U.S. Court of Appeals for the 7th Circuit
Docket No. 15-3242 Opinion: March 25, 2016
In this case about manufacturer liability in the setting of a commercial distribution relationship, a customer attempts to hold the manufacturer of a product liable for the distributor’s failures. The customer’s claims are based on the so-called “special relationship” between the distributor and manufacturer, as well as the customer’s status as an alleged intended beneficiary of the distribution arrangement. The 7th Circuit, however, was having none of it.
American Commercial Lines (ACL) manufactures and operates tow boats and barges that operate on US inland waterways. Lubrizol manufactures industrial lubricants and additives. VCS Chemical Corp. (VCS) distributed Lubrizol products to customers such as ACL.
Lubrizol and VCS jointly persuaded ACL to buy product through VCS. But before delivery began Lubrizol terminated VCS as a distributor – without informing ACL. VCS did not inform ACL either. Instead of telling ACL that it could no longer provide the Lubrizol product, VCS supplied a substitute. When ACL figured out the switch it sued both VCS and Lubrizol, arguing that the two must have enjoyed a “special relationship” because of their apparent cooperating in selling ACL on the idea of buying the Lubrizol product.
In its lawsuit in the District Court, ACL claimed that it had been duped by VCS who was acting on behalf of Lubrizol, and that as a result both companies were liable for the switch. ACL settled. Lubrizol brought a Motion to Dismiss and the District Court dismissed it. ACL appealed the dismissal of Lubrizol to the 7th Circuit.