Webster’s Third International Dictionary 1396 (3d ed. 1986), Giving the terms their common and
accepted meaning, “may assign, transfer, mortgage, pledge, hypothecate or encumber this Lease or
any interest under it to American National Bank and Trust Company of Chicago” means that if
Elmhurst Property chose to assign, transfer, mortgage, pledge, hypothecate or encumber the lease
or any interest under the leasc, it was required to assign, transfer, etc. to American National Bank
and Trust Company of Chicago and no one else. Moreover, paragraph 16.1 provides that “any
transfer, assignment, mortgage, encumbrance, licn, charge or subletting contrary to the provisions
of this Lease” is not permitted. The assignment of the lease by Elmhurst Property to South Industrial
was contrary to the provisions of the lease and, therefore, improper.

The sublease expressly provides that “[t]his sublease is expressly subject to and subordinate
to the Prime Lease, and to all mortgages, deeds of trust and ground or underlying leases to which the
Prime Lease is or shall be subordinate.” (Compl, Ex. 4 J !(a).) Thus, South Industrial is not the
proper party to bring a claim for breach of the sublease.

Rule 17 provides that “[nJo action shall be dismissed on the ground that it is not prosecuted
in the name of the real party in intercst until a reasonable time has been allowed after objection for
ratification of commencement of the action by, or joinder or substitution of, the real party in
interest.” Fed.R.Civ.P, 17(a). Therefore, the real party in interest is granted leave to ratify the

commencement of this action within twenty-one days of the date of this order.

-19-



performance of the following conditions precedent: (1) delivery by Ingersoll-Rand of a Phase T
Environmental Survey; (2) determinations by Platt based on soil and other tests that all physical
aspects and conditions of the premises and its improvements were acceptable to Platt; (3)
determination by Platt, bascd on an environmental audit report, that the premises were in full
compliance with federal, state, and local environmental laws, statutes, codes and regulations; (4)
certain determinations by Platt concerning sewer and water facilities; (5) certain determinations by
Platt concerning the provision of utilities; (6) determination by Platt that the premises were properly
and validly zoned for usc as an environmental testing and consulting business or that it was possible
to obtain proper zoning from the City of Elmhurst; and (7) a determination that Platt’s proposed
development or modification of the premises would not violate the Illinois Endangered Species
Protection Act or the Illinois Historical Preservation Act. (Compl. Ex. 2 ] R-2(a)(i)-(vi)).

The complaint alleges that Ingersoll-Rand delivered a Phase | environmental survey to Platt
prior to closing; Platt hired MPA to perform a Phase | environmental survey of the premises, which
included a limited soil investigation of the premises, inspection of the premises, and interview of
Ingersoll-Rand employees; and Elmhurst Property, an assignee of Platt, purchased the premiscs on
or about September 26, 2000. These allegations reasonably support the inference that South
Industrial or its predecessors performed the conditions precedent required by the Sales Contract.
Morcover, the complaint alleges that Ingersoll-Rand agreed to provide the premises free of
hazardous contamination, that the premises werc later found to be contaminated with PCBs, and that
South Industrial was injured by the loss of a prospective tenant due to the PCB contamination. These
allegations adequately state a claim for breach of contract.

Ingersoll-Rand next argues that South Industrial fails to state a claim for fraud and should

-13-



EPA or any other regulatory agency the release of PCBs.

In 2000, Robert J, Platt (“Platt”) began negotiations with Ingersoll-Rand for the purchase of
the premises. Ingersoll-Rand did not inform Platt of its PCB use or of PCB contamination. On or
about August 25, 2000, Platt and Ingersoll-Rand entered into a real estate sales contract (“the Sales
Contract”) under which Platt agreed to purchase the premises for $2,800,000. Ina rider to the Sales
Contract (“the rider”), Ingersoll-Rand made certain representations and warranties as to
environmental conditions at the premises. Spccifically, Ingersoll-Rand represented that it:

has previously complied, and is currently complying in all respects, with all federal,

state and local statutes, laws, ordinances, orders, rules, regulations and moratoria

relating to its operations at or its occupancy of the Property, including, but not

Jimited to, the Clean Air Act, as amended, the Federal Water Pollution Control Act,

as amended, the Safe Drinking Water Act, as amended, the Resource Conservation

and Recovery Act, as amended (“RCRA”), the Toxic Substances Control Act, as

amended, the Emergency Planning and Community Right-to-Know Act of 1986, the

Hazardous Material Transportation Act, as amended, and the Comprehensive

Environmental Response, Compensation and Liability Act, as amended

(“CERCLA”). Seller has not received any notice alleging any non-compliance with

or potential liability pursuant to any of such statutes, ordinances, orders, rules,

regulations or moratoria[.]

