R & L GRAIN CO. v. Chicago Eastern Corp.

• Decision Date: 16 April 1981
• Docket Number: No. 79 C 5475.,79 C 5475.
• Citation: R & L GRAIN CO. v. Chicago Eastern Corp., 531 F. Supp. 201 (N.D. Ill. 1981)
• Parties: R & L GRAIN COMPANY, a Wisconsin Corporation on behalf of itself and on behalf of all owners of 105' diameter grain bins manufactured by Defendant, Plaintiffs, v. CHICAGO EASTERN CORPORATION, An Illinois Corporation, Defendant.
• Court: U.S. District Court — Northern District of Illinois

531 F. Supp. 201

R & L GRAIN COMPANY, a Wisconsin Corporation on behalf of itself and on behalf of all owners of 105' diameter grain bins manufactured by Defendant, Plaintiffs, v.CHICAGO EASTERN CORPORATION, An Illinois Corporation, Defendant.

No. 79 C 5475.

United States District Court, N. D. Illinois, E. D.

April 16, 1981.

COPYRIGHT MATERIAL OMITTED

Robert C. Keck, Jr., Jenner & Block, Chicago, Ill., for plaintiffs.

Erwin I. Katz, Hoffman & Davis, Patrick W. O'Brien, Thomas P. Johnson, Mayer, Brown & Platt, Chicago, Ill., for defendant.

MEMORANDUM OPINION

Motion to Dismiss

Introduction

MAROVITZ, District Judge.

PlaintiffR & L Grain Company brings this action against defendantChicago Eastern Corporation seeking recovery for certain losses allegedly sustained by it as a result of its purchase of a grain storage bin manufactured by defendant.Plaintiff's amended complaint also contains class allegations on behalf of all owners of bins manufactured by defendant of the variety purchased by plaintiff.Plaintiff is a Wisconsin corporation with its principal place of business in Wisconsin.Defendant is an Illinois corporation with its principal place of business in Illinois.The jurisdiction of the Court is invoked pursuant to 28 U.S.C. § 1332.

Plaintiff's amended complaint alleges that in the fall of 1978, after consultations with Porter Grain Systems, Inc.(Porter), an Indiana corporation, it decided to purchase a grain storage bin (the "bin") manufactured by defendant.Porter purchased the material components of the bin from defendant for $311,738.Only plaintiff and Porter were parties to the contract of sale.¹Porter assembled the bin after defendant made delivery at plaintiff's Monroe, Wisconsin facility.

Plaintiff alleges that at the time of the sale of the bin, defendant expressly warranted that the bin could safely store grain throughout the most severe Wisconsin winters.Amended Complaint¶ 7.Further, plaintiff alleges that defendant was aware of the purpose for which the bin was to be used and that both plaintiff and Porter were relying on defendant's judgment at the time of sale to select a suitable bin.Id.,¶ 9.

Plaintiff alleges that the bin contains certain design defects which cause it to be unsuitable for its intended purpose and unsafe to persons working in and around the bin.²On January 14, 1979, the roof of the bin collapsed causing damage to the bin and related equipment.Repairs to the bin were made at a cost of $57,394.76.Plaintiff also alleges that the collapse of the roof of the bin cost plaintiff $100,000 in lost profits from anticipated grain storage rentals.

In addition, plaintiff alleges that the bin is in need of further repairs at an estimated cost of $210,000.These repairs, plaintiff alleges, will occasion additional lost rental revenues of $25,000.

Plaintiff seeks recovery of both its allegedly already incurred and anticipated repair costs and lost rentals.Plaintiff also seeks to recover the purchase price of the bin.Lastly, plaintiff seeks recovery of those financing costs for its purchase of the bin that accrued during the period the bin was in disuse due to the collapse of the roof; i. e., $32,250.The total recovery sought by plaintiff is $700,000, plus attorney's fees.

Plaintiff's theories of recovery are set forth in the four counts of its amended complaint.Count I alleges defendant's liability in strict tort.Count II alleges liability upon a negligence theory.Count III seeks recovery pursuant to defendant's alleged express warranties and implied warranties of merchantability and fitness for a particular purpose.SeeIll.Rev.Stat. ch. 26, §§ 2-313, 2-314, and 2-315.Count IV contains plaintiff's class allegations made pursuant to Rule 23 of the Federal Rules of Civil Procedure.

Pending before the Court is defendant's motion to dismiss each count in plaintiff's amended complaint.Motions to dismiss are not to be granted "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief."Conley v. Gibson,355 U.S. 41, 45-46, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80(1957).When ruling upon a motion to dismissa court shall accept as true all well-plead factual allegations.Cruz v. Beto,405 U.S. 319, 92 S.Ct. 1079, 31 L.Ed.2d 263(1972).For the reasons set forth below, the Court denies defendant's motion in part and grants the motion in part.

