get work or bonding. It would not be surprising if Safeco, Rush, or Morse/Diesel's animosity towards Windowmaster resulted in harm to Windowmaster's reputation in the construction industry. But the touchstone of tort law generally, and the detriment element of the Illinois tort of misrepresentation in particular, is causation. How Windowmaster's cooperation with Safeco pursuant to the July 16 letter agreement -- cooperation that was full and substantial, see para. 22 -- resulted in its getting no work in the industry is not reasonably gathered. The lack of a link between Windowmaster's cooperation and its present inability to find work may explain why Windowmaster has not sought compensatory damages from Safeco for the five harms asserted in Count 5, but instead seeks punitive damages only.
Because Windowmaster has failed to allege a detriment resulting from Safeco's alleged misrepresentations, it has not stated a claim for misrepresentation under Illinois law. For this reason, the court dismisses Count 5 of Windowmaster's Third Amended Complaint under Rule 12(b) (6), Fed.R.Civ.P.
Morse/Diesel's Motion for Summary Judgment
The court now turns to Morse/Diesel's motion for summary judgment on a portion of Count 1 of Safeco's cross-claim. There Safeco alleges that Morse/Diesel is liable for $ 1,177,341.88 paid to Windowmaster for work in progress and materials at the time Morse/Diesel declared Windowmaster in default and terminated its construction subcontract. The gravamen of Safeco's overpayment claim is had Morse/Diesel been more diligent in scrutinizing Windowmaster's requests for payment, Rush would not have paid Windowmaster amounts that were not due, which allegedly prejudiced Safeco's position as surety for the project.
Morse/Diesel's motion turns on who did bear responsibility for supervising payments to Windowmaster -- or more importantly, who did not. It is undisputed that Rush entered into a written Construction Agreement with Morse/Diesel for construction of the new hospital wing. According to Article 15 of the General Conditions of the Agreement, a contractor who desired work-in-progress payments or payments for materials had to apply to either the "Owner" -- named under the General Conditions as Rush and "its designated representatives, successors and assigns" in Article 1.A -- or the "Owner's Representative," who was Schal Associates. In certain cases Schal could submit payment applications to Hansen Lind/Meyer Solomon Cordwell Buenz, Rush's architect on the project. Once approved, payments were the responsibility of Rush or Schal.
Windowmaster was a subcontractor on the Rush project. Windowmaster's subcontract with Morse/Diesel incorporated the General Conditions of the Rush Construction Agreement. According to the subcontract, "Payment to [Windowmaster] shall be made either directly from the Owner" -- again defined under the subcontract as Rush -- "or otherwise only from funds [Morse/Diesel] has received from the Owner for payment to [Windowmaster] for this purpose." The subcontract provided further: "Payments, less retentions, shall be made in accordance with the procedure as set forth in the Owner's General Conditions."
From the documents submitted to the court it is apparent that the General Conditions are the major source of obligations relating to payments. Under the General Conditions, only Rush, Schal, and Rush's architect bore any measure of contractual responsibility for overseeing payments. No clause in the General Conditions obligates Morse/Diesel to screen or otherwise approve of payments to subcontractors like Windowmaster. Windowmaster's subcontract for its part places only one duty on Morse/Diesel with respect to payment: it must forward moneys received from Rush for the account of Windowmaster to Windowmaster.
Safeco contends that the General Conditions obligated Morse/Diesel to screen payment applications because the subcontract incorporated the General Conditions, and thus whatever Rush and Schal had to do under the general contract, Morse/Diesel had to do on its subcontracts. Safeco also claims that on numerous occasions Morse/Diesel made recommendations on Windowmaster's payment requests. Regardless of what extrinsic facts Safeco can bring to bear, however, this court must ignore them when faced with unambiguous promises. See Metalex Corp. v. Uniden Corp. of America, 863 F.2d 1331, 1333 (7th Cir. 1988) (construing Illinois law -- court's sole responsibility when faced with unambiguous contract is to declare its meaning). The contracts before the court are unambiguous on the issue of who bears responsibility for screening payments. The General Conditions indeed incorporate subcontracts when subcontracts are in view, but nothing in the General Conditions transposes Rush or Schal's responsibility under the Contract to Morse/Diesel in the event of a subcontract. As for the Windowmaster subcontract, it explicitly states that payments are to be made in accordance with the procedures set forth in the General Conditions. This explicit language defeats any suggestion by Safeco that this court must impose additional duties on Morse/Diesel -- particularly when the claimed duty arises not from disputed language, but from sheer analogy.
