The opinion of the court was delivered by: RONALD GUZMAN, District Judge
MEMORANDUM OPINION AND ORDER
In this diversity action, Plaintiff Cortez Productions, Inc. ("Cortez")
seeks compensatory and punitive damages for breach of contract against
defendants Monterey Peninsula Artists, Inc. ("Monterey"); Wesley Hunter;
Don Pearson; William Burke Shannon; Clarence Slaten; Reel Rhythm
Entertainment; and Kimberly Cottman. Defendant Monterey moves to dismiss
the complaint for failure to state a claim upon which relief may be
granted pursuant to Rule 12(b)(6) of the Federal Rules of Civil
Procedure. For the reasons set forth below, the Court denies the motion.
Plaintiff promotes music concerts in North America. (Compl. ¶ 2.)
Defendant Monterey represents musicians and musical groups, including the
rock band Aerosmith. (Id. ¶ 3.) Defendants Wesley Hunter, Don Pearson,
William Burke Shannon, and Clarence Slaten were principals of the
now-bankrupt Fifth Degree Concerts, Inc. ("Fifth Degree"). (Id. ¶¶ 11-13,
17.) Fifth Degree also promoted music concerts in North America. (Id. ¶
15.) According to Plaintiff, it entered into an agreement with Fifth
Degree and Monterey, which provided that Cortez and Fifth Degree would
cause $500,000 in aggregate to be wire transferred to Monterey in an
effort to secure Aerosmith for a series of concerts in Mexico. that would
be promoted by Cortez and Fifth Degree. Monterey was to hold this money
in escrow pursuant to instructions drafted by Fifth Degree. The parties'
Escrow
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Agreement, which is attached to the complaint and is the basis of
Plaintiff's claims against Monterey, states that: "In the event Promoters
and Monterey Peninsula Artists, Inc. and Aerosmith do not sign a contract
granting Promoters the rights to promote a concert tour featuring
Aerosmith in Mexico, the Escrow Funds shall be released by the Escrow
Agent and returned to Promoters on the tenth (10th) day after the date of
this agreement." (Compl. ¶ 29, Ex. A ¶ 5.) The agreement was dated
April 24, 2002. (Id.)
At the end of April 2002, Cortez forwarded its $250,000 share of the
escrow funds to Fifth Degree. (Compl. ¶ 30.) Then, at the beginning of
May 2002, the whole of the $500,000 in escrow funds were wire transferred
to Monterey, the escrow agent. (Id. ¶ 31.) No agreement was ever reached
regarding the Aerosmith concert tour in Mexico, and in July 2002,
Monterey directed that the money in the escrow account be wire
transferred back into the account from which it had been received.
(Def.'s Mot. to Dismiss ¶ 2.) Defendant Monterey contends this action
discharged its obligations under the escrow agreement to return the money
"to Promoters." (Id.) Plaintiff alleges that because Monterey did not
return the money to both Cortez and Fifth Degree, it failed to return the
money "to Promoters" and, therefore, breached the contract and breached
its fiduciary duty as an escrow agent to act in accordance with the terms
of the escrow agreement. (Compl. ¶¶ 136, 141.)
A motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of
Civil Procedure disputes whether the plaintiff has stated a claim upon
which relief may be granted. Autry v. Northwest Premium Servs.,
144 F.3d 1037, 1039 (7th Cir. 1998). The motion should not be granted
unless it appears beyond a doubt that the plaintiff could prove no set of
facts in support of his claims entitling him to relief. Szumy v. Am.
Gen. Fin., Inc., 246 F.3d 1065, 1067 (7th Cir. 1998). In analyzing a
motion to dismiss, all alleged facts are both accepted as true and
construed, together with any reasonable inferences drawn from them, in
the light most favorable to the plaintiff. Caldwell v. City of Elwood,
959 F.2d 670, 671 (7th Cir. 1992). By definition a motion to dismiss for
failure to state a claim upon which relief may be granted is restricted
to the pleadings themselves, and attached documents are deemed part of
the pleadings and so are properly regarded when considering
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the motion. Approved Home v. Peters, No. 98 C 2949, 1998 WL 417492, at *1
(N.D. Ill. July 17, 1998). A federal court sitting in diversity
jurisdiction will apply state law to substantive matters and federal law
to procedural matters. Allstate Ins. Co. v. Menards, Inc., 285 F.3d 630,
636 (7th Cir. 2002).
Plaintiff seeks damages from Monterey for breach of contract and
fiduciary duty. In order to state a claim for breach of contract, a
plaintiff must first establish both the existence of a contract with a
defendant and that the defendant breached this contract. Chilmark
Partners, LLC v. MTS, Inc., No. 02 C 5339, 2003 U.S. Dist. LEXIS 7077, at
*8-9 (N.D. Ill. Apr. 23, 2003). In Illinois, a contract is interpreted by
looking no further than its "four corners." Bourke v. Dun & Bradstreet
Corp., 159 F.3d 1032, 1036 (7th Cir. 1998); Chilmark, 2003 U.S. Dist.
LEXIS 7077, at *10. Under this theory of interpretation, the court first
determines if any of the language within the contract is ambiguous by
looking to its plain and obvious meaning. Bourke, 159 F.3d at 1036;
Chilmark, 2003 U.S. Dist. LEXIS 7077, at *10. Ambiguity does not result
from a mere disagreement among the parties over what a particular term
means, but rather from the use of language that is reasonably susceptible
to more than one meaning. White v. White, 378 N.E.2d 1255, 1258 (Ill.
App. Ct. 1978). In the absence of ambiguous language, the court should
enforce the contract as written. Chilmark, 2003 U.S. Dist LEXIS 7077, at
*10.
Here, Plaintiff maintains that Monterey is in breach of contract
because it failed to return the escrow funds "to Promoters," meaning to
both Cortez and Fifth Degree. (Compl. ¶ 136.) Plaintiff also contends
that Monterey's failure to return the money in this manner represents a
breach of its fiduciary duty as an escrow agent. (Id. ¶ 141.) An escrow
agent has a fiduciary duty to act in accordance with the terms of the
escrow agreement. Bescor v. Chicago Title & Tr. Co., 446 N.E.2d 1209,
1213 (Ill.App. Ct. 1983); TOTO Petroleum Corp. v. Newell, 338 N.E.2d 491
(Ill.App. Ct. 1974).
Monterey argues that it satisfied its obligation under the escrow
agreement to return the money "to Promoters" when it returned the funds
to the same account from which it received them and is therefore in
breach of neither the contract nor its fiduciary duty. (Defs Mot. to
Dismiss ¶ 2.)
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However, Monterey's construction of the agreement, while reasonable,
requires an inference in favor of Defendant and this Court must draw all
reasonable inferences in favor of Plaintiff for the purposes of this
motion to dismiss.
The term "to Promoters" is ambiguous and susceptible of two reasonable,
but conflicting, interpretations. The Court therefore concludes that
Plaintiff has established that a set of facts may exist upon which it
might prevail at trial on its claims for breach of contract and fiduciary
duty.
For the reasons set forth above, the Court denies Defendant Monterey
Peninsula Artists, Inc.'s ...