AmeriFactors Fin. Grp. v. Univ. of Chi.

• Court: U.S. District Court — Northern District of Illinois
• Writing for the Court: Joan H. Lefkow, United States District Judge
• Citation: 619 F.Supp.3d 842
• Docket Number: Case No. 21 C 6803
• Decision Date: 03 August 2022
• Parties: AMERIFACTORS FINANCIAL GROUP, LLC, Plaintiff, v. UNIVERSITY OF CHICAGO, Defendant.

619 F.Supp.3d 842

AMERIFACTORS FINANCIAL GROUP, LLC, Plaintiff, v. UNIVERSITY OF CHICAGO, Defendant.

Case No. 21 C 6803

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

Signed August 3, 2022

Ryan T. Johnson, Parker Edward Lawton, Diana Helene Psarras, Robbins Dimonte, Ltd., Chicago, IL, Angelica M. Fiorentino, AmeriFactors Financial Group, Celebration, FL, for Plaintiff.

OPINION AND ORDER

Joan H. Lefkow, United States District Judge

AmeriFactors Financial Group, LLC filed this action against the University of Chicago, seeking to recover money allegedly owed under an agreement. The University has moved to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6). (Dkt. 34.) For the reasons below, the motion is granted.

BACKGROUND

On November 8, 2019, the University entered into a construction agreement with Klein Construction, Ltd., to design and build a new campus building. In turn, Klein subcontracted with other companies for materials, labor, equipment, and other services necessary for the project. The construction agreement enabled the University to pay the subcontractors directly through a joint check to the subcontractors and Klein if the University learned that Klein had not paid the subcontractors on time.

On July 9, 2021, Klein and AmeriFactors entered into a factoring agreement, a form of assignment that refers to the purchase of a company's accounts receivable. AmeriFactors purchased Klein's accounts receivable, including its accounts with the University. Pursuant to this agreement, Klein assigned to AmeriFactors Invoice 14 (dkt. 29-4).

Klein sent Invoice 14 to the University on August 13, 2021, for work completed between June and July 2021. Invoice 14 shows an outstanding balance of $1,272,073.45. The vast majority of this total ($1,176,674.57) was due for work completed by subcontractors, with only $95,393.88 apportioned to Klein itself. (Dkt. 29-4 at 2). At a time not alleged (and, according to counsel at oral argument, not known to AmeriFactors), the University directly paid the subcontractors what they were owed on Invoice 14. (Dkt. 29, ¶ 66). Whether Klein was paid is not alleged.

On August 26, 2021, AmeriFactors emailed a letter to the University, which reads:

KLEIN CONSTRUCTION LTD. wishes to assign Payment Application #14[.] Please review the attached payment application(s) and sign below to verify that all work has been completed and/or services performed as shown on the payment application(s), that the amount stated on the payment application(s) will be paid by your office, that there are no disputes, claims of offset, credits owed, prior payments, discounts, or any other matters that you contend reduces your obligation to pay the full amount of the payment application(s), and that you waive your right to assert any defense to payment of the payment application(s). In the event of a dispute related to this transaction, the prevailing party shall be entitled to recover its reasonable fees and costs.

We/I further confirm that the total amount shown on the payment application(s) will be paid within 60 (sixty) days to AmeriFactors . . . and shall constitute an agreement not to assert defenses or claims against payment pursuant to the Uniform Commercial Code.

(Dkt. 29-5).

A University employee signed the document on August 27, 2021, and returned it to AmeriFactors without indicating that it had a credit, offset, or prior payment to the subcontractors. Also on August 27, AmeriFactors and Klein sent a document notifying the University of the completed assignment, which included a copy of Invoice 14. The notice states that AmeriFactors "will now serve as [Klein's] accounts receivable management team," that all of Klein's accounts and invoices were assigned to AmeriFactors, and that payment for Invoice 14 and all future invoices must go to AmeriFactors instead of Klein. (Dkt. 29-6 at 1.)

On September 17, 2021, Klein sent the University another invoice (Invoice 15) for work completed in August 2021. Invoice 15 reflects an outstanding balance of $858,325.08, with $18,124.92 due to Klein and the remainder due to various subcontractors. (Dkt. 29-7.) The Invoice also indicates that the University had already paid over $6,000,000 in connection with the construction project, although it did not specify to whom or when this money was paid.

