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Egan v. Daikin North America LLC

United States District Court, D. Massachusetts

February 4, 2019

CHRISTOPHER EGAN and JEAN EGAN
v.
DAIKIN NORTH AMERICA, LLC, DAIKIN APPLIED AMERICAS, INC., and DACA DELAWARE DISSOLUTION TRUST as Successor-In-Interest to DAIKIN AC AMERICAS, INC.

          MEMORANDUM AND ORDER ON DEFENDANTS' MOTIONS FOR SUMMARY JUDGMENT

          RICHARD G. STEARNS UNITED STATES DISTRICT JUDGE

         Christopher and Jean Egan brought this lawsuit against Daikin North America, LLC (Daikin NA), Daikin Applied Americas, Inc. (Daikin AA), and DACA Delaware Dissolution Trust (DACA Trust) for damages caused by an allegedly defective HVAC system.[1] The Complaint sets out three claims: breach of express and implied warranties (Count I); negligent misrepresentation (Count II); and intentional misrepresentation (Count III). Defendants move for summary judgment on all counts.[2] For the reasons to be explained, Daikin AA and Daikin NA's motions for summary judgment will be allowed, while DACA Trust's motion will be denied, except for the Count I claims of breach of express warranty and breach of implied warranty of fitness for a particular purpose, which will be allowed.

         BACKGROUND

         The facts, viewed in the light most favorable to the Egans as the nonmoving party, are as follows. In 2009, the Egans purchased and began renovating their home at 5 Commonwealth Avenue in Boston, Massachusetts. As part of the renovation, the Egans purchased a Daikin VRV III heating and cooling system, which included twenty-one indoor fan coil units (FCUs).[3] The coils are composed of copper coils, aluminum fins, and galvanized header plates.[4] A non-conductive Styrofoam drain pan sits beneath to collect water that drips from the coils.

         The Egans hired Allied Consulting Engineering Services, Inc., as their HVAC engineer. Allied coordinated with the Egans' architect, Dell Mitchell Architects, to engineer and design the HVAC system. A subcontractor, Climate Engineering, LLC, then installed the system.

         In 2016, the Egans began experiencing problems with the HVAC coils. They bought replacement coils from Daikin NA and replacement components from Daikin AA. They also hired New England Cooling Towers (NECT) to install shutoff valves, which allowed them to isolate individual coil failures without affecting the entire system.

         On August 30, 2017, the Egans initiated this lawsuit. They allege that the HVAC system was defectively designed because the coils were susceptible to premature corrosion.[5]

         DISCUSSION

         Summary judgment is appropriate when, based upon the pleadings, affidavits, and depositions, “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). “To succeed, the moving party must show that there is an absence of evidence to support the nonmoving party's position.” Rogers v. Fair, 902 F.2d 140, 143 (1st Cir. 1990). “‘[T]he mere existence of a scintilla of evidence' is insufficient to defeat a properly supported motion for summary judgment.” Torres v. E.I. Dupont De Nemours & Co., 219 F.3d 13, 18 (1st Cir. 2000), quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986).

         Piercing the Corporate Veil

         As a preliminary matter, the Egans contend that all three defendants are liable for claims stemming from the sale of their HVAC system. While DACA Trust concedes that it provided a one-year warranty on the HVAC coils, Daikin AA and Daikin NA dispute their role in the sale. The Egans maintain that Daikin AA can be held liable for the sale because it “directed” Stebbin-Duffy's sale of the system. Opp'n (Dkt # 69) at 1. Specifically, it “employed Stebbins-Duffy as a manufacturer's representative; distributed components of the VRV III system to Stebbins-Duffy for sale to the plaintiffs; and compensated Stebbins-Duffy based on its sale of the VRV III system.” Id. at 7. However, as Daikin AA points out, it did not manufacture, distribute, or sell the Egans' HVAC system. Further, Stebbins-Duffy had contracted with F.W. Webb Company to supply Daikin products.[6] Daikin NA, for its part, did not exist until 2013, four years after the Egans purchased their HVAC system. NSOF (Dkt # 46) ¶¶ 17, 22.

