Zaremski v. American Arbitration Association, Inc.

Filing 40

MEMORANDUM Opinion and Order Written by the Honorable Gary Feinerman on 5/9/2012.Mailed notice.(jlj)

UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
MILES ZAREMSKI,
Plaintiff,
vs.
AMERICAN ARBITRATION ASSOCIATION, INC.,
Defendant.

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11 C 5221
Judge Feinerman

MEMORANDUM OPINION AND ORDER
Plaintiff Miles J. Zaremski worked as an arbitrator on a series of arbitrations pursuant to
an agreement with Defendant American Arbitration Association, Inc. (“AAA”). The two parties
to the arbitrations failed to pay Zaremski’s monthly invoices, Zaremski refused to proceed with
the arbitrations, AAA removed him as an arbitrator, and Zaremski sued AAA, seeking to recover
the unpaid balance of his invoices as well as the fees he lost due to his allegedly wrongful
removal. AAA has moved to dismiss the complaint under Federal Rule of Civil Procedure
12(b)(6). The motion is granted in part and denied in part.
Background
The well-pleaded facts alleged in the complaint are assumed true on a Rule 12(b)(6)
motion. See Reger Dev., LLC v. Nat’l City Bank, 592 F.3d 759, 763 (7th Cir. 2010). Also
pertinent at the Rule 12(b)(6) stage are exhibits attached to the complaint, see Fed. R. Civ. P.
10(c); Witzke v. Femal, 376 F.3d 744, 749 (7th Cir. 2004), and exhibits attached to the parties’
briefs that are “referred to” in the complaint and “central to [Plaintiff’s] claim,” Wright v.
Associated Ins. Cos., 29 F.3d 1244, 1248 (7th Cir. 1994). See Hecker v. Deere & Co., 556 F.3d
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575, 582 (7th Cir. 2009). To the extent an exhibit contradicts the complaint’s allegations, the
exhibit takes precedence. See Forrest v. Universal Sav. Bank, F.A., 507 F.3d 540, 542 (7th Cir.
2007).
Zaremski is an arbitrator with a specialty in Medicare. Doc. 1 at ¶ 5. AAA invited
Zaremski to arbitrate a set of ten Medicare Demonstration Project cases between the State of
New York and the federal Center for Medicare & Medicaid Services (“CMS”), which were
scheduled to commence the week of February 15, 2011. Id. at ¶ 6. Zaremski indicated that he
was interested. Id. at ¶ 11. The AAA case manager, Karen Fontaine, informed Zaremski that the
cases were governed by an AAA rule providing that “billing arrangements must be made through
the AAA and not with any party.” Id. at ¶ 13. In November 2010, AAA sent Zaremski his
appointment papers, consisting of a Notice of Appointment and Notice of Compensation
Agreement. Id. ¶¶ 6, 15-16, 18; Doc. 16 at 29-34.
The Compensation Agreement provided that the parties to the arbitrations were
responsible for paying Zaremski, and exculpated AAA from liability for any non-payment:
“Payment for your compensation is the obligation of the parties and it is understood that the
[AAA] has no liability, direct or indirect, for such payment.” Doc. 16 at 30. The agreement then
set forth the procedures by which Zaremski would be paid, and reiterated that AAA was not
liable for any non-payment:
Unless you specify otherwise, the parties are advised that deposits are due
30 days prior to the first hearing. No later than two weeks prior to the
hearing, the Case Manager will advise you of the total amount on deposit.
Should the parties fail to make deposits in a timely manner, you must
determine whether to go forward or suspend the proceedings until such time
as deposits have been made. …

