Torello et al v. Napleton Auto Werks, Inc.

Filing 102

MEMORANDUM Opinion and Order Signed by the Honorable Robert W. Gettleman on 3/6/2018: Third-party defendants' motion 95 for summary judgment is granted. Status hearing set for 4/12/2018 is stricken. Civil case terminated. Mailed notice (cn)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
STEVE TORELLO, as Trustee of the Central
States Joint Board of Health and Welfare Fund and
CHEMICAL & PRODUCTION WORKERS
UNION LOCAL 30,

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Plaintiffs,
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v.
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NAPLETON’S AUTO WERKS, INC.,
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Defendant.
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_________________________________________ )
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NAPLETON’S AUTO WERKS, INC.,
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Third-Party Plaintiff,
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v.
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MY BENEFITS GROUP, INC., and Rod Maynor, )
individually,
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Third-Party Defendant.
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Case No. 16 C 2435

Judge Robert W. Gettleman

MEMORANDUM OPINION AND ORDER
Plaintiffs Steve Torello, as Trustee of the Central States Joint Board Health and Welfare
Fund (the “Fund”) and the Chemical & Production Workers Union Local 30 (the “Union”) sued
Napleton’s Auto Werks, Inc., alleging a breach of Collective Bargaining Agreement (“CBA”) with
the Union and a Participation Agreement with the Fund, seeking collection of union dues,
initiation dues, and contributions to the Fund for the period November 1, 2012, through October 1,
2014 (the “Audit Period”). Napleton’s then brought a third-party complaint against My Benefits
Group, Inc. (“MBG”) and its owner Rod Maynor, claiming that if Napleton’s owed plaintiff, then
MBG and/or Maynor owed it the same amount because Napleton’s would not have entered into the

union contracts absent MBG’s and Maynor’s fraud and misrepresentations. Specifically,
Napleton’s third-party complaint alleges: (1) negligent misrepresentation against MBG (Count I);
(2) fraud against MBG and Maynor (Count II); and (3) breach of fiduciary duty against MBG
(Count III). MBG and Maynor have now moved for summary judgment on all three counts. For
the reasons described below, the motion is granted.
BACKGROUND
Sometime in 2012 Napleton’s became interested in procuring health insurance for its
employees. In September 20, 2012, Michael Jopes of Napleton’s met with Maynor in Jopes’
office. Jopes claims that Maynor indicated the MBG was an insurance broker, or that it “at least
provided services similar to an insurance broker,” meaning that MBG would put Napleton’s
together with an insurance company and negotiate the rates. Maynor denies ever telling Jopes
that MBG was an insurance broker, and describes MBG as “a company that was established to talk
with employers on their benefits that they have in their company today and if at all there was any
way to improve their benefits we went over that and talked about their benefits.” Also at the
September 2012 meeting was Patrick Keenan, an insurance broker that Napleton’s used for its
health insurance needs.
MBG had a contract with Local 30 that “allowed MBG to speak with employers about
whether joining the Union would increase benefits for their employees.” In essence, MBG
recruited companies to join the local.
As a result of the September 2012 meeting, Napleton’s entered into a Recognition
Agreement and Addendum, effective November 1, 2012, through October 31, 2013, in which it
affirmed its intent to voluntarily recognize the Union as the exclusive bargaining agent of its
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non-supervisory employees, and agreed to become a signatory to the CBA. On November 1,
2013, Napleton’s executed an additional Recognition Agreement and Addendum, effective
November 1, 2013 through October 31, 2014, again affirming its intent to recognize the Union.
In addition to the Union agreements, Napleton’s entered into Participation Agreements
with the Fund, obligating it to pay contributions to the Fund for covered employees “so long as the
Employer is a party to a [CBA] with a local union affiliated with the [Fund] . . ..”
In a December 26, 2017 Memorandum Opinion this court granted summary judgment for
plaintiffs and against Napleton’s, and on February 7, 2017, the court entered judgment in favor of
plaintiff and against Napleton’s in the amount of $464,205.14.
DISCUSSION
MBG and Maynor have moved for summary judgment on all counts. Summary judgment
is appropriate when “there is no genuine dispute as to any material fact and the movant is entitled
to judgment as a matter of law.” Fed. R. Civ. P. 56(a). The movant bears the burden of
establishing both elements, Becker v. Tenebaum-Hill Associates, Inc., 914 F.2d 107, 110 (7th Cir.
1990), and all reasonable inferences are drawn in the non-movant’s favor. Fisher v. Transco
Services - Milwaukee, Inc., 979 F.2d 1239, 1242 (7th Cir. 1992). If the movant satisfies its
burden, then the non-movant must set forth specific facts showing there is a genuine issue for trial.
Nitz v. Craig, 2013 WL 593851, *2 (N.D. Ill. Feb. 12, 2013). In doing so, the non-movant cannot
simply show some metaphysical doubt as to the material facts. Pignato v. Givaudan Flavors
Corp., 2013 WL 995157, *2 (N.D. Ill. March 13, 2013) (citing Matsushita Elec. Indus. Co. v.
Zenith Radio Corp., 475 U.S. 574, 586 (1986)). Summary judgment is inappropriate when “the

