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THORPE v. LEVENFELD

September 29, 2005.

BARRY THORPE, Plaintiff,
v.
ANDREW W. LEVENFELD, LEVENFELD & THORPE, LLC, ANDREW W. LEVENFELD AND ASSOCIATES, LTD. Defendants.



The opinion of the court was delivered by: GEORGE MAROVICH, District Judge

MEMORANDUM OPINION AND ORDER

Plaintiff Barry Thorpe ("Thorpe") filed a six-count complaint against defendants Andrew W. Levenfeld ("Levenfeld"), Levenfeld & Thorpe, LLC ("Levenfeld & Thorpe") and Andrew W. Levenfeld and Associates, Ltd. ("Levenfeld & Associates"). In his first amended complaint, Thorpe asserts state law claims for fraudulent inducement, constructive fraud, breach of fiduciary duty, breach of contract, accounting, promissory estoppel and unjust enrichment.*fn1 Defendants move pursuant to Rules 9(b) and 12(b)(6) of the Federal Rules of Civil Procedure for an order dismissing plaintiff's claims. For the reasons set forth below, the Court grants in part and denies in part defendants' motion to dismiss. I. Background

For purposes of this motion to dismiss, the Court takes as true the allegations in the first amended complaint (the "complaint"). The Court also considers the Operating Agreement of Levenfeld & Thorpe, LLC (the "Agreement") attached to and referred to in plaintiff's first amended complaint. See Fed.R.Civ.P. 10(c).

  As alleged in the complaint, the relevant facts are as follows. Both defendant Levenfeld and plaintiff Thorpe are attorneys licensed to practice in the state of Illinois. Thorpe's specialties are securities and corporate law. Levenfeld & Thorpe was a limited liability company that had its principal place of business in Illinois. Levenfeld & Associates was a professional corporation organized and with its principal place of business in Illinois. Levenfeld & Thorpe and Levenfeld & Associates were each formed to engage in the practice of law.

  As of early 2001, Thorpe worked as an attorney at Levenfeld & Associates, where he had worked for about three years. At about that time, Thorpe informed Levenfeld that Thorpe had received offers to work for other law firms. Thorpe alleges that in order to keep Thorpe from leaving Levenfeld & Associates, Levenfeld told Thorpe that he would make Thorpe a partner in the firm and that Thorpe would be considered to have had an ownership interest in Levenfeld & Associates dating back to January of 2001. Levenfeld also told Thorpe that the ownership interest would carry over to Levenfeld & Thorpe, a new limited liability company that Levenfeld and Thorpe would form.

  Thorpe and Levenfeld formed Levenfeld & Thorpe in June 2001, when they signed the Agreement, which created the entity and detailed the structure of the organization. In the three months leading up to June 2001, Thorpe and Levenfeld discussed at the offices of Levenfeld & Associates how Levenfeld & Thorpe would be organized. Levenfeld represented to Thorpe that (among other things) Levenfeld would have a 25% ownership interest, that Levenfeld would manage the affairs of the practice in a fair and equitable manner, that Thorpe would be paid a salary and distribution and that Thorpe would receive benefits. They signed the Agreement in June 2001.

  In early 2003, Levenfeld informed Thorpe that he was dissolving Levenfeld & Thorpe. Thorpe alleges both 1) that Levenfeld informed Thorpe that Levenfeld would not pay him the compensation and distributions to which he was entitled and 2) that, in fact, Levenfeld failed to make such payments. Thorpe alleges he was intentionally forced out of the entities because Levenfeld knew that they were about to receive substantial fees from which Thorpe would have to be paid.

  Based on these allegations, Thorpe asserts claims for fraudulent inducement, breach of fiduciary duty, constructive fraud, breach of contract, accounting, promissory estoppel and unjust enrichment.

  II. Standards on a motion to dismiss

  The Court may dismiss claims pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure where the plaintiff fails "to state a claim upon which relief can be granted." Fed.R.Civ.P. 12(b)(6). The purpose of a motion to dismiss under this Rule is to test the sufficiency of the complaint, not to rule on its merits. Gibson v. City of Chicago, 910 F.2d 1510, 1520 (7th Cir. 1990). In considering a motion to dismiss, the Court accepts as true all well-pleaded factual allegations and draws all reasonable inferences in the plaintiff's favor. McCullah v. Gadert, 344 F.3d 655, 657 (7th Cir. 2003). On a motion to dismiss, the "issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims." Cole v. U.S. Capital, Inc., 389 F.3d 719, 724 (7th Cir. 2004) (quoting Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)).

  The Federal Rules of Civil Procedure generally require simple notice pleading. Fed.R.Civ.P. 8(a). Certain allegations, however, must be stated with particularity. For example, Federal Rule of Civil Procedure 9(b) mandates that "all averments of fraud" must be "stated with particularity." Fed.R.Civ.P. 9(b).

  III. Discussion

  In this diversity action, the parties implicitly agree that Illinois law applies to the state common-law claims. The duty of a federal court considering a diversity case is "to predict what the state's highest court would do if presented with the identical issue." Taco Bell ...


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