United States District Court, S.D. Indiana, Indianapolis Division
U.S. SPECIALTY INSURANCE COMPANY, CITY OF COLUMBUS, INDIANA, Plaintiffs,
DAIMLER TRUCKS NORTH AMERICA, LLC, Defendant.
ORDER ON MOTION FOR LEAVE TO FILE SECOND AMENDED
J. Dinsmore, United States Magistrate Judge
matter is before the Court on Plaintiffs' Motion for
Leave to File Second Amended Complaint.
[Dkt. 49.] Plaintiffs seek to
amend their complaint to reflect the Court's dismissal of
their breach of implied warranty of merchantability claim and
to clarify their product liability claim. For the reasons set
forth below, the Court DENIES Plaintiffs' Motion.
2008, Best Equipment purchased a Freightliner packer truck
(the “2007 Freightliner”) from Daimler, added a
trash compactor, and sold the resulting Garbage Truck to the
City of Columbus. On May 11, 2015, the engine compartment of
the 2007 Freightliner caught fire, causing extensive damage
to that truck and two other packer trucks owned by the City
parked nearby at the time. The City of Columbus, along with
its insurer U.S. Specialty Insurance Co. d/b/a/ Tokio Marine
HCC (“Plaintiffs”), filed this lawsuit to recover
insurance benefits paid to the City. Plaintiffs assert that a
defective power distribution module caused the fire, and that
Daimler had knowledge of the defect and failed to warn
Plaintiffs of the danger. Plaintiffs filed this action on
November 23, 2016, alleging a claim of breach of implied
warranty of merchantability and a products liability tort
claim. [Dkt. 1.]
19, 2017, the Magistrate Judge issued a Report and
Recommendation finding that the breach of implied warranty of
merchantability claim should be dismissed because it was
barred by the statute of limitations. [Dkt. 47.] The
Magistrate Judge further recommended the products liability
claim be dismissed as to the 2007 Freightliner because
recovery was barred by the economic loss rule. However, the
Magistrate Judge noted that the rule does not bar recovery
for the “other property” destroyed by the fire.
The so-called “other property rule” provides that
damage from a defective product may be recoverable under a
tort theory if the defect causes damage to other property.
Gunkel v. Renovations, Inc., 822 N.E.2d 150, 153
to the other property rule, Plaintiffs asserted they should
be able to recover the damages to the trash compactor,
separately installed upon the 2007 Freightliner. However, as
the Amended Complaint did not distinguish between the 2007
Freightliner (recovery for which is barred by the economic
loss rule) and the trash compactor attachment, the Magistrate
Judge recommended dismissal of the claim as to the 2007
Freightliner with the opportunity to replead. Neither party
having objected to the Report and Recommendation, the Court
adopted it on June 7, 2017. [Dkt. 48.]
8, 2017, Plaintiffs filed this motion seeking to amend the
complaint to specifically assert that the trash compactor
constitutes “separately acquired goods” for which
damages are recoverable under a products liability theory.
[Dkt. 49 at 2.] Defendants object, arguing that
because the City of Columbus purchased the 2007 Freightliner
and trash compactor as one unit, the trash compactor is not
“other property” and recovery for damages remains
barred by the economic loss rule.
to amend pleadings is to be freely given when justice so
requires. Fed.R.Civ.P. 15(a)(2). The Court, however, may deny
leave to amend a complaint when there is undue delay, bad
faith, dilatory motive, undue prejudice to the opposing
party, or when the amendment would be futile. Bethany
Phamacal Co. v. QVC, Inc., 241 F.3d 854, 860-61
(7th Cir. 2001). Defendants assert allowing the
amendment would be futile because the tort claim for damages
to the trash compactor is barred by the economic loss rule.
In support of their argument, Defendants submitted invoices
that show the 2007 Freightliner (chassis and cab) was
purchased by Best Equipment from Daimler on April 17, 2008.
[Dkt. 52-2.] Best Equipment then sold the 2007
Freightliner as a “Garbage Truck” (having
installed the trash compactor) to the City of Columbus on
April 18, 2008. [Dkt. 52-1.] Because Plaintiffs
purchased the 2007 Freightliner and trash compactor as a
single unit (as a Garbage Truck), Defendants argue, the trash
compactor is not “other property.”
maintain that the trash compactor constitutes “other
property” because it was separately acquired and
installed upon the 2007 Freightliner, regardless of whether
it was installed before or after the City of Columbus
purchased the vehicle. Plaintiffs rely upon a 1997 United
States Supreme Court case applying the federal common law of
admiralty, Saratoga Fishing Co. v. J.M. Martinac &
Co. 520 U.S. 875 (1997). In Saratoga Fishing,
the initial purchaser of a vessel added a skiff, fishing net,
and other equipment to the M/V Saratoga before selling the
vessel with this additional equipment to a subsequent
purchaser. When a defective hydraulic system in the
vessel's engine room failed, the vessel caught fire and
the ship sank. The secondary owner then filed suit against
the manufacturer of the hydraulic system and the company that
built the vessel. The issue presented to the Supreme Court
was whether the skiff, fishing net, and other equipment added
by the initial purchaser constituted “other
property.” The Court determined that they did.
Saratoga, 520 U.S. at 876. Plaintiffs assert that
like the fishing equipment in Saratoga, the trash
compactor was separately acquired and installed on the 2007
Freightliner by Best Equipment and therefore should be
considered “other property.”
this Court, proceeding under diversity jurisdiction, is
tasked with applying Indiana law, not federal maritime law.
Defendants point to a body of Indiana law holding that the
defective “product” for purposes of applying the
economic loss rule “is the product purchased by the
plaintiff, not the product furnished by the defendant. . . .
If a component is sold to the first user as part of the
finished product, the consequences of its failure are fully
within the rationale of the economic loss doctrine... [and]
therefore is not ‘other property.”
Gunkel, 822 N.E.2d at 155. For example, in
Indianapolis-Marion County Public Library, 929
N.E.2d 722 (Ind. 2010), the Library hired an architect to
renovate and expand the downtown Indianapolis facility,
including the parking garage. The architect then
subcontracted with other companies for engineering and design
services. When the Library discovered defects in the parking
garage, it sued the architect and the subcontractors. Id.
at 725. In applying the economic loss rule denying
recovery in tort for the defective garage, the court noted:
T]he Library purchased a complete refurbishing of its library
facility from multiple parties. The Library did not purchase
a blueprint from the Defendants, concrete from the materials
supplier, and inspection services to ensure the safety of the
construction project in isolation; it purchased a complete
renovation and expansion of all the components of its
facility as part of a single, highly-integrated transaction.
Thus, irrespective of whether Defendants' negligence was
the proximate cause of defects in the design of the library
facility, for purposes of the other property rule, the
product or service that the Library purchased was the
renovated and expanded library facility itself.
Id. at 731.
the product purchased by the City of Columbus was the Garbage
Truck. Best Equipment sold the City that finished product
comprised of the trash compactor and the 2007 Freightliner.
Therefore, just as the entire library facility itself was
found to be the defective “product” purchased by
the Library, the entire Garbage Truck is also the defective
product purchased by ...