Reschke v. Pactiv, LLC
Filing
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MEMORANDUM Opinion and Order. Defendant's motion to dismiss Counts IV and V isgranted. Count IV is dismissed without prejudice, and Count V is dismissed with prejudice. It is so ordered. Status hearing previously set for 12/18/14 is stricken and reset to 1/29/15 at 10:30 a.m. Signed by the Honorable Marvin E. Aspen on 12/12/2014. Notice mailed by judge's staff (ntf, )
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
ROBERT RESCHKE,
Plaintiff,
vs.
PACTIV, LLC,
Defendant.
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Case No. 1:14-cv-04656
Hon. Judge Marvin E. Aspen
MEMORANDUM OPINION AND ORDER
MARVIN E. ASPEN, District Judge:
Presently before us is Defendant Pactiv’s motion to dismiss Counts IV and V of Plaintiff
Robert Reschke’s complaint, filed pursuant to Federal Rules of Civil Procedure 9(b) and
12(b)(6). For the reasons stated below, we grant Defendant’s motion.
BACKGROUND
In 1992, Plaintiff began working as a Finishing Manager for Dopaco, Inc., and was
promoted to Plant Manager in 1998. (Compl. at Count IV ¶¶ 9, 12.) In July 2000, Plaintiff
entered into an “Employment Stay Bonus and Severance Agreement” (the “Dopaco Agreement”)
with Dopaco. (Id. at Count IV ¶ 11, Ex. C.) The Dopaco Agreement as amended provides that
in the event of a “Change of Control” or of Plaintiff’s termination for “Good Reason” or
“Without Cause,” Plaintiff could receive severance pay equal to 100% of his “Two Year
Average Compensation,” plus benefits. (Id. at Count IV ¶ 14.)
Defendant acquired Dopaco on May 20, 2011, through a stock purchase agreement. (Id.
at Count IV ¶ 12.) Plaintiff alleges that the acquisition bound Defendant to the Dopaco
Agreement. (Id. at Count IV ¶ 13.) In April 2012, Defendant changed the bonus structure that
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had entitled Plaintiff to a bonus for the prior fifteen years. (Id. at Count IV ¶¶ 16–18.) Plaintiff
alleges that because this change resulted in a permanent reduction of his compensation, he
elected to exercise his severance option under the Dopaco Agreement. (Id. at Count IV ¶ 19.)
Plaintiff further claims that Defendant “terminated [him] by leading him to believe a severance
payment would be made” pursuant to the Dopaco Agreement, but then refused to pay him the
severance compensation. (Id. at Count IV ¶¶ 22–25.)
Plaintiff initially filed charges with the United States Equal Employment Opportunity
Commission (“EEOC”) and the Illinois Department of Human Rights (“IDHR”). (Resp. at 2.)
The EEOC issued a right to sue letter on March 24, 2014. (Id.) Thereafter, Plaintiff filed his
five-count complaint on June 19, 2014, alleging that Defendant: (1) discriminated against him
because of his age when it terminated his employment without severance pay in violation of the
Age Discrimination in Employment Act (“ADEA”), and the Illinois Human Rights Act (Counts I
and II); (2) breached its obligations under the Dopaco Agreement (Count III); (3) made
fraudulent misrepresentations to induce him to elect his severance option (Count IV); and
(4) negligently misrepresented that he would be entitled to severance pay (Count V).
(See Compl.) Defendant answered Counts I, II, and III, and moved to dismiss Counts IV and V.
(Resp. at 2.) For both Counts IV and V, Plaintiff seeks damages of 100% of his two-year
average compensation, in addition to life insurance, medical insurance, and disability insurance
for one year. (Compl. at Count IV ¶ 26; Count V ¶ 32.)
STANDARD OF REVIEW
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).
To survive a motion to dismiss, the complaint must contain a “short and plain statement of the
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claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). Specifically, “a
complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is
plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S. Ct. 1937, 1949 (2009) (citing
Bell Atl. Corp. v. Twombly, 540 U.S. 544, 555, 127 S. Ct. 1955, 1964–65 (2007)). The
plausibility standard “is not akin to a ‘probability requirement,’ but it asks for more than a sheer
possibility that a defendant has acted unlawfully.” Id. Thus, while a complaint need not give
“detailed factual allegations,” it must provide more than “labels and conclusions, and a formulaic
recitation of the elements of a cause of action.” Twombly, 540 U.S. at 545, 127 S. Ct. at 1964–
65; Killingsworth v. HSBC Bank Nevada, N.A., 507 F.3d 614, 618–19 (7th Cir. 2007). The
statement must be sufficient to provide the defendant with “fair notice” of the claim and its basis.
Twombly, 540 U.S. at 545, 127 S. Ct. at 1964 (quoting Conley v. Gibson, 355 U.S. 41, 47, 78
S. Ct. 99, 102 (1957)); Tamayo v. Blagojevich, 526 F.3d 1074, 1083 (7th Cir. 2008). In
evaluating a motion to dismiss, we must accept all well-pleaded allegations in the complaint as
true and draw all reasonable inferences in the plaintiff’s favor. Thompson v. Ill. Dep’t of Prof’l
Reg., 300 F.3d 750, 753 (7th Cir. 2002).
