In the

United States Court of Appeals

For the Seventh Circuit

No. 00-3765

Quantum Management Group, Ltd.,

Plaintiff-Appellant,

v.

The University of Chicago Hospitals,

Defendant-Appellee.

Appeal from the United States District Court 

for the Northern District of Illinois, Eastern Division.

No. 99 C 2248--Ronald A. Guzman, Judge.

Argued March 1, 2002--Decided March 25, 2002

 Before Flaum, Chief Judge, and Bauer and

Harlington Wood, Jr., Circuit Judges.

 Flaum, Chief Judge. Magistrate Judge

Ashman granted The University of Chicago

Hospitals’ ("UCH") motion for summary

judgment, holding that Quantum Management

Group, Ltd. ("Quantum") was not entitled

to additional payments under the contract

between the parties because Quantum

failed to present a genuine issue of

material fact on an essential element of

its case. The court held that at least

two of the three conditions precedent

were not met. The court also found that

UCH was entitled to damages from Quantum

for breaching the contract. Quantum

appeals. We affirm the decision of the

district court.

I. Background

 In 1995, in an attempt to reap the

savings that the private sector had

achieved through managed health care

programs and to improve beneficiaries’

access to care, the State of Illinois

announced an intended program that would

require Medicaid recipients to be

enrolled in managed health care plans.

Because the state’s announced program had

the potential of threatening its patient

base, UCH decided to create its own

managed care plan for its Medicaid

patients.
A. Facts Relating to Quantum’s Claim

 In order to create this type of plan,

Illinois law required UCH to enter into a

contract with the state ("the State

Contract") that authorized the proposed

plan to provide assistance to Medicaid

beneficiaries, and provided that the

state would pay the plan a monthly fee

for each enrollee. 

 In July 1996, UCH entered into a

contract ("the Agreement") with Quantum,

a consultancy with experience in

establishing and operating managed care

programs. Frederick Fey, as trustee of

the Frederick Fey Family Trust, was the

president, sole limited partner, and

controlling shareholder of Quantum

Management Group, Inc., Quantum’s

corporate general partner. The Agreement

provided that Quantum would design,

establish, and operate a managed health

care plan ("the Plan"), eventually known

as Family First, in which UCH’s Medicaid

patients could enroll. Upon execution of

the Agreement, Quantum hired George

Morrow to be CEO, as well as a number of

consultants and other employees--150, at

the peak--for the plan. The Plan became

operational in January 1997; the first

members enrolled in March of that year.

The Plan’s highest enrollment level in

any given month was 17,618. Morrow

resigned as CEO in July 1997.

 The Agreement included a two-and-a-half

page section ("Section IV") entitled

"Payments to Quantum." The language of

Section IV, and the facts surrounding the

provision’s conditions, give rise to

Quantum’s allegations. The provision

states first that UCH will pay Quantum

monthly consulting fees and expenses.

(Section IV (A)). UCH did so--to the tune

of 2 million dollars. Section IV also

provides for additional payments to

Quantum if certain conditions are met. 

In addition to the other payments

described herein . . . UCH[ ] 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 (hereinafter 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 (in each case not

including investment income and expenses)

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

purpose 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. 

Section IV(B). Under the terms of this

Section, Quantum is not entitled to a

Monthly Fee for any given month unless at

least two profitable months exist. First,

the Plan must have achieved a breakeven

level of enrollees (or, in other words,

achieved the number of enrollees

necessary to create an operating gain)

during any month before the one for which

a fee may be due. Second, the month for

which a fee is due must have surpassed

that breakeven level by at least twenty

percent. UCH never paid Quantum Monthly

Fees. 

 The only financial data produced at

trial showed that the Plan suffered an

operating loss each month it was in oper

ation. Quantum contends that the plan

broke even in either March or May of

1998, as evidenced by Fey’s testimony

that two officers of UCH told him that

the plan was "cash positive" and making

money. Quantum points to no evidence

suggesting that a month existed where the

Plan’s enrollment level reached 120% of

the supposed breakeven point. Quantum

admits that no hard data exist as to

whether the Plan ever reached a breakeven

point, but contends that it was UCH’s

duty to keep such records.

 Section IV(D) of the Agreement provides

that UCH shall continue to pay any

Monthly Fees payable under Section IV(B)

if it terminates the Agreement without

cause. Section IV(E) states that if the

Agreement is terminated for cause,
payments due under IV(B) shall cease.

Section IV(F), which applies when the

Plan undergoes a significant structural

change, provides that development fees,

which Fey concedes include IV(B)

payments, shall be equitably adjusted.

