United States District Court, N.D. Illinois, Eastern Division
January 6, 2005.
DAVID A. BLENDER, doing business as MUSTANG CAPITAL, LLC, Plaintiff,
AMERICAN FEED AND FARM SUPPLY, INC., Defendant.
The opinion of the court was delivered by: SUZANNE CONLON, District Judge
MEMORANDUM OPINION AND ORDER
David Blender ("Blender") d/b/a Mustang Capital, LLC
("Mustang") sues American Feed and Farm Supply, Inc. ("American")
for breach of contract. Specifically, Blender contends he is
entitled to a $225,000 success fee and a $5000 monthly advisory
fee under the parties' consulting contract. American removed this
case from state court, and now moves for summary judgment under
The following facts are undisputed. Mustang provides
consulting, advisory and intermediary services to locate
third-party business financing sources for clients. American
Facts at ¶ 2. American distributes and supplies agricultural,
farm and ranch products. Id. at ¶ 3. On April 7, 2002, Mustang
and American signed an agreement, providing:
Advisor agrees to utilize "best efforts" in
identifying, negotiating, and structuring debt and/or
equity financing and/or strategic relationship(s) on
behalf of The Company. The Company agrees to pay
MUSTANG a cash success fee in the amount equal to
three percent (3%) of any Senior Loan(s)* and five
percent (5%) of any Equity* committed to The Company if The Company
closes a transaction with a source whom MUSTANG
interacts on behalf of The Company.
SUCCESS FEE PAYMENT
Success fees are due in full to the Advisor in the
state of Illinois when the transaction is closed or
funded (initially or fully). The Company authorizes
the funding sources to pay MUSTANG the full success
fee directly from the proceeds of any and all funding
obtained as a result of MUSTANG's direct or indirect
This Agreement may be terminated by either party upon
one party providing the other party 30 days prior
written notice, however, termination of this
Agreement by either party does not relinquish The
Company's fiduciary responsibility and contractual
obligations(s) to compensate Advisor upon successful
purchase transaction, funding or additional financing
with and all Advisor and non-Advisor identified
lending, financing, investment, and funding sources
or other such third-party financings with whom
Advisor has interacted on The Company's behalf and
shall remain in effect for a period of not less than
one (1) year from the date of termination of this
Agreement. If a transaction or an additional funding
with any company, individual, or funding source with
whom Advisor has interacted on The Company's behalf
occurs within 12 months after the date of termination
of this Agreement, the above noted success fee is
immediately due and payable to Advisor.
Id. at ¶ 8; Blender Add'l Facts at Ex. 4. In addition, the
agreement provided American would pay Mustang $5000 per month.
American Facts at ¶ 7. Joseph Hahn, American's president, asked
Blender to draft the agreement using plain language. Id. at ¶
9. American made minor changes to the draft agreement, but never
sought to add language regarding the term "interaction" as used
in the agreement. Blender Add'l Facts at ¶¶ 8-9. Blender and
American reviewed the termination provision language; American
did not object to the language.*fn1
Id. at ¶ 13.
Before seeking a financing lender, Blender and American
prepared a financing profile for American that did not identify
American by name. American Facts at ¶ 11. The profile was sent to potential funding sources; Blender was not authorized to disclose
American's identity to the funding source until the funding
source executed a confidentiality agreement, referred to as a
Non-Disclosure Agreement ("NDA"). Id. at ¶ 12; Blender Resp. to
American Facts at ¶ 12. Upon receipt of the signed NDA, Blender
identified American as the client and provided American's full
financial information to the potential lender. American Facts at
¶ 13. American was aware there was no language in the agreement
specifying that Blender was required to have a signed NDA or
identify American to the lending source to qualify for a
termination success fee. Blender Add'l Facts at ¶¶ 22-23.
In May 2002, Blender contacted Bruce Walderson, a sales
representative with Textron Financial Corporation's ("Textron")
Chicago office, on American's behalf. Id. at ¶ 27. Walderson's
initial response to Blender's call was favorable. Id. Blender
had a previous working relationship with Textron's Ft. Worth,
Texas office and initially contacted that office on American's
behalf. Id. at ¶ 30. Blender ultimately received Walderson's
name from a sales person in the Textron Dallas, Texas office.
