Ello et al v. Brinton et al
Filing
147
OPINION AND ORDER: For the reasons set forth in the Opinion and Order, Defendant Gary Brinton's motions for summary judgment 126 and 131 are GRANTED; Defendant Seven Peaks Marketing Chicago, LLC's motion for summary judgment is GRANTED IN PART AND DENIED IN PART; Plaintiffs' motion for leave to file a response to Defendants' motions for summary judgment instanter 133 is DENIED. Counts II and III are DISMISSED. Count I remains pending against Seven Peaks Marketing, Chicago, LLC. Signed by Judge Rudy Lozano on 3/28/2018. (jss)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF INDIANA
HAMMOND DIVISION
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ANTHONY E. ELLO and
EVELYN ELLO,
Plaintiffs,
vs.
GARY R. BRINTON and
SEVEN PEAKS MARKETING
CHICAGO, LLC,
Defendants.
NO. 2:14–CV-00299
OPINION AND ORDER
This matter is before the Court on Defendant Gary Brinton’s
Motion
for
Summary
Judgment
and
Subject
Matter
Jurisdiction
Challenge, filed on August 14, 2017 (DE #126); Defendant Seven
Peaks Marketing Chicago, LLC’s Motion for Summary Judgment and
Subject Matter Jurisdiction Challenge, filed on August 14, 2017
(DE #128); Defendant Gary Brinton’s Motion for Summary Judgment
and Subject Matter Jurisdiction Challenge, filed on August 17,
2017 (DE #131); Plaintiff’s [sic] Motion for Leave to File Response
to Defendants’ Motions for Summary Judgment Instanter, filed on
September 26, 2017 (DE #133).
For the reasons set forth below,
Defendant Gary Brinton’s motions for summary judgment (DE #126 and
DE #131) are GRANTED; Defendant Seven Peaks Marketing Chicago,
‐1‐
LLC’s motion for summary judgment (DE #128) is GRANTED IN PART AND
DENIED IN PART; Plaintiffs’ motion for leave to file a response to
Defendants’ motions for summary judgment instanter (DE #133) is
DENIED.
Counts II and III are DISMISSED.
Count I remains pending
against Seven Peaks Marketing Chicago, LLC.
BACKGROUND
In 2013, Anthony and Evelyn Ello (together, “Plaintiffs”)
entered into a Lease Agreement with defendant Seven Peaks Marketing
Chicago, LLC, (“SPMC”), pursuant to which Plaintiffs leased their
bowling alley to SPMC for thirteen years.
property after eleven months.
SPMC vacated the
Plaintiffs filed this lawsuit
asserting that (1) SPMC breached the Lease Agreement, (2) defendant
Gary Brinton (“Brinton”) is liable for SPMC’s alleged misconduct
under an alter ego theory of liability, and (3) Brinton and SPMC
(together, “Defendants”) fraudulently induced Plaintiffs to enter
into the Lease Agreement.
During discovery, Defendants served
Plaintiffs with requests for admission.
Plaintiffs failed to
answer the requests for admission in a timely manner.
After the close of discovery, Brinton filed two motions for
summary judgment and subject matter jurisdiction challenge (DE
#126 and #131), which the Court will treat as one.
SPMC also filed
a motion for summary judgment and subject matter jurisdiction
challenge (DE #128).
The motions for summary judgment argue that
(1) Plaintiffs’ failure to answer the request for admission and
‐2‐
failure to make damages disclosures in their initial disclosures
preclude them from offering evidence of damages, (2) without a
prospect of a redressable injury, this Court lacks subject matter
jurisdiction, and (3) they are entitled to summary judgment on all
claims.
Plaintiffs failed to file a response to any of the motions
for summary judgment in a timely manner.
On September 26, 2017,
Plaintiffs filed a motion for leave to file a response to the
motions for summary judgment instanter.
(DE #133.)
On the same
day, they filed a combined response to the motions for summary
judgment that included a motion to withdraw admissions pursuant to
Federal Rule of Civil Procedure 36(b).
(DE #135.)
Plaintiffs’
motion for leave to file a response instanter and motion to
withdraw admissions were fully briefed.
Defendants reserved the
right to file reply briefs if the Court granted Plaintiffs’
motions.
DISCUSSION
Motion for Leave to File Response to Summary Judgment Motions
Instanter
Plaintiffs move for leave to file a late response to the
defendants’ motions for summary judgment instanter.
Federal Rules
of Civil Procedure Rule 6(b)(1) provides that a court “may, for
good cause, extend the time . . . on motion made after the time
has expired if the party failed to act because of excusable
‐3‐
neglect.”
Fed. R. Civ. P. 6(b)(1)(B); see Keeton v. Morningstar,
Inc., 667 F.3d 877, 883 (7th Cir. 2012) (Rule 6(b) “gives courts
discretion (with certain exceptions not applicable here) to grant
extensions of time when deadlines are missed because of excusable
neglect.”).
The
determination
whether
a
party’s
neglect
is
excusable is “at bottom an equitable one, taking account of all
relevant circumstances surrounding the party's omission.”
Pioneer
Inv. Servs. Co. v. Brunswick Assocs. L.P., 507 U.S. 380, 395, 113
S. Ct. 1489, 123 L.Ed.2d 74 (1993); see Raymond v. Ameritech Corp.,
442 F.3d 600, 606 (7th Cir. 2006) (“Pioneer applies whenever
‘excusable neglect’ appears in the federal procedural rules.”).
