F.3d 385, 390 (7" Cir. 2002) (Illinois follows rule that punitive damages are unavailable to
plaintiff under a breach of contract theory unless that plaintiff “show[s] that the breach of
contract involved tortious misconduct, such as duress or fraud or abuse of fiduciary duty.”’).
Defendants believe that Pope has failed to state a claim for fraud and breach of fiduciary duty. If
Defendants are correct, Pope’s own allegations show that he is entitled to recover far less than
the $75,000 jurisdictional requirement.

i Plaintiff Has Not Sufficiently Alleged That Defendants Breached Any Fiduciary
Duty

Under Illinois law, a plaintiff may recovery for breach of fiduciary duty where: (1) a
fiduciary duty exists on defendant’s part; (2) the defendant breached that fiduciary duty; and (3)
damages proximately resulted from the breach. Lucini Italia Co. v. Grappolini, 231 F.Supp.2d
764, 770 (N.D. III. 2002). Defendants argue that the Court should dismiss this claim because
Pope failed to plead the existence of a fiduciary duty. The Court agrees. Pope’s Complaint
contains no allegation that a fiduciary duty existed. Pope has only alleged that the parties had a
contractual relationship. Unfortunately for Pope, 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.
Il, 1997).

Pope counters that a principle-agent relationship creates a fiduciary relationship as a
matter of law. Illinois law supports this contention. See Stathis v. Geldermann, Inc., 692 N.E.2d
798, 809 (II. App. Ct. 1998). In his Complaint, however, Pope fails to allege any facts
supporting the existence of a principle-agent relationship. Accordingly, Defendants’ motion to

dismiss Plaintiff's breach of fiduciary duty claim is granted.


$75,000. Instead, Pope claims that his compensatory damages equal $35,353.41. Without
subject matter jurisdiction, the Court dismisses Pope’s Complaint in its entirety.
CONCLUSION
Defendant’s motion to dismiss is granted. Pope has failed to sufficiently plead causes of
action for fraud and breach of fiduciary duty. Subject matter jurisdiction over Plaintiff's
Complaint is based upon the availability of punitive damages, which are unavailable under

Plaintiff's remaining claims. Accordingly, Pope’s Complaint is dismissed without prejudice.

DATED: August 20, 2003 ENTERED

AMY J. ST.

United States District Court Judge

F.2d 1436, 1443 (7" Cir. 1992).


ANALYSIS
Plaintiff's Complaint is based on four state common law causes of action: (1) breach of
fiduciary duty, (2) fraud, (3) breach of covenant of good faith and fair dealings, and (4) breach of
contract. Defendant attacks each of these claims. Before addressing those arguments, the Court
will analyze its basis for subject matter jurisdiction over this action.

Il Subject Matter Jurisdiction Is Dependent On Whether Punitive Damages Are
Available To Defendants

Plaintiff alleges that this Court has subject matter jurisdiction pursuant to 28 U.S.C. §
1332, which requires a diversity of citizenship and an amount in controversy of at least $75,000.
In order to satisfy the amount in controversy requirement for diversity jurisdiction, a plaintiff's
claim of damages of more than $75,000 must be made in good faith. Neuma, Inc. v. AMP, Inc.,
259 F.3d 864, 881 (7” Cir. 2001). Pope claims to have suffered $35,353.41 in compensatory
damages. (R. 7-1, Am. Compl. at 9.) He also seeks $2,000,000 worth of punitive damages. (Jd.)
Therefore, to satisfy the jurisdictional prerequisite, Pope must sufficiently allege that he is
entitled to punitive damages.

