Opinion
Case No. 99 C 2248
August 18, 2000
LAWRENCE S. CHARFOOS, Esq. Charfoos Christensen, P.C. Detroit, MI 48202 Attorney for Plaintiff
MICHAEL v. CASEY, Esq. HAROLD B. HILBORN, Esq. Varga, Berger, Ledsky, Hayes Casey Chicago, IL 60606 Attorneys for Defendant
MEMORANDUM OPINION AND ORDER
Defendant, The University of Chicago Hospitals ("Hospitals"), retained Plaintiff, Quantum Management Group Limited ("Quantum"), to establish and administer a managed health care plan (the "Plan") for Medicaid recipients in Chicago, Illinois. The contract provided for consulting fees to be paid to Quantum, and for additional payments if the Plan ever became profitable. Quantum believes the Plan did achieve a profit, and has filed this breach of contract action against Defendant to recover a percentage of those profits. Defendant denies that the Plan ever achieved profitability as defined in the contract, and has moved for summary judgment. Defendant also filed several counterclaims, and moves for summary judgment on those claims as well. Defendant's motion for summary judgment is before this Court by limited consent of all parties in accordance with 28 U.S.C. § 636(c); see also FED. R. Civ. P. 73.
I. Background
The following undisputed facts are taken from the parties' Local Rule 56.1 submissions. Quantum is a consulting group with experience in starting and operating managed care plans for Medicaid recipients. Mr. Frederick Fey, as trustee of the Frederick Fey Family Trust, is the only limited partner of Quantum. He is also the president and controlling shareholder of Quantum's corporate general partner, Quantum Management Group, Inc.
For convenience, the following submissions shall be abbreviated as follows: Defendant The University of Chicago Hospitals' Rule 12(M) Statement in Support of Its Motion For Summary Judgment, "Def.'s 56.1(a) ¶" Amended Answer of Plaintiff to Defendant's Motion for Summary Judgment, "Pl.'s 56.1(b), ¶ __ " Concise Response to Movant's Statement, "Pl.'s 56.1(b)(3)(B), ¶ Defendant The University of Chicago Hospitals' Rule 56.1 Response to and Motion to Strike Plaintiff's Statement of Additional Facts, "Def.'s 56.1(a) Resp., ¶".
In late 1995, the State of Illinois (the "State") announced a plan to change its Medicaid program in a manner that potentially threatened the Hospitals customer base. In response to the State's announcement, the Hospitals decided to create its own managed healthcare plan (the "Plan") to preserve its sizeable base of Medicaid patients. Accordingly, the Hospitals hired Quantum to establish and administer the Plan, and entered into an agreement with Quantum on June 16 and 17, 1996 (the "Agreement")
In order to enroll Medicaid recipients in the Plan, the Hospitals was required to enter into a Comprehensive Prepaid Health Plan Contract (the "State Contract") with the State of
Illinois Department of Public Aid. The State Contract authorized the Plan to provide medical assistance to Medicaid recipients and provided that the State would pay the Plan a predetermined monthly fee for each Medicaid recipient who enrolled in the Plan.
Mr. George Morrow was retained by Quantum to serve as Chief Executive Officer ("CEO") of the Plan. Mr. Morrow served in that capacity until his resignation on July 16, 1997. After the agreement was executed, Quantum also recruited a management team of consultants and began hiring employees for the Plan, which became known as "Family First." At its peak, the Family First Plan comprised approximately 150 employees.
The Plan became operational in January of 1997. It began to enroll its first members in March of 1997. For every month of its operation, the Plan suffered an operating loss. In the Fall of 1997, the State decided not to make the announced changes to its Medicaid program. After considering a number of alternatives to keeping the Plan alive, the Hospitals decided in the Spring of 1998 to offer the Plan for sale. In late May of 1998, the Hospitals told Quantum of their intention to sell the Plan, and terminated the Agreement on May 25, 1998. Although Quantum bid on the purchase of the Plan, the Hospitals sold the Plan to another bidder. The sale of the Plan closed on July 31, 1998. The sale of the Plan also terminated the State Contract in accordance with Section V of the Agreement:
[u]pon notification by the State to [the Hospitals] that it has not been awarded a State Contract or that the State Contract has been terminated, this Agreement shall terminate. In such case . . . [the Hospitals] shall not be liable to make payments pursuant to Section IV.B or Section IV.C.
