DISCUSSION

A motion to dismiss tests the sufficiency of the complaint, not the merits of the
suit. Triad Assoes., Inc. v. Chicago Housing Auth., 892 F.2d 583, 586 (7th Cir, 1989). In
Tuling on a motion to dismiss, the Court must accept all factual allegations in the
complaint as true and draw all reasonable inferences in favor of the plaintiff. Gomez v.
Jil. St. Ba. of Educ., 811 F.2d 1030, 1039 (7th Cir. 1987). If, when viewed in the light
most favorable to the plaintiff, the complaint fails to state a claim upon which relief can
be granted, the court must dismiss the case. Fed. R. Civ, P. 12(b)(6); Gomez, 811 F.2d at
1039. A motion to dismiss may be granted only if the court concludes that “no relief
could be granted under any set of facts that could be proved consistent with the

allegations.” Hishon v, King & Spalding, 467 U.S. 69, 73 (1984).

A. Motion to Strike
ATI has moved to strike the affidavit attached to defendants’ reply brief in support
of their motion to dismiss, When deciding whether to grant or deny a Rule 12(b)(6)
motion to dismiss, the court only considers the pleadings. Under Rule 12(b) if “matters
outside the pleadings are presented to and not excluded by the court, the motion shall be
treated as one for summary judgment and disposed of as provided in Rule 56.” This
matter is not ripe for summary judgment, so the Court will limit its review to the

pleadings, and any extraneous maierial will not be considered.

B, Joint Venture
“A joint venture is defined as an association of two or more persons to carry out a
single enterprise for profit.” O'Connell v. Pharmaco, 164 Ill. App. 3d 68, 72, 517 N.E.2d
688, 691 (4th Dist. 1987). A joint venture can be inferred from the facts and

circumstances with the intent of the parties being the most important element. /d.



attach copies of the writings that satisfy the Statute of Frauds at this point in the litigation.

Even if the Statute of Frauds did apply to this agreement, there is a possibility that
ATI could receive compensation for what it contributed to the alleged joint venture or
could get the oral contract enforced based on a theory of partial performance. “Under
Illinois law, a party may not assert the statute of frauds where there has been sufficient
partial performance of a contract in reliance upon that party’s promises or conduct.”
Trustmark, 2001 WL 1268539, at *11.

In this case, ATI alleges it performed due to its reliance on its alleged joint
venture agreement with defendants. ATI alleges that it advanced and incurred
approximately $381,778 in expenses in reliance on defendants’ promises and conduct
related to the alleged joint venture. (Compl. { 13-17.) ATI should have the opportunity
to establish that: (1) it did, in fact, partially perform and (2) it is entitled at the very least
to compensation for what it did. Aviation Resource Partners, Inc. v. BAA USA, Inc., No.
95 C 6117, 1997 WL 610326, at *5 (N.D. II. Sep. 29, 1997).

Assuming all factual assertions in the complaint as true, AT! has sufficiently
alleged a breach of a joint venture agrecment that is not barred by the Statute of Frauds as
well as fraudulent inducement. It follows that ATI’s tortious interference with contract

(Count ITI) and unjust enrichment (Count I'V) claims remain as they are based on that

agreement. Therefore, the Court denies defendants’ motion to dismiss.



has received only $81,000 from or on behalf of Raja/Kaypee. (/d.)

Tn May 2000, Samy met with Raja in India, at which time Raja and his father, K.
Palaniswamy Gounder, whom Samy understood to be owner of Kaypee, assured him of
ATI's equity ownership position in the partics’ Kaypee textile venture. (/d. { 20.) Ina
phone conversation in September 2000, it became clear to Samy thal Raja/Kaypee had no
intention of sharing profits with or otherwise compensating or reimbursing ATI for its
efforts and expenditures. (Jd. { 21.) ATJ demanded an accounting, value of its capital
contributions, and all payment, compensation and reimbursement to which it is entitled
from defendants. (/d. 22.) In response, defendants have denied that they ever entered
into a joint venture with ATI and that ATI invested any monies or otherwise obtained an
ownership interest in such a venture. (/d. {| 23.) In September 2000, Raja began to travel
to the U.S. on his own to conduct and promote Kaypee textile business here. (/d. | 24.)

Defendants argue that each of ATI’s claims is based on an oral contract that could
not be performed within one year and, as such, is barred by the Illinois Statute of Frauds,
740 ILL. ComP. STAT. 80/1 et seg. They argue that because ATI set forth in its complaint
the anticipated time period of more than one year and accordingly there are no set of facts
that ATI could allege in an amended complaint to state a claim upon which relief may be
granted, the counts against defendants must be dismissed with prejudice.

ATI argues that though the joint venture was originally discussed and agreed upon
orally, it was confirmed, promoted, advanced and continuously evidence by and in
numerous writings as stated in the Complaint. (Pl.’s Resp. at 2.) ATI further argues that
there are no formal requirements for a joint venture agreement, and therefore, its joint
venture agreement with defendants does not need to be in writing. (Jd. at 3.) Finally, ATL

argucs that Count I (Fraudulent Inducement) and Count 'V (Unjust Enrichment) do not

sound in contract and cannot be barred by the Statute of Frauds. (Jd. at 6.)



