Wells Fargo Bank, v. Leafs Hockey Club, Inc.

Filing 148

MEMORANDUM Opinion and Order Signed by the Honorable Amy J. St. Eve on 5/11/2015:Mailed notice(kef, )

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
UMB BANK, NATIONAL ASSOCIATION,
as Indenture Trustee under Trust Indenture
dated February 1, 2007,
Plaintiff/Counter-Defendant,
v.
LEAFS HOCKEY CLUB, INC.,
Defendant/Counter-Plaintiff,

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Case No. 13 C 2247

MEMORANDUM OPINION AND ORDER
AMY J. ST. EVE, District Court Judge:
On March 2, 2015, the Court granted Plaintiff/Trustee UMB Bank, N.A.’s (the “Trustee”)
motion for summary judgment against Defendant Leafs Hockey Club, Inc. (the “Club”) based on
the Club’s breach of the parties’ Guaranty Agreement.1 In the March 2, 2015, Memorandum,
Opinion, and Order, the Court directed the Trustee to file a motion to prove up damages,
including the exact amount of principal, interest, and fees owed by the Club due to its breach of
the Guaranty Agreement. The Trustee’s motion to prove up damages is now before the Court.
For the following reasons, the Court grants the Trustee’s motion and awards the Trustee
damages as discussed below. The Trustee must file a proposed judgment order, including the
calculation of the interest due as of today, May 11, 2015, with the Court by no later than May 13,
2015. In addition, the parties must follow the local procedures under Northern District of Illinois
Local Rule 54.3 regarding attorney’s fees, including the requirement to “confer and attempt in

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The Court presumes familiarity with its March 2, 2015, Memorandum, Opinion, and
Order granting the Trustee’s summary judgment motion.

good faith to agree on the amount of fees or related nontaxable expenses that should be awarded
prior to filing a fee motion.” See N.D. Ill. L.R. 54.3(d).
BACKGROUND
As discussed in the Court’s March 2015 summary judgment ruling, the Trustee
established that there were no genuine issues of material fact that the Club’s breach of the
Guaranty Agreement caused over $20 million in damages. In the present motion, the Trustee
seeks as damages: (1) $20 million in principal; (2) $4,326,123.63 in unpaid interest, which is
continuing to accrue daily as simple interest at a per diem rate; and (3) $9,854.50 in Trustee’s
fees, which are also continuing. In support of the present motion, the Trustee sets forth the
affidavit of Virginia Housum, a Senior Vice President and Workout Specialist in the Corporate
Trustee Department at UMB. (R. 136-1, Housum Aff. ¶ 2.) Housum is the individual
principally responsible for determining the best mechanisms for collecting on the loan at issue in
this lawsuit, ascertaining and calculating the unpaid amounts due, and ensuring repayment of
debt service on the loan. (Id. ¶ 3.)
It is undisputed that the Illinois Finance Authority issued $20 million in bonds, the
proceeds of which were loaned to LHC, LLC (“LHC”) under the Loan Agreement. Under the
Loan Agreement and the Guaranty Agreement, LHC was the borrower and the Club was the
guarantor. The bonds at issue consisted of four different series maturing in different years with
different rates of interest. Following LHC’s default, the Trustee sent notices of acceleration and
filed a proof of claim in LHC’s bankruptcy case reflecting the full $20 million in bond proceeds
as outstanding. Despite guarantying repayment, the Club has never made any payments pursuant
to its obligations under the Guaranty Agreement.

