1ST Class Legal (I.S.), Ltd. v. Niro, et al.

Northern District of Illinois, ilnd-1:2016-cv-06793

Memorandum of Law in Support of Its Motion for Summary Judgment by 1st Class Legal (I.S.), Ltd.

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Case: 1:16-cv-06793 Document #: 35 Filed: 02/10/17 Page 1 of 8 PageID #:195 MARC S. MAZER WEILL & MAZER, A Professional Corporation 90 New Montgomery Street Suite 1400 San Francisco, CA 94105 Telephone: (415) 421-0730 STEVE VARHOLA LYMAN LAW FIRM 227 West Monroe Street, Suite 2650 Chicago, Illinois 60606 Attorneys for Plaintiff and Counter Defendant 1st CLASS LEGAL (I.S.), LTD. UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION 1st CLASS LEGAL (I.S.), LTD., a foreign) Case No.: 16 CV 6793 corporation,)) Plaintiffs,)) Honorable Robert. M. Dow, Jr. v.)) RAYMOND NIRO, individually and doing) business as NIRO, HALLER & NIRO, an) Illinois Law Partnership, NIRO LAW, LTD.,) an Illinois Corporation, formerly known as) NIRO, HALLER & NIRO, LTD.,)) Defendants.)) and related Counter Claim)) PLAINTIFF-COUNTERDEFENDANT'S MEMORANDUM OF LAW IN SUPPORT OF ITS MOTION FOR SUMMARY JUDGMENT Plaintiff and Counterdefendant 1ST CLASS LEGAL, LTD. ("1CL") respectfully submits the following Memorandum of Law in Support of Its Motion for Summary Judgment on the Counterclaim filed by Defendant and Counterplaintiff NIRO LAW, LTD. ("Niro") against 1CL. PLAINTIFF-COUNTERDEFENDANT'S MEMORANDUM OF LAW IN SUPPORT OF ITS MOTION FOR SUMMARY JUDGMENT CASE NO. 1:16-cv-06793 1 Case: 1:16-cv-06793 Document #: 35 Filed: 02/10/17 Page 2 of 8 PageID #:196 INTRODUCTION The Counterclaim states one cause of action. Niro claims that 1CL breached a written agreement to loan funds to it for payment of costs associated with legal proceedings initiated by clients of Niro and for whom Niro acted as attorney of record. Niro claims that although 1CL loaned a significant amount of the total agreed upon funds 1CL breached the agreement by failing to fund the entire amount of the loan funds. Niro claims, as its sole damages, the deficiency amount of the difference between the agreed upon loan amount and the actual amount 1CL loaned to Niro. This is the sole claim for damages made by Niro in its Counterclaim, confirmed by its Computation of Damages provided in its Rule 26 disclosures. As shown below, Niro's claim fails as a matter of law. Under established authority, the measure of damages for a claim of breach of an agreement to loan money is not the amount agreed to be loaned. Since the only damages Niro seeks are not allowed by law, an essential element of damages is lacking from its Counterclaim. Accordingly, 1CL is entitled to summary judgment in its favor and against Niro on its Counterclaim. ARGUMENT Legal Standard Summary judgment is appropriate where "the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). Once a movant meets its burden, the non-movant must provide specific facts demonstrating a genuine issue for trial. Fed.R.Civ.P. 56(e); Fass v. Sears, Roebuck & Co., 532 F.3d 633, 640-641 (7th Cir. 2008). A genuine issue of material fact PLAINTIFF-COUNTERDEFENDANT'S MEMORANDUM OF LAW IN SUPPORT OF ITS MOTION FOR SUMMARY JUDGMENT CASE NO. 1:16-cv-06793 2 Case: 1:16-cv-06793 Document #: 35 Filed: 02/10/17 Page 3 of 8 PageID #:197 exists only where "the evidence is such that a reasonable jury could return a verdict for the non- moving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). "The plaintiff cannot merely allege the existence of a factual dispute to defeat summary judgment. … Instead, [it] must supply evidence sufficient to allow a jury to render a verdict in [its] favor." Basith v. Cook County, 241 F.3d 919, 926 (7th Cir. 2001) (internal quotation marks and citations omitted).1 I. Damages are an Essential Element of a Claim for Breach of Contract. It is beyond dispute that damages are an essential