Sterling National Bank v. Bernard N. Block et al

Filing 169

MEMORANDUM OPINION AND ORDER. For the reasons stated herein, Plaintiff's motion for summary judgment 134 is denied. Defendants' motion for summary judgment 128 is granted in part and denied in part. Civil case terminated. Signed by the Honorable Harry D. Leinenweber on 6/14/2019:Mailed notice(maf)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

STERLING NATIONAL BANK,
Plaintiff and
Counterclaim Defendant,
v.

Case No. 16 C 9009
Judge Harry D. Leinenweber

BERNARD N. BLOCK, TRUSTEE,
et al.,
Defendant and
Counterclaim Plaintiff.

MEMORANDUM OPINION AND ORDER
This case arises out of an alleged breach of a stock purchase
agreement. The parties to that agreement, Defendants Bernard N.
Block,

Trustee,

et

(collectively,

al.,

the

“Sellers”)

and

Plaintiff Sterling National Bank (“Sterling”), have cross-moved
for summary judgment. For the reasons stated herein, Plaintiff’s
Motion for Partial Summary Judgment (Dkt. No. 134) is denied, and
Defendant’s Motion for Summary Judgment (Dkt. No. 128) is granted
in part and denied in part.
I.

A.

BACKGROUND
The Parties

The Court will begin with a brief overview of the parties and
the nature of the business at issue, before diving into the details
of this contract dispute. There are three corporate entities

involved in this case. The first two are the parties to this
litigation: Sterling and the Sellers. The third, Damian, is a
company that the Sellers sold to Sterling in 2015.
Before it was acquired by Sterling, Damian was a privatelyheld

corporation

that

provided

short-term

payroll

funding

to

temporary staffing agencies (the “Clients”). (Answer ¶ 10, Dkt.
No. 20.) Damian’s Clients provide temporary employees to other
businesses (the “End Users”). (Defs.’ Resp. to Pl.’s Stmt. of Facts
(“PSOF”) ¶ 7, Dkt. No. 142.) Damian offered its Clients two levels
of service: “full service” and “money only.” (PSOF ¶ 8.) Fullservice Clients submitted their workers’ hours and hourly wage to
Damian

at

various

intervals,

and

Damian

would

then

pay

the

temporary employees, withhold the proper payroll taxes, transmit
those taxes to the proper jurisdictions, and invoice the End Users,
among other services. (PSOF ¶ 9; Pl.’s Resp. to Defs.’ Stmt. of
Facts (“DSOF”) ¶ 15, Dkt. No. 147.) After receiving the invoices,
the End Users would transfer the amount they owed to Damian’s bank
facility, from which Damian would remit payments to its Clients.
(PSOF ¶ 10.) For money-only Clients, Damian would pay the temporary
workers

based

on

the

Clients’

invoices,

which

Damian

then

transmitted to the End Users. (PSOF ¶ 21.) Damian did not create
invoices for its money-only Clients (hence the use of the term
“money only”). (PSOF ¶ 11.)
- 2 -

Damian, of course, charged for its services. Though the
parties

vigorously

dispute

the

details

of

Damian’s

billing

practices, its business model was essentially as follows: The End
Users repaid the amount Damian paid to the temporary workers.
Damian charged its Clients a base fee for its services (expressed
as

a

percentage

of

total

billing)

and

offered

a

variety

of

discounts and late fees based on how quickly the Client paid the
base fee. (See PSOF ¶¶ 13, 17-18.) If the End User paid its invoice
within a specified period of time, measured from the invoice date,
the Client would only owe Damian the base fee. (PSOF ¶ 18.) If the
End User paid its invoices within a shorter period of time, the
Client would receive a fast pay discount. (PSOF ¶ 19.) If the End
User paid after the specified time period, the Client would owe
Damian late fees. (PSOF ¶ 20.)
The contract Damian used with both full-service and moneyonly Clients is called an “Accounts Funding and Administration
Agreement” (“Client Contract”). (PSOF ¶ 12.) The Client Contract
was based on a standardized form, but Clients could negotiate
conditions such as fees, discounts, and term lengths. (PSOF ¶¶ 1213.) Full-service Client Contracts included a Schedule of Fees,
which identified the base fee and the periods of time that would
trigger the fast pay discounts and late fees. (PSOF ¶¶ 17-20.) For
full-service Clients, the invoice date started the clock for the
- 3 -

