## In the



# U n ited S ta tes Co urt o f Ap p ea ls

F o rth eS e v e n th C ir cu it
N o. 11

- 3124 C IT ADEL G R OUP L IMI TED , a Del awar e Cor po r at i o n, Plai nt i f f

-Appe l l ant, v.
W AS HI NGT ON R EGIONAL M EDICAL C ENTE R, D efend a nt-A pp ellee. Appeal from the United States District Court fo r the N o rthernDi stricto f Illino is, Eas tern Div isi on. No . 1:07- cv-1394

—MarvinE . A sp en, Judge .
A RG UE D A PRI L 11, 2012

— D ECI DE D A UGUS T 15, 2012

Befo re W OO D , W I L L I A MS, a nd T INDER, C ircu it Judges. T INDER, C ircu it Judge. This i s a di ver si ty case ar i si ng fro m the b re akdown o fco ntra ct ne got i ation s between Ci tadel Group Lim i ted and W ashi ngto n Regi onalM edi calCenter ove r the deve l opm ent, co nstr ucti on, and l eas e-back ar ra ngem ent o fa m ed ical offi ce b uil ding. W ashi ngto n Regi onalente re d i nto a co ntra ct with Cit adel to pro ceed with pre- const ructi on proj ect devel opm ent, w h ich2 N o. 11

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co nt empl at ed th e su bs equent e xe cut i o n o fg r o und a nd space l eas es. Yet, nego ti ati ons ove r the l eas es p ro ved unfr uit ful and W ashi ngto n Regi onalde c ided to m ove f o r wa r d o n c o ns t r uc t i o n i nt e r na l l y ( wi tho uta n o ut s i de devel oper )
. Ci tadelsued f ori ts cos ts and l ostpro fi ts on th e d ea l. W e foun d i n a p revious op inion tha t the d is t r ict cou rt had perso nalj uri sdic tio n ove r W ashi ngto n Regi onalto re so lve th is d isp u te
. Se eCi t ade l Grp. Lt d. v. Was hi ngt on R eg’l, 5 36 F
. 3d 757( 7th Ci r . 2 00 8)
. On r emand, the dis t r i c t c o ur t di s mi s s e d Ci t a de l ’ s c l a i m fo r f a i l ur e to nego ti ate i n go od f ai th atthe plead i ng st age and gr anted sum m ar y j ud gm ent in f avo r ofW ashi ngto n Regi ona lo n Ci ta del ’ s cl ai m f o r b r ea cho fc o nt r ac t ( l o stpr o fi ts )
. The parti es set tl ed Cita del ’ s cl ai m s f or cos ts and fe es i ncurr ed p re-cons tru ction
. Citad el app eals the d istri ct cou rt’s d i s m i s s a la n d s u m m a r y j u d g m e n tr u l i n g . W e a ffi r m. Cita del f ai l ed to show t h at W ashi ngto n Regi onalente re d i nto a bind i ng ag re em ent t o com ple te the l eas e-back ar r an g ementi n the abs en ce o fe xe cut ed leases

. At the ti m e the par ti es’ r el ati onshi p ended , t h ey sti l lhad not agr eed o n ess enti allea se ter m s, m ostnot abl y, r entalr ate s. Cita del ’ s brea ch ofco ntra ct c l ai m f orl ostpro fi ts ther ef or e f ai l s a s a m atter o f l aw . Ci tadel ’ s cl ai m f or bre ach of the du ty to nego ti ate i n goo d f ai th al so fails because no lan guage i n the parti es’ ag re em ent r equi re d th em to en ga ge in g oo d fait h n eg ot iat io n s, n or d id it est abl i sh a fra m ew or k forthe nego ti ati on pro cess . A bsent such l anguage , we do not i nfe r a duty.N o. 11

- 3124 3 I . FACTS W ashi ngto n Regi onali s a non- profi t o rg ani za ti on that oper ate s m edi calf aci l i ti es i n A rk ansas . Ci tadeli s a co rpor at i o n e ng ag ed i n r ea le st at e d ev el o pm en t wi tha f o cus on the heal thcar e ind ustr y. In ear l y 2 005, W ashi ngto n Re g i o na l so ug ht to dev el o p a m edi ca l o ffi ce bu i l di ng th ro u gh a lea se -b ac k a rra n ge m en t w ith an ou ts id e d ev eloper . W ashi ngto n Regi onalpl anned to execute a l ongte r m g r o und lease o n the pr o per tyt o the de ve l o per . The devel operwould then desi gn ( acco rdi ng t o W ashi ngto n R e g i o n a l ’ s s p e c i fi c a t i o n s ) , fi n a n c e , c o n s t r u c t, a nd o wn the m edi calfac ili ty, wh i l e l eas i ng ba ck bui l ding space to W as hi ngt o n Re g i o na l

. Thi s st r uctur e al l o wed W as hi ngto n Regi onalto avo i d incu rr i ng subs tanti aldebt on i ts bal ance s heet. W ashi ngto n Regi onalCE O W i l l i am B ra d ley p lac e d Sen ior V ice P re sid en t T am i H u tc h iso n in charg e o fthe proj ect. H utchi son issued a “Request f or Pr o po sa l ” to s ev eral de ve l o per s, i nc l udi ngCi ta del

. The re quest i nd i cate d that W ashi ngt o n Re g i o na lwas i nt er es te d i n e xe cut i nga “ l o ng - te r m gr o und l ea se ” f o r the pu rpos e of devel opi ng a 30, 000 square f oo t m edi cal f ac i l i ty
. W as hi ng to n Re g i o na lpr o po se d a 3 0- y ea r g r o und lea s e starting at $1,812 p er m ont h an d i nc reasing eve ry fi ve yea rs . C ita d el s u b m itt ed a p ro p os al in res p on se , w h er e b y it wou l d a s s ume r e s po ns ib i l i t y f o r the p r oj e c ta nd thi r dp ar ty fin an c in g of th e b u i l d i n g. See C ita del , 53 6 F
. 3d at 75 9. Ci ta deli nc l ude d a “ co m pr eh en si ve de ve l o pm en t propos al ” with an appende d “A uthor i zati on t o Pro

ceed. ” I t no ted that“[ t] he Proj ect’ s e xact c onst ructi on co st4 N o. 11

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w i l lbe d ri ven by[ W ashi ngto n Regi onal ’ s] speci fi cati ons” and pr ovi ded an anti ci pated i nter est ra te and fee o n th e p roj ec t loa n . I f W as h in gt on R eg ion al c h os e C ita d el, th e l et te r r eque st ed W as hi ng to n Re g i o na lt o s ign the Autho r i zati on t o Pr o ce ed an d r etur n i t al o ngwi ththe re quested deposi t. A tta ched to the pr oposa ll ett erwas a th re e- page “ Prel i m i naryLeasing Ter m s S heet. ” Th e t er m s s heet w as pref aced bythe f ol l owing l anguage : The f ol low i ng te rm s r efl ect i nter estr ate s a s o f M ay 9, 20 05 . Th is t er m s s h ee t is su bjec t t o c re d it r ev i ew, c o m m i tm en ts c o m m i tt ee a ppr o va la nd ch an g i ng m ar k et co ndi ti o ns among o th er co nsi derat i ons. The proj ect cos ts as w el las stru ctura l ter m s a re subj ect to change f ol l owing re vi ew o f t h e final proj ect d esign along w ith arch itect’s an d co n st ru c tio n m an ag er ’s fin al c os t e st im at e. T h e sh ee t sta te d th at P roj ec t C os t w as “$ 5,0 00 ,00 0 (e s t im ated , final b u d g e t to be d eterm ined by the H osp ital’ s f aci l i ty desi gn speci fi cati ons)
. ” I t further p ro vi ded that

