Sports Capital Holdings (St. Louis), LLC v. Schindler Elevator Corp.

SPORTS CAPITAL HOLDINGS (ST. LOUIS), LLC,AND KIEL CENTER PARTNERS, LP, D/B/A SCOTTRADE CENTER, Plaintiffs, v. SCHINDLER ELEVATOR CORPORATION AND KONE, INC.F/K/A MONTGOMERY KONE INC., F/K/A MONTGOMERY ELEVATOR COMPANY, Defendants.

Case No. 4:12CV1108 SNLJ

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MISSOURI EASTERN DIVISION

Dated: April 10, 2014

MEMORANDUM AND ORDER

This matter is before the Court on the defendants' motions to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). The motions have been fully briefed and are ready for disposition.

I. Background

This lawsuit arises out of a "catastrophic mechanical failure" of an escalator inside the Scottrade Center facility in St. Louis, Missouri. The subject escalator, a Montgomery 5E Solid Balustrade Model 4503 escalator, was installed in the Scottrade Center in 1994. Defendant KONE, Inc. (KONE), as the successor in interest to Montgomery, designed and manufactured the escalator. The escalator utilized an electronic brake board to monitor the speed of the escalator and apply braking as necessary. After the original design and manufacture of the escalator, KONE designed a new brake board mechanismto retro-fit onto the subject escalator. The replacement brake board was installed approximately two months before the escalator malfunction.

On or about June 1, 2009, plaintiffs, doing business as Scottrade Center, entered into a written contract with Schindler Elevator Corporation (Schindler) for maintenance and repair of six passenger escalators at the Scottrade Center facility, including the subject escalator. In August 2009, Schindler technicians installed the KONE retro-fitted brake board on the subject escalator and coordinated and supervised the annual inspection of the subject escalator.

On October 8, 2009, the St. Louis Blues Hockey Club had its first home game of the season. After the game, as fans were leaving the arena, the escalator suffered a "catastrophic mechanical failure, ran out of control and crashed" resulting in the injuries of several persons riding the escalator, as well as damage to the escalator itself.

This lawsuit was originally filed in the Circuit Court for the City of St. Louis and was removed to this Court based on diversity jurisdiction. Plaintiffs filed a multi-count complaint against defendant Schindler alleging breach of contract, fraudulent misrepresentation, negligent misrepresentation, negligent hiring, negligent training, negligent supervision, implied indemnity, and punitive damages. Schindler filed a motion to dismiss the claims for fraudulent misrepresentation, negligent misrepresentation, negligent hiring, negligent training, negligent supervision, and punitive damages, which was granted by this Court.

Subsequently, plaintiffs filed a first amended complaint against defendant Schindler and adding defendant KONE. The first amended complaint includes claims ofbreach of contract (Count I) and implied indemnity (Count IV) against Schindler and strict liability defective product (Count II), negligent design and manufacture (Count III), implied indemnity (Count IV), and punitive damages (Count V) against KONE. Schindler filed a motion to dismiss seeking dismissal of certain claims stated in Counts I and IV. KONE filed a motion to dismiss seeking dismissal of plaintiffs' claims stated in Counts II, III, IV, and V.

II. Legal Standard - Motion to Dismiss

The purpose of a Rule 12(b)(6) motion to dismiss for failure to state a claim is to test the legal sufficiency of a complaint so as to eliminate those actions "which are fatally flawed in their legal premises and designed to fail, thereby sparing litigants the burden of unnecessary pretrial and trial activity." Young v. City of St. Charles, 244 F.3d 623, 627 (8th Cir. 2001) (quoting Neitzke v. Williams, 490 U.S. 319, 326-27 (1989)). "To survive a motion to dismiss, a claim must be facially plausible, meaning that the "factual content . . . allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged."" Cole v. Homier Dist. Co., Inc., 599 F.3d 856, 861 (8th Cir. 2010) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). The Court must "accept the allegations contained in the complaint as true and draw all reasonable inferences in favor of the nonmoving party." Id. (quoting Coons v. Mineta, 410 F.3d 1036, 1039 (8th Cir. 2005)). "Further, documents attached to or incorporated within a complaint are considered part of the pleadings, and courts may look at such documents for all purposes." Brown v. Medtronic, Inc., 628 F.3d 451, 459-60 (8th Cir. 2010); Great Plains Trust Co. v. Union Pacific R. Co., 492 F.3d 986, 990 (8th Cir. 2007).

