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Marsulex Environmental Technologies v. Selip S.P.A.

United States District Court, M.D. Pennsylvania

March 27, 2017

MARSULEX ENVIRONMENTAL TECHNOLOGIES, Plaintiff,
v.
SELIP S.P.A., Defendant.

          MEMORANDUM

          Susan E. Schwab United States Chief Magistrate Judge

         I. Introduction.

         Plaintiff Marsulex Environmental Technologies (“MET”), a Delaware Corporation with its principal place of business in Lebanon, Pennsylvania, brings this diversity action for strict liability, breach of contract, breach of express and implied warranties, and unjust enrichment against Defendant Selip S.P.A. (“Selip”), an Italian corporation with its principal place of business in Fontanellato (Parma), Italy. MET, who is now proceeding via an amended complaint, maintains that Selip deficiently designed and manufactured piping that was supplied to one of MET's customers in Poland. Before the Court is Selip's motion to dismiss the entire amended complaint on the basis that a provision in the parties' agreement precludes MET from raising the claims therein.[1] In the alternative, Selip moves to dismiss Count I of the amended complaint, a strict liability claim, on the basis that it is barred by Pennsylvania's economic loss doctrine. For the reasons set forth below, Selip's motion will be granted in part and denied in part.

         II. Background and Procedural History.

         On February 6, 2015, MET filed an original complaint (doc. 1) against Selip, alleging that Selip deficiently designed and manufactured piping that was supplied to one of MET's customers in Poland. In lieu of an answer, Selip filed a motion (doc. 6) to dismiss MET's original complaint under the doctrine of forum non conveniens, insisting that this action could not proceed fairly in the Middle District of Pennsylvania, and that instead, it should be litigated in Poland. In the alternative, Selip moved under Rule 12(b)(6) of the Federal Rules of Civil Procedure to dismiss Count I, alleging strict liability. Selip argued, among other things, that Count I was barred by Pennsylvania's economic loss doctrine.

         On March 18, 2016, the Court ruled on Selip's motion to dismiss. See docs. 28, 29. The motion was denied under the doctrine of forum non conveniens, but granted under Rule 12(b)(6) to dismiss Count I pursuant to Pennsylvania's economic loss doctrine. Having so ruled, the Court instructed MET to file an amended complaint. MET filed that amended complaint (doc. 33) on April 15, 2016, raising (as it did before) claims of strict liability, breach of contract, breach of express warranty, breach of implied warranty, and unjust enrichment due to Selip's allegedly deficient design and manufacturing of the piping that was supplied to MET's customer in Poland.

         Since the filing of the amended complaint, Selip has filed its second motion (doc. 42) to dismiss. This time, Selip moves for dismissal of the entire amended complaint on the basis of a provision in the parties' Contract. In the alternative, however, Selip moves for dismissal of Count I in the amended complaint, a strict liability claim. Selip, who also moved for dismissal of Count I in its first motion to dismiss, resurrects its argument here and maintains that MET's strict liability claim is barred by Pennsylvania's economic loss doctrine.

         III. The Amended Complaint.

         In order to once again evaluate the adequacy of MET's pleadings, we briefly state the facts, as set forth in the amended complaint, as follows:[2]

         On or about January 22, 2010, MET, a company which provides air quality control systems to minimize the emission of air pollutants, entered into an engineering and procurement agreement with Zaklady Azotowe “Pulway” S.A. (hereinafter, “ZAP”), a chemical company in Poland, which specializes in the manufacturing of fertilizer. Doc. 33 at ¶¶ 8, 9. This agreement, in part, required MET to oversee the design and purchase of goods for the construction of a Flue Gas Desulfurization Unit (“FGD Unit” or “Unit”) at ZAP's chemical plant in Poland. Id. at ¶ 10. According to MET, the environment inside an FGD Unit is highly corrosive, and based on past experience, MET determined that the FGD Unit required “External Fiberglass Reinforced Plastic Piping” (“FRP piping” or “piping”).[3] Id. at ¶¶ 1, 11.