various discounts and fees that might apply. (PSOF ¶ 28.) Moneyonly Client Contracts contained a “Money Only Addendum,” which
identified the base fee, any late fees, and the time period
applicable to each. (PSOF ¶ 22.) Some money-only Client Contracts
started the fee clock not by reference to the invoice date (as
Damian did not generate invoices for money-only Clients) but rather
by Damian’s receipt of labor invoices. (PSOF ¶ 23.)
B.

The Contract at Issue

On February 27, 2015, Sterling acquired Damian from the
Sellers pursuant to a stock purchase agreement (“SPA”). (PSOF ¶ 42;
see also SPA, Ex. A to Answer, Dkt. No. 20-1.) The following SPA
terms are most relevant to this litigation: the Sellers represented
to Sterling that it was providing a full and accurate picture of
Damian’s

finances,

liabilities,

and

obligations;

the

Sellers

agreed to indemnify Sterling for losses incurred in the case of a
breach of those representations and warranties; Sterling agreed to
pay $25 million to purchase Damian, $2 million of which Sterling
would place into an escrow account for future claims asserted
against the Sellers; and both parties agreed to a set of procedures
by which they would handle indemnification claims. (See generally
SPA.)
On July 20, 2015, Sterling learned that a former Damian
employee was calling Clients and informing them that Damian had
- 4 -

improperly backdated its Client invoices to shorten the window of
time in which the End Users could make early or on-time payments.
(DSOF ¶ 30.) Sterling investigated this allegation and learned
that in June of 2009, Alvin Block, the founder of Damian, directed
that

Damian

change

its

invoicing

practices.

(PSOF

¶ 30.)

Specifically, Damian began to date invoices on Sunday, the final
day of a given work week. (Answer ¶ 17.) Previously, Damian dated
most Client invoices on the first Friday after a work week (five
days from Sunday, the end of the work week). (PSOF ¶ 30.) After
Damian changed the date on its invoices to the Sunday at the end
of the pay period, it did not begin transmitting or delivering its
invoices to the End Users earlier than it had before changing the
invoice dates. (Defs.’ Resp. to Pl.’s Stmt. of Add. Facts (“PSOAF”)
¶ 72, Dkt. No. 153.)
Sterling calls this practice improper “backdating”; Sellers
call it “conform[ing] the invoice date to the contract date.”
(Answer ¶ 17.) The Court will refer to it as the “2009 change.” As
a result of the 2009 change, Clients had a shorter window in which
they could obtain early pay discounts or avoid late fees. (PSOF
¶ 33.) Sterling asserts that it was not informed of the 2009 change
in Damian’s invoice dating practice prior to the closing of the
Damian acquisition, and that this lack of information constituted
a breach of the SPA. (PSOF ¶ 50.)
- 5 -

C.

Sterling’s Investigation and Indemnification Claim

After learning of the former Damian employee’s allegations,
Sterling hired the law firm of Wachtell, Lipton, Rosen & Katz
(“WLRK”)

to

conduct

an

investigation.

(DSOF

¶ 32.)

On

approximately August 3, 2015, Sterling sent letters to Damian’s
remaining Clients (which at this point were Sterling’s Clients)
that stated, “an issue has come to our attention that may result
in a credit to your account,” and, “Sterling is in the process of
reviewing the data and [is] committed to working through all of
the information as soon as practical.” (DSOF ¶ 46.) By early
August, Sterling had drafted a script that its employees could use
to call the Damian Clients and notify them that they may be
entitled to refunds. (DSOF ¶ 47.) By August 7, 2015, Sterling
decided that if its investigation determined that overcharges took
place, it would discharge any liabilities it owed. (DSOF ¶ 48.) On
August 10, 2015, a Sterling in-house lawyer circulated a draft
“Document Hold Notice,” intended to preserve documents for use in
the internal investigation. (DSOF ¶ 49.) On that same day, Sterling
discussed contacting the U.S. Attorney’s Office (“USAO”) about the
2009 change. (DSOF ¶ 51.)
On August 11, 2015, WLRK drafted a memorandum for a meeting
with the USAO that summarized the facts it had learned so far,
including an estimate that the 2009 change had created a $1.2 to
- 6 -