element of a claim for breach of contract. "In order to plead a cause of action for breach of contract, a plaintiff must allege: (1) the existence of a valid and enforceable contract; (2) substantial performance by the plaintiff; (3) a breach by the defendant; and (4) resultant damages." W.W. Vincent & Co. v. First Colony Life Ins. Co., 351 Ill.App.3d 752, 286 Ill.Dec. 734, 814 N.E.2d 960, 967 (2004); see also Ollivier v. Alden, 262 Ill.App.3d 190, 199 Ill.Dec. 579, 634 N.E.2d 418, 422 (1994) ("As the party seeking to recover, the plaintiff bears the burden of proving that he or she sustained damages....") (emphasis added). Therefore, it is necessary for Niro to show that it did, in fact, suffer some recoverable damages. See Transp. & Transit Assocs., Inc. v. Morrison Knudsen Corp., 255 F.3d 397, 401 (7th Cir.2001).7 Merely showing that a contract has been breached without demonstrating actual damage does not suffice to state a claim for breach of contract. Id. ("On TTA's understanding of what ¶ 4 means, MKC broke its promise; neither MKC nor Amerail (after the delegation in 1 The loan agreements in issue specify that the law of the United Kingdom governs disputes. However, it is a familiar principle that a choice of law provision governs substantive, not procedural, aspects of a dispute. Kalmich v. Bruno, 553 F.2d 549, 553 (7th Cir.), cert. denied, 434 U.S. 940 (1977); Colonial Penn Life Ins. Co. v. Assured Enterprises, Ltd., 151 F.R.D. 91 (N.D.Ill.1993); ABF Capital Corp. v. McLauchlan, 167 F. Supp. 2d 1011, 1014 (N.D. Ill. 2001). PLAINTIFF-COUNTERDEFENDANT'S MEMORANDUM OF LAW IN SUPPORT OF ITS MOTION FOR SUMMARY JUDGMENT CASE NO. 1:16-cv-06793 3 Case: 1:16-cv-06793 Document #: 35 Filed: 02/10/17 Page 4 of 8 PageID #:198 1995) even once offered TTA an opportunity to meet another subcontractor's bid. But this does not matter unless TTA can show damages, and the district court held that it could not do so.") (Emphasis added.) See also, TAS Distrib. Co. v. Cummins Engine Co., 491 F.3d 625, 631 (7th Cir. 2007). II. Because Damages are Not Shown, Summary Judgment is Appropriate. Summary judgment is proper where a "nonmoving party is unable to establish the existence of an essential element to [that party's] case, and on which [that party] will bear the burden of proof at trial" Northbound Grp., Inc. v. Norvax, Inc., 5 F. Supp. 3d 956, 974 (N.D. Ill. 2013), aff'd, 795 F.3d 647 (7th Cir. 2015). The inability to establish the element of damages will justify summary judgment. As damages are an essential element of an action for breach of contract under Indiana law, Strong v. Commercial Carpet Co., 163 Ind.App. 145, 322 N.E.2d 387, 391 (1975), and Appellant failed to show any, summary judgment for the City on breach of contract was appropriate. A.V. Consultants, Inc. v. Barnes, 978 F.2d 996, 1001 (7th Cir. 1992). Because damages are an element of a breach of contract claim, summary judgment is appropriate against a plaintiff who cannot demonstrate that it could prove damages. Pamado, Inc. v. Hedinger Brands, LLC, 785 F. Supp. 2d 698, 709 (N.D. Ill. 2011). The Court may consider the damages issues raised in this summary judgment motion. See Dunkin' Donuts Inc. v. N.A.S.T., Inc.., 428 F.Supp.2d 761, 767 (N.D.Ill.2005) (summarizing cases); Ace Hardware Corp. v. Marn, Inc., No. 06 CV 5335, 2008 WL 4286975, at *17 (N.D.Ill. Sept.16, 2008) ("If Defendants cannot show that a genuine issue of material fact exists in relation to their damages sought in their counterclaim, summary judgment must be entered in favor of [Plaintiff]."). Since proof of damages is an essential element of both breach of contract and fraud claims, "a non-movant's failure to produce sufficient evidence of the damages element of its claim calls for the entry of summary judgement against that party." Dunkin' Donuts, 428 F.Supp.2d at 767. BP Amoco