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Gohealth, LLC v. Simpson

United States District Court, N.D. Illinois, Eastern Division

June 24, 2014

GOHEALTH, LLC, Plaintiff,
v.
PAUL SIMPSON; JOSEPH LOCONTI; JAKE MENDELL; ZOOM HEALTH, INC.; LIGHTHOUSE INSURANCE GROUP, LLC; CHUCK FARRO; and JASON FARRO, Defendants.

ORDER

EDMOND E. CHANG, District Judge.

Plaintiff GoHealth, LLC brings this lawsuit against Defendants Zoom Health, Inc., Paul Simpson, Joseph LoConti, and Jake Mendell (collectively, the Zoom Defendants), and against Lighthouse Insurance Group, LLC, Jason Farro, and Chuck Farro (collectively, the Lighthouse Defendants), asserting a variety of Illinois state-law claims arising out of a failed business relationship between GoHealth and Defendants.[1] R. 71, Second Am. Compl. Defendants have moved to dismiss [R. 72] Counts Three (breach of fiduciary duty - Zoom), Four (veil piercing - Zoom), Five (indemnity), Six (Uniform Fraudulent Transfer Act - Zoom), Seven (conspiracy), Eight (aiding and abetting breach of fiduciary duty - Lighthouse), Nine (Uniform Fraudulent Transfer Act - Lighthouse), Ten (veil piercing - Lighthouse), and Eleven (tortious interference with contract - Lighthouse) of GoHealth's Second Amended Complaint under Federal Rule of Civil Procedure 12(b)(6). On November 26, 2013, the Court entered an Order [R. 76] deciding Counts Three (breach of fiduciary duty), Four (veil piercing of Zoom), and Five (indemnity) of Defendants' motion. The Court now addresses the remaining counts. For the reasons explained below, Defendants' partial motion to dismiss is granted in part and denied in part.

I. Legal Standard

"A motion under Rule 12(b)(6) challenges the sufficiency of the complaint to state a claim upon which relief may be granted." Hallinan v. Fraternal Order of Police Chicago Lodge No. 7, 570 F.3d 811, 820 (7th Cir. 2009). "[W]hen ruling on a defendant's motion to dismiss, a judge must accept as true all of the factual allegations contained in the complaint." Erickson v. Pardus, 551 U.S. 89, 94 (2007). A "complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. v. Twombly, 550 U.S. 544, 570 (2007)). These allegations "must be enough to raise a right to relief above the speculative level." Twombly, 550 U.S. at 555. And the allegations that are entitled to the assumption of truth are those that are factual, rather than mere legal conclusions. Iqbal, 556 U.S. at 679.

Ordinarily, under Federal Rule of Civil Procedure 8(a)(2), a complaint generally need only include "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2). But claims alleging fraud must also satisfy the heightened pleading requirement of Federal Rule of Civil Procedure Rule 9(b), which requires that "[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake." Fed.R.Civ.P. 9(b) (emphasis added). Thus, Rule 9(b) requires that fraud claims "state the identity of the person making the misrepresentation, the time, place, and content of the misrepresentation, and the method by which the misrepresentation was communicated to the plaintiff." Uni*Quality, Inc. v. Infotronx, Inc., 974 F.2d 918, 923 (7th Cir. 1992) (internal quotation marks omitted). Put differently, fraud claims "must describe the who, what, when, where, and how of the fraud." Pirelli Armstrong Tire Corp. Retiree Med. Benefits Trust v. Walgreen Co., 631 F.3d 436, 441-42 (7th Cir. 2011) (internal quotation marks and citation omitted).

II. Analysis

At issue in this Order are Counts Six (Uniform Fraudulent Transfer Act - Zoom), Seven (conspiracy), Nine (Uniform Fraudulent Transfer Act - Lighthouse), Ten (veil piercing - Lighthouse), and Eleven (tortious interference with contract - Lighthouse) of GoHealth's Second Amended Complaint.[2] The Court assumes the reader's familiarity with the relevant background of this case as described in the November 26 Order [R. 76] and will repeat below only what is necessary to decide the currently pending motion. In considering Defendants' Rule 12(b)(6) motion, the Court looks to both the Second Amended Complaint and the additional facts alleged in GoHealth's supplemental brief [R. 96]; the Court allowed consideration of facts in the supplemental brief in lieu of allowing yet another amended complaint while the motion to dismiss was pending. The Court addresses each count in turn.

