Jones et al v. Culver Franchising System, Inc.
MEMORANDUM Opinion and Order: For the foregoing reasons, the Court denies the following motions: (1) CFSI's Motion to Strike Plaintiff Wilbern's Affidavit, 131 ; (2) CFSI's Motion to Strike Plaintiffs' Expert John A. Gordon, [12 2]; (3) CFSI's Motion for Partial Summary Judgment on Time-Barred Claims, 99 ; (4) CFSI's Motion for Summary Judgment On Plaintiffs' Claims for Lost Profits, 123 ; and (5) CFSI's Motion for Summary Judgment on CFSI's Counte rclaim for Breach of Contract and Breach of Personal Guaranty, 96 . CFSI's Motion for Summary Judgment on All Claims Brought by Wilbern Enterprises, LLC, 102 , is granted in part and denied in part, with the Court dismissing Wilbern Enterpris es' claims in Count II only. In addition, Plaintiffs shall file a position statement not to exceed 5 pages within 7 days from the date this Order is entered stating whether Wilbern intends to pursue a claim under Count III based on his guarant y. If Wilbern does intend to pursue such a claim, Plaintiffs' position statement shall provide appropriate argument and citation of authority to support Wilbern's legal right to pursue such a claim. CFSI may file a response, also limited t o 5 pages, within 7 days after Plaintiffs' position statement is filed. A status hearing is set for October 21, 2015 at 9:00 a.m. Counsel should be prepared to discuss the expected length of trial, and their own trial schedules, as a firm trial date will be set at the status conference. Signed by the Honorable Thomas M. Durkin on 9/29/2015:Mailed notice(srn, )
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
MICHAEL ANTHONY G. WILBERN, and
WILBERN ENTERPRISES, LLC,
CULVER FRANCHISING SYSTEM, INC.,
No. 13 C 3269
Judge Thomas M. Durkin
MEMORANDUM OPINION AND ORDER
Plaintiffs Michael Anthony G. Wilbern (“Wilbern”) and Wilbern Enterprises,
LLC (“Wilbern Enterprises”) sued Defendant Culver Franchising System, Inc.
(“CFSI”), a Wisconsin corporation in the business of franchising the Culver’s brand
restaurant. Plaintiffs allege that CFSI engaged in a pattern and practice of racial
discrimination in violation of 42 U.S.C. § 1981. Section 1981 prohibits racial
discrimination in the making and enforcement of contracts, and “applies to all
phases and incidents of the contractual relationship.” Rivers v. Roadway Express,
Inc., 511 U.S. 298, 302 (1994). 1 CFSI has filed a series of motions, which have been
The full text of the statute reads as follows:
§ 1981. Equal rights under the law
(a) Statement of equal rights
All persons within the jurisdiction of the United States
shall have the same right in every State and Territory to
make and enforce contracts, to sue, be parties, give
evidence, and to the full and equal benefit of all laws and
proceedings for the security of persons and property as is
enjoyed by white citizens, and shall be subject to like
fully briefed. For the reasons that follow, CFSI’s motions are now denied, with the
exception that Wilbern Enterprises’ claim under Count II is dismissed.
INITIATION OF BUSINESS DEALINGS BETWEEN PLAINTIFFS
Wilbern is an African-American individual residing in Illinois. Wilbern
Enterprises is an Illinois limited liability company organized by Wilbern for the
purpose of owning and operating a Culver’s franchise located in Franklin Park (the
“Franklin Park Franchise”). Culver’s restaurants offer burgers, sandwiches, salads,
dinners, frozen custard desserts, beverages, and other menu items in a quickservice, casual dining setting. Craig Culver and other members of his family opened
the first Culver’s restaurant in Sauk City, Wisconsin in 1984. Today there are
punishment, pains, penalties, taxes,
exactions of every kind, and to no other.
(b) “Make and enforce contracts” defined
For purposes of this section, the term “make and enforce
contracts” includes the making, performance, modification,
and termination of contracts, and the enjoyment of all
benefits, privileges, terms, and conditions of the
(c) Protection against impairment
The rights protected by this section are protected against
impairment by nongovernmental discrimination and
impairment under color of State law.
42 U.S.C. § 1981.
The Court does not cite to the parties’ Local Rule 56.1 Statements in this section
for the reasons discussed later in this opinion. The facts referenced are taken from
the record as a whole, and include a mixture of both disputed and undisputed facts,
which are set forth for background purposes only.
approximately 501 Culver’s restaurants in twenty-one states, most of which operate
pursuant to franchise agreements between CFSI and independent franchise owners.
Wilbern lived in Wisconsin when he first became interested in becoming a
Culver’s franchisee. He had extensive prior operational experience running
franchise restaurants, and got together with his friend Michael L. Jones (“Jones”) to
formulate an informal business plan whereby they would own and operate between
them at least five and perhaps as many as ten Culver’s restaurants. In pursuit of
this plan, they met with Craig Culver and other CFSI officers and employees in
April or May of 2002, and shortly thereafter completed CFSI’s 16-week
owner/operator training program. Jones then became the first African-American
franchisee in Culver’s system when he opened a franchise in Noblesville, Indiana in
or about January 2003. 3
CFSI’S FAILURE TO APPROVE FRANCHISING OPPORTUNITIES
ON THE CHICAGO SOUTH SIDE.
Wilbern started out his Culver’s career as the general manager at the
Noblesville franchise. Soon afterwards, however, he was asked by CFSI to provide
support at a Culver’s franchise located in Lansing, Illinois (owned by an unrelated
party). Wilbern did so, and then continued to help CFSI at other franchise locations
in Illinois while also scouting for various locations to open his own Culver’s
Jones and his company, MBAJ Group, LLC, also filed § 1981 claims against CFSI.
Those claims originally were part of this same action until Jones moved to sever his
case from Wilbern’s case due to Jones’ filing in Indiana of a petition in bankruptcy.
The Court granted Jones’ unopposed severance motion, and then stayed Jones’ case
during the pendency of the bankruptcy.
restaurant. Wilbern testified 4 that he informed Craig Culver and other CFSI
employees or officers from the start of his desire to pursue a franchise located on the
South Side of Chicago. By the end of 2003, Wilbern had identified several potential
sites on the South Side of Chicago he believed would be good locations for a Culver’s
restaurant. Wilbern testified that, on multiple occasions from 2003 through 2012,
he proposed the South Side sites he had identified to Tom Goldsmith, CFSI’s
Director of Development, as well as other CFSI officers or employees. In addition,
he asked Goldsmith to help him find other South Side locations if CFSI did not like
any of the three sites Wilbern had proposed. Wilbern also stayed in contact with the
Chicago aldermen in whose wards the South Side sites were located. Wilbern
understood and believed that the City of Chicago would provide tax increment
financing (“TIF” funds) or other forms of support for any new Culver’s restaurant
opened at those sites. Wilbern believed that the availability of TIF and other public
funds was significant to site-selection because, with this type of assistance, his costs
of developing a new Culver’s restaurant would compare favorably to other potential
sites where public financial support was not available.
Wilbern testified that, despite his repeated requests, CFSI failed to approve
any of the sites he selected, all of which were in predominantly African-American
communities on the South Side of Chicago. CFSI did approve Wilbern for two
franchises in the western suburbs of Chicago, however. First, CFSI approved
Wilbern’s testimony consists of both his deposition testimony and the affidavit he
submitted in opposition to CFSI’s summary judgment motions (R. 116-1). CFSI’s
motion to strike Wilbern’s affidavit is discussed later in this opinion.
Wilbern in 2005 for the Franklin Park Franchise. Second, CFSI approved Wilbern
in 2009 for a second franchise that was to be located in Hillside, Illinois. Wilbern
never opened the Hillside franchise.
Wilbern testified that when he applied for both the Franklin Park and
Hillside locations, he strongly preferred a South Side location and told CFSI as
much. He testified that CFSI steered him away from a South Side location to the
two west suburban locations, telling him that he had a better chance of receiving
corporate approval for a franchise if he chose those west suburban locations.
Wilbern testified that he went along with the Franklin Park location in 2005
because he did not want to rock the boat when his relationship with CFSI was just
in its beginning stages. He stated that later, in 2009, he submitted an application
for both a South Side location at Marshfield Plaza and the Hillside location, but
that he submitted the application for Hillside only because Goldsmith urged him to
select that location. CFSI approved the Hillside application, but did not take any
action on the Marshfield Plaza application.
THE FRANKLIN PARK FRANCHISE.
Wilbern signed the Franchise Agreement on behalf of Wilbern Enterprises on
November 29, 2005. The Franklin Park Franchise was doing well at first, but then
began experiencing financial difficulties. Wilbern testified that those financial
difficulties were caused by the higher-than-normal fixed costs at that location,
which were largely due to a leasing arrangement with a company by the name of
Milkshake, LLC (“Milkshake”). Milkshake purchased the land on which the
restaurant was situated and then leased it back to Wilbern Enterprises. Wilbern
testified that he agreed to this arrangement at the urging of CFSI. 5
Wilbern testified that two other factors also contributed to the Franklin Park
Franchise’s financial difficulties. Wilbern testified that Joe Femis, who held the
position with CFSI of franchise business partner consultant, would not give his
approval to raising food prices at the Franklin Park Franchise to off-set the higherthan-normal fixed costs at that location. In addition, CFSI allowed two other
franchises to open within five or six miles from the Franklin Park Franchise.
Wilbern testified that CFSI denied him the same benefits it routinely gave to other
franchisees, which benefits included allowing a franchisee to set its own food prices
and protecting an existing franchisee’s market share from “cannibalization” of sales
by a new franchisee. 6
TERMINATION OF THE FRANCHISE AGREEMENT.
Eventually, the Franklin Park Franchise’s financial difficulties led Wilbern to
Milkshake is owned by Tim Nietzel, a Wisconsin real estate investor who has been
involved in purchasing land for other Culver’s franchises under the same type of
CFSI contends that its conduct on both these issues was in compliance with the
terms of the Franchise Agreement, which provides that the franchisee has control
over its food prices and grants the franchisee protection from the opening of a new
franchise only if the proposal for the new franchise is within a three-mile radius of
the current franchise. The two new franchises in question — Lyons and Rosemont
— were more than three miles from the Franklin Park Franchise. Plaintiffs have
submitted testimony from a restaurant industry expert, however, who will testify
that CFSI has a past practice of not approving any new franchise — even one
beyond the contractually protected radius — if the new franchise will encroach on
the existing franchisee’s sales, which Plaintiffs’ expert will testify happened here.
seek help from CFSI. Wilbern testified that, at a meeting on September 13, 2010,
Craig Culver verbally committed to providing Wilbern Enterprises with a lender
guaranty. A guaranty from CFSI would have enabled Wilbern Enterprises to
refinance its lease with Milkshake and thereby reduce its largest cost. Wilbern
testified that Craig Culver lulled him into thinking he would receive support and
financial assistance from CFSI, and that CFSI then engaged in a calculated scheme
to string him along with misleading statements and empty promises while the
Franklin Park Franchise continued to deteriorate financially. The guaranty never
materialized, and, in May 2012, Wilbern Enterprises filed for protection under
Chapter 11 of the Bankruptcy Code.
An exchange of emails on September 5, 2012 between Forrest Ingram,
Wilbern Enterprise’s bankruptcy attorney, and Steve Anderson, General Counsel
for CFSI, supports Wilbern’s claim that he continued to seek approval for a
franchise on the South Side of Chicago even while the bankrupty proceeding was
In furtherance of my telephone conversation with you
earlier this morning, if Michael sells his interest in the
Culver’s franchise at Franklin Park, we would be open to
considering him for another Culver’s restaurant.
However, before we would grant him another franchise he
would have to go through the application process . . . .
Michael’s biggest hurdle will be whether he has enough
liquid assets to start a new business, and we must be
assured that his liabilities, including tax obligations, are
not going to jeopardize the potential for success of such a
Please call me if you would like to discuss this further.
Steven E. Anderson
Culver Franchising System, Inc.
Mike has been in consultation with several alderman who
have indicated that they will GIVE him property (or sell it
to him for less than $5,000) if he will open a Culver's
business in a TIFF neighborhood that needs to have new
businesses so as to increase employment. Thus, he does
not need funds to pay rent or to purchase a building.
I have indicated to Mike that he can contact you directly
to submit the forms and to discover if there is anything
else that you require before Culver’s will consider and
possibly grant him the new franchise.
R. 116-16 at 2-3.
Wilbern testified that he was led to believe by his communications with CFSI
such as the one above that support from CFSI was forthcoming even while the
bankruptcy proceedings were pending. He testified that no employee or officer of
CFSI ever told him during this time that CFSI would not support him, that CFSI
had denied his application for a franchise at Marshfield Plaza, or that CFSI would
never approve a franchise located on the South Side of Chicago. For these reasons,
Wilbern stated, he never contemplated suing CFSI during the bankruptcy; his focus
instead was on salvaging his franchise relationship with CFSI.
On October 10, 2012, the bankruptcy court dismissed Wilbern Enterprises’
Chapter 11 proceedings upon motion by the trustee. The bankruptcy court file
shows 7 that Wilbern Enterprises’ two largest creditors (one of which was
Milkshake) obtained relief from the automatic bankruptcy stay, which led the
trustee to move to dismiss the Chapter 11 proceedings, or, in the alternative, to
convert it to a Chapter 7 case, on the ground that reorganization was no longer
feasible. The bankruptcy file does not reveal whether the bankruptcy court
considered the trustee’s alternative request to convert to a Chapter 7 proceeding.
The bankruptcy court’s dismissal order was without prejudice. See 11 U.S.C. § 349.
On November 30, 2012, Milkshake evicted Wilbern Enterprises from the
Franklin Park premises. By letter dated the same day as the eviction, CFSI notified
Wilbern Enterprises of its termination of the Franchise Agreement. Wilbern
Enterprises received the termination letter sometime in the first week of December
2012. Not long after CFSI terminated the Franchise Agreement, Guy Hollis took
over the Franklin Park Franchise. Hollis is white. At the time he took over the
Franklin Park Franchise, Hollis already owned a Culver’s franchise in Lyons, which
is one of the two competing franchises that allegedly contributed to the demise of
the Franklin Park Franchise. He also owned another Culver’s franchise located in
west suburban Berwyn.
The original complaint was filed on April 30, 2013. On August 2, 2013, CFSI
filed a motion to dismiss, which this Court granted in part and denied in part. R. 41
(Jones v. Culver Franchising Sys., Inc., 12 F. Supp. 3d 1079 (N.D. Ill. 2013)). The
The Court may take judicial notice of the bankruptcy court file. See United States
v. Wood, 925 F.2d 1580, 1582 (7th Cir. 1991).
Court’s ruling on CFSI’s motion to dismiss interpreted the original complaint as
involving two types of § 1981 claims: (1) claims alleging racial discrimination in
connection with the Franklin Park Franchise; and (2) claims alleging racial
discrimination in connection with CFSI’s failure to enter into other franchising
agreements with Plaintiffs. Id. at 1084. The Court held that only Wilbern
Enterprises could assert a claim based on the Franklin Park Franchise because the
corporate entity, not the individual owner of that entity, was the contracting party
under the Franchise Agreement. Id. at 1084. The Court held that as to claims
relating to other potential franchise agreements, however, the original complaint’s
allegations viewed in the light most favorable to Plaintiffs were sufficient to state a
claim on behalf of both Wilbern and Wilbern Enterprises. The Court noted that,
should Plaintiffs ultimately obtain a jury verdict in their favor on this claim, CFSI
could not be subject to double counting of damages. Id. at 1087-88.
After the Court ruled on CFSI’s first motion to dismiss, Plaintiffs filed an
Amended Complaint. The Amended Complaint incorporates the Court’s previous
ruling by separating Plaintiffs’ § 1981 claims according to whether they concern
discrimination with respect to an existing contractual relationship or discrimination
in the formation of new contractual relationships. Thus, the first two counts of the
Amended Complaint allege alternative § 1981 claims based on CFSI’s alleged denial
of new franchising opportunities -- Count I on behalf of Wilbern and Count II on
behalf of Wilbern Enterprises. Plaintiffs’ § 1981 claims based on the Franklin Park
Franchise are alleged in Count III. Notwithstanding this Court’s previous ruling on
CFSI’s first motion to dismiss, Count III is alleged on behalf of both Wilbern and
WILBERN’S COUNT III CLAIM ARISING OUT OF THE FRANKLIN
PARK FRANCHISE AGREEMENT.
