Thomas L Pearson and the Pearson Family Members Foundation, The v. University of Chicago, The

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF OKLAHOMA

THE THOMAS L. PEARSON AND

PEARSON FAMILY FOUNDATION,

Plaintiff and Counterclaim

Defendant, Case No. 18-99-JWB

v.

THE UNIVERSITY OF CHICAGO,

Defendant and Counterclaim

Plaintiff.

MEMORANDUM AND ORDER

This matter is before the court on the parties’ proposed pretrial order. This court held a

pretrial hearing by phone on December 14, 2023, and it became clear that the parties could not

agree what claims and issues are ripe for trial. The court therefore issues the following order to

definitively rule on what currently contested aspects of the case will proceed to trial, and it orders

the parties to submit an amended proposed pretrial order by June 20 based on the rulings herein.

I. Background

The court has set forth the factual background and early procedural history of this case in

detail in a prior order. (Doc. 360.) Hence, the court recounts only the background necessary for

deciding the disputed pretrial order provisions.

Plaintiff’s amended complaint alleged express breaches of contract, breaches of the implied

duty of good faith and good dealing, fraudulent inducement, and unilateral mistake. See (Doc.

110.) Plaintiff also sought the equitable remedy of recission and punitive damages. See (id.) The

court has granted summary judgment for the University on the following express breach of contract

claims:

 the quality of the March 2017 Definitive Operating Plan and Budget,

 the timeliness of the University’s faculty appointments,

 the University’s appointment of an Institute Director and Executive Director, and

 creating and developing a new academic curriculum.

(Id. at 62.) The court also struck from the amended complaint the express breach of contract claim

regarding the University’s alleged failure to provide an Initial Budget that complied with § 3.1(d)

because it exceeded the scope of the leave to amend. (Id.) Next, the court granted summary

judgment on Plaintiff’s claim for unilateral mistake and Plaintiff’s request for punitive damages.

(Id.) The court has also since granted the University summary judgment on Plaintiff’s express

breach of contract claim regarding faculty qualifications. (Doc. 427.) The court, however, denied

the University summary judgment on Plaintiff’s fraudulent inducement claim and on Plaintiff’s

remedy of equitable recission. (Id. at 50–53, 56–60.) With this background in mind, the court

proceeds to the claims Plaintiff alleges remain in the case.

II. Analysis

The parties contest many claims in the pretrial order. The court analyzes whether the

contested claims are properly in the case at this stage of litigation. The court will address in more

detail how to properly formulate the claims in proposed jury instructions at a future conference.

A. Breach of Contract Claims

The University claims that there are six unpled express breach of contract claims for which

Plaintiff cannot establish good cause for failing to allege until now and should thus be removed

from the pretrial order. See (Doc. 417 at 28.) The disputed claims are at paragraphs 61, 64, 65,

67, 69, and 71. The claims allege that (1) the University breached § 3.1(d) in the Grant Agreement

by unilaterally reducing the number of Fellows and/or Scholars; (2) the University overcharged

the Pearson Institute (“TPI”) on rent; (3) the University failed to properly report or disclose a ten

percent tax or assessment on the Pearson Fund; (4) the University breached its confidentiality

obligations, leading to publication of confidential information; (5) the University breached § 3.1(a)

of the Grant Agreement by failing to develop a plan for dignitaries and invited visitors to TPI; and

(6) the University failed to hire a Grants Administrator and a Communications Manager. (PPTO

¶¶ 61, 64, 65, 67, 69, 71.) Plaintiff effectively admits that it has never pleaded these claims, but

instead argues that the University should be on notice of these claims because the topics have come

up during discovery. (Doc. 416 at 13–15.) Alternatively, Plaintiff argues that the court should

freely grant leave to amend. (Id. at 9.)

Regarding Plaintiff’s argument that it can constructively amend its complaint carte blanche

because the University failed to object to some requests for admission or to certain deposition

subject-matter is a dubious proposition. In determining what is relevant for discovery, “a flexible

treatment of relevance is required and the making of discovery, whether voluntary or under court

order, is not a concession or determination of relevance for purposes of trial.” Fed. R. Civ. P.

