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U.S. HOME CORP. v. GEORGE W. KENNEDY CONST.

June 7, 1983

U.S. HOME CORPORATION, PLAINTIFF, GEORGE W. KENNEDY CONSTRUCTION COMPANY, INC., ET AL., DEFENDANTS.


The opinion of the court was delivered by: Shadur, District Judge.

MEMORANDUM OPINION AND ORDER

U.S. Home Corporation ("U.S. Home") filed this diversity action against several individuals and corporations that furnished services or products in connection with a sewer construction project for which U.S. Home was general contractor. Two of the defendants moved under Fed.R.Civ.P. ("Rule" 12(b)(6) for their dismissal from this lawsuit:

    1. George W. Kennedy Construction Company, Inc.
  ("Kennedy"), the subcontractor that constructed and
  installed some of the sanitary and storm sewers and
  water mains in the project; and
    2. Armco, Inc. ("Armco"), the manufacturer of water
  mains and sewer components used by Kennedy.

Kennedy's motion scarcely merited discussion and has been denied for reasons announced orally from the bench May 6, 1983. Because Armco's motion requires analysis, it is dealt with in this' memorandum opinion and order.

Count VIII, the only claim directed against Armco, sounds in strict liability:

  12. The truss pipe, its parts and components, were
  manufactured by Defendant, ARMCO, INC. in an
  inherently defective condition, and were in that
  condition at the time the pipe left the possession and
  control of that Defendant.
  13. The defective condition of the pipe rendered the
  sewer system inoperative because of extensive water
  infiltration, the partial and total collapse of
  portions of the system and the truss pipe's total
  failure to operate as required. These failures were
  all the direct and proximate result of inherent
  defects in the truss pipe.

Under Klaxon Co. v. Stentor Electric Manufacturing Co., 313 U.S. 487, 496-97, 61 S.Ct. 1020, 1021-22, 85 L, Ed. 1477 (1941) Illinois choice of law doctrine defines the source of substantive principles to test the legal sufficiency of Count VIII. At the May 6 hearing this Court asked both counsel to address the choice of law question neither had considered in its memoranda. Both have since answered that Illinois also provides the substantive rule of decision, and though neither's analysis is more than superficial*fn1 this Court will treat those answers as a binding agreement to look to Illinois law.

Both parties claim to invoke the recent and authoritative Illinois Supreme Court decision in Moorman Manufacturing Co. v. National Tank Co., 91 Ill.2d 69, 61 Ill.Dec. 746, 435 N.E.2d 443 (1982). As is so often the case under those circumstances, each is partly right and partly wrong.

Armco contends U.S. Home's claimed damages are "economic losses" that Moorman renders non-recoverable under a strict liability theory. Specifically Armco says two types of economic loss are involved:

    1. the costs of repairing (or replacing) the
  allegedly inferior truss pipe and
    2. consequential losses arising from the pipe's
  qualitative defects.

U.S. Home counters that Count VIII escapes Moorman's strict liability limitation by seeking redress for both economic loss and property ...


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