McWane Incorporated v. Crow Chicago Indus ( 2000 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 99-3819
McWane, Inc.,
Plaintiff-Appellant,
v.
Crow Chicago Industrial, Inc.,
and Halff Associates, Inc.,
Defendants-Appellees.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 98 C 84--Harry D. Leinenweber, Judge.
Argued May 31, 2000--Decided August 9, 2000
Before Flaum, Chief Judge, and Bauer and
Harlington Wood, Jr., Circuit Judges.
Bauer, Circuit Judge. In 1988, Crow Chicago
Industrial, Inc. and McWane, Inc. entered into a
limited partnership agreement to redevelop
property located in Carol Stream, Illinois. The
agreement included a Letter of Understanding
regarding a due diligence investigation of the
property. Crow hired Halff Associates, Inc., an
environmental consulting firm, to conduct an
environmental audit. On January 7, 1998, McWane
filed suit against Crow and Halff to recover the
cost of remediating the contamination of its
property caused by the defendants’ breach of
contract and negligent and willful acts and
omissions. On May 27, 1998, the district court
dismissed McWane’s claim against Crow for breach
of an express written contract and for willful
and wanton misconduct for failure to state a
claim pursuant to Fed.R.Civ.P. 12 (b)(6). On
October 1, 1999, the district court granted
summary judgment in favor of Crow and Halff on
McWane’s remaining claims because the statute of
limitations had run. McWane now appeals.
First, McWane argues that the district court
improperly dismissed his complaint for breach of
the Letter of Understanding. He contends that the
Letter of Understanding imposed a duty on Crow to
conduct an environmental investigation and a duty
to remediate contamination. McWane contends that
Crow breached the Letter of Understanding by
creating "new and additional contamination by
contaminating previously uncontaminated soils."
The district court found that the Letter of
Understanding did not impose a duty on Crow to
remediate and found that no breach occurred.
We review 12(b)(6) dismissals de novo. Looper
Maintenance Service Inc. v. City of Indianapolis,
197 F.3d 908, 911 (7th Cir. 1999). In a claim for
breach of contract, the meaning of the contract
"must be determined from the words or language
used, and a court cannot place a construction on
the contract which is contrary to the plain and
obvious meaning of the language." Johnstowne
Centre Partnership v. Chin, 99 Ill. 2d 284, 287,
458 N.E.2d 480, 481 (1983). If the district court
determines that the contract is unambiguous, it
may determine its meaning as a matter of law.
Meladax Corp. v. Uniden Corp., 863 F.2d 1331,
1333 (7th Cir. 1988). The unambiguous contract
controls over contrary allegations in the
plaintiff’s complaint. Charles Hester Enter.,
Inc. v. Illinois Founders Ins. Co., 114 Ill. 2d
278, 287, 499 N.E.2d 1319, 1323 (1986).
The Letter of Understanding provided that Crow
shall have the right to conduct a due diligence
investigation of the property involving any
matters, "which in the sole discretion of Crow
affect the development of the Land, including
removal of underground storage tanks." The Letter
further provided:
If the environmental investigation/audit reveals
that any one or more of the Tanks has been or is
leaking, or reveals any other environmental
contamination of the land, McWane shall have the
option to remediate the contamination at its cost
to the satisfaction of Crow, which remediation
shall include any additional engineering expense
which results from the contamination, but not the
expense for removal of the Tanks, which shall be
the Partnership’s expense; or McWane may elect
not to remediate such contamination, in which
event it shall reimburse Crow for costs and
expenses incurred by Crow in the environmental
portion of the investigation.
The duty to remediate the contamination is
clearly and unambiguously allocated to McWane,
not Crow. The only option afforded McWane is how
to handle the responsibility of the remediation,
not whether McWane has the responsibility. At no
point, does the Letter of Understanding impose a
duty on Crow to conduct a due diligence
investigation; it is only provided with the right
to conduct such an investigation. Crow owes no
duty under the contract regarding the due
diligence investigation. The district court
stated that while tortious conduct might have
occurred, such conduct does not constitute a
breach of the Letter of Understanding. We agree;
the Letter of Understanding is unambiguous and
the district court correctly dismissed the claim.