As a preliminary matter, CFSI makes the observation in one or more of its
summary judgment briefs that this Court’s prior ruling on CFSI’s first motion to
dismiss means that Wilbern’s individual claim in Count III concerning the Franklin
Park Franchise Agreement is not viable. R. 100 at 10 n. 3; R. 127 at 2-3. In its prior
ruling, the Court held that Wilbern could not assert a claim based on the Franklin
Park Franchise because § 1981 provides a remedy only to persons who are parties to
the contract. Here, only Wilbern Enterprises, not Wilbern, was a party to the
Franchise Agreement. See R. 41 (Jones, 12 F. Supp. 3d at 1086-87 (citing Domino’s
Pizza, Inc. v. McDonald, 546 U.S. 470 (2006)).
After the Court entered its order on the first motion to dismiss, CFSI filed a
counterclaim against Wilbern seeking to recover under a personal guaranty
executed by him simultaneously with Wilbern Enterprises’ execution of the
Franchise Agreement. R. 46 at 35-36. Wilbern’s personal guaranty provides that, in
consideration of CFSI’s execution of the Franchise Agreement, Wilbern guaranteed
Wilbern Enterprises’ payment to CFSI of amounts due under the Franchise
Agreement, as well as Wilbern Enterprises’ “performance of the covenants and
obligations” in the Franchise Agreement. R. 46-3 at 31 (Personal Guaranty And
Agreement To Be Bound Personally By The Provisions Of The Franchise Agreement
(Ex. D to Franchise Agreement)). The personal guaranty further provides that
Wilbern is “personally bound by every provision contained in th[e] Franchise
Agreement including the non-compete provisions,” and that the personal guaranty
would “be construed as though [Wilbern] executed a Franchise Agreement
containing the identical provisions of this Franchise Agreement.” Id.
The Court’s previous ruling does not address the holding of Domino’s Pizza,
Inc. insofar as the Amended Complaint and Wilbern’s personal guaranty are
concerned. Nor have either CFSI or Plaintiffs ever addressed that question.
Nevertheless, it is not entirely clear from the record whether Plaintiffs intend to
pursue Wilbern’s claim in Count III of the Amended Complaint. Compare R. 117 at
34 n. 9 (Pls. Mem. in Opp. to CFSI’s Summ. Jud. Motions), with R. 136 at 4 (Pls.
Resp. to Defs. Rule 56.1 Stmt., ¶ 12). Therefore, the Court directs Wilbern to file a
position statement regarding whether he intends to pursue this claim. If he does,
then he should provide the Court with citations to authority with appropriate
analysis to support an argument that he suffered an injury distinct from any injury
to Wilbern Enterprises, and that the injury he suffered flowed directly from racially
motivated interference with rights he has under the guaranty agreement.
WILBERN ENTERPRISES’ COUNT II CLAIM FOR DENIAL
FUTURE FRANCHISING OPPORTUNITIES.
CFSI also observes in one or more of its filings that Wilbern Enterprises does
not have a viable claim for denial of future franchising opportunities as alleged in
Count II of the Amended Complaint. R. 127 at 2-3. CFSI acknowledges this Court’s
prior ruling upholding the alternative pleading of this claim, but contends that
discovery has now shown that this claim is invalid because Wilbern testified at his
deposition he would not have used Wilbern Enterprises to open another Culver’s
franchise but instead would have created a new business entity to do so. Id.
The factual record is not entirely clear on this issue. On the one hand,
Wilbern admits in his response to one of CFSI’s Rule 56.1 statements that he
“planned on creating a separate entity” for any “subsequent franchise agreement”
on the South Side. R. 112 at 9, ¶ 24. On the other hand, Wilbern’s deposition
testimony supporting this admission was made with respect to Marshfield Plaza
only. See R. 101-6 at 3 (Wilbern Dep. at 497). Wilbern did not testify about his
intentions for any of the other franchising opportunities for which Plaintiffs seek to
Nevertheless, the Court can resolve this issue based on the testimony of
Plaintiffs’ damages expert, John Gordon. Gordon’s proposed testimony indicates
that Plaintiffs’ claims regarding denial of franchising opportunities include three
Island (95th and Stony
(2) Marshfield Plaza; and (3) Chatham Market (83rd and Stewart). Based on this
testimony as well as other evidence in the record the Court concludes that Plaintiffs’
denial of franchising opportunities claims break down as follows:
Stony Island: Plaintiffs’ lost opportunity claim based on Stony Island relates
to Wilbern’s desire to open a franchise there in 2005, when he allegedly was steered
to the Franklin Park location instead of his preferred location at 95th and Stony
Island. There is no evidence in the record that would support the view that Wilbern
would have opened a franchise at both Stony Island and Franklin Park at this time.
Therefore, any lost profits that arise out of a hypothetical Stony Island restaurant
are profits that Wilbern Enterprises would have earned in place of income it either
earned or lost at the Franklin Park location. Consequently, damages arising from
lost profits from a hypothetical Stony Island franchise should be taken into account
under Wilbern Enterprises’ damages claims for alleged § 1981 violations in Count
III of the Amended Complaint.
Marshfield Plaza: Plaintiffs’ lost opportunity claim based on Marshfield Plaza
relates to Wilbern’s desire to open an additional franchise at this location after he
already had opened the Franklin Park Franchise. The evidence shows that Wilbern
sought to open a franchise at Marshfield Plaza through an entity other than
Wilbern Enterprises. Accordingly, the claim for loss profits from a hypothetical
franchise at Marshfield Plaza is a denial of franchising opportunity claim that can
be asserted only by Wilbern pursuant to Count I.
Chatham Market: Plaintiffs’ lost opportunity claim based on Chatham
Market (83rd and Stewart) arises out of Gordon’s theory, set forth in his expert
report, that Wilbern would have been successful at the Marshfield Plaza location
and that this success would have enabled him to open another franchise by the year
2014. In other words, the claim to recover lost profits associated with a hypothetical
franchise at Chatham Market stems from Wilbern’s denial of franchising
opportunity claim based on Marshfield Plaza. Therefore, this loss, if it is
recoverable, would be recoverable only by Wilbern pursuant to Count I.
In summary, Wilbern Enterprises does not have a viable claim for denial of
franchising opportunities. Instead, it has a damages claim to recover lost profits
that the Franklin Park Franchise might have earned had it been located at Stony
Island instead of Franklin Park. This damages claim arises under Count III.
Accordingly, Wilbern Enterprises’ claim under Count II for denial of franchising
opportunities is dismissed.
CFSI’S MOTIONS TO STRIKE
At oral argument, the Court denied CFSI’s motion to strike the affidavit filed
by Wilbern in opposition to CFSI’s summary judgment motions. The Court confirms
that oral ruling for the reasons given in open court, but adds to those reasons the
following discussion of the issues raised in CFSI’s brief in support of its motion to
CFSI invokes the “sham affidavit” rule, according to which “a plaintiff cannot
manufacture an issue of fact by submitting an affidavit that contradicts prior sworn
testimony.” McCann v. Iroquois Mem’l Hosp., 622 F.3d 745, 750-51 (7th Cir. 2010).
The rule “is designed to avoid sham factual issues and prevent parties from taking
back concessions that later prove ill-advised.” Id. at 751 (citing cases). “But it
applies when the change is incredible and unexplained. In contrast, when the
change is plausible and the party offers a suitable explanation such as confusion,
mistake, or lapse in memory, a change in testimony affects only its credibility, not
its admissibility.” Id. (internal quotation marks and citations omitted).
In the few instances in which CFSI attempts to show inconsistency between
Wilbern’s affidavit and Wilbern’s deposition testimony, its efforts come up
significantly short. CFSI seems to recognize this, and instead objects to Wilbern’s
affidavit mostly on the basis that it offers additional information and detail not
provided in Wilbern’s deposition testimony. There is no rule or principle of law,
however, saying that a witness may not supplement the record with an affidavit
providing additional information. In fact, Rule 56(c)(1) specifically contemplates
such affidavits. 8 The only restriction on Rule 56(c)(1) is the “sham” affidavit rule,
which Wilbern’s affidavit does not violate.
CFSI asserts that Wilbern’s affidavit nevertheless is somehow improper
because it is “self-serving.” The Seventh Circuit, however, has foreclosed that
argument. See Hill v. Tangherlini, 724 F.3d 965, 967 (7th Cir. 2013) (“As we have
repeatedly emphasized over the past decade, the term ‘self serving’ must not be
used to denigrate perfectly admissible evidence through which a party tries to
present its side of the story at summary judgment.”) (internal quotation marks and
citations omitted); see also Widmar v. Sun Chem. Corp., 772 F.3d 457, 459-60 (7th
Cir. 2014) (“Self-serving affidavits can indeed be a legitimate method of introducing
facts on summary judgment.”), cert. denied, 135 S. Ct. 2892 (2015); Payne v. Pauley,
337 F.3d 767, 773 (7th Cir. 2003) (seeking to “lay to rest the misconception that
evidence presented in a ‘self-serving’ affidavit is never sufficient to thwart a
See Fed. R. Civ. P. 56(c)(1) (“A party asserting that a fact cannot be or is genuinely
disputed must support the assertion by: (A) citing to particular parts of materials in
the record, including depositions, documents, electronically stored information,
affidavits or declarations, stipulations (including those made for purposes of the
motion only), admissions, interrogatory answers, or other materials; . . .”) (emphasis
summary judgment motion”).
To be sure, all affidavits, including those of a party, must meet the usual
requirements for evidence presented on summary judgment, such as the hearsay
rule or the requirement of personal knowledge. See, e.g., Widmar, 772 F.3d at 460;
Payne, 337 F.2d at 772. CFSI argues that some areas of Wilbern’s affidavit raise
these concerns. But it makes no effort to point out specifically which parts.
Moreover, even if portions of Wilbern’s affidavit violate an evidentiary rule, many of
the statements in the affidavit are not relevant to any fact that is material to an
issue raised in CFSI’s summary judgment motions. If there is a valid evidentiary
basis for discounting any material statement in Wilbern’s affidavit, the Court will
consider that issue when it addresses the summary judgment motion rather than in
the context of ruling on a blanket motion to strike. See Custom Vehicles, Inc. v.
Forest River, Inc., 464 F.3d 725, 727-28 (7th Cir. 2006).
CFSI has filed a motion to strike the proposed testimony of Plaintiffs’ expert
witness, John Gordon. CFSI’s motion is brought under Rule 702 of the Federal Rules
of Evidence, which requires that expert testimony be (1) “help[ful] [to] the trier of
fact to understand the evidence or to determine a fact in issue,” (2) be “based on
sufficient facts or data,” (3) use “reliable principles and methods,” and (4) “reliably
appl[y] the principles and methods to the facts of the case.” Fed. R. Evid. 702. In
Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993), the Supreme
Court charged trial judges with the responsibility of acting as gatekeepers to prevent
irrelevant or exclude unreliable expert testimony from being admitted. Lapsley v.
Xtek, Inc., 689 F.3d 802, 809 (7th Cir. 2012). In Kumho Tire Co. v. Carmichael, 526
U.S. 137, 147-48 (1999), the Court clarified that this gatekeeper function applies to
all expert testimony, not just testimony based in science, and further held that the
trial court has “wide latitude in performing its gatekeeping function and
determining both how to measure the reliability of expert testimony and whether the
testimony itself is reliable,” id. at 152-53.
With these legal principles in mind, the Court turns to Gordon’s expert
testimony. Gordon is a restaurant industry analyst and management consultant
with extensive restaurant operations and financial management experience. R. 13740 at 5 (Gordon Report, ¶ 2). He is a certified Master Analyst of Financial Forensics
(MAFF), who specializes in complex business analytical projects. Id. Gordon’s
proposed testimony covers issues relevant to liability and well as issues related to
damages. The opinions he intends to give at trial, briefly summarized, include the
95th and Stony Island — Gordon will testify that: (1) beginning in
2006, Wilbern would have been successful at developing a franchise in the Stony
Island Corridor on the Chicago South Side; (2) the reasons CFSI gave for not
approving a franchise location in the Stony Island Corridor do not make sense from a
business standpoint; (3) the Stony Island location was a better franchise location
than the Franklin Park location; and (4) Plaintiffs suffered economic losses as a
result of CFSI’s failure to approve a franchise in the Stony Island Corridor. R. 13740 at 11-14.
Franklin Park — Gordon will testify that: (1) sales at the Franklin
Park Franchise were detrimentally affected by CFSI’s decision in 2009 to allow a
competing franchise to open in Lyons, as well CFSI’s decision in 2010 to allow
another competing franchise to open in Rosemont; (2) CFSI’s decisions in 2009 and
2010 to allow the opening of the Lyons and Rosemont franchises were inconsistent
with past decisions or actions that demonstrate a “policy and practice of being
concerned with the prospect of cannibalization of existing units”; and (3) the
Franklin Park Franchise would have been marginally profitable over a twenty-five
year period but for the “cannibalization” of its sales by the competing Lyons and
Rosemont franchises. R. 137-40 at 14-23, 61-63.
Marshfield Plaza — Gordon will testify that: (1) beginning in 2007
through at least the end of 2010, Plaintiffs would have been successful at developing
a franchise at Marshfield Plaza on the Chicago South Side; (2) CFSI’s criticisms of
the Marshfield site were unjustified from a business standpoint; and (3) Wilbern
suffered economic losses as a result of CFSI’s failure to approve a franchise at the
Marshfield Plaza. R. 137-40 at 21-31, 64-84.
83rd and Stewart — Gordon will testify that: (1) Wilbern would have
earned strong financial and cash returns had he been allowed to open at Marshfield
Plaza; (2) these profits would have enabled Wilbern to add an additional franchise at
another South Side location by the year 2014; (3) Wilbern would or could have
opened the additional franchise at Chatham Market, located at 83rd and Stewart;
and (3) Wilbern suffered economic losses from his inability to expand to 83rd and
Stewart in the year 2014 as a result of CFSI’s refusal to allow Wilbern to open the
Marshfield franchise. R. 137-40 at 31-32, 85-87.
CFSI’s Differential Treatment Of Plaintiffs And Variance From
Standard Restaurant Franchise Practices -- Gordon will testify that Plaintiffs
were treated differently than other franchisees and not in accordance with expected
standard restaurant industry practices in terms of: (1) oversight of site selection
process; (2) oversight of menu pricing; and (3) collaboration with a competing
franchisee (Guy Hollis). R. 137-40 at 32-36.
The Court will begin its Daubert analysis with CFSI’s arguments for
excluding Gordon’s expert opinions on liability issues. CFSI contends that Gordon’s
opinions on whether CFSI treated Plaintiffs in the same or a consistent manner as it
treated white franchisees, and whether CFSI exercised best business practices in
connection with how it treated Plaintiffs, should be barred for three reasons.
First, CFSI asserts that Gordon is not an expert in restaurant franchising or
on franchisor-franchisee relations. In response, Plaintiffs point out that Gordon is a
member of the American Association of Franchisees and Dealers, and that he has
published numerous articles on topics involving restaurant franchises and chain
restaurants. Plaintiffs further state that, of the seventeen representative sample
engagements as an expert and consultant on restaurant industry legal matters listed
by Gordon on his CV, more than half concern franchisor-franchisee disputes. R.134
CFSI takes issue with Gordon’s qualifications primarily because Gordon
admitted that “[he] has not received specific education or course work in franchising
or any education through the International Franchise Association.” R. 122 at 11. But
“[t]he notion that Daubert . . . requires particular credentials for an expert witness is
radically unsound.” Tuf Racing Prods., Inc. v. Am. Suzuki Motor Corp., 223 F.3d 585,
591 (7th Cir. 2000) (rejecting argument that an “accountant should not have been
permitted to testify as an expert witness because he does not have a degree in
economics or statistics or mathematics or some other ‘academic’ field that might bear
on the calculation of damages”). “Nothing in the text, purpose, or history of Rule 702
supports the notion that formal education or training is an indispensable
prerequisite to a finding of testimonial competency. Indeed, the uncompromisingly
plain language of the Rule refutes it.” Loeffel Steel Prods., Inc. v. Delta Brands, Inc.,
372 F. Supp. 2d 1104, 1113 (N.D. Ill. 2005) (quoting Fed. R. Evid. 702, which
provides that a witness may be qualified to as an expert “by knowledge, skill,
experience, training, or education”) (emphasis added); see also Haager v. Chicago
Rail Link, LLC, 232 F.R.D. 289, 293 (N.D. Ill. 2005) (an expert’s qualifications “need
not be based on academic pedigree alone”).
