Federal Signal Corporation v. Tammcor Industries, Inc. et al
Filing
85
MEMORANDUM OPINION AND ORDER Signed by the Honorable Harry D. Leinenweber on 6/28/2017:Mailed notice(wp, )
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
FEDERAL SIGNAL CORPORATION,
Plaintiff,
v.
Case No. 14 C 7683
TAMMCOR INDUSTRIES, INC.,
and PEERLESS INDEMNITY
INSURANCE COMPANY (a
Liberty Mutual Company),
Judge Harry D. Leinenweber
Defendants.
MEMORANDUM OPINION AND ORDER
I.
Plaintiff,
Federal
BACKGROUND
Signal
Corporation
(“Federal
Signal”)
was named as a defendant in a California state court products
liability action arising from a personal injury suffered by an
employee while working on board a marine vessel.
The employee
alleged that he suffered permanent partial blindness caused by
wind-borne particles of paint hitting him in the eyes.
The
paint particles blew off of an “Atkinson Dynamics Model AD-TB-25
Speaker,” manufactured by Federal Signal, which was affixed to a
weather deck bulkhead.
specific
cause
of
his
The plaintiff further alleged that the
injury
was
the
failure
of
the
powder
coating applied to the talk back part of the speaker to congeal
or
adhere
properly,
which
caused
it
to
degrade
into
loose,
dusty, free-flying particles of paint.
Tammcor Industries, Inc.
(“Tammcor”), the Defendant here, who is alleged in this case to
be responsible for the painting, was not named in that lawsuit.
Federal Signal settled the lawsuit in December 2014 for the
sum
of
$450,000.00.
Federal
Signal
also
entered
into
agreements with two other defendants in the law suit.
for
contributions
toward
the
settlement
of
side
In return
$25,000.00
each,
Federal Signal was assigned all rights, if any, those defendants
had against Tammcor.
Federal
Signal,
after
settling
the
products
liability
lawsuit, filed this suit against Tammcor seeking indemnity to
recover its and its two co-defendants’ defense and settlement
costs.
The First Amended Complaint alleges that the defective
product
that
manufactured
gave
by
rise
to
Tammcor
the
and
product
sold
liability
to
incorporation into the AD-TB-25 Speaker.
Federal
lawsuit
was
Signal
for
Count I of the First
Amended Complaint seeks contractual indemnification based on a
written provision in an alleged purchase order given to Tammcor
by
Federal
Signal.
Indemnification,
Contribution.
and
(Count
Count
Count
II
III
IV
is
not
is
is
based
based
directed
on
on
against
Implied
Equitable
Tammcor.)
Tammcor has moved for dismissal of each of the three counts.
- 2 -
The
specific
coating
failure
contends,
were
parts
were
in
metal
purchased
purchase orders.
question
subject
castings
from
which,
Tammcor
to
the
powder
Federal
Signal
pursuant
to
written
These castings were incorporated by Federal
Signal into the AD-TB-25 Speaker System which it assembled and
sold.
Tammcor was responsible for obtaining the metal castings
from a Federal Signal supplier and then coating and painting
them.
However,
according
to
an
expert
report
prepared
for
Federal Signal, these castings were not properly painted for a
product intended for use in a “marine environment.”
The report
further opined that the castings made of aluminum should have
been pretreated in order to enable them to resist corrosion.
In
a letter Federal Signal sent to Hose-McCann Communications, the
purchaser of the AD-TB-25 Speaker, it admitted that its speaker
failed
to
pass
a
salt
spray
testing
based
on
the
corrosion
performance criteria.
Federal Signal bases its claim for indemnity on the preprinted terms of its standard form purchase order, which stated
as follows in paragraph 12 of the Terms & Conditions:
INDEMNIFICATION.
Seller shall defend, indemnify and
hold harmless Buyer against all damages, claims or
liabilities and expenses (including attorney’s fees)
arising out of or resulting in any way from any defect
in the goods or services purchased hereunder, or from
any act or omission of Seller, its agents, employees
or subcontractors.
This indemnification shall be in
- 3 -
addition to the warranty obligations of Seller and
Seller agrees to provide Certificates of Insurance for
such Indemnity upon request.
