Bryton Properties LLC, Rockwell Series v. Cudnik
OPINION and ORDER: Cudnik's motion to stay (dkt. 10 ) is granted. The parties shall file a joint status report by December 31, 2020, or within seven days after the state court rules on whether Kids' Work breached the lease, whichever comes first. Status hearing set for 11/17/2020 is stricken. Signed by the Honorable Joan H. Lefkow on 11/16/2020. Mailed notice (ags)
Case: 1:20-cv-03686 Document #: 18 Filed: 11/16/20 Page 1 of 10 PageID #:376
IN THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF ILLINOIS
BRYTON PROPERTIES LLC,
) Case No. 20 C 3686
) Judge Joan H. Lefkow
OPINION AND ORDER
Bryton Properties LLC, Rockwell Series (“Bryton”) has filed suit against Sarah Cudnik
for an alleged breach of her guaranty of a lease between Bryton and Kids’ Work Chicago, Inc.
(Dkt. 1.) In a concurrent proceeding in state court, Bryton seeks possession of the property and
rental payments due under the lease. (Dkt. 10-1 at 187.) Cudnik now moves for a stay of this
federal proceeding under the Colorado River abstention doctrine. (Dkt. 10.) For the reasons
stated below, the motion to stay is granted. 1
In 2011, Kids’ Work entered into a lease with Bryton to operate a child-care business in
Chicago. (Dkt. 1 ¶ 9.) Cudnik, President of Kids’ Work, executed a personal guaranty of the
lease. (Id. ¶ 10.) In March 2020, due to the pandemic known as COVID-19, the Governor of
Illinois issued a “Stay-at-Home Order,” preventing schools from meeting in-person. (Id.) Kids’
Work had to suspend all operations until May, when it reopened with limited capacity. (Id. at 9.)
The court has jurisdiction under 28 U.S.C. § 1332(a) because complete diversity exists and the
amount in controversy exceeds $75,000, and venue is proper under 28 U.S.C. § 1391 because the events
giving rise to Bryton’s claims occurred in this district.
Case: 1:20-cv-03686 Document #: 18 Filed: 11/16/20 Page 2 of 10 PageID #:377
Having lost its revenue stream, Kids’ Work failed to pay Bryton the full amount due under the
lease. (Dkt. 10-1 Exh. 3.)
In June 2020, Bryton filed an action in the Circuit Court of Cook County for forcible
entry and detainer (eviction). (Id.) In that action, which remains pending, Bryton seeks
possession and past-due rent. (Id.) Kids’ Work has answered and raised affirmative defenses and
counterclaims alleging, among other things, that the Stay-at-Home Order constituted a “casualty”
under the Lease that abated its obligation to pay rent. (Dkt. 10-1 Exh. 1 at 7–35.) The eviction
action appears not to be removable because both Kids’ Work and Bryton are citizens of Illinois.
(Dkt. 1 ¶ 6; dkt. 1 Exh. 1 at 1.)
The week after filing its complaint in state court, Bryton filed this action in federal court,
alleging that Cudnik (a citizen of Wisconsin) breached her guaranty by failing to satisfy Kids’
Work’s obligations under the lease. (Dkt. 1.) In response, Cudnik has asked this court to stay the
federal action under the Colorado River abstention doctrine. (Dkt. 10.)
The Seventh Circuit “recognize[s] a general presumption against abstention.” AXA Corp.
Sols. v. Underwriters Reinsurance Corp., 347 F.3d 272, 278 (7th Cir. 2003) (citing Sverdrup
Corp. v. Edwardsville Cmty. Unit Sch. Dist. No. 7, 125 F.3d 546, 549–50 (7th Cir. 1997)). The
Colorado River abstention doctrine applies, therefore, to “rare cases in which the federal court
may decline to exercise its jurisdiction in deference to a concurrent state-court proceeding.”
