WASHINGTON FRONTIER LEAGUE BASEBALL, LLC et al v. ZIMMERMAN et al

Filing 73

ORDER granting 39 Motion to Dismiss and 41 Motion to Dismiss. The Plaintiffs are granted leave to file a second amended complaint with respect to Counts I and III, within fourteen (14) days of the date of this Order. If no such amendment is filed, the Court will convert the dismissal to one with prejudice so that a final appealable judgment can be issued. Signed by Judge Tanya Walton Pratt on 11/18/2015. (JLS)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION
WASHINGTON FRONTIER LEAGUE
BASEBALL, LLC, and STUART A. WILLIAMS,
Plaintiffs,
v.
MICHAEL E. ZIMMERMAN, MKE BASEBALL,
LLC, MKE SPORTS & ENTERTAINMENT,
LLC, and FRONTIER PROFESSIONAL
BASEBALL, INC.,
Defendants.

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ORDER ON MOTIONS TO DISMISS
This matter is before the Court on Motions to Dismiss filed by Defendants Michael E.
Zimmerman (“Zimmerman”), MKE Baseball, LLC, and MKE Sports & Entertainment, LLC
(“MKE Sports”) (collectively, “the Zimmerman Defendants”) (Filing No. 39) and Defendant
Frontier Professional Baseball, Inc. (“Frontier League”) (Filing No. 41).

The Zimmerman

Defendants contend that dismissal is warranted pursuant to Federal Rules of Civil Procedure
12(b)(6), 12(b)(3) and 23.1. Plaintiffs Washington Frontier League Baseball, LLC (“Washington
Club”) and Stuart A. Williams (“Williams”) (collectively, “Plaintiffs”) initiated this derivative
action on behalf of the Frontier League and themselves after the Zimmerman Defendants secured
a baseball expansion opportunity that Washington Club and Williams had been pursuing.
Specifically, Plaintiffs allege that the Zimmerman Defendants have conspired to breach fiduciary
duties owed to them and tortuously interfered with their business relationships. For the following
reasons, the Court GRANTS the Motions to Dismiss.

I. BACKGROUND
Williams, his wife, and another investor are the owners of the Washington Club, which is
a member club in the Frontier League. Frontier League is an independent, professional baseball
league with thirteen teams. Each Frontier League member has a team that plays in the Frontier
League. Each Frontier League member helps fund a travel team that plays in the Frontier League
so that there are an even number of teams to balance out the playing schedule.
Frontier League is a not-for-profit corporation organized under Ohio law and has its
principal place of business in Illinois. Frontier League’s board of directors is comprised of a
representative from each of the member clubs within Frontier League. Williams is Washington
Club’s representative and therefore serves as a director on Frontier League’s board of directors.
One of the other Frontier League members is Rock River Valley Baseball, LLC (the “Rock
River Valley Club”), which is owned by W. Chris Hanners (“Hanners”). During the times relevant
to this action, Bryan Wickline (“Wickline”) was Rock River Valley Club’s president and
representative to Frontier League’s board of directors. Hanners, Wickline, and Rock River Valley
Club are collectively referred to as the “Hanners Group” throughout this Order.
In early March 2014, the city of Kokomo, Indiana contacted Frontier League to discuss the
possibility of placing an expansion team in Kokomo’s to-be-built baseball stadium. A few days
later, Frontier League’s commissioner, deputy commissioner, and one of its directors visited
Kokomo and met with the mayor, director of operations, and city engineer to further discuss the
opportunity. They discussed a lease for the stadium and other related matters. A few days later,
the commissioner engaged Williams in the discussions with Kokomo regarding the expansion
opportunity. The commissioner and Williams collaborated to develop a strategy for Frontier
League’s response to Kokomo’s interest in a partnership with the Frontier League. On March 19,

