Lewis Lumber & Milling, Inc. v. Mereen-Johnson, LLC
Filing
95
MEMORANDUM OPINION OF THE COURT. Signed by District Judge Eli J. Richardson on 11/27/2018. (DOCKET TEXT SUMMARY ONLY-ATTORNEYS MUST OPEN THE PDF AND READ THE ORDER.)(am)
IN THE UNITED STATES DISTRICT COURT FOR THE
MIDDLE DISTRICT OF TENNESSEE
NASHVILLE DIVISION
LEWIS LUMBER & MILLING, INC.,
Plaintiff,
v.
MEREEN-JOHNSON, LLC
Defendant.
MEREEN-JOHNSON, LLC,
Third-Party Plaintiff,
v.
MARTIN SPROCKET & GEAR, INC.
and NAP TOOLS LLC a/k/a NAP
GLADU,
Third-Party Defendants.
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NO. 3:17-cv-00643
JUDGE RICHARDSON
MEMORANDUM OPINION
Before the Court is Third-Party Defendant Martin Sprocket & Gear, Inc. (“Martin”)’s
Motion to Dismiss Third-Party Plaintiff Mereen-Johnson, LLC (“Mereen-Johnson”)’s Third-Party
Complaint (Doc. No. 66). Mereen-Johnson has responded in opposition (Doc. No. 78), and Martin
has replied (Doc. No. 80). For the reasons set forth below, the motion will be denied.
FACTUAL BACKGROUND
In March 2016, Plaintiff Lewis Lumber & Milling, Inc. (“Lewis Lumber”) purchased a
commercial rip saw and associated equipment from Mereen-Johnson. (Doc. No. 1-1 ¶ 3.) MereenJohnson delivered the rip saw system (the “System”) to Lewis Lumber on January 20, 2017. (Id.
¶ 10.) Immediately after Lewis Lumber began using the System, Lewis Lumber experienced
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significant problems, including system jamming and multiple roller breakage, which rendered it
unable to use the System. (Id. ¶ 11.) Lewis Lumber communicated the deficiencies to MereenJohnson. (Id.) On February 10, 2017, Mereen-Johnson removed the System from Lewis Lumber’s
premises to assess the System’s deficiencies. (Id. ¶ 12.) Based on these allegations, Lewis Lumber
filed this lawsuit, seeking damages from Mereen-Johnson for breach of contract, breach of
warranty, and violations of the Tennessee Consumer Protection Act. (Id. ¶¶ 15-23.)
Mereen-Johnson, in turn, brought a Third-Party Complaint against Martin and NAP Gladu,
alleging that they caused the System’s problems by providing certain incorrect components and/or
calculations. (Doc. No. 45 at 17 ¶ 10.) Mereen-Johnson alleges that Martin agreed to provide
certain rollers (the “Rollers”) to be used in the System. (Id. at 17 ¶ 11.) However, during the
manufacturing process, Martin left out a center donut steel round in the middle of each roller to
support the welded shaft. (Id.) The absence of donut steel rounds caused the System to fail. (Id.)
Based on these allegations, Mereen-Johnson brings the following claims against Martin: (1)
indemnity; (2) contribution; (3) breach of express warranty; (4) breach of implied warranty of
merchantability; and (5) breach of implied warranty of fitness. (Id. ¶¶ 13-39.) Martin has not
answered the Third-Party Complaint, but instead has moved to dismiss it in full based largely on
the Limited Warranty it attaches to its memorandum in support of its motion to dismiss. (Doc. No.
67-1.)
