American Guardian Warranty Services, Inc. et al v. JCR-Wesley Chapel, LLC et al
Filing
200
MEMORANDUM Opinion and Order: For the reasons stated herein, Defendant's Motion for Summary Judgment (Dkt. No. 184) is denied. This case will proceed to trial on March 2, 2020. Status hearing set for December 5, 2019 is vacated. Signed by the Honorable Harry D. Leinenweber on 11/19/2019:Mailed notice(maf, )
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
AMERICAN GUARDIAN WARRANTY
SERVICES, INC. and AMERICAN
GUARDIAN FUNDING CORPORTATION
Case No. 16 CV 11407
Plaintiffs,
Judge Harry D. Leinenweber
v.
AUTOMOBILE PROTECTION
CORPORATION, INC.,
Defendant.
MEMORANDUM OPINION AND ORDER
This case involves a car dealership, its exclusive provider
of
limited
warranties
(Plaintiff
American
Guardian
Warranty
Services), and the company that allegedly interfered with the
relationship
between
the
two
(Defendant
Automobile
Protection
Corporation). For the reasons stated herein, Defendant’s Motion
for Summary Judgment (Dkt. No. 184) is denied.
I.
BACKGROUND
This lawsuit began in 2016, when Plaintiffs American Guardian
Warranty Services, Inc. and American Guardian Funding Corporation
(collectively,
“American
Guardian”
or
“AGW”)
sued
JCR-Wesley
Chapel, LLC, Jesus Rosario, and Cynthia Rosario (collectively,
“the Dealership Defendants”) for breach of contract. JCR-Wesley
Chapel is a Florida limited liability company that, at the times
relevant to this lawsuit, owned a car dealership. Jesus “Jay”
1
Rosario is the owner of JCR-Wesley Chapel. Cynthia Rosario is
Jesus’s former spouse. (Subsequent references to “Rosario” in this
opinion are to Jesus Rosario.)
American Guardian provides financing and warranty servicers
to car dealerships. This suit arose out of a series of contracts
between American Guardian and the Dealership, in which American
Guardian
gave
Dealership’s
the
Dealership
promise
to
a
in
exchange
for
exclusively
sell
loan
the
American
Guardian
contracts to its customers. The first contract was formalized on
November 7, 2013, when the Dealership Defendants entered into a
“Dealer Agreement” with American Guardian. (Pls.’ Resp. to Def.’s
Stmt. of Facts (“DSOF”) ¶¶ 2-3, Dkt. No. 189.) The Dealer Agreement
provided that American Guardian would loan the Dealership $300,000
in
exchange
for
the
Dealership
selling
exclusively
American
Guardian warranty products for five years. (Id.) On November 14,
2014, the Dealership and American Guardian entered into a “Dealer
Agreement Funding Addendum,” which extended the exclusive-sale
period in exchange for an additional $1,030,601.15 loan. (DSOF
¶ 5.)
The
American
Dealership
Guardian
on
signed
a
third
December
15,
Addendum
2015,
for
Agreement
an
with
additional
$716,357.52 loan. (Id. ¶ 6.) The Dealer Agreement and the following
Addendums all contained the following language:
For a period of sixty (60) months from the effective
date, Dealer agrees to provide substantially all vehicle
service contracts, limited warranty, guaranteed asset
2
protection[], certified ancillary product production
through American Guardian Warranty Services, Inc. or its
approved product providers. For purposes of this
provision, substantially all shall mean [95%] of vehicle
service contracts, limited warranty, guaranteed asset
production[], certified ancillary product production
produced by Dealer.
(Def.’s Resp. to Pls.’ Stmt. of Add. Facts (“PSOAF”) ¶ 6, Dkt. No.
195.) Thus, the final 2015 agreement obligated the Dealership to
sell American Guardian products until December 2020. (PSOAF ¶¶ 56, 11.)
The dispute between the parties began brewing in early 2016.
Rosario approached American Guardian for additional funding for
the Dealership. (PSOAF ¶ 12.) Around the same time, in April 2016,
representatives
from
Automobile
Protection
Corporation,
Inc.