Elements that may be considered in determining the existence of the intent to engage ina
joint venture are:

(1) an express or implied agreement to carry out some enterprise; (2)

manifestation of an intent to be associated as a joint venture; (3) a joint

interest evidenced by the contribution of property, financial resources,

effort, skill, or knowledge by cach joint venturer; (4) some degree of joint

proprietorship or mutual right to exercise control over the enterprise; and

(5) a provision of the joint sharing of profits and losses.

Id.

Tf it is determined that a joint venture exists, the laws of partnership govern that
joint venture. /d. at 72, 517 N.E.2d at 691-92. Also, “[a] joint adventure may be
established without any specific formal agreement to enter into a joint enterprise * * *, Tt
is the nature of the enterprise undertaken that controls, not the form of the agreement.
Reese v. Meiahn, 53 Ill. 2d 508, 513, 292 N.E. 2d 375, 379 (Ill. 1973). In Reese, there
was no written contract between the parties and the court determined that there was a
joint venture created between them. Jd.

In this case, ATI has alleged the existence of a joint venture. Having properly
alleged the existence of a joint venture, it is not proper to dismiss ATI’s claims until they
have time to prove the existence of this venture. Although there is no written contract

evidencing this joint venture, Illinois law makes it clear that this is not necessary.

C, Applicability of Statute of Frauds
Defendants assert that all of ATI’s claims are based on an oral contract that could
not be performed within a year and are therefore barred by the Statute of Frauds, 740 ILL.
Comp. STAT. 80/1 et seg. ATI concedes that the original joint venture was agreed upon

orally, however, ATI also contends that it was later confirmed, promoted, advanced, and



CONCLUSION
For the reasons set forth above, the Court denies defendants’ motion to dismiss

[doc. no. 6-1] and grants plaintiff's motion to strike [doc. no. 12-1].

soorverep. 7-//-02- ENTER:

4 BEE °

(ON. RONALD A. G
United States Judge



Minute Order Form (06/97)

United States District Court, Northern District of Lllinois

Name of Assigned Judge
or Mayistrate Judge

Sitting Judge if Other

Ronald A. Guzman than Assigned Judge

CASE NUMBER

01 C 6249 DATE 9/11/2002

CASE ASSOCIATED TEXTILE,INC. Vs. PALANISWAMY VEERARAJA,et al
TITLE
[In the following box (a) indicate the party filing the motion, e.g., plaintiff, defendant, 3rd party plaintiff, und (b) state briefly the nature
MOTION: of the motion being presented.)
DOCKET ENTRY:
qa oO Filed motion of [ use listing in “Motion” box above.]
(2) oO Brief in support of motion due
3) a Answer brief to motion duc . Reply to answer brief due.
(4) o Ruling/Hearing on set for at
(5) Oo Status hearing[held/continued to] [sct for/re-set for] on set for at
(6) 0 Pretrial conference[held/continued to] (set for/re-set for] on set for at
(7) Oo Trial[set for/re-set for] on ato,
(8) Oo [Bench/Jury trial] [Hearing] held/continued to E
(9) a This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]
OFRCP4(m) ClLocal Rule 41.1 CIFRCP41(a)(1) CO FRCP41(a\(2).
ao [Other docket entry] ©. ENTER MEMORANDUM OPINION AND ORDER: the Court denies
defendants’ motion to dismiss [6-1] and grants plaintiff's motion to strike [12-1].

al [For further detait see order attached to the original minute order.]

No notices required, advised in open court

No notices required. number of notices

Notices mailed by judge’s staff.

SEP 1 2 2002

Notified counsel by telephone. date docks

Docketing to mail notices

ATOH gn

Mail AQ 450 form, Ines! keting eputy inital

Copy to judge/magistrate judge,

date muited notice
courtroom

deputy’s
initials

Date/time received in
central Clerk's Office

mailing depuly initials



continuously evidenced in numerous writings. (Pl.’s Resp. at 2.) It is clear that ATI’s
actions stemming from the agreement lasted from 1996 until 2000, so the contract was
not performed in a year. (Compl. 12.) However, there is no statement in the complaint
that the original agreement could not have been completed in one year at the time it was
entered into. ATI asserts that the Statute of Frauds is not applicable because there are no
formal requirements for forming a joint venture. (PI.’s Resp. at 3.) Since all of ATI’s
claims are state law claims, Illinois law applies.

