Opinion
Civil Action 3:20-cv-01884-JMC
02-18-2022
Scott Avant, Plaintiff, v. Ahern Rentals, Inc., Defendant.
ORDER AND OPINION
Before the court is Defendant Ahern Rentals, Inc.'s (“Ahern”) Motion for Reconsideration of the Court's Order Denying Defendant's Motion to Amend Answer and File Third Party Complaint. (ECF No. 50.) Plaintiff Scott Avant has entered a Response in Opposition to the Motion (ECF No. 51), to which Ahern replied (ECF No. 52). For the following reasons, the court DENIES the Motion (ECF No. 50) as set forth below.
I. FACTUAL AND PROCEDURAL BACKGROUND
The following allegations are taken from the Complaint. (See ECF No. 1-1.)
Ahern, which is “North America's largest independently owned equipment rental company, ” “routinely hired” Southern Diesel Repair, LLC (“Southern Diesel”) to complete “repairs on vehicles and trailers in Ahern's rental inventory.” (ECF No. 1-1 at 2.) Plaintiff worked as a mechanic for Southern Diesel. Id. Ahern sought repairs on one of its “Trail King manufactured ‘low boy' trailer[s]” but, because of a recent fire at Southern Diesel's garage, the repairs were to occur at “an unimproved lot consisting of dirt and gravel.” (Id. at 2-3.) Ahern delivered the trailer to the unimproved lot. (Id. at 3.) Although Plaintiff did not know how to position a jack under the trailer due to its low height, an unnamed Ahern employee allegedly showed Plaintiff “how to elevate the trailer[] by depressing the back ramp into the ground, using the trailer's hydraulic system that was connected to the Ahern Rig.” (Id.) Plaintiff later purportedly used this method to access the trailer's undercarriage. (Id.) Unfortunately, the hydraulics failed and the trailer collapsed on Plaintiff, causing him severe injuries. (Id. at 3-4.) Subsequently, Plaintiff filed suit against Ahern, alleging negligence for failing to properly maintain its equipment or warn of its failure. (See Id. at 4-5.)
The unimproved lot was allegedly owned by “SDR Towing and Recovery, LLC” (“SDR Towing”), a “sister company” to Southern Diesel. (ECF No. 1-1 at 2.)
On August 12, 2021, Ahern filed a Motion seeking to amend its Answer and file a Third-Party Complaint to implead Southern Diesel and others for claims including the South Carolina Contribution Among Tortfeasors Act (“SCCAT”), breach of contract, negligence, and equitable indemnity. (See ECF No. 27.) Plaintiff opposed the Motion, insisting that (1) Ahern did not have “good cause” under Rule 16 to do so, as it has known of the Third-Party Defendants for years; (2) the claims in the Third-Party Complaint were not derivative of Plaintiff's claims, which is required under Rule 14; and (3) no right to relief exists for the claims, as many were barred under the South Carolina Workers' Compensation Act (“the Act”). Ahern countered it had shown good cause because Plaintiff's deposition revealed new, significant information regarding the Third-Party Defendants that Ahern could not previously have uncovered, despite its diligent investigation. (ECF No. 29 at 13.) Ahern argued that its claims against the Third-Party Defendants derived from Plaintiff's claims (id. at 12-13), and finally, that considerations of judicial economy weighed in favor of granting leave to amend and implead the Third-Party Defendants (id.).
In particular, Ahern sought to assert causes of action against the following entities: Southern Diesel Repair, LLC, Southern Diesel Repair Service, LLC, SDR Towing and Recovery, LLC, SDR Towing LLC, SDR Towing and Recovery of SC, LLC, SDR Towing of S.C. LLC, and Interstate 26 Service Center, LLC (“Third-Party Defendants”). (ECF No. 27-1 at 1.)
