Court Opinion

ID: 855809
Source: CourtListenerOpinion
Date Created: 2013-03-21 14:26:47.828448+00
Date Added: 2024-06-11T09:02:12.315617
License: Public Domain

In the

United States Court of Appeals
               For the Seventh Circuit

No. 11-3176

L ARRY H ARMON, et al.,
                                                Plaintiffs-Appellants,
                                  v.

B EN G ORDON,
                                                 Defendant-Appellee.

             Appeal from the United States District Court
        for the Northern District of Illinois, Eastern Division.
             No. 10 CV 01823—Charles P. Kocoras, Judge.

    A RGUED F EBRUARY 15, 2013—D ECIDED M ARCH 21, 2013

 Before F LAUM, W OOD , and H AMILTON, Circuit Judges.
  F LAUM, Circuit Judge. In 2004, Larry Harmon entered
into an agreement on behalf of Larry Harmon &
Associates, P.A. (“LHA”), to provide Chicago Bulls
rookie Ben Gordon with financial and consulting ser-
vices. Although the contract stated that Harmon
would serve as Gordon’s financial and tax advisor for
the “duration of [his] playing career,” it outlined a com-
pensation arrangement only for the length of Gordon’s
rookie contract with the Bulls. In 2007, Gordon became
unsatisfied with Harmon’s services, based in part on
2                                           No. 11-3176

what he viewed to be a breach of a fiduciary duty
relating to a bad investment, and prematurely ter-
minated the parties’ financial and consulting services
agreement. Litigation ensued. Gordon first sued Harmon,
claiming Harmon had breached a promissory note be-
tween the parties and had breached his fiduciary duties.
In the course of that lawsuit, Harmon asserted counter-
claims against Gordon for breach of the financial
services and consulting agreement and tortious inter-
ference with prospective business advantage. The dis-
trict court dismissed Harmon’s tortious interference
claim under Rule 12(b)(6) and dismissed his breach of
contract claim under Rule 12(b)(1). Harmon then refiled
his breach of contract claim in Illinois state court and
also alleged malicious prosecution, abuse of process,
and tortious interference with prospective business
advantage claims. After Gordon removed the case
to federal court, the district court dismissed each of
Harmon’s tort claims and granted summary judgment
in Gordon’s favor on Harmon’s breach of contract
claim, concluding that the parties had intended their
agreement to last only for the length of Gordon’s
rookie contract. Harmon timely appealed the district
court’s summary judgment ruling and its dismissal of
his malicious prosecution and tortious interference
claims. For the reasons set forth below, we affirm.

                    I. Background
A. Factual Background
 In 2004, Gordon signed a three-year rookie contract
with the Chicago Bulls, which included an option for the
No. 11-3176                                                 3

Bulls to extend his contract for a fourth year. On May 17,
2004, Gordon entered into a financial services and con-
sulting agreement with Harmon 1 (the “Agreement”),
which stated that Harmon would provide his services
to Gordon for the “duration of [Gordon’s] playing ca-
reer.” Despite this language, the parties agreed to a
compensation arrangement that would last only
through the end of Gordon’s rookie contract. The Agree-
ment provided that in exchange for Harmon’s services,
Gordon would pay Harmon $4,000 per month during
his first season, $5,000 per month during his second
season, and $6,000 per month during his third and (po-
tential) fourth seasons. The Agreement also stated that
at the end of Gordon’s rookie contract, Harmon
would “evaluate the amount of work” performed on
Gordon’s behalf and provide Gordon “with a new en-
gagement letter at that time.”
  On May 5, 2006, Harmon emailed Gordon and
informed him that the Agreement’s monthly payments
would be replaced by a percentage-based fee equal to
1.5% of Gordon’s annual income beginning with Gordon’s
April 2006 invoice. Gordon paid monthly invoices pursu-
ant to the modified fee schedule from April 2006 to
June 2007. In August 2006, however, Gordon expressed
his concern to Harmon about the fee change during an

1
  “Harmon” refers to Larry Harmon and LHA collectively
as appellants. LHA, a California partnership that provides
accounting and financial services to its clients, is now known
as Harmon-Castillo, LLP. Larry Harmon is a California
resident and LHA’s President and CEO.
4                                             No. 11-3176