Under Illinois law, punitive damages are available to plaintiffs successfully pleading and
eventually proving fraud. Additionally, Illinois law allows punitive damages with a fiduciary
duty claim so long as the breach of duty is “accompanied by aggravating circumstances such as
wilfulness, wantonness, malice or oppression so as to their warrant imposition as punishment.”
In re Estate of Wernick, 502 N.E. 2d 1146, 1156-57 (Ill. App. Ct. 1986). If Pope’s claims for
fraud and breach of fiduciary duty fail, he cannot recover punitive damages under his remaining

breach of contract counts. Zapata Hermanos Sucesores, S.A. v. Hearthside Baking Co., Inc., 313


Wl. Plaintiff Has Not Sufficiently Alleged That Defendants Engaged In Fraud

A plaintiff alleging fraud must do so with particularity. Fed. R. Civ. P. 9(b); DiLeo v.
Ernst & Young, 901 F.2d 624, 627 (7" Cir. 1990). A claim for fraud under Illinois law includes
five elements: “(1) a false statement of material fact; (2) defendant’s knowledge that the
statement was false; (3) defendant’s intent that the statement induce the plaintiff to act; (4)
plaintiff's reliance upon the truth of the statement; and (5) plaintiff's damages resulting from
reliance on the statement.” Connick v. Suzuki Motor Co., 675 N.E.2d 584, 591 (Ill. 1996).
Defendant argues that Pope has not pled the cause of action and its elements with particularity.

A. Pope has not Individualized Defendants’ Conduct

Plaintiff alleges that Defendants made fraudulent representations in the written contract,
the closing documents and the accounting documents. He fails, however, to plead with any sort
of particularity in terms of whom did what. Instead, Pope lumps Defendants together in each
allegation. This strategy falls short of meeting the particularity standard. Shapo v. Engle, No. 98
C 7909, 1999 WL 1045086, at *13 (N.D. Ill. Nov 12, 1999) (“Where there are multiple
defendants, the complaint must notify each defendant of the specific act purportedly committed
by the defendant, which justifies that defendant's inclusion in the particular count.”).

B. Pope has not Sufficiently Alleged that Defendants Knew that the Statements
were False

Pope also fails to properly plead Defendants’ state of mind. Under Illinois law,
Defendants must have known that their representations were false. Connick, 675 N.E.2d at 591.
Plaintiffs’ allegations only state that Defendants “knew or should have known” that their

statements were false. This is insufficient. Landon v. GTE Communications Servs. Inc., 696


‘Minute Orde!’ Form (06/97)

United States District Court, Northern District of Llinois

Name of Assigned Judge Amy J. St. Eve Sitting Judge if Other
or Magistrate Judge “av than Assigned Judge
CASE NUMBER 03 C 3335 DATE 8/20/2003
CASE Glenn Pope vs. Smith-Rothchild Financial Company
TITLE
[In the following box (a) indicate the patty filing the motion, e.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature
MOTION: of the motion being presented.]
DOCKET ENTRY:
(1) Q Filed motion of [ use listing in “Motion” box above.]
(2) Q Brief in support of motion due
(3) Qo Answer brief to motion due . Reply to answer brief due.
(4) Q Ruling/Hearing on set for at
6) oO Status hearing[held/continued to] [set for/re-set for] on set for at
(6) Oo Pretrial conference{held/continued to] [set for/re-set for] on set for at
(7) im} Trial[set for/re-set for]on_ at | -
(8) oO (Bench/Jury trial] [Hearing] held/continued to __ at
(9) QO This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]
OOFRCP4(m) CiLocal Rule 41.1 CIFRCP41(a)(1) C1 FRCP41(a)(2).
ao Wl {Other docket entry] | Enter Memorandum Opinion and Order. Defendants' motion to
dismiss is granted. Plaintiffs Amended Complaint is dismissed without prejudice.
(i) [For further detail see order attached to the original minute order.]
No notices required, advised in open court
No notices required.
umber of novices
Notices mailed by judge’s staff.
Notified counsel by telephone.
oY | Docketing to mail notices.
Mail AO 450 form.
Copy to judge/magistrate judge.
courtroom
thy deputy’s
initials
central Clerk’s Office rmaiing deputy initials



F.Supp. 1213, 1221 (N.D. IIL 1988).

Cc Pope has not Sufficiently Alleged any Statements that Can Provide the Basis
for his Fraud Claim

The only alleged false statements that Plaintiff alleges with any sort of particularity are
those made in the closing and accounting documents. Pope does not allege, however, that
Defendants made these statements intending to induce the plaintiff to act, that he relied upon the
truth of these statements or that he suffered damages as a result of that reliance. Therefore, Pope
has not properly pleaded common law fraud under Illinois law.

