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Luke Oil Co. v. Sandhu Petroleum Inc.

United States District Court, Seventh Circuit

December 16, 2013

LUKE OIL CO., Plaintiff,
v.
SANDHU PETROLEUM INC., HARJINDER SINGH SANDHU, NAVDEEP GILL, LOVEDEEP SINGH DULAT, AND LARKIN INC., Defendants.

MEMORANDUM OPINION AND ORDER

THOMAS M. DURKIN, District Judge.

Luke Oil Co., has sued the Defendants, Sandhu Petroleum Inc., Harjinder Singh Sandhu ("Sandhu"), Navdeep Gill, Lovedeep Singh Dulat ("Dulat"), and Larkin, Inc., alleging claims of breach of contract, unjust enrichment, and tortious interference with a contract. This matter is before the Court on Sandhu and Gill's motion to dismiss the individual claims against them in Counts VI and VII pursuant to Federal Rule of Civil Procedure 12(b)(6). R. 39. For the following reasons, the motion is granted.

BACKGROUND

Luke Oil is a wholesale supplier of motor fuels. R. 26 ¶ 8. Defendant Larkin owns and operates a gas station in Elgin, Illinois (the "Larkin gas station"). R. 26 ¶ 14. Dulat is an owner/officer of Larkin. R. 26 ¶ 15. Defendant Sandhu Petroleum is also a wholesale supplier of motor fuels. R. 26 ¶ 9. Sandhu and Gill, who are husband and wife, are owners/officers of Sandhu Petroleum and also operate gas stations. R. 26 ¶¶ 11-12. Luke Oil alleges that "upon information and belief, Sandhu Petroleum is an alter ego of defendants" Sandhu and Gill. R. 26 ¶ 13.

On or about May 25, 2011, Luke Oil entered into a motor fuels supply and security agreement (the "supply agreement") with Larkin and Dulat to supply motor fuels to the Larkin gas station for seven years. R. 26 ¶¶ 15-16. As a result, Luke Oil began delivering motor fuels to the gas station in accordance with the supply agreement's terms. R. 26 ¶ 21. The supply agreement also required the Larkin gas station to be "rebranded" as a "GoLo" brand station (Luke Oil's trademarked brand), which Larking and/or Dulat did. R. 26 ¶¶ 22, 28.

Luke Oil alleges that "on or about April 1, 2012, Larkin and Dulat ceased purchasing fuel and conducting business with [it] without cause." R. 26 ¶ 26. Luke Oil alleges that the reason behind this is Sandhu Petroleum, Sandhu, and Gill "solicited Larkin and Dulat for a supply contract of their own to the detriment of Luke [Oil], " and induced Larkin and Dulat to stop conducting business with Luke Oil and, instead, purchase fuel from them. R. 26 ¶¶ 27-28. According to Luke Oil, this was done despite the fact that the Larkin gas station was branded with Luke Oil's "GoLo" brand. R. 26 ¶¶ 27-28.

Luke Oil alleges that Sandhu Petroleum began delivering fuel to the Larkin gas station in April 2012 and that the Larkin gas station was rebranded as a "Phillips 66" in May 2012. R. 26 ¶¶ 32, 35. Luke Oil further alleges that, at some point, it gave notice to Sandhu Petroleum, Sandhu, and Gill of its existing contract with Larkin. R. 26 ¶ 29.

As a result of the collective Defendants' alleged conduct, Luke Oil filed this action on November 11, 2012, seeking compensatory and punitive damages resulting from the breach of contract alleged. R. 1, R. 26.