LEGAL STANDARD
For purposes of a motion to dismiss, the Court must, as it has above, take all of the factual
allegations in the complaint as true. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). To 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. Id. A claim has facial plausibility when the plaintiff
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pleads factual content that allows the court to draw the reasonable inference that the defendant is
liable for the misconduct alleged. Id. Threadbare recitals of the elements of a cause of action,
supported by mere conclusory statements, do not suffice. Id. When there are well-pleaded factual
allegations, a court should assume their veracity and then determine whether they plausibly give
rise to an entitlement to relief. Id. at 679. A legal conclusion, including one couched as a factual
allegation, need not be accepted as true on a motion to dismiss, nor are mere recitations of the
elements of a cause of action sufficient. Id. at 678; Fritz v. Charter Township of Comstock, 592
F.3d 718, 722 (6th Cir. 2010). Moreover, factual allegations that are merely consistent with the
defendant’s liability do not satisfy the claimant’s burden, as mere consistency does not establish
plausibility of entitlement to relief even if it supports the possibility of relief. Iqbal, 556 U.S. at
678.
In determining whether a complaint is sufficient under the standards of Iqbal and its
predecessor and complementary case, Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), it may
be appropriate to “begin [the] analysis by identifying the allegations in the complaint that are not
entitled to the assumption of truth.” Iqbal, 556 U.S. at 680. Identifying and setting aside such
allegations is crucial because they simply do not count toward the plaintiff’s goal of showing
plausibility of entitlement to relief. As suggested above, such allegations include “bare assertions,”
formulaic recitation of the elements, and “conclusory” or “bald” allegations. Id. at 681. The
question is whether the remaining factual allegations plausibly suggest an entitlement to relief. Id.
If not, the pleading fails to meet the standard of Rule 8 and thus must be dismissed pursuant to
Rule 12(b)(6). Id. at 683.
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DISCUSSION
I.
Whether the Court Can Consider the Limited Warranty
Defendant argues that the Third-Party Complaint against it should be dismissed because
the Limited Warranty’s express terms bar Mereen-Johnson’s claims. The threshold issue,
therefore, is whether the Court can consider the Limited Warranty in deciding the instant motion
to dismiss.
Generally, matters outside the pleadings may not be considered in ruling on a motion to
dismiss under Rule 12(b)(6) unless the motion is converted to one for summary judgment under
Rule 56. Fed. R. Civ. P. 12(d). However, courts may consider matters of judicial notice without
converting the motion into one for summary judgment. Armengau v. Cline, 7 F. App’x 336, 344
(6th Cir. 2001). In addition, “documents attached to the pleadings become part of the pleadings
and may be considered on a motion to dismiss.” Commercial Money Ctr., Inc. v. Illinois Union
Ins. Co., 508 F.3d 327, 335 (6th Cir. 2007) (citing Fed. R. Civ. P. 10(c)). This also applies “when
a document is referred to in the pleadings and is integral to the claims.” Id. at 335-36. Furthermore,
where the plaintiff does not refer directly to documents in the pleadings, if those documents govern
the plaintiff’s rights and are necessarily incorporated by reference, then the motion need not be
converted to one for summary judgment. Weiner v. Klais & Co., Inc., 108 F.3d 86, 89 (6th Cir.
1997) (holding that plan documents could be incorporated without converting the motion to
dismiss to one for summary judgment even though the complaint referred only to the “plan” and
not the accompanying documents).
However, a court’s ability to consider supplemental documents on a motion to dismiss is
not without limitation. While “documents integral to the complaint may be relied upon, even if
they are not attached or incorporated by reference, it must also be clear that there exist no material
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disputed issues of fact regarding the relevance of the document.” Mediacom Se. LLC v. BellSouth
Telecomm., Inc., 672 F.3d 396, 400 (6th Cir. 2012) (internal citations, quotation marks, and
alterations omitted). In other words, if the authenticity, validity, or enforceability of a document is
not in dispute, the court may consider it on a motion to dismiss, but a genuine dispute as to the
legal sufficiency of a document requires the court to consider the issue under a motion for summary
judgment standard. Composite Techs., L.L.C. v. Inoplast Composites SA DE CV, 925 F. Supp. 2d
868, 873 (S.D. Ohio 2013) (citing Mediacom Se. LLC, 672 F.3d at 873). Moreover, a court may
not consider materials outside the pleading that “rebut, challenge, or contradict anything in the
plaintiffs’ complaint” without converting the motion to one for summary judgment. Song v. City
of Elyria, 985 F.2d 840, 842 (6th Cir. 1993); see Mediacom Se. LLC, 672 F.3d at 399 (reversing
the district court’s dismissal when it relied upon material that directly conflicted with facts set
forth in the plaintiff’s complaint).