McWane next argues that the district court
erred in granting Superior’s motion for summary
judgment on the remaining claims because the
statute of limitations had run. Under Illinois
law, "actions on unwritten contracts, expressed
or implied, or on awards of arbitration, or to
recover damages for an injury done to property,
real or personal, or to recover the possession of
personal property or damages for the detention or
conversion thereof, and all civil actions not
otherwise provided for, shall be commenced within
5 years next after the cause of action accrued."
735 ILCS 5/13-205. The district court found that
in 1989 McWane knew of the contaminated soil and
that it had been moved to another site on its
property. By 1991, McWane knew for certain that
the Illinois Environmental Protection Agency
disputed the test results conducted by Halff and
had requested resampling. McWane was put on
notice no later than 1991 of possible
contamination. Therefore, the five year statute
of limitations would have run in 1996. McWane did
not file suit until 1998. The district court
correctly granted summary judgment in favor of
Superior.
We review de novo the district courts order
granting summary judgment. Vector-Springfield
Properties, Ltd. v. Central Illinois Light Co.,
Inc., 108 F.3d 806 (7th Cir. 1997). In Illinois,
the Discovery Rule is used to determine the
commencement of the statute of limitations.
Hermitage Corp. v. Contractors Adjustment Co.,
166 Ill. 2d 72, 77 (1995). The statute begins to
run when the plaintiff knows or reasonably should
know of his injury and knows that it was
wrongfully caused. Id. The period begins when the
injury could have been discovered through the
exercise of appropriate diligence, not discovery
of the actual injury. Burns Philip Food, Inc. v.
Cavalea Continental Freight, Inc., 135 F.3d 526
(7th Cir. 1998). When it becomes apparent from
the undisputed facts that only one conclusion can
be drawn, it is a question for the court.
Witherall v. Weimer, 85 Ill. 2d 146, 155 (1981).
As part of its due diligence investigation,
Crow hired Halff to conduct an environmental
audit of the property and to remove four
underground storage tanks, which had been used to
store gasoline. Ruth Stear was Halff’s
representative on site. Bob Phelps’, McWane’s
vice president, was present as the tanks were
removed on May 26, 1989. His notes establish that
he was aware at that time of a small amount of
soil contamination. It was to be tested and Stear
was to notify the IEPA. In a June 27, 1989,
letter from Stear to the IEPA, which was also
sent to Phelps, Stear states that the gasoline
contaminated soil was removed from the excavation
and moved to an on-site location for aerating.
Further, the June 1989, Environmental Audit--
Phase II Report indicated that the UST No. 2
contained lead.
In 1990, the agreement between McWane and Crow
ended and Crow no longer had any involvement in
the property. In 1991, the IEPA sent a letter to
Phelps stating that the analytical data was
incomplete. Phelps apprized Barry Robison, an
environmental expert hired by McWane, of the
contaminated soil and forwarded the letter from
the IEPA to him. Phelps stated the need to
resample the contaminated soil because the IEPA
found the sampling detection level used
unacceptable. On October 7, 1991, Halff advised
Phelps and Robison of the cost to resample and
presented them with three alternatives: resample
the soil, write the IEPA to "try to get it do
something," or wait until the IEPA did something.
Phelps notes reflect these three possibilities.
McWane did nothing. Not until 1994 did McWane
hire another environmental consultant and
discover that extensive remedial work was needed.
While the district court’s oral ruling contains
a few factual errors, its analysis is nonetheless
correct. From the facts above, it is clear that
McWane possessed sufficient information to put it
on notice of a possible injury. In 1989, McWane
knew the soil had been contaminated and moved to
another site. In 1991, it knew that the IEPA was
concerned and disputed the test results. The
burden was on McWane to inquire further as to
whether an actionable wrong had occurred. Vector-
Springfield at 810. McWane was clearly on inquiry
notice and knew that it was ultimately
responsible for the remediation. McWane chose not
to do anything, hoping the IEPA would take over.
Because the suit was not filed until 1998, it
falls outside the bounds of the statute of
limitations. Summary judgment was appropriate.
For the foregoing reasons the judgment of
district court is Affirmed.