Villa Health Care, Inc. v. Illinois Health Care Management II, L.L.C.

Filing 14

OPINION: Villa's Motion for Judgment on the Pleadings (d/e 6 ) is GRANTED. The 2009 Agreement expired on September 30, 2012. This conclusion renders IHCMs Counterclaim (see d/e 3 ), which seeks an order that the 2009 Agreement was automatica lly extended through September 30, 2014 and damages for breach of contract, MOOT. Villa's "Counterclaim of Counter-Defendant/Counter-Plaintiff" (d/e 5 , at pages 7 through 20) remains pending. SEE WRITTEN OPINION. Entered by Judge Sue E. Myerscough on 7/24/2013. (MJ, ilcd)

E-FILED

Thursday, 25 July, 2013 02:19:17 PM
Clerk, U.S. District Court, ILCD

IN THE UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF ILLINOIS
SPRINGFIELD DIVISION
VILLA HEALTH CARE, INC., an
Illinois not-for-profit corporation,
Plaintiff,
v.
ILLINOIS HEALTH CARE
MANAGEMENT II, LLC, a Missouri
limited liability company,
Defendant.

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No. 12-3205

OPINION
SUE E. MYERSCOUGH, U.S. District Judge:
This matter is before the Court on Plaintiff’s Motion for Judgment
on the Pleadings (Motion) (d/e 6). Because the Court agrees with
Plaintiff’s interpretation of the contract at issue, the Court grants
Plaintiff’s Motion and Declaratory Judgment is entered in Plaintiff’s
favor.
I. BACKGROUND
On August 2, 2012, Plaintiff, Villa Health Care Management, Inc.
(Villa), filed a Complaint seeking a declaratory judgment that Villa’s

Management Agreement with Defendant, Illinois Health Care
Management II, L.L.C. (IHCM), would expire by its terms on September
30, 2012. See d/e 1.
The Complaint alleges as follows. Villa is an Illinois not-for-profit
corporation that owns and operates a shelter care facility and a skilled
nursing facility in Sherman, Illinois. IHCM is a Missouri corporation
that was employed by Villa to manage Villa’s Sherman facilities.
IHCM has managed Villa’s facilities since 1991. In 2009, the
Parties entered into the contract (the 2009 Agreement) at the center of
this dispute. The Parties were operating under the 2009 Agreement at
the time Villa filed its Complaint for declaratory judgment.
The 2009 Agreement provided for IHCM to manage Villa’s
facilities for a three-year term and laid out the various duties and
obligations of the Parties. At issue in this case is Section 2.1 of the 2009
Agreement, which reads as follows:
Section 2.1 Term. The term of this Agreement shall
commence as of October 1, 2009 at 12:01 a.m. (the
"Commencement Date") and shall continue through
September 30, 2012. Owner shall establish annual
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performance goals in the Budgets (as hereinafter defined) for
Manager to meet during Owner's fiscal year and provided
Manager meets such annual performance goals, Owner and
Manager shall renew the Management Agreement in a form
substantially similar to this Agreement each year through
September 30, 2012. Notwithstanding the foregoing, this
Agreement may sooner terminate pursuant to the provisions
of Article V hereafter.
The 2009 Agreement also has a choice of law provision in Section
12.4 that states Illinois law governs the contract. Section 12.9 of the
Agreement contains a merger clause which states “this Agreement
evidences the entire agreement of the parties hereto with respect to the
subject matter hereof. Any amendments or modifications of this
Agreement shall not be effective except in writing executed by all of the
parties hereto.”
The Court held oral argument on the Motion on June 14, 2013.
II. JURISDICTION AND VENUE
The court has subject matter jurisdiction based upon the diversity
of the Parties and because the amount in controversy exceeds $75,000.
See 28 U.S.C. § 1332(a). Personal jurisdiction and venue requirements
are satisfied because the relevant acts occurred in this judicial district.
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See World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297
(1980) (personal jurisdiction exists where a corporation “purposefully
avail[ed] itself of the privilege of conducting activities” in the forum
State); see 28 U.S.C. §1391(b)(2) (venue is proper where a substantial
part of the events or omissions giving rise to the claim occurred).
III. LEGAL STANDARD
“Under Federal Rule of Civil Procedure 12(c), ‘a party can move for
judgment on the pleadings after the filing of the complaint and answer.’”
Monumental Life Ins. Co. v. Illinois Mutual Life Ins. Co., 2012 WL
5845631, at *1 (N.D. Ill. Nov. 19, 2012) (quoting Supreme Laundry
Serv., LLC v. Hartford Cas. Ins. Co., 521 F.3d 743, 746 (7th Cir. 2008).
The Seventh Circuit has stated that for the purposes of Rule 12(c), “[t]he
pleadings include the complaint, the answer, and any written instruments
attached as exhibits.” Northern Indiana Gun & Outdoor Shows, Inc. v.
City of South Bend, 163 F.3d 449, 452 (7th Cir. 1998).
In evaluating a motion for judgment on the pleadings brought
pursuant to Rule 12(c), a court employs the “same standard that applies

