Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

WTM, INC. v. HENNECK

December 14, 2000

WTM, INC. AND PENTAIR, INC., PLAINTIFFS,
V.
WILLIAM J. HENNECK, JR. AND ERNEST C. PAYNE, DEFENDANTS.



The opinion of the court was delivered by: Alesia, District Judge.

MEMORANDUM OPINION AND ORDER

Before the court is defendants' motion to dismiss counts III and IV and to strike certain paragraphs of plaintiffs' second amended complaint. For the following reasons, the court grants in part and denies in part defendants' motion.

I. BACKGROUND

Plaintiffs WTM, Incorporated ("WTM") and Pentair, Incorporated ("Pentair") (collectively "plaintiffs") bring this action against defendants William J. Henneck, Jr. ("Henneck") and Ernest C. Payne ("Payne") (collectively "defendants"). Pentair is a publicly traded company which manufactures and sells various products, including electronics enclosures. WTM is a wholly-owned subsidiary of Pentair. Defendants were the officers and directors of several companies (collectively "WEB") which manufactured metal enclosures for computers.

Plaintiffs claim that the purchase of WEB was made in reliance on several representations made by defendants regarding their current and future status with Compaq, WEB's largest customer. According to plaintiffs, defendants represented that they had a strong relationship with Compaq and that their business dealings with Compaq were extensive. However, Compaq had withdrawn much of its business from WEB and has refused to conduct any new, substantial business with WEB. Plaintiffs argue that defendants knew of the disintegrating relationship with Compaq prior to the sale of WEB to plaintiffs but concealed that material information from plaintiffs. Plaintiffs now allege that the value of WEB was artificially inflated at the time of purchase and, consequently, the purchase of WEB resulted in substantial loss to plaintiffs. Any additional facts, the court will discuss in further detail under the relevant claim.

As a result of this dispute, plaintiffs have filed a four-count complaint against defendants. Count I is a claim for violation of the federal securities law, alleging that defendants violated various sections of the Securities Act and Rule 10b-5. Count II is a claim for breach of contract, alleging that defendants breached the warranties and representations made in the sale agreement. Count III is a claim for violation of the Minnesota Securities Act, alleging that defendants participated in a fraudulent scheme and course of business. Count IV is a claim for violations of the Illinois' common law on fraud, alleging that defendants failed to disclose critical and significant material facts which plaintiffs relied upon and were, consequently, tricked by those omissions.

Defendant now brings a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). Defendants argue that count III should be dismissed because the sale agreement entered into between the parties contained a choice-of-law provision which clearly stated that Illinois law governs. Therefore, defendants claim, plaintiffs cannot bring a claim under Minnesota law. Next, defendants argue that count IV must be dismissed because the Agreement contained an indemnification clause which serves as plaintiffs' exclusive remedy. Finally, defendants argue that certain paragraphs of the complaint must be stricken, pursuant to Federal Rule of Civil Procedure 12(f), as immaterial and unduly prejudicial.

WTM is a Minnesota corporation with its principal place of business in Minnesota. Pentair is a Minnesota corporation with its principal place of business in Minnesota. Hennek is an Illinois citizen. Payne is a Wisconsin citizen. The defendants' companies are all Illinois corporations. Further, the amount in controversy exceeds $75,000. Thus, plaintiffs correctly allege that this court has jurisdiction based upon diversity of citizenship under 28 U.S.C. § 1332. In addition, this court has jurisdiction under 28 U.S.C. § 1331 as Count I arises under federal law.

II. DISCUSSION

A. Standard for Deciding a Rule 12(b)(6) Motion to Dismiss

In addressing the defendants' motion to dismiss pursuant to 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 plaintiffs. Gomez v. Illinois State Bd. of Educ., 811 F.2d 1030, 1039 (7th Cir. 1987); 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 plaintiffs, the complaint fails to state a claim upon which relief can be granted, the court must dismiss it. See FED.R.CIV.P. 12(b)(6); Gomez, 811 F.2d at 1039. However, the court may only dismiss the claim if it appears beyond doubt that plaintiffs can prove no set of facts in support of their claim that would entitle them to relief. See Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957).

While the Federal Rules of Civil Procedure provide a liberal notice pleading standard, the complaint must include either direct or inferential allegations with respect to all material elements of the claims asserted. ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.