Help at Home, Incorporated v. MEDICAL CAPITAL, L.L.C., d/b/a MEDCAP

In the
United States Court of Appeals
For the Seventh Circuit
No. 00-1208
HELP AT HOME, INCORPORATED,
Plaintiff-Appellant,
v.
MEDICAL CAPITAL, L.L.C., d/b/a MEDCAP,
Defendant-Appellee.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 99 C 3799--James F. Holderman, Judge.
ARGUED JANUARY 12, 2001--DECIDED AUGUST 7, 2001
Before RIPPLE, ROVNER and EVANS, Circuit
Judges.
RIPPLE, Circuit Judge. Help At Home,
Inc. ("HAH") filed this diversity action
against Medical Capital, L.L.C.
("MedCap") for breach of contract,
promissory estoppel, and breach of the
implied duty of good faith and fair
dealing. MedCap moved to dismiss HAH’s
claims as barred by the Illinois Credit
Agreements Act, 815 ILCS 160/1 et seq.
("ICAA"). The district court granted
MedCap’s motion, and HAH now appeals. For
the reasons set forth in the following
opinion, we affirm the judgment of the
district court.
I
BACKGROUND
A. Facts
HAH is a non-medical home care provider.
It had borrowed money from Harris Bank
and had defaulted on its payments. Harris
Bank agreed to forbear temporarily from
collecting on the loans, but that
agreement was set to expire on June 8,
1999. Harris Bank indicated to HAH that,
upon expiration of the agreement, it
would use the funds in HAH’s accounts at
the bank to offset the amount of the
loans. To prevent this setoff, HAH

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entered into an agreement with MedCap
under which MedCap allegedly promised "to
extend credit sufficient to takeout the
Harris Bank loan." R.14 at 2 (internal
quotation marks omitted).
HAH and MedCap exchanged several
documents related to their financing
agreement. A Sale and Servicing Agreement
("SSA") memorialized the terms of the
arrangement. The SSA was signed only by
HAH’s chief operating officer; no
representative of MedCap signed the SSA.
MedCap also sent Uniform Commercial Code
("UCC") financing statements for various
states to HAH and asked HAH to sign and
return them. These UCC forms gave MedCap
a security interest in HAH’s accounts
receivable, inventory, and other items,
and they explicitly referenced the SSA in
the following terms:
This financing statement covers all
Receivables now or hereafter created or
acquired by the Debtor/Provider [HAH] and
sold, transferred or assigned to the
Secured Party, MEDCAP Credit Co., LLC.
[sic], under the Sale and Servicing
Agreement dated as of May 21, 1999,
including the Schedules, Exhibits and
Addendums thereto, all as now or
hereafter amended . . . .
R.17, Ex.C at 2. Some of the UCC forms
were signed by both HAH and MedCap;
others were signed only by HAH. Lastly,
MedCap sent HAH a commitment letter
stating that it would "provide financing
to [HAH] upon completion of the closing
process" and that the funding "would
provide proceeds sufficient to takeout
the Harris Bank loan." Id. at Ex.A. The
chief executive officer of MedCap signed
the commitment letter, but the letter did
not require a signature from HAH.
On June 8, 1999, MedCap informed HAH
that it would be unable to provide the
funding HAH needed to repay the Harris
Bank loan. As a result, HAH had to secure
alternate financing at higher interest
rates and under less desirable terms than
its agreement with MedCap provided. It
then filed suit against MedCap.
B. Proceedings in the District Court
HAH brought three causes of action
against MedCap: breach of contract,
promissory estoppel, and breach of the

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implied duty of good faith and fair
dealing. MedCap moved to dismiss HAH’s
claims; it argued that its agreement with
HAH was one for credit that was
unenforceable because there was no
writing that expressed the terms of the
agreement and that was signed by both
parties, as required by the ICAA. HAH
responded that the ICAA did not apply to
its agreement with MedCap because the
agreement was for the sale of HAH’s
accounts receivable and was not a credit
agreement. HAH argued alternatively that
the ICAA was satisfied because each of
the parties had signed various documents,
and, when considered together, the
documents clearly evidenced the terms of
the parties’ agreement.
The district court granted MedCap’s
motion to dismiss. It first held that HAH
had admitted judicially that its
agreement with MedCap was a loan by
referring to it as such in its complaint.
Consequently, the agreement was covered
by the ICAA. Noting that this court has
described the ICAA as imposing a "strong
form of the Statute of Frauds," R.18 at 5
(citing Resolution Trust Corp. v.
Thompson, 989 F.2d 942, 944 (7th Cir.
1993)), the court took the view that the
ICAA requires that both parties to the
loan agreement sign the same document.
Notably, the court went on to hold that,
even if the parties could comply with the
statute by relying on several writings,
the writings at issue in this case did
not even satisfy the common law
requirements of Illinois’ general statute
of frauds. In that regard, the court
pointed out that the loan commitment
letter signed by MedCap did not refer to
any other unsigned writing; none of the
other writings relied upon by HAH
referred to or were attached to the
letter of commitment. Therefore, there
was nothing in HAH’s pleadings or
argument to demonstrate that the writings
constituted a single contract. The
district court therefore held that the
ICAA barred each of HAH’s claims against
MedCap.
HAH filed a motion to reconsider. It
based its argument on Bank One,
Springfield v. Roscetti, 723 N.E.2d 755
(Ill. App. Ct. 1999), appeal denied, 731
N.E.2d 762 (Ill. 2000), which, in its
view, established that the ICAA did not
require a single writing signed by both

