CALVIN HORNE v. ELECTRIC EEL MANUFACTURING COMPANY, INC., еt al.
No. 19-2082
United States Court of Appeals For the Seventh Circuit
ARGUED JANUARY 23, 2020 — DECIDED FEBRUARY 10, 2021
Before ROVNER, HAMILTON, and SCUDDER, Circuit Judges. ROVNER, Circuit Judge.
Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 1:17-cv-08080 — Ronald A. Guzmán, Judge.
I.
In reviewing this grant of a motion for summary judgment, we examine the record in the light most favorable to the nonmovant, Horne, and construe all reasonable inferences from the evidence in his favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986); Yahnke v. Kane County, Ill., 823 F.3d 1066, 1070 (7th Cir. 2016). The review of the record was complicated in the district court when the parties failed to fully comply with Local Rule 56.1.1 In his response to the defendants’ Local Rule 56.1(a)(3) statement of material facts, Horne failed to support his denials of certain of the defendants’ facts with specific references to the record. The district court therefore deemed Horne “to have admitted all properly supported material facts
On July 21, 2017, Horne noticed that the main sewer drain for his house was clogged. He decided to rent an electric drain rodder from Home Depot so that he could attempt to clear the drain. Horne went to the tool rental department at the Home Depot in Homewood, Illinois, and told an employee that he needed an electric rodder. The employee selected a machine and presented it to Horne, who then signed a three-page rental contract. The entire rental process lasted approximately ten minutes.
The contract identified the rented device as “Drain Cleaner 100’ x 3/4“,” with Part Number 0448505995. The equipment corresponding to that part number was an Electric Eel
Prior to the event at issue here, Horne had rented electric drain rodders from Home Depot a handful of times over a period of many years to clear the same drain at his home. The rodder he rented on July 21, 2017, appeared different from those he rented in the past. This machine was “raggedy” and “kind of old.” It had peeling paint, was rusty, and had a “dingy yellow” plastic cover over the machine‘s cage and cable. Horne did not complain about the condition of the machine at the time of the rental because the Home Depot employee had selected it and it seemed fine to use.
Horne took the machine home and read the operating manual that Home Depot provided. Two friends, Perry Bennett and Reginald Tolliver, were with Horne as he set up the rodder and began to use it. After positioning the rodder near an
The kinked part of the cable had not yet reached the drain when Horne stopped the device. Bennett advised him to not put the bent cable down the pipe, fearing it could crack the pipe. In order to remove the cable from the drain, Horne placed the toggle switch into the reverse position and then pressed down on the foot pedal. But the powered reverse did not work, and nothing happened when Horne pressed down on the pedal. Horne then decided to remove the cable by hand so that he could return the malfunctioning machine to Home Depot and exchange it for another. As Tolliver watched, Horne
Horne sued Home Depot and Electric Eel in state court, bringing claims of negligence and breach of warranty against both defendants. He also brought a claim against Electric Eel for strict liability for producing a defective and dangerous product. Horne later added a claim against Home Depot for spoliation when the company lost the machine at issue months after Horne‘s lawyer asked the company to preserve it as evidence in Horne‘s civil action. The defendants removed the case to federal court and eventually moved for summary judgment.
In granting judgment in favor of Home Depot on the negligence and warranty claims, the court relied entirely on a broadly drafted exculpatory clause in the rental contract. The court concluded that the spoliation claim was “derivative” of Horne‘s other claims and failed because Horne could not demonstrate that the loss of the evidence was the proximate cause of his inability to prove his substantive claims. For the strict liability claim brought against Electric Eel, the court
After the court granted judgment in favor of the defendants, Horne filed a Rule 59 motion contending that the court misapplied the parties’ burden of proof in summary judgment proceedings, misconstrued Illinois law, and improperly ignored material questions of fact that precluded summary judgment. The court denied the motion, concluding that Horne could have raised the issues earlier and also that he was simply recasting earlier arguments. Horne appeals.
II.
On appeal, Horne asserts that the district court erred in granting judgment in favor of Home Depot on the basis of the exculpatory provision. That provision is unenforceable, he contends, because Home Depot materially breached the contract by providing him with a drain cleaner that was not in good working condition, contrary to an express promise in the agreement. He argues that the district court improperly placed the burden on him to disprove Home Depot‘s affirmative defense. In any case, Horne points out, the evidence regarding the condition of the machine was in conflict, and that alone should have precluded summary judgment. Horne also argues that the release and exculpatory provisions of the rental
Home Depot responds that Horne waived his primary argument on appeal, namely, that the exculpatory clause was unenforceable because of Home Depot‘s material breach. If the argument was not waived, Home Depot argues in the alternative that the undisputed evidence demonstrates that the machine was in good working condition. Home Depot also asserts that the exculpatory clause is enforceable and not contrary to public policy under Illinois law, and that the spoliation claim was properly dismissed. Finally, Home Depot contends that the district court did not abuse its discretion in quashing the subpoena issued to RGIS because it was untimely.
A.
We review the district court‘s grant of summary judgment de novo, and as we noted above, we examine the record in the light most favorable to Horne and construe all reasonable inferences from the evidence in his favor. Anderson, 477 U.S. at 255; McCottrell v. White, 933 F.3d 651, 661–62 (7th Cir. 2019). Summary judgment is appropriate when there are no genuine disputes of material fact and the movant is entitled to judgment as a matter of law.
Horne devotes much of his briefing to detailing alleged errors in analysis by the district court. “But since the review of
1.