Chem. Co. v. Flint Hills Res., LLC, No. 05 C 5661, 2009 WL 1033373, at *3 (N.D. Ill. Apr. 17, 2009). PLAINTIFF-COUNTERDEFENDANT'S MEMORANDUM OF LAW IN SUPPORT OF ITS MOTION FOR SUMMARY JUDGMENT CASE NO. 1:16-cv-06793 4 Case: 1:16-cv-06793 Document #: 35 Filed: 02/10/17 Page 5 of 8 PageID #:199 III. The Only Damages Claimed by Niro are for Failure to Fund the Loan; Niro is Seeking the Amount of the Loan that Was Not Funded. Niro has failed to establish the necessary element of damages; the only item claimed as damages cannot be recovered as a matter of law. Niro admits that its action is premised on the Master Loan Agreement and related Case Specific Loan Agreements attached to the Counterclaim (collectively "Loan Agreement"). (Counterclaim, ¶6.) Niro further admits that its action is premised on an asserted obligation to make loans pursuant to that agreement. (Id., ¶8.) Niro further admits that the transactions in issue were covered by Case Specific Loan Agreements, which by their terms are incorporated into the Master Loan Agreement (all collectively referred to hereinafter as the "Loan Agreement"). (Id., ¶¶10, 16, and 22.) Niro asserts only one cause of action for breach of the Loan Agreement. (Id., ¶¶32-34.) In its Rule 26 disclosures, Niro made clear that the only damages claimed are the shortfall in the amount agreed to be loaned: Computation of Damages. Pursuant to the three Case Specific Loan Agreements, 1st Class Legal (I.S.) Ltd., committed to a total of $4 million in funding, but provided only $2,420,000. Counterplaintiff seeks damages in the amount of the shortfall, $1,580,000, plus interest and applicable legal costs and expenses. IV. The Measure of Damages for a Breach of Contract to Lend Money is not the Amount Agreed to be Loaned. Niro's Counterclaim effectively seeks a judgment for the amount of the unfunded loan, and to effectively be relieved from performing any of its obligations under the Loan Agreement. Niro improperly seeks an order of "specific performance" compelling the lender to fund the agreed upon loan. It has been repeatedly stated and held that the measure of damages for a breach of contract to lend money is not the amount agreed to be loaned. PLAINTIFF-COUNTERDEFENDANT'S MEMORANDUM OF LAW IN SUPPORT OF ITS MOTION FOR SUMMARY JUDGMENT CASE NO. 1:16-cv-06793 5 Case: 1:16-cv-06793 Document #: 35 Filed: 02/10/17 Page 6 of 8 PageID #:200 The measure of damages is not the amount agreed to be loaned or advanced since damages are to be limited to losses sustained. 22 Am. Jur. 2d Damages § 106 (emphasis added). It is well settled that the measure of damages for breach of a contract to lend money is not the amount agreed to be loaned in accordance with the rule that damages are limited to losses sustained. 4 A.L.R.4th 682 (originally published in 1981) (emphasis added). To the extent the trial court intended to award as damages the amount due to be paid under the loan, the trial court erred. In an action for breach of a contract to lend money, "the basic measure of damages is not the amount agreed to be loaned." 25 Williston, supra, § 66:100 (emphasis added). In re Transact, Inc., No. SACV 13-1312-MWF, 2014 WL 3888230, at *23 (C.D. Cal. Aug. 6, 2014), appeal dismissed sub nom. In re: TRANSACT, INC., Debtor, JOHN M. WOLFE, Chapter 7 Tr. of Transact, Inc., Appellant, v. FRANK D'ERRICO, individually & on behalf of the Frank D'Errico Living Trust; RHFD PEBBLE, INC., Appellees., No. 14-56453, 2016 WL 6081389 (9th Cir. Oct. 18, 2016). As a general rule, damages for breach of a contract to lend money for a definite period of time is not the amount agreed to be loaned or advanced but rather the cost of getting another loan, consisting principally of the difference between the interest that the borrower contracted to pay and what he was compelled to pay to procure a replacement loan. Alderton, 139 Mich. 