Balensiefen v. Princeton National Bancorp d/b/a Citizens National Bank

Filing 18

ORDER entered by Judge James E. Shadid on 6/23/11 - The Court now ADOPTS the Report & Recommendation 13 of the Magistrate Judge in its entirety. Accordingly Defendant's Motion to Dismiss 10 is DENIED. The matter is REFERRED to Magistrate Judge Cudmore for further proceedings. (SF, ilcd)

E-FILED

Thursday, 23 June, 2011 11:58:17 AM
Clerk, U.S. District Court, ILCD
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF ILLINOIS

STEPHANIE BALENSIEFEN,

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Plaintiff,
vs.
PRINCETON NATIONAL BANCORP,
INC. d/b/a CITIZENS NATIONAL BANK
OF PRINCETON, a National Banking
Association,
Defendant,

Case No. 10 CV01263
The Honorable James E. Shadid
Magistrate Judge G. Cudmore

ORDER
On March 30, 2011, a Report and Recommendation was filed by Magistrate Judge Byron
G. Cudmore in the above captioned case recommending that Defendant’s Motion to Dismiss be
denied. Defendant Princeton National Bancorp, Inc. d/b/a Citizens National Bank of Princeton
(“Citizens”) filed a timely objection to the Report and Recommendation and this Order follows.
BACKGROUND
The relevant facts were sufficiently set forth in the comprehensive Report &
Recommendation of the Magistrate Judge and need not be restated here. Suffice it to say that this
action arises out of alleged sex discrimination and retaliation by Citizens against Stephanie
Balensiefen under Title VII of the Civil Rights Act of 1964 and the Illinois Human Rights Act.
42 U.S.C. § 2000e-2(a)(1); 775 ILCS 5/1-102(A)(2008). It also arises out of alleged retaliation
against Balensiefen under Section 20 of the Illinois Whistleblower Act (“IWA”). 740 ILCS
174/20 (2008). As indicated by the Report and the Plaintiff’s Response to Citizens Motion to
Dismiss, the Plaintiff’s state law claim may additionally—or more accurately—fall under
Section 15 of the IWA.

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Balensiefen, as a citizen of Florida, originally brought this action before the Court based
on diversity jurisdiction. In her Second Amended Complaint, Plaintiff added Title VII claims to
her allegations—thereby brining her complaint within the scope of federal question jurisdiction.
Supplemental jurisdiction over Plaintiff’s IWA claims exists pursuant to 28 U.S.C. § 1367.
Plaintiff twice amended her complaint and Defendant brought a Motion to Dismiss against
Plaintiff’s Second Amended Complaint. The Magistrate Judge recommended that the Motion to
Dismiss be denied regarding all of the Plaintiff’s claims. Citizens filed timely objections to the
Report and Recommendation. Balensiefen filed a response to Citizens objections, and this Order
follows.
STANDARD OF REVIEW
A district court reviews de novo any portion of a magistrate judge’s report and
recommendation to which written objections have been made. See Fed. R. Civ. P. 72(b). “The
district judge may accept, reject, or modify the recommended decision, receive further evidence,
or recommit the matter to the magistrate judge with instructions.” Id.
ANALYSIS
Citizens objects to the Report and Recommendation (“Report”) with regard to three
matters. First, Citizens takes issue with the Report’s recommendation that Plaintiff’s Second
Amended Complaint can be supplemented with allegations in Plaintiff’s Answer to state a claim
under Section 15 of the IWA. Second, Citizens objects to the Report’s finding that Plaintiff’s
internal reports of Citizens’ violations of the Truth in Lending Act state a claim pursuant to
Section 20 of the IWA. Third, Citizens opposes the Report’s finding that Plaintiff’s Second
Amended Complaint complies with Rules 8(a) and 10(b) of the Federal Rules of Civil Procedure.
Each objection will be addressed in turn.

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I.

FACTS EXTERNAL TO PLAINTIFF’S SECOND AMENDED COMPLAINT
UTILIZED TO OPPOSE A MOTION TO DISMISS
Citizens maintains that Balensiefen’s Second Amended Complaint insufficiently states a

