Van Dorn v. Peters et al

Filing 162

MEMORANDUM Opinion and Order: The Court denies both Defendant's Motions for Summary Judgment as to Counts II, III, and IX 119 123 . Signed by the Honorable Sharon Johnson Coleman on 1/30/2018. Mailed notice.(ym, )

UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
BARBARA J. VAN DORN, an individual

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Plaintiff,
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v.
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JOHN PETERS, an individual, KENNETH )
T. JAKUBOWSKI, an individual, and
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PETERS FINANCIAL GROUP, INC., an )
Illinois Corporation,
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Defendants.
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Case No. 14-cv-3920
Judge Sharon Johnson Coleman

MEMORANDUM OPINION AND ORDER
On May 15, 2015, Plaintiff, Ms. Barbara J. Van Dorn (“Van Dorn”) filed an Amended
Complaint alleging, amongst others, claims of civil conspiracy (Count III) and aiding and abetting a
breach of fiduciary duty (Count IX) against Defendants John Peters and Peters Financial Group,
Inc. (collectively “Peters”). Van Dorn also alleged an additional claim of breach of fiduciary duty,
Count II, against Kenneth T. Jakubowski (“Jakubowski”). Peters and Jakubowski moved separately
for summary judgement as to Counts II, III, and IX, denying the conspiracy allegations and rejecting
the proposition that Van Dorn was owed any fiduciary duty in this loan transaction. For the
foregoing reasons, both Peters’ and Jakubowski’s Motions for Summary Judgement are denied.
Background
OneBig Tent, LLC (“OBT”) was a Delaware start-up company operating in Chicago, IL.
Jakubowski was the Chief Executive officer and sole-manager of OBT. Peters was an investor in
OBT. Although he did not hold any official title, he regularly advised the company on structural and
financial matters. Van Dorn was an investor who had previously invested in 5-10 small companies,
including OBT, prior to 2012. By her own admission, she considered herself a “sophisticated
investor.”
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In June of 2012, Jakubowski approached Van Dorn about investing additional funds into
OBT; however, Van Dorn was reluctant. In an effort to move the deal forward, Jakubowski
suggested that Van Dorn ask Peters whether he would be interested in guaranteeing the loan as he
had done previously with another investor. On June 26, 2012, Jakubowski emailed Van Dorn to
explain that the guaranty would be a separate agreement from the loan with OBT and to urge her to
contact Peters directly to finalize the guaranty details. Van Dorn contacted Peters, who expressed
interest in guaranteeing her loan.
Van Dorn contends that she told Peters and Jakubowski that she would not provide the loan
without it being guaranteed. Throughout the negotiations, Van Dorn did not ask to see OBT’s
financial information or to find out why the company needed additional funds. She explained that
she was not concerned about whether the company had outstanding debts or obligations prior to
moving forward with the loan because she believed that the loan would be guaranteed. Jakubowski
maintains that Van Dorn never unequivocally stated that her loan was contingent upon a guaranty.
He does, however, admit that Van Dorn did not commit to invest in OBT this time until she was
offered the guaranty option.
Jakubowski emailed Van Dorn on June 27, 2012 to ask if she could fund the loan by June 30,
2012. At this point, Jakubowski claims he was not aware of whether Van Dorn and Peters had
finalized their guaranty agreement. Two days later Van Dorn informed Jakubowski that she needed
additional time to review the guaranty and complete due diligence, so she could not fund the loan so
quickly. That afternoon, Peters forwarded Van Dorn a draft of the guaranty. He had not looked at
it yet, but he suggested they both take the weekend to review the document and discuss any changes
the following Monday.
On July 2, 2012, Jakubowski sent Van Dorn an email with the finalized version of the
warrant and promissory note; directions for funding the loan; and the draft of Peters’ guaranty
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agreement. Van Dorn responded to Jakubowski, stating that she had spoken to Peters that morning
and the guaranty was acceptable. Peters was copied in this email. Following that exchange, Plaintiff
authorized a wire transfer for the full loan amount of $200,000 without having the signed guaranty
in hand. The money was funded to OBT on July 6, 2012. Van Dorn signed the guaranty on July 7,
2012 and emailed it to Peters. Peters never responded to that email or executed the guaranty.
After the July 2, 2012 communications, Peters did not have contact with Jakubowski or Van
Dorn until July 10, 2012 when he responded to a string of emails between OBT’s principals
discussing the company’s finances and the Van Dorn’s loan. First, Peters sent an email to the entire
