Allstate Indem. Co. v. ADT LLC

110 F.Supp.3d 856

Allstate Indemnity Company, as subrogee of Giovanni and Kathy Lasso, Plaintiff,

v.ADT LLC, d/b/a ADT Security Services, Defendant.

No. 14 C 9494

United States District Court, N.D. Illinois, Eastern Division.

Signed June 17, 2015

Brad Mitchell Gordon, Grotefeld Hoffmann Schleiter Gordon & Ochoa LLP, Chicago, IL, for Plaintiff.

David Francis Jasinski, Marcelline DeFalco, Mulherin, Rehfeldt & Varchetto, P.C., Wheaton, IL, for Defendant.

MEMORANDUM OPINION AND ORDER

JORGE L. ALONSO, United States District Judge

Before the Court is defendant ADT LLC's motion to dismiss the complaint with prejudice, which is granted for the reasons explained below.

BACKGROUND

This diversity suit arises out of a fire that occurred on October 25, 2013 at the Gurnee, Illinois home of Giovanni and Kathy Lasso. The fire caused severe property damage. (Compl. ¶ 6.) The Lassos had a homeowners insurance policy from plaintiff, Allstate Indemnity Company ("Allstate"), which covered property damage resulting from fire. (Id. ¶ 4.) Pursuant to the policy, Allstate paid the Lassos $1,375,323.70 for repairs, replacement, and other associated expenses, (id. ¶ 8), and "became subrogated to the rights and claims against any person or entity that may be liable for causing the fire loss," (id. ¶ 9).

The complaint alleges as follows. Defendant, ADT LLC ("ADT"),¹ had contracted with the Lassos in 2007 to install "a security system, monitoring for security alarm, police emergency, and fire alarm" in exchange for a monthly fee. (Id. ¶¶ 10–11.) The system was designed to monitor and transmit alarms that would notify ADT, a central monitoring station, and/or the fire department in the event of a fire or the detection of smoke. (Id. ¶ 19.)

In March 2013, the Lassos entered into a oral contract with ADT to repair or replace their first-floor smoke detector, which had been damaged by Mr. Lasso's misuse and thus was not covered by the contractual limited warranty, and restore the fire detection system to "full operational status." (Id. ¶¶ 12–13, 55.) ADT replaced the first-floor smoke detector/alarm, but did not finish all the necessary repairs. (Id. ¶ 14.) Before leaving, ADT advised the Lassos that the upstairs detector/alarm still had to be replaced "due to the fact that both detectors/alarms worked together to operate," but it failed to advise the Lassos "of the repercussions of the incomplete repair, only that ADT would return to complete the necessary repairs." (Id. ¶¶ 15–16.) When ADT left their home, the Lassos believed that they had "a completely operational, functioning and monitored fire alarm and smoke detection system," because ADT did not advise them to the contrary. (Id. ¶ 17.) ADT never returned to complete the stated necessary work to ensure that the detectors worked together, "further reinforcing the Lassos' belief" that the system was "fully functioning," (id. ¶ 18), and it never alerted the Lassos that the fire detection system "was non-operational and not monitored despite its being fully aware it never completed the necessary repairs of March 2013," (id. ¶ 20).

No one was at home when the fire started on October 25, 2013. (Id. ¶¶ 21–22.) When Mrs. Lasso returned and saw that the kitchen area was on fire, she was relying on the fire detection and notification system but was unaware that the system was inoperable and had failed to notify ADT, the monitoring entity, or the fire department. (Id. ¶¶ 24–25.) As a result, the Lassos' home sustained "severe property damage, beyond what would have been sustained had the fire detection system been fully operational and performing as promised by ADT." (Id. ¶ 26.)

Allstate seeks to recover from ADT the sum that Allstate paid to the Lassos under the homeowners insurance policy.² The complaint contains six counts: negligence (Count I); gross negligence (Count II); breach of implied warranty (Count III); consumer fraud (Count IV); breach of contract (Count V); and strict liability (Count VI).

ADT moves to dismiss the complaint with prejudice pursuant to Federal Rule of Civil Procedure 12(b)(6), or, in the alternative, to limit plaintiff's recoverable damages to $500.