26(b)(1) advisory committee’s note to 1970 amendment (emphasis added). The standard for

discovery is broader than what is admissible at trial. Touching on a topic in discovery is not

automatically akin to formal amendment. And, more importantly, Plaintiff ignores the fact that

ordinarily, formal claim amendment is required in the Tenth Circuit. Smith v. Aztec Well Servicing

Co., 462 F.3d 1274, 1285 (10th Cir. 2006) (“[W]e typically expect plaintiffs to file a formal motion

to amend their pleadings if they want to add an entirely new claim to their complaint.”) In Smith,

the Tenth Circuit affirmed the district court’s denial of adding a claim to a pretrial order based on

interrogatory responses by the plaintiff over a year prior. Id. There, the original claim was for

compensation for travel to and from a work site, and the new interrogatory-based claim would

have covered alleged uncompensated time at the work site. See id. at 1284. Similarly here, the

amended complaint alleged certain express breaches of contract, and now Plaintiff is attempting

to allege new contractual breaches. The court finds references to potential new issues in discovery

did not include new claims in the case.

Which brings the court to Plaintiff’s second argument regarding leave to amend—

Plaintiff’s requested standard is incomplete. The initial scheduling order in this case established a

deadline to amend the pleadings on September 21, 2018. (Doc. 47.) Because the scheduling order

deadline has (long) passed, Plaintiff must also meet the applicable Rule 16 standard—good

cause—to amend its pleadings via the pretrial order. See Gorsuch, Ltd., B.C. v. Wells Fargo Nat.

Bank Ass’n, 771 F.3d 1230, 1241 (10th Cir. 2014). Plaintiff provides no justification, let alone

good cause for these brand new claims to enter the case at this late stage. This case contrasts with

cases like Minter v. Prime Equipment Co., 451 F.3d 1196 (10th Cir. 2006), where a defendant’s

late discovery disclosure justified a plaintiff’s attempt to amend his claims three weeks before the

trial date. Id. at 1206–07. The court thus strikes the aforementioned express breach of contract

claims from the proposed pretrial order.

B. Good Faith and Fair Dealing Claims

Before addressing Plaintiff’s specific claims, the court notes at the outset that Plaintiff

attempts to lump all its good faith allegations in a single claim. (Doc. 416 at 16.) As Plaintiff puts

it in the proposed pretrial order:

[Plaintiff] bargained for the creation and operation of an institute that would have

long-term financial stability and which would be operated by an academic partner

who was acting in good faith and in accordance with its own standards and

procedures. By engaging in the forgoing actions and inactions in breach of its

express obligations and its implied duty of good faith and fair dealing, the

University has caused [Plaintiff] to lose these central benefits of the Grant

Agreement for which they bargained.

(PPTO at 41.)

Plaintiff, however, provides no caselaw to back up this characterization of its claims in its

supplemental briefing. And characterizing a breach of good faith and fair dealing as encompassing

express breaches of contract is contradictory. See Spinelli v. Nat’l Football League, 903 F.3d 185,

206 (2d Cir. 2018) (“A party certainly cannot succeed on claims for both breach of an express

contract term and breach of the implied covenant based on the same facts . . . .”). And Plaintiff

elsewhere in the proposed pretrial order systematically outlines specific contract provisions where

it believes that the University, while not necessarily breaching an express provision, undermined

what a reasonable party would have expected to gain from that provision. (PPTO at 6, 9–12.) This

approach appears consistent with the University’s construction of Plaintiff’s claims and with New

York law. See Travellers Int’l, A.G. v. Trans World Airlines, Inc., 41 F.3d 1570, 1577 (2d Cir.

1994) (holding the district court properly concluded there was a duty to exercise specific

contractual promotional obligations in good faith). The court thus rejects Plaintiff’s suggested

schema that it has a single good faith and fair dealing claim with many facets regarding the entirety

of the Grant Agreement and proceeds with analyzing individual good faith and fair dealing claims.

First, the parties contest whether Plaintiff may bring a good faith and fair dealing claim

based on the University’s purported failure to regularly report on TPI’s budgeting and financial

condition. The University argues, inter alia, that such a claim fails as a matter of law because it

would impermissibly undermine express provisions of the contract, which the court previously

dealt with at summary judgment. (Doc. 417 at 15, 21.)

“Under New York law, a covenant of good faith and fair dealing is implied in all contracts.”

