COBURN GROUP LLC. v. WHITECAP ADVISORS LLC.

COBURN GROUP, LLC, Plaintiff,

v.WHITECAP ADVISORS LLC, Defendant.

Case no. 07 CV-2448

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS, EASTERN DIVISION

Filed: April 4, 2011

Judge Gary Feinerman

DEFENDANT WHITECAP ADVISORS LLC'S RENEWED MOTION FOR JUDGMENT

AS A MATTER OF LAW ON PLAINTIFF'S QUANTUM MERUIT CLAIM

Dated: April 4, 2011

Respectfully submitted,

Michael D, Hultquist

One of the attorneys for defendant

Whitecap Advisors, LLC

Michael D. Hultquist (ARDC No. 6194345)

SNR Denton US LLP

233 South Wacker Drive, Suite 7800

Chicago, Illinois 60606

Telephone: 312.876.8000

Facsimile: 312.876.7934 Pursuant to Fed. R. Civ. P. 50(b), Defendant Whitecap Advisors LLC ("Whitecap") hereby renews its motion for judgment as a matter of law (previously made pursuant to Fed R. Civ. P. 50(a), hereinafter the "Original Motion") granting judgment in favor of Whitecap dismissing plaintiff's quantum meruit claim. As detailed below, the evidence submitted by plaintiff was insufficient as a matter of law to support a determination in its favor on that claim. Equally significant, the jury's own verdict form makes clear that, separate from the evidence it heard on plaintiff's contract claim, it was unable to determine the reasonable value of plaintiff's services (an essential element of quantum meruit). As a result, despite the jury's verdict in favor of plaintiff on that claim, Whitecap is entitled to judgment. In support of this motion, Whitecap states:

PRELIMINARY STATEMENT

Plaintiff went to trial on two claims: one for breach of contract, and one on an alternative theory of quantum meruit. Following the close of evidence, Whitecap submitted the Original Motion seeking judgment in its favor as a matter of law as to both of plaintiff's claims. (See doc. no. 334). The Court denied that motion, and both claims were submitted to the jury. On plaintiff's contract claim, the jury returned a verdict in Whitecap's favor - specifically finding that no contract existed. On its quantum meruit claim, however, the jury returned a verdict for plaintiff, and awarded plaintiff damages in an amount virtually the same as that sought by plaintiff on its contract claim. A copy of the verdict form as completed by the jury (doc. no. 339) is attached as Exhibit A.

That award is not supported by law or the record. As noted in the Original Motion, plaintiff's quantum meruit claim required it to prove (among other things) the reasonable value of its services in the absence of a contract. However, there was no evidence in the record fromwhich a reasonable jury could determine any such value. Rather, the only evidence plaintiff chose to offer on this subject was the testimony of its industry expert who testified that the amount and duration of the fees of a third-party marketer such as plaintiff are always determined by agreement, and that third-party marketers are paid only what their clients agree to pay them. The expert made no allowance whatsoever for the determination of compensation on any other basis. Accordingly, the testimony of plaintiff's industry expert did not provide the jury with a reasonable basis to conclude that plaintiff was entitled to any more fees than it had already received.

The jury expressly found that Whitecap had no agreement with plaintiff that would entitle plaintiff to more than it earned while the parties worked together. (See Exh. A at 1). Because plaintiff did not offer any other evidence of damages other than what it sought under its contract claim, (such as evidence of any of its expenses, the time it spent finding investors for Whitecap, or the like), there was insufficient evidence as a matter of law from which the jury could determine the reasonable value of plaintiff's services in the absence of an agreement.

The completed verdict form makes clear that the jury itself recognized the absence of any such evidence. In particular, as detailed below, the verdict form and the Court's instructions directed the jury to determine whether and to what extent plaintiff was entitled to quantum meruit damages by first determining the "Fair Value" of plaintiff's services with respect to each investor it found plaintiff had introduced, and then totaling those numbers and subtracting from that amount the $866,390.49 that plaintiff had already been paid. But the completed verdict form reveals that instead of making any "Fair Value" determination, the jury simply imported numbers for each investor directly from the itemized damage chart that plaintiff submitted to the jury for its contract claim, (see attached Exhibit B). The jury then totaled those numbers and added the$866,390.49 that plaintiff had already been paid before then subtracting that same amount to reach its final damage number. In this way, the jury "calculated" a quantum meruit award that was not based on a determination of the reasonable value of plaintiff's services with respect to each investor. Instead, it was based on plaintiff's itemized contract damages - the only real evidence the plaintiff provided the jury on its alleged damages.