The court denied Ahern's motion on several grounds. (ECF No. 44.) First, the court found that Ahern had no right to relief under the South Carolina Workers' Compensation Act (“the Act”), which “provides the exclusive remedy for an employee who sustains injuries arising out of his employment . . . [and] bars all common law actions against an employer based on injuries within the scope of the [Act].” (Id. at 5-6 (citing Mabry v. McLeod Physician Assocs. II, No. 4:20-cv-3147-SAL, 2021 WL 1701226, at *3 (D.S.C. Feb. 19, 2021), report and recommendation adopted sub nom. Mabry v. McLeod Physician Assocs. II, No. 4:20-cv-3147-SAL, 2021 WL 1691955 (D.S.C. Apr. 29, 2021) (internal citations omitted)).) Because Plaintiff, “a direct or loaned employee of all proposed [Third-Party] Defendants, ” could not recover from them under the Act, Ahern likewise could not bring suit against them through impleader. (ECF No. 44 at 5-6.) In essence, the court concluded that no “right to relief exist[ed] under the applicable substantive law” established by the Act, and thus, impleader was improper under Rule 14. The court's conclusion applied in equal force to all causes of action alleged in the proposed Third-Party Complaint. As to Ahern's third-party negligence and SCCAT claims, the court stated they were clearly barred under the exclusivity provision of the Act. (Id. at 7.) Similarly, Ahern's third-party breach of contract and equitable indemnity claims “rested on nearly identical grounds as those supporting the negligence and SCCAT claims, ” and were barred by the Act because they arose from the same core set of facts alleging the Third-Party Defendants negligently caused or contributed to Plaintiff's injury. (Id. at 7-8.)
The court also concluded that any amendment of Ahern's Answer would likely be futile under Rule 15 as no substantive cause of action against the Third-Party Defendants could be maintained. Finally, the court remarked that even if Ahern had a right to relief, it would still likely deny leave to amend in light of “undue delay and complications” that would result from the amendment of Ahern's Answer and impleader of the Third-Party Defendants. (Id. at 10.)
Ahern raises two arguments in this Motion for Reconsideration (ECF No. 50). First, Ahern alleges that the court failed to distinguish among the proposed Third-Party Defendants and did not specify which one(s) were Plaintiff's statutory employers under the Act. (Id. at 1.) Conceding that Southern Diesel, as Plaintiff's direct employer, clearly falls within the scope of the Act, Ahern nonetheless argues that the remaining six proposed Third-Party Defendants did not have an employer-employee relationship with Plaintiff at any point and are therefore not shielded by the Act's exclusivity provision. (Id.) Second, Ahern lays out the timeline of its various filings in this case to support its claim that impleading the Third-Party Defendants will not cause “undue delay and complications” in this case. (Id. at 5-6.)
II. LEGAL STANDARDS
A. Rule 54
Under Rule 54(b) of the Federal Rules of Civil Procedure,
“any order or other decision, however designated, that adjudicates fewer than all the claims or the rights and liabilities of fewer than all the parties does not end the action as to any of the claims or parties and may be revised at any time before the entry of a judgment adjudicating all the claims and all the parties' rights and liabilities.”Fed. R. Civ. P. 54(b). A federal district court “retains the power to reconsider and modify its interlocutory judgments . . . at any time prior to final judgment when such is warranted.” Am. Canoe Ass'n v. Murphy Farms, Inc., 326 F.3d 505, 514-15 (4th Cir. 2003). Compared to motions to reconsider final judgments pursuant to Rule 59(e) of the Federal Rules of Civil Procedure, Rule 54(b)'s approach involves broader flexibility to revise interlocutory orders before final judgment as the litigation develops. Despite the inherent flexibility embodied within Rule 54(b), the United States Court of Appeals for the Fourth Circuit has mindfully cautioned that “the discretion afforded by Rule 54(b) ‘is not limitless[.]'” U.S. Tobacco Coop. Inc. v. Big S. Wholesale of Va., LLC, 899 F.3d 236, 256 (4th Cir. 2018) (quoting Carlson v. Bos. Sci. Corp., 856 F.3d 320, 325 (4th Cir. 2017)). The Fourth Circuit emphasizes that a district court's revision pursuant to Rule 54(b) is “cabined . . . by treating interlocutory rulings as law of the case.” Carlson, 856 F.3d at 325 (citations omitted). Although Rule 54(b) provides a district court with discretion to revisit an earlier ruling, “such discretion is ‘subject to the caveat that where litigants have once battled for the court's decision, they should neither be required, nor without good reason permitted, to battle for it again.'” U.S. Tobacco Coop. Inc., 899 F.3d at 257 (quoting Off. Comm. of Unsecured Creditors of Color Tile, Inc. v. Coopers & Lybrand, LLP, 322 F.3d 147, 167 (2d Cir. 2003)).
