Delta Consulting v. R. Randle Construct ( 2008 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 07-3660
D ELTA C ONSULTING G ROUP, INCORPORATED ,
Plaintiff-Appellee,
v.
R. R ANDLE C ONSTRUCTION, INCORPORATED
AND R ONALD S. R ANDLE ,
Defendants-Appellants.
Appeal from the United States District Court
for the Southern District of Illinois.
No. 06 C 504—Michael J. Reagan, Judge.
A RGUED O CTOBER 23, 2008—D ECIDED F EBRUARY 5, 2009
Before B AUER, W OOD , and T INDER, Circuit Judges.
B AUER, Circuit Judge. R. Randle Construction, Inc., and
Ronald S. Randle (collectively, “Randle”) entered into
two construction contracts with Belleville Township
High School District 201 (School District) to perform
2 No. 07-3660
work as a general contractor on the Belleville East High
School Project (Project). Disputes over the Project arose
between Randle and the School District, which caused
delays, which in turn, caused Randle to suffer finan-
cial losses. Randle hired Delta Consulting Group, Inc.
(Delta) to prepare and present a Request for Equitable
Adjustment (REA) to the School District, to recover the
damages attributable to the School District. Delta ex-
pressed that the REA’s preparation, which included
the necessary services, could typically be accomplished
with the approximate preliminary budget of $34,000.00.
Delta’s proposal stated that the figure represented
an estimate of the amount normally required for
these types of jobs. Randle paid Delta a $5,000.000 retainer.
Using documents and information provided by Randle,
Delta produced an REA representing damages for ap-
proximately $1.6 million. The REA consisted of three
phases: (1) Familiarization and Initial Assessment, which
included a review of Randle’s documentation, site visits,
key personnel interviews and assessment of claim
issues; (2) Detailed Analysis and Report, which included
extensive analysis of issues, a schedule analysis and a
calculation of damages reflected in an REA; and (3) Dis-
pute Resolution, which included Delta’s attendance
at dispute resolution proceedings.
Delta submitted the REA to the School District in an
effort to recover Randle’s damages. The School District,
through its representative, Landmark Contract Manage-
ment, Inc. (Landmark), reviewed the REA and concluded
that the accompanying documents and analysis did not
support $1.6 million in damages. At Randle’s request,
No. 07-3660 3
Delta undertook additional services to revise the REA
using additional documentation from Randle; Delta
submitted a second REA for approximately $1.7 million.1
On February 25, 2004, Delta and Randle met with
Landmark to discuss the resubmitted REA. Landmark
reviewed the claims with Delta and questioned the lack
of documentation to support the School District’s liability
for Randle’s damages. Although Delta attempted to
address Landmark’s concerns, Landmark again found
that the documentation did not adequately support the
REA claim.
On March 5, 2004, Randle met with Landmark to
discuss the resubmitted REA; frustrated with Delta’s
previous interactions with Landmark, Randle did not
invite Delta to this meeting. Landmark repeated its con-
cerns that the documentation submitted by Delta did not
support the REA claim. Randle abruptly ended the
meeting and claimed that he would sue the School District.
Throughout this process, Randle received Delta’s in-
voices for the REA services and continuously paid the
invoices through March 9, 2004.2 Delta ultimately billed
Randle $144,174.35; Randle paid $62,622.19 without
objection (excluding the $5,000 retainer).
1
Sometime after the submission of the revised REA, the
School District offered, and Randle rejected, $100,000.00 to
settle the claim.
2
Although the date is unknown, the district court determined
that Randle terminated Delta’s services sometime after its
last payment on March 9, 2004.
4 No. 07-3660
Randle hired a private firm and sued the School District
for damages caused by the delay of the Project. Delta
accepted Randle’s request that Delta refrain from
pursuing immediate collection on the unpaid invoices
until Randle’s claim had been litigated. Ultimately,
Randle settled its claim with the School District for
$450,000.00.
