Ritchie Capital Management LLC v. Reservoir Capital Partners, LP et al
Filing
74
OPINION and Order. Signed by the Honorable Sara L. Ellis on 12/13/2016. Mailed notice (lf, )
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
RITCHIE CAPITAL MANAGEMENT, L.L.C., )
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Plaintiff,
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v.
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JOHN KERMATH,
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Defendant.
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______________________________________ )
JOHN KERMATH,
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Counter-Plaintiff,
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v.
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RITCHIE CAPITAL MANAGEMENT, L.L.C., )
AARON ROBERTS THANE RITCHIE, and )
PLAN ADMINISTRATOR FOR THE
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RITCHIE CAPITAL MANAGEMENT, L.L.C. )
BENEFIT PLANS,
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Counter-Defendants.
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No. 15 C 8021
Judge Sara L. Ellis
OPINION AND ORDER
Ritchie Capital Management, L.L.C. (“Ritchie Capital”), an investment management
company, filed suit against John Kermath, its former president, for misappropriating Ritchie
Capital’s confidential and privileged information. Kermath filed counterclaims against Ritchie
Capital, the Plan Administrator for the Ritchie Capital Management, L.L.C. Benefit Plans (the
“Plan Administrator”), and Ritchie Capital’s founder and former chief executive officer, Aaron
Roberts Thane Ritchie (“Thane Ritchie,” and collectively with Ritchie Capital and the Plan
Administrator, the “Ritchie Parties”), seeking to recover benefits arising from his alleged
misclassification as an independent contractor while working for Ritchie Capital, in addition to
outstanding wages, bonuses, and other employment-related compensation he did not receive
when he left Ritchie Capital’s employment. 1 Kermath brings his claims pursuant to the
Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. § 1001 et seq., the Illinois
Wage Payment and Collection Act (the “IWPCA”), 820 Ill. Comp. Stat. 115/1 et seq., and the
common law of unjust enrichment. Because Kermath agreed not to receive any benefits Ritchie
Capital offered its employees and he has not pleaded facts to suggest he did not enter into the
waiver knowingly and voluntarily, the Court dismisses Kermath’s ERISA benefits claim without
prejudice. Kermath’s IWPCA claim for unpaid compensation may proceed because he has
sufficiently alleged an agreement for payment so as to put Ritchie Capital and Thane Ritchie on
notice of the contours of that claim, although he cannot pursue this claim with respect to accrued
unused vacation time. But the Court dismisses Kermath’s unjust enrichment claim, which seeks
the same recovery as the IWPCA claim, because it is governed by his compensation agreements
with Ritchie Capital, and Kermath has not properly pleaded the claim in the alternative.
BACKGROUND 2
Ritchie Capital manages investment funds. Although it currently has its headquarters in
the Cayman Islands, it also had offices in Illinois. It was in Illinois where Kermath began
working for Ritchie Capital in May 2006.
1
Ritchie Capital filed suit against not only Kermath but also Reservoir Capital Partners, L.P., Reservoir
Capital Group L.L.C., Reservoir Capital Master Fund, L.P., Reservoir Capital Master Fund II, L.P.,
Reservoir Capital Investment Partners, L.P. (collectively, “Reservoir”), and Eric Engler. Reservoir then
filed counterclaims against the Ritchie Parties. All claims among the Ritchie Parties, Reservoir, and
Engler have been dismissed with prejudice pursuant to the parties’ joint motion. Docs. 63, 65. Only the
claims between the Ritchie Parties and Kermath remain pending.
2
The facts in the background section are taken from Kermath’s counterclaims and are presumed true for
the purpose of resolving the Ritchie Parties’ motion to dismiss. See Virnich v. Vorwald, 664 F.3d 206,
212 (7th Cir. 2011). A court normally cannot consider extrinsic evidence without converting a motion to
dismiss into one for summary judgment. Hecker v. Deere & Co., 556 F.3d 575, 582–83 (7th Cir. 2009).
Where a document is referenced in the counterclaim and central to Kermath’s claims, however, the Court
may consider it in ruling on the motion to dismiss. Id.
