Nevada Power Company v. Trench France SAS et al

Filing 60

ORDER Granting Defendant Siemens AG Osterreich's 44 Motion to Dismiss. Plaintiff Nevada Power Company's 1 Complaint is Dismissed without prejudice. The clerk shall enter judgment accordingly and close the case. Signed by Judge James C. Mahan on 6/1/2016. (Copies have been distributed pursuant to the NEF - SLD)

1
2
3
4

UNITED STATES DISTRICT COURT

5

DISTRICT OF NEVADA

6

***

7

NEVADA POWER COMPANY,

8

Plaintiff(s),

9
10
11

Case No. 2:15-CV-264 JCM (NJK)
ORDER

v.
TRENCH FRANCE SAS, and SIEMENS
AG OSTERREICH,
Defendant(s).

12
13

Presently before the court is defendant Siemens AG Osterreich’s (“Siemens”) motion to

14
15
16
17
18
19
20
21
22
23
24
25

dismiss. (ECF No. # 44).1 Plaintiff Nevada Power Company (“Nevada Power”) filed a response
(ECF No. # 48), and Siemens filed a reply. (ECF No. # 52).
I.

Background
Nevada Power is a Nevada corporation. (ECF No. 1, ¶ 3). Elin was an Austrian corporation

until it was acquired by Siemens over ten years ago. (Id., ¶¶ 5,6). Siemens is an Austrian
corporation with a principal place of business located in Elin’s former facility. (Id., ¶ 6). Siemens
is a successor in interest to Elin. (Id., ¶ 7).
In 1998, Nevada Power contracted with Elin to purchase two specialized high-voltage
transformers. (Id. ¶ 10). Elin also installed high-voltage bushings into transformers in Nevada
Power’s Crystal Substation, located north of Las Vegas, NV. (Id., ¶¶ 11,12). Nevada Power and
Elin agreed to a five-year warranty on manufacturing defects to the transformers’ material and

26
27
28

1

hearing.
James C. Mahan
U.S. District Judge

Defendant requests a hearing on this matter. At this time, the court declines to hold a

1

workmanship. (Exh. 1). The warranty lasted until approximately 2003. Id. The warranty agreement

2

included a provision capping liability at $13,794,884. (ECF No. 48).

3

In May of 2011, and on September 14, 2011, bushings at Nevada Power’s substation failed,

4

causing fire and damage. (ECF No. 1, ¶¶ 16,17). In early 2012, Nevada Power removed another

5

bushing after it failed testing. (Id., ¶ 18). Representatives from the parties attended an inspection

6

in California. (Id., ¶ 20). The inspection revealed that the bushings were manufactured defectively.

7

Id. Originally, the design called for symmetrical step-wise foil insulation layers within a bushing.

8

(Id., ¶ 21). However, the bushing’s asymmetrical insulation did not conform to the symmetrical

9

design. (Id., ¶ 22).

10

Nevada Power asserts the bushings’ failure results from the manufacturing defect. (Id., ¶

11

25). It quantifies damages at $9,063,908.00 under NRS 704.805. (Id., ¶ 29). Nevada Power’s

12

complaint alleges strict product liability, a claim arising in tort, as the sole cause of action against

13

Siemens. (Id., ¶ 33).

14

II.

Legal Standard

15

A court may dismiss a plaintiff's complaint for “failure to state a claim upon which relief

16

can be granted.” Fed. R. Civ. P. 12(b)(6). A properly pled complaint must provide “[a] short and

17

plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2);

18

Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). While Rule 8 does not require detailed

19

factual allegations, it demands “more than labels and conclusions” or a “formulaic recitation of the

20

elements of a cause of action.” Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009) (citation omitted).

21

“Factual allegations must be enough to rise above the speculative level.” Twombly, 550 U.S. at

22

555. Thus, to survive a motion to dismiss, a complaint must contain sufficient factual matter to

23

“state a claim to relief that is plausible on its face.” Iqbal, 129 S.Ct. at 1949 (citation omitted).

24

In Iqbal, the Supreme Court clarified the two-step approach district courts are to apply

25

when considering motions to dismiss. First, the court must accept as true all well-pled factual

26

allegations in the complaint; however, legal conclusions are not entitled to the assumption of truth.

27

Id. at 1950. Mere recitals of the elements of a cause of action, supported only by conclusory

28

statements, do not suffice. Id. at 1949. Second, the court must consider whether the factual

James C. Mahan
U.S. District Judge

-2-

1

allegations in the complaint allege a plausible claim for relief. Id. at 1950. A claim is facially

2

plausible when the plaintiff's complaint alleges facts that allow the court to draw a reasonable

3

inference that the defendant is liable for the alleged misconduct. Id. at 1949.