1.5 million “aggregate financial impact” on the Damian Clients.
(DSOF ¶¶ 52-57.) The memorandum stated that Sterling intended to
calculate and refund the amount of overcharges to the Clients.
(DSOF ¶ 54.) It further stated, “[w]e are alerting you because
there is a possibility of fraudulent conduct here.” (DSOF ¶ 56.)
WLRK communicated with the AUSO on August 12, 2015 and conveyed
the substance of the memorandum in that conversation. (DSOF ¶ 57.)
On November 3, 2015, Sterling informed Damian Clients that it
had

hired

a

forensic

consultant—AlixPartners—to

determine

the

amount of any adjustments that may be made. (DSOF ¶¶ 59-60.)
AlixPartners

eventually

informed

Sterling

that

the

additional

amounts paid by all of Damian’s Clients as a result of the 2009
change was between $1.2 and 1.3 million. (DSOF ¶ 57.) Another
meeting between WLRK and the USAO took place on December 2, 2015.
(DSOF ¶ 61.) The memorandum WLRK prepared for that meeting stated,
in

part:

“Sterling

contacted

all

current

clients

that

were

potentially impacted by the changed billing practice. . .. Since
we reached out to your office in August, Sterling has completed
its investigation into this practice.” (DSOF ¶ 63.) The memorandum
also stated, “Sterling intends to contact each client that it has
determined was affected by this practice and reimburse them the
amounts that AlixPartners has determined are owed to them.” (Id.)

- 7 -

On December 11, 2015, Sterling informed the Sellers that it
was invoking the SPA’s indemnity clause and requested that the
Sellers use the $2 million in escrow to indemnify Sterling for its
losses resulting from Damian’s backdating practices. (DSOF ¶ 61.)
On December 16, 2015, a Sterling executive wrote to the remaining
Damian

Clients,

stating

that

Sterling’s

investigation

was

complete, and stating the amount of refund each Client would
receive. (DSOF ¶¶ 64-65.) In a December 24, 2015, letter, the
Sellers informed Sterling that they refused to indemnify Sterling.
(PSOF ¶ 63.)
Sterling ultimately concluded that 285 of the Damian Clients
lost discounts or paid improper late fees due to the 2009 change.
(PSOAF ¶ 88.) However, of those 285 Clients, Sterling has only
made payments to 68 of them. (Id.) To date, Sterling has refunded
$799,164.33 to the Damian Clients that remained with Sterling.
(PSOF ¶ 68.) It has not reimbursed former Damian Clients. (DSOF
¶ 60.)
D.

The Instant Litigation

Plaintiff brings eight breach of contract counts under the
SPA: (I) material misrepresentation of and failure to disclose
Damian’s financial condition; (II) material misrepresentation of
and failure to disclose Damian’s liabilities, obligations, and
commitments; (III) material misrepresentation of and failure to
- 8 -

disclose Damian’s material breach of its contracts with clients;
(IV)

material

misrepresentation

of

and

failure

to

accurately

report accounts receivable; (V) material misrepresentation of and
failure to disclosure potential legal actions against Damian; (VI)
failure to provide full and accurate disclosure; (VII) failure to
provide notice of material events; and (VIII) failure to indemnify
Sterling Bank.
Defendants,

in

turn,

assert

four

counterclaims

against

Plaintiff: (I) declaratory judgment action that the Sellers, not
Sterling, are entitled to the amount in escrow, that Sterling’s
December 11, 2015, letter is void, and that the Sellers are
entitled to pre- and post-judgment interest at 12 percent annum;
(II) Sterling breached the SPA by sending improper notice to the
escrow

agent;

(III)

injunctive

relief

mandating

Sterling

to

instruct the escrow agent to disburse the escrow to the Sellers;
and (IV): Sterling breached the SPA by failing to pay a required
post-closing adjustment of $35,568.49.
The parties now cross-move for summary judgment. Sterling
seeks summary judgment with respect to the Sellers’ liability and
Defendants’ counterclaims. The Sellers seek summary judgment in
their favor as to their counterclaims and all of Plaintiff’s
counts.

