The opinion of the court was delivered by: Judge Joan H. Lefkow
MEMORANDUM OPINION AND ORDER
In this action Plaintiff, Central States, Southeast and Southwest Areas Pension Fund ("the Pension Fund"), filed a complaint against defendants to collect the net proceeds of real estate leasing activity pursuant to a settlement agreement concerning a prior case. Jurisdiction is correctly based in diversity, 28 U.S.C. § 1332, as none of the trustees of the Pension Fund is a citizen of the same state as any defendant and the amount in controversy exceeds $75,000 exclusive of interest and costs. Before the court are the parties' cross motions for summary judgment. For the following reasons, plaintiff's motion for summary judgment [#51] will be granted and defendants' motion for summary judgment [#54] will be denied.
Summary judgment obviates the need for a trial where there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). To determine whether any genuine issue of fact exists, the court must pierce the pleadings and assess the proof as presented in the pleadings, depositions, answers to interrogatories, admissions, and affidavits that are part of the record. Fed R. Civ. P. 56(c) & advisory committee's notes. The party seeking summary judgment bears the initial burden of proving that there is no genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed. 2d 265 (1986). In response, the non-moving party cannot rest on mere pleadings alone but must use the evidentiary tools listed above to designate specific material facts showing that there is a genuine issue for trial. Id. at 324; Insolia v. Philip Morris Inc., 216 F.3d 596, 598 (7th Cir. 2000). A material fact is one that might affect the outcome of the suit. Insolia, 216 F.3d at 598--99. Although a bare contention that an issue of fact exists is insufficient to create a factual dispute, Bellaver v. Quanex Corp., 200 F.3d 485, 492 (7th Cir. 2000), the court must construe all facts in a light most favorable to the non-moving party and draw all reasonable inferences in that party's favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed. 2d 202 (1986).
In April 2005, the Pension Fund filed case No. 05 C 1949 ("the Preceding Lawsuit") in the Northern District of Illinois against certain of the defendants to collect $13,907,192.10 in withdrawal liability incurred by an employer as a result of a withdrawal from a multi-employer pension plan, as well as interest and statutory penalties. In October 2005, the court entered a stipulated preliminary injunction which required the defendants in the lawsuit to remit more than $2 million in past due withdrawal liability payments and to timely pay all future interim withdrawal liability payments. In July 2006, the Pension Fund and defendants entered into a written settlement agreement to resolve the Pension Fund's claims in the Preceding Lawsuit.
Before reaching that agreement, the parties exchanged various drafts. Of particular relevance to this lawsuit, the parties negotiated a provision whereby defendants would annually pay to the Pension Fund the Net Proceeds from the previous year's leasing of five specific parcels of real property (hereinafter referred to as "the Properties"). In response to the Pension Fund's initial draft of the settlement agreement, defendants provided a marked-up draft of the agreement in which defendants proposed being permitted to deduct from total proceeds (in order to calculate Net Proceeds) "capital improvements," "reasonable management fees not to exceed six percent of the gross rental proceeds," and "any other reasonable and necessary costs and expenses of operating and managing the Properties." Defs.' Resp. to Pl.'s SoF ¶ 10. The Pension Fund rejected these proposed deductions, although it ultimately agreed to allow defendants to deduct a reduced amount for management fees.
The parties' written settlement agreement ("the Agreement") provides that it was entered into in Illinois and that it would be "construed and interpreted in accordance" with Illinois law. Defs.' Resp. to Pl.'s SoF ¶ 14. Pursuant to the terms of the Agreement, defendants paid the Pension Fund $1,273,572.66. Defendants also agreed to remit "Additional Consideration to the Pension Fund. Id. ¶ 16. Specifically, defendants agreed to "pay or cause to be paid to the Pension Fund 60 percent of the Net Proceeds" from the Properties, as well as certain Net Proceeds with respect to the sales of the properties. Id. Paragraph 2(b) of the Agreement defines Net Proceeds as follows:
Net Proceeds with respect to the lease of the Properties shall mean all proceeds generated on or after January 1, 2006, from any such lease, less any reasonable and necessary costs incurred in the lease of the Properties, including (i) mortgage payments; (ii) direct costs of maintaining the Properties (and buildings and appurtenances thereon), provided that the lessor is responsible for paying such costs under any lease; (iii) insurance; (iv) real estate taxes required to be paid by the lessor under the lease; (vi) [sic] utilities required to be paid by the lessor under the lease; [and] (vi) management fees actually incurred, but not to exceed the lesser amount of $32,500 or 2% of the total revenues from all leases for the relevant year . . . .
Pl.'s SoF ¶ 17; Pl.'s SoF, Ex. 4 ( pt. 1 of 4), Ex. A, at 6.
The Agreement required defendants to provide the Pension Fund with an annual accounting "beginning on January 15, 2007 and continuing on each January 15 thereafter," establishing the Net Proceeds due to the Pension Fund each year. Id. ¶ 18. The Agreement further required defendants to pay such amounts to the Pension Fund within seven days after the combined accounting was approved by the parties.
In 2007, defendants provided the Pension Fund with the accounting of Net Proceeds due to the Pension relating to leasing activity in 2006. The Pension Fund and defendants were not able to agree, however, on the Net Proceeds, and the Pension Fund then demanded that defendants pay certain Net Proceeds to the Pension Fund. Defendants have not remitted any Net Proceeds to the Pension Fund with respect to leasing activity in 2006.
Defendants argue that there were no Net Proceeds due to the Pension Fund for 2006, claiming that the "reasonable and necessary costs incurred in the lease of the Properties" exceeded the total lease proceeds. Id. ¶ 23. Among the items that defendants argue constitute "reasonable and necessary costs incurred in the lease of the Properties" for 2006 is depreciation with respect to the Properties in the amount $377,264.00." Id. ¶ 24.
The Pension Fund argues that depreciation does not constitute a "reasonable and necessary cost" under the terms of the Agreement. If the claimed $377,264.00 deduction for depreciation is added back in, the defendants would ...