email discussion, and the debate over the fee change
continued into the fall of 2006 and the winter of 2006-07.
The exchange concluded with an April 10, 2007 email
sent to Gordon, in which Harmon stated, “[y]ou and
I have had many discussions about fees in your second
contract and have agreed to come up with a working
resolution when that time comes, based on the prior
history of your account, which I think is more than fair,
for the both of us.”
  During the course of the parties’ dealings in 2006,
Harmon brought a California real estate project to
Gordon’s attention. Gordon alleged that Harmon had
described the project as an investment opportunity in
a commercial real estate development and that he
believed he would obtain an ownership interest in the
project if he invested. Harmon asserted, however, that
Gordon was never promised ownership in the property.
In February 2007, Gordon transferred $1,000,000 to
Vitalis Partners (“Vitalis”), an entity affiliated with
Harmon, and the parties executed a promissory note.
The transaction was structured in the form of a loan to
Vitalis without an ownership interest attached, and the
promissory note provided that Vitalis would pay
Gordon monthly interest payments on the loan. Vitalis
failed to make such payments in March through June
of 2007.
  Dissatisfied with Harmon’s performance, Gordon
terminated Harmon’s services and discontinued his
monthly payments on July 1, 2007. His rookie con-
tract with the Chicago Bulls continued into 2008.
No. 11-3176                                              5

B. Procedural Background
  Gordon filed suit against Harmon, Vitalis, and one
other individual in September 2007 (the “Gordon law-
suit”), alleging that Vitalis breached the parties’ promis-
sory note by failing to make interest payments and
that Harmon breached his fiduciary duty to Gordon in
connection with the fee change and the real estate pro-
ject. In his answer, Harmon asserted counterclaims
against Gordon for breach of the Agreement and tortious
interference with prospective business advantage. The
district court dismissed the tortious interference coun-
terclaim for failure to state a claim under California
law, but denied Gordon’s motion to dismiss with
respect to the other counterclaim. Gordon then moved
for summary judgment on his breach of contract
claim, and Harmon moved for summary judgment on
Gordon’s breach of fiduciary duty claim. After deter-
mining that Harmon had breached the promissory note,
the district court entered judgment in Gordon’s favor
in the amount of $1,386,666.67. Finally, the district court
granted summary judgment for Harmon on Gordon’s
breach of fiduciary duty claim and dismissed for lack
of jurisdiction Harmon’s breach of contract claim
relating to Gordon’s repudiation of the Agreement
because Harmon did not plead an amount in controversy.
  On March 2, 2010, Harmon re-filed his breach of
contract and tortious interference claims in the Circuit
Court of Cook County under Illinois law (the “Harmon
lawsuit”). Gordon removed the case to the district court
on March 23, 2010. Harmon then filed an amended com-
6                                             No. 11-3176

plaint adding claims against Gordon for malicious pros-
ecution and abuse of process. The district court dis-
missed Harmon’s tort claims on January 27, 2011. With
respect to Harmon’s tortious interference claim, the
district court held that the claim was barred by the
prior dismissal of the same claim in the Gordon lawsuit.
Because Harmon based the tortious interference claim
in the Gordon lawsuit on California law and his re-filing
of the claim on Illinois law, the district court also held
that Harmon was judicially estopped from “adopt[ing]
two different postures in two cases arising out of the
same facts.” As to the malicious prosecution claim,
the district court held that Harmon did not plead
special damages as required under Illinois law.
  The parties subsequently filed cross motions for sum-
mary judgment on Harmon’s breach of contract claim
based on Gordon’s termination of the Agreement.
Harmon argued that the Agreement served as an en-
forceable contract for the duration of Gordon’s
playing career, whereas Gordon argued that the parties
had agreed on a valid contract only for the length of
his contract with the Bulls.
  In reaching its decision on the breach of contract
claim, the district court considered testimony Harmon
had given during a deposition in the Gordon lawsuit
relating to the Agreement’s duration. In relevant part,
Harmon testified:
    Q. How were you going to determine—at that point
       in time as of May 2004, how were you going to
       determine what Mr. Gordon would pay you
       after the fourth year?
No. 11-3176                                            7

   A. After sitting down and talking about it.
   Q. Would there be a new contract executed at that
      time?
   A. That’s correct.
   Q. Okay. So it was contemplated at the time of this
      contract that in four years—in three or four years,
      depending on whether his option was exercised,
      whether you and Mr. Gordon would execute
      another contract?
   A. Correct.
   [. . .]
   Q. Do you have any idea what that new contract
      would have said?
   A. What that new contract would have said?
   Q. Yeah.
   A. At that particular time?
   Q. Yeah.
   A. No.
   Q. Do you have any idea what the fee agreement
      would have been at that particular time?
   A. It says right here “amount of work we performed
      on your account”—“provide you with a new
      letter.”
   Q. That would be a negotiation between you and
      Mr. Gordon at that time, right?
8                                            No. 11-3176

