statement by the repudiating party that they cannot or will not perform under the terms of the
contract. Wilmette Partners v. Hamel, 594 N.E.2d 1177, 1186 (IH. App. Ct. 1992). An
affirmative act by a party to a contract which is inconsistent with the ability or willingness to
perform may also constitute an anticipatory repudiation. In Casati v. Aero Marine Mgmt. Co.,
the defendant formed a contract with the plaintiff under which the plaintiff was to receive
compensation for finding a buyer for the defendant's property within a specified time. 413
N.E.2d 122, 125 (Ill. App. Ct. 1980). That court found that the defendant repudiated its contract
when it took the property off the market before the expiration of the period during which the
plaintiff could produce a buyer, an action which was inconsistent with its performance under the
contract. Id. See also Restatement (Second) of Contracts § 250 (1981) (affirmative act which
renders obligor unable or apparently unable to perform is a repudiation).

In this context, Defendant's course of conduct since January 2005 amounts to an
anticipatory repudiation of the settlement agreement. First, Defendant's repeated failure to
voluntarily make payments to Plaintiff each month creates an inference that Defendant does not
intend to comply with the terms of the agreement for the six remaining years of the agreement.
This inference is strengthened by Defendant's assignment of all of its assets to a trustee for the
benefit of its creditors. The record shows that Defendant's liabilities outweigh its assets by
roughly $1.5 million and that, under the terms of Defendant's assignment for the benefit of
creditors, its assets will be liquidated and the proceeds distributed to its creditors. Thus, while
the series of payments in default might show that Defendant is unwilling to perform under the
terms of the settlement agreement, the assignment for the benefit of creditors suggests that

Defendant is unable to pay Plaintiff $25,000 per month for the next six years. The combination

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C. Attorneys' Fees

Plaintiff also seeks to recover attorneys’ fees of $800. (PI.'s Mot. at Ex. H.) The
settlement agreement expressly provides that "if a party must seek the assistance of the Court to
remedy an uncured breach . . . the Court shal] award the prevailing party . . . reasonable attorneys’
fees." (PI.'s Mot. at Ex. A.) As Plaintiff prevails on this motion seeking a remedy for

Defendant's breach, Plaintiff is entitled to its reasonable attorneys’ fees of $800.

D. Defendant's Response

At a hearing before this Court on June 2, 2005, Defendant's counsel declined to submit a
response to Plaintiff's motion. However, defendant's counsel did refer the Court to Illinois statute
815 ILCS § 105/9. This statute relates to "Failure of Consideration" and it is unclear how this
applies to the instant case. Since it is unclear how Defendant contends that this statute applies to
this case, and Defendant has made no attempt to argue its relevance, it does not carry any

persuasive weight in opposition to Plaintiff's motion.

HI. Conclusion

For the reasons stated above, Plaintiff's motion is granted, and judgment is entered for
Plaintiff in the amount of $1,120,034.00.

ENTER ORDER:

~ the 0 CSA

MARTIN C. ASHMAN
Dated: June 27, 2005. United States Magistrate Judge



settlement agreement, and that, as a result of this anticipatory repudiation, Plaintiff is entitled to
judgment for the entire amount remaining to be paid under the agreement.

This Court has the power to reinstate the case in order to enforce the settlement
agreement. The parties agreed that this Court would retain jurisdiction over the case for the
purpose of enforcing the terms of the settlement and this agreement was incorporated into the
Agreed Order of Dismissal signed by the parties and the Court on August 11, 2003. (PI.'s Mot. at
Ex. E.) It follows that this Court has jurisdiction to reinstate the case and enter judgments in
order to enforce the settlement agreement. Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S.
375, 381-82 (1994). Because the basis for jurisdiction over the original action was diversity of
citizenship pursuant to 28 U.S.C. § 1332, the Court applies the substantive law of the State of

Illinois to resolve this matter.

A. Anticipatory Repudiation

Plaintiff alleges that Defendant's course of conduct beginning in January 2005 constitutes
an anticipatory repudiation of the settlement agreement. Defendant's conduct since that time, as
stated in Plaintiff's motion and memorandum and agreed by both parties in open court, includes
defaulting on the monthly payments for January, February, March, April, and May of 2005, as
well as undertaking an assignment for the benefit of creditors on March 31, 2005.

