FDIC v. Urban Partnership Bank et al
Filing
67
MEMORANDUM Opinion and Order Signed by the Honorable John Robert Blakey on 1/22/2018. Mailed notice(gel, )
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
FDIC AS RECEIVER FOR SEAWAY
BANK AND TRUST COMPANY,
Plaintiff,
Case No. 17-cv-01517
v.
Judge John Robert Blakey
URBAN PARTNERSHIP BANK,
Defendant.
URBAN PARTNERSHIP BANK,
Third-Party Plaintiff,
v.
FIRST FINANCIAL NETWORK, INC.,
Third-Party Defendant.
MEMORANDUM OPINION AND ORDER
Third-Party Plaintiff Urban Partnership Bank (Urban) sued Third-Party
Defendant First Financial Network, Inc. (FFN) for breach of contract and failure to
indemnify.
[36].
Urban alleges that FFN breached its contract to manage the
online auction of distressed loans, resulting in the underlying suit by the Federal
Deposit Insurance Corporation (FDIC) when the sale of those loans fell through. Id.
FFN moves to dismiss Urban’s third-party complaint on the grounds that Urban
cannot show damages and is not entitled to indemnification. [41]. For the reasons
explained below, this Court partially grants and partially denies FFN’s motion.
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I.
Background
A.
Materials
This Court draws facts from the amended complaint, [36], and the exhibits
attached to it, see Thompson v. Ill. Dep’t of Prof’l Reg., 300 F.3d 750, 753 (7th Cir.
2002). Here, this Court may also consider the exhibit attached to FFN’s motion to
dismiss, [65], without converting the motion to one for summary judgment, as
discussed below. See Levenstein v. Salafsky, 164 F.3d 345, 347 (7th Cir. 1998).
B.
Factual Allegations
Urban formed in August 2010 to purchase certain assets of a failed bank from
the FDIC.
[36] ¶ 5.
These assets included a number of “non-performing or
otherwise distressed” loans that Urban bought while entering a “loss share”
agreement with the FDIC, which would shoulder certain losses arising from these
loans. Id. ¶¶ 5, 6. When a number of the loans continued experiencing losses,
Urban decided to sell off a portfolio of some of the loans. Id. ¶ 7. Urban hired FFN
as a financial advisor to manage the sale of the portfolio because of FFN’s “history
and experience” selling loans and assets and its familiarity with FDIC policies,
since the FDIC had to approve the sale. Id. ¶¶ 7–9.
In the summer of 2015, Urban and FFN developed a proposal for the FDIC on
the planned sale of the loan portfolio. Id. ¶ 10. FFN drafted the proposal, which
detailed FFN’s relevant experience and the proposed sale process. Id. ¶¶ 11–14.
The FDIC approved the sale in September 2015. Id. ¶ 15–16. In October, Urban
and FFN entered a Loan Sale Engagement Agreement (LSEA), which made FFN
Urban’s exclusive advisor in the sale, granted FFN the exclusive right to market
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and sell the portfolio for a specified period, and committed FFN to various tasks
relating to the sale, including managing the online auction for the portfolio. Id. ¶¶
17–19. FFN’s alleged breach of the LSEA forms the basis of Urban’s third-party
complaint.
The LSEA required FFN to prepare various legal documents for the auction,
including the loan sale agreement (LSA), and additional terms and conditions of
sale. Id. ¶ 19. FFN also had to analyze all the bids received for the portfolio using
its proprietary Bid Optimization Model and provide “bid day reports” to UPB. Id.
The bid analysis was to include a detailed assessment of “all phases of the sale.” Id.
¶¶ 13, 26.
Beginning October 14, 2015, interested buyers previously vetted and
approved by FFN could visit FFN’s website and access information about the
portfolio, including the terms and conditions of sale. Id. ¶¶ 20–22. On October 15,
FFN told Urban that it wanted to amend the terms and conditions of sale by adding
a requirement that bidders submit a servicing plan explaining “how loan payments
will be collected and administered after the servicing transfer date” if the bidder
won. Id. ¶ 23. Urban accepted the recommendation; on October 22, FFN posted the
updated terms and conditions online and notified eligible bidders of the change. Id.
