United States District Court, E.D. North Carolina, Western Division
JAMES C. DEVER, III, Chief District Judge.
On February 20, 2014, PCS Phosphate Company, Inc. ("PCS"), filed a complaint against American Home Assurance Company ("American Home") [D.E. 1]. PCS seeks a declaratory judgment that American Home owes PCS a duty to defend and a duty to indemnify in two underlying actions concerning alleged environmental contamination. See PCS Compl. [D.E. 1] ¶¶ 26-32.
On November 14, 2014, American Home filed a third-party complaint against Zurich American Insurance Company ("Zurich American") and Federal Insurance Company ("Federal"). In the third-party complaint, American Home seeks a declaratory judgment that Zurich American and Federal owe PCS a duty to defend and a duty to indemnify, indemnification for American Home's costs in defending PCS, or, alternatively, contribution to the costs of defending and indemnifying PCS. See AHAC Compl. [D.E. 31]. On January 14, 2015, Federal moved to dismiss American Home's third-party complaint for failure to state a claim [D.E. 46] and filed a supporting memorandum of law [D.E. 47]. On February 9, 2015, American Home responded in opposition to Federal's motion to dismiss [D.E. 55]. On February 23, 2015, Federal replied [D.E. 57]. As explained below, the court grants in part and denies in part Federal's motion to dismiss the third-party complaint.
From 1965 to 2006, Ward Transformer Company, Inc., and Ward Transformer Sales and Service, Inc. (collectively "Ward"), built, repaired, reconditioned, and sold transformers in Raleigh, North Carolina. PCS Compl. [D.E. 1] ¶ 1. During these activities, polychlorinated biphenyls ("PCBs") were released into the environment on and around the Ward facility ("Ward Site"). Id . ¶ 2. Between 1978 and 2002, PCS and its local predecessor, Texasgulf, Inc. ("Texasgulf'), sent transformers to Ward for repair and refurbishment. Id . ¶ 3. During the transformer repairs, PCBs were released into the environment. Id . ¶ 4.
In April 2003, the Environmental Protection Agency ("EPA") began a remedial investigation of the Ward Site. Id . ¶ 5. In September 2005, the EPA entered into a settlement agreement with Consolidation Coal Company ("Consol") and Carolina Power & Light Company ("CP&L") to provide for the removal of contamination at the Ward Site and to reimburse the EPA for its costs. Id . ¶ 6. On April 18, 2008, PCS notified American Home that PCS had been identified as a potentially responsible party for the Ward Site contamination, and demanded that American Home defend and indemnify PCS in connection with any resulting lawsuits. See Id . ¶ 7. On April 30, 2009, Consol and CP&L each filed an action against PCS seeking contribution for past and future costs associated with the settlement agreement. Id . ¶¶ 8, 10. On July 15, 2009, PCS notified American Home of the two lawsuits and reiterated its demand for defense and indemnification. Id . ¶ 13. Subject to a reservation of rights, American Home accepted the defense of PCS in the Consol and CP&L actions. See AHAC Compl. [D.E. 31] ¶ 10.
Federal issued a Commercial General Liability policy to Texasgulf with an effective date of April 30, 1985, to April 30, 1986. Id . ¶ 18. PCS is an insured under the policy. Id . ¶ 19. In its third-party complaint, American Home seeks a declaratory judgment that, under this policy, Federal owes PCS a duty to defend and a duty to indemnify in the Consol and CP&L actions, indemnification for American Home's costs, or, alternatively, contribution of defense and indemnification costs. Id . ¶¶ 24-41.
On January 14, 2015, Federal moved to dismiss American Home's third-party complaint pursuant to Rule 12(b)(6). Mot. Dismiss [D.E. 46]; see Fed.R.Civ.P. 12(b)(6). Federal asserts that a pollution exclusion in its insurance policy precludes any duty to defend or indemnify PCS in the Consol and CP&L actions and, consequently, precludes any need to indemnify American Home or to contribute to PCS's defense. Mem. Supp. Mot. Dismiss [D.E. 47] 7.
A motion to dismiss under Rule 12(b)(6) tests the legal and factual sufficiency of a complaint. See Fed.R.Civ.P. 12(b)(6); Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); Bell Atl. Corp. v. Twombly., 550 U.S. 544, 555-56 (2007); Vitol. S.A. v. Primerose Shipping Co., 708 F.3d 527, 543 (4th Cir. 2013); Giarratano v. Johnson, 521 F.3d 298, 302 (4th Cir. 2008). The court need not accept a complaint's conclusions of law. See Iqbal. 556 U.S. at 678-79; Twombly. 550 U.S. at 555; Nemet Chevrolet. Ltd. v. Consumeraffairs.com. Inc., 591 F.3d 250, 255 (4th Cir. 2009). As for a complaint's factual sufficiency, a party must plead "enough facts to state a claim to relief that is plausible on its face." Twombly., 550 U.S. at 570. "[N]aked assertions of wrongdoing" cannot "cross the line between possibility and plausibility of entitlement to relief." Francis v. Giacomelli, 588 F.3d 186, 193 (4th Cir. 2009) (quotation omitted); see Vitol. S.A., 708 F.3d at 543. "The plausibility standard is not akin to a probability requirement, ' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Iqbal, 556 U.S. at 678. A plaintiff armed with nothing more than "labels and conclusions" or a formulaic recitation of the elements of a cause of action cannot proceed. Twombly., 550 U.S. at 555 & n.3; Vitol. S.A., 708 F.3d at 543; Francis, 588 F.3d at 193. "Deterniining whether a complaint states a plausible claim for relief will... be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Iqbal, 556 U.S. at 679.
When ruling on a Rule 12(b)(6) motion, a court may also consider documents incorporated into the complaint or attached to a motion to dismiss, so long as the attached documents are integral to the complaint and authentic. Tellabs. Inc. v. Makor Issues & Rights. Ltd., 551 U.S. 308, 322 (2007); Philips v. Pitt Cnty. Mem'l Hosp., 572 F.3d 176, 180 (4th Cir. 2009); Phillips v. LCI Int'l. Inc., 190 F.3d 609, 618 (4th Cir. 1999). A court also may take judicial notice of public records, such as court documents. See, e.g., Tellabs, 551 U.S. at 322; Philips, 572 F.3d at 180. Here, American Home's complaint expressly incorporates PCS's complaint, the complaints of Consol and CP&L in the underlying actions, and the Federal insurance policy. Moreover, the parties have attached these documents to their submissions, and there is no dispute as to their authenticity. See, e.g., AHAC Compl. [D.E. 31] ¶¶ 8, 18; CP&L Compl. [D.E. 55-1]; Consol Compl. [D.E. 55-2]; [D.E. 46-1]. Thus, the court may consider them in ruling on Federal's motion to dismiss.
A federal court sitting in diversity applies the choice of law rules of the forum state. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941); DiFederico v. Marriott Int'l. Inc., 714 F.3d 796, 807 (4th Cir. 2013): Fed. Ins. Co. v. S. Lithoplate. Inc., 7 F.Supp. 3d 579, 583 (E.D. N.C. 2014). Under North Carolina law, the "substantive law of the state where the last act to make a binding contract occurred, usually delivery of the policy, controls the interpretation of the contract." Fortune Ins. Co. v. Owens, 351 N.C. 424, 428, 526 S.E.2d 463, 466 (2000). Here, Federal has shown, and American Home does not dispute, that delivery of the Federal policy occurred in Connecticut. See Mem. Supp. Mot. Dismiss 6; [D.E. 46-1] 1. Thus, Connecticut law controls the interpretation of the Federal insurance contract.