OBT Finance Committee apologizing for not being “more a part of this conversation” because he
had “been sick.” (Dkt. 123-4). He also inquired into whether Van Dorn had sent the funds since he
had “not signed the guarantee[sic] yet.” (Dkt. 123-4). Peters sent a second email a few minutes later
directly to Jakubowski telling him he was concerned about executing the guaranty since he was
dissatisfied with Jakubowski’s management. Peters suggested that Jakubowski meet with him the
next day to discuss these reservations. Van Dorn was not included in either of the emails.
Jakubowski and Peters met near Peters’ office on July 11, 2012 to discuss the current state of
the company and the structural issues that Peters felt needed to be addressed in order for him to
move forward with guaranteeing the loan. While Jakubowski admits that he and Peters had several
conversations about OBT’s financials prior to the loan being funded, these communications
between July 10 and 11, 2012 were the first times that Jakubowski recalls Peters articulating any
hesitation about guaranteeing the loan. Jakubowski did not take Peters’ statements seriously and
believed he was using threats to leverage power over OBT decision-making.
In her depositions, Van Dorn admits that she does not know when Peters first told
Jakubowski that he was absolutely not going to execute the guaranty, or whether Peters and
Jakubowski actually conspired to get Van Dorn to fund the loan without the guaranty. She also
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admits that she has not seen any documents reflecting such agreements between Peters and
Jakubowski.
Peters contends that he continued to do his due diligence into the financial health of OBT.
Seeing that nothing changed, he lost confidence in OBT and personally decided he would not grant
any additional guaranties or investments, including Van Dorn’s loan between September and
October of 2012. Peters did not, however, notify Jakubowski or Van Dorn of his decision at that
time.
A year later, Jakubowski sent a letter dated September 24, 2013 to OBT investors informing
them that OBT’s “business model [wa]s not suited for today’s market” and that he would be
“[w]inding up the venture.” (Dkt. 90-7). Upon receiving the news, Van Dorn sent Peters an email
indicating that she “would like to move forward to collect [the loaned funds] under the terms” of
the guaranty. (Dkt. 90-8). Peters did not respond.
On January 14, 2013, Paul Richards sent Peters a request for “the ‘correct’ descriptions for
each of these investments or loans that were from 2012” via email. (Dkt. 123-4). Peters responded
the same day asking him to “remove references to [his] guarantee[sic], at least with Sis” because he
“[n]ever signed and [he] would not have [signed] given the actions of Ken at the time.” (Dkt. 123-4).
Peters explained that he “was going to bting[sic] this up but then [Van Dorn] funded anyway.” (Dkt.
123-4).
Peters followed up with Jakubowski on January 24, 2013 about the 2012 investments and
offered the following statement about the Van Dorn loan:
. . . as far as [Van Dorn] is concerned, she chose to fund without being in possession
of my guarantee[sic]. I actually had some issues at the time relative to your paying
yourself, fiscal control and my concern that institutional funding was ambiguous
(thus calling into question the likelihood that this would be an actual bridge loan
which would be paid back on a timely basis), I would have insisted that those be
cleared up prior to my signing. I was travelling and [Van Dorn] funded while I was
away. I decided to let that sleeping dog lie, but I do not feel that I have any
guarantee[sic] obligations at this time.
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(Dkt. 123-4). Jakubowski was not convinced that Peters did not intend to guarantee Van Dorn’s
loan until May 6, 2015, when Peters sent him an email saying “that he unequivocally did not sign the
guaranty.” (Dkt 122-5, pp. 80:6-8, 81).
A year later, on January 6, 2014, Van Dorn sent Peters a certified letter as final notice to
compel payment of her guaranty in full. Peters did not respond. Van Dorn called him on January
13, 2014 and remembers Peters admitted to a conversation he had with Jakubowski about the
guaranty prior to her funding the loan. Peters memorialized that conversation in a letter, where he
stated that he spoke to Jakubowski “[p]rior to [Van Dorn’s] funding of the $200,000 loan” and “[he]
expressed [his] concerns as to how previous investments were being used by the company.” (Dkt.
123-4; Dkt. 90-3). The letter also stated that “ [Peters] told [Jakubowski] that in light of [his]
concerns, [he] would not be willing to sign a guaranty or provide any additional funding to the
company.” (Dkt. 123-4; Dkt. 90-3). In the letter, Peters also confirmed that he “was out of town
when [Van Dorn] decided to fund the loan in July 2012” and while he “was admittedly surprised” to
find out that the loan had been closed during that time, he surmised that she had “determined that it
was a proper investment” for her. (Dkt. 123-4; Dkt. 90-3).

