the out-of-scope work completed by plaintiff. Plaintiff also seeks other damages in an amount not
less than $200,000.
LEGAL STANDARD

In ruling on a motion to dismiss for failure to state a claim, the court considers “whether
relief is possible under any set of facts that could be established consistent with the allegations.”
Bartholet v. Reishauer A.G., 953 F.2d 1073, 1078 (7" Cir. 1992). A claim may be dismissed
only if it is beyond doubt that under no set of facts would plaintiff's allegations entitle it to relief.
Conley v. Gibson, 355 U.S. 41, 45-46; Travel All Over the World, 73 F.3d at 1429-30. The
purpose of a motion to dismiss is to test the sufficiency of the complaint, not to decide its merits.
See Gibson v. City of Chicago, 910 F.2d 1510, 1520 (7" Cir. 1990).

DISCUSSION

Motion to Dismiss for Lack of Subject Matter Jurisdiction

Defendant moves to dismiss plaintiff’s complaint arguing that plaintiff has failed to
properly allege diversity of citizenship under 28 U.S.C. § 1332. For purposes of diversity
jurisdiction, a corporation is a citizen of the state where it has its principal place of business as
well as a citizen of the state in which it is incorporated. 28 U.S.C. 1332(c). Accordingly,
plaintiff has alleged that it is an Indiana corporation with its principal place of business in South
Bend, Indiana.

Despite these allegations, defendant argues that diversity fails because plaintiff has failed
to allege any specific address in Indiana and because plaintiff has attached a copy of the Contract
(“Exhibit ‘1°”) that lists only plaintiff's Illinois address. Defendant cites to Banco Del Estado v.

Navistar Int'l Transp. Corp., 942 F.Supp. 1176, 1179 (N.D.IIl. 1996), and Whirlpool Fin. Corp.


considered them because the documents were referred to in the complaint and were "central to
[the plaintiff's] claim as they constitute[d] the core of the parties' contractual relationship."

In the instant case, plaintiffs complaint never refers to letters that defendant has attached
to its motion. The complaint simply alleges that plaintiff had completed performance and that no
valid grounds existed for defendant to terminate the contract. Moreover, even though plaintiff's
letter may have some bearing on the plaintiffs claim for wrongful termination, it is not “central”
to its claim in the sense that the “letter of intent” and “offer to sell” were central to the plaintiff's
breach of contract claim based on mutual assent in Venture Assoc. Instead, the letters are central
to defendant’s defense of plaintiffs claims.

Therefore, to view the letters would require the court to convert defendant's motion to
dismiss into one for summary judgment. Rule 12(b) states, "If, on a motion asserting the ...
failure of the pleading to state a claim upon which relief can be granted, matters outside the
pleading are presented to and not excluded by the court, the motion shall be treated as one for
summary judgment." Fed.R.Civ.P.12(b). The court declines to do so at this stage. When
reviewing a motion to dismiss, the court's inquiry is generally limited to the factual allegations
contained within the four corners of the complaint. Hill v. Trustees of Ind. Uniy., 537 F.2d 248,
251 (7" Cir.1976). Therefore, defendant’s motion to dismiss with respect to Count 4 is denied.

Request for Pre-judgment Interest and Attorney’s Fees

Plaintiff requests pre-judgment interest from defendant, which is a municipal corporation.
Plaintiff claims that a municipality is liable for interest if the funds have been wrongfully
obtained or illegally withheld, citing Pennwalt Corp. y. Metro. Sanitary District of Greater

Chicago, 379 F.Supp. 899, 900 (N.D.Ill. 1974). The Seventh Circuit has made it clear, however,


against defendant. Defendants have moved to dismiss these counts, arguing that provision GC-
28, which is part of the general conditions of the contract,’ prohibits the contractor from
receiving any further payment once the Commission terminates the contract for default.
Provision GC-28 states that, if the Contractor is in default:

... then the Commission may, without prejudice to any other right or remedy and

after giving the Contractor (and the surety or sureties on the Performance Bond

given by the Contractor) seven (7) days written notice terminate the Contract for

default... In such case, the Contractor shall not be entitled to receive any further

payment.

