First District, Fifth Division.

PIER TRANSPORTATION, INC., Plaintiff–Appellant,

v.

The BRAMAN AGENCY, LLC, Defendant–Appellee.

No. 1–15–0300.

|

Dec. 31, 2015.

Appeal from the Circuit Court of Cook County. No. 14 L 8863, Raymond W. Mitchell, Judge Presiding.

 

 

ORDER

Justice GORDON delivered the judgment of the court:

*1 ¶ 1 Held: The trial court properly granted defendant’s motion to dismiss plaintiff’s complaint because it clearly appears that no set of facts could be proven which would entitle plaintiff to relief.

 

¶ 2 Plaintiff, Pier Transportation, Inc., appeals an order from the circuit court of Cook County granting defendant’s, Braman Agency, LLC, motion to dismiss for failure to commence the action within the time allowed under the statute of limitations. 735 ILCS 5/13–205 (West 2012) (five years for breach of oral contract claims); 815 ILCS 505/10a(e) (West 2012) (three years for consumer fraud actions). Plaintiff filed a complaint for breach of oral contract and for violations of the Consumer Fraud and Deceptive Business Practices Act (815 ILCS 505/2 (West 2012)), claiming that the actions were actually third-party contribution and indemnity actions, which would place the actions within the statute of limitations.

 

¶ 3 For the following reasons, we affirm the trial court’s decision.

 

 

¶ 4 BACKGROUND

¶ 5 Plaintiff is an Illinois company that specializes in long-distance trucking and freight services. Defendant is an insurance agency doing business in the State of Illinois.

 

¶ 6 Liberty Mutual Insurance Company (Liberty Mutual) initiated a lawsuit against plaintiff claiming that plaintiff refused to pay the premiums for a workers’ compensation insurance policy written by it.

 

¶ 7 Later, plaintiff filed a third-party negligence complaint against defendant, claiming that plaintiff instructed defendant to purchase workers’ compensation insurance for its office employees only and defendant secured a workers’ compensation policy that included truck drivers who plaintiff claimed were independent contractors, not subject to workers’ compensation.

 

¶ 8 Liberty Mutual voluntarily dismissed the case, which it later refiled.

 

¶ 9 Plaintiff also filed a counterclaim against Liberty Mutual claiming violations of the Consumer Fraud and Deceptive Business Practices Act (Consumer Fraud Act) (815 ILCS 505/2 (West 2012)). Liberty Mutual moved to dismiss the counterclaim, arguing that the three-year statute of limitations for consumer fraud claims had passed, citing section 505/10a(e) of the Act. On November 19, 2013, the trial court denied Liberty Mutual’s motion to dismiss, and found that the counterclaim was timely filed under the savings statute, section 5/13–207 of the Code of Civil Procedure (Code) (735 ILCS 5/13–207 (West 2012)). Pier’s counterclaim in the Liberty Mutual suit remains pending and is not at issue on this appeal.

 

¶ 10 Plaintiff refiled the same third-party action that was filed in the initial action against defendant in the refiled Liberty Mutual case.

 

¶ 11 Defendant then filed a motion to dismiss plaintiff’s third-party complaint under section 2–619.1 of the Code (735 ILCS 5/2–619.1 (West 2012)). Defendant argued that plaintiff’s third-party action was essentially seeking contribution or indemnity from defendant for plaintiff’s liability in the Liberty Mutual case. Defendant argued that such third-party actions were barred by the statute of limitations, because there cannot be a cause of action for indemnity or contribution for a breach of contract claim where the parties were not joint tortfeasors. Further, defendant argued that plaintiff’s third-party action should be dismissed since plaintiff had not suffered damages to support a negligence claim because the case against Liberty Mutual had not been decided.

 

*2 ¶ 12 Plaintiff then filed, with leave of court, an amended third-party complaint against defendant that contained three counts. Count I was for negligence. Count II was brought under the Consumer Fraud and Deceptive Business Practice Act, claiming defendant acted fraudulently in procuring insurance from Liberty Mutual. Count III was for common law fraud.

 

¶ 13 Defendant then filed a motion to dismiss all three counts of plaintiff’s amended third-party complaint. Defendant sought to dismiss count I on the same grounds as in its previous motion.

 

¶ 14 Defendant sought to dismiss count II under section 2–615 of the Code (735 ILCS 5/2–615 (West 2012)), arguing that under the Consumer Fraud Act, a private cause of action cannot arise unless a party can prove actual damages. Since plaintiff had not yet suffered damages in the Liberty Mutual case, defendant argued that count II failed to state a cause of action.

 

¶ 15 Finally, defendant sought to dismiss count III under section 2–615 of the Code, arguing that it, too, was premature because plaintiff had not yet suffered damages.

 

¶ 16 The trial court granted defendant’s motion to dismiss all three counts for failure to state a cause of action for which relief could be granted, without prejudice.

 

¶ 17 Plaintiff then filed a second amended third-party complaint that contained two counts. Count I sought indemnification from defendant, alleging that defendant acted negligently in procuring insurance from Liberty Mutual. Plaintiff argued that defendant’s negligence derivatively caused plaintiff’s liability for breaching its insurance contract with Liberty Mutual. Thus, count I sought indemnification from defendant for the full amount of any damages the court determined plaintiff owed to Liberty Mutual for breach of contract.

 

¶ 18 Count II alleges that defendant owes plaintiff contribution under the Joint Tortfeasor Contribution Act (Joint Tortfeasor Act) (740 ILCS 100/2 (West 2012)) for any liability determined in the Liberty Mutual lawsuit. In count II, plaintiff alleges that defendant intentionally concealed, misrepresented, or omitted the material fact that the insurance policy it procured from Liberty Mutual included coverage for plaintiff’s truck drivers, despite plaintiff’s request to exclude them from coverage as independent contractors. Plaintiff argues that “[i]f judgment is entered against [plaintiff] on the complaint for non-payment of premiums brought by [Liberty Mutual], [plaintiff] is entitled to judgment against Third–Party Defendant [defendant], in an amount commensurate with that percentage of culpability attributable to Third–Party Defendant [defendant], in causing the damages suffered by [Liberty Mutual].”

 

¶ 19 Defendant moved to dismiss both counts of plaintiff’s second amended third-party complaint under section 2–619(a)(9) of the Code. Defendant argued that count I for indemnity was barred by the statute of limitations.

 

¶ 20 Defendant argued that plaintiff’s contribution claim failed to state a cause of action under section 2–615 of the Code because plaintiff and defendant were not joint tortfeasors liable to Liberty Mutual.

 

*3 ¶ 21 On April 4, 2014, the trial court granted defendant’s motion to dismiss, finding that plaintiff’s allegations did not constitute grounds for either indemnification or contribution. The trial court found that indemnity was not an appropriate remedy because “a stranger to a contract between two parties cannot be compelled to indemnify one of the parties for breach of contract absent the stranger’s express agreement to indemnify.”

 

¶ 22 The trial court similarly found that since defendant was not a party to the insurance contract, defendant’s alleged liability for negligence would not be derivative of plaintiff’s breach and thus contribution was also an improper remedy. The order stated that “[defendant] is a non-party and cannot be held to contribute for another party’s alleged breach of contract.”

 

¶ 23 In its ruling the court added that “[u]nder the Illinois Code of Civil procedure, without derivative liability, a third party complaint is not proper.” Thus, the trial court noted that if plaintiff wished to recover from defendant, “[t]he claim must be brought in a separate action.”

 

¶ 24 On May 5, 2014, plaintiff filed a motion to reconsider or, in the alternative, to find that there was no just reason to delay enforcement or appeal. On May 13, 2014, the trial court denied that motion.

 

¶ 25 On June 12, 2014, plaintiff filed a notice of appeal from the trial court’s dismissal of plaintiff’s second amended third-party complaint against defendant. This court dismissed this appeal on September 5, 2014, for lack of jurisdiction.

 

¶ 26 On August 22, 2014, plaintiff filed a separate two-count complaint against defendant. Count I was entitled “Breach of Contract/Indemnification” and alleges that defendant breached its duty to plaintiff by failing to procure workers’ compensation insurance that excluded truck drivers from coverage. Plaintiff argued that as a result of defendant’s negligence, “[i]f judgment is entered against [plaintiff] on [Liberty Mutual]’s complaint for non-payment of worker’s compensation premiums, [plaintiff] is entitled to indemnification from [defendant] for the amount of the judgment.”

 

¶ 27 Count II was entitled “Violation of the Consumer Fraud and Deceptive Practices Act” and alleges that defendant acted fraudulently in procuring insurance from Liberty Mutual.