“ Ci t a de l wi l l pr o v i de de v e l o pme nt s e r v i c e s f o r a f ee of 4% to be i nc lud ed i n th e Proj ect C o s t .” In l ater corre spondence, Ci tadeli nfo rm ed W ashi ngto n Regi onal that ther e was no m ar k- up o n const ructi on co sts o ther than the fee f orproj ect devel opm ent. T he term s she et s e t f orth th e lease term , the sq ua re feeto fle as ed space, the tenant i m prove m ent a l l owance, an d a variable an d fixed l ease rate f o r a prim ary care pract i ce, am bul ato rysur ger y c enter, and m edi c alo ffi ce space. Ci tadelpro posed the f ol l owing fi xed ter m l eas eN o. 11

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ra tes : $1 1. 20 per square f oo t forth e pri m ar y c ar e pr actice, $18.27 p er sq ua re foot for th e am bu latory su rgery cente r, and f ai r m ar ketvalue f orthe m edi calo ffi ce spa ce . Ci ta delno te d fl ex ibi l i tywi thr es pec t to the g r o und l ea s e t e r m, s ug g e s t i nga 6 0

- y e a r t e r m, wi th t wo 1 0- yea r extensi on o ptions a nd a f ai r m ar ketl eas e r ate , as r easo n ab ly d et er m in ed by W as h in gt on R eg ion al. W ashi ngto n Regi onalsub s e qu e ntly r equeste d add i ti onal i nfo rm ati on about Cit adel ’ s pro posal, as ki ng Ci tadelto m ake var i ous a ss u m pti ons. Ci tadelpro vi ded a detai l ed devel opm ent b ud ge t o f$6 , 200, 000 w i th devel oper ’ s fees o f$ 24 8, 00 0 ( 4 per ce nt ) i n r es po ns e. Ci ta delCEO a nd Pr es i den t Dav i d Va r wi gt es ti fi ed th athe i nf o r m ed W as hi ngto n Regi onalthatthe Prel i m i na ry Ter m s S heet set f or th an eco nom i c f or m ula fo r deter m i ni ng l eas e r ate s so tha t W as hi ng to n Re g i o na lha d flexibi l i tyi n de ci di ng th e type o fbui l ding i t wanted. ( Cita del descr ibed this as a “ bui l d- to
- su i t” l ease-ba cka r r an g ement
. ) The f or m ula : Tota lproj ec t costx the capi tal i zati on r ate ( 8. 84 perce nt) ÷ tot al square feet = aver age re nt per square f oo t. U nd erthi s form u la, the bui l ding l eas e r ate s fl uctuated d ep en d in g on th e p roj ec t c os ts , w h i c h w er e d ep en d en t in l ar g e par t o n W as hi ng to n Re g i o na l ’ s ch o se n b ui l di ng sp ec ifica tio n s (in c lu d in g s ize an d int er ior la yo u t). V ar w ig al so tes ti fi ed that a “ w hol e ho st ofthin gs” co uld ca use the t ota lproj ec t c os t t o fl uctuate, i ncl ud i ng co st ofr aw m ate ri al s, co st ofl abor, fina nci ng fees , i nter est s r ate s, et c . B u t t h e fo rm u la c an n o t b e fo u n d an yw h er e in th e Pr el i m i na r y Te r m s S he eto r a ny o th erdo cument ex ch an g ed be twe enthe pa r ti es . A cc o r di ngt o Va r wi g, he6 N o. 11

- 3124 i nf o r m ed W as hi ng to n Re gional tha t “whe n y o u g o t o the c los in g you’ l lbe abl e t o l oo k a t the l eas e a nd l oo k b ack here and m athem ati cal l y t i e itto gether. ” Hu tchi son tes ti fi ed that she unders too d that th e higher the c ost ofco nstr ucti on, the hi gherthe l eas e r ate s. B rad ley presen ted Citad el’ s and anot he r dev eloper’s propos alto W ashi ngto n Regi onal ’ s bo ar d m em ber s in J uly

. Ci ta del ’ s budg etpr es en te d t o the b o ar d refl ec ts the i ncre ase d costo f$6 , 200, 000 and cor re sponding re vi sed bui l ding re ntal ra tes. I t i s no t cl earhow W ashi ngto n Regio n alo btained the co rr espondi ng hi gherr ental r at es . Brad l eyr ec o m m en ded Ci ta del ’ s pr o po sa la nd the Board appro ved m ov i ng f or w ar d on the proj ect w i th Cita del, autho ri zi ng paym ent o fthe $60, 000 deposi t. A ro und thi s t i m e, Ci tadelse nt H utc h iso n a further r ev i se d b udg ets ho wi ng a to ta l pr oj ec t co sto f$ 8. 5 m i l l i o n. The f ol l owing m onth, Ci tadelpre sente d W ashin gton Regi onalwith a let teri denti fi ed as i ts “co m prehensi ve devel op m ent pr oposa l

. ” Thi s s eco nd l ett erwas si m i l ar to Ci ta del ’ s i ni ti al p r o po sa li n a l lmate r i alr es pec ts , e xc e pttha ti ta dde d the l a s ts e nt e nc e t o the fol l owi nga ppend ed “A uthor i zati on t o Pro ceed”: [ W ashi ngto n Regi onal ] autho ri zes Ci tadel

. . . to proce ed w i th Pr oj ect devel opm ent a t a fee o f f our perce nt ( 4% ) o fproj ect cos ts ac c ording to th e fo llow in g s c h ed u le: (i) a 1% goo d fait h d ep os it u p on ex ec u tio n of th is p ro p os al, an d (ii) th e b alan c e fro m P roj ec t fu n d in g. [W as h in gt on R eg ion al] i s r esponsibl e foral ll ega lexpenses and other c o s t s a s s o c i a t e d wi th P r oj e c tde v e l o pme nt, e xc e ptN o. 11

- 3124 7

ar chi tectural and e ngi neer i ng fees , wh ethero r not the pr oj ect i s ul ti m ate l y d eve l oped. Proj ect cos ts an d exp en ses m ay be inclu d ed i n th e Proj ect’s budget a nd hence, r efund ed to [ W ashi ngto n Regio n al] a t P roj ec t fu n d in g. [Washing ton Regional] w ill on ly be respo nsible fo r arch itectu ral an d en gin eeri ng f e e s i n thee ve nt[ Was hi ngt on Reg i onal ]does no t execu te its s pa ce leases a nd gro un d lea se . ( em phasi s a dd ed). B radley, o n behal fo fW ashi ngto n R e g i o n a l, s i g n e d th e A u th o r i z a t i o n t o P r o c e e d i n S e p t e mber an d i nform ed the W ash ington R e g ional board m em ber s that Ci ta d el “i s m oving f or w ar d and constr uctio n sh ou ld be gin in M ar c h or A p ril 20 06 .” Cita del beg an working o n the proj ect. I t hi re d atto rney s, ar c h ite c ts , en gin ee r s, re fin ed bu ild in g p lan s, en ga ge d in zoni ng r evi ew , and beg an the proce ss ofse curi ng fi nanci ng. A l lthe w hi l e, the parti es continu ed to neg oti ate l eas e t er m s. In M ar ch 200 6, A da m L ynch fro m Ci tadel se n t H u tc h iso n a n e m ail a tt ac h in g “ a p re lim in ar y c alcul at i o n fo r [ th e bui l di ng ’ s] l ea se ra te s. ” The e m ai li ncl ude d a do cumentwi tha s um m ary o fc o st s f o r the pr oj ec t o f$ 10
. 8 m i l l i o n a nd hi g he r l ea se r at es ( e. g . , the pri m ar y c ar e s pace had a re vis ed fi xed rat e o f$2 8 per square f oo t)
. The docum ent c om p ar ed the or i gi nal l eas e r ate s with the new l eas e r ate s; Lynch exp l ai ned to H u tc h iso n th at it w as a “p ro p or ti o n a l ch an ge .” Cita del i ncl ud ed a form ula expl ai ni ng how the new l eas e r a t e s we r e c a l c ul a t e d a s the p r o du c to fc o s tper square f oo t ÷o ri gina l c ost persquar e foo t x o ri gi nal aver age l eas e r ate. A fterr ecei vi ng thi s e m ai l, H utchi son8 N o. 11