American Facts at ¶ 15. Walderson telephoned Blender and told him
to contact James St. Clair, Walderson's boss. Blender Add'l Facts
at ¶ 29. Accordingly, on May 21, 2002, Blender sent an e-mail to
Walderson and St. Clair and attached the profile and NDA.
American Facts at ¶ 14. On September 18, 2002, Walderson and St.
Clair's employment with Textron terminated. Id. at ¶¶ 17-18.
Blender did not reveal American's identity to Walderson and St.
Clair because they did not sign and return the NDA. Id. at ¶
16. Blender advised American he contacted Textron on its behalf.
Blender Add'l Facts at ¶ 32. American was unaware of Textron as a
potential lending source until Blender identified Textron to
American. Id. at ¶ 33. Between May and August 2002, Blender obtained NDAs and term
sheet financing proposals from lenders other than Textron. Id.
at ¶ 19. At American's request, Blender also assisted American's
attempt to negotiate, structure and close financing with Sunrock
Capital. Id. at ¶ 20. The Sunrock Capital loan fell through in
August 2002 and did not close. Id. Blender did not identify
Sunrock Capital as a potential funding source. Blender Add'l
Facts at ¶ 35. American paid Blender a $170,343.32 success fee
for his work on the Sunrock deal. Id. at ¶¶ 38-39. On August
12, 2002, Blender sent American a letter at American's request
listing the funding sources with whom Blender had interacted on
American's behalf, including a contact person and phone number
for each source. American Facts at ¶ 21; Blender Resp. to
American Facts at ¶ 21 and Exs. 5-6. Textron and Walderson were
on the list. Blender Resp. to American Facts Ex. 6. American did
not dispute the contents of Blender's list. Blender Add'l Facts
at ¶ 46.
Blender did not have an exclusive agreement with American, and
American was free to use services of other consultants in its
effort to secure a lender. American Facts at ¶ 10. On August 23,
2002, American signed a contract with a second loan intermediary
broker, Steve Clapp of Credit Access Corporation ("CAC"), located
in Denver, Colorado. Id. at ¶ 22. American's contract with CAC
specifically prohibited CAC from contacting any of the sources
Blender identified in his August 12, 2002 letter, so that Blender
would continue to have opportunities to put together a deal for
American. Id. at ¶ 23. In mid-September, the CAC contract was
modified to permit CAC to seek financing from any lenders except
those with whom Blender had obtained signed NDA's, or lenders
with whom Blender negotiated at American's request. Id. at ¶
On October 23, 2002, CAC contacted Gary Collins in Textron's
Oswega, Oregon office; CAC and Collins compiled a written term
sheet proposal from Textron to American. Id. at ¶ 25. Collins never had any contact with Blender, nor was he aware of
Blender's previous contacts with Walderson. Id. at ¶ 26.
American did not accept Textron's October 23, 2002 term sheet.
Id. at ¶ 27.
On October 24, 2002, American signed a consulting agreement
with a third broker, Morris Anderson & Associates, Ltd.
("Morris"). Id. at ¶ 29. Robert Swett, Morris' consultant,
recommended that American terminate its contract with Mustang to
save $5000 per month in expenses. Id. at ¶¶ 30-31. On October
29, 2002, American sent Blender written notice that it was
terminating their agreement. Id. at ¶ 32. As of October 29,
2002, none of the potential funding sources Blender contacted had
any active or pending financing negotiations with American. Id.
at ¶ 33. Blender stopped performing work for American shortly
after receipt of the termination notice, and he did not send
American an invoice for any November 2002 advisory services.
Id. at ¶¶ 34-35. American paid all monthly $5000 retainer and
expense invoices from April 2002 through October 31, 2002. Id.
at ¶ 44.
