Burlington Northern & Santa Fe Railway Co. v. Abc-Naco

• Decision Date: 31 March 2009
• Docket Number: No. 1-07-0043.,1-07-0043.
• Citation: 906 N.E.2d 83
• Parties: The BURLINGTON NORTHERN AND SANTA FE RAILWAY COMPANY, Plaintiff-Appellee, v. ABC-NACO, a Delaware Corporation, Defendant-Appellant (TTX Company, a Delaware Corporation, Defendant-Appellee; Norfolk Southern Railway Company, a Virginia Corporation, Defendant).
• Court: United States Appellate Court of Illinois

906 N.E.2d 83

The BURLINGTON NORTHERN AND SANTA FE RAILWAY COMPANY, Plaintiff-Appellee, v. ABC-NACO, a Delaware Corporation, Defendant-Appellant (TTX Company, a Delaware Corporation, Defendant-Appellee; Norfolk Southern Railway Company, a Virginia Corporation, Defendant).

No. 1-07-0043.

Appellate Court of Illinois, First District, Fourth Division.

March 31, 2009.

BryceDowney, LLC, Chicago (Geoffrey A. Bryce, Terrence J. Madden, of counsel), for Appellant.

Freeborn & Peters LLP, Chicago (Richard T. Sikes, Jr., David S. Becker, of counsel), for Appellee, The Burlington Northern & Santa Fe Railway Company.

Swanson, Martin & Bell, LLP, Chicago (Kevin V. Boyle, Richard Keating, of counsel), for Appellee, TTX Company.

Justice GALLAGHER delivered the modified opinion of the court on rehearing:

The Burlington Northern & Santa Fe Railway Company (BNSF) brought an action against defendants ABC-NACO (NACO), TTX Company and Norfolk Southern Railway Company for damages from the June 6, 2001, derailment of 26 cars of a freight train traveling through a region of the Arizona desert known as Eagle Nest. No one was injured as a result of the derailment. A jury trial was held in which NACO was the lone remaining defendant.

NACO now appeals the verdict against it on numerous grounds, including the strength of the evidence against it. For the reasons set forth below, we affirm the jury's verdict, and we conclude that NACO is entitled to a setoff of $5.2 million, reflecting Illinois law, against the $4.4 million judgment against it. We also affirm the trial court's grant of summary judgment to TTX on NACO's counterclaim.

BACKGROUND

BNSF's complaint, filed in June 2003 in Cook County circuit court, alleged that the derailment was caused by a defective transom on one of the railroad cars. BNSF alleged that the transom broke and that a portion of the transom hung below the top of the rail on which the train was traveling. Most of the railcars involved in the derailment were transporting new automobiles, many of which were almost entirely damaged or destroyed.

The transom at issue in this case was designed by NACO. The entire railcar, including the transom, was manufactured by TTX. A railcar transom is connected to the truck assembly that carries a railcar, and its purpose is to keep the sides of the truck together so the railcar remains in alignment on top of the rail, especially while traveling on a curve. Transoms can be formed from one piece of steel or fabricated from separate pieces of material. The transom at issue in this case was fabricated and had been welded to repair cracking.

Count I of BNSF's complaint sought damages from NACO and TTX based on a strict liability theory of product liability, asserting that NACO and/or TTX did not properly design, manufacture or assemble the transom and that the transom was defective and inherently dangerous when it left their possession. In count II, BNSF alleged negligence against NACO and TTX in the design, manufacture and assembly of the transom, contending that those defendants should have known the transom was not suitable for its intended use. Count III alleged that Norfolk Southern welded the transom at issue in a Norfolk Southern repair shop on May 7, 2001, about a month before the derailment occurred, and that the welding repairs were negligent. Counts IV and V alleged breach of express warranty against TTX and breach of implied warranty against TTX and NACO.

NACO admitted that it designed the transom but denied that it was defective and denied that the transom caused the derailment. Before trial, TTX and Norfolk Southern each settled with BNSF for $2.6 million, or a total settlement of $5.2 million. On September 7, 2005, the trial court entered a written order approving the settlement and dismissing all claims against TTX and Norfolk Southern, except NACO's implied indemnity claim against TTX. The order indicated that NACO, as the remaining defendant, would be entitled to a setoff of $5.2 million against a future jury verdict in accordance with the Illinois Joint Tortfeasor Contribution Act (the Illinois Contribution Act) (740 ILCS 100/1 et seq. (West 2002)). The order included language pursuant to Illinois Supreme Court Rule 304(a) (210 Ill.2d R. 304(a)) that the trial court found no just reason existed to delay an appeal of that order.

