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Newberry v. Service Experts Heating & Air Conditioning, LLC

United States District Court, E.D. Kentucky, Central Division

April 6, 2018



          Joseph M. Hood Senior U.S. District Judge.

         This matter is before the Court upon three motions to dismiss filed by Lennox Industries, Inc. (“Lennox”) [DE 10], Service Experts Heating & Air Conditioning, LLC (“SEHAC”) [DE 11], and Service Experts, LLC [DE 12]. Plaintiff has responded to each of these Motions [DE 13, 14, 15], and each defendant has filed a Reply in further support of their Motions [DE 17, 18, 19.] The Court concludes that there is merit to each motion and will dismiss all claims against these three defendants for the reasons stated below.


         This action involves a long-standing dispute between the parties. For the purposes of evaluating the Motion to Dismiss, the Court accepts the following facts averred in the Complaint as true.

         On December 7, 2011, SEHAC made a service call to Plaintiff's home to repair an Aqua-Pure backwash filter system, but Plaintiff was informed that SEHAC would not be able to repair the unit because it did not service Aqua-Pure equipment. (¶ 11). On December 12, 2011, SEHAC returned to Plaintiff's home and sold Plaintiff two new water system units. The first was a TS 2000 Easy Water Toxin Shield Backwash Water Filter (“Toxin Shield System”) manufactured by Defendant Freije Treatment Systems, Inc. (“Freije”), for the entire home, and the second was a Revita water system for the kitchen. (¶ 12). SEHAC installed the whole house Easy Water Toxin Shield System and Revita water system the same day and Plaintiff paid Defendant SEHAC in full for both systems on the same day. (¶¶ 14, 15).

         On December 19, 2011, Plaintiff informed SEHAC of problems with both new water systems. (¶ 16). On December 20, 2011, an agent of SEHAC came to Plaintiff's home to inspect the systems, repair the water systems, and take a water sample to assure Plaintiff that the water was safe to drink and use. (¶ 17). The employee and/or agent of SEHAC then announced that the Easy Water Toxin Shield water system was working perfectly, and advised Plaintiff that they were taking a water sample for testing. (¶ 17). On December 30, 2011, another employee and/or agent of Defendant SEHAC made a second service call to Plaintiff's home and advised Plaintiff, “Your water tested fine, ” and then, and on other unspecified occasions, assured Plaintiff that the water was safe for consumption. (¶¶ 18, 19).

         After other interactions, Plaintiff asked for the Easy Water Toxin Shield system to be removed and asked that the Aqua-Pure system be re-installed. (¶¶ 20-24). SEHAC informed Plaintiff that it would submit claims for the systems, but never returned to service the system, remove the system, or return or re-install Plaintiff's Aqua-Pure system despite repeated assurances that they would return the Aqua-Pure filter system or compensate Plaintiff for his loss. (¶¶ 25-26). Plaintiff avers that SEHAC repeatedly assured him that the issue would be resolved but then denied any knowledge of Plaintiff's claim for taking and failing to return the Aqua-Pure filter system prior to January 23, 2013. (¶ 34). Plaintiff's Aqua-Pure filter system has not been returned and Plaintiff has not received monetary compensation for it. (¶ 36).

         In 2013, Plaintiff and his spouse filed substantially similar civil actions against Defendants SEHAC, Service Experts LLC, and Lennox Industries, Inc., in Kentucky state court. Defendants removed the cases to the United States District Court, Eastern District of Kentucky, at Covington. (¶¶ 37-38; Newberry v. Service Experts Heating and Air Conditioning, et al., No. 2:13-cv-00080-DLB-CJS [“Newberry Prior Action”]; Rorick v. Service Experts Heating and Air Conditioning, et al., No. 2:13-cv-00081-WOB-CJS) [“Rorick Prior Action”]). During the pendency of those prior actions, an attorney for Defendants pointed out to Newberry that, at the time the suit commenced, no one in Plaintiff's home was sick or injured physically from drinking or using the water in Plaintiff's home and assured Plaintiff that a Defendant had, in fact, tested the water and stated that the water was safe for Plaintiff to drink and use. Plaintiff conceded that there was no present evidence of physical injury nor any established reason to suspect future harm to health or safety from the water in Plaintiff's home. (¶¶ 39-40).

         Thus, on May 21, 2013, Plaintiff filed a Notice of Voluntary Dismissal Without Prejudice in the Newberry Prior Action. (¶ 39; Newberry Prior Action, DE 7). The Court entered an Order and dismissed the Newberry Prior Action without prejudice on May 22, 2013. (¶ 39; Newberry Prior Action, DE 8). It later dismissed the Rorick Prior Action without prejudice, on November 15, 2012, but subject to certain “terms and conditions.”[1] (Rorick Prior Action, DE 16). Before that dismissal, Plaintiff, who is also an attorney, represented his wife at an October 9, 2013, hearing. During that hearing, Newberry explained to the court that he was aware of “physical injuries” which he believed were related to the water filtration system.[2] He explained that four of his dogs had developed tumors and one cat had died after drinking the water and that his wife, Rorick, had been diagnosed with blood clots, intimating that he believed these injuries were the result of some sort of failure of the filtration system at bar in that case, which is the same as the system in this case.

