Sports Capital Holdings (St. Louis), LLC et al v. Schindler Elevator Corporation
MEMORANDUM AND ORDER..IT IS HEREBY ORDERED that defendant Schindler Elevator Corporations motion to dismiss (ECF #23) is GRANTED. Plaintiffs claims for damages are limited to the annual price of the parties contract and reasonable attorneys fees and costs. All other damages that are expressly barred by the parties contract, including damages for loss of use, loss of goodwill, and damages incurred as a result of claims by injured third-parties, are DISMISSED with prejudice. Finally, Count IV is D ISMISSED without prejudice. IT IS FURTHER ORDERED that defendant KONE, Inc.s motion to dismiss (ECF #33) is GRANTED in part and DENIED in part. The motion is GRANTED as to Counts IV and V, which are DISMISSED without prejudice. The motion is DENIED in all other respects.. Signed by District Judge Stephen N. Limbaugh, Jr on 4/10/14. (MRS)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
SPORTS CAPITAL HOLDINGS
(ST. LOUIS), LLC, AND KIEL
CENTER PARTNERS, LP,
D/B/A SCOTTRADE CENTER,
SCHINDLER ELEVATOR CORPORATION )
AND KONE, INC. F/K/A MONTGOMERY )
KONE INC., F/K/A MONTGOMERY
Case No. 4:12CV1108 SNLJ
MEMORANDUM AND ORDER
This matter is before the Court on the defendants’ motions to dismiss pursuant to
Federal Rule of Civil Procedure 12(b)(6). The motions have been fully briefed and are
ready for disposition.
This lawsuit arises out of a “catastrophic mechanical failure” of an escalator inside
the Scottrade Center facility in St. Louis, Missouri. The subject escalator, a Montgomery
5E Solid Balustrade Model 4503 escalator, was installed in the Scottrade Center in 1994.
Defendant KONE, Inc. (KONE), as the successor in interest to Montgomery, designed
and manufactured the escalator. The escalator utilized an electronic brake board to
monitor the speed of the escalator and apply braking as necessary. After the original
design and manufacture of the escalator, KONE designed a new brake board mechanism
to retro-fit onto the subject escalator. The replacement brake board was installed
approximately two months before the escalator malfunction.
On or about June 1, 2009, plaintiffs, doing business as Scottrade Center, entered
into a written contract with Schindler Elevator Corporation (Schindler) for maintenance
and repair of six passenger escalators at the Scottrade Center facility, including the
subject escalator. In August 2009, Schindler technicians installed the KONE retro-fitted
brake board on the subject escalator and coordinated and supervised the annual inspection
of the subject escalator.
On October 8, 2009, the St. Louis Blues Hockey Club had its first home game of
the season. After the game, as fans were leaving the arena, the escalator suffered a
“catastrophic mechanical failure, ran out of control and crashed” resulting in the injuries
of several persons riding the escalator, as well as damage to the escalator itself.
This lawsuit was originally filed in the Circuit Court for the City of St. Louis and
was removed to this Court based on diversity jurisdiction. Plaintiffs filed a multi-count
complaint against defendant Schindler alleging breach of contract, fraudulent
misrepresentation, negligent misrepresentation, negligent hiring, negligent training,
negligent supervision, implied indemnity, and punitive damages. Schindler filed a
motion to dismiss the claims for fraudulent misrepresentation, negligent
misrepresentation, negligent hiring, negligent training, negligent supervision, and
punitive damages, which was granted by this Court.
Subsequently, plaintiffs filed a first amended complaint against defendant
Schindler and adding defendant KONE. The first amended complaint includes claims of
breach of contract (Count I) and implied indemnity (Count IV) against Schindler and
strict liability defective product (Count II), negligent design and manufacture (Count III),
implied indemnity (Count IV), and punitive damages (Count V) against KONE.
Schindler filed a motion to dismiss seeking dismissal of certain claims stated in Counts I
and IV. KONE filed a motion to dismiss seeking dismissal of plaintiffs’ claims stated in
Counts II, III, IV, and V.