In October 2004, Randle’s accountants conducted an
audit of Randle’s financial statements. As part of the
audit, Randle, through its agent, sent Delta a letter to
confirm that $89,302.16 was the amount due to Delta as of
September 30, 2004. Delta responded that the correct
amount due was $81,552.16. Randle did not object after
receiving Delta’s response until roughly a year later.
When Delta sought payment on the unpaid invoices,
Randle responded that it was not satisfied with Delta’s
performance and should not be charged for inadequate
work. Delta sued Randle to recover $81,552.16 in unpaid
invoices (ultimately seeking $76,552.16 after applying
the initial retainer), plus 9% interest as permitted by law.
Randle claimed that Delta failed to adequately present
the REA and counterclaimed for breach of contract.
On August 23, 2007, the district court granted Delta’s
summary judgment motion in its entirety. Specifically,
the district court held that the communications between
Delta and Randle, which included Randle’s failure to
object to Delta’s statement of account within a reason-
able time and Randle’s partial payment of the account
over the preliminary estimate, established an account
stated. The district court also awarded summary judg-
ment in favor of Delta on Randle’s counterclaim; Randle
No. 07-3660 5
impliedly waived its right to damages for Delta’s alleged
breach by paying, and not contesting, $62,622.19.
On October 25, 2007, the district court further ordered:
(1) that prejudgment interest at the Illinois statutory rate
of 5% be awarded to Delta; and (2) that postjudgment
interest at the Illinois statutory rate of 9% be awarded
to Delta until Randle pays the judgment.
This timely appeal followed.
DISCUSSION
Randle argues that, as a matter of law, the district court
erred in holding that an account stated existed against
Randle, where genuine issues of material fact are
present as to the amount owed to Delta. Randle also
claims that genuine issues of material fact exist to
preclude summary judgment on the waiver of its breach
of contract counterclaim. Randle further argues that the
district court improperly struck a portion of this counter-
claim. Finally, Randle argues that the district court
applied the incorrect rate to the postjudgment interest
award. We review de novo the district court’s decision to
grant summary judgment, construing all the facts and
inferences in favor of Randle, the nonmoving party. See
Springer v. Durflinger, 518 F.3d 479, 483-84 (7th Cir. 2008).
We also apply the substantive law of Illinois, the state
in which this diversity case was filed. See Global Relief
Found., Inc. v. New York Times Co., 390 F.3d 973, 981 (7th
Cir. 2004).
Summary judgment is appropriate when the pleadings,
depositions, answers to interrogatories, and admissions
6 No. 07-3660
on file, together with any affidavits, show that there is no
genuine issue of material fact and the movant is entitled
to judgment as a matter of law. Fed. R. Civ. P. 56(c). “The
initial burden is on the moving party . . . to demonstrate
that there is no material question of fact with respect to
an essential element of the non-moving party’s case.” Cody
v. Harris, 409 F.3d 853, 860 (7th Cir. 2005). If the moving
party meets this burden, the non-moving party must
submit evidence that there is a genuine issue for trial.
Fed. R. Civ. P. 56(e); Ptasznik v. St. Joseph Hosp., 464 F.3d
691, 694 (7th Cir. 2006). The existence of merely a
scintilla of evidence in support of the non-moving
party’s position is insufficient; there must be evidence
on which the jury could reasonably find for the
non-moving party. Springer, 518 F.3d at 483-84.
We address each issue in turn.
A. Account Stated
Randle first claims that summary judgment was im-
proper because the existence of an account stated was in
dispute.
An “account stated” determines the amount of a preex-
isting debt when parties who previously have conducted
monetary transactions agree that there truly is an
account representing the transactions between them.
