MARVIN E. ASPEN, District Judge.
This dispute between Washington Regional Medical Center ("WRMC") and Citadel Group Limited ("Citadel") pertains to the development of a medical office building ("MOB") in Springdale, Arkansas. WRMC moves for partial summary judgment on Count II of Citadel's amended complaint. (Dkt. No. 124.) In Count II, Citadel seeks lost profits arising from WRMC's alleged breach of an agreement between them. (Dkt. No. 63.) We grant WRMC's motion.
WRMC is an Arkansas not-for-profit corporation that operates medical facilities in that state. (Def.'s 56.1 Facts ¶ 1.) Citadel is a Delaware corporation headquartered in Chicago, Illinois and engaged in real estate development with a focus on the healthcare industry.
In early 2005, WRMC was considering developing a MOB in Springdale, Arkansas on property owned by its affiliate, the Washington Regional Foundation.
Seeking this type of arrangement, WRMC's Senior Vice President, Tami Hutchison, who Bradley had placed in charge of the project, issued a "Request for Proposal" ("RFP") on April 26, 2005 to eight developers, including Citadel. (Id. ¶ 2.) The RFP indicated that WRMC was interested in executing a "long-term ground lease" with a developer for the purpose of developing a 30,000 square foot medical facility in which WRMC would then lease a portion of the space for a primary care practice. (Id. ¶ 3.) Some of the remaining space would be preleased for use as an ambulatory surgery center and an orthopedic clinic. (Dkt. No. 137-9 at 4-5.) Under a heading titled "[e]stimated ground lease rate and terms," the RFP stated that WRMC was "propos[ing] a 30-year lease" at $1,812 per month for the first ten years, $1,993 per month for the next ten years, and $2,192 per month for the last ten years. (Id. at 5.) The RFP also identified certain "Requested Terms" to be included in the proposals, specifically the "[p]roposed lease rate and [o]ther [l]ease [t]erms." (Id.)
On May 13, 2005, Citadel submitted a proposal in response to the RFP. (Def.'s 56.1 Facts ¶ 5.) The first section of the proposal was a proposal letter with an appended "Authorization to Proceed" identical in all but one line to the "Authorization to Proceed" WRMC would later sign. (Dkt. No. 137-9 at 11-12; Def.'s 56.1 Facts ¶ 12.) The second section of the proposal was a three-page "Preliminary Leasing Terms Sheet" ("Terms Sheet"). (Def.'s 56.1 Facts ¶ 6.) The Terms Sheet began by stating:
(Dkt. No. 137-9 at 13.) The Terms Sheet then provided an estimated project cost of $5,000,000, with the caveat that the final budget would be "determined by [WRMC]'s facility design specifications." (Id.) The Terms Sheet also proposed two pairs of variable and fixed rate lease options for the space leases in the MOB. (Id. at 13-14.) The monthly cost per square foot of the different space lease options varied depending on whether the leased space would be used for primary care practice, an ambulatory surgery center, or other medical offices. (Id.) The Terms Sheet also proposed a sixty-year "fair market value" lease for the ground lease on the property. (Id. at 15.)
Although Citadel's proposal sought a response by May 27, 2005, WRMC requested more information about the proposal on June 7, 2005. (Id. at 12; Pl.'s 56.1 Facts ¶ 9.) Citadel provided a detailed development budget of $6,200,000 in response to this request on June 15, 2005. (Pl.'s 56.1 Facts ¶ 11.) On July 19, 2005, William Bradley presented Citadel's proposal and another developer's proposal to Washington Regional Medical System's Board of Directors ("the Board"), which governs WRMC. (Id. ¶ 13.) Bradley recommended Citadel's proposal over the other developer's
After WRMC's auditors certified that the proposal would qualify for off-balance sheet treatment, Citadel submitted another proposal letter to WRMC on August 24, 2005. (Id. ¶ 16; Def.'s 56.1 Facts ¶ 10.) Although the letter began by stating "Citadel Group Limited is pleased to present [WRMC] with [Citadel's] comprehensive development proposal," the letter does not expressly incorporate any other documents. (Def.'s 56.1 Facts ¶¶ 10-11.) Nevertheless, the August 24 letter was nearly identical to the May 13 letter. Besides certain dates, the only substantive difference in the August 24 letter was the addition of a sentence in the appended "Authorization to Proceed." (Id. ¶ 12.) The text of the Authorization to Proceed was as follows, with emphasis added to the sentence not previously included:
(Def.'s 56.1 Facts ¶ 18.) Bradley signed the Authorization to Proceed on behalf of WRMC on September 15, 2005, despite the fact that Citadel had sought a response by August 31, 2005. (Dkt. No. 137-9 at 12.)
