The opinion of the court was delivered by: Hon. Harry D. Leinenweber
MEMORANDUM OPINION AND ORDER
Before the Court is Defendant Alan Birkley's (hereinafter, "Birkley") Motion to Dismiss the securities fraud complaint brought by Guy Stone, Anna Stone, Gayl Gorham, Gary Stone, Joyce Stone, Wendy Kassel and Thomas Kassel (collectively, the "Plaintiffs"). For the following reasons, the Motion is granted in part and denied in part. Count II is dismissed, but the remainder of the Complaint stands.
Plaintiffs brought a six-count Complaint against Birkley and Chicago Investment Group, LLC alleging: (1) a violation of Securities and Exchange Commission Rule 10b-5; (2) a violation of the Illinois Securities Law, 815 Ill. Comp. Stat. 5/12; (3) a violation of the Illinois Consumer Fraud and Deceptive Practices Act (the "ICFDPA"), 815 Ill. Comp. Stat. 505; (4) intentional misrepresentation; (5) negligent misrepresentation; and (6) breach of fiduciary duty. Their Complaint was filed on January 4, 2011. Plaintiffs assert that they attempted service immediately, but a summons was not issued as to Birkley until August 24, 2011, and he was not served until September 6, 2011. Plaintiffs have not yet obtained service on Chicago Investment Group.
The following facts are taken from Plaintiffs' Complaint and will be accepted as true for the purposes of this motion. In April 2006, Birkley, a broker at Chicago Investment Group, met with Plaintiffs and encouraged them to invest in Western Springs One LLC, and Dartmoor Homes, Inc. (collectively, "Dartmoor"). Birkley encouraged Plaintiffs to invest in the property through investment promissory notes (the "Notes"), and told them this was a risk-free investment. Birkley told Plaintiffs the Notes would provide a return on investment at a rate of 15 percent and that he had invested in the same Notes due to the past performance of similar Dartmoor Notes. He did not provide a prospectus or any other written information about the Notes. Plaintiffs accepted his assurances and invested in Dartmoor.
In April and May 2006, Birkley executed the Notes for the Plaintiffs in varying amounts. (The relationship between the parties in not made clear in the Complaint, but separate notes were issued to Guy and Anna Stone, Wayne and Gayl Gorham, Gary and Joyce Stone, and Wendy and Thomas Kassel.) The Notes were payable in October 2007, but when Plaintiffs attempted to redeem them, Birkley told them they could not be redeemed at that time. Instead, Birkley offered new, risk-free notes that would mature on December 31, 2008. The original notes were "replaced" for all the Plaintiffs except Guy and Anna Stone.
Although the Complaint is not entirely clear, it appears that even after the Notes were replaced, Birkley continued to reassure the Plaintiffs that payment on the original Notes could be made by the end of 2007. Pls.' Compl. ¶ 16--17. At any rate, Dartmoor did not pay on the Notes in either when they originally were due or in December 2008.
In March 2009, Plaintiffs met with Birkley, and he told them the Notes would be paid soon. Over the course of 2009, Plaintiffs telephoned Birkley six to ten times to demand payment. Birkley told them the Notes would be paid soon. In the late spring of 2009, Thomas Kassel asked Birkley whether Plaintiffs could obtain security for the Notes, and he assured Kassel that the investment was safe. In or about August 2009, Thomas Kassel met with Birkley and officials from Dartmoor Homes, Inc. Birkley told him Plaintiffs would be paid back in about two months. They were not paid, and this suit followed.
Birkley moves to dismiss on the grounds that: (1) Plaintiffs were on "inquiry notice" of potential fraud more than two years before the January 4, 2011, filing date, making the securities fraud claims untimely; (2) Plaintiffs failed to comply with Illinois law regarding notice of rescission; and (3) Plaintiffs failed to comply with service requirements.
The question in deciding a motion to dismiss is whether the well-pleaded facts, taken as true, state a claim upon which relief can be granted. Gen. Elec. Cap. Corp. v. Lease Resolution, 128 F.3d 1074, 1080 (7th Cir. 1997). The statute of limitations is an affirmative defense that Plaintiffs need not anticipate in their complaint. Brooks v. Ross, 578 F.3d 574, 579 (7th Cir. 2009). However, the Court may dismiss the Complaint if the expiration of a statute of limitations is clear from its face. Id.
B. Relevant Statutes of Limitation
A claim for a Rule 10b-5 violation, such as the one Plaintiffs bring in Count I of their Complaint, must be brought "not later than the earlier of: (1) two years after the discovery of the facts constituting the violation; or (2) five years after the violation." 28 U.S.C. § 1658(b)(1)(2). For the purposes of this opinion, the Court will refer to this statute as a statute of limitations. Although the Seventh Circuit has indicated that both subsections are actually statutes of repose, the distinction is not relevant to ...