Shinmax Industry (Hong Kong) Co., Ltd. v. Colovos Company

Filing 42

Enter MEMORANDUM, OPINION AND ORDER: Shinmaxs motion to dismiss is denied. Signed by the Honorable Virginia M. Kendall on 2/19/2014.Mailed notice(tsa, )

IN THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF ILLINOIS

Plaintiff
Shinmax
v.

Case No: 13 c 5430

Judge Virginia M. Kendall
Defendant
Colovos
ORDER
Shinmax’s motion to dismiss is denied.
(T:)

STATEMENT
Plaintiff Shinmax Industry (Hong Kong) Co., Ltd. moves to dismiss Defendant Colovos
Company’s counterclaims for conversion, breach of contract, and unjust enrichment for failure to
state a claim upon which relief can be granted. For the reasons stated herein, this Court denies
Shinmax’s motion.
A complaint or counterclaim must contain sufficient factual matter to state a claim to relief
that is plausible on its face. See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); see also Young v. City
of Chicago, No. 10 C 989, 2012 WL 2368407, at *1 (N.D. Ill. June 21, 2012) (applying Iqbal to
counterclaim). A claim is plausible on its face when the pleading contains factual content that
supports a reasonable inference that the defendant is liable for the harm. Id. This requires enough
factual content to create a reasonable expectation that discovery will reveal evidence of wrongdoing.
See Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556 (2007). For purposes of this motion, this
Court accepts Colovo’s well-pleaded allegations as true and draws all reasonable inferences in
Colovos’s favor. See Yeftich v. Navistar, Inc., 722 F.3d 911, 915 (7th Cir. 2013).
Under Illinois law, conversion generally requires: “(1) a right to the property; (2) an absolute
and unconditional right to immediate possession of the property; (3) a demand for possession; and
(4) that the defendant wrongfully and without authorization assumed control, dominion, or
ownership over the property.” Van Diest Supply Co. v. Shelby County State Bank, 425 F.3d 437, 439
(7th Cir. 2005). But “a demand is unnecessary to establish a conversion where some other
independent act of conversion can be shown.” Stathis v. Geldermann, Inc., 630 N.E.2d 926, 931 (Ill.
App. Ct. 1994).
Here, Colovos alleges that it owned the master tooling Shinmax used to manufacture
products and packaging for two retailers. (Dkt. No. 17, Counterclaims ¶¶ 10-12 and 16-17.) Colovos
further alleges that Shinmax could only use that master tooling to fill orders from Colovos and a
second company. (Id. at ¶¶ 12 and 17.) According to Colovos, Shinmax used the master tooling to
manufacture products for other companies. (Id. at ¶¶ 21, 36, and 40.)

These allegations are sufficient to state a claim for conversion. Colovos’s allegation that it
owned the master tooling, if true, establishes that it has a right to the property and a right to
immediate possession of the property. And Colovos’s allegation that Shinmax exceeded its authority
by using the master tooling to manufacture products for other companies, if true, establishes that
Shinmax wrongfully assumed control over the master tooling. This allegation also supports an
inference that Shinmax committed an independent act of conversion that renders a demand
unnecessary. If it used master tooling that allegedly belongs to Colovos to manufacture and sell
products to other companies, then Shinmax deprived Colovos of its control over its master tooling.
Depriving the owner of an item or information may be conversion. See Conant v. Karris, 520 N.E.2d
757, 763 (Ill. App. Ct. 1987) (holding that depriving original owner of the benefit of confidential
information states a claim for conversion). Therefore, this Court will allow Colovos to proceed with
its conversion claim because the alleged acts by Shinmax deprived Colovos of the exclusivity it
alleged bargained for.
This Court will also allow Colovos to proceed with its breach of contract and unjust
enrichment claims. In Illinois, a breach of contract claim requires one to plead the existence of a
contract, the performance of its conditions by one party, breach by the other party, and damages
because of the breach. DeliverMed Holdings, LLC v. Schaltenbrand, 734 F.3d 616, 626 (7th Cir.
2013). Here, Colovos alleges that the parties entered an agreement concerning master tooling (Dkt.
No. 17, Counterclaims ¶¶ 10-12 and 16-17), that Colovos paid for the master tooling (Id.,
Counterclaims ¶¶ 15 and 19), that, “on information and belief,” Shinmax violated that agreement by
using the master tooling to manufacture products for other companies (Id., Counterclaims ¶ 21), and
that it was harmed as a result (Id., Counterclaims ¶ 23). These allegations are sufficient to place
Shinmax on notice of Colovos’s breach claim. See Brooks v. Ross, 578 F.3d 574, 581 (7th Cir. 2009)
(“specific facts are not necessary; the statement need only give the defendant fair notice of what the
. . . claim is and the grounds upon which it rests”) (citation omitted) (omission in original). This is
true even though Colovos alleges one element of its claim on information and belief. Indeed, by
signing the pleading, Colovos’s counsel certified that “the factual contentions have evidentiary
support or, if specifically so identified, will likely have evidentiary support after a reasonable
opportunity for further investigation or discovery.” Fed. R. Civ. P. 11(b)(3). Therefore, this Court
will allow Colovos to proceed with its breach of contract claim.
An unjust enrichment claim under Illinois law requires one to plead that one party unjustly
retained a benefit to the detriment of the other party and that retention of that benefit violates the
fundamental principles of justice, equity, and good conscience. Cleary v. Philip Morris Inc., 656
F.3d 511, 516 (7th Cir. 2011). “The Illinois Supreme Court appears to recognize unjust enrichment
as an independent cause of action.” Id. As discussed above, Colovos alleges that Shinmax deprived
Colovos of control over Colovos’s master tooling and Shinmax benefitted by selling products made
with the master tooling to other companies. If true, then Shinmax unfairly profited from Colovos’s
loss of the exclusivity it allegedly bargained for. Therefore, this Court will allow Colovos to proceed
with its unjust enrichment claim. Consequently, this Court denies Shinmax’s motion to dismiss
Colovos’s counterclaims.

Date: February 19, 2014

/s/ Virginia M. Kendall