Although they concede they had an agreement as of September 15, 2005, the parties dispute the scope of that agreement. (Def.'s 56.1 Facts ¶ 16.) Citadel contends that WRMC was accepting Citadel's "comprehensive development proposal" by signing the Authorization to Proceed. (Pl.'s 56.1 Facts ¶ 18.) In particular, Citadel claims that WRMC knew it was accepting the Terms Sheet from the May 13 proposal, because WRMC relied upon Citadel's proposed lease terms in comparing Citadel's proposal to the competing developer's. (Id. ¶¶ 13, 17-18.) As such, Citadel believes it is entitled to damages for the profits it would have received had it implemented all the elements of the comprehensive development proposal. (Id. ¶ 39.) According to Citadel, these lost profits include the rental income from the space leases discussed in the Terms Sheet, the residual value of the MOB, and other fees that would have been incurred upon the deal's closing. (Def.'s 56.1 Facts ¶ 73.)
On the other hand, WRMC alleges that "[n]either ground nor space leases had been drafted, much less executed, at the time WRMC signed the Authorization." (Id. ¶ 26.) In support of this contention, WRMC points to the fact that the language of the Authorization to Proceed anticipates that the execution of the ground and space leases might never occur. (Id. ¶ 15.) Indeed, WRMC argues that ground and space leases were never executed, and thus Citadel cannot seek lost profits based on them. (Mem. at 12-15.)
Whatever the scope of their agreement on September 15, 2005, the parties continued
On March 21, 2006, Citadel's Adam Lynch sent WRMC's Tami Hutchison an email attaching "a preliminary calculation for [the MOB's] lease rates." (Def.'s 56.1 Facts ¶ 41.) The attached document compares what it describes as the "Original Terms Sheet" from May 9, 2005, with "Preliminary Lease Rates" dated March 21, 2006. (Lynch Dep., Ex. 36 at 2.) The new "Preliminary Lease Rates" are different and higher. (Id.) There is also a formula explaining how the new lease rates were calculated as the product of "cost per s[quare] f[oot]/org cost per s[quare] f[oot] × org avg lease rate." (Id.)
Upon receiving the March 21 email, Hutchison responded to Lynch the same day saying, "Wow, this is a big difference. We need to discuss." (Def.'s 56.1 Facts ¶ 42.) Later, on April 26, 2006, Hutchison again wrote to Lynch regarding the proposed lease rates:
(Id. ¶ 43.) Although WRMC states otherwise, Citadel contends that Hutchison knew that a fair market value lease rate was not required by the parties' agreement but was merely financially better for WRMC. (Pl.'s 56.1 Facts ¶ 26.) Citadel also points to the undisputed facts that a fair market value lease rate for a standard MOB would be between $22 and $25 per square foot and that the lease rate quoted in Citadel's March 21 correspondence for the primary care space was $23.44. (Id. ¶ 27.)
On May 4, 2006, Hutchison informed Lynch that WRMC was considering the cost of terminating its relationship with Citadel. (Pl.'s 56.1 Facts ¶ 29.) The following day Hutchison sent Citadel CEO David Varwig a letter stating:
(Def.'s 56.1 Facts ¶ 45.) Varwig responded to Hutchison's letter on May 8, 2006 with a "current estimate of costs incurred to date" totaling $722,216. (Id. ¶¶ 48-49.) Varwig also added: "If you want to cancel the project, let me know as soon as possible and we will then direct everyone to stop work and send precise invoices."