In November 2002, Collins' boss, who was located in Textron's
Alpharetta, Georgia office, informed Collins that Swett contacted
another Textron sales representative in Alpharetta regarding
financing for American. Id. at ¶ 36. Collins had previously
proposed a Textron terms sheet; because American was located in
Collins' territory, he worked with Swett to prepare a new term
sheet financing proposal. Id. American accepted Textron's
November 23, 2002 term sheet financing proposal and on February
18, 2003, Textron issued financing to American. Id. at ¶¶
37-38. Blender did not negotiate, structure or close any
financing with Textron on American's behalf. Id. at ¶ 41.
American paid CAC a broker's commission as a result of its
obtaining the initial Collins proposal. Id. at ¶ 42. DISCUSSION
I. Summary Judgment Standards
Summary judgment is appropriate when the moving papers and
affidavits show there is no genuine issue of material fact and
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 moving party meets its burden, the non-moving
party must go beyond the pleadings and set forth specific facts
showing there is a genuine issue for trial. Fed.R.Civ.P.
56(e); Silk v. City of Chicago, 194 F.3d 788, 798 (7th Cir.
1999). The court considers the record as a whole and draws all
reasonable inferences in the light most favorable to the party
opposing the motion. Bay v. Cassens Transport Co.,
212 F.3d 969, 972 (7th Cir. 2000). A genuine issue of material fact exists
when "the evidence is such that a reasonable jury could return a
verdict for the nonmoving party." Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 248 (1986).
II. Summary Judgment Motion
A. Success Fee
The crux of this dispute is whether Blender is entitled to a
success fee under the termination provision of the parties'
agreement. American argues the agreement is unambiguous and
Blender is not entitled to a success fee under Illinois law
because he was not the procuring cause of American's loan from
Textron. Specifically, American contends it agreed to pay Blender
a success fee if Blender successfully identified, negotiated,
structured and closed new financing for American. Further,
American asserts Blender could not interact to negotiate and
structure a financing deal with any potential funding source
until Blender obtained a signed NDA, or until American asked
Blender to become involved with the negotiation and structuring
of a deal with a funding source American identified through its own efforts. Because Blender did not
obtain a signed NDA from Textron, and because American did not
close a financing transaction with Textron as a result of any
contact or involvement of Blender's, American argues Blender did
not earn a success fee pursuant to the contract termination
provision. American concludes this court should find under
Illinois law that the term "interaction" as used in the agreement
means Blender had to procure the Textron loan to be entitled to
the success fee.
In response, Blender argues the agreement's termination
provision unambiguously provides he was to receive a success fee
if American ultimately financed with a lender with whom Blender
interacted on American's behalf. Blender contends there is no
contractual language requiring Blender to be the procuring cause
of the deal to recover a fee, nor is there contractual language
requiring him to obtain a signed NDA from the lending source to
recover his fee. Blender argues that Illinois' procuring cause
doctrine does not apply to contracts that provide other bases for
The parties agree that Illinois law controls this contract
dispute. The court must initially determine, as a matter of law,
whether the contract language is ambiguous as to the parties'
intent. Quake Construction Inc. v. American Airlines, Inc.,
141 Ill.2d 281, 288, 565 N.E.2d 990 (Ill. 1990). Contract provisions
must be viewed as a whole to give effect to the parties' intent.
Schek v. Chicago Transit Authority, 42 Ill.2d 362,
247 N.E.2d 886, 888 (Ill. 1969); Kerton v. Lutheran Church Extension Fund,
262 Ill. App. 3d 74, 634 N.E.2d 16, 18 (Ill.App. 1994). "If no
ambiguity exists, the parties intent must be derived . . . solely
from the writing itself." Quake, 141 Ill.2d at 288; see also
Metalex Corp. v. Uniden Corp., 863 F.2d 1331, 1333 (7th Cir.
1988) (interpretation of an unambiguous contract is a question of
law for the court; summary judgment should be granted based on the plain meaning of the contract itself). When interpreting a
contract, terms are to be given their plain and ordinary meaning.
Vill. of Glenview v. Northfield Woods, Water & Utility,
216 Ill.App. 3d 40, 48, 576 N.E.2d 238, 244 (Ill.App.Ct. 1991).
"Parties entering into an agreement are presumed to have used
terms having no technical meaning . . . the words are to be
construed according to their common understanding and common
usage." Id., (citations omitted). A contract is not ambiguous
merely because the parties dispute the meaning of its terms.