2
At all times, Ritchie Capital treated Kermath as an independent contractor. Ritchie
Capital memorialized Kermath’s employment arrangement in an amended and restated
professional services agreement (“PSA”), signed by Kermath on November 14, 2008 and
retroactive to May 6, 2006. 3 The PSA specifically provides that Kermath was an independent
contractor, that nothing in the PSA “should be construed to create . . . [an] employer-employee
relationship,” and that Kermath “is not the agent of [Ritchie Capital] and is not authorized to
make any representation, contract, or commitment on behalf of [Ritchie Capital].” Doc. 56-1
§ 3. Further, the PSA provides that Kermath “will not be entitled to any of the benefits that
[Ritchie Capital] may make available to its employees, such as group insurance, profit-sharing,
or retirement benefits.” Id. Ritchie Capital agreed to pay Kermath “a fee for services rendered
under the [PSA] as set forth in Exhibit A,” as well as to reimburse him “for any reasonable
expenses incurred in connection with the performance of services under” the PSA. Id. § 2.
Upon the PSA’s termination, Ritchie Capital was to pay Kermath “fees and expenses on a
proportional basis . . . for work which is then in progress, up to and including the effective date
of such termination.” Id. Exhibit A only set forth that Kermath’s fee for his services was to be
“based on a rate per month as determined from time to time.” Id. at 6.
Despite the PSA’s formalization of his status as an independent contractor, Kermath’s
day-to-day activities suggested an employer-employee relationship: he used Ritchie Capital’s
email, phone, and computer systems, office space, and business equipment; he had a Ritchie
Capital email address; Ritchie Capital provided Kermath with a company-issued Blackberry and
3
The Ritchie Parties attach to their reply an original professional services agreement, which Kermath
signed on May 10, 2006. Doc. 59-1. The Court does not consider this original agreement, as Kermath
does not reference it in his counterclaims nor is it central to his complaint. Moreover, the Ritchie Parties
could have, but did not, attach it to their opening memorandum in support of their motion to dismiss and
instead waited until the reply and until Kermath could not respond further to their arguments concerning
this agreement to provide it to the Court.
3
paid for the data charges; he routinely worked five days a week from Ritchie Capital’s Illinois
offices; he used a corporate credit card for business-related expenses; and he reported to one or
more superiors and supervised other employees. Additionally, Ritchie Capital paid Kermath
bonuses tied in part to his work performance and he received deferred compensation amounts
based on the performance of Ritchie Capital managed funds.
In September 2007, Ritchie Capital promoted Kermath to president of the company, with
Thane Ritchie remaining as chief executive officer. Kermath began signing documents on
Ritchie Capital’s behalf and had access to almost all aspects of the business. His job duties
included asset management, staffing and supervision of employees, oversight of the accounting
department, audit management, valuations, and litigation strategy. Kermath also determined
bonus payments and salaries for other Ritchie Capital employees, subject to Thane Ritchie’s final
approval. When Thane Ritchie moved out of the country, Kermath effectively became the de
facto chief executive officer as well, with certain Ritchie Capital regulatory filings even
identifying him as such.
On March 17, 2015, Thane Ritchie reasserted day-to-day operational control over Ritchie
Capital and demoted Kermath to vice president. He then reappointed Kermath as president in
April 2015. This did not last long, however, as Thane Ritchie again demoted Kermath to vice
president on May 8. Kermath resigned from Ritchie Capital on August 7, 2015. When he left,
he did not receive his outstanding compensation from Ritchie Capital, which included a base
$30,000 monthly payment he had received since he started working for Ritchie Capital and a
portion of his 2014 bonus that Ritchie Capital had agreed in writing to pay him no later than
September 30, 2015. 4
4
Although Kermath did not include these details in his counterclaim but rather in his response, the Court
can consider them here because they are consistent with the facts alleged in his counterclaim. See Help at
4
LEGAL STANDARD
A motion to dismiss under Rule 12(b)(6) challenges the sufficiency of the complaint, not
its merits. Fed. R. Civ. P. 12(b)(6); Gibson v. City of Chicago, 910 F.2d 1510, 1520 (7th Cir.
