The Solutions Team, Inc. v. Oak Street Health, MSO, LLC. et al

Filing 130

MEMORANDUM OPINION AND ORDER Signed by the Honorable Robert M. Dow, Jr. on 9/21/2020. Mailed notice(cdh, )

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

)
)
Plaintiff,
)
)
v.
)
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OAK STREET HEALTH, MSO, LLC.,
)
BRUCE SCHAUMBERG, and
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CENTURYLINK COMMUNICATIONS, )
LLC,
)
)
Defendants.

Case No. 17-cv-1879
Judge Robert M. Dow, Jr.

MEMORANDUM OPINION AND ORDER
For the reasons set forth below, Defendants’ motions to dismiss [83, 84, 86] are granted.
Counts II, III, IV, V, and VI are dismissed.
I.

Background1
Plaintiff The Solutions Team is in the data-storage business and contracts with companies

that generate electronic data for the storage of that data. [67, at ¶¶ 6-7.] Defendant Oak Street
Health (“Oak Street”) is a network of primary care doctors’ offices that specialize in the healthcare
of adults on Medicare. [67, at ¶ 8.] As part of its business, Oak Street gathers and generates
protected health information on its patients, which it stores electronically (i.e., the Data). [Id. ¶¶ 910.] Defendant Bruce Schaumberg is the founder of Focus Solutions, which installs and supports
software products for electronic records and offers professional IT and consulting services, among
other things. [Id., at ¶¶ 11-15.] In March 2015, Schaumberg arranged a meeting between Oak
Street and Plaintiff. [Id., at ¶ 20.]

1

For purposes of ruling on Defendant’s motions to dismiss, the Court accepted as true all of Plaintiff’s
well-pleaded factual allegations and drew all reasonable inferences in Plaintiff’s favor. Killingsworth v.
HSBC Bank Nevada, N.A., 507 F.3d 614, 618 (7th Cir. 2007).

On March 27, 2015, Oak Street and Plaintiff entered into a Services Agreement (the
“Agreement”), pursuant to which Plaintiff would store and maintain the Data; provide Oak Street
with a “viable path for saving and retrieving Data”; and provide equipment and services pursuant
subsequent proposals entered into between the parties. [Id. at ¶¶ 22-24.] The Agreement provided
for an initial two-year term, which was to automatically renew for 48 months if neither party gave
notice of termination within thirty-five days of the end of the existing term, or by February 20,
2017. [Id. at ¶¶ 26-27; 67-2 at ¶ 6(a).] The Agreement also provides that, “[i]n addition” to the
aforementioned cancellation right, the “Term” would automatically renew with respect to “all
Services and Products” provided to Oak Street “each time a new Proposal for additional Services
or Products is adopted by the Parties.” [67-2, at ¶ 6(a).] It also allowed Oak Street to terminate
“for its convenience at any time” by giving Plaintiff 90 days written notice. [Id. at ¶ 6(c).]
Defendant CenturyLink Communications LLC (“CenturyLink”) is an internet service
provider that offers IT solutions, hosting, and managed services for business. [67, at ¶ 17.] In early
2016, Oak Street retained CenturyLink to implement an MPLS2 circuit and provide cloud
computing services in conjunction with those provided by Plaintiff. [Id. at ¶ 40]. On April 1, 2016,
CenturyLink hosted a telephone conference for Schaumberg and other representatives of Oak
Street, during which the parties discussed replacing Plaintiff and discontinuing use of its services
under the relevant contracts between Plaintiff and Oak Street. [Id. at ¶ 33.] On April 5, 2016 and
May 5, 2016, Oak Street executed proposals for additional equipment or services or both from
Plaintiff. [Id. at ¶¶ 34-35.]

2

The second amended complaint does not explain this acronym (nor do the first two complaints), but the
Court understands it to mean “Multiprotocol Label Switching” and to describe a particular method of
routing data in a telecommunications network.

2

At some point, Oak Street decided that it wanted to terminate its relationship with Plaintiff
and switch its data service provider to CenturyLink. However, Oak Street needed the data on
Plaintiff’s servers to do so. According to Plaintiff, Defendants conspired to gain the access to
Plaintiff’s computers and informational systems under false pretenses. Between September 2016
and February 2017, Oak Street and Schaumberg made various requests to Plaintiff, including
requests to access data on Plaintiff’s system. Plaintiff alleges that Defendants misrepresented the
true reason they sought access to the data, i.e., that Oak Street planned to migrate its hosted
applications and data away from Plaintiff and to use CenturyLink’s services instead. [Id., at ¶ 120.]
Plaintiff asserts that Oak Street made a series of representations to Plaintiff (including statements
from Schaumberg) and generally claims that Oak Street knew the representations were false
“and/or omitted its intent.” See [67, at ¶¶ 118, 120]. Plaintiff also that Schaumberg made a series
of representations to Plaintiff and knew that they were false “and/or withheld information” about
the representations. See [67, at ¶¶ 128-29]. Those two sets of representations are presented without
duplication here:
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Keith Forshaw, Oak Street Health’s Vice President of Information Technology
Operations & Enterprise Security, sought to confirm that The Solutions Team was
Oak Street’s premier strategic partner for Greenway hosting on August 30, 2019,
despite knowing it was planning to migrate Greenway to CenturyLink;
Forshaw assured The Solutions Team that the requested access was for the limited
purpose of Focus Solutions designing and running select reports of the Data for
Oak Street;
On December 27, 2016, Schaumberg contacted Todd Gooden at The Solutions
Team about working on the MPLS connection stating they “finished development
on some additional ETL’s that will be moving all of the BIN data from Prod to
EDW and Edmund is concerned about moving this data over the connection we
have.”;
On January 4, 2017, Schaumberg contacted The Solutions Team and requested
work to be performed on the MPLS connection between CenturyLink and The
Solutions Team;
On January 6, 2017, Schaumberg contacted The Solutions Team requesting
connectivity work on the MPLS server;