         In his Complaint in the present action, he avers that, beginning January 8, 2015, several of Plaintiff's pets became ill with various forms of what were, or were believed to be, cancer. Some died. (¶¶ 41-44, 46, 52). In the fall of 2015, Plaintiff's spouse began suffering reoccurring migraine headaches, a condition for which she is receiving ongoing medical treatment. (¶ 45). On February 26, 2016, Plaintiff submitted a sample of the household water supply to an environmental laboratory after which tests revealed for the first time that the household water supply had been contaminated with known carcinogenic compounds at dangerously high levels. (¶ 49). The carcinogens were entering the water supply while the water filtration systems manufactured by Freije and installed by SEHAC were supposed to be filtering toxins out of the water supply. (¶ 50). The water passing through these systems was the primary source of drinking water for Plaintiff and his spouse, and was the sole source of drinking water for all of the animals that died. (¶ 51). After learning of the toxins in the water, Plaintiff connected to a public water supply and replaced a water heater and a portion of the plumbing. (¶ 53).

         On March 16, 2017, Plaintiff filed the present action. It is substantially similar to, and contains many of the same factual averments, as the Newberry Prior Action. Also on March 16, 2017, Plaintiff's spouse, Kimberly Rorick, filed a new action. (Rorick v. Service Experts Heating and Air Conditioning, et al., No. 5:17-cv-00132-JMH). It is substantially similar to Plaintiff's action and is also substantially similar to, and contains many of the same factual averments, as the Rorick Prior Action. Both of these new actions were filed in the Lexington division of this Court.


         In ruling on Defendants' Rule 12(b)(6) motion, the Court must “construe the complaint in the light most favorable to the plaintiff, accept its allegations as true, and draw all reasonable inferences in favor of the plaintiff.” Jones v. City of Cincinnati, 521 F.2d 555, 559 (6th Cir. 2008). The Court is not bound to accept as true “recitals of the elements of a cause of action, supported by mere conclusory statements[.]” Ashcroft v. Iqbal, 556 U.S. 662, 678. “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.'” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 570). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556).

         “Generally, at the motion to dismiss stage, a federal court may consider only the plaintiff's complaint.” In re Omnicare, Inc. Securities Litigation, 769 F.3d 455, 466 (6th Cir. 2014). However, “if a plaintiff references or quotes certain documents, or if public records refute a plaintiff's claim, a defendant may attach those documents to its motion to dismiss, and a court can then consider them in resolving the Rule 12(b)(6) motion without converting the motion into a Rule 56 motion for summary judgment.” Id. Thus, the Court may consider the prior Newberry action, as well as the pleadings and public proceedings in the action, Rorick v. Service Experts Heating & Air Conditioning, LLC, 2:13-cv-81-WOB (referenced in Plaintiff's complaint at ¶ 37-39).


         As an initial matter, the Court agrees with the Defendants Lennox and Service Experts that Plaintiff has failed to aver any act or omission by either of them that led to his injuries. SEHAC was responsible for the sale and installation of a Freije system and was in contractual privity with Plaintiff on the facts averred. Although the Court must accept all well-pled factual allegations, the existence of an agency relationship is a legal determination that is not entitled to the same presumption. See Papasan v. Allain, 478 U.S. 265, 286 (1986) (“Although for the purposes of this motion to dismiss we must take all the factual allegations in the complaint as true, we are not bound to accept as true a legal conclusion couched as a factual allegation.”). “When attempting to plead liability through agency, a claimant must plead facts that would support a finding that the alleged agents had actual or apparent authority to act on behalf of another.” Pixler v. Huff, 2012 WL 3109492, at *9 (W.D.Ky. July 31, 2012)(internal quotation marks and citation omitted).

         While Plaintiff avers a parent-subsidiary relationship between Defendant SEHAC and both Lennox and Service Experts and avers that they do business in Kentucky by and through SEHAC, Plaintiff's Complaint conflates the idea of vicarious liability and piercing the corporate veil. Absent some averment that Lenox and Service Experts were directly involved in the sale or installation of the Freije system and the subsequent repairs and failure to reinstall the prior system or were in contractual privity with Plaintiff, “the mere existence of a parent-subsidiary relationship is insufficient to establish vicarious liability.” See Moore v. Lowe's Companies, Inc., 2013 WL 1907488 at n. 4 (W.D.Ky. May 7, 2013); see, e.g., Beck v. Consol. Rail Corp., 394 F.Supp.2d 632, 640 (S.D.N.Y. 2005). Moreover, “[u]nless otherwise provided in the articles of incorporation, a shareholder of a corporation shall not be personally liable for the acts or debts of the corporation except that he or she may become personally liable by reason of his own acts or conduct.” KRS § 271B.6-220. Without more, the averment that Lennox and Service Experts were “transacting business . . . through” SEHAC is insufficient to establish the type of relationship upon which a party may found a case like this.

         Plaintiff must observe the corporate structure and its implications absent an adequately pleaded claim that the corporate veil should be pierced. See Sudamax Industria e Comercio de Cigarros, Ltda v. Buttes & Ashes, Inc., 516 F.Supp.2d 841, 847 (W.D. Ky. 2007) (citing Morgan v. O'Neil,652 S.W.2d 83, 85 (Ky. 1983); Natural Resources and Environmental Protection Cabinet v. Williams,768 S.W.2d 47, 50-51 (Ky. 1989) (“‘A shareholder may be liable for a corporate debt either by “piercing the corporate veil” or by statutory authorization'”; a complaint which alleges neither is fatally defective); Zetter v. Griffith Aviation, Inc., 2006 WL 1117678, *8 (E.D.Ky. April 25, 2006); First National Bank of Louisville v. Lustig,809 F.Supp. 444, 446 (E.D.La. 1992) (interpreting Kentucky law); Baseball at Trotwood, LLC v. Dayton ...

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