misleading recommendations of the investments in National.
VI. COUNT VIII -- BREACH OF CONTRACT
In Count VIII, Carl asserts that Galuska contracted to guarantee his investment in National and claims that Galuska has breached this contractual obligation. Galuska challenges the sufficiency of this count.
In order to state a claim for breach of contract, a complaint must allege that a contract existed, that plaintiff performed his contractual obligations, that defendant breached his contractual obligations, and that plaintiff suffered damages as a result. See Derson Group, Ltd. v. Right Management Consultants, Inc., 683 F. Supp. 1224, 1230 (N.D. Ill. 1988). The facts alleged in the complaint, viewed in a light most favorable to Carl, fulfill these requirements.
Carl has alleged that a contract existed, i.e., that Galuska promised to guarantee the investment. The consideration for this promise were the investments in National.
Carl claims to have performed his obligation by investing in National. The claimed breach is Galuska's alleged failure to pay for Carl's losses, which resulted in the damage of the unrecompensed losses themselves.
VII. COUNT IX -- ACCOUNTING
Defendant Galuska challenges plaintiff's demand, in count IX, for an accounting. Galuska argues that he has already disclosed all information he possesses concerning Carl's investment. This is a factual contention, which the court cannot consider on a 12(b)(6) motion to dismiss. See Walker v. Gibson, 604 F. Supp. 916, 920 (N.D. Ill. 1985) (12(b)(6) motion not proper vehicle for fact based defense). As Galuska has raised no legal objection to plaintiff's demand for an accounting, the motion to dismiss this count will be denied.
VIII. COUNT X -- ILLINOIS SECURITIES ACT
In Count X, plaintiff asserts that Galuska violated the Illinois Securities Act. Ill. Rev. Stat. ch. 121 1/2 paras. 137.8, 137.12. Galuska argues that he is exempt from the requirements of the Act because he had a good faith belief that the transactions in question were exempt and because he is a certified public accountant. He has appended a copy of his C.P.A. certificate to his motion.
Again, Galuska has raised factual disputes which cannot be resolved on a 12(b)(6) motion to dismiss. See Walker v. Gibson, 604 F. Supp. at 920. On this motion, the court looks only to the complaint, the facts alleged in which are taken as true. Galuska's characterization of his own state of mind and his C.P.A. certificate are not of the complaint, but rather are evidence supporting possible affirmative defenses. The motion to dismiss count X is denied.
IX. COUNT XI -- NEGLIGENCE
Galuska has challenged count XI, in which Carl claims that Galuska negligently performed his duties as an investment adviser. Galuska argues that Carl has inadequately alleged the elements of duty, breach of duty and causation of damage. He cites Pickett v. First American Savings & Loan Assoc., 90 Ill. App. 3d 245, 412 N.E.2d 1113, 45 Ill. Dec. 531 (5th Dist. 1980). The motion to dismiss this count is denied.
Contrary to Galuska's assertions, Carl has alleged a duty, i.e., that arising from the accountant/investment adviser-client relationship. Further, the alleged breach of that duty and plaintiff's theory of causation are clear from the complaint. Galuska, in the exercise of reasonable care, should have discovered and alerted Carl to the financial problems at National before recommending the investment. If Galuska had recognized the problems and informed Carl of them, the unsuccessful investment would never have been made and the resulting losses would not have occurred.
X. COUNT XII -- BREACH OF CONTRACT
In Count XII, Carl asserts a breach of contract claim against Galuska. This count concerns investments allegedly recommended by Galuska "in addition to" those relating to Calvert, Davis and National. Galuska has challenged this count under Fed. R. Civ. P. 12(2), asserting lack of subject matter jurisdiction.
Plaintiff characterizes count XII as being a pendent claim to the federal securities' claims in counts I and II. In order to be subject to the court's pendent jurisdiction, a state law claim and the main federal claim must derive from a "common nucleus of operative fact." See United Mine Workers v. Gibbs, 383 U.S. 715, 725, 16 L. Ed. 2d 218, 86 S. Ct. 1130 (1966).
The nucleus of operative fact implicated by Carl's federal law claims are the dealings where Galuska solicited investments on behalf of Calvert and Davis. Because they concern different investment targets and different recommendations by Galuska, claims pertaining to the different investments referred to in Count XII would require an entirely distinct set of proof from the federal claims. The claims in count XII therefore do not concern the same nucleus of fact as the claims based on federal law. As a result, count XII cannot be supported by pendent jurisdiction.
Nor can jurisdiction be conferred on a diversity theory. The complaint alleges that plaintiff Carl is a "citizen of the United States and a resident and domiciliary of the state of Israel." (Complaint, para. 1.) A U.S. citizen residing abroad is not a citizen of any state and therefore cannot maintain a suit in federal court where jurisdiction is based solely on diversity of citizenship. See Sadat v. Mertes, 615 F.2d 1176, 1180 (7th Cir. 1980); 28 U.S.C. § 1332(a)(1). Because the state law claims in count XII are not viable as either pendent or diversity claims, they are dismissed for lack of subject matter jurisdiction.
For the reasons stated in this memorandum opinion and order, defendant Galuska's motion to dismiss count XII for lack of subject matter jurisdiction is GRANTED. His motion to dismiss the other counts is DENIED. Parties are urged to discuss settlement of the case. The case is set for further status on February 6, 1992 at 10 a.m.
JAMES F. HOLDEPMAN
United States District Judge
DATED: February 4, 1992