United States District Court, N.D. Illinois, Eastern Division
John E. Freiburger and Partners Wealth Management, Inc., Plaintiffs,
Kevin J. Timmerman, Bradley J. Lewis, Steele Capital Management, Inc., Defendants.
MEMORANDUM OPINION AND ORDER
S. Shah United States District Judge
1998, plaintiffs John Freiburger and Partners Wealth
Management, Inc. had an arrangement to solicit clients for
defendant Steele Capital Management, Inc., an investment
management services company, in exchange for referral fees.
Around fifteen years later, plaintiffs approached clients
about transferring their accounts away from Steele Capital
and to plaintiffs' new platform, and over 80 clients left
Steele Capital. Defendants Kevin Timmerman and Brad Lewis
(employees of Steele Capital) corresponded with clients in an
attempt to keep them from transferring accounts. Asserting
that the letters were defamatory, plaintiffs brought claims
against all defendants for defamation per se (Count
I), tortious interference with prospective business relations
(Count II), commercial disparagement (Count III), and claims
for breach of contract and unjust enrichment against Steele
Capital (Counts IV and V). . In turn, Steele Capital brought
counterclaims against plaintiffs for unjust enrichment and
tortious interference with business expectancy (Counterclaims
II and V) and counterclaims against Freiburger alone for
breach of contract (Counterclaims I and VI) and breach of
fiduciary duty (Counterclaim IV). .
move for summary judgment on all of Steele Capital's
remaining counterclaims. . Defendants move for partial
summary judgment on plaintiffs' claims for defamation,
commercial disparagement, and breach of contract.
.Lewis did not file a separate motion for
partial summary judgment, but submitted an additional
memorandum of law for partial summary judgment on
plaintiffs' claims against him for defamation per
se and commercial disparagement. .
following reasons, plaintiffs' motion to strike portions
of defendants' reply brief, , is granted,
defendants' motion for partial summary judgment on Counts
I, III, and IV, , is granted, and plaintiffs' motion
for summary judgment, , is granted in part on
Counterclaims II and VI and denied on the remaining
judgment is appropriate if the movant shows that there is no
genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law. Spurling v. C
& M Fine Pack, Inc., 739 F.3d 1055, 1060 (7th Cir.
2014); Fed.R.Civ.P. 56(a). A genuine dispute as to any
material fact exists if “the evidence is such that a
reasonable jury could return a verdict for the nonmoving
party.” Anderson v. Liberty Lobby, Inc., 477
U.S. 242, 248 (1986). The party seeking summary judgment has
the burden of establishing that there is no genuine dispute
as to any material fact. See Celotex Corp. v.
Catrett, 477 U.S. 317, 323 (1986). For each motion,
factual inferences are viewed in the nonmovant's favor.
See Hotel 71 Mezz Lender LLC v. Nat'l Ret. Fund,
778 F.3d 593, 603 (7th Cir. 2015).
parties in this lawsuit were all involved in the financial
services and individual wealth management business. 
¶ 8. John Freiburger was the sole owner of
Partners Wealth Management, Inc., a general services
financial planning firm that originated clients for a variety
of financial services.  ¶ 5;  ¶ 4. He was
also a “Registered Representative” of NFP
Securities, Inc. in NFP Securities's broker/dealer
capacity and an “Independent Advisor
Representative” of NFP Securities in its
“Registered Investment Advisor”
capacity.  ¶ 2;  ¶ 7; 
¶ 4. Located in Iowa, Steele Capital Management, Inc.
was a “Registered Investment Advisor” and
provided investment advisory services to individuals and
company-sponsored retirement plans.  ¶¶ 2-3.
(Partners Wealth was not a Registered Investment Advisor.
 ¶ 6.) Kevin Timmerman co-owned Steele Capital, and
Brad Lewis was its Senior Portfolio Manager. 
¶¶ 2, 4.