Accordingly, “a court may revise an interlocutory order under the same circumstances in which it may depart from the law of the case: ‘(1) a subsequent trial producing substantially different evidence; (2) a change in applicable law; or (3) clear error causing manifest injustice.'” Id. (quoting Carlson, 856 F.3d at 325). While this standard resembles the standard under Rule 59(e), it accounts for “potentially different evidence discovered during litigation as opposed to the discovery of ‘new evidence not available at trial.'” Carlson, 856 F.3d at 325 (quoting Pac. Ins. Co. v. Am. Nat'l Fire Ins. Co., 148 F.3d 396, 403 (4th Cir. 1998)).
In evaluating a Rule 54(b) motion for an error of law or manifest injustice, courts are “not persuaded that reconsideration is appropriate based on arguments that have already been considered and rejected by the court.” Sanders v. Lowe's Home Centers, LLC, No. 0:15-CV02313-JMC, 2016 WL 5920840, at *4 (D.S.C. Oct. 11, 2016); U.S. Home Corp. v. Settlers Crossing, LLC, No. 08-1863- DKC, 2012 WL 5193835, at *3 (D. Md. Oct. 18, 2012); see Sanders v. Wal-Mart Stores E., No. 1:14-CV-03509-JMC, 2016 WL 6068021, at *2 (D.S.C. Oct. 17, 2016).
B. Rule 14
Rule 14(a)(1) states that a
“defending party may, as third-party plaintiff, serve a summons and complaint on a nonparty who is or may be liable to it for all or part of the claim against it. But the third-party plaintiff must, by motion, obtain the court's leave if it files the third-party complaint more than 14 days after serving its original answer.”Fed. R. Civ. P. 14(a)(1) . “District courts have broad discretion over motions for leave to file a third-party complaint, which is also called ‘impleader.'” Turner v. Harmon, No. 20-cv-2328-JKB, 2021 WL 1219515, at *2 (D. Md. Mar. 31, 2021) (citing Noland Co. v. Graver Tank & Mfg. Co., 301 F.2d 43, 50 (4th Cir. 1962)). This Rule “intends that the third-party defendant be liable to the defendant for such damages for which the defendant may be liable to the plaintiff.” Laughlin v. Dell Fin. Servs., L.P., 465 F.Supp.2d 563, 566 (D.S.C. 2006).
The Rule “cannot be used . . . to bring into a controversy matters which merely happen to have some relationship to the original action.” Deutsche Bank Nat'l Tr. Co. v. Stevenson, No. 2:12-cv-1854-CWH, 2013 WL 12241630, at *2 (D.S.C. Jan. 30, 2013) (citation omitted). Further, a “right to relief [must] exist[] under the applicable substantive law” for the claims brought in the Third-Party Complaint. Turner, 2021 WL 1219515, at *2 (citations and internal marks omitted). See also Tetra Tech EC/Tesoro Joint Venture v. Sam Temples Masonry, Inc., No. 3:10-cv-1597-CMC, 2011 WL 1048964, at *3 (D.S.C. Mar. 21, 2011) (“Rule 14 also requires that there be a right to relief under the applicable substantive law. In other words, the defendant must “assert a derivative or secondary claim for relief that is recognized by applicable substantive law.”); Brown v. Shredex, Inc., 69 F.Supp.2d 764, 767 (D.S.C. 1999) (“Federal Rule of Civil Procedure 14 permits claims for contribution to be filed in third-party actions so long as the governing substantive law recognizes a right of contribution.”) Thus, if state law renders a proposed third-party defendant immune from the third-party plaintiff's claim, no substantive right to contribution exists, and Rule 14 precludes the impleader.
