United States District Court, N.D. Illinois, Eastern Division
JOSEPH MERCOLA, as Trustee of the Joseph M. Mercola Declaration of Trust, JANET SELVIG, as Trustee of the Mercola Insurance Trust, and MERCOLA.COM HEALTH RESOURCES, LLC, Plaintiffs,
MOSTAFA ABDOU, MARK ZIEBOLD, and THE KOENIG GROUP, LLC, Defendants/Third-Party Plaintiffs,
MICHAEL A. PASSANANTI, individually and as agent of DUGGAN BERTSCH, LLC, DUGGAN BERTSCH, LLC, ANDREW BENNETT, individually and as agent of AXA ADVISORS, LLC, and AXA ADVISORS, LLC d/b/a Business Strategies Group of Illinois, Third-Party Defendants.
MEMORANDUM OPINION AND ORDER
FEINERMAN, UNITED STATES DISTRICT JUDGE
Mercola (along with his sister and his company, who can be
ignored) alleges in this diversity suit that attorney Mark
Ziebold, insurance broker Mostafa Abdou, and Abdou's
employer, The Koenig Group, LLC, hoodwinked him into
purchasing several premium financed life insurance policies.
Doc. 139. The operative complaint alleges legal malpractice
against Ziebold, breach of fiduciary duty against Abdou and
Koenig, and common law and statutory fraud against Abdou.
Earlier in the case, the court denied Defendants' motions
to dismiss. Docs. 59-60 (reported at 2015 WL 3545414 (N.D.
Ill. June 5, 2015)); Docs. 66-67 (reported at 2015 WL 4475287
(N.D. Ill. July 21, 2015)).
answering, Defendants-whom this opinion will call
“Third-Party Plaintiffs”- filed third-party
complaints under the Illinois Joint Tortfeasor Contribution
Act (“JTCA”), 740 ILCS 100/2(a), against the
investment advisor AXA Advisors, LLC, its agent Andrew
Bennett, and the law firm Duggan Bertsch, LLC (and a Duggan
partner, who can be ignored). Docs. 176-78. Because the
third-party complaints are materially identical, they will be
referred to in the singular and only one will be cited.
Third-Party Defendants have moved under Federal Rule of Civil
Procedure 12(b)(6) to dismiss the third-party complaints.
Docs. 196, 213, 215. In addition, Duggan has moved under the
JTCA for a finding that the settlement it reached with
Mercola was made in good faith and thus bars the third-party
contribution claims against it. Doc. 235. The motions are
Rule 12(b)(6) motion, the court must accept the third-party
complaint's well-pleaded factual allegations, with all
reasonable inferences drawn in Third-Party Plaintiffs'
favor, but 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 [third-party] complaint, documents that are critical
to the [third-party] complaint and referred to in it, and
information that is subject to proper judicial notice,
” along with additional facts set forth in Third-Party
Plaintiffs' briefs opposing dismissal, so long as those
additional facts “are consistent with the
pleadings.” Phillips v. Prudential Ins. Co. of
Am., 714 F.3d 1017, 1020 (7th Cir. 2013). The facts are
set forth as favorably to Third-Party Plaintiffs as those
materials permit. See Pierce v. Zoetis, 818 F.3d
274, 277 (7th Cir. 2016).
allegations against Third-Party Plaintiffs are set forth in a
prior opinion, familiarity with which is assumed. 2015 WL
3545414 at *1-2. The third-party complaint acknowledges the
existence though not the truth of Mercola's allegations,
i.e., that Third-Party Plaintiffs breached their
fiduciary duties to Mercola, made negligent
misrepresentations, and committed legal malpractice in
connection with Mercola's obtaining premium financed life
insurance policies, and that as a result, Mercola incurred
substantial losses when he surrendered those policies and
repaid the loans that he had used to finance the premiums.
