The opinion of the court was delivered by: Aspen, District Judge.
MEMORANDUM OPINION AND ORDER
This action arises from the alleged misconduct of the
defendants in the construction of a custom-built chemical plant
for plaintiff Adams Laboratories. Counts I, III, and IV allege
that defendants improperly induced the plaintiff to enter into
the construction contract, setting forth the alternative theories
of fraudulent, negligent, and innocent misrepresentation. Count
II alleges negligence on the part of the defendants in the
construction of the chemical plant. Counts V through IX seek
damages for alleged breaches of the contract between Jacobs and
Adams.
Defendant Jacobs has moved for summary judgment on two grounds.
First, Jacobs asserts that there are no material issues now in
dispute, and that as a matter of law it is entitled to judgment.
Second, Jacobs argues that because Adams entered into an
agreement to dismiss the litigation as to Pennwalt without an
express reservation of its right to proceed against Jacobs, Adams
has forfeited its cause of action against Jacobs.*fn1
The Seventh Circuit has observed that "[w]ith the ever
increasing burden upon the judiciary, persuasive reasons exist
for the utilization of summary judgment procedure whenever
appropriate." Kirk v. Home Indemnity Co., 431 F.2d 554, 560 (7th
Cir. 1970). Nonetheless, it is not within the province of the
Court to resolve issues of disputed fact in a trial by affidavit.
Moutoux v. Gulling Auto Electric, Inc., 295 F.2d 573, 576 (7th
Cir. 1961). The basic mission of the summary judgment procedure
is to allow the Court to determine whether there are any factual
disputes which require resolution by trial. "[The] party moving
for summary judgment has the burden of clearly establishing the
non-existence of any genuine issue of fact that is material to a
judgment in his favor." Cedillo v. International Association of
Bridge & Structural Iron Workers, Local Union No. 1, 603 F.2d 7,
10 (7th Cir. 1979). Any doubts as to the existence of material
issues of fact must be resolved against the moving party.
Moutoux, 295 F.2d at 576. It is in light of these governing
principles that the Court must assess Jacobs' motions for summary
judgment.
The Misrepresentation Claims
In Counts I, III, and IV, Adams alleges that it was induced to
enter into the contractual relationship with Jacobs on the basis
of Jacobs' misrepresentations as to its qualifications and
expertise. Specifically, Adams alleges that Jacobs claimed to
have fifty years of experience in designing the type of chemical
plant desired by Adams, and that it had successfully designed
several such plants at locations throughout the world. In
addition, Adams asserts that Jacobs represented that a particular
site was appropriate for construction of the plant and that the
proposed plant would cause no environmental problems. Adams
claims that these representations were false when
made, and that its assent to the contract therefore was
improperly induced.
Illinois law clearly recognizes a cause of action for
misrepresentations which induce a party to enter into a
contractual relationship which he otherwise would have foregone.
Eisenberg v. Goldstein, 29 Ill.2d 617, 195 N.E.2d 184, 186, cert.
denied, 377 U.S. 964, 84 S.Ct. 1645, 12 L.Ed.2d 735 (1964). This
is the case irrespective of whether the misrepresentation is
fraudulent. Lake City Corp. v. Michigan Avenue National Bank of
Chicago, 33 Ill.App.3d 100, 337 N.E.2d 251, 255 (1st Dist. 1975).
Jacobs, however, argues that Adams waived its misrepresentation
claims by continuing to adhere to the contractual relationship
between the parties even after it learned of the alleged
misrepresentation. Eisenberg, 195 N.E.2d at 186-187; Bulley &
Andrews, Inc. v. Symons Corp., 25 Ill.App.3d 696, 323 N.E.2d 806,
811 (1st Dist. 1975).
