did not exist for purposes of Count II is the same as the "agreement or understanding" which plaintiffs must allege existed in order to state a claim in Count I.
We find that at a minimum plaintiffs' complaint on this matter is in need of some substantial clarification. Plaintiffs' comment in its memorandum in response clearly seems to disavow the existence of the very same business relationships that must necessarily exist in order for us to hold that Count I is facially valid. Accordingly, we grant Datro's motion to dismiss Count I without prejudice and with leave to amend within 20 days.
B. Count V: Breach of Fiduciary Duty
In Count V plaintiffs allege that, as the their mortgage brokers, Dolphin and Datro were in a fiduciary relationship with them and consequently owed them typical fiduciary duties such as honesty and diligence. They allege that Dolphin and Datro breached these duties when they failed to act in plaintiffs best interest in finding a mortgage.
Although Dolphin and Datro purportedly move to dismiss this count, the briefs they submitted attack only the factual contentions of plaintiffs' complaint. In fact, Dolphin's motion reads more like an answer in that instead of outlining the necessary elements of plaintiffs' case and then demonstrating on which one plaintiffs have failed to meet their burden, it simply admits and denies certain statements of fact in the complaint. Such contentions are insufficient to demonstrate that plaintiffs have failed to state a claim because for purposes of such a motion the court accepts all well-pled allegations of the complaint as true. Miree v. DeKalb County, 433 U.S. 25, 27, n.2, 53 L. Ed. 2d 557, 97 S. Ct. 2490 (1977). Moreover, any factual ambiguities are construed in favor of the plaintiff. Curtis v. Bembenek, 48 F.3d 281, 283 (7th Cir. 1995). Accordingly, both Dolphin's and Datro's motions to dismiss Count V are denied.
IV. Counts IV, IX, X: Defendant Zachary
Defendant George Zachary, the president and controlling shareholder of Beneficial Construction,
is named as a defendant in Counts IV, IX and X.
All of these claims are based on the Illinois Consumer Fraud Act (ICFA). Zachary has filed a motion to dismiss all three counts.
A. Count IV: The Illinois Consumer Fraud Act
In Count IV plaintiffs allege that Zachary and Beneficial Construction engaged in unfair and deceptive practices in violation of the Illinois Consumer Fraud Act by arranging the financing for the construction work in such a way that plaintiffs would be left without recourse in the event the defendants took plaintiffs' money and abandoned the work.
ICFA generally prohibits the use of unfair or deceptive practices in the conduct of any trade or commerce and entitles any consumer harmed by such practices to bring an action against the wrongdoer. 815 ILCS 505/2. A claim for an ICFA violation will be deemed sufficient for purposes of a defendant's motion to dismiss if plaintiff alleges that (1) the defendants engaged in a deceptive act or practice, (2) the defendants intended plaintiffs to rely on the deception and (3) the deception occurred in the course of conduct involving trade or commerce. Hernandez v. Vidmar Buick Co., 910 F. Supp. 422, 427 (N.D. Ill. 1996).
Zachary first argues that Count IV should be dismissed on the ground that plaintiffs have failed to state a claim against him as an individual defendant. He asserts that he cannot be held personally liable for the actions of his corporation, Beneficial Construction. A simple reading of the statute, however, reveals that this argument is without merit. ICFA clearly provides that "any person" may be sued under its provisions, including "any agent, employee, salesman, partner, officer, director, member, [or] stockholder" of a corporation that is also being sued. 815 ILCS § 505/1, 10(a). In addition, numerous cases have permitted officers, directors and stockholders to be named as individual defendants under ICFA, where they were personally involved in the activities which gave rise to the cause of action. See Moore v. Fidelity Financial Services, Inc., 949 F. Supp. 673 (N.D.Ill. 1997); People ex rel Hartigan v. All American Aluminum & Construction Co., 171 Ill. App. 3d 27, 524 N.E.2d 1067, 121 Ill. Dec. 19 (Ill.App.1st 1988) (officer and controlling shareholder held liable for ICFA violation); People ex rel Fahner v. American Buyers Club, Inc., 115 Ill. App. 3d 759, 450 N.E.2d 904, 71 Ill. Dec. 216 (Ill.App.3d 1983) (president and principal shareholder held liable for ICFA violation); Garcia v. Overland Bond & Investment Co., 282 Ill. App. 3d 486, 668 N.E.2d 199, 218 Ill. Dec. 36 (1996) (Ill.App.1st 1996). It would clearly be inappropriate to grant Zachary's motion on that ground.
However, defendant Zachary next argues that even if Zachary is properly named as an individual defendant, plaintiffs have failed to meet their burden of pleading under ICFA because their complaint is not pled with specificity, as required by Illinois law. Gallagher Corp. v. Massachusetts Mut. Life Ins. Co., 940 F. Supp. 176, 180 (N.D.Ill. 1996). In particular, a plaintiff must state the "identity of the persons making the misrepresentation, the time, place and content of the misrepresentation, and the method by which the misrepresentation was communicated. Schiffels v. Kemper Fin.Svcs., 978 F.2d 344, 352 (7th Cir. 1992) (quoting Bankers Trust Co. v. Old Republic Ins. Co., 959 F.2d 677, 683 (7th Cir. 1992)).
With respect to this argument, we agree with defendant Zachary. In Count IV, plaintiffs allege that Zachary engaged in two "unfair and deceptive practices" in violation of ICFA. First, they claim that Zachary arranged the financing for their construction work in such a manner that caused them to be left without recourse in the event Beneficial Construction did not finish the job (Cplt. P102(a)). Second, plaintiffs claims that Zachary failed to finish the work and thereby caused their damage (Cplt. P102(b)). Beyond that, the only other allegations relevant to Count IV are in the complaint's statement of facts where plaintiffs allege that Beneficial Construction referred plaintiffs -- and had previously referred other of its clients -- to Datro and the lenders that they allege defrauded them.
