Full Circle Vill.brook GP v. ProTech 2004-D, LLC

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FULL CIRCLE VILLAGEBROOK GP, LLC, Plaintiff, v. PROTECH 2004-D, LLC, AMTAX HOLDINGS 436, LLC, ALDEN TORCH FINANCIAL LLC, Defendants.

No. 20-cv-07713

United States District Court, N.D. Illinois, Eastern Division

September 15, 2023

MEMORANDUM OPINION AND ORDER

MARY M. ROWLAND, UNITED STATES DISTRICT JUDGE

Plaintiff Full Circle Villagebrook GP, LLC brought this breach of contract and tortious interference action against Defendants AMTAX Holdings 436, LLC, Protech 2004-D, LLC and Alden Torch Financial LLC. Before the Court are: Defendants' motion for summary judgment, Plaintiff's partial motion for summary judgment, Plaintiff's motion to exclude and Plaintiff's motion to compel. For the reasons stated below, Defendants' motion for summary judgment [169] is granted, Plaintiff's partial motion for summary judgment [133] is denied, Plaintiff's motion to exclude [204] is denied as moot and Plaintiff's motion to compel [231] is denied.

SUMMARY JUDGMENT STANDARD

Summary judgment is proper where “the movant shows that 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); see also Celotex Corp. v Catrett, 477 U.S. 317, 322 (1986). A genuine dispute as to any material fact exists if “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 (1986). The substantive law controls which facts are material. Id. After a “properly supported motion for summary judgment is made, the adverse party ‘must set forth specific facts showing that there is a genuine issue for trial.'” Id. at 250 (quoting Fed.R.Civ.P. 56(e)).

The Court “consider[s] all of the evidence in the record in the light most favorable to the non-moving party, and [ ] draw[s] all reasonable inferences from that evidence in favor of the party opposing summary judgment.” Logan v City of Chicago, 4 F.4th 529, 536 (7th Cir. 2021) (quotation omitted). The Court “must refrain from making credibility determinations or weighing evidence.” Viamedia, Inc. v. Comcast Corp. 951 F.3d 429, 467 (7th Cir. 2020) (citing Anderson, 477 U.S. at 255). In ruling on summary judgment, the Court gives the non-moving party “the benefit of reasonable inferences from the evidence, but not speculative inferences in [its] favor.” White v. City of Chicago, 829 F.3d 837, 841 (7th Cir. 2016) (internal citations omitted). “The controlling question is whether a reasonable trier of fact could find in favor of the non-moving party on the evidence submitted in support of and opposition to the motion for summary judgment.” Id.

When cross-motions for summary judgment are filed, “[t]he ordinary standards for summary judgment remain unchanged [and] we construe all facts and inferences arising from them in favor of the party against whom the motion under consideration is made.” Blow v. Bijora, Inc., 855 F.3d 793, 797 (7th Cir. 2017). “Cross-motions must be evaluated together, and the court may not grant summary judgment for either side unless the admissible evidence as a whole-from both motions-establishes that no material facts are in dispute.” Bloodworth v. Vill. of Greendale, 475 Fed.Appx. 92, 95 (7th Cir. 2012).

BACKGROUND^[1]

I. The Parties

Full Circle is wholly owned by Full Circle Communities, Inc. (“FCC”), a 501(c)(3) non-profit entity whose mission is to create and preserve affordable housing. PSOF ¶ 9. The Partnership has four partners: (i) Full Circle is the General Partner; (ii) Full Circle's affiliate, Full Circle Holding, LLC (“FCH”), is the Other Limited Partner; (iii) Defendant, AMTAX HOLDINGS, 436 (“AMTAX”), is the Investor Limited Partner (ILP); and (iv) Defendant, PROTECH 2004-D, LLC (“PROTECH”), is the Special Limited Partner (SLP). Id. ¶ 12. Alden Torch, through its subsidiaries, controls the Limited Partners. Id. ¶ 13.^[2]

II. The Partnership and Property

The Partnership owns and operates Villagebrook Apartments (the “Property”), a 189-unit affordable housing apartment complex in Carol Stream, Illinois, that was financed and developed in accordance with the Low-Income Housing Tax Credit (“LIHTC”) program. PSOF ¶ 1. The Project is a “qualified low-income housing project” eligible for federal income tax credits and other tax benefits under Section 42 of the Internal Revenue Code, which are earned during a fifteen-year “Compliance Period.” DSOF ¶ 2. The Compliance Period for the Project ended on December 31, 2019. Id. ¶ 14.