D. Plaintiff has not Alleged a Claim for Constructive Fraud

Plaintiff attempts to stave off dismissal by arguing that Defendants’ actions constitute
constructive fraud. Under Illinois law, however, a plaintiff must show that a confidential or
fiduciary duty exists and that such duty was breached to recover on a constructive fraud claim.
Stathis v. Geldermann, Inc., 692 N.E.2d 798, 809 (Ill. App. Ct. 1998). As discussed previously,
Pope has not sufficiently pled a breach of a fiduciary duty. See supra, Section 1. Thus, Plaintiff
cannot maintain a claim for constructive fraud. Accordingly, Pope has not sufficiently alleged
any type of fraud recognized by Illinois common law.

IV. | With Plaintiff's Claims For Fraud And Breach Of Fiduciary Duty Failing, The
Court Does Not Have Subject Matter Jurisdiction Over The Action

Because Plaintiff has not sufficiently alleged fraud or breach of a fiduciary duty, punitive
damages are not available to Pope. Even if successful on his remaining breach of contract

actions,' Plaintiff has not alleged facts to show that compensatory damages in themselves exceed

' Although the Court need not address the issue, it does note that Plaintiff could not maintain a
cause of action for breach of a covenant of good faith and fair dealings. This is not an
independent cause of action under Illinois law. See Beraha v. Baxter Health Care Corp., 956

6


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,

Defendants.

weer eres

MEMORANDUM OPINION AND ORDER
AMY J. ST. EVE, Judge:
Glenn Pope filed a four-count complaint against Smith-Rothchild Financial Company,
WD Investment Company, LLC and Kevin Werner. Defendants move to dismiss each count

pursuant to Federal Rule of Civil Procedure 12(b)(6). For the reasons stated herein, Defendants’
E9

DGCZETE
motion is granted. Was be
AUG 2 1 2003

BACKGROUND
1. Legal Standards
A motion to dismiss pursuant to Rule 12(b)(6) tests the legal sufficiency of a complaint,
instead of the merits of the case. Triad Assocs., Inc. v. Chicago Hous. Auth., 892 F.2d 583, 586
(7" Cir. 1989). The Court views all the facts alleged in the complaint, as well as any reasonable
inferences drawn from those facts, in the light most favorable to the plaintiff. Stachon v. United
Consumers Club, Inc., 229 F.3d 673, 675 (7" Cir. 2000). Dismissal is appropriate only when “it

is clear that no relief could be granted under any set of facts that could be proved consistent with

~



the allegations” of the complaint. Hishon v. King & Spaulding, 467 U.S. 69, 73, 104 S.Ct. 2229,
2232, 81 L.Ed.2d 59 (1984). While a complaint need not set out in detail the facts upon which a
plaintiff bases his claim, Benson v, Cady, 761 F.2d 335, 338 (7" Cir. 1985), it must “include
either direct or inferential allegations with respect to all material elements of the claims
asserted.” Indus. Hard Chrome Ltd. v. Hetran, Inc., 64 F.Supp.2d 741, 744 (N.D. Ill. 1999)
(citing Perkins v. Silverstein, 939 F.2d 463, 466 (7" Cir. 1991)). Attaching bare legal
conclusions to narrated facts fails to satisfy federal pleading requirements. Strauss v, City of
Chicago, 760 F.2d 765, 768 (7" Cir. 1985).
il. Allegations

Plaintiff and Defendants jointly invested in certain real property pursuant to a written
contract. (R. 7-1, Am. Compl. 4 3.) In that contract, Pope promised to pay the cost to acquire the
property. Werner agreed to arrange for all of the financing of the transaction. Once the parties
sold the property, Pope would receive fifty percent of the profits from that sale. (/d. 4 4.)

Pursuant to the contract, Pope paid an initial investment of $15,000. Defendants used this
money to purchase and sell certain property. (/d. J] 5-6.) Defendants, however, failed to keep
up with their end of the bargain when they sold the property. Defendants opted not to sell the
property to the highest qualified bidder, chose not inform Pope before selling the property and
failed not give Pope half of the profits. (/d. {{] 4-5.) In addition, Defendants made various false
statements on the closing and accounting statements which resulted in a smaller profit for Pope.

(id. {§ 7-9.)