Whether there was justification for defendant’s termination of plaintiff for default,
however, is factually disputed. Plaintiff alleges that its work was completed at the time of
termination and that the termination was wrongful and a breach of contract. Questions of fact
cannot be resolved on a motion to dismiss. Taken in the light most favorable to plaintiff, Counts
1, 5 and 6 each state claims and cannot be dismissed.

Count 2—Breach of Contract

Count 2 alleges that defendant breached the contract by tortiously and wrongfully causing
hindrances and disruptions to plaintiff’s performance, by failing and refusing to grant additional
and justified time extensions, and by failing to compensate plaintiff for the approximately
$200,000 in damages it sustained as a result of these hindrances. Defendant has moved to

dismiss Count 2 by pointing to an exculpatory, or “no damages for delay” clause in the contract.

Provision GC-24 of the contract states the following:

> The general conditions of the contract are attached to the defendant’s motion as Exhibit A.
Plaintiffs complaint, however, had incorporated by reference each of these specific documents.
Therefore, viewing these documents will not convert the motion into one for summary judgment.


v. GN Holdings, Inc., 873 F.Supp. 111, 123 n. 18 (N.D. Ill. 1995), to argue that when the
attached exhibit contains specific factual information that contradicts the complaint’s allegations
and precludes recovery as a matter of law, then the exhibit’s information controls. Exhibit “1,”
however, does not directly contradict any jurisdictional allegations in the complaint.!
Maintaining an office in Illinois is not inconsistent with plaintiff's principal place of business and
state of incorporation being in Indiana. See Macheras v. Center Art Galleries--Hawaii, Inc., 776
F.Supp. 1436, 1438 (D.Haw. 1991)(noting that, “for purposes of diversity jurisdiction, there is an
important difference between merely transacting business in a state, and having one's principal
place of business in a given state. Only in the latter case will a corporation be considered a
citizen of a particular state for purposes of diversity jurisdiction.”). As a result, plaintiff has
sufficiently alleged diversity jurisdiction.

Count i—Breach of Contract, Count 5—Quantum Meruit
and Count 6—Promissory Estoppel Against Defendant

Count | alleges that defendant breached the contract by failing and refusing to pay: 1) the
remaining $978,140.58 of the adjusted contract price, and 2) the additional $154,883, which
includes the out-of-scope work that plaintiff had submitted as bulletin cost proposals but had not
yet incorporated into formal contract change orders. In Count 5, plaintiff seeks to recover in
quantum meruit $154,883 for the value of labor, materials and equipment that plaintiff provided

while performing the Project’s out-of-scope work. Count 6 is a promissory estoppel claim

‘Moreover, Banco Del Estado and Whirlpool Fin. Corp. are easily distinguishable because
neither involved a scenario in which the defendant challenged the plaintiffs diversity allegations.
Banco Del Estado involved an attached, flawed translation of a contract. Whirlpool Fin. Corp.
dealt with a securities fraud claim, in which the compliant omitted facts and circumstances that
were actually disclosed in the relevant transaction document.


faith is implied by Illinois law into every contract and breach of that duty is simply a breach of
the underlying contract.” Industrial Specialty Chems., Inc. v. Cummins Engine Co. Inc., 902
F.Supp. 805, 811 (N.D.IIL 1995); Banco Del Estado vy. Navistar Int'l Transp. Corp., 942 F.Supp.
1176, 1179 (N.D.IN. 1996); LaScola v. U.S. Sprint Comm., 946 F.2d 559, 565 (7" Cir. 1991);
Triad Assocs, Inc. v. Chicago Hous. Auth., 892 F.2d 583, 589 (7" Cir. 1989), cert. denied, 498
U.S. 845 (1990). Because plaintiff has already alleged a separate breach of contract claim, a
claim for breach of implied warranty of good faith, fair dealing, and duty to cooperate is
superfluous and, as a result, is dismissed.

