U.S. Court of Appeals Affirms Trial Court Decision That Party Seeking Discovery Rule Must Offer Sufficient Evidence for Its Use – Broaddus v. Shields

In business, it is important to trust your partners and that the information that they provide is truthful. However, to ensure that trusted business associates do not withhold information and knowingly deceive people, the law imposes a fiduciary duty. This duty requires a party to act in the best interest of another party and forbids the party from putting his/her own interests first.

In the Illinois business lawsuit of Bret A. Broaddus v. Kevin Shields, 7th Circuit, No. 11-1117 (December 21, 2011), the plaintiff accuses the defendant of a breach of fiduciary duty. Kevin Shields was the managing partner of Will Partners, LLC, a company in which Bret Broaddus owned a 10 percent membership. Broaddus owned this interest for a little over two years, after which he made the decision to sell his share of Will Partners, a decision which Broaddus alleges was based on false information provided by Shields.

Will Partners was started as a property management company in Monee, Illinois. One of its projects involved the construction of a warehouse for World Kitchen, Inc., who in turn paid Will Partners rent every month. When Broaddus invested in Will Partners, it was agreed that the bulk of his interest would be coming from World Kitchen’s rent. It is this agreement that serves as the basis for the relevant business lawsuit.

The current case is somewhat complicated by the fact that Broaddus was involved in a serious car accident just a year after investing in Will Partners. He suffered a traumatic brain injury and had a court-appointed legal guardian to help him with his matters until September 2002. It was shortly after Broaddus was legally able to resume responsibility for his own finances that Shield allegedly informed Broaddus that World Kitchen was going bankrupt.

It is at this point where the accounts of what transpired begin to differ. First, Shields alleges that he informed Broaddus that World Kitchen was in bankruptcy and that Will Partners would need to pay World Kitchen’s real estate taxes. However, Broaddus alleged that Shields informed him that World Kitchen was delinquent on its rent. In addition, while Shields maintains that Broaddus contacted him a few months later to discuss selling his share of Will Partners, Broaddus maintains that Shields approached him and asked to buy his shares.

In March 2003, Broaddus eventually sold his share in Will Partners. And while Broaddus was informed that he could view Will Partners’s books and records at any point prior to the sale, Broaddus maintains that during the whole course of the sale that he remained under the impression that World Kitchen was not paying its rent. He alleged that had he known it was in fact paying its rent that he would not have sold; Broaddus points to this misrepresentation as a breach of fiduciary duty by Shields.

Broaddus did not bring his business lawsuit against fields until May 2008. Shields moved for the case’s dismissal on the basis that it was not filed within the five year statute of limitations. According to Shields, the statute began running in March 2003, when the sale of Broaddus’s shares of Will Partners was finalized. However, Broaddus maintains that he was not able to discover that World Kitchen was in fact paying its rent until the summer of 2003; therefore, the five year statute was extended until the summer of 2008.

However, the only evidence Broaddus was able to produce to show that he could not have discovered that World Kitchen was paying its rent until the summer of 2003 was his own affidavit. Yet this affidavit conflicted with statements that Broaddus made during his discovery deposition that indicated he could have and should have discovered this information much earlier. Broaddus admitted that prior to the sale he was receiving distribution deposits from Will Partners and acknowledged that these could not have been distributed unless World Kitchen was paying its rent.

The district court granted Shields motion for summary judgment, a decision that was affirmed by the appellate court. The court denied Broaddus’s attempt to attribute the business misunderstanding to his traumatic brain injury on the basis that he had not raised the argument in the district court and therefore could not raise it on appeal. The appellate court also affirmed the district court’s decision regarding Shields’s indemnification counterclaim and the attorney fees of $798,619.16.

Kreisman Law Offices has been handling Cook County business litigation matters for more than 36 years in and around Chicago, Cook County, and surrounding areas, including Oak Park, Hoffman Estates, Skokie, Chicago’s Logan Square, Lincolnwood, Des Plaines, and Hinsdale.

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