Peter Newberry v. Service Experts Heating & Air Conditioning ( 2020 )

NOT RECOMMENDED FOR PUBLICATION
File Name: 20a0132n.06
Nos. 18-6028/19-5110
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
PETER CANAVAN NEWBERRY, et al., )
FILED
Mar 05, 2020
) DEBORAH S. HUNT, Clerk
Plaintiffs-Appellants, )
)
v. ) ON APPEAL FROM THE
) UNITED STATES DISTRICT
SERVICE EXPERTS HEATING & AIR ) COURT FOR THE EASTERN
CONDITIONING, LLC, et al., ) DISTRICT OF KENTUCKY
)
Defendants-Appellees. )
)
BEFORE: ROGERS, WHITE, and READLER, Circuit Judges.
ROGERS, Circuit Judge. The district court in this diversity case applied Kentucky statutes
of limitation to dismiss all the plaintiffs’ state law claims against defendant Service Experts
Heating & Air Conditioning, LLC (“SEHAC”). The claims arose out of the malfunction of, and
failure to fix, water filtrations systems installed by defendant in plaintiffs’ home. The filtration
systems malfunctioned from the very beginning, leading to the appearance of a black substance in
plaintiffs’ water. An earlier suit was settled before any discovery took place; plaintiffs dismissed
those claims without prejudice. To the extent that plaintiffs seek recovery under various causes of
action for personal injury and injury or trespass to property, the district court properly determined
under Kentucky accrual rules that plaintiffs discovered the harms and the alleged causation more
than five years (the longest relevant statutory period) before bringing the instant suit. The district
court also properly held that plaintiffs’ breach of warranty and conversion claims were untimely.
Nos. 18-6028/19-5110, Newberry, et al. v. Service Experts Heating & Air Conditioning, et al.
However, to the extent that plaintiffs brought suit based on defendants’ alleged failure to meet
contractual obligations to remove the new system and restore the old system, plaintiffs’ complaints
plausibly allege contractual breaches within the relevant period. A remand is therefore necessary
on those claims. Plaintiffs’ various other contentions on appeal are without merit.
I.
On December 7, 2011, plaintiffs Rorick and Newberry, who are married, made a call to
SEHAC to repair their Aqua-Pure backwash water filter system. SEHAC responded that they did
not service Aqua-Pure products, and offered instead to sell Rorick and Newberry two new water
filtration units. The first was a TS+ 2000 Easy Water Toxin Shield backwash water filter
manufactured by Freije Treatment Systems, Inc. The second was a Revita water filtration system
for the kitchen. Rorick and Newberry agreed and purchased the products the same day. On
December 19, 2011, plaintiffs informed SEHAC that both water filtration systems were not
functioning properly. Plaintiffs complained to SEHAC that the water pressure in their home was
low, that the systems leaked, and that the water had turned a “dirty blackish brown color.” SEHAC
came out the next day to inspect plaintiffs’ water systems and found that the Easy Water Toxin
Shield system had been installed “backwards,” causing the water to turn a dark color. SEHAC
claimed to have fixed the problem that day and advised plaintiff that they had taken a water sample
for testing. However, ten days later on December 30, 2011, plaintiffs continued to report the
presence of “blackish brown material that was also causing Plaintiffs’ drains to drain slowly and
back up.”
Plaintiffs became “acutely concerned about the quality and safety of the water” and asked
SEHAC repeatedly whether or not the water that was now passing through the filtration systems
was safe to drink. SEHAC advised plaintiffs on January 2, 2012 that the water sample taken on
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December 30, 2011 “tested fine.” SEHAC did not provide a copy of the water test, but assured
plaintiffs that the water was safe to drink.
Plaintiffs continued to experience difficulties with both water systems. On January 6,
2012, SEHAC could not get the Revita system to function properly and removed it from plaintiffs’
kitchen. SEHAC also promised to remove the whole-house filtration system and reinstall
plaintiffs’ original Aqua-Pure system free of charge, upon request at any time during the first year
of service. At an unspecified date thereafter, plaintiffs requested that SEHAC remove the whole-
house system and replace it with the original Aqua-Pure system. In response, SEHAC told
plaintiffs that it would submit insurance claims for the defective whole-house system. However,
SEHAC never removed the system, nor did it return the Aqua-Pure system or provide monetary
compensation.
After hearing no response from SEHAC, plaintiffs asked SEHAC on June 19, 2012 for
copies of the insurance claims SEHAC purportedly submitted. On June 28, 2012, SEHAC’s claims
adjuster told plaintiffs that Lennox Industries, SEHAC’s parent company, had submitted a claim
to him and that he was investigating it. When plaintiffs expressed to the claims adjuster their
dissatisfaction with how long it was taking to return their Aqua-Pure system, he informed plaintiffs
that Lennox Industries was the proper party to sue for any claims. Finally, on January 24, 2013,
SEHAC sent an email to plaintiffs stating that SEHAC was “unaware of any [insurance] claim”
by plaintiffs.
Having grown weary of SEHAC’s inaction, Newberry and Rorick each filed substantially
similar civil actions against SEHAC and its parent companies Service Experts and Lennox
Industries in Kentucky state court on March 22, 2013. Newberry, who is an attorney, represented
himself in his lawsuit, while representing his wife in hers. Plaintiffs each brought claims for breach
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of contract, breach of warranty, fraud, defamation, unjust enrichment, and “malice, oppression, or
fraud.” Newberry’s complaint also included a claim for conversion.
