# Vibrant Credit Union v. Infinity Federal Credit Union

> District Court, C.D. Illinois · March 3, 2022

URL: https://www.frixlaw.com/law-library/cases/10136640

## Case

- **Court:** District Court, C.D. Illinois
- **Decided:** March 3, 2022
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/10136640

## How later opinions describe it (automated extraction)

- noting that if a court finds a letter of intent’s language to be ambiguous, “parol evidence is admissible to explain and ascertain what the parties intended.” (quotation marks omitted)
- noting that a determination as to whether a Letter of Intent’s language is ambiguous is a question of law

## Opinion text

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF ILLINOIS
ROCK ISLAND DIVISION

VIBRANT CREDIT UNION, )
)
Plaintiff, )
)
v. ) Case No. 4:21-cv-04049-SLD-JEH
)
INFINITY FEDERAL CREDIT UNION, )
)
Defendant. )

ORDER

Before the Court is Defendant Infinity Federal Credit Union’s (“Infinity”) Motion to
Dismiss Count I Pursuant to F.R.C.P. 12(b)(6), ECF No. 6. For the following reasons, the
motion is GRANTED.
BACKGROUND1
Both Infinity and Plaintiff Vibrant Credit Union (“Vibrant”) are member-owned credit
unions. Between December 2018 and September 2019, the parties engaged in discussions
regarding a potential merger of the two institutions. As an offer to engage in merger
negotiations, Vibrant drafted a Letter of Intent (the “Letter of Intent” or “Letter”) setting forth
certain terms and conditions that the parties expected the eventual definitive written agreement
(the “Definitive Agreement”) providing for the merger transaction (the “Transaction”) to include.
The Letter was negotiated by both parties. On June 18, 2019, Matt McCombs, the CEO of
Vibrant, and Elizabeth Hayes, the CEO of Infinity, both signed the Letter. The Letter states that

1 At the motion to dismiss stage, the court “accept[s] as true all well-pleaded facts in the complaint, and draw[s] all
reasonable inferences in [the plaintiff’s] favor.” Pierce v. Zoetis, Inc., 818 F.3d 274, 277 (7th Cir. 2016). Thus, the
factual background is drawn from the complaint, ECF No. 1.
“[b]ased on the information currently known to VIBRANT, it is proposed that the Definitive
Agreement include” certain terms, including one clause (the “costs clause”) which provides that
VIBRANT will cover all costs and expenses, unless the Transaction does not take
place, or is otherwise cancelled. If the Transaction does not take place, the
expenses will be split based on the prorated percentage of total assets of both
Parties determined by the June 30, 2019 financial call report.

Letter 1–2, Compl. Ex. B, ECF No. 1-2 at 5–8.
The merger efforts were ultimately unsuccessful. On September 20, 2019, Infinity sent a
written notice of termination of the negotiations to Vibrant. A total of $395,072.60 had been
incurred in costs as a result of the merger attempt, all of which had been paid by Vibrant.
Infinity’s pro-rata share of the merger costs comes to $121,247.78; Infinity has failed to pay
Vibrant any of this amount.
On March 18, 2021, Vibrant filed suit against Infinity, bringing claims for breach of
contract (Count I) and promissory estoppel (Count II). Compl. 4–6, ECF No. 1.2 Infinity now
moves to dismiss Count I3 of the complaint for failure to state a claim. Mot. Dismiss 1.
DISCUSSION
I. Legal Standard
A complaint must contain “a short and plain statement of the claim showing that the
pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). At the motion to dismiss stage, the key
inquiry is whether the complaint is “sufficient to provide the defendant with ‘fair notice’ of the
plaintiff’s claim and its basis.” Indep. Tr. Corp. v. Stewart Info. Servs. Corp., 665 F.3d 930, 934

