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April 6, 2004.


The opinion of the court was delivered by: HARRY LEINENWEBER, District Judge


Plaintiff Oak Brook Bank ("Oak Brook") filed suit against defendant Crowe, Chizek and Company, LLC ("Crowe Chizek") alleging breach of contract and professional malpractice. Crowe Chizek now moves under Rule 12(c) of the Federal Rules of Civil Procedure for a judgment on the pleadings.


  On February 5, 2001, the Audit Committee of Oak Brook retained Crowe Chizek, a national accounting and consulting firm, to perform loan review services. In exchange for a fee of $33,000, Crowe Chizek agreed to review sixty commercial and commercial real estate loans, recommend risk grades for each loan, and prepare a worksheet describing its risk recommendations. In addition, Crowe Chizek's work would observe and report on Oak Brook's loan administration practices, including loan documentation, loan approval, problem loan management and normal loan monitoring. The review took place during the week of October 24, 2001. This review did not amount to a comprehensive audit of Oak Brook's business. Rather, Crowe Chizek performed its review through a selective testing and sampling of various loans authorized by Oak Brook. Crowe Chizek, in its engagement letter, specifically noted that its review "would not include all aspects of your internal control nor would they include a detailed examination of all transactions." Crowe Chizek worked under the assumption that "all information provided to us is accurate and complete in all material respects, contains no material omissions, and is updated on a prompt and continuous basis." Given these conditions, Crowe Chizek noted that it "cannot be relied upon to disclose all errors or irregularities that may exist."

  One of the loans Crowe Chizek reviewed during this process was a loan made to 60 W. Erie, LLC (hereafter "60 W. Erie" and the "60 W. Erie Loan"). Oak Brook's loan committee approved this loan on March 22, 2000. In doing so, they authorized a $19.5 million line of credit to 60 W. Erie to finance construction of a 22-story, 54-unit condominium building. However, Oak Brook's loan committee conditioned their approval on the loan meeting certain conditions. These included:
• The participation of another bank in the loan on a 50/50 basis;
• 18 condominium pre-sales at no less than $320 per square foot;
• $2 million cash equity from the borrower;
• The receipt of weekly sales reports; and • The receipt of quarterly project financial statements.
  After completing their review of the 60 W. Erie Loan, Crowe Chizek recommended that Oak Brook maintain the loan's current risk grade of "3B." A 3B loan requires "consistent monitoring to verify performance, collateral sufficiency and viability, compliance with certain loan requirements, or other relevant factors." The risk involved in this type of loan "is considered acceptable and within normal underwriting guidelines, so long as the loan is given the proper level of management supervision." Oak Brook claims that this risk-classification is entirely normal for a standard performing construction loan.
  In reality, at the time Crowe Chizek conducted its evaluation, Oak Brook claims that the loan had glaring problems that should have caused Crowe Chizek to give it a much harsher evaluation. Oak Brook claims that, based on the documentation given Crowe Chizek to perform its review, Crowe Chizek should have realized that, among other things:
• Construction, which was scheduled to begin in November 2000 and finish in February 2001, had not yet begun as of the October 2001 review;
• Construction was now not projected to finish until the end of 2002, long after the loan's April 2002 maturity date;
• There were insufficient funds to complete construction;
• Despite the loan committee's requirement, the loan did not close with 50/50 participation from a partner bank; • Despite the loan committee's requirement, the loan closed based on a proposal to construct only a 21-story, 32-unit building, 22 units less than the plan approved by the Committee, and a design that Oak Brook did not even see a budget for;
• Oak Brook had not received weekly sales reports or quarterly project financial statements.
  Following Crowe Chizek's review, Oak Brook hired Near North Title Insurance ("Near North") to act as an escrow agent for the 60 W. Erie Loan. Over the course of the next six months, Oak Brook (through Near North) disbursed $7 million to 60 W. Erie. Oak Brook eventually learned that, rather than construct the building they promised, the operators of 60 W. Erie instead defrauded Oak Brook out of the loan — submitting fraudulent progress reports to induce Oak Brook to continue making disbursements. Oak Brook has sued these individuals for breach of the loan agreement and fraud in state court.


  A Rule 12(c) Motion can be granted only if it appears beyond doubt that the plaintiff cannot prove any facts that will support the claim for relief. See Brunt v. Service Employees Intern. Union, 284 F.3d 715 (7th Cir. 2002). Under Rule 12(c), the Court must view the allegations of the pleadings in the light most favorable to Oak Brook. See Delgado v. Jones, 282 F.3d 511 (7th Cir. 2002).


  The crux of Crowe Chizek's argument is that Oak Brook's state court action against the operators of 60 W. Erie estops it from claiming that Crowe Chizek bears liability for its loss. In its state court proceedings, Oak Brook does not accuse Crowe Chizek of wrongdoing. Instead, it blames its loss squarely on the fraudulent misconduct of 60 W. Erie. Specifically, Oak Brook claims that it disbursed $7 million to 60 W. Erie between November 2001 and April 2002 because of false and fraudulent submissions it received from 60 W. Erie on the status of the construction project. In Crowe Chizek's view, Oak Brook's pleadings here and in state court require granting its 12(c) Motion on two grounds: 1) Crowe Chizek's limited review of the loan and its warranty regarding the accuracy of its findings precludes a finding of liability on grounds of either breach of contract or negligence, because it lacked the requisite duty to uncover such a fraud; and 2) The fraudulent actions of 60 W. Erie LLC constituted independent and intervening actions that prevent Crowe Chizek from being held legally responsible.

  A. Crowe Chizek's Review

  Crowe Chizek's first argument centers on the fact that its review of Oak Brook's loan practices was limited in scope. The review lasted only a single week in October 2001, and took place entirely within Oak Brook's own offices. Crowe Chizek had no responsibility to conduct interviews or perform any site visits. It merely reviewed documents. Therefore, Crowe Chizek clearly did not review the allegedly fraudulent submissions that led to the disbursements from November 2001 to April 2002. Even in its October 2001 document review, Crowe Chizek's engagement letter makes clear that it took on only limited responsibilities and obligations. There is no dispute that Crowe Chizek was not asked to audit any loan, nor is there any dispute that Crowe Chizek had no responsibility to detect the presence of false or forged documents in the files it reviewed. Similarly, it is also clear that Crowe Chizek, under the terms of the engagement letter, was not responsible for uncovering "all errors or irregularities that may exist" within the files. These factors combined, in Crowe Chizek's view, mean that it lacked a duty (either contractually or under a professional malpractice standard) to uncover the fraud that damaged Oak Brook.

  Although the Court acknowledges Crowe Chizek's limited duties, it does not believe that these limitations warrant a judgment on the pleadings. No one disputes that Crowe Chizek, under its contract with Oak Brook, had only restricted responsibilities in performing its loan review. The appropriate legal question is whether Crowe Chizek contractually breached or committed professional malpractice with the duties it did have.

  Therefore, the Court must examine what exactly Crowe Chizek's duties were under the terms of the engagement letter, which effectively formed its contract with Oak Brook, The engagement letter, contrary to Crowe Chizek's assertions, does not appear on its face to give Crowe Chizek blanket legal protection for "any" errors that might survive the review. After all, the contract never disclaims Crowe Chizek's liability for negligence or non performance. Rather, the contract merely acknowledges that Crowe Chizek "cannot be relied upon to ...

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