United States District Court, N.D. Illinois, Eastern Division
DEBRA F. RUDERMAN, Individually and as a Trustee of the Debra Freed Ruderman Declaration of Trust Dated October 9, Case 1995, as Amended, Judge Harry D. Leinenweber Plaintiff,
LAURANCE H. FREED, Defendant.
MEMORANDUM OPINION AND ORDER
HARRY D. LEINENWEBER, District Judge.
Before the Court is Defendant Laurance H. Freed's ("Freed") Motion to Dismiss portions of Plaintiff Debra F. Ruderman's ("Ruderman") Complaint pursuant to Federal Rules of Civil Procedure 12(b)(6) and 9(b) [ECF No. 27]. For the reasons stated herein, the Motion is granted in part and denied in part.
The Court draws the following factual background from Ruderman's Complaint. Ruderman and Freed are siblings. Their father built a successful real estate business in Chicago (the "Business"), which Freed eventually took over.
Since 2000, the Business has been owned by DDL, an Illinois limited liability company. Freed serves as the sole manager and majority owner of DDL and is President of DDL's subsidiary, Joseph Freed and Associates LLC. Ruderman is a passive investor in the Business and owns a minority interest in DDL. Ruderman's interest in DDL is held in a trust (the "Trust") for her and her children. Freed was previously a trustee for the benefit of Ruderman's children. Ruderman alleges that as the manager and owner of DDL, and as trustee, Freed owed her fiduciary duties.
Ruderman's Complaint details a number of transactions in which Freed either forged Ruderman's name onto certain documents or withheld material information from her. The first transaction occurred in 2004, when Freed determined that DDL should purchase a shopping center in Madison, Wisconsin from the University of Wisconsin Foundation ("UWF"). UWF advised Freed that DDL's owners - including Ruderman - would have to personally guarantee notes totaling $6 million. According to the Complaint, Freed or someone at his direction forged Ruderman's name on two guaranties (the "UWF Guaranties") without her knowledge or authorization. The UWF Guaranties purported to obligate Ruderman personally on $1.5 million. Freed or someone acting at his direction also forged Ruderman's name on other legal documents connected to the transaction, including the purchase agreement and a legal opinion certificate needed for closing. Although the purchase occurred in April 2004, Ruderman did not learn of the UWF Guaranties until March 2010. UWF later filed suit against Ruderman and Freed, and Ruderman ultimately settled with UWF.
The next transaction occurred in December 2007. Ruderman had recently received a $4.3 million distribution from DDL, which she deposited into investment accounts with Bank of America (the "Bank"). The Bank had been a lender to the Business and DDL, which still owed approximately $50 million on outstanding loans. In an effort to gain an extension on the overdue loans, Freed agreed to pledge Ruderman's investment accounts as additional security. Without Ruderman's knowledge or authorization, Freed or someone at his direction signed a pledge agreement in Ruderman's name (the "Pledge"). Ruderman did not learn of the Pledge until October 2008.
By July 2008, the loans were still in default. The Bank agreed to another extension on the condition that Ruderman sign two forbearance agreements (the "Forbearance Agreements"). Freed obtained Ruderman's signature on the documents, but failed to disclose certain material facts about the forged Pledge, which the Forbearance Agreements purportedly validated. Less than two years later, in May 2010, the Bank acted on the Pledge and liquidated Ruderman's investment accounts in partial repayment of the loans.
The Complaint details six other documents to which Ruderman's name was allegedly forged by Freed or someone acting under his direction. These documents purport to assign Ruderman's or the Trust's interests, or pledge certain accounts belonging to Ruderman. Ruderman also alleges that Freed withheld from her material information concerning DDL and other entities in which they share an interest.
In November 2014, Ruderman filed the instant lawsuit. Her eight-count Complaint seeks an accounting, declaratory judgment, and Freed's expulsion from DDL. It also includes claims for violation of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), breach of fiduciary duty, fraud and fraudulent concealment, breach of the DDL operating agreement, and violation of the Illinois Consumer Fraud and Deceptive Business Practice Act ("ICFA"). Freed seeks to dismiss portions of the RICO claim (Count I), the fraud and ICFA claims (Counts V and VII) in their entirety, and certain allegations relating to the Forbearance Agreements.
II. LEGAL STANDARD
A motion to dismiss for failure to state a claim under Rule 12(b)(6) challenges the legal sufficiency of a complaint. Hallinan v. Fraternal Order of Chi. Lodge No. 7, 570 F.3d 811, 820 (7th Cir. 2009). To survive a Rule 12(b)(6) motion to dismiss, a complaint must contain "enough facts to state a claim to relief that is plausible on its face." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). When considering a Rule 12(b)(6) motion to dismiss, a court must accept the plaintiff's allegations as true, and view them in the light most favorable to the plaintiff. Camasta v. Jos. A. Bank Clothiers, Inc., 761 F.3d 732, 736 (7th Cir. 2014) (citation omitted). However, a court need not accept as true "legal conclusions, or threadbare recitals of the elements of a cause of action, supported by mere conclusory statements." Brooks v. Ross, 578 F.3d 574, 581 (7th Cir. 2009) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)) (internal quotations and alterations omitted).
Ruderman's RICO, common-law fraud, and ICFA claims are governed by Rule 9(b), a heightened pleading standard that requires a party to "state with particularity the circumstances constituting fraud." FED. R. CIV. P. 9(b). These circumstances include "the identity of the person who made the misrepresentation, the time, place and content of the misrepresentation, and the method by which the misrepresentation was communicated to the plaintiff." Windy City Metal Fabricators & Supply, Inc. v. CIT Tech. Fin. Servs., Inc., 536 F.3d 663, 668 (7th Cir. 2008) ...