ia

development efforts to work on products that Omron did not yet have. Omron has failed to
comply with its obligations under the distributor agreement and the amended distributor
agreement,

Saito, Wilson, and Vivcrito were responsible for cultivating the distributorship
relationship with Research and, at all times, established, supervised, directed and controlled the
activities of Omron and its employees. Omron, Saito, Wilson, and Viverito made
misrepresentations concerning its sales force and marketing and promotional plans regarding
Research's products with knowledge that the misrepresentations were false. The Defendants
made the misrepresentations with the specific intent that Research would rely upon the
misrepresentations and omissions in making decisions.

In reviewing a motion to dismiss, the court reviews all facts alleged in the complaint and
any reasonable inferences drawn therefrom in the light most favorable to the plaintiff. See
Marshall-Mosby v. Corporate Receivables, Inc., 205 F.3d 323, 326 (7th Cir. 2000) (Marshall-
Mosby). A plaintiff is not required to plead the facts or the elements of a claim, with the
exceptions found in Federal Rule of Civil Procedure 9, See Swierkiewicz v. Sorema, 534 U.S.
506, 511 (2002) (Swierkiewicz); Walker v. Thompson, 288 F.3d 1005, 1007 (7" Cir. 2002). A
filing under Federal Rule of Civil Procedure need not contain all the facts that will be necessary
to prevail. It should be “short and plain”, and it suffices if it notifies the defendant of the
principal events. See Hoskins v. Poelstra, 320 F.3d 761, 764 (7" Cir. 2003). Dismissal is
warranted only if “it appears beyond a doubt that the plaintiff can prove no set of facts in support

of his claim which would entitle him to relief.” Conley v. Gibson, 355 U.S. 41, 45-46 (1957).

The simplified notice pleading relies upon liberal discovery and summary judgment motions to



La

addition, Omron did not put into effect the promotional efforts that Omron described to Research
before the distributor agreement was cxecuted; and Rescarch learned that Omron was not willing
to commit the resources it had promised to the marketing of Research’s products. Research later
Icarned that, in many cases, Omron was selling Research’s stethoscopes and related products at
prices that were significantly higher than the prices suggested by Research. Research also
learned that Omron’s customer service was inadequate, causing purchascrs to be dissatisfied with
Omron.

In October 2001, Deslauriers initiated a business review meeting with Saito, Wilson, and
Viverito. At this meeting, Saito reassured Deslauriers of Omron’s commitment to establish itself
as a premium medical device distributor, and reiterated that Omron envisioned Research’s
products playing a key role in that effort. Saito also committed to honoring Omron’s purchase
requirements under the distributor agreement.

In November 2001, it became clear to Research that Omron was not honoring its
purchasing requirements; and Rescarch sent Omron a notice of default. Omron informed
Research that it was not going to meet its contractual purchase requirements for 2001 and 2002
and demanded changes to the distributor relationship with Research. Having committed
significant resources, Research had no choice but to enter into an amended distributor agreement
with Omron. Furthermore, both before and after entering into the distributor agreement, Omron
had informed Research that it had a need for Research’s innovative products; and Omron
encouraged and monitored Research's efforts to develop new products. Because Research relied

upon Omron’s representations that Omron was a multi-billion dollar enterprise whose product

mix would be enhanced by Research’s products, Research changed the focus of its research and



»

define disputed issues and facts and to dispose of unmeritorious claims. See Swierkiewicz, 534
USS. at 513.

However, “in all averments of fraud or mistake, the circumstances constituting fraud or
mistake shall be stated with particularity.” Fed. R. Civ. P. 9(b). In order to survive dismissal, the
plaintiff must plead the who, what, when, and where of the alleged fraud. See Lachmund v. ADM
Investor Serv., Inc., 191 F.3d 777, 782 (7th Cir. 1999) (quotations omitted). “The allegations
must be specific enough to provide the defendants with a general outline of how the alleged fraud
scheme operated and of their purported role in the scheme.” Rohlfing v. Manor Care, Inc., \72
F.R.D. 330, 347 (N.D, 11.1997) (citations omitted). To determine whether counts are sufficiently
pled, a court will bear in mind the purposes of Rule 9(b): “(1) protecting the defendants’
reputations; (2) preventing fishing expeditions; and (3) providing adequate notice to the
defendants.” Rohlfing, 172 F.R.D. at 347 (citing Vicom, Inc. v. Harbridge Merchant Servs., Inc.,
20 F.3d 771, 777 (7th Cir.1994)),

Omron seeks dismissal of Count II, Research’s fraud claim against all of the Counter-
Defendants, contending that Research failed to adequately plead the requirements under Rule 9.

In the instant case, Research’s allegations of fraud are limited to three named defendants.
Research identifies specific meetings with these Defendants and the representations that were
made at the specific mectings. While some of the alleged misrepresentations do not specify
which of the three named Defendants made the misrepresentations, Research does specify certain
statements by certain Defendants, i.e, Wilson represented that Omron’s salespeople were

seasoned Omron salespeople; Saito reassured Deslauriers that Omron envisioned Research’s

products playing a key role in Omron’s commitment to establish itself as a premium medical



+ Mite Orar Form £06797)

United States District Court, Northern District of [linois

Nume of Assigned Jud; . Sitting Judge if Other
ie Magistrate ge John W. Darrah than Assigned Judge
CASE NUMBER 02 C8669 DATE 5/29/2003
CASE OMRON HEALTHCARE, INC. vs, DOCTOR’S RESEARCH GROUP
TITLE

Ltn the following box (a) indicate the party filing the motion, ¢.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature
of the motion being presented.)

