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Factory Mutual Insurance Co. v. Derby Industries, LLC

United States District Court, W.D. Kentucky, Louisville Division

March 19, 2018

FACTORY MUTUAL INSURANCE COMPANY, as subrogee of General Electric Company, PLAINTIFF
v.
DERBY INDUSTRIES, LLC DEFENDANT

          MEMORANDUM OPINION AND ORDER

          Joseph H. McKinley, Jr., Chief Judge.

         This matter is before the court on a motion for partial dismissal by defendant Derby Industries, LLC (“Derby”). (DN 19.) Also before the Court are motions by plaintiff Factory Mutual Insurance Company (“Factory Mutual”) to exclude all documents outside the pleadings (DN 28) and to set an initial case management conference. (DN 37.) Fully briefed, these matters are ripe for decision.

         I. Background

         The present dispute stems from a large fire that occurred at General Electric Company's (“GE”) Appliance Park, a 1, 000 acre industrial manufacturing campus in Louisville, Kentucky. (Pl.'s Compl. [DN 1] ¶ 7.) Appliance Park had six main buildings at the time of the fire, one of which was known as “AP6.” On April 3, 2015, a fire originated in AP6 and quickly spread, completely destroying the 650, 000 square foot warehouse section of AP6 and its contents. (Id. ¶ 17.) The fire also significantly damaged the 100, 000 square foot office section of AP6 and its contents, and smoke caused extensive soot damage to the adjacent building and its contents. (Id. ¶¶ 17-18.) Additionally, GE claims that the fire damage disrupted manufacturing and business operations throughout Appliance Park and the United States. (Id. ¶ 19.)

         At the time of the fire, GE was leasing approximately 450, 000 square feet of floor space in AP6 to Derby pursuant to a written lease agreement (“Lease Agreement”). GE exclusively used and occupied the 100, 000 square feet of office space in AP6, while the remaining floor space was used and occupied in various ways by GE and its subcontractors/tenants. GE and Derby were also parties to a Supplier Distribution Center Agreement (“SDC Agreement”). Pursuant to this agreement, Derby used its leased floor space in AP6 as a supplier distribution center for palletized bulk and high rack storage. (Id. ¶ 12.) The complaint alleges that the majority of the palletized bulk stored by Derby was comprised of flammable, plastic parts stacked up to twenty-six feet in the air. (Id. ¶ 17.) The complaint also claims that the rapid spread of fire across AP6 was the direct and proximate result of the “enormous fuel load” created by Derby's bulk storage and high rack storage practices. (Id.) Factory Mutual, which at all relevant times provided property and business interruption insurance to GE, alleges that damages from the fire total approximately $140 million. (Id. ¶¶ 8, 20.) Factory Mutual reimbursed GE for damages in the amount of $134 million, as the policy imposed a $6 million deductible on GE. (Id. ¶ 28.)

         Factory Mutual, as subrogee of GE, filed this complaint against Derby on April 3, 2017, alleging negligence/negligence per se, breach of contract, and contractual indemnification and seeking $140 million in damages. (DN 1.) Derby has filed a motion to partially dismiss the complaint pursuant to Fed.R.Civ.P. 12(b)(6), as Factory Mutual has failed to state a claim for the $6 million deductible paid by GE and the $68.5 million cost associated with rebuilding AP6. (DN 19.) Factory Mutual has responded by seeking to exclude the documents Derby cites to in support of their motion, as they are matters outside the pleadings. (DN 28.) Alternatively, Factory Mutual argues that the motion should be converted into one for summary judgment, and that under either standard, Derby's motion should be denied. (Id.) Finally, Factory Mutual has also filed a motion to set an initial case management conference. (DN 37.)

         II. Standard of Review

         The first issue before the court is the proper standard to apply to Derby's motion for partial dismissal. Generally, under Rule 12(b)(6), the court must assess the facial sufficiency of the complaint without resorting to matters outside the pleadings. See Wysocki v. Int'l Bus. Mack Corp., 607 F.3d 1102, 1004 (6th Cir. 2010). If “matters outside the pleadings are presented to and not excluded by the court” when deciding a Rule 12(b)(6) motion, “the motion must be treated as one for summary judgment under Rule 56.” Fed.R.Civ.P. 12(d).

         In support of its motion, Derby attached a document called “Agreement Relating to AP6 Lease and SDC” (“Termination Agreement”) not contained in the pleadings. (DN 19-1, at 15.) Derby's motion also references the contents of a “Confidential Settlement Agreement” (“CSA”) which was not attached to the pleadings or the present motion but has since been filed under seal with the Court. (DN 43.) Factory Mutual urges the court to strike and exclude the attached document and reference to the CSA as unauthenticated documents outside the pleadings and consider the motion under Rule 12(b)(6). Alternatively, Factory Mutual argues that the motion should be converted to a motion for summary judgment under Rule 56.

         The Court will convert Derby's motion into one for summary judgment. Factory Mutual's contention that the Termination Agreement and CSA are unauthenticated and therefore should be stricken is rendered moot by Factory Mutual's filing of the same documents, along with affidavits for authentication purposes, as exhibits to its response to Derby's motion. (DN 28-1, 28-2.) Further, Factory Mutual has also attached and relied upon a document entitled “Assignment of Claims Agreement” (“Assignment Agreement”) in its response to Derby's motion. This Assignment Agreement is not contained in the pleadings, and thus the court must convert Derby's motion to one for summary judgment in order to consider this document in Factory Mutual's response. As both parties have attached and relied upon documents not contained in the pleadings and had an opportunity to respond to the documents submitted by the opposing parties, the court finds it appropriate to convert Derby's motion into a motion for summary judgment. Therefore, Factory Mutual's motion to exclude those documents included by Derby in its motion (DN 28) is DENIED.

         A party moving for summary judgment must show that “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). The moving party bears the burden of demonstrating the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Additionally, the Court must draw all factual inferences in favor of the nonmoving party. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). A genuine issue for trial exists when “there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986).

         III. Discussion

         Derby's motion argues that Factory Mutual may not recover (1) the $6 million paid by GE as a deductible and (2) damages for the rebuild value of AP6, estimated by Factory Mutual to ...


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