Opinion
Civ. No. 99C2464.
February 28, 2000.
MEMORANDUM AND ORDER
This Court has before it Defendants' Motions to Dismiss. (doc. #'s 7-1, 16, 18, 30, 43, 44, 58). Defendants Yohe, M.J. Washburn, Cooper Industries, Shell Oil, Hoyt Corporation, Martin Franchises, and J.B. Management, Inc. have filed Motions to Dismiss for failure to state a claim upon which relief may be granted. This Court, having considered the pleadings, finds in the defendants' favor and dismisses Plaintiffs' complaint.
This Court will refer to the motions to dismiss collectively as Defendants' motions except where individualized reference is proper.
BACKGROUND
Plaintiffs' allegations, accepted as true on a motion to dismiss, Antonelli v. Sheahan, 81 F.3d 1422, 1427 (7th Cir. 1996), are as follows. In 1997, College Inn Partners and American National Bank Trust Company of Chicago brought suit against Deby, Inc., Robert and Barbara DeJong, and Harold and Shirley Eavey (collectively referred to as "Deby"). That case, College Inn Partners, et al. v. Deby, Inc., et al., No. 97 C 2989, is still pending in Judge Shadur's court. In College Inn, it is alleged that contaminants from service station and dry cleaning operations operated on property owned by Deby migrated to the property owned by College Inn in violation of the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), the Resource Conservation and Recovery Act ("RCRA"), and Illinois tort law. The College Inn plaintiffs seek corrective action and reimbursement for costs incurred from Deby.
On April 2, 1999, Deby sought leave to file a third party complaint against the defendants in this case. Judge Shadur denied that motion without prejudice. The impetus for this decision was the fact that the case was nearly two years old and discovery was set to close within two months of the motion. Then on April 15, 1999, Deby filed the complaint in this case against the named defendants. In this case, Deby alleges that in the event that it is found liable in the College Inn case, the defendants are liable for contribution under CERCLA and Illinois common law.
MOTION TO DISMISS STANDARD
The purpose of a Rule 12(b)(6) motion to dismiss is to test the sufficiency of the complaint, not to decide the merits of the case. A motion to dismiss should not be granted unless it appears beyond a reasonable doubt that Plaintiffs can prove no set of facts which would entitle them to relief. Conley v. Gibson, 355 U.S. 41, 45-46 (1957). In deciding a motion to dismiss, all well-pleaded factual allegations must be accepted as true, and all reasonable inferences drawn in a light most favorable to Plaintiffs. DiBenedetto v. City of Chicago, 873 F. Supp. 106, 108 (N.D. Ill. 1994). This Court must construe those pleadings liberally in compliance with the notice pleading provision of the federal rules. Leatherman v. Tarrant County Narcotics Intelligence and Coordination Unit, 507 U.S. 163, 168 (1993). However, this Court need not stretch the allegations beyond their sensible and reasonable implications. Chan v. City of Chicago, 777 F. Supp. 1437, 1440 (N.D. Ill. 1991).
ANALYSIS Illinois Joint Tortfeasor Contribution Act
Under Illinois law, where two or more parties are subject to liability arising from the same tort injury to property, the tortfeasor who has paid more than its pro rata share of the liability has a claim of contribution. 740 ILCS 100/2 (1993). The Illinois Joint Tortfeasor Contribution Act ("Contribution Act") permits a contribution cause of action before or after payment of a settlement or judgment, but where an action is pending, the contribution claim must be asserted in that action either by counterclaim or third party complaint. 740 ILCS 100/5 (1995). Stated another way, a clear reading of the statute leaves no room for confusion; when a cause of action is currently pending, the only claim for contribution must be raised as either a counterclaim or a third party complaint.
Only joint tortfeasors have a right of contribution under the Act. Henry v. St. John's Hosp., 563 N.E.2d 410, 414 (Ill. 1990). A joint tortfeasor is one who shares liability for the particular injury. Premium Plastics, Inc. v. LaSalle National Bank, No. 92 C 413, 1992 WL 309561, at *2 (N.D. Ill, Oct. 22, 1992). Stated another way, "[c]ontribution exists among joint tortfeasors, not between torfeasors and the party they injure." Id. The liability is determined at the time of the injury, not at the time the contribution action is brought. Highland v. Bracken, 560 N.E.2d 406, 409 (Ill.App.Ct. 1990).
