United States District Court, N.D. Illinois, Eastern Division
MEMORANDUM AND ORDER
B. Gottschall, United States District Judge.
Capital Finance, LLC (“BankDirect”) filed this
suit for breach of contract against Capital Premium
Financing, Inc. (“CPFI”). CPFI answered and
asserted six counterclaims seeking, among other things,
rescission of an option BankDirect holds to purchase assets
held by CPFI under a predetermined pricing structure.
Counter-defendants BankDirect and Texas Capital Bank, NA
(“TCB”) move for summary judgment dismissing the
counterclaims against them. They argue that CPFI's
contract counterclaims must fail as a matter of law under the
contract doctrines of waiver and election of remedies.
and CPFI are, and were at all relevant times, in the
commercial insurance premium finance business. They
“originat[e] and service[e] loans for the financing of
commercial property insurance premiums.” BankDirect SOF
¶ 22, ECF No. 43.
2010, BankDirect and CPFI entered into a series of agreements
they collectively refer to as “the Transaction
Facility.” BankDirect SOF ¶ 25. The Transaction
Facility consists chiefly of a Master Transaction Agreement
(“MTA”), an option agreement, a promissory note,
a participation agreement, and a loan purchase and sale
agreement. (Id.; see also BankDirect Ex.
A-E, ECF Nos. 40-1 thru 40-5 (copies of these documents).)
CPFI characterizes these agreements, which together span 667
pages, as “a complicated set of inter-related
agreements.” Ans. & Countercl. at 67 ¶ 33, ECF
No. 45. Among many other things, the Transaction
(i) that BankDirect would be the exclusive purchaser of
certain eligible insurance premium finance loans originated
by CPFI, as determined by a related Loan Purchase, Sale and
Servicing Agreement (Exh. A, p. 49, ¶ 35); (ii) that
BankDirect funds or reimburses CPFI for the principal premium
amount of the underlying commercial insurance policy being
financed (Exh. A, p. 49, ¶ 36(b)); and (iii) that the
Option Agreement granted BankDirect an option to purchase
CPFI's assets approximately five years from the execution
of the MTA pursuant to the terms of the Option Agreement, the
MTA and Asset Purchase Agreement, which was attached as
Exhibit A to the MTA. (Exh. A, p. 52, ¶ 47); and (iv)
that the Option Agreement provided BankDirect with the option
to purchase CPFI's assets in approximately five (5) years
from the execution of the MTA based on a predetermined
“earnings based formula.” (Exh. A, p. 52,
¶¶ 47-48; see also, Exhs. 3 and 4 to Exh.
SOF ¶ 27.
option gave BankDirect the right to elect on January 30,
2016, to purchase certain assets (CPFI disputes exactly which
ones) from CPFI at a predetermined price of 5.25 times
earnings before taxes. See BankDirect's A n s .
to CPFI Counter SOF ¶ 5, ECF No. 60; Option Agreement
§ 2.02, ECF No. 44-3. The option agreement requires CPFI
to complete the sale within thirty days of BankDirect
exercising its option. BankDirect SOF ¶ 28; Option
Agreement § 4.01. On January 30, 2016, BankDirect
advised CPFI that it would exercise its rights under the
option agreement, but CPFI has refused to perform.
five-count amended complaint, BankDirect seeks declaratory
and injunctive relief requiring CPFI to complete the sale
under the option agreement and monetary damages for breaching
the MTA and option agreement. CPFI pleads six counterclaims
in its answer. It asks the court to rescind the option
agreement, award concomitant declaratory relief, and enter a
judgment for money damages.
parties group the breaches alleged in CPFI's
counterclaims into three broad categories. The first concerns
BankDirect's obligations to negotiate a marketing
agreement within ninety days following the transaction
facility's effective date. See MTA §
3.06(a). CPFI alleges that BankDirect violated the MTA and
the marketing agreement (BankDirect reserves the right to
dispute that a marketing agreement was reached) by, among
other things, refusing to count sales of CPFI loans toward
the quotas of BankDirect sales personnel and thereby
destroying any incentive they had to sell CPFI loans.
See Countercl. ¶ 14.
second arises under § 3.06(c) of the MTA. CPFI alleges
that BankDirect breached the MTA when it purchased Standard
Premium Funding, a company CPFI views as a direct competitor,
in June 2011. After the purchase:
BankDirect began marketing its own products for the small to
mid-market insurance agency market segment throughout the
United States, including in the Eastern United States and
ceased implementing the Marketing Collaboration Agreement
with CPFI. BankDirect failed to market or promote CPFI's
products in the United States. In doing so, BankDirect
deprived CPFI of an expected sales force that would market
CPFI's loan products and services to small and mid-sized
insurance agencies in the Eastern United States (among other
regions as well).
bases its third alleged breach on an agreement dated July 20,
2011, to modify partially the transaction facility
(“the acknowledgment agreement”). ECF No. 44-5.
Under that agreement, which was part of a larger
reorganization, BankDirect switched the division that
purchased CPFI loans to BankDirect Capital Finance
(“BDFC”). See ECF No. 44-5 § 2;
see also Countercl.¶¶ 93-97. As a
result of the reorganization (but not as a formal requirement
of the acknowledgment agreement), CPFI's loans began to
be “required . . . [to] comply with stricter loan
criteria, including the collection of certain specific
customer information and the performance of additional
administrative processes.” Countercl. ¶ 99. Those
requirements allegedly harmed CPFI because many insurance
agencies prefer lenders who do not require this additional
information. See Id. ¶¶ 100-02.
SUMMARY JUDGMENT STANDARD
judgment is appropriate “if the movant shows that there
is no genuine dispute as to any material fact and the movant
is entitled to judgment as a matter of law.”
Fed.R.Civ.P. 56(a). A genuine dispute as to any material fact
exists if “the evidence is such that a reasonable jury
could return a verdict for the nonmoving party.”
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986). In resolving summary judgment motions, “facts
must be viewed in the light most favorable to, and all
reasonable inferences from that evidence must be drawn in
favor of, the nonmoving party-but only if there is a
‘genuine' dispute as to those ...