 

¶ 28 On September 19, 2014, that suit was consolidated with the Liberty Mutual suit.

 

¶ 29 Defendant again moved to dismiss plaintiff’s complaint as time-barred under section 2–619(a)(5) of the Code (735 ILCS 2–619(a)(5) (West 2012)). Defendant argued that the relevant statutes of limitations for plaintiff’s claims had passed, and that plaintiff’s indemnity claim alleged nothing more than a breach of an oral contract, and thus the applicable statute of limitations for count I was the five-year statute of limitation for oral contract claims.

 

¶ 30 Defendant argued that the relevant statute of limitations for count II was the three-year statute of limitations on claims brought under the Consumer Fraud Act.

 

*4 ¶ 31 Plaintiff filed a response to defendant’s motion to dismiss, claiming that count I of its complaint should not be dismissed under the statute of limitations, because count I was an action for indemnity from defendant, not a claim for breach of an oral contract.

 

¶ 32 Plaintiff further argued that count II should not be dismissed as time-barred because count II was actually an action for contribution from defendant, as a joint tortfeasor with Liberty Mutual.1 Thus, plaintiff argued, the actions should not be time-barred before plaintiff’s liability in the Liberty Mutual suit has been determined.

 

¶ 33 On December 30, 2014, the trial court granted defendant’s motion to dismiss. The trial court found that plaintiff was barred from bringing the claims in its complaint by their respective five- and three-year statutes of limitations for breach of oral contract and consumer fraud claims. The order stated:

 

¶ 34 “Pier Transportation’s breach of oral contract and consumer fraud claims are based on actions and representations that took place in 2004 and an insurance policy that ended May 14, 2006. The statute of limitations for oral contracts is five years. 725 ILCS 5/13–205. The statute of limitations for consumer fraud claims is three years. 815 ILCS 505/10a(e). Pier Transportation filed its complaint in August 2014, well beyond the three- and five-year limitations periods.”

 

¶ 35 In its opinion the trial court additionally found that “Pier Transportation attempts to avoid the statute of limitations by asserting that its claims are not for breach of contract and consumer fraud, but indemnification and contribution.” The trial court reasoned that “[t]he Braman Agency did not expressly agree to indemnify Pier Transportation, and there is no basis upon which to imply such an agreement.” Regarding contribution, the order provided that “Pier Transportation is not entitled to contribution under the Joint Tortfeasor Contribution Act for its alleged breach of contract.” The order further provided that “Pier Transportation cannot seek contribution from The Braman Agency as a joint tortfeasor on its own consumer fraud counterclaim against Plaintiffs LM Insurance and Liberty Insurance Corporation.”

 

¶ 36 On January 23, 2015, plaintiff filed a motion to reconsider the court’s previous denial of 304(a) language in the April 4, 2014, order dismissing its third-party complaint against defendant. The trial court denied that motion on January 27, 2015. On January 28, 2015, plaintiff filed a notice of appeal appealing the December 30, 2014, dismissal of its complaint.

 

 

¶ 37 ANALYSIS

¶ 38 On appeal, plaintiff argues that the trial court erred in granting defendant’s motion to dismiss because (1) plaintiff alleged a proper cause of action for implied indemnity against defendant as a result of their principal-agent relationship; (2) plaintiff had a proper basis for seeking contribution from defendant under the Joint Tortfeasor Act based on plaintiff’s allegation that defendant acted in concert with Liberty Mutual to violate the Consumer Fraud Act; and, accordingly, (3) plaintiff’s claims for indemnity and contribution should not have been time-barred by the statutes of limitations governing consumer fraud and breach of oral contract claims, but instead should be allowed under the statute of limitations governing contribution and indemnity actions.

 

*5 ¶ 39 For the following reasons, we affirm the trial court’s dismissal of plaintiff’s indemnity and contribution claims as time-barred.

 

 

¶ 40 I. Jurisdiction

¶ 41 Initially, although not discussed by the parties, we must assess our jurisdiction to decide this case. In the case at bar, while plaintiff’s complaint was dismissed by the trial court, Liberty Mutual’s suit, which was consolidated with the instant case, remains active. Generally, “[i]f multiple parties or multiple claims for relief are involved in an action, an appeal may be taken from a final judgment as to one or more but fewer than all of the parties or claims only if the trial court has made an express written finding that there is no just reason for delaying either enforcement or appeal or both.” Ill. S.Ct. R. 304(a) (eff.Feb.26, 2010).

 

¶ 42 However, “Rule 304(a) does not necessarily apply to all actions involving multiple claims or parties.” Nationwide Mutual Insurance Co. v. Filos, 285 Ill.App.3d 528, 532 (1996). Where a consolidated case concerns several actions involving an inquiry into the same event only in its general aspects and is limited to a joint trial, but each action retains separate docket entries, verdicts, and judgments, “an order dismissing one of the actions is deemed final and immediately appealable.” Nationwide, 285 Ill.App.3d at 532. In that situation, Rule 304(a) language is not required before the appellate court will have jurisdiction. Nationwide, 285 Ill.App.3d at 532. Conversely, where multiple actions fully merge into a single action, thereby losing their individual identities, they must be disposed of as one lawsuit, and Rule 304(a) language would be required before a dismissal of less than all counts could be heard on appeal. Nationwide, 285 Ill.App.3d at 532 (citing Kassnel v. Village of Rosemont, 135 Ill.App.3d 361, 364 (1985)). See also In re Adoption of S.G., 401 Ill.App.3d 775, 781 (2010).

 

¶ 43 In the case at bar, plaintiff is appealing the trial court’s dismissal of plaintiff’s complaint against defendant that was consolidated into Liberty Mutual’s lawsuit against plaintiff. However, plaintiff’s action against defendant retained its own docket number, and plaintiff’s legal rights in the action against defendant can be determined independently from the issues in the Liberty Mutual lawsuit, without affecting that suit’s outcome. The separate actions were consolidated for the sake of efficiency, and they are not intertwined to the extent that they have lost their “individual identity.” Thus, even though the Liberty Mutual suit remains pending, the trial court’s dismissal of plaintiff’s action against defendant was final and appealable without Rule 304(a) language, and we have jurisdiction to hear the case.

 

 

¶ 44 II. Standard of Review

¶ 45 Under a section 2–619 dismissal, our standard of review is de novo. Solaia Technology, LLC v. Specialty Publishing Co., 221 Ill.2d 558, 579 (2006); Morr–Fitz, Inc. v. Blagojevich, 231 Ill.2d 474, 488 (2008). De novo consideration means we perform the same analysis that a trial judge would perform. Khan v. BDO Seidman, LLP, 408 Ill.App.3d 564, 578 (2011).

 

*6 ¶ 46 Under section 2–619(a)(5), a defendant may raise a statute of limitations issue in a motion to dismiss. Hermitage Corp. v. Contractors Adjustment Co., 166 Ill.2d 72, 84 (1995). When a defendant does so, the plaintiff must provide enough facts to show the court that the motion should be denied. Hermitage Corp., 166 Ill.2d at 84.

 

¶ 47 When reviewing “a motion to dismiss under section 2–619, a court must accept as true all well-pleaded facts in plaintiffs’ complaint and all inferences that can reasonably be drawn in plaintiffs’ favor.” Morr–Fitz, 231 Ill.2d at 488. “In ruling on a motion to dismiss under section 2–619, the trial court may consider pleadings, depositions, and affidavits.” Raintree Homes, Inc. v. Village of Long Grove, 209 Ill.2d 248, 262 (2004). Even if the trial court dismissed on an improper ground, a reviewing court may affirm the dismissal if the record supports a different ground for dismissal. Raintree, 209 Ill.2d at 261 (when reviewing a section 2–619 dismissal, we can affirm “on any basis present in the record”); In re Marriage of Gary, 384 Ill.App.3d 979, 987 (2008) (“we may affirm on any basis supported by the record, regardless of whether the trial court based its decision on the proper ground”).

 

 

¶ 48 III. Statute of Limitations

¶ 49 On appeal, plaintiff argues that the trial court erred by dismissing its claims against defendant as time-barred by the statutes of limitations governing a breach of an oral contract and consumer fraud actions. Plaintiff argues the court should have properly applied the statute of limitations governing contribution and indemnity actions, under which its claims would not have been barred.

 

¶ 50 Initially, we note that the statute of limitations governing contribution and indemnity cannot apply to plaintiff’s claims in this case on strictly procedural grounds. Contribution and indemnity claims are third-party actions, which allow a defendant to bring an additional party into a lawsuit for the purpose of establishing derivative liability. Kerschner v. Weiss & Co., 282 Ill.App.3d 497, 502 (1996). In other words, “[i]n a proper third-party action, the liability of the third-party defendant is dependent upon the liability of the third-party plaintiff to the original plaintiff.” Kerschner, 282 Ill.App.3d at 502.

