BRAND MARKETING GROUP, LLC v. INTERTEK TESTING SERVICES NA, INC. et al

Filing 36

ORDER denying 27 Motion to Dismiss; denying 25 Motion to Compel Arbitration. Signed by Judge Arthur J. Schwab on 1-11-13. (Moschetta, Nicole)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
BRAND MARKETING GROUP, LLC doing
business as THERMABLASTER,
12cv1572
ELECTRONICALLY FILED

Plaintiff,
v.
INTERTEK TESTING SERVICES NA, INC.
doing business as INTERTEK TESTING
SERVICES,
Defendant.

Memorandum Order
Pending before this Court are defendant’s motions to compel arbitration (doc. no. 25) and
to dismiss pursuant to Fed. R. Civ. P. 12(b)(6) and 12(b)(7) (doc. no. 27). After careful
consideration of the motions (doc. nos. 25 and 27), plaintiff’s responses (doc. nos. 30 and 32),
and replies (doc. nos. 34 and 35), defendant’s motions will be DENIED (with exception of
negligence claim which plaintiff has agreed to dismiss).
I.

Factual Background

Plaintiff, Brand Marketing Group, (“Brand”) is a limited liability company which imports
and sells vent free gas room heaters throughout the United States. Doc. No. 19 at ¶ 1 (Amended
Complaint). Defendant, Intertek Testing Services, N.A., Inc. (“Intertek NA’) is a subsidiary of
Intertek Group PLC (“Intertek Group”), a multinational inspection, product testing and
certification company headquartered in London. Id. at ¶ 2. Intertek Testing Services Shenzhen,
Ltd. (“Interteck Shenzhen”) is a separate corporate subsidiary of Intertek Group located in
Guangzhou, China. Id. Intertek NA is a Nationally Recognized Testing Laboratory accredited
to certify products compliant with North American Safety Standards. However, Intertek

Shenzhen, the location where the relevant testing in this matter took place, is not accredited to
certify compliance with North American Safety Standards.
Prior to Brand’s involvement in the circumstances at issue here, Reecon M & E Co., Ltd.
(“Reecon”), a Chinese manufacturing company, had contracted with Intertek NA for testing
services related to other unrelated products. Doc. No. 19 at Exhibit 4, and Doc. No. 31, Exhibit
C.
According to the Declaration of David O. Brand, importantly, several months after the
Certification Agreement was executed (in August 2010), Brand was, for the first time, put into
contact with Reecon, through an intermediary Chinese manufacturing company. Doc. No. 31,
Exhibit D.
Following Ace Hardware Corporation’s (“Ace”) indication of an intent to purchase the
heaters in December 2010, Brand then contacted Reecon regarding the manufacture of the
heater. Doc. No. 19 at ¶ 15, 16. Once Brand received the purchase order from Ace on April 26,
2011, Brand worked with Reecon to have the heaters certified “compliant” with American
National Standards Institute (“ANSI”) standards, which governs unvented room heaters for sale
in the United States. Doc. No. 19 at ¶ 21.
In exchange for money paid by Reecon, in accordance with the Certification Agreement,
Intertek NA provided testing and certification services for the heaters. The heaters were tested to
the ANSI standard at Intertek Shenzhen. Doc. No. 19 at ¶ 21-22.
On November 14, 2011, Intertek issued a Test Report certifying compliance with the
ANSI standard. Doc. No. 19 at ¶ 35. Plaintiff alleges that even though Intertek Shenzhen was
not accredited a Nationally Recognized Testing Laboratory, on February 29, 2012, Intertek NA
issued an Authorization to Mark (“ATM”) indicating that a product complies with the standard it
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was tested to (in this case ANSI Z21.11). Doc. No. 19 at ¶ 60, Exhibit 7. According to plaintiff,
the test report and ATM were representations made by Intertek NA that the heaters complied
with the ANSI standard.
Then, on March 8, 2012, Intertek NA suddenly suspended its listing and labeling
privileges for Brand’s heaters, and Intertek NA advised Reecon to quarantine all inventories of
products covered by the November 14, 2011, test report. Doc. No. 19 at ¶ 62. On March 12,
2012, Intertek NA employee, Rick Curkeet, sent an email to Ace advising that “the
Thermalblaster (sic) units have been found to be in non-compliance with the specified standard.
We are expecting the manufacturer to take appropriate actions in this matter. Obviously you
should quarantine those you have and keep them out of the market.” Doc. No. 19 at ¶ 64, and
Exhibit 9.
According to plaintiff, “[t]his purposeful action and others by Intertek NA were intended
to and did result in harm to Brand’s contractual relationship with Ace.” Doc. No. 31 at 3.
Brand has filed suit in the Court of Common Pleas of Allegheny County, Pennsylvania,
on September 20, 2012, and this matter was properly removed to this Court on October 30, 2012.
Doc. No. 1. Intertek NA filed its first motion to dismiss on November 21, 2012 (doc. no. 13),
and on November 29, 2012, Brand filed an Amended Complaint, alleging the following tort
theories: (1) Violation of Section 552 of the Restatement of Torts (Second); (2) Interference with
Contractual Relations; (3) Disparagement; (4) Corporate Defamation; and (5) Negligence. Doc.
No. 19.
II.

