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Floyd County Mutual Insurance Association v. CNH Industrial America LLC

United States District Court, N.D. Iowa, Eastern Division

August 23, 2019

FLOYD COUNTY MUTUAL INSURANCE ASSOCIATION a/s/o CLARK R. McGREGOR, RONALD R. McGREGOR REVOCABLE TRUST, and McGREGOR FARMS INC., Plaintiff,
v.
CNH INDUSTRIAL AMERICA LLC, Defendant.

          MEMORANDUM OPINION AND ORDER

          C.J. WILLIAMS, UNITED STATES DISTRICT JUDGE

         This matter is before the Court on plaintiff's Motion to Certify Order and for Stay of the Proceedings. (Doc. 18). Defendant did not file a resistance. For the following reasons, plaintiff's motion is denied.

         I. FACTUAL BACKGROUND

         Plaintiff alleges that it is an insurance company with its principal place of business in Charles City, Iowa. (Doc. 17, at 2). Plaintiff asserts that it issued an insurance policy to Clark R. McGregor, the Ronald R. McGregor Revocable Trust, and McGregor Farms Inc. (collectively, “McGregor”) and that the policy covered a tractor manufactured by defendant. (Id.). Plaintiff alleges that the tractor started on fire while its insured was properly operating it and the tractor was destroyed. (Id., at 3). Plaintiff claims that under the terms of the policy it paid McGregor $145, 000 for the tractor and $22, 787.81 for other personal property in the tractor destroyed in the fire. (Id.). Plaintiff asserts that it is subrogated to all of McGregor's claims against defendant. (Id.).

         II. PROCEDURAL HISTORY

         Plaintiff's complaint included four counts against defendant: 1) negligence; 2) breach of warranty; 3) strict liability; and 4) failure to warn. (Doc. 1, at 3-4). Defendant moved to dismiss plaintiff's complaint for failure to state a claim upon which relief can be granted under Federal Rule of Civil Procedure 12(b)(6). (Doc. 6). Defendant moved to dismiss Count II, the breach of warranty claim, because the express warranty that accompanied McGregor's purchase of the tractor conspicuously disclaimed all implied warranties, and the express warranty expired before the fire. (Doc. 6, at 1). Plaintiff conceded that its warranty claims were barred and agreed to the dismissal of Count II (Doc. 9, at 3). The Court dismissed Count II with prejudice. (Doc. 16, at 2).

         As to Counts I, III, and IV, defendant argued that Iowa's economic loss doctrine (“ELD”), also known as the “economic loss rule, ” barred plaintiff's tort claims because plaintiff did not allege damages to anything other than the tractor itself. (Doc. 6, at 2). Plaintiff asserted that Iowa law recognizes a “[s]udden and [d]angerous [e]xception” to the ELD. (Doc. 9, at 4-9). Plaintiff argued the purported sudden and dangerous exception allows a plaintiff to bring product defect claims in tort, even if there is no damage to other property, if the defect resulted in a sudden and dangerous occurrence. (Id.). Plaintiff also asserted that even it if was required to plead damage to property other than the tractor, it alleged such damage in the complaint. (Id., at 9-11). In the alternative, plaintiff moved for leave to amend its complaint if the Court found that plaintiff was required to plead damage to property other than the tractor and that the complaint failed to do so. (Id., at 2 n.1, 10).

         On July 1, 2019, the Court issued its Order granting defendant's Motion to Dismiss (“Order”). (Doc. 16). The Court noted that “[t]he Iowa Supreme Court has consistently held that Iowa's ELD bars recovery in tort when the plaintiff has sustained purely economic damages.” (Id., at 3 (citing Des Moines Flying Service, Inc. v. Aerial Services Inc., 880 N.W.2d 212, 218 (Iowa 2016); Annett Holdings, Inc. v. Kum & Go., 801 N.W.2d 499, 503 (Iowa 2011); Determan v. Johnson, 613 N.W.2d 259, 261-62 (Iowa 2000))). The Court explained that Iowa courts apply a multi-factor test to determine if a claim sounds in contract or tort, but there must be damages which extend beyond the product itself for a product defect claim to sound in tort. (Id., at 4 (citing Determan, 613 N.W.2d at 262)). The Court held that the complaint only alleged damage to the tractor, and thus the ELD barred plaintiff's tort claims. (Id., at 4-5).

