KFC Corp. v. Iron Horse of Metairie Rd., LLC
| Decision Date | 10 July 2020 |
| Docket Number | No. 18 C 5294,18 C 5294 |
| Parties | KFC Corporation, Plaintiff, v. IRON HORSE OF METAIRIE ROAD, LLC and IRON ROOSTER, LLC, Defendants. PROFESSIONAL SERVICE INDUSTRIES, INC., Third-Party Defendant. |
| Court | U.S. District Court — Northern District of Illinois |
MEMORANDUM OPINION AND ORDER
Iron Horse of Metairie Road, LLC and Iron Rooster, LLC (together "Iron Rooster") bring a Second Amended Complaint against third-party defendant, Professional Service Industries, Inc. ("PSI"), alleging various breach of contract and tort claims related to the environmental remediation of 702 Metairie Road in Metairie, Louisiana. PSI has moved to dismiss under Federal Rule of Civil Procedure 12(b)(6) and for partial summary judgment under Rule 56(a). PSI has also moved to strike, pursuant to Rule 56(c)(4), an exhibit submitted by Iron Rooster. For the reasons set forth below, PSI's motion to dismiss is denied, its motion to strike is denied in large part and granted in part, and its partial motion for summary judgment is granted in part and denied in part.
The Court addresses PSI's motion to dismiss before turning to the motion to strike and the motion for summary judgment. In considering the motion to dismiss, the Court accepts the well pleaded facts in Iron Rooster's first amended complaint as true and draws all permissible inferences in favor of the plaintiff. Agnew v. NCAA, 683 F.3d 328, 334 (7th Cir. 2012).
Before KFC Corporation ("KFC") sold fried chicken at 702 Metairie Road, the property was home to a dry-cleaning business. Sec. Am. Compl. ¶ 2, ECF No. 194. This piece of history matters because, as it happens, cleaning clothes involved dirtying the soil. It remains unclear who unearthed the fact of contamination, but in the early 2000s KFC hired PSI, an environmental consulting firm, to investigate the extent of the pollution and facilitate remediation. Id. ¶ 14. To do so, PSI worked alongside the Louisiana Department of Environmental Quality (LDEQ), and in 2005, LDEQ accepted a Voluntary Remedial Action Plan (the "2005 VRAP") that PSI submitted on behalf of KFC. Id. ¶ 15. The plan called for "in-situ chemical oxidation" and "multi-phase extraction" as the primary methods of remediation. Id. ¶ 11.
Roughly eight years later, in September 2013, KFC and Iron Rooster entered into a purchase agreement by which Iron Rooster would buy the property. Id. ¶ 10. The purchase agreement provided for a due diligence period so that Iron Rooster could, among other things, investigate the environmental condition of the property. Id. ¶ 12. KFC directed Iron Rooster to obtain information about the status of remediation from KFC's Environmental Programs Manager, Julie Reese. Id. ¶ 18. Reese, however, didn't provide the desired information and prevented Iron Rooster from discussing the remediation of the property with other KFC employees. Id. ¶ 19. Instead, Reese directed Iron Rooster to communicate with PSI, which was still under contract with KFC at the time (the KFC-PSI contract). Id. Despite KFC's instruction to treat Iron Rooster like a client, Id. ¶ 20, PSI painted an unduly rosy picture of the status of remediation. PSI did not disclose that the multiphase extraction system—one of the two primary components of the 2005 VRAP—had become inoperable in 2012. Id. ¶ 28. PSI also failed to disclose that it had never "fully delineated the containment plume" that was to be addressed in the 2005 VRAP or "definitivelydetermined the direction of groundwater flow" at the site. Id. ¶ 26. PSI also omitted that it had met with LDEQ in October 2013 to discuss the stalled remediation on the property. Id. ¶ 22. To the contrary, PSI assured Iron Rooster that remediation was "virtually complete." Id. ¶ 30. PSI claimed that "LDEQ would approve a new VRAP under which the sole remaining remediation would consist of the installation of a cap on a portion of the Property"—a project that, as of January 2014, PSI represented would cost $8,000-$10,000. Id. ¶¶ 32-33. To substantiate these projections, PSI provided Iron Rooster a proposal for the new VRAP (the "2014 VRAP proposal") on February 13, 2014—the day before the scheduled sale. Id. ¶ 35. Relying on PSI's representations, Iron Rooster agreed to purchase the property and the sale closed on February 14, 2014. Id. ¶ 40. As part of the sale, Iron Rooster and KFC signed an Assignment, Assumption and Indemnity Agreement, under which KFC assigned to Iron Rooster all of KFC's rights under the 2005 VRAP and KFC's contract with PSI. Id. ¶ 43.
