NORTH AMERICAN ELITE INSURANCE COMPANY v. VICTORY FIRE PROTECTION, INC.

RESPONSE in Opposition re MOTION for Summary Judgment of Third Party/Fourth Party Defendant Penn Builders Inc.

E.D. Pa.November 9, 2018

IN THE UNITED STATES DISTRICT COURT EASTERN DISTRICT OF PENNSYLVANIA NORTH AMERICAN ELITE INSURANCE COMPANY, as subrogee of Penn Foundation, Inc., Plaintiff, vs. VICTORY FIRE PROTECTION, INC., Defendant/ Third-Party Plaintiff, vs. PENN BUILDERS, INC., Third-Party Defendant. NORTH AMERICAN ELITE INSURANCE COMPANY, as subrogee of Penn Foundation, Inc., Fourth-Party Plaintiff, v. PENN BUILDERS, INC.; SIMPLEX GRINNELL, n/k/a JOHNSON CONTROLS FIRE PROTECTION LP; and ANCHOR FIRE PROTECTION COMPANY, Fourth-Party Defendants. CASE NO: 2:17-cv-03554-WB PLAINTIFF'S, NORTH AMERICAN ELITE INSURANCE COMPANY, as subrogee of Penn Foundation, Inc., OPPOSITION TO MOTION FOR SUMMARY JUDGMENT OF THIRD PARTY/FOURTH PARTY DEFENDANT PENN BUILDERS. INC. Plaintiff and Fourth Party Plaintiff, North American Elite Insurance Company, ("Plaintiff'), as subrogee of Penn Foundation, Inc. ("Penn Foundation"), submits its Opposition to Fourth-Party Defendant Penn Builders Inc.'s Motion for Summary Judgment. Case 2:17-cv-03554-WB Document 101 Filed 11/09/18 Page 1 of 9 I. INTRODUCTION Penn Builders Inc. ("Penn Builders") is a general contractor who constructed a building known as the Penn Villa facility which is owned by Plaintiffs subrogor Penn Foundation. The construction of the Penn Villa facility required installation of a fire suppression system. Penn Builders retained Defendant Victory Fire Protection, Inc. ("Victory Fire Protection") to install the fire protection system at the Penn Villa facility. The installation of the fire protection system was completed in November of 2012. The system was not installed properly, and in particular it was not installed as required by the code adopted NFPA 13 standards. See, further, Plaintiffs Opposition to Victory Fire Protection's Motion for Summary Judgment, at Section I and Section II, subsection A, pg. 1-5. See, also, Exhibit "J", Report, Supplemental Report, and Rebuttal Report of J. Pablo Ross, P.E., Defendant's Statement of Undisputed Facts, Joint Appendix of Exhibits PB-115-116. (hereinafter "the Ross Reports"). In summary, the failure of Victory Fire Protection to identify the location of every low point pipe drain valve on the fire protection system "as-built" drawings, and the failure of Victory Fire Protection to provide visible signage to identify the presence of these low point drain valves, lead to water remaining in a pipe in the unheated attic space of the Penn Villa facility after the first full flow test of the fire protection system on December 29, 2015. As a result, and during a period of below freezing weather conditions on January 5, 2016, the water left in the pipe froze, burst the pipe, and caused substantial water damage. The Penn Villa facility suffered damages in the amount of $373,651.20 as a result of the burst pipe.1 Plaintiff paid Penn Foundation for these damages pursuant to the policy of insurance it had issued to Penn 1 See, Victory Fire Protection Inc.'s Statement of Undisputed Material Facts in Support of Motion for Summary Judgment ("VFSUMF") ffijl and 14, citing Joint Appendix Exhibit ("JAPP Ex.") A, Complaint ("Compl") 6, 10, 18. 2 Case 2:17-cv-03554-WB Document 101 Filed 11/09/18 Page 2 of 9 Foundation, and Plaintiff is now pursuing its subrogation rights against Victory Fire Protection.2 After Plaintiff initiated this action and filed its Complaint, Victory Fire Protection used the impleader provisions of Federal Rule of Civil Procedure 14 to file an action as a Third-Party Plaintiff against, inter alia, Penn Builders.3 Victory Fire Protection's Complaint against Penn Builders alleges that Penn Builders was ultimately responsible for supervising the installation of the fire suppression system, and that Penn Builders also directed Victory Fire Protection to eschew the requirement that visible signage be posted to identify the location of the drain pipes and valves for the dry system.4 Thereafter, Plaintiff filed its Federal Rule of Civil Procedure 14(a)(3) Complaint against, inter alia, Penn Builders and