KMK Grp., LLC v. Helco Corp.
KMK Grp., LLC v. Helco Corp.
Opinion of the Court
KMK Group, LLC sues Helco Corp. and its mortgage trustee Chicago Title Land Trust Company (together, "Helco"), alleging that by not timely responding to KMK's request to amend the parties' contract, Helco breached the contract and interfered with KMK's prospective economic advantage. Doc. 1. Helco moves to dismiss under Civil Rule 12(b)(6). Doc. 20. The motion is granted in part and denied in part.
Background
In resolving Helco's Rule 12(b)(6) motion, the court must accept the complaint's well-pleaded factual allegations, with all reasonable inferences drawn in KMK's favor, but not its legal conclusions. See Zahn v. N. Am. Power & Gas, LLC ,
KMK, a California commercial real estate manager, and Helco, an Illinois corporation, own separate parcels in McHenry Plaza, a shopping center in McHenry, Illinois. Doc. 1 at ¶¶ 1-3, 6, 12, 15, 21. The Second Amended Operation and Easement Agreement ("OEA") governs the relationship among KMK, Helco, and the other parcel owners. Id. at ¶¶ 7, 26. The OEA identifies the parcel owners as "Parties." Ibid. ; Doc. 1-1 at 5, 7.
Section 6.5 of the OEA, which governs circumstances where a Party must obtain consent or approval from another Party, provides:
6.5 Approval Rights.
(A) Nothing contained in this OEA shall limit the right of a Party to exercise its business judgment, or act, in a subjective manner, with respect to any matter as to which it has been specifically granted such right, or the right to act in its sole discretion or sole judgment, whether "objectively" reasonable under the circumstances ....
(B) Unless otherwise herein provided, whenever a consent or approval (the "approval") is required, such approval shall not be unreasonably withheld or delayed. Unless provision is made for a specific time period, each response to a request for an approval shall be given by the Party to whom directed within thirty (30) days of receipt of such request. Any disapproval shall be in writing and the reasons therefor shall be clearly stated.
*794If a response is not given within the required time period, the requested Party shall be deemed to have given its approval.
(C) If the Approving Parties' approval is requested, unanimous approval must be given.
Doc. 1-1 at 39. In essence, Section 6.5(B) provides as a general matter that a Party must give its approval or disapproval within thirty days of a request, or else be deemed to have approved, and must justify any disapproval in writing.
Section 6.8(E), which governs amendments, provides: "This OEA may be amended by, and only by, a written agreement signed by all of the then current Approving Parties." Id. at 40. Section 1.1 provides that one "Approving Party" shall represent the "Developer Tract" and another shall represent the "Target Tract," and that each shall be "designated from time to time to make certain decisions and/or give certain approvals pursuant to the terms of [the] OEA." Doc. 1 at ¶ 29; Doc. 1-1 at 5-6. Helco is the Approving Party for the Developer Tract, while non-party Illinois Realty, LLC is the Approving Party for the Target Tract. Doc. 1 at ¶¶ 13, 30, 32.
In December 2017, KMK entered into an agreement with Chicago Bread, a Panera Bread franchisee, to redevelop and lease KMK's parcel. Id. at ¶¶ 38-39, 41. A condition precedent to the agreement was the adoption of an OEA amendment that would permit the redevelopment. Id. at ¶ 44. In early 2018, a proposed redevelopment plan was distributed to the other property owners, and Hamra Enterprises, the property development company that controlled and managed Chicago Bread, id. at ¶ 39, discussed amending the OEA with them. Id. at ¶¶ 50-51.
On June 7, 2018, KMK and Chicago Bread amended their redevelopment/lease agreement to provide that Chicago Bread could terminate the agreement if it could not in good faith secure the OEA amendment by August 6, 2018. Id. at ¶¶ 46-49. On June 13, 2018, Hamra Vice President Ben Kaplan emailed all parcel owners a proposed Third Amendment to the OEA. Id. at ¶ 55. The email stated that Chicago Bread would terminate its agreement with KMK if it could not secure the amendment by August 6, 2018. Ibid. The proposed amendment designated the area in which the planned redevelopment would take place, required KMK's parcel to leave twenty-four parking spaces available to Panera customers, and replaced a provision allowing KMK's former tenant Arby's to post Arby's signs with one permitting any restaurant occupant of KMK's parcel to post its signs. Id. at ¶¶ 57-59; Doc. 1-1 at 62. None of these changes would have negatively affected any other store in the shopping center. Doc. 1 at ¶ 56.
