that the bin could safely store grain throughout the most
severe Wisconsin winters. Amended Complaint ¶ 7. Further,
plaintiff alleges that defendant was aware of the purpose for
which the bin was to be used and that both plaintiff and Porter
were relying on defendant's judgment at the time of sale to
select a suitable bin. Id., ¶ 9.
Plaintiff alleges that the bin contains certain design
defects which cause it to be unsuitable for its intended
purpose and unsafe to persons working in and around the
bin.*fn2 On January 14, 1979, the roof of the bin collapsed
causing damage to the bin and related equipment. Repairs to the
bin were made at a cost of $57,394.76. Plaintiff also alleges
that the collapse of the roof of the bin cost plaintiff
$100,000 in lost profits from anticipated grain storage
In addition, plaintiff alleges that the bin is in need of
further repairs at an estimated cost of $210,000. These
repairs, plaintiff alleges, will occasion additional lost
rental revenues of $25,000.
Plaintiff seeks recovery of both its allegedly already
incurred and anticipated repair costs and lost rentals.
Plaintiff also seeks to recover the purchase price of the bin.
Lastly, plaintiff seeks recovery of those financing costs for
its purchase of the bin that accrued during the period the bin
was in disuse due to the collapse of the roof; i.e.,
$32,250. The total recovery sought by plaintiff is $700,000,
plus attorney's fees.
Plaintiff's theories of recovery are set forth in the four
counts of its amended complaint. Count I alleges defendant's
liability in strict tort. Count II alleges liability upon a
negligence theory. Count III seeks recovery pursuant to
defendant's alleged express warranties and implied warranties
of merchantability and fitness for a particular purpose.
See Ill.Rev.Stat. ch. 26, §§ 2-313, 2-314, and
2-315. Count IV contains plaintiff's class allegations made
pursuant to Rule 23 of the Federal Rules of Civil Procedure.
Pending before the Court is defendant's motion to dismiss
each count in plaintiff's amended complaint. Motions to dismiss
are not to be granted "unless it appears beyond doubt that the
plaintiff can prove no set of facts in support of his claim
which would entitle him to relief." Conley v. Gibson,
355 U.S. 41, 45-46, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957).
When ruling upon a motion to dismiss a court shall accept as
true all well-plead factual allegations. Cruz v. Beto,
405 U.S. 319, 92 S.Ct. 1079, 31 L.Ed.2d 263 (1972). For the
reasons set forth below, the Court denies defendant's motion in
part and grants the motion in part.
Counts I and II — Tort
Before addressing defendant's challenge to the sufficiency of
plaintiff's tort claims, the Court must ascertain what law
governs those claims.*fn3 This being an action founded upon
the Court's diversity jurisdiction, it is bound to apply state
substantive law, Erie Railroad Co. v. Tompkins,
304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), and the
choice-of-law principles of Illinois in order to determine
which state's law shall govern. Klaxon Co. v. Stentor
Electric Manufacturing Co., 313 U.S. 487, 61 S.Ct. 1020,
85 L.Ed. 1477 (1941). With respect to tort law claims, Illinois
courts apply the substantive law of the place of injury unless
the application of those factors set forth in the Restatement
(Second) of Conflict of Laws §§ 6 and 145*fn4 (1971)
that another forum has a more significant relationship to the
claim. Ingersoll v. Klein, 46 Ill.2d 42, 48,
262 N.E.2d 593, 596 (1973).
In the instant case, only Illinois and Wisconsin bear any
significant relationship to plaintiff's tort claims. Between
the relevant tort law of those jurisdictions, a true conflict
exists. Because plaintiff alleges only injury related to the
bin itself and consequent lost income, plaintiff's claims are
for economic loss only.*fn5 See Alfred N. Koplin Co. v.
Chrysler Corp., 49 Ill. App.3d 194, 199, 7 Ill.Dec. 113,
116-17, 364 N.E.2d 100, 103-04 (1977). State jurisdictions are
divided as to whether purely economic loss is recoverable
pursuant to tort law theory.*fn6 See id. at 200, 7
Ill.Dec. at 118-19, 364 N.E.2d at 105-06, and cases cited
therein. Wisconsin is among the minority of jurisdictions which
permit the recovery in tort of economic loss. LaCrosse v.
