Court Opinion

ID: 4671642
Source: CourtListenerOpinion
Date Created: 2021-03-25 21:03:54.513399+00
Date Added: 2024-06-11T08:02:45.064451
License: Public Domain

Digitally signed by
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                                   Appellate Court                           Date: 2021.03.25
                                                                             12:29:00 -05'00'

             Elleby v. Forest Alarm Service, Inc., 2020 IL App (1st) 191597

Appellate Court        RUTH ELLEBY, Plaintiff-Appellant, v. FOREST ALARM
Caption                SERVICE, INC., LINDA LICHTENAUER, MARK COYLE, and
                       RON LYNGEN, Defendants-Appellees.

District & No.         First District, Fifth Division
                       No. 1-19-1597

Filed                  March 6, 2020

Decision Under         Appeal from the Circuit Court of Cook County, No. 18-CH-12724; the
Review                 Hon. Neil H. Cohen, Judge, presiding.

Judgment               Affirmed.

Counsel on             James L. Wideikis, Shawn M. Staples, and Jonathan L. Loew, of Much
Appeal                 Shelist P.C., of Chicago, for appellant.

                       David J. Stein and Jiwon J. Yhee, of Masuda, Funal, Eifert & Mitchell,
                       Ltd., of Chicago, for appellee Forest Alarm Service, Inc.

                       Paul F. Markoff and Karl G. Leinberger, of Markoff Leinberger LLC,
                       of Chicago, for other appellees.
     Panel                     PRESIDING JUSTICE HOFFMAN delivered the judgment of the
                               court, with opinion.
                               Justices Rochford and Delort concurred in the judgment and opinion.

                                               OPINION

¶1        The plaintiff, Ruth Elleby, appeals from orders of the circuit court of Cook County that
      (1) dismissed her claims against defendants Linda Lichtenauer, Mark Coyle, and Ron Lyngen
      (collectively, the individual defendants) and (2) entered judgment on the pleadings in favor of
      defendant Forest Alarm Service, Inc. (FASI). For the reasons that follow, we affirm.
¶2        The following facts relevant to the disposition of this appeal were adduced from the
      pleadings and exhibits of record.
¶3        FASI is an Illinois corporation that provides security alarm sales, service, installation, and
      monitoring. According to the plaintiff, FASI is a “family-owned, closely held corporation.”
      The individual defendants, along with the plaintiff, are shareholders of FASI. Lichtenauer and
      the plaintiff each own 33.5% of the shares, and Lyngen and Coyle each own 16.5% of the
      shares. Coyle, in addition to being a shareholder of FASI, is also the president and secretary of
      FASI.
¶4        In 2017, the plaintiff considered selling her shares of FASI. On August 16, 2017, the
      plaintiff’s attorney sent Coyle a letter, indicating that the plaintiff had decided to “exercis[e]
      her rights under the Illinois Business Corporation Act *** to have the Corporation and/or its
      shareholders purchase her shares.” The letter stated that the plaintiff was willing to sell her
      shares at a price based on a 2013 valuation of FASI.
¶5        On October 19, 2017, an attorney representing the individual defendants responded,
      disputing that the “Illinois Business Corporation Act” provided the plaintiff with a right to
      force them to purchase her shares. The letter stated that, nonetheless, the individual defendants
      were willing to purchase the plaintiff’s shares for a $178,177 or, alternatively, sell their shares
      to her using the 2013 valuation.
¶6        On November 14, 2017, the plaintiff’s attorney sent an e-mail to the individual defendants’
      attorney, requesting that certain FASI records “be produced within 14 days” so the plaintiff
      could adequately respond to their offer. The requested records included, inter alia, client lists,
      profit and loss statements, balance sheets, and “any and all personal Credit Card Statements,
      belonging to [the individual defendants] that have been used to pay FASI invoices.”
¶7        On January 15, 2018, the plaintiff’s attorney sent a letter to the attorney representing the
      individual defendants, noting that the plaintiff had not received a response to her demand for
      records. The letter also alleged that the plaintiff’s “access to the on-line company financial and
      banking records” had been blocked and that the plaintiff “discovered several unauthorized and
      wasted expenditures made by the Company to Macy’s Department Store.” The letter further
      alleged that the plaintiff discovered “several questionable alarm part expenditures,
      unauthorized bonus payments, unexplained credit card purchases and sales of company
      vehicles,” and that “FASI client contracts are inexplicably being transferred or terminated.”
      The letter concluded by stating that the plaintiff was willing to sell her shares for the price of
      $450,000.00 and gave the individual defendants 14 days to respond.