2 The Court has subject matter jurisdiction over this action on the basis of diversity. See Compl. 1, 3 (asserting that
the parties are citizens of different states and reasonably alleging that Vibrant seeks damages in excess of $75,000).
3 The motion to dismiss makes clear that Infinity only seeks the dismissal of Count I of the complaint. See Mot.
Dismiss 1. Likewise, the memorandum in support of the motion to dismiss discusses only Count I. See Mem. Supp.
Mot. Dismiss 2–4, ECF No. 6-1. Thus, although Infinity includes in the memorandum that it “respectfully requests
that the Court dismiss [Vibrant’s] [c]omplaint in its entirety,” id. at 5, the Court assumes that this is an error and that
Infinity only wishes the Count to dismiss Count I.
(7th Cir. 2012) (quoting Erickson v. Pardus, 551 U.S. 89, 93 (2007)); see also Fed. R. Civ. P.
10(c) (“A copy of a written instrument that is an exhibit to a pleading is a part of the pleading for
all purposes.”). While “detailed factual allegations are unnecessary, the complaint must have
‘enough facts to state a claim to relief that is plausible on its face.’” Pierce v. Zoetis, Inc., 818
F.3d 274, 277 (7th Cir. 2016) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).

“A claim has facial plausibility when the plaintiff pleads factual content that allows the court to
draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft
v. Iqbal, 556 U.S. 662, 678 (2009).
When deciding on a motion to dismiss, the court must take “[t]he complaint’s well-
pleaded factual allegations, though not its legal conclusions, . . . [as] true,” Phillips v. Prudential
Ins. Co. of Am., 714 F.3d 1017, 1019 (7th Cir. 2013), and “draw all inferences in the light most
favorable to the nonmoving party,” Vesely v. Armslist LLC, 762 F.3d 661, 664 (7th Cir. 2014).
“While legal conclusions can provide the framework of a complaint, they must be supported by
factual allegations.” Iqbal, 556 U.S. at 679.

II. Analysis
In Count I of the complaint, Vibrant alleges that the Letter of Intent is a valid contract
between the parties and that Infinity has breached the contract by failing to pay its pro rata share
of the merger costs. Compl. 4–5. Infinity disagrees, arguing that the Letter of Intent is not
binding and therefore cannot obligate Infinity to pay any portion of the costs. Mem. Supp. Mot.
Dismiss 3, ECF No. 6-1. As such, Infinity asserts, the Court should dismiss Count I of the
complaint for failure to state a claim. Mot. Dismiss 1.
In Illinois,4 “letters of intent may be enforceable.” Quake Constr., Inc. v. Am. Airlines,
Inc., 565 N.E.2d 990, 994 (Ill. 1990). However, “such letters are not necessarily enforceable
unless the parties intend them to be contractually binding.” Id. If a letter provides that execution
of a definitive contract is a condition precedent to the enforceability of the terms, the letter does
not bind the parties. Terracom Dev. Grp. Inc. v. Coleman Cable & Wire Co., 365 N.E.2d 1028,

1031 (Ill. App. Ct. 1977) (“Where the reduction of an agreement to writing and its formal
execution is viewed by the parties as a condition precedent to the vesting of rights and duties,
there can be no contract until then, even if the actual terms have been agreed upon.” (quotation
marks omitted)). But “the mere recitation in the writing that a more formal agreement was yet to
be drawn” does not make the letter unenforceable if the parties intend it to be binding. Interway,
Inc. v. Alagna, 407 N.E.2d 615, 618 (Ill. App. Ct. 1980); see also Quake, 565 N.E.2d at 993
(“The fact that parties contemplate that a formal agreement will eventually be executed does not
necessarily render prior agreements mere negotiations, where it is clear that the ultimate contract
will be substantially based upon the same terms as the previous document.” (quotation marks

omitted)).
Thus, to resolve the instant motion, the Court will examine whether the parties intended
the Letter of Intent to be binding. “The determination of the intent of the parties may be a
question of law or a question of fact, depending on the language of the document.” Chi. Inv.
Corp. v. Dolins, 418 N.E.2d 59, 62 (Ill. App. Ct. 1981). If the Letter of Intent’s language “is
unambiguous, the construction of the purported contract is a question of law”; however, if it is
ambiguous, “the determination of [the Letter’s] meaning is a question of fact” and cannot be
resolved at the motion to dismiss stage. See id. The Court will first analyze whether the

