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Ecn Financial LLC v. Galmors/G&G Steam Services, Inc.

United States District Court, E.D. Pennsylvania

August 1, 2018

ECN FINANCIAL LLC, Plaintiff,
v.
GALMOR'S/G&G STEAM SERVICES, INC. and STEVE GALMOR, Defendants/Third-Party Plaintiffs.
v.
TOTAL EQUIPMENT AND RENTAL, LLC d/b/a BOBCAT OF OKLAHOMA CITY, Third-Party Defendant.

          MEMORANDUM

          C. Darnell Jones, II J.

         Plaintiff ECN Financial, LLC (“ECN”) brings the present action against Defendant Galmor's/G&G Steam Services, Inc. and Steve Galmor (collectively, “G&G”) alleging liability for the balance due on a loan between the parties. (ECF No. 1, Ex. A.) Thereafter, G&G impleaded Third-Party Defendant Total Equipment and Rental, LLC d/b/a Bobcat of Oklahoma City (“Total Equipment”), alleging breach of contract and warranty for the equipment G&G purchased with the loan ECN provided. (ECF No. 4 ¶ 25.)

         Presently before the Court is Total Equipment's Motion to Dismiss pursuant to Federal Rules of Civil Procedure 12(b)(1), (2) and (6) and 28 U.S.C. § 1367(c)(2), or, in the Alternative, to Strike the Third-Party Complaint pursuant to Federal Rule of Civil Procedure 14(a)(4) or Federal Rule of Civil Procedure 8(a)(2), (ECF No. 9.), and responses thereto. For the reasons set forth in this memorandum, this Court denies Third-Party Defendant's Motion to Dismiss.

         Procedural Background

         ECN filed its Complaint on April 4, 2017 in the Montgomery County Court of Common Pleas, seeking $270, 984.53 in damages from G&G for the unpaid balance on the loan ECN provided. (ECF No. 1, ¶¶ 1, 13, 15.) On June 19, 2017, G&G timely removed the matter to this Court based on diversity of citizenship, pursuant to 28 U.S.C. §§ 1332, 1441, and 1446. (ECF No. 1, ¶¶ 7, 9-12.)

         On June 27, 2017, G&G filed an Answer, alleging that ECN's Complaint failed to add a necessary and indispensable third-party, Total Equipment, to the lawsuit. (ECF No. 3, ¶ 23.)

         Thereafter, on July 11, 2017, G&G filed a Complaint to Join Total Equipment as Third-Party Defendant, pursuant to Fed.R.Civ.P. 14(a). (ECF No. 4.)

         On September 11, 2017 Total Equipment filed a Motion to Dismiss or, in the Alternative, to Strike the Third-Party Complaint. (ECF No. 9.) On October 2, 2017, G&G filed a Response in Opposition to Total Equipment's Motion to Dismiss or, in the Alternative, to Strike the Third-Party Complaint. (ECF No. 14.) Finally, on October 26, 2017, Total Equipment filed their Reply to G&G's Response. (ECF No. 17.)

         Factual Allegations

         ECN is a Delaware Limited Liability Company headquartered in Montgomery County, Pennsylvania (ECF No. 1, p. 7). ECN is in the business of providing business equipment loans. (ECF No. 1, Ex. A.) G&G is an Oklahoma corporation with a primary place of business in Elk City, Oklahoma, (ECF No. 1, Ex. A ¶ 3), and an office in Shamrock, Texas. (ECF No. 9, Ex. 1 ¶ 20.) Total Equipment is also an Oklahoma corporation with a primary place of business in Oklahoma City, Oklahoma. (ECF No. 4, ¶ 2.)

         In late 2014, G&G was interested in purchasing equipment for commercial purposes. (ECF No. 4, ¶ 7.) G&G discussed their interest with Total Equipment, who recommended a Doosan DA 40 articulated dump truck (“Doosan”). (ECF No. 4, ¶ 8.) As part of said purchase, Total Equipment agreed to open a repair facility in Elk City, Oklahoma to service the Doosan, (ECF No. 4, ¶ 9), and provide G&G with substitute “loaner” equipment in the event said Doosan ever needed repairs. (ECF No. 4, ¶ 10.) Additionally, Total Equipment provided a 2, 000 hour service agreement, a three year/5, 000 hour power train warranty, and a 15, 000 hour frame, Arctic Hinge, and Tandem Housing warranty. (ECF No. 4, Ex. C.)