incorporated by reference the claims made by Victory Fire Protection within Victory Fire Protection's Complaint against Penn Builders/ Plaintiff also asserted within its Federal Rule of Civil Procedure 14(a)(3) Complaint direct claims against Penn Builders to the extent that Victory Fire Protection is able to establish its claims of liability against Penn Builders.6 Both Victory Fire Protection and Penn Builders have filed Motions for Summary Judgment. Penn Builders' Motion for Summary Judgment is predominantly directed toward the issues raised by Victory Fire Protection's Complaint against Penn Builders, which issues primarily concern the contractual agreement between Victory Fire Protection and Penn Builders. However, Penn Builders also asserts that Plaintiffs claims against Penn Builders (by way of Plaintiffs FRCP 14(a)(3) Complaint) should be dismissed because Plaintiffs expert has not 2 JAPP Ex." A, Complaint Exhibit A, Plaintiffs Complaint. 3 See, PBSUMF ^|8, citing JAPP ex. F, Victory Fire Protection's Complaint. 4 See, PBSUMF ^8, citing JAPP ex. F, Victory Fire Protection's Complaint. 5 See, PBSUMF, ^[6, citing JAPP Ex. H. Plaintiffs FRCP 14(a)(3) Complaint against Penn Builders, et al. The two other named Third Party Defendants, Anchor Fire Protection, Inc. and SimplexGrinnell have been dismissed from this lawsuit 6. Id. 3 Case 2:17-cv-03554-WB Document 101 Filed 11/09/18 Page 3 of 9 rendered any opinions against Penn Builders. This assertion does not support summary judgment in favor of Penn Builders and against Plaintiff because it is incorrectly premised upon only the content of Plaintiff s expert's reports and completely ignores the factual allegations made by Victory Fire Protection against Penn Builders. Specifically, Victory Fire Protection alleges that the lack of adequate signage was attributable to Penn Builders' Penn Villa construction project superintendent Joe Horton, and that Penn Builders therefore is liable to the degree this omission caused the loss.7. Therefore, there exist a disputed material issue of fact sufficient to preclude a grant of summary judgment in favor Penn Builders and against Victory Fire Protection. II. UNDISPUTED FACTS A. The Sprinkler System Installed at Penn Villa Was Deficient Penn Villa was built pursuant to a construction contract ("Construction Contract") between Penn Foundation and Penn Builders dated July 5, 2011.8 The Construction Contract identifies Penn Foundation as the "Owner" of Penn Villa and Penn Builders as the "Contractor" for the construction of Penn Villa.9 Victory Fire Protection was the subcontractor retained to install the fire protection system and entered into a Subcontract Agreement ("Subcontract Agreement").10 The sprinkler system included a dry section in the unheated attic of Penn Villa, which section was not intended to constantly hold water but, instead, would be filled with pressurized air which would activate the system upon depressurization.11 Victory Fire Protection installed the fire protection sprinkler system, but did not identify the location of low point drain 7 See, Penn Builders Inc.'s Statement of Undisputed Material Facts in Support of Motion for Summary Judgment BPSUMF T[8, citing JAPP ex. F, Victory Fire Protection's Complaint. 8 See, PBSUMF, 1J2, citing JAPP Ex. A. Contract between Penn Foundation Inc. and Penn Builders Inc. 9 Id. 10 See, PBSUMF, ^|6, citing JAPP Ex. H. Plaintiffs 14(a)(3) Complaint against Penn Builders, et al. 11 See. PBSUMF, ^fl3, citing JAPP Ex. J. Report, Supplemental Report, and Rebuttal Report of Plaintiffs Expert, J. Pablo Ross, P.E. (collectively, "The Ross Reports") at PB 114-115. 