KMK Grp., LLC v. Helco Corp., 18 C 6361

• Citation: 380 F.Supp.3d 790
• Decision Date: 08 May 2019
• Docket Number: 18 C 6361
• Parties: KMK GROUP, LLC, Plaintiff, v. HELCO CORP. and Chicago Title Land Trust Company, Defendants.
• Court: U.S. District Court — Northern District of Illinois

380 F.Supp.3d 790

KMK GROUP, LLC, Plaintiff,

v.HELCO CORP. and Chicago Title Land Trust Company, Defendants.

18 C 6361

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

Signed May 8, 2019

Kenneth E. Rechtoris, David Mitchell Poell, Sheppard Mullin Richter & Hampton LLP, Chicago, IL, for Plaintiff.

Steven Howard Gistenson, Jennifer Ann Warner, Melanie Jeanne Chico, Dykema Gossett PLLC, Chicago, IL, for Defendants.

MEMORANDUM OPINION AND ORDER

Gary Feinerman, United States District Judge

KMK Group, LLC sues Helco Corp. and its mortgage trustee Chicago Title Land Trust Company (together, "Helco"), alleging that by not timely responding to KMK's request to amend the parties' contract, Helco breached the contract and interfered with KMK's prospective economic advantage. Doc. 1. Helco moves to dismiss under Civil Rule 12(b)(6). Doc. 20. The motion is granted in part and denied in part.

Background

In resolving Helco's Rule 12(b)(6) motion, the court must accept the complaint's well-pleaded factual allegations, with all reasonable inferences drawn in KMK's favor, but not its legal conclusions. See Zahn v. N. Am. Power & Gas, LLC , 815 F.3d 1082, 1087 (7th Cir. 2016). The court must also consider "documents attached to the complaint, documents that are critical to the complaint and referred to in it, and information that is subject to proper judicial notice," along with additional facts set forth in KMK's brief opposing dismissal, so long as those additional facts "are consistent with the pleadings." Phillips v. Prudential Ins. Co. of Am. , 714 F.3d 1017, 1019-20 (7th Cir. 2013) (internal quotation marks omitted). The facts are set forth as favorably to KMK as those materials permit. See Domanus v. Locke Lord, LLP , 847 F.3d 469, 478-79 (7th Cir. 2017). In setting forth the facts at this stage, the court does not vouch for their "objective truth." Goldberg v. United States , 881 F.3d 529, 531 (7th Cir. 2018).

KMK, a California commercial real estate manager, and Helco, an Illinois corporation, own separate parcels in McHenry Plaza, a shopping center in McHenry, Illinois. Doc. 1 at ¶¶ 1-3, 6, 12, 15, 21. The Second Amended Operation and Easement Agreement ("OEA") governs the relationship among KMK, Helco, and the other parcel owners. Id. at ¶¶ 7, 26. The OEA identifies the parcel owners as "Parties." Ibid. ; Doc. 1-1 at 5, 7.

Section 6.5 of the OEA, which governs circumstances where a Party must obtain consent or approval from another Party, provides:

6.5 Approval Rights.

(A) Nothing contained in this OEA shall limit the right of a Party to exercise its business judgment, or act, in a subjective manner, with respect to any matter as to which it has been specifically granted such right, or the right to act in its sole discretion or sole judgment, whether "objectively" reasonable under the circumstances ....

(B) Unless otherwise herein provided, whenever a consent or approval (the "approval") is required, such approval shall not be unreasonably withheld or delayed. Unless provision is made for a specific time period, each response to a request for an approval shall be given by the Party to whom directed within thirty (30) days of receipt of such request. Any disapproval shall be in writing and the reasons therefor shall be clearly stated.

If a response is not given within the required time period, the requested Party shall be deemed to have given its approval.

(C) If the Approving Parties' approval is requested, unanimous approval must be given.

Doc. 1-1 at 39. In essence, Section 6.5(B) provides as a general matter that a Party must give its approval or disapproval within thirty days of a request, or else be deemed to have approved, and must justify any disapproval in writing.

Section 6.8(E), which governs amendments, provides: "This OEA may be amended by, and only by, a written agreement signed by all of the then current Approving Parties." Id. at 40. Section 1.1 provides that one "Approving Party" shall represent the "Developer Tract" and another shall represent the "Target Tract," and that each shall be "designated from time to time to make certain decisions and/or give certain approvals pursuant to the terms of [the] OEA." Doc. 1 at ¶ 29; Doc. 1-1 at 5-6. Helco is the Approving Party for the Developer Tract, while non-party Illinois Realty, LLC is the Approving Party for the Target Tract. Doc. 1 at ¶¶ 13, 30, 32.

In December 2017, KMK entered into an agreement with Chicago Bread, a Panera Bread franchisee, to redevelop and lease KMK's parcel. Id. at ¶¶ 38-39, 41. A condition precedent to the agreement was the adoption of an OEA amendment that would permit the redevelopment. Id. at ¶ 44. In early 2018, a proposed redevelopment plan was distributed to the other property owners, and Hamra Enterprises, the property development company that controlled and managed Chicago Bread, id. at ¶ 39, discussed amending the OEA with them. Id. at ¶¶ 50-51.

