Airborne America, Inc. v. Kenway Composites

District Court, S.D. California·Decided August 16, 2021·No. 3:20-cv-02208·Unknown

Opinion

1 2 3 4 5 6 7 10 11 AIRBORNE AMERICA, INC., a Nevada Case No.: 20-CV-2208 JLS (WVG) corporation, 12 ORDER GRANTING DEFENDANTS Plaintiff, 13 GEMINI INSURANCE COMPANY v. AND BERKLEY INSURANCE 14 COMPANY’S MOTION TO DISMISS KENWAY COMPOSITES, a Maine 15 PLAINTIFF’S COMPLAINT corporation; CPK MANUFACTURING,

16 LLC, a Delaware limited liability (ECF No. 8) company; KENWAY CORPORATION, a 17 Maine corporation; CREATIVE 18 PULTRUSIONS, a Pennsylvania corporation; HILL & SMITH 19 HOLDINGS, PLC, a United Kingdom 20 public limited company; KENNETH G. PRIEST II, an individual; SUSAN 21 PRIEST, an individual; MICHAEL 22 PRIEST, an individual; TERRY PRIEST, an individual; IAN KOPP, an individual; 23 GEMINI INSURANCE COMPANY, a 24 Delaware corporation; BERKLEY INSURANCE COMPANY, a Delaware 25 corporation; and DOES 1-100, inclusive, 26 Defendants. 27

