Il. Fraud (Count 1)

Defendants argue that Plaintiff has failed to state a claim for fraud under Illinois law
because Plaintiff has alleged misrepresentations based on future conduct which do not constitute
fraud in Illinois. It is true that where an alleged misrepresentation relates to a future event, it is
generally not actionable in Illinois. LaScola v. U.S. Sprint Communications, 946 F.2d 559, 568
(7" Cir. 1991). An exception to this rule exists for promissory fraud. “Promissory fraud is a
false representation of intent concerning future conduct, such as a promise to perform a contract
when there is no actual intent to do so.” Houben v. Telular Corp., 231 F.3d 1066, 1074 (7" Cir.
2000). The promise must be part of a scheme to defraud. Jd. Promissory fraud is a “disfavored
cause of action in Illinois because fraud is easy to allege and difficult to prove or disprove.”
Bower v. Jones, 978 F.2d 1004, 1012 (7" Cir. 1992), Thus, “the burden on a plaintiff claiming
promissory fraud is deliberately high,” and the plaintiff must “be able to point to specific,
objective manifestations of fraudulent intent.” Jd.

Plaintiff has not met his high burden. He does not allege that a scheme to defraud
existed. He does not allege that Werner’s statements were made as part of or in furtherance of a
scheme to defraud. Allegations of a scheme are essential, because “otherwise, anyone with a
breach of contract claim could open the door to tort damages by alleging that the promises
broken were never intended to be performed.” Bower, 978 F.2d at 1012.

Furthermore, Plaintiff must allege fraud with particularity. Fed. R. Civ. P. 9(b); DiLeo v.
Ernst & Young, 901 F.2d 624, 627 (7" Cir. 1990). Other than Defendant Kevin Werner, Plaintiff
fails to plead with particularity who did what to whom and when. Instead, he lumps the

Defendants together. Such allegations do not meet the particularity mandates of Rule 9(b). See


<

CONCLUSION
Defendant’s motion to dismiss is granted, and the case is dismissed for lack of subject
matter jurisdiction.

Dated: December 5, 2003 ENTERED:

CL [M$

AMY J. ST. EVE
United States District Court Judge



under Illinois law. See APS Sports Collectibles, Inc. v. Sports Time, Inc., 299 F.3d 624, 628 (7
Cir. 2002). Accordingly, Count IV is dismissed.
VI. Constructive Fraud (Count V)

Defendant argues that Plaintiff has failed to state a claim for constructive fraud because
he has not alleged a fiduciary relationship between the parties. Because the Court has found that
Plaintiff's fiduciary allegations are sufficient at this stage, Defendants’ motion is denied as to the
constructive fraud claim.

VI. Subject Matter Jurisdiction

Because Plaintiff relies on diversity jurisdiction pursuant to 28 U.S.C. § 1332, the amount
in controversy must exceed $75,000 and there must be complete diversity of citizenship.
Plaintiff “bears the burden of proving that the case is properly in federal court, as it is he who is
trying to invoke federal jurisdiction.” Del Vecchio v. Conseco, Inc., 230 F.3d 974, 979 (7" Cir.
2000). Further, Plaintiff must make his claim of damages exceeding $75,000 in good faith.
Neuma, Inc. v. AMP, Inc., 259 F.3d 864, 881 (7" Cir. 2001). Plaintiff claims to have suffered
$35,353.41 in compensatory damages, $120,000 in consequential damages and $2,000,000 in
punitive damages. (R. 15-1, SAC at 13.) If Plaintiff's claims for consequential and punitive
damages fail, this Court lacks jurisdiction to entertain the case because the amount in controversy
will be only $35,353.41.

A. Consequential Damages:

Plaintiff alleges $120,000 in consequential damages based on his contention that he was
unable to purchase a house in September 2002 because he had not received his profit from

Defendants. Plaintiff alleges that he would have received a $120,000 profit on the house if he



Shapo v. Engle, No. 98 C 7909, 1999 WL 1045086, at *13 (N.D. Ill. Nov. 12, 1999).
I. Breach of Contract (Count II)

Defendants argue that the Court should dismiss Plaintiffs breach of contract claim
because Plaintiff has failed to allege specific facts as to each Defendant. A breach of contract
claim, however, is governed by the liberal notice pleading requirements of Rule 8. See Williams
v. Seniff, 342 F.3d 774, 792 (7" Cir. 2003). Plaintiff's allegations meet this standard.