Because Home Depot asserts that Horne waived this argument regarding the company‘s material breach of the rental contract, we must first discuss the proceedings in the district court in some detail. Home Depot sought summary judgment on all of Horne‘s claims on the basis of exculpatory clauses in the rental contract. The primary exculpatory clause provides in relevant part:
RELEASE, INDEMNIFICATION AND WAIVER OF DAMAGES. TO THE FULLEST EXTENT PERMITTED BY LAW, CUSTOMER INDEMNIFIES, RELEASES, WAIVES AND HOLDS THE HOME DEPOT HARMLESS FROM AND AGAINST ALL CLAIMS, LOSSES, EXPENSES (INCLUDING ATTORNEY‘S FEES AND EXPENSES), LIABILITIES AND
DAMAGES (INCLUDING PERSONAL INJURY, DEATH, PROPERTY DAMAGE, LOST PROFITS, AND SPECIAL, INCIDENTAL AND CONSEQUENTIAL DAMAGES) IN ANY WAY CONNECTED WITH THE EQUIPMENT, ITS OPERATION OR USE, OR ANY DEFECT OR FAILURE THEREOF OR A BREACH OF THE HOME DEPOT‘S OBLIGATIONS HEREIN.
R. 151-3, ¶ 9. Home Depot also relied on an assumption-of-risk clause which provides, in relevant part:
CUSTOMER LIABILITY. DURING THE RENTAL PERIOD, CUSTOMER ASSUMES ALL RISKS ASSOCIATED WITH AND FULL RESPONSIBILITY FOR THE POSSESSION, CUSTODY AND OPERATION OF THE EQUIPMENT, INCLUDING, BUT NOT LIMITED TO, RENTAL CHARGES, CUSTOMER TRANSPORT, LOADING AND UNLOADING, PROPERTY DAMAGES AND DESTRUCTION, LOSSES, PERSONAL INJURY, AND DEATH.
R. 151-3, ¶ 7. We will refer to these two provisions together as the “Exculpatory Clause.” Horne contended below that, under Illinois law, a party who is in material breach may not take advantage of terms of the contract that benefit that party, and so the Exculpatory Clause could not be enforced against him because Home Depot materially breached the contract.
In setting forth the nature of the material breach, Horne cited language from the “General Responsibilities” paragraph of the rental contract:
The Home Depot will provide Customer the tool(s) identified on page 1 of this Agreement (the “Equipment“) “as is” and in good working condition for the time (“Rental Period“) and rental subtotal price identified on page 1 of this Agreement (“Rental Price“).
R. 151-3, ¶ 1 (hereafter “Paragraph 1“). Horne asserted that Home Depot promised the new machine associated with the part number listed in the contract, but instead provided a machine that appeared “old, raggedy and rusty[.]” R. 170, at 2. He explained:
Home Depot promised to provide Calvin [Horne] with the Model R drain cleaner in good working condition per the Tool Rental Agreement. Instead, he received a drain cleaner with significant functional issues, such as: a pre-existing kink in the cable hidden to Calvin until after he started using it ...; a reverse toggle switch that was faulty ...; and, a foot pedal that malfunctioned when Calvin pressed down on it. Home Depot failed to deliver on its promise to Calvin that the drain cleaner would be in good working condition.
In furtherance of his observation that the machine appeared old еven though Home Depot claimed that it had been recently assembled, Horne inferred that Home Depot provided him with the “wrong machine.” After asserting repeatedly that the machine he was given had a defective foot pedal, a defective forward/reverse toggle switch, and a pre-existing kink in the cable, Horne summed up the breach in the district court proceedings:
Here, there is no doubt that Home Depot materially breached the contract by providing Calvin with the wrong drain cleaner which caused significant and permanent injuries due to the defective condition of the drain cleaner; as such, Home Depot must not be able to benefit from the terms of the contract, including enforcement of the alleged Exculpatory Clause.
R. 170, at 6. Horne provided variations on this theme that the Exculpatory Clause was unenforceable due to Home Depot‘s breach. For example, because the contract promised a machine
3.
In its reply, Home Depot asserted that, because Horne did not sue for breach of contract, his reliance on contract law was misplaced and had no bearing on the enforceability of the Exculpatory Clause.4 The company made much of Horne‘s inference that he was provided the “wrong machine.” Home
4.
The district court accepted Home Depot‘s characterization of Horne‘s claim of breach of contract as being that he was provided the “wrong machine,” and rejected that claim because Horne had already admitted that he received the machine described in the contract. Among the facts that the court deemed admitted were: (1) that Horne rented an Electric Eel Model R drain cleaner with part number 0448505995, (R. 171, ¶ 18); (2) that after signing the contract for that device, he returned to his home with that particular drain cleaner (R. 171,
But the court erred in accepting Home Depot‘s characterization of Horne‘s argument regarding the nature of the breach. To be sure, Horne‘s summary judgment briefing in the district court was not a model of clarity. But the focus on the “wrong machine” inference led to a misapprehension of Horne‘s actual argument, as well as an unfounded claim by Home Depot that Horne “waived” his argument about breach of the “good working condition” clause:
A true reading of plaintiff‘s response to Home Depot‘s motion for summary judgment reveals that it is completely devoid of any argument that Home Depot breached the Contract by failing to provide him with the Machine “in good working condition.” Instead, he argued before the district court that Home Depot breached the Contract by “providing Calvin with the wrong drain cleaner.”
Brief of Defendants-Appellees, at 18. That was not a “true reading” of Horne‘s response to Home Depot‘s motion for summary judgment.5
Although Home Depot now supplies some citations to the record in support of its claim on appeal that the machine was in good wоrking condition,7 that evidence is disputed. For the purposes of summary judgment, therefore, we must assume that the machine had the three flaws asserted by Horne, regardless of how recently the device had been manufactured and delivered to the store. Because Horne did not waive his claim that Home Depot materially breached the “good working condition” clause of the contract by providing a defective machine, we turn to the merits of that claim.
B.
We begin by examining Illinois law to define the parameters of the dispute because, in addition to disagreeing about the facts, the parties disagree about the law that governs exculpatory clauses. Home Depot begins with the proposition
Horne is also correct that, under Illinois law, a party in material breach may not enforce a provision of a contract that is favorable to him, suсh as an exculpatory clause. Dubey v. Public Storage, Inc., 918 N.E.2d 265, 284 (Ill. App. 2009) (“a party who materially breaches a contract cannot take advantage of the terms of the contract which benefit him“); Goldstein v. Lustig, 507 N.E.2d 164, 168 (Ill. App. 1987) (same); Builder‘s Concrete Co. of Morton v. Fred Faubel & Sons, Inc., 373 N.E.2d 863, 870 (Ill. App. 1978) (same). Cf. LB Steel, LLC v. Carlo Steel Corp., 122 N.E.3d 274, 290 (Ill. App. 2018) (party who commits first material breach may not recover damages for other party‘s subsequent breach, citing Dubey). And a party seeking to enforce a favorable provision has the burden of proving substantial compliance with the contract. James v.
