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Tharaldson Financial Group, Inc. v. AAF McQuay Inc.

United States District Court, D. Nevada

September 30, 2014

AAF McQUAY INC. dba McQUAY INTERNATIONAL, a Minnesota corporation; and DOES 1 through 40, inclusive, Defendants.


GLORIA M. NAVARRO, Chief District Judge.

Pending before the Court is the Motion for Judgment on the Pleadings (ECF No. 7) filed by Defendant Daikin Applied Americas Inc. f/k/a AAF-McQuay ("McQuay") on October 15, 2013. Plaintiffs Tharaldson Financial Group, Inc. ("Tharaldson"), Ironshore Specialty Insurance Company ("Ironshore"), and Industrial Risk Insurers ("Industrial") (collectively "Plaintiffs") filed their Response in Opposition (ECF No. 13) on October 31, 2014, and McQuay filed its Reply (ECF No. 15) on November 11, 2013.


Plaintiffs initially filed the current action in Nevada state court on August 9, 2013. (Complaint, ECF No. 1-1). According to the Complaint, a fire occurred on or about August 11, 2010 at a property located at 5735 Dean Martin Drive, Las Vegas, Nevada (the "Property"). ( Id. ¶ 1). The fire was caused by the failing of the heating ventilation and cooling ("HVAC") unit located at the Property, which was manufactured and sold by McQuay and the unnamed defendants. ( Id. ¶¶ 10-11). The Property, which was at all relevant times managed and operated by Tharaldson and was insured by Ironshore and Industrial (the "Insurers"), suffered damages in excess of $10, 000 as a result of the fire. ( Id. ¶¶ 1, 9). These damages were subsequently paid out to Tharaldson by Ironshore and Industrial under their applicable insurance policies, which led to the legal and equitable subrogation of Tharaldson's rights to the Insurers. ( Id. ¶ 8).

Plaintiffs Complaint asserts three causes of action against McQuay for (1) strict products liability, (2) negligence, and (3) breach of implied warranty. ( Id. ¶¶ 14-23). McQuay subsequently removed the action to federal court (ECF No. 1) on October 11, 2013 and filed the current pending Motion for Judgment on the Pleadings (ECF No. 7).


Federal Rule of Civil Procedure 12(c) provides that "[a]fter the pleadings are closed- but early enough not to delay trial-a party may move for judgment on the pleadings." "Judgment on the pleadings is properly granted when, accepting all factual allegations in the complaint as true, there is no issue of material fact in dispute, and the moving party is entitled to judgment as a matter of law." Chavez v. United States, 683 F.3d 1102, 1108 (9th Cir. 2012). Accordingly, "[a]nalysis under Rule 12(c) is substantially identical to analysis under Rule 12(b)(6) because, under both rules, a court must determine whether the facts alleged in the complaint, taken as true, entitle the plaintiff to a legal remedy." Id.

In order to survive a motion to dismiss under Rule 12(b)(6), a complaint must allege "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 (2009) (internal quotation marks omitted). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id.

The Court, however, is not required to accept as true allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences. See Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). A formulaic recitation of a cause of action with conclusory allegations is not sufficient; a plaintiff must plead facts showing that a violation is plausible, not just possible. Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 555) (emphasis added).


In its motion, McQuay asserts that Plaintiffs' claims for strict products liability and negligence are barred by the economic loss doctrine and that Plaintiffs' claim for breach of implied warranty is barred by a contractual disclaimer. (Mot. for Judgment 6:1-10:10, ECF No. 7). McQuay further argues that even if it is not entitled to judgment on the pleadings for all of Plaintiffs' claims, Plaintiffs' damages for those claims are still limited by an express contractual disclaimer. ( Id. 10:11-11:25).

A. Economic Loss Doctrine

The Supreme Court of Nevada has explained that "the economic loss doctrine marks the fundamental boundary between contract law, which is designed to enforce the expectancy interests of the parties, and tort law, which imposes a duty of reasonable care and thereby generally encourages citizens to avoid causing physical harm to others." Terracon Consultants W., Inc. v. Mandalay Resort Grp., 206 P.3d 81, 86 (Nev. 2009). To accomplish this purpose, "the doctrine bars unintentional tort actions when the plaintiff seeks to recover purely economic losses." Id. (internal quotations omitted). Accordingly, "a plaintiff may not recover economic loss under theories of strict products liability or negligence." Calloway v. City of Reno, 993 P.2d 1259, 1264 (Nev. 2000) overruled on other grounds by Olson v. Richard, 89 P.3d 31, 33 (Nev. 2004) (finding that the economic loss doctrine does not bar recovery for negligence claims brought under Nevada Revised Statutes Chapter 40). Moreover, when an integrated component of a product, such as a building's heating or plumbing system, fails and causes damage to the larger product but not to other property, only economic loss has occurred. Id. at 1268-69; see also ( Fireman's Fund Ins. Co. v. Sloan Valve Co., 2:10-CV-01816-RLH, 2011 WL 5598324, at *2 (D. Nev. Nov. 16, 2011) ("In a case such as this, when an integral component of a product (including a building) fails and damages the larger product, only economic loss occurs and, thus, tort recovery is barred.").

In their Complaint, Plaintiffs seek recovery of damages to the Property under theories of both strict products liability and negligence. (Complaint ¶ 11, ECF No. 1-1). Plaintiffs, argue that the economic loss doctrine does not apply to bar these claims because the HVAC unit- which Plaintiffs admit had been installed in the Property for over a year-was not an integral part of the Property, or at least whether the HVAC unit ...

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