Sterling National Bank v. Bernard Block, 984 F.3d 1210

Background

In February 2015 Sterling National Bank purchased Damian Services Corp.; $2 million of the purchase price was held in escrow under a negotiated Stock Purchase Agreement (SPA).
Damian had changed its invoice-dating practice in 2009 to date invoices as of the last day of the workweek, which narrowed clients’ discount windows and increased late fees; some internal evidence suggested the change was hidden from clients.
After closing, a former Damian employee alerted clients; Sterling retained Wachtell Lipton and a forensic accountant (AlixPartners), who estimated overcharges of about $1.29 million and advised prosecutors (who declined prosecution).
Sterling refunded current clients (not former clients) and on December 11, 2015 served a 30-page demand for indemnification from the escrow under the SPA; Sellers refused and declined to participate in the SPA’s claim process.
The district court granted summary judgment to the Sellers, reasoning Sterling’s indemnity notice was untimely and prejudicial (irrevocable forfeiture); the court denied Sellers’ claim for statutory pre‑ and post‑judgment interest. Sterling appealed; the Seventh Circuit reversed the summary judgment and remanded.

Issues

Issue	Plaintiff's Argument (Sterling)	Defendant's Argument (Sellers)	Held
Timeliness of indemnity notice under §8.05(c)	Notice was timely because Sterling only became "aware" of a Direct Claim after completing its investigation and drafting the demand; the SPA required reasonable detail.	Sterling became aware by August 2015 (initial findings) and thus notice (Dec. 11) was untimely under the 10‑day rule.	Reversed district court: whether the 10‑day clock started is factbound and unresolved on summary judgment; cannot be decided for Sellers as a matter of law.
Effect of late notice — irrevocable forfeiture/prejudice	Even if notice was late, the SPA excuses delay unless the indemnifying party irrevocably forfeited rights or defenses; Sellers have not shown irrevocable forfeiture.	Late notice prejudiced Sellers by preventing settlement control, defense of third‑party claims, and timely investigation.	Held for Sterling: undisputed facts show Sellers did not irrevocably forfeit rights or defenses; timing cannot relieve indemnity obligation.
Merits of underlying liability (whether 2009 dating breached client contracts)	SPA breach/warranty claims arise from Sellers’ nondisclosure and misrepresentations; facts support trial on whether clients had viable claims and whether Sellers knew the change was unauthorized.	The invoice‑dating change did not breach client contracts as a matter of law.	Court declined to decide merits on appeal; merits are fact‑intensive and unsuitable for appellate resolution on summary judgment.
Pre‑ and post‑judgment interest on escrowed funds	Sterling: SPA funnels remedies to indemnification and contains interest/post‑judgment provisions; pre‑judgment interest barred by agreement and not clearly mandated by statute.	Sellers: entitled to statutory prejudgment interest and to 12% contractual post‑judgment interest on escrow.	Affirmed in part: prejudgment interest not available under the SPA and Illinois law on this record; 12% contractual post‑judgment rate only applies after a final, non‑appealable adjudication.

Key Cases Cited

Wisconsin Central Ltd. v. TiEnergy, LLC, 894 F.3d 851 (7th Cir. 2018) (Rule 58 separate-document requirement and when appellate jurisdiction may still lie)
Calumet River Fleeting, Inc. v. Int’l Union of Operating Engineers, Local 150, AFL-CIO, 824 F.3d 645 (7th Cir. 2016) (requirements for declaratory relief and separate judgment language)
Gallagher v. Lenart, 226 Ill.2d 208 (Ill. 2007) (contract interpretation: give effect to parties’ intent and plain language)
Bank of America, N.A. v. Moglia, 330 F.3d 942 (7th Cir. 2003) (interpretation of contracts negotiated by sophisticated commercial parties)
West Bend Mut. Ins. Co. v. Procaccio Painting & Drywall Co., 794 F.3d 666 (7th Cir. 2015) (courts should enforce plain contract terms for sophisticated parties)
Land of Lincoln Goodwill Indus., Inc. v. PNC Financial Servs. Grp., 762 F.3d 673 (7th Cir. 2014) (avoid rendering contract provisions superfluous)
International Financial Servs. Corp. v. Chromas Technologies Canada, Inc., 356 F.3d 731 (7th Cir. 2004) (appellate court should not decide complex, factbound contract merits in the first instance)
Hecker v. Deere & Co., 556 F.3d 575 (7th Cir. 2009) (ESI conversion costs may be taxable under §1920)
Race Tires America, Inc. v. Hoosier Racing Tire Corp., 674 F.3d 158 (3d Cir. 2012) (limits on recoverable ESI/copying costs)