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re sponded to Lynch say i ng, “W ow, thi s i s a bi g di ffer ence. W e n ee d to d isc u ss .” A n em ai lfro m Lynch the f ollow in g m onth s tat ed that C ita d el w as refin in g t h e p roj ec t b u d ge t a n d ex p ec te d it to b e l o werg i ve n c er ta i n c o str ev i si o ns . L y nc h a l so e xp lai ne d that the final set ofdraw ings ha d b een circul ate d a nd that“the co nstr ucti on co sts wil lbe fi nal i zed i n the ne arfutur e. ” H ut ch i so n r es po nde d, r efer en cing Cita del ’ s p ro p os al ofa $30 per square foo t r ate i n i ts draft l eas e: “[W ]e [W ashi ngto n Regi onal ] have to have a lease r at e th ati s f ai r mar k etv alue , o r we ar en ’ t g o i ng to gi ve you the s u p p or t y ou’ l lneed in or der t o cl o se b y M ay1 5th. W e’ l lne ed to b e as su r ed th atthe $30/ s[ quare] f [ oo t] thati s i l l ustr ate d in the draft l eas e can be r ed u c ed by about 25% i n or der forthi s t o get backi nt o a com f or t z one f orus. ” Hu tchi son tes ti fi ed that a f a i r mar k e t v a l ue l e a s e r a t e wo ul d b e b e t we e n $22 and $25 per square f oo t. On M ay4, 2 00 6, Hutc hi so n s en t Lyn cha n e m ai le xpress i ng se ri ous c oncern ov er the proj ecte d cost s o f const ructi on a nd expl ai ni ng tha t “ the o ver al lproj ect cos t re m ai ns hi gherthan i t s houl d be co m pa re d to o ther proj e c t s we h a v e g o i ngo n. ” Hut c hi s o n i nfo r med Ly nch that W ashi ngto n Regi ona l w as consi deri ng the co st of ter m i nati ng the i r re l ati onshi p. H ut c h i son sent Varwig a l ett erthe next day see ki ng addit i onaldocum entat i on i tem i zi ng proj ect co st s because ther e was co ncer n “that the pr el i m i naryco sts thatCi tadel has pre sente d refl ect a to ta l pr oj ec t co st th at i s no t co m pet i ti ve wi th th e m ark et
. As the Bo ar d m ay det er m i ne no t to pr o ce ed wi ththeN o. 11

- 3124 9 P roj ec t b as ed on cu rre n t c os t p roj ec tio n s w e w ou ld d ire c t C ita d el n otto inc u r an y fu rt h er co st s . . . .” H utchi son al so re ques te d an esti m ate o factual co sts i ncurr ed to date on the proj ect. V ar w ig re sponded that Cita del had i ncurr ed $72 2, 200 i n cos ts. S ubsequ entl y, o n M ay 10, Lynch sentH utchi son the r equeste d bud get th atpr es en te d t w o op ti o ns b as ed o n di ffer en t te na nt i m prove m ent o pti ons. The fi rs t o pti on s how ed a t ota l bu d get of $7, 117 ,4 0 0 , a l ease rate of $19.70 p er squ are f oo t, and a tenant i m prove m ent a l l owance of$4 0 per square f oo t. T h e seco nd o pti on s how ed a t ota lbudget o f$ 8, 54 7, 50 0, a l ea se rate o f$ 23
. 66 pe r s qua r e f o o t, a nd a t enant i m prove m ent a l l owance of$74. 85. A t W ashi ngto n Regi onal ’ s M ay 16, 20 06 boar d m eet i ng, H utchi son and W ashi ngto n Regi onal ’ s Chi efFin an ci al Offi ce r, Da n Ec kel s, made a pr es en ta ti o n c o m par i ng th e s e c o nd o pt i o n o ut l i ne d in Ci t a de l ’ s May1 0 th b ud get to the c o sto fde ve l o pi ngthe medi ca lo ff i ce b ui l di ng w i thout an o utsi de devel oper . The co m pari son showed th atthe b o ar d c o ul d s av e $2 , 466,000 b y c o m pl et i ng the pr oj ect i nter na lly. The m i nutes furtherst ate d that

“ Hut c hi s o n a dv i s e d th a twe r e the Bo a r d t o de c i de to pu rs u e d evel opm ent .
. . o n i ts own , [ W ashi ngto n Regi onal ] would have to nego ti ate se parat i on co sts with [ C i t a d e l ]
. . . . ” Wa s h i n g t o n R e g i o n a l d e c i d e d i t no l onge r needed to use a thi rd -p ar ty devel oper ; i ts c o nc e r n ab o utdeb to n i ts bal a nc e s he e th a d d i s s i pa t e d. H utchi son re com m ended that W ashi ngto n Regi onal com p lete c ons tru ction w ithou t C itad el; the B oard ag re ed . W as h in gt on R e gio n al in for m ed C ita d el th at it w as ter m i nati ng the i r re l ati onshi p. A t the ti m e, Ci tadel10 N o. 11

- 3124 ha d c o m pl et ed th e dev el o p m en t st ag e o fthe pr oj ec t an d was pr epa r i ngt o c o m m en ce c o ns truct i o n. The parti es c o ul d n ot agr ee on “ separ ati on co sts
. ” Ci tadel w as see ki ng al lo fi ts cos ts, and W as h in gto n Regi onal ass er ted thati t was o nl y obl i gat ed to pay cer tain re asonab l e co sts and fees. W ashi ngto n Regi onalal so refused to pay thes e exp en ses u nless it received “d eli verab l es ” fr o m Ci ta del, s pec i fi ca l l y the a r ch i te ctur al, e ngi neer i ng, and const ructi on pl ans f orthe bui l ding. Ci tadel fi l ed sui t. W ashi ngton R egio nalthen enter ed i nto contr acts with the ar chi tectand engin eerCi tadelhad re tained fo r th e pr oj ect. W ashi ngto n Regi onalpai d them to re l eas e thei r cl ai m s a gainst Ci tadel, used the i r pla ns, and buil t the m edi calf aci l i ty.

