may please the court my name is patrick jones and i represent the plaintiff appellants in this case northbound group inc would like to reserve three minutes for we've already this is a simple breach of contract case the rose out of the defendant's failed performance under an asset purchase agreement whereby a defendant nor back sink acquired the assets related to the lead bought brand from plaintiff appellant northbound group northbound principles ben weidner and rob mcaleer spent twelve years of their lives developing the lead bot business into the top site top business for internet generated life insurance leads in two thousand and eight the appellant's bank suddenly cut off its line of credit causing a cash crunch that prevented the appellant from fulfilling the orders of its growing number of customers transaction was over six thousand open orders for the purchase of life insurance leaves eleven lead supply agreements from third parties who would supply leads could then be sold to lead by customers a talk ranking on google search if you searched life insurance leads back at that time the number one site that would pop up would be lead by and eighteen internet domains that could all be used to generate new life insurance liens it's the pla contention that nor backs failed she'd make good faith efforts to use those assets and there's four issues that are presented to the court the first is whether the district court properly granted summary judgment in favor of nor vax and libata l l c with respect to count three the breach of contract claim within that issue there's two separate issues the first is whether the court ruled correctly as a matter of law that a party a non party to a contract cannot be held liable for which i contract second sub issue is whether the district court properly resolved the issue nor vacs as good faith performance under the a p a at the summary judgment stage nor vacs or lead by the oil seas nor facts so you're not interested in  access sumed all of the obligations and all the benefits of the asset purchase and did you know that before the contract with side i mean that with that no i don't believe that was now your hon but i don't believe the record clear on that point specifically there's presumably nothing remotely surprising about that right now we're peroration sets up a subsidiary whether it's in corporation or an l to shield those and it is a limited liability corporation right right oh yes you are now the surprising thing is that we bought also you didn't pay the purchase price nor bax did the surprising thing is that  believe they had a general understanding that they thought that the operations would trickle through libata l l c not that they would be dealing directly on all matters with norbeck sank an initially the employment agreements were actually drafted for lead bought l s c to so searches recognize that non parties to a contract may be held liable for breach of that contract if they are either in privy to the contract or if they are third party beneficiaries the court seven circuit sure brothers and the lower court recognized it in their opinion on the motion to dismiss the parties and there was no alter ego argument alleged in the complaint was there no there hour and that was one of the major problems that was set in motion by the court's decision on the motion to dismiss at the motion to dismiss stage the court ruled that north found nor vac things then it can hold nor backs directly liable for breach of the contract therefore there was no reason at that point to amend the complaint and allege an alter ego theory had the court held at the motion to dismiss stage that only a party to a contract can be held liable for that contract that is a rule with no exceptions then yes sure we would have amended the complaint to add to all three therefore according to the lower court's ruling on the motions to dismiss the plaintiff and done everything it needed to do to make the whole nor vacs ank liable for breach of contract so your theory is that  would turn commercial law upside down right so what is it what is it you think you have to show i'm sorry or are i misspoke it isn't that nor a vaccine question pretty with the contract itself what does that mean to you that means that and assumed by its conduct all of the responsibilities and obligations under the contract nonetheless despite the fact that northbound did exactly what the district court instructed to do the legal standard changed at the summary judgment stage at summary judgment stage the district court reversed a stealth reversed itself and now held that a non party to a contract can never be held liable for breach of that contract that's not the law this circuit and that's not the law the case at the very least if that is going to be the rule set forth in this case and if that if this court agrees that that's the proper legal standard in the seventh circuit the plaintiff had to have been on notice and had a right to be on notice that that was going to be the new standard the new legal standard applied summary judgment stage as the seventh circuit state in los lobos explored a party is entitled to notice that its case is going to be dismissed on a certain  point before the ax actually falls in this case the plaintiff had no notice that the court was going to reverse itself and that as you state your are an alter ego theory would have been preferable there was there a motion filed to reconsider yes there was and that was denied as well that was done remember and there but there was no opinion now i don't live there often jones can i ask you about the motion to strike some your evidence yes and particularly interested in the discussion regarding the so called bude platform issue in the affidavits about the if you had had an opportunity to respond to the nation  contradict anything that was in the affidavit well there's probably the issue here the first level the problem