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

Filing 47

MEMORANDUM OPINION. Signed by Judge Theodore D. Chuang on 8/1/2014. (aos, Deputy Clerk)

•

UNITED STATES IJISTRICT COURT
DISTRICT OF :\IARYLANIJ

GREAT NORTHERN INSURANCE
COMPANY, as subrogee o/Wilmer Cutler
Pickering lIale and Dorr, LI.P,
Plaintill:
v.

Civil Action No. TDC-I3-1829

RECALL TOTAL INFORMATION
MANAGEMENT, INC., el ul.,
Defendants.

MEMORAl'mU:\1

OPINION

This matter is before the Court on a Motion to Dismiss Counts IV. V. and VI of PlaintilT
Great Northern Insurance Company's First Amended Complaint by Defendants Kelly Services
Inc. ("Kelly Services") and Defendant Lorenzo Piard ("Piard'") (collectively, "Defendants").
ECF No. 30. At issue is whether Plaintitf has properly alleged that (1) Defendants owed a duty
of care to Plaintiffs

subrogor. such that Plaintitr has sufliciently stated a claim for negligence

(Counts IV and V); and (2) Kelly Services is vicariously liable for Piard's allegedly negligent act
(Count VI).

Having reviewed the pleadings and supporting documents. the Court finds no

hearing is necessary.

See Loeal Rule 105.6 (D. Md. 2014).

Defendants' Motion to Dismiss is DENIED.

For the follO\ving reasons.

I. BACKGROUNIJ'
Plaintiff is an insurance company doing business in rv1aryland.
this case are Recall Total Infonnation

Management,

The four defendants in

Inc. ("Recall Totar').

Recall Secure

Destruction Services. Inc. ("Recall Secure"), Kelly Services. and Lorenzo Piard. At all relevant
times, Recall Total and Recall Secure (collectively, "'Recal!"') together operated a document
storage warehouse facility located in Landover, Maryland (the "Warehouse").

Pursuant to an

Agreement for Services with Recall. Kelly Services provided temporary workers for Recall's
Warehouse.

Piard is a Maryland resident and temporary worker employed by Kelly Services and

assigned to work at the Warehouse.
Nonparty Wilmer Cutler Pickering Hale and DOfr LLP r'WilmerHale")

is a law firm with

an office in Washington. D.C. WilmerHale stored some of its business records, documents. and
other property (the '"property") at the \Varehouse, pursuant to a Master Services Agreement with
Recall. At all relevant times, PlaintilTinsured the property.
On June 28, 2012, "a large section ofthc roof of [the Warehouse] collapsed," killing a
Recall worker and causing the destruction of some of the property. Am. Compl. ~~ 17-18. ECF
No. 14. Pursuant to the terms and conditions of its insurance policy, PlaintifTpaid WilmerHale
significantly more than $75,000 for the value of the property and additional expenses incurred as
a result of the collapse,

Plaintiff alleges that it is "subrogated to the rights of Wilmer Hale to the

extent of its payments."

/d. ~ 20.

On June 22, 2013, Plaintiff filed a complaint asserting elaims solely against Recall for
gross negligence, breach of contract and warranty, and bailment.

Comp\., ECF No. l.

On

December 19.2013, the Court granted in part a Motion to Dismiss tiled by Recall, dismissing

Unless otherwise noted, the facts are derived from Plaintilrs
No. 14.
J

2

First Amended Complaint, ECF

without prejudice Plaintiffs

gross negligence claim. Mem. Op. 5-6 (Williams. J.). ECF No. 12.

The Court did not rule on the other two claims and granted Plaintiff 30 days to tile an amended
complaint. It!.
On January 17, 2014, PlaintitT filed its First Amended Complaint. adding Kelly Services
and Piard as defendants.

Among other claims, Plaintiff alleged that Kelly Services assigned

Piard to Recall's Warehouse but failed to confinn that Piard •• as properly trained. qualified. and
v
certified to operate the order picker and other equipment used at the Warehouse.