1990). In considering a Rule 12(b)(6) motion to dismiss, the Court accepts as true all wellpleaded facts in the plaintiff’s complaint and draws all reasonable inferences from those facts in
the plaintiff’s favor. AnchorBank, FSB v. Hofer, 649 F.3d 610, 614 (7th Cir. 2011). To survive
a Rule 12(b)(6) motion, the complaint must not only provide the defendant with fair notice of a
claim’s basis but must also be facially plausible. Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S. Ct.
1937, 173 L. Ed. 2d 868 (2009); see also Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.
Ct. 1955, 167 L. Ed. 2d 929 (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.
ANALYSIS
I.
ERISA Claim (Count I)
Kermath claims that Ritchie Capital misclassified him as an independent contractor and
so wrongfully excluded him from coverage under its employer-sponsored benefit plans during
his employment. He seeks to recover all benefits allegedly due him under these benefit plans
and to clarify his rights to future benefits, if any. To state a claim for these benefits under
ERISA, Kermath must allege (1) he qualifies as an employee, and (2) he was eligible to receive
benefits under the terms of Ritchie Capital’s benefit plans. Estate of Suskovich v. Anthem Health
Plans of Va., Inc., 553 F.3d 559, 571 (7th Cir. 2009); see also Nationwide Mut. Ins. Co. v.
Darden, 503 U.S. 318, 323–24, 112 S. Ct. 1344, 117 L. Ed. 2d 581 (1992) (adopting test for
Home Inc. v. Med. Capital, L.L.C., 260 F.3d 748, 752–53 (7th Cir. 2001) (plaintiff may add facts in
response to motion to dismiss if they are consistent with the allegations of the complaint).
5
determining who qualifies as an employee under ERISA). The Ritchie Parties argue that
Kermath’s claim fails on both elements because the PSA establishes that he worked as an
independent contractor for Ritchie Capital and agreed that he did not have any entitlement to
benefits Ritchie Capital made available to its employees. 5
Initially, the Court cannot definitively decide Kermath’s status as an independent
contractor or an employee based solely on the pleadings. Courts use a ten-factor test to
determine if an individual qualifies as an employee under ERISA, considering:
(1) the extent of control which, by the agreement, the master may
exercise over the details of the work; (2) whether or not the one
employed is engaged in a distinct occupation or business; (3) the
kind of occupation, with reference to whether, in the locality, the
work is usually done under the direction of the employer or by a
specialist without supervision; (4) the skill required in the
particular occupation; (5) whether the employer or the workman
supplies the instrumentalities, tools, and the place of work for the
person doing the work; (6) the length of time for which the person
is employed; (7) the method of payment, whether by the time or by
the job; (8) whether or not the work is a part of the regular business
of the employer; (9) whether or not the parties believe they are
creating the relation of master and servant; (10) whether the
principal is or is not in business.
Suskovich, 553 F.3d at 565–66. Although the PSA designates Kermath as an independent
contractor, this alone is not dispositive. See E.E.O.C. v. Sidley Austin Brown & Wood, 315 F.3d
696, 705 (7th Cir. 2002) (noting that Supreme Court, in Darden, rejected “mechanical test” in
determining who qualified as an employee, setting forth a list of factors to consider instead of
merely saying “that an employee is anyone who is called an employee”); Cox v. Gannett Co.,
No. 1:15-cv-02075-JMS-DKL, 2016 WL 1425525, at *4 (S.D. Ind. Apr. 12, 2016) (plaintiff’s
5
The Ritchie Parties do not argue that Kermath has not exhausted his administrative remedies, and so the
Court does not address this issue. See In re FedEx Ground Package Sys., Inc., 722 F. Supp. 2d 1033,
1047–52 (N.D. Ind. 2010) (finding that exhaustion would not be futile where plaintiffs contended they
were misclassified as independent contractors because issue of eligibility under plans needed to be
determined).