I I . ANALY SI S Cita de l o r i g i na l l y fi l e d s ui t i n s t a t e c o ur t f o r b r e a c h of contr act see ki ng co sts i ncurr ed i n the pre- const ructi on phase o fthe proj ect. A fterW ashi ngto n Regi onalr em ove d th e ca se t o fede r alc o ur t unde r di ve r si ty j ur i sdi ct i o n, Cita del am ended it s co m pla i nt to as ser t a dd i ti onal cl ai m s, o nl y tw o of which a re ati ssue here : br each o f contr act f orl ostpro fi ts ( Count I I) a n d br each o fthe du ty to neg otiate in good f aith (Co u n t III ). Th e d istri ct cou rt gr anted W ashi ngto n Regi onal ’ s r equest f ordi sm i ssa l of C o u n t III an d lat er gra n te d su m m ar y jud gm en t in fav or of W as h in gt on R eg ion al on C ou n t II.N o. 11

- 3124 11 A . B rea c h of C on trac t (C ou n t II) T he district cou rt grante d W as hin gton Region al’s m o ti o n fo r s um m ar y j udg m en t o n Co untII a fte r c o ncl udi ngtha t th e par ti es di d no t en ter in to a b i ndi ng co nt r ac t to c o m pl et e th e pr o po se d l ea se -ba cka r r an g ement and i nstea d, w er e s ti l lnego ti ating k ey ter m s. The d i str i ct cour t reaso ned that the s cope o fthe A uthor i zati on to Pro ceed addres sed o nl y the i ni ti aldevel opm en t s tag e o fthe pr oj ect an d c o nt empl at ed th e ex ec ut i o n o fg r o und and space l eas es befor e co nstr ucti on co uld be gi n. Beca us e th o se l ea se s wer e ne ve r ex ec ut ed, th e co ur t foun d no co ntra ct. Ou r re vi ew i s de no vo. M cCoy v. Har r i s on , 34 1 F
. 3d 600, 604 ( 7th Ci r. 20 03)
. S um m ar y j ud gm en t i s a pp ro pri ate o nl y i f “the m o va nt sh o ws th at th er e is no ge nui ne d isp u te as to an y m at er ial fa c t a n d th e m ov an t is enti tl ed to j ud gm ent a s a m att er o f law. ” F ed. R. Ci v. P . 5 6( a)
. W e co nstr ue al lf acts and re aso nabl e infe re nces i n the l i ght m ostf avo rabl e t o the no n-m oving par ty. Spi vey v . Adapt i veM ktg. LL C, 622 F .3 d 816, 822 (7th Cir. 20 10 )
. W he n th e m at er i alf ac ts a r e no t i n di spu te , the ex i st en ce a nd i nt er pr et at i o n o fa c o nt r ac t ar e qu est i o ns ofl aw tha t the co urt m ay deci de on a m oti on f or s u m m ar y jud gm en t. Se eEcho, Inc . v. W hi t s on Co. , Inc., 12 1 F.3 d 10 99 , 110 2 (7th C ir. 19 97 ); cf. Winfo rge, Inc. v. C o a ch m en Indust
. , Inc. , N o . 10-3178, 2012 W L 30647 26, * 9 (7th C ir. July 30, 2012) (app ell ate r e v ie w a fter benc h trial w he re f ac t s a r e d i s p u t e d i s f o r c l e a r e r r o r )
. E v e n wh en a contrac t is a m bi guous, as l ong as the e xtrinsi c ev i dence bear i ng o n the i nter pr et at i on i s undis pu ted and l eads t o12 N o. 11

- 3124

W e “d o no twor r y a bo utc on fl i c to fl a ws un l e s s the pa rt ie s 1 disagree on w hich st ate’ s la w app li es . ” A uto

- O w ners Ins. C o. v. We b s o lv C om p u ting, Inc ., 580 F. 3d 543, 547 ( 7th Cir

. 2009) ( q u o ta tio n s o m itt ed ); s e e a l s o Un i t e d S t a t e s v . Ka s h a mu , 656 F. 3d 67 9, 6 8 5 (7th C ir. 20 11 ). Fu rth er, “w he n n eithe r p arty raises a (co n tin u ed ...) o nl y o ne r ea so nabl e i nterp reta ti o n, we ca n de ci de th e m at te r on su m m ar y jud gm en t. S e eCo n t ’ l Ca s . Co
. v. Nw. Nat
. Ins . Co. , 427 F.3d 103 8, 1041 ( 7th Cir. 2005). W ashi ngto n Regi onalco ncedes that i t e nter ed i nto a legal l y e nf o r ce ab l e co nt r ac t wi thCi ta delwhens i g ni ng the Autho r i z a t i o n t o Pr o c e e d. Th e qu e s t i o n o n appeal i s the sc ope o fthe parti es’ ag re em ent. The A uthor i zati on, wh i c h exp re ssl y a l l owed Ci tadelto beg i n proj ect d ev elo p m en t, ac kn ow led ge d t h a t t h e p a r tie s s till needed to execute sp ace and gro und l eas es. W ashi ngto n Re g i o na lwas r es po ns ibl e f o ra l ll eg ale xpens es an d othe r cos ts ass oci ate d w i th proj ect devel opm ent “ w hether ornotthe proj ect [ w as] ul ti m ate l y d ev elo ped,” and w as r es po ns ibl e f o r a r ch i te ctur ala nd e ng i ne er i ng fee s “in the eve nt [ W ashi ngto n Regi onal ] does n ot execute i ts s pa c e l e a s e s a nd g r o un d l e a s e . ” Ci t a de lr e c e i v e d a $60, 000 g o o d f ai thde po si t to b eg i n pr oj ec t dev el o pm en t w i th the bal ance du e fro m proj ect fund i ng at c los ing, w hic h nev er occu rred

. Th e pa rties settled C itad el’ s cl ai m f orpre - const ructi on co sts and fees ; Ci ta d elnow s e e k s th e l o s tp r o fi t s i tw o u l d h a v e enj o y e d h a d i tc o mpl e t e d th e p r oj e c ta n d l e a s e d th e b u i l d i n gb a c kt o Wa sh

ingto n Re g i o na l

. Bo thpa r ti es a ppl y I l l i no i s l aw, a nd thus, so do we. 1N o. 11

- 3124 13

(
. . . c on t i nu e d) 1 confli ctofl aw i ss ue in a divers ity cas e, the federal court si m ply app li es the l aw ofthe s tat e i n w hich the fed er a l court si ts
. ” R
. E. Wood v. M i d- V al l ey Inc. , 94 2 F .2d 425 , 42 6 (7th C ir . 19 9 1 ). A “pre l i m i narywri ti ng tha t refl ects a tenta ti ve agr eem en t c on tin ge n t u p on th e s u c c es sfu l co m p let ion of n eg ot iati ons that ar e on going, does notam ount t o a co ntra ct that bi nd s the par ti es. ” O cea n A t l
. D e v. C o rp. v. A uro ra C hristia n S ch s., Inc., 322 F.3d 983 , 995-96 (7th C ir. 20 02 ) (Il li noi s l aw)
. Al th o ug h Ci ta deli s co r r ec t th atthe A uthor i zati on does notexpre ss ly state that the par ti es’ agr eem ent was subj ect to a m or e defi ni ti ve doc u m en t, m agi c wo r ds a r e n o tr e qu i r e d. “ [ T] he p a r t i e s n e e d n ot re ci te a for m ula to dem on st ra te that a defi ni ti ve agr eem ent l i es i n the future. W or ds expres si ng co n tin ge ncy ordepend ence on a subse quent eve nt o r agr eed- on el em ent wil ldo. ” PFT R ob e rs on , Inc . v. V o lvo Truck s N .A ., Inc. , 420 F.3d 72 8, 73 2 (7 th C ir. 20 05 ) ( Il l i n ois law ); see al s o Oce an Atl., 3 22 F. 3d at 999 ( sta ti ng tha t the abs ence ofa “subj ect to” clau se does not “car ryta l i sm ani c si gnifi can ce”). As we h a v e s a i d, “ [ i ] fthe p a r t i e s ’ wr i tt e n wo r ds do not show a cl eari ntent be b ound, then they will n ot be hel d to a pre l i m i naryag re em ent. ” O ce an A tl
. , 322 F .3d at 99 6 (q u ot at ion s o m itt ed ); see id. at 99 7 & 1 00 2 (hol di ng th a tth e o ffe r l e t t e r a c c e p t e d b y th e d e fe n d a n ts e t ti ng for th “s om e of th e p ar am et er s” for th e s ale