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when reviewing a motion to dismiss for failure to state a claim under Rule
12(b)(6).” Buchanan-Moore v. Cnty. of Milwaukee, 570 F.3d 824, 827
(7th Cir. 2009). “Like Rule 12(b) motions, courts grant a Rule 12(c)
motion only if ‘it appears beyond doubt that the plaintiff cannot prove
any facts that would support his claim for relief.’” Craigs, Inc. v. General
Elec. Capital Corp., 12 F.3d 686, 688 (7th Cir. 1993) (quoting
Thomason v. Nachtrieb, 888 F.2d 1202, 1204 (7th Cir. 1989)). When
considering the motion, all reasonable inferences must be made in favor
of the non-moving party. Ogden v. Atterholt, 606 F.3d 355, 358 (7th
Cir. 2010). “Claims that raise a pure issue of contract interpretation may
be resolved by motions for judgment on the pleadings because the
construction of a written contract is a matter of law.” Land of Lincoln
Goodwill Industries, Inc. v. PNC Financial Service Group, 2013 WL
2446375, at *5 (C.D. Ill. June 5, 2013) (citing Asta, LLC v.
Telezygology, Inc., 629 F.Supp.2d 837, 842 (N.D. Ill. 2009).
Further, if matters outside the pleadings are presented to and not
excluded by the court, the motion must be treated as one for summary

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judgment. Fed.R.Civ.P. 12(d). The Court may, however, “properly
consider the relevant entirety of a document integral to or explicitly
relied upon in the complaint . . . without converting the motion into one
for summary judgment.” Lamarche v. Metro. Life Ins. Co., 236 F. Supp.
2d 50, 54 (D. Me. 2002) (citing Clorox Co. Puerto Rico v. Proctor &
Gamble Commercial Co., 228 F.3d 24, 32 (1st Cir. 2000)).
IV. ANALYSIS
A.

Principals of Contract Interpretation Under Illinois Law
The 2009 Agreement is governed by Illinois law. Under Illinois

law, when construing a contract, “the primary objective is to give effect to
the intention of the parties.” Thompson v. Gordon, 241 Ill. 2d 428, 441
(Ill. 2011). This requires looking to the language of the contract as a
whole. Id.
Courts in Illinois follow the “four corners” approach, in which the
court “initially looks to the language of a contract alone.” Air Safety, Inc.
v. Teachers Realty Corp., 185 Ill. 2d 457, 462 (1999) (citing Rakowski v.
Lucente, 104 Ill. 2d 317, 323 (1984)). If the contractual language is

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unambiguous, then the court will not look to parol evidence, but will
interpret the contract according to its plain meaning. Camico Mut. Ins.
Co. v. Citizens Bank, 474 F.3d 989, 993 (7th Cir. 2007). “An
instrument is ambiguous only if the language used is reasonably or fairly
susceptible to having more than one meaning, but it is not ambiguous if a
court can discover its meaning simply through knowledge of those facts
which give it meaning as gleaned from the general language of the
contract.” Bourke v. Dun & Bradstreet Corp., 159 F.3d 1032, 1036 (7th
Cir. 1998).
Extrinsic evidence may not be considered if the contract is facially
unambiguous and contains an integration clause. Air Safety, Inc., 185 Ill.
2d at 463 (where the court refused to consider parol evidence to show
that a facially unambiguous contract was ambiguous when the contract
contained an explicit integration clause). If the court finds the contract
ambiguous on its face, however, the court can consider extrinsic evidence
to determine the parties’ intent. Thompson, 241 Ill. 2d at 441.
Further, under Illinois contract law, a written agreement “must be

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presumed to speak the intention of the parties who signed it. It speaks
for itself, and the intention with which it was executed must be
determined from the language used. It is not to be changed by extrinsic
evidence.” Air Safety, Inc., 185 Ill. 2d at 462 (quoting Western Illinois
Oil Co. v. Thompson, 26 Ill. 2d 287, 291 (1962); see also Pecora v.
Szabo, 94 Ill. App. 3d 57, 63 (1981) (“[I]f the contract imports on its
face to be a complete expression of the whole agreement, it is presumed
that the parties introduced into it every material item[.]”). Moreover, in
interpreting Illinois law, the Seventh Circuit has stated that, while not
dispositive, “a merger clause is strong evidence that the parties intended
the writing be the complete and exclusive agreement between them.”
L.S. Heath & Son v. AT & T Info. Sys., Inc., 9 F.3d 561, 569 (7th Cir.
1993).
B.