Public policy in Illinois “strongly favors freedom to contract,” and therefore exculpatory clauses are generally enforced “‘unless (1) it would be against a settled public policy of the State to do so, or (2) there is something in the social relationship of the parties militating against upholding the agreement.‘” Harris v. Walker, 519 N.E.2d 917, 919 (Ill. 1988) (quoting Jackson v. First Nat‘l Bank, 114 N.E.2d 721, 725 (Ill. 1953)). See also Reuben H. Donnelley Corp. v. Krasny Supply Co., 592 N.E.2d 8, 11 (Ill. App. 1991) (“private parties to a contract may allocate the risk of negligence as they see fit and exculpatory clauses are not violative of public policy as a matter of law“). At the same time, exculpatory clauses are not favored in Illinois, and are to be strictly construed against the party they benefit, especially when that party was also the drafter, as is the case here. Scott & Fetzer Co. v. Montgomery Ward & Co., 493 N.E.2d 1022, 1029 (Ill. 1986). “Such clauses
1.
In moving for summary judgment, Home Depot contended that the Exculpatory Clause “clearly and unambiguously releases Plaintiff‘s claims against Home Depot.” The company argued that the Exculpatory Clause was valid and enforceable because it did not violate public policy; there was no special relationship between the parties and no substantial disparity in the bargaining positions; and the type of injury the plaintiff suffered was reasonably foreseeable and contemplated by the parties. We will address these contentions in a moment, but we first note that Home Depot‘s motion and its argument failed to address or acknowledge other significant legal hurdles that a defendant must overcome in seeking the enforcement of an exculpatory clause.
For example, as we have just noted, a party in material breach may not take advantage of provisions in the contract that are favorable to it. Dubey, 918 N.E.2d at 284. In moving for
2.
That leads to the second deficiency in Home Depot‘s argument for summary judgment, namely, that the rental agreement contained ambiguous and even contradictory provisions on the promised condition of the device. The contract first confusingly promised to provide the rented equipment “‘as is’ and in good working condition.” R. 151-3, ¶ 1. The phrase “as is” usually signifies that “the buyer takes the entire risk as to the quality of the goods involved and he must trust to his own inspection. Implied and express warranties are excluded in sales of goods ‘as is.‘” Black‘s Law Dictionary, Fifth Edition (1979). There is considerable ambiguity in promising to provide goods both “as is” and “in good working condition.” In a later paragraph of the rental agreement, the company deepened the ambiguity as it attempted to disclaim all warranties, including, apparently, the express promise it made in the first paragraph:
Customer acknowledge(s) acceptance of the Equipment “as is” and on a “where is” basis, with “all faults” and without any recourse whatsoever against The Home Depot.8
R. 151-3, ¶ 8. The provision of goods with “all faults” means that the buyer аccepts, “in the absence of fraud on the part of the vendor, all such faults and defects as are not inconsistent with the identity of the goods as the goods described.” Black‘s Law Dictionary, Fifth Edition (1979). In resolving the ambiguity of these provisions against the drafter, and in construing this language in the context of the entire agreement, we conclude that the initial express promise to provide the drain rodder in “good working condition” takes precedence over the limiting phrases “as is” and “with all faults.” Scott & Fetzer, 493 N.E.2d at 1029-30. Home Depot thus may not disclaim liability for injuries that occur as a result of a breach of that express promise.
3.
This reading also resolves other objections that Horne raised to Home Depot‘s summary judgment motion. Citing to Shorr Paper Products, Inc. v. Aurora Elevator, Inc., 555 N.E.2d 735 (Ill. App. 1990), and Jewelers Mutual Ins. Co. v. Firstar Bank Illinois, 820 N.E.2d 411 (Ill. 2004), Horne contended that Home Depot could not assume a specific duty (to provide a device in good working condition) in one part of a contract, and then
The Illinois Supreme Court found the agreement ambiguous because it sought to relieve the defendant of all liability in one sentence and assumed a particular liability in another sentence. But the Court found no need to resolve the ambiguity:
Whatever the meaning of the exculpatory clause, it clearly cannot be applied to a situation in which defendant is alleged to have breached its duty to exercise ordinary care to prevent unauthorized persons from opening the box. This is a specific duty that defendant assumed in the contract, and it formed the heart of the parties’ agreement. A party cannot promise to
act in a certain manner in one portion of a contract and then exculpate itself from liability for breach of that very promise in another part of the contract.
Jewelers Mutual, 820 N.E.2d at 415. That is because “focusing solely on exculpatory provision of contract to the exclusion of its specifically articulated obligations ... would render [a] defendant‘s contractual duties illusory.” Jewelers Mutual, 820 N.E.2d at 415-16 (citing Shorr Paper, 555 N.E.2d at 738).9 Here, the heart of the agreement and the primary obligation of Home Depot under the contract was to provide the rented equipment in good working condition. If Home Depot‘s breach of that
The district court found that the principle articulated in Jewelers Mutual applied only to contract claims and was thus irrelevant to Horne‘s negligence claim, relying on Geimer v. Bank of America, N.A., 784 F.Supp.2d 926, 934 (N.D. Ill. 2011). But Geimer supplies no support for this proposition. The plaintiff there cited Jewelers Mutual in support of an argument that negligent failurе to take appropriate security precautions against identity theft was a recognized basis for bank liability, over and above any contractual liability which may exist. The plaintiff was attempting to sidestep Illinois’ Moorman rule, holding that plaintiffs may not recover for solely economic loss under tort theories of negligence and the like. The Geimer court rejected the applicability of Jewelers Mutual, noting that the lower courts in Jewelers Mutual had dismissed the plaintiff‘s negligence claim under the Moorman doctrine, and the Illinois Supreme Court had not disturbed that decision. Because Horne seeks damages for personal injury, the Moorman doctrine is inapplicable. And as we explained above, it is the defendants who seek to enforce the contract here and so Horne may turn to contract law to demonstrate why the Exculpatory Clause may not be enforced.