PlaintifT

alleged that Recall then allowed Piard to operate the order picker even though he was not
properly trained and certilied to do so, as required by Maryland Occupational Safety and Health
("'MOSH") regulations and by Recall"s standard operating procedures and policies.
Plaintiff also asserted that Piard "carelessly and recklessly" operated an order picker
without the proper certification and training, and struck an overstressed storage rack. causing it
;.'to tip over onto an adjoining rack, which resulted in a domino efTect of collapsing rack
systems."

Am. Compl. ~ 51. These collapsing racks struck a building support column, which

led to the partial roof collapse that killed a Recall worker and destroyed the property.
On March 14, 2014, Kelly Services and Piard tiled this fl"lotion to Dismiss. The Court
addresses in a separate opinion Recall's Moti()O to Dismiss. ,,',;hich is also before the Court.
RecaJrs Mot. Dismiss Am. Comp!.. ECF No. 30.

II. OISCUSSIOi\"
A. Legal Standard
A court must deny a Federal Rule of Civil Procedure 12(b)(6) motion to dismiss for
failure to state a claim where the complaint alleges enough facts to state a plausible claim for
relief. Ashcroft ". Iqhal. 556 U.S. 662, 678 (2009) (quoting Bell All. Carp.
3

l'.

TlI'omhly. 550 U.S.

544, 570 (2007».

A claim is plausible v,'hen ,.the plaintiff pleads factual content that allows the

Court to draw the reasonable inference that the defendant is liablc for the misconduct alleged:'

!d. "Rule 12(b)(6) 'docs not countenance ...
complaint's

factual allegations.'"

dismissals bascd on a judgc's

disbelief of a

Colon Health Centers of Am,. LLC v. Hazel. 733 F.3d 525,

545 (4th Cir. 2013) (quoting Neitzke v. Williams, 490, U.S. 319, 327 (1989)).

Rather. in

assessing whcther this standard has been met, the Court must examine the complaint as a whole,
consider the factual allegations in the complaint as true, and construe the factual allegations in
the light most favorable to the plaintiff. AlbriKht
Bd. ofComm'rs

I'.

Oliver. 510 U.S. 2b6, 268 (1994); Lambeth

of Davidson Cnty., 407 F.3d 266. 268 (4th Cir. 2005) (citing Scheller

416 U,S, 232, 236 (1974».

t',

I'.

Rhodes.

Legal conclusions or condusory statements do not suffice and are

not entitled to the assumption of truth. Iqbal, 556 U.S. at 678.
8. Analysis
To state a claim for negligence under Maryland law, a plaintiff must allcge that "(1) that
the defendant was under a duty to protect the plaintiff from injury. (2) that the defendant
breached that duty, (3) that the plaintiff suffercd actual injury or loss. and (4) that the loss or
injury proximately resulted from the defendant's
Upjohn Co., 879 A.2d 1088, 1092 (Md. 2004).
dismiss Plaintilrs
duty to Plaintitrs

breach of the duty,"

Doe \" Pharmacia &

Here, Defendants argue that the Court should

negligence claims against them because they owed no legally cognizable tort
subrogor, Wilmerllale.

Kelly Services also argues that even if the Court

concludcs that Piard had such a duty, Kelly Services is not vicariously liablc for Piard's alleged
negligent acts because he was acting as Recall's "borrowed servant" at the time of those acts.
As set forth below, the Court concludes that the Complaint properly alleged that Piard
owed a duty of care to Recall's customers who storcd property at the Warehouse, including

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WilmerHale,
employees.

and that Kelly Services owed Recalrs

customers a duty to hire and train its

Any dispute as to \"hetber liability for Kelly Services' duty was shined to Recall by

contract is a question of fact that would be inappropriate for the Court to determine at the
12(b)(6) stage.

The Court also concludes that the Amended Complaint properly alleged that

Kelly Services is vicariously liable for Piard's alleged negligent acts. Thus, Plaintitrs

Amended

Complaint properly states claims for negligence in Counts IV and V and re5pondeaf superior
liability in Count VI.
1.

