Kindra Lake Towing, L.P. et al

Filing 80

MEMORANDUM Opinion and Order: For the foregoing reasons, Black Diamond's motion to dismiss Counts V, VII, VIII, and paragraph 18a of Count VI, is granted without prejudice, Kindra's motion to dismiss Count I is granted without prejudice, and Kindra's motion to dismiss Counts III, IV, and paragraph 18a of Count II is denied. 53 To the extend Foundation can cure the deficiencies the Court has described with respect to Counts I, V, VII, VIII, and paragraph 18a of Count VI, Foundation may file an amended pleading by December 11, 2015. Signed by the Honorable Thomas M. Durkin on 11/20/2015:Mailed notice(srn, )

UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
In the Matter of the Complaint of
KINDRA LAKE TOWING, L.P. and BLACK
DIAMOND MARINE EQUIPMENT, INC. for
exoneration from or limitation of
liability.

No. 15 C 3174

--------------------------------------------------------

Judge Thomas M. Durkin

In the Matter of the Complaint of
FOUNDATION THEATRE GROUP, INC. for
exoneration from or limitation of
liability.
MEMORANDUM OPINION AND ORDER
Kindra Lake Towing, L.P., and Black Diamond Marine Equipment, Inc.,
bring this action under admiralty law, 46 U.S.C. § 30505, et seq. See R. 1. Kindra
demise chartered 1 a barge to Black Diamond, which then demise chartered the
barge to intervenor Foundation Theatre Group, Inc. The barge sank while docked at
Navy Pier in Chicago. Kindra and Black Diamond seek a declaration that they are
not liable for the barge accident. Foundation also seeks such a declaration regarding
its potential liability. See R. 20. Additionally, Foundation answered Kindra and
Black Diamond’s complaint, asserting affirmative defenses and claims against

1 A demise charter “constitutes the only form of charter that purports to invest
temporary powers of ownership in the charterer.” Baker v. Raymond Int’l, Inc., 656
F.2d 173, 182 (5th Cir. 1981). “A ‘demise charterer’ [is] one who contracts for the
vessel itself and assumes exclusive possession, control, command and navigation
thereof [and] is treated as the owner for many purposes[.]” Matute v. Lloyd
Bermuda Lines, Ltd., 931 F.2d 231, 235 (3d Cir. 1991). A demise charter is
“therefore tantamount to, though just short of, an outright transfer of ownership.”
Guzman v. Pichirilo, 369 U.S. 698, 701 (1962).

Kindra and Black Diamond for the following: violation of an implied warranty of
seaworthiness (Counts I and V); negligence with respect to the barge’s
seaworthiness and docking of the barge (Counts II and VI); fraudulent
misrepresentation with respect to the barge’s seaworthiness (Counts III and VII);
and negligent misrepresentation with respect to the barge’s seaworthiness (Counts
IV and VIII). See R. 38. Kindra and Black Diamond have moved to dismiss
Foundation’s implied warranty and misrepresentation claims, and the negligence
claims to the extent that they concern seaworthiness—Counts I and V; III and VII;
IV and VIII; paragraph 18a of Count II; and paragraph 18a of Count VI—for failure
to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6). R. 53.2 For the
following reasons, their motion is granted in part and denied in part.
Legal Standard
A Rule 12(b)(6) motion challenges the sufficiency of the complaint. See, e.g.,
Hallinan v. Fraternal Order of Police of Chi. Lodge No. 7, 570 F.3d 811, 820 (7th
Cir. 2009). A complaint must provide “a short and plain statement of the claim
showing that the pleader is entitled to relief,” Fed. R. Civ. P. 8(a)(2), sufficient to
provide defendant with “fair notice” of the claim and the basis for it. Bell Atl. Corp.
v. Twombly, 550 U.S. 544, 555 (2007). This standard “demands more than an
unadorned, the-defendant-unlawfully-harmed-me accusation.” Ashcroft v. Iqbal, 556

