Opinion
02 C 8252
September 16, 2003
MEMORANDUM OPINION AND ORDER
Plaintiff Charles H. Harrell, Sr. ("Harrell") filed an eleven-count Complaint against Bower Motors, Inc. ("Bowers"), General Motors Corp. ("GM") and John Does 1-10 on September 17 2002 in Cook County Circuit Court. Subsequently, GM removed the case to this court based on diversity grounds (735 Ill. Comp. Stat. § 1332); filed a Motion to Dismiss; and filed a Motion for Summary Judgment. Thereafter, Harrell moved to remand the case back to state court on the grounds that there was a non-diverse defendant and then presented a motion for leave to file an amended complaint on July 16, 2003. For the reasons set forth below, the Court denies Harrell's leave to file an amended complaint and grants GM's motion for summary judgment.
Because this Court is granting GM's motion for summary judgment and denying Harrell's motion for leave to file an amended complaint, Harrell's motion to remand and GM's motion to dismiss are denied as moot.
BACKGROUND
Unless otherwise noted, the following facts are not in dispute. In October 1994, Harrell was given an opportunity to invest, via the GM Minority Dealer Development Program, with a Division of GM in the purchase of a Dealership called Buick of Countryside (the "Dealership"). The investment agreement Harrell entered with GM contained both written and verbal terms. This investment agreement set forth that Harrell agreed to invest $500,000 as an initial investment of capital towards the purchase. However, Harrell alleges that during the investment negotiations, he was precluded from participating in the due diligence process of the Dealership and therefore, Harrell was "led to purchase a non-Project 2000 dealership". On October 5, 1994, Motors Holding Division (a division of GM) and Bower executed an Asset Purchase Agreement, where Motors Holding Division agreed to purchase Bower's assets and assume Bower's responsibilities. On October 27, 1994, January 26, 1995 and October 4, 1996, Mr. Harrell, GM and the Dealership entered into and executed Stockholders Agreements for the stock in the Dealership. Additionally, Harrell became dealer operator of the Dealership.Shortly after deciding to invest in and operate the Dealership in 1994, Harrell asserts that the retail sales of the Dealership reached a new low in 1994. As a result, Harrell began complaining to GM about the Dealership's purported financial and other problems. For example, on December 9, 1994, Harrell wrote to GM, stating: "[A]t this point we are maxed out on expenses for being in business only a month. We continue to uncover large expenditures that were not clearly explained at the time of the buy sell." Similar statements were sent to GM in later years until Harrell filed this Complaint in September, 2002.
DISCUSSION
I. Standard for Motion for Summary Judgment
Summary judgment should be granted when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). When making such a determination, the court must construe the evidence and make all reasonable inferences in favor of the non-moving party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986). Summary judgment is appropriate, however, when the non-moving party "fails to make a showing sufficient to establish the existence of an element essential to the party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); See also Courtney v. Biosound, 42 F.3d 414, 418 (7th Cir. 1994).
II. GM' s Motion for Summary Judgment
GM asserts that the Complaint was brought approximately eight years after Harrell knew or should have known of his alleged claims and injuries. Further, the following Counts of Harrell's Complaint are governed by a five-year statute of limitations (735 III. Comp. Stat. 5/13-205): breach of a written/oral contract (Count I); negligence (Count II); fraudulent misrepresentation (Count III); negligent misrepresentation (Count IV); fraudulent nondisclosure (Count V); conspiracy (Count VIII), unjust enrichment (Count IX), conversion (Count X); and breach of fiduciary duty (Count XI). Moreover, malice/defamation (Count VI) has a one-year statute of limitations (735 III. Comp. Stat. 5/13-201) and securities fraud (Count VII) has a three-year statute of limitations (815 III. Comp. Stat. 5/13(D)). Harrell does not challenge the fact that the Complaint was brought approximately eight years after Harrell expressed to GM that he had been wronged. Instead, Harrell claims that the statutes of limitations on each of these claims should be equitably tolled. Specifically, Harrell alleges that the Court should apply the continuing-tort theory to his claims. Under Illinois law, a cause of action accrues "when a person knows or reasonably should know that it was wrongfully caused." Knox College v. Celotex Corp., 88 III.2d 407, 415 (1981). Moreover, "the delay in the commencement of the limitations period for continuing torts does not apply to contractual torts." Federal Signal Corp. v. Thorn Automated Systems, Inc., 693 N.E.2d 418, 421 (1st Dist. 1998). Here, because all the torts alleged arise out of underlying contractual relationships, the limitations begin to run on the date of the alleged breach. See Hermitage Corp. v. Contractors Adjustment Co., 651 N.E.2d 1132, 1135 (III. 1995). As has been shown, Harrell knew of the wrong caused by GM resulting from their contractual negotiations in 1994 as is evident in a letter that he wrote to GM stating his grievance. Therefore, the statute of limitations are not tolled and as such, each claim is barred by the previously stated applicable statute of limitations.
