Cooper v. Cooper
| Decision Date | 17 February 2023 |
| Docket Number | 19 C 6855 |
| Parties | Dr. Lawrence Cooper, DDS, Plaintiff, v. Dr. Howard I. Cooper; and Excellence in Dentistry, Ltd., Defendants. |
| Court | U.S. District Court — Northern District of Illinois |
Dr Lawrence Cooper, DDS (“Larry”),[1] sued his son Dr Howard I. Cooper (“Howard”) and Howard's corporation Excellence in Dentistry, Ltd. (“EID”) in October 2019. In his first amended complaint, Dkt. No. 30 Larry asserts claims against Howard for breach of contract fraud, and breach of the implied covenant of good faith and fair dealing, as well as an unjust enrichment claim against both defendants. Larry now moves for partial summary judgment. In his view, the only remaining issue for a jury to decide is punitive damages under the fraud claim. For the following reasons, the motion is granted in part and denied in part.
The following facts are undisputed except where noted. Larry and Howard are father and son, and both are dentists. Pl.'s Statement of Material Facts (“PSOF”), Dkt. No. 56 ¶ 1. Prior to 2010, Howard worked at Larry's practice, which Larry owned through the corporation 2-Gentle Dental Associates, Ltd. (“2-Gentle”). Id. ¶ 2. When Larry decided to retire, he and Howard entered into an Asset Purchase Agreement dated November 1, 2010. Id. ¶¶ 3-4; Pl.'s Ex. 2, Dkt. No. 56-2 (the “Asset Purchase Agreement”). Under the agreement, Howard paid $180,000 in exchange for the “entire interest in the business assets” of the “dental practice located at 5101 Washington Street, Gurnee, Illinois.” Asset Purchase Agreement at 3 (), § I.A; see Id. (NOW THEREFORE clause) (“Seller agrees to sell to Purchaser and Purchaser agrees to purchase from Seller the'the practice'} [sic] on the following terms and conditions.”); PSOF ¶¶ 5-6.
Section XX of the Asset Purchase Agreement states:
Subsequent Sale of Dental Practice. In the event that the Purchaser sells or merges the dental practice or sells the assets separately where the assets sold are not replaced with an asset of equal value prior to January 2, 2024, Dr. Lawrence Cooper shall be entitled to receive fifty (50%) percent of the net sales price.
The agreement also contains an integration (or “entire agreement”) clause and a clause requiring any amendments to the agreement to be signed and in writing. Asset Purchase Agreement §§ XXII, XXIII.
The transaction closed on January 1, 2011. Defs.' Statement of Material Facts (“DSOF”), Dkt. No. 74 ¶ 13. That same day, Howard transferred the assets from the sale to EID, a corporation he had formed and of which he was the sole shareholder and sole director. PSOF ¶¶ 18-19; DSOF ¶ 23.
In April 2019, Howard, EID, and Zieba Dentistry Gurnee, Ltd. (“Zieba”) entered into a separate asset purchase agreement. PSOF ¶ 24; Pl.'s Ex. 7, Dkt. No. 56-7 (the “Zieba Agreement”). Under the Zieba Agreement, in exchange for about $2.4 million, Zieba acquired “substantially all of the assets of [EID] relating to or used in the Practice,” where “Practice” was defined as the “dental practice . . . located at 5101 Washington Street, Gurnee IL 60031.” PSOF ¶¶ 25, 29. Certain assets were excluded under the Zieba Agreement, such as cash, causes of action, accounts receivable, and rights under the Zieba Agreement belonging to EID as of the closing date of that agreement, as well as Howard's personal effects located at the office, including artwork and other decorations. Id. ¶ 26. Larry did not receive any share of the money from the transaction with Zieba. Id. ¶ 33.
At his deposition, Howard testified that he had an oral agreement with Larry that Section XX of the Asset Purchase Agreement would only apply for two or three years. Id. ¶¶ 12-13. Howard asked Larry to make this shorter term explicit in Section XX of the Asset Purchase Agreement, but Larry refused. Id. ¶ 15.
Summary judgement is appropriate “if 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). A material fact is genuinely in dispute when “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). I resolve all factual disputes in defendants' favor and give them “the benefit of all reasonable inferences that may be drawn from the record.” Coleman v. Donahoe, 667 F.3d 835, 842 (7th Cir. 2012) (citation omitted).