(Def.'s 56.1(a), Ex. 2, at 11.)
Section IV of the Agreement governed Plaintiff's consulting fees and out-of-pocket expenses. Section IV.A authorized reimbursement by the Hospitals to Quantum for certain expenses authorized by a Budget Business Plan:
the Hospitals] shall reimburse Quantum for any and all expenses properly incurred by Quantum, but in each case only to the extent such expenses were within the scope of the Budget included within the Business Plan or within the scope of a later Budget adopted by [the Hospitals] which was in effect at the time the expense was incurred by Quantum.
(Id. at 8.) The original Budget Business Plan authorized $25,000 per month for Mr. Fey's services from April through December of 1997. A written modification to the Budget dated December 17, 1996 earmarked an additional $26,000 per month for Mr. Morrow's services as CEO of the Plan. When Mr. Morrow resigned in July of 1997, Quantum continued to charge and accept $26,000 per month for five months thereafter, even though Mr. Morrow no longer performed any services for the Plan.
Furthermore, in December of 1996, the Hospitals decided that it needed Quantum's services for 90 days more than originally planned and Mr. Morrow's services as the Plan's CEO through December of 1997. The written modification reflected this change in plans and increased Quantum's consulting fees. As consideration for the increase in consulting fees, the parties agreed to split equally the amount of increase in consulting fees. (Def.'s 56.1(a), Ex. 20; Pl.'s 56.1(b), ¶ 49.) Quantum's share of the increase in consulting fees totaled $148,690.37, which has not repaid to the Hospitals.
Section IV.B of the Agreement authorizes the payment of a "Monthly Fee" to Quantum if the Plan ever achieved an operating gain:
In addition to the other payments described herein, . . . [the Hospitals] shall pay Quantum compensation for its services in an amount based on the number of enrollees in the Plan on the first day of the previous month (hereafter referred to as the "Monthly Fee" payable with respect to such previous month); provided, however, that no Monthly Fee shall be payable with respect to any month in which the Plan experienced an operating loss. For such purpose an operating loss shall mean an excess of total expenses over total revenues . . . computed on an accrual basis as specified by generally accepted accounting principles.
Notwithstanding anything to the contrary above, a Monthly Fee with respect to a given month shall not be due if the total enrollment in the Plan on the first day of the previous month was less than 120% of the breakeven level of enrollment. The breakeven level of enrollment for such purposes shall mean the number of enrollees in the Plan on the first day of the first month in which the Plan did not experience an operating loss, as defined above.
(Id.) This means that in order for Quantum to be entitled to a Monthly Fee, the Plan had to first achieve a breakeven level of enrollees in a certain month (i.e., not experience an operating loss) and then surpass that breakeven level of enrollment in a subsequent month by at least twenty percent.
According to the only financial data produced in this case, the Plan suffered an operating loss for each month of its operation. But Quantum claims that the Plan broke even in either March or May of 1998. Mr. Fey also testified that Messrs. Harrison and Dost, officers of the Hospitals, told him that the Plan was "cash positive" and making "money" in March of 1998.
In March of 1998, 15,825 members were enrolled in the Plan, and in May, 17,464 were enrolled. One hundred and twenty percent of both figures is 18,990 and 20,956, respectively. The Plan's maximum enrollment never exceeded 17, 618, over 1, 300 enrollees shy of the 120% breakeven level of enrollment based on March of 1998.
The Agreement also contemplated a "significant structural change, such as a sale or merger." (Id. at 10, § IV.F.) When that occurs, Section IV.F provides that "the parties shall equitably adjust the developmental fees otherwise payable under this Section." (Id. at 10.) Quantum admits that if no Monthly or Annual Fees are due at the time when the Plan is sold, Quantum "is not entitled to any fees under Section IV(F) because there are no fees to equitably adjust." (Def.'s 56.1(a), ¶ 34; see also Pl.'s 56.1(b), ¶ 34.)
