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Maher v. The Rowen Group, Inc.

United States District Court, N.D. Illinois, Eastern Division

July 7, 2015

ROBERT P. MAHER and MARILYN V. MAHER, Plaintiffs,
v.
THE ROWEN GROUP, INC., d/b/a PLAYROOM ENTERTAINMENT, and DANIEL M.J. ROWEN, Defendants.

MEMORANDUM OPINION AND ORDER

MARVIN E. ASPEN, District Judge.

On September 7, 2012, Plaintiffs Robert and Marilyn Maher ("Plaintiffs" or "the Mahers") brought suit against The Rowen Group, Inc., d/b/a Playroom Entertainment ("Playroom") and its president and founder, Daniel M.J. Rowen ("Rowen"), alleging numerous claims arising out of a loan made from the Mahers to Playroom. Rowen had acted as guarantor for the loan. Playroom and Rowen subsequently filed counterclaims against the Mahers, alleging that the Mahers had breached the loan agreements themselves and had committed tortious interference with another contract.[1] Plaintiffs filed a motion for partial summary judgment as to their claims for breach of contract (Count One) and for breach of guaranty (Count Two). Plaintiffs also sought summary judgment in their favor on Defendants' counterclaims. (Dkt. No. 179.)

By opinion dated January 20, 2015 ("Opinion"), we denied Plaintiffs' motion with respect to the intertwined breach of contract claim and counterclaim. (Dkt. No. 299.) We found that Defendants had breached three particular sections of the loan agreement executed June 30, 2011 ("Agreement"), triggering default. (Op. at 28-38.) Due to these breaches, the Agreement entitled the Mahers to accelerate the indebtedness. ( Id. at 38.) We further found that the Mahers demanded payment on August 20, 2012 and that Defendants had not satisfied their obligations to pay the accelerated debt in full. ( Id. ) We denied summary judgment, however, because we found that Defendants raised a genuine question of material fact about whether the Mahers adequately performed their duties under the Agreement. ( Id. at 38-40.) By April 6, 2012, the Mahers had refused to disburse the final $65, 000 under Agreement, and the parties dispute whether that refusal was justified. ( Id. ) Due to open questions surrounding whether the Mahers "substantially complied with all the material terms of the [Agreement], " as necessary for them to prevail on a breach of contract claim, we denied Plaintiffs' motion both as to their breach of contract claim and as to Defendants' breach of contract counterclaim. (Op. at 40-41 (quoting Goldstein v. Lustig, 154 Ill.App.3d 595, 599, 507 N.E.2d 164, 168 (1st Dist. 1987).)

In the Opinion, we also granted Plaintiffs' motion in part. We found Rowen liable for breach of guaranty and dismissed Defendants' counterclaim against Plaintiffs for tortious interference. (Op. at 41-45.) We concluded that, like the Agreement, the unconditional guaranty ("Guaranty") signed by Rowen on June 30, 2011 authorized the Mahers to accelerate the debt and demand immediate payment of any unpaid balance in light of Defendants' breaches under the Agreement. (Op. at 41-42.) Because it is undisputed that Rowen had not paid the accelerated debt, and because the Mahers' performance was not relevant to the claim for breach of guaranty, we granted summary judgment against Rowen on Count Two. (Op. at 41-42 & nn. 28-29.)

On January 26, 2015, Plaintiffs filed two motions. First, Plaintiffs ask that we reconsider our denial of their motion on the breach of contract claims. (Dkt. No. 300.) Second, Plaintiffs ask that we enter final judgment against Rowen on Count Two under Rule 54(b).[2] (Dkt. No. 302.) For their part, Defendants filed a motion on January 27, 2015, seeking reconsideration of our ruling in Plaintiffs' favor on Count Two. (Dkt. No. 304.) For the reasons set forth below, we deny all three motions.

STANDARD OF REVIEW

Because the parties have asked us to reconsider a non-final order, our analysis is guided by Federal Rule of Civil Procedure 54(b), as well as our inherent authority. See Bank of Waunakee v. Rochester Cheese Sales, Inc., 906 F.2d 1185, 1191 (7th Cir. 1990); Caine v. Burge, 897 F.Supp.2d 714, 716 (N.D. Ill. 2012); Mitchell v. JCG Indus., 845 F.Supp.2d 1080, 1082-83 (N.D. Ill. 2012); see also Moses H. Cone Mem. Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 12, 103 S.Ct. 927, 935 (1983) (noting that "every order short of a final decree is subject to reopening at the discretion of the district judge"). Rule 54(b) provides that a non-final order "may be revised at any time before the entry of a judgment adjudicating all the claims and all the parties' rights and liabilities." Fed.R.Civ.P. 54(b). Reconsideration is appropriate only "where a court has misunderstood a party, where the court has made a decision outside the adversarial issues presented to the court by the parties, where the court has made an error of apprehension (not of reasoning), where a significant change in the law has occurred, or where significant new facts have been discovered." Broaddus v. Shields, 665 F.3d 846, 860 (7th Cir. 2011), overruled on other grounds by Hill v. Tangherini, 724 F.3d 965, 967 n.1 (7th Cir. 2013); see also Bank of Waunakee, 906 F.2d at 1191; Caine, 897 F.Supp.2d at 716.

"[A] motion for reconsideration does not allow a party to revisit strategic decisions that prove to be improvident, to reargue the evidence, to make new arguments, or to introduce new evidence that could have been presented earlier." HCP of Ill., Inc. v. Farbman Group I, Inc., 991 F.Supp.2d 999, 1000 (N.D. Ill. 2013); Caine, 897 F.Supp.2d at 717; see Janusz v. City of Chi., 03 C 4402, 2015 WL 269934, at *4 (N.D. Ill. Jan. 20, 2015). Rule 54 motions thus serve a limited function and are granted only in exceptional circumstances. Bank of Waunakee, 906 F.2d at 1191; HCP of Ill., Inc., 991 F.Supp.2d at 1000; Caine, 897 F.Supp.2d at 717; see Patrick v. City of Chi., 14 C 3658, 2015 WL 1880389, at *2 (N.D. Ill. Apr. 23, 2015).

