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In Retail Fund Algonquin Commons, L.L.C. v. Abercrombie & Fitch Stores

May 10, 2010

IN RETAIL FUND ALGONQUIN COMMONS, L.L.C., AN ILLINOIS LIMITED LIABILITY COMPANY, BY ITS MANAGER, IN RETAIL FUND, L.L.C., A DELAWARE LIMITED LIABILITY COMPANY, BY ITS MANAGER, IN RETAIL MANAGER, L.L.C., A DELAWARE LIMITED LIABILITY COMPANY, BY ITS MANAGER, INLAND REAL ESTATE CORPORATION, A MARYLAND CORPORATION, PLAINTIFF,
v.
ABERCROMBIE & FITCH STORES, INC., AN OHIO CORPORATION, DEFENDANT.



The opinion of the court was delivered by: Marvin E. Aspen, District Judge

MEMORANDUM OPINION AND ORDER

Presently before us is Defendant Abercrombie & Fitch Stores, Inc.'s ("Abercrombie") 12(b)(6) motion to dismiss two counts of Plaintiff Inland Real Estate Corporation's ("Inland") First Amended Complaint. Count I alleges property damage as a result of Abercrombie's negligent supervision, and Count II alleges negligent misrepresentation. For the reasons stated below, we grant Abercrombie's motion as to Count II, but deny it as to Count I.

Background

Inland is the owner of Algonquin Commons, LLC, a high-end retail mall located in Algonquin, Illinois. (Compl. ¶ 1.) In 2003, Abercrombie became a tenant in this retail mall and supervised a team of architects, contractors, and other professionals that was hired to build a "bump-out"-a customized facade protruding from one wall-of its retail store in the mall. (Id. ¶¶ 15--16.) At the time of this construction, Abercrombie was aware of topographical grade differences at the site that potentially would create drainage problems if the bump-out were to be built but decided to pursue the construction anyway. (Id. ¶¶ 17--23.)

In March 2008, Inland became aware that there was a water intrusion problem at the Abercrombie store. (Id. ¶ 28.) This water intrusion caused damage to Abercrombie's retail store and the adjacent property. (Id. ¶¶ 40, 52.) In September 2008, Abercrombie gutted its store and vacated the premises. (Id. ¶ 27.) Throughout September and October of 2008, Abercrombie and the architects and contractors hired to construct the bump-out denied any prior knowledge of the drainage dangers posed by the grade differential. (Id. ¶¶ 29--34.)

On December 1, 2009, Inland filed its First Amended Complaint ("Complaint") alleging three claims. Inland alleges negligent hiring and supervision (Count I), (Id. ¶¶ 35--40),*fn1 negligent misrepresentation (Count II), (Compl. ¶¶ 41--52), and breach of contract (Count III), (Id. ¶¶ 53--69). Upon receiving notice of this Complaint, Abercrombie filed a 12(b)(6) motion to dismiss Counts I and II.

Standard of Review

A motion to dismiss is meant to test the sufficiency of the complaint, not to decide the merits of the case. Gibson v. City of Chi., 910 F.2d 1510, 1520 (7th Cir. 1990). Accordingly, a court may grant a motion to dismiss under Rule 12(b)(6) only if a complaint lacks "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 1974 (2007); see Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949--50 (2009) (stating that a court's determination "whether a complaint states a plausible claim for relief will . . . be a context-specific task"); Killingsworth v. HSBC Bank Nev., N.A., 507 F.3d 614, 618--19 (7th Cir. 2007); EEOC v. Concentra Health Servs., Inc., 496 F.3d 773, 776--77 (7th Cir. 2007). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 129 S.Ct. at 1949. Although a sufficient complaint thus need not give "detailed factual allegations," it must provide more than "labels and conclusions, and a formulaic recitation of the elements of a cause of action." Twombly, 550 U.S. at 555, 127 S.Ct. at 1964--65; see Iqbal, 127 S.Ct. at 1949 (similarly noting that "threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice"); see also Brooks v. Ross, 578 F.3d 574, 581 (7th Cir. 2009); Killingsworth, 507 F.3d at 618--19. These requirements ensure that the defendant receives "fair notice of what the . . . claim is and the grounds upon which it rests." Twombly, 550 U.S. at 555, 127 S.Ct. at 1964 (quotation omitted); see also Fed. R. Civ. P. 8(a). In evaluating a motion to dismiss, we must accept all well-pleaded allegations in the complaint as true and draw all reasonable inferences in the plaintiff's favor. Iqbal, 127 S.Ct. at 1949--50; Bissessur v. Ind. Univ. Bd. of Trs., 581 F.3d 599, 602--03 (7th Cir. 2009); Brooks, 578 F.3d at 581; Thompson v. Ill. Dep't. of Prof'l Reg., 300 F.3d 750, 753 (7th Cir. 2002).

