The opinion of the court was delivered by: Judge Robert M. Dow, Jr.
MEMORANDUM OPINION AND ORDER
Before the Court are two motions to dismiss Plaintiff's complaint, one filed by Defendant Hewitt Ennisknupp, Inc.  and one filed by Defendants Hewitt Associates, Inc., Aon Hewitt, and Aon Corporation . For the following reasons, Defendant Hewitt Ennisknupp, Inc.'s motion  is granted in part and denied in part, and the Court gives Plaintiff 28 days from the date of this order to replead the counts that the Court has dismissed. The motion filed by the remaining Defendants  is respectfully denied.
Ennis Knupp & Associates, Inc. ("Ennis Knupp") was an independent firm that provided investment consulting services to institutional clients. ¶ 24. Ennis Knupp was organized as a closely-held corporation. ¶ 35. Plaintiff Neeraj Baxi ("Plaintiff" or "Baxi") began his employment with Ennis Knupp in July 2000 as a senior investment analyst. ¶ 38. In 2002, Plaintiff was promoted to associate and was required to purchase 100 shares of Ennis Knupp for $10,000 (i.e., $100 per share). ¶ 39. In 2005, Plaintiff became a Principal and was required to purchase an additional 900 shares of Ennis Knupp for $90,000 (again, at $100 per share). ¶ 39. In 2006, Planitiff was awarded another 196 shares. Id. Ultimately, Plaintiff owned 1,196 shares of Ennis Knupp, approximately 4% of the company. Id.
On August 23, 2006, Plaintiff entered into a Third Restated and Amended Stock Restriction and Purchase Agreement, which required Plaintiff to sell his shares back to Ennis Knupp upon his separation from the company. The 2006 Stock Restriction Agreement provides in relevant part:
Transfer Upon Termination of Employment. [* * *] [W]ithin ninety (90) days after the termination of employment by a Shareholder, the Corporation shall purchase all [* * *] of the Shares owned by said Shareholder as of the date of termination of his employment with [Ennis Knupp], and the person then holding such Shares shall sell them to the [Ennis Knupp], at the price and on the other terms and conditions hereinafter specified. 2006 Stock Restriction Agreement § 3, Ex. A to Defendant Hewitt Ennisknupp, Inc. f/k/a Ennis Knupp & Associates, Inc. ("HEK") Memorandum .*fn2 The 2006 Stock Restriction Agreement defines the phrase "termination of employment" as the "voluntary or involuntary termination of a Shareholder's employment with [Ennis Knupp] for any reason whatsoever (including death or retirement) at any time." Id. at § 1(h). The ninth signature page of the 2006 Stock Restriction Agreement contains Plaintiff's signature. Id.
The 2006 Stock Restriction Agreement was amended in April 2008. Plaintiff signed the 2008 Amendment. See Ex. B. to HEK Mem. The 2006 Stock Restriction Agreement, as amended by the 2008 Amendment, provides in pertinent part:
[T]he purchase price for each Share purchased by [Ennis Knupp] pursuant to the terms of this Agreement upon termination of [Plaintiff's] employment * * * shall be an amount equal to the lesser of(i) the Fair Market Value of such Share or (ii)
(A) with respect to a Class A Share, the Capital Contribution paid by [Plaintiff] for each such Class A Share; provided, that the capital contributed in exchange for such Class A Share as of the date hereof shall be deemed to be equal to One Hundred Dollars ($100) and (B) with respect to a Class B Share, (x) if [Plaintiff] made a Capital Contribution for such Class B Share, the Capital Contribution paid by [Plaintiff] for each such Class B Share; provided that, the capital contributed in exchange for such Class B Share as of the date hereof shall be deemed to be equal to One Hundred Dollars ($100), (y) if [Plaintiff] did not make a Capital Contribution for such Class B Share, but accepted such Class B Share as compensation and paid income tax thereon, the amount of such compensation, as determined by the Board of Directors; provided, that each such compensation for one Class B Shaer as of the date hereof shall be deemed to be equal to One Hundred Dollars ($100) or (z) if the Shareholder was issued such Class B Share as a non-taxable distribution or dividend, One Hundred Dollars ($100) (the price that is the lesser of clauses (i) and (ii) above shall be referred to as the "Purchase Price").
Id. at § 2 (emphasis added).
Section 12 of the Stock Restriction Agreement (titled "Sale of the Corporation") discussed the obligations of shareholders (like Plaintiff) in the event of a sale or merger. Among other things, § 12 provided that upon "the consummation of" a sale or merger of the company, "all of the Shareholders holding a particular class or series of Shares shall receive the same form and amount of consideration per share* * *."
