Marine Power Holding, L.L.C. v. Malibu Boats, LLC

Filing 20

ORDER & REASONS denying without prejudice 5 Motion to Dismiss or to Transfer Case. Signed by Judge Martin L.C. Feldman on 11/5/2014. (caa)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
MARINE POWER HOLDINGS, LLC

CIVIL ACTION

V.

NO. 14-2065

MALIBU BOATS, LLC

SECTION "F"
ORDER AND REASONS

Before the Court is the defendant's motion, pursuant to
Federal Rule of Civil procedure 13(a)(1) and the rule against claim
splitting, to dismiss this case or to transfer it to the Eastern
District

of

Tennessee

for

potential

consolidation

previously filed lawsuits between the parties.

with

two

For the reasons

that follow, the motion is DENIED WITHOUT PREJUDICE.
Background
Marine

Power

is

a

Louisiana

company

manufactures, and sells engines for sport boats.

that

designs,

Malibu is a

Tennessee and Delaware company that manufactures and sells sport
boats.

In 2013, Marine Power and Malibu entered into an agreement

for Malibu to purchase engines for its boats from Marine Power.
There are currently three lawsuits pending between Marine
Power and Malibu.

The first two concern a purchase order (557 PO)

for 571 engines, and the third concerns a warranty on LS3 engines.
The purchase order was not for LS3 engines.
First, on April 15 of this year, Malibu filed suit against
Marine Power in the Eastern District of Tennessee (3:14-cv-152).

1

Malibu sought a declaratory judgment on its purported cancellation
of the 557 Purchase Order.

Then, on April 22, Marine Power filed

suit against Malibu in this district (2:14-cv-912).

Both of these

lawsuits

Judge

concerned

the

557

Purchase

Order,

and

Africk

transferred the second case to the Eastern District of Tennessee
under the "first to file" rule.

He found that the two cases might

substantially overlap, requiring transfer.

He also noted that he

expressed no opinion as to which case should proceed or as to where
venue was proper.
In the Eastern District of Tennessee, this second case (now
3:14-cv-242) was assigned to the same judge as the first, but the
cases have not been consolidated.
Pending in the first lawsuit are four motions:
(1) Motion to enjoin Marine Power from maintaining a laterfiled lawsuit in the Eastern District of Louisiana, by Malibu
Boats
(2) Motion to dismiss for improper venue or in the alternative
to transfer, by Marine Power
(3) Motion for temporary restraining order or preliminary
injunction, by Malibu Boats
(4)

Motion

to

amend

complaint,

by

Malibu

Boats

(Filed

10/29/2014).
Marine Power filed the third lawsuit in this Court.

This

third case concerns a warranty on LS3 engines. Dealers of Malibu's

2

boats contacted Marine Power about the failure of eight LS3
engines.

Marine Power believes that the engines failed due to

water intrusion because of a design defect in Malibu's boats.
Malibu disagrees and claims that it has no responsibility for the
failure of the LS3 engines.

Marine Power invoiced Malibu for the

costs of replacing the engines, and Malibu refuses to pay.

Marine

Power claims that this is contrary to the terms of Marine Power's
warranty. Marine Power seeks a declaration from this Court that it
has no obligation to repair or replace the failed engines per its
warranty

and

that

it

is

not

responsible

for

the

costs

of

manufacturing and installing corrective parts to prevent water from
leaking into the LS3 engines.

Marine Power also seeks damages for

the engines it has already replaced and for the injury to its
business reputation.
On October 29, Malibu moved to amend its complaint in the
first lawsuit in Tennessee.

In its proposed amended complaint,

Malibu includes many assertions concerning the LS3 warranty at
issue in the case pending here.