Relevant circumstances include “the danger of prejudice to the
[non-movant], the length of the delay and its potential impact on
judicial proceedings, the reason for the delay, including whether
it was within the reasonable control of the movant, and whether
the movant acted in good faith.”
Pioneer, 507 U.S. at 395.
important is the reason for the delay.
“Most
To establish excusable
neglect, the moving party must demonstrate genuine ambiguity or
confusion about the scope or application of the rules or some other
good reason for missing the deadline, in addition to whatever lack
of
prejudice
and
absence
of
delay
he
can
show.”
Satkar
Hospitality, Inc. v. Fox Television Holdings, 767 F.3d 701, 707
(7th Cir. 2014).
“[A] lawyer’s errors are imputed to the client
‐4‐
for the purpose of [excusable neglect].”
Moje v. Fed. Hockey
League, LLC, 792 F.3d 756, 758 (7th Cir. 2015).
Here, Plaintiffs admit that they missed the deadline for
filing a response brief in opposition to the motions for summary
judgment by fifteen days.
The sole reason offered by Plaintiffs
is that their counsel had commitments in other cases.
(DE #133 at
1-2; DE #144 at 4 (noting that counsel’s supporting affidavits
list of two cases on which they were working “as exemplars, not
the exclusive tasks that consumed counsel’s time”).
The Court
prefers
this
to
resolve
cases
on
their
merits,
but
in
case
Plaintiffs’ counsel proffers nothing upon which to find excusable
neglect.
“[I]t is widely accepted that neglect due to a busy
schedule is not excusable.”
Keeton, 667 F.3d at 883 (citation
omitted); see Raymond, 442 F.3d 600 (affirming district court's
refusal to consider a late-filed response to a summary judgment
motion despite the plaintiff's counsel's claimed busyness); Dean
v. Chicago Transit Auth., 118 F. Appx. 993, 996 (7th Cir. 2005)
(“An attorney's busy schedule . . . does not rise to the level of
excusable neglect.”); Easley v. Kirmsee, 382 F.3d 693, 698 (7th
Cir.
2004)
excusable,
(“[A]ttorney
no
matter
inattentiveness
what
the
to
resulting
litigation
is
consequences
not
the
attorney's somnolent behavior may have on a litigant.”).
Plaintiffs note that they have not requested many extensions
in this matter, but fail to offer any reason why they could not
‐5‐
have requested an extension before the deadline had expired.
Plaintiffs’ neglect is not excusable because they “could and should
have moved for an extension” if they wished to preserve their right
to file responses to Defendants’ summary judgment motions.
Adams
v. City of Indianapolis, 742 F.3d 720, 734 (7th Cir. 2014); see
Flint v. City of Belvidere, 791 F.3d 764, 768 (7th Cir. 2015)
(“Neglect is generally not excusable when a party should have acted
before the deadline.”).
their
summary
judgment
excusable neglect.
Moreover, Plaintiffs’ delay in filing
response
brief
weighs
against
finding
Postle v. Bath & Body Works, LLC, No. 13 C
50374, 2015 WL 521365, at *4 (N.D. Ill. Feb. 9, 2015) (“The length
of the delay weighs against granting the [m]otion” for leave to
file
instanter
motion.).
documents
in
opposition
to
summary
judgment
Plaintiffs inexplicably waited over two weeks to seek
permission for the late filing, thus undermining any claim of goodfaith mistake.
See Peters v. Wal-Mart Stores E., LP, 512 Fed.
Appx. 622, 628 (7th Cir. 2013) (holding that district court did
not abuse discretion in striking summary judgment response brief
where counsel waited nearly three weeks to seek permission for the
late filing); Postle, 2015 WL 521365, at *4 (filing two weeks late
was inexcusable); Dean, 118 Fed. Appx. 993 (affirming denial of
plaintiff’s motion to file a response to a summary judgment motion
instanter filed nearly two weeks after the deadline).
“District
courts possess great authority to manage their caseload and have
‐6‐
the right to expect that deadlines will be honored.”
Dean, 118 F.
Appx. at 996 (citation and internal quotation marks omitted); see
Reales v. Consol. Rail Corp., 84 F.3d 993, 996 (7th Cir. 1996)
(district courts “are entitled—indeed they must—enforce deadlines”
for the filing of motions and other papers).
Plaintiffs’ counsel have failed to meet their burden of
showing that excusable neglect prevented them from timely filing
their response to the motions for summary judgment.
Their alleged
busyness fails to meet the Seventh Circuit’s excusable neglect
standard.
Accordingly, the Court DENIES Plaintiffs’ motion for
leave to file a late response to the defendants’ motions for
summary judgment instanter.1
Motions for Summary Judgment
Summary judgment must be granted when “there is no genuine
dispute as to any material fact and the movant is entitled to
judgment as a matter of law.”
Fed. R. Civ. P. 56(a).
A genuine
dispute of material fact exists when “the evidence is such that a
reasonable jury could return a verdict for the nonmoving party.”
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S. Ct.