    A. Correct.
    Q. It was contemplated at the time of May of 2004
       that this contract would be in force or effect for
       three or four years, and then you’d execute
       another contract with Mr. Gordon?
    A. That’s correct.
    Q. As you sit here today, there’s no way you could
       have predicted what that contract would have
       said?
    A. Correct.
    Q. In fact, there is no way you could have predicted
       if Mr. Gordon would have even signed another
       contract; is that correct?
    A. Never prediction of that.
    Q. Okay. So it would be all speculation to say that
       Mr. Gordon, after three or four years, would
       have signed another contract with you?
    A. You would think that most of the work you do,
       most of your clients are lifetime contracts, but
       you don’t know.
    Q. Did Mr. Gordon ever sign another written con-
       tract with you after this?
    A. Not a signed, but—the answer is no.
In opposition to Gordon’s motion for summary
judgment, Harmon submitted a supplemental affidavit
addressing the terms of the Agreement. In the affida-
vit, Harmon stated that he agreed to provide services
No. 11-3176                                             9

to Gordon for the entirety of his playing career and at
no time did Harmon or LHA consent to limiting the
Agreement’s duration. The district court rejected
Harmon’s affidavit, reasoning that “[a] party cannot
submit an affidavit whose statements contradict prior
deposition or sworn testimony.”
  In light of Harmon’s deposition testimony, the district
court concluded that there was no material issue of
fact that the parties had intended their contract to last
only for Gordon’s three or four seasons with the Bulls.
Accordingly, the district court entered summary judg-
ment in Gordon’s favor. In addressing damages, the
district court explained that Harmon’s calculation of
lost fees was based on a contract lasting for the dura-
tion of Gordon’s NBA career, and it therefore denied
Harmon’s motion for summary judgment in its entirety.

                     II. Discussion
   On appeal, Harmon argues that the district court erred
in concluding that the parties intended the Agreement
would last only for the length of Gordon’s rookie
contract with the Bulls. Harmon asserts that under the
terms of the Agreement, he is entitled to 1.5% of Gordon’s
salary for the remainder of Gordon’s career in the NBA.
If, however, the district court correctly interpreted the
terms of the Agreement, it is Harmon’s position that he
is entitled to damages for Gordon’s unpaid fees during
the remainder of Gordon’s rookie contract. Finally,
Harmon argues that the district court erred in dismissing
his tortious interference and malicious prosecution
10                                              No. 11-3176

claims. Upon review, we find Harmon’s arguments
unconvincing and affirm the district court’s rulings in
this case.

A. Breach of Contract Claim
  Harmon’s first set of arguments pertain to the district
court’s grant of summary judgment in Gordon’s favor
on Harmon’s breach of contract claim. Harmon contends
that the district court improperly considered extrinsic
evidence and misconstrued Harmon’s deposition testi-
mony when interpreting the terms of the Agreement.
He further argues that even if the district court’s inter-
pretation of the contract was correct, he was nonethe-
less entitled to damages for Gordon’s unpaid fees
between July 2007 and June 2008. We review the district
court’s grant of summary judgment de novo and draw
all reasonable inferences from the evidence in the light
most favorable to the nonmoving party. Raymond v.
Ameritech Corp., 442 F.3d 600, 606 (7th Cir. 2006).

  1.   There is no material issue of fact that the parties
       entered into only one contract intended to last for
       the duration of Gordon’s rookie contract.
  In construing a contract, a court’s primary objective is
to ascertain and give effect to the intention of the parties.
Thompson v. Gordon, 948 N.E.2d 39, 47 (Ill. 2011). The
contract must be construed as a whole; each provision
must be viewed in light of the other provisions in the
contract. Id. If the contract’s language is unambiguous,
No. 11-3176                                                11

it must be given its plain and ordinary meaning. Id. If,
however, the contract is “susceptible to more than one
meaning,” the court may consider extrinsic evidence to
determine the parties’ intent. Id.
  Under Illinois law, when a court decides that a con-
tract is ambiguous, its interpretation generally becomes
a question of fact for the jury. Cont’l Cas. Co. v. Nw. Nat’l.
Ins. Co., 427 F.3d 1038, 1041 (7th Cir. 2005). If, however,
“the extrinsic evidence bearing on the interpretation
is undisputed,” the construction of the ambiguous
contract is a question of law for the court. Id. (quoting
Baker v. America’s Mortg. Servicing, Inc., 58 F.3d 321, 326
(7th Cir. 1995)). Summary judgment is appropriate
when no reasonable jury could find for the plaintiff
even when all reasonable inferences are drawn from
the undisputed extrinsic evidence. Id.
  Harmon contends that the parties’ intent is clear from
the language of the Agreement and that the district court
should not have considered extrinsic evidence to deter-
mine the Agreement’s duration. Harmon points to the
language in the Agreement stating that LHA “will
provide detailed financial and tax consulting services
for the duration of [Gordon’s] playing career in the Na-
tional Basketball Association (“NBA”)” in arguing
for the Agreement’s lack of ambiguity. Despite this lan-
guage, however, the Agreement outlined a payment
structure only for the duration of Gordon’s three- or four-
year rookie contract. Moreover, the Agreement speci-
fied that “[a]fter [Gordon’s] rookie contract, [LHA] will
evaluate the amount of work that [it has] performed on
12                                            No. 11-3176

