CNH Industrial Capital America LLC v. Able Contracting Inc et al
ORDER granting 43 44 Third-Party Defendants' Motions to Dismiss for Failure to State a Claim. AND IT IS SO ORDERED. Signed by Honorable Richard M Gergel on 2/7/2017.(sshe, )
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF SOUTH CAROLINA
CNH Industrial Capital America LLC,
f/k/a CNH Capital America, LLC,
Able Contracting, Inc. and Chandler M.
Civil Action No. 9:16-cv-2520-RMG
ORDER and OPINION
CNH Industrial America LLC and G, J & L, )
Inc. d/b/a Border Equipment,
Able Contracting, Inc. and Chandler M.
This matter comes before the Court on Third-Party Defendants' motions to dismiss for
failure to state a claim. (Dkt. Nos. 43, 44). For the reasons below, the Court GRANTS the
On July 12,2016, Plaintiff CNH Industrial Capital America LLC ("CNH Capital")
brought a lawsuit against Defendants Able Contracting and Chandler Lloyd. The complaint
consisted of the following causes of action: (1) breach of contract claims based on Defendants'
alleged nonpayment of balances owed under three sales contracts for new equipment; (2) CNH
Capital's right to possession of a tractor; and (3) breach of a personal guaranty executed by
Defendant Lloyd. (Dkt. No.1).
In their answer, Defendants/Third-Party Plaintiffs brought a third-party complaint against
Third-Party Defendants CNH Industrial America LLC ("CNH Industrial") and G, J & L
("Border") alleging 10 different causes of action: (1) breach of contract, (2) breach of warranty,
(3) breach of contract with fraudulent intent, (4) fraud, (5) violation of South Carolina's Unfair
Trade Practices Act, (6) violation of the Fair Practices ofFarrn, Construction, Industrial, and
Outdoor Power Equipment Manufacturers, Distributors, Wholesalers, and Dealers Act, (7)
violation of S.c. Code § 39-50-10 et seq. against CNH only, (8) negligence against Border only,
(9) equitable indemnity and (10) rejection of goods. (Dkt. No. 18).
Third-Party Defendants filed motions to dismiss the third-party complaint, arguing, inter
alia, that they were improperly impleaded third parties because the claims against them are not
derivative claims. (Dkt. Nos. 43, 44).
II. Legal Standard
Impleader is controlled by Rule 14(a) of the Federal Rules of Civil Procedure, which
states, "[a] defending party may, as a third-party plaintiff, serve a summons and complaint on a
nonparty who is or may be liable to it for all or part of the claim against it." The Rule also
provides that "[a]ny party may move to strike the third-party claim, to sever it, or to try it
separately." Fed.R.Civ.P. 14(a)(4). "Courts are granted wide discretion in determining whether
to permit such third party procedure." United States v. Joe Grasso & Son, Inc., 380 F.2d 749,
751 (5th Cir. 1967) (internal quotations omitted).
"The third party claim must be 'derivative' ofthe plaintiffs claim because '[d]erivative
liability is central to the operation of Rule 14. '" Scott v. P PG Indus. Inc., No. 89-2362, 1990
WL 200655, at *3 (4th Cir. Dec.13, 1990) (unpublished) (quoting Watergate Landmark Condo.
Unit Owners' Ass'n v. Wiss, Janey, Elstern Assoc., 117 F.R.D. 576,578 (E.D. Va. 1987)). "It is
not sufficient that the third-party claim is a related claim; the claim must be derivatively based on
the original plaintiff's claim." Id. (quoting United States v. One 1977 Mercedes Benz, 708 F.2d
444,452 (9th Cir. 1983), cert. denied, 464 U.S. 1071 (1984)). "Rule 14(a) does not allow the
defendant to assert a separate and independent claim even though the claim arises out of the
same general set of facts as the main claim." United States v. Olavarrieta, 812 F.2d 640, 643
(11th Cir. 1987); Laughlin v. Dell Fin. Servs., 465 F.Supp.2d 563, 566 (D.S.C. 2006). In other
words, impleader "must involve an attempt to pass on to the third party all or part of the liability
asserted against the defendant. ... An impleader claim may not be used to assert any and all
rights to recovery arising from the same transaction or occurrence as the underlying action."
