Dupont et al v. Freight Feeder Aircraft Corporation, Inc. et al

Filing 56

MEMORANDUM AND ORDER, The Court GRANTS the motion to dismiss or, in the alternative, for judgment on the pleadings as to the individual defendants (Doc. 43 ) filed by defendants Freight Feeder, L. David Bridges, Stephen Carmichael and H. Clif Saylor ; DISMISSES Count 1 against defendants L. David Bridges, Stephen Carmichael and H. Clif Saylor with prejudice; DISMISSES Count 2 without prejudice; and DIRECTS the Clerk of Court to enter judgment accordingly at the close of the case. Defendants L. David Bridges, Stephen Carmichael and H. Clif Saylor are terminated as parties to this case. The only remaining claim is Count 1 for breach of contract against Freight Feeder. Signed by Judge J. Phil Gilbert on 10/24/2013. (jdh)

UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ILLINOIS
JOHN J. DUPONT and RANDY MOSELEY,
Plaintiffs,
v.

Case No. 13-cv-256-JPG-DGW

FREIGHT FEEDER AIRCRAFT CORPORATION,
INC., L. DAVID BRIDGES, R. DARBY BOLAND,
KEVIN WILLIAMS, STEPHEN CARMICHAEL, H.
CLIFF SAYLOR, EDWARD F. EATON, WILL
WEEKS, KIM LITTLEFIELD, and THE FIRST
NATIONAL BANK OF ST. LOUIS,
Defendants.
MEMORANDUM AND ORDER
This matter comes before the Court on the motion to dismiss or, in the alternative, for
judgment on the pleadings as to the individual defendants (Doc. 43) filed by defendants Freight
Feeder Aircraft Corporation (“Freight Feeder”), L. David Bridges, Stephen Carmichael and H.
Clif Saylor, the only remaining defendants in this case. Plaintiffs John J. Dupont and Randy
Moseley have responded to the motion (Doc. 53), and the defendants have replied to that response
(Doc. 54).
I.

Background
This case stems from a May 2011 settlement agreement (and several addenda thereto)

(collectively, “the Settlement Agreement”) between the plaintiffs, all the defendants except the
defendant First National Bank of St. Louis (“Bank”), and other parties who are not present in this
lawsuit. The Settlement Agreement resolved another case in this district, Freight Feeder Aircraft
Corp. v. Dupont, 11-cv-259-JPG-DGW, involving allegation of securities fraud, fraudulent
misrepresentation, negligent misrepresentation, misappropriate of trade secrets, breach of

contract, promissory estoppel, breach of the duty of good faith and fair dealing, breach of fiduciary
duty and self-dealing. Among other things, the Settlement Agreement obligated Freight Feeder to
make reasonable efforts to negotiate and close a sale of its assets, to pay certain sums to Dupont
and Moseley following the sale, and to pay Dupont certain sums on a monthly basis if the sale did
not occur within a certain time after the Settlement Agreement was executed. The Settlement
Agreement specifically states, in pertinent part:
5.35 Freight Feeder shall use commercially reasonable efforts to successfully
close a Freight Feeder Asset Sale within six (6) months of the Signature Date.
Should the Funding Date not occur within six (6) months following the Signature
Date, beginning in the seventh month following the Signature Date Freight Feeder
shall pay to Dupont monthly payments of Ten Thousand Dollars ($10,000) (the
“Adequate Protection Payment”) for each month that a Freight Feeder Asset Sale
has not been closed. The Adequate Protection Payment shall be due on the
fifteenth (15th) day of each given month.
***
5.38 Contingent upon and following a successful closing and funding of a
Freight Feeder Asset Sale, Freight Feeder agrees to pay Mosely Sixty-Five
Thousand Dollars ($65,000). The payment set forth in the preceding sentence
shall be paid to Mosely within seven (7) business days of the Funding Date of any
Freight Feeder Asset Sale.
***
5.40 . . . . Dupont and Mosely agree and acknowledge that their remedies
following a payment default shall be limited to monetary damages against Freight
Feeder for the amounts owed hereunder, and will not give rise to any claims for
rescission or nullification of this Settlement Agreement. . . .
Settlement Agreement at 17-18 (Doc. 2-1). The Settlement Agreement also provided that the
parties released their claims against all other parties of any kind, known or unknown, that they
possessed before the Settlement Agreement was executed. Settlement Agreement § 6.01. The
addenda to the Settlement Agreement extended the Settlement Agreement’s deadlines.
Plaintiffs Dupont, Moseley and Utilicraft Aerospace Industries, Inc. (“Utilicraft”) bring a