 

¶ 51 However, plaintiff’s action against defendant in the instant case is a separate action that was consolidated with the Liberty Mutual case. The complaint against defendant does not seek to add defendant as a codefendant in the Liberty Mutual case, but rather initiates a separate action in which Braman is a defendant against plaintiff. Accordingly, the statutes of limitations respectively governing breach of oral contract and consumer fraud claims must apply, not the statute of limitations for third-party indemnity and contribution actions. We note that, while plaintiff initially filed a third-party complaint against defendant, plaintiff is not appealing the dismissal of that complaint in this appeal, but is appealing only the dismissal of its separately filed complaint.

 

*7 ¶ 52 Since plaintiff does not argue on appeal that its claims would survive if the statutes of limitations for breach of oral contract and consumer fraud claims apply, we affirm the decision of the trial court dismissing plaintiff’s claims as time-barred under those limitation periods.

 

¶ 53 Furthermore, even if plaintiff brought its complaint as a third-party action, its claims for contribution and indemnity would still fail to state a cause of action under the facts of this case. Thus, applying the statute of limitations governing contribution and indemnity actions would be improper.2

 

¶ 54 For the purpose of addressing plaintiff’s arguments on appeal, we will analyze the substantive legal sufficiency of what plaintiff argues are its claims for indemnity and contribution. The critical inquiry is whether the allegations in the complaint are sufficient to state a cause of action upon which relief may be granted. Wakulich v. Mraz, 203 Ill.2d 223, 228 (2003). In making this determination, all well-pleaded facts in the complaint, and all reasonable inferences that may be drawn from those facts, are taken as true. Young, 213 Ill.2d at 441. In addition, we construe the allegations in the complaint in the light most favorable to the plaintiff. Young, 213 Ill.2d at 441. We acknowledge that a cause of action should not be dismissed on the pleadings unless it clearly appears that no set of facts could be proven which would entitle the plaintiff to relief. Illinois Graphics Co. v. Nickum, 159 Ill.2d 469, 488 (1994).

 

 

¶ 55 A. Indemnity

¶ 56 In the case at bar, the trial court granted defendant’s motion to dismiss plaintiff’s indemnity claim against defendant, finding that since plaintiff’s allegations constituted a breach of an oral contract claim, the indemnity action was barred under the five-year statute of limitations governing breach of oral contract claims. In its order dismissing the indemnity claim, the trial court found that since defendant did not expressly agree to indemnify plaintiff, there is no basis upon which to imply such an agreement, and thus the court could not apply the statute of limitations governing indemnity actions to the complaint. On appeal, plaintiff argues that its complaint was improperly dismissed under the breach of oral contract statute of limitations, because an indemnity action would have been timely filed and that plaintiff and defendant’s principal-agent relationship formed a proper basis for indemnity. We do not find this argument persuasive.

 

¶ 57 As noted, a third-party claim allows a defendant to bring an additional party into a lawsuit for the purpose of establishing derivative liability. Kerschner v. Weiss & Co., 282 Ill.App.3d 497, 502 (1996). In other words, “In a proper third-party action, the liability of the third-party defendant is dependent upon the liability of the third-party plaintiff to the original plaintiff.” Kerschner, 282 Ill.App.3d at 502.

 

*8 ¶ 58 Indemnity and contribution are mutually exclusive third-party claims that allocate a plaintiff’s damages among multiple joint tortfeasors. Kerschner, 282 Ill.App.3d at 502. While contribution apportions the distribution of loss among joint tortfeasors based on relative degrees of fault, indemnity shifts the entire loss to the joint tortfeasor who was actually at fault. Kerschner, 282 Ill.App.3d at 502. The right to indemnity may be either express in the form of a written contract, or implied by law. Kerschner, 282 Ill.App.3d at 502.

 

¶ 59 In this case, the parties had no written agreement to indemnify, and thus we will only discuss whether plaintiff’s complaint alleges a proper basis for an implied right to indemnity from defendant. Under implied indemnity, the law implies a promise to indemnify where a blameless party is derivatively liable to the underlying plaintiff based on that party’s relationship with a third party who actually caused the plaintiff’s injury in tort. Kerschner, 282 Ill.App.3d at 503.

 

¶ 60 To state a proper cause of action for implied indemnity, a third-party complaint must allege: (1) a pre-tort relationship between the third-party plaintiff and the third-party defendant that gave rise to an implied duty to indemnify; and (2) a qualitative distinction between the conduct of the third-party plaintiff and the third-party defendant. Frazer v. A.F. Munsterman, Inc., 123 Ill.2d 245, 255 (1988); Kerschner, 282 Ill.App.3d at 503. Classes of pre-tort relationships that have traditionally given rise to a duty to indemnify include lessor-lessee, employer-employee, owner-lessee, and master-servant relationships. Kerschner, 282 Ill.App.3d at 503–04.

 

¶ 61 In the case at bar, plaintiff argues that its principal-agent relationship with defendant satisfies the pre-tort relationship element, and thus the facts plaintiff alleges in its complaint stated a proper cause of action. However, defendant correctly argues that the requisite pre-tort relationship cannot exist where the underlying lawsuit is based solely on breach of contract.

 

¶ 62 This court has previously found that the requisite pre-tort relationship cannot exist in an implied indemnity action where the underlying lawsuit is solely for breach of contract, which is not a tort. Schulson v. D’Ancona & Pflaum LLC, 354 Ill.App.3d 572, 577 (2004) (citing Talandis Construction Corp. v. Illinois Building Authority, 23 Ill.App.3d 929, 935 (1974), and Board of Education of High School District No. 88 v. Joseph J. Duffy Co., 97 Ill.App.2d 158, 162 (1968)). In keeping with this precedent, an implied right of indemnity requires that the underlying lawsuit concerns “tortious conduct of some kind, where the courts attempt to determine which party must bear primary responsibility for the injury.” Talandis, 23 Ill.App.3d at 934.

 

¶ 63 Plaintiff argues that Schulson is distinguishable from the instant case, and thus should not prevent plaintiff’s right to indemnity from defendant.

 

*9 ¶ 64 In Schulson, the third-party plaintiff, Schulson, was the defendant in an underlying lawsuit for breach of contract brought against him by a bank after he failed to pay a loan. Schulson, 354 Ill.App.3d at 574. Schulson sought indemnification from his lawyer, Sonnenschein, for negligently providing legal advice that caused him to default on the loan. Schulson, 354 Ill.App.3d at 574. However, the appellate court found that Schulson’s indemnity action was improper where the underlying lawsuit was solely for breach of contract, and the third-party defendant was a stranger to that contract. Schulson, 354 Ill.App.3d at 577.

 

¶ 65 Plaintiff attempts to distinguish Schulson from the instant case by arguing that in Schulson, “the attorney’s actions in drafting the clause played no role in why the contract was breached,” whereas in the case at bar, defendant’s actions in procuring plaintiff’s insurance coverage are directly related to plaintiff’s alleged breach of the insurance contract. This distinction bore no influence on the Schulson court’s finding that Schulson had no right to indemnity from his lawyer where the underlying lawsuit was solely for breach of contract. Schulson, 354 Ill.App.3d at 577 (finding that “[a]n implied indemnity action against Sonnenschein was not available to Schulson in the underlying breach of contract claim because Sonnenschein was a stranger to the contract. There can be no pre-tort relationship under such circumstances.”).

 

¶ 66 Plaintiff cites Roberson v. Knupp Insurance Agency, 125 Ill.App.2d 373 (1970), in support of its position that a right of indemnity exists between a party liable for breaching an insurance contract and a stranger to that contract, where the stranger to the contract acted as the breaching party’s insurance agent in forming the contract. However, Roberson does not stand for this proposition, nor does any other Illinois case.