The Seventh Circuit has said that “a court should consider a proposed expert’s
full range of practical experience as well as academic or technical training when
determining whether that expert is qualified to render an opinion in a given area.”
Smith v. Ford Motor Co., 215 F.3d 713, 718 (7th Cir. 2000). Moreover, experts may
rely on their professional experience to offer opinion testimony regarding the
standard of care and generally-accepted industry standards. See WH Smith Hotel
Servs., Inc. v. Wendy’s Int'l, Inc., 25 F.3d 422, 429 (7th Cir. 1994) (affirming
admission of testimony by expert on real estate leases regarding customs in the
commercial real estate industry). 9
In its reply, CFSI appears to concede the more general point that Gordon is
qualified to testify regarding franchise matters, but argues instead that none of the
franchise articles written by Gordon relates specifically to the issue of whether one
franchisee has been treated differently than another franchisee. This level of
specificity, however, is not required. See Loeffel Steel Prods., Inc., 372 F. Supp. 2d at
1113 (“An expert need not necessarily have specific experience with a particular
facet of his or her expertise in order to be competent to testify as to that facet. A lack
of specialization generally does not affect the admissibility of the opinion, only its
weight.”) (internal quotation marks and citations omitted). In sum, the Court finds
See also Baldonado v. Wyeth, 2012 WL 3234240, at *3, 5 (N.D. Ill. Aug. 6, 2012)
(denying Daubert challenge to expert who would opine that defendant “did not do
what a reasonable pharmaceutical company should have done,” where expert
“[brought] to bear her experience and training on the issue”); In re Yasmin and Yaz
(Drospirenone) Mktg., Sales Practices & PMF Prods. Liab. Litig., 2011 WL 6740391,
at *12 (S.D. Ill. Dec. 22, 2011) (plaintiffs “may ask a witness, who has familiarity
with other pharmaceutical companies, if that witness is familiar with custom and
practice in the industry,” and may also ask witness whether defendant’s “action
comported with that industry standard”); Fed. Ins. Co. v. Arthur Andersen, LLP,
2006 WL 6555232, at *3 (N.D. Ill. Jan. 18, 2006) (permitting expert testimony on
insurance industry’s custom and practice of claims handling); Harms v. Lab. Corp. of
Am., 155 F. Supp. 2d 891, 903-04 (N.D. Ill. 2001) (testimony on the “general
standards of care in the industry” comes from the expert’s professional knowledge,
and is “classic expert testimony”).
that Gordon is qualified to render the expert opinions as outlined in his report
relating to restaurant franchising, franchisor-franchisee relations, industry customs
and best practices, and the disparate treatment of Plaintiffs vis a vís other Culver’s
CFSI next argues that Gordon’s testimony concerning disparate treatment is
not based on sufficient facts or data. According to CFSI, Gordon “cherry picks” two
white franchisees (Hollis and Obriecht) to use as comparators, while ignoring
evidence showing that Plaintiffs were not treated any differently than many
franchisees other than Hollis and Obriecht. CFSI misperceives the scope of the
“sufficient facts and data” component of Rule 702. To be sufficient, Rule 702 requires
only that “there be a link between the facts or data the expert has worked with and
the conclusion the expert’s testimony is intended to support.” U.S. v. Mamah, 332
F.3d 475, 478 (7th Cir. 2003). This standard, by its terms, is not restricted to a
purely numerical inquiry. Thus, while the quantity of data considered by the expert
may be relevant to establishing the necessary link, it is relevant only insofar as it
bears on the question of whether the expert has employed an appropriate
methodology, and this question, in turn, depends on the nature of the matter on
which the expert is opining. See Manpower, Inc. v. Ins. Co. of Penn., 732 F.3d 796,
808 (7th Cir. 2013) (“Rule 702’s requirement that expert opinions be supported by
‘sufficient facts or data’ means ‘that the expert considered sufficient data to employ
the methodology.’”), quoting Stollings v. Ryobi Tech., Inc., 725 F.3d 753, 766 (7th Cir.
2013) (observing by way of illustration that an opinion about an average gross sales
price could not be reliably supported by evidence relating to sales to only one
customer “because a single observation does not provide a sufficient basis for
calculating an average”).
In this case, Gordon’s testimony is offered on the issue of discrimination in
treatment among franchisees. “‘Discrimination among franchisees means that as
between two or more similarly situated franchisees, and under similar financial and
marketing conditions, a franchisor engaged in less favorable treatment toward the
discriminatee than toward other franchisees.’” Andy Mohr Truck Ctr., Inc. v. Volvo
Trucks N. Am., 2015 WL 2124994, at *5 (S.D. Ind. May 6, 2015) (quoting Canada
Dry Corp. v. Nehi Beverage Co. of Indianapolis, 723 F.2d 512, 521 (7th Cir. 1983)).
The location of the franchises owned by Hollis and Obriecht, and the similarities of
their situations as compared to Wilbern, 10 establish a reasonable basis for Gordon to
have chosen those franchisees as comparators. See Henry v. Jones, 507 F.3d 558, 564
(7th Cir. 2007) (“The similarly situated inquiry is a flexible, common-sense one that
asks, at bottom, whether there are enough common factors . . . to allow for a
meaningful comparison in order to divine whether intentional discrimination was at
play.”) (internal quotation marks and citation omitted). CFSI makes various
arguments regarding additional franchisees who Gordon did not consider in his
analysis, but those arguments go to the weight of Gordon’s testimony not to its
Hollis owns a Culver’s franchise in west suburban Lyons and Berwyn. Obreicht
was approved after this lawsuit was filed to open the first Culver’s restaurant in
Chicago, specifically, in the predominantly white Wrigleyville neighborhood.
Finally, CFSI asserts that Gordon’s testimony regarding CFSI’s failure to
exercise best practices or conform to industry standards “is misguided” because
“[t]his case has nothing to do with whether CFSI’s site selection process was
sophisticated or even consistent with the industry standard.” R. 152 at 7. Instead,
CFSI argues, this case is “about whether CFSI applied [its] principles and policies,
regardless of quality or sophistication, evenly across franchisees.” Id. CFSI is correct
insofar as the ultimate issue in the case is concerned, but incorrect regarding the
relevancy of the proposed expert testimony. The testimony is relevant to the issue of
pretext. A reasonable jury might conclude from this expert testimony that the
reasons CFSI gave for the conduct of which Plaintiffs complain were not the real
motivating factors for that conduct. The remaining points argued by CFSI on this
issue once again go to the weight to be given to Gordon’s testimony and not to its
admissibility. Indeed, CFSI has basically provided an outline of what its crossexamination of Gordon should be. Again, these are issues that “hinge on credibility
assessments and issues of fact that must be resolved by a jury.” Andy Mohr Truck
Ctr., Inc., 2015 WL 2124994, at *5.
As a precursor to testifying about Wilbern’s lost profits damages, Gordon is
prepared to testify that Wilbern would have been able to open a South Side franchise
had CFSI not denied him the opportunity to do so. CFSI challenges at least two
factual assumptions on which Gordon’s testimony on this point is based — the
assumption that Wilbern would have received TIF funds 11 to use as equity towards
the costs of building a South Side franchise, and the assumption that Wilbern would
have been able to negotiate a lease at Marshfield Plaza. In addition, CFSI challenges
Gordon’s opinions regarding the causes of the decline in sales at the Franklin Park
Franchise. The Court will address each of these issues separately.
The TIF Assumption.
CFSI asserts that Gordon is not an expert in TIF funding, and that he
therefore should be disallowed from “providing any opinions or testimony that in any
way relate to TIF or assume the presence of TIF as a precursor to lost profits.”
R. 122 at 10. CFSI’s focus on Gordon’s lack of expertise in the area of TIF funding,
however, misstates the relevant inquiry. The guiding legal principles are found in
Federal Rule of Evidence 703, which states as follows:
An expert may base an opinion on facts or data in the case
that the expert has been made aware of or personally
observed. If experts in the particular field would
reasonably rely on those kinds of facts or data in forming
an opinion on the subject, they need not be admissible for
the opinion to be admitted. But if the facts or data would
otherwise be inadmissible, the proponent of the opinion
may disclose them to the jury only if their probative value
in helping the jury evaluate the opinion substantially
The City of Chicago’s official website describes TIF as follows:
“Tax Increment Financing (TIF) is a special funding tool
used by the City of Chicago to promote public and private
investment across the city. Funds are used to build and
repair roads and infrastructure, clean polluted land and
put vacant properties back to productive use, usually in
conjunction with private development projects.”
outweighs their prejudicial effect.
Gordon was entitled to assume that the TIF funds would have been available
as a “fact” in the case. As the court explained in Richman v. Sheahan:
If an expert could not base his opinion on [factual]
assumptions — which in turn is based on testimony —
there could be little meaningful and informative expert
testimony in any case in which there was a divergence of
testimony. The question is not whether the opinion is
based on assumptions, but whether there is some factual
support for them. If there is not, they are by hypothesis
unreliable and inadmissible. If there is, it is for the jury,
properly instructed, to determine the credibility of the
witnesses and thus the weight to be given to the expert
415 F. Supp. 2d 929, 942 (N.D. Ill. 2006) (citation and footnote omitted).
Experts routinely opine based upon factual assumptions given to them. Id;
MediaTek inc. v. Freescale Semiconductor, Inc., 2014 WL 971765, at *2 (N.D. Cal.
Mar. 5, 2014) (defendant’s argument for “the wholesale elimination of the
background sections upon which Lawton bases her damages calculations . . . is either
patently frivolous or fundamentally misunderstands the nature of expert testimony
at trial”). The proponent of the expert bears the burden of persuading the jury that
the underlying facts for the expert’s opinion exist. For this reason, “a seasoned trial
attorney will not even attempt to call the expert to opine at trial until the evidence
underlying the opinion has actually been admitted.” MediaTek inc., 2014 WL
971765, at *2. Nevertheless, the validity of the expert’s factual assumptions is not
the focus under a pre-trial Daubert inquiry. In performing its gatekeeping function,
this Court’s primary concern is with “the validity of the methodology employed by an
expert.” Manpower, Inc., 732 F.3d at 806. “The soundness of the factual
underpinnings of the expert’s analysis” is a “factual matter to be determined by the
trier of fact.” Smith, 215 F.3d at 718. As the Supreme Court explained in Daubert,
“[v]igorous cross-examination, presentation of contrary evidence, and careful
instruction on the burden of proof are the traditional and appropriate means of
attacking shaky but admissible evidence.” Daubert, 509 U.S. at 596.
In accepting the factual assumption that Wilbern would have received TIF
funds for the South Side franchises in question, Gordon relied on, among other
things, Wilbern’s testimony that the various aldermen and city officials with whom
he met “consistently offered to support the development of a Culver’s unit [in the
South Side of Chicago] via the [TIF] program.” R. 137-40 at 11 (Gordon Report,
¶ 16). Wilbern’s testimony in and of itself was sufficient to support Gordon’s factual
assumption regarding the availability of TIF funds. See Tuf Racing Prods., 223 F.3d
at 591 (rejecting challenge to admission of C.P.A.’s earnings projections even though
those projections were the product of financial information furnished by the plaintiff
and the plaintiff’s counsel). “That the expert accountant in Tuf could opine on future
earnings on the basis of information supplied by counsel should make clear that the
reliability of the data itself is not the object of the Daubert inquiry.” Manpower, Inc.,
732 F.3d at 808 (emphasis in original). Whether Wilbern’s testimony ultimately is
admissible at trial is not the issue on a pre-trial Daubert inquiry. Under Rule 703,
Gordon was permitted to rely on Wilbern’s testimony even if it would not be
admissible at trial.
This is not to say that an expert opinion is never subject to a pre-trial
challenge based on the lack of factual support. But in considering such a challenge,
the Court must determine only whether Plaintiffs have “some” evidence to support
Gordon’s factual assumptions. Richman, 415 F. Supp. 2d at 942. Plaintiffs clearly
have met that standard here. In addition to considering Wilbern’s testimony, Gordon
also conducted his own independent investigation on the TIF issue in which he
consulted numerous other sources of data. 12 Thus, this is not a case in which an
Gordon reviewed the following depositions and declarations: (1) Deposition of
Carrie Austin, Alderman for the 34th Ward (Marshfield Plaza), who testified that
she is “100 percent sure” Wilbern would have received TIF funding for a Culver’s at
Marshfield Plaza, R. 125-17 at 25; (2) Deposition of Chester Wilson, Alderman
Austin’s Chief of Staff, who confirmed Alderman Austin’s testimony, R. 125-18 at
45-52, 57; (3) Declaration of Howard Brookins, Alderman for the 21st Ward
(Chatham Market), who stated that he has “substantial discretion as to how all TIF
funds are used in [his] ward (¶ 6), that he is “very confident” he “would have been
able to find sufficient TIF and/or other funds for a new Culver’s restaurant [at 83rd
and Stewart],” and that “this project was more than doable” (¶ 8), R. 152-21 at 3-4;
(4) Declaration of Michele Harris, Alderman for the 8th Ward (Stony Island),
stating that “[t]here [was] no doubt in [her] mind” that she “would have been able to
support” Wilbern to get a Culver’s restaurant built in her ward, including finding
“TIF or other funds that would be needed to close any gap between what” Wilbern
“had available and what was needed to acquire the site and build the restaurant”
(¶ 10), R. 125-24 at 3; and (5) Declaration of Todd Stroger, former Alderman of the
8th Ward (Stony Island), stating that he “is virtually 100% positive that anyone
opening a new Culver’s restaurant” at any site in the Stony Island corridor between
2001 and 2006 “would have received TIF or other incentives from the City” (¶ 6),
and that “[i]t would have been virtually unprecedented” for the Chicago City
Council to have rejected a funding request for “this type of development when it
received the Alderman’s support, which [he] would have given unequivocally” (¶ 10),
R. 125-23 at 3-4. In addition, Gordon relied on other, independent sources of data,
including what appears to be an analysis Gordon prepared from publicly available
information concerning TIF appropriations and committed uses of those funds to
assess whether the various alderman actually could have made good on their
promises of TIF funds. R. 125-5 at 26, 64-65 (Gordon Report,¶ 41 and Ex. 6). Gordon
also relied on (1) “a summary of the State of Illinois Code relative to TIF”; (2) data
about Berwyn where “eight different restaurants [were] funded via TIF”; (3) “a
expert makes assumptions that are unsupported by any evidence. See, e.g., Elcock v.
Kmart Corp., 233 F.3d 734, 756 (3rd Cir. 2000) (reversing jury verdict because
district court failed to exclude expert opinion regarding amount of plaintiff’s lost
economic opportunities based on assumption that plaintiff could have earned over
$12,000 a year but for her injury, where plaintiff failed to adduce evidence at trial
that she could have obtained employment at those wages). Indeed, CFSI has not
offered any contrary evidence on the TIF issue. But even if it did, that would not
change the Court’s analysis, because “it is clear that [Gordon] d[id] not assume
these facts without any basis.” In re Ready-Mixed Concrete Antitrust Litig., 261
F.R.D. 154, 165 (S.D. Ind. 2009). Nor, for that matter, did Gordon “rely on a single
data point, or on a subset of data that was plainly insufficient to support” his
methodology. Manpower, Inc., 732 F.3d at 808-09. As a result, any evidence CFSI
might have offered in an effort to contradict Gordon’s conclusions would not have
been “pertinent to [the Court’s] Daubert examination.” In re Ready-Mixed Concrete
Antitrust Litig., 261 F.R.D. at 165.
Faced with support in the record for Gordon’s assumption that TIF funds
would have been available, CFSI’s speculation argument has evolved from being
focused on the TIF assumption in general to being focused on the more specific
assumption that TIF funds would have been available on a “100%, up-front, lump
sum” basis, as CFSI defines that term. R. 152 at 1. CFSI contends that Gordon’s
PowerPoint presentation,” which he attached to his supplemental report; and
(4) research he did “via the law firm of Polsky & Associates,” which “has a robust
website of TIF reports, TIF articles, and the like.” R. 125-9 at 24 (Gordon’s Dep. Day
damages opinions depend on a “100%, up-front, lump sum” assumption, and that
this assumption is speculative because none of the witnesses who Plaintiffs
potentially may present at trial to establish the availability of TIF funds testified to
payment terms of “100%, up-front, lump sum” funding.
