Maher et al v. The Rowen Group, Inc. et al
Filing
87
MEMORANDUM Opinion and Order. Signed by the Honorable Marvin E. Aspen on 4/22/2013:Judicial staff mailed notice(gl, )
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
ROBERT P. MAHER and MARILYN V.
MAHER, individuals,
Plaintiffs,
v.
THE ROWEN GROUP, INC., d/b/a
PLAYROOM ENTERTAINMENT, a
California corporation; and DANIEL M. J.
ROWEN, an individual,
Defendants.
)
)
)
) Case No. 12-cv-07169
)
) Honorable Marvin E. Aspen
)
) Magistrate Judge Arlander Keys
)
)
)
)
)
MEMORANDUM OPINION AND ORDER
Plaintiffs Robert P. Maher (“Maher Sr.”) and Marilyn V. Maher (collectively “the
Mahers”) filed suit against Defendants The Rowen Group, Inc., Playroom Entertainment
(“Playroom”), and Daniel M. J. Rowen (“Rowen”) alleging breach of contract and fraud. (Dkt.
No. 1.) Rowen filed a four-count counterclaim alleging fraud (Count I), conspiracy in restraint
of trade (Count II), breach of contract (Count III), and tortious interference with a contract
(Count IV). (Dkt. No. 29.) Rowen later amended the counterclaim, adding Robert P. Maher Jr.
(“Maher Jr.”) and ACD Distribution LLC (“ACD”) as defendants to Counts I and II. (Dkt. No.
33.) Presently before us is the Mahers’ motion to dismiss Rowen’s amended counterclaim.
(Dkt. No. 34.) For the reasons set forth below, we grant the Mahers’ motion with respect to
Counts I and II of the amended counterclaim, and deny the motion as to Counts III and IV.
BACKGROUND
The following facts are drawn from Rowen’s amended counterclaim and accepted as true
for the purposes of this motion. Rowen is President of The Rowen Group Inc., a California
corporation that conducts business under the name Playroom Entertainment. (Am. Countercl.
¶ 9.) Playroom manufactures toys, primarily in the hobby and game industries. (Id.) Rowen
approached Maher Jr. to solicit a loan for Playroom, in exchange for which Rowen offered a
large discount on Playroom’s goods to ACD, a distributor in the hobby and game industries. (Id.
¶ 14, 16.) Maher Jr. is President of ACD and his mother, Marilyn Maher, is Chief Financial
Officer. (Id. ¶ 11) Maher Jr. told Rowen that his parents, Maher Sr. and Marilyn, might be
willing to provide a larger loan to Playroom if Playroom signed an exclusive distribution
agreement with ACD. (Id. ¶¶ 15–16.) Rowen then began negotiating over the terms of the Loan
with Maher Sr. (Id. ¶¶ 16–18.)
On June 30, 2011, Rowen and the Mahers executed a Loan Agreement (“Loan”),
whereby the Mahers agreed to loan Playroom $500,000. (Id. ¶ 26) The parties also executed a
Security Agreement, a Promissory Note (“Note”), and an Unconditional Guaranty Agreement
(“Guaranty”) (collectively “Loan Documents”). (Compl. ¶ 12–15.) The Loan was conditioned
on Playroom’s execution of an exclusive distribution agreement (“Distribution Agreement”) with
ACD. (Am. Countercl. ¶ 16.) Rowen and ACD executed the Distribution Agreement on July
14, 2011. (Id. ¶ 27.)