Additionally, he informed Van Dorn, in

the letter, that he had spoken with his attorney and was advised that “since [he] was neither an
officer nor director . . . [he] should not voice . . .[his] concerns to any vendors or potential investors”
as “they would ultimately make their own investment decisions.” (Dkt. 123-4). Peters contends that
at the time when he wrote the letter, he believed the dates and timing of the occurrences were
accurate.
Later on May 31, 2017, Peters signed a declaration that attempted to clarify the exact timing
of the events he identified in his letter from January 2014 to Van Dorn. He claimed that the
inconsistencies “were based on [his] memory of events that took place in July of 2012 . . . [and that
he] did not review any documents to confirm the timing of [his] correspondences with Jakubowski
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in relation to Plaintiff’s funding of the Loan prior to” discussing these matters with her. [Dkt 1226].
The instant suit arises because Van Dorn believes that Defendants agreed and conspired to
induce her to invest based on assurances of a guaranty that Peters had no intention of fulfilling.
Defendants bring this motion arguing that Van Dorn has not provided sufficient substantive
evidence to survive summary judgment.
Legal Standard
Summary judgment is appropriate “if the pleadings, depositions, answers to interrogatories,
and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to
any material fact and that the moving party is entitled to a judgment as a matter of law.” Celotex Corp.
v. Catrett, 477 U.S. 317, 322, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986); see also Fed. R. Civ. P. 56(c).
The party who bears the burden of proof on an issue may not rest on the pleadings or mere
speculation, but must affirmatively demonstrate that there is a genuine issue of material fact that
requires a trial to resolve. Celotex, 477 U.S. at 324. “A genuine issue of material fact arises only if
sufficient evidence favoring the nonmoving party exists to permit a jury to return a verdict for that
party.” Springer v. Durflinger, 518 F.3d 479, 483 (7th Cir. 2008)(citation omitted). The moving party
bears the initial burden of demonstrating that there is no genuine issue of material fact, and if done,
judgment as a matter of law should be granted in its favor. Vision Church v. Vill. of Long Grove, 468
F.3d 975, 988 (7th Cir. 2006). All evidence and inferences must be viewed in the light most
favorable to the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S. Ct. 2505,
91 L. Ed. 2d 202 (1986). Once the moving party has met the initial burden, the non-moving party
must offer more than a mere scintilla of evidence that there is a genuine issue of material fact to
survive summary judgment. Roger Whitmore's Auto Servs. v. Lake County, Ill., 424 F.3d 659, 667 (7th
Cir. 2005). “To determine whether genuine issues of material fact exist, we ask if ‘the evidence
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presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that
one party must prevail as a matter of law.’” Adeyeye v. Heartland Sweeteners, LLC, 721 F.3d 444, 449
(7th Cir. 2013) (citing Anderson, 477 U.S. at 251-52).
Discussion
Count III: Civil Conspiracy
In the instant action, Van Dorn relies on the conversation and letter with Peters from
January 2014 as a basis to support her theory that he decided not to guarantee her loan before she
actually funded it. Van Dorn argues that Jakubowski and Peters conspired to conceal this fact in
