Travelers Property Casualty Company of America v. Mountaineer Gas Company et al

Filing 56

MEMORANDUM OPINION AND ORDER denying the Hess defendants' 19 MOTION to Dismiss; granting the Hess defendants' 33 MOTION to Dismiss 21 Crossclaim; granting Pallotine and St. Mary's 37 MOTION to Dismiss Third-Party Compla int; directing the 21 Third-Party Complaint against Pallotine Health Services, Inc., and St. Mary's Medical Center, Inc., be dismissed. Signed by Judge Joseph R. Goodwin on 11/16/2015. (cc: counsel of record; any unrepresented party) (taq)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF WEST VIRGINIA
CHARLESTON DIVISION

TRAVELERS PROPERTY CASUALTY
COMPANY OF AMERICA,
Plaintiff,
v.

CIVIL ACTION NO. 2:15-cv-07959

MOUNTAINEER GAS COMPANY, et al.,
Defendants.

MEMORANDUM OPINION AND ORDER
This is a subrogation action brought by an insurance company, Travelers Property Casualty
Company, relating to an explosion at St. Mary’s Medical Center in Huntington, West Virginia.
Pending before the court are three motions to dismiss filed pursuant to Rule 12(b)(6) of the Federal
Rules of Civil Procedure. First, defendants Hess Corporation, Hess Energy Marketing, and Direct
Energy Business Marketing (the “Hess defendants”) move to dismiss the four counts in the
plaintiff’s complaint directed at the Hess defendants, Counts V through VIII. Defs.’ Mot. to
Dismiss [ECF No. 19]. Second, the Hess defendants move to dismiss co-defendant Mountaineer
Gas Company’s crossclaim against the Hess defendants. Defs.’ Mot. to Dismiss Cross-cl. [ECF
No. 33]. Lastly, third-party defendants Pallotine Health Services and St. Mary’s Medical Center
move to dismiss Mountaineer Gas Company’s third-party complaint. Third-Party Defs.’ Mot. to
Dismiss Third-Party Compl. [ECF No. 37].

For the reasons discussed below, the Hess defendants’ Motion to Dismiss [ECF No. 19] is
DENIED; the Hess defendants’ Motion to Dismiss Crossclaim [ECF No. 33] is GRANTED; and
Pallotine and St. Mary’s Motion to Dismiss Third-Party Complaint [ECF No. 37] is GRANTED.
I.

Background
On June 25, 2013, a boiler exploded at St. Mary’s Medical Center in Huntington, West

Virginia. The plaintiff, Travelers Property Casualty Company of America, was the insurance
company providing coverage for Pallotine Health Services, which managed St. Mary’s. Compl. ¶
1, 10–11. Following the explosion, the plaintiff paid $669,009 to Pallotine according to the terms
of their insurance policy. Compl. ¶ 9. This dispute—a subrogation action—arises from Travelers’
attempt to recover the insurance payout from the entities Travelers alleges are responsible for the
explosion. Travelers filed its action against Mountaineer Gas Company (“Mountaineer”),
Combustion Service & Equipment Company (“CS&E”), and the Hess defendants, alleging, in
various combinations, (1) strict liability, (2) negligence, (3) breach of contract, and (4) breach of
warranty.
According to the Complaint, St. Mary’s had expanded its boiler plant and installed three
new boilers prior to the explosion. Compl. ¶ 12–13. CS&E was responsible for setting up the
boilers. Id. ¶ 14. Pallotine contracted with Hess Corporation and Hess Energy1 to purchase natural
gas, which Mountaineer transmitted to St. Mary’s. Id. ¶ 15–16. A problem arose following
installation of the new boilers—the gas pressure was too low when all three boilers were operating.
Id. ¶ 17. St. Mary’s called Mountaineer and CS&E representatives, who came to St. Mary’s on
June 25, 2013, to troubleshoot the issue. Id. ¶ 18–19. After some testing, the Mountaineer

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Hess Energy became Direct Energy in 2014. Compl. ¶ 15.

