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INDUSTRIAL HARD CHROME. LTD. v. HETRAN

September 2, 1999

INDUSTRIAL HARD CHROME, LTD., IHC LIMITED PARTNERSHIP, AND BAR TECHNOLOGIES, L.L.C., PLAINTIFFS,
v.
HETRAN, INC. AND GLOBAL TECHNOLOGY, INC., DEFENDANTS.



The opinion of the court was delivered by: Alesia, District Judge.

  MEMORANDUM OPINION AND ORDER

Before the court is defendants motion to dismiss, pursuant to Federal Rules of Civil Procedure 12(b)(6) and 12(f), plaintiffs' third amended complaint. For the following reasons, the court grants in part and denies in part defendants' motion to dismiss.

I. BACKGROUND

Plaintiffs Industrial Hard Chrome, Limited ("IHC"), IHC Limited Partnership ("IHCLP") and Bar Technologies, L.L.C. ("Bar") (collectively "plaintiffs") bring this diversity action against defendants Hetran, Incorporated ("Hetran") and Global Technology, Incorporated ("Global") (collectively "defendants"). IHC, IHCLP, and Bar are all located in Illinois with their principal places of business in Illinois. Hetran is a New York corporation with its principal place of business in Pennsylvania. Global is a Pennsylvania corporation with its principal place of business in Pennsylvania. The amount in controversy exceeds $75,000. Thus, this court has original subject matter jurisdiction pursuant to 28 U.S.C. § 1332.

This action arises out of a contract dispute between plaintiffs and defendants for the design, manufacture and delivery of an integrated series of machines (the "Cell"). Pursuant to this contract, Hetran agreed to manufacture a Cell that would function in accordance with certain specifications. Those specifications required that the Cell operate at a rate of eighty feet per minute in order to straighten steel rods, that are one to six inches in diameter, in a single pass. In turn, IHC agreed to pay Hetran a modified amount of $5,452,325.28 for the Cell. Further, IHC entered into a surety agreement in which Global agreed to act as a surety, or guarantor, of the sales agreement between IHC and Hetran. Plaintiffs now allege that the Cell delivered by Hetran failed to function pursuant to the contract specifications and that Global failed to correct this alleged default.*fn1 Any additional facts, the court will discuss in further detail under the relevant claim.

As a result of this dispute, IHC, IHCLP, and Bar have filed a five-count complaint against Hetran and Global. Count I is a claim for breach of contract, alleging that the Cell did not meet the specifications contained in the sale contract. Count II is a claim for breach of implied warranty of fitness for a particular purpose, alleging that Hetran did not design or manufacture a Cell that was fit to operate at particular specifications. Count III is a claim for breach of express warranty, alleging that the Cell delivered breached the equipment warranty contained in the sale contract. Count IV is a breach of contract claim, alleging that Global breached the surety agreement insofar as it failed to correct Hetran's alleged default. Count V is a claim for breach of implied warranty of merchantability, alleging that the Cell was not merchantable.

Defendants argue all five counts should be dismissed for various reasons. In addition, defendants argue that IHCLP and Bar should be dismissed because they are not proper plaintiffs. The court addresses defendants' arguments below.

II. DISCUSSION

A. Standard for Deciding a Rule 12(b)(6) Motion to Dismiss

In addressing defendants' motion to dismiss pursuant to Federal Rules of Civil Procedure 12(b)(6) and 12(f),*fn2 the court assumes that all factual allegations in the complaint are true and draws all reasonable inferences in favor of plaintiffs. Gomez v. Illinois State Bd. of Educ., 811 F.2d 1030, 1039 (7th Cir. 1987); Cromley v. Board of Educ. of Lockport, 699 F. Supp. 1283, 1285 (N.D.Ill. 1988). If, when viewed in the light most favorable to the plaintiffs, the complaint fails to state a claim upon which relief can be granted, the court must dismiss it. See FED. R. CIV. P. 12(b)(6); Gomez, 811 F.2d at 1039. However, the court may dismiss the claim only if it appears beyond a doubt that the plaintiffs can prove no set of facts in support of their claim that would entitle them to relief. See Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957).

While the Federal Rules of Civil Procedure provide a liberal notice pleading standard, the complaint must include either direct or inferential allegations with respect to all material elements of the claims asserted. Perkins v. Silverstein, 939 F.2d 463, 466 (7th Cir. 1991). Bare legal conclusions attached to narrated facts will not suffice. Strauss v. City of Chicago, 760 F.2d 765, 768 (7th Cir. 1985).

B. IHCLP and Bar's Claims as Third-Party Beneficiaries

IHCLP and Bar join IHC in the complaint against Hetran and Global. All of the claims alleged in plaintiffs' third amended complaint are based upon the contract entered into between IHC and Hetran for the manufacture and sale of the Cell. Neither IHCLP nor Bar was a party to the contract. However, plaintiffs allege that IHCLP and Bar have the right to sue as third-party beneficiaries to the contract.

It is well-settled under Illinois law that a third party may sue for breach of contract if that contract was entered into for the direct benefit of that third party. F.W. Hempel & Co., Inc. v. Metal World, Inc., 721 F.2d 610, 613 (7th Cir. 1983) (citing "the seminal and still vital Illinois authority" Carson Pirie Scott & Co. v. Parrett, 346 Ill. 252, 178 N.E. 498, 501 (1931)). A party is a "direct" beneficiary — and therefore a third-party beneficiary to the contract — if the parties to the agreement manifested an intent to confer a benefit upon that third party. Hunter v. Old Ben Coal Co., 844 F.2d 428, 432 (7th Cir. 1988). While a third party does not have to be specifically named in the contract, the contract must at least define a th ...


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