Broaddus v. Shields

• Decision Date: 21 December 2011
• Docket Number: No. 11–1117.,11–1117.
• Citation: 665 F.3d 846
• Parties: Bret A. BROADDUS, Plaintiff–Appellant, v. Kevin SHIELDS, Defendant–Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

665 F.3d 846

Bret A. BROADDUS, Plaintiff–Appellant,

v.Kevin SHIELDS, Defendant–Appellee.

No. 11–1117.

United States Court of Appeals, Seventh Circuit.

Argued Oct. 19, 2011.Decided Dec. 21, 2011.

Lawrence A. Stein(argued), Attorney, Huck Bouma, Wheaton, IL, for Plaintiff–Appellant.

Thomas I. Matyas(argued), Attorney, Wildman, Harrold, Allen & Dixon LLP, Chicago, IL, for Defendant–Appellee.

Before FLAUM and MANION, Circuit Judges, and MAGNUS–STINSON, District Judge.^*MAGNUS–STINSON, District Judge.

This is an appeal from three district court orders in a dispute between former business partners.Plaintiff-appellantBret A. Broaddus sued Defendant-appelleeKevin Shields for breach of fiduciary duty, and Mr. Shields counterclaimed for indemnification.Ultimately, the district court granted summary judgment in favor of Mr. Shields on Mr. Broaddus' claim for breach of fiduciary duty, granted summary judgment in favor of Mr. Shields on his indemnification claim, and awarded Mr. Shields $798.619.16 in attorney's fees.After reviewing each of the district court orders at issue, we affirm.

I.Background

A.Mr. Broaddus' and Mr. Shields' Business Relationship

Will Partners, LLC(“Will Partners”), was organized in 1998 to acquire and improve real property in Monee, Illinois.Mr. Shields was the managing member of Will Partners.Between 1998 and 1999, Will Partners financed and facilitated the construction of a 700,200 square foot warehouse to serve as the central distribution facility for World Kitchen, Inc.(“WKI”).WKI paid rent to Will Partners each month.

On November 2, 2000, Mr. Broaddus entered into a written agreement for a 10% membership interest in Will Partners(the “November 2000 Agreement”).Mr. Broaddus' share garnered approximately 45% of Will Partners' net cash flow.

In November 2001, Mr. Broaddus was involved in a serious car accident.He suffered significant bodily injury and a traumatic brain injury.A legal guardian was appointed for him on February 15, 2002.In September 2002, Mr. Broaddus requested that the guardianship be terminated and represented that he“ha[d] recovered sufficiently from his injuries to manage his own affairs.”The guardianship was terminated.

In late 2002, Mr. Shields contacted Mr. Broaddus, and they discussed the fact that WKI was in bankruptcy.Mr. Shields informed Mr. Broaddus that Will Partners would need to make a capital call in order to pay WKI's real estate tax installment.Mr. Broaddus alleges that Mr. Shields also told him that WKI was delinquent on its rent of approximately $45,000 per month.Mr. Shields denies making that representation.

Sometime after this discussion, Mr. Broaddus and Mr. Shields discussed the sale of Mr. Broaddus' interest in Will Partners.The parties have different recollections of the relevant conversations.Mr. Shields attests that in October or November 2002, Mr. Broaddus asked him to purchase Mr. Broaddus' interest in Will Partners so that Mr. Broaddus could move to Florida.According to Mr. Shields, Mr. Broaddus demanded $800,000 for his interest, and Mr. Shields countered at $400,000.Mr. Broaddus contends, however, that Mr. Shields approached him in March 2003 and offered to buy his interest in Will Partners so that Mr. Broaddus would not have to put more money into the company.

The parties agree that in March 2003, Mr. Shields purchased Mr. Broaddus' interest in Will Partners for $600,000.Between March 26 and March 30, 2003, Mr. Broaddus executed at least two assignments in connection with the transaction (the “March 2003 Assignments”).In both assignments, Mr. Broaddus represented and warranted that he“has had an opportunity to ask questions and receive answers regarding the terms and conditions of the sale ... and has had full access to such other information concerning [Will Partners] as he has requested, including an opportunity to examine the books and records of [Will Partners] and to discuss the condition of [Will Partners].”

Mr. Broaddus alleges that he only sold his interest in Will Partners because Mr. Shields allegedly told him that WKI—Will Partners' only tenant—was not paying rent.Documents produced during discovery show that WKI was, in fact, paying rent during the relevant time.Mr. Shields emphasizes that Will Partners sent Mr. Broaddus a copy of the February 2003 and March 2003 income statements to Mr. Broaddus' office, indicating that WKI had paid its rent.Mr. Broaddus asserts that he did not receive those statements because he was recovering from the car accident and was not traveling to his office during the relevant time.Mr. Broaddus admits, however, that he received the distribution deposits reflected on the financial statements and that Will Partners could not have made a distribution unless WKI was paying its rent.Nevertheless, Mr. Broaddus claims that he could not have reasonably discovered that WKI was paying its rent until the summer of 2003.

