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NATIONAL SERV. ASSN. v. CAPITOL BANKERS LIFE INS.

August 25, 1993

NATIONAL SERVICE ASSOCIATION, INC., an Illinois corporation and S.B. LEXINGTON, INC., an Illinois corporation, Plaintiffs,
v.
CAPITOL BANKERS LIFE INSURANCE COMPANY, INC., a Minnesota corporation, Defendant.



The opinion of the court was delivered by: CHARLES RONALD NORGLE, SR.

 CHARLES R. NORGLE, SR., District Judge:

 Before the court is defendant Capitol Bankers Life Insurance Company's ("Capitol Bankers") motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6). The motion is granted in part and denied in part for reasons stated below. The court grants leave to file an amended complaint in compliance with this opinion.

 FACTS

 Plaintiff National Service Association, Inc. ("National Service") is an Illinois insurance broker and is in the business of marketing and administering life insurance products. According to the complaint, Capitol Bankers entered into a written contract with National Service on April 1, 1984 providing that National Service was to perform marketing and administrative services on Capitol Bankers' behalf to facilitate the sale of Capitol Bankers' life insurance products. Plaintiff S.B. Lexington, Inc. ("Lexington") is in the business of selling life insurance. Lexington allegedly contracted with Capitol Bankers on April 21, 1980 to act as a general agent for Capitol Bankers. This relationship lasted nearly nine years.

 The complaint alleges that National Service performed its contractual obligations by assisting with and conducting marketing seminars with Capitol Bankers' sales agents and producers, by providing technical advice to Capitol Bankers' sales agents, and by creating and administering the Voluntary Employees' Beneficiary Associations ("VEBA") plans and trusts. The complaint states that National Service invested a large amount of time and money into marketing and recruiting insurance agents and clients for Capitol Bankers. Capitol Bankers, however, failed to compensate National Service according to the agreement, billed clients directly in violation of the agreement, failed to pay for the advertising, promotional, and sales material for which they were obligated to pay according to the agreement, failed to introduce its policy and the policy's use with the VEBA to general agents and producers, and improperly terminated the agreement. Furthermore, Capitol Bankers allegedly purloined the agents and clients recruited by National Service in order to sell a different, comparable life insurance product and in order to avoid paying commissions and fees to National Service.

 Capitol Bankers notified National Service that their agreement was terminated and allegedly immediately ceased performing its obligations, although the contract provides that their obligations were to continue for another six months. The complaint alleges that, following the termination of the agreement, National Service continued to administer Capitol Bankers' insurance policies and procured the payment of premiums from insureds at the request of and for the benefit of Capitol Bankers.

 The complaint also alleges that Lexington performed its obligations as general agent. Lexington hired insurance sales agents, conducted sales training, and provided office space and materials to agents for the purposes of producing sales of Capitol Bankers' life insurance products. Beginning around February of 1985, Capitol Bankers allegedly failed to pay Lexington for its sales of Capitol Bankers' life insurance products. Also, Capitol Bankers allegedly pirated agents and clients Lexington recruited in order to sell its products and avoid payment to Lexington. Following the termination of the agreement between Capitol Bankers and Lexington, Lexington allegedly continued to procure the payment of premiums from insureds at the request of and for the benefit of Capitol Bankers.

 The eight-count second amended complaint filed by National Service and Lexington seeks an accounting, alleges breach of contract, alleges breach of covenant of good faith, alleges quantum meruit and unjust enrichment, claims intentional interference with National Service's prospective business advantage, and seeks recovery on behalf of Lexington for an account stated. Capitol Bankers filed the present motion to dismiss counts I through V, VII, and VIII of the second amended complaint.

