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Transcanada USA Operations, Inc. v. Michels Corp.

United States District Court, S.D. Texas, Houston Division

December 31, 2019

MICHELS CORPORATION, Defendant/Third-Party Plaintiff,
PIPE DOGS, INC., Third-Party Defendant/ Third-Party Plaintiff
REACTOR RESOURCES LLC, Third-Party Defendant.



         Pending are Third-Party Defendant Pipe Dogs, Inc.'s Motion to Dismiss for Failure to Join a Required Party, Motion to Dismiss Plaintiff TransCanada USA Operations Inc.'s Complaint for Failure to State a Claim, and Motion for a More Definite Statement (Document No. 19) and Reactor Resources's 12(b) (6) Motion to Dismiss and, in the Alternative, 12 (e) Motion for More Definite Statement (Document No. 27). After considering the motions, responses, replies, and applicable law, the Court concludes as follows.

         I. Background

         Plaintiff TransCanada USA Operations, Inc. ("TransCanada") maintains crude oil pipelines, including portions of the Keystone pipeline.[1] On November 9, 2012, TransCanada and Defendant Michels Corporation ("Michels") entered into a Master Construction and Maintenance Services Agreement for U.S. Pipeline Construction and Maintenance Services (the "MSA") .[2] As part of the MSA, Michels agreed that it would be liable to TransCanada for "any and all losses, injuries, damages, fines, penalties, costs and expenses incurred by or suffered upon" TransCanada "in any manner directly or indirectly caused, occasioned, attributable or contributed to in whole or in part by reason of (i) any breach or non-compliance with any term or provision of this Contract, ... or (ii) any act or omission including as a result of fault, negligence or willful misconduct, whether active or passive, of Contractor or any Subcontractor."[3] Michels also agreed that it would defend and indemnify TransCanada and would hold TransCanada harmless "from and against any and all Claims."[4]

         Pursuant to the MSA, TransCanada and Michels entered into a Release Order for Michels to investigate leaks in part of TransCanada's pipeline and to provide a vendor to locate leaks.[5]According to Michels, TransCanada elected to use Pipe Dogs, Inc. ("Pipe Dogs") to locate any leaks and determined that Michels should subcontract with Pipe Dogs for these services due to Michels's ongoing presence at the pipeline location.[6]

         Michels entered into a Professional Service Agreement ("PSA") with Pipe Dogs for the pipe leak investigation.[7] Pipe Dogs performed the investigation in May 2016, and Michels alleges that the investigation was done under the sole supervision of TransCanada.[8] To perform this leak detection service, dimethyl sulfide gas ("DMS") was released into the pipeline, and dogs that are specially trained to detect the characteristic smell of the gas at low concentrations walked along sections of the pipeline and would alert their handlers if they detected the scent.[9]TransCanada alleges that when Pipe Dogs released quantities of DMS into the specified section of the pipeline, "an excess amount of [DMS] was negligently injected . . . [which] ultimately contaminated certain batches of crude oil shipped on the Keystone pipeline."[10] TransCanada then paid a claim for damages based on the contaminated oil.[11] TransCanada informed Michels of the claim and sought payment from Michels pursuant to the MSA.[12] TransCanada alleges that Michels did not resolve the claim or indemnify TransCanada for its payment.[13] Consequently, TransCanada filed its suit alleging a claim against Michels for breach of the MSA.[14]

         Michels answered and filed its Third-Party Complaint against Pipe Dogs, alleging claims for indemnification pursuant to the PSA and for negligence.[15] Pipe Dogs then filed its own Third-Party Complaint against Reactor Resources, LLC ("Reactor Resources").[16]Pipe Dogs alleges that it contracted with Reactor Resources to formulate and inject the DMS and that Reactor Resources, not Pipe Dogs, was the entity that injected the DMS into the pipeline before Pipe Dogs performed its leak detection services in May 2016.[17] Pipe Dogs alleges against Reactor Resources negligent workmanship, negligent hiring, breach of warranty, delegation of non-delegable duty, and seeks contribution.

         II. Pipe Dogs's Motions

         A. Failure to Join a Reguired Party

         Pipe Dogs argues that TransCanada's suit should be dismissed pursuant to Rule 12(b)(7) because "non-party Reactor Resources LLC is reguired for the resolution of plaintiff's and third-party plaintiff's suits but cannot be joined."[18] As if to prove itself wrong, however, one day after filing its Rule 12(b) (7) motion, Pipe Dogs did in fact join Reactor Resources as a party to this case by naming it the third-party defendant in Pipe Dogs's third-party action.[19] Reactor Resources thereupon entered its appearance and filed a Rule 12(b) (6) motion to dismiss Pipe Dogs's third-party claims.