For these reasons, Morse/Diesel is entitled to summary judgment on Safeco's cross-claim of liability for overpayments made to Windowmaster.
Safeco's Motion for Summary Judgment
Safeco lastly seeks summary judgment on Count 2 of the Amended Complaint of Rush Presbyterian St. Luke's Medical Center. In that count Rush seeks equitable reformation of Safeco's bond for Windowmaster on grounds of mutual mistake. The Windowmaster bond nominally ran in favor of Morse/Diesel, Inc.; Safeco has admitted that it should have run in favor of Morse/Diesel of Illinois, Inc., and Rush wants to stretch the bond even further to cover itself.
The first bridge which the court must cross is the law which governs Rush's claim. In earlier proceedings in this case before Judge Frank J. McGarr, the court dismissed Rush's claim for recovery on Safeco's bond, stating that Rush could not enforce rights on a bond which expressly limited the right of action to Morse/Diesel alone. The Seventh Circuit affirmed this decision. The court reached its conclusion after noting that neither Rush nor Safeco had raised the issue of the proper governing law in either the district court or the court of appeals. The court thus held that the parties had stipulated to the application of Illinois law. See Rush Presbyterian St. Luke's Med. C. v. Safeco Ins. Co., 825 F.2d 1204, 1205-07 (7th Cir. 1987).
This time around Safeco was not sure that it wished to make the same stipulation. It thus brought Illinois and Florida law to the court's attention, never taking a position as to which applies. Safeco could have taken Rush's offer to stipulate to Illinois law, but hedging its bet, Safeco leaves it to the court to decide which law is proper.
The federal courts are obliged to rely on the conflict-of-law principles of the forum state in deciding the governing law in diversity cases. See Klaxon Co. v. Stentor Co., 313 U.S. 487, 495-96, 85 L. Ed. 1477, 61 S. Ct. 1020 (1941). The most recent Seventh Circuit interpretation of Illinois choice of law rules in contract suits is set forth in Palmer v. Beverly Enterprises, 823 F.2d 1105, 1106-10 (7th Cir. 1987). There the court noted that the Illinois courts were moving toward the "most significant contacts" rule of the Restatement (Second) of Conflict of Laws § 188 (1971) (hereinafter "Restatement"). The court in Purcell & Wardrope Chtd. v. Hertz Corp., 175 Ill. App. 3d 1069, 1079, 530 N.E.2d 994, 1001, 125 Ill. Dec. 585 (1988), announced what the Seventh Circuit predicted, and listed these factors which the court must consider in determining which state has the most significant relationship to a contract claim: the place of negotiation, the place of contract execution, the place of performance, the location of the subject matter of the contract, and the domicile, residence, place of incorporation, and place of business of the parties.
From these elements it appears that three states have relationships to this case: Florida, Illinois, and Washington. Florida is where Windowmaster requested and was given the bond. Illinois is where the bond was to be performed, for if Windowmaster defaulted, payment was to go to Morse/Diesel Inc. of Illinois.
The subject matter of the bond also was in Illinois. The domiciles, residences, and places of incorporation and business of the parties to the bond are Washington (Safeco) and Florida (Windowmaster).
Deciding which state has the most significant relationship to Rush's claim involves more than totalling numbers of contacts. The Restatement urges courts to evaluate these contacts "according to their relative importance with respect to the particular issue." Restatement § 188(2). Even § 193 of the Restatement, which suggests that the law of the location of the insured risk governs surety contracts, only goes so far:
The validity of a contract of . . . surety . . . insurance and the rights created thereby are determined by the local law of the state which the parties understood was to be the principal location of the insured risk during the term of the policy, unless with respect to the particular issue, some other state has a more significant relationship under the principles stated in § 6 to the transaction and the parties, in which event the local law of the other state will be applied.