         G&G purchased the Doosan from Total Equipment for $460, 404.43 on December 18, 2014. (ECF No. 9, Ex. 1 ¶ 19.) To finance the purchase, ECN provided G&G with a loan. (ECF No. 4, ¶ 1.) ECN and G&G signed a Promissory Note, Security Agreement and Personal Guaranty (collectively, “the loan”), which secured the purchase of the Doosan. (ECF No. 1, Ex. A ¶¶ 5-6.) Total Equipment did not sign any documents related to the loan, and did not reserve the right to receive payments directly from G&G on the loan. (ECF No. 1, Ex. A.) The loan contained a forum selection clause, which states that G&G and ECN consent to Pennsylvania jurisdiction for any disputes arising under the loan. (ECF No. 1, Ex. A.)

         G&G agreed to make six monthly payments of $13, 000, followed by fifty four monthly payments of $7, 265.06 under the loan. (ECF No. 1, Ex. A ¶ 7.) G&G made the first twenty three monthly payments, (ECF No. 1, Ex. A ¶ 9), until the time, in which G&G alleges, Total Equipment breached the warranties and agreements related to the Doosan purchase. (ECF No. 4.) Specifically, G&G alleges that Total Equipment only opened a repair facility for one week before closing and vacating said facility, (ECF No. 4, ¶ 14), did not make any loaner equipment available when its Doosan needed repairs, (ECF No. 4, ¶ 15), and failed to make repairs covered under the warranties Total Equipment provided. (ECF No. 4, ¶ 17.) G&G further alleges that Total Equipment's breaches rendered the Doosan “essentially useless and valueless.” (ECF No. 4, ¶19.) G&G repeatedly requested Total Equipment repair the Doosan, but Total Equipment refused. (ECF No. 4, ¶ 17.) Due to the Doosan's defective condition and Total Equipment's inadequate service, G&G withheld payments on its loan, (ECF No. 4, ¶ 20), and has not made a loan payment since January 2017. (ECF No. 4, Ex. A ¶ 9.)

         On June 28, 2017, following their default on the loan, G&G received notice of ECN's plans to repossess and sell the Doosan to mitigate their financial loss, in compliance with the Uniform Commercial Code. (ECF No. 4, ¶ 22-23.) However, ECN's re-sale did not cover G&G's remaining indebtedness on the loan, (ECF No. 4, Ex. E), and therefore ECN alleges G&G is still liable for the remaining balance. (ECF No. 1, Ex. A ¶¶ 13, 15; ECF No. 4, ¶ 24.) G&G's Complaint to Join alleges that any of G&G's indebtedness on the remaining loan is a direct result of Total Equipment's breaches of the warranties and agreements related to the Doosan purchase. (ECF No. 4, ¶ 25.) Specifically, G&G alleges that the Doosan had been devalued by Total Equipment's “multiple failures, ” to provide functioning equipment and make necessary repairs, (ECF No. 14, p. 12), and that Total Equipment is liable to G&G for any amount due to ECN “to the extent that the amount recovered at the repossession sale is less than what would have been recovered had the equipment not been defective and unrepaired.” (ECF No. 14, p. 12.) G&G further alleges that Total Equipment's liability to ECN should also include “any amount that ECN [spent] to repair the equipment, ” prior to the re-sale. (ECF No. 14, p. 13).

         G&G does not contest their consent to Pennsylvania jurisdiction in the forum selection clause within the loan. However, Total Equipment, as a non-signatory to the loan, denies any consent to Pennsylvania jurisdiction, and seeks to dismiss all claims G&G made against them in this Court related to the Doosan sale. (ECF No. 9.)

         Standards of Review

         A. Rule 12(b)(1) Standard of Review

         A challenge to subject matter jurisdiction under Rule 12(b)(1) may take two forms: a facial challenge or a factual challenge. If a facial challenge concerns an alleged pleading deficiency, and the trial court is restricted to a review of the allegations of the complaint and any documents referenced therein. CNA v. United States, 535 F.3d 132, 139 (3d Cir. 2008); Gould Elec. Inc. v. United States, 220 F.3d 169, 177 (3d Cir. 2000). When considering a facial challenge, “the trial court must consider the allegations of the complaint as true.” Mortensen v. First Fed. Sav. & Loan Ass'n, 549 F.2d 884, 891 (3d Cir. 1977).

         A factual challenge “concerns the actual failure of a plaintiff's claims to comport factually with the jurisdictional prerequisites.” CNA, 535 F.3d at 139 (internal quotation, citation, and alterations omitted). If the challenge before the trial court is a factual challenge, the court does not accord any presumption of truth to the allegations in the plaintiff's complaint, and the plaintiff bears the burden of proving subject-matter jurisdiction. Id. With a factual challenge, the court may weigh evidence outside the pleadings and make factual findings related to the issue of jurisdiction. Id.; U.S. ex rel. Atkinson v. Pa. Shipbuilding Co., 473 F.3d 506, 514 (3d Cir. 2007). ...


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