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LANDRY v. KEENE CORP.

January 19, 1993

LAWRENCE L. LANDRY, PHILIP M. GRACE and LAWRENCE G. MARTIN, Liquidating Trustees, Plaintiffs,
v.
KEENE CORPORATION, Defendants.


Lindberg


The opinion of the court was delivered by: GEORGE W. LINDBERG

MEMORANDUM OPINION AND ORDER

 Plaintiffs, Lawrence L. Landry, Philip M. Grace and Lawrence G. Martin, as liquidating trustees for the John D. and Catherine T. MacArthur Foundation ("Foundation"), have filed an asbestos property damage or "abatement" action against defendant Keene Corporation ("Keene") for asbestos-containing fireproofing installed in the building at the time of its construction. Keene has filed a motion to dismiss and a motion for summary judgment.

 Pursuant to the MacArthur Liquidating Trust Agreement, the liquidating trustees own the former Eastern Airlines Reservations Building located at 800 Commerce Drive in Oak Brook, Illinois. Eastern Airlines designed and constructed the building in 1968. The specifications provided that the building was to be fireproofed with a mix of inorganic virgin chrysotile asbestos fibers and white mineral fiber. The fireproofing was purchased from defendant's predecessor corporation, Baldwin-Ehret-Hill Corp, and installed in 1969 by subcontractor, Wilkin Insulation Co. The subcontractor sprayed the asbestos-containing fireproofing onto the structural framework of the second floor in accordance with building specifications.

 In March of 1972, Eastern conveyed title to the building to Bankers Life and Casualty Co. ("Bankers") in a sale/leaseback transaction. Eastern's lease provided that the airline retained the responsibility to "maintain, repair, or rebuild, or remake alterations, replacements, or renewals of any nature to the leased Premises."

 John MacArthur was the sole shareholder of Bankers. After MacArthur died in January of 1978, the Foundation became the sole shareholder. Bankers subsequently conveyed the building in trust to the Foundation in 1984. Eastern continued as lessee under the lease until September 26, 1990 when the lease was terminated during Eastern's bankruptcy proceedings. Throughout the duration of Eastern's lease, neither Bankers nor the Foundation trustees were involved in the maintenance or repair of the building.

 Bankers also conveyed the Gulf & Western building to the Foundation in 1984, along with documents which outlined the multi-million dollar problem of removing the building's asbestos-containing fireproofing. Plaintiff Lawrence Martin ("Martin") was Bankers' vice-president of real estate and had general supervisory authority over the Gulf & Western building. By letter dated March 2, 1982, Lehrer/McGovern, Inc. sent a proposal for renovation of the Gulf & Western building to Phil O'Conner, a Bankers' employee who reported directly to Martin. The proposal provided that if the asbestos fireproofing exceeded certain quantities, it would have to be removed according to certain procedures at a cost of $ 1,400,000. By memo dated March 3, 1982, Martin was informed that the current estimate for removing the asbestos fireproofing was $ 1,900,000. Another proposal for structural work on the Gulf & Western building dated April 1, 1983 listed three options, each of which called for asbestos removal in compliance with the latest EPA methods at costs ranging up to $ 900,000.

 In March of 1983, Martin requested approval for installation of a sprinkler system in the Gulf & Western building at a cost of $ 1,401,250. By memo dated January 10, 1983, Martin was informed that a tenant was testing the asbestos-containing fireproofing and that this "may result in a confrontation between us and [the tenants] where they will demand that we do the installation at night because of the safety factor of the employees."

 On January 16, 1984, Bankers' employee Michael Curtis, who reported to O'Conner, signed a $ 685.25 check requisition form for air sampling the Gulf & Western building for asbestos. Curtis testified that he was informed the tests were conducted to try and calm tenants' fears over the presence of asbestos-containing products in the building.

 Martin and Curtis were subsequently hired by the Foundation because of their familiarity with the Eastern building, the Gulf & Western building and other properties conveyed by Bankers to the Foundation. The Foundation discovered that the Eastern building contained asbestos during a tour given to representatives of the Foundation in January of 1987 or 1988. The information was elicited from Eastern in response to specific questions by Curtis.

 Eastern discovered that the building's fireproofing contained asbestos in 1984 when it was planning to replace the roof. The presence of extensive amounts of asbestos-fireproofing materials in the building was confirmed in an asbestos assessment study conducted by Hygienetics, Inc. Eastern hired Hygienetics to perform the study to determine how the presence of asbestos would affect its attempt to market the building's lease. The Foundation did not receive a copy of the study until late 1990.

 Plaintiffs commenced this action on May 14, 1991 to recover for existing property damage to the building caused by the presence of the asbestos as well as damages to be sustained from asbestos removal. Defendant subsequently filed a motion to dismiss and a motion for summary judgment.

 Discussion

 In resolving a motion to dismiss for failure to state a claim pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, the court must accept as true all well-pleaded allegations of fact and draw all inferences in the light most favorable to plaintiffs. Martin v Youngstown Sheet & Tube Co., 911 F.2d 1239, 1241 (7th Cir 1990). A complaint should not be dismissed for failure to state a claim unless it is beyond doubt that plaintiffs could prove no set of facts which would entitle them to relief. Conley v Gibson, 355 U.S. 41, 45-46, 78 S. Ct. 99, 102, 2 L. Ed. 2d 80 (1957).

 Rule 12(b)(6) provides that "if matters outside the pleadings are presented to and not excluded by the court, the motion [to dismiss) shall be treated as one for summary judgment pursuant to Rule 56." Under Rule 56(C), summary judgment is appropriate if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." FRCP 56(C). Once the moving party shows that there are no genuine issues of material fact, the burden of proof shifts to the nonmoving party to designate specific facts showing that there is a genuine issue for trial. Celotex Corp. v Catrett, 477 U.S. 317, 324, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986). To defeat a motion for summary judgment, the nonmoving party must "make a showing sufficient to establish the existence of [the] elements essential to that party's case." Id at 322.

 Defendant contends that plaintiffs' complaint should be dismissed pursuant to the Illinois construction statute of repose. The construction statute of repose, section 13-214(b) of the ...


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