Kellers Systems v. Transport Intern. Pool
| Decision Date | 21 November 2001 |
| Docket Number | No. 01 C 0989.,01 C 0989. |
| Parties | KELLERS SYSTEMS, INC., a New York corporation, Plaintiff, v. TRANSPORT INTERNATIONAL POOL, INC., a Pennsylvania corporation, Defendant. Transport International Pool, Inc., a Pennsylvania corporation, Counterplaintiff, v. Kellers Systems, Inc., a New York corporation, and Doubledown Stables, Inc., an Illinois corporation, Counterdefendants. |
| Court | U.S. District Court — Northern District of Illinois |
Ronald Hanley Balson, Kelly Deann Hales, Carrie A. Hall, Hill, Gilstrap & Balson, Chicago, IL, for plaintiffs.
Alexander Terras, Wilson & McIlvaine, Timothy Scott Harris, Quarles & Brady LLC, Chicago, IL, for defendant.
Plaintiff/Counter-defendant Kellers Systems, Inc. (Kellers) sued Defendant/Counter-plaintiff Transport International Pool, Inc.'s (TIP) in the Circuit Court of Cook County, Illinois alleging breach of contract and conversion and seeking specific performance of a contract. TIP removed the case to this court pursuant to 28 U.S.C. § 1446, and filed an answer and a two-count counterclaim alleging a breach of the same contract by Kellers. The counterclaim also added Doubledown Stables, Inc.'s (Doubledown) as a counter-defendant, alleging that Doubledown is essentially the alter-ego of Kellers and seeking to hold Doubledown responsible for Kellers's alleged breach of contract. Kellers and Doubledown have moved this court to dismiss TIP's counter-claims pursuant to Fed.R.Civ.P. 12(b)(6). For the following reasons, Kellers and Doubledown's Motion to Dismiss is granted in part and denied in part.
At the heart of this case are between 274 to 331 apparently missing or unavailable semi-trailers and the subsequent responsibilities for their recovery.1 Kellers, a New York corporation with its principal place of business in Chicago, Illinois, leases tractor-trailers. TIP is a Pennsylvania Corporation engaged in the business of renting, servicing and leasing semi-trailers in Illinois and throughout the United States. Doubledown is an Illinois corporation with its principal place of business in Illinois.
On December 9, 1997, Kellers and TIP entered into an Asset Purchase Agreement pursuant to which TIP would buy Kellers's assets in its semi-trailer leasing business. The December 9 agreement, together with four subsequent amendments, constitutes the entirety of the asset purchase agreement (the "Agreement"). The parties agreed that Pennsylvania law would govern the "validity, performance, and enforcement" of the Agreement.2 Additionally, the parties agreed that some of Kellers's assets, specifically certain semi-trailer units that were apparently missing or unavailable due to customer disputes between Kellers and its lessees, would remain excluded from the December 9 sale. The parties termed these missing or unavailable units as the "Managed Units," and agreed that both Kellers and TIP would assume certain responsibilities with respect to these semi-trailers. Paragraph 2.5(c) of Amendment 3 to the Agreement and Paragraph 3 of Amendment 4 to the Agreement encompass the parties' obligation with respect the "Managed Units." Paragraph 2.5(c), in relevant part, states:
Buyer [TIP] agrees to manage the accounts for each such excluded Unit, including without limitation monitoring insurance certificates, billing in the ordinary course, and forwarding all payments received on account of each such unit directly to Seller [Kellers]. In respect to each lease, Seller shall take whatever action Seller deems appropriate to terminate the lease, conclude the lease, and recover the Unit or allow the lease to complete its term. When and as Seller recovers each Unit, Seller shall deliver the Unit to Buyer. Buyer shall thereupon pay the Seller the fair market value for such Unit.