Initially, the Court notes that the witnesses to whom CFSI refers were not
deposed, or else they were deposed but CFSI did not ask them about “100%, upfront, lump sum” TIF funding. Therefore, the Court cannot say what their
testimony on that issue would be. Moreover, CFSI’s argument overlooks the fact
that Gordon filed a supplemental report that opines Wilbern would have been able
to obtain financing to begin the project even without receiving the TIF funds on a
“100%, up-front, lump-sum” basis. See R. 137-41 at 8-11 (Gordon Supp. Report,
¶¶ 11-18). CFSI challenges Gordon’s supplemental opinion on this issue, but does
not make any specific argument regarding either Gordon’s expertise or methodology
in rendering that opinion. 13 The Court cannot say based on the current record that
Gordon does not have a sufficient background in restaurant financing to be able to
render an expert opinion regarding the availability of lender financing based solely
on the promise of TIF funds.
In any event, even if the Court looked only at Gordon’s original expert opinion,
and even if that original opinion included the factual assumption of “100%, up-front,
lump sum” funding as defined by CFSI, that factual assumption appears to the
CFSI merely challenges one data input Gordon looked at in rendering that
financing opinion, but even if that data input were otherwise inadmissible at trial,
as CFSI contends, CFSI has not made any argument that it is not of the type on
which experts in the field typically rely. See Fed. R. Evid. 703.
Court to be sufficiently based on existing data, or, at the very least, on an
extrapolation from existing data. See Gen. Elec. Co. v. Joiner, 522 U.S. 136, 146
(1997) (“Trained experts commonly extrapolate from existing data.”). In making the
analytical connection between availability of TIF funds in general and availability of
a sufficient amount of TIF funds disbursed in a manner to have allowed Wilbern to
finance the project, Gordon properly could have relied on the data cited in a previous
footnote. In addition, he might have relied on the facts and other data set forth in
either the deposition or expert report of Plaintiffs’ second expert (now withdrawn),
Zeb McClaurin. CFSI’s arguments against reliance on McLaurin’s expert opinions
(which the Court addresses next), even if accepted, would not bar Gordon’s reliance
on the facts and data to which McLaurin testified because CFSI has made no
argument that those facts and data are not of the type on which experts in the field
typically rely. See Fed. R. Evid. 703. 14
CFSI suggests that McLaurin testified that “100%, up-front, lump sum” TIF
funding was “unprecedented.” The Court has reviewed the cited testimony,
however, and does not agree with CFSI’s characterization of it. The most that can
be said is that in McLaurin’s own experiences with receiving TIF funds, McLaurin
has not received those funds in the exact manner described by CFSI. But McLaurin
also testified that, even though he had never sought and obtained TIF funds in the
manner CFSI described, in his opinion it was possible Wilbern could have. In any
event, even if McLaurin’s personal view supported CFSI’s “unprecedented”
argument, that would be beside the point. CFSI argues that Gordon may not rely on
McLaurin’s expert opinions, and that argument, if accepted, would also mean that
CFSI cannot rely on those opinions either. Setting aside McLaurin’s expert
opinions, the issue is whether the facts or data to which McLaurin testified (as
opposed to his expert opinion) would support a factual assumption of “100%, upfront, lump sum” TIF funding. From the Court’s own review of McLaurin’s
deposition testimony, it appears that the facts to which McLaurin testified are
ambiguous on that issue, but that they do appear to provide some basis for Gordon
to extrapolate to a “100%, up-front, lump sum” TIF funding assumption.
In short, even if Gordon has to rely, as CFSI argues, on a “100%, up-front,
lump sum” TIF assumption, the Court does not believe that Gordon’s expert opinions
fall into the category of “opinion evidence that is connected to existing data only by
the ipse dixit of the expert.” Joiner, 522 U.S. at 146. Nor does the Court think that
“there is simply too great an analytical gap between the data and the opinion
proffered” by Gordon. Id. Perhaps a “100 percent, up-front, lump-sum” TIF
assumption makes Gordon’s testimony less compelling. But “[t]he fact that an
expert's testimony contains some vulnerable assumptions does not make the
testimony irrelevant or inadmissible.” Stollings, 725 F.3d at 768.
The last issue raised by CFSI’s challenge to Gordon’s damages testimony —
which is in fact the central focus of CFSI’s Daubert challenge — relates to the
testimony of McLaurin. The Court did not begin its analysis with a discussion of
McLaurin because his testimony is mostly irrelevant to the Court’s Daubert review
of Gordon’s proposed damages testimony given all the other sources of data on which
Gordon can rely for the TIF funding assumption. Nevertheless, the Court will
address CFSI’s arguments concerning McLaurin. Plaintiffs originally designated
McLaurin as an expert witness who was expected to testify at trial to his opinion
that Wilbern was likely to have received TIF funding if he had been granted a
franchise on the Chicago South Side. McLaurin’s expert opinion was derived from
his own experience as a developer of Chicago real estate and recipient of TIF
funding. In preparing his original report, Gordon consulted with McLaurin on the
TIF issue. According to CFSI, McLaurin’s expert opinions on TIF funding have been
“discredited” because Plaintiffs withdrew their expert designation of McLaurin after
he was confronted during his deposition with evidence of a past legal problem. This
legal problem did not relate to the area on which McLaurin was expected to testify,
but it nevertheless reduced his appeal as a witness in a jury trial.
CFSI argues that Gordon’s consultation with McLaurin somehow taints
Gordon’s damages opinion. But it is difficult to understand why that would be so.
To begin with, it is inaccurate to say that Plaintiffs’ withdrawal of McLaurin based
on his diminished appeal as a witness in a jury trial had the result of “discrediting”
McLaurin’s opinions regarding the likelihood of TIF funding being available to
Wilbern. CFSI does not argue that McLaurin is not an expert on TIF. Nor has CFSI
made any attempt to raise an evidentiary challenge to either his expert opinions or
the facts on which those opinions are based. Therefore, there is no basis for saying
that Gordon could not rely on his consultation with McLaurin on the TIF issue,
along with the various other sources he examined on that issue, before reaching the
conclusion that Wilbern likely would have received TIF funds, and then using that
factual assumption to formulate his own expert opinion that Wilbern would have
been able to open a South Side franchise.
The concern raised by Gordon’s consultation with McLaurin is the possibility
that Gordon will be testifying to another, non-testifying expert’s opinion. In general,
however, Rule 703 permits an expert to rely on the opinions of other experts in a
related field. The case cited by Plaintiffs in support of this principle is United States
v. 1,014.16 Acres of Land, which states that “[a]n expert cannot be an expert in all
fields, and it is reasonable to expect that experts will rely on the opinion of experts
in other fields as background material for arriving at an opinion.” 558 F. Supp.
1238, 1242 (W.D. Mo. 1983), aff‘d, 739 F.2d 1371, 1373 (8th Cir. 1984) (per curiam).
CFSI discounts this case because it was decided by a federal district court in
another district. But the principle for which Plaintiffs cited that case is one that is
widely accepted, including by the Seventh Circuit. See Dura Auto. Sys. of Ind., Inc.
v. CTS Corp., 285 F.3d 609, 613 (7th Cir. 2002) (“Dura”) (“[I]t is common in technical
fields for an expert to base an opinion in part on what a different expert believes on
the basis of expert knowledge not possessed by the first expert; and it is apparent
from the wording of Rule 703 that there is no general requirement that the other
expert testify as well.”) (emphasis omitted).
Despite the general rule, however, Dura held that there are limits to this kind
of expert testimony, particularly where the “soundness of the underlying expert
judgment is in issue.” Id. In that situation, a testifying expert may not offer an
opinion that “parrot[s] the opinion” of a non-testifying expert. Id. Dura cited In re
James Wilson Associates, 965 F.2d 160, 172-73 (7th Cir. 1992), for this proposition,
which held, according to Dura, that a testifying expert could “use what the [nontestifying expert] told him to offer an opinion within the [testifying expert’s] domain
of expertise, but he could not testify for the purpose of vouching for the truth of what
the [non-testifying expert] had told him — of becoming in short the [non-testifying
expert’s] spokesman.” Id. (internal quotation marks and citation omitted).
Here, Gordon did exactly what Dura and In re James Wilson Associates say he
can do. He used what McLaurin told him to form his opinion that Wilbern would
have been able to open a franchise located in the South Side of Chicago. Gordon may
not — and Plaintiffs say they do not intend to offer him to — vouch for McLaurin’s
opinion that TIF funds would have been available to Wilbern. This means that
Gordon can neither testify directly about McLaurin’s expert opinion that TIF funds
would have been available, nor give his own opinion to the same effect. He cannot do
the latter because he admits he is not qualified to offer his own expert opinion on the
subject, and therefore he would only be “vouching for” the expert opinion of
But these limitations do not lead to the result CFSI seeks here – which is a
ruling disqualifying Gordon from testifying to the expert opinions he is qualified to
make. In Dura, the plaintiff’s testifying expert did not have the expertise to render
an opinion on the contested fact issue and the non-testifying experts on whom the
testifying expert had relied were all disqualified from testifying based on the
plaintiff’s failure to disclose their names in a timely manner. So far, Dura is similar
to this case, in that Gordon is not qualified to give an expert opinion regarding the
availability of TIF funds and McLaurin, who is qualified on that issue, has been
withdrawn and so will not be testifying. But in Dura, the factual assumption was
scientific in nature and could only be established through expert testimony;
therefore, the disqualification of the experts on whom plaintiff’s testifying expert
relied meant there was a failure of proof on a factual assumption that was essential
to the testifying expert’s opinions. Here, on the other hand, there is some ambiguity
in the record whether availability of TIF funds is even an essential factual
component of Gordon’s expert testimony. But assuming it is, CFSI has not made any
showing that expert testimony is required to establish the availability of TIF
funding (notwithstanding that Plaintiffs originally sought to provide expert opinion
evidence on the issue). And, as discussed, there is ample non-expert evidence in the
record to support the underlying fact that TIF funds would have been available.
Therefore, there is no failure of proof on Gordon’s factual TIF assumption.
Finally, CFSI argues that because Plaintiffs have withdrawn McLaurin as an
expert witness, “[t]here is no way for CFSI or this Court to test or assess the
reliability of McLaurin’s opinions.” R. 122 at 11. This assertion is based on the
premise that Gordon will somehow be vouching for McLaurin’s expert opinion, which
the Court already has explained is not the case. CFSI is free to test or assess
Gordon’s opinion that Wilbern would have been able to open a South Side franchise.
Under Rule 705, “an expert may state an opinion — and give the reasons for it —
without first testifying to the underlying facts or data. But the expert may be
required to disclose those facts or data on cross-examination.” Thus, CFSI may
explore on cross-examination the extent to which Gordon’s opinion depends on the
assumption that TIF funds would have been available. Theoretically, in doing so,
CFSI could open the door for Gordon to testify about McLaurin’s opinions. But since
that testimony would violate the principles outlined in Dura, the remedy is for the
Court to limit Gordon’s testimony regarding the sources of data on which he relied to
the sources other than McLaurin’s expert opinion.
The Marshfield Lease.
CFSI also challenges the factual assumption that Wilbern would have been
able to negotiate a lease at Marshfield Plaza. CFSI’s arguments in this regard are
based on deposition testimony which shows that Wilbern encountered some
unresolved issues in negotiations with the Marshfield Plaza landlord. CFSI says that
this evidence shows that Wilbern would not have been able to negotiate a lease.
Wilbern, on the other hand, says that he stopped negotiating with the landlord
before the issues were resolved because he did not get approval for the Marshfield
location from CFSI. Had he gotten approval, Wilbern contends, he would have been
able to resolve the issues with the landlord and ultimately sign a lease.
Whenever an issue in a case revolves around a hypothetical situation such as
“what would have happened,” the inquiry “necessarily involves an element of
approximation and uncertainty.” Fujifilm Corp. v. Motorola Mobility LLC, 2015 WL
1737951, at *2 (N.D. Cal. Apr. 8, 2015) (internal quotation marks and citation
omitted); see Fishman v. Estate of Wirtz, 807 F.2d 520, 550 (7th Cir. 1986) (“plaintiff
is given an exceedingly difficult task: quantifying the difference between what
actually happened and what would have happened in a hypothetical free market”).
That is not a reason, however, to say that Wilbern’s version of “what would have
happened” is speculation. The generally accepted legal principle to be applied in this
situation is that, “[w]here the defendant’s wrong has caused the difficulty of proof of
damages, he cannot complain of the resulting uncertainty.” Mid-Am. Tablewares,
Inc. v. Mogi Trading Co., 100 F.3d 1353, 1365 (7th Cir. 1996) (internal quotation
marks and citation omitted); see also Olympia Equip. Leasing Co. v. W. Union Tel.
Co., 797 F.2d 370, 383 (7th Cir. 1986) (“Speculation has its place in estimating
damages, and doubts should be resolved against the wrongdoer.”) (citing Story
Parchment Co. v. Paterson Parchment Paper Co., 282 U.S. 555 (1931)), cert. denied,
480 U.S. 934 (1987).
The Court would be usurping the role of the jury were it to conclude that
CFSI’s view of the evidence and inferences to be drawn therefrom should prevail as a
matter of law. CFSI’s argument that Gordon’s damages testimony is speculative
because the evidence is controverted on whether Wilbern would have been able to
negotiate a lease is an argument CFSI must make to the jury.
The Causes Of The Franklin Park Franchise’s
Lastly, CFSI challenges Gordon’s opinions on the causes of the decline of
Wilbern’s sales at the Franklin Park Franchise, arguing that those opinions are not
based on sufficient facts and data. CFSI does not challenge Gordon’s methodology.
Instead, CFSI’s arguments center on the quantity and types of data used by Gordon
for his analysis. CFSI repeatedly states that Gordon “disregards” certain evidence
which CFSI believes is more important than the evidence on which Gordon does rely.
At the same time, CFSI ignores the evidence that would support Gordon’s
For instance CFSI points to evidence showing that in 2007 and 2008, Wilbern
began to experience problems paying his food supplier. From this fact, CFSI seeks to
draw the conclusion that the Franklin Park Franchise’s financial problems had
nothing to do with CFSI’s approval of competing franchises in 2009 and 2010.
Plaintiffs, on the other hand, point out that CFSI approved Wilbern for another
franchise in 2009. They draw the conclusion from this evidence that the financial
problems Wilbern was having in 2007 and 2008 were not so serious that his financial
viability was threatened, at least not until 2009 and 2010 when CFSI approved the
competing franchises. Neither of these competing conclusions is compelled by the
evidence. In another example, CFSI points out that the Franklin Park Franchise,
the Lyons franchise, and the Rosemont franchise have all remained in business since
Wilbern’s default. From this evidence, CFSI concludes that Wilbern’s default did not
have anything to do with CFSI allowing the Lyons and Rosemont franchises to open.
But CFSI fails to acknowledge that the Franklin Park Franchise is now owned by
the same person (Hollis) who owns the Lyons franchise (as well as another west
suburban franchise in Berwyn). Therefore, sales from all three of these franchises
went into a single pocket. From this, a jury might conclude that the Lyons franchise
did have a “cannibalization” effect, but that the effect did not impact the bottom line
of the new Franklin Park franchise owner (Hollis) in the same way that it did
Wilbern Enterprises’ bottom line.
The point of these examples is not to argue the evidence. It is instead to show
that what CFSI is really challenging is not the lack of sufficient facts or data on
which Gordon’s methodology relies but rather the conclusions Gordon draws from
the data. “Rule 702’s requirement that the district judge determine that the expert
used reliable methods does not ordinarily extend to the reliability of the conclusions
those methods produce — that is, whether the conclusions are unimpeachable.”
Stollings, 725 F.3d at 765. CFSI’s arguments are material to cross-examination, but
they are not a basis to bar Gordon’s testimony. “The district court usurps the role of
the jury, and therefore abuses its discretion, if it unduly scrutinizes the quality of
the expert's data and conclusions rather than the reliability of the methodology the
expert employed.” Manpower, Inc., 732 F.3d at 806. CFSI’s arguments are not
properly resolved by this Court under Daubert; therefore, its motion to strike
Gordon’s testimony is denied.
CFSI’S MOTIONS FOR SUMMARY JUDGMENT
SUMMARY JUDGMENT STANDARD
Summary 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); see also Celotex Corp. v. Catrett, 477 U.S. 317,
322-23 (1986). The Court considers the entire evidentiary record and must view all
of the evidence and draw all reasonable inferences from that evidence in the light
most favorable to the nonmovant. Ball v. Kotter, 723 F.3d 813, 821 (7th Cir. 2013).