The district court similarly rejected the applicability of the Jewelers Mutual principle to Horne‘s breach of warranty claim (which sounds in contract) because the rental agreement did not leave Horne without any remedy in the event of Home Depot‘s breach. Specifically, the contract provided:
Should The Home Depot fail to meet any of its obligations under this Agreement, Customer‘s only remedy is repair or replacement of deficient Equipment or to receive, at The Home Depot‘s option, a rental charge adjustment.
R. 151-3, ¶ 3. In this case, that would mean that Horne‘s damages for loss of his finger would be limited to $63.80, the rental charge. In the district court, Home Depot did not respond to Horne‘s argument under Jewelers Mutual, did not cite or rely on paragraph 3 of the rental agreement, and did not argue that Horne‘s damages were limited to refund of the rental amount. In light of that waiver, and given that Home Depot bore the burden of demonstrating its entitlement to summary judgment, that should have been the end of the matter.10 Indeed, Home Depot makes no attempt on appeal to
Instead, Home Depot now cites paragraph 3 primarily as a means for resolving contradictory terms in the contract. Home Depot contends that paragraph 3 is a more specific provision regarding remedies that limits the reach of the more general Exculpatory Clause, and does not relieve Home Depot of all liability. Home Depot argues that, if the machine was not in good working condition, then Horne was entitled to its repair or replacement (or, presumably, as the agreement specifies, the return or adjustment of his $63.80 rental fee). This new argument attempting to reconcile the conflicting provisions of the rental agreement comes too late, and does not address Illinois law construing exculpatory clauses strictly against the drafter and against the party seeking to enforce them, which in both instances is Home Depot. As a secondary matter, Home Depot asserts without citation to any case law that Horne‘s reliance on Jewelers Mutual and Shorr Paper is misplaced because paragraph 3 of the rental contract supplied him with a remedy and did not immunize Home Depot from all liability. Again, Home Depot did not present this argument to the district court, and it fails to account for Illinois law construing ambiguities strictly against the drafter. Finally, Home Depot fails to address why a provision purportedly limiting damages for breach of contract would apply to a claim for negligence. At
4.
Our reading harmonizing the conflicting provisions of the rental agreement also resolves another variation of Horne‘s opposition to Home Depot‘s motion for summary judgment, namely, that the injury he sustained was not within those contemplated by the Exculpatory Clause. See R. 170, at 11-12 (arguing that Horne did not assume the risk of using a defective drain cleaner, in light of the contract‘s promise to provide a machine in good working condition). Courts closely scrutinize liability release clauses because they are disfavored under Illinois law, and they are strictly construed against the party seeking to rely on them. The parties need not contemplate the precise occurrence that later results in injury, but the defendant must put the plaintiff on notice of the range of dangers for which the plaintiff assumes the risk of injury. Hawkins v. Capital Fitness, Inc., 29 N.E.3d 442, 447 (Ill. App. 2015). Under the contract, Horne assumed the risks of operating a machine in good working condition. But because of the “good working condition” clause, he did not assume the risks of operating a machine with flaws in its basic functioning. Because Horne has evidence that three key features of the machine were defective and because a jury could infer that those defects caused his injuries, he is entitled to take his case against Home Depot to trial. And because his substantive
5.
This is not to say that exculpatory clauses in general or the specific one at issue here are toothless. Horne must prove at trial that the machine was not in good working condition and that the alleged flaws in the machine were the cause of his injuries. Reading the Exculpatory Clause in the context of the whole agreement, Home Depot is not liable for injuries caused by a machine in good working condition. Most power tools come with inherent risks. If the device was not flawed and a customer nevertheless lost a finger, or suffered some other injury to her person or property, her remedies would be limited to repair or replacement of the machine, or adjustment of the rental fee.
C.
We promised earlier that we would also address whether the Exculpatory Clause here violates Illinois public policy. Because we have read the Exculpatory Clause narrowly as required by Illinois law, we conclude that it does not violate public policy. That is, because the Clause does not exculpate Home Depot for breach of the core promise in the contract, it is enforceable. As we noted above, exculpatory clauses are generally enforced “unless (1) it would be against a settled public policy of the State to do so, or (2) there is something in the social relationship of the parties militating against upholding the agreement.” Harris, 519 N.E.2d at 919; Jackson, 114 N.E.2d at 725. Moreover, the clause must spell out the intention of the parties with great particularity and will not be
We have already addressed Horne‘s last point by holding that the rental agreement may not exculpate Home Depot for injuries that result from breach of its core obligation to provide a machine in good working condition. We now conclude that, with the limits we have placed on this Clause, enforcement would not violate public policy in Illinois. Illinois allows private parties to a contract to allocate the risk of negligence, and exculpatory clauses are not, in and of themselves, violative of public policy as a matter of law. Reuben H. Donnelley, 592 N.E.2d at 11. “In the absence of legislation to the contrary, courts will not interfere with contracts containing exculpatory clauses, unless there is a defect in the contract negotiation process such that a disparity in bargaining power denied a party a meaningful choice.” Id. See also Progressive Universal Ins. Co. of Ill. v. Liberty Mut. Fire Ins. Co., 828 N.E.2d 1175, 1180 (Ill. 2005) (an agreement will not be invalidated on public policy grounds unless it is clearly contrary to what the constitution, the statutes or the decisions of the courts have declared to be the public policy or unless it is manifestly injurious to the public welfare).