(APCO) visited the Dealership. (PSOAF ¶¶ 15-16.) Like American
Guardian, APCO is an automobile warranty provider that provides
loans
to
car
dealerships
in
exchange
for
exclusive
sales
agreements. Joey Falcon was the Dealership’s general manager at
the time. (PSOAF ¶ 11.) Falcon had reviewed the Dealership’s
contracts with American Guardian and understood that the exclusive
sales term continued through December 2020. (Id.) Still, Falcon
met with an APCO Vice President, Pete Lee, and APCO salesperson,
Rob Mirra, and discussed how a loan advance from APCO could be
helpful in funding additions to the Dealership. (PSOAF ¶ 16.)
On April 30, 2016, Lee sent an email to Mirra stating, “I
wanted to let you know that the loan for [the Dealership] is
3
approved. We are working on loan agreements and should have them
next week.” (PSOAF ¶ 18.) On May 3, 2016, APCO sent its rate quotes
and books to the Dealership. (Id. ¶ 20.) On May 13, 2016, Mirra
received a copy of the Dealer Agreement between the Dealership and
American Guardian. (Id. ¶ 21.) Mirra circulated a copy of the
contract to other APCO executives. (Id. ¶ 21.) On October 1, 2016,
APCO entered into an exclusive contract with the Dealership to
sell the same type of warranty products the Dealership was still
obligated to sell for American Guardian. Soon after, American
Guardian sued the Dealership Defendants for breach of contract.
APCO was not originally a party to this suit. In their Second
Amended Complaint, American Guardian added APCO as a defendant.
(See Sec. Am. Compl., Dkt. No. 101.) American Guardian alleges
that
APCO
intentionally
induced
the
Dealership
Defendants
to
breach their contract with American Guardian. American Guardian
asserts two claims against APCO: tortious interference with an
existing business relationship, and tortious interference with a
contract.
The Court has issued three prior rulings in this case. (See
May 22, 2017, Mem. Op., Dkt. No. 55; June 5, 2018, Mem. Op, Dkt.
No. 124; Oct. 24, 2018, Order, Dkt. No. 142.) In denying APCO’s
earlier motion to dismiss under Federal Rule of Civil Procedure
12(b)(6), the Court held as follows: (1) the Dealership Agreement
is not unconscionable; (2) American Guardian pleaded each element
4
of
a
claim
for
tortious
interference
with
contract;
and
(3)
American Guardian’s claims are not barred by the lawful competition
privilege. (See Oct. 24, 2018, Order.)
In June 2019, the Dealership Defendants settled with American
Guardian and were dismissed from this case. (See Minute Entry,
Dkt. No. 173.) The case between American Guardian and APCO is set
to begin a jury trial on March 2, 2020. APCO now moves for summary
judgment, arguing that American Guardian has insufficient evidence
to support a claim for tortious interference with contract or
business relationship.
II.
STANDARD
Summary judgment is appropriate where there are no genuine
issues of material fact and the movant is entitled to judgment as
a matter of law. Levy v. Marion Cty. Sheriff, 940 F.3d 1002, 1008–
09 (7th Cir. 2019) (citing Fed R. Civ. P. 56(a)). The Court
considers the entire evidentiary record and draws all reasonable
inferences from that evidence in the light most favorable to the
nonmovant. Horton v. Pobjecky, 883 F.3d 941, 948 (7th Cir. 2018).
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.” Johnson v.
Advocate Health and Hosps. Corp., 892 F.3d 887, 894, 896 (7th Cir.
2018). Inferences supported only by speculation or conjecture will
not suffice. Skiba v. Ill. Cent. R.R. Co., 884 F.3d 708, 721–22
5
(7th Cir. 2018). Summary judgment is warranted only if the evidence
is such that a reasonable jury could not return a verdict for the
nonmoving party. Id. (citing Anderson v. Liberty Lobby, Inc., 477
U.S. 242, 248 (1986)).
III.
DISCUSSION
Interference with contract and interference with business
relations (sometimes called prospective economic advantage) are
related torts. Int’l Mktg., Ltd. v. Archer-Daniels-Midland Co.,
Inc., 192 F.3d 724, 731 (7th Cir. 1999). In Illinois, the elements
of a tortious interference with an existing contract claim are:
(1) the existence of a valid and enforceable contract
between the plaintiff and another; (2) the defendant’s
awareness of this contractual relation; (3) the
defendant’s intentional and unjustified inducement of a
breach of the contract; (4) a subsequent breach by the
other, caused by the defendant’s wrongful conduct; and
(5) damages.