As part of the loan agreement, Playroom was required to switch to ACD’s accounting
software, maintain its financial records in accordance with Generally Accepted Accounting
Principles (“GAAP”), and sever its relationship with a third-party factoring company it used for
2
processing invoices. (Id. ¶¶ 23–24.) Before executing the Loan and Distribution Agreement, the
Mahers made a number of oral promises to Rowen. Specifically, the Mahers stated that Marilyn
Maher and ACD would provide training to Playroom employees regarding how to use ACD’s
accounting software, and Maher Sr. would personally factor Playroom’s invoices.1 (Id.) Maher
Sr. and Maher Jr. also promised that ACD would prioritize sales and promotion of Playroom’s
goods and that ACD would make up for any sales Playroom lost as a result of the Distribution
Agreement. (Id. ¶ 20.) After executing the Loan, the Mahers made further oral promises that
Marilyn Maher would perform accounting services for Playroom and maintain its financial
records in accordance with GAAP, that the Mahers would loan Playroom an additional $200,000
if needed, and that Playroom’s settlement with a Chinese manufacturer was accurately
represented in accordance with GAAP in its financial records. (Id. ¶¶ 23–24, 26, 32.)
Rowen alleges that the Mahers failed to make good on these promises. Marilyn Maher
did not shift Playroom’s accounting records onto the new software in a timely fashion nor did
she maintain Playroom’s financial records in accordance with GAAP. (Id. ¶¶ 29–31.) ACD did
not prioritize sales and promotion of Playroom’s products. As a result, Playroom had
substantially lower sales than usual in the third and fourth quarters of 2011, and its financial
records are not up to date and in accordance with GAAP. (Id. ¶ 28.) Pursuant to the Loan, the
Mahers initially advanced $435,000 of the agreed upon $500,000 to Playroom. However, the
1
Factoring is a form of commercial financing whereby a business (assignor) sells its accounts
receivable (invoices) to a third party (factor). The factor is obligated to pay for the receivables at
maturity and this is represented as an asset on the assignor’s balance sheet. The factor will often
provide an advance payment, in the form of cash, to the assignor before the maturity date. This
method of factoring is a common means of increasing cash flow to finance the day-to-day
activities of a business. See Albert F. Reisman, What the Commercial Lawyer Should Know
About Commercial Finance and Factoring, 79 Com. L.J. 146, 147 (1974).
3
Mahers refused to supply Playroom with the final $65,000 due under the Loan because they
alleged Playroom was in “possible default.” (Id. ¶¶ 33–35.) Subsequently, the Mahers filed suit
against Rowen for breach of contract and fraud. (Id. ¶ 40.)
STANDARD OF REVIEW
We apply the same legal standard of review for motions to dismiss counterclaims as we
do for motions to dismiss complaints. See McLaughlin v. Chi. Transit Auth., 243 F. Supp. 2d
778, 779 (N.D. Ill. 2003). A motion to dismiss under Rule 12(b)(6) is meant to test the
sufficiency of the complaint, not to decide the merits of the case. Gibson v. City of Chi., 910
F.2d 1510, 1520 (7th Cir. 1990). A court may grant a motion to dismiss under Rule 12(b)(6)
only if a complaint lacks enough facts “to state a claim for relief that is plausible on its face.”
Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S. Ct. 1937, 1949 (2009) (quoting Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570, 127 S. Ct. 1955, 1974 (2007)); Killingsworth v. HSBC Bank Nev.,
N.A., 507 F.3d 614, 618–19 (7th Cir. 2007). “A claim has facial plausibility when the plaintiff
pleads factual content that allows the court to draw the reasonable inference that the defendant is
liable for the misconduct alleged.” Iqbal, 556 U.S. at 678, 129 S. Ct. at 1949.
Although a facially plausible complaint need not give “detailed factual allegations,” it
must allege facts sufficient “to raise a right to relief above the speculative level.” Twombly, 550
U.S. at 555, 127 S. Ct. at 1964–65. “Threadbare recitals of the elements of a cause of action,
supported by mere conclusory statements, do not suffice.” Iqbal, 556 U.S. at 678, 129 S. Ct. at
1949. These requirements ensure that the defendant receives “fair notice of what the . . . claim is
and the grounds upon which it rests.” Twombly, 550 U.S. at 555, 127 S. Ct. at 1964–65. At this
stage in the litigation we take as true all factual allegations made in the complaint, and construe
4
all reasonable inferences in the plaintiff’s favor. Murphy v. Walker, 51 F.3d 714, 717 (7th Cir.
