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Mach Mold Inc. v. Clover Associates

August 17, 2005

MACH MOLD INC. AND INDIANA INSURANCE CO., AS SUBROGEE OF MACH MOLD INC. PLAINTIFFS,
v.
CLOVER ASSOCIATES, INC. D/B/A MACHINERY SUPPLY AND KINGMAN DEDICATED SERVICE, INC. DEFENDANTS.
CLOVER ASSOCIATES, INC. CROSS-CLAIM PLAINTIFF
v.
KINGMAN DEDICATED SERVICE, INC. CROSS-CLAIM DEFENDANT
KINGMAN DEDICATED SERVICE, INC. COUNTERCLAIM & THIRD-PARTY PLAINTIFF
v.
KM INDUSTRIAL MACHINERY CO.; GES EXPOSITION SERVICES; CITY OF CHICAGO; F.H. PASCHEN, S.N. NIELSEN, INC.; ILLINOIS BELL TELEPHONE; & PEOPLE'S GAS LIGHT & COKE CO. THIRD-PARTY DEFENDANTS.



The opinion of the court was delivered by: Honorable David H. Coar

MEMORANDUM OPINION AND ORDER

I. FACTS

Plaintiff Mach Mold is a custom builder of plastic molds. Mach Mold has a facility in Benton Harbor, Michigan. In 2001, Mach Mold became interested in acquiring a horizontal milling machine for its facility. Some time during 2001, Mach Mold contacted Leading Edge New Machinery, Inc. ("Leading Edge"), which sold machinery to machine and die shops in the United States, about the possibility of purchasing such a machine. Leading Edge was also an importer of milling machines made by Eumach, a Taiwanese company. Leading Edge put Mach Mold in contact with KM Industrial Machinery Supply, one of the machinery dealerships with which it worked. Mach Mold had purchased machinery through KM several times over an approximately twenty-year period. On July 18, 2001, KM sent Mach Mold a written quote for a Eumach horizontal milling machine ("the Machine") for $315,000. Between July 2001 and late summer 2002, Mach Mold and KM continued to discuss terms of a possible sale. In late summer 2002, KM notified Mach Mold that it could offer the Machine at a discount, if Mach Mold would agree to let the Machine be displayed at the International Machinery and Technology Show ("IMTS") in Chicago, Illinois. KM quoted a new (discounted) price of $285,000, but stated that all of the other terms of sale remained the same, in keeping with the written quote and terms of sale provided in July 2001. According to the written terms and conditions attached to the original sales quote, KM would retain title to the Machine until the contract price was fully paid, but the sale would be free on board ("FOB") at the point of shipment and the buyer would bear any risk of loss after KM tendered the machine. KM expressly disclaimed liability for any damages that might occur during or pursuant to shipping and specified that the buyer would have to seek recovery from the carrier directly.

Mach Mold agreed to KM's revised quote, including the requirement that the Machine be displayed at the IMTS. Mach Mold then sought financing for the purchase, specifically a financial lease through a bank. Mach Mold began discussions for a financial lease with Fifth Third Bank, whereby Fifth Third would purchase the Machine and lease it to Mach Mold as the end user. At the conclusion of the lease period, Mach Mold would purchase the Machine for its fair market value. During the lease negotiations, Bill Mach, the president of Mach Mold, attended the IMTS. While there, he verbally agreed on the terms of a related sales deal with Christopher Bologna, the president of Leading Edge. This deal involved the sale of a Numera boring machine that Mach Mold wished to sell or trade-in for additional discounting on the price of the Machine. Because a bank would only offer a financial lease for the amount that Mach Mold actually paid for the Machine, Leading Edge agreed to purchase the Numera machine outright for $45,000, rather than accept it as a trade-in, and to pay Mach Mold with the money it received for the Machine from KM. This served as an indirect rebate of $45,000 of the Machine's $285,000 contract price, but enabled Mach Mold to negotiate for a financial lease for the full $285,000.

The structure of the sales deal for the Machine went as follows: Eumach sold the Machine to Leading Edge, which sold it to a machinery dealer, KM Industrial, which sold the Machine to Mach Mold. Mach Mold was to pay KM Industrial $285,000 for the Machine. KM Industrial was to pay Leading Edge $285,000 or some agreed portion thereof for the Machine. At the same time, Mach Mold sold its Numera machine to Leading Edge, which was to pay Mach Mold with the money from KM Industrial from the sale of the Machine itself. The parties did not reduce the sales agreement to a written memorandum.

