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Rush v. 220 Ingraham Operating Corp.

United States District Court, E.D. Pennsylvania

May 18, 2018

ELIZABETH RUSH, INDIVIDUALLY, AND AS MOTHER AND NATURAL GUARDIAN OF OLIVIA RUSH, Plaintiff,
v.
220 INGRAHAM OPERATING CORP. and TRYAD GROUP MANAGEMENT, LLC, Defendants/Third-Party Plaintiffs,
v.
DOMINICK BOYD; ALICIA BROWN; KATE BOYD; BORN INTO THE ARTS; and B.I.A. STUDIOS, LLC, Third-Party Defendants

          OPINION DEFENDANTS' MOTION TO DISMISS, ECF NO. 7 - GRANTED IN PART AND DENIED IN PART

          JOSEPH F. LEESON, JR. UNITED STATES DISTRICT JUDGE.

         I. INTRODUCTION

         This is a personal injury/breach of contract action brought by Elizabeth Rush, individually and as mother and natural guardian of Olivia Rush, a minor, arising from the injury Olivia suffered when she tripped on allegedly defective flooring during her dance lesson. The owners of the dance studio rented the space from Defendants. Defendants have moved to dismiss the breach of contract and negligent retention counts, as well as all requests for punitive damages. For the reasons set forth below, the Motion to Dismiss is granted with respect to the breach of contract and negligent retention counts, but denied as to the claim for punitive damages in Count Three.

         II. BACKGROUND

         Reading the factual allegations in the light most favorable to Rush, the Complaint alleges as follows: Dominick Boyd and Alicia Brown own a dance studio called Born Into The Arts, where Olivia Rush took dance lessons. The floor inside the building housing the dance studio was not suitable for dance instruction and when Defendants' custodian attempted to cover the defective floor with a linked wood floor overlay, he created a tripping hazard. Olivia tripped on the hazard and suffered serious injury, including permanent brain damage. The property housing the dance studio was rented by Born Into The Arts (alias B.I.A. Studios, LLC) (“the tenant”) from Defendant 220 Ingraham Operating Corp.[1] A provision in the commercial lease between B.I.A. Studios, LLC and 220 Ingraham Operating Corp. required the tenant to obtain liability insurance in the amount of $1, 000, 000, which it did not acquire, and to obtain an inspection by the City of Bethlehem to operate a dance studio, which it did not procure. An inspection would have revealed the defective flooring, and the lack of insurance has made the tenant judgment proof, both of which have harmed Rush, and form the basis of Count One: breach of contract.

         In Counts Two and Three, Rush claims that Defendants were negligent in not requiring the tenant to get the property inspected by the City and, inter alia, leaving the property to the tenant knowing it would be used as a dance studio even though the floor was not in a safe condition. Finally, Rush asserts a negligent retention claim in Count Four for Defendants' alleged negligent retention of the tenant knowing that the tenant was not complying with the terms of the lease by (1) failing to maintain insurance, (2) failing to obtain licensing from the City to operate a dance studio, (3) damaging the floor by installing an overlay, and (4) making delinquent rent payments. Rush seeks punitive damages in Counts Three and Four.

         Defendants filed a Motion to Dismiss Counts One and Four for failure to state a claim, and the punitive damages claim in Counts Three and Four as not properly supported. Rush filed a brief in opposition to the Motion to Dismiss.

         III. STANDARD OF REVIEW

         In rendering a decision on a motion to dismiss, this Court must “accept all factual allegations as true [and] construe the complaint in the light most favorable to the plaintiff.” Phillips v. Cnty. of Allegheny, 515 F.3d 224, 233 (3d Cir. 2008) (quoting Pinker v. Roche Holdings Ltd., 292 F.3d 361, 374 n.7 (3d Cir. 2002)) (internal quotation marks omitted). Only if “the ‘[f]actual allegations . . . raise a right to relief above the speculative level'” has the plaintiff stated a plausible claim. Id. at 234 (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 540, 555 (2007)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). However, “the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions.” Id. (explaining that determining “whether a complaint states a plausible claim for relief . . . [is] a context-specific task that requires the reviewing court to draw on its judicial experience and common sense”). The defendant bears the burden of demonstrating that a plaintiff has failed to state a claim upon which relief can be granted. Hedges v. United States, 404 F.3d 744, 750 (3d Cir. 2005) (citing Kehr Packages, Inc. v. Fidelcor, Inc., 926 F.2d 1406, 1409 (3d Cir. 1991)).

         IV. ANALYSIS

         A. Count One, breach of contract, is dismissed because Rush was neither a party to the contract nor a third-party beneficiary.

         Defendants argue that the breach of contract claim should be dismissed because Rush was not a party to the contract, nor an intended third-party beneficiary. In response, Rush alleges, inter alia, that Olivia was an intended third-party beneficiary of the contract based on the duty Defendants owed to a business invitee and based on her alleged membership in a class of persons that the City inspection was designed to protect.

         There are two tests for third-party-beneficiary status under Pennsylvania law. The first requires that the parties to the agreement indicate in the contract that the purported beneficiary is a third-party beneficiary. See M.S. v. Cedar Bridge Military Acad., 904 F.Supp.2d 399, 412 (M.D. Pa. 2012), adopted by 904 F.Supp.2d 399, 401-03 (M.D. Pa. 2012) (holding that the plaintiff could not show that the defendant had a duty to ensure that its tenant maintain liability insurance). The second test does not require an affirmative recognition of the purported beneficiary in the contract itself, but imposes two requirements: (1) the circumstances must be so compelling that recognition of the beneficiary's right is appropriate to effectuate the intention of the parties (standing requirement), and (2) it must be shown either that the performance satisfies an obligation of the promisee to pay money to the beneficiary or that the circumstances indicate that the promisee intends to give the beneficiary the benefit of the promised performance (the two types of claimants that may be intended third-party beneficiaries). Id.

         Rush does not allege that her daughter was affirmatively recognized as a beneficiary in the lease; therefore, the second test applies. Applying this test, this Court finds that Rush was not an intended third-party beneficiary. As to Rush's reliance on the insurance provisions in the lease and the duties of a landlord to a tenant's invitees, “Pennsylvania courts have held that insurance clauses do not create third party beneficiary status because these clauses are typically drafted to protect lessors, not to benefit lessees' business invitees.” Bryan v. Acorn Hotel, 931 F.Supp. 394, 397 (E.D. Pa. 1996). See also Taylor v. Pathmark Inc., No. 11-7702, 2013 U.S. Dist. LEXIS 33526, at *2 (E.D. Pa. Mar. 11, 2013) (dismissing the breach of contract claim against a grocery store and the company it contracted with to conduct snow removal because the plaintiff, who was injured when he slipped on ice outside the grocery store, was not a party to, nor intended third-party beneficiary of, the contract). Rush's argument that she was a member in a class of persons that the City inspection was designed to protect is also unavailing because the Pennsylvania courts “do not believe that parties ordinarily intend to confer such benefits upon the public at large or assume such massive potential liability when they enter into a contract.” Hicks v. ...


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