DePuy Synthes Sales, Inc. v. OrthoLA, Inc., 953 F.3d 469, 475 (7th Cir. 2020). Deference to a
state-court proceeding may be appropriate when it would promote “[w]ise judicial
administration, giving regard to conservation of judicial resources and comprehensive
disposition of litigation.” Colo. River Water Conservation Dist. v. United States, 424 U.S. 800,
Case: 1:20-cv-03686 Document #: 18 Filed: 11/16/20 Page 3 of 10 PageID #:378
817, 96 S. Ct. 1236 (1976) (quoting Kerotest Mfg. Co. v. C-O-Two Fire Equip. Co., 342 U.S.
180, 183, 72 S. Ct. 219 (1952)) (internal quotation marks omitted). The Seventh Circuit employs
a two-step analysis in Colorado River cases: First, the court asks whether the concurrent actions
in state and federal court are parallel; if so, the court then asks “whether the necessary
exceptional circumstances exist to support a stay or dismissal.” DePuy Synthes Sales, Inc., 953
F.3d at 477 (citing LaDuke v. Burlington N. R.R., 879 F.2d 1556, 1559 (7th Cir. 1989)).
“Two suits are considered parallel ‘when substantially the same parties are
contemporaneously litigating substantially the same issues in another forum.’” Id. (quoting Clark
v. Lacy, 376 F.3d 682, 686 (7th Cir. 2004)). “Formal symmetry is unnecessary, as long as there
is a ‘substantial likelihood that the state litigation will dispose of all claims presented in the
federal case.’” Id. at 477–78 (quoting Clark, 376 F.3d at 686). “[A] district court should examine
whether the suits involve the same parties, arise out of the same facts and raise similar factual
and legal issues.” Tyrer v. City of S. Beloit, Ill., 456 F.3d 744, 752 (7th Cir. 2006) (citing Clark,
376 F.3d at 686). The court must focus on “the parties’ litigation interests in the two lawsuits.”
Clark, 376 F.3d at 686. The parties and issues in this case are “substantially the same” as those in
the state case because, in each, Bryton sues a defendant who is liable only if Kids’ Work
breached the lease. Although Cudnik is not a party to the eviction action, her interests are “nearly
identical” to those of Kids’ Work. Clark, 376 F.3d at 686; cf. Caminiti & Iatarola, Ltd. v. Behnke
Warehousing, Inc., 962 F.2d 698, 700–01 (7th Cir. 1992) (holding that a probate estate and a
corporation that the estate partly owned were “substantially the same” because “their interests in
the dispute . . . are nearly identical”).
Case: 1:20-cv-03686 Document #: 18 Filed: 11/16/20 Page 4 of 10 PageID #:379
Further, Cudnik and Kids’ Work are “substantially the same” because their liability is
coextensive. In Illinois, “the liability of a guarantor is limited by and is no greater than that of the
principal debtor and if no recovery could be had against the principal debtor, the guarantor would
also be absolved of liability.” Riley Acquisitions, Inc. v. Drexler, 946 N.E.2d 957, 963, 408 Ill.
App. 3d 397 (2011) (quoting Edens Plaza Bank v. Demos, 660 N.E.2d 1, 6, 277 Ill. App. 3d 201
(1995)) (internal quotation marks omitted). “Although the language of a guaranty agreement
ultimately determines a specific guarantor’s liability, the general rule is that discharge,
satisfaction, or extinction of the principal obligation also ends the liability of the guarantor.” Id.
(quoting Edens Plaza Bank, 660 N.E.2d at 6) (internal quotation marks omitted).
Here, the guaranty provides that Cudnik is liable only to the extent that Kids’ Work is:
Cudnik “guarantees … the full and prompt payment of Rent, and any and all other sums and
charges payable under the Lease by the Tenant … [and] the full and timely performance and
observance of all of the covenants, terms, conditions and agreements under the Lease provided to
be performed and observed by the Tenant ….” (Dkt. 1 Exh. 2 (emphasis added).) The same is
true of Cudnik’s promise to pay “all damages which Landlord may suffer in consequence of any
default or breach under the Lease or this Guarantee.” (Id.) By the plain language of the
guaranty, if Kids’ Work breached the lease, Cudnik is responsible, and if Kids’ Work did not
breach the lease, Cudnik did not breach her guaranty.