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…
… Your bills should be submitted in a format that is presentable to the
parties, should detail the dates on which the charges were incurred and must
correspond with the terms of compensation outlined herein. Upon receipt,
the AAA will release payment from the amounts deposited by the parties.
Should there be insufficient funds on deposit, you will not receive payment
until the parties have made additional deposits. …
In the event your Award is delivered prior to payment by the parties of the
agreed upon compensation, the [AAA] is authorized but not obligated to
seek to collect these monies on your behalf by all lawful means to represent
you in any action or proceeding for such recovery and to file a claim in any
bankruptcy or insolvency proceeding for such monies. The [AAA] may
prosecute and receive any recovery on behalf of the undersigned and has full
authority to compromise or settle such claims as may be, in its discretion,
appropriate. However under no circumstances whatsoever will the [AAA]
be liable for any failure to collect any or all the monies due.
Ibid. Prior to executing the appointment papers, Zaremski told Fontaine that he would accept the
appointment only “if his normal billing for fees and costs are followed as reflected in monthly
billing to be paid within thirty days thereafter.” Doc. 1 at ¶ 15. Fontaine agreed, and Zaremski
signed the Compensation Agreement, but only after adding “Billing to be monthly per
arrangement with the AAA.” Ibid.; see also Doc. 16 at 31.
In late November 2010, Zaremski began preparing for the upcoming arbitrations. On
December 1, 2010, Zaremski tendered invoices to Fontaine for his November 2010 work,
expecting to be paid within thirty days. Doc. 1 at ¶ 20. Zaremski subsequently submitted
monthly invoices for his work in December 2010, January 2011, February 2011, and March
2011. Id. at ¶ 22. The total bill came to $135,072.
Payment of the invoices was repeatedly delayed, prompting much back and forth between
Zaremski and AAA. On December 21, 2010, Fontaine emailed Zaremski that she had “invoiced

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the parties for [November 2010], there should not be a problem getting paid for the time already
spent. So keep sending the invoices as you incur time.” Id. at ¶ 21. On January 7, 2011, she
informed Zaremski that he should send all invoices to AAA and not the parties; she also told him
for the first time that “the government does not provide the AAA with deposits by which
Zaremski would receive his compensation.” Id. at ¶¶ 24-25. One week later, Fontaine emailed
Zaremski that the State of New York did not foresee any problems with the payment and that she
would update him as soon as AAA received the “necessary forms” from the State. Id. at ¶ 26.
On January 26, Fontaine emailed Zaremski that she had received the forms and was processing
them. Id. at ¶ 27. Two days later, she informed Zaremski that she had sent the forms to the
State. Id. at ¶ 28.
On February 4, 2011, not having received any payment, Zaremski entered an order
continuing the proceedings until March 22. Id. at ¶ 31. On February 8, Fontaine emailed
Zaremski, saying that she was processing the latest invoice for January 2011, noting that the State
had been reviewing an earlier invoice, and assuring him that “invoicing will be completed this
week.” Id. at ¶ 32. Three days later, she emailed Zaremski that “[t]he invoices have been
submitted to both CMS and NY. I have calls and emails out to both (sic) agency to get update as
soon as I receive update I will advise.” Id. at ¶ 33. On March 8, Fontaine reiterated to Zaremski
that she had been following up with the parties about payment. Id. at ¶ 34.
On March 10, 2011, Zaremski cancelled the arbitrations on the ground that he had not
been paid. Id. at ¶ 35. On March 15, Fontaine emailed Zaremski to say that she was processing
his most recent invoices for February 2011. Id. at ¶ 36. A couple weeks later, counsel for AAA
told Zaremski that the invoices contained errors that “must be corrected before final invoices can
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be provided to the parties for processing.” Id. at ¶ 37. On May 12, at AAA’s request, Zaremski
resubmitted all of his invoices in a different format. Id. at ¶ 22. On July 30, AAA issued a check
to Zaremski for $62,692.50. Id. at ¶ 38. In the meantime, on June 3, 2011, AAA removed
Zaremski as the arbitrator for the cases. Id. at ¶ 70.
Zaremski filed this suit on August 1, 2011. In December 2011, AAA tendered another
check to Zaremski for $62,692.50; AAA believes that this is the balance due Zaremski on his
invoices, while Zaremski claims that the two checks are $9,687 short. Docs. 25-1, 30. In
addition to pursuing that alleged balance, Zaremski seeks the fees he lost due to AAA’s allegedly
improper removal of him from the arbitrations.
Discussion
Zaremski’s complaint purports to state seven counts, all sounding in state law. AAA has
moved to dismiss all seven counts.
I.

