Smerdon v. GEICO Casualty Company

Filing 22

MEMORANDUM (Order to follow as separate docket entry) re: 16 MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM (Third Party Complaint) filed by Wal-Mart Stores, Inc. Signed by Honorable Matthew W. Brann on 6/9/2017. (jn)

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
BRENDA G. SMERDON and RENE
L. SPAULDING, her wife,
Plaintiffs,
v.
GEICO CASUALTY COMPANY,
Defendant,
v.
WAL-MART STORES, INC.,
Third Party Defendant.

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No. 4:16-CV-02122
(Judge Brann)

MEMORANDUM OPINION
JUNE 9, 2017
I.

BACKGROUND
While shopping at her local Wal-Mart in Mansfield, Tioga County,

Pennsylvania, Plaintiff Brenda G. Smerdon allegedly observed an unidentified
individual rob the store. 1 Upon witnessing the robbery, Ms. Smerdon, along with
several other patrons, chased the robber outside to the store’s parking lot.2 The

1

Pl.’s Compl., ECF No. 1, Ex. 1, ¶ 4.

2

Id. ¶ 5.

robber then ran into a nearby vehicle, attempting to flee the scene.3 When she
reached the purported getaway car, Ms. Smerdon stretched her arm through the
passenger side window and attempted to grab the keys.4
Unfortunately for Ms. Smerdon, the car sped off, ejected her from the
vehicle, and ran her over.5 The alleged robber was never apprehended, and the
subject vehicle turned out to be stolen.6 Ms. Smerdon contends that, as a result of
this incident, she sustained skull fractures, traumatic brain injury, right knee
injuries, and lower extremity injuries.7
Further, according to Ms. Smerdon she maintained an automobile insurance
policy with Defendant GEICO Casualty Company at the time of the accident,
which included uninsured motorist coverage.8 Nevertheless, GEICO refused to
provide coverage to Ms. Smerdon for her uninsured motorist claim by virtue of her
alleged “assumption of the risk” under the policy.9

3

Id. ¶ 4.

4

Id. ¶ 6.

5

Id.

6

Id. ¶¶ 7–8.

7

Id. ¶ 9.

8

Id. ¶ 12.

9

See id. ¶ 14; Def.’s Answer, ECF No. 4 ¶ 14.

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On October 13, 2016, Ms. Smerdon initiated breach of contract and bad faith
claims against GEICO in the Court of Common Pleas of Tioga County.10 Just over
one week later, GEICO removed the case to this Court.11 Thereafter, on November
15, 2016, GEICO filed a Third Party Complaint against Wal-Mart.12 On February
28, 2017, Wal-Mart filed a motion to dismiss the Third Party Complaint.13 Because
the Third Party Complaint fails to plead sufficient factual matter to state a plausible
claim for relief, Wal-Mart’s motion to dismiss is granted.
II.

LAW
Under Federal Rule of Civil Procedure 12(b)(6), a defendant may file a

motion to dismiss for “failure to state a claim upon which relief can be granted.”
Such a motion “tests the legal sufficiency of a pleading,” and “streamlines
litigation by dispensing with needless discovery and factfinding.”14 “Rule 12(b)(6)
authorizes a court to dismiss a claim on the basis of a dispositive issue of law.”15

10

ECF No. 1, Ex. 1.

11

Notice of Removal, ECF No. 1.

12

ECF No. 7.

13

ECF No. 16.

14

In re Hydrogen Peroxide Litigation, 552 F.3d 305, 316 n.15 (3d Cir. 2008) (Scirica, C.J.)
(quoting Szabo v. Bridgeport Machines, Inc., 249 F.3d 672, 675 (7th Cir. 2001) (Easterbrook,
J.)); Neitzke v. Williams, 490 U.S. 319, 326–27 (1989).

15

Neitzke, 490 U.S. at 326 (citing Hishon v. King & Spalding, 467 U. S. 69, 73 (1984)).

