The opinion of the court was delivered by: Ronald A. Guzman, United States Judge
MEMORANDUM OPINION AND ORDER
Plaintiffs Kemper/Prime Industrial Partners, Enterprise Center VII, L.P., Enterprise Center VIII, L.P., Enterprise Center IX, L.P., and Enterprise Center X, L.P. have sued defendant Montgomery Watson Americas, Inc. for negligent misrepresentation. Defendant Montgomery Watson Americas, Inc. subsequently filed a third-party claim against The Prime Group, Inc. seeking indemnification from a form agreement that was executed in connection with a former project.
Before this court is defendant Montgomery Watson Americas' Inc. motion for summary judgment against the four Enterprise Centers pursuant to FED R. CIV. P. ("Rule") 56. This motion seeks a finding, as matter of law, that Montgomery Watson Americas' Inc. ("Montgomery Watson") owed no duty to the Four Enterprise Centers under the limited reach of Illinois' law of negligent misrepresentation. Also pending is third-party defendant the Prime Group Inc's. motion for summary judgment against Montgomery Watson pursuant to Rule 56.
For the reasons set forth below Montgomery Watson's motion for summary judgment is granted as to no duty owed to the Enterprise Centers. The Prime Group's motion for summary judgment based on alleged unenforceability of the indemnification provision is denied.
In June 1990, Plaintiff Kemper Prime Industrial Partners purchased a 120 acre parcel of industrial property located at 13535 S. Torrence Ave. in Chicago, Illinois. In anticipation of purchasing the site, from U.S. MetalSource Corp. the Prime Group, Inc.'s managing general partner, James Martell, retained Warzyn Engineering, Inc. to perform an environmental assessment of the property in order to determine if potential environment concerns or liabilities existed at the property. Warzyn is the predecessor to the defendant in this case, Montgomery Watson. It is undisputed that Montgomery Watson never owned the property or occupied the property nor did it engage in any operation of any kind.
On February 28, 1990, Prime Group and Warzyn executed Agreement No. 60848 or Work Order No. One. Work Order No. One related exclusively to services to be performed by Warzyn at the property. Work Order No. One expressly provided the Services shall be performed subject to and upon the termed conditions set forth in the Professional Services Agreement (the "Agreement") dated December 12, 1989, by and between Warzyn and Client [the Prime Group], which Agreement is hereby amended to incorporate this Work Order. James Martell, Senior Vice-President for the Prime Group admitted he saw and forwarded the December 12, 1989 Professional Services Agreement to Prime Group's legal department, which approved the Professional Service Agreement before Martell signed it. Mr. Martell also received authorization from Prime Group's legal department to sign Work Order One incorporating the December 12, 1989 Professional Agreement.
The Professional Service Agreement contained an Indemnification provision in paragraph 9 which provided the following:
except for claims covered under the policies of
insurance and policy limits identified in paragraph
7, the Client shall be solely responsible to third
parties for damages arising as a result of Warzyn's
performance or nonperformance of any Services. To the
maximum extent permitted by law, the Client shall
indemnify, defendant and hold harmless Warzyn from all
costs arising out of or connected with third party
claims, other than claims covered under the policies
of insurance and policy limits identified in Paragraph
Warzyn then conducted a four month environmental assessment of the Property and was paid over $100,000 for its services.*fn1
(Third-Party Def.'s LR 56.1(a)(3) ¶ 3.) This investigation was conducted in two phases and consisted of a site visit, a historical records search, a review of previous reports concerning the property, and an investigation of existing state and federal background information pertaining to the property and testing of the soil and other duties. Warzyn also performed a subsurface investigation which included soil boring, installation of monitoring wells, analyses of required decontamination procedures, water level measurements, ground water sampling, PCB wipe sampling procedures and other field issues. A limited second round of boreholes was approved by the Prime Group only for the east side of the property. Warzyn had its proposed scope of work cut "significantly" by the Prime Group, and as a result Warzyn concluded in 1990 that in numerous places there were still undefined areas out on the grounds. D. Wieman Tr. 68:10-69:12 and 88:12-91:15. It is undisputed that Warzyn as part of its environmental assessment requested Sanborn Fire Maps but were told they were unavailable. It is also undisputed that sometime after Warzyn performed its assessment it became apparent that Sanborn Maps for the property were available for the years 1897, 1913, 1947, 1950, 1976, and 1987. The Sanborn Maps for 1947 and 1950 revealed the presence of twenty-six (26) underground storage tanks (adjacent to building A) but the later two maps did not show the underground tanks. Mr. Garske of Carlson Financial testified that "there were no underground storage tanks at the property when Warzyn performed its 1990 assessment;" since the time Warzyn was on the property in 1990 there have been no UST's removed, and there are no UST's at the site today. (Garske Tr. 75:11-76:11).
The investigation was completed in June of 1990. Warzyn published two reports entitled "Environmental Assessment" and "Subsurface Investigation" The 1990 report identified environmental contamination all across the property and additional sampling and investigation would be required to determine the full extent of the contamination. (D. Wieman Tr. 68:10-69:12 and 88:12-91:15) These two final reports were finalizations of earlier draft reports provided to the Prime Group.
Plaintiff, Kemper/Prime Industrial Partners ("Kemper/Prime") then formed an Illinois general partnership on or about June 22, 1990, and purchased the Property and its industrial buildings five days later. (Def.'s L.R 56.1(a)(3) ¶¶ 7-8.) U.S. MetalSource agreed to indemnify the Prime Group for certain environmental conditions on the property, i.e. asbestos removal and environmental contamination (See ¶¶ 6, 7, 8 & 9 of the Improved Real Estate Purchase Agreement, Exhibit I to Kemper Prime's L.R. 56.1(b)(3)(A) Statement). U.S. MetalSource then filed bankruptcy approximately one year later.
On or about June 4, 1992, Enterprise Center VII, L.P., Enterprise Center VIII, L.P., Enterprise Center IX, L.P., and Enterprise Center X, L.P. ("Enterprise Centers") were formed, (Id. ¶ 10.) After formation of the of the four enterprise centers, a new investigation of the property was conducted for environmental assessment purposes by Dunn Corporation ("Dunn") on or about February 3, 1993.
As part of Dunn's investigation, it is undisputed that Dunn Corporation referenced Warzyn's environmental report noting inconsistent conditions set forth in Warzyn environmental assessment and raised questions as to other points in Warzyn's assessment of the site. Dunn discovered additional widespread contamination on the Property which allegedly existed prior to Kemper/Prime's 1990 purchase of the Property. (Third-Party Def.'s LR 56.1(a)(3) ¶ 13.)
On or about June 25, 1993 Kemper/Prime Industrial Partners sold Site Lots 2 and 16 to Enterprise Centers VII L.P. for $6,901,562, On or about June 25, 1993, Kemper/Prime Industrial partners sold Site Lots 7, 8, 9, 10, and 11 to Enterprise Center VIII, L.P. for $5,647,180. Thereafter, during 1995-1997, Kemper/Prime Industrial Partners sold to other persons not in this lawsuit Lots 18, 19 and 20 located at the north end of the Site. On or about June 25, 1993, Kemper/prime Industrial Partners sold Site Lots 13, 14 and 15 to enterprise Center IX, L.P. for $4,098,731. On or about June 25, 1993. Kemper/Prime Industrial Partners sold Site Lots 6 and 12 to Enterprise Center X, for $3,518,166. Kemper/Prime ...