1995). Additionally, we consider documents attached and “incorporated into the complaint by
reference” when considering a 12(b)(6) motion to dismiss. Tellabs, Inc. v. Makor Issues &
Rights, Ltd., 551 U.S. 308, 322 (2007). See also Thompson v. Ill. Dept. of Prof’l Regulation, 300
F.3d 750, 753 (7th Cir. 2002) (citing Fed. R. Civ. P. 10© (“A copy of any written instrument
which is an exhibit to a pleading is a part thereof for all purposes.”)).
ANALYSIS
I.
Fraud (Count I)
In support of his promissory fraud claim, Rowen alleges the Mahers and Maher Jr. made
a series of false promises to induce him to execute the Loan and Distribution Agreement. He
also states the Mahers promised to take certain actions after entering into these agreements and
then reneged on all of these promises. The Mahers argue that Rowen’s promissory fraud claim is
barred by the Illinois Credit Agreements Act, 815 ILCS 160/1 (“ICAA”), because it relies on
promises made by the Mahers and Maher Jr. to take certain actions related to the parties’ credit
agreement.
A. The Applicability of the ICAA to Rowen’s Fraud Claim
The ICAA precludes all claims by debtors “in any way related to a credit agreement,”
unless those claims are premised upon a written agreement signed by both parties. 815 ILCS
160/2. In addition to prohibiting actions based on new oral credit agreements, the ICAA also
bars actions that rely on an oral agreement to modify an existing credit agreement. 815 ILCS
160/3. The applicability of the ICAA in this case depends on whether the oral promises
underlying the fraud claim form part of, or otherwise modify, the parties’ written credit
5
agreement. Therefore, we must first define the scope of the written credit agreement, and then
determine how the oral promises at issue here relate to the written agreement.
1. The Scope of the Credit Agreement
The ICAA defines a “credit agreement” as “an agreement or commitment by a creditor to
lend money or extend credit or delay or forbear repayment of money not primarily for personal,
family or household purposes, and not in connection with the issuance of credit cards.” 815
ILCS 160/1(1). “If any portion of the parties’ agreement takes the form of a loan or an extension
of credit, the ICAA applies.” Help at Home, Inc. v. Med. Capital, L.L.C., 260 F.3d 748, 754 (7th
Cir. 2001) (citing Whirlpool Fin. Corp. v. Sevaux, 96 F.3d 216, 223 (7th Cir. 1996)). The parties
agree that the Loan and the related Loan Documents form a credit agreement under the plain
language of the ICAA. They dispute, however, whether the Distribution Agreement is also part
of the credit agreement.
The Mahers contend that the Distribution Agreement was an integral part of the Loan and
as such should be considered “part and parcel” of the comprehensive credit agreement. (Mem. at
4.) We have not found any Illinois cases addressing the ICAA’s applicability to an exclusive
distribution agreement like the one at issue here. The majority of ICAA cases involving integral
related documents have dealt with guaranty agreements, which unlike the Distribution
Agreement, could not stand independently of the underlying loan. See, e.g., General Electric
Business Fin. Servs., Inc. v. Silverman, 693 F. Supp. 2d 796, 803 (N.D. Ill. 2010); Bank One,
Springfield v. Roscetti, 309 Ill. App. 3d 1048, 1058, 723 N.E.2d 755, 762 (4th Dist. 1999). Other
cases involve collateral insurance and escrow agreements, which are financial instruments that
also would typically not exist without an underlying credit agreement. See R & B Kapital Dev’t
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LLC v. North Shore Cmty. Bank & Trust Co., 358 Ill. App. 3d 912, 919, 832 N.E.2d 246, 253
(1st Dist. 2005); Nordstrom v. Waukanda Nat’l Bank, 282 Ill. App. 3d 142, 144, 668 N.E.2d 586,
587 (2d Dist. 1996).