Protestant Hospital Builders Club, Inc. v. Goedde, 424 N.E.2d
1302, 1306 (Ill. App. Ct. 1981). When a statement of
account is rendered by one party to another and is
retained by the latter beyond a reasonable time without
objection, that statement constitutes an acknowledg-
No. 07-3660 7
ment and recognition by the latter of the correctness of
the account, together with a promise, express or implied,
for the payment of such balance, and establishes an
account stated. W.E. Erickson Construction, Inc. v. Con-
gress-Kenilworth Corp., 477 N.E.2d 513, 520 (Ill. App. Ct.
1985); Motive Parts Co. of Am., Inc. v. Robinson, 369
N.E.2d 119, 122 (Ill. App. Ct. 1977). In this manner, the
debtor and creditor have a meeting of the minds as to the
accuracy of the account and have manifested their
mutual assent to the agreement. Toth v. Mansell, 566
N.E.2d 730, 734-35 (Ill. App. Ct. 1990). The manner of
acquiescence is not critical, and the meeting of the
minds may be inferred from the parties’ conduct and the
circumstances of the case. Id. at 735.
Randle repeatedly argues that it would not have
entered into an agreement where it would pay over four
times what it initially expected to pay. Delta’s preliminary
estimate stated that preparation and presentation of a
typical REA would normally cost approximately
$34,000.000; Randle continuously paid the invoices after
it had reached the preliminary budget figure. Sig-
nificantly, Randle ultimately paid $62,622.19, excluding
the $5,000.00 retainer, almost twice the estimate. Although
Randle suggests that the total amount billed should be
roughly around the preliminary estimate, the parties did
not contractually lock themselves into the preliminary
estimate. The parties mutually assented to continuing
services under the proposal because Randle continued
to pay invoices for Delta’s services. See In re Marriage of
Angiuli, 480 N.E.2d 513, 518 (Ill. App. Ct. 1985) (“Assent
to an account stated may be shown by payment or part
payment of the balance.”).
8 No. 07-3660
In addition to part payments, Randle’s active con-
duct specifically established an account stated for the
remaining, unpaid invoices. Randle initiated an agree-
ment, that Delta accepted, in which Delta would withhold
efforts to collect on the unpaid invoices while Randle
attempted to resolve the Project dispute through litiga-
tion. By this agreement, Randle impliedly acknowledged
that it owed payment to Delta for unpaid invoices after its
last payment on March 9, 2004. It is unreasonable to believe
that a transacting business would ask for more time to pay
a debt it did not acknowledge it incurred.
More importantly, Randle settled any doubt that it
owed money to Delta by its actions in October 2004.
Randle acknowledged the accuracy of its debt to Delta
when Randle, through its agent, requested that Delta
confirm a balance due of $89,302.16. Delta responded that
it was only owed $81,552.16. Randle argues that it never
agreed to the accuracy of the account by this occurrence;
the correspondence is not an acknowledgment of a
debt, but rather a potential debt reflected on its books.
Based on our review of the record, we agree with the
district court that Randle’s request was made to confirm
an actual amount owed. The language of the request,
written by Randle, is telling: “Our auditors . . . are con-
ducting an audit of our financial statements. Please
confirm the amounts $89,302.16 due to you.” Thus, when
Delta replied, listing the unpaid invoices in an itemized
statement, it rendered a statement of account to Randle.
Our only inquiry now is whether the parties mutually
assented to the amount billed. To determine this, we look
No. 07-3660 9
to whether Randle acquiesced in the correctness of the
statement by retaining it beyond a reasonable time
without objection. We conclude that Randle failed to
object to the statement of account within a reasonable time.
Throughout its brief, Randle argues that its acceptance
of invoices and partial payments of those invoices did not
establish an account stated because, to use Randle’s
words, payments made on those invoices were made
“before Randle came to the realization that it had made
a mistake by hiring Delta.” Randle argues that once the
first REA had been rejected by Landmark, its frustration
was relayed to Delta and repeated after subsequent REA
rejections. Randle argues that because it only paid a
portion of the total billings, it objected to the excessive
amount billed.