4

Where the complaint does not “permit the court to infer more than the mere possibility of

5

misconduct, the complaint has alleged, but it has not shown, that the pleader is entitled to relief.”

6

Id. (internal quotations and alterations omitted). When the allegations in a complaint have not

7

crossed the line from conceivable to plausible, plaintiff's claim must be dismissed. Twombly, 550

8

U.S. at 570.

9

The Ninth Circuit addressed post-Iqbal pleading standards in Starr v. Baca, 652 F.3d 1202,

10

1216 (9th Cir. 2011). The Starr court stated, “[f]irst, to be entitled to the presumption of truth,

11

allegations in a complaint or counterclaim may not simply recite the elements of a cause of action,

12

but must contain sufficient allegations of underlying facts to give fair notice and to enable the

13

opposing party to defend itself effectively. Second, the factual allegations that are taken as true

14

must plausibly suggest an entitlement to relief, such that it is not unfair to require the opposing

15

party to be subjected to the expense of discovery and continued litigation.” Id.

16

III.

Discussion

17

Nevada Powers fails to state a legally cognizable claim. The economic loss doctrine shields

18

Siemens from liability based on purely economic losses. The court rejects plaintiff’s assertion that

19

NRS 704.805(4) creates an independent cause of action. Even if it does, plaintiff has not pled that

20

Siemens negligently destroyed property used “in the production, distribution or delivery of the

21

service provided by” Nevada Power. NEV. REV. STAT. 704.805(4). Plaintiff also contends that the

22

contract between Nevada Power and Elin creates tort liability. The court reads the provision in

23

question as a cap on liability were a claim to arise, not an attempt to create a private cause of

24

action.

25

A. Economic loss doctrine prevents a claim

26

Plaintiff argues Siemen’s manufacturing defects resulted in “substantial damage at the

27

substation.” (ECF. No. 1). Defendant argues that the damages consist solely of damages to the

28

transformer itself and plaintiff’s claim is thus precluded by the economic loss doctrine. The court

James C. Mahan
U.S. District Judge

-3-

1

agrees with the defendant. Plaintiff’s strict liability claim is precluded by the economic loss

2

doctrine.

3

A tort claim is precluded by the economic loss doctrine when plaintiff seeks to recover

4

“purely economic losses.” Peri & Sons Farm, Inc. v. Jain Irr., Inc., 933 F. Supp. 2d 1279,1283

5

(D. Nev. 2013). Purely economic loss is “the loss of the benefit of the user's bargain… including

6

… the cost of repair and replacement of the defective product … without any claim of personal

7

injury or damage to other property.” Calloway v. City of Reno, 116 Nev. 250, 257 (Nev. SCt. 2000)

8

(citing American Law of Products Liability (3d) § 60:39, at 69 (1991).

9

The complaint and response are vague with respect to what “substantial damages at the

10

substation” resulted from the transformer destruction. Absent further explanation from the

11

plaintiff, it would be “unfair to require the opposing party to be subjected to the expense of

12

discovery and continued litigation” based on plaintiffs vague reference to damages “at the

13

substation.” Starr, 652 F.3d at 1216; (ECF. No. 1, ¶ 16).

14

The complaint alleges that damages happened “at” the substation, not “to” the substation.

15

Id. Plaintiff makes no plain allegation of personal injury or damage to property beyond the

16

transformers themselves. See generally id.; Calloway, 116 Nev. at 257. The seemingly intentional

17

vagueness in the complaint does not give Siemen proper notice of any further damage. Iqbal, 129

18

S.Ct. at 1949. Further, plaintiff’s response fails to identify any damages “at the substation” beyond

19

damage to the transformer itself, indicating to the court that those were the only damages at the

20

substation.

21

Therefore, the court finds the economic loss doctrine precludes Nevada Power’s claim. The

22

complaint is construed to allege damage to the transformers only, not to the substation. Damage to

23

the transformer is governed by contract law, not tort law. Accordingly, no claim exists.

24

...

25

...

26

...

27

...

28

...

James C. Mahan
U.S. District Judge

-4-

1

B) The Contract does not give rise to tort liability.

2

The limitation on liability clause in the sale agreement from Nevada Power does not create

3

a cause of action.2 The limitation of liability, as its name implies, only limits compensation were

4

a tort to arise. It does not and cannot create a cause of action.3

5

On-face, the contract does not create tort liability. Contract interpretation does not go beyond

6

the four-corners of the document if the plain language is facially clear. Southern Trust v. K & B

7

Door Co., 104 Nev. 564, 568 (1998). Here, the language is facially clear. The contract provides

8

that Elin “shall not be liable in contract, in tort … or for any … damages” exceeding roughly

9

thirteen million dollars. Construing the contract to create some cause of action requires improper

10

inferences and would produce absurd results. Century Sur. Co. v. Casino W., Inc., 329 P.3d 614,

11

617 (Nev. 2014).

