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R&M Trucking-Intermodal, Inc. v. Dr. Miracle's, Inc.

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

July 18, 2017

R&M TRUCKING-INTERMODAL, INC., Plaintiff,
v.
DR. MIRACLE'S, INC., DRM HOLDINGS, INC., DRM HOLDINGS d/b/a DRM/JPC BRANDS, and RICHARD LOMBARDI, Defendants.

          MEMORANDUM OPINION AND ORDER

          Robert M. Dow, Jr., United States District Judge

         Plaintiff R&M Trucking-Intermodal, Inc. brings this action alleging breach of contract and related claims against Defendants Dr. Miracle's, Inc., DRM Holdings, Inc., DRM Holdings d/b/a DRM/JPC Brands, (collectively, “DRM”), and Richard Lombardi. Currently before the Court are Defendant Lombardi's motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) [29], and Defendant DRM's Rule 12(b)(6) motion to dismiss [37]. For the reasons set forth below, Defendant Lombardi's motion to dismiss [29] is granted in part and denied in part, and Defendant DRM's motion to dismiss [37] is granted in part and denied in part: Plaintiff's breach of contract claim against Defendant DRM for breach of the Settlement Agreement (Count I) can proceed; the common law fraud claim against Defendant Lombardi (Count II) can proceed; the promissory estoppel claim (Count III) can proceed against Defendant DRM and is dismissed as to Defendant Lombardi; the Illinois Consumer Fraud and Deceptive Business Practices Act claim (Count IV) is dismissed as to both Defendants; and the quantum meruit claim against Defendant DRM (Count V) is dismissed. Plaintiff is given until August 18, 2017 to file a second amended complaint consistent with this opinion, if it believes in good faith that it can overcome the deficiencies identified below. This case is set for further status hearing on August 23, 2017 at 9:00 a.m.

         I. Background

         The following facts are drawn from Plaintiff R&M Trucking-Intermodal's First Amended Complaint [6] and the attached exhibits. Plaintiff is a full-service trucking company offering transportation and warehousing services in the Chicago area. [6, at ¶ 16.] Defendant DRM is a producer and distributor of hair care products. Defendant Lombardi is the Chief Financial Officer of DRM and was at all relevant times the personal contact for all communication between Plaintiff and DRM. [Id. at ¶ 1.]

         Plaintiff contends that in 2012 and 2013, Plaintiff performed transportation and warehousing services for Defendant DRM, including shipping and storage services for a large amount of inventory. [Id. at ¶ 2.] According to Plaintiff, the inventory consisted of 773 pallets of chemical-based hair relaxer kits (equivalent to 20 full-size trailer loads), which Defendant DRM stored in Plaintiff's warehouse for a weekly storage fee. [Id. ¶¶ 2, 21.] Plaintiff alleges that beginning in March 2013, Defendant DRM agreed to pay Plaintiff a storage fee of approximately $2, 512.25 per week to store the inventory until Defendant DRM was able to find an alternative storage facility. [Id. at ¶ 22.] Plaintiff contends that Defendant DRM incurred significant monthly invoices for Plaintiff's transportation and warehouse services and refused to pay these invoices to Plaintiff. [Id. at ¶ 3.] Plaintiff further contends that Defendant refused Plaintiff's repeated requests to remove the inventory it had stored at Plaintiff's warehouse, which prevented Plaintiff from using the space for other paying customers. [Id.]

         Specifically, Plaintiff alleges that in April 2013, Defendant Lombardi asked Plaintiff to perform additional transportation and storage services for Defendant DRM. Plaintiff asserts that it informed Defendant Lombardi via email that DRM owed Plaintiff an outstanding balance of $429, 505.73 to date for past transportation and storage services, and that at least one half of that outstanding balance would need to be paid before Plaintiff would perform additional services for DRM. [Id. at ¶¶ 24-25.] Defendant Lombardi emailed Plaintiff on April 3, 2013 and stated that DRM would pay Plaintiff $165, 858 that day and would make another payment of $60, 981.09 five days later, and requested that Plaintiff prepare the items for shipping. [Id. at ¶ 26; id., at Exhibit A.] Plaintiff states in its First Amended Complaint that it relied on Defendant Lombardi's assurance that the payments would be made and agreed to perform the additional services for DRM. [Id. at ¶ 27.] However, Plaintiff contends that Defendant DRM did not make the payments as promised and instead made “sporadic payments in much smaller amounts” over the course of several months. [Id. at ¶ 28.]

