Great Lakes Repair, Inc. v. S/Y STARS & STRIPES Vessel No. 1029843 et al

Filing 37

MEMORANDUM OPINION Signed by the Honorable Samuel Der-Yeghiayan on 10/4/2016: Denying Defendant Paul Schulz's motion to dismiss. Mailed notice (mw, )

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
GREAT LAKES REPAIR, INC.,

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Plaintiff,
v.
PAUL SCHULZ, et al.
Defendant.

No. 15 C 9506

MEMORANDUM OPINION
SAMUEL DER-YEGHIAYAN, District Judge
This matter is before the court on Defendant Paul Schulz’s (Schulz) motion to
dismiss. For the reasons stated below, the motion to dismiss is denied.

BACKGROUND
On August 1, 2015, the Stars & Stripes, a custom-built 78-foot sailing vessel,
ran aground. Schulz allegedly contacted Plaintiff Great Lakes Repair, Inc. (Great
Lakes) and Great Lakes allegedly dispatched three vessels to salvage the Stars &
Stripes. Great Lakes allegedly entered into a salvage agreement (Agreement) with
Schulz and Defendant AC Chicago, LLC (ACC). Great Lakes, brings this lawsuit to
recover the alleged costs incurred while salvaging the Stars & Stripes. Great Lakes
alleges that they are entitled to payment under the Agreement of at least $200,000.

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Great Lakes includes in their complaint preferred maritime lien claims brought
against Schulz, ACC, and the Stars & Stripes (Count I), breach of contract claims
brought against Schulz, ACC, and the Stars & Stripes (Count II), and quantum
meruit/unjust enrichment claims brought against Schulz, ACC, and the Stars &
Stripes (Count III). Schulz now moves to dismiss all claims brought against him.

LEGAL STANDARD
In ruling on a motion to dismiss brought pursuant to Federal Rule of Civil
Procedure 12(b)(6) (Rule 12(b)(6)), the court must draw all reasonable inferences
that favor the plaintiff, construe the allegations of the complaint in the light most
favorable to the plaintiff, and accept as true all well-pleaded facts and allegations in
the complaint. Appert v. Morgan Stanley Dean Witter, Inc., 673 F.3d 609, 622 (7th
Cir. 2012); Thompson v. Ill. Dep’t of Prof’l Regulation, 300 F.3d 750, 753 (7th Cir.
2002). A plaintiff is required to include allegations in the complaint that “plausibly
suggest that the plaintiff has a right to relief, raising that possibility above a
‘speculative level’” and “if they do not, the plaintiff pleads itself out of court.”
E.E.O.C. v. Concentra Health Services, Inc., 496 F.3d 773, 776 (7th Cir.
2007)(quoting in part Bell Atlantic Corp. v. Twombly, 127 S.Ct. 1955, 1965 (2007));
see also Morgan Stanley Dean Witter, Inc., 673 F.3d at 622 (stating that “[t]o survive
a motion to dismiss, the complaint must contain sufficient factual matter, accepted as
true, to state a claim to relief that is plausible on its face,” and that “[a] claim has
facial plausibility when the plaintiff pleads factual content that allows the court to
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draw the reasonable inference that the defendant is liable for the misconduct
alleged”)(quoting Ashcroft v. Iqbal, 556 U.S. 662 (2009))(internal quotations
omitted).

DISCUSSION
I. Specific Allegations Against Schulz Individually
Schulz moves to dismiss all claims against him. Schulz contends that Great
Lakes has failed to plead any specific allegations against Schulz, individually, and
that the claims against Schulz are indistinguishable from those against ACC. In the
complaint, Great Lakes alleges that “Great Lakes and Schulz and/or ACC entered
into a Salvage Agreement. . .” (Compl. Par. 15). Great Lakes also alleges that Schulz
signed the relevant Agreement, which was attached to the complaint. Also, the
contract does not indicate that Schulz signed the contract on behalf of ACC. In fact,
“AC Chicago” or “ACC” does not even appear within the four corners of the
contract. Accordingly, Great Lakes has provided specific allegations against Schulz
individually.

II. Representative Capacity
Schulz argues that he was acting in a representative capacity when signing the
Agreement. The court must look at the parties’ intent when signing the contract to
determine whether an individual intended to be bound. Camico Mut. Ins. Co. v.
Citizens Bank, 474 F.3d 989, 992 (7th Cir. 2007). In determining party intent, the
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court first looks “to the language of the contract alone.” Id. If the language is clear
and unambiguous, the court will interpret the contract without extrinsic evidence.
Utility Audit, Inc. v. Horace Mann Serv. Corp., 383 F.3d 683, 687 (7th Cir. 2004)
(citing Trade Center v. Dominick's Finer Foods, 711 N.E.2d 333, 335 (Ill. App. Ct.
1999)). An ambiguity within the contract exists, however, “if the contract's language
is susceptible to more than one interpretation.” Camico Mut. Ins. Co. 474 F.3d at
993. If an ambiguity exists, the court must use extrinsic evidence to determine the
intent of the parties. Camico Mut. Ins. Co. 474 F.3d at 993.
The Agreement states, “Owner warrants that he/she is the owner of the Vessel
and/or has been authorized by the owner of the Vessel to enter into this Agreement
and to authorize salvor to perform salvage services for the Vessel.” (P. Ex. A 1).
This language in the Agreement is ambiguous because it does not clarify whether
Schulz was signing on his behalf or signing on behalf of the true owner.
Accordingly, whether Schulz intended to be bound individually is a factual question
and involves facts outside of the pleadings. See Freeman v. Liu, 112 F.R.D. 35, 37
(N.D. Ill. 1986)(stating that where a contract is ambiguous, determining whether the
defendant signed as an agent requires the court to look to extrinsic evidence to guide
their decision).
However, an “agent is not personally liable for a breach of contract by h[is]
principal if the agency relationship has been disclosed at the time the contract is
executed.” Merrill Tenant Council v. U.S. Dep't of Housing & Urb. Dev., 638 F.2d
1086, 1095 (7th Cir.1981). Notably, there is an exception to that general rule, which
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occurs when the agent does not inform the contracting party that he is acting on
behalf of a particular principal, the so-called “undisclosed principal” exception. See
Lustig v. Brown, 2004 WL 2095667, *2 (N.D. Ill. 2004)(upholding claims against
individual defendants, who claimed they were acting as corporate agents in signing a
contract, for failure to demonstrate they were acting on behalf of the corporation).
The complaint does not contain specific allegations regarding whether Schulz
disclosed his association with ACC at the time the contract was executed. Also, the
pleadings are insufficient to determine whether Schulz was authorized by ACC to
enter into the Agreement on their behalf or whether Great Lakes was aware that
Schulz was acting as an agent on behalf of a principal. Plaintiff has alleged
sufficient facts to make his breach of contract claim against Schulz plausible.
In regards to piercing the corporate veil, Great Lakes makes clear in its
response that it is not currently seeking to pierce the corporate veil. Accordingly, this
court need not delve into the merits of piercing the corporate veil at this stage of the
litigation. Therefore, the motion to dismiss is denied.

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CONCLUSION
Based on the foregoing analysis, Schulz’s motion to dismiss is denied.

___________________________________
Samuel Der-Yeghiayan
United States District Court Judge
Dated: October 4, 2016

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