Johns v. Eastman Chemical Co.

248 F. Supp. 3d 765, 2017 U.S. Dist. LEXIS 49592, 63 Bankr. Ct. Dec. (CRR) 258
CourtDistrict Court, S.D. West Virginia
DecidedMarch 31, 2017
DocketCIVIL ACTION NO. 2:16-01775
StatusPublished
Cited by3 cases

This text of 248 F. Supp. 3d 765 (Johns v. Eastman Chemical Co.) is published on Counsel Stack Legal Research, covering District Court, S.D. West Virginia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Johns v. Eastman Chemical Co., 248 F. Supp. 3d 765, 2017 U.S. Dist. LEXIS 49592, 63 Bankr. Ct. Dec. (CRR) 258 (S.D.W. Va. 2017).

Opinion

MEMORANDUM OPINION . AND ORDER

John T. Copenhaver, Jr., United States District Judge

Pending are defendant’s motion to dismiss, ECF No. 3, filed March 1, 2016, and plaintiff’s alternative motion for leave to amend, ECF No. 11, filed May 9, 2016.

I. Background

On January 9, 2014, a chemical mixture leaked from a storage facility owned and operated by Freedom Industries (“Freedom”) into the Elk River. The leak resulted in contamination of West Virginia American Water Company’s water treatment plant and interruption in water service for residents of the surrounding area. The leaked mixture contained, along with other chemicals, 4-methylcyclohexane methanol, commonly referred to as “Crude MCHM.” The Crude MCHM was manufactured and sold to Freedom by defendant Eastman Chemical Company (“Eastman”).

As a result of the spill, Freedom incurred significant remediation expenses as well as loss of income. Freedom filed for Chapter 11 Bankruptcy on January 17, 2014, and a Chapter 11 plan (“Plan”) was confirmed by the United States Bankruptcy Court for the Southern District of West Virginia on October 6, 2015. Plaintiff Robert L. Johns was appointed to serve as the GC Plan Administrator and Spill Claim Plan Administrator of Freedom. Under the terms of the Plan, plaintiff .has the authority to pursue those claims and causes of actions retained by Freedom. Of relevance here, Section 11.6 of the Plan (“Retention of Causes of Action”) provides, in pertinent part, that the Spill Claim Plan Administrator:

[S]hall have the exclusive right to enforce and shall retain, all Causes of Action of the Debtor and the Estate against any Persons, including, without limitation, Claims or Causes of Action arising from or relating [to] the Incident. ,

The “Incident” is defined as “the occurrence whereby on January 9, 2014, a substance primarily consisting of [Crude MCHM] was released from Tank No. 396 at the [Freedom facility] onto the facility and into the Elk River in Charleston, WV.” Plan, ECF No. 1-5, § 1.53.

Plaintiff filed his original complaint in Kanawha County Circuit Court on January 19, 2016, and his amended complaint on January 25. The amended complaint asserts that Eastman knew of certain hazardous properties of Crude MCHM, including that Crude MCHM was corrosive to carbon steel and hazardous to human health, and that Eastman failed to disclose these properties to Freedom. Because Freedom was unaware of the corrosive nature of Crude MCHM, it stored the chemical in a carbon steel tank, resulting in the failure of the tank and chemical spill. The amended complaint contains six claims against Eastman: 1) breach of contract; 2) breach of warranty; 3) fraud; 4) .product liability; 5) negligence; and 6) punitive damages. Defendant removed the case to this court on February 23,2016. On March 1, 2016, defendant' filed the now pending motion to dismiss. The motion seeks dismissal of every claim, asserting that:

1) the Plan failed to preserve Freedom’s claims against defendant, and that all claims are thus barred by res judicata;
[768]*7682) plaintiffs fraud, product liability, and negligence claims are barred by the statute of limitations;
3) plaintiff has failed to allege a sufficient factual basis for a breach of contract claim;
4) plaintiff has failed to allege a sufficient factual basis for a breach of warranty claim;
5) plaintiff has failed to plead its fraud claim with particularity; and
6) that all of plaintiffs claims are disguised claims for implied indemnification, and that Freedom’s fault in the spill precludes recovery on such a claim.

II. Standard

Federal Rule of Civil Procedure 8(a)(2) requires that a pleader provide “a short and plain statement of the claim showing ... entitle[ment] to relief.” Fed.R.Civ.P. 8(a)(2); Erickson v. Pardus, 551 U.S. 89, 93, 127 S.Ct. 2197, 167 L.Ed.2d 1081 (2007). Rule 12(b)(6) correspondingly permits a defendant to challenge a complaint when it “fail[s] to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). The required “short and plain statement” must provide 'fair notice of what the ... claim is and the grounds upon which it rests.’ ” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 545, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957), overruled on other grounds, Twombly, 550 U.S. at 563, 127 S.Ct. 1955). In order to survive a motion to dismiss, “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ ” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Twombly, 550 U.S. at 570, 127 S.Ct. 1955); see also Monroe v. City of Charlottesville, 579 F.3d 380, 386 (4th Cir. 2009). The court must also “draw[] all reasonable ... inferences from th[e] facts in the plaintiffs favor.” Edwards v. City of Goldsboro, 178 F.3d 231, 244 (4th Cir. 1999).

Ill, Analysis

1. Plaintiff’s claims are not barred by res judicata.

A bankruptcy court’s confirmation of a chapter 11 plan is treated as a final judgment with res judicata effect. In re Varat Enterprises, Inc., 81 F.3d 1310, 1315 (4th Cir. 1996). Thus, parties may be precluded from raising issues or claims post-confirmation that could have been raised prior to confirmation. Id. However, a debtor may choose to retain causes of action for post-confirmation enforcement in its bankruptcy plan. In re Kmart Corp., 310 B.R. 107, 119 (Bkrtcy N.D. Ill 2004).

Section 11.6 of Freedom’s chapter 11 Plan purported to reserve all claims or causes of action “arising from or relating [to] the Incident.” Defendant asserts that this provision did not properly preserve Freedom’s right to pursue claims against defendant, because it does not precisely delineate the category or type of claim preserved. Defendant argues that, while Bankruptcy Code § 1123(b)(3)(B) provides an exception to the res judicata effect of a confirmed chapter 11 plan, a general reservation of litigation rights is not sufficient where the defendant was a previously named creditor. In re Air Cargo, Inc., 2008 WL 2415039 at *5 (D. Md. June 11, 2008).

Regarding the content of a Chapter 11 bankruptcy plan, 11 U.S.C. § 1123(b)(3) states that a plan may provide for:

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Cite This Page — Counsel Stack

Bluebook (online)
248 F. Supp. 3d 765, 2017 U.S. Dist. LEXIS 49592, 63 Bankr. Ct. Dec. (CRR) 258, Counsel Stack Legal Research, https://law.counselstack.com/opinion/johns-v-eastman-chemical-co-wvsd-2017.