Opinion ID: 205909
Heading Depth: 2
Heading Rank: 1

Heading: LF Repudiated the Parties’ Agreement

Text: On September 29, LF’s general counsel told Arlington’s investment banker that LF was unwilling to “fund any more money under the DIP.” And on October 4, outside counsel for LF told counsel for Arlington’s creditor committee that LF was “not willing to proceed further with the DIP loan; in other words, we will make no further loans to the Debtors. . . . We think the Debtor should find a new DIP lender to pay out our loan and fund the options that expire at the end of this month.” We conclude that in making the statement it did on September 29 (a statement then verified and corroborated by the October 4 email), LF committed an anticipatory breach of the parties’ lending agreement. These stateNo. 09-3560 15 ments demonstrated LF’s intent not to perform any more of its lending obligations under the Interim Order. Under Illinois law, a party commits an anticipatory repudiation when it manifests a clear, unequivocal intent not to perform under the contract when per- formance is due. In re Marriage of Olsen, 528 N.E.2d 684, 686 (Ill. 1988); Draper v. Frontier Ins. Co., 638 N.E.2d 1176, 1181 (Ill. App. 1994). The repudiation has to “render unattainable” the point of the contract. Olsen, 528 N.E.2d at 686. When one party has committed a repudiation, the other party can treat the contract as ended. Timmerman v. Grain Exch., L.L.C., 915 N.E.2d 113, 124 (Ill. App. 2009); Truman L. Flatt & Sons Co., Inc. v. Schupf, 649 N.E.2d 990, 994 (Ill. App. 1995). Whether an anticipatory repudiation has occurred is a question of fact. Id. As such, looming large in our determination are the factual findings and credibility determinations made by the bankruptcy court, findings that we review for clear error.5 Freeland, 540 F.3d at 729. The bankruptcy judge concluded that LF’s statements did amount to a repudiation, a finding that is more than plausible in light of the record here, and one we agree with. We believe the meaning of the September 29 and October 4 statements was clear: LF was not going to perform any more of its lending obligations under the Interim 5 The trial on LF’s motion involved five witnesses, three days of testimony, and over 100 exhibits, and generated 700 pages of trial transcript as well as 900 pages of deposition transcripts that the parties stipulated into evidence. 16 No. 09-3560 Order, and if Arlington wanted additional funds, it was going to have to look elsewhere. By stating that no further lending was forthcoming, LF had rendered the point of the parties’ agreement unattainable.6 LF argues that its statements were only referring to a lack of interest in making additional lending agreements with Arlington, not regarding intentions of honoring the agreement they already had. The bankruptcy court found testimony from LF’s general counsel to this effect not to be credible, and that the evidence as a whole instead “plainly showed LF’s desire to exit the Arlington scene entirely.” We reached the same conclusion after our review of the record. LF was not talking about some hypothetical future lending when making these statements. It was talking about whether it would perform any more lending under this DIP loan, and making clear it would not. The undisputed evidence was that Marks said LF did not want to lend any more money under “the DIP,” and the bankruptcy court, looking at the way the parties used that terminology, concluded that he was clearly talking about LF’s present funding obligations. And LF’s October 4 email further 6 The background against which the statements was made supports this conclusion. LF had only agreed to be a postpetition lender for Arlington because it wanted to preserve its ability to bid for Arlington’s assets in the bankruptcy sale. But by late September, LF had decided it was not going to be a buyer and was increasingly uncomfortable with its corresponding position as a DIP lender. As the bankruptcy court concluded, “LF had had enough of Arlington. It wanted out.” No. 09-3560 17 supports this conclusion—referring to “the DIP loan” and that Arlington should find a “new DIP lender” to pay out “our loan.” To be a repudiation, a statement need only be “sufficiently positive to be reasonably understood as meaning the breach will actually occur.” C.L. Maddox, Inc. v. Coalfield Servs., Inc., 51 F.3d 76, 81 (7th Cir. 1995) (quoting 2 E. Allan Farnsworth, Farnsworth on Contracts § 8.21, p. 475 (1990)). LF’s statements were more than sufficiently positive. Any reasonable person on the receiving end of LF’s September 29 and October 4 statements would take them to mean that LF did not intend to make any more DIP loans to Arlington. LF correctly points out that the September 29 and October 4 statements were not made directly to Arlington, but to its investment banker and Creditor Committee, respectively—both technically third parties. But Arlington’s investment banker was acting as an agent, and statements to an agent within the scope of the agent’s authority can qualify as statements to the principal. See, e.g., N. Assur. Co. of Am. v. Summers, 17 F.3d 956, 964 (7th Cir. 1994). And the Creditor Committee was obviously no stranger to the situation, and it is unrealistic for LF to argue that a statement to it would have no effect on the parties’ agreement. Cf. 2 E. Allan Farnsworth, Contracts § 8.21 p. 561 (3d ed. 2004) (statement cannot be made to a “mere stranger”). As the bankruptcy judge correctly observed, LF had to know that comments to the Creditor Committee would make their way to Arlington. And in any event, we conclude as the bankruptcy court did that the repudiation took place on September 29, as Marks’s statement alone clearly manifested LF’s intent not to perform. The October 4 18 No. 09-3560 email merely corroborates the September 29 statement and makes it even more clear that LF was walking away from the lending agreement.7