Free Brief - District Court of Colorado - Colorado

Case 1:03-cv-01291-MSK-CBS

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Case No. 03-cv-1291-MSK-CBS FRIEDA E. ENSSLE, BURKE E. ENSSLE, and HEIDI ENSSLE WILSON Plaintiffs, v. ILLINOIS TOOL WORKS INC., SAMES CORPORATION, BINKS RESEARCH & DEVELOPMENT CORPORATION, JOHN DOE/JANE DOE (any person receiving value for transfer of Binks R&D assets) Defendants.

DEFENDANT ILLINOIS TOOL WORKS INC.'S BRIEF ON PLAINTIFFS' UNJUST ENRICHMENT CLAIM

Defendant Illinois Tool Works Inc. ("ITW"), by its attorneys, submits this Brief on Plaintiffs' Unjust Enrichment Claim (Count 10) in response to the Court's request for briefing at the December 13, 2005 Final Pretrial Conference. Plaintiffs assert claims for both breach of an express contract and unjust enrichment seeking the same alleged damages because ITW did not clean up the historic contamination at the property. The critical issue posed by these inconsistent claims is not when Plaintiffs must elect which claim to pursue, but whether Plaintiffs have a right to elect at all. Under Colorado law, a party cannot elect to pursue a quasi-contract claim where an express contract covers the same subject matter. Plaintiffs' unjust enrichment claim is precluded because an enforceable lease already covers the subjects of the claim--the permissible uses of the property and the condition in which the property had to be returned to Plaintiffs.

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FACTS ITW leased the property from Plaintiffs from 1998 until 2003. ITW's tenancy began on September 30, 1998, eight years after the contamination at the former drum storage area was discovered, when it assumed the lease originally dated August 17, 1983, between Plaintiffs and Binks R&D. See Assignment and Assumption of Lease (attached hereto as Exhibit A) at 1. Each Plaintiff consented to the assignment. Id. at 3-4. ITW vacated the property shortly before the expiration of the lease on July 31, 2003. During its five-year tenancy, ITW paid Plaintiffs $477,732 in rent for the right to use the property consistent with the lease. The 1983 lease, including its original 25 paragraphs and three addendums, governed ITW's tenancy, including its responsibility, if any, for addressing the historic contamination. The lease gave ITW the right to use the property: for research and development and manufacturing purposes, and for any other lawful business purpose. The use of the premises shall at all times comply with all health and police regulations and all federal, state and municipal laws or ordinances now in force or which may hereafter be enacted. 1983 Lease (attached hereto as Exhibit B) at ¶ 3. The lease then set forth the condition in which the property had to be returned. It provided that: [o]n or before the last day of the term, or upon the sooner termination thereof, Tenant shall peaceably and quietly surrender the leased premises in good order and condition, reasonable wear and tear excepted. Id. at ¶ 9. The lease also required ITW to maintain the interior and exterior of the building and repair any damage it caused, as the tenant was required to do since the lease was amended in 1995. See id. at Third Addendum ¶ 4. Plaintiffs sued Binks R&D, Sames, and ITW on July 17, 2003 and subsequently cleaned up the historic contamination. Plaintiffs now seek to recover those cleanup costs and related

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damages. Plaintiffs claim that a lease existed with ITW and that it required ITW to clean up the contamination. See Final Pretrial Order at 4. ITW does not dispute that the lease it assumed is an enforceable contract. The only disputes between ITW and Plaintiffs for trial are (1) the meaning of the lease terms (i.e., was ITW somehow required to surrender the property in its 1959 or 1963 condition, as opposed to its condition at the inception of the 1983 lease or the 1998 assignment) and (2) whether ITW breached those contractual obligations. Even though an enforceable lease governed ITW's use of the property and the property's condition at surrender, Plaintiffs also assert a claim for unjust enrichment. Plaintiffs claim that the defendants collectively "operated their business on the property for over 45 years, contaminated the property, failed to remediate the contamination, and have been unjustly enriched by not spending the money necessary for the costs of the clean up." Final Pretrial Order at 6. Plaintiffs intend to pursue both claims at trial. ARGUMENT Unjust enrichment "is a theory of contract recovery that invokes an implied contract when the parties either have no express contract or have abrogated it." Dudding v. Norton Frickey & Assoc., 11 P.3d 441, 444 (Colo. 2000). "[A] party cannot recover for unjust enrichment by asserting a quasi-contract when an express contract covers the same subject matter because the express contract precludes any implied-in-law contract." Bedard v. Martin, 100 P.3d 584, 591-92 (Colo. Ct. App. 2004) (citing Interbank Invs., LLC v. Eagle River Water & Sanitation Dist., 77 P.3d 814, 816 (Colo. Ct. App. 2003)). If an express contract exists, it supercedes any alleged terms of an implied contract. Printz Servs. Corp. v. Main Electric, Ltd., 949 P.2d 77, 82 (Colo. Ct. App. 1997), aff'd in part, 980 P.2d 522 (Colo. 1999).

