Great Northern Insurance Company v. Recall Total Information Management, Inc. et al

Filing 12

MEMORANDUM OPINION. Signed by Judge Alexander Williams, Jr on 12/19/2013. (bas, Deputy Clerk)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
SOUTHERN DIVISION

GREAT NORTHERN INSURANCE
COMPANY
as subrogee of Wilmer Cutler Picking Hale and
Dorr, LLP,
Plaintiff,
v.

Civil Action No. 8:13-cv-01829-AW

RECALL TOTAL INFORMATION
MANAGEMENT, INC.
et al.,
Defendants.

MEMORANDUM OPINION
Pending before the Court is Defendants’ Motion to Dismiss. The Court has reviewed the
record and deems a hearing unnecessary. For the following reasons, the Court GRANTS IN
PART Defendants’ Motion to Dismiss.
I.

FACTUAL AND PROCEDURAL BACKGROUND
Unless otherwise noted, the Court takes the following facts from Plaintiff’s Complaint.

Plaintiff Great Northern Insurance Company is an insurance company that is incorporated in
Indiana and whose principal place of business is New Jersey. Plaintiff does business in
Maryland. Defendants are related corporate entities. Defendant Recall Total Information
Management Inc. (Recall Total) is a Delaware corporation whose principal place of business is
Georgia. At all relevant times, Recall Total engaged in the business of document management
and storage and operated a document storage warehouse facility located at 1501 Cabin Branch
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Drive, Landover, Maryland (the Warehouse). For its part, Defendant Recall Secure Destruction
Services Inc. (Recall Secure) is likewise a Delaware corporation whose principal place of
business is Georgia. At all relevant times, Recall Secure engaged in the business of document
destruction and operated the Warehouse. The Court refers to Recall Total and Recall Secure
collectively as “Defendants.”
Nonparty Wilmer Cutler Pickering Hale and Dorr, LLP (WilmerHale) is a law firm with
an office in Washington, D.C. WilmerHale stored some of its business records, documents, and
other property at the Warehouse (the Property). At all relevant times, Plaintiff insured
WilmerHale’s Property pursuant to a Master Service Agreement (the Agreement). On June 28,
2012, “significant portions of [the Warehouse] collapsed[,] causing the destruction of [the
Property].” Doc. No. 1 ¶ 8. Pursuant to the Agreement, Plaintiff allegedly paid WilmerHale
significantly more than $75,000. Plaintiff further alleges that, as subrogee of WilmerHale, it is
“subrogated to the rights of WilmerHale to the extent of its payments.” Id. ¶ 11.
Based on these essential allegations, Plaintiff asserts claims against Defendants for gross
negligence, breach of contract and warranty, and bailment. The Complaint contains little factual
adornment. To support its claim for gross negligence, Plaintiff alleges that Defendants’ “conduct
demonstrated a flagrant disregard for applicable codes, regulations and applicable customs,
standards, and practices and a willful violation of its duties and obligations to WilmerHale.” Id. ¶
14. Plaintiff further alleges that the “partial building collapse . . . and the resulting damages . . .
were caused by the . . . gross negligence, . . . willful misconduct, and recklessness of Recall . . . .
.” Id. ¶ 15. Additionally, the Complaint contains a list of vague allegations generally averring
that Defendants failed to properly (1) investigate and maintain the Warehouse and (2) supervise

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and train their employees. See id. The Complaint contains no other consequential allegations. See
generally id. ¶¶ 16–27.
On June 22, 2013, Plaintiff filed said Complaint. Doc. No. 1. Defendants filed their
Motion to Dismiss on August 23, 2013. Doc. No. 7. Defendants attached the Agreement to their
Motion to Dismiss. See Doc. No. 7-2. Defendants assert that the Agreement limits their liability
for the damage or destruction of the Property to $2 per “carton” unless WilmerHale can show
gross negligence. Defendants base this assertion on section 11 of the Agreement, which is titled
“Limitation of Liability.” See id. § 11. In pertinent part, section 11(A) provides as follows:
With the exception of those claims resulting from Recall’s gross negligence [or]
willful misconduct, . . . in the event of any loss, damage or destruction of
customer materials caused by Recall’s breach of its obligations hereunder to
[WilmerHale], Recall’s liability shall be limited to: . . . $2.00 per registered item.
See id. § 11(A), 11(A)(ii).
Defendants argue that this clause limits their liability to $54,706 because (1) Plaintiff has
failed to state a facially plausible claim for gross negligence and (2) an investigation has revealed
that the collapse of the Warehouse resulted in the loss of only 27,353 cartons. To buttress the
second assertion, Kenneth Lee Clark, Regional Operations Director of Defendants, states in an
affidavit included with the Motion to Dismiss that “[b]ased on diligent investigation . . . , the best
information [Defendants have] available [to date] is that [WilmerHale] lost 27,353 cartons of
materials.” Doc. No. 7-3 ¶ 6. Defendants conclude that $54,706 falls below the $75,000
threshold for diversity jurisdiction and that the Court must dismiss the case for lack of subject
matter jurisdiction.

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Plaintiff filed its Response on September 27, 2013. Doc. No. 9. Plaintiff makes a series of
assertions purporting to show that the collapse was severe and involved grossly negligent
behavior. For instance, citing a series of news reports, Plaintiff asserts that 90% of the
Warehouse collapsed and that a worker died due to the collapse. See id. at 2–3. Plaintiff then
argues that it has stated a facially plausible claim for gross negligence. Plaintiff further asserts
that, by attaching the Agreement and Clark’s affidavit to the Motion to Dismiss, Defendants
converted it into a motion for summary judgment. Plaintiff concludes that it is entitled to early
discovery under Rule 56(d) because it cannot present facts essential to oppose summary
judgment without it. Defendants have replied and the matter is ripe for review.
II.