Defendants' Tort Ilutics

Altbough there is "no precise formula" for detennining

the existence of a tort duty

between parties, among the key factors that Maryland courts generally consider are: the nature
of the harm likely to result from a failure to exercise due care. the foreseeability of the harm. and
the relationship between the parties. See Doe 879 A.2d at 1092-93; Jacques v. First Nat 'I. Bank

~f id.,
A

515 A.2d 756, 759-60 (Md. 1985). In this instance, the nature of the hann-<lamage

destruction of property-falls

squarely within the range

()f

nr

harms actionable under tort law. and

it was reasonably foreseeable that a lack of due care by an order picker operator could result in
such damage.

Defendants argue. howcver. that Plaintiff has not stated a valid claim for

ncgligcnce because neither Piard nor Kelly Services had a sunicicntly close relationship with
Recall's

storage customers

to support the existence of a duty of care.

Defendants make two primary claims:

Mot. Dismiss 5.

(1) there is no duty of care because neither Piard nor

Kelly Services had a contractual relationship with WilmerHale; and (2) imposing a duty of care
to Recall's customers is contrary to Maryland law because it "would effectively create a duty to
an indeterminate class of people despite [Defendants] having no relationship with that class or
control over who becomes a member of that class:'

Mot. Dismiss 5-8.

5

Although historically, contractual privity was a requirement to establish a duty of care in
certain tort actions, the Maryland Court of Appeals has recognized that in cascs involving
physical harm to persons or property, such a requirement no longer exists.

Council of Co-

Owners AI/antis Condo., Inc. \-'.Whiting-Turner COnlruclin;.:Co., 517 A.2d 336, 341 (Md. 1986)
("The requirement of privity of contract has been abandoned as a basis for recovery by third
parties for physical harm to themselves and tangible things against those who negligently supply,
rcpair, or construct things so as to leave them in an unreasonably dangcrous condition.") (quoting
Prosser and Keeton on the Lmr of TOr/s,
1984».2

S

93, at 667-68 (W. Pagc Keaton et al. eds., 5th ed.

Rather, if a party enters into a contract under \vhich it may affect the interests of

another person, it owes a duty to avoid causing physical harm, even if it lacks privity of contract
"",iththat person:
But by entering into a contract \vith A. the defendant may place himself in such a
rclation toward R that the law \vill impose upon him an obligation, sounding in
tort and not in contract, to act in such a way that R will not be injured. The
incidental fact of the existence of a contract with A does not negative the
responsibility of the actor when he enters upon a course of affirmative conduct
which may be expccted to alIect the interests of another person.
Council o/Co-Owners,

517 A.2d at 341 (quoting Prosser ~ 93 at 667-68).

This principle is illustrated in i'ac!fic Indemnify Co. v. Whaley, 560 F. Supp. 2d. 425 (D.
Md. 2008). in which an insurance company subrogee brought a negligence claim against the
defendant subcontractor when the tarp that the defendant staplcd to the roof of the subrogor's

2 To the extent that such a requirement remains, it arises in cases involving only "cconomic
loss"-intangible
hanns not involving physical damage to persons or property. S'ee, e.g.,
Jacques, 515 A.2d at 759-60 (contrasting economic loss cases, \••..
hich require "an intimate
nexus" between the parties consisting of "contractual privity or its equivalent:' with those cases
involving risk of personal injury, for which "no such direct relationship need be shov.,rn'"). But
even in cases involving only economic loss, Maryland courts have, depending on the facts. found
a sufficiently intimate nexus to establish a duty of care even bet\veen parties that lack contractual
privity. ,!)'ee.e.g., Walpert. Smullian & Blumenthal. P.A. v. Katz. 762 A,2d 582, 608-09 (Md.
2000); Council oleo-owners. 517 A,2d at 344.
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home was blown ofT during a storm, damaging the interior. Jd. at 427. Applying Maryland tort
law, the Court found that where there was "physical damage ... to tangible things:' it was "clear
that once [the defendant) undertook the responsibility oftarping the roof: it owed a 'tort duty' to
perform the work with reasonable care:' and that "[tJhis tort duty exists notwithstanding the lack
of contractual privity" between the subcontractor and the property owner.