Counts II and VI each contain a paragraph 18, which in turn include six
subsections (a) through (f). Only subsection (a) of paragraph 18 of Counts II and VI
concerns the seaworthiness of the barge. The remaining allegations in Counts II
and VI concern Kindra and Black Diamond’s action to secure the barge to Navy
Pier, which are not at issue on this motion.
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U.S. 662, 678 (2009). While “detailed factual allegations” are not required, “labels
and conclusions, and a formulaic recitation of the elements of a cause of action will
not do.” Twombly, 550 U.S. at 555. The complaint must “contain sufficient factual
matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’”
Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 570). “‘A claim has facial
plausibility when the plaintiff pleads factual content that allows the court to draw
the reasonable inference that the defendant is liable for the misconduct alleged.’”
Mann v. Vogel, 707 F.3d 872, 877 (7th Cir. 2013) (quoting Iqbal, 556 U.S. at 678). In
applying this standard, the Court accepts all well-pleaded facts as true and draws
all reasonable inferences in favor of the non-moving party. Mann, 707 F.3d at 877.
Background
Supplemental Admiralty Rule F provides a process for a “vessel owner” to
seek “exoneration from [or] limitation of liability” with respect to claims regarding
the vessel. Kindra and Black Diamond’s complaint seeks such a declaration. Rule F
also provides that the plaintiff vessel owner may seek (1) an injunction staying any
already pending actions against the vessel owner, and (2) issuance of a notice to all
potential claimants to file their claims in the federal action filed by the vessel
owner. The Court issued such an order in this case, R. 10, and Foundation filed its
answer including its claims in response.
Foundation’s answer not only responds to Kindra and Black Diamond’s
allegations and asserts affirmative defenses, but, pursuant to subsection (5) of Rule
F, also states factual allegations of its own upon which Foundation bases its claims

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against Kindra and Black Diamond. Since Kindra and Black Diamond seek to
dismiss Foundation’s claims against them, the following recitation of background
facts is taken from the allegations upon which Foundation bases those claims (with
an exception noted below).
Foundation has produced a Halloween haunted house for Navy Pier several
times in years past. R. 38 at 9 (¶ 2). Navy Pier wanted Foundation to produce a
haunted house again in 2014. Id. Navy Pier told Foundation that the haunted house
should be constructed on a barge docked to the pier, and told Foundation to charter
the barge from Kindra. Id. (¶ 3). Kindra entered into a demise charter with Black
Diamond in order for Black Diamond to then demise charter the barge to
Foundation. Id. at 10 (¶¶ 5, 7).
Foundation did not attach its Charter Agreement with Black Diamond to its
answer. But Foundation did attach the Charter Agreement to its own complaint
seeking exoneration or limitation of liability. See R. 20-1. Although Kindra and
Black Diamond caption their motion under Rule 12(b)(6), it seeks dismissal of
Foundation’s claims based on the affirmative defense of waiver and therefore it is
really a motion for judgment on the pleadings pursuant to Rule 12(c). See Yassan v.
J.P. Morgan Chase & Co., 708 F.3d 963, 975-76 (7th Cir. 2013) (“even though
district courts have granted Rule 12(b)(6) motions on the basis of affirmative
defenses and this court has affirmed those dismissals, we have repeatedly cautioned
that the proper heading for such motions is Rule 12(c), since an affirmative defense

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is external to the complaint”).3 Therefore, the Court finds it inconsequential that
Foundation attached the Charter Agreement to its complaint, and not its answer.
Both Foundation’s complaint and answer are pleadings in this case such that the
Charter Agreement can be considered under Rule 12. See Fed. R. Civ. P. 10(c) (“A
copy of a written instrument that is an exhibit to a pleading is a part of the pleading
for all purposes.); cf. Prestone Prods. Corp. v. South/Win, Ltd., 2013 WL 5164024, at
*2 n.1 (N.D. Ill. Sept. 13, 2013) (“While the Settlement Agreement [which is, of
course, a kind of contract] was not attached as an exhibit to the Complaint, it was
attached as an exhibit to [the] answer so the Court may properly consider it in
deciding a Rule 12(c) motion.”).
Moreover, even if the Charter Agreement is actually “outside the pleadings,”
it nevertheless falls in the “narrow exception” permitting consideration of such
documents “aimed at cases interpreting, for example, a contract.” 188 LLC v.
Trinity Indust., Inc., 300 F.3d 730, 735 (7th Cir. 2002). “It is . . . well-settled in this
circuit that documents attached to a motion to dismiss are considered part of the
pleadings if they are referred to in the plaintiff’s complaint and are central to his
claim.” Yassan, 708 F.3d at 975. Kindra and Black Diamond’s complaint referenced
the Charter Agreement, see R. 1 ¶ 7, and so did Foundation’s answer in which it
stated the claims at issue on this motion. See R. 38 at 10 (¶ 7). Thus, the Court will

