A dispute between two air conditioning manufacturers over a
CTA contract won’t continue in federal court after a judge in Chicago relinquished
jurisdiction and dismissed the action, allowing it to be filed again in state
Labs Inc., of San Diego, which makes custom air handling and air conditioning
units in Mexico, was pursuing a breach of contract claim against Elk Grove
Village-based Edwards Engineering. Edwards had contracted with the CTA to
rehabilitate the HVAC system at the CTA’s 103rd Street repair
facility and, according to ELI, certified it would comply with the Buy America
Act’s mandate that federal funds for components used to build transportation
systems be manufactured in America.
CTA told Edwards ELI’s parts did not comply with the Buy America Act, Edwards
canceled its purchase order. On Sept. 24, 2014, ELI sued Edwards, and on June
2, 2015, U.S. District Judge Marvin E. Aspen denied a motion to dismiss the
litigation, finding the Buy America Act did not necessarily void the contract
between the two companies. Edwards filed a counterclaim on July 29, 2015, making
breach of contract claims against ELI and a third-party complaint against CTA, alleging
state law claims for breaches of contract, good faith, fair dealing and implied
warranty and spoliation.
Oct. 30, 2015, the CTA responded to Edwards’ breach of contract claim and moved
to dismiss the others. CTA also that day filed a counterclaim against Edwards
and a fourth-party complaint against Western Surety Company, which represented
Edwards, seeking damages for Edwards’ alleged breach of contract.
Dec. 16, 2015, ELI filed a notice of settlement for its claims with Edwards; Aspen
granted a subsequent motion to enforce the settlement, which involved ELI voluntarily
dismissing all its claims on June 20, 2016. All that remained for Aspen to
consider was state common law claims between Edwards, CTA and Western.
to Aspen, Edwards, the CTA and Western had participated in “extensive mediation
efforts” since late 2015, leading him to hold CTA’s motion to dismiss in
abeyance. After private mediation in mid-January, the parties said they
couldn’t reach a settlement, so Aspen set a May 2017 deadline for completing
discovery and filing a brief on whether his court should end jurisdiction over
the state law claims. Edwards and Western said the court should decline to
exercise supplemental jurisdiction; CTA said it should retain.
factors favor dismissing the remaining state law claims,” Aspen wrote in
a March 2 opinion. “This
case was grounded on state law causes of action, and the basis for original
jurisdiction - the diversity of the parties - has since fallen away. Accordingly,
comity, convenience, and fairness to the parties counsels in favor of having
their state law claims decided in a state forum.”
further noted there exists a separate, pending state court case in which
Edwards, Western and the CTA are all parties. Although that case is in the
early stages, the CTA disputes the notion the federal and state disputes could
be consolidated - though Aspen notes “CTA has not presented any reason” to
support that argument.
also argued the exchange of “thousands of documents in connection with their
mediation efforts” means starting over would start another two years of legal
maneuvering. But Aspen said there would be no need to start over in state court,
since there’s already a case pending.
of the parties have argued that it is ‘absolutely clear’ how the pending state law
claims should be decided, nor have they argued any of the asserted claims are
frivolous,” Aspen wrote. “The contract claims raised by the parties are complex
and involve interpretation and application of Illinois common law, and they
should be pursued in a state forum.”
Engineering is represented in the action by attorneys from the firms
of Querrey & Harrow, Ltd., and of Tressler LLP, each of Chicago.
Energy Labs is represented by Gordon & Rees LLP, of Chicago.
CTA is represented by the firm of Ice Miller LLP, of Chicago.