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Al Maha Trading & Contr. Holding Co. v. W.S. Darley & Co.

United States District Court, N.D. Illinois, Eastern Division

March 27, 2013

AL MAHA TRADING & CONTRACTING HOLDING COMPANY, a Saudi Arabian limited liability company, Plaintiff,
v.
W.S. DARLEY & CO., an Illinois corporation, Defendant

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[Copyrighted Material Omitted]

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For Al Maha Trading & Contracting Holding Company, Plaintiff: William M. Ejzak, Attorney at Law, Chicago, IL.

For W.S. Darley & Co., Defendant: Francis A Citera, Paul Alexis Del Aguila, Greenberg Traurig, LLP., Chicago, IL.

OPINION

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James F. Holderman, Chief United States District Judge.

MEMORANDUM OPINION AND ORDER GRANTING IN PART AND DENYING IN PART W.S. DARLEY & CO.'S RULE 12(B)(6) MOTION TO DIMSMISS [15]

On March 16, 2012, plaintiff Al Maha Trading & Contracting Holding Company (" Al Maha" ) filed a twelve-count complaint against defendant W.S. Darley & Co. (" Darley" ), seeking damages and equitable remedies resulting from " Darley's selection and sale of six fire trucks to Al Maha." (Dkt. No. 1 (" Compl." ) & 1.)

Pending before the court is Darley's Rule 12(b)(6) motion to dismiss. (Dkt. No. 15.) For the reasons set forth below, Darley's motion is granted in part and denied in part. Counts I, III, VI, VII, VIII, X, and XI are dismissed with prejudice, while Counts II, IV, V, IX, and XII remain pending before the court.

BACKGROUND

The following background facts are from the Complaint, as required at this stage of the litigation, and the court has accepted all of the Complaint's well-pleaded factual allegations as true. Council 31 of the Am. Fed. of State, County & Municipal Employees, AFL-CIO v. Quinn, 680 F.3d 875, 884 (7th Cir. 2012).

Al Maha is a limited liability company organized under the laws of the Kingdom of Saudi Arabia, with its principal place of business in Al-Khobar, Saudi Arabia. (Compl. & 2.) Al Maha specializes in the fields of fire protection, prevention, hazard mitigation, emergency medical services, and the provision of manpower for these fields, serving the Saudi Arabian and neighboring markets. ( Id. ) On August 24, 2008, Al Maha entered into a contract with Rabigh Refining and Petrochemicals Company,

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LLC (" Petro Rabigh" ) to provide firefighting services and equipment, including fire trucks, at Petro Rabigh's refinery located Rabigh, Saudi Arabia (the " Petro Rabigh Contract" ). ( Id. & 6.)

Darley is an Illinois corporation with its principal place of business in Itasca, Illinois. ( Id. & 3.) On its website, Darley advertises itself as " dedicated to serving the World's Fire and Emergency Services." ( Id. & 7.) Darley's website states that Darley has over 60 years of experience in " supplying apparatus, pumps and firefighting equipment to . . . governments and agencies around the world" and that it supplied a " major order in recent years" that included " 500 HM pumps for Saudi Arabia Civil Defense." ( Id. )

In 2008, Al Maha's manager for the Petro Rabigh Contract, Christopher Gale (" Gale" ), approached Darley to purchase fire trucks that would satisfy the requirements of the Petro Rabigh Contract and otherwise be fit for service in Saudi Arabia. ( Id. & 8.) The specifications of the Petro Rabigh Contract, which Gale provided to Darley, did not specify engine-type or fuel-type for the desired fire trucks. ( Id. )

In early to mid-2009, Darley sold Al Maha six fire trucks (" Fire Trucks" ) for a total purchase price of U.S. $2,931,000.00 and shipped the Fire Trucks to Al Maha in Saudi Arabia. ( Id. & & 10, 12.) Al Maha did not view or inspect the Fire Trucks before purchasing them. ( Id. & 8.) Darley knew that Al Maha needed the Fire Trucks for service and use in Saudi Arabia, and Al Maha relied on Darley's expertise in the international sale of firefighting equipment, including fire trucks, to supply Al Maha with fire trucks that would be fit for service in Saudi Arabia. ( Id. & 8.)

" At some point after receiving shipment of the Fire Trucks," Al Maha " ultimately learned" that the Fire Trucks could not be operated in Saudi Arabia due to a diesel fuel issue. ( Id. & 13.) Specifically, the Fire Trucks' diesel engines required Ultra Low Sulfur Diesel (" ULSD" ), which is not available in Saudi Arabia. ( Id. ) The Fire Trucks could not run on High Sulfur Diesel (" HSD" ), the only type of diesel fuel available in Saudi Arabia, and they could not be retrofitted to run on HSD. ( Id. ) Additionally, contrary to Al Maha's expectation and understanding, four of the six Fire Trucks were not new and had in excess of 6,000 miles on their odometers. ( Id. & 15.) Al Maha also learned that Darley had charged Al Maha " hundreds of thousands of U.S. dollars" over prevailing market prices, and that Darley had given Gale an undisclosed payment " in excess of $50,000" in connection with the sale of the Fire Trucks. ( Id. & & 16-17.)

