The opinion of the court was delivered by: Shadur, District Judge.
MEMORANDUM OPINION AND ORDER*fn1
Slate Printing Company ("Slate") is plaintiff and
counter-defendant in this action, and Metro Envelope Company
("Metro") is defendant and counter-plaintiff. Metro has filed
a cross-complaint against Allied Paper, Inc. ("Allied"),*fn2
and Allied has now moved for its dismissal. Metro also seeks to
impose on Slate the burden of alleged judicial admissions, with
a consequent disposition of the entire litigation adversely to
Slate. For the reasons stated in this memorandum opinion and
(1) Allied's motion to dismiss Metro's
cross-claim is granted.
(2) Metro's motion for designation of judicial
admissions and consequential relief is denied.
Each of Slate, Allied and Metro provided either goods or
services for Metro's ultimate sale of printed envelopes to
Montgomery Ward & Co. ("Ward"). Ward had contracted with Metro
and Slate for the manufacture of envelopes by Metro from paper
printed by Slate. To fulfill its obligations Slate contracted
for purchase of paper stock from Allied, which was unaware of
Slate's other arrangements. Metro's cross-claim however asserts
that "Allied knew that Slate intended to sell the paper to
Dismissal of Metro's Cross-Claim Against Allied
Metro's third-party-beneficiary claim rests on its allegation
that when Allied contracted with Slate "Allied knew that Slate
intended to sell the paper [presumably after processing it] to
another party" — a party that turned out to be Metro. Because
the paper allegedly did not conform to Slate's specifications,
Allied would have breached its contracts with Slate. Metro
claims standing to recover from Allied for that breach. Allied
moves to dismiss Count I on the ground that Metro was not a
third-party beneficiary of the Allied-Slate contract.
Under Erie principles state law provides the rule of decision
in this diversity case. Black-letter principles as to
third-party beneficiaries were stated by the Illinois Supreme
Court in Carson Pirie Scott & Co. v. Parrett, 346 Ill. 252,
257, 178 N.E. 498, 501 (1931) and have been quoted over and
over again for the past 50 years:
. . if a contract be entered into for a direct
benefit of a third person not a party thereto,
such third person may sue for breach thereof. The
test is whether the benefit to the third person is
direct to him or is but an incidental benefit to
him arising from the contract. If direct he may
sue on the contract; if incidental he has no right
to recovery thereon.
Application of the distinction between "direct" and
"incidental" benefit is a function of the intent of the parties
and must be made on a case-by-case basis. Vinylast Corp. v.
Gordon, 10 Ill. App.3d 1043, 1049, 295 N.E.2d 523, 527 (1st
Dist. 1973). More constructive than the direct-indirect
dichotomy, which tends to be result-oriented rather than an
analytical tool, is the recent reaffirmation in Midwest
Concrete Products Co. v. LaSalle National Bank, 94 Ill. App.3d 394,
396, 49 Ill.Dec. 968, 418 N.E.2d 988, 990 (1st Dist.
[I]nasmuch as people usually stipulate for
themselves, and not for third persons, a strong
presumption obtains in any given case that such
was their intention, and that the implication to
overcome that presumption must be so strong as to
amount practically to an express declaration.
Certainly there was no such express declaration in this case.
Nor were the circumstances of the Allied-Slate agreement such
as to overcome the "strong presumption." Illinois cases that
have reached the opposite result typically involve fact
situations like those in Gothberg v. Nemerovski, 58 Ill. App.2d 372,
385-86, 208 N.E.2d 12, 19-20 (1st Dist. 1965) (automobile
liability insurance policy construed to make person injured by
policyholder a third-party beneficiary); Kravitz v. Lake
County, 62 Ill. App.3d 101, 104-05, 19 Ill.Dec. 611,
379 N.E.2d 126, 128-29 (2d Dist. 1978) (land purchasers held able to sue
for violation of agreement between their vendor and county
providing that no water connection fee would be charged); or
Mearida v. Murphy, 87 Ill. App.3d 87, 90, 42 Ill.Dec. 650,
409 N.E.2d 145, 148 (4th Dist. 1980) (adjoining landowners had
standing to enforce an easement ...