plausible claim under Section 15 of the IWA. Citizens further contends that, given this alleged
failure in limine to state a plausible claim, facts outside the Plaintiff’s Second Amended
Complaint cannot be used to flesh out her claims such that they withstand Citizens’ Motion to
Dismiss.
This objection arises out of the Plaintiff’s decision to frame her IWA claims under
Section 20 of the IWA. Section 20 prohibits employers from retaliating against employees who
refuse “to participate in activity that would result in a violation of a State or federal law, rule, or
regulation.” 740 ILCS 174/20 (2008). In her Complaint, Amended Complaint, and Second
Amended Complaint, the Plaintiff suggests that she refused to participate in violations of the
Truth in Lending Act by internally reporting nonconforming activity.
As the Magistrate Judge noted, it is difficult to understand how an internal report could
be construed as a refusal to participate in an illegal activity. It seems likely that the Plaintiff’s
IWA allegations would fall more naturally under Section 15(b) of the statute which prohibits
retaliation where “an employee disclos[es] information to a government or law enforcement
agency [and] the employee has reasonable cause to believe that the information discloses a
violation of a State or federal law, rule, or regulation.” 740 ILCS 174/15 (2008). To be
actionable, retaliation under Section 15 requires that the complaining party reported a violation
to a government or law enforcement agency; merely reporting activity to an internal authority
has been held insufficient. See, e.g., Zelman v. Hinsdale Twp. High Sch. Dist. 86, 10 C 00154,
2010 WL 4684039, at *2 (N.D. Ill. Nov. 12, 2010)(“Under the IWA, there is no cause of action
where an employee reveals information only to his or her employer.”). Therefore, without any

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indication in her Second Amended Complaint that Balensiefen made an external report of any
alleged violations, it initially appears that she failed to state an actionable claim of retaliation.
However, in her Response Plaintiff asserts that she reported violations of the Truth in
Lending Act to the Federal Deposit Insurance Corporation. Because Balensiefen’s first mention
of an external report arises within her Response, Citizens maintains this portion of Balensiefen’s
allegations should not be considered by the court when reviewing the sufficiency of Plaintiff’s
Complaint. It argues that, if the Plaintiff’s allegations are not plausible independent of facts
outside her complaint, her complaint is insufficient and fairly subject to dismissal. To support
this argument, Citizens relies on Reynolds v. CB Sports Bar, Inc., 623 F.3d 1143, 1147 (7th Cir.
2010). Reynolds held that:
[A]lthough the plaintiff is required to plead more than bare legal conclusions to
survive a motion to dismiss, once the plaintiff pleads sufficient factual material to
state a plausible claim—that is, sufficient to put the defendant on notice of a
plausible claim against it—nothing in Iqbal or Twombly precludes the plaintiff
from later suggesting to the court a set of facts, consistent with the well-pleaded
complaint, that shows that the complaint should not be dismissed.
Reynolds, 623 F.3d at 1147 (internal citations omitted).
Citizens seems to construe the plausibility standard emerging in Reynolds as one
demanding an exact alignment of legal theories and facts. Citizens also seems to construe the
standard as a rigid bar to the introduction of additional facts. However, this interpretation of the
plausibility standard is not consistent with that set forth by Bell Atl. Corp. v. Twombly, 550 U.S.
544 (2007), or Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009), as these cases “do not undermine the
principle that plaintiffs in federal courts are not required to plead legal theories.” Hatmaker v.
Memorial Medical Center, 619 F.3d 741, 743 (7th Cir. 2010).
Furthermore, Citizens interpretation of the plausibility standard seems to conflict with the
Reynolds standard itself. In Reynolds, the court found that, although the plaintiff “could have

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included more factual material in her complaint, she had done enough to nudge her claim…over
the line to plausible” and had sufficiently put the defendant on notice of her claim against it.
Reynolds, 623 F.3d at 1147. The plaintiff was free, on appeal, to present additional facts to
support her claims against a motion to dismiss. Id.
Here, Balensiefen’s complaint was sufficient to notify Citizens that a claim of retaliation
was being brought against it pursuant to the IWA. Whether the complaint did so under Section
15 or Section 20 does not constitute a dispositive matter as “even citing the wrong statute need
not be a fatal mistake, provided the error is corrected in response to the defendant’s motion for
summary judgment and the defendant is not harmed by the delay in correction.” Hatmaker, 619
F.3d at 743 (citing Ryan v. Illinois Dept. of Children and Family Serv., 185 F.3d 751, 764 (7th
Cir. 1999)).
There does not here appear to be any reason to regard Plaintiff’s failure to state her
claims under Section 15(b) as a “fatal” error. Id. Rather, the Plaintiff is granted leave to amend
her complaint to specifically include a Section 15(b) allegation.
II.

