Ritchie Capital Management LLC v. Reservoir Capital Partners, LP et al
OPINION AND ORDER. For the foregoing reasons, the Court grants in part and denies in part the Ritchie Parties' motion to dismiss 82 . The Court dismisses Kermath's unjust enrichment claim against Thane Ritchie (First Amended Counterclaim Count 4) with prejudice. The Court orders the Ritchie Parties to answer the remaining allegations of the First Amended Counterclaims by June 16, 2017. The Court further strikes the status date set for June 6, 2017 and resets it to August 2, 2017 at 9:30 a.m. Signed by the Honorable Sara L. Ellis on 6/1/2017. Mailed notice(rj, )
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
RITCHIE CAPITAL MANAGEMENT, L.L.C., )
RITCHIE CAPITAL MANAGEMENT, L.L.C., )
AARON ROBERTS THANE RITCHIE, and )
PLAN ADMINISTRATOR FOR THE
RITCHIE CAPITAL MANAGEMENT, L.L.C. )
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 amended 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 claims for unjust
enrichment, promissory estoppel, and violations of the Employee Retirement Income Security
Act (“ERISA”), 29 U.S.C. § 1001 et seq., and the Illinois Wage Payment and Collection Act (the
“IWPCA”), 820 Ill. Comp. Stat. 115/1 et seq. He also seeks a declaratory judgment that his
agreement with Ritchie Capital was void ab initio. The Court previously dismissed Kermath’s
ERISA and unjust enrichment claims without prejudice and limited his IWPCA claim to unpaid
wages and bonuses. See Doc. 74. The Ritchie Parties move for dismissal of the declaratory
judgment, ERISA, unjust enrichment, and promissory estoppel claims, and argue in a footnote
that Kermath cannot resurrect his IWPCA claim for unused vacation time.
Because Kermath has adequately alleged that the independent contractor provision in the
2008 professional services agreement (the “2008 PSA”) may offend public policy, the Court
allows Kermath to proceed on his claim challenging the enforceability of the 2008 PSA. To the
extent the classification portion of the 2008 PSA is invalid, the Court finds it severable, meaning
that the waiver of benefits provision remains enforceable. But because Kermath has alleged he
did not knowingly and voluntarily waive his right to benefits, which the Court cannot properly
determine at this stage, the Court allows Kermath to proceed on his ERISA claim. And because
Kermath has adequately pleaded his unjust enrichment and promissory estoppel claims in the
alternative to his IWPCA claims, Kermath may pursue those claims, except that the Court
dismisses the unjust enrichment claim as to Thane Ritchie, who Kermath does not allege directly
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.
retained any benefit. Finally, because Kermath has added allegations to support an IWPCA
claim for accrued unused vacation time, Kermath’s IWPCA claim now includes his request to
recover not only unpaid wages and bonuses but also unused vacation time.
Ritchie Capital manages investment funds. Although it currently has its headquarters in
the Cayman Islands, it also had offices in Illinois. Kermath began working for Ritchie Capital in
May 2006 in Illinois.
At all times, Ritchie Capital treated Kermath as an independent contractor. Ritchie
Capital memorialized Kermath’s employment arrangement in two professional services
agreements, both of which Ritchie Capital drafted. The first one (the “2006 PSA”), which
Kermath signed on May 10, 2006, had an initial term of May 6 to June 30, 2006 and was subject
to renewal. Kermath continued working for Ritchie Capital beyond June 30, 2006, but no formal
renewal of the 2006 PSA occurred after that date. On November 14, 2008, Kermath signed the
second professional services agreement (the “2008 PSA”), which explicitly stated that it was
retroactive to May 6, 2006. Both the 2006 and the 2008 PSAs provide 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. 76-1 § 3; Doc. 76-2 § 3. Further, both the 2006 and the 2008 PSAs provide 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.” Doc. 76-1 § 3;
The facts in the background section are taken from Kermath’s first amended counterclaims and the
exhibits attached thereto 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); Local 15, Int’l Bhd. of Elec.
Workers, AFL-CIO v. Exelon Corp., 495 F.3d 779, 782 (7th Cir. 2007).