Even after the sale and the assignment of the KFC-PSI contract, however, PSI failed to tell Iron Rooster about the defunct extraction system, the un-delineated containment plume, and the lack of clarity around the flow of water underneath the site. Id. ¶ 46. Still unaware of these problems, Iron Rooster engaged PSI to implement the 2014 VRAP proposal and obtain a certificate of completion from LDEQ—a relationship that Iron Rooster characterizes as being "[p]ursuant to the PSI contract, and pursuant to written and oral agreements to extend, modify and/or amend the PSI contract." Id. ¶ 45. The first step, according to PSI, was to conduct further confirmatory sampling to verify the likelihood of success of the solution contemplated by the 2014 VRAP proposal—a concrete cap on the portion of the property that still had excess levels of contaminants. Id. ¶ 49. Accordingly, on March 14, 2014, PSI presented Iron Rooster with a proposal to provide this soil sampling, which Iron Rooster authorized (the "March 2014 post-sale agreement"). Id.¶ 51. A few months later, on June 14, 2014, PSI provided a second proposal, which Iron Rooster also authorized (the "June 2014 post-sale agreement"). Id. ¶ 54.1 In the second proposal, PSI committed to prepare and obtain a new VRAP in line with the 2014 VRAP proposal and satisfy the remediation requirements for "obtaining a Certification of Completion under Partial VRP." Id. ¶ 55. Roughly nine months later, in March 2015, PSI submitted a new VRAP application. Id. ¶ 59. LDEQ informed PSI, however, that it could not accept the March 2015 application because KFC's 2005 VRAP remained in place. Id. ¶ 50. PSI assured Iron Rooster that it would obtain KFC's cooperation in submitting the March 2015 VRAP. Id. ¶ 62. PSI presented the VRAP application to KFC and requested that KFC withdraw its 2005 VRAP, but KFC refused to withdraw the prior VRAP, instead requesting to be a co-applicant on the new application. Id. ¶¶ 63-64. PSI revised and resubmitted the VRAP application with KFC's name attached, but the new application ran into the same problem: even as a co-applicant, KFC refused to withdraw the 2005 VRAP. Id. ¶¶ 65-66. Although the record is not clear as to why KFC took this position, Iron Rooster attributes the refusal to the fact that the new VRAP application did not provide for remediation of an adjacent parcel. Id. ¶ 67.
In response to these difficulties, PSI sent Iron Rooster a third proposal in May 2015, which provided for further sampling—this time including the adjoining property. Id. ¶ 71. PSI represented that the off-site sampling was necessary to address LDEQ's concerns. Id. ¶ 74. On June 29, 2015, PSI submitted a revised version of the third proposal, which Iron Rooster authorized (the "June 2015 post-sale agreement"). Id. ¶¶ 72-73. And as late as May 2016, PSI submitted offsite sampling results to LDEQ pursuant to this agreement. Id. ¶ 77.
Soon thereafter, however, the relationship between PSI and Iron Rooster soured. On June 6, LDEQ issued a notice to KFC that LDEQ would require additional offsite investigation and testing under the 2005 VRAP, and that, as sole applicant for the 2005 VRAP, KFC would be responsible for the additional testing. Id. ¶¶ 78, 82. KFC engaged its previous partner PSI to perform this investigation and, in June 2016, PSI—without prior warning or written notice—ceased all work for Iron Rooster. Id. ¶¶ 79, 84. Then, in October 2016, PSI ceased communications with Iron Rooster, a development that Iron Rooster attributes to a request of KFC. Id. ¶ 89. Nonetheless, roughly a year later PSI undertook further sampling and analysis to determine the extent of contamination on the property and the neighboring property. Id. ¶ 96. Following the analysis, PSI did not provide timely results from those samples to Iron Rooster and still has not produced all the requested results. Id. ¶ 97. Despite the lack of communication, on January 30, 2018, PSI submitted an invoice to Iron Rooster for $25,881.20 to cover the most recent sampling. Id. ¶ 98.
In December 2016, KFC filed suit against Iron Rooster in the Eastern District of Louisiana alleging breach of contract under the February 2014 purchase and assignment agreements for failure to complete the remediation required by the 2005 VRAP. Iron Rooster filed a third-party complaint against PSI, asserting breach of contract,2 detrimental reliance, negligent and fraudulent misrepresentations and omissions, and a claim for attorney's fees, costs, and expenses. PSI moved to have the complaint transferred to this Court in accordance with the forum selection clause (PSI is based in Chicago) contained in the post-sale agreements. On June 30, 2018, Judge Vance granted PSI's motion and transferred the third-party complaint to this Court pursuant to 28 U.S.C.§ 1404(a), which permits a court to transfer a case to any venue to which "all parties have consented." See also Atl. Marine Const. Co. v. U.S. Dist. Court for W. Dist. of Texas, 571 U.S. 49, 59 (2013) (). The litigation between KFC and Iron Rooster has since settled.
To survive a motion to dismiss under Rule 12(b)(6) for failure to state a claim upon which relief can be granted, a complaint must "contain sufficient factual...
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