(Compl. Ex. 2 R-4(a)(ii).) Ingersoll-Rand also represented that the premises “(including land,
surface water, ground water, if any) is (sic) free” of all contamination. (Compl. Ex. 2 R-4(a)(iii)).

As a condition precedent to purchase, Ingersoll-Rand was required to provide a “Phase I
Environmental Survey”. Ingersoll-Rand also promised to deliver to Platt “all engineering plans,
studies, tests and other documents previously prepared by or at [its] direction . . . with respect to”

the premises, including all environmental audits or assessments or occupational health studies.

Ingersoll-Rand and Platt agreed that, at closing, Ingersoll-Rand would enter into a six-month triple-

net lease of the premises,



CONCLUSION
For the reasons stated herein, Defendant’s Motion to Dismiss is granted in part and denied
in part. If commencement of this action for brcach of the sublease is not ratified by the real party

in interest within twenty-one days of the date of this order, Counts IV and V shall be dismissed.

IT IS SO ORDERED.
Cy
fF
pL fad
John W. Darrah, Judge
\_United States District Court
Date: ctthey 200%

-20-



insufficient to allege reckless misconduct necessary to support an allowance of punitive damages.”
Wait v, First Midwest Bank/Danville, 142 Ill. App. 3d 703, 710 (1986). While the instant complaint
contains this language, when the alleged conduct within the Complaint is read as a whole, in addition
to the above phrase, South Industrial sufficiently pled outrageous conduct demonstrating a reckless
indifference to the rights of others. Therefore, South Industrial’s prayer for punitive damages in
Count III is not stricken.

Finally, Ingersoll-Rand argues that South Industrial has not alleged that it is the proper party
to bring a claim for breach of the sublease (Counts IV and V).

Federal Rule of Civil Procedure 17 provides that “[¢]very action shall be prosecuted in the
name of the real party in interest.” Fed.R.Civ.P. 17(a). Ingersoll-Rand argues that South Industrial
is not the proper party to sue for breach of the sublease because Elmhurst Property’s assignment of
the lease to South Industrial was improper under Articles 9 and 16 of the lease.

The lease is attached to the Complaint as Addendum A to Exhibit 4. Article 9 of the lease
provides that:

Tenant and Landlord may (a) assign, transfer, mortgage, pledge, hypothecate or

encumber (his Lease or any interest under it to American National Bank and Trust

Company of Chicago, which Landlord hereby identifies as the Lender and (b) Tenant

may sublet the Premises or any part thereof to Ingersoll-Rand Company, a New

Jersey corporation and to Mostardi-Platt Associates, Inc., an Illinois corporation.

(Compl. Ex. 4, Addendum A 49.1.) Article 16 of the lease provides that:

Lach provision of this Lease shall extend to and shail bind and inure to the benefit

not only of Landlord and Tenant, but also their respective heirs, legal representatives,

successors and assigns, but this provision shall not operate to penmit any transfer,

assignment, mortgage, encumbrance, lien, charge or subletting contrary to the

provisions of this Lease.

(Compl. Ex. 4, Addendum A 16.1.) Paragraph 16.3 provides that “[n]o modification, waiver or

-17-



On March 14, 2001, Platt spoke with Gerald Moran (“Moran”), Ingersoll-Rand’s Assistant
General Counsel, regarding the PCB contamination. Ina letter dated March 15, 2001, Moran stated
that: Ingersoll-Rand “question{[ed] [RJP’s] motivation for taking wipe samples for PCBs”;
“Ingersoll-Rand had no knowledge, actual or constructive, that there could have been PCB
contamination” on the premises; “Ingersoll-Rand would not have been obligated to clean up the
PCBs in [the warehousc] based on [its] use of such area”; and Ingersoll-Rand was not holding over
as a result of personal property remaining on the premises because Section 19(a) of the sublease
provided that RJP’s remedy for failure to remove personal property was RJP gained title to the
property or RJP could store, destroy or otherwise dispose of such property at Ingersoll-Rand’s
expense. (Compl. Ex. 10.) The March 15, 2001 Icttcr also stated that Ingersoll-Rand’s notice of
termination of the sublease was timely.

In a letter dated March 16, 2001, counsel for RJP asked Ingersoll-Rand to clean up the
contamination. Ingersoll-Rand did not clean up the PCB contamination by March 17, 200].

Ina letter dated March 26, 2001, counsel for RJP notified Ingersoll-Rand that it believed that
Ingersoll-Rand was unlawfully possessing the property as a holdover tenant due to the PCB
contamination; the premises were “found damaged, rendered unsuitable for occupancy and not in
good repair” due to the PCB contamination; and the contamination caused a long-term Icasc for the
property to fall through.