In addition, Harrell's Complaint refers to the investment agreement between Harrell and GM as containing both written and oral terms. In Harrell's later pleadings, he appears to concede that this claim is time-barred and as a result, Harrell refers to an entirely new agreement which was allegedly breached, namely a written Stockholders Agreement, which is governed by a ten-year statute of limitations (735 III. Comp. Stat. 5/13-206). However, for the reasons discussed supra in Section III, this claim is meritless as well.
Therefore, because all of Harrell's claims are time-barred, GM's Motion for Summary Judgment is granted.
III. Harrell's Motion for Leave to File an Amended Complaint
In his amended complaint, Harrell re-alleges Counts II through X of his original complaint, which as previously explained, are time-barred. In addition, Harrell also seeks to add a new Count I and Count XI, as well as, four new parties substituting for John Does 1-4. The first new count, Count I, is for breach of contract under the Stockholders agreement and/or Asset Purchase Agreement and the second new count, Count XI, is a breach of an oral contract claim.
Any time after a responsive pleading has been served, a party must seek leave from the court or written consent of the adverse party to amend a pleading. Amendola v. Bayer, 907 F.2d 760, 764 (7th Cir. 1990) (citing Fed.R.Civ. 15(a)). Although leave to amend is to be given freely where justice so requires, it may be denied for apparent or declared reasons, such as "undue delay, bad faith, dilatory motive, undue prejudice to the opposing party, or when the amendment would be futile." Bethany Pharmacal Co., Inc. v. OVC, Inc., 241 F.3d 854, 861 (7th Cir. 2001).
Harrell sought leave to amend approximately eight months after GM filed its Motion to Dismiss and Motion for Summary Judgment, apparently in response to GM's dispositive motions. If the leave to amend is granted, this will only result in another round of dispositive motions and briefing, which will not only prejudice the defendant but also preclude the Court from adjudicating the case in a timely and efficient manner.
Moreover, Count I for breach of the Stockholders's Agreement and Count XI for breach of an oral contract are also time-barred and thus, the amendment is futile. Count XI for breach of an oral contract is barred by a five year statute of limitations (735 III. Comp. Stat. 5/13-205).
In Count I, Harrell alleges a breach of Section VI of Stockholders Agreement and a breach of the Asset Purchase Agreement. Clause VII of the Stockholder's Agreement states "[t]he operator represents that the Operator has had an opportunity to review with counsel of the Operator's own choice this Agreement and all other documents executed or to be executed in connection with the formation and financing of the Dealer Company." Despite this express language, Harrell claims that he was not afforded access to accurate information regarding the financial condition of the Dealership. Nonetheless, Harrell did voluntarily sign the 1994 Stockholders Agreement despite his later allegation that he did so "under duress". In addition, the record demonstrates that Harrell subsequently entered into and executed two additional Stockholders Agreements, containing the identical clause confirming that he was provided with adequate information and could protect his own interests. Therefore, Harrell essentially waived his right to later contest this clause under a breach of contract theory and as such, is barred from asserting this Claim over eight years later in response to a Motion to Dismiss and a Motion for Summary Judgment.
The language quoted in Harrell's pleading does not appear in Section VI of the 1994, 1995 or 1996 Stockholders Agreements. The Court can only assume that Harrell meant to refer to Section VII of the Stockholders Agreement as opposed to Section VI.
Furthermore, Harrell contends that he has a viable breach of action claim based upon an alleged breach of the Asset Purchase Agreement between Motors Holding Company (a division of GM) and Bowers. This would be true if Harrell could prove that he is a third-party beneficiary to this contract. "The rule is settled in this State that, if a contract be entered into for a direct benefit of a third person not a party thereto, such third may sue for breach thereof. The test is whether the benefit is direct to him or is but an incidental benefit to him arising from the contract. If direct, he may sue on the contract; if incidental he has no right of recovery thereon." Carson Pirie Scott Co. v. Parrett, 178 N.E. 498, 501 (Ill. 1931). In Illinois, in order for a party to properly fall withing the category of a third-party beneficiary: "the promisor's intention must be evidenced by an express provision in the contract identifying the third-party beneficiary". McCoy v. Illinois Intern. Port Dist., 778 N.E.2d 705, 712 (1st Dist. 2002). "There is a strong presumption that the parties to a contract intend the provisions of that contract to apply only to them and not to third parties." Id. In this case, there is no express provision in the contract identifying Harrell as a third-party beneficiary. Therefore, it is not proper to allow Harrell to sustain a breach of contract claim based upon the Asset Purchase Agreement under the theory that he is a third-party beneficiary. As a result, the ten-year statute of limitations for a written contract is inapplicable; and as such, the claim is barred by the five-year statute of limitations for oral contracts.
CONCLUSION
For the reasons set forth above, the Court denies Harrell's Motion for Leave to File an Amended Complaint and grants Defendant GM's Motion for Summary Judgment.