- 9 -

II.

LEGAL STANDARD

Summary judgment is appropriate when there are no genuine
issues of material fact and the moving party is entitled to
judgment as a matter of law. FED. R. CIV. P. 56(a); see also Liu v.
T&H Mach., Inc., 191 F.3d 790, 794 (7th Cir. 1999) (citation
omitted).

A genuine issue of material fact exists only if “the

evidence is such that a reasonable jury could return a verdict for
the nonmoving party.”

Pugh v. City of Attica, 259 F.3d 619, 625

(7th Cir. 2001) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 248 (1986)). When considering Sterling’s Motion for Summary
Judgment, the Court construes the facts in the light most favorable
to the Sellers, and when considering the Sellers’ Motion for
Summary Judgment, the Court construes the facts in the light most
favorable to Sterling. See First State Bank of Monticello v. Ohio
Cas. Ins. Co., 555 F.3d 564, 567 (7th Cir. 2009).
III.

A.

DISCUSSION

Is Sterling Entitled to Indemnification?

Counts I through VII of Sterling’s Complaint allege that the
Sellers breached the SPA by making various untrue representations,
warranties, and disclosures. However, the Court need not delve

- 10 -

into

these

Counts

because

Count

VIII,

concerning

the

SPA’s

indemnification clause, is dispositive of this matter.
Count VIII of Sterling’s Complaint charges that the Sellers
breached the SPA by not indemnifying Sterling for its losses
stemming from the 2009 change. In the SPA, the Sellers (“the
Indemnifying

Party”)

agreed

to

indemnify

Sterling

(“the

Indemnified Party”) for losses incurred due to a breach of the
representations and warranties contained in the SPA. (SPA § 8.02.)
Sterling agreed to place $2 million of the $25 million purchase
price into an escrow account for future indemnification claims,
and both parties agreed to a set of procedures through which they
would handle indemnification claims. (SPA § 8.05.)
The SPA specifies procedures for two types of indemnification
claims: Third Party Claims (brought against the Indemnifying Party
by any person who is not a party to the SPA) and Direct Claims
(brought by the Indemnified Party on account of a loss that did
not result from a Third-Party Claim). (See SPA §§ 8.05(a), (c).)
The notice procedures for both types of claims are essentially the
same: Sterling is required to give the Sellers “reasonably prompt
written notice” of the indemnification claim, “in any event not
later than [10] days after the Indemnified Party becomes aware of
such

Direct

Claim.”

(SPA

§ 8.05(c);

see

also

SPA

§ 8.05(a)

(specifying that Sterling must give notice for Third Party Claims
- 11 -

“in any event not later than [10] days after receipt of such notice
of such Third Party Claim.”).) The failure to give prompt notice
“shall

not,

however,

relieve

the

Indemnifying

Party

of

its

indemnification obligations, except and only to the extent that
the Indemnifying Party irrevocably forfeits rights or defenses by
reason of such failure.” (Id.) Further, Sterling’s notice must
“describe the Direct Claim in reasonable detail,” include copies
of all material written evidence thereof, and indicate the amount,
if reasonably practicable, of the loss that Sterling sustained.
(Id.)
The Sellers argue that Sterling failed to give prompt notice,
thus forfeiting its rights to indemnification. The timeline of
Sterling’s

notice

is

therefore

relevant,

and

the

Court

will

summarize it here. Sterling first learned of the 2009 change on
July 20, 2015, from a former Damian employee. (DSOF ¶ 30.) Not
knowing the truth of this allegation, Sterling hired WLRK to
investigate. (DSOF ¶ 32.) Sterling contacted Damian’s remaining
Clients on August 3, 2015, to inform them that they may be entitled
to a refund. (DSOF ¶ 46.) By August 7, 2015, Sterling decided that
if its investigation determined that overcharges took place, it
would discharge any liabilities it owed. (DSOF ¶ 48.) Soon after,
Sterling