Although plaintiffs’ initial lawsuits focused on the defendants’ refusal to refund their
purchase and the damage done to plaintiffs’ plumbing, the complaints also alleged adverse health
consequences resulting from the improper installation of the whole-house filtration system. For
example, as part of their fraud claim, plaintiffs alleged that they had “defective water systems
which have caused multiple problems in [their] home, including, but not limited to, contamination
of water, contamination of plumbing system of home, leakage, loss of water pressure, clogged
drains, colored water, and adverse health problems.” Further, plaintiffs alleged that “[a]s a result
of Defendant SEHAC’s fraudulent misrepresentations, Plaintiff has suffered health problems after
living in a home with dirty and questionable water declared safe by Defendant SEHAC.”
The defendants removed the cases to the United States District Court for the Eastern
District of Kentucky on May 7, 2013. See Newberry v. Service Experts Heating and Air
Conditioning, et al., No. 2:13-cv-80-DLB-CJS (E.D. Ky. filed May 7, 2013); Rorick v. Service
Experts Heating and Air Conditioning, et al., No. 2:13-cv-81-WOB-CJS (E.D. Ky. filed May 7,
2013). Newberry voluntarily dismissed his case shortly thereafter on May 22, 2013. Rorick
continued litigating her case, with Newberry as her attorney. During docket call before Judge
Bertelsman on October 9, 2013, Newberry elaborated on the health problems his wife and pets
were experiencing from water contamination:
THE COURT: Are you suing for more than the 75?
MR. NEWBERRY: For more than the 75?
THE COURT: More than the $75,000 in damages.
MR. NEWBERRY: Yes, Your Honor. There are physical injuries also.
Again, we don’t know what was deposited into the
drinking water –
THE COURT: Personal injuries to the people?
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MR. NEWBERRY: Yes, Your Honor.
...
MR. NEWBERRY: Your Honor, we’ve been trying to get discovery as to
what was put in the drinking water. That’s the real
linchpin of this case.
THE COURT: It made people ill?
MR. NEWBERRY: There are four dogs that drink water from the house
watering system. They’ve all developed tumors since
this. One cat has died. And the plaintiff has been
diagnosed with blood clots.
We have video of material and then brown material
from these tanks going into our water system. And
my attempts, through e-mails, as plaintiff’s attorney,
was to find out what is in there. And, in fact, one of
the defendant’s employees came to the home one day
to take a water sample and actually took a water
sample, put it in a jug, yet then left the home, leaving
the jug behind, and then later reported –
THE COURT: Well, if you’ve got a personal injury claim that your
clients have tumors, is that in [the complaint]?
MR. NEWBERRY: No, Your Honor. This is all -- again, those are dogs.
Those are dogs. My wife just developed the blood
clot. She just –
THE COURT: Well, you have to have medical testimony.
MR. NEWBERRY: Yes, Your Honor, we probably will, if it’s related.
THE COURT: You can amend at a later date.
MR. NEWBERRY: But it would be helpful if we knew the chemicals or
the materials that were deposited into our water.
Defendant has that information.
During the hearing, the district judge set a discovery schedule and dispositive motion
deadline. One month later on November 13, 2013, the parties indicated they had reached a
settlement and filed an agreed order of dismissal. The agreed order stated that Rorick would
dismiss her case without prejudice subject to the condition that any subsequent lawsuit stemming
from the parties’ dispute would have to be filed in the “Covington Division” of the Eastern District
of Kentucky.
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Newberry and Rorick indeed filed two subsequent actions on March 16, 2017, this time in
Lexington, which is in the Central Division of the Eastern District of Kentucky. Newberry v.
Service Experts Heating & Air Conditioning, LLC, et al., No. 5:17-cv-131-JMH (E.D. Ky. filed
Mar. 16, 2017); Rorick v. Service Experts Heating & Air Conditioning, LLC, et al., No. 5:17-cv-
132-JMH (E.D. Ky. filed Mar. 16, 2017). Plaintiffs brought many of the same claims as in their
prior actions, as well as new claims for personal injury, injury to real and personal property, and
products liability.1 Plaintiffs allege that in 2015, three of their dogs and one of their cats died of
cancer. They further allege that in the fall of 2015, Rorick began suffering from recurring migraine
headaches. Another one of plaintiffs’ dogs was diagnosed with cancer in February 2016 and is
still undergoing treatment.
The complaint states that on February 26, 2016, plaintiffs submitted a water sample from
their home to ALS Environmental Laboratories. The tests revealed “that the household water
supply had been contaminated with known carcinogenic compounds at dangerously high levels.”
Since the results of the water test, two more of plaintiffs’ dogs were diagnosed with cancer, one of
which died.
Plaintiffs allege that the contaminated water in their home was a direct and proximate result
of SEHAC’s negligent installation of the whole-house water filtration system. Furthermore, they
allege that SEHAC knew or should have known of the risks that plaintiffs faced but failed to warn
plaintiffs, and worse, “repeatedly advised and assured” plaintiffs that the drinking water in their
home was safe.
Plaintiffs explain in their new complaints that Rorick voluntarily dismissed her initial
lawsuit based on representations made by defendants’ attorney that “there was no present evidence
1
The products liability claim is against Freije Treatment Systems, Inc., which is not a party to this appeal.
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of physical injury” to plaintiffs and that SEHAC had tested the water from plaintiffs’ home and
found it to be safe. Plaintiffs contend that they “relied upon Defendant SEHAC’s repeated
representations that the water had been tested by Defendant.”
Defendants SEHAC, Service Experts, and Lennox all filed motions to dismiss. In three
separate orders issued in March 2018, April 2018, and January 2019, the district court granted the
motions and dismissed all claims against these defendants. The district court first dismissed all
claims against Service Experts and Lennox, neither of which was accused of wrongdoing and
whose only connection to the dispute was as parent companies to SEHAC. The district court also
dismissed ten out of eleven claims against SEHAC as time-barred, for the following reasons.
