represents that it reached an agreement, on January 4, 2012, to
sell the company to American Electric Power (“AEP”), and that the
transaction has not yet closed. Mot. at Ex. A, Casadont
Declaration. Therefore, BlueStar argues, Mr. Keen’s breach of
contract claim based on its alleged failure to pay him the $1 or
$1.5 million lump sum payment never ripened and is now moot.

In his Complaint, which was filed on November 1, 2011, Mr.
Keen acknowledged that a sale of the Company had not yet taken
place, and instead alleged that “a sale of BlueStar is pending
and imminent” and that, upon the closing of such a sale, he would
be entitled to the lump sum payment. Complaint, 99133, 40. In
his response to the motion to dismiss, Mr. Keen argues that the
declaration attached to BlueStar’s motion “contains self-serving
conclusions” and does not include important information such as
“when the deal was reached, when the agreement was completed,
whether there was any delay in finalizing the deal or scheduling
the closing occurred, and the reasons for any such delays.”
Response at pp. 2-3. Mr. Keen asserts that he should be entitled
to discovery on these issues in order to determine if any of the
facts discovered support a breach of the implied covenant of good
faith and fair dealings attached to the contract.

“A covenant of good faith and fair dealing is implied in
every contract absent a provision that specifically states

otherwise.” Kipnis v. Mandel Metals, Inc., 318 I11.App.3d 498,



in Mr. Keen’s Complaint, count 3 (which seeks recovery against
BlueStar for defamation per se) should be dismissed pursuant to
FRCP 12(b) (6) because Mr. Keen’s averment of defamation per se is
legally insufficient as a matter of substantive Illinois law.
Specifically, BlueStar contends that Illinois Supreme Court
precedent instructs that defamation per se, like common law
fraud, “must be pled with a heightened level of precision and
particularity.” Green v. Rogers, 234 Ill. 2d 478, 495 (2009).

\

Thus, where, as here, a claim for defamation per se is pled “on
information and belief,” Illinois law mandates that “the factual
basis informing the plaintiff’s belief must also be pled.” Id.
at 495-96.

BlueStar argues that count 3 must be dismissed because Mr.
Keen fails to allege with the requisite particularity any factual
basis for his “belief” that the alleged defamatory comments were
ever made. In Paragraph 42 of the complaint, Mr. Keen alleges
“on information and belief” that he “is aware” of an August 2011
meeting during which BlueStar’s Chief Information Officer “and
potentially others” allegedly accused him of “criminal and
tortious conduct” in the presence of other BlueStar employees.
See Complaint, 942. The next two paragraphs of the complaint
characterize the alleged defamatory comments set forth in

paragraph 42. BlueStar argues that these paragraphs are devoid

of any facts to describe or explain the factual basis for Mr.

10


that the information regarding the sale to AEP did not exist in
November 2011 when the complaint was filed, and that the alleged
sale is still underway, the Court grants Mr. Keen’s request for
leave to amend count 1 of his complaint.
B. Subject Matter Jurisdiction

Next, BlueStar argues that subject matter jurisdiction is
lacking here because the parties are not diverse and because Mr.
Keen’s allegations cannot satisfy the $75,000 amount-in-
controversy threshold. In his Complaint, Mr. Keen alleges that
the Court has subject matter jurisdiction on the basis of
diversity of citizenship pursuant to 28 U.S.C. § 1332(a).
Complaint, 95. For diversity jurisdiction to exist, Mr. Keen must
establish (1) that he and BlueStar are citizens of different
States; and (2) that the amount in controversy exceeds $75,000.

1. Diversity of Citizenship

Mr. Keen alleges in his complaint that BlueStar is an
Illinois corporation with its principal place of business in
Chicago, Illinois and that he “is a resident of Cincinnati,
Hamilton County, Ohio.” Complaint, (71-3. Diversity
jurisdiction, however, exists when the parties are “citizens” of
different states. 28 U.S.C. § 1332(a) (1). It is insufficient to
allege a party’s “residency.” See Adams v. Catrambone, 359 F. 3d
858, 861 n.3 (7th Cir. 2004).