DISCUSSION
Defendant argues that Plaintiff’s claims of fraudulent misrepresentation (Count IV) and
negligent misrepresentation (Count V) should be dismissed. As set forth below, we grant
Defendant’s motion because Plaintiff’s complaint does not meet the heightened pleading
standard for fraudulent misrepresentation, and because his negligent misrepresentation claim is
barred by the Moorman doctrine.
A.
Fraudulent Misrepresentation (Count IV)
Plaintiff claims that Defendant made fraudulent misrepresentations to induce him into
electing his severance option. (Compl. at Count IV ¶ 22.) A claim for fraud must include the
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following elements: “(1) a false statement of material fact; (2) defendant’s knowledge that the
statement was false; (3) defendant’s intent that the statement induce the plaintiff to act;
(4) plaintiff’s reliance upon the truth of the statement; and (5) plaintiff’s damages resulting from
reliance on the statement.” Tricontinental Indus., Ltd. v. PricewaterhouseCoopers, LLP, 475
F.3d 824, 841 (7th Cir. 2007) (citing Connick v. Suzuki Motor Co., Ltd., 174 Ill. 2d 482, 496, 675
N.E.2d 584, 591 (Ill. 1996)).
Additionally, Federal Rule of Civil Procedure 9(b) requires plaintiffs who assert fraud
claims to “state with particularity the circumstances constituting fraud.” Fed. R. Civ. P. 9(b). To
satisfy the particularity requirement, an allegation of fraud must include the “who, what, when,
where, and how: the first paragraph of any newspaper story.” DiLeo v. Ernst & Young, 901 F.2d
624, 627 (7th Cir. 1990); accord Borsellino v. Goldman Sachs Grp., Inc., 477 F.3d 502, 507
(7th Cir. 2007); Hoffman v. Nationwide Mut. Ins. Co., No. 10 C 3841, 2011 WL 3158708, at *3
(N.D. Ill. July 26, 2011). Although Rule 9(b) does not require the plaintiff to plead facts
sufficient to prove that the alleged misrepresentations were false, it does require the plaintiff to
state “the identity of the person making the misrepresentation, the time, place, and content of the
misrepresentation, and the method by which the misrepresentation was communicated to the
plaintiff.” Camasta v. Jos. A. Bank Clothiers, Inc., 761 F.3d 732, 737 (7th Cir. 2014) (quoting
Uni*Quality, Inc. v. Infotronx, Inc., 974 F.2d 918, 923 (7th Cir. 1992) (citations omitted)). 1
In his complaint, Plaintiff asserts that Defendant made “false and fraudulent
representations” relating to his severance pay. (Compl. at Count VI ¶ 26.) This conclusory
allegation does not meet the heightened pleading standard for fraud. Plaintiff fails to allege any
specific facts to support the elements of fraud, such as: who made the alleged misrepresentation,
intent, knowledge, and other conditions of a person’s mind may be alleged generally.
See Fed. R. Civ. P. 9(b).
1 Malice,
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the content of the misrepresentation, when and where Defendant made the misrepresentation, or
the means of communication through which Plaintiff received the misrepresentation. The closest
thing to the required allegations is Plaintiff’s assertion that “[Defendant] terminate[d] [Plaintiff]
by leading him to believe a severance payment would be made and then denied him the
compensation after terminating his employment.” (Compl. at Count VI ¶ 22.) But again,
Plaintiff does not describe what Defendant said to deceive him, who said it, when it was said,
where, or through what means. In his Response, Plaintiff reiterates the five prima facie elements
required for a fraud claim, but does not add any facts or details to bolster his complaint. (See
Resp. at 6–8.) Since Plaintiff failed to provide sufficient facts for us to determine that his
allegations of fraud are “responsible and supported, rather than defamatory and extortionate,” he
has not satisfied the Rule 9(b) particularly requirement. Ritacca v. Storz Med., A.G., 291 F.R.D.
176, 180 (N.D. Ill. 2013) (quoting Ackerman v. Nw. Mut. Life Ins. Co., 172 F.3d 467, 469
(7th Cir. 1999)). Therefore, Defendant’s motion to dismiss Count IV is granted without
prejudice.
B.
Negligent Misrepresentation (Count V)
In Count V, Plaintiff claims that Defendant negligently misrepresented to Plaintiff that he
was entitled to severance pay and benefits in order to induce him into electing his severance
package option. He further alleges that as a result of Defendant’s negligent conduct, he lost
economic compensation and insurance benefits. The Illinois Supreme Court’s decision in
Moorman Mfg. Co. v. Nat’l Tank Co. established the economic loss doctrine in Illinois.