Eumach put the Machine on an ocean vessel in Taiwan, at which point ownership transferred from Eumach to Leading Edge, pursuant to the terms of the agreement. Leading Edge brought the Machine to the Port of Seattle and then shipped it via truck to Chicago for the IMTS. The Machine arrived at a warehouse in Chicago still in its sheet metal shipping container. At the warehouse, Leading Edge had the Machine uncrated and prepared for exhibition. The shipping crate and packing material were discarded by the warehouse company. From the warehouse, Leading Edge had the Machine transferred by flatbed truck to McCormick Place convention center in Chicago, where the IMTS took place. GES Exposition Services provided convention services to McCormick Place. During IMTS 2002, GES unloaded the Machine from the flatbed truck and positioned it in Leading Edge's booth on the exhibition floor. At some point during the IMTS show, two large steel electromagnets weighing several hundred pounds each were placed on the table of the Machine. The Machine was "dry-cycled" during the IMTS, meaning that it was connected to a power source but that no coolant was loaded and no actual work performed.

At the end of the IMTS 2002 show, Leading Edge filled out a GES outbound material handling services order form, which specified that GES would move the Machine from the exhibition floor to the loading dock and help load the Machine onto a truck trailer. At the bottom of the form in block letters is the phrase, "This is not a bill of lading." No bill of lading was created; however, both Leading Edge and the carrier regarded the outbound material handling services order form as a bill of lading despite the written disclaimer. Leading Edge did not request that GES crate the Machine or provide packing material or dunnage. According to the written sales quote KM provided to Mach Mold in June 2001, the Machine would be shipping free on board ("FOB") from a West Coast Port. The attached "KM Industrial Terms and Conditions of Sale" specified that "All sales are made F.O.B. point of shipment. Seller's title passes to Buyer and Seller's liability as to delivery ceases upon making delivery of material purchased hereunder to carrier at shipping point in good condition; the carrier acting as Buyer's agent. All claims for damages must be filed with the carrier." Leading Edge understood that Mach Mold would arrange for a carrier to pick up the Machine from McCormick Place and informed the GES representative that information about Mach Mold's carrier would be forthcoming.

In late August 2002, Mach Mold contacted Clover Associates, a trucking company it had previously used to transport machinery, and asked it to visit Mach Mold's facility. On August 29, 2002, Clover faxed a written quote to Mach Mold for the transportation of the Machine from Chicago, Illinois to Benton Harbor, Michigan. The quoted cost, including permits and flag cars, was given as $2,614.00. Mach Mold and Clover agreed that Clover would also transport the Machine's tool changer and other components from a Chicago warehouse to Benton Harbor in a separate shipment for a cost of $1,050.00. Because of labor issues at McCormick Place, Clover told Mach Mold in or about September 2002 and advised that it preferred to use a "union carrier" to transport the main section of the Machine from Chicago to Benton Harbor. Clover accordingly contacted Kingman Dedicated Services, which was a "union carrier," and requested a quote for tranporting the Machine from Chicago to Benton Harbor, including the cost of obtaining the necessary permits and required escort vehicle for the load. In or about early September, Mach Mold agreed to the use of a second carrier, provided that the carrier carried sufficient insurance to cover the cost of the Machine. Mach Mold requested that Clover provide proof of insurance from Kingman. Mach Mold did not communicate with Kingman prior to September 18, 2002.

Sometime prior to September 16, 2002, Clover notified Kingman that it accepted Kingman's quote to pick up and transport the Machine from McCormick Place in Chicago to Benton Harbor. Kingman then obtained oversize load permits for transporting the Machine from Chicago to Benton Harbor. On September 16, 2002, Kingman's semi-truck, double drop flatbed trailer arrived at McCormick Place with William Golembieski as its driver. Golembieski was not called to a loading dock until September 17, 2002, at which time GES personnel loaded the Machine onto Kingman's flatbed trailer in good condition. Golembieski secured the Machine to the flatbed trailer with four chains, and secured eleven boxes of equipment related to the Machine on his trailer. He then covered the boxes and Machine with a tarpaulin, which was strapped to the trailer. The Machine protruded at least one foot over each side of the eight-and-a-half foot wide double drop flatbed trailer. Golembieski signed the order form for outbound material handling services without exception, accepting the Machine in good condition. Golembieski then began driving the Machine along the route specified in the City of Chicago oversized load permit towards interstate highways I-80/I-94. The City permit routed Kingman along Torrence Avenue on Chicago's south side and then onto I-80/I-94.