III. Discussion

A. Defendant Schindler's Motion to Dismiss

1. Counts I and IV - Contractual Liability Limitation

Schindler argues that Counts I and IV of plaintiffs' first amended complaint should be dismissed to the extent plaintiffs seek damages that are expressly barred by the parties' contract. Paragraph 3 of the contract's terms and conditions provides:

[Schindler] will not be liable for damages of any kind, whether in contract or in tort, or otherwise, in excess of the annual price of this Agreement. We will not be liable in any event for special, indirect or consequential damages, which include but are not limited to loss of rents, revenues, profit, good will, or use of Equipment or property, or business interruption.

Schindler contends that this provision limits its liability for damages to the amount of the annual price of the contract and that any other damages claimed by plaintiffs are barred. Plaintiffs contend that the contractual liability limitation is ambiguous, unconscionable, and otherwise unenforceable to the extent it limits the amount of damages plaintiffs may recover and to the extent it purports to exempt Schindler from future liability for gross negligence.

The validity of a contractual liability limitation presents a question of law for the court. Purcell Tire & Rubber Co. v. Exec. Beechcraft, Inc., 59 S.W.3d 505, 508 (Mo. banc 2001). It is well-settled in Missouri that "[s]ophisticated parties have freedom of contract - even to make a bad bargain, or to relinquish fundamental rights." Id. This freedom includes the right to contractually limit future remedies. Id.; Roy A. Elam Masonry, Inc. v. Fru-Con Constr. Corp., 922 S.W.2d 783, 791 (Mo. App. E.D. 1996) ("Provisions in private contracts limiting or excluding liability for consequential damageshave been held not violative of public policy, provided the limitation or exclusion was not unconscionable."); World Enterprises, Inc. v. Midcoast Aviation Services, Inc., 713 S.W.2d 606, 611 (Mo. App. E.D. 1986) ("[I]n contracts for services, consequential damages may be contractually limited or excluded). Limitations of liability do not violate public policy where the language is clear, unambiguous, unmistakable, and conspicuous. Purcell Tire, 59 S.W.3d at 509.

In Purcell Tire & Rubber Co. v. Exec. Beechcraft, Inc., the Supreme Court of Missouri affirmed a trial court's enforcement of a contractual provision that limited a defendant's liability to the price of the parties' contract. 59 S.W.3d at 509-11. The plaintiff in Purcell Tire, a large retail tire dealer, sued the defendant aviation business for breach of contract and negligence, claiming $372,458 in damages allegedly attributable to the defendant's failure to discover an oil leak in the plaintiff's airplane during a pre-sale inspection. Id. at 508. The defendant moved for summary judgment on the basis of a provision in the parties' contract that provided: "It is expressly agreed that the liability, if any, of Executive Beechcraft, Inc. under this agreement shall be limited to the cost of services performed hereunder." Id. The trial court enforced the limitation of liability provision and the defendant confessed judgment for the $1,250 contract price. In affirming the trial court's enforcement of the contractual limitation of liability provision, the Supreme Court of Missouri found that the clause did not violate public policy, as it was clear, unambiguous, and unmistakable. Id. at 509. Further, the court found that the provision was not unconscionable and noted that courts rarely find liability limitations unconscionable where both parties are sophisticated businesses. Id. at 510.

Like the plaintiff in Purcell Tire, plaintiffs here contractually agreed that Schindler's liability, "whether in contract or in tort, or otherwise" would be limited to the annual price of the contract. Further, like the parties in Purcell Tire, the parties are sophisticated businesses. Despite these similarities, plaintiffs failed to address the Purcell Tire case in their briefing. The Court finds this deficiency troubling.

Plaintiffs contend the contract is ambiguous because the contract does not contain an "annual price." According to plaintiffs, annual price is not defined by the contract. Further, plaintiffs argue that the contract does not have an annual price because the contract had a four-year term and allowed for variable payment schedules and price adjustments. "Ambiguity depends on context. Contract language is not interpreted in a vacuum, but by reference to the contract as a whole." Id. at 510 (internal quotations and citations omitted). "Language that is ambiguous to an unsophisticated party may not be ambiguous to a sophisticated commercial entity." Id. Here, the contract's price provisions provide, in relevant part, as follows:

PRICE

In consideration of the services provided hereunder, you agree to pay us the sum of $5,535.00 per month, payable in annual installments of $66,420.00, exclusive of applicable taxes, subject to payment terms and Price Adjustment set forth below. You agree to pay, as an addition to the price herein, the amount of any current or future sales, use, excise or other tax applicable to the services provided hereunder. You may alternatively choose to make...