United States District Court, N.D. Illinois, Eastern Division
MEMORANDUM OPINION & ORDER
JOAN B. GOTTSCHALL, District Judge.
Plaintiff ForteCEO Services, Inc. sued defendants Terra Contracting, LLC; Terra Abatement Services, LLC; Terra I/S, LLC; PJT Equipment Leasing, LLC; and Down Under Municipal Services, LLC; alleging breach of contract and seeking a declaratory judgment. Now before the court is Forte's motion for partial summary judgment on its claim for declaratory judgment. For the reasons stated below, the motion is granted.
The following facts are not disputed unless indicated otherwise.
Forte is an Illinois corporation that provides business-consulting services. As of September 26, 2012 (the date on which the defendants answered the complaint), the defendants (collectively, Terra) were citizens of Michigan and were engaged in the business of providing, or supporting, environmental-remediation services and industrial, sewer and hazardous-material cleaning and abatement services. From at least 2010 through 2012, Steve Taplin was the 100% owner of Terra Contracting, LLC; Terra Abatement Services, LLC; Terra I/S, LLC, and PJT Equipment Leasing, LLC. Taplin also owned 68% of Down Under Municipal Services, LLC before January 1, 2011, at which time he became its 100% owner.
In February 2010, Terra engaged Forte to provide a detailed assessment of Terra's business. On May 12, 2010, Forte and Terra entered into and executed a written agreement detailing the "scope, process, and deliverables" of the project. One of the goals of the project is to "[i]mplement recommendations from the Business Assessment report that will grow sales, profits, and Enterprise Value." (Agreement 1, ECF No. 88-4.)
In his deposition, Taplin indicated that he considers the agreement binding on all parties. Forte began providing anticipatory services to Terra in April 2010, and continued providing services pursuant to the terms of the agreement after May 12, 2010. Forte's engagement with Terra ended in March 2011.
By the terms of the agreement, 25% of Forte's base fee for its services was deferred into an incentive bucket. Forte was entitled to incentive payments based on annual-performance and sale-incentive formulas detailed in the agreement. The parties dispute how the formulas work, but agree that they are tied in part to Terra's EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization).
In July 2010, Enbridge Energy Partners, LLP engaged Terra to provide contracting services relating to a leak in an underground pipeline that caused an estimated 800, 000 gallons of crude oil to spill into a waterway of the Kalamazoo River in Michigan. Terra earned substantial revenue from the Enbridge project in 2010 and 2011.
Bruce Reder was Terra's chief financial officer from July 27, 2010 through December 31, 2012. Around April 2011, Reder prepared an EBITDA-improvement calculation for 2009 and 2010 based on Terra's audited financial statements and a calculation of the Annual Performance Incentive Fee for 2010. Reder sent the calculation to Forte on April 26, 2011. The EBITDA-improvement calculation included EBITDA relating to the Enbridge project. Sometime thereafter, Forte received Terra's audited financial statements for 2009 and 2010. The 2010 statements included earnings and expenses from the Enbridge project.
Forte sent an invoice dated July 15, 2011 to Terra for incentive-fee amounts due pursuant to the parties' agreement. Terra advised Forte that it would not pay the amount set forth in the invoice. Terra told Forte that EBITDA relating to Enbridge should not be included in Terra's EBITDA for purposes of the incentive-compensation calculations.
In connection with this litigation, Terra provided Forte with its calculations of the incentive-compensation formulas in the agreement, totaling $175, 000. In those calculations, Terra did not include EBITDA it asserted was related to the Enbridge project. Forte argues that revenue and expenses from the Enbridge revenue should have been included in Terra's EBITDA calculation.
The agreement's incentive-formula provision states:
1. Annual Performance (For years 2010 and beyond)
% of EBITDA (excluding ForteONE cost) above 2009 level in each calendar year
5% from 0 to $500, 000
7.5% from $500, 001 to $1, 000, 000
10.0% above $1, 000, 000
Paid within 30 days of final audited ...