Hoke v. Abrams et al

Filing 44

MOTION by Defendants Daniel Abrams, Ashwinie Sharan for judgment on the Pleadings and for Dismissal of Plaintiff's Complaint (Csajaghy, Stephen)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

RITA HOKE, an individual,
Plaintiff,
v.
DANIEL J. ABRAMS, and
ASHWINI SHARAN, individuals
Defendants and Third
Party Plaintiffs
v.
CAMERON C. HORAN, an individual,
Third Party Defendant

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Case no. 16-cv-01174

Judge Thomas M. Durkin

MOTION FOR JUDGMENT ON THE PLEADINGS AND FOR DISMISSAL OF
PLAINTIFF’S COMPLAINT
Defendants Daniel J. Abrams and Ashwini Sharan (“Defendants”), through their
undersigned counsel and pursuant to Fed. R. Civ. P. 12(c), file this Motion for Judgment on the
Pleadings and for Dismissal of Plaintiff’s Complaint and in support thereof, state as follows:
I.

INTRODUCTION

Plaintiff Rita Hoke’s claim against the Defendants is based on her allegation that she did
not receive certain wages and other compensation from Integrated Care Pharmacy, LLC (“ICP”).
She has sued the individual Defendants, Daniel Abrams and Ashwini Sharan, members of ICP,
for alleged violations of the Illinois Wage Payment and Collection Act (“Wage Act”).
Defendants Abrams and Sharan – also members of the limited liability company – asserted a
counterclaim for breach of fiduciary duty against Plaintiff which has been dismissed by this

Court. The basis for the Court’s decision was that Delaware law applied to the relationship
between the members of ICP and Delaware law permits members of a limited liability company
to modify or completely eliminate fiduciary duties between members in the company’s
Operating Agreement.
Based on the Court’s ruling, Defendants Abrams and Sharan now move for judgment on
the pleadings pursuant to Fed. R. Civ. P. 12(c) to dismiss Plaintiff’s claims asserted against them
because: (a) the very same Operating Agreement that Plaintiff relied upon in her Motion also
bars the claims she has asserted against the two individuals defendants; and (b) the relationship
between the members of ICP is governed by Delaware law pursuant to the Operating Agreement
and Delaware law does not recognize the wage claim Plaintiff has asserted against the two
individuals.
II.

STANDARD OF REVIEW

A motion for judgment on the pleadings pursuant to Fed. R. Civ. P. 12(c) permits a party
to move for judgment after the parties have filed the complaint and answer. N. Indiana Gun &
Outdoor Shows, Inc. v. City of S. Bend, 163 F.3d 449, 452 (7th Cir. 1998). Courts review Rule
12(c) motions under the same standard as a motion to dismiss under Rule 12(b). Id.; Frey v.
Bank One, 91 F.3d 45, 46 (7th Cir.1996). Like Rule 12(b) motions, courts grant a Rule 12(c)
motion only if “it appears beyond doubt that the plaintiff cannot prove any facts that would
support his claim for relief.” Craigs, Inc. v. General Elec. Capital Corp., 12 F.3d 686, 688 (7th
Cir.1993) (quoting Thomason v. Nachtrieb, 888 F.2d 1202, 1204 (7th Cir.1989)). The court
views the facts in the complaint in the light most favorable to the non-moving party. Id.
In order to survive a Rule 12(b)(6) motion, and a Rule 12(c) motion, the complaint must
provide the defendant with fair notice of a claim’s basis and must contain sufficient factual

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matter, that, when accepted as true, is plausible on its face. Bonte v. U.S. Bank, N.A., 624 F.3d
461, 463 (7th Cir. 2010); see also Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); Bell Atlantic
Corp. v. Twombly, 550. U.S. 544, 555 (2007). Plaintiff has failed to meet this standard. “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. In this case, Plaintiff has failed to meet this standard and the Court should grant
Defendants’ motion for judgment on the pleadings and dismiss the complaint. Delaware law
applies to the relationship between the parties, thus barring the claims Plaintiff has asserted
against Defendants.
III.

