Ogden Martin Systems of Indianapolis, Inc. v. Whiting Corp.

• Citation: 179 F.3d 523
• Decision Date: 21 May 1999
• Docket Number: No. 98-2120,98-2120
• Parties: OGDEN MARTIN SYSTEMS OF INDIANAPOLIS, INC., Plaintiff-Appellant, v. WHITING CORP., Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

179 F.3d 523

OGDEN MARTIN SYSTEMS OF INDIANAPOLIS, INC., Plaintiff-Appellant, v. WHITING CORP., Defendant-Appellee.

No. 98-2120.

United States Court of Appeals Seventh Circuit.

Argued Jan. 20, 1999.

Decided May 21, 1999.

Ronald H. Balson (argued), Kadish & Associates, Chicago, IL, for Plaintiff-Appellant.

Stephen C. Schulte, Stephen V. D'Amore (argued), Winston & Strawn, Chicago, IL, for Defendant-Appellee.

Before COFFEY, RIPPLE, and KANNE, Circuit Judges.

KANNE, Circuit Judge.

Ogden Martin Systems of Indianapolis, Inc., an Indiana corporation, filed suit in federal district court against Whiting Corporation, a Delaware corporation with its principal place of business in Illinois, properly alleging diversity jurisdiction and claiming that Whiting breached a contract to supply two overhead cranes. Whiting moved to dismiss based on its belief that the contract was a transaction involving the sale of goods and, therefore, the suit was time barred because Ogden Martin did not file it within the applicable statute of limitations under Indiana's Uniform Commercial Code ("UCC"). The district court granted this motion and dismissed Ogden Martin's suit. Because we agree that Ogden Martin's suit was not filed within the applicable statute of limitations, we affirm.

I. History

On September 15, 1986, Ogden Martin and Whiting entered into a contract in which Whiting agreed to construct, deliver, and assemble two solid waste handling cranes and operating systems. The total contract price was $924,405. According to the terms of the contract, Ogden Martin owed Whiting $915,100 for two "13.5 Ton Solid Waste Refuse Cranes" with various options and $9,305 for four two-day "Service Engineer Site Visits" conducted during the first year of the contract. Ogden Martin alleges that Whiting constructed the cranes as a permanent improvement to its real property. In contrast, Whiting contends that the contract was a transaction in goods and, thus, governed by Indiana's UCC.

The parties' contract specified that Whiting would deliver the equipment and materials identified in the contract to Ogden Martin's plant by April 30, 1997. According to Ogden Martin's complaint, Whiting completed delivery and installation of the two overhead cranes by August 1988. On July 2, 1991, an accident at Ogden Martin's plant revealed material and latent defects in the construction of the cranes. Inspection of the cranes allegedly disclosed that Whiting failed to comply with construction specifications. This failure resulted in substantial damage to Ogden Martin's plant, necessitating massive reconstruction. Ogden Martin admits it learned of Whiting's deficient performance at the time of the accident. In 1993, Ogden Martin discovered additional damage to the girders, and a study conducted in 1996 revealed that it was necessary to replace the girders.

Ogden Martin filed suit in federal district court on June 27, 1997, alleging that Whiting breached the parties' contract. Whiting filed a motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, claiming that the four year statute of limitations for transactions involving the sale of goods as set forth in Indiana's UCC barred Ogden Martin's suit. Ogden Martin opposed this motion based on its twofold contention that (1) the construction of the cranes was an improvement to real property and not a transaction in goods and (2) Whiting should be judicially estopped from asserting that the contract was a transaction in goods because of a supposedly contradictory position Whiting had taken in a previous lawsuit.

The district court rejected Ogden Martin's estoppel argument and concluded that the contract at issue did, in fact, constitute a transaction in goods under the UCC. Based on this conclusion, the court applied the UCC's four year statute of limitations for suits arising from such transactions. The court granted Whiting's motion to dismiss because Ogden Martin's cause of action for breach of contract accrued no later than July 2, 1991, when Ogden Martin did or should have discovered the alleged breaches, and Ogden Martin did not commence its suit until June 27, 1997--nearly six years later and well outside the four year statute of limitations period.

II. Analysis

Ogden Martin argues on appeal that the district court's decision granting Whiting's motion to dismiss warrants reversal on two grounds. First, Ogden Martin contends that Whiting should have been judicially estopped from asserting that the contract between the parties constituted a transaction involving the sale of goods. Second, Ogden Martin submits that the district court erred in concluding that the contract constituted a transaction involving the sale of goods. Ogden Martin claims that the cause of action resulted from an injury sustained as a result of an improvement to real property and, therefore, the suit was timely filed under the six year statute of limitations applicable to this type of action.