During the ensuing correspondence that developed between counsel for Ingersoll-Rand and
RIP, Ingersoll-Rand took the position that RJP’s discovery of PCB contamination was an attempt
to renegotiate the purchasc price of the premises and to obtain money from Ingersoll-Rand to convert

the premises into office space. Ingersoll-Rand also expressed doubt as to the veracity of the

-9-



irregularities and reportedly free of PCBs. MPA found no electrical capacitors or hydraulic lifts in
the building. MPA also found fluorescent light ballasts that were in good condition with no evidence
of leaks.

MPA interviewed Welu and Fumo regarding the current and past usc of the premises, the
facility operations, and recent improvements to the premises. Neither Welu nor Fumo told MPA of
Ingersoll-Rand’s use of PCBs; that building surfaces, sewers, and sumps were contaminated with
PCBs; or that PCBs had been released in the building. In fact, Welu and Fumo stated that Ingersoll-
Rand had never used or handled PCBs or any other hazardous materials on the premises. Fumo
assured Platt that audits performed regularly by Ingersoll-Rand’s in-house personnel and outside
consultants showed that PCBs werc never used or handled on the premises.

Platt assigned all of his rights, title, and interest in and to the Sales Contract to an exchange
intermediary, Investment Advantage Group (“IAG”), through a Purchase, Lease and Like-Kind
Exchange Agreement (“Exchange Agreement”) signed on September 26, 2000. LAG assigned its
rights in the Sales Contract to ilmburst Property, LLC, a Delaware limited liability company of
which IAG was the sole member.

On or about September 26, 2000, Ingersoll-Rand sold the premises to Elmhurst Property by
warranty deed. On or about September 27, 2000, Elmhurst Property entered into a seven-year lease
of the premises with RJP Lilmhurst Properties, LLC (“RJP”), a Delaware limited liability company
of which Platt was president and sole member.

On September 27, 2000, RJP and Ingersoll entered into a non-renewable sublease of the
premises. The sublease expired on March 31, 2001. The sublease could be terminated earlier if

Ingersoll-Rand provided thirty-days’ written notice of termination. Pursuant to the sublease,

~6-



Ingersoll-Rand hired Capsule Environment (“Capsule”) to perform the environmental survey
(“the Capsule survey”) of the premises. On September 8, 2000, Capsule inspected the premises and
interviewed Mark Greer (“Greer”), the facility service manager; Joseph Fumo, the facility manager;
and Jay Welu (“Welu”), branch manager, whom Ingersoll-Rand identified as knowledgeable about
the building’s use and condition. Greer, Fumo and Welu did not tell Capsule that Ingersoll-Rand
used PCBs or handled equipment containing PCBs; that building surfaces, sewers, and sumps were
contaminated with PCBs; or that PCBs had been released in the building. Capsule presented the
Phase | Report to Ingersoll-Rand on September 14, 2000, which did not contain discussion,
assessment, or analysis concerning PCBs. The Phase I Report was delivered to Platt prior to closing.

On August 28, 2000, Platt retained Mostardi-Platt Associates, Inc. (“MPA”) to perform a
Phase | environmental survey of the premises.

On August 27, 2000, MPA conducted a limited soil investigation of the premises that further
assessed two recognized environmental conditions identified by its Phase I environmental survey,
an oil-stained sump and a former petroleum underground storage tank. MPA took two soil samples
from below the building’s concrete floor near the sump and former underground storage tank. It
analyzed the soil for a number of chemicals, including PCBs, and found no PCBs or other chemicals
of significance.

On August 30, 2000, MPA also inspected the premises for potential recognized
environmental conditions, including sources of PCBs such as electrical transformers, fluorescent
light ballasts, electrical capacitors, and hydraulic lifts. MPA identified the presence of three pole-
mounted electrical transformers on the south side of the exterior of the building. These transformers

were owned by Commonwealth Edison and were in good condition with no visible leaks or

a5-



amendment of this Lease or any ofits conditions or provisions shall be binding upon Landlord unless
in writing signed by Landlord.” (Comp}, Ex. 4, Addendum A 16.3.)

Ingersoll-Rand argues that paragraph 9.1 of Article 9 of the lease permits assignment of the
lease ony to American National Bank and ‘rust Company of Chicago. South Industrial argues that
paragraph 9,1 permits assignment to American National Bank and Trust Company of Chicago but
does not exclude any other assignments.