— perhaps e ven th e mo s ti mpo r t a n tt e r ms

— was no t bindi ngwher e th e14 N o. 11

- 3124 par ti es s tructur ed ea ch of th e tr an sa ct i o ns i n s ucha w ay that prepar ati on a nd exec uti on o fa m or e co m preh en siv e c on tr ac t w as a p re re q u isit e t o th e d ea l). “Illin ois per m i ts pa r ti es t o . . . r ea ch [ ] ag r ee m en t i n s ta g es wi th o ut ta kin g th e risk th at c ou rt s w ill en for c e a p ar t i a l b a rg ain th a to n e si de o r th e o th e r w o u l d h a v e r ej e c t e d a s i n c o mple te. ” PFT R ob e rs on , 420 F. 3d at 731. “[ T]he om iss i on ofcr uci alte rm s i s powerful evi dence thatno contr act w as i ntended.” SeeHaslund v. Sim on P rop. Grp., Inc. , 37 8 F.3d 653 , 655 (7th C ir. 2004) (I ll inois l aw ). W e a cknowle dge thatj us t be cause “a f or m alwri tte n do cumenti s anti ci pat ed do es no t pr ec l ude e nf o r ce m en t ofa speci fi c pre l i m i narypro m i se. ” D a w son v. G en. M o t o rs Corp
. , 97 7 F
. 2d 369, 374 ( 7th Ci r. 1 992). “The f act that par ti es c o nt empl at e th ata f o r m ala g r ee m en t wi l le ven tual l y b e e xecuted does not necess ar i l y r en d er p ri orag re em ents m er e neg oti ati ons, wh ere . . . the ult i m ate co ntra ct wi l lb e s ubs ta nt i al l y b as ed upo n the s ame t er m s as the previ ous do c u m ent. ” Q ua k e C o nstr., Inc. v. A m . Airlin es, Inc. , 565 N
. E
. 2d 990, 993 (I ll

. 1990) (qu otations om itted ). “Unde r I l l i no i s l aw, c o ur ts f o cus o n the p ar ti es ’ i nt en ti ons to deter m i ne wh etheran e nfo rce abl e co ntra ct c om es i nto bei ng duri ng the co urse o fnego ti ati ons, o r w hether som e type o ff or m al i zati on ofthe agr eem ent i s r equi re d be f o r e i t be co m es b i ndi ng . ” A/ S Apothe ke r ne s La b orat or i um fo r Sp ecia lpra epa rater v. I.M .C
. C hem
. G rp. , I n c., 87 3 F
. 2d 1 5 5 , 1 5 7( 7 th Ci r . 1 9 8 9 )
. We c o ns i de r, a mon go the r thi ngs, t h e com ple xi ty ofthe agr eem ent, the am ount o f m oneyi nvol ved, wh etherthe agr eem ent r equi re s a f o r m alwri tingf o r ful le xpr es si on o fi ts t er m s, a ndN o. 11

- 3124 15

N ei the r par t y a ddre s s es I l l i noi s ’ par ol ev id en c e ru l e and 2 b oth rely on e x trinsic ev id en ce in su p p or t of their ar g u m en ts. SeeC FC In v ., L L C v. M cLea n , 9 0 0 N. E. 2 d 7 1 6 , 7 2 2

- 2 3 ( I l l

. App
. C t. 20 08 ) (exp lain ing the ru le). W e d o n ot n eed to d elv e into the i m pl i c at i ons ofthe par ol e vi denc e ru l e he re be c ause eve n c ons i der i ng the e xt ri ns i c e vi denc e, Ci t ade l c ann ots how thatthe parti es ent ered i nto a b ind ing agreem ent f or com pletion of the p ro ject. w hetherthe nego ti ati ons i nd ica te thata f or m alwri tte n d oc u m en t is co n te m p lat ed

. SeeQ uak e C onst. , 565 N
. E.2 d at 994. I m port an tl y, the i ntent to be b ound is “m eas ured ob j ec tiv ely , by t h e p ar tie s’ w or d s a n d co n d u c t,” n otth eir s t a t e d s ubj e c t i v e i nt e nt a s t o the mea ning o f the ag re em ent. B lo ckv. M agu ra , 9 4 9 N. E. 2 d 1 2 6 1 , 1 2 6 7n . 2 ( I l l

. App
. C t. 2011 ); s eeals o E m p ro M fg

. C o. v. B all- C o M

fg. , Inc. , 87 0 F.2d 423 , 425 (7th C ir. 1989) (I ll inois l aw ). 2 P ar ties i n I l l i noi s ca n re ach ag re em ent in phases

— an d here , Ci tadeland W ashi ngto n Regi onalente red i nto a co nt r ac t o nl y a s to pr e- co ns truct i o n de ve l o p m ent
. The A uthor i zati on s et th e stag e forfurthernego ti ati ons on l eas e t erm s n ecessar y forco m ple ti on o fthe l eas e-back ar ra ngem ent; the parti es’ l ack ofag re em en t o n thos e term s con stitut ed a fa ilure of negotiation, not p erform ance. The ev i den ce in the re cor d si m plydoes not supp or t a fi nd i ng tha t W ashi ngto n Regi onal i ntended to be b o und t o c o m pl et e th e pr oj ec t wi thCi ta del be fo r e th e m at er i alt er m s o fthe l ea ses h ad be enha m m er ed o uta nd th e leas es e x ec u te d

. SeeAbbott Labs. v. Alpha Th erapeutic Corp
. , 1 6 4 F
. 3 d 3 8 5 , 3 8 8 ( 7 th Ci r . 1 9 9 9 ) ( I l l i n o i s l a w) ( fi ndi ngtha t ag r ee m en t o n g en er alt er m s r equi r i ng16 N o. 11

