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McKillip v. Lambert

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

December 17, 2019

JASON LAMBERT, et al., Defendants.



         Plaintiff Stephen McKillip, Sr. brings this action against Jason Lambert, Stephen McKillip, Jr., and other parties to the relevant Merger Agreement alleging breach of contract and fraud claims. Before the Court is Lambert's motion to dismiss McKillip's first amended complaint pursuant to Federal Rules of Civil Procedure 12(b)(6) and 12(b)(7). For the reasons explained below, the Court grants in part with prejudice and denies in part Lambert's motion.


         The following facts are summarized from the first amended complaint, [1] as well as the Merger Agreement underlying this lawsuit. Stephen McKillip, Sr. (“McKillip”), Lambert, and others entered into a merger agreement (“Merger Agreement”) on December 29, 2017. Pursuant to the Merger Agreement, defendant One of Kind Prints, Inc. was merged into defendant McKillip Industries, Inc. leaving McKillip Industries as the surviving entity. McKillip alleges that Lambert and McKillip, Jr. agreed to purchase ownership of McKillip Industries for $2, 000, 000 to be paid in $8, 000 bi-weekly installments. McKillip also contends that Lambert and McKillip, Jr. abandoned the business on May 10, 2018 and have stopped making payments for the purchase of McKillip Industries.

         In Count I, McKillip alleges a breach of contract claim against Lambert and McKillip, Jr. for failure to make payments in accordance with the Merger Agreement. In Count II, McKillip alleges a common law fraud claim against Lambert.

         Legal Standard

         A motion to dismiss pursuant to Rule 12(b)(6) for failure to state a claim tests the sufficiency of the complaint, not its merits. See Camasta v. Jos. A. Bank Clothiers, Inc., 761 F.3d 732, 736 (7th Cir. 2014). When considering dismissal of a complaint, the Court accepts all well pleaded factual allegations as true and draws all reasonable inferences in favor of the plaintiff. Erickson v. Pardus, 551 U.S. 89, 94, 127 S.Ct. 2197, 167 L.Ed.2d 1081 (2007) (per curiam). To survive a motion to dismiss, plaintiff must “state a claim for relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). A complaint is facially plausible when plaintiff alleges “factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). When ruling on a motion to dismiss, courts “may consider documents attached to the pleadings so long as the documents are referred to in the complaint and central to the plaintiff's claims.” Doe v. Columbia Coll. Chicago, 933 F.3d 849, 854 (7th Cir. 2019).


         Breach of Contract Claim

         Lambert first argues that McKillip's breach of contract claim fails to state a claim because the Merger Agreement requires McKillip Industries, not Lambert or McKillip, Jr., to pay $2, 000, 000 for the purchase of McKillip Industries. In making this argument, Lambert ignores the plain language of the Merger Agreement and asks the Court to consider the Subordinated Security Agreement instead. First, the Merger Agreement equivocally states:

Stephen McKillip, Jr. and Jason Lambert shall purchase ownership of McKillip from Stephen McKillip, Sr. and become 50/50 owners of McKillip.
The Purchase Price of ownership of McKillip shall be Two Million and No/100 Dollars ($2, 000, 00.00), through seller financing and paid in installments as indicated herein… $8, 000.00 paid bi-weekly[.]
The purchase of the ownership of McKillip shall be seller-financed through Stephen McKillip, Sr., with Stephen McKillip, Sr. taking a subordinate position to the lending bank.

         Whereas, the Subordinated Security Agreement between McKillip and McKillip Industries (as the debtor) states that it is a “partial security for the payment and performance by Debtor of the Seller Note, which security agreement shall be subordinated to Debtor's senior lender, namely Providence Bank and Trust[.]” In short, the Subordinated Security Agreement and Seller Note pertain to the financing of the merger. Thus, it appears Lambert is asking the Court to delve into the bank loan and the transaction(s) that ...

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