To defeat summary judgment, a nonmovant must produce more than “a mere
scintilla of evidence” and come forward with “specific facts showing that there is a
genuine issue for trial.” Harris N.A. v. Hershey, 711 F.3d 794, 798 (7th Cir. 2013).
Ultimately, summary judgment is warranted only if a reasonable jury could not
return a verdict for the nonmovant. Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
THE PARTIES’ LOCAL RULE 56.1 FACT STATEMENTS.
Before proceeding to CFSI’s summary judgment motions, the Court must
pause to address the parties’ Local Rule 56.1 Fact Statements. The Court allowed
CFSI to file separate motions for each issue it wished to raise on summary
judgment. That now regretted decision led to a morass of Local Rule 56.1 filings –
twelve separate documents, totaling close to 300 pages with a combined total of
almost 500 paragraphs of purported “undisputed” facts in support of summary
judgment and additional facts in opposition thereto. Aside from sheer volume, these
filings violated the letter and spirit of the Local Rule in multiple ways, but most
egregiously by bombarding the Court with factual and legal arguments that are
outside the purpose of Rule 56.1 statements. See Sys. Dev. Integration, LLC v.
Computer Sciences Corp., 739 F. Supp. 2d 1063, 1068 (N.D. Ill. 2010), amended in
part on other grounds, 2011 WL 1311903 (N.D. Ill. Apr. 1, 2011); Malec v. Sanford,
191 F.R.D. 581, 584-85 (N.D. Ill. 2000). As a result of both parties’ noncompliance, 15
CFSI correctly points out that a large portion of the problem is attributable to
Plaintiffs’ two statements of additional facts filed pursuant to Local Rule
56.1(b)(3)(C). Absent prior leave of Court, a respondent to a summary judgment
motion may file no more than 40 separately-numbered paragraphs of additional
facts. See Local Rule 56.1(b)(3)(C). One of Plaintiffs’ statements contains 177
paragraphs, and the other contains 83 paragraphs. Moreover, many of the
paragraphs in both statements of additional fact contain five or more separate
subparagraphs, and long excerpts from deposition testimony and Wilbern’s
affidavit. It was virtually impossible for CFSI to properly respond to these
paragraphs in accordance with the procedures of Local Rule 56.1. Further, no
purpose is served by copying the deposition and affidavit word for word into the
statements. Fact statements should contain “specific, concrete, and particularized”
factual statements. De v. City of Chicago, 912 F. Supp. 2d 709, 713-14 (N.D. Ill.
2012). Moreover, they should reflect only facts that are material to the movant’s
motion. Id.; see Cimber v. Cooperative Plus, Inc., 527 F.3d 635, 643 (7th Cir. 2008).
Instead of extracting from the affidavit and depositions the specific, concrete and
the Court has chosen to mostly disregard the fact statements and conduct its own
review of the record. In addition, the Court now makes clear, in case there is any
doubt, that no further summary judgment motions will be entertained in this
particularized facts needed to decide CFSI’s summary judgment motions, Plaintiffs
frustrated CFSI’s ability to respond in a proper manner and “burden[ed] an already
burdened judicial system.” Greer v. Bd. of Educ. of City of Chic., 267 F.3d 723, 727
(7th Cir. 2001). Given Plaintiffs’ violations of Local Rule 56.1, CFSI would have been
more successful had it moved to strike Plaintiffs’ two statements of additional facts
rather than Wilbern’s affidavit. The statements were improper; the affidavit was
not. But that does not mean CFSI was itself in compliance with Local Rule 56.1. Of
particular note is CFSI’s response to Plaintiffs’ statements of additional facts. CFSI
further compounded its error of moving to strike Wilbern’s affidavit by giving a
general denial to many of the paragraphs in Plaintiffs’ statements followed by a
citation to its motion to strike. CFSI did this even in response to paragraphs in
Plaintiffs’ statements of additional facts that were specific, concrete, and
particularized and thus not in violation of the Local Rule. CFSI also gave other
inappropriate responses, such as to deny the “characterization, summarization, and
interpretation of the cited testimony,” or to admit that the cited deposition
testimony was accurately reported by Plaintiffs but to deny its substance on the
ground that CFSI “has insufficient knowledge to admit or deny.” These responses
are purely argumentative. See Malec, 191 F.R.D. at 584. CFSI’s own statements of
undisputed facts also were not in full compliance with Local Rule 56.1. For example,
they contain paragraphs that are argumentative and not supported by the record
citations provided. See, e.g., R. 98 at 3-4 (Def. Stmt., ¶¶17, 23). In addition, they
contain statements telling the Court only what Plaintiffs alleged in their complaint,
as opposed to what the record shows the facts to be. CFSI says that its purpose was
to “assume” the allegations of the complaint were true and argue it was still entitled
to summary judgment. But summary judgment is based on all the evidence in the
record. See Fed. R. Civ. P. 56(c)(1). By its approach, CFSI was ignoring the actual
record, which included evidence clarifying, expanding upon, or contradicting the
allegations in the complaint in respect to issues raised by CFSI in its summary
judgment motions. Nor did Plaintiffs’ response help to enlighten the Court on what
the record actually showed as to those issue. Because of the way CFSI worded its
factual statements, Plaintiffs’ response merely admitted that the statements
accurately reflected what the complaint said. The end result was pages and pages of
factual posturing and argument by both parties designed more to obscure than to
aid the Court in its summary judgment task.
SUMMARY JUDGMENT ON TIME-BARRED CLAIMS.
CFSI argues that if Plaintiffs allegations regarding the discriminatory events
on which their claims are based are “tak[en] as true,” summary judgment is proper
because there are no disputed fact issues regarding when those events occurred.
R. 100 at 1. Based on those dates, CFSI argues that all of the alleged discriminatory
events in Count I are time-barred, and that all of the alleged discriminatory events
in Count III also are time-barred with the exception of the alleged discriminatory
events occurring after April 30, 2009 as alleged in paragraphs 82-90, and paragraph
111(e)-(g) of the Amended Complaint. R. 99 at 3; R. 100 at 2 n. 1.
WHICH STATUTE OF LIMITATIONS APPLIES?
The Supreme Court held in Goodman v. Lukens Steel Co., 482 U.S. 656, 66064 (1987), that federal courts should borrow the state statute of limitations
applicable to personal injury claims for § 1981 claims. In Illinois, personal injury
claims are governed by the two-year statute of limitations in 735 ILCS § 5/13-202.
Three years after Goodman, Congress enacted 28 U.S.C. § 1658, which establishes a
catch-all, four-year statute of limitations for federal statutes enacted after
December 1, 1990. After 28 U.S.C. § 1658 was enacted, the question arose whether
§ 1981 was a federal statute “enacted after December 1, 1990” in order for 28 U.S.C.
§ 1658 to apply. The answer to that question was not clear because § 1981 originally
was enacted in 1866, but was amended in 1991. The Supreme Court answered that
question in Jones v. R.R. Donnelley & Sons Co., 541 U.S. 369 (2004). Jones held that
28 U.S.C. § 1658 did not apply to § 1981 claims relating to contract formation,
because those claims “arise under” subsection (a) of § 1981, which was part of the
statute as originally enacted in 1866. Id. at 382. Jones held that 28 U.S.C. § 1658
did apply to claims arising out of existing contractual relationships — i.e., relating
either to contract termination or to “the enjoyment of all benefits, privileges, terms,
and conditions of the contractual relationship” — because those claims “arise under”
subsection (b) of § 1981, which was added to the statute by the 1991 amendments.
Thus, Wilbern’s claim in Count I is governed by the two-year statute of
limitations of 735 ILCS § 5/13-202 because it is a subsection (a) claim relating to
contract formation. Count III, on the other hand, which concerns the Franklin Park
Franchise, is governed by the four-year statute of limitations of 28 U.S.C. § 1658
because those claims are subsection (b) claims relating to contract termination and
“the enjoyment of all benefits, privileges, terms, and conditions of [an existing]
contractual relationship.” 42 U.S.C. § 1981(b).
WHEN DID PLAINTIFFS’ § 1981 CLAIMS ACCRUE?
The next issue is “the ever vexing question of when the statue of limiatios
begins to run in a discrimination case.” Webb v. Indiana Nat’l Bank, 931 F.2d 434,
435 (7th Cir. 1991); see Cada v. Baxter Healthcare Corp., 920 F.2d 446, 450 (7th Cir.
1990) (“Accrual is the date on which the statute of limitations begins to run. It is
not the date on which the wrong that injures the plaintiff occurs, but the date —
often the same, but sometimes later — on which the plaintiff discovers that he has
been injured.”), cert. denied, 501 U.S. 1261 (1991). While the parties make a number
of different arguments, basically, CFSI’s position is that accrual occurred on the
date that each of the alleged discriminatory events took place, while Plaintiffs argue
that accrual was delayed on all of their § 1981 claims until the date on which CFSI
terminated the Franklin Park Franchise.
Accrual is a question of federal law regardless of whether 28 U.S.C. § 1658 or
735 ILCS § 5/13-202 provides the applicable statute of limitations. See Wallace v.
Kato, 549 U.S. 384, 388 (2007) (“the accrual date of a § 1983 cause of action is a
question of federal law that is not resolved by reference to state law”). 16 Applying
the approach followed in this Circuit, the proper way to analyze the question is to
first identify the injury, and next determine the date on which Plaintiffs could have
sued for that injury. See Hileman v. Maze, 367 F.3d 694, 696 (7th Cir. 2004)
(citation omitted). Then, the Court should look to see whether the date on which
Plaintiffs could have sued for the injury coincides with the date Plaintiffs knew or
should have known their rights were violated. Id. Plaintiffs have alleged one type of
injury in Count I and another type of injury in Count III. Because “the precise
injury” is “critical” to a proper determination of when a cause of action accrues, id.,
Count I should be analyzed separately from Count III.
Count I — Denial
The injury Wilbern allegedly suffered under Count I is the denial of a
franchising opportunity. CFSI argues that this injury occurred on two occasions.
The standards of proof for discrimination claims under § 1981 are generally the
same as those applicable to § 1983 (and also Title VII) cases. Egonmwan v. Cook
Cnty. Sheriff’s Dep’t, 602 F.3d 845, 850 n.7 (7th Cir. 2010).
The first was on November 29, 2005, when the parties executed the Franchise
Agreement, because that is when Plaintiffs allegedly were steered to the Franklin
Park location and away from the Stony Island location Wilbern preferred. The
second was on September 9, 2009, when CFSI approved the Hillside location but not
the Marshfield Plaza location.
As noted earlier, Plaintiffs’ damages theory related to Stony Island does not
state a denial of franchising opportunity claim. Instead, that damages theory
relates to Wilbern Enterprises’ claim under Count III that it was denied the
opportunity to select the location of a franchising opportunity it was granted. As
such, Wilbern Enterprises’ claim based on Stony Island is really a denial of
contractual benefits claim related to the Franklin Park Franchise. That claim,
therefore, falls under the statute of limitations analysis in the next section.
The second denial of franchising opportunities claim relates to Wilbern’s
application to open a franchise at Marshfield Plaza. CFSI seeks to apply the
“discrete discriminatory acts” rule enunciated by the Supreme Court in Nat’l R.R.
Passenger Corp. v. Morgan, 536 U.S. 101 (2002), to this claim. In Morgan, the
Supreme Court held that a “discrete retaliatory or discriminatory act ‘occurred’ on
the day that it ‘happened.’” Id. at 110. The Court rejected the notion that Congress’
use of the term “unlawful employment practice” in Title VII was intended to
“convert[ ] related discrete acts into a single unlawful practice for the purposes of
timely filing.” Id. at 111. Thus, the Court concluded, “discrete acts that fall within
the statutory time period do not make timely acts that fall outside the time period if
a discrete discriminatory act occurs on a day that is outside the statute of
limitations.” Id. at 112. Rather, “[e]ach discrete discriminatory act starts a new
clock for filing charges alleging that act.” Id. at 113.
CFSI contends that the alleged denial of a future franchising opportunity
based on Wilbern’s application for Marshfield Plaza occurred on the date that CFSI
approved the Hillside application, which was September 9, 2009. The problem with
this analysis is that Wilbern’s application for a franchise at Marshfield Plaza, which
Wilbern submitted at the same time as the Hillside application, was never denied
by CFSI. In fact, there is evidence that the Marshfield Plaza application was still
under consideration by CFSI as late as September 5, 2012, as shown by the email
exchange between Wilbern Enterprises’ bankruptcy attorney and CFSI’s general
counsel. R. 116-16 at 2. In Webb, the Seventh Circuit considered whether a plaintiff
could “resuscitate a stale claim [of discrimination] by asking for reconsideration.”
Webb, 931 F.2d at 436 (internal quotation marks and citation omitted). The Seventh
Circuit held that where the later decision is an “inevitable consequence of the
earlier determination,” then the statute of limitations begins to run from the date of
the earlier determination. Id. at 437. But where the earlier decision is “a decision on
that application, not for all time — or the plaintiff neither knew nor should have
known that it was a decision for all time, then the statute of limitations did not
start to run then.” Id. (emphasis in original). In short, “[o]nly if the defendant has
made clear that the plaintiff will not receive further consideration is the plaintiff on
notice of a permanent exclusion — a freeze, a ceiling on advancement, parallel to a
denial of tenure — that starts the statute of limitations running on any future job
Webb was decided before the Supreme Court’s opinion in Morgan, but recent
decisions support that it is still good law. See, e.g., Smith v. Potter, 445 F.3d 1000,
1007 (7th Cir. 2006) (“[t]he Supreme Court has consistently instructed that, in
determining when [a discrimination claim] accrues, the proper focus is upon the
time of the discriminatory acts,” and the Seventh Circuit “has expanded on that
framework, essentially creating a two-prong test to determine the date of an
unlawful employment practice: (1) there must be a final, ultimate, non-tentative
decision to terminate the employee, and (2) the employer must give the employee
unequivocal notice of its final termination decision”) (internal quotation marks and
citations omitted) (emphasis in original), overruled in part on other grounds, Hill v.
Tangherlini, 724 F.3d 965, 967 n.1 (7th Cir. 2013). Under Webb, Wilbern’s denial of
franchising opportunity claim based on Marshfield Plaza did not accrue on
September 9, 2009 because Wilbern was not told at this time that his application for
that location was denied.
In addition, the Seventh Circuit’s opinion in Stuart v. Local 727, Int’l
Brotherhood of Teamsters, 771 F.3d 1014 (7th Cir. 2014), also supports the
application of Webb here and further serves to distinguish Morgan. The plaintiff in
Stuart was a female professional driver who wanted to drive vehicles ferrying
equipment and persons involved in movie and television productions. Id. at 1016.
Those jobs, however, were available only upon referral by the local union. Id.
Accordingly, in March 2010, the plaintiff joined the local union and submitted a
referral application. Id. at 1017. For the following year and a half, the plaintiff
waited but never received a referral from the union. Id. In October 2011, believing
that the local union had an unwritten policy or practice of only referring males, the
plaintiff filed a charge of sex discrimination with the EEOC and timely filed suit in
December 2013 after receiving her right to sue letter. Id. at 1017. The district court
dismissed the plaintiff’s complaint, finding that her EEOC charge was untimely
because, even though she had alleged at least one failure to refer within the statute
of limitations, she had alleged other failures to refer outside of the statute of
limitations and also other specific things that showed she knew about the
discrimination against women by the local union since at least 2005. Id. at 1017-18.
According to the Seventh Circuit, the district court erroneously believed that,
in order to state an actionable discrimination claim, Morgan required the plaintiff
to allege a specific refusal of a request to be hired within the limitations period. Id.
at 1019. The Seventh Circuit disagreed, however, and held that an allegation of a
“failure to refer,” as opposed to a specific refusal to hire, stated a legally cognizable
discrimination claim. Id. (quoting EEOC v. Metal Serv. Co., 892 F.2d 341, 349 (3d
Cir. 1990), which stated that “courts have generally held that the failure to formally
apply for a job opening will not bar a Title VII plaintiff from establishing a prima
facie claim of discriminatory hiring, as long as the plaintiff made every reasonable
attempt to convey his interest in the job to the employer”). Of particular note here,
the Seventh Circuit held that a failure to hire/failure to refer discrimination claim
“was not a situation contemplated by the decision in the Morgan case.” Id. Morgan,
the Seventh Circuit said, did not establish a rule that, in order to allege a
discrimination claim, a plaintiff was required to allege a discrete discriminatory act.
