UIRC-GSA Holdings, LLC v. Rainier GSA Portfolio I, LLC

Filing 325

MEMORANDUM Opinion and Order Signed by the Honorable Robert W. Gettleman on 2/26/2020: The court dismisses the fraudulent concealment and unjust enrichment counterclaims brought by Rainier Reality Acquisitions GP, LLC, and Rainier GSA Portfolio I, LLC, against William Blair & Company, LLC. Blair's motion to dismiss [Doc. 316 ] is otherwise denied. Blair must answer Rainier's counterclaim for breach of contract on or before March 18, 2020. This matter is set for a status hearing on March 25, 2020, at 9:10 a.m. Mailed notice (cn).

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
RAINIER REALTY ACQUISITIONS GP, LLC, and
RAINIER GSA PORTFOLIO I, LLC,
Counter-Third-Party Plaintiffs,
v.
WILLIAM BLAIR & COMPANY, LLC,
Counter-Third-Party Defendant.

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Case No. 15 CV 9518
Judge Robert W. Gettleman

MEMORANDUM OPINION A ND ORDER
William Blair & Company, LLC (“Blair”) provided investment banking services to two
clients related to this case. The first client was a real estate company, UIRC-GSA Holdings, Inc.
(“UIRC”). UIRC wanted to acquire properties leased to the United States General Services
Administration. Because UIRC needed capital, it hired Blair in 2014 to sell bonds to private
investors. To sell those bonds for UIRC, Blair prepared solicitation materials: documents
describing legal rights, offering terms, and financial information. UIRC claims that those
solicitation materials are protected by copyright.
Blair’s second client was Rainier Realty Acquisitions GP, LLC (“Rainier”). Like UIRC,
Rainier is a real estate company. In 2015, Rainier hired Blair for the same reason that UIRC
hired Blair: to raise capital for acquiring properties leased to the General Services
Administration. The solicitation materials that Blair prepared for Rainier were nearly identical to
those that Blair had prepared for UIRC.

UIRC sued Rainier and Blair for copyright infringement. Rainier settled. Blair did not.
The ongoing litigation between UIRC and Blair has been the subject of many of this court’s
orders. See UIRC-GSA Holdings Inc. v. William Blair & Co., L.L.C., No. 15-CV-9518, 2017 WL
1163864 (N.D. Ill. Mar. 29, 2017) (St. Eve, J.); 2017 WL 3593117 (Aug. 21, 2017) (St. Eve, J.);
264 F. Supp. 3d 897 (Aug. 28, 2017) (St. Eve, J.); 2018 WL 6573226 (Dec. 13, 2018)
(Gettleman, J.).
This order is not about UIRC’s suit against Blair. It is about Blair’s suit against its second
client—Rainier. After Rainier settled with UIRC, Blair sued Rainier for breaching their
indemnification agreement. See 2017 WL 3700792 (Aug. 25, 2017) (St. Eve, J.) (dismissing
Blair’s claims against Rainier without prejudice); 289 F. Supp. 3d 852 (Jan. 11, 2018) (St. Eve,
J.) (dismissing some of Blair’s claims against Rainier). Rainier counterclaimed for fraudulent
concealment, breach of contract, and unjust enrichment.
Blair moves to dismiss Rainier’s counterclaims. For the following reasons, Blair’s motion
is granted in part: the court dismisses Rainier’s counterclaims for fraudulent concealment and
unjust enrichment. The court denies Blair’s motion to dismiss Rainier’s counterclaim for breach
of contract. Rainier and Blair signed an engagement agreement in which Blair agreed to “assist
and advise” Rainier in raising capital. Rainier alleges that Blair did so in bad faith, using the
documents it had drafted for UIRC as a template despite knowing that UIRC claimed copyright
protection in those same documents. Those allegations raise an inference that Blair breached its
engagement agreement.
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Fraudulent concealment
First, Blair moves to dismiss Rainier’s counterclaim for fraudulent concealment. To avoid

dismissal, a claim must be plausible. Rainier’s fraudulent concealment claim is plausible if the

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court, taking the allegations as true, can reasonably infer that Blair is liable. Ashcroft v. Iqbal,
556 U.S. 662, 678 (2009), citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007).
Blair is liable for fraudulent concealment if it intentionally concealed a material fact that
it had a duty to disclose. Wigod v. Wells Fargo Bank, N.A., 673 F.3d 547, 571 (7th Cir. 2012).
Blair had a duty to disclose if it had a “fiduciary or confidential relationship” with Rainier.
Connick v. Suzuki Motor Co., 174 Ill. 2d 482, 500 (Ill. 1996). Blair would also have had a duty
to disclose if Rainier had placed “trust and confidence” in Blair such that Blair was in “position
of influence and superiority.” Id.
Blair had no duty to disclose UIRC’s copyright claim. Rainier’s fraudulent concealment
claim is thus dismissed. Rainier does not argue that Blair was its fiduciary. Nor could Rainier do
so: their engagement agreement expressly provides that “Blair is not and will not be construed as
a fiduciary.” Rainier argues instead that Blair’s advice was confidential. That is clear, Rainier
argues, based on the engagement agreement: “[A]ny advice rendered by Blair during the course
of participating in negotiations and meetings with [Rainier] . . . are intended solely for the benefit
and confidential use of [Rainier] and will not be . . . given to any other person for any purpose
without Blair’s prior written consent.”
The engagement agreement’s garden-variety confidentiality clause did not place Blair in
a position of influence and superiority over Rainier. For that to be so, Blair must have been
“clearly dominant, either because of superior knowledge of the matter derived from
overmastering influence on the one side, or from weakness, dependence, or trust justifiably
reposed on the other side.” Wigod, 673 F.3d at 572 (quotation marks and alteration omitted),
quoting Miller v. William Chevrolet/GEO, Inc., 326 Ill. App. 3d 642, 657 (Ill. App. 2001). Blair,
“[i]n short,” must have “exercise[d] overwhelming influence” over Rainier. Wigod, 673 F.3d
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at 572 (quotation marks and citation omitted). The confidentiality clause did not allow Blair to
exercise overwhelming influence over Rainier. It merely barred Blair and Rainier from
disclosing Blair’s advice without prior written consent.
The confidentiality clause was in an agreement entered into at arms-length between
sophisticated parties: Blair, an investment bank, and Rainier, a real estate company. Their
commercial relationship lacks “sufficient indicia of disparity in experience or knowledge” such
that Blair clearly dominated Rainier. Miller, 326 Ill. App. 3d at 657. Blair thus had no duty to
disclose UIRC’s copyright claim. The court need not consider Blair’s argument that Rainier
failed to “state with particularity the circumstances constituting fraud.” Fed. R. Civ. P. 9(b).
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Breach of contract
Next, Blair moves to dismiss Rainier’s counterclaim for breach of contract. Rainier

