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Dundee Cement Co. v. Chemical Laboratories Inc.

July 18, 1983

DUNDEE CEMENT COMPANY, A DELAWARE CORPORATION, PLAINTIFF-APPELLANT,
v.
CHEMICAL LABORATORIES, INC., A KANSAS CORPORATION, D/B/A PENN STATE INDUSTRIES, AND DANIEL A. VAUGHN, INDIVIDUALLY, DEFENDANTS-APPELLEES



Appeal from the United States District Court for the Northern District of Illinois. No. 82 C 1591 -- Stanley J. Roszkowski, Judge.

Pell and Coffey, Circuit Judges, and Weigel, Senior District Judge.*fn*

Author: Pell

PELL, Circuit Judge.

In this case we consider whether Illinois tort law permits a plaintiff whose property was not physically damaged to recover for purely economic losses allegedly caused by the negligence of a defendant. The district court granted the appellees' motion to dismiss the complaint on the grounds that the appellees had no legal duty to the appellant and that Illinois law does not permit recovery under a negligence theory for purely economic losses.

I. FACTS

Because the district court granted the appellees' motion to dismiss, Fed. R. Civ. P. 12(b)(6), we will accept the appellant's version of the facts for purposes of this appeal.

On October 31, 1980, a truck owned by Chemical Laboratories, Inc. (Chemical) and driven by its employee Daniel A. Vaughn overturned on United States Route 83 in Lemont, Illinois. The truck was carrying a flammable liquid that spilled onto the road as a result of the accident. Although the liquid did not ignite, state highway authorities closed Route 83 for more than five hours.

Dundee Cement Co. (Dundee) owns a cement terminal whose sole access road connects with the part of Route 83 that was closed after the accident. The company alleges that it lost at least $29,595.02 in business because customers were unable to reach the access road while Route 83 was closed. None of Dundee's property was physically damaged by the spill.

On March 30, 1982, Dundee brought this diversity action in the United States District Court for the Northern District of Illinois. Count I of the complaint sought recovery from Vaughn for lost profits, alleging that he breached his duty to Dundee either by driving negligently or by negligently inspecting and maintaining the truck's brakes. Count II sought to recover from Chemical for the same lost profits, contending as three alternatives that Chemical negligently inspected and maintained the brakes, that it was vicariously liable for Vaughn's negligent driving, and that res ipsa loquitur applied.

The appellees moved to dismiss the complaint for failure to state a claim upon which relief can be granted. Fed. R. Civ. P. 12(b)(6). The district court granted the motion in an order dated September 30, 1982, holding, first, that the appellees had no duty to the appellant because the damages were too indirect and remote as a matter of policy to allow recovery and, second, that Illinois law bars recovery for purely economic losses.

On October 12, 1982, the appellants moved to reconsider the order under rule 59(e) of the Federal Rules of Civil Procedure. The court denied this motion on October 20. The appellants appealed from both orders.

II. DISCUSSION

In Illinois, the state whose law governs this case, a plaintiff in a negligence action must establish the existence of a duty owned by the defendant to the plaintiff, a breach of that duty, and an injury proximately resulting from the breach. Cunis v. Brennan, 56 Ill. 2d 372, 374, 308 N.E.2d 617, 618 (1974). The district court rejected the appellant's contention that the appellees owed a duty to Dundee and held, additionally, that Illinois law bars recovery for purely economic losses.

We will address both of the alternative bases for the court's holding. First, we will consider whether the injury claimed was too remote a consequence of the appellees' negligence to permit the appellant to recover under Illinois law. Second, we will ...


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