Horne‘s reliance on Section 2-314 of the commercial code as support for his public policy argument is unavailing. That section provides for an implied warranty of merchantability for goods “unless excluded or modified.” See
Finally, Horne‘s generic “David and Goliath” argument regarding the relative bargaining position of the parties is not the sort of disparity that violates public policy under Illinois law. Bargaining relationships that potentially violate public policy include those between an employer and employee; between the public and those charged with a duty of public service, such as involving a common carrier, an innkeeper, a public warehouseman or a public utility; and between parties where there is such a disparity of bargaining power that the agreement does not represent a free choice on the part of the
D.
Horne‘s case against Electric Eel is a different matter entirely, both factually and legally. Horne brought claims against Electric Eel for negligence, strict products liability, and breach of express and implied warranties. Although his complaint alleged many different acts of negligence and types of faults with the device, in opposing Electric Eel‘s motion for summary judgment, Horne pointed to the malfunctioning foot pedal and toggle switch as the defects that caused his injuries. Yet he conceded that, because the drain cleaner is no longer available for inspection, “it is impossible to determine the specific malfunction of this machine as it existed on July 21, 2017.” R. 166, at 4. He asserted that Electric Eel was negligent in failing to properly inspect and test the defective product but failed to supply record support for this assertion or even explain how the company‘s inspections and tests were
In Illinois, an injured plaintiff may allege two types of products liability claims: negligence and strict liability. Salerno v. Innovative Surveillance Tech., Inc., 932 N.E.2d 101, 108 (Ill. App. 2010). Horne has alleged both. “[T]o recover in a strict product liability action, a plaintiff must plead and prove that the injury complained of resulted from a condition of the product, that the condition was unreasonably dangerous, and that it existed at the time the product left the manufacturer‘s control.” Mikolajczyk v. Ford Motor Co., 901 N.E.2d 329, 335 (Ill. 2008). For his negligence claim, Horne must establish the existence of a duty of care owed by the defendant, a breach of that duty, an injury proximately caused by that breach, and damages resulting from the breach. Salerno, 932 N.E.2d at 111 (citing Calles v. Scripto-Tokai Corp., 864 N.E.2d 249, 263 (Ill. 2007)). For a breach of warranty claim based on a product defect, a plaintiff must prove, among other things, that the purported defect existed when the product left the manufacturer‘s control. Alvarez v. American Isuzu Motors, 749 N.E.2d 16, 22 (Ill. App. 2001).
Under Illinois law, in a products liability action, whether based on strict liability or negligence, the plaintiff must demonstrate a causal relationship between the injury and the manufacturer‘s product. ... The causal relationship can be proven by circumstantial evidence. ... But in order to get to the jury, the plaintiff must demonstrate more than a mere possibility that the product caused the injury. ... Rather, the plaintiff must come forward with evidence justifying an inference of probability.
Thornton v. M7 Aerospace LP, 796 F.3d 757, 770 (7th Cir. 2015).
As it did in analyzing the claims against Home Depot, the district court again rejected Horne‘s unsupported denial that he received the device listed in the contract, and so we will agаin assume that Horne received the device that Electric Eel manufactured and delivered to the Home Depot store on May 2, 2017. In its
Horne responded to this statement with, “Deny. There were other defects present.” Horne did not cite any record evidence to support either his bald denial or his assertion that there were defects present when Electric Eel shipped the device. In fact, Horne did not supply references to the record in support of any of his denials in his response to Electric Eel‘s statement of material facts, and so the district court deemed Horne to have admitted Electric Eel‘s version of the facts to the extent they were properly supported. Electric Eel‘s assertion that there were no defects in the device when it left the company‘s control is well-supported by Berry‘s testimony. Horne also failed to produce any evidence that Electric Eel‘s actions (or omissions) were the cause of his injury. And he failed to produce any evidence regarding the alleged design defect, offering only speculation that some unspecified safer design would have prevented his injuries. See Salerno, 932 N.E.2d at 111 (manufacturer‘s duty to design reasonably safe products does not require the product to reflect the safest design possible; the question is not whether the product could have been made safer, but whether it is dangerous because it fails to perform in the manner reasonably to be expected in light of its nature and intended function). In any case, speculation that the device could have incorporated more safety features is inadequate to demonstrate that Electric Eel‘s action or inaction was the cause of his injuries.
E.
Finally, Horne appeals the district cоurt‘s grant of a motion to quash a subpoena issued to RGIS, LLP. This court reviews a district court‘s grant or denial of a motion to quash a subpoena for abuse of discretion. Mitchell v. City of Chicago, 862 F.3d 583, 586 (7th Cir. 2017). Near the close of discovery, Horne learned that Home Depot had hired RGIS to inventory tools that the store rented out. Believing that RGIS had information that could assist him in locating the missing machine or in proving the spoliation claim, Horne attempted to subpoena RGIS, seeking inventory reports and other documents. RGIS notified Horne‘s counsel that the subpoena had not been sent to the company‘s registered agent. Horne‘s counsel then reissued the
F.
Before closing, we respond briefly to our dissenting colleague. Like the district court, the dissent concludes that the final sentence of paragraph 3 of the rental agreement limits Home Depot‘s liability for failing to provide a machine in good working order to repair or replacement of the machine, or an adjustment to the rental charge of $68.30. That clause, the dissent contends, keeps the agreement from being rendered illusory because Home Depot “is not completely off the hook for a breach.” Because of the availability of this limited remedy, the dissent finds Jewelers Mutual inapplicable.
But Home Depot waived any reliance on this contract provision by failing to cite it, rely on it, or develop any argument using it in any manner in the district court even though Horne asserted that the company was in breach, and invoked Jewelers Mutual. In fact, in the district court, Home Depot simply denied that it breached the contract, and the company failed entirely to respond to Horne‘s argument under Jewelers Mutual and Shorr Paper. Arguments not raised in the district court are waived. Savory v. Cannon, 947 F.3d 409, 430 (7th Cir. 2020); Milwaukee Ctr. for Independence, Inc. v. Milwaukee Health Care, LLC, 929 F.3d 489, 493-94 (7th Cir. 2019). Even on appeal, Home Depot continues to rely primarily on its claim that it may enforce the Exculpatory Provision because it did not breach the contract, although the company now acknowledges that it might need to show more than that it provided a drain cleaner in “as is” condition. Having ignored Horne‘s argument entirely in the district court, Home Depot makes only a cursory and incomplete effort to respond to Jewelers Mutual on appeal.