Breach of contract is a state law claim. Therefore, Illinois law governs. Contract
interpretation is a question of law. Diamond v. United Food & Commercial Workers Union Local
881, 329 Ll. App. 3d 519, 524 (2002). The goal of contract construction is to determine and give
effect to the parties’ intent at the time of contracting. Shields Pork Plus, Inc. v. Swiss Valley AG
Serv., 329 Il. App. 3d 305, 310 (2002). “Ifthere is no ambiguity, the interpretation of the contract
is a question of law to be determined solcly from the terms of the contract itself,” M.H. Detrick Co.
v. Century Indemnity Co., 299 Ill. App. 3d 620, 625 (1998), and the words are to be given their
common and accepted meaning. Shields Pork Plus, Inc., 329 lll. App. 3d at 310. Whether a contract
is ambiguous is a question of law. Shields Pork Plus, Inc., 329 Ill. App. 3d at 311.

A contract term is ambiguous “‘when the language used is susceptible to more than one
meaning... oris obscure in meaning through indefiniteness of expression... .’” Shields Pork Plus,
Inc., 329 Ill. App. 3d at 310 (quoting Wald v. Chicago Shippers Ass'n, 175 Ill. App. 3d 607, 617
(1988)). However, a disagreement between the partics as to how to interpret the contract terms does
not render the terms ambiguous. Shields Pork Plus, Inc., 329 Ill. App. 3d at 310.

The term “may assign” is unambiguous. The term is not susceptible to more than one

meaning. The word “may” means “shall, must — used esp[ecially] in deed, contracts, and statutes.”

-18-



Industrial by special warranty deed. About the same time, Elmhurst Property transferred all of its
interests in the lease to South Industrial.

During the period of the sublease, RJP and/or South Industnal identified GE Power Systems
(“GE”) as a prospective tenant for the premises after the expiration of Ingersoll-Rand’s sublease.
GE hired Earth Tech, Inc. (“Earth Tech”) to perform a limited scope environmental site assessment
of the premises, as required by GE’s pre-lcase due diligence policy. GE asked Earth Tech to sample
and test sediment, soil borings, surface wipes, and water for a list of chemicals, including PCBs.
Earth Tech took samples on February 21 and 22, 2001. Earth Tech found PCBs on building surfaces
and in a sewer drain on the premises above remedial objectives established by the Illinois
Environmental Protection Agency (“TEPA”).

GE told RJP of the PCB contamination and that it would not lease the premises because of
the PCB contamination. After receiving this information, RJP hired MPA to confirm the presence
of PCBs, From February 28 through March 31, 2001, MPA collected samples from building
surfaces, drains, sumps and other areas of the building. Tests at Great Lakes Analytical showed that
each of the areas was contaminated with PCBs. Samples from building surfaces exceeded cleanup
standards established by the EPA and the IEPA.

Jna letter dated March 8, 2001, Platt informed Ingersoll-Rand that, under Section 19(a)(ii)
of the sublease, unless “all debris, garbage, and hazardous materials, wastes and residues” were
removed from the promises, RJP would consider Ingersoll-Rand to be a holdover tenant. Ina letter
dated March 9, 2001, counsel for RJP informed Ingersoll-Rand of the detection of PCB
contamination on the premises and requested that Ingersoll-Rand “take all appropriate steps

necessary to assess and remedy this problem by the expiration of the sublease.” (Compl. Ex. 9.)

--



® Minute Order Form (06/97)

United States District Court, Northern District of Illinois

Name of Assigned Judge John W. Darrah Sitting Judge if Other
or Magistrate Judge than Assigned Judge
CASE NUMBER 02 C 4528 DATE 1/30/2003
CASE SOUTH INDUSTRIAL LEASING, LLC vs. INGERSOLL-RAND COMPANY
TITLE
Lin the following box (a) indicate the party filing the motion, ¢., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature
MOTION: of the motion being presented.]

DOCKET ENTRY:
(63) a Filed motion of [ usc listing in “Motion” box above.]
(2) im} Brief in support of motion due
(3) oO Answer brief to motion due. . Reply to answer brief due. .
(4) o Ruling/Hearing on set for at
(5) o Status hearing[held/continued to] [set for/re-set for] on set for at :
(6) oO Pretrial conference[held/continucd to] [set for/re-set for] on set for ato.
(7) QO Trial[set for/re-set for] on at
(8) 0 (Bench/Jury trial] [Hearing] held/continucd to at
(9) oO This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]
OFRCP4(m) Ol Local Rule 41.1 OFRCP41(aX1) OO FRCP41(a)(2).
ao =o [Other docket entry] Status hearing held and continued to 2/20/03 at 9:00 a.m. Steven J.
Rosenberg’s motion to appear as lead counsel for plaintiffis granted. Enter Memorandum Opinion And
Order. Defendant’s motion to dismiss is granted in part and denied in part. If commencement of this
action for breach of the sublease is not ratified by the real party in interest within twenty-onc days of the
date of this order, Counts IV and V shall be dismissed.
(il) ff [For further detail see order attached to the original minute order.]
No notices required, advised in open court.
‘No notices required, umber af notices
Natices mailed by judge's staff.
‘Notificd counsel by telephone. VAN ud
" 4
wo | Docketing to mail notices, — °