Legal Standard – Motion to Dismiss
The purpose of a Rule 12(b)(6) motion to dismiss for failure to state a claim is to
test the legal sufficiency of a complaint so as to eliminate those actions “which are fatally
flawed in their legal premises and designed to fail, thereby sparing litigants the burden of
unnecessary pretrial and trial activity.” Young v. City of St. Charles, 244 F.3d 623, 627
(8th Cir. 2001) (quoting Neitzke v. Williams, 490 U.S. 319, 326-27 (1989)). “To survive a
motion to dismiss, a claim must be facially plausible, meaning that the “factual content . .
. allows the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged.”” Cole v. Homier Dist. Co., Inc., 599 F.3d 856, 861 (8th Cir. 2010)
(quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). The Court must “accept the
allegations contained in the complaint as true and draw all reasonable inferences in favor
of the nonmoving party.” Id. (quoting Coons v. Mineta, 410 F.3d 1036, 1039 (8th Cir.
2005)). “Further, documents attached to or incorporated within a complaint are
considered part of the pleadings, and courts may look at such documents for all
purposes.” Brown v. Medtronic, Inc., 628 F.3d 451, 459-60 (8th Cir. 2010); Great Plains
Trust Co. v. Union Pacific R. Co., 492 F.3d 986, 990 (8th Cir. 2007).
Defendant Schindler’s Motion to Dismiss
Counts I and IV – Contractual Liability Limitation
Schindler argues that Counts I and IV of plaintiffs’ first amended complaint
should be dismissed to the extent plaintiffs seek damages that are expressly barred by the
parties’ contract. Paragraph 3 of the contract’s terms and conditions provides:
[Schindler] will not be liable for damages of any kind, whether in contract or in
tort, or otherwise, in excess of the annual price of this Agreement. We will not be
liable in any event for special, indirect or consequential damages, which include
but are not limited to loss of rents, revenues, profit, good will, or use of Equipment
or property, or business interruption.
Schindler contends that this provision limits its liability for damages to the amount of the
annual price of the contract and that any other damages claimed by plaintiffs are barred.
Plaintiffs contend that the contractual liability limitation is ambiguous, unconscionable,
and otherwise unenforceable to the extent it limits the amount of damages plaintiffs may
recover and to the extent it purports to exempt Schindler from future liability for gross
The validity of a contractual liability limitation presents a question of law for the
court. Purcell Tire & Rubber Co. v. Exec. Beechcraft, Inc., 59 S.W.3d 505, 508 (Mo.
banc 2001). It is well-settled in Missouri that “[s]ophisticated parties have freedom of
contract – even to make a bad bargain, or to relinquish fundamental rights.” Id. This
freedom includes the right to contractually limit future remedies. Id.; Roy A. Elam
Masonry, Inc. v. Fru-Con Constr. Corp., 922 S.W.2d 783, 791 (Mo. App. E.D. 1996)
(“Provisions in private contracts limiting or excluding liability for consequential damages
have been held not violative of public policy, provided the limitation or exclusion was
not unconscionable.”); World Enterprises, Inc. v. Midcoast Aviation Services, Inc., 713
S.W.2d 606, 611 (Mo. App. E.D. 1986) (“[I]n contracts for services, consequential
damages may be contractually limited or excluded). Limitations of liability do not
violate public policy where the language is clear, unambiguous, unmistakable, and
conspicuous. Purcell Tire, 59 S.W.3d at 509.
In Purcell Tire & Rubber Co. v. Exec. Beechcraft, Inc., the Supreme Court of
Missouri affirmed a trial court’s enforcement of a contractual provision that limited a
defendant’s liability to the price of the parties’ contract. 59 S.W.3d at 509-11. The
plaintiff in Purcell Tire, a large retail tire dealer, sued the defendant aviation business for
breach of contract and negligence, claiming $372,458 in damages allegedly attributable
to the defendant’s failure to discover an oil leak in the plaintiff’s airplane during a presale inspection. Id. at 508. The defendant moved for summary judgment on the basis of
a provision in the parties’ contract that provided: “It is expressly agreed that the liability,
if any, of Executive Beechcraft, Inc. under this agreement shall be limited to the cost of
services performed hereunder.” Id. The trial court enforced the limitation of liability
provision and the defendant confessed judgment for the $1,250 contract price. In
affirming the trial court’s enforcement of the contractual limitation of liability provision,
the Supreme Court of Missouri found that the clause did not violate public policy, as it
was clear, unambiguous, and unmistakable. Id. at 509. Further, the court found that the
provision was not unconscionable and noted that courts rarely find liability limitations
unconscionable where both parties are sophisticated businesses. Id. at 510.