Rather than treating these failings as a waiver, the dissent treats this new argument as preserved because the district court constructed the argument for Home Depot. But under the principle of party presentation, courts generally do not craft new arguments for a party, especially in civil cases and especially when the party is represented by counsel:
In our adversarial system of adjudication, we follow the principle of party presentation. As this Court stated in Greenlaw v. United States, 554 U.S. 237 (2008), “in both civil and criminal cases, in the first instance and on appeal ..., we rely on the parties to frame the issues for decision and assign to courts the role of neutral arbiter of matters the parties present.” Id., at 243. In criminal cases, departures from the party presentation principle have usually occurred “to proteсt a pro se litigant‘s rights.” Id., at 244; see, e.g., Castro v. United States, 540 U.S. 375, 381-383 (2003)
Again, Home Depot never once in the district court relied on the limitation of remedies provision. This well represented corporation is not in need of our assistance in crafting arguments for summary judgment, yet the district court and now the dissent risk our role as neutral arbiters to become advocates for one side of this dispute. It is not our role to save a party from the consequences of drafting ambiguous or contradictory contract terms, or failing to advance arguments that may be advantageous. Moreover, a company may decide for strategic business reasons not to pursue legal arguments that may be available to them. It is not difficult to imagine that Home Depot made a strategic choice not to raise the refund-is-sufficient-remedy argument in the district court because of the message that this would deliver to potential customers. Imagine the marketing: “Whether you lose a finger, a hand, or
But in any case, this provision does little to save the primary promise in the contract from becoming illusory, and perhaps that is why Home Depot did not advocate this position itself until the district court fashioned the argument. Jewelers Mutual rejected the idea that a return of the rental fee could relieve the bank of liability for breaching a duty it expressly assumed:
In this contract, in exchange for plaintiff‘s rental fee, defendant assumed the obligation to exercise ordinary care to prevent unauthorized access to the safety deposit box. Having assumed this duty, defendant cannot exculpate itself from liability for a breach of that duty. Accepting defendant‘s argument would mean that, if defendant routinely breached these safety deposit box rental agreements by handing the keys to anyone who came in off the street and asked for them, it would have no liability to its customers except to give them their rental fee back. It is safe to assume that, if defendant explained the agreement this way in the contract, defendant would not have many safety deposit box customers.
Jewelers Mutual, 820 N.E.2d at 416-17.
A return of the rental fee arguably compensates the renter for a complete failure to provide a drain rodder, and leaves the renter in no worse position than if he had never rented the
Moreover, although the contract purports to absolve Home Depot from all liability for breach of the contract (which it may not do without rendering the express promise of the contract illusory), nothing in the contract limits remedies for the company‘s negligence in failing to supply a machine in good working condition. To be sure, Home Depot could have exercised ordinary care in inspecting the machine, and missed some latent defect. As we explained above, Home Depot would not be liable under those circumstances. The dissent seems to go farther and assume not only that this could happen (i.e. that the company could exercise ordinary care and miss a latent defect) but that it actually did happen here. But there are disputed issues of material fact as to whether Home Depot exercised ordinary care in inspecting the machine it rented to
Although Illinois law allows parties to bargain away their rights, it reads exculpatory clauses narrowly, and against the drafter. This contract was anything but clear, and its ambiguous and contradictory language does not protect Home Depot to the degree afforded by the district court or the dissent.
III.
Because Horne has raised genuine issues of material fact regarding whether Home Depot breached the contract by failing to provide a drain cleaner in good working condition, we vacate the judgment in favor of Home Depot and remand for proceedings consistent with this opinion. We affirm the judgment in favor of Electric Eel, and we also affirm the court‘s ruling on the RGIS subpoena. Because we vacate the judgment in part, we also vacate the district court‘s award of costs to the defendants as prevailing parties, and remand for reconsideration as to Electric Eel, which remains a prevailing party.
AFFIRMED IN PART AND VACATED AND REMANDED IN PART.
I
A
Starting with the breach-of-warranty claim, all agree that Horne‘s claim sounds in contract. Under Illinois law, “[a] party cannot promise to act in a certain manner in one portion of a contract and then exculpate itself from liability for breach of that very promise in another part of the contract.” Jewelers Mut. Ins. Co. v. Firstar Bank Ill., 820 N.E.2d 411, 415 (Ill. 2004). Doing so renders the contract illusory. See id. at 415-16 (citing Shorr Paper Prods., Inc. v. Aurora Elevator, Inc., 555 N.E.2d 735, 738 (Ill. App. Ct. 1990); and Contact Lenses Unlimited, Inc. v. Johnson, 531 N.E.2d 928, 931 (Ill. App. Ct. 1988)). The majority and I agree on this basic legal principle. So far, so good.
But the majority then relies on an Illinois Supreme Court decision, Jewelers Mutual, to conclude that applying the Exculpatory Clause to Horne‘s breach-of-warranty claim would make Home Depot‘s rental agreement illusory. It is at this point that our paths diverge. Based on my reading of the rental agreement, Home Depot provides customers a remedy — albeit a limited one — in the event the company breaches its obligation to provide equipment in “good working condition.” Because Home Depot does not entirely exculpate itself
As the majority explains, the plaintiffs in Jewelers Mutual “were insurers of individuals and businesses that rented safety deposit boxes at a bank.” Maj. Op. 25. The rental agreement included a clause providing that the “customer assumes all risks of depositing the contents of the box with defendant and that there ‘shall be no liability on the part of said bank, for loss of, or injury to, the contents of said box from any cause whatever.‘” Jewelers Mut., 820 N.E.2d at 414-15. The next sentence of the rental agreement, however, indicated that the bank assumed “one particular liability” — that of exercising “ordinary care to prevent the unauthorized opening of the box.” Id. at 415. The Illinois Supreme Court explained that the two clauses could not be reconciled because “[a] party cannot promise to act in a certain manner in one portion of a contract” by promising to exercise ordinary care but then completely “exculpate itself from ... that very promise” which “formed the heart of the parties’ agreement.” Id. And the situation was not one, the court explained, where, “in the event of a breach, the plaintiff‘s damages are limited to a return of the rental fee.” Id. In the end, then, Jewelers Mutual held that the “exculpatory provision is not applicable to an allegation that defendant breached its [contractual obligation],” so the plaintiff could seek damages for the breach. Id. at 417.
