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TNT Logistics North America, Inc. v. Bailly Ridge TNT

September 21, 2006

TNT LOGISTICS NORTH AMERICA, INC. PLAINTIFF,
v.
BAILLY RIDGE TNT, LLC, LOCATION FINDERS INTERNATIONAL, INC., AND MICHAEL H. ROSE, DEFENDANTS.



The opinion of the court was delivered by: Judge Rebecca R. Pallmeyer

MEMORANDUM OPINION AND ORDER

Plaintiff TNT Logistics North America, Inc. ("TNT") and Defendant Bailly Ridge TNT, LLC ("Bailly") are parties to a lease negotiated on behalf of the lessor, Bailly, by Defendants Location Finders International and Michael H. Rose.*fn1 The parties understood that TNT, the lessee, would operate a warehouse on the leased property on a 24/7 schedule. In its First Amended Complaint (the "Complaint"), TNT alleges that Bailly has breached a provision of the lease that required it to construct an earthen berm and solid fence necessary for noise abatement, and has failed to indemnify TNT against claims asserted by neighboring landowners who have filed complaints with the Illinois Pollution Control Board (the "Board") and who seek restrictions on TNT's operations due to the noise. Defendants now move to dismiss the Complaint. They argue that TNT's "conclusory statements about what might occur in actions brought by neighboring homeowners" before the Board do not state an actual case or controversy within Article III of the Constitution. They contend, further, that Plaintiff's allegations are defeated by the language of the written lease agreement and that LFI, which is not a party to the contract, is not properly sued for its breach. For the reasons set forth below, the motion is granted in part and denied in part.

FACTS

For purposes of this motion, the court presumes the truth of all of TNT's well-pleaded allegations. See Travel All Over the World, Inc. v. Kingdom of Saudi Arabia, 73 F.3d 1423, 1429 (7th Cir. 1996). The parties' dispute revolves around the meaning of relevant provisions of the lease agreement; those provisions are incorporated by reference into the Complaint and are properly before the court pursuant to FED. R. CIV. P. 10 (c).

Plaintiff TNT is in the business of providing warehouse and distribution services. (Am. Compl. ¶ 10.) On March 1, 2004, TNT entered into a lease agreement (the "Lease") with Bailly for land and property located in the Bailly Ridge Corporate Center in Monee, Illinois. (Id. ¶ 16.)

Defendant LFI, through its president Michael Rose, negotiated the Lease on behalf of Bailly. (Id. ¶ 15.) Paragraph 4 of the Lease imposes certain obligations on Bailly: pursuant to paragraph 4(b)(iii), Bailly "represent[ed] and warrant[ed]" that warehouse operations "on a 24-hour a day, 7-day a week basis, shall be permitted under all applicable land use and zoning laws, codes, regulations and ordinances and applicable covenants and restrictions of record during the Lease Term." (Id. ¶ 17, quoting Lease Paragraph 4(b), Ex. A to Complaint.) Paragraph 4(b) also requires Bailly to indemnify TNT against certain claims that might arise:

[Bailly] shall indemnify and hold [TNT] harmless from and against, and shall reimburse Tenant for, all liabilities[,] obligations, suits, causes of action, administrative actions, losses, damages, fines, penalties, claims, demands, costs, charges, judgments and expenses , including reasonable attorneys' fees and costs (collectively, "Claims"), arising from or in connection with any breach of these representations and warranties.

This indemnification obligation shall include, without limitation, all Claims arising from any challenges seeking to eliminate or reduce the scope of [TNT]'s intended use of the Premises. This indemnification obligation shall not include any claims arising from [TNT]'s failure to operate its facility in conformity with local zoning laws and codes, provided that such local zoning laws and codes permit the operation of the Premises as represented and warranted in item (iii) above. (Id. ¶¶ 17-19, quoting Lease Paragraph 4(b).)

The parties were aware, months before the execution of the Lease, of the possibility that warehouse operations would generate noise. Consultants from the firm of Shiner and Associates studied the property and issued a report that recommended the construction of an earthen berm and a wooden fence for the purposes of noise reduction. (Id. ¶¶ 27-28, 31.) In an unsigned document on Defendant LFI's letterhead, dated October 17, 2003 and titled "Sound Attenuation Proposal", an unidentified person (identified only as "I") committed to building the berm and fence and explained that to account for the cost of this construction, the rent for the leased property would be increased by "$.10 per square foot per year." (Id. ¶¶ 29-33; Sound Attenuation Proposal, Ex. B to Complaint.) Together with the Lease, Bailly and TNT executed a "Construction Addendum" which required Bailly to provide "an earthen berm topped by a solid fence," subject to TNT's approval, and "[in] compliance with the conclusions of the Shiner and Associates report of October 17, 2003." (Am. Compl. ¶ 22, citing Construction Addendum (14)(A)(3), Ex. A to Complaint.) Defendant Michael Rose, a member of Bailly and President of LFI, executed a guaranty of Bailly's obligations on the Lease. (Id. ¶¶ 22-26.)

TNT took possession of the property in December 2004 and began warehouse operations there the same month. (Id. ¶¶ 33, 34.) The following June, persons who live near the property filed six complaints against TNT with the Board, alleging that the noise being emitted from the premises violated Illinois law and asking the Board to order TNT to relocate or change its hours of operation. (Id. ¶¶ 35-37.) TNT alleges that it "will incur more than $75,000 in attorney fees to defend itself" and that an order requiring it to relocate would cost more than $75,000. (Id.¶ 40.) On July 1, 2005, TNT wrote to Defendants TNT and Michael Rose, advising them of the complaints and notifying them that "TNT considered [Baillly and Rose] to have obligations under the Lease to indemnify, hold TNT harmless, and reimburse TNT with regard to" the citizen complaints. (Id. ¶ 42.) Counsel for Bailly and Rose responded on July 7, denying indemnification "at this time" and characterizing the neighbors' complaints as based on TNT's exceeding the noise levels permitted under zoning codes. (Id. ¶ 44; Letter from Lewison to Dawson of 7/7/05, Ex. J to Complaint.)

TNT alleges that the fence constructed by "[Bailly] or its affiliate" is not a solid fence and does not comply with the conclusions of the Shiner and Associates report. (Id. ¶¶ 46-49.) Plaintiff alleges, further, that the inadequacies in the fence "caused or contributed to cause" the citizen complaints against TNT. (Id. ¶ 50.)

DISCUSSION

In the Complaint, Plaintiff TNT charges Bailly, Rose, and LFI with breach of contract (Counts I, II, and III). In addition, as alternatives to its breach of contract claim against LFI, Plaintiff charges LFI with common law negligence (Count IV) and seeks recovery under a promissory estoppel theory (Count V). In their motion to dismiss, Defendants argue that until the Board determines that TNT's operations at the property violate the law, Plaintiff's indemnity claim is not ripe for adjudication. (Defendants' Memorandum in Support of Their Motion to Dismiss Plaintiff's First Amended Complaint (hereinafter "Defs. Mem."), at 8.) In any event, Defendants contend, Plaintiff's claim for indemnification is defeated by the language of the Lease agreement. (Id. at 9-10.) Because Defendant LFI is not a party to the Lease, Defendants argue that LFI is not liable for breach of contract. (Id. at 12.) They contend that any negligence claim against LFI cannot be maintained under the "voluntary undertaking" doctrine and is barred by the Moorman doctrine. (Id. ...


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