United States District Court, N.D. Illinois, Eastern Division
ELMHURST LINCON-MERCURY, INC. EMPLOYEES 401k PROFIT SHARING PLAN & TRUST, Plaintiff,
DAVID G. MEARS, ELMHURST LINCOLN-MERCURY, INC., UNIVERSAL UNDERWRITERS INSURANCE COMPANY, and JAMES F. BEST, P.C., Defendants.
MEMORANDUM OPINION AND ORDER
February 18, 2016, Elmhurst Lincoln-Mercury, Inc. Employees
401(k) Profit Sharing Plan and Trust (“the
Plan”), by its acting trustee, Thomas Potts, Jr., filed
this ERISA and negligence suit against its former trustee
David Mears, Elmhurst Lincoln-Mercury (“ELM”),
ELM's insurer Universal Underwriters Insurance Company,
and James F. Best P.C., a law firm that represented Universal
in earlier litigation related to the Plan. Doc. 1. A default
has been entered against ELM and Mears under Federal Rule of
Civil Procedure 55(a). Doc. 40. Universal and Best move under
Rules 12(b)(6) and 16(f) to dismiss the claims against them
on several grounds, including that the Plan, by filing this
suit, improperly split claims that it could and should have
brought in a closely related case, Weir v. Elmhurst
Lincoln-Mercury, Inc., No. 13 C 2694 (N.D. Ill. filed
Apr. 10, 2013). Docs. 35, 38. The motions are granted.
resolving a Rule 12(b)(6) motion, the court assumes the truth
of the operative complaint's well-pleaded factual
allegations, though not its legal conclusions. See Zahn
v. N. Am. Power & Gas, LLC, 815 F.3d 1082, 1087 (7th
Cir. 2016). The court must also consider “documents
attached to the complaint, documents that are critical to the
complaint and referred to in it, and information that is
subject to proper judicial notice, ” along with
additional facts set forth in the Plan's brief opposing
dismissal, so long as those facts “are consistent with
the pleadings.” Phillips v. Prudential Ins. Co. of
Am., 714 F.3d 1017, 1020 (7th Cir. 2013) (internal
quotation marks omitted); see also Defender Sec. Co. v.
First Mercury Ins. Co., 803 F.3d 327, 335 (7th Cir.
2015). The facts are set forth as favorably to the Plan as
those materials allow. See Pierce v. Zoetis, 818
F.3d 274, 277 (7th Cir. 2016). In setting forth those facts,
the court does not vouch for their accuracy. See Jay E.
Hayden Found. v. First Neighbor Bank, N.A., 610 F.3d
382, 384 (7th Cir. 2010). Because the Weir suit
provides much of the background for this suit and underpins
the motions to dismiss, the court takes judicial notice of
the filings in Weir. See Ennenga v. Starns,
677 F.3d 766, 773-74 (7th Cir. 2012) (holding that public
court documents are judicially noticeable); Henson v. CSC
Credit Servs., 29 F.3d 280, 284 (7th Cir. 1994) (same,
and collecting cases).
a defunct Delaware corporation that was registered with the
Illinois Secretary of State until August 13, 2010, when the
Secretary revoked its authority to do business in Illinois.
Doc. 32 (16 C 2390) at ¶ 5. The Plan is ELM's
ERISA-qualified profit-sharing plan, which provided benefits
to eligible ELM employees. Id. at ¶ 7.
April 10, 2013, James Weir, a former ELM employee and Plan
beneficiary, brought the Weir suit against ELM, the
Plan, ELM's successor corporation Bright Leasing, Inc.,
and Mears (ELM's former owner and the Plan's
then-trustee), alleging ERISA violations. Doc. 1 (13 C 2694)
at ¶¶ 4-5, 7, 19-50. The suit also sought
injunctive relief against Oppenheimer & Co., an
investment firm that held the Plan's funds on deposit.
Id. at ¶¶ 6, 51-58. Weir filed a corrected
complaint the following day, Doc. 5 (13 C 2694); a first
amended complaint on July 1, 2013, Doc. 18 (13 C 2694); and
then, with the court's approval, a second amended
complaint on May 9, 2014, Doc. 51-52 (13 C 2694). The second
amended complaint added Universal as a defendant, alleging
that Universal, in its role in the defense and settlement of
two earlier federal and state court suits brought on behalf
of Plan participants Michael Lureau and Martin Felt (the
“Lureau/Felt litigation”), breached its
ERISA fiduciary duty to the other beneficiaries, including
Weir. Doc. 51 at ¶¶ 14-19, 43-51. On August 11,
2014, the court in Weir set deadlines for written
discovery, dispositive motions, and motions to amend the
pleadings and add new parties. Doc. 68 (13 C 2694). In
particular, the order set a December 8, 2014 deadline for
motions to amend the pleadings or add new parties.
November 25, 2014, Weir moved to remove Mears as the
Plan's trustee and to replace him with Larry Shippe. Doc.
77 (13 C 2694). The court granted the motion on December 2,
2014, and in the same order granted the parties' joint
oral motion to extend the deadlines and, in particular,
extended the deadline for filing motions to amend the
pleadings or add new parties to February 2, 2015. Doc. 80 (13
C 2694). On January 16, 2015, Weir moved to vacate the order
appointing Shippe as the Plan's trustee and to instead
appoint Potts. Doc. 81 (13 C 2694). On January 22,
2015-eleven days before the February 2, 2015 deadline for
moving to amend the pleadings or add new parties-the court
granted the motion to appoint Potts. Doc. 84 (13 C 2694).
