Paper Mfrs. Co. v. Rescuers, Inc.

Decision Date19 August 1999
Docket NumberNo. 3:97 CV 582 AS.,3:97 CV 582 AS.
Citation60 F.Supp.2d 869
PartiesPAPER MANUFACTURERS COMPANY, Plaintiff, v. RESCUERS, INC., f/k/a Arcar Graphics, Inc., Defendant.
CourtU.S. District Court — Northern District of Indiana

Edward A Sullivan, III, Baker and Daniels, South Bend, IN, Albert J Dahm, Baker and Daniels, Fort Wayne, IN, for Zimmer, Inc.

Philip E. Kalamaros, Timothy J. Maher, Edward N. Kalamaros & Associates, South Bend, IN, Edward N Kalamaros & Associates, South Bend, IN, for Paper Manufacturers Company, Perfecseal — A Bemis Company, Bemis Company, Inc.

Don G. Blackmond, Don G. Blackmond, Jr., Doran Blackmond Ready Hamilton and Williams, South Bend, IN, for Rescuers Inc.


ALLEN SHARP, District Judge.

This cause is before the Court on Defendant's, Rescuers, Inc. (Rescuers), Motion for Summary Judgment. The issues have been fully briefed and this Court has considered same.


Jurisdiction is proper pursuant to 28 U.S.C. § 1332 as the parties are citizens of different states and the amount in controversy exceeds the required amount.


The initial cause of action in this case arose between plaintiff Zimmer, Inc. (Zimmer), a Delaware corporation having its principal place of business in Warsaw, Indiana, and Paper Manufacturers Company (PMC), a Pennsylvania corporation with its principle place of business in Philadelphia, Pennsylvania. Zimmer produces and sells various medical products, one of which is a bone cement powder that is used in orthopedic implant procedures. Sometime in 1994, Zimmer contracted with PMC for it to manufacture packages for this bone cement powder. Allegedly, PMC was aware of the need for sterility due to the end use of the bone cement powder.

Sometime in mid 1994, PMC began purchasing ink from Rescuers (formerly ARCAR Graphics) to use for printing on the pouches it was manufacturing for Zimmer.1 PMC began shipping pouches to Zimmer in December, 1994. In April 1995, Zimmer discovered that some of the packages provided by PMC were defective and caused contamination of the bone cement product. Contamination occurred when the packages failed to seal properly and when a chemical in the ink seeped into the bone cement. Zimmer had to recall all of its product and initiated suit against PMC. PMC filed a third-party complaint against its ink supplier. PMC alleged that a chemical "anti-scuff" agent in Rescuers' ink caused the defect and contamination of Zimmer's bone cement and therefore, Rescuers was liable in negligence, strict liability and for breach of contract.

Zimmer and PMC settled their dispute with the assistance of Magistrate Judge Cosby and the original action was dismissed with prejudice on March 17, 1999. Upon consent of the remaining parties, on March 23, 1999, the third-party claim was transferred to Magistrate Judge Robin Pierce for final disposition. Rescuers filed its motion for summary judgment on March 1, 1999 and the Magistrate was working with the parties to resolve the case. Due to Judge Pierce's unexpected death on July 5, 1999, the action was returned to this Court which now addresses third-party defendant's motion.


Summary judgment is proper if the pleadings, depositions, answers to interrogatories and admissions on file, together with any affidavits, show that there exists no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed. R.Civ.P. 56; Russo v. Health, Welfare & Pension Fund, Local 705, 984 F.2d 762 (7th Cir.1993). A thorough discussion of Rule 56 can be found in a trilogy of cases decided in 1986 by the Supreme Court of the United States.2 See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Celotex addressed the initial burdens of the parties under Rule 56, and Anderson addressed the standards under which the record is to be analyzed within the structure of Rule 56.

The initial burden is on the moving party to demonstrate, "with or without supporting affidavits," the absence of a genuine issue of material fact and that judgment as a matter of law should be granted in the moving party's favor. Celotex, 477 U.S. at 324, 106 S.Ct. 2548 (quoting Fed.R.Civ.P. 56). A question of material fact is a question which will be outcome determinative of an issue in the case. The Supreme Court has instructed that the facts material in a specific case shall be determined by the substantive law controlling the given case or issue. Anderson, 477 U.S. at 248, 106 S.Ct. 2505. Once the moving party has met the initial burden, the opposing party must "go beyond the pleadings" and "designate `specific facts shows that there is a genuine [material] issue for trial.'" Id. The non-moving party cannot rest on its pleadings, Waldridge v. American Hoechst Corp., 24 F.3d 918, 920-21 (7th Cir.1994); Hughes v. Joliet Correctional Ctr., 931 F.2d 425, 428 (7th Cir.1991), nor may that party rely upon conclusory allegations in affidavits. Cusson-Cobb v. O'Lessker, 953 F.2d 1079, 1081 (7th Cir.1992).