At the May 16, 2006 meeting of WRMC's Board of Directors, Hutchison and WRMC's Chief Financial Officer, Dan Eckels, made a presentation comparing the second option outlined in Citadel's May 10 budget to the cost of developing the MOB without an outside developer. (Pl.'s 56.1 Facts ¶¶ 32-33.) Based on a comparison of Citadel's quoted lease rate of $23.66 per square foot and an "[i]nhouse" lease rate of $22.29 per square foot, that presentation identifies a "[r]ental premium w/developer" of $1.37 per square foot yielding a $2,466,000 difference in rent. (Id. ¶ 33.) According to Citadel's characterization, which WRMC disputes, the Board was therefore considering "the financial benefits of internalizing Citadel's profit." (Id. ¶ 34.) For its part, WRMC acknowledges that "separation costs" were discussed at the meeting but denies that these costs were understood to include the $4.5 million Citadel alleges in lost profits. (Def.'s 56.1 Facts ¶¶ 57-60.) Regardless, WRMC's Board voted to discontinue the use of an outside developer for the MOB at the May 16 meeting. (Id. ¶ 56.) WRMC informed Citadel that it was terminating their relationship the following day. (Id. ¶ 61.)
Following the termination of their agreement, Citadel sent WRMC a letter on May 30, 2006 seeking $587,841.94 "to reimburse [Citadel] for [its] progress payments and cover [its] outstanding balances with various parties." (Id. ¶ 64.) The letter enclosed "supporting documentation and invoices for Citadel Group's expenses incurred on the project." (Id.) WRMC contended that, by the terms of the Authorization to Proceed, it was only obligated to pay architectural and engineering fees. (Id. ¶ 65.) WRMC also refused to pay these expenses unless it received "deliverables" from Citadel, specifically the architectural, engineering, and construction plans for the MOB. (Pl.'s 56.1 Facts ¶ 35.) Citadel maintained that this work product was in fact its "development work product." (Id.) Ultimately, WRMC never made any payment to Citadel other than the original $60,000 deposit tendered along with the Authorization to Proceed. (Id. ¶ 37.)
Citadel filed its initial complaint in this action on January 31, 2007 in the Circuit Court of Cook County, Illinois. (Def.'s 56.1 Facts ¶ 71.) The initial complaint sought $587,841.94 in damages for breach of the Authorization to Proceed. (Id.) WRMC removed the case to this Court, and litigation continued on this single claim for two years. (Id. ¶ 72.)
Meanwhile, in May and July of 2007, WRMC signed agreements to continue using the same architect, AMB Development Group, LLC ("AMB"), and engineer, USI Consulting Engineers, Inc. ("USI"), that Citadel had hired. (Id. ¶ 69.) WRMC paid the architect and engineer sums of $207,646.40 and $29,923.06, respectively, which they had theretofore been seeking from Citadel. (Def.'s 56.1 Facts, Ex. 8
On February 18, 2009, apparently after learning of the MOB's construction, Citadel filed an amended complaint. (Dkt. No. 63 at 4.) The amended complaint contained the original count plus three additional counts. (Id. at 1-7.) Count II, on which WRMC now seeks partial summary judgment, alleges that WRMC's "actions in using Citadel's AMB and USI plans and the work product which they had prepared for Citadel to build the [MOB] are a breach of its agreement with Citadel." (Id. at 4.) Citadel further alleges that it has been damaged by "breach of the parties' agreement because it has lost the benefit of the bargain it would have otherwise enjoyed if it had been able to complete the project and lease it to [WRMC], as called for in the parties' agreement." (Id.)
Summary judgment is proper only 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 issue for trial 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. 2505, 2510, 91 L.Ed.2d 202 (1986). This standard places the initial burden on the moving party to identify those portions of the record that "it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986). Once the moving party meets this burden of production, the nonmoving party "must go beyond the pleadings" and identify portions of the record demonstrating that a material fact is genuinely disputed. Id.; Fed.R.Civ.P. 56(C). In deciding whether summary judgment is appropriate, we must accept the nonmoving party's evidence as true, and draw all reasonable inferences in that party's favor. See Anderson, 477 U.S. at 255, 106 S.Ct. 2505.
WRMC moves for partial summary judgment on Count II on the grounds that Citadel's claim for lost profits stems from ground and space leases that were not part of the Authorization to Proceed and were not ultimately executed.