The district determined that plaintiffs’ claims for negligence (count four) and negligent
failure to warn (count two) accrued in October 2013, when plaintiffs made statements at a hearing
before Judge Bertelsman demonstrating their knowledge of water contamination in their home and
its resulting negative health effects. This was more than three years before plaintiffs filed their
second round of complaints in March 2017. Accordingly, these claims, which carry one-year and
two-year statutes of limitation respectively, were time-barred. The court held that plaintiffs’
claims for “contamination of water” (count three) and fraud (counts five and twelve)—both
governed by five-year statutes of limitation—were also time-barred because they accrued in
December 2011. In support of its holding, the court pointed to plaintiffs’ complaints from the first
round of litigation, which alleged that SEHAC made false statements about their household water
quality as early as December 20, 2011. Plaintiffs’ complaints from the earlier litigation also made
clear that they knew of water contamination by December 2011.
The court next rejected plaintiffs’ argument that the doctrine of equitable estoppel
prevented defendants from invoking the statute of limitations defense. According to the district
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court, plaintiffs did not act reasonably in relying on defendants’ alleged misrepresentations and
failed to actively investigate their claims despite having had reason to do so.
The district court also dismissed plaintiffs’ claims for contract fraud (count seven), breach
of contract (count eight), and unjust enrichment (count nine). Each of these claims originated from
SEHAC’s alleged violation of its oral contract with plaintiffs, under which it had agreed to properly
install, service, and replace plaintiffs’ water filtration systems. The district court reasoned that
because plaintiffs in their 2013 complaints had failed to allege conduct relating to these claims
after January 6, 2012, they effectively conceded that these claims accrued on or before that date.
As the longest limitations period for any of these claims is five years, and January 6, 2012 is more
than five years before plaintiffs filed their 2017 complaints, their claims were held to be untimely.
Plaintiffs’ breach of warranty claim (count six) was also deemed untimely under that statute’s four-
year limitations period. The court observed that a Kentucky breach of warranty claim accrues
“when tender of delivery is made.” As SEHAC installed the water filtration system in plaintiffs’
home more than four years before March 2017, the breach of warranty claim was time-barred.
Plaintiffs’ conversion claim, which plaintiffs admitted had accrued on January 24, 2013, was
likewise time-barred under the applicable two-year statute of limitations. Finally, the court
construed the remaining claim against SEHAC for “malice, oppression and fraud” as a request for
punitive damages and dismissed it in light of its dismissal of the other claims against SEHAC.
In June and August 2018, after most (although not all) of their claims had been dismissed,
Newberry and Rorick moved to transfer their cases to the Northern Division of the Eastern District
of Kentucky. They argued that the court in the Central Division lacked subject-matter and personal
jurisdiction pursuant to the agreed order of dismissal in the prior case, which stated that
“subsequent law suits must be re-filed in the United States District Court for the Eastern District
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of Kentucky, Covington Division.” The district court denied the motions to transfer. Plaintiffs
have timely appealed the judgments dismissing their claims and the order denying their transfer
motions. We consolidated the cases for purposes of appeal.
In Newberry’s appeal brief, he states that he was diagnosed with an illness on November
1, 2018, one month after he appealed the district court’s orders. He alludes to the fact that this
illness made him more susceptible to believing defendants’ allegedly fraudulent statements, and
asks the court of appeals to “remand for an evidentiary hearing on facts of Appellant’s recently
diagnosed illness.”
II.
On appeal, plaintiffs have raised a number of challenges to the district court’s rulings. All
lack merit except for the argument that, according to the complaint, the oral contract to repair or
replace the filtration system was first breached less than five years before the instant suit was
brought.
A. Parent Company Liability
The district court correctly dismissed all claims against SEHAC’s parent companies
Service Experts and Lennox. Plaintiffs have not alleged that Service Experts or Lennox injured
them directly. Instead, they seek to hold those companies responsible for SEHAC’s alleged
misconduct because of their statuses as SEHAC’s parent companies. However, under Kentucky
law, “mere ownership and control of a corporation by the persons sought to be held liable is not
alone a sufficient basis for denial of entity treatment.” White v. Winchester Land Dev. Corp., 584
S.W.2d 56, 61 (Ky. 1979), overruled on other grounds by Inter-Tel Techs, Inc. v. Linn Station
Props., LLC, 360 S.W.3d 152 (Ky. 2012). Plaintiffs have not alleged sufficient facts to pierce the
corporate veil in this case and thus may not recover against Service Experts and Lennox.
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B. Negligence and Negligent Failure to Warn (counts two and four)
The district court properly dismissed plaintiffs’ claims for negligent failure to warn (count
two) and negligence (count four) on statute-of-limitations grounds. In their negligent-failure-to-
warn claim, plaintiffs allege that SEHAC knew or should have known that the whole-house
filtration system was improperly installed and could harm plaintiffs and their property. In their
general negligence claim, plaintiffs allege that SEHAC breached its duty to properly install the
water systems in a manner that would provide a safe, potable water supply. Plaintiffs further allege
that SEHAC breached its duty to remedy unsafe conditions created by the improper installation.
For purposes of analysis, the district court determined that the negligent-failure-to-warn
claim would be governed by the two-year statute of limitations for damage to personal property,
Ky. Rev. Stat. § 413.125, and the general negligence claim would be subject to the one-year statute
of limitations for personal injury, Ky. Rev. Stat. § 413.140(1)(a). The parties appear to agree on
this much, but contest when the claims accrued under these statutes.
