382, 385, 77 Ill. Dec. 759, 762 (1984). The Contribution Act provides that “where 2 or more
persons are subject to liability in tort arising out of the same injury to person or property... .there
is aright of contribution among them even though judgment has not been entered against any or
all of them.” 740 ILCS 100/2(a) (emphasis added). A party subject to liability in contract cannot
make a valid claim for contribution under the Contribution Act. See Jackson Nat’l Life Ins. Co.
y. Gofen & Glossberg, 882 F. Supp. 713, 723-24 (N.D. Ill. 1995) (“The only duty which
Boulevard is alleged to have breached is a contractual one, thereby making a claim of
contribution inapplicable”); Granville Beach Condo. Ass my, Granville Beach Condos., Inc., 227
Il. App. 3d 715, 723, 592 N.E.2d 160, 165, 169 Ill. Dec. 673, 678 (1992) (no right of
contribution under Contribution Act where claims were to recover economic loss); Hennepin
Drainage & Levee Dist. v. W.H. Klingner, 187 Ill. App. 3d 710, 712, 543 N.E.2d 967, 969, 135
Ill. Dec. 399, 401 (1989) (party subject to liability for breach of contract precluded from
bringing third party complaint for contribution).

Williams-Hayward is not subject to any liability in tort. CP Rail is suing Williams-
Hayward for breach of express warranty, breach of implied warranty of fitness, breach of
implied warranty of merchantability, unjust enrichment and promissory estoppel. All of these
claims are grounded in contract doctrine. See 2314 Lincoln Park West Condo. Ass'n v. Mann,
Gin, Ebel & Frazier, Ltd., 136 IN). 2d 302, 307, 555 N.E.2d 346, 348, 144 Ill. Dec. 227, 229
(1990); U.S. Home Corp. v. George W. Kennedy Const. Co., Inc., 617 F. Supp. 893, 897 (N.D.
Ill. 1985); Hayes Mech., Inc. v. First Indus., L.P., 812 N.E.2d 419, 425, 285 Ill. Dec. 599, 606
(2004); F.D.LC. v. Gravee, 966 F. Supp. 622, 630 (N.D. Ill, 1997); A/S Apothekernes

Laboratorium for Specialpraeparater v. LM.C. Chem. Group, Inc., 725 F.2d 1140, 1142 (7" Cir.



caused a breach of a contract between Williams-Hayward and CP Rail or that this second alleged
breach was contemplated as a probable result of the first breach.

A claim for implied contractual indemnity exists where “one party’s breach of contract
causes a second party to breach a separate contract with a third party.” Carrillo v. Jam Prods.,
Lid., 173 Ill. App. 3d 693, 697, 527 N.E.2d 964, 967, 123 Ill. Dec. 326, 329 (1988). Under these
circumstances, the second party may shift its contractual liability to the first party. Jd. This
result is justified provided the damages arising from the first party’s breach were reasonably
within the contemplation of the parties as a probable result of that breach. Case Prestressing
Corp. y. Chicago College of Osteopathic Medicine, 118 Ill. App. 3d 782, 788, 455 N.E.2d 811,
816, 74 Ill. Dec. 382, 387 (1983).

In the context of this case, for Williams-Hayward to successfully seek indemnification
from NSC for any potential liability to CP Rail, Williams-Hayward must allege that NSC’s
breach of its contract with Williams-Hayward caused Williams-Hayward to breach a separate
contract with CP Rail. Further Williams-Hayward would have to allege that CP Rail’s damages
were reasonably contemplated by the parties as a probable result of NSC’s breach of its contract
with Williams-Hayward.

