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INDUSTRIAL HARD CHROME, LTD. v. HETRAN

December 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 plaintiffs' fourth amended complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). For the reasons that follow, the court grants in part and denies in part defendants' motion.

I. BACKGROUND

Plaintiffs Industrial Hard Chrome, Limited ("IHC"), IHC Limited Partnerships ("IHCLP") and Bar Technologies ("Bar") (collectively "plaintiffs") have filed a five-count complaint against defendants Hetran, Incorporated ("Hetran") and Global Technology, Incorporated ("Global") (collectively "defendants"). Count I is a claim for breach of the sale contract, alleging that an integrated series of machines (the "Cell") did not meet the specifications contained in the agreement. 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 a surety agreement insofar as it failed to correct Hetran's alleged default.*fn1 Count V is a claim for breach of implied warranty of merchantability, alleging that the Cell was not merchantable.

For the sake of brevity, the court will not restate the facts. The facts may be found in Industrial Hard Chrome, Ltd. v. Hetran, Inc., 64 F. Supp.2d 741 (N.D.Ill. 1999). Any additional facts, the court will discuss in further detail under the appropriate section.

In this motion, defendants argue that various counts of plaintiffs' fourth amended complaint be dismissed for failing to state a cause of action.*fn2 Defendants argue that (1) IHCLP and Bar should be dismissed from the complaint because they are not parties to or third-party beneficiaries of the sale contract or the surety agreement; (2) Counts I, III, and IV should be dismissed because plaintiffs did not fully perform their own obligations under the sale contract, which serves as the basis for those counts; and (3) Count II should be dismissed because plaintiffs cannot allege a particular purpose for the Cell as it is a custom-built machine.

II. DISCUSSION

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

In addressing defendants' motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), the court must accept all factual allegations in the complaint as true and draw 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 only dismiss the claim if it appears beyond 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

IHC and Hetran entered into an agreement for the design, manufacture, and delivery of the Cell which would operate in accordance with certain specifications contained in the contract. In addition, IHC entered into a surety agreement with Global, whereby Global agreed to act as the guarantor of the sale contract between IHC and Hetran. While neither IHCLP nor Bar were parties to the contracts, plaintiffs allege that IHCLP and Bar have the right to sue as third-party beneficiaries of the contracts. Defendants contend that IHCLP and Bar are not third-party beneficiaries and, therefore, cannot bring this action against the defendants.

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)). While the third party does not need to be specifically named in the contract, the contract must at least define a third party by description of class, and the particular class-member must be identified at the time performance is due. Id.

In deciding whether IHCLP and Bar should be dismissed from this action, the court will first address Counts I, II, III and V, which relate to the sale contract. Second, the court will ...


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