538 B.R. 417
N.D. Ill.2015Background
- Emerald Casino lost its Illinois Gaming Board (IGB) license after investigations found repeated failures to disclose material information; the loss led to Emerald's bankruptcy and appointment of Trustee Frances Gecker.
- Trustee sued seven former officers/directors for breach of the Amended Shareholders’ Agreement and related claims; the court found six defendants liable for breaching the Agreement and dismissed claims against Peer Pedersen.
- The court found Defendants’ failures to disclose (violations of IGB Rules 140(a), 140(b)(3), and 110(a)) were substantial factors in the IGB’s revocation decision; causation turned on the totality of conduct, not any single isolated act.
- The Agreement was interpreted to create several (not joint) liability because each shareholder promised to conform his own behavior to IGB rules rather than guaranteeing others’ performance.
- For damages the court excluded the Trustee’s expert testimony as inadmissible and relied on market evidence — principally the IGB’s reissuance/sale of the license to Midwest Gaming/Des Plaines valued at a $272 million net present value — and apportioned that amount equally among the six liable defendants.
- Both sides moved for reconsideration: Trustee sought joint-and-several exposure (full value from each defendant); Defendants argued the proper market measure was $125 million (the cash Midwest paid), not $272 million. The court denied both motions.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether damages should be joint-and-several (each defendant liable for full license value) | Gecker: Each defendant’s individual breach independently caused the license loss, so each should bear full damages | Defs: Liability is several; damages must reflect each defendant’s contribution | Denied: Court found liability under Agreement is several; causation involved combined conduct, and court properly apportioned damages among the six defendants |
| Whether the Amended Shareholders’ Agreement creates joint obligations | Gecker: Agreement language supports treating obligations as joint so each signer can be held for full loss | Defs: Agreement creates individual promises to comply with IGB rules—several liability | Denied: Court reaffirmed agreement creates several liability based on parties’ intent and contract language |
| Proper valuation of the lost license ($272M vs $125M) | Gecker: Rely on market evidence (IGB decision and prior valuations) setting value at $272M | Defs: True sale price was $125M paid by Midwest; other payments (host municipality commitments) shouldn’t count | Denied: Court refused late-filed new evidence, held $272M (NPV of transaction including host municipality commitment) reflects market value of package sold |
| Whether Illinois law requires joint-and-several liability for an indivisible harm in contract cases | Gecker: Indivisible harm doctrine and some precedents support joint liability | Defs: Contract law requires express joint promise or statute; tort rules do not automatically apply | Denied: Court declined to extend tort-based indivisible-harm joint liability to contract absent clear authority; apportionment permitted where reasonable basis exists |
Key Cases Cited
- City of Chicago v. Beretta U.S.A. Corp., 821 N.E.2d 1099 (Ill. 2004) (test for causation when multiple factors combine: whether conduct was a material element and substantial factor)
- Board of Trustees v. Coopers & Lybrand, 803 N.E.2d 460 (Ill. 2003) (tort apportionment: joint liability only when indivisible harm cannot be reasonably apportioned)
- Richman v. Sheahan, 512 F.3d 876 (7th Cir. 2008) (discusses four approaches for multiple defendants causing single harm; incremental‑harm approach permits apportionment)
- Bank of Waunakee v. Rochester Cheese Sales, Inc., 906 F.2d 1185 (7th Cir. 1990) (standards for granting reconsideration motions)
- InsureOne Indep. Ins. Agency, LLC v. Hallberg, 976 N.E.2d 1014 (Ill. App. Ct. 2012) (state appellate case adopting a concurrent-breach approach permitting joint liability in contract under unique facts; court declined to follow)