This connection makes the parties and issues in state and federal court substantially the
same. As one court in this district has persuasively explained, where “claims on the guaranty are
only valid if its claims under the … Loan Agreement are themselves valid,” and liability
“depends directly on the validity and enforceability” of the principal agreement, actions against a
guarantor and a principal obligor are parallel. Corus Bank, N.A. v. de Guardiola, 593 F. Supp. 2d
Case: 1:20-cv-03686 Document #: 18 Filed: 11/16/20 Page 5 of 10 PageID #:380
991, 994 (N.D. Ill. 2008). Bryton alleges in this case that Cudnik is liable only because Kids’
Work is liable. (Dkt. 1 ¶¶ 12–13.) These are the same allegations that Bryton must prove to
obtain both possession and rent from Kids’ Work. (Dkt. 10-1 Exh. 3 ¶¶ 11–12, 18–19.) By the
same token, Cudnik will defend against liability on the same grounds as Kids’ Work, primarily
by asserting that the Stay-at-Home Order was a “casualty” under the lease, excusing Kids’ Work
from paying “Rent.” (Dkt. 10-1 Exh. 1 at 7–35.) Because both Bryton’s rights to relief and the
defendants’ defenses turn on the same issues in the state and federal actions, there is a substantial
likelihood that the state court’s resolution of those issues will resolve Cudnik’s liability in this
case. Thus, the federal breach of guaranty action and state breach of lease action are
“substantially the same.”
Bryton does not persuade the court that differences between the guaranty and the lease
destroy the parallels between the state and federal cases. First, Bryton argues that Cudnik may be
liable even if Kids’ Work is not. The court is not persuaded. Although a creditor may overcome
the presumption that a guarantor’s liability depends on the principal’s liability, Riley
Acquisitions, 964 N.E.2d at 964–65, the presumption is strong because “a guarantor ‘is a favorite
of the law.’” Id. at 965 (quoting Hensler v. Busey Bank, 596 N.E.2d 1269, 1274 (Ill. App. Ct.
1992)). “A guarantor is to be accorded the benefit of any doubt which may arise from the
language of the contract, and his liability is not to be varied or extended by construction or
implication beyond its precise terms.” Id. (quoting Hensler, 596 N.E.2d at 1274) (internal
quotation marks omitted). Nothing in Cudnik’s guaranty overrides this presumption. She has
guaranteed performance of Kids’ Work’s obligations under the lease, nothing more, nothing less.
Bryton cites the provision in the guaranty that Bryton “shall have the right to enforce this
[guaranty] irrespective of whether or not other proceedings or steps are pending or being taken
Case: 1:20-cv-03686 Document #: 18 Filed: 11/16/20 Page 6 of 10 PageID #:381
seeking to collect from” Kids’ Work. (Dkt. 14 at 12.) While this provision establishes Bryton’s
option to pursue payment from Cudnik alone, it does not establish that Cudnik is liable for
anything other than Kids’ Work’s breaches of the lease. Had Bryton chosen to sue only Cudnik,
for instance, this court still would have determined whether Kids’ Work breached the lease to
decide whether Cudnik breached her guaranty. Moreover, Bryton did not exercise its option to
sue only Cudnik, instead suing both Cudnik in federal court and Kids’ Work in state court,
asking two courts to address the same issues. The cases are still parallel.