4 Both parties agree that Illinois law applies here. See Mem. Supp. Mot. Dismiss 2–4 (citing exclusively to Illinois
law); Resp. Mot. Dismiss 3–9, ECF No. 8 (same).
language of the Letter of Intent is ambiguous and, if it is not, it will then determine what the text
of the Letter indicates as to whether the parties intended to bound by the Letter. See Quake, 565
N.E.2d at 994 (noting that a determination as to whether a Letter of Intent’s language is
ambiguous is a question of law). For the Court to grant Infinity’s motion, the language within
the four corners of the Letter must show “that the alleged contract unambiguously indicated that

it was in reality not a contract, but rather some lesser undertaking by the parties which was a
precursor to a valid and enforceable agreement.” See Dolins, 418 N.E.2d at 62.
a. Ambiguity
A contract is ambiguous if it is “capable of being understood in more senses than one.”
First Nat’l Bank of Chi. v. Victor Comptometer Corp., 260 N.E.2d 99, 102 (Ill. App. Ct. 1970).
A court will consider a letter of intent to be ambiguous as to the parties’ intent, then, if the
language of the letter can be interpreted to both show an intent to be bound and an intent not to
be bound. In analyzing whether an agreement shows an intent to be bound, courts consider
factors such as “whether the agreement contains many or few details, . . . whether the agreement

requires a formal writing for the full expression of the covenants, and whether the negotiations
indicated that a formal written document was contemplated at the completion of the
negotiations.” Quake, 565 N.E.2d at 994. “To determine intent, the entire contract must be
viewed as a whole.” Magnus v. Lutheran Gen. Health Care Sys., 601 N.E.2d 907, 913 (Ill. App.
Ct. 1992).
Here, the Letter of Intent is unambiguous as to the parties’ intent not to be bound. One
clause of the Letter states that “[t]he provisions in this letter of intent are intended only as an
expression of intent on behalf of the Parties; are not intended to be legally binding on either
Party, or the Stockholders; and are expressly subject to the execution of an appropriate Definitive
Agreement.” Letter 2; see also id. at 1 (“This letter of intent is not a binding contract between
the Parties.”). Illinois courts have found that language in a letter of intent stating that a desired
transaction is “subject to” the execution of a definitive agreement is unambiguous, clearly
indicating that “a formal, written agreement [i]s a condition precedent to the formation of a
binding contract.” See Interway, 407 N.E.2d at 619–20; see also Magnus, 601 N.E.2d at 912

(holding that where a letter of intent stated that “[e]ach party’s obligations . . . [were] subject to
and contingent upon the execution of the [definitive agreement],” the letter “was not ambiguous”
and “clearly made the [definitive agreement’s] execution within 30 days a condition precedent to
any binding contract” (quotation marks omitted)). The inclusion of the “subject to” language in
the Letter of Intent in this case makes the Letter similarly unambiguous here. See Letter 2.5
Indeed, “the only result apparent from this language is that neither party would be bound to the
transaction until both had signed a formal and definitive contract,” Terracom, 365 N.E.2d at
1031, which did not happen as the negotiations failed before a Definitive Agreement was
reached.

Vibrant disputes that this language unambiguously establishes that the execution of a
Definitive Agreement was a condition precedent to the formation of a binding contract. Rather,
it argues that the language in the Letter is similar to that of the letter of intent in Quake and
contends that the Court should follow Quake’s lead and find the Letter of Intent ambiguous. See
Resp. Mot. Dismiss 7–9, ECF No. 8. In Quake, the court found that a letter of intent was
ambiguous because certain terms in the letter indicated an intent not to be bound, while other

5 Infinity further points out that the Definitive Agreement’s execution “would be subject to the satisfactory
completion of VIBRANT’s and INFINITY’s due diligence investigation of each other’s businesses and would also
be subject to approval of the Parties’ respective board[s] of directors.” Mem. Supp. Mot. Dismiss 3 (emphasis
omitted) (quoting Letter 1). This additional condition precedent to the formation of a binding contract further
clarifies the parties’ unambiguous intention that the Letter of Intent be only one step in the long process towards an
enforceable agreement.
terms evinced an intent to be bound. Quake, 565 N.E.2d at 996–97. Among the terms implying
an intent to be bound were an indication that “the work was to commence approximately 4 to 11
days after the letter was written” and a clause providing that one party reserved the right to
cancel the letter if the parties could not agree on a fully executed definitive agreement. Id. at
995, 996–97.