Motion to Compel Arbitration

“Under Pennsylvania law, the parties must submit an issue to arbitration where: (1) the
parties entered into an agreement to arbitrate and (2) the dispute falls within the scope of that
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agreement.” McAlister v. Sentry Ins. Co.. 958 F.2d 550, 552 (3d Cir. 1992)(citing Rocca v. Pa
Gen. Ins. Co., 516 A.2d 772, 772-73 (Pa. Super. 1986)). In resolving a motion to compel
arbitration, the Court employs the same standard as a motion for summary judgment. Control
Screening LLC v. Tech. Application & Prod. Co., 687 F.3d 163, 167 (3d Cir. 2012).
“If a party has not agreed to arbitrate, the courts have no authority to mandate that he do
so.” E.I. Dupont de Nemours & Co. v. Rhone Poulenc & Resin Intermediates, S.A.S., 269 F.3d
187, 194 (3d Cir. 2001)(citations omitted). The United States Court of Appeals for the Third
Circuit has unequivocally held that “a non-signatory cannot be bound to arbitrate unless it is
bound under traditional principles of contract and agency law” to be akin to a signatory of the
underlying agreement. Id.
Even a cursory review of the Certification Agreement on which defendant relies to
support its claim that Brand is required to arbitrate reveals that Brand neither signed the
agreement, nor is Brand even mentioned within the four corners of the document. Doc. No. 19,
Exhibit 4. As Brand points out, the reason for Brand’s absence from the agreement is because
the Certification Agreement predates by several months, Reecon’s first contact with Brand (and
there has been no evidence presented to the contrary). Therefore, the arbitration provision of the
Certification Agreement does not cover Brand, nor the current dispute.
As for defendant’s arguments that Brand is either an alter-ego of Reecon, or that Brand is
a third-party beneficiary to the Certification Agreement, the allegations of the Amended
Complaint as well as the exhibits attached thereto do nothing to establish that Brand’s
relationship with either Intertek NA or Reecon to be one of a third-party beneficiary. The law is
equivocal on this point - - in order for a person or entity to be third party beneficiary to a
contract, “both contracting parties must have expressed an intention that the third party be a
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beneficiary, and that intention must have affirmatively appeared in the contract itself.” Scarpitti
v. Weborg, 609 A.2d 147, 149 (Pa. 1992).
III.

