United States District Court, N.D. Illinois
November 8, 2004.
The opinion of the court was delivered by: PHILIP REINHARD, District Judge
MEMORANDUM OPINION AND ORDER
Plaintiffs Spence Group Services, Inc. ("Services"), William R.
Spence and Pamela McLamore-Spence brought action in the Circuit
Court of McHenry County, Illinois, against defendants Phoenix
Home Life Insurance ("Phoenix"), Centera Partners ("Centera") and
John D. Dennison ("Dennison"). Defendants removed this action to
federal court based on diversity jurisdiction.
28 U.S.C. § 1332(a)(1). William and Pamela are citizens of Illinois. Services
is a Delaware corporation with its principal place of business in
Illinois. Phoenix is a New York corporation with its principal
place of business in Connecticut. Dennison is a citizen of
Wisconsin. Centera is a limited liability company whose sole
member is Dennison and thus is a citizen of Wisconsin for
diversity purposes. The amount in controversy exceeds $75,000.
Plaintiffs' first amended complaint alleges thirteen counts;
seven counts against Phoenix, four counts against Centera and
four counts against Dennison. The counts are based on fraud,
violation of the Illinois Consumer Fraud and Deceptive Business
Practices Act, 815 ILCS 505, and negligent misrepresentation.
Plaintiffs seek damages, punitive damages and the equitable
remedies of reformation and specific performance against Phoenix.
Plaintiffs seek damages and punitive damages against Centera and
Defendants move to dismiss plaintiffs' first amended complaint,
in its entirety, pursuant to Fed.R. Civ. P. 12(b)(6) and 9(b)
asserting plaintiffs fail to state a ripe case or controversy due
to no current injury, fail to plead fraud with the required
specificity fail to identify what language in the contract should
be reformed, and fail to identify in what way defendants can
specifically perform the contract. For the purposes of this
motion, the court accepts all well-pleaded allegations in the
complaint as true and draws all reasonable inferences in favor of
the plaintiff. Travel All Over the World, Inc. v. Kingdom of
Saudi Arabia, 73 F.3d 1423, 1428 (7th Cir. 1996).
Dennison is an insurance producer who is Phoenix's agent
appointed by Phoenix to "sell and service" its life insurance
policies and products." Centera is "owned and/or controlled by
Dennison" and Dennison is Centera's employee. Dennison "held
himself out as a knowledgeable and competent individual in the
field of life insurance and securities and as such indicated to
plaintiffs that he would procure a tax-free, second-to-die, split
dollar life insurance policy for plaintiffs in the amount of
$20,000,000." "Beginning in late 2000 . . . Dennison repeatedly
misrepresented to plaintiffs that the Phoenix Life Policy was a
tax-free, second-to-die life insurance policy." "Since that
time," Dennison and Phoenix have informed plaintiffs the policy
is not "tax-free and . . . [is] subject to substantial estate tax
consequences." On or about December 28, 2000, plaintiffs
purchased "a second-to-die life insurance policy" from Phoenix as
"a direct and proximate result" of Dennison's misrepresentations.
Plaintiffs are the individuals about whom the "second-to-die"
determination for paying the insurance policy is based.
Plaintiffs are alive and "have paid and continue to pay premiums"
for the policy.
A motion to dismiss pursuant to Fed. Rule Civ.P. 12(b)(6) does
not test whether the plaintiff will prevail on the merits, but
instead whether the plaintiff has properly stated a claim for
which relief may be granted. Pickrel v. City of Springfield,
Ill., 45 F.3d 1115, 1118 (7th Cir. 1995). The complaint does
not need to specify the correct legal theory to survive a
Fed.R.Civ. P. 12(b)(6) motion, provided that "relief is possible under
any set of facts that could be established consistent with the
allegations." Bartholet v. Reishauer A.G., 953 F.2d 1073, 1078
(7th Cir. 1992).
Defendants argue that plaintiffs' first amended complaint
should be dismissed as a matter of law because the complaint
fails to state a ripe case or controversy. Defendants state that
plaintiffs' first amended complaint does not claim an injury
plaintiffs "have suffered or are currently suffering"; rather,
plaintiffs base their claim on an "alleged injury that might
possibly occur at some point in the future." Plaintiffs counter
that their complaint "sets forth quantifiable damages and current
injuries that include, but are not limited to, costs of the
premiums for the [p]olicy, attorneys' fee and a tax liability of
up to $10 million dollars".