Federal Signal produced examples of prior dealings between
it and Tammcor where such a standard form purchase order was
used. However, it was unable to produce any such purchase order
governing
the
sale
of
the
specific
castings
subject of the products liability lawsuit.
produced
that
referred
to
this
product
was
that
were
the
The only document
an
offer
letter
Federal Signal sent to Tammcor, which purported to detail its
offer to Tammcor to machine the specific product in question.
This offer required Tammcor to purchase specific raw casting
inventory from a Federal Signal supplier, then to transition the
purchasing of castings to another Federal Signal supplier, and
to maintain inventory of the castings on a consignment basis.
The
offer
control,
handled
Tammcor
further
and
by
delivery
Federal
was
stated
from
that
die
Signal.
responsible
pricing,
casting
The
for
offer
all
engineering,
suppliers
further
tooling
quality
were
to
provided
costs,
responsible for maintaining inventory of product.
and
be
that
was
The offer
said nothing about pre-treating and/or painting the castings.
Nor did the offer make mention of any requirement that Tammcor
indemnify Federal Signal.
The offer did, however, state that
- 4 -
“the agreement” could only “be modified in writing signed by
both parties.”
II.
TAMMCOR’S MOTION
Tammcor bases its Motion for Summary Judgment on Count I on
Federal
Signal’s
agreement.
It
failure
bases
to
its
produce
Motion
a
for
written
Summary
indemnity
Judgement
on
Counts III and IV on Federal Signal’s alleged design failure to
ensure
made
satisfaction
it
at
least
straightforward:
of
corrosion
partially
this
is
at
a
performance
fault.
breach
criteria,
Tammcor’s
of
contract
which
Motion
claim
is
for
indemnity, and the first element is the existence of a valid
contract
consisting
consideration.
of
an
offer,
an
acceptance,
All American Roofing, Inc. v. Zurich Am. Ins.
Co., 404 Ill.App.3d 438, 439 (1st Dist. 2010).
has
produced
and
writings
consisting
of
an
Federal Signal
offer
agreement,
engineering drawings, buy cards, a memorandum of understanding
between the parties, and a Kanban agreement, none of which set
forth
an
agreement
on
Tammcor’s
part
to
indemnify
Federal
Signal.
Federal Signal responds by asserting that the two parties
had a long term business relationship, which started in 2004 and
ended in 2008, under which Tammcor supplied Federal Signal with
parts
for
industrial
audio
speakers
- 5 -
that
Federal
Signal
assembled and sold.
In this case, Tammcor was responsible for
obtaining, coating, and painting the castings to be used in the
audio speakers.
Tammcor shipped the castings from its Kentucky
plant to Federal Signal’s facility in Danville, Kentucky.
specifications
required
Tammcor
to
pretreat
the
The
castings
by
applying an undercoating and then paint them.
Over
the
course
of
their
relationship,
it
was
Federal
Signal’s practice to send Tammcor purchase orders specifying the
number of parts to be shipped and the price per unit.
Printed
on the back of each purchase order were “terms and conditions of
purchase,”
noted.
which
included
the
indemnity
language
previously
Federal Signal further responds that during the years in
question, 2004 through 2008, Tammcor made over 400 shipments of
parts to Federal Signal which were initiated by its form written
purchase orders.
Federal Signal’s 30(b)(6) witness, Pat Oddo
(“Oddo”), testified that each purchase of parts from Tammcor was
initiated
by
provision.
Additionally
showing
that
a
purchase
the
order
Federal
specific
containing
Signal
part
in
prepared
question
the
indemnity
“buy
was
cards,”
purchased
pursuant to a specific purchase order number. Further, Federal
Signal’s purchase order number appeared on Tammcor’s Shipment
Register, which was used for tracking customer orders.
This
register
were
showed
the
sale
of
the
- 6 -
parts
in
question
and
referred
to
by
the
Federal
Signal
purchase
order
number.
Federal Signal concluded by arguing that the missing purchase
order is a so called “lost instrument” and the existence, as
well as the terms and conditions of lost instruments, can be
proved
by
secondary
(circumstantial)
produced in abundance in this case.
evidence,
which
it
has
It relies upon Federal Rule
of Evidence 1002 as well as Coltec Indus. Inc. v. Zurich Ins.
Co., 2002 WL 31185789 at *5 (N.D. Ill. Sept. 30, 2002).
