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Appeals Court Upholds Finding Against Breach of Contract Because No Contract Existed

 

A recent Illinois appeals court ruling caught the eyes of our Naperville business litigation attorneys. On December 22, the Illinois First District Court of Appeal ruled that a trial court was correct in finding no breach of contract between an individual and an investment firm. CFC Investment v. McLean, No. 1-08-0161 (Ill. 1st Dec. 22, 2008). Defendant Daniel McLean was a real estate developer and investor doing business through a group of companies the appeals court collectively called River East. Plaintiff CFC Investments was an investor in River East.

CFC offered to sell its interest in 2001, and part owner Craig Duchossois, through phone calls and written negotiations with McLean, agreed on a price of $16.7 million. McLean wrote in a signed letter that he was “willing to arrange for the purchase of your interest in River East” and that after CFC’s written agreement, he would “commence to secure the capital.” Duchossois signed to signal his acceptance and sent it back in September of 2001. McLean then wrote a letter specifying that River East needed 90 days to complete the buyout. However, no action was taken until March of 2002, when Duchossois wrote to demand that McLean finish the deal. He received no response. In early April of 2003, River East investors sold their interests to Mitsui Sumitomo Insurance Company. CFC’s share of the proceeds was $2.5 million.

In 2004, CFC sued McLean for breach of contract. The trial turned partially on the issue of whether McLean had offered to buy the shares himself, as Duchossois believed, or merely find investors to do it, as McLean contended. The trial court barred evidence favorable to CFC several times, rejected a proposed jury instruction from the company and answered a question from the jury over CFC’s objections. CFC appealed of all these decisions.

In its decision, the appeals court first found that the trial court was right to admit parol evidence (evidence outside a written contract), because it helped the jury determine whether the written materials the two men exchanged was in fact a contract. The letters, the court wrote, did not show that the men meant them to be a complete contract. It then examined the court’s decision to exclude McLean’s deposition statement that it was possible that somebody could interpret his letter as a promise to personally buy CFC’s shares. Because the statement was speculation, the court found, the trial judge was right to exclude it from evidence.

The court next turned to the trial court’s decision to exclude evidence of McLean’s alleged mismanagement of River East after the date of the alleged breach of contract. CFC wished to use this to show that McLean offered to buy CFC out to cover up his mismanagement. However, the appeals court said, McLean clearly did not have much of an interest in purchasing the shares, since he did not, and in fact allowed CFC to audit River East’s financial records. The issue would be confusing and distracting, they wrote, so the trial court was right to exclude this evidence as well.

The appeals court also took up two issues of jury-judge interaction. CFC challenged the judge’s rejection of a jury instruction it proposed. The appeals court dismissed this as not an abuse of the trial judge’s discretion and therefore not reversible, pointing out that no evidence presented at trial supported the proposed instruction. CFC’s next appeal was an objection to the answer the judge gave to a question from the jury: Did CFC have to prove that McLean as an individual offered to buy the shares? The judge said yes, and the appeals court found that answer proper, since CFC sued McLean individually and presented no evidence that he was working on behalf of someone else.

Finally, the appeals court rejected the argument that the judgment as a whole was against the manifest weight of the evidence. Pointing out that “this was a close case,” it nonetheless declined to second-guess the jury. Thus, the First District affirmed the decision.

The Chicago business and commercial litigation lawyers at DiTommaso-Lubin handle all types of breach of contract litigation, including disputes over whether a contract exists. From our offices in Oak Brook, Illinois and Chicago, we represent public, private and closely held businesses of all sizes. If you have a contract dispute and you’d like to discuss your options with an experienced business attorney, we would like to help. Contact us online for a confidential consultation.