The opinion of the court was delivered by: David H. Coar, United States District Judge
MEMORANDUM OPINION AND ORDER
Before this Court is Plaintiff/Counterdefendant, Baird Credit Corporation's ("BCC"), Motion to Dismiss the Counterclaim against it pursuant to Federal Rules of Civil Procedure 8(a) and 12(b)(6). Also before this Court is Third Party Defendant Robert W. Baird & Co., Inc.'s ("RWB") Motion to Dismiss the Third Party Complaint against it. For the reasons stated in the opinion below, BCC's and RWB's Motions to Dismiss are GRANTED in part and DENIED in part.
Factual and Procedural Background
BCC filed a two-count breach of contract complaint against Joseph A. Seher and Mary Beth Seher ("Sehers"), alleging that the Sehers have defaulted on their contractual loan obligations to BCC. The Complaint alleges that, as a result of this default, the Sehers owe BCC approximately $4,237,424.08 in principal and accrued interest, The Sehers filed a Counterclaim and Third Party Complaint against BCC and RWB (collectively referred to as "BCC/RWB"). Count I of the Counterclaim and Third Party Complaint is a breach of contract claim, in which the Sehers allege that BCC/RWB failed to liquidate the collateral stock (shares of ABC-NACO) pursuant to the terms of the Collateral Pledge Agreements. The Sehers further allege that, had BCC/RWB liquidated the stock, the proceeds of the sale would have been sufficient to cover the outstanding debt, and the Sehers would have received a $1.6 million surplus, In Counts II and III of the Counterclaim and Third Party Complaint, the Sehers allege that BCC/RWB breached their fiduciary duty to the Sehers, and violated the Wisconsin Uniform Commercial Code in failing to liquidate the collateral stock. Be Core this Court are BCC's and RWB's Motions to Dismiss the Counterclaim and Third Party Complaint.
I. Motion to Dismiss Standard
The purpose of a motion to dismiss is to test the sufficiency of the complaint, not to decide the merits of the case. In evaluating the motion, the Court accepts as true all facts and allegations in the complaint and makes all reasonable inferences in the plaintiff's favor. See Holman v. Indiana, 211 F.3d 399, 402 (7th Cir. 2000). Under Federal Rule of Civil Procedure 8(a), a complaint need only state a short and plain statement of the claim showing that the pleader is entitled to relief to be sufficient. Leatherman v, Tarrant County Narcotics Unit, 507 U.S. 163, 168 (1993). Complaints should only be dismissed if it is clear that no set of facts in support of the claim would entitle the plaintiff to relief. See Ledford v. Sullivan, 105 F.3d 354, 356 (7th Cir. 1997) (quoting Hishon v. King & Spalding, 467 U.S. 69. 73 (1984)). The Sehers assert three causes of action in both the Counterclaim and Third-Party Complaint. This Court addresses each count and party in turn.
II. BCC's Motion to Dismiss the Counterclaim
A. Count I — Breach of Contract
The contracts at issue in this case — the Demand Promissory Notes and the Collateral Pledge Agreements — provide that Wisconsin law governs, and no party contests the applicability of Wisconsin law. In Count I, the Sehers allege that BCC breached its contracts by failing to liquidate the collateral stock when it promised to do so, BCC argues that the Sehers fail to state a claim upon which relief can be granted because, under the contracts, BCC had no obligation to liquidate the collateral stock absent a written demand by the Sehers. BCC further argues that any oral promises upon which the Sehers rely are insufficient as a matter of law because the Sehers have not adequately pled that these promises modified, replaced, or otherwise superceded the pertinent provisions of the written contracts. The Sehers counter that BCC told them that, pursuant to "regulations," it was required to liquidate the stock, and that these banking regulations are an express part of the contract.
The Demand Promissory Notes ("Notes") and the Collateral Pledge Agreement ("Agreement") provide that BCC has the sole option to liquidate the collateral stock in the event of a default. Specifically, the Notes state:
if a default occurs under the terms of this
Note . . . then BCC may, at its sole option, exercise any and
all rights and remedies at law or in equity including
without limitation . . . all rights of BCC against any
and all of Borrower's financial assets, investment
property, securities . . . held as security by BCC for
payment of the outstanding balance under this Note.
If the Sehers wanted to liquidate the collateral stock, under the Agreement, the Sehers could have made a written demand to BCC to liquidate. The Agreement states in pertinent part:
Any requests concerning disposition of the Collateral
must be in writing and be received by the Secured
party. . . . Secured Party may refuse to sell any
Collateral even though requested in writing, unless
the proposed sale plus other sums tendered by Debtor,
if any, will pay in full all Obligations, or
substitute Collateral satisfactory to Secured Party is
delivered to Secured Party.
Thus, the unambiguous language of the contracts demonstrates that BCC was not required to liquidate the collateral stock.*fn1
However, contrary to BCC's belief, the fact that the option to liquidate was discretionary does not automatically defeat the Sehers' breach of contract claim. Wisconsin law, like many other states, reads the duty of good faith into every contract, Market Street Assocs. Ltd. Partnership v. Frey, 941 F.2d 588
, 593-96 (7th Cir. 1991) (applying Wisconsin law). This duty requires BCC to exercise its discretion under the contracts in a manner that is consistent with the reasonable expectations of the parties. Beraha v. Baxter Healthcare Corp., 956 F.2d 1436
, 1444 (7th Cir. 1992) (interpreting the covenant ...