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2014, Frontier League and Kokomo signed a Memorandum of Understanding (“MOU”), which
gave both parties the exclusive opportunity to gather more information and conduct further
negotiations with one another. The MOU expired by its own terms on May 18, 2014.
Before the expiration of the MOU, the Kokomo expansion opportunity was discussed at
Frontier League’s board of directors meeting held in Florida on March 25, 2014. At the meeting,
the directors, including Wickline of the Rock River Valley Club and Williams, confirmed that the
Kokomo expansion opportunity was a Frontier League opportunity. The directors agreed that Clint
Brown (“Brown”), owner of the member club in Florence, Kentucky, would pursue the Kokomo
expansion opportunity on behalf of Frontier League and its members under the umbrella of the
March 19, 2014 MOU. However, by mid-June 2014, after the expiration of the MOU, Brown
withdrew from the negotiations between Frontier League and Kokomo, and Williams alleges that
he became Frontier League’s sole authorized representative to pursue the Kokomo expansion
opportunity on behalf of Frontier League.
While Brown was having discussions with Kokomo about the expansion opportunity, the
Hanners Group was discussing the Kokomo expansion opportunity with Zimmerman. On June 2,
2014, after the MOU had expired, Hanners, through the Rock River Valley Club, entered into a
memorandum of understanding with Zimmerman regarding pursuing the Kokomo expansion
opportunity. While Williams’s efforts with Kokomo were in progress, he learned that the Hanners
Group was working with the Zimmerman Defendants in attempting to secure a lease agreement
with Kokomo for the expansion opportunity.
After the MOU had expired, Frontier League’s attorney, Thomas Ysursa (“Ysursa”), wrote
to the Hanners Group on July 2, 2014, asserting that the Kokomo expansion opportunity was an
opportunity for Frontier League to pursue and that the Hanners Group should not take any further

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action regarding the opportunity in Kokomo or such action would be considered a breach of their
fiduciary duties to Frontier League and its members. Ysursa acknowledged receiving an email
and draft lease agreement for the Kokomo stadium from the Hanners Group and the Zimmerman
Defendants. He noted that the Hanners Group should “take no further action of any kind in relation
to Kokomo until such time as you provide the League an opportunity to review the lease and you
provide an update to the Executive Committee as to the state of your negotiations and your
intentions with Kokomo.” (Filing No. 36 at 7.)
The Hanners Group and the Zimmerman Defendants continued in their negotiations to
secure the Kokomo expansion opportunity, so Ysursa wrote to the Hanners Group again on July
8, 2014. He proposed an agreement to Hanners Group in which Frontier League and the Rock
River Valley Club would execute a mutual release through which Frontier League would waive
any claims against Hanners Group for interfering with any business expectancy interests and for
breach of fiduciary duties. Under the terms of the proposal, Frontier League would negotiate the
terms of the final lease with Kokomo, the lease would be in the name of a new entity, not the Rock
River Valley Club or Frontier League, and the new entity would consist of Frontier League
members that desired to invest in the Kokomo expansion opportunity.
On July 11, 2014, MKE Baseball, LLC, one of Zimmerman’s entities, executed a lease
with Kokomo for a baseball opportunity in Kokomo. The lease was assignable by MKE Baseball,
LLC to any limited liability company in which Hanners or Zimmerman was a majority owner.
After securing the lease with Kokomo, Zimmerman used the lease as leverage to try to gain
membership in the Frontier League, but his request was denied by the board of directors.
After Zimmerman was denied membership in the Frontier League, he was named the chief
executive officer of the Rock River Valley Club, making him an officer of a Frontier League

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member team. MKE Sports, another of Zimmerman’s entities, entered a managed services
agreement with the Rock River Valley Club, which allowed MKE Sports to control and operate
the Rock River Valley Club, a Frontier League team. Zimmerman publicly announced that he was
partnering with Hanners to buy and manage numerous minor league baseball teams.
On September 2, 2014, Zimmerman revealed that he was bringing a team from the Prospect
League, a competitor of Frontier League, to Kokomo to play at the stadium covered by the Kokomo
lease. The bylaws of Frontier League prohibit officers or owners of Frontier League member
teams from owning, controlling, or operating another baseball team in the Frontier League or in
any other baseball league unless approved by two-thirds of Frontier League’s members. Wickline
assisted the Zimmerman Defendants in bringing a Prospect League team to Kokomo in violation
of fiduciary duties, and Hanners is involved in owning or operating the Prospect League team in
Kokomo in violation of his fiduciary duties and Frontier League’s bylaws.
Because Frontier League did not secure the Kokomo expansion opportunity, “the League
members, and therefore the League itself, must continue incurring the significant costs associated
with funding the travel team[, and] . . . the League and its members lost the fair market value of
the Kokomo opportunity . . . [and] the $50,000 expansion fee.” (Filing No. 36 at 9–10, ¶¶ 34, 35,
37.)
Washington Club made two demands on Frontier League to bring this action on its own
behalf. The first demand was an August 20, 2014 letter to Frontier League’s executive committee,
explaining the damages Frontier League had already incurred as a result of the conduct of the
Hanners Group and the Zimmerman Defendants and demanding the initiation of its own legal
action against the Zimmerman Defendants. The demand requested that the executive committee
convene to discuss the demand. Washington Club made a second demand sixteen days later

