United States District Court, N.D. Illinois, Eastern Division
ROBERT T.E. LANSING, et al., Plaintiffs,
GEORGE CARROLL and GW CARROLL VI LLC, Defendants. and GEORGE CARROLL and GW CARROLL VI LLC, Counter-Plaintiffs,
ROBERT T.E. LANSING, REALTY PORTFOLIO HOLDINGS LP, MICHAEL COULTER SMITH, as trustee of CELEBRATE LIFE TRUST, RICHARD J. STEPHENSON, et al., Counter-Defendants
For Robert T.E. Lansing, de Gelderse Blom LP, RTE Lansing VI LLC, RTE Lansing CCRC LLC, Plaintiffs: Michael P Mayer, LEAD ATTORNEY, Lawrence R. Desideri, Shawn Gebhardt, Winston & Strawn LLP, Chicago, IL.
For George W. Carroll, GW Carroll VI LLC, Defendants, Counter Claimants: James R. Figliulo, LEAD ATTORNEY, James H. Bowhay, Jeff Douglas Harris, Figliulo & Silverman, Chicago, IL.
For Celebrate Life Trust U/A/D 7/1/08, Richard J. Stephenson, Counter Defendants: Charles Chejfec, LEAD ATTORNEY, Katten Muchin Rosenman LLP, Chicago, IL.
For Realty Portfolio Holdings LP, Counter Defendant: Charles Chejfec, LEAD ATTORNEY, Evan Blake Elsner, Katten Muchin Rosenman LLP, Chicago, IL; Kathleen Marie Flannery, Katten Muchin Rosenman, Chicago, IL.
For Robert T.E. Lansing, Counter Defendant: Michael P Mayer, LEAD ATTORNEY, Lawrence R. Desideri, Winston & Strawn LLP, Chicago, IL.
For RTE Lansing CCRC LLC, RTE Lansing VI LLC, de Gelderse Blom LP, Counter Defendants: Michael P Mayer, LEAD ATTORNEY, Winston & Strawn LLP, Chicago, IL.
Memorandum Opinion And Order
Manish S. Shah, United States District Judge.
George Carroll and Robert Lansing co-founded a real-estate investment business in which each owned equal interests. Years later, however, the relationship between the two co-owners soured, and Lansing elected to invoke the " buy/sell" provisions of various governing agreements. Pursuant to those agreements, Lansing offered to purchase Carroll's shares in the business for approximately 14.5 million dollars, and simultaneously made an offer to sell Lansing's own shares to Carroll for the same price. Carroll chose to buy Lansing's shares, but was unable to close on the purchase within the prescribed period of time. When Carroll then refused to allow Lansing to buy his interests for the previously-set amount, Lansing sued Carroll for breach of contract. Lansing also purported to purchase Carroll's interests anyway through a transfer agreement, which Carroll never signed.
Carroll filed a counterclaim against Lansing, asserting a breach-of-fiduciary-duty claim based on Lansing's alleged " conversion" of Carroll's ownership interests. Carroll also brought counterclaims against the entities that had provided Lansing with the funds necessary to carry out the conversion, alleging that these entities--Realty Portfolio Holdings LP, a limited partnership; and its limited partner, Celebrate Life Trust--participated in the alleged breach. In addition, Carroll asserted counterclaims against the trust and one of its settlors, Richard Stephenson, for aiding and abetting that breach. Realty Portfolio filed a motion to dismiss the participation claim against that entity, which was denied. Celebrate Life Trust and Richard Stephenson now move to dismiss the counterclaims against them pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. For the reasons discussed below, the motion is denied.
I. Legal Standard
Rule 8(a)(2) of the Federal Rules of Civil Procedure requires that a claim for relief contain " a short and plain statement of the claim showing that the pleader is entitled to relief." The purpose of this requirement is to " give the defendant fair notice of what the . . . claim is and the grounds upon which it rests." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)). To satisfy these " notice" pleading requirements, the complaint need not set forth detailed factual allegations. Id. (citation omitted). But it must present enough " factual matter, accepted as true, [that the] 'claim to relief . . . is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Twombly, 550 U.S. at 570). Motions under Rule 12(b)(6) are meant " to test the sufficiency of the complaint, not . . . the merits" of the plaintiff's case. Weiler v. Household Fin. Corp., 101 F.3d 519, 524 n. 1
(7th Cir. 1996) (quoting Triad Assocs., Inc. v. Chicago Hous. Auth., 892 F.2d 583, 586 (7th Cir. 1989)). In considering a Rule 12(b)(6) motion to dismiss, I therefore accept as true all well-pleaded factual allegations and draw all reasonable inferences in the plaintiff's favor. Cincinnati Life Ins. Co. v. Beyrer, 722 F.3d 939, 946 (7th Cir. 2013) (quoting Reynolds v. CB Sports Bar, Inc., 623 F.3d 1143, 1146 (7th Cir. 2010)).
This is, at bottom, a business divorce between two individuals, but the tangle of related entities and trusts involved in the case requires some explanation. The procedural history also warrants some detailed recitation since, through no fault of the parties, the suit has been assigned to three different district judges during several years of motion practice over the pleadings.
A. Creation of the Westminster/Litchfield Business
In the 1990s, George Carroll and Robert Lansing created a real-estate investment business. As part of this business, Carroll and Lansing established a series of ten investment funds--the " Westminster funds" --through which individuals and entities could invest in small- and medium-sized properties. See  ¶ 31. Each of the ten funds was created as a limited partnership, each with its own general partner. See id. ¶ 1; id. at 59 n. 6; see also [129-TAC] ¶ 24. The ten general partners--one for each fund--were limited liability companies created jointly by Carroll and Lansing (and of which Carroll and Lansing served as equal members ). See  ¶ ¶ 1, 31; id. at 59 n. 6. As part of their investment business, Carroll and Lansing also co-created Litchfield Advisors Incorporated, a management-consulting company that performed various advisory and administrative services for the Westminster funds. See id. ¶ 1. Upon incorporation, Carroll and Lansing each owned an equal number of Litchfield shares. Id. Carroll moved to California to manage the corporation's Los Angeles office, while Lansing stayed in Illinois to oversee operations there. See id. ¶ 30; [129-TAC] ¶ 23.
The governing document for Litchfield (the shareholders' agreement) included a " buy/sell" provision, which set forth a process whereby one shareholder could either dissociate from the corporation (by selling his shares to the other owner) or take full control of the company (by buying the other owner's shares). See  ¶ 2; see also [129-TAC] ¶ ¶ 2, 32. The buy/sell provision required that any offer made under its terms be at once an offer to buy and to sell--that is, if one co-owner offered to buy the other's shares for a stated price, the
offering owner was also obligated to sell his own shares for that same price. See Shareholders Agreement of Litchfield Advisors Inc., [106-2] ¶ 12.2(a); see also  at 59 n. 7 (incorporating by reference the shareholders' agreement). It would then be up to the offeree to determine which of the two offers--buy or sell--he wished to accept. See [106-2] ¶ 12.2(a)-(c) Acceptance of either offer marked the start of a 120-day closing period, at the end of which the offeror and offeree had to buy and sell (or sell and buy) at the agreed price. See id. ¶ 12.2(c). Similar " buy/sell" provisions were also included ...