 

¶ 67 In Roberson, the plaintiff in the underlying lawsuit sued his employer, L.H. Cavender, for personal injury arising out of his employment as a lumber cutter. Roberson, 125 Ill.App.2d at 375. The trial court entered a judgment against Cavender, who in turn filed a third-party complaint against Roberson Brothers Lumber Company. Roberson, 125 Ill.App.2d at 375. Cavender alleged that Roberson Brothers had procured workers’ compensation insurance covering himself and all persons working for him in connection with work done exclusively for Roberson Brothers, and sought judgment against Roberson Brothers in the amount he owed to his injured employee. Roberson, 125 Ill.App.2d at 375. Roberson Brothers then filed its own third-party complaint against Knupp Insurance Agency, which alleged “that Knupp failed to obtain riders, endorsements and amendments to Workmen’s Compensation Insurance Policy * * * and alleged that Roberson Brothers relied upon the advice of and procurement by Knupp of endorsements to said policy; and that the policy procured for plaintiffs by Knupp did not provide the benefits requested and that Knupp caused plaintiff and Cavender to rely upon the policy.” Roberson, 125 Ill.App.2d at 376. The appellate court found that Roberson Brothers had a proper basis for its indemnity claim, reasoning that “when an agent or broker, who, with a view to compensation for his services, undertakes to procure insurance for another, and, unjustifiably or through his own fault or neglect, fails to do so, he is liable for any damages resulting therefrom.” Roberson, 125 Ill.App.2d at 377.

 

*10 ¶ 68 Plaintiff correctly asserts that the Roberson court found that an implied right of indemnity existed based on a pre-tort relationship between the third-party plaintiff and its insurance broker. Roberson, 125 Ill.App.2d at 375. It is also true that the pre-tort relationship in Roberson was in many ways similar to the parties’ relationship in the instant case. However, the legally relevant distinction between Roberson and the instant case is that in Roberson the lawsuit underlying the third-party indemnity claim was not for breach of contract, but rather for personal injury, which is a tort. Roberson, 125 Ill.App.2d at 375. Thus, while Roberson alleged an implied right of indemnity based on a principal-agent relationship between the insured and his insurance broker where the underlying lawsuit was predicated on tort liability, that case is not applicable here, where the underlying suit is based solely on breach of contract without any predication on tort liability.

 

¶ 69 We find plaintiff’s reliance on Kerschner v. Weiss & Co., 282 Ill.App.3d 497 (1996), and Anixter Brothers, Inc. v. Central Steel & Wire Co., 123 Ill.App.3d 947 (1984), to be unpersuasive for similar reasons. Again, plaintiff correctly asserts that in both of these cases the appellate court found that an implied right of indemnity existed based on a pre-tort principal-agent relationship, similar to that between the parties in this case. Kerschner, 282 Ill.App.3d at 504; Anixter Brothers, Inc., 123 Ill.App.3d at 952–53. However, the appellate court upheld a right of indemnity in these cases because, unlike in the instant case, the lawsuits underlying the indemnity claims concerned tort liability. Kerschner, 282 Ill.App.3d at 500, 507 (wrongful termination of partnership, breach of fiduciary duty, and tortious interference with contract); Anixter Brothers, Inc., 123 Ill.App.3d at 948 (product liability). As such, neither case establishes or supports a right of implied indemnity where the underlying suit is solely for breach of contract.

 

¶ 70 Plaintiff also argues that section 2–2201 of the Insurance Placement Liability Act (735 ILCS 5/2–2201 (West 2012)) provides a cause of action for indemnity. Section 2–2201(a) states that “[a]n insurance producer, registered firm, and limited insurance representative shall exercise ordinary care and skill in renewing, procuring, binding, or placing the coverage requested by the insured or proposed insured.” 735 ILCS 5/2–2201(a) (West 2012). This statute codifies a duty of care that insurance brokers must exercise in procuring coverage on behalf of their clients. However, it does not speak to the issue in this case. A third-party indemnity action is not an appropriate remedy for a defendant liable solely for a breach of contract, absent an express agreement to indemnify. Further, Pier has cited no authority, and our own research has discovered none, where this statute has been used to support a cause of action for indemnity.

 

*11 ¶ 71 Since the law does not provide an implied right of indemnification in a breach of contract case from a party who was a stranger to the contract, the trial court properly applied the statute of limitations governing the breach of an oral contract for a dismissal of Pier’s indemnification claim.

 

 

¶ 72 B. Contribution

¶ 73 We next address whether plaintiff alleged a proper cause of action for contribution in count II that would have allowed the trial court to assess the timeliness of plaintiff’s claim under the statute of limitations governing contribution. We again find that count II was properly dismissed under the statute of limitations governing consumer fraud claims, not that governing contribution claims, because a third-party plaintiff cannot seek contribution in an underlying lawsuit based solely on breach of contract. Here, we have the same issue again.

 

¶ 74 The trial court granted defendant’s motion to dismiss count II of plaintiff’s complaint under the statute of limitations for consumer fraud claims rather than applying the statute of limitations governing contribution actions. The trial court found that plaintiff was “not entitled to contribution under the Joint Tortfeasor Contribution Act for its alleged breach of contract,” and that since count II alleges that defendant was liable to plaintiff for consumer fraud violations, the three-year statute of limitations for consumer fraud claims bars the claim.

 

¶ 75 Plaintiff argues that the trial court erred by failing to understand the nature of its contribution claim. Rather than seeking contribution from defendant for any liability incurred in the underlying Liberty Mutual suit, plaintiff argues that count II sought to include defendant as a codefendant with Liberty Mutual for the consumer fraud violations. However, plaintiff’s argument has a number of fatal flaws.

 

¶ 76 First, if we accepted plaintiff’s characterization of count II as an attempt to add defendant to plaintiff’s pending counterclaim against Liberty Mutual, we would be deprived of jurisdiction. As we discussed in the beginning of our analysis, we only have jurisdiction to consider the dismissal of plaintiff’s complaint because it retains its own distinct character even after being consolidated with the Liberty Mutual suit. See ¶ 41–43. However, if count II of plaintiff’s complaint is merely an attempt to add a party to plaintiff’s counterclaim in the Liberty Mutual suit, then that distinct character is lost and we would be deprived of jurisdiction in the absence of a Rule 304(a) finding.

 

¶ 77 Furthermore, even if reading plaintiff’s complaint as distinct from the Liberty Mutual case, plaintiff’s argument is based on an incorrect reading of the Joint Tortfeasor Act. Section 2(a) of the Joint Tortfeasor Act (740 ILCS 100/2 (West 2012)) provides that “Except as otherwise provided in this Act, where 2 or more persons are subject to liability in tort arising out of the same injury to person or property, or the same wrongful death, there is a right of contribution among them, even though judgment has not been entered against any or all of them.” Contribution is a remedy available to a “tortfeasor who has paid more than his pro rata share of the common liability, and his total recovery is limited to the amount paid by him in excess of his pro rata share.” 740 ILCS 100/2 (West 2012). Therefore, contribution is a legal mechanism by which a party that has suffered losses in tort liability to an injured party can recover a proportionate share of those losses from a third-party tortfeasor jointly liable to the same injured party for the same injury.

 

*12 ¶ 78 In the case at bar, plaintiff’s contribution complaint fails to state a cause of action, because plaintiff’s liability in the underlying Liberty Mutual suit is limited solely to the damages from a breach of contract action. Plaintiff cannot state a cause of action for contribution on the facts of this case because the right of contribution exists only among parties jointly liable in tort, and not between one party liable for breach of contract and a third-party stranger to that contract. J.M. Krejci Co. v. Saint Francis Hospital of Evanston, 148 Ill.App.3d 396, 397–98 (1986) (finding that the text of the contribution statute “expressly requires each party to the contribution action to be ‘subject to liability in tort’ to the injured party”). As a result, the trial court could have dismissed this case for failure to state a cause of action.

 

¶ 79 Additionally, the right of contribution arises from joint liability in tort causing injury to person or property, and does not exist where economic loss is the only damage. J.M. Krejci Co., 148 Ill.App.3d at 397–98. Although in some cases a breach of contract could result in tort liability for the party in breach, the economic loss doctrine provides “that there is no recovery in tort for purely economic losses that result from a breach of contract.” J.M. Krejci Co., 148 Ill.App.3d at 398.

 

¶ 80 Thus, plaintiff’s complaint appears to conflate two distinct legal concepts, in an attempt to create a contribution claim where the facts do not support one. Plaintiff’s complaint nominally states a claim against defendant alleging that Liberty Mutual and defendant’s tortious consumer fraud precipitated plaintiff’s breach of contract. However, by plaintiff’s own admission, this count of its complaint “is essentially Pier’s Retitled Counterclaim for Contribution [sic ].” Plaintiff also sought to impose the section 13–204(b) statute of limitations governing contribution in this action, further suggesting that it intended this claim to seek contribution from defendant in the Liberty Mutual case, rather than damages resulting from Liberty Mutual and defendant’s alleged tortious conduct.

