Party
Complaint
The Court concludes that Defendants have failed to establish that their proposed third-
party complaint asserts a claim upon a nonparty who is or may be liable for all or part of the
claim against them in this case. Although Defendants allege that proposed third-party defendant
Cessna Aircraft’s actions increased the deficiency damages sought by Plaintiff, they fail to
establish that Cessna Aircraft’s liability is dependent on the outcome of Plaintiff’s claim or that it
is secondarily liable to Defendants. Even if Defendants are found to be liable to Plaintiff for a
deficiency under a breach of contract theory in this case, that finding of liability would not itself
entitle Defendants to a right to indemnification from Cessna Aircraft. Furthermore, Defendants
mischaracterize the potential liability as “indemnification,” as Kansas law does not recognize
implied indemnification in contract claims.10 Cessna Aircraft’s purported liability to Defendants
9
99 F.R.D. 566, 569 n.1 (S.D.N.Y. 1983).
10
Id. at *7 (relying on Haysville U.S.D. No. 261 v. GAF Corp., 666 P.2d 192, 199 (Kan. 1983)).
4
would not be secondary to or derivative of Defendants’ liability to Plaintiff under the Promissory
Note, Security Agreement, and Guaranty in this case. Moreover, Defendants’ reliance on Old
Republic Insurance Co. v. Concast, Inc.11 is misplaced. Old Republic stands for the proposition
that third-party claims for declaratory relief need not be secondary or derivative.12 Defendants’
proposed third-party complaint does not request declaratory relief, therefore, Old Republic is
inapplicable and the general rule of requiring secondary or derivative liability controls.
Finally, even if derivative or secondary liability was present, the Court finds the other
factors weigh in favor of denying the motion. Specifically, Defendants’ proposed disparagement
claim against third-party defendant Cessna Aircraft would create burdensome factual and legal
questions that could unduly delay and unnecessarily complicate the present case’s relatively
straightforward breach of contract claim. In light of the potential for unnecessary complication
and because Defendants’ claim is not secondary to or derivative of Defendants’ purported
liability to Plaintiff under the Promissory Note, Security Agreement, and Guaranty, the proper
place to raise that claim is in a separate action against Cessna Aircraft.
IT IS THEREFORE ORDERED THAT Defendants’ Motion for Leave to File ThirdParty Complaint (ECF No. 14) is DENIED.
IT IS FURTHER ORDERED THAT a Scheduling Conference is set for January 9,
2015 at 10:00 a.m. for the purpose of resetting the Scheduling Order deadlines. The parties
should submit a revised Report of Planning Conference on or before January 5, 2015.
IT IS SO ORDERED.
11
99 F.R.D. 566, 568 (S.D.N.Y. 1983).
Id. at 568 (noting that “[f]or most cases…impleader may properly occur only in cases where a
third-party defendant’s liability derives from or is secondary to that of defendants…[i]n an action for
declaratory judgment, however, such an interpretation of the Rule makes it logically impossible for
defendants to maintain third-party complaints.”)
12
5
Dated in Kansas City, Kansas on this 15th day of December 2014.
s/ Teresa J. James
Teresa J. James
United States Magistrate Judge
6
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?