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through a letter dated September 5, 2014. This second letter addressed additional damages to
Frontier League resulting from Kokomo and Zimmerman’s announcement that a Prospect League
team would be based in Kokomo. Washington Club demanded that Frontier League consider
taking its own action against the Zimmerman Defendants and at least have the executive committee
meet as a precursor to further action.
Less than three months after the first demand, on November 14, 2014, Washington Club
and Williams filed this lawsuit before Frontier League provided a response to the demands. The
complaint alleged claims for civil conspiracy to breach fiduciary duties, tortious interference, and
unjust enrichment against the Zimmerman Defendants.1 On January 13, 2015, the Zimmerman
Defendants filed their Motion to Dismiss, and on January 26, 2015, Frontier League filed its
Motion to Dismiss.
On February 3, 2015, Frontier League issued a report from its executive committee wherein
it considered, addressed, and rejected Washington Club’s demands. Soon thereafter, on February
6, 2015, Washington Club and Williams filed their Amended Complaint (Filing No. 36) to address
the alleged deficiencies raised in the motions to dismiss. On February 20, 2015, the Zimmerman
Defendants and Frontier League filed their second round of motions to dismiss. Because of the
filing of the Amended Complaint and a second round of motions to dismiss, the Court denied as
moot the Zimmerman Defendants’ first round of motions to dismiss.

Under Frontier League’s bylaws, the Frontier League commissioner has jurisdiction over Washington Club’s claims
against the Hanners Group. Thus, on August 27, 2014, Washington Club filed a complaint with the commissioner
against the Hanners Group for breach of their fiduciary duties to Frontier League and violations of Frontier League’s
bylaws.
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II. LEGAL STANDARD
Federal Rule of Civil Procedure 12(b)(6) allows a defendant to move to dismiss a complaint
that has failed to “state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). When
deciding a motion to dismiss under Rule 12(b)(6), the court accepts as true all factual allegations
in the complaint and draws all inferences in favor of the plaintiff. Bielanski v. County of Kane,
550 F.3d 632, 633 (7th Cir. 2008). However, courts “are not obliged to accept as true legal
conclusions or unsupported conclusions of fact.” Hickey v. O’Bannon, 287 F.3d 656, 658 (7th Cir.
2002).
The 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). In Bell Atlantic Corp. v. Twombly, the
Supreme Court explained that the complaint must allege facts that are “enough to raise a right to
relief above the speculative level.” 550 U.S. 544, 555 (2007). Although “detailed factual
allegations” are not required, mere “labels,” “conclusions,” or “formulaic recitation[s] of the
elements of a cause of action” are insufficient. Id. The allegations must “give the defendant fair
notice of what the . . . claim is and the grounds upon which it rests.” Id. Stated differently, the
complaint must include “enough facts to state a claim to relief that is plausible on its face.” Hecker
v. Deere & Co., 556 F.3d 575, 580 (7th Cir. 2009) (citation and quotation marks omitted). To be
facially plausible, the complaint must allow “the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing
Twombly, 550 U.S. at 556).
[T]he record under 12(b)(6) is limited to the language of the complaint and to those
matters of which the court may take judicial notice. The complaint cannot be
amended by the briefs filed by the plaintiff in opposition to a motion to dismiss.
By the same token, the defendant cannot, in presenting its 12(b)(6) challenge,
attempt to refute the complaint or to present a different set of allegations. The
attack is on the sufficiency of the complaint, and the defendant cannot set or alter
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the terms of the dispute, but must demonstrate that the plaintiff’s claim, as set forth
by the complaint, is without legal consequence.
Gomez v. Illinois State Bd. of Education, 811 F.2d 1030, 1039 (7th Cir. 1987) (citation omitted).
However, “[courts] consider documents attached to the complaint as part of the complaint itself.
Such documents may permit the court to determine that the plaintiff is not entitled to judgment.”
Reger Dev., LLC v. Nat’l City Bank, 592 F.3d 759, 764 (7th Cir. 2010) (citations omitted).
Additionally, the court may consider documents that are referred to in the complaint and that are
concededly authentic and central to the plaintiff’s claim. Santana v. Cook County Bd. of Review,
679 F.3d 614, 619 (7th Cir. 2012). When a party attaches exhibits to its complaint and incorporates
the exhibits into the pleadings, if there are contradictions between the exhibits and the complaint,
the exhibits generally will control. Bogie v. Rosenberg, 705 F.3d 603, 609 (7th Cir. 2013).
Dismissal is appropriate “when a party has included in its complaint ‘facts that establish
an impenetrable defense to its claims.’” Hecker, 556 F.3d at 588 (quoting Tamayo v. Blagojevich,
526 F.3d 1074, 1086 (7th Cir. 2008)). “A plaintiff pleads himself out of court when it would be
necessary to contradict the complaint in order to prevail on the merits. . . . If the plaintiff voluntarily
provides unnecessary facts in her complaint, the defendant may use those facts to demonstrate that
she is not entitled to relief.” Id. (quoting Tamayo, 526 F.3d at 1086). While “a plaintiff is not
required to plead facts in the complaint to anticipate and defeat affirmative defenses,” if the
complaint “nonetheless sets out all of the elements of an affirmative defense, dismissal under Rule
12(b)(6) is appropriate.” Indep. Trust Corp. v. Stewart Info. Servs. Corp., 665 F.3d 930, 935 (7th
Cir. 2012) (citing Brooks v. Ross, 578 F.3d 574, 579 (7th Cir. 2009)).
In a derivative action, the complaint must be verified and plead certain allegations with
specificity. See Fed. R. Civ. P. 23.1. The complaint must “allege that the plaintiff was a
shareholder or member at the time of the transaction complained of” and “that the action is not a
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collusive one to confer jurisdiction that the court would otherwise lack.” Fed. R. Civ. P. 23.1. A
derivative action complaint must “state with particularity any effort by the plaintiff to obtain the
desired action from the directors or comparable authority . . . and the reasons for not obtaining the
action or not making the effort.” Fed. R. Civ. P. 23.1(b)(3). Additionally, the plaintiff must “fairly
and adequately represent the interests of shareholders or members who are similarly situated in
enforcing the right of the corporation or association.” Fed. R. Civ. P. 23.1(a).
III. DISCUSSION
Frontier League and the Zimmerman Defendants have requested dismissal of this action
based on the Plaintiffs’ failure to meet the Rule 23.1 pleading requirements, a lack of standing,
improper venue, the business judgment rule, and failure to state a claim upon which relief can be
granted. The Court will address the Defendants’ motions in turn.
The Court first notes that Washington Club and Williams do not allege an injury
independent of or beyond that which they claim they have suffered as a result of not securing the
Kokomo lease and the associated lost opportunities with placing a Frontier League team in
Kokomo. Therefore, any claims for a civil conspiracy to breach fiduciary duties, tortious
interference, or unjust enrichment based on the relationship among Washington Club, Williams,
and Frontier League are not sufficiently pled to state a claim for relief. The pleadings seek relief
based on the potential business opportunities with expanding into the Kokomo market, not on the
relationship among Washington Club, Williams, and Frontier League.
A.