The record, however, reveals otherwise. Although
Randle may have been frustrated with Delta’s perfor-
mance, Randle continued to pay through its frustration,
impliedly acknowledging the debt incurred. Randle paid
invoices after the denial of the first REA and continued
to pay after the denial of the resubmitted REA. More
importantly, Randle privately met with Landmark on
March 5, 2004, at the pinnacle of its frustration with Delta,
and still made a payment four days later on March 9, 2004.
Randle’s subjective frustration alone did not constitute
a refusal to pay the invoices or a contest on the amount
billed. Randle’s behavior was not a valid objection to the
account stated.
Moreover, Randle’s failure to object did not stop there.
Months after Delta had fallen out of Randle’s good
10 No. 07-3660
graces, Randle sent Delta a letter to confirm the amount
owed to Delta; significantly, when Randle received
Delta’s response indicating a lower amount, Randle did
nothing. Randle even states that it “did nothing because
there was nothing [it] needed to do.” Randle believed
that its failure to respond did not constitute an acknowl-
edgment of a debt because such an acknowledgment was
not intended, as its dissatisfaction already constituted
its objection. But as noted above, the objective facts estab-
lish that an account was rendered and Randle did not
object to it. Randle never contested Delta’s accounting
statement and even conceded at oral argument that there
is no documentation of its objection. Thus, Randle acqui-
esced in the correctness of that statement by failing to
object to it within a reasonable time and that acquiescence
is sufficient to establish an account stated between the
parties. Protestant Hospital Builders, 424 N.E.2d at 1306.
Furthermore, Randle did not present evidence to open
the account stated. “A court will not open an account
stated absent showing fraud, omission or mistake.” First
Commodity Traders, Inc. v. Heinold Commodities, Inc., 766
F.2d 1007, 1011 (7th Cir. 1985); see also Meeker v. Fowler, 341
N.E.2d 412, 415 (Ill. App. Ct. 1976). Randle’s conclusory
statements that it did not subjectively agree to the
amount owed, without presenting evidence of fraud,
omission or mistake, are not sufficient to oppose sum-
mary judgment. Hall v. Printing and Graphic Arts Union,
696 F.2d 494, 500 (7th Cir. 1982).
Accordingly, Randle provided no evidence that it
objected within a reasonable time to Delta’s confirmation
No. 07-3660 11
of $81,522.16 (excluding the retainer) in unpaid invoices;
it did not raise a genuine issue of material fact regarding
the existence of an account stated.
B. Individual Liability
Next, Randle argues that the district court erred in
holding Ron Randle, as an individual, also liable for
Delta’s unpaid invoices. Although the record reflects that
Delta sent its invoices to R. Randle Construction Inc. and
Delta only received payments from the corporation, Delta
sued both the corporation and Randle individually and
Randle never challenged the claim against his individual
capacity before the district court. The lack of capacity to
sue or be sued is a defense that must be pleaded with
specificity or it is waived. See Fed. R. Civ. P. 9(a); see also
Wagner Furniture Interiors, Inc. v. Kemner’s Georgetown
Manor, Inc., 929 F.2d 343, 345-46 (7th Cir. 1991) (failure to
raise the issue of capacity by direct negative averment
waives the defense) (citations omitted). Importantly, not
only did Randle not contest his individual capacity
below, he also counterclaimed on behalf of the corpora-
tion and as an individual; therefore this argument is
waived before our court. See Karazanos v. Madison Two
Assoc., 147 F.3d 624, 629 (7th Cir. 1998).
C. Waiver
Randle argues that the district court erred because
genuine issues of material fact exist as to whether Randle
waived its breach of contract claim for $62,622.19. The
district court, while assuming, without finding, that
12 No. 07-3660
Delta breached, held that Randle had waived any right to
damages by its conduct in relation to Delta’s consulting
services. We agree; we also assume, without holding, that
Delta breached the contract, but need not address the
issue because Randle impliedly waived its right to dam-
ages under that claim.