Id. Imposing such a requirement, the Seventh Circuit said, “would open a large gap
in Title VII,” id. at 1020, as demonstrated by the following hypothetical the court
Suppose a woman applies for a job as a crane operator on
construction sites, a traditionally male job. The employer
has an ironclad but of course undisclosed rule of never
hiring women for such jobs. A woman applies and the
employer tells her it has no openings now but will notify
her as soon as there is one; but in fact the employer has
decided that, pursuant to its policy, it will not notify her
of any openings. 301 days go by and the employer informs
her: “Ha ha; we don’t hire women; you’ll have to file your
EEOC charge yesterday if you want to sue us.”
The same hypothetical would read here: Wilbern applies for a franchise at
Hillside and also for one at Marshfield Plaza, and is told only that he can open a
franchise at Hillside. No action is taken on the Marshfield Plaza application,
although there are discussions between the parties where Wilbern is told that CFSI
is still “open” to granting him another franchise. In fact, however, if Plaintiffs’
allegations are believed, CFSI has already decided, pursuant to its secret
discriminatory policy, that it will never approve Wilbern for the Marshfield Plaza.
CFSI waits until two years and a day after it granted the Hillside application and
then tells Wilbern, “sorry, we have a policy against Culver’s franchises being located
in African-American neighborhoods; you’ll have to file a discrimination claim
yesterday if you want to sue us.” 17
Wilbern states in his affidavit (and other evidence in the record supports)
that: (1) CFSI never formally denied Wilbern’s request for a franchise at Marshfield
Plaza; (2) as far as Wilbern knew, the entire City of Chicago was open for Culver’s
franchises; (3) CFSI had no official policy against opening restaurants in AfricanAmerican neighborhoods; (4) no one from CFSI ever explicitly told Wilbern the
entire South Side of Chicago was off-limits; and (5) Wilbern was led to believe,
through various communications with CFSI personnel taking place as late as
September 5, 2012, that Wilbern’s request for the Marshfield Plaza site was still
under consideration by CFSI. It does not matter that there are other instances in
the record of CFSI’s failure to approve a franchising opportunity on the South Side
of Chicago that extend back to a time outside the limitations period. “There is no
rule that a plaintiff who has been repeatedly discriminated against by her employer
cannot challenge any of the discriminatory acts” unless he files suit within the
statute of limitations “after the first such act.” Stuart, 771 F.3d at 1018; see also
Morgan, 536 U.S. at 113 (“The existence of past acts and the employee’s prior
This hypothetical is more analogous to the facts in this case than the “repeated
assault” hypothetical CFSI’s counsel relied on at oral argument. Counsel’s
hypothetical was to assume that, for a ten-year period, one person repeatedly
assaults another person. In that situation, there is a cause of action for each time
the attacker harms the victim. If the victim decides not to file suit until the ninth
year, and all that has happened from the ninth year forward is the attacker spit on
the victim, then the victim can recover damages for the attacker spitting on him,
but cannot recover damages for all the other attacks that occurred outside the
statute of limitations. Counsel’s hypothetical clearly involves a discrete act (an
assault), whereas Plaintiffs’ denial of franchising opportunities claim, as discussed
above, does not.
knowledge of their occurrence, however, does not bar employees from filing charges
about related discrete acts so long as the acts are independently discriminatory and
charges addressing those acts are themselves timely filed.”); Webb, 931 F.2d at 437
(“A defendant cannot by virtue of its history of discrimination against an employee
prevent that employee from complaining about new discriminatory acts.”).
The Court has found no evidence in the record, let alone undisputed evidence,
of a formal or even an informal denial by CFSI of Wilbern’s application for the
Marshfield Plaza location. Moreover, even if there was a formal denial of that
application in 2009, the record shows that CFSI told Wilbern in 2012 it was still
open to considering him for a South Side franchise. Wilbern was never
“authoritatively informed,” Webb, 931 F.2d at 437, that he would never receive
approval for the Marshfield franchise. Therefore, CFSI’s decision approving the
Hillside application was not final with respect to the Marshfield application, and
the statute of limitations did not begin to run on the Marshfield application. CFSI
did not put Wilbern on notice of a “permanent exclusion,” id., until it terminated the
Franklin Park Franchise. At that time, Wilbern either knew or should have known
that he would receive no further consideration for a South Side franchise. Wilbern
filed this lawsuit approximately four months after receiving the termination letter,
which was well within the applicable two-year statute of limitations of 735 ILCS
§ 5/13-202. Therefore, Wilbern’s Count I claim for denial of franchising
opportunities is timely.
Count III — Discriminatory Treatment
The § 1981 injury Plaintiffs allege in Count III of the Amended Complaint is
two-fold. First, there is an injury arising from the termination of the Franchise
Agreement. Second, there is an injury arising from the denial of the “enjoyment of all
benefits, privileges, terms, and conditions of the contractual relationship” (“denial of
contractual benefits injury”). The Court holds that Count III is not barred by the
statute of limitations regardless of which of these two injuries is the injury for which
Plaintiffs seek recovery.
First, Plaintiffs’ discriminatory termination claim involves a discrete act
under Morgan. That act occurred on the date that Plaintiffs received notice of the
termination, which was the first week of December 2012. Accordingly, a cause of
action alleging injury resulting from the termination would not expire until four
years later, which was the first week of December 2016. Plaintiffs timely filed suit
before that date. Moreover, CFSI misperceives the reach of the “discrete act” rule
when it argues that it is entitled to summary judgment on Plaintiffs’ “allegations”
relating to events that occurred outside the four-year statute of limitations measured
from the date of termination. Morgan “does not ‘bar an employee from using the
prior acts [that fall outside the statute of limitations] as background evidence in
support of a timely claim.’” Malin v. Hospira, Inc., 762 F.3d 552, 561 (7th Cir. 2014)
(quoting Morgan, 536 U.S. at 113)). All of the conduct and events alleged in the
Amended Complaint appear to be relevant to Plaintiffs’ timely filed discriminatory
termination claim; 18 therefore, CFSI is not entitled to summary judgment on those
Second, the statute of limitations analysis regarding Plaintiffs’ injuries
arising out of CFSI’s alleged denial of contractual benefits, when evaluated under
Morgan’s discrete discriminatory acts rule, is not as straight-forward as the analysis
applicable to Plaintiffs’ injuries arising out of CFSI’s alleged wrongful termination.
CFSI seems to just assume, however, that the discriminatory acts alleged by
Plaintiffs in support of their denial of contractual benefits claim are “discrete acts,”
and then argues the statute of limitations consequences of applying that label.
CFSI’s result-oriented approach ignores the case law giving meaning to the term
A discrete discriminatory act is something that is itself actionable. See
Wallace, 549 U.S. at 388 (“it is the standard rule that [accrual occurs] when the
plaintiff has a complete and present cause of action, that is, when the plaintiff can
file suit and obtain relief”) (internal quotation marks and citations omitted). A
plaintiff cannot sue until “the wrongful act or omission results in damages.” Id. at
391. Therefore, prior knowledge of discrimination is irrelevant for purposes of the
statute of limitations if the plaintiff has not yet suffered an injury for which he can
sue. See Webb, 931 F.2d at 436 (rejecting argument that the plaintiff should have
sued years before the discriminatory acts of which she complained since it was then
Whether there is a separate evidentiary objection to prior acts outside the statute
of limitations is dealt with by motions in limine before trial, not in a summary
that she discovered the defendant did not treat blacks as well as whites, stating:
“[y]ou cannot be forced to sue before you are injured” and “you can't, of course, sue
for damages until you have been injured”).
Applying this basic principle immediately disposes of at least one of CFSI’s
arguments. CFSI cites to the allegation in the Amended Complaint that, while
attending the Culver’s franchise training session, Wilbern felt unwelcome, was
excluded from conversations, and was otherwise isolated. CFSI claims that a § 1981
claim based on this allegation is time-barred because the training session took place
in 2002, eleven years before this lawsuit was filed. CFSI’s analysis falters, however,
because this allegation does not allege a discrete discriminatory act. The training
session occurred three years before the Franchise Agreement was executed.
Therefore, even though Wilbern said he felt discriminated against at this event,
neither Wilbern Enterprises nor Wilbern could possibly have suffered the injury of
which they complain in Count III – a denial of contractual benefits – because the
contractual relationship was not even in existence yet. Without a compensable
injury, Plaintiffs could not have filed a § 1981 lawsuit against CFSI, and this is true
regardless of whether Wilbern admitted at his deposition that he felt discriminated
against at the training session.
To decide whether the remainder of Plaintiffs’ allegations that form the basis
of their denial of contractual benefits claim are “discrete discriminatory acts,” the
Court looks for further definitional assistance. In Morgan, the Supreme Court said
that discrete discriminatory acts include things like “termination, failure to
promote, denial of transfer, or refusal to hire.” Morgan, 536 U.S. at 114. A discrete
act of discrimination, therefore, “is like a termination, a failure to promote, or [a]
refusal to hire,” in that it “is easily identifiable” and “its occurrence can be
pinpointed in time.” Hildebrandt v. Ill. Dept. of Nat’l Resources, 347 F.3d 1014, 1028
(7th Cir. 2003) (quoting Inglis v. Buena Vista Univ., 235 F. Supp. 2d 1009, 1023
(N.D. Iowa 2002)). Conversely, an act is not a discrete discriminatory act if its
occurrence is difficult to pinpoint in time. See Dooley v. Abbott Labs., 2009 WL
1033600, at *6 (N.D. Ill. Apr. 17, 2009).
“[W]hen an employer makes employment decisions over time that make it
difficult for the employee to determine the actual date of discrimination,” the
continuing violations doctrine applies. Tinner v. United Ins. Co. of Am., 308 F.3d
697, 707 (7th Cir. 2002), cert. denied, 538 U.S. 944 (2003). “The office of [the
continuing violations doctrine] is to allow suit to be delayed until a series of
wrongful acts blossoms into an injury on which suit can be brought. It is thus a
doctrine not about a continuing, but about a cumulative, violation.” Limestone Dev.
Corp. v. Village of Lemont, 520 F.3d 797, 801 (7th Cir. 2008). The proto-typical case
environment/sexual harassment case. See id. (“The first instance of coworker’s
offensive words or actions may be too trivial to count as actionable harassment, but
if they continue they may eventually reach that level and then the entire series is
actionable. If each harassing act had to be considered in isolation, there would be no
claim even when by virtue of the cumulative effect of the acts it was plain that the
plaintiff had suffered actionable harassment.”) (citing Morgan, 536 U.S. at 117). But
courts have applied the continuing violations doctrine outside the hostile work
environment/sexual harassment context as well, even after Morgan, where the
plaintiff’s claim is composed of a series of separate acts that collectively constitute
one unlawful employment practice. See, e.g., Turley v Rednour, 729 F.3d 645, 651
(7th Cir. 2013) (applying continuing violations doctrine to an Eighth Amendment
claim where “prison officials repeatedly and regularly imposed lockdown for
improper purposes, and with each continuing day and period of lockdown, [the
plaintiff’s] injuries increased”); United Air Lines, Inc. v. Air Line Pilots Ass’n, Int’l,
563 F.3d 257, 269 (7th Cir. 2009) (applying continuing violations doctrine in case
alleging union engaged in “multi-faceted and ongoing slowdown campaign” causing
injury to airline, where “the defendants engaged in unlawful actions before and
during the limitations period that caused injuries before and during the limitations
period,” the “earlier actions shed light on the actions within the limitations period,”
and “the earlier actions that continued into the limitations period combined with
actions well within the period to create new injuries”). 19
Here, Plaintiffs’ denial of contractual benefits claim involves on-going acts
that combined to cause injury to Plaintiffs and for which it is difficult to pinpoint
CFSI cites to Burkes v. McDonald’s Corp., 1997 WL 28300 (N.D. Ill. Jan. 21,
1997), but in that case, the franchisee alleged a discrete, one-time decision by the
franchisor refusing to grant the franchisee permission to sell his franchise. That is a
very different situation from the one here, which involves a series of initially trivial
acts that ultimately escalated to an unlawful course of conduct. While not every
§ 1981(b) claim necessarily involves a series of separate acts that collectively
constitute one unlawful employment practice, Plaintiffs’ § 1981(b) denial of
contractual benefits claim in this case does.
the exact moment when the discrimination occurred. These on-going courses of
conduct include CFSI’s alleged wrongful failure to provide financial assistance,
CFSI’s alleged failure to protect Wilbern Enterprises from harmful competition, and
CFSI’s alleged pressuring to maintain lower prices than Wilbern wanted to set. The
alleged wrongful steering leading to the Franklin Park site selection also falls into
this category, but could be said to have ended no later than the date on which the
Franchise Agreement was executed, which was in November 2005. Plaintiffs filed
suit outside the four-year statute of limitations from that date, but Wilbern was just
entering into a relationship with CFSI at this time and therefore should not be
expected to have identified and sued for discriminatory steering at that moment.
See Johnson v. Nyack Hosp., 891 F. Supp. 155, 165 (S.D.N.Y 1995) (statute of
limitations should not be applied in a way that requires a plaintiff to bring suit
during “the continued existence of a close and important relationship that
reasonably may be regarded as making the commencement of litigation
inappropriate or unduly costly in human terms”).
Had Plaintiffs sued immediately in response to any of the issues raised by
their denial of contractual benefits claim, they would have run the risk of
“infuriat[ing] [CFSI] by complaining about what might be an inconsequential act of
discrimination that [they] did not expect to be repeated.” Stuart, 771 F.3d at 1018;
see also Webb, 931 F.2d at 437 (the law should not require a plaintiff “to sue at the
drop of a hat”). While CFSI relies on the discovery rule, 20 that rule does not apply
Under the discovery rule, the statute of limitations begins to run as soon as a
where a plaintiff would have difficulty initially recognizing that his legal rights had
been violated. In the latter situation,“[i]f the victim of [discrimination] sues as soon
as the [discrimination] becomes sufficiently palpable that a reasonable person
would realize [he] had a substantial claim [of discrimination], then [he] sues in time
and can allege as unlawful conduct the entire course of conduct that in its
cumulative effect [amounts to actionable discrimination].” Limestone Dev. Corp., 520
F.3d at 801.
The Court holds that none of the alleged wrongful acts identified in Count III
that occurred prior to CFSI’s termination of the Franchise Agreement were
sufficiently decisive so as to have enabled Plaintiffs to realize that they suffered a
compensable injury, and to have imposed the burden on Plaintiffs to disrupt an ongoing close and important relationship in order to bring suit. Plaintiffs “could not
reasonably be expected to [have] perceived the alleged violation” at the time each act
occurred. Savory v. Lyons, 469 F.3d 667, 672 (7th Cir. 2006), cert. denied, 550 U.S.
960 (2007). Therefore, the continuing violations doctrine permitted them to wait
until the discrimination escalated to the point where the accrued injury they
suffered was reasonably apparent such that the law would expect them to act
promptly in asserting their legal rights. That did not happen until Plaintiffs
received notice in early December 2012 that CFSI had terminated the Franchise
Agreement. This act occurred within the four-year statute of limitations period of 28
plaintiff knows that he has been injured, even if the plaintiff does not know that
“the injury is actionable.” Fayoade v. Spratte, 284 Fed. Appx. 345, 347 (7th Cir.
U.S.C. § 1658. Accordingly, Plaintiffs’ denial of contractual benefits claim as alleged
in Count III was timely filed.
As an alternative to finding that Plaintiffs’ claims are not barred by the
statute of limitations based on the accrual date for those claims, the Court also
finds that there is at least a disputed issue of fact regarding whether accrual was
delayed by the doctrine of equitable estoppel. “A defendant who prevents a plaintiff
from obtaining information that he needs in order to be able to file a complaint that
will withstand dismissal is forbidden, under the rubric of equitable estoppel, to
plead the statute of limitations for the period in which the inquiry was thwarted.”
Jay E. Hayden Foundation v. First Neighbor Bank, N.A., 610 F.3d 382, 385 (7th Cir.
2010). “Classic examples include hiding evidence, destroying evidence, or promising
not to plead the statute of limitations.” Cancer Found., Inc. v. Cerberus Capital
Mgmt., LP, 559 F.3d 671, 676 (7th Cir. 2009). “Equitable estoppel springs from basic
considerations of fairness, and denotes efforts by the defendant, above and beyond
the wrongdoing upon which the plaintiff's claim is founded, to prevent, by fraud or
deception, the plaintiff from suing in time.” Mitchell v. Donchin, 286 F.3d 447, 450
(7th Cir. 2002) (internal quotation marks and citations omitted).
