United States District Court, N.D. Illinois, Eastern Division
MEMORANDUM OPINION AND ORDER
VIRGINIA M. KENDALL UNITED STATES DISTRICT
a breach of contract dispute stemming from the
Plaintiffs' purchase of Defendants' businesses.
Defendants now move to partially dismiss the complaint. The
motion to dismiss [Dkt. 27] is granted. Counts II, III, IV,
V, VI, and VII are dismissed without prejudice. If Plaintiffs
wish to file an amended complaint, they must do so within 28
days of the entry of this order.
motion to dismiss under Rule 12(b)(6), the Court accepts the
complaint's well-pleaded factual allegations, with all
reasonable inferences drawn in the non-moving party's
favor, but not its legal conclusions. See Smoke Shop, LLC
v. United States, 761 F.3d 779, 785 (7th Cir. 2014). The
facts below are drawn from Plaintiffs' Amended Complaint
Richard Dandino operated a business that facilitated
wholesale automobile dealership licenses for auto dealerships
in Michigan and Missouri. (Dkt. 24 ¶¶ 4, 6.) The
business consisted of setting up dealership entities,
providing office space, providing logistical support, and
assisting with dealership licensing, administrative
functions, and books and records for auto dealership
customers. (Id. ¶ 7.) Defendant U.S. Dealer
Licensing LLC (“Licensing LLC”) performed these
services in Missouri, and another entity, USDL Services LLC
(“USDL”), performed the same services in
Michigan. (Id. ¶ 8.)
April 2018, Plaintiff Anik Shah and his associate, Edward
Bergmann, began negotiating with Dandino to purchase the
operations and assets of Licensing LLC and USDL.
(Id. ¶ 5.) Shah and Bergmann agreed to purchase
both entities and they set up an Indiana LLC called U.S.
Dealer License LLC (“US Dealer”) to facilitate
the purchase. (Id. ¶ 13.) On May 1, 2018, U.S.
Dealer entered into an asset purchase agreement (the
“Purchase Agreement”) with Licensing LLC and
USDL. (Id. ¶ 14, see also Id. at
14-22.) U.S. Dealer purchased all aspects of Licensing LLC
and USDL except for certain real estate holdings in Indiana,
which were subject to a lease agreement between the parties.
(Id.) The purchase price was $1, 250, 000.00, which
was separated into two payments: $1, 150, 000 in cash at
closing, and a promissory note secured by Shah for the
additional $100, 000 made payable to Dandino. (Id.
¶¶ 15-16; see also Id. at 37-39.)
the sale negotiations, Dandino told Shah and Bergmann that
the Missouri business had customers and was operational, but
that they would have to get the Michigan business up and
running. (Id. ¶ 10.) In the Purchase Agreement,
Defendants represented that at the time of execution,
“there [were] no actions, suits, or proceedings
pending, or, to the Seller's knowledge, threatened or
anticipated before any court or governmental or
administrative body or agency affecting these assets.”
(Id. ¶ 19; see also Id. at 27, §
G(4)). Unbeknownst to Plaintiffs, however, there were
“regulatory and licensing decisions against clients of
Defendants in Missouri” at the time the Purchase
Agreement was executed. (Id. ¶ 22.) In fall
2017, the Missouri Department of Revenue determined that
Licensing LLC's client applicants were denied franchise
auto dealership licenses because the rented space and
services offered by Licensing LLC did not satisfy Missouri
licensing requirements. (Id.) Licensing LLC's
clients were actively litigating and seeking declaratory
relief in Missouri to challenge the Department of
Revenue's licensing denials. (Id. ¶ 23.)
Dandino was aware of the ongoing litigation at the time the
Purchase Agreement was executed, but he never told Plaintiffs
about any pending or threatened litigation or regulatory
actions affecting Licensing LLC's or USDL's ability
to operate in Missouri or Michigan. (Id.