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representative advised that the low gas pressure was related to a problem with Mountaineer’s gas
supply. Id. ¶ 21. Mountaineer’s representative then opened a bypass line, allowing gas to flow to
the boilers without first passing through a Mountaineer strainer. Id. ¶ 23. The strainer’s role was
to remove “dirt and other impurities from the natural gas supply” before it reached St. Mary’s
boilers. Id. ¶ 22–23. The complaint alleges that “bypassing the strainer allowed natural gas
containing impurities and contaminants to foul plaintiff’s insured’s natural gas supply lines and its
gas fueled equipment causing it to malfunction.” Id. ¶ 24. One of the boilers exploded shortly after
the bypass was opened, destroying the boiler and damaging the boiler house. Id. ¶ 26–27.
In response to the plaintiff’s complaint, Mountaineer filed an Answer, Crossclaim, and
Third-Party Complaint [ECF No. 21], in which it asserted crossclaims against its co-defendants
CS&E and the Hess defendants, as well as third-party claims against Pallotine and St. Mary’s, on
the basis that these other parties’ acts were the proximate cause of the explosion and that
Mountaineer should be entitled to indemnity or contribution. The Hess filed the instant motions to
dismiss the plaintiff’s complaint and Mountaineer’s crossclaim in lieu of filing an answer.
Pallotine and St. Mary’s have also filed a motion to dismiss Mountaineer’s third-party claims.
II.

Legal Standard
A motion to dismiss filed under Rule 12(b)(6) tests the legal sufficiency of a complaint or

pleading. Giarratano v. Johnson, 521 F.3d 298, 302 (4th Cir. 2008). Rule 8 of the Federal Rules of

Civil Procedure requires that a pleading contain a “short and plain statement of the claim showing
that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). As the Supreme Court stated in
Ashcroft v. Iqbal, that standard “does not require ‘detailed factual allegations,’ but it demands more
than an unadorned, the-defendant-unlawfully-harmed-me accusation.” 556 U.S. 662, 678 (2009)
(quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)).
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A court cannot accept as true legal conclusions that merely recite the elements of a cause
of action supported by conclusory statements. Iqbal, 556 U.S. at 677–78. “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. at 678 (quoting Twombly, 550 U.S. at 570). To achieve
facial plausibility, the plaintiff must plead facts that allow the court to draw the reasonable
inference that the defendant is liable, and those facts must be more than merely consistent with the
defendant’s liability to raise the claim from merely possible to probable. Id.
In determining whether a plausible claim exists, the court must undertake a context-specific
inquiry, “[b]ut where the well-pleaded facts do not permit the court to infer more than the mere
possibility of misconduct, the complaint has alleged—but it has not ‘show[n]’—‘that the pleader
is entitled to relief.’” Id. at 679 (quoting Fed. R. Civ. P. 8(a)(2)).
III.

Analysis
A. The Hess Defendants’ Motion to Dismiss
The Hess defendants move to dismiss the plaintiff’s claims against them—namely strict

liability (Count V), negligence (Count VI), breach of contract (Count VII), and breach of warranty
(Count VIII)—for failure to state a claim pursuant to Rule 12(b)(6) of the Federal Rules of Civil
Procedure.
i. Strict Liability and Negligence (Counts V and VI)
The Hess defendants contend that the plaintiff’s strict liability and negligence claims
should be dismissed pursuant to the gist of the action doctrine. Mem. Supp. Defs.’ Mot. Dismiss
6. In West Virginia, courts may apply the gist of the action doctrine “to prevent the recasting of a
contract claim as a tort claim.” Gaddy Eng’g Co. v. Bowles Rice McDavid Graff & Love, LLP, 746

