Stoller et al v. Berkshire Hathaway, Inc. et al
Filing
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MEMORANDUM Opinion and Order: The plaintiffs' motion to strike 206 is denied, the defendants' motion for judgment on the pleadings 175 is granted in part and denied in part and the plaintiffs' cross-motion for judgment on the plead ings 205 is denied. Counts IIXIII are dismissed with prejudice. Michael Stoller's breach of contract claim is also dismissed with prejudice, and Michael and Leo Stoller are therefore dismissed from this action. Christopher Stoller's breach of contract claim remains pending. Signed by the Honorable Sharon Johnson Coleman on 1/9/2019. Mailed notice. (ym, )
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
CHRISTOPHER STOLLER and LEO
STOLLER, as the legal guardian of
MICHAEL STOLLER,
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) Case No. 18-cv-47
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) Judge Sharon Johnson Coleman
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Plaintiffs,
v.
BERKSHIRE HATHAWAY, INC.,
WARREN E. BUFFETT, CMH
MANUFACTURING, INC., CLAYTON
HOMES, INC., CMH MANUFACTURING
WEST, INC., KEVIN T. CLAYTON, TIM
WOODS, LARRY TOMPKINS, TIM
KUHM, SIMPSON, MCMAHAN, GLICK &
BURFORD, PLLC, JONATHEN E.
BELING, CLAYTON HOME BUILDING
GROUP, BERKSHIRE HATHAWAY
HOME BUILDERS, and JOHN DOES 1-10,
Defendants.
MEMORANDUM OPINION AND ORDER
The plaintiffs, Christopher Stoller and Michael Stoller, brought this action against numerous
defendants. Michael Stoller was subsequently replaced in this lawsuit by his father, Leo Stoller,1 and
the majority of the defendants were dismissed based on inadequate service of process. The two
remaining defendants, CMH Manufacturing West, Inc. and CMH Manufacturing, Inc., now move
for judgment on the pleadings. The plaintiffs have filed a cross-motion for judgment on the
pleadings, and also move to strike the defendants’ motion. For the following reasons, the plaintiffs’
motion to strike and request for sua sponte sanctions [206] is denied, the plaintiffs’ motion for
judgment on the pleadings [205] is denied, and the defendants’ motion for judgment on the
pleadings [175] is granted in part and denied in part.
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For purposes of clarity the Court describes these claims as belonging to Michael Stoller throughout.
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Background
The following facts are taken from the pleadings and are accepted as true for the purpose of
the present motion.
In 2015, Christopher Stoller entered into discussions with Tim Woods about becoming a
reseller of CMH manufactured homes in the Lake Geneva area of Wisconsin. In early 2017,
Christopher Stoller and Tim Woods executed an agreement for Stoller to become a retailer of CMH
homes. As part of that agreement, Christopher Stoller certified that “all Authorized Products are
purchased for resale or demonstration purposes only.” A “Confirmation Order” was subsequently
entered on February 20, 2017, reflecting that Christopher Stoller had ordered one of CMH’s
prefabricated homes.
Woods and Christopher Stoller subsequently executed a Construction Contract Agreement
in May of 2017, although that Contract states in its terms that it was made as of February 20, 2017.
The Construction Contract Agreement incorporated the Confirmation Order as the scope of work
to be performed. The plaintiffs allege that CMH breached their obligations under the Construction
Contract Agreement and, by incorporation, the Confirmation Order, by providing a house that
varied from specifications and suffered from material defects. The plaintiffs further allege that the
home was damaged while being set on its foundation, and that CMH refused to make repairs
necessary to render the property livable or marketable.
Legal Standard
Federal Rule of Civil Procedure 12(c) permits a party to move for judgment on the
pleadings, which consist of the complaint, the answer, and any written instruments attached as
exhibits. Northern Indiana Gun & Outdoor Shows, Inc. v. City of South Bend, 163 F.3d 449, 452 (7th Cir.
1998). A motion for judgment on the pleadings under Rule 12(c) is governed by the same standards
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as a motion to dismiss for failure to state a claim pursuant to Federal Rule of Civil Procedure
12(b)(6). Hayes v. City of Chicago, 670 F.3d 810, 813 (7th Cir. 2012).
A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) tests the legal
sufficiency of the complaint, not the merits of the allegations. The allegations must contain
sufficient factual material to raise a plausible right to relief. Bell Atlantic Corp. v. Twombly, 550 U.S.
