United States District Court, N.D. Illinois, Eastern Division
MEMORANDUM OPINION AND ORDER
D. Leinenweber, Judge
Federal Signal Corporation ("Federal Signal") was
named as a defendant in a California state court products
liability action arising from a personal injury suffered by
an employee while working on board a marine vessel. The
employee alleged that he suffered permanent partial blindness
caused by wind-borne particles of paint hitting him in the
eyes. The paint particles blew off of an "Atkinson
Dynamics Model AD-TB-25 Speaker, " manufactured by
Federal Signal, which was affixed to a weather deck bulkhead.
The plaintiff further alleged that the specific cause of his
injury was the failure of the powder coating applied to the
talk back part of the speaker to congeal or adhere properly,
which caused it to degrade into loose, dusty, free-flying
particles of paint. Tammcor Industries, Inc.
("Tammcor"), the Defendant here, who is alleged in
this case to be responsible for the painting, was not named
in that lawsuit.
Signal settled the lawsuit in December 2014 for the sum of
$450, 000.00. Federal Signal also entered into side
agreements with two other defendants in the law suit. In
return for contributions toward the settlement of $25, 000.00
each, Federal Signal was assigned all rights, if any, those
defendants had against Tammcor.
Signal, after settling the products liability lawsuit, filed
this suit against Tammcor seeking indemnity to recover its
and its two co-defendants' defense and settlement costs.
The First Amended Complaint alleges that the defective
product that gave rise to the product liability lawsuit was
manufactured by Tammcor and sold to Federal Signal for
incorporation into the AD-TB-25 Speaker. Count I of the First
Amended Complaint seeks contractual indemnification based on
a written provision in an alleged purchase order given to
Tammcor by Federal Signal. Count III is based on Implied
Indemnification, and Count IV is based on Equitable
Contribution. (Count II is not directed against Tammcor.)
Tammcor has moved for dismissal of each of the three counts.
specific parts in question subject to the powder coating
failure were metal castings which, Federal Signal contends,
were purchased from Tammcor pursuant to written purchase
orders. These castings were incorporated by Federal Signal
into the AD-TB-25 Speaker System which it assembled and sold.
Tammcor was responsible for obtaining the metal castings from
a Federal Signal supplier and then coating and painting them.
However, according to an expert report prepared for Federal
Signal, these castings were not properly painted for a
product intended for use in a "marine environment."
The report further opined that the castings made of aluminum
should have been pretreated in order to enable them to resist
corrosion. In a letter Federal Signal sent to Hose-McCann
Communications, the purchaser of the AD-TB-25 Speaker, it
admitted that its speaker failed to pass a salt spray testing
based on the corrosion performance criteria.
Signal bases its claim for indemnity on the preprinted terms
of its standard form purchase order, which stated as follows
in paragraph 12 of the Terms & Conditions:
INDEMNIFICATION. Seller shall defend, indemnify and hold
harmless Buyer against all damages, claims or liabilities and
expenses (including attorney's fees) arising out of or
resulting in any way from any defect in the goods or services
purchased hereunder, or from any act or omission of Seller,
its agents, employees or subcontractors. This indemnification
shall be in addition to the warranty obligations of Seller
and Seller agrees to provide Certificates of Insurance for
such Indemnity upon request.
Signal produced examples of prior dealings between it and
Tammcor where such a standard form purchase order was used.
However, it was unable to produce any such purchase order
governing the sale of the specific castings that were the
subject of the products liability lawsuit. The only document
produced that referred to this product was an offer letter
Federal Signal sent to Tammcor, which purported to detail its
offer to Tammcor to machine the specific product in question.
offer required Tammcor to purchase specific raw casting
inventory from a Federal Signal supplier, then to transition
the purchasing of castings to another Federal Signal
supplier, and to maintain inventory of the castings on a
offer further stated that pricing, engineering, quality
control, and delivery from die casting suppliers were to be
handled by Federal Signal. The offer further provided that
Tammcor was responsible for all tooling costs, and was
responsible for maintaining inventory of product. The offer
said nothing about pre-treating and/or painting the castings.
Nor did the offer make mention of any requirement that
Tammcor indemnify Federal Signal. The offer did, however,
state that "the agreement" could only "be
modified in writing signed by both parties."
TAMMCOR' S MOTION
bases its Motion for Summary Judgment on Count I on Federal
Signal's failure to produce a written indemnity
agreement. It bases its Motion for Summary Judgement on
Counts III and IV on Federal Signal's alleged design
failure to ensure satisfaction of corrosion performance
criteria, which made it at least partially at fault.
Tammcor's Motion is straightforward: this is a breach of
contract claim for indemnity, and the first element is the
existence of a valid contract consisting of an offer, an
acceptance, and consideration. All American Roofing, .
Inc. v. Zurich Am. Ins. Co., 404 Ill.App.3d 438, 439
(1st Dist. 2010). Federal Signal has produced writings
consisting of an offer agreement, engineering drawings, buy
cards, a memorandum of understanding between the parties, and
a Kanban agreement, none of which set forth an agreement on
Tammcor's part to indemnify Federal Signal.
Signal responds by asserting that the two parties had a long
term business relationship, which started in 2004 and ended
in 2008, under which Tammcor supplied Federal Signal with
parts for industrial audio speakers that Federal Signal
assembled and sold. In this case, Tammcor was responsible for
obtaining, coating, and painting the castings to be used in
the audio speakers. Tammcor shipped the castings from its
Kentucky plant to Federal Signal's facility in ...