Second, Bryton cites the provision that Cudnik’s liability “shall in no way be affected or
impaired . . . by any compromise, waiver, settlement, change, subordination, modification or
disposition of any Guaranteed Payment or Guaranteed Obligation” under the lease. (Dkt. 10 at
225; dkt. 14 at 12. While this language limits the effect on Bryton’s rights under the guaranty of
any alternative resolution of the eviction case, it also reinforces the principle that liability under
the guaranty hinges on whether a payment or obligation is owed under the lease. In other words,
although Cudnik might still be liable if Bryton settles its dispute with Kids’ Work before the
state court can resolve the identical issues in that case, that does not make the issues any less
identical. In any case where Colorado River applies, the state case could end without resolving
the underlying issues, such as by voluntary dismissal. The appropriate course is to lift the stay if
that happens, not to refuse a stay in the first place.
Nor does Bryton persuade the court that Colorado River should not apply when the state
case involves a principal obligor and the federal case involves a guarantor. Bryton cites several
cases declining Colorado River stays under those circumstances and concludes that Colorado
River categorically does not apply here. E.g., Wells Fargo Bank, N.A. v. Leafs Hockey Club, Inc.,
No. 13 C 2247, 2013 WL 5433789 (N.D. Ill. Sep. 30, 2013); JLM Financial Investments 4 LLC
Case: 1:20-cv-03686 Document #: 18 Filed: 11/16/20 Page 7 of 10 PageID #:382
v. Aktipis, No. 11 C 2561, 2012 WL 74856, at *2 (N.D. Ill. Jan. 9, 2012); Bank of Montreal v.
McKenzie Methane Corp., No. 93 C 3610, 1993 WL 420985, at *7 (N.D. Ill. Oct. 18, 1993);
Mitsui Taiyo Kobe Bank, Ltd. v. First Nat. Realty & Dev. Co., 788 F. Supp. 1007 (N.D. Ill.
1992). But the Seventh Circuit encourages “painstaking comparison of the federal and state
complaints,” Tyrer, 456 F.3d at 752, and this court will not refuse a stay on such categorical
grounds. In the cases Bryton cites, the courts held that a stay would force the plaintiff to attempt
to collect payment from the principal obligor first, essentially nullifying the purpose of the
guaranty. E.g., JLM, 2012 WL 74856, at *2. In this case, however, both the state and federal
cases involve the same genuine and substantial contractual dispute about whether any obligation
exists. This is therefore not a case where Cudnik asks Bryton to wait until a state court inevitably
rules against Kids’ Work, thereby forcing Bryton to try to collect from Kids’ Work first. Rather,
Bryton cannot collect payment from anyone until some court decides the novel issue of whether
the Stay-at-Home Order is a “casualty.” The question is whether two courts should decide the
same issue or whether this court should defer to the state court.
The court thus concludes that the state and federal actions are parallel.
As noted above, if concurrent actions are parallel, the court then asks “whether the
necessary exceptional circumstances exist to support a stay or dismissal.” DePuy Synthes Sales,
Inc., 953 F.3d at 477 (citing LaDuke, 879 F.2d at 1559). Ten factors inform the answer to this
second question: (1) whether “the case concerns rights in property, and if so, whether the state
has assumed jurisdiction over that property”; (2) the “convenience of the federal forum”; (3) the
“value in avoiding ‘piecemeal’ or broken-up proceedings”; (4) the “order in which jurisdiction
was obtained”; (5) the source of governing law; (6) the “adequacy of the state-court action to
Case: 1:20-cv-03686 Document #: 18 Filed: 11/16/20 Page 8 of 10 PageID #:383
protect the federal plaintiff’s rights”; (7) the “relative progress of the state and federal
proceedings”; (8) the “presence or absence of concurrent jurisdiction”; (9) the availability of
removal; and (10) whether “the federal action is vexatious or contrived.” Id. A district court may
also consider any “special characteristic of the case before it.” Id.