An exclusive distribution agreement is not a financial instrument that is commonly a
condition precedent to a loan. In this case, however, the purpose of the Distribution Agreement
is analogous to the purpose of other types of documents that have been considered part of a
credit agreement under the ICAA. Without the Distribution Agreement, the Mahers would not
have extended the Loan to Rowen and Playroom, and without the Loan, Rowen would not have
signed the Distribution Agreement with ACD. Because the two agreements were mutually
dependent, the Distribution Agreement was integral to the credit agreement. See Help at Home,
260 F.3d at 756 (“[The lender] only agreed to extend the loan to the borrower if the borrower
could secure a guarantor. As a result, the guaranty agreement was an integral part of the loan . . .
.”); In re American Consol. Transp. Cos., Inc., 433 B.R. 242, 249 (Bankr. N.D. Ill. 2010)
(holding that an interest rate swap agreement was not integral to the loan because there was no
evidence “that the bank would not have extended the loan had American not entered into the
swap agreement.”).
This conclusion is further supported by the text of the Loan, which states that all funds
after the initial $75,000 disbursement “shall be contingent on and conditioned upon . . . Lender’s
determination that Borrower has granted to ACD . . . certain exclusive distribution rights . . .”
(Compl., Ex. A) The parties freely admit they would not have executed their deal without both
agreements in place. (Am. Countercl. ¶ 16, Mem. at 4.) Under these circumstances, the two
agreements effectively form a single transaction. Accordingly, we hold that the Distribution
7
Agreement is part of the credit agreement for the purposes of the ICAA.
2. The Oral Agreements
Having determined that the Distribution Agreement is part of the parties’ credit
agreement, we hold that the alleged oral promises related to the Distribution Agreement also fall
within the scope of the ICAA. The ICAA “is to be construed broadly to prohibit all claims
arising from alleged extra-contractual representations, omissions or conduct in a credit
relationship.” VR Holdings, Inc. v. LaSalle Bus. Credit, Inc., No. 01 C 3012, 2002 WL 356515,
at *3 (N.D. Ill. Mar. 6, 2002).
In this case, prior to executing the Loan and Distribution Agreement, the Mahers
promised to prioritize Playroom’s sales, perform certain factoring and computer training
services, and provide additional credit if necessary. (Am. Countercl. ¶¶ 48(b)—(e).) Rowen
alleges that the Mahers intended these oral promises to fraudulently induce him to execute the
Loan and Distribution Agreement. (Am. Countercl. ¶ 51.) These promises are unmistakably
part of the Distribution Agreement, because they could only have arisen in relation to the terms
of the written agreement. They were not, however, memorialized in the written agreement, so
they are properly understood as “extra-contractual representations . . . in a credit agreement.”
VR Holdings, 2002 WL 356515, at *3. Accordingly, the ICAA prohibits Rowen from bringing a
claim based on these promises.
Rowen also claims Defendants made certain alleged misrepresentations regarding
accounting services after the execution of the Distribution Agreement, for the purpose of
fraudulently inducing him “to fire Playroom’s bookkeeper and allow Marilyn Maher to oversee
and handle Playroom’s financial record-keeping.” (Am. Countercl. ¶¶ 48(a), 50.) As with the
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oral promises prior to execution, these promises are inextricably bound with the terms of the
written agreement. Playroom’s accounting methods were a condition of the parties’ credit
agreement. (Am. Countercl. ¶ 23 (“In order for Playroom to enter into the Loan Agreement with
the Mahers, the Mahers required that Playroom move onto ACD’s accounting inventory and
overall customer relationship management software, MAS 500.”).) Thus, the subsequent oral
promises or alleged misrepresentations changing Playroom’s accounting methods amount to an
“agreement by a creditor to modify or amend an existing credit agreement.” 815 ILCS 160/3.
Therefore, Rowen may not bring a claim for fraud based on these oral promises.
Because the oral promises underlying the fraud claim either modify or form a part of the
parties’ credit agreement as defined by the ICAA, we grant the Mahers’ motion to dismiss Count
I of Rowen’s amended counterclaim.
II.
