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Freight Train Advertising, LLC v. Chicago Rail Link

November 14, 2012

FREIGHT TRAIN ADVERTISING, LLC, PLAINTIFF,
v.
CHICAGO RAIL LINK, LLC,
DEFENDANT.



The opinion of the court was delivered by: Judge Virginia M. Kendall

MEMORANDUM OPINION AND ORDER

This case arises out of a contract for the placement of a large advertisement on a railroad bridge above a highway in Illinois. The Plaintiff Freight Train Advertising, LLC, ("FTA"), entered into a Track Lease with Defendant Chicago Rail Link, LLC, ("CRL"), under which FTA would lease a section of a bridge in the City of Chicago to display its Mobile Signage Unit upon which advertisement space could be rented. After FTA placed its Unit on the bridge, the Illinois Department of Transportation requested that CRL take down FTA's Unit, pursuant to a 1961 Agreement between IDOT and several railroads that they would not erect any signs for advertising purposes on the railroad bridges. FTA brought suit against CRL for fraudulent misrepresentation, negligent misrepresentation, fraudulent concealment and breach of contract, alleging that FTA suffered actual damages of at least $300,000 and consequential damages of at least $7,000,000 in the form of lost advertising revenue.

This case is now before the Court on CRL's Motion for Summary Judgment, or Alternatively for Partial Summary Judgment, pursuant to Rule 56 of the Federal Rules of Civil Procedure. (Doc. 36). CRL argues that FTA materially breached the contract by failing to secure the permits and legal authorities' approval to place its advertising displays, and therefore FTA cannot maintain an action for breach of contract against CRL. In addition, CRL seeks summary judgment on FTA's remaining claims because they are premised on FTA being a successor-in-interest to the railroads that were parties to the 1961 Agreement with IDOT and CRL insists it was a bona fide purchaser who was not bound by the 1961 Agreement; in addition, CRL argues, that 1961 Agreement would not apply to FTA's Mobile Signage Unit. In the alternative, FTA argues that FTA's claim for negligent misrepresentation must fail because the facts do not support that CRL was in the business of solely providing information rather than providing a product with ancillary information. For the reasons discussed below, CRL's Motion is granted in part with respect to FTA's claim of negligent misrepresentation and denied in part with respect to FTA's remaining claims; accordingly, the parties should prepare for trial.

I. MATERIAL UNDISPUTED FACTS *fn1

FTA is a Limited Liability Company organized under the laws of the State of Texas with its principal place of business in Carrollton, Texas. (FTA 56.1 Resp. ¶ 2). FTA consists of Brad Berkley as its President and Ray Sipperley who holds an interest through Ray's Railroad Company. ( Id. ¶ 8). CRL is a Limited Liability Company that provides common carrier railroad transportation for compensation, as a "railroad operator" pursuant to 49 U.S.C. § 10102(5), with its principal place of business in Denver, Colorado. ( Id. ¶ 3, 4). Jurisdiction and venue are proper. See 28 U.S.C. § 1332; 28 U.S.C. § 1391(a). Illinois state law controls. (Doc. 1, Ex. A, Lease § 21.11).
On August 26, 2010, FTA *fn2 entered into an agreement entitled the Track Lease with CRL. ( Id. ¶ 9). Pursuant to the Track Lease, FTA leased from CRL a strip of property on a bridge in the City of Chicago overlooking a highway, on which to construct a short railroad track upon which to park and display a railcar with a Mobile Signage Unit. ( Id. ¶ 10). CRL was aware that FTA intended to use the Mobile Signage Unit for advertising purposes. (CRL Add'l 56.1 Resp. ¶ 3). In fact, under the Lease, CRL would be compensated by both a monthly rental payment and 30% of the net profits obtained by FTA from renting the space for advertisements. (Doc. 1, Ex. A, Lease §§ 3.1, 3.2). Under the Track Lease, FTA agreed to: *fn3

comply with any and all law, by-law, order, ordinance, ruling, regulation certificate, approval, consent or directive and any applicable federal, state, or municipal government, government department, agency or regulatory authority or any court of competent jurisdiction, including without limitation, those pertaining to environmental matters, advertising and signage, and including, without limitation, regulations and laws found in Chapter 17-12 of the Chicago Municipal Code and the Illinois Highway Advertising Control Act of 1971 (collectively, "Laws") and other

[CRL] requirements relating to the use of the Track. (Doc. 1, Ex. A, Lease § 4.3). Notably: *fn4

If [FTA]'s use of the "Track" . . . violates the "Laws", as defined in Section 4.3 [above], either Party may terminate this Agreement upon giving the other Party not less than sixty (60) days written notice to terminate for any reason whatsoever in that Party's sole discretion and regardless of performance or non-performance of any covenants and agreements . . . and without regard to any loss or damage incurred by either Party as a result of such termination or cancellation.