Quasi-Contract Claims (Counts II, III, and IV)
The complaint does not articulate a straightforward breach of contract claim for what

Zaremski believes to be the unpaid portion of his invoices. This omission no doubt reflects
Zaremski’s recognition that the Compensation Agreement unambiguously exculpates AAA from
such liability. In an effort to avoid the exculpatory clause, the complaint in Counts II through IV
sets forth three quasi-contract causes of action—quantum meruit, promissory estoppel, and unjust
enrichment—that seek to recover the unpaid amounts.
Illinois law holds that a plaintiff may not pursue quasi-contract claims if his relationship
with the defendant is governed by an express contract. See Hess v. Kanoski & Assocs., 668 F.3d
446, 455 (7th Cir. 2012) (quantum meruit and unjust enrichment); Dumas v. Infinity Broad.
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Corp., 416 F.3d 671, 677, 678 n.9 (7th Cir. 2005) (“Under Illinois law, a claim for promissory
estoppel will only succeed where all the other elements of a contract exist, but consideration is
lacking. … As this court has noted, to allow the doctrine of promissory estoppel to be invoked
where consideration exists, ‘becomes a gratuitous duplication or, worse, circumvention of
carefully designed rules of contract law.’”) (quoting All-Tech Telecom, Inc. v. Amway Corp., 174
F.3d 862, 869 (7th Cir. 1999)); People ex rel. Hartigan v. E & E Hauling, Inc., 607 N.E.2d 165,
177 (Ill. 1992) (“Because unjust enrichment is based on an implied contract, where there is a
specific contract which governs the relationship of the parties, the doctrine of unjust enrichment
has no application.”) (internal quotation marks omitted). Zaremski’s relationship with AAA is
governed by the Compensation Agreement. Doc. 1 at ¶ 15; Doc. 16 at 31. It follows that the
quasi-contract claims are barred.
Zaremski opposes this result by arguing that the Compensation Agreement is invalid for
lack of consideration. The argument is incorrect, for the agreement imposed identifiable
obligations on both parties. Zaremski agreed to arbitrate the cases, and AAA agreed to allow
Zaremski to arbitrate the cases. Id. at 30. AAA effectively served as a broker, matching those
seeking arbitration services with arbitrators experienced in the relevant area. AAA also was
responsible for invoicing the arbitration parties and for releasing payment to Zaremski. Ibid.
(“Upon receipt [of the bills], the AAA will release payment from the amounts deposited by the
parties.”). Given the obligations imposed on AAA, the Compensation Agreement does not fail
for lack of consideration. And contrary to Zaremski’s submission, the agreement is not rendered
illusory by the fact that it exculpates AAA from liability in the event Zaremski is not paid. See
Rutter v. Arlington Park Jockey Club, 510 F.2d 1065, 1068 (7th Cir. 1975) (“It would not be an
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illusory contract to agree to provide [fire] protection but be exculpated from negligence. The
contract would still require that some fire protection be rendered.”).
Zaremski next argues that the Compensation Agreement is void because it was
fraudulently induced. The court will assume for present purposes that there was fraudulent