discussed

contacting

the

USAO

about

the

backdating

practices it had discovered. (DSOF ¶ 51.) In preparation for a
- 12 -

meeting with the USAO, WLRK prepared a memo summarizing what it
knew of the 2009 change, including an estimate that the 2009 change
had created a $1.2 to 1.5 million “aggregate financial impact” on
Damian Clients. (DSOF ¶¶ 52-57.) On August 12, 2015, WLRK conveyed
to the USAO the substance of that memorandum. (DSOF ¶ 57.) On
November 3, 2015, Sterling informed Damian Clients that it had
hired a forensic consultant, AlixPartners, to determine the amount
of any adjustments. (DSOF ¶¶ 59-60.) Another meeting between WLRK
and the USAO took place on December 2, 2015. (DSOF ¶ 61.) The
memorandum WLRK prepared for that meeting stated, in part: “Since
we reached out to your office in August, Sterling has completed
its investigation into this practice,” and “Sterling intends to
contact each client that it has determined was affected by this
practice and reimburse them the amounts that AlixPartners has
determined are owed to them.” (DSOF ¶ 63.)
On December 11, 2015, Sterling gave the Sellers notice that
it was invoking the indemnification clause. (DSOF ¶ 61; see also
December Notice, Ex. 22 to Defs.’ Stmt. of Material Facts, Dkt.
No. 130-13.) Sterling stated that it was bringing both a Third
Party Claim and a Direct Claim under the SPA. (Id.) Just five days
later, on December 16, 2015, Sterling again wrote to its remaining
Damian Clients, stating that its investigation was complete, and
providing the amount of refund each Client would receive. (DSOF
- 13 -

¶¶ 64-65.) In a December 24, 2015, letter, the Sellers informed
Sterling that they refused to indemnify Sterling. (PSOF ¶ 63.)
Sterling claims that its notice was timely under the SPA
because it was in communication with the USAO and “sought to avoid
interfering with a possible criminal investigation.” (Pl.’s Resp.
to Defs.’ Mot. at 8, Dkt. No. 146.) Sterling explains that it
sought indemnification only “[o]nce the USAO declined to pursue a
fraud case against Defendants.” (PSOAF ¶ 90.)
However, Sterling offers no explanation of how giving notice
of its indemnification claim would impede a possible criminal
investigation by the USAO. Nor does Sterling indicate that it was
instructed

by

the

USAO

to

conceal

Sterling’s

internal

investigation from the Sellers. Furthermore, Sterling was clearly
not keeping its investigation a secret, as it had sent several
rounds of letters out to its remaining Damian Clients advising
them that it was investigating a Damian billing issue. It was
reasonable for Sterling to undertake some form of preliminary
investigation to ensure that it was making an indemnification claim
in good faith, and that it could describe its claim in “reasonable
detail” as the SPA requires. (SPA § 8.05(c).) However, the SPA
clearly states that Sterling must give notice within 10 days of
when it “becomes aware” of its claim. (Id.) Sterling was certainly
“aware” of its claim by the time it first met with the USAO, in
- 14 -

August of 2015. Therefore, Sterling failed to give timely notice
as required under the SPA.
Sterling next asserts that, even if its notice was not timely,
the Sellers did not forfeit any rights or defenses, and so still
must indemnify Sterling under the SPA § 8.05(c). (See SPA § 8.05(c)
(The failure to give prompt notice “shall not . . . relieve the
Indemnifying Party of its indemnification obligations, except and
only to the extent that the Indemnifying Party irrevocably forfeits
rights or defenses by reason of such failure.”) (emphasis added).)
The Sellers assert that they forfeited the following rights and
defenses as a result of Sterling’s failure to promptly give notice
of the indemnification claim:
1. The right to contest whether the Clients were indeed
entitled to refunds. The SPA gives the Indemnifying
Party “the right to participate in, or . . . assume the
defense of any Third Party Claim at the Indemnifying
Party’s expense. . . the Indemnifying Party shall
control such defense, and the Indemnified Party shall
cooperate in good faith in such defense.” (SPA
§ 8.05(a).)
2.
The right to negotiate individual settlements with each
Client for less than the full amount claimed. The SPA gives
the Indemnifying Party the right to settle a Third Party Claim
“without leading to liability or the creation of a financial
or other obligation on the part of the Indemnified Party.”
(SPA § 8.05(b).)

