actual revenues generated under the agreement. Defendants ascertain that the damages Antech
seeks are based on the contractual five-year requirement of at least $48,000 in services per year.
There is sufficient notice of Antech’s basis for the damage claim. Qualms about whether that
amount must be offset goes to the merits of the claim and is not a basis for dismissing the
complaint.

B. Count II

The animal hospital and owners’ argument that the complaint insufficiently pleads
damages on Count II is without merit. They contend Antech provides no detail about how it was
damaged. A fair reading of the complaint reveals allegations that the animal hospital and owners
failed to comply with the exclusivity provision and the minimum annual services requirement,
breaching the loan agreement. The complaint does not explicitly allege that those purported
breaches caused the loan to come due, but that is a reasonable inference, confirmed by the terms
of the agreement. The complaint provides adequate notice of the claim.

The animal hospital and owners’ memorandum questions whether Count II is moot. They
contend that they tendered the outstanding loan amount to Antech on March 1, 2012. If Antech
has received its requested relief, no case or controversy remains for the court to decide, depriving
it of subject matter jurisdiction. See Ortiz v. John O. Butler Co., 94 F.3d 1121, 1125 (7th Cir.
1996). However, the animal hospital and owners do not provide evidence that a payment was
made, and the court cannot consider an unsupported assertion outside the four corners of the
complaint on a motion to dismiss.

C. Liability of Individual Defendants

The individual defendants contend they should be dismissed because they are not


benefit of a transaction is equivalent to a consent to all the obligations arising from it, so far as
the facts are known, or ought to be known, to the person accepting”); Recorded Picture Co.
[Prods.] Ltd. v. Nelson Entm’t, Inc., 61 Ca. Rptr. 2d 742, 748-49 (Cal. App. Ct. 1997)
(discussing § 1589). Both Robert and Graham Merkin are identified in the agreement as
“Animal Hospital Owner” and the agreement sets forth several obligation and benefits
specifically for “Animal Hospital Owner,” not “Animal Hospital.” Because both owners’ names
were included in the agreement, it is a reasonable inference that the non-signing owner received
benefits with knowledge of the obligations under the agreement and may be deemed to have
consented to the agreement. Drawing reasonable inferences in Antech’s favor, the complaint
states a basis for liability against both individual defendants.

TI. Conclusion

The motion to dismiss the complaint is denied.

ENTER:

Satuny € Onbonr—

Suzann@B. Conlon
June 29, 2012 United States District Judge



are improper because they represent lost profits. They argue lost profits may be recovered only if
the parties expressly contemplated this remedy or if “exceptional circumstances” not present here
exist. Def. Mem. at 5. This argument is not supported by California law. See Cal. Civ. Code
§ 3300 (“For the breach of an obligation arising from contract, the measure of damages, except
where otherwise expressly provided by this code, is the amount which will compensate the party
aggrieved for all the detriment proximately caused thereby, or which, in the ordinary course of
things, would be likely to result therefrom”). Defendants confuse the difference between lost
profits as general damages and lost profits as special damages. General damages are “a natural
result of a breach” and “flow directly and necessarily from a breach of contract.” Lewis Jorge
Constr. Mgmt., Inc. v. Pomona Unified Sch. Dist., 102 P.3d 257, 261 (Cal. 2004). Special
damages are “secondary or derivative losses arising from circumstances that are particular to the
contract or to the parties.” Jd. They are recoverable only if the breaching party knew or should
have known of the special circumstances at the time of contracting. /d. The unearned profits of
the contract that was breached are usually general damages. See id. at 263. However, if the
breach caused the injured party to miss out on other business opportunities, the profits lost from
those collateral activities are special damages and recoverable only if the contracting parties
contemplated them. Here, the damages sought relate directly to what Antech expected to receive
from the animal hospital and owners under the contract and, if proven, is allowed as “what
[Antech] would have received if the contract had been fully performed on both sides.” Jd. at 261;
Cal. Civ. Code § 3358.

The last argument about Count I concerns Antech’s calculation of damages. The animal

hospital and owners assert Antech improperly seeks lost revenue without accounting for the


signatories to the contract. Robert Merkin contends he did not sign the agreement, and Graham
Merkin contends he signed in his capacity as an officer of the animal hospital, not in his personal
capacity.