III. The LPA and the Appraisal

The rights and obligations of the partners, including the Option, are governed by the Second Amended and Restated Agreement of Limited Partnership (the “LPA”), effective May 1, 2005. PSOF ¶ 2.^[3] Section 7.4.J of the LPA provides in part that, after the Compliance Period, Full Circle can purchase the Limited Partners' interests in the Partnership “for cash, based on the amount they would receive if the property were sold at the fair market value . . ., and the proceeds of such sale were applied in accordance with this Agreement.” DSOF ¶ 13. The section continues: “[t]he General Partner shall select one appraiser from LaSalle Bank National Association's or Deutsche Bank Berkshire Mortgage's approved list. This appraiser shall serve as the only appraiser...” Id. “If, however Deutsche Bank Berkshire Mortgage or LaSalle Bank National Association do not have an approved list, the General Partner may select an appraiser subject to the approval of the Investor Limited Partner, provided such approval shall not be unreasonably withheld.” Id.

On November 4, 2020, Full Circle sent the Limited Partners a letter, via Alden Torch, stating it was exercising its option under Section 7.4.J to purchase the Limited Partners' interests in the Partnership based on an appraisal performed by Newmark Knight Frank Valuation & Advisory, LLC (“NKF”). Id. ¶ 15. NKF determined the fair market value of the Property was $14.1 million. Id. ¶ 5. Full Circle's letter stated in part that it selected NKF “because the firm is on both [banks'] approved lists, and the firm has now completed its work....” Id. ¶ 16. Neither LaSalle Bank National Association nor Deutsche Bank Berkshire Mortgage existed in 2020. Id. ¶ 17.^[4]

According to Full Circle, its written notice properly exercised the Option under the LPA; Defendants do not dispute written notice was sent but contend that Full Circle did not validly exercise its option [227 ¶ 6]. PSOF ¶ 6. In response, the Limited Partners refused to transfer their partnership interests to Full Circle. Id. ¶ 7. On December 23, 2020, Full Circle filed suit in this Court to enforce the Option at the $494,594 Option Price and recover damages. Id. ¶ 8.

IV. The Claims and Pending Motions

In this suit Full Circle filed a three-count complaint for: (I) breach of contract against the ILP and SLP; (II) declaratory judgment against the ILP and SLP; and (III) tortious interference with the LPA against Alden Torch. [1]. Full Circle claims the Limited Partners, directed by Alden Torch, breached the LPA by refusing to transfer their interests to Full Circle under the Option based on the purchase price determined by an appraiser, and that Alden Torch tortiously interfered with that contract. Defendant Limited Partners filed a counterclaim seeking a declaratory judgment that, among other things, the NKF Appraisal is not binding on the Limited Partners and Full Circle cannot purchase the Limited Partners' interests for the amounts set forth in the NKF Appraisal. [47].

Defendants move for summary judgment arguing that the undisputed facts establish that Full Circle did not comply with the LPA's appraisal provisions. Defendants argue that Full Circle's claims all fail as a result. In its motion, Full Circle seeks summary judgment on its breach of contract and declaratory judgment claims, on the Limited Partners' declaratory judgment counterclaim, and partial summary judgment as to Alden Torch's liability for tortious interference. Full Circle also filed a motion to exclude the report and testimony of Defendants' expert Thomas Morton, as well as a motion to compel document production and for leave to conduct limited discovery.

ANALYSIS

I. Count I - Breach of Contract

Full Circle alleges that it unconditionally exercised its Option, creating a binding contract for the sale of the LP Interests at the Option Price determined under the NKF Appraisal, but the Limited Partners did not facilitate the sale of the LP Interests to Full Circle as required under the contract. On summary judgment Defendants argue that Full Circle's selection of an appraiser did not comply with Section 7.4.J of the LPA. Defendants contend that this dooms Full Circle's breach of contract claim because Full Circle failed to seek AMTAX's approval for the appraiser. According to Defendants, this was a failure of a condition precedent and a material breach of the LPA. As a result, Defendants argue, their performance under the contract was excused. Full Circle counters that it complied with Section 7.4.J of the LPA by selecting NKF to do the appraisal because NKF was on both banks' approved lists.

Under Illinois law, a breach of contract claim requires: “(1) the existence of a valid and enforceable contract; (2) performance by the plaintiff; (3) breach of contract by the defendant; and (4) resultant injury to the plaintiff.” Henderson-Smith & Assocs., Inc. v. Nahamani Fam Serv. Ctr. Inc., 752 N.E.2d 33, 43 (2001) (citation omitted). Illinois law also provides that a “party cannot sue for breach of contract without alleging and proving that he has himself substantially complied with all the material terms of the agreement.” Costello v. Grundon, 651 F.3d 614, 640 (7th Cir. 2011) (cleaned up). “And a...