Jewelers Mutual would apply to Home Depot‘s rental agreement if the Exculpatory Clause totally and completely eliminated liability for failing to provide the rental equipment in “good working condition.” Indeed, the majority adopts this
Should The Home Depot fail to meet any of its obligations under this Agreement, Customer‘s only remedy is repair or replacement of deficient Equipment or to receive, at The Home Depot‘s option, a rental charge adjustment.
R. 151-3, at ¶ 3.
The majority treats Home Depot as having waived any reliance on the Limited Liability Clause. Though the majority is correct that Home Depot did not reference the Limited Liability Clause in its summary judgment papers, the district court discussed the clause in its order granting Home Depot‘s motion for summary judgment. More specifically, the district court recognized that “the exculpatory clause, when read together with the provision in Paragraph 3, limits Home Depot‘s contractual liability but does not entirely exculpate Home Depot.” Horne v. Home Depot U.S.A., Inc., 2019 WL 556709, at *5 (N.D. Ill. Feb. 12, 2019). In my view, the district court‘s reference to and reliance on the Limited Liability Clause means there is no waiver here. See United States v. City of Chicago, 869 F.2d 1033, 1036 (7th Cir. 1989) (“It is folly for [a party] to assert that an appeals court on review of a district court judgment cannot consider the merits of each and every theory that the district judge relied upon in deciding the case.“). Moreover, under Illinois law we must construe the one-page rental agreement “as a whole, viewing particular terms or provisions in the context of the entire agreement.” Matthews v. Chi. Transit Auth., 51 N.E.3d 753, 776 (Ill. 2016); see id. (explaining contracts should not be interpreted “by
Reading the rental agreement as a whole, the general Exculpatory Clause combined with the more specific Limited Liability Clause do not entirely exculpate Home Depot from liability. Rather, the rental agreement allows Horne to recover limited damages. Home Depot, in short, is not completely off the hook for a breach: because the Limited Liability Clause applies to Horne‘s contractual claim, the Exculpatory Clause does not render the rental agreement illusory. So Jewelers Mutual does not govern.
In charting a different course, the majority opinion lists cases to support the proposition that “a party in material breach may not enforce a provision of a contract that is favorable to him, such as an exculpatory clause.” Maj. Op. 20 (emphasis added). What these cases ultimately seem to be getting at, however, is the settled principle that a party cannot maintain a suit for damages for breach of contract when the complaining party is also in breach. See Robinhorne Constr. Corp. v. Snyder, 251 N.E.2d 641, 645-46 (Ill. App. Ct. 1969) (citing Glenridge Coal Co. v. Marion County Coal Co., 205 Ill. App. 264, 265 (Ill. App. Ct. 1917) (“An action for breach of a contract cannot be maintained where the complaining party is in default.“)); and Consumers Mut. Oil Co. v. W. Petroleum Co., 216 Ill. App. 382, 385 (Ill. App. Ct. 1920) (“[A] party suing for damages for a breach of a contract must not only aver but prove he is not himself in default as to the agreement for the breach of which the suit is brought ....“)). Indeed, of all five cases relied on by
Assuming Horne can prove that Home Depot failed to provide the drain-rodding machine in good working order, his remedy for the contractual breach should be limited to “repair or replacement” of the machine, or at Home Depot‘s option, a rental charge adjustment of $63.80. I would remand to the district court with instructions that the remedy for the breach-of-warranty claim cannot deviate from or exceed the compensation allowed by the Limited Liability Clause.
B
Next up is the negligence claim. The majority opinion offers no real distinction in its analysis of Horne‘s contract and negligence claims. Rather, the majority concludes that because nothing in paragraph 3‘s Limited Liability Clause applies to claims for negligence, Horne can proceed to trial on his tort claim. But because I read the Exculpatory Clause‘s language in paragraph 9 as applying to claims that sound in negligence, I would treat Horne‘s contract and tort claims as distinct from one another.
(1) [H]e supplied the chattel in question, (2) the chattel was defective at the time it was supplied, (3) the defect could have been discovered by a reasonable inspection, when inspection is required (I.e., where the danger of substantial harm because of a defect is great, as we deem it is here), and (4) the defect was the proximate cause of the injury.
Id. at 137 (citing Chambliss v. Walker Constr. Co., 197 N.E.2d 83, 86 (Ill. App. Ct. 1964) (defective truck); and Witt v. John Hennes Trucking Co., 199 N.E.2d 231, 234 (Ill. App. Ct. 1964) (defective crane)). Section 408 of the Restatement (Second) of Torts, which Illinois courts apply, similarly provides that “[o]ne who leases a chattel as safe for immediate use is subject to liability to those whom he should expect to use the chattel ... if the lessor fails to exercise reasonable care to make it safe for such use or to disclose its actual condition to those who may be expected to use it.” Restatement (Second) of Torts § 408 (Am. L. Inst. 1965); see, e.g., Brobbey v. Enter. Leasing Co. of Chi., 935 N.E.2d 1084, 1093-94 (Ill. App. Ct. 2010) (applying section 408). Comment (a) to section 408 then adds this instruction:
When lessor must inspect. The fact that a chattel is leased for immediate use makes it unreasonable
for the lessor to expect that the lessee will do more than give it the most cursory of inspections. The lessor must, therefore, realize that the safe use of the chattel can be secured only by precautions taken by him before turning it over to the lessee. ... If the chattel is made by a third person, the lessor is required to exercise reasonable care to inspect it before turning it over to the lessee.
Restatement (Second) of Torts § 408 cmt. a (second emphasis added).