                                                   -2-
¶8         Subsequently, the plaintiff hired a new attorney who, on August 17, 2018, sent a letter to
       the individual defendants’ attorney, demanding again “the production of FASI’s books and
       records pursuant to 805 ILCS 5/7.75.” The letter stated that the records were being requested
       by the plaintiff’s “forensic accountant and business valuator” and threatened to “utilize the
       legal system” if the records were not produced. Attached to the letter was a three-page list of
       the records that the plaintiff demanded be produced. The letter also asked the individual
       defendants’ attorney to clarify whether he represented FASI or the individual defendants.
¶9         On August 25, 2018, the individual defendants’ attorney responded and confirmed that, as
       he stated in his initial communication, he represented only the individual defendants, not FASI.
       Regarding the plaintiff’s threat to “utilize the legal system” if the records were not produced,
       the individual defendants’ attorney noted that the plaintiff had not yet directed any of her
       demands for records to FASI. He also opined that her document demand was “well beyond
       anything authorized by 805 ILCS 5/7.75.” He reiterated though that, because he represented
       the individual defendants and not FASI, the plaintiff’s demand for FASI records was “not [his]
       issue.” The letter also stated that the individual defendants were willing to “discuss a resolution
       based on a real and current valuation” of FASI.
¶ 10       On August 28, 2018, the plaintiff’s attorney sent a letter to Coyle, in his capacity as both
       “President and Registered Agent” of FASI, and demanded “the production of FASI’s books
       and records pursuant to 805 ILCS 5/7.75.” The letter included the three-page attachment listing
       the records the plaintiff wished produced. The letter demanded that FASI produce the records
       “no later than October 1, 2018.”
¶ 11       On October 1, 2018, Frank Cesario, FASI’s certified public accountant (CPA), sent an e-
       mail to the plaintiff, Coyle, and Lichtenauer. Attached to the e-mail was a document that
       Cesario called the “financial statement for [FASI] through August 31, 2018.” The attachment
       included a balance sheet and a profit and loss statement.
¶ 12       On October 3, 2018, Cesario sent another e-mail to the plaintiff and the individual
       defendants. This e-mail included additional financial documents, including a profit and loss
       statement that compared the months of January through August for both 2017 and 2018 and
       general journal transactions dated August 31, 2018.
¶ 13       On October 10, 2018, Coyle sent an e-mail to the plaintiff, Lyngen, and Lichtenauer,
       attaching the FASI “financial reports” for 2017. The following reports were included: general
       and administrative expenses, costs of goods sold, statement of income and retained earnings,
       and a balance sheet.
¶ 14       On October 11, 2018, the plaintiff filed a two-count complaint against the individual
       defendants and FASI. 1 Count I alleged that FASI and the individual defendants violated
       section 7.75 of the Business Corporation Act of 1983 (Act) (805 ILCS 5/7.75(d) (West 2018))
       by refusing her “numerous requests” for FASI’s books and records. Pursuant to section 7.75(d)
       of the Act (id.), the plaintiff also sought to hold the individual defendants liable for 10% of the
       value of her stock in FASI, damages, and attorney fees for refusing her request to examine the
       records. In support of her claim, the plaintiff attached copies of the e-mails and letters detailed
       above. Count II alleged that the individual defendants breached the fiduciary duties they owed
       to FASI and to her. Specifically, the plaintiff alleged that the individual defendants breached

          1
           The original complaint also included Christina Pavia as a defendant, but she was not named as a
       defendant in the amended complaint.

