United States District Court, Central District of Illinois, Springfield Division
June 27, 2001
UNITED STATES OF AMERICA, PLAINTIFF,
STATE OF ILLINOIS, DEFENDANT.
The opinion of the court was delivered by: Richard Mills, United States District Judge
A valid contract must be enforced.
One who breaks a valid contract must honor the result.
Such is the case here.
In 1992 the United States Judicial Conference, through the
Administrative Office of the United States Courts (the "Conference"),
made a Criminal Justice Act grant of federal money to the State of
Illinois for the Office of the State Appellate Defender (the "Appellate
Defender"). The grant was to be used to provide legal services in federal
death penalty habeas corpus cases.
A 1993 audit concluded that $35,787 of the grant funds had been used
for obligations incurred outside the period of the grant or for purposes
not allowed by the grant. As such, the Conference made a written demand
to the Appellate Defender for $35,787 on December 1, 1993.
On March 20, 1995, the Appellate Defender wrote a letter to the
Conference which stated "we are seeking funding to pay for [the] audit
finding. [We] will keep you advised of the progress". The Appellate
Defender again wrote to the Conference on August 27, 1999, stating that
they have "asked the Illinois Legislature to provide funding to pay" the
On January 31, 2001, the Conference — via the United States
— filed suit against the State of Illinois for repayment of the
Appellate Defender's debt. The Appellate Defender moves to dismiss the
case, arguing that the United States did not file it before the
applicable statute of limitations period expired. Further, the Appellate
Defender argues that the United States is barred from pursuing the debt
because the grant does not expressly allow the government to pursue a
breach of contract claim in court.
STANDARD OF REVIEW
In ruling on a motion to dismiss, the Court must accept well pleaded
allegations of the complaint as true. See Hishon v. King & Spalding,
467 U.S. 69, 104 S.Ct. 2229, 2233, 81 L.Ed.2d 59 (1984); Car Carriers,
Inc. v. Ford Motor Co., 745 F.2d 1101, 1104 (7th Cir. 1984), cert.
denied, 470 U.S. 1054, 105 S.Ct. 1758, 84 L.Ed.2d 821 (1985). Although a
complaint is not required to contain a detailed outline of the claim's
basis, it nevertheless must contain either direct or inferential
allegations respecting all the material elements necessary to sustain a
recovery under some viable legal theory. See Car Carriers, 745 F.2d at
1106. Dismissal should not be granted unless it appears beyond doubt that
the plaintiff can prove no set of facts in support of his claim that
would entitle him to relief. See Conley v. Gibson, 355 U.S. 41, 45-46, 78
S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957). Furthermore, the court must accept
as true all well-pled allegations and draw all reasonable inferences in
the plaintiffs favor. See Perkins v. Silverstein, 939 F.2d 463, 466 (7th
A. Statute of Limitations
Title 28 U.S.C. § 2415(a) allows an agency of the United States to
bring an action for money damages based on an express or implied contract
provided it does within six years of the alleged breach. See
28 U.S.C. § 2415(a). However, this six-year statute of limitations is
not absolute. Section 2415(a) provides that a cause of action re-accrues
"in the event of later partial payment or written acknowledgment of
debt". See id.; see also, United States v. Rollinson, 866 F.2d 1463, 1468
(D.C. Cir.), cert. denied 493 U.S. 818, 110 S.Ct. 71, 107 L.Ed.2d 37
(1989) ("where a debtor unequivocally acknowledges and evidences a
sufficient commitment to pay a preexisting debt, the law will treat the
acknowledgment as a new promise to pay").
In the instant case, a contract claim began to accrue in 1993 when the
Conference learned of the Appellate Defender's alleged breach. The
Conference could have taken immediate action against the Appellate
Defender at that time, but it chose not to do so after the Appellate
Defender provided letters on March 20, 1995, and August 27, 1999, stating
that it was seeking funds to pay the $35,787 debt. Believing these
letters to be written assurances of an intention to honor a debt, the
Conference forestalled filing suit until January 31, 2001 — more
than six years after its breach of contract claim first accrued. The
Appellate Defender contends that this delay is fatal to the Conference's
The Court disagrees.
By sending the Conference the 1995 and 1999 letters, the Appellate
Defender bought time and provided unequivocal written acknowledgments of
its debt. See, i.e., United States v. Culver, 958 F.2d 39, 40 (4th Cir.