With regard Wilbern’s denial of franchising opportunities claim, Wilbern
testified that he continued to seek a South Side franchise leading up to and
throughout the time in which he owned the Franklin Park Franchise. A reasonable
factfinder could find that CFSI placed Wilbern “in an impossible position” when it
failed to definitively deny Wilbern a franchise opportunity on the South Side:
Wilbern “could infuriate” CFSI by continuing to press for a South Side franchise
immediately after CFSI approved it for a location in the western suburbs; he could
“sue [CFSI] prematurely for discrimination”; or he could “simply forgo any remedy
under” § 1981. Stuart, 771 F.3d at 1020 (applying doctrine of equitable estoppel to
statute of limitations defense under Title VII). “By impaling [him] on this threepronged fork,” a reasonable factfinder could find that CFSI prevented Wilbern from
suing within the two-year statute of limitations. Id.
A reasonable factfinder also could find that, while Wilbern feared CFSI’s
failure to approve him for a South Side franchise might be the product of
discrimination, he hoped it was not. Further, a reasonable factfinder could find that
CFSI purposefully fostered Wilbern’s hope by failing to definitively deny the
Marshfield Plaza application and leading Wilbern to believe that he was not a
victim of discrimination and there was still a chance the application might be
approved. See Harris v. WGN Continental Broadcasting Co., 650 F. Supp. 568, 575
(N.D. Ill. 1986) (plaintiff stated a claim for equitable estoppel where he alleged his
employer told him that his transfer was due to the separation of divisions and that
With regard to Plaintiffs’ denial of contractual benefits claim arising out of
discriminatory steering in the selection of the Franklin Park site, a reasonable
factfinder could find that Wilbern was faced with the Hobson’s choice of accepting
the Franklin Park location, infuriating CFSI by refusing to accept its preferred
location, or again suing prematurely for discrimination. See Stuart, 771 F.3d at
1020. As to the other allegations in Plaintiffs’ denial of contractual benefits claim, a
reasonable factfinder could rely on Wilbern’s testimony that, in September 2010,
Craig Culver offered to guaranty a loan so that Wilbern could buy-out Milkshake’s
lease. There is conflicting testimony in the record regarding the circumstances of
this promise, but there is sufficient evidence to support Plaintiffs’ claim that the
promise was made and that CFSI purposefully led Wilbern to believe the guaranty
was forthcoming over an extended period of time when it secretly never intended to
fulfill the promise. Assuming Plaintiffs’ version of the facts, Wilbern was misled to
believe that CFSI would support him with a guaranty thereby concealing from
Wilbern the actual discriminatory motive behind CFSI’s previous course of conduct
which led to the Franklin Park Franchise’s financial difficulties. See Harris, 650
F. Supp. at 575.
MOTION FOR SUMMARY JUDGMENT ON “ALL CLAIMS” BROUGHT
BY WILBERN ENTERPRISES, LLC.
CFSI argues that it is entitled to summary judgment on all of Wilbern
Enterprises’ § 1981 claims because (1) there is a failure of proof on Plaintiffs’
§ 1981(b) claims relating to the Franklin Park Franchise; 21 and (2) Wilbern
CFSI only argues for summary judgment against Wilbern Enterprises’ Count III
claim, but the Court will assume that it would make the same argument against
Wilbern’s Count III claim if Wilbern establishes a right to seek relief under that
Enterprises is judicially estopped from asserting any of its claims against CFSI
based on its failure to disclose those claims in the bankruptcy proceeding.
FAILURE OF PROOF ISSUE.
“To establish a claim under § 1981, the [P]laintiffs must show that (1) they are
members of a racial minority; (2) the defendant had an intent to discriminate on the
basis of race; and (3) the discrimination related to one or more of the activities
enumerated in the statute (i.e., the making and enforcing of a contract).” Morris v.
Office Max, Inc., 89 F.3d 411, 413 (7th Cir. 1996). CFSI asserts that Plaintiffs’
§ 1981(b) claim arising out of the Franklin Park Franchise Agreement fails under
both the second and third requirements.
CFSI argues first that Plaintiffs have insufficient evidence that CFSI
intentionally discriminated against them. The proper method in a § 1981 case for
analyzing whether a defendant is entitled to summary judgment on the issue of
intentional discrimination is to apply the substantive standards and methods of
proof applicable to Title VII cases. See Gonzalez v. Ingersoll Mill. Mach. Co., 133
F.3d 1025, 1035 (7th Cir. 1998). “A Title VII plaintiff can satisfy her burden of proof
by two avenues: (1) she may present direct evidence of discriminatory intent or,
because of the difficulty in directly proving discrimination, (2) she may use the
indirect, burden-shifting procedure set forth in McDonnell Douglas Corp. v. Green,
411 U.S. 792 (1973).” Id. at 1031. CFSI by-passes this analytical framework, and
instead makes only one argument. CFSI’s argument is that the only evidence of
intentional discrimination in this case is evidence of disparate impact, not disparate
treatment. R. 128 at 4.
CFSI bears the burden of proving that it is entitled to summary judgment as
a matter of law. Having failed to present any argument or evidence analyzing
Plaintiffs’ discrimination claims under either the direct or indirect method of proof,
CFSI’s summary judgment motion must be denied. See Estate of Moreland v. Dieter,
395 F.3d 747, 759 (7th Cir.) (“Perfunctory or undeveloped arguments are waived.”),
cert. denied, 545 U.S. 1115 (2005).
In any event, even a cursory review of the record shows that there is
sufficient evidence to support a prima facie case of intentional discrimination. See
generally Home Repair, Inc. v. Paul W. Davis Sys., Inc., 2000 WL 126905, at *7
(N.D. Ill. Feb. 1, 2000) (denying summary judgment in § 1981 case where the
evidence submitted by the plaintiff “create[d] a cumulative picture of discrimination
from which a rational jury could find that,” when the franchisor refused to consent
to a transfer of one of its franchises to the plaintiff whose owner was African
American, the franchisor intended to discriminate against plaintiff in violation of
§ 1981). Moreover, CFSI’s argument that Plaintiffs cannot prove intentional
discrimination because they rely on disparate impact evidence is really an
evidentiary point about the statistical evidence Plaintiffs intend to submit in
support of their intentional discrimination claim. That argument should be made in
a motion in limine before trial, although CFSI should keep in mind that, even
though disparate impact is not a valid theory in a § 1981 case, see Gen. Bldg.
Contractors Ass’n v. Penn., 458 U.S. 375, 389 (1982) (“§ 1981 reaches only
purposeful discrimination”), statistical evidence showing a disparate impact
nonetheless is relevant and admissible to show intentional discrimination. See Int’l
Bhd. of Teamsters v. United States, 431 U.S. 324, 339 (1977) (statistical evidence
may play an important role in a pattern or practice case, even though the ultimate
issue on which the plaintiff must prevail is intentional discrimination); Adams v.
Ameritech Servs., Inc., 231 F.3d 414, 424 (7th Cir. 1999) (“There is no presumption
that statistical evidence has no useful role to play in disparate treatment
employment discrimination cases – indeed, we are hard pressed to see how anyone
could take such a position consistent with the Supreme Court’s guidance on the
matter and this court has not done so.”); Nash v. Consol. City of Jacksonville, 895 F.
Supp. 1536, 1541 (M.D. Fla. 1995) (“Even though proof of disparate impact alone is
insufficient to establish a section 1981 or section 1983 violation, disparate impact is
a form of evidence with which Plaintiff can demonstrate disparate treatment.
Evidence of a disproportionate impact is relevant to the question of intent since an
invidious discriminatory purpose may often be inferred from the totality of the
relevant facts.”) (citations omitted), aff'd sub nom., Nash v. Consol. City of
Jacksonville, 85 F.3d 643 (11th Cir. 1996).
Compliance With Franchise Agreement.
CFSI next argues that it is entitled to summary judgment on Count III
because the facts are undisputed that it has complied with all provisions of the
Franchise Agreement. Plaintiffs respond that there is no requirement under
§ 1981(b) that the plaintiff plead and prove a breach of contract. CFSI replies that its
position is not that a breach of contract is a condition precedent to an actionable
§ 1981(b) claim. Instead, CFSI states, its position is that “the ‘benefits, privileges,
terms, and conditions’ that Wilbern Enterprises is entitled to ‘enjoy’” under
§ 1981(b) are “limited to what is contained therein.” R 128 at 3 (emphasis added).
Essentially, CFSI is asking the Court to rule, as a matter of law, that a
§ 1981(b) defendant cannot be guilty of racial discrimination in the “benefits,
privileges, terms, and conditions” of a contract if the plaintiff does not have a right
under the terms of the contract to expect or demand (or, alternatively, if the
defendant does not have any obligation under the terms of the contract to provide)
any different treatment than what the plaintiff got. Notwithstanding CFSI’s
protestations to the contrary, this is just a convoluted way of saying that there has
to be a breach of contract. Thus, CFSI’s admission that a plaintiff does not have to
prove “a breach of contract [as] a condition precedent to an actionable Section 1981
claim,” R. 128 at 3 n.1, is fatal to CFSI’s summary judgment argument.
In any event, even if CFSI could reconcile its position on this issue, its
argument is contrary to the Seventh Circuit’s opinion in Elkhatib v. Dunkin Donuts,
Inc., 493 F.3d 827 (7th Cir. 2007). In that case, the plaintiff was a Palestinian Arab
of the Muslim faith and a franchisee of Dunkin Donuts. He alleged racial
discrimination giving rise to a claim under § 1981 based on Dunkin Donuts’ denial of
his request to relocate or renew his franchises, which denial, the plaintiff alleged,
was motivated by the plaintiff’s refusal to sell pork products. In its defense to the
plaintiff’s § 1981 claims, Dunkin Donuts “point[ed] to the franchise agreement itself,
which require[d] all franchisees to carry Dunkin Donuts’ full food product line.” Id.
at 830. Dunkin Donuts further argued that the plaintiff’s “refusal to carry pork
products violates that provision” and “establishes that he cannot or will not perform
his obligations under the contract.” Id.
The Seventh Circuit rejected these arguments, holding that Dunkin Donuts
could not rely on the literal terms of the franchise agreement to defeat the plaintiff’s
§ 1981 claim because the plaintiff alleged that Dunkin Donuts “has never required
its franchisees to carry the full product line despite that language, and in fact that it
affirmatively assisted franchisees in carrying less than the full product line by
providing signs for stores declaring: ‘No Meat Products Available.’” Id. The Seventh
Circuit said that evidence showing Dunkin Donuts did not enforce the contractual
provision against some franchisees while enforcing it against the plaintiff was
sufficient to defeat Dunkin Donuts’ summary judgment motion on the plaintiff’s
§ 1981 claim. Id. at 831. “[I]f Dunkin Donuts continued to allow franchisees to carry
less than its full product line without consequence or any other indication that the
provision was a material part of the contract, then it could hardly point to that
neglected provision to defeat a claim of racial discrimination if it chose to enforce it
against only certain racial minorities.” Id. at 830. Like the plaintiff in Elkhatib,
Plaintiffs have produced evidence “sufficient to raise an inference that [CFSI]
applied its legitimate [contractual] expectations in a disparate manner.” Id. at 831
(internal quotation marks and citation omitted). Therefore, CFSI’s argument for
summary judgment on this basis is rejected.
The relevant facts regarding CFSI’s judicial estoppel argument are
undisputed. Wilbern Enterprises filed for Chapter 11 bankruptcy in the United
States Bankruptcy Court for the Northern District of Illinois on May 9, 2012.
Wilbern Enterprises did not disclose in either its bankruptcy schedules or at any
time during the bankruptcy proceedings that it had an unliquidated § 1981 claim
against CFSI. The bankruptcy court dismissed Wilbern Enterprises’ Chapter 11 case
on October 10, 2012 upon the motion of the trustee, who argued cause to either
convert or dismiss the case under 11 U.S.C. § 1112(b)(4)(A), because there was no
longer a reasonable likelihood of rehabilitation after the bankruptcy court granted
Milkshake relief from the bankruptcy stay to allow it to proceed with a state court
eviction proceeding. By letter dated November 30, 2012 and received by Wilbern
Enterprises sometime in the first week of December 2012, CFSI terminated the
Franchise Agreement “effective immediately.” On April 30, 2013, Plaintiffs filed the
Under the heading of “judicial estoppel,” CFSI actually makes two arguments
— a standing argument and an estoppel argument. CFSI’s standing argument is
that Wilbern Enterprises’ failure to disclose its § 1981 claims in its Chapter 11
bankruptcy schedules means those claims remained a part of the bankruptcy estate
so that Wilbern Enterprises no longer has standing to assert them. Because CFSI
failed to adequately identify this as a separate and distinct argument from its
judicial estoppel argument, and also failed to adequately develop the standing issue
even within the context of its judicial estoppel argument, the Court finds CFSI has
waived this ground for summary judgment. See Estate of Moreland, 395 F.3d at 759.
In the alternative, the Court rejects CFSI’s standing argument for the reasons given
in Crawford v. Franklin Credit Mgmt., 758 F.3d 473, 483-87 (2d Cir. 2014) (§ 554 of
the Bankruptcy Code dealing with abandonment of property of the estate does not
apply to a bankruptcy petition that has been dismissed pursuant to § 349 of the
Code; pursuant to § 349(b)(3), a dismissal of a bankruptcy case re-vests the property
of the estate in the entity in which such property was vested immediately before the
commencement of the case, i.e., the debtor).
On the issue of judicial estoppel, CFSI is correct that case law from this circuit
(and others as well) holds that “a debtor in bankruptcy who denies owning an asset,
including a chose in action or other legal claim, cannot realize on that concealed
asset after the bankruptcy ends.” Cannon-Stokes v. Potter, 453 F.3d 446, 448 (7th
Cir. 2006), cert. denied, 549 U.S. 1261 (2007) (citing case law). There are several
reasons why the Court will not apply judicial estoppel in this case.
As an initial matter, the Court previously held in this opinion that Wilbern
Enterprises’ § 1981 claims did not accrue until CFSI terminated the Franchise
Agreement. CFSI terminated the Franchise Agreement after the Chapter 11
proceedings were dismissed, so there was no bankruptcy estate in existence when
the claims came into existence. Like CFSI’s statute of limitations arguments, CFSI’s
judicial estoppel argument fails to distinguish between Wilbern’s knowledge of a
legally cognizable claim and Wilbern’s knowledge of events or conduct on which a
future claim of discrimination might later be based. Regardless of the fact that
Wilbern was aware of some of the acts or conduct on which Wilbern Enterprises’
claims are based when Wilbern Enterprises filed its bankruptcy schedules, those
acts and conduct had not yet ripened into a legal cause of action. So there was
nothing for Wilbern Enterprises to disclose. See Yapp v. Astellas Pharma Global
Dev., Inc. 2015 WL 1326371, at *3 (N.D. Ill. Mar. 20, 2015) (debtor “has no obligation
to include in her schedule of contingent and unliquidated claims a cause of action
that had not yet accrued as of the bankruptcy filing date”) (citing Cusano v. Klein,
264 F.3d 936, 948 n.5 (9th Cir. 2001)). 22
In any event, judicial estoppel only applies where the omission is intentional.
See Metrou v. M.A. Mortenson Co., 781 F.3d 357, 360 (7th Cir. 2015) (“When as in
Cannon-Stokes a debtor stubbornly tries to cut out the creditors, then the claim is
gone forever.”). The requisite intent cannot be inferred from the mere fact of
nondisclosure. See Ryan Operations G.P. v. Santiam-Midwest Lumber Co., 81 F.3d
355, 364 (3d Cir. 1996) (“policy considerations militate against adopting a rule that
the requisite intent for judicial estoppel can be inferred from the mere fact of
nondisclosure in a bankruptcy proceeding”). Some omissions “will be innocent —
In the cases CFSI cites, it was clear that the claims had accrued and that the
debtor knew about them at the time the debtor failed to disclose them. See CannonStokes, 453 F.3d at 447 (debtor was pursuing an administrative claim for $300,000
against the Postal Service at the same time as she filed a Chapter 7 bankruptcy
petition that did not disclose the administrative claim); Thompson v. O’Bryant, 2008
WL 1924954, at *1 (N.D. Ill. Apr. 30, 2008) (debtor prepared a five-count lawsuit
asserting his claims five days prior to filing for bankruptcy and then filed the
lawsuit in state court weeks after his Chapter 13 bankruptcy case was dismissed).
based on poor communication between bankruptcy counsel and tort counsel, or based
on a belief that the tort claim will not be valuable — and should not be punished.”