Motion to Dismiss

In considering a Rule 12(b)(6) motion, Federal Courts require notice pleading, as
opposed to the heightened standard of fact pleading. Fed. R. Civ. P. 8(a)(2) requires only “‘a
short and plain statement of the claim showing that the pleader is entitled to relief,’ in order to
‘give the defendant fair notice of what the . . . claim is and the grounds on which it rests.’” Bell
Atlantic Corp. v. Twombly, 550 U.S. 554, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47
(1957)).
Building upon the landmark United States Supreme Court decisions in Twombly and
Ashcroft v. Iqbal, 556 U.S. 662 (2009), the United States Court of Appeals for the Third Circuit
explained that a District Court must undertake the following three steps to determine the
sufficiency of a complaint:
First, the court must “tak[e] note of the elements a plaintiff must plead to state a
claim.” Second, the court should identify allegations that, “because they are no
more than conclusions, are not entitled to the assumption of truth.” Third,
“whe[n] there are well-pleaded factual allegations, a court should assume their
veracity and then determine whether they plausibly give rise to an entitlement for
relief.” This means that our inquiry is normally broken into three parts: (1)
identifying the elements of the claim, (2) reviewing the Complaint to strike
conclusory allegations, and then (3) looking at the well-pleaded components of
the Complaint and evaluating whether all of the elements identified in part one of
the inquiry are sufficiently alleged.
Malleus v. George, 641 F.3d 560, 563 (3d Cir. 2011) (quoting Iqbal, 556 U.S. at 675, 679).
The third step of the sequential evaluation requires this Court to consider the specific
nature of the claims presented and to determine whether the facts pled to substantiate the claims
are sufficient to show a “plausible claim for relief.” Fowler, 578 F.3d at 210. “While legal
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conclusions can provide the framework of a Complaint, they must be supported by factual
allegations.” Id. at 210-11; see also Malleus, 641 F.3d at 560.
This Court may not dismiss a Complaint merely because it appears unlikely or
improbable that Plaintiff can prove the facts alleged or will ultimately prevail on the merits.
Twombly, 550 U.S. at 563 n.8. Instead, this Court must ask whether the facts alleged raise a
reasonable expectation that discovery will reveal evidence of the necessary elements. Id. at 556.
Generally speaking, a Complaint that provides adequate facts to establish “how, when, and
where” will survive a Motion to Dismiss. Fowler, 578 F.3d at 212; see also Guirguis v. Movers
Specialty Servs., Inc., 346 F. App’x. 774, 776 (3d Cir. 2009).
In short, a Motion to Dismiss should not be granted if a party alleges facts, which could,
if established at trial, entitle him/her to relief. Twombly, 550 U.S. at 563 n.8.
The Gist of the Action Doctrine Does Not Bar Plaintiff=s Tort Claims
Defendant argues that the Agist of the action@ doctrine bars plaintiff=s tort claims because
the action is based upon the Certification Agreement. The Agist of the action@ rule has not been
addressed by the Supreme Court of Pennsylvania, but was first recognized in 1992 by the
Superior Court of Pennsylvania in Bash v. Bell Tel. Co., 601 A.2d 825 (Pa. Super. 1992).
As described by the United States Court of Appeals for the Third Circuit:
Under [Pennsylvania=s] Agist of the action@ test,
to be construed as a tort action, the [tortious] wrong ascribed to the defendant
must be the gist of the action with the contract being collateral . . . . [T]he
important difference between contract and tort actions is that the latter lie from
the breach of duties imposed as a matter of social policy while the former lie for
the breach of duties imposed by mutual consensus. Redevelopment Auth. of
Cambria County v. International Ins. Co., 454 Pa.Super. 374, 685 A.2d 581, 590
(1996) (en banc) (quoting Phico Ins. Co. v. Presbyterian Med. Servs. Corp., 444
Pa.Super. 221, 663 A.2d 753, 757 (1995)). In other words, a claim should be
limited to a contract claim when "the parties' obligations are defined by the terms
of the contracts, and not by the larger social policies embodied in the law of
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torts." Bash v. Bell Telephone Co., 411 Pa.Super. 347, 601 A.2d 825, 830 (1992).
Bohler-Uddeholm America, Inc. v. Ellwood Group, Inc., 247 F.3d 79, 103-04 (3d Cir. 2001).
In Etoll, Inc. v. Elias/Savion Advertising, Inc., 811 A.2d 10 (Pa. Super. 2002), the
Superior Court of Pennsylvania stated:
& 28 Thus, persuasive authority interpreting Pennsylvania law has restated the
gist of the action doctrine in a number of similar ways. These courts have held
that the doctrine bars tort claims: (1) "arising solely from a contract between the
parties" (Galdieri [v. Monsanto Co., 2002 U.S. Dist. Lexis, 11391 at *33 (E.D.
Pa. 2002)]; (2) where "the duties allegedly breached were created and grounded in
the contract itself" (Werner Kammann [Maschinenfabrick GmbH. v. Max Levy
Autograph, Inc., 2002 WL 126634 at **6-7 (E.D.Pa. 2002)]; (3) where "the
liability stems from a contract" (Asbury [Auto. Group LLC. v. Chrysler Ins. Co.,
2002 WL 15925 at *3 (E.D.Pa. 2002)]; or (4) where the tort claim "essentially
duplicates a breach of contract claim or the success of which is wholly dependent
on the terms of a contract." (Polymer Dynamics [, Inc. v. Bayer Corp., 2000 WL
1146622 at *6 E.D.Pa. 2000)].
Etoll, 811 A.2d at 19-20 (parallel citations omitted).
“In some circumstances, ‘it is possible that a breach of contract also gives rise to an
actionable tort[.] To be construed as in tort, however, the wrong ascribed to defendant must be
the gist of the action, the contract being collateral.’” Pediatrix Screening, Inc. v. TeleChem
Intern., Inc., 602 F.3d 541, 549-550. (quoting Bash v. Bell Tel. Co., 601 A.2d 825, 829 (Pa.
Super. 1992)).
At this early stage of the proceedings, it appears that the gist of plaintiff’s action is and
remains in tort, with the Certification Agreement being collateral to the alleged torts.
Accordingly, the motion to dismiss on this basis will be DENIED.1
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Defendant also argues that the request for punitive damages should be stricken. However, the
Amended Complaint makes sufficient allegations that defendant’s conduct “was outrageous,
either because of the defendant’s evil motive or reckless indifference to the rights of others.”
Summit Fasteners, Inc. v. Harleysville Nat. Bank & Trust Co., Inc., 599 A.2d 203, 207 (Pa.
Super. 1991) (citing Gray v. H.C. Duke & Sons, 563 A.2d 1201 (Pa. Super. 1989)). Therefore,
the Court declines to strike the request for punitive damages at this early stage of the litigation.
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Economic Loss Doctrine Does Not Bar Plaintiff’s Claim for Negligent
Misrepresentation
Defendant next argues that the economic loss doctrine bars plaintiff’s negligence claims
(Count I and Count V). However, since plaintiff has agreed to dismiss its negligence claim at
Count V of the Amended Complaint (see doc. no. 33), the Court will examine only plaintiff’s
claim for negligent misrepresentation under the Restatement of Torts § 552 (Second).2
Under Pennsylvania law, “the economic loss doctrine . . . precludes recovery in tort if the
plaintiff suffers a loss that is exclusively economic, unaccompanied by an injury to either
property or person.” Bouriez v. Carnegie Mellon Univ., 430 F. App’x 182, 187 (3d Cir. 2011)
(citing Excavation Techs., Inc. v. Columbia Gas Co. of Pa., 985 A.2d 840, 841 n.3 (Pa. 2009)).

