Lexington Insurance Company et al v. Office Depot, Inc. et al

Filing 34

WRITTEN Opinion entered by the Honorable Harry D. Leinenweber on 5/6/2013:For the reasons that follow, the Court grants Defendant Office Depot, Inc.'s Motion to Dismiss Counts III and IV [ECF No. 7]. Mailed notice(wp, )

Order Form (01/2005)

United States District Court, Northern District of Illinois
Name of Assigned Judge
or Magistrate Judge

Harry D. Leinenweber

CASE NUMBER

12 C 9990

CASE
TITLE

Sitting Judge if Other
than Assigned Judge

DATE

5/6/2013

Lexington Insurance Company et al. v. Office Depot, Inc. et al.

DOCKET ENTRY TEXT

For the reasons that follow, the Court grants Defendant Office Depot, Inc.’s Motion to Dismiss Counts III and
IV [ECF No. 7].

O[ For further details see text below.]

Docketing to mail notices.

STATEMENT
Before the Court is Defendant Office Depot, Inc.’s motion to dismiss. For the reasons that follow, the
Court grants the motion.
I. FACTUAL BACKGROUND
This case involves a subrogation action which arises from a fire in the 25-story Bank of America,
N.A. (“BOA”) banking center located at 33 North Dearborn, in Chicago, Illinois. On March 6, 2011, an
electrical counterfeit currency bill detector started a fire at BOA. The fire spread and caused significant
damage to BOA and adjacent properties in the building. Plaintiffs Lexington Insurance Company, Arch
Specialty Insurance, Hanover Insurance Company, Cincinnati Insurance Company, State Farm Fire &
Casualty Company, Certain Underwriters at Lloyds of London and Certain London Market Insures, and
American Family Insurance Group (collectively, “Plaintiffs”) insured the building and various tenants against
the loss at the time of the fire. Plaintiffs have reimbursed each of their insureds for their losses and now seek
to recover amounts they paid their insureds in connection with the fire. They seek to be reimbursed from
Defendants Hilton Trading Corporation d/b/a Accubanker USA, (“Accubanker”), Office Depot, Inc. (“Office
Depot”) and Bank of America, N.A. (collectively, “Defendants”).
On December 14, 2012, Defendant Office Depot removed this case to Federal Court. Shortly after
removing the case, it filed the instant motion, seeking to dismiss Plaintiffs’ negligence (Count III) and strict
liability (Count IV) claims.
II. LEGAL STANDARD
“A motion under Rule 12(b)(6) challenges the sufficiency of the complaint to state claim upon which
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STATEMENT
relief may be granted.” Hallinan v. Fraternal Order of Police of Chi. Lodge No. 7, 570 F.3d 811, 820 (7th
Cir. 2009). When considering a motion to dismiss under Rule 12(b)(6), the Court takes all well pleaded
allegations of the complaint as true and views them in the light most favorable to the plaintiff. Appert v.
Morgan Stanley Dean Witter, Inc., 673 F.3d 609, 622 (7th Cir. 2012). To satisfy the notice-pleading standard
of Federal Rule of Civil Procedure 8, a complaint must provide a “short and plain statement of the claim
showing that the pleader is entitled to relief,” and must provide the defendant with fair notice of the claim and
its basis. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). A claim has facial plausibility and survives
dismissal when the plaintiff pleads factual content that allows the court to draw the reasonable inference that
the defendant is liable for the misconduct alleged. Appert, 673 F.3d at 622.
III. DISCUSSION
A. Negligence (Count III)
Plaintiffs assert a negligence claim against Defendant Office Deport for its part in selling the defective
electrical counterfeit currency bill detector. Office Depot contends Plaintiffs’ negligence claim should be
dismissed because Plaintiffs fail to allege Office Depot owed and breached a legal duty to Plaintiffs.
Plaintiffs argue their complaint alleges Office Depot owed a duty to Plaintiffs because of its involvement in
the design, manufacture, testing and inspecting of the electrical counterfeit currency bill detector.
“[I]n any negligence action, a plaintiff must establish the existence of a duty, a breach of that duty, an
injury that was proximately caused by that breach, and damages.” Jablonski v. Ford Motor Co., 955 N.E.2d
1138, 1153-54 (Ill. 2011). “The touchstone of this [C]ourt’s duty analysis is to ask whether a plaintiff and a
defendant stood in such a relationship to one another that the law imposed upon the defendant an obligation
of reasonable conduct for the benefit of the plaintiff.” Marshall v. Burger King, 856 N.E.2d 1048, 1057 (Ill.
2006). In determining whether a defendant owed a duty, the Court considers (1) likelihood of injury; (2)
reasonable foreseeability of such injury; (3) the magnitude of the burden of guarding against the injury; and
(4) consequences of placing that burden on defendant. Brewster v. Rush-Presbyterian-St. Luke’s Med.
Center, 836 N.E.2d 635, 637 (Ill. App. Ct. 2005).
In relevant part, Plaintiffs’ complaint states, “Office Depot owed a duty to Plaintiffs to exercise
reasonable skill and care in designing, constructing, manufacturing, testing, inspecting and selling the subject
Accubanker D62 [the electrical counterfeit currency bill detector].” ECF No. 1-1 at ¶ 70. Plaintiffs allege
Office Deport breached this duty by, “[f]ailing to properly construct the subject Accubanker D62 . . . failing
to properly design the subject Accubanker D62, failing to properly warn of the dangerous condition that
existed . . . failing to correct and/or remedy the unreasonable defects . . . failing to maintain proper process
and quality control over the manufacture, assembly of completeness . . .” Id. at ¶ 71.
Office Depot argues these allegations are insufficient because 1) it did not design or manufacture the
electrical counterfeit currency bill detector; and because 2) the complaint fails to allege the electrical
counterfeit bill detector was in a dangerous condition when it arrived at BOA or that Office Depot had
knowledge of the said defects. The Court agrees.
Plaintiffs fail to allege facts that demonstrate Office Depot could foresee the injuries sustained by
Plaintiffs, who were not purchasers, users, or foreseeable users of the electrical counterfeit currency bill
detector. See e.g., Solis v. BASF Corp., No. 1-11-0875, 2012 WL 4748186 at *18 (Ill. App. Ct. Oct. 4, 2012)
(finding the lower court properly instructed the jury that the distributor had a duty to warn and instruct the
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STATEMENT
user of the dangers rather than providing a more expansive duty instruction). While Plaintiffs rely on Scott
and Fetzer Company v. Montgomery, to support their position, the Court finds Plaintiffs’ reliance misplaced.
473 N.E.2d 421 (Ill. App. Ct. 1984). In Scott, a group of plaintiff tenants brought a tort action against the
adjoining tenant and the corporation which supplied, installed, and maintained the adjoining tenant’s fire
alarm system. Id. at 425. The product at issue in that case was a fire alarm system which had the purpose of
detecting and stopping the spread of fires. Id. In Scott, the court determined it was foreseeable that a failure
