Webb et al v. Frawley et al
Filing
105
MEMORANDUM Opinion and Order Signed by the Honorable Elaine E. Bucklo on 2/23/2018. Mailed notice. (mgh, )
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
Nicholas Webb
Plaintiff,
v.
Michael Frawley.
Defendant.
)
)
)
)
)
) Case No. 15 C 6406
)
)
)
)
)
)
MEMORANDUM OPINION ORDER
In this action, whose litigation costs at this juncture must
vastly exceed the damages originally asserted,1 Nicholas Webb, a
securities trader fired from his job at the financial services
1
Webb and his erstwhile co-plaintiff, Thad Beversdorf, originally
filed this action in the Circuit Court of Cook County. After
defendant removed to this court, plaintiffs moved to remand on the
ground that the amount in controversy did not exceed $75,000.
Judge Der-Yeghiayan denied that motion, and he also granted the
defendant’s motion to compel arbitration. Plaintiffs appealed. See
Webb v. Frawley, 858 F.3d 459 (7th Cir. 2017). The Seventh Circuit
affirmed the denial of remand and affirmed the order compelling
arbitration in part, requiring Beversdorf to arbitrate his claims,
but remanding Webb’s claims to this court. Id. at 461-62. I note
that the employment dispute at the heart of this case also spawned
a related action, Webb v. Financial Industry Regulatory Authority,
Inc., 16 C 4664 (N.D. Ill.), in which Webb and Beversdorf allege
that FINRA mishandled claims they submitted for arbitration and
later withdrew. That action was likewise removed to federal court,
where Judge Wood dismissed it at the pleading stage in a decision
Webb and Beversdorf have appealed. See id., 2017 WL 2868996 (N.D.
Ill. July 5, 2017) (Wood, J.), notice of appeal filed July 26,
2017). This is, by any measure, a lot of litigation arising out of
events that plaintiff originally indicated caused him no more than
$75,000 in damages.
firm Jeffries, LLC, sues his former supervisor, Michael Frawley.
Webb claims that Frawley encouraged him to spend hundreds of hours
pursuing trades in iron ore, even though Frawley knew—but hid from
Webb—that Jeffries had decided to “cancel iron ore as a product”
and would not approve the trades. Webb asserts claims for tortious
interference with contract and for common law fraud. Before me is
Frawley’s motion to dismiss the complaint under Fed. R. Civ. P.
12(b)(6), which I grant for the following reasons.
The basic pleading standards of Rule 8 are not demanding. A
plaintiff must plead enough facts to “present a story that holds
together,” and that, if true, entitle him to relief. Swanson v.
Citibank,
N.A.,
614
F.3d
400,
404
(7th
Cir.
2010).
Webb’s
complaint does not cross this modest threshold. Defendants raise a
number of specific arguments for dismissal, several of which I
address briefly, but their overarching argument—that plaintiff’s
claim is inherently implausible, i.e., that it does not “hold
together”—is compelling.
The basic story that emerges from plaintiff’s complaint is
that in late 2011, Jeffries sought to enter the metals trading
market and recruited Frawley—a trader with expertise in metals
trading, who then worked for another firm called Newedge—for this
purpose. Frawley, in turn, recruited other metals traders from
Newedge,
working
including
in
Webb,
Jeffries’s
who
Chicago
resigned
office
2
from
in
Newedge
June
of
and
began
2012,
under
Frawley’s supervision. Shortly thereafter, however, allegedly in
response to a legal action in which Newedge claimed that Jeffries
had
“poached”
its
employees,
Jeffries
implemented
a
policy
requiring that all of the metals trades generated by Webb and
others formerly at Newedge be executed through Jeffries’s London
desk. (Webb and his colleagues were located in Jeffries’s Chicago
office.)
In
addition,
expenses
to
the
Jeffries
metals
adopted
trading
a
policy
business
of
unit
allocating
that
were
not
fiscally attributable to that unit. Webb claims that Frawley was
unhappy with these policies because they made his business unit
appear unprofitable and compromised the ability of the employees
in
the
unit—including
Frawley
himself—to
earn
commissions
and
bonuses. This jeopardized Frawley’s ability to retain qualified
traders in his unit. In addition, Frawley allegedly feared that
these policies—which remained in place from July 2012 until May
2013—would
have
a
negative
commercial
reputation,
and
effect
his
on
ability
his
to
compensation,
obtain
his
employment
elsewhere.
Jeffries’s
management
allegedly
decided
in
May
2013
to
“cancel iron ore as a product at Jeffries” and directed Frawley to
tell the traders in his unit to stop pursuing iron ore business.
Frawley
ignored
that
directive,
Webb
claims,
and
instead
encouraged Webb to continue pursuing iron ore trades. In fact,
after telling Webb in August of 2013 that his job was “in peril,”
3
Frawley suggested that Webb could save his job by booking a few
large iron ore deals. Webb allegedly complied, and the next day he
sent Frawley a request to approve a pending iron ore trade with a
client he had developed in the preceding months.2 Frawley approved
the
trade,
but
Webb
later
learned
that
Jeffries’s
management
“refused to consider the iron ore deal” because unbeknownst to
Webb, “iron ore had been formally cancelled as a product” as of
the previous May. Webb then had to call all of his prospective
iron ore clients to tell them that Jeffries would not engage in
iron ore transactions, which he claims irreparably damaged his
commercial reputation. Webb was terminated without explanation on
October 21, 2013. He was later advised that the termination was
for poor performance and lack of production.