/d. at 430 nn.5-6

(citing Klein v. Dougherty, 87 A.2d 821. 825 (Md. 1952)). Similarly, in this case Piard owed a
duty of reasonable care to Recall's storage customers, even \\'ithout a contractual relationship
with them, because he could be expected to affect their interests as he operated machinery to
move their property around within the Warehouse.

Kelly Services also arguably owed them a

duty of care in hiring and training Piard, which the Court discusses in further detail in the
following section.
Defendants further assert that Maryland law would not countenance finding a duty of
care in this case because to do so would effectively establish a duty to '.hundreds or thousands of
companies

and individuals with which/whom

[Defendants]

never [had] any contact:'

Mot.

Dismiss 9, and would amount to creating a duty to "an indeterminable class of people" or ..the
public at large;' Mot. Dismiss 6-7. In support of this argument, Defendants cite Valentine v. On
Target. Inc., 727 A.2d 947 (Md. 1999), in which the court held that a gun shop did not owe a
duty to a viclim murdered with a gun stolen from the store because it did not owe a duty to the
public at large to prevent the theft of its handguns, and because to do so would create "an
indefinite duly to the general public:'

ld. at 953. Defendants also rely on Doe, 879 A.2d 1088,

in \vhich the court found that a pharmaceutical company did not owe a duty to a woman ",-ho
contracted HIV from her husband, a company lab technician who had been infected while
handling the pathogen at work.

Id. at 1090-91. The Doe court held that. while the company

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owed such a duty to the employee, this duty did not extend to his spouse because to do so "wuuld
create an expansive new duty to an indeterminate class of people," including "all the sexual
partners of its employees ...

[andJ any person who could have contracted HIV-2 from the

employee by any means." Id. at 1095-96.
Defendants
indeterminable"

assert

that

the class

of Recall's

customers

here

is "by definition

because Defendants had no control over, or knowledge of who they were, and

because WilmerHale became Recall's customer after Kelly Services had already entered into its
Agreement for Services with Recall. Defs.' Reply 6-7, ECF No. 40. The present case, however,
is readily distinguishable bccause it does not require finding a duty of care to an "indeterminable
class of pcoplc" or "the public at large." The class of individuals or entities to whom Defendants
would owe a duty of care is limited to those Recall customers whose physical property was
stored in the Warehouse.

Plaintiff does not seek to extend a duty of care outside the Warchouse

to include the classes of individuals at issue in Valentine or Doe. such as family members or
clients of storage customers, or the general public.

Rather, the class of customers, although

perhaps numerous, consists of a specific, dcfined list that undoubtedly could, if required. be
compiled from Recall's business records.

That Defendants did not knov.' each customer in

advance by name does not, as Defendants argue, create a '.boundless category of potential
plaintifTs," such that it would '''make tort law unmanageable.'"

Id. at 6 (quoting Doe, 879 A.2d

at 1096). See Henley v. Prince George.s County. 503 A.2d 1333. 1340-41 (Md. 1986) (stating

that a defendant's

duty to a class of people is not necessarily limited by "those within a

foreseeable zone of danger whose identities are known in advance[;] . , . that such persons could
not be identified

in advance

does not mean that they are not included in the class").

Accordingly, the Court concludes that the Complaint sutliciently alleges that Defendants owed a

8

tort duty to the closed universe of Recall customers who stored their physical property in the
Warehouse, including Plaintilrs
2.

subrogor.

Kell)' Sen'ices's Du~' to Train its Employees

Although Piard. as the order picker operator who allegedly started the chain reaction that
led to the destruction of property, primarily owed a duty of care to Recalrs customers. the
Complaint also sutliciently alleges a duty of care on the part of Kelly Services. Specifically. in
Count V of the Amended Complaint. Plaintiff alleges that Kelly Services assigned Piard to work
at the Warehouse without confirming that Piard was properly trained and certified to operate
Recall's order picker and other equipment. Am. Compl .•~~61-62.
Under Maryland la".', employers can be liable to third partics for negligent hiring or
training of their employees.