(hd

Mail AO 450 form. [Mee rae
‘Copy to judge/magistrate judge. re §
courtroom Ras Hl oy date maed notice
LG deputy’s aul
initials
Date/time received int
central Clerk's OMMiee mailing deputy initials



of the deed, there is a merger of the two instruments and, unless a reservation is made in the deed,
[the deed] supersedes all contract provisions.” Lanterman v. Edwards, 294 Ill. App. 3d 351, 353
(1998). “A notable exception [to the merger doctrine] . . . is that when the contract for the sale of
real estate contains provisions that are not fulfilled by delivery of the deed, the contract is not merged
as to such provisions, but remains open for performance of such terms.” Neppl v. Murphy, 316 Il.
App. 3d 581, 585 (2000). In determining whether and to what extent the contract merged into the
deed, a court will look at the intention of the parties and the surrounding circumstances. Krajcir v.
Egidi, 305 Ul. App. 3d 613, 623 (1999).

Courts should look first at the nature of the warranty contained in the contract. Nepp/, 316
Ill. App. 3d at 587. Pursuant to the Sales Contract, Ingersoll-Rand warranted, among other things,
that: (1) it had complied with and was currently complying with “all federal, state and local statutes,
laws, ordinances, orders, rules, regulations and moratoria’ relating to its business and conduct on
the premises, including the Clean Air Act, the Federal Water Pollution Control Act, the Safe
Drinking Water Act, the RCRA; the Toxic Substances Control Act, the Emergency Planning and
Community Right-To-Know Act of 1986, the Hazardous Material Transportation Act, and the
CERCLA; (2) it had not received any notices alleging non-compliance or potential liability pursuant
to any such statute or law; (3) the premises, including land, surface water, ground water, were free
of all contamination, including, among others, any hazardous waste as defined in Subtitle C of the
RCRA and the CERCLA; and (4) it had no knowledge of any adverse facts relating to the physical
condition of the premises, building or any part thereof which had not been specifically disclosed in
writing to Elmhurst Property. (Compl. Ex. 2 ] R-4(ii), (ili), (iv)).

“Generally, warranties as to quality . . . touch upon aspects other than the conveyance itself’

-1i-



environmental surveys conducted by companies owned by RJP or Platt.

In April 2001, RIP hited Ketcr Environmental (“Ketcr”), a certified, independent third party
to conduct PCB sampling. Keter took wipe samples in the warehouse and loading dock of the
building. Keter found PCB levels on building surfaces and a sludge sample that exceeded EPA
standards.

Ina letter dated April 27, 2001, counsel for RJP asked Ingersoll-Rand to clean up the PCB
contamination. Ina letter dated May 2, 2001, counsel for Ingersoll-Rand stated that there was no
evidence that Ingersoll-Rand had caused the PCB contamination. Ingersoll-Rand continued to deny
that it had caused the PCB contamination even after discussions between executives at Ingersoll-
Rand and RJP.

On March 21, 2001, Elmhurst Property conveyed the premises to South Industrial. South
Industrial then hired Keter to assess and oversee the clean up of the building. Due to the extent of
the PCB contamination, Keter had to hire Thomas Madden Construction (“Madden”) to remove the
contaminated concrete floors and drains in July and August 2001. Madden also disconnected and
closed some drains. Madden replaced the floors and drains in September 2001.

In August 2001, RJP and South Industrial informed Ingersoll-Rand of the wastes generated
by the clean up and asked Ingersoll-Rand to arrange for disposal of those wastes. Ingersoll-Rand
refused.

DISCUSSION

Ingersoll-Rand argues that dismissal is appropriate because South Industrial’s breach of

contract claim is barred by the merger doctrine.

“In general, if the terms of a contract for the sale of real estate are fulfilled by the delivery

-10-



Ingersoll-Rand agreed not to “commit, or suffer to be committed, any annoyance, waste, nuisance,
act or thing against public policy.” (Compl. Ex. 446.) Ingersoll-Rand also agreed to indemnify RJP
for “any liability arising from [Ingersoll-Rand’s] violation of any environmental, health or safety law,
regulation or ordinance.” (Compl. Lix. 4 § 14().) The sublease also provided that:

[u)pon the Expiration Date or upon the termination of {Ingersoll-Rand’s| right of

possession, whether by lapse of time or at [Ingersoll-Rand’s] option . . . [Ingersoll-

Rand] shall (i) immediately surrender the [p]remises to [RJP] in the same condition

as existed on August 25, 2000, ordinary wear and tear excepted and (ii) remove all

items of personal property from the [b]uilding and [p]remises.