order to induce her to fund the loan without the benefit of the guaranty. Defendants now move for
summary judgement on the civil conspiracy claim (Count III).
To make a showing of civil conspiracy, the facts must demonstrate: “(1) an express or
implied agreement among defendants to deprive plaintiff of his or her constitutional rights and (2)
actual deprivations of those rights in the form of overt acts in furtherance of the agreement.”
Wagner v. Evans, No. 15-cv-6165, 2016 U.S. Dist. LEXIS 11964, at *15 (N.D. Ill. Feb. 2, 2016) (citing
Scherer v. Balkema, 840 F.2d 437, 441 (7th Cir. 1988)).
The timing of Peters’ decision not to fund the loan and of his communication with
Jakubowski are critical to this claim. The letter that Van Dorn relies on states definitively that Peters
told Jakubowski prior to the funding of the loan that “in light of [his] concerns, [he] would not be
willing to sign a guaranty or provide any additional funding to the company.” (Dkt. 90-3). Both
defendants maintained, in their depositions, that Peters had not definitely decided on whether to
guarantee the loan until well after it was funded. They also offered emails sent after the loan was
funded where Peters indicated that he was reluctant to guarantee the loan because of the financial
state of OBT. Defendants’ version of the evidence conflicts with the January 2014 letter that Peters
sent to Van Dorn. The only evidence offered to cure the inconsistency in the timing of Peters’
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decision was a “self-serving” declaration he executed on May 31, 2017 in preparation of litigation.
Defendants offer no proof that the timing mentioned in the January 2014 letter was a mistake other
than through their own depositions, which could also be construed as “self-serving” assertions.
While it is well-established that uncorroborated, self-serving, conclusory assertions cannot defeat a
motion for summary judgment, if they are based on personal knowledge or firsthand experience
however, such assertions can be evidence of a disputed fact. Berry v. Chi. Transit Auth., 618 F.3d 688,
691 (7th Cir. 2010). Defendants, conversely, have cited no authority that a “self-serving” assertion
can be used to eliminate a disputed fact, especially when that fact is unfavorable to their cause.
Reaching a conclusion here would require this Court to enter into the purview of the jury—weighing
the value of the evidence and making a credibility determination. This is not appropriate for
summary judgment. Payne v. Pauley, 337 F.3d 767, 771 (7th Cir. 2003)(finding it to be “dangerous
territory” for a court to weigh conflicting evidence during summary judgment).
As all inferences should be drawn in Van Dorn’s favor, if the dates in the letter are taken as
true, the inconsistency between it and the other evidence raises a question about when Peters
actually decided not to guarantee the loan and whether he disclosed this decision to Jakubowski
prior to the loan being funded. Since the timing and content of the conversation are critical to
determining whether there was agreement prior to funding that would constitute a conspiracy, this
conflict presents a question of material fact. Accordingly, neither Peters nor Jakubowski are entitled
to summary judgment as to Count III.
Counts II and IX: Breach of Fiduciary Duty and Aiding and Abetting a Breach of Fiduciary Duty
Defendant Jakubowski moves for summary judgment on the breach of fiduciary duty claim
(Count II) and Peters moves for summary judgment with respect to Count IX—aiding and abetting
a breach of fiduciary duty.

