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Federal Insurance Company As Subrogee of Fulton Financial Corporation v. Handwerk Site Contractors

November 28, 2012

FEDERAL INSURANCE COMPANY AS SUBROGEE OF FULTON FINANCIAL CORPORATION,
PLAINTIFF
v.
HANDWERK SITE CONTRACTORS, UGI CORPORATION, AND UGI UTILITIES, INC. DEFENDANTS,



The opinion of the court was delivered by: Christopher C. Conner United States District Judge

Judge Conner

MEMORANDUM

Presently before the court is the Report and Recommendation (Doc. 63) of Magistrate Judge Methvin, recommending that the motion for summary judgment (Doc. 32) of defendants UGI Corporation and UGI Utilities, Inc. (collectively, "UGI"), be granted in part and denied in part. Defendant Handwerk Site Contractors ("Handwerk") filed a partial objection (Doc. 66) to Judge Methvin's Recommendation on April 17, 2012, as did UGI (Doc. 64) on April 16, 2012. Handwerk raises three objections to the Magistrate Judge Methvin's report, arguing that the report fails to apply the law of Pennsylvania on the economic loss doctrine, that there are factual questions which preclude entry of summary judgment in favor of UGI with regard to Handwerk's economic losses, and that in any event the court is collaterally estopped from entering summary judgment in favor of UGI. (Doc. 67 at 1). UGI objects to Magistrate Judge Methvin's conclusion that factual disputes preclude summary judgment, namely: (1) whether Handwerk was engaged "excavation work" within the meaning of the Pennsylvania One Call Act, and (2) whether the accident in this case was solely caused by Handwerk's negligence. (Doc. 64 at 3-40.

All objections have been fully briefed, and the matter is ripe for disposition. For the reasons to be discussed, the court will adopt in part and reject in part Magistrate Judge Methvin's Report and Recommendation.

I. Factual and Procedural Background

Summary judgment is appropriate only when "there is no genuine issue as to any material fact," and the moving party is entitled to judgment as a matter of law. FED. R. CIV. P. 56(c). Accordingly, the court will view the facts "in the light most favorable to the nonmoving party." Morton Intern., Inc. v. A.E. Staley Mfg. Co., 343 F.3d 669, 679-80 (3d Cir. 2003) (internal quotation and citation omitted).

In April of 2008, Handwerk entered into a contract with the Borough of Hummelstown for construction along East Main Street. Specifically, Handwerk was engaged to install or replace a concrete sidewalk, concrete curb, and storm drain. Before beginning construction, Handwerk made the requisite call to Pennsylvania One Call, in order to ascertain the location of service lines on the construction site. Handwerk concedes that UGI correctly marked the location of the gas line on the site. (Handwerk's Response to UGI's Requests for Admissions, Doc. 32-2 ¶ 21) ("Handwerk's Admissions"). Further, Handwerk agrees that facilities owners do not, in common practice, indicate the depth of service lines when marking them in accordance with the One Call Act. (Id. ¶ 35). The line that UGI marked was installed on July 10, 1975. (Doc. 41-2 at 6).

An accident occurred on May 21, 2008. While using a Case 580 backhoe, a piece of powered equipment, Handwerk's operator struck a 3/4 inch steel medium pressure gas service line. (UGI's Requests for Admissions, Doc. 32-1 ¶¶ 1-4; Handwerk's Admissions, Doc. 32-2 ¶¶ 1-4). The parties dispute whether the backhoe struck the line while "in the movement of earth, rock or other material." UGI asserts that is precisely what occurred, but Handwerk disagrees, and asserts that the backhoe was merely scraping macadam*fn1 off the surface of the roadway. (Handwerk's Admissions, Doc. 32-2 ¶ 3). There is also a dispute as to how deep the line was buried at the time it was struck. (See Doc. 41-2 at 6). What is not disputed, however, is that there was an explosion and fire, which damaged a building located at 300 East Main Street.

Litigation followed. Plaintiff Federal Insurance ("Federal") brought this diversity action as subrogee of the Fulton Financial Company ("Fulton"), the holder of the mortgage lien on the 300 East Main Street property. As the insurer of the property, Federal paid Fulton $199,735.94 as compensation for its interest in the damaged property. Federal then brought suit against Handwerk and UGI alleging negligence, and seeking to hold them jointly and severally liable for the amount paid to Fulton, plus interest, costs and attorney's fees. Parallel to this federal litigation are a number of state proceedings arising out of the same accident. In an order dated November 23, 2010 (Doc. 30), the court denied Handwerk's motion to dismiss/stay the proceedings (Doc. 13) on abstention grounds. See Colorado River Water Cons. Dist. v. United States, 424 U.S. 800 (1976).