¶¶ 27–29.
Under the terms and conditions, bidders had to submit both the
servicing plans and the actual bids to FFN. Id. ¶¶ 23, 30. The terms and conditions
also provided that the terms of sale—set out in the loan sale agreement (LSA)—
were non-negotiable. Id. ¶ 32.
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FFN drafted the LSA and posted it online on October 30. Id. ¶¶ 33–34. The
LSA contained several provisions relating to the “servicing transfer date,” meaning
the date when the responsibilities for servicing the loans would transfer from Urban
to the purchaser. Id. ¶¶ 31, 36–37. The LSA distinguished between loans governed
by the Real Estate Settlement Procedures Act (RESPA), and those not subject to
RESPA. Id. ¶¶ 37–39. The servicing transfer date for non-RESPA loans was the
date of the sale’s closing, December 11, 2015. Id. ¶ 38. Urban’s servicing of RESPA
loans was also to cease on the closing date, except as required by law. Id. ¶ 39.
Reading the LSA and RESPA together, this meant that Urban would transfer all
servicing to the buyer on December 26 (i.e., 15 days after the closing). Id. ¶¶ 39–40.
At one point Urban asked FFN if the LSA was clear enough for bidders to ascertain
the servicing transfer date; FFN’s counsel recommended leaving the provisions as
they stood, and Urban acquiesced. Id. ¶¶ 42–44.
The deadline for bids was November 17, 2015. Id. ¶ 45. Seaway Bank and
Trust Company (Seaway), an Illinois bank, registered as a bidder on October 16,
and at some point before the deadline asked FFN to waive the requirement that
Seaway submit a servicing plan with its bid. Id. ¶¶ 47–50. FFN declined, but said
that Seaway could submit the servicing plan the day after the bid deadline. Id. ¶
51. On November 17, Seaway submitted its bid and an initial deposit of $100,000 to
FFN. Id. ¶¶ 52–58. It submitted a servicing plan the next day, as agreed with
FFN. Id. ¶ 59.
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When the bidding closed, FFN gave Urban its bid analysis of all the offers for
the portfolio, based upon which Urban decided to accept Seaway’s bid. Id. ¶¶ 63–
65. The bid analysis did not raise any issue relating to Seaway’s servicing plan. Id.
¶ 64. FFN notified Seaway of its successful bid and released all other bids. Id. ¶¶
66–67. On November 24, 2015, Seaway wired FFN its final deposit. Id. ¶ 68.
On December 4, Seaway told FFN that it could not service the loans until at
least 120 days after the December 11 closing date—contrary to the provisions of the
LSA. Id. ¶¶ 40, 69, 78. Urban alleges that up to this point, FFN had not reviewed
or vetted Seaway’s servicing plan. Id. ¶¶ 70–71. Urban also claims that if it had
known about Seaway’s purported change to the servicing transfer date, it would not
have accepted Seaway’s bid. Id. ¶ 76.
On the closing date, December 11, Seaway did not pay the balance of the
purchase price, as required by the initial terms and conditions and the LSA. Id. ¶
81. FFN and Urban determined that Seaway had defaulted on the sale agreements,
which, under the LSA, entitled Urban to keep Seaway’s deposits as a remedy. Id.
¶¶ 82–84. FFN transferred Seaway’s deposits to Urban. Id. ¶ 85.
In early 2016, Seaway sued Urban and FFN in Cook County Circuit Court for
the return of its deposits. Id. ¶ 86; see also ¶ 33 (describing exhibits filed in state
case in May 2016). Seaway sued based in part upon the theory that Urban could
not hold the deposits based upon the LSA, since Urban and Seaway never had a
meeting of the minds, and thus no enforceable contract existed. Id. Specifically,
Seaway alleged that the LSA did not specify a servicing transfer date of December
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26, 2015, and that its own servicing plan put Urban and FFN on notice that
Seaway’s agent could not service the loans until at least 120 days after the
December 11 closing. Id. ¶ 87.