544, 569 n.14, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). Although Rule 8 does not require a plaintiff
to plead particularized facts, the complaint must assert factual “allegations that raise a right to relief
above the speculative level.” Arnett v. Webster, 658 F.3d 742, 751–52 (7th Cir. 2011). When ruling
on a motion to dismiss, the Court must accept all well-pleaded factual allegations in the complaint as
true and draw all reasonable inferences in the plaintiff’s favor. Boucher v. Fin. Sys. of Green Bay, Inc.,
880 F.3d 362, 365 (7th Cir. 2018).
Discussion
As an initial matter, the Court turns to the plaintiffs’ motion to strike the defendants’ motion
for judgment on the pleadings and request for sua sponte sanctions. That motion is based on the
plaintiffs’ contention that the defendants improperly relied on documents beyond the scope of the
complaint in their motion for judgment on the pleadings. The use of evidence beyond the scope of
the pleadings, however, would only justify this Court in striking that evidence, not in striking the
entirety of the defendants’ motion. The Stollers do not ask this Court to strike the individual pieces
of evidence at issue, and this Court therefore declines to consider the merits of the exhibits at issue
in ruling on the motion to strike.
The plaintiffs also seek the issuance of sua sponte sanctions against the defendants. The
plaintiffs, however, have failed to identify any legal ground on which a federal court could authorize
sanctions against the defendants. Indeed, it is well established that federal courts cannot sanction
litigants sua sponte. Johnson v. Waddell & Reed, Inc., 74 F.3d 147, 150–51 (7th Cir. 1996). Even if the
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plaintiffs had identified a legal basis for their request for sanctions, moreover, there is nothing
unreasonable or frivolous about the defendants’ motion. Accordingly, the plaintiffs’ request for
sanctions is also denied.
The defendants’ motion contends (1) that the Stollers’ claims for violations of the Illinois
Consumer Fraud Act, common law fraud, equitable estoppel, and civil conspiracy fail to satisfy the
heightened leading standard of Federal Rule of Civil Procedure 9(b), (2) that the Stollers’ claims for
conversion, intentional infliction of emotional distress, tortious inducement of breach of a fiduciary
duty, tortious interference with contract, and aiding and abetting fail to state a claim on which relief
may be granted, (3) that Michael Stoller’s breach of contract claim fails to allege a cognizable interest
in the contract at issue, and (4) that Christopher Stoller’s breach of contract claim fails to allege that
the contract at issue was supported by consideration.
In response, the Stollers assert that these arguments must be rejected because the defendants
improperly rely on evidence outside the pleadings to support their motion. Federal Rule of Civil
Procedure 10(c) provides that “[a] copy of a written instrument that is an exhibit to a pleading is a
part of the pleading for all purposes.” Documents attached to a motion to dismiss or motion for
judgment on the pleadings are similarly considered to be part of the pleadings if they are referenced
in the plaintiffs’ complaint and are central to their claims. 188 LLC v. Trinity Indus. Inc., 300 F.3d
730, 735 (7th Cir. 2002). This exception exists in order to prevent parties from surviving a motion
to dismiss by “artful pleading or by failing to attach relevant documents.” Id.
Here, both the Retailer Agreement and the Service and Inspection Agreement were attached
to the complaint as Exhibit 6. Although the defendants have now provided fully executed copies of
the unsigned agreements that were originally attached to the complaint, the Stollers’ have not
established that the substitution of executed contracts for unexecuted contracts is material or
improper. Those documents are accordingly taken to constitute a part of the pleadings.
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Unlike the Retailer Agreement and the Service and Inspection Agreement, the New Retailer
Application was not attached to the complaint. It was, however, referenced in the Retailer
Agreement, which provided that “Retailer agrees to buy the CMH manufactured housing and related
authorized products identified on the New Retailer Application (Form 101A).” This Court is
therefore empowered to consider the New Retailer Application because it was expressly
incorporated into the Retailer Agreement. Id.
This leaves the matter of the Data Plate, which was not referenced in the complaint or in the
exhibits attached to the complaint. The defendants contend that the data plate is properly before
this Court because it is central to the Stollers’ breach of contract claim. To the contrary, the data
plate is not central to the Stollers’ claim but is instead central to the defense against that claim. See
generally Elward v. Electrolux Home Products, Inc., 264 F. Supp. 3d 877, 886 (N.D. Ill. 2017) (Lee, J.)
(recognizing that documents relevant solely to affirmative defenses are unlikely to be within the
scope of the court’s inquiry at the pleading stage). Accordingly, the data plate is not properly before
this Court.
The Court turns to the Stollers’ arguments concerning the doctrine of unclean hands. The
doctrine of unclean hands prevents a party from recovering when that party is guilty of misconduct
in connection with the subject matter of the litigation. Gambino v. Boulevard Mortg. Corp., 922 N.E.2d
380, 416, 398 Ill.App.3d 21 (2009). The Stollers, without any supporting authority, attempt to apply
the doctrine of unclean hands to the defendants’ litigation conduct, based on their erroneous and
conclusory assertion that the present motion is frivolous. Even if it was, however, the doctrine of
unclean hands only applies to conduct concerning the subject matter of litigation, not the conduct of
litigation. Cf. Scheiber v. Dolby Labs., Inc., 293 F.3d 1014, 1021 (7th Cir. 2002) (“‘Unclean hands’ really
just means that in equity as in law the plaintiff’s fault, like the defendant’s, is relevant to the question
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of what if any remedy the plaintiff is entitled to.”). It accordingly provides no basis for denying the
defendants’ motion for judgment on the pleadings.