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Although it is undisputed that the damages at issue amounted to over $20 million,
because the exact amount of damages resulting from the Club’s breach was not readily
determinable from the parties’ summary judgment submissions, the Court directed the Trustee to
file a motion as follows: “The Trustee’s motion to prove up its damages, including the principal,
interest, fees, and other amounts owed by the Club due to its breach of the Guaranty Agreement,
along with the supporting documentation and citations to relevant sections of the Trust
Indenture, Guaranty Agreement, and/or Loan Agreement, is due on or before March 16, 2015.”
(R. 125, Mem, Order, & Op., at 2.) The Court requested the supporting documentation and
citations to the relevant contracts because the parties’ summary judgment Local Rule 56.1
Statements of Facts and Responses were confusing and incomplete, especially regarding the
calculation of fees and interest. See Stevo v. Frasor, 662 F.3d 880, 887 (7th Cir. 2011) (district
courts have considerable discretion in applying local rules). Nevertheless, the Club asked for
leave to file a Rule 56.1 Statement of Facts in response to the present motion, which the Court
granted. Many of the Club’s newly-filed Rule 56.1 Statements reiterate the facts underlying the
breach of contract claim, as well as the Club’s affirmative defenses and equitable accounting
claim. Any such statements and the attendant arguments regarding liability are irrelevant to the
Court’s present analysis. That being said, the remainder of the Club’s Rule 56.1 Statement of
Facts are helpful to the Court’s determination of the damages due and owing.
LEGAL STANDARD
Under Illinois law, which governs this contract dispute, “[t]he measure of damages for
breach of contract is the amount that will compensate the aggrieved party for the loss ‘which
either fulfillment of the contract would have prevented or which the breach of it has entailed.’”

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Santorini Cab Corp. v. Banco Popular N. Am., 2013 IL App (1st) 122070, 999 N.E.2d 46, 52,
376 Ill.Dec. 403 (1st Dist. 2013) (citation omitted). Also under Illinois law, plaintiffs have the
burden of “establishing both the correct measurement of damages and the final computation of
damages based on that measurement.” Dynegy Mktg. & Trade v. Multiut Corp., 648 F.3d 506,
518 (7th Cir. 2011) (quoting Ollivier v. Alden, 262 Ill.App.3d 190, 199 Ill.Dec. 579, 634 N.E.2d
418, 422 (2d Dist. 1994)). Plaintiffs, however, “are not required to prove damages to the exact
cent; they must merely establish a ‘reasonable basis for computing damages.’” Dynegy Mktg,
648 F.3d at 518 (quoting Razor v. Hyundai Motor Am., 222 Ill.2d 75, 305 Ill.Dec. 15, 854
N.E.2d 607, 626 (Ill. 2006)).
ANALYSIS
In support of the present motion, the Trustee filed Housum’s affidavit, which details the
basis and calculation of damages the Club owes based on Housum’s personal knowledge and the
attendant documentary evidence. Moreover, Housum’s two-day deposition transcript explaining
the measurement and calculation of damages is part of the district court record. Since August
2009, Housum has been the individual principally responsible for acting on behalf of the
bondholders to determine the best mechanisms for collecting on the loan, ascertaining and
calculating the unpaid amounts due, and ensuring repayment of debt service on the loan.
(Housum Aff. ¶¶ 2, 3.) Housum specifically avers that in preparation of her affidavit, she
reviewed UMB’s file relating to this matter, along with documents posted on the Electronic
Municipal Market Access (“EMMA”) website maintained by the Municipal Securities
Rulemaking Board that the United States Securities and Exchange Commission supervises. (Id.
¶¶ 4, 5.) Other documents Housum relied upon included UMB’s Transfer Agency Forms and

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Wells Fargo’s Notices of Partial Payment of Interest. (R. 142-1, Housum Supp. Aff. ¶¶ 5, 6.)
Further, Housum reviewed this documentation in the context of the Limited Offering
Memorandum, which delineates the debt service schedule for the bonds. (Housum Aff. ¶ 9.)
I.