                                                    -3-
       their fiduciary duty by failing to produce the financial records and books she requested,
       engaging in corporate waste and self-dealing, and by freezing the plaintiff out of the
       management and control of FASI.
¶ 15        On October 26, 2018, the individual defendants filed a motion to dismiss the plaintiff’s
       complaint pursuant to section 2-615 of the Code of Civil Procedure (Code) (735 ILCS 5/2-615
       (West 2018)). The individual defendants raised the following arguments: (1) count I was not
       ripe because section 7.75(b) of the Act (805 ILCS 5/7.75(b) (West 2018)) provides her with
       the right to “examine, in person or by agent, at any reasonable time” FASI’s books and records
       and she has alleged only that she demanded the “production” of such records, (2) the plaintiff’s
       complaint failed to allege that she brought her claim derivatively on behalf of FASI, (3) the
       plaintiff failed to allege facts establishing a fiduciary duty because FASI is not a closely held
       corporation nor is it governed by a shareholder agreement, (4) the plaintiff’s complaint failed
       to plead facts that established conduct that amounted to a breach of fiduciary duty, and (5) the
       plaintiff failed to allege damages.
¶ 16        On November 11, 2019, FASI filed a motion to dismiss the plaintiff’s only claim against
       it, count I, pursuant to section 2-615 of the Code. FASI’s motion adopted and incorporated the
       individual defendants’ argument from their motion to dismiss regarding count I.
¶ 17        On January 29, 2019, the circuit court entered an order giving the plaintiff 14 days to amend
       her complaint.
¶ 18        On February 15, 2019, the plaintiff filed an amended complaint, seeking relief both
       individually and derivatively on behalf of FASI. Count I still alleged that the individual
       defendants and FASI violated section 7.75(d) of the Act (id. § 7.75(d)) by refusing her
       “numerous requests” for FASI’s books and records, attaching copies of the e-mails and letters
       detailed above. The plaintiff amended count II to reflect that she brought the claim derivatively
       on FASI’s behalf. The plaintiff also alleged that “[d]emand on the Board of Directors of [FASI]
       to bring this suit against the individual defendants herein would be a futile and useless act, in
       that defendants committed the wrongs complained of herein, have profited from the wrongs,
       and defendants would not bring suit against themselves.” In count II, she alleged that the
       individual defendants breached their fiduciary duties. Specifically, she alleged that the
       individual defendants breached their fiduciary duties in the following ways: (1) “freezing” her
       out of FASI by “blocking [her] access to [FASI’s] on-line financial and banking records,”
       denying her “the ability to participate in the operation and management of” FASI, and denying
       her access to FASI’s books and records; (2) “unauthorized and wasted expenditures made by
       [FASI] to Macy’s Department Store;” (3) “several questionable alarm part expenditures;”
       (4) “unauthorized bonus payments;” (5) “unexplained credit card purchases and sales of
       [FASI] vehicles;” (6) terminating or transferring client contracts; and (7) “preparing balance
       sheet entries that evidence potentially improper distributions or inadequate bookkeeping.” In
       support of her claims, the plaintiff attached a copy of an unsigned shareholder agreement that
       included in the margins handwritten addendums and Microsoft Word comments. According to
       the plaintiff, the shareholders “did not formally execute or sign [FASI’s] Shareholder
       Agreement” but “everyone operated under the document as if it were fully executed.” In
       support of her claim that there were unauthorized expenditures at Macy’s Department Store,
       the plaintiff attached bank records that she claimed were from FASI’s checking account with
       entries that state “Auto Pymt Macys” and “CITIAUTFDR.”

                                                   -4-
¶ 19       On April 1, 2019, the individual defendants again filed a motion to dismiss pursuant to
       section 2-615 of the Code. Regarding count I, they once more argued that the plaintiff alleged
       only that she demanded the “production” of books and records from FASI, not that she ever
       demanded to “examine” FASI’s books and records. As such, the individual defendants argued
       that the plaintiff failed to allege they ever refused a request to examine FASI’s books and
       records. Regarding count II, the individual defendants argue that the plaintiff failed to allege
       that she made a demand on FASI’s board of directors to bring suit or why demand was excused,
       the existence of a fiduciary duty, or sufficient facts to show that the alleged conduct amounted
       to a breach of fiduciary duties.
¶ 20       On June 13, 2019, the circuit court granted the individual defendants’ motion to dismiss as
       to both counts of the plaintiff’s amended complaint. As to count I, the circuit court held that
       the plaintiff “had no right to the production of the records she sought, merely the right to
       examine them,” and the plaintiff did not allege that she ever made a request to examine the
       records in person that was denied. The court also held that the plaintiff did not allege any facts
       showing the Lichtenauer or Lyngen had any control over FASI’s records or that they refused
       any request for access to the records on behalf of FASI. As to count II, the circuit court first
       noted that, because the plaintiff was raising a derivative claim, she was required to allege
       particularized facts showing that she made a demand on the corporation to bring suit and was
       refused or that she should be excused from making such a demand. The court held that the
       plaintiff’s conclusory statement that “demand would be futile” was insufficient. Moreover, the
       court held that, although the plaintiff sufficiently alleged that the individual defendants owed
       FASI and each other a fiduciary duty, the plaintiff failed to allege sufficient facts “from which
       it can be concluded that any of the conduct at issue constitutes a breach of fiduciary duty.”
       Specifically, the court held the following: the individual defendants did not breach their
       fiduciary duties by failing to produce books and records because the plaintiff did not make a
       proper request for such records; the individual defendants did not deny the plaintiff the ability
       to participate in the management of FASI because minority shareholders are not entitled to so
       participate absent a shareholder agreement and the shareholder agreement the plaintiff attached
       to her amended complaint was unexecuted; and the plaintiff’s allegations regarding the
       “unauthorized” expenditures and terminated contracts were not sufficient to allege a breach of
       a fiduciary duty.
¶ 21       On July 17, 2019, FASI filed a motion for judgment on the pleadings, arguing that the
       plaintiff’s allegation against it in count I is identical to the allegation the circuit court dismissed
       against the individual defendants in its June 13, 2019, order. FASI incorporated the June 13,
       2019, order into its motion for judgment on the pleadings, arguing that the court’s reasoning
       in that order applied equally to it.
¶ 22       Only July 18, 2019, the circuit court granted FASI’s motion for judgment on the pleadings.
       The circuit court provided the plaintiff with an opportunity to once again amend her complaint,
       which she refused. At the plaintiff’s request, the circuit court entered an order dismissing her
       claims against FASI and the individual defendants “with prejudice.” This appeal followed.
¶ 23       On appeal, the plaintiff argues that the circuit court erred by dismissing her two claims
       against the individual defendants and granting judgment on the pleadings in favor of FASI on
       count I. We first address the circuit court’s decision to dismiss count I as to the individual
       defendants and enter judgment on the pleadings on count I in favor of FASI.