Under normal circumstances, a claim accrues at the time the defendant’s conduct “causes
injury that produces loss or damage.” Abel v. Austin, 411 S.W.3d 728, 736 (Ky. 2013) (quoting
Alagia, Day, Trautwein & Smith v. Broadbent¸ 882 S.W.2d 121, 126 (Ky. 1994)). At plaintiffs’
urging, however, the district court applied what is known as the “discovery rule,” which tolls the
statute of limitations until the plaintiff discovers—or in the exercise of reasonable diligence should
have discovered—the fact of injury and that injury may have been caused by the defendant’s
conduct. See Fluke Corp. v. LeMaster, 306 S.W.3d 55, 60 (Ky. 2010). According to plaintiffs,
they did not discover that their water had been contaminated until March 18, 2016, when they
received the results of a water sample revealing high levels of carcinogens in their household water
supply.
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However, as the district court and the defendants point out, the record contradicts plaintiffs’
account and reveals that plaintiffs knew or reasonably should have known more than five years
before these suits were brought in March 2017 that there was injury to their person and property
from water in their home that was contaminated and constituted a health hazard as a result of
SEHAC’s actions.2 First, in their complaints filed on March 22, 2013, plaintiffs alleged that as a
result of defendants’ conduct, their water ”had turned a dirty brown color, and that because of
SEHAC’s “fraudulent misrepresentations,” there was “contamination of water” in plaintiffs’ home
which had led to “adverse health problems.” The complaints further alleged that “[a]s a result of
Defendant SEHAC’s fraudulent misrepresentations, Plaintiff has suffered health problems after
living in a home with dirty and questionable water declared safe by Defendant SEHAC.”
Plaintiffs elaborated on these allegations at the October 9, 2013 hearing. At the hearing,
Newberry told the court that five of his family’s pets had developed cancer, and that Rorick had
been diagnosed with blood clots. Newberry also suggested at the hearing that contaminated water
was the cause of these health problems:
THE COURT: Are you suing for more than the 75?
MR. NEWBERRY: For more than the 75?
THE COURT: More than the $75,000 in damages.
MR. NEWBERRY: Yes, Your Honor. There are physical injuries also.
Again, we don’t know what was deposited into the
drinking water –
THE COURT: Personal injuries to the people?
MR. NEWBERRY: Yes, Your Honor.
...
2
Plaintiffs have not objected to reliance by the district court on factual allegations and statements made by plaintiffs
in the prior litigation. We do not address how we would resolve a properly preserved objection to that reliance. In
general, we may consider records from a prior case when the district court relied on them and when plaintiffs have
had an opportunity to challenge their factual content. See Stafford v. Jewelers Mut. Ins. Co., 554 F. App’x 360, 369
(6th Cir. 2014); see also Green Mt. Realty Corp. v. Leonard, 750 F.3d 30, 36 n.2 (1st Cir. 2014); Kinnett Dairies, Inc.
v. Farrow, 580 F.2d 1260, 1277 n.33 (5th Cir. 1978).
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MR. NEWBERRY: Your Honor, we’ve been trying to get discovery as to
what was put in the drinking water. That’s the real
linchpin of this case.
THE COURT: It made people ill?
MR. NEWBERRY: There are four dogs that drink water from the house
watering system. They’ve all developed tumors
since this. One cat has died. And the plaintiff has
been diagnosed with blood clots. We have video of
material and then brown material from these tanks
going into our water system. And my attempts,
through e-mails, as plaintiff’s attorney, was to find
out what is in there.
(emphasis added).
Despite having made these statements in October 2013, plaintiffs assert in their complaints
that at the time Rorick voluntarily dismissed her case in November 2013, “there was no evidence
of physical injury nor any established reason to suspect future harm to health or safety from the
water in Plaintiff’s home.” Plaintiffs similarly contend on appeal that “there was no reasonable
reason to suspect any harm from the continuing use of the water passing through the Toxin Shield
filtration system until the culmination of a series of events that began in 2015.” We have
previously rejected, in the federal securities law context, a plaintiff’s attempt to invoke a discovery
rule where its statements in prior litigation showed awareness of a legally cognizable injury before
the expiration of the statute of limitations. See New Eng. Health Care Emps. Pension Fund v.
Ernst & Young, LLP, 336 F.3d 495, 501-02 (6th Cir. 2003). This case is no different. Even
applying the discovery rule, plaintiffs’ negligence claims are still untimely.
Plaintiffs attempt to contextualize Newberry’s statements at the October 2013 hearing,
emphasizing that plaintiffs had yet to determine with certainty whether defendants were
responsible for their injuries. But the discovery rule does not continue to toll the statute of
limitations until a plaintiff is certain of who has wronged him. Rather, as the district court correctly
observed, “once the Plaintiff encounters facts that ‘should excite his suspicion,’ he effectively has
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‘actual knowledge of th[e] entire claim.’” Newberry v. Service Experts Heating & Air
Conditioning, LLC, No. 5:17-cv-131, 2018 WL 1701316, at *5 (E.D. Ky. Apr. 5, 2018) (quoting
Fluke Corp., 306 S.W.3d at 64). Plaintiffs’ statements during the prior litigation clearly
demonstrate that they suspected contaminated water was causing health problems and that SEHAC
was to blame.
Even assuming plaintiffs lacked actual knowledge of their injury and its cause in 2013,
their constructive knowledge was sufficient. “Under the discovery rule, it is the date of the actual
or constructive knowledge of the injury which triggers the running of the statute of limitations.”