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claim against Freight Feeder and a number of individual parties to the Settlement Agreement
(defendants Bridges, R. Darby Boland, Kevin Williams, Carmichael, Saylor, Edward F. Eaton,
Will Weeks and Kim Littlefield) for breach of contract (Count 1). They also sue the individual
defendants (Count 2) and the Bank (Count 3) for fraud. Defendants Boland, Williams, Eaton,
Weeks, Littlefield and the Bank and all claims purportedly brought by Utilicraft have been
dismissed from this case without prejudice.
The defendants ask the Court to dismiss Counts 1 and 2 against the individual defendants
pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim or, in the
alternative, to grant judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(c).
As for Count 1, the breach of contract claim, they argue that the plain language of the Settlement
Agreement reveals that they have no obligation to pay Dupont or Mosely and that the payment
obligation was solely undertaken by Freight Feeder. As for Count 2, the fraud claim, the
defendants first argue that the First Amended Complaint fails to meet the pleading standard set
forth in Federal Rule of Civil Procedure 8(a) or the heightened pleading standard for fraud as set
forth in Federal Rule of Civil Procedure 9(b). They then argue that these fraud claims, which are
based on alleged misrepresentations by the individual defendants prior to the Settlement
Agreement, were released by that agreement.
In response (Doc. 53), the plaintiffs argue that the intent of the Settlement Agreement was
clearly to provide them with certain sums of money and that the individual defendants, as
principals of Freight Feeder and signatories to the Settlement Agreement, breached their
obligation under the Settlement Agreement to make reasonable efforts to sell Freight Feeder’s
assets. As for the fraud claim, the plaintiffs argue their claim is based on fraudulent inducements
to enter into the addenda to the original settlement agreement in March and September 2012,

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namely, misrepresentations that the individual defendants were making commercially reasonable
efforts to sell Freight Feeder’s assets. They believe they have adequately pled the details
surrounding their claim. Alternatively, they ask for leave to replead Count 2.
II.

Analysis
A.

Standard for Dismissal

When reviewing a Rule 12(b)(6) motion to dismiss, the Court accepts as true all allegations
in the complaint. Erickson v. Pardus, 551 U.S. 89, 94 (2007) (citing Bell Atl. Corp. v. Twombly,
550 U.S. 544, 555 (2007)). For most claims, to avoid dismissal under Rule 12(b)(6) for failure to
state a claim, a complaint must contain a “short and plain statement of the claim showing that the
pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). This requirement is satisfied if the
complaint (1) describes the claim in sufficient detail to give the defendant fair notice of what the
claim is and the grounds upon which it rests and (2) plausibly suggests that the plaintiff has a right
to relief above a speculative level. Bell Atl., 550 U.S. at 555; see Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009); EEOC v. Concentra Health Servs., 496 F.3d 773, 776 (7th Cir. 2007).
However, for fraud claims, a plaintiff must meet a more demanding standard. Federal
Rule of Civil Procedure 9(b) requires a plaintiff alleging fraud to “state with particularity the
circumstances constituting fraud.” Generally, pleading “with particularity” requires a plaintiff to
describe the “who, what, when, where, and how” of the fraud, although that formulation is not set
in stone and may vary based on the facts of a particular case. Pirelli Armstrong Tire Corp.
Retiree Med. Benefits Trust v. Walgreen Co., 631 F.3d 436, 441-42 (7th Cir. 2011).
The particularity requirement ensures that plaintiffs do their homework before
filing suit and protects defendants from baseless suits that tarnish reputations.
And the requirement dovetails with lawyers’ ethical obligations to ensure they
conduct a pre-complaint inquiry before signing off on their clients’ contentions.
Id. at 439. The Rule 9(b) fraud pleading standard applies in this case to Count 2, a claim for fraud
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against the individual defendants.
B.

Count 1: Breach of Contract

With respect to Count 1, the Court applies the notice pleading requirements set forth in
Rule 8(a). It further relies on the Settlement Agreement itself, not what the Amended Complaint
alleges the Settlement Agreement says. See Polzin v. Gage, 636 F.3d 834, 838 n. 1 (7th Cir.
2011) (per curiam).
Whether the Settlement Agreement obligates the individual defendants to pay anything to
Dupont and Mosely or creates any liability for the individual defendants if Freight Feeder fails to
perform as promised in the agreement is a question of contract interpretation. Under Illinois law,
when construing a contract the Court must give effect to the intent of the parties. Schek v.
Chicago Transit Auth., 247 N.E.2d 886, 888 (Ill. 1969). The Court must first attempt to
determine this intent solely from the contract language. Air Safety, Inc. v. Teachers Realty Corp.,
706 N.E.2d 882, 884 (Ill. 1999) (citing Western Ill. Oil Co. v. Thompson, 186 N.E.2d 285, 287 (Ill.
1962)); Rakowski v. Lucente, 472 N.E.2d 791, 794 (Ill. 1984). It is the Court’s duty to construe
and enforce the contract as it was written. Shaffer v. Liberty Life Assur. Co. of Boston, 746
N.E.2d 285, 288 (Ill. App. Ct. 2001). If the language is unambiguous, the Court must interpret the
contract as a matter of law without reference to extrinsic, or parol, evidence. Air Safety, 706
N.E.2d at 884. On the other hand, if the language is susceptible to more than one meaning, then
the contract is ambiguous and parol evidence may be used to determine the parties’ intent. Air
Safety, 706 N.E.2d at 884. Whether the contract is ambiguous is a question of law to be
determined by the Court. Central Ill. Light Co. v. Home Ins. Co., 821 N.E.2d 206, 214 (Ill. 2004).
The Settlement Agreement is unambiguous as to which of the defendants it obligates to
perform: Freight Feeder. The clear language obligates only Freight Feeder to make reasonable