91 Ill. 2d 69, 88, 435 N.E.2d 443, 451–52 (Ill. 1982); see Wigod v. Wells Fargo Bank, N.A., 673
F.3d 547, 567 (7th Cir. 2012). The Moorman doctrine generally prohibits recovery of economic
losses under a tort theory to “a party whose complaint is rooted in disappointed contractual or
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commercial expectations.” Banco del Estado v. Navistar Int’l Transp. Corp., 942 F. Supp. 1176,
1181 (N.D. Ill. 1996) (quoting Collins v. Reynard, 154 Ill. 2d 48, 54, 607 N.E.2d 1185, 1188
(Ill. 1992)); see Wigod, 673 F.3d at 567. Here, Plaintiff seeks damages for 100% of his two-year
average compensation, as well as life, medical, and disability insurance for one year. (Compl.
at Count V ¶¶ 14, 32.) These are purely economic damages from an alleged breach of contract
that are typically not recoverable in tort.
Plaintiff argues, however, that an exception to the Moorman doctrine applies in his case.
Under the relevant exception, “a plaintiff may pursue a negligent misrepresentation claim against
a defendant who: (1) is ‘in the business of supplying information;’ and (2) provides ‘this
information for the guidance of others in their business relations with third parties.’” LeDonne v.
Axa Equitable Life Ins. Co., 411 F. Supp. 2d 957, 963 (N.D. Ill. 2006) (quoting Gerdes v. John
Hancock Mut. Life Ins. Co., 712 F. Supp. 692, 696 (N.D. Ill. 1989)); see Rankow v. First
Chicago Corp., 870 F.2d 356, 362–63 (7th Cir. 1989).
Under the first prong, the determination of whether an enterprise is in the business of
supplying information requires a fact-specific inquiry to examine the nature of the business and
the end product. Rankow, 870 F.2d at 361–64; Gerdes, 712 F. Supp. at 697. Illinois courts
generally find that defendants who provide only information to their clients, such as accountants,
real estate brokers, and stockbrokers, are “in the business of supplying information.” Hartford
Fire Ins. Co. v. Henry Bros. Const. Mgmt. Servs., LLC, 877 F. Supp. 2d 614, 620 (N.D. Ill.
2012); Tolan & Son, Inc. v. KLLM Architects, Inc., 308 Ill. App. 3d 18, 28, 719 N.E.2d 288, 297
(1st Dist. 1999). At the other end of the spectrum, courts typically find that defendants who
produce tangible products, such as manufacturers, are not “in the business of supplying
information.” Dvore v. Casmay, No. 6 C 3076, 2008 WL 4427467, at *7 (N.D. Ill. Sept. 29,
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2008); Tolan & Son, 308 Ill. App. 3d at 28–29; Fox Assoc., Inc. v. Robert Half Int’l, Inc., 334
Ill. App. 3d 90, 95, 777 N.E.2d 603, 607 (1st Dist. 2002); see Rankow, 870 F.2d at 364;
Hartford, 877 F. Supp. 2d at 620–21. In short, if the defendant’s end goal is to create a tangible
product, then he does not meet the business of supplying information requirement. See Hartford,
877 F. Supp. 2d at 620; Tolan & Son, 308 Ill. App. 3d at 29.
The second prong of the exception requires the defendant to provide “information for the
guidance of others in their business relations with third parties.” LeDonne, 411 F. Supp. 2d at
963 (quoting Gerdes, 712 F. Supp. at 696). To satisfy this prong, the plaintiff must allege that he
used the information supplied by the defendant to guide him in a business transaction with a third
party. Gerdes, 712 F. Supp. at 698 (citing Rankow, 870 F.2d at 362–63).
Plaintiff does not fall under this exception to the Moorman doctrine because Defendant is
not in the business of supplying information, nor did Defendant provide any information to
Plaintiff that could be construed as guidance for Plaintiff’s business relations with third parties.
LeDonne, 411 F. Supp. 2d at 963 (quoting Gerdes, 712 F. Supp. at 696). Plaintiff’s argument
that Defendant is “in the unique position of supplying the information related to [Defendant]’s
employee benefits and severance payments,” (Resp. at 13), is a far-fetched interpretation of the
Moorman exception. Although Defendant may supply benefit information to its employees, this
human resources function is merely incidental to its primary manufacturing operations.
See Rankow, 870 F.2d at 364; Hartford, 877 F. Supp. 2d at 620. Defendant is in the business of
making paper cups. (Compl. at Count V ¶ 4.) Unlike pure information providers, manufacturers
like Defendant do not produce information themselves, and are thus not “in the business of
supplying information.” Hartford, 877 F. Supp. 2d at 620; see also Gen. Elec. Capital, Corp. v.
Equifax Servs., Inc., 797 F. Supp. 1432, 1442 (N.D. Ill. 1992). Additionally, even if Defendant
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was an information supplier, information about employee benefits and severance payments
would not have been for the “guidance of [Plaintiff] in [his] business relations with third parties.”
LeDonne, 411 F. Supp. 2d at 963 (quoting Gerdes, 712 F. Supp. at 696). Therefore, Defendant’s
motion to dismiss Count V is granted with prejudice.
CONCLUSION
For the reasons set forth above, Defendant’s motion to dismiss Counts IV and V is
granted. Count IV is dismissed without prejudice, and Count V is dismissed with prejudice. It is
so ordered.
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Marvin E. Aspen
United States District Judge
Dated: December 12, 2014
Chicago, Illinois
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