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This is true of any claim, “without regard to whether it is based on an outlandish
legal theory or on a close but ultimately unavailing one.”16
Beginning in 2007, the Supreme Court of the United States initiated what
some scholars have termed the Roberts Court’s “civil procedure revival” by
significantly tightening the standard that district courts must apply to 12(b)(6)
motions.17 In two landmark decisions, Bell Atlantic Corporation v. Twombly and
Ashcroft v. Iqbal the Roberts Court “changed . . . the pleading landscape” by
“signal[ing] to lower-court judges that the stricter approach some had been taking
was appropriate under the Federal Rules.”18 More specifically, the Court in these
two decisions “retired” the lenient “no-set-of-facts test” set forth in Conley v.
Gibson and replaced it with a more exacting “plausibility” standard.19
Accordingly, after Twombly and Iqbal, “[t]o survive a motion to dismiss, a
complaint must contain sufficient factual matter, accepted as true, to ‘state a claim
to relief that is plausible on its face.’”20 “A claim has facial plausibility when the
plaintiff pleads factual content that allows the court to draw the reasonable

16

Neitzke, 490 U.S. at 327.

17

See Howard M. Wasserman, The Roberts Court and the Civil Procedure Revival, 31 Rev.
Litig. 313 (2012).

18

550 U.S. 544 (2007); 556 U.S. 662, 678 (2009); Wasserman, supra, at 319–20.

19

Iqbal, 556 U.S. at 670 (citing Conley v. Gibson, 355 U.S. 41 (1957)) (“[a]cknowledging that
Twombly retired the Conley no-set-of-facts test”).

20

Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 570).

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inference that the defendant is liable for the misconduct alleged.”21 “Although the
plausibility standard does not impose a probability requirement, it does require a
pleading to show more than a sheer possibility that a defendant has acted
unlawfully.”22 Moreover, “[a]sking for plausible grounds . . . calls for enough facts
to raise a reasonable expectation that discovery will reveal evidence of
[wrongdoing].”23
The plausibility determination is “a context-specific task that requires the
reviewing court to draw on its judicial experience and common sense.”24 No matter
the context, however, “[w]here a complaint pleads facts that are ‘merely consistent
with’ a defendant’s liability, it ‘stops short of the line between possibility and
plausibility of entitlement to relief.’”25
When disposing of a motion to dismiss, a court must “accept as true all
factual allegations in the complaint and draw all inferences from the facts alleged
in the light most favorable to [the plaintiff].”26 However, “the tenet that a court
must accept as true all of the allegations contained in the complaint is inapplicable

21

Iqbal, 556 U.S. at 678.

22

Connelly v. Lane Const. Corp., 809 F.3d 780, 786 (3d Cir. 2016) (Jordan, J.) (internal
quotations and citations omitted).

23

Twombly, 550 U.S. at 556.

24

Iqbal, 556 U.S. at 679.

25

Id. at 678 (quoting Twombly, 550 U.S. at 557 (internal quotations omitted)).

26

Phillips v. Cnty. of Allegheny, 515 F.3d 224, 228 (3d Cir. 2008) (Nygaard, J.).

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to legal conclusions.”27 “After Iqbal, it is clear that conclusory or ‘bare-bones’
allegations will no longer survive a motion to dismiss.”28 “Threadbare recitals of
the elements of a cause of action, supported by mere conclusory statements, do not
suffice.”29
As a matter of procedure, the United States Court of Appeals for the Third
Circuit has instructed that:
Under the pleading regime established by Twombly and Iqbal, a court
reviewing the sufficiency of a complaint must take three steps. First, it
must tak[e] note of the elements [the] plaintiff must plead to state a
claim. Second, it should identify allegations that, because they are no
more than conclusions, are not entitled to the assumption of truth.
Finally, [w]hen there are well-pleaded factual allegations, [the] court
should assume their veracity and then determine whether they
plausibly give rise to an entitlement to relief.30
III.

ANALYSIS
“Where . . . substantive law recognizes a right of contribution and/or

indemnity, impleader under Rule 14 is the proper procedure by which to assert
such claims.”31 Federal Rule of Civil Procedure 14 (entitled “Third-Party
Practice”) provides at subpart (a)(1) that “[a] defending party may, as third-party
plaintiff, serve a summons and complaint on a nonparty who is or may be liable to

27

Iqbal, 556 U.S. at 678 (internal citations omitted).

28

Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009) (Nygaard, J.).