Malibu seeks to add two new causes

of action to the Tennessee case: breach of warranty and violation
of the Magnuson-Moss Warranty Act.1
Malibu now moves this Court to dismiss the third lawsuit or

1

Upon motion, if the court in the Eastern District of
Tennessee grants the motion to amend the complaint to include these
warranty issues, this Court will consider again whether transfer is
proper.
3

transfer it to the Eastern District of Tennessee.
I.
Federal Rule 13(a) provides that any claim that "arises out of
the transaction or occurrence that is the subject matter of the
opposing party's claim" is a compulsory counterclaim and must be
asserted or it will be waived.2

To determine whether this standard

of same "transaction or occurrence" is met, the courts apply four
tests: (1) whether the legal and factual issues raised by the claim
and counterclaim are the same; (2) whether, absent compulsory
counterclaim, res judicata would bar a subsequent suit on the
counterclaim; (3) whether substantially the same evidence supports
or refutes both the claim and the counterclaim; or (4) whether
there is a logical relation between the claim and counterclaim.
Plant v. Blazer Fin. Servs., Inc., 598 F.2d 1357, 1360 (5th Cir.
1979).

The Fifth Circuit favors the "logical relationship" test.

Naturesweet, Ltd. v. Mastronardi Produce, Ltd., No. 12-1424, 2013
WL 460068, at *5 (N.D. Tex. Feb. 6, 2013).

A logical relationship

exists "when the same operative facts serve as the basis of both
claims or the aggregate core of facts upon which the claim rests
activates

additional

legal

rights,

otherwise

dormant,

in

the

defendants." Montgomery Elevator Co. v. Building Eng'g Servs. Co.,
730 F.2d 377, 380 (5th Cir. 1984).

2

The test for the rule against claim splitting is essentially
the same: it bars a claim if it arises out of the same transaction
or series of transactions as the first claim.
4

II.
The case pending here and the cases pending in Tennessee do
not arise out of the same transaction or occurrence.

They share

two qualities: the identity of the parties and their business
relationship.

In no other way are they related.

First, the two sets of cases do not raise the same legal or
factual issues.

The issues raised here are whether the cause of

the failures of the LS3 engines is a design defect by Marine Power
as to the engines or by Malibu as to the boats and whether Marine
Power's warranty covers the failure of these engines.

The issues

in the cases pending in Tennessee are whether Marine Power or
Malibu breached the 557 Purchase Order and whether Malibu acted
properly in cancelling that purchase order.

The actions arise out

of different contracts.
Second, res judicata on the actions pending in Tennessee would
not bar Marine Power from proceeding with the action pending here.
A finding that Malibu properly terminated the 557 Purchase Order
and that Marine Power breached the 557 Purchase Order would have no
bearing on whether a defect by Marine Power or Malibu caused the
failure of the LS3 engines.

It would also not inform whether the

failure of these engines was a warrantable event.
Third, the claims in the two sets of lawsuits will not involve
the same evidence.

The evidence in the warranty action will

concern Marine Power's design of the LS3 engines, Malibu's design

5

of the boats, what caused the failure of the engines, and the terms
of Marine Power's warranty.

The evidence in the purchase order

actions in Tennessee will concern the terms of the purchase order,
the correspondence among the parties about the delivery of engines
under the purchase order, any agreement on the delivery schedule,
the delivery of the engines, and Malibu's treatment of those
engines.

There is no evidentiary overlap.

Finally, there is no logical relationship between the case
pending here and those in Tennessee, except for the hostility of
the litigants.

The engine warranty action and the purchase order

actions arise out of distinct sets of operative facts.
concern

different

contracts,

they

involve

different

They

types

of

engines, and they relate to different legal rights.3
According, the motion to dismiss or to transfer is DENIED
WITHOUT PREJUDICE.

New Orleans, Louisiana, November 5, 2014

______________________________
MARTIN L. C. FELDMAN
UNITED STATES DISTRICT JUDGE

3

Obviously the issues between the parties could be best and
most efficiently resolved in one forum, but for the tit-for-tat
strategy of the lawyers. Efficiency, however, does not appear to
be a matter of concern, nor does the needless cost of these cases.
6