         On or about June 21, 2010, MET entered into a Contract with Selip, under which Selip agreed to design, manufacture, and supply FRP piping for the construction of the FGD Unit at ZAP's chemical plant.[4] Id. at ¶ 12. This Contract required Selip to, among other things, fabricate the FRP piping in accordance with Selip's recommended procedures and all approved drawings. Id. at ¶ 14. This Contract further required the inner and outer surfaces of the FRP piping to be “free of cracks.” Id. at ¶ 15 (quoting doc. 33-1 at 9, ¶ 4.4). In addition, Selip warranted that the contracted-for equipment would be “properly and professionally constructed;” it would “meet the technical requirements of the Purchase Order[, ] including the standards and regulations[, ] as well as the best engineering practices;” and it would be “new and unused, of the specified material, free of defects, and fit for the application specified.” Id. at ¶ 16 (quoting doc. 33-2 at 3, ¶ 5). Selip further warranted that the FRP piping would be “of merchantable quality, free from all defects in design, workmanship and materials, and . . . fit for the particular purposes for which they [were] purchased, ” and finally, “provided in strict accordance with the specification, samples, drawings, designs or other requirements (including performance specification) approved or adopted by [MET].” Id. at ¶ 17 (quoting doc. 33-3 at 4, ¶ 10 (b)).

         On or about February 3, 2011, Selip delivered the FRP piping to ZAP's plant, and in October of 2012, the plant began operating. Id. at ¶¶ 18, 19. Only a few months later in January of 2013, Selip was notified that there were cracks in the FRP piping. Id. at ¶ 20. Selip, after examining the FRP piping at ZAP's plant, acknowledged the cracks, but deemed the cracks “superficial” and filled them with resin. Id. According to MET, these cracks were an early warning sign that Selip's FRP piping was defective, and as was later revealed, Selip's hasty repair failed to correct the underlying problems. Id.

         On or about September 16, 2013, Selip was notified that new cracks were forming in the FRP piping. Id. at ¶ 21. According to MET, the continued cracking demonstrated that the problems with the piping were significant, and further, that the piping was continuing to deteriorate. Id. Selip, on or about April 8, 2014, went to ZAP's plant, examined the cracking in the FRP piping, acknowledged-once again-that there were cracks in the piping, and avowed that it would provide support and assistance to repair the cracks. Id. at ¶ 22. According to the amended complaint, Selip, contrary to the parties' “agreement, ” specified that all costs for its assistance to repair its defective piping would be charged to either MET or ZAP. Id.

         On or about May 31, 2014, there was a serious malfunction on the FGD Unit caused by the failure of the FRP Piping. Id. at ¶ 23. ZAP, on June 2, 2014, informed MET of this failure, and MET, on the same day, informed Selip of the same. Id. The following day, MET sent Selip photographs of the failed FRP piping and resulting damage at ZAP's plant. Id. at ¶ 24. According to MET, the photographs illustrate that the FRP piping essentially exploded and tore apart, causing structural damage to ZAP's pumping station facility, which housed the FGD Unit and key components of the FGD Unit other than the FRP piping itself, such as the agitator, expansion joints, and flanges. Id. Thereafter, MET informed Selip of ZAP's understanding that the failure was caused by a deficiency in Selip's design and manufacturing of the FRP piping, and MET requested that Selip dispatch someone to ZAP's plant in order to examine the piping and make a determination as to why it failed. Id. at ¶ 25. According to MET, however, Selip refused to send someone. Id. at ¶ 26.

         As a result of the failed FRP piping, ZAP's plant was completely shut down for approximately three months. Id. at ¶ 27. In addition, MET was required to repair the FGD Unit in order to comply with guarantees and performance obligations in its agreements with ZAP. Id. at ¶ 28. More specifically, MET was under warranty for all key equipment used in the FGD Unit. Id. And, in order to repair the Unit, MET was forced to replace, at its own expense, the failed FRP piping with a product from another manufacturer. Id. at ¶ 29. MET was also forced to replace other various key components of the FGD Unit, also at its own expense, including the agitator, expansion joints, and flanges. Id.

         In addition, MET hired a third-party expert (the “Expert”) to investigate Selip's failed FRP piping. Id. at ¶ 30. The Expert evaluated cross-sections from samples of the piping, as well as the piping's construction via “visual inspection and a modified loss on ignition test-also referred to as a burn test.” Id. at ¶ 31. The Expert concluded that the FRP piping supplied by Selip was poorly constructed because Selip used low strength reinforcement and non-structural components in the flange area of the piping. Id. at ¶ 32. The Expert further concluded that the flanges in the piping did not meet Selip's design and fabrication requirements. Id. In particular, the Expert's tests revealed that the woven roving layers that were required by Selip's working procedures were not used in the flange section of the FRP piping, thus resulting in weak piping, which could not handle the stress that it was intended to handle. Id. at ¶ 33. The Expert's tests also revealed that the FRP piping included “flange areas that had joints and were not made essentially from one piece as depicted in Selip's drawings and working procedures.” Id. at ¶ 34. “Selip's use of flanges with joints reduced the overall flange strength because a joint crevice was located directly behind the point of high stress in the flange hub.” Id. Finally, the testing showed instances of poor secondary bonding. Id. at ¶ 35.