Analysis

Abercrombie first contends that Counts I and II of the Complaint are barred by the Moorman doctrine, which provides that economic loss is not recoverable in tort under Illinois law. Because both counts share the same damages and underlying facts, we first consider whether the Moorman doctrine bars these claims. See Nepomoceno v. Knights of Columbus, No. 96 C 478, 1999 WL 66570 at *11 (N.D. Ill. Feb. 08, 1999) (analyzing the economic loss doctrine first for two claims alleging the same damage). Abercrombie alternatively argues that even if Counts I and II are not barred by Moorman, they fail to state a plausible claim for relief.

I. Moorman Doctrine

In Moorman Manufacturing Co. v. National Tank Co., 91 Ill.2d 69, 435 N.E.2d 443 (1982), the Illinois Supreme Court held that economic loss is not recoverable in tort, a legal theory now commonly referred to in Illinois as the "Moorman doctrine." Illinois law defines economic loss as "damages for inadequate value, costs of repair and replacement of the defective product, or consequent loss of profits without any claim of personal injury or damage to other property." Adams Labs., Inc. v. Jacobs Eng'g, 761 F.2d 1218, 1223 (N.D. Ill. 1985) (citing Moorman, 91 Ill. 2d at 82, 435 N.E.2d at 449); see also Nepomoceno, 1999 WL 66570 at *11. Tort claims are barred because "[c]ontract law provides the proper remedy" for these "disappointed commercial expectations." Am. United Logistics, Inc. v. Catellus Dev. Corp., 319 F.3d 921, 926 (7th Cir. 2003). "To recover in tort under the economic loss doctrine, a party must show harm above and beyond a party's contractual or commercial expectations." Id. (citing In re Chi. Flood Litig., 176 Ill. 2d. 179, 200--01, 680 N.E.2d 265, 276 (1997)).

Property damage, which is the type of damage alleged in this case, caused by "disappointed commercial expectations, gradual deteriorations, internal breakage, or other nonaccidental causes, rather than a dangerous event," is considered economic loss and barred by the Moorman doctrine. In re Chi. Flood Litig., 176 Ill. 2d. at 200--01, 680 N.E.2d at 275 (citing Redarowicz v. Ohlendorf, 92 Ill. 2d. 171, 177--78, 441 N.E.2d 324, 327 (1982)). Thus, the first critical question for us is whether the particular property damages alleged by Plaintiff should be considered economic loss. In Redarowicz, the Illinois Supreme Court addressed the difference between property damage that should be considered economic loss, and thus not recoverable in tort, and property damage that should not be considered economic loss. Redarowicz, 92 Ill. 2d at 178, 441 N.E.2d at 327. In that case, the plaintiff was seeking damages for the costs of replacement and repair of a defectively constructed chimney. Id. Because it was "not a case where defective construction created a hazard that resulted in a member of the plaintiff's family being struck by a falling brick from the chimney" and the only danger facing the plaintiff were "additional expenses for living conditions that were less than what was bargained for," the court held that the claim was barred by the economic loss doctrine. Id.

This distinction appears in Moorman itself, in which the plaintiff purchased a grain storage tank from the defendant, and this tank later developed a crack. Moorman, 91 Ill. 2d at 74--74, 435 N.E.2d at 445. The Illinois Supreme Court recognized that a suit in strict liability to recover the cost of repairing this crack was barred by the economic loss doctrine. Id. In so holding, the court noted: "Tort theory is appropriately suited for personal injury or property damage resulting from a sudden or dangerous occurrence." Id. at 86, 435 N.E.2d at 450. Subsequent decisions have illustrated this principle that "cases in which Moorman has been applied are grounded on the notion that the complaining party, if he wished protection against the particular type of harm suffered, could have bargained for a guarantee or warranty against it." Congregation of the Passion, Holy Cross Province v. Touche Ross & Co., 159 Ill. 2d. 137, 162, 636 N.E.2d 503, 514 (1994) (quoting Collins v. Reynard, 154 Ill. 2d 48, 56, 607 N.E. 2d 1185, 1189 (1992)); see also 2314 Lincoln Park W. Condo. Ass'n v. Mann, Gin, Ebel & Frazier, Ltd., 136 Ill. 2d 302, 309--12, 555 N.E.2d 346, 349--50 (1990); Anderson Elec., Inc. v. Ledbetter Erection Corp., 115 Ill. 2d 146, 149--54, 503 N.E.2d 246, 247--50 (1986); Mars Inc. v. Heritage Builders of Effingham, Inc., 327 Ill. App. 3d 346, 357--58, 763 N.E. 2d 428, 438--39 (4th Dist. 2002). Because the Moorman doctrine originated in the context of products liability, its application to the ...


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