1998, Freiburger and Steele Capital entered into an oral
agreement. In exchange for referring clients to Steele
Capital, Freiburger would receive a percentage of the fees
that those clients paid to Steele Capital.  ¶ 11.
This agreement was to continue so long as the clients used
Steele Capital for their investment management purposes.
 ¶ 12. Two years later, Freiburger and Steele
Capital memorialized their oral agreement by executing a
“branch office agreement, ” which was terminable
with six months written notice.  ¶ 14;  ¶
24; [137-10]. Timmerman Dated: behalf of Steele Capital.
 ¶ 15.
branch office agreement stated that Freiburger was an
“independent contractor” who would operate his
financial services business as a branch office of Steele
Capital and be an “Investment Advisor
Representative” of Steele Capital. [137-10] at 1, 3.
Under the agreement, Freiburger would be paid 60% of the
client fees he brought to Steele Capital.  ¶ 22;
[137-10] at 1. (At some later point, the percentage was
raised to 65%-the parties do not explain when or how the
change came about. See, e.g.,  ¶¶ 23,
56, 60.) Steele Capital paid Freiburger a higher referral fee
than other solicitors because Freiburger agreed to provide
more services than typical solicitors.  ¶ 25. The
branch office agreement contained an exclusivity clause,
which required Freiburger to “place all investment
management business with [Steele Capital]” but allowed
Freiburger to place Registered Investment Advisor business
with another advisor if the services that a client desired
fell outside Steele Capital's normal course of business.
 ¶ 17; [137-10] at 1. The branch office agreement
also contained an integration clause stating that the
agreement “contains the entire understanding of the
parties with respect to the subject matter hereto and shall
not be modified or terminated except by written instrument
executed by or on behalf of the party against whom
modification or termination is sought to be enforced.”
[137-10] at 3.
2000 to 2004, Freiburger was an Investment Advisor
Representative of Steele Capital and actually signed client
contracts on behalf of Steele Capital.  ¶
30. While the branch office agreement was in
place, Freiburger also served as a Registered Representative
for NFP Securities, Inc., a broker/dealer.  ¶ 19;
 ¶ 7. The parties generally agree that NFP
Securities eventually insisted on having its own agreement
with Steele Capital, but dispute whether Steele Capital and
NFP Securities did so to comply with the Securities &
Exchange Commission's Rule 206(4)-3 (regarding cash
payments for client solicitations) or for other reasons.
 ¶¶ 23-24;  ¶ 16. In 2004, Steele
Capital and NFP Securities entered into a “Client
Referral and Services Agreement.”  ¶ 24;
 ¶ 16; [75-2]. Once again, Timmerman signed the
agreement on behalf of Steele Capital.  ¶ 25.
Freiburger did not sign the agreement. [75-2] at 4.
to the client referral agreement, NFP Securities would allow
its registered representatives to solicit clients for Steele
Capital on a “non-exclusive basis.”  ¶
25; [75-2] at 1. Steele Capital would pay NFP Securities for
all services rendered by NFP Securities registered
representatives, and NFP Securities would, in turn, pay its
registered representatives.  ¶ 27. Clients referred
to Steele Capital would sign a disclosure statement stating
that NFP Securities and Freiburger were being paid a referral
fee by Steele Capital.  ¶ 22; [75-2] at 1, 5. Each
client using Steele Capital's wealth management services
signed an Investment Management Agreement with Steele
Capital, which stated that “[t]his agreement may be
terminated by either party at any time without penalty upon
written notice.”  ¶¶ 38-39. Steele
Capital had no recourse against clients who terminated their
Investment Management Agreements; instead, clients were free
to transfer their accounts.  ¶¶ 40-41.
2012, Freiburger informed Timmerman that he would be
transferring millions of dollars in client accounts from
Steele Capital to NFP Securities's platform. The parties
dispute the timing and extent of that conversation. Timmerman
recalls a phone call in August 2012 when Freiburger said that
he was having financial difficulties and needed to move $50
million away from Steele Capital to NFP Securities in order
to increase his revenue.  ¶ 32; [137-2] at 32- 33.