         On or about September 24, 2014, MET informed Selip that there were manufacturing defects in the FRP piping, and further, that the piping was not manufactured in accordance with the parties' contract, Selip's working procedures, or Selip's design. Id. at ¶ 36. Moreover, Selip failed to manufacture sections of the piping's flange areas in conformity with the standard industry practice because “Selip prepared the piping's flanges with a non-structural short segment of pipe placed behind the flange extending the length of the elbow rather than laying-up the flange directly onto the end of the elbow.” Id. at ¶ 37. As a result, Selip's FRP piping was not fit for its intended use. Id.

         As a result, MET requested payment from Selip in the amount of $557, 873.53 for the following: (1) replacement of (a) the defective FRP piping, (b) the agitator in the FGD Unit, and (c) the flanges in the FGD Unit; (2) repair of other components of the FGD Unit; and (3) other services that it was forced to render as a result of Selip's defective FRP piping. Id. at ¶ 38. According to the amended complaint, Selip rejected this request on or about October 29, 2014. Id. at ¶ 39.

         IV. Legal Standards.

         In accordance with Rule 12(b)(6) of the Federal Rules of Civil Procedure, the court may dismiss a complaint for “failure to state a claim upon which relief can be granted.” When reviewing a motion to dismiss, “[w]e must accept all factual allegations in the complaint as true, construe the complaint in the light favorable to the plaintiff, and ultimately determine whether plaintiff may be entitled to relief under any reasonable reading of the complaint.” Mayer v. Belichick, 605 F.3d 223, 229 (3d Cir. 2010). In making that determination, we “consider only the complaint, exhibits attached to the complaint, matters of public record, as well as undisputedly authentic documents if the [plaintiff's] claims are based upon these documents.” Id. at 230.

         “A Rule 12(b)(6) motion tests the sufficiency of the complaint against the pleading requirements of Rule 8(a).” I.H. ex rel. D.S. v. Cumberland Valley Sch. Dist., 842 F.Supp.2d 762, 769-70 (M.D. Pa. 2012). “Under Federal Rule of Civil Procedure 8(a)(2), a pleading must contain a ‘short and plain statement of the claim showing that the pleader is entitled to relief.'” Ashcroft v. Iqbal, 556 U.S. 662, 677-78 (2009). The statement required by Rule 8(a)(2) must give the defendant fair notice of what the plaintiff's claim is and of the grounds upon which it rests. Erickson v. Pardus, 551 U.S. 89, 93 (2007). Detailed factual allegations are not required, but more is required than labels, conclusions, and a formulaic recitation of the elements of a cause of action. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). “In other words, a complaint must do more than allege the plaintiff's entitlement to relief.” Fowler v. UPMC Shadyside, 578 F.3d 203, 211 (3d Cir. 2009). “A complaint has to “show” such an entitlement with its facts.” Id.

         In considering whether a complaint fails to state a claim upon which relief can be granted, the court must accept as true all well-pleaded factual allegations in the complaint, and all reasonable inferences that can be drawn from the complaint must be construed in the light most favorable to the plaintiff. Jordan v. Fox Rothschild, O'Brien & Frankel, Inc., 20 F.3d 1250, 1261 (3d Cir. 1994). But a court “need not credit a complaint's bald assertions or legal conclusions when deciding a motion to dismiss.” Morse v. Lower Merion Sch. Dist., 132 F.3d 902, 906 (3d Cir. 1997). Additionally, a court need not “assume that a . . . plaintiff can prove facts that the . . . plaintiff has not alleged.” Associated Gen. Contractors of Cal. v. California State Council of Carpenters, 459 U.S. 519, 526 (1983).

         Following Twombly and Iqbal, a well-pleaded complaint must contain more than mere legal labels and conclusions. Rather, it must recite factual allegations sufficient to raise the plaintiff's claimed right to relief beyond the level of mere speculation. In practice, consideration of the legal sufficiency of a complaint entails a three-step analysis:

First, the court must ‘tak[e] note of the elements a plaintiff must plead to state a claim.' Second, the court should identify allegations that, ‘because they are no more than conclusions, are not entitled to the assumption of truth.' Finally, ‘where there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement for relief.'

Santiago v. Warminster Tp., 629 F.3d 121, 130 (3d Cir. 2010) (quoting Iqbal, 556 U.S. at 675 & ...


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