On January 27, 2017, the Illinois Department of Financial and Professional
Regulation’s Banking Division closed Seaway and appointed the FDIC as Seaway’s
receiver. Id. ¶ 88. On February 27, the FDIC substituted as plaintiff in Seaway’s
state court action and immediately removed the case here. Id. ¶¶ 89–90. On March
1, the FDIC voluntarily dismissed its claims against FFN. Id. ¶ 91. On March 10,
Urban sent FFN a demand for defense and indemnification, which FFN denied.
[65]. Urban filed a third-party complaint against FFN in April, [13], which it
amended in July, [36]. FFN moved to dismiss. [41].
II.
Legal Standard
A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6)
“challenges the sufficiency of the complaint for failure to state a claim upon which
relief may be granted.” Gen. Elec. Capital Corp. v. Lease Resolution Corp., 128 F.3d
1074, 1080 (7th Cir. 1997). A motion to dismiss does not generally reach questions
of fact. See Int’l Mktg., Ltd. v. Archer-Daniels-Midland Co., Inc., 192 F.3d 724, 729–
30 (7th Cir. 1999); but see Levenstein, 164 F.3d at 347 (7th Cir. 1998) (documents
attached to a motion to dismiss may be considered under certain circumstances). To
survive a motion to dismiss, a complaint must provide a “short and plain statement
of the claim showing that the pleader is entitled to relief,” Fed. R. Civ. P. 8(a)(2),
giving the defendant “fair notice” of the claim “and the grounds upon which it rests.”
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355
6
U.S. 41, 47 (1957)). A complaint must allege “sufficient factual matter” to “state a
claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009) (quoting Twombly, 550 U.S. at 570). A claim has facial plausibility “when
the pleaded factual content allows the court to draw the reasonable inference that
the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678 (citing
Twombly, 550 U.S. at 556).
In evaluating a complaint, this Court draws all
reasonable inferences in the plaintiff’s favor and accepts all well-pleaded allegations
as true. Id. The Court need not, however, accept legal conclusions or conclusory
allegations. McCauley v. City of Chicago, 671 F.3d 611, 616 (7th Cir. 2011).
III.
Analysis
FFN seeks to dismiss Urban’s third-party complaint on the grounds that
Urban has not established the damages element of its breach of contract claim
(Count I), and is not entitled to be indemnified or defended by FFN (Count II). [41,
43]. This Court addresses each of Urban’s claims in turn.
A.
Count I: Breach of Contract
Urban first alleges that FFN breached the LSEA, resulting in damages from
the failure of the portfolio auction (Count I). [36] ¶¶ 92–104. The LSEA contains a
choice-of-law provision providing that it is governed by Oklahoma law. [36] at 36
(LSEA § 23(b)).
This Court upholds contractual choice-of-law clauses where
applying the chosen body of law does not contravene any “fundamental Illinois
public policy,” and where the chosen forum has “some relationship” with “the
parties or the transaction at issue.” Amakua Dev. LLC v. Warner, 411 F. Supp. 2d
941, 951 (N.D. Ill. 2006) (internal quotation marks omitted). Because this case
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presents a relatively simple claim that FFN did not fulfill its contractual
obligations, and Illinois and Oklahoma place similar emphasis on giving contract
terms their plain meaning, compare Am. Biomedical Grp., Inc. v. Techtrol, Inc., 374
P.3d 820, 826 (Okla. 2016), with Dean Mgmt., Inc. v. TBS Const., Inc., 790 N.E.2d
934, 939 (Ill. App. Ct. 2003), nothing in the record or relevant law suggests that
applying Oklahoma law would offend Illinois public policy, see Amakua, 411 F.
Supp. 2d at 951. Additionally, given that FFN is an Oklahoma corporation, [36] ¶ 2,
the selection of Oklahoma law is not so arbitrary as to justify overturning the freely
negotiated choice-of-law clause in the LSEA, see id. at 951–52.
Accordingly,
Oklahoma law governs this dispute.
Under Oklahoma law, a plaintiff alleging a breach of contract must show the
“formation of a contract; a breach of that contract; and actual damages suffered
from that breach.” Oltman Homes, Inc. v. Mirkes, 190 P.3d 1182, 1185 (Okla. App.