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In a January 6, 2017 handwritten note, Forshaw requested Focus Solutions be
allowed access for “MPLS Connection”;
On January 9, 2017, Schaumberg requested access to the server from The Solutions
Team, again omitting reference to the intent to take all Data and sever the
connection between The Solutions Team and Oak Street;
On January 12, 2017, Schaumberg requested two different remote networks to be
available on the MPLS Connection between The Solutions Team and CenturyLink
datacenters. He stated that “at this time, we are only trying to replace the current
VPN between TST and [CenturyLink] to utilize the MPLS. Everything with the
clinics will stay the same.”;
On the same date, Schaumberg told The Solutions Team that it needed to improve
the time expended on replicating data between servers within The Solutions Team;
On January 12, 2017, Oak Street, through Forshaw, encouraged The Solutions
Team to “just work with Bruce [Schaumberg]” to satisfy his requests and echoed
Schaumberg’s email stating the priority was replacing the “VPN with MPLS
between TST and [CenturyLink].”;
On January 14, 2017, Schaumberg wrote to The Solutions Team requesting The
Solutions Team to investigate a slow connection between The Solutions Team and
CenturyLink after sending a test file across the networks to assess the ability to take
the Data;
On January 15, 2017, Schaumberg requested that The Solutions Team remove a
server access policy that was previously in place for eight months so he could
perform a data load. He represented that he needed access to an application hosted
by The Solutions Team and a server at The Solutions Team data center;
Schaumberg claimed, “Extracting, copying and downloading data is specifically
why we do access these servers,” a manipulation and misrepresentation of the scope
of his reporting and processing jobs;
Schaumberg and Oak Street represented that unfettered access was necessary
stating, “I [Schaumberg] do have some work I need to do” without mentioning that
the “work” was transferring the Data from The Solutions Team servers;
Schaumberg did not mention that access was sought to permit him and Oak Street’s
other service providers, including CenturyLink, to conduct critical testing to
measure how much time each database backup would take and/or the speed of file
transfers from The Solutions Team to CenturyLink via the MPLS connection in
preparation for the February 2017 migration.

See [67, at ¶¶ 118, 120, 128-29]. Plaintiff granted Oak Street access to Oak Street’s Data on or
about February 5, 2017. [Id. at ¶ 124.] Schaumberg allegedly used that access to copy the Data
and transfer it from Plaintiff to CenturyLink. [Id. at ¶ 124.] On February 10, 2017, Oak Street sent
written notice to Plaintiff that, effective March 27, 2017, it was cancelling the Agreement and
Proposals. [Id. at ¶ 93 & Ex. G.] Oak Street took the position that no further payments were due

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because it provided timely notice of termination pursuant to Paragraph 6(a) of the Agreement. [Id.]
Plaintiff disagrees. [Id. at ¶ 96.]
Plaintiff filed its original complaint [1] in this action on March 10, 2017, asserting claims
for breach of contract, violations of the Computer Fraud and Abuse Act, and fraudulent
inducement against Oak Street, as well as claims for tortious interference with a contract,
violations of the Computer Fraud and Abuse Act, fraudulent inducement, and breach of fiduciary
duty against Focus Solutions and Bruce Schaumberg. Defendants moved to dismiss the complaint,
and this Court granted the motions to dismiss all but Plaintiff’s breach of contract claim against
Oak Street, without prejudice. [18.] On April 5, 2018, Plaintiff filed its first amended complaint
[20] alleging claims for breach of contract, violations of the Computer Fraud and Abuse Act, and
fraudulent inducement against Oak Street, and claims for violations of the Computer Fraud and
Abuse Act and fraudulent inducement against Focus Solutions and Bruce Schaumberg.
Defendants moved to dismiss all counts, and this Court granted the motions to dismiss all but
Plaintiff’s breach of contract claim against Oak Street without prejudice. See [32].
On October 7, 2019, Plaintiff filed its second amended complaint [67], which alleges
breach of contract against Oak Street (Count I), and promissory fraud against Oak Street for its
own conduct and for Schaumberg’s (assuming he is Oak Street’s agent) (Count II). In the
alternative, if Schaumberg is not an agent of Oak Street, Plaintiff alleges fraud against Schaumberg
individually (Count III), as well as a claim for tortious interference with contract (Count IV).
Plaintiff also alleges tortious interference with contract against CenturyLink (Count V). Finally,
the Second Amended Complaint alleges civil conspiracy against all Defendants (Count VI).3 Oak
Street moved to dismiss Counts II and VI against it pursuant to Rule 12(b)(6). [84.] Schaumberg

3

The exact nature of the alleged conspiracy is somewhat unclear, as discussed in section III.C.

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moved to dismiss Counts III, IV, and VI [86], and CenturyLink moved to dismiss counts V and VI
[83], both under the same rule. Those motions to dismiss are now before the Court.
One other disagreement, and a subsequent ruling, are significant to the resolution of the
motions to dismiss. As discovery proceeded, a dispute arose over the relationship between Oak
Street and Schaumberg.

Schaumberg and Oak Street have consistently maintained that

Schaumberg acted as an agent for Oak Street. See, e.g., [75 at 13-14.] In the original complaint
and first amended complaint, Plaintiff alleged the same thing. [1, at ¶¶ 66-69, 82-85, 96; 20, at ¶¶
84-88, 103-107, 122.] (In fact, the second amended complaint contains the same allegation. [67,
at ¶¶ 118-19.])

But when Oak Street asserted the attorney-client privilege over certain

communications that included Schaumberg, Plaintiff argued that discovery had revealed that
Schaumberg was not an agent, but an independent contractor, and therefore the privilege did not
apply. [91, at 6.]. Magistrate Judge Cummings determined that Oak Street and Schaumberg “had
an agency relationship of sufficient substance and character to preserve its attorney-client privilege
over documents shared with him.” [95, at 5.] Specifically, Judge Cummings noted that “the factual
record provided by Oak Street’s declarations establishes that Schaumberg acted as Oak Street’s
agent with respect to its dealings with [Plaintiff]” and that Plaintiff “would be barred from
disputing the fact of Schaumberg’s agency by its second amended complaint,” in which Plaintiff
alleges that Schaumberg acted as an agent of Oak Street. [95, at 4 (citing [67, at ¶¶ 119, 118]).
II.