Generally, courts have looked to two elements to determine the validity of a third-party claim: (1) the Third-Party Defendants “must be potentially liable to” Defendant; and (2) the Third-Party Defendants' “liability must relate to” Plaintiff's “claim against . . . [Defendant] such that . . . [the Third-Party Defendants'] liability arises only if . . . [Defendant] is first held liable to [P]laintiff.” Deutsche Bank Nat'l Tr. Co., 2013 WL 12241630, at *2 (quoting Tetra Tech EC/Tesoro Joint Venture v. Sam Temples Masonry, Inc., No. 3:10-cv-1597-CMC, 2011 WL 1048964, at *3 (D.S.C. Mar. 21, 2011)).
III. ANALYSIS
At the outset, the court notes Ahern's Motion must be considered under Rule 54(b) rather than Rule 59, because it urges reconsideration of an interlocutory order of this court, rather than its final judgment. Ahern posits that the court committed a clear error of law. (See ECF No. 50 at 4-5.) Ahern asserts that there is no evidence that six of the proposed Third-Party Defendants ever employed Plaintiff under the Act, and therefore the court erred in concluding the Act's exclusivity provision shielded them from civil liability. As evidence on this point, Ahern notes Plaintiff “himself, testified that his true employer was Southern Diesel [and] . . . [h]is Complaint and answers to [i]nterrogatories state the same.” (Id. at 4.) Ahern argues further that Plaintiff's claim that he “either served as a direct or loaned employee of all proposed [Third]-Party Defendants” was not sufficiently developed on the record.
However, closer scrutiny of the proposed Third-Party Complaint (ECF No. 27-1 at 6-18), reveals the only articulated reason for impleading the Third-Party Defendants is their close relationship to Southern Diesel, who, as Ahern concedes, is immune from civil claims as Plaintiff's statutory employer. (ECF No. 50 at 4.) The proposed Third-Party Complaint references the Third-Party Defendants only as a collective and does not distinguish the claims or factual allegations between each entity. (Id. at 6.) As the court noted in its original Order, every claim in the Third- Party Complaint arises from the same underlying facts surrounding Plaintiff's injury, and every cause of action against the Third-Party Defendants is grounded in a negligence theory. (ECF No. 44 at 7-8 (explaining that the claims in the Third-Party Complaint require Ahern to prove negligence, whether grounded in these entities' failure to train, supervise, instruct, maintain premises and facilities, or promulgate proper safety protocols).) But “these are precisely the types of claims the Act precludes.” (Id. at 8.) Ahern cannot simply change the character of an action by restating its negligence claim under a breach of contract header. After all, a legal claim is defined foremost by “its factual content, not the legal theories that it might propound.” Fare Deals Ltd. v. World Choice Travel.Com, Inc., 180 F.Supp.2d 678, 686 (D. Md. 2001). Moreover, the negligence-based theories asserted against the Third-Party Defendants assume that they have some kind of employer-employee relationship with Plaintiff. How else, after all, could a failure to supervise or failure to train theory be maintained against unrelated corporate entities which have no connection to Plaintiff's admitted statutory employer?
To answer this question, the court need not go further than Ahern's own allegations in its proposed Third-Party Complaint. Identifying the proposed Third-Party Defendants, Ahern connects each named entity to Plaintiff's undisputed statutory employer Southern Diesel as follows:
37. “Upon information and belief, Third-Party Defendants - including Southern Diesel Repair, LLC - share or shared common or substantially similar ownership, directors and officers, business names, policies and procedures, facilities, office space, oversight and management responsibilities, employees, equipment, and other commonalities as to be revealed during the course of discovery and/or demonstrated at trial.