4 Case 2:17-cv-03554-WB Document 101 Filed 11/09/18 Page 4 of 9 valves, and did not include signage indicating where the drains and drainage valves for the piping in the dry section were located.12 As described within the Ross Reports, and the pleadings already on file in connection with Victory Fire Protection's concurrently filed Motion for Summary Judgment, the consequences of these failings were the January 5, 2016 pipe freeze, break, and ensuing water loss at the Penn Villa facility. Following the loss, Victory Fire Protection alleged that the lack of adequate signage was attributable to Penn Builders superintendent Joe Horton, and that Penn Builders therefore is liable to the degree that this omission caused the loss.13 III. SUMMARY JUDGMENT STANDARD Summary judgment is proper "when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). The initial burden is on the moving party to demonstrate to the court that the record is devoid of issues of material fact and that the law supports a motion in the movant's favor. Celotex Corp. v Catrett, 477 U.S. 317, 325 (1986). However, summary judgment is a drastic remedy. Ness v. Marshall, 660 F.2d 517 (3d Cir. 1981). Because the remedy is so drastic, the posture of federal courts toward summary judgment is one of exacting standards and restraint. Bayou Bottling, Inc. v. Dr. Pepper Co., 543 F. Supp. 1255 (W.D. La. 1982), judgment affd, 725 F.2d 300 (5th Cir. 1984) ("Summary judgment should be used sparingly in all cases, and it is only with great caution and much soul-searching that these motions will be granted"). In the instant case, Penn Builders has failed to meet the imposing standards required for success on a motion for summary judgment. 12 Id. at PB 121. 13 See, PBSUMF ^|8, citing JAPP ex. F, Victory Fire Protection's Complaint. 5 Case 2:17-cv-03554-WB Document 101 Filed 11/09/18 Page 5 of 9 IV. ARGUMENT A. Federal Rule of Civil Procedure 14(a)(3) Does Not Require a Plaintiff Joining a Third-Party Plaintiffs Complaint to Advance an Independent Theory of the Case This case is in federal court and therefore governed by federal procedure. Hanna v. Plumer, 380 U.S. 460 (1965). As described above, Victory Fire Protection has used the provisions of Federal Rule of Civil Procedure 14 to implead Penn Builders.14 Victory Fire Protection's Rule 14 action against Penn Builders is appropriate, as is Plaintiffs incorporation by reference of the Victory Fire Protection's third-party claims made against Penn Builders pursuant to Plaintiffs FRCP 14(a)(3) Complaint. Therefore, Penn Builders' assertion that summary judgment against Plaintiff is supported by the lack of any allegation of fault by Plaintiff on the part of Penn Builders is without merit. In paragraphs 14, 26, and 27 of Penn Builders' Motion for Summary Judgment, Penn Builders posits the argument that because "plaintiff has produced three expert reports which render no opinion against Penn Builders...plaintiff is making no separate claim against Penn Builders, and summary judgment is appropriate for that reason as well." Penn Builders does not, and cannot cite, to any case law supporting the notion that Plaintiff is required to advance a theory of liability or to proffer evidence separate and distinct from the theory and evidence proffered by the Third-Party Plaintiff Victory Fire Protection so long as Plaintiff has incorporated by reference the entirety of Victory Fire Protection's third-party plaintiffs claim against Penn Builders. Indeed, the case law supports the opposite conclusion. 14 See, PBSUMF |8, citing JAPP ex. F, Victory Fire Protection's Complaint. 6 Case 2:17-cv-03554-WB Document 101 Filed 11/09/18 Page 6 of 9 B. Third Party Claims Are Derivative of Plaintiffs Claim Against the Defendant/Third-Party Plaintiff "A third-party claim under Rule 14 can be maintained only if the liability asserted is in some way derivative of the main claim." Kohl's Dep't Stores, Inc. v. Target Stores, Inc., 214 F.R.D. 406, 413 (E.D. Va. 2003). Stated otherwise, "The secondary or derivative liability notion is central...The claim against the third-party defendant must be based upon plaintiffs claim against defendant. The crucial characteristic of a Rule 14 claim is that defendant is attempting to transfer to the third-party defendant the liability asserted against defendant by the original plaintiff." 