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Grayson v. Shanahan

United States District Court, N.D. Illinois, Eastern Division

November 29, 2016

DENVER R. GRAYSON and DENVER, INC., Plaintiffs,
v.
DANIEL SHANAHAN, MICHAEL J. KORST, P.C., and MICHAEL J. KORST, Defendants.

          MEMORANDUM OPINION AND ORDER

          John Z. Lee United States District Judge

         This case arises out of a dispute between two business partners regarding the distribution of proceeds from the sale of a Domino's Pizza franchise. Plaintiff Denver Grayson, the sole shareholder of Plaintiff Denver, Inc., has filed a two-count complaint against his former partner, Defendant Daniel Shanahan, as well as the attorney who represented both partners in the sale and his professional corporation, Defendants Michael Korst and Michael J. Korst, P.C. (collectively, “Korst”). In Count I, Plaintiffs allege legal malpractice and breach of fiduciary duty against Korst. In Count II, Plaintiffs claim unjust enrichment against Shanahan. Shanahan filed a motion to dismiss Count II of Plaintiffs' complaint [19] pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim. For the reasons given below, the Court grants Shanahan's motion.

         Factual Background

         Plaintiff Denver Grayson is a Wisconsin citizen and the sole officer and shareholder of Plaintiff Denver, Inc., a Wisconsin corporation (“Denver”). Compl. ¶¶ 3-4, ECF No. 1. Defendant Daniel Shanahan is an Illinois citizen. Id. ¶ 5. He conducted business as D.D.S. Pizza Enterprises, Inc. (“DDS”), a dissolved Illinois corporation. Id.; Def.'s Mem. Supp. Mot. Dismiss, Ex. 2, at 8, ECF No. 20.

         In October of 2006, Grayson, through Denver, and Shanahan, through DDS, formed DJ's Pizza, LLC, for the purpose of operating a franchised Domino's Pizza restaurant in Milwaukee, Wisconsin. Compl. ¶ 7; Compl., Ex. A, Operating Agreement of DJ's Pizza Art. 2, Sec. 1. Denver and DDS were the sole owners of DJ's Pizza. Compl. ¶ 7.

         In November 2014, Grayson and Shanahan, through their respective entities, sold substantially all of the restaurant's assets to a third party. Id. ¶¶ 8, 10. Defendant Michael Korst, a licensed Illinois attorney, represented Grayson and Shanahan in the sale of DJ's Pizza. Id. ¶¶ 6, 10. Under the negotiated Sale of Assets Agreement, authorized by Grayson and signed by both Grayson and Shanahan, the buyer agreed to distribute $340, 550 of the purchase price to DDS. Def.'s Mem., Ex. 1, Sale of Assets Agreement § III(A)(1); see also Compl., Ex. B, Seller's Closing Statement. Grayson and Denver received no proceeds from the sale. Compl. ¶ 12.

         Plaintiffs now bring this lawsuit against Shanahan and Korst. With respect to Shanahan, they allege in Count II of their complaint that Shanahan was unjustly enriched at closing in the amount of $304, 203, because those funds should have been given to Grayson and Denver under the terms of the Operating Agreement. Id. ¶¶ 17-18.

         As for Korst, Plaintiffs assert that Korst breached his fiduciary duty to them by failing to explain that they were entitled to receive certain funds as a result of the sale under the operating agreement of DJ's Pizza. See Id. ¶ 11; Pls.' Mem. Opp'n Mot. Dismiss, Ex. F, Aff. of Denver Grayson ¶ 4, ECF No. 25. Plaintiffs claim that, because of Korst's alleged dereliction, they entered into the sale agreement believing that all of the sale proceeds belonged to Shanahan. Id. As a result, Plaintiffs seek a judgment against Korst for $304, 203.

         Defendant Shanahan has moved to dismiss Plaintiffs' unjust enrichment claim pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim. Def.'s Mem. 1. Specifically, Shanahan argues that Plaintiffs cannot assert an unjust enrichment claim under either Illinois or Wisconsin law because they entered into an express contract regarding the allocation of the proceeds from the sale of DJ's Pizza. Id. at 5.

         Legal Standard

         To survive a motion to dismiss pursuant to Rule 12(b)(6), a complaint must “state a claim to relief that is plausible on its face.” 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.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). The Court must accept “all well-pleaded factual allegations as true and view them in the light most favorable to the plaintiff.” Lavalais v. Vill. of Melrose Park, 734 F.3d 629, 632 (7th Cir. 2013) (citing Luevano v. Wal-Mart Stores, Inc., 722 F.3d 1014, 1027 (7th Cir. 2013)). Mere legal conclusions, however, “are insufficient to survive a Rule 12(b)(6) motion.” McReynolds v. Merrill Lynch & Co., Inc., 694 F.3d 873, 885 (7th Cir. 2012) (citing Iqbal, 556 U.S. at 678). In addition to the complaint itself, on a motion to dismiss the Court may 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.” Geinosky v. City of Chi., 675 F.3d 743, 745 n.1 (7th Cir. 2012).

         Analysis

         I. Plaintiffs' Unjust Enrichment Claim Against Shanahan Is Barred by the Existence of an Express Contract

         In Count II, Plaintiffs allege an unjust enrichment claim against Shanahan for taking and retaining the distribution he received from the sale of DJ's Pizza. Compl. ¶¶ 17-20. Shanahan argues that Count II should be dismissed under both Illinois and Wisconsin law, because Plaintiffs cannot assert the existence of an express ...


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