Legal Standard
To survive a Federal Rule of Civil Procedure (“Rule”) 12(b)(6) motion to dismiss for

failure to state a claim upon which relief can be granted, the complaint first must comply with
Rule 8(a) by providing “a short and plain statement of the claim showing that the pleader is entitled
to relief,” Fed. R. Civ. P. 8(a)(2), such that the defendant is given “fair notice of what the * * *

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claim is and the grounds upon which it rests.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)
(quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)) (alteration in original). Second, the factual
allegations in the complaint must be sufficient to raise the possibility of relief above the
“speculative level.” E.E.O.C. v. Concentra Health Servs., Inc., 496 F.3d 773, 776 (7th Cir. 2007)
(quoting Twombly, 550 U.S. at 555). “A pleading that offers ‘labels and conclusions’ or a
‘formulaic recitation of the elements of a cause of action will not do.’” Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009) (quoting Twombly, 550 U.S. at 555). Dismissal for failure to state a claim under
Rule 12(b)(6) is proper “when the allegations in a complaint, however true, could not raise a claim
of entitlement to relief.” Twombly, 550 U.S. at 558.4 In reviewing a motion to dismiss pursuant
to Rule 12(b)(6), the Court accepts as true all of Plaintiffs’ well-pleaded factual allegations and
draws all reasonable inferences in Plaintiffs’ favor. Killingsworth v. HSBC Bank Nevada, N.A.,
507 F.3d 614, 618 (7th Cir. 2007). However, “[t]o survive a motion to dismiss, the well-pleaded
facts of the complaint must allow the court to infer more than the mere possibility of misconduct.”
Langworthy v. Honeywell Life & Acc. Ins. Plan, 2009 WL 3464131, at *2 (N.D. Ill. Oct. 22, 2009)
(citing McCauley v. City of Chicago, 671 F.3d 611, 616 (7th Cir. 2011)). Evaluating whether a
“claim is sufficiently plausible to survive a motion to dismiss is ‘a context-specific task that
requires the reviewing court to draw on its judicial experience and common sense.’” Id. (quoting
McCauley, 671 F.3d at 616).
Furthermore, claims sounding in fraud are subject to Rule 9(b)’s heightened pleading
standard. B.E.L.T., Inc. v. Wachovia Corp., 403 F.3d 474, 477 (7th Cir. 2005). Under Rule 9(b),
a plaintiff alleging fraud “‘must state with particularity the circumstances constituting fraud or

4

As Defendants point out, Plaintiff’s response briefs cite several cases that predate the Twombly/Iqbal
standard. See, e.g., [105, at 3-4]. To the extent that Plaintiff’s citations suggest applying an outdated or
overruled standard—such as the “no set of facts” language in P.H. Int’l Trading Co. v. Christia Confezioni
S.p.A., 2005 WL 2420377 (N.D. Ill. Sept. 29, 2005)—the Court declines to follow them.

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mistake.’” United States ex rel. Presser v. Acacia Mental Health Clinic, LLC, 836 F.3d 770, 776
(7th Cir. 2016) (quoting Fed. R. Civ. P. 9(b)). Ordinarily, the plaintiff “must describe the ‘who,
what, when, where, and how’ of the fraud—’the first paragraph of any newspaper story.’” Id.
(quoting United States ex rel. Lusby v. Rolls-Royce Corp., 570 F.3d 849, 853 (7th Cir. 2009)); see
also Camasta v. Jos. A. Bank Clothiers, Inc., 761 F.3d 732, 737 (7th Cir. 2014) (Rule 9(b) requires
the plaintiff to state “the identity of the person making the misrepresentation, the time, place, and
content of the misrepresentation, and the method by which the misrepresentation was
communicated to the plaintiff.” (quoting Uni*Quality, Inc. v. Infotronx, Inc., 974 F.2d 918, 923
(7th Cir. 1992)). While providing this broad guidance, “[t]he Seventh Circuit has shied away from
a rigid, formulaic approach to Rule 9(b) and noted that ‘[t]he twin demands of detail and flexibility,
though in tension with one another, make sense in light of the competing purposes of the federal
rules.’” Goldberg v. Rush Univ. Med. Ctr., 929 F. Supp. 2d 807, 815 (N.D. Ill. 2013) (quoting
Pirelli Armstrong Tire Corp. Retiree Med. Benefits Trust v. Walgreen Co., 631 F.3d 436, 442 (7th
Cir. 2011)).
III.

Analysis
A.

Count II Fraud in the Inducement (Oak Street) and Count III Fraud (Bruce
Schaumberg)

Plaintiff brings a fraud in the inducement claim against Oak Street (Count II). Plaintiff
also brings a claim labeled only “Fraud” against Schaumberg (Count III), but that claim mirrors
Count II and is pled as a fraud in the inducement claim, so the Court treats it as such. (See, e.g.,
[67] at ¶ 135 (alleging that “[a]s a direct and proximate result of Schaumberg’s fraudulent
inducement, The Solutions Team suffered damages”) (emphasis added)). To state a claim for fraud
in the inducement, a plaintiff must plead specific facts establishing: (1) a false statement of material
fact; (2) by one who knows or believes it to be false; (3) made with the intent to induce action by
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another in reliance on the statement; (4) action by the other in reliance on the truthfulness of the
statement; and (5) injury to the other resulting from that reliance. Benson v. Stafford, 941 N.E.2d
386, 405 (Ill. App. Ct. 2010); Soules v. Gen. Motors Corp., 402 N.E.2d 599, 601 (Ill. 1980).
The Court has previously noted that the false statements alleged by Plaintiff relate to
statements of intent rather than statements regarding present or past facts, and that Illinois law
recognizes a cause of action for promissory fraud for false or misleading statements relating to
future conduct. See, e.g., [18, at 6], [32, at 9]. Many of the alleged false statements in the second
amended complaint are the same as those alleged in prior complaints, though a few new allegations
do appear. Defendants Oak Street and Schaumberg again move to dismiss Plaintiff’s fraud claims
on three grounds: (1) Defendants’ statements of future intent are not actionable as promissory fraud
because Plaintiff fails to allege a pattern or scheme to defraud; (2) the second amended complaint
does not allege reasonable reliance; and (3) the second amended complaint does not allege an
injury caused by fraud.
1.