inducement. But fraudulent inducement renders a contract voidable, not void. See Halla v. Chi.
Title & Trust Co., 104 N.E.2d 790, 795 (Ill. 1952); 23-25 Bldg. P’ship v. Testa Produce, Inc.,
886 N.E.2d 1156, 1163 (Ill. App. 2008). Illinois law gives two choices to contractual parties
claiming fraud in the inducement: “(1) rescind the contract, or (2) waive the defect, ratify the
contract, and enforce it.” 23-25 Bldg. P’ship, 886 N.E.2d at 1163. “A person who has been
misled by fraud or misrepresentation is required, as soon as he learns the truth, to disaffirm or
abandon the transaction with all reasonable diligence, so as to afford both parties an opportunity
to be restored to their original position. If, after discovering the untruth of the representations, he
conducts himself with reference to the transaction as though it were still subsisting and binding,
he thereby waives all benefit of relief from the misrepresentations.” Havoco of Am., Ltd. v.
Hilco, Inc., 731 F.2d 1282, 1288 (7th Cir. 1984) (quoting Eisenberg v. Goldstein, 195 N.E.2d
184, 187 (Ill. 1963)). Thus, the agreement is void on fraudulent inducement grounds only if
Zaremski properly rescinded it.
The pleadings make clear that Zaremski did not rescind. “[A] party seeking to rescind a
contract on the ground of fraud or misrepresentation must elect to do so promptly after learning
of the fraud or misrepresentation. It is well-established that an unreasonable delay in taking the
necessary steps to set aside a fraudulent agreement will have the effect of affirming it.” Hassan
v. Yusuf, 944 N.E.2d 895, 918 (Ill. App. 2011) (citations omitted); see also Mollihan v. Stephany,
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340 N.E.2d 627, 629 (Ill. App. 1975) (party seeking to rescind “must announce his purpose and
must adhere to it”). Zaremski first learned of the alleged fraud in early January 2011. At that
point, he had been awaiting payment on his first invoice for over thirty days, and AAA had
informed him that the parties would not be providing deposits from which AAA could disburse
payment. Instead of rescinding the agreement, however, Zaremski continued as the arbitrator for
nearly two months and submitted invoices for January, February, and March 2011. Zaremski did
not even seek rescission in his complaint, which was filed in August 2011. The first time
Zaremski mentioned rescission was on November 6, 2011, in his response to AAA’s arguments
for dismissing the quasi-contract claims. Doc. 18 at 5-6.
Zaremski’s continued performance and delay after learning of the alleged fraud had the
effect of affirming the Compensation Agreement. See Eisenberg, 195 N.E.2d at 186-87
(prohibiting the plaintiff from rescinding a purchase agreement nearly a year after the purchase);
City of Chicago v. Mich. Beach Hous. Coop., 696 N.E.2d 804, 809 (Ill. App. 1998) (prohibiting a
lender from rescinding a loan where the lender continued to disburse money after learning of the
borrower’s fraud); Ario v. Am. Patriot Ins. Agency, Inc., 2007 WL 2743204, at *8 (N.D. Ill. Sept.
7, 2007). Because Zaremski did not rescind, his relationship with AAA is governed by the
agreement, and because the agreement governs their relationship, he may not pursue his quasicontract claims.
II.

