Del. & Hudson Ry. Co. v. Knoedler Mfrs., Inc.

DELAWARE & HUDSON RAILWAY COMPANY, INC., et.al., Plaintiffs,

v.KNOEDLER MANUFACTURERS, INC., et al., Defendants.

C.A. No. 11-314 Erie

UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA

Dated: August 1, 2013

Chief District Judge McLaughlin

MEMORANDUM OPINION

McLAUGHLIN, SEAN J., Chief Judge

This matter is before the Court upon Motions to Dismiss Pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6) filed by Defendants Knoedler Manufacturers, Inc. ("Knoedler") and Durham Industrial Sales, Inc. ("Durham"). This Court has jurisdiction pursuant to 28 U.S.C. § 1332(a)(3). For the reasons which follow, Defendants' motions are granted.

I. Procedural Background

On December 16, 2011, Plaintiff Canadian Pacific Railway ("Plaintiff") commenced the instant action against Knoedler and Durham asserting claims for indemnification, breach of contract, product liability and negligence under Pennsylvania law. On March 30, 2012, Plaintiff filed an Amended Complaint reasserting the sameclaims.¹ Knoedler and Durham responded by filing motions to dismiss, primarily asserting that Plaintiff's state law claims were pre-empted by the Locomotive Inspection Act ("LIA"), 49 U.S.C. § 20701. On February 12, 2013, this Court dismissed Plaintiff's indemnification claim with prejudice after concluding that it was pre-empted by the LIA. See Delaware & Hudson Ry. Co., Inc. v. Knoedler Manucturers, Inc., 2013 WL 504814 (W.D. Pa. 2013). Plaintiff's breach of contract claim was dismissed on the basis of the Court's determination that the factual allegations set forth in the Amended Complaint were insufficient to state a claim. Id. The Court noted the possibility that Plaintiff's breach of contract claim might also be pre-empted by the LIA, but declined to rule on that issue at that time in light of the insufficiency of Plaintiff's factual allegations. Consistent with Shane v. Fauver, 213 F.3d 113, 116 (3rd Cir. 2000), the Court granted Plaintiff an opportunity to attempt to cure the defects in its breach of contract claim, resulting in a Second Amended Complaint on February 28, 2013.

II. Factual Background

Plaintiff's breach of contract claim stems from four previous lawsuits brought against the company by employees who sustained injuries as the result of faulty locomotive seats. (Second Amended Complaint, ¶¶ 27-32). Each of the four injured employees filed suit under the Federal Employer's Liability Act ("FELA"), 45 U.S.C. § 51 et seq., alleging that the faulty seats in Plaintiff's locomotives violated the Locomotive Inspection Act, 49 U.S.C. § 20701. (Id.). Plaintiff settled each of the four employee lawsuits for an aggregate amount of $2,723,000. (Id. at ¶¶ 29-32).

The locomotives at issue were manufactured by General Electric ("GE") pursuant to a contract entered into between GE and Plaintiff in the mid-1990's. (Id. at ¶ 8). The seats which caused the injuries were purchased by GE from Knoedler pursuant to "a contract, or a series of contracts." (Id. at ¶ 10-14). As part of its contract with GE, Knoedler allegedly agreed to provide seats "of suitable quality to prevent seat failures" and which "compl[ied] with the standards of the Locomotive Inspection Act and applicable federal regulations." (Id. at ¶¶ 15, 17).

At some point in the "late 1990's and early 2000's," GE and Plaintiff identified certain defects in the seats which presented safety concerns, resulting in numerous communications between GE and Knoedler regarding the nature of the defects and how they might be repaired. (Id. at ¶¶ 19-20). When Knoedler failed to repair the seats to GE's satisfaction, Knoedler invited Durham to attempt to refurbish and repair the seats on Knoedler's behalf. (Id. at 21-22). Durham subsequently entered into a contract or series of contracts with GE pursuant to which Durham "agreed to refurbish the Knoedler seats in such a way as to prevent seat failures" and to "comply with the standards of the Locomotive Inspection Act and applicable federal regulations and . . . to perform its work in such a way that the Knoedler seats would so comply." (Id. at ¶¶ 23, 25). Despite their efforts, neither Knoedler nor Durham was able to successfully remedy the defects in the seats, resulting in the aforementioned injuries and the instant lawsuit. (Id. at ¶¶ 21-27).