on the defendant’s part could lead to fire damages to both the client’s property and adjacent properties since
the product’s purpose was to detect and stop fires. Id.
The electrical counterfeit currency bill detector in this case is not analogous to a smoke detector. As a
seller of this product, the Court does not find it was reasonable for Office Depot to foresee that the sale of the
said product would result in fire to multiple property owners.
As further support for dismissal, Office Depot references Judge St. Eve’s recent opinion in the related
case, Brenner, Ford & Monroe et. al v. Bank of America and Office Depot, Inc. See No. 12-C-6400, ECF No.
33. In that subrogation case, the insurance companies representing the adjacent tenants have sued BOA and
Office Depot to recover amounts they paid to the insureds in connection with the same fire. The court there
granted Office Depot’s motion to dismiss plaintiffs’ negligence claims, finding plaintiffs failed to allege
Office Depot owed plaintiffs a legal duty. Id.
Office Depot argues that because Plaintiffs’ complaint in this case has nearly identical allegations as
the one in Brenner, Ford & Monroe, this Court should follow suit. In response, Plaintiffs make no attempt to
distinguish the instant complaint from the one in Brenner, Ford & Monroe. Instead, they suggest Judge St.
Eve erred because she focused “simply on the allegation of warning, not the inspection, testing, design and
manufacture allegations.” Pls.’ Resp. to Def. Office Depot’s Mot. to Dismiss Pls.’ Comp. at 6.
This Court disagrees with Plaintiffs’ characterization. In her ruling, Judge St. Eve noted that the
dismissal of the negligence claim against Office Depot was appropriate because plaintiffs failed to “establish
that Office Depot could foresee the injuries sustained by Plaintiffs who were not purchasers, users, or
foreseeable users of the product.” Brenner, Ford & Monroe et al. v. Bank of America and Office Depot, Inc.,
No. 12-C-6400, (Dec. 7, 2012), ECF No. 33. The same is true here. Plaintiffs are not purchasers or
foreseeable users of the electrical counterfeit currency bill detector. Thus, the Court fails to see how the
claim here warrants different treatment.
Furthermore, Plaintiffs fail to allege that Office Depot knew or should have known that the electrical
counterfeit currency bill detector was in a defective condition at the time it was sold to BOA. See Jablonski,
955 N.E.2d at 1159 (“[W]hen a design defect is present at the time of sale, the manufacture has a duty to take
reasonable steps to warn at least the purchaser of the risk as soon as the manufacturer learns or should have
learned of the risk created by its fault.”). There are no allegations here that Office Depot knew or should have
known that the electrical counterfeit currency bill detector was defective, or that the product was defective at
the time Office Depot sold it to BOA. Additionally, unlike the defendant in Scott, who installed and
maintained the fire detector and was aware of the adjacent premises, Plaintiffs fail to allege that Office Depot
knew or should have known that the electrical counterfeit currency bill detector would be placed in a location
with adjacent tenants.
Accordingly, the Court finds Plaintiffs have not pled that Office Depot owed Plaintiffs a duty. As
such, their negligence claim against Office Depot must be dismissed.
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STATEMENT
B. Strict Liability (Count IV)
Plaintiffs also allege a strict liability tort claim based on products liability. They claim Office Depot is
liable under this theory because it distributed the defective electrical counterfeit currency bill detector and
failed to “properly design, manufacture, test, inspect and sell” the product. Pls.’ Comp. at 16. Office Depot
argues that this claim should be dismissed pursuant to Illinois’ “seller’s exception.” 735 Ill. Comp. Stat. 5/2621 (West 2010).
To establish a strict liability claim in Illinois, a plaintiff must plead that 1) an injury resulted from a
condition in a product; 2) the condition of the product was unreasonably dangerous; and 3) the condition
existed at the time the product left the manufacturer’s control. Saieva v. Budget Rent-A-Car of Rockford, 591
N.E.2d 507, 515 (Ill. 1992). “At common law, all entities in the distributive chain of an allegedly defective
product, including manufacturers, sellers, wholesalers, distributors, and lessors of the product, are strictly
liable in the products liability actions for injuries resulting from that product.” Brobbey v. Enter. Leasing
Co., 935 N.E.2d 1084, 1091 (Ill. App. Ct. 2010). In 1979, Illinois enacted the “seller’s exception.” See 735
Ill. Comp. Stat. 5/2-621. This exception allows the Court to dismiss a nonmanufacturer defendant from a
strict liability product claim, if the defendant certifies the correct identity of the manufacturer of the defective
product. Id.
Attached with Office Depot’s motion is an affidavit from its National Account Manager. See Tierney
v. Vahle, 304 F.3d 734, 738-39 (7th Cir. 2002) (explaining that while courts are typically confined to the
pleadings on 12(b)(6) motion to dismiss, the court can consider documents that are central to the plaintiff’s
claim). This affidavit certifies that “[t]he only counterfeit bill detector Office Depot ever sold was product
number 937747, [the electrical counterfeit currency bill detector at issue] which was manufactured by and
purchased from Hilton Trading Corp. d/b/a Accubanker USA.” See ECF No. 7-4 at ¶ 11.
Despite this certification, Plaintiffs contend dismissal is not appropriate because Office Depot’s
affidavit “fails to certify the correct identity of the manufacturer of the defective product . . . ” Pls.’ Resp. to
Def. Office Depot’s Mot. to Dismiss Pls.’ Comp. at 10. In light of the language quoted above, the Court
finds this assertion baffling. It is undeniable that the affidavit states that the electrical counterfeit bill detector
“was manufactured by and purchased from Hilton Trading Corp. d/b/a Accubanker USA.” See ECF No. 7-4
at ¶ 11. Because of this, the Court finds Office Depot has satisfied the requirements for the seller’s exception.
However, the Court’s inquiry does not end here. There are certain exceptions which preclude a court
from dismissing a nonmanufacturer under the seller’s exception. In relevant part the statute states:
[a] court shall not enter a dismissal order relative to any certifying defendant or
defendants other than the manufacturer even though full compliance with subsection (a) of this
Section has been made where the plaintiffs can show one or more of the following:
(1) That the defendant has exercised some significant control over the design or manufacture
of the product, or has provided instruction or warnings to the manufacturer relative to the
alleged defect in the product which caused the injury, death or damage; or
(2) That the defendant had actual knowledge of the defect in the product which caused the
injury, death, or damage; or