A. Separate Cause of Action for Contribution
In Laue v. Leifheit, 473 N.E.2d 939 (Ill. 1984), the Illinois Supreme Court established a "procedural requirement that actions for contribution must be filed during the pendency of the underlying direct action. The decision does not hold that all actions for contribution brought within the time an underlying suit is pending are timely filed." Hayes v. Mercy Hospital Medical Center, 557 N.E.2d 873, 877 (Ill. 1990). Deby asserts that because the holding in Laue is a procedural one, this Court must apply federal procedural law in this case. Deby completely misses the point. As Hanna v. Plumer, 380 U.S. 460 (1965) and other cases make clear, "in all cases where a federal court is exercising jurisdiction solely because of the diversity of citizenship of the parties, the outcome of the litigation in the federal court should be substantially the same, so far as legal rules determine the outcome of a litigation, as if it would be tried in a State court." Guaranty Trust Co. v. New York, 326 U.S. 99, 109 (1945) (emphasis added). This Court has jurisdiction over this case pursuant to 28 U.S.C. § 1331, federal question jurisdiction, rather than 28 U.S.C. § 1332, diversity of citizenship. The fact that Laue is a procedural rule is therefore not dispositive of the issue. West v. Conrail, 481 U.S. 35, 39 n. 4 (1987).
Deby now claims that the Illinois Supreme Court merely established a state procedural rule, meaning that this Court should apply Rule 14 of the Federal Rules of Civil Procedure and allow its contribution action to continue. Deby's reading of the holding in Hayes is much too broad to overcome the requirement of filing a counterclaim or third party complaint in the pending College Inn action. Rule 14 provides that a defendant may implead third parties. As any first year law student can attest, impleader is the process of bringing a new party into an existing lawsuit to facilitate expeditious, efficient, and economical results. 6 Wright, Miller Kane, Federal Practice and Procedure § 1442 2d 1990). Because Rule 14's explicit purpose is to combine lawsuits in the interest of judicial economy, it would be counterproductive to allow Deby to file a separate cause of action during the pendency of the College Inn suit. Specifically, "[i]f the governing substantive law recognizes a right of contribution, impleader under Rule 14 is a proper procedure by which to seek relief from joint tortfeasors." Ragusa v. City of Streator, 95 F.R.D. 527, 528 (N.D. Ill. 1982). Therefore, it is clear that any cause of action Deby may seek to assert against the defendants must be done in the College Inn case, rather than in this Court. In the interests of judicial efficiency, Rule 14's purpose "is in all cases to avoid circuity of action, and thus finally in one litigation to dispose of the entire subject matter arising from a particular set of facts, and accomplish ultimate justice for all concerned with economy in litigation, but without prejudice to the rights of another." United States v. Pryor, 2 F.R.D. 382, 386 (N.D. Ill. 1940) (emphasis added). The fact remains that whether this Court applies the rule set forth in the Illinois courts or whether this Court applies Rule 14, Deby's contribution action must be raised in the pending College Inn case or be dismissed until judgment is entered in that case. Deby cannot circumvent the purpose of the Contribution Act, Rule 14, or the state court's holding in Laue by asserting that because Laue is a procedural rule, this Court should abandon well established precedent and statutory authority.
The Contribution Act specifically states that in pending actions, claims for contribution must be brought as counterclaims or third party complaints. 740 ILCS 100/5 (1995). In this case, Deby attempts to make an end-run around this well-established rule. This Court would be remiss if it allowed such conduct to proceed. Deby has two options, either appeal Judge Shadur's denial of the motion to file a third-party complaint, or wait until judgment has been entered to file a separate cause of action for contribution. Nonetheless, Deby's separate cause of action under the Contribution Act may not continue before judgment is entered in College Inn.