The Agreement also obligated Quantum to select a computer management information system ("MIS") that could comply with the reporting requirements to regulatory agencies. Section III.E provides:
Quantum shall make recommendations and assist in the selection, development and/or integration of information and internal communication systems, which shall include a management information system ("MIS") for the gathering, synthesis, storage and retrieval of data required for the Plan. Among other capabilities, the MIS shall be designed for the purpose of . . . making required reporting to regulatory agencies.
(Def.'s 56.1(a), Ex. 2, at 4.) Quantum selected an MIS without an in-depth technical due diligence of the product, and the MIS failed to meet the reporting requirements of the Illinois Department of Public Aid, causing the Plan to be out of compliance with the State Contract. To remedy the defects in the MIS selected by Quantum, the Hospitals retained another consultant to bring the Plan into compliance with the State's reporting requirements at a cost of $166,945.
Finally, when Mr. Fey was hired by the Hospitals, Mr. Fey leased an apartment in Chicago, and the Hospitals reimbursed him $2,026 for the security deposit on the apartment. When Mr. Fey moved out of the apartment, he instructed his landlord to refund the security deposit to him. Mr. Fey has never returned the security deposit to the Hospitals.
II. Discussion
A. Summary Judgment Standard
Summary judgment is proper only when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the 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); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). In ascertaining whether summary judgment is appropriate, the Court must view the evidence, and draw all reasonable inferences therefrom, in the light most favorable to the non-moving party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986); Kennedy v. United States, 965 F.2d 413, 417 (7th Cir. 1992). If the non-movant bears the burden of proof on an issue, however, he or she may not simply rest on the pleadings, but rather, must affirmatively set forth specific facts establishing the existence of a genuine issue of material tact. See Celotex, 477 U.S. at 322-26.
Summary judgment is appropriate where the non-moving party "fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Id. at 322. Consequently, motions for summary judgment must be analyzed in light of both the applicable substantive law and the question of whether a reasonable jury could return a verdict in the non-movant's favor. See Checkers, Simon Rosner v. Lurie Corp., 864 F.2d 1338, 1344 (7th Cir. 1988). "Where the record taken as a whole could not lead a rational trier of fact to find for the non-movant party, there is no genuine issue for trial," and summary judgment must be granted. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).
B. Plaintiff's Breach of Contract Claims
Defendant argues that Plaintiff is entitled to additional payments if it satisfies three conditions under the Agreement. First, under Section IV.D of the Agreement, Plaintiff must be terminated without cause. Second, the Plan must achieve an operating gain in any given month in accordance with Section IV.B. The enrollment during the first month of operating gain is defined as breakeven enrollment (for convenience, this first month of operating gain shall be hereafter referred to as the "breakeven month"). Third, the total enrollment during the previous month from which additional payments are to be made must exceed 120% of the breakeven level of enrollment. Defendant contends that Plaintiff cannot satisfy any three of these requirements. But for summary judgment purposes, we shall assume without deciding that Plaintiff has raised an issue of fact concerning whether it was terminated without cause. However, for the reasons given below, Plaintiff has failed to raise a genuine issue of fact regarding the other two requirements.
1. The Plan Suffered an Operating Loss For Each Month It Was In Operation.
The only financial evidence on the Plan's financial condition is the Hospitals' Spreadsheet of Plan Financial Information for Fiscal Year 1998. (Def.'s 56.1(a), Exs. 9A 9B.) This spreadsheet, which was prepared by Defendant, itemizes the actual revenues and expenses for fiscal year 1998, and shows that the Plan suffered an operating loss for each month during fiscal year 1998. The Plan's "best" month occurred in March of 1998, when it suffered a loss of $72,721, according to the spreadsheet. There is no other financial evidence which shows that the Plan was profitable in any month during its lifespan.