IV. Fiduciary Duty (Count II)

Defendants argue that the Court should dismiss this claim because Plaintiff has failed to
plead the existence of a fiduciary duty. A contractual relationship alone does not normally create
a fiduciary duty. Oil Express Nat'l, Inc. v. Latos, 966 F. Supp. 650, 650-51 (N.D. Ill. 1997).
However, “a fiduciary relationship may be established by a showing that confidence was reposed
on one side and domination and influence resulted on the other.” Glovaroma, Inc. v. Maljack
Prods., Inc., No. 96 C 3985, 1998 WL 102742, at *4 (N.D. Ill. Feb. 26, 1998) (citations and
quotations omitted).

Here, Plaintiff alleges that a fiduciary duty existed between the parties. He further alleges
that Defendants “had complete dominance and superiority” in the business relationship. (R. 15-
1, SAC {ff 6, 27.) Drawing all inferences in the light most favorable to Plaintiff, as the Court
must, the Court finds that Plaintiff has sufficiently alleged the existence of a fiduciary duty.
Whether or not Plaintiff can prove these allegations is an issue for another day.

Vv. Breach of A Covenant of Good Faith and Fair Dealing (Count IV)
In Count IV, Plaintiff purports to allege a cause of action for breach of a covenant of good

faith and fair dealing. As the Court previously noted, this is not an independent cause of action



damages can be awarded only for conduct that is outrageous either because defendant’s acts are
done with evil motive or a reckless indifference to others’ rights.” LID Assocs. v. Dolan, 324 Ill.
App. 3d 1047, 1072, 756 N.E.2d 866, 887, 258 Ill. Dec. 592, 613 (Ill. App. Ct. 2001)(citing Loitz
y. Remington Arms Co., 138 Ill. 2d 404, 415-16, 150 Ill. Dec. 510, 563 N.E.2d 397 (1990)). “In
cases where the defendants contest punitive damage allegations, we require the plaintiff to
support its claim with ‘competent proof,’ lest fanciful claims for punitive damages end up
defeating the statute’s requirement of a particular amount in controversy.” Del Vecchio, 230
F.3d at 979.

Although Plaintiff has successfully alleged a breach of fiduciary duty, he has not alleged
that the Defendants acted with wilfulness, wantonness, malice or oppression. Accordingly,
punitive damages are not available for Plaintiff's breach of fiduciary duty claim.

Plaintiff has failed to successfully make a claim that more than $75,000 is the amount in
controversy. His claim is only for $35,353.41. Accordingly, this Court does not have diversity
jurisdiction over the case. Given that Plaintiff has not asserted any other basis for federal
jurisdiction, Plaintiff's Second Amended Complaint is dismissed for lack of subject matter

jurisdiction.



— SL “

‘Mrute Order Form (06/97)

[S@ United States District Court, Northern District of Illinois
No

Name of Assigned Judge Sitting Judge if Other
or Magistrate Judge Amy J. St. Eve than Assigned Judge

CASE NUMBER 03 C 3335 DATE 12/5/2003
CASE Pope vs. Smith Rothchild
TITLE

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

MOTION:

DOCKET ENTRY:

(1) 0 Filed motion of [ use listing in “Motion” box above.]

(2) im) Brief in support of motion due

(3) Qa Answer brief to motion due___._ Reply to answer brief due.

(4) o Ruling/Hearingon eset for____at

(5) o Status hearing[held/continued to] [set for/re-set for]on__setfor__at

(6) Oo Pretrial conference[held/continued to] [set for/re-set for]on__—setfor ss at
(7) 0 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]

OOFRCP4(m) CO Local Rule 41.1 OFRCP41(a)\(1)  FRCP41(a)(2).
(10) | [Other docket entry] Enter Memorandum Opinion and Order. Defendants’ motion to dismiss the complaint

is granted. The case is dismissed for lack of subject matter jurisdiction. Status hearing set for 1/5/04 is stricken.
Any other pending dates are stricken.

