WAKLEY et al v. SUSTAINABLE LOCAL FOODS LLC et al
ORDER granting Local Initiatives Support Corporation's 60 Motion to Dismiss for Failure to State a Claim without prejudice. Plaintiffs are granted leave to replead the claims against LISC within thirty days, if they can do so consistent with their obligations under Rule 11 of FRCP. If they fail to replead the claims against LISC within the time allowed, the claims will be with prejudice. Signed by Magistrate Judge Denise K. LaRue on 5/9/2017 (dist made) (CBU)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
VICTOR WAKLEY, et al.,
SUSTAINABLE LOCAL FOODS LLC, et
Entry and Order on Local Initiatives Support Corporation’s Motion to Dismiss [doc. 60]
In April 2016, Plaintiffs Victor Wakley and Julie Wakley commenced this action
against numerous defendants, including Local Initiatives Support Corporation (LISC),
alleging a conspiracy to violate Plaintiffs’ civil rights along with numerous state law
On September 21, 2016, Plaintiffs moved for leave to amend their complaint,
seeking to add factual allegations of developments that had occurred since the filing of
the original complaint. The motion was not opposed. The motion was granted and the
Amended Complaint was filed November 4, 2016. Subsequently, LISC filed a Motion to
Dismiss for Failure to State a Claim Upon Which Relief May Be Granted [doc. 60]. Plaintiffs
and LISC have stipulated to the referral of the motion to the undersigned, and the District
Judge referred the motion to the undersigned for ruling.
The Amended Complaint alleges that Victor Wakley is the President of Save Our
Veterans, Inc. and that Julie Wakley, his spouse, is an investor in Save Our Veterans. [Am.
Compl., doc. 54, ¶¶ 14-16.]
It alleges that Save Our Veterans entered into a lease
agreement with Southeast Neighborhood Development, Inc. (SEND) to rent the real
property at 101 South Parker Avenue in Indianapolis, Indiana. [Id. ¶ 1 & Ex. B.] The
complaint alleges that Save Our Veterans had an option to purchase the property and
that SEND breached the agreement by selling the property to the City of Indianapolis.
[Id. ¶¶ 50-51, 73.] The Amended Complaint further alleges that the City conspired with the
other Defendants to steal the property from Save Our Veterans and steal the Wakleys’
investment in their business. [Id. ¶¶ 5 & 46.]
The Amended Complaint alleges that LISC and the other defendants have “engaged
in a pattern and practice of using fraudulent practices to commit fraud, [and] make
negligent misrepresentations ….” [Id. ¶ 1.] LISC allegedly knew of the existence of the
lease Save Our Veterans had with Send and conspired to induce SEND to breach its
contractual obligations. [Id. ¶¶ 90, 100.] The Wakleys claim that “[LISC] is a funding
company who has offered money to the co-conspirators and [has] provided the necessary
funding for the co-conspirators to commit a forceful wrongful eviction of Plaintiff(s) and
force Save Our Veterans out of business.” [Id. ¶ 23.] They allege that Defendant Mike
Bowling “offered to borrow $200,000 … via [LISC] then ‘relend’ [it] to Save Our Veterans
….” [Id. ¶ 42.]
The Amended Complaint contains ten counts. The first nine allege state law claims
of fraud, negligent misrepresentation, breach of contract, breach of implied-in-fact
contract, tortious interference with a third-party contract, breach of implied covenant of
good faith and fair dealing, unfair business competition, conversion, and trespass to land.
The tenth count alleges that the City and other Defendants have conspired to deprive
Plaintiffs’ of their due process, civil, and constitutional rights “by taking control of
Plaintiffs (sic) business and property without notice.” [Id. ¶ 153.]
Federal Rule of Civil Procedure 12(b)(6) authorizes the dismissal of claims for
“failure to state a claim upon which relief may be granted.” Fed. R. Civ. P. 12(b)(6). A
motion to dismiss tests the legal sufficiency of the complaint. Szabo v. Bridgeport Machs.,
Inc., 249 F.3d 672, 675 (7th Cir. 2001). “To survive a motion to dismiss, a complaint must
contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible
on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial plausibility when the plaintiff
pleads factual content that allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.” Id. “Plausibility” is not equated with
“probability”; instead, it is “more than a sheer possibility that a defendant has acted
unlawfully.” Iqbal, 556 U.S. at 678.