6
label as independent contractor did not preclude him from being a participant for purposes of
ERISA claim). Kermath alleges that the PSA’s classification of him as an independent
contractor was void and that he acted as an employee, not an independent contractor, providing
specific examples to suggest that status. For example, Kermath claims that he worked out of
Ritchie Capital’s offices using Ritchie provided equipment on a full-time uninterrupted basis for
over nine years. He also alleges that he supervised other Ritchie Capital employees, setting their
compensation and conducting performance reviews, and that he himself took on specific officer
roles within the company, including those of president and vice president, signing documents on
Ritchie Capital’s behalf. Kermath’s allegations suffice to allege that Ritchie Capital should have
treated him as an employee. See Brown v. Club Assist Road Serv. U.S., Inc., No. 12 CV 5710,
2013 WL 5304100, at *5–6 (N.D. Ill. Sept. 19, 2013) (allowing plaintiffs to proceed on FLSA
claim, noting that final analysis as to whether plaintiffs should be considered employees was “a
matter more appropriately resolved at summary judgment”); Bucciarelli-Tieger v. Victory
Records, Inc., 488 F. Supp. 2d 702, 709 (N.D. Ill. Mar. 1, 2007) (determining whether party is
employee or independent contractor under agency rules was necessarily fact-intensive
determination that could not be made on motion to dismiss); Oplchenski v. Parfums Givenchy,
Inc., No. 05 C 6105, 2007 WL 495289, at *4 (N.D. Ill. Feb. 12, 2007) (court could not determine
whether plaintiffs were entitled to be participants in ERISA plans at motion to dismiss stage).
But even assuming that Ritchie Capital misclassified Kermath as an independent
contractor, the Ritchie Parties argue that Kermath cannot proceed on his ERISA claim because
he explicitly waived any claim to such benefits in the PSA. See Doc. 56-1 § 3 (“[Kermath] will
not be entitled to any of the benefits that [Ritchie Capital] may make available to its employees,
such as group insurance, profit-sharing, or retirement benefits.”). The Ritchie Parties contend
7
that this exclusion is enforceable because an employer “need not extend [its] benefit plan to all
employees.” Trombetta v. Cragin Fed. Bank for Sav. Emp. Stock Ownership Plan, 102 F.3d
1435, 1440 (7th Cir. 1996); see also Bauer v. Summit Bancorp, 325 F.3d 155, 166 & n.20 (3d
Cir. 2003) (“Summit could limit plan participation to certain groups or classifications of
employees, as long as that limitation was not based upon age or length of service.”). Thus,
according to the Ritchie Parties, regardless of whether Kermath was an employee, he agreed not
to receive benefits and the Court should enforce that agreement. See Capital Cities/ABC, Inc. v.
Ratcliff, 141 F.3d 1405, 1410 (7th Cir. 1998) (enforcing agreement between newspaper and its
carriers that provided that carriers would not be treated as employees and would not receive “any
benefits or other compensation currently paid by The Star to its employees or hereafter declared
by The Star for the benefit of its employees”); Bendsen v. George Weston Bakeries Distribution
Inc., No. 4:08CV50 JCH, 2008 WL 4449435, at *3–4 (E.D. Mo. Sept. 26, 2008) (finding on
motion to dismiss that, regardless of whether they met the common law definition of employee,
plaintiffs lacked standing to assert ERISA claims because they disavowed any claims to benefits
in their distribution agreements); Robinson v. Mt. Carmel Med. Ctr., Inc., No. Civ.A.05-1091MLB, 2005 WL 1521962, at *2–3 (D. Kan. June 27, 2005) (finding on motion to dismiss that
plaintiff’s contract, in which she agreed she had no claim for benefits “customarily arising from
an employer/employee relationship” precluded her from having standing to bring ERISA claim).
Kermath responds that the Court should not prematurely determine that he waived his
rights to benefits at the motion to dismiss stage because such waiver must be made knowingly
and voluntarily, a determination that cannot be made from the face of the complaint. 6 See
Melton v. Melton, 324 F.3d 941, 945 (7th Cir. 2003) (for beneficiary to waive ERISA benefits,
6
Kermath does not argue, as he does with respect to his classification as an independent contractor in the
PSA, that the waiver provision of the PSA is void, nor does the counterclaim contain any such
allegations.