(11) [For further detail see order attached to the original minute order.}

No notices required, advised in open court.

No notices required.
umber of notices

Notices mailed by judge’s staff.

Notified counsel by telephone, DEC 9. 8 73

wv | Docketing to mail notices.

oY | Mail AO 450 form 99 12 sn
99 LoyyLSia "Ss
Leno Niet)

Copy to judge/magistrate judge

4
BEC 9 8 9083

courtroom 20:4 id So 930 bu date muited notice
Tuy deputy’s
initials = aint
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had been able to purchase it. A plaintiff may recover consequential damages “where they were
reasonably foreseeable, were within the contemplation of the parties at the time the contract was
entered, or arose out of special circumstances known to the parties.” Mohr v. Dix Mut. County
Fire Ins. Co., 143 Ill. App. 3d 989, 996, 493 N.E.2d 638, 643, 97 Ill. Dec. 831, 836 (Ill. App. Ct.
1986). See Line Equip. Servs., Inc. v. Signal Med. Servs., Inc., 319 F.3d 288, 289 (7" Cir. 2003).
Such damages must not be too speculative or uncertain. Bockman Printing & Servs., Inc. v.
Baldwin-Gregg, Inc., 213 Ill. App. 3d 516, 527, 572 N.E.2d 1094 (Ill. App. Ct. 1991).

Plaintiff fails to allege that consequential damages were reasonably foreseeable, that
Defendants contemplated them at the time they entered the contract, or that they arose out of
special circumstances known to the parties. Although Plaintiff urges the Court to infer
consequential damages from the complaint, the Court will not make such an inference based on
the tangential allegations in the complaint.

B. Punitive Damages

Given that Plaintiffs claim for consequential damages fails, Plaintiff's punitive damages
claim must survive in order for the Court to have jurisdiction. Although Illinois law provides for
punitive damages for fraud, the Court is dismissing Plaintiff’s fraud claim for the reasons set
forth above.

Plaintiff can also recover punitive damages with a fiduciary duty claim as long as the
breach of duty is “accompanied by aggravating circumstances such as wilfulness, wantonness,
malice or oppression so as to warrant their imposition as punishment.” In re Estate of Wernick,
151 Ill. App. 3d 234, 249, 104 IIL. Dec. 486, 496, 502 N.E.2d 1146, 1156-57 (Ill. App. Ct. 1986),

modified on other grounds, 127 Ill. 2d 61, 129 Il. Dec. 111, 535 N.E.2d 876 (1989). “[PJunitive



tests the federal jurisdiction of a complaint. See Fed. R. Civ. P. 12(b)(1). It is well settled that
federal jurisdiction is limited to cases of “actual controversy.” Arizonans for Official English v.
Arizona, 520 U.S. 43, 67, 117 S. Ct. 1055, 1068, 137 L. Ed. 2d 170 (1997). Plaintiffs bear the
burden of proving the existence of subject matter jurisdiction. Jnt’l Harvester Co. v. Deere &
Co., 623 F.2d 1207, 1210 (7" Cir. 1980). In analyzing a Rule 12(b)(1) motion, the Court may
look beyond the pleadings. See Long v. Shorebank Dev. Corp., 182 F.3d 548, 554 (7" Cir.
1999); Int’l Harvester, 623 F.2d at 1210. The Court must accept all well-pleaded factual
allegations as true and draw all reasonable inferences in favor of the plaintiff. Long, 182 F.3d at
554; Neiman v. Rudolf Wolff & Co., Ltd., 619 F.2d 1189, 1190 (7 Cir. 1980).