There is No Ambiguity in Section 2.1 of the 2009 Agreement
The dispute in this case centers on the meaning of Section 2.1 of

the 2009 Agreement. As stated, Section 2.1 states as follows:
Section 2.1 Term. The term of this Agreement shall
commence as of October 1, 2009 at 12:01 a.m. (the
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"Commencement Date") and shall continue through
September 30, 2012. Owner shall establish annual
performance goals in the Budgets (as hereinafter defined) for
Manager to meet during Owner's fiscal year and provided
Manager meets such annual performance goals, Owner and
Manager shall renew the Management Agreement in a form
substantially similar to this Agreement each year through
September 30, 2012. Notwithstanding the foregoing, this
Agreement may sooner terminate pursuant to the provisions
of Article V hereafter.
Villa and IHCM both claim that this provision is unambiguous on
its face. However, the Parties set forth very different interpretations of
what the language in Section 2.1 of the 2009 Agreement means. The
Court notes that Illinois’ Supreme Court has stated that “a contract is
not rendered ambiguous merely because the parties disagree on its
meaning.” Thompson v. Gordon, 241 Ill.2d 428, 443 (2011).
Specifically, Villa contends that the performance goal language in
the 2009 Agreement is only mentioned in regard to renewal of the 2009
Agreement each year through September 30, 2012, with the agreement
terminating on September 30, 2012. IHCM, by contrast, reads the
provision as automatically extending the 2009 Agreement beyond the
September 30, 2012 termination date if IHCM achieves the goals
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specified in the annual budgets.
Moreover, IHCM maintains that the September 30, 2012 date in
the renewal provision was intended to limit the number of annual
reviews, not as the final termination date. Under IHCM’s interpretation,
if IHCM met the budget goals for the 2010 budget year, then an
agreement with a fresh three-year term would be executed on or about
October 1, 2011, moving the termination date to September 30, 2014.
According to IHCM, “[t]his measurement process was to continue
through September 30, 2012, at which time any further measurements
against a prior year’s approved budget would cease and the then existing
Management Agreement would continue for its remaining term and only
be extended upon an agreement of the parties and not automatically by
operation of the management agreement.”
IHCM’s reading of this provision directly contradicts the plain
language of Section 2.1 which clearly states the intended end date of the
contract, not once, but twice. The language in Section 2.1 indicates the
Parties’ intent that the contract end by its own terms on September 30,

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2012, regardless of whether IHCM met the budget goals.
Furthermore, if the Court accepted IHCM’s position that the 2009
Agreement would automatically be renewed if IHCM met performance
goals, the contract could potentially extend indefinitely. Additionally,
under IHCM’s interpretation, IHCM could miss the budget goals for the
first two years of the contract but earn a three-year automatic extension
of the contract by meeting its goal in the third year of the 2009
Agreement.
IHCM’s reading essentially asks this Court to rewrite Section 2.1.
However, the 2009 Agreement states nothing on its face regarding
automatic renewal.
Villa’s suggested reading, by contrast, gives meaning to every term
of Section 2.1. Under Villa’s reading of the 2009 Agreement, the
contract commenced on October 1, 2009 and was for a three-year term
to end on September 30, 2012, provided IHCM met the budgetary goals
each year. Villa’s reading is supported by the language in Section 2.1.
Accordingly, the Court finds that Section 2.1 unambiguously states

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the 2009 Agreement terminated by its own terms on September 30,
2012, and the Court declines to consider any parol evidence offered by
IHCM.
IV. CONCLUSION
For the reasons stated, Villa's Motion for Judgment on the
Pleadings (d/e 6) is GRANTED. The 2009 Agreement expired on
September 30, 2012. This conclusion renders IHCM’s Counterclaim (see
d/e 3), which seeks an order that the 2009 Agreement was automatically
extended through September 30, 2014 and damages for breach of
contract, MOOT. Villa’s “Counterclaim of Counter-Defendant/CounterPlaintiff” (d/e 5, at pages 7 through 20) remains pending.
ENTER: July 24, 2013
FOR THE COURT:
s/Sue E. Myerscough
SUE E. MYERSCOUGH
UNITED STATES DISTRICT JUDGE

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