- 3124 fu t u r e n e g o t i a t i o n t o h a mme r o u tmo r e s p e c i fi c t e r ms d id n ot con stitut e a bind ing con tract). A co nt r ac t r equi r es mutua la ss en t ( det er m i ne d b y the p ar itie s’ o bj ec tiv e c on d u c t) a s t o a ll m at er ial te rm s. See id. at 38 7; s e eal s o Nat’ l Pr od. Worke rs U ni on Ins. Tr us tv. Cign a Corp. , 665 F.3d 89 7, 90 1 (7 th C ir. 20 11 ) (Ill in ois l aw)
. I nde fi ni te ne ss o f a m at er i al te r m r en ders a co ntr ac t u n en for c ea b le w h en th e c ou rtca n n otrea s o n a b ly supp l y the m i ssin g t er m thr ough co ntra cti on inter preta
tion, for ex am p le, by referencing an agreed up on form u la. Se eATA Ai r l i ne s , Inc . v. Fe d. Exp. Corp. , 66 5 F.3 d 88 2, 88 6-8 7 (7 th C ir. 20 11 ), pe t
. ce rt. filed8 0 U
. S
. L
. W. 3 6 6 9 (U .S. M ay 22 , 201 2) (N o. 11 -14 16 ); s e eal s o Hasl und, 378 F. 3d at 6 54. “A contr act m ay be e nfo rce d even thou gh s om e co ntra ct t er m s [ ar e] m i ssing o r l eft t o be agr eed upon, but i fes senti alte rm s a re so un c er tain that ther e i s no bas i s fordeci ding w h et h er the agr eem ent has been kept orbr oke n, ther e is no contr act. ” M il ex Prods. , Inc. v. A lra Lab., Inc. , 6 03 N
. E
. 2d 1 226, 12 33 (I ll

. A p p . Ct
. 1992). To ent eri nto a v alid lease und erI l l i noi s l aw , part i es m us t ag r ee ( ata min i m um ) to th e spa ce , t er m , r en t am ou n t, an d tim e a n d m an n er of p ay m en t. See M i l l e nni um Park Joi ntVe nt ure, LL C v. Houl i han , 94 8 N
. E.2 d 1, 19 (I ll

. 2010). Cita del ar gues that the par ti es agr eed o n the ess enti al ter m s thro ugh the Prel i m i naryLeasing Ter m s S heet. Both parti es, howe ve r, r eadi l y a cknowle dge thatthe l eas e sh ee tp r o v i d e d o n l y e s t i ma t e s . F o r e x a mpl e , th e b u i l d i ng l eas e r ate s were base d on an e sti m ate d constr ucti on cos t that the par ti es assu m ed w oul d fluctuate depen di ng, a m o ngo th erthi ng s, o n the bu il di ngl ay o utN o. 11

- 3124 17 chose n by W ashi ngto n Region al

. Thus, the P relim ina ry T er m s S heet w as exactly that: pre l i m i nary . I t e xpr es sly st at es tha t i t i s su bj ec t to c ha ng e f o l l o wi ngr ev i ew o fthe fi nalproj ect desi gn al ong w i th t h e fi nalco st est i m ate
. Cita del ar gu es this st ate m ent m eant subj ect to change f o r fi na ncing co nt i ng en ci es , b utno th i ngl i m i ts the l an g u a g e t o fi n a n c i n gc o n t i n g e n c i e s . In s t e a d , th e t e r ms sh ee t s ta te s th at it is su bj ec t t o “ c h an gin g m ar ke t c on d iti ons am ong ot he rcons i de r at i ons . ” (em p ha sis add ed ). “T he pa rties dec ide for them selves w he th er prelim inary nego ti ati ons w i l l bi nd them , and they do so th ro ugh thei r w or ds. ” A bbo tt La bs. , 16 4 F
. 3d at 388. Cita del ar gues th at through the te rm s s heet and subsequent negot i ati ons, W ashi ngto n Regi onalag re ed to a f or m ula f orcal cul ating r entalr ate s which g ave W as hi ngto n R eg ion al flex ibilit y in ch oo sin g t h e b u ild in g it want ed. The f o r m ul a, howev er, i s no t se t f o r thi n a ny do cumente xc ha ng ed be twe enthe pa r ti es . As the dist ri ct c ourtst ate d, i fth e parti es’ ag re em ent c enter ed ar ound thi s for m ula, i ts om i ssi on fro m the com prehensi ve p roposal, te rm s s heet, and any othe r w ri tte n do cument, i nc l udi n g c o r r es po nde nc e be twe en t he p ar tie s, is gla rin g. See 78 4 F . Su p p . 2d 94 9, 96 2 (N .D . I ll. 2011 )
. T h e fa cts tak en i n f avo r ofCi tadelm ay re aso nabl y s up porta fi nd i ng tha t W ashi ngto n Regi onal w as aw ar e o f t h e f o r m u la (or atlea st th e re lat ion sh ip between co sts and l eas e r ate s) , but aw ar eness does not equa te wi thagre ement
. No e vi den ce s uppo r ts a fi ndi ng th a tWa s h i n g t o n R e g i o n a la g r e e d t o b e b o u n d b y a ny r e nt a lr a t e ( no ma t t e r h o w h i g h) the f o r mul a g e ne r a t e d. T h e m ajor in p u t in to C ita d e l ’ s fo rm u la

— const ructi on18 N o. 11

- 3124

cos ts

— wa s c o n s t a n t l y fl u c t u a t i n g, d e p e n d e n to n n u mer ous v ar i abl es ( som e o fwh i ch w er e be yond the contr ol ofei therparty) , and n ot constr ai ned by a ny defi ned b ou n d s. Cf. So nne nb l i ck

- Gold m an Corp
. v. M urphy, 420 F
. 2d 11 69 , 1 17 3 ( 7th Ci r . 1 97 0) ( fi nd in gb i ndi ng contr act eve n though the a m ount o fr ese rv es w as l eft t o th e d isc re tio n of th e l e n d er w h er e t h e c on tr ac t e x p re ss ly r e qu i r e d a “rea son a ble reserve” ). The i ni ti ales ti m at ed proj ect cos t o f$5 m i l l i on was re vi sed to $6

. 2 m i l l i on be f or e W ashi ngto n Re gional si g n e d th e Au th o r i z a t i o n t o P r o c e e d

. Atth i s p o i n t, t he ev i den ce s ho ws tha t th e par ti es a nt i ci pated e nt er i ng su bs eque nt l ea se s f o r the c o ns truct i o n ph as e an d W as hi ng to n Re g i o na lwas no th i ngless tha n o pti m i st i c ab o ut the pa r t i e s ’ l o ng - t e r m r e l a t i o ns hi p. As W a s hing t on Regi onal ’ s s peci fi cati ons and C i tadel ’s cos t e sti m ate s ch an ged , thou gh, so did W ash ington Region al’s d esire to use Ci tadelas the proj ect devel oper . C ita del r evi sed th e e s t i m a te u p w ar d to $8 .5 m illion, th en to $1 0.8 m i l l i on, and fi nal l y b ack dow n to $7. 1/ $8. 5 m i l l i on du ring t he par ti es’ nego ti ati ons. Giv en the unsett l ed m ate ri alte rm s o fthe parti es’ ag re em ent, w e agr ee w i th the di str ict court that W ashi ngto n Regi onalwas not “ass enti ng to wh ate vero utput the form u la gener ate d w hen the keyi npu t, to talproj ect cos t, was so o b vio u sly i n fl ux.” 78 4 F
. S up p. 2d at96 2. Thi s i s fur th ere vi den t fr o m the pa r ti es ’ c o nt i nui ng nego ti ati ons. W hen Cit adel pre sente d the $1 0. 8 m il l i on co ste st i m at e wi thc o r r es po ndi ng l y hi g he r b uil d i ng re n ta l rat es , W as h in gt on R eg ion al re sp on d ed : “ W ow , th isN o. 11

