In the

United States Court of Appeals

For the Seventh Circuit ____________

No. 05-1144

KEMPER/PRIME INDUSTRIAL PARTNERS,

Plaintiff-Appellant,

v.

MONTGOMERY WATSON AMERICAS, INC.,

Defendant-Appellee,

v.

THE PRIME GROUP, INC.,

Third-Party Defendant.

____________

Appeal from the United States District Court

for the Northern District of Illinois, Eastern Division.

No. 97 C 4278—Ronald A. Guzman, Judge.

____________

ARGUED NOVEMBER 27, 2006—DECIDED JUNE 12, 2007

PUBLISHED JUNE 19, 2007

____________

Before BAUER, WOOD, and EVANS, Circuit Judges.

WOOD, Circuit Judge. This case concerns who is responsible for certain environmental clean-up costs. Kemper/

Prime Industrial Partners (“Kemper/Prime”), the plaintiff,

claims that an environmental assessment of a parcel of

land performed by Warzyn, Inc., the predecessor of defendant Montgomery Watson Americas, Inc. (“Montgomery”),

was deficient insofar as it failed to reveal to Kemper/Prime
2 No. 05-1144

the full extent of contamination and clean-up costs. The

property in question was called the Chicago Enterprise

Center (“the Property”), which Kemper/Prime purchased

after receiving Warzyn’s report in 1990. Later, when it

decided to refinance the Property in 1996, Kemper/Prime

conducted another environmental assessment of the

land. The new assessor discovered contamination that

was present in 1990 but that Warzyn had not detected.

Kemper/Prime sued Montgomery, Warzyn’s successor,

claiming negligent misrepresentation on Warzyn’s part,

but the district court ruled that its evidence of damages

was insufficient and dismissed the case with prejudice.

We affirm.

I

In February 1990, an entity called the Prime Group, not

to be confused with plaintiff Kemper/Prime, hired Warzyn

to conduct an environmental assessment of the Property,

a 120-acre stretch of industrial land in south Chicago, to

determine whether the Property had unknown environmental hazards or problems. Warzyn understood that the

Property would soon be bought by a new partnership to be

known as Kemper/Prime, which was created to make that

purchase by partners in the Prime Group. As planned,

Kemper/Prime purchased the Property after Warzyn

issued its final reports in June of 1990.

As part of its assessment, Warzyn conducted a fourmonth evaluation of the Property, including a site visit, an

historical records search, a review of previous reports

about the Property, an investigation of information from

state and federal sources relevant to the Property, soil

testing, soil boring, installation of monitoring wells,

analyses of decontamination procedures, water level

measurements, ground water sampling, PCB wipe sampling procedures and other field testing. Warzyn concluded
No. 05-1144 3

that there were still unreviewed areas in the Property, but

based on the scope of the work that the Prime Group had

commissioned, it did not investigate these additional

areas.

Warzyn published two reports for the Prime Group in

June of 1990. The reports identified some contamination,

focusing in particular on two sections of land (identified

as SB17 and SB8) within the Property that were part of

a “major area of concern” south of Building S. The Prime

Group had expected Warzyn to retrieve Sanborn Fire Maps

for the Property, but Warzyn reported that such maps

were unavailable. At some point after Warzyn’s assessment, the parties learned that this was incorrect, and that

Sanborn Maps were available for the years 1897, 1913,

1947, 1950, 1976, and 1987. The Sanborn Maps for 1947

and 1950 showed 26 underground storage tanks on the

Property. The later two Sanborn Maps showed none of

these tanks.

After issuing its reports, Warzyn sent a short letter to

the Prime Group noting that Warzyn had “developed a

proposal to quantify the extent of contamination identified.” Neither the reports nor the letter stated that Warzyn

had taken the next step and quantified the full environmental remediation costs for the Property. Instead, the

reports and the letter identify some costs for cleaning

up some of the identified contamination. In context, it

appears that the costs may relate to the “major area of

concern” near Building S, because the cost discussion

follows immediately after the discussion of the Building S

area. That area is not a part of the Property at issue in

this litigation.