is how specifically deposition questions were the definition deposition questions at least that i saw back in the motion to strike were pretty broad they both lose if they lose both the witnesses were given plenty of opportunities where this information needs seemingly have been responsive to the question so why not go ahead and grant the motion to strike your honor i believe it's the movement's responsibility to elicit specific testimony if they're not going to pin down the deposition what now well they kept asking anything more you know have you told us everything do you remember anything else and they kept saying no right right and not remembering a fact doesn't contradict that fact point there are so what he was being asked questions about was within each cell on that spreadsheet what were the figures that went in to those calculations and at the time he testified that he could remember that he needed to review his narrative that he essentially need to go behind the paper form that he had printed out he needed to go into the software and look behind those numbers to see how he reached that calculation that's what he did later and that refresh his memory so saying i don't remember what was in that box is different from contradicting what was actually in that box and how about what i asked you about which was about the good platform information i'm not  shouldn't worry about the big quote for my stuff i'm not on that issue on any issue no would be the big platform is relevant to once again that more vaccine control of the entire we vote operations could make a sale of course they had control they were the parent company right just so it is relevant on that issue the second subpart of issue number one is whether or not the district court properly determined that the summary judgment stage that nor vax had acted in good faith under the charms of the a p a again this whole thing is contrary to the seven circuits decision and brave versus baxter health care there the seventh circuit clearly stated the questions of good faith are intense questions of fact that should be reserved for a jury in this case article two i of the asset purchase agreement required nor vacs to use the assets in furtherance of the lead but grant and ventilate admittedly there was evidence on both sides as the court recognized in footnote twelve on page twenty five there was evidence that north actually used one of the eighteen domain names that they acquired under the a p a to develop to generate new life insurance leads however there's also evidence that same evidence that they didn't use seventeen of the eighteen and that the one that they used they only develop that new website after a year after they had acquired the other we bought assets did your clients negotiate in the u s a purchase agreement for any standards of gives the defendants the option to walk away which they chose not to there yes so the evidence show that they used one website over f over a year after the acquisition the evidence also showed that they took advantage of some but not all of the more than six thousand open orders for the purchase of life insurance leaves the evidence also can you i just want to know i thought you were going to get to the damages spread sheet i'm assuming you're going to get there but i wanted to know why that wasn't produced during discovery and if you talk about that sure quite simply wasn't a question throughout the discovery process we had a practice with opposing counsel that during a deposition if there was a document those referenced that you want a copy of that had been produced you asked for in writing and it's abundantly clear from the deposition transcript that counsel for the defendants told me i want to copy of that narrative that i'm going to give you a letter after this deposition is over that list each of the documents that i want from you that letter never came and i viewed the spreadsheet narrative as more of a the the damages narrative and that we had refused to produce that was in air and i believe that the district court may have been misled on that point because we again were allowed to respond when was that information subject to initial disclosure requirements and rule twenty six a the initial disclosure that we made was the damages calculation itself well the rules still requires  deposition right well the evidence on which those calculations were based was already in the record and that evidence is we've got the supply agreements with new york life potential strategy bay those contracts put forth the purchase price for the lead for the leads are going to be purchased and also in some cases the volume that's going to be purchased so that was already in the record already in the record where the l statements that put forth the cost of goods sold and the traditional and customary overhead so the you know this is a once again a simple breach of contract case and the calculation of damages is pretty straightforward you take the price at which the leads would have been sold you subtract cost of goods and overhead and there you get the profit and the all the evidence to make those calculations was already in the record that's not my question right now that that fact was not in evidence that they had they've been making any profits yes yes and they made profits after the acquisition too that's where they are now  wish course but i thought we had a new business that was essentially on the brink of bankruptcy when your bank pulled credit  that's what the district court held your honor but the facts especially when viewed in a light most favorable to northbound clearly indicate that this wasn't a no business this was an ongoing business that had been in operation for twelve years for twelve years prior to the acquisition northbound was in the business of generating and selling life insurance leads and let's say in the two years prior to the acquisition  lead by interchangeably