United States District Court, N.D. Illinois, Eastern Division
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For Northbound Group, Inc., Plaintiff: Patrick M Jones, LEAD ATTORNEY, Greensfelder Hamker & Gale P.C., Chicago, IL; James H. Ferrick, III, Greensfelder, Hemker & Gale, P.C., St. Louis, MO.
For Norvax, Inc., Leadbot LLC, Clint Jones, Michael Ahern, Defendants, ThirdParty Plaintiffs, Counter Claimants: Jeffrey Brian Greenspan, LEAD ATTORNEY, Meites, Mulder, Burger & Glink, Chicago, IL; Christopher E. Kentra, Meckler, Bulger & Tilson, Chicago, IL.
For Robert McAleer, Benjamin Wagner, Third Party Defendants: Patrick M Jones, LEAD ATTORNEY, Greensfelder Hamker & Gale P.C., Chicago, IL; James H. Ferrick, III, Greensfelder, Hemker & Gale, P.C., St. Louis, MO.
For Northbound Group, Inc., Counter Defendant: Patrick M Jones, LEAD ATTORNEY, Greensfelder Hamker & Gale P.C., Chicago, IL.
MEMORANDUM OPINION AND ORDER 
SIDNEY I. SCHENKIER, United States Magistrate Judge.
Plaintiff Northbound Group, Inc. (" Northbound" or plaintiff), filed an amended complaint against defendants Norvax, Inc. (" Norvax" ), its Chief Executive Officer (" CEO" ) Clint Jones, its Chief Financial Officer (" CFO" ) Michael Ahern, and Leadbot, LLC (" Leadbot" ) (collectively, " defendants" ), alleging that the defendants are liable for fraud, promissory estoppel, breach of contract, breach of fiduciary duty, and conversion (doc. # 4). This Court dismissed the claims for promissory estoppel, breach of fiduciary duty, and conversion; dismissed Leadbot from the fraud claim; narrowed the claim of fraudulent inducement " to the alleged statements about the Bid Platform" ; and dismissed Mr. Jones and Mr. Ahern from the contract claim. Northbound Group, Inc. v. Norvax, Inc., No. 11 C 6131, 2012 WL 394336, at *11 (N.D. Ill. Feb. 6, 2012). Subsequently, defendants filed an answer, affirmative defenses, and a three-count counter-claim/third-party complaint: (1) Leadbot against Northbound, its Chief Executive Officer (" CEO" ) Benjamin Wagner, and its Chief Operating Officer (" COO" ) Robert McAleer for conversion (" Counterclaim Count I" ); (2) Norvax and Leadbot against Mr. Wagner and Mr. McAleer (" counter-defendants" ) for breach of fiduciary duty (" Counterclaim Count II" ); and (3) Norvax and Leadbot against Mr. Wagner, Mr. McAleer, and Northbound for fraud (" Counterclaim Count III" ) (doc. # 56).
Plaintiff Northbound has filed a motion for partial summary judgment on Count III of the amended complaint (breach of contract) (doc. # 112); defendants Leadbot and Norvax have cross-moved for summary judgment on that claim in its entirety (doc. # 129); defendants Norvax, Mr. Jones, and Mr. Ahern have moved for summary judgment on the fraud claim (Count I of the amended complaint) (doc. # 129); and finally, Northbound and third-party
defendants Mr. Wagner and Mr. McAleer seek summary judgment on all three counts of Norvax and Leadbot's counterclaim (Count I: Conversion; Count II: Breach of Fiduciary Duty; and Count III: Fraud) (doc. # 112).
For the following reasons, we grant summary judgment for the defendants on Count I of the amended complaint for fraud and for Norvax on Count III for breach of contract. We grant in part Northbound's motion for partial summary judgment on Count III for the withheld earn-out payments, and grant Leadbot's corresponding motion for summary judgment on Count III other than for plaintiff's claim for the withheld earn-out payments. We also grant counter-defendants' motion for summary judgment on all three counts of the counterclaim asserted against them.
As a preliminary matter, we address two motions to strike filed by the plaintiff and counter-defendants, as well as a motion to strike filed by the defendants. First, we address the motion of Northbound, Mr. Wagner, and Mr. McAleer (doc. # 134) to strike what they characterize as immaterial facts, inferences, and arguments set forth in defendants' Local Rule 56.1(a) statement of uncontested facts (doc. # 162 (corrected version of doc. # 131)) and their motion to strike and response (doc. # 148) to defendants' Local Rule 56.1(b)(3)(C) statement of additional uncontested facts (doc. # 142). We then consider defendants' motion (doc. # 154) to strike portions of the affidavits of Benjamin Wagner (doc. # 136) and Robert McAleer (doc. # 137) filed in support of Northbound's Response in Opposition to Defendants' Motion for Summary Judgment (doc. # 135).