Schubert, Schroeder & Associates, Inc., 72 Wis.2d 38,
44-45, 240 N.W.2d 124, 127 (1976). The issue is one which the
Illinois Supreme Court has yet to address and there is a
conflict between those Appellate Courts of Illinois that have
decided the issue. Compare Alfred N. Koplin Co. v. Chrysler
Corp., 49 Ill. App.3d 194, 7 Ill.Dec. 113, 364 N.E.2d 100
and Rhodes Pharmacal Co. v. Continental Can Co.,
72 Ill. App.2d 362, 219 N.E.2d 726 (1966) (economic loss not
recoverable in tort) with Moorman Manufacturing Co. v.
National Tank Co., 92 Ill. App.3d 136, 47 Ill.Dec. 186,
414 N.E.2d 1302 (1980) (economic loss recoverable in tort).
When a federal court sitting in diversity is confronted with
a state law question that has not been decided by the highest
court of the particular state, it is incumbent upon the federal
court to "discern" state law by examining relevant lower court
decisions as well as other relevant authority. McKenna v.
Ortho Pharmaceutical Corp., 622 F.2d 657, 661 (3d Cir.),
cert. denied, 449 U.S. 976, 101 S.Ct. 387, 66 L.Ed.2d
237 (1980). Recently, the United States Court of Appeals for
the Third Circuit was called upon to discern Illinois' rule of
law with respect to the recovery of economic loss in tort and
concluded that it was Erie-bound to follow the rule of
Rhodes and Koplin barring such recovery.
Jones & Laughlin Steel Corp. v. Johns-Manville Sales
Corp., 626 F.2d 280, 285 (3d Cir. 1980); See also
Pittway Corp. v. Lockheed Aircraft Corp., 641 F.2d 524
(7th Cir., 1981). This Court concurs with the reasoning of the
Third Circuit and adopts that reasoning
herein.*fn7 Hence, the Court is faced with a true conflict
between Wisconsin and Illinois law as to the availability of
economic loss recovery in tort.
As stated, Illinois tort choice-of-law rules presumptively
favor application of the substantive law of the place of
injury. Ingersoll v. Klein, 46 Ill.2d at 48, 262
N.E.2d at 596; see also In re Air Crash Disaster Near
Chicago Illinois on May 25, 1979, 644 F.2d 594 (7th Cir.,
1981). The Court finds that those pertinent factors*fn8
favoring application of Illinois law are that the conduct
alleged to have caused plaintiff's injuries occurred in
Illinois and that defendant is an Illinois resident. Illinois
has an interest in the application of its rule disallowing the
recovery of economic loss in tort to the commercial dealings of
its resident defendants. Pittway Corp. v. Lockheed Aircraft
Corp., 641 F.2d 524 (7th Cir., 1981). On the other hand,
the factors favoring the application of Wisconsin law are no
less significant. The alleged injury occurred in Wisconsin and
defendant is a Wisconsin resident. Wisconsin has an interest in
its rule allowing the redress of economic loss in tort actions
and in the application of that rule to permit recovery for
resident plaintiffs. Id. In sum, the factors favoring
the application of Wisconsin law are of equal significance as
those favoring the application of Illinois law. Therefore, the
latter do not overcome the presumption in favor of application
of the law of the place of injury, Wisconsin.
The Court now turns to defendant's arguments in support of
dismissal of Counts I and II. Defendant's argument that Counts
I and II should be dismissed because they allege economic loss
only is resolved in plaintiff's favor by the above discussion.
See LaCrosse v. Schubert, Schroeder & Associates,
Inc., 72 Wis.2d at 44-45, 240 N.W.2d at 127. Defendant
also argues that plaintiff's negligence claim is legally
insufficient because it does not contain an allegation pleading
the absence of contributory negligence. This argument is
specious. Federal procedural law, generally applicable to
diversity actions, Gilmore v. Witschorek, 411 F. Supp. 491,
495 (E.D.Ill. 1976); Wright & Miller Federal Practice
& Procedure § 1343, does not require a plaintiff to
plead the absence of contributory negligence in order to state
a claim in negligence.*fn9 Fed.R.Civ.P. 8(c); see Merit
Insurance Co. v. Colao, 603 F.2d 654, 659 (7th Cir. 1979).