1
Plaintiffs buried a motion to withdraw their admissions in their response brief
in opposition to Defendants’ motions for summary judgment. (See DE #135 at 811.) In doing so, Plaintiffs failed to comply with Local Rule 7-1(a), which
requires that motions be filed separately. N.D. Ind. L.R. 7-1(a); see Petty v.
City of Chicago, 754 F.3d 416, 420 (7th Cir. 2014) (“[D]istrict courts may
require parties to strictly adhere to their rules.”). Because the Court has
denied Plaintiffs’ motion for leave to file their response brief instanter,
Plaintiffs’ response brief is not before the Court, and thus, the Court will
not consider the motion to withdraw the admissions contained therein.
‐7‐
2505, 91 L. Ed. 2d 202 (1986).
Not every dispute between the
parties makes summary judgment inappropriate; “[o]nly disputes
over facts that might affect the outcome of the suit under the
governing
law
will
properly
preclude
the
entry
of
summary
judgment.” Id. To determine whether a genuine dispute of material
fact exists, the Court must construe all facts in the light most
favorable to the nonmoving party and draw all reasonable inferences
in that party’s favor.
See Ogden v. Atterholt, 606 F.3d 355, 358
(7th Cir. 2010).
A party opposing a properly supported summary judgment motion
may not rely on allegations in her own pleading but rather must
“marshal and present the court with the evidence she contends will
prove her case.”
651,
654
(7th
Goodman v. Nat'l Sec. Agency, Inc., 621 F.3d
Cir.
2010).
“[I]nferences
relying
on
mere
speculation or conjecture will not suffice.” Stephens v. Erickson,
569 F.3d 779, 786 (7th Cir. 2009) (citation omitted).
If the
nonmoving party fails to establish the existence of an essential
element on which he bears the burden of proof at trial, summary
judgment is proper.
See Massey v. Johnson, 457 F.3d 711, 716 (7th
Cir. 2006).
Local Rule 56-1(a) requires a summary judgment movant to file
a “‘Statement of Material Facts’ that identifies the facts that
the moving party contends are not genuinely disputed.”
L.R. 56-1(a).
N.D. Ind.
The party opposing the motion must respond within
‐8‐
twenty-eight days with a “Statement of Genuine Disputes” that sets
forth the “material facts that the party contends are genuinely
disputed so as to make a trial necessary.”
1(b)(2).
N.D. Ind. L.R. 56-
“[A] failure to respond by the nonmovant as mandated by
the local rules results in an admission.”
680, 683 (7th Cir. 2003).
Smith v. Lamz, 321 F.3d
When an opposing party fails to respond
to a summary judgment motion, Federal Rule of Civil Procedure 56(e)
permits judgment for the moving party only if the movant is
entitled to it.
Fed. R. Civ. P. 56(e)(3).
In other words, summary
judgment may only be granted “if appropriate—that is, if the motion
demonstrates that there is no genuine issue of material fact and
that the movant is entitled to judgment as a matter of law.”
LaSalle Bank Lake View v. Seguban, 54 F.3d 387, 392 (7th Cir. 1995)
(citation omitted)).
Defendants filed a Combined Statement of Material Facts in
accordance with Local Rule 56-1(a).
Plaintiffs failed to comply
with Local Rule 56-1(b) by failing to file their response to
Defendants’ motions for summary judgment in a timely manner, and
the Court has denied Plaintiffs’ motion for leave to file their
untimely response.
Thus, the facts as claimed and properly
supported by Defendants in their Combined Statement of Material
Facts are deemed admitted without controversy.
This Court has
reviewed the following facts and finds that they are adequately
‐9‐
supported with appropriate citations to admissible evidence in the
record.
Facts
Plaintiffs
Anthony
Ello
(“Anthony”)
and
Evelyn
(“Evelyn”) are married and reside in Chesterton, Indiana.
Ex. A at 25, 29.)
Ello
(Defs.
Plaintiffs had an interest in a bowling alley
and lounge located in Chesterton, Indiana (“Bowling Alley”).
(DE
#24.) In July 2013, Plaintiffs intended to close the Bowling Alley
due to lack of community support.
(Defs. Ex. F.)
Defendant SPMC
is a Utah limited liability company with its principal place of
business in Utah, and is registered to do business in Indiana.
(Defs. Exs. X, Y.) SPMC specialized in family entertainment. SPMC
has articles of incorporation and an operating agreement.
Exs. X, AA.)
(Defs.
It is registered to do business in Utah, Delaware
and Indiana, files its own annual tax return, and maintains a
separate bank account.
(Defs. Exs. Y, BB, CC.)
When a local realtor contacted SPMC about the Bowling Alley,
SPMC expressed an interest in leasing or buying the Bowling Alley,
and initiated contact with Plaintiffs.
(Defs. Ex. G.)
On or
before July 12, 2013, SPMC and Plaintiffs entered the Lease
Agreement (“Lease” or “Lease Agreement”).
(DE #24-1.)
The Lease
had a thirteen year term and included the following obligations:
(1) SPMC would make monthly base rent payments to Horizon Bank in
the amount of Plaintiffs’ mortgage payment (approximately $4,300
‐10‐
per month) (“Rent”); (2) SPMC would make monthly premium rent
payments to Plaintiffs to compensate them for their $60,000 of
equity in the Bowling Alley (“Equity Payments”); and (3) SPMC would
pay utilities and taxes, and would obtain insurance on the Bowling
Alley.