Plaintiff offers no evidence of a breakeven month sufficient to defeat summary judgment. Plaintiff asserts in its answer to Defendant's interrogatory that the "break even level of enrollment is found in the May, 1998 financial generated by Defendant." (Def.'s 56.1(a), Ex. 10, ¶ 4.) However, the May, 1998 financial generated by Defendant clearly shows that the Plan suffered a loss in May of 1998. Plaintiff offers no calculations or financial data or any other evidence other than Mr. Fey's self-serving, naked assertions to challenge the accuracy of the figure that appears in the spreadsheet. Mr. Fey's deposition testimony that "[t]here's a lack of credibility" in Defendant's spreadsheet, (Pl.'s 56.1(b), Ex. 1, at 176), does not create an issue of fact as to whether the Plan achieved an operating gain. Mere conclusory assertions, unsupported by specific facts, made in depositions opposing a motion for summary judgment, are not sufficient to defeat a properly supported motion for summary judgment. See Lujan v. National Wildlife Fed'n, 497 U.S. 871, 888 (1990); see also Mills v. First Fed. Sav. Loan Ass'n, 83 F.3d 833, 843 (7th Cir. 1996) (holding that while it is true that a nonmoving party's own deposition can constitute affirmative evidence to defeat a summary judgment motion, conclusory statements in the plaintiff's deposition do not create issues of fact).
Plaintiff also relies on Mr. Fey's deposition testimony that Messrs. Harrison and Dost told Mr. Fey that the Plan was "cash positive" and "making money" in March of 1998 as proof that the Plan achieved an operating gain. This testimony does not create an issue of fact because it is inadmissible hearsay, it lacks foundation, it is not based on personal knowledge, it violates the best evidence rule, and it does not explicitly satisfy any condition precedent to the Agreement. There being no financial records to substantiate the financial condition of the Plan, Mr. Fey's testimony to prove the contents of these phantom records is hearsay, lacks foundation, and is not based on personal knowledge. FED. R. EVID. 801; see also United States v. Marshall, 762 F.2d 419, 425-26 n. 4 (5th Cir. 1985). Nor can Plaintiff use Mr. Fey's testimony to prove the contents of any of these records without producing the records themselves. FED. R. EVID. 1002. Finally, even if the Plan were "cash positive" or "making money," these statements do not prove or tend to prove that the Plan did not suffer an operating loss, as that term is defined by the Agreement. Section IV.B.1 of the
By "operating gain" we mean that the Plan did not achieve an operating loss as defined in the Agreement.
Agreement defines an operating loss as "an excess of total expenses over total revenues . . . computed on an accrual basis as specified by generally accepted accounting principles." (Def.'s 56.1(a), Ex. 2, at 8.) Plaintiff does not identify any generally accepted accounting principle which permits an entity's financial condition to be established by the testimony of its officers alone without any supporting financial records, and this Court knows of none. Plaintiff's testimony that several officers told Mr. Fey that the Plan was profitable does not create an issue of fact sufficient to preclude summary judgment.
Plaintiff blames Defendant for the lack of accounting records on the Plan's financial condition, and argues that it need not demonstrate with "mathematical precision" that the Plan achieved an operating gain. First of all, Plaintiff's claimed frustrated attempts at getting discovery come too late in the day. The summary judgment stage is not the appropriate time to complain about lack of discovery. If Plaintiff felt that it was not getting the discovery it needed, it could have used any of the various procedural devices at its disposal during discovery to obtain relevant financial records. But it does not appear that Defendant has resisted discovery; rather, it appears that Plaintiff simply chose not to pursue various available methods (some albeit expensive or time-consuming) for determining the Plan's actual accrued monthly expenses.
Plaintiff also claims that the Hospitals "alone had the obligation to maintain the financial records" and that "there seems to be no significant dispute on the proposition that Defendant, the sole keeper of the accounting records, had the obligation to perform monthly accountings and failed to do so." (Pl.'s Resp., at 14, 15.) But Plaintiff does not cite to any provision in the Agreement which obligated the Hospitals to keep records documenting any additional fees beyond those authorized by the Budget to which Plaintiff might be entitled. Rather, Section III.F states that it was Plaintiff's obligation to prepare financial management reports and to keep financial and accounting records. (Def.'s 56.1(a), Ex. 1, at 4.)
Finally, Plaintiff argues that it need not prove with mathematical certainty that the Plan was profitable, because the "wrongful prevention doctrine" estops a party who prevents the occurrence of a condition precedent from standing on that condition's nonoccurrence to refuse to perform his part of the contract. (Pl.'s Resp., at 16 (citing Wasserman v. Autohaus on Edens, Inc., 559 N.E.2d 911, 918 (Ill.App.Ct. 1st Dist. 1990).) But Plaintiff has offered no evidence that the Hospitals prevented the occurrence of a condition precedent to the Agreement, so it cannot rely on the wrongful prevention doctrine.