Injury

The Court begins with the injury issue because it is the most straightforward. Defendants
argue that Plaintiff has failed to allege any injury beyond damages stemming from the alleged
breach of contract. Plaintiff responds that it alleged two types of injuries: depreciation loss on
equipment, and expenditures of time and resources “beyond the scope of those provided for in the
Agreement or subsequent Proposals.” [97, at 14.] The Court finds neither argument persuasive.
As this Court has already discussed, “the alleged depreciation in the value of equipment
that was to be used servicing the contract is really another way to recover income lost as a result
of the alleged breach of contract.” [32 at 12-13.] Plaintiff asserts that the “depreciation losses on
equipment purchased … are separate from the damages associated with the breach of contract” but

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does not explain how they are separate. [97, at 14.] On the contrary, the two amended complaints
themselves suggest that the depreciation losses are associated with the (alleged) breach of
contract.5 Paragraph 74 of the first amended complaint alleges that Plaintiff suffered depreciation
losses on equipment purchased for Oak Street that had “lai[n] dormant for 15 months.” Paragraph
97 of the second amended complaint essentially repeats that allegation and does not update the
amount of time that has passed. In essence, the amended complaints allege that since Oak Street
stopped making payments under the contract, the equipment has been dormant and suffered
depreciation, for which Plaintiff seeks compensation. Given the timeline and causal chain alleged
in the second amended complaint, it remains clear that the depreciation losses flow from the
alleged breach of contract.

The relevant paragraph even shows that Plaintiff thought of

depreciation as a contract issue. Paragraph 97 notes that Plaintiff suffered depreciation losses
“despite efforts to mitigate.” Mitigation is a requirement for recovering damages in contract
claims, not fraud claims. See, e.g., Moran Foods, Inc. v. Mid-Atl. Mkt. Dev. Co., LLC, 476 F.3d
436, 440 (7th Cir. 2007) (“[t]he duty to mitigate damages is of course a general contractual duty”);
RESTATEMENT (SECOND) OF CONTRACTS § 350 (1981) (“As a general rule, a party cannot recover
damages for loss that he could have avoided by reasonable efforts.”)). Plaintiff’s own framing of
the issue confirms that the depreciation costs are damages flowing from the alleged breach of
contract. Therefore, those costs cannot constitute an injury for the purposes of pleading a fraud
claim. See, e.g., Bucciarelli-Tieger v. Victory Records, Inc., 488 F. Supp. 2d 702, 711 (N.D. Ill.
2007) (under Illinois law, “injury from fraud must be more than just damages arising from a breach
of contract”) (citations omitted).

5

It is not exactly clear what fifteen-month period Plaintiff is referring to. Plaintiff may mean the time
between February 8, 2017, when Oak Street purported to terminated the contract with Plaintiff, and April
5, 2018, when Plaintiff filed of the first amended complaint, though that is only fourteen months.

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Next, Plaintiff argues that it suffered losses from performing services “beyond the scope
of those provided for in the Agreement or subsequent Proposals.” [97, at 14.] The specific services
Plaintiff identifies are that Plaintiff “assigned an employee to investigate this backup and
restoration issue” reported by Schaumberg ([67, at ¶ 83]), and “added a network card to each server
IP address to connect to servers from CenturyLink and provide new IP addresses, and spent time
and resources investigating the speed of the MPLS connection ([67, at ¶ 122]). Neither the second
amended complaint nor Plaintiff’s response briefs explain how these services were beyond the
scope of its contracts with Oak Street, especially when the contracts state that Plaintiff would
provide support services to Oak Street. For example. the Service Agreement says that Plaintiff
would provide the following: “Application Server, Server (SQL License), RDS Server (RDS
License), Bandwidth, Support, Intrusion Detection System, Managed Firewalls in Data Center.”
[67-2, at 18] (emphasis added).6 Furthermore, the original Agreement and subsequent proposals
describe “support” in various ways, including: “World-Class Support means you contact us only
once to resolve any issue — we take it from there” [67-2, at 11]; [67-3, at 3]; “Our people...[will]
sink their teeth into your issues on the first time of asking, and won’t let go until it’s resolved” [672, at 12]; [67-3, at 4]. Considering the obligations described in the contracts that Plaintiff attached
to the second amended complaint, it is difficult to see how responding to Defendants’ requests and
investigating their concerns was beyond the scope of the contracts. And if the services were not
beyond the scope of the contract, it is not clear how Plaintiff was injured by performing them. As
a result, the facts pled in the second amended complaint are not sufficient to allege that these
activities were injuries for the purpose of a fraud claim, and Counts II and III must be dismissed.

“When ruling on a motion to dismiss, the court may consider ‘documents * * * attached to the complaint,
documents * * * central to the complaint and * * * referred to in it, and information that is properly subject
to judicial notice.’” Amin Ijbara Equity Corp. v. Vill. of Oak Lawn, 860 F.3d 489, 493 (7th Cir. 2017)
(quoting Williamson v. Curran, 714 F.3d 432, 436 (7th Cir. 2013)).
6

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2.

Misrepresentations

“[P]romissory fraud, i.e., a false statement of intent regarding future conduct rather than
present or past facts, ‘is generally not actionable under Illinois law unless the plaintiff also proves
that the act was a part of a scheme to defraud.’” Trade Fin. Partners, LLC v. AAR Corp., 573 F.3d
401, 413 (7th Cir. 2009) (quoting Ass’n Benefit Servs., Inc. v. Caremark Rx, Inc., 493 F.3d 841,
853 (7th Cir. 2007)). Thus, under Illinois law, “promissory fraud is actionable only if it either is
particularly egregious or, what may amount to the same thing, it is embedded in a larger pattern of
deceptions or enticements that reasonably induces reliance and against which the law ought to
provide a remedy,” often referred to as a scheme to defraud. Desnick v. Am. Broad. Companies,
Inc., 44 F.3d 1345, 1354 (7th Cir. 1995). This requirement is an application of the principle that
fraud suits should be “based on * * *more than an allegation of a fraudulent promise,” in order to
avoid the “risk of turning every breach of contract suit into a fraud suit.” Id. Defendants Oak Street
and Schaumberg argue that Plaintiff’s fraud claims based on promissory should be dismissed
because Plaintiff again fails to allege a scheme to defraud. Defendants also argue that any
omissions they made are not actionable.
Plaintiff responds in four ways: (1) arguing that this case is similar to P.H. Int’l Trading
Co. v. Christia Confezioni S.p.A., 2005 WL 2420377, at *8 (N.D. Ill. Sept. 29, 2005); (2) arguing
that the relevant future intent for promissory fraud is Oak Street’s “intent to continue to use
[Plaintiff’s] services” [97, at 8]; (3) repeating Plaintiff’s version of the facts without citing any
caselaw but P.H. Int’l and asserting that it qualifies as a “scheme” under Illinois law; and (4)
arguing that Defendants’ omissions qualify as “active concealment.” None of these positions
establish misrepresentations that allow Plaintiff to state a claim for fraud.