During its summary judgment analysis, the court must construe the facts and draw all reasonable inferences in the light most favorable to the nonmoving party. Smith v. Fruin, 28 F.3d 646, 650 (7th Cir.1994), cert. denied, 513 U.S. 1083, 115 S.Ct. 735, 130 L.Ed.2d 638 (1995); Brennan v. Daley, 929 F.2d 346, 348 (7th Cir.1991), reh'g denied, 1993 WL 518446. Furthermore, it is required to analyze summary judgment motions under the standard of proof relevant to the case or issue. Anderson, 477 U.S. at 252-55, 106 S.Ct. 2505.


Initially, the Court must determine whether Indiana, Illinois or Pennsylvania law applies.3 As a rule, a court in a diversity case must apply the substantive law of the forum in which it sits, Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), including that pertaining to choice of law. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941); American Family Mut. Ins. Co. v. Williams, 839 F.Supp. 579 (S.D.Ind.1993); Hubbard Mfg. Co., Inc. v. Greeson, 515 N.E.2d 1071 (Ind.1987). Therefore, if the laws of more than one jurisdiction arguably are in issue, Erie requires the federal court to apply the choice of law rules of the state in which it sits. Jean v. Dugan, 20 F.3d 255 (7th Cir.1994) (citing Klaxon Co., 313 U.S. at 496-97, 61 S.Ct. 1020); Hubbard Mfg., 515 N.E.2d at 1073. Accordingly, this court will apply Indiana's choice of law rules in making its determination of which state's law governs the substantive issues.

A. Contract Issues

The characterization of the nature of an action bears upon the choice-of-law question. The present action arises from contract, tort and strict liability claims. Formerly, in contract cases, Indiana courts applied the law of the state in which the alleged contract was made or was to be performed. See Hubbard Mfg., supra; Travelers Ins. Companies v. Rogers, 579 N.E.2d 1328 (Ind.Ct.App.1991). The focus upon performance, in most instances, resulted in application of the law where the breach took place. That rule was modified, however, to allow application of the law of the state with the most significant contacts to the subject matter of the litigation be applied, regardless of the place of the breach. W.H. Barber Co. v. Hughes, 223 Ind. 570, 63 N.E.2d 417 (1945); Travelers Ins. Companies, 579 N.E.2d at 1330. The test requires that a court analyze "all acts of the parties touching the transaction in relation to the several states involved" and apply "the law of the state with which the facts are in most intimate contact." W.H. Barber, supra; OVRS Acquisition Corp. v. Community Health Serv., Inc., 657 N.E.2d 117 (Ind.Ct.App.1995), reh'g denied (1996) (abandoning the strict lex loci rule in contract cases). As formulated by the Indiana Supreme Court, the rule has been stated succinctly as follows:

The court will consider all acts of the parties touching the transaction in relation to the several states involved and will apply as the law governing the transaction the law of that state with which the facts are in most intimate contact.

W.H. Barber, supra; Eby v. York-Division, Borg-Warner, 455 N.E.2d 623 (Ind. Ct.App.1983). In determining which state has the "most intimate contact", Indiana recognizes the rule as formulated by the Restatement, Second, Conflict of Laws, § 188 (1971). Coldwell Banker & Co. v. Karlock, 686 F.2d 596 (7th Cir.1982); Sullivan v. Savin Business Machines Corp., 560 F.Supp. 938 (N.D.Ind.1983). The applicable section states that "[I]n the absence of an effective choice of law by the parties, the contacts to be taken into account in applying the principles of § 6 to determine the law applicable to an issue include:

(a) the place of contracting,

(b) the place of negotiation of the contract,

(c) the place of performance,

(d) the location of the subject matter of the contract, and

(e) the domicil, residence, nationality, place of incorporation and place of business of the parties.

These contacts are to be evaluated according to their relative importance with respect to the particular issue." RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 188(2) (1969 and App.). If the place of negotiating the contract and the place of performance are in the same state, the local law of that state will usually be applied, except as otherwise provided in §§ 189-199 and 203. Id. at § 188(3). Also, in determining any conflicts of law questions with respect to the interpretation or enforcement of contracts, the following factors must be taken into account:

(1) A court, subject to constitutional restrictions, will follow a statutory directive or its own state on choice...

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