Torrence Avenue is a four lane road, with two lanes for traffic going northbound and two lanes for southbound traffic. On September 17, 2002, at least one section of Torrence Avenue was undergoing construction work somewhere in the area between 95th Street and 130th Street. In the construction zone, the normal traffic pattern had been disrupted. The northbound lanes were closed for construction and one southbound lane had been converted into a northbound lane.

Thus, both north- and southbound traffic were travelling in what were normally the two southbound lanes. Despite the fact that he was driving an oversize load, Golembieski determined that he would be able to safely drive through the construction zone. (Golembieski Dep., at 113.) At some point along Torrence Avenue between 95th Street and the I-94 entrance ramp, while Golembieski was driving in the southbound lane, the Machine apparently struck a stationary roadside pole, which may have been a telephone or utility pole. The driver did not notice anything to indicate that the roadway, the curb, or the pole had been changed as part of construction or that they were temporary. The driver did not see the Machine strike the pole, but heard a noise and felt an impact of some kind.

Golembieski did not stop the trailer immediately but continued through the construction zone to the I-94 entrance ramp. Golembieski was unable to estimate where on Torrence Avenue the Machine struck the pole or how far he drove after the impact before stopping. In any event, he stopped the trailer on the shoulder of the I-94 entrance ramp and examined the Machine. Golembieski then telephoned Kingman's emergency dispatch number to report that he apparently had struck something and that the tarp covering the Machine was now ripped. (Golembieski Dep. at 42-44.) The following morning, when Golembieski's escort driver for Indiana arrived, Golembieski inspected the Machine again and noticed that the Machine's electrical panel appeared to have "moved a little bit inside the tarp." (Id. at 49.) During his drive through Indiana, Golembieski stopped at a truck stop for a break. While there, he noticed that the electrical panel had "moved some," so he bought a two-inch strap to use to hold the panel in place. (Id. at 62.) To strap the electrical panel in place, Golembieski "wiggle[d]" into an opening at the end of the tarp and crawled along the interior. The rip in the tarp permitted sufficient light for him to see the Machine. At the same time, he noticed that there were dents on the control panel box. (Id. at 63-64.) This was the first time he had looked under the tarp since leaving McCormick Place.

Golembieski then continued on to Benton Harbor, where he arrived at the Mach Mold facility, parked the trailer in the parking lot, and began to untarp the Machine. (Golembieski Dep., at 69.) Bill Mach, the owner of Mach Mold, described seeing the truck "leaning radically to the right" when it arrived and the "machine cabinet ... hanging below the canvas [tarp] on the pavement." (Mach Dep., at 77.) Mach also described a rip in the tarp covering the Machine that was approximately three to four feet long. (Id.) Mach informed Golembieski that he was rejecting the delivery and directed Golembieski to retarp the Machine.

Golembieski replaced the tarp on the Machine and waited for directions from Kingman's dispatcher. Kingman could not take the trailer with the Machine back to its facility in Indiana because the oversized permits had expired. Kingman's dispatcher advised Golembieski to park the trailer with the Machine on it at Mach Mold. Golembieski then unhooked his truck and left the trailer there.

Mach Mold, Leading Edge, and KM Industrial then began to discuss who owned the Machine at the time of the accident. Leading Edge informed Mach Mold that liability for the damage to the Machine was between Mach Mold and KM. In turn, KM Industrial informed Mach Mold that its liability for damage to the Machine ended when it tendered the Machine in good condition to Mach Mold's carrier at the point of shipment and that Mach Mold was still responsible for paying the agreed sales price for the Machine, despite the damage. An insurance adjuster for Kingman examined the Machine and declared it a total loss. A machinery repair company also examined the Machine, apparently at the request of Kingman's insurer, and declared it too damaged to be repaired. Mach Mold filed a claim with its insurance carrier, Indiana Insurance Company. In January 2003, Indiana Insurance paid Mach Mold $175,000 for its claim for damages to the Machine. Mach Mold tendered the $175,000 to KM Industrial. In the normal course of business, KM would have then paid Leading Edge this money. Leading Edge, however, filed for bankruptcy in late 2002, largely because it was unable to meet its obligations and had not been paid for the Machine. KM had acquired Leading Edge's assets and accounts receivable in a bankruptcy sale. In January 2003, however, KM paid the $175,000 to Leading Edge's creditor, Bank One. Mach Mold still owes the outstanding balance on the Machine, which comes to $110,000.*fn1