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S.E.2d 568, 577 (W. Va. 2013). This doctrine bars recovery in tort when any of the following
factors is present: “(1) where liability arises solely from the contractual relationship between the
parties; (2) when the alleged duties breached were grounded in the contract itself; (3) where any
liability stems from the contract; and (4) when the tort claim essentially duplicates the breach of
contract claim or where the success of the tort claim is dependent on the success of the breach of
contract claim.” Id.
The facts of this case are fundamentally in the nature of tort. The defendants allegedly
supplied gas in a dangerously defective condition, causing or contributing to an explosion and
attendant property damage to the insured. Although the plaintiff’s kitchen-sink approach to
pleading gives the gist of the action doctrine some allure, if anything, the plaintiffs are stretching
to recast their tort action as a breach of contract action, not the other way around. The details of
the alleged contract are immaterial. The fact that the parties may have had a contract for the supply
of gas which may have contained “an express and/or implied term . . . [to] provide safe, reasonable
and usable natural gas,” Compl. ¶ 83, does not necessarily subsume the tort action. There is an
independent tort duty not to supply a dangerously defective product, and such a duty would have
existed regardless of the presence of a contractual term stating as much. Thus, although the plaintiff
has pleaded its contract claims in language similar to that used for its tort claims, it is clear that the
gist of the action lies in tort.
Accordingly, the Hess defendants’ motion to dismiss Counts V (strict liability) and VI
(negligence) of the Complaint is DENIED.

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ii. Breach of Contract and Breach of Warranty (Counts VII and VIII)
The Hess defendants argue that the plaintiff provides “only the most cursory detail”
regarding the existence of a contract between the insured and the Hess defendants. Defs.’ Mot. to
Dismiss 10. This critique also underpins the supposed inadequacy of the breach of warranty claim.
Id. at 12–13. I point out that “detailed factual allegations” are not required to survive a motion to
dismiss and the plaintiff’s claims are not inadequate for want of detail. Iqbal, 556 U.S. 678;
Twombly, 550 U.S. 555.
Even so, I have considerable doubt as to the contract and breach of warranty claims, as
mentioned in my discussion of the tort claims above. I will allow them to continue, despite my
reservations, as they will be more appropriately dealt with in a summary judgement context. The
nature of the contract and breach of warranty claims—stemming from a boiler explosion and
consequent property damage, which bear the hallmarks of a tort action—indicates that scant
additional resources will be expended in allowing the contract-based claims to move forward at
this stage.
Accordingly, the Hess defendants’ motion to dismiss Counts VII (breach of contract) and
VIII (breach of warranty) of the Complaint is DENIED.
B. The Hess Defendants’ Motion to Dismiss Mountaineer’s Crossclaim
The Hess defendants move to dismiss co-defendant Mountaineer’s crossclaim, claiming
that the crossclaim fails to plead sufficient factual allegations with respect to the Hess defendants.
Mem. Supp. Mot. Dismiss Cross-cl. 5. I agree.
Mountaineer’s barebones crossclaim alleges no specific facts supporting an inference that
Mountaineer is entitled to contribution or indemnity. The crossclaim consists of the following

