General Elec. Capital v. EQUIFAX SERVICES, 90 C 7076.

Citation797 F. Supp. 1432
Decision Date30 July 1992
Docket NumberNo. 90 C 7076.,90 C 7076.
PartiesGENERAL ELECTRIC CAPITAL, CORP., a New York Corporation, and General Electric Capital Commercial Automotive Finance, Inc., a Delaware Corporation, Plaintiffs, v. EQUIFAX SERVICES, INC., a Georgia Corporation, Defendant.
CourtUnited States District Courts. 7th Circuit. United States District Court (Northern District of Illinois)

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COPYRIGHT MATERIAL OMITTED

Kurt L. Schultz, W. Gordon Dobie, Winston & Strawn, Chicago, Ill., for plaintiffs.

Paul Stephen Turner, Michael C. Cook, Robert Bernard Blasio, David Luther Hartsell, McCullough, Campbell & Lane, Chicago, Ill., for defendant.

MEMORANDUM OPINION AND ORDER

ALESIA, District Judge.

Before the court are the parties' cross-motions for summary judgment. Defendant, Equifax Services, Inc. ("Equifax"), moves for summary judgment on Counts II, III and IV of the complaint and for partial summary judgment limiting plaintiffs' potential recovery on Count I. Plaintiffs, General Electric Capital Corporation ("GECC") and General Electric Capital Commercial Automotive Finance, Inc. ("GECCAF"), have responded to Equifax's motion and have also filed a cross-motion for summary judgment on Count I and requesting an order striking Equifax's First and Fifth Affirmative Defenses. For the reasons discussed below, Equifax's motion for summary judgment on Count II is denied. Equifax's motion for summary judgment on Counts III and IV is granted. Equifax's motion for partial summary judgment on Count I is denied. GECC's motion for partial summary judgment on Count I is granted.1

I. FACTS2

GECC is a New York corporation in the business of financing durable goods and other assets, including automobile inventory for dealers throughout the United States. GECC provides a line of credit to dealerships, which allows the dealership to purchase automobiles from the manufacturer and place them in a showroom for sale. As each automobile is sold, the dealer remits the outstanding balance for that vehicle to GECC. This arrangement is commonly known as "floor plan financing."

GECCAF is a Delaware corporation in the business of providing credit to automobile dealers for the purpose of purchasing motor vehicle inventories. On June 1, 1989, GECC acquired the outstanding stock and assets of Transamerica Automotive Finance Corporation ("Transamerica") from Transamerica Commercial Finance Corporation, I. GECC changed Transamerica's name to General Electric Capital Commercial Automotive Finance, Inc.

Equifax is a Georgia corporation in the business of providing floor plan financing services and business information to lenders for inventory control and collection purposes.3 GECC and Equifax entered into a contract in 1986,4 under which Equifax would provide inspection services in connection with GECC's automobile dealer financing business. Under the contract, Equifax was to inspect automobile inventories by means of a visual examination of the vehicles. If a vehicle could not be visually examined, Equifax was to check the "Manufacturers Statement of Origin" to verify that the vehicle was part of the dealer's inventory.

As part of GECC's acquisition of Transamerica, GECC requested Equifax to conduct a floor plan inspection at Dabelow Pontiac-Buick, Inc. (the "Dabelow dealership"), located in Cannon Falls, Minnesota. The Dabelow dealership was part of the Transamerica loan portfolio which GECC was acquiring. As part of the acquisition agreement between GECC and Transamerica, GECC had 30 days in which to inspect the loan portfolio. On June 23, 1989, Equifax's field representative, Roger E. Knudtson, visited the Dabelow dealership and conducted a floor plan inspection. A written report details the results of that inspection.5 Knudtson's inspection is at the heart of this lawsuit. GECC and GECCAF contend that Knudtson misreported a number of vehicles in his inspection report. On September 26, 1989, GECC made a written claim against Equifax regarding the accuracy of the Dabelow Pontiac floor plan inspection. In that letter, GECC complained that "nine vehicles, nearly $130,000 in inventory, were possibly sold and delivered prior to the June inspection and not reported on the Equifax inspection."6

GECC and GECCAF filed a complaint as a result of the above described inspection. In Count I of the complaint, GECC alleges that Equifax breached its contract with GECC by failing to conduct an adequate inspection of the Dabelow dealership on June 23, 1989. In Count II, GECC alleges that Equifax was negligent in providing business information and conducting the inventory inspection at the Dabelow dealership. In Count III, GECCAF alleges it is a third party beneficiary of the contract between Equifax and GECC, and thus, GECCAF is entitled to recover against Equifax for Equifax's alleged breach. In Count IV, GECCAF avers that it has been injured by reason of Equifax's allegedly negligent inspection of the Dabelow dealership.