Like the plaintiff in Purcell Tire, plaintiffs here contractually agreed that
Schindler’s liability, “whether in contract or in tort, or otherwise” would be limited to the
annual price of the contract. Further, like the parties in Purcell Tire, the parties are
sophisticated businesses. Despite these similarities, plaintiffs failed to address the
Purcell Tire case in their briefing. The Court finds this deficiency troubling.
Plaintiffs contend the contract is ambiguous because the contract does not contain
an “annual price.” According to plaintiffs, annual price is not defined by the contract.
Further, plaintiffs argue that the contract does not have an annual price because the
contract had a four-year term and allowed for variable payment schedules and price
adjustments. “Ambiguity depends on context. Contract language is not interpreted in a
vacuum, but by reference to the contract as a whole.” Id. at 510 (internal quotations and
citations omitted). “Language that is ambiguous to an unsophisticated party may not be
ambiguous to a sophisticated commercial entity.” Id. Here, the contract’s price
provisions provide, in relevant part, as follows:
In consideration of the services provided hereunder, you agree to pay us the sum
of $5,535.00 per month, payable in annual installments of $66,420.00, exclusive
of applicable taxes, subject to payment terms and Price Adjustment set forth
below. You agree to pay, as an addition to the price herein, the amount of any
current or future sales, use, excise or other tax applicable to the services provided
hereunder. You may alternatively choose to make semi-annual payments of
$33,542.10 (a 1% premium for a price of $5,590.35 per month; initial here if semiannual ___), or quarterly payments of $17,103.15 (a 3% premium for a price of
$5,701.05 per month; initial here if quarterly DS). This offer is firm for 90 days
from the date of our proposal. Acceptance beyond that dale may require updates of
the Price and Price Adjustment Provisions.
The contract Price and labor rates for extra work will be adjusted annually, as of
the date of the local labor rate adjustment, and will be increased or decreased on
the basis of changes to the local straight time hourly rate for mechanics. If there is
a delay in determining a new labor rate, or an interim determination of a new labor
rate, we will notify you and adjust the price at the time of such determination, and
we will retroactively bill or issue credit, as appropriate, for the period of such
delay. We also reserve the right to adjust the contract price quarterly/annually on
the basis of changes in other expenses such as fuel, waste disposal, government
regulations or administrative costs.
SPECIAL TERMS AND PRICING
A minimum of 20 man hours per month will be spent maintaining the equipment.
It is understood that standby will be provided for 4 events per year. – Assumes
total of 32 hours on site, can be broken up! DS DB
The Price Adjustment as described will be capped at 3% per year. The price
adjustment will take place every July. The first possible price adjustment taking
place in 2010.
While plaintiffs are correct that annual price is not defined in the contract by a
stated definition, annual price is defined within the context of the contract as a whole.
Because the meaning of annual price can be clearly ascertained from the contract, it is not
ambiguous. Additionally, the four-year term of the contract, the price adjustments, and
the flexibility in payment arrangements (annual, semi-annual, or quarterly) do not create
an ambiguity. Accordingly, the Court finds that the contract is not ambiguous.
For their second attempt to avoid the liability limitation, plaintiffs argue it is
unenforceable as unconscionable because it fixes damages that are unreasonably low and
disproportionately harsh. “Where both parties are sophisticated businesses and damages
are economic, courts rarely find that liability limitations are unconscionable.” Purcell, 59
S.W.3d at 510. In Purcell Tire, the Supreme Court of Missouri explicitly rejected an
argument similar to that proffered by plaintiffs here. 59 S.W.3d at 510. There, the
plaintiff tire dealer argued the contract’s limitation of liability provision, which limited
the defendant’s liability to the price of the contract ($1,250) was unconscionable because
it fixed damages that were disproportionately small in relation to the actual damages it
allegedly sustained ($372,458). The same result is warranted here. Like the plaintiff in
Purcell Tire, plaintiffs are sophisticated businesses who “have the freedom of contract –
even to make a bad bargain, or to relinquish fundamental rights.” Id. at 508. This Court
finds that the contractual liability limitation is not unconscionable.