In response to this argument, Mr. Keen asserts that other



505 (lst Dist.2000). In determining what constitutes a good
faith performance, “a party vested with contractual discretion
must exercise that discretion reasonably and with proper motive,
and may not do so arbitrarily, capriciously, or in a manner
inconsistent with the reasonable expectations of the parties.”
Dayan v. McDonald's Corp., 125 I1l.App.3d 972, 990-91 (1st
Dist.1984). BlueStar has produced evidence, in the form of a
Declaration from its Chief Legal Officer, establishing that no
sale of the Company occurred in 2011. And, up to this point, Mr.
Keen has provided no evidence suggesting that BlueStar in any way
caused a delay in the sale; nor has he produced evidence
suggesting that such conduct, if it occurred, might constitute a
violation of the implied duty of good faith and fair dealing.
Indeed, Mr. Keen has alleged no facts to suggest that a delay -
even if deliberate - would give rise to a claim, given the
specific language in the contract; to be sure, he has not alleged
a claim for breach of the covenant of good faith and fair
dealing, and it is not clear that he can do so, consistent with
Rule 11.

Based upon the allegations and the record before it, the
Court agrees with BlueStar that count 1, as currently pled, was
not ripe when pled and has since become moot. Mr. Keen seeks
leave to amend his complaint under Federal Rule of Civil

Procedure 15(a) (2) to cure any pleading deficiencies. And, given



c. Mr. Keen’s Defamation Per Se Claim

Finally, BlueStar moves to dismiss Mr. Keen’s defamation
claim under Federal Rule of Civil Procedure 12(b) (6). The
Court’s determination regarding subject matter jurisdiction makes
consideration of this issue moot. But, because Mr. Keen will
have an opportunity to amend his complaint, the Court is inclined
to consider briefly the adequacy of the defamation per se claim.

A motion to dismiss under Rule 12(b) (6) challenges the
sufficiency of the complaint for failure to state a claim upon
which relief may be granted; it should be granted only if it
appears beyond all doubt that the plaintiff can prove no set of
facts in support of its claim that would entitle it to relief.
E.g., Conley v. Gibson, 355 U.S. 41, 45-46 (1957). In ruling on
a motion to dismiss under 12(b) (6), the Court accepts as true all
well pleaded facts alleged in the complaint and it draws all
reasonable inferences from those facts in favor of the non-moving
party, in this case, Mr. Keen. See, e.g., Jackson v. E.J, Brach
Corp., 176 F.3d 971, 977-78 (7th Cir. 1999). The Court does not
ask whether Mr. Keen will ultimately prevail; rather, it asks
whether he is entitled to offer evidence to support his claims
against BlueStar. E.g., Smith v. Cash Store Mgmt., Inc., 195
F.3d 325, 327 (7th Cir. 1999).

Here, BlueStar argues that, even if this Court determines

that it has subject matter jurisdiction over the remaining claims



IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

THOMAS KEEN, an individual,
Plaintiff,

v. Case No. 11 C 7754
BLUESTAR ENERGY SERVICES,
INC., d/b/a BLUESTAR ENERGY
SOLUTIONS, an Illinois
Corporation, BLUESTAR ENERGY
HOLDINGS, INC.,

Magistrate Judge Arlander Keys

Defendants.

MEMORANDUM OPINION AND ORDER

Plaintiff Thomas Keen was employed by Defendant BlueStar
Energy Services from May 2006, through June 30, 2011. BlueStar
hired him on May 15, 2006 as its Chief Technology Officer; Mr.
Keen later became the Chief Information Officer. On June 30,
2011, Mr. Keen left BlueStar voluntarily, after negotiating and
executing a Confidential Separation Agreement and Release
(“Separation Agreement.”) Mr. Keen started a new job in
Cincinnati, Ohio on July 1, 2011.

Among other things, the Separation Agreement provided Mr.
Keen with the opportunity to receive additional compensation if
the Company was sold under certain circumstances; it also
included a non-disparagement clause. According to Mr. Keen,

BlueStar failed to perform its obligations under the Separation



of proving actual damages; this must be balanced against the
desire to protect defendants from baseless claims. Green, 917
N.E.2d at 461.