HPI Health Care Servs., Inc. v. Mt. Vernon Hosp., Inc., 545 N.E.2d
672, 676 (Ill. 1989); A-Abart Elec. Supply, Inc. v. Emerson Elec.
Co., 956 F.2d 1399, 1404 (7th Cir. 1992). In a tortious inference
with
a
business relationship or
prospective economic
advantage
claim, the plaintiff must establish (1) the existence of a valid
business relationship (not necessarily evidenced by an enforceable
contract) or expectancy; (2) the knowledge of the relationship or
expectancy on the part of the interferer; (3) an intentional
interference
inducing
or
causing
a
breach
or
termination
of
the relationship or expectancy; and (4) resultant damage to the
6
party whose relationship or expectancy has been disrupted. Curtis
1000, Inc. v. Suess, 843 F. Supp. 441, 452 (C.D. Ill.), aff’d, 24
F.3d 941 (7th Cir. 1994).
A. Causation
APCO’s primary argument is that American Guardian cannot
establish the required causation for either tort; that is, that
APCO’s interference caused the Dealership’s breach of contract.
APCO asserts that Rosario, the Dealership’s principal, had already
decided to breach the Dealership’s contract with American Guardian
before entering into talks with APCO. APCO’s primary support for
this argument is Rosario’s June 3, 2019, deposition, in which he
testified:
Q: By the time Rob Mirra started talking to you about
the APCO warranty program, had you already decided to
move on to a different company?
A: Yes.
…
Q: And you’d already decided you were moving on [from
AGW] but you were just trying to work your way out of
that relationship, true?
A: Correct. I wanted it to be mutually acceptable.
…
Q: [APCO] contacted you, you guys got in contact somehow?
A: No. We had made the decision we were done with AGW.
We had been talking to a couple different vendors.
(June 3, 2019, Rosario Dep. 44:11-14; 49:18-22; 71:24-72:4. Ex.
H to DSOF.)
7
APCO
is
correct
in
the
sense
that
Rosario’s
deposition
testimony is unequivocal: he had already decided to breach the
American
Guardian
contract
before
beginning
talks
with
APCO.
However, as American Guardian points out, there is conflicting
evidence in the record. For example, in his January 10, 2018
deposition, Rosario testified that he did not reach out to APCO;
APCO initiated communication with him:
Q: When did you first reach out to… APCO?
A: I did not reach out to them.
Q: Did they reach out to you?
A: Multiple agencies always – they come around all the
time.
(Jan. 10, 2018, Rosario Dep. 177:4-9, Ex. A to DSOF.)
But Mirra
testified that the opposite was true:
Q: Well, you solicited JCR-Wesley Chapel.
A: I didn’t solicit anybody. Jay [Rosario] called me.
…
Q: Did you ever solicit JCR-Wesley Chapel to come work
or do business with APCO while they were under contract
with American Guardian?
A: No.
(June 19, 2019, Mirra Dep. 64:13-24, Ex. L to DSOF.) Thus, there
is an issue of fact regarding whether the Dealership or APCO
initiated this relationship, and why.
There is a further issue of material facts on the causation
question. A sub-plot running through this case—and the subject of
a former counterclaim that has since been dismissed since the
Dealership
Defendants
settled—was
the
Dealership
Defendants’
contention that in 2013, at the beginning of their contractual
8
relationship, American Guardian promised to set up a reinsurance
company for JCR-Wesley Chapel, LLC. The reinsurance company would
allow JCR to retain the warranty payments paid by customers with
American Guardian contracts and earn investment income on them.
Several years passed and the reinsurance company still had not
been established (the parties dispute whether this was American
Guardian’s or the Dealership Defendants’ fault). However, Falcon,
the
Dealership’s
general
manager,
did
ultimately
set
up
the
reinsurance company with American Guardian in the spring of 2016.
And Falcon’s deposition testimony on this subject indicates that
Rosario had not made up his mind at that point about whether to
breach the American Guardian agreement:
Q: In April and May [of 2016], we’ve established that
you went ahead and spoke with people at [AGW], received
documentation and started and actually formed a
reinsurance company ultimately, didn’t you?
A: Yes.
Q: And did you do all the—did you do that all the time
knowing you planned to go to a different—a competitor?