Frontier League’s Motion to Dismiss
Frontier League asserts that the derivative claims in the Amended Complaint must be

dismissed because the Amended Complaint does not state with particularity the efforts made by
Washington Club and Williams to obtain the desired action from the directors and the reasons for

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Washington Club and Williams not obtaining the action or the reasons for not making the effort
of a demand. Frontier League further asserts that the derivative claims must be dismissed because
Washington Club and Williams do not fairly and adequately represent the interests of the other
members of Frontier League. On these two bases, Frontier League explains that Washington Club
and Williams lack standing to assert the derivative claims in the Amended Complaint. Frontier
League also relies on the “business judgment rule” in its Motion to Dismiss.
“[C]omplaining shareholders must (1) spell out the efforts made to have the directors or
the other shareholders take the action demanded, (2) explain why they failed in this effort or did
not make it, and (3) show that they ‘fairly and adequately’ represent the interests of other
shareholders ‘similarly situated.’” Weston v. Weston Paper & Mfg. Co., 658 N.E.2d 1058, 1060
(Ohio 1996); see also Fed. R. Civ. P. 23.1, Ohio R. Civ. P. 23.1. Failure to meet these requirements
is a bar to any derivative action because failure to comply with Rule 23.1 results in a lack of
standing to bring derivative claims. Auletta v. Ortino (In re Ferro Corp. Derivative Litig.), 511
F.3d 611, 617 (6th Cir. 2008).
A corporation’s directors have the primary authority to file a lawsuit on behalf of the
corporation, and the shareholders may make a demand on the directors to bring a suit on behalf of
the corporation. However, shareholders do not have an independent right to bring suit unless the
directors refuse to do so and that refusal is wrongful, fraudulent, arbitrary, or is the result of bad
faith or bias on the part of the directors. Drage v. P&G, 694 N.E.2d 479, 482 (Ohio Ct. App.
1997). An exception to this general demand rule allows a shareholder to bring a derivative action
without making a demand if the shareholder can demonstrate that a demand would have been
futile.