On October 7, 2021, AmeriFactors sent the University a second notice of assignment reiterating that all of Klein's accounts had been assigned to it. (Dkt. 29-8.) Less than two weeks later, on October 19, 2021, AmeriFactors filed an action against the University to recover the balances reflected on Invoices 14 and 15. (Dkt. 1-1.)¹

On November 5, 2021, AmeriFactors sent a document titled "Notice of Default by Klein Construction" to the University, stating that Klein "defaulted under the terms of its Agreement with AmeriFactors" and that AmeriFactors was owed $1,272,073.45. (Dkt. 29-9.) In short, whether or not the University had paid the subcontractors what Klein owed them, AmeriFactors alleges that it is entitled to the entire amounts of Invoices 14 and 15 (respectively valued at $1,272,073.45 and $859,325.08), rather than the amounts of those invoices ($95,393.88 and $18,124.92, respectively) that the University actually owed to Klein.

LEGAL STANDARD

A Rule 12(b)(6) motion challenges the sufficiency of the complaint for failure to state a claim upon which relief may be granted. In ruling on 12(b)(6) motions, the court accepts as true all well-pleaded facts in the complaint and draws all reasonable inferences from those facts in favor of the plaintiff. See Taha v. Int'l Bhd. of Teamsters, Local 781, 947 F.3d 464, 469 (7th Cir. 2020). And the court considers documents attached to the complaint as incorporated therein. Fed. R. Civ. P. 10(c); see Williamson v. Curran, 714 F.3d 432, 436 (7th Cir. 2013). To survive dismissal, the complaint "must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.' " Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678, 129 S.Ct. 1937. The allegations must "raise a right to relief above the speculative level." Twombly, 550 U.S. at 555, 127 S.Ct. 1955.

ANALYSIS

AmeriFactors' second amended complaint makes seven claims, all based on the outstanding amounts reflected on Invoices 14 and 15: (I) breach of contract; (II) open account; (III) account stated; (IV) UCC 9-607 statutory lien and account debtor enforcement; (V) promissory estoppel; (VI) unjust enrichment; and (VII) conversion.²

I. Count I: Breach of Contract

The University contends that the breach of contract claim fails because there was no consideration to support any alleged contract between it and AmeriFactors. A breach of contract claim requires the plaintiff to plausibly allege the existence of an offer, acceptance, consideration, definite terms, performance by the plaintiff, breach, and resulting damages. See MC Baldwin Fin. Co. v. DiMaggio, Rosario & Veraja, LLC, 364 Ill.App.3d 6, 300 Ill.Dec. 601, 845 N.E.2d 22, 30 (2006). Consideration is a bargained-for exchange in which the promisor receives a benefit or the promisee suffers a detriment. See JPMorgan Chase Bank, N.A. v. Asia Pulp & Paper Co., 707 F.3d 853, 866 (7th Cir. 2013) (citing Vassilkovska v. Woodfield Nissan, Inc., 358 Ill.App.3d 20, 294 Ill.Dec. 207, 830 N.E.2d 619 (2005)).

AmeriFactors argues that the University's signature on the August 26 letter (an offer) created an enforceable contract (separate from the assignment) to pay the full balance of Invoice 14. First, it argues that the University received a benefit in that the funds AmeriFactors provided to Klein allowed it to continue the construction project. But since Klein had already contracted to do this work, its already-agreed-upon performance does not constitute consideration for a contract between AmeriFactors and the University. See Sciarabba v. Chrysler Corp., 173 Ill.App.3d 57, 122 Ill.Dec. 870, 527 N.E.2d 368, 373 (1988).

Even if the University did not receive a benefit, AmeriFactors contends that it incurred a detriment based on the August 26 letter because it would not have purchased Invoice 14 from Klein under the factoring agreement absent receipt of the signed letter from the University. See 810 Ill. Comp. Stat. 5/9-406(a) (account debtor obligated to pay assignee after effective notice).

The letter, however, never mentions this; such a detriment can hardly be considered part of a bargained-for exchange where the University was not notified that AmeriFactors was relying on the letter in this way until after it had already provided the verification. (Dkt. 29, ¶¶ 19-23.) Nor has AmeriFactors cited authority supporting its assertion that its agreement with and payment to Klein constitute a legal detriment sufficient to show consideration for a separate contract with the University, particularly where Klein and AmeriFactors had entered into the factoring agreement contemplating the assignment weeks earlier. In short, there is no enforceable contract between the University and AmeriFactors because there is no consideration.

Additionally, at oral argument, AmeriFactors stated that its claim rests on the underlying assignment between Klein and AmeriFactors. As the assignee of Invoice 14, AmeriFactors may look to the University only to enforce Klein's right to collect payment. See Secura Ins. v. Phillips 66 Co., 462 Ill.Dec. 308, 206 N.E.3d 1027 (Ill. App. Ct. 2022) (following an assignment, assignee stands in the shoes of assignor). AmeriFactors cannot have greater rights or be owed more than Klein was owed. Yet nowhere in the complaint does AmeriFactors...