Background
Aberdeen Developers secured a forty-one million dollar loan in two thousand and eighteen using a mixed-use building in Chicago as collateral. Wells Fargo Bank became the trustee for the lender, and LNR Partners was appointed as the special servicer. In January two thousand and twenty-one, a major tenant filed for bankruptcy, triggering a Cash Sweep Event Period under the Cash Management Agreement. This allowed the servicer to deposit building income into a special account. The parties dispute how long the servicer may hold the excess revenue in that account. The district court dismissed the breach-of-contract claim, concluding the agreements unambiguously allowed the defendants to retain the funds until the contract term ended.
The court’s reasoning
The court reviewed the dismissal de novo and applied Illinois law. Under Illinois law, a contract is ambiguous if it is subject to more than one reasonable interpretation. The court found that both sides offered reasonable constructions of the agreements. Aberdeen Developers argued that Section three point four, subsection J of the Cash Management Agreement required monthly disbursement of excess cash flow. The court found this reasonable because Section three point four states disbursements occur each collection period. Conversely, the defendants argued that Section six point three, subsection B of the Loan Agreement and Section three point four, subsection I of the Cash Management Agreement allowed holding the funds until a Cash Sweep Cure occurs. The court found this construction also reasonable. Because both interpretations were plausible, the court could not resolve the claim on a motion to dismiss.
The Loan Agreement and CMA are ambiguous because both sides offer reasonable constructions of their terms.
What it means going forward
The decision prevents summary dismissal of contract disputes where the language permits multiple reasonable readings. It requires lower courts to allow such cases to proceed to fact-finding or trial to determine the parties’ actual intent. This reinforces the principle that contract ambiguity is a question of fact, not a matter of law resolvable at the pleading stage.
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