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First, the only authority Plaintiff cites to argue that Defendants’ conduct constitutes a
“scheme” for promissory fraud purpose is P.H. Int’l, in which the court denied a motion to dismiss
promissory fraud claims. 2005 WL 2420377, at *8. But P.H. Int’l denied the motion to dismiss
under the now-defunct “no set of facts” standard that Twombly expressly overruled. 550 U.S. at
563 (the “no set of facts” formulation is “best forgotten as an incomplete, negative gloss on an
accepted pleading standard”). This Court cannot deny a motion to dismiss on the basis of a district
court case that employed a now-overruled standard, so P.H. Int’l does not help Plaintiff establish
that it has adequately pled a claim relying on promissory fraud.
Second, the Court turns to the alleged misrepresentations that form the basis of the fraud
claim. Defendants make a persuasive (and unrebutted) argument that the allegations in the second
amended complaint are insufficient to establish promissory fraud because they do not make out a
“scheme,” as required by Illinois law. The bulk of the alleged misrepresentations remains the same
as the first amended complaint; most assert that Defendants represented that their access to
Plaintiff’s data or servers was for the limited purpose of running reports and establishing better
connections [67 at ¶¶ 54, 5764, 65, 67, 68, 118]. Previously, the Court found those allegations to
be the same representation made numerous times. [32, at 10-11]. Plaintiffs cannot establish a
scheme to defraud merely by alleging that defendants made the same representation multiple times.
Nat’l Painting, Inc. v. PPG Architectural Finishes, Inc., 2015 WL 1593008, at *4 (N.D. Ill. Apr.
1, 2015) (“While plaintiff alleges that defendants made the allegedly fraudulent representations
multiple times, such an allegation, without more, does not raise plaintiff’s claim to an actionable
promissory fraud case.”) (citing LeDonne v. Axa Equitable Life Ins. Co., 411 F. Supp. 2d 957, 962
(N.D. Ill. 2006)). Those allegations, standing alone, are still insufficient to allege a scheme to
defraud.

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But the second amended complaint does add a few allegations, which Oak Street argues
are not actionable and do not establish a “scheme” under Illinois law. Those new allegations are:
1) [67, at ¶ 118(a)]: that Keith Forshaw “sought to confirm that [TST] was Oak Street Health’s
premier strategic partner for Greenway hosting on August 30, 201[6], despite knowing it
was planning to migrate Greenway to Century Link[.]”
2) [67, at ¶ 118(j)]: that, on January 14, 2017, Schaumberg asked TST “to investigate a slow
connection between [TST] and CenturyLink after sending a test file across the networks to
assess the ability to take the Data.”
3) [67, at ¶ 118(k)]: that Schaumberg “requested that [TST] remove a server access policy
that was previously in place for eight months so he could perform a data load” and
“represented that he needed access to an application hosted by [TST] and a server at [TST]
data center.”)
4) [67, at ¶ 118(l)]: that Schaumberg misrepresented that “[e]xtracting, copying and
downloading data is specifically why we do access these servers.”
Oak Street argues that none of these alleged misrepresentations are actionable, because
they are not misrepresentations, or statements of material fact, or promises of future action or
future intent, and because Plaintiff does not allege with specificity that it relied on these statements
(much less relied reasonably) to take any action. [85, at 9-13.] Plaintiff appears to concede these
points, because its response brief [97] does not respond substantively to any of these arguments.
Instead, the response attempts to shift the basis of the promissory fraud claim to Oak Street’s
“intent to continue to use [Plaintiff’s] services.” [97, at 8.] But the second amended complaint
does not allege any misrepresentations about Oak Street’s intent to continue using Plaintiff’s
services—other than perhaps a vague statement about Plaintiff being a “strategic partner” [67 at ¶
43] that is not obviously a promise of future conduct or expression of future intent—and certainly
does not do so with the particularity required by Rule 9(b). Furthermore, this argument refers to
the services Plaintiff was providing under its contract with Oak Street, which is another indication
that Plaintiff has a contractual dispute with Oak Street, not any fraud claim.

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The final point on misrepresentations is a dispute over whether Oak Street and Schaumberg
made actionable omissions. Under Illinois law, “the omission or concealment of a material fact
when * * * the person has the opportunity and duty to speak also amounts to fraudulent
misrepresentation.” Havoco of Am., Ltd. v. Sumitomo Corp. of Am., 971 F.2d 1332, 1341 (7th Cir.
1992). This Court previously found that the alleged omissions did not amount to actionable
misrepresentations because Plaintiff failed to identify any duty to speak on the part of Defendants.
[32, at 10.] The second amended complaint asserts no such duty either, but Plaintiff’s response
brief argues that a duty to speak arose because Oak Street and Schaumberg “remained silent
regarding material facts and used deceptive conduct and suppressed material facts” [97, at 11],
citing Heider v. Leewards Creative Crafts, Inc., 613 N.E.2d 805, 814 (Ill. App. Ct. 1993). Though
the quoted portion of Heider deals with a claim of fraudulent concealment,7 Plaintiff denies that it
is alleging any fraudulent concealment. [97, at 11.]
Because Plaintiff is not pursuing a fraudulent concealment claim, the purpose of citing
Heider for its discussion of fraudulent concealment is not clear, and Plaintiff does not explain how
the quoted passage—or any other part of Heider—applies to the promissory fraud issue in its fraud
in the inducement claims. Furthermore, the case is distinguishable. Heider dealt with a property
seller’s (misleading) response to a buyer’s inquiry about a latent defect in a building. Heider, 613
N.E.2d at 814. There, the defendant’s duty to disclose arose “upon inquiry from plaintiff.” Id.
Even if the property seller’s position in Heider were analogous to a recipient of services under a
contract—and Plaintiff has not explained why that would be true—Plaintiff has not alleged that it