Freiburger does not recall a particular phone call in August
and denies that he was in financial difficulties or needed to
increase revenue, but he admits that at some point, he
informed Timmerman that he would be moving $30 million away
from Steele Capital to NFP Securities.  ¶ 32;
[137-6] at 149-52. Freiburger received a letter from NFP
Securities in July 2012 about transferring client assets to
NFP Securities's investment platform-the parties dispute
whether Freiburger was required to move assets pursuant to
the letter.  ¶ 45.
the parties' relationship, Freiburger referred 118
clients to Steele Capital. In 2012, he approached clients
about transferring their accounts to NFP Securities's new
platform.  ¶ 12. Around the end of 2012,
clients started transferring their accounts; over the next
year or so, a total of 84 clients transferred over to NFP
Securities.  ¶ 52;  ¶ 12. It is
undisputed that Freiburger could not transfer accounts on his
own initiative, but could only do so upon client
authorization.  ¶ 48. Timmerman sent Freiburger a
letter on July 31, 2013, stating that Steele Capital was
formally terminating the branch office agreement. 
¶ 31; [137-34]. For the few clients remaining with
Steele Capital, Timmerman reduced Freiburger's referral
fee to 50%.  ¶ 60. None of the clients who
transferred to the NFP Securities platform ever returned to
Steele Capital.  ¶ 66.
April to October 2013, Timmerman and Lewis sent letters and
emails to clients, which form the basis for plaintiffs'
defamation claims.  ¶ 63; [137-37]. Timmerman
authored five emails and letters sent on April 8, June 11,
July 8 (two identical letters), July 15 (a letter sent to 80
clients), and September 3, 2013.  ¶ 61; [137-37] at
1-11. Lewis wrote two emails, sent on October 24 and October
29, 2013. [137-37] at 12-13. Plaintiffs filed suit shortly
Defamation Per Se (Count I)
move for summary judgment on plaintiffs' claim for
defamation per se on the basis that their statements
were non-defamatory, true, subject to an innocent
construction, privileged, or a combination thereof.
defamatory statement is a statement that harms a person's
reputation to the extent it lowers the person in the eyes of
the community or deters the community from associating with
him.” Solaia Tech., LLC v. Specialty Pub. Co.,
221 Ill.2d 558, 579 (2006). A statement is defamatory
per se-meaning that special damages need not be
shown-“if its harm is obvious and apparent on its
face.” Id. In Illinois, statements considered
defamatory per se include: words that impute a
person has committed a crime; words that impute a person is
unable to perform or lacks integrity in performing her or his
employment duties; and words that impute a person lacks
ability or otherwise prejudices that person in her or his
profession. Id. at 580. “Although a statement
may fit into one of these categories, this fact, standing
alone, ‘has no bearing on whether the alleged
defamatory statement is actionable, ' because certain
factors may render defamatory statements non-actionable as a
matter of law.” Giant Screen Sports v. Canadian
Imperial Bank Of Commerce, 553 F.3d 527, 532
(7th Cir. 2009) (quoting Hopewell v. Vitullo, 299
Ill.App.3d 513, 518 (1st Dist. 1998)).
defendants moved to dismiss the defamation claim under Rule
12(b)(6) by arguing in a single paragraph-without citation to
authority-that they had no malicious intent and therefore
could not be held liable for defamation per se. At
that stage of the case, such a conclusory argument was
insufficient to show that plaintiffs had no cause of action
for defamation per se. Now, on a full record and
with the benefit of the parties' briefing the nature and
truth of the statements at issue, the allegedly defamatory
nature of defendants' statements can be resolved as a
matter of law.
defamatory per se statement is not actionable
“if it is reasonably capable of an innocent
construction”-a question of law. Solaia Tech.,
221 Ill.2d at 580. Statements that can reasonably be
interpreted to refer to someone other than the plaintiff, or
to have an innocent construction, are not actionable for
defamation per se, and “[t]here is no
balancing of reasonable constructions.” Id.