A: No.
(Jan. 24, 2018, Falcon Dep. 76:18-77:3, Ex. 9 to PSOAF.) This
testimony
suggests
facts
in
dispute
regarding
whether
the
Dealership planned to breach its agreement with American Guardian
prior to April or May of 2016.
Additionally, emails from Mirra to Rosario in September of
2016 indicate that Mirra believed Rosario had not yet made up his
mind about what to do about the American Guardian contract. On
9
September 7, 2016, Mirra sent Rosario and Falcon an email that
read, in part:
I have been giving a bunch of though[t] on this AGW
contract and your potential liability if worst case
scenario happens. The fact is you have made zero off
this relationship thus far, other than paying off your
loan and doing a direct write, that has only benefited
AGW. … The point of this is all to show that even if
worst case scenario happens you would still be able to
pay the fine and have more money than you ever did with
them. There comes a point when severing toxic business
relationship is the only option.
(PSOAF ¶ 26 (emphasis added).) The italicized portions of the above
email appear to show Mirra encouraging or persuading Rosario to
breach the American Guardian contract. Mirra would not need to
convince Rosario to breach the agreement if Rosario had already
decided to do so months before.
On September 20, 2016, Mirra sent a follow-up email to Rosario
that further indicates an attempt to convince him to breach the
American Guardian contract:
Jay I have a meeting tomorrow morning and I did not hear
back from you what your intentions are? I want you to
know I will still look out for you no matter what. That
being said, regardless the outcome of any litigation
look at the proforma I sent you. You are getting a
million bucks interest free!!! Plus a real offshore
position that will net you millions. You can invest this
free money however you wish. Worst case you could still
pay off whatever settlement if any you are hit with. I
would never steer you wrong, your [sic] my friend to
till the end, I hope you know that. I just don’t want
this to pass you.
(PSOAF ¶ 27 (emphasis added).) Again, such an email would not be
necessary
if
Rosario
had
already
10
decided
to
terminate
the
Dealership’s relationship with American Guardian. Mirra’s emails
undercut APCO’s assertion that “Rosario had already determined
[the
Dealership’s]
future
business
relations
with
American
Guardian would end.” (Def.’s Mot. at 10, Dkt. No. 185.) And the
fact that the Dealership ended up signing with APCO may also be
indicative of causation—perhaps Rosario was not sure he was going
to leave American Guardian until APCO offered him a specific deal.
Ultimately, the causation question at issue in this case turns on
weighing conflicting testimony between Rosario, Falcon, and Mirra.
And
summary
judgment
is
“notoriously
inappropriate
for
determination of claims in which issues of intent, good faith and
other subjective feelings play dominant roles.” Stumph v. Thomas
& Skinner, Inc., 770 F.2d 93, 97 (7th Cir. 1985) (citing Pfizer,
Inc. v. Internat’l Rectifier Corp., 538 F.2d 180, 185 (8th Cir.
1976)). There is sufficient evidence in the record for a reasonable
jury to conclude that APCO caused Rosario’s decision to breach the
Dealership’s contract with American Guardian. Therefore, this is
a question of fact best left for the jury.
B. Intent
Next, APCO contends that American Guardian cannot establish
that APCO intended to prevent the Dealership from performing its
contract with American Guardian—another required element in both
tortious interference in contract and business relations. Intent
to induce requires “some active persuasion, encouragement, or
11
inciting that goes beyond merely providing information in a passive
way.” Webb v. Frawley, 906 F.3d 569, 579 (7th Cir. 2018) (citing
In
re
Estate
of
Albergo,
656
N.E.2d
97,
103
(Ill.
1995);
Restatement (Second) of Torts § 766 cmt. h (“The essential thing
is the intent to cause the result. If the actor does not have this
intent, his conduct does not subject him to liability under this
rule even if it has the unintended effect of deterring the third
person from dealing with the other.”)).
There is sufficient evidence to allow a reasonable jury to
find APCO had the requisite intent in this case. On the day Mirra
received
a
copy
of
the
Dealership’s
contract
with
American
Guardian, he sent a copy of that contract to two APCO executives,
along with an email that read:
Good morning Gents. I have a signed copy of Jay’s
agreement with AGW[]. I hope we can identify some “outs.”