The completed jury form reflects the logical conclusion that these "quantum meruit damages" were awarded in this way because the jury was presented with no means of actually measuring the quantum meruit value of plaintiff's services. But on the record presented to it, and as a matter of law, this was one thing that the jury could not do: not only is there no evidence that could support an award of contract-based damages in the absence of a contract; such an award is directly contrary to the record evidence (which consists solely of the testimony of plaintiff's own expert). Of equal importance, as a matter of law (and based on the Court's own instructions) the jury could only award quantum meruit damages based on a determination of the reasonable value of plaintiff's services with respect to each investor - a determination that the verdict sheet plainly indicates the jury did not make (because it could not do so).

In short, there is no reasonable support for the jury's award other than the evidence plaintiff and its expert offered in support of plaintiff's breach of contract claim. That is a legally insufficient basis to support a damages award on the completely separate legal theory of quantum meruit .which requires the jury to only award the fair value of plaintiff's services. As a result, Whitecap is entitled to judgment as a matter of law on plaintiff's quantum meruit claim despite the jury's verdict.

ARGUMENT

Under Fed. R. Civ. P. 50:

If a party has been fully heard on an issue during a jury trial and the court finds that a reasonable jury would not have a legally sufficient evidentiary basis to find for the party on that issue, the court may: (A) resolve the issue against the party; and (B) grant a motion for judgment as a matter of law against the party on a claim or defense that, under the controlling law, can be maintained or defeated only with a favorable finding on that issue.

Fed. R. Civ. P. 50(a)(1). "If the court does not grant a motion for judgment as a matter of law made under Rule 50(a), the court is considered to have submitted the action to the jury subject to the court's later deciding the legal questions raised by the motion", which may be "renewed" after an adverse verdict. Fed. R. Civ. P. 50(b). On any such motion, "the question is simply whether the evidence as a whole, when combined with all reasonable inferences permissibly drawn from that evidence, is sufficient to allow a reasonable jury to find in favor of the plaintiff. A mere scintilla of evidence, however, will not suffice." Hall v. Forest River, Inc., 536 F.3d 615, 619 (7^th Cir. 2008) (citations and internal quotations omitted). "If, viewing the evidence in the proper light, the nonmoving party did not introduce enough evidence to support her claim, then judgment as a matter of law is correct." Massey v. Blue Cross-Blue Shield of Ill, 226 F.3d 922, 924 (7^th Cir. 2000).¹

Here, the evidence was insufficient as a matter of law to allow a reasonable jury to find in favor of plaintiff on its quantum meruit claim. "To establish a quantum meruit claim under Illinois law, [p]laintiff[] must show (1) the performance of services, (2) the reasonable value ofthose services, and (3) [defendant's] receipt of a benefit from [p]laintiff that it would be unjust for it to retain without paying compensation." Cora v. Rancilio Macchine Per Caffe, No. 01 C 3613, 2003 WL 21654152, *7 (N.D. 111. Jul. 14, 2003). Thus, for a reasonable jury to have found in plaintiff's favor on this claim, there would have to have been sufficient evidence from which that jury could calculate the reasonable value of plaintiff's services in the absence of a contract. But there was none.

Instead, plaintiff chose to offer evidence only of contractual industry compensation standards, arguing that the value of its services was some percentage (which plaintiff argued should be 20% or even greater) of Whitecap's fees on each investment for as long as the investment remained in Whitecap's funds (which the parties have occasionally referred to as "in perpetuity"). But plaintiff's own expert (Douglas Cramer) testified categorically that under industry standards a third-party marketer does not get paid more than the fund manager has contractually agreed to pay. In particular:

• Cramer testified that "[i]t's standard that the manager will pay the marketer what is contracted to pay." (Testimony of D. Cramer, Trial Transcript (1/13/11), 714:13-14, emphasis added).

• Cramer agreed that "it's not industry practice for the manager to be required to pay commissions for a longer period of time than it agreed to" - in fact, he confirmed: "Correct. It's the contract.'" (Id., 716:1-6, emphasis added).

• Cramer agreed that "[i]f the third party marketer does not have a contract with the hedge fund manager, there isn't an industry practice that says that the third party marketer...