(Compl. Ex. 4 4 19(a).) Under the sublease, if Ingersoll-Rand did not immediately surrender the
premises on the Expiration Date or upon sublease termination, it was required to:

(i) pay to [RJP] on demand for all liability, obligation, claim, loss, cost, actual or

consequences [sic] damages, interest, expenses (including, without limitations all

legal fees and expenses) arising from or relating to, directly or indircctly, such failure

to surrender the [p]remises and (ii) indemnify and defend [RJP] against all liability,

obligation, claim, loss, cost, actual or consequences [sic] damages, interest, expenses

... arising from or relating to, directly or indirectly, such failure to surrender the

[p]remises.

(Compl. Ex. 4 19(c).) Ingersoll-Rand continued its uninterrupted occupancy of the building and
remained its sole and exclusive occupant.

On February 14, 2001, Ingersoll gave written notice to RJP of its intent to terminate its
tenancy effective March 17, 2001. After February 14, 2001 but before March 17, 2001, Platt and
RJP learned that the building was contaminated with PCBs. RJP asked Ingersoll-Rand to clean up
the contamination, but Ingersoll-Rand refused. Ingersoll-Rand failed to pay the rent and taxes due
for the period from March | to March 17, 2001, and never provided the keys to the building to RJP,

limiting RJP’s access to the building.

On March 21, 2001, Elmhurst Property transferred all of its interests in the premises to South

-Ts



it purchased the premises, Ingersoll-Rand continued to be the sole occupant of the building.

During its occupancy, Ingersoll-Rand sold, rented, and repaired air compressors and ancillary
air power equipment within the building. Ingersoll-Rand also owned and operated an electrical
transformer within the building for some portion of its thirty-four-year occupancy of the building.
However, this transformer was removed prior to August 2000.

At some point during Ingersol/-Rand’s occupancy of the building, the building became
contaminated with polychlorinated biphenyls or PCBs. PCBs are a mixture of synthetic organic
chemicals. The United States Environmental Protection Agency (“the EPA”) has determined that
PCBs are probably carcinogenic to humans. PCBs have significant health effects, including cancer,
neurotoxicity, reproductive and developmental toxicity, immune system suppression, liver damage,
skin irritation, and endocrine disruption.

PCBs were used in industrial and commercial applications, including electrical and hydraulic
equipment, pesticides, plasticizers, rubber products, pigments, dycs, and carbonless copy paper.
PCBs were also used as a dielectric fluid in electrical equipment, such as transformers and
capacitors, as well as hydraulic and heat transfer systems, PCBs were also used as a synthetic
lubricant in air compressors. By Act of Congress, production of PCBs ceased in 1977, although their
use and distribution were permitted in a manner prescribed by the EPA.

The PCB contamination occurred as a result of Ingersoll-Rand’s repair and service of air
compressors and other equipment containing PCBs, spills and releases of PCBs from an electrical
transformer used by Ingersoll-Rand, and/or other activitics by Ingersoll-Rand. Ingersoll-Rand took
no steps or inadequate steps to clean up the PCB contamination but, instead, allowed PCBs to remain

in and contaminate the buildings surfaces, sewers, and sumps. Ingersoll-Rand did not report to the

3.



be dismissed. Specifically, Ingersoll-Rand argues that South Industrial does not plead any false
statements upon which it reasonably relied.

To state a claim for fraudulent misrepresentation under Dlinois law, South Industrial must
allege that (1) defendant made a statement (2) of a material nature (3) which was untrue, (4) known
by the person making it to be untrue, or made in culpable ignorance of its truth or falsity, (5) relied
upon by South Industrial to its detriment, (6) made for the purpose of inducing reliance, and (7)
South Industrial’s reliance led to its injury. Bensdorf & Johnson, Inc. v. Northern Telecom Lid., 58
F. Supp. 2d 874, 881 (N.D. Ll. 1999) (citing Doherty v. Kahn, 682 N.E.2d 163, 167 (Ill. App. Ct.
1997)). “[T]he alleged misrepresentation must . . . relate to a past or present fact, not a future or
contingent event,” except where the misrepresentations are part of a “scheme to defraud”. Bensdorf
& Johnson, 58 F. Supp. 2d at 881 (citing Razdan v. General Motors Corp., 979 F. Supp. 755, 759
(N.D. Ill. 1997)). To take refuge in the “scheme to defraud” exception, a plaintiff must allege, in
addition to the intentional misrepresentation, “that defendant intended to induce plaintiff to act for
defendant’s benefit in reliance on the misrepresentation.” Bensdorf& Johnson, 58 F. Supp. 2d at 881
(citations omitted),