Plaintiff and counter-defendants Northbound, Mr. Wagner, and Mr. McAleer have filed a " Motion to Strike Immaterial Facts, Inferences and Arguments Set Forth in Defendants' Local Rule 56.1(a) Statement of Uncontested Facts" (doc. # 134) and a " Motion to Strike and Response to Defendants' Local Rule 56.1(b)(3)(C) Statement of Additional Uncontested Facts" (doc. # 148). Plaintiff and counter-defendants urge this Court to strike the defendants' statement of uncontested facts (doc. # 162) and statement of additional uncontested facts (doc. # 142) because they contain legal argument, mischaracterizations, immaterial and irrelevant statements, statements that contradict documentary evidence, and inadmissible evidence (doc. # 134 at 2-6; doc. # 148 at 2). Defendants filed a response to the motion to strike their Rule 56.1(a) statement (doc. # 153) and a response to the motion to strike their statement of additional uncontested facts (doc. # 165).
Local Rule 56.1 " is designed, in part, to aid the district court, 'which does not have the advantage of the parties' familiarity with the record and often cannot afford to spend the time combing the record to locate the relevant information,' in determining whether a trial is necessary." Delapaz v. Richardson, 634 F.3d 895, 899 (7th Cir. 2011) (citation omitted). Local Rule 56.1(a)(3) requires the moving party to provide " a statement of material facts as to which the moving party contends there is no genuine issue." Cracco v. Vitran Express, Inc., 559 F.3d 625, 632 (7th Cir. 2009); see Sojka v. Bovis Lend Lease, Inc., 686 F.3d 394, 398 (7th Cir. 2012) (Rule 56.1 statements require " parties to nail down the relevant facts and the way they propose to support them" ). " The opposing party is required to file 'a response to each numbered paragraph in the moving party's statement, including, in the case of
any disagreement, specific references to the affidavits, parts of the record, and other supporting material relied upon." Cracco, 559 F.3d at 632 (citing N.D.Ill. R. 56.1(b)(3)(B)). Also, a nonmovant who seeks to assert facts beyond those fairly responsive to the movant's Rule 56.1(a)(3) statement must do so in a separate statement of additional facts under Local Rule 56.1(b)(3)(C). See Ciomber v. Cooperative Plus, Inc., 527 F.3d 635, 643-44 (7th Cir. 2008); Gray v. Ghosh, No. 12 C 194, 2013 WL 5497250, at *4 (N.D. Ill. Oct. 3, 2013).
Rule 56.1 statements must identify relevant, admissible evidence supporting material facts, without making factual or legal arguments. See Cady v. Sheahan, 467 F.3d 1057, 1060 (7th Cir. 2006). Although we are entitled to demand strict compliance with the Local Rules, we have broad discretion in deciding whether to do so. See Benuzzi v. Bd. of Educ. of City of Chicago, 647 F.3d 652, 655 (7th Cir. 2011).
In the present case, while we agree that defendants' Rule 56.1 statements contain some argumentative, immaterial, irrelevant, or duplicative assertions, we are able to separate defendants' properly alleged facts from their improperly asserted statements. Therefore, we deny as moot plaintiff's and counter-defendants' motions to strike (docs. ## 134, 148), and we will accordingly disregard any improper statements. See, e.g., Zitzka v. Vill. of Westmont, 743 F.Supp.2d 887, 897 (N.D. Ill. 2010) (denying motions to strike as moot and separating proper from improper allegations); Alvarado v. Corporate Cleaning Serv., Inc., 719 F.Supp.2d 935, 938 n.2 (N.D. III. 2010) (denying motion as moot and disregarding improper factual assertions).
The defendants have filed a motion to strike portions of the affidavits of Northbound's CEO Benjamin Wagner (doc. # 136) and its COO Robert McAleer (doc. # 137) on the ground that the affidavits contradict Mr. Wagner's and Mr. McAleer's prior deposition testimony (doc. # 154). Plaintiff filed no response to this motion.
