Caterpillar, Inc. v. Usinor Industeel

Decision Date30 March 2005
Docket NumberNo. 04 C 2474.,04 C 2474.
Citation393 F.Supp.2d 659
PartiesCATERPILLAR, INC., an Illinois corporation, and Caterpillar Mexico, S.A., a foreign corporation, Plaintiffs, v. USINOR INDUSTEEL, a foreign corporation, Usinor Industeel (USA), Inc., a Pennsylvania corporation, and Leeco Steel Products, Inc., an Illinois corporation, Defendants.
CourtU.S. District Court — Northern District of Illinois

Edward H. Williams, Lauren Rachel Frank, Michael Rowe Feagley, Mayer, Brown, Rowe & Maw LLP, Chicago, IL, for Plaintiffs.

Michael H. King, McGuireWoods Ross & Hardies, Patricia Klein Smoots, Samantha Colleen Gordon, Theodore Thomas Eidukas, McGuireWoods LLP, Charles Franklin, Jeffrey A. Schulman, Nancy Erin Gunnard, Wolin & Rosen, Ltd., Chicago, IL, for Defendants.


PALLMEYER, District Judge.

Plaintiffs Caterpillar, Inc. ("Caterpillar") and Caterpillar Mexico, S.A. ("CMSA") filed this action against three defendants: Usinor Industeel ("Usinor"), a French steel manufacturer; Usinor Industeel (USA), Inc. ("Usinor USA"), Usinor's U.S. subsidiary; and Leeco Steel Products, Inc. ("Leeco"), Usinor's North American distributor. At issue is a transaction involving a specialized type of steel called Creusabro 8000 that Usinor manufactured and sold to CMSA through Leeco. CMSA used the steel to fabricate heavy-duty dump truck bodies for Caterpillar which, in turn, sold the trucks to its customers for use in mining operations. Caterpillar alleges that most of the truck beds made with Creusabro 8000 cracked and became unusable, forcing Caterpillar to replace the trucks at great cost to itself and its reputation.

In their eleven-count Complaint, Plaintiffs assert individual claims against each Defendant. Specifically, Plaintiffs charge Usinor with breach of express and implied warranties and failure to deliver conforming goods in violation of the United Nations Convention on Contracts for the International Sale of Goods, opened for signature Apr. 11, 1980, S. TREATY DOC. No. 98-9 (1983), 19 I.L.M. 668, reprinted in 15 U.S.C.A. app. at 332 (West 1998) (hereinafter the "CISG"),1 and the Illinois version of the Uniform Commercial Code ("UCC"), 810 ILCS 5/2-313, 5/2-315 (Counts II and V); promissory estoppel (Counts III and VIII); and violation of French law (Count XI). Plaintiffs charge Usinor USA with promissory estoppel (Counts IV and X) and breach of express and implied warranties in violation of the UCC (Count VII). Finally, Plaintiffs charge Leeco with breach of express and implied warranties and failure to deliver conforming goods in violation of the CISG and the UCC (Counts I and VI), and promissory estoppel (Count IX).

Usinor and Usinor USA together move to dismiss all eight counts asserted against them (Counts II-V, VII, VIII, X, and XI) pursuant to Fed. R. Civ. P. 12(b)(6). Usinor and Usinor USA alternatively move for a more definite statement as to Count XI (the French law claim) under Fed. R. Civ. P. 12(e). Leeco moves separately to dismiss Count VI only, pursuant to the Illinois "Distributor Statute," 735 ILCS 5/2-621. For the following reasons, Defendants' motions are granted in part and denied in part.

A. The Parties

Plaintiff Caterpillar is an Illinois corporation with its principal place of business in Peoria, Illinois. (Compl.¶ 5.) Caterpillar specializes in the manufacture and distribution of heavy equipment, including heavy-duty dump trucks used in mining operations. (Id. ¶ 12.) Caterpillar maintains a plant in Decatur, Illinois, which specializes in manufacturing such trucks. (Id. ¶ 15.) Plaintiffs assert that Caterpillar is well known for its high-quality dump trucks and derives significant competitive advantage from this reputation in the industry. (Id. ¶ 1.)

Plaintiff CMSA, a Mexican corporation with its principal place of business in Monterrey, Mexico, is a subsidiary of Caterpillar. (Id. ¶¶ 2, 6.) CMSA manufactures truck bodies for Caterpillar at its facilities in Mexico. (Id. ¶ 2.) Plaintiffs assert that CMSA was experienced at manufacturing truck bodies for Caterpillar and had a proven track record of producing high-quality truck bodies. (Id.)

Defendant Usinor, a steel manufacturer, is a French corporation with its principal place of business in Cedex, France.3 (Id. ¶¶ 1, 7, 13.) Defendant Usinor USA is a Delaware corporation with its principal place of business in Pennsylvania. (Id. ¶ 8.) Plaintiffs assert that Usinor USA was a wholly owned subsidiary and alter ego of Usinor, and that Usinor USA acted as Usinor's actual agent, at all times relevant to this dispute. (Id.)