29

Iqbal, 556 U.S. at 678.

30

Connelly, 809 F.3d at 787 (internal quotations and citations omitted).

31

In re One Meridian Plaza Fire Litig., 820 F. Supp. 1492, 1496 (E.D. Pa. 1993).

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it for all or part of the claim against it.” “Third-party practice, also known as
impleader, is generally permitted when the third party’s liability is dependent upon
the outcome of the main claim or when the third party is potentially secondarily
liable to the defendant.”32 Neither of those prerequisites is satisfied here, as
GEICO’s liability in contract is wholly independent of Wal-Mart’s alleged
premises liability in tort.
This link between the third-party and underlying claims is crucial, given that
“Rule 14 creates no substantive rights. Unless there is some substantive basis for
the third-party plaintiff’s claim he cannot utilize the procedure of Rule 14.”33
Impleader, therefore, “is not proper when the third-party plaintiff alleges only that
the third-party defendant is solely liable to the plaintiff.”34
“A defendant may not use Rule 14 to implead a third-party defendant who
may have liability to the plaintiff instead of the defendant or in addition to the
defendant. Rather, a defendant may use Rule 14 to implead a third-party defendant
only if that third party will be liable to the defendant if the defendant is found
liable to the plaintiff.”35 “In other words, a third party claim is not appropriate

32

Blais Const. Co. v. Hanover Square Assocs.-I, 733 F. Supp. 149, 152 (N.D.N.Y. 1990)
(internal quotation marks omitted).

33

Robbins v. Yamaha Motor Corp., U.S.A., 98 F.R.D. 36, 37 (M.D. Pa. 1983).

34

Pitcavage v. Mastercraft Boat Co., 632 F. Supp. 842, 845 (M.D. Pa. 1985).

35

United States v. Bailey, 516 F. Supp. 2d 998, 1020 (D. Minn. 2007), aff’d, 571 F.3d 791 (8th
Cir. 2009), and aff’d, 571 F.3d 791 (8th Cir. 2009).

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where the defendant and putative third party plaintiff says, in effect, ‘It was him,
not me.’”36
“Impleader under Rule 14 has quite consistently been held to be within the
sound discretion of the court.”37 Thus, courts are “afforded broad discretion to
dismiss a third-party complaint filed under Rule 14(a).”38
GEICO’s Third Party Complaint contains two substantive claims against
Wal-Mart. The first is that Wal-Mart is solely liable for Ms. Smerdon’s damages
based on negligence in failing to provide adequate security, to properly train its
security staff, and to warn its patrons accordingly.39 In its responsive briefing,
GEICO concedes that impleader of this first claim is procedurally invalid.40
Second, GEICO claims that, if Plaintiffs are entitled to recover on their
underlying Complaint, Wal-Mart must also be liable to GEICO for contribution

36

Watergate Landmark Condo. Unit Owners’ Ass’n v. Wiss, Janey, Elstner Assocs., Inc., 117
F.R.D. 576, 578 (E.D. Va. 1987).

37

Nat’l Fire Ins. Co. of Hartford v. Daniel J. Keating Co., 35 F.R.D. 137, 140 (W.D. Pa. 1964).

38

Allstate Ins. Co. v. Structures Design/Build, LLC, 2016 WL 1071040, at *7 (W.D. Va. Mar.
17, 2016).

39

Def.’s Third Party Compl., ECF No. 7, ¶ 10.

40

ECF No. 20 at 2 (“Initially, GEICO concedes that Wal-Mart cannot be solely liable for the
plaintiff and agrees that those portions of the Third Party Complaint alleging sole liability
against Wal-Mart should be dismissed with prejudice.”).

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and/or indemnification.41 GEICO concedes that this conclusion applies only to
Plaintiffs’ breach of contract claim and not their bad faith allegations.42
Accordingly, the narrow question that this motion presents is whether
GEICO may properly implead Wal-Mart on the theory that Wal-Mart could be
liable to GEICO for contribution and/or indemnification on Plaintiffs’ underlying
breach of contract claim. The law compels the conclusion that Wal-Mart is not
properly impleaded under that theory.
A federal court sitting in diversity must apply state substantive law.43 “In
Pennsylvania, indemnification is limited to those situations in which defendants’
liability is secondary or when an indemnification contract exists.”44 Consequently,
where “no such contract exists” and in cases that do not involve secondary
liability, “the court proceeds with the analysis as if [the third-party plaintiff] seeks
contribution from the third-party defendants.”45 Because GEICO had not

41

Third Party Compl. ¶ 11.