[his] account and provide [him] with a new engagement
letter at that time.”
  Because the Agreement lacks any provisions for com-
pensation beyond Gordon’s rookie contract, it does not
unambiguously bind the parties for longer than the
three or four years of that contract. We need not
determine whether the Agreement could ever be inter-
preted to impose that obligation on Gordon. From
Harmon’s perspective, the best that can be said of the
Agreement is that it is ambiguous as to lasting beyond
Gordon’s rookie contract. But even if we assume the
Agreement’s language is ambiguous, we agree with the
district court that the extrinsic evidence removes any
ambiguity as a matter of law.
  Harmon argues that if the parties’ intent is not clear
from the Agreement’s language, the question of
contractual ambiguity is a question for the jury and not
for the judge and the district court should not have
reached this issue at the summary judgment stage.
Under Illinois law, however, “whether a contract is am-
biguous is a question of law for the court.” Shields
Pork Plus, Inc. v. Swiss Valley Ag Serv., 767 N.E.2d 945,
949 (Ill. App. Ct. 2002). It is true that once contractual
ambiguity is established, the task of interpreting the
contract’s meaning generally becomes a question of fact
for the jury. Cont’l Cas., 427 F.3d at 1041. In this case,
however, the district court seemingly concluded that
the extrinsic evidence at issue was undisputed and that
the construction of the ambiguous contract was there-
fore a question of law for the court. We agree.
No. 11-3176                                                13

  The extrinsic evidence relevant to the interpretation
of the contract is Harmon’s sworn deposition testi-
mony from the Gordon lawsuit, which relates directly
to the Agreement’s duration. During his deposition,
Harmon testified that the parties intended to execute a
new agreement after Gordon’s rookie contract. He indi-
cated that at the time the parties executed the Agree-
ment, he could not predict what a new contract would
have said or even that Gordon would have entered into
a second contract. Instead, he explained that the parties
intended to engage in a negotiation about the terms of
a second contract at the appropriate time.
  In an apparent attempt to dispute this relevant
extrinsic evidence, Harmon submitted a supplemental
affidavit with his motion for summary judgment in the
district court. In the affidavit, Harmon stated, “I have
reviewed Gordon’s assertion that the Agreement would
only be in force for the first four years of Gordon’s NBA
career. This is incorrect. The Agreement specifically
provided that LHA was to be Gordon’s financial
and tax adviser for the entire duration of Gordon’s
NBA playing career.” Dkt. 69 at 2. However, Harmon’s
representation directly contradicts his earlier deposi-
tion testimony, which clearly indicated the parties’ intent
to negotiate a new contract following Gordon’s three
or four seasons with the Bulls, and “the law of this
circuit does not permit a party to create an issue of fact
by submitting an affidavit whose conclusions con-
tradict prior deposition or other sworn testimony.”
Buckner v. Sam’s Club, Inc., 75 F.3d 290, 292 (7th Cir. 1996).
Thus, assuming the Agreement’s ambiguity, the dis-
14                                           No. 11-3176

trict court appropriately considered the sworn deposi-
tion testimony in ascertaining the parties’ intent.
  Read together, Harmon’s testimony and the language
of the Agreement make clear that the parties intended
the Agreement to last only for the length of Gordon’s
rookie contract. The Agreement outlined the terms of
the parties’ relationship for only three or four years
and indicated that Harmon would provide Gordon with
a new engagement letter after the conclusion of Gordon’s
rookie contract. Harmon’s testimony is consistent with
this language. He explained that the Agreement would
be in effect for only three or four years and at the con-
clusion of those years, the parties would enter into a
new contract. It seems that Harmon indicated his willing-
ness to provide Gordon with services for the length of
Gordon’s career, but Harmon’s testimony clarifies that
the parties did not accede to such terms. Gordon termi-
nated Harmon’s services in July 2007 without having
negotiated or agreed upon any new contract for the
time period beginning after the completion of Harmon’s
contract with the Bulls.
  The basic premise of Harmon’s argument on appeal
is that there was no need for another negotiation
between the parties to extend their business relation-
ship because the April 2006 change in fee structure con-
stituted the new “agreement” on compensation that
would last for the duration of Gordon’s NBA career.
Harmon asserts that his deposition testimony rep-
resents the parties’ intent at the time they entered into
the Agreement in 2004, but that the subsequent change
No. 11-3176                                                   15