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In this case, Washington Club and Williams acknowledge that “Washington Club is not
proceeding on futility grounds.” (Filing No. 49 at 12.) Therefore, to maintain their derivative
claims, Washington Club and Williams must state with particularity in their Amended Complaint
the efforts they have taken to obtain the desired action from the directors and the reasons for not
obtaining that action.
In the Amended Complaint, it is alleged that Washington Club made two demands on
Frontier League to bring this action on its own behalf. On August 20, 2014, Washington Club sent
a letter to Frontier League’s executive committee, explaining the damages Frontier League had
already incurred as a result of the conduct of the Hanners Group and the Zimmerman Defendants
and demanding the initiation of its own action against the Zimmerman Defendants. The demand
also requested that the executive committee convene to discuss the demand. Sixteen days later,
on September 5, 2014, Washington Club sent a second letter addressing additional damages to
Frontier League resulting from Kokomo and Zimmerman’s announcement that a Prospect League
team would be based in Kokomo. In the second letter, Washington Club demanded that Frontier
League consider taking its own action against the Zimmerman Defendants and at least have the
executive committee meet as a precursor to further action.
Less than three months after the first demand, on November 14, 2014, Washington Club
and Williams filed this lawsuit before Frontier League completed its investigation and provided a
response to the demands. On January 13 and 26, 2015, the Defendants filed motions to dismiss,
which included the argument regarding the demand requirement. On February 3, 2015, Frontier
League issued a report stating it considered, addressed, and rejected Washington Club’s demands.
Then on February 6, 2015, Washington Club and Williams filed their Amended Complaint.

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Washington Club and Williams assert that “plaintiffs filed this lawsuit on November 14,
2014 after the League’s board of directors and its Executive Committee failed or refused to
convene to consider the Washington Club’s demands and failed to issue any response to the
Washington Club’s demands.” (Filing No. 36 at 13.) Frontier League asserts that this is not
enough to satisfy the demand requirement for derivative actions. However, after this action was
initiated, Frontier League issued its February 3, 2015 report wherein it rejected Washington Club’s
demands. Then Washington Club and Williams filed their Amended Complaint with Frontier
League’s refusal in hand. Therefore, in this case, there have been two demands, a refusal of those
demands, and an Amended Complaint that alleges facts concerning the demands and refusal.
Washington Club and Williams next must allege why they failed in their effort to obtain
the requested action in the demands and that Frontier League’s refusal was wrongful, fraudulent,
arbitrary, or the result of bad faith or bias on the part of the directors.
Washington Club and Williams allege that Frontier League’s February 3, 2015 report “is a
self-serving whitewash designed to conceal the bias and conflicts of interest on the part of the
League,” that other Frontier League members were violating their fiduciary duties regarding the
Kokomo opportunity, and that the “League’s conduct in stonewalling the League Complaint and
refusing to accept the Washington Club’s demand has not been in good faith and for the benefit of
the League; instead, it is to protect and preserve self-interested parties who apparently
independently breached the fiduciary duties they owed to the League and its members.” (Filing
No. 36 at 13–14.)
The allegations in the Amended Complaint explain that members of Frontier League were
violating their fiduciary duties to Frontier League and its other members and that these violations
and conflicts of interest caused the refusal of Washington Club’s and Williams’s demands. The

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Amended Complaint explains that Frontier League’s refusal was the result of bias on the part of
the directors because of their self-interest. These allegations are sufficient at the motion to dismiss
stage.
Finally, it must appear that Washington Club and Williams fairly and adequately represent
the interests of the other members of Frontier League. The Amended Complaint alleges that this
is the case. Frontier League argues that Washington Club and Williams cannot fairly and
adequately represent the interests of Frontier League because they stood to personally gain from
securing the Kokomo opportunity themselves. Washington Club and Williams respond that
Frontier League’s argument ignores the allegations in the Amended Complaint that Frontier
League considered the Kokomo opportunity to be a Frontier League opportunity, not an
opportunity for just a single member, and that each of the Frontier League members would benefit
from the addition of a team in Kokomo, the payment of an expansion fee, and the value of the new
team for any member who invested in the team. At this stage of the litigation, it appears that
Washington Club and Williams will fairly and adequately represent the interests of Frontier
League and its other members.
As an additional basis to dismiss the derivative claims, Frontier League relies on the
business judgment rule and argues that, in its business judgment, it has decided not to pursue the
derivative claims and requests dismissal of those claims. The business judgment rule “is a
rebuttable presumption that directors are better equipped than the courts to make business
judgments and that the directors acted without self-dealing or personal interest and exercised
reasonable diligence and acted in good faith.” Marsalis v. Wilson, 778 N.E.2d 612, 615–16 (Ohio
Ct. App. 2002). Frontier League asserts that the Amended Complaint does not allege facts with
sufficient particularity to overcome the presumption of the business judgment rule.