ANALYSIS

We begin with Plaintiffs' motion for reconsideration of our conclusions as to the breach of contract claims. We then address the remaining motions related to our holding for Plaintiffs on their breach of guaranty claim.

I. Reconsideration as to the Breach of Contract Claim and Counterclaim

In Illinois, a successful breach of contract claim requires proof of the existence of a valid contract, the plaintiff's substantial performance of the contract, the defendant's breach of the contract, and damages. Fednav Int'l Ltd. v. Cont'l Ins. Co., 624 F.3d 834, 839 (7th Cir. 2010); Reger Dev., LLC v. Nat'l City Bank, 592 F.3d 759, 764 (7th Cir. 2010); W.W. Vincent & Co. v. First Colony Life Ins. Co., 351 Ill.App.3d 752, 759, 814 N.E.2d 960, 967 (1st Dist. 2004); see RTP LLC v. ORIX Real Estate Capital, Inc., 13 C 350, 2014 WL 4414512, at *5 (N.D. Ill. Sept. 8, 2014). As set forth in detail in the Opinion, we found that three of the four elements of Plaintiffs' contract claim were satisfied. The parties did not dispute the existence or validity of the Agreement. We concluded that Defendants breached the contract by violating Sections 5.1(b), 5.2(a), and 7.3, triggering default under Section 8.3, as well as under Section 8.7(g). (Op. at 32-33, 35-36, 37-38.) We further held that damages plainly stemmed from Defendants' breach of the Agreement because they have not repaid the accelerated debt in full. ( Id. at 29, 38.)

We denied summary judgment for Plaintiffs, however, because of open fact questions about whether the Mahers' substantially performed their obligations under the Agreement. ( Id. at 38-40.) The Mahers' primary obligation was to disburse the loan funds. The Mahers disbursed $435, 000, but argued that they were excused from funding the remaining $65, 000 because the Agreement permitted them to cease making any advances upon the event of any "Event of Default" or "Possible Default." (Agreement §§ 1.14, 8, 9.4; see Pls.' MPSJ Mem. at 13; Pls.' MPSJ Reply at 11-12.) The Mahers pointed out that they notified Rowen of the existence of the Possible Default situation by email dated April 6, 2012.[3] (Pls.' MPSJ Mem. at 13; see also 4/6/12 Maher email to Rowen (Dkt. No. 180-2).)

In evaluating that argument we focused, as did the parties, on whether Defendants' acts of default occurred before or after the Mahers' refusal to advance the final $65, 000 payment. ( See Op. at 39-40.) The parties disputed when Rowen requested the disbursement in early 2012, and the record is not clear on that point. ( Id. at 39.) Rowen testified that he requested that final sum in February or March of 2012-well before the April 6, 2012 email warning of Possible Default. ( Id. ) Additionally, emails from Rowen dated March 8, 2012 and April 5, 2012 include language that a trier of fact could deem as requests by Rowen for the disbursement. ( Id. ) We thus concluded that Defendants had raised questions of material fact about the timing of Playroom's request and whether the Mahers had the authority under the Agreement to refuse to make further advances to Defendants at that time. ( Id. at 39-40.)

In the present motion, Plaintiffs argue that we misapprehended the terms and relevance of Section 9.4 of the Agreement, which governs their rights in the event of default. (Mot. to Alter ¶¶ 5-9; see also Reply ISO Mot. to Alter at 2-7.) They contend that because we found that Defendants committed two particular defaults prior to February 2012, we must also conclude axiomatically that the Mahers had no contractual duty under Section 9.4 to advance further funds. (Mot. to Alter ¶¶ 5-8.) Having reviewed the original summary judgment submissions along with the pending motion, and as discussed below, we perceive no misapprehension or manifest error of law or fact.

A. Violation of Section 5.2(a)-Failure to Comply with GAAP

Before addressing Plaintiffs' first argument, we review the pertinent background. In the Agreement, Playroom entered into an affirmative covenant whereby it promised to "[use] its best efforts to keep true and complete financial records" and to "keep such records in accordance with GAAP"[4] on or by October 31, 2011. (Agreement § 5.2(a).) It is undisputed that Defendants attempted to update their accounting practices but that they failed to become GAAP-compliant by the October 31, 2011 deadline. (Op. at 21-22.) We noted in the Opinion that the parties dispute whether Playroom ever achieved GAAP-compliance, or when. ( Id. at 33.) Nonetheless, we found that Defendants admittedly violated Section 5.2(a) by failing to meet the contractual deadline. ( Id. )

Plaintiffs contend that, in light of this default, Section 9.4 of the Agreement entitled them to withhold future advances. Section 9.4 of the Agreement provides that "[u]pon the occurrence of any Possible Default, [the Mahers] may immediately cease making Advances on the Loan while any Possible Default exists ." (Agreement § 9.4 (emphasis added).) "Possible Default" is defined as "an event, condition, or thing which, with the lapse of any applicable grace period or the giving of notice, or both, would constitute an Event of Default." ( Id. § 1.14.) Section 9.4 further provides that "[u]pon the occurrence of any Event of Default, [the Mahers] shall thereafter have no obligation under any circumstances to make any further Advances." ( Id. § 9.4.) "Events of Default" are defined in and governed by Section 8 of the Agreement. Under Section 8.3, the violation of an affirmative covenant, as ...


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