Because Bryton does not ask this court and the state court to “concurrently assume
jurisdiction over the same” property, the first factor is not relevant. Tyrer, 456 F.3d at 751. The
second factor is neutral because both actions have been filed in and are based on events
occurring in Chicago. (Dkt. 10-1 at 72, 86.) The third factor—avoiding piecemeal or broken-up
proceedings—weighs strongly in favor of a stay. As the court in DePuy noted, “the danger of
piecemeal litigation does not turn on formal identity of issues but on concerns about the efficient
use of judicial resources and the public’s perception of the legitimacy of judicial authority.” 953
F.3d at 478. “[A] high risk of inconsistent results and wasteful duplication” concerned the court
and weighed “strongly in favor of abstention.” Id. In this case, if the federal action moves
forward, both this court and the state court would have to ascertain Kids’ Work’s obligations
under the lease, risking inconsistent results and duplicated efforts.
Factors four and five, likewise, weigh in favor of a stay. The state court obtained
jurisdiction first, a sequence Bryton chose. Illinois law governs both actions, which weighs in
favor of abstaining to let the state court interpret its own law. That weight increases because of
unique legal issues involved: How the state’s response to the COVID-19 pandemic affects leases
presents novel and important state-law questions. DePuy Synthes Sales, 953 F.3d at 477
(authorizing district court to consider “a special characteristic of the case before it”).
The sixth factor weighs slightly against a stay because Bryton likely cannot join its
breach of guaranty claim in its state court action. Illinois statute severely limits claims that can
Case: 1:20-cv-03686 Document #: 18 Filed: 11/16/20 Page 9 of 10 PageID #:384
be joined to a forcible entry and detainer action in state court to only those “matters . . . germane
to the distinctive purpose of the proceeding,” with a special exception for claims for rent. 735 Ill.
Comp. Stat. 5/9-106. In Twin-City Inn v. Hahne Enters., Inc., 37 Ill. 2d 133, 139 (Ill. 1967), the
Illinois Supreme Court concluded that an action for breach of guaranty was not “germane” and
therefore improperly joined. Nonetheless, because Cudnik’s obligations to Bryton under the
guaranty flow from Kids’ Work’s obligations under the lease, Bryton will have a full and fair
opportunity to litigate the critical issues that will resolve Cudnik’s liability. Whatever obligations
the state court finds flowing to Bryton under the lease, those obligations will then be enforceable
to the full extent provided for under the guaranty. And finally, because eviction actions are so
narrowly focused, they also resolve quickly, minimizing the length of the stay. Bem I, L.L.C. v.
Anthropologie, Inc., No. 98 C 358, 1999 WL 1212643, at *5 (N.D. Ill. Dec. 14, 1999), aff’d, 301
F.3d 548 (7th Cir. 2002), and aff’d, 301 F.3d 548 (7th Cir. 2002) (“[T]he purpose of the Illinois
statute is to provide summary proceedings with a quick resolution on the issue of possession
only[.]”). The sixth factor therefore weighs only slightly against abstention.
Factors seven, eight, and nine also weigh in favor of abstention. The state court
proceedings are slightly more advanced than the federal proceedings, as Kids’ Work has
answered Bryton’s complaint and filed both affirmative defenses and counterclaims. (Dkt. 10-1
Exh. 1.) While this court sitting in diversity has jurisdiction over the guaranty dispute, the state
court is capable of exercising jurisdiction over all of the relevant issues, including possession and
liability under the lease. In a similar vein, the fact that the eviction action cannot be removed to
federal court (because there is no diversity of citizenship), but must, instead, proceed in state
court, weighs in favor of a stay. The tenth factor is neutral because there is no indication that the
federal action is vexatious or contrived.
Case: 1:20-cv-03686 Document #: 18 Filed: 11/16/20 Page 10 of 10 PageID #:385
On balance, with several factors weighing in favor of abstention and only one weighing
slightly against, the court finds that exceptional circumstances warrant a stay.
Cudnik’s motion to stay (dkt. 10) is granted. The parties shall file a joint status report by
December 31, 2020, or within seven days after the state court rules on whether Kids’ Work
breached the lease, whichever comes first.
Date: November 16, 2020
U.S. District Judge Joan H. Lefkow
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?