Larry asserts that Howard breached Section XX of the Asset Purchase Agreement when he failed to pay Larry half of the net sale price from the Zieba transaction. To succeed on this claim, Larry must establish: “(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.” Zirp-Burnham, LLC v. E. Terrell Assocs., Inc., 826 N.E.2d 430, 439 (Ill.App.Ct. 2005) (citation and quotation marks omitted).
There is no dispute that the first two elements are met.[2] See PSOF ¶¶ 4, 6; DSOF ¶¶ 12-13, 17, 20. Additionally, Howard does not contest Larry's assertion that the damages are one half of the net sale price under the Zieba Agreement, which Larry supports with record evidence. Howard acknowledged at his deposition that “the net sales price of every asset that [he] sold to Zieba” was $2,408,714.19, Howard Dep., Pl.'s Ex. 1, Dkt. No. 56-1 at 96:17- 20, a figure which is also reflected in the transaction's closing statement. PSOF ¶ 29. Half of that amount is $1,204,357.09, which I accept as the damages to which Larry is entitled if successful on his breach of contract claim. See NutraSweet Co. v. X-L Eng'g Co., 227 F.3d 776, 791 (7th Cir. 2000) ().
That leaves only a dispute over the element of breach. Defendants suggest that the term “practice” is ambiguous as used in the Asset Purchase Agreement. But the agreement clearly provides for the sale of the “practice” to Howard. For example, $180,000 was the “total consideration and purchase price for the sale of the practice,” Asset Purchase Agreement § I.A; see also Id. § II (). It is true that one of the recitals refers to Larry's desire to sell the “entire interest in the business assets of said practice” to Howard, id. at 3, which defendants argue shows that the sale is for some assets of the practice rather than the practice itself. But sale of the assets of the practice is not inconsistent with sale of the practice. Any doubt as to the scope of the agreement is resolved by the above-cited portions of the agreement and the “NOW THEREFORE” clause, which summarizes the transaction as one in which “Seller agrees to sell to Purchaser and Purchaser agrees to purchase from Seller the'the practice'} [sic] on the following terms and conditions.” Id. The agreement then goes on to specify what assets Howard will receive as part of his purchase of the practice: tangible assets ranging from fixtures and equipment to patient records and accounts receivable, id. §§ I.A.1, V, VII, as well as intangible assets like goodwill, id. §§ I.A.2, V.
Section XX--the focus of the parties' dispute--is itself premised on the fact that what Larry sold Howard in 2011 was the practice. It contemplates what should happen if, among other things, Howard “sells or merges the dental practice.” Id. § XX. If Howard were never given the practice in the first place, that provision would be rendered meaningless. See Prestwick Cap. Mgmt. v. Peregrine Fin. Grp., Inc., 727 F.3d 646, 656 (7th Cir. 2013) . To top it off, Howard admitted to the fact that he “acquired the Dental Practice from Larry when Larry retired,” PSOF ¶ 3 (citing Howard Dep. at 10:14-16), where “Dental Practice” was defined as the practice at which both Larry and Howard practiced as of 2010, id. ¶ 2. See also Defs.' Resp. to PSOF, Dkt. No. 75 ¶¶ 2, 3 (admitting these facts).
In support of his argument that the term “practice” is ambiguous, Howard emphasizes that asset sales and stock sales are treated differently for purposes of successor liability, as well as the fact that “Lawrence retained ownership of all of the shares in his entity, 2-Gentle, and did not transfer any stock or shares to Howard,” Resp., Dkt. No. 71 at 6 (citing DSOF ¶¶ 11, 22). These propositions may be true, but defendants do not explain why sale of the “practice” could only be effectuated through a stock sale, rather than an asset sale including patient records, accounts receivable, and goodwill. As discussed above, the agreement itself establishes that it is for sale of the practice.
I thus reject defendants' position that the term “practice” as used in the Asset Purchase Agreement is ambiguous. See Interim Health Care of N Ill., Inc. v. Interim Health Care, Inc., 225 F.3d 876, 879 (7th Cir. 2000) . Pursuant to Section XX's terms, there are two scenarios under which Larry “shall be entitled to receive fifty (50%) percent of the net sales price.” First, if, prior to January 2, 2024, Howard “sells or merges the dental practice,” and second, if, prior to January 2, 2024, Howard “sells the assets...
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