Doc. 76-2 § 3. Ritchie Capital agreed to pay Kermath “a fee for services rendered under [the
respective 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 PSAs. Doc. 76-1
§ 2; Doc. 76-2 § 2. Upon the termination of the PSA, 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.” Doc. 76-1 § 2; Doc. 76-2 § 2. While the 2006 PSA set
out a more detailed payment schedule, Doc. 76-1 at 8, Exhibit A in the 2008 PSA indicated only
that Kermath’s fee for his services was to be “based on a rate per month as determined from time
to time.” Doc. 76-2 at 6. Kermath claims he did not have a sufficient opportunity to consult
with an attorney before signing the 2006 or 2008 PSAs and did not understand the benefits he
was foregoing by signing those agreements.
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
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.
Although Thane Ritchie always remained involved in Ritchie Capital and oversaw
Kermath’s work there, 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.
This included a base $30,000 monthly payment for the months of July and August 2015, an
amount he had been receiving since 2007 regardless of whether he was sick, vacationing, or
otherwise not working for all or part of any month. Additionally, Kermath did not receive
$160,000 of his 2014 bonus, which Ritchie Capital had agreed in writing to pay him no later than
September 30, 2015. Finally, Kermath did not receive payment for 3.5 days of accrued and
unused vacation time under Ritchie Capital’s written vacation policy, which provided that, upon
termination, employees would receive a lump sum payment for vacation days that had been
accrued but not taken during the current vacation year.
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.
Declaratory Judgment and ERISA Claims (Counts I and II)
Kermath claims that Ritchie Capital misclassified him as an independent contractor and
consequently, wrongfully excluded him from coverage under its employer-sponsored benefit
plans during his employment. He asks that the Court declare the 2008 PSA void ab initio
entirely or at least with respect to those provisions that designate Kermath as an independent
contractor and define the effects of the misclassification, including his exclusion from employerprovided benefits. Kermath also 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 that (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 determining who qualifies as an employee under ERISA).
The Ritchie Parties reassert their argument that Kermath cannot proceed on his ERISA
claim because he waived any claim to such benefits in the 2006 and 2008 PSAs.3 See Doc. 76-2
§ 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.”).
Kermath attempts to avoid this argument by claiming that the entire 2008 PSA, including the
waiver provision, was void ab initio based on his misclassification as an independent contractor.
Alternatively, Kermath contends that he has adequately alleged that he did not knowingly and
voluntarily waive his right to the benefits, requiring the claim to proceed to further discovery.
Validity of the 2008 PSA
First, the Court must address Kermath’s argument that the 2008 PSA was void ab initio.
Illinois law provides that a contract is void ab initio if “it expressly contravenes the law or a
known public policy” of Illinois. In re Marriage of Newton, 955 N.E.2d 572, 584, 2011 IL App
(1st) 090683, 353 Ill. Dec. 105 (2011). Kermath contends that the 2008 PSA was void ab initio
because, by designating him as an independent contractor instead of an employee, Ritchie
Capital violated the Internal Revenue Code and violated public policy against the
misclassification of employees. Illinois courts “have explicitly stated that it is a clearly
established police of Illinois to prevent its citizens from violating federal law.” Brandon v.
Anesthesia & Pain Mgmt. Assocs., Ltd., 277 F.3d 936, 942 (7th Cir. 2002) (collecting cases). At
The Ritchie Parties do not move to dismiss the ERISA claim based on the fact that Kermath cannot
establish that he qualified as an employee based on the Court’s previous ruling that, at the pleading stage,
Kermath sufficiently alleged that Ritchie Capital should have treated him as an employee. See Doc. 83 at
7 n.2 (Ritchie Parties acknowledging Court’s ruling while maintaining that Kermath cannot establish that
he was a Ritchie Capital employee); Doc. 74 at 6–7 (Court’s opinion on the Ritchie Parties’ motion to
dismiss Kermath’s counterclaims). As before, the Ritchie Parties also do not argue that Kermath failed to
exhaust his administrative remedies, and so the Court similarly does not address this issue here. 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).
least one Illinois court has found that Illinois “has a legitimate interest in preventing employee
misclassification because employees who are misclassified as independent contractors lose the
benefit of worker protection laws, including minimum wage, discrimination, and occupational
safety laws,” noting as well the revenue Illinois loses from misclassification. Bartlow v.