No issue of fact exists regarding whether the Plan ever achieved an operating gain. The only credible and admissible evidence presented unequivocally demonstrates that the Plan suffered an operating loss for each month it was in operation. Accordingly, Defendant is entitled to summary judgment on the breach of contract claim.
2. The Plan Never Achieved 120% of Breakeven Level of Enrollment.
Even assuming that Plaintiff could show that the Plan achieved an operating gain, it undisputably cannot demonstrate that the Plan ever achieved 120% of the breakeven level of enrollment as required by Section IV.B. Plaintiff contends that the breakeven month occurred in either March or May of 1998. No matter which month is selected, it is undisputed that there was never any month whose level of enrollment exceeded 120% of the enrollment of the selected month. The enrollment in March was 15,825 and in May was 17,464. One hundred and twenty percent of 15,825 is 18,990 and of 17,464 is 20,956. It is undisputed that the Plan's highest enrollment level was 17,618. (Pl.'s 56.1(b), ¶¶ 29-30.) Even taking the lower month of enrollment, March, the Plan's enrollment level never exceeded 17,618, over 1,300 shy of the 18,990 needed to exceed 120% of the breakeven enrollment. Plaintiff does not deny any of these figures, and does not even address them in its response brief. Accordingly, summary judgment is appropriate on the claims of Plaintiff's complaint.
3. Defendant Is Not Obligated To Make Future Payments.
Plaintiff argues that the Agreement obligates the Hospitals to make additional payments in accordance with Section IV.D even if they are no longer operating the Plan. Section V of the Agreement provides:
[u]pon notification by the State to [the Hospitals] that it has not been awarded a State Contract or that the State Contract has been terminated, this Agreement shall terminate. In such case . . . [the Hospitals] shall not be liable to make payments pursuant to Section IV.B or Section IV.C.
(Def.'s 56.1(a), Ex. 2, at 11 (emphasis added).) It is undisputed that the State Contract was terminated in July of 1998. Thus, under Section V, the Hospitals have no obligation to make any payments in accordance with Section IV.B. Section IV.D states that if the Agreement is terminated by the Hospitals without cause, then the Hospitals must continue to make payments in accordance with Section IV.B. But Section V excuses payments under Section IV.B. Thus, under the strict terms of the Agreement, regardless of whether the Agreement was terminated with or without cause, Defendant had no obligation to make any additional payments under Section IV.D to Plaintiff after the State Contract was terminated in July of 1998.
Plaintiff further contends that Section IV.F contemplates an exception which obligates Defendant to make additional payments where Defendant terminates the State Contract by selling the Plan. Section IV.F provides "[i]f the Plan undergoes a significant structural change, such as a sale or merger, then the parties shall equitably adjust the developmental fees otherwise payable under this Section." (Def.'s 56.1(a), Lx. 2, at 10.) But in his Rule 56.1(b) response, Plaintiff admits that "[w]here the Plan is sold at a time when Monthly and Annual Fees are not due, plaintiff is not entitled to any fees under Section IV(F) of the Agreement because there are no fees to equitably adjust." (Pl.'s 56.1(b), ¶ 34.) Since Plaintiff was never entitled to a monthly fee under Section IV.B because the Plan never achieved an operating gain, and since no annual fee is payable unless a monthly fee is payable, (Pl.'s 56.1(b), ¶ 31), there are no fees to equitably adjust and Plaintiff is not entitled to any fees under Section IV.F.
C. Defendant's Breach of Contract Counterclaim
Defendant also filed several counterclaims, seeking damages from Plaintiff for (1) breaching Section IV.A of the Agreement after the resignation of the Plan's CEO, Mr. George Morrow; (2) for refusing to repay a security deposit refunded by Plaintiff's landlord and originally paid for by the Hospitals; (3) for breaching a written modification to the Business Plan Budget; and (4) for breaching Sections III.E and III.U of the Agreement for failing to select a computer management information system that would enable the Plan to comply with reporting requirements under the State Contract. Defendant seeks damages under the theories of breach of contract, negligence, and breach of fiduciary duty.
