The opinion of the court was delivered by: J. Phil Gilbert District Judge
This matter comes before the Court on Defendant Brad Rench's (hereinafter "Rench") Motion to Dismiss (Doc. 23). Plaintiff Ivan Neathery (hereinafter "Neathery") filed a Response (Doc. 23) thereto. Defendant Clay Winfield (hereinafter "Winfield"), acting pro se, also filed a Motion to Dismiss (Doc. 32) that incorporated Rench's dismissal motion, to which Neathery also filed a Response (Doc. 38).
For the following reasons, the Court GRANTS the instant motions.
As a preliminary matter, the Court notes that Defendants' motions again fail to specify a rule under which they are filed. Nevertheless, the Court assumes that the motions to dismiss are for failure to state a claim upon which relief can be granted pursuant to Federal Rule of Civil Procedure 12(b)(6).
For motions made under Federal Rule 12(b)(6), the Court must accept all factual allegations in the complaint as true and draw all reasonable inferences from those facts in favor of the plaintiff. Erickson v. Pardus, 551 U.S. 89, 94 (2007) (per curiam) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007)); Tricontinental Indus., Ltd. v. PricewaterhouseCoopers, LLP, 475 F.3d 824, 833 (7th Cir. 2007). The Court, accepting all of Neathery's factual allegations as true and drawing all reasonable inferences in his favor, finds as follows:
Rench, the president of Meridian Bank, and Winfield and Timothy Keiser (hereinafter "Keiser"), members of the board of directors of Meridian Bank, allowed Meridian Bank to extend loans to themselves to purchase real estate subject to lower interest rates than they would receive with any other bank. These individuals were able to extend these loans by fraudulently pledging security. Further, the trio caused Meridian Bank to purchase real estate at an amount more than five times the amount of the fair market value. These individuals abused their respective positions and inside information and engaged in conduct that benefitted them on a personal basis, to the detriment of Meridian Bank and its shareholders.
Defendants also provided fictitious information to Neathery, an individual shareholder of Meridian Bank, regarding the financial state of the bank, its lending policies and procedures, and its operational policies and procedures. They represented there would be no self dealing or mismanagement of capital. Defendants represented to him that his shareholder voting rights would not be affected by the actions, inactions or conduct of the board or officers of the bank. In reliance on these representations, Neathery bought shares of stock.
On October 10, 2008, the director of the Illinois Department of Financial and Professional Regulation, Division of Banking, closed Meridian Bank and appointed the Federal Deposit Insurance Corporation (hereinafter "FDIC") as its receiver. The FDIC accepted its appointment and thereafter succeeded to all rights, titles, and powers and privileges of Meridian Bank pursuant to 12 U.S.C. § 1821 (c)(3)(A), including the right to bring a derivative claim against the corporation. (See Doc. 2, Exh. B). Neathery, an individual shareholder of Meridian Bank, did not receive notice of the receivership prior to filing his complaint in this case.
II. Relevant Procedural Posture
On May 28, 2009, Neathery filed a six-count Complaint (Doc. 2, Exh. C.) in the Circuit Court of the Third Judicial Circuit, Madison County, Illinois, seeking recovery for alleged misconduct by Rench, Winfield, Keiser and Meridian Bank. On August 18, 2009, FDIC filed a notice of substitution of parties in order to substitute the FDIC for Meridian Bank. On August 19, 2009, FDIC timely removed the state court action to this Court. (Doc. 2). On February 25, 2010, the Court granted in part and denied in part FDIC and Rench's first Motions to Dismiss (Docs. 10, 11). (See Doc. 21). Specifically, the Court granted said motions insofar as they sought dismissal of Neathery with prejudice from bringing Count I, alleging a shareholder derivative claim, and Count II, alleging a shareholder derivative claim of waste of corporate assets. The Court directed the Clerk of Court to substitute FDIC for Neathery as to said counts, thereby adding FDIC as a plaintiff and terminating FDIC as a defendant in this matter. However, Neathery's status as plaintiff continued as to Counts III through V, alleging individual violations of The Illinois Consumer Fraud and Deceptive Business Practices Act (hereinafter "ICFDBPA"), and Count VI, alleging civil conspiracy. The Court granted Neathery leave to amend his complaint without Count I or Count II or any new counts. The Court reasoned that if Neathery was given leave to amend, he could potentially demonstrate that he suffered from an individual injury other than the devaluation of stock based on the conduct of the Defendants, thereby stating a claim for which relief can be granted. On March 19, 2010, Neathery filed his First Amended Complaint (Doc. 22), and the instant motions were brought thereafter that target the remaining claims.*fn1