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parties. HAH also invited the court’s
attention to the UCC financing
statements, some of which were signed by
both parties. The court, however, refused
to vacate its earlier dismissal. It
stated that it had considered "every
document" the parties had submitted and
had concluded that the true nature of the
transaction was a credit arrangement
subject to the ICAA. R.22. It further
noted that "those documents, including
the [UCC] financing statements, together
do not satisfy the requirements of the
[ICAA]." Id. Following the district
court’s denial of its motion to
reconsider, HAH filed this appeal.
II
DISCUSSION
A. Standard of Review
We review the district court’s grant of
a motion to dismiss de novo. See Home
Valu, Inc. v. Pep Boys, 213 F.3d 960, 963
(7th Cir. 2000). We accept all of the
well-pleaded factual allegations in the
plaintiff’s complaint as true and draw
all reasonable inferences in favor of the
plaintiff. See id. We shall affirm the
district court’s dismissal of the
complaint only if it appears beyond doubt
that the plaintiff cannot prove any set
of facts that would entitle it to relief.
See Conley v. Gibson, 355 U.S. 41, 45-46
(1957); Home Valu, 213 F.3d at 963.
The letter of commitment signed by
MedCap, but not by HAH, was referred to
in the complaint, and the district court
properly considered it as part of the
pleadings. See Wright v. Associated Ins.
Cos., 29 F.3d 1244, 1248 (7th Cir. 1994).
In replying to MedCap’s motion to
dismiss, HAH supplemented its pleadings
with copies of other writings between the
parties and the affidavit of Joel Davis,
HAH’s chief operating officer. The
district court also properly considered
this material in its ruling on the
motion. "A plaintiff need not put all of
the essential facts in the complaint;" he
may add them by affidavit or brief in
order to defeat a motion to dismiss if
the facts are consistent with the
allegations of the complaint. Hrubec v.
Nat’l R.R. Passenger Corp., 981 F.2d 962,
963-64 (7th Cir. 1992).

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Because jurisdiction is based on
diversity of citizenship, the substantive
rights of the parties are governed by
state law. See Erie R.R. Co. v. Tompkins,
304 U.S. 64, 78 (1938); Lexington Ins.
Co. v. Rugg & Knopp, Inc., 165 F.3d 1087,
1090 (7th Cir. 1999). In this case, the
parties agree that Illinois law is
controlling./1 It is our duty to apply
the law that we believe the Supreme Court
of Illinois would apply if the case were
before that tribunal rather than before
this court. See Brunswick Leasing Corp.
v. Wis. Cent. Ltd., 136 F.3d 521, 527
(7th Cir. 1998). When the "state supreme
court has not ruled on an issue,
decisions of the state appellate courts
control, unless there are persuasive
indications that the state supreme court
would decide the issue differently."
Lexington, 165 F.3d at 1090.
B. The ICAA
1. Nature of the Parties’ Agreement
We first must resolve whether the
transaction between HAH and MedCap is a
credit agreement covered by the ICAA. As
we have noted earlier, the district court
took the view that HAH ought to be bound
by its characterization of the agreement
as a loan in its complaint. We believe
that the district court was on solid
ground in reaching that determination. An
examination of the amended complaint
reveals that, throughout the document,
HAH referred to the agreement as a loan.
It is a "well-settled rule that a party
is bound by what it states in its
pleadings." Soo Line R.R. Co. v. St.
Louis Southwestern Ry. Co., 125 F.3d 481,
483 (7th Cir. 1997). "Judicial admissions
are formal concessions in the pleadings,
or stipulations by the party or its
counsel, that are binding upon the party
making them." Keller v. United States, 58
F.3d 1194, 1198 n.8 (7th Cir. 1995). We
have acknowledged that there may be
instances in which statements made in
superseded pleadings that had been filed
early in the litigation should not be
characterized properly as admissions. See
Moriarty v. Larry G. Lewis Funeral Dirs.
Ltd., 150 F.3d 773, 777-78 (7th Cir.
1998). We have no such situation here.
Although the original complaint did refer
to the transaction as a loan, the same
term is repeated in the amended
complaint. Indeed, its usage is increased