42

ECF No. 20 at 5 (“Of course, GEICO is not suggesting that Wal-Mart would be liable with
GEICO for contribution or indemnification on any bad faith verdict as this would arise out of
a separate and independent tort claim.”).

43

See Chamberlain v. Giampapa, 210 F.3d 154, 158 (3d Cir. 2000) (citing Erie R.R. v.
Tompkins, 304 U.S. 64 (1938)).

44

Pitcavage, 632 F. Supp. at 846 & n.2. (“Indemnification cannot be obtained in the absence of
an indemnification contract or in the absence of active/passive liability.”) See also Burke v.
Koch Indus., 744 F. Supp. 677, 680 (E.D. Pa. 1990) (“[I]ndemnification contracts are not
favored by the law, and thus that they should be construed strictly, that they must establish
indemnification within the four corners of the text, and that they must relate the intention of
the parties with the utmost particularity.”).

45

Pitcavage, 632 F. Supp. at 846, n.1.

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contracted with Wal-Mart for indemnification and because no facts suggesting
secondary liability for the underlying breach of contract have been alleged,
impleader on that ground is inappropriate.
That leaves impleader by way of a claim for contribution. Although this is
perhaps GEICO’s strongest avenue in theory, it nevertheless is also unavailing.
“Contribution is not a recovery for the tort, but rather it is the enforcement of an
equitable duty to share liability for the wrong done by both.”46 Contribution in
Pennsylvania is governed by the Pennsylvania Uniform Contribution Among
Tortfeasors Act.47 Under that Act, contribution is only available between (or
among) “joint tortfeasors.”48 The Act defines “joint tortfeasors” as “two or more
persons jointly or severally liable in tort for the same injury to persons or
property.”49 Thus, courts have recognized that “contribution is not available for
breach of contract claims,” like that upon which GEICO relies here.50
Importantly, GEICO’s proposed “arising out of the same incident” test for
joint tortfeasors in contribution cases—in addition to ignoring tort-contract
distinction—also fails to distinguish proper defendants from those who are too

46

EQT Prod. Co. v. Terra Servs., LLC, 179 F. Supp. 3d 486, 493 (W.D. Pa. 2016) (Fischer, J.)
(citing Swartz v. Sunderland, 403 Pa. 222, 169 A.2d 289, 290 (1961)).

47

42 Pa. C.S. §§ 8322–8327.

48

42 Pa. C.S. § 8324(a).

49

42 Pa. C.S. § 8322 (emphasis added).

50

EQT Prod. Co., 179 F. Supp 3d at 493.

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remote to incur liability.51 For instance, if Wal-Mart could plausibly face a
contribution claim derived solely from an insurance coverage dispute, there seems
to be no principled reason why GEICO could not also implead the company that
manufactured the store’s cash registers, anti-theft devices, or surveillance cameras,
or even the automaker who designed the getaway car’s keys, windows, or ignition.
Because contribution likely would not lawfully lie as to any of those parties,
GEICO’s “arising out of the same incident” test must be inherently flawed. As
counsel for Wal-Mart suggests, this fault likely stems from the fact that the
“wrongdoing” alleged against GEICO is the subsequent contractual breach of its
policy with Ms. Smerdon, whereas the “wrongdoing” alleged against Wal-Mart
sounds in tort and is limited to the circumstances of the original accident itself.52
Neither do concerns for judicial economy militate in favor of impleader. To
the contrary, any suggestion that overlapping issues transcend the two complaints
appears more illusory than GEICO lets on. For instance, although Ms. Smerdon’s
claims against GEICO may require this Court to address contract principles like
“assumption of the risk” under the policy’s terms, any negligence action against
Wal-Mart might address “assumption of the risk” and contributory or comparative
negligence—as those terms have been interpreted in the applicable tort law.

