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Womack v. Brady McCasland, Inc.

United States District Court, S.D. Illinois

June 29, 2017

PAMELA WOMACK d/b/a PJW ENTERPRISES Plaintiff,
v.
BRADY MCCASLAND, INC. Defendant. BRADY MCCASLAND, INC., Counter-Claimant,
v.
JAMES WOMACK, JORDAN WOMACK, and ALAN JOHNSON, Counter-Defendants.

          MEMORANDUM AND ORDER

          David R. Herndon, United States District Judge

         I. Introduction

         Now before the Court is Counter-Defendant Alan Johnson's Motion to Dismiss Counts IV-VIII of Defendant/Counter-Claimant's Second Amended Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) (Doc. 58).[1] Defendant/Counter-Claimant, Brady McCasland, Inc. (hereinafter “BMI”), opposes the motion on grounds that the pleading requirements of 12(b)(6) are satisfied and Counter-Defendant has adequate notice of Defendant/Counter-Claimant's claims (Doc. 70). For the reasons explained below, the Court DENIES Counter-Defendant's Motion to Dismiss (Doc. 58).

         II. Background

         On June 8, 2015, BMI removed this case from the Circuit Court of St. Clair County, Illinois, based on diversity jurisdiction under 28 U.S.C. §§ 1332 and 1341 (Doc. 1). Upon removal, defendants filed a motion to dismiss Plaintiff's complaint for failure to state a claim (Doc. 7). Thereafter, Plaintiff sought leave to file her First Amended Complaint (Doc. 9). The Court granted the request, and on July 16, 2015, Womack d/b/a PJW Enterprises, filed a three count amended complaint (Doc. 13). On August 13, 2015, BMI filed a Motion to Dismiss the First Amended Complaint (Doc. 21). On March 22, 2016, this Court entered an Order denying BMI's Motion to Dismiss (Doc. 34). BMI then filed its Answer, Affirmative Defenses, and Counterclaim (Doc. 35).

         On July 1, 2016, BMI filed a Motion for Leave to File a Second Amended Counterclaim and Motion for Joinder of a Third Party (Doc. 46). On July 21, 2016, BMI filed a nine (9) count Second Amended Complaint against Counter-Defendants James Womack, Jordan Womack, and Alan Johnson (hereinafter referred to as Johnson) (Doc. 48). Counts IV, V, VI, VII, and VIII are directed at Johnson and allege the following under Illinois law: fraud (Count IV), conspiracy to commit fraud (Count V), aiding and abetting fraud (Count VI), breach of fiduciary duty (VII) and conspiracy to breach fiduciary duty (VIII).

         III. Motion to Dismiss

         A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) challenges the sufficiency of the complaint for failure to state a claim upon which relief may be granted. Gen. Hallinan v. Fraternal Order of Police Chicago Lodge No. 7, 570 F.3d 811, 820 (7th Cir. 2009). The Supreme Court explained in Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007), that in order to withstand Rule 12(b)(6) dismissal, a complaint “does not need detailed factual allegations, ” but must contain “enough facts to state a claim for relief that is plausible on its face.” 550 U.S. at 570.

         Twombly and Ashcroft v. Iqbal, 556 U.S. 662 (2009) retooled federal pleading standards, but notice pleading remains all that is required in a complaint. “A plaintiff still must provide only ‘enough detail to give the defendant fair notice of what the claim is and the grounds upon which it rests and, through his allegations, show that it is plausible, rather than merely speculative, that he is entitled to relief.'” Tamayo v. Blagojevich, 526 F.3d 1074, 1083 (7th Cir. 2008) (citation omitted). In making this assessment, the district court accepts as true all well-pleaded factual allegations and draws all reasonable inferences in the plaintiff's favor. See Rujawitz v. Martin, 561 F.3d 685, 688 (7th Cir. 2009); St. John's United Church of Christ v. City of Chi., 502 F.3d 616, 625 (7th Cir. 2007).

         Despite the established standard discussed above, Federal Rule of Civil Procedure 9(b) articulates the following heightened standard for fraud or mistake and conditions of mind: “In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person's mind may be alleged generally.” Fed.R.Civ.P. 9(b). The Seventh Circuit has held that in order to survive dismissal on a Rule 12(b)(6) motion, the complaint “must plead the ‘who, what, when, where, and how' of the alleged fraud.” DiLeo v. Ernst & Young, 901 F.2d 624, 627 (7th Cir. 1990); Lachmund v. ADM Investor Services, Inc., 191 F.3d 777, 782 (7th Cir. 1999) (quoting Uni* Quality, Inc. v. Infotronx, Inc., 974 F.2d 918, 923 (7th Cir. 1992)); Rao v. BP Products North America, Inc., 589 F.3d 389, 401 (7th Cir. 2009) (citing DiLeo, 901 F.2d at 627). As such, “circumstances of fraud or mistake” include “the identity of the person who made the misrepresentation, the time, place and content of the misrepresentation, and the method by which the misrepresentation was communicated to the plaintiff.” Windy City Metal Fabricators & Supply, Inc. v. CIT Technology¸536 F.3d 663, 668 (7th Cir. 2008) (quoting Gen. Elec. Capital Corp. v. Lease Resolution Corp., 128 F.3d 1074, 1078 (7th Cir. 1997)).

         Additionally, claims that are not by definition claims of fraud, but which “sound[] in fraud, ” i.e. are “premised upon a course of fraudulent conduct, ” still warrant the Rule 9(b) heightened pleading standard. Borsellino v. Goldman Sachs Group, Inc., 477 F.3d 502, 507 (7th Cir. 2007) (citing Rombach v. Chang¸355 F.3d 164, 170-71 (2d Cir. 2004)); See also Sears v. Likens, 912 F.2d 889, 893 (7th Cir. 1990). Whether the rule applies will depend on the plaintiffs' factual allegations. Id. (citing In re Daou Sys., Inc., 411 F.3d 1006, 1027-28 (9th Cir. 2005) and Cal. Pub. Employees' Ret. Sys. v. Chubb Corp., 394 F.3d 126, 160-61 (3d Cir. 2004)). Each of the challenged claims at issue here are based upon the same alleged acts of fraud. Therefore, Rule 9(b) applies to Count IV, as well as Counts V-VIII. The pleadings must be specific enough to put fraud defendants on notice of the conduct alleged. Freedom Mortg. Corp v. Burnham Mortg., Inc., 720 F.Supp.2d 978, 989 (N.D. Ill. 2010). With this heightened standard in mind, the Court turns to Counts IV-VIII of BMI's Second Amended Complaint, as applied to Counter-Defendant Alan Johnson.

         IV. Analysis

         a. Count IV: Fraud

         First, Johnson argues that Count IV of BMI's counterclaim is “comprised of legal conclusions and conclusory statements” and is not pled with “the specificity required under the law” because of the following: (1) the specific date of when the under loading occurred is not stated; (2) only Johnson's length of employment at BMI is claimed to give rise to “special confidence”; (3) concerted action is claimed without any “details [of] how they acted in concert”; and (4) there is nothing demonstrating how BMI determined the cars were under loaded, what benefit Johnson realized, or what actions were taken to conceal the “Scheme.” Doc. 59, Pg. 4-5. Furthermore, Johnson identifies as conclusory BMI's allegations that Johnson “knowingly and voluntarily encourage[d], facilitated, and participated in the Scheme in concert with the Womacks, concealed the scheme from the Womacks and realized a ...


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