The Court cannot consider the Limited Warranty on this Motion to Dismiss for several
reasons. First, the Court cannot take judicial notice of the Limited Warranty because it does not
fall within the scope of Federal Rule of Evidence 201(b). Second, the Limited Warranty is not
attached or referred to in the Third-Party Complaint and is not necessarily incorporated by
reference. Third, none of the allegations in the Third-Party Complaint rely on the Limited
Warranty’s terms. Fourth, the Limited Warranty was not attached to the Answer, because no
answer has been filed. Fifth, Mereen-Johnson disputes the authenticity, validity, and enforceability
of the Limited Warranty as applied to both itself and distributor General Engineering & Equipment
Co. (“GEECO”). 1 Mereen-Johnson argues that there is no evidence that it or GEECO received or
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According to the Limited Warranty, Martin sold the Rollers to GEECO, who then shipped them
to Mereen-Johnson. (Doc. No. 67-1 at 1.)
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accepted the Limited Warranty or that the Limited Warranty attached to the memorandum is a true
and accurate copy. Mereen-Johnson’s representations sufficiently raise issues that cannot be
resolved at this stage of the case. See Bailey v. Hartford Life & Accident Ins. Co., No. 5:15CV406,
2016 WL 760431, at *3 (N.D. Ohio Feb. 26, 2016) (declining to consider the unauthenticated copy
supplied by defendant in support of its motion to dismiss). Sixth, Martin asserts that the Limited
Warranty absolves it of liability to Mereen-Johnson, directly challenging Plaintiff’s claims. Thus,
if the Court were to consider the Limited Warranty in deciding the motion to dismiss, it would be
raising the pleading standard beyond that set forth in Twombly and Iqbal—forcing the plaintiff’s
allegations to be plausible not only as stated in the complaint, but also after attacked by whatever
interpretation a defendant wants to put on whatever documents it wishes to attach to a motion to
dismiss. A complaint’s allegations are subject to this kind of testing at the summary judgment
stage, but not on a motion to dismiss. In light of the foregoing, the Court cannot consider the
Limited Warranty without converting the instant motion to one for summary judgment. In the
absence of full discovery on the issue, the Court declines to convert the motion. 2 Therefore, to the
extent Martin’s motion to dismiss is based on the Limited Warranty, it will be denied. 3
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The Court has broad discretion to decide whether to consider matters outside the pleadings and
convert the motion. See Wysocki v. Int’l Bus. Mach. Corp., 607 F.3d 1102, 1104 (6th Cir. 2010)
(applying an abuse of discretion standard to district court’s decision to convert a 12(b)(6) motion
to dismiss into a motion for summary judgment); Graham v. City of Hopkinsville, Ky., No. 5:12CV-23, 2012 WL 4483866, at *2 (W.D. Ky. Sept. 28, 2012) (“A district court has broad discretion
when deciding whether to convert a motion to one for summary judgment.”).
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In its Reply, Martin attacks both Mereen-Johnson’s failure to take a position on whether the
agreement discussed in its Third-Party Complaint includes the Limited Warranty and MereenJohnson’s equivocal language regarding the Limited Warranty’s validity or enforceability. Martin
states, “Mereen-Johnson’s failure to admit or deny that its ‘agreement with Martin’ includes the
Limited Warranty is insufficient as a matter of law to raise any genuine dispute. Thus, the Limited
Warranty is part of the Third-Party Complaint, and Mereen-Johnson has failed to state a claim
upon which relief can be granted.” (Doc. No. 80 at 2.) This argument is not persuasive. Martin’s
argument proceeds as if the term “genuine dispute” as used in the above-discussed case law
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II.
