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FOGEL v. GORDON & GLICKSON

February 10, 2004.

RICHARD L. FOGEL, Plaintiff,
v.
GORDON & GLICKSON, P.C., an Illinois Professional Corporation, GORDON & GLICKSON, L.L.C., an Illinois Limited Liability Corporation, and MICHAEL E.C. MOSS, Defendants



The opinion of the court was delivered by: JOAN H. LEFKOW, District Judge

MEMORANDUM OPINION AND ORDER

Plaintiff Richard L. Fogel ("Fogel") has filed a one-count second amended complaint against defendants Gordon & Glickson, P.C., Gordon & Glickson, L.L.C., and Michael E.C. Moss ("Moss"). Fogel alleges defendants are liable for fraud. Defendants have moved to dismiss the second amended complaint based on Fogel's failure to plead fraud under Federal Rules of Civil Procedure 9(b) and 12(b)(6). The court has diversity jurisdiction under 28 U.S.C. § 1332 in that there is complete diversity of citizenship between the parties*fn1 and the amount in controversy exceeds $75,000. For the reasons set forth below, the motion is granted. Page 2

MOTION TO DISMISS STANDARDS

  A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) challenges the sufficiency of the complaint for failure to state a claim upon which relief may be granted. General Elec. Capital Corp. v. Lease Resolution Corp., 128 F.3d 1074, 1080 (7th Cir. 1997). Dismissal is appropriate 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(1957); Kennedy v. Nat'l Juvenile Det. Ass'n, 187 F.3d 690, 695 (7th Cir. 1999). In ruling on the motion, the court accepts as true all well pleaded facts alleged in the complaint, and it draws all reasonable inferences from those facts in favor of the plaintiff. Jackson v. E.J. Brach Corp., 176 F.3d 971, 977 (7th Cir. 1999); Zemke v. City of Chicago, 100 F.3d 511, 513 (7th Cir. 1996).

  ALLEGATIONS IN THE FIRST AMENDED COMPLAINT

  The facts, taken as true from plaintiff's second amended complaint, are as follows: In March 1986, Fogel joined the law firm Gordon & Glickson, P.C. (the "P.C.") as an associate attorney. In January 1991, he became an income partner. In January 1993, he became an equity shareholder of the P.C., purchasing 2,500 shares for $2,500.

  In 1997 and 1998, respectively, the P.C. created "investment pools" for its equity shareholders. The investment pools were comprised of stocks and stock options received or otherwise purchased from various corporate clients. To purchase these stocks and stock options, the P.C. used funds that it otherwise could have distributed to the equity shareholders. Because the investment pools were assets of the P.C., they were subject to the claims of the P.C.'s general creditors.

  The investment pools were managed through an "Asset Management Committee" (the Page 3 "Investment Committee") comprised of Moss, Mark L. Gordon and Philip P. McGuigan. The Investment Committee handled all transactions for the P.C. with respect to the investment pools and periodically issued reports about these pools to the P.C.'s equity shareholders. The reports detailed the estimated current fair market value of the pools' assets and each equity shareholder's interest in the pools.

  On April 30, 1999, the P.C. re-organized and transferred general operations, assets and liabilities to Gordon & Glickson, L.L.C. (the "L.L.C."). At this time, the equity shareholders of the P.C., including Fogel, became members of the L.L.C. Further, the members of the P.C.'s Investment Committee became members of the L.L.C.'s Investment Committee and performed the same duties as before.

  In 1999, certain stocks and stock options of the P.C.'s 1997 and 1998 investment pools (the "initial investments") were transferred to the L.L.C. The L.L.C. accounted for these initial investments in the same way as did the P.C. Certain stocks and stock options, however, remained in the P.C.'s 1997 investment pool. This was done because the Investment Committee determined that certain cash and securities should remain in the P.C. to satisfy current and future firm obligations.

  At the time of reorganization, the firm created a Deferred Compensation Plan and Agreement (the "Plan") for the benefit of certain employees. The Plan included provisions detailing how deferred compensation was to be paid to employees upon their withdrawal from the firm.

  On December 15, 1999, Fogel voluntarily resigned from his position with the law firm and provided a notice of withdrawal from the L.L.C. to be effective January 14, 2000. On the Page 4 morning of November 12, 1999, firm member and Investment Committee chair Mark L. Gordon ("Gordon") left two voice mail messages for Fogel urging Fogel to re-draft his notice of withdrawal from the firm to indicate a withdrawal date after January 1, 2000. Gordon suggested that by doing so Fogel would ultimately receive a greater amount of deferred compensation. Based upon Gordon's recommendation, on December 15, 1999, Fogel provided an amended written notice of withdrawal to be effective January 14, 2000. Fogel ceased practicing law as a member of the firm as of January 14, 2000. At the time of his withdrawal, the firm determined that it owed him $462,570.87 in deferred compensation. (Complaint ¶ 17.)

  By January, 2000, the firm, through an email to Fogel from Moss, was expressing concern in relation to potential adverse tax ramifications posed by the firm's 1999 reorganization. To facilitate the firm and its members, including Moss, meeting their April 15, 2000, tax filing obligations, the firm decided prior to February 21, 2000, to sell certain stock in the 1997 investment pool and distribute the proceeds of that sale to firm members. According to Fogel, the sale of this stock "would result in the Investment Pool not having sufficient assets to meet firm deferred compensation obligations to Fogel." (Id. ¶ 20.) Thus, the firm, through Moss, "began a campaign in January, 2000, to convince Fogel to forego his right to deferred compensation beginning in 2001" and remain a member of the investment pools. (Id.; Ex. F.)

  Fogel ultimately did not elect the firm's proposal, maintaining his right to receive deferred compensation owed to him. However, Fogel was not advised by the firm that by not accepting their proposal he would not receive full payment of his deferred compensation. (Id. ¶ 22.) Firm correspondence in August, 2000, through Moss, indicated that Fogel ...


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