United States District Court, N.D. Illinois, Eastern Division
September 21, 2004.
CANADIAN PACIFIC RAILWAY COMPANY, a Canadian Corporation, Plaintiff,
WILLIAMS-HAYWARD PROTECTIVE COATINGS, INC., an Illinois Corporation, Defendant.
The opinion of the court was delivered by: AMY J. ST. EVE, District Judge
MEMORANDUM OPINION AND ORDER
Counter-Defendant Williams-Hayward filed a counterclaim against
Involuntary Plaintiff National Steel Car, Limited ("NSC")
alleging claims of contribution and indemnity. NSC has moved to
dismiss these claims for failure to state a claim pursuant to
Federal Rule of Civil Procedure 12(b)(6). For the reasons set
forth below, NSC's motion to dismiss is granted.
1. Rule 12(b)(6) Standards
A Rule 12(b)(6) motion to dismiss tests the legal sufficiency
of a complaint, not the merits of a claim. See Triad Assocs.,
Inc. v. Chicago Hous. Auth., 892 F.2d 583, 586 (7th Cir.
1989). When evaluating a motion to dismiss, the Court views the
complaint "in the light most favorable to the plaintiff, taking
as true all well-pleaded factual allegations and making all
possible inferences from those allegations in his or her favor."
Lee v. City of Chicago, 330 F.3d 456, 459 (7th Cir. 2003).
Dismissal is appropriate only where it appears beyond doubt that
under no set of facts would the plaintiff's allegations entitle him to
relief. Hishon v. King & Spalding, 467 U.S. 69, 73,
104 S.Ct. 2229, 81 L.Ed.2d 59 (1984).
Much of the relevant background of this case has been described
by the Court in its prior opinion addressing Williams-Hayward's
motion to dismiss. See Canadian Pacific Ry. Co. v.
Williams-Hayward Protective Coatings, Inc., 2003 WL 1907943
(N.D. Ill. Apr. 17, 2003). In sum, Plaintiff Canadian Pacific
Railway Company ("CP Rail") is a Canadian corporation with its
principal place of business in Alberta, Canada. Defendant
Williams-Hayward is an Illinois corporation engaged in the
business of manufacturing paint. Involuntary Plaintiff NSC is a
Canadian rail car manufacturer who contracted with CP Rail to
provide railway cars for the transportation of paper.
During the manufacture of the railway cars for CP Rail,
problems arose concerning the quality of the paint provided by
Williams-Hayward and applied by NSC. Eventually, CP Rail stopped
accepting cars that had been treated with Williams-Hayward's
paint. CP Rail thereafter sued Williams-Hayward on the following
claims: breach of warranty, breach of implied warranty of
fitness, breach of implied warranty of merchantability,
fraud,*fn1 unjust enrichment and promissory estoppel. Upon
order of the court, CP Rail filed an amended complaint, naming
NSC as an "involuntary plaintiff" under Rule 19. (R. 27-1, Am.
Compl. at ¶ 2.) Williams-Hayward then filed counterclaims against
both CP Rail and NSC. (R. 42-1, Countercl. at p. 14-17; R. 95-1,
Supplement to Countercl. at 1-7.)
NSC moved to dismiss counts two and four of Williams-Hayward's
counterclaims. (R. 99-1, Counter-Def.'s Mot. To Dismiss at 1.)
Williams-Hayward subsequently moved to voluntary dismiss counts
four, five, six and seven of its counterclaims. (R. 112-1, Def's
Mot. To Dismiss.) The Court granted this motion and denied NSC's motion
to dismiss count four as moot. (R. 113-1, Min. Order.) NSC's
motion to dismiss count two of Williams-Hayward's counterclaims
remains for disposition.
In count two of its counterclaims, Williams-Hayward alleges
that in the event it is found liable to Plaintiff CP Rail, it is
entitled to contribution and indemnity from NSC for the amount of
the judgment against it. (R. 42-1, Countercl. at ¶ 18.) NSC moves
to dismiss count two for Williams-Hayward's failure to state any
claim upon which relief can be granted.
I. Claim For Contribution
Illinois law recognizes two actions for contribution, one
statutory and the other derived from common law. NSC moves to
dismiss the claim for contribution on the grounds that
Williams-Hayward is only potentially subject to liability in
contract and, therefore, has no right to contribution under the
Illinois Joint Tortfeasor Contribution Act, 740 ILCS 100/2 ("the
Contribution Act"). NSC further argues that Williams-Hayward has
no cause of action for equitable contribution because
Williams-Hayward has not alleged that it and NSC were acting as
insurers in this case. Although Williams-Hayward did not specify
in its pleadings which of these actions it is alleging, in its
response to NSC's motion to dismiss, Williams-Hayward asserts it
is entitled to relief under the common law equitable right to
contribution. (R. 127-1, Counter-Pl.'s Resp. at 2.) Under either
approach, Williams-Hayward fails to state a claim of
A. The Contribution Act
In 1979 the Illinois legislature enacted the Contribution Act
to codify the Illinois Supreme Court's holding in Skinner v.