Costigan, 974 N.E.2d 937, 953, 2012 IL App (5th) 110519, 363 Ill. Dec. 140 (2012) (addressing
misclassification in the construction industry), aff’d in relevant part, 13 N.E.3d 1216, 2014 IL
115152, 383 Ill. Dec. 95 (2014); see also Craig v. FedEx Ground Package Sys., Inc., 686 F.3d
423, 430–31 (7th Cir. 2012) (in certifying question of plaintiffs’ employment status to Kansas
Supreme Court, noting that “the issue [of misclassification] is of great importance not just to this
case but to the structure of the American workplace,” highlighting the “economic incentives for
employers to use independent contractors,” the “potential for abuse in misclassifying employees
as independent contractors” in that they “are denied access to certain benefits and protections,”
and the “significant costs to government” resulting from misclassification in the form of
uncollected tax revenues); Benders v. Bellows & Bellows, 515 F.3d 757, 767 (7th Cir. 2008)
(federal laws concerning classification of workers as employees or independent contractors
“affect the tax revenues collected by the federal government, the compliance with which . . . is a
matter of public concern”); U.S. Dep’t of Labor Administrator’s Interpretation No. 2015-1, 2015
WL 4449086, at *1 (July 15, 2015) (noting as a matter of public policy that misclassification
results in employees not receiving “important workplace protections such as the minimum wage,
overtime compensation, unemployment insurance, and workers’ compensation” and that
“[m]isclassification also results in lower tax revenues for government”). Taking state and federal
policy against misclassification into account, the Court finds that Kermath has sufficiently
alleged a basis to find that the 2008 PSA, at least to the extent it classifies Kermath as an
independent contractor and not an employee, was void ab initio.4 Thus, the Court allows
Kermath to proceed on his claim concerning the enforceability of the 2008 PSA.
Severability of Waiver Provision
But even assuming that Ritchie Capital misclassified Kermath as an independent
contractor, rendering that portion of the 2008 PSA void, the Ritchie Parties contend that the
Court should still enforce the waiver of benefits provision contained therein because the 2008
PSA includes a severability clause. The severability clause in the 2008 PSA provides, in
In case any one or more of the provisions contained in this
Agreement shall, for any reasons, be held to be invalid, illegal, or
unenforceable in any respect, such invalidity, illegality, or
unenforceability shall not affect the other provisions of this
Agreement, and this Agreement shall be construed as if such
invalid, illegal, or unenforceable provision had never been
Doc. 76-2 § 8.2. “An unenforceable provision is severable unless it is ‘so closely connected’
with the remainder of the contract that to enforce the valid provisions of the contract without it
‘would be tantamount to rewriting the [a]greement.” Wigginton v. Dell, Inc., 890 N.E.2d 541,
549, 382 Ill. App. 3d 1189, 321 Ill. Dec. 819 (2008) (alteration in original) (quoting AbbottInterfast Corp. v. Harkabus, 619 N.E.2d 1337, 1344, 250 Ill. App. 3d 13, 189 Ill. Dec. 288
(1993)). In determining whether severance is appropriate, the Court should take into account
Because the Court finds that Kermath has adequately alleged that the 2008 PSA was void ab initio, the
Court need not address the Ritchie Parties’ arguments that he cannot claim that the 2008 PSA was
voidable and that Kermath ratified the 2008 PSA by failing to rescind it. A void contract cannot be
ratified, and so the fact that Kermath continued working for years after signing the 2008 PSA does not
affect the Court’s analysis in determining whether he can proceed on his claim that the 2008 PSA should
be found void ab initio. See Ill. State Bar Ass’n Mut. Ins. Co. v. Coregis Ins. Co., 821 N.E.2d 706, 713,
355 Ill. App. 3d 156, 290 Ill. Dec. 394 (2004) (“[A] contract that is void ab initio is treated as though it
never existed; neither party can chose [sic] to ratify the contract by simply waiving its right to assert the
defect. On the other hand, if a contract is merely voidable, a party can either opt to void the contract
based upon that defect, or choose, instead, to waive that defect and ratify the contract despite it.”).
“the extent to which the provisions operate independently of each other” and whether the
agreement includes a severability clause. Abbott-Interfast Corp., 619 N.E.2d at 1343–44. “The
existence of a severability clause in a contract certainly strengthens the case for the severance of
unenforceable provisions because it indicates that the parties intended for the lawful portions of
the contract to be enforced in the absence of the unlawful portions.” Id. at 1343.