The quoted portion is: “[S]ilence accompanied by deceptive conduct or suppression of material facts gives
rise to active concealment; it is then the duty of the party which has concealed information to speak. * * *
Illinois law supports the notion that fraudulent concealment may be found in the absence of an affirmative
misrepresentation. That is, silence accompanied by deceptive conduct results in an act of concealment, and
at that point a duty to disclose arises.” Heider, 613 N.E.2d at 814.
7

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made any inquiries that would give Oak Street a duty to disclose its future plans to not renew the
Agreement or to migrate services away from Plaintiff. The Court is not convinced that any
doctrine of fraudulent concealment applies to the claims in this case, and even if it did, Plaintiff
has not pled that Defendants actively concealed material information. The second amended
complaint does not plead that Defendants owed any duty of disclosure to Plaintiff.
In sum, the alleged omissions are not actionable; Plaintiff does not plead a “scheme”
establishing promissory fraud; and the second amended complaint fails to plead misrepresentations
of material fact sufficient to state a claim for fraud in the inducement against Oak Street and
Schaumberg.
3.

Reasonable Reliance

The reliance element of fraud claims must be pled with particularity. Prescott v. Argen
Corp., 2015 WL 94168, at *3 (N.D. Ill. Jan. 6, 2015) (“These allegations, however, omit the
particular circumstances of either [plaintiffs’] reliance—e.g., the approximate date of their
reliance, the specific documents on which they relied, the specific misstatements within the
documents on which they relied, or how any misstatements caused plaintiffs to rely on them.”).
Oak Street argues that Plaintiff has failed to plead reasonable reliance with particularity for three
reasons: (1) failure to plead the dates of reliance or how Plaintiff relied on the statements; (2)
failure to link acts of reliance with specific misrepresentations; and (3) failure to plead that any
reliance was reasonable. [85, at 14-15.]
The date argument may be dispatched quickly. The second amended complaint includes
the dates of the alleged misrepresentations. To the extent that Plaintiff acted in response to the
alleged misrepresentation, the Court can reasonably infer that the dates pled are the starting dates

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of the reliance; it is not necessary for the complaint to repeat each date when describing Plaintiff’s
responses to the alleged misrepresentations.
The next point, how Plaintiff relied on the alleged misrepresentations, overlaps somewhat
with Oak Street’s second argument—namely, that Plaintiff failed to connect ats of reliance with
specific misrepresentations. Plaintiff does allege generally that it took certain actions in reliance
on Defendants’ statements, such as establishing new IP addresses and routes between Oak Street
and CenturyLink, or investigating network connections and file transfer speeds, but does not link
those actions back to specific (alleged) misrepresentations from Oak Street or Schaumberg.
Rather, Plaintiff generally asserts that it relied on Oak Street’s statements, then shifts to arguing
that “[i]t is reasonable to infer that [Plaintiff]8 relied on the existing relationship between it and its
customer without knowing Oak Street’s plan to migrate its data to CenturyLink.” [97, at 12-13.]
But even if that is true, it does not help Plaintiff plead the elements of fraud in the inducement. To
do so, Plaintiff must plead that it relied on misrepresentations, not on a contract, and Plaintiff does
not claim that its contracts with Oak Street or any portion of them are misrepresentations. It seems
that Plaintiff merely assumed the contractual relationship would continue, despite the possibility
(reflected in the contract terms themselves) that Oak Street could seek to end the agreement
without cause, or simply not renew it (see Sections 6(c) and 6(a) of the Agreement, respectively
[67-2, at 3]). That is simply not reasonable reliance on a misrepresentation as required to state a
fraud in the inducement claim, and Plaintiff’s resort to the Agreement again suggests that it has a
contractual claim, rather than any fraud claim.

The original sentence reads “Oak Street” here, but the Court believes that to be a mistake; it does not make
sense to write that Oak Street relied on its contractual relationship with Oak Street. Rather, the Court infers
that Plaintiff intended to write that Plaintiff relied on its contractual relationship with Oak Street.
8

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B.

Count IV Tortious Interference with Contract (Bruce Schaumberg), and
Count V Tortious Interference with Contract (CenturyLink)

Plaintiff brings claims for tortious interference with a contract (Counts IV and V) against
Schaumberg and CenturyLink. To state a claim of tortious interference with a contract, a plaintiff
must plead (1) the existence of a valid and enforceable contract between the plaintiff and another;
(2) the defendant’s awareness of the contract; (3) the defendant’s intentional and unjustified
inducement of a breach of the contract; (4) a subsequent breach by the other, caused by the
defendant’s conduct; and (5) damages. Dopkeen v. Whitaker, 926 N.E.2d 794, 797 (Ill. App. Ct.
2010).
1.