6 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1446 (3d ed. 2018). The derivative nature of third-party claims are clearly described by this summary provided by the U.S. District Court for the Eastern District of Virginia: "A third party claim is not appropriate where the defendant and putative third party plaintiff says, in effect, 'It was him, not me.' Such a claim is viable only where a proposed third party plaintiff says, in effect, 'If I am liable to plaintiff, then my liability is only technical or secondary or partial, and the third party defendant is derivatively liable and must reimburse me for all or part (one-half, if a joint tortfeasor) of anything I must pay plaintiff.'" Watergate Landmark Condo. Unit Owners' Ass'n v. Wiss, Janey, Elstner Associates, Inc., 117 F.R.D. 576, 578 (E.D. Va. 1987). C. Rule 14(a)(3) Does Not Prohibit the Plaintiff from Incorporating the Third- Party Defendant's Claims by Reference. Rule 14(a)(3) is permissive and leaves to Plaintiffs discretion whether and how to assert a claim against a third-party defendant. The rule reads in relevant part, "[t]he plaintiff may assert against the third-party defendant any claim arising out of the transaction or occurrence that is the subject matter of the plaintiffs claim against the third-party plaintiff." Numerous authorities have noted that "may" assert leaves the decision entirely in Plaintiffs hands. See, 6 Charles 7 Case 2:17-cv-03554-WB Document 101 Filed 11/09/18 Page 7 of 9 Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1459 (3d ed. 2018); See also, Answering Serv., Inc. v. Egan, 728 F.2d 1500, 1503 (D.C. Cir. 1984). In this action, Plaintiff elected to assert claims against Penn Builders but chose to do so by incorporating Victory Fire Protection's third-party action by reference.15 This is permissible and has the effect of coupling Plaintiffs claims against Penn Builders with the claims brought against Penn Builders by Victory Fire Protection. Moreover, had Penn Builders attempted to dismiss this action on the pleading as a 12(b)(6) motion, the motion would (1) be converted into a motion for summary judgment and (2) fail on its face because parties are allowed to incorporate litigation documents by reference. See, DiFolco v. MSNBC Cable LLC., 622 F.3d 104, 111 (2d Cir. 2010) ("A district court may consider the facts alleged in the complaint, documents attached to the complaint as exhibits, and documents incorporated by reference in the complaint.") Therefore, Plaintiffs action against Penn Builders is subject to a factual dispute. D. Any Disagreement Between Plaintiffs Expert and Victory Fire Protection's Expert Underscores why Summary Judgment Is Inappropriate at this Juncture Penn Builders suggests that a disagreement between Victory Fire Protection's expert reports and Plaintiffs expert's reports somehow supports Penn Builders' Motion for Summary Judgment. To the extent that these reports differ in what quantum of fault they attribute to the conduct of Penn Builders, then this disagreement underscores why this Court should not dispose of this case without first submitting issues to the trier of fact. See, e.g. Sightsound.com Inc. v. N2K, Inc., 391 F.Supp.2d 321, 330 (W.D. Pa. 2003)("Where there is specific, plausible and detailed testimony by dueling expert witnesses, summary judgment is often inappropriate.") (internal citations and quotations omitted). 15 See, PBSUMF, |6, citing JAPP Ex. H. Plaintiffs 14(a)(3) Complaint against Penn Builders, et al 8 Case 2:17-cv-03554-WB Document 101 Filed 11/09/18 Page 8 of 9 V. CONCLUSION: Victory Fire Protection exercised its rights under Rule 14 to implead Penn Builders. Plaintiff then chose to file a Federal Rule of Civil Procedure 14(a)(3) Complaint which incorporates by reference Victory Fire Protection's Third-Party Complaint. Insofar as Penn Builders seeks to support its Motion for Summary Judgment on the grounds of any deficiency in Plaintiffs pleading, or evidence proffered by Plaintiff, Penn Builders fails to recognize the incorporation by reference of Victory Fire Protection's causes of action into Plaintiffs 14(a)(3) Complaint, and Penn Builders also fails to recognize the disputed issues of fact. For these reasons, summary judgment should be denied. Dated: November 9, 2018 Respectfully submitted, /s/Dcmiel C. Thevenv Daniel C. Theveny, Esq. (PA 41059) COZEN O'CONNOR, P.C. One Liberty Place 1650 Market Street, Suite 2800 Philadelphia, PA 19103 Tel: (215) 665-4194 Fax: (866) 240-3638 dthevenv@,cozen.com Attorneys for Plaintiff North American Elite Insurance Company a/s/o Penn Foundation, Inc. 9 Case 2:17-cv-03554-WB Document 101 Filed 11/09/18 Page 9 of 9