Sometime in January or Feburary 2003, Mach Mold moved the Machine from Kingman's trailer in the parking lot into Mach Mold's building and put it in place. Mach Mold then invested approximately $20,000 in repairs and parts to get the Machine to operate. The Machine has been operational and in use since May 2003, although Mach Mold describes it as out of alignment and requiring frequent maintenance.

Mach Mold then brought this lawsuit against Clover and Kingman, seeking recovery for the damage to the Machine under the Carmack Amendment, 49 U.S.C. § 14706, to the Interstate Commerce Act, 49 U.S.C. § 13101 et seq., or, as an alternative claim, for common law negligence in shipping and delivering the Machine. Clover and Kingman filed third-party claims against GES Exposition Services; the City of Chicago; and F.H. Paschen/S.N. Nielsen, Inc., a construction firm that was working on Torrence Avenue during the time in question. Kingman asserts negligence claims against GES Exposition Services for its role in loading and unloading the Machine; against the City of Chicago for its role in routing Kingman's driver and in overseeing construction on City streets; and F.H. Paschen/S.N. Nielsen, Inc. for its role in performing construction on City streets. (Kingman Dedicated's Counterclaim and Third-Party Claims, May 17, 2004.) In its third-party complaint, Clover asserts that GES Exposition Services' negligent acts or omissions in loading and unloading the Machine were a proximate cause of the Machine's damage; that KM Industrial Machinery's negligent acts or omissions in discarding in shipping, loading or unloading the Machine were a proximate cause of the Machine's damage; that the City of Chicago was negligent in directing Kingman's driver along a road under construction and in supervising any road construction zones; and that F.H. Paschen/S.N. Nielsen, Inc. was negligent in directing Kingman's trailer through a construction zone and in maintaining a construction zone in accordance with all applicable traffic safety regulations. (Clover's Third-Party Claims, Jun. 24, 2004.) Before this Court are Mach Mold's motion for summary judgment against Clover and Kingman; Clover's motion for partial summary judgment against Mach Mold; Kingman's motion for summary judgment against Mach Mold; GES Exposition Services' motion for summary judgment against Kingman; F.H. Paschen, S.N. Nielsen, Inc.'s motion for summary judgment against Clover and Kingman; and the City of Chicago's motion for summary judgment against Clover and Kingman. In addition, Mach Mold has requested that the Court strike Kingman's response to Clover's Motion for Summary Judgment and strike Clover's response to Kingman's Motion for Summary Judgment. For the reasons stated below, the motions are granted in part and denied in part.

II. SUMMARY JUDGMENT STANDARD

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 genuinely disputed issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c); Schuster v. Lucent Techs., Inc., 327 F.3d 569, 573 (7th Cir. 2003)(quoting Fed. R. Civ. P. 56(c)). When reviewing a motion for summary judgment, the court must view the facts in the light most favorable to the nonmoving party and draw all reasonable inferences in its favor. See, e.g., Krchnavy v. Limagrain Genetics Corp., 294 F.3d 871, 875 (7th Cir. 2002). A triable fact issue exists "only if there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party." Schuster, 327 F.3d at 573 (quoting Wade v. Lerner New York, Inc., 243 F.3d 319, 321 (7th Cir. 2001) (quotation omitted)).

The movant bears the initial burden of establishing that there is no genuinely disputed issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). "Because the purpose of summary judgment is to isolate and dispose of factually unsupported claims," the non-movant must then present specific facts showing that there is an issue for trial. Michael v. St. Joseph County, et al., 259 F.3d 842, 845 (7th Cir. 2001) (quoting Fed. R. Civ. P. 56(e)). To successfully oppose the motion, the non-movant cannot rest on the pleadings alone, but must designate specific facts in affidavits, depositions, answers to interrogatories, or admissions that establish that there is a genuine triable issue. Celotex, 477 U.S. at 324. A scintilla of evidence in support of the non-movant's position is insufficient to defeat a summary judgment motion; "there must be evidence on which the jury could reasonably find for the [non-movant]." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