With respect to plaintiff's warranty claims, the Court finds
that Illinois law governs. Warranty claims are in the nature of
contract claims. Alfred N. Koplin Co. v. Chrysler
Corp., 49 Ill. App.3d at 203-04, 7 Ill.Dec. at 120, 364
N.E.2d at 107. In the instant case, the parties to the contract
of sale expressly agreed that the contract would be governed by
Illinois substantive law. Defendant's Exhibit E. Plaintiff's
contract claims are governed by Illinois' adopted version of
the Uniform Commercial Code (the "Code"), Ill.Rev.Stat. ch. 26,
§§ 1-101 through 10-104. The Code's pertinent choice-of-law
rule is found in Ill.Rev.Stat. 1-105(1). Section 1-105(1)
provides that agreements as to applicable law will be honored
provided the chosen forum bears an "appropriate relation" to
the transaction. Defendant, one of the parties to the contract,
is an Illinois resident and the contract was apparently
executed in Illinois. Therefore, the Court finds that Illinois
bears an appropriate relation to the contract between defendant
and Porter, see Seeman v. Philadelphia Warehouse Co.,
274 U.S. 403, 47 S.Ct. 626, 71 L.Ed. 1123 (1927), and,
consequently, the Court will enforce their agreement to make
Illinois substantive law binding.
Plaintiff sues both on an express warranty and implied
warranties of merchantability and fitness for particular use.
The warranty provision of the contract provides:
The seller warrants products of its manufacture
(excluding electric motors) to be free from
defects in materials and workmanship if properly
installed cared for and operated under normal
conditions with competent supervision. THERE ARE
NO WARRANTIES OF MERCHANTABILITY OR OTHERWISE
WHICH EXTEND BEYOND THE DESCRIPTION OF THE FACE
HEREOF AND NO WARRANTIES OF ANY KIND WITH RESPECT
TO ELECTRIC MOTORS.
Seller's liability is limited to repair and
replacement at its factory of goods or parts
defective in material or workmanship for a period
of 12 months from the date of delivery to
purchaser, PROVIDED that no liability shall exist
during this period unless full payment has been
received. In no event shall seller be liable for
damages for injury to persons or property or for
incidental or consequential damages.
The above warranty supersedes all other warranties
and no person, agent, or dealer is authorized to
give any warranties or to assume any other
liability for the seller.
Defendant's Exhibit E.
Plaintiff's express warranty*fn10 is alleged in paragraph 7
of its amended complaint, which states: "At the time it
[defendant] sold the bin to Porter and R&L, representatives and
employees of Chicago Eastern expressly represented and
warranted that the Bin would be capable of enduring through the
most severe winters in Green County, Wisconsin." Plaintiff
makes the following allegation in support of its claim of an
implied warranty of fitness for a particular use: "At the time
of contract with Porter and R&L, Chicago Eastern had reason to
know and knew the particular purpose for which the Bin was
required and that Porter and R&L were relying on Chicago
Eastern's skill or judgment to select and furnish a suitable
Bin." Amended Complaint, ¶ 9.
The warranties upon which plaintiff relies are governed by
sections 2-313, 2-314, and 2-315 of the Ill.Rev.Stat. ch. 26,
§§ 2-313 through 2-315. Section 2-313 governs express
warranties. Section 2-314 implies a warranty of merchantability
into all sales contracts governed by the Code. Section 2-315
provides what circumstances will cause a warranty of fitness
for a particular purpose to be implied into a sales contract.
Express warranties and warranties implied by sections 2-314 and
2-315 may be excluded pursuant to section 2-316 of the Code.
That section provides, in pertinent part:
(1) Words or conduct relevant in the creation of
an express warranty and words or conduct tending
to negate or limit warranty shall be construed
wherever reasonable as consistent with each other;
but subject to the provisions of this Article on
parol or extrinsic evidence (Section 2-202)
negation or limitation is inoperative to the
extent that such construction is unreasonable.
(2) Subject to subsection (3), to exclude or
modify the implied warranty of merchantability or
any part of it the language must mention
merchantability and in case of a writing must be
conspicuous, and to exclude or modify any implied
warranty of fitness the exclusion must be by a
writing and conspicuous. Language to exclude all
implied warranties of fitness is sufficient if it
states, for example, that "There are no warranties
which extend beyond the description on the face
The Code also permits a seller to effectively limit his damages
for breach of warranty, provided the limitation is not
unreasonable or unconscionable. Ill.Rev.Stat. ch. 26, §§
2-316(4), 2-718, and 2-719.