Metrou, 781 F.3d at 360; see New Hampshire v. Maine, 532 U.S. 742, 753 (2001) (“We
do not question that it may be appropriate to resist application of judicial estoppel
when a party’s prior position was based on inadvertence or mistake.”) (internal
quotation marks and citation omitted). In light of all the circumstances shown in the
record, including on-going communications between Wilbern and CFSI during the
pendency of the bankruptcy, even if Wilbern Enterprises’ § 1981 claims were or came
into existence before the bankruptcy was dismissed, there is no evidence that the
omission of those claims from Wilbern Enterprises’ bankruptcy schedules was an
intentional act done with the purpose of obtaining an unfair advantage or benefit.
See Spaine v. Community Contacts, Inc., 756 F.3d 542, 547 (7th Cir. 2014) (judicial
estoppel does not apply where there was no basis for inferring that the debtor
deliberately concealed her claim from the bankruptcy trustee and her creditors).
CFSI’s primary contention appears to be that Wilbern Enterprises gained an
unfair advantage from not having disclosed its § 1981 claims. But the Court cannot
imagine what that advantage might be. Certainly, CFSI was not prejudiced. Nor did
Wilbern Enterprises receive an undeserved benefit. The bankruptcy proceedings
were dismissed on motion of the trustee without Wilbern Enterprises receiving a
discharge of any debts. CFSI asserts that, “had the potentially valuable claim been
disclosed, the trustee may very well have recommended converting the bankruptcy
case to a chapter 7 case as opposed to dismissing the case altogether.” R. 128 at 10.
From the Court’s review of the bankruptcy file, however, the trustee’s motion did
seek the alternative relief of conversion. Whether the trustee failed to “recommend”
that option outside of its motion is not reflected in the record. Similarly, whether a
creditor might have objected to dismissal and sought conversion to a Chapter 7
dissolution instead, also is outside the record. Without any factual development of
these arguments, it is speculation to assume disclosure of Wilbern Enterprises’
§ 1981 claims against CFSI would have been significant to a decision to convert
Wilbern Enterprises’ Chapter 11 reorganization to a Chapter 7 liquidation. It also
makes no sense to assume, as CFSI does, that dismissal as opposed to conversion
gave Wilbern Enterprises an “unfair advantage.” If Wilbern Enterprises were to
recover on its § 1981 claims, its creditors would be free to seek collection of any debts
still owed to them directly from Wilbern Enterprises without having to proceed by
way of filing a claim in a Chapter 7 case. Thus, if the Court were to speculate on this
issue, it would have to assume that Wilbern Enterprises’ creditors were in a better
not worse position from Wilbern Enterprises’ bankruptcy petition having been
dismissed rather than converted. 23
Inexplicably, CFSI states that “Wilbern Enterprises obtained a benefit from its
failure to disclose because it is now able to assert the potentially valuable claim in
this litigation (and retain any recovery entirely for its own benefit), free and clear of
the numerous creditors’ claims that were listed in the bankruptcy case who
otherwise would have been entitled to that recovery had the claim been disclosed
and had the case been kept in bankruptcy.” R. 128 at 12. This is a bold and
completely unsupported and unsupportable statement for CFSI to make. Wilbern
Enterprises did not receive a discharge. Therefore, dismissal of the Chapter 11
proceedings did not affect the rights of any of its creditors insofar as Wilbern
Enterprises’ assets are concerned. There is absolutely no basis for CFSI to say, as it
does, that Wilbern Enterprises “dodged its creditors.” Id. The Court expects a great
MOTION FOR SUMMARY JUDGMENT ON LOST PROFITS.
CFSI moves for summary judgment on Plaintiffs’ damages claims for lost
profits arising out of (1) potential franchising opportunities, and (2) the Franklin
LOST PROFITS FROM POTENTIAL FRANCHISING
The “New Business” Rule.
CFSI argues that Plaintiffs may not recover lost profits damages arising out
of any of the three potential franchising opportunities for which Plaintiffs seek
recovery as outlined in Gordon’s expert report. According to CFSI, such damages
are not recoverable as a matter of law pursuant to the “new business rule.” 24 The
new business rule bars recovery of “expected profits of a new commercial business”
because they “are considered too uncertain, specific and remote to permit recovery.”
TAS Distrib. Co. v. Cummins Engine Co., 491 F.3d 625, 633 (7th Cir. 2007).
Plaintiffs rely primarily on TAS Distributing, a case applying Illinois law. 25 It
is not clear whether TAS Distributing considered Illinois law absolute on the issue
deal more candor from litigants than what CFSI’s statements on this issue reveal.
In its reply brief, CFSI denies advocating a ruling, as a matter of law, against
recovery of lost profits by a new business, but the arguments made in its opening
brief show otherwise.
Plaintiffs also cite to Stuart Park Assocs. Ltd. P’ship v. Ameritech Pension Trust,
51 F.3d 1319, 1328 (7th Cir. 1995), which references the rule without any analysis,
and Kiswani v. Phoenix Sec. Agency, Inc., 247 F.R.D. 554, 557 (N.D. Ill. 2008), which
itself relies on TAS Distributing.
of whether lost profits can ever be recovered by a new business. 26 But assuming it
did, more recent Illinois law reflects a more flexible approach. See Tri-G, Inc. v.
Burke, Bosselman & Weaver, 856 N.E.2d 389, 407 (Ill. 2006) (“There is no inviolate
rule that a new business can never prove lost profits.”); Apa v. Nat’l Bank of
Commerce, 872 N.E.2d 490, 493 (Ill. App. 2007) (“Lost profits may be recovered
when there are any criteria by which the probable profits may be estimated with
reasonable certainty.”) (emphasis added).
Moreover, while the Court may look to state law for guidance on general tort
principles, federal law is controlling in a § 1981 case. See Sullivan v. Little Hunting
Park, Inc., 396 U.S. 229, 239 (1969) (“[c]ompensatory damages for deprivation of a
federal right are governed by federal standards”) (citing 42 U.S.C. § 1988). Applying
general tort law principles, the Seventh Circuit analyzed the new business rule and
rejected it. See MindGames, Inc. v. W. Publ’g Co., 218 F.3d 652, 657 (7th Cir. 2000)
(“The ‘new business’ rule is an attempt now widely regarded as failed to control the
award of [lost profits] damages by means of a rule. The rule doesn’t work because it
manages to be at once vague and arbitrary.”), cert. denied, 531 U.S. 1126 (2001).
Instead of a “flat prohibition against awarding damages” for lost profits of a new
business, the Seventh Circuit has held that courts should apply “the general
standard governing proof of damages, which requires a plaintiff to make a
reasonable estimate of its damages as distinct from relying on hope and a guess.”
To the extent TAS Distributing has been interpreted this way, other courts have
noted that its analysis of Illinois law is “far from convincing.” H.B. Williamson Co.
v. Ill-Eagle Enters., Ltd., 2015 WL 802250, at *6 (S.D. Ill. Feb. 25, 2015).
Parvati Corp. v. City of Oak Forest, 709 F.3d 678, 685 (7th Cir. 2013); see also
MindGames, Inc., 218 F.3d at 658 (“courts have become sufficiently sophisticated in
analyzing lost-earnings claims, and have accumulated sufficient precedent on the
standard of undue speculativeness in damages awards, to make the balance of costs
and benefits tip against the rule”). Therefore, Plaintiffs’ damages claims to recover
lost profits from other franchising opportunities is not barred by the new business
Lost Profits From
CFSI also argues that Plaintiffs’ evidence of lost profits is insufficient to
support their recovery here. Generally, there is no one method by which a plaintiff
must establish lost profits with reasonable certainty. In the franchise context,
however, courts have held that historical data from franchise operations can be a
proper yardstick for losses sustained by a potential franchisee who was prevented
from going into the franchise business by the wrongful conduct of the defendant.
See, e.g., FMS, Inc. v. Volvo Constr. Equip. N.A., Inc., 2007 WL 844899, at *10 (N.D.
Ill. Mar. 20, 2007) (“courts are willing to entertain lost profit calculations based
upon historical data from franchise operations, even when those calculations also
included the business owner’s assumptions, and sometimes, when the business had
not yet begun operation”); America’s Favorite Chicken Co. v. Samaras, 929 S.W.2d
617, 629 (Tex. App. 1996) (damage model presented by expert, which took into
account historical operations of Popeye’s franchises, the potential for failure of a
new franchise and the factors upon which he based his evaluation of the likelihood
of the plaintiff’s success, including the plaintiff’s experience in the industry,
provided “an intelligent objective basis” for plaintiff’s damages); No Ka Oi Corp. v.
Nat’l 60 Minute Tune, Inc., 863 P.2d 79, 83 (Wash. App. 1993) (“proof of the
nationwide character of the franchise business at issue provided an ample basis for
computation of probable losses”), rev. denied, 877 P.2d 1287 (Wash. 1994); Pauline’s
Chicken Villa, Inc. v. KFC Corp., 701 S.W.2d 399, 401 (Ky. 1985) (adequate
yardstick for lost profits calculations provided by data from a “national franchisor,
with uniformity of national advertising, uniform quality control, earnings and
expense figures on nearby and comparable locations, and an available history
concerning success and failure ratios”); Smith Dev. Corp. v. Bilow Enters., Inc., 308
A.2d 477, 482-83 (R.I. 1973) (trial court erred in refusing to allow expert testimony
regarding sales of other McDonald’s restaurants in the area as basis for estimating
plaintiff’s lost profits for a McDonald’s that did not open because of defendants’
CFSI distinguishes these cases by saying all but one are from outside this
jurisdiction, but does not otherwise offer any reason to question the persuasiveness
of the analysis or validity of the conclusions reached by those courts. CFSI also does
not attempt to challenge Plaintiffs’ ability to present evidence of lost profits for the
potential franchises at Stony Island and Marshfield Plaza using sales and costs
figures from other Culver’s restaurants in comparable geographic locations. Instead,
CFSI repeats the arguments it made for excluding Plaintiffs’ expert testimony
regarding those two locations. 27 The Court already has addressed those arguments
in its discussion of CFSI’s Daubert motion. The same analysis applies here.
Accordingly, CFSI is not entitled to summary judgment on Plaintiffs’ lost profits
claims arising out of potential franchises at Stony Island and Marshfield Plaza.
Lost Profits From Chatham Market.
CFSI’s arguments regarding Wilbern’s lost profits damages claim arising out
of a potential franchise at Chatham Market presents a slightly different issue. That
claim is one level removed from Plaintiffs’ other lost profits damages claims. Gordon
theorized that Wilbern would have opened the Chatham Market franchise as a
result of the success he would have achieved had he been allowed to open the
Marshfield Plaza franchise.
Despite the additional assumption underlying this lost profits claim, the
same general tort principles govern. See RESTATEMENT (SECOND)
TORTS § 910
(1979) (“One injured by the tort of another is entitled to recover damages from the
other for all harm, past, present and prospective, legally caused by the tort.”);
TORTS § 912, comment d (“When the tortfeasor has
prevented the beginning of a new business or the prosecution of a single
transaction, all factors relevant to the likelihood of the success or lack of success of
the business or transaction that are reasonably provable are to be considered,
including general business conditions and the degree of success of similar
CFSI also challenges other evidence on lost profits under Federal Rule of
Evidence 401. CFSI’s Rule 401 arguments, however, are more appropriately raised
at trial or by motion in limine prior to trial.
enterprises.”). Nevertheless, this once-removed damages claim involves a greater
concern that the likelihood of lost profits is too remote and speculative. See id.
(“Because of a justifiable doubt as to the success of new and untried enterprises,
more specific evidence of their probable profits is required than when the claim is
for harm to an established business.”).
Although some leeway in proof as to the amount of damages is allowed to a
plaintiff who has suffered a wrong, “at some point too many inferences become mere
speculation” and damages must be precluded. Mid–Am. Tablewares, Inc., 100 F.3d
at 1368 (quoting Roebuck v. Drexel Univ., 852 F.2d 715, 736 (3d Cir. 1988)); see also
MindGames, Inc., 218 F.3d at 658 (“a start-up company should not be permitted to
obtain pie-in-the-sky damages upon allegations that it was snuffed out before it
could begin to operate”). Plaintiffs have not cited any case law where recovery of lost
profits was allowed in a once-removed situation like this. Because the issue has not
been adequately explored on the current motions, the Court will reserve judgment
on it at this time. The parties may provide the Court with a supplemental
memorandum of law limited to five pages on this issue, to be filed before the final
pretrial conference. In addition, Plaintiffs may consider whether an offer of proof
through their expert will be useful in resolving this issue.
LOST PROFITS FROM FRANKLIN PARK FRANCHISE.
CFSI’s arguments regarding lost profits from the Franklin Park Franchise
are repetitive of the arguments it makes in its motion to strike Gordon’s expert
testimony on that issue. Because the Court denied CFSI’s motion to strike Gordon’s
testimony, CFSI is not entitled to summary judgment on Plaintiffs’ damages claim
for the recovery of lost profits from the Franklin Park Franchise. However, the
Court notes that the undisputed evidence in the record is that Plaintiffs were
seeking only a single franchise in the 2002-2005 time-period. Further, Plaintiffs
contend that they ended up at the Franklin Park location only as a result of having
been steered away from the Stony Island location. Therefore, damages measured by
the lost profits at a potential franchise at Stony Island would appear to be
duplicative of lost profits damages from the Franklin Park Franchise. If Plaintiffs
wish to present evidence on both, they must reconcile their damages claims for this
time-period so as to avoid double recovery.
MOTION FOR SUMMARY JUDGMENT ON CFSI’S COUNTERCLAIM
FOR BREACH OF CONTRACT AND BREACH OF PERSONAL
CFSI’s final motion seeks summary judgment on CFSI’s counterclaims
against Plaintiffs to recover royalties allegedly owed by Plaintiffs under the
Franchising Agreement and Wilbern’s guaranty. Plaintiffs do not contest the fact
that they fell behind on royalties and are not contesting CFSI’s calculation of the
amount of its claim. Therefore, the amount claimed by CFSI may be treated as an
established fact that CFSI will not have to prove at trial.
Entry of summary judgment in favor of CFSI on its counterclaims, however,
would be inappropriate at this time. Disputed issues of fact exist on Plaintiffs’
affirmative defenses to CFSI’s counterclaims, which include fraudulent inducement
and breach of the covenant of good faith and fair dealing. In addition, disputed
issues of fact exist on CFSI’s affirmative defense of a set-off based on damages
Plaintiffs seek to recover on their § 1981 claims. Therefore, summary judgment on
CFSI’s counterclaims is denied.
For the foregoing reasons, the Court denies the following motions: (1) CFSI’s
Motion to Strike Plaintiff Wilbern’s Affidavit, R. 131; (2) CFSI’s Motion to Strike
Plaintiffs’ Expert John A. Gordon, R. 122; (3) CFSI’s Motion for Partial Summary
Judgment on Time-Barred Claims, R. 99; (4) CFSI’s Motion for Summary Judgment
On Plaintiffs’ Claims for Lost Profits, R. 123; and (5) CFSI’s Motion for Summary
Judgment on CFSI’s Counterclaim for Breach of Contract and Breach of Personal
Guaranty, R. 96.
CFSI’s Motion for Summary Judgment on All Claims Brought by Wilbern
Enterprises, LLC, R. 102, is granted in part and denied in part, with the Court
dismissing Wilbern Enterprises’ claims in Count II only.
In addition, Plaintiffs shall file a position statement not to exceed 5 pages
within 7 days from the date this Order is entered stating whether Wilbern
intends to pursue a claim under Count III based on his guaranty. If Wilbern does
intend to pursue such a claim, Plaintiffs’ position statement shall provide
appropriate argument and citation of authority to support Wilbern’s legal right to
pursue such a claim. CFSI may file a response, also limited to 5 pages, within 7
days after Plaintiffs’ position statement is filed.
A status hearing is set for October 21, 2015 at 9:00 a.m. Counsel should be
prepared to discuss the expected length of trial, and their own trial schedules, as
a firm trial date will be set at the status conference.
Thomas M. Durkin
United States District Judge
Dated: September 29, 2015
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