- 3124 19 i s a bi g di ffer ence. W e need to disc uss. ” In re sponse to Cita del ’ s pro posed r entalr ate o f$3 0 persquar e foo t, W ashi ngto n Re gio n al stat ed that the l eas e r ate had to be f ai r m ar ketvalue and thus, r ed u c ed by about 25 perce nt. A fte r W as h in gt on R eg ion al in for m ed C ita d el th at it wa s cons i de r i ngthe c o s to ft e r mi na t i ngthe r e l a t i o ns hi p, Cita del pro posed r ate s that were m or e a l i gned w i th f a i r ma r k e tv a l ue . Was hing t o n Re g i o na ldi d n o ta c c e pt C ita d el’s p ro p os al. To b e su r e, Ci ta del ’ s pr o po se d t er m s m ay ha ve co nsti tuted a defini te offer . A s C ita d elexpl ai ns, W ashi ngton Regi onalused tho se ter m s t o com p ar e the co st of dev el o pi ng the medi ca lo ffi ce b ui l di ngi nt erna l l y v er su s w i th Cita del

. W hat Cita del f ai l s to re al i ze, though, is that W ashi ngto n Regi onal ’ s use o fCi tadel ’ s fi gure s doe s not m ean that W ash ington Region a l a cce p ted Citad el’ s offer . Quit e the o pp osi te, W ashi ngto n Regi onalr ej ecte d that offerafterco m pari ng the co sts
. Cita del ’ s co ntenti on that the p ar ties i ntended to enter i nto a co m p lex m ult i

- m i l l i on dol l arco nstr ucti on proj ect and l ong-term l eas e-backar ra ngem ent without fi rs t si gni ng l eas es w i th se t pr i ce t er m s a nd i nstea d, base d on a fo r mul a tha twa s s ubj e c tt o a my r i a d o fc o nt i ng e nc i es and not s et f or th i n th e p ar ti es’ wri tte n exchanges , sim p ly d efie s log ic. Se ePFT Robe rs on , 4 20 F. 3d at 730 (sta tingtha t o ne o fthe pa r ti es “ want ed a co m pl et e an d f or m al ar ra ngem ent bef or e bei ng bound,” and that “[ s] uc h ca ut i o n i s to b e ex pec te d i n a mul ti

- m i l l i o ndol l ardealth at w oul d l astf orm any y ear s. ”)
. Ci tadel reli es on o urde ci si o n in D awso n , 9 7 7F
. 2 d a t3 74 , to20 N o. 11

- 3124

su ppo r t i ts po si ti o n b uttha t ca se i s r ea di l y di st i nguish

ab l e. I n Daws on , f ra nchis or Genera l M oto rs l ed fra nchis ee Daw son to belie ve that i t would notr ai se re nt abov e a cer tain set am ount and Daw son re l i ed o n th i s “ ass urance. ” Id. a t3 7 1
. We he l d tha twh e n “ [ p]l aced i n the contex t of the pri ordeal i ngs a nd di scussi ons betw een” the par ti es, wh etherGM o ffer ed t o c ap l eas e ra te s w as am b igu ou s. Id. at 373. W e a lso expl ai ned that “one party ’ s a cquie scence i n the othe r’ s r el i ance on the pre l i m i naryag re em ent i s a f acto r that supp or ts enf or cem ent. ” Id. at374. Unl i k e i n D awso n , Ci tadeland W ashi ngto n Regional did nothave a preexi sting r el ati onshi p and the part i es w er e in const ant neg oti ati ons ove r bui l ding re ntalr ate s. Ci ta delha d no t y etb egun the c o ns truct i o n ph as e o fthe p roj ec t w h en W as h in gt on R eg ion al t er m in at ed th eir relation sh i p. W e ar e th er efo r e no t pr es en te d wi tha s i tu
at i o n whe r e Ci ta delpr o po se d r en tal rat es a nd W as hi ngto n Regio n al a cquie sced i n Cit adel ’ s r el i ance o n th o se r at es . F ur th er, the l ease r at e ca p i n D awso n was a fi xed m echanica lfi gure , wh er eas Ci tadel ’ s purpor ted f or m ula r el i ed on co st ofco nstr ucti on that was sub j ect to numer o us fl uctua ting va r i ab l es . At no po i ntdi d W as hington R egional agree to pa y w ha tever figures w ere gener ate d fr om thi s inc onspi cuous f or m ula

. In f act, W ash in gto n Regi onalo bj ecte d w hen the est i m ate d re ntalr ate s co nti nued to r i se si gni fi cantl y. The A uthor i zati on t o Pro ceed an d the part i es’ subse

quent deal i ngs e vi dence W ashi ngto n M u tu al ’ s intent to us e Ci ta delt o c o ns tructthe b uildi ngo nl y a fte r the par ti es a g reed on r en ta lr at es a nd e xe cut ed g r o und a ndN o. 11

- 3124 21 sp ac e le as es . See, e.g ., Winfo rge, Inc., 2012 W L 3064726, at * 11 ( Vir gi ni a l aw ) ( evi dence thatpart i es contin ued to nego ti ate sco pe o fwork aftersi gni ng pre l i m i naryag re em en t s u p p or te d find in g t h at n o c on tr ac t e x ist ed ). A lthough the parti es nego ti ate d l eas e ter m s, thos e n ego ti atio n s p r ov ed u n fru itfu l. It is n otou r fu n c tio n to st ep in as a nego ti ating party and fi l l i n m ate ri al te rm s t hat th e p ar tie s c ou ld n otag re e o n . Se eHas l und, 37 8 F.3 d at 655 ( “[ I ] fthe choi ce o fpri ce c ould be del ega ted to a cour t i t would be the cou rt a n d not the par ti es that w as th e c o n t r a c t m ak er .”); A T A A irlines , 66 5 F
. 3d at 886- 87 ( “Courts i nter pret and e nfo rce co ntra cts; theydon’ t m ake c ontr acts
. ”)
. Ci tadel ’ s br each ofco ntra ct c l ai m f orl ost p ro fits th er efo re fails

.

B. Breach ofD u ty t o N egotiate i n G oo d F aith (C ou n t III) Cita del al l ege d i n Count III thatW ashi ngto n Regi onal bre ached the coven an t ofgo od f ai th and f ai r deal i ng by n otn eg ot iat in g t h e u ltim a t e l ea se s fo r th e p roj ec t in goo d fa i th. W ashi ngto n Regi on alm ove d to dism i ss C ou n t III b e c a u s e t h e c ov en an t o f goo d fait h an d fair deal i ng i s not an i nd ependent cause of acti on un d er Illin ois law se p ar at e fro m br ea c h of co n tr ac t. S e eA PS Sports Co ll ec ti bles, Inc. v. Sports Tim e, Inc. , 29 9 F. 3d 624, 62 8 ( 7th Ci r. 20 02)
. The di str i ct c ourt, however, co nstr ued the c om p lain t liber al l y t o i ncl ud e a cl ai m f orthe bre ach ofduty t o nego ti ate , wh i ch I l l i nois does re cogni ze as an ind ep en d en t c au se of ac tio n . See A /S A p o thek ernes Lab orat or i um , 87 3 F
. 2d at 158 & 15 9 n. 2. The di str i ct22 N o. 11