         The Egans counter that they are “entitled to pierce the corporate veil and treat [the Daikin] defendants as a single entity” because, among other things, Michael Hastings, a Field Support Manager at Daikin NA, testified that DACA is not a corporation separate from Daikin NA, that DACA and Daikin NA have the same website, and that Daikin AA is a representative of Daikin NA.[7] Opp'n (Dkt # 58) at 16-19. They rely on Brown v. Daikin Am. Inc., 756 F.3d 219 (2d Cir. 2014), where the court made note of the intermingling of Daikin corporations. Opp'n (Dkt # 58) at 17. They also cite Daikin AA's joinder motion as evidence of the “blurred distinction” among defendants. Opp'n (Dkt # 69) at 12.

         A basic tenet of corporation common law is that corporations are separate and distinct entities, whatever the relationships that may exist between or among them. Scott v. NG U.S. 1, Inc., 450 Mass. 760, 766 (2008). Massachusetts is especially strict in respecting the corporate form. Birbara v. Locke, 99 F.3d 1233, 1238 (1st Cir. 1996). Under Massachusetts law, “[a] veil may be pierced [only] where the parent exercises ‘some form of pervasive control' of the activities of the subsidiary ‘and there is some fraudulent or injurious consequence of the intercorporate relationship.'” Scott, 450 Mass. at 767, quoting My Bread Baking Co. v. Cumberland Farms, Inc., 353 Mass. 614, 619 (1968).

         Here, even accepting Hastings' testimony in its entirety, there is insufficient evidence to overcome the reluctance of the Massachusetts courts to authorize a piercing of the corporate form. See Spaneas v. Travelers Indemnity Co., 423 Mass. 352, 354 (1996) (“Only in rare instances, in order to prevent gross inequity, will a Massachusetts court look beyond the corporate form.”). Although the Egans accurately list the twelve factors that Massachusetts courts consider when evaluating an attempt to pierce the corporate veil, see Opp'n (Dkt # 58) at 17; see also Pepsi-Cola Metro. Bottling Co. v. Checkers, Inc., 754 F.2d 10, 14-16 (1st Cir. 1985) (describing the twelve factors), they do not apply them to the facts here. Instead, they reaffirm their reliance on the Second Circuit's decision in Brown, where the court held that the plaintiff's employment discrimination claim sufficiently alleged that Daikin America, Inc., and Daikin Industries, Ltd., were his joint employer because they “conducted interrelated operations, had common ownership, and were subject to centralized control of labor relations.” 756 F.3d at 228. But the Egans' reliance is misplaced. Brown necessarily applied New York and not Massachusetts law; involved two different Daikin entities that were in a parent-subsidiary relationship (not the constellation of three subsidiaries here); and applied the “single-employer test” under Title VII, and not a veil-piercing test similar to the one adopted in Massachusetts. Id. at 226-227. In short, the Egans have been unable to produce enough evidence to pierce the corporate veil. Therefore, before proceeding to the merits of each claim, the court concludes that only DACA Trust, as trustee for DACA, can be held liable for alleged warranties and representations relating to the sale of the HVAC system.[8] See NSOF (Dkt # 46), Ex. A ¶ 12 (“DACA is the only entity to provide a warranty to Plaintiffs.”).

         Breach of Express Warranty

         An express warranty may be created by “[a]ny affirmation of fact or promise made by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain.” Mass. Gen. Laws ch. 106, § 2-313(1)(a). The Egans allege that defendants breached a number of express warranties, including that the HVAC system could “be installed practically anywhere, ” could “perform flawlessly in any climate, ” and came with “one of the best warranties in the business.” NSOF (Dkt # 59) ¶¶ 60, 74-75. But DACA Trust, for its part, is not liable for any express warranty claim because the warranty on the coils was for one year and it had long expired (the Egans do not allege any problems with their 2009 HVAC system prior to September of 2016).[9]See Cook v. Cullen, 2007 WL 4946161, at *4 (Mass. Super. 2007) (finding that a plaintiff's breach of express warranty claim “was barred by the one-year restriction stated in the warranty”); Boston Helicopter Charter, Inc. v. Agusta Aviation Corp., 767 ...


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