Because the parties acknowledge they had an agreement, this case presents a question of contract interpretation. In Illinois,
If the written contract is unambiguous, a court must "construe the parties' intent from the writing itself as a matter of law and effectuate its plain and ordinary meaning." Doornbos Heating, 403 Ill.App.3d at 488, 342 Ill.Dec. 612, 932 N.E.2d at 1092; Interway, 85 Ill.App.3d at 1098, 41 Ill.Dec. 117, 407 N.E.2d at 619. Whether a contract is ambiguous is a question of law. Interway, 85 Ill.App.3d at 1098, 41 Ill.Dec. 117, 407 N.E.2d at 619; Curia, 587 F.3d at 829. A contract is ambiguous when "the language employed is susceptible to more than one reasonable meaning or obscure in meaning through indefiniteness of expression." Platt v. Gateway Intern. Motorsports Corp., 351 Ill.App.3d 326, 330, 286 Ill.Dec. 222, 813 N.E.2d 279, 283 (5th Dist.2004); Curia, 587 F.3d at 829.
In Illinois, a lease is a particular kind of contract with specific elements required to be enforceable. In order to be enforceable, the purported lease agreement must specify: "(1) the extent and bounds of the property; (2) the term of the lease; (3) the amount of rent; and (4) the time and manner of payment." Millenium Park Joint Venture, LLC v. Houlihan, 241 Ill.2d 281, 310, 349 Ill.Dec. 898, 948 N.E.2d 1 (2010); see also Feeley v. Michigan Ave. Nat'l Bank, 141 Ill.App.3d 187, 191, 95 Ill.Dec. 542, 490 N.E.2d 15, 18 (1st Dist. 1986). Absent any of these elements, there is no enforceable lease. Millenium Park Joint Venture, 241 Ill.2d at ____, 349 Ill.Dec. 898, 948 N.E.2d 1, 2010 WL 5187762, at *14. But even if a document contains all the essential elements of a lease, the document is not a lease if the parties do not intend it to be one. Feeley, 141 Ill.App.3d at 192, 95 Ill.Dec. 542, 490 N.E.2d at 18. In determining whether the parties intended for a document to be a lease, a court looks to "the language of the agreement, the circumstances surrounding the negotiation of the agreement, custom in the industry or trade, and the conduct of the parties before and after the agreement." Id. (citations omitted).
In this case, the lease-back plan WRMC initially pursued envisioned multiple leases and related agreements. Given this complexity, we are mindful of the Seventh Circuit's admonition that "Illinois
The material facts pertinent to Count II are undisputed. Citadel concedes that "many of the facts" upon which WRMC relies for its motion are true. (Resp. at 2.) Citadel argues, however, that the facts WRMC presents are only part of the story. (Id.) But even with Citadel's additional facts in view, there is no genuine issue of material fact as to whether the alleged breach of the parties' agreement can give rise to Citadel's damages for lost profits. Fed.R.Civ.P. 56(a). It can not. Therefore, WRMC is entitled to summary judgment on Count II. Id.
Before analyzing particular portions of the parties' agreement, it is important to have a broad view of the context in which their agreement arose. As is undisputed, WRMC initially sought to develop a MOB in Springdale, Arkansas through a lease-back arrangement with an outside developer. (Def.'s 56.1 Facts ¶¶ 4-5.) Under this arrangement, WRMC would grant a long-term lease to a developer, who would then build the MOB, retain ownership of it, and lease it back to WRMC. (Id. ¶ 5.) Had WRMC pursued the lease-back plan to fruition, the plan would have had two contracting phases: first, the selection of an outside developer; and second, the closing of the deal with the developer, including, among other things, the execution of ground and space leases. As it happened, WRMC only pursued the lease-back plan through the first phase. After hiring Citadel and working with it for several months, WRMC ultimately chose not to use an outside developer at all. (Pl.'s 56.1 Facts ¶¶ 32-33.) Nevertheless, Citadel attempts to construe the agreement executed during the first phase of contracting — the only agreement ever executed between WRMC and Citadel — as giving rise to damages that could only flow from an agreement reached in the second phase of contracting. The unambiguous language of the agreement the parties did reach, considered in light of the parties' continuing negotiation after that agreement, dictates this conclusion.
