United States District Court, N.D. Illinois, Eastern Division
JOHN E. FREIBURGER and PARTNERS WEALTH MANAGEMENT, INC., Plaintiffs,
KEVIN J. TIMMERMAN, BRADLEY J. LEWIS, and STEELE CAPITAL MANAGEMENT, INC., Defendants. STEELE CAPITAL MANAGEMENT, INC., Counter-plaintiff,
JOHN E. FREIBURGER and PARTNERS WEALTH MANAGEMENT, INC., Counter-defendants.
MEMORANDUM OPINION AND ORDER
MANISH S. SHAH, District Judge.
Steele Capital Management, Inc. is a registered investment advisor. For many years, John Freiburger referred clients to Steele in exchange for a portion of the fees collected from those clients. Around August 2012, Freiburger-through his closely affiliated company, Partners Wealth Management, Inc.-launched a new investment management platform and asked clients to switch from Steele to this new platform. Steele-through two of its employees, Kevin Timmerman and Bradley Lewis-sent letters to clients, asking them not to switch. In response, Freiburger and Partners Wealth sent their own letters to clients, explaining their decision to move to a new platform. Freiburger and Partners Wealth sued Steele, Timmerman, and Lewis. Steele counterclaimed against Freiburger and Partners Wealth. Each side asserts various contract and tort theories.
Steele answered the complaint, but Timmerman and Lewis move to dismiss the claims against them individually, arguing that they acted only in their corporate capacities and are therefore protected by a qualified privilege. For the reasons discussed below, that motion is denied.
Freiburger and Partners Wealth move to dismiss certain counterclaims, for a variety of reasons. For the reasons discussed below, that motion is granted in part and denied in part.
I. Legal Standards
The motions to dismiss are brought under Rule 12(b)(6) of the Federal Rules of Civil Procedure. For each motion, I construe the complaint (or counter-complaint) in the light most favorable to the non-moving party, accept as true all well-pleaded facts, and draw reasonable inferences in favor of the non-moving party. Yeftich v. Navistar, Inc., 722 F.3d 911, 915 (7th Cir. 2013). Statements of law, however, need not be accepted as true. Id. Rule 12(b)(6) limits my consideration to "allegations set forth in the complaint itself, documents that are attached to the complaint, documents that are central to the complaint and are referred to in it, and information that is properly subject to judicial notice." Williamson v. Curran, 714 F.3d 432, 436 (7th Cir. 2013).
To survive a motion under Rule 12(b)(6), the complaint or counter-complaint must "state a claim to relief that is plausible on its face." Yeftich, 722 F.3d at 915 (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). "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." Id. (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)).
Steele is a registered investment advisor-for a fee, it advises clients about buying and selling securities. Counter-complaint ¶¶ 1, 11-13. Timmerman is Steele's co-owner and president, and Bradley Lewis is a senior manager. Complaint ¶¶ 3-4. Beginning in 1998, Freiburger referred clients to Steele, in exchange for 60% of the fees collected from those clients. Complaint ¶¶ 9, 11; Counter-complaint ¶¶ 2, 14. In November 2000, the parties entered into a "Branch Office Agreement, " which memorialized aspects of their arrangement. Counter-complaint ¶ 20.
Around August 2012, Freiburger-through his "closely affiliated" company, Partners Wealth-launched a new investment management platform and asked clients to switch from Steele to this new platform. Complaint ¶ 12; Counter-complaint ¶¶ 2, 27-28, 37. In response, Steele-through Timmerman and Lewis- sent letters to clients, describing the split and asking them not to switch. Complaint ¶¶ 13-28. The letters stated, for example, that switching to Freiburger's new services was not in clients' best interests; that Freiburger had created a conflict of interest between himself and his clients; and that Freiburger's move was motivated by his business's financial struggles. Complaint ¶¶ 13-28. Freiburger responded, writing to clients that he knew the split caused them concern, and that the decision to move to a new platform was based on an in-depth evaluation conducted with the goal of creating a better experience and better outcomes for clients. Counter-complaint ¶ 66-67. About 70 clients switched. Counter-complaint ¶ 4, 40.
III. Timmerman and Lewis's Motion to Dismiss
A. Application of a Qualified Privilege
Timmerman and Lewis argue that the claims against them should be dismissed because they were acting in their corporate capacities, and should therefore be covered by a qualified privilege. In the context of a defamation case, "[a] qualified privilege protects communications that would normally be defamatory and actionable.... To determine if a qualified privilege exists, a court looks only to the occasion itself for the communication and determines as a matter of law and general policy whether the occasion created some recognized duty or interest to make the communication so as to make it privileged." Pompa v. Swanson, 990 N.E.2d 314, 321 (2d Dist. 2013).
One context in which a qualified privilege exists is a "union meeting... concerning official union business." Id . See also Sullivan v. Conway, 157 F.3d 1092, 1098 (7th Cir. 1998) ("It would be a disservice to the administration of unions and other organizations if the responsible officers of these organizations were inhibited by fear of defamation suits from making, within the confines of nonpublic meetings devoted to the affairs of the organization, candid criticisms of persons who might be friends of a person attending the meeting."). Another such context is an employer's internal investigation of alleged misconduct by its employees. Popko v. Cont'l Cas. Co., 355 Ill.App.3d 257, 264 (1st Dist. 2005). Timmerman and Lewis have not cited any case, nor am I aware of any, holding that the threat of losing customers to a competitor creates a context in which otherwise defamatory statements are protected by a qualified privilege. The statements at issue here were not made ...