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Section 552 provides:
(1) One who, in the course of his business, profession or employment, or in any
other transaction in which he has a pecuniary interest, supplies false information
for the guidance of others in their business transactions, is subject to liability for
pecuniary loss caused to them by their justifiable reliance upon the information, if
he fails to exercise reasonable care or competence in obtaining or communicating
the information.
(2) Except as stated in Subsection (3), the liability stated in Subsection (1) is
limited to loss suffered
(a) by the person or one of a limited group of persons for whose benefit
and guidance he intends to supply the information or knows that the
recipient intends to supply it; and
(b) through reliance upon it in a transaction that he intends the information
to influence or knows that the recipient so intends or in a substantially
similar transaction.
(3) The liability of one who is under a public duty to give the information extends
to loss suffered by any of the class of persons for whose benefit the duty is
created, in any of the transactions in which it is intended to protect them.
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“Pennsylvania has not limited the applicability of the economic loss doctrine to situations in
which the parties are bound by a contractual relationship or are otherwise in privity with one
another.” Id. “Pennsylvania has, however, carved out an exception to the economic loss
doctrine for claims of negligent misrepresentation asserted pursuant to Section 552 of the
Restatement (Second) of Torts.” Id. (citing Excavation Techs., 985 A.2d at 840). Thus, the
question is “whether [Intertek] owe[d Brand] a duty pursuant to Section 552, as such a duty
would preclude the application of Pennsylvania's economic loss doctrine.” Id.
Defendant cites to Excavation Techs., Inc. v. Columbia Gas Co of Pa., 936 A.2d 111,
113-16 (Pa. Super. Ct. 2007) in support of its claim that Section 552 only applies to design
professionals. However, the Pennsylvania Supreme Court did not adopt the reasoning of the
Superior Court when the case was appealed. See Excavation Techs., 985 A.2d at 841.
In Bilt-Rite Contractors, Inc. v. The Architectural Studio, the Pennsylvania Supreme
Court stated that the Section 552 exception applies “where information is negligently supplied by
one in the business of supplying information, such as an architect or design professional, and
where it is foreseeable that the information will be used and relied upon by third persons, even if
the third parties have no direct contractual relationship with the supplier of information.” 866
A.2d 270, 286 (Pa. 2005) (emphasis added). Thus, it is possible for Section 552 to apply to nondesign professionals. See First United Bank & Trust v. PNC Fin. Servs. Grp., Inc., 667
F.Supp.2d 443, 457 (M.D. Pa. 2009) (applying § 552 exception to a financial institution);
Comcast Spectacor L.P. v. Chubb & Son, Inc., 2006 WL 2302686, *22 n.33 (E.D. Pa. Aug. 8,
2006) (applying § 552 exception to an insurance broker).
Plaintiff’s Amended Complaint pleads sufficient facts to state a cause of action for
negligent misrepresentation. Specifically, the Amended Complaint sufficiently pleads that
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Intertek supplied false information during the course of its business for Brand’s use during the
course of Brand’s business transactions. Furthermore, the Amended Complaint sufficiently
pleads that Brand justifiably relied upon Intertek’s representations. The Court will decline to
dismiss Count I at this early stage of the litigation. See First United, 667 F.Supp.2d at 457
(“Construing the complaint in the light most favorable to [plaintiff], the Court finds that the
allegations are sufficient at this early stage of the case to state a negligent misrepresentation
claim that fits under the narrow exception to the economic loss rule announced in Bilt–Rite.”).
Reecon Is Not an Indispensable Party to this Litigation
Defendant next argues that plaintiff’s Amended Complaint should be dismissed for
failure to join an “indispensable” party – namely Reecon. The primary factors to be considered
by this Court in determining whether a party is indispensable are listed in Fed. R. Civ. P. 19 as
follows:
(a) Persons Required to Be Joined if Feasible.
(1) Required Party. A person who is subject to service of process and whose
joinder will not deprive the court of subject-matter jurisdiction must be joined as a
party if:
(A) in that person’s absence, the court cannot accord complete relief among
existing parties; or
(B) that person claims an interest relating to the subject of the action and is so
situated that disposing of the action in the person’s absence may:
(i) as a practical matter impair or impede the person's ability to protect the
interest; or
(ii) leave an existing party subject to a substantial risk of incurring double,
multiple, or otherwise inconsistent obligations because of the interest.
Fed. R. Civ. P. 19. See also Field v. Volkswagenwerk AG, 626 F.2d 293, 297 (3d Cir. 1980).