8
waiver must be “explicit, voluntary, and made in good faith” (citation omitted)); Finz v.
Schlesinger, 957 F.2d 78, 81 (2d Cir. 1992) (ERISA waivers are given stricter scrutiny than
those in typical contract cases); Craig v. Smith, 597 F. Supp. 2d 814, 823 (S.D. Ind. 2009)
(collecting cases). Kermath put the waiver at issue in his counterclaim by directly quoting its
language, 7 but he did not suggest that he did not enter into the waiver knowingly or voluntarily,
as he does in his response. Instead, he all but ignores the waiver in his counterclaim despite
acknowledging its existence in the PSA, proceeding as if it does not exist and the only roadblock
to his receiving benefits is his alleged misclassification as an independent contractor. Only in the
face of the Ritchie Parties’ motion to dismiss does Kermath change his tune. 8 Although Kermath
attempts to argue that he did not knowingly and voluntarily waive his right to benefits in his
response by pointing to a lack of allegations in the counterclaim to that end, Kermath cannot
amend his counterclaim to counter the Ritchie Parties’ motion to dismiss by way of arguments
made in his response brief. See Pirelli Armstrong Tire Corp. Retiree Med. Benefits Trust v.
Walgreen Co., 631 F.3d 436, 448 (7th Cir. 2011). Moreover, the lack of such allegations
suggests the opposite—that there were no issues with the waiver of benefits.
Because Kermath has not included allegations in his counterclaim to counter the effect of
the waiver of benefits included in the PSA, the Court agrees with the Ritchie Parties that, as
7
Kermath does not argue that the Court should view the waiver issue as an affirmative defense and so the
Court does not treat it as such.
8
Kermath also argues in a footnote that the PSA may not be enforceable because it does not identify any
consideration for its execution. See Doc. 58 at 9 n.5. The Court need not address this undeveloped
argument here, particularly where Kermath alleges no facts in his counterclaim to suggest that anything
but the classification of him as an independent contractor in the PSA was void based on his actual job
duties for Ritchie Capital at the time he signed the PSA. See Schrock v. Learning Curve Int’l, Inc., 744 F.
Supp. 2d 768, 770 n.1 (N.D. Ill. 2010) (“Undeveloped arguments and arguments raised in footnotes are
waived.”). To the extent Kermath seeks to pursue a claim of the PSA’s invalidity as a whole, he should
amend his counterclaim accordingly.
9
pleaded, he may not proceed on his ERISA claim because he has not adequately alleged his
eligibility to receive benefits under Ritchie Capital’s benefit plans. 9 See Capital Cities, 141 F.3d
at 1410. 10 This waiver, unlike that in Stewart v. Project Consulting Services, Inc., does not
depend on Kermath’s contractual status as an independent contractor. Cf. No. CIV. A. 99-3595,
2001 WL 1334995, at *2–3 (E.D. La. Oct. 26, 2001) (finding that plaintiff did not waive right to
pursue ERISA benefits where agreement provided that “plaintiff is not entitled to employee
benefits because he is not an employee”). Instead, Kermath’s waiver is almost identical to that
found in Capital Cities, providing that he “will not be entitled to any of the benefits that [Ritchie
Capital] may make available to its employees,” and thus operates independently of the PSA’s
designation of Kermath as an independent contractor. Doc. 56-1 § 3. The Court will provide
Kermath an opportunity to amend his claim to the extent he can allege facts that may overcome
that waiver. See Howell v. Motorola, Inc., 633 F.3d 552, 559 (7th Cir. 2011) (listing eight
factors courts consider in determining whether releases of ERISA claims are valid); Smart v.
