2024 IL App (3d) 230114
Ill. App. Ct.2024Background
- Tom Logue sold his financial services business (Logue Financial Planning) to Scott Cline (Cline Financial Concepts, LLC) in 2017 by executing a Buy-Sell Agreement.
- The agreement entitled Logue to 70% of a 1.5% annual management fee on any former accounts Cline was able to retain for four years, with provisions addressing client retention, recruitment, and a penalty for late payments.
- After the sale, Cline discovered Logue’s clients had been largely invested in high-risk inverse floater bonds, contrary to representations that they were conservative investments, and some had suffered losses. Regulatory inquiries regarding these investments had also occurred.
- Cline eventually terminated the agreement, alleging breaches by Logue, and stopped making scheduled payments, prompting Logue to sue for breach of contract. Cline counterclaimed, raising fraudulent inducement and breach defenses.
- The trial court found for Logue, awarding damages based on actual fees earned post-sale (not anticipated fees), minus a reduction for certain clients, and declined to grant statutory prejudgment interest. Logue appealed the damages calculation and the denial of interest.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Damages should be based on anticipated (not actual) client retention and fees | Logue argued expected damages of $637,000, using an anticipated 75% retention rate as contemplated by the parties | Cline argued actual events—including Logue's conduct—resulted in lower than expected retention, so damages should reflect actual (not anticipated) results | Damages should be based on actual retention and fees since Logue’s conduct contributed to lower retention, and anticipated damages would be speculative |
| $14,112 reduction for certain clients was supported by evidence | Reduction was not justified because there was no evidence these specific 6 clients were lost due to Logue's conduct or filed complaints | General dissatisfaction among clients justified the reduction for unretained clients | The specific $14,112 reduction was not supported by the record; it was factually erroneous; damages increased by this amount on appeal |
| Entitlement to statutory prejudgment interest | Prejudgment interest on the amount due was required since the damages were capable of computation | No, as the contract provided for a late fee penalty and the amount due was not easily ascertainable | Denied statutory prejudgment interest—court discretion was reasonable given contract provisions and complexity in calculating damages |
Key Cases Cited
- Farwell Constr. Co. v. Ticktin, 84 Ill. App. 3d 791 (Plaintiff must prove damages to a reasonable certainty)
- Midland Hotel Corp. v. Reuben H. Donnelley Corp., 118 Ill. 2d 306 (Damages for lost profits must afford a reasonable basis for computation and avoid speculation)
- SK Hand Tool Corp. v. Dresser Indus., Inc., 284 Ill. App. 3d 417 (A court must not ignore plaintiff’s own conduct in lost profits damages)
- Gretencord v. Cryder, 336 Ill. App. 3d 930 (Damages that are arbitrary or not based on evidence are against the manifest weight of the evidence)
- Certain Underwriters at Lloyd’s, London v. Abbott Labs., 2014 IL App (1st) 132020 (Prejudgment interest not awarded when damages are not easily ascertainable)