The Boeing Company v. Leo A. Daly Company
1:13-cv-00027
N. Mar. I.Feb 14, 2014Background
- Boeing Service Company contracted with Commonwealth Ports Authority for Saipan Airport improvements and subcontracted design and construction management to Leo A. Daly (Daly).
- Boeing alleges Daly performed deficiently in the design/management of a terminal addition and that those defects harmed the existing main terminal (seismic code violations), leading to eight causes of action.
- Daly moved to dismiss five counts: implied contractual indemnity, professional malpractice and negligence (economic loss rule), Commonwealth Consumer Protection Act claim, and a bad-faith indemnity/punitive damages claim.
- The court evaluates the motion under Rule 12(b)(6) plausibility standards (Twombly/Iqbal) and predicts Commonwealth Supreme Court law where unsettled.
- The court denies the motion to dismiss on all challenged claims, finding each claim plausible under Commonwealth law analogues and Restatement authority.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Implied contractual indemnity | Boeing may plead implied indemnity in equity in addition to any express indemnity | Daly: Commonwealth does not recognize implied contractual indemnity; cannot plead both | Court: Commonwealth would recognize implied indemnity; pleading both (alternative theories) is permissible — DENIED dismissal |
| Economic loss doctrine (malpractice/negligence) | Defects damaged other property (main terminal), so economic loss rule does not bar recovery | Daly: Economic loss rule bars tort claims for purely economic/contractual losses | Court: Predicts Commonwealth follows Restatement/majority; alleged harm to existing terminal is damage to other property — tort claims plausible — DENIED dismissal |
| Commonwealth Consumer Protection Act (CCPA) applicability | Boeing: Claim alleges deliberate deception; merchants are consumers under Act so CCPA applies | Daly: CCPA does not reach commercial participants or contract-like disputes | Court: Where deception is alleged, Act applies to merchants/consumers; ambiguity resolved for consumer — DENIED dismissal |
| Bad faith in indemnity obligations & punitive damages | Boeing: Bad-faith breach of indemnity (like insurance) supports tort and punitive damages | Daly: Punitive damages barred for contract breaches; bad-faith claim is duplicative of contract claim | Court: Commonwealth recognizes tort bad-faith in insurance/indemnity contexts and punitive damages may be recoverable; claim plausible — DENIED dismissal |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (plausibility pleading standard under Rule 12(b)(6))
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (complaint must plead facts making relief plausible)
- Med. Lab. Mgmt. Consultants v. Am. Broad. Cos., 306 F.3d 806 (9th Cir.) (predicting state law where no controlling state decision)
- Starr v. Baca, 652 F.3d 1202 (9th Cir.) (factual allegations must give fair notice and render relief plausible)
- Saratoga Fishing Co. v. J.M. Martinac & Co., 520 U.S. 875 (product/component failure harming other property may allow recovery despite economic-loss concerns)
- Jimenez v. Superior Court, 58 P.3d 450 (Cal. 2002) (housing-defect decisions allowing recovery for damage to other property)
- Gunkel v. Renovations, Inc., 822 N.E.2d 150 (Ind. 2005) (similar rule in housing-defect context)
- Pulte Home Corp. v. Parex, Inc., 923 A.2d 971 (Md. Ct. Spec. App. 2007) (economic-loss analysis in construction context)
- Flagstaff Affordable Housing Ltd. v. Design Alliance, Inc., 223 P.3d 664 (Ariz. 2010) (contrasting authority on economic-loss in construction)
- Bradley v. Harcourt, Brace & Co., 104 F.3d 267 (9th Cir.) (addressing inconsistent factual positions but not barring alternative pleadings)