Northbound Group, Inc. v. Norvax, Inc.
5 F. Supp. 3d 956
N.D. Ill.2013Background
- Northbound sold assets to Leadbot LLC under a February 27, 2009 Asset Purchase Agreement (APA) providing an earn-out based on Leadbot EBITA through June 30, 2012 (Amendment 2). Norvax is Leadbot’s sole member.
- Northbound alleged fraud (representations about Norvax’s “Bid Platform”), breach of contract, and other claims; the court previously narrowed/dismissed several claims and parties.
- Leadbot withheld earn-out payments from August 2011 through June 2012; Northbound seeks those amounts (approx. $56,204.03 claimed) plus interest; also sought punitive damages and fees.
- Defendants counterclaimed against Northbound and its officers for conversion, breach of fiduciary duty, and fraud.
- Court struck portions of post-deposition affidavits that contradicted deposition testimony or relied on documents not produced in discovery; limited admissible evidence on key factual issues.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Breach of contract — earn-out withholding | Northbound: Leadbot breached APA by withholding monthly earn-outs Aug 2011–Jun 2012 | Leadbot: withholding justified by counterclaims/affirmative defenses and alleged mutual suspension; Norvax: not party to APA | Court: Liability found for Leadbot’s withholding (partial SJ for Northbound); amount and interest to be proved. |
| Breach of contract — other alleged breaches (use of assets, good faith) | Northbound: Leadbot (and Norvax) failed to use assets to further Leadbot brand and violated implied covenant | Leadbot: APA required use but not full use of all assets; Norvax: not a party | Court: Leadbot entitled to SJ on contract claims except withheld earn-out; Norvax entitled to SJ because it was not party to APA. |
| Fraud by Norvax/Jones/Ahern (misstatements about Bid Platform and lead volumes) | Northbound: Norvax reps repeatedly stated Bid Platform awarded to highest bidder and could generate 500–1,000 leads/day, inducing the sale | Defendants: No specific evidence of who said what, when, where; projections/opinions not actionable | Court: SJ for defendants on fraud claim — non-specific, conclusory assertions and opinions/promises insufficient; reliance not shown. |
| Counterclaims (conversion, breach of fiduciary duty, fraud by Northbound/officers) | Leadbot/Norvax: Northbound retained assets, misrepresented customer relationships, officers breached duties | Northbound/Wagner/McAleer: returned laptop, no ownership transfer of leased furniture, no fiduciary duties shown, fraud assertions vague | Court: SJ for Northbound and its officers on all three counterclaims; conversion failed (no possessory right), fiduciary duty unsupported (no operating agreement/evidence), counter-fraud lacks specificity and damages. |
Key Cases Cited
- Delapaz v. Richardson, 634 F.3d 895 (7th Cir. 2011) (purpose of Local Rule 56.1 to aid the court in summary judgment review)
- Cracco v. Vitran Express, Inc., 559 F.3d 625 (7th Cir. 2009) (requirements for Rule 56.1 statements)
- Lujan v. National Wildlife Federation, 497 U.S. 871 (U.S. 1990) (Rule 56(e) does not permit conclusory affidavits to defeat summary judgment)
- Anderson v. Liberty Lobby, 477 U.S. 242 (U.S. 1986) (summary judgment standard and inferences to nonmoving party)
- Ghandi v. Sitara Capital Mgmt., LLC, 721 F.3d 865 (7th Cir. 2013) (fraud allegations require time, place, manner specificity even after discovery)
- Ass’n Benefit Servs., Inc. v. Caremark Rx, Inc., 493 F.3d 841 (7th Cir. 2007) (promissory fraud: future intent statements generally not actionable absent scheme)
- Zimmerman v. Crothall, 62 A.3d 676 (Del. Ch. 2013) (in LLC context, fiduciary duties depend on governing agreement)
- TAS Distrib. Co. v. Cummins Engine Co., 491 F.3d 625 (7th Cir. 2007) (plaintiff must prove damages with reasonable certainty in contract cases)