in the fee structure made a new agreement at the end
of Gordon’s rookie seasons unnecessary.
  Harmon cannot support this contention. There is no
evidence in the record that in April 2006, or at any time
thereafter, the parties agreed that the new percentage-
based fee schedule would last for the duration of
Gordon’s NBA career or even that it would extend
beyond the four seasons specified in the Agreement.2
In fact, there is direct evidence to the contrary. On
April 10, 2007, almost one year after the change in fee
structure, Harmon sent Gordon an email addressing,
in part, their ongoing debate about the fee change. In
the email, Harmon stated, “[y]ou and I have had many
discussions about fees in your second contract and
have agreed to come up with a working resolution
when that time comes, based on the prior history of
your account, which I think is more than fair, for the
both of us.” Dkt. 60, Ex. N at 1. This statement indicates
that even after the April 2006 change in the Agreement’s

2
  In granting summary judgment in Harmon’s favor on
Gordon’s breach of fiduciary duty claim in the Gordon
lawsuit, the district court concluded that Gordon’s payment
of fourteen invoices that calculated his fee as a percentage of
his income indicated his assent to the fee change. Gordon v.
Vitalis Partners, LLC, No. 07-CV-6807, 2010 WL 381119, at *3
(N.D. Ill. Jan. 27, 2010) (citing Forkin v. Cole, 548 N.E.2d 795,
807 (Ill. App. Ct. 1989)). The district court did not, however,
state that Gordon’s acquiescence resulted in a new contract or
that Gordon had agreed to pay Harmon 1.5% of his salary
for the duration of his NBA career.
16                                              No. 11-3176

fee structure, Harmon still anticipated negotiating a
second contract with Gordon following his fourth season
with the Bulls. The record is clear that the parties never
executed such a contract. Consequently, we agree with
the district court that the Agreement and undisputed
extrinsic evidence show that the parties entered into
one contract intended to last for the same length of
time as Gordon’s rookie contract with the Bulls.

  2. Harmon is not entitled to damages.
  Because the Bulls extended Gordon’s rookie contract
into a fourth year, the terms of the Agreement required
Gordon to pay Harmon for his financial and consulting
services through June 2008. However, Gordon terminated
Harmon’s services in July 2007. In Illinois, when a
party repudiates a contract, the other party to the
contract “is entitled to recover the value of the contract
to him at the time of its breach.” Rankin v. Hojka, 355
N.E.2d 768, 774 (Ill. App. Ct. 1976). But as the party
seeking to recover, the plaintiff must prove that he
suffered damage because of the breach and establish the
correct measure of damages. TAS Distrib. Co., Inc. v.
Cummins Engine Co., Inc., 491 F.3d 625, 631 (7th Cir. 2007);
Ollivier v. Alden, 634 N.E.2d 418, 422 (Ill. App. Ct. 1994).
  In his complaint, Harmon asserted a damages calcula-
tion of $1,254,782.08 on the basis that the parties had
entered into a contract to last for the duration of
Gordon’s career in the NBA. After determining the
parties did not intend for the Agreement to last beyond
the first four years of Gordon’s career, the district court
No. 11-3176                                               17

denied Harmon’s motion for summary judgment in its
entirety without awarding damages. On appeal, Harmon
contends he is entitled to a portion of his calculated
damages regardless of the Agreement’s duration.
   In the district court, Gordon’s motion for summary
judgment asserted: (1) the Agreement was limited to the
three or four years of his rookie contract; (2) Gordon
was entitled to terminate the relationship at any time;
and (3) Harmon did not sustain any compensable dam-
ages. Gordon’s motion sought summary judgment as
to the entire case. Taken together, those arguments were
clear enough and broad enough to require Harmon to
present a fallback theory of damages for the fourth
year of Gordon’s rookie contract in the event that the
district court rejected his much more ambitious
$1.2 million claim. It was not the district court’s responsi-
bility to formulate that fallback theory for Harmon. In
his response to Gordon’s summary judgment motion,
Harmon included only a brief, conclusory footnote in-
dicating that he would be entitled to damages even
under Gordon’s interpretation of the Agreement’s dura-
tion. But the footnote did not specify an amount of dam-
ages, did not cite any relevant evidence or authority,
and did not respond to Gordon’s argument that he was
entitled to terminate the contract at any time. We have
often said that a party can waive an argument by present-
ing it only in an undeveloped footnote, see, e.g., Parker
v. Franklin Cnty. Cmty. Sch. Corp., 667 F.3d 910, 924 (7th
Cir. 2012) (finding waiver); Long v. Teachers’ Ret. Sys. of
Illinois, 585 F.3d 344, 349 (7th Cir. 2009) (same), and we
therefore conclude that Harmon waived his argument
18                                           No. 11-3176

for damages for any premature termination of the Agree-
ment. The district court properly entered summary judg-
ment in Gordon’s favor on Harmon’s breach of con-
tract claim.