A claim for fraudulent misrepresentation (Count IJ) must meet the pleading requirements
of Rule 9(b). Rule 9(b) provides that “[i]n all averments of fraud... the circumstances constituting
fraud . . . shall be stated with particularity. Fed. R. Civ. P. 9(b). This means that persons alleging
fraud must state “‘the who, what, when, where, and how.’” Boyd Mach. & Repair Co. v. American
Int'l Homes, Ltd., 100 F. Supp. 2d 898, 900 (N.D. Ill. 2000) (quoting DiZeo v. Ernst & Young, 901
F.2d 624, 628 (7th Cir. 1990)). “The allegations must be specific enough to provide the defendants

with a general outline of how the alleged fraud scheme operated and of their purported role in the

-J4-



fact that the rider made the duty to purchase subject to the absence of contaminants reasonably
supports the inference that Elmhurst Property relied on the statements to its detriment and that the
statements were made for the purpose of inducing reliance. The complaint also alleges that Elmhurst
Property assigned its rights in the premises to South Industrial. Finally, the allegations in the
complaint reasonably support the inference that the reliance led to South Industrial’s injuries: the loss
of a prospective tenant, GE, and the cost of testing and cleaning due to the PCB contamination.

Ingersoll-Rand also moves to strike South Industrial’s prayer for punitive damages because
South Industrial does not allege that Ingersoll-Rand’s conduct was outrageous, willful, wanton, evil,
recklessly indifferent, or with malice.

“In order to be entitled to punitive damages, one must allege outrageous conduct, acts
perpetrated by evil motive or with reckless indifference to the rights of others. .. . Punitive damages
should not be awarded if the defendant’s misconduct is not above and beyond the conduct needed
for the basis of the underlying cause of action.” Guice v. Sentinel Techs., Inc., 294 Ill. App. 3d 97,
110-11 (1997) (internal citations omitted), Punitive damages may also be recovered in a fraud action
“where the wrong involves some violation of duty springing from a relation of trust or confidence,
or where the fraud is gross, or the case presents other extraordinary or exceptional circumstances
showing malice and willfulness.” Berman v. Dempsey, 257 Ill. App. 3d 496, 501 (1994) (internal
quotation marks omitted). Whether the particular facts of a case justify the imposition of punitive
damages is a question of law. Parsons v. Winter, 142 Ill. App. 3d 354, 360 (1986).

The complaint contains an allegation that Ingersoll-Rand acted with “reckless indifference
to the rights of others” when it repeatedly refused to clean up the alleged PCB contamination.

Generally, “[tJhe mere addition of the phrase [‘reckless indifference to the rights of others’] . . . is

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support the allegations in his or her claim. Strasburger v. Board of Education, 143 F.3d 351, 359
(7th Cir. 1998).

“Although the Federal Rules of Civil Procedure do not require a plaintiff ‘to set out in detail
the facts upon which he bases his claim,’. . . he must ‘set out sufficient factual matter to outline the
elements of his cause of action or claim, proof of which is essential to his recovery.”” Benson v.
Cady, 761 F.2d 335, 338 (7th Cir. 1985) (internal citation omitted). A complaint will not avoid
dismissal if it contains “bare legal conclusions” absent facts outlining the basis of the claims.
Perkins vy. Silverstein, 939 F.2d 463, 467 (7th Cir. 1991).

BACKGROUND

For purposes of this Motion to Dismiss, the following allegations are taken as true.

South Industrial is a Delaware limited liability company with its principal offices in Illinois.
South Industrial is the successor of Roger J. Platt and Elmhurst Property, LLC, a Delaware limited
liability company. South Industrial is the assignee of the claims from RJP Elmhurst Properties, LLC,
a Delaware limited liability company. Ingersoll-Rand is a New Jersey corporation with its principal
offices in North Carolina,

This action involves Ingersoll-Rand’s sale and lease of real property located at 888 Industrial
Drive, Elmhurst, Illinois (“the premises”). Prior to 1967, the premises were undeveloped and used
for farming. In 1967, a building was constructed on the premises. Northwest National Bank of
Chicago Trust No. 189 (“the trust”) was the owner of the premises and the building. Ingersoll-Rand
was the first occupant of the building, leasing it from the trust for a term that began on
November 10, 1967 and ended August 3, 1987. During this time, no other tenant occupied the

building. On or about August 3, 1987, Ingersoll-Rand purchased the premises from the trust, After

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

SOUTH INDUSTRIAL LEASING, LLC, )
an Illinois limited liability company,

Case No. 02 € 4528 DOCKETED

Plaintiff,
Hon. John W. Darrah JAN 3 1 2003

Vv.

INGERSOLL-RAND COMPANY,
a New Jersey corporation,

)
)
)
)
)
)
)
)
)
)

Defendant.