 

¶ 81 However, attempting to fashion a workable contribution claim by alleging that Liberty Mutual and defendant engaged in tortious conduct still fails to state a valid cause of action. In order to state a proper claim for contribution from defendant in this case, the parties would have to be jointly liable in tort to Liberty Mutual. Instead, plaintiff argues that defendant and Liberty Mutual are jointly liable to plaintiff in tort. This is a fundamental misunderstanding of contribution as a third-party action, and it fails to state a claim for which relief can be granted.

 

¶ 82 Further, no party alleges injury to person or property, and thus the only damages in the lawsuit are economic losses. Contribution is therefore not available to plaintiff on the facts alleged in its complaint against defendant.

 

*13 ¶ 83 Thus, the trial court correctly found that plaintiff’s complaint failed to state a proper contribution claim, and it properly dismissed count II as untimely under the statute of limitations governing consumer fraud actions.

 

 

¶ 84 CONCLUSION

¶ 85 For the foregoing reasons, we find that the trial court properly dismissed counts I and II of plaintiff’s complaint against defendant as time-barred by the three- and five-year statutes of limitations governing breach of oral contracts and consumer fraud claims, respectively.

 

¶ 86 Affirmed.

 

Justices LAMPKIN and PALMER concurred in the judgment.

All Citations

Not Reported in N.E.3d, 2015 IL App (1st) 150300-U, 2015 WL 9590287

 

 

Footnotes

1

We note that this is not a properly structured cause of action for contribution, as noted by the trial court in its December 31, 2014, order, and as discussed in depth in the analysis section below.

2

Since we find that the statute of limitations for contribution and indemnity actions does not apply in this case, we need not address whether plaintiff’s claims would have been timely under that limitations period.

 

 

 

United States District Court,

E.D. Pennsylvania.

American Atelier, Inc., Plaintiff,

v.

Materials, Inc., Defendant.

CIVIL ACTION No. 13-7138

|

Signed 12/22/2015

 

 

MEMORANDUM

MCHUGH, District Judge

*1 This is a contract action brought by American Atelier, Inc., a manufacturer of specialty furniture, against Materials, Inc., a supplier of architectural products. Atelier contends that Materials supplied it with veneers (thin slices of wood used to produce flat panels for furniture) that did not conform to the terms of the contract and breached the implied warranty of merchantability. Discovery is now complete, and I am persuaded that on the evidence in this case, no reasonable jury could find either a breach of contract for the goods used or a breach of the warranty of merchantability. In simple terms, Atelier seeks to impose a duty on Materials which the contract does not support, and which Materials expressly disclaimed. Accordingly, Defendant’s Motion for Summary Judgment will be granted as it pertains to all claims, except for a discrete and limited claim as to 41 sheets of veneer around the time the goods were tendered.

 

 

1. Summary of Material Facts

Plaintiff Atelier was retained by the Loews hotel chain to build custom furniture for its rooms. It is undisputed that Loews’ design professionals, Daroff Design, a well-known design and architectural firm, specified to Plaintiff that a particular wood veneer was to be used in the manufacture of the furniture. The selected veneer was manufactured in Italy by a wel-known and well-established supplier, Tabu, through a proprietary process that involves bleaching an African hardwood, Anigre, and infusing it with white dye. Compl. at ¶¶ 9-10; Def.’s Mem. in Supp. Mot. Summ. J. at 4. Atelier purchased the specified “Anigre veneers” from Materials, Tabu’s U.S. distributor, and used them to construct the furniture. Plaintiff also alleges that some of the veneers were moldy when delivered, and replacement veneers were therefore sent and used in the construction of the furniture. Compl. at ¶ 15.

 

Within only a few months of installation, Loews complained that those portions of the furniture exposed to ultraviolet light from the sun had discolored and darkened to an amber color, and as a result Atelier incurred the cost of replacing the veneers with a different maple veneer. Goodman Dep. at 35:21-23. Surfaces of the Anigre veneer not exposed to sunlight maintained their original white appearance. Goodman Dep. at 94:23-95:2.

 

The written contract governing the sale in question is composed of three purchase orders requesting that Materials supply the Anigre veneer and a single attached page setting forth the “Terms of Sale.” In the section of the contract entitled “Warranty Disclaimer,” it states:

All products distributed by Materials Inc. are manufactured to meet the standard industry specifications of our suppliers. Since MI has no control over end products fabricated with the material sold, no warranty is expressed or implied. … MI makes no warranty based on any usage of trade of fitness for any particular use. Buyer assumes all risks resulting from the use with other substances or in any process.

This language clearly defines the role of Defendant Materials: it supplies wood products made according to the specifications of the manufacturers it represents, but takes no responsibility for the way in which the product is altered after sale during the buyer’s fabrication process.

 

*2 The next paragraph of that same section further defines the relationship between the buyer and seller. Turning to the fabricator’s role, the section states: “All installation and fabrication are the buyers’ responsibility, unless otherwise stated. Materials, equipment and workmanship must conform to industry standard practices, conditions, procedures and recommendations.” Materials as a seller is providing a wood product that will be subject to further finishing, and the contract explicitly provides that the responsibility for that finishing process rests with Atelier as buyer. The contract then provides the buyer with the option to seek information pertinent to effective finishing of the product; specifically, it cautions and advises buyers as follows:

[Materials] may supply installation instructions or guidelines, as provided by the manufacturers, upon request. All wood surfaces, like all materials, will alter in color due to exposure to ultraviolet (UV) light or simply aging of the wood. Fading of wood surfaces can be reduced by the use of non-yellowing finishes that contain UV inhibitors.

 

The record reflects that Atelier did not request such assistance from Materials. Rather, it requested that samples of the Anigre veneer be sent so that a finishing consultant with which Atelier routinely worked, CCI, could test them for suitability. Goodman Dep. at 48-49. The record reflects that Materials complied with this request. Unfortunately (and somewhat inexplicably), the consultant that Atelier retained only tested for water repellency and did not do any testing pertinent to the issue of how the veneer might react with ultraviolet light after finishing. The relevant testimony in this regard comes from Plaintiff’s president, David Goodman, a registered architect:

Q: Did you send the samples of the white Anigre to CCI for them to analyze or did they come to you to analyze the Anigre?

A: They’re in our plant probably once a week. And they would — they would gladly do any kind of samples or analysis for us or testing. As far as samples that were prepared, they would take them to their facility and do their own testing or send it out to a lab to do certain testing, depending on the request for testing.

Q: With respect to the initial samples that you-all received of the white Anigre, did CCI perform testing?

A: They performed water tests. And basically, that was it pretty much.

W: Was it recommended by you to anybody that CCI also do UV light testing or color fastness testing?

A: No.

Q: Did CCI recommend that it be tested for additional color fastness qualities or UV protectant qualities?

A: That’s not our place at—at that juncture. When something is specified it’s—it’s usually something that has been approved for its usability in the environment that it’s being maintained. And we were basically to follow those specifications. We can offer different options, but we don’t get involved in testing after the product that’s specified is specified. It’s just not our place to do that.

Q: I understand it’s not your place because you’re following the specs of Daroff.

A: Yes.

Goodman Dep. at 53:6-54:18.

Q: You mentioned that CCI did not do any kind of testing on color change as a result of exposure to UV on your control samples prior to fabrication of all the furniture, correct?

A: Yes, I did.

Q: But CCI certainly could have, right?

A: I assume so, yes.

Goodman Dep. 104:21-105:5.

 

Materials made some recommendations to Atelier about the use of a cold press and how to handle the material to avoid marking or splitting. Goodman Dep. 48:10-20. Materials also specifically warned Atelier about keeping the unfinished product covered to avoid UV exposure and had a general conversation with Atelier about the need to use a finishing product with a UV protectant. Goodman Dep. 63:15-18, 73:12-74:9. However, Materials did not recommend any particular finishing products. Goodman Dep. at 69:19-21. It was CCI that ultimately specifically advised Atelier regarding the chemical finishing process it should use to coat and protect the raw veneer for use with hotel furniture:

*3 Q: So with respect to what specific finishing products to use, that’s where you relied on CCI, correct?

A: And we brought CCI in to — to do some sampling and finishing for — for our review, yes.

Goodman Dep. at 64:11-16.

Q: You would agree that they [Defendant] did not specifically recommend any finish, correct?

A: Correct.

Goodman Dep. at 69:19-69:21

Q: With respect to the finishing specifications, you would agree that those were specified by CCI in detail in terms of the coats and the sealants, right?

A: Yes, we worked together on that.

Q: Now, Materials, Inc. never had [a] conversation with CCI, to the best of your knowledge, right?

A: No, Not that I know of.

Goodman Dep. at 109:18-110:3

 

A fact of central relevance is that Loews’ designer, Darroff, insisted that Atelier produce a specific “look” in finishing the veneer, regardless of the inherent challenges in working with such material.