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cour t nev er thel ess f ound that C ita del f ai l ed to st ate a c laim under Rul e 1 2( b) ( 6) bec ause Cita del co uld not poi nt to any l anguage i n the A uthor i zati on that l i m i ted the par ti es’ behav i orwh i l e neg oti ating the l eas es. W e r evi ew di sm issal s under Rule 12(b) ( 6) de nov o. S e e Sa nta na v. C o o kC nty . B d. o f R eview , 6 7 9 F
. 3 d 6 1 4 ( 7th Ci r . 2 01 2)
. W e construe th e amende d c o m pl ainti n the ligh t m os t fa vo ra b le t o C ita d el, ac c ep t C ita d el’s w ellple aded fa cts as tr ue, and draw al lr eas onabl e infe re nces inC ita d el’s fav or . See Ash crof t v. Iq b al , 55 6 U.S
. 66 2, 67 8 ( 2009 )
. The co m pla i nt m ust co ntai n en ou gh f acts to st ate a cla im for re lief th at is p lau sib le on its fac e. Se eid. In d ec id in g a m ot ion to d ism iss for failu re to st at e a c l aim w e m ay consi der docum ents at tached t o orr efer enced inth e p lea d in g if th ey are ce n t r a l t o t h e c laim

. See B row nm a rk F ilm s, LL Cv. C o m edy P a rtners , 68 2 F
. 3d 687, 690 (7th Cir. 2012). A n agree m ent t o nego ti ate i n go od f ai th i s a co ntra ct. Se eVe nt ureAs s oc . Co rp. v. Ze ni t h Data Sys
. Corp. , 96 F. 3d 275, 27 8 ( 7th Ci r. 19 96) ( “[ A ] gr eem ents to nego ti ate to war d the f o r m at i o n o fa c o nt r ac t ar e th emse l ve s en for c ea b le a s c on tr ac t s i ft h e p ar tie s in te n d ed to be lega lly bo und.”)

. Thi s duty pr ev en ts a pa r ty“ fr o m r en o unc i ng the deal, aba nd oni ng the negot iatio ns o r i nsi sting o n c o nd i t i o ns tha tdo n o tc o nfo r m t o the p r e l i mi na r y ag re em ent. ” M ilex P rod s. , 60 3 N
. E.2 d at 1 234. Fo r exam ple , “a partym igh t bre ach i ts obl i gat i on t o bar gain i n go od f ai th byunrea sonab l y insi sting o n a c ondit i on o u ts i de of th e s c op e of th e pa rt ies ’ p re lim in ar y agr ee m en t, es p ec ially w here such insi ste nce i s a thi nl y d i sgui sed pre text f orN o. 11

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sc ot c h in g t h e d ea l be c au s e o fan u n fav or ab le c h an ge in m ar ketco nd i ti ons. ” Id. U n like th e d u ty of go od fait h i m p os ed on p ar tie s in contr act perf or m ance, ther e is n o i nherentduty o fgo od f ai th with re spect to contr act f or m ati on. W h ether a party has a gr eed to nego tiat e in go od f ai th and the sco pe of th at d u t y are det erm ined by the term s or fram ew ork es ta b lish ed in t h e p ar tie s’ p re lim in ar y a gr ee m en t. Id. ; see a lso A /S A po thek ernes , 8 73 F
. 2d at 15 9 ( st at i ngtha t i n the abse nce o fany agr eed upon te rm s o r eve n a g en eral fra m ew or k withi n w hi ch to co nd uct the neg oti at ions, p a r t i e s a r e fr e e t o i ns i s to n o rr ej e c ta n y p r o p o s e d t e r ms th atthe y wi sh )
. La ng ua g e i n the relevantdo cument mu s ti n d i c a t e th a tg o o d f a i th n e g o t i a t i o n s w e r e c o n t e mp lat ed , see Feldm a n v . A llegh eny Int’l, Inc., 85 0 F
. 2d 1217, 1223 ( 7th Cir. 1 98 8); we shoul d not r ead i nto the a gr eem ent t erm s that do not exi st, see A /S A po thek ernes , 87 3 F. 2d at 159 n. 2. A d u ty m ay be ba se d o n ex p licitlan gu ag e, see V entu re A ssoc s. , 9 6 F .3 d at27 7, an d lan gu ag e t h at is les s s o, see M ilex , 60 3 N
. E.2 d a t 1233 ( the a gr eem ent s tat ed that the defendant w oul d “have the e xcl usi ve ri ght t o m anufa ctu r e [a] prod uc t for [plaintiff ] ( at a negotiate d pri ce ) .
. . ” (em p h as is a d d ed )); see also A /S A po thek ernes , 87 3 F
. 2d at 15 6 , 1 5 8 ( fi nd i nga du t ywh e r e the p a r t i e s s i g ne d a l ett ero fi ntent set ti ng fo rt h som e t er m s a nd ag re ei ng to nego ti ate excl usi vel y fora peri od ofti m e t o ham m er ou tthe r e mai ningt e r ms a nd c o ns ummat e a n a g r eem ent)
. The A uthor i zati on co uld h av e been s tr uctured t o re quir e g oo d fa i th neg oti ati ons or a n est abl i shed fra m e-24 N o. 11

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wo r kf o r the n e g o t i a t i o n pr o c e s s , b uti tdi d n o t
. Ins tea d, i te x p r e s s l y c o n t e mp l a t e d th a tth e p a r t i e s ma y n o tc o mp let e t h e d ea l an d p r o v i d e d C ita d el w ith a re m ed y if W as h in gt on R eg ion al fa iled to ex ec u t e t h e le as es . Th is l anguage di d n ot bi nd W ashi ngto n Regi onalto go od f ai th neg oti ati ons; wh at i t di d w as provi de W ashi ngto n Re gio n al with an o ut. W ashi ngto n Regi onalwas fre e t o en d the negotia ti o ns whenthe de alb ec ame di sa dva ntag eous as l ong as i t pai d C i tadelthe ar chi tectural and engi neer i ng fees i ncurr ed ( and p os sibl y s urr endered th e $ 60 ,00 0 “ go od fait h d ep os it” ). C f. M i lex, 603 N
. E.2 d at 1233 ( fi nd i ng a va lid contra ct where evi dence showed that the par ti es i ntended to contr act in t h e abse nce o f a settled price). “In a bu s in e s s tran sact ion both sides p resu m ably try to getthe besto fthe deal

. ” Fe l dm an , 8 50 F. 2d at1 22 3. In the abse nce o fco ntra ct t er m s l i m i ti ng the abi l i ty to act w i th sel f

- i nter es t, a par ty i s no t pr ohibi ted fro m bar gaini ng to its o w n ec on om ic a d va n ta ge . See M ilex P rod s. , 60 3 N
. E.2 d at 123 4-35. T he pa rties here ne gotiated and w ere o pti m i st i c th atthe y c o ul d r ea cha n a g re ement, b utW as hi ng to n Re g i o na lne ve r pr o m i se d tha t th e ne g o ti at i o ns w ou l d u l tim at ely be su c c es sfu l. See id. I t neg oti ate d w i th Ci tadel, but w hen Citad el’ s pro posed r entalr ate s i ncre ase d s i gni fi cantl y at a ti m e w hen W ashi ngto n Regi onalwas no l onge r concerned w i th car ry i ng debt on i ts b al an ce s he et, W as hi ng to n Regi o na lc ho se t o b ac ko ut ofthe nego ti ati ons. N othi ng pro hibi ted W ashi ngto n R eg ion al fro m so ac tin g in its bu sin es s in te re st
.N o. 11

- 3124 25 I I I . C ONC L US I ON Forthe re aso ns st ate d, w e A F F I RM th e d istr ic t c ou rt’s j ud gm ent in f avo r of W as hi ngto n Regi onaland aga i nst Cita del o n Counts I Iand I I Io fi ts am ended com pla i nt.

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