 In the fall of 1997, the State announced

that, contrary to its 1995 announcement,

it would not implement a mandatory

managed care program for Medicaid

beneficiaries. In May 1998, UCH told

Quantum that it intended to sell the Plan

and terminated the Agreement. Quantum

considered buying the Plan, but was

outbid. On July 31, 1998, the sale of the

Plan closed. The State Contract was,

therefore, terminated as well. 

B. Facts Relating to UCH’s Counterclaim

 UCH paid Quantum under Section IV(A),

which states that UCH shall reimburse

Quantum for all expenses, to the extent

that such expenses were "within the scope

of the Budget included within the

Business Plan or within the scope of a

later Budget . . . in effect at the time

the expense was incurred by Quantum." The

Business Plan allowed for $25,000 per

month for Fey’s services from April

through December 1997. A December 17,

1996 modification to the budget allowed

for an increase in consulting fees as

well as an additional $26,000 per month

for Morrow’s services. Morrow resigned in

July 1997. Quantum continued to charge

and accept the $26,000 per month for five

months thereafter. That is, it received a

total of $130,000 for services it did not

provide. Also, as consideration for the

December 17 modification, Quantum agreed

to split equally the increase in fees;

UCH would initially pay Quantum’s share,

as a draw against future payments.

Quantum’s share of the increase equaled

$148,690. It has not repaid UCH. 

 Section III(E) of the Agreement provides

that Quantum shall recommend 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. . . . [T]he MIS shall be

designed for the purpose[ ] of . . .

making required reporting to regulatory

agencies." Quantum selected an MIS that
failed to make the required reporting to

the Illinois Department of Public Aid.

Due to this failure, the Plan did not

comply with the State Contract. UCH

retained another consultant to achieve

compliance with the reporting

requirements at a cost of $166,945. 

 Finally, when Fey moved to Chicago to

begin working for the Plan, UCH paid a

$2,026 security deposit required by the

landlord of his apartment. When Fey moved

out, he instructed the landlord to refund

the deposit to him. He never reimbursed

UCH. 

 Pursuant to U.S.C. sec.636(c) and Fed.

R. Civ. P. 73, the parties consented to

the exercise of jurisdiction by

Magistrate Judge Ashman for the limited

purpose of ruling on UCH’s summary

judgment motion. Judge Ashman granted the

motion, holding that Quantum failed to

raise a genuine issue of material fact as

to whether the Plan achieved an operating

gain during any given month, or as to

whether the Plan ever reached 120% of the

enrollment level of any supposed

breakeven month. The court also awarded

UCH $447,661.37, holding that Quantum

breached the Agreement by collecting fees

earmarked for Morrow’s services after his

resignation, by failing to return its

half of the additional consulting fees

advanced by UCH, by failing to return the

security deposit on Fey’s apartment, and

by failing to select an appropriate MIS. 

II. Discussion

 We review a grant of summary judgment de

novo, viewing all of the facts, and

drawing all reasonable inferences

therefrom, in favor of the nonmoving

party. See, e.g., Lewis v. Holsum of Fort

Wayne, Inc., 278 F.3d 706 (7th Cir.

2002). Summary judgment is proper 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." Id.; Fed. R. Civ. P. 56(c). If

the nonmoving party fails to make a

sufficient showing on an essential

element of her case, the moving party is

entitled to judgment as a matter of law

because "a complete failure of proof

concerning an essential element of the
[nonmovant’s] case necessarily renders

all other facts immaterial." Celotex

Corp. v. Catrett, 477 U.S. 317, 323

(1986). 

A. Quantum’s Claim 

 No breach on UCH’s part occurred unless

it terminated the Agreement without

cause, and two requisite profitable

months occurred--one that first achieved

an operating gain (the breakeven month),

and a second that surpassed the breakeven

month by 20%. The district court assumed

without deciding that UCH’s termination

of the contract was without cause. We do

the same. At issue, then, are the two

Section IV(B) profitable-month

conditions. The only financial data

presented--UCH’s Spreadsheet of Plan

Financial Information for Fiscal Year

1998--itemized revenues and expenses for

the year and showed an operating loss for

each month. According to this evidence,

neither a breakeven month nor a month

that achieved at least 120% of the

enrollment level of a breakeven month

occurred. These two profitable months are

conditions precedent to UCH’s contractual

obligation. Hardin, Rodriguez & Boivin

Anesthesiologists, Ltd. v. Paradigm Ins.

Co., 962 F.2d 628, 633 (7th Cir. 1992)

("Under Illinois law, a condition

precedent is some act that must be

performed or event that must occur before

a contract becomes effective or before

one party to an existing contract is

obligated to perform."). Where a

condition precedent is not satisfied, no

breach of contract occurs for failure to

perform. Id.