Amount of Principal Due
The Trustee maintains that based on the publically available records of the four separate

series of bonds, as well as the transfer agency forms submitted by the former Trustee (Wells
Fargo) and the current Trustee (UMB),2 the full amount of principal, namely, $20 million, is still
due and owing. Although there is no dispute that the loan was in the amount of $20 million, the
Club takes issue with the $20 million in principal due and owing stating that “LHC made one
semiannual bond payment in full.” (R. 140, Club’s Rule 56.1 Stmt. Facts ¶ 8.) In support of this
statement, the Club relies on Housum’s deposition transcript, but misstates her testimony. To
clarify, at her deposition, Housum testified that LHC made one loan payment, but that this
payment only covered interest on the loan and did not go to the loan’s principal. (R. 146,
Housum Dep., at 82, 169, 170, 174-75; Housum Aff. ¶ 13.) The Club attempts to refute
Housum’s testimony and affidavit, which establish that the entire amount of principal remains
due, by focusing on the admissibility of the documents Housum relied upon in making her
determination. Specifically, the Club argues that the Depository Trust Company’s (“DTC”)
transfer documents, EMMA documents, and Wells Fargo’s Notices of Partial Payment of
Interest are inadmissible hearsay and lack authentication.

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On January 24, 2014, the Court granted Plaintiff’s motion to substitute UMB Bank,
N.A. as Plaintiff/Trustee in this case. (R. 52.)
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The loan documents, namely, the notices of partial payment, are admissible pursuant to
the business records exception, especially in tandem with Housum’s affidavit and supplemental
affidavit explaining how these documents were made and maintained, as discussed in detail
below. See Melendez-Diaz v. Mass., 557 U.S. 305, 321, 129 S.Ct. 2527, 174 L.Ed.2d 314 (2009)
(“Documents kept in the regular course of business may ordinarily be admitted at trial despite
their hearsay status.”); see, e.g., Achey v. BMO Harris Bank, N.A., ___ F.Supp.3d ___, 2014 WL
4099139, at *4 (N.D. Ill. 2014) (loan documents “plainly are admissible pursuant to the business
records exception set fort in Rule 803(6).”). Turning to the EMMA and DTC documents,
EMMA “serves as the official source for municipal securities disclosures and related market
data” providing “on-line access to centralized new issue municipal securities disclosure
documents (known as official statements)” and the “DTC is a member of the U.S. Federal
Reserve System, and a registered clearing agency with the Securities and Exchange
Commission.”3 Based on the function and purpose of EMMA and the DTC, the documents
Housum relied upon are not inadmissible hearsay because they are business records and market
reports. See Fed.R.Evid. 803(6) (excepting from hearsay “[r]ecords of regularly conducted
activity”); Fed.R.Evid. 803(17) (excepting “[m]arket quotations, tabulations, lists, directories, or
other published compilations, generally used and relied upon by the public or by persons in
particular positions.”).
As to the authentication of these documents, Housum, who has personal knowledge of
how these systems and banking practices work, has set forth the following statements as to their

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See http://en.wikipedia.org/wiki/Electronic_Municipal_Market_Access (last visited
May 11, 2015); http://en.wikipedia.org/wiki/Depository_Trust_&_Clearing_Corporation (last
visited May 11, 2015).
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authenticity. See United States v. Cejas, 761 F.3d 717, 723 (7th Cir. 2014); see also Fed.R.Evid.
901(a) (documents are authenticated by evidence “sufficient to support a finding that the matter
in question is what its proponent claims.”). Housum first avers that Exhibit E is a true and
correct copy of UMB’s DTC Transfer Agency Change Form effective date January 27, 2014,
signed by Laura Roberson, UMB Vice President. (Housum Supp. Aff. ¶ 5; Housum Dep., at
168-69.) She further asserts that Exhibit F is a true and correct copy of Wells Fargo’s DTC
Transfer Agency Change Form and related swing letters, effective date January 27, 2014, and
that she has personal knowledge of the procedures under which these documents were made and
maintained and kept in the course of ordinary and usual business at both Wells Fargo and UMB.
(Housum Supp. Aff. ¶ 5; Housum Dep., at 161-62.) Also, she states that the documents were
made at or near the time of the events recorded therein and were created by individuals with
knowledge or from information transmitted by a person with knowledge and who reported that
knowledge in the regular course of business. (Housum Supp. Aff. ¶ 5.)
In her supplemental affidavit, Housum further avers that Exhibit G is a true and correct
copy of Notices of Partial Payment of Interest dated March 1, 2010; Notices of Partial Payment
of Interest dated September 1, 2010; Notices of Partial Payment of Interest dated March 1, 2011;
Notices of Partial Payment of Interest dated September 1, 201l; Notices of Partial Payment of
Interest dated March 1, 2012; and Notices of Partial Payment of Interest dated August 31, 2012.
(Id. ¶ 6.) She states that she has personal knowledge of the procedures under which these
documents were made and maintained and that it has been her practice to draft these notices each
and every time a payment or partial payment was made toward the bonds. (Id.) In addition, she
avers that the notices were posted on EMMA’s website and testified that UMB independently