Tortious Interference with a Contract Claim (Count IV)
In support of his tortious interference with a contract claim, Rowen argues that the
Mahers “intentionally and unjustifiably” induced ACD to breach the Distribution Agreement
with Rowen. The Mahers argue that Count IV should be dismissed because it is barred by the
ICAA. Alternatively, they state that Count IV should be dismissed because Rowen failed to
plead that it delivered sufficient products to ACD, which they allege is a necessary element of a
tortious interference claim based on a consignment model contract.
A. The ICAA’s Applicability to Rowen’s Tortious Interference Claim
First, we address the ICAA’s applicability to Rowen’s tortious interference claim.
Unlike the fraud and conspiracy claims, the tortious interference claim is not based on any
alleged oral promise related to the credit agreement. Rowen claims that the Mahers encouraged
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their son, Maher Jr., to intentionally refrain from selling Playroom’s products, in violation of the
Distribution Agreement. This claim is based entirely on the Mahers’ alleged actions inducing
ACD to breach its contract with Rowen. It does not rely for its existence on an unwritten credit
agreement or an oral modification to an existing credit agreement. Therefore, this claim is not
barred by the ICAA.
B. The Sufficiency of Rowen’s Tortious Interference Claim
Next, we address the Mahers argument that Rowen has failed to allege that Playroom
delivered sufficient products to ACD. The Mahers argue that Rowen must plead delivery by
Playroom as a necessary element of his tortious interference claim. The Mahers contend that
without this allegation there can be no breach by ACD, and thus no interference by the Mahers.
To plead a cause of action for tortious interference with a contract under Illinois law, a plaintiff
must allege: “(1) the existence of a valid and enforceable contract between the plaintiff and
another; (2) the defendant’s awareness of this contractual relation; (3) the defendant’s intentional
and unjustified inducement of a breach of the contract; (4) a subsequent breach by the other,
caused by the defendant’s wrongful conduct; and (5) damages.” Voelker v. Porsche Cars North
Am., Inc., 353 F.3d 516, 527–28 (7th Cir. 2003) (citing HPI Health Care Servs., Inc. v. Mt.
Vernon Hosp., 131 Ill.2d 145, 155, 545 N.E.2d 672, 676 (Ill. 1989).
The Mahers’ argument attacks the fourth element of the cause of action. They argue that
Rowen must allege and prove that Playroom delivered sufficient products to ACD as part of his
tortious interference complaint. In support of this proposition the Mahers mistakenly rely on
Scentura Creations Inc. v. Long., 325 Ill. App. 3d 62, 756 N.E.2d 451 (2d Dist. 2001).
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Though Scentura dealt with a consignment model relationship, the facts of that case were
substantially different than those before us. The consignment model relationship at issue in
Scentura was a “pyramid scheme” or “chain referral sales technique” in which consignees were
compensated based on their ability to bring additional consignees into contractual relationships
with the consignor. Scentura, 325 Ill. App. 3d. at 68, 756 N.E.2d at 474. Although the
plaintiff/consignor in Scentura did allege that it had delivered merchandise to the
defendant/consignee in its complaint, the court never held that this was a necessary element of its
breach of contract claim. All the court held in Scentura was that the contract at issue was void
for violating state public policy regarding pyramid schemes. Id. at 72, 756 N.E.2d at 477.
Furthermore, the Mahers’ argument that Rowen is required to plead Playroom’s full
performance under the contract conflates a breach of contract claim with a tortious interference
claim. Under Illinois law, a plaintiff alleging tortious interference with a contract only needs to
plead “a subsequent breach by the other,” and not his own performance. See HPI Health Care
Servs., Inc., 131 Ill.2d at 155, 545 N.E.2d at 676 (emphasis added). Rowen has alleged a breach
by ACD in that it failed to use commercially reasonable efforts to sell and promote Rowen’s
products. The Mahers’ argument goes to the merits of Rowen’s breach claim against ACD and
as such is not an appropriate basis for dismissal under Rule 12(b)(6).
