American Quality Schools Corporation v. The Leona Group et al
OPINION AND ORDER GRANTING 8 MOTION to Dismiss for Failure to State a Claim by Defendant The Leona Group; GRANTING 9 MOTION to Dismiss for Failure to State a Claim by Defendant School Board of the East Chicago Urban Enterprise Academy The; GRANT ING 12 MOTION to Dismiss Counts I, III, and IV of Plaintiff's Complaint Pursuant to Rule 12(b)(6) by Defendant Ben Clement. Plaintiff American Quality Schools Corporation's Complaint is DISMISSED WITHOUT PREJUDICE. Signed by Judge Rudy Lozano on 9/22/17. (cer)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF INDIANA
AMERICAN QUALITY SCHOOLS
THE LEONA GROUP, et al.,
OPINION AND ORDER
This matter is before the Court on: (1) Motion to Dismiss
Counts II and III of Complaint Pursuant to Rule 12(b)(6), filed
by The Leona Group on December 13, 2016 (DE #8); (2) Defendant
the School Board of the East Chicago Urban Enterprise Academy’s
Motion to Dismiss Plaintiff’s Complaint, filed on December 13,
2016 (DE #9); and (3) Defendant Ben Clement’s Motion to Dismiss
Counts I, III, and IV of Plaintiff’s Complaint Pursuant to Rule
12(b)(6), filed on December 16, 2016 (DE #12).
set forth below, the motions are GRANTED.
For the reasons
The Complaint is
DISMISSED WITHOUT PREJUDICE.
American Quality Schools (“AQS”) brought suit against The
Leona Group (“Leona”), the School Board of the East Chicago Urban
Enterprise Academy (“Board”), and Ben Clement (“Clement”) in Lake
Management Organization (“EMO”).
AQS entered into a contract to
operate the East Chicago Urban Enterprise Academy (“Academy”), a
charter school, from July 1, 2014 to June 30, 2016.
received high academic ratings under AQS’s management.
those ratings, the Board did not renew AQS’s contract to manage
Instead, the Board contracted with Leona to manage
The complaint alleges that this was the result of
Clement and Leona interfering with AQS’s business relationship
with the Board (Counts I and II).
The complaint further alleges
that Clement conspired with both Leona (Count III) and the Board
(Count IV) to interfere with AQS’s business relationship with the
Lastly, the complaint alleges that the Board breached its
fiduciary duty to AQS (Count V).
Each Defendant has filed a motion to dismiss the complaint.
The motions are fully briefed and ripe for adjudication.
Federal Rule of Civil Procedure 12(b)(6) allows a complaint
to be dismissed if it fails to “state a claim upon which relief
can be granted.”
Fed. R. Civ. P. 12(b)(6).
than fraud and mistake are governed by the pleading standard
outlined in Federal Rule of Civil Procedure 8(a), which requires
a “short and plain statement” that the pleader is entitled to
Maddox v. Love, 655 F.3d 709, 718 (7th Cir. 2011).
In order to survive a Rule 12(b)(6) motion, the complaint
“must contain sufficient factual matter, accepted as true, to
Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009)(quoting Bell
Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
inferences from those facts must be resolved in the plaintiff’s
Pugh v. Tribune Co., 521 F.3d 686, 692 (7th Cir. 2008).
However, pleadings consisting of no more than mere conclusions
are not entitled to the assumption of truth.
Iqbal, 556 U.S. at
allegations, as well as “[t]hreadbare recitals of the elements of
a cause of action, supported by mere conclusory statements.”
at 678 (citing Twombly, 550 U.S. at 555).
Intentional Interference with a Business Relationship
The complaint alleges that the Board’s contract with AQS was
educational consultant in late 2015.
Previously, Clement served
on the board of a different charter school, the Thea Bowman
Leadership Academy (“TBLA”).
In that role, Clement was part of a
decision to sever TBLA’s relationship with AQS in favor of its
competitor, Leona. Defendants argue that this claim must fail
because there was no business relationship to interfere with and,
even if there were, the complaint does not allege the illegal
conduct required for the claim to succeed.
The elements of intentional interference with a business
relationship under Indiana law include: (1) the existence of a
valid business relationship; (2) The defendant’s knowledge of the
existence of the relationship; (3) intentional interference with
damages resulting from the interference.
Harvest Life Ins. Co.
Additionally, a plaintiff need not show the existence of a valid
contract where the defendant illegally achieved its end.
also Johnson v. Hickman, 507 N.E.2d 1014, 1019 (Ind. Ct. App.
The contract entered into by the Board and AQS expired on
June 30, 2016.
It did not contain a renewal provision.
AQS has not alleged that the Board breached the
Leona and Clement urge this Court to find that the
business relationship between AQS and the Board expired with the
contract, and there was therefore no business relationship that
they could have interfered with.