(Id. at 1.)
Article V of the Lease addresses the Security
Deposit Bond (“Bond”):
Concurrently with Tenant's execution of this Lease or a
soon as practical thereafter, Tenant shall maintain a
deposit bond with Landlord in the sum of $75,000.00 in
the form of a bond issued by a bonding/insurance company
(hereinafter the "Security Deposit Bond"). The Security
Deposit Bond shall be for the benefit of the Landlord to
secure the faithful performance by Tenant of all of the
terms, covenants, and conditions of this Lease to be
kept and performed by Tenant during the term of this
Lease. If Tenant defaults with respect to the payment
provisions of this Lease, Landlord may, but shall not be
obligated to make demand on the Security Deposit Bond
with the bonding company for the payment of any amount
which Landlord may spend by reason of Tenant's default
or to compensate Landlord for any other loss or damage
which Landlord may suffer by reason of Tenant's default.
. . . [I]f Tenant shall exercise its option to purchase
the Premises, the Security Deposit Bond or any balance
thereof shall be returned to Tenant. . . .
(Id. at 2.)
The Lease also includes a remedy provision in the
event of default.
The parties executed an addendum to the Lease,
which gave SPMC the option to purchase the Bowling Alley.
(Id. at
10.)
After entering the Lease, SPMC made efforts to obtain the
Bond.
On July 17, 2013, Brinton informed Plaintiffs that he had
asked his insurance agent with Multi-Serve Insurance to contact
Plaintiffs regarding the Bond.
(Defs. Ex. O at 5-6.)
‐11‐
On July 26,
2013, Brinton emailed a bond application to Dean Insurance, copying
Anthony and Horizon Bank, stating that Wendy Dean said the Bond
would be placed in “7 days or so.”
(Id. at 2.)
Anthony and
Brinton also discussed bond alternatives after the Lease was
entered, including using it for improvements to the building.
(Defs. Ex. A at 242-43.)
Brinton began negotiating with Horizon Bank for the purchase
of the Bowling Alley.
(Defs. Ex. I at 71-72.)
of these negotiations.
Anthony was aware
(Defs. Ex. A at 237-39.)
On September 10,
2013, Brinton emailed Anthony notifying him that “[m]y intentions
are to purchase the bowling alley from you through financing from
Kent Mishler at Horizon Bank, thus alleviating the need for the
security bond because we will be owners.
Ex. P.)
Not tenants.”
(Defs.
Brinton’s negotiations with Horizon Bank continued off
and on until June 2014.
(Defs. Ex. I at 71-72; DE #131-8 at 29.)
Anthony admitted that Plaintiffs weren’t “aggressively pursuing”
the Bond because they were busy people, and because Brinton was
pursuing financing to purchase the Bowling Alley.
255.)
(Defs. Ex. A at
Anthony did not know whether he communicated with SPMC
between January 2014 and the end of May 2014, and did not think
his attorney did so.
(Id. at 251-52.)
SPMC paid rent and the Bowling Alley’s utilities until June
2014.
(See Defs. Ex. L at 226; Defs. Ex. B.)
SPMC had a premises
insurance policy in place on the Bowling Alley beginning on
‐12‐
September 12, 2013, and paid the premiums through June 2014.
(Defs. Exs. L at 226; Defs. Ex. N.)
improvements
to
the
Bowling
Alley.
SPMC also made capital
(Defs.
Ex.
K
at
2-3.)
Plaintiffs did not provide SPMC with a tax notice prior to June
2014.
(Defs. Ex. J at 138.)
On June 9, 2014, SPMC received a letter from Plaintiffs’
counsel stating that to avoid being in default under the Lease,
SPMC must submit the completed form of bond within five days.
(Defs. Ex. Q.)
At that time, SPMC and Horizon Bank were still
discussing financing for SPMC to purchase the Bowling Alley.
(See
DE #131-8 at 29.)
That same day, Bowling Alley manager Ryan
Hartman
–
(“Hartman”)
who
was
Plaintiffs’
tenant
and
former
employee – told SPMC general manager Matt Phair (“Phair”) that
Plaintiffs sent SPMC a demand letter and intended to change the
locks on the Bowling Alley doors if SPMC did not comply with the
Lease.
3.)
(Defs. Ex. K at 2.)
Phair informed SPMC of this.
(Id. at
SPMC considered this information to be reliable because of
Hartman’s close relationship to Plaintiffs and his knowledge of
the demand letter before SPMC received it.
(Defs. Ex. L at 198-
201.) That day, SPMC removed certain items from the Bowling Alley.
(Defs. Exs. K, R.)
Phair oversaw the removal, which he maintains
was done in a workmanlike manner, taking care to leave anything
belonging to Plaintiffs and not to damage any property or fixture.
(Defs. Exs. K, R, T.)
SPMC left food, frozen items, and certain
‐13‐
assets in the Bowling Alley.
(Defs. Exs. K, T.)
The following
day, Plaintiffs locked SPMC out of the Bowling Alley by changing
the locks. (Defs. Ex. K.) Evelyn was there and told SPMC employees
to leave the property.
(Id.)
On June 11, 2014, SPMC’s counsel emailed Plaintiffs’ counsel
a letter responding to their demand letter, noting that SPMC had
vacated the Bowling Alley, and its reluctance to walk away from
the Lease.