B. Tort Claims
  Harmon next argues that the district court erred in
dismissing his tortious interference with prospective
business advantage claim and his malicious prosecu-
tion claim. We address these dismissals in turn.

 1.   Harmon’s tortious interference claim is barred
      by res judicata.
  Harmon originally filed his tortious interference claim
in the Gordon lawsuit, alleging that Gordon made certain
false statements to third parties about Harmon’s work
that interfered with his ability to enter into business
relationships with prospective clients. In the Gordon
lawsuit, the parties did not dispute that California law
should apply to Harmon’s tortious interference claim,
and the district court accepted their agreement. After
assessing Harmon’s pleadings together with the
elements of a California tortious interference cause of
action, the district court dismissed the claim. The court
explained that Harmon had alleged interference with
future relationships rather than alleging interference
with future benefits from preexisting relationships,
which is a pleading requirement for a tortious inter-
ference claim under California law.
No. 11-3176                                            19

  Notwithstanding the court’s dismissal, Harmon
asserted the same tortious interference claim in the
present lawsuit, but this time argued at the motion-to-
dismiss stage that he had sufficiently alleged a violation
of Illinois law. The district court held that res judicata
precluded Harmon from reasserting his tortious inter-
ference claim and held that he was judicially estopped
from arguing that Illinois law applies to his claim.
We review a dismissal on res judicata grounds de novo,
Chi. Title Land Trust Co. v. Potash Corp., 664 F.3d 1075,
1079 (7th Cir. 2011), and review the district court’s ap-
plication of judicial estoppel for abuse of discretion,
Haschmann v. Time Warner Entm’t Co., 151 F.3d 591, 605
(7th Cir. 1998).
  A federal court sitting in diversity must apply the
res judicata principles of the state in which the court is
located. Allan Block Corp. v. Cnty. Materials Corp., 512
F.3d 912, 915 (7th Cir. 2008) (citing Semtek Int’l Inc. v.
Lockheed Martin Corp., 531 U.S. 497, 508 (2001)). For the
application of res judicata, Illinois law requires: (1) “a
final judgment on the merits rendered by a court of
competent jurisdiction,” (2) “an identity of cause of
action,” and (3) the same parties or their “privies” in
both cases. Hudson v. City of Chicago, 889 N.E.2d 210,
213 (Ill. 2008). Here, there is no question that Harmon’s
tortious interference claim involves the same parties as
the claim filed in the Gordon lawsuit. Thus, we need
only consider whether the district court’s dismissal of
the claim in the Gordon lawsuit amounted to a final judg-
ment on the merits and whether the tortious inter-
20                                              No. 11-3176

ference claim asserted under Illinois law in this case
presents the “same cause of action.”
  Harmon represents that the district court dismissed
his tortious interference claim in the Gordon lawsuit
under Federal Rule of Civil Procedure 12(b)(1) for lack
of jurisdiction when it entered summary judgment on
Gordon’s contract and fiduciary duty claims. By the time
the district court entered summary judgment in the
Gordon lawsuit, however, it had already dismissed
Harmon’s tortious interference claim on the pleadings. In
a July 31, 2008 decision, the district court explained
that Harmon’s allegations were “insufficient to state a
cognizable claim of tortious interference” and granted
Gordon’s motion to dismiss. Gordon v. Vitalis Partners,
LLC, No. 07-CV-6807, 2008 WL 2961258, at *4 (N.D. Ill.
July 31, 2008). Under Illinois law, a “dismissal of a com-
plaint for failure to state a claim is an adjudication on
the merits.” River Park, Inc. v. City of Highland Park,
703 N.E.2d 883, 889 (Ill. 1998).
   Contrary to Harmon’s assertion, it is of no con-
sequence that the district court did not indicate whether
it was dismissing the tortious interference claim with
or without prejudice. Unless otherwise stated, dis-
missals pursuant to Rule 12(b)(6) are deemed to be with
prejudice. Paganis v. Blonstein, 3 F.3d 1067, 1071 (7th Cir.
1993). The cases Harmon cites addressing dismissals
under Rule 12(b)(1) are inapplicable. Res judicata acts
to bar Harmon’s tortious interference claim as long as
it is the same cause of action he asserted in the Gordon
lawsuit.
No. 11-3176                                              21