In 2008, Plaintiff informed Ennis Knupp that he intended to leave the company and move back to India. ¶ 40. At the time, Ennis Knupp was considering establishing a presence in India and asked Plaintiff if he would manage the opening of Ennis Knupp's Indian office in Mumbai.
Id. Plaintiff agreed. He moved to India in March 2008. ¶ 42. In April 2009, Plaintiff entered into an employment agreement with Ennis Knupp & Associates India Private Limited ("EK India") related to his management of EK India ("The Employment Agreement"). Id. HEK attached a copy of the Employment Agreement as Exhibit C to its memorandum. The Employment Agreement provides in part: "[EK India] or you may terminate this appointment by giving one months notice in writing." Employment Agreement § 7.
In December 2009, Mr. Steve Voss, executive board member of Ennis Knupp ("Voss"), contacted Plaintiff to discuss the progress of the India office. ¶ 43. During their conversation, Voss told Plaintiff to "change the strategic direction of the Indian office." Id. Voss then "assured Mr. Baxi that he would have until, at the very least, November 2010 to show EK that the Indian office was capable of reaching its targets." Id. Plaintiff alleges that he "relied on Mr. Voss's representation about his employment and assured Mr. Voss that he would stay until at least November 2010 so that he could fulfill his duties to the company." ¶ 44. According to Plaintiff, this discussion constituted "a binding contract wherein Mr. Baxi was to be employed until November 30, 2010, at the very least." ¶ 101.
However, on February 1, 2010, Voss informed Plaintiff that Ennis Knupp was shuttering the Indian Office and asked Plaintiff to resign immediately. ¶ 45. During their conversation, Plaintiff asked why Ennis Knupp had changed strategy so suddenly and whether there was anything significant happening with the company. Voss told Plaintiff "that there was no concrete reason for the company reneging on its promise to keep the India office open until at least November 2010." ¶ 46.
Unbeknownst to Plaintiff, by February 2010 and before, Ennis Knupp was engaged in merger talks with Hewitt. ¶¶ 34, 46. Ennis Knupp decided to shut down the India office and terminate Plaintiff not for "no concrete reason," but instead "in order to become a more attractive acquisition target" for Hewitt. Id. Plaintiff alleges that "[i]f Mr. Baxi had been told that this was the reason that EK was trying to buy back his shares he would not have resigned or sold his shares to EK." Id. Plaintiff alleges that during their phone call, Voss concealed at least three material facts: (1) that Ennis Knupp was in the midst of merger talks with Hewitt; (2) that there would be material changes to Ennis Knupp's ownership and management; and (3) that "if he continued to work at the company for just a few more months, instead of getting $119,600 for his shares, he would be entitled to approximately $1.5 million," when the merger was consummated.
Subsequent to their discussion, Voss sent Plaintiff the following e-mail: Neeraj-the following are the separation documents just referenced during our conversation. Please review these and consider how you would like to handle the separation. Please note that this e-mail serves as notification of your separation from EK India and your separation and repurchase from Ennis Knupp as a shareholder. In terms of time line, as discussed we anticipate a period where we would seek your assistance to close out events for EK India. This would be followed by a severage package. As it related to internal communication, the current best thinking is to make shareholders aware Wednesday evening and the rest of the firm sometime on Thursday. I will keep you informed as to what is done and when.
¶¶ 50, 52; see Ex. D to Def. Mem. ("Voss E-mail"). Two draft separation letters were attached to the Voss E-mail for Plaintiff's consideration: (i) a resignation letter by which Plaintiff would tender his resignation from EK India, and alternatively, (ii) a termination letter which provided the requisite 30-day notice pursuant to Section 7 of the Employment Agreement that Plaintiff was being terminated due to Ennis Knupp's liquidation of EK India. Id.; ¶¶ 50, 52. Also attached to the Voss E-mail was a Stock Repurchase Agreement which set forth the terms by which Ennis Knupp would buy back Plaintiff's shares upon his separation from the company. ¶ 50.
Ennis Knupp kept Plaintiff on their payroll until March 31, 2010. However, following that date, Plaintiff performed "over 250 hours of work for EK" in helping the company to shutter the Indian Office "without getting any compensation whatsoever." ¶ 54. "[U]ntil September 10, 2010 Mr. Baxi was still being asked to perform services for the company and, as of September 30, 2010 Mr. Baxi was still listed on EK's website as a member of the 'General Consulting Team.'" ¶ 7. According to Plaintiff, Ennis Knupp "needed Mr. Baxi to keep working for the company [long past the date of his termination] in order to comply with Indian laws regarding the winding up of the Mumbai office." ¶ 55.
Hewitt announced that it had entered into a definitive agreement to acquire Ennis Knupp on July 20, 2010. ¶ 24. On September 2, 2010, Hewitt announced that it had completed its acquisition of Ennis Knupp. ¶ 25.