Ct. 2008). Oklahoma courts have also held that “uncertainty as to the amount of
damages does not prevent recovery, and where it clearly appears that loss of profits
to a business had been suffered, it is proper to let the jury determine what the loss
probably was.” Ferrell Const. Co., Inc. v. Russell Creek Coal Co., 645 P.2d 1005,
1010 (Okla. 1982) (internal quotation marks omitted). FFN contends that Urban
cannot establish actual damages as a result of any alleged breach of contract, and
therefore fails to state a claim. [43] at 9–13. It argues first, that Urban cannot
show that it has suffered or will suffer damages from any breach of the LSEA, and
second, that the LSEA’s limitation-of-liability provision forecloses any damages. Id.
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This Court finds that Urban’s allegations sufficiently show damages to
survive FFN’s motion to dismiss. Rule 8 does not require “that a plaintiff plead
damages with particularity.” Williams v. Sabin, 884 F. Supp. 294, 296 (N.D. Ill.
1995); Fed. R. Civ. P. 8(a)(3). Damage theories may be pled generally or in the
alternative, and developed through discovery. Williams, 884 F. Supp. at 296; Fed.
R. Civ. P. 8(a)(3). Additionally, this Court draws all reasonable inferences in the
plaintiff’s favor on a motion to dismiss, including inferences relating to damages.
See Centerline Equip. Corp. v. Banner Personnel Serv., Inc., 545 F. Supp. 2d 768,
779 (N.D. Ill. 2008). Whether Urban has sufficient evidence to support a claim for
damages is a question for summary judgment. See Allen v. Schnuck Mkts., Inc., No.
15-cv-0061-MJR-DGW, 2015 WL 5076966, at *3 (S.D. Ill. Aug. 27, 2015) (citing
Carlson v. CSX Transp., Inc., 758 F.3d 819, 827 (7th Cir. 2014)).
Here, Plaintiff alleges that FFN failed to fulfill its obligations under the
LSEA, and as a result, the portfolio sale and the sale agreement with Seaway fell
through. [36] ¶ 102–04. Should this Court ultimately find that no valid agreement
existed between Urban and Seaway, Urban alleges that its attendant loss of
Seaway’s deposits will cost of “millions of dollars.” Id. ¶ 104. Additionally, Urban
seeks any amount that would compensate Urban “for its actual losses.” Id. At
present, this Court may readily infer that those losses include the lost opportunity
to sell the portfolio to another bidder, see id. ¶¶ 67, 76–77, and the costs of
maintaining responsibility for the distressed loans in the portfolio, including
servicing costs, see id. ¶¶ 7, 23, 31. Urban sufficiently pleads such damages to put
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FFN on notice that Urban seeks compensation for the economic losses stemming
from the failed portfolio sale. This showing satisfies Rule 8. See Allen, 2015 WL
5076966, at *3.
Even if Urban only claimed damages for the loss of Seaway’s deposits—which
is not the case, as noted above—that loss is not “illusory,” as FFN argues. [43] at
13. In Oklahoma, parties claiming breach of contract may generally recover any
damages that “would naturally and generally result from the breach according to
the usual course of things.” Florafax Int’l Inc. v. GTE Mkt. Res., Inc., 933 P.2d 282,
292 (Okla. 1997); see also Okla. Stat. tit. 23, § 21. In following this rule, Oklahoma
courts expressly embrace the general principle of Hadley v. Baxendale, (1854) 156
Eng. Rep. 145, that damages for breach of contract are those that flow naturally
from the breach, or that fall within the contemplation of the parties. See Florafax,
933 P.2d at 292.
Hadley’s definition, enshrined in Oklahoma’s damages statute, encompasses
both direct and consequential damages (a relevant distinction under the LSEA,
discussed next); but here, the loss of deposits, whether a direct or consequential
damage, certainly flows naturally from FFN’s alleged breach. See id. FFN’s alleged
breach of the LSEA caused the failed agreement between Seaway and Urban. If
Urban lost the deposits in addition to losing the planned portfolio sale, that loss
would likewise be attributable to the breach: FFN’s failure to secure a meeting of
the minds between Seaway and Urban plausibly breached the LSEA, causing the
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loss of the deposits. Nor does FFN offer any authority to the contrary. [43] at 11–
13; [45] at 2–3.