Between 1993 and 1996, two other environmental

assessments were done on the Property—one by Dunn

Corporation in 1993 and one by Carlson Environmental,

Inc., in 1996. Also during this time, Kemper/Prime subdi-
4 No. 05-1144

vided and sold significant sections of the Property. Taken

together, these sales yielded millions of dollars in profits

for Kemper/Prime.

Kemper/Prime was nevertheless displeased to learn that

the Property had more environmental contamination than

it had been led to believe before its initial purchase. In

1997, Kemper/Prime sued Montgomery. Then in 1999,

several of the entities that had purchased sections of the

Property joined the suit as plaintiffs. Also in 1999, Montgomery filed a third-party claim against the Prime Group

pursuant to an indemnification provision in the 1990

agreement between the Prime Group and Warzyn. In 2003,

the district court dismissed the claims brought by the

1999 plaintiffs. No claims have been filed between

Kemper/Prime and the Prime Group. (This is important

because a defendant’s impleader under FED. R. CIV. P. 14

of a party that is not diverse from the plaintiff does not

destroy jurisdiction. See 28 U.S.C. § 1367(b).)

Although Kemper/Prime filed its complaint against

Montgomery in 1997, the litigation dragged on for several

years. In 2003, Montgomery made two motions in limine

about the standard of damages the district court should

employ, questioning whether Kemper/Prime would be able

to satisfy its burden of proof under the appropriate

standard. The district court expressed “serious doubts

about the ability of . . . Kemper/Prime . . . to provide

evidence of damages.” Kemper/Prime then filed a “Memorandum Of Evidence On Damages That It Will Present At

Trial.” After Montgomery filed a responsive brief, the

district court concluded that “Plaintiff cannot offer proof

of all necessary parameters of the damages calculation,

and [therefore] Plaintiff is barred from presenting evidence

of damages at trial” and dismissed the case with prejudice,

in substance granting summary judgment in Montgomery’s

favor. Kemper/Prime appeals its dismissal to this court.

We note that Montgomery’s claim for indemnification
No. 05-1144 5

against the Prime Group is still pending in the district

court, which would ordinarily mean that the judgment

is not yet final in this case for purposes of 28 U.S.C.

§ 1291. Here, however, the court issued an order under

FED. R. CIV. P. 54(b) certifying that all claims between

Kemper/Prime and Montgomery were resolved and there

was no just reason for delay for purposes of appeal. Our

appellate jurisdiction is therefore secure.

II

Because the district court’s jurisdiction was based on

diversity of citizenship, 28 U.S.C. § 1332(a), we look to

state law (here, that of Illinois) for the rules of decision.

See 28 U.S.C. § 1652; McClain v. Owens-Corning Fiberglas

Corp., 139 F.3d 1124, 1126 (7th Cir. 1998) (specifically

addressing the question of whether evidence supports an

award of damages). The Illinois Supreme Court allows

suits alleging negligent misrepresentation “where [the

defendant] is in the business of supplying information for

the guidance of others in their business transactions.”

Brogan v. Mitchell Int’l, 692 N.E.2d 276, 278 (Ill. 1998);

Moorman Mfg. Co. v. National Tank Co., 435 N.E.2d 443,

452 (Ill. 1982). A plaintiff alleging negligent misrepresentation must prove (1) the defendant made “a false statement of material fact,” (2) the defendant had the “intention

to induce the other party to act,” (3) the plaintiff relied “on

the truth of the statements,” (4) “damage to the other

party resulting from such reliance,” and (5) the “defendant

owes a duty to the plaintiff to communicate accurate

information.” Board of Educ. v. A, C & S, Inc., 546 N.E.2d

580, 591 (Ill. 1989). At issue in this appeal is the fourth

element, “damage . . . resulting from such reliance.”

The Illinois state courts have not adopted a particular

approach to damages for negligent misrepresentation

cases. Montgomery argued before the district court that
6 No. 05-1144

the proper measure of damages here is the diminution of

value of the land at issue, while Kemper/Prime asked the

district court to adopt the damages standard set forth in

§ 552B of the Second Restatement of Torts. The district

court agreed with Kemper/Prime and looked to § 552B

for its standard.