Defendant Leeco is an Illinois corporation with its principal place of business in Darien, Illinois. Plaintiffs assert that Leeco is Usinor's exclusive North American distributor, and that Leeco was Usinor's agent at all times relevant to this dispute. (Id. ¶¶ 9, 15.)

B. Creusabro 8000 Steel

In 1998, Usinor and Usinor USA (collectively "the Usinor Defendants") requested a meeting with Caterpillar to present what Caterpillar characterizes as a "sales pitch" for a new type of steel called Creusabro 8000 ("Creusabro"). (Id. ¶ 13.) At a meeting on April 20, 1998 in Decatur, Illinois, and at a similar meeting in Joliet, Illinois,4 the Usinor Defendants claimed that Creusabrowas the "next generation" of steel because it was harder, had a higher yield strength, had better welding characteristics, and could be processed more inexpensively than regular steel. (Id.) Specifically, the Usinor Defendants told Caterpillar that Creusabro steel did not require preheating for welded joints which were less than 50 mm, or two inches, thick. (Id.) This was a significant improvement over the steel Caterpillar was then using, which required preheating for joints thicker than 40 mm. (Id.) The Usinor Defendants also claimed that any of four industry-accepted welding processes would work with Creusabro. (Id. ¶ 31.)

Upon Caterpillar's request following the April 1998 meeting, the Usinor Defendants provided samples of Creusabro, which Caterpillar then tested and determined would perform as the Usinor Defendants had claimed. (Id. ¶ 14.) Plaintiffs assert that the Usinor Defendants promised that the sample was representative of steel they could provide on a high volume basis and that all Creusabro would perform as well as the sample. (Id.)

In the spring of 2000, representatives of the Usinor Defendants met with Caterpillar at Caterpillar's dump-truck plant in Decatur, Illinois. (Id. ¶ 15.) This time, representatives from Leeco, the Usinor Defendants' exclusive North American distributor, attended as well. (Id.) All Defendants made another presentation about the benefits of Creusabro and promised, both orally and in writing, that Creusabro could be welded without preheating in thicknesses up to 50 mm.5 (Id.) Caterpillar informed Defendants that it intended to use Creusabro for truck bodies, and gave the Usinor Defendants and Leeco design specifications for the truck bodies that would be manufactured using Creusabro steel. (Id.)

Caterpillar submitted proposals to its dump truck customers for lighter weight truck bodies that would result from using Creusabro steel. (Id. ¶ 17.) While it planned ultimately to sell the truck bodies, Caterpillar did not plan to manufacture all the truck bodies itself. (Id.) Some would be fabricated by CMSA, its Mexican subsidiary, and some by Western Technology Services International, Inc. ("Westech"), a Wyoming company unrelated to Caterpillar.6 (Id. ¶¶ 2, 17.) Representatives of Leeco and of the Usinor Defendants inspected CMSA's plant in Mexico and assured CMSA that its facilities were appropriate for fabricating truck bodies with Creusabro. (Id. ¶ 18.) Having previously visited Westech's plant as well in May 1999, Leeco and the Usinor Defendants informed Caterpillar that the facilities and processes in place at both CMSA and Westech were appropriate for fabricating truck bodies with Creusabro.7 (Id. ¶ 19.)

After entering into contracts with its customers to sell the lighter weight truck bodies, Caterpillar issued purchase orders to CMSA and Westech for completed truck bodies. CMSA and Westech then issued purchase orders to Leeco for Creusabro steel to be used in fabricating the truck bodies. (Id. ¶¶ 20, 21.) Plaintiffs assert that the Usinor Defendants instructed CMSA and Westech to buy the Creusabro from Leeco. (Id. ¶ 20.)

C. Problems with the Creusabro Steel

CMSA and Westech received their first shipments of Creusabro in 2000.8 (Compl.¶ 21.) Using steel from the first shipment of Creusabro, Westech fabricated eight truck bodies and delivered them to the Bald Mountain mine in Nevada in June 2000. No problems were reported with these trucks. (Id.) Beginning with the next shipment of Creusabro steel, however, Plaintiffs assert that "serious problems with the steel began to occur." (Id. ¶ 22.) Seven truck bodies manufactured by Westech for delivery to the Centralia Mine in Washington in June and July 2000 displayed "hydrogen-induced cracking" in their floors during manufacture and along the side walls once in use. (Id.) In July 2000, four more Westech-made trucks had to be taken out of service from the Chino Mine in New Mexico due to cracks throughout their bodies. (Id. ¶ 23.) The customer9 at the Chino Mine demanded that Caterpillar provide replacement truck bodies using a different kind of steel; Caterpillar did so. (Id.) In September 2000, a Westech-made truck body delivered to Tyrone Mine in New Mexico also displayed cracking, forcing Westech to add horizontal and vertical ribs to reduce flexing and cracking. (Id.)

Truck bodies manufactured by CMSA fared no better. When CMSA delivered nineteen truck bodies to Bagdad Mine in Arizona, hydrogen-induced cracking was present where the shipping brackets were placed, even though CMSA had implemented additional processing measures during...

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