The essential premise of this argument is that Adams learned of
the alleged misrepresentations by early 1975, prior to the time
at which Adams sought Jacobs' assistance in attempting to remedy
the deficiencies in the chemical plant. This premise is based on
the assumption that because Adams knew and complained of
deficiencies in the performance of the plant, it also knew of the
misrepresentations as to Jacobs' qualifications and expertise
with respect to the construction of such a plant.*fn2 In Eisenberg,
the plaintiffs alleged that the defendant had induced their
contractual relationship by misrepresenting the condition of the
building that was the subject of the contract. In that case, the
court held that upon taking possession of the building and
learning of the numerous building code violations, the plaintiffs
should have been aware that the building was not in "first rate
physical condition" as had been claimed by the defendant. Id.,
195 N.E.2d at 186. Similarly, in Symons Corp., the defendant
allegedly had induced plaintiff's agreement to a contract by
misrepresenting the true cost of a particular concrete forming
process. The court observed that once the plaintiff became aware
of the true cost of the process, it could be charged with
awareness of any alleged misrepresentation. Id., 323 N.E.2d at
811.
Eisenberg and Symons Corp., however, are distinguishable. In
the instant case, the relationship between the alleged
misrepresentation as to qualifications and the deficiencies in
the plant's performance is less direct. As a result, plaintiff's
dissatisfaction with the performance of the plant does not
necessarily suggest awareness of the alleged misrepresentations
as to Jacobs' expertise and qualifications. The Court concludes
that Jacobs has failed to satisfy its burden of establishing the
nonexistence of dispute as to the critical factual issue of when
Adams learned of the alleged misrepresentations. Accordingly, its
motion for summary judgment as to Counts I, III, and IV is
denied.*fn3
In Count II, Adams seeks to recover damages for Jacobs' alleged
negligence in the construction of the chemical plant. According
to the plaintiff, the chemical plant built by Jacobs was to
convert raw soapstock into specified quantities of fatty acids,
glycerin, and inorganic salts by a process called saponification
and acidulation. Due to the alleged negligence in the design of
the plant, however, Adams claims that inadequate amounts of fatty
acids, and no glycerin or inorganic salts, were recovered. Jacobs
moves for summary judgment on this claim on the grounds that tort
theories of liability do not permit recovery "for solely
`economic losses' absent property damage or personal injury from
the use of the product." Alfred N. Koplin & Co. v. Chrysler
Corp., 49 Ill.App.3d 194, 7 Ill.Dec. 113, 120, 364 N.E.2d 100,
107 (2d Dist. 1977). Adams counters that since there was damage
to the raw soapstock that is used in the saponification process,
it is entitled to state a claim for negligence.
In Koplin, the court defined economic loss as damages for
inadequate value, repair, and replacement of the defective good,
loss of profits, and diminution in the value of the product. Id.,
7 Ill.Dec. at 116, 364 N.E.2d at 103. Since the complaint alleged
no damage to person or property, the court found that an action
in tort could not lie. Id., 7 Ill.Dec. at 120, 364 N.E.2d at 107.
This case, however, presents a more subtle question of the
dividing line between economic and property damage. The
plaintiff's primary grievance in Count II concerns the plant's
failure to perform up to expectations, and the resultant economic
loss. However, the plaintiff also alleges that the imperfections
in the process caused damage to its property — the raw soapstock
used in the saponification process. This is not diminution in the
value of the product sold by Jacobs to Adams, one of the
definitions of economic loss. Rather, it is diminution in the
value of a separate piece of property that is used in the
process. In this sense, the instant case is more analogous to
Admiral Oasis Hotel v. Home Gas Industries, 68 Ill.App.2d 297,
216 N.E.2d 282 (1st Dist. 1965), wherein the court permitted an
action in negligence for the faulty construction of an air
conditioning unit when there also was damage to carpeting and
furniture from the malfunctioning unit. This alleged loss is
sufficient to state a claim for property damage as required to
sustain a negligence count under Koplin.*fn4 Accordingly, the motion
for summary judgment on Count II is denied.
In Counts V through IX of the Amended Complaint, Adams seeks
the recovery of damages stemming from the alleged breach of
several provisions of the contract between the parties. Jacobs
seeks a judgment in its favor on this issue of ...