Aside from their arguments concerning the scope of documents properly considered in
ruling on this motion, the Stollers’ only substantive argument is their cross-motion for partial
judgment on the pleadings on their breach of contract claims. The Stollers make no attempt to
counter the defendants’ arguments that judgment on the pleadings is warranted with respect to the
Stollers’ claims for violations of the Illinois Consumer Fraud Act (Count II), common law fraud
(Count V), conversion (Count VI), intentional infliction of emotional distress (Count VII), equitable
estoppel (Count VIII), tortious inducement of breach of fiduciary duties (Count IX), civil conspiracy
(Count X), tortious interference with contract (Count XI), contract fraud (Count XII), or aiding and
abetting (Count XIII). The Stollers’ silence on these issues effectively amounts to their concession.
See Bonte v. U.S. Bank, N.A., 624 F.3d 461, 466 (7th Cir. 2010) (“Failure to respond to an
argument . . . results in waiver.”). The Court is therefore compelled to grant judgment on the
pleadings with respect to those claims.
The Court accordingly turns to the parties cross-motions for judgment on the pleadings with
respect to the breach of contract. The defendants contend that Michael Stoller cannot state a claim
for breach of contract because he was not a party to any of the contracts at issue. It is well settled
that under Illinois law a nonparty to a contract can sue for breach of that contract only if the
contracting parties intended to confer a direct benefit upon the nonparty. Terrell v. Childers, 836 F.
Supp. 468, 473 (N.D. Ill. 1993) (quoting Carson Pirie Scott & Co. v. Parrett, 178 N.E. 498, 501, 346 Ill.
252 (1931)). Although it is alleged that Michael Stoller had an “equitable interest” in the property at
issue, there is no allegation to suggest that he was an intended direct beneficiary of the parties’
contract. To the contrary, his interest appears to arise from residency; a use at odds with the
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language of the contracts at issue. Accordingly, Michael Stoller has failed to state a claim for breach
of contract.
Christopher Stoller’s breach of contract claim is based on the defendants’ alleged breach of
the May 25, 2017, Construction Contract Agreement. Stoller, in his cross-motion for judgment on
the pleadings, contends that judgment is warranted because the defendants clearly breached this
agreement by failing to perform the described work, failing to repair defects in the house, and failing
to comply with the contract’s certification provisions. The defendants, however, denied these
factual allegations in their answer. Accordingly, Christopher Stoller cannot establish that he is
entitled to judgment on the pleadings. See Hal Roach Studios, Inc. v. Richard Feiner and Co., 896 F.2d
1542, 1550 (9th Cir. 1989) (“For purposes of the motion [for judgment on the pleadings,] the
allegations of the moving party which have been denied are assumed to be false.”); see also Friedman v.
Washburn Co., 145 F.2d 715, 717 (7th Cir. 1944).
The defendants, conversely, contend that they are entitled to judgment on the pleadings
because there was no consideration given in exchange for their execution of the Construction
Contract Agreement (the defendants offer no explanation for why they would have executed a
meaningless agreement). This argument turns on the defendants’ assertion that it had fully
performed its obligations under the Retailer Sales and Service Agreement, as demonstrated by the
home’s data plate. As previously discussed, however, the data plate is not properly before this Court
and the defendants therefore are unable to establish when the Stollers’ home was manufactured.
Even if the data plate were admissible, moreover, it is altogether unclear whether the defendants’
obligations under the Retailer Agreement were satisfied at the time of manufacture as opposed to
the time of delivery or title transfer, and the defendants have not offered argument on this point.
The Court accordingly denies both parties’ motions for judgment on the pleadings with
respect to Christopher Stoller’s breach of contract claims.
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Conclusion
For the foregoing reasons, the plaintiffs’ motion to strike [206] is denied, the defendants’
motion for judgment on the pleadings [175] is granted in part and denied in part and the plaintiffs’
cross-motion for judgment on the pleadings [205] is denied. Counts II–XIII are dismissed with
prejudice. Michael Stoller’s breach of contract claim is also dismissed with prejudice, and Michael
and Leo Stoller are therefore dismissed from this action. Christopher Stoller’s breach of contract
claim remains pending.
SO ORDERED.
____________________________________
Sharon Johnson Coleman
United States District Court Judge
DATED: 1/9/2019
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