The Court finds Quake distinguishable. The Letter includes a reference to a financial call
report scheduled to take place on June 30, 2019, Letter 2, which Vibrant believes is comparable
to the work commencement provision in Quake, Resp. Mot. Dismiss 8. But a plan for the actual
work that is the subject of an agreement to commence in short order (as in Quake) is very
different from the financial call report referenced in the Letter here, which was not the desired
end result of the negotiations (the merger was) but rather merely a part of the discussions
between the parties leading up to the formation of a Definitive Agreement. And there is no
clause in the Letter of Intent providing for the cancellation of the Letter—the Letter only notes
that the Transaction may be cancelled, but the Transaction was to take place only after the

formation of the Definitive Agreement. See Letter 1; cf. Inland Real Est. Corp. v. Christoph, 437
N.E.2d 658, 660 (Ill. App. Ct. 1981) (“The clause ‘at which time this letter shall be null and
void’ evinces the intent to be then bound, for we fail to see the necessity for a provision
nullifying or voiding a writing in the future if the parties never intended for that writing to be
binding from its inception.”); but see Magnus, 601 N.E.2d at 913 (finding that the letter was
unambiguous because it was clear that “the parties intended that execution of the formal
Agreement within 30 days was a condition precedent to the formation of a contract” even though
the letter also provided that “if the Agreement were not executed within 30 days, the [l]etter of
[i]ntent was void”).
Additionally, the letter in Quake did not include the phrase “subject to” or any other
language indicating a condition precedent, Quake, 565 N.E.2d at 992–93, further distinguishing
that letter from the one at hand. See Magnus, 601 N.E.2d at 912–13 (noting that the Quake letter
“did not include a condition precedent or a ‘subject to’ clause” and stating that “[t]here is a
difference between the execution of a formal agreement being a condition precedent to a binding

contract and a mere reference to a future contract”).
Finally, in Quake, “[t]he letter of intent included detailed terms of the parties’
agreement.” Quake, 565 N.E.2d at 996. As Infinity notes, while the Letter of Intent “identifies
some terms that [Vibrant] wished to include in the final Definitive Agreement, if one was
reached[,] [t]hese proposed terms do not include a date that the proposed merger would be
consummated, a date that the Definitive Agreement would be executed, financial terms of the
proposed merger, comprehensive releases, discussion of how assets would conveyed, or
comprehensive warranties and notices.” Mem. Supp. Mot. Dismiss 3–4 (citation omitted). In
the absence of these terms that “would be essential [to] the completion of a successful merger

between two sizable financial institutions,” see id. at 4, the Court finds that the letter reflects “an
incomplete state of agreement,” as questions concerning these important terms “could arise and
would require either clarification or additional agreements before the terms would have
contractual finality.” See Interway, 407 N.E.2d at 620.6 None of the terms which render the
Quake letter ambiguous are present here.
Beyond the comparisons to Quake, Vibrant also points to language in the Letter that
provides that after Infinity signed the Letter, the Letter “w[ould] constitute [their] agreement

6 In Interway, the court also noted that while there were some “inconsistencies exist[ing] on the face of the
document,” they did not render the letter of intent ambiguous but rather “exhibit[ed] the tentative nature” of an
incomplete agreement and “indicate[d] the inconclusive state of the negotiations between the parties.” Interway,
407 N.E.2d at 620.
with respect to its subject matter.” See Resp. Mot. Dismiss 10 (emphasis omitted) (citing Letter
3). However, the letter in Interway likewise contained the phrase “This will confirm our
agreement,” but the court nonetheless found that the letter was not binding because it was
unambiguous that the transaction was subject to a definitive binding contract being executed.
Interway, 407 N.E.2d at 620. As in Interway, the fact that the Letter references an “agreement”