Plaintiff's complaint is pled in eleven counts. Count I alleges a violation of Section 10(b) of Securities Exchange Act of 1934, 15 U.S.C. § 78j, and Rule 10b-5, 17 C.F.R. § 240.10b-5. In summary, Plaintiff alleges that Voss defrauded him by inducing him to sell his shares back to the company for $119,600 when Voss knew that those shares would be worth far more a few months later because of the impending merger with Hewitt. See ¶¶ 56-64. Count II is an Illinois state law claim for "breach of fiduciary duty" in connection with Plaintiff's sale of hire shares back to the company. See ¶¶ 65-69. Count III is a claim for "Violation of Labor Laws" for unpaid "wages, salary, bonuses, and commissions" for work that Mr. Baxi performed after March 31, 2010." ¶ 72. That count states that "Mr. Baxi's labor law claims are governed by the Illinois Wage Payment and Collection Act," or "in the alternative, Mr. Baxi's labor law claims are governed by India's labor law." ¶ 75. The complaint does not identify which portion of India's "labor law" governs Plaintiff's claims. Count IV (fraudulent inducement), Count V (negligent misrepresentation), and Count VI (unjust enrichment) all specifically concern Plaintiff's sale of his Ennis Knupp shares. ¶¶ 78-99. Count VII (breach of contract) alleges that "[i]n December 2009, Mr. Baxi and EK had a binding contract wherein Mr. Baxi was to be employed until November 30, 2010, at the very least * * * and EK breached [by] failing to pay Mr. Baxi his salary until November 30, 2010." ¶¶ 101-102. Count VIII and IX are both for "breach of the covenant of good faith and fair dealing." Count VIII involves Ennis Knupp's failure to keep Plaintiff employed "until November 30, 2010, at least." ¶ 105. Count IX is for a breach of the covenant of good faith and fair dealing implied in the "binding contracts" that Mr. Baxi entered into "[i]n 2002, 2005, and 2006 * * * wherein Mr. Baxi received a total of 1196 shares of EK stock * * * so that he could participate in the economic growth of the company." ¶ 110. Count X (promissory estoppel) is for the breach of Ennis Knupp's "clear and unambiguous promise to Mr. Baxi that he would be employed by EK until at least November 30, 2010." ¶ 115. Although it is difficult to ascertain from the pleading, Count XI (quantum meruit) also appears to concern the work that Mr. Baxi provided to Ennis Knupp after March 31, 2010.*fn3
Defendants move to dismiss the complaint for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). A motion to dismiss tests the sufficiency of the complaint, not its merits. See, e.g., Gibson v. City of Chicago, 910 F.2d 1510, 1520 (7th Cir. 1990). To survive a Rule 12(b)(6) motion to dismiss, the complaint first must comply with Rule 8(a) by providing "a short and plain statement of the claim showing that the pleader is entitled to relief," Fed. R. Civ.P. 8(a)(2), such that the defendant is given "fair notice of what the * * * claim is and the grounds upon which it rests." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). Second, the factual allegations in the complaint must be sufficient to raise the possibility of relief above the "speculative level," assuming that all of the allegations in the complaint are true. E.E.O.C. v. Concentra Health Servs., Inc., 496 F.3d 773, 776 (7th Cir. 2007) (quoting Bell Atlantic, 550 U.S. at 569 n.14). "[O]nce a claim has been stated adequately, it may be supported by showing any set of facts consistent with the allegations in the complaint." Bell Atlantic, 550 U.S. at 563. In other words, the pleading must allege facts that plausibly suggest the claim asserted. Twombly, 550 U.S. at 570. "A pleading that offers 'labels and conclusions' or a 'formulaic recitation of the elements of a cause of action will not do.'" Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009) (quoting Twombly, 550 U.S. at 555). As noted above, the Court accepts as true all well-pleaded facts alleged by Plaintiff and all reasonable inferences that can be drawn therefrom. See Barnes v. Briley, 420 F.3d 673, 677 (7th Cir. 2005).
Allegations of fraud, such as the allegations made in support of Plaintiff's securities fraud and fraudulent misrepresentation claims, are subject to the heightened pleading standard set forth in Federal Rule of Civil Procedure 9(b). In re Healthcare Compare Corp. Sec. Litig., 75 F.3d 276, 280-81 (7th Cir. 1996). Plaintiffs must plead the circumstances constituting fraud with particularity. Fed. R. Civ. P. 9(b). They must identify the person who made the misrepresentation; the time, place, and content of the misrepresentation; and the method by which the misrepresentation was communicated. Vicom, Inc. v. Harbridge Merchant Servs., Inc., 20 F.3d 771, 777 (7th Cir. 1994); see also Borsellino v. Goldman Sachs Group, Inc., 477 F.3d 502, 507 (7th Cir. 2007) (fraud must be pled with particularity by providing the who, what, when, where, and how). The stringent pleading requirement under Rule 9(b) serves three main purposes: "'to protect defendants' reputations, to prevent fishing expeditions, and to provide adequate notice to defendants of the claims against them.'" SEC v. Buntrock, 2004 WL 1179423, at *3 (N.D. Ill. May 25, 2004) (quoting Chu v. Sabratek Corp., 100 F. Supp. 2d 815, 819 (N.D. Ill. 2000)).