(Defs. Ex. U.)
The letter indicated that SPMC was
cancelling the insurance policies related to the Bowling Alley and
directing that the utilities be shut off.
(Id.)
The letter also
suggested that the business opportunity could be salvaged.
(Id.)
Plaintiffs did not respond to this letter, and filed the instant
lawsuit in August 2014.
On March 1, 2017, Defendants served Plaintiffs with requests
for admissions. (Defs. Ex. E.) Plaintiffs failed to answer within
the thirty days allowed by Rule 36(a)(3) of the Federal Rules of
Civil Procedure.
Discovery ended in this case on April 28, 2017.
(DE #116.)
Analysis
Initial Disclosures Issue
Defendants
maintain
that
Plaintiffs
violated
Rule
26(a)(1)(A)(iii) of the Federal Rules of Civil Procedure by serving
Initial
Disclosures
containing
no
damages
total,
calculation, and no damages documentary evidence.
‐14‐
damages
They assert
that such violation leaves Plaintiffs with no admissible damages
evidence,
which
is
fatal
to
all
of
their
claims.
Rule
26(a)(1)(A)(iii) requires a party to disclose “a computation of
each category of damages claimed by the disclosing party.”
Rule
26(a) disclosures must be supplemented “in a timely manner if the
party learns that in some material respect the disclosure or
response is incomplete or incorrect, and if the additional or
corrective information has not otherwise been made known to the
other parties during the discovery process or in writing.”
R. Civ. P. 26(e)(1)(A).
Fed.
Rule 37(c)(1) provides that a party is
not allowed to use information that it should have, but failed to,
disclose
under
Rule
26(a)
or
(e),
unless
such
failure
“was
substantially justified or is harmless.” Fed. R. Civ. P. 37(c)(1).
Plaintiffs’ Initial Disclosures state that Plaintiffs “will
testify to their damages, which includes the amount due under the
lease agreement, unnecessary professional fees and the ultimate
loss of the property and additional payments made to Horizon Bank.”
(Defs. Ex. C at 2.)
The Initial Disclosures also provide that
witness Terry Hiestand will testify to “damages resulting from the
breach” and witnesses “Kent Mishler/Horizon Bank employees” will
testify to “damages resulting from the default.”
(Id. at 2-3.)
The Initial Disclosures attached the Lease Agreement, which is
governed by Utah law.
(Id.)
Under Utah law, damages for breach
of contract “may include general (or direct) and consequential (or
‐15‐
special) damages.”
Trans-W. Petroleum, Inc. v. U.S. Gypsum Co.,
379 P.3d 1200, 1202 (Utah 2016).
General damages for a breach of contract or lease are
measured by the market value of the very thing promised,
at the time of performance. Such general damages are
said to be implied in law because they are the probable
and necessary result of the injury.
Hence, they are
damages which everybody knows are likely to result from
the harm described.
Id. at 1206–07 (internal citations, quotation marks and brackets
omitted).
Consequential
damages
“are
reasonably
within
the
contemplation of, or reasonably foreseeable by, the parties at the
time the contract was made.”
quotation marks omitted).
Id. at 1202 (citation and internal
“While the standard for determining the
amount of damages is not so exacting as the standard for proving
the fact of damages, there still must be evidence that rises above
speculation and provides a reasonable, even though not necessarily
precise, estimate of damages.”
Atkin, Wright & Miles v. Mtn.
States Tel. & Tel. Co., 709 P.2d 330, 336 (Utah 1985).
Defendants cite Sulaiman v. Biehl & Biehl, Inc., No. 15 C
04518, 2016 WL 5720476 (N.D. Ill. Sept. 30, 2016), to argue that
the Court should dismiss Plaintiffs’ claims based on their Initial
Disclosures.
Consumer
Fraud
In Sulaiman, the plaintiff alleged an Illinois
and
Deceptive
Business
Practices
claim, but had not requested actual damages.
Act
(“ICFA”)
Id. at *8. Plaintiff
later argued that he had actual damages of “his time and energy
spent calling Biehl to dispute the debt.”
‐16‐
Id.
The court held
that the plaintiff failed to meet the disclosure requirements of
Rule 26(a)(1)(A)(iii) because he failed to identify evidence of
actual damages that he suffered as a result of the alleged ICFA
violation.
Id.
This Court finds Sulaiman to be distinguishable.
Unlike Sulaiman, here Plaintiffs allege a breach of contract and
damages resulting from the breach of contract, and the contract
itself provides a method of determining damages for a breach.2
While Defendants argue that they have “no idea” of the damages
alleged by Plaintiffs, the Lease Agreement shines light on this
issue, at least as to Plaintiffs’ breach of contract claim.3
The
Lease Agreement provides that the Lease had a thirteen-year term,
and that SPMC would pay Rent of approximately $4,300 per month,
Equity Payments to compensate Plaintiffs for their $60,000 of
equity in the Bowling Alley, utilities, and taxes, among other
obligations.
The Amended Complaint alleges that SPMC failed to
perform terms of the Lease, and abandoned the Bowling Alley after
eleven months of the thirteen-year term.
(Am. Compl. ¶29-¶30.)