they use the term interchangeably in their mental complaint they use the names of these companies interchangeably in the deposition questions they asked to my clients witnesses and they've used their clients have used the names interchangeably in their deposition testimony i think before i respond to the different arguments that plaintive has in support of its breach of contract count i'd like to just review a few key points about the respective parties in the case and about some of the key provisions of the asset purchase no access to other capital it had no other potential purchasers of its assets lead by l l c purchased north bonds assets in february of two thousand and nine lead by l l c is a delaware limited liability company nor vex is the member and manager of lead but l l c importantly nor bikes is not a party to the a p a under the asset purchase agreement in this case assets were defined as all property rights and other assets of north bound business the a p a required only that lead bought l l c use those assets in furtherance of the lead bought brand there were no specific obligations with respect operations that were placed on leave bought in the a p a in fact is is this court recognized but had the discretion to terminate the a p a upon its discretion ninety days notice to northbound it's also important to note what is not in the p p a to despite what plaintiff can suggest asserts in this case there is no provision in the a p a that requires nordics to provide a minimum level of life insurance leads to lead by there's also no provision in a party to the a p a it cannot be held directly responsible for any alleged contractual liabilities of lead but it did so on a rather simplistic basis libata is the delaware l l c under the laws of delaware the members and managers of c can't be held personally responsible for the debts and obligations of the company this ruling was absolutely correct what northbound has attempted to do is raise several different arguments to establish direct contractual liability of  on appeal appears that northbound is attempting to rely upon this court's decision in kaplan vs sure although that decision absolutely is opposite to the proposition that northbound is making here in that case a plane of tried to assert a breach of contract claim claiming that he was in privity with his former corporation such that he could pursue a claim on a on a real estate contract the corporation had with the defendants this court specifically rejected that theory and noted that there was nothing in the record the demonstrated that in fact that right had been assigned to the plaintiff by his former corporation in that opinion the court identified privy of contract in to find it to mean the mutual or successive relationship to the same rights of property the relationship may arise by operation of law or by involuntary or voluntary transfer in this case north brown has not presented any evidence to demonstrate that there's been a transfer of any rights under the a p a between northbound also relies on the cap on decision to support its argument that somehow because a district court did not dismiss north bound breach of contract claim at the b in this case it was therefore somehow precluded from granting summary judgment on this issue of probity of contract that except exact same argument was made by the plaintiff in the kaplan case and it was rejected by this court this court ruled that and recognized that motions to dismiss under twelve b six are governed by a different standard than motions judgment under rule fifty six it rejected the exact same arguments being put forth by north bound here and this argument should be wrecked rejected in this case northbound also made the argument in its brief that nordics could be held directly proposition that northbound is contending in the philips decision the court consider the argument of whether or not to direct participant liability doctrine could be used to extend contractual liability to a parent corporation and specifically rejected that contention the court recognized that the doctrine was only recognized in the town in the context of court or tort claims and it specifically refused to extend it to ca to contract claims so it's our position that although nor northbound relies on phil's pers well point it did catch or dicks rather than supports their position there were also arguments made in north downs appellate brief that for the first time on appeal that nor vexingly bought or alter egos of each other and therefore there is no piercing the corporate veil claim that was pled by northbound in this case therefore it's waived on that basis as well even if the the arguments entitle to any consideration in order to pierce the corporate veil would would piercing the corporate veil have to what what cases indicate that you have to plead that you're going to seek recovery under a piercing the corporate veil theory with a well point opinion page nine addresses that a well point opinion i believe so well which gilbert that's right your honor but this court has said scores if not hundreds of times that complaints do not need to plead legal fears now some are judgments  entirely different story your honor understood but in the context of this case when you when you evaluate the merits of the theory if you just evaluate what has to be established in order to pierce the corporate veil the facts simply aren't here in any event in any regard ok that let's don't try to worry about the pleadings is what i'm trying to tell you i understand you got past that stage you lost your motion to dismiss but you won on summary judgment focus on summary judgment and don't tell us that it's necessary to plead the theory ok yes or in any event there are sufficient facts to demonstrate any reason to pierce the corporate veil here and were generated in the course of this case the type of information's necessary in order to be allowed