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November 18, 1997

CUMIS INSURANCE SOCIETY, INC., a foreign corporation, Plaintiff,

The opinion of the court was delivered by: ALESIA

 Before the court are three motions filed by defendants Gary A. Peters ("Peters"), Marvin Glanzrock ("Glanzrock"), and Guardian Collection Service, Inc. ("Guardian") (all three defendants collectively referred to as "defendants"). These three motions are defendants' (1) motion to dismiss plaintiff Cumis Insurance Society, Inc.'s ("Cumis") complaint pursuant to Federal Rule of Civil Procedure 12(b)(6); (2) defendants' motion for a more definite statement pursuant to Federal Rule of Civil Procedure 12(e); and (3) defendants' motion to strike immaterial statements contained in plaintiff's complaint pursuant to Federal Rule of Civil Procedure 12(f). For the reasons that follow, the court (1) grants in part and denies in part defendants' Rule 12(b)(6) motion to dismiss; (2) denies defendants' Rule 12(e) motion for a more definite statement; and (3) grants in part and denies in part defendants' Rule 12(f) motion to strike immaterial statements.


 The complaint alleges the following facts which, for the purpose of ruling on defendants' Rule 12(b)(6) motion, are taken as true. Hishon v. King & Spalding, 467 U.S. 69, 73, 81 L. Ed. 2d 59, 104 S. Ct. 2229 (1984). Defendant Guardian is a collection agency. Defendants Peters and Glanzrock are the sole directors, officers, and shareholders of Guardian. Prior to the filing of this lawsuit, Cumis had been a client of Guardian for fifteen years. Pursuant to an agreement between Cumis and Guardian ("the agreement"), defendants would attempt to collect debts owed to Cumis by third parties. In return for their services, Cumis paid Guardian commissions.

 The method for paying the commissions was that Guardian would deduct the commissions it had earned from the money that it had collected and then remit the balance to Cumis. The agreement required Guardian to send to Cumis quarterly remittance/accounting statements ("accounting statements") for each Cumis account on which money was collected. The accounting statement for each account was to state the total amount collected, the amount deducted by Guardian for its commissions, and the balance owed to Cumis. Along with each accounting statement, Guardian was to send a check payable to Cumis in the net amount collected on behalf of Cumis along with each accounting statement.

 In approximately August of 1996, Cumis began to suspect that defendants had been wrongfully withholding money that was collected on behalf of and owed to Cumis. To determine if that was true, in approximately October of 1996, Cumis asked defendants to allow Cumis to conduct an audit of the collection records maintained by Guardian. Pursuant to that request, defendants granted Cumis access to some, but not all, of the documents and records related to the collection histories on Cumis accounts for the two prior years.

 After examining the records and documents to which it was allowed access, Cumis determined that Guardian had wrongfully withheld from Cumis over $ 132,000. The money was withheld under a system devised by Peters and Glanzrock pursuant to which defendants would collect money owed to Cumis, would not disclose the collection to Cumis, and then would convert the money to their own personal accounts. In March of 1997, Cumis demanded defendants to turn over all funds wrongfully withheld. Defendants refused to return the money owed to Cumis.

 In response to Cumis' complaint, defendants have filed three motions. The court will address each of these motions in turn.


 A. Defendants' motion to dismiss counts I-VI and VIII

 1. Standard for deciding a Rule 12(b)(6) motion to dismiss

 When deciding a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), the court must accept all factual allegations in the complaint as true and draw all reasonable inferences in favor of the plaintiff. Cromley v. Board of Educ. of Lockport, 699 F. Supp. 1283, 1285 (N.D. Ill. 1988). If, when viewed in the light most favorable to the plaintiff, the complaint fails to state a claim upon which relief can be granted, the court must dismiss the case. See FED. R. CIV. P. 12(b)(6); Gomez v. Illinois State Bd. of Educ., 811 F.2d 1030, 1039 (7th Cir. 1987). However, the court may dismiss the complaint only if it appears beyond a doubt that the plaintiff can prove no set of facts in support of his claim that would entitle him to relief. Conley v. Gibson, 355 U.S. 41, 45-46, 2 L. Ed. 2d 80, 78 S. Ct. 99 (1957).

 Even under the liberal notice pleading standard of the Federal Rules of Civil Procedure, however, a complaint must include either direct or inferential allegations respecting all material elements of the claims asserted. Perkins v. Silverstein, 939 F.2d 463, 466 (7th Cir. 1991). Bare legal conclusions attached to narrated facts will not suffice. Strauss v. City of Chicago, 760 F.2d 765, 768 (7th Cir. 1985).