Even drawing all reasonable inferences in favor of Williams-Hayward, Williams-
Hayward has not pled the requisite elements of an implied contractual indemnity claim. First,
Williams-Hayward does not allege anywhere in its original counterclaims or its amended
counterclaims either the presence of a contract between itself and CP Rail or a subsequent breach
of this contract by Williams-Hayward. Second, although Williams-Hayward does allege in
paragraph 10 of its counterclaims that NSC breached its contract with Williams-Hayward by

failing to pay Williams-Hayward for any of the paint it purchased, Williams-Hayward fails to


291 Ill. App. 3d 917, 919, 684 N.E.2d 884, 886, 225 Ill. Dec. 893, 895 (1997) (plaintiff seeking
contribution from fellow directors for their common corporate obligation to the IRS). In
contrast, Williams-Hayward does not allege it and NSC have a joint obligation to CP Rail in
which Williams-Hayward has paid more than its proportion. Neither does it allege any amount
in excess that it has paid. The only debt alleged by Williams-Hayward is the amount owed to it
by NSC, making Williams-Hayward an obligee, not an obligor. (R. 42-1, Counterel. at 11.)
Without an allegation of joint obligation, Williams-Hayward cannot state a claim for equitable
contribution. Accordingly, Williams-Hayward’s claim for contribution is dismissed.
Il. Claim For Indemnity

NSC challenges Williams-Hayward’s implied tort indemnity claim and implied contract
indemnity claim. Although Williams-Hayward has not specified which implied indemnity
doctrine it is pleading, it has failed to plead either sufficiently.

A. Implied tort indemnity

NSC argues that Williams-Hayward cannot allege a claim for implied tort indemnity
because the claims against Williams-Hayward from which it is seeking indemnity sound in
contract not tort. NSC also argues Williams-Hayward has not pled the presence of a pre-tort
relationship, a necessary element of an implied indemnity claim based upon quasi-contractual
principles. Williams-Hayward counters that its allegation of a buyer-seller relationship satisfies
the requirement of a pre-tort relationship.

The doctrine of implied tort indemnity “shifts the entire responsibility for tort-related
losses from a blameless tortfeasor to a truly culpable one.” Zielinski v. Miller, 277 Ill. App. 3d
735, 739, 660 N.E.2d 1289, 1293, 214 Ill. Dec. 340, 344 (1995) (emphasis added). The Illinois

Supreme Court has identified two rights of indemnification stemming from the implied tort


1984). Accordingly, Williams-Hayward cannot seek contribution from NSC under the
Contribution Act.

B. Common law contribution

Williams-Hayward argues its claim for contribution is based on the common law right to
contribution, which is not limited to parties subject to tort liability. The right to common law
contribution stems from “the compulsory payment by a joint obligor of more than his share of a
common obligation.” Ruggio v. Ditkowsky, 147 Ill. App. 3d 638, 642, 498 N.E.2d 747, 750, 101
Il. Dec. 423, 426 (1986). To succeed on a contribution claim, the co-obligor must disclose that
he has paid more than his just proportion of the joint indebtedness as well as the amount of that
excess. Id.

NSC contends that the common law contribution claim is only available in the narrow
context of contribution among co-insurers. While it appears that many equitable contribution
suits do arise in the context of co-insurers, some case law decided after the enactment of the
Contribution Act involves common law contribution claims among parties that are neither
tortfeasors nor co-insurers. These cases are limited, however, to instances where the parties,
either by agreement or by statute, were obligated together to a third party for a financial
obligation, See e.g., Ruggio v. Ditkowsky, 147 Ill. App. 3d 638, 640, 498 N.E.2d 747, 749, 101
Ill. Dec. 423, 425 (1986) (plaintiff seeking contribution from defendants on two promissory
notes each of them cosigned); Tembrina v. Simos, 208 Ill. App. 3d 652, 655, 567 N.E.2d 536,
538, 153 Ill. Dec. 578, 580 (1991) (plaintiff seeking contribution for payment of mortgage where
parties were each jointly and severally liable for payments); Fletcher v. Marshall III, 260 Ill.
App. 3d 673, 673, 632 N.E.2d 1105, 1106, 198 Ill. Dec. 494, 495 (1994) (plaintiff seeking

contribution from defendant who co-signed an apartment lease with plaintiff); Aardema v. Fitch,


488, 491-92 (1985). A buyer-seller relationship is not a sufficient pre-tort relationship to
support a traditional indemnity claim. Jethroe v. Koehring Co., 603 F. Supp. 1200, 1204 (S.D.
Ill. 1985). See also AMF, Inc. v. Victor J. Andrew High School, 176 Il. App. 3d 337, 342, 526
N.E.2d 584, 587, 122 Ill. Dec. 325, 328 (1988.)