In answering Federal's complaint, Handwerk and UGI brought cross-claims against one another. (See Handwerk Answer, Doc. 12; UGI Answer, Doc. 8). Handwerk sought contribution or indemnification from UGI on the grounds that UGI negligently constructed, installed, and maintained the gas line, specifically by installing and/or maintaining the line at too shallow a depth. (Doc. 12 at 4-7). Handwerk also sought money damages from UGI for equipment damages and expenses incurred as a result of the explosion. Similarly, UGI sought contribution or indemnification from Handwerk, claiming that Handwerk's negligence was the sole cause of the accident. (Doc. 8 at 6).

On April 14, 2011, UGI moved for summary judgment (Doc. 32). UGI argued that the accident was caused solely by the negligence of Handwerk, that UGI owed no tort duty to Handwerk with regard to the depth of the line, and that even if such duty existed, Handwerk failed to put forth evidence showing that UGI breached its duty. (See generally Doc. 33). In the alternative, UGI argued that Handwerk's claim for damages other than indemnification or contribution were barred by the economic loss doctrine. (Id. at 11-14). Reserving the right to prove UGI's liability should its motion be denied, Federal nonetheless joined UGI in arguing that Handwerk was solely liable for the explosion. (See generally Doc. 37).

Handwerk opposed UGI's motion on various grounds. First, Handwerk argued that a genuine dispute of material fact existed as to whether it was engaged in "excavation" at the time of the accident, precluding summary judgment. Similarly, Handwerk disputed that it was required by law to have engaged in hand-digging to ascertain the precise location of the line. Handwerk also argued that UGI misstated Pennsylvania law on proximate causation and on the economic loss doctrine. (See generally Doc. 34).

On April 3, 2012, Magistrate Judge Methvin issued a Report in which she recommended that UGI's motion for summary judgment be granted with regard to Handwerk's claims for damages arising out of the emergency response and related work incurred by the explosion, as barred by the economic loss doctrine, but that UGI's motion should be denied in all other respects. Magistrate Judge Methvin specifically found that the question of whether Handwerk was involved in "excavation" as defined in the statute "involves genuine disputes of material fact, and/or application of fact to law" which precluded summary judgment. (Doc. 63 at 10). She also found that material factual disputes existed as to: (1) the reasonableness of Handwerk's decision not to employ hand-digging to identify the precise location of the line; (2) whether UGI was negligent in either installing or failing to maintain the line at a particular depth; and (3) whether UGI's conduct was a proximate cause of the explosion. (Id. at 11-13).

II. Standard of Review

When objections to a magistrate judge's Report and Recommendation are filed, the court must perform a de novo review of the contested portions of the report. Supinski v. United Parcel Serv., Civ. A. No. 06-0793, 2009 WL 113796, at *3 (M.D. Pa. Jan. 16, 2009) (citing Sample v. Diecks, 885 F.2d 1099, 1106 n. 3 (3d Cir. 1989); 28 U.S.C. § 636(b)(1)(c)). "In this regard, Local Rule of Court 72.3 requires 'written objections which . . . specifically identify the portions of the proposed findings, recommendations or report to which objection is made and the basis for those objections.'" Id. (citing Shields v. Astrue, Civ. A. No. 07-417, 2008 WL 4186951, at *6 (M.D. Pa. Sept. 8, 2008)). The Report and Recommendation in the above-captioned matter concerns a motion for summary judgment, and so the court must apply the familiar Rule 56 standard.

Through summary adjudication the court may dispose of those claims that do not present a "genuine issue as to any material fact" and for which a jury trial would be an empty and unnecessary formality. See FED. R. CIV. P. 56(a). The burden of proof is upon the non-moving party to come forth with "affirmative evidence, beyond the allegations of the pleadings," in support of its right to relief. Pappas v. City of Lebanon, 331 F. Supp. 2d 311, 315 (M.D. Pa. 2004); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). This evidence must be adequate, as a matter of law, to sustain a judgment in favor of the non-moving party on the claims. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250-57 (1986); Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587-89 (1986); see also FED. R. CIV. P. 56(a). Only if this threshold is met may the cause of action proceed. Pappas, 331 F. Supp. 2d at 315.

III. Statutory and Regulatory Background

This litigation involves federal and state law governing installation, maintenance, and excavation of utility service lines. The Pennsylvania One Call Act, 73 PA. CONS. STAT. ยง 176 et seq. ("the One Call Act" or "the Act") governs the locating and marking of utility service lines prior to construction, in order to avoid damage to the lines and the hazards that accompany such damage. The Act ...


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