(quoting Mittelman v. Witous, 135 Ill.2d 220, 232
(1989)). But courts “should not strain to see an
inoffensive gloss” when the defendant “clearly
intended and unmistakably conveyed a defamatory
per se statements are also nonactionable if they are
expressions of opinion, but “a false assertion of fact
can be defamatory even when couched within apparent opinion
or rhetorical hyperbole.” Solaia Tech., 221
Ill.2d at 581. The test for determining whether a statement
is opinion or factual assertion requires considering: (1)
“whether the statement has a precise and readily
understood meaning;” (2) “whether the statement
is verifiable;” and (3) “whether the
statement's literary or social context signals that it
has factual content.” Id.
that are “substantially true” are also not
actionable. Substantial truth “is shown where the
‘gist' or ‘sting' of the allegedly
defamatory material is true.” Coghlan v. Beck,
2013 IL App (1st) 120891, ¶ 42; see Haynes v. Alfred
A. Knopf, Inc., 8 F.3d 1222, 1227 (7th Cir. 1993).
Substantial truth is normally a question for the factfinder,
but it is a question of law when no reasonable jury could
find that the statement was not substantially true.
Coghlan, 2013 IL App (1st) 120891, ¶ 42.
is also a defense to defamation. Solaia Tech., 221
Ill.2d at 585. Other than a passing reference to the concept,
defendants' opening brief did not develop any argument
for how Timmerman and Lewis's statements were privileged.
 at 5. Half of defendants' reply brief, however, was
devoted to explaining how privilege applied to make their
statements nonactionable.  at 4-6, 8-12. “[I]t is
well-settled that arguments first made in the reply brief are
waived.” Billhartz v. C.I.R., 794 F.3d 794,
801 n.4 (7th Cir. 2015); see Bakalis v. Golembeski,
35 F.3d 318, 326 n. 8 (7th Cir. 1994) (argument waived where
it was made in a footnote in the opening brief and was
“not developed fully until the reply brief”).
Plaintiffs' motion to strike the portions of
defendants' reply brief advancing a privilege argument,
, is granted.
these principles in mind, each letter is addressed below.
April 8, 2013 Timmerman Email
April 8, 2013 email to a client ( ¶ 16; [137-37] at
1-2) contained ten statements that plaintiffs allege were
1) “[W]e have been managing your account since July
2001 and I feel obligated to let you know that transferring
your assets to John Freiburger's new platform is not in
your best interests.”
2) “Moving your account may be beneficial to John, but
I can't see how it benefits you at all.”
statements are nonactionable opinion. Timmerman's use of
the phrases “I feel obligated” and “I
can't see how” would not, alone, shield a
defamatory factual assertion from being actionable. See
Wilkow v. Forbes, Inc., 241 F.3d 552, 555 (7th Cir.
2001). But the terms “best interests, ”
“beneficial, ” and “benefits” have no
precise meaning and are not objectively verifiable. Such
determinations are vague and highly subjective, as reasonable
minds could differ about what is in a client's
“best interest.” Even Freiburger has admitted
that reasonable minds could differ about whether an
investment is in a client's best interest.  ¶
62. These terms are also not expressed in a
context signaling that they are meant to convey specific
factual content, which further suggests that they were
intended to express Timmerman's subjective opinion. These
statements are not actionable.
3) “John informed us in August of 2012 that he was
going to start moving accounts from us, and I believe you are
the very first and only client to make the switch.”
assert that the second half of this sentence regarding the
client is defamatory per se. In hindsight,
defendants acknowledge that this client was not the first or
only client to switch accounts, but argue that Timmerman
believed this statement at the time.  ¶ 25. But
because Timmerman is making the factual assertion that this
client is the first to switch accounts, the qualifier
“I believe” does not transform this statement
into a nonactionable opinion. See Solaia Tech., 221
Ill.2d at 580 (“[A] false assertion of fact can be
defamatory even when couched within apparent opinion or
of the accuracy of this statement, however, it can be
innocently construed. A statement is defamatory per
se only “if its harm is obvious and apparent on
its face, ” and falls into one of the defamatory
per se categories. Id. at 579-80.