In addition if we can point out any breach of contract
on the part of AGW[]. Any help would sure be appreciated
at this point. Thanks in advance guys.
(PSOAF ¶ 23.) APCO’s desire to identify breaches, or “outs,” in
the
Dealership’s
contract
with
American
Guardian
indicates
a
desire to deter the Dealership from completing that contract.
Moreover, Mirra’s two September 2016 emails to Rosario further
support the intent element. Mirra told Rosario that he had made
“zero off this relationship” with American Guardian, and “[t]here
comes a point when severing toxic business relationship is the
only option.” (PSOAF ¶ 26.) Mirra then went on to tell Rosario
12
that if he signed with APCO, Rosario would “[get] a million bucks
interest free!!! … You can invest this free money however you wish.
Worst case you could still pay off whatever settlement if any you
are hit with.” (PSOAF ¶ 27.) This email is certainly suggestive of
an intent to induce a breach. Therefore, there remains a genuine
issue of
material
fact
regarding
APCO’s
intent
to
cause
the
Dealership’s breach.
A final note about the elements of these torts. APCO appears
to argue, in its response to American Guardian’s statement of
additional facts, that the contract between American Guardian and
the Dealership was invalid in the first instance—or at least, that
the contract did not mean what it said. In APCO’s response to
American Guardian’s Statement of Additional Facts, APCO labeled
any fact related to the terms of American Guardian’s contracts
with the Dealership as “disputed.” (PSOAF ¶¶ 5, 7, 14, 30-31.) The
basis of this “dispute” is APCO’s assertion that the Dealership
could never have agreed to sell 95% of warranties through American
Guardian,
Dealership
as
required
was
by
the
simultaneously
Dealer
Agreement,
obligated
to
sell
because
the
25%
its
of
warranties through Nissan. (Id.) See for example APCO’s response
to American Guardian’s paragraph 14:
At that time of the additional proposals, JCR was still
under the exclusive December 15, 2015 Dealer Agreement,
which was never terminated or rescinded.
13
RESPONSE: Disputed. Selling AGW products exclusively
during the AGW contract term was not possible because
25%
of
the
warranties
JCR
was
obligated
to
simultaneously sell were Nissan. Rosario discussed this
fact with AGW and AGW did not object.
(PSOAF ¶ 14.)
Thus, it appears APCO is arguing that American Guardian cannot
establish the first element of both tortious interference with
contract: an existing contract between American Guardian and the
Dealership.
However,
“opinion,
suggested
inferences,
legal
arguments and conclusions are not the proper subject matter” of a
Local Rule 56.1 statement. Phillips v. Quality Terminal Servs.,
LLC, 855 F. Supp. 2d 764, 771 (N.D. Ill. 2012) (citation omitted).
Fact statements are designed to “assist the court by organizing
the
evidence,
identifying
undisputed
facts,
and
demonstrating
precisely how each side propose[s] to prove a disputed fact with
admissible evidence.”
Markham v. White, 172 F.3d 486, 490 (7th
Cir. 1999). Burying this argument in a response to a statement of
material facts is an inappropriate use of a fact statement and is
insufficient to brief the issue for the Court’s consideration.
Therefore, to the extent APCO intended to make this argument at
summary judgment, it is waived. United Cent. Bank v. Davenport
Estate LLC, 815 F.3d 315, 318 (7th Cir. 2016) (“perfunctory and
undeveloped” arguments are waived).
14
C. “Industry Practice”
Finally,
APCO
argues
that
American
Guardian
engages
in
precisely the same behavior that American Guardian claims to be
tortious
in
this
case.
APCO
argues
that
warranty
providers,
American Guardian included, routinely call on dealerships that are
already in exclusive sales agreements in an attempt to win their
business. APCO can rest assured that an outcome for the Plaintiffs
in this case would not put the general industry practice in sales
of soliciting new clients at risk. This litigation concerns only
the specific acts of APCO’s employees and whether those actions
crossed the line from routine salesmanship and persuasion into
inducing contract breach.
IV.
CONCLUSION
Defendant’s Motion for Summary Judgment (Dkt. No. 184) is
denied. This case will proceed to trial on March 2, 2020.
IT IS SO ORDERED.
Harry D. Leinenweber, Judge
United States District Court
Dated: 11/19/2019
15
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