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Travelers Property Casualty Co. of America, As Subrogee of Gottlieb v. Sears Logistics Services

September 18, 2012


The opinion of the court was delivered by: Judge John J. Tharp, Jr.


Travelers Property Casualty Company of America, Inc., sued Sears Roebuck and Company and Sears Logistic Services, Inc. (together, "Sears") as insurance subrogee of Gottlieb Health Resources, Inc. and Gottlieb Memorial Hospital (together, "Gottlieb"). Travelers alleges that by failing to maintain proper drainage conditions and altering the natural flow of water runoff from its property, Sears negligently caused millions of dollars in flood damage to its neighbor Gottlieb's hospital complex in Melrose Park, Illinois. Travelers also brings nuisance and trespass claims based on the same facts. Sears now moves under Federal Rule of Civil Procedure 12(b)(6) to dismiss the Complaint, and alternatively asks the Court to strike portions of the Complaint or require Travelers to provide a more definite statement. For the reasons discussed below, the Court denies Sears' motions in full.

A. Background

The Complaint alleges, and the Court accepts as true for purposes of this Motion, the following facts: On July 23, 2010, a severe storm descended on the Chicago area, producing heavy rains. Gottlieb incurred substantial water damage during the storm. The basement of the hospital was flooded with water up to two feet deep in some spots. The water damaged the hospital's infrastructure and areas such as the cafeteria and the pharmacy; it also destroyed medical equipment and devices in the basement. Gottlieb's insurer, Travelers, ultimately paid out over $4.2 million for the property damage.

Adjacent to and uphill from Gottlieb is a Sears distribution facility. The highly trafficked facility consists of buildings, loading docks, and large paved parking lots. Sears' property also includes a large wooded area consisting of overgrown vegetation and a "wetland area" that includes a large pool of standing water. According to the Complaint, the storm drain system under the developed parts of the Sears property was inadequate to absorb rainfall runoff from the buildings. Due to neglect and poor maintenance, the drainage system became corroded and ultimately, "nonfunctional." This, combined with the slope of the parking lots toward the wooded area, resulted in greater accumulation of water in the pool over time.

During the July 23 storm, rainfall run-off from the developed portion of the Sears property flowed from building roofs and the paved surfaces into the standing pool of water, causing it to overflow and run off of the Sears lot onto the Gottlieb property. A huge volume of water cascaded over the concrete wall of the hospital's loading dock and rushed through the doors into the basement. The water flooded the basement at depths over two feet in some parts, destroying medical equipment, damaging the hospital's infrastructure (such as elevators and wiring), and ruining parts of the facility. The flood interrupted operation of the hospital and necessitated major emergency and long-term repairs.

Based on these allegations, Travelers claims that Sears negligently failed to maintain its property in various ways that created an unnatural surface water flow and caused the flooding of the Gottlieb facility. Travelers enumerates eleven separate negligent acts or omissions, from failing to properly maintain and inspect the underground drainage system to failing to install detention basins. Travelers also claims that the flood waters constituted both a private nuisance and a trespass upon Gottlieb's property.

B. Discussion

Sears moves to dismiss the Complaint in full, arguing that even if all of Travelers' factual allegations are true, there is no basis for liability. Specifically, Sears argues that any water that flowed from its dominant tract to Gottlieb's subservient tract is well within what is permitted by the water-flow easement it enjoys pursuant to Illinois common law. Sears asserts that the natural flow of water, from which its easement emanates, is "along and through the wooded area," and that the water entered Gottlieb's property along precisely that route, precluding liability as a matter of law. Sears further argues that, without any negligence, there can be no nuisance or trespass, because both claims require some unlawful encroachment.

