United States District Court, N.D. Illinois, Eastern Division
THOMAS J. STEINES, Plaintiff/Counter-Defendant,
SUSAN MENRISKY, Defendant, and DONALD W. MENRISKY, Defendant/Counter-Plaintiff/Third-Party Plaintiff,
SHERYL STEINES, Third-Party Defendant.
MEMORANDUM OPINION AND ORDER
Steines brought this suit against his former business
partner, Donald Menrisky, and Menrisky's wife, Susan
Menrisky, seeking damages and injunctive relief. Doc. 98. The
Menriskys answered, Doc. 102, and Donald brought
counterclaims against Thomas and third-party claims against
his wife, Sheryl Steines, Doc. 95. The Steineses now move
under Federal Rule of Civil Procedure 12(b)(6) to dismiss
some of the counterclaims and third-party claims. Doc. 108.
The motion is granted in part and denied in part.
resolving a Rule 12(b)(6) motion, the court assumes the truth
of the operative pleading'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 [pleading], documents that are critical to
the [pleading] and referred to in it, and information that is
subject to proper judicial notice, ” along with
additional facts set forth in Donald's brief 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 Donald as
those materials allow. See Pierce v. Zoetis, 818
F.3d 274, 277 (7th Cir. 2016). In setting forth those facts
at this stage, 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).
and Thomas founded Simplesoft, a software company, about
twenty years ago. Doc. 95 at ¶¶ 1, 3, 10. Donald
and Thomas both contributed to the early development of the
company, with Thomas running the Chicago division and Donald
running the Dayton, Ohio division. Id. at ¶ 11.
Although initially the Steineses owned all Simplesoft shares,
in 1997 Sheryl gave up her shares, which were transferred to
Donald, who became a 50% owner of the company. Id.
at ¶ 14. In recent years, Susan took on an
“operations manager” role, with responsibility
for several management functions, such as benefits and health
insurance. Id. at ¶ 20. Donald, Susan, Thomas,
and Sheryl currently are directors and officers of
Simplesoft. Id. at ¶¶ 1-4. The board is
divided evenly between the Steines and Menrisky families.
Id. at ¶ 15.
several years, the Chicago division (run by Thomas) focused
on information technology services for computer system
infrastructure, while the Dayton division (run by Donald)
focused on software development. Id. at ¶ 21.
During that time, the Chicago division generated more revenue
than the Dayton division. Id. at ¶ 22. Thomas
and Donald nonetheless distributed profits evenly, which
became a source of tension. Id. at ¶ 23. To
resolve that tension, Thomas and Donald entered into what has
been called the “Grand Bargain.” Id. at
¶ 24. Under the Grand Bargain, if one division was more
profitable than the other, the difference would be paid as a
bonus to whomever headed up the higher-earning division,
after which (for tax reasons) the profits would be equally
divided. Id. at ¶¶ 24-25.
early 2000s, Donald began to resell “customer
relationship management software” and offer other
customer-service focused products out of the Dayton division.
Id. at ¶ 26. Over time, this caused the Dayton
division to grow and become more profitable, while the
Chicago division shrunk. Id. at ¶ 29. Thomas
sold a particular product line and set of contracts to
Collier Computing out of the Chicago division, initially
splitting Collier's $100, 000 up-front payment with
Donald. Id. at ¶¶ 30-31. Thomas then
announced his plan to retain the remainder of the Collier
sale proceeds because, in his view, they were generated by
the Chicago division. Id. at ¶ 31. Thomas would
end up collecting over $100, 000 of those proceeds.
Id. at ¶ 32.
the Chicago division's business had shrunk, Thomas
continued to do work for Simplesoft, largely in the form of
accounting, taxes, and payroll management. Id. at
¶¶ 33, 35. He also performed, on Simplesoft's
behalf, consulting services for Kraft Foods. Id. at
¶ 34. In 2011, Thomas declared himself finished with
Simplesoft and began to shift to his own bank account the
proceeds derived from the Kraft account. Id. at
¶ 36. Thomas and Donald then agreed that Donald would
buy Thomas's Simplesoft stock. Id. at ¶ 37.
The agreed buyout price was to be equal to the payments
Donald had received from the Collier sale. Id. at
¶ 37. Thomas agreed to continue performing accounting
and payroll functions, in exchange for Simplesoft continuing
to pay for his health insurance. Id. at ¶ 39.
has been making payments to Thomas pursuant to the buyout
agreement for the past several years. Id. at ¶
43. Overall, those payments have totaled an amount “in
the neighborhood” of the agreed-upon buyout price.
Ibid. Donald requested an accounting to confirm that
his end of the bargain was complete, but Thomas did not
comply. Id. at ¶ 44. Nor did Thomas offer
Donald access to Simplesoft's financial records in
QuickBooks. Ibid. Donald continued to press for
access to the QuickBooks file, and Thomas continued to
refuse. Id. at ¶ 46. As Donald became
increasingly concerned, Thomas continued to refuse his demand
and also committed numerous accounting practice errors, such
as failing to make payroll on time. Id. at ¶
47. When Donald confronted Thomas, Thomas accused Donald of
“screwing him, ” with no further elaboration.
Id. at ¶ 48. Thomas then said that he was going
to start taking a salary for himself, and Donald strongly
objected. Id. at ¶ 49.
January 2016, Thomas finally turned over the QuickBooks file,
which the Menriskys' accountant reviewed. Id. at
¶ 51. The accountant observed several abnormalities.
Id. at ¶ 52. There were several instances that,
according to Donald, amounted to theft by Thomas, including
payments to himself or Sheryl for their own use, without
notice to or approval of the Menriskys. Id. at
¶ 55. At that point, Donald notified Thomas that he
intended to transfer all banking and accounting functions to
Dayton, made arrangements for customers to send payments to
an Ohio bank account, and engaged a third-party contractor to
manage payroll. Id. at ¶¶ 58-60.
brought this suit in June 2016, on his own behalf and also
purportedly on behalf of Simplesoft, against the Menriskys.
Doc. 1. The Menriskys answered, and Donald filed a
third-party complaint against Sheryl and counterclaims
against Thomas. Doc. 26. Simplesoft then was dismissed as a
plaintiff, without prejudice to Thomas filing derivative
claims for Simplesoft's benefit. Doc. 36. The pleadings
have been amended several times; the operative complaint is
the second amended complaint, Doc. 159, and the operative
counterclaims and third-party claims are the first amended
counterclaims and third-party claims, Doc. 95.
has eleven counterclaims against Thomas, which allege
individual and derivative claims sounding in fiduciary duty,
conversion, conspiracy to commit conversion, breach of
contract, theft of corporate opportunity, and unjust
enrichment. Doc. 95 at ¶¶ 64-151. He seeks a
variety of relief, including a forced sale of shares,
dissolution, an accounting, and compensatory and punitive
damages. Id. at ¶¶ 64-151. Donald's
third-party claims against Sheryl, individual and derivative,
sound in breach of fiduciary duty, conspiracy to commit
conversion, unjust enrichment, and constructive trust.
Id. at ¶¶ 152-91. The Steineses have moved
to dismiss Counterclaims VI through XI and Third-Party Claims
I, III, IV, and V in their entirety, and to partially dismiss
Counterclaims IV and V and Third-Party Claim II. Doc. 108.