LEGAL STANDARD

A Rule 12(b)(6) motion challenges the sufficiency of the complaint. See, e.g., Hallinan v. Fraternal Order of Police of Chi. Lodge No. 7, 570 F.3d 811, 820 (7th Cir. 2009). A complaint must provide "a short and plain statement of the claim showing that the pleader is entitled to relief, " Fed.R.Civ.P. 8(a)(2), sufficient to provide defendant with "fair notice" of the claim and the basis for it. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). This "standard demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). While "detailed factual allegations" are not required, "labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly, 550 U.S. at 555. The complaint must "contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.'" Ashcroft, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 570). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Mann v. Vogel, 707 F.3d 872, 877 (7th Cir. 2013) (quoting Iqbal, 556 U.S. at 678). In applying this standard, the Court accepts all well-pleaded facts as true and draws all reasonable inferences in favor of the non-moving party. Mann, 707 F.3d at 877.

ANALYSIS

Count VI of Luke Oil's amended complaint is a claim against Sandhu individually for tortious interference with a contract. Count VII is the same claim but against Gill individually. Sandhu and Gill have filed a joint motion to dismiss, contending that these two counts should be dismissed because Luke Oil has not adequately alleged their individual liability. Specifically, they contend that Luke Oil "fails to allege any facts whatsoever to establish [the] alleged alter ego' status or a basis for seeking to pierce the corporate veil of liability provided by Sandhu Petroleum." R. 39 ¶ 9 (emphasis in original). They believe the alter ego allegation amounts to a mere legal conclusion, which if true, is insufficient under Federal Rule of Civil Procedure 8. R. 39 ¶ 9.

Under Illinois law, "a corporation as a legal entity exists separately from its shareholders, directors, and officers, who are not ordinarily liable for the corporation's liabilities." Forsythe v. Clark USA, Inc., 836 N.E.2d 850, 854 (Ill.App.Ct. 1st Dist. 2005), aff'd 864 N.E.2d 227 (Ill. 2007). However, a party may "pierce the corporate veil" and assert a claim against an individual "when an individual or entity uses a corporation merely as an instrumentality to conduct that person's or entity's business." Laborers' Pension Fund v. Lake City Janitorial, Inc., 758 F.Supp.2d 607, 618 (N.D. Ill. 2010) (quoting Laborers' Pension Fund v. Lay-Corn, Inc., 580 F.3d 602, 610-11 (7th Cir. 2009) (internal quotation marks omitted)). Thus, in an action to pierce a corporate veil under Illinois law, a plaintiff must allege that (1) there is a unity of interest and ownership such that the separate personalities of the corporation and the individual no longer exist, and (2) adherence to the fiction of separate corporate existence would sanction a fraud or promote injustice. Wachovia Sec., LLC v. Banco Panamericano, Inc., 674 F.3d 743, 752 (7th Cir. 2012) (quoting Hystro Prods. Inc. v. MNP Corp., 18 F.3d 1384, 1388-89 (7th Cir. 1994)).

The Court does not need to look further than the first prong to determine that Luke Oil's amended complaint is inadequately pled. The overall focus on the first prong is whether a corporation has respected corporate formalities and whether a corporation is essentially a sham. See Judson Atkinson Candies, Inc. v. Latini-Hohberger Dhimantec, 529 F.3d 371, 379 (7th Cir. 2008). Factors considered in making this determination include the following: inadequate capitalization, failure to observe corporate formalities, failure to issue stock or pay dividends, missing corporate records, commingling funds, diverting assets to an owner to a creditor's detriment, and whether the corporation is a mere façade for a dominant owner. Wachovia, 674 F.3d at 752 (citing Fontana v. TLD Builders, Inc., 840 N.E.2d 767, 778 (Ill.App.Ct. 2d Dist. 2005)). Here, Luke Oil's only allegations that support the first prong are that Sandhu and Gill (1) are husband and wife, and (2) are the owners/directors of Sandhu Petroleum. R. 26 ¶¶ 11-13. But these two allegations, coupled with Luke Oil's conclusory statement that Sandhu Petroleum is their "alter ego, " do not support the conclusion that the line between Sandhu and Gill's personal conduct and that of the corporation (Sandhu Petroleum) has been blurred. See Yeftich v. Navistar, Inc., 722 F.3d 911, 915 (7th Cir. 2013) ("Where a complaint pleads facts that are merely consistent with' a defendant's liability, it ...


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