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maintained the data posted on EMMA’s website. (Id.; Dep. at 11-13, 177-78.) Further, she
states that these documents are routinely made and kept in the course of ordinary and usual
business at Wells Fargo and that the documents were made at or near the time of the events
recorded. (Housum Supp. Aff. ¶ 6.) Again, she asserts that the documents were created by
individuals with knowledge or from information transmitted by a person with knowledge and
who reported that knowledge in the regular course of business, and that it was her regular
practice to make such documents. (Id.)
Moreover, the Club’s arguments based on what the Trustee did or did not produce
during discovery do not save the day, especially because the fact discovery deadline has long
since passed, and the Club had the opportunity to take Housum’s deposition testimony on two
separate occasions, July 1, 2014 and July 16, 2014. At her deposition, Housum answered all of
counsel’s questions based on her personal knowledge and as a workout specialist. The Club’s
argument that Housum did not answer the fundamental questions about the amount due and
owing under the Loan Agreement is belied by her detailed deposition testimony, which included
answering counsel’s specific questions that walked Housum through the amount due and owing
in LHC’s bankruptcy proof of claim.4 In addition, counsel had the opportunity to examine
Housum further at the continuation of the deposition on July 16, 2014.

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The Indenture Trustee’s Amended Proof of Claim filed on April 3, 2013, indicates that
the principal amount due and owing was $20 million. (See 13-B-7001, Claim 2-2, Addendum, at
2.) The Court takes judicial notice of the bankruptcy court’s docket in In re LHC, LLC, 13-7001,
which shows that, to date, neither LHC nor the Club have objected to the amounts in the
Indenture Trustee’s Amended Proof of Claim. See Spaine v. Cmty. Contacts, Inc., 756 F.3d 542,
545 (7th Cir. 2014) (courts “may take judicial notice of publicly available records of court
proceedings”).
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Because Housum relied upon admissible, authenticated documentation in her calculations
and had a reasonable basis for computing the principal due and owing, the Club’s argument that
LHC made one payment that went to the principal amount fails. See Dynegy Mktg, 648 F.3d at
518-19. The Trustee has established that the Club owes $20 million in principal. Therefore, the
entire amount of principal, namely, $20 million, is due and owing.
II.

Interest Calculations
Next, the Trustee asserts that the unpaid interest as of March 16, 2015 is $4,326,123.63.

In determining the amount of interest due, the Trustee via Housum premised the calculation on
the different bond series and interest due. Specifically, the $20 million principal is the aggregate
of three series of tax-exempt bonds totaling $18,880,000 designated as “Sports Facility Revenue
Bonds, Series 2007A,” and one series of taxable bonds totaling $1,120,000 designated as “Sports
Facility Revenue Bond, Taxable Series 2007B.” (Housum Aff. ¶ 10.) The four series of bonds
are identified by their Committee on Uniform Securities Identification Procedures (“CUSIP”)
numbers provided for the bond issuance. (Id. ¶ 11; Housum Dep., at 14-15.) The CUSIP
numbers, breakdown of principal amount, and interest rates are as follows:
CUSIP # 45202UAF1 in the amount of $995,000 at 5.625%
CUSIP # 45202UAG9, in the amount of $6,063,00 at 5.875%
CUSIP # 45202UAH7, (taxable) in the amount of $11,820,00 at 6.0%
CUSIP # 45202UAJ3, in the amount of $1,120,000 at 9.0%
(Housum Aff. ¶¶ 11, 12, 14.) The interest due is calculated on a per diem basis in the amount of
$3,395.24 and was further calculated by aggregating the daily interest rate on each of the bonds.
(Id. ¶ 16; Housum Dep., at 175-76.) The Trustee also took into account LHC’s partial payments