Reed-Prentice Division Package Machinery Co., 70 Ill. 2d 1,
374 N.E.2d 437, 15 Ill. Dec. 829 (1977). Doyle v. Rhodes,
101 Ill. 2d 1, 8, 461 N.E.2d 382, 385, 77 Ill. Dec. 759, 762 (1984). The Contribution Act
provides that "where 2 or more persons are subject to liability
in tort arising out of the same injury to person or property
. . . there is a right of contribution among them even though
judgment has not been entered against any or all of them."
740 ILCS 100/2(a) (emphasis added). A party subject to liability in
contract cannot make a valid claim for contribution under the
Contribution Act. See Jackson Nat'l Life Ins. Co. v. Gofen &
Glossberg, 882 F. Supp. 713, 723-24 (N.D. Ill. 1995) ("The only
duty which Boulevard is alleged to have breached is a contractual
one, thereby making a claim of contribution inapplicable");
Granville Beach Condo. Ass'n v. Granville Beach Condos., Inc.,
227 Ill. App. 3d 715, 723, 592 N.E.2d 160, 165,
169 Ill. Dec. 673, 678 (1992) (no right of contribution under Contribution Act
where claims were to recover economic loss); Hennepin Drainage &
Levee Dist. v. W.H. Klingner, 187 Ill. App. 3d 710, 712,
543 N.E.2d 967, 969, 135 Ill. Dec. 399, 401 (1989) (party subject to
liability for breach of contract precluded from bringing third
party complaint for contribution).
Williams-Hayward is not subject to any liability in tort. CP
Rail is suing Williams-Hayward for breach of express warranty,
breach of implied warranty of fitness, breach of implied warranty
of merchantability, unjust enrichment and promissory estoppel.
All of these claims are grounded in contract doctrine. See 2314
Lincoln Park West Condo. Ass'n v. Mann, Gin, Ebel & Frazier,
Ltd., 136 Ill. 2d 302, 307, 555 N.E.2d 346, 348,
144 Ill. Dec. 227, 229 (1990); U.S. Home Corp. v. George W. Kennedy Const.
Co., Inc., 617 F. Supp. 893, 897 (N.D. Ill. 1985); Hayes Mech.,
Inc. v. First Indus., L.P., 812 N.E.2d 419, 425,
285 Ill. Dec. 599, 606 (2004); F.D.I.C. v. Gravee, 966 F. Supp. 622, 630
(N.D. Ill, 1997); A/S Apothekernes Laboratorium for
Specialpraeparater v. I.M.C. Chem. Group, Inc., 725 F.2d 1140,
1142 (7th Cir. 1984). Accordingly, Williams-Hayward cannot seek contribution
from NSC under the Contribution Act.
B. Common law contribution
Williams-Hayward argues its claim for contribution is based on
the common law right to contribution, which is not limited to
parties subject to tort liability. The right to common law
contribution stems from "the compulsory payment by a joint
obligor of more than his share of a common obligation." Ruggio
v. Ditkowsky, 147 Ill. App. 3d 638, 642, 498 N.E.2d 747, 750,
101 Ill. Dec. 423, 426 (1986). To succeed on a contribution
claim, the co-obligor must disclose that he has paid more than
his just proportion of the joint indebtedness as well as the
amount of that excess. Id.
NSC contends that the common law contribution claim is only
available in the narrow context of contribution among
co-insurers. While it appears that many equitable contribution
suits do arise in the context of co-insurers, some case law
decided after the enactment of the Contribution Act involves
common law contribution claims among parties that are neither
tortfeasors nor co-insurers. These cases are limited, however, to
instances where the parties, either by agreement or by statute,
were obligated together to a third party for a financial
obligation, See e.g., Ruggio v. Ditkowsky,
147 Ill. App. 3d 638, 640, 498 N.E.2d 747, 749,
101 Ill. Dec. 423, 425 (1986)
(plaintiff seeking contribution from defendants on two promissory
notes each of them cosigned); Tembrina v. Simos,
208 Ill. App. 3d 652, 655,
567 N.E.2d 536, 538, 153 Ill. Dec. 578,
580 (1991) (plaintiff seeking contribution for payment of mortgage
where parties were each jointly and severally liable for payments);
Fletcher v. Marshall III, 260 Ill. App. 3d 673, 673,
632 N.E.2d 1105, 1106, 198 Ill. Dec. 494, 495 (1994) (plaintiff seeking
contribution from defendant who co-signed an apartment lease with
plaintiff); Aardema v. Fitch, 291 Ill. App. 3d 917, 919, 684 N.E.2d 884, 886,
225 Ill. Dec. 893, 895 (1997) (plaintiff seeking contribution from fellow
directors for their common corporate obligation to the IRS). In
contrast, Williams-Hayward does not allege it and NSC have a
joint obligation to CP Rail in which Williams-Hayward has paid
more than its proportion. Neither does it allege any amount in
excess that it has paid. The only debt alleged by
Williams-Hayward is the amount owed to it by NSC, making
Williams-Hayward an obligee, not an obligor. (R. 42-1, Countercl.
