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Ambrosia Land Investments, LLC v. Peabody Coal Co.

April 9, 2008


Appeal from the United States District Court for the Southern District of Illinois. No. 05 C 371-David R. Herndon, Chief Judge.

The opinion of the court was delivered by: Bauer, Circuit Judge


Before BAUER, CUDAHY and SYKES, Circuit Judges.

Plaintiff-Appellant Ambrosia Land Investments, LLC*fn1 ("Ambrosia") and Intervening Plaintiff-Appellant Illinois Mine Subsidence Insurance Fund ("the Fund") (collectively "the Plaintiffs") appeal the district court's conclusion that their claims are barred by the Illinois Construction Statute of Repose, 735 ILCS 5/13-214(b). For the following reasons, we reverse.

I. Background

In 1995, Ambrosia constructed a warehouse on its property in St. Clair County, Illinois, which happened to be located above St. Ellen Mine ("the Mine"), an underground coal mine originally built in the early 1900s that spans over 3,800 acres. Peabody, who had acquired the rights to the Mine in 1957 from Perry Coal Company, operated the Mine until 1960, when it closed the Mine. The Mine was designed using a widely-recognized method of mining called the "room and pillar," in which shafts are driven down into the earth, creating passageways for the movement of coal and personnel. Coal is removed, leaving empty areas or "rooms." "Pillars" are then formed from the remaining coal and rock, providing structure and support for the rooms and for the surface above the mine during the time the mine is in operation and permanently thereafter. While pillars are usually reinforced with secondary support by installing bolts or timber, because of the passage of time, the exact type of secondary support used in the Mine is unknown. As time passes, the surface above a mine sinks or shifts as a result of mine subsidence, which is the deterioration of the pillars, design defects, or geological occurrences.

In order to insure that property owners have the financial resources to repair damage to property caused by mine subsidence, the Illinois legislature established the Fund to provide reinsurance for mine subsidence losses to Illinois property. 215 ILCS 5/801.1, 5/803.1. The Fund is required to enter into reinsurance agreements with all Illinois property insurers, whereby premiums are collected by the insurer and paid to the Fund under the agreement. Once the insurer receives a claim of potential mine subsidence from the property owner, it forwards the claim to the Fund. The Fund hires geologists to investigate the claim and eventually determine whether the damage was caused by mine subsidence or other earth movement. If the Fund determines that the damage was caused by mine subsidence, it notifies the insurer, who in turn fulfills its contractual duties by paying the insured for the losses claimed, and then requests reinsurance reimbursement from the Fund. The Fund reimburses the property insurer for the amount it paid to its insured, and the Fund is then subrogated to the rights of both the insured and the property insurer. See 215 ILCS 5/815.1(b).

In late November 2000, forty years after Peabody closed the Mine, Ambrosia noticed that its warehouse had structural damage. Suspecting that the damage was the result of mine subsidence, Ambrosia filed a claim with its insurance company, Federated Mutual, on its insurance policy for mine subsidence loss coverage. Federated, in turn, forwarded the claim to the Fund. The Fund received Federated's claim and hired geologist Stephen Danner to investigate. On March 14, 2002, Danner concluded that mine subsidence from the Mine caused damage to the warehouse on the Ambrosia property. Federated paid Ambrosia the maximum amount of its mine subsidence loss coverage policy-$350,000-and then requested reimbursement of that amount from the Fund. The Fund paid Federated the full amount of the claim.

On April 21, 2005, Ambrosia filed suit against Peabody in Illinois state court, claiming that it sustained actual damages that substantially exceeded the $350,000 amount that it received from Federated. The complaint alleged that (1) Peabody, as owner and operator of the Mine, was negligent in failing to provide adequate support for the surface above the Mine, and (2) Peabody violated its duty to prevent mine subsidence under the Illinois Surface Coal Mining Land Conservation and Reclamation Act ("SCMLCRA"), 225 ILCS 720/4.02. Peabody removed the case to federal court on the basis of diversity jurisdiction. In October, 2005, the Fund moved to intervene as an additional plaintiff under 215 ILCS 5/815.1, claiming Peabody was strictly liable for failing to provide sufficient support for the surface of the Ambrosia property, and asserting its subrogation rights to recover the $350,000 it paid pursuant to its reinsurance agreement with Federated in 2002.

Peabody moved for summary judgment, asserting in part that Plaintiffs's sought to hold Peabody liable for their acts or omissions that occurred over forty-five years ago, and that a coal mine constituted an improvement to real property, thus Plaintiffs's claims were barred under the Illinois Construction Statute of Repose, 735 ILCS 5/13-214(b).

Plaintiffs also filed a summary judgment motion, claiming that it was undisputed that the warehouse was undermined by Peabody during the period it operated the Mine (1957 to 1960), and because a surface owner had an absolute right to subjacent support, Peabody was strictly liable for failing to provide subjacent support under Illinois law. Plaintiffs also argued that § 13-214(b) did not bar their claims because the removal of coal was not construction of an "improvement to real property."

On March 27, 2007, the district court granted Peabody's motion for summary judgment, finding that § 13-214(b) barred Plaintiffs's claims because a coal mine constituted "construction of an improvement to real property." Accordingly, the district court denied Plaintiffs's motion for summary judgment as moot. This timely appeal followed.

II. Discussion

We begin by determining whether the district court erred in granting summary judgment in favor of Peabody. We review a district court's grant of summary judgment de novo, drawing all inferences in favor of the nonmoving parties. Breneisen v. Motorola, Inc., 512 F.3d 972, 977 (7th Cir. 2008). Summary judgment is appropriate where there are no genuine issues of material fact and the moving party (Peabody) is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). Our task is to determine whether, as a matter of law based on undisputed facts, the Illinois statute of repose bars the Plaintiffs's claims. Hausman v. Monarch Mach. Tool Co., 997 F.2d 351, 353 (7th Cir. 1993).

The Illinois Construction Statute of Repose, entitled "Construction-Design management and supervision," provides that:

No action based upon tort, contract or otherwise may be brought against any person for an act or omission of such person in the design, planning, supervision, observation or management of construction, or construction of an improvement to real property after 10 years have elapsed from the time of such act or omission.*fn2

735 ILCS 5/13-214(b). Application of § 13-214(b) involves a two-step analysis: (1) whether a coal mine is an "improvement to real property," and (2) whether Peabody engaged in activities that fall within the ambit of § ...

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