Fraud Claim (Count I)
Count I is labeled “fraudulent misrepresentation/common law fraud.” Doc. 1 at p. 6.

Like the quasi-contract claims, the fraud claim seeks to recover what Zaremski believes to be the
unpaid balance on his invoices. The fraud claim rests on Zaremski’s allegations that AAA
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falsely represented to him that the arbitration parties would deposit funds in advance from which
Zaremski would be paid, that he would be paid within thirty days of submitting his invoices, and
that his invoices were being processed in a timely manner. Id. at ¶¶ 42-51.
AAA contends that the complaint fails to state a fraud claim because it alleges promissory
fraud—false statements of future intent—which generally is not actionable under Illinois law.
See Wigod v. Wells Fargo Bank, N.A., 673 F.3d 547, 570 (7th Cir. 2012). This general rule is
subject to a very broad exception holding that promissory fraud is actionable if the plaintiff
“proves that the [false statement of future intent] was part of a scheme to defraud.” Ibid.
(internal quotation marks omitted); see also HPI Health Care Servs., Inc. v. Mt. Vernon Hosp.,
Inc., 545 N.E.2d 672, 682 (Ill. 1989). “To invoke the scheme exception, the plaintiff must allege
and then prove that, at the time the promise was made, the defendant did not intend to fulfill it.”
Wigod, 673 F.3d at 570. The plaintiff “must be able to point to specific, objective manifestations
of fraudulent intent—a scheme or device.” Bower v. Jones, 978 F.2d 1004, 1011 (7th Cir. 1992)
(internal quotation marks omitted). “Such evidence would include a pattern of fraudulent
statements, or one particularly egregious fraudulent statement.” Wigod, 673 F.3d at 570 (internal
quotation marks and citations omitted). In addition, Zaremski’s fraud claim must allege “with
particularity the circumstances constituting fraud or mistake.” Fed. R. Civ. P. 9(b); see Vicom,
Inc. v. Harbridge Merchant Servs., Inc., 20 F.3d 771, 777 (7th Cir. 1994). “This ordinarily
requires describing the ‘who, what, when, where, and how’ of the fraud, although the exact level
of particularity that is required will necessarily differ based on the facts of the case.”
AnchorBank, FSB v. Hofer, 649 F.3d 610, 615 (7th Cir. 2011).

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The three instances of fraud alleged by Zaremski fail to satisfy these requirements. First,
Zaremski points to AAA’s promise that he could bill the parties on a monthly basis and would be
paid within thirty days. Doc. 1 at ¶ 15; Doc. 16 at 31. Because this amounts to a promise of
future intent, the complaint must allege that “at the time the promise was made, [AAA] did not
intend to fulfill it.” Wigod, 673 F.3d at 570 (emphasis added); see also Ass’n Benefit Servs., Inc.
v. Caremark RX, Inc., 493 F.3d 841, 853 (7th Cir. 2007). The complaint does not allege that. It
alleges only that “AAA knew that Zaremski’s bills would not be paid monthly,” Doc. 1 at ¶¶ 43,
48, begging the question of when AAA had that knowledge. To state a fraud claim based on this
promise, Zaremski must allege (if he can do so while satisfying his Rule 11 obligations) that
AAA did not intend to fulfill its promise at the time the promise was made.
Second, Zaremski contends that AAA misrepresented in the Compensation Agreement
that the arbitration parties would make advance deposits from which Zaremski would be paid.
Doc. 1 at ¶ 18. The trouble with this contention is that the agreement says no such thing. All the
agreement states is that “the parties are advised that deposits are due 30 days prior to the first
hearing” and that “[s]hould the parties fail to make deposits in a timely manner, you must
determine whether to go forward or suspend the proceedings until such time as deposits have
been made.” Doc. 16 at 30 (emphasis added). There can be no viable fraud claim if the
defendant did not say the untrue thing it is alleged to have said.
Third, Zaremski alleges that AAA repeatedly misled him into believing that it had
processed his invoices and that it was working with the arbitration parties to secure payment.
Doc. 1 at ¶¶ 20-37, 46-47, 49, 58. The key allegation, and the only one identifying a potential
false statement by AAA, is the following:
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On April 1, 2011, Zaremski received an email from counsel for AAA …. In
that email message, [AAA’s counsel] told Zaremksi that “we have identified
certain issues, including some errors in what you have submitted to us
which must be corrected before final invoices can be provided to the parties
for processing …. Until correct invoices are submitted, payment cannot
proceed [to] the approval process.” This statement is in direct contradiction
to AAA’s previous statements … indicating that the invoices were being
processed.
Id. at ¶ 37. This allegation lacks the specificity required by Rule 9(b), for it does not identify
which invoices contained errors. This is no minor omission. The complaint references seven
separate invoices, two of which were submitted less than one month before AAA’s counsel sent
the April 1 email. Id. at ¶¶ 20, 22, 36. For all that can be discerned from the complaint, AAA’s
counsel may have been referring to “issues” with those two recent invoices, in which case AAA
made no misrepresentations at all.
For these reasons, Zaremski’s fraud claim is dismissed without prejudice. Zaremski may
seek leave to file an amended complaint that attempts to replead that claim.
III.