Finally, plaintiffs contend Schindler cannot contractually release itself from future
liability for gross negligence. Plaintiffs argue that whether Schindler’s actions or
inactions are mere negligence or gross negligence is a question of fact for the jury to
determine. This argument ignores the fact that plaintiffs’ claims against Schindler sound
in contract. Indeed, the only duties plaintiffs allege Schindler to have breached are those
arising from the parties’ contract. This Court previously dismissed with prejudice
plaintiffs’ negligence claims against Schindler. At this time, there is not a negligence
claim pending against Schindler and, accordingly, there is no determination to be made
regarding negligence. The issue of whether Schindler can contractually release itself
from its own gross negligence is not before this Court.
This Court finds that the liability limitation is clear, unambiguous, unmistakable,
and conspicuous and, as a result, does not violate public policy. Schindler’s motion to
dismiss plaintiffs’ first amended complaint will be granted to the extent plaintiffs seek
damages that are expressly barred by the parties’ contract. The contractual liability
limitation in the parties’ contract limits Schindler’s liability for damages to the amount of
the annual price of the contract. Additionally, the contract provides for reasonable
attorneys’ fees and costs to the prevailing party in the event of litigation. Any other
damages claimed by plaintiffs, including damages for loss of use, loss of goodwill, and
damages incurred as a result of claims by injured third-parties, will be dismissed.
Count IV - Implied Indemnity
Schindler argues that Count IV should be dismissed because plaintiffs and
Schindler do not share identical, co-extensive duties with respect to third-party patrons of
the Scottrade Center and, as a result, the doctrine of implied indemnity is inapplicable.
“Indemnity is a right which inures to a person who has discharged a duty which is owed
by him, but which, as between himself and another, should have been discharged by the
other, so that if the second does not reimburse the first, the second is unjustly enriched to
the extent that his liability has been discharged.” State ex rel. Manchester Ins. & Indem.
Co. v. Moss, 522 S.W.2d 772, 774 (Mo. banc 1975). Under Missouri law, the doctrine of
indemnity applies only where the indemnitee and indemnitor have co-extensive, identical
duties. Id.; Navigators Management Co., Inc. v. St. Paul Fire and Marine Ins. Co.,
4:06CV1722 SNLJ, 2011 WL 6258488, at *1 (E.D. Mo. Dec. 15, 2011).
While Count IV is titled “implied indemnity,” it references the contracts between
plaintiffs and defendants, a tendered and rejected demand for indemnification, and the
Missouri statute on contribution among joint tort-feasors (section 537.060 RSMo). From
the pleading, it is unclear as to whether plaintiffs are attempting to plead implied
indemnity, contractual indemnity, or contribution pursuant to Missouri statute.
Indemnity and contribution are separate and distinct concepts. SSM Health Care St.
Louis v. Radiologic Imaging Consultants, LLP, 128 S.W.3d 534, 539 (Mo. App. E.D.
2003). That said, in plaintiffs’ briefing, they argue that they have an implied indemnity
claim against Schindler because (1) Schindler would be unjustly enriched if it does not
reimburse Scottrade for the duties that Scottrade discharged in its settlements with the
injured third-party patrons and (2) that between plaintiffs and Schindler “identical
obligations either explicitly exist, or should be imposed as a matter of law.” Plaintiffs’
arguments are not supported by their vague and confusing pleading in Count IV.
Plaintiffs have not pled that Schindler would be unjustly enriched or that plaintiffs and
Schindler have identical, co-extensive duties. This Court declines to review points set
out in briefing not in the pleading itself. As to defendant Schindler, Count IV will be
dismissed without prejudice.
Defendant KONE’s Motion to Dismiss
Economic Loss Doctrine
KONE argues that plaintiffs’ tort claims for damages are expressly barred by
Missouri’s economic loss doctrine because plaintiffs suffered only economic losses.
“Missouri’s economic loss doctrine bars recovery under strict liability or negligence
theories if the only damage is to the product sold.” OneBeacon Ins. Co. v. Deere & Co.,
778 F.Supp.2d 1005 (8th Cir. 2011) (citing Sharp Bros. Contracting Co. v. American
Hoist & Derrick Co., 703 S.W.2d 901, 903 (Mo. banc 1986); Clevenger & Wright Co. v.