Count 4—Breach Of Contract—-Wrongful Termination

Plaintiff alleges that, at the time of termination, plaintiff had completed its contract work,
was not in default, and that defendant had no valid grounds to terminate plaintiffs performance
for default. Defendant has attached to its motion a letter from plaintiff to defendant, and
defendant’s termination letter, arguing these letters disclose that the real reason for termination
was in response to plaintiff's written refusal to perform.

For purposes of a 12(b)(6) motion, documents that a defendant attaches to a motion to
dismiss are considered part of the pleadings only when they are, 1) referred to in the plaintiff's
complaint, and 2) are central to its claim. Venture Assoc. Corp. v. Zenith Data Systems, 987 F.2d
429, 431 (7" Cir. 1993); Stobinske-Sawyer v. Village of Alsip, 2002 WL 287770 (N.D.Ill. 2002).
In Venture Assoc., the plaintiff's complaint referred to three letters, including an “offer to sell”
and a “letter of intent,” and alleged that those letters manifested the mutual assent of the parties

to contract. The defendant attached those letters to its motion to dismiss, and the court


Minute Order Form (06/97)

United States District Court, Northern District of Illinois

Name of Assigned Judge Sitting Judge if Other
or Magistrate Judge Robert W. Gettleman than Assigned Judge
CASE NUMBER 01 C 9601 DATE April 3, 2002
CASE Batteast Construction Co. v_ Public Building Commission of Chicago
TITLE
[in the following box (a) indicate the party filing the motion, ¢.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature
MOTION: of the motion being presented.]
DOCKET ENTRY:
qd) aq Filed motion of [ use listing in “Motion” box above.]
(2) o Brief in support of motion due
(3) o
(4) Oo Ruling/Hearing on set for at .
(5) rT Status hearing set for 4/25/02, at 9:00 a.m.
(6) o Pretrial conference[held/continued to] [set for/re-set for] on set for at .
(7) im) Trial[set for/re-set for] on at
(8) o [Bench/Jury trial] [Hearing] held/continued to at
(9) ii] This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]
OOFRCP4(m) CO General Rule21 OFRCP41(a)(1) O FRCP41(a)(2).
qo) [Other docket entry] Memorandum opinion and order entered. Defendant’s
motion to dismiss is denied with respect to counts 1,2,4,5 and 6m but granted
with respect to count 1. Defendant’s motion to strike plaintiff's request for pre-
judgment interest and attorney’s fees is granted Defendant’s answer to the
remaining counts is due by 4/24/02..
(vl) @ [For further detail see order attached to the original minute order.]
No notices required, advised in open court,
No notices required. umber otrotizes
X_ | Notices mailed by judge's staff, APR 05 2002
Notified counsel by telephone. dae docketed
Docketing to mail notices.
Mail AO 450 form. ‘ds ny initials
Copy to judge/magistrate judge. y
courtroom date mailed notice
GDS deputy’s
ey a
TM Battie received ht
central Clerk’s Office naling deputy initials



to file its answer to the remaining counts on or before April 24, 2002. This matter is set for a

report on status April 25, 2002, at 9:00 a.m.

ENTER: April 3, 2001

Robert W. Gettleman
United States District Judge

ll


that a municipality is subject to pre-judgment interest only if the funds have been wrongfully
obtained and illegally withheld. McKee-Berger-Mansueto, Inc. v. Bd. of Ed. of City of Chicago,
626 F.2d 559, 566 (7" Cir. 1980);* Norton v. City of Chicago, 690 N.E.2d 119, 127 (Ill. App. Ct.
1997). Plaintiff has not alleged that the funds were illegally obtained. Accordingly, defendant’s
motion to strike plaintiffs request for pre-judgment interest is granted.