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statements: (1) the Hess defendants are named in Travelers’ complaint for committing “acts or
omissions, which were the proximate cause of injuries and damage sustained by the Traveler’s
[sic] insured; (2) “Mountaineer was not negligent;” and (3) in the event that the any of the
defendants are found to have been negligent, Mountaineer “is entitled to express or implied
contribution or indemnity.” Answer, Cross-cl., & Third-Party Compl. 11. These are precisely the
types of legal conclusions that are not entitled to the assumption of truth in assessing the
sufficiency of a claim under Twombly and Iqbal. See Iqbal, 556 U.S. at 678–79 (“The tenet that a
court must accept as true all allegations contained in a complaint is inapplicable to legal
conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory
statements, so not suffice.”).
In its Response, Mountaineer defends the sufficiency of its claim on the grounds that
indemnity and contribution are derivative of the plaintiff’s original claim, and as such,
“Mountaineer’s crossclaim effectively incorporates by reference the allegations in the Complaint.”
Resp. to Mot. to Dismiss Cross-cl. 6. Mountaineer did not expressly incorporate Travelers’
Complaint into its crossclaim, and even so, this would not overcome Mountaineer’s failure to plead
sufficient facts relevant to the elements of an indemnity or contribution claim.
Accordingly, the Hess defendants’ Motion to Dismiss Mountaineer’s Crossclaim is
GRANTED.
C. Pallotine and St. Mary’s Motion to Dismiss Mountaineer’s Third-Party
Complaint
Mountaineer filed its Third-Party Complaint asserting negligence against the insured,
Pallotine and St. Mary’s, and joining them as third-party defendants pursuant to Rule 14 of the
Federal Rules of Civil Procedure. Mountaineer alleges that acts or omissions of the insured and its
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agents were the proximate cause of the boiler explosion. Answer, Cross-cl., & Third-Party Compl.
14. Mountaineer states that that the insured are therefore “liable to Mountaineer for any and all
damages complained of in this civil action.” Id.
The third-party defendants move to dismiss on the grounds that the complaint “violates
basic insurance subrogation principles” and “improperly seeks to have Travelers obtain a recovery
from its own insured.” Mot. to Dismiss Third-Party Compl. 4–5. Mountaineer argues that
subrogation principles should have no effect on Mountaineer’s third-party complaint or its ability
to assert its negligence claim against Pallotine and St. Mary’s. Resp. Opp. Mot. Dismiss ThirdParty Compl. 9. [ECF No. 42].
The court believes Mountaineer’s Third-Party claims—asserting that Pallotine and St.
Mary’s were negligent and proximately caused the explosion—are better conceptualized as a
defense to the plaintiff Travelers’ claims. Travelers is essentially standing in the shoes of its
insured, Pallotine and St. Mary’s, in this subrogation action. See, e.g., syl. pt. 1, Porter v.
McPherson, 479 S.E.2d 668 (W. Va. 1996) (“The doctrine of subrogation is that one who has the
right to pay, and does pay, a debt which ought to have been paid by another is entitled to exercise
all the remedies which the creditor possessed against that other.”). Because Travelers is asserting
the rights of its insured, any defenses the defendants would assert against the insured, such as
comparative negligence, may be asserted against Travelers.
Moreover, it appears Mountaineer misunderstands the effect of joining a party under Rule
14. Rule 14 states in pertinent part, “[a] third-party defendant may proceed under this rule against
a nonparty who is or may be liable to the third-party defendant for all or part of any claim against
it.” Fed. R. Civ. P. 14(5). This means that Mountaineer’s third-party claims against Pallotine and

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St. Mary’s are limited to reimbursement of any amount Mountaineer might ultimately owe
Travelers. Consequently, denying the joinder of the third-party defendants under Rule 14 does not
prejudice Mountaineer in any way—asserting the allegedly negligent conduct of Pallotine and St.
Mary’s as a defense to reduce Mountaineer’s own liability would have the same effect as directly
recovering the amount of the reduction from Pallotine and St. Mary’s as third-party defendants.
Accordingly, Pallotine and St. Mary’s Motion to Dismiss Mountaineer’s Third-Party
Complaint is GRANTED.
IV.

Conclusion
In sum, the Hess defendants’ Motion to Dismiss [ECF No. 19] is DENIED; the Hess

defendants’ Motion to Dismiss Crossclaim [ECF No. 33] is GRANTED; and Pallotine and St.
Mary’s Motion to Dismiss Third-Party Complaint [ECF No. 37] is GRANTED. Accordingly, the
court ORDERS the Third-Party Complaint against Pallotine Health Services, Inc., and St. Mary’s
Medical Center, Inc., be DISMISSED.
The court DIRECTS the Clerk to send a copy of this Order to counsel of record and any
unrepresented party.
ENTER:

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November 16, 2015