A.O. Smith Harvestore Prod. Inc., 625 S.W.2d 906, 909 (Mo. App. W.D. 1981)). “The
remedy available in such cases is limited to contract or warranty claims.” Id. “When a
product injures only itself the reasons for imposing a tort duty are weak and those for
leaving the party to its contractual remedies are strong.” Id. (quoting East River S.S.
Corp. v. Transamerica Delaval, Inc., 476 U.S. 858, 871-72 (1986)).
The economic loss doctrine was set out by the Supreme Court of Missouri in
Crowder v. Vandendeale, where, in an action by a subsequent home purchaser against the
home builder to recover damages for latent structural defects, the court held that the
purchaser’s suit under an implied warranty theory of recovery was an adequate remedy.
564 S.W.2d 879, 884 (Mo. banc 1978). The court accordingly barred the plaintiff’s
attempt to recover on his second theory of recovery based on the builder’s failure to use
ordinary care. Id. The Supreme Court of Missouri thus “indicated that liability in tort is
only appropriate in cases in which recovery is sought for ‘personal injury, including death
or property damage . . . .’” Self v. Equilon Enterprises, L.L.C., 2005 WL 3763533, at *8
(E.D. Mo. March 30, 2005) (quoting Crowder, 564 S.W.2d at 881); Sharp Bros.
Contracting Co. v. American Hoist & Derrick Co., 703 S.W.2d 901, 903 (Mo. banc 1986)
(holding that a plaintiff cannot recover on a strict liability theory in tort where the only
damage is the product sold, no personal damage).
Plaintiffs argue that the doctrine is not applicable because there was personal
injury and the escalator damaged itself in a violent occurrence. In support of their
arguments, plaintiffs allege facts in their response that were not pled in the first amended
petition. Again, this Court will not review points set out in briefing not in the pleading
itself. There is, however, sufficient pleading of personal injury in the first amended
petition to consider that argument.
Plaintiffs’ first amended petition alleges personal injury to patrons of Scottrade as
a result of the escalator malfunction. Defendant KONE characterizes this loss as the
“economic and commercial loss for the payments and settlement of claims made by its
patrons.” It is indisputable that the escalator did not merely damage itself – there was
personal injury to patrons of Scottrade. This Court finds that the tort claims are not
barred by the economic loss doctrine and KONE’s motion to dismiss on this basis will be
Statute of Repose
KONE maintains that the plaintiffs’ claims are barred by Missouri’s statute of
repose as set forth in section 516.097 RSMo and its ten year statute of limitations. To the
extent plaintiffs plead claims alleging strict liability for defective product and negligent
design and manufacture with regard to the replacement brake board installed
approximately two months before the escalator malfunction, the statute of repose is not a
bar to such claims. The issue of the bar of the statute of repose would be limited to the
escalator as originally installed in 1994.
The statute of repose is an affirmative defense. See Travelers Indemnity Co. of
America v. The Williams-Carver Co., 326 S.W.3d 45, 47 (Mo. App. W.D. 2010). Section
516.097 is “designed to protect architects, engineers, and builders against tort liability for
defective improvements to real property.” Lay v. P & G Health Care, Inc., 37 S.W.3d
310, 317 (Mo. App. W.D. 2000). It provides, in relevant part:
1. Any action to recover damages for economic loss, personal injury, property
damage or wrongful death arising out of a defective or unsafe condition of any
improvement to real property, including any action for contribution or indemnity
for damages sustained on account of the defect or unsafe condition, shall be
commenced within ten years of the date on which such improvement is completed.
2. This section shall only apply to actions against any person whose sole
connection with the improvement is performing or furnishing, in whole or in part,
the design, planning or construction, including architectural, engineering or
construction services, of the improvement.
Section 516.097 RSMo.
