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TCF Equipment Finance v. KMH Systems, Inc.

United States District Court, M.D. Tennessee, Columbia Division

August 5, 2019

TCF EQUIPMENT FINANCE, a division of TCF NATIONAL BANK, Plaintiff,
v.
KMH SYSTEMS, INC., VALLEY PACKAGING CORP., and AMUR EQUIPMENT FINANCE, INC. Defendants.

          FRENSLEYMAGISTRATE JUDGE.

          MEMORANDUM

          WILLIAM L. CAMPBELL, JR. UNITED STATES DISTRICT JUDGE.

         Before the Court is Plaintiff TCF Equipment Finance's Motion to Dismiss Counterclaim of Amur Equipment Finance, Inc. (Doc. No. 16.) Amur responded to the motion (Doc. No. 23) and TCF submitted a reply (Doc. No. 24). For the reasons set forth below, the motion to dismiss is GRANTED.

         I. BACKGROUND

         The following facts are as alleged in the Counterclaim (Doc. No. 16). Amur and TCF are parties to a Purchase and Sale Agreement (“PSA”). (Id. at ¶ 7.) Section 7.1 of the PSA contains the following indemnification provision:

Without limiting any other rights which Seller [Amur] may have hereunder or under applicable law, [TCF] shall indemnify Seller [Amur] and its officers, directors, agents and employees (each, an “Indemnified Party”) from and against any and all damages, losses, claims, taxes, liabilities, costs, expenses and other amounts payable, including reasonable attorneys' fees and disbursements (all of the foregoing being collectively referred to as “Indemnified Amounts”) awarded against or incurred by any Indemnified Party arising out of or as a result of (i) any breach by [TCF] of any representation or warranty made by [TCF] (or any of its officers or employees) in this Agreement or any other Transaction Document, (ii) any breach by [TCF] of any covenant made by [TCF] in this Agreement or any other Transaction Document, or (iii) any action, proceeding or claim (actual or threatened) related to this Agreement or any other Transaction Document or to any Purchased Asset arising from the negligence or willful misconduct of [TCF], including, without limitation, any judgment, award, settlement, reasonable attorneys' fees and other costs or expenses incurred in connection with any such action, proceeding or claim. (PSA, Section 7.1(b), Doc. No. 1-6.)

         On September 13, 2018, TCF filed a complaint against Amur, asserting claims that relate to the PSA. (Id. at ¶¶ 10-11.) Amur filed a counterclaim, asserting that it has incurred legal expenses “as a result of an action, proceeding, or claim related to the PSA” and is entitled to indemnification of these expenses under the indemnification provision of the PSA. (Id. at ¶ 14.)

         TCF moved to dismiss the counterclaim pursuant to Federal Rule of Civil Procedure 12(b)(6), arguing the contract language provides for indemnification only for claims arising from the negligence or willful misconduct of TCF and Amur did not allege any such conduct.

         II. STANDARD OF REVIEW

         In deciding a motion to dismiss under Rule 12(b)(6), a court must take all the factual allegations in the complaint as true. Ashcroft v. Iqbal, 556 U.S. 662 (2009). To survive a motion to dismiss, a complaint must contain sufficient factual allegations, accepted as true, to state a claim for relief that is plausible on its face. Id. A claim has facial plausibility when the plaintiff pleads facts that allow the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. Id. In reviewing a motion to dismiss, the Court construes the complaint in the light most favorable to the plaintiff, accepts its allegations as true, and draws all reasonable inferences in favor of the plaintiff. Directv, Inc. v. Treesh, 487 F.3d 471, 476 (6th Cir. 2007).

         In considering a Rule 12(b)(6) motion, the Court may consider the complaint and any exhibits attached thereto, public records, items appearing in the record of the case and exhibits attached to Defendant's motion to dismiss so long as they are referred to in the Complaint and are central to the claims. Bassett v. National Collegiate Athletic Assn., 528 F.3d 426, 430 (6th Cir. 2008).

         III. ANALYSIS

         TCF argues the relevant portion of the indemnification provision is limited to “claims arising from the negligence or willful misconduct of TCF”, and the counterclaim is devoid of any allegations that could constitute negligence or willful misconduct. Amur counters that its right to indemnification is not limited to claims arising out of negligence or willful misconduct because, applying the rule of the last antecedent, the limitation modifies only “purchased asset.”

         The PSA has a choice of law provision specifying the application of New York law to the agreement. (See PSA, Doc. No. 1-6 at § 8.6.). Accordingly, the Court will construe the agreement in accordance with New York law. See Boswell v. RFD-TV The Theater, LLC, 498 S.W.3d 550, 555-56 (Tenn. ...


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