The Travelers Indemnity Company of American v. Shawmut Woodworking & Supply, Inc. et al

Filing 36

OPINION AND ORDER. For the reasons stated in the accompanying Opinion and Order, the Court denies Defendant Birk's motion to dismiss the complaint 25 . The Court orders Birk to answer the complaint by October 2. 2017. Signed by the Honorable Sara L. Ellis on 9/18/2017. Mailed notice(rj, )

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
THE TRAVELERS INDEMNITY
COMPANY OF AMERICA,
Plaintiff,
v.
SHAWMUT WOODWORKING &
SUPPLY, INC. d/b/a SHAWMUT
DESIGN AND CONSTRUCTION;
BIRK PLUMBING, INC.;
DEL FRISCO’S OF CHICAGO, LLC
d/b/a DEL FRISCO’S DOUBLE EAGLE
STEAKHOUSE,
Defendants.

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No. 17 C 1771
Judge Sara L. Ellis

OPINION AND ORDER
On two occasions, waste-laden water flowed into Tom Ford Retail Illinois, LLC’s (“Tom
Ford”) store, causing damage to Tom Ford’s real and personal property. Tom Ford’s insurance
provider, Travelers Indemnity Company of America (“Travelers”), brings this action against
Defendants Shawmut Woodworking & Supply, Inc. d/b/a Shawmut Design and Construction
(“Shawmut”), Birk Plumbing, Inc. (“Birk”), and Del Frisco’s of Chicago, LLC d/b/a Del Frisco’s
Double Eagle Steakhouse (“Del Frisco’s”) to recover Tom Ford’s insured and uninsured
damages. Travelers alleges negligence against all Defendants for failing to ensure the plumbing
work performed in the building and subsequent waste disposal would not cause harm to other
tenants, such as Tom Ford, and also brings a nuisance claim against Del Frisco’s. Birk moves to
dismiss Travelers’ negligence claim, arguing that the economic loss doctrine precludes recovery.
Because the Court finds that Travelers has sufficiently alleged facts to meet the sudden or

dangerous occurrence exception to the economic loss doctrine, the Court denies Birk’s motion to
dismiss.
BACKGROUND 1
In 2012, Tom Ford began leasing space in a commercial building at 58-66 East Oak
Street in Chicago, Illinois for one of its retail stores. Travelers provided Tom Ford with an
insurance policy for its business and property. At some point, Del Frisco’s, a steakhouse,
entered into a lease for the commercial space directly above Tom Ford in the building. Del
Frisco’s contracted with Shawmut to build out its space. Shawmut subcontracted with Birk for
the plumbing work associated with the Del Frisco’s project.
Birk’s plumbing work was faulty, leading waste materials to “obstruct, damage or
overload the Building’s drainage or sewer system.” Doc. 1 ¶ 19. Specifically, on October 15,
2014 and March 17, 2015, plumbing pipes in Tom Ford’s space “became obstructed, damaged,
or overloaded with waste materials from Del Frisco’s, which in turn caused waste-laden water to
flow into and damage Tom Ford’s real property and personal property.” Id. ¶ 20. Tom Ford had
to perform emergency repairs and cleanup. Tom Ford filed two insurance claims with Travelers
of over $75,000, which Travelers paid. Tom Ford also sustained uninsured losses of $50,000
from the flooding incidents. Tom Ford assigned its rights to pursue recovery of these uninsured
losses to Travelers. 2

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The facts in the background section are taken from Travelers’ complaint and are presumed true for the
purpose of resolving Birk’s motion to dismiss. See Virnich v. Vorwald, 664 F.3d 206, 212 (7th Cir. 2011);
Local 15, Int'l Bhd. of Elec. Workers, AFL-CIO v. Exelon Corp., 495 F.3d 779, 782 (7th Cir. 2007). The
Court also considers the exhibits attached to Travelers’ response to the motion to dismiss, as they are
matters of public record. See Gen. Elec. Capital Corp. v. Lease Resolution Corp., 128 F.3d 1074, 1080–
81 (7th Cir. 1997); Henson v. CSC Credit Servs., 29 F.3d 280, 284 (7th Cir. 1994) (taking judicial notice
of state court documents).