See Williams v. C/m'crland farms Dairy, Inc., 78 F. Supp. 2d 479,

484 (D. Md. 1999) (applying Maryland law to find a cause of action for employer's negligent
failure to train). See also Fidelity First Home A!ortg Co. v. Williams. 56 A,3d 50 I, 511- I2 (Md.
Ct. Spec, App. 20 12) (stating that employers may owe a duty arising from its role in hiring.
supervising, and retaining employees).
training, the plaintifTmust

To establish a cause of action for negligent hiring or

show that the injury was caused by the employee's negligence, that

the employee knew or should have known that the employee was capable of inflicting the harm,
and that the failure to properly hire or train their employees was the proximate cause of the harm.
Cloverland Farms, 78 F. Supp. 2d at 484.
Here, PlaintifT alleged that Kelly Services failed to conlirm that Piard. a Kelly Services
employee, wa') properly trained and certified to operate the order picker and other mechanized
equipment routinely used at the Warehouse, but nevertheless assigned Piard to the Warehouse.
Plaintiff also alleged that Piard"s negligent operation of the order picker caused the roof collapse

9

that destroyed the property. The Court concludes that PlaintilThas sulliciently pled a negligence
claim against Kelly Services on the basis of its duty to hire and train its employees.
Kelly Services argues that the Agreement for Services between Kelly Services and Recall
assigned all responsibility for training. directing. and supervising Kelly Services employees to
Recall. Del's.' Reply 9-10. These contract provisions assign responsibility to Kelly Services for
"[r]ecruiting. hiring. assigning. orienting, reassigning, counseling. disciplining, and discharging
the Kelly Temporary Employees:'

Am. Compl. Ex. A ~ 2(a)(i), but to Recall for the "direction.

supervision and control" of the employees' services, as well as "providing adequate instructions,
assistance, supervision and time to perform the services requested of them."

/d. at

* 3(a).

Because these provisions do not unambiguously identify which company had responsibility for
training employees such as Piard and ensuring that they had the proper certifications to operate
machinery such as an order picker.3 it would be inappropriate for the Court to determine this
question of fact at the 12(b)(6) stage and conclude that Kelly Services' duty to hire and train had
been shifted to Recall by contract. Afar/in MarielJa Corp" v. 1m 'I Telecomms. Satellile Org .. 978
F.2d 140. 143 (4th Cir. 1992) ("[TJhe construction of ambiguous contract provisions is a factual
determination that precludes dismissal on a motion for failure to state a claim.").

Accordingly.

the Court concludes that Plaintiff has properly stated a negligence claim against Kelly Services.
3.

Kelly Sen'ices's Vicarious LiahilitJ

In Count VI, PlaintiO' alleges that Kelly Services is vicariously liable for the negligent
acts of Piard. Maryland courts have recognized consistently the doctrine of respondeat superior.
\,,"hereby employers are liable for employee's torts committed within the scope of employment.

The only reference to trammg is a narrow one: the requirement that Recall provide
"information. training, and safety equipment with respect to hazardous substances." Am. Compl.

3

Ex. A

*

3(a).

10

Embrey v. f/olly, 442 A.2d 966, 969 (Md. 1982) ("[IJt is hornbook law that an employer is
ordinarily responsibly for the tortious conduct of his employee committed while the servant was
acting within the scope of the employment relationship.").

Here. Plaintiff alleges that Kelly

Services hired Piaed to operate order pickers and other mechanized equipment in Recalrs
Warehouse, and that Piaed "carelessly and recklessly operated an order picker," causing the
accident. Am. CampI.

'I~

51-52. Kelly Services was Piaed's employer.

sef!