This court faced a similar lack of standards for damages

in a diversity action in Trytko v. Hubbell, Inc., 28 F.3d 715,

721-24 (7th Cir. 1994). In Trytko, the plaintiff brought a

negligent misrepresentation action under Indiana law. Id.

at 718. The Trytko court noted that “[a]lthough the [Indiana Supreme Court] adopted § 552 of the Restatement

(describing the elements of the tort of negligent misrepresentation), no Indiana court has discussed or adopted

§ 552B’s view of damages. Nevertheless, the Restatement,

in its stature, seems an appropriate starting point for

our discussion.” Id. at 721-24. The Trytko court, consistently with many others, adopted § 552B and its commentary as the proper standard of damages, including that

section’s limitation of damages in negligent misrepresentation cases to reliance damages only, not expectancy

damages. Id. at 724 (citing § 552B(2)). See also Becker v.

PaineWebber, Inc., 962 F.2d 524, 527 (5th Cir. 1992);

Cunha v. Ward Foods, Inc., 804 F.2d 1418, 1426 (9th Cir.

1986); Battenfeld of Am. Holding Co. v. Baird, Kurtz &

Dobson, 60 F. Supp. 2d 1189, 1202 (E.D. Pa. 1999); Rosales

v. AT&T Information Systems, Inc., 702 F. Supp. 1489,

1501 (D. Colo. 1988); First Interstate Bank of Gallup v.

Foutz, 764 P.2d 1307, 1310 (N.M. 1988); Law Offices of

L.J. Stockler v. Rose, 436 N.W.2d 70, 85-86 (Mich. Ct. App.

1989).

We agree with the district court that if Illinois courts

were to address the issue of standard of damages in a

negligent misrepresentation action, they likely would

adopt § 552B as their standard. Section 552B reads:
No. 05-1144 7

Damages for Negligent Misrepresentation

(1) The damages recoverable for a negligent misrepresentation are those necessary to compensate the

plaintiff for the pecuniary loss to him of which the

misrepresentation is a legal cause, including

(a) the difference between the value of what he has

received in the transaction and its purchase price

or other value given for it; and

(b) pecuniary loss suffered otherwise as a consequence

of the plaintiff’s reliance upon the misrepresentation.

(2) the damages recoverable for a negligent misrepresentation do not include the benefit of the plaintiff’s contract with the defendant.

Relying on § 552B, the district court concluded that in

order to prove damages, Kemper/Prime needed to “offer

evidence of (1) the cost of remediating the contamination listed in the 1990 Report, and (2) the total cost of

remediating the contamination that existed on the Property at the time of the 1990 Report.” This evidence could

satisfy either § 552B(1)(a) or (b) because it would either

show the extent to which Kemper/Prime overpaid for the

Property or the additional costs Kemper/Prime was

forced to incur because of its reliance on Warzyn’s reports.

In fact, this interpretation of § 552B was generous to the

plaintiff, as § 552B can be read more narrowly. Indeed,

Montomgery contends that the district court’s approach to

pecuniary loss is “expansive.” Because Kemper/Prime’s

evidence of damages does not satisfy even the district

court’s standard, however, we do not need to consider

further whether Illinois would adopt a narrower reading

of § 552B. Instead we move directly to the district court’s

conclusion that Kemper/Prime failed to raise a genuine

issue of fact on allowable damages.
8 No. 05-1144

III

Illinois law requires that the plaintiff’s “evidence shall

with a fair degree of probability tend to establish a basis

for the assessment of damages.” Schatz v. Abbott Laboratories, Inc., 281 N.E.2d 323, 326 (Ill. 1972). If it meets that

standard (which we understand for purposes of a federal

diversity case to mean evidence that, if believed by a trier

of fact, would suffice to show damages), it need not be

exact. Here, Kemper/Prime needed to proffer evidence

of (1) the cost of remediating the contamination listed in

the 1990 Report, and (2) the total cost of remediating the

contamination that existed on the Property at the time

of the 1990 Report.