28 1 Presently before the Court is Defendants Gemini Insurance Company (“Gemini”) 2 and Berkley Insurance Company’s (“Berkley”) (collectively, “Defendants”) Motion to 3 Dismiss Plaintiff’s Complaint (“Mot.,” ECF No. 8), as well as Plaintiff Airborne America, 4 Inc.’s (“Plaintiff”) Opposition thereto (“Opp’n,” ECF No. 10) and Defendants’ Reply in 5 support thereof (“Reply,” ECF No. 13). The Court took the matter under submission 6 without oral argument pursuant to Civil Local Rule 7.1(d)(1). See ECF No. 15. Having 7 carefully reviewed Plaintiff’s Complaint (“Compl.,” ECF No. 1-4), the Parties’ arguments, 8 and the law, the Court GRANTS Defendants’ Motion. 9 BACKGROUND1 10 This action arises out of Plaintiff’s “catastrophic loss of a[n over $45,000,000] 11 investment into a business that barely opened its doors before being forced to close in 12 2017.” Compl. ¶ 1. Plaintiff invested in developing an indoor skydiving facility in 13 downtown San Diego (the “Project”). Id. ¶ 3(a). Aerolab, LLC (“Aerolab”) designed the 14 Project, which consisted of two wind tunnels in a 10,000 square foot building. Id. ¶¶ 26– 15 27. Each tunnel contained, among other things, a clear tube with a skydiving platform, a 16 large fan, and four turning vanes designed to direct the air inside the tunnel and support the 17 skydivers. Id. ¶¶ 27–30. The large fan had a 2,700-pound nose cone assembly, which was 18 designed to smooth and direct the airflow. Id. ¶ 3 n.2. Aerolab hired numerous 19 subcontractors to construct the Project, one being Kenway Corporation (“Kenway”).2 Id. 20 ¶ 11. Gemini issued Kenway an insurance policy with a policy limit of $1,000,000. Id. 21 ¶ 75; Mot. at 1. Berkley is Gemini’s manager and is defending Kenway in a separate 22 negligence action. Compl. ¶¶ 18, 35. 23 Kenway’s responsibilities in the Project included manufacturing the turning vanes 24 and the large fan’s nose cone. Id. ¶¶ 30–31. Together, Aerolab and Kenway installed the 25 26 1 The facts alleged in Plaintiff’s Complaint are accepted as true for purposes of the present Motion. See Vasquez v. Los Angeles Cnty., 487 F.3d 1246, 1249 (9th Cir. 2007) (holding that, in ruling on a motion to 27 dismiss, the Court must “accept all material allegations of fact as true”). 28 1 turning vanes. Id. ¶ 32. On December 7, 2016, the turning vanes in Wind Tunnel One 2 exploded, which shut down the Project for several months. Id. ¶¶ 32–33. Kenway 3 allegedly admitted to Defendants that it should have continued to analyze the buckling of 4 the turning vanes, and that the “buckling, combined with the inherent design flaw of the 5 blind leading edge joint[, led] to the catastrophic failure.” Id. ¶ 35 (emphasis omitted). 6 Following this incident, Kenway and its officers3 allegedly schemed to enrich 7 themselves by selling Kenway’s assets to Hill & Smith (“Hill”) and its subsidiary, Creative 8 Pultrusions (“Creative”).4 Id. ¶¶ 36–37. As part of the asset purchase agreement, Hill and 9 Creative would manufacture new turning vanes for the Project, while Kenway would retain 10 liability for the turning vanes’ design. Id. ¶ 41. Additionally, Kenway would process the 11 liability claim for the turning vane failure with Berkley. Id. 12 Plaintiff claims that Kenway “made a secret insurance claim to pay for replacement 13 turning vanes and subsequently planned to secretly pocket the money.” Id. ¶ 37. Mr. Kopp 14 and Mr. Priest, officers of Kenway, allegedly swore under oath to Defendants that the 15 turning vane incident was “the result of Kenway’s (and no one else’s) ‘errors and 16 omissions.’” Id. ¶ 45. Subsequently, Defendants paid Kenway $470,000 on its insurance 17 claim related to the turning vane incident. See id. ¶ 46. Kenway in turn planned to use the 18 insurance payout to hire Creative on a fixed price contract to manufacture replacement 19 turning vanes for the Project. Id. ¶¶ 41, 45–46; see also Mot. at 4. As a result of 20 Defendants’ payment, Kenway released the remainder of the $1,000,000 policy, and 21 Kenway excused Defendants from any further liability to Kenway related to the turning 22 vane incident. Compl. ¶¶ 44, 47. Kenway allegedly further attempted to limit it and 23 24 25 3 Throughout its Complaint, Plaintiff refers to Kenway’s officers as the “Individual Defendants.” See generally Compl. The Individual Defendants are Kenneth G. Priest II, Susan Priest, Terry Priest, and Ian 26 Kopp, all of whom Plaintiff claims are an alter ego of Kenway. See id. ¶ 13. Plaintiff alleges Kenway and the Individual Defendants “concocted a plan to further enrich themselves and even potentially cut off 27 Plaintiff’s rights while they were at it.” Id. ¶ 36. 28 1 Defendants’ exposure for the turning vane incident by presenting Plaintiff with an 2 agreement stating that Kenway would be released from any further claims resulting from 3 the design or failure of the turning vanes. Id. ¶¶ 48, 51. The release stated, in part: 4 “[Plaintiff] acknowledges that Kenway Corporation is fulfilling all its warranty obligations associated with the Airborne San 5 Diego original turning vane failure by its design, testing and 6 supply of these modified replacement vanes at Kenway Corporation’s costs. In exchange for the design, testing and 7 supply of these replacement vanes, [Plaintiff] releases Kenway 8 from any additional present or future claims, damages, or liabilities of any kind relating to the failure or to the design of the 9 vanes.” 10 11 Id. ¶ 51 (emphasis omitted). 12 Plaintiff claims that Defendants raised concerns to Kenway about the release 13 because it was “‘narrow’ and did not include ‘typical’ release language.” Id. ¶ 53. But 14 Kenway informed Defendants it desired to balance “thorough protection” against 15 “provoking litigation.” Id. ¶ 54. Kenway allegedly represented to Plaintiff that Defendants 16 “w[ould] NOT allow [Kenway] to start the warranty replacement process without this 17 documentation in place.” Id. ¶ 55 (emphasis in original). On March 6, 2017, Plaintiff 18 signed the release, allegedly without knowledge any company but Kenway would be 19 working on the Project. Id. ¶ 57–58. On June 12, 2017, the Project experienced a further 20 catastrophic setback. The nose cone in Tunnel One, designed and manufactured by 21 Kenway and Aerolab, blew apart. Id. ¶¶ 60–61. Plaintiff alleges that the nose cone 22 weighed three times its intended weight. Id. ¶ 60. This incident occurred “only days” after 23 rebalancing work had been done in Tunnel One. Id. ¶ 64. According to Plaintiff, it would 24 have been much more careful about the rebalancing had it known that Kenway had 25 admitted to Defendants that “its design and manufacturing work on the [P]roject had been 26 negligent.” Id. ¶ 63. 27 /// 28 /// 1 The nose cone incident proved to be the Project’s “knockout blow.” Id. ¶ 66. 2 Plaintiff learned it would cost an additional $4,500,000 to $7,000,000 to repair the damage. 3 Id. By August 2017, Plaintiff closed its doors and defaulted on its loans. Id. ¶¶ 68–69.

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