                                                      -5-
¶ 24       A motion to dismiss a complaint under section 2-615 of the Code (735 ILCS 5/2-615 (West
       2018)) attacks the legal sufficiency of a complaint based upon defects apparent on the face of
       the complaint. Bogenberger v. Pi Kappa Alpha Corp., 2018 IL 120951, ¶ 23. The critical
       inquiry is whether the allegations of the complaint, when construed in a light most favorable
       to the plaintiff, are sufficient to state a cause of action upon which relief may be granted. Id.
       In making this determination, all well-pleaded facts in the complaint must be taken as true. Id.
       Our supreme court has emphasized that Illinois is a fact-pleading jurisdiction that requires the
       plaintiff to allege sufficient facts “to bring a claim within a legally recognized cause of action.”
       Marshall v. Burger King Corp., 222 Ill. 2d 422, 429-30 (2006). A cause of action will not be
       dismissed on the pleadings unless it clearly appears that no set of facts can be proved which
       will entitle the plaintiff to recover. Beahringer v. Page, 204 Ill. 2d 363, 369 (2003). Our review
       is de novo. Bogenberger, 2018 IL 120951, ¶ 23.
¶ 25       Section 2-615(e) of the Code provides that “[a]ny party may seasonably move for judgment
       on the pleadings.” 735 ILCS 5/2-615(e) (West 2018). In general, a pleading motion claims
       that, even if all of the facts alleged by the opponent were true, movant is entitled to judgment.
       Christensen v. Wick Building Systems, Inc., 64 Ill. App. 3d 908, 912 (1978). A motion for
       judgment on the pleadings requires the circuit court to examine the pleadings to determine
       whether an issue of fact exists, or conversely, whether the controversy can be resolved as a
       matter of law. Crestview Builders, Inc. v. Noggle Family Ltd. Partnership, 352 Ill. App. 3d
       1182, 1184-85 (2004). We review de novo a decision to grant a motion on the pleadings. See
       Egan v. Steel, 137 Ill. App. 3d 539, 543 (1985).
¶ 26       The plaintiff argues that her amended complaint properly alleged a claim that the
       defendants violated her rights under section 7.75 of the Act (805 ILCS 5/7.75 (West 2018)),
       which states as follows:
                    “(b) Any person who is a shareholder of record shall have the right to examine, in
               person or by agent, at any reasonable time or times, the corporation’s books and records
               of account, minutes, voting trust agreements filed with the corporation and record of
               shareholders, and to make extracts therefrom, but only for a proper purpose. In order
               to exercise this right, a shareholder must make written demand upon the corporation,
               stating with particularity the records sought to be examined and the purpose therefor.
                    (c) If the corporation refuses examination, the shareholder may file suit in the
               circuit court *** to compel by mandamus or otherwise such examination as may be
               proper. If a shareholder seeks to examine books or records of account the burden of
               proof is upon the shareholder to establish a proper purpose. If the purpose is to examine
               minutes or the record of shareholders or a voting trust agreement, the burden of proof
               is upon the corporation to establish that the shareholder does not have a proper purpose.
                    (d) Any officer, or agent, or a corporation which shall refuse to allow any
               shareholder or his or her agent so to examine and make extracts from its books and
               records of accounts, minutes and records of shareholders, for any proper purpose, shall
               be liable to such shareholder, in a penalty of up to ten per cent [sic] of the value of the
               shares owned by such shareholder, in addition to any other damages or remedy afforded
               him or her by law. It shall be a defense to any action for penalties under this Section
               that the person suing therefor has within two years sold or offered for sale any list of
               shareholders of such corporation or any other corporation or has aided or abetted any
               person in procuring any list of shareholders for any such purpose, or has improperly