Under Illinois law, an anticipatory repudiation occurs when the "repudiating party
unequivocally and without justification renounces its duty to perform the contract on its date of
performance." Busse v. Paul Revere Life Ins. Co., 793 N.E.2d 779, 783 (Ill. App. Ct. 2003)

(internal quotations omitted). Conduct which constitutes a repudiation is normally an explicit

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of these factors makes it extremely improbable that Defendant will render performance in the
future and therefore constitutes an anticipatory repudiation.

This conclusion is strengthened by the way in which Illinois law has treated bankruptcy in
the context of contract law. In Bigelow v. Bicek, the court agreed with the Minnesota Supreme
Court that "[o]rdinarily, bankruptcy is a complete disablement of the bankrupt from performance
of his contracts and the equivalent of a repudiation... ." 18 N.E.2d 398, 402 (ill. App. Ct. 1938)
(quoting Stern v. Mayer, 207 N.W. 737, 739 (Minn. 1926)). The court agreed with the
Minnesota Supreme Court's assessment that "[the bankrupt corporation] for all purposes was
lifeless and consequently there could be no performance" of its contractual obligations. fd.

While an assignment for the benefit of creditors is not in all ways equivalent to
bankruptcy per se, it is similar in the respect that, like a corporation which is in bankruptcy, a
corporation which has assigned all of its assets to a trustee is no longer able to directly fulfill its
monetary contract obligations. In /i/. Bell Tel. Co. v. Wolf Furniture House Corp., the court
described an assignment for the benefit of creditors as "pass[ing] the legal and equitable title to
the property absolutely, beyond the control of the assignor." 509 N.E.2d 1289, 1292
(Ill. App. Ct. 1987) (quoting Browne-Chapin Lumber Co. v. Union Nat'l Bank of Chicago,

42 N.E. 967, 970 (Ill. 1896)). The connection between the common-law assignment for the
benefit of creditors and bankruptcy is also demonstrated by the fact that, until the abolition of the
concept of “acts of bankruptcy" from the United States Code, an assignment for the benefit of
creditors was specified in Chapter 11 as an "act of bankruptcy." See 11 U.S.C. § 21{a) (1976)

(assignment of assets is an act of bankruptcy). See also S. Rep. No. 989, 95th Cong., 2d Sess. 34


Copies have been mailed to:

MICHAEL W. DUFFY, Esq.
JOHN S. SAWIN, Esq.

Childress Duffy Goldblatt, Ltd.

515 North State Street
Suite 2200
Chicago, IL 60610

Attorneys for Plaintiff

JOHN T. ALLEN, Esq.

Law Office of John T. Allen, P.C.
39 South LaSalle Street

Suite 200

Chicago, IL 60603-1641

Attorney for Defendant


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

EASTERN DIVISION
THE BUDD COMPANY, )
a Michigan Corporation, )
)
Plaintiff, ) Case No, 02 C 154
)
v. } Magistrate Judge
) Martin C. Ashman
APPLIED COMPOSITES CORP., )
an Illinois Corporation, )
)
Defendant. )

MEMORANDUM OPINION AND ORDER

Plaintiff, The Budd Company, moves this Court to reinstate this case and enforce its
settlement agreement with Defendant, Applied Composites Corp. This case was removed to the
United States District Court for the Northern District of Illinois on the basis of diversity of
citizenship, at which time both parties consented to have a magistrate judge conduct any and all
proceedings in this case, including the entry of final judgment. See 28 U.S.C. § 636(c);

Local R. 73.1(a). On August 11, 2003, the parties agreed to voluntarily dismiss their case in
accordance with the terms of a settlement agreement negotiated with the assistance of this Court.
Plaintiff now seeks a judgment against Defendant in the amount of $1,120,034, which represents
the entire amount Defendant currently owes Plaintiff under the settlement agreement plus

attorneys’ fees of $800. For the reasons that follow, Plaintiff's motion is granted.


(1978); U.S. Code & Admin. News 1978, pp. 5787, 5820 (The Bankruptcy Reform Act of 1978
abolished the concept of "acts of bankruptcy.").

In short, Defendant has defaulted on several consecutive payments and placed itself in a
situation akin to bankruptcy by undertaking an assignment for the benefit of creditors. This
Court is satisfied that Defendant's course of conduct is sufficient to constitute an anticipatory

repudiation of the settlement agreement.