Plaintiffs argue that this statement imputes that
plaintiffs' lack integrity for recommending that clients
leave Steele Capital when other clients do not think it is a
good idea. From the perspective of an ordinary reader, and
considering the context of the statement, a natural and
obvious reading is that it offers no reflection on
plaintiffs' integrity but instead focuses on the unnamed
client. The statement “you are the first and only
client to make the switch” reads as an appeal to herd
mentality, suggesting that the client made a foolhardy
decision and was unwise to leave Steele Capital because other
clients have chosen not to do so. Clients could decide to not
change investment management advisors for all sorts of
reasons that do not reflect on plaintiffs' integrity-for
example based on different investment preferences or
incentives. This statement can be innocently construed as not
referring to or impugning plaintiffs' integrity or
profession. It is not actionable.
4) “For soliciting you, we have been paying John 65% of
your investment advisory fees.”
statement is a factual assertion, but it is substantially
true-plaintiffs have even brought a breach of contract claim
asserting that they are entitled to a 65% fee from Steele
Capital for soliciting clients. See, e.g., 
¶ 54;  at 2, 15. Whether Timmerman later reduced
the percentage does not alter the fact that the
“gist” of this statement is true. It is not
5) “The way John explained it to me, when you move to
his new platform you will be paying 1.15% instead of 1.00%.
However, if he doesn't get $50 million dollars on this
new platform then your fee may go to 1.30%.”
6) “By staying with John you will probably pay at least
1.15% but if you move back to us you will pay only 0.35%.
This would save you approximately $4, 240 per year (based on
your account being $530, 000).”
Timmerman's statements may imply that he is merely
offering his understanding of Freiburger's new platform,
his statements include the factual assertions that the
client's fee will increase to 1.15% or 1.30% if they
transfer platforms. It is disputed whether transferring
platforms would cause clients to be charged higher fees.
See, e.g.,  ¶ 57. But statements that
clients will be charged higher fees, even if false, do not
impugn Freiburger's professional integrity or ability,
and are not defamatory per se. “Words which
reflect on a business's integrity or reputation may give
rise to a defamation action, ” but “false prices
do not impugn the integrity of the plaintiff.”
Downers Grove Volkswagen, Inc. v. Wigglesworth
Imports, Inc., 190 Ill.App.3d 524, 531 (2d Dist.
1989) (brochure listing false prices for plaintiff's
services was not defamatory, even per quod); see
Wilkow, 241 F.3d at 557 (“[A]n allegation of greed
is not defamatory.”); Garber-Pierre Food Prods.,
Inc. v. Crooks, 78 Ill.App.3d 356, 360-61 (1st Dist.
1979) (letter accusing corporation of charging higher prices
than its competitors was not defamatory per se
because it amounted to criticism of plaintiff's policy
decision regarding prices rather than impugning its business
cite to Installation Services, Inc. v. Crown Castle
Broadcast USA Corp. for the proposition that statements
concerning “overcharging” and
“gouging” are defamatory factual assertions. No.
04 C 6906, 2006 WL 2024220, at *5 (N.D. Ill. July 13, 2006).
But the analysis in Installation Services relied on
similar statements being found actionable in Imperial
Apparel, Ltd. v. Cosmo's Designer Direct, Inc., No.
1-05-2744, 2006 WL 1766708 (1st Dist. 2006). That opinion was
superseded and modified upon denial of rehearing by
Imperial Apparel, Ltd. v. Cosmo's Designer Direct,
Inc., 367 Ill.App.3d 48 (1st Dist. 2006), which held
that an ad stating the plaintiff was selling imitation goods
of inferior quality could be innocently construed as
referring to someone other than plaintiffs, and affirmed
dismissal of the defamation per se claim.