51

See ECF No. 20 at 4.

52

See ECF No. 21 at 4.

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Last, I will consider the futility of amendment. Federal Rule of Civil
Procedure 15 sets forth the mechanisms for amending a pleading prior to trial.
Section 15(a)(1) applies to amendments as a matter of course. Amendment as a
matter of course is inapplicable here, because GEICO elected not to make such an
amendment within the two time periods provided for in that section. Section
15(a)(2), entitled “Other Amendments,” explains that “[i]n all other cases, a party
may amend its pleading only with the opposing party’s written consent or the
court’s leave. The court should freely give leave when justice so requires.”
The Third Circuit has “previously discussed when a court may deny leave to
amend under Rule 15(a)(2).”53 In Shane v. Faver, for example, then Circuit Judge
Samuel A. Alito, Jr. stated that “[a]mong the grounds that could justify a denial of
leave to amend are undue delay, bad faith, dilatory motive, prejudice, and
futility.”54 “‘Futility’ means that the complaint, as amended, would fail to state a
claim upon which relief could be granted.”55 “In assessing futility, the District
Court applies the same standard of legal sufficiency as applies under Rule
12(b)(6).”56

53

Holst v. Oxman, 290 F. App’x 508, 510 (3d Cir. 2008).

54

213 F.3d 113, 115 (3d Cir. 2000) (quoting In re Burlington Coat Factory Sec. Litig., 114
F.3d 1410, 1434 (3d Cir.1997) (Alito, J.).

55

Shane, 213 F.3d at 115.

56

Id.

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“Moreover, substantial or undue prejudice to the non-moving party is a
sufficient ground for denial of leave to amend.”57 “The issue of prejudice requires
that we focus on the hardship to the defendants if the amendment were
permitted.”58 “Specifically, we have considered whether allowing an amendment
would result in additional discovery, cost, and preparation to defend against new
facts or new theories.”59
“The decision to grant or deny leave to amend a complaint is committed to
the sound discretion of the district court.”60 “Factors the trial court may
appropriately consider in denying a motion to amend include undue delay, undue
prejudice to the opposing party, and futility of amendment.”61 For instance, “if the
proposed change clearly is frivolous or advances a claim or defense that is legally
insufficient on its face, the court may deny leave to amend.”62
With that background in mind, I have considered the following factors: As
previously noted, GEICO did not elect to amend its Third Party Complaint as a

57

Cureton v. Nat’l Collegiate Athletic Ass’n, 252 F.3d 267, 273 (3d Cir. 2001).

58

Id.

59

Id.

60

Coventry v. U.S. Steel Corp., 856 F.2d 514, 518 (3d Cir. 1988).

61

Averbach v. Rival Mfg. Co., 879 F.2d 1196, 1203 (3d Cir. 1989) (quoting Foman, 371 U.S. at
182).

62

Ross v. Jolly, 151 F.R.D. 562, 565 (E.D. Pa. 1993) (citing 6 Wright, Miller, & Kane, Federal
Practice & Procedure: Civil 2d § 1487). See also Vosgerichian v. Commodore Int’l Ltd.,
Civil Action No. 92-CV-4867, 1998 WL 966026, at * 3 (E.D. Pa. Nov 6, 1998), aff’d sub
nom Vosgerichian v. Commodore Int’l, 191 F.3d 446 (3d Cir. 1999).

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matter of course. Rather, even upon reading Wal-Mart’s arguments for dismissal, it
nevertheless chose to proceed to briefing. Further, the operative questions that this
Memorandum Opinion addressed were primarily legal in nature, such that the
repleading of additional facts would have no impact on the availability or
unavailability of certain procedural channels. Finally, leave to amend would
prejudice Wal-Mart, who would be required to expend additional time and
resources on a case to which it possesses only a tangential connection. For those
reasons, granting leave to amend would be futile, and Wal-Mart’s motion to
dismiss will be granted with prejudice.
IV.

CONCLUSION
For the foregoing reasons, Wal-Mart’s motion to dismiss GEICO’s Third

Party Complaint is granted with prejudice.
An appropriate Order follows.

BY THE COURT:

s/ Matthew W. Brann
Matthew W. Brann
United States District Judge

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