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Johns v. Eastman Chemical Co.

United States District Court, S.D. West Virginia, Charleston

March 31, 2017

ROBERT L. JOHNS, in his capacity as GC Plan Administrator and as Spill Claim Plan Administrator for FREEDOM INDUSTRIES, INC., a domestic corporation Plaintiff,
v.
EASTMAN CHEMICAL COMPANY, a Delaware corporation, Defendant

          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;
2) plaintiff's 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 plaintiff's claims are disguised claims for implied indemnification, and that Freedom's fault in the spill ...

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