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Brown v. Skyline Furniture Manufactiruing, Inc.

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

June 12, 2017




         Plaintiff, Terrence L. Brown, brings this action against defendants Skyline Furniture Manufacturing, Inc., SEA Products, Inc., and Ted Wecker, asserting claims of fraudulent misrepresentation, breach of fiduciary duty, Family and Medical Leave Act violations, and Illinois Wage Payment and Collection Act violations. The defendants move this Court to dismiss Brown's fraudulent misrepresentation and breach of fiduciary duty claims or, alternatively, to dismiss SEA Products from the fraudulent misrepresentation claim. For the reasons set forth herein, that motion is granted in part and denied in part.


         The following allegations taken from the plaintiff's amended complaint are accepted as true for the purpose of ruling on this motion. Skyline is a closely-held Illinois corporation that designs and manufactures furniture. SEA Products, Inc. is an Illinois corporation that shares several common owners or shareholders with Skyline and that shares Skyline's offices, showrooms, staff, and financial resources. Ted Wecker is the CEO of Skyline and SEA Products. Brown was continuously employed by SEA Products or Skyline between 1993 and December 29, 2014, at which time he was working for SEA Products as a sales executive. SEA Products fired Brown on December, 29, 2014, for reasons that are contested but that are not at issue in the present motion. At the time of his termination, Brown held 46, 000 shares in Skyline, which constituted approximately 12% of Skyline's outstanding shares.

         Immediately after terminating Brown on December 29, 2014, Wecker informed Brown that Skyline would be willing to purchase his stock for $15 per share. When pressed, Wecker stated that the stock was worth $15 per share, but refused to conduct a third-party valuation of the company when Brown requested one. Brown returned to Skyline the next day, and again questioned Wecker about the value of the shares. Wecker again asserted that they were worth $15. In an effort to persuade Brown, Wecker agreed to notify Brown of any sales of Skyline stock over the next 18 months that exceeded $15 per share and to pay Brown “the additional amount based on the selling stock price” above $15 per share, “less $75, 000.”

         In reliance on these statements, Brown sold his stock back to Skyline for $15 per share. No Skyline stock was sold in the next 18 months, and Brown therefore received the agreed to price of $15 per share. Brown subsequently filed the present action based, in part, on his assertion that the Skyline stock was worth more than $15 per share.

         Legal Standard

         A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) tests the legal sufficiency of the complaint, not the merits of the allegations. The allegations must contain sufficient factual material to raise a plausible right to relief. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 569 n.14, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). Although Rule 8 does not require a plaintiff to plead particularized facts, the complaint must contain factual “allegations that raise a right to relief above the speculative level.” Arnett v. Webster, 658 F.3d 742, 751-52 (7th Cir. 2011). Put differently, Rule 8 “does not require ‘detailed factual allegations, ' but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009), see also Fed. R. Civ. P. 8(a). When ruling on a motion to dismiss, the Court must accept all well-pleaded factual allegations in the complaint as true and draw all reasonable inferences in the plaintiff's favor. Park v. Ind. Univ. Sch. of Dentistry, 692 F.3d 828, 830 (7th Cir. 2012). When a complaint sounds in fraud, Federal Rule of Civil Procedure 9(b) requires that the complaint “state with particularity the circumstances constituting fraud or mistake.” A plaintiff must allege the identity of the person making the misrepresentation and the means, time, place, and content of the misrepresentation. Borsellino v. Goldman Sachs Grp., Inc., 477 F.3d 502, 507 (7th Cir. 2007).


         The defendants first contend that Brown has failed to state a claim for fraudulent misrepresentation. In order to state a claim for fraudulent misrepresentation, a plaintiff must allege (1) a false statement of material fact; (2) knowledge or belief of the falsity by the party making the statement; (3) an intention to induce the other party to act; (4) action by the other party in reliance on the truth of the statement; and (5) damages resulting from that reliance. Dloogatch v. Brincat, 920 N.E.2d 1161, 1166, 396 Ill.App.3d 842 (2009).

         The defendants contend that Brown has not alleged a legally actionable false statement of material fact. Generally, an expression of opinion does not constitute a statement of fact and therefore cannot support an action for fraud. Statements as to the value of property are often treated as expressions of opinion and, if so intended and understood, cannot give rise to a fraud claim. Duhl v. Nash Realty Inc., 429 N.E.2d 1267, 1272, 102 Ill.App.3d 483 (1981). An exception exists, however, when the representation as to value “is not a mere expression of opinion but is made as a statement of fact for the listener to rely upon. . . .” Id.

         Here, the defendants contend that Wecker's statement that the stock was worth $15 constituted his opinion and not a statement of fact. In support of this assertion, the defendants argue, not incorrectly, that the value of closely-held corporations is hard to appraise and that Wecker's statement was unsupported by anything suggesting that it constituted an accurate valuation. A reasonable factfinder, however, could conclude from the context that Wecker's statements as to the value of the stock (as opposed to what Skyline would offer for it) constituted statements of fact. Accordingly, Brown has adequately alleged a legally actionable false statement of material fact.

         The defendants also contend that Brown has failed to plausibly allege justifiable reliance. A plaintiff justifiably relies on a defendant's misrepresentation where the circumstances are such as to make it reasonable for the plaintiff to accept the defendant's statements without an independent inquiry or investigation. Equity Builders and Contractors, Inc. v. Russell, 406 F.Supp.2d 882, 889 (N.D. Ill. 2005). The defendants' argument on this point, however, does not actually assert that it was unreasonable for Brown to accept Wecker's statement of value. Instead, it asserts that Brown had the ability to independently assess the share price value himself or to request the information necessary to do so. The ability to independently estimate Skyline's share price, however, has no direct bearing on whether or not it was reasonable for Brown to rely on Wecker's statement of that share price. Here, Brown has alleged facts sufficient to establish justifiable reliance, and this Court therefore holds that he has plausibly alleged that element of his fraudulent misrepresentation claim.

         The defendants alternatively contend that, if the fraudulent misrepresentation claim is not dismissed in its entirety, SEA Products should be dismissed from it because Brown does not allege any facts stating a plausible fraud claim against SEA ...

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