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COLMAN v. GREENFIELD

October 11, 2005.

ROBERT COLMAN, AS TRUSTEE OF THE ROBERT COLMAN TRUST, Plaintiff,
v.
ROGER GREENFIELD, THEODORE KASEMIR, et al., Defendants.



The opinion of the court was delivered by: BLANCHE MANNING, District Judge

MEMORANDUM AND ORDER

Before the court is defendants' motion to dismiss under Rule 12(b)(6) certain counts of plaintiff's complaint for failure to state a claim. For the reasons stated below, the defendants' motion is denied in part and granted in part.

I. Background

  Plaintiff has filed a ten-count complaint seeking to enforce a judgment he has obtained against defendants' affiliates. Specifically, plaintiff alleges that he has a $954,728.60 judgment (excluding attorneys' fees, costs, and interest) against Bar Louie Tempe, Inc. and a $488,604.20 judgment (again excluding attorneys' fees, costs, and interest) against defendant Restaurant Development Group ("RDG"). Defendants Roger D. Greenfield and Theodore Kasemir are officers, directors, and sole shareholders of both RDG and Bar Louis Tempe. According to the plaintiff, Greenfield and Kasemir, in order to avoid making payment on the judgments, caused RDG to transfer to or for the benefit of the defendants valuable rights under certain management agreements for no consideration and thereafter caused RDG to cease its business operations. Plaintiff seeks to avoid RDG's alleged fraudulent transfers and to collect the judgments from the defendants based upon their improper conduct and failure to operate their business in accordance with applicable law.

  Defendants have moved to dismiss counts II (avoidance of fraudulent transfers — actual fraud), III (aiding and abetting actual fraudulent transfers), IV (avoidance of fraudulent transfers — constructive fraud), VI (aiding and abetting breach of fiduciary duties) and VIII (aiding and abetting unlawful dividend) of the Amended Complaint*fn1 under Fed.R.Civ.P. 12(b)(6) for failure to state a claim. Specifically, defendants contend that a cause of action for aiding and abetting does not exist under Illinois law and that counts II and IV must be dismissed because plaintiff has failed to plead fraud with particularity as required by Fed.R.Civ.P. 9(b).

  II. Standard for Motion to Dismiss

  The Court may dismiss claims pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure if the plaintiff fails "to state a claim upon which relief can be granted." Fed.R.Civ.P. 12(b)(6). 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)).

  III. Analysis A. Aiding and Abetting

  Defendants first argue that no separate tort of aiding and abetting law exists in Illinois. Classic Amenities, Inc. v. Verbeke, et al., No. 00 C 3326, 2003 WL 21801021, at *2 n. 1 (N.D. Ill. August 1, 2003) ("Ready Care argues that under Illinois law there is no separate tort of aiding and abetting. As pointed out in Eastern Trading Co. v. Refco, Inc., 229 F.3d 617, 623 (7th Cir. 2000), this is true.").

  It is true that the Seventh Circuit stated in Eastern Trading that "aiding and abetting is a basis for imposing liability for the tort aided and abetted rather then being a separate tort." Eastern Trading, 229 F.3d at 623. In so holding, however, the Seventh Circuit acknowledged that at least two Illinois cases had recognized aiding and abetting as a distinct claim. Id. (stating that "a couple of cases have language (weakly) consistent with the separate-tort idea.") (citing Carter Coal Co. v. Human Rights Comm'n, 633 N.E.2d 202, 205 (Ill.App.Ct. 1994); Wolf v. Liberis, 505 N.E.2d 1202, 1208 (Ill.App.Ct. 1987)). Indeed, cases subsequent to Eastern Trading have recognized a separate cause of action for aiding and abetting. Thornwood, Inc. v. Jenner & Block, 799 N.E.2d 756, 759-762 (Ill.App.Ct. 2003) (recognizing aiding and abetting fraud and aiding and abetting breach of fiduciary duty); Hefferman v. Bass, No. 04 C 5748, 2005 WL 936900, at *3 (N.D. Ill. Apr. 15, 2005) (addressing defendant's motion to dismiss an aiding and abetting claim "rooted in intentional behavior" and stating the elements thereof) (citing Thornwood, 799 N.E.2d 756).

  Moreover, the District Court for the Southern District of New York recently had occasion to address whether such causes of action existed as distinct and separate claims under Illinois law in In re Parmalat Securities Litigation, 377 F. Supp. 2d 390, 412-14 (S.D.N.Y. 2005). The In re Parmalat court noted the conflict between the Seventh Circuit's position in Eastern Trading and subsequent cases interpreting Illinois law, such as Thornwood and Hefferman, and concluded that "[g]iven this trend in the lower courts, the Court cannot agree with defendants that Thornwood is an outlier unworthy of the respect that a federal court sitting in diversity must give to the decisions of the Illinois Court of Appeals." In re Parmalat, 377 F. Supp. 2d at 413-14 (citations omitted).

  This court agrees with the In re Parmalat court that Illinois courts recognize separate claims for aiding and abetting. This court acknowledges that it has previously concluded that the "Seventh Circuit has expressly found that the tort of aiding and abetting fraud does not exist in Illinois." W. United Life Assurance Co. v. Fifth Third Bank, 02 C 7315, 2003 WL 21800076, at *4 (N.D. Ill. July 29, 2003) (citing Eastern Trading, 229 F.3d at 624). However, as the defendants note in their brief, the Thornwood case by the Illinois Appellate Court finding a cause of action for aiding and abetting was decided after this court's ruling in Fifth Third Bank. Further, as the In re Parmalat court noted, "the dispute is academic" because the:
Seventh Circuit and the intermediate Illinois courts agree that knowingly assisting another to commit fraud gives rise to civil liability under Illinois law. They simply disagree on whether such conduct should be called fraud or aiding and abetting fraud.
In re Parmalat, 377 F. Supp. 2d at 414; see Eastern Trading, 229 F.3d at 623 ("There is nothing to be gained by multiplying the number of torts, and specifically by allowing a tort of aiding and abetting a fraud to emerge by mitosis from the tort of fraud, since it is apparent that one who aids and abets a fraud, in the sense of assisting the fraud and wanting it to succeed, is himself guilty of fraud"). Because the court concludes that a cause of action exists under Illinois law for aiding and abetting, the court denies defendants' motion to dismiss Counts II, VI, and XIII of the amended complaint.

  B. Pleading with Particularity Under Fed.R.Civ.P. 9(b).

  Defendants argue that plaintiff's counts II and IV alleging that the defendants fraudulent transfers should be dismissed because plaintiff has failed to plead these ...


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