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In response, Washington Club and Williams point out that any matters involving the
business judgment rule do not have to be pled with heightened specificity, relying on Marsalis,
778 N.E.2d at 616. When a breach of a fiduciary duty is alleged, “the business judgment rule
would impose on Plaintiffs a burden at trial to present evidence to rebut the presumption the rule
imposes. However, Plaintiffs are not likewise obligated to plead operative facts in their complaint
that would rebut the presumption.” Id. They point out the allegations in the Amended Complaint
that assert the self-interest, bias, and conflicts of interests at play in the board of directors and the
executive committee that overcome the business judgment presumption. When considering the
Motion to Dismiss, the Court must accept as true all factual allegations in the Amended Complaint
and view them in a light most favorable to the Plaintiffs. In doing so, the Amended Complaint
sufficiently pleads facts of self-interest, bias, and conflicts of interest to overcome the business
judgment presumption.
In making its business judgment argument, Frontier League also asserts that it determined
Frontier League did not sustain sufficient damages to justify litigation. However, it relies on facts
that are not contained in the pleadings, and the Court considers the Motion to Dismiss by looking
at whether the Amended Complaint has a sufficient factual basis. The parties cannot change the
factual allegations of the complaint with their briefing. In the Amended Complaint, Washington
Club and Williams alleged three categories of damages sustained by Frontier League and its
members. Again, the Court must accept as true all factual allegations in the Amended Complaint
and view them in a light most favorable to the Plaintiffs, and in doing so, the Amended Complaint
is sufficient to overcome the business judgment presumption at this stage of the litigation.
Accepting the factual allegations as true and viewing them in a light most favorable to
Washington Club and Williams, the Amended Complaint presents sufficient allegations to support

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a derivative action by the Plaintiffs on behalf of nominal defendant Frontier League. However, as
will be discussed below, the substantive, underlying claims cannot survive dismissal. The
derivative aspect of the Amended Complaint is inseparable from, united with, and identical to the
substantive, underlying claims. Because the derivative aspect of the Amended Complaint goes
hand-in-hand with the underlying claims and the substantive, underlying claims cannot survive
dismissal, the derivative action involving Frontier League must be dismissed also.
B.

The Zimmerman Defendants’ Motion to Dismiss
In their Motion to Dismiss, the Zimmerman Defendants seek the dismissal of this action

based on improper venue, derivative pleading deficiencies, and failure to state a claim for which
relief can be granted as to the substantive, underlying claims.
The Zimmerman Defendants first seek dismissal based on improper venue. They claim
that the action should be dismissed or, alternatively, transferred to the district court in Wisconsin
where they reside. They assert that there is no substantial part of the events giving rise to the claim
that occurred in Indiana, and there is no close nexus between the claims and this district. However,
as the Court already has noted, the pleadings seek relief based on the potential business
opportunities in Kokomo, Indiana. Therefore, the Court declines the invitation to transfer this
action to a different venue and will not dismiss the action on this basis.
Next, the Zimmerman Defendants seek dismissal based on deficiencies in pleading the
derivative claims. They advance the same arguments asserted by Frontier League regarding the
insufficiency of the derivative pleadings. For the reasons already discussed, this argument does
not warrant dismissal.
Lastly, the Zimmerman Defendants seek dismissal based on Washington Club’s and
Williams’s failure to state claims for which relief can be granted as to the substantive, underlying

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claims alleged in the Amended Complaint. Those claims are civil conspiracy to breach fiduciary
duties, tortious interference, and unjust enrichment.
1.

Civil Conspiracy to Breach Fiduciary Duties

The Zimmerman Defendants assert that the claim for civil conspiracy to breach fiduciary
duties must be dismissed because such a claim likely is not recognized in Indiana, and even if the
claim is recognized, the Amended Complaint fails to allege facts necessary to support the claim.
They rely on DiMaggio v. Rosario, 950 N.E.2d 1272 (Ind. Ct. App. 2011), which affirmed a
12(b)(6) dismissal on grounds that the complaint failed to sufficiently allege elements and facts of
a claim for third-party, non-fiduciary aiding and abetting a fiduciary in breach of their duty. There,
the court did not decide whether Indiana recognized or should adopt such a cause of action. Id. at
1276.
In a more recent decision from the Indiana Court of Appeals, relying on DiMaggio, the
court stated, “Indiana does not recognize such a cause of action. . . . We believe that the decision
to adopt a new cause of action for aiding and abetting in the breach of fiduciary duty is a decision
better left to the legislature or our supreme court.” Crystal Valley Sales, Inc. v. Anderson, 22
N.E.3d 646, 656 (Ind. Ct. App. 2014).
In contrast to Crystal Valley Sales and DiMaggio, district courts from this District and the
Northern District of Indiana have suggested that a claim for aiding and abetting another party’s
breach of its fiduciary duty is recognized in Indiana. See Baker O’Neal Holdings, Inc. v. Ernst &
Young LLP, 2004 U.S. Dist. LEXIS 6277, at *36 (S.D. Ind. Mar. 24, 2004) (holding that dismissal
of claim is unwarranted and explaining that “[t]here are very few cases on point in Indiana, but it
appears from the cases that do exist that a non-fiduciary can be liable for aiding and abetting
another party’s breach of its fiduciary duty”); Abrams v. McGuireWoods, LLP, 518 B.R. 491, 500