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of interest in the amount of $2,447,386.27 in making the interest calculation. (Housum Aff. ¶
18.)
In response, the Club first argues that the per diem interest amount of $3,395.24 is in
error because LHC made a semiannual bond payment that went to the principal. As discussed
above, the Club has failed to refute the Trustee’s factual basis and calculation that this payment
went to interest alone, therefore, this argument is unavailing. See, e.g., Dynegy Mktg. & Trade,
648 F.3d at 519. Next, the Club takes issue with the Trustee’s reliance on hearsay documents
used in calculating LHC’s partial payments of interest in the amount of $2,447,386.27. Again,
the Notices of Partial Payment Interests are business records maintained in the normal course of
business and authenticated by Housum in her supplemental affidavit, as well as discussed in
detail at her deposition. See Fed.R.Evid.R. 803(6). The Club’s arguments do not refute the
Trustee’s interests calculations.
Accordingly, as of March 16, 2015, the Club owed $4,326,123.63 in unpaid interest with
a daily per diem rate of $3,395.24. The Trustee must calculate the amount of unpaid interest as
of today, May 11, 2015, in its proposed judgment order due on or before May 13, 2015.
III.

Trustee Fees
Last, the Trustee contends that the Trustee’s fees–as provided by the Guaranty

Agreement–amount to $9,854.50. In support of this amount, Housum avers that she reviewed
her time-keeping records, which track the fees accrued in her work on behalf of the bondholders
in connection with the loan. (Housum Aff. ¶ 21.) In further support of this amount, the Trustee
provides the March 16, 2015, UMB account invoice stating that the default specialist billed
16.80 hours at a rate of $510 an hour for a total of $8,568.00. The invoice also bills $340.00 in

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“default administrative fees,” $833.33 for “administrative fees,” and $113.17 in out of pocket
expenses. (R. 136-11, Ex. H, 3/16/15, Invoice; Housum Aff. ¶ 23.) In her supplemental
affidavit, Housum avers that this amount subtracts the amount LHC has previously paid for
Trustee’s fees in connection with LHC’s bankruptcy. (Housum Supp. Aff. ¶ 8.) Housum also
asserts that she has personal knowledge of how the UMB invoice was made and that it is the
regular practice for UMB to make such documents. (Id. ¶ 7.)
The Club takes issue with the fact that Housum did not attach her time-keeping records to
her affidavit and that the Trustee did not turn over her time-keeping records during discovery.
Also, the Club argues that the March 2015 UMB invoice does not delineate the exact work
Housum performed and on what dates she performed these tasks. In short, the Club is arguing
that the documentary evidence supporting the amount of Trustee’s fees is not a “reasonable basis
for computing damages.” It is not entirely clear why Housum did not attach the time-keeping
records delineating her tasks. This omission and the invoice’s lack of detail, however, do not
support the conclusion that the Trustee’s basis for these fees is unreasonable, especially because
courts resolve any reasonable doubts as to the amount of damages against the wrongdoer. See
MindGames, Inc. v. Western Pub. Co., Inc., 218 F.3d 652, 658 (7th Cir. 2000). On a final note,
the Court rejects the Club’s hearsay and authentication arguments regarding these documents for
the same reasons discussed above. Because the Trustee maintains that these fees are continuing,
the Trustee must calculate the amount of Trustee’s fees as of today, May 11, 2015, and include
these fees in its proposed judgment order due on or before May 13, 2015.

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CONCLUSION
The Court grants the Trustee’s motion to prove up damages as to the principal, interest,
and Trustee’s fees. The Trustee’s proposed judgment order is due on or before May 13, 2015.
The parties must follow the local procedures under Northern District of Illinois Local Rule 54.3
regarding attorney’s fees.
Dated: May 11, 2015
ENTERED

______________________________
AMY J. ST. EVE
United States District Court Judge

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