Wiseman v. Alliant Hosps., Inc., 37 S.W.3d 709, 712 (Ky. 2000) (citation omitted). A plaintiff
who is presented with sufficient indicia of a potential cause of injury must engage in a “prompt,
independent investigation” of the source of the injury. See Fluke Corp., 306 S.W.3d at 61. The
record demonstrates that plaintiffs had enough information by October 9, 2013 to warrant their
own “prompt, independent investigation” of their household water quality. Had they engaged in
reasonable diligence, they would have discovered the causal connection between their injuries and
SEHAC’s faulty installation of their filtration system by October 9, 2013 at the latest. Given that
plaintiffs filed their new complaints more than three years after this date, their claims for negligent
failure to warn and negligence—which carry one-year and two-year statutes of limitation
respectively—are time-barred.
C. Contamination of Water (count three)
Rorick and Newberry’s claims for contamination of water (count three) are likewise barred
by the applicable statute of limitations. The district court correctly determined—and the parties
agreed—that a claim for “contamination of water” is properly viewed as one for trespass to real
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property, which carries a five-year statute of limitations. Ky. Rev. Stat. § 413.120(4); see Ray v.
Ashland Oil, 389 S.W.3d 140, 148 (Ky. Ct. App. 2012).
The discovery rule does not apply to plaintiffs’ trespass claims because the rule is
employed only for latent injuries. Fluke Corp., 306 S.W.3d at 60. Unlike the illnesses that affected
plaintiffs and their pets, the contamination of plaintiffs’ water was not a latent injury. The water
noticeably contained “blackish brown materials” on December 19, 2011, and plaintiffs’ trespass
claim accrued on that date. For purposes of the trespass claim, it does not matter that plaintiffs
failed to comprehend the seriousness of the contamination at that point in time. A plaintiff’s “lack
of knowledge of the extent of his injury does not toll a statute of limitation to which the discovery
rule is applied.” Carroll v. Owens-Corning Fiberglas Corp., 37 S.W.3d 699, 700 (Ky. 2000)
(quoting Louisville Trust Co. v. Johns-Manville Prods. Co., 580 S.W.2d 497, 500 (Ky. 1979)).
Having accrued on December 19, 2011, plaintiffs’ “contamination of water” claims brought on
March 16, 2017 are untimely under Kentucky’s five-year statute of limitations for trespass to real
property.
D. Fraud (counts five and twelve)
Plaintiffs’ fraud claims in counts five and twelve of the complaints are also time-barred
because they accrued more than five years before the filing of the 2017 complaints. These claims
refer to statements SEHAC allegedly made on December 30, 2011 and January 2, 2012, as well as
during the first round of litigation, that the water in plaintiffs’ home was tested and that it was safe
to drink. In Kentucky, fraud actions are subject to a five-year limitations period, which begins to
run “when a plaintiff could have discovered the fraud in the exercise of reasonable diligence.”
Republic Bank & Tr. Co. v. Bear Stearns & Co., 683 F.3d 239, 259 (6th Cir. 2012); see Ky. Rev.
Stat. §§ 413.120(11); 413.130(3); Madison Cty. v. Arnett, 360 S.W.2d 208, 210 (Ky. 1962).
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Plaintiffs argue that they did not know SEHAC was misrepresenting the safety of the water until
they tested the water themselves in 2016. As discussed above, however, plaintiffs certainly had
reason to suspect SEHAC’s alleged fraud by March 22, 2013, when they averred in their
complaints that “[a]s a result of Defendant SEHAC’s fraudulent misrepresentations, Plaintiff has
suffered health problems after living in a home with dirty and questionable water declared safe by
Defendant SEHAC.”
Furthermore, the record demonstrates that plaintiffs, had they exercised reasonable
diligence, would have discovered the alleged fraud no later than January 2012. Under Kentucky
law, a plaintiff has “a duty to exercise reasonable diligence to discover [his] cause of action within
the time prescribed by the statute of limitations.” Bridgefield Cas. Ins. Co. v. Yamaha Motor Mfg.
Corp. of Am., 385 S.W.3d 430, 434 (Ky. Ct. App. 2012). The duty to investigate arises “on notice
that something [is] amiss,” Victory Cmty. Bank v. Socol, 524 S.W.3d 24, 29 (Ky. Ct. App. 2017),
and a plaintiff’s failure to do so precludes application of the discovery rule. See Bridgefield Cas.
Ins. Co., 385 S.W.3d at 434. Plaintiffs continued seeing “blackish brown materials” in their water
after SEHAC told them their water was safe on December 30, 2011. In addition, plaintiffs had
reason to doubt the veracity of SEHAC’s employees, one of whom told Newberry that he had
taken a water sample on December 20, 2011 even though Newberry saw that “he [had] left the
water sample in the jug on the Plaintiff’s kitchen counter” that same day. Taken together, these
facts indicate that plaintiffs were “on notice that something was amiss” and should have further
investigated.
E. Equitable Estoppel
Plaintiffs propose the defense of equitable estoppel to combat SEHAC’s statute-of-
limitations arguments. “An estoppel may arise to prevent a party from relying on a statute of
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limitation by virtue of a false representation or fraudulent concealment.” Munday v. Mayfair
Diagnostic Lab., 831 S.W.2d 912, 914 (Ky. 1992) (citation omitted). It is not clear to which claims
plaintiffs ask the court to apply this defense, but it appears that it applies most logically to the
claims discussed up to this point that deal with contamination of plaintiffs’ water. Contrary to
plaintiffs’ contention, the defendants are not equitably estopped from relying on the statute-of-
limitations defense because SEHAC’s alleged misrepresentations did not prevent plaintiffs from
discovering the water contamination on their own.