38. Upon information and belief, Third-Party Defendants engage or engaged in a unified operation with regular self-dealing and individual members operating as dual agents without distinction as to who they represent as a result of Third-Party Defendants' blended business enterprise.
39. Upon information and belief, Third-Party Defendants integrate or have integrated their resources and operations to achieve a common business purpose.
40. Upon information and belief, Third-Party Defendants operate or have been operated in such a manner so that their legal distinction is blurred and they are amalgamated as a single business enterprise and/or are the alter ego of each other.
41. Third-Party Defendants and their principals and/or dominant interest holders failed to observe corporate formalities.
42. Third-Party Defendants operate as a single business entity, and thus must be treated as a single entity.
43. Third-Party Defendants' acts, omissions, abuse of the corporate form, and blurring of the entities' legal distinctions have resulted or will result in injustice and/or fundamental unfairness.
44. Third-Party Defendants should be treated as one and the same and be jointly and severally liable for the events and claims described herein under theories of single business enterprise, amalgamation of interests, alter ego, and piercing the corporate veil.
45. At the time of the December 7, 2017 incident, and at all relevant times prior and subsequent thereto, Third-Party Defendants had control over their employment decisions, staffing decisions, training protocols, company policies, safety procedures, workplace safety, oversight and supervision measures, management of personnel, provision of proper protective equipment, and provision of appropriate jack stands, jacks, cribbing, and other tools and equipment for use in connection with the repair of Ahern's trailer. . . .”(ECF No. 27-1 at 8-10 (emphasis added)). Ahern names these Third-Party Defendants only because they are so closely tied to Plaintiff's statutory employer that they must be considered a single business enterprise or an “alter ego.” (ECF No. 27-1 at 9.) But because South Carolina workers compensation law precludes claims against the alter egos of a statutory employer, Ahern's third-party claims are without merit.
South Carolina recognizes the alter ego theory, which “functions on the premise that when two corporations operate essentially as one, they should be considered as one for workers' compensation purposes.” Poch v. Bayshore Concrete Prod./S.C., Inc., 747 S.E.2d 757, 763 (S.C. 2013) (quotation omitted). Thus, where multiple defendants are sued for compensation and are found to constitute “in essence a single entity, ” the Act treats them as a single unit. Id. at 764. This issue arises frequently in the context of parent and subsidiary companies. In Monroe v. Monsanto Co., 531 F.Supp. 426, 434 (D.S.C. 1982), this court analyzed controlling South Carolina cases and identified eight questions which a court should consider before determining “whether []two related businesses . . . should be considered as separate and distinct for workmen's compensation purposes, ” including whether the two businesses (1) maintain separate corporate identities; (2) maintain separate Boards of Directors; (3) transact business from different locations under different managers; (4) hire and pay their own employees; (5) hold themselves out to their employees as two separate identities; (6) engage in different business activities; (7) maintain separate books, bank accounts, and payroll records; and (8) file separate tax returns. Id. While Monroe recognizes that there were “undoubtedly other factors which are or may be relevant to a determination of this issue, ” these eight questions serve as a useful starting point. Id. The South Carolina Supreme Court subsequently adopted the eight-factor test in Poch, reiterating however, that “none of the factors alone provide[s] immunity” under the Act, and “no one factor is controlling.” Poch, 747 S.E.2d at 764. At bottom, these cases recognize that where two corporate entities are not sufficiently distinct under the Monroe factors, they can be “viewed as only one economic entity, ” which is “immune from employees' tort actions” under the Act. Id.