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in that second document. Moreover, it is
clear that HAH was aware of the existence
of the underlying documents at least by
the time that it filed its response to
the motion to dismiss because it attached
those documents to the response.
Therefore, we are not confronted with the
preliminary best efforts of a party to
provide an initial characterization of
the case, but with the deliberate
repetition of that characterization in
the operative complaint and the
maintenance of that characterization up
to the time that the motion was submitted
to the district court for decision./2
Even if we did not rely on HAH’s
admission in its amended complaint, we
still would conclude that the transaction
was a loan. The ICAA defines a credit
agreement as "an agreement or commitment
by a creditor to lend money or extend
credit or delay or forbear repayment of
money not primarily for personal, family
or household purposes, and not in
connection with the issuance of credit
cards." 815 ILCS 160/1(1) ("Section 1").
If any portion of the parties’ agreement
takes the form of a loan or an extension
of credit, the ICAA applies. See
Whirlpool Fin. Corp. v. Sevaux, 96 F.3d
216, 223 (7th Cir. 1996).
After reviewing the SSA, we conclude
that the district court correctly
determined that the parties’ transaction
was a loan covered by the ICAA. Under the
SSA, MedCap established a "Facility
Limit" for HAH of $5 million, which could
be increased at MedCap’s discretion and
upon HAH’s request. R.17, Ex.D at
M000050. Within this $5 million limit,
HAH could request that MedCap purchase
certain of its accounts receivable
("receivables"); whether or not to
purchase the receivables was within
MedCap’s discretion. If MedCap chose to
purchase the receivables, the parties
would treat that purchase as a sale that
vested all rights in the receivables in
MedCap. In exchange for this arrangement,
HAH would pay MedCap a monthly discount
fee, plus a maintenance fee and an
"Annual Facility Fee." Id.
The net effect of this agreement was
that, as set forth in the commitment
letter, MedCap provided accounts-
receivable financing to HAH.
Specifically, MedCap established a credit

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limit for HAH. Within that credit limit,
HAH could ask MedCap to loan it funds.
HAH’s method of repayment was its
receivables rather than cash. The monthly
fee that HAH was to pay to MedCap for
these services was set at an amount
"equal to 30/360 of the annualized base
rate of Prime + 2.5%, multiplied by the
average outstanding Purchase Base for the
preceding month." Id. (emphasis in
original). The terms of the SSA referring
to "sales" of HAH’s receivables are best
viewed as a device to ensure that MedCap
had the legal ability to recoup the funds
it lent HAH through the receivables.
Because we have concluded that the
agreement embodied in the SSA is
essentially a loan, the ICAA is
implicated, and its terms must be
satisfied.
2. The ICAA’s Signature Requirement
The ICAA provides that
[a] debtor may not maintain an action on
or in any way related to a credit
agreement unless the credit agreement is
in writing, expresses an agreement or
commitment to lend money or extend credit
or delay or forbear repayment of money,
sets forth the relevant terms and
conditions, and is signed by the creditor
and the debtor.
815 ILCS 160/2 ("Section 2"). The ICAA’s
writing requirement is a strong form of
the statute of frauds. See Resolution
Trust Corp. v. Thompson, 989 F.2d 942,
944 (7th Cir. 1993); McAloon v. Northwest
Bancorp, Inc., 654 N.E.2d 1091, 1094
(Ill. App. Ct. 1995). In particular, it
requires the signatures of both parties;
the signature of only one party renders
the agreement unenforceable. See
Resolution Trust, 989 F.2d at 944;
McAloon, 654 N.E.2d at 1094.
Additionally, the ICAA bars all actions
that are in any way related to the
alleged credit agreement, whether those
actions sound in contract or in tort. See
Nordstrom v. Wauconda Nat’l Bank, 668
N.E.2d 586, 588 (Ill. App. Ct. 1996);
McAloon, 654 N.E.2d at 1095; First Nat’l
Bank in Staunton v. McBride Chevrolet,
Inc., 642 N.E.2d 138, 142 (Ill. App. Ct.
1994). It also bars traditional
exceptions to the statute of frauds, such
as fraud, part performance, and equitable