A complaint need not contain “detailed factual allegations,” but “more than labels
and conclusions” and “a formulaic recitation of the elements of a cause of action” are
required. Twombly, 550 U.S. at 555. When deciding a motion to dismiss, the court
“accept[s] all well-pleaded factual allegations as true and view[s] them in the light most
favorable to the plaintiff.” Lavalais v. Vill. of Melrose Park, 734 F.3d 629, 632 (7th Cir. 2013).
The court may consider documents attached to the complaint. Bible v. United Student Aid
Funds, Inc., 799 F.3d 633, 639–40 (7th Cir. 2015); Fed. R. Civ. P. 10(c).
LISC has moved for dismissal of all claims against it, arguing that none of the
counts state a claim against it upon which relief may be granted. LISC notes that Plaintiffs
have already amended their complaint once. Plaintiffs have filed a lengthy response, but
for the most part, they fail to challenge LISC’s arguments for dismissal. The only claims
they attempt to argue are sufficient are the fraud and conspiracy claims. Thus, they do
not appear to challenge LISC’s motion with respect to any of the other claims.
Nonetheless, all the claims against LISC should be dismissed for failure to state a claim.
Fraud. The elements of fraud are “(1) a material misrepresentation of past or
existing fact which (2) was untrue, (3) was made with knowledge of or in reckless
ignorance of its falsity, (4) was made with the intent to deceive, (5) was rightfully relied
upon by the complaining party, and (6) which proximately caused the injury or damage
complained of.” Kesling v. Hubler Nissan, Inc., 997 N.E.2d 327, 335 (Ind. 2013) (quoting
Lawyers Title Ins. Corp. v. Pokraka, 595 N.E.2d 244, 249 (Ind. 1992)). “[A] party must state
with particularity the circumstances constituting fraud.” Fed. R. Civ. P. 9(b). In the
Seventh Circuit, parties “must plead the ‘who, what, when, where, and how: the first
paragraph of any newspaper story’ of the alleged fraud.” Rocha v. Rudd, 826 F.3d 905, 911
(7th Cir. 2016) (quoting United States ex rel. Lusby v. Rolls–Royce Corp., 570 F.3d 849, 853
(7th Cir. 2009)). This includes “‘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[s].’” Id. (quoting Uni*Quality Inc.
v. Infotronx, Inc., 974 F.2d 918, 923 (7th Cir. 1992)). “[I]n a case involving multiple
defendants, ‘the complaint should inform each defendant of the nature of his alleged
participation in the fraud.’” Id. (quoting Vicom, Inc. v. Harbridge Merch. Servs., 20 F.3d 771,
777–78 (7th Cir. 1994)).
Plaintiffs argue that courts have recognized that it is impractical to require specific
citation to each instance of fraudulent conduct when such conduct is repeated frequently
and over a lengthy period of time. But they cite out-of-circuit case law, none of which
are binding on this Court. Plaintiffs also suggest that the heightened pleading standards
are relaxed where factual information is peculiarly within the defendant’s knowledge or
control, but again they cite only out-of-circuit case law. Plaintiffs’ authorities are not in
line with the binding Seventh Circuit case law cited above, which this Court must follow.
Measured against the appropriate, heightened pleading standards, the Amended
Complaint fails to state a fraud claim against LISC. The allegations do not satisfy Rule
9(b)’s particularity standards. Plaintiffs do not provide specific names, dates, times,
places, or content of the misrepresentations giving rise to alleged fraud. Even though
there are multiple defendants in this case, Plaintiffs have not informed each defendant of
the nature of its alleged participation in the fraud. Therefore, the fraud claim against
LISC should be dismissed.
Negligent Misrepresentation. Negligent misrepresentation has four elements under
Indiana law: “(1) the defendant, in the course of his business, profession, or employment,
or in any other transaction in which he has a pecuniary interest, supplies false
information for the guidance of others in their business transactions; (2) the defendant
fails to exercise reasonable care or competence in obtaining or communicating the
information; (3) the plaintiff justifiably relies upon the information supplied by the
defendant; and (4) the plaintiff suffers pecuniary loss as a result.” Harrison Mfg., LLC v.
Bienias, No. 4:11-cv-00065-TWP-WGH, 2013 WL 6486668, at *6 (S.D. Ind. Dec. 10, 2013)
(citing U.S. Bank, N.A. v. Integrity Land Title Corp., 929 N.E.2d 742, 747 (Ind. 2010);
Restatement (Second) of Torts § 552). The Amended Complaint fails to allege at least the first
three elements, if not all four elements, as to LISC; therefore it fails to state a claim for
negligent misrepresentation against LISC.