B. Implied Indemnity under the Contribution Act
Defendants also argue that Deby's Complaint fails to state a claim for implied indemnity. It is Defendants' contention that the doctrine of implied indemnity based upon negligence was eliminated by the Contribution Act. In Allison v. Shell Oil Co., 495 N.E.2d 496, 501 (Ill. 1986), the court stated "[a]ctive-passive indemnity is no longer a viable doctrine for shifting the entire cost of tortious conduct from one tortfeasor to another." Active-passive negligence is also known as implied indemnity and is based upon "the injustice in allowing a more culpable or `active' tortfeasor to escape liability based on the plaintiff's choice of which defendant to sue." Mollfulleda v. Phillips, 882 F. Supp. 689, 693 (N.D. Ill. 1994). Defendants read this statement to mean that Illinois law no longer recognizes indenmification based on fault. Defendants' interpretation of Allison's holding is accurate. However, not all forms of implied indemnity were eradicated by the Contribution Act. "It should be noted that the trial and appellate courts spoke too broadly when they declared that implied indenmity had been abolished by the Contribution Act," Thatcher v. Commonwealth Edison, 527 N.E.2d 1261, 1263 (Ill. 1988). In fact, "[i]mplied indemnity is still viable under certain circumstances in strict liability actions where the indemnitee is faultless and where a faultless principal has been vicariously liable for conduct of its agent." Byrton Dairy Products v. Harborside Refriger. Serv., 991 F. Supp. 977, 986 (N.D. Ill. 1997) (citations omitted). The only type of implied indemnity that was abolished by the Contribution Act is that based on tort principles of relative blameworthiness, such as in this case. American National Bank Trust Co. v. Columbus-Cuneo-Cabrini Medical Ctr., 609 N.E.2d 285, 288 (Ill. 1992). Because Deby could be found liable in the College Inn case, it cannot maintain an action for implied indemnity. "[G]overning principle[s] in this jurisdiction [dictate] that the costs of accidental injury are to be apportioned in accordance with the relative fault of all concerned in this action." Allison, 495 N.E.2d at 496. In the event that Deby is found negligent "in that it knew or should have known of [the release, it] would be unfair for it to be able, through an action of implied indemnity, to shift the entire loss to other defendants when its own negligence contributed to cause the [release.]" Frazer v. A.F. Munsterman, Inc., 527 N.E.2d 1248, 1255 (Ill. 1988). Even in the event that Deby is not found negligent, this Court should still abstain from finding an implied indemnity cause of action because Deby is claimed to be at fault in the College Inn case. Thatcher, 527 N.E.2d at 1263. Therefore, Deby's claims for implied indemnity must fail because it is potentially liable in the College Inn case and it has failed to allege vicarious liability in this case.
Defendants claim, and this Court agrees that Deby has failed to allege implied indemnity based on vicarious liability. "[C]ommon law implied indemnity was not abolished by the Contribution Act in quasi-contractual relationships involving vicarious liability." Id. at 289. Deby claims that it has made a claim of vicarious liability against Defendants because their complaint alleges that the defendants participated in the gasoline station or dry cleaning business at the time the hazardous substances were released. Deby's claims fall short of claims of vicarious liability though, because "[p]ersonal liability is imposed only when the officer is alleged to have taken part in the illegal act initially giving rise to the corporation's liability." Musikiwamba v. Essi, Inc., 760 F.2d 740, 753 (7th Cir. 1985) (emphasis in original). Deby has failed to allege that Defendants took part in the illegal act of releasing hazardous substances while they were officers or owners of the various corporations, and therefore, Deby's vicarious liability claim must fail.
C. Subject to Liability in Tort
Shell Oil claims that Deby's complaint should be dismissed because Deby has failed to allege that Shell Oil is subject to liability in tort. Deby counters that under the Contribution Act, no such requirement exists. Because the Contribution Act explicitly requires Deby to allege that the defendants are subject to liability in tort, Count XI of the complaint is dismissed.
"A contribution action cannot be maintained against a party who is not subject to liability in tort." Cornett v. Gromann Service Co., 590 N.E.2d 1013, 1017 (Ill.App. 1992) (citation omitted). This is because "[t]he basis for a contributor's obligation depends on his liability in tort to the injured party." Harnischfeger Corp. v. Gleason Crane Rentals, Inc., 585 N.E.2d 166, 169 (Ill.App. 1991). "Thus, the Act limits apportionment to those `subject to liability in tort' for the injuries." Ewanic v. Pepper Const. Co., 712 N.E.2d 852, 855 (Ill.App. 1999) (citing 740 ILCS 100/2(a)). "The Illinois Contribution Act, therefore, provides at a minimum two prerequisites to the applicability of the Act to any given situation. First, two or more persons must be subject to liability in tort; and second, that liability must arise out of the same injury to person or property." U.S. Steel Supply, Inc. v. Alco Standard Corp., No. 89 C 20241, 1990 WL 304252, *5 (N.D. Ill. May 4, 1990).
The Contribution Act specifically provides that "[e]xcept as otherwise provided in this Act, where 2 or more persons are subject to liability in tort arising out of the same injury to person or property, or the same wrongful death, there is a right of contribution among them, even though judgment has not been entered against any or all of them." 740 ILCS 100/2(a) (West 1992) (emphasis added).