Q: And I understand, except for when you’re serving as maybe the architect for your own buildings, you’re typically following the direction of design firms like Daroff So you didn’t pick the product, correct?

A: That’s correct, yes.

…

[W]e followed the specification that Loews—or the designer specified for the Loews project. And that’s, our—our job. Our business is to follow specifications.

Goodman Dep. at 27:13-18, 28:10-13.

Q: However, it’s no surprise that wood, all woods of all different types will change color over time, correct?

A: Some a little more than others, correct, in their natural state.

…

Q: Like white varies more, correct?

A: Bleached white, yes.

Q: At any point in time prior to manufacturing all of this furniture that you did for the Loews Hotel, did you ever mention to anyone that if they really want white, maybe they should use a product other than wood?

A: We didn’t really get into that discussion. Because, again, Daroff is a very high-end designer. And they direct the — the show. And you basically supply them with what they ask for when they want it. And they sign off on approval. So we weren’t in a position to — to try to substitute or offer things that we felt were, you know, similar.

Q: Right. But by way of your answer, it’s clear that that was something that you already had in mind, but maybe were not at liberty to express?

A: Yes.

Goodman Dep. at 82:2-84:18.

 

Finally, the “Warranty Disclaimer” section of the contract ends by advising purchasers that Materials “stand[s] behind the recommendations of the AWI Architectural Woodwork Quality Standards, 8th edition, Version 1.0, 2003 for all wood products.” The parties agree that pursuant to those standards, fabricators are cautioned to “avoid BLEACHED VENEERS because of potential finishing problems.” Pl.’s Resp. in Opp. Mot. Summ. J., Ex. F at 2.

 

Plaintiff attaches great significance to the bleaching process used in the manufacture of the veneers. As part of the discovery in this case, Atelier has identified three expert witnesses who would “testify that the problem with the Anigre product sold by materials was that it is bleached and thus inherently unstable from a color fastness perspective.” PL’s Supplemental Mem. in Opp. to Def.’s Mot. for Summ. J. at 8.

 

*4 In opposing the Motion for Summary Judgment, Atelier argues that Materials did not “disclose” the fact that the veneer was bleached in making the sale. The record shows, however, that a sales catalog provided to Atelier specifically states: “Natural veneers of different species are first bleached to remove any natural color variation and flaws of the wood,” and it describes the veneers as undergoing a “combination of [a] bleaching and dyeing process.” Def.’s Mot. Summ. J., Ex. H at 9. Plaintiff’s President stated that they had this catalog at the outset of the project and reviewed it with CCI:

Q: If you could go a few pages later to the information from Materials, Inc. that’s included in this packet of information. Did you produce that information to CCI at some point in time?

A: Yes, we reviewed this with them.

Q: Where did you get this information from?

A: They had a catalog that was supplied to us when we spent “X” number of dollars to get the material that was specified.

Q: So you had this at the outset of the project?

A: We did.

Goodman Dep. 116:3-16.

 

In addition, Plaintiff’s President indicated that this was common knowledge in the industry:

Q: So what is the origin of your understanding that it’s a bleached and dyed veneer?

A: It’s bleached. It’s bleached.

Q: How do you know that?

A: We were told that. And we—we know it’s bleached. You can’t turn something brown to white without bleaching it. It’s—it’s bleached and it’s dyed.

Q: You said “We were told that.” Who told you that?

A: We had been told by other design companies, people that have purchased the veneers. I mean, we’re part of an industry. And we talk amongst each other. The material is bleached and it’s dyed.

Goodman Dep. at 125:13-126:4.

 

 

1. Procedural Posture of the Case

At the outset of the case, I denied a Motion to Dismiss the claim for breach of the warranty of merchantability because Material’s attempted disclaimer was legally insufficient. I granted that same Motion with respect to breach of a warranty of fitness for a particular purpose, because Materials had met the controlling legal standard to make such a disclaimer effective. Defendant Materials also moved to dismiss on the ground that Atelier had failed to state a claim for breach of contract. I denied that portion of the Motion, simultaneously observing that the Complaint was “not a model of clarity or completeness,” and further observing that there was “some conceptual tension in enforcing the disclaimer of the warranty for a particular purpose, while simultaneously permitting the breach of contract claim to proceed.” Order Ruling on Mot. to Dismiss, Doc. No. 12 at 2, 5.

 

Defendant now moves for summary judgment on both remaining counts, which Plaintiff opposes. Although the parties approach the issues from vastly different perspectives, and to a certain extent failed to engage, the oral arguments on the Motion and certainly the record make the obligations created by the contract sufficiently clear enough to be addressed by the Court.

 

 

III. Standard of Review

Summary judgment is proper “if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(c)(2). A fact is material if it “might affect the outcome of the suit under the governing law,” and a dispute is genuine “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., All U.S. 242, 248 (1986). “Factual disputes that are irrelevant or unnecessary will not be counted.” Id.

 

*5 The party moving for summary judgment has the initial burden of identifying the portions of the record that demonstrate an absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The movant need not “support its motion with affidavits or other similar materials negating the opponent’s claim.” Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). It can meet its burden simply by “pointing out… that there is an absence of evidence to support the nonmoving party’s claims.” Id. at 325.

 

“The non-moving party must then “rebut the motion with facts in the record and cannot rest solely on assertions made in the pleadings, legal memoranda, or oral argument.” ” Berckeley Inv. Group. Ltd. v. Colkitt, 455 F.3d 195, 201 (3d Cir.2006). “The mere existence of a scintilla of evidence in support of the plaintiff’s position will be insufficient; there must be evidence on which the jury could reasonably find for the plaintiff.” Anderson, 477 U.S. at 252; see also Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986) (stating that the opponent of summary judgment “must do more than simply show that there is some metaphysical doubt as to the material facts.”). If the non-moving party “fails to make a showing sufficient to establish the existence of an element essential to that party’s case, and on which that party will bear the burden at trial,” summary judgment is appropriate. Celotex, 477 U.S. at 322.

 

While it is not a court’s role to make credibility determinations or weigh the evidence, a court must assess “whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.” Liberty Lobby, 477 U.S. at 251-52.

 

 

1. Breach of Contract Claim

In simple terms, the evidence of record is that Daroff specified the use of Tabu Anigre veneers, Materials supplied samples of the veneers that were tested by Atelier, and then Materials fulfilled the purchase orders and supplied the exact product Atelier requested it to supply in accordance with the instructions of Atelier’s client.

 

Atelier now argues, however, that Materials breached the contract for the sale of those veneers used in the construction of the furniture. The relevant contract term on which Atelier relies is the statement included in the “Warranty Disclaimer” section that advises purchasers that Materials “stand[s] behind the recommendations of the AWI Architectural Woodwork Quality Standards, 8th edition, Version 1.0, 2003 for all wood products.” The parties agree that pursuant to those standards, fabricators are cautioned to “avoid BLEACHED VENEERS because of potential finishing problems.” PL’s Resp. in Opp. Mot. Summ. J., Ex. F at 2. The parties disagree as to the legal significance of this language in the contract.1 Atelier argues that this means that Materials was contractually bound to provide only products conforming to AWI standards, and since the veneers were bleached, “Materials breached its contract with AAI by selling it a product that was not in accordance with the AWI standards.” PL’s Supplemental Mem. in Opp. to Mot. for Summ. J. at 9. Atelier points to deposition testimony from Materials’ President, who admitted that he found it difficult to reconcile the AWI directive with his company’s practice of selling bleached veneers. PL’s Resp. to Mot. for Summ. J., Ex. D at 15-16.

 

 

1. Interpreting the Contract

*6 Under Pennsylvania law, “[i]n construing a contract, a court’s paramount consideration is the intent of the parties.” O’Farrell v. Steel City Piping Co., 403 A.2d 1319, 1324 (Pa. Super. Ct. 1979). “[I]n order to interpret contracts with some consistency, and in order to provide contracting parties with a legal framework which provides a measure of predictability, the courts must eschew the ideal of ascertaining the parties’ subjective intent and instead bind parties by the objective manifestations of their intent.” Mellon Bank, N.A. v. Aetna Bus. Credit, Inc., 619 F.2d 1001,1009 (3d Cir. 1980) (applying Pennsylvania state law). A court may not construe a contract in such a way that it deviates from the plain meaning of the written terms. Id. at 1010 (quoting Best v. Realty Management Corp., 101 A.2d 438, 440 (Pa. Super. Ct. 1953)).