at ¶ 11.) Without an allegation of joint obligation,
Williams-Hayward cannot state a claim for equitable contribution.
Accordingly, Williams-Hayward's claim for contribution is
II. Claim For Indemnity
NSC challenges Williams-Hayward's implied tort indemnity claim
and implied contract indemnity claim. Although Williams-Hayward
has not specified which implied indemnity doctrine it is
pleading, it has failed to plead either sufficiently.
A. Implied tort indemnity
NSC argues that Williams-Hayward cannot allege a claim for
implied tort indemnity because the claims against
Williams-Hayward from which it is seeking indemnity sound in
contract not tort. NSC also argues Williams-Hayward has not pled
the presence of a pre-tort relationship, a necessary element of
an implied indemnity claim based upon quasi-contractual
principles. Williams-Hayward counters that its allegation of a
buyer-seller relationship satisfies the requirement of a pre-tort
The doctrine of implied tort indemnity "shifts the entire
responsibility for tort-related losses from a blameless
tortfeasor to a truly culpable one." Zielinski v. Miller,
277 Ill. App. 3d 735, 739, 660 N.E.2d 1289, 1293, 214 Ill. Dec. 340,
344 (1995) (emphasis added). The Illinois Supreme Court has
identified two rights of indemnification stemming from the
implied tort indemnity doctrine active-passive indemnity and quasi-contract
indemnity. Allison v. Shell Oil Co., 113 Ill. 2d 26, 28-31,
495 N.E.2d 496, 498-99, 99 Ill. Dec. 115, 117-18 (1986). Since the
Contribution Act abolished active-passive indemnity,
Williams-Hayward must rely on the quasi-contractual right to
indemnity for implied tort indemnity. Id. at 34. To establish
such a claim, Williams-Hayward must allege a pre-tort
relationship with NSC and a qualitative difference in their
conduct in the occurrence. Frazer v. A.F. Munsterman, Inc.,
123 Ill. 2d 245, 255, 527 N.E.2d 1248, 1251, 123 Ill. Dec. 473, 476
Williams-Hayward implicitly suggests it is indeed pleading a
quasi-contractual right to indemnity by arguing that its
buyer-seller relationship with NSC meets the requirement of a
pre-tort relationship. Williams-Hayward, however, has failed to
establish an even more requisite element of a quasi-contractual
right to indemnity the underlying tort the "pre-tort"
relationship preceded. See Zielinski, 277 Ill. App. 3d at 739
(dismissing claims of implied indemnity where underlying
complaint sounded in contract, not in tort). The Seventh Circuit
has held that a claim for implied indemnity only exists when the
indemnitee is guiltless with respect to the "underlying tort."
Mizuho Corp. Bank v. Cory & Assoc., Inc., 341 F.3d 644, 652-53
(7th Cir. 2003). As discussed above, CP Rail has not asserted
any claims sounding in tort against Williams-Hayward.
Accordingly, Williams-Hayward cannot seek indemnification from
NSC on the basis of quasi-contractual implied indemnity.
Even if it were permissible to indemnify a party for an
underlying contractual claim pursuant to the doctrine of
quasi-contractual implied immunity, Williams-Hayward has not
alleged a valid pre-tort relationship. Classic pre-tort
relationships giving rise to a duty to indemnify are those of
lessor/lesee, employer/employee, owner/lessee, and
master/servant. Van Slambrouck v. Economy Baler Co.,
105 Ill. 2d 462, 469-70, 475 N.E.2d 867, 870-71, 86 Ill. Dec. 488, 491-92 (1985). A buyer-seller relationship is not a
sufficient pre-tort relationship to support a traditional
indemnity claim. Jethroe v. Koehring Co., 603 F. Supp. 1200,
1204 (S.D. Ill. 1985). See also AMF, Inc. v. Victor J. Andrew
High School, 176 Ill. App. 3d 337, 342, 526 N.E.2d 584, 587,
122 Ill. Dec. 325, 328 (1988.)
In support of its argument, Williams-Hayward cites Maxfield v.