Equifax answered and asserted five Affirmative Defenses. Only the First and Fifth Affirmative Defenses are relevant to the motions pending. Equifax's First Affirmative Defense states that Counts II and IV, the negligence counts of the complaint, fail to state a claim, as Equifax owes no independent, extra-contractual duty to either GECC or GECCAF. In addition, Equifax's First Affirmative Defense states that Counts II and IV, further fail to state a claim because GECC and GECCAF are not entitled to collect for economic losses arising out of tort. Equifax's Fifth Affirmative Defense states that to the extent that Equifax has any liability with respect to the accuracy of the Dabelow floor plan inspection, that liability is limited. Equifax asserts that paragraph four of the GECC-Equifax contract limits plaintiffs' measure of damages to the remaining balance on the nine automobiles involved, plus interest.

Equifax has moved for summary judgment in its favor and against plaintiffs on Counts II, III, and IV of the complaint and for partial summary judgment limiting plaintiff's recovery on Count I to $128,878. GECC and GECCAF responded by moving for an order granting partial summary judgment in their favor and striking Equifax's First Affirmative Defense and Fifth Affirmative Defense.

II. DISCUSSION
A. Standard of Review

A motion for summary judgment must be granted if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." FED.R.CIV.P. 56(c). A party opposing a motion for summary judgment must set forth specific facts showing that there is a genuine issue for trial. Celotex Corp. v. Catrett, 477 U.S. 317, 324, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986); Schroeder v. Lufthansa German Airlines, 875 F.2d 613, 620 (7th Cir.1989). A genuine issue of material fact exists only where there is sufficient evidence favoring the non-moving party to support a jury verdict for that party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-50, 106 S.Ct. 2505, 2510-11, 91 L.Ed.2d 202 (1986). All reasonable factual inferences must be viewed in favor of the non-moving party. Holland v. Jefferson Nat'l. Life Ins. Co., 883 F.2d 1307, 1312 (7th Cir.1989). If the evidence presented by the non-movant is merely colorable or is not sufficiently probative, summary judgment is appropriate. Wolf v. Fitchburg, 870 F.2d 1327, 1330 (7th Cir.1989).

B. Equifax's Motion for Summary Judgment

In seeking to narrow the issues of this case, Equifax's motion for summary judgment states that this case is a straightforward breach of contract claim. Unfortunately for Equifax, it is not. First, Equifax maintains that GECC may not maintain a negligence action against it for two reasons: (1) Equifax owes no extra-contractual tort duty to GECC and (2) GECC may not recover against Equifax in tort for purely economic damages. Hence, Equifax concludes judgment must be entered in its favor on Count II of the complaint. Next, Equifax argues that GECCAF is not a third-party beneficiary of the contract between GECC and Equifax. Equifax concludes, therefore, that judgment must be entered in its favor on Counts III and IV of GECCAF's complaint since GECCAF is not a proper party to the suit. Last, Equifax claims that even if it is held to be liable to GECC and GECCAF, a specific provision of the contract between the parties limits Equifax's liability to the outstanding balance on the allegedly misreported vehicles.

1. Count II — Equifax's Tort Liability to GECC

Equifax asserts in its First Affirmative Defense that Count II, the negligence count, fails to state a claim because Equifax owes no independent, extra-contractual duty to GECC. In addition, Equifax asserts that Count II also fails to state a claim because GECC is not entitled to collect for economic losses arising out of tort. We address each issue separately.7

a. Equifax's assertion that it owes no duty to GECC

According to Equifax, a claim for negligent misrepresentation must be supported by an independent, extra-contractual duty. The existence of a legal duty is a question of law to be determined by the court. Roe v. Catholic Charities of the Diocese of Springfield, 225 Ill.App.3d 519, 167 Ill.Dec. 713, 722, 588 N.E.2d 354, 363 (1992); cf. Garris v. Schwartz, 551 F.2d 156, 162 (7th Cir.1977). Equifax's argument raises a complicated issue involving the interrelationship between Illinois' Moorman doctrine on economic loss and the tort of negligent misrepresentation by one in the business of providing information to others. Moorman Mfg. Co. v. National Tank Co., 91 Ill.2d 69, 61 Ill.Dec. 746, 435 N.E.2d 443 (1982). Adding to the intricacy of the issue is the apparent conflict among several courts as to whether a duty independent of a contract is necessary to maintain an action for negligent misrepresentation between contracting parties.

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