Plaintiffs have not alleged how SEHAC’s misrepresentations about the quality of the water
in their home prevented them from finding out about the water contamination or otherwise
diligently pursuing their claims during the statutory period. Plaintiffs had complete control of and
access to their allegedly faulty filtration system and could have conducted their own water tests at
any time after they noticed water contamination starting in 2011. Moreover, as the district court
observed, plaintiffs were given a full opportunity to conduct discovery in the initial Rorick action
in October 2013 but chose instead to reach a settlement with the defendants. In short, although
plaintiffs assert that they lacked knowledge of the water contamination as a result of SEHAC’s
fraudulent statements, they do not allege that they lacked the means of acquiring this knowledge.
It follows that, even if plaintiffs could demonstrate that they actually relied on SEHAC’s alleged
misrepresentations, that reliance would not have been reasonable, and equitable estoppel would
not apply.
Kentucky law requires this conclusion. Plaintiffs must show (1) that they lacked the
“means of acquiring knowledge of the truth” about the defendant’s misconduct, (2) that they
reasonably relied on the defendant’s misrepresentations, and (3) that they failed to timely sue
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because of these misrepresentations. See Fluke Corp., 306 S.W.3d at 62; Boggs v. 3M Co., No.
11-57-ART, 2012 WL 3644967, at *6-7 (E.D. Ky. Aug. 24, 2012) (applying Fluke Corp.).
The equitable estoppel doctrine is “reserved for truly exceptional circumstances,” and does
not relieve a plaintiff of his obligation “to act diligently to investigate apparent possible causes of
[his] injuries in order to pursue claims within the statute of limitations.” Fluke Corp., 306 S.W.3d
at 67. Accordingly, Kentucky decisions applying equitable estoppel “appear to require ‘some act
or conduct which in point of fact misleads or deceives plaintiff and obstructs or prevents him from
instituting his suit while he may do so.” Munday, 831 S.W.2d at 914 (emphasis added) (quoting
Adams v. Ison, 249 S.W.2d 791, 792 (Ky. 1952)). For instance, in Fluke Corp., where the plaintiffs
argued that they were unaware of their products liability claim due to the defendants’ failure to
disclose certain product defects, the court held that there was no estoppel because plaintiffs could
not show that they “lacked the means of acquiring knowledge of the truth that the [product] could
have malfunctioned, which would render any actual reliance reasonable.” 306 S.W.3d at 62.
Likewise in Cantrell v. Ashland Oil, Inc., the Kentucky Supreme Court held that equitable estoppel
did not apply to an untimely lawsuit alleging water contamination. Nos. 2006-SC-763-DG, 2007-
SC-818-DO, 2010 WL 1006391, at *11 (Ky. Mar. 18, 2010). Although the defendant in Cantrell
had misrepresented the fact that a chemical in plaintiffs’ groundwater was harmless, plaintiffs
could not “demonstrate that [defendant] prevented them from discovering the damage to their
ground water.” Id. (citing Weiand v. Bd. of Trs. of Ky. Ret. Sys., 25 S.W.3d 88, 91 (Ky. 2000)).
F. Fraud, Breach of Contract, and Unjust Enrichment (counts seven, eight, and nine)
Unlike their tort claims relating to water contamination, plaintiffs’ claims for breach of oral
contract (and related claims of unjust enrichment and contract fraud) have not been shown to be
time-barred under the applicable five-year statutes of limitation. Plaintiffs allege that they entered
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into an oral contract with SEHAC to “properly install, service, and/or repair the whole house toxin
shield water filtration system.” They further allege that this contract was entered into on December
12, 2011 and included a one-year obligation to service the filtration system.
On appeal, plaintiffs’ statute-of-limitations arguments focus solely on an alleged term of
the oral contract that defendants were required “to remove either or both of [the] water filtration
systems and to reinstall Plaintiff’s Aqua-Pure system for no additional charge in the event that
Plaintiff was dissatisfied with the systems that were purchased from [defendants] ‘at any time
during the first year of service upon request by Plaintiff.’” This oral contractual provision is also
the basis for one of plaintiffs’ fraud claims (count seven) and for plaintiffs’ unjust enrichment
claim (count nine). Plaintiffs assert that SEHAC’s fraudulent statements induced them to enter
into the oral contract. Plaintiffs also allege that their payment of $3,200 under the contract
conferred a benefit to SEHAC and that SEHAC’s retention of that benefit was unjust given its
failure to perform.
Both parties assume the existence of an oral contract and agree that each of these three
claims is governed by a five-year statute of limitations. See Ky. Rev. Stat. §§ 413.120(1),
413.120(11); EQT Prod. Co. v. Big Sandy Co., LP, 590 S.W.3d 275, 287 (Ky. Ct. App. 2019)
(applying five-year statute-of-limitations period in Ky. Rev. Stat. § 413.120(11) to unjust
enrichment claims). The parties also appear to agree that the claims accrued either when
defendants allegedly breached the obligation or when the obligation was repudiated. This appears
to be the law at least with respect to suits for breach of contract. EQT Prod. Co., 590 S.W.3d at
292 (citing Hoskins Adm’r v. Kentucky Ridge Coal Co., 305 S.W.2d 308, 311 (Ky. 1957)); Berger
v. Savient Pharms., Inc., No. 2009-CA-1858-MR, 2011 WL 4861427, at *4 (Ky. Ct. App. Oct. 14,
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Nos. 18-6028/19-5110, Newberry, et al. v. Service Experts Heating & Air Conditioning, et al.
2011) (citing Upton v. Ginn, 231 S.W.3d 788, 791 (Ky. Ct. App. 2007)). The parties make
identical statute-of-limitations arguments with respect to the three claims.