Counts I and II—Tort

Before addressing defendant's challenge to the sufficiency of plaintiff's tort claims, the Court must ascertain what law governs those claims.³This being an action founded upon the Court's diversity jurisdiction, it is bound to apply state substantive law, Erie Railroad Co. v. Tompkins,304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188(1938), and the choice-of-law principles of Illinois in order to determine which state's law shall govern.Klaxon Co. v. Stentor Electric Manufacturing Co.,313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477(1941).With respect to tort law claims, Illinois courts apply the substantive law of the place of injury unless the application of those factors set forth in the Restatement (Second) of Conflict of Laws§§ 6 and 145⁴(1971) indicate that another forum has a more significant relationship to the claim.Ingersoll v. Klein,46 Ill.2d 42, 48, 262 N.E.2d 593, 596(1973).

In the instant case, only Illinois and Wisconsin bear any significant relationship to plaintiff's tort claims.Between the relevant tort law of those jurisdictions, a true conflict exists.Because plaintiff alleges only injury related to the bin itself and consequent lost income, plaintiff's claims are for economic loss only.⁵SeeAlfred N. Koplin Co. v. Chrysler Corp.,49 Ill.App.3d 194, 199, 7 Ill.Dec. 113, 116-17, 364 N.E.2d 100, 103-04(1977).State jurisdictions are divided as to whether purely economic loss is recoverable pursuant to tort law theory.⁶Seeid. at 200, 7 Ill.Dec. at 118-19, 364 N.E.2d at 105-06, and cases cited therein.Wisconsin is among the minority of jurisdictions which permit the recovery in tort of economic loss.LaCrosse v. Schubert, Schroeder & Associates, Inc.,72 Wis.2d 38, 44-45, 240 N.W.2d 124, 127(1976).The issue is one which the Illinois Supreme Court has yet to address and there is a conflict between those Appellate Courts of Illinois that have decided the issue.CompareAlfred N. Koplin Co. v. Chrysler Corp.,49 Ill.App.3d 194, 7 Ill.Dec. 113, 364 N.E.2d 100andRhodes Pharmacal Co. v. Continental Can Co.,72 Ill.App.2d 362, 219 N.E.2d 726(1966)(economic loss not recoverable in tort)with Moorman Manufacturing Co. v. National Tank Co.,92 Ill.App.3d 136, 47 Ill.Dec. 186, 414 N.E.2d 1302(1980)(economic loss recoverable in tort).

When a federal court sitting in diversity is confronted with a state law question that has not been decided by the highest court of the particular state, it is incumbent upon the federal court to "discern" state law by examining relevant lower court decisions as well as other relevant authority.McKenna v. Ortho Pharmaceutical Corp.,622 F.2d 657, 661(3d Cir.), cert. denied,449 U.S. 976, 101 S.Ct. 387, 66 L.Ed.2d 237(1980).Recently, the United States Court of Appeals for the Third Circuit was called upon to discern Illinois' rule of law with respect to the recovery of economic loss in tort and concluded that it was Erie-bound to follow the rule of Rhodes and Koplin barring such recovery.Jones & Laughlin Steel Corp. v. Johns-Manville Sales Corp.,626 F.2d 280, 285(3d Cir.1980);See alsoPittway Corp. v. Lockheed Aircraft Corp.,641 F.2d 524(7th Cir., 1981).This Court concurs with the reasoning of the Third Circuit and adopts that reasoning herein.⁷Hence, the Court is faced with a true conflict between Wisconsin and Illinois law as to the availability of economic loss recovery in tort.

As stated, Illinois tort choice-of-law rules presumptively favor application of the substantive law of the place of injury.Ingersoll v. Klein,46 Ill.2d at 48, 262 N.E.2d at 596;see alsoIn re Air Crash Disaster Near Chicago Illinois on May 25, 1979,644 F.2d 594(7th Cir., 1981).The Court finds that those pertinent factors⁸ favoring application of Illinois law are that the conduct alleged to have caused plaintiff's injuries occurred in Illinois and that defendant is an Illinois resident.Illinois has an interest in the application of its rule disallowing the recovery of economic loss in tort to the commercial dealings of its resident defendants.Pittway Corp. v. Lockheed Aircraft Corp.,641 F.2d 524(7th Cir., 1981).On the other hand, the factors favoring the application of Wisconsin law are no less significant.The alleged injury occurred in Wisconsin and defendant is a Wisconsin resident.Wisconsin has an interest in its rule allowing the redress of economic loss in tort actions and in the application of that rule to permit recovery for resident plaintiffs.Id.In sum, the factors favoring the application of Wisconsin law are of equal significance as those favoring the application of Illinois law.Therefore, the latter do not overcome the presumption in favor of application of the law of the place of injury, Wisconsin.

The Court now turns to defendant's arguments in support of dismissal of Counts I and II.Defendant's argument that Counts I and II should be dismissed because they allege economic loss only is resolved in plaintiff's favor by the above discussion.SeeLaCrosse v. Schubert, Schroeder & Associates, Inc.,72 Wis.2d at 44-45, 240 N.W.2d at 127.Defendant also argues that plaintiff's negligence claim is legally insufficient because it does not contain an allegation pleading the absence of contributory negligence.This argument is specious.Federal procedural law, generally applicable to diversity actions, Gilmore v. Witschorek,411 F.Supp. 491, 495(E.D.Ill.1976);Wright & Miller Federal Practice & Procedure§ 1343, does not require a plaintiff to plead the...