In short, had FFN fully performed its obligations under the LSEA, Urban
and Seaway would have had an enforceable contract; Urban would either have sold
the portfolio or been entitled to keep the deposits upon Seaway’s default. Allegedly,
FFN’s breach foreclosed both outcomes, either of which could serve as a measure of
Urban’s damages. See Florafax, 933 P.2d at 292 (loss of expected monetary gain is
recoverable); Sun Ridge Investors, Ltd. v. Parker, 956 P.2d 876, 878 (Okla. 1998)
(“The measure of damages for breach of contract is the amount that would place the
aggrieved party in the position he would have occupied had the breach not
occurred.”).
Finally, FFN argues that Urban fails to plead facts surmounting the LSEA’s
limitation on FFN’s liability. [43] at 13–15. The LSEA excludes claims for lost
profits, or “special, incidental, indirect or consequential damages arising out of or in
connection with this agreement or the subject matter hereof.” [36] at 32 (LSEA §
17). This limitation does not apply to direct damages or damages resulting from
gross negligence.
Id.
FFN contends that Urban’s damages are entirely
consequential (indirect), and that Urban insufficiently pleads gross negligence,
making any relief a legal impossibility. [43] at 14–15. This Court disagrees.
First, this Court already found that Urban plausibly alleges direct damages
from any breach of the LSEA, including the costs of maintaining the distressed
loans in the unsold portfolio. See [36] ¶¶ 7, 23, 31. The LSEA does not limit such
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damages. Second, even if the bulk of Urban’s damages are consequential, Urban
adequately pleads gross negligence such that any claims for consequential damages
remain viable at this stage.
In Oklahoma, gross negligence means the “want of slight care and diligence.”
Okla. Stat. tit. 25, § 6. “Slight care or diligence” refers to that which “persons of
ordinary prudence usually exercise about their own affairs of slight importance.”
State ex rel. Okla. Bar Ass’n v. Braswell, 663 P.2d 1228, 1232 (Okla. 1983); Okla.
Stat. tit. 25, § 4.
The parties spend some time in their briefs arguing whether the Oklahoma
Supreme Court requires an intentional act to show gross negligence, citing Fox v.
Okla. Mem. Hosp., 774 P.2d 459 (Okla. 1989). The court in that case stated:
The question is whether the negligence of the hospital physicians and
staff was either so flagrant, so deliberate, or so reckless that it is
removed from the realm of mere negligence. The intentional failure to
perform a manifest duty in reckless disregard of the consequences or in
callous indifference to the life, liberty or property of another, may
result in such a gross want of care for the rights of others and of the
public that the finding of a wilful [sic], wanton, deliberate act is
justified.
Id. at 461 (emphasis added).
This Court interprets the phrase “intentional failure” as an illustration of the
level of negligence necessary to remove a case “from the realm of mere negligence,”
id., not as a requirement of an intentional act. In context, the Oklahoma Supreme
Court evidently sought to identify conduct of such recklessness or deliberate
indifference as to distinguish it from mere negligence. Id.; see also NMP Corp. v.
Parametric Tech. Corp., 958 F. Supp. 1536, 1546 (N.D. Okla. 1997) (Gross
12
negligence is “the same as a negligence claim, differing only as to the degree.”).
Indeed, Fox itself found that the plaintiff presented a plausible claim for gross
negligence by claiming that surgeons failed to “adequately inspect his open
abdomen” where they accidentally sealed in a six-and-a-half inch clamp. 774 P.2d
at 460, 462. The court found such conduct plausibly willful and wanton, while
leaving the final resolution of that issue as a question of fact for trial. Id. at 462.
Failing to properly inspect a surgery patient—much like failing to properly vet an
auction bid—may not be “intentional,” yet it could suffice to constitute gross
negligence.