Plaintiffs argue that SEHAC disavowed its obligation on January 24, 2013, less than five
years before suit was brought on March 16, 2017. But even so, if there were an earlier breach, in
particular one before March 2012, the three claims would be untimely. Plaintiffs argue in effect
that there was no breach until December 12, 2012, the date by which plaintiff was required to
request the replacement of the new system with the old one. But that argument does not make
clear why there was no breach before that time. The contractual provision described in the
complaint could be read to require replacement of the old system within a reasonable time of a
valid request, and not whenever SEHAC felt like it until the end of the year.
On the other side, SEHAC’s only limitations argument for these claims is that plaintiffs’
“breach of contract claim must obviously have accrued by [January 6, 2012] in order to have been
asserted in the Newberry Prior Action, but that accrual was more than five years before the filing
of this action”3 It is not obvious from the earlier complaint, however, that the claim must have
accrued by January 6, 2012. According to both the earlier and later complaints, that date is when
SEHAC allegedly reiterated its promise contained in the December 12, 2011 oral contract. Neither
complaint states that a request to replace the filtration system was made on that date, much less
that SEHAC breached or repudiated on that date. The allegation in both complaints that plaintiff
asked for removal of the new system and reinstallation of the old system is simply undated.
Similarly undated is the subsequent paragraph stating that SEHAC never returned to remove the
new system or reinstate the older one.
3
The argument appears to be based on the district court’s statement that these were claims which “were asserted in
the earlier action and which relied upon actions taken at the latest on January 6, 2012, according to the Newberry Prior
Complaint.” Newberry, 2018 WL 1701316, at *6. The district court did not further elaborate on why these claims
were time-barred, other than to set out, and provide citations for, the relevant limitations periods. Id.
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Nos. 18-6028/19-5110, Newberry, et al. v. Service Experts Heating & Air Conditioning, et al.
It is thus unclear whether the alleged oral agreement to remove and replace was breached
before or after March 16, 2012, and thus whether the contract, contract fraud, and unjust
enrichment claims (counts seven through nine) were time-barred. The statute of limitations is an
affirmative defense which the defendant has the burden to demonstrate. Lutz v. Chesapeake
Appalachia, LLC, 717 F.3d 459, 464 (6th Cir. 2013). Further, the allegations in the complaint
must “affirmatively show that the claim is time-barred” for a motion to dismiss to be granted. Id.
(quoting Cataldo v. U.S. Steel Corp., 676 F.3d 542, 547 (6th Cir. 2012)). Without more, on the
current record, it was premature to dismiss on limitations grounds the three claims based on the
alleged contractual obligation to remove and replace upon request.
SEHAC argues in the alternative that plaintiffs fail to allege their fraud claim with
particularity as required by Federal Rule of Civil Procedure 9(b) because plaintiffs do not allege
the identity of the individual who made the alleged fraudulent statements. SEHAC is correct that
our caselaw has required that a plaintiff “identify the speaker.” Frank v. Dana Corp., 547 F.3d
564, 570 (6th Cir. 2008). SEHAC is also correct that Newberry and Rorick allege only that the
“employee and/or agent of Defendant SEHAC” made fraudulent statements. However, we have
also observed that the identity of the speaker is necessary only to “enable a particular defendant to
determine with what it is charged.” United States ex rel. Bledsoe v. Cmty. Health Sys., Inc., 501
F.3d 493, 507 (6th Cir. 2007) (quoting Hoover v. Langston Equip. Assocs., 958 F.2d 742, 745 (6th
Cir. 1992)). Thus, while a plaintiff’s complaint that refers only to “defendants” is insufficient
under Rule 9(b), see Cataldo, 676 F.3d at 551-52 (collecting cases), a complaint that identifies a
particular corporate defendant as well as the “time, place, and content of the alleged
misrepresentation” need not also identify the corporation’s individual employee who made the
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alleged fraudulent misrepresentation. Bledsoe, 501 F.3d at 506. As shown below, the allegation
in plaintiffs’ complaints fits these criteria:
On January 6, 2012, the Revita water filtration system for the kitchen was removed
by Defendant SEHAC after it was unable to get it to work properly. Defendant
SEHAC reiterated its earlier promise to remove its systems and reinstall Plaintiff’s
Aqua-Pure system for no charge at any time during the first year of service upon
request by Plaintiff for any reason whatsoever.
Accordingly, plaintiffs have alleged their contract fraud claim in count seven with sufficient
particularity.
G. Breach of Warranty (count six)
The district court correctly ruled that plaintiffs’ breach of warranty claims are time-barred.
Kentucky law provides that a buyer may assert a breach of warranty action within four years of
“when tender of delivery is made, except that where a warranty explicitly extends to future
performance of the goods and discovery of the breach must await the time of such performance
the cause of action accrues when the breach is or should have been discovered.” Ky. Rev. Stat. §
355.2-725(2). Plaintiffs concede that their breach of warranty claims accrued on January 24, 2013
at the latest, which is more than four years before their new complaints were filed.
H. Conversion (count ten)
Plaintiffs’ claims for conversion can also be easily disposed of, as plaintiffs’ new
complaints were filed long after the expiration of the two-year statute of limitations. Plaintiffs
contend—without citation to authority—that a five-year limitation period applies instead. This
contention contradicts the consensus among courts that conversion claims in Kentucky are
governed by Kentucky Revised Code § 413.125, which establishes a two-year statute of limitations
for “[a]n action for the taking, detaining or injuring of personal property, including an action for
specific recovery.” See Weatherly v. Hospice of Lake Cumberland, Inc., No. 2018-CA-248-MR,
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Nos. 18-6028/19-5110, Newberry, et al. v. Service Experts Heating & Air Conditioning, et al.