3 In any event, the legal standard for both rules is the same and the difference in
caption does not change the Court’s ruling. See Lodholtz v. York Risk Servs. Group,
Inc., 778 F.3d 635, 639 (7th Cir. 2015); see also Hayes v. City of Chicago, 670 F.3d
810, 813 (7th Cir. 2012) (affirming district court’s granting of a 12(b)(6) motion “as if
it were filed as a Rule 12(c) motion”).
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consider the Charter Agreement’s provisions in addressing Kindra and Black
Diamond’s motion.
The Charter Agreement provides the following in relevant part:
[Foundation] understands and agrees that [Black
Diamond], by tendering Delivery of the Barge to
[Foundation], makes no warranty or representation,
either express or implied, regarding the condition,
seaworthiness or fitness of such Barge for any particular
purpose. [Foundation] further agrees that by accepting
Delivery of the Barge, it acknowledges that (i)
[Foundation] is fully satisfied with the condition of the
Barge and the fitness of the Barge for the purposes
[Foundation] intends to use it, and (ii) [Foundation]
thereafter shall have no right to make any claim of any
kind against [Black Diamond] under any theory
whatsoever (including without limitation theories or
negligence, unseaworthiness, or breach of warranty)
based in whole or in part on any alleged deficiency in the
condition, design, fitness or suitability of the Barge and/or
its equipment and/or appurtenances.
R. 20-1 at 2 (¶ 4(B)). The agreement was to be signed on behalf of Black Diamond by
its general manager, Donald Campbell. See id. at 10. Campbell is also the general
manager of Kindra. R. 38 at 10 (¶ 5).
Prior to signing the Charter Agreement, Foundation questioned Kindra and
Black Diamond about the condition of a hatch on the deck of the barge. Id. at 10 (¶
8). Kindra and Black Diamond assured Foundation that the hatch would not be a
problem. Id.
Foundation also entered into a separate contract with Black Diamond and
Kindra to move the barge to and from Navy Pier and to provide all necessary
moorings of the barge to Navy Pier. Id. at 11 (¶ 9). When the barge arrived at Navy

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Pier on September 24, 2014, Kindra and Black Diamond failed to ensure that it had
a proper fender to protect the pier wall, and failed to ensure that the barge was
properly secured to the pier. Id. (¶ 11). This led to the barge repeatedly slamming
into the pier wall causing damage to the barge and the pier. Id. (¶ 12). Kindra
oversaw installation of a new fender and re-securing of the barge to the dock on
October 1, 2014, but did not inspect the barge for damage. Id. at 11-12 (¶ 14).
On October 31, 2014, the haunted house was cancelled due to a storm. Id. at
12 (¶ 15). Foundation contacted Kindra and Black Diamond to request assistance in
moving the barge to a safer mooring, but no assistance was provided. Id. That
evening the barge sank. Id. (¶ 16).
Analysis
I.

Black Diamond
Black Diamond argues that Foundation’s negligence claim to the extent it is

based on seaworthiness (Count VI (¶ 18(a)), and Foundation’s implied warranty and
misrepresentation claims (Counts V, VII, and VIII), should be dismissed based on
the Charter Agreement’s waiver clause. In opposition, Foundation contends that
waiver is an affirmative defense, and “affirmative defenses do not justify dismissal
under Rule 12(b)(6),” because “a complaint need not anticipate or attempt to diffuse
potential defenses.” R. 68 at 3.
Although Foundation is correct that plaintiffs are not required to anticipate
affirmatives defenses, “if it is plain from the complaint that the [affirmative]
defense is indeed a bar to the suit dismissal is proper without further pleading.” Jay