to to to obtain a type of relief simply has been generated in this record northbound also makes arguments that both  we bought violated their duty of good faith and fair dealing under the a p a and their principal argument is that the defendants failed to sufficiency sufficiently use the assets that they obtained through the asset purchase agreement in furtherance of the lead bought brand the duty of good faith and fair dealing as this court well knows only requires that contractual discretion be exercised reasonably in this context northbound claims that the defendants failed to adequately use customer contracts that were in existence and transferred by virtue of the a p a they've alleged and claim that certainly supply agreements that were transferred as part of the a p a were not sufficiently sufficiently used and they've also claim that certain websites and domains weren't sufficiently used in the first instance with respect to north of x the district court probably ruled that because it is not a party to the a p a it has no duty of good faith and fair dealing and this basis the claims against more banks fail in the district court probably recognize that fact with respect to lead but in order to sustain its claims northbound have to come forward some type of evidence to demonstrate that in fact  use the northbound assets in an reasonable manner but it did so in a way to interfere with his contractual rights it's our contention there's absolutely no information or evidence at all in the record to support that and we cite to the depositions of mr clint jones who's the c e o of nor backs and lead bot and mr michael mahoney who's the chief information officer from your backs both of those individuals who were deposed in this case and specifically asked about these issues both of the  individuals testified that we but tried to use northbound existing customer contracts but they were poorly negotiated and commercially unreasonable the company couldn't make money under those contracts they also tried to use the lead supply contracts that they purchased by virtue of the a p a in found that the suppliers were poor performers and that again that the agreements were commercially reasonable for the company they also testified that they tried to use the websites in the domains that they obtained but the technology was poo and then that they couldn't be used effectively for the company you know we would submit that there are no disputed issues of fact of whether or not lead bought fulfilled its duty of good faith and fair dealing there is no controverted evidence to to suggest that the information that was provided by these witnesses is anything other than completely accurate sketcher how does this business work where do these leads come from what happens is old news generally speaking to model it is that the companies run a series of websites if an individual were to get on a website and fill out the required number of fields personal information about themselves and their interest in developing or obtaining either life insurance or health insurance then that information in of itself becomes what is known as a lead and it's a sellable item then either to an insurance company wants to make a sale with respect to an insurance policy or potentially with a broker that may want to sell insurance things so in this context yes there's also another thing there's an admission on record in this case by the defendants by the two owners of northbound which demonstrate as a matter of law that lead but acted in good faith and fair dealings with respect to this transaction  there was an e mail chat that was produced in this case between mr mcaleer and mr wagner its stock in number one thirty one in that document the owners of northbound expressly had met that b did everything in its power to try to make the lead bought business work they had met but the reason why the business didn't work was because of economic conditions and poor contracts that they entered into on behalf of the company it's an essential document to evaluate this allegation that lead bot violated its covenant with good faith and fair dealing and it provides an independent basis alone to deny or grant summary judgment on a claim did the a p a contractor agreements with respect to norbeck to supply leads later those were changed into independent employment agreements and they were given management positions it's not accurate to say though that lead by did not have bank accounts that lead but did not have assets in it leave out did not have employees that's wrong it did have all those things it also had an independent office in arizona where ran its operations ultimately the plaintiffs in or to a  terminations of their employment agreement with more bags is that correct that is correct and that's not part of the city excuse me that's not part of the suit no it's not where we are medically or parties or they know they're not part  i'd like to turn to the district court's decision to grant defendants motion to strike mr macular supposed deposition affidavit and the supporting exhibits which were projections of lost profits of the never been produced in discovery on the district court acted completely within its discretion in this regard because the affidavit testimony was inconsistent with mr macleish hi how can a district court of discretion to grant a motion while prohibiting the opposing party from responding to it judge i think briefs to courts are filed are entertained at the discretion of the court i think in this context talking about due process i don't believe there's a due process issue here and i don't believe opportunity to be heard there was opportunity be heard their witness was deposed they had an opportunity respond to to the motion not to the motion a court prohibited that yes the i mean we see industry judges see all the time conflicts between or argued conflicts between deposition testimony and affidavits