See id.
Thus, Oklahoma courts examine the magnitude of the
negligence rather than require specific actions to be alleged. Other courts applying
Fox have likewise noted that a number of paths lead to “gross negligence,” including
recklessness. See Redd v. Big Dog Holding Co., LLC, No. Civ-15-263-c, 2016 WL
6956650, at *2 (W.D. Okla. Nov. 28, 2016) (to be grossly negligent, defendant’s
conduct must be “so flagrant, so deliberate or so reckless that it is removed from the
realm of mere negligence”) (emphasis added) (quoting Fox, 774 P.2d at 461).
Here, Plaintiff alleges both that FFN failed to adequately draft the LSA and
that FFN failed to even read Seaway’s servicing plan before giving Urban the bid
analysis. [36] ¶¶ 42–44, 70–74. Because the LSEA obligated FFN to evaluate the
bids fully, including all aspects of the sale, its failure to review these documents
may constitute gross negligence.
See Braswell, 663 P.2d at 1228 (under “mere
preponderance” standard, lawyer’s failure to keep track of case such that statute of
limitations on claim expired would constitute gross negligence). Moreover, FFN’s
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degree of negligence presents a question of fact inappropriate for resolution at this
stage. Fox, 774 P.2d at 462. For now, Urban plausibly alleges gross negligence by
FFN, and its claims for consequential relief remain viable. This Court denies FFN’s
motion to dismiss as to Count I.
B.
Count II: Indemnification
Count II of Urban’s third-party complaint alleges that FFN breached the
LSEA by failing to indemnify and defend Urban in the FDIC’s suit. [36] ¶¶ 105–08.
FFN argues that the LSEA does not require it to indemnify or defend Urban. [43]
at 13. The LSEA obligates FFN to “defend, indemnify and hold harmless” Urban in
any suits: (i) arising from the “action or inaction” of FFN; (ii) incurred as a result of
gross negligence, misconduct, or any breach of contract by FFN; (iii) alleging that
any of FFN’s work infringed on intellectual property; or (iv) for personal injury or
property damage resulting from FFN’s “grossly negligent or intentional acts.” [36]
at 30–31 (LSEA § 16(a)). FFN contends that this suit did not arise from its action
or inaction; that Urban does not allege gross negligence; and in the alternative that
Urban’s demand for indemnification and defense was untimely. [43] at 16, 17. This
Court need not address FFN’s first two arguments since it finds that Urban’s claim
for indemnification was untimely.
The LSEA requires the party seeking indemnification to notify the
indemnifying party “within ten (10) business days from receipt of notice of such suit
or claim which involves indemnification obligations of the other party.” [36] at 31
(LSEA § 16(c)(i)). Seaway brought its initial case against Urban and FFN in early
2016. See, e.g., [36] ¶ 33. The FDIC removed the case on February 27, 2017. Id. ¶¶
14
89–90.
According to the letter submitted as an exhibit with FFN’s motion to
dismiss, Urban did not demand indemnification until March 10, 2017, well beyond
ten days from the date of either suit. See [65]. 1 Because FFN attached the demand
letter to its motion to dismiss, this Court ordinarily could not consider it without
converting the motion into one for summary judgment. See Levenstein, 164 F.3d at
347. Here, however, the letter falls within an exception to that rule.
Generally, a court ruling on a motion to dismiss may consider only consider
the plaintiff’s complaint and any documents attached to it. See id. But one “narrow
exception” exists. Id. Documents attached to a motion to dismiss “are considered
part of the pleadings if they are referred to in the plaintiff’s complaint and are
central to his claim.” Wright v. Associated Ins. Cos., Inc., 29 F.3d 1244, 1248 (7th
Cir. 1994). Courts may consider such documents on a motion to dismiss without
converting it to a motion for summary judgment. Id.; see also Levenstein, 164 F.3d
at 347; Venture Assocs. Corp. v. Zenith Data Sys. Corp., 987 F.2d 429, 431–32 (7th
Cir. 1993). This exception (also followed in other circuits) prevents a plaintiff from
escaping dismissal “simply by failing to attach to his complaint a document that
proved his claim had no merit.” See Tierney v. Vahle, 304 F.3d 734, 738 (7th Cir.
