MEMORANDUM OPINION AND ORDER

MILTON I. SHADUR, Senior District Judge.

Peter Moede ("Moede") filed this action to recover what he claims as his share of the proceeds of a sale of property in which he was one of five investors. Three of the four co-investor defendants—Ronald Sandler ("Sandler"), Mitchell Miller ("Miller") and Robert Michelson ("Michelson")1— have moved for summary judgment on Moede's two counts charging breach of the Operating Agreement ("Agreement") and violation of the Illinois Limited Liability Company Act ("Act," 805 ILCS 180/1-1 to 180/60-1).2 For the following reasons, their motion is granted in part and denied in part.

Standard of Review

Every Rule 56 movant bears the burden of establishing the absence of any genuine material factual dispute (Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)). For that purpose courts consider evidentiary records in the light most favorable to nonmovants and draw all reasonable inferences in their favor (Lesch v. Crown Cork & Seal Co., 282 F.3d 467, 471 (7th Cir.2002)). But to avoid summary judgment a nonmovant "must produce more than a scintilla of evidence to support his position" that a genuine issue of disputed fact exists (Pugh v. City of Attica, 259 F.3d 619, 625 (7th Cir.2001)) and "must set forth specific facts that demonstrate a genuine issue of triable fact" (id.). Ultimately summary judgment is warranted only if a reasonable jury could not return a verdict for the nonmovant (Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)).

Factual Background

This Court's August 27, 2009 memorandum opinion and order ("Opinion"), 701 F.Supp.2d 997 (N.D.Ill.2009) has already described many of the key facts in this case. Because some new facts have come to light since the issuance of the Opinion, this opinion will detail those facts with minimal reiteration of the factual background described in the Opinion.

On April 20, 2004 Moede and Movants, along with Pochter as the sole designated manager, formed BD Venture 2 LLC ("BD"), a manager-managed limited liability company, for the purpose of holding a 50% interest in Mount Prospect Partners, LLC, a company that was to manage, develop and sell a parcel of real estate (the "Land") in Mount Prospect, Illinois (D. St. ¶¶ 8, 10). Gendell Busse Partners, represented by Scott Gendell ("Gendell"), owned the other 50% share in Mount Prospect Partners, LLC (G. Decl. ¶ 23).

Gendell, who was also the manager of Mount Prospect Partners, LLC, approached Pochter in January 2006 offering to buy out BD's interest in the joint venture for $200,000 (G. Decl. ¶ 6). Gendell alternatively offered Pochter the opportunity to buy out Gendell Busse Partners' own 50% share at the same price (id.). Pochter declined both alternatives at that time (id.). Over the next several months, however, Pochter reconsidered the matter (id. ¶ 7), and in late September 2006 an agreement was reached for the sale of BD's interest for $200,000 (id. ¶ 8).

On October 4 a draft agreement documenting the sale was sent to Pochter, who rejected it because he also wanted to be released from his guaranty of the mortgage on the Land (id.). Gendell's employees procured the necessary documentation from the bank for that purpose, and on October 19 they told Pochter that the release documents would be ready by October 23 (the next Monday) and that a check for $200,000 would be ready not later than October 24 (id. ¶¶ 8-10). Pochter signed the release papers and picked up the check not later than October 25 (id. ¶¶ 11-12).

Pochter did not inform Moede or Movants of the sale (D. St. ¶ 27; see M. St. ¶¶ 41-42). Instead he sent an email to Moede and Movants on October 24, stating only that he had received an offer to sell the Land to Gendell for $200,000 and that he recommended going forward with the sale (D. St. ¶¶ 25-26).4 Michelson then called Gendell to confirm that he had made such an offer. Gendell responded that the deal was already done (having been agreed to some two weeks earlier) and that all that remained was for Pochter to pick up the check payable to BD (G. Decl. ¶ 11). Michelson called again the next day and was told Pochter had indeed picked up the check (id. ¶ 12).

After learning of Pochter's dissembling, Sandler called and emailed Pochter to discuss both Pochter's lie and the return of Movants' investments (S. Decl. ¶¶ 27-28). At some point during their interchange Pochter told Sandler that BD had $307,000 on hand and that he believed wind-up costs for BD would total $12,000 to $14,000 (D. St. ¶ 29). Sandler then demanded that Movants receive $29,000 each—an amount representing what he believed to be each Movant's 10% interest in BD's cash on hand following the sale.5 Sandler also demanded that neither Moede nor Pochter receive any distribution until Movants had a chance to examine the books (S. Decl. Ex. G).6 In response to Sandler's demand, each Movant received a check for $29,000 on or about October 27 (D. St. ¶ 33).