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(N.D. Ind. 2014) (“there is some Indiana precedent, albeit with a thick layer of dust on it, that at
least suggests Indiana does recognize liability for aiding and abetting another party’s breach of
fiduciary duty,” and “despite the fact that there is no Indiana case expressly recognizing liability
for aiding and abetting breach of fiduciary duty, I think it likely that an Indiana court would allow
this claim to go forward”). Both Baker O’Neal Holdings and Abrams rely on the early decision
from the Indiana Court of Appeals of Sharts v. Douglas, 163 N.E. 109 (Ind. Ct. App. 1928). In
Sharts, the court allowed a claim against a third-party, “non-fiduciary” for aiding and abetting a
trustee in breaching his duties. Id. at 112 (“It is also the law that a third party who has aided and
abetted the trustee in carrying out the fraudulent scheme may be joined as defendant in the same
action.”).
While Indiana may recognize a claim against a third-party, non-fiduciary for aiding and
abetting another party’s breach of its fiduciary duty, the Amended Complaint in this case is
deficient in pleading such a claim. This claim would require that the fiduciary breach its duty, that
the third-party, non-fiduciary knowingly and substantially assist in the breach, and that the thirdparty, non-fiduciary be aware of its role when providing the assistance. Fifth Third Bank v. Double
Tree Lake Estates, LLC, 2014 U.S. Dist. LEXIS 99758, at *34 (N.D. Ind. July 23, 2014). Further,
“such a tort [would] require that the nonfiduciary act knowingly or intentionally when joining the
fiduciary in an enterprise constituting a breach of fiduciary duty.” Crystal Valley Sales, Inc., 22
N.E.3d at 656. In Crystal Valley Sales, the court determined that the allegations were insufficient
to state a claim for aiding and abetting a breach of fiduciary duties because the complaint did not
allege that the defendants acted with knowledge or intent concerning the fiduciary’s duties to the
company. The complaint failed to allege any knowledge of the defendants concerning the coconspirator fiduciary’s duties as a shareholder of the company. Id.

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Likewise, in this case, Washington Club and Williams have failed to state a claim for aiding
and abetting a breach of fiduciary duties. They have alleged in their Amended Complaint that the
“Zimmerman Defendants acted in concert with the Hanners Group in the breach of the Hanners
Group’s fiduciary duties to the League, its members and its directors.” (Filing No. 36 at 15.)
However, the Amended Complaint does not allege that the Zimmerman Defendants had
knowledge of the Hanners Group’s fiduciary duties to Frontier League and its members, and it
does not allege that the Zimmerman Defendants knowingly and intentionally assisted the Hanners
Group in breaching their duties.
The factual allegations in the Amended Complaint explain that Frontier League’s attorney
wrote to the Hanners Group, not to the Zimmerman Defendants, to demand that they stop any
efforts to secure the opportunity in Kokomo. There are no allegations that Frontier League’s
attorney contacted the Zimmerman Defendants regarding standing down or stopping with efforts
to aid and abet the Hanners Group in breaching their fiduciary duties. There is nothing in the
Amended Complaint to indicate that the Zimmerman Defendants knew about the Hanners Group’s
fiduciary duties or knowingly and intentionally assisted the Hanners Group in breaching those
duties. Thus, even if Indiana does recognize such a claim, the Amended Complaint fails to allege
facts to support a claim for civil conspiracy to breach fiduciary duties.
2.

Tortious Interference with a Business Relationship

Next, the Zimmerman Defendants assert that the claim for tortious interference with a
business relationship must be dismissed because there are no facts supporting a business
relationship between Frontier League and Kokomo or Washington Club, Williams, and Kokomo.
Additionally, there are no allegations of illegal conduct on the part of the Zimmerman Defendants.

