The opinion of the court was delivered by: JAMES ZAGEL, District Judge
MEMORANDUM OPINION AND ORDER
On April 26, 2004, Plaintiffs Service Auto Parts, Inc. ("SAP")
and Wayne Hodgetts, Jr. filed a four-count Complaint against
Defendants Benjamin & Birkenstein (B&B) and Harold Leftwich,
alleging accounting negligence, breach of fiduciary duty, fraud,
and negligent misrepresentation. All the counts in Plaintiffs'
Complaint relate to accounting and consulting services provided
by Leftwich, an employee of B&B. Those services included
preparation of SAP's financial statements, balance sheets, income
statements, general ledgers, tax returns, and weekly payroll.
Specifically, Plaintiffs allege that Leftwich, among other
things, knowingly prepared incorrect financial statements in
which SAP appeared to be more profitable and financially stable
than it actually was. According to Plaintiffs, the overly
positive picture portrayed in the financial reports caused them
to make financially detrimental and unsupportable business
decisions. It should be noted that Leftwich was not hired to
audit the financial statements of the company but rather to
prepare them. The motive behind Leftwich's actions has not been
alleged, but it need not be in this case. Analysis
Defendants now move, pursuant to Fed.R. Civ. P. 12(b)(6), to
dismiss Plaintiffs' Complaint. A motion to dismiss under Rule
12(b)(6) is proper where it appears beyond doubt that the
plaintiff can prove no set of facts in support of his claim,
which would entitle him to relief. Conley v. Gibson,
355 U.S. 41, 45-46 (1957). In reviewing a motion to dismiss, the court
must construe all allegations in the complaint in the light most
favorable to the plaintiff and accept all well-pled facts and
allegations as true. Bontkowski v. First Nat'l Bank,
998 F.2d 459, 461 (7th Cir. 1993).
A. Plaintiffs' Allegations of Accounting Negligence and Breach
of Fiduciary Duty
In their Complaint, Plaintiffs allege independent counts of
accounting negligence and breach of fiduciary duty. Defendants
argue that these claims cannot be maintained as separate counts
because they are duplicative. Under Illinois law, a breach of
fiduciary duty claim can be properly dismissed if "it alleges the
same operative facts and the same resulting injury" as a
negligence claim, Fabricare Equip. Credit Corp. v. Bell, Boyd &
Lloyd, 328 Ill. App. 3d 784, 791 (1st Dist. 2002), or if it
mirrors a negligence claim. Calhoun v. Rane,
234 Ill. App. 3d 90 (1st Dist. 1992).
Plaintiffs' claims for breach of fiduciary duty and accounting
negligence are similar; they deal with the same set of relevant
facts, Leftwich's dereliction duty, and they allege the same
financial injury. While some additional facts, relevant to a
claim for breach of fiduciary duty, are separately alleged, they
either arise out of or are intimately related to the facts
alleged in the accounting negligence claim. Because of the
overwhelming similarities, I find that Plaintiffs' breach of
fiduciary duty claim is duplicative and should be dismissed. B. Plaintiffs' Claim of Fraud
Despite Defendants' argument to the contrary, even a cursory
review of Plaintiffs' fraud claim shows that Plaintiffs have, in
fact, alleged each element with the particularity required by
Fed.R. Civ. P. 9(b). To allege a claim for fraud, the Plaintiffs
must establish that (1) defendant made a false statement of
material fact, (2) defendant knew the statement was false, (3)
defendant intended the statement to induce plaintiff to act, (4)
plaintiff reasonably relied on the truth of the statement, and
(5) plaintiff's damages resulted from that reliance. Hart v.
Boehmer Chevrolet Sales, Inc., 337 Ill. App. 3d 742, 752
(2nd Dist. 2003). Specifically, Plaintiffs allege that
Leftwich knowingly and intentionally prepared SAP's financial
statements inaccurately, improperly reducing its accounts payable
and removing debt from its financial statements, in order to
inflate SAP's gross profit margins during the fiscal year ending
June 30, 2002 and the fiscal period ending March 31, 2003. (Cmpl.
¶¶ 24-26, 30(a) and (b), 52-56). The Complaint goes further to
describe the alleged misstatements in detail, stating that
Leftwich under reported SAP's debt by $605,000 and accounts
payable by $225,000. (Cmpl. ¶ 30). The Complaint also alleges
that, on May 6, 2003, Leftwich admitted to manipulating and
misrepresenting accounting entries, including accounts payable,
costs of goods sold, and debt, so as to artificially inflate
SAP's gross profit margin. (Cmpl. ¶ 52). Plaintiffs' fraud claim
then concludes by alleging that Plaintiffs lost approximately
$1.5M because of their reliance on Leftwich's misstatements.
Since the information contained in Plaintiffs' fraud count more
than satisfies the requirements of Rule 9(b), I find the claim
may stand C. Plaintiffs' Claim of Negligent Misrepresentation
Defendants argue that Plaintiffs' claim for negligent
misrepresentation should be dismissed because it fails to allege
that Defendants intended to induce Plaintiffs to act. Plaintiffs,
on the other hand, argue that intent to induce is not an explicit
element of negligent misrepresentation and reference cases,
including Zimmerman v. Northfield Real Estate, Inc.,
156 Ill. App. 3d 154 (1st Dist. 1986) and Harkala v. Wildwood Realty,
Inc., 200 Ill. App. 3d 447 (1st Dist. 1990), to support
their point. The parties' argument over the purported elements of
negligent misrepresentation is, however, somewhat irrelevant.
Unlike fraud, negligent misrepresentation is not subject to
heightened pleading requirements. Plaintiffs' negligent
misrepresentation claim is more than sufficient to put Defendants
on notice of the claim against them and to satisfy the
requirements of federal notice pleading. Moreover, even if
particularity was required and intent to induce was an element,
Plaintiffs' pleading would still be sufficient to state a claim
for negligent misrepresentation as Plaintiffs do, in fact, allege
that Defendants acted with the intent to induce Plaintiffs'
actions. (Cmpl. ¶ 14-19, 22, 30, 45, 52-57). For these reasons, I
am allowing Plaintiffs' claim for negligent misrepresentation.
D. Punitive Damages, Prejudgment Interest, & Attorneys' Fees
Defendants argue that Plaintiffs' claims for punitive damages,
prejudgment interest, and attorneys' fees should be dismissed
because they are not supported by the allegations in Plaintiffs'
Complaint. I disagree. Under Illinois law, a plaintiff may seek
punitive damages, attorneys' fees, and prejudgment interest in
connection with a claim for fraud. Home Sav. & Loan Assoc. v.
Schneider, 108 Ill. 2d 277, 284 (1985) (Punitive damages may be
allowed "where the wrong involves some violation of a duty
springing from a relation of trust or confidence."); Roboserve, Inc. v. Kato Kagaku Co., 78 F.3d 266, 273-74
(7th Cir. 1996) (Out of pocket losses, such as attorneys'
fees, may be recoverable, in an action for fraud, if they stem
from actions induced by defendant's misstatements.); Forrester
v. State Bank of East Moline, 52 Ill. App. 3d 34, 42 (3rd
Dist. 1975) (The Illinois Interest Act has been held to allow
interest on a judgment for fraud.). In this case, it is far too
early to tell what type of damages will be appropriate. Since
there is a possible basis for Plaintiffs' claims for punitive
damages, prejudgment interest, and attorneys' fees, I will allow
them to stand
Defendants' Motion to Dismiss is GRANTED as to Plaintiffs'
claim for breach of fiduciary duty and is otherwise DENIED.
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