Moede was not copied on any of the emails responsive to Pochter, nor indeed did he know that the sale had been consummated (M. St. ¶¶ 41-44). And he was also wholly unaware of Sandler's demand to Pochter that Movants receive their distributions before any distributions were made to Moede or Pochter (see id.).

Sometime in November, after Movants had received their distributions, Miller called Moede's accountant Daryl Nirode ("Nirode"). During that conversation Miller told Nirode that the Land had been sold and that Movants had received their distributions (M. St. ¶ 44). Moede then directed Nirode to communicate with Pochter to arrange for Moede's distribution from the proceeds of the sale (id. ¶ 33 [sic—should be M. St. ¶ 45, because it directly follows M. St. ¶ 44]).

When Nirode did so, Pochter agreed to give Moede only $100,000 at that time (id.). Pochter sent Moede a check in that amount in mid-December, but he stopped payment on the check before it could be honored. In late December Pochter sent Moede a second check, but Moede could not cash it because of insufficient funds (id.).

Pochter later disappeared, and in June 2007 Moede obtained a default judgment against him in this action. Moede has been unable to collect on the judgment.

Breach of the Agreement

As this Court has previously said, there is no dispute that the Agreement was a legally binding contract among the parties. Moede claims two breaches of the Agreement: (1) Movants' approval of the sale of the Land without his approval or consent, in violation of its Section 6.3, and (2) Movants' demand for and acceptance of distributions from the sale that were not matched by a proportional distribution to Moede (corresponding to their respective percentage interests in BD), in violation of its Sections 5.1 and 5.2.

Approval of the Sale of Land

Moede's claim that Movants breached the Agreement by approving the sale of the Mount Prospect land cannot survive the current summary judgment motions. Movants have submitted supplemental evidence comprising the Gendell declaration and supporting exhibits—and that evidence shows the sale was complete before Pochter notified any of BD's other members—including Movants—of Gendell's offer.

Moede has not challenged the admissibility of that supplemental evidence, which clearly establishes that Pochter had negotiated and agreed to the sale of the Land well before his October 24 email to Movants and Moede. Because Movants played no part in approving the sale of the Land before it was consummated, as a matter of law they did not breach any provision of the Agreement in that respect. To be sure, Pochter did not comply with Agreement § 6.3—but that does not support Moede's claim against Movants.

Demand for and Acceptance of Unmatched Distributions

But Moede's claim that Movants breached the Agreement by their improper conduct in connection with the distributions from the proceeds of sale stands on a wholly different footing.7 Disputed issues of fact exist both as to the amount of money available to BD after the sale of the Land and as to Movants' actions in demanding their distributions.8

Movants claim that the $29,000 each received was 10% of the cash Pochter claimed to have on hand, so that they did not receive disproportionate distributions. Despite Moede's objections as to evidentiary admissability, there is no hearsay problem posed by Movants' tendering of Pochter's statements that BD had $307,000 on hand and that wind-up costs would be approximately $12,000 to $14,000. Those statements have been offered not for their truth but rather for the effect the statements had on each of them (see Fed. R.Evid. 801(c)). Those statements about BD's assets could reasonably be argued to have led Movants to believe that each of them could anticipate receiving at least $29,000.

But Sandler's demand on behalf of Movants (himself included) that Pochter distribute that amount to each of them before any moneys were paid out to Pochter or to Moede was not only violative of his obligations but profoundly disturbing. After all, the very essence of the limited liability company structure requires its non-manager members (such as Sandler and the other Movants) to forgo active involvement in such decisions as are committed to the manager member or members.9 If Sandler had a legitimate concern that Moede's handling of his contribution obligations had disentitled him to proportionate treatment in terms of his percentage of ownership (a question left for the future, and hence one on which this opinion expresses no substantive views10), there were legitimate means available to preserve the status quo until that issue could be addressed—but the exercise of self-help by shutting Moede off from financial participation while Sandler and the other Movants "got theirs" was not among them.

