Sunday, March 27, 2016
Ind. Decisions - 7th Circuit decided one Indiana civil case on March 25th, posted this weekend
In American Commercial Lines, LL v. The Lubrizol Corporation (SD Ind., Barker), a 7-page opinion, Judge Posner writes:
The plaintiff and appellant in this commercial suit, American Commercial Lines (ACL), manufactures and operates tow boats and barges that ply the nation’s inland waterways. The defendant, Lubrizol, manufactures industrial lubricants and additives, including a dieselfuel additive that it calls LZ8411A. A company named VCS Chemical Corp. distributed the additive, and Lubrizol and VCS jointly persuaded ACL to buy it from VCS. Before delivery began, however, Lubrizol terminated VCS as a distributor because of suspicion that it was engaging in unethical conduct—one of Lubrizol’s employees had failed to disclose to his employer that he was also a principal of VCS. But Lubrizol did not inform ACL that VCS was no longer its distributor.
No longer able to supply ACL with LZ8411A, VCS substituted an additive that ACL contends is inferior to LZ8411A. At least some of this other additive (which both Lubrizol and ACL call the “Counterfeit Additive”) was produced by Afton Chemical Corp. VCS didn’t inform ACL of the substitution. According to ACL’s complaint, Lubrizol learned of the substitution too but also didn’t inform ACL, which when it discovered the substitution brought the present suit—a diversity suit alleging a variety of violations of Indiana common law—against VCS, VCS’s principal owner (who is also its CEO), and Lubrizol. ACL settled with VCS and its owner, leaving Lubrizol as the only defendant. The district judge dismissed part of the remaining suit on Lubrizol’s motion to dismiss and the rest on its motion for summary judgment. * * *
A manufacturer has no duty at common law to protect the customers of its distributors from misconduct by a distributor. ACL could have asked Lubrizol, which it knew to be VCS’s supplier, for a contractual guaranty against VCS’s failing to perform its contract with ACL. It didn’t ask for a guaranty, apparently trusting VCS. ACL is not some helpless consumer, at the mercy of the companies it does business with; its estimated value in 2010 was $800 million. * * *
A competent party—a big boy like ACL—should be required to exhaust its contractual remedies before invoking tort law and tort‐like extensions of contract law. A welldrafted contract provides a cleaner basis for a legal remedy than does a nebulous body of jargony legal theories such as “special relationship,” “constructive fraud,” “duty of good faith and fair dealing,” “disinterested malevolence,” and “quasi‐contract.”
A word finally about that last term, quasi‐contract. ACL treats it as if it were synonymous with contract, whereas the term “quasi‐contract” actually denotes absence of a contract, coupled with a sense that there would have been a contract had it not been for some unexpected intervening event. * * * AFFIRMED.
Posted by Marcia Oddi on March 27, 2016 10:48 AM
Posted to Ind. (7th Cir.) Decisions