 

However, even a contract term that appears to be clear and unambiguous on its face may reveal a latent ambiguity if the facts of a particular case make the meaning of a term uncertain. Duquesne Light Co. v. Westinghouse Elec. Corp., 66 F.3d 604, 614 (3d Cir. 1995) (citing Easton v. Washington Cty. Ins. Co., 137 A.2d 332 (Pa. 1957)). After all, “English is often a difficult and elusive language, and certainly not uniform among all who use it. External indicia of the parties’ intent other than written words are useful, and probably indispensable, in interpreting contract terms.” Mellon Bank, 619 F.2d at 1010.2

 

In determining whether a term contains such an ambiguity, the judge must consider the words of the contract, the circumstances under which the contract was made, the alternative meaning suggested by counsel, and any objective evidence offered in support of that meaning. Id. at 1011-11; see also Bohler-Uddeholm Am., Inc. v. EllwoodGrp., Inc., 247 F.3d 79, 93 (3d Cir. 2001). “An ambiguous term should ‘receive a reasonable construction and one that will accord with the intention of the parties.’ ” Mellon Bank, 619 F.2d at 1010-11 (citing United Refining Co. v. Jenkins, 189 A.2d 574, 580 (Pa. 1963)). A court may consider “the format, construction and terms of the contract generally.” Duquesne Light Co., 66 F.3d at 615.

 

A contract is not rendered ambiguous, however, “by the mere fact that the parties do not agree on the proper construction.” Id. at 614 (quoting Samuel Rappaport Family P’ship v. Meridian Bank, 657 A.2d 17, 21-22 (Pa. Super. Ct. 1995)). “If no ‘reasonable’ alternative meanings are put forth, then the writing will be enforced as the judge reads it on its ‘face.’ ” Mellon Bank, 619 F.2d at 1013 n. 13 (citing Int’l Sys., Inc. v. Pers. Data Sys., Inc., 418 A.2d 518, 520 (Pa. Super. Ct. 1980)).

 

In examining the contract term at issue in this case, I note that it is contained in the second paragraph of a section entitled “Warranty Disclaimer.” The first paragraph in that section defines the role of Materials as a supplier who guarantees that all of the products it distributes will be “manufactured to meet the standard industry specifications of our suppliers.” Def’s Mot. for Summ. J., Ex. D. (emphasis added). The reader is thereby first notified that the operative standard to which Materials is holding itself is that of its own industry suppliers. Materials then disclaims any warranty of fitness for a particular purpose and reminds the purchaser that Materials is not responsible for any risks the buyer takes in altering the product. The next paragraph, which contains the operative term, turns its focus to the buyer’s responsibilities, emphasizing that “[a]ll installation and fabrication are the buyers’ responsibility,” and offering advice on the use of UV inhibitors. The term referencing the AWI standards then follows. The context thus signals to the reader that Materials is referring the buyer to the AWI standards as a source of information that the buyer should consult when carrying out its own installation and fabrication responsibilities. Since a court may consider “the format, construction and terms of the contract generally,” I am persuaded that the context in which the AWI Standards are referenced—at the end of a long disclaimer—is meaningful. Duquesne Light Co., 66 F.3d at 615.

 

*7 In addition, the AWI standards provide guidelines to fabricators—not suppliers—regarding proper finishing techniques for materials like veneers. Atelier’s proffered interpretation of the contract term, then, would require me to find that the reference to AWI standards binds Materials to only sell products that would allow a buyer to construct final projects that are in conformity with the AWI standards. That is not a “reasonable construction” of the contract language. I do not construe the AWI’s general admonition against using bleached veneers as creating a duty on the part of Materials to inquire into the details of a project to protect Atelier from making a poor choice. The AWI standards run more than 600 pages. To hold that Materials would have a duty in making every sale to inquire into the details of the particular use of its products defies reason, and imposes the very kind of obligation it specifically disclaims. Finding such a contractual duty would be particularly inappropriate on the facts here, as Atelier looked to Loew’s designer and its own consultant for guidance on finishing the product.

 

Nor do I attach significance to the fact that Materials gratuitously offered advice to Atelier as to the best technique for attaching the veneers, specifically recommending a cold press rather than a hot press. Goodman Dep. at 48:10-20. With respect to the relevant issues here—choice of material and finishing technique—Atelier’s choice was driven by Daroff and CCI. Plaintiff’s Officer even noted that he was not aware Materials had referenced the AWI:

Q: And you’d agree that they referred you to AWI standard for selection of appropriate finishing of the veneers?

A: No, I didn’t agree to that. There was never a discussion on them referring us to AWI standards. That was never part of their discussion. That may be in their literature, but it’s certainly not in a discussion I had with Steve Kitezh at Materials, Inc.

Goodman Dep. at 69:22-70:7.

 

It appears, then, that this term is not ambiguous, and Atelier did not rely on representations made by Materials regarding the AWI standards. There are inherent risks of building with veneers, so Materials’ general advice to consult the AWI standards serves as a warning to fabricators that they should consult an external source for guidelines on manufacturing with the products provided by Defendant. I do not construe this clause as placing an affirmative duty on Materials, as Plaintiff suggests.

 

 

1. Duty to Disclose

Atelier also claims that Materials had an obligation to disclose to Atelier that the veneers were bleached, and it failed to do so. Although Atelier tries to paint this dispute as a genuine issue of material fact, I find it to be neither genuine nor material.

 

First, there is no genuine dispute regarding Atelier’s access to information stating that the veneers in question were bleached. Tabu’s use of bleach is not only revealed in the sales catalog provided to Atelier at the outset of the project, but touted as one of the benefits of its proprietary process. Def’s Mot. Summ. J., Ex. H at 9. The evidence therefore does not present “a sufficient disagreement… requir[ing] submission to ajury.” Liberty Lobby, 477 U.S. at 251-52.

 

Furthermore, this issue is not material to the breach of contract claim. The record evidence shows that Atelier did not rely on this representation by Atelier since its standards for this custom project were provided by Daroff. Def.’s Supplemental Mem. in Supp. Mot. for Summ. J. at 5-6. In a case in which the buyer is an experienced fabricator of custom wood furniture, and is supported by design professionals and an outside finishing consultant, I cannot discern what duty of disclosure Materials would have, particularly where the buyer specifies a particular veneer from a particular manufacturer. Plaintiff’s expert Mike DiGuiro opines: “While Materials Inc. cannot keep companies from specifying their products for applications, when they become aware of the application, they have a responsibility to let the customer know when the materials specified do not meet the standards of an organization that they tout as adhering to in their literature.” Report of Mike DiGuiro at 3-4. Although I must view all facts in the light most favorable to the non-movant in considering a Motion for Summary Judgment, I need not defer to any expert’s purported legal conclusions.

 

*8 To the extent that Atelier is arguing that Materials had a duty to notify it that the bleached process made the veneers inappropriate for this project, it seeks to revive the argument that Materials breached the warranty of fitness for a particular purpose, which was adequately disclaimed. This was foreshadowed by my opinion on the Defendant’s Motion to Dismiss: “Plaintiff’s contractual claim would seem to depend upon Materials’ understanding of the use to which the veneer would be put. It might be that this disclaimer [of fitness for a particular purpose] language has evidentiary significance in defining the scope of the agreement between the parties.” Order Ruling on Mot. to Dismiss, Doc. No. 12 at 5-6. Plaintiff cannot now use this “duty to disclose” argument as a backdoor method of reviving the warranty for a particular purpose claim. Perhaps bleached veneers were not an appropriate choice for this context, but Materials did not warrant that they were and therefore had no corresponding duty to alert Atelier to this fact.

 

 

1. Damaged Veneers

Plaintiff’s Breach of Contract claim also encompasses a claim for damages resulting from veneers that were provided by Materials but not used to produce the furniture in question because they were blemished. Ateliers alleged in its Complaint that

Materials shipped to AAI certain other material that arrived wet and moldy, splitting at the seams and yellowed and could not be sued. Other product purchased from Materials was damaged during the trucking process on a carrier arranged by Materials. AAI immediately put Materials on notice of the problems, including sending it samples and photographs of the defective and damaged product, but Materials did nothing to address the issue.

Compl. at ¶ 15. Atelier says that Materials refused to replace the damaged product, forcing Atelier instead to purchase more veneers to replace the damages ones, and Atelier “seeks as one element of its breach of contract claim the additional cost of the additional veneer it purchased from Materials.” Pl.’s Second Supplemental Mem. in Opp. Def.’s Mot. Summ. J. at 4.3

 

Despite the allegations in the Complaint—which assert that that “Materials shipped to AAI” the materials at issue “on a carrier arranged by Materials”—the record evidence indicates that Atelier actually picked the veneers up from Materials’ warehouse in its own truck and delivered the goods to a warehouse owned by a third party, Versatek. In its own supplemental brief, Atelier admits that an “AAI driver … picked up” the pallets of veneers “at defendant’s place of business.” PL’s Second Supplemental Mem. in Opp. Def.’s Mot. Summ. J. at 2. The veneers were then inspected, and damage was revealed.