The Court previously found that the waiver of benefits provision in the 2008 PSA does
not depend on Kermath’s contractual status as an independent contractor. See Doc. 74 at 10
(comparing waiver in 2008 PSA to that found in Capital Cities/ABC, Inc. v. Ratcliff, 141 F.3d
1405, 1410 (7th Cir. 1998), concluding that it operated independently of the 2008 PSA’s
designation of Kermath as an independent contractor); cf. Stewart v. Project Consulting Servs.,
Inc., 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”). Taken together with the
2008 PSA’s severability clause, this supports a finding that the provision designating Kermath as
an independent contractor can be severed from the remainder of the 2008 PSA, including the
waiver provision, and that the waiver provision remains enforceable despite Kermath’s
arguments that the provision identifying him as an independent contractor instead of an
employee is void ab initio.5
In his response to the motion to dismiss, Kermath attempts to tie the waiver of benefits to his
employment status, arguing that the Court should rely on the Ninth Circuit’s decision in Vizcaino v.
Microsoft Corp., 120 F.3d 1006 (9th Cir. 1997), in which the court concluded that the terms of the
plaintiffs’ contracts, including waivers of benefits, were “results which hinge on the status determination
itself.” Id. at 1011–12. But Vizcaino admittedly did not consider the statements regarding benefits in the
plaintiffs’ agreements as a waiver of benefits. Id. at 1012. Instead, in Vizcaino, the plaintiffs’ agreements
specifically tied their status as independent contractors to their lack of benefits. See id. at 1010
(agreements provided that “[a]s an Independent Contractor to Microsoft, you are self employed and are
responsible to pay all your own insurance and benefits”); see also Jammal v. Am. Family Ins., No. 1:13
CV 437, 2013 WL 4049673, at *1 n.3 (N.D. Ohio Aug. 9, 2013) (noting language of agreement stating
Kermath argues, however, that the Court should not prematurely determine that he
waived his rights to benefits at the motion to dismiss stage because such a waiver must be made
knowingly and voluntarily and that determination 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, 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 alleges that Ritchie Capital drafted the 2008 PSA, that he did not
have a sufficient opportunity to review it with counsel of his choosing before signing it, and that
the parties did not negotiate it in any respect. Kermath further claims that he did not understand
the rights he was giving up by signing the 2008 PSA and that he only understood the legal effects
of the waiver language in 2015. The Ritchie Parties contend that Kermath’s allegations are too
conclusory and contradicted by other facts in the counterclaim, but because of the fact-intensive
inquiry required to determine whether Kermath knowingly and voluntarily waived his right to
benefits, the Court finds he may proceed to discovery to further explore his contentions that the
waiver is unenforceable because he did not knowingly and voluntarily enter into it. See Howell
v. Motorola, Inc., 633 F.3d 552, 559 (7th Cir. 2011) (listing eight factors courts consider in
determining the validity of releases of ERISA claims); Smart v. Gillette Co. Long-Term
that “[a]s an independent contractor you . . . are not eligible for various employee benefits”). Kermath
does not present any compelling argument for the Court to deviate from its prior conclusion that the
waiver provision operates independently of his (mis)classification as an independent contractor so as to
remove this case from the waiver analysis or require the Court to find that the allegedly void provision
cannot be severed from the remainder of the 2008 PSA, including the waiver provision.
Kermath explicitly addresses the waiver provision in his amended counterclaims, so the Court does not
find merit in Kermath’s argument that it should defer consideration of the issue because it is an
affirmative defense, particularly because to state a claim for benefits under ERISA, Kermath must allege
that he is eligible to receive benefits, which requires him to plead around the waiver provision.
Disability Plan, 70 F.3d 173, 182 (1st Cir. 1995) (noting “fact-intensive” nature of waiver
inquiry). Whether Kermath will prevail on his ERISA claim, particularly in light of the fact that
he worked for years without benefits and appears not to have expressed dissatisfaction with his
arrangement until his termination, is an issue to be resolved on a more complete record. 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 worked for years without benefits and never
“expressed dissatisfaction with their compensation package, including their non-participation in”
the benefit plans).
Unjust Enrichment and Promissory Estoppel (Counts IV and V)
Kermath also brings claims for unjust enrichment and promissory estoppel against
Ritchie Capital and Thane Ritchie as alternative forms of relief to his IWPCA claim to recover
the compensation he claims he properly earned but has not received from Ritchie Capital. The
Ritchie Parties argue that Kermath cannot pursue these quasi-contractual remedies because his
claims concerning unpaid compensation are governed by the 2008 PSA and offshoot
compensation agreements. See Enger v. Chicago Carriage Cab Corp., 812 F.3d 565, 571 (7th
Cir. 2016) (“When two parties’ relationship is governed by contract, they may not bring a claim
of unjust enrichment unless the claim falls outside the contract.”); Wagner Excello Foods, Inc. v.