Neither Weir nor the Plan moved to extend the February 2,
February 12, 2015, the court referred the case to Magistrate
Judge Cox for a settlement conference. Docs. 85-86 (13 C
2694). On March 18, 2015, Weir's counsel, Glenn Gaffney,
filed an appearance on behalf of the Plan; Gaffney also
represents the Plan in this case. Doc. 90 (13 C 2694); Doc. 2
(16 C 2390). On March 26, 2015, the court, on the
parties' agreement, extended the discovery and
dispositive motion deadlines, but neither Weir nor the Plan
sought to extend the deadline for moving to amend the
pleadings or add parties. Doc. 93 (13 C 2694). A settlement
conference was held on May 6, 2015, and the parties proceeded
before Magistrate Judge Cox through September 2015 regarding
the parties' continued settlement discussions. Docs. 100,
111, 113 (Case 13 C 2694).
meantime, on December 8, 2014, Universal brought suit in the
Circuit Court of Cook County, Illinois (the “Coverage
Action”), seeking a declaration that Universal has no
coverage obligations to indemnify ELM, Bright, Mears, and the
Plan in the Weir suit. Universal Underwriters
Ins. Co. v. Elmhurst Lincoln-Mercury, Inc., No. 2014 CH
19590 (Cir. Ct. Cook Cnty. filed Dec. 8, 2014). Weir and
Potts removed the Coverage Action to federal court, where it
was assigned to District Judge Dow. Doc. 1 (15 C 2400). On
April 9, 2015, Weir moved to reassign and consolidate the
Coverage Action with Weir. Doc. 95 (13 C 2694). At a
hearing on that motion on April 15, 2015, Doc. 99 (13 C
2694), the Plan (through Gaffney) orally sought leave to file
an ERISA cross-claim against Universal (its co-defendant) in
Weir. Doc. 38-2 (16 C 2390) at 11. The court denied
the oral motion, reminded counsel that the time to amend the
pleadings had closed, and suggested that the Plan file a
written motion for leave to file a cross-claim against
Universal. Id. at 11-12. The Plan did not file that
1, 2015, Judge Dow remanded the Coverage Action to state
court. Doc. 18 (15 C 2400). After the remand, on September
18, 2015, Weir and the Plan filed counterclaims against
Universal in the Coverage Action. Docs. 38-3, 38-4 (16 C
2390). The counterclaims alleged, among other things, common
law fraud and civil conspiracy, and were premised on
allegations materially identical to those underpinning
Weir's ERISA claim against Universal in the Weir
suit. Compare Doc. 52 (13 C 2694) at ¶¶
13-19, with Doc. 38-3 (16 C 2390) at 66-68,
and Doc. 38-4 (16 C 2390) at 67-70.
December 9, 2015, in the Weir suit, the Plan moved
in writing for leave to file an ERISA cross-claim against
Universal based on Universal's alleged role in the
defense and settlement of the Lureau/Felt
litigation, and a third-party claim against Best, which, as
noted, had represented Universal in that litigation. Doc.
134-2 (13 C 2694); Doc. 32 (16 C 2390) at ¶ 43; Doc.
38-6 (16 C 2390). The court set a briefing schedule for that
motion. Doc. 137 (13 C 2694). At the presentment hearing, the
court observed that Gaffney at the time was representing both
Weir, the plaintiff, and the Plan, a defendant; the court
observed that such dual representation might be problematic.
Gaffney apparently agreed, see Ill. Rules of
Professional Conduct 1.7(b)(3) (“[A] lawyer may
represent a client if … the representation does not
involve the assertion of a claim by one client against
another client represented by the lawyer in the same
litigation.”), for on December 21, 2015, Weir (via
Gaffney) moved to dismiss his claim against the Plan. Doc.
138 (13 C 2694). The court granted the motion. Doc. 141 (13 C
2694). And because that dismissal resulted in the Plan no
longer being a party in Weir, the court denied as
moot the Plan's motion for leave to file a cross-claim
against Universal and a third-party claim against Best.
Ibid. Before doing so, the court asked Gaffney on
the record whether that was proper course of action; Gaffney
agreed that it was, and acknowledged that the Plan's next
step was to file a motion to intervene. Ibid.
Plan did not and has not filed a motion to intervene
Weir. Rather, after Universal moved to enforce the
settlement that it believed (incorrectly) it had negotiated
with Weir and the Plan at the May 2015 settlement conference,
Doc. 144 (13 C 2694); Doc. 160 (13 C 2694) (denying the
motion), the Plan filed this suit. Doc. 1 (16 C 2390). The
operative complaint asserts ERISA claims against ELM and
Mears (Count I), and ERISA claims against Universal (Count
II), and ERISA and negligence claims against Best (Counts
III-IV) based on Universal's and Best's roles in the
defense and settlement of the Lureau/Felt
litigation. Doc. 32 (16 C 2390). On May 23, 2016, Weir moved
in Weir to consolidate this case with Weir.
Doc. 180 (13 C 2694). After Universal indicated that it would
move to dismiss this case, the court denied Weir's motion
to consolidate without prejudice to renewal after the
resolution of the motions to dismiss. Doc. 182 (13 C 2694).
contends that the Plan's claims against Universal and
Best are duplicative of claims brought in Weir and
also violate the rule against claim splitting. Doc. 38 (16 C
2390) at 6-9; Doc. ...