  Illinois employs a transactional test to determine
whether two claims are the same for res judicata pur-
poses. Chi. Title, 664 F.3d at 1079-80. Under this test,
“separate claims will be considered the same cause of
action . . . if they arise from a single group of opera-
tive facts, regardless of whether they assert different
theories of relief.” Id. (internal quotation marks omitted).
Accordingly, Illinois courts have held that a plaintiff
is barred from filing a state law claim arising from the
same operative facts as a federal claim that has already
been adjudicated on the merits. River Park, 703 N.E.2d
at 894. In line with this principle, other courts have
held that a plaintiff cannot obtain a judgment, favorable
or unfavorable, on a claim under one state’s law and
then later file the same claim under another state’s
law when the two claims arise from the same operative
facts. See, e.g., Davis Wright & Jones v. Nat’l Union Fire
Ins. Co., 709 F. Supp. 196, 200 (W.D. Wash. 1989), aff’d
897 F.2d 1021 (9th Cir. 1990) (explaining that a plaintiff
who received a displeasing judgment under Washington
law could not “escape the result of the doctrine of
res judicata simply by filing suit in another state where
the law may be more accommodating to [its] allega-
tions arising out of the same transaction”); Smith v.
Jenkins, 562 A.2d 610, 614 & n.5 (D.C. 1989) (barring a
claim advanced under District of Columbia law, even
though the prior action had framed the same claim as
one arising under Maryland law); see also Wright, Miller
& Cooper, 18 Fed. Prac. & Proc. Juris. § 4411 (2d ed.) (“A
second action may be precluded on the ground that the
same claim or cause of action was advanced in the first
22                                                  No. 11-3176

action even though a different source of law is involved.
Claim preclusion may apply to theories advanced . . .
under the laws of different sovereigns.”).
  In formulating his tortious interference claim in his
complaint in this case, Harmon pled the same facts
that supported the claim he asserted in the Gordon law-
suit. He then applied Illinois law in responding to
Gordon’s motion to dismiss. Although a tortious inter-
ference claim asserted under California law has stricter
pleading and substantive requirements than the
same claim asserted under Illinois law,3 a party
cannot simply refile a losing claim under a law with
more favorable requirements. If the relitigation of such
claims were allowed, plaintiffs could avoid the effects
of res judicata by repleading unsuccessfully adjudi-
cated claims and arguing for the application of a
different state’s law.4

3
  Under California law, the tort of interference with
prospective business advantage requires the plaintiff to plead
“the existence of a business relationship with which the tort-
feasor interfered.” Roth v. Rhodes, 30 Cal. Rptr. 2d 706, 715
(Cal. Ct. App. 1994). In Illinois, however, a plaintiff need only
allege that he had a reasonable expectation of entering into
a business relationship. Cook v. Winfrey, 141 F.3d 322, 327
(7th Cir. 1998).
4
  In most cases, collateral estoppel will prevent a party from
arguing for the applicability of a state law that differs from
the law a court applied to the same claim in a previous action.
See Wright, Miller & Cooper, 18 Fed. Prac. & Proc. Juris. § 4417
                                                  (continued...)
No. 11-3176                                                   23

   Having determined that the tortious interference claim
in this case presents the same cause of action involving
the same parties as the claim the district court dismissed
on the merits in the Gordon lawsuit, we conclude
that the district court properly dismissed the claim on
res judicata grounds. Because res judicata bars the re-
assertion of the same claim even under Illinois law, we
need not address whether the district court abused
its discretion in applying judicial estoppel.

    2.   Harmon did not plead special damages required
         for a malicious prosecution claim.
  Harmon’s final argument is that the district court
erred in dismissing his malicious prosecution claim for
failure to state a claim. A party asserting a cause of action
for malicious prosecution in Illinois must allege facts

4
   (...continued)
(2d ed.) (“If successive actions are brought between the
same parties in the same forum, arising out of the same rela-
tionships, a choice-of-law determination should often be
established by issue preclusion.”). In Illinois, however,
collateral estoppel is “limited to the precise factual or legal
issues actually litigated and decided when a prior order was
entered.” People v. Williams, 563 N.E.2d 385, 392 (Ill. 1990).
“Actually litigated” means “that the parties disputed the issue
and the trier of fact resolved it.” Taylor v. Peoples Gas Light &
Coke Co., 656 N.E.2d 134, 141 (Ill. 1995). Here, collateral
estoppel does not preclude Harmon from asserting the ap-
plicability of Illinois law because the parties did not dispute
that California law governed in the Gordon lawsuit.
24                                              No. 11-3176