B. Plaintiff's Remedy

Plaintiff seeks a judgment for the entire amount remaining to be paid under the settlement
agreement. Under Illinois law, in cases of anticipatory repudiation, the non-repudiating party
may (1) treat the contract as rescinded and sue on a quantum meruit basis, (2) keep the contract
alive for the benefit of both parties, or (3) treat the repudiation as putting an end to the contract
for all purposes of performance and sue for damages. Casati, 413 N.E.2d at 127. See also
Equity Ins. Managers of Ill, LLC v. McNichols, 755 N.E.2d 75, 80 (Ill. App. Ct. 2001) (measure
of damages is the amount that will put non-breaching party in as good a position as they would
be in if contract was performed). If the non-repudiating party chooses to treat the repudiation as
putting an end to the contract for all purposes of performance, that party may "sue for the profits
he would have realized" had the contract been performed. Casati, 413 N.E.2d at 127. This is the
option Plaintiff chooses. Because there has been an anticipatory repudiation of the whole
contract, as discussed above, under Illinois law, Plaintiff is entitled to recover the entire

outstanding consideration for the settlement agreement.


I. Background

Plaintiff filed a breach of contract suit in Illinois state court. Defendant removed the suit
to the United States District Court for the Northern District of Illinois on the basis of diversity of
citizenship and subsequently filed a counterclaim against Plaintiff to recover payments for
allegedly non-conforming goods. On August 11, 2003, the parties agreed to voluntarily dismiss
their case with prejudice in accordance with the terms of a settlement agreement negotiated with
the assistance of this Court. (Pl.'s Mot. at Ex. E.) The agreement provided, in relevant part, that
Defendant would pay Plaintiff $1,547,000 at the rate of $25,000 per month beginning in
August 2003 and continuing from month to month until the entire amount was paid. (PI.'s Mot.
at Ex. A.) Under the terms of the agreement, Defendant was authorized to skip two months of
payments per year; in the absence of advance notice to the contrary, those months were to be
August and December. (Id.) Payments were due on the first business day of the month, with a
ten-business-day grace period. (Id.) At the expiration of this grace period, Defendant would be
in default according to the terms of the agreement. (Id.) The agreed order dismissing the case
also stated that this Court would retain jurisdiction for the purpose of enforcing the terms of the
settlement agreement. (Id.)

All parties agree that Defendant complied with the terms of the settlement agreement
through December 2004.

Defendant defaulted on its January, February, and March of 2005 payments. On March 9,
2005, Plaintiff filed a Motion to Reinstate Case and for a judgment in the amount of the

outstanding payments. On March 15, 2004, judgment was entered in favor of Plaintiff for


$50,000, which represented the total of the three outstanding monthly payments less a $25,000
set-off to Defendant for a $25,000 payment made to Plaintiff in open court on that date.

According to Plaintiff's motion and statements in open court, which Defendant does not
oppose, Defendant has subsequently failed to make its monthly payments for April and May of
2005. Furthermore, Plaintiff has provided the Court with evidence that Defendant has
undertaken an assignment for the benefit of creditors. (Pl.'s Supp. Mem. at Ex. A.) The evidence
presented by Plaintiff shows that Defendant's liabilities exceed its assets by approximately
$1.5 million and that Defendant has assigned all of its assets to a trustee for the purpose of
selling off Defendant's assets and distributing all proceeds to Defendant's creditors. (Id.)

On June 2, 2005, Plaintiff filed this Motion to Reinstate Case and Enforce Settlement
Agreement, which differs from its previous motion before this Court in that it seeks a judgment
for the entire amount outstanding under the settlement agreement and includes an affidavit to the
effect that the amount remaining to be paid is $1,119,234. (PI.'s Mot. at Ex. G.) Plaintiff also
seeks attorneys’ fees of $800 in accordance with the provision of the settlement agreement that
awards attorneys’ fees to a party that successfully seeks the Court's assistance to remedy an

uncured breach of the agreement by another party. (Pl.'s Mot. at Ex. A, H.)

II. Discussion
Plaintiff moves the Court to reinstate this case and enforce the settlement agreement by
entering a judgment for Plaintiff for the total amount remaining to be paid under the settlement
agreement and for attorneys’ fees as provided in the settlement agreement. Plaintiff alleges that

Defendant's course of conduct since January 2005 constitutes an anticipatory repudiation of the

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