         The Court then addressed whether Iowa law recognizes a sudden and dangerous exception to the ELD separate from the multi-factor test. (Id., at 5). The Court pointed out that it previously rejected an identical argument in Conveyor Co. v. Sunsource Technology Services Inc., 398 F.Supp.2d 992 (N.D. Iowa 2005). (Id.). The Court quoted Conveyor's finding that there is “no suggestion in Iowa cases that a ‘sudden or dangerous occurrence,' standing alone, will transform what is otherwise a contract or breach of warranty claim into a strict product liability claim, in the absence of personal injury or property damage extending beyond damage to the product itself.” (Id. (quoting Conveyor Co., 398 F.Supp.2d at 1011)). The Court granted defendant's Motion to Dismiss as to plaintiff's tort claims, but granted plaintiff leave to amend to assert damage to property other than the tractor. (Id., at 6).

         On July 12, 2019, plaintiff filed its Amended Complaint which reasserts plaintiff's claims for negligence, strict liability, and failure to warn. (Doc. 17, at 3-4). The Amended Complaint alleges that plaintiff paid McGregor $145, 000 for the tractor and $22, 787.81 for other personal property in the tractor that was destroyed in the fire. (Id., at 3). Plaintiff also filed its motion requesting that the Court certify the Order for interlocutory appeal under Title 28, United States Code, Section 1292(b). (Doc. 18, at 1). Plaintiff seeks an interlocutory appeal of the Court's holdings that Iowa has not adopted a separate sudden and dangerous exception to the ELD, and that accordingly plaintiff is required to plead damage to property other than the tractor to assert tort claims. (Id., at 2). On July 26, 2019, defendant filed its answer to plaintiff's Amended Complaint. (Doc. 23). Defendant's answer asserted several affirmative defenses, including the ELD, but defendant does not assert that the Court lacks subject matter jurisdiction over plaintiff's claims. (Id., at 5-6).

         III. ANALYSIS

         A. Applicable Law

         “An order dismissing some but not all claims is not final and not immediately appealable. Such an order may be appealed, however, if certain conditions enumerated in . . . 28 U.S.C. § 1292(b) have been met.” Mathers v. Wright, 636 F.3d 396, 398 (8th Cir. 2011) (internal citation omitted). Under Section 1292(b), a district court may certify an order for interlocutory appeal when: “(1) the order involves a controlling question of law; (2) there is substantial ground for difference of opinion; and (3) certification will materially advance the ultimate termination of the litigation.” Union Cty., Iowa v. Piper Jaffray & Co., 525 F.3d 643, 646 (8th Cir. 2008) (quoting White v. Nix, 43 F.3d 374, 377 (8th Cir.1994)). For certification to be appropriate each of the three criteria must be satisfied, and each criterion requires a separate inquiry. Quality Office Furnishings, Inc. v. Allsteel, Inc., No. 3:17-cv-00041-JEG, 2018 WL 7077066, at *10 (S.D. Iowa Dec. 18, 2018) (citing In re Facebook, Inc., IPO Sec. & Derivative Litig., 986 F.Supp.2d 428, 479 (S.D.N.Y. 2013); Sacchi v. Verizon Online LLC, No. 14-CV-423 RA, 2015 WL 1729796, at *2 (S.D.N.Y. Apr. 14, 2015)).

         “[Section] 1292(b) should and will be used only in exceptional cases where a decision on appeal may avoid protracted and expensive litigation, as in antitrust and similar protracted cases.” White, 43 F.3d at 376 (citation and internal quotation marks omitted). “A motion for certification must be granted sparingly, and the movant bears the heavy burden of demonstrating that the case is an exceptional one in which immediate appeal is warranted.” Id. Certification under Section 1292(b) is within the Court's discretion. De Dios v. Indem. Ins. Co. of N. Am., No. C ...


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