STANDARD OF REVIEW

A.

Motion to Dismiss
The purpose of a 12(b)(6) motion to dismiss is to test the sufficiency of the plaintiff’s

complaint. See Edwards v. City of Goldsboro, 178 F.3d 231, 243 (4th Cir. 1999). In two recent
cases, the U.S. Supreme Court has clarified the standard applicable to Rule 12(b)(6) motions.
Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009); Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007).
These cases make clear that Rule 8 “requires a ‘showing,’ rather than a blanket assertion, of
entitlement to relief.” Twombly, 550 U.S. at 556 n.3 (quoting Fed. R. Civ. P. 8(a)(2)). This
showing must consist of at least “enough facts to state a claim to relief that is plausible on its
face.” Id. at 570.
In deciding a motion to dismiss, the court should first review the complaint to determine
which pleadings are entitled to the assumption of truth. See Iqbal, 129 S. Ct. at 1949–50. “When
there are well-pleaded factual allegations, a court should assume their veracity and then
determine whether they plausibly give rise to an entitlement to relief.” Id. at 1950. In so doing,

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the court must construe all factual allegations in the light most favorable to the plaintiff. See
Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 783 (4th Cir. 1999). The Court
need not, however, accept unsupported legal allegations, Revene v. Charles County
Commissioners, 882 F.2d 870, 873 (4th Cir. 1989), legal conclusions couched as factual
allegations, Papasan v. Allain, 478 U.S. 265, 286 (1986), or conclusory factual allegations
devoid of any reference to actual events, United Black Firefighters v. Hirst, 604 F.2d 844, 847
(4th Cir. 1979).
III.

LEGAL ANALYSIS

A.

Gross Negligence
This Court has previously had occasion to state the standard for gross negligence under

Maryland law.1 “Gross negligence connotes ‘wanton and reckless disregard for others.’”
Markevicz v. Garcia, Civil Action No. 8:08–cv–02877–AW, 2011 WL 6888641, at *2 (D. Md.
Dec. 29, 2011) (quoting Boyer v. State, 594 A.2d 121, 132 (Md. 1991)). “A defendant acts with
wanton and reckless disregard for others ‘only when he inflicts injury intentionally or is so
utterly indifferent to the rights of others that he acts as if such rights did not exist.’” Id. (quoting
Barbre v. Pope, 935 A.2d 699, 717 (Md. 2007)).
In this case, taking the allegations as true and construing them in the most favorable light,
one could not plausibly infer that Defendants’ conduct in connection with the Warehouse’s
collapse constituted gross negligence. To support its gross negligence claim, Plaintiff simply
alleges that Defendants flagrantly disregarded the applicable building codes and standards and
failed to properly (1) investigate and maintain the Warehouse and (2) supervise and train their
employees. These are conclusory factual assertions and, hence, warrant no weight. See Moore v.

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The underlying accident happened in Maryland and both Parties have assumed that Maryland law
applies to Plaintiff’s claims.

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Nat’l Tire & Battery, Civil Action No. 13–cv–01779 AW, 2013 WL 5587295, at *4 (D. Md. Oct.
9, 2013) (citing cases). Plaintiff adds that the collapse was caused by “gross negligence” and/or
“willful misconduct.” These allegations likewise warrant no weight as they are mere “legal
conclusions.” See Iqbal, 556 U.S. at 1950–51. Although Plaintiff argues that the “allegations”
gleaned from the news reports mentioned above create a plausible inference of gross negligence,
the Court declines to consider these averments as Plaintiff made them in a legal memorandum,
not the Complaint. See Henthorn v. Dep’t of Navy, 29 F.3d 682, 688 (D.C. Cir. 1994) (citing
cases) (“[T]he sparse case law addressing the effect of factual allegations in briefs or memoranda
of law suggests that such matters may never be considered when deciding a 12(b)(6) motion.”);
Herring v. Wells Fargo Home Loans, Civil Action No. 8:13–cv–02049–AW, 2013 WL 5781584,
at *1 (D. Md. Oct. 24, 2013) (ellipsis in original) (citation and internal quotation marks omitted)
(“[F]actual allegations contained in legal briefs or memoranda are . . . treated as matters outside
the pleading for purposes of Rule [12(b)(6)].”).
For these reasons, the Court dismisses Plaintiff’s gross negligence claim. However, as
explained below, this dismissal is without prejudice to the right of Plaintiff to file an amended
complaint.
B.

Subject Matter Jurisdiction
It is premature to address the subject matter jurisdiction question. Defendants contend

that the Agreement clearly shows that Plaintiff cannot cross the jurisdictional threshold of
$75,000 because, due to the lack of gross negligence, section 11 limits their liability to $54,706.
But this argument takes for granted that Plaintiff cannot state a claim for gross negligence, which
remains to be seen. At the end of the day, it makes more sense to wait and see if Plaintiff
manages to state a facially plausible gross negligence claim before delving into the jurisdictional
dispute.
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In sum, the Court grants in part Defendants’ Motion to Dismiss. As a result, the Court
dismisses, without prejudice, Plaintiff’s gross negligence claim. In view of the upcoming holiday
season, the Court gives Plaintiff 30 days to file an amended complaint.
IV.

CONCLUSION
For the foregoing reasons, the Court GRANTS IN PART Defendants’ Motion to

Dismiss. A separate Order follows.
December 19, 2013
Date

/s/
Alexander Williams, Jr.
United States District Judge

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