Accordingly, the Court finds that, if Mr. Keen intends to
file an amended complaint that includes a defamation per se claim
based upon information and belief, he must at least plead the
facts upon which the belief is founded. Mr. Keen should be
mindful of the fact that, although damages are presumed in an
action for defamation per se, “the amount of damages is still an
evidentiary issue.” Macklem v. Pearl, No. 10 C 830, 2011 WL
2200037, at *4 (N.D. Ill. May 31, 2011) (citing Knight v. Chicago
Tribune Co., 895 N.E.2d 1007 (Ill. App. Ct. 2008)). “The Court
cannot presume substantial damages.” Id. (citing Republic Tobacco
Co. v. N. Atl. Trading Co., Inc., 381 F.3d 717, 734 (7th Cir.
2004)). Thus, saying that damages are presumed for a properly
pled defamation per se claim, says nothing about whether damages
exist in an amount that would satisfy the amount-in-controversy
threshold. Mr. Keen will need to show that the presumed damages,
when combined with the salary payments he alleges he is owed,
total $75,000 or more.

Conclusion

For the reasons set forth above, BlueStar’s motion to

dismiss [#18] is granted, and the complaint is dismissed for lack

of subject matter jurisdiction. The dismissal is without

12



Keen’s “belief” that these statements were made, and therefore,
are insufficient.

In response, Mr. Keen contends that he is not required to
plead count 3 “with a heightened level of precision and
particularity.” He argues that the heightened pleading
requirement does not apply in federal court, and that, instead,
the pleading requirements in federal diversity cases are governed
by federal law, specifically Federal Rule of Civil Procedure 8.
To support his position he cites Muzikowski v. Paramount Pictures
Corp., 322 F.3d 918, 926 (7th Cir. 2003), as well as Cody v.
Harris, 2004 WL 783105 (N.D. Ill. Jan. 22, 2004) and Bell
Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007) (“heightened
fact pleading of specifics” is not required to survive a motion
to dismiss).

As Judge Evans noted in Lott v. Levitt, however, the federal
court’s “reliance on federal procedural rules does not allow us
to ignore Illinois substantive law... .” Lott v. Levitt, 556
F.3d 564, 569 (7th Cir. 2009). And, although the issue here
(whether a plaintiff may rely on “information and belief” in
pleading defamation per se) is closer to the procedural end of
the spectrum than the issue raised in Lott (whether the innocent
construction rule applied), it nonetheless implicates state
substantive policy - namely, the policy of relieving plaintiffs

who properly plead defamation per se claims from the obligation

1]



allegations of his complaint, including the address of his
residence and the location of his job, taken together create
proof of his citizenship in Ohio. But “[w]hen the parties allege
residence but not citizenship, the [district] court must dismiss
the suit.” Id. (citation and quotation omitted). If Mr. Keen can
cure these defects with an amended complaint, he is given leave
to do so.

2. Amount in Controversy

Next, BlueStar argues that, even if Mr. Keen can amend his
jurisdictional allegation, he cannot reach the requirement for
the amount in controversy. BlueStar argues that, at most, Mr.
Keen can allege damages of $39,000 in lost salary payments. It
argues that he cannot claim the $1 million bonus as discussed
above and cannot claim a potential recovery in excess of $35,000
for damage to “reputation and goodwill” as a result of the non-
disparagement and defamation claims. Mr. Keen disputes both
these arguments. To some extent, his ability to allege an amount
in controversy of $75,000 or more will depend upon whether he
can, in good faith, allege that he is entitled to the additional
compensation outlined in the Separation Agreement. As explained
below, it will also depend on whether he can make a showing
concerning damages in an amended defamation claim. For now, the
Court agrees that the amount in controversy appears to fall well

short of the statutory threshold.



beyond the allegations of the complaint to determine that it had
jurisdiction to hear the... claim.”)