" In and around the period from mid- to late 2010," Al Maha " communicated to Darley . . . in substance that the Fire Trucks could not be operated in Saudi Arabia due to the diesel fuel issue" and that the Fire Trucks " showed significant mileage on their odometers." ( Id. & 18.)

" In or around early 2011," Al Maha's retained expert reported to Al Maha that the Fire Truck engines could not be retrofitted to use HSD and that using more than a few tanks of HSD would lead to " total engine destruction." ( Id. & 19.) In February 2011, Al Maha's expert provided Al Maha with a five-page document from Freightliner, LLC, titled " CRITICAL WARNING for ALL U.S. and CANADIAN DEALERS REGARDING the EXPORT of VEHICLES EQUIPPED with U.S. EPA 2007 ENGINES," which explained that " vehicle performance and customer satisfaction will be seriously affected if the required ultra low sulfur diesel fuel

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is not used" and also prohibited the sale of trucks equipped with " EPA 2007" engines outside the U.S. or Canada without previous authorization. ( Id. & 20.)[1] One of the trucks Darley sold to Al Maha was a 2008 Freightliner Truck, and all six of the Fire Trucks Darley sold to Al Maha were equipped with Heavy Duty (Diesel) Engines (" HDEs" ) designed to run on ULSD in compliance with the EPA 2007 standards. ( Id. & 21.)

Al Maha was unable to use or sell the Fire Trucks in Saudi Arabia, including under the Petro Rabigh Contract, or elsewhere in the Persian Gulf region where only HSD is available. ( Id. & & 19, 23.) In March 2012, Al Maha's counsel provided Darley with notice of rejection and/or revocation of acceptance of the Fire Trucks. ( Id. & 24.) Al Maha alleges that Darley knew, or should have known, that the Fire Trucks " could not be operated in most of the rest of the world--and particularly including not in Saudi Arabia, due to the lack of availability of ULSD in Saudi Arabia." ( Id. & 22.)

Al Maha asserts claims against Darley under Illinois law for: breach of implied warranty of fitness for particular purpose (Counts I and II); unconscionable contract (Count III); mutual mistake (Count IV); unilateral mistake (Count V); fraud (Count VI); fraudulent inducement (Count VII); negligent misrepresentation (Count VIII); violation of the Illinois Consumer Fraud Act (Count IX); breach of fiduciary duty (Count X); constructive fraud (Count XI); and inducement of breach of fiduciary duties (Count XII). Jurisdiction is established in this court pursuant to 28 U.S.C. § 1332(a)(2).

LEGAL STANDARD

Rule 8 of the Federal Rules of Civil Procedure requires complaints to include " a short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2). In other words, the complaint must " give the defendant fair notice of what the . . . claim is and the grounds upon which it rests." Bell A. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)). To survive a motion to dismiss, " a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2008) (quoting Twombly, 550 U.S. at 570). " 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." Id. at 1948-49. A complaint is sufficient if it gives " enough details about the subject-matter of the case to present a story that holds together." Swanson v. Citibank, 614 F.3d 400, 404 (7th Cir. 2010). On the other hand, a plaintiff " can plead himself out of court by pleading facts that show that he has no legal claim." Atkins v. City of Chicago, 631 F.3d 823 (7th Cir. 2011). Plaintiffs are also not permitted to rely on " mere labels, conclusions, or a formulaic recitation of the elements of a cause of action." DeGuelle v. Camilli, 664 F.3d 192, 198 (7th Cir. 2011). When reviewing a 12(b)(6) motion to dismiss, the court " construe[s] all well-pleaded alleged facts, and draw[s] all reasonable inferences, in a light most favorable to the plaintiff." Council 31, 680 F.3d at 884.

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ANALYSIS

I. Breach of Implied Warranty of Fitness for Particular Purpose (Remedy Pursuant to Section 2-711 of the UCC) (Count I)

In Count I of its Complaint, Al Maha seeks to cancel its contract with Darley and recover as damages the $2,931,000.00 Al Maha paid for the Fire Trucks, as well as Al Maha's incidental and consequential damages, alleging that Darley breached the Illinois Uniform Commercial Code's (" UCC" ) implied warranty of fitness for a particular purpose by selling fire trucks to Al Maha that could not be operated in Saudi Arabia. Darley argues that Count I should be dismissed with prejudice because " Al Maha failed, as a matter of law, to timely reject or revoke its acceptance of the Fire Trucks." (Dkt. No. 19 (" Darley's Mem." ) at 5.)

The Illinois UCC provides generally that every contract for the sale of goods includes an implied warranty of fitness for a particular purpose if " the seller at the time of contracting has reason to know any particular purpose for which the goods are required and that they buyer is relying on the seller's skill or judgment to select or furnish suitable goods." 810 ILCS 5/2-315. If the buyer " rightfully rejects or justifiably revokes acceptance" of any non-conforming goods, the buyer may cancel the contract and recover the amount of the price ...


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