United States District Court, N.D. Illinois, Eastern Division
September 21, 2004.
ASSOCIATION BENEFIT SERVICES, INC. Plaintiff,
ADVANCEPCS HOLDING CORPORATION, a Delaware corporation, ADVANCEPCS MAIL SERVICES OF BIRMINGHAM, INC., an Alabama corporation, Defendants.
The opinion of the court was delivered by: MATTHEW KENNELLY, District Judge
MEMORANDUM OPINION AND ORDER
The plaintiff in this case, Association Benefit Services, Inc.
("ABS"), arranges contracts between companies and prescription
benefit managers to administer prescription benefit plans. In
return, ABS earns commissions based on the number of
prescriptions filled. The defendants, AdvancePCS Holding
Corporation and AdvancePCS Mail Services of Birmingham, Inc., are
prescription benefit managers. According to ABS, the defendants
promised to pay ABS commissions in the amount of $0.25 per retail
claim and $1.50 per mail order claim if it could arrange a
contract between AdvancePCS and the American Automobile
Association ("AAA"). Am. Comp., Count 1, ¶ 5; Pl. Ex. A. In
reliance on this promise, ABS claims that from May through August
2003, it provided AdvancePCS with information necessary to adjust
its prescription management proposal to meet the AAA's needs.
Id. ¶ 9. ABS also alleges that in reliance on this promise, it
refrained from working with competitor prescription benefits managers, including Merck and Caremark, during that time period.
Id. ¶ 10.
In late August 2003, AdvancePCS signed the desired contract
with AAA. On September 1, ABS received a draft contract from
AdvancePCS providing that ABS would receive commissions of only
$.025 per retail claim and $.025 per mail order claim from the
AAA deal far less than ABS says was originally promised. Am.
Comp., Count 1, ¶ 12. ABS alleges that AdvancePCS breached its
agreement to pay ABS $0.25 and $1.50 per claim, id., Count 2, ¶
3, and that AdvancePCS committed fraud in making that promise
because it never had any intention of paying ABS the higher
commissions. Id., Count 1, ¶ 14.
In its second amended complaint, ABS has added allegations of
unjust enrichment to its original claims of fraud and breach of
contract. First, ABS claims that AdvancePCS has been unjustly
enriched because it obtained the AAA contract through fraud
against ABS. 2d Am. Comp., Count 3, ¶ 18. Second, ABS claims that
because AdvancePCS secured a contract with AAA, it was able to
make billions of dollars in a later merger with Caremark. Id. ¶
19. ABS alleges this merger would not have occurred absent the
contract with AAA. Id. ¶ 20.
The defendants have moved to dismiss all of ABS' claims, except
for its breach of contract claim against AdvancePCS Holding. For
the reasons stated below, the Court grants the motion to dismiss
in part and denies it in part.
Dismissal of a claim under Rule 12(b)(6) is appropriate only if
it appears beyond doubt that the plaintiff can prove no set of
facts in support of his claim. Kennedy v. Nat'l Juvenile Det.
Ass'n, 187 F.3d 690, 695 (7th Cir. 1999). For purposes of a
motion to dismiss, the Court accepts the plaintiff's allegations
as true and draws reasonable inferences in the plaintiff's favor.
Zemke v. City of Chicago, 100 F.3d 511 (7th Cir. 1999).
1. Count 1 Fraud
Federal Rule of Civil Procedure 9(b) requires that "in all
averments of fraud or mistake, the circumstances constituting
fraud or mistake shall be stated with particularity." What this
means is that a claim for fraud must specifically describe "the
identity of the person who made the representation, the time,
place, and content of the misrepresentation, and the method by
which the misrepresentation was communicated to the plaintiff."
General Electric Capital Corp. v. Lease Resolution Corp.,
128 F.3d 1074, 1078 (7th Cir. 1997). ABS' fraud claim is a claim of
promissory fraud, that is, a "fraud based on a false
representation of intent to perform a promise or some future
conduct." Sa'Buttar Health & Medical, P.C. v. TAP
Pharmaceuticals, Inc., No. 03 C 4074, 2004 WL 1510023, *4 (N.D.
Ill. July 2, 2004) (citing Doherty v. Kahn,
289 Ill. App. 3d 544, 562, 682 N.E.2d 163, 176,
224 Ill. Dec. 602 (1997).*fn1
Claims of promissory fraud are disfavored because they are "easy
to allege and difficult to prove or disprove." Id. at *11,
citing Bower v. Jones, 978 F.2d 1004, 1012 (N.D. Ill. 1992);
see also, Marchionna v. Ford Motor Co., No. 94 C 275, 1995 WL
476591, *6 (N.D. Ill. Aug. 10, 1995) ("The Seventh Circuit has
cautioned against allowing a plaintiff to turn a simple suit for
breach of contract into a claim for fraud."), citing Desnick,
M.D., Eye Services v. American Broadcasting Companies,
44 F.3d 1345, 1354 (7th Cir. 1995).
Illinois provides a remedy for promissory fraud only if it is
part of a "scheme" to defraud. Desnick, 44 F.3d at 1354. What
constitutes a "scheme" is not entirely clear; as the Seventh
Circuit has pointed out, "[s]ome cases suggest that the exception
has swallowed the rule" against tort claims based on fraudulent promises. Id. But the "scheme"