III. Standard of Review

Rule 8(a) of the Federal Rules of Civil Procedure states that a pleading must set forth a claim for relief which contains a short and plain statement of the claimshowing that the pleader is entitled to relief. A motion to dismiss filed pursuant to Federal Rule of Civil Procedure 12(b)(6) must be viewed in the light most favorable to the plaintiff and all the well-pleaded allegations of the complaint must be accepted as true. Erickson v. Pardus, 551 U.S. 89, 93-94 (2007); Neitzke v. Williams, 490 U.S. 319 (1989); Estelle v. Gamble, 429 U.S. 97 (1976). The issue is not whether the plaintiff will prevail at the end but only whether he should be entitled to offer evidence to support his claim. Neitzke; Scheuer v. Rhodes, 419 U.S. 232 (1974). As the United States Supreme Court recently held in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), a complaint must be dismissed pursuant to Rule 12 (b)(6) if it does not allege "enough facts to state a claim to relief that is plausible on its face." Id. at 570 (rejecting the traditional 12 (b)(6) standard set forth in Conley v. Gibson, 355 U.S. 41 (1957)). The court must accept as true all allegations of the complaint and all reasonable factual inferences must be viewed in the light most favorable to plaintiff. Angelastro v. Prudential-Bache Securities, Inc., 764 F.2d 939, 944 (3rd Cir. 1985). The Court, however, need not accept inferences drawn by plaintiff if they are unsupported by the facts as set forth in the complaint. See California Pub. Employee Ret. Sys. v. The Chubb Corp., 394 F.3d 126, 143 (3rd Cir. 2004) (citing Morse v. Lower Merion School Dist., 132 F.3d 902, 906 (3rd Cir. 1997)). Nor must the court accept legal conclusions set forth as factual allegations. Twombly, 550 U.S. at 555 (citing Papasan v. Allain, 478 U.S. 265, 286 (1986)). "Factual allegations must be enough to raise a right to relief above the speculative level." Twombly, 550 U.S. at 555. Although the United States Supreme Court does "not require heightened fact pleading of specifics, [the Court does require] enough facts to state a claim to relief that is plausible on its face." Id. at 570.

IV. Discussion

In the Second Amended Complaint, Plaintiff asserts that Knoedler and Durham each breached contracts with GE to which Plaintiff was an intended third-party beneficiary under Pennsylvania law. Plaintiff alleges that these contracts, whether oral or written, contained either an express or implied promise that the seats would be of suitable quality to prevent seat failures and otherwise comply with the requirements of the LIA, 49 U.S.C. § 20701. In pertinent part, the LIA provides as follows:

A railroad carrier may use or allow to be used a locomotive or tender on its railroad line only when the locomotive or tender and its parts and appurtenances -

(1) are in proper condition and safe to operate without unnecessary danger of personal injury;

(2) have been inspected as required under this chapter and regulations prescribed by the Secretary of Transportation under this chapter; and

(3) can withstand every test prescribed by the secretary under this chapter.

49 U.S.C. § 20701.

In our previous Memorandum Opinion, we described the purpose and scope of the LIA as follows:

In essence, the LIA imposes upon a railroad carrier "an absolute and continuing duty to maintain the locomotive, and all parts and appurtenances thereof, in proper condition . . . without unnecessary peril to life and limb." Lilly v. Grand Trunk Western R. Co., 317 U.S. 481, 485 (1943). However, the LIA does not confer a private right of action upon injured employees. See 49 U.S.C. § 21302 (1994); 49 c.f.r. 229.7(b) (2000); Law v. General Motors, 114 F.3d 908, 912 (9th Cir. 1997); Bonner v. Union Pacific, 2005 WL 1593635 (D. Idaho 2005). Rather, an employee who is injured as the result of a violation of the LIA must bring an action under FELA, a general negligence statute that allows railroad employees to recover for injuries caused by employer negligence. Id. As a supplement to FELA, the LIA "dispenses, for thepurposes of employees' suits, with the necessity of proving that violations of the safety statutes constitute negligence . . . and making proof of such violations . . . effective to show negligence as a matter of law." Urie v. Thompson, 337 U.S. 163, 189 (1949).

Delaware & Hudson, 2013 WL 504814 at *2. We also noted the well-settled principle that the "federal government possesses exclusive authority to regulate locomotive equipment and, consequently . . . the LIA fully occupies the field of locomotive design to the exclusion of all state laws." Id. at **2-3 (citing Napier v. Atlantic Coast Line Railroad, 272 U.S. 605, 612-13 (1926) ([T]he power delegated to the Commission by the [LIA] . . . is a general one. It extends to the design, the construction and the material of every part of the locomotive and tender and of all appurtences. . . . We hold that state legislation is precluded, because the [LIA], as we construe it, was intended to occupy the field."); Kurns v. Railroad Friction Products Corp, 132 S.Ct. 1261 (2012) (reiterating that the LIA pre-empts Pennsylvania state law claims related to locomotive design and maintenance); Union Pacific Railroad v. Motive Equipment, 714 N.W.2d 232 (Wis. App. 2006) (noting that the pre-emptive reach of the LIA extends to state law claims asserted by railroad companies against component manufacturers). Finally, in dismissing Plaintiff's indemnification claim, we concluded that the LIA's broad pre-emptive effect applies "whether a direct action is brought against the manufacturer or a claim [is brought] for indemnity and/or contribution." I...