“Missouri applies an “activity analysis’ to determine whether a defendant’s
activity is solely connected with the design, planning and construction of the
improvement.” Travelers Indemnity Co. of America, 326 S.W.3d at 48-49 (citing Blaske
v. Smith & Entzeroth, Inc., 821 S.W.2d 822, 837 (Mo. banc 1991)). “[I]f a defendant has
any connection that gives rise to liability with respect to an improvement other than by
design, planning, or construction, section 516.097 is not available as an affirmative
defense.” Id. at 49 (quoting Lay, 37 S.W.3d at 321). “The defendant’s sole connection to
the defective or unsafe improvement to real property must be as an architect, engineer, or
builder. Id. “The statute does not protect a manufacturer whose standard product is
fabricated at the manufacturer’s factory, made available to the general public, and then
furnished for the inclusion in the improvement by the persons constructing the
improvement under circumstances where the manufacturer has no substantial on-site
construction activity.” Id. (internal quotations and citations omitted). “To invoke the
affirmative defense, a manufacturer must have substantial participation at the
construction site in significant activities in installing or incorporating the product into the
real property.” Id.
In their briefing, the parties argue disputed facts and the merits as to the
application of the statute of repose. There are a number of issues and factors to be
considered with regard to the determination of the applicability of the statute of repose.
Because it is an affirmative defense, defendant KONE bears the burden of proof. Here,
the defense requires a factual inquiry and it is not amenable to resolution on a motion to
dismiss plaintiffs’ first amended complaint. See Blankenship v. Chamberlain, 695
F.Supp.2d 966, 971 (E.D. Mo. 2010) (“[g]enerally speaking, an affirmative defense based
on a statute of limitations that requires a factual inquiry is not amenable to resolution on a
motion to dismiss). Accordingly, the motion to dismiss on this basis will be denied.
KONE argues that Count IV should be dismissed because plaintiffs and KONE do
not share identical, co-extensive duties with respect to third-party patrons of the Scottrade
Center and, as a result, the doctrine of implied indemnity is inapplicable. KONE’s
argument is essentially the same as Schindler’s argument on this claim by plaintiffs. As
discussed above with regard to defendant Schindler’s motion, plaintiffs have similarly not
pled that defendant KONE would be unjustly enriched or that plaintiffs and KONE have
identical, co-extensive duties. As to defendant KONE, Count IV will be dismissed
KONE maintains that Count V must be dismissed because there is no independent
cause of action for punitive damages under Missouri law. KONE is correct in that
“[t]here is no independent cause of action for punitive damages under either federal or
Missouri law . . . .” Jackson v. Wiersema Charter Service, Inc., 4:08cv27 JCH, 2009 WL
1310064, at *3 (E.D. Mo. May 11, 2009). Under Missouri law, “[a] punitive damage
claim is not a separate cause of action, it must be brought in conjunction with a claim for
actual damages.” Misischia v. St. John’s Mercy Med. Ctr., 30 S.W.3d 848, 866 (Mo.
App. E.D. 2000).
In their response, plaintiffs state they did not intend to bring a separate punitive
damages claim but instead, the punitive damages claim is brought in conjunction with
their claims for actual damages within their strict liability and negligent design and
manufacture claims. Plaintiffs’ stated intention and plaintiffs’ pleading are not
consistent. Count V will be dismissed. The dismissal is without prejudice to allow
plaintiffs an opportunity to seek to amend their complaint to bring punitive damages
claims in conjunction with their remaining claims to the extent punitive damages are
proper under such claims.
For the reasons set forth above, Schindler’s motion is granted and KONE’s motion
is granted in part and denied in part.
IT IS HEREBY ORDERED that defendant Schindler Elevator Corporation’s
motion to dismiss (ECF #23) is GRANTED. Plaintiffs’ claims for damages are limited
to the annual price of the parties’ contract and reasonable attorneys’ fees and costs. All
other damages that are expressly barred by the parties’ contract, including damages for
loss of use, loss of goodwill, and damages incurred as a result of claims by injured thirdparties, are DISMISSED with prejudice. Finally, Count IV is DISMISSED without
IT IS FURTHER ORDERED that defendant KONE, Inc.’s motion to dismiss
(ECF #33) is GRANTED in part and DENIED in part. The motion is GRANTED as
to Counts IV and V, which are DISMISSED without prejudice. The motion is
DENIED in all other respects.
Dated this 10th day of April, 2014.
STEPHEN N. LIMBAUGH, JR.
UNITED STATES DISTRICT JUDGE
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