It is well-settled law in the Seventh Circuit that a party cannot create a dispute about an issue of material fact merely by submitting an affidavit that contradicts earlier deposition testimony. See Piscione v. Ernst & Young, L.L.P., 171 F.3d 527, 532 (7th Cir. 1999); Beck v. Univ. of Wis. Bd. of Regents, 75 F.3d 1130, 1134 (7th Cir. 1996). When deposition and affidavit testimony conflict, the deposition will trump the affidavit unless the statement in the deposition is demonstrated to be mistaken. See id. A party cannot defeat a motion for summary judgment by producing a self-serving affidavit that relies on conclusory statements or that is not supported by facts in the record. See Piscione, 171 F.3d at 532-33; Celotex, 477 U.S. at 324. Finally, an affiant must base his or her statements on personal knowledge. See Lac du Flambeau Indians v. Stop Treaty Abuse-Wis., Inc., 991 F.2d 1249, 1259 (7th Cir. 1993), citing Fed. R. Civ. P. 56(e).

A. Review of Local Rule 56.1 Requirements

The purpose of a summary judgment proceeding is to identify those cases that be resolved without a trial. To that end, the courts in this District have clarified the requirements of summary judgment pleadings in Local Rule 56.1. This rule requires parties to file statements of material facts "as to which the ... party contends there is no genuine issue and that entitle the ... party to a judgment as a matter of law." N.D. Ill. L.R. 56.1(a)(3). Local Rule 56.1 outlines the obligations of the parties in a summary judgment proceeding. Courts in this district have broad discretion to enforce the rule, and the Seventh Circuit regularly upholds strict enforcement of Local Rule 56.1. See, e.g., Midwest Imps., Ltd. v. Coval, 71 F.3d 1311, 1316 (7th Cir. 1995) (citing cases).

This Court urges all the parties in this case to review Local Rule 56.1. Judge Castillo's detailed discussion of Rule 56.1 requirements and procedures in Malec v. Sanford, 191 F.R.D. 581 (N.D. Ill. 2000), provides an excellent guide to proper form for statements of material facts. "There are three separate types of statements governed by Rule 56.1: the movant's statement, the non-movant's response and statement of additional facts, and the movant's response to the additional facts." Id. at 583. Statements of material fact should consist of short statements making specific references to materials supporting the fact set forth in the statement. A non-movant's statement of facts must "cite specific evidentiary materials" that justify the non-movant's denial of a movant's factual allegation. A general denial is insufficient. The statement of facts is not the place for argumentative statements; it is also not the place for drawing inferences or making legal arguments. Malec, 191 F.R.D. at 584. In addition, the memorandum of law is not the appropriate place to dispute an opposing party's statement of facts; that is the purpose of the response to the statement of facts, which is separate from the memorandum of law. See L.R. 56.1(b)(2)-(3). This Court expects parties to comply with the local rules and will not reconfigure party filings for them.

All material facts must be supported by specific references to the record, or, in the case of any disagreement with the opposing party's statement of material fact, by specific references to affidavits or other supporting materials relied upon. But a citation alone is insufficient; a party must also provide the cited material to the Court. This Court cannot consider evidence it does not have before it. In a complex case with multiple cross-motions, such as this, the Court also will not dig through a party's filings in reference to other motions in the hopes of finding the material cited in, but not attached to, the motion presently before it. As such, a statement of fact which cites to a portion of a deposition or affidavit but fails to provide the relevant portion will be deemed unsupported and therefore inadmissible.

III. LEGAL ANALYSIS

A. RISK OF LOSS

Clover and Kingman*fn2 argue that Mach Mold does not have standing to bring any claims on the damaged machine. Specifically, they contend that Mach Mold was not the legal owner of the machine at the time Kingman delivered the machine to Mach Mold's Michigan facility. Instead, Mach Mold purchased the damaged machine from KM Industrial Supply in January 2003, almost four months after the damage at issue. Kingman argues that the original verbal sales agreement was never completed. Under that scenario, Leading Edge purchased the machine from Eumach and brought the machine to the United States. Leading Edge was supposed to sell the machine to KM Industrial Supply, a dealer in industrial machines. KM, in turn, was to sell the machine to Fifth Third Bank, which was to lease the machine on a financial lease to Mach Mold, the end-user. Because Mach Mold rejected the damaged machine when it arrived in Benton ...


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