ARGUMENT

A. The Language of the Operating Agreement Bars Plaintiff’s Claims Against
Defendants Abrams and Sharan.
Plaintiff sued Defendants Abrams and Sharan for alleged violations of the Illinois Wage
Act and seeks to impose personal liability against her co-members in the limited liability
company for allegedly failing to pay salary and other benefits. Putting aside the factual
inaccuracies of that claim (which will be raised, if necessary, in subsequent pleadings), her claim
fails as a matter of law.
The Wage Act provides that officers of a corporation or agents of an employer may be
deemed to be the “employers” of the employees of the company if they “knowingly permit”
violations of the Act, such as failing to pay wages. See 820 ILCS 115/13. Thus, rather than sue
ICP, Plaintiff has instead sued the individual Defendants (her fellow members in the limited
liability company) as if they were her “employer” and seeks to impose liability upon them
individually. Plaintiff seeks this recovery against the Defendants by attempting to have them
deemed “employers” under the Wage Act. See Complaint at § 27.
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The Amended and Restated Operating Agreement, signed by the members of ICP, bars
Plaintiff’s claims. Specifically, section 6.06(c) states:
No member or Manager shall be personally liable for any indebtedness, liability or
obligation of the Company, except as specifically provided for in this Agreement or
required pursuant to the Act or any other applicable law.
[See Doc. No. 19-3, Amended and Restated Operating Agreement, at § 6.06(c), p. 24] This
language – eliminating personal liability for debts, liabilities, and obligations of the company bars the claims Plaintiff has asserted against the Defendants individually for unpaid wages.
Plaintiff specifically alleges in her Complaint that Defendants were officers, managing members
and/or members of ICP’s Board of Directors (Compl. at ¶ 10, 11), and the Amended Operating
Agreement specifically identifies the Defendants as Members of ICP. [See Doc. No. 19-3,
Amended and Restated Operating Agreement, at p. 36, 40] Thus, under this language of the
Operating Agreement, the claims must be dismissed.
Moreover, the language of the Operating Agreement eliminates any duties between the
members. See Operating Agreement at § 6.06(d). The Operating Agreement states that
fiduciary duties or other duties are hereby eliminated. Id. The broad language of the Operating
Agreement also eliminates a duty allegedly owed by the Defendants for unpaid salary and other
compensation. Thus, Plaintiff’s claims are barred by the language of the Operating Agreement –
the same language Plaintiff herself has sought to enforce against Defendants. Defendants
respectfully request that this Court enforce the language of the Operating Agreement and dismiss
the claims asserted against them.
To the extent Plaintiff attempts to argue that the language of the Operating Agreement
actually allows her Wage Act claim, such argument should be dismissed. The language of the
Operating Agreement very clearly states that “[n]o member or Manager shall be personally liable

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for any indebtedness, liability or obligation of the Company.” This language is clear that a
member cannot be personally liable for any debt of ICP. Any obligation pursuant to the Wage
Act should qualify as a debt or obligation of the company and this is not recoverable against a
member of the limited liability company.
The Operating Agreement then lists exceptions to this statement, including the phrase “or
any other applicable law.” This phrase is joined to the prior phrase “or required pursuant to the
Act” and is joined with that phrase by “or”; it does not exist on its own to create a separate
category of exception to allow a claim pursuant to the Wage Act. If the language were read such
that “any other applicable law” allowed this Wage Act claim, this phrase would swallow the first
phrase and primary goal of paragraph 6.06(c), which is to eliminate personal liability for a
member of the limited liability company. Such a reading would render the first phrase of 6.06(c)
meaningless and would be an unreasonable result.
“An unreasonable interpretation [is one that] produces an absurd result or one that no
reasonable person would have accepted when entering the contract.” The Estate of Lucille
Osborn v. Kemp, 991 A.2d 1153, 1160 (Del. 2010). Indeed, “[r]esults which vitiate the purpose
or reduce terms of the contract to an absurdity should be avoided.” Id. (citing Gore v. Beren, 867
P.2d 330, 337 (Kan. 1994), Born v. Hammond, 146 A.2d 44, 47 (Md. 1958) (“if a contract was
susceptible of two constructions, one of which would produce an absurd result and the other of
which would carry out the purpose of the agreement, the latter construction should be adopted”)).
Thus, the phrase “any other applicable law” must be read in context of the entire provision and
there is no exception in 6.06(c) that allows personal liability of the members of the limited
liability company for a Wage Act claim and Plaintiff’s claims should be dismissed and judgment
entered against her.