A

In order to meet this burden, Kemper/Prime pointed to

the 1990 Warzyn report, the testimony of an expert, Gary

Vajda, the testimony of one of its officers, James Martell,

the other Warzyn materials, a draft letter from Warzyn to

Martell on May 31, 1990, and a few lines of handwritten

notes following a conversation between Martell and

Warzyn on June 1, 1990. We agree with the district court

that this evidence does not “establish a basis for the

assessment of damages” with any degree of probability,

let alone “with a fair degree of probability.” First,

Kemper/Prime has identified no statement by Warzyn in

the 1990 reports or in any supporting documentation

from Warzyn produced at the time of the reports of the

cost of remediation for the Property. Second, Kemper/

Prime identifies nothing in the reports or other Warzyn

documents from which a court could infer the cost of

remediation. Third, even if Kemper/Prime could point to

such a remediation cost, Kemper/Prime has not demonstrated how a court could infer from that data what the

cost of remediating only the sections of the Property at
No. 05-1144 9

issue in this litigation would be or compare the cost of

remedying the problems Warzyn found on the relevant

parcel to the cost of full remediation in 1990, the second

fact required by the district court.

Kemper/Prime contends that the affidavit by its expert

Gary Vajda concerning the standard of care in environmental assessment reports is evidence of the cost of

remediating the contamination identified by Warzyn in

1990. Vajda stated that it is “the standard practice of

consultants performing this type of work to at least

provide a qualitative but more often a quantitative evaluation of the potential liabilities . . . [and] it was not unusual

to provide order of magnitude costs (or cost ranges) that

bracket the potential liabilities.” (emphasis added). This

statement is far too vague, however, to support a claim

that Kemper/Prime was entitled to view the Warzyn

reports as a definitive statement of the costs of

remediation, nor does it demonstrate an industry

standard practice that requires cost estimates for all

possible remediation.

Montgomery correctly states in its brief to this court that

there is no evidence that Warzyn made any statement to

Martell, Senior Vice President of the Prime Group and an

officer of Kemper/Prime and the Prime Group, or anyone

else, that the cost to remediate all the contamination on

the Property in 1990 was $300,000. Although Kemper/

Prime may have been technically correct when it told the

district court that Warzyn “failed to quantify the contamination for locations where it found contamination,” a lack

of quantification is a far cry from a representation by

Warzyn that there were no remediation costs.

Kemper/Prime’s Evidence Memo to the district court stated

that it “relied on [Warzyn] to determine the potential

environmental concerns or liability at the Property,” not

the costs of remediating the Property. The short letter

from Warzyn drafted on May 31, 1990, states that Warzyn
10 No. 05-1144

“developed a proposal to quantify the extent of contamination identified,” but again it does not state that Warzyn

quantified any of the remediation costs or that it was

expected to do so.

Even if Kemper/Prime had expected a full remediation

cost estimate, it could not reasonably have viewed the

$300,000 figure it references to be such an estimate. The

notes from the phone call and the short draft letter from

Warzyn, on which Kemper/Prime relies, refer specifically

to just two sections of land (labeled SB17 and SB8) within

the Property. These two sections of land were part of a

larger section that Warzyn labeled a “major area of concern” south of Building S. We have doubts that this letter,

with the word “DRAFT” stamped in large print on every

page, could be considered relevant evidence of guaranteed

remediation costs. At best, the $300,000 is part of the

remediation costs implied by the contamination identified

in the reports. Yet not only were the costs for remediating

the rest of this problem area not discussed, but this

portion of the Property is not at issue in this litigation.

Warzyn’s comprehensive reports were issued in June

1990, just days after the draft letter was written. Taking

just one example, one of the reports notes the presence of

chromium at MW4 (a monitoring well used for the report).