3.
The right to participate in the investigation of
Direct Claims. The SPA states, “The Indemnified Party
shall allow the Indemnifying Party and its professional
advisors to investigate the matter or circumstance
alleged to give rise to the Direct Claim and the
Indemnified Party shall assist the Indemnifying Party’s
- 15 -

investigation by giving such information and assistance
. . . as the Indemnifying Party of any of its
professional advisors may reasonably request.” (SPA
§ 8.05(c).)
4.
The following defenses: (1) that many of the Client
Contracts
contain a
clause
releasing
Damian
of
liability; (2) that the Illinois contract law defense of
voluntary payment shields Damian from liability; (3)
that any Client claims about the 2009 change would
violate the Illinois five-year state of limitations for
common law fraud; (4) that the “account stated” defense
shields Damian from liability; and (5) that Damian
established a new course of dealing after the 2009 change
in which Clients acquiesced to the Sunday invoice date.
First, Sterling argues that the Sellers’ defenses would not
have been successful. The Court need not delve into this debate,
as the SPA asks only whether the Indemnifying Party “forfeited”
defenses, not whether the Indemnifying Party forfeited defenses
that it was sure to win.
Next, Sterling asserts that the Sellers did not “forfeit
rights or defenses” because the Sellers did not attempt to assert
any rights or defenses after receiving notice on December 11, 2015.
However, months before Sterling had given the Sellers notice, it
had already informed the Clients that they may be entitled to
refunds. (DSOF ¶ 46.) And Sterling had already paid over $650,000
to outside counsel for an investigation into the 2009 change.
(Compl. ¶ 35.) Thus, Sterling had already rendered some of the
Sellers’ rights and defenses moot, and it would be a meaningless
formality to say that the Sellers had to assert them after they
- 16 -

had already been forfeited (particularly when the SPA gives no
indication

that

“asserting”

those

rights

or

defenses

after

receiving notice is necessary). Furthermore, the SPA states that
“the Indemnifying Party shall have [30] days after its receipt of
. . . notice to respond in writing.” (SPA § 8.05(c).) Even after
giving late notice, Sterling failed to give the Sellers 30 days to
respond, and instead proceeded directly to contacting the Clients
on December 16, 2015, to inform them of the exact amount of the
refund each Client would receive. (DSOF ¶ 65.) Sterling’s late
notice thus irrevocably forfeited the Sellers’ rights under the
SPA: to contest whether the Clients were actually entitled to
refunds, to negotiate individual settlements, and to participate
in the investigation. Therefore, Sterling’s failure to give prompt
notice relieves the Sellers of their indemnification obligations.
The Court grants summary judgment as to Count VIII in favor of the
Sellers.
Because

Sterling

is

not

entitled

to

indemnification,

it

cannot obtain relief under the SPA. Section 8.09 provides, subject
to two exceptions that are not relevant, that:
The sole and exclusive remedy with respect to any and
all claims (other than claims arising from fraud,
criminal activity or intentional misconduct on the part
of a party hereto, in connection with the transactions
contemplated by this Agreement) for any breach of a
representation, warranty, . . . agreement or obligation
set forth herein or otherwise relating to the subject
- 17 -

matter of this Agreement, shall be pursuant to the
indemnification provisions[.]
(SPA § 8.09 (emphasis added).)
Sterling does not allege any fraud, criminal activity or
intentional

misconduct

in

connection

with

the

SPA

and

concedes that it is “only seeking indemnification” in this
litigation. (Pl.’s Resp. to Defs.’ Mot. at 5). Because the
Sellers are relieved of their indemnification obligation,
Sterling is not entitled to its sole form of relief under the
SPA. Therefore, Counts I through VII are denied as moot.
B.