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estoppel. See Whirlpool, 96 F.3d at 226;
McAloon, 654 N.E.2d at 1094. Illinois
courts have emphasized repeatedly that
the ICAA is a broad statute that will be
applied the way it was written, even
though the results of that application
may at times seem harsh. See Mach.
Transps. of Ill. v. Morton Cmty. Bank,
687 N.E.2d 533, 535-36 (Ill. App. Ct.
1997); McAloon, 654 N.E.2d at 1095-96;
First Nat’l, 642 N.E.2d at 142.
It is clear that the SSA satisfies three
of the ICAA’s four requirements: It
commits the parties’ agreement to
writing, expresses MedCap’s intention to
extend credit to HAH, and sets forth the
terms and conditions that will govern the
arrangement. It does not, however,
contain the signatures of both parties.
Indeed, several UCC financing statements
are the only documents among the many
that the parties exchanged that contain
the signatures of both parties. The only
other document MedCap signed was the
commitment letter it sent to HAH. We must
decide whether these documents, when
considered together with the SSA,
aresufficient to satisfy the ICAA.
Neither party questions that, under
Illinois’ general statute of frauds, the
writing evidencing the agreement need not
be on a single piece of paper, so long as
the signed writing refers expressly to
the unsigned writings, or the documents
are so connected, either physically or
otherwise, that it is evident that they
refer to the same contract. See Prodromos
v. Howard Sav. Bank, 692 N.E.2d 707, 710
(Ill. App. Ct. 1998); see also Bower v.
Jones, 978 F.2d 1004, 1008 (7th Cir.
1992). MedCap, however, argues that,
because the ICAA is broader than the
general statute of frauds, individual
signatures on multiple documents are
insufficient. In turn, HAH renews the
argument it made to the district court in
its motion to reconsider. It contends
that, under Bank One, Springfield v.
Roscetti, 723 N.E.2d 755 (Ill. App. Ct.
1999), appeal denied, 731 N.E.2d 762
(Ill. 2000), the credit agreement need
not be embodied in one document and that
the parties’ signatures on the UCC forms
are sufficient because those forms
expressly refer to the SSA.
We are unpersuaded by HAH’s argument
that Bank One resolves the issue before

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us in this case. The issue the Appellate
Court of Illinois addressed in Bank One
was whether a guaranty agreement,
executed at the same time as the
guaranteed loan but memorialized in a
separate document, was a credit agreement
subject to the requirements of the ICAA.
See Bank One, 723 N.E.2d at 762-63.
Anemployee at Bank One encouraged
Roscetti to serve as a guarantor by
telling Roscetti that he would watch the
borrower "like a hawk." Id. at 758
(internal quotation marks omitted). When
Bank One filed suit against Roscetti to
enforce the guaranty agreement, Roscetti
filed a counterclaim alleging that Bank
One had breached its contract to watch
the borrower like a hawk. Bank One argued
that the ICAA barred Roscetti’s
enforcement of the oral agreement, and
Roscetti responded that a guaranty
agreement was not a credit agreement
within the meaning of the ICAA. See id.
at 758-59.
The court determined that the guaranty
agreement was a credit agreement covered
by the statute. See id. at 762-63.
Although a guaranty relationship
ordinarily may not be a credit
arrangement, the court determined that
this guaranty agreement could not be
viewed in isolation from the un-derlying
loan entered into with the borrower. Bank
One only agreed to extend the loan to the
borrower if the borrower could secure a
guarantor. As a result, the guaranty
agreement was an integral part of the
loan, and the written guaranty agreement,
along with several other documents,
constituted the entire credit agreement.
See id. In reaching its decision, the
court stated:
A credit agreement often consists of
several documents that, together, create
the terms of the extension of credit. The
documents are, in many instances,
conditioned upon each other, and a
default under one is usually a default
under all. Significantly, the [ICAA] does
not limit the definition of "credit
agreement" to being a single document.
Id. Because the guaranty agreement was
part of the original credit agreement,
the court concluded that Bank One’s
promise to watch the borrower like a hawk
was an oral modification of the original
agreement that, under the ICAA, was not