CenturyLink

CenturyLink argues that Plaintiff failed to allege that it had knowledge of a contract
between Plaintiff and Oak Street or that it induced any breach of that contract. Beginning with the
knowledge point, Plaintiff argues that it is not required to plead knowledge with specificity, as
knowledge may be alleged generally under Federal Rule of Civil Procedure 9(b). That may be
true, but the second amended complaint does not even allege knowledge generally. There is no
allegation that CenturyLink was aware of any of the contracts between Plaintiff and Oak Street;
rather, Plaintiff alleges that it “had a reasonable expectation of continuing its business relationship
with Oak Street” and that “CenturyLink knew of this expectancy.” [67, at ¶¶ 147-48.] A business
expectancy is not a contract, and while the Court must make reasonable inferences in Plaintiff’s
favor, it may not substitute into the complaint different words that stand for different legal
concepts. Despite discussing the Agreement and Proposals several times, the second amended
complaint simply does not allege that CenturyLink was aware of any of them.
Turning to the fourth element of tortious interference with contract, inducement, Plaintiff
argues that it alleged intentional and unjustified inducement of a breach of contract with the claim
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that CenturyLink “facilitat[ed] Oak Street Health’s migration to CenturyLink.” [67, at ¶ 149.]
Plaintiff expands on this argument by listing specific actions CenturyLink took to assist the transfer
of data from Plaintiff to CenturyLink. See [96, at 6-8.] The problem with Plaintiff’s position is
that CenturyLink’s actions may have aided Oak Street in (allegedly) breaching a contract, but none
of them constituted persuading, encouraging, or inciting Oak Street to breach any contract. See
Sterling Fire Restoration, Ltd. v. Wachovia Bank N.A., 2012 WL 4932845, at *6 (N.D. Ill. Oct.
16, 2012) (“Establishing inducement, in the context of a claim for tortious interference with a
contract, requires some active persuasion, encouragement, or inciting.”) (citing In re Estate of
Albergo, 656 N.E.2d 97, 103–04 (Ill. App. Ct. 1995)); see also Sysco Corp. v. Katz, 2013 WL
5519411, at *7 (N.D. Ill. Oct. 3, 2013) (dismissing tortious interference with contract claim
because plaintiff did not allege facts suggesting defendant’s “active persuasion or encouragement
in inducing” a breach of contract). The second amended complaint fails to allege that CenturyLink
induced Oak Street to breach any contract.
2.

Schaumberg

The briefs raise two issues related to Count IV, the tortious interference with contract claim
against Schaumberg. The first is a matter of agency, and the second a matter of inducement.
Beginning with agency, Schaumberg argues that he acted as an agent of Oak Street (see [67, at ¶¶
16, 118, 119]; [95, at 5]) and, just as in the original complaint, Plaintiff fails to allege that his
actions as an agent are not privileged. Plaintiff responds that Count IV is pled in the alternative,
noting that paragraph 137 of the second amended complaint begins, “To the extent that Bruce
Schaumberg was not an agent of Oak Street Health….” Plaintiff argues that “Schaumberg was
treated as any other vendor” by Oak Street and therefore was an independent contractor, not an
agent. [98, at 8.]

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Plaintiff’s brief cites no factual allegations in support of this argument. The Court’s review
of the complaint identified no factual allegations to support this argument. A conclusory assertion,
in the alternative or not, is insufficient to support Plaintiff’s claim that Schaumberg was not an
agent of Oak Street. As a result, Plaintiff faces the problem that Schaumberg identified: the second
amended complaint, like the original complaint, fails to allege that Schaumberg’s actions on behalf
of Oak Street were not privileged (see [18, at 27-28]), and Count IV must be dismissed.
Turning to the second issue, even if the second amended complaint had adequately
addressed agency, it still fails to state a claim for tortious interference with contract against
Schaumberg. As a preliminary note, Count IV, like the tortious interference claim against
CenturyLink, asserts that Plaintiff “had a reasonable expectation of continuing its business
relationship with Oak Street Health for services outlined in the Agreement and all subsequent
Proposals” and that “Schaumberg knew of this expectancy.” [67, at ¶¶ 138-39.] As discussed
previously, a business expectancy is not a contract, and these allegations do not plead any elements
required to state a claim for tortious interference with a contract.
Next, Schaumberg adopts CenturyLink’s arguments regarding tortious interference [88, at
2], and even if he had not, the inducement portion of the argument applies to Plaintiff’s claim
against Schaumberg.9 Furthermore, where one defendant successfully challenges a claim on a
ground common to several defendants, the Court has inherent authority to dispose of the claims
with respect to other defendants if the plaintiff had an adequate opportunity to respond. Acequia,
Inc. v. Prudential Ins. Co. of Am., 226 F.3d 798, 807 (7th Cir. 2000) (“[W]e have stated that where
one defendant succeeds in winning summary judgment on a ground common to several defendants,

9

Despite the inadequacy of the allegations about a business expectancy, the second amended complaint
does plead Schaumberg’s awareness of at least one contract between Oak Street and Plaintiff. Paragraph
45 asserts that Schaumberg sent an email to Keith Forshaw referring to Plaintiff’s contract. [67, at ¶ 45.]

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the district court may also grant judgment to the nonmoving defendants, if the plaintiff had an
adequate opportunity to argue in opposition.”) (citing Malak v. Associated Physicians, Inc., 784
F.2d 277, 280 (7th Cir. 1986)). So the Court now turns to the argument that Schaumberg’s actions
did not constitute inducement to breach a contract.
The second amended complaint does not plead that Schaumberg induced Oak Street to
breach any contract. It contains no allegations that Schaumberg engaged in “active persuasion,
encouragement, or inciting” regarding a breach of contract. Sterling Fire Restoration, Ltd. v.
Wachovia Bank N.A., 2012 WL 4932845, at *6 (N.D. Ill. Oct. 16, 2012). As with the failed claim
against CenturyLink, the second amended complaint alleges only that Schaumberg “facilitat[ed]
Oak Street Health’s migration to CenturyLink,” which is not sufficient to allege that Schaumberg
induced Oak Street to breach any contract. For this reason, too, Count IV is dismissed.
C.

Count VI Civil Conspiracy

Defendants also argue that Plaintiff fails to state a claim for civil conspiracy. Illinois law
defines civil conspiracy as “a combination of two or more persons for the purpose of
accomplishing by concerted action either an unlawful purpose or a lawful purpose by unlawful
means.” McClure v. Owens Corning Fiberglas Corp., 720 N.E.2d 242, 258 (Ill. 1999) (quoting
Buckner v. Atlantic Plant Maintenance, Inc., 694 N.E.2d 565, 571 (Ill. 1998)). To state a claim
for conspiracy, a plaintiff must allege “(1) an agreement between two or more persons for the
purpose of accomplishing either an unlawful purpose or a lawful purpose by unlawful means; and
(2) at least one tortious act by one of the co-conspirators in furtherance of the agreement that
caused an injury to the plaintiff.” Borsellino, 477 F.3d at 509 (citing McClure, 720 N.E.2d at 258);
see also Boothe v. Sherman, 66 F.Supp.3d 1069, 1078 (N.D. Ill. 2014) (same). A conspiracy to
commit fraud must be pled with particularity under Rule 9(b). Borsellino v. Goldman Sachs Grp.,