Rowen’s claims also satisfy the other elements of a tortious interference claim. He
alleges, and Defendants do not dispute, the existence of a valid and enforceable contract between
it and ACD. (Am. Countercl. ¶ 70.) Rowen further alleges that the Mahers were aware of the
contractual relationship between Rowen and ACD, and in fact required that Rowen enter into the
Distribution Agreement with ACD. (Id. ¶¶ 20, 27, 71.) Although Rowen does not provide many
11
facts to support his claim that the Mahers intentionally induced ACD to breach the Distribution
Agreement, there is enough in the counterclaim, construing all inferences in favor of Rowen, to
pass muster at this early stage. For example, Rowen states that its sales in the third and fourth
quarters (immediately after it entered into the agreement with ACD) were substantially lower
than usual for that time of year. (Id. ¶ 28.) Rowen claims that the Mahers told their son Robert
Maher Jr. to stop selling Rowen’s products, and that ACD did in fact intentionally stop selling
them, in breach of the Distribution Agreement. Finally, Rowen alleges that it was damaged by a
reduction in sales that it would have otherwise made had ACD not breached the Distribution
Agreement. Rowen has therefore stated a valid claim for tortious interference with a contract.
Accordingly, we deny the Mahers’ motion to dismiss Count IV of Rowen’s amended
counterclaim.
III. Conspiracy in Restraint of Trade Claim (Count II)
In Count II, Rowen alleges that the Mahers and Maher Jr. conspired to force Playroom to
default on the Loan so that they could acquire Playroom’s assets. In support of this claim,
Rowen states that the Mahers and Maher Jr. intentionally held Playroom’s products in inventory
and failed to uphold their promises to perform certain accounting and other tasks. (Am.
Countercl. ¶ 62.) Rowen alleges that these actions restrained trade because they “nearly erased
Playroom’s presence in the national hobby/game market.” (Am. Countercl. ¶ 63.) The Mahers
argue that Rowen’s counterclaim is insufficiently pled because it fails to identify a market and
fails to allege that the counter-defendants have market power.2 (Mem. at 12.)
2
The Mahers also argue that Rowen’s conspiracy in restraint of trade claim is barred by the
ICAA. We need not reach this issue since we find Rowen’s failure to plead an anti-trust injury
dipositive.
12
Rowen brought the conspiracy claim pursuant to statutory provisions in the Sherman Act.
Rowen seeks damages pursuant to 15 U.S.C. § 15(a) based on the Mahers’ and Maher Jr.’s
alleged conspiracy in violation of 15 U.S.C. § 1. A plaintiff alleging a violation of § 1 of the
Sherman Act must plead and prove: “(1) a contract, combination, or conspiracy; (2) a resultant
unreasonable restraint of trade in [a] relevant market; and (3) an accompanying injury.” Agnew
v. Nat’l Collegiate Athletic Ass’n, 683 F.3d 328, 334–35 (7th Cir. 2012) (quoting Denny’s
Marina, Inc. v. Renfro Prods., Inc., 8 F.3d 1217, 1220 (7th Cir. 1993). The Sherman Act is
intended to protect consumers from anti-competitive behavior. “Thus, the plaintiff must allege,
not only an injury to himself, but an injury to the market as well.” Car Carriers, Inc. v. Ford
Motor Co., 745 F.2d 1101, 1107 (7th Cir. 1984); see also Juneau Square Corp. v. First Wis.
Nat’l Bank of Milwaukee, 624 F.2d 798, 811 (7th Cir. 1980) (stating that “[t]he Sherman Act
requires more than mere injury to a competitor. Plaintiffs must show also that the effect upon
competition in the marketplace is substantially adverse.”) (internal quotations omitted).
Rowen has failed to meet the threshold requirement of pleading an antitrust injury.
Although Rowen has alleged an injury to Playroom as a result of the Mahers’ actions, he has not
provided enough facts from which we may infer an injury to consumers. Rowen states that
Playroom has lost sales and that Maher Jr. and ACD are now able to monopolize the market
chain for Playroom’s products. But an injury to Playroom alone does not constitute a valid
antitrust claim. Rowen has stated that Playroom is part of the hobby/game industry, but has
provided no facts regarding Playroom’s market share or the projected impact the Maher’s action
will have on the hobby/game market. Because Rowen failed to allege any impact on market
competition or injury to consumers, we hold that his conspiracy in restraint of trade claim fails to
13
state a claim on which relief may be granted. See Agnew, 683 F.3d at 334–35; Wagner v.