requirement must have some meaning, and the Seventh Circuit has
interpreted it to permit a claim for promissory fraud only if it
is "particularly egregious" or if the fraud is "embedded in a
large pattern of deceptions or enticements." Id. Put another
way, the fraudulent promise must be "one element of a pattern of
fraudulent acts." Speakers of Sport, Inc. v. ProServ, Inc.,
178 F. 3d 862, 866 (7th Cir. 1999).
This requirement has been met in this case. Though ABS alleges
that the defendants made a number of false promises, they all
amount to repetition of a single promise the commitment to pay
commissions at a particular level if ABS got the AAA contract for
the defendants. See Am. Comp., Count 1, ¶¶ 5-8. But, "a series
of unfulfilled promises" may be sufficient to satisfy the
"scheme" requirement. See Speakers of Sport, Inc,
178 F.3d at 866. And the Illinois Supreme Court has allowed a promissory
fraud claim to proceed based on repeated false promises of future
payment. HPI Healthcare Serv., Inc., v. Mt. Vernon Hosp., Inc.,
131 Ill. 2d 145, 545 N.E.2d 672 (1989); see also, e.g., Zic v.
Italian Government Travel Office, 140 F. Supp. 2d 991, 995-96
(N.D. Ill. 2001). Though it is by no means clear that ABS will be
able to prove the requisite scheme, the allegations it has made
are sufficient to satisfy the scheme requirement.
ABS has also sufficiently alleged that the defendants' promises
were false when made, see Am. Comp., Count 1, ¶ 8, and that it
was damaged as a result. Id. ¶ 17. Allegations of intent and
damages need not be alleged with particularity. See
Fed.R.Civ. P. 9(b); Linc Finance Corp. v. Onwuteaka, 129 F.3d 917, 922
(7th Cir. 1999).
As currently alleged, however, ABS' fraud claim fails because
it lumps two defendants together without making any effort to
distinguish or state what misrepresentations were made by what defendant. See Sears v. Liken, 912 F.2d 889, 893 (7th Cir.
1990). Though an exception exists where the information needed to
plead the circumstances of fraud with particularity is
unavailable to the plaintiff, see, e.g., Corley v. Rosewood Care
Center, Inc. of Peoria, 142 F.3d 1041, 1051 (7th Cir. 1998), no
such allegation appears in the complaint.
2. Count 2 Breach of Contract
AdvancePCS Mail Services has moved to dismiss Count 2 because
of the absence of any allegation that the purported contract was
with it, as opposed to AdvancePCS Holding. This point is well
taken. Absent any direct allegation that ABS' contract was with
AdvancePCS Mail or, at a minimum, an allegation providing the
basis for ABS' belief that such was the case, it cannot maintain
a breach of contract claim against AdvancePCS Mail Services.
3. Count 3 Unjust Enrichment Claim
Count 3 is a claim of unjust enrichment. To state a claim for
unjust enrichment under Illinois law, ABS must allege that
AdvancePCS retained a benefit to the detriment of ABS and that
its retention of the benefit violates justice, equity, and good
conscience. See, e.g., McCabe v. Crawford & Co.,
210 F.R.D. 631, 643 (N.D. Ill. 2002). When, as in this case, the plaintiff
seeks to recover benefits provided to the defendants by a third
party, Illinois law also requires an allegation that the
defendant procured the benefit from the third party through some
type of wrongful conduct.*fn2 HPI Healthcare,
131 Ill.2d at 161, 545 N.E.2d at 679.
ABS has stated a claim of unjust enrichment as to AdvancePCS's
contract with AAA. If ABS is correct that it received only a small fraction of the
commissions it was promised from AdvancePCS's contract with AAA,
then it may be unjust to allow AdvancePCS to keep all the profits
it received from the contract. Defendants argue that ABS should
not be allowed to state a claim for all of its revenue from the
contract with AAA. Def. Mot. to Dismiss at 9. But at this early
stage of the proceedings, there is no reason to circumscribe the
precise nature of the relief to which ABS may be entitled if it
proves this aspect of its claim.
ABS has failed, however, to state a claim of unjust enrichment
with regard to AdvancePCS's merger with Caremark. Even under the
wrongful conduct exception discussed in HPI Health Care, ABS
has no claim on money given to AdvancePCS by a third party to
which ABS is not entitled. See Asch v. Teller, Levit &
Silvertrust, P.C., No. 00 C 3290, 2003 WL 22232801, *7 (N.D.
Ill. Sept. 26, 2003). The only wrongful conduct alleged by ABS in
this case concerns the contract between AdvancePCS and AAA, not
the deal between AdvancePCS and Caremark. Furthermore, ABS does
not contend that it suffered any detriment from the merger. It
had no part in the merger and does not claim it considered
merging with either company. See McCabe, 210 F.R.D. at 643
(detriment must be shown in an unjust enrichment claim).
For the reasons stated above, the Court grants defendants'
motion to dismiss the amended complaint [docket no. 6]. In
addition, the Court grants defendants' motion to dismiss the
second amended complaint [docket no. 12] as to the unjust
enrichment claim concerning the Caremark merger but otherwise
denies the motion. Based on this ruling, paragraph 19 of Count 3
is stricken. If plaintiff wishes to amend Counts 1 and 2 to
attempt to eliminate the defects the Court has noted, it must
file a motion for leave to amend by no later than October 1,
2004. The case is set for a status hearing on October 5, 2004 at 9:30AM.
Defendants need not answer Count 3 before that date.