Shell Oil maintains that Deby has failed to state a claim sufficient to withstand the motion to dismiss because it has failed to allege that Shell Oil is subject to liability in tort. Instead, the complaint alleges that Shell Oil had obligations and duties to ensure that the service station which it operated did not cause damage or injury to people or the environment. Deby further alleges that Shell Oil violated this duty by failing to ensure that the operations of the gas station would not harm the environment. Unfortunately, these allegations are insufficient to maintain a cause of action which holds Shell Oil subject to liability in tort. Because Deby has failed to assert that Shell Oil is subject to liability in tort, Count XI of their complaint must be dismissed.
Deby counters this argument by claiming that the Contribution Act contains no such requirement, but a reading of the statute clearly contradicts this assertion.
Comprehensive Environmental Response Compensation and Liability Act
"Contribution is unavailable to a party liable under federal law unless a federal statute expressly establishes such a remedy." Rockwell Inter. Corp. v. UI Intern. Corp., 702 F. Supp. 1384, 1389 (N.D. Ill. 1988). CERCLA contains an explicit contribution provision, however, "[t]o receive any actual compensation through an action for contribution, the party must have been found liable as a defendant in an earlier or pending action." Id. In this case, Deby has yet to be found liable in the pending College Inn case, therefore, the contribution action is premature and improper.
A. Responsible Parties under CERCLA
Defendants argue that the complaint fails to state a claim under CERCLA for two reasons. First, Yohe argues that he is not a responsible party under 42 U.S.C. § 9607(a)(2). It is Yohe's assertion that Deby has failed to allege that he is an owner or operator under the Act, and therefore, the CERCLA claim must fail. Alternatively, Defendants claim that Deby fails to allege that it never polluted the site, and this omission is fatal to the claim. Defendants ask this Court to dismiss the complaint because implied indemnity based on negligence is barred by the Contribution Act and Deby has failed to allege implied indemnity based on vicarious liability. Deby counters that Defendants' motions to dismiss should be denied because to grant the motion would be unjust and prejudicial, and contrary to judicial economy.
Yohe claims that, even though he was a corporate official in Deby, he is not a responsible party under CERCLA because he was neither an owner nor an operator under the statute. Section of 107(a) of CERCLA creates a private right of action to recover response costs from responsible persons. 42 U.S.C. § 9607(a). Persons covered by CERCLA include "any person who at the time of disposal of any hazardous substance owned or operated any facility at which such hazardous substances were disposed of." § 9607(a)(2). "CERCLA's definition of `person' includes individuals, as well as corporations, and does not automatically exclude corporate officers or employees." Pape v. Great Lakes Chemical Co., No. 93 C 1585, 1993 WL 424249, at *4 (N.D. Ill. Oct. 19, 1993) (citing 42 U.S.C. § 9601(21)). In fact, it is well established that under CERCLA, corporate officials may be held liable as operators. Sidney S. Arst Co. v. Pipefitters Welfare Educ. Fund, 25 F.3d 417, 420 (7th Cir. 1994). However, the fact that Yohe is a corporate official with supervisory capacity is not enough to hold him liable under CERCLA. Id. at 422. It is incumbent upon Deby to allege that Yohe actively participated in, or exercised specific control over the activities in question. Id. Specifically, an operator "must manage, direct, or conduct operations specifically related to pollution, that is, operations having to do with the leakage or disposal of hazardous waste, or decisions about compliance with environmental regulations." United States v. Bestfoods, 524 U.S. 51, 66 (1998). "Without such direction, personal involvement, the corporation and not the associated individuals must be regarded as owning or operating the hazardous waste site in question." Sydney S. Arst, at 421-422. In other words, in order to hold a corporate officer liable as a responsible person, this Court must find that Yohe had "knowledge of an activity and the duty and power to prevent it," but acquiesced. Id. at 420. This is so because "[c]orporations are liable for the acts of their officers and directors, not the other way `round. An officer or other employee is liable under CERCLA for the consequences of his own decisions, and under both CERCLA and common law principles of respondeat superior the corporation shares this liability." Citizens Elec. v. Bituminous Fire Marine Ins. Co., 68 F.3d 1016, 1021 (7th Cir. 1995). At most, Deby's complaint alleges that Yohe actively participated in the management and activities of Deby at the time the hazardous substances were disposed of. These allegations are woefully inadequate to maintain a cause of action for owner/operator liability under CERCLA. Deby has failed to allege that Yohe directed the operations related to the pollution of the site, and absent such assertions, this Court must dismiss Count II of Deby's complaint.