2002). The classic scenario warranting an exception are “cases interpreting, for
example, a contract.” Levenstein, 164 F.3d at 347. Even though the Seventh Circuit
has not yet defined its exact scope, the exception clearly does not apply if the
Originally, FFN did not properly attach the demand letter to its memorandum supporting its
motion to dismiss, see [43], but FFN later filed the letter properly, [65]. That delay does not alter
this Court’s analysis.
1
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exhibit’s authenticity is in question, or where discovery would be required to
“authenticate or disambiguate” it. Tierney, 304 F.3d at 739.
Here, Urban’s complaint states that “Urban demanded that FFN indemnify
and defend it against” the FDIC’s claims, and FFN refused to do so. [36] ¶¶ 107,
108. This allegation clearly refers to the demand letter that FFN now seeks to
submit. Further, the letter remains central to Urban’s claim: an element of this
breach of contract claim is that there was, in fact, a breach. See Oltman Homes, 190
P.3d at 1185 (elements of breach of contract); see also Elward v. Electrolux Home
Prod., Inc., 264 F. Supp. 3d 877, 886 (N.D. Ill. 2017) (exception warranted where
attachments concern “the elements of plaintiff’s claim”). The demand letter shows
conclusively that Urban’s request for indemnification and defense was untimely,
and FFN therefore committed no breach in denying it.
Finally, there is no question as to the demand letter’s authenticity. Urban
concedes its legitimacy, acknowledging in its response brief that it sent FFN the
demand letter on March 10, 2017.
See [44] at 14, 15; see also Steigmann v.
Democratic Party of Ill., 406 F. Supp. 975, 986 (N.D. Ill. 2005) (“Plaintiff cannot get
a free pass to get beyond a motion to dismiss by simply failing to attach documents
(that he effectively concedes are accurate) to the Complaint where the Complaint
refers to those documents and those documents are central to his claim.”) (citing
Venture Assocs., 987 F.2d at 431). Accordingly, this Court may consider the demand
letter attached to FFN’s motion to dismiss without converting FFN’s motion to
dismiss to a motion for summary judgment. See Levenstein, 164 F.3d at 347.
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With the demand letter properly before this Court, Count II must be
dismissed. The LSEA clearly states that the parties must demand indemnification
“within ten (10) business days from receipt of notice of such suit or claim which
involves indemnification obligations of the other party.” [36] at 31 (LSEA § 16(c)(i)).
Urban offers no authority as to why this Court should consider the FDIC’s claim a
distinct “suit or claim” from Seaway’s original suit, filed back in 2016. Even if the
“suit or claim” at issue constituted the FDIC’s suit, the FDIC became the plaintiff in
the underlying suit against Urban and removed this case to federal court on
February 27, 2017. [36] ¶¶ 89–90. Urban untimely demanded indemnification on
March 10, more than ten days after February 27.
Rather than contesting the validity of the demand letter, Urban argues that
the LSEA’s purpose was fulfilled because FFN had notice of the FDIC’s claim,
having been Urban’s co-defendant until March 1, 2017. [44] at 14. But the LSEA’s
indemnification provision does not include an exception for situations where the
indemnifying party is not prejudiced, or is a co-defendant, or is otherwise on notice
of the suit.
See [36] at 30–32.
Under the “plain meaning” of the LSEA, Am.
Biomedical Grp., 374 P.3d at 826, Urban had to make its demand for
indemnification—at a minimum—within ten days of the initiation of the FDIC’s
suit on February 27. It did not do so, and FFN therefore did not breach the LSEA
by refusing to indemnify and defend Urban. This Court grants FFN’s motion to
dismiss Count II.
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IV.
Conclusion
This Court partially grants and partially denies FFN’s motion to dismiss,
[41]. This Court denies the motion for Count I of Urban’s third-party complaint and
grants it for Count II.
Dated: January 22, 2018
Entered:
____________________________
John Robert Blakey
United States District Judge
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