United States District Court, Northern District of Illinois, E.D
January 3, 1985
IN RE CONTINENTAL ILLINOIS SECURITIES LITIGATION.
The opinion of the court was delivered by: Grady, District Judge.
This case is before the court on defendant John A. Redding's
motion to dismiss Count I of plaintiff FDIC's first amended
complaint. The motion raises three arguments. First, Redding
asserts that Count I fails to state a claim because an action
against a corporate officer for the negligent performance of
employment duties sounds in contract, not tort. Second, Redding
contends that in any event the FDIC's tort action is barred by
Moorman Manufacturing Co. v. National Tank Co., 91 Ill.2d 69,
61 Ill.Dec. 746, 435 N.E.2d 443 (1982), since it seeks recovery
for purely economic losses. Redding's final argument is that
the FDIC lacks standing to sue him for negligence because the
Bank's purported assignment of its claim against Redding was
defective. I will address these arguments separately.
I. Is The FDIC Limited To A Contract Action?
Redding contends that inasmuch as the FDIC's action against him
is based on the negligent performance of employment duties, the
action is one for breach of contract and may not be brought in
tort. I disagree. `Every employment relationship arises out of
a contract, and therefore the logical extension of Redding's
argument would be that no employer can ever sue an employee for
negligence. In Illinois, however, "an employee owes to his
employer the duty of exercising reasonable care in the
performance of his [employment]
duties." Stawasz v. Aetna Insurance Company, 99 Ill. App.2d 131,
240 N.E.2d 702, 704 (2d Dist. 1968). When an employee
negligently performs his duties, the employer may sue to
recover for damages caused by the negligence. Id. See also 3A
W. Fletcher, Cyclopedia Of The Law Of Corporations § 1029
(Perm.Ed. 1984) ("The liability of . . . [corporate] officers
. . . is not limited to [actions for] breaches of trust . . . but
extends also to negligence.") Since I find nothing in the
Illinois case law which suggests that the FDIC should be
limited to a contractual remedy, I reject Redding's argument
that the FDIC's negligence allegations fail to state a claim
upon which relief could be granted.*fn1
II. Does The Moorman Doctrine Bar Plaintiff's Action?
Redding next argues that the decision of the Illinois Supreme
Court in Moorman, supra, bars all negligence actions which
seek to recover purely economic losses, and therefore precludes
the FDIC from pursuing this tort claim. Once again, I disagree.
The Moorman case involved damages caused by a defective
product. Although Moorman contains some broad language which
would appear to support Redding's position, my reading of the
opinion indicates that in reaching its decision, the Court was
motivated primarily by a desire to avoid infringing on the
Uniform Commercial Code ("UCC") in defective products cases.
The Court emphasized time and again that the UCC provided the
proper framework for recovery of economic losses in such cases,
and concluded: "When the defect is of a qualitative nature and
the harm relates to the consumer's expectation that a product
is of a particular quality so that it is fit for ordinary use,
contract, rather than tort, provides the appropriate set of
rules for recovery." Id. at 88, 435 N.E.2d at 451.
Given the Court's focus on the defective products area, and the
opinion's repeated references to and utilization of examples
involving the UCC, warranty law, and consumer expectations, it
seems clear that Moorman itself does not bar this negligence
action, which has nothing to do with the sale or use of
defective products, the UCC or the disappointed expectations of
a consumer.*fn2 Accordingly, Redding's second argument is
III. Did The Assignment Give The FDIC Standing To Pursue This
Action Against Redding?
Finally, Redding argues that the Bank's assignment to the FDIC
of Count V of the prior derivative action was insufficient to
afford the FDIC standing to pursue this claim. Specifically,
Redding points out that before the assignment was made, this
court dismissed Count V against Redding for failure to state a
claim. See Order of April 2, 1984. According to Redding,
therefore, there was simply no claim to be taken by the
assignee. The FDIC responds that Section 6.1 of the Assignment
expressly encompassed "any or all claims" the Bank may have had
as of the commencement date, and thus included the negligence
claim now asserted against Redding.
I am inclined to agree with the FDIC that the language of
Section 6.1 is sufficiently broad to encompass this cause of
action. But I am unable to say that Redding's point is entirely
lacking in nuisance value. Accordingly, in order to avoid
needless uncertainty over this detail, I believe the Bank and
the FDIC would be well-advised to execute another assignment of
the claim, and to amend the complaint to reflect the new
assignment. Leave is granted to amend within the next 30 days.
For the reasons stated above, the motion to dismiss is denied,
except that the FDIC should obtain a new assignment of the
claim against Redding and the other bank employee