and it all depends on the details and whether there's an explanation you know in this case you all were asking very broad and open ended questions most of our memories don't do as well intill were prompted with specific questions there are explanations that can be given here that's cut off by the district court's instruction don't respond to this judge i would point to north bounds of argument here on deal and what it suggests that it would have said to the district court and whether or not that would have been about beneficial or change the determination and all apparently all would have said was counsel promised that he would write me a letter and specifically asked for something and didn't do it i spent this entire case trying to get jocular to two different issues judges to sort out fairly and after hearing from both sides yes or i believe that the district court had the information and needed in order to rule on the motion the motion strike in any event with respect to the that information would have been admissible the court properly ruled that under the new business rule in illinois that the projections that were being submitted by north on here  conjecture and relax they lacked reliability in this context northbound argues that in fact because northbound was in existence before the e p a and had operations before the e p a that it was a new venture but it's i'm contradicting in the record that a significant aspect of this dispute involves lead by northbound their efforts to sell health insurance leads on behalf of lead by something that they never did they never did when they were part of northbound they attempted to sell health insurance leads mr wagner mr mcaleer while they were employees of lead bought they were regulated in that regard by north bound by nor vacs in this context if you look at the proposed projections that are the exhibits to mr mack leaders affidavit they can incorporate over nine point seven five million dollars of projected health insurance lead sales  something that northbound never did in the past in that regard the district court was absolutely appropriate in ruling that in fact this was a new business venture and evidence of lost profits were in miscible separately there are some arguments that were made by brief not real clearly that perhaps you could rely on its past conduct in order to establish lost profits i think in the questioning that happened with my opponent it's obvious none of that information is in the record and in fact we do argue there were no profits and there was no course of performance you can support those type of damages there's also an argument that's been made here by north found that because certain agreements that were used by mr are in order to generate his projections we're just generally produced in the record that it should be allowed to go forward and try to sort of damage claims case how are the district court properly ruled that  did not have to piece together information that was produced by the parties in the record in order to try to sustain northbound damage claims on this report's opinion says it is not this court's responsibility to research in constructions construct the party's arguments in this context the district was absolutely on point secondarily the information that northbound talks about are the same contracts that provide the basis for mr mack lierse speculative last profit projections so in any event it is barred by the illinois new business rule in under any circumstances finally there was an argument that was made by north bound that it should be relieved from a stipulation that it made with respect to the amount of withheld earn out that it was awarded on summary judgment in the court below in this regard it's our position that the district court ruled completely appropriately it ruled in favor of northbound on the withheld earn out but it was it independently identified that the documentation that northbound relied upon on its face was ambiguous in terms of what the amount of the the earn out would be the court offered to conduct an evidentiary hearing on the issues and invited the parties to stipulate the a including the right to limit sales to of health insurance leads to light the right to limit leads or provide none at all and the right to terminate the a p a on ninety days notice both mr jones i heard the who saw the language operate it is agree and i didn't hear the operated not operated as a separate entity i believe there are one excludes the other are really yes that a brand is with your out of the only reason that the plaintiff entered into the stipulation at that point was because the district court judge was going to allow the defendants to introduce new evidence in support of its argument that it never supported that summary judgment stage that there that the amount of the arnaout the matter they are now damages to somehow be reduced they never supported that would be a good argument for appeal if you had a the arnaout because the p and l statements were only produced three months after the close of discovery and so that would be a good argument if you went ahead and had a contested hearing on it and the judgment was entered the amount of forty five thousand instead of  need for a trial on the damages where the defendants were going to put somebody on the stand who had never had enough it was weighted the need for a trial right and what you want is a trial when that issue right now you are what you're asking for on this know what i want to summary street judge denied it and said the evidence wasn't clear enough wasn't even legible so i disagree i was hard to read but it was legible and he also held he also held that the defendants had put forth no evidence in support of their claim therefore that's the only evidence this court would have to rule on is the evidence in favor of the matter that turned out it was withheld which is the larger amount not the smaller