Tammcor answers by arguing that, because Federal Signal’s
witness Oddo could not affirm that he witnessed the destruction
of
the
alleged
lost
secondary evidence.
document,
Federal
Signal
cannot
rely
on
It cites U.S. v. McGaughey, 977 F.2d 1067,
1071 (7th Cir. 1992), a dubious contention as we shall see.
Tammcor further argues that the offer letter’s failure to state
an indemnity requirement establishes that there is no agreement
to indemnify.
failed
to
Finally, Tammcor argues that Federal Signal has
establish
anything
but
a
“mere
possibility”
of
a
factual dispute, which is insufficient to avoid summary judgment
under Posey v. Skyline Corp., 702 F.2d 102, 106 (7th Cir. 1983).
III.
DISCUSSION
It appears to the Court that Federal Signal has the better
of
the
argument.
It
has
established
more
than
possibility” that the missing purchase order existed.
- 7 -
a
“mere
First,
Federal Signal’s witness, Oddo, testified that no purchases were
made from Tammcor without a written purchase order containing
the indemnity provision, and there were hundreds of them issued
to
Tammcor
provision.
over
the
years,
all
containing
the
indemnity
Thus, this case is similar to Capitol Converting
Equipment, Inc. v. Lep Transport, Inc., No. 88 C 6001, 1989 WL
121272 (N.D. Ill. Oct. 11, 1989).
In that case, the defendant
sold equipment to the plaintiff that was lost at sea.
The
plaintiff sought damages for the value of the equipment and loss
of profits.
the
The defendant presented an affirmative defense that
invoice
by
which
limitation of liability.
lost.
the
equipment
was
sold
contained
a
The specific invoice was claimed to be
The defendant introduced evidence of a course of dealing
between
the
initiated
by
parties
consisting
invoices,
and
of
hundreds
produced
six
of
transactions
randomly
selected
invoices all of which contained the limitation of liability.
plaintiff
merely
denied
that
such
an
In
response,
the
invoice
existed.
The court held that such a course of dealing between
the parties presented a question of fact that precluded summary
judgment as to the affirmative defense of limited liability.
In
support of its decision, the court cited Section 1-205 of the
Uniform
Commercial
Code
(now
810
- 8 -
ILCS
5/1-303
(b)),
which
provides for a course of dealing to give a “common basis of
understanding….”
In
response,
Converting,
denied
Tammcor,
the
like
the
applicability
defendant
of
the
in
Capital
Commercial
Code,
contending that this was a sale of services (painting) rather
than of a product (castings).
However, as is clear from the
offer document, Tammcor was to supply castings that were to be
painted and was paid for painted castings.
With respect to the
course of dealing, all Tammcor’s 30(b)(6) witness could testify
to was:
Q.
Okay.
Sir would you explain that process –
and now I’m talking about Federal Signal, not
generally, but just – not all your customers.
I’m
talking about specifically Federal Signal.
Would you explain the process or describe the
process for placing and filling orders for Federal
Signal.
Okay. So, first of all, for – for Federal Signal
to initiate an order, would they send you a purchase
order?
A.
To the best of my memory, they would either
send an e-mail or call in a purchase order.
Q.
Did they – so they would send an e-mail, or
they would call in – a what – an order?
A.
Call in, like, a purchase order.
I believe
they also probably faxed at that point in time. They
would fax it – a purchase order in, or they would
perhaps e-mail or call one in.
Q.
Okay. So – so the order would be initiated
by Federal Signal using a purchase order; is that
correct?
- 9 -
A.
To the best of my memory, yes.
Q.
And they would send that to you in – to the
best of your recollection – in one of three ways:
They would either fax it in or they’d e-mail in the
purchase order, and you said that they would call in
the purchase order.
What do you – do you recall them actually doing
that, actually calling in a purchase order?
A.
Yes.
Q.
Okay. All right.
And the purchase order
that would be sent in to you, whether by fax or email, that was a – that was on a Federal Signal
purchase order form, correct?
A.
Yes.
Thus, as was true in Capitol Converting Equipment, Tammcor was
unable to provide clear testimony contradicting Federal Signal’s
circumstantial evidence.
The case of U.S. v. McGaughny, is on point, even though it
is cited by Tammcor.
In that case a tax payer had allegedly
executed a waiver of the statute of limitations while he and the
government
attempted
to
negotiate
a
compromise.
They
were
ultimately unable to do so, and the government filed a suit to
collect the delinquent tax.