Deby's § 107 claim must fail because it seeks contribution from Yohe. Because Deby is a potentially liable party which seeks contribution from other potentially liable parties, its claim is governed by § 133(f). Akzo Coatings, Inc. v. Aigner Corp., 30 F.3d 761, 765 (7th Cir. 1994).
"[A] complaint does not automatically state a claim for CERCLA `operator' liability merely by being directed against persons holding management or like positions." Sidney S. Arst, 25 F.3d at 421. However, dismissal for failure to state a claim should be granted only where Plaintiff's complaint exhibits some bar to relief on its face, or where the allegations establish the defendant's affirmative defense. Id. at 421, n. 6. Therefore, "[t]o survive a motion to dismiss a plaintiff must allege that persons associated with the corporation directly and personally engaged in conduct that led to the specific environmental damage at issue in the case." Id. Because "a plaintiff does not state a claim for owner or operator liability if she merely alleges that certain individuals had general corporate authority or served generally in a supervisory capacity," id; this Court finds that Deby has failed to state a cause of action against Yohe for owner/operator liability.
B. Innocent Landowner under CERCLA
As the current owner of the land, Deby is liable, unless it demonstrates that a statutory defense is applicable to it. Kerr-McGee Chemical v. Lefton Iron Metal, 14 F.3d 321, 325 (7th Cir. 1994). "A direct action for recovery of response costs is reserved only for innocent parties." Soo Line R. Co. v. Tang Ind., Inc., 998 F. Supp. 889, 894 (N.D.Ill. 1998). "Section 107(b) requires that [Deby] demonstrate, among other things, that it took precautions to prevent the `threat of release' or other foreseeable consequences arising from the pollution on the site." Kerr-McGee, 14 F.3d at 325. Absent such a showing, Deby cannot maintain a § 107, innocent landowner defense. Instead, the general rule is that "parties who are themselves liable are barred from suing directly under § 107(a). Soo Line, 998 F. Supp. 893 (citing Akzo Coatings, Inc. v. Aigner Corp., 30 F.3d 761, 764 (7th Cir. 1994). This is because where a potentially responsible party sues another potentially responsible party under CERCLA, its claim becomes one of contribution. Id. The exception to the rule exists where "landowners who allege that they did not pollute the Site in any way may sue for direct response costs under § 107(a)." Rumpke of Indiana, Inc. v. Cummins Engine Co., Inc., 107 F.3d 1235, 1240 (7th Cir. 1997).
This Court finds the court's analysis in Soo Line to be helpful. In that case, the court began its analysis by determining whether the plaintiff in that case was an innocent landowner. That very issue is currently before Judge Shadur in the College Inn case. It would run contrary to judicial economy, efficiency, and consistency to have to courts determine Deby's liability. This Court believes the most prudent course of action is to dismiss this case until judgment is entered in College Inn.
CONCLUSION
Deby cannot bring its claim for contribution in a separate case while the College Inn action is pending, because to do so would be in direct violation of the Contribution Act. "[C]ontribution is a remedy available to parties held liable, through judgment or settlement, in some damages action." Rockwell International Corp. v. UI International Corp., 702 F. Supp. 1384, 1389 (N.D.Ill. 1988). To receive "actual compensation . . . the party [seeking contribution] must have been found liable as a defendant in an earlier or pending action." Id. As has been stated numerous times, there is a pending action in Judge Shadur's court to determine Deby's liability for the contamination of the site. Deby's liability has not been determined in the College Inn case, so to permit it to pursue contribution against these defendants in this Court would serve a great injustice. Therefore, this Court dismisses Deby's complaint, in its entirety, without prejudice. Although the Shins and Sunoco failed to filed motions to dismiss, Deby's claims against them are identical to J.B. Management and Shell Oil. Furthermore, because this Court is dismissing Deby's federal claims, it declines to exercise supplemental jurisdiction over its state law claims. Accordingly, Defendants Motions to Dismiss (doc. #'s 7-1, 16, 18, 30, 43, 44, 58) are GRANTED. Deby's complaint is dismissed without prejudice. Yohe's Motion to Strike portions of Deby's complaint (doc. #7-2) is dismissed as moot.
IT IS SO ORDERED.