1992) (finding a written acknowledgment to be created under § 2415(a)
where a debtor listed a debt in a financial statement and then provided
the statement to a creditor during settlement negotiations). The
acknowledgments contained in the letters were new promises to pay the
$35,787 debt. See Rollinson, 866 F.2d at 1468. A six-year statute of
limitations started to run anew on the Appellate Defender's debt with
each letter. The Appellate Defender sent the last of these letters on
August 27, 1999 — extending the Conference's filing deadline to
August 27, 2005. The advantage that the letters bought — additional
time — cannot be used as a means of escaping the obligation the
letters expressed. The United States, by filing its claim against the
Appellate Defender on January 31, 2001, has easily avoided any statute of
B. Breach of Contract Claim
Recognizing that its statute of limitations argument may not succeed,
the Appellate Defender makes an alternative argument for dismissal based
on the Conference's alleged agreement to forego a breach of contract
remedy. Illinois law allows parties to limit their contractual rights and
remedies by express agreement. See Lake County Trust Company v. Two Bar
B, Inc., 182 Ill. App.3d 186, 192, 130 Ill.Dec. 686, 537 N.E.2d 1015,
1019 (Ill.App.Ct. 1989). When construing these agreements, a court must
read the contract as a whole. See Omnitrus Merging Corporation v.
Illinois Tool Works, Inc., 256 Ill. App.3d 31, 34-35, 195 Ill.Dec. 701,
628 N.E.2d 1165, 1168 (Ill.App.Ct. 1994). It can only dismiss a claim if
the sole reasonable construction of the contract is that the parties
intended for exclusive remedies to apply. See id. If such a construction
does not clearly show that the parties intended to limit their remedies,
the contract must be read to allow cumulative rather than exclusive
remedies. See Cordiant MN, Inc. v. David Cravit & Associates, Ltd., 1997
WL 534308, *8 (N.D.Ill.) (citing Nitrin, Inc. v. Bethlehem Steel
Corporation, 35 Ill. App.3d 596, 606, 342 N.E.2d 79, 86 (Ill.App.Ct.
The Appellate Defender contends that Paragraph 23 of the grant
prohibits the Conference from pursuing a breach of contract claim.
Paragraph 23 states as follows:
Failure to comply with terms and conditions: In the
event the Grantee fails to comply substantially with
any of the terms and conditions of the grant award set
forth herein, or is unable to deliver the
representation and other services which are the
subject of this agreement, the Conference, or its
authorized representative, may reduce, suspend, or
terminate, or disallow payments under this grant award
as it deems appropriate. The Conference or its
authorized representative shall give notice to the
Grantee of an intent to reduce, suspend, or terminate
payments on at least ten days prior to taking such
action. Such notice shall indicate the intended
actions and reasons therefore.
The Appellate Defender argues that this language should be read to limit
the Conference's remedies to a reduction, suspension, termination, or
disallowance of payments and prevent the Conference from pursuing a
breach of contract claim. The Appellate Defender's argument is untenable
both practically and legally speaking.
First, it is extremely unlikely that the Conference would intentionally
fashion a grant that kept the right to reduce, suspend, terminate or
disallow payments as its only remedies. Such a limited collection of
remedies would allow a party like the Appellate Defender to spend grant
money in any manner it pleased without affording the Conference an avenue
for recovering misspent funds. Interpreting Paragraph 23 in the manner
suggested by the Appellate Defender would allow for this absurdity. As a
rule, courts should "construe contracts so as to avoid absurd results".
See Foxfield Realty, Inc. v. Kubala, 287 Ill. App.3d 519, 524, 223
Ill.Dec. 52, 678 N.E.2d 1060, 1063 (1997). In keeping with this rule, the
Court will not construe Paragraph 23 or the contract as a whole to limit
the Conference's remedies.
Second, nothing in Paragraph 23 or the contract as a whole suggests
that the parties intended to limit the Conference's rights to the
aforementioned remedies. If the parties wished to limit the Conference's
remedies, they could have easily included language to that effect. They did
not. Absent such an express limitation, the Conference's remedial rights
must be deemed cumulative and the breach of contract claim must be
allowed to proceed. See Nitrin, 342 N.E.2d at 86.
Ergo Defendant's Motion to Dismiss is DENIED.
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