Id. at 57-58. On appeal, the Illinois Supreme Court
affirmed dismissal of the defamation per se claim
but held that the ad could not be reasonably interpreted as
stating actual fact. Imperial Apparel, Ltd. v.
Cosmo's Designer Direct, Inc., 227 Ill.2d 381,
400-02 (2008). Installation Services and
Imperial Apparel are not relevant to the point
here-that describing a competitor's price relative to
one's own is not, without more, an attack on the
competitor's integrity. Timmerman's assertions
regarding plaintiffs' higher prices were not defamatory.
statement about Steele Capital being willing to take the
client back for only a 0.35% fee is also not defamatory
per se-it merely represents Steele Capital's
offer to that client. These statements are not actionable.
7) “If you sell everything to go into the funds John is
recommending you could end up paying significant capital
admitted that this statement was substantially true. 
¶ 57.This statement is not actionable.
8) “The DFA funds that we believe John is recommending
to you have not performed well.”
phrase “performed well” has no precise meaning
and is not objectively verifiable, suggesting that it is
merely an expression of opinion. Even if this were not
opinion, it could be innocently construed as mere
disagreement about investment strategy, not necessarily
impugning plaintiffs' professional ability. This
statement is nonactionable.
9) “Many sales people will try to sell you on the low
expense ratios of the DFA funds. This is very
context, this statement is followed by: “It would be
like saying a Toyota Camry is better than a Mercedes Benz
because it costs less. The bottom line with funds, just like
cars, is how well they perform; and DFA funds have not been
performing well.” [137-37] at 2. Although the phrase
“misleading” is tied to the factual context of
selling DFA funds, it is not an objectively verifiable
statement- there is no metric to determine whether selling
DFA funds with low expense ratios is misleading or deceptive.
For example, in Hopewell v. Vitullo, the statement
that the plaintiff was “fired because of
incompetence” was nonactionable opinion because
“[r]egardless of the fact that ‘incompetent'
is an easily understood term, its broad scope renders it
lacking the necessary detail for it to have a precise and
readily understood meaning.” 299 Ill.App.3d 513, 519
(1st Dist. 1998). Because the statement lacked “context
and content” to limit the scope of “incompetent,
” there was no “precise meaning relating to the
alleged defamatory statement” and the veracity of the
statement was incapable of being verified. Id. at
519-20. Similarly, here, while “misleading” is an
easily understood term, the statement that marketing based on
the low expense ratios of DFA funds is misleading lacks
sufficient factual context to make Timmerman's assertion
verifiable. This statement can also be innocently construed
to refer to salespeople generally, not necessarily
Freiburger. It is nonactionable.
10) “I am guessing John told you not to take my phone
calls; however, I would greatly appreciate an opportunity to
speak with you. We have been managing your account for the
past 12 years and it is very important that we talk.”
statement is not opinion, because it contains the factual
assertion that Freiburger told the client not to accept phone
calls from Steele Capital. Plaintiffs argue that this
statement implies that they were trying to prevent clients
from speaking with defendants, in order to conceal
misconduct. However, the statement can be innocently
construed-a businessperson can advise a client not to take
phone calls from a competitor for all sorts of reasons that
do not relate to concealing misconduct. This statement is not
April 8 email from Timmerman does not contain any actionable
June 11, 2013 Timmerman Letter
allege that five statements from Timmerman's June letter
are defamatory ( ¶ 18; [137-37] at 3). None of the
statements are actionable for defamation per se.
1) “I feel obligated to let you know that transferring
your assets to John Freiburger's new platform is not in
your best interests.”
phrase “best interest” lacks a precise meaning
and is inherently subjective. Whether transferring platforms
is in a client's best interests is an ...