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Liberty Mutual Fire Insurance Co. v. BRG Sports, Inc.

United States District Court, E.D. New York

June 21, 2018

LIBERTY MUTUAL FIRE INSURANCE COMPANY, Plaintiff,
v.
BRG SPORTS, INC., BELL SPORTS, INC., and VISTA OUTDOOR, Defendants.

          For the Plaintiff MARSHALL T. POTASHNER DAVID SHYER GLENN P. BERGER Jaffe & Asher LLP

          For the Defendants JAMES C. UGHETTA JASON SCHMITZ Littleton Joyce Ughetta Park & Kelly LLP

          ORDER

          FREDERIC BLOCK SENIOR UNITED STATES DISTRICT JUDGE

         Plaintiff Liberty Mutual Fire Insurance Co. (“Liberty”) brings this action as a subrogee of Bollinger Sports LLC (“Bollinger”), claiming breach of warranty and contractual indemnification. Defendants BRG Sports, Inc., Bell Sports, Inc., and Vista Outdoor (collectively, “defendants”) move to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), arguing Liberty failed to state its claims and is barred from bringing them by an anti-assignment provision. Defendants' motion is denied.

         I

         This lawsuit stems from a dispute over an April 9, 2012 Asset Purchase Agreement (“APA”) between Bollinger and defendants.[1] Pursuant to the APA, Bollinger purchased a set of assets from Bell Sports, Inc. (“Bell Sports”), including the design of defendants' Embark Resistance Band (the “Embark Band”) exercise equipment.[2] Bollinger then began selling its own product line (the “Bollinger Band”) based on the design of the Embark Band.

         On April 1, 2014, Bollinger was sued for products liability by a purchaser of the Bollinger Band, who claimed it malfunctioned and struck him in the eye (the “Underlying Action”). Bollinger then discovered that in 2011, the Embark Band had been recalled in cooperation with the Consumer Product Safety Commission (“CPSC”) for the same defect. Bell Sports did not disclose this recall or product defect to Bollinger when it entered into the APA.

         Liberty, who insured Bollinger for the relevant time period, stepped into Bollinger's shoes and defended the Underlying Action as Bollinger's subrogee. Liberty settled the Underlying Action for $650, 000 and incurred $155, 000 in costs for the defense. Liberty then brought the present action, again as Bollinger's subrogee, against defendants to recover this money.

         II

         Under Federal Rule of Civil Procedure 12(b)(6), a party may move to dismiss a complaint that “fail[s] to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). To survive, the complaint must plead “enough facts to state a claim to relief that is plausible on its face, ” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007), and “allow[] the court to draw the reasonable inference that the defendant is liable for the misconduct alleged, ” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

         The parties agree that Texas substantive law controls under the APA's choice of law provision.

         A. Express Negligence

         First, defendants argue that Texas's “express negligence test” bars Liberty's claims. Under this test, a party that seeks “to indemnify the indemnitee from the consequences of its own negligence must express that intent in specific terms.” Ethyl Corp. v. Daniel Construction Co., 725 S.W.2d 705, 708-09 (Tex. 1987). Defendants argue that what Liberty is seeking is indemnification for Bollinger's negligence in selling the defective exercise band.

         This argument mischaracterizes Liberty's complaint. Liberty claims that defendants should indemnify it for Bell Sports's failure to disclose the design flaws and recall, not Bollinger's own negligence in selling the ...


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