The opinion of the court was delivered by: Charles P. Kocoras, District Judge
This matter comes before the court on the motion of Defendants Arkin Youngentob Associates, LLC ("AYA") and Stuart Youngentob to dismiss Counts VIII and IX of the complaint of Plaintiff Joseph Beale pursuant to Federal Rules of Civil Procedure 12(b)(1), 12(b)(2), 12(b)(5), and 12(b)(6). For the following reasons, the 12(b)(1) motion is entered and continued; the 12(b)(5) motion is denied as moot; and the 12(b)(2) and 12(b)(6) motions are denied.
According to the allegations of the complaint, which must be accepted as true for purposes of this motion, AYA and Youngentob are licensed to act as insurance agents in the state of Illinois. Defendant Security Life of Denver Insurance Company ("ING") is an issuer of insurance policies. Defendant Revolution Portfolio, LLC ("Revolution") purchases judgments at a discount and attempts to collect upon them.
Revolution purchased a $7.3 million judgment rendered against Beale in Florida state court. When the judgment was not satisfied, Revolution and three other creditors began involuntary Chapter 7 bankruptcy proceedings against Beale in the Northern District of Illinois. In conjunction with the bankruptcy, the trustee instituted adversary proceedings against Beale and others not involved in this suit. On November 15, 2005, the trustee and the third parties reached a settlement to resolve the adversary proceedings.
In connection with the settlement, Beale and Revolution entered into a separate agreement (the "Agreement") on December 12, 2005. In relevant part, it stated that Beale would pay Revolution a total amount of $1.6 million consisting of $350,000 in cash and a $1.25 million life insurance policy that Beale would obtain and transfer to Revolution before a specific date.
By early April 2007, Beale had not obtained a policy, and Revolution declared him in default of the Agreement. Subsequently, AYA and Youngentob communicated with Revolution about potential policy terms and submitted an application to ING that resulted in a policy issuing in early June.
On June 27, 2007, the parties executed an amendment to the Agreement; it specified that the policy must be transferred to Revolution by 3 pm Eastern time on July 2, 2007. Before that date, AYA and Youngentob became aware that ING would require a document evidencing the authorization of Revolution's signature on the transfer documents before the transfer could be effectuated. They informed Revolution of the deficiency but did not tell Beale.
The additional paperwork was ultimately provided to ING, but not until 3:50 pm on July 2, 2007. As a result, ING did not acknowledge the transfer until July 3, the day after the deadline specified in the Amendment. However, once the policy was transferred, Beale could not rescind it. Revolution declared Beale to be in default and did not perform its corresponding obligations under the amended agreement. According to Beale, AYA and Youngentob withheld the information about the inevitable default to prevent him from rescinding the policy with ING, thereby ensuring that they would retain their commission for obtaining the policy.
On June 5, 2008, Beale sued AYA and Youngentob for breach of fiduciary duty and negligence in connection with their actions in effectuating the transfer of the policy to Revolution.*fn1 AYA and Youngentob moved to dismiss those claims for lack of subject matter jurisdiction under Fed. R. Civ. P. 12(b)(1), lack of personal jurisdiction under Fed. R. Civ. P. 12(b)(2), insufficient service of process under Fed. R. Civ. P. 12(b)(5), and failure to state a claim under Fed. R. Civ. P. 12(b)(6).
Concluding that the jurisdictional allegations of the complaint were insufficient to establish diversity, we issued a rule to show cause on September 24, 2008, to address the jurisdictional deficiencies and accordingly do not examine the merits of the Rule 12(b)(1) challenge herein.
AYA and Youngentob initially challenged the sufficiency of service upon them in this case. Subsequently, however, both executed waivers of service, mooting the Rule 12(b)(5) challenge to Beale's complaint. Consequently, this opinion addresses only the 12(b)(2) and 12(b)(6) motions.
I. Motion to Dismiss for Lack of Personal ...