The purpose of a motion to dismiss under Rule 12(b)(6) is to “test the sufficiency of the
complaint, not to decide the merits” of the case. Triad Assocs., Inc. v. Chicago Housing Auth.,
892 F.2d 583, 586 (7" Cir. 1989). When deciding a motion to dismiss pursuant to Rule 12(b)(6),
the Court views “the complaint in the light most favorable to the plaintiff, taking as true all
well-pleaded factual allegations and making all possible inferences from those allegations in his
or her favor.” Lee v. City of Chicago, 330 F.3d 456, 459 (7" Cir. 2003) (citations omitted).
Dismissal is appropriate only where it appears beyond doubt that under no set of facts would
plaintiff's allegations entitle him to relief. See Henderson v. Sheahan, 196 F.3d 839, 846 (7" Cir.
1999); Kennedy v. National Juvenile Det. Ass'n, 187 F.3d 690, 695 (7" Cir. 1999).

In order to assess whether the Court has jurisdiction, the Court must first address several

aspects of the motion to dismiss for failure to state a claim.



SAC 43.) Defendants Kevin Werner, Patricia Wemer and Anthony Disano are members of the
WD Investment Company. (/d.) Plaintiff and Defendant Kevin Werner, acting on behalf of
Smith-Rothchild and WD Investments, jointly invested in certain real property pursuant to a
written contract. (/d. | 4.) The property was located at 7539 South Phillips Avenue, Chicago,
Ulinois. (/d.) Plaintiff promised to pay the cost to acquire the property. (/d.) Werner agreed to
arrange for the financing of the transaction. (/d.) Once the parties sold the property, the parties
agreed that cach party would receive fifty percent of the profits from that sale. (/d.)

Pursuant to the contract, Pope paid an initial investment of $15,000. (/d. { 10.)
Defendants purchased the property for $160,000. (d. 45.) Defendants subsequently sold the
property for $260,450.81 “without informing the Plaintiff and refused to consider another
qualified purchaser who was offering a higher price.” (/d.) Plaintiff alleges that he only received
$14,872.00 from the sale, rather than the $50,225.41 to which he was entitled. (/d.) In addition,
Plaintiff contends that Defendants made various false statements on the closing and accounting
statements which resulted in a smaller profit for Plaintiff. (Id. §] 7-10.)

ANALYSIS

The SAC alleges fraud (count I), breach of contract (count II), breach of fiduciary duty
(count II), breach of covenant of good faith (count IV) and constructive fraud (count V).
Defendants seek to dismiss each count pursuant to Federal Rules of Civil Procedure 12(b)(6) and
12(b)(1).

I. Legal Standards
Defendant seeks to dismiss this case under both Rule 12(b)(1) for lack of subject matter

jurisdiction and Rule 12(b)(6) for failure to state a claim. A Rule 12(b)(1) motion to dismiss



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

GLENN L. POPE,
Plaintiff,

No. 03 C 3335
v.

SMITH-ROTHCHILD FINANCIAL COMPANY,
WD INVESTMENT COMPANY, LLC and
KEVIN WERNER, PATRICIA WERNER AND
ANTHONY DISANO,

wee ee ewe Se SH SSS SY

Defendants.

MEMORANDUM OPINION AND ORDER
AMY J. ST. EVE, Judge:

On August 20, 2003, this Court dismissed Plaintiff's Amended Complaint without
prejudice for failure to plead fraud and breach of fiduciary duty, and for lack of subject matter
jurisdiction. See Pope v, Smith-Rothchild Fin. Co., et al., No. 03 C 3335, 2003 WL 21994023
(N.D. Ill. Aug. 21, 2003). On September 9, 2003, Plaintiff filed a Second Amended Complaint.
(R. 15-1, Second Amended Complaint (“SAC”).) Defendants move to dismiss each count of the
SAC pursuant to Federal Rule of Civil Procedure 12(b)(6), as well as for lack of subject matter
jurisdiction pursuant to Rule 12(b)(1). For the reasons stated herein, Defendants’ motion is
granted and the case is dismissed for lack of subject matter jurisdiction.

FACTUAL ALLEGATIONS

Defendant Kevin Werner is the owner and manager of Defendant WD Investment

Company and the Vice President of Defendant Smith-Rothchild Financial Company. (R. 15-1,

oD