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RehabCare Group East Inc. v. Sak Management Services

August 18, 2010


The opinion of the court was delivered by: Judge Joan H. Lefkow


RehabCare Group East Inc. ("RehabCare") filed a five-count amended complaint against SAK Management Services, LLC ("SAK"), Coventry Living Center, LLC ("Coventry"), Parkview Terrace, LLC ("Parkview"), St. Anthony's Nursing and Rehabilitation Center ("St. Anthony's") and Walnut Grove Village, LLC ("Walnut Grove"),*fn1 arising out of their alleged failure to pay money due to RehabCare for services it provided. All defendants except for SAK have answered the complaint, and SAK now moves to dismiss all claims against it-promissory estoppel (Count II), unjust enrichment (Count III), account stated (Count IV), and tortious interference with contracts (Count V)-pursuant to Federal Rule of Civil Procedure 12(b)(6). For the following reasons, the motion [#39] is denied.


RehabCare is a provider of therapy services. Am. Compl. ¶ 2. It allegedly contracted with Coventry, St. Anthony's, Parkview and Walnut Grove (the "Facility Defendants") to provide therapy services to their patients. Id. ¶ 12. Though RehabCare allegedly performed all obligations required of it by contract, id. ¶ 13, it alleges that it was never compensated for its services. Id. ¶ 15. Despite numerous requests, id. ¶ 16, statements of account supplied to the defendants, id. ¶ 47, and meetings in which RehabCare was promised by the defendants that the outstanding balance would be paid, id. ¶¶ 16--17, the payments have allegedly not yet been made. This is despite the Facility Defendants' allegedly being reimbursed by Medicare for "all or a significant portion of the services provided by RehabCare." Id. ¶ 21.

During the period in question, SAK allegedly managed the Facility Defendants' hospitals. Id. ¶ 22. SAK is alleged to have known about the agreements between the Facility Defendants and RehabCare, and to have used its position and influence to encourage the Facility Defendants to breach their contract with RehabCare and divert funds to SAK's sole benefit. Id. Further, the actual relationship between SAK and the Facility Defendants is alleged to have been much closer than SAK's role as manager might suggest. Specifically, SAK is alleged to have (1) directed the payment of insider debts, including to SAK and one another, before third-party creditors, (2) commingled funds, (3) shared other assets without a corresponding exchange of value, (4) intentionally undercapitalized the business in which they were engaged, (5) leveraged unprofitable locations to ensure that the more profitable locations remained profitable and available to provide funds to SAK and other insiders, and (6) used the Facility Defendants as business conduits for SAK and other insiders. Id. ¶ 23.


A motion to dismiss under Rule 12(b)(6) challenges a complaint for failure to state a claim upon which relief may be granted. See Fed. R. Civ. P. 12(b)(6); General Elec. Capital Corp. v. Lease Resolution Corp., 128 F.3d 1074, 1080 (7th Cir. 1997). In ruling on a Rule 12(b)(6) motion, the court accepts as true all well-pleaded facts in the plaintiff's complaint and draws all reasonable inferences from those facts in the plaintiff's favor. Dixon v. Page, 291 F.3d 485, 486 (7th Cir. 2002). In order to survive a Rule 12(b)(6) motion, the complaint must not only provide the defendant with fair notice of the claim's basis, but must also state facts which establish that the requested relief is plausible, and not just possible, on its face. Ashcroft v. Iqbal, --- U.S. ----, 129 S.Ct. 1937, 1949, 173 L.Ed. 2d 868 (2009); see also Bell Atl. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed. 2d 929 (2007).


I. Promissory Estoppel (Count II)

SAK argues that Count II must be dismissed because (1) RehabCare has failed to allege the existence of a specific promise, and (2) promissory estoppel may not be invoked where a written contract-in this case the contract between the Facility Defendants and RehabCare-controls the transaction. The first argument is untenable: the complaint states that the defendants*fn2 promised that the payments would be made. Thus, RehabCare pleaded facts showing the existence and the contents of the promise. This allows the court to infer a right to recovery under promissory estoppel provided the remaining elements of the claim are met. Thus, the claim is plausible, not just possible, and Rule 8(a) of the Federal Rules of Civil Procedure is satisfied. Iqbal, 129 S.Ct. at 1949.

SAK's second argument is no better. Undoubtedly, "once consideration is found to exist, a party to the contract can no longer maintain an action for promissory estoppel where the performance which is said to satisfy the requirement of detrimental reliance is the same performance that supplies the consideration for the contract." Prentice v. UDC Advisory Servs., Inc., 648 N.E.2d 146, 151, 271 Ill. App. 3d 505, 207 Ill. Dec. 690 (1995) (emphasis added); see also The Sharrow Group v. Zausa Dev. Corp., No. 04 C 6379, 2004 WL 2806193, at *3 (N.D. Ill. Dec. 6, 2004) ("Under Illinois law, promissory estoppel and unjust enrichment are unavailable where the parties have entered into an express contract." (citing cases)).

But SAK was not a party to the written contract at issue-the contract existed only between the Facility Defendants and RehabCare. SAK claims that this is irrelevant, because once it has been established that there is a contract controlling the transaction, no one can be held liable under promissory estoppel for a promise to perform the terms of that contract. The court finds no legal support for this assertion. See DeGeer v. Gillis, No. 09 C 6974, 2010 WL 1609914, at *9 (N.D. Ill. April 21, 2010) ("The doctrine of promissory estoppel generally does not apply where a contract exists between the parties." (emphasis added)). All cases cited by SAK indicate only that promissory estoppel is barred when there is a contract between the parties. See, e.g., The Sharrow Group, 2004 WL 2806193, at *3 ("'As a rule, plaintiffs cannot pursue quasi-contractual claims where there is an express contract between the parties.'" (quoting Prodromos v. Poulos, 560 N.E.2d 942, 948, 202 Ill. App. 3d 1024, 148 Ill. Dec. 345 (1990))).

It is unclear whether SAK is arguing that it was in fact a party to the contract or acting on behalf of one*fn3 -perhaps due to its role as an agent of the Facility Defendants. It is important to emphasize, however, that SAK bears the burden of proving the legal insufficiency of the claim. Fedders Corp. v. Elite Classics, 279 F. Supp. 2d 965, 973 (S.D. Ill. 2003). SAK does not cite a single case to defend this argument, and the closest it comes to actually arguing the point is the assertion that there can be no promissory estoppel where the promisee is obligated to perform under a written contract. If it was SAK's intention to make this argument, then these allegations are the sort of "perfunctory and undeveloped assertion[s]" that courts are not obligated to entertain as legal arguments. United States v. Hook, 195 F.3d 299, 310 (7th Cir. 1999) ("[I]t is not the obligation of this court to research and construct the legal arguments open to parties, especially when they are represented by counsel. In order to develop a legal argument effectively, the facts at issue must be ...

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