See Computers Unlimited, Inc.
v. Midwest Data Systems, Inc., 657 N.E.2d 165, 168 (Ind. Ct. App.
1995)(finding, under the facts of that case, that no business
relationship existed after termination of the contract).
The complaint does not allege facts from which it can be
inferred that a business relationship existed between AQS and the
Board outside of the relationship established by the contract.
extensive than the single contract at issue here.
the relationship began eleven years prior to this contract.
#19 at 8).
That fact, however, is not in the complaint, and will
not be considered by this Court.1
Even if, as AQS alleges, its business relationship with the
AQS’s complaint alleges that Clement was not impartial
and favored a transfer to Leona.
He further alleges that the
information that was not relevant to the proposal process but
would have been relevant to a management transition.
“If, on a motion under Rule 12(b)(6) or 12(c), matters outside the pleadings
are presented to and not excluded by the court, the motion must be treated as
one for summary judgment under Rule 56.” Fed. R. Civ. P. 12(d). See Tradewinds
Glob. Logistics, LLC v. Garrett's Transp., LLC, No. 1:15-CV-00608-RLY-DKL,
2015 WL 8362401, at *2 (S.D. Ind. Dec. 8, 2015). This Court, in its
discretion, is excluding all materials outside of the pleadings.
unethically, not illegally.
See Biggs v. Marsh, 446 N.E.2d 977,
983-84 (Ind. Ct. App. 1983).
violation of the Indiana Unfair Trade Secrets Act (“IUTSA”), I.C.
§ 24-2-3-2 et seq., provides the illegal act.
however, does not allege a violation of this provision.
AQS, without any citation to legal authority, also suggests
that there is an implied duty to act in good faith.
(DE #19 at
9). In certain contexts, for example, employment contracts and
insurance contracts, there is such a duty.
See Perron on behalf
of Jackson v. J.P. Morgan Chase Bank N.A., 845 F.3d 852, 856 (7th
This obligation arises when one party is a fiduciary
or superior, or when a special relationship exists.
relationship exists here, for reasons explained more fully below.
Because the complaint does not contain facts supporting AQS’s
claim that its business relationship with the Board extended
supporting AQS’s assertion that Leona and Clements engaged in
The complaint alleges that Clement conspired with both Leona
(Count III) and the Board (Count IV) to interfere with AQS’s
business relationship with the Board.
Defendants argue that,
because the intentional interference with a business relationship
claims fail, the conspiracy claims also fail.
In Indiana, there is no independent cause of action for
It is a derivative claim.
See Anton Realty, LLC v.
8675188 (S.D. Ind. Dec. 11, 2015)(dismissing a civil conspiracy
claim where the underlying claim of tortious interference with a
contractual relationship failed).
See also Miller v. Central
Ind. Cmty. Found., Inc., 11 N.E.3d 944, 962-63 (Ind. Ct. App.
Instead, AQS argues that the giving of trade secrets
As this Court has pointed out already, the
complaint does not allege a trade secrets claim.
conspiracy claim is dependent upon the intentional interference
with a business relationship claim.
do the conspiracy claims.
Since those claims fail, so
Counts III and IV must be dismissed.
Breach of Fiduciary Duty
Count V of the complaint alleges that the Board breached its
fiduciary duty to AQS.
The Board asserts that it did not owe AQS
a fiduciary duty.
The Academy is an Indiana not-for-profit corporation.
Indiana law, the directors of not-for-profits must act in good
faith, and in the best interests of the corporation.
I.C. § 23-
While the Board did owe a duty to the Academy, AQS is a
separate entity from the Academy.
In Geiger & Peters, Inc. v. Berghoff, 854 N.E.2d 842, 850
(Ind. Ct. App. 2006) an insolvent corporation failed to pay a
The creditor sued for breach of fiduciary duty.
Indiana Court of Appeals found that “[t]he duty of the directors
[and officers] is to the corporation and its stockholders, not to
Nappanee Canning Co. v. Reid,
Murdock & Co., 64 N.E. 870, 872 (1902)).
While this situation is
a little different - the corporation at issue is a not-for-profit
- the same holds true: the Board’s duty runs to the Academy, not
The complaint suggests that the fiduciary duty arises from
the fact that the Board performs a governmental function and
utilizes tax dollars.
AQS provides no support for this theory in
response to the instant motion.
Instead, AQS again relies on
establishes a fiduciary relationship between AQS and the Board.
Accordingly, Count V fails and must also be dismissed.
dismiss (DE ## 8, 9, 12) are GRANTED.
The Defendants have asked
that AQS’s complaint be dismissed with prejudice.
DATED: September 22, 2017
/s/ RUDY LOZANO, Judge
United States District Court
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