2
Defendants also cite several cases addressing Plaintiffs’ attempts to submit
damages evidence after the close of discovery. See, e.g., Dynegy Mktg. & Trade
v. Multiut Corp., 648 F.3d 506, 513 (7th Cir. 2011) (affirming exclusion of
declaration submitted months after discovery closed); Ablan v. Bank of Am.
Corp., No. 11 CV 4493, 2014 WL 6704293, at *5 (N.D. Ill. Nov. 24, 2014) (adopting
report and recommendation barring plaintiffs from relying on or introducing new
evidence at summary judgment or trial), aff'd, 665 F. Appx. 544 (7th Cir. 2016).
Because Plaintiffs’ admissions are deemed admitted and discovery is closed,
this is not at issue here.
3
Because the Court grants summary judgment in Defendants’ favor on Plaintiffs’
other claims for the reasons provided below, it does not address the sufficiency
of Plaintiffs’ Initial Disclosures as to those claims.
‐17‐
The Lease Agreement addresses default and remedies therefore,
including Plaintiffs’ entitlement to recover unpaid rent.
#24-1 at ¶18.1-¶18.2.)
reasonable,
even
(DE
Because the Lease Agreement provides a
though
not
necessarily
precise,
estimate
of
damages for SPMC’s alleged breach of contract under Utah law, the
Court finds that Plaintiffs’ Initial Disclosures satisfy Rule
26(e) as to the breach of contract claim.
Standing
The Court will address Defendants’ contention that Plaintiffs
lack standing to sue before considering the merits of their claims.
Standing is an essential component of Article III’s case-orcontroversy requirement.
Lujan v. Defenders of Wildlife, 504 U.S.
555, 560, 112 S. Ct. 2130, 119 L.Ed.2d 351 (1992).
standing
requirements:
redressability.
injury
See id. at 561.
in
fact,
There are three
causation,
and
Each element of standing is “an
indispensable part of the plaintiff's case . . . [that] must be
supported in the same way as any other matter on which the
plaintiff bears the burden of proof, i.e., with the manner and
degree of evidence required at the successive stages of the
litigation.”
Id. at 561.
Defendants argue that Plaintiffs lack
standing because they fail to establish injury in fact, i.e.,
damages.
“To establish injury in fact, a plaintiff must show that
he or she suffered ‘an invasion of a legally protected interest’
that is ‘concrete and particularized’ and ‘actual or imminent, not
‐18‐
conjectural or hypothetical.’”
Spokeo, Inc. v. Robins, 136 S. Ct.
1540, 1548, 194 L. Ed. 2d 635 (2016) (quoting Lujan, 504 U.S. at
560).
“A ‘concrete’ injury must be ‘de facto’; that is, it must
actually exist.”
Id. (citation omitted).
Plaintiffs’ Amended Complaint asserts claims of breach of
contract and fraudulent inducement.
Count I alleges that SPMC
breached the Lease by abandoning the property and failing to:
secure the Bond; pay the rent, taxes and assessments; maintain
insurance; and maintain the Bowling Alley in good order and
condition.
(Am.
Compl.
¶29-¶30.)
Count
III
alleges
that
Defendants fraudulently induced Plaintiffs to enter into the Lease
by misrepresenting that SPMC: (1) had enough capital to pay for
the Bond, insurance, and utilities; (2) would secure the Bond when
in fact no bond had been obtained, and Brinton knew that no bond
would
be
obtained
when
they
entered
the
Lease;
and
(3)
was
authorized to conduct business in Indiana when the company was not
registered or licensed in Indiana prior to entering the Lease.
(Id., ¶50, ¶¶52-53.)
To prevail on these claims, Plaintiffs must
prove they suffered damages.
See Carmichael v. Higginson, 402
P.3d 146, 149 n.5 (Utah Ct. App. 2017) (plaintiff must prove
damages under breach of contract claim); Wheatcraft v. Wheatcraft,
825 N.E.2d 23, 30 (Ind. Ct. App. 2005) (plaintiff must prove
‐19‐
misrepresentation “proximately caused the injury or damage” to
prevail on fraud claim).4
Defendants cite Plaintiffs’ admissions as evidence of their
lack of damages.
Plaintiffs failed to answer Defendants’ requests
for admission within the thirty days allowed by Rule 36(a)(3) of
the Federal Rules of Civil Procedure.
As such, the matters were
deemed admitted by operation of the Federal Rules.
Civ.
P.
36(a)(3).
“A
conclusively established.”
matter
admitted
under
See Fed. R.
[Rule
Fed. R. Civ. P. 36(b).
36]
is
Plaintiffs’
admissions conclusively establish that they have no evidence that
they incurred damages proximately caused by: (1) nonpayment of
Rent and utilities on the Bowling Alley from June 1, 2013, through
June 10, 2014 (the date SPMC vacated the property); (2) SPMC’s
making of Equity Payments to Plaintiffs before SPMC vacated the
property; (3) absence of liability insurance on the Bowling Alley
before SPMC vacated the property; and (4) the timing of SPMC’s
registration to do business in Indiana.
(Defs. Ex. E at 6-7.)
But Plaintiffs’ admissions do not negate all of their alleged
damages.