 DISCUSSION

 This court must emphasize that, on a motion to dismiss, all well-pleaded factual allegations are accepted as true, as well as all reasonable inferences drawn from those allegations. Mid America Title Co. v. Kirk, 991 F.2d 417, 419 (7th Cir. 1993). Because federal courts simply require "notice pleading," Leatherman v. Tarrant County Narcotics Intelligence & Coordination Unit, 122 L. Ed. 2d 517, 113 S. Ct. 1160, 1163 (1993), this court construes pleadings liberally. See Powell Duffryn Terminals, Inc. v. CJR Processing, Inc., 808 F. Supp. 652, 654 & n.1, 655-56 (N.D. Ill. 1992). A complaint's mere vagueness or lack of detail is not sufficient to justify a dismissal. Strauss v. City of Chicago, 760 F.2d 765, 767 (7th Cir. 1985). In construing reasonable inferences, however, the court need not stretch allegations beyond their sensible and reasonable implications. Chan v. City of Chicago, 777 F. Supp. 1437 (N.D. Ill. 1991). And although a complaint need not specify the correct legal theory to survive a motion to dismiss, Tolle v. Carroll Touch, Inc., 977 F.2d 1129, 1134-35 (7th Cir. 1992) (citing Bartholet v. Reishauer A.G., 953 F.2d 1073, 1078 (7th Cir. 1992)), the complaint must allege all elements of a cause of action necessary for recovery, Ellsworth v. City of Racine, 774 F.2d 182, 184 (7th Cir. 1985), cert. denied, 475 U.S. 1047, 89 L. Ed. 2d 574, 106 S. Ct. 1265 (1986). A party fails to state a claim upon which relief may be granted only if that party can prove no set of facts upon which to grant legal relief, Ross v. Creighton Univ., 957 F.2d 410, 413 (7th Cir. 1992).

 Counts I and V seek, on behalf of National Service and Lexington respectively, an equitable accounting and alternatively damages for breach of contract. Because an accounting is an equitable remedy, the court possesses broad discretion to refuse to award such a remedy if the party has an adequate remedy at law. First Commodity Traders, Inc. v. Heinold Commodities, Inc., 766 F.2d 1007, 1011 (7th Cir. 1985). National Service and Lexington can demonstrate that there is no adequate remedy at law if the accounts between them and Capitol Bankers are of such a complicated nature that resort can only be made to an equitable remedy. Dairy Queen, Inc. v. Wood, 369 U.S. 469, 478, 8 L. Ed. 2d 44, 82 S. Ct. 894 (1962); TMF Tool Co. v. H.M. Financiere & Holding, S.A., 689 F. Supp. 820, 825 (N.D. Ill. 1988).

 Capitol Bankers claims that the discovery in this case should have produced enough documents to make the measure of contract damages ascertainable, and therefore the equitable remedy of an accounting is inapplicable. Nonetheless, for the purpose of this motion to dismiss, the allegations in the complaint are true. The complaint establishes that both National Service and Lexington have not received information necessary to ascertain the amounts due them even after they demanded the information from Capitol Bankers. Further, though the complaint alleges in the alternative a claim for money damages for breach of contract, the complaint also alleges that the damages cannot be determined from the records that have been available to it in the course of discovery. See Heinhold Commodities, 766 F.2d at 1011. Thus, a determination of damages may not be possible without the need for an equitable accounting, as is alleged.

 Nevertheless, National Service and Lexington have not alleged the accounts are complicated as to be beyond the comprehension of a trier of fact. See TMF Tool, 689 F. Supp. at 825; Cleland v. Stadt, 670 F. Supp. 814, 818-19 (N.D. Ill. 1987). The types of fees and commissions alleged in the complaint -- the amount of which is unknown to National Service and Lexington -- may be the type of information particularly susceptible to an equitable accounting. But the court will not deem the legal remedies inadequate merely because the measure of damages due National Service and Lexington necessitates a resort to business records. Zell v. Jacoby-Bender, Inc., 542 F.2d 34, 36 (7th Cir. 1976). The court dismisses counts I and in on that basis but grants both plaintiffs leave to file an amended ...


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