Within the four corners of the complaint, Antech alleges it entered into the agreement
with “Defendants,” implying the animal hospital and both owners are all parties to the agreement.
Compl. 8. Allegations in the complaint may be disregarded if contradicted by the actual
agreement. Massey, 464 F.3d at 645. However, the agreement, without more, fails to support the
conclusion that Robert and Graham Merkin are not contractually bound. There are affirmative
provisions, unaddressed by defendants, that contradict their contentions.

First, the agreement lists the parties as:

Antech: Antech Diagnostics
Animal Hospital(s): Downers Grove Animal Hospital
Owner(s): Robert Merkin, D.V.M., Graham Merkin, D.V.M.

Def. Mem., Ex. B at p.1 (emphasis in original). The agreement states that it “is entered into by
and between Antech Diagnostics (‘Antech’) and the party or parties listed below as ‘Animal
Hospital Owners(s)’ as of the Effective Date ....” Jd. (bold in original). The agreement is
peppered with references to duties specifically assigned to the animal hospital owner:

. “Animal Hospital Owner is required to utilize Antech to provide Laboratory
Services required by Animal Hospital(s) . . .”; Jd.

. “The obligations of Animal Hospital Owner with respect to the Minimum
Average Annual Fee . . .”; Id.

° “During the Term, Animal Hospital Owner shall cause all veterinary diagnostic
and clinical laboratory services . . . that are to be performed for and on behalf of
the Animal Hospital(s), to be performed by a veterinary diagnostic laboratory
owned by Antech....” /d., Ex.B 1.1.


IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

ANTECH DIAGNOSTICS, INC., )
)
Plaintiff, )

) Civil Action No.: 12 C 2736
v. )

) Suzanne B. Conlon, Judge

DOWNERS GROVE ANIMAL HOSPITAL _ )
& BIRD CLINIC, P.C. et al., )
)
Defendants. )
)

MEMORANDUM OPINION AND ORDER

Antech Diagnostics, Inc. sues Downers Grove Animal Hospital & Bird Clinic, P.C.,
Robert Merkin, and Graham Merkin in a two-count complaint for breach of contract and breach
of a loan agreement. Defendants move to dismiss under Federal Rule of Civil Procedure
12(b)(6).

I. Background!

Antech provides veterinary laboratory services. It entered into a Lab Services Agreement,
beginning January 1, 2009, with the animal hospital, owned by Robert and Graham Merkin. The
agreement covers two areas. First, it provides that Antech would be the animal hospital’s

exclusive provider of laboratory services for five years with a minimum of at least $48,000

' The facts are taken from the complaint and from the agreement itself. Antech did not
attach the agreement to the complaint. But defendants include a copy with their motion to
dismiss. Because the agreement is referred to in the complaint, it may be considered on a motion
to dismiss without converting it to a summary judgment motion. Fed. R. Civ. P. 10(c); 188 LLC
v. Trinity Indus., Inc., 300 F.3d 730, 735 (7th Cir. 2002).

1


. If the laboratory services are unsatisfactory and are not remedied, “Animal
Hospital Owner may at the time elect to terminate the contract and pay back a pro
rated portion of the unforgiven loan.” Jd., Ex. B 4 1.2.
° Without authorized written consent, “Animal Hospital Owner and Antech
Officers shall not . . . publicly disclose, advertise, or publish the existence of the
Agreement or any terms of this Agreement... .” Jd., Ex. B 4.
The agreement also specifically grants a benefit to the owners, loaning $50,000 to “Animal
Hospital Owner,” not to the animal hospital. J/d., Ex. B at p. 1. The loan conditions require
“Animal Hospital Owner” to make loan payments, and provides loan forgiveness if “Animal
Hospital Owner” complies with certain conditions relating to the laboratory services. Jd., Ex. B
at {4 3.1, 3.2. Additionally, the signature line of the agreement is titled “ANIMAL HOSPITAL
OWNER.” /d., Ex. B at p. 4 (emphasis in original). At no point in the agreement is the animal
hospital identified as a professional corporation or is its legal status otherwise identified.