Plaintiff also requests attorney’s fees. Illinois law adheres to the “American Rule” by
clearly prohibiting attorney’s fees “absent a statute or a contractual agreement” authorizing an
award. Kerns v. Engelke, 390 N.E.2d 859, 865 (Ill. 1979). Plaintiff's reliance on Zapata
Hermanos y. Hearthside Baking, 2001 WL 1000927 (N.D.IIl. 2001), is misplaced. In Zapata,
Judge Shadur awarded attorney’s fees pursuant to the Convention on the International Sale of
Goods, the treaty applicable to the transactions in that case, and therefore was not bound by the
American Rule. There is no such treaty or other exception in this case. Because plaintiff points
to no statute or contractual agreement that would suggest the otherwise, defendant’s motion to
strike plaintiff's request for attorney’s fees is granted.

CONCLUSION

For the aforementioned reasons, defendants’ motion to dismiss is denied with respect to

Counts 1, 2, 4, 5 and 6, but granted with respect to Count 3. Defendant’s motion to strike

plaintiff's request for pre-judgment interest and attorney’s fees is granted. Defendant is ordered

* In McKee-Berger-Mansueto, the Seventh Circuit stated, “Although the district court in
Pennwalt Corporation v. The Metropolitan Sanitary District of Greater Chicago, 379 F.Supp.
899, 900 (N.D.IIL. 1974) stated the exception differently, that the funds must be wrongfully
obtained or illegally withheld, other decisions of the Illinois Supreme Court citing this particular
exception to the common law have used the conjunctive "and," and we believe this to be the
proper test.” The Seventh Circuit then cited Morgan v. City of Rockford, 31 N.E.2d 596 (1940)
and Smith v. County of Logan, 119 N.E. 932, 936 (1918) to support its reasoning.

10


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It is further expressly understood and agreed that the Contractor shall not be

entitled to any damages or compensation, or to be reimbursed for any losses, on

account of any delay or delays resulting from any of the aforesaid causes or any

other cause whatsoever.

Plaintiff acknowledges this clause but insists that, even if the alleged “delays” as used in the
complaint are equivalent to the “delays” as used in the contract, Illinois recognizes exceptions to
these exculpatory provisions.

In linois, exceptions to exculpatory provisions, such as a “no damages for delay” clause,
include circumstances in which the delay is caused by bad faith, the delay is not within the
contemplation of the parties, the delay is of unreasonable duration, or the delay is attributable to
the inexcusable ignorance or incompetence of the engineer. J.B. Steel Contractors v. C. Iber &
Sons, 642 N.E.2d 1215, 1223 (Ill. 1994); Mellon Stuart Contr. Inc. v. Metropolitan Water
Reclamation Dist. of Chicago, 1995 WL 124133 (N.D.Ill. 1995). Plaintiffs complaint
specifically alleges that defendant’s tortious and wrongful conduct caused the delays, the delays
were beyond the contemplation of the parties, and the defendant’s conduct delayed plaintiff's
performance for an unreasonable duration. Therefore, plaintiff's compliant falls within the first

three exceptions and is facially sufficient to withstand defendant’s motion to dismiss.

Count 3——Breach of Implied Warranty

Count 3 alleges breach of implied warranty, claiming that defendant owed plaintiff an
implied duty of good faith and fair dealing, as well as an implied duty to cooperate and not
hinder plaintiff in the performance of its work. Defendant moves to dismiss Count 3, arguing
that, under Illinois law, there is no separate claim for breach of any implied covenant of good

faith and fair dealing. The court agrees. It is well settled that “the obligation to deal in good


In January 2001, plaintiff was able to achieve substantial completion of the contract work.
During this time, defendant accepted beneficial occupancy of the work and thereafter began using
the facility for its intended purpose. In addition, defendant issued contract punch lists to plaintiff
identifying the remaining work to be performed for acceptance of the Project and issued directives
ordering plaintiff to perform extra and additional work. Many of these directives were incorporated
into new bulletins. Defendant subsequently issued additional punch lists, which altered the original
punch list that was used to identify the remaining work to be completed. Plaintiff alleges that the
punch list items were completed by May 2001, but that, between January and June 2001, defendant
continued to issue additional directives ordering plaintiff to perform extra work.