Doc. 176 at ¶¶ 16-22. The third-party complaint
proceeds to allege the following. On or about October 2013,
when he still held the policies, Mercola retained Bennett,
AXA Advisors, and Duggan to be his “Financial Advisory
Team” and advise him about the policies. Id.
at ¶¶ 23-25. Based on their advice, Mercola
prematurely surrendered the policies, incurring losses
alleged to exceed $3 million. Id. at ¶ 26. In
advising Mercola to prematurely surrender the policies,
Third-Party Defendants breached the duty of care that they
owed Mercola, thus giving rise to third-party contribution
liability to Third-Party Plaintiffs. Id. at
¶¶ 29-30, 34-35.
Third-Party Defendants' Motion to Dismiss
Whether the Third-Party Claims Comply With Rule 14
14(a) states that “[a] defending party may, as
third-party plaintiff, serve a summons and complaint on a
nonparty who is or may be liable to it for all or part of the
claim against it.” Fed.R.Civ.P. 14(a)(1). Third-Party
Defendants argue that Rule 14(a) allows a third-party
complaint only if the third-party plaintiff alleges that the
third-party defendant is derivatively liable to the
third-party plaintiff for the plaintiff's claim against
it. Doc. 198 at 7-8. In this, Third-Party Defendants are
correct. See Owen Equip. & Erection Co. v.
Kroger, 437 U.S. 365, 368 n.3 (1978); Hartford Acc.
and Indem. Co. v. Sullivan, 846 F.2d 377, 381 (7th Cir.
1988) (“[I]t is hard to see how [the requirements of
Rule 14] could be fulfilled unless the third-party's
liability was derivative.”). Third-Party Defendants
then argue that the third-party complaint, which charges that
they acted negligently towards Mercola, does not allege that
they are derivatively liable to Third-Party Plaintiffs. Doc.
198 at 8-11. In this, they are wrong.
derivative liability exists is a question of substantive law,
which in this diversity suit is Illinois law. See Ragusa
v. City of Streator, 95 F.R.D. 527, 528 (N.D. Ill. 1982)
(“Though Rule 14(a) establishes the procedure for
bringing in a third party, choice of law rules direct us to
Illinois law to determine the substantive propriety of doing
so.”); 6 Charles Allen Wright, Arthur R. Miller &
Mary Kay Kane, Federal Practice & Procedure
§ 1448, at 453-54 (3d ed. 2010) (“If the governing
substantive law recognizes a right of contribution, impleader
under Rule 14 is a proper procedure by which to seek relief
from joint tortfeasors.”). The JTCA states that
“where 2 or more persons are subject to liability in
tort arising out of the same injury to person or property, or
the same wrongful death, there is a right of contribution
among them, even though judgment has not been entered against
any or all of them.” 740 ILCS 100/2(a). The third-party
complaint alleges that “in the event” Third-Party
Plaintiffs are held liable to Mercola, they should recover
from Third-Party Defendants “by way of contribution
… an amount as is commensurate with the relative
degree of culpability or fault attributable” to
Third-Party Defendants. Doc. 176 at ¶¶ 31, 36.
Thus, any liability that Third-Party Defendants may
have to Third-Party Plaintiffs depends on, and thus is
derivative of, Third-Party Plaintiffs' liability to
Mercola. It follows that the third-party complaints for
contribution under the JTCA are proper under Rule 14(a).
See Dowe v. Nat'l R.R. Passenger Corp., 2003 WL
22383016, *4 (N.D. Ill. Oct. 17, 2003) (“If the
particular alleged tortfeasor who is sued wants to protect
itself against paying more than its ‘fair share' of
the plaintiff's damages, it can do so (if permitted by
the relevant jurisdiction's law) by making contribution
claims against the other joint tortfeasors as third party
claims under Rule 14.”).
Whether the Third-Party Complaint States a Viable
Contribution Claim Under Illinois Law
noted, the JTCA allows contribution claims only if the
third-party plaintiff's liability arises from the
“same injury” to the plaintiff as does the
third-party defendant's liability. Third-Party Defendants
argue that the third-party claims do not satisfy this
requirement because they simply allege “a variation of
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