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Many of the parties involved here are also involved in a state court lawsuit involving water damages
Tom Ford suffered because of frozen pipes at Del Frisco’s that burst. In that lawsuit, The Phoenix

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LEGAL STANDARD
A motion to dismiss under Rule 12(b)(6) challenges the sufficiency of the complaint, not
its merits. Fed. R. Civ. P. 12(b)(6); Gibson v. City of Chicago, 910 F.2d 1510, 1520 (7th Cir.
1990). In considering a Rule 12(b)(6) motion to dismiss, the Court accepts as true all wellpleaded facts in the plaintiff’s complaint and draws all reasonable inferences from those facts in
the plaintiff’s favor. AnchorBank, FSB v. Hofer, 649 F.3d 610, 614 (7th Cir. 2011). To survive
a Rule 12(b)(6) motion, the complaint must not only provide the defendant with fair notice of a
claim’s basis but must also be facially plausible. Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S. Ct.
1937, 173 L. Ed. 2d 868 (2009); see also Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.
Ct. 1955, 167 L. Ed. 2d 929 (2007). “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.” Iqbal, 556 U.S. at 678.
ANALYSIS
Birk argues that Travelers’ negligence claim is barred by the economic loss doctrine,
which “denies a remedy in tort to a party whose complaint is rooted in disappointed contractual
or commercial expectations.” Collins v. Reynard, 607 N.E.2d 1185, 1188, 154 Ill. 2d 48, 180 Ill.
Dec. 672 (1992). In Illinois, the economic loss doctrine was first set forth in Moorman
Manufacturing Co. v. National Tank Co., 435 N.E.2d 443, 191 Ill. 2d 69, 61 Ill. Dec. 746 (1982).
Moorman defined “economic losses” as:
damages for inadequate value, costs of repair and replacement of
the defective product, or consequent loss of profits-without any
claim of personal injury or damage to other property . . . as well as
Insurance Co. v. Shawmut Woodworking & Supply, Inc., No. 2016-L-003362 (Ill. Cir. Ct.), a court in the
Circuit Court of Cook County denied Birk’s motion to dismiss a similar negligence claim in which it also
argued the economic loss doctrine applied. See Docs. 28-2, 28-2. Because the state court order does not
contain any reasoning, the Court only notes the fact that Birk did not prevail on similar arguments without
attaching any additional significance to the matter.

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the diminution in the value of the product because it is inferior in
quality and does not work for the general purposes for which it was
manufactured and sold.
Id. at 449 (citations omitted) (internal quotations marks omitted).
First, Travelers argues that the economic loss doctrine does not apply to its claim against
Birk because no contract or bargain existed between Tom Ford and Birk, with Birk never
performing any work inside Tom Ford’s tenancy in the commercial building occupied by both
Tom Ford and Del Frisco’s. In other words, Travelers contends that for the economic loss
doctrine to apply, the parties must have been involved in a contractual relationship. But the
economic loss doctrine does not require the plaintiff to have an available contractual remedy.
See Anderson Elec., Inc. v. Ledbetter Erection Corp., 503 N.E.2d 246, 249, 115 Ill. 2d 146, 104
Ill. Dec. 689 (1986) (“A plaintiff seeking to recover purely economic loss due to defeated
expectations of a commercial bargain cannot recover in tort, regardless of the plaintiff’s inability
to recover under an action in contract.”); see also In re Chicago Flood Litig., 680 N.E.2d 265,
274–76, 176 Ill. 2d 179, 223 Ill. Dec. 532 (1997) (finding economic loss doctrine applicable to
those plaintiffs who only alleged economic loss and not physical property damage for alleged
negligence against city and contractor, with whom plaintiffs did not have a contractual
relationship). Thus, the absence of a contractual relationship makes no difference to the
applicability of the economic loss doctrine.
Instead, the Court must determine whether an exception to the economic loss doctrine
applies to Travelers’ claim from the face of the pleadings. Illinois recognizes three exceptions to
the economic loss doctrine: (1) where the plaintiff sustained personal injury or property damage
as a result of a sudden or dangerous occurrence; (2) “where the plaintiff’s damages are
proximately caused by a defendant’s intentional, false representation;” and (3) “where the

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plaintiff’s damages are proximately caused by a negligent misrepresentation by a defendant in
the business of supplying information for the guidance of others in their business transactions.”
Id. at 275. Travelers only contends that the first exception—for a sudden or dangerous
occurrence—applies here. For this exception, the Court must find both (1) a sudden or
dangerous event and (2) damage to other property. Id. (“[T]he event, by itself, does not
constitute an exception to the economic loss rule. Rather, the exception is composed of a
sudden, dangerous, or calamitous event coupled with personal injury or property damage.”
(emphasis added)).
I.

Sudden or Dangerous Occurrence
In its motion, Birk conclusorily argues that Travelers has not pleaded a sudden or

dangerous occurrence. But Travelers alleges that the damage Tom Ford suffered arose from a
sudden or calamitous event, with the plumbing pipes becoming so overloaded with waste
material that water burst into Tom Ford’s property. In reply, Birk contends that a water leak,
particularly one caused by an accumulation of water in a pipe, cannot meet the requirement for
the exception. Courts have recognized that damage caused by water leaks does constitute a
sudden or dangerous event, however. See, e.g., Sovereign Chem. & Petroleum Prods., Inc. v.
Ameropan Oil Corp., 148 F.R.D. 208, 213 (N.D. Ill. 1992) (economic loss doctrine did not bar
recovery where frozen pipes burst and caused water leak). As for Birk’s argument that the leak
was caused by an accumulation of water in the pipes, meaning it cannot be considered sudden,
Birk focuses on the wrong issue; the occurrence at issue is the actual leak itself and not the
events leading up to it. See United Air Lines, Inc. v. CEI Indus. of Ill., Inc., 499 N.E.2d 558, 562,
148 Ill. App. 3d 332, 102 Ill. Dec. 1 (1986) (“We must look to the suddenness of the occurrence
of an event—the point when the injury occurs (a fire, overturning of a truck, collapse of a