Third-Party Beneficiary Claim (Count V)
Count V seeks recovery of the allegedly unpaid balance of the invoices on the theory that

Zaremski was a third-party beneficiary to the contract between AAA and the arbitration parties.
Doc. 1 at ¶¶ 77-80. The claim rests on the premise that AAA’s contract with the arbitration
parties “provided for the payment of arbitrator fees … to AAA for further distribution to
[Zaremski],” and that “AAA failed to perform under or enforce the contract(s),” resulting in
Zaremski not being paid. Id. at ¶¶ 77, 80.
At bottom, the third-party beneficiary claim seeks to hold AAA liable for the arbitration
parties’ failure to pay Zaremski. As noted above, the Compensation Agreement exculpates AAA

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from such liability; it provides that AAA has “no liability, direct or indirect,” for payment of
arbitrators, that AAA “is authorized but not obligated to seek to collect these monies on [an
arbitrator’s] behalf,” and that “under no circumstances whatsoever will [AAA] be liable for any
failure to collect any or all the monies due.” Doc. 16 at 30. Thus, as currently pleaded,
Zaremski’s third-party beneficiary claim must be dismissed. See Sanjuan v. Am. Bd. of
Psychiatry & Neurology, Inc., 40 F.3d 247, 249 (7th Cir. 1994) (“Illinois enforces covenants not
to sue.”); Harris v. Walker, 519 N.E.2d 917, 919 (Ill. 1988); Haendel v. Illinois, 1996 WL
1805020, at *8 (Ill. Ct. Cl. Apr. 22, 1996) (holding that an exculpatory clause in a contract
between the plaintiff and the defendant barred the plaintiff’s third-party beneficiary claim). The
dismissal, however, will be without prejudice, as the court cannot foreclose the possibility that
Zaremski might claim that AAA breached its contract with the arbitration parties in ways not
covered by the Compensation Agreement’s exculpatory clause. Doc. 19 at 10 (where Zaremski’s
brief implies that AAA might have failed to properly invoice the arbitration parties in the manner
required by AAA’s contract with those parties).
IV.

Fiduciary Duty Claim (Count VI)
Count VI is a fiduciary duty claim premised on the theory that AAA owed Zaremski a