For example, the admissions do not address the damages
4
Magistrate Judge Springmann determined that Indiana law applies to Plaintiffs’
fraud claim, and that Utah law applies to the breach of contract and alter ego
claims. (DE #19 at 5.) The Court need not separately consider the alter ego
claim in Count II because under Utah law, “[a]lter ego theory is not an
independent claim for relief; rather, it is a theory of liability.” Jones &
Trevor Mktg., Inc. v. Lowry, 2012 UT 39, 284 P.3d 630, 640 n.1 (Utah 2012)
(citation omitted).
‐20‐
allegedly caused by SPMC’s failure to pay Rent or Equity Payments
after it vacated the property on June 10, 2014.
Defendants
because
their
also
argue
Initial
that
Plaintiffs
Disclosures’
failure
have
to
no
standing
satisfy
26(1)(A)(iii) leaves them with no admissible damages.
Rule
The Court
has found that Plaintiffs’ Initial Disclosures, including the
Lease Agreement, provide evidence of damages for breach of contract
under Utah law.
Thus, this argument is unavailing.
Considered in
the light most favorable to Plaintiffs, the evidence that SPMC did
not secure the Bond and vacated the Bowling Alley prior to the
expiration of the Lease, coupled with the Lease Agreement’s remedy
provisions, provide sufficient evidence of damages to satisfy the
injury in fact requirement for standing.
Therefore, the Court
will consider the merits of Plaintiffs’ claims.
Count I - Breach of Contract Claim
SPMC moves for summary judgment on Count I of the Amended
Complaint.
Count I alleges that SPMC breached the Lease by
abandoning the Bowling Alley and failing to: secure the Bond; pay
rent, taxes and assessments; maintain the insurance coverage; and
maintain the Property in good order and condition.
(Am. Compl. ¶¶29-30).)
(DE #24 at 5
In Utah, “[t]he elements of a prima facie
case for breach of contract are (1) a contract, (2) performance by
the party seeking recovery, (3) breach of the contract by the other
party, and (4) damages.” Carmichael, 402 P.3d at 149 n.5 (citation
‐21‐
omitted).
As noted above, damages for breach of contract under
Utah law “may include general (or direct) and consequential (or
special) damages.”
on
Plaintiffs’
Trans-W. Petroleum, 379 P.3d at 1202.
admissions,
SPMC
argues
that
their
Relying
breach
of
contract claim should be dismissed based on a lack of evidence of
damages.5 “Admissions made under Rule 36, even default admissions,
can serve as the factual predicate for summary judgment.”
United
States v. Kasuboski, 834 F.2d 1345, 1350 (7th Cir. 1987) (citations
omitted); see Fed. R. Civ. P. 56(c)(1)(A).
Plaintiffs’ admissions
conclusively establish that they have no evidence of damages
proximately
caused
by
the
absence
of
liability
insurance
or
nonpayment of Rent, Equity Payments, or utilities from June 1,
2013, through June 10, 2014, when SPMC vacated the Bowling Alley;
and that when SPMC vacated the Bowling Alley, the bowling alley
computers and scoring system were fully operable.
6-9.)
(Defs. Ex. E at
However, these admissions do not address the damages
allegedly caused after SPMC vacated the Bowling Alley.
The evidence demonstrates that on June 9, 2014, Plaintiffs
informed SPMC that it must submit the Bond to avoid being in
default under the Lease, and that SPMC vacated the Bowling Alley
the following day.
While the Amended Complaint alleges SPMC
abandoned the Bowling Alley, Defendants assert that Plaintiffs
5
SPMC also argues that summary judgment should be granted on Count I because
Plaintiffs’ Initial Disclosures fail to satisfy Rule 26(a)(1(A)(iii). The Court
has considered and rejected this argument, and need not address it again here.
‐22‐
locked SPMC out of the Bowling Alley.
Considering the evidence
before the Court in the light most favorable to Plaintiffs, there
is a genuine issue of material fact as to whether SPMC breached
the Lease.
The Lease Agreement provides for remedies for breach
of the Lease’s provisions, including Plaintiffs’ entitlement to
recover unpaid rent. Because there is evidence sufficient to raise
a genuine issue of material fact as to Plaintiffs’ damages under
the Lease Agreement, the Court denies SPMC’s motion for summary
judgment as to Count I.
Count III - Fraud Claim
Defendants move for summary judgment on Count III of the
Amended Complaint.
Count III alleges that Defendants fraudulently
induced Plaintiffs to enter into the Lease. “To constitute a valid
claim for fraud, the complaining party must prove there was a
material misrepresentation of past or existing fact made with
knowledge
or
reckless
ignorance
of
its
falsity,
and
the
misrepresentation caused reliance to the detriment of the person
relying upon it.”
Am. United Life Ins. Co. v. Douglas, 808 N.E.2d
690, 701 (Ind. Ct. App. 2004) (citation omitted).
“To prevail on
a fraud claim, a plaintiff claiming both breach of contract and
fraud must prove that the breaching party committed the separate
and independent tort of fraud and that such fraud resulted in
injury distinct from that resulting from the breach of contract.”
‐23‐
Dean v. Kruse Found., Inc. v. Gates, 932 N.E.2d 763, 768 (Ind. Ct.
App. 2010) (citation omitted).
Defendants
argue
that
Plaintiffs’
fraud
claim
is
a
repackaging of the breach of contract claim, with no alleged injury
distinct from the breach of contract.
The Court agrees.