                                                    -6-
               used any information secured through any prior examination of the books and records
               of account, or minutes, or records of shareholders of such corporation or any other
               corporation.
                    (e) Upon the written request of any shareholder of a corporation, the corporation
               shall mail to such shareholder within 14 days after receipt of such request a balance
               sheet as of the close of its latest fiscal year and a profit and loss statement for such
               fiscal year; provided that if such request is received by the corporation before such
               financial statements are available, the corporation shall mail such financial statements
               within 14 days after they become available, but in any event within 120 days after the
               close of its latest fiscal year.” Id. § 7.75(b)-(e).
¶ 27        Thus, in order to state a claim, the plaintiff was required to allege that she (1) was a
       shareholder of FASI, (2) who made a written demand upon FASI, (3) stating with particularity
       the records she wished to examine, and (4) the purpose therefor.
¶ 28        The plaintiff contends that she made numerous demands for the books and records of FASI,
       provided a detailed list of the records requested, stated that the records were for the purposes
       of evaluating the price of her shares, and was refused the records.
¶ 29        The defendants respond that the plaintiff failed to allege she made a “written demand upon
       [FASI]” to “examine” its books and records at a reasonable time that was subsequently denied.
       They raise three primary arguments. First, they contend that the plaintiff failed to allege that
       she made a request to “examine” FASI’s books and records. Rather, they contend the exhibits
       demonstrate only that she made a demand for the records to be “produced,” which is not her
       statutory right under section 7.75(b) of the Act. Second, they argue that the vast majority of
       the plaintiff’s demands were not made to FASI, as is required by statute, but to the individual
       defendants’ lawyer. Third, the defendants contend that, even if the plaintiff did make a
       statutorily compliant request, she was never denied the right to examine the records. We
       ultimately agree with the defendants.
¶ 30        We begin by addressing the defendants’ argument that the plaintiff failed to state a claim
       because she demanded production of the records, not to examine them. The plain language of
       section 7.75(b) of the Act provides shareholders with the right to “examine, in person or by
       agent,” a corporation’s books and records. Id. § 7.75(b). The defendants are correct that, in
       each of the letters attached to the plaintiff’s complaint, she only ever demands that FASI’s
       records and books be “produced.” However, we do not believe that section 7.75(b) requires
       shareholders to say the magic word “examine” in order to be entitled to a corporation’s books
       and record. Moreover, in order for a shareholder to examine a corporation’s books and records,
       they must first be produced in some fashion. For instance, in Hagen v. Distributed Solutions,
       Inc., 328 Ill. App. 3d 132, 139, 146 (2002), this court found that a shareholder’s written request
       that “ ‘documents be provided’ ” to him pursuant to section 7.75 of the Act so that he may
       examine them was sufficient under the Act. Likewise, the plaintiff’s demand that specific
       books and records be “produced” is sufficient given the detailed nature of the request.
¶ 31        Nonetheless, even assuming that the plaintiff’s request for production of records is
       compliant with section 7.75(b) of the Act, that section also states that, in order to exercise the
       right to examine a corporation’s books and records, “a shareholder must make written demand
       upon the corporation.” 805 ILCS 5/7.75(b) (West 2018). Here, although the plaintiff made
       several written demands for books and records that she maintains were ignored, most of those
       letters were sent to the individual defendants’ attorney, not to FASI. It was not until August