fiduciary duty to ensure that his invoices were paid. Id. at ¶¶ 82-83. “A fiduciary duty may be
created where one party places trust and confidence in another, thereby placing the latter party in
a position of influence and superiority over the former.” Greenberger v. GEICO Gen. Ins. Co.,
631 F.3d 392, 401 (7th Cir. 2011) (internal quotation marks omitted). “The essence of a
fiduciary relationship is that one party is dominated by the other. The fact that one party trusts
the other is insufficient … . The dominant party must accept the responsibility, accept the trust
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of the other party before a court can find a fiduciary relationship.” Pommier v. Peoples Bank
Maycrest, 967 F.2d 1115, 1119 (7th Cir. 1992). That said, “[a] slightly dominant business
position does not operate to turn a formal contractual relationship into a confidential or fiduciary
relationship.” Ibid. (internal quotation marks and alterations omitted); see also Original Great
Am. Chocolate Chip Cookie Co. v. River Valley Cookies, Ltd., 970 F.2d 273, 280 (7th Cir. 1992);
Benson v. Stafford, 941 N.E.2d 386, 397-98 (Ill. App. 2010); Lagen v. Balcor Co., 653 N.E.2d
968, 975 (Ill. App. 1995). Relevant factors in determining whether a fiduciary relationship exists
include “the degree of kinship between the parties, the disparity in age, health, education, or
business experience between the parties, and the extent to which the servient party entrusted the
handling of its business to the dominant party and placed its trust and confidence in it.” Benson,
941 N.E.2d at 398. Illinois law requires a fiduciary duty plaintiff to “prove by clear and
convincing evidence the existence of a fiduciary or special relationship.” Greenberger, 631 F.3d
at 401; see also Burdett v. Miller, 957 F.2d 1375, 1382 (7th Cir. 1992).
Zaremski has pleaded a viable fiduciary duty claim. The complaint alleges that Zaremski
trusted AAA (and that AAA accepted his trust) to bill the arbitration parties and to collect
payment for him. Doc. 1 at ¶ 82. The complaint further alleges that AAA forbade Zaremski
from contacting the arbitration parties about his payment. Id. at ¶¶ 24, 40, 82. Thus, accepting
the complaint’s well-pleaded allegations as true, Zaremski was entirely at AAA’s mercy
regarding his payment, giving rise to a fiduciary duty on AAA’s part. See Tully v. McLean, 948
N.E.2d 714, 739-40 (Ill. App. 2011) (a fiduciary relationship existed between contracting parties
where the plaintiff completely trusted the defendant to manage a retail complex for the plaintiff’s
benefit).
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AAA takes issue with the premise that Zaremski had no control over obtaining payment,
arguing that he had the power to suspend the proceedings until the parties paid him. Doc. 23 at
13. This may turn out to be a convincing argument on summary judgment, but it does not
persuade at the Rule 12(b)(6) stage, for it prompts the factual question whether Zaremski actually
could have stalled the proceedings until he got paid. According to Zaremski, the answer to that
question is “no”—the complaint alleges that he tried to suspend and cancel the proceedings as
leverage, only to have AAA remove and replace him as the arbitrator. Doc. 1 at ¶¶ 31, 35, 70.
This is sufficient to defeat dismissal of the fiduciary duty claim on the ground advanced by AAA.
V.

Improper Removal Claim (Count VII)
Count VII alleges that AAA’s removal of him as an arbitrator violated an AAA rule

permitting removal only if the arbitrator is “unable to perform the duties of the office.” Doc. 1 at
¶¶ 71, 74. The count is styled “Declaratory Judgment,” and AAA moves to dismiss it solely on
the ground that Zaremski cannot seek a declaratory judgment for a past breach of contract while
also seeking monetary relief for that breach. Doc. 16 at 12; Doc. 23 at 14-15. Zaremski clarified
at oral argument, however, that Count VII is a breach of contract claim premised on the theory
that AAA was contractually prohibited from removing him. Zaremski also explained that
because he was unaware when filing the complaint that the arbitrations had been completed by
another arbitrator, he sought a judgment requiring AAA to reinstate him. Having learned that the
arbitrations are completed, Zaremski now says that he seeks monetary damages in the amount of
the fees he would have earned had he been allowed to finish the arbitrations.
Although it might have been better had the complaint affixed a “breach of contract” label
to Count VII, “[a] complaint need not identify legal theories, and specifying an incorrect theory is
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not a fatal error.” Rabe v. United Air Lines, Inc., 636 F.3d 866, 872 (7th Cir. 2011); see also
Hatmaker v. Mem’l Med. Ctr., 619 F.3d 741, 743 (7th Cir. 2010). The complaint need only
allege facts establishing a plausible claim for relief. AAA’s motion to dismiss provides no basis
to conclude Count VII fails to do so with respect to its removal of Zaremski as an arbitrator on
the Medicare Demonstration Project cases.
Conclusion
AAA’s motion to dismiss is denied as to the fiduciary duty claim (Count VI) and the
improper removal claim (Count VII). The motion is granted as to the fraud claim (Count I) and
the third-party beneficiary claim (Count V), which are dismissed without prejudice, and as to the
quasi-contract claims (Counts II-IV), which are dismissed with prejudice. Zaremski has until
May 29, 2012, to move for leave to file an amended complaint that seeks to replead the fraud and
third-party beneficiary claims.

May 9, 2012
United States District Judge

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