In Illinois, waiver is the voluntary and intentional
relinquishment of a known right. United States v. Sumner,
265 F.3d 532, 537 (7th Cir. 2001); Gallagher v. Lenart, 874
N.E.2d 43, 56 (Ill. 2007). Waiver may be made by an
express agreement or it may be implied from the
conduct, acts or words of the party who is alleged to have
waived a right. Ryder v. Bank of Hickory Hills, 585 N.E.2d
46, 49 (Ill. 1991). “An implied waiver may arise where
a person against whom the waiver is asserted has
pursued such a course of conduct as to sufficiently evi-
dence an intention to waive a right or where his conduct
is inconsistent with any other intention than to waive
it.” Id.; see also PPM Finance, Inc., v. Norandal USA, Inc.,
392 F.3d 889, 895 (7th Cir. 2004) (waiver implied when
a party’s conduct is inconsistent with an intention to
assert that right). Although waiver may be implied, the
act relied on to constitute the waiver must be clear, un-
equivocal and decisive. The Galesburg Clinic Assoc., v.
West, 706 N.E.2d 1035, 1037 (Ill. App. Ct. 1999). Where
there is no dispute as to the material facts and only one
reasonable inference can be drawn therefrom, it is a
question of law whether the facts proved constitute waiver.
Wald v. Chicago Shippers Assoc., 529 N.E.2d 1138, 1147-48
(Ill. App. Ct. 1988). However, if the facts necessary to
constitute waiver are in dispute or if reasonable minds
might differ as to the inferences to be drawn from the
No. 07-3660 13
undisputed evidence, then the issue becomes a question
of fact. Id. at 1148.
Randle argues that the district court erred as its actions
do not clearly and unequivocally indicate a desire to
relinquish its right to repayment of $62,622.19. Although
the district court held that Randle’s conduct impliedly
waived the right, Randle states that its failure to
demand the money paid and later acknowledgment of a
larger debt owed to Delta are not inconsistent with
Randle’s intent to enforce its rights on damages. Specifi-
cally, Randle argues that its frustration with Delta’s
deficient work and the lack of a substantiated REA exem-
plified that Delta had not earned the money it was paid, or
as Randle put it, the money that Delta successfully ex-
tracted from Randle. However, we conclude that
Randle’s conduct supports its implied waiver and therefore
will not disturb the district court’s decision on this issue.
The undisputed, objective facts sufficiently evidence
a finding of waiver. As previously described above,
Randle had been paying Delta’s invoices after: (1) the
preliminary budget had been reached; (2) the preliminary
budget had been far exceeded; (3) the first submitted REA
had been rejected; (4) the re-submitted REA had been
rejected; and (5) Randle’s hostile meeting with Landmark.
Such conduct did not reasonably portray Randle’s objec-
tion of payment for the services rendered and does not
reflect Randle’s desire to seek its money back. In fact,
these actions established the opposite; even though
Delta’s work was not what Randle expected, Randle
continuously accepted Delta’s performance by paying for
14 No. 07-3660
it and never once objecting to it. See Chicago College of
Osteopathic Medicine v. George A. Fuller Co., 719 F.2d 1335,
1343 (7th Cir. 1983) (citing Royal Ornamental Iron, Inc. v.
Devon Bank, 336 N.E.2d 105, 110 (Ill. App. Ct. 1975))
(waiver may arise “by conduct manifesting a continued
recognition of the contract’s existence after learning of
the breach thereof, such as by continuing to accept per-
formance of the contract and to have the benefit thereof.”).
More importantly, Randle not only failed to contest
what was paid, it acknowledged further indebtedness by
asking Delta to suspend collection and by not objecting to
the receipt of Delta’s lowered statement of account. As
previously discussed, Randle never objected to the in-
voices, never sought return of the money paid and kept
paying; this objective conduct manifested a clear, unequiv-
ocal and decisive intention to waive its rights.