12

Even assuming arguendo that the parties could negotiate a cause of action into existence, the

13

provision does not express the intent to opt out of the economic loss doctrine. Nevada Power’s suit

14

over a manufacturing defect based on a product sold almost twenty years ago is the exact type of

15

“unlimited economic liability” the economic loss doctrine prevents. Halcrow, Inc. V. Eighth Jud.

16

Ct., 302 P.3d 1148 (S. Ct. Nev. 2013).

17

C) NRS 704.805 does not create a cause of action.

18

NRS 704.805(4) does not create an independent cause of action exempt from the economic

19

loss doctrine. Plaintiff analogizes to causes of action authorized by two other Nevada statutes for

20

which courts found the economic loss doctrine did not apply. However, these statutes are

21

distinguishable.

22

In Olson, the court found that the statute explicitly exempts the cause of action from “any

23

conflicting law otherwise applicable to the claim or cause of action.” Olson v. Richard, 120 Nev.

24
25
This court may consider materials submitted with the complaint if “(1) the complaint
refers to the document; (2) the document is central to the plaintiff's claim; and (3) no party
questions the authenticity of the document.” U.S. v. Corinthian Colleges, 655 F.3d 984, 999 (9th
Cir. 2011). The court takes judicial notice of the contract.
2

26
27
28
James C. Mahan
U.S. District Judge

By definition a tort is “a violation of a duty imposed by law, a wrong independent of
contract.” Benard v. Rockhill Dev. Co., 103 Nev. 132, 135 (1987)
3

-5-

1

240, 244 (S. Ct. Nev. 2004) (quoting NEV. REV. STAT. 40.635(2)). The statute also expressly makes

2

the contractor liable for building houses poorly. Id.

3

In Davis, the court allowed the claim to succeed because NRS 645.252 created an

4

independent legal duty with statutory damages independent to any duties established by contract.4

5

Davis v. Beling, 278 P.3d 501 (S.Ct. Nev. 2012). The statute created a right of action to recover

6

damages from a realtor that breached his or her duty to a client. Id. In both cases, the statute created

7

a cause of action whereby the parties were recovering for breach of a duty independent of economic

8

losses.

9

Unlike those statutes, NRS 704.805(4) does not create a cause of action and cannot

10

reasonably be read as covering products liability cases. If the Nevada legislature intended the

11

statute to apply to product liability, it would have introduced strict liability in the text. Instead, it

12

defines the damages available under common law for negligent and intentional destruction of

13

public utilities’ property. See NEV. REV. STAT. 704.805.

14

Even if it did create an independent cause of action, plaintiff has not sufficiently pled that

15

Siemens conduct falls under the statute. Under NRS 704.805(4), a party is financially liable if they

16

(1) willfully or negligently (2) injure or destroy property (3) used in the production, distribution,

17

or delivery of public utility services. NEV. REV. STAT. 704.805. The statute covers financial costs

18

associated with repairing or replacing destroyed property while it is currently in use.

19

Here, plaintiff does not allege Siemens injured or destroyed property in use. Instead, it

20

argues the property was destroyed as a result of a manufacturing defect occurring before the

21

property went into use. To create liability, a utility company’s property has to be used for energy

22

production when a party willfully or negligently destroys or injures it. Defendant’s alleged conduct

23

occurred before plaintiff asserts the transformers were in use. Moreover, the inclusion of

24

“negligence” or “willfulness” as standards in the statute expressly precludes a standard of strict

25

liability. See Shoshone Coca-Cola Bottling Co. v. Dolinski, 82 Nev. 439, 442 (1966).

26
27
“The economic loss doctrine does not, however, bar the recovery of purely economic
losses when the defendant intentionally breaches a duty that is imposed independently of the
obligations arising from contract.” Davis v. Beling, 278 P.3d 501 (S.Ct. Nev. 2012)
4

28
James C. Mahan
U.S. District Judge

-6-

1

Based on the forgoing, the statute does not create a cause of action against Siemens.

2

Therefore, Nevada Power has failed to state a plausible claim for relief because recovery is

3

precluded under the economic loss doctrine.

4

IV.

Conclusion

5

Accordingly,

6

IT IS HEREBY ORDERED, AJUDGED, AND DECREED that Defendant Siemens AG

7
8
9

Osterreich’s motion to dismiss (ECF No. 44) be, and the same hereby is, GRANTED.
IT IS FURTHER ORDERED that the plaintiff Nevada Power Company’s complaint (ECF
No. 1) be, and the same hereby is, DISMISSED without prejudice.

10

The clerk shall enter judgment accordingly and close the case.

11

DATED June 1, 2016.

12
13

__________________________________________
UNITED STATES DISTRICT JUDGE

14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
James C. Mahan
U.S. District Judge

-7-