Moore's Federal Practice § 14.04[a]. A third-party claim may be asserted under Rule 14(a)(I)
only when the third party's liability is in some way dependent on the outcome ofthe main claim
or when the third party is secondarily liable to the defending party. Wright, Miller, Kane and
Marcus, 6 Federal Practice and Procedure Civil § 1446 (emphasis added).
Therefore, at least one of the Third-Party Defendants' claims must satisfy two
requirements: (1) "the non-party must be potentially liable to the third party plaintiff," and (2)
"the non-party's liability must relate to the plaintiffs claim against the defendant/third party
plaintiff such that the third party defendant's liability arises only if the defendant/third-party
plaintiff is first held liable to plaintiff." Tetra Tech ECITsoro Joint Venture v. Sam Temples
Masonry, Inc., No. 10-1597,2011 WL 1048964, at *6 (D.S.C. Mar. 21,2011).
Because indemnification is a "classic case for impleader," Moore's Federal Practice §
14.04[b], and a party asserting an impleader claim can join additional claims under permissive
joinder rules, id. § 14.04[c], the Court first turns to Third-Party Plaintiffs' equitable
indemnification claim. "In order to sustain a claim for equitable indemnity, the existence of
some special relationship between the parties must be established." Toomer v. Norfolk S. Ry.
Co., 544 S.E.2d 634,637 (S.C. Ct. App. 2001).
Here, Third-Party Plaintiffs have failed to establish such a relationship with either third
party defendant. Third-Party Defendant CNH Industrial is the manufacturer of machinery that
was sold to Third-Party Plaintiffs through Third-Party Defendant Border, an independent dealer.
To the extent Third-Party Plaintiffs have alleged any relationship with CNH Industrial, it is
indirect rather than special. And although the South Carolina Supreme Court has held that a
purchaser of a defective vehicle was entitled to indemnification from the seller, the court
ostensibly did so under a breach of warranty theory instead of equitable indemnity, and the
underlying lawsuit in that case was for an accident caused by the defective condition of the
vehicle rather than nonpayment of balances on a sales contract or breach of a personal guarantee.
See Stuck v. Pioneer Logging Mach., Inc., 30 I S.E.2d 552, 553 (S.C. 1983). Accordingly, Third
Party Plaintiffs' claims for equitable indemnification must be dismissed.
The Court next turns to Third-Party Plaintiffs' remaining nine claims: (1) breach of
contract, (2) breach of warranty, (3) breach of contract with fraudulent intent, (4) fraud, (5)
violation of South Carolina's Unfair Trade Practices Act, (6) violation ofthe Fair Practices of
Farm, Construction, Industrial, and Outdoor Power Equipment Manufacturers, Distributors,
Wholesalers, and Dealers Act, (7) violation of S.C. Code § 39-50-10 et seq. against CNH only,
(8) negligence against Border only, and (9) rejection of goods. Each of these claims fails to
satisfy the impleader requirement that "the third party defendant's liability arises only if the
defendant/third-party plaintiff is first held liable to plaintiff." Tetra Tech ECITsoro Joint
Venture v. Sam Temples Masonry, Inc., No. 10-1597,2011 WL 1048964, at *6 (D.S.C. Mar. 21,
2011) (emphasis added). Third-Party Plaintiffs could bring these claims against Third-Party
Defendants even if Third-Party Plaintiffs were not held liable to Plaintiffs for the underlying
claims in the initial complaint. In other words, although Third-Party Defendants may be liable to
Third-Party Plaintiffs, any liability from the claims asserted is not derivative, as required by Rule
Third-Party Plaintiffs make two arguments for why its third-party claims are proper: (1)
any liability incurred by Third-Party Plaintiffs would not have occurred but for Third-Party
Defendants' misconduct and misrepresentations; and (2) Third-Party Plaintiffs' third-party
claims all rely on the same nucleus of operative fact. (See, e.g., Dkt. No. 47 at 11). These
arguments are meritless, both independently and in the aggregate. Even if both assertions are
true, Third-Party Plaintiffs' claims still fails to meet Rule 14's derivative-liability requirement
because Third-Party Defendants' alleged liability is independent of Defendants/Third-Party
For the abovementioned reasons, the Court GRANTS Third-Party Defendants' motions
to dismiss. (Dkt. Nos. 43,44).
AND IT IS SO ORDERED.
United States Di'strict Court Judge
February ?, 2017
Charleston, South Carolina
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