In his first breach of contract claim, Mr. Keen alleges that
BlueStar failed to pay him what it agreed to pay him under the
Separation Agreement. In the complaint, Mr. Keen alleges
entitlement “to receive additional compensation in the amount of
$1 million dollars, or in the alternative, $1.5 million dollars”
in the event of “the sale of BlueStar prior to December 31,
2011.” Complaint, 916. Specifically, the contract language
governing Mr. Keen’s alleged entitlement to this payment is found
in Sections 4.1 and 4.2 of the Separation Agreement. See
Complaint, Exhibit B. Section 4.1 of the Separation Agreement
expressly provides that Mr. Keen is entitled to this lump sum
payment “[i]n the event of a sale prior to December 31, 2011 of
the Company.” Id. Section 4.2 of the Separation Agreement
further clarifies that “[f]lor the purposes of this Release
Agreement, a sale, transfer or conveyance is deemed to have taken
place only at the time such sale, transfer or conveyance closes,
i.e., the date on which BlueStar actually sells, transfers or
conveys its stock or assets.” Id. (emphasis in the original).

BlueStar argues that count 1 is moot and should be dismissed
because the company was not sold in 2011, a necessary
prerequisite to Mr. Keen’s entitlement to the additional

compensation he claims in his complaint. Rather, BlueStar



in its entirety pursuant to Federal Rule of Civil Procedure
12(b) (1) for lack of subject matter jurisdiction. More
specifically, BlueStar argues that the complaint fails to allege
diversity of citizenship and that his allegations cannot satisfy
the requisite $75,000 amount in controversy threshold. Finally,
BlueStar argues that count 3 - the defamation claim - should be
dismissed pursuant to Federal Rule of Civil Procedure 12(b) (6)
because his averments of defamation per se are legally
insufficient as a matter of law. The Court considers each
argument in turn.
A. Count 1 and the Additional Compensation

First, BlueStar argues that Mr. Keen’s breach of contract
claim regarding failure to pay was never ripe and is now moot.
BlueStar contends that this count should be dismissed under
Federal Rule of Civil Procedure 12(b) (1) because the Court lacks
subject matter jurisdiction. In evaluating a motion to dismiss
pursuant to Rule 12(b) (1), the Court accepts as true all
well-pleaded factual allegations and draws all reasonable
inferences in favor of plaintiff. See Long v. Shorebank Dev.
Corp., 182 F.3d 548, 554 (7th Cir. 1999). However, in addition
to the pleadings and legal arguments, the Court considers
evidence extrinsic to the pleadings. See Hay v. Indiana State
Bd. of Tax Comm’rs, 312 F.3d 876, 879 (7th Cir. 2002) (“[T]he

district court has not only the right, but the duty to look



Agreement, and, on November 1, 2011, he sued. In his complaint,
Mr. Keen alleges that BlueStar breached the Separation Agreement
by failing to pay him what he was owed thereunder, and by failing
to honor the agreement’s non-disparagement clause. More
specifically with regard to the non-disparagement clause, he
alleges that BlueStar executives - including Alberto Ruocco, his
replacement as Chief Information Officer - said terrible things
about him at a staff meeting on August 26, 2011, including
falsely accusing him of criminal and tortious conduct. Mr. Keen
alleges that Mr. Ruocco and BlueStar continued to press these
accusations after the staff meeting and have continued
maliciously to impugn his reputation. In addition to the breach
of contract counts, Mr. Keen also alleges a defamation count,
based upon the same conduct.

The parties consented to proceed before a United States
Magistrate Judge and the case was reassigned to this Court on
January 24, 2012 [#23]. The case is currently before the Court
on BlueStar’s motion to dismiss [#18].

Discussion

BlueStar seeks dismissal of this action on three grounds.
First, it seeks to dismiss count 1 - the breach of contract claim
predicated on BlueStar’s alleged failure to pay what it owed
under the Separation Agreement ~ arguing that it was never ripe

and is now moot. Second, BlueStar moves to dismiss the complaint



prejudice, however, and Mr. Keen is given until April 30, 2012 to
file an amended complaint, to the extent he is able to allege
facts to cure the defects discussed above. The case is set for a

status hearing on May 14, 2012 at 9:00 a.m.

Date: March 30, 2012

ENTERED:

Qrlewie bows

¢
MAGISTRATE JUDGE ARLANDER KEYS
UNITED STATES DISTRICT COURT

13