¶¶ 20, 25-28.) Dandino was aware that one of his
employees had been deposed in connection with the litigation
and he was aware that Licensing LLC's clients had
requested that Licensing LLC pay their attorneys' fees.
(Id.) Dandino retained legal counsel in Missouri to
represent Licensing LLC and its customers in the declaratory
relief litigation, and he was receiving copies of legal
filings as early as October 2017. (Id. ¶ 30.)
declaratory judgment litigation was ultimately unsuccessful,
and at least seven of Licensing LLC's clients were denied
dealership franchise licenses. (Id. ¶ 32.) The
result of the litigation “effectively ended”
Licensing LLC's ability to operate in Missouri.
(Id. ¶ 33.) The ability of Licensing LLC and
USDL to operate in Missouri and Michigan was a material and
principal consideration Plaintiffs relied on in executing the
Purchase Agreement. (Id. ¶ 21.) If Shah and
Bergmann had been aware of the Missouri litigation and its
impact on Licensing LLC's ability to operate, they would
not have executed the Purchase Agreement on the terms
specified. (Id. ¶ 36.) Plaintiffs suffered
significant financial loss as a result of Dandino's
failure to disclose the Missouri litigation before the sale.
(Id. ¶ 37.)
personally negotiated and made all material representations
to Plaintiffs regarding the assets at issue and the terms of
the Purchase Agreement and accompanying promissory note.
(Id. ¶ 39.) After the sale, Dandino withdrew
all the money paid from the Purchase Agreement, transferred
it to personal accounts, and “effectively shut down
Licensing [LLC].” (Id. ¶ 41.) While
running Licensing LLC, Dandino co-mingled personal and
business funds and failed to operate the business as a
separate legal entity from his personal transactions.
(Id. ¶ 42.)
now bring claims against Licensing LLC for breaching the
Purchase Agreement (Count I), and, alternatively, promissory
estoppel (Count III) and unjust enrichment (Count V).
Plaintiffs also bring claims against Dandino for breaching
the promissory note (Count II), fraud (Count
VII), and, alternatively, promissory estoppel
(Count IV) and unjust enrichment (Count VI).
motion to dismiss under Rule 12(b)(6), the Court construes
the complaint in the light most favorable to the plaintiff,
accepts the factual allegations as true, and draws all
reasonable inferences in the plaintiff's favor.
Reynolds v. CB Sports Bar, Inc., 623 F.3d 1143, 1146
(7th Cir. 2010). A complaint need contain only a “short
and plain statement of the claim showing that the pleader is
entitled to relief.” Fed.R.Civ.P. 8(a)(2). That
statement must contain sufficient factual matter, accepted as
true, to state a claim for relief that is plausible on its
face, Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009),
and raise a right to relief above the speculative level.
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
(2007). However, a plaintiff's claim need only be
plausible, not probable. Indep. Trust Corp. v. Stewart
Info. Servs. Corp., 665 F.3d 930, 935 (7th Cir. 2012).
Evaluating whether a plaintiff's claim is sufficiently
plausible to survive a motion to dismiss is “a
context-specific task that requires the reviewing court to
draw on its judicial experience and common sense.”
McCauley v. City of Chicago, 671 F.3d 611, 616 (7th
Cir. 2011) (citing Iqbal, 556 U.S. at 678).
9(b) requires a party alleging fraud to “state with
particularity the circumstances constituting fraud.”
Fed.R.Civ.P. 9(b). This “ordinarily requires describing
the ‘who, what, when, where, and how' of the fraud,
although the exact level of particularity that is required
will necessarily differ based on the facts of the
case.” AnchorBank, FSB v. Hofer, 649 F.3d 610,
615 (7th Cir. 2011) (citation omitted); see also Camasta
v. Jos. A. Bank Clothiers, Inc., 761 F.3d 732, 737 (7th
Cir. 2014). Rule 9(b) applies to “all averments of
fraud, not claims of fraud.” Borsellino v. Goldman
Sachs Grp., Inc., 477 F.3d 502, 507 (7th Cir. 2007).