Simmons, 96 Ill.2d 81, 86-87, 499 N.E.2d 110, 112,
70 Ill. Dec. 236, 238 (1983), which found a buyer-seller relationship
sufficient to assert an "upstream"*fn2 indemnity claim. But
Williams-Hayward is asserting a "downstream" indemnity claim. The
Illinois Supreme Court has found that a buyer-seller relationship
does not support a "downstream" indemnity cause of action. See
Van Slambrouck, 105 Ill. 2d at 470. Further, Maxfield
specifically states any potential liability from the
indemnification results from tortious conduct, not a breach of
contract. Maxfield, 96 Ill. 2d at 87. See also Bloomer
Choclate Co. v. Bongards Creameries, Inc., 635 F. Supp. 919, 931
(N.D. Ill. 1986) (citing authority limiting the availability of a
buyer-seller indemnity to instances where a defendant's liability
stems from an underlying tort claim, not a breach of contract or
breach of warranty claim). Accordingly, Williams-Hayward cannot
plead a claim of implied tort indemnity.
B. Implied contractual indemnity
NSC argues that Williams-Hayward has not alleged facts
sufficient to support a claim for implied contractual indemnity.
Specifically it argues count two does not allege a breach of
contract between Williams-Hayward and either NSC or CP Rail. NSC
also contends Williams-Hayward has not alleged that NSC's breach
of a contract between NSC and Williams-Hayward caused a breach of a contract between Williams-Hayward and CP
Rail or that this second alleged breach was contemplated as a
probable result of the first breach.
A claim for implied contractual indemnity exists where "one
party's breach of contract causes a second party to breach a
separate contract with a third party." Carrillo v. Jam Prods.,
Ltd., 173 Ill. App. 3d 693, 697, 527 N.E.2d 964, 967, 123 Ill.
Dec. 326, 329 (1988). Under these circumstances, the second party
may shift its contractual liability to the first party. Id.
This result is justified provided the damages arising from the
first party's breach were reasonably within the contemplation of
the parties as a probable result of that breach. Case
Prestressing Corp. v. Chicago College of Osteopathic Medicine,
118 Ill. App. 3d 782, 788, 455 N.E.2d 811, 816, 74 Ill. Dec. 382,
In the context of this case, for Williams-Hayward to
successfully seek indemnification from NSC for any potential
liability to CP Rail, Williams-Hayward must allege that NSC's
breach of its contract with Williams-Hayward caused
Williams-Hayward to breach a separate contract with CP Rail.
Further Williams-Hayward would have to allege that CP Rail's
damages were reasonably contemplated by the parties as a probable
result of NSC's breach of its contract with Williams-Hayward.
Even drawing all reasonable inferences in favor of
Williams-Hayward, Williams-Hayward has not pled the requisite
elements of an implied contractual indemnity claim. First,
Williams-Hayward does not allege anywhere in its original
counterclaims or its amended counterclaims either the presence of
a contract between itself and CP Rail or a subsequent breach of
this contract by Williams-Hayward. Second, although
Williams-Hayward does allege in paragraph 10 of its counterclaims
that NSC breached its contract with Williams-Hayward by failing
to pay Williams-Hayward for any of the paint it purchased,
Williams-Hayward fails to reallege or otherwise incorporate this allegation into count two.
(R. 42-1, Countercl. at ¶ 13.)
Third, even if Williams-Hayward did make these allegations, it
fails to allege how NSC's breach of contract caused a subsequent
breach of a contract between Williams-Hayward and CP Rail.
Williams-Hayward alleged it entered into a contract with NSC for
the purchase of paint, which NSC allegedly breached by not paying
for the paint it purchased. (R. 42-1, Countercl. at ¶ 6, 10.) It
is unclear how NSC's failure to pay for the paint could breach
any contract between Williams-Hayward and CP Rail.
Williams-Hayward alleges NSC improperly and incorrectly applied
and cured the paint in the railway cars it delivered to CP Rail.
(R. 42-1, Countercl. at ¶ 16.) Williams-Hayward, however, has not
alleged it had a contract governing NSC's method of paint curing
or paint application in the railway cars. Consequently,
Williams-Hayward fails to state a claim for indemnification based
on implied contractual indemnity. CONCLUSION
For the reasons set forth above, Counter-Defendant NSC's motion
to dismiss is granted. Count two is dismissed without prejudice
for failure to state a claim upon which relief can be granted.