By the time the suit was filed the
waiver was unable to be located.
Based on government testimony
it appeared that the document had been destroyed in accordance
with
IRS
regular
procedures
regarding
document
retention.
Various documents were introduced together with affidavits which
- 10 -
indicated that the waiver had indeed been executed.
The court
relied upon Federal Rule of Evidence 1002, which provides that
“other evidence of a document in writing . . . is admissible if
all
originals
are
lost
or
have
been
destroyed,
unless
proponent lost or destroyed them in bad faith. . . .”
the
The court
continued on: “Of course, before secondary evidence may be used,
it
must
be
demonstrated
destroyed.
that
the
original
has
actually
been
Unless someone testifies that he or she personally
destroyed or witnessed the destruction of a document, such proof
will ordinarily be circumstantial.”
977 F.2d at 1071.
Thus,
the court was saying not what Tammcor said it said, but that the
missing
document
may
be,
and
normally
will
be,
proved
by
circumstantial evidence such has Federal Signal has offered in
this case.
Moreover, Oddo said that the purchase order copies might
have
been
policy.
lost
In
due
to
addition,
Federal
all
Signal’s
documents
document
concerning
retention
the
purchase
state a purchase order number that is consistent and includes
the product tracking documents maintained by Tammcor.
In
summary,
circumstantial
the
evidence
Court
that
finds
an
that
indemnity
there
is
agreement
sufficient
governing
the sale of the parts in question existed to raise a question of
fact which precludes summary judgment here.
- 11 -
A.
Tammcor
Implied
also
Contract
Contribution.
Counts III and IV
seeks
of
summary
judgment
Indemnity,
and
as
to
Count
IV,
Count
III,
Equitable
Obviously implied indemnity is an alternative to
contractual indemnity.
According to the case of Jinwoong, Inc.
v. Jinwoong, Inc., 310 F.3d 962, 965-966 (7th Cir. 2002), the
right to indemnity may be implied in a contract between two
parties that have a preexisting relationship and fail to include
an in indemnity agreement, where it is apparent that they would
have done so had it occurred to them.
However, it is generally
limited to cases where one party is at fault and the other party
blameless,
i.e.,
strictly
liable.
What
the
evidence
here
appears to show is that Tammcor was responsible for painting the
subject parts and may have failed to do so properly in accord
with the engineering drawings.
However, Federal Signal’s own
expert stated that the specifications for the parts were not
appropriate
for
a
“maritime
environment”
and
Federal
Signal
admitted to Hose-McCann Communications, the purchaser of the ADTB-25, that its product failed to pass a salt spray testing
based on the corrosion performance criteria.
Thus, it appears
that Federal Signal is not blameless so that is not entitled to
take advantage of the doctrine of implied indemnity.
310 F.3d at 966.
Jinwoong,
Federal Signal disputes the admissibility of
- 12 -
the
Hose-McCann
authenticated
letter,
and
was
arguing
inadmissible
both
that
hearsay.
it
As
was
to
lack
not
of
authentication, production in discovery normally is considered
sufficient authentication for the recipient to use in evidence.
See,
U.S.
v.
Brown,
688
F.2d
1112,
1116
(7th
Cir.
1982).
Federal Rule of Evidence 901 provides that authentication as a
condition precedent to admissibility “is satisfied by evidence
sufficient to support a finding that the matter in question is
what
the
proponent
claims.”
The
fact
of
its
production
in
discovery is powerful evidence that the document is authentic
unless the producer disavows it at the time of production.
As
to
an
hearsay,
it
is
admissible
under
Rule
801(d)(2)
as
admission of a party opponent.
With regard to Count IV, Equitable Contribution, Federal
Signal cites no cases supporting such a claimed cause of action.
Of course, comparative fault allows a fact finder under certain
circumstances to allocate contributions to a judgment.
However,
this would require a repeat trial of the underlying personal
injury case.
Since Federal Signal did not rely on comparative
fault, it is waived.
Therefore, Count IV is dismissed.
- 13 -
IV. CONCLUSION
For the reasons stated herein, Tammcor’s Motion for Summary
Judgment [ECF No. 67] is denied as to Count I, but granted as to
Counts III and IV.
IT IS SO ORDERED.
Harry D. Leinenweber, Judge
United States District Court
Dated: June 28, 2017
- 14 -
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?