(Doc. 1, Ex. A, Lease § 1.2). The Track Lease was also: *fn5

made subject to the rights granted by or through [CRL] for any surface, subsurface or aerial uses antedating this Agreement, including but not limited to the construction, maintenance, operation, renewal and/or relocation of fences, pipelines, communication lines, power lines, railroad tracks and signals, and any and all applicable appurtenances. [CRL] accepts and reserves the right to grant additional uses of the same or similar nature subsequent to the execution of this Agreement, without payment of any sum for damages, so long as such use does not unreasonably interfere with the use of Track by [FTA] for a Mobile Signage Unit. (Lease § 21.7). In addition, FTA agreed to: defend, indemnify, release and hold harmless [CRL] from any and all costs, obligations, liabilities, duties, fines, penalties, judgments and/or attorney's fees that Lessor may incur as a result of addressing or defending any alleged or actual violation of any Laws related to [FTA]'s use of the Track and associated property. (Lease §8). In addition, FTA agreed to: obtain[ ], without expense to [CRL], all necessary public authority and permission, including applicable permits, for the maintenance and operation of the Track. (Lease §4.2). The Mobile Signage Unit was rolled out to its location on the bridge's tracks on or around January 10, 2011. (FTA 56.1 Resp. ¶ 17). Of the communications amongst CRL, FTA and the Illinois Department of Transportation that followed the roll-out, the parties dispute the admissibility, relevance and import. The parties also fail to present the emails in a chronological or coherent manner or in conformity with Local Rule 56.1. Nonetheless, the parties do not dispute that on January 28, 2011, Andy Rabadi, a Senior Railroad Engineer with the Illinois Department of Transportation, emailed Adam Hess of CRL requesting that the Mobile Signage Unit be removed immediately. *fn6 (Doc. 45, Ex. A-6). Rabadi stated that the removal was necessary to comply with an Agreement executed in 1961 by the State of Illinois and the Chicago River and Indiana Railroad Company and the New York Central Railroad Company, which states: "RAILROAD agrees not to erect, nor grant permission to erect, any advertising sign on RAILROAD property within the limits of this improvement." (Doc. 45, Ex. A-2, p. 13).

On February 10, 2011, Adam Hess of CRL forwarded to Brad Berkley and Ray Sipperley of FTA the 1961 Agreement, stating that they needed to get on the same page and that CRL was performing some additional research to verify its validity. (Doc. 45, Ex. A-2, p. 13). Also on February 10, 2011, Mike Shore of CRL met with the City of Chicago Building Commissioner Richard Monocchio. (FTA Add'l 56.1 ¶ 28; Doc. 45, Ex. A-12). The Commissioner provided CRL with an Emergency Vacate Order, citing its police powers, to order that the sign be removed because it constituted a hazard to the public roadway. (Doc. 45, Ex. A-12). CRL removed the Unit from its location over the Dan Ryan Expressway on February 15, 2011. (FTA 56.1 Resp. ¶ 22).

In its First Amended Complaint, FTA claims that the 1961 Agreement was between CRL's predecessors-in-interest and the State of Illinois, and expressly prohibited CRL from erecting or permitting others to erect advertisements on the subject property. FTA alleges that when Adam Hess and CRL represented that CRL had the authority to enter into the Track Lease, CRL knew or should have known that capacity was lacking. As such, FTA argues, CRL's material statements were false or made with sufficient recklessness to be actionable as fraudulent misrepresentation. (Doc. 19, Complaint, p. 6). In addition, FTA alleges CRL negligently misrepresented its ability to convey a leasehold, when it failed to exercise reasonable care in communicating limitations on the land to FTA. (Doc. 19, Complaint, p. 7). In the alternative, FTA alleges, CRL knew that it lacked the right to enter into the Track Lease and fraudulently concealed that fact from FTA. (Doc. 19, Complaint, p. 8). Finally, if in the alternative the Track Lease is valid and enforceable, FTA argues that CRL breached the contract when it failed to transfer the leasehold interest as due. (Doc. 19, Complaint, p. 9).

CRL asserts that it had no knowledge of the 1961 Agreement until late January, 2011, after the Mobile Signage Unit was in place, when IDOT sent CRL a copy of the ...


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