On July 7, 2018, Kaplan sent an email to all parcel owners attaching a revised proposed Third Amendment, noting in bold and underlined font that all parties had "agreed in concept to the attached, with the one owner exception of [Helco President] Heather Mooney," from whom Kaplan had received no comment. Id. at ¶¶ 20, 61. Kaplan stated that he hoped to finish the amendment process by July 20. Id. at ¶ 61. On July 12, Kaplan told KMK that all parcel owners other than Helco had agreed to the proposed amendment. Id. at ¶ 63.
No later than July 13, 2018, Mooney sent Kaplan suggested revisions to the proposed amendment and expressed her belief that two Helco tenants, a Sears Outlet store and a Great Clips hair salon, had "approval rights" over OEA amendments. Id. at ¶¶ 63-64. Mooney stated that she did not want to ask the tenants for approval until the proposed amendment was finalized.
*795Id. at ¶ 64. The OEA did not require Helco to obtain its tenants' approval before signing an amendment. Id. at ¶ 70. In a July 13 email, Kaplan attached a final draft proposed amendment incorporating Mooney's suggestions and asked Mooney to "immediately go[ ] to her two tenants to seek approval," reminding her of the August 6 "drop dead date" and asking all Approving Parties to execute the amendment by July 27. Id. at ¶ 64.
All parcel owners except Helco approved the proposed Third Amendment by July 27, 2018. Id. at ¶¶ 65-68. On July 31, Kaplan told the parcel owners in an email that he "ha[d] been told that [Mooney] went to the two tenants" and had "heard ... from a local official" that the tenants "have no issue and would welcome Panera to the center." Id. at ¶ 69. Kaplan again reminded Mooney about the August 6 deadline. Ibid. Kaplan emailed Mooney again on August 1, asking her if Helco would sign the amendment if Sears and Great Clips consented. Id. at ¶ 71. Mooney responded, "Our attorney already explained this to you." Ibid.
By August 3, Helco still had not approved the proposed amendment, so KMK and Chicago Bread amended their redevelopment/lease agreement to extend the "drop dead date" to August 20, 2018. Id. at ¶ 74. Kaplan told Mooney about the new deadline in an August 7 email, adding that the deadline would not be extended further and that Chicago Bread would terminate the agreement if it could not secure the OEA amendment. Id. at ¶ 75. Mooney did not respond. Id. at ¶¶ 76-77. On August 14, a representative from Sears told McHenry officials that it had approved the proposed OEA amendment, McHenry's mayor relayed this information to Kaplan, and Kaplan called Mooney and left a message on her voicemail. Id. at ¶ 78. Mooney did not call back that day. Ibid. In an August 15 phone call, Mooney told Kaplan that she would approve the proposed amendment only if Chicago Bread agreed to indemnify Helco against any claims brought by Sears against Helco due to the redevelopment. Id. at ¶ 79. Kaplan refused. Ibid.
That day, Kaplan called Mooney's primary contact at Sears. Id. at ¶ 80. The Sears contact told Kaplan that Sears was not required to consent to OEA amendments under its agreement with Helco, but said that Sears would consent if Helco reduced its rent. Id. at ¶¶ 81-82. Helco refused to reduce Sears's rent or to sign the amendment without Sears's approval. Id. at ¶¶ 81-82. Sears later emailed McHenry's mayor to say that it did not "want [McHenry] to suffer" because the deal fell through, but that it "was not required to sign" and Helco did not "need to ask [Sears] to sign" a consent to the amendment. Id. at ¶ 83. Sears stated that it hoped Helco would "sign the consent form without involving" Sears. Ibid. Kaplan emailed Mooney the next day to say that Sears did not believe it had to agree to the amendment and asking why Mooney refused to sign the amendment, but Mooney did not respond. Id. at ¶¶ 86-87.