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Inc., 477 F.3d 502, 509 (7th Cir. 2007). “A cause of action for civil conspiracy exists only if one
of the parties to the agreement commits some act in furtherance of the agreement, which is itself a
tort.” Adcock v. Brakegate, Ltd., 645 N.E.2d 888, 894 (Ill. 1994); see also Indep. Trust Corp. v.
Stewart Info. Servs. Corp., 665 F.3d 930, 939 (7th Cir. 2012). A conspiracy claim fails if the
allegations of the independent cause of action underlying the conspiracy fail. Coghlan v. Beck, 984
N.E.2d 132, 151 (Ill. App. Ct. 2013). “A defendant who innocently performs an act which happens
to fortuitously further the tortious purpose of another is not liable under the theory of civil
conspiracy.” Borsellino, 477 F.3d at 509 (quoting Adcock, 645 N.E.2d at 894).
The Court dismisses the civil conspiracy claim, for several reason. First, as discussed
above the Court has determined that Counts II through V must be dismissed, meaning the
independent causes of action have failed. As a result, Plaintiffs conspiracy claim also fails.
Coghlan, 984 N.E.2d at 151; see also Indeck N. Am. Power Fund, L.P. v. Norweb PLC, 735 N.E.2d
649, 662 (2000).
Second, to the extent that the second amended complaint alleges that Oak Street and
Schaumberg conspired with each other, the conspiracy claim fails. Schaumberg acted as Oak
Street’s agent in Oak Street’s dealings with Plaintiff (see section III.B.i.), and “Illinois law holds
that it is not legally possible to have a conspiracy between an agent * * * and the agent’s principal.”
Copot v. Stewart Title Guar. Co., 2020 WL 1848204, at *6 (N.D. Ill. Apr. 13, 2020) (citing
Buckner, 694 N.E.2d at 571).
Third, the second amended complaint fails to plead an agreement between Defendants with
particularity. To explain this point, the Court must first resolve a dispute over whether and how
Rule 9(b) applies to the conspiracy claim in this case. “Rule 9(b) applies to ‘averments of fraud,’
not claims of fraud, so whether the rule applies will depend on the plaintiffs’ factual allegations.

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A claim that ‘sounds in fraud’—in other words, one that is premised upon a course of fraudulent
conduct—can implicate Rule 9(b)’s heightened pleading requirements.” Borsellino, 477 F.3d at
507 (citations omitted). This includes claims for conspiracy to commit fraud. Id; see also
Cincinnati Life Ins. Co. v. Beyrer, 722 F.3d 939 (7th Cir. 2013) (finding that plaintiff failed to
plead her conspiracy to commit fraud claim with requisite particularity under Fed. R. Civ. P. 9(b)).
Plaintiff’s conspiracy count alleges that Oak Street, Schaumberg, and CenturyLink
“conspired and agreed among themselves” to “fraudulently induce [Plaintiff] to grant access to
serves at [its] data center,” [67, at ¶ 154], and that Defendants “did, in fact, fraudulent induce
[Plaintiff] to … allow access to the Data by intentionally misrepresenting material facts regarding
the relationship with CenturyLink” [67, at ¶ 155]. And as discussed above, Plaintiff asserted
fraudulent inducement claims against Oak Street and Schaumberg. In sum, the conspiracy count
is a claim that “sounds in fraud.”
But when CenturyLink argued that Plaintiff had not pled the conspiracy claim with
particularity (or pled any allegations of fraud against CenturyLink, [83-1, at 10-11]), Plaintiff
asserted for the first time that CenturyLink’s alleged tortious interference with contract—not any
allegation of fraud in the second amended complaint—was the basis for CenturyLink’s liability as
a co-conspirator. [96, at 8.]10 Plaintiff’s brief does not explain why this means Rule 9(b) should
not apply, but the Court infers that is the conclusion that Plaintiff draws.
Plaintiff does not explain why Rule 9(b) should not apply to a conspiracy count that
Plaintiff twice says is based on fraudulent inducement. See [67, at 154-155]. Plaintiff cites no

10

Plaintiff also cites P.H. International for the proposition that a plaintiff does not have to plead a civil
conspiracy claim with particularity. 2005 WL 2420377, at *10. But the conspiracy in P.H. International
was not a conspiracy to commit fraud, see id. at *11, so Rule 9(b) did not apply. Furthermore, the case that
P.H. International cites and which Plaintiff left out, Walker v. Thompson, 288 F.3d 1005 (7th Cir. 2002),
does not involve a conspiracy to commit fraud either. See id. at 1007. The rule Plaintiff cites simply does
not apply to the fraud-based conspiracy Plaintiff attempts to allege.

23

authority stating that Rule 9(b) does not apply when a defendant to a conspiracy claim sounding
in fraud is himself not alleged to have committed the fraud. Plaintiff may mean that Rule 9(b)
should not apply to the conspiracy count only as it relates to CenturyLink, since CenturyLink is
not alleged to have committed fraud. But Plaintiff cites no authority for this proposition either,
and the Court is not sure how it could apply Rule 9(b) to allegations about one party to an
agreement but not to allegations about that party’s alleged co-conspirators. Plaintiff’s position is
legally unsupported and practically challenging, if not impossible. Indeed, the Court concludes
that Rule 9(b) does apply to Plaintiff’s conspiracy count, because it sounds in fraud, meaning that
it the conspiracy must be pled with specificity.
But the second amended complaint fails this requirement, too. It does not allege “the who,
what, when, where, and how” of the conspiracy to commit fraudulent inducement with the level
of detail required by Rule 9(b), especially regarding CenturyLink. See Presser, 836 F.3d at 776.
Indeed, besides the conclusory statement in Paragraph 154 that Defendants “conspired and agreed”
with each other, the second amended complaint says almost nothing about agreements between
any of the Defendants. Without adequately alleged agreement, the conspiracy claim fails and must
be dismissed.
IV.

Conclusion
For the reasons set forth above, Defendants’ motions to dismiss [83, 84, 86] are granted.

Counts II, III, IV, V, and VI are dismissed.

Dated: September 21, 2020

____________________________
Robert M. Dow, Jr.
United States District Judge

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