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East Kentucky Power Cooperative, Inc. v. Aecom Technical Services, Inc.

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

May 6, 2019

EAST KENTUCKY POWER COOPERATIVE, INC., Plaintiff,
v.
AECOM TECHNICAL SERVICES, INC., Defendant/Third Party Plaintiff.
v.
WEDDLE ENTERPRISES, INC., Third-Party Defendant, and CONSULTING SERVICES, INC., Third-Party Defendant.

          MEMORANDUM OPINION AND ORDER

          JOSEPH M. HOOD, SENIOR U.S. DISTRICT JUDGE

         Third-Party Defendants Weddle Enterprises, Inc. (“Weddle”) and Consulting Services, Inc. (“CSI”) separately moved [DE 13, 22] to dismiss Defendant/Third-Party Plaintiff AECOM Technical Services, Inc.'s (“AECOM's”) third-party complaint against them.

         In the underlying dispute, Plaintiff, East Kentucky Power Cooperative, Inc. (“EKPC”, ) alleges it made an agreement (the “Design Contract”) with AECOM, under which AECOM would design and provide construction support services for an expansion of the Spurlock Landfill, including design and development of construction plans for an external haul road. [DE 1-1]. While construction of the external haul road was on-going, a portion of the slope on which the road was constructed failed. [Id.].

         As a result of the slope failure, EKPC brought several claims against AECOM, including breach of contract, breach of the covenant of good faith and fair dealing, breach of warranty, indemnity, misrepresentation, and professional negligence. [Id.]. AECOM has since filed suit against Weddle and CSI, seeking indemnity from Weddle and CSI for damages stemming from any liability that might accrue to AECOM as a result of an alleged slope failure. [DE 10].

         CSI and Weddle now move to dismiss AECOM's third-party complaint, arguing that AECOM is not entitled to bring an indemnity claim against them pursuant to Federal Rule of Civil Procedure 14(a)(1), and that AECOM failed to state claim for indemnity under Kentucky common law. [DE 13; DE 22]. AECOM has responded to the CSI and Weddle's respective motions to dismiss. [DE 21; 23]. The third-party defendants have replied in support of their motion or the time for replies has otherwise expired. [DE 24]. As a result, this matter is ripe for review and consideration.

         For the reasons that follow, CSI and Weddle's respective motions to dismiss [DE 13; DE 22] AECOM's third-party complaint [DE 10] are GRANTED.

         I. Procedural and Factual Background

         EKPC owns and operates a power generation facility near Maysville, Kentucky, which is known as the Hugh L. Spurlock Generating Station (“Spurlock Power Plant”). [DE 1-1 at 1, PageID #6, ¶ 1]. In addition, EKPC owns and operates a landfill (“Spurlock Landfill”) adjacent to the Spurlock Power Plant, which is used for the disposal of coal combustion residues produced at the Spurlock Power plant. [Id., PageID #6, ¶ 2].

         On or around January 18, 2016, EKPC retained AECOM to provide design and construction support services for an expansion of the Spurlock Landfill known as the “Area, C, Phase 3 lateral expansion.” [Id., PageID #6, ¶ 4]. On July 29, 2016, EKPC retained AECOM to provide a preliminary design for an external, permanent haul road (the “External Haul Road”) to access the bottom of the Area C, Phase 3 cell construction. [Id. at 2, PageID #7, ¶ 5]. On August 17, 2016, EKPC requested AECOM proceed with the development of construction plans for the External Haul Road. [Id. at 2, PageID #7, ¶ 7]. On October 7, 2016, AECOM delivered plans for design for the External Haul Road. [Id. at 3, PageID #8, ¶ 14]. On October 14, 2016, AECOM provided EKPC with its proposal for the design of the External Haul Road. [Id.] On March 3, 2017, AECOM delivered to EKPC a set of design plans for the construction of the External Haul Road, marked “For Construction.” [Id. at 3, PageID #8, ¶ 14].

         AECOM alleges that, at some point, EKPC also entered contracts with Weddle and CSI. [DE 10]. The EKPC-Weddle contract allegedly required Weddle to acquire materials necessary for the External Haul Road and to construct the External Haul Road. [DE 10 at 2-3, PageID #77-8, ¶ 11]. AECOM also claims EKPC entered into a contract with CSI, requiring CSI to oversee, supervise, and manage the construction of the External Haul Road; to provide construction monitoring and conformance laboratory testing of the structural fill materials for the road; to report to EKPC; to prepare daily field reports and laboratory testing results; and to attend construction progress meetings. [DE 10 at 3, PageID #78, ¶ 12].

         On March 10, 2017, while construction of the External Haul Road was still in progress, a portion of the slope on which the External Haul Road was being constructed failed (the “Slope Failure”), causing damage to, and loss of a portion of the External Haul Road. [Id. at 3, PageID #8, ¶ 16]. Following the Slope Failure, EKPC retained CSI to conduct an evaluation of the Slope Failure and to determine the cause of the failure. [Id. at 3, PageID #8, ¶ 17]. CSI then issued a 19-page report regarding the Slope Failure. [Id. at 3-4, PageID #8-9, ¶ 19.]

         On June 7, 2018, EKPC filed this action in Clark Circuit Court, Division I, bringing several claims against AECOM, including breach of contract, breach of the covenant of good faith and fair dealing, breach of warranty, indemnity, misrepresentation, and professional negligence. [DE 1-1]. AECOM then removed the action to this Court, based on diversity jurisdiction, pursuant to 28 U.S.C. §§ 1332, 1441, and 1446. [DE 1].

         AECOM then filed a third-party complaint seeking indemnity from Weddle and CSI for damages stemming from any liability that might accrue to AECOM as a result of an alleged slope failure, and further seeks apportionment to the extent of Weddle and CSI's fault for the Slope Failure. [DE 10]. CSI and Weddle now move to dismiss AECOM's third-party complaint, arguing that AECOM is not entitled to bring an indemnity claim against them pursuant to Federal Rule of Civil Procedure 14(a)(1), and that, in any event, AECOM failed to state claim for indemnity under Kentucky common law. [DE 13 at 1; DE 22-1].

         CSI and Weddle now move to dismiss AECOM's third-party complaint, arguing that AECOM is not entitled to bring an indemnity claim against them pursuant to Federal Rule of Civil Procedure 14(a)(1), and that AECOM failed to state claim for indemnity under Kentucky common law. [DE 13 at 1; DE 22-1]. In response, AECOM asserts that it has stated a valid claim for indemnity under Kentucky law, arguing that “...any damage caused to [EKPC] by the slope failure was exclusively and entirely caused by the negligent actions or inactions of CSA (and Weddle).” [DE 21, PageID #173; Doc. 23, PageID #183]. AECOM further argues that CSI and Weddle ...


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