The complaint alleges that, during the course of the work, plaintiff diligently pursued the
remaining work, but encountered disruptions, hindrances, and other problems that were beyond its
control and caused by defendant’s tortious and wrongful actions. These hindrances prevented
plaintiff from completing the work within the time allotted by the contract. The complaint also
alleges that, with the exception of the 56-day extension, defendant failed to grant plaintiff any
additional time to complete its performance and threatened to assess contract-liquidated damages
against plaintiff for failing to complete the Project within the performance period.

Defendant refused to make progress payments to plaintiff after May 9, 2001, and on June 26,
2001, forwarded a default termination letter to plaintiff pursuant Section 28 of the contract. As a
result of the letter, plaintiff was forced to leave the Project site. Plaintiff alleges that, at the time of
termination, it had completed all of the work required by the contract and was in the process of
closing out the Project and resolving the few work items that remained open. Plaintiff claims

defendant owes $978,140.58 as the unpaid amount of the adjusted contract price and $154,883 for


contracting. Defendant, a municipal corporation with offices in Chicago, Illinois, existing pursuant
to the Illinois Public Building Commission Act, administers the construction of building facilities
for the City of Chicago. Plaintiff submitted bids to defendant for the construction of the Chicago
Children’s Advocacy Center (the “Project”) in accordance with defendant’s plans and specifications.
On November 9, 1999, defendant awarded a contract to plaintiff, identified as Contract No. 1123R,
for the Project.

The contract provided that plaintiff would be paid the lump sum price of $4,461,908, and that
the amount might be adjusted to include extras and any changes implemented pursuant to the terms
of the contract. Generally, the scope of plaintiff's work included site clearing, demolition,
miscellaneous earth work, and construction of the new facility. The contract required the Project’s
completion by November 1, 2000, but also provided that the completion date could be extended if
plaintiff experienced problems to its work that were beyond its control or if defendant changed the
scope of the plaintiffs work by ordering extras or other changes.

Plaintiffcommenced performance under the contract on November 22, 1999, and periodically
invoiced defendant for the progress plaintiff made pursuant to the contract. In turn, defendant made
progress payments to plaintiff. During the course of the work, defendant periodically instructed
plaintiff to perform extra work, pursuant to the contract’s changes clause, in order to correct defects
and errors in the plans. The parties administered specific changes using bulletin numbers (a specific
change would be identified with a bulletin number). The parties then negotiated plaintiffs additional
compensation that resulted from these bulletins. The parties eventually entered into nine formal
contract change orders, which formally increased the contract price to $6,352,407.74 and extended
the Project’s completion date to December 27, 2000.

%
2


IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION
BATTEAST CONSTRUCTION COMPANY, )
INC., )
)
Plaintiff, )
) No. 01€9601

ve )

) Judge Robert W, Gettleman
PUBLIC BUILDING COMMISSION OF )
CHICAGO, )
)
Defendant. )

MEMORANDUM OPINION AND ORDER

Plaintiff, Batteast Construction Company, Inc. has filed a six count complaint against the
Public Building Commission of Chicago. Count 1 of plaintiffs complaint alleges breach of
contract for failure to make payments due. In Count 2, plaintiff alleges breach of contract
resulting from defendant’s hindrances and disruptions to plaintiffs performance of the contract.
The remaining counts include breach of implied warranty (Count 3), breach of contract resulting
from wrongful termination (Count 4), quantum meruit (Count 5), and promissory estoppel
(Count 6). Defendant has moved to dismiss plaintiff's complaint for lack of subject matter
jurisdiction. Defendant also moves to dismiss each count for failure to state a claim. For the
following reasons, defendants' motion is denied in part and granted in part.

FACTS

For purposes of a motion to dismiss, the court accepts the factual allegations of the complaint
as true and draws all reasonable inferences in favor of plaintiff. Travel All Over the World, Inc. v.
Kingdom of Saudi Arabia, 73 F.3d 1423, 1428 (7" Cir. 1996). Plaintiff, an Indiana corporation with

its principal place of business in South Bend, Indiana, is in the business of general construction

\%