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evidence is such that a reasonable jury could return a verdict for the non-moving party.”
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
Counts I and II
In Counts I and II Napleton’s alleges that MBG and Maynor are guilty of negligent
misrepresentation and fraud. Specifically, it claims that Maynor and MBG assured Jopes that:
(1) any employee that desired health insurance through [the Fund] would be required to sign a
“check-off card” indicating that they wished to join the Local; (2) only those employees who
signed the “check-off cards” would be provided health insurance through the Fund; and (3) neither
the Fund nor Local 30 would enforce any term of any CBA, Addendum to a CBA, Recognition
Agreement, or Participation Agreement other than requiring payment of a portion of the insurance
premiums for employees who desired insurance coverage through the Fund.
Under Illinois law, which the parties agree applies to the instant dispute, to prevail on a
claim for negligent misrepresentation, a plaintiff must establish: (1) a false statement of material
fact; (2) carelessness or negligence in ascertaining the truth of the statement by the party making it;
(3) an intent to induce the other party to act; (4) action by the other party in reliance on the truth of
the statement; (5) damage to the other party as a result of its reliance; and (6) a duty on the part of
the defendant to communicate accurate information. Tricontinental Indus. v.
PricewaterhouseCoopers, LLP, 475 F.3d 834, 833-34 (7th Cir. 2007).
To prevail on a claim for fraud, a party must establish: (1) a false statement of material
facts; (2) the defendant’s knowledge that the statement was false; (3) the defendant’s intent that the
statement induce the plaintiff to act; (4) the plaintiff’s reliance on the truth of the statement; and
(5) damages resulting from reliance on the statement. Id. at 841.
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Reliance on a defendant’s negligent misrepresentation must be reasonable. Rovell v.
American National Bank, 194 F.3d 867, 870 (7th Cir. 1999). Similarly, on a claim for fraud,
reliance must also be reasonable. Quinn v. McGraw-Hill Cos., 168 F.3d 331, 335 (7th Cir. 1999).
The reasonable reliance requirement is the same under both claims. Id.
“Illinois courts have long recognized that a party is not justified in relying on
representations made when he has ample opportunity to ascertain the truth of the representations
before he acts. When he is afforded the opportunity of knowing the truth . . . he cannot be heard to
say he was deceived by misrepresentations.” Faust Printing, Inc. v. MAN Corp., 2007 WL
4442325, *3 (N.D. Ill. Sept. 14, 2007) (and cases cited therein). “Illinois courts have consistently
refused to extend the doctrine of fraudulent inducement to vitiate contracts where the complaining
party could have discovered the fraud by reading the instrument and had opportunity to do so; this
is the so-called ‘due diligence’ rule.” Id.
In the instant case, Jopes knew that for employees to be excluded from the bargaining unit,
they must be shown as an exclusion on the Addendum and Recognition Agreements. Indeed,
Napelton’s claim is that MBG and Maynor told Jopes that they could accomplish his goal by
simply adding a provision to the addendum excluding anyone who did not sign a check-off card.
Yet, Napleton’s signed two Recognition Agreements, Addenda Agreements and Participation
Agreements that contained no such provisions. The Recognition Agreements it did sign
contained exclusions for mechanics and “1099 sales people,” but contained no provision to
exclude employees who did not sign a check-off card. Despite this obvious lack of what it
deemed to be the most important provision, Napleton’s never inquired of MBG, the Union/Local,