Am. CampI. Ex. A at

~ 2(a) ("lE]ach Kelly Temporary Employee supplied to Customer pursuant to this Agreement
shall be a full time employee cfKelly, not a 1099 contractor:'). and is therefore liable for Piaed's
alleged negligent acts.
Although Kelly Services claims that Count VI fails to state a claim because Kelly
Services has no liability pursuant to the '"borrowed servant"' doctrine. this argument fails under
thc facts of this case. Undcr Maryland law, wherc a temporary employment agency's cmployees
are assigncd to another employer. "that employee's status under the borrowed servant doctrine is
immateriar'

if the temporary employment agency and the borrowing employer "contractually

agreed that one or the other should bear the risk of a particular employec's negligent acts:' NVR.
Inc.

l'.

Just Temps, 31 F.App'x. 805, 807 (4th CiT. 2002); Sea Land Indus. Inc.

1'.

Gen. Ship

Repair Corp., 530 F. Supp. 550, 563 (D. Md. 1982). Here. the Agreement for Services between
Kelly Services and Recall states that Kelly Services is responsible for "[p]aymcnt for injury to
people (including death) or loss to property caused by negligent or intentional conduct of Kelly
Temporary Employee[s] acting \vithin the scope of thcir employment," Am. CampI. Ex. A
2(a)(xi).

*

The Agreement for Services also contains indemnification clauses for both Kclly

Services and Recall.

Specifically.

Kelly Services agreed to indcmnify Recall against "all

demands, claims, actions. losses, judgmcnts. costs and expenses ...

11

arising out of '"[a]ny

negligent act or omission on the part of the Kelly Temporary Employees which occur within the
scope of their employment, provided Kelly's indemnity obligation \vill be limited to property
damage, bodily injury, and \\Tongful death:'

!d. at

* II and 11(c).

Recall agreed to indemnify

Kelly Services against such liabilities arising out of "[a]ny negligent act or omission or
intentional conduct on the part of [Recall]:'

!d. at ~ 12(b). These provisions are substantially

similar to those cited by the court in NVR, Inc, to reject the argument that the borrowed servant
doctrine precluded a temporary employment agency's liability. NVR. Inc., 31 F. App'x at 80708, Therefore. the borrO\ved servant analysis likewise does not apply here.-t
Kelly Services further argues that Recall is solely responsible because among other
liabilities, Recall agreed to indemnify Kelly Services against liability arising out of the "[u]se of
any vehicle. machinery,

equipment

or material in the care, custody or control of Kelly

Temporary Employees in connection with the performance of services under this Agreement:'
lei. at

* 12(1). Plaintill: on the other hand. argues that this provision. when read together with the

preceding ~ 11, ean only be taken to mean that Recall is solely responsible only where the use of
its vehicles-and
damage.

not the sole or partial negligence of a Kelly temporary employee-eaused

Opp. Mot. Dismiss 7,

the

Because there are conflicting interpretations of ambiguous

contract provisions. this issue should not be resolved through a motion to dismiss.

Alartin

Kelly Services asserts that lv'VR, Inc. is distinguishable because in that case, the claims 'were
brought by the borrowing employer against the temporary services agency. Defs.' Reply 10-11.
There is nothing in NVR, Inc.. however, that explicitly or implicitly indicates that the core
principle in that case-that
the borrowed servant doctrine does not apply when a temporary
employment agency contractually accepts liability lor its employee's negligent acts-is invalid
when the claim is brought by a third party, Although Kelly Services also relies on H!hirehead v.
Sq{it'uy Steel Products. Inc" 497 A.2d 803 (Md. 1985). that was a worker's compensation case in
which. unlike here. there was no mention of contractual provisions allocating responsibility for
employee negligence to either the borrowing employer or the temporary employment agency.
See itl., at 78-84,
4

12

•

Afariella

Corp., 978 F.2d at 143. "be Court concludes that Plaintiff has sutliciently stated a

vicarious liability claim against Kelly Services.
III.

COIlo"CLVSIOIlo"

For the foregoing reasons. Defendants' Motion to Dismiss is DENIED. A separate Order
follows.

Date: August I, 2014
~
United States District Judge

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