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The existence of an express contract on the same subject matter thus precludes a claim for unjust enrichment at any stage in the litigation. "Alternative pleading . . . does not limit the principle that an express contract precludes an implied contract on the same subject matter." Interbank Invs., LLC, 77 P.3d at 817. See also Bedard, 100 P.3d at 591-92 (affirming dismissal of unjust enrichment claim on summary judgment because express contract covered same subject); Stanford v. Ronald H. Mayer Real Estate, Inc., 849 P.2d 921 (Colo. Ct. App. 1993) (same); Printz Servs. Corp., 949 P.2d at 82 (reversing trial court's award of damages on unjust enrichment claim because there was no dispute that an express contract existed). A party therefore cannot elect to ignore an express contract (i.e., where the express contract's terms are unhelpful to the party) in order to pursue an unjust enrichment claim. Plaintiffs do not generally dispute this rule. On December 13, 2005, Plaintiffs' counsel indicated that: "I believe that the law of the State of Colorado is if the contract is enforceable, then there is no unjust enrichment claim. . . . [W]e want to preserve this claim in the unlikely event ­ but it's possible ­ that the contract is found not to be enforceable." Hearing Transcript (docket no. 354) at 39: 11-16 (emphasis added). Indeed, a party can recover under unjust enrichment if an express contract is unenforceable; for example, if a contract failed or was rescinded. See Interbank Inv., LLC, 77 P.3d at 816. But Plaintiffs' concern here is entirely unfounded--the lease's enforceability is not disputed.1 Importantly, ITW does not dispute that the lease it assumed, including all three addendums, is enforceable against it through the 1998 assignment. The only disputes for trial are the meaning of the lease terms and whether ITW breached those obligations. A dispute over

If the enforceability of the lease was in dispute, ITW concedes that Plaintiffs could proceed to trial on both claims and, in the event the lease was found to be unenforceable, Plaintiffs could attempt to recover under unjust enrichment instead. But that is not at issue here. 4

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whether a contract was breached, as opposed to its enforceability, does not entitle a party to proceed with an unjust enrichment claim. An unjust enrichment claim cannot expand a party's obligations on a subject matter already covered by an express contract. See, e.g., Printz Servs. Corp., 949 P.2d at 82 (express contract supercedes any implied terms). The lease originally dated August 17, 1983, assumed by ITW in 1998, governed ITW's tenancy, including any possible responsibility to clean up the historic contamination. The express contract specified how the property could be used and in what condition the property had to be returned--the exact subjects of Plaintiffs' claim for unjust enrichment. See Final Pretrial Order at 6. If ITW breached the lease, Plaintiffs can already recover damages on their breach of contract claim. But if ITW did not breach the lease, ITW could not have been unjustly enriched. ITW paid Plaintiffs $477,732 in rent for the right to use the property consistent with the lease agreement. Plaintiffs cannot usurp the provisions of a bargained-for express contract by alleging more stringent obligations under a theory of unjust enrichment. CONCLUSION The 1983 lease is an enforceable express contract that specified the permissible uses of the property and in what condition the property had to be returned to Plaintiffs. Colorado law thus prohibits Plaintiffs from pursuing their unjust enrichment claim that is premised on these same subjects. Pursuant to Federal Rule of Civil Procedure 16(c)(1), ITW therefore requests that the Court strike Plaintiffs' unjust enrichment claim against ITW from the Final Pretrial Order.

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Dated: December 23, 2005

By: s/ Matthew C. Sostrin Robin R. Lunn Susan E. Brice Paul M. Drucker Matthew C. Sostrin MAYER, BROWN, ROWE & MAW LLP 71 South Wacker Drive Chicago, Illinois 60606 Tel: (312) 701-8138 Fax: (312) 706-9119 Attorneys for Illinois Tool Works Inc.

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CERTIFICATE OF SERVICE I hereby certify that on December 23, 2005, I electronically filed the foregoing with the Clerk of Court using the CM/ECF system which will send notification of such filing to at least the following e-mail addresses: [email protected] Asimakis Iatridis Counsel for Plaintiffs [email protected] Peter Rogers Counsel for Plaintiffs [email protected] Angela DeVine Counsel for Sames Corporation and Binks Research and Development Corporation

s/ Matthew C. Sostrin Robin R. Lunn Susan E. Brice Paul M. Drucker Matthew C. Sostrin MAYER, BROWN, ROWE & MAW LLP 190 South LaSalle Street Chicago, Illinois 60603-3441 Tel: (312) 701-8138 Fax: (312) 706-9119 [email protected] Attorneys for Illinois Tool Works Inc.