Indiana
“bar[s] fraud claims where the damages arising from the fraud claim
are not separate and distinct from the damages resulting from a
breach of contract.”
Garmin Wurzburg Gmbh v. Auto. Imagineering
& Mfg., LLC, No. 314CV02006PPSCAN, 2016 WL 3072011, at *2 (N.D.
Ind. June 1, 2016) (citing Epperly v. Johnson, 734 N.E.2d 1066,
1073 (Ind. Ct. App. 2000) (finding that the plaintiff's fraud claim
failed because the defendant's misrepresentation was merely a
breach of the parties' contract; “[t]he misrepresentation did not
result in injury distinct from that resulting from the breach, and
it thus is not independently actionable as fraud”)).
There is no
evidence before the Court of an injury resulting from Defendants’
allegedly fraudulent conduct that is separate and distinct from
the alleged injury resulting from the breach of the Lease.
(See
also Am. Compl. ¶57 (alleging in Count III that Plaintiffs were
“damaged when [SPMC] abandoned the Property after fulfilling only
eleven (11) months of the thirteen (13) year lease.”).) Therefore,
Defendants’ motions for summary judgment on Count III is GRANTED.
‐24‐
Count II - Alter Ego Claim
Brinton moves for summary judgment on Count II of the Amended
Complaint, which alleges that Brinton should be held liable for
SPMC’s conduct under an alter ego theory of liability.
The Lease
Agreement and its addendum provide that the Lease was between
Plaintiffs and SPMC as tenant, and are signed by Brinton as
managing member of SPMC.
(DE #24-1 at 1, 8-10.)
Under Utah law,
“[t]he alter ego doctrine is an exception to the general rule that
limits
stockholders’
corporation.”
liability
for
obligations
of
Lowry, 284 P.3d at 635 (citation omitted).
the
“If a
party can prove its alter ego theory, then that party may ‘pierce
the corporate veil’ and obtain a judgment against the individual
shareholders even when the original cause of action arose from a
dispute with the corporate entity.”
Id. (citation omitted).
A
party may pierce the corporate veil when (1) there is “such unity
of interest and ownership that the separate personalities of the
corporation and the individual no longer exist” and (2) “the
observance of the corporate form would sanction a fraud, promote
injustice, or an inequitable result would follow.”
Norman v.
Murray First Thrift & Loan Co., 596 P.2d 1028, 1030 (Utah 1979)
(citations omitted).
Utah courts consider the following factors
in determining whether the formalities element of the Norman test
is satisfied:
‐25‐
(1) undercapitalization of a one-man corporation; (2)
failure to observe corporate formalities; (3) nonpayment
of dividends; (4) siphoning of corporate funds by the
dominant stockholder; (5) nonfunctioning of other
officers or directors; (6) absence of corporate records;
(7) the use of the corporation as a facade for operations
of the dominant stockholder or stockholders; and (8) the
use of the corporate entity in promoting injustice or
fraud.
Lowry, 284 P.3d at 636 (citing Colman v. Colman, 743 P.2d 782, 786
(Utah Ct. App. 1987)).
in
an
alter
ego
“Where a party moves for summary judgment
case,
the
court
must
evaluate
the
entire
relationship between the corporation and its officers and ask
whether there are disputed facts relevant to Norman's two-part
test for piercing the corporate veil.”
Id. at 638.
“[E]vidence
of even one of the Colman factors may be sufficient to suggest
both elements of a party's alter ego theory.”
Id.
Defendants argue that the alter ego claim should be dismissed
because Plaintiffs have no admissible evidence supporting this
theory of liability.
Defendants cite Plaintiffs’ admissions that
they have no evidence that, during the period between June 1, 2013,
and June 10, 2014: SPMC was undercapitalized; SPMC’s cash and
assets were not kept separate from other entities; SPMC did not
maintain accurate financial records; Brinton used SPMC assets for
the benefit of other entities; SPMC was a sham used by Brinton to
protects his own assets; or SPMC had no real business organization.
(Defs. Ex. E at 7-8.)
In addition, Defendants proffer evidence
that Brinton’s personal funds are kept separate from any entity’s
‐26‐
funds, including SPMC’s funds, as well as documentation of SPMC’s
business registrations, license, operating agreement, tax returns,
separate bank account, and articles of organization.
before
the
Court
undercapitalization
does
of
not
SPMC,
proffer
any
siphoning
of
The record
evidence
funds
by
of
the
Brinton,
nonfunctioning of other members, an absence of company records, or
failure to observe company formalities.
Because there is no
genuine issue of material fact as to any of the Coleman factors,
Brinton’s motion for summary judgment on Count II is GRANTED.
CONCLUSION
For the reasons set forth above, Defendant Gary Brinton’s
motions for summary judgment (DE #126 and DE #131) are GRANTED;
Defendant Seven Peaks Marketing Chicago, LLC’s motion for summary
judgment
(DE
#128)
is
GRANTED
IN
PART
AND
DENIED
IN
PART;
Plaintiffs’ motion for leave to file a response to Defendants’
motions for summary judgment instanter (DE #133) is DENIED. Counts
II and III are DISMISSED.
Count I remains pending against Seven
Peaks Marketing Chicago, LLC.
DATED:
March 28, 2018
/s/ RUDY LOZANO, Judge
United States District Court
‐27‐
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