claims that Blair breached the duty of good faith “implicit in every contract” under Illinois law.
Cohen v. American Security Insurance Co., 735 F.3d 601, 612 (7th Cir. 2013). But that duty,
Blair argues, is merely “an aid in construing a contract”—it “does not create an independent
cause of action.” McArdle v. Peoria School District No. 150, 705 F.3d 751, 755 (7th Cir. 2013).
Blair is right that a party does not breach a contract merely because it acts in bad faith;
contract law “does not proceed on the philosophy that I am my brother’s keeper.” Original Great
American Chocolate Chip Cookie Co. v. River Valley Cookies, Ltd., 970 F.2d 273, 280 (7th Cir.
1992). Still, contract law forbids parties from invoking a contractual provision “dishonestly to
achieve a purpose contrary to that for which the contract had been made.” Id. This bar against
bad faith is not an independent cause of action. It depends on the contract. The bar against bad
faith applies when “one party to an agreement is given wide discretion, and the other party must
hope the discretion is exercised fairly.” Interim Health Care of Northern Illinois, Inc. v. Interim

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Health Care, Inc., 225 F.3d 876, 884 (7th Cir. 2000), citing Dayan v. McDonald’s Corp., 125
Ill.App.3d 972, 990 (Ill. App. 1984).
Rainier states a breach of contract claim based on bad faith. Under the engagement
agreement, Blair agreed to: “assist and advise” Rainier in financing $38 million in lease revenue
bonds; “assist in the preparation of any solicitation materials”; and “assist in structuring the
underlying documentation.” These provisions gave Blair wide discretion: there were countless
ways in which Blair could have “assist[ed]” and “advise[d]” Rainier. As the “party vested with
contractual discretion,” Blair had to “exercise that discretion reasonably and with proper motive,
and may not do so arbitrarily, capriciously, or in a manner inconsistent with the reasonable
expectations of the parties.” Dayan, 125 Ill. App. 3d at 991.
Rainier’s allegations raise an inference that Blair drafted Rainier’s bond solicitation
documents in bad faith. Blair allegedly copied those documents verbatim from documents that
Blair had drafted for UIRC. UIRC had claimed copyright protection in those documents—and
Blair allegedly knew it. By using UIRC’s documents as a template for Rainier’s—and by doing
so without disclosing UIRC’s copyright claim—Blair allegedly subjected Rainier to liability for
copyright infringement. To do so was an unreasonable exercise of Blair’s discretion to “advise”
and “assist” Rainier that could not have been consistent with Rainier’s reasonable expectations.
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Unjust enrichment
Finally, Blair moves to dismiss Rainier’s counterclaim for unjust enrichment. Blair argues

that “recovery for unjust enrichment is unavailable” because “the conduct at issue is the subject
of an express contract between the plaintiff and defendant.” Cohen, 735 F.3d at 615 (7th Cir.
2013). The court agrees. Blair’s conduct was governed not only by the engagement agreement,

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but also by a separate indemnification agreement. Rainier’s unjust enrichment claim is thus
dismissed.
Rainier argues that Federal Rule of Civil Procedure 8(d) allows pleading unjust
enrichment as an alternative to breach of contract. True enough, “[b]ut the inconsistent-pleading
option in this context is limited.” Cohen, 735 F.3d at 615 (affirming the dismissal of an unjust
enrichment claim based on breach of contract). Rainier may plead that: (1) there is an express
contract, and Blair is liable for breaching it; and (2) if there is no express contract, then Blair is
liable for unjustly enriching itself at Rainier’s expense. Id. That is not what Rainier has pleaded.
Like the plaintiff in Cohen, Rainier “acknowledges throughout that there is an express contract,”
id., but claims that if Blair did not breach, then Blair was unjustly enriched by the fees it
collected from Rainier. Pleading unjust enrichment this way is “impermissible.” Id.
CONCLUSION
The court dismisses the fraudulent concealment and unjust enrichment counterclaims
brought by Rainier Reality Acquisitions GP, LLC, and Rainier GSA Portfolio I, LLC, against
William Blair & Company, LLC. Blair’s motion to dismiss [Doc. 316] is otherwise denied. Blair
must answer Rainier’s counterclaim for breach of contract on or before March 18, 2020. This
matter is set for a status hearing on March 25, 2020, at 9:10 a.m.
ENTER:

February 26, 2020

__________________________________________
Robert W. Gettleman
United States District Judge

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