         Contrary to the contention of Pipe Dogs, its joinder of Reactor Resources as a third-party defendant in its own cross action does not destroy the Court's diversity jurisdiction. Even though Reactor Resources is not diverse from the original Plaintiff TransCanada, the Court has supplemental jurisdiction over Pipe Dogs's third-party action under 28 U.S.C. § 1367(a). The exceptions to § 1367 (a) found in § 1367 (b) and (c) do not apply. The Fifth Circuit has held that "'plaintiff in § 1367(b) refers to the original plaintiff in the action--not to a defendant that happens also to be a counter-plaintiff, cross-plaintiff, or third-party-plaintiff." State Nat'l Ins. Co. v. Yates, 391 F.3d 577, 580 (5th Cir. 2004). TransCanada, the original Plaintiff, is not suing Reactor Resources and is not required to do so. Third-Party Plaintiff Pipe Dogs cannot destroy the Court's diversity jurisdiction by its third-party action. Id. Accordingly, Pipe Dogs's motion to dismiss for failure to join a required party is denied.

         B. Motion to Dismiss and Motion for a More Definite Statement

         Pipe Dogs moves to dismiss TransCanada's suit for failure to state a claim against Pipe Dogs on which relief can be granted. However, TransCanada has not sued Pipe Dogs and is not seeking any relief against Pipe Dogs. TransCanada's claim is solely against Michels, and alleges that Michels breached the MSA between TransCanada and Michels. Michels has joined issue by filing a responsive answer. Pipe Dogs's Rule 12(b)(6) motion to dismiss TransCanada's suit against Michels has no merit and is denied.

         Pipe Dogs also moves for an order requiring Michels to file a more definite statement under Rule 12(e) .[20] "A party may move for a more definite statement of a pleading to which a responsive pleading is allowed but which is so vague or ambiguous that the party cannot reasonably prepare a response." Fed.R.Civ.P. 12(e). A motion for a more definite statement should be denied where the movant is reasonably able to respond to the pleading. Mitchell v. E-Z Way Towers, Inc., 269 F.2d 126, 131-32 (5th Cir. 1959); Benavides v. Laredo Med. Ctr., No. L-08-105, 2009 WL 1755004, at *8 (S.D. Tex. June 18, 2009) (Alvarez, J.).

         The Court finds that Michels's Third-Party Complaint details the portions of the PSA between Michels and Pipe Dogs upon which Michels relies for its claim against Pipe Dogs for indemnity, and--with its attachments of both TransCanada's First Amended Complaint and Michels's responsive Answer--adequately pleads the basis for its negligence claim against Pipe Dogs. In no manner is Michels's pleading "so vague or ambiguous" that Pipe Dogs cannot reasonably prepare a response.

         Pipe Dogs complains that the specific amount of damages sought by TransCanada from Michels, and hence by Michels from Pipe Dogs, has been redacted from Michels's pleading, and therefore Pipe Dogs does not know what damages are being sought from it. Pipe Dogs can determine this during pretrial discovery as TransCanada's case against Michels proceeds. Arista Records LLC v. Greubel, 453 F.Supp.2d 961, 972 (N.D. Tex. 2006) (damages are a "matter[] that can be clarified and developed during discovery, not [a] matter[] that impede[s] [its] ability to form a responsive pleading"). Pipe Dogs's Rule 12(e) motion for a more definite statement is denied.

         III. Reactor Resources's Motion to Dismiss Reactor Resources moves to dismiss Pipe Dogs's Third-Party Complaint for failure to state a claim and in the alternative moves for a more definite statement.

         A. Legal Standard

         Rule 12(b) (6) provides for dismissal of an action for "failure to state a claim upon which relief can be granted." Fed.R.Civ.P. 12(b) (6) . When a district court reviews the sufficiency of a complaint before it receives any evidence either by affidavit or admission, its task is inevitably a limited one. See Scheuer v. Rhodes, 94 S.Ct. 1683, 1686 (1974), abrogated on other grounds by Harlow v. Fitzgerald, 102 S.Ct. 2727 (1982) . The issue is not whether the plaintiff ultimately will prevail, but whether the plaintiff is entitled to offer evidence to support the claims. Id.

         In considering a motion to dismiss under Rule 12(b)(6), the district court must construe the allegations in the complaint favorably to the pleader and must accept as true all well-pleaded facts in the complaint. See Lowrey v. Tex. A&M Univ. Sys., 117 F.3d 242, 247 (5th Cir. 1997). To survive dismissal, a complaint must plead "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 127 S.Ct. 1955, 1974 (2007) . "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." Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009). While a complaint "does not need detailed factual allegations . . . [the] allegations must be enough to ...

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