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Allen & Company, LLC v. Sanford Usd Medical Center

March 15, 2011


The opinion of the court was delivered by: Judge Robert W. Gettleman


Plaintiff Allen & Company, LLC, brought a two-count complaint in the Circuit Court of the Eighteenth Judicial District, DuPage County, Illinois, alleging claims for declaratory judgment and breach of contract. Defendant Sanford USD Medical Center removed the action to this court pursuant to 28 U.S.C. § 1441(b). Defendant has filed counterclaims for declaratory relief and unjust enrichment. Plaintiff filed the instant motion for summary judgment. For the reasons discussed below, plaintiff's motion for summary judgment is granted.*fn1


On August 30, 2004, defendant entered into a five-year License Agreement with BioSafe Medical Technologies, Inc. ("BioSafe"), an Illinois corporation that sold proprietary technology for conducting blood sample analysis for various purposes, including cholesterol testing. Defendant was obligated to pay BioSafe a monthly fee for a license to use its technology, and BioSafe was to provide defendant with the right to its license, as well as training, components to assemble a cholesterol blood-screen test, and relevant printed collateral materials. The agreement also required BioSafe to refer blood samples to Sanford for cholesterol testing, and guaranteed Sanford certain revenues from those referrals.

Also on August 30, 2004, First Commercial Bank ("First Commercial") and defendant entered into a Master Lease Agreement for BioSafe medical equipment (a cholesterol panel system) that required defendant to make lease payments to First Commercial over a period of five years. The Master Lease Agreement included a so-called "hell or high water" provision warning defendant that its obligation to make rental payments was "irrevocable and absolute."*fn3

It also contained a waiver of defense provision, under which defendant agreed to waive all defenses and counterclaims against First Commercial or its assignee ("the rights of any transferee, assignee or secured party shall not be subject to any defense, set-off or counterclaims that Lessee may have against Lessor or any other party"). The Master Lease Agreement further provided that First Commercial had the right to assign its interest in the lease at any time without notice to defendant.

The parties attached to and incorporated into the Master Lease Agreement a signed Equipment Acceptance certifying that defendant had accepted the BioSafe cholesterol panel system. Specifically, the Equipment Acceptance stated that the equipment (described unambiguously as "Biosafe Cholesterol Panel System") had "been delivered and inspected, is of an acceptable size, design, capacity and manufacture, is in good working order, repair and condition, and has been installed to the satisfaction of Lessee; and [defendant] unconditionally accepts the Equipment for all purposes of the Lease." Also attached to and incorporated into the Master Lease Agreement was an Equipment Schedule stating that defendant was to make monthly rental payments for the next 60 months.

Plaintiff Allen & Company, LLC, which is in the business of providing financing for leasing agreements, agreed to finance First Commercial's Master Lease Agreement with defendant. First Commercial accordingly assigned its right to receive payment under the Master Lease Agreement to plaintiff. Plaintiff claims that when it agreed to finance the Master Lease Agreement, it believed (based on the terms of the Master Lease Agreement and the attached Equipment Acceptance) that the equipment had already been delivered to and accepted by defendant.

Plaintiff performed under the Master Lease Agreement and its financing agreement with First Commercial until February 2008, at which time defendant stopped making the monthly payments. Plaintiff filed the instant litigation in Illinois state court, and the case was subsequently removed to this court. Defendant has asserted various affirmative defenses and counterclaims based on the separate Licensing Agreement that it executed with BioSafe. Essentially, defendant argues that it never received and accepted the equipment that was the subject of the Agreement, that it has no duty to make lease payments to First Commercial, the financing party, and that the Agreement was the product of fraud and conspiracy.

Plaintiff has filed the instant motion for summary judgment, claiming that Sanford has failed to present any evidence to support its affirmative defenses and counterclaims. Plaintiff argues that courts have consistently enforced this type of agreement's terms to bar defenses and counterclaims such as those presented by defendant. Additionally, plaintiff argues that because defendant executed the Master Lease Agreement, signed the Equipment Acceptance, and performed for over three years, it is now estopped from raising defenses and counterclaims against plaintiff.


I. Legal Standard

A movant is entitled to summary judgment under Rule 56 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(a). The moving party bears the initial burden of pointing out the absence of a genuine issue of material fact. Once the moving party has met that burden, the nonmoving party must go beyond the pleadings and present specific facts showing there is a genuine issue for trial. Celotex, 477 U.S. at 322-23 ("In our view, the plain language of Rule 56(c) mandates the entry of summary judgment . . . against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which the party will bear the burden of proof at trial."). The court ...

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