Count I of the complaint asserts violations of Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b) and the SEC's Rule 10(b)(5), 17 C.F.R. 240.10b-5. "Section 10(b) * * * forbids the 'use or employ, in connection with the purchase or sale of any security * * * [of] any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the [SEC] may prescribe as necessary or appropriate in the public interest or for the protection of investors.'" Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 318 (2007) (quoting 15 U.S.C. § 78j(b)). Rule 10b-5 also forbids a company or an individual "to make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading." 17 C.F.R. § 240.10b-5(b). "The elements of a Rule 10b-5 claim are: (1) defendants made a false statement or omission; (2) of a material fact; (3) with scienter; (4) in connection with the purchase or sale of securities; (5) upon which the plaintiffs justifiably relied; and (6) that the false statement proximately caused the plaintiffs' damages." In re Ulta Salon, Cosmetics & Fragrance, Inc. Securities Litigation, 604 F. Supp. 2d 1188, 1194-95 (N.D. Ill. 2009) (citing Caremark, Inc. v. Coram Healthcare Corp., 113 F.3d 645, 648 (1997)).
Count I turns in large part on the extent to which this case is like Jordan v. Duff and Phelps, 815 F.2d 429, 435 (7th Cir. 1987). In that case, the Seventh Circuit held that Rule 10b-5 prohibits closely-held corporations (like Ennis Knupp) from withholding news of a merger from their shareholder-employees if news of that merger might affect the shareholder-employees' decisions about when to leave employment and sell their shares. See Jordan, 815 F.2d at 435. The rationale in Jordan follows from the Seventh Circuit's "special facts" doctrine, which imposes a fiduciary duty on closely-held corporations to disclose material facts known to the corporation but unknown to the minority shareholder when purchasing company stock from that minority shareholder. Id. Courts have held that the existence of merger negotiations is the kind of fact that, when known to the corporation but not the minority shareholder, must be disclosed prior to the corporation's purchase of the minority shareholder's stock. See e.g., Jordan, 815 F.2d at 434; Michaels v. Michaels, 767 F.2d 1185, 1196 (7th Cir. 1985). And when an employee's departure from his employer will trigger the sale of stock back to his employer, the departure itself "is an investment decision as much as it is an employment decision." Jordan, 815 F.2d at 437 ("The securities acts apply to investment decisions, even those made indirectly or bound up with other decisions, such as employment or entrepreneurship.").
Because Count I is for securities fraud, "[t]here must be an 'investment' decision, to be sure." Jordan, 815 F.2d at 437 (citing Rand v. Anaconda-Ericsson, Inc., 794 F.2d 843 (2d Cir. 1986); Harris Trust & Savings Bank v. Ellis, 810 F.2d 700, 703-04 (7th Cir. 1987)) (emphasis added). A brief discussion of the facts in Jordan may be helpful to elucidate this requirement. Jordan was an employee of Duff & Phelps ("D&P"), a closely-held company, who was permitted to purchase 188 shares of D&P stock as part of his compensation package. Jordan, 815 F.2d at 432. Under the applicable stock purchase agreement, termination of employment with D&P for any reason would trigger an automatic buyback of Jordan's shares. Id.
On November 16, 1983, Jordan told Hansen, the chairman of the D&P Board, that he was resigning to accept a job with another firm. Jordan, 815 F.2d at 432. Jordan did not ask Hansen about any potential mergers and Hansen did not volunteer any such information, although Hansen knew that: (1) D&P's negotiators had recently reached a merger agreement with Security Pacific, which the D&P board subsequently vetoed, that placed a value of $50 million on D&P; and (2) the D&P board had decided two days earlier to solicit other bids for the firm. Id. at 432-33.
By mutual agreement, Jordan worked for D&P for the rest of the year so that his stock would be bought back at its December 31, 1983 value, not its value at year end 1982, as it would have been under the stock purchase agreement had he left before the end of 1983. Jordan, 815 F.2d at 432. Between the date of Jordan's resignation and his actual departure from the firm, negotiations between D&P and Security Pacific resumed in earnest and the D&P board adopted a resolution that modified the stock purchase agreement to allow ...