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A suit for breach of fiduciary duty is governed by the law of the state of incorporation. CDX
Liquidating Trust v. Venrock Associates, 640 F.3d 209, 212 (7th Cir. 2011). As a Delaware corporation,
Delaware law applies here and the default rule is that managers of a corporation have a fiduciary
duty. Feeley v. NHAOCG, LLC, 62 A.3d 649, 662 (Del. Ch. 2012). The LLC Agreement
(“Agreement”) for OBT explicitly provides that managers have exclusive control over the company.
As the manager operating OBT, Jakubowski has management authority and under Delaware law,
owes a fiduciary duty to members and investors—a fact that Defendants have not contested.
“When fiduciaries communicate with their beneficiaries in the context of asking the
beneficiary to make a discretionary decision . . . the fiduciary has a duty to disclose all material facts
bearing on the decision at issue.” Metro Commc’n Corp. v. Advanced Mobilecomm Techs. Inc., 854 A.2d
121, 156 (Del. Ch. 2004). Corporate fiduciaries breach their duty of disclosure under Delaware law
when they make “a materially false statement,” “omit a material fact,” or make “a partial disclosure
that is materially misleading.” Pfeffer v. Redstone, 965 A.2d 676, 684 (Del. 2009). A material fact is one
that a reasonable person considers essential to her decision. Id. “Put another way, there must be a
substantial likelihood that the disclosure of the omitted fact would have been viewed by the
reasonable investor as having significantly altered the ‘total mix’ of information made available.”
Gantler v. Stephens, 965 A.2d 695, 710 n.44 (Del. 2009).
To to succeed on a claim of aiding and abetting a breach of fiduciary duty, Van dorn must
also prove that Peters participated in the breach and that the breach caused damage. CMS Inv.
Holdings, LLC v. Castle, No. 9468-VCP, 2015 Del. Ch. LEXIS 169, at *72 (Ch. June 23, 2015)
Under Delaware law, Jakubowski as the manager of OBT owed Van Dorn a fiduciary duty
of full candor about any information that he knew to be material to the loan agreement. See Kyle v.
Appollomax, L.L.C., 987 F. Supp. 2d 519, 524 (D. Del. 2013). This presents two questions critical to
resolving this factual inquiry—whether Jakubowski knew that Peters decided not to guaranty the
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loan prior to funding and whether that guaranty was critical to Van Dorn moving forward with the
loan.
As discussed above, the timing and content of the conversation between Jakubowski and
Peters are material facts that remain unresolved. Given this conflict, if the conversation happened
prior to Van Dorn funding on or about July 6-9, 2012, then the question remains whether
Jakubowski had an obligation to disclose that information to Van Dorn before she acted. As a
fiduciary, the law supports that he was obliged to disclose Peters’ decision before Van Dorn funded
had he known that the guarantee was critical to her decision. The facts are divided on the issue of
whether the guaranty was material. Van Dorn alleges that she made it clear that she would not
proceed with investing any more money without it being guaranteed. This is evidenced by the facts
that she did not engage in serious talks with OBT until the guaranty was put on the table; she made
reference to the guaranty throughout the negotiations; and she communicated directly with the
guarantor, Peters, to set the terms. This intent was undermined by her decision to move forward
without first getting the guaranty signed by Peters, and Peters’ and Jakubowski’s recollection that
Van Dorn never explicitly stated that the guaranty was critical to the deal. The significance of the
guaranty presents a question of material fact necessary to determine whether Jakubowski had a
fiduciary duty to disclose Peters intentions to Van Dorn, and also the role, if any, that Peters played
in enabling said a breach. Consequently, Jakubowski’s motion to dismiss Count II and Peters
motion to dismiss Count IX are denied.

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Conclusion
Based on the foregoing, this Court denies both Defendants’ Motions for Summary Judgment
as to Counts II, III, and IX.
IT IS SO ORDERED.

ENTERED:

SHARON JOHNSON COLEMAN
United States District Court Judge

Dated: 1/30/2018

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