United States District Court, W.D. Kentucky, Louisville Division
FACTORY MUTUAL INSURANCE PLAINTIFF COMPANY, as subrogee of General Electric Company,
DERBY INDUSTRIES, LLC DEFENDANT
MEMORANDUM OPINION AND ORDER
H. MCKINIEY, JR., CHIEF JUDGE
matter is before the court on a partial motion to dismiss
pursuant to Fed.R.Civ.P. 12(b)(6) by Defendant Derby
Industries, LLC ("Derby"). [DN 69]. Fully briefed,
this matter is ripe for decision.
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.)
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.)
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. (Id.) Derby filed a
motion to partially dismiss the complaint arguing in part
that Factory Mutual, as subrogee of GE, failed to state a
claim for the $6 million deductible paid by GE because such
claim belonged to GE and that GE was the real party in
interest with respect to the claim for its deductible. (DN
19.) In response to Derby's partial motion to dismiss,
Factory Mutual attached an assignment of claims dated June
27, 2017, by which GE assigned its right to pursue the
deductible to Factory Mutual. In its reply, Derby argued that
even if the assignment was valid, Factory Mutual's claim
for the deductible was time-barred by the applicable two-year
statute of limitations.
Memorandum Opinion and Order dated March 20, 2018, the Court
granted Derby's motion to dismiss the $6 million
deductible claim finding that Factory Mutual "cannot
maintain a claim for the $6 million deductible, as the
subrogee of GE, as it never actually paid that amount."
(DN 47 at 5.) While recognizing that GE assigned its personal
claim for this $6 million against Derby to Factory Mutual
(Assignment Agreement [DN 28-1] ¶ 2), the Court
concluded the assignment did not resolve this pleading
deficiency, as Factory Mutual could only recover as the real
party in interest if it had brought a claim in that capacity.
The Court instructed that if Factory Mutual wished to pursue
claims against Derby for the $6 million deductible as the
real party in interest, it should file a proper motion for
leave to amend its complaint, which should include a proposed
amended complaint that alleged that theory of recovery.
Mutual has since filed a First Amended Complaint alleging
that GE assigned its right to pursue the deductible to
Factory Mutual, and Factory Mutual is suing in its capacity
as real party in interest for the deductible amount.
(PL's First Amended Compl. at ¶ 23 [DN 63].) Derby
now moves to dismiss Plaintiffs claim for the deductible with
prejudice arguing that GE's assignment of its claim to
Factory Mutual is invalid, as it was executed on June 28,
2017, outside the two-year statute of limitations for
property damage claims.
Standard of Review
motion to dismiss for failure to state a claim pursuant to
Fed.R.Civ.P. 12(b)(6), a court "must construe the
complaint in the light most favorable to plaintiff,"
League of United Latin Am. Citizens v. Bredesen, 500
F.3d 523, 527 (6th Cir. 2007) (citation omitted),
"accept all well-pled factual allegations as true[,
]" id., and determine whether the "complaint states
a plausible claim for relief[, ]" Ashcroft v.
Iqbal 556 U.S. 662, 679 (2009). Under this standard, the
plaintiff must provide the grounds for his or her entitlement
to relief which "requires more than labels and
conclusions, and a formulaic recitation of the elements of a
cause of action." Bell Atl. Corp. v. Twombly,
550 U.S. 544, 555 (2007). A plaintiff satisfies this standard
only when he or she "pleads factual content that allows
the court to draw the reasonable inference that the defendant
is liable for the misconduct alleged." Iqbal,
556 U.S. at 678. A complaint falls short if it pleads facts
"merely consistent with a defendant's
liability" or if the alleged facts do not "permit
the court to infer more than the mere possibility of
misconduct." Id. at 678, 679. Instead, the
allegations must "'show[ ] that the pleader is
entitled to relief" Id. at 679 (quoting
GE's total loss from the fire was $140 million, it was
required to pay $6 million towards the loss as a deductible.
(Assignment Agreement [DN 28-1] ¶ E.) In its original
complaint filed on April 3, 2017, Factory Mutual, as subrogee
of GE, sought to recover the entire value of GE's $140
million loss from Derby, including the $6 million deductible
that Factory Mutual never paid to GE. Based on the June 27,
2017, assignment from GE, Factory Mutual now asserts a claim
for the $6 million deductible as the real party in interest.
Derby argues that Factory Mutual may not recover the $6
million deductible paid by GE because neither GE nor Factory
Mutual as assignee of that claim filed its claim for the
deductible within the applicable two-year statute of
limitations pursuant to KRS §
413.125. In response, Factory Mutual maintains that
the motion to dismiss should be denied because under both
Fed.R.Civ.P. 15(c)(1)(B) and 17(a)(3), the substitution of
Factory Mutual as the real party in interest as to the claim
for recovery of the deductible relates back to the original
Civ. P. 15(c)(1) applies in three types of situations