         Plaintiff asserts that on June 14, 2013, it again demanded that Defendant Lombardi make an immediate payment on the invoices that were over 30 days old, which amounted to approximately $108, 000.[1] [Id. at ¶ 29.] Plaintiff contends that on August 24, 2014, it emailed Defendant Lombardi and again requested payment on the past due invoices and further requested that Defendant Lombardi remove the inventory from Plaintiff's warehouse given that Plaintiff was not being paid the agreed upon monthly storage fee. [Id. at ¶ 30.] Plaintiff contends that it could no longer afford to store the inventory without payment for the services and that it “had a growing customer base and needed room to store containers for its other customers.” [Id. at ¶ 31.] On August 24, 2014, Defendant Lombardi assured Plaintiff via email that he would “clear up the bills by the end of the week.” [Id. at ¶ 32; id. at Exhibit B.]

         According to Plaintiff, by February 2014, Defendant DRM still had not removed the inventory from Plaintiff's warehouse and “continued to dismiss all efforts by [Plaintiff] to collect the storage fees due and owing to [Plaintiff].” [Id. at ¶ 33.] On February 3, 2014, Plaintiff allegedly emailed Defendant Lombardi and demanded that the inventory be removed from the warehouse and that the overdue balance of $84, 818.38 be paid immediately. Defendant Lombardi responded that he would “look into it.” [Id. at ¶¶ 34-35.] Plaintiff emailed Defendant Lombardi again on February 11, 2014 to request an update. On February 25, 2014, Defendant Lombardi informed Plaintiff that he would write a check for $55, 000 that week. [Id. at ¶¶ 36- 37; id., at Exhibit C.] Plaintiff alleges that on March 3, 2014, it informed Defendant Lombardi that the promised check never arrived. On March 27, 2014, Plaintiff informed Defendant Lombardi that Defendant DRM owed Plaintiff over $160, 000 and again demanded that payment be made and that the inventory be removed to make room for Plaintiff's paying customers, or Plaintiff would take legal action. [Id. at ¶¶ 38-39; id., at Exhibit D.]

         In an email dated April 7, 2014, Defendant Lombardi emailed Plaintiff proposing to settle the entire matter by having Defendant DRM pay Plaintiff a discounted amount and remove the inventory by the end of June, with Defendant DRM responsible for all moving charges. [Id. at ¶ 40.] The email states:

         Here is what I propose:

1) Last statement I saw was at the end of January for a balance of 84k
2) I would like to discount the balance by 20% - since the charges were monthly for storage only
3) Beginning next week I will pay you 12.5 per week for 9 weeks-which would be 112.5 in total-that approximate discounted amount I would owe thru [sic] June [ ] would be paid by week of June 9.
4) Then by June 15th we would devise a plan and move all product out by end of June-will pay all moving charges at the agreed rate.
Please review and think about this offer. This is the best I can do at this time.

[Id., at Exhibit E.] Plaintiff alleges that it accepted the terms of the offer, thus creating an enforceable contract (“the Settlement Agreement”). [See id. at ¶ 40.]

         Plaintiff alleges that as of May 2014, Defendant had not made any payments in accordance with the Settlement Agreement. Plaintiff states that on May 5, 2014, it inquired as to why it had not received any payments, and Defendant Lombardi informed Plaintiff that he would send a “catch-up check” that week. [Id. at ¶¶ 41-42.] Plaintiff asserts that on September 4, 2014, it again emailed Defendant Lombardi to further inquire as to why no payments had been made and why the inventory had not been removed in accordance with the terms of the Settlement Agreement. [Id. at ¶ 43.] On September 8, 2014, the parties held a telephone conference and agreed that Defendant would make an immediate payment of $25, 000 and would pay the remainder of the $162, 698.13 outstanding balance at a later date. [Id. at ¶ 44; id., at Exhibit G.]