The Sellers’ Counterclaims

The Court turns to the Sellers’ counterclaims. The Sellers
assert

four

counterclaims

against

Plaintiff:

(I)

declaratory

judgment that the Sellers, not Sterling, are entitled to the amount
in escrow, and that Sellers are entitled to pre- and post-judgment
interest at 12% annum; (II) Sterling breached the SPA by sending
improper notice to the escrow agent; (III) injunctive relief
mandating Sterling to instruct the escrow agent to disburse the
escrow to Sellers; and (IV) Sterling breached the SPA by failing
to pay a required post-closing adjustment of $35,568.49. The
Sellers specified that they do not seek summary judgment with
respect to Count IV, as Sterling has apparently paid the postclosing adjustment. (See Defs.’ Memo. at 1 n.1, Dkt. No. 129.)

- 18 -

Thus, summary judgment as to the Sellers’ Count IV is denied as
moot.
Beyond disclaiming their Count IV, the Sellers did not advance
any arguments specifically in favor of their counterclaims in their
summary

judgment

briefing.

The

Sellers’

Motion

for

Summary

Judgment asserts vaguely that they are seeking summary judgment on
only

one

counterclaim

(“Sellers

are

(see

entitled

Defs.’
to

Mot.

at

summary

2,

Dkt.

judgment

No.
on

128)
their

Counterclaim”), which they describe as encompassing at least the
declaratory judgment action as well as “other relief.” (Defs.’
Memo. at 1 (“Sellers filed a Counterclaim for declaratory judgment
and other relief claiming that Sellers, rather than Sterling, were
entitled to the escrowed funds.”).). Thus, it appears to the Court
that the Sellers are at least seeking summary judgment on their
declaratory judgment action.
The

Declaratory

Judgment

Act

allows

a

federal

court

to

“declare the rights and other legal relations of any interested
party seeking such declaration.” 28 U.S.C 28 U.S.C. §§ 2201, 2202.
The Act allows a defendant to sue to establish its nonliability.
Beacon Theatres, Inc. v. Westover, 359 U.S. 500, 504 (1959).
decision

of

a

district

court

to

grant

declaratory

relief

The
is

discretionary. NUCOR Corp. v. Aceros Y Maquilas de Occidente, S.A.
de C.V., 28 F.3d 572, 577 (7th Cir. 1994). In their Answer, the
- 19 -

Sellers requested a declaration with several specific components:
that (a) Sterling is not entitled to indemnification from the
escrow; (b) Sterling’s December 11, 2015, Letter is “void”; (c)
the Sellers are entitled to all amounts held in the Escrow; and
(d) the Sellers are entitled to pre- and post-judgment interest at
the rate of 12 percent annum. In their motion and briefing, the
Sellers only argued the substance of declaration (a): that Sterling
is not entitled to indemnification from the escrow. However, the
Court has already established the Sellers’ nonliability on this
issue, in granting summary judgment for the Sellers on Count VIII
of Sterling’s Complaint. Therefore, such a declaratory judgment
would

be

arguments

redundant.
for

the

Furthermore,
remainder

of

Sterling
the

has

requested

not

advanced

declaration,

rendering them waived. See Crespo v. Colvin, 824 F.3d 667, 674
(7th Cir. 2016) (“[P]erfunctory and undeveloped arguments . . .
are

waived.”).

Sellers’

motion

for

summary

judgment

on

its

declaratory judgment action is denied.
The Sellers’ remaining counterclaims, Counts II and III, are
also not mentioned in their summary judgment briefing. Therefore,
to the extent Sellers seek summary judgment on these claims, it is
denied. See id.

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IV.

CONCLUSION

For the reasons stated herein, Sterling’s Motion for Partial
Summary Judgment (Dkt. No. 134) is denied.

The Sellers’ Motion

for Summary Judgment (Dkt. No. 128) is granted in part and denied
in part as follows: The Sellers are entitled to judgment in their
favor as to Count VIII. The Sellers are not entitled to judgment
as to their counterclaims.

IT IS SO ORDERED.

Harry D. Leinenweber, Judge
United States District Court
Dated: 6/14/19

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