Setting aside for a moment whether Webb’s allegations, taken
as true, add up to liability on the theories Webb asserts, the
conduct Webb attributes to Frawley is hard to fathom. Webb insists
that
Frawley
knew
Jeffries
would
not
consummate
the
iron
ore
trades he directed Webb to pursue, yet nothing in the complaint
suggests any rational explanation for why Frawley would send an
employee who reports to him on a fruitless mission. Webb’s only
response is that Frawley was “not acting on behalf of Jeffries”
2
The complaint, which has not been amended since Beversdorf was
terminated as a plaintiff, actually alleges that Beversdorf sent
Frawley the approval request, which related to a client that
Beversdorf and Webb had developed. I note this detail for
precision, but it is not material to my analysis.
4
but was “serving his own interests,” thinking about his postJeffries employment options and reputation in the industry, but
that
is
no
response
at
all.
The
question
remains:
what
could
Frawley possibly gain in the eyes of industry professionals or a
potential
employer
from
cultivating
the
failure
of
his
direct
report? If Webb has some theory for why Frawley’s reputation and
job prospects were inversely related to the success of the traders
in the business unit he led, nothing in the complaint or in his
response brief hints at it.
Even if I assume, however, that it somehow behooved Frawley
to sabotage Webb’s performance, the facts Webb alleges do not
support his claims. As Frawley observes, Webb’s claim is premised
on conduct Frawley directed at Webb himself, namely, encouraging
him
to
pursue
trades
he
knew
their
mutual
employer
would
not
approve. “Under Illinois law, liability for tortious interference
[of contract] may only be premised on acts immediately directed at
a third party which cause that party to breach its contract with
the plaintiff.” George A. Fuller Co., a Div. of Northrop Corp. v.
Chicago College of Osteopathic Medicine, 719 F.2d 1326, 1331 (7th
Cir. 1983) (conduct directed at the plaintiff does not support
claim for tortious interference) (citing Mitchell v. Weiger, 409
N.E. 38, 41 (Ill. App. Ct. 1980)). Webb responds that in Frierson
v. Univ. of Chicago, 2015 WL 7771030, at *3 (Ill. App. Ct. Dec. 2,
2015), the Illinois Appellate Court recognized an exception to
5
this rule that applies “where a corporate officer interferes with
an employee’s employment with the corporation.” But this citation
does
not
dismissed
advance
the
Webb’s
cause
plaintiff’s
because
tortious
the
court
interference
in
Frierson
claim
on
the
ground that nothing in her complaint suggested that the supervisor
who allegedly interfered with her contract benefitted from her
termination.
Id.
Webb’s
complaint
suffers
from
precisely
that
infirmity.
Another major flaw in Webb’s contractual interference theory
relates
to
Frawley’s
putative
intent.
All
agree
that
tortious
interference with contract requires that the defendant intend to
induce
a
contractual
breach.
See
Strosberg
v.
Brauvin
Realty
Serv., Inc., 691 N.E. 2d. 834, 845 (Ill. App. Ct. 1998). Webb’s
theory appears to be that Frawley intended for Webb to be fired
for defying the decision of Jeffries’s management to stop pursuing
iron ore trades and for wasting time on trades that would go
nowhere instead of pursuing potentially fruitful transactions. But
this
theory
cannot
be
reconciled
with
Webb’s
allegations
that
Frawley was “desperate to save his commercial reputation” and that
“[t]he only way” to do so was “to develop a series of lucrative
trades in the iron ore business and attribute these trades and
transactions to his efforts.” The only reasonable way to construe
these allegations is that Frawley intended Webb’s iron ore trades
to succeed, not to fail and bring about his termination. For this
6
reason,
too,
Webb’s
tortious
interference
with
contract
claim
falters at the gate.
Webb’s fraud claim is fatally flawed for similar reasons. To
begin,
the
claim
is
governed
by
Rule
9(b),
which
of
course
requires the particulars of the alleged fraud to be pled with
specificity. See DiLeo v. Ernst & Young, 910 F.2d 624, 627 (7th
Cir. 1990). The fraud Webb asserts is that “Frawley represented to
Webb that Jeffries wanted him to seek iron ore trades,” knowing
that was not true. But the only allegation attributing specific
representations to Frawley asserts that “[o]n May 31, 2013, Webb
and
Beversdorf
were
told
by
Frawley
that
they
would
be
facilitating Iron Ore across the Metals Desk globally.” Compl. at
¶ 43. The complaint also references an e-mail Frawley allegedly
sent on the same date “to various employees of Jeffries indicating
that Webb and Beversdorf would facilitate bringing the Jeffries
Metals Desk into the iron ore market.” Id. at ¶ 42. Webb does not
identify any specific statement Frawley allegedly made, but even
reading between the lines of his allegations to infer an implicit
misrepresentation about what Jeffries “wanted,” it is impossible,
for the reasons discussed above, to piece them together into a
theory of fraud that makes sense. See Borsellino v. Goldman Sachs
Group, Inc., 477 F.3d 502, 508 (7th Cir. 2007) (complaint failed
to “describe any sort of plausible ‘what’ of the fraud” where the
alleged
scheme
made
“neither
economic
7
nor
common
sense.”)
If
Frawley intended Webb to rely on Frawley’s tacit indication that
Jeffries
would
termination
(as
support
Webb’s
iron
ore
tortious
trades
to
bring
interference
about
claim
Webb’s
asserts),
Frawley’s own, allegedly tenuous situation at Jeffries could only
worsen as a result of Webb’s reliance. Webb tries to shift the
focus away from Frawley’s standing at Jeffries and towards the
industry as a whole, but that does not change the analysis, since
Webb does not explain how or why Frawley’s professional reputation
would
be
improved
or
salvaged
by
Webb’s
pursuit
of
futile
business.
For the foregoing reasons, Frawley’s motion to dismiss is
granted.
ENTER ORDER:
Elaine E. Bucklo
United States District Judge
Dated: February 23, 2018
8
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?