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its own insurance broker, or its own legal counsel.1 Instead, it simply signed the Agreements,
first in 2012, and then again in 2013, apparently without ever reading them. The contracts it
signed explicitly contradicted the so-called “promises” MBG is alleged to have made. Under
such circumstances, no trier of fact could conclude that Napleton’s reliance on such promises (if
they were indeed made) was reasonable. Consequently, the court grants MBG and Maynor’s
motion for summary judgment on Counts I and II.
Count III
In Count III, Napleton’s alleges that MBG acted as its insurance broker and as such owed
Napleton’s a fiduciary duty to inform it of all material facts, and breached that duty by making the
alleged false statements.
This claim is specifically barred by Illinois law. 735 ILCS 5/2-2201(b) provides that:
No cause of action brought by any person or entity against any insurance producer,
registered firm, or limited insurance representative concerning the sale, placement,
procurement, renewal, binding, cancellation of, or failure to procure any policy of
insurance shall subject the insurance producer, registered firm, or limited insurance
representative to civil liability under standards governing the conduct of a fiduciary
or a fiduciary relationship except when the conduct upon which the cause of action
is based involves the wrongful retention or misappropriation by the insurance
producer, registered firm, or limited insurance representative of any money that
was received as premiums, as a premium deposit, or as a payment of a claim.
Insurance brokers are included as insurance producers under this statute. Mercola v.
Abdou, 223 F.Supp.3d 720, 728 (N.D. Ill. 2016). Section 5/2-2201(b) immunizes insurance
brokers from claims based on alleged breach of fiduciary duty. AYH Holdings, Inc. v. Avreco,

1 Napelton’s argument that MBG “thwarted” its efforts to investigate the veracity of the misrepresentations is
nonsensical. It claims to have asked MBG for a copy of the master agreement referenced in the addenda, that MBG
first refused and then showed Napelton’s an unrelated union contract. Napelton’s also claims that MBG refused to
provide contact information for Local 30. If true, however, this should have put Napelton’s on notice that further
investigation was necessary and that it should not sign the agreements. Instead, it signed the agreements without
attempting to ensure that they contained the necessary exclusions.

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Inc., 357 Ill.App.3d 17, 43 (1st Dist. 2005). The section narrowly defines the scope of a breach of
fiduciary duty claim, limiting such claims to “conduct . . . involving the wrongful retention or
misappropriation . . . of any money that was received as premiums, as a premium deposit, or as
payment of a claim.” M.G. Skinner & Assoc. Ins. Agency, Inc. v. Norman-Spencer Agency, Inc.,
845 F.3d 313, 321 (7th Cir. 2017).
In the instant case, there is no evidence that MBG or Maynor received any money from
Napleton’s (or anyone else) for procuring the insurance. Nor is Napleton’s suing for the wrongful
retention of any premium. Consequently, Napleton’s breach of fiduciary duty claim is barred by
section 5/2201(b).
CONCLUSION
For the reasons described above, third-party defendants’ motion for summary judgment
(Doc. 95) is granted.
ENTER:

March 6, 2018

__________________________________________
Robert W. Gettleman
United States District Judge

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