After the entry of that order, BNSF filed a motion in limine requesting that the court apply Arizona law to this case. NACO responded that the trial court already had determined its right to a setoff under Illinois law as reflected in the September 7, 2005, order, from which no appeal had been taken. After lengthy debate between the parties and the trial court, the court granted BNSF's motion and ruled that it would apply Arizona law to the merits of this case.

Under the Arizona statute, NACO was considered a "manufacturer" of the transom. NACO amended its answer to raise several affirmative defenses available under Arizona's product liability statute. NACO contended, inter alia, that Norfolk Southern's repair modified the transom in a way that was not reasonably foreseeable and that did not comply with a written specification for repair ("Specification No. 30"). NACO further asserted that BNSF failed to mitigate its damages because its investigative crew dragged and overturned several railcars while clearing the accident site. As to the negligence count, NACO contended that BNSF was contributorily negligent because BNSF received maintenance warnings to inspect transoms for cracking and that BNSF should have discovered in its own inspections that the transom was improperly repaired.

A jury trial was held in January and February 2006. The record on appeal is lengthy, numbering close to 70 volumes, and, accordingly, specific trial testimony will be recounted below when relevant to the issues raised on appeal. The jury was instructed as to Arizona substantive law. All defendants were listed on the jury verdict forms pertaining to liability. The jury returned a verdict for BNSF and awarded total damages of approximately $8.3 million. On the strict liability count, the jury apportioned the relative degrees of fault as 50 % NACO, 45 % TTX and 5 % Norfolk Southern. As to the negligence count, the jury found NACO 53 % at fault, TTX to be 40 % at fault, Norfolk Southern 5 % at fault and BNSF 2 % at fault.

The court entered judgment against NACO representing 53 % of the total verdict, or approximately $4.4 million. The court's order further stated, despite the prior ruling that Illinois law would apply to the setoff issue, that "pursuant to Arizona law, this judgment will not [be] subject to any set-off." Therefore, applying Arizona's several liability statute, the court did not apply the $5.2 million setoff representing the settlements by TTX and Norfolk Southern.

NACO argued in a posttrial motion that despite the application of Arizona law to the merits of the case, the setoff reflecting Illinois contribution law should have been awarded in keeping with the trial court's September 7, 2005, order. NACO also asserted that it was entitled to judgment notwithstanding the verdict or, in the alternative, a new trial. The trial court denied NACO's posttrial motion, and this appeal followed.

ANALYSIS

On appeal, NACO first contends that the trial court was bound by its original ruling that the $5.2 million setoff under Illinois law should be applied, which would erase the $4.4 million judgment against NACO in its entirety. NACO argues that the trial court could have applied the setoff under Illinois law even after the court concluded that Arizona law governed the substance of the complaint. In the alternative, NACO asserts that a new trial is warranted because the court erred in applying Arizona law to the merits of BNSF's claims.

I. Choice of Law Issues

A. Substantive Law to be Applied

We first consider whether the trial court correctly ruled that Arizona product liability law should apply in this case because the outcome of that inquiry affects our review of NACO's remaining contentions. A trial court's choice of law is reviewed de novo. Townsend v. Sears, Roebuck & Co., 227 Ill.2d 147, 154, 316 Ill.Dec. 505, 879 N.E.2d 893, 898 (2007). A choice-of-law determination is required only when a difference in the law of the states will affect the outcome. Townsend, 227 Ill.2d at 155, 316 Ill.Dec. 505, 879 N.E.2d at 898. Therefore, we consider whether a difference exists in the product liability laws of Arizona and Illinois. (The parties agree that the law of those two states differs on the issue of contribution among tortfeasors, which will be discussed later in more detail.)

BNSF's complaint raised claims of strict product liability and negligence as to the design and manufacture of the transom. Illinois and Arizona both recognize strict liability in tort for product liability, and, more specifically, for the defective design of a product. See Townsend, 227 Ill.2d at 156, 316 Ill.Dec. 505, 879 N.E.2d at 899; Woodill v. Parke Davis & Co., 79 Ill.2d 26, 37 Ill.Dec. 304, 402 N.E.2d 194 (1980) (generally); Golonka v. General Motors Corp., 204 Ariz. 575, 579, 65 P.3d 956, 960 (App.2003). The trial court applied Arizona's product liability statute and held that NACO, as the designer of the transom, was a "manufacturer" as a matter of law because the Arizona statute includes the designer of a product in the chain of culpability for a defective item. See Ariz.Rev.Stat. § 12-681(3) (Lexis 2004) (a "manufacturer" is a "person or entity that designs, assembles, fabricates, produces, constructs or otherwise prepares a product or component part of a product before its sale"). Thus, by statute in Arizona, a designer is subject to strict liability for a design defect.

Illinois law lacks a similar definition. NACO asserts that had Illinois law been applied, it would not have faced strict liability for a design defect as the designer of the transom, as...