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efforts to sell Freight Feeder’s assets and only Freight Feeder to pay Dupont and Mosely.
Settlement Agreement §§ 5.35 and 5.38. It further clearly limits Dupont and Mosely to the
remedy of seeking damages from Freight Feeder. Settlement Agreement § 5.40. There is no
reasonable interpretation of the plain language of the Settlement Agreement that would obligate
the individual defendants to make reasonable efforts to sell Freight Feeder’s assets or to pay
Dupont or Mosely. For this reason, the Court will dismiss Count 1 as to the individual
defendants.
C.

Count 2: Fraud

With respect to Count 2, the Court applies the heightened notice pleading requirements set
forth in Rule 9(b). The plaintiffs’ allegations in the complaint do not satisfy this pleading
requirement. The plaintiffs concede in their response to the motion to dismiss that the alleged
fraudulent representations that form the basis for Count 2 occurred after execution of the original
settlement agreement in May 2011; claims based on statements predating the original settlement
agreement were released by that agreement. Settlement Agreement § 6.01. Therefore, the Court
only considers representations alleged after May 2011.
The plaintiffs allege that in September 2012, the individual defendants conspired with the
Bank to remove him from a residence in Santa Fe, New Mexico, despite the individual defendants’
promise to continue making mortgage payments on the residence, by threatening to sell an aircraft
for less than it was worth. Am. Comp. at 10. Count 2 of the Amended Complaint specifically
alleges,
47.
The Individual Defendants engaged in a pattern of intentional
misrepresentations with the Plaintiffs with the intent that the Plaintiffs rely on the
misrepresentations made.
48.
The Plaintiffs justifiably relied on the Individual Defendants’ intentional
misrepresentations and were harmed by the aforementioned intentional
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misrepresentations.
49.
Specifically, Dupont suffered harm from the Defendants’ continued
misrepresentations because the Defendants fraudulently induced Dupont into
performing on the addenda to the Settlement Agreement.
Am. Compl. at 11. The plaintiffs also point to paragraphs 39 to 41 of the Amended Complaint to
support their fraud claim, but there are no allegations of any representations, much less any
misrepresentations, in those paragraphs.
The plaintiffs’ allegations with respect to their claim against the individual defendants are
not pled with the requisite particularity of Rule 9(b). The plaintiffs do not describe the “who,
what, when, where, and how” of the individual defendants’ alleged fraud and instead make vague
allegations that the individual defendants made some unspecified misrepresentations with the
intent that the plaintiffs rely on them. This is insufficient. Accordingly, the Court will dismiss
Count 2 without prejudice. If the plaintiffs believe they can plead Count 2 with sufficient
particularity, they may seek leave to further amend the Amended Complaint and tender the
proposed amended pleading for the Court’s review. However, if they file such a motion, they
must do so by November 1, 2013, the deadline to amend the pleadings as set forth in Magistrate
Judge Wilkerson’s August 30, 2013, scheduling order (Doc. 47).
III.

Conclusion
For the foregoing reasons, the Court:


GRANTS the motion to dismiss or, in the alternative, for judgment on the pleadings as to
the individual defendants (Doc. 43) filed by defendants Freight Feeder, L. David Bridges,
Stephen Carmichael and H. Clif Saylor;



DISMISSES Count 1 against defendants L. David Bridges, Stephen Carmichael and H.
Clif Saylor with prejudice;



DISMISSES Count 2 without prejudice; and



DIRECTS the Clerk of Court to enter judgment accordingly at the close of the case.
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Defendants L. David Bridges, Stephen Carmichael and H. Clif Saylor are terminated as parties to
this case. The only remaining claim is Count 1 for breach of contract against Freight Feeder.
IT IS SO ORDERED.
DATED: October 24, 2013
s/J. Phil Gilbert
J. PHIL GILBERT
DISTRICT JUDGE

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