MEMORANDUM OPINION AND ORDER

Plaintiff, South Industrial Leasing, LLC (“South Industrial”), filed a five-count complaint
against Defendant, Ingersoll-Rand Company (“Ingersoll-Rand”), alleging breach of contract (Counts
1 and II), fraudulent misrepresentation (Count III), and breach of the sublease (Counts LV and Y).
Ingersoll-Rand moves, pursuant to Federal Rule of Civil Procedure 12(b)(6), to dismiss the
complaint for failing to state a claim upon which relief can be granted.

For the reasons that follow, Ingersoll-Rand’s Motion to Dismiss is denied in part and granted
in part.

LEGAL STANDARD

When considering a motion to dismiss, the district court must review the complaint liberally,
taking as true all well-pleaded allegations and the inferences that may be drawn from them, See
Sapperstein v. Hager, 188 F.3d 852, 855 (7th Cir. 1999), Any ambiguities in the complaint are
construed in favor of the plaintiff. Kelly v. Crosfield Catalysts, 135 F.3d 1202, 1205 (7th Cir. 1998).

Dismissal is proper only when it appears beyond doubt that Plaintiff can prove no sct of facts to

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and are incidental to the main purpose of the deed, which is to transfer good title.” Lanterman, 294
Tl. App. 3d at 353. Here, the warranties that Ingersoll-Rand made that the premises and building
were free of hazardous contamination and that it was complying with federal, state, and local law
governing the use of hazardous material were warrantics of quality that were “collatcral to and
independent of the provisions in the subsequent deed.” Neppl, 316 Ll. App. 3d at 587. Delivery of
the deed did not fulfill these obligations.

“When a contract for the conveyance of land provides for performance of the ‘other acts
besides conveyance,’ it remains in effect until such provisions have been fully performed.” Nepp/,
316 Tl, App. 3d at 587. The complaint alleges that Ingersoll-Rand repaired and serviced equipment
containing PCBs on the premises and took no steps or inadequate steps to clean up PCB
contamination. These allegations reasonably support the inference that Ingersoll-Rand did not
perform the warranties, and the contract is not merged into the deed. Therefore, the doctrine of
merger does not bar South Industrial’s breach of contract claim.

Ingersoll-Rand also argues that dismissal of the breach of contract claim is appropriate
because South Industrial has not pled all the elements of breach of contract. Specifically, Ingersoll-
Rand argues that South Industrial has not pled that it or its predecessors complied with the terms of
the Sales Contract or its rider or were excused from performing.

In order to state a breach of contract claim under Illinois law, a plaintiff must allege (1) the
existence of a valid and enforceable contract, (2) performance by the plaintiff, (3) breach of the
contract by the defendant, and (4) injury to the plaintiff as a result of the defendant’s breach.
Gonzalzles y. Am. Express Credit Corp., 315 Ul. App. 3d 199, 206 (2000).

The Sales Contract provided that Platt’s obligation to buy the premises was subject to the

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scheme.” Rohlfing v. Manor Care, Inc., 172 F.R.D. 330, 347 (N.D. Ill. 1997) (citations omitted).

To determine whether Count II is sufficient, a court will bear in mind the purposes of Rule
9(b): “(1) protecting the defendants’ reputations; (2) preventing fishing expeditions; and (3)
providing adequate notice to the defendants.” Rohifing, 172 F.R.D. at 347 (citing Vicom, Inc. v.
Harbridge Merchant Servs., Inc., 20 F.3d 771, 777 (7th Cir. 1994)).

The complaint alleges that the PCB contamination occurred as a result of Ingersoll-Rand’s
repair and service equipment containing PCBs and other activities by Ingersoll-Rand; Ingersoll-Rand
was the sole occupant of the building and the premises for thirty-four years; Ingersoll-Rand
employees, Weln and Fumo, in interviews with MPA, stated that Ingersoll-Rand had never used or
handled PCBs or any other hazardous materials on the premises; Fumo assured Platt that audits
performed regularly by Ingersol]-Rand’s in-house personnel and outside consultants showed that
PCBs were never used or handled on the premises; and that Welu and Fumo were interviewed on
August 30 and September 5, 2000, respectively. These allegations meet the “who, what, where,
when and how” requirement of Rule 9(b).

Furthermore, these allegations adequately state a claim for fraudulent misrepresentation under
Illinois law. The statement was material. The rider expressly gave Platt the right not to honor his
obligation to purchase the premises if they were contaminated with hazardous materials like PCB.
The complaint also alleges that Ingersoll-Rand repaired and serviced equipment containing PCBs
on the premises. This allegation reasonably supports the inference that Welu’s and Fumo’s
statements to MPA and Platt were untrue and known by Welu and Fumo to be untrue or made in
culpable ignorance of the statements’ falsity at the time they were uttered. The complaint alleges

that Elmhurst Property, Platt’s assignee, purchased the premises. This allegation coupled with the

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