In support of its argument, Williams-Hayward cites Maxfield v. Simmons, 96 Ill. 2d 81,
86-87, 499 N.E.2d 110, 112, 70 Ill. Dec. 236, 238 (1983), which found a buyer-seller
relationship sufficient to assert an “upstream” indemnity claim. But Williams-Hayward is
asserting a “downstream” indemnity claim. The Illinois Supreme Court has found that a buyer-
seller relationship does not support a “downstream” indemnity cause of action. See Van
Slambrouck, 105 Ili. 2d at 470. Further, Maxfield specifically states any potential liability from
the indemnification results from tortious conduct, not a breach of contract. Maxfield, 96 Ill. 2d
at 87. See also Bloomer Choclate Co. v. Bongards Creameries, Inc., 635 F. Supp. 919, 931
(ND. Ill. 1986) (citing authority limiting the availability of a buyer-seller indemnity to instances
where a defendant’s liability stems from an underlying tort claim, not a breach of contract or
breach of warranty claim). Accordingly, Williams-Hayward cannot plead a claim of implied tort
indemnity.

B. Implied contractual indemnity

NSC argues that Williams-Hayward has not alleged facts sufficient to support a claim for
implied contractual indemnity. Specifically it argues count two does not allege a breach of
contract between Williams-Hayward and either NSC or CP Rail. NSC also contends Williams-

Hayward has not alleged that NSC’s breach of a contract between NSC and Williams-Hayward

2 “Upstream” indemnity involves the shifting of liability to a manufacturer or previous user of a product, while
“downstream” indemnity involves the shifting of liability to a subsequent user or handler. De Anda v. Midland-Ross
Corp., 644 F. Supp. 263, 265 (N.D. Ill 1986).



i)

* Minute Order Fen (06/97)

United States District Court, Northern District of Iinois

; T set ‘
Name of Assigned Judge Sitting Judge if Other
or Magistrate Judge Amy J. St. Eve than Assigned Judge
CASE NUMBER 02 C 8800 DATE 9/21/2004
CASE Canadian Pacific vs, Williams Hayward
TITLE
[In the following box (a) indicate the party filing the motion, e.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature
MOTION: of the motion being presented.]
_ DOCKET ENTRY:
a) a Filed motion of [ use listing in “Motion” box above.]
(2) a Brief in support of motion due
@) Oo Answer brief to motion due. . Reply to answer brief due.
(4) Oo Ruling/Hearing on set for at
(5) oO Status hearing[held/continued to] [set for/re-set for] on set for __at
(6) o Pretrial conference[held/continued to} {set for/re-set for] on set for at
(7) Oo Trial{set for/re-set for] on at
(8) oO {Bench/Jury trial] [Hearing] held/continued to at
(9) oO This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]
OFRCP4(m) OLocal Rule 41.1 CFRCP4i(a)(1) OO FRCP41(a)(2).
(10) Ml {Other docketentry] Enter Memorandum Opinion and Order. National Steel Car's motion to dismiss Count
I of Williams-Hayward's counterclaims is granted.
(ll) gf [For further detail see order attached to the original minute order.]
No notices required, advised in open court.
No notices required. umber of notices
Notices mailed by judge's staff, )
Notified counsel by telephone. EP el p04
“ date dockfied
wv | Docketing to mail notices.
Mail AO 450 form, dociereh Soka ints 4
Copy to judge/magistrate judge. | 9
courtroom date mailed notice
tad deputy’s
initials - -
Date/time received in;
central Clerk’s OME ailing deputy initials



CONCLUSION
For the reasons set forth above, Counter-Defendant NSC’s motion to dismiss is granted.
Count two is dismissed without prejudice for failure to state a claim upon which relief can be
granted.