B.Mr. Broaddus' Breach of Fiduciary Duty Claim Against Mr. Shields

On May 30, 2008—five years and two months after selling his interest in Will Partners—Mr. Broaddus, an Illinois citizen, filed a Complaint in state court against Mr. Shields, a California citizen, for breach of fiduciary duty.Mr. Shields removed Mr. Broaddus' action to federal court on the basis of diversity jurisdiction.The parties agree that Illinois law governs Mr. Broaddus' claim and that a five-year statute of limitations applies.

Early in the case, on December 29, 2008, Mr. Shields filed a motion for summary judgment, arguing that the five-year statute of limitations barred Mr. Broaddus' claim.In response, Mr. Broaddus attested that Mr. Shields had told him that WKI was not paying its rent to Will Partners and that he was not able to verify that WKI was actually paying its rent until the summer of 2003 when Ed Hayes confirmed that information.The district court denied Mr. Shields' request for summary judgment, in part, because of Mr. Broaddus' representations about the Hayes conversation.The court also concluded that although it was possible for Mr. Broaddus to discover his injury in March 2003, the parties had offered no evidence regarding any knowledge Mr. Broaddus should have possessed at that time.The district court also lifted a previously imposed stay of discovery.

On February 8, 2010, Mr. Shields filed a renewed motion for summary judgment, again raising the statute of limitations.Mr. Shields challenged the admissibility of the earlier evidence submitted by Mr. Broaddus to support application of the discovery rule.On reply, Mr. Shields also noted critical discrepancies between Mr. Broaddus' declaration and his deposition.

In response to Mr. Shields' renewed summary judgment motion, Mr. Broaddus admitted that Mr. Hayes had no personal knowledge regarding whether WKI was paying its monthly rent during the relevant time period.Nevertheless, Mr. Broaddus submitted an amended affidavit containing many of the same representations from his prior affidavit, including his representation that he was not able to verify that WKI was paying its rent until the summer of 2003 when Mr. Hayes confirmed that information.

The district court ultimately granted Mr. Shields' renewed motion for summary judgment.After analyzing the Illinois discovery rule, the district court concluded that Mr. Broaddus could not rely on his self-serving affidavit to create an issue of material fact when his deposition testimony directly contradicted his representations regarding any conversation with Mr. Hayes.Because Mr. Broaddus made no attempt to explain the discrepancy, and the district court found that his attestations regarding the alleged conversation with Mr. Hayes were not based on personal knowledge, the district court concluded that Mr. Broaddus had not met his burden to invoke application of the discovery rule.Consequently, the district court held that Mr. Broaddus' breach of fiduciary duty claim was barred by the statute of limitations.Mr. Broaddus appeals that decision.

C.Mr. Shields' Indemnification Counterclaim

In response to Mr. Broaddus' Complaint, Mr. Shields filed a counterclaim for indemnification, seeking to enforce a contractual indemnity provision and two contractual fee-shifting provisions.

After the district court granted summary judgment in favor of Mr. Shields on Mr. Broaddus' breach of fiduciary duty claim, Mr. Shields moved for summary judgment on his indemnification claim.The district court addressed each of the contracts at issue and determined that each afforded Mr. Shields a basis for indemnity by Mr. Broaddus.

Mr. Broaddus appeals the district court's order granting summary judgment in favor of Mr. Shields on each of the contracts related to the indemnification counterclaim.

D.Attorney's Fees Award

On September 15, 2010, Mr. Shields filed a fee petition requesting $966,696.21 in attorney's fees.As of the date of that filing, Mr. Shields had paid $932,629.19 of that amount.Mr. Broaddus challenged the reasonableness of the fee request and argued that Mr. Shields' business, Griffin Capital, actually paid the fees.Mr. Broaddus further argued that Mr. Shields' counsel overstaffed the case and had incurred unnecessary expenses reviewing unrelated litigation in which Mr. Broaddus was involved.

The district court rejected most of Mr. Broaddus' contentions concerning the reasonableness of the fees and determined there was no evidence that Mr. Shields had not paid the fees as represented.The district court agreed with Mr. Broaddus, however, that Mr. Shields' defense had been overstaffed and that time spent reviewing and monitoring Mr. Broaddus' other litigation was unrelated and not compensable.The district court reduced Mr. Shields' request by $168,077.05 and awarded him $798,619.16 in attorney's fees.Mr. Broaddus appeals the district court's fee award.

II.Discussion

As indicated previously, Mr. Broaddus appeals three of the district court's orders: (1) the...