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Baldwin Enterprises, Inc. v. Retail Ventures

February 18, 2010


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


A. Introduction

This lawsuit stems from a commercial lease agreement executed in 1973, an amendment to (and guaranty of) the lease agreement in 2000, and a multi-layered reorganization and merger in 2003. The crux of the case is whether, under the guaranty, the named Defendant in this action is liable to the named Plaintiff for unpaid rent and damages for breach of the lease.

Baldwin Enterprises filed this action in the Circuit Court of Bond County, Illinois, from which Retail Ventures, Incorporated removed the case to this Court one year ago. The removal notice properly identifies the basis for federal subject matter jurisdiction -- the diversity statute, 28 U.S.C. § 1332.*fn1

The discovery deadline has elapsed. The case is set for trial June 21, 2010, with a June 4, 2010 final pretrial conference. The January 12, 2010 settlement conference was continued by the Honorable Philip M. Frazier, United States Magistrate Judge. The case comes before this Court on timely cross-motions for summary judgment, which were fully briefed as of February 5, 2010. For the reasons stated below, the Court denies Plaintiff's motion and partially grants/partially denies Defendant's cross-motion.

B. Factual and Procedural Background*fn2

In May 1993, an Illinois partnership named CLEPA's (as landlord) and a Missouri corporation named Gramex Corporation (as tenant) entered into a commercial lease agreement for a property located at 1400 East Route 40 in Greenville, Illinois ("the Lease"). The Lease had a 15-year term and obligated Gramex Corporation to pay annual base rent of $234,000 in 12 monthly installments of $21,175.

In November 1999, Value City Department Stores, Inc. ("Value City") purchased 100% of the common stock of Gramex Corporation. Also on that date, Gramex Corporation assigned all of its rights and interest under the Lease to Gramex Retail Stores, Inc. ("Gramex Retail"). Gramex Retail assumed all the obligations and benefits of tenant Gramex Corporation under the lease. See Assignment at Doc. 24-3, p. 34.

On May 23, 2000, two documents central to this litigation were executed. First, CLEPA's (as landlord) and Gramex Retail (as tenant) executed an Amended Lease. Second, Value City executed a Guaranty of Lease, whereby Value City guaranteed Gramex Retail's performance of obligations under the Amended Lease. Sometime after the Amended Lease and Guaranty were executed, Baldwin Enterprises, Inc. ("Baldwin") acquired all interest in CLEPA's, explaining why Baldwin is the named Plaintiff herein.

In October 2003, Value City underwent a corporate reorganization. The record contains a tangle of allegations and attestations about what happened in that reorganization. Carefully scrutinized, the record reveals that Value City became a wholly-owned subsidiary of Retail Ventures, Inc. ("RVI"). Specifically (as described more fully below) via a transaction known as a triangular merger, Value City merged into a subsidiary of RVI (as opposed to merging directly with RVI). The consequences of that merger are at issue here.

In April 2008, the leased premises were abandoned, allegedly leaving rent owed, real estate taxes unpaid, and the parking lot in a state of extreme disrepair. The ultimate question is whether RVI is liable to Baldwin for the alleged breach (via the Guaranty executed by Value City). Baldwin says yes, contending that RVI assumed the liabilities of Value City. RVI says no, maintaining that the October 2003 reorganization left Value City intact as a corporation with its own liabilities and did not render RVI the guarantor under the Guaranty executed by Value City.

In January 2009, Baldwin sued RVI in Illinois state court. Baldwin alleged that Gramex Retail abandoned the premises and defaulted on the lease, that Value City had guaranteed performance of all lease covenants, and that RVI continued the previous business activity of (and succeeded to the obligations of) Value City, thereby rendering RVI liable to Baldwin for unpaid rent of roughly $128,000, repair costs of about $84,000, real estate taxes of $113,000, plus interest, attorney's fees and costs of this action.

RVI removed the case to the United States District Court in February 2009. Baldwin amended its complaint in April 2009. The amended complaint contains two counts. Both counts allege breach of the Guaranty.

Count I proceeds on a theory ofsuccessor liability (against RVI as successor to Value City). Count II alleges that the Court should pierce the corporate veil of Value City (to impose liability against Value City's alter-ego, RVI).

Baldwin moved for partial summary judgment on the issue of RVI's successor liability (Count I) on November 30, 2009. RVI timely opposed Baldwin's motion and cross-moved for summary judgment on January 4, 2010. The motions were fully briefed February 5, 2010. With that factual and procedural overview, the Court turns to the standards governing analysis of the pending motions.

C. Applicable Legal Standards

Summary judgment is appropriate where there are no genuine issues of material fact, and the moving party is entitled to judgment as a matter of law. Turner v. The Saloon, Ltd., -- F.3d --, 2010 WL 424580, *3 (7th Cir. Feb. 8, 2010); Durable Mfg. Co. v. U.S. Department of Labor, 578 F.3d 497, 501 (7th Cir. 2009), citing FED.R.CIV.P.56(c). Accord Levy v. Minnesota Life Ins. Co., 517 F.3d 519 (7th Cir. 2008); Breneisen v. Motorola, Inc., 512 F.3d 972 (7th Cir. 2008), citing Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986).

In ruling on a summary judgment motion, this Court must view in the light most favorable to the non-movant the evidence plus all inferences reasonably drawn from the evidence. Reget v. City of La Crosse, -- F.3d --, 2010 WL 424581 (7th Cir. Feb. 8, 2010); TAS Distributing Co., Inc. v. Cummins Engine Co., Inc., 491 F.3d 625, 630 (7th Cir. 2007).

When cross-motions for summary judgment are filed, "we look to the burden of proof that each party would bear on an issue of trial; we then require that party to go beyond the pleadings and affirmatively to establish a genuine issue of material fact." Diaz v. Prudential Ins. Co. of America, 499 F.3d 640, 643 (7th Cir. 2007). As the United States Court of Appeals for the Seventh Circuit has explained, on cross-motions for summary judgment, the Court must construe "the evidence and all reasonable inferences in favor of the party against whom the motion under consideration is made." Durable, 578 F.3d at 501, citing Rickher v. Home Depot., Inc., 535 F.3d 661, 664 (7th Cir. 2008). Accord Jefferson v. United States, 546 F.3d 477, 480 (7th Cir. 2008).

And when the nonmoving party bears the burden of proof, he must demonstrate the existence of a genuine fact issue to defeat summary judgment. Reget, 2010 WL 424581, *2. That is, the non-movant must provide evidence on which the jury or court could find in his favor. See Maclin v. SBC Ameritech, 520 F.3d 781, 786 (7th Cir. 2008).

D. Analysis

The central question here is whether Defendant RVI is the guarantor of obligations under the Amended Lease and, therefore, on the hook for damages from any breach of the lease terms. RVI is not named as the guarantor in the Guaranty. ...

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