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July 11, 1990

W.A. TAYLOR & COMPANY, Plaintiff,

The opinion of the court was delivered by: SHADUR


 W.A. Taylor & Co. ("Taylor") has sued Griswold and Bateman Warehouse Co. ("Griswold"), Quality Distribution Systems ("Quality") and three of Quality's officers (collectively with Quality termed "Quality Defendants"), asserting claims arising from damage to Taylor's products stored at Quality's Copenhagen Warehouse in Franklin Park, Illinois (the "Warehouse"). Now both Griswold and Quality Defendants have independently moved for partial summary judgment, all defendants have jointly submitted a memorandum regarding the scope of the damages properly claimed under Taylor's complaint, and Taylor has moved for a formulation of issues relating to a contractual limitation of liability asserted by Quality Defendants. Having reviewed all of the various submissions relating to each of these issues, this Court:

1. grants Quality Defendants' Fed. R. Civ. P. ("Rule") 56 summary judgment motion as to Taylor's fraud-based claim in principal part (though not entirely) and grants the motion of Quality's three officers (but not Quality itself) as to Taylor's conversion claim, but denies Quality Defendants' Rule 56 motion in all other respects,
2. grants Griswold's summary judgment motion in principal part (though not entirely),
3. finds that on the record tendered to this Court Taylor may not properly include 3,474 cases of product found missing after January 1988 in its damage prayer and
4. finds that there is an issue of fact as to whether Quality may be estopped from asserting its contractual liability limitation.


 Beginning in 1982 Taylor, a distributor of various brands of alcoholic beverages and an affiliate of Hiram Walker & Sons, Inc. ("Walker"), stored its products in Griswold's Warehouse. On August 2, 1985 Walker and Griswold signed a master contract governing their overall relationship.

 On August 12, 1986 Griswold President Patricia Corbett ("Corbett") wrote Taylor that Griswold would be "affiliating its Chicago operations with Quality" effective September 1 (Complaint Ex. A). In fact Griswold and Quality had entered into an agreement four days earlier (on August 8) under which Quality was to sublease the Warehouse, with a license to use the name "Griswold & Bateman of Illinois" (Complaint Ex. B). In essence that agreement effected the sale of Griswold's entire Chicago-based business to Quality and represented an effort on Griswold's part generally to terminate its warehouse activities in the Chicago area. Before mailing that letter to Taylor Corbett sent a draft of the letter to Pagone in order for him to verify the background information that it included as to Quality and the Pagones.

 That change in the warehouse operation did not purport to affect the relationship with Taylor created by the 1985 Walker-Griswold contract. Six months later (February 12, 1987) Walker's Director of Administration Jim Reinhart ("Reinhart") sent Quality's president Joe Pagone ("Pagone") a formal notice that Walker intended to cancel the master contract as of May 31, 1987. That however was not intended to signal an end to the relationship. Instead it was a necessary precondition to a renegotiation of terms: Reinhart's letter also asked that Quality send Taylor a new contract and Rate Quotation for review.

 In response, on February 16 Quality forwarded its proposal in Rate Quotation 00289. Taylor General Traffic Manager Jack Deckert ("Deckert") replied with a counterproposal suggesting lower storage rates. Pagone accepted the new terms and on March 3 sent Taylor Rate Quotation 00272 reflecting Taylor's proposed (and now accepted) changes. Deckert forwarded the new Rate Quotation to Taylor's Legal Department for review, then sent Pagone a Panafax stating the Legal Department required one change in the contract: Sections 3(b) and (c) (relating to transfer of goods and termination of storage) should be amended to require 30 days' advance notice by Quality. Again Quality agreed to Taylor's proposal and sent Rate Quotation 00729 reflecting that change.

 Rate Quotation 00729 was thus the final contract between the parties. It contained a number of provisions now relevant:

1. Taylor's products not held in customs bond were stored at the rate of $ .0715 per carton per month.
2. Taylor's products held in customs bond were stored at the rate of $ .1715 per carton per month.
3. Quality's liability was limited in this manner:
Liability for loss or damage shall be limited to the actual value of the goods stored: and in no case shall the liability exceed 250 times the base storage rate unless an excess value is declared by the storer at the time the goods are stored. There will be a charge of 2/10 of one percent per month on the excess valuation in addition to the base storage rate. *fn2"

 Whenever Taylor shipped any goods to the Warehouse after that, it received by way of acknowledgement a warehouse receipt with this provision on the front (capitals in original):

The goods listed hereon were received in apparent good order, except as noted hereon (contents, conditions and quality unknown) subject to all terms and conditions on the reverse side hereof. Such property to be delivered to THE DEPOSITOR upon payment of all storage, handling and other charges.
The property covered by this receipt has NOT been insured by warehouse operator for the benefit of depositor against fire or any other casualty.

 And this was one of the "terms and conditions on the reverse hereof " (emphasis in original)

Liability and Limitation of Damages -- Sec. 11
(A) The warehouseman shall not be liable for any loss or injury to goods stored however caused unless such loss or injury resulted from the failure of the warehouseman to exercise care in regard to them as a reasonable careful man would exercise in like circumstances and warehouseman is not liable for damages which could not have been avoided by the exercise of such care.
(B) Goods are not insured by warehouseman against loss or injury however caused.
(C) The depositor declares that damages are limited to 250 times the monthly storage rate provided, however, that such liability may at the time of acceptance of this contract as provided in Section 1 be increased in part or all of the goods hereunder in which event a monthly charge of will be made in addition to the regular monthly storage charge. *fn3"

 On August 20 Quality notified Taylor that "we have experienced some water damage to your product," that it was in the process of checking those products and that it would notify Taylor of the results within two weeks. Taylor acknowledged receiving the letter and asked that the results of the inspection be forwarded as soon as possible.

 As of November 24, 1987 Taylor still had not received a report of the damage. Only after Taylor started receiving complaints from its customers did it launch its own investigation of the damage. On January 28, 1988 Taylor and Quality conducted a physical inventory of Taylor's goods in the Warehouse. In a February 4, 1988 letter Taylor presented a written claim to Quality for 661 cases and 156 bottles of its product valued at $ 85,098.53. That claim demanded payment in full for those products. By way of a February 9, 1988 letter Quality denied liability for Taylor's lost products on the basis that the damages suffered resulted from an "unforseeable act of God." On August 18, 1988 Taylor filed this lawsuit seeking recovery for its damaged and lost goods.

 At some time after its February 4, 1988 letter *fn4" Taylor, this time through a review of its own books, discovered missing what it now claims to be an additional 3,474 cases of its product, which it valued at $ 400,676.41, that should have been in Quality's control. Although no formal claim was ever made for those additional missing cases, Taylor seeks recovery for their loss as part of the damages in this suit.

 Based on those facts Taylor's Second Amended Complaint ("Complaint") asserts four charges:

Count 1: Negligence against Quality.
Count 2: Conversion against all Quality-related defendants.
Count 3: Common law fraud against all defendants.
Count 4: Violations of Illinois' Consumer Fraud and Deceptive Practices Act (the "Illinois Act") against all defendants.

 In the current spate of motions Quality Defendants move for summary judgment on Counts 2, 3 and 4; Griswold moves for summary judgment on Counts 3 and 4; together Quality Defendants and Griswold seek to limit the scope of Taylor's claim by excluding the 3,474 cases discovered missing after January 28, 1988; and Taylor moves under Rule 16(c)(1) for a formulation of issues relating to the contractual liability limitation asserted by Quality Defendants. Each of those issues will be addressed in turn.

 Quality Defendants' Summary ...

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