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enforceable because it was not in
writing. See id. at 763.
Bank One addresses the question of
whether a credit agreement, as defined in
Section 1 of the ICAA, can be comprised
of multiple documents, and it resolves
that question in the affirmative.
However, Bank One gives us no indication
of which parties had signed which
documents and does not even mention the
signature requirement of Section 2 of the
ICAA. Although HAH suggests that, under
Bank One, the ICAA is satisfied when each
party signs one of the documents
comprising the credit agreement, it would
be just as consistent with Bank One to
assert that both parties must sign all of
the documents. Indeed, the latter
assertion may be more consistent with the
express terms of the ICAA. In short, Bank
One sheds little, if any, light on the
question of whether multiple documents
may be aggregated to satisfy the
signature requirement of Section 2 of the
ICAA, which is the question we must
answer in this case.
Only one case addresses squarely the
ICAA’s signature requirement, and that
case does not resolve the precise
question we face here. See McAloon, 654
N.E.2d at 1094 (holding that the
plaintiffs could not maintain a breach of
contract claim based on a written loan
proposal initialed by the defendants in
the absence of an allegation that the
plaintiffs also had signed the proposal).
We decline to resolve this heretofore
unanswered question of state law because,
even if we assume that HAH may rely on
multiple documents to satisfy the ICAA’s
signature requirement, we still would
have to conclude that the documents the
parties signed in this case were
insufficient. The only documents signed
by MedCap are its commitment letter and
some of the UCC financing statements. As
the district court noted, the commitment
letter does not support HAH’s argument
because it does not reference any other
document that allegedly comprises the
contract nor does it discuss the terms of
the parties’ agreement. Without some
connection to the rest of the documents,
we cannot read the commitment letter as
demonstrating an intent to contract. See
Sims v. Broughton, 589 N.E.2d 1056, 1060
(Ill. App. Ct. 1992) (considering whether
a document was "prepared with the view

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that it should be evidence of a binding
contract").
The UCC financing statements also are
too attenuated from the underlying
agreement, as expressed in the SSA, to
evidence the parties’ intent to contract.
The UCC forms themselves are designed to
secure a property interest created by the
underlying agreement; if the underlying
agreement is invalid, so is the security
interest created by the UCC forms. We do
not believe that the policies that the
state courts have said animate the ICAA
would be served adequately if we were to
infer from the UCC forms, which depend on
the SSA for their validity, that the SSA
itself is valid. Permitting such
documents to establish the validity of
the underlying credit arrangement would
hardly be implementing "a strong form of
the Frauds Act." McAloon, 654 N.E.2d at
1094.
The documents in this case that either
bear the signatures of both parties or
are signed by MedCap simply do not
encompass the entire loan agreement.
Thus, the terms of the ICAA are not met,
even if HAH may rely on all of the
documents in the record to satisfy
Section 2 of the ICAA. All of HAH’s
claims against MedCap must fail.
SeeNordstrom, 668 N.E.2d at 588-89
(dismissing claims of breach of contract
and promissory estoppel for failure to
comply with the ICAA); First Nat’l, 642
N.E.2d at 142 (dismissing counterclaim of
breach of implied duty of good faith and
fair dealing for failure to comply with
the ICAA).
Conclusion
The district court was correct in
dismissing HAH’s complaint for failure to
satisfy the terms of the ICAA. Therefore,
its judgment is affirmed.
AFFIRMED
FOOTNOTES
/1 See Northbrook Excess & Surplus Ins. Co. v.
Procter & Gamble Co., 924 F.2d 633, 637 (7th Cir.
1991) (applying Ohio law in a diversity case when
the parties agreed that Ohio’s law should gov-
ern); see also Echo, Inc. v. Whitson Co., 52 F.3d
702, 707 (7th Cir. 1995) (stating that, when
neither party suggests that the law of a state
other than the forum state ought to apply, the

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forum state’s law applies by default); Kritikos
v. Palmer Johnson, Inc., 821 F.2d 418, 421 (7th
Cir. 1987) (holding that the parties’ failure to
raise a choice-of-law issue on appeal resulted in
a waiver of the issue).
/2 HAH responds by asking us to take judicial notice
of a complaint MedCap filed in the Superior Court
of California in which MedCap presumably de-
scribed the agreement as a purchase of accounts
receivable, and HAH asks that we bind MedCap to
this statement. As an initial matter, we point
out that a judicial admission is binding only in
the litigation in which it is made. See Higgins
v. Mississippi, 217 F.3d 951, 954 (7th Cir.
2000). In other litigation, it is merely an
evidentiary admission. See id. at 955. More
fundamentally, HAH first raised this argument in
its reply brief on appeal, and MedCap has moved
to strike the portion of HAH’s brief relating to
the argument. We agree that HAH, by not making
this argument in its opening brief, has waived
the issue. See United States v. Spaeni, 60 F.3d
313, 317 (7th Cir. 1995). We therefore grant the
motion to strike this argument from HAH’s reply
brief.

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