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Mitsui Sumitomo Insurance USA, Inc. v. Denham-Blythe Co. Inc.

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

April 30, 2019

MITSUI SUMITOMO INSURANCE USA, INC. as subrogee of ASAHI BLUEGRASS FORGE CORPORATION, Plaintiff,
v.
DENHAM-BLYTHE COMPANY, INC., et al., Defendants.

          SECOND AMENDED MEMORANDUM OPINION AND ORDER

          Joseph M. Hood Senior U.S. District Judge

         This matter comes before the Court on Defendant Denham-Blythe Company, Inc's (“Denham-Blythe”) Motion to Dismiss Pursuant to Federal Rule of Civil Procedure 12(b)(6). [DE 20]. Having considered the matter fully, and being otherwise sufficiently advised, the undersigned will grant Defendant Denham-Blythe's Motion to Dismiss Pursuant to Federal Rule of Civil Procedure 12(b)(6) [DE 20].

         FACTUAL AND PROCEDURAL BACKGROUND

         This case arises from a January 31, 2011 design-build contract (“the Contract”) between Asahi Bluegrass Forge Corporation (“Asahi”) and Denham-Blythe for the construction of a 68, 000 square foot manufacturing facility (“the Building”). [DE 20-1, at 2]. “Denham-Blythe and Asahi utilized AIA Document A141 - 2004 Standard Form of Agreement Between Owner and Design-Builder, with modifications specific to this job, for the Contract.” [DE 20-1, at 2 (citing [DE 20-2])]. On March 2, 2012, the roof of the Building was damaged by severe winds and was subsequently repaired by Denham-Blythe. [DE 20-1, at 2]. Again, on March 1, 2017, the roof of the Building sustained damage from severe winds, and Denham-Blythe completed both the temporary repair work and permanent repair work. Id.

         After the roof was damaged on March 1, 2017, Asahi submitted property damages claims to its insurer, Plaintiff Mitsui Sumitomo Insurance USA, Inc. (“Mitsui”). Id. “According to the Complaint, Mitsui Sumitomo made payments to Asahi in response to the claims in the amount of $1, 315, 092.00 under policy PKG3126694 (hereinafter referred to as ‘the Policy') with effective dates of October 1, 2016 through October 1, 2017.” Id. (citing [DE 20-3]). On February 22, 2018, Mitsui, as subrogee of Asahi, filed its Complaint [DE 1] against Denham-Blythe, BlueScope, Varco, and Arrow asserting subrogation rights against Defendants for the amounts paid to repair the property damage caused by the 2017 severe winds. [DE 1]. Mitsui's claims against Denham-Blythe include negligence, breach of contract, breach of warranty of workmanlike services, and negligent misrepresentation. Id. On April 13, 2018, Denham-Blythe filed the present Motion to Dismiss [DE 20].

         STANDARD OF REVIEW

         Federal Rule of Civil Procedure 12(b)(6) provides that a complaint may be attacked for failure “to state a claim upon which relief can be granted.” To survive a Rule 12(b)(6) 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.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A motion to dismiss is properly granted if it is beyond doubt that no set of facts would entitle the petitioner to relief on his claims.” Computer Leasco, Inc. v. NTP, Inc., 194 Fed.Appx. 328, 333 (6th Cir. 2006). When considering a Rule 12(b)(6) motion to dismiss, the court will presume that all the factual allegations in the complaint are true and draw all reasonable inferences in favor of the nonmoving party. Total Benefits Planning Agency v. Anthem Blue Cross & Blue Shield, 552 F.3d 430, 434 (6th Cir. 2008) (citing Great Lakes Steel v. Deggendorf, 716 F.2d 1101, 1105 (6th Cir. 1983)). “The court need not, however, accept unwarranted factual inferences.” Total Benefits Planning Agency, 552 F.3d at 434 (citing Morgan v. Church's Fried Chicken, 829 F.2d 10, 12 (6th Cir. 1987)).

         DISCUSSION

         A. DEFENDANT DENHAM-BLYTHE'S MOTION TO DISMISS PURSUANT TO RULE 12(B)(6)

         In support of dismissal, Defendant Denham-Blythe argues the following: (1) “Kentucky law recognizes the sacred right to contract;” (2) “[t]he claim is barred by the waiver of subrogation clause contained in the design build contract between Denham-Blythe and Asahi Bluegrass Forge Corporation;” (3) “[t]he insurance policy issued by Plaintiff to Asahi Bluegrass Forge Corporation granted Asahi the right to waive subrogation;” and (4) “[t]he claim is barred by the dispute resolution clauses in the contract.” [DE 20-1, at 1].

         1. KENTUCKY LAW AND THE RIGHT TO CONTRACT

         Denham-Blythe correctly asserts, “Kentucky Courts have long honored the freedom to contract[, ]” and “The Kentucky Supreme Court has affirmed this principle many times.” [DE 20-1, at 4].[1]“Generally, the doctrine of freedom to contract prevails and, in the absence of ambiguity, a written instrument will be enforced strictly according to its terms.” Mullins v. N. Kentucky Inspections, Inc., No. 2009-CA-000067-MR, 2010 WL 3447630, at *1 (Ky. Ct. App. Sept. 3, 2010) (citing Frear v. P.T.A. Industries, Inc., 103 S.W.3d 99, 106 (Ky. 2003)); see also Commonwealth v. L. G. Wasson Coal Mining Corp., Ky., 358 S.W.2d 347 (1962) (“In considering the legality of Contract B, we recognize the sacred right to contract without undue interference.”). In Mullins, the Supreme Court of Kentucky recited Jones v. Hanna, 814 S.W.2d 287, 289 (Ky. Ct. App. 1991) as follows:

“[C]ontracts voluntarily made between competent persons are not to be set aside lightly. As the right of private contract is no small part of the liberty of the citizen, the usual and most important function of courts is to enforce and maintain contracts rather than to enable parties to escape their obligations on the pretext of public policy or illegality. If the legality of the contract can be sustained in whole or in part under ...

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