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Petrakopoulou v. DHR International

April 30, 2009

FALLYA PETRAKOPOULOU, PLAINTIFF/COUNTERDEFENDANT
v.
DHR INTERNATIONAL, INC., DEFENDANT/COUNTERCLAIMANT.



The opinion of the court was delivered by: United States District Judge Elaine E. Bucklo

MEMORANDUM OPINION AND ORDER

In this employment dispute, defendant DHR International, an executive search firm, counters the breach of contract claim brought by plaintiff Fallya Petrakopoulou, DHR's former employee, with the affirmative defense (and identical counterclaim) that the employment contract plaintiff asserts is void because she fraudulently induced defendant to execute it. On December 17, 2008, I granted plaintiff's motion to dismiss this affirmative defense and counterclaim. Petrakopoulou v. DHR Int'l., Inc. 590 F.Supp.2d 1013 (N.D.Ill. 2008) ("Petrakopoulou I"). Defendant has since amended its claim,*fn1 and plaintiff again moves to dismiss. For the reasons discussed below, I deny plaintiff's motion.

I.

As set forth in greater detail in Petrakopoulou I, defendant is an executive search firm headquartered in Chicago with offices throughout the world. On June 1, 2007, after more than a year of negotiations, the parties entered into an employment agreement (the contract at issue here) pursuant to which plaintiff would open an office to conduct defendant's business in Paris, France. Approximately six months into plaintiff's employment, defendant sought to change the terms of her contract. Plaintiff refused to accept the proposed changes. Defendant informed her that it deemed her refusal a constructive resignation and immediately terminated her, cutting off all access she previously had to defendant's various systems, and refusing to make compensation and other payments plaintiff asserts were owing to her. Plaintiff claims that these acts violate the terms of the parties' employment agreement.

Defendant counters that the parties' employment agreement is void because plaintiff fraudulently induced defendant to enter into the agreement. In its original claim, defendant cited three allegedly false representations plaintiff made during the parties' negotiations and claimed that it reasonably relied on these misrepresentations in agreeing to hire plaintiff on the terms set forth in the employment agreement. Defendant claimed that plaintiff represented: 1) that she was personally responsible for consistently generating between $1 million and $1.5 million in annual revenue based on her existing client base; 2) that she had the ability to transition her existing client base to defendant; and 3) that she had the ability to consistently generate at least $1 million in annual revenue for defendant.

I dismissed defendant's claim on several grounds. First, I found that defendant failed to meet the heightened pleading standard of Fed. R. Civ. P. 9(b) because nothing in defendant's allegations suggested that it had done any investigation to ascertain the truth or falsity of plaintiff's putative representations. As to the representation about plaintiff's past performance, I held that mere speculation that the statements were untrue was insufficient to support a fraud claim. Petrakopoulou I, at 1019, relying inter alia on Ackerman v. Northwestern Mutual Life Ins. Co., 172 F.3d 467 (7th Cir. 1999). Next, I found that the claim that plaintiff misrepresented her future earning potential was inactionable as within the "realm of expressions of opinion and statements regarding future events that are not actionable as fraud in Illinois." Id. (citing Prime Leasing, Inc. V. Kendig, 332 Ill.App.3d 300, 773 N.E.2d 84, 92 (Ill.App.Ct. 2002)). Finally, I held that the claim that plaintiff misrepresented her "ability" to transition her existing client base was "subject to a wide variety of interpretations, and without a clear allegation of what plaintiff is alleged to have said (along with the other necessary details of who, where, when, and how)," defendant had not adequately pled its claim.

In its amended claim, defendant has slightly recharacterized plaintiff's misrepresentations and now asserts two categories of allegedly false statements: 1) misrepresentations relating to her past revenue generation; and 2) false statements regarding her client base. In the first category, defendant again claims that plaintiff represented that she was responsible for generating between $1 million and $1.5 million in annual revenue from her existing client base. In the amended allegations, defendant identifies three individuals, Joshua Christ, Nick Slee, and Geoff Hoffman, "and others," to whom plaintiff allegedly made this claim verbally between mid 2006 and May 2007.*fn2 Defendant then alleges that "in these same conversations, as well as in several e-mail communications beginning in or about May 2006," plaintiff represented that her annual salary at that time was between $300,000 and $400,000. Finally, defendant claims that plaintiff told Geoff Hoffman in or around May of 2006 that even in her least successful year, she still generated between $800,000 and $900,000 in revenue for her employer.

Defendant's allegations relating to the second category of misrepresentations include that plaintiff stated she had "ensured the transfer of revenue from her existing client base to DHR." Defendant fleshes out this allegation with the following details: First, in a telephone conversation with Geoff Hoffman in or about May 2006, plaintiff stated that many of her clients would "follow her wherever she went," including to DHR. In particular, plaintiff stated that one of her primary clients (which she identified by name at the time),*fn3 had indicated that it had several positions it wanted her to fill, and that those assignments would remain with her if she left her then-current employer. According to defendant, plaintiff "stressed the significance of this commitment" because she consistently generated hundreds of thousands of dollars in revenue annually from that particular client. In addition, defendant claims that during the same time frame, plaintiff told Nick Slee that she had already advised her clients of her intent to join DHR, and that several of her clients---including two she mentioned by name--had indicated that their business would continue with plaintiff at her new firm. Defendant adds that within the "search" industy, it is common for individuals in plaintiff's position to "discuss a possible change of employment with [productive] clients to obtain assurances that the client relationships will indeed continue after the change."

Oddly, defendant does not allege that any of the clients plaintiff supposedly named did not, in fact, continue with plaintiff after her move, nor in fact does it specify the allegedly insufficient amount she generated in fees while in its employ.*fn4 Defendant does address both of these points in its supporting memorandum, however, arguing that defendant worked on only two search assignments in the first six months of her employment (and that they were not the assignments she claimed her clients had previously promised), and that she had generated less than $70,000 in fees.

Defendant rounds out its allegations with conclusory statements that plaintiff's representations were false; that she knew her representations to be false or was culpably ignorant of their falsity; that she intended to induce reliance on the false statements; and that defendant did, in fact, reasonably rely on her statements to its detriment.

II.

A motion to dismiss tests the sufficiency of claims, not their merit. Gibson v. City of Chicago, 910 F.2d 1510, 1520 (7th Cir. 1990). I must accept all well-pleaded allegations in defendant's claim as true and draw all reasonable inferences in defendant's favor. McMillan v. Collection Prof'ls, Inc., 455 F.3d 754, 758 (7th Cir. 2006). Dismissal is warranted only if the factual material in the claim fails plausibly to suggest that defendant is entitled to relief. Bell Atlantic Corp. v. Twombly, 127 S.Ct. 1955, 1965 (2007).

Fraud in the inducement is a form of common-law fraud. Lagen v. Balcor Co., 274 Ill.App.3d 11, 653 N.E.2d 968, 972 (Ill.App.Ct. 1995). The elements of common-law fraud in Illinois are: 1) a false statement of material fact; 2) knowledge or belief by the maker that the statement was false; 3) an intent to induce reliance on the statement; 4) reasonable ...


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