Notwithstanding this default duty that lessors owe to lessees, parties may generally contract around liability for negligence. Illinois law is clear on the point. “Public policy strongly favors freedom to contract, as is manifest in both the United States Constitution and [the Illinois] constitution.” McClure Eng‘g Assocs., Inc. v. Reuben H. Donnelley Corp., 447 N.E.2d 400, 402 (Ill. 1983) (citation omitted). Under Illinois law, a party may contract to avoid liability for its own negligence and, absent fraud or willful and wanton negligence, the contract will be valid and enforceable unless: (1) there is a substantial disparity in the bargaining position of the two parties; (2) enforcing the contract would violate public policy; or (3) something in the social relationship between the parties militates against upholding the contract. See Garrison v. Combined Fitness Ctr., Ltd., 559 N.E.2d 187, 189-90 (Ill. App. Ct. 1990); see also
The underlying rationale for these principles is that “courts should not interfere with the right of two parties to contract with one another if they freely and knowingly enter into the agreement.” Garrison, 559 N.E.2d at 190. The majority concludes, and I agree, that none of the three exceptions renders the rental agreement‘s Exculpatory Clause unenforceable. Indeed, Illinois law allows parties to allocate the risk of negligence through use of exculpatory clauses, see Reuben H. Donnelley Corp. v. Krasny Supply Co., 592 N.E.2d 8, 11 (Ill. App. Ct. 1991), and as the majority explains, Horne‘s “David and Goliath” argument regarding his bargaining position as compared to Home Depot‘s “is not the sort of disparity that violates public policy under Illinois law.” Maj. Op. 33. Nor did Horne have any type of special relationship with Home Depot that Illinois courts have identified as violating public policy.
To be sure, exculpаtory clauses “do not enjoy special favor” under Illinois law. Meyers v. Rockford Sys., Inc., 625 N.E.2d 916, 921 (Ill. App. Ct. 1993). They must be strictly construed against the benefitting party, especially when that party drafted the release. See Harris v. Walker, 519 N.E.2d 917, 919 (Ill. 1988). “Such clauses must spell out the intention of the parties with great particularity and will not be construed to defeat a claim which is not explicitly covered by their terms.” Scott & Fetzer Co. v. Montgomery Ward & Co., 493 N.E.2d 1022, 1029-30 (Ill. 1986). Illinois law does not require the “precise occurrence which results in injury” to have been contemplated by the contracting parties at the time they enter into the contract. Garrison, 559 N.E.2d at 190. Instead, the injury must fall “within the scope of possible dangers ordinarily
Recall that the Exculpatory Clause in the Home Depot rental agreement states the following:
RELEASE, INDEMNIFICATION AND WAIVER OF DAMAGES. TO THE FULLEST EXTENT PERMITTED BY LAW, CUSTOMER INDEMNIFIES, RELEASES, WAIVES AND HOLDS THE HOME DEPOT HARMLESS FROM AND AGAINST ALL CLAIMS, LOSSES, EXPENSES (INCLUDING ATTORNEYS FEES AND EXPENSES), LIABILITIES, AND DAMAGES (INCLUDING PERSONAL INJURY, DEATH, PROPERTY DAMAGE, LOST PROFITS, AND SPECIAL, INCIDENTAL AND CONSEQUENTIAL DAMAGES) IN ANY WAY CONNECTED WITH THE EQUIPMENT, ITS OPERATION OR USE, OR ANY DEFECT OR FAILURE THEREOF OR A BREACH OF THE HOME DEPOT‘S OBLIGATIONS HEREIN.
R. 151-3, at ¶ 9. The rental agreement also includes an Assumption-of-Risk Clause, which provides, in relevant part:
CUSTOMER LIABILITY. DURING THE RENTAL PERIOD, CUSTOMER ASSUMES ALL RISKS ASSOCIATED WITH AND FULL RESPONSIBILITY FOR THE POSSESSSION, CUSTODY AND OPERATION OF THE EQUIPMENT, INCLUDING, BUT NOT LIMITED TO, RENTAL CHARGES, CUSTOMER TRANSPORT, LOADING AND
UNLOADING, PROPERTY DAMAGES AND DESTRUCTION, LOSSES, PERSONAL INJURY, AND DEATH.
R. 151-3, at ¶ 7.
The scope of these provisions is broad. The Exculpatory Clause expressly includes within its list of assumed risks “personal injury” resulting from the “equipment, its operation or use.” Horne‘s hand injury falls squarely within that language, and the injury he suffered falls within the scope of injuries reasonably contemplated by him. Remember, too, that Horne already knew from Home Depot‘s Safety and Operation Guide, which he had reviewed before, that he was to “use caution at all times” and that the “cables can twist or kink and cause serious injury,” since “fingers or other body parts can be caught in rotating parts.”
The majority rightly concludes that the Exculpatory Clause does not violate public policy, nor is the disparity in the parties’ bargaining positions so great that the contract cannot be enforced as written. Absent any language in the rental agreement that Home Deрot contractually assumed a duty of care, I would enforce the Exculpatory Clause as written against Horne‘s negligence claim. See, e.g., Jewelers Mut., 820 N.E.2d at 415 (assuming liability to exercise ordinary care to prevent unauthorized opening of box).
To be clear, Home Depot‘s promise to provide the machine in “good working condition” is not equivalent to the bank‘s promise in Jewelers Mutual to exercise ordinary care in preventing the unauthorized opening of a box. This is because it remains conceivable that Home Depot or any other lessor
II
A final, practical observation warrants underscoring. Hardware and other big-box stores presumably rely on limited-liability and exculpatory provisions as one way to keep the price of the rentals affordable. Customers agree to this trade-off by signing the contract. Given today‘s majority decision, these stores might do well to revisit their rental agreements. Including contradictory promises — such as offering equipment “as is” and “in good working condition” — causes a reаl, yet avoidable, contractual conundrum. In the same vein, exculpating all liability in one clause, but only limiting that liability in another, creates another interpretive challenge — one in which I disagree with the majority‘s approach.
I respectfully dissent.