A. Count Ten: Veil Piercing (Lighthouse)

In Count Ten, GoHealth seeks to pierce Lighthouse's corporate veil and hold Chuck and Jason Farro personally liable for Lighthouse's debts. See Second Am. Compl. ¶¶ 150-59. At the outset, Defendants reiterate their argument from the earlier motion to dismiss that veil-piercing is not an independent cause of action as a matter of Illinois state law. Def.'s Br. (citing R. 62 at 3-4). For the reasons explained in the November 26 Order with respect to Count Four, see R. 76 at 16-17, the Court construes Count Ten not as a standalone legal claim, but as a theory of personal liability for the other legal claims in the Second Amended Complaint. Because the imposition of personal liability against the Lighthouse Defendants affects the viability of other claims at issue in Defendants' motion, the Court addresses Count Ten first.

Generally, officers of a corporation are not liable for the corporation's debts and obligations. Macaluso v. Jenkins, 420 N.E.2d 251, 254 (Ill.App.Ct. 1981). If the corporation is merely the alter ego of its officers, however, a court may disregard the corporate form and pierce the corporate veil of limited liability to hold the officers personally liable. Tower Investors, LLC v. 111 E. Chestnut Consultants, Inc., 864 N.E.2d 927, 941 (Ill.App.Ct. 2007). Specifically, courts may pierce the corporate veil if (1) there is such a unity of interest and ownership that the corporation and its officers are no longer separate personalities, and (2) maintaining the fiction of a separate corporation would promote injustice or inequitable circumstances. Id.

On the first prong, unity of interest, Illinois law considers numerous factors, including the following:

(1) inadequate capitalization; (2) failure to issue stock; (3) failure to observe corporate formalities; (4) nonpayment of dividends; (5) insolvency of the debtor corporation; (6) nonfunctioning of the other officers or directors; (7) absence of corporate records; (8) commingling of funds; (9) diversion of assets from the corporation by or to a stockholder or other person or entity to the detriment of creditors; (10) failure to maintain arm's-length relationships among related entities; and (11) whether the corporation is in fact a mere facade for the operation of the dominant stockholders.

Fontana v. TLD Builders, Inc., 840 N.E.2d 767, 778 (Ill.App.Ct. 2005). GoHealth contends that factors three (failure to observe corporate formalities), ten (failure to maintain an arms-length relationship), and eleven (Lighthouse was a mere façade) weigh in favor of veil-piercing. Pl.'s Br. at 10-11. But, as explained below, GoHealth has not adequately alleged any of these factors as to Lighthouse.

In going after Lighthouse, GoHealth tries to rely on the Court's prior conclusion that the veil-piercing allegations against Zoom were enough: GoHealth argues that the allegations are "sufficiently and similarly outlined as to Lighthouse to lead this Court to the same conclusion regarding Chuck Farro and Jason Farro." Pl.'s Br. at 10. But the Farros' alleged relationship with Lighthouse is markedly different from LoConti's and Simpson's alleged relationship with Zoom. Indeed, most of GoHealth's allegations regarding the Farros do not even relate to Lighthouse, highlighting instead the Farros' involvement with Zoom 's side of the allegedly fraudulent transaction. See id.; Second Am. Compl. at ¶ 32 (alleging Farros "communicated regularly" with Zoom Defendants regarding Zoom's debt); id. ¶¶ 33-34, 40-41 (alleging Lighthouse Defendants participated in the asset transfer and employed a number of Zoom employees); id. ¶ 42 (alleging Farros, who had a financial interest in, exercised control over, and influenced direction of Zoom, retained control over Zoom's assets post-transfer); Pl.'s Supp. Br. at 6-8 (alleging Farros participated in Zoom's negotiations with another potential buyer). GoHealth does not explain how these allegations that the Farros were "equally complicit" in Zoom 's asset transfer, see Pl.'s Br. at 10, ...


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