establishing: (1) that the defendant brought an action
against the plaintiff maliciously and without probable
cause; (2) that the action was terminated in favor of
the plaintiff; and (3) that “the plaintiff suffered ‘special
injury’ or special damage beyond the usual expense,
time, or annoyance in defending a lawsuit.” Serfecz v.
Jewel Food Stores, 67 F.3d 591, 602 (7th Cir. 1995) (citing
Levin v. King, 648 N.E.2d 1108, 1110 (Ill. App. Ct. 1995)).
Here, Harmon alleged that Gordon had maliciously
filed his breach of fiduciary duty claim in the Gordon
lawsuit and that Harmon had incurred costs and lost
business as a result. Without discussing the other
elements of the tort, the district court dismissed the
malicious prosecution claim because it found that
Harmon’s alleged damages did not amount to anything
more than the usual expense and inconvenience
associated with defending a lawsuit. We review the
district court’s dismissal de novo. Cler v. Ill. Educ. Ass’n,
423 F.3d 726, 729 (7th Cir. 2005).
  The special injury rule reflects the responsibility of
courts “to maintain a proper balance between the
societal interest in preventing harassing suits and in
permitting the honest assertion of rights in [court].” Cult
Awareness Network v. Church of Scientology Int’l, 685
N.E.2d 1347, 1356 (Ill. App. Ct. 1997). In nearly all mali-
cious prosecution cases in which Illinois courts have
found a special injury, “the nature of the underlying suit
visited upon the plaintiff some quantifiable damage
causing characteristic.” Levin, 648 N.E.2d at 1111. These
injuries have generally resulted from “an arrest or
No. 11-3176                                               25

seizure of property or some constructive taking or inter-
ference with the person or property.” Id. at 1110.
  In Equity Associates, Inc. v. Village of Northbrook,
524 N.E.2d 1119 (Ill. App. Ct. 1988), an Illinois appel-
late court affirmed the dismissal of the plaintiffs’
malicious prosecution claim because the plaintiffs did not
allege special injury beyond the damages generally sus-
tained in defending a lawsuit. Id. at 1122–24. In that
case, the real estate developer plaintiffs alleged dam-
ages including the loss of potential tenants, the
loss of potential institutional lending commitments,
the inability to develop certain property, attorneys’ fees
and other costs, and damage to the plaintiffs’ reputation.
Id. at 1123. The plaintiffs asserted that their alleged prop-
erty interference was sufficient to establish special in-
jury, but the court explained that the plaintiffs’ property
had never been “subjected to the control of the court,”
and thus had not been “actually [or] constructively
seized as a result of [the] suit.” Id. The court further
explained that “[i]t is a physical disturbance to
property, not the prevention of its physical develop-
ment, which constitutes damage requiring just compen-
sation.” Id. at 1124.
  The damages Harmon alleged in his malicious pros-
ecution complaint include extensive negative publicity,
loss of existing clients and an inability to attract new
clients, attorneys’ fees, and litigation costs. Like in
Equity Associates, these alleged damages do not exceed
what any other individual or company defending a
breach of fiduciary duty suit might experience. In such
26                                            No. 11-3176

a case, it is reasonable for the defendant to expect to be
subject to negative publicity, and in turn, experience a
loss of present or future clients. Like in any other civil
case, a defendant should also anticipate paying attor-
neys’ fees and litigation costs. Moreover, in filing the
lawsuit, Gordon’s purpose was to obtain a judgment
for damages against Harmon. He did not “seek to
enjoin [Harmon’s] conduct, attach his property, repeti-
tiously litigate the same issue, or oppressively force
[Harmon] to defend a controversy that had been judi-
cially determined.” Levin, 648 N.E.2d at 1112.
   Harmon nonetheless contends that the balance
between permitting the honest assertion of rights and
preventing harassing suits has been upset. In the case
Harmon cites in support of this argument, however, the
court did not find special damages in the plaintiff’s
malicious prosecution complaint and it distinguished
cases in which a malicious prosecution defendant had
filed an excessive number of consecutive lawsuits
against a plaintiff. See Howard v. Firmand, 880 N.E.2d
1139, 1142 (Ill. App. Ct. 2007). Harmon did not experience
any comparable harassment here and none of his alleged
damages go beyond the normal injury associated with
defending a lawsuit. The district court appropriately
granted Gordon’s motion to dismiss.

                    III. Conclusion
  For these reasons, we A FFIRM the district court’s grant
of summary judgment in Gordon’s favor and A FFIRM
No. 11-3176                                            27

the district court’s dismissal of Harmon’s tortious inter-
ference and malicious prosecution claims.

                          3-21-13