Help at Home Incorp. v. Medical Capital L.L.C.

• Decision Date: 07 August 2001
• Docket Number: No. 00-1208,00-1208
• Citation: 260 F.3d 748
• Parties: (7th Cir. 2001) HELP AT HOME, INCORPORATED, Plaintiff-Appellant, v. MEDICAL CAPITAL, L.L.C., d/b/a MEDCAP, Defendant-Appellee
• Court: U.S. Court of Appeals — Seventh Circuit

Page 748

260 F.3d 748 (7th Cir. 2001)

HELP AT HOME, INCORPORATED, Plaintiff-Appellant, v. MEDICAL CAPITAL, L.L.C., d/b/a MEDCAP, Defendant-Appellee.

No. 00-1208

In the United States Court of Appeals For the Seventh Circuit

ARGUED JANUARY 12, 2001

DECIDED AUGUST 7, 2001

Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 99 C 3799--James F. Holderman, Judge. [Copyrighted Material Omitted]

Before RIPPLE, ROVNER and EVANS, Circuit Judges.

RIPPLE, Circuit Judge.

Help At Home, Inc. ("HAH") filed this diversity action against Medical Capital, L.L.C. ("MedCap") for breach of contract, promissory estoppel, and breach of the implied duty of good faith and fair dealing. MedCap moved to dismiss HAH's claims as barred by the Illinois Credit Agreements Act, 815 ILCS 160/1 et seq. ("ICAA"). The district court granted MedCap's motion, and HAH now appeals. For the reasons set forth in the following opinion, we affirm the judgment of the district court.

I BACKGROUND

A. Facts

HAH is a non-medical home care provider. It had borrowed money from Harris Bank and had defaulted on its payments. Harris Bank agreed to forbear temporarily from collecting on the loans, but that agreement was set to expire on June 8, 1999. Harris Bank indicated to HAH that, upon expiration of the agreement, it would use the funds in HAH's accounts at the bank to offset the amount of the loans. To prevent this setoff, HAH entered into an agreement with MedCap under which MedCap allegedly promised "to extend credit sufficient to takeout the Harris Bank loan." R.14 at 2 (internal quotation marks omitted).

HAH and MedCap exchanged several documents related to their financing agreement. A Sale and Servicing Agreement ("SSA") memorialized the terms of the arrangement. The SSA was signed only by HAH's chief operating officer; no representative of MedCap signed the SSA. MedCap also sent Uniform Commercial Code ("UCC") financing statements for various states to HAH and asked HAH to sign and return them. These UCC forms gave MedCap a security interest in HAH's accounts receivable, inventory, and other items, and they explicitly referenced the SSA in the following terms:

This financing statement covers all Receivables now or hereafter created or acquired by the Debtor/Provider [HAH] and sold, transferred or assigned to the Secured Party, MEDCAP Credit Co., LLC. [sic], under the Sale and Servicing Agreement dated as of May 21, 1999, including the Schedules, Exhibits and Addendums thereto, all as now or hereafter amended . . . .

R.17, Ex.C at 2. Some of the UCC forms were signed by both HAH and MedCap; others were signed only by HAH. Lastly, MedCap sent HAH a commitment letter stating that it would "provide financing to [HAH] upon completion of the closing process" and that the funding "would provide proceeds sufficient to takeout the Harris Bank loan." Id. at Ex.A. The chief executive officer of MedCap signed the commitment letter, but the letter did not require a signature from HAH.

On June 8, 1999, MedCap informed HAH that it would be unable to provide the funding HAH needed to repay the Harris Bank loan. As a result, HAH had to secure alternate financing at higher interest rates and under less desirable terms than its agreement with MedCap provided. It then filed suit against MedCap.

B. Proceedings in the District Court

HAH brought three causes of action against MedCap: breach of contract, promissory estoppel, and breach of the implied duty of good faith and fair dealing. MedCap moved to dismiss HAH's claims; it argued that its agreement with HAH was one for credit that was unenforceable because there was no writing that expressed the terms of the agreement and that was signed by both parties, as required by the ICAA. HAH responded that the ICAA did not apply to its agreement with MedCap because the agreement was for the sale of HAH's accounts receivable and was not a credit agreement. HAH argued alternatively that the ICAA was satisfied because each of the parties had signed various documents, and, when considered together, the documents clearly evidenced the terms of the parties' agreement.