PLAINTIFF’S INTERNAL COMPLAINTS UTILIZED TO STATE A CLAIM
UNDER SECTION 20 OF THE IWA
Citizens objects to the Magistrate Judge’s recommendation that Plaintiff’s internal reports

can form the basis of a claim pursuant to Section 20 of the IWA. Plaintiff asserts that “the only
way…to cease participation in the systemic failure to provide Truth in Lending disclosures” was
to make an internal report to one of the organization’s vice presidents. Pl.’s 2nd Am. Compl. 15.
Citizens maintains that these internal complaints cannot lead to actionable retaliation under the
IWA.

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Indeed, there are many cases in which internal complaints were found to be insufficient
to state a claim under Section 15 of the IWA. See, e.g., Clark v. Moline Public Library, 09-4054,
2010 WL 331726 (C.D. Ill. Jan. 26, 2010) (dismissing plaintiff’s IWA claim as plaintiff reported
alleged misconduct only to her employer); See, e.g., Riedlinger v. Hudson Respiratory Care,
Inc., 478 F.Supp.2d 1051, 1054 (N.D.Ill.2007) (holding that there is no cause of action where
plaintiff reveals alleged misconduct only to plaintiff’s employer). There is also caselaw
indicating that internal complaints are insufficient to state a claim under Section 20. See
Robinson v Alter Barge, 513 F.3d 668, 670 (7th Cir. 2008) (finding that plaintiff’s internal
complaints of the illegal drug use of his coworkers failed to provide a basis for actionable
retaliation under Section 20 of the IWA).
However, unlike these cases, Balensiefen suggests that her professional role was intertwined
with the violations such that her only avenue of “refusing to participate” would be to make
complaints within the organization. Contrary to the situation in Robinson—where plaintiff’s
silence and continued work in the presence of illegal drug use by his coworkers was not an
illegal activity—here Balensiefen’s silence and continued cooperation with a system in violation
of the Truth in Lending Act can be construed as an illegal course of conduct.
Therefore, the Court agrees with the Magistrate Judge that that it would be premature to
dismiss Plaintiff’s potential Section 20 claim. The possibility that Plaintiff’s conduct, given her
individual circumstances, could constitute her only avenue of “refusing to participate” is not
implausible. Rather it deserves further development in discovery. Therefore, Citizens’ Motion to
Dismiss is denied in this respect.

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III.

FEDERAL RULES 8(a) AND 10(b)

Citizens has objected to the Report’s finding that Plaintiff’s complaint adequately conforms
to Rule 8(a) and Rule 10(b). Federal Rule of Civil Procedure 8(a) does not demand an exhaustive
statement of a claim. Rather, a “short and plain statement showing that the pleader is entitled to
relief” is all that is required. Fed. R. Civ. P. 8(a)(2). While Twombly certainly altered federal
pleading requirements, the Seventh Circuit has understood the case as holding “only that at some
point the factual detail in a complaint may be so sketchy that the complaint does not provide the
type of notice of the claim to which the defendant is entitled under Rule 8.” Airborne Beepers &
Video, Inc. v. AT & T Mobility LLC, 499 F.3d 663, 667 (7th Cir. 2007). Certainly,
Balensiefen’s allegations are not so “sketchy” that Citizens can justifiably claim it was not on
notice as to the nature of Balensiefen’s allegations.
Additionally, Federal Rule of Civil Procedure 10(b) requires pleading in separate counts for
“each claim founded on a separate transaction or occurrence” only where doing so would
“promote clarity.” Fed. R. Civ. P. 10(b). As the Report notes, Plaintiff’s allegations are rooted in
many of the same transactions and occurrences. Given the inherent overlap in the factual
background of Plaintiff’s allegations, it is not inappropriate for Plaintiff to have structured the
Complaint as it stands. The paragraph structure of the Complaint does not to interfere with the
clarity of the overall document—particularly as Paragraph 48 of the Second Amended Complaint
clearly identifies the general basis on which the Plaintiff hinges her allegations.
The Magistrate Judge was correct in recommending that the Complaint is “clear enough as it
stands.” Report 12. The Plaintiff’s complaint afforded the Defendant with sufficient notice to
file an answer and to begin defending itself against Balensiefen’s allegations. Therefore, at this
stage, the Plaintiff has met what is required of her under the Federal Rules.

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CONCLUSION
For the reasons set forth herein, the Court now ADOPTS the Report & Recommendation
[#13] of the Magistrate Judge in its entirety. Accordingly, Defendant’s Motion to Dismiss [#10]
is DENIED. The matter is REFERRED to Magistrate Judge Cudmore for further proceedings.
ENTERED this 23rd day of June, 2011.

s/ James E. Shadid
James E. Shadid
United States District Judge

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