The animal hospital and owners do not address these references to “Animal Hospital
Owner” in the agreement. Their argument that the agreement is between Antech and the animal
hospital cannot be sustained because of repeated references to “Animal Hospital Owner” as a
contracting party.

Defendants argue that Robert Merkin cannot be held liable for breach of contract because
he did not sign the agreement. They assert Graham Merkin signed the agreement (purportedly in
his capacity as an officer of the animal hospital). This argument lacks merit on a motion to
dismiss for two reasons. First, the signature on the agreement is illegible, and the court cannot
make a finding of fact about who signed it on a motion to dismiss. Second, California law

provides that a nonsignatory may be deemed to have consented to a contract by voluntarily

accepting the contract’s benefits. See Cal. Civ. Code § 1589 (“A voluntary acceptance of the


annually. Along with the exclusivity provision, the agreement contains a confidentiality
provision, covering the terms, conditions, and pricing information in the agreement. The other
aspect of the agreement is a $50,000 loan from Antech to the animal hospital owner, to be repaid
in annual installments of $10,000 plus interest. A loan payment would be forgiven if the animal
hospital owner complied with the minimum yearly amount of services and the exclusivity
provisions, and if he timely paid invoices for the previous year.

Antech alleges the animal hospital and its owners breached the exclusivity and
confidentiality provision of the agreement and seeks damages of $133,884.55 in Count I. In
Count II, Antech also alleges the animal hospital and its owners breached the loan terms by
failing to comply with the exclusivity provision and with the minimum required amount of
services and seeks $27,892.61 in damages.

II. Analysis

The animal hospital and owners move to dismiss under Rule 12(b)(6). On a motion to
dismiss for failure to state a claim, the court accepts as true the well-pleaded allegations of the
complaint and draws all reasonable inferences in favor of the non-moving party. Appert v.
Morgan Stanley Dean Witter, Inc., 673 F.3d 609, 622 (7th Cir. 2012). But if an allegation in the
complaint conflicts with the written agreement, the agreement usually controls. Massey v.
Merrill Lynch & Co., 464 F.3d 642, 645 (7th Cir. 2006). The complaint must contain enough
factual allegations to demonstrate a plausible right to relief and to provide defendants fair notice
of the claim and the basis for it. Appert, 673 F.3d at 622. Facial plausibility requires “factual
content that allows the court to draw the reasonable inference that the defendant is liable for the

misconduct alleged.” Wigod v. Wells Fargo Bank, N.A., 673 F.3d 547, 555-56 (7th Cir. 2012)


(quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). The parties agree that California law
provides the substantive law of decision in this diversity case.
A. Count I

The animal hospital and owners argue that Count I should be dismissed because the
agreement does not permit damages beyond repayment of the loan. They cite paragraph 3.3,
which states:

3.3 Default. If (i) [a required annual loan payment is not made]; or (ii) Animal

Hospital Owner breaches the exclusivity provisions set forth in Section 1 hereof;

or (iii) Animal Hospital Owner [fails to timely pay invoices], then such shall

constitute an event of default with respect to the Loan. At any time after the

occurrence of an event of default, Antech may declare the entire amount of the

Loan to be due and payable, whereupon the Loan shall become forthwith due and

payable without presentment, demand, protest or other notice of any kind... .

The remedies available to Antech hereunder are intended to compensate Antech

for the Loan and discounts provided hereunder, which Loan and discounts would

not have been provided unless Animal Hospital agreed to the Minimum Average

Annual Fee requirements set forth herein, the requirement set forth in Section 1

regarding exclusivity, and the payment for Laboratory Services hereunder in a

timely manner.
The animal hospital and owners contend that this paragraph provides the only remedy in the
event of a breach, and so Count I should be dismissed because it seeks unrecoverable damages.

The argument is unsupported by the agreement. The default provision clearly falls under
the section of the agreement titled “3. Terms and Conditions of Loan,” which contains
paragraphs about the terms of the loan, forgiveness of the loan, and default. Def. Mem., Ex. B at
§ 3 (bold in original). The animal hospital and owners make no attempt to explain why the court
should apply this provision to limit remedies for breaches unrelated to the loan agreement. Nor

does any other provision in the agreement purport to limit remedies in the event of a breach.

More generally, the animal hospital and owners contend the damages sought in Count I