Tom and Caleb,
I am pleased to report a significant and favorable development in the case. On August 22, 2022, the Honorable Patricia Delacroix of the Circuit Court of Cook County, Illinois, issued her ruling on GAP's Motion to Strike Affirmative Defenses, which we filed on July 15, 2022. The Court granted the motion as to two of Prairie Basin Grain Co.'s three affirmative defenses, substantially narrowing the issues that remain in dispute. Below is a summary of the ruling and our recommended next steps.
**Summary of the Ruling**
*Defenses Stricken*
The Court struck the following two defenses:
**1. Force Majeure.** PBGC had argued that the October 17, 2021 fire at its Macon County elevator facility excused its performance under the Off-Take Agreement dated March 15, 2019. The Court agreed with our position that the force majeure clause in the Off-Take Agreement does not operate to excuse payment obligations — it applies only to delivery and logistical performance. The Court further noted that the fire affected only one of PBGC's six elevator facilities across Champaign, Macon, and Piatt Counties, undermining any argument that the event rendered performance broadly impracticable.
**2. Commercial Impracticability.** The Court held that under Illinois law, the defense of commercial impracticability requires a showing of objective impossibility, not mere financial difficulty. PBGC's cash-flow problems, hedging losses, and the elevator fire — individually or collectively — do not rise to that standard. The Court specifically noted that financial inability to pay is not a recognized basis for this defense under controlling authority.
*Defense Surviving*
**3. Failure to Mitigate.** The Court allowed PBGC's affirmative defense of failure to mitigate damages to survive at this stage. This defense alleges that GAP failed to take reasonable steps to reduce its losses following PBGC's default. While the Court found the defense sufficiently pled to proceed past the motion-to-strike stage, I want to assure you that this is a common affirmative defense in commercial breach-of-contract cases, and based on the facts as we understand them, GAP is well-positioned to defeat it. The burden of proof on mitigation rests with PBGC, and the actions GAP took following the default should withstand scrutiny.
**Significance of the Ruling**
This ruling eliminates PBGC's two most substantive defenses and meaningfully strengthens GAP's position across all three counts: the breach of contract claim (Count I) for the full $4,870,050.00 in principal, plus accrued interest at 1.5% per month under Section 7.3 of the Off-Take Agreement; the claim under the Musgrave Guaranty (Count II, capped at $2,000,000); and the Account Stated claim (Count III). With the force majeure and commercial impracticability defenses off the table, the contested issues are now significantly narrower.
The surviving failure-to-mitigate defense is manageable. We anticipate being able to address it through targeted discovery and, if the facts warrant, a motion for summary judgment at the appropriate time.
**Next Steps**
- **Case Management Conference.** A Case Management Conference is scheduled for September 12, 2022 before Judge Delacroix, at which the discovery schedule and other pretrial deadlines will be set.
- **discovery.** We are already preparing written discovery — including interrogatories, document requests, and requests for admission — to serve on PBGC following the conference. Our discovery will focus on PBGC's financial condition, its asset base, and the factual underpinnings of its failure-to-mitigate defense.
- **Ongoing Interest Accrual.** As a reminder, contractual interest at 1.5% per month continues to accrue on all five unpaid invoices (GAP-2021-3187, GAP-2021-3244, GAP-2021-3301, GAP-2021-3358, and GAP-2022-0042), which increases GAP's total claim with each passing month.
- **Collectability Considerations.** Our team continues to monitor PBGC's financial condition. Publicly available information suggests ongoing financial distress, which we are tracking carefully and which will inform our enforcement and collection strategy as the case progresses.
**Court's Written Order.** We expect to receive the signed order from the clerk's office shortly. I will forward a copy to you as soon as it is entered and received.
We will also prepare a more detailed written status memorandum for your review in advance of the September 12 Case Management Conference, so that you have a full picture of the litigation posture and our strategy going forward.
In the meantime, I would be happy to schedule a call to discuss the ruling and next steps in greater detail. Please do not hesitate to reach out with any questions.
Best regards,
Francesca Morano Partner Calderwood & Harkness LLP 225 West Wacker Drive, Suite 4000 Chicago, IL 60606 T: (312) 555-4720 F: (312) 555-4700 fmorano@calderwoodharkness.com
Matter No. 1020-00005
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