A motion under Rule 12(b)(6) challenges a complaint's sufficiency to state a claim upon which relief may be granted. Hallinan v. Fraternal Order of Police Chicago Lodge No. 7, 570 F.3d 811, 820 (7th Cir. 2009). In considering a defendants Rule 12(b)(6) motion, the Court accepts as true all of the factual allegations in the complaint and draws all reasonable inferences in favor of the plaintiff. Erickson v. Pardus, 551 U.S. 89 (2007); McGowan v. Hulick, 612 F.3d 636, 637 (7th Cir.2010). However, the Court does not accept as true allegations that are mere legal conclusions. Ashcroft v. Iqbal, 556 U.S. 662, 679-80 (2009).

A federal complaint should be "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). But however short and plain, it must contain sufficient detail to "give the defendant fair notice of what the claim is and the grounds upon which it rests." Bell Atl. v. Twombly, 550 U.S. 544, 545 (2007). And it must have "sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 570). The "required level of factual specificity rises with the complexity of the claim." McCauley v. City of Chicago, 671 F.3d 611, 616--17 (7th Cir. 2011) All told, the factual allegations "must be enough to raise a right to relief above the speculative level." Twombly, 550 U.S. at 555. This bears repeating in the context of Sears' arguments: the allegations of the complaint need not "prove" or "demonstrate" anything other than that the plaintiff's claim is plausible; the plaintiff is not required to plead every fact that would be necessary to prove in order to prevail on its claims.

Because this case invokes diversity jurisdiction, state substantive law governs the dispute. Fednav Intern. Ltd. v. Continental Ins. Co., 624 F.3d 834, 838 (7th Cir. 2010). Here, the parties agree that Illinois law applies. See id. (forum state's law applies absent a conflict-of-laws dispute). In applying Illinois law, the Court must "ascertain the substantive content of state law as it either has been determined by the highest court of the state or as it would be by that court if the present case were before it now." Swearingen v. Momentive Specialty Chemicals, Inc., 662 F.3d 969, 971-972 (7th Cir. 2011).

Travelers' complaint sounds primarily in negligence. Negligence entails the breach of a duty owed to the plaintiff that proximately causes damages. Simpkins v. CSX Transp., Inc., 965 N.E.2d 1092, 1096 (Ill. 2012). In arguing that Illinois law does not provide for liability for the natural flow of water from a dominant to a servient tract, Sears essentially argues that it did not owe a legal duty to Gottlieb under the facts alleged in the Complaint. See id. at 1097 (explaining that the "involved, complex, and nebulous" concept of "duty" is the sum of multiple factors describing a relationship between plaintiff and defendant). Travelers, in response to the motion to dismiss, does not contest Sears' characterization of the relationship between the two properties, although its Complaint did not use the terminology of "dominant" and "servient" estates. Travelers also relies on the same body of water-rights case law as Sears, so there is no disagreement between the parties about the appropriate legal framework. The Court therefore proceeds on the same basis as the parties, designating Sears and Gottlieb as the dominant and servient landowners, respectively.

Illinois follows, and has partially codified, the "civil rule," which provides that the holder of the dominant estate has an implied easement in servient tracts to the extent of any natural water run-off. See Bollweg v. Richard Marker Assocs., Inc., 818 N.E. 2d 873, 884 (Ill. App. Ct. 2004); 70 ILCS 605/2-1. The dominant, or higher, estate has the right to allow surface water to follow the natural course of drainage onto the lower estate and may also construct artificial ditches or drains to more efficiently carry away surface water. Hahn v. County of Kane, 964 N.E.2d 1216, 1223-24 (Ill. App. Ct. 2012); Bollweg, 818 N.E.2d at 884. And the owner of a dominant estate may also increase or alter the flow of water onto a servient tract if it is required for "proper husbandry" or reasonable development. Bollweg, 818 N.E. 2d at 885. However, in Templeton v. Huss, the Illinois Supreme Court rejected outright the contention that the dominant estate has "an unlimited right to increase the rate or amount of surface-water runoff flowing onto [the servient estate], regardless of the cause of or extent of the increase." 311 N.E.2d 141, 145 (Ill. 1974). Thus, the Illinois courts consistently repeat that the right to increase water flow or runoff is not unlimited. Hahn, 964 N.E.2d at 1224; Bollweg, 818 N.E. ...

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