2019 WL 1422848, at *2-3 (Ky. Ct. App. Mar. 29, 2019); see also Madison Capital Co., LLC v. S
& S Salvage, LLC, 507 F. App’x 528, 540 (6th Cir. 2012); Jair United Inc. v. Inertial Airline
Servs., Inc., No. 3:12-cv-799-H, 2013 WL 4048539, at *4 (W.D. Ky. Aug. 9, 2013). Plaintiffs’
complaints state that on June 19, 2012, plaintiffs asked SEHAC to return their “missing Aqua-Pure
filter system which Defendant Removed from Plaintiff’s home without Plaintiff’s knowledge or
consent.” The conversion claims were therefore at least four years old at the time plaintiffs filed
their new complaints, making them over two years late.
I. Motions to Transfer
Plaintiffs argue on appeal, as they did below, that their cases must be transferred pursuant
to the terms of the agreed order of dismissal in the 2013 Rorick lawsuit. That order provides that
any subsequent lawsuit stemming from the 2013 dispute between Rorick and defendants “must be
re-filed in the Untied States District Court for the Eastern District of Kentucky, Covington
Division.”4 Plaintiffs take this to mean that “only the Covington Division of the Eastern District
of Kentucky possesses both subject matter and personal jurisdiction over this case and the named
parties.”
Having carefully considered the record on appeal and the briefs of the parties, we are not
persuaded that the district court abused its discretion when it denied plaintiffs’ motions to transfer
their cases from the Central Division to the Northern Division of the Eastern District of Kentucky.
See Newberry v. Service Experts Heating & Air Conditioning LLC, No. 5:17-cv-131, 2018 WL
4101508 (E.D. Ky. Aug. 28, 2018); Rorick v. Service Experts Heating & Air Conditioning, LLC,
No. 5:17-cv-132, 2018 WL 4495467 (E.D. Ky. Sept. 19, 2018). Because the district court fully
4
The agreement’s use of the term “Covington Division” likely refers to the Northern Division, which encompasses
both the Ashland and Covington dockets. See Rule 3.1(a) of the Joint Local Rules for the Eastern District and Western
District of Kentucky.
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articulated the reasons why transfer was improper, a detailed opinion by this court would be
duplicative and serve no useful purpose. Accordingly, we adopt the analysis and conclusions of
the district court and affirm its orders denying plaintiffs’ motions to transfer.
J. Motion to Continue
In addition, Rorick complains that the district court abused its discretion by denying her
third motion for extension of time to (1) respond to defendants’ motion to dismiss and (2) to retain
new counsel. Rorick’s argument lacks merit. The record reveals that the district court granted two
separate motions for extension of time, giving Rorick a total of six additional weeks to find counsel
and respond to defendants’ motion. The district court appears to have struck a balance between
Rorick’s desire to be accommodated and its need to process cases in a timely manner. Thus, the
district court’s actions do not leave a “definite and firm conviction” that it committed a clear error
of judgment. See Arban v. West Publ’g Corp., 345 F.3d 390, 404 (6th Cir. 2003) (quoting
Cincinnati Ins. Co. v. Byers, 151 F.3d 574, 578-79 (6th Cir. 1998)). The district court did not
abuse its discretion by denying Rorick’s motion for yet another extension of time.
Rorick also contends that the district court abused its discretion by considering the
defendants’ motion to dismiss without the benefit of her response brief, which was filed within the
time permitted under the rules for pro se litigants. This argument is also unavailing. The issues
the court decided in the motion to dismiss Rorick’s complaint had already been briefed by both
parties in the parallel Newberry action. See Newberry, 2018 WL 1701316 (E.D. Ky. Apr. 5, 2018).
Further, Rorick’s “response,” once it was filed, did not add anything to the already briefed
arguments, as it consisted merely of a two-paragraph statement lacking any citation to authority.
Therefore, any error (if there was one) was harmless and does not constitute a ground for “vacating,
modifying, or otherwise disturbing” the district court’s judgment. Fed. R. Civ. P. 61.
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K. Request for Remand and Evidentiary Hearing
Finally, we decline to require, as suggested in Newberry’s appeal brief, a hearing based on
his statement that he was diagnosed with an illness on November 1, 2018, one month after he
appealed the district court’s orders. Newberry alludes to the fact that this illness made him more
susceptible to believing defendants’ allegedly fraudulent statements and asks the court of appeals
to “remand for an evidentiary hearing on facts of Appellant’s recently diagnosed illness.”
Newberry has not demonstrated how his illness would affect the merits of his claims at this stage
of the litigation. For purposes of a motion to dismiss, his assertions that he actually relied on
defendants’ fraudulent statements are taken as true. In addition, the test for whether Newberry
should have been aware of his claims for statute-of-limitations purposes is objective, not
subjective. See Greywolf v. Roman Catholic Diocese of Covington, No. 2010-CA-814-MR, 2011
WL 3361342, at *3 (Ky. Ct. App. Aug. 5, 2011) (citing Adams, 249 S.W.2d at 793). Nor has
Newberry suggested that his illness caused him to have an unsound mind that tolled the statute of
limitations under Kentucky Revised Statute § 413.170(1). Of course, Newberry is permitted to
provide evidence of his mental state on remand to the extent he feels it helps his case.
III.
For these reasons, we reverse the district court’s judgment dismissing plaintiffs’ claims for
fraud (count seven), breach of contract (count eight), and unjust enrichment (count nine), and
remand for further consideration in light of this opinion. We affirm all other aspects of the district
court’s judgment.
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