Dated: September 21, 2004 ENTERND:

AMY J. ST. E i A. (

United States Distict Court Judge

il


reallege or otherwise incorporate this allegation into count two. (R. 42-1, Countercl. at 13.)
Third, even if Williams-Hayward did make these allegations, it fails to allege how NSC’s
breach of contract caused a subsequent breach of a contract between Williams-Hayward and CP
Rail. Williams-Hayward alleged it entered into a contract with NSC for the purchase of paint,
which NSC allegedly breached by not paying for the paint it purchased. (R. 42-1, Countercl. at §
6, 10.) Itis unclear how NSC’s failure to pay for the paint could breach any contract between
Williams-Hayward and CP Rail. Williams-Hayward alleges NSC improperly and incorrectly
applied and cured the paint in the railway cars it delivered to CP Rail. (R. 42-1, Counterel. at §
16.) Williams-Hayward, however, has not alleged it had a contract governing NSC’s method of
paint curing or paint application in the railway cars. Consequently, Williams-Hayward fails to

state a claim for indemnification based on implied contractual indemnity.

10



indemnity doctrine ~ active-passive indemnity and quasi-contract indemnity. Allison v. Shell Oil
Co,, 113 Ill. 2d 26, 28-31, 495 N.E.2d 496, 498-99, 99 Ill. Dec. 115, 117-18 (1986). Since the
Contribution Act abolished active-passive indemnity, Williams-Hayward must rely on the quasi-
contractual right to indemnity for implied tort indemnity. Jd. at 34. To establish such a claim,
Williams-Hayward must allege a pre-tort relationship with NSC and a qualitative difference in
their conduct in the occurrence. Frazer v. A.F. Munsterman, Inc., 123 Ill. 2d 245, 255, 527
N.E.2d 1248, 1251, 123 Ill. Dec. 473, 476 (1988).

Williams-Hayward implicitly suggests it is indeed pleading a quasi-contractual right to
indemnity by arguing that its buyer-seller relationship with NSC meets the requirement of a pre-
tort relationship. Williams-Hayward, however, has failed to establish an even more requisite
element of a quasi-contractual right to indemnity -- the underlying tort the “pre-tort” relationship
preceded. See Zielinski, 277 Ill. App. 3d at 739 (dismissing claims of implied indemnity where
underlying complaint sounded in contract, not in tort). The Seventh Circuit has held that a claim
for implied indemnity only exists when the indemnitee is guiltless with respect to the
“underlying tort.” Mizuho Corp. Bank v. Cory & Assoc., Inc., 341 F.3d 644, 652-53 (7" Cir.
2003). As discussed above, CP Rail has not asserted any claims sounding in tort against
Williams-Hayward. Accordingly, Williams-Hayward cannot seek indemnification from NSC on
the basis of quasi-contractual implied indemnity.

Even if it were permissible to indemnify a party for an underlying contractual claim
pursuant to the doctrine of quasi-contractual implied immunity, Williams-Hayward has not
alleged a valid pre-tort relationship. Classic pre-tort relationships giving rise to a duty to
indemnify are those of lessor/lesee, employer/employee, owner/lessee, and master/servant. Van

Slambrouck y. Economy Baler Co., 105 Ill. 2d 462, 469-70, 475 N.E.2d 867, 870-71, 86 Ill. Dec.



Dismiss.) The Court granted this motion and denied NSC’s motion to dismiss count four as
moot. (R. 113-1, Min. Order.) NSC’s motion to dismiss count two of Williams-Hayward’s
counterclaims remains for disposition.
ANALYSIS

In count two of its counterclaims, Williams-Hayward alleges that in the event it is found
liable to Plaintiff CP Rail, it is entitled to contribution and indemnity from NSC for the amount
of the judgment against it. (R. 42-1, Countercl. at { 18.) NSC moves to dismiss count two for
Williams-Hayward’s failure to state any claim upon which relief can be granted.
I. Claim For Contribution

Illinois law recognizes two actions for contribution, one statutory and the other derived
from common law. NSC moves to dismiss the claim for contribution on the grounds that
Williams-Hayward is only potentially subject to liability in contract and, therefore, has no right
to contribution under the Illinois Joint Tortfeasor Contribution Act, 740 ILCS 100/2 (“the
Contribution Act”). NSC further argues that Williams-Hayward has no cause of action for
equitable contribution because Williams-Hayward has not alleged that it and NSC were acting as
insurers in this case. Although Williams-Hayward did not specify in its pleadings which of these
actions it is alleging, in its response to NSC’s motion to dismiss, Williams-Hayward asserts it is
entitled to relief under the common law equitable right to contribution. (R. 127-1, Counter-P1.’s
Resp. at 2.) Under either approach, Williams-Hayward fails to state a claim of contribution.

