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Gordon v. Vitalis Partners

January 27, 2010

BEN GORDON, G7 DEVELOPMENT, INC. AND BG4, INC., PLAINTIFFS,
v.
VITALIS PARTNERS, LLC; LARRY HARMON & ASSOCIATES, P.A.; KCD DEVELOPMENT, CO.; LARRY HARMON AND KENNY CRUZ, DEFENDANTS.



The opinion of the court was delivered by: Charles P. Kocoras United States District Judge

MEMORANDUM OPINION

CHARLES P. KOCORAS, District Judge

This matter comes before the court on two motions for summary judgment. In the first, Plaintiffs Ben Gordon; G7 Development, Inc.; and BG4, Inc. (collectively referred to herein as "Gordon") request summary judgment in their favor on Count I of Gordon's complaint. In the second, Defendants Larry Harmon and Larry Harmon & Associates, PA (collectively referred to herein as "LHA") move for summary judgment in their favor on Count II of Gordon's complaint. For the reasons set forth below, both motions are granted.

BACKGROUND

Gordon is a professional basketball player who played for the Chicago Bulls from 2004 until 2009, when he left the Bulls to play for the Detroit Pistons. Before Gordon was drafted by the Bulls as a rookie, he engaged LHA as financial advisors and consultants. The engagement letter*fn1 stated in pertinent part that LHA would provide "services for the duration of [Gordon's] playing career in the National Basketball Association ("NBA")." The letter went on to set forth estimated fees for these services. For the first year of Gordon's anticipated four-year contract with the Bulls, the estimated fees would be $4000 per month, plus out-of-pocket expenses. In the second year, the estimated monthly fee would increase to $5000 plus out-of-pocket expenses. Finally, in the third year and the fourth year (assuming that the team exercised its option to keep Gordon for that year), the fee would go to $6000 per month plus out-of-pocket expenses. The letter reiterated that this schedule was not finalized and that the fee ultimately charged would be "based upon the amount of actual time spent on your account at standard billing rates." After Gordon's rookie contract was completed, LHA would evaluate the amount of work performed on his account and provide Gordon with a new engagement letter.

In May 2006, Harmon informed Gordon that, beginning with the April 2006 invoice, LHA's fees had changed from the previously used flat-fee structure to a percentage-based model, specifically 1.5% of Gordon's annual income. Although Gordon did not explicitly agree to the new arrangement, for the next 14 months he paid all invoices Harmon sent, which were calculated at the 1.5% rate. In four of those 14 months, the fee charged using the 1.5% calculation had yielded a fee in excess of the amount that would have been due under the flat-fee system. Gordon did not object to the new fee structure until June 2007. Over that period, the overall fees using the percentage-based calculation were $10,302.53 less than would have been charged using the flat fee amounts.

In February 2007, Defendants Larry Harmon, Kenny Cruz, LHA, KCD Development, LLC ("KCD"), and Vitalis Partners, LLC ("Vitalis") (collectively referred to as "the borrowers") executed a note memorializing, inter alia, an obligation to repay $1,350,000 to Gordon. The parties do not agree on the purpose of the loan or the specifics of how it came to pass. However, there is no dispute that Gordon read the promissory note (prepared by the borrowers) and discussed it with another financial advisor before signing and only then authorized that the funds be transferred. Pursuant to the note, all of the borrowers jointly and severally promised to repay Gordon $1,250,000 over a two-year period ($1,000,000 plus 17.5% interest). Full payment was required by February 12, 2009. The contract provided that the borrowers would be in default if they failed to make any payment within 45 days of the payment date provided. For late payments, a late charge of 3% would be applied. The note provided a variety of other remedies as well. On or shortly after February 12, 2007, Gordon fulfilled all of his obligations under the note when he transferred $1,000,000 of his own funds to the borrowers.

Harmon and Cruz acknowledged that they were obligated to repay the $1,250,000 when the note expired on February 12, 2009. However, that payment was not made.*fn2

At some point in 2007, which is not specified in the record, Gordon fired LHA as his advisors. His rookie contract continued into 2008.

In September 2007, Gordon filed suit, alleging breach of contract for failure to pay the note and breach of fiduciary duty in connection with the transaction underlying the note as well as other aspects of the parties' business dealings. LHA subsequently filed a counterclaim for breach of contract. Discovery has been completed and each party now moves for summary judgment on one of the counts of the main complaint.

LEGAL STANDARD

Summary judgment is appropriate when "the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant in entitled to summary judgment as a matter of law." Fed. R. Civ. P. 56(c). A genuine issue of material fact exists when the evidence is such that a reasonable jury could find for the non-movant. Buscaglia v. United States, 25 F.3d 530, 534 (7th Cir. 1994). The movant in a motion for summary judgment bears the burden of demonstrating the absence of a genuine issue of material fact by specific citation to the record; if the party succeeds in doing so, the burden shifts to the non-movant to set forth specific facts showing that there is a genuine issue of fact for trial. Fed. R. Civ. P. 56(e); Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 2554 (1986). In considering motions for summary judgment, a court construes all facts and draws all inferences from the record in favor of the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 2513 (1986).

With these principles in mind, we turn to the ...


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