                                                   -7-
       28, 2018, that the plaintiff made a demand of FASI via a letter to Coyle, in his capacity as
       FASI’s president and registered agent. Therefore, the plaintiff made, at most, “one written
       demand upon the corporation” for the books and records she is entitled to pursuant to section
       7.75(b) of the Act.
¶ 32       That said, the plaintiff was also required to allege that her request was refused, and she has
       not done so here. As the plaintiff’s complaint acknowledges, on October 1, 2018, FASI’s CPA
       sent her, Coyle, and Lichtenauer a copy of FASI’s balance sheet as of August 31, 2018, and a
       profit and loss statement from January through August 2018. On October 3, 2018, FASI’s CPA
       sent another e-mail with additional financial documents attached. On October 10, 2018, Coyle
       sent an e-mail to the plaintiff with still more financial information attached. The plaintiff filed
       the complaint giving rise to this appeal on the next day. Put simply, the plaintiff has not alleged
       that FASI, nor any agent or officer of FASI, refused her request for an examination of corporate
       books and records. Rather, the facts alleged show that the plaintiff’s sole request for FASI’s
       books and records directed to FASI was answered on the day she set as a deadline (October 1,
       2018) and more documents were produced in the subsequent week. Evidently unhappy with
       the content of the production, she filed this lawsuit. Even taking the facts in the light most
       favorable to the plaintiff, we cannot conclude that she alleged sufficient facts to state claim for
       a violation of section 7.75(b) of the Act.
¶ 33       In so holding, we acknowledge that in Hagen this court found that a shareholder was
       entitled to judgment even though he did not allege that the corporation explicitly refused his
       request. However, we find Hagen distinguishable on the grounds that here, unlike in Hagen,
       the plaintiff did not make multiple requests for records that were ignored for six months before
       she filed suit. Instead, as previously mentioned, the plaintiff made a sole request for books and
       records directed to FASI, and FASI produced some records on the deadline given. The plaintiff,
       unhappy with the production, filed this suit. We conclude that, based on these facts, the plaintiff
       has failed to allege that FASI, or any agent of officer thereof, refused her request to examine
       FASI’s books and records.
¶ 34       To be clear, the plaintiff is entitled, as a shareholder, to examine the records she has
       requested of FASI pursuant to section 7.75(b) of the Act. See id. However, the Act requires
       that, in order for the circuit court to issue a writ of mandamus or award damages, she must first
       allege that she was refused access. See id. § 7.75(c), (d). She has not done so here. Accordingly,
       the circuit court did not err by dismissing count I as to the individual defendants or granting
       judgment on the pleadings in favor of FASI.
¶ 35       The plaintiff next argues that the circuit court erred by granting the individual defendants’
       motion to dismiss count II: a derivative claim brought on behalf of FASI that alleged the
       individual defendants breached their fiduciary duties. Once again, our review of a circuit
       court’s decision to grant a motion to dismiss pursuant to section 2-615 of the Code is de novo.
       Bogenberger, 2018 IL 120951, ¶ 23.
¶ 36       A shareholder derivative suit permits an individual shareholder to bring suit “ ‘to enforce
       a corporate cause of action against officers, directors, and third parties.’ ” (Emphasis in
       original.) Kamen v. Kemper Financial Services, Inc., 500 U.S. 90, 95 (1991) (quoting Ross v.
       Bernhard, 396 U.S. 531, 534 (1970)). It was intended as a vehicle to allow shareholders to
       protect a corporation’s interests from “ ‘faithless directors and managers.’ ” Id. (quoting Cohen
       v. Beneficial Industrial Loan Corp., 337 U.S. 541, 548 (1949)). However, to preserve the
       balance of control, the shareholder must first demonstrate as a precondition to bringing suit

                                                    -8-
       that she made a demand on the corporation to pursue the action and that the demand had been
       refused or that the demand was “ ‘excused by extraordinary conditions.’ ” Id. at 96 (quoting
       Ross, 396 U.S. at 534). “The demand requirement is not merely a matter of procedure.” In re
       Huron Consulting Group, Inc., 2012 IL App (1st) 103519, ¶ 17.
¶ 37       The plaintiff argues that the circuit court erred by first finding that she failed to allege
       sufficient facts to show that demand on FASI to bring the suit was excused by extraordinary
       conditions. According to the plaintiff, she properly alleged that demand on the FASI board of
       directors to bring suit would be a futile and useless act because the individual defendants would
       not bring suit against themselves. The individual defendants respond that the plaintiff failed to
       allege who FASI’s board of directors were and, therefore, failed to allege why demand would
       be useless.
¶ 38       In the plaintiff’s amended complaint, she stated that “[d]emand on the Board of Directors
       of [FASI] to bring this suit against the individual defendants herein would be a futile and
       useless act, in that defendants committed the wrongs complained of herein, have profited from
       the wrongs, and defendants would not bring suit against themselves.” We first note that the
       individual defendants are correct in that the plaintiff never alleged who was on FASI’s board
       of directors and why they would not bring suit against the individual defendants. Instead, the
       plaintiff seems to be arguing that, because the individual defendants hold a majority of the
       shares in FASI and are the defendants in this suit, it naturally follows that they would not have
       allowed FASI to bring this suit and, as such, a demand would have been futile.
¶ 39       The plaintiff is correct that “[d]emand is excused where the majority of the directors are
       themselves involved in the matters complained of, so that it is evident that the demand would
       be unavailing.” (Internal quotation marks omitted.) Valiquet v. First Federal Savings & Loan
       Ass’n of Chicago, 87 Ill. App. 3d 195, 200 (1979). However, the plaintiff is still required to
       “plead facts, not conclusions.” Id. Additionally, “courts assess futility ex ante rather than
       ex post.” Kamen v. Kemper Financial Services, Inc., 939 F.2d 458, 462 (7th Cir. 1991).
¶ 40       Here, the plaintiff did not allege who sat on FASI’s board of directors. The plaintiff’s
       complaint alleged only that Coyle is President and Secretary of FASI, as well as a shareholder,
       and that Lyngen and Lichtenauer are also shareholders. There is no allegation that Lyngen or
       Lichtenauer are involved in the operation of FASI in any way. The plaintiff appears to be
       conflating the board of the directors and the shareholders, and while it is possible that the
       individual defendants also sit on the board of directors and, therefore, would be resistant to
       bringing suit against themselves, the plaintiff has not specifically alleged that is the case here.
       We reiterate that “[t]he demand requirement is not merely a matter of procedure.” In re Huron
       Consulting Group, Inc., 2012 IL App (1st) 103519, ¶ 17. The plaintiff was required to plead
       facts, not conclusions, which she has failed to do. We, therefore, conclude that the plaintiff has
       failed to allege with particularity facts showing that the demand requirement was excused.
¶ 41       That said, even if we were to find that the plaintiff sufficiently alleged that demand would
       have been futile, we still conclude that she failed to state a claim that the individual defendants
       breached their fiduciary duty.
¶ 42       To state a claim for breach of fiduciary duty, the plaintiff must allege the following: “(1)
       that a fiduciary duty exists; (2) that the fiduciary duty was breached; and (3) that such breach
       proximately caused the injury of which the party complains.” Lawlor v. North American Corp.
       of Illinois, 2012 IL 112530, ¶ 69.