 2. Count I -- Fraud

 Count I is a claim against all three defendants for fraud. Defendants have moved to dismiss Count I, making three arguments in support their motion. The court will consider each of these arguments in turn.

 a. Common law elements of fraud

 First, defendants argue that Count I fails to allege sufficiently a claim for fraud. Under Illinois law, *fn1" the elements for common law fraud are:

(1) a false statement of material fact; (2) the party making the statement knew or believed it to be untrue; (3) the party to whom the statement was made had a right to rely on the statement; (4) the party to whom the statement was made did rely on the statement; (5) the statement was made for the purpose of inducing the other party to act; and (6) the reliance by the person to whom the statement was made led to that person's injury.

 Siegel v. Levy Org. Dev. Co., Inc., 153 Ill. 2d 534, 607 N.E.2d 194, 198, 180 Ill. Dec. 300 (Ill. 1992) (citing Redarowicz v. Ohlendorf, 92 Ill. 2d 171, 441 N.E.2d 324, 65 Ill. Dec. 411 (Ill. 1982)).

 Defendants argue that Cumis cannot properly allege that it acted in reliance on any misrepresentations made by defendants. The gist of defendants' argument is that because Cumis was obligated under the agreement to send accounts to defendants, Cumis cannot allege that it sent accounts to Guardian in reliance on the alleged misrepresentations.

 The fact that the parties allegedly had an agreement does not negate Cumis' allegation that it sent accounts to Guardian in reliance on Guardian's misrepresentations. For example, even if the agreement required Cumis to send accounts to Guardian, this does not necessarily mean that Cumis was required to send to Guardian all of the accounts that Cumis allegedly sent. Similarly, the agreement possibly might have provided that if one party breaches the agreement, the other party is not obligated to perform further under the agreement. Thus, the court cannot determine at this stage of the litigation that Cumis cannot properly allege that it relied on any misrepresentations made by Guardian.

 b. Economic losses

 Defendants' second argument is that Cumis cannot state a claim for fraud because "it is axiomatic under Illinois law that a party may not recover in tort for what is essentially a breach of contract cause of action." (Defs.' Memo. in Support of Its Rule 12(b)(6) Mot. to Dismiss Counts I-VI and VIII of the Pl.'s Compl. (hereinafter "Defs.' Memo") at 3.) Defendants cite Johnson v. George J. Ball, Inc., 248 Ill. App. 3d 859, 617 N.E.2d 1355, 187 Ill. Dec. 634 (Ill. App. Ct. 1993), and Bankest Imports, Inc. v. ISCA Corp., 717 F. Supp. 1537 (S.D. Fla. 1989), in support of their argument.

 The cases that defendants cite do no support their argument. The main case on which defendants rely is Johnson. However, Johnson is simply not on point. In Johnson, the court was addressing the issue of whether the plaintiff could maintain separate causes of action for breach of contract and fraud in the inducement. Johnson, 617 N.E.2d at 1361. The particular sentence on which defendants rely was dicta and cannot be taken out of context, as defendants have done here, to support their argument that Cumis cannot maintain both a breach of contract claim and a fraudulent misrepresentation claim.

 Defendants also cite Bankest Imports. Bankest Imports explains that Florida law does not allow a party to bring a tort action to recover economic losses which resulted from the purchase of product or service unless there is a claim for personal injury or damage to property. Bankest Imports, 717 F. Supp. at 1540. Under Florida law, the plaintiff must bring a breach of contract action to recover such economic losses. Id.

 Bankest Imports, however, addresses Florida law. Under Illinois law, a plaintiff can recover in tort for economic loss where the defendant has made intentional false representations. Moorman Mfg. Co. v. National Tank Co., 91 Ill. 2d 69, 435 N.E.2d 443, 452, 61 Ill. Dec. 746 (Ill. 1982); Trans States Airlines v. Pratt & Whitney Can., Inc., 177 Ill. 2d 21, 682 N.E.2d 45, 48, 224 Ill. Dec. 484 (Ill. 1997) (reiterating the well-established exception to the Moorman economic loss rule which allows a plaintiff to recover his economic losses in a tort action "where the plaintiff's damages are proximately caused by a defendant's intentional, false representation"). In this case, Cumis has alleged that ...

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