Mooney did not approve or disapprove the amendment or provide any updates to KMK or Chicago Bread between August 16 and August 20. Id. at ¶ 88. On August 20, Chicago Bread terminated its agreement with KMK. Id. at ¶ 89. On August 21, the day after the August 20 deadline, Mooney told Kaplan that Sears had consented to the amendment and asked him to "[l]et [Helco] know the status of the transaction." Id. at ¶ 93. Mooney never explained in writing why she believed her approval of the amendment was contingent on Sears's consent. Id. at ¶ 91. KMK alleges that Helco used Sears's unwillingness to consent as a pretext, and that Helco delayed *796approving the proposed OEA amendment in bad faith. Id. at ¶ 92.
Discussion
KMK alleges that Helco breached Section 6.5(B) of the OEA by not approving or disapproving the amendment or justifying any disapproval in writing within thirty days. Id. at ¶¶ 97-129. KMK also alleges that Helco intentionally interfered with KMK's prospective economic advantage by delaying its approval in bad faith until after Chicago Bread terminated the redevelopment/lease agreement with KMK. Id. at ¶¶ 130-38. KMK moves to dismiss both claims. Doc. 20.
I. Breach of Contract Claim
The parties agree that Illinois law governs KMK's contract claim. Doc. 21 (citing Illinois law); Doc. 28 (same). An Illinois breach of contract plaintiff must allege: "(1) the existence of a valid and enforceable contract; (2) substantial performance by the plaintiff; (3) breach of contract by the defendant; and (4) resultant injury to the plaintiff." Avila v. CitiMortgage, Inc. ,
"The basic rules of contract interpretation under Illinois law are well settled. In construing a contract, the primary objective is to give effect to the intention of the parties." Right Field Rooftops, LLC v. Chi. Cubs Baseball Club, LLC ,
"If the words in the contract are clear and unambiguous, they must be given their plain, ordinary and popular meaning." Right Field Rooftops ,
As noted, KMK alleges that Helco breached Section 6.5(B) by unreasonably withholding its approval of the proposed *797OEA amendment and by not explaining in writing its reasons for approving or disapproving the amendment within thirty days. Doc. 1 at ¶¶ 97-129. According to KMK, Section 6.5(B) reasonably can be read "to apply in all situations where a party has been asked to give 'a formal sanction to' a request under the OEA," including a request to agree to a proposed OEA amendment. Doc. 28 at 11 (emphasis added) (quoting Approve , Black's Law Dictionary (10th ed. 2014)). Thus, KMK argues, a reasonable jury could find that Helco was obligated to respond to Chicago Bread's request to approve the proposed OEA amendment in the manner set forth in Section 6.5(B).
Helco is correct as a matter of law: Under the general/specific canon referenced above, Section 6.5(B) does not govern requests to approve OEA amendments. As noted, Section 6.5(B) provides that if a party does not respond to a request for approval within thirty days, "the requested party shall be deemed to have given its approval." Doc. 1-1 at 39. If a request to sign a proposed OEA amendment were governed by Section 6.5(B), then an Approving Party that did not respond to such a request would be deemed to have approved the amendment. Section 6.8(E), however, provides that the OEA can be amended "by, and only by, a written agreement signed by all of the then current Approving Parties." Doc. 1-1 at 40 (emphasis added). Therefore, Section 6.5(B) contemplates a general method of approval (silence) that Section 6.8(E) precludes in the specific context of proposed OEA amendments. For that reason, Section 6.8(E), not Section 6.5(B), applies to requests to approve amendments. See Aeroground ,
KMK cites no authority to counter Helco's invocation (Doc. 121 at 8) of the general/specific canon to resolve whatever tension exists between Sections 6.5(B) and 6.8(E), thereby forfeiting any such argument. See M.G. Skinner & Assocs. Ins. Agency v. Norman-Spencer Agency, Inc. ,
KMK's interpretation of the OEA cannot be reconciled with its text. The reason is simple: By providing that the OEA "may be amended by, and only by, a written agreement signed by all of the then current Approving Parties," Doc. 1-1 at 40, Section 6.8(E) plainly conveys that a written agreement signed by the Approving *798Parties is not only necessary, but also sufficient, to effectuate an amendment. Section 6.8(E) thus leaves no role for Section 6.5(B) to play in the amendment approval process.