By asserting the term "interact" means Blender must be the
procuring cause of the transaction, American reads limitations
into the termination section of the agreement that do not exist.
American's reliance on Mirza v. Fleet Retail Finance, Inc.,
354 F.3d 687 (7th Cir. 2004), Modern Tackle Co. v. Bradley Indus.,
Inc., 11 Ill.App.3d 502, 297 N.E.2d 688 (Ill.App.Ct. 1973) and
the cases cited therein, is misplaced. In those cases, the broker
or finder failed to demonstrate his services were the procuring
cause of the transaction and thus no commission was awarded.
American ignores the specific holding in Modern Tackle,
however, that the broker or finder must be the procuring cause of
the transaction "unless the contract specifies otherwise."
Modern Tackle, 297 N.E.2d at 693. In Modern Tackle and
Mirza, the procuring cause requirement was enforced to alleged
oral agreements. When an agreement specifies a method for
recovering fees or commissions that does not require the broker
to be the procuring cause, the procuring cause rule is
Courts have consistently found the procuring cause rule
inapplicable when a contract specifies other methods for fee
recovery. For example, Bass v. Banga, 656 F. Supp. 312 (N.D.
Ill. 1987), aff'd, 857 F.2d 1476 (7th Cir. 1988), involved a
dispute regarding a real estate broker's commission. The written
agreement between the parties provided a brokerage commission
would be paid if a contract to purchase and sell property was
executed within six months after termination of the agreement "with a purchaser to whom it was offered during
the period hereof." Id. at 313. The court rejected defendant's
argument that the broker was not entitled to the commission
because he was not the procuring cause of the eventual sale.
Id. at 314-15. Relying on Kokinis v. Kotrick,
74 Ill. App. 3d 224, 392 N.E.2d 697 (Ill.App.Ct. 1979), the court found no
procuring cause requirement in the contract. Accordingly, the
court held the broker could recover under the contract, whether
or not he was the procuring cause of the sale, because he
"offered" the property to the party who purchased it within six
months of the contract's expiration. Id. at 315-16.
In Kokinis, a real estate broker brought suit to recover a
commission under the terms of an exclusive listing agreement for
the sale of a motel. 392 N.E.2d at 698. The written agreement
provided the broker would receive a commission if he procured a
purchaser of the property, sold the property, or "if the property
is sold to anyone . . . to whom it was submitted or sold after
termination of this agreement to whom it was submitted or shown
by [plaintiff] . . . during the term of this agreement." Id. at
700. Analyzing the broker's entitlement to a commission after
termination of the agreement, the court rejected defendant's
argument that the broker was not entitled to the commission
because he was not the procuring cause of the sale. Noting the
broker could recover under the contract if he submitted the
property to the buyer within the specified time, whether or not
he was the procuring cause of the sale, the court determined it
need only decide whether the broker's actions constituted a
"submission" of the property. Id. at 701-02. After consulting
prior decisions interpreting the meaning of the word "submit," as
well as definitions, the court found the term "submit" synonymous
with the term "offer." Id. at 702-03. The court held the
broker's mailing of a flyer, indicating an unidentified motel in
the area was for sale and furnishing his name and telephone
number, and his follow up telephone call to see if the buyer was
interested in seeing the property, were sufficient to constitute a submission or offer
entitling him to the commission. Id.; see also Grub & Ellis
Co. v. Bradley Real Estate Trust, 909 F.2d 1050, 1055-56 (7th
Cir. 1990) (failure to procure is irrelevant when agreement
expressly provides for commission payment without regard to
agent's role in transaction); 56 Ill.Admin. Code 300.510(a)
("absent an express agreement to the contrary, an employee who
is the procuring cause of a sale or other transaction is entitled
to commission . . .") (emphasis added).