D. Striking Portion of Counterclaim
Randle next argues that a portion of its counterclaim,
labeled by the district court as “Reconstructing or Repro-
ducing Delta’s Amended REA,” should not have been
struck by the district court. The district court held that
this claim was made without basis and should have
been amended or withdrawn, and because it was not,
the court struck this portion of the counterclaim. We
review a district court’s decision to strike for an abuse
of discretion and will not disturb a decision that is rea-
sonable and not arbitrary. Holbrook v. Norfolk S. Ry. Co., 414
F.3d 739, 745 (7th Cir. 2005); see also Adusumilli v. City
of Chicago, 164 F.3d 353, 359 (7th Cir. 1998). Under this
No. 07-3660 15
standard, we find that the district court’s actions were
proper.
Rule 12(f) provides that a district court “may strike from
a pleading an insufficient defense or any redundant,
immaterial, impertinent, or scandalous matter.” Fed. R.
Civ. P. 12(f). The court may either strike on its own or on
a motion by a party and has considerable discretion in
striking any redundant, immaterial, impertinent or scan-
dalous matter. Id.; Talbot v. Robert Matthews Distrib. Co.,
961 F.2d 654, 665 (7th Cir. 1992). Randle’s counterclaim, in
pertinent part, sought damages for the amount paid to
the law firm to entirely re-construct a third and final
REA, after Delta could not do what it was hired to.
Undisputably, a third REA was never created. Randle
later attempted to explain that the damages sought were
the contingent fee payment to the law firm which would
not have been necessary had Delta properly performed
its duties. The district court quoted Randle that the law
firm was hired to file suit and not to re-present the REA to
the School District and struck the claim as without basis.
The district court alternatively found that had Randle
amended this claim to seek the contingent fee, Randle
would still have failed.
Here, Randle needlessly spends much of its argument
on this issue addressing the district court’s alternative
decision that had Randle amended his claim seeking
attorney’s fees, there would still have been no recovery.
We need not consider this alternative argument because
Randle failed to sufficiently argue what is properly
before our court: whether the district court abused its
discretion when it struck the portion of the counterclaim.
16 No. 07-3660
On this issue, Randle’s opening brief dedicated only
five lines of argument that consisted entirely of a false
suggestion and a conclusory allegation. First, Randle
begins by suggesting that the district court erred when it
“struck this component of the [c]ounterclaim although
no motion to strike had been filed by [Delta].” However,
Rule 12(f) expressly tells us that a court can act on its own.
Fed. R. Civ. P. 12(f)(1). Second, Randle states that “this
reference to a potential measure of damages does not
constitute redundant, immaterial, impertinent, or scandal-
ous matter.” However, Randle does not, and could not,
elaborate on this conclusory allegation because, as the
district court properly found, there is no basis for the
claim at all. A third REA was never created. In addi-
tion, the district court never prohibited Randle from
amending its counterclaim, and we note that Randle
never sought leave of court to file its amendment. Randle
simply failed to amend this portion of its counterclaim,
leaving behind an impertinent, immaterial claim that
was well within the discretion of the district court to strike.
See Talbot, 961 F.2d at 665 (district court did not abuse
discretion in striking allegations devoid of factual basis
under Rule 12(f)).
E. Postjudgment Interest
Lastly, the district court imposed a 9% postjudgment
interest rate under Illinois law. Randle argues and Delta,
at oral argument, concedes that 28 U.S.C. § 1961(a) ap-
plies. Accordingly, we remand this case solely to determine
the appropriate postjudgment interest rate under
the federal statute.
No. 07-3660 17
CONCLUSION
We affirm the district court’s grant of summary judg-
ment in favor of Delta on all factual issues but remand
this case only for the appropriate calculation of
postjudgment interest.
2-5-09