United States District Court, N.D. Illinois, Eastern Division
RANDALL S. GOULDING, as assignee of the original plaintiff, SECURITIES COUNSELORS, INC., Plaintiff,
OSCEOLA GOLD, INC., a Delaware Corporation, and PIZZ, INC., a Nevada Corporation, Defendants.
MEMORANDUM OPINION AND ORDER 
I. SCHENKIER UNITED STATES DISTRICT JUDGE.
Counselors, Inc. ("Securities Counselors")
originally sued defendants Osceola Gold, Inc. ("Osceola
Gold") and Pizz, Inc. ("Pizz") (collectively
"defendants" or "counterplaintiffs") in
Illinois state court. Defendants removed the action to
federal court and filed a motion to dismiss (docs. #1, 7). In
response, Securities Counselors sought leave to file an
amended complaint, and plaintiff Randall S. Goulding
("Mr. Goulding, " "plaintiff or
'"counterdefendant") as assignee of Securities
Counselors was granted leave and filed a First Amended
Complaint ("FAC") (docs. #13: Motion to Amend; doc.
# 16: First Amen. Compl.). The FAC asserts four counts-breach
of contract, unjust enrichment, quantum meruit, and account
stated-seeking recovery of $191, 173.63 in fees for legal
services plaintiff allegedly provided defendants. Defendants
filed a motion to dismiss the FAC for failure to state a
claim (doc. # 18), which this Court denied (doc. # 30).
defendants filed an answer to the FAC, along with affirmative
defenses and counterclaims (doc. #31: Ans. to First Amend.
Compl, Affirm. Def. and Counterclaims).
Defendants-counterplaintiffs (whom, for convenience, we will
refer to simply as defendants) pled seven affirmative
defenses as well as the following counterclaims: (a) breach
of contract in connection with an attorney-client agreement
(I); (b) breach of contract in connection with a mining
agreement (II); (c) fraud (III); (d) fraud in the inducement
(IV); (e) fraudulent concealment by a fiduciary (V); and (f)
constructive fraud in a contract (VI). Plaintiff now has
moved to dismiss the counterclaims pursuant to Rule 12(b)(6)
of the Federal Rules of Civil Procedure, and to strike and
dismiss defendants' affirmative defenses ("Motion to
Strike and Dismiss") (doc. # 33: Motion to Strike and
Dismiss). Plaintiffs motion is fully briefed (doc. # 34:
Defs.' Resp.). For the reasons below, the Court grants in
part and denies in part plaintiffs motion.
following allegations are taken from the defendants'
affirmative defenses and counterclaims and are presumed true
for purposes of the Motion to Strike and Dismiss. See
Deutsche Bank National Trust Co, v. Cannon, No. 12 C
5225, 2016 WL 212488, at n. 2 (N.D. Ill. Jan. 19, 2016);
Hishon v. King & Spalding, 467 U.S. 69, 73
(1984); Forrest v. Universal Savings Bank, F.A., 507
F.3d 540, 542 (7th Cir. 2007).
and Mr. Goulding entered into a contract for Mr. Goulding to
provide legal services to bring a mining project public as
set forth in the parties' Attorney-Client Agreement dated
April 28. 2015 (the "Attorney-Client Agreement")
(Counterclaim I. ¶ 1). Mr. Goulding allegedly
misrepresented that he was in good standing with the
Financial Industry Regulatory Authority ("FINRA")
(Counterclaim III, * 1). Defendants claim that Mr. Goulding
knew, at the time he made this misrepresentation, that he was
not in good standing with FINRA because he had been suspended
from the practice of law for fraud against the United States
in 1994. and was at the time currently engaged in litigation
in which the Securities and Exchange Commission was accusing
him of securities fraud (Id., Â¶ 5). As a consequence
of Mr. Goulding not being in good standing, FINRA would not
accept an opinion for a name change, symbol change or reverse
split and, therefore, Mr. Goulding failed to perform these
services which were required under the Attorney-Client
Agreement. (Id., ¶ 3; Counterclaim I, ¶
4). Mr. Goulding also failed to make the necessary filings to
make the public company OTC Pink current with OTC Markets;
nor did he make the initial filings to obtain DTC eligibility
(Counterclaim I, ¶¶ 5-6).
allege that, in addition, Mr. Goulding was unable to perform
a reverse merger with Counter Development Technologies, Inc.
("ENTI"), or deliver ENTI without debts or lawsuits
as required under the Attorney-Client Agreement, even though
he had falsely represented that he would be able to deliver
the ENTI vehicle (Id. Â¶ 3). Mr. Goulding allegedly
knew, at the time of the representation, that he would not be
able to deliver ENTI because he owed ENTI's owner a
considerable sum of money and the owner would not deliver the
ENTI vehicle without payment, which Mr. Goulding could not
secure (Counterclaim III, ¶ 6).
and Mr. Goulding entered into a second contract entitled
Mining Rights/Stock Purchase Agreement (the "Mining
Agreement"), pursuant to which Mr. Goulding was to
provide legal services in an effort to bring a mining project
public (Counterclaim II, ¶ 1). Mr. Goulding failed to
perform on the Mining Agreement by failing to deliver a 1934
Act reporting company and to make necessary 1934 Act filings
(Id., ¶¶ 3-4).
federal court sitting in diversity, we apply Illinois state
substantive law to determine the elements of the claims that
have been pled, as defendant argues that Illinois applies and
plaintiff does not argue otherwise. Gocsel v. Boley
Intern. (U.K.) Ltd., 806 F.3d 414. 419 (7th Cir. 2015)
citing Erie Railroad Co. v. Tompkins, 304 U.S. 64
(1938). However, we apply federal procedural rules and
federal case law interpreting those rules.
assessing a motion to strike, the Court considers Federal
Rule of Civil Procedure 12(f). Under Rule 12(1) "[t]he
court may strike from a pleading an insufficient defense or
any redundant, immaterial, impertinent, or scandalous
matter." Fed.R.Civ.P. 12(f). "Affirmative defenses
arc pleadings and, therefore, are subject to all pleading
requirements of the Federal Rules of Civil Procedure."