Whether Mereen-Johnson’s Indemnity Claim is Plausible
Martin makes only one argument independent of the Limited Warranty. Specifically,
Martin asserts that the indemnity claim against it should be dismissed based on Texas common
law. Mereen-Johnson, however, argues that Tennessee law applies instead. 4 To consider Martin’s
argument, the Court must first conclude that Texas law applies.
In determining choice of law on a motion to dismiss, courts generally examine the face of
the complaint and additional documents in the categories discussed above. See In re Darvocet,
Darvon & Propoxyphene Prod. Liab. Litig., No. 2:11-MD-2226-DCR, 2013 WL 663575, at *2
(E.D. Ky. Feb. 22, 2013) (“Because the Court was ruling on a motion to dismiss, it based
its choice of law analysis on the allegations in the plaintiffs’ Amended Complaint.”); FroomLipman Grp., L.L.C. v. Forest City Enterprises, Inc., Case No. 1:06 CV 185, 2008 WL 11379985,
at *4 (N.D. Ohio Jan. 23, 2008) (ruling on a motion to dismiss and examining the face of the
regarding attachments to motions to dismiss has the same meaning it has when used in the
articulation of summary judgment standard. Given the vital distinctions between a motion to
dismiss under Rule 12(b)(6) and a motion for summary judgment, this cannot be the correct
interpretation of the case law, and Martin has cited to no authority indicating that it is. In fact, the
one case Martin cites to support its argument indicates just the opposite. The Sixth Circuit in
Ouwinga v. Benistar 419 Plan Servs., 694 F.3d 783 (6th Cir. 2012) does not indicate that a party
in Mereen Johnson’s shoes would have to produce evidence contradicting the asserted validity and
relevance of the disclaimer relied on by the movant. Rather, the Sixth Circuit reversed the District
Court’s decision to consider the disclaimer attached to the motion to dismiss, stating that the
“district court erred in considering the disclaimers at the 12(b)(6) stage when their validity was
directly in question based on the full context of their presentation to the [plaintiffs]” as discussed
in the plaintiffs’ brief and complaint. Id. at 696-97. Likewise, in the present case, the enforceability
and relevance of the Limited Warranty is directly in question based on the context of their
presentation to Mereen-Johnson—a context that must await development through discovery.
In addition, as previously discussed, the Limited Warranty is not part of the Third-Party
Complaint and therefore could be considered only if the Court converted the instant motion to one
for summary judgment. The Court will not convert the motion into one for summary judgment,
and Defendant is not required at this stage to produce an argument—let alone evidence—to refute
Martin’s assertions based on the Limited Warranty.
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The Court notes that neither party fully analyzes the choice-of-law issue.
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complaint to determine the choice of law issue). Martin’s assertion that Texas law applies solely
rests on the Limited Warranty, which the Court declines to consider in deciding the motion to
dismiss for the previously stated reasons. See Doc. No. 67-1 (“Sale of Martin products and tools
shall be governed by the laws of the State of Texas . . .”). The Third-Party Complaint only provides
one nexus to Texas: Martin’s principal place of business. (Doc. No. 45 at 15 ¶ 2.) This allegation
on its own is insufficient for the Court to conclude that Texas law applies to the indemnity claim,
especially because the Third-Party Complaint also alleges ties to Minnesota, Indiana, and
Tennessee. (See id. at 15 ¶ 1, 16 ¶¶ 3, 8.) Accordingly, because Martin has failed to establish at
this stage of the litigation that Texas law applies to the indemnity claim, and its argument to dismiss
that claim is solely premised on Texas law, Martin’s motion to dismiss the indemnity claim will
be denied.
CONCLUSION
For the foregoing reasons, the Court will DENY Martin’s Motion to Dismiss MereenJohnson’s Third-Party Complaint (Doc. No. 66). An appropriate order will be entered.
____________________________________
ELI RICHARDSON
UNITED STATES DISTRICT JUDGE
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