Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.


March 31, 2003


The opinion of the court was delivered by: Joan B. Gottschall, District Judge.


Plaintiff Jerry Calvin brings this action against The Leitner Thomas Group ("LTG"), as well as David Thomas and Paul Leitner, alleging two counts of fraud, breach of fiduciary duty, two counts of breach of contract, and a count titled "detrimental reliance" based on a prior business relationship between the parties. The defendants have moved for summary judgment on all counts. For the reasons stated below, their motion is granted in part and denied in part.


Defendants Thomas and Leitner are in the business of buying, managing, and selling companies with other investors. After a particular company is sold, Thomas and Leitner provide management oversight in return for a management fee. In August 1997, Thomas and Leitner began to consider the acquisition of Aurora Custom Machining ("Aurora"), a closely-held custom machine shop in Aurora, Illinois. In May 1997, Aurora received a letter from General Motors Locomotive Group ("GMLG"), its biggest customer, stating that GMLG anticipated a significant increase in locomotive production in 1998 by as much as 50%. In addition, Thomas and Leitner met with a Senior Buyer from GMLG who told them that Aurora should expect up to a 50% increase in orders. Thomas and Leitner's plan for Aurora included bundling it for resale with another company already owned by Thomas and Leitner, Ingersoll Products Company ("Ingersoll").

After a national search, Thomas and Leitner approached Jerry Calvin (who then resided in New Hampshire) as a potential executive officer for Aurora. It is undisputed that Thomas and Leitner told Calvin that they intended to sell Aurora with Ingersoll within six months. According to Calvin, Thomas and Leitner promised him that he would be employed by Aurora until it sold. Thomas and Leitner contend that they told Calvin that his employment could be long-term or short-term, depending on whether a sale could be achieved within six months. Calvin also maintains that Thomas and Leitner told him that Aurora had a "written commitment" from GMLG for a 50% increase in orders. Thomas and Leitner dispute that they told Calvin there was a "written commitment," asserting instead that, based on the letter from GMLG, as well as the meeting with GMLG, they informed Calvin that they believed that GMLG would increase its orders by 50%. They invited Calvin to visit Aurora for himself to evaluate whether it would be a favorable acquisition. Calvin made two trips to Aurora and met with personnel there. He did not ask to review any documents, including any GMLG "written commitment," during either visit. On January 12, 1998, Thomas and Leitner sent Calvin a letter ("employment agreement") offering Calvin the position of President of Aurora and a seat on Aurora's board. The letter listed their proposed terms of employment. Calvin counter-signed the offer letter and wrote "accepted" next to his signature.

Calvin asserts that in February 1998, while reviewing blanket purchase orders to Aurora, he discovered for the first time that there was no "written commitment" from GMLG to increase orders by 50%. On July 28, 2000, Calvin sold his home in New Hampshire and subsequently purchased a home in Illinois in August 2000. He also joined a country club in Illinois in August 2000. Since discovering that there was no "written commitment," Calvin remained employed by Aurora for an additional two and a half years until he was ultimately terminated in September 2000. Prior to Calvin's termination, Aurora and Ingersoll were not sold.


Summary judgment is appropriate if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." FED. R. CIV. P. 56(c). The moving party has the initial burden to prove that no genuine issue of material fact exists. Matsushita Elec. Indust. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). Once the moving party shows that there is no genuine issue of material fact, the burden shifts to the nonmoving party to designate specific facts showing that there is a genuine issue for trial. Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986).

I. Counts I and II: Fraud

In Illinois, the elements of common law fraud are: (1) a false statement of material fact, (2) defendant's knowledge that the statement was false; (3) defendant's intent that the statement induce the plaintiff to act; (4) plaintiff's reliance on the statement; (5) plaintiff's damages resulting from reliance on the statement. Miller v. William Chevrolet/GEO, Inc., 326 Ill. App.3d 642, 648 (1st Dist. 2001). Calvin asserts two counts of fraud in relation to the alleged "written commitment" (Count I) and an alleged promise to employ him until Aurora was sold (Count II).

Calvin's first fraud claim alleges that the defendants lied to Calvin when they told him that they had received a "written commitment" confirming that GMLG would increase its orders to Aurora by 50%. According to Calvin, the defendants told him that, in light of the commitment from GMLG to increase orders, Aurora would meet certain earnings levels (upon which his bonus was based). Calvin maintains that the bonus was the primary reason he accepted the defendants' offer of employment. In addition, Calvin argues that he reasonably relied upon the defendants' statement regarding the GMLG written commitment in accepting the defendants' offer of employment. Calvin asserts that he had no reason to doubt the veracity of the defendants' statement and, therefore, had no affirmative duty to perform a "due diligence" type investigation of Aurora.

In response, the defendants argue that Calvin fails to satisfy the first element of fraud — the false statement of material fact — and the fourth element — plaintiff's reliance on the alleged statement. Defendants maintain that they never told Calvin that GMLG had provided a written commitment regarding future orders. Instead, they claim that they told Calvin that GMLG had indicated that it intended to increase its purchase orders in the future, but never told Calvin that they had a commitment in writing. In addition, the defendants argue that even if such a statement were made, it would have been unreasonable for Calvin to rely on such a statement in light of his opportunity to investigate and review the financial records of Aurora during his two initial trips.

The court finds the factual dispute over whether or not the defendants told Calvin they had a written commitment from GM to be material to the disposition of the first fraud claim. In fact, the parties agree that whether or not the defendants told Calvin they had a "written commitment" is a disputed fact. In addition, the question of whether an individual's reliance was reasonable must be considered in light of all the circumstances. Kolsun v. Vembu, 869 F. Supp. 1315, 1328-29 (N.D. Ill. 1994) (finding reasonableness of reliance to be a disputed question of fact). Although they argue that Calvin should have investigated the existence of the "written commitment," the defendants fail to explain why Calvin had such a duty with respect to that particular statement, or why Calvin should have had reason to know that their representation was not reliable. The court cannot say as a matter of law that it was unreasonable for Calvin to rely on the defendants' alleged misrepresentation. Therefore, defendant's motion for summary judgment on Claim I is denied.

Calvin's second fraud claim stems from the defendants' 1999 acquisition of Brogdon Tool & Die, Inc. ("Brogdon"), an aerospace manufacturing company. According to Calvin, he performed all the work necessary to investigate and acquire Brogdon at the request of the defendants. Calvin argues that in exchange for his efforts in acquiring Brogdon, the defendants promised him — but never delivered — the position of Chief Executive Officer of Brogdon, an uncapped bonus, and options for up to 10% of Brogdon stock (with vesting to begin one year from the defendants' acquisition of the company). Calvin argues that the defendants made these promises, which they knew they had no intention of keeping, ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.