MW4 appears to be within the area of the Property at

issue in this case. After noting the MW4 chromium, among

other findings, the report states “[a]dditional sampling

would be required to determine the extent of soil contamination, the presence of additional inorganics, and the

migratory nature of compounds found.” This is one of

many statements to Kemper/Prime underscoring the

limited scope of Warzyn’s work. Kemper/Prime’s contention, then, that the “Defendant left Martell with the

impression that except for the remedial estimate provided

to Martell, there were no other remedial costs” has no

basis in the evidence that was proffered.
No. 05-1144 11

Kemper/Prime could have used its expert to analyze the

Warzyn reports, take note of every measurable amount of

contamination identified, and calculate remediation costs

based on some industry standard cost, but it did not do so.

Without such additional materials, the district court was

left with no means of identifying or inferring the cost of

remediation from the Warzyn reports.

Finally, we are left with two insurmountable calculation

problems. Kemper/Prime has sold significant sections of

the Property since 1990; indeed, in post-argument submissions the parties discussed the effect of Kemper/Prime’s

sale of its remaining holdings in October 2004. Any

remediation costs identified in the Warzyn reports would

need to be reduced by the costs associated with the

sections of the Property no longer owned by Kemper/

Prime. This has not been done. Second, there is no evidence that even the $300,000 figure, nor any other figure,

is what is called a Tier One remediation cost, or that it

was calibrated to any particular standard of remediation.

There are many such standards for cleaning up contaminated land, depending on what the planned use of the

land is. As the district court noted, in order to come up

with a valid comparison of the cost of remediating the

problems that were identified with the cost of remediating

all problems that existed, both must be calibrated to the

same standard. Kemper/Prime offers only Tier One

evidence of the full cost of remediating the contamination

that existed in 1990. A court given these two cost estimates would be left to compare them not knowing if it

was making an apples-to-apples comparison or an applesto-oranges comparison. That level of uncertainty is insufficient to “establish a basis for the assessment of damages”

with any “degree of probability.”

Therefore, we are led to the same conclusion as the

district court: Kemper/Prime has not shown a genuine
12 No. 05-1144

issue of material fact for the remediation costs for the

contamination listed in the 1990 Warzyn reports.

B

Kemper/Prime’s evidence of the total cost of remediating

all of the contamination that existed on the Property at the

time of the 1990 reports is equally flawed. Again,

Kemper/Prime’s cost estimates do not make any adjustments for the sections of the Property it no longer owns.

Moreover, Kemper/Prime’s cost estimates are calculated

only for the Tier One standard. Beyond the comparison

problems to which these gaps give rise, it appears from

the record that the Tier One standard is not normally

used to remediate industrial properties. There is nothing

in the record to suggest that Kemper/Prime or any subsequent owner of the Property wants to use it for nonindustrial use. Therefore, even if the estimates were

tailored to the correct sections of the Property, they

would still be unusable in this case. This evidence too

therefore fails to raise a triable fact issue.

IV

Montgomery also urges this court to accept an alternative basis for affirming the district court’s opinion. Montgomery contends that the district court’s interpretation of

pecuniary loss is too “expansive” because it includes

benefit-of-the-bargain damages, which are not available

in negligent misrepresentation actions. See Restatement

(Second) of Torts § 552B(2), Comment b (“[T]here is as a

general rule no liability for merely negligent conduct that

interferes with or frustrates a contract interest or an

expectancy of pecuniary advantage.”) Although we see the

logic of Montgomery’s argument, there is no need to

address its merits. Kemper/Prime’s evidence of damages
No. 05-1144 13

falls short under the more generous standard set forth by

the district court, and so it would inevitably fail under the

stricter standard Montgomery prefers. We cannot help

but note, however, that yet another Kemper/Prime entity,

the Prime Group Partners, has agreed to remediate all the

contamination and indemnify Kemper/Prime against

environmental liabilities at the Property. It also appears

that since this lawsuit began, Kemper/Prime has sold its

remaining interests in the Property for a profit. We are

left with a plaintiff that appears to have benefitted

significantly from the purchase of the Property, with no

sign of any pecuniary loss.

V

The district court gave Kemper/Prime every opportunity

to put forth evidence of its recoverable damages, but it

failed at every turn. We therefore AFFIRM the decision of

the district court.

A true Copy:

Teste: 

 ________________________________

Clerk of the United States Court of

Appeals for the Seventh Circuit 

USCA-02-C-0072—6-19-07