As an initial matter, the parties dispute what documents and portions thereof ought to be considered as their agreement. WRMC contends that the agreement consists solely of the one-paragraph Authorization to Proceed contained in Citadel's August 24, 2005 letter and executed by WRMC on September 15, 2007. (Def.'s 56.1 Facts ¶¶ 10-18.) Citadel maintains that WRMC agreed to a "comprehensive development proposal" that includes, in particular, the Terms Sheet accompanying Citadel's letter of May 13, 2007. (Def.'s 56.1 Facts ¶¶ 8, 17.)
In any event, this dispute is immaterial. Even if we view the contract as encompassing both the Authorization to Proceed and the Terms Sheet, the language in those documents unambiguously indicates that Citadel and WRMC had not reached agreement on the ground and space leases essential to Citadel's claim for damages in Count II. According to its own title, the Terms Sheet was in fact a "Preliminary Leasing Terms Sheet." (Dkt. No. 137-9 at 13 (emphasis added).) Furthermore, the document begins with a broadly-worded disclaimer providing that:
(Id. (emphasis added)) Words and phrases like "preliminary" and "subject to change" are not ambiguous, and we can interpret them as a matter of law. Interway, 85 Ill.App.3d at 1098, 41 Ill.Dec. 117, 407 N.E.2d at 619. Under their plain and ordinary meaning, these words and phrases convey a lack of finality. Id. Thus, the Terms Sheet was clear on one essential point: the terms contained therein were not final.
The lack of finality apparent from the face of the Terms Sheet means that, even if the Terms Sheet is part of the parties' contract, their contract does not include ground and space leases. As the court in Feeley made clear, "the final determination in ascertaining whether an instrument is a lease is what was intended by the parties." 141 Ill.App.3d at 192, 95 Ill.Dec. 542, 490 N.E.2d at 18. The unambiguously preliminary nature of the lease terms outlined in the Terms Sheet demonstrates that neither Citadel in drafting the document, nor WRMC in accepting it, was agreeing to definite lease terms.
Further equivocation with respect to specific terms makes this intent clear. With respect to the space leases, WRMC was to "choose between" fixed and variable lease rate options for both the primary care space and the ambulatory surgery center. (Dkt. No. 137-9 at 13-14.) Thus, the Terms Sheet did not even purport to establish a "definite and agreed price of rental" for the space leases, as is required to have an enforceable lease. Feeley, 141 Ill.App.3d at 191, 95 Ill.Dec. 542, 490 N.E.2d at 18. Similarly, the Terms Sheet's proposal for a sixty-year ground lease is followed by a parenthetical stating that "the Project Owner [Citadel] is flexible on the Lease Term." (Dkt. No. 137-9,
This conclusion also accords with the document the parties both agree is part of their agreement, the Authorization to Proceed. Immediately prior to the date and signature block, the Authorization to Proceed concludes: "Washington Regional Medical Center will only be responsible for architectural and engineering fees in the event Washington Regional Medical Center does not execute its space leases and ground lease." (Dkt. No. 137-9 at 72 (emphasis added).) The contingent phrasing of this sentence leaves little doubt that the leases had not been and were not being executed as of the signing of the Authorization to Proceed. PFT Roberson, 420 F.3d at 732 ("[T]he parties need not recite a formula to demonstrate that a definitive agreement lies in the future. Words expressing contingency or dependence on a subsequent event or agreed-on element will do."). Instead, the execution of or failure to execute the leases was to occur in the future. Thus, the Authorization to Proceed unambiguously demonstrates that the parties were not executing ground and space leases by signing that document.
The parties' behavior after the signing of the Authorization to Proceed further confirms the scope of their agreement. See Feeley, 141 Ill.App.3d at 192, 95 Ill.Dec. 542, 490 N.E.2d at 18 (holding that "the conduct of the parties before and after the agreement" is relevant to determining whether the parties intended an instrument to be a lease). It is undisputed that the parties continued to negotiate regarding the terms of the ground and space leases after the signing of the Authorization to Proceed but prior to WRMC's termination of Citadel as developer.