Paragraph 3 of Amendment 4 provides:
For each of the Managed Units (those identified under paragraph 2.5(c) as amended in Amendment No. 3), Seller [Kellers] agrees to immediately send notice to each of the lessees advising each such lessee that the respective lease is terminated at the end of the minimum term and the Units are to be immediately returned to a TIP branch location. TIP shall draft the letter, to KELLERS' satisfaction, and shall provide the branch location for each such return. If any lessee fails to return such Units as directed, KELLERS will take such action as is reasonably necessary to pursue the prompt recovery of such Units. [Emphasis added]
As evidenced by the present litigation, the "Managed Units" were never recovered or presented for sale pursuant to the Agreement. Kellers sued TIP, arguing that TIP failed to perform its obligations to manage the accounts of the "managed units," that TIP held possession of the titles to the missing units, and that TIP's actions precluded Kellers from recovering the missing units.3 TIP counter-claimed, alleging a breach of contract on Kellers's part, claiming that Kellers failed to "take such action as is reasonably necessary to pursue the prompt recovery of such Units" under paragraph 3 of Amendment 4. TIP also alleges that Kellers breached the agreement by filing suit against TIP, and seeks recovery pursuant to the indemnification provisions provided in the Agreement. Finally, TIP alleges a veil-piercing claim against Doubledown, claiming that Doubledown commingled funds with Kellers and hence should be held liable for any damages to TIP as the result of Kellers's alleged breach of contract.4
In reviewing a motion to dismiss, the court does not address the merits of the counter-claim, but merely tests the sufficiency of the pleading. Deberry v. Sherman Hospital Ass'n, 741 F.Supp. 1302, 1303 (N.D.Ill.1990). Under the federal notice pleading standards, all well-pleaded allegations are construed liberally, and dismissal is proper only where the claimant can prove no set of facts to support the allegations. Conley v. Gibson, 355 U.S. 41, 46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). All well-pleaded facts are taken as true and the claimant is entitled to all reasonable inferences therefrom. Ed Miniat, Inc. v. Globe Life Ins. Group, Inc., 805 F.2d 732, 733 (7th Cir.1986). Consequently, a complaint does not fail due to either vagueness or lack of detail. Strauss v. City of Chicago, 760 F.2d 765 (7th Cir. 1985).
Count I of TIP's counter-claim alleges breach of contract on Kellers's part. First, TIP alleges that Kellers breached the agreement by failing "to take such action as is reasonably necessary to pursue the recovery of the managed units," and that Kellers' failure to recover the Managed Units abrogates TIP's obligation to purchase those units. Essentially, TIP argues that its obligation to purchase has not accrued due to Kellers's failure to perform.5 Kellers asserts that TIP has not alleged any damages, other than the costs of litigation, due to Kellers' claimed breach. Thus, Kellers argues the breach of contract claim should be dismissed.
To state a claim for breach of contract against Kellers, TIP must allege the following: (1) the existence of a valid contract; (2) TIP complied with the Agreement and performed its obligations; (3) Kellers breached the Agreement; and (4) Kellers' breach has damaged TIP. See Pierce v. Montgomery County Opportunity Board, Inc., 884 F.Supp. 965, 970 (E.D.Pa.1995). Under the liberal notice pleading standards of Rule 8(a), TIP need assert only a "short and plain statement" as to the elements of the breach of contract claim. Fed.R.Civ.P. 8(a); See Ryan v. Mary Immaculate Queen Ctr., 188 F.3d 857, 860 (7th Cir.1999).
Neither Kellers nor TIP dispute the existence of a valid and binding contract. TIP has alleged that Kellers breached the Agreement by failing "to take such action as is reasonably necessary to pursue the recovery of the Managed Units." TIP requests that the court enter judgment for money damages due to Kellers's breach of the Agreement. While TIP's complaint does not specifically detail the damages due to Kellers's failure to recover the missing units, on a motion to dismiss the court must afford all reasonable inferences in favor of the claimant. See Ed Miniat, Inc., 805 F.2d at 733. Dismissal is proper only where the claimant can prove no set of facts to support the claim. See Conley, 355 U.S. at 46, 78 S.Ct. 99. The court finds that TIP has at least provided sufficient notice to Kellers of a breach of contract claim. TIP's request for damages is not solely limited to indemnification.6 In any event, TIP has stated a claim for breach of contract. Therefore, Kellers' motion to dismiss TIP's counter-claim, with respect to the allegation that Kellers failed to take reasonable action to recover the missing units, is denied.
Second, Count I of TIP's counterclaim asserts a breach of contract by Kellers based on the indemnification provisions of the Agreement. TIP claims that Kellers breached the Agreement "through its filing of the Complaint." Consequently, TIP seeks indemnification for the attorney's fees, costs, and expenses of defending the lawsuit. Essentially, TIP claims the indemnification provisions of the contract provide for fee-shifting in lawsuits between the two parties to the Agreement. Kellers argues the indemnification provisions of the contract apply to third-party claims only. The issue is whether the indemnification provisions of the Agreement extend to a lawsuit filed by one party to the Agreement against the other. Based upon the parties' choice of law provision in the Agreement, Pennsylvania law governs the construction of the indemnification agreement.
Courts construe indemnification provisions strictly and interpret their application "against the party seeking their protection." Lackie v. Niagara Machine and Tool Works, 559 F.Supp. 377, 378 (E.D.Pa.1983) citing Dilks v. Flohr Chevrolet, 411 Pa. 425, 192...
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