Gillette Co. Long-Term Disability Plan, 70 F.3d 173, 182 (1st Cir. 1995) (noting “fact-intensive”
nature of waiver inquiry). But see Capital Cities, 141 F.3d at 1410 (noting on summary
judgment that argument that carriers were unaware of waiver was unavailing where they had
9
The Court notes that Kermath does not attempt to argue that the Court should not enforce the waiver
merely based on his misclassification as an independent contractor, as suggested by the Ninth Circuit in
Vizcaino v. Microsoft Corp., 120 F.3d 1006, 1012 (9th Cir. 1997) (labeling of worker as independent
contractor in agreement, along with waiver of benefits that follows, does not matter if worker is actually a
common law employee). See also Barnard v. Advance Pension Plan, No. 06-6265-HO, 2008 WL
4838844, at *6 (D. Or. Nov. 4, 2008) (following Vizcaino).
10
Kermath makes much of the fact that Capital Cities was decided on a motion for summary judgment.
Although the carriers in Capital Cities had the opportunity to present arguments as to the voluntariness of
the waiver and whether they were coerced into signing the waiver, at this stage, Kermath has not even
placed such questions at issue, instead merely alleging that the PSA contained the waiver, which
forecloses any claim for eligibility. The Court acknowledges that dismissal now may not end Kermath’s
pursuit of the claim; it instead merely requires Kermath to meet his burden at the pleading stage to allege
eligibility to receive benefits under the terms of Ritchie Capital’s benefit plans.
10
worked for years without benefits and never “expressed dissatisfaction with their compensation
package, including their non-participation in” the benefit plans).
II.
IWPCA Claim (Count II)
Kermath also brings a claim under the IWPCA, alleging that Ritchie Capital and Thane
Ritchie have not paid him his final compensation, comprised of wages, bonuses, and accrued,
unused vacation, that they allegedly owe him for work performed through and including the date
of his resignation in August 2015. The IWPCA provides Kermath with a cause of action to
recover final compensation, defined as “wages, salaries, earned commissions, earned bonuses,
and the monetary equivalent of earned vacation and earned holidays, and any other compensation
owed the employee by the employer pursuant to an employment contract or agreement between
the 2 parties.” 820 Ill. Comp. Stat. 115/2. The Ritchie Parties argue that Kermath has not
adequately alleged an agreement to pay him the specified compensation, that the PSA bars any
claims for bonuses or vacation time, and that Kermath has not provided any specifics as to the
agreed upon rate for his work, the work that remains uncompensated, or the total amount they
owe him.
Taking the last argument first, Kermath provided additional details surrounding his
IWPCA claim in his response, which the Court can consider to supplement his allegations. See
Ziccarelli v. Phillips, No. 12 CV 9602, 2013 WL 5387864, at *9 (N.D. Ill. Sept. 25, 2013)
(considering additional allegations of terms of parties’ alleged agreements to support claims in
plaintiffs’ response). He claims that Ritchie Capital paid him $30,000 each month, including
when on vacation, and that Ritchie Capital has still not paid him half of his documented 2014
bonus, a six-figure amount, even though Ritchie Capital promised in writing to pay it no later
11
than September 30, 2015. This suffices to provide the Ritchie Parties with notice of the amounts
Kermath seeks to recover.
Next, Kermath responds that, although the PSA may not have explicitly set out the bonus
structure, by repeatedly paying him a bonus and deferred compensation, Ritchie Capital caused
these aspects of his compensation to become terms of his employment. See Landers-Scelfo v.