         Plaintiff brought suit on September 9, 2016 and filed his First Amended Complaint [6] on October 26, 2016. Plaintiff contends that as of the date of the filing of the lawsuit, no payments had been made by Defendant DRM in accordance with the terms of the Settlement Agreement and that Defendant DRM still had not removed the inventory from Plaintiff's warehouse, and thus monthly storage fees continued to accrue. [Id. at ¶ 45.] Plaintiff asserts that as of the date of the filing of the lawsuit, Defendant DRM owed Plaintiff in excess of $450, 000 in accrued storage fees plus the costs of removal of the abandoned inventory. [Id. at ¶ 46.] Plaintiff brings a breach of contract claim against DRM for breach of the Settlement Agreement (Count I), a common law fraud claim against Lombardi (Count II), a promissory estoppel claim against DRM and Lombardi (Count III), an Illinois Consumer Fraud and Deceptive Business Practices Act claim against DRM and Lombardi (Count IV), and a quantum meruit claim against DRM (Count V), which is pled in the alternative.[2] Lombardi filed a 12(b)(6) motion to dismiss [29] on December 20, 2016, and DRM filed a 12(b)(6) motion to dismiss on January 13, 2017 [37], which are currently before the Court.

         II. Legal Standard

         To survive a Rule 12(b)(6) motion to dismiss for failure to state a claim upon which relief can be granted, the complaint first must comply with Rule 8(a) by providing “a short and plain statement of the claim showing that the pleader is entitled to relief, ” Fed.R.Civ.P. 8(a)(2), such that the defendant is given “fair notice of what the * * * claim is and the grounds upon which it rests.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)) (alteration in original). Second, the factual allegations in the complaint must be sufficient to raise the possibility of relief above the “speculative level.” E.E.O.C. v. Concentra Health Servs., Inc., 496 F.3d 773, 776 (7th Cir. 2007) (quoting Twombly, 550 U.S. at 555). “A pleading that offers ‘labels and conclusions' or a ‘formulaic recitation of the elements of a cause of action will not do.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 555). Dismissal for failure to state a claim under Rule 12(b)(6) is proper “when the allegations in a complaint, however true, could not raise a claim of entitlement to relief.” Twombly, 550 U.S. at 558. In reviewing a motion to dismiss pursuant to Rule 12(b)(6), the Court accepts as true all of Plaintiff's well-pleaded factual allegations and draws all reasonable inferences in Plaintiff's favor. Killingsworth v. HSBC Bank Nevada, N.A., 507 F.3d 614, 618 (7th Cir. 2007).

         III. Analysis

         A. Lombardi's Motion to Dismiss

         Defendant Lombardi argues that all counts against him (Counts II, III, and IV) should be dismissed pursuant to Federal Rule of Civil Procedure 12(b)(6). The Court will address each count in turn.

         1. Count II: Common Law Fraud

         In Count II, Plaintiff brings a claim of common law fraud, alleging that Defendant Lombardi, as an authorized agent of Defendant DRM, “knowingly and falsely reported to Jerome May, President of [Plaintiff], the following statements regarding the outstanding balance and the [i]nventory” that was to be removed from Plaintiff's warehouse:

a. On April 2, 2013 Lombardi told [ ] May in an email that Lombardi would pay $165, 858 and would make another payment of $60, 981.90 five days later in exchange for Plaintiff taking the time and effort to prepare the product for immediate shipping.
b. On August 24, 2013, Lombardi reported to Plaintiff that he would “clear up all bills by the end of the week.”
c. On February 25, 2014, Lombardi against reported to Plaintiff[, ] “you will be getting a check for just ...

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