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B. Delaware Law Applies to the Relationship between the Members of ICP and
Likewise Bars Plaintiff’s Claims.
In this Court’s recent ruling granting Plaintiff’s Motion to Dismiss the counterclaims, the
Court ruled that Delaware law applied to the relationship between the members of ICP. [Doc.
No. 38] Based on the application of Delaware law to the claims at issue, Plaintiff has failed to
state a claim against the individual Defendants and her claims should be dismissed.
Delaware’s wage statute differs from Illinois’ wage statute. The Illinois Wage Act allows
claims against a member of a limited liability company for unpaid wages, and under limited
circumstances, deems members of a limited liability company to be “employers.” See, e.g., 820
ICLS 115/1. Delaware’s wage act, however, is quite different.
Delaware’s wage act does not permit members of a limited liability company to be sued
personally for wages allegedly owed by the limited liability company. Dept. of Labor ex. Rel.
Chasanov v. Brady, C.A. No. CPU-4-09-8966, 2010 WL 8706963, at *3 (Del. Ch. March 23,
2010). Indeed, the Delaware Chancery Court has explained that the Delaware wage claim statute
“makes clear that the debt and obligations of a LLC is not that of the members or managers.” Id.
at *3. Thus, Plaintiff cannot sue the Defendants personally for wages, bonuses, and expenses
because Delaware law applies to the relationship between the members of ICP, and Delaware
law does not allow claims against individuals members of a limited liability company.
This Court has now made clear that Illinois law does not apply to the relationship
between the members of ICP, and, instead, Delaware law governs that relationship. [Doc No.
38] Because Delaware law governs the relationship between the members of the limited liability
company – the Plaintiff and Defendants in this action – and Delaware law does not allow the
type of claims Plaintiff has attempted to bring here, Plaintiff cannot sue the Defendants pursuant
to the Illinois Wage Act and those claims must be dismissed.
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Plaintiff has argued – quite weakly – that her claims against the individual Defendants are
“based on an employer-employee relationship” and implies that her claim is not based on the fact
that they are members of ICP. [Pl.’s Reply Br., Doc. No. 26 at pp. 6-7] That argument is a legal
fiction.
Plaintiff sued the individual Defendants based on their roles as members, officers or
directors of ICP – not as “employers.” Indeed, the Complaint includes no allegations at all that
either of the individual Defendants was her actual employer, but instead alleged that ICP was her
employer. [Compl. at ¶ 13, Doc. No. 1] The Complaint specifically alleges that Plaintiff is
suing the Defendants individually as “members” and/or “officers” and/or “Directors” because the
Illinois Wage Act “deems’ them to be employers.” [Compl. at ¶¶ 10, 11, 25, 27, 32, 34, 39, 41,
47, 49] Thus, it is their role as “members” or “officers” or “Directors” of ICP that is the basis for
Plaintiff’s claims against Defendants. And because they cannot be held individually liable to the
Plaintiff in any of these roles, Defendants respectfully request that the Plaintiff’s Complaint be
dismissed in its entirety with prejudice pursuant to Fed. R. Civ. P. 12(c).
IV.

CONCLUSION

Defendants Abrams and Sharan request that the Court enter judgment against Plaintiff on
the pleadings and dismiss Plaintiff’s claims for recovery from them personally of allegedly
unpaid salary, deferred salary, bonuses, and expenses. They request that the Court continue to
apply Delaware law to the relationship between the members of ICP. The language of the
Operating Agreement and well-settled Delaware law both bar Plaintiff’s claims, and the claims
against Defendants Abrams and Sharan should be dismissed.
Respectfully submitted this 10th day of August, 2016.
s/ Stephen E. Csajaghy
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Stephen E. Csajaghy
Condit Csajaghy LLC
695 S. Colorado Blvd., Suite 270
Denver, CO 80246
Telephone: [phone]
Facsimile: 720-287-6605
[e-mail]
Christina D. Hatzidakis
Hatzidakis Law
120 S. State Street, Suite 200
Chicago, IL 60603
Telephone: [phone]
Facsimile: 312.674.7446
[e-mail]
Attorneys for Defendants/ Third Party Plaintiffs
CERTIFICATE OF SERVICE (CM/ECF)
I hereby certify that on this 10th day of August, 2016, I electronically filed the foregoing
MOTION FOR JUDGMENT ON THE PLEADINGS AND FOR DISMISSAL OF
PLAINTIFF’S COMPLAINT with the Clerk of the Court using the CM/ECF system which
will send notification of such filing to the following parties via email:
Daniel Lynch
Julia Katz
LYNCH THOMPSON LLP
150 South Wacker, Suite 2600
Chicago, IL 60606
Attorneys for Plaintiff

William J. Factor
David P. Holtkamp
FACTORLAW
105 W. Madison, Suite 1500
Chicago, IL 60602
and
Andrew D. Johnson
Onsager Guyerson Fletcher Johnson LLC
1801 Broadway, Suite 900
Denver, CO 80202
Attorneys for Cameron C. Horan
s/ Trish D. Schart
Trish D. Schart
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