A. The Contribution Act

In 1979 the Illinois legislature enacted the Contribution Act to codify the Illinois
Supreme Court’s holding in Skinner v. Reed-Prentice Division Package Machinery Co., 70 ll.

2d 1, 374 N.E.2d 437, 15 Ill. Dec. 829 (1977). Doyle v. Rhodes, 101 Ill. 2d 1, 8, 461 N.E.2d


no set of facts would the plaintiff's allegations entitle him to relief. Hishon v. King & Spalding,
467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984).
BACKGROUND

Much of the relevant background of this case has been described by the Court in its prior
opinion addressing Williams-Hayward’s motion to dismiss. See Canadian Pacific Ry. Co. y.
Williams-Hayward Protective Coatings, Inc., 2003 WL 1907943 (N.D. Ill. Apr. 17, 2003).

In sum, Plaintiff Canadian Pacific Railway Company (“CP Rail”) is a Canadian corporation with
its principal place of business in Alberta, Canada. Defendant Williams-Hayward is an Illinois
corporation engaged in the business of manufacturing paint. Involuntary Plaintiff NSC is a
Canadian rail car manufacturer who contracted with CP Rail to provide railway cars for the
transportation of paper.

During the manufacture of the railway cars for CP Rail, problems arose concerning the
quality of the paint provided by Williams-Hayward and applied by NSC. Eventually, CP Rail
stopped accepting cars that had been treated with Williams-Hayward’s paint. CP Rail thereafter
sued Williams-Hayward on the following claims: breach of warranty, breach of implied
warranty of fitness, breach of implied warranty of merchantability, fraud,' unjust enrichment and
promissory estoppel. Upon order of the court, CP Rail filed an amended complaint, naming
NSC as an “involuntary plaintiff” under Rule 19. (R. 27-1, Am, Compl. at 2.) Williams-
Hayward then filed counterclaims against both CP Rail and NSC. (R. 42-1, Countercl. at p.14-
17; R. 95-1, Supplement to Countercl. at 1-7.)

NSC moved to dismiss counts two and four of Williams-Hayward’s counterclaims. (R.
99-1, Counter-Def.’s Mot. To Dismiss at 1.) Williams-Hayward subsequently moved to

voluntary dismiss counts four, five, six and seven of its counterclaims. (R. 112-1, Def’s Mot. To

’ The claim for fraud has since been dismissed.


IN THE UNITED STATES DISTRICT COURT DG sim
FOR THE NORTHERN DISTRICT OF ILLINOIS Sep , ee)

EASTERN DIVISION I N 04

CANADIAN PACIFIC RAILWAY COMPANY, _ )
a Canadian Corporation, )
)
Plaintiff, )

) No. 02 C 8800
v. )
)
WILLIAMS-HAY WARD PROTECTIVE )
COATINGS, INC., an Illinois Corporation, )
)
Defendant. )

MEMORANDUM OPINION AND ORDER

AMY J. ST. EVE, District Court Judge

Counter-Defendant Williams-Hayward filed a counterclaim against Involuntary Plaintiff
National Steel Car, Limited (“NSC”) alleging claims of contribution and indemnity. NSC has
moved to dismiss these claims for failure to state a claim pursuant to Federal Rule of Civil
Procedure 12(b)(6). For the reasons set forth below, NSC’s motion to dismiss is granted.

LEGAL STANDARDS

1. Rule 12(b)(6) Standards

A Rule 12(b)(6) motion to dismiss tests the legal sufficiency of a complaint, not the
merits of acclaim. See Triad Assocs., Inc. v. Chicago Hous. Auth, 892 F.2d 583, 586 (7" Cir.
1989). When evaluating a motion to dismiss, the Court views the complaint “in the light most
favorable to the plaintiff, taking as true all well-pleaded factual allegations and making all
possible inferences from those allegations in his or her favor.” Lee v. City of Chicago, 330 F.3d

456, 459 (7" Cir. 2003). Dismissal is appropriate only where it appears beyond doubt that under