DISCUSSION

A. Legal Standards and Applicable Law

"A motion under Rule 12(b)(6) tests whether the complaint states a claim on which relief may be granted." Richards v. Mitcheff, 696 F.3d 635, 637 (7th Cir.2012). Under Rule 8(a)(2), a complaint must include "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2). The short and plain statement under Rule 8(a)(2) must "give the defendant fair notice of what the claim is and the grounds upon which it rests." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (ellipsis omitted). Under federal notice-pleading standards, a plaintiff's "[f]actual allegations must be enough to raise a right to relief above the speculative level." Id. Stated differently, "a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ " Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Twombly, 550 U.S. at 570, 127 S.Ct. 1955 ). "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." Id. (citing Twombly, 550 U.S. at 556, 127 S.Ct. 1955 ). "In reviewing the sufficiency of a complaint under the plausibility standard, [courts must] accept the well-pleaded facts in the complaint as true, but [they] ‘need not accept as true legal conclusions, or threadbare recitals of the elements of a cause of action, supported by mere conclusory statements.’ " Alam v. Miller Brewing Co., 709 F.3d 662, 665–66 (7th Cir.2013) (quoting Brooks v. Ross, 578 F.3d 574, 581 (7th Cir.2009) ).

District courts exercising diversity jurisdiction must apply the choice-of-law rules of the forum state to determine what substantive law governs the case. See Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). The parties do not address this threshold issue, but they both rely on Illinois law. Therefore, the Court will apply Illinois law. See Harter v. Iowa Grain Co., 220 F.3d 544, 559 n. 13 (7th Cir.2000) (the court will not perform an independent choice-of-law analysis where the parties agree on the governing law and the choice bears a "reasonable relation" to their dispute).

B. Contractual Waiver of Subrogation

First, the Court must address the 2007 "Residential Services Contract" (the "Contract") between ADT and the Lassos, which is attached as Exhibit A to ADT's memorandum in support of its motion to dismiss.³ Documents that a defendant attaches 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 its claim. 188 LLC v. Trinity Indus., Inc., 300 F.3d 730, 735 (7th Cir.2002). Plaintiff does not object to the Court's considering the Contract. Because the Contract is referred to in the complaint and central to plaintiff's claims, the court will consider it without converting ADT's motion into a motion for summary judgment.See Burke v. 401 N. Wabash Venture, LLC, 714 F.3d 501, 505 (7th Cir.2013).

Pursuant to the Contract, ADT and the Lassos agreed that ADT would install and monitor a burglary and fire alarm system at the Lassos' home. ADT asserts that the Contract contains a waiver of subrogation rights that bars Allstate's claims or, alternatively, contains a limitation of liability that limits Allstate's damages to $500. (R. 9, Def.'s Mem. Supp. Mot. 5–9.) The threshold question is whether the Contract applies to the 2013 repair efforts. In support of its contention that the Contract applies, ADT cites the following provision:

REPAIRS AND PARTS REPLACEMENT. At your request we will repair or replace the equipment we provided at our then-prevailing prices after the Limited Warranty and, if purchased, the Extended Limited Warranty expire. At your request we will also repair or replace anything excluded from the Limited Warranty and Extended Limited Warranty at our then-prevailing prices.

(R. 19 at 5, ¶ 17.)

In response, plaintiff asserts that this provision of the Contract does not apply to the repair work performed in 2013 because its claims arise from a "separate agreement" that the Lassos and ADT entered into for that work. (R. 16, Pl.'s Resp. 4, 6–8.) In plaintiff's view, paragraph 17 is "indefinite" and unenforceable in that it "contemplates a future agreement and leaves crucial terms, such as price, product and timeframe, to future negotiation between ADT and its customers." (Id. 8.) The Court is unpersuaded. First, as ADT notes, plaintiff does not allege that the Contract was not in effect at the time of the fire. Indeed, the Contract states that its initial term was for three years and that thereafter, it would automatically renew in thirty-day increments unless terminated by written notice. Furthermore, paragraph 17 does not contemplate a "future agreement" and is not indefinite. It contemplates the customer's request for repair or replacement of equipment that had been provided pursuant to the Contract, at any time the Contract is in effect, and specifies that the cost to repair any equipment that was excluded from the Limited Warranty and Extended Limited Warranty would be what ADT was charging at the time. The Contract by its terms applied to the repair work at issue. Plaintiff's contention that the work was performed outside the scope of the Contract is rejected.

In support of its argument that Allstate's claims are barred, ADT argues that Allstate is bound by the Lassos' agreement in the Contract to waive all subrogation claims:

WE ARE NOT AN INSURER. WE ARE NOT AN INSURER AND YOU WILL OBTAIN FROM AN INSURER ANY INSURANCE YOU DESIRE. THE AMOUNT YOU PAY US IS BASED UPON THE SERVICES WE PERFORM AND THE LIMITED

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