The court need not delve into a lengthy factor-by-factor analysis here. Ahern's own allegations in the Third-Party Complaint leave no doubt that these entities are protected from liability under the Act. (See ECF No. 27-1 at 9 ¶ 43 (“Third Party Defendants operate as a single business entity, and thus must be treated as a single entity”).) Plaintiff does not challenge these allegations. Nothing on the record supports a contrary conclusion. The court concludes that because South Carolina substantive law precludes contribution from the proposed Third-Party Defendants to Ahern, impleader is improper pursuant to Rule 14.
Similarly, in assessing whether to permit amendment pursuant to Rule 15, the court must ascertain whether “the Third-Party Complaint satisfies ‘the requirements of the federal rules.'” U.S. ex rel. Wilson v. Kellogg Brown & Root, Inc., 525 F.3d 370, 376 (4th Cir. 2008) (citing Laber v. Harvey, 438 F.3d 404, 426, 429 (4th Cir. 2006) (en banc). In this light, if the “proposed amended complaint does not properly state a claim under Rule 12(b)(6) . . . further amendment would be futile.” Id. Thus, the court need not grant leave to amend. See Edwards v. City of Goldsboro, 178 F.3d 231, 242 (4th Cir. 1999) (establishing that leave to amend pleadings should be denied under Rule 15(a) only when the non-moving party proves (1) prejudice, (2) bad faith by the moving party, or (3) futility). Ahern's own statement of its causes of action does not provide a viable claim for relief nor permit Ahern to circumvent the Third-Party Defendants' civil immunity under the Act. Thus, the court cannot say that its decision to deny leave to amend the Answer and implead the Third-Party Defendants constitutes a clear error of law. Ahern cannot bypass South Carolina's workers compensation law through legal maneuvers and technicalities. Ahern's attempts to do so in the proposed Third-Party Complaint and again in this Motion fail at their inception. This Motion for Reconsideration is therefore denied.
See, also Melito v. Am. Eagle Outfitters, Inc., No. 14-cv-2440 (VEC), 2016 WL 6584482, at *2 (S.D.N.Y. Nov. 7, 2016), explaining that “in motions to amend pleadings under Federal Rule of Civil Procedure 15, [] which are analyzed using a standard that ‘closely tracks' the standard for analyzing Rule 14 motions to file a third-party complaint, Satterfield v. Maldonado, No. 14 Civ. 0627(JCF), 2014 WL 4828860, at *3 (S.D.N.Y. Sept. 19, 2014), ‘many courts have recognized that while the procedural vehicles of a motion to amend and a motion to dismiss are distinct, they nevertheless operate under the same standard.'” Id. (citing Firestone v. Berrios, 42 F.Supp.3d 403, 413 (E.D.N.Y. 2013); Crippen v. Town of Hempstead, No. 07-cv-3478 (JFB)(ARL), 2009 WL 803117, at *1 n.1 (E.D.N.Y. Mar. 25, 2009) (“[T]he standard for futility with respect to a motion to amend under Rule 15 is identical to the standard for a Rule 12(b)(6) motion to dismiss- namely, the court must determine whether the allegations in the complaint state a claim upon which relief can be granted.”); Nettis v. Levitt, 241 F.3d 186, 194 n.4 (2d Cir. 2001) (“Determinations of futility are made under the same standards that govern Rule 12(b)(6) motions to dismiss.”), abrogated on other grounds by Slayton v. Am. Express Co., 460 F.3d 215 (2d Cir. 2006).
The court need not reach Ahern's separate request for the court to “reconsider, clarify, and amend its Order to the extent that it relies on ‘undue delay or complications' in denying [Ahern's] Motion.” (ECF No. 50 at 5.) This additional reason was stated succinctly at the conclusion of the court's analysis as an alternate basis for its decision. The court's reasoning relied largely on the proposed Third-Party Defendants' immunity under the Act. Because Defendant has no claim for relief under South Carolina's substantive workers' compensation law, the court need not reach the same conclusion based on the “undue delay and complications” prong of Rule 14.
IV. CONCLUSION
After careful consideration, the court DENIES Defendant's Motion for Reconsideration. (ECF No. 50.)
IT IS SO ORDERED.