Indeed, it is plain that Movants recognized that their receipt of such preferential distribution treatment could result in an overage. Sandler prepared a memorandum detailing the partial distribution, which stated in part (S. Decl. Ex. H):

By demanding distribution at an earlier time and under different circumstances than any potential distributions to Moede and Pochter, Movants received a preferential distribution that they expressly recognized could prove to be disproportionate. They cannot now disclaim responsibility for that known risk.

This opinion has already referred to Sandler's stated concerns about the level of Moede's entitlement to company funds. That subject calls for some elaboration, for Movants assert that they intended to delay Moede's and Pochter's distributions only until such time as the books could be examined. But that does not explain away their successful demand to jump the gun on any such examination by getting their distributions up front.12 Their demand expressly stated that they wanted their money immediately.

As Movants have characterized the matter, they were entitled to at least $29,000 each but might receive an even greater distribution after inspection of the books, because they thought neither Moede nor Pochter had fully funded his capital contribution. Most simply put, that belief and thought might perhaps attempt to rationalize Movants' self-preferential course of conduct, but they cannot justify it in legal terms.

Although what has been said to this point plainly calls for the rejection of Movants' effort to obtain summary judgment, a bit should be added about still another open factual issue—this one disputed, as the matters adverse to Movants and already set out are not. Despite Movants' claim that BD's October bank statement proves that it had $307,000 in cash on hand for distribution, the actual amount available is unknown. Moede correctly points out that even though the bank statement shows deposits of $307,000—an amount consistent with what Movants say Pochter told them—it also shows withdrawals of $232,400. Absent evidence of where that money (other than the $87,000 distributed to Movants) went, Movants' claim that they received only their due is not supported. And that is separate and apart from the previously explained flaws in their position.

In sum, Movants demanded and received distributions from BD before and on different terms than any even attempted distribution to Moede. Moreover, even those preferred distributions may not have been proportionate, something that Movants recognized when Sandler made the improper demand on their behalf. For more than one reason, then, it cannot be said that Movants did not breach the Agreement by demanding and receiving their preferred distributions.

Violation of the Act

Moede has also alternatively pleaded claimed violations of the Act by Movants. In that respect, of course, the parties are subject to the Act only to the extent it is not trumped by the Agreement (Act § 15-5). In the absence of a showing that the Agreement is invalid13 or otherwise inoperative, the Agreement would govern to the extent that it modifies the Act.

Movants correctly point out (D. Mem. 9-12) that the Agreement supersedes the Act by requiring consent of members holding only a majority of the percentage interests to authorize the sale of the Land and by providing for distributions in proportionate—not equal—shares. Relatedly, any Act provisions that would otherwise require distributions in equal shares upon BD's dissolution are inoperative, because the Agreement provides instead that distributions upon dissolution will be made proportionally (D. Mem. 10).

With BD being manager-managed, and with no assertion that Movants exercised the authority of a manager (except, of course, for their already-discussed intrusion on the manager's role by their improper demand for preferred distributions), the one reported Illinois case that addresses any provision of Act § 15-3 teaches that Movant owed no duty to BD or to Moede simply by virtue of being members of BD (Act § 15-3(g)(1); Katris v. Carroll, 362 Ill.App.3d 1140, 299 Ill.Dec. 482, 842 N.E.2d 221 (1st Dist.2005)).14 But that principle, as set forth in the cited section of the Act and in the Katris opinion's analysis of Act § 15-3(g)(3), does not take account of the real focus of Movants' breach of the Act. Assuredly with the facts viewed through a pro-Moede lens, and indeed as admitted by Movants themselves, Movants have clearly violated their fiduciary obligations to fellow member Moede as defined in Act §§ 15-3(a) through 15-3(d).

In sum, the same conduct by Movants that bars summary judgment in their favor stemming from their demand for and receipt of preferred distributions precludes summary judgment in their favor as to Moede's corresponding claim under the Act. That claim also survives for future resolution.

Conclusion

For the reasons stated in this opinion, Movants' motion for summary judgment is granted as to Moede's claim that they breached the Agreement by assenting to the sale of the Land. But their Rule 56 motion is denied as to Moede's claims that they breached both the Agreement and the Act by demanding and taking preferred distributions. This action is set for a status hearing at 8:45 a.m. December 2, 2009.