On June 7, 2018, KMK and Chicago Bread amended their redevelopment/lease agreement to provide that Chicago Bread could terminate the agreement if it could not in good faith secure the OEA amendment by August 6, 2018. Id. at ¶¶ 46-49. On June 13, 2018, Hamra Vice President Ben Kaplan emailed all parcel owners a proposed Third Amendment to the OEA. Id. at ¶ 55. The email stated that Chicago Bread would terminate its agreement with KMK if it could not secure the amendment by August 6, 2018. Ibid. The proposed amendment designated the area in which the planned redevelopment would take place, required KMK's parcel to leave twenty-four parking spaces available to Panera customers, and replaced a provision allowing KMK's former tenant Arby's to post Arby's signs with one permitting any restaurant occupant of KMK's parcel to post its signs. Id. at ¶¶ 57-59; Doc. 1-1 at 62. None of these changes would have negatively affected any other store in the shopping center. Doc. 1 at ¶ 56.

On July 7, 2018, Kaplan sent an email to all parcel owners attaching a revised proposed Third Amendment, noting in bold and underlined font that all parties had "agreed in concept to the attached, with the one owner exception of [Helco President] Heather Mooney," from whom Kaplan had received no comment. Id. at ¶¶ 20, 61. Kaplan stated that he hoped to finish the amendment process by July 20. Id. at ¶ 61. On July 12, Kaplan told KMK that all parcel owners other than Helco had agreed to the proposed amendment. Id. at ¶ 63.

No later than July 13, 2018, Mooney sent Kaplan suggested revisions to the proposed amendment and expressed her belief that two Helco tenants, a Sears Outlet store and a Great Clips hair salon, had "approval rights" over OEA amendments. Id. at ¶¶ 63-64. Mooney stated that she did not want to ask the tenants for approval until the proposed amendment was finalized.

Id. at ¶ 64. The OEA did not require Helco to obtain its tenants' approval before signing an amendment. Id. at ¶ 70. In a July 13 email, Kaplan attached a final draft proposed amendment incorporating Mooney's suggestions and asked Mooney to "immediately go[ ] to her two tenants to seek approval," reminding her of the August 6 "drop dead date" and asking all Approving Parties to execute the amendment by July 27. Id. at ¶ 64.

All parcel owners except Helco approved the proposed Third Amendment by July 27, 2018. Id. at ¶¶ 65-68. On July 31, Kaplan told the parcel owners in an email that he "ha[d] been told that [Mooney] went to the two tenants" and had "heard ... from a local official" that the tenants "have no issue and would welcome Panera to the center." Id. at ¶ 69. Kaplan again reminded Mooney about the August 6 deadline. Ibid. Kaplan emailed Mooney again on August 1, asking her if Helco would sign the amendment if Sears and Great Clips consented. Id. at ¶ 71. Mooney responded, "Our attorney already explained this to you." Ibid.

By August 3, Helco still had not approved the proposed amendment, so KMK and Chicago Bread amended their redevelopment/lease agreement to extend the "drop dead date" to August 20, 2018. Id. at ¶ 74. Kaplan told Mooney about the new deadline in an August 7 email, adding that the deadline would not be extended further and that Chicago Bread would terminate the agreement if it could not secure the OEA amendment. Id. at ¶ 75. Mooney did not respond. Id. at ¶¶ 76-77. On August 14, a representative from Sears told McHenry officials that it had approved the proposed OEA amendment, McHenry's mayor relayed this information to Kaplan, and Kaplan called Mooney and left a message on her voicemail. Id. at ¶ 78. Mooney did not call back that day. Ibid. In an August 15 phone call, Mooney told Kaplan that she would approve the proposed amendment only if Chicago Bread agreed to indemnify Helco against any claims brought by Sears against Helco due to the redevelopment. Id. at ¶ 79. Kaplan refused. Ibid.

That day, Kaplan called Mooney's primary contact at Sears. Id. at ¶ 80. The Sears contact told Kaplan that Sears was not required to consent to OEA amendments under its agreement with Helco, but said that Sears would consent if Helco reduced its rent. Id. at ¶¶ 81-82. Helco refused to reduce Sears's rent or to sign the amendment without Sears's approval. Id. at ¶¶ 81-82. Sears later emailed McHenry's mayor to say that it did not "want [McHenry] to suffer" because the deal fell through, but that it "was not required to sign" and Helco did not "need to ask [Sears] to sign" a consent to the amendment. Id. at ¶ 83. Sears stated that it hoped Helco would "sign the consent form without involving" Sears. Ibid. Kaplan emailed Mooney the next day to say that Sears did not believe it had to agree to the amendment and asking why Mooney refused to sign the amendment, but Mooney did not respond. Id. at ¶¶ 86-87.

Mooney did not approve or disapprove the amendment or provide any updates to KMK or Chicago Bread between August 16 and August 20. Id. at ¶ 88. On August 20, Chicago Bread terminated its agreement with KMK. Id. at ¶ 89. On August 21,...