Nor is KMK's reading a "natural" or "reasonable" construction of Section 6.8(E) in the context of the OEA as a whole. Land of Lincoln ,
KMK also argues that because Section 6.8(E) provides that a proposed amendment can go into effect only with the agreement of the "Approving Parties," requests to approve proposed amendments must be governed by Section 6.5(B). Doc. 28 at 12. That argument fails to persuade. Section 6.5(B) does not use the term "Approving Parties," a fact that itself defeats KMK's submission that Section 6.8(E)'s reference to "Approving Parties" necessarily refers back to Section 6.5(B). The OEA uses the term "Approving Party" not to invoke Section 6.5(B), but simply to identify precisely who must agree to a proposed amendment: the representative from the Target Tract (currently, Indiana Realty) and the representative from the Developer Tract (currently, Helco), as distinct from all "Parties" to the OEA. In some circumstances, such as under Section 6.8(E), the Approving Parties' role is to decide whether to approve something, while in others, the Approving Parties have no authority to approve or disapprove the action in question. E.g. , Doc. 1-1 at 13 ("[E]ach Party reserves the right to create a temporary staging and/or storage area in the Common Area on its Tract .... [A] Party shall give the Approving Parties at least thirty (30) days prior notice of the proposed location of such staging and/or storage area ....") (emphasis added). Thus, by providing that a proposed amendment requires the approval of the two Approving Parties, Section 6.8(E) simply identifies which Parties' approval is required for a proposed amendment; it does not subject requests to approve a proposed amendment to the Section 6.5(B) process.
Finally, KMK argues that Helco violated the duty of good faith and fair dealing by failing to respond reasonably or without delay to KMK's requests to amend. Doc. 28 at 13-14 (citing Hilfiker Square, LLC v. Thrifty Payless, Inc. ,
*799In sum, the OEA is unambiguous: Section 6.5(B) does not apply to proposed amendments to the OEA, and Helco therefore could not have breached Section 6.5(B) by refusing to respond, or to respond in a certain way, to KMK's request that Helco agree to its proposed amendment. Accordingly, KMK's breach of contract claim is dismissed.
II. Intentional Interference with Prospective Economic Advantage Claim
"The elements of [an intentional interference with prospective economic advantage] claim are: (1) the plaintiff's reasonable expectation of entering into a valid business relationship; (2) the defendant's knowledge of the plaintiff's expectancy; (3) purposeful or intentional interference by the defendant that prevents the plaintiff's legitimate expectancy from ripening into a valid business relationship; and (4) damages to the plaintiff resulting from the interference." Cromeens, Holloman, Sibert, Inc. v. AB Volvo ,
Illinois law "recognize[s] a privilege in [certain tort] cases where the defendant was acting to protect an interest which the law deems to be of equal or greater value than the plaintiff's contractual rights." HPI Health Care Servs., Inc. v. Mt. Vernon Hosp., Inc. ,
KMK does not deny that Helco enjoys a privilege to pursue its own financial interest, but instead argues that the complaint's allegations give rise to the inference that Helco acted with malice. Doc. 28 at 16. Helco responds that the complaint shows that it acted to protect its own financial interests by taking steps to *800ensure that Sears would not sue it due to the amendment. Doc. 21 at 13-15. KMK has the better of the argument.
First, KMK pleads facts allowing a reasonable inference that Helco's refusal to agree to the proposed OEA amendment in a timely manner was "without justification," Delloma ,
The complaint's allegations give rise to the further inference that Helco "intentionally" delayed its approval decision. Delloma ,
Because a reasonable jury could infer from the allegations in KMK's complaint that Helco delayed intentionally and without justification, KMK has met its burden to allege malice and thus to overcome Helco's asserted privilege at the pleading stage.
Helco also argues that an independent source of privilege arises from various OEA provisions reserving the right of parcel owners to make business judgments even if those judgments are not objectively reasonable. Doc. 21 at 13-14; Doc. 30 at 12. Because Helco cites no authority for the proposition that a contract provision can itself give rise to a privilege defense to an intentional interference claim, the argument is forfeited for purposes of this motion. See M.G. Skinner ,
Conclusion
Helco's motion to dismiss is granted as to KMK's contract claim and denied as to its intentional interference with prospective economic advantage claim. The contract claim is dismissed without prejudice to KMK filing an amended complaint. See Runnion ex rel. Runnion v. Girl Scouts of Greater Chi. & Nw. Ind. ,
Reference
- Full Case Name
- KMK GROUP, LLC v. HELCO CORP. and Chicago Title Land Trust Company
- Cited By
- 1 case
- Status
- Published