Magellan Health Servs., Inc., 121 F. Supp. 2d 673, 682 (N.D. Ill. 2000) (“Without any allegation
as to how market-wide competition will be affected, the complaint fails to allege a claim on
which relief may be granted.”). Accordingly, we grant the Mahers’ motion to dismiss Count II
of Rowen’s amended counterclaim.
IV.
Breach of Contract Claim (Count III)
In Count III, Rowen claims that the Mahers breached the terms of the Loan by failing to
disburse the final installment of $65,000. The Mahers argue that they were justified in
withholding this payment because they had alerted Rowen that he was in “possible default.”
Essentially, the Mahers’ assert that they were excused from disbursing these funds under the
terms of the Loan. However, our inquiry at this stage is limited to the sufficiency of Rowen’s
pleading. Therefore, we focus only on the facts alleged in the counterclaim to determine if
Rowen has adequately pled his breach of contract claim. To plead a cause of action
for breach of contract under Illinois law, a plaintiff must allege: “(1) the existence of a valid and
enforceable contract; (2) substantial performance by the plaintiff; (3) a breach by the defendant;
and (4) the resultant damages.” Fednav Int’l Ltd. v. Cont’l Ins. Co., 624 F.3d 834, 839 (7th Cir.
2010) (quoting W.W. Vincent & Co. v. First Colony Life Ins. Co., 351 Ill. App. 3d 752, 759, 814
N.E.2d 960, 967 (1st Dist. 2004)); Reger Dev., L.L.C. v. Nat’l City Bank, 592 F.3d 759, 764 (7th
Cir. 2010).
Rowen alleges, and the Mahers do not dispute, that the Loan and other related documents
constitute a valid contract. (Am. Countercl. ¶ 26.) Rowen also sufficiently pleads a breach of
the contract by the Mahers and resulting damages. Rowen states that the Mahers failed to pay
14
the final $65,000 due under the Loan, thereby breaching the contract. (Am. Countercl. ¶ 66–67.)
He alleges Playroom’s relationship with a particular German game licensor was damaged due to
the Mahers’ breach. (Id. ¶ 34.) Rowen has therefore sufficiently pled the first, second, and
fourth elements of a breach of contract claim.
Rowen’s claim that Playroom substantially performed all of its obligations under the
contract is the only questionable element of his breach of contract claim. In Count III, Rowen
states simply that Playroom has performed all of its obligations under the Loan. (Am. Countercl.
¶ 65.) Although this statement standing alone is somewhat conclusory, we view the
counterclaim in its entirety and look to other sections to see if he has offered any facts that
support his alleged performance. See Murphy, 51 F.3d at 717. Earlier in the counterclaim,
Rowen states that Playroom has made and continues to make every payment required of it under
the Loan. (Am. Countercl. ¶ 35–36.) This allegation lends support to Rowen’s claim that he has
substantially performed under the contract. Additionally, after receiving notice of possible
default Rowen asked the Mahers what he needed to do to avoid defaulting and was told no action
was necessary and the notice was just a warning. (Am. Countercl. ¶ 35.)
Construing all inferences in Rowen’s favor, as we must at this point, it is plausible that he
substantially performed his obligations under the contract. Accordingly, we deny the Mahers’
motion to dismiss Count III of Rowen’s amended counterclaim.
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CONCLUSION
For the reasons set forth above, the Mahers’ motion to dismiss Counts I and II of
Rowen’s amended counterclaim is granted. The Mahers’ motion to dismiss Counts III and IV of
the amended counterclaim is denied. It is so ordered.
________________________________
Honorable Marvin E. Aspen
U.S. District Court Judge
Date: April 22, 2013
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