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“In Indiana, an action for tortious interference with business relationships has five
elements: the existence of a valid business relationship; the defendant’s knowledge of the
existence of the relationship; the defendant’s intentional interference in the relationship; the
absence of any justification; and, damages resulting from the defendant’s interference.” Comfax
Corp. v. North Am. Van Lines, 587 N.E.2d 118, 124 (Ind. Ct. App. 1992). “Another element which
is discussed with regard to proof of this cause of action is that a defendant acted illegally in
achieving his end.” Harvest Life Ins. Co. v. Getche, 701 N.E.2d 871, 876 (Ind. Ct. App. 1998).
The parties dispute whether this “illegal conduct of the defendant” element is necessary to the
claim. However, this dispute is immaterial to resolving the issues in this case.
The Court determines that this claim must be dismissed because the allegations in the
Amended Complaint show that there was no existing, valid business relationship with which the
Zimmerman Defendants could have interfered. Washington Club and Williams assert that they
had a prospective business relationship with Kokomo and that they adequately alleged that
relationship in the Amended Complaint. However, the claim fails in this case because the
“relationship” alleged is a prospective opportunity to enter into a business relationship with
Kokomo, not a valid, existing business relationship with Kokomo. The necessity of an existing
business relationship is highlighted in one of the cases on which Washington Club and Williams
rely. The Indiana Court of Appeals affirmed dismissal on summary judgment because the
“counterclaim fails to state any facts which would show that [the counter-defendant] interfered
with [the counter-plaintiff’s] business relationships with any third parties, beyond bald assertions
of possible business opportunities.” Comfax, 587 N.E.2d at 124.
Regarding any potential business relationship between Frontier League and Kokomo, the
Amended Complaint shows that no business relationship actually existed between them beyond

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the MOU that gave them an exclusive opportunity to gather more information and conduct further
negotiations with one another. However, the MOU expired by its own terms on May 18, 2014,
and the actions of the Zimmerman Defendants occurred after the expiration of the MOU.
Because the allegations in the Amended Complaint show that there was no existing, valid
business relationship with which the Zimmerman Defendants could have interfered, this claim
must be dismissed.
3.

Unjust Enrichment

The Zimmerman Defendants explain that the claim for unjust enrichment must be
dismissed because there are no facts to support an “actual wrong or misleading conduct” by the
Zimmerman Defendants. Washington Club and Williams respond by simply stating that “the
plaintiffs allege that the Zimmerman Defendants conspired with the Hanners Group and tortiously
interfered with certain prospective business relationships in the myriad of ways set forth above,”
which shows an “actual wrong or misleading conduct.” (Filing No. 49 at 10.)
“To recover under an unjust enrichment claim, a plaintiff must generally show that he
rendered a benefit to the defendant at the defendant’s express or implied request, that the plaintiff
expected payment from the defendant, and that allowing the defendant to retain the benefit without
restitution would be unjust.” Reed v. Reid, 980 N.E.2d 277, 296 (Ind. 2012). Thus, the plaintiff
must confer some benefit upon the defendant, and allowing the defendant to retain the benefit
without any compensation to the plaintiff would be unjust.
The Amended Complaint is devoid of any allegations that Frontier League, Washington
Club, or Williams conferred a benefit on the Zimmerman Defendants. There are no allegations
that the Zimmerman Defendants explicitly or implicitly requested a benefit from Frontier League,
Washington Club, or Williams. Therefore, the unjust enrichment claim must also be dismissed.

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IV. CONCLUSION
For the foregoing reasons, the Court GRANTS the Zimmerman Defendants’ and Frontier
League’s Motions to Dismiss (Filing No. 39; Filing No. 41). The determination now is whether
the dismissals should be with or without prejudice. The Court notes that Plaintiffs’ have previously
amended the complaint in this matter. A court should “freely give leave [to file an amended
complaint] when justice so requires.” Fed. R. Civ. P. 15(a)(2). Moreover, dismissal with prejudice
is appropriate where an amendment would be futile. Accordingly, Count II, Tortious Interference,
is dismissed with prejudice. However, since it is at least possible that an amendment might cure
the flaws with Counts I and III, those counts are dismissed without prejudice. The Plaintiffs are
granted leave to file a second amended complaint with respect to Counts I and III, within fourteen
(14) days of the date of this Order. If no such amendment is filed, the Court will convert the
dismissal to one with prejudice so that a final appealable judgment can be issued.

SO ORDERED.

Date: 11/18/2015

DISTRIBUTION:
Andrew M. McNeil
BOSE MCKINNEY & EVANS, LLP
[e-mail]
Jacques C. Condon
CONDON LAW FIRM LLC
[e-mail]
Jay Jaffe
FAEGRE BAKER DANIELS LLP
[e-mail]

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Nathaniel L. Swehla
GRAYDON HEAD RITCHEY
[e-mail]
Kevin L. Murphy
KEVIN L. MURPHY PLLC
[e-mail]

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