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Janice Meaden and John Meaden Iii, Residents of the State of v. Thomas F. Meaden

November 30, 2012

JANICE MEADEN AND JOHN MEADEN III, RESIDENTS OF THE STATE OF CALIFORNIA PLAINTIFF,
v.
THOMAS F. MEADEN, A RESIDENT OF THE STATE OF ILLINOIS, AND MEADEN PRECISION MACHINED PRODUCTS COMPANY, AND ILLINOIS CORPORATION, DEFENDANT.



The opinion of the court was delivered by: Judge Robert W. Gettleman

MEMORANDUM OPINION AND ORDER

Janice Meaden and John Meaden III ("plaintiffs") filed a two-count amended complaint against Thomas Meaden and Meaden Precision Machined Products Company ("defendants"), alleging breach of a stock redemption agreement. On July 30, 2012, defendants answered the complaint and filed a counterclaim for various declaratory judgments. Plaintiffs filed the instant motion to strike defendants' answers and affirmative defenses, and to dismiss defendants' counterclaim. For the reasons discussed below, the motion to strike is granted in part and denied in part, and the motion to dismiss defendants' counterclaim is denied.

BACKGROUND

This case involves a family dispute that arose after the death of the parties' father, John A. Meaden, Jr. ("John, Jr."), in 2009. The complaint alleges that the parties entered into a stock purchase agreement in 1989, which obligated defendants to purchase plaintiffs' shares of the family business, Meaden Precision Machined Products Company ("MPMP"). According to the plaintiffs, this purchase agreement was breached by the defendants.

Defendants have answered, alleging affirmative defenses and bringing a counterclaim of seven counts. The counterclaim includes defendants' side of the narrative and seeks to broaden the scope of the case by resolving other demands that plaintiffs have allegedly made of defendants in connection with John Jr.'s estate plan and the family business. Defendants allege that the estate plan included elements in addition to the stock purchase agreement, including: a land trust, a life insurance trust, irrevocable insurance trusts, and a number of gratuitous gifts detailed in an outline drafted by John Jr.'s attorney, Earnest Palmer ("the Ernie Outline"). Defendants contend that they are entitled to various declaratory judgments regarding these elements of the estate plan.

In Count I of the counterclaim, defendants claim that plaintiffs have waived any claim arising under the stock purchase agreement by rejecting a purchase offer made by defendants. In Count II, defendants seek a declaratory judgment that the irrevocable insurance trust agreements have been terminated, and that plaintiffs are barred from making any claims thereunder. According to defendants, John Jr., his wife, and defendant Thomas Meaden each established an irrevocable insurance trust in 1989. Each trust held a one-third interest in a universal life insurance policy for John, Jr. By late 1996, the universal life insurance policy allegedly became unaffordable and impractical, and defendant Thomas Meaden ceased making yearly gifts to his trust. In 2001, John Jr. and Mary stopped making gifts to their respective trusts and the policy was cashed in, with the plaintiffs receiving the proceeds. The respective shares of the three irrevocable insurance trusts were liquidated and disbursed to Janice in April 2002 and to John Meaden, III in March 2004.

In Counts III and IV, defendants allege that plaintiffs have made demands on defendant Thomas Meaden to make certain gifts described in the Ernie Outline. Count III seeks a declaratory judgment that the Ernie Outline is not an enforceable agreement, and Count IV seeks a declaratory judgment that defendant Thomas Meaden has not breached the Ernie Outline. The outline, drafted in 1989, is titled an "agreement" and contains fifteen clauses, many of which benefit plaintiffs. In Count III, defendants claim that the outline is a series of gratuitous promises made without consideration and is therefore unenforceable. Defendants further claim that plaintiffs have ratified defendants' conduct in relation to certain provisions of the Ernie Outline and have therefore waived any related claims. In Count IV, defendants again claim the agreement is unenforceable and that because certain events have rendered many of the gifts unwarranted, defendant Thomas Meaden cannot be in breach of the agreement.

Counts V and VI concern the land trust. The land trust involves property in Burr Ridge, Illinois, and the building in which MPMP is housed. The land and the building were placed in a land trust by John Jr. in the late 1970s, and John Jr.'s children and a number of grandchildren were named as the beneficiaries. In Count VI of the counterclaim, defendants claim that plaintiffs have breached their fiduciary duties as holders of the power of direction of the trust. Defendants also seek a declaratory judgment in Count V that plaintiffs have waived any claim against MPMP for rents and capital improvements made to the Burr Ridge property.

Count VII of the counterclaim alleges that plaintiffs are minority shareholders of MPMP, which is a closely held corporation. As such, defendants claim that plaintiffs owe fiduciary duties to the corporation and have breached those duties by refusing to negotiate a new lease with the company.

DISCUSSION

I. Motion to Strike Answer

Fed.R.Civ.P. 12(f) permits a court to strike from any pleading "any redundant, immaterial, impertinent, or scandalous matter." Motions to strike under Rule 12(f) are not favored, however, and "[t]o strike allegations, they must be so unrelated to the party's claims as to be [de]void of merit and unworthy of any consideration." Robinson v. SABIS Educ. Sys., Inc., 2000 WL 343251, at *4 (N.D. Ill. March 31, 2000); see also Heller Fin., Inc. v. Midwhey Powder Co., Inc., 883 F.2d 1286, 1294 (7th Cir.1989); Safe Bed Technologies Co. v. KCI USA, Inc., 2003 WL 21183948, at *2 (N.D. Ill. May 20, 2003) ("Motions to strike under Rule 12(f) are generally not favored, and are usually denied unless the pleading's language is clearly prejudicial"); Vakharia v. Little Co. of Mary Hosp. & Health Care Ctrs., 2 F.Supp.2d 1028, 1033 (N.D. Ill.1998) ( "A movant bears the burden of demonstrating that the challenged allegations are so unrelated to plaintiff's claim as to be devoid of merit, unworthy of consideration, and unduly prejudicial.").

Plaintiffs claim that defendants' answer contains immaterial and impertinent material, specifically citing the answers to paragraphs 12 and 14. Those answers elaborate beyond a bare denial of the paragraph of the complaint and are not in the form approved by this district. See, e.g., State Farm Mut. Auto. Ins. Co. v. Riley, 199 F.R.D. 276, 280 (N.D. Ill. 2001). Nevertheless, the answers are not so egregious as to warrant being stricken. Plaintiff has not demonstrated that the "improperly placed defenses" included in those answers are so unrelated as to be "devoid ...


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