The first issue is whether the Statute of Frauds makes the agreement between
defendants and ATI unenforceable. The Statute of Frauds states that “any agreement that
is not to be performed within the space of one year from the making thereof. . . shall be
in writing, and signed by the party to be charged therewith... .” 740 ILL. Comp. Star.
80/1. This would render a contract to be performed over five years void, However, in
this case, while the performance by ATI lasted for five years, there is no evidence at this
point to support or refute the possibility that at the time of the alleged agreement, the
contract could not have been performed in one year since the agreement was lo work
together to market textiles that theoretically could have ended at any point. Still, the fact
that ATI performed for five years does seem to make it more likely than not that this
contract could not have been performed in one year.

ATI also argues that the oral agreement was evidenced by many numerous
writings. (PI.’s Resp. at 2.) “Two or more writings may satisfy the writing requirement
of the statute as long as ‘all the essential terms are stated with reasonable certainty and the
documents arc connected in such a way that they may be said to relate to the same
contract.” Trustmark Ins. Co. v. General Cologne Life Reinsurance of Am., No. 00 C
1926, 2001 WL 1268539, at *9 (N.D. TIl. Oct. 22, 2001) (quoting Pillay v. G.C. Servs.
Ltd. Partnership, No. 98 C 1198, 1998 WL 242135, at *2 (N.D. Ill. May 6, 1998)).

Because of Rule 8(a)(2)’s notice pleading standard, there is no requirement that ATL



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

ASSOCIATED TEXTILE, INC.,, an
Tllinois Corporation,

Plaintiff,

Y. Judge Ronald A, Guzman

PALANISWAMY VEERARAJA, 01 C 6249 ‘ frp
a foreign (alien) individual, and KAYPEE
EXPORTERS, a foreign (alien) concern,

Defendants,

ee eT Tee Tee

SE Cp lo
MEMORANDUM OPINION AND ORDER & ° ay
Plaintiff Associated Textile, Ine. (“ATI”) has sued Palaniswamy Veciiaja
(“Raja”) and Kaypee Exporters (“Kaypee”) for breach of a joint venture agreement ay
(Count J), fraudulent inducement (Count Il), tortious interference with contract (Count
TI1), and unjust enrichment (Count 1V). Before the Court is Raja and Kaypee’s motion to
dismiss the complaint pursuant to Federal Rule of Civil Procedure (“Rule”) 12(b)(6).
Also before the Court is ATI’s motion to strike the affidavit attached to defendants’ reply
brief in support of their Rule 12(b)(6) motion to dismiss. For the reasons provided in this

Memorandum Opinion and Order, the Court grants ATI’s motion to strike and denies

defendants’ motion to dismiss.

FACTS
In October 1995, Raja, on behalf of Kaypee, met Veerasikku Bommiasamy
(“Samy”), principal of LaSalle Textiles, Inc. (“LaSalle”). (Compl. 7.) LaSalle sold
East Indian textiles domestically and imported from Raja and Kaypee, as well as other
East Indian mills. (/d.) Samy and Raja also met with Robert Walls (“Walls”), principal
of Whitewall Enterprises, Inc., who had taken over the day-to-day operations of LaSalle.

(id.) At this time, the parties discussed the possibility of a joint venture. (/d.) By late

A|



1995, relations soured between the owners of LaSalle and Walls, and they settled their
disputes through litigation. (/d. 8.) In late 1995, Raja initiated many conversations and
meetings with Samy in which they began discussing a joint venture to import and market
Kaypee textiles in the United States and Canada. (/d. 9.) In exchange for capital
contributions from Samy and Raja/Kaypee’s ability to make full use of Samy’s textile
contacts and accounts in the United States and Canada and his related services, Raja
agreed that Samy or his U.S. entity would receive full reimbursement of all expenses
incurred, and one-third profits from Kaypee’s textile sales in the United States and
Canada. (/d.) Raja assured Samy that he and Kaypee would take all actions necessary to
ensure that Samy or his entity could legally share the profits of Kaypee. (/d.) Due to the
breakdown of relations with Walls over the business of LaSalle, the owners of LaSalle
formed a new entity to manufacture, import and market Kaypee’s textiles, and
incorporated ATI in early 1996. (7d. J 10.)

In reliance upon Raja’s agreement to pay one-third of Kaypee’s profits from U.S.
and Canada sales to the newly formed ATI in consideration of its owners’ capital
contributions, and ability to make full use of Samy’s contracts/accounts and related
services, Samy, on behalf of ATI, began to raise capital for and undertook significant
work toward the parties’ alleged venture. (/d. 911.) From 1996 to 2000, Samy/ATI
represented Raja/Kaypee in the U.S. and Canada and built up sales to approximately $8
million by procuring many accounts. (/d. 12.) During this period Raja regularly
communicated from India with ATI, by phone and fax, regarding the parties’ alleged joint
venture efforts to sell Kaypee textiles in the U.S. and Canada. (/d.)

In furtherance of the parties’ joint venture between 1996 and 2000, ATI advanced
and incurred expenses for Raja/Kaypee in the approximate amount of $381,778. (d. {{{
13-17.) Despite repeated requests by ATT for an accounting and the payments to which it

is entitled, Raja/Kaypee has failed to provide any accounting, (/d. 18.) To datc, ATI