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E. Hayden Found. v. First Neighbor Bank, N.A., 610 F.3d 382, 383 (7th Cir. 2010).
And an affirmative defense—including waiver—based on a contract that is part of
the pleadings is a proper basis for a motion to dismiss. See De Lage Landen Fin.
Servs., Inc. v. M.D.M. Leasing Corp., 2007 WL 4355037, at *2 (N.D. Ill. Dec. 10,
2007) (a contract attached to the complaint can be the basis for judgment on an
affirmative defense under Rule 12); MB Fin. Bank, N.A. v. Planet Airways, Inc.,
2005 WL 1189597, at *1 n.1, *2-3 (N.D. Ill. May 4, 2005) (dismissing counterclaims
and striking affirmative defenses based on a waiver clause in a contract that was
attached to the pleadings and incorporated by reference); see also Palan v.
Commonwealth Edison Co., 2015 WL 1911104, at *2 (N.D. Ill. Apr. 27, 2015) (the
plaintiff “extensively references the waiver in his operative complaint, anticipating
the affirmative defense by conceding that he signed the waiver but alleging that his
consent was neither knowing nor voluntary. Given this, the court on a Rule 12(b)(6)
motion may consider the waiver itself”); Willis Corroon Corp. of Utah, Inc. v. United
Capitol Ins. Co., 1998 WL 30069, at *3 (N.D. Cal. 1998) (“[W]hile the interim
settlement agreement may not be ‘central’ to the substantive issues in [the]
complaint, it clearly is central to [the plaintiff’s] ability to bring this action since the
agreement is a binding contract which allegedly limits the parties’ right to sue. The
agreement is therefore centrally relevant—and potentially dispositive—in the same
way that facts indicating the existence of a statute of limitations or res judicata
would be.”).

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Considering the Charter Agreement’s waiver clause, the Court finds that
Foundation waived the claims against Black Diamond that Black Diamond seeks to
dismiss. It is true that under Illinois law, “a general release is valid [only] as to all
claims of which a signing party has actual knowledge or that he could have
discovered upon reasonable inquiry.” Fife v. mPhase Techs., Inc, 2014 WL 7146212,
at *16 (N.D. Ill. Dec. 15, 2014) (emphasis added). This standard implicates the
factual record and usually requires that the question of the scope of a general
release be reserved for summary judgment. See id.; see also JPMorgan Chase Bank,
N.A. v. Asia Pulp & Paper Co., 707 F.3d 853, 862-64 (7th Cir. 2013) (affirming
summary judgment on fraud claims based on general contractual waiver); UMB
Bank, Nat’l Ass’n v. Leafs Hockey Club, Inc., 2015 WL 920919, at *6 (N.D. Ill. Mar.
2, 2015) (granting summary judgment on fraud claims based on general contractual
waiver); Richelieu Foods, Inc. v. New Horizon Warehouse Distrib. Ctr., Inc., 67 F.
Supp. 3d 903, 913-14 (N.D. Ill. 2014) (same). Foundation contends that such
circumstances are present here. But the Court need not address the scope of the
general waiver language in the Charter Agreement, because in addition to the
general waiver Foundation specifically waived claims relating to “unseaworthiness”
and “breach of warranty.” R. 20-1 at 2 (¶ 4(B)). These specific waivers precisely
mirror Foundation’s allegations that Black Diamond breached the “implied
warranty of seaworthiness,” R. 38 at 17 (¶ 18); made misrepresentations with
respect to the barge’s “seaworthiness,” R. 38 at 19 (¶ 18), 20 (¶18); and was
negligent so as to render the barge “unseaworthy,” R. 38 at 18 (¶ 18a). Thus, Counts

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V, VII, VIII, and paragraph 18a of Count VI, unambiguously fall within the scope of
the Charter Agreement’s waiver clause, and those claims are dismissed.
II.