Cambridge Cap. LLC v. Ruby Has LLC, 565 F. Supp. 3d 420, 455 (S.D.N.Y. 2021) (quoting State

St. Bank & Tr. Co. v. Inversiones Errazuriz Limitada, 374 F.3d 158, 170 (2d Cir. 2004)). But

“[n]o obligation can be implied . . . which would be inconsistent with other terms of the agreement

of the parties.” Id. (alteration original) (citation omitted). “Absent a connection to an express or

presumed contractual right or obligation, the doctrine [of good faith and fair dealing] ‘does not

import a generalized code of good conduct into the law of contracts.’” Id. at 456 (citation omitted).

For example, “[w]here a contract allows a bank to withhold consent for particular conduct and sets

no express restrictions on the bank’s right to do so, the bank is not prohibited from unreasonably

or arbitrarily withholding such consent.” State St. Bank & Tr. Co., 374 F.3d at 170.

Here, Plaintiff is clearly attempting to resurrect an express breach of contract claim that it

lost at the summary judgment phase as a good faith and fair dealing claim. Plaintiff is again

asserting in the proposed pretrial order that the Initial Budget did not list outside funding sources,

that the first time Plaintiff learned the endowment was insufficient to cover all TPI and Pearson

Forum expenses was when it received the Definitive Budget in 2017, and that it had a reasonable

expectation that it would be appraised of all budgetary sources. See (PPTO ¶¶ 15–31.) Moreover,

Plaintiff continues to allege that the University committed some grave breach of the parties’

relationship with the much-ballyhooed budgetary footnote, which stated that Harris School

contributions to TPI and the Pearson Forum were subject to reevaluation. (Id. ¶ 22.)

The court previously held that the express terms of the contract clearly did not require the

preliminary budget to contain information about other funding sources for TPI and the Pearson

Forum when it denied Plaintiff summary judgment, and, more importantly, struck the claim based

on the preliminary budget requirements in § 3.1(d) of the Grant Agreement as exceeding the scope

of leave to amend. (Doc. 360 at 22–32.) The court also granted the University summary judgment

on the express breach of contract claim regarding the Definitive Budget’s reevaluation footnote.

(Id. at 33.) The court based its holdings on express contract provisions and uncontroverted facts.

(Id. at 23 (“And here, the only logical reading of the Grant Agreement as a whole is that § 3.1(d)

merely required the Initial Budget to reflect how Plaintiffs’ endowment was being used.”), 34

(“[Plaintiff] cite[s] no evidence to support its allegations that the [Definitive Budget] contained

material errors, failed to meet standards of quality or professionalism, or otherwise was unfit for its

intended use.”).) Plaintiff fails to show that it has been deprived of an implied benefit of the bargain

regarding the budgetary process. Plaintiff is rather seeking to imply a benefit to the Grant

Agreement inconsistent with the terms of the agreement. Moreover, any minor attempt to allege

additional facts at this stage of litigation in a half-hearted effort to differentiate the good faith claim

from the express breach claim, after the court granted summary judgment, is merely

inappropriately trying to amend claims after a scheduling deadline without good cause. See

Gorsuch, Ltd., 771 F.3d at 1241. (“[P]arties seeking to amend their complaints after a scheduling

order deadline must establish good cause for doing so.”). The court therefore holds that Plaintiff

has no ground to assert a good faith and fair dealing claim based on the Initial Budget, the

Definitive Budget, or the financial reporting by the University regarding the budgetary process.

Second, the University argues that Plaintiff cannot have a good faith and fair dealing claim

based on the University’s alleged failure to provide necessary leadership by failing to hire an

Executive Director and hiring James Robinson as an unqualified Institute Director. (Doc. 417 at

22.) The University argues, inter alia, that such a claim is inconsistent with this court’s

interpretation of express contract provisions, and a duty of good faith cannot be implied where it

would contradict an express contract provision. (Id. at 24.) The court agrees with the University.

The court held at summary judgment that the University (1) had hired a qualified Institute Director,

and (2) that the University was not required to hire an Executive Director under the express terms

of the fully integrated contract. (Doc. 360 at 44–48.) To hold that Plaintiff could recover under a

good faith theory would contradict the court’s interpretation of the contract’s express terms, for

instance, that the University fulfilled its obligation to appoint an Institute Director who was a

prominent faculty member with an established record of published scholarship demonstrating his

commitment to issues relevant to TPI’s work. (Id. at 45 (citing (Doc. 6 § 3.2(a))). Similarly holding

that good faith required the University to appoint an Executive Director would also be contradictory

to the clear terms of the contract, which provide many details about leadership appointment but do not

require appointment of an Executive Director. Plaintiff thus cannot assert a good faith claim based on

the Institute Director and Executive Director issues at trial.