MOTION:

DOCKET ENTRY:

(1) a Filed motion of [ use listing in “Motion” box above.]

(2) QO Brict in support of motion duc

Q) Oo Answer brief to motion due___. Reply to answer briefdue__.

(4) o Ruling/Hearingon_ set fora

(3) Oo Status hearing{held/continucd to] [sct for/re-sct for] on _— set for at

(6) Oo Pretrial conference[held/continued to] [set for/re-setfor])on__—ssetfor_ al
(7) Qa Trial{set for/re-set for]on_—_at

(8) Oo [Bench/Jury trial] [Hearing] held/continued to at

(9) oO This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]

OFRCP4(m) C) Local Rule 41.1 OFRCP41(a)(1) OO FRCP41(a)(2).

(10) Ml [Otherdocketentry) Status hearing held and continued to 6/18/03 at 9:00 a.m. Enter Memorandum
Opinion And Order. Omron's motion to dismiss is denied. Omron’s answer to be filed on or before
6/12/03.

(il) of [For further detail see order attached to the original minute order.]

No notices required, advised in open court,

No notices required, nuriber of notlces

Notices mailed by judge’s staff.

Notified counsel by telephone,

| Docketing to mail notices.

Mail AO 450 form docketing depuy intial

Ae

Copy to judge/magistrate judge.

date mailed notice
courtroom

Lo deputy's
initials

Date/time received in
gentryl Clerk's Office aling deputy ints



device distributor. Ln light of the specific meetings, specific dates, and statements alleged in the
Counterclaim, and the limited number of Defendants alleged to have made such statements,
Research has sufficiently alleged the who, what, when, and where of the alleged fraud.

Omron also contends that Research has failed to state a claim for fraud. Omron argues
that the alleged misstatements do not constitute fraud and Omron attempts to demonstrate that
the allegations in the Counterclaim would not constitute fraud. [However, at this stage of the
litigation, the alleged misstatements, and the reasonable inferences from such misstatements,
support a claim for fraud.

Omron also argues that the alleged misstatements were immaterial and are not tied to any
damages or causation. However, Research need not plead or prove the elements of a fraud claim;
and the Court cannot address the merits of the allegations at this stage of the litigation. See
Swierkiewicz, 534 U.S. at 511,513. Based on the allegations in the Counterclaim, Research has
sufficiently pled a cause of action for fraud to place the Defendants on notice of the claims
against them,

For the reasons stated above, Omron’s Motion to Dismiss is denied.

puss Gitay 87, 2003 Q/ [hassel

JOHN W. DARRAH
United States District Judge



UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
OMRON HEALTHCARE, INC.,

Plaintiff,

v.

DOCTOR’S RESEARCH GROUP, INC, and
RICHARD J, DESLAURIERS,

No. 02 C 8669
Defendants.

Judge John W. Darrah
DOCTOR’S RESEARCH GROUP, INC,
Defendant/Counterclaim-Plaintiff,
¥.
OMRON RESEARCH GROUP, INC.;

KAZUO SAITO; JOHN WILSON; and
VINCE VIVERITO,

we SS Se Se Se eS SSS eee rere

Counterclaim-Defendants.
MEMORANDUM OPINION AND ORDER

Plaintiff, Omron Healthcare, Inc. (“Omron”), filed suit against Defendants, Doctor’s
Research Group, Inc. (“Research”) and Richard J. Deslauriers (“Deslauriers”), alleging breach of
contract, breach of warranty, fraudulent misrepresentation, and violation of the Illinois Franchise
Disclosure Act. Subsequently, Research filed a Counterclaim against Omron, Kazuo Saito
(“Saito”), John Wilson (“Wilson”), and Vinee Viverito (“Viverito”), alleging breach of contract
against Omron and fraud against all Defendants. Presently pending before the Court is Omron’s

Motion to Dismiss Count II of the Counterclaims.

A reading of Research’s Counterclaim supports the following summary of the alleged

ho



operative conduct of the parties as to Rescarch’s counterclaims.

In early fall 2000, an Omron representative invited Deslauriers, President of Research, to
visit Omron to discuss a potential distributorship relationship whereby Omron would sell certain
Reserach products. On October 10, 2000, Deslauriers attended a meeting with several Omron
executives, including Saito, Wilson, Viverito. Omron represented that it was a multi-billion dollar
enterprise which was in the process of expanding its business from selling lower quality, high
volume, medical devices, to serving a higher quality market. Omron represcntatives also stated that
Omron was prepared to invest millions of dollars in marketing and promotion in the sale of Research
products. After the meeting, Omron provided Research with a list of approximately thirty
dedicated Omron sales representatives throughout the United States, who Omron, through
Wilson, represented to be seasoned Omron salespeople. Instead, those salespeople were
independent contractors who sold medical devices and products for a variety of companies, one
of which was Omron.

During the fall or winter of 2000, Research showed Omron several new products that
Research was developing. Viverito and other Omron employees expressed enthusiasm about
incorporating into Omron’s product line devices that Research was developing. In connection
with the distributor agreement, Omron requested a right of first refusal to add to its product line
all new diagnostic products that Research developed.

Within a few months after cntering into the distributor agreement, when Omron’s sales
failed to meet the levels forccasted in Omron’s sales plan, Research learned that Omron did not
have the promised direct sales force and that Omron relied upon independent contractors who

sold medical devices and products for various other companies in addition to Omron. In