These allegations are not sufficient to state a claim against Zachary. At a minimum, we find that he is entitled to somewhat more specificity. ICFA prohibits the use of unfair and deceptive practices by use of misrepresentation, fraud or the concealment of fact with the intent that others rely upon the deception. 815 ILCS 505/2. Plaintiffs, however, never tell us what misrepresentations Zachary allegedly made to them. We accept as true the allegation that Zachary referred plaintiffs to Dolphin Mortgage and George Datro, as well as the allegation that plaintiffs had no recourse against their lenders after Beneficial Construction ceased performance, but this does not mean that Zachary intended to defraud them or even that he knew that Dolphin was (allegedly) merely a pass-through to GB Home Equity and Guaranty Bank, rather than being a true mortgage broker. In short, although Zachary may have made the referral, absent any allegation that he knew Dolphin was a fraudulent entity, we fail to see how the referral could constitute a misrepresentation, lie or omission of material fact as ICFA requires. Id.
Similarly, the fact that plaintiffs claim that Zachary ceased work after the flood and failed to finish the job does not, alone, constitute an unfair or deceptive act. As explained, plaintiffs must allege some sort of fraud or misrepresentation that goes beyond a common law breach of contract claim in order to proceed under ICFA. Accordingly, we grant Zachary's motion to dismiss Count IV with leave to amend within 20 days.
B. Count IX and X: The Illinois Consumer Fraud Act
Zachary next moves to dismiss Counts IX and X. In Count IX, plaintiffs allege that Beneficial Construction and Zachary violated ICFA, 815 ILCS 505/2, 2E and 2F when Guaranty Bank and GB Home Equity collected finance, delinquency, collection and refinance charges from plaintiffs, even though such collection was barred by the Illinois Retail Installment Sales Act (RISA), 815 ILCS 405/1 et seq. In Count X, plaintiffs allege that Beneficial Construction and Zachary violated the same sections of Illinois law by concealing the interest rate on plaintiffs' loans, misrepresenting that no interest rate would be paid, and including coercive and unconscionable credit provisions in the construction contract.
As previously discussed, ICFA Section 505/2 provides that no one use unfair or deceptive practices in the conduct of any trade or commerce. ICFA § 2E provides that a person who violates certain other Illinois consumer protection laws may be subject to liability under ICFA. Section 2F prohibits sellers from charging a different price to cash purchasers than they do purchasers using credit in transactions covered by ICFA.
Zachary argues that these counts should be dismissed because they allege only that Beneficial Construction committed certain acts in violation of ICFA and do not refer to actions taken by Zachary. We disagree. In federal court a plaintiff need only plead facts sufficient to put a defendant on notice of the plaintiff's claim for relief. See Fed.R.Civ.P. 8(a) (providing that a plaintiff is required to make only a short, plain statement of the claim that shows the pleader is entitled to relief.) As discussed earlier, it is clear that the officers and directors of corporations can be held liable for violations of ICFA. 815 ILCS § 505/1, 10(a). Additionally, we observe that both Counts IX and X incorporate by reference paragraph 7 of the complaint, which provides:
Defendant George Zachary ("Zachary") is the president of Beneficial Construction. On information and belief, he is also its owner, and has complete control over its business practices and conduct. The only other officer of Beneficial Construction is Constance Zachary, who on information and belief is the wife of George Zachary.
We believe that this statement, taken in conjunction with the statements in Count IX and X regarding Beneficial Construction and Zachary, is sufficient to state a claim under ICFA against Zachary. We accordingly deny Zachary's motion to dismiss Counts IX and X.
This court has subject matter jurisdiction over this action because several of the claims present questions of federal law. 28 U.S.C. § 1331. Pursuant to this jurisdiction, the court has supplemental jurisdiction over all claims sufficiently related to the claim on which its original jurisdiction is based. 28 U.S.C. § 1367(a). State claims will be deemed "sufficiently related" to the core claim if they are part of the same "case or controversy," or if they arise from a "common nucleus of operative facts" and the federal claim is sufficiently substantial to confer subject matter jurisdiction in the court. Argento v. Village of Melrose Park, 838 F.2d 1483 (7th Cir. 1988).
In this case, all of plaintiffs' surviving claims clearly arise from the same factual circumstances. In addition, we retain original jurisdiction over Count I, which is brought under RESPA and is still pending against three of the named defendants (Guaranty Bank, GB Home Equity, and Dolphin Mortgage), at least until plaintiffs amend their complaint, if they so choose, and/or formally move to dismiss Guaranty Bank. Additionally, we retain original jurisdiction over Counts VI and VII, both of which are brought under the Truth in Lending Act and are still pending against Guaranty Bank and GB Home Equity, at least, again, until plaintiffs amend their complaint and/or formally move to dismiss Guaranty Bank. Finally, we retain original jurisdiction over Count VIII, which is brought under the Truth in Lending Act and still pending against Beneficial Construction. In total, these federal claims are more than substantial enough to confer subject matter jurisdiction on this court and, consequently, supplemental jurisdiction over all of the related claims. Accordingly, for the time being this court will retain jurisdiction over plaintiffs' entire remaining action.
For the aforestated reasons we reach the following conclusions: Defendant Dolphin's motion to dismiss Counts I and V is denied; defendant Datro's motion to dismiss Count I is granted, and its motion to dismiss Count V is denied; defendant Zachary's motion to dismiss Counts IV, IX and X is granted entirely. Finally, plaintiffs' have dismissed Count II from this case. Plaintiff has leave to amend those counts that were dismissed within 20 days.
JAMES B. MORAN
Senior Judge, U.S. District Court
January 15, 1998.