1. Agreement Section IV(B): Breakeven

Month

 Quantum contends that Fey’s deposition

testimony that two UCH representatives

told him that the Plan was "cash

positive" in March 1998 constitutes

sufficient evidence to raise a genuine

issue of material fact. We disagree.

First, the district court held that such

testimony was inadmissible hearsay (as

Fey did not establish that the statements

were made in a representative capacity)

and violated myriad other federal rules

of evidence. Moreover, even if we accept

the statements as true, they do little to

prove that a breakeven month occurred as

defined by the Agreement: "an excess of
total expenses over total revenues . . .

computed on an accrual basis as specified

by generally accepted accounting

principles." 

 Quantum argues that the testimony is

enough because the Agreement placed the

burden of keeping the monthly breakdown

of accrued monthly medical expenses was

on UCH. Because UCH breached the contract

by failing to do so, it contends, it

cannot be expected to provide specific

financial data to the court. However,

Quantum can point to no actual clause in

the Agreement that places such a duty on

UCH. Quantum attempts to rely on the

Illinois Wrongful Prevention Doctrine

which provides that a party that prevents

the occurrence of a condition precedent

may not ruly on such nonoccurrence to

refuse to perform. Swaback v. American

Information Technologies Corp., 103 F.3d

535 (7th Cir. 1996). The doctrine is

simply inapplicable in this case because

nothing suggests that UCH wrongfully pre

vented the Plan from achieving an

operating gain. Even if Quantum could

show that UCH had the duty to produce

better records and did not do so, which

it cannot, the doctrine would not be of

any help. 

2. Agreement Section IV(B): 120% of the

Breakeven Level

 Even assuming that the evidence to which

Quantum points regarding the breakeven

month creates a genuine issue of material

fact, Quantum presented absolutely no

evidence to the district court that a

month existed where the Plan achieved

120% of the breakeven level of

enrollment. The lowest enrollment for a

month that Quantum argues was a breakeven

month was 15,825 in March 1998; one

hundred twenty percent of 15,825 is

18,990. Quantum does not contest that the

Plan’s highest enrollment level was

17,618. In fact, it fails to address the

issue altogether in its brief on appeal.

Quantum admits that the 120% month is an

essential element that it must prove, but

makes no attempt to do so.

3. Other Agreement Sections

 If the Agreement was terminated for

cause, Section IV(E) provides that no

payments beyond those paid by UCH are

due. If the Agreement was terminated
without cause, Section IV(D) states that

any payments called for under IV(B) shall

continue. If the sale of the plan

constituted a structural change, then

Section IV(F) states that any IV(B)

payments due shall be equitably adjusted.

Because Quantum fails to show that it was

entitled to payment under Section IV(B),

Sections IV(D) and (F) are not

implicated. Therefore, whether the

Agreement was terminated for or without

cause, Quantum creates no issue of fact.

We agree with the district court that

summary judgment was appropriate. 

B. UCH’s Counterclaim

 First, UCH argues, and the district

court agreed, that Quantum breached

Section IV(A) of the Agreement by

continuing to charge and accept $26,000

per month, earmarked in the modified

budget for Morrow’s services, for five

months after Morrow’s resignation.

Because IV(A) allows for only those

expenses within the scope of the budget,

and Quantum makes no argument in its

brief on appeal contesting that these

payments were outside the scope of that

budget, we agree with the district court

that UCH is entitled to the $130,000 that

it paid for services never rendered. 

 Second, the district court held that

Quantum was liable to UCH for $148,690.37

that was advanced by UCH. As

consideration for the December 1996

modification to the Plan’s budget,

allowing for an increase in consulting

fees to Quantum, Quantum agreed to share

equally the increase. It never repaid UCH

its share, and presents no argument on

appeal as to how the district court erred

in finding it liable. UCH is entitled to

payment. 

 Third, we agree that Quantum is liable

to UCH for the $2,026 security deposit.

It makes no argument as to why it is not,

and creates no genuine issue of material

fact. 

 Finally, the district court held that

Quantum is liable for the $166,945 that

UCH expended to retain a consultant to

bring the Plan into compliance with the

reporting requirements of the Illinois

Department of Public Health. Section

III(E) of the Agreement provides that

Quantum shall "make recommendations and
assist in the selection . . . of . . . a

management information system ("MIS") . .

. . Among other things, the MIS shall be

designed for the purpose of . . . making

required reporting to regulatory

agencies." Quantum has admitted that it

was responsible for the selection of MIS

software and that the system it chose was

unable to meet the state reporting

requirements. It did not present evidence

to the district court that created an

issue of fact and it similarly fails to

develop an argument on appeal.

III. Conclusion

 For the reasons stated herein, we AFFIRM

the decision of the district court.