Here, nothing in the agreement required Blender to be the
procuring cause of a deal in order to receive a success fee. Nor
did the agreement define "interact" to mean Blender was required
to identify, negotiate, structure and close a deal. On its face,
the "Financing Services" language binding Blender to use his
"best efforts" did not limit his right to recover a success fee
to only those situations where he completed all of the identified
tasks. In fact, Blender did not "identify" Sunrock Capital as a
potential lender, nor did the deal close. Nevertheless, American
paid his success fee based on his negotiation efforts. The fact
American requested his assistance does not alter the analysis;
the success fee did not depend on completion of a pre-defined set
of tasks. In addition, the termination section of the agreement
in and of itself anticipates Blender may be awarded a success fee
whether or not he is around to complete all tasks necessary to
close a deal.
The contract is unambiguous. The termination agreement clearly
provides Blender was entitled to a success fee if: (1) American
closed a transaction; (2) with a lender; (3) with whom Blender
had interacted; (4) within 12 months after the agreement was
terminated. It is undisputed that Blender communicated with
Textron in at least two telephone calls and an e-mail on
American's behalf. American argues the communications were not on
its behalf because Textron did not know American's identity and
there was no interaction because there was no signed NDA. These arguments lack merit. Setting aside the agreement's undisputed
silence concerning these "requirements," Blender's communications
were clearly on American's behalf; there is nothing to suggest
Blender's communications were for a purpose unrelated to
American. It must be noted that American requested and received a
list from Blender of the funding sources with whom he
"interacted," Textron was on the list and American never disputed
the list's contents.
Although Blender did not receive a signed NDA or negotiate with
Textron, the agreement did not require those actions for the
award of a success fee. It is undisputed that Blender identified
Textron as a potential lending source, Blender advised American
he had contacted Textron on its behalf, and American was unaware
of Textron as a lending source until advised of Textron by
Blender. Blender forwarded the NDA and American's blind profile
to Textron and communicated with Textron's Texas and Illinois
offices on American's behalf. He did not negotiate or close the
deal. However, all that was required was interaction with the
lending source during the agreement's tenure. American stretches
the meaning of "interact" to reach beyond the agreement. Giving
"interact" its ordinary and customary meaning, Blender clearly
interacted with the lending source on American's behalf, and
American secured financing with that lending source withing
twelve months of the agreement's termination.
Accordingly, American's summary judgment motion on the success
fee issue must be denied. Blender did not cross-file for summary
judgment. Nevertheless, when there are no disputed issues of
material fact, the district court may grant summary judgment sua
sponte in favor of the non-moving party. Jones v. Union Pacific
Railroad Co., 302 F.3d 735, 740 (7th Cir. 2002). "The court may
issue summary judgment sua sponte as long as the losing party
is given notice and an opportunity to come forward with its
evidence." Id. When a party moves for summary judgment, both parties are on notice that summary judgment is under
consideration. Id. In Jones, the moving party argued there
were no genuine issues of material fact. Although the court
agreed, it concluded that the undisputed facts warranted judgment
in the non-movant's favor. Id. The same is true here. Summary
judgment in favor of Blender on his claim for a termination
success fee must be granted.
B. Monthly Advisory Fee
Blender's complaint alleges he is entitled to a $5000 monthly
advisory fee for November 2002. American moves for summary
judgment on the monthly advisory fee claim, asserting it paid all
advisory fees for which it was invoiced. It is undisputed that
Blender stopped performing work for American shortly after
receipt of American's termination notice, and he did not send
American an invoice for November 2002 advisory services. It is
undisputed that American paid all monthly $5000 retainer and
expense invoices from April 2002 through October 31, 2002.
Blender's response to summary judgment is devoid of any basis for
recovery of a $5000 advisory fee for November 2002. Blender has
failed to advance specific facts showing there is a genuine issue
for trial. Fed.R.Civ.P.56(e); Silk v. City of Chicago,
194 F.3d 788, 798 (7th Cir. 1999). American's summary judgment motion
on Blender's claim for a $5000 advisory fee must be granted.
American's summary judgment motion is granted as to the $5000
November 2002 advisory fee and denied as to the termination
success fee. Summary judgment is granted in favor of Blender on
the success fee issue.