A. Standard of Review

In the proceedings before the district court, Whiting moved to dismiss Ogden Martin's complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. Such a motion challenges the sufficiency of the complaint for failure to state a claim upon which relief may be granted. See Fed.R.Civ.P. 12(b)(6). "[A] complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). We review a district court's grant of a motion pursuant to Rule 12(b)(6) de novo, accepting all of the well-pleaded allegations in the complaint as true and drawing all reasonable inferences in favor of the plaintiff. See Hi-Lite Prods. Co. v. American Home Prods. Corp., 11 F.3d 1402, 1405 (7th Cir.1993).

B. Judicial Estoppel

Central to the success of Whiting's motion to dismiss before the district court was Whiting's ability to advance the argument that the contract between Ogden Martin and Whiting was a transaction in goods and, therefore, subject to the UCC's four year statute of limitations for causes of action arising from such transactions. Ogden Martin contends that the doctrine of judicial estoppel should have barred Whiting from asserting this position in the present case.

The doctrine of judicial estoppel is an equitable concept "provid[ing] that a party who prevails on one ground in a lawsuit cannot turn around and in another lawsuit repudiate the ground." McNamara v. City of Chicago, 138 F.3d 1219, 1225 (7th Cir.), cert. denied, --- U.S. ----, 119 S.Ct. 444, 142 L.Ed.2d 398 (1998); see also Chaveriat v. Williams Pipe Line Co., 11 F.3d 1420, 1427 (7th Cir.1993) ("A litigant is forbidden to obtain a victory on one ground and then repudiate that ground in a different case in order to win a second victory."). Judicial estoppel serves "to protect the courts from being manipulated by chameleonic litigants who seek to prevail, twice, on opposite theories." Levinson v. United States, 969 F.2d 260, 264 (7th Cir.1992); see also Ladd v. ITT Corp., 148 F.3d 753, 756 (7th Cir.1998) ("[T]he purpose of the doctrine ... is to reduce fraud in the legal process by forcing a modicum of consistency on a repeating litigant."). Although there is no precise formula guiding the application of this doctrine, we have identified certain prerequisites to its application: (1) the later position must be clearly inconsistent with the earlier position; (2) the facts at issue should be the same in both cases; and (3) the party to be estopped must have convinced the first court to adopt its position. See Levinson, 969 F.2d at 264-65. ¹

Ogden Martin bases its judicial estoppel argument on its belief that Whiting's characterization of the contract in the present case as a contract involving a transaction in goods is inconsistent with the position taken by Whiting in a prior unrelated lawsuit. See Witham v. Whiting Corp., 975 F.2d 1342 (7th Cir.1992). In Witham, a plaintiff was injured at the plant at which he was employed, Allied Structural Steel Company ("Allied"), when he was struck by a girder attached to a crane Whiting manufactured. An important factual distinction between Witham and the present case is that the contract in Witham did not require Whiting to install the crane at Allied's plant. Rather, Allied contracted with Chicago Steel Erectors, a third party, for the installation of the crane it purchased from Whiting. The plaintiff filed suit against Whiting, relying on various negligence theories. Whiting moved for summary judgment, arguing that the plaintiff's suit was not filed within the Illinois ten year statute of repose for actions based on contract or tort arising from improvements to real property. The district court granted Whiting's motion for summary judgment, and we affirmed.

Ogden Martin submits that Whiting's argument in Witham precludes Whiting from arguing that the contract in the present case for the manufacture and installation of two overhead cranes was a contract involving a transaction in goods. We disagree. "[T]his court has generally considered the applicability of the doctrine [of judicial estoppel] only when there are successive litigations arising from the same factual circumstance." Ezekiel v. Michel, 66 F.3d 894, 904 (7th Cir.1995). This case is not a successive suit. And, while judicial estoppel is not strictly limited to such suits, see Continental Illinois Corp. v. Commissioner, 998 F.2d 513, 518 (7th Cir.1993), Ogden Martin makes no showing that Whiting's position in the present case is clearly inconsistent with its position in Witham.

The sole issue before the court in Witham was whether the plaintiff's personal injury action was barred by Illinois' ten year statute of repose governing injuries arising from improvements to real property. In Witham, Whiting argued that at the time the...