Corp. Office Sys., Inc., 827 N.E.2d 1051, 1059, 356 Ill. App. 3d 1060, 293 Ill. Dec. 170 (2005)
(“[E]mployers and employees can manifest their assent to conditions of employment by conduct
alone. . . . [A]n employer and an employee, by acting in a manner consistent with an employment
agreement, can set the material terms of the agreement, including the amount of
compensation[.]”). But see Stark v. PPM Am., Inc., 354 F.3d 666, 672 (7th Cir. 2004) (plaintiff
cannot use “past practice” to create a contract to support IWPCA claim for unpaid bonus). The
PSA indicates that Kermath’s fee will be based on a rate per month to be determined from time
to time, but Kermath also alleges that Ritchie Capital paid him bonuses tied in part to his work
performance and awarded him deferred compensation based on the performance of Ritchie
Capital’s managed funds. According to Kermath, Thane Ritchie approved the wages, bonuses,
and deferred compensation he received. This suggests that the parties reached some type of
agreement concerning the rate at which Kermath was to be paid under the PSA and that bonuses
could have been part of that rate. 11 The Ritchie Parties argue that no such agreement could exist
because the PSA includes an integration clause and requires any changes to be in writing, but
11
Kermath’s allegations are less clear as to whether the parties had an agreement concerning vacation
time. In his response, he states that Ritchie Capital paid him $30,000 each month, including months when
he was on vacation. This suggests that he did not have vacation days but merely that, in calculating his
final compensation, Kermath contends that no amounts should be deducted for days he did not work
during the outstanding pay periods. To the extent Kermath attempts to recover separately for vacation
days, he has not plausibly suggested that he had an agreement to be compensated for unused vacation
days and so cannot pursue that as part of his IWPCA claim. See Grant v. Bd. of Educ. of City of Chi., 668
N.E.2d 1188, 1196, 282 Ill. App. 3d 1011, 218 Ill. Dec. 356 (1996) (noting absence of contractual
obligation for payment of accumulated unused sick leave).
12
these requirements may have been waived by conduct. See Wilder v. J.C. Christensen &
Assocs., Inc., No. 16-cv-1979, 2016 WL 7104283, at *5 (N.D. Ill. Dec. 6, 2016) (discussing
waiver requirements); Landers-Scelfo, 827 N.E.2d at 1059 (amount of compensation can be set
by conduct if consistent with agreement). Alternatively, at least with respect to the bonus
Kermath seeks to recover, he alleges that Ritchie Capital agreed to that bonus in writing.
Discovery may prove Kermath’s allegations false, but at this stage, Kermath has alleged enough
to proceed on his IWPCA claim for unpaid wages and bonuses.
III.
Unjust Enrichment (Count III)
Finally, Kermath claims that Ritchie Capital and Thane Ritchie have been unjustly
enriched because they have not properly compensated Kermath for work he has already
performed. But “[w]hen two parties’ relationship is governed by contract, they may not bring a
claim of unjust enrichment unless the claim falls outside the contract.” Enger v. Chicago
Carriage Cab Corp., 812 F.3d 565, 571 (7th Cir. 2016). Here, Kermath’s relationship with
Ritchie Capital and his claims concerning unpaid compensation are governed by the PSA and
offshoot compensation agreements, which appear to bar his unjust enrichment claim. In
response, Kermath argues that he has alleged that the PSA was void ab initio, allowing him to
pursue his unjust enrichment claim in the alternative to his IWPCA claim. Although this may
have been Kermath’s intention, his counterclaim only alleges that the PSA’s designation of him
as an independent contractor was void, leaving the remainder of the PSA, including as it relates
to compensation, intact. Additionally, Kermath incorporated the entirety of his allegations,
including those related to his IWPCA claim, into his unjust enrichment claim, failing to
accurately plead in the alternative. See Nathan v. Canadian Pac. Ry. Co. v. Williams-Hayward
Protective Coatings, Inc., No. 02 C 8800, 2003 WL 1907943, at *5 (N.D. Ill. Apr. 17, 2003)
13
(“While Plaintiff is entitled under Federal Rule of Civil Procedure 8(e)(2) to plead the alternative
claims of breach of contract and unjust enrichment despite the inconsistency between those
claims, Plaintiff’s unjust enrichment claim must not include allegations of a specific contract
governing the parties’ relationship.”). Because Kermath’s unjust enrichment claim challenges
the terms of the parties’ compensation agreements and is not pleaded in the alternative, the Court
must dismiss his unjust enrichment claim.
CONCLUSION
For the foregoing reasons, the Court grants in part and denies in part the Ritchie Parties’
motion to dismiss [55]. The Court dismisses Kermath’s ERISA and unjust enrichment claims
(Counterclaim Counts 1 and 3) without prejudice. The Court limits Kermath’s IWPCA claim
(Counterclaim Count 2) to unpaid wages and bonuses, dismissing any claim for accrued unused
vacation time.
Dated: December 13, 2016
______________________
SARA L. ELLIS
United States District Judge
14
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