Kindra
Kindra was not a party to Foundation’s Charter Agreement with Black

Diamond, so unlike Foundation’s claims against Black Diamond, its claims against
Kindra are not barred by the Charter Agreement’s waiver clause. Kindra argues,
however, that this lack of privity also means that Foundation’s implied warranty,
misrepresentation claims, and negligence claim with respect to seaworthiness
(Counts I, III, IV, and paragraph 18a of Count II) should be dismissed.
Count I alleges a breach of an implied warranty of seaworthiness. “Under the
law of Illinois, privity of contract is a prerequisite to recover economic damages for
breach of implied warranty.” Voelker v. Porsche Cars N. Am., Inc., 353 F.3d 516, 525
(7th Cir. 2003) (citing Rothe v. Maloney Cadillac, Inc., 518 N.E.2d 1028, 1029-30
(Ill. 1988)). Since Foundation does not allege that it was in privity of contract with
Kindra with respect to any implied warranty of seaworthiness, its claim for breach
of an implied warranty must be dismissed for lack of privity.
Foundation argues that “issues of fact exist with regard to the corporate
structure between Kindra and Black Diamond,” and “arguments may be developed
through discovery that the knowledge of one may be imputed to the other, and that
the wrongful acts of one may be imputed to the other.” R. 68 at 7. Piercing the
corporate veil cannot help Foundation here, however, because the Court has held
that Foundation waived its implied warranty claim in the Charter Agreement with

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Black Diamond. If Kindra is Black Diamond’s alter ego, as Foundation alleges,
Foundation’s waiver with respect to Black Diamond would then also apply to claims
against Kindra.
Counts III and IV are for fraudulent and negligent misrepresentation. These
are tort actions which are “‘measured by the scope of the duty owed rather than the
artificial concepts of privity,’” and for which a “‘lack of direct contractual
relationship between the parties is not a defense.’” F.D.I.C. v. Msarsky, 968 F. Supp.
2d 915, 926 (N.D. Ill. 2013) (quoting Rozny v. Marnul, 250 N.E.2d 656, 660 (Ill.
1969)); see also Quinn v. McGraw-Hill Cos., Inc., 168 F.3d 331, 335 (7th Cir. 1999)
(“The Illinois Supreme Court has recognized that the tort of negligent
misrepresentation extends to third parties who lack privity with the defendant[.]”);
Ga.-Pac. Corp. v. Walsh Constr. Co. of Ill., 2001 WL 1135855, at *2 (N.D. Ill. Sept.
26, 2001) (“[I]t is well established in Illinois that privity is not a prerequisite of
fraud cases.” (citing St. Joseph Hosp. v. Corbetta Constr. Co., Inc., 316 N.E.2d 51, 72
(Ill. App. Ct. 1st Dist. 1974)); Stein v. D’Amico, 1989 WL 91874, at *3 (N.D. Ill. Aug.
8, 1989) (“In Illinois privity is not a prerequisite to recovery in fraud cases.” (citing
St. Joseph Hosp., 316 N.E.2d at 72)). Kindra does not address this reasoning. Thus,
Kindra’s

motion

to

dismiss

Foundation’s

fraudulent

and

negligent

misrepresentation claims (Counts III and IV) is denied.
Similarly, the Illinois Supreme Court has held that “it is axiomatic that every
person owes a duty of ordinary care to all others . . . and such a duty does not
depend upon contract, privity of interest or the proximity of relationship, but

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extends to remote and unknown persons.” Jane Doe-3 v. McLean Cnty. Unit Dist.
No. 5 Bd. of Dirs., 973 N.E.2d 880, 887-88 (Ill. 2012). Similar to Foundation’s
argument in support of its claims for fraudulent and negligent misrepresentation,
Kindra does not address the reasoning that privity is not required for a negligence
claim. Thus, Kindra’s motion to dismiss Foundation’s negligence claim regarding
seaworthiness (Counts II (¶ 18a)) is denied as well.
Conclusion
For the foregoing reasons, Black Diamond’s motion to dismiss Counts V, VII,
VIII, and paragraph 18a of Count VI, is granted without prejudice, Kindra’s motion
to dismiss Count I is granted without prejudice, and Kindra’s motion to dismiss
Counts III, IV, and paragraph 18a of Count II is denied. To the extent Foundation
can cure the deficiencies the Court has described with respect to Counts I, V, VII,
VIII, and paragraph 18a of Count VI, Foundation may file an amended pleading by
December 11, 2015.
ENTERED:
______________________________
Honorable Thomas M. Durkin
United States District Judge
Dated: November 20, 2015

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