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¶ 43        Here, the plaintiff argues that FASI is a closely held corporation and, as a result, the
       individual defendants owed fiduciary duties to FASI. Additionally, she argues that Coyle, as
       an officer of FASI, owed FASI a fiduciary duty of loyalty. We agree with the plaintiff that
       Coyle, as president and secretary of FASI, owed a duty of loyalty to FASI. See Cooper Linse
       Hallman Capital Management, Inc. v. Hallman, 368 Ill. App. 3d 353, 357 (2006) (explaining
       that a corporate officer owes a duty of loyalty to their corporate employer). However, it is less
       clear that FASI is a closely held corporation. If, in fact, FASI is not a closely held corporation,
       then the plaintiff has not alleged that Lichtenauer and Lyngen, as minority shareholders, owed
       FASI a fiduciary duty. See Dowell v. Bitner, 273 Ill. App. 3d 681, 690 (1995) (“[I]n general, a
       mere owner of stock does not owe a fiduciary duty to the corporation.”).
¶ 44        To begin, the plaintiff does not allege that FASI has elected to be a closely held corporation
       under section 2A.05 of the Act (805 ILCS 5/2A.05 et seq. (West 2018)). Rather, she argues
       that FASI is a closely held corporation under common law because its stock is not sold openly
       on the market. In Hagshenas v. Gaylord, 199 Ill. App. 3d 60, 69 (1990), the Second District
       applied common-law principles applicable to closely held corporations despite the fact that the
       company at issue was not subject to a previous version of the Act. The Hagshenas court relied
       on the definition of a close corporation as “ ‘one in which the stock is held in a few hands, or
       in a few families, and wherein it is not at all, or only rarely, dealt in by buying or selling,’ ”
       and also the fact that the shareholders elected themselves directors and officers and participated
       in the day-to-day operations. Id. (quoting Galler v. Galler, 32 Ill. 2d 16, 27 (1964)); see also
       Illinois Rockford Corp. v. Kulp, 41 Ill. 2d 215 (1968). Here, the plaintiff alleged that FASI’s
       shares were in the hands of only four individuals and the “stock is not bought and sold on the
       open market.” However, only one of the four shareholders, Coyle, is alleged to be involved
       with the day-to-day operations of FASI. Therefore, it is far from certain whether FASI is a
       closely held corporation, in which case Lynden and Lichtenauer would not owe FASI a
       fiduciary duty.
¶ 45        Regardless, even assuming, arguendo, that the individual defendants owed FASI a
       fiduciary duty, the plaintiff was also required to allege that the individual defendants breached
       those fiduciary duties. She failed to do so here. The plaintiff’s amended complaint alleged that
       the individual defendants breached their fiduciary duties in the following ways: (1) “freezing
       out” the plaintiff by denying her “the ability to participate in the operation and management
       of” FASI, denying her access to FASI’s books and records, and “blocking [the plaintiff’s]
       access to [FASI’s] on-line financial and banking records”; (2) “unauthorized and wasted
       expenditures made by [FASI] to Macy’s Department Store”; (3) “several questionable alarm
       part expenditures”; (4) “unauthorized bonus payments”; (5) “unexplained credit card
       purchases and sales of [FASI] vehicles”; (6) terminating or transferring client contracts; and
       (7) “preparing balance sheet entries that evidence potentially improper distributions or
       inadequate bookkeeping.” We take each in turn.
¶ 46        One of the plaintiff’s primary allegations is that the individual defendants were “freezing”
       her out of FASI by denying her the ability to participate in the operation and management of
       FASI, blocking her access to FASI’s on-line financial and banking records, and denying her
       access to FASI’s books and records. We have already addressed the plaintiff’s claims regarding
       the books and records above, and we conclude once again that, because the plaintiff failed to
       allege that the individual defendants ever denied her access to such records, she cannot state a
       claim that they breached their fiduciary duties. Turning to the plaintiff’s other contentions, we