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STATEMENT
(3) that the defendant created the defect in the product which caused the injury, death, or
damage.
735 Ill. Comp. Stat. 5/2-621 (c)(1)(3).
Plaintiffs argue that their complaint alleges that Office Depot exercised significant control over the
design and manufacture of the product. They contend that Office Depot’s affidavit fails to refute this
allegation. The Court disagrees.
Paragraph 12 of the affidavit states that after Office Depot received the electrical counterfeit currency
bill detectors it “never opened or otherwise altered the individual “D-62” counterfeit detection unit boxes
[and] these boxes were shipped to Bank of America, N.A. per order specifications in their original unaltered
unit boxes.” ECF No. 7-4 at ¶ 12. The Court finds this statement sufficient to establish that Office Depot
was not in significant control of the design or manufacturing of the product at issue. Therefore, the Court
finds the exception to the seller’s exception inapplicable.
As a final note, the Court points out that if Plaintiffs engage discovery and find that the information in
Office Depot’s affidavit is inaccurate, Plaintiffs are permitted to bring Office Depot back in this litigation.
See 735 Ill. Comp. Stat. 5/2-621(b)(2); see also LaRoe v. Cassens & Sons, Inc., 472 F. Supp. 2d 1041, 1053
(S.D. Ill. 2006) (stating that non-manufacturing defendant dismissed from an action pursuant to the seller's
exception to products liability claims “remains functionally a party, susceptible of reinstatement at any time
before judgment”). At this juncture, however the Court finds dismissal appropriate.
IV. CONCLUSION
For the foregoing reasons, the Court grants Defendant Office Depot’s motion to dismiss.

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