300. Walker v. Brooke Corp., No. 2:08-CV-14574, 2010 WL 1257341, at *4 (E.D. Mich. Mar. 30, 2010). The reason for this rule is that an alternative loan can be found, and the borrower is under an affirmative duty to seek alternative sources: In other words, the would-be borrower, upon learning that the supposed lender refuses to perform the contract, must actively seek alternative sources of financing. Only where such a search fails to yield an alternative source may the aggrieved party seek special damages, including lost profits, to compensate for the breach. The denial of special damages, and particularly lost profits, where other financing was available, or where it was not sought, is based on sound policy. Where an alternative financing source is available, other damages due to the breach are generally avoidable, and hence not compensable. Utah Farm Prod. Credit Ass'n v. Cox, 627 P.2d 62, 65 (Utah 1981). PLAINTIFF-COUNTERDEFENDANT'S MEMORANDUM OF LAW IN SUPPORT OF ITS MOTION FOR SUMMARY JUDGMENT CASE NO. 1:16-cv-06793 6 Case: 1:16-cv-06793 Document #: 35 Filed: 02/10/17 Page 7 of 8 PageID #:201 In the present case, the only item of damages claimed by Niro is the amount allegedly agreed to be loaned or advanced. The above authorities are uniform in concluding that this is not the measure of damages. As noted above, because damages are an element of a breach of contract claim, summary judgment is appropriate against a plaintiff who cannot demonstrate that it could prove damages. Pamado, Inc. v. Hedinger Brands, LLC, 785 F. Supp. 2d 698, 709 (N.D. Ill. 2011). Since Niro cannot demonstrate that it can prove damages, summary judgment as to the Counterclaim is appropriate.2 CONCLUSION For the foregoing reasons, 1CL respectfully requests that the Court grant it judgment on the Counterclaim as a matter of law and all other relief it deems just. Dated: February 10, 2017 2 The law of the United Kingdom is in accord with the above analysis. See, South African Territories, Ltd. v. Wallington, [1898] A.C. 309, 67 L. J. Q. B. 470, 78 L. T. Rep. (N. S.) 426, 14 T. L. R. 298, 46 Wkly. Rep. 545: "On a contract to lend money, no action will lie for the money." From the same decision: "That specific performance of a contract to lend money cannot be enforced is so well established, and obviously so wholesome a rule, that it would be idle to say a word about it." See also, Western Wagon, etc., Co. v. West, [1892] 1 Ch. 271, 61 L. J. Ch. 244, 66 L. T. Rep. (N. S.) 402, 40 Wkly. Rep. 182; Sichel v. Mosenthal, 30 Beav. 371, 8 Jur. N. S. 275, 31 L. J. Ch. 386, 5 L. T. Rep. N. S. 784, 10 Wkly. Rep. 283, 54 Eng. Reprint, 932. (Copies of the foregoing authorities are provided herewith.) PLAINTIFF-COUNTERDEFENDANT'S MEMORANDUM OF LAW IN SUPPORT OF ITS MOTION FOR SUMMARY JUDGMENT CASE NO. 1:16-cv-06793 7 Case: 1:16-cv-06793 Document #: 35 Filed: 02/10/17 Page 8 of 8 PageID #:202 Respectfully submitted, 1ST CLASS LEGAL (I.S.), LTD. By: /s/Marc S. Mazer Marc S. Mazer WEILL & MAZER, A Professional Corporation 90 New Montgomery Street Suite 1400 San Francisco, CA 94105 (415) 421-0730 Attorneys for Plaintiff and Counter-Defendant 1st Class Legal (I.S.), Ltd. CERTIFICATE OF SERVICE The undersigned, an attorney, certifies that on February 10, 2017, he caused the foregoing Plaintiff and Counter-Defendant's, 1st CLASS LEGAL, LTD., Memorandum of Law in Support of Its Motion for Summary Judgment to be served upon all counsel of record via the court's electronic docketing system. Dated: February 10, 2017 1ST CLASS LEGAL (I.S.), LTD. By: /s/Steve M. Varhola Steve M. Varhola LYMAN LAW FIRM, LLC 227 West Monroe Street, Suite 2650 Chicago, Illinois 60606 (312) 762-9517 Attorneys for Plaintiff and Counter-Defendant 1st Class Legal (I.S.), Ltd. PLAINTIFF-COUNTERDEFENDANT'S MEMORANDUM OF LAW IN SUPPORT OF ITS MOTION FOR SUMMARY JUDGMENT CASE NO. 1:16-cv-06793 8