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The United States Court of Appeals for the Third Circuit in McArthur v. Rosenbaum Co.
of Pittsburgh, 180 F.2d 617 (3d Cir. 1950), succinctly described Rule 19’s application in this
fashion: “[t]he two tests, therefore, as to what constitutes an indispensable party are: (1) Is the
interest of the alleged indispensable party such as will be directly affected legally by the
adjudication? (2) Will the failure to join the alleged indispensable party be inconsistent with
equity and good conscience?” Id. at 621-22.
In this case, complete relief may be granted among the parties. The thrust of Intertek’s
argument is that because Reecon was a party to the contract, disposing of the action without
Reecon’s joinder would impede Reecon from protecting its interest and/or leave a substantial
risk of duplicative litigation. However, as rehearsed, Brand was not a party to the Certification
Agreement. As Brand’s claims are not contract based, Reecon will still be able to protect its’
interest and there is no threat of duplicated litigation.
IV.

Conclusion

For these reasons, as to the motion to compel arbitration (doc. no. 25), said motion is
DENIED.
As to the motion to dismiss (doc. no. 27), with the exception of Count V (negligence - which plaintiff has agreed to dismiss), viewed in light of the foregoing pleading standards, this
Court simply cannot say, at this early stage of the proceedings, that plaintiff will be able to state
no set of facts in support of its claims against defendant. Accordingly, said motion to dismiss
(doc. no. 27) is DENIED.
s/ Arthur J. Schwab
Arthur J. Schwab
United States District Judge
cc: All ECF Counsel of Record
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