The district court granted MedCap's motion to dismiss. It first held that HAH had admitted judicially that its agreement with MedCap was a loan by referring to it as such in its complaint. Consequently, the agreement was covered by the ICAA. Noting that this court has described the ICAA as imposing a "strong form of the Statute of Frauds," R.18 at 5 (citing Resolution Trust Corp. v. Thompson, 989 F.2d 942, 944 (7th Cir. 1993)), the court took the view that the ICAA requires that both parties to the loan agreement sign the same document. Notably, the court went on to hold that, even if the parties could comply with the statute by relying on several writings, the writings at issue in this case did not even satisfy the common law requirements of Illinois' general statute of frauds. In that regard, the court pointed out that the loan commitment letter signed by MedCap did not refer to any other unsigned writing; none of the other writings relied upon by HAH referred to or were attached to the letter of commitment. Therefore, there was nothing in HAH's pleadings or argument to demonstrate that the writings constituted a single contract. The district court therefore held that the ICAA barred each of HAH's claims against MedCap.

HAH filed a motion to reconsider. It based its argument on Bank One, Springfield v. Roscetti, 723 N.E.2d 755 (Ill. App. Ct. 1999), appeal denied, 731 N.E.2d 762 (Ill. 2000), which, in its view, established that the ICAA did not require a single writing signed by both parties. HAH also invited the court's attention to the UCC financing statements, some of which were signed by both parties. The court, however, refused to vacate its earlier dismissal. It stated that it had considered "every document" the parties had submitted and had concluded that the true nature of the transaction was a credit arrangement subject to the ICAA. R.22. It further noted that "those documents, including the [UCC] financing statements, together do not satisfy the requirements of the [ICAA]." Id. Following the district court's denial of its motion to reconsider, HAH filed this appeal.

II DISCUSSION

A. Standard of Review

We review the district court's grant of a motion to dismiss de novo. See Home Valu, Inc. v. Pep Boys, 213 F.3d 960, 963 (7th Cir. 2000). We accept all of the well-pleaded factual allegations in the plaintiff's complaint as true and draw all reasonable inferences in favor of the plaintiff. See id. We shall affirm the district court's dismissal of the complaint only if it appears beyond doubt that the plaintiff cannot prove any set of facts that would entitle it to relief. See Conley v. Gibson, 355 U.S. 41, 45-46 (1957); Home Valu, 213 F.3d at 963.

The letter of commitment signed by MedCap, but not by HAH, was referred to in the complaint, and the district court properly considered it as part of the pleadings. See Wright v. Associated Ins. Cos., 29 F.3d 1244, 1248 (7th Cir. 1994). In replying to MedCap's motion to dismiss, HAH supplemented its pleadings with copies of other writings between the parties and the affidavit of Joel Davis, HAH's chief operating officer. The district court also properly considered this material in its ruling on the motion. "A plaintiff need not put all of the essential facts in the complaint;" he may add them by affidavit or brief in order to defeat a motion to dismiss if the facts are consistent with the allegations of the complaint. Hrubec v. Nat'l R.R. Passenger Corp., 981 F.2d 962, 963-64 (7th Cir. 1992).

Because jurisdiction is based on diversity of citizenship, the substantive rights of the parties are governed by state law. See Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938); Lexington Ins. Co. v. Rugg & Knopp, Inc., 165 F.3d 1087, 1090 (7th Cir. 1999). In this case, the parties agree that Illinois law is controlling.¹ It is our duty to apply the law that we believe the Supreme Court of Illinois would apply if the case were before that tribunal rather than before this court. See Brunswick Leasing Corp. v. Wis. Cent. Ltd., 136 F.3d 521, 527 (7th Cir. 1998). When the "state supreme court has not ruled on an issue, decisions of the state appellate courts control, unless there are persuasive indications that the state supreme court would decide the issue differently." Lexington, 165 F.3d at 1090.

B. The ICAA

1. Nature of the Parties' Agreement

We first must resolve whether the transaction between HAH and MedCap is a credit agreement covered by the ICAA. As we have noted earlier, the district court took the view that HAH ought to be bound by its characterization of the agreement as a loan in its complaint. We believe that the district court was on solid ground in reaching that determination. An examination of the amended complaint reveals that, throughout the document, HAH referred to the agreement as a loan. It is a "well-settled rule that a party is bound by what it states in its pleadings." Soo Line R.R. Co. v. St. Louis Southwestern Ry. Co., 125 F.3d 481, 483 (7th Cir. 1997). "Judicial admissions are formal concessions in the pleadings, or stipulations by the party or its counsel, that are binding upon the party making them." Keller v. United States, 58 F.3d 1194, 1198 n.8 (7th Cir. 1995). We have acknowledged that there may be instances in which statements made in superseded pleadings that had been filed early in the litigation should not be characterized properly as admissions. See Moriarty v. Larry G. Lewis Funeral Dirs. Ltd., 150 F.3d 773, 777-78 (7th Cir. 1998). We have no such situation here. Although the original complaint did refer to the transaction as a loan, the same term is repeated in the amended complaint. Indeed, its usage is increased in that second document. Moreover, it is clear that HAH was aware of the existence of the underlying...