Fearn Int’l Inc., 601 N.E.2d 956, 964–65, 235 Ill. App. 3d 224, 176 Ill. Dec. 258 (1992)
(promissory estoppel claim not available where parties have entered into a binding contract on
the same issue). Heeding the Court’s instructions, Kermath has taken care to plead his unjust
enrichment and promissory estoppel claims in the alternative. See 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) (“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.”). Kermath has ensured that these claims do
not include any allegations of an express contract, claiming instead that the parties developed a
course of dealing regarding his monthly compensation and that emails and other writings
document the bonus and vacation pay he seeks to recover. Because Kermath has properly
pleaded these quasi-contractual claims in the alternative, the Court cannot accept the Ritchie
Parties’ invitation to dismiss them because of the existence of the 2008 PSA and related
But the Court agrees that Kermath’s unjust enrichment claim against Thane Ritchie fails.
Although Kermath alleges that Thane Ritchie was Ritchie Capital’s chief executive officer, he
provides no basis to pierce the corporate veil or disregard corporate formalities so as to allow the
Court to infer that Thane Ritchie himself unjustly retained a benefit to Kermath’s detriment, as
opposed to Thane Ritchie’s company, Ritchie Capital, failing to pay Kermath the compensation
he claims to be owed. Cf. PharMerica Chicago, Inc. v. Meisels, 772 F. Supp. 2d 938, 965–66
(N.D. Ill. 2011) (allowing unjust enrichment claim to proceed against individual defendant where
plaintiff alleged that individual defendant controlled corporate defendants and, as alter ego of
corporate defendants, was unjustly enriched). As a result, the Court dismisses the unjust
enrichment claim against Thane Ritchie.7
Because this is the second time the Court addresses Kermath’s unjust enrichment claim and the Ritchie
Parties raised the adequacy of Kermath’s pleading against Thane Ritchie in their motion to dismiss the
initial counterclaims, the Court finds it appropriate to dismiss the unjust enrichment claim against Thane
Ritchie with prejudice. See Pirelli Armstrong Tire Corp., Retiree Med. Benefits Tr. v. Walgreen Co., No.
09 C 2046, 2010 WL 624709, at *1 (N.D. Ill. Feb. 18, 2010) (dismissing amended complaint with
prejudice after previous dismissal of ICFA and unjust enrichment claims without prejudice), aff’d, 631
F.3d 436 (7th Cir. 2011).
IWPCA Unused Vacation Pay Claim (Count III)
In a footnote, the Ritchie Parties contend that the Court should disregard Kermath’s
additional allegations of entitlement to payment for unused vacation days under the IWPCA.
The Court previously allowed Kermath to proceed on his IWPCA claim but limited that claim to
unpaid wages and bonuses. Doc. 74 at 12 n.11, 14. In doing so, the Court noted that Kermath
had not plausibly suggested that he had an agreement to be compensated for unused vacation
days. Kermath’s amended counterclaims include allegations that Ritchie Capital had a written
vacation policy, which provided for a lump sum payment of unused vacation days upon
termination, and that Kermath had accrued twelve vacation days in 2015 and used 8.5 of them as
of his resignation date, leaving him with 3.5 days of unused vacation days for which he seeks
payment. Although the Court agrees that these allegations may not align with his allegations that
Ritchie Capital paid Kermath the same $30,000 monthly salary regardless of the number of
vacation days he took in any given month, at this stage the Court allows Kermath to proceed on
his IWPCA claim not only for unpaid wages and bonuses but also for unused vacation days.
For the foregoing reasons, the Court grants in part and denies in part the Ritchie Parties’
motion to dismiss . The Court dismisses Kermath’s unjust enrichment claim against Thane
Ritchie (First Amended Counterclaim Count 4) with prejudice. The Court orders the Ritchie
Parties to answer the remaining allegations of the First Amended Counterclaims by June 16,
2017. The Court further strikes the status date set for June 6, 2017 and resets it to August 2,
2017 at 9:30 a.m.
Dated: June 1, 2017
SARA L. ELLIS
United States District Judge
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