Defendant argues that when Mr. Morrow resigned as the Plan's CEO, Plaintiff continued to charge for Mr. Morrow's services in violation of Section IV.A of the Agreement, which provides:
[the Hospitals] shall reimburse [Plaintiff] for any and all expenses properly incurred by [Plaintiff], but in each case only to the extent such expenses were within the scope of the Budget included within the Business Plan or within the scope of a later Budget adopted by [the Hospitals] which was in effect at the time the expense was incurred by [Plaintiff]
(Def.'s 56.1(a), Ex. 2, at 8.) Plaintiff responds that Mr. Dost, an officer of the Hospitals, testified that he knew of no impropriety. Plaintiff further argues that Mr. Harrison, president of the Hospitals, asked Fey to "replace Mr. Morrow" and that Fey agreed to do so.
Once again, Plaintiff's evidence falls far short of the mark. Mr. Dost's telling Mr. Fey that Mr. Dost knew of no impropriety does not establish that Plaintiff did not violate Section IV.A. As Defendant points out, "it was exactly because Mr. Dost was not aware of the overcharges that plaintiff was able to get away with them." (Def.'s Reply, at 13.) Furthermore, Plaintiff has not proffered any evidence that Mr. Fey's replacing Mr. Morrow was authorized by any Budget within the Business Plan or any later Budget approved by the Hospitals.
In fact, only two Budgets were authorized by the Hospitals, (Pl.'s 56.1(b), ¶¶ 45, 47), and neither of them authorized Fey's assumption of Mr. Morrow's fees. The original Budget authorized a fee of $25,000 per month payable to Mr. Fey from April through December of 1997. (Def.'s 56.1(a), ¶ 46.) The written modification to the Budget earmarked an additional $26,000 per month payable to Mr. Morrow for his services as the Plan's CEO.
Plaintiff breached Section IV.A by charging and accepting expenses not authorized by the original Business Plan Budget or as modified. Mr. Morrow resigned as the Plan's CEO in July of 1997, and performed no more services for the Plan thereafter. (Def.'s 56.1(a), ¶ 47.) Nevertheless, Plaintiff continued to charge and accept $51,000 per month, which included $26,000 earmarked for Mr. Morrow's services, even though Mr. Morrow no longer performed any services for the Plan, from August to December of 1997. (Id.) This clearly violated Section IV.A of the Agreement, and Defendant has suffered damages in the amount to $130,000 ($26,000 multiplied by five months), an amount not disputed by Plaintiff, and is entitled to said amount.
Defendant also wants back the security deposit it paid for Mr. Fey's apartment. When Mr. Fey leased an apartment in Chicago, Defendant reimbursed Plaintiff $2,026 for the security deposit on the apartment. When Fey moved out of the apartment, he instructed his landlord to refund the security deposit directly to him. Plaintiff has never returned the security deposit to the Hospitals. Because Plaintiff has not responded to this contention, Plaintiff has waived any defenses and Defendant is entitled to the amount of $2,026.
Next, Defendant contends that Plaintiff breached the written modification to the Business Plan Budget by refusing to refund half of a negotiated increase in consulting fees. In December of 1996, Defendant desired to keep the Plan's developmental team in place for an additional 90 days, i.e., through March of 1997, and to retain Mr. Morrow through December of 1997 as the Plan's CEO. The original Budget had not contemplated that Mr. Morrow and the developmental team would be needed for that additional period. Thus, as consideration for the increase in consulting fees called for by the original Budget, the parties agreed to split equally the amount of increase in consulting fees, with Plaintiff's share "to be born by [the Hospitals] initially as a draw against future payments under the (Agreement]." (Def.'s 56.1(a), Ex. 20; Pl.'s 56.1(b), ¶ 49.)