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       note that the plaintiff is a minority shareholder and, therefore, is not entitled to control the
       operations of FASI absent a shareholder agreement. See Gidwitz v. Lanzit Corrugated Box Co.,
       20 Ill. 2d 208, 215 (1960). Recognizing this fact, the plaintiff attached a copy of an unsigned
       shareholder agreement to her amended complaint that she contends provided her with the right
       to participate in the management of FASI and forms the basis of her claim that the individual
       defendants breached their fiduciary duties by “freezing” her out. The individual defendants
       respond that no such agreement existed and note that the attached shareholder agreement is
       unsigned and has handwritten notations and Microsoft Word comments in the margins. We
       agree with the individual defendants.
¶ 47       The Act requires that a shareholder agreement be “in writing.” 805 ILCS 5/7.71(a) (West
       2018). As the shareholder agreement attached here is unsigned, features handwritten notations,
       and Microsoft Word comments, it does not satisfy the Act’s requirement that an agreement
       between parties be “in writing.” Thus, the plaintiff’s sole right as a shareholder is “to
       participate, according to the amount of [her] stock, in selection of the management of the
       corporation.” Gidwitz, 20 Ill. 2d at 215. The plaintiff has failed to allege specific facts showing
       that the individual defendants prevented her from participating, consistent with the amount of
       shares she owns, in selecting the management of FASI. Illinois is a fact-pleading jurisdiction,
       which requires the plaintiff to allege sufficient facts “to bring a claim within a legally
       recognized cause of action.” See Marshall, 222 Ill. 2d at 429-30 (citing cases). The plaintiff
       has failed to do so here and, therefore, the circuit court did not err in concluding that she failed
       to state a claim for breach of fiduciary duty based on these allegations.
¶ 48       The plaintiff next alleged a breach of fiduciary duty based on “unauthorized and wasted
       expenditures made by [FASI] to Macy’s Department Store.” In support of this claim, the
       plaintiff attached bank records that she attests are for FASI’s checking account with entries
       that state “Auto Pymt Macys” and “CITIAUTFDR.” As the individual defendants point out,
       nothing about the bank statement indicate that they reflect purchases at Macy’s Department
       Store. According to the individual defendants, the payments went to “Citi, the issuer of the
       credit card that can be used anywhere, including for business expenses.” Regardless of whether
       that is accurate, the fact remains that the plaintiff has failed to allege specific, supporting facts
       upon which to base an accusation that the expenditures were “unauthorized and wasted.” There
       is no allegation that what was purchased did not have a legitimate business purpose. In fact,
       there is no allegation as to what was purchased. The plaintiff’s sole basis for alleging these
       purchases were “unauthorized or wasted” is her apparent belief about the store where the
       purchase occurred. Once more, we conclude that the circuit court did not err in dismissing this
       claim. See id.
¶ 49       The plaintiff’s next allegation is that she discovered “several questionable alarm part
       expenditures.” However, the plaintiff failed to allege any details regarding the expenditures,
       such as who made the expenditures, what the expenditures were, when the expenditures were
       made, what she found “questionable” about the expenditures, and how did the expenditure
       amount to a breach of fiduciary duty. Put simply, this is not fact-pleading, and the circuit court
       did not err in dismissing this allegation.
¶ 50       We find that several of the plaintiff’s remaining allegations suffer from the same flaw: no
       specific factual support. Specifically, the plaintiff’s allegations regarding “unauthorized bonus
       payments,” “unexplained credit card purchases and sales of [FASI] vehicles,” and terminating
       or transferring “client contracts” all fail to allege specific facts to support a claim that this

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       conduct amounted to a breach of fiduciary duty. In other words, there is simply no facts alleged
       to determine who engaged in the conduct, what the conduct actually consisted of, and why it
       was a breach of a fiduciary duty. As such, the circuit court did not err in dismissing this
       allegation for failing to state a claim against the individual defendants.
¶ 51       Lastly, the plaintiff alleged a breach of fiduciary duty based on “preparing balance sheet
       entries that evidence potentially improper distributions or inadequate bookkeeping.” Put
       simply, the plaintiff cannot state a claim for breach of fiduciary duty by alleging “potentially
       improper” conduct. This pure speculation falls far short of Illinois’s fact-pleading standard.
       See id.
¶ 52       In sum, we conclude that the circuit court did not err when it granted the individual
       defendants’ motion to dismiss count II of the plaintiff’s amended complaint. The plaintiff
       failed to allege that the she was excused from making a precondition demand on FASI, and
       she failed to allege sufficient facts to state a claim against the individual defendants for
       breaching their fiduciary duties.
¶ 53       For these reasons, we affirm the judgment of the circuit court.

¶ 54      Affirmed.

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