Although Citadel argues that WRMC should not have been surprised at the increase, the record is clear that the change in lease rates concerned WRMC. (Def.'s 56.1 Facts ¶ 42; Pl.'s 56.1 Resp. ¶ 42.) In response to Lynch's email, Hutchison responded, "Wow, this is a big difference. We need to discuss." (Def.'s 56.1 Facts ¶ 42.) Later, on April 26, 2006, Hutchison again emailed Lynch saying, "we have to have a lease rate that is fair market value, or we aren't going to be able to give you the support you'll need in order to close by May 15th." (Id. ¶ 43.) Citadel claims it had already provided a fair market value lease rate and that it did so again in the
Citadel nevertheless argues that "all of the key terms to the development and leases were set" when WRMC signed the Authorization to Proceed on September 15, 2005. (Resp. at 10.) In particular, Citadel relies on the fact that the Terms Sheet "outlined very specific leasing terms which show a lease rate as a function of the final cost of the building pursuant to a simple formula." (Id. at 14 (citation omitted).) Thus, according to Citadel, "the specific financial (or deal) terms of the lease were a part of the proposal letter accepted by WRMC." (Id.)
But whatever formulaic relationship might have existed between the terms on the Terms Sheet, this relationship is certainly not apparent from the face of the document. Indeed, the formula Citadel presents in its Response — "Total project cost × 0.0884 [the capital rate] ÷ 30,000 [square feet] = Average rent per [square foot]" — does not appear on the Terms Sheet. (Id. at 4; Dkt. No. 137-9, at 13-15.) If this formula was as fixed and fundamental as Citadel now claims it is, its absence from the Terms Sheet — a document Citadel drafted — is glaring. Nebel, Inc. v. Mid-City Nat. Bank of Chicago, 329 Ill.App.3d 957, 968, 263 Ill.Dec. 843, 769 N.E.2d 45, 53 (1st Dist.2002) ("[C]ontractual agreements are construed against the drafter."). And while Citadel, as the nonmovant, is entitled to all reasonable inferences based on the facts in the record, it is not entitled to superimpose a formula on a document where no such formula appears. See PFT Roberson, 420 F.3d at 730 (declining to enforce preliminary agreement where party seeking enforcement relied on formula for contract price that did not appear in document purporting to be contract).
Regardless of whether the Terms Sheet contained the formula, Citadel claims that WRMC knew that the lease rates were a function of the total project cost. (Resp. at 13-14.) But this fact, if true, is immaterial. Even if WRMC knew that Citadel based its lease rates on the total project cost, WRMC was not committing to pay any total project cost, however high, in the form of correspondingly high lease rates. Indeed, the total project cost — the key variable in Citadel's formula — was described as "estimated" on the Terms Sheet. (Dkt. No. 137-9 at 13.) Furthermore, the last line of the disclaimer on the Terms Sheet is also particularly relevant: "The project costs as well as structural terms are subject to change following review of the final project design along with architect's and construction manager's final cost estimate." (Id.) It would contravene the expressly preliminary nature of the Terms Sheet to say that WRMC was assenting to whatever output the formula generated when the key input, total project cost, was so obviously in flux.
Citadel also points to our holding at the motion to dismiss stage that a reasonable inference could be drawn that the Authorization to Proceed may have "restricted WRMC from proceeding with the Project without Citadel." (Dkt. No. 77 at 16.) But the standard at the summary judgment stage is different. See Fed.R.Civ.P. 56(e) (noting that "if a party fails to properly support an assertion of fact" the court may grant summary judgment). We are no longer required to accept as true Citadel's assertion that WRMC's completion of the MOB using the same architects and engineers breached the agreement. (Dkt. No. 63 at 4.) The only relevant text in the agreement provides that WRMC's failure to execute ground and space leases obligates it to pay any architectural and engineering fees. (Dkt. No. 137-9 at 72.) The agreement is silent as to whether WRMC's use of the same architects and engineers to complete the MOB would be a breach. As the Seventh Circuit has said, summary judgment is the "put up or shut up" moment in a case. AA Sales & Assoc., Inc. v. Coni-Seal, Inc., 550 F.3d 605, 612 (7th Cir.2008). Thus, Citadel's silence on this point is fatal.