It is well-settled that parties opposing summary judgment may not create issues of fact by contradicting themselves with post-deposition affidavits. Holloway v. Delaware Cnty. Sheriff, 700 F.3d 1063, 1075 (7th Cir. 2012); Kalis v. Colgate--Palmolive Co., 231 F.3d 1049, 1055 (7th Cir. 2000) (" the law of this circuit does not permit a party to create an issue of fact by submitting an affidavit whose conclusions contradict prior deposition or other sworn testimony" ). When a declarant contradicts his or her prior deposition testimony, a court must examine the particular circumstances of the change in testimony to determine " whether it is plainly incredible or merely creates a credibility issue for the jury." Patton v. MFS/Sun Life Fin. Distribs., 480 F.3d 478, 488 (7th Cir. 2007). Defendants ask us to strike paragraphs 3 through 6 of Benjamin Wagner's affidavit (doc. # 136), and paragraphs 3, 4, 5, 11 and Exhibits J and K of Robert McAleer's affidavit (doc. # 137).
Defendants argue that paragraphs 3 through 6 of the Wagner affidavit and paragraphs 3 through 5 of the McAleer affidavit improperly attempt to assert that in persuading Northbound to sell its assets to start a new business, representatives from Norvax falsely advised Mr. Wagner and Mr. McAleer that its computer systems that matched insurance leads with orders from Norvax's customers (the " Bid Platform" ) would award bids to the highest
bidder (doc. # 154 at 2--7). The amended complaint alleged that Mr. Jones and Mr. Ahern " repeatedly represented to Northbound that the Bid Platform did not discriminate among bids and awarded leads to the highest bidder" (doc. # 4 at ¶ 20). In their depositions, Mr. Wagner and Mr. McAleer were both questioned regarding any conversations they had with Norvax executives Mr. Jones and Mr. Ahern in the period preceding the signing of the document that memorialized the business agreement, the Asset Purchase Agreement (doc. # 4, Ex. A: " APA" ). They both testified regarding specific meetings with Norvax representatives in which a variety of issues were discussed in anticipation of doing business together, such as possible debt forgiveness, office space, and having the new company proceed as a single company with multiple brands (doc. # 154, Ex. C (Wagner Deposition Excerpts) & Ex. D (McAleer Deposition Excerpts); doc. # 162, Ex. D (Wagner Deposition Excerpts) & Ex. E (McAleer Deposition Excerpts)).
Despite being questioned about -- and testifying about -- negotiations leading to the APA, neither one ever mentioned any discussions about the Bid Platform or how it functioned. Though neither one was explicitly asked whether anyone from Norvax made promises about the Bid Platform, the performance of the Bid Platform was clearly central to Northbound's claim of fraud. One would expect that either Mr. Wagner or Mr. McAleer, or both, would have recalled and recounted such significant representations that allegedly induced them to enter the agreement with Leadbot. But they did not.
Nevertheless, in response to the defendants' motion for summary judgment, Northbound filed affidavits of Mr. Wagner and Mr. McAleer in which they now attest (though without any specificity as to when, where, or to whom) that Mr. Jones made a representation about the Bid Platform: " Jones also represented, prior to entering into the APA, that Norvax's bid platform awarded bids to the highest bidder. Jones also repeated this false statement shortly after entering into the APA" (doc. # 137 ¶ 3; doc. # 136 ¶ 4). In addition, they assert in their affidavits that Mr. Ahern " confirmed" Mr. Jones's representations and that Northbound relied on the representations in entering into the APA (doc. # 136 ¶ ¶ 5, 6; doc. # 137 ¶ ¶ 4, 5).
Given the amended complaint's allegations that Mr. Jones and Mr. Ahern " repeatedly" made such representations, we find it noteworthy that during their depositions, neither Mr. Wagner nor Mr. McAleer identified or described any such statements; they did not mention any discussion of Norvax's Bid Platform. Nor do they attempt to explain how or why they now recall that these representations were made, when they did not recall or describe them during their depositions. See Stanfield v. Dart, No. 10 C 6569, 2012 WL 6720433, at *4 (N.D. III. Dec. 27, 2012) (disregarding fact in affidavit that contradicted deposition lack of recall without explaining subsequent recollection). Consequently, we find the statements an improper attempt to create a material dispute of fact.