 

Because of this sequence of events, the parties disagree about whether Atelier rejected the goods upon discovering the problem, or whether it accepted the goods and then attempted to revoke its acceptance. This distinction is important because under the UCC in Pennsylvania, a party may reject goods showing any nonconformity, 13 Pa.C.S. § 2601, but if he accepts the goods, he may only later revoke his acceptance if the nonconformity “substantially impairs its value to him,” and he has accepted it either (1) on the reasonable assumption that nonconformity would be cured, or (2) “if his acceptance was reasonably induced either by the difficulty of discovery before acceptance or by the assurances of the seller.” 13 Pa.C.S. § 2608. Under 13 Pa.C.S. § 2606, which establishes “what constitutes an acceptance,” a buyer may be deemed to have accepted the goods by default if he fails to reject the goods within a reasonable time. See SCM Grp., USA, Inc. v. Custom Designs & Mfg. Co., 89 F. App’x 779, 780 (3d Cir. 2004).

 

*9 Ultimately, this disagreement reveals a genuine issue of material fact that precludes the Court from deciding this issue. Under Pennsylvania law, the questions of whether a nonconformity exists, whether the nonconformity substantially impairs the value of the good to the purchaser, and whether the rejection or revocation of acceptance of goods occurred within a reasonable time after tender or delivery are generally deemed to be questions of fact to be resolved by the fact finder. Ford Motor Credit Co. v. Caiazzo, 564 A.2d 931, 936 (Pa. Super. 1989). A reasonable jury could find that black marks and mold constituted a nonconformity that substantially impaired the value of those veneers to Atelier, Atelier inspected and revoked their acceptance of the goods within a reasonable time after tender, and Materials has not yet fully compensated Atelier for the damages. This discrete claim —limited to veneers damaged or moldy at the time of tender—is therefore inappropriate for summary judgment.

 

 

1. Breach of Warranty of Merchantability Claim

Defendant also seeks summary judgment on Plaintiff’s claim for Breach of the Warranty of Merchantability. Atelier has produced a report from a qualified expert, Mike DiGiuro, who conducted an in-depth analysis of the reason for the discoloration in the veneer and the series of design and fabrication decisions that led to Loews’ dissatisfaction. Although Atelier suggests that this report supports their breach of warranty claim, the conclusions reached by its experts undercut rather than support the existence of a defect.

 

Pennsylvania law provides that, for merchant sellers of goods, “[a] warranty that the goods shall be merchantable is implied in a contract for their sale.” 13 Pa.C.S. § 2314(a). “The concept of ‘merchantability’ does not require that the goods be the best quality, or the best obtainable.” Gall by Gall v. Allegheny Cnty. Health Dep’t, 555 A.2d 786, 789-90 (Pa. 1989) (citations omitted); Altronics of Bethlehem, Inc. v. Repco, Inc., 957 F.2d 1102, 1105 (3d Cir. 1992) (citing 13 Pa.C.S. § 2314(b)(3)). To qualify as merchantable, goods must simply “pass without objection in the trade under the contract description,” be of “fair average quality,” be fit for the ordinary purposes for which the goods are used, display an even level of quality among all units, be adequately packaged, and conform to any promises made on the label. 13 Pa.C.S. § 2314(b). To prove a breach of the warranty of merchantability under Pennsylvania law, “a plaintiff must show that the equipment obtained from the supplier was defective,” and that the defect occurred in the absence of abnormal use and reasonable secondary causes. Visual Commc’ns, Inc. v. Konica Minolta Bus. Solutions U.S.A., Inc., 611 F. Supp. 2d 465, 470 (E.D. Pa. 2009) (citing Altronics, 957 F.2d at 1105). Plaintiff bears the burden of eliminating any alternative causes fairly suggested by the evidence. Altronics, 957 F.2d at 1106.

 

Atelier has not pointed to any defect in the product itself beyond the fact that it was bleached, which is an advertised characteristic of the product. In its supplemental brief, Atelier articulates its evidence of the defect as follows: “Experts will testify that problem with veneers is that they were bleached and thus inherently unstable from a color fastness perspective, [and] that the bleaching of the White Anigre made it difficult to delay the inherent yellowing characteristics of the product.” Specifically, the ultimate opinion rendered by Mr. DiGiuro in the section of his report entitled “Conclusions” states: “the discoloration was not caused by any process or procedure completed by AAI, but was an inherent characteristic in the veneer, and AAI did everything they could have reasonably done to meet the specifications provided by Daroff Design and Loews.” Report of Mike DiGiuro at 5.4 Another expert, Ronald Obie, states that “the bleached Anegre veneer is strongly prone to oxidation.” Report of Ronald Obie at 4. Atelier identifies no flaw in the process by which the veneers were bleached. It asserts only that the use of bleach to obtain the “look” of the veneer panels made it harder to finish them in a way that would resist yellowing. Plaintiff’s experts themselves explicitly state that the product reacted in the way that bleached veneers are expected to react under certain field conditions. In short, the admission that preserving colorfastness is one of their “inherent” challenges of bleached veneers is fundamentally inconsistent with Altelier’s theory of defect; Atelier cannot assert as a defect an intrinsic feature of the product it specified. As bleached veneers, the goods were of “fair average quality” and would “pass without objection in the trade under the contract description.” 13 Pa.C.S. § 2314(b). Any problems stemmed from the use to which they were put.

 

*10 To be sure, this “inherent characteristic” may be highly relevant to a fabricator’s decision about how and where to use this product. In an effort to prove that the goods are not fit for the ordinary purposes for which the goods are used, Atelier attempts to define the scope of the product’s purpose narrowly—as the manufacture of hotel furniture—and then argue that the product is obviously defective because it discolored when used for that particular purpose, to an extent that it is no longer usable for use in that particular high-end context. Once again, this erroneously conflates merchantability with fitness for a particular purpose.

 

 

1. Conclusion

For these reasons, Defendant’s Motion for Summary Judgment is granted as it pertains to the Breach of Contract claim for the veneers used in the construction of the furniture, and for the Breach of the Warranty of Merchantability claim. The Motion is denied as it pertains to Plaintiff’s discrete and limited breach of contract claim for allegedly damaged and moldy veneers. An appropriate order follows.

 

All Citations

Slip Copy, 2015 WL 9461326

 

 

Footnotes

1

Atelier attempts to describe this apparent contradiction as a genuine issue of material fact that precludes summary judgment. PL’s Supplemental Mem. in Opp. to Def.’s Mot. for Summ. J. at 4. However, Materials does not dispute that these two facts are both true. The parties merely disagree as to the effect this has on the duties of Materials under the terms of the contract, and therefore whether Materials is entitled to judgment as a matter of law on the breach of contract claim. Therefore, this question is properly considered by the Court on summary judgment, rather than reserving its determination for a jury. Liberty Lobby, All U.S. at 248.

2

Although the Parole Evidence Rule typically bars the use of extrinsic evidence to vary or add to the contract, when the parties ask the Court to interpret a potentially ambiguous contract provision, extrinsic evidence of intent is permissible. Mellon Bank, 619 F.2d at 1010 n.9.

3

Atelier argues that this claim for damages resulting from the moldy veneers is part of its case, but not part of Defendant’s Motion for Summary Judgment. PL’s Second Supplemental Mem. Opp. Def.’s Mot. Summ J. at 1. Although Materials did not address the facts pertinent to this claim in its initial Motion for Summary Judgment, it was made clear through supplemental briefing and oral argument that Defendant motioned for summary judgment on all claims, including the claim for the moldy veneers, which Plaintiff stated was an element of Count I in the Complaint for Breach of Contract. The parties were permitted to supplement the record with evidence relevant to this claim.

4

DiGuiro’s report also addresses the question of whether Atelier, with the advice of CCI, was in any way at fault for the discoloration because of the sealant used. The report indicates that the sealant used did not cause the yellowing, and it was an appropriate choice for preventing the yellowing. Report of Mike DiGuiro at 4-5. This evidence may be relevant to Plaintiff’s separate burden to prove that “the defect occurred in the absence of abnormal use and reasonable secondary causes,” Konica Minolta, 611 F. Supp. 2d at 470, but does not establish a defect.