Plaintiff responds that Defendant breached the Agreement, and therefore Plaintiff's contractual obligation to share the increase in consulting fees was discharged. But Plaintiff has not shown that Defendant breached the agreement, and even if it did, Plaintiff has not identified how Defendant's breach discharges Plaintiff's contractual obligation to share the increase in consulting fees. Because Plaintiff admits that its share of the increase in consulting fees totaled $148,690.37 and that it has never repaid these fees, (Pl.'s 56.1(b), ¶ 50), Plaintiff owes Defendant $148,690.37 per the written modification to the Business Plan Budget of December 17, 1996.
Finally, Defendant seeks damages for Plaintiff's breach of Sections III.E and III.U of the Agreement. Defendant argues that Plaintiff failed to select a computer management information system ("MIS") to enable it to comply with the reporting requirements under the State Contract. Section III.E provides:
[Plaintiff] shall make recommendations and assist in the selection, development and/or integration of information and internal communication systems, which shall include a management information system ("MIS") for the gathering, synthesis, storage and retrieval of data required for the Plan. Among other capabilities, the MIS shall be designed for the purpose of . . . making required reporting to regulatory agencies.
(Def.'s 56.1(a), Ex. 2, at 4.) Section III.U states that Plaintiff "agrees to comply with all provisions of the State Contract and any and all other applicable statutes and regulations." (Id. at 8.) Plaintiff's only response is that it "has categorically denied this entire argument given that Mr. Dost testified it was his recommendation to use CSS [sic, CSC] and he participated in the due diligence." (Pl.'s Resp., at 19.)
It is undisputed that Plaintiff selected the MIS "without an in-depth technical due diligence of the product." (Pl's 56.1(b), ¶¶ 52-53.) Mr. Dost testified that he "wasn't involved in the identification of the actual software" and that "he would not have been qualified to make that selection." (Dost Dep., at 47.) Plaintiff also admitted in response to Defendant's Request to Admit that "plaintiff was responsible for the selection of the CSC Healtheare MHC software product." (Def.'s 56.1(a), Ex. 13, ¶¶ R6 A6.) It is also undisputed that because of Plaintiff's MIS selection, Plaintiff and the Plan were "unable to meet any of our reporting requirements with the Illinois Department of Public
Plaintiff's responses to Paragraphs 52 and 53 of Defendant's Rule 56.1(a) submission do not dispute this statement. Plaintiff does not specifically deny that he was responsible for selecting the MIS for the plan, nor does he deny that he did so without proper due diligence. Plaintiff only states that Mr. Dost testified that he participated in the due diligence, but Dost's testimony does not create an issue of fact as to Plaintiff's poor MIS selection or lack of due diligence.
Aid and are out of compliance with [the State Contract]." (Id., ¶ 54.) Thus, Plaintiff did not recommend or select an MIS that was "designed for the purpose of making required reporting to regulatory agencies," and therefore breached Section III.E of the Agreement.
Plaintiff does not contest Defendant's measure of damages of the breach of Section III.E of the Agreement. As a result of Plaintiff's failure to select an MIS that could meet the State's reporting requirements, Defendant had to retain another consultant at an additional cost of $166,945 to remedy the defects in the MIS selected by Plaintiff and to bring the Plan into compliance with the State's reporting requirements. (Pl.'s 56.1(b), ¶ 55.) Plaintiff neither admits nor denies the accuracy of Defendant's damages amount, but such equivocation constitutes an admission. See Karazanos v. Madison Two Associates, 147 F.3d 624, 626 (7th Cir. 1998). Therefore, Defendant is entitled to $166,945 as damages for Plaintiff's failure to select a suitable MIS per the Agreement.
D. Defendant's Other Counterclaims
In addition, Defendant seeks damages for negligence and breach of fiduciary duty for Plaintiff's failure to exercise select an appropriate MIS, and for overcharging fees and expenses. However, because Defendant has been made whole by reason of its breach of contract counterclaim for Plaintiff's overcharging and for Plaintiff's poor MIS selection, damages for these counterclaims would be duplicative.
For housekeeping purposes, this Court notes that Plaintiff's motion for partial summary disposition regarding Defendant's counterclaims of negligence and breach of fiduciary duty [39-2] is still pending. Although these counterclaims are duplicative of the breach of contract counterclaim, since this motion was not referred to this Court and is not within the scope of the parties' limited consent, we make no further comment on its disposition.