Third, Plaintiff argues that it can base a good faith and fair dealing claim (at least in part)

on the University’s failure to develop a unique curriculum for TPI. (Doc. 416 at 18–19.) The

court granted summary judgment for the University on Plaintiff’s express breach of contract claim

based on essentially the same operative facts as the current curriculum assertions because “the

Grant Agreement is not ambiguous. The operative terms of the contract merely require the

University to offer a certain number of classes ‘relating to the study of global conflict and its

resolution’ by the dates set forth in the Initial Operating Plan.” (Doc. 360 at 50 (citing (Doc. 6

§ 3.1(a), Ex. C-1–C-5).) Thus, to hold that a duty of good faith required the University to develop

an entirely new curriculum for TPI is inconsistent with the express terms governing the courses

offered by the University through TPI. The court holds Plaintiff cannot assert a good faith and fair

dealing claim based off its desire for a unique curriculum at trial. Plaintiff also lists a failure to

have chaired faculty each teach two to four courses a year in the PPTO as a breach of the duty of

good faith and fair dealing. (PPTO ¶¶42–44.) This good faith claim was never pled, and Plaintiff

has not established good cause to assert such a claim. Gorsuch, Ltd., 771 F.3d at 1241.

Next, the parties dispute whether Plaintiff can properly allege a breach of the duty of good

faith and fair dealing regarding the University’s faculty chairs selection process. The court

analyzed this claim in detail in its summary judgment order. (Doc. 427 at 6, 8–9.) For the reasons

discussed in that order, the court finds that Plaintiff properly alleged, and that the University failed

to seek summary judgment on, this claim. A good faith and fair dealing claim based on the faculty

selection process is sufficiently distinct from the faculty quality claim for which the court granted

summary judgment and will thus be preserved in the pretrial order.

Finally, Plaintiff seeks to hold the University accountable on a good faith and fair dealing

theory based on what it describes as an alleged pattern of concealment. (PPTO ¶¶ 50–60.) The

University argues that the claims in paragraphs 54, 57, and 59 are not pled in the amended

complaint. (Doc. 417 at 27–28.) These allegations include (1) that the University unilaterally

changed TPI’s mission statement, (2) that the University deleted an employee biography off a

website, and (3) that the University failed to inform Plaintiff that TPI office space was being used

by individuals unassociated with TPI. (PPTO ¶¶ 54, 57, 59.) The University is correct. These

allegations are not factual support for a previously alleged claim, they are new claims. See (Doc.

110 (failing to allege any claim related to changing a mission statement, deleting website

information, or using TPI offices for non-TPI employees).) And Plaintiff fails to even attempt to

establish good cause to amend its pleadings after the scheduling order deadline has long passed.

See Gorsuch, Ltd., 771 F.3d at 1241. To show good cause, Plaintiff needed to show that scheduling

deadlines could not be met despite its diligent efforts. Id. at 240. The court thus strikes these

claims from the proposed pretrial order.

C. Other Issues Remaining

Based on this court’s prior rulings, the court makes the following notations for the benefit

of the record. Plaintiff may assert at trial its claim for fraudulent inducement based on its allegation

that it was induced to enter the Grant Agreement based on the University’s failure to disclose the

total operating costs of TPI and the Pearson Forum. (Doc. 360 at 52.) Plaintiff has also preserved

its request for the equitable remedy of recission. (Doc. 360 at 60.) Therefore, this claim and

accompanying remedy will also be included in the pretrial order. The court also notes that it is

undisputed that the University has a counterclaim for a breach of the Grant Agreement, and that

Plaintiff has not objected to the University’s request to amend its counterclaim in the pretrial order.

III. Conclusion

The court therefore orders the parties to provide to the court, via email to the chambers

email address, an amended proposed pretrial order consistent with the above rulings by June 20.

The court also imposes the following rules. The parties’ factual background sections are limited

to five pages each, in total. The amended proposed pretrial order should be no more than 25 pages

total.

IT IS SO ORDERED.

Dated: June 6, 2024 /s/John W. Broomes

JOHN W. BROOMES

UNITED STATES DISTRICT JUDGE