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ceiling)—where such occurrence causes personal injury or damage to property external to the
defective product which exposes a party to an unreasonable risk of injury to himself or his
property, rather than the suddenness or length of time within which the defect or cause of the
occurrence develops (ignition of polyurethane padding, locking wheel brakes, water leakage)
and manifests itself in the sudden and calamitous occurrence.”). Travelers’ complaint does not
clearly set forth the time it took for the pipes to leak the waste-laden water into Tom Ford’s
property on the two occasions at issue. But at this stage, drawing all inferences in Travelers’
favor, the Court finds Travelers has sufficiently alleged a sudden or dangerous event, with it
conceivable that water suddenly entered Tom Ford’s property. See id. at 563 (ceiling collapse
caused by water leaking through faulty roof constituted a sudden and dangerous event, regardless
of whether water “gradually accumulated” or “‘suddenly’ poured in”); see also Mars, Inc. v.
Heritage Builders of Effingham, Inc., 763 N.E.2d 428, 435–36, 327 Ill. App. 3d 346, 261 Ill.
Dec. 458 (2002) (“[M]erely stat[ing] the frame collapsed in a thunderstorm . . . sufficiently
alleged the claimed property damage was caused by a sudden and dangerous event.”). Further
factual development may prove otherwise, but at this point, the Court moves on to consider
whether the water leakage resulted in personal injury or property damage to other property, the
second element of the exception. See Yeadon Fabric Domes, LLC v. Roberts Envtl. Control
Corp., No. 15 CV 6679, 2016 WL 3940098, at *2–3 (N.D. Ill. July 21, 2016) (finding that
plaintiff had sufficiently alleged, for purposes of motion to dismiss, that dome had ruptured
suddenly even though defendant contended that events leading up to rupture could have taken
approximately two weeks).

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II.

Damage to Other Property
For the sudden or dangerous occurrence exception to apply, Travelers must seek damages

for loss to property other than the defective product. Trans States Airlines v. Pratt & Whitney
Canada, Inc., 682 N.E.2d 45, 52, 177 Ill. 2d 21, 224 Ill. Dec. 484 (1997). The economic loss
doctrine bars “tort recovery when a defective product causes the type of damage [to other
property] one would reasonably expect as a direct consequence of the failure of the defective
product.” Id. at 58 (emphasis added). The Court thus considers the “injured party’s bargainedfor expectation” in determining whether the damage was to the same or separate property. Id. at
46.
Birk argues that Travelers cannot satisfy the “other property” requirement because both
Del Frisco’s and Tom Ford shared space in the same building, meaning that the same structure
was damaged and any property damage Tom Ford suffered cannot be separated from the product
at issue, the allegedly defectively installed plumbing pipes. But the Court disagrees. Although
Tom Ford and Del Frisco’s shared space in the same commercial building, to say that Tom Ford
contemplated damage to its leased space and the property therein from pipes within Del Frisco’s
space, as alleged in the complaint, or that the property affected, which includes both real and
personal property, is the same stretches the imagination at the motion to dismiss stage. Without
additional information, the Court cannot determine the relationship between the pipes at issue
and the property allegedly damaged. See Yeadon Fabric Domes, 2016 WL 3940098, at *3
(allowing plaintiff to proceed on tort theory, finding that court could not determine relationship
between products at motion to dismiss stage to conclude that separate property was damaged).
Additionally, the fact that Tom Ford and Del Frisco’s occupied space in the same commercial
building does not automatically mean that the Court must consider all of the damage as a whole.

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See Scott & Fetzer Co. v. Montgomery Ward & Co., 493 N.E.2d 1022, 1026, 112 Ill. 2d 378, 98
Ill. Dec. 1 (1986) (allowing tenants who occupied space in a warehouse to pursue damages for
loss of property “other than the defective product,” including for “damages resulting from the
loss of audio equipment, paint sprayers, speakers, inventory, supplies, and stock”). Therefore, at
this stage, the Court finds that Travelers has sufficiently pleaded its claim to meet the sudden or
dangerous occurrence exception to the economic loss doctrine, allowing it to proceed on its
negligence claim against Birk.
CONCLUSION
For the foregoing reasons, the Court denies Defendant Birk’s motion to dismiss the
complaint [25]. The Court orders Birk to answer the complaint by October 2. 2017.

Dated: September 18, 2017

______________________
SARA L. ELLIS
United States District Judge

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