For a claim to be ripe, plaintiffs must show that the alleged
injury has occurred. Nepomoceno v. Knights of Columbus, 1999 WL
66570 at 7 (N.D.Ill. 1999) (citing In re Prudential Ins. Co. of
America, 962 F.Supp. 450, 506 (D.N.J. 1997), aff'd, 148 F.3d 283
(3rd Cir. 1998), cert. denied, 67 U.S.L.W. 3364 (1999))
(Anderson, J.). See also, Sierra Club v. Marita, 46 F.3d 606,
610 (7th Cir. 1995) (discussing ripeness, standing and
injury). Plaintiffs have alleged they have paid and are paying
premiums on a policy which is not what they bargained for. While
the possible $10,000,000 tax liability is clearly speculative at
this point the insureds are still alive and we do not know what
the estate tax, which currently is slated for repeal in 2010 only
to be reinstituted in 2011, will be on their death), a fair
reading of their complaint is that they contracted for a policy
that would yield no estate tax if they died immediately after its
effective date and that they did not get that. This is enough to
survive a motion to dismiss.
Counts I, V, and VIII allege Phoenix, Dennison and Centera,
respectively, engaged in fraudulent conduct. Counts II, and IX
allege Phoenix and Centera, respectively, violated the Consumer
Fraud and Deceptive Business Practices Act. Fed. Rule Civ. P.
9(b) requires that fraud claims be pleaded with particularity.
Similarly, "claims made pursuant to the Illinois Consumer Fraud
Act must be plead with specificity" in accordance with the
requirements of Fed. Rule Civ.P. 9(b). Gallagher Corp. v. Mass.
Mutual Life Ins. Co., 940 F.Supp. 176, 180 (N.D.Ill. 1996)
(Moran, J.). "The purpose . . . of the heightened pleading
requirement . . . is to force the plaintiff to do more than the
usual investigation before filing his complaint" because "charges
of fraud . . . frequently ask courts in effect to rewrite the
parties' contract or otherwise disrupt established
relationships." Ackerman v. Northwestern Mutual Life Ins. Co.,
172 F.3d 467, 469 (7th Cir. 1999). Thus, to meet the pleading
requirements, plaintiffs must state "the identity of the person
making the misrepresentation, the time, place and content of the
misrepresentation, and the method by which the misrepresentation
was communicated." Gallagher Corp., 940 F. Supp. at 180. While
the complaint lacks specificity as to dates and specific
statements made by Dennison, and the court could order plaintiffs
to re-plead, such an order is unlikely to advance the resolution
of this case. Plaintiffs have stated Dennison told them in the
period leading up to their purchase of the policy that the
proceeds would not be subject to the estate tax. Defendants
presumably can deny Dennison ever made such a statement in their
Counts I, II, and III seek the remedy of reformation based on
fraud, violation of the Consumer Fraud and Deceptive Business
Practices Act and negligent misrepresentation. Defendants contend
that the claims for reformation should fail because the first
amended complaint does not identify what language in the contract
should be reformed. It is difficult to see how reformation could
help plaintiffs and they do not say specifically what's wrong
with the policy as written. Rather than dismissal, the court
orders plaintiff to file a more definite statement within 21 days
specifying how the language of the contract should be reformed.
See Fed.R. Civ. P. 12(e).
Count IV of plaintiffs' complaint seeks specific performance of
the "contract offered by Dennison on behalf of Phoenix". To plead
a request for specific performance, plaintiffs must allege the
existence of a valid contract, that plaintiffs performed or were
ready, willing and able to perform their part of the contract,
and that defendants refused to perform their part of the
contract. American Nat'l Bank and Trust Co. of Chi., v.
Allmerica Financial Life Ins. and Annuity Co., 2003 WL 1921815,
5 (N.D.Ill. 2003) (Grady, J.). It is difficult to see how
specific performance applies here. Plaintiffs ask that the
contract they thought they were getting be specifically performed
but they do not offer an specifics as to what should be done to
achieve the sought for tax free status. Rather than dismissal,
the court orders plaintiff to file a more definite statement
within 21 days specifying what specific action needs to be taken
for defendants to perform the contract. See Fed.R. Civ. P.
For the foregoing reasons, defendants' motion to dismiss is
denied. Plaintiffs are given 21 days to file a more definite
statement as to reformation and specific performance as discussed
above. The parties are ordered to appear before Magistrate Judge
Mahoney within 30 days to arrange for mediation of this case
through the court's mediation program.