The opinion of the court was delivered by: Hon. Joan H. Lefkow
Plaintiff Leila R. Taylor ("Leila") filed a third amended complaint against Michael Feinberg ("Michael") and Marcy Feinberg ("Marcy") arising from Michael's alleged misappropriation of assets belonging to the estates of Leila's and Michael's parents, Erla and Max Feinberg (respectively, "Erla" and "Max"), as well as assets belonging to Leila as a joint account holder with Michael.*fn1 The claims against Michael are for breach of fiduciary duty (Count I), constructive fraud (Count II), fraudulent concealment (Count III), unjust enrichment (Count IV), conversion (Count V), equitable accounting (Count VI), and violation of the Illinois Joint Tenancy Act ("JTA"), 765 Ill. Comp. Stat. 1005/4 (Count VII). The claims against Marcy are for aiding and abetting Michael's alleged misconduct (Count VIII) and unjust enrichment (Count IX). Before this court are Michael's and Marcy's motions to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). For the following reasons, Michael's motion [#96] is denied, and Marcy's motion [#97] is granted in part and denied in part.
Erla and Max, the parents of Michael and Leila, were residents of Chicago, Illinois and had amassed considerable wealth before their deaths. Third Am. Compl.¶¶ 6--7. Max died on December 4, 1986, Erla on October 21, 2003. Id. During the nearly twenty years Erla lived after Max's death, she remained in Chicago, near Michael and his children. Id. ¶ 7. Leila, at all relevant times, lived in California with her husband, Marshall Taylor ("Marshall"). Id. ¶¶ 1, 7, 21. Michael had power of attorney for Erla starting in June 1994 and tended to her financial affairs until her death. Id. ¶¶ 2, 7.
While Erla was alive, she held joint bank accounts with her two children. Id. ¶ 9. All statements for the joint accounts were sent to Michael. Id. ¶ 11. Leila alleges that from early 1987 to December 18, 2004, Michael misappropriated at least $450,000 for his own benefit from these accounts. Id. ¶¶ 9--10. Leila alleges that the misappropriations include, among others, the following transactions that Michael made from joint accounts: (1) from November 19, 1997 to December 18, 2004, he withdrew at least $55,025 from a joint account at JPMorgan Chase ("Chase account"); (2) in December 2002, he wrote a $100,000 check to himself for the purchase of a summer home from the Chase account; (3) in February 2000, he wrote and cashed a check for $58,000 for personal use from the Chase account; (4) from 1998 to 2004, he wrote checks amounting to at least $26,625 for his grandchildrens' tuition from the Chase account; (5) from December 1997 to 2004, he made ATM withdrawals of at least $86,000 from a joint account at the Bank of Lincolnwood ("Lincolnwood account");
(6) in December 2002, he wrote an $80,000 check to himself towards a summer home purchase from the Lincolnwood account; (7) from 1998 to 2004, he wrote checks totaling at least $44,650 for his grandchildrens' tuition from the Lincolnwood account; and (8) he made other withdrawals or payments from the joint accounts benefitting himself and other family members aside from Leila. Id. ¶ 10. Leila further claims that Michael misappropriated stock and bond income rightfully owned by Max's estate to which Leila had rights as Max's heir. Id. ¶¶ 9, 12. Michael also allegedly received Erla's social security income and allowance from Max's estate without accounting for the checks. Id.¶ 13.
The misappropriations, according to Leila, continued for over a year after Erla's death and deprived Leila of at least $300,000 and possibly upwards of $850,000. Id.
¶¶ 15--16. Michael claims that Erla orally authorized him to withdraw what money he needed from the joint accounts as long as he accounted to Leila. Id. ¶ 14. Leila alleges, however, that Michael admits he did not account to Leila. Id. Leila claims that Michael refused to provide her with documentation about the joint accounts upon her request in January 2004, leading her to first review joint account statements only in November 2004. Id. ¶ 17. Leila further learned about Michael's alleged misappropriation from a probate matter involving Erla's estate on May 19, 2006. Id. ¶ 18. She claims that the misappropriation started as early as 1987, leaving a nearly ten-year gap before the earliest documentation of alleged misappropriation that Leila is aware of, which is from November 1997. Id.
Finally, Leila alleges that Michael concealed his misappropriations
with the help of Marcy, his wife, and other family members.*fn3
Id. ¶¶ 17--26. Leila claims that Michaelconvinced family members, including Marcy, to aid in the concealment
of the alleged misappropriations during at least one meeting on May 2,
2004. Id. ¶¶ 22--26. Marcy allegedly knew of Michael's
misappropriation and aided and abetted Michael in the concealment of
the misappropriation as part of a scheme that involved ignoring
Michael's misappropriation, allowing him to keep as much money as
possible, concealing Michael's misappropriation and breach of
fiduciary duty from Leila, allowing evidence to be lost or destroyed,
and having other family members sue Leila and Marshall for their own
alleged misappropriation in state court. Id. ¶¶ 22, 28--29. Leila also
claims that Marcy benefitted financially from the alleged
misappropriation via the summer home payments and use of cash
misappropriated by Michael. Id. ¶ 30.
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); Gen. Elec. Capital Corp. v. Lease Resolution Corp., 128 F.3d 1074, 1080 (7th Cir. 1997). In ruling on a 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 establish that the requested relief is plausible on its face. Ashcroft v. Iqbal, 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). Allegations of fraud are subject to the heightened pleading standard of Rule 9(b), which requires a plaintiff to "state with particularity the circumstances constituting fraud or mistake." Fed. R. Civ. P. 9(b). This means that the plaintiff must plead the "who, what, when, where, and how: the first paragraph of any newspaper story." DiLeo v. Ernst & Young, 901 F.2d 624, 627 (7th Cir. 1990).
I. Compliance with Rule 9(b)
As in the original complaint, the heightened pleading standards of Rule 9(b) apply to the alleged misappropriations underlying Leila's claims. Rule 9(b) requires a party to state with particularity the circumstances constituting fraud or mistake, although malice, intent, and knowledge may be alleged generally. Though a breach of fiduciary duty does not necessarily indicate fraudulent behavior, Rule 9(b) applies to averments, not claims, of fraud. Borsellino v. Goldman Sachs Group, Inc., 477 F.3d 502, 507 (7th Cir. 2007). Thus, "[a] claim that 'sounds in fraud'-in other words, one that is premised upon a course of fraudulent conduct-can implicate Rule 9(b)'s heightened pleading requirements." Id.
Although Leila does not use the word "fraud" to describe the conduct at issue in the complaint, the actions alleged as the basis for the breach of fiduciary duty and other claims sound in fraud. Michael is accused of engaging in fraudulent conduct, specifically misappropriating funds, concealing the misappropriation and other material facts, allowing evidence of the misappropriation to be lost or destroyed, and allocating misappropriated funds to other family members. Therefore, Rule 9(b) applies to Michael's alleged misappropriation and the accompanying fraudulent conduct that underlies each count.
With her third amended complaint, Leila has sufficiently remedied the pleading defects identified by the court in its September 28, 2009 opinion as related to Michael's alleged misappropriation from the joint accounts. She has identified from which accounts money was improperly withdrawn (the Chase and Lincolnwood accounts), as well as specific time periods over which these withdrawals took place and the uses to which the withdrawals were put. She has also alleged that Michael did not account for the withdrawals to Leila contrary ...