Heller Financial, Inc. v. Midwhey Powder Co., Inc.,
883 F.2d 1286. 1294 (7th Cir. 1989). "While the Seventh
Circuit has not addressed whither the Twomhfy-Iqbal
standard applies to affirmative defenses, judges in this
district have generally found these requirements to
apply." Edwards v. Mack Trucks, Inc., 310
F.R.D. 382. 386 (N.D. Ill. 2015); Maurice Sporting Goods,
Inc. v. BB Holdings, Inc., No. 15 C 11652. 2016 WL
4439948. at * 1 (N.D. Ill. Aug. 23. 2016) ("The
Court--along with many others in this district--examines
affirmative defenses by reference to Twomhly's
'plausibility' pleading standard").
same time, we apply these standards mindful that motions to
strike affirmative defenses are "disfavored" unless
they serve to "remove unnecessary clutter from the
case." Heller Financial. 883 F.2d at 1294.
"Affirmative defenses will be stricken 'only when
they are insufficient on the face of the
pleadings."" Williams v. Jader Fuel Co.,
Inc., 944 F.2d 1388, 1400 (7th Cir. 1991) quoting
Heller Financial, 883 F.2d at 1294. A motion to strike
an affirmative defense "will not be granted unless it
appears to a certainty that plaintiffs would succeed despite
any state of the facts which could be proved in support of
the defense, and are inferable from the pleadings."
Williams, 944 F.2d at 1400 (citations and
quotations omitted). We address plaintiffs motion to
strike defendants" affirmative defenses in Section III
assessing plaintiffs motion to dismiss, we consider Federal
Rule of Civil Procedure 12(b)(6). Motions to dismiss pursuant
to Rule 12(b)(6) challenge the sufficiency of a pleading.
Ualiinan v. Fraternal Order of Police of Chicago Lodge
No. 7, 570 F.3d 811. 820 (7th Cir. 2009). A Rule
12(b)(6) motion to dismiss a counterclaim is subject to the
same standards as a motion to dismiss a complaint. See
Northern Trust Co. v. Peters, 69 F.3d 123. 129 (7th Cir.
1995). The Court construes all well-pleaded allegations of
the counterclaims in the light most favorable to defendants,
accepting as true all well-pleaded facts. United Central
Bank v. Davenport Estate LLC, 815 F.3d 315. 318 (7th
Cir. 2016). and drawing ail reasonable inferences in their
favor. White v. Keely, 814 F.3d 883, 887-88 (7th
Cir. 2016). To survive a motion to dismiss under Rule
12(b)(6), not only must a counterclaim provide fair notice of
the claim's basis, but it also must allege enough facts
to show that, on its face, the requested claim is plausible,
and not just possible. Bell Atlantic Corp. v.
Twomhty, 550 U.S. 544. 570 (2007). See also
Fed. R.Civ.P, 8(a)(2). While the counterclaim need not set
forth "detailed factual allegations."
"[t]hreadbare recitals of the elements of a cause of
action, supported by mere conclusory statements, do not
suffice." Ashcroft v. Iqbal, 556 U.S. 662, 678
claim alleges fraud, the federal rules add an elevated
pleading standard, which requires that '"a party
must state with particularity the circumstances constituting
fraud or mistake." Federal Rule of Civil Procedure 9(b),
see also Camasla v. Jos. A. Bank Clothiers, Inc.,
761 F.3d 732, 737 (7th Cir. 2014). The Seventh Circuit has
described this standard as requiring a complaint to
"describe the 'who, what, when, where, and how"
of the fraud- 'the first paragraph of any newspaper
story" United Stales ex rel. Presses-v. Acacia
Mental Health Clinic. LLC, 836 F.3d 770. 776 (7th Cir.
2016) (citations omitted). "While Rule 9(b)
"does not require a plaintiff to plead facts that if
true would show that the defendant's alleged
misrepresentations were indeed false, it does require the
plaintiff to state 'the identity of the person making the
misrepresentation, the time, place and content of the
misrepresentation, and the method by which the
misrepresentation was communicated to the
plaintiff."" Camasta, 761 F.3d at 737
quoting Uni*quality. Inc. v. Injotronx. Inc., 974
F.2d 918. 923 (7th Cir. 1992).
Seventh Circuit has warned that '"courts and
litigants often erroneously take an overly rigid view of the
formulation" and that the precise details that must be
included in a complaint 'may vary on the facts of a given
ease.""" Presser, 836 F.3cl at 776
(citations omitted). "Nevertheless, plaintiffs
must "use some ... means of injecting precision and some
measure of substantiation into their allegations of
fraud.""" Id. quoting 2 James Wm.
Moore et al, Moore's Federal Practice § 9.03[l][b],
at 9-22 (3d ed. 2015). We address plaintiffs motion to
dismiss in Section IV below.
moves to strike all of defendants' affirmative defenses
(Motion to Dismiss and Strike at 5-11). Defendants pled seven
affirmative defenses: (1) failure to state a claim; (2)
breach of fiduciary duties; (3) unclean hands; (4)
frustration of purpose - Attorney Client Agreement; (5)
frustration of purpose-Mining Agreement; (6)