does not counteract the existence of the condition precedent.
The Court does not find that the Letter of Intent can be interpreted in more than one way
as to the parties’ intent. As such, the Court concludes that the Letter is unambiguous.
b. Intent
Having found the Letter of Intent to be unambiguous, the Court may determine the
parties’ intention as to the enforceability of the Letter as a matter of law by looking to the
Letter’s language. See Interway, 407 N.E.2d at 619 (“[I]f the trial court classifies the writings as
unambiguous, then the intention of the parties must necessarily be determined solely from the
language used in the document.”); cf. id. (noting that if a court finds a letter of intent’s language

to be ambiguous, “parol evidence is admissible to explain and ascertain what the parties
intended.” (quotation marks omitted)). As noted above, the Court finds that the Letter’s
language unambiguously indicates that the parties did not intend the Letter to be binding. See
supra Section II(a).
Vibrant proposes an alternate interpretation: that the costs clause is binding “independent
of the execution of a Definitive Agreement” because it applies to costs accrued during merger
negotiations and thus should be treated differently than any clause that might be dependent on
the execution of a subsequent formal agreement. Resp. Mot. Dismiss 4–5.7 It points primarily to

7 Although not made explicit, the Court assumes that Vibrant’s argument here is intended to apply if the Court found
the Letter unambiguous and proceeded to interpreting the Letter’s language to discern the parties’ intention. See
the language stating that Infinity’s duty to pay a portion of the costs was conditioned on the
failure of the Transaction to occur and argues that, as such, this obligation “simply cannot be
read as being dependent upon an eventual Definitive Agreement without reaching an absurd
result.” Id. at 5–6.
The Court disagrees. The plain text of the Letter does not support the interpretation that

the costs clause is binding independent of the execution of a Definitive Agreement. First, the
Letter states that “[t]he provisions in this letter of intent”—not “some provisions” or “the
provisions not discussing merger negotiations”—“are expressly subject to the execution of an
appropriate Definitive Agreement.” See Letter 2. The clear implication is that all provisions in
the Letter, including the costs clause, are subject to the execution of the Definitive Agreement
and cannot be considered binding until this condition precedent is met. See Interway, 407
N.E.2d at 619–20.
Second, the costs clause appears as one of several enumerated terms under the statement,
“[b]ased on the information currently known to VIBRANT, it is proposed that the Definitive

Agreement include the following terms . . . .” See Letter 1–3. This organization makes clear that
the costs clause is set forth as a proposed term to be included in the Definitive Agreement, not as
a term intended to be binding on its own. Vibrant appears to conflate the Definitive Agreement
with the Transaction, and, indeed, if these terms were interchangeable, it would be absurd to
include a clause that could only be triggered by the parties’ failure to reach a Definitive
Agreement when the execution of the Definitive Agreement is itself a condition for the term to
be binding. But these terms are not interchangeable, and looking to the Letter as a whole, see

Resp. Mot. Dismiss 9 (“[T]here is simply no other way to interpret the Letter of Intent than to find the parties
intended to be bound by their agreement to split the merger costs . . . in the event the merger transaction was not
completed.” (emphasis added)).
Magnus, 601 N.E.2d at 913, the Court interprets the costs clause to account for the situation in
which the Definitive Agreement was executed but the Transaction was subsequently cancelled or
failed to come to fruition. Contrary to Vibrant’s representations, there is no support for an
interpretation in which the costs clause, because it applies to costs incurred during merger
negotiations, is binding but other terms that set forth obligations after the execution of a

Definitive Agreement are not.
For these reasons, the Court finds that the Letter of Intent is not binding and, therefore,
that Vibrant has failed to state a claim for breach of contract. The Court grants Infinity’s motion
to dismiss Count I of the complaint.
CONCLUSION
Accordingly, Defendant Infinity Federal Credit Union’s Motion to Dismiss Count I
Pursuant to F.R.C.P. 12(b)(6), ECF No. 6, is GRANTED. Count I is dismissed. Defendant is
directed to file an answer to Count II within 14 days. See Fed. R. Civ. P. 12(a)(4)(A).
Entered this 3rd day of March, 2022.
s/ Sara Darrow
SARA DARROW
CHIEF UNITED STATES DISTRICT JUDGE

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10136640. Public record. Not legal advice.