Moreover, even were these statements not stricken, they are too conclusory and barren of supporting detail to defeat summary judgment. See Lujan v. Nat'l Wildlife Fed'n, 497 U.S. 871, 888, 110 S.Ct. 3177, 111 L.Ed.2d 695 (1990) ( " The object of [Rule 56(e)] is not to replace conclusory allegations of the complaint or answer with conclusory allegations of an affidavit" ). Despite having the benefit of discovery, both Mr. Wagner and Mr. McAleer only offer general descriptions of the defendants' purported misstatements, still failing to specify when, where, and how the
alleged misrepresentations were made. Cf. Ghandi v. Sitara Capital Mgmt., LLC, 721 F.3d 865, 870 (7th Cir. 2013) (affirming grant of summary judgment and denial of motion to amend complaint where even after discovery, plaintiffs did not specify time, place, or manner of communication of alleged fraudulent misrepresentations). Northbound cannot now create an issue of fact with the vague assertions in these post-deposition affidavits. See also Gabrielle M. v. Park Forest-Chicago Heights, Ill. Sch. Dist. 163, 315 F.3d 817, 822 (7th Cir. 2003) ( " It is well established that in order to withstand summary judgment, the non-movant must allege specific facts creating a genuine issue for trial and may not rely on vague, conclusory allegations" ) (emphasis in original); Hadley v. Cnty. of DuPage, 715 F.2d 1238, 1243 (7th Cir. 1983) ( " Rule 56 demands something more specific than the bald assertion of the general truth of a particular matter, rather it requires affidavits that cite specific concrete facts establishing the existence of the truth of the matter asserted" ). Therefore, we grant the motion to strike the portions of paragraphs 4, 5, and 6 of Benjamin Wagner's affidavit  and 3, 4 and 5 of Robert McAleer's affidavit that address representations about the Bid Platform.
Defendants also seek to strike paragraph 11 of the McAleer affidavit, in which Mr. McAleer states that he created a damages spreadsheet attached to the affidavit as Exhibit J, along with " a narrative detailing the evidence that I relied on in making the computations," attached as Exhibit K (doc. # 137 at ¶ 11, Ex.'s K & L). Defendants point out that at the time of Mr. McAleer's October 29, 2012 deposition, he was unable to recall how he had calculated the damages reflected in an earlier (and somewhat different) damages spreadsheet that had been produced in discovery; nor was he aware of whether any underlying worksheet existed that recorded the analysis he used (doc. # 154 at 7-8 & Ex. D: McAleer Deposition Excerpts at 177:18-24; 180:23-181:1; 184:22-185:3; 185:12-186:5). After his deposition and prior to the close of discovery on November 30, 2012, Mr. McAleer never supplied any underlying documents supporting the spreadsheet or revealing how he calculated the figures in that document.
It was only on June 3, 2013, six months after the close of discovery and in response to the defendants' motion for summary judgment, that plaintiff filed Mr. McAleer's affidavit, which for the first time supplied a " narrative" explanation for the plaintiff's damages calculation (doc. # 137 at Ex. L). But nowhere on the document or in the affidavit does Mr. McAleer describe when he created this " narrative." And, although at the time of his deposition Mr. McAleer could not recall how he arrived at his calculations, he does not explain in his affidavit how he came to remember that analysis now. See Stanfield, 2012 WL 6720433, at *4. We are mindful that Mr. McAleer asserts generally that " [a]ll of the evidence that I relied on has been produced, primarily by the Defendants, as part of the discovery process in this case" (doc. # 137 at ¶ 11). However, neither Exhibit L nor Mr. McAleer's affidavit identifies any of the documentary evidence on which the spreadsheet is purportedly based. Moreover, defendants contend, without contradiction, that Mr. McAleer's narrative document (Ex. L) was never produced during discovery (doc. # 154 at 9).
Defendants argue that this paragraph of Mr. McAleer's affidavit and the referenced exhibits should be stricken both because they contradict Mr. McAleer's deposition testimony and because they rely on inadmissible evidence. We agree. Because paragraph 11 and Exhibits K and L are inconsistent with Mr. McAleer's deposition testimony and because plaintiff did not produce the worksheet he relied upon during discovery, we grant the motion to strike paragraph 11 and Exhibits K and L. See Technology Sourcing, Inc. v. Griffin, No. 10 C 4959, 2013 WL 1828750, at *1 (N.D. Ill. Apr. 30, 2013) (motion to strike damages affidavit granted where affiant had previously testified that he did not know or was noncommittal in response to deposition questions regarding damages); Divane v. Dunning Elec. Serv., Inc., No. 11 CV 4915, 2013 WL 1442219, at *3 (N.D. Ill Apr. 5, 2013) (striking documents attached to affidavit that had not been produced in discovery); see also Fed.R.Civ.P. 37(c)(1) ( ...