Viewing the contract as a whole, as we must, what we are able to discern is that the parties' agreement was a preliminary one that contemplated future agreements. Bourke v. Dun & Bradstreet Corp., 159 F.3d 1032,
Lastly, Citadel also claims damages pursuant to a 4% development fee referenced in the Authorization to Proceed and a 2.5% construction and permanent lending fee referenced in the August 24 letter accompanying the Authorization to Proceed. (Id.; Dkt. No. 137-9 at 71-72.) Citadel's claim to these fees is plagued by the same faulty assumption that doomed its claim to income from the leases. (Def.'s 56.1 Facts ¶ 78-79.) Because WRMC chose not to close the lease-back deal with Citadel — as WRMC was entitled to do — Citadel was never entitled to these fees and cannot recover them now.
The Authorization to Proceed made the outstanding portion of the 4% development fee contingent on "Project funding," which was to occur, if at all, at the closing of the lease-back deal. As the Authorization to Proceed provides:
(Dkt. No. 137-9 at 72.) This payment "schedule" contemplates two relevant occurrences: first, "execution of this proposal"; and second, "Project funding." (Id.) It is undisputed that WRMC made the deposit payment based on the projected budget at the time the Authorization to Proceed was executed.
Citadel is also not entitled to the 2.5% construction and permanent lending fee. Citadel's August 24 letter accompanying the Authorization to Proceed describes the lending fee as follows:
(Dkt. No. 137 at 71.) This sentence, like virtually all the documents upon which Citadel relies, unambiguously demonstrates the preliminary nature of the parties' agreement. The rates quoted were "anticipated" and "based on market conditions." (Id.) And furthermore, the "Project loan" described was never issued, because the deal never closed. Thus, WRMC was not agreeing to pay this fee by signing the Authorization to Proceed, and Citadel is also not entitled to it as a matter of law.
Citadel is not entitled to seek "the benefit of the bargain" from a deal that was never consummated. (Dkt. No. 73 at 4.) Accordingly, WRMC's motion for partial summary judgment on Count II is granted. It is so ordered.
Similarly, in Dawson v. General Motors Corp., the Seventh Circuit considered whether correspondence between General Motors ("GM") and one of its dealers regarding renewal of the dealer's sub-lease with GM was sufficient to form the basis of a contract claim. 977 F.2d 369, 373 (7th Cir.1992). Based on the parties' extensive prior dealings as sub-lessor and sub-lessee, the Court found that GM's assurance that the dealer's sub-lease would be renewed at a rental rate that would not increase more than three percent over any five-year term was sufficiently definite to survive a motion to dismiss. Id. at 374. In Dawson, the calculation was as simple as adding three percent to the initial lease rate at the beginning of a five-year term.
By contrast, Citadel's formula contains numerous contingencies dependent on the subjective "wish, will, and desire" of numerous parties. Sonnenblick-Goldman, 420 F.2d at 1173. These include, at a minimum, the yet-to-be determined project cost, capital rate, and building size. As such, Citadel's formula is not the fixed lodestar Citadel would like it to be.
But in light of this bedrock principle of contract law, the figure Citadel provides for the development fee is rather curious. Citadel seeks $351, 977, which is 4% of $8,799,421. (Def.'s 56.1 Facts ¶ 73; Dkt. No. 125-11 at 14.) Citadel apparently declined to deduct the $60,000 deposit from the $351,977 and is thus seeking recovery for damages it admittedly never sustained. (Pl.'s 56.1 Facts ¶ 15.) Furthermore, according to Citadel's response to WRMC's interrogatories, the $8,799,421 figure is from the "Last Project budget" dated May 10, 2006. (Dkt. No. 125-11, at 14.) And yet, the "Last Project budget" Citadel submitted to WRMC on May 10, 2006 was in fact two budget options, neither of which specifies a project cost of $8,799,421. (Pl.'s 56.1 Facts ¶ 30; Dkt. No. 137-9 at 29-30.) Admittedly, one of these options includes a total project cost of $8,547,472, but Citadel's failure to offer any explanation as to why these figures are different is troubling. (Id.)