Breach of Contract. “Under Indiana law, the elements of a breach of contract action
are the existence of a contract, the defendant’s breach thereof, and damages.” Bible, 799
F.3d at 644 (quoting U.S. Valves, Inc. v. Dray, 190 F.3d 811, 814 (7th Cir. 1999)). The
Amended Complaint does not allege that the existence of a contract between the Wakleys
and LISC. Therefore, the breach of contract claim should be dismissed.
Breach of Implied-in-fact Contract. “‘A contract can be implied in fact when the
conduct of the parties infers a meeting of the minds, even in the absence of an express
contract.’” Nibco Inc. v. Arthur J. Gallagher Risk Mgmt. Servs., Inc., No. 3:14-CV-00457, 2016
WL 1222217, at *7 (N.D. Ind. Mar. 29, 2016) (quoting L.I. Combs & Sons, Inc. v. Ind./Ky.
Reg’l Council of Carpenters, No. 2:09CV150, 2010 WL 4553664, at *4 (N.D. Ind. Nov. 3,
2010)). The elements of an implied-in-fact contract are the same as an express contract:
offer, acceptance, and consideration; but the parties’ conduct expresses the agreement.
Garwood Packaging, Inc. v. Allen & Co., Inc., IP 98-1058-C-M/S, 2002 WL 31924512, at *19
(S.D. Ind. Dec. 26, 2002). The Amended Complaint does not allege conduct of the Wakleys
and LISC expressing an agreement; as a result, it fails to state a claim for breach of
Tortious Interference with a Contractual Relationship. Tortious interference with a
contractual relationship under Indiana law has five elements: “(1) the existence of a valid
and enforceable contract; (2) defendant’s knowledge of the existence of the contract; (3)
defendant’s intentional inducement of breach of the contract; (4) the absence of
justification; and (5) damages resulting from defendant’s wrongful inducement of the
breach.” Craftsman Chem. Corp. v. IVC Industrial Coatings, Inc., No. 2:15-cv-00425-LJMMJD, 2017 WL 365815, at *6 (S.D. Ind. Jan. 25, 2017) (quoting Bilimoria Comput. Sys., LLC
v. Am. Online, Inc., 829 N.E.2d 150, 156 (Ind. Ct. App. 2005)); see also Winkler v. V.G. Reed
& Sons, Inc., 638 N.E.2d 1228, 1235 (Ind. 1994). A significant omission in the allegations
of the Amended Complaint: the Wakleys are not alleged to be parties to any contract. In
the absence of the existence of a contract, they have failed to state a claim for tortious
inference with a contractual relationship. The allegations allege a lease between Save Our
Veterans and SEND. To the extent the Amended Complaint purports to state a claim for
tortious inference of the relationship under the lease, the Wakleys would not be the
proper party to assert such a claim. This claim, too, should be dismissed.
Breach of Implied Covenant of Good Faith and Fair Dealing. Indiana law recognizes
“an implied covenant of good faith in the context of employment contracts, insurance
contracts, and certain other limited circumstances—for example, when one counterparty
stands in a fiduciary, superior, or special relationship to the other.” Perron on behalf of
Jackson v. J.P. Morgan Chase Bank, N.A., 845 F.3d 852, 856 (7th Cir. 2017). “A party violates
the implied duty of good faith and fair dealing when, though not breaching the express
terms of the contract, he nonetheless behaves unreasonably or unfairly. Id. This action
did not arise from an employment, insurance, or special relationship context. Thus,
Indiana law would not recognize the tort in this context. In addition, as noted, there is
no allegation that the Wakleys and LISC were parties to any contract. Therefore, the
Amended Complaint has failed to state a claim against LISC for breach of the implied duty
of good faith and fair dealing.
Unfair Competition. Under Indiana law, a cause of action for unfair competition is
“defined as ‘the attempt to create confusion concerning the source of the unfair
competitor’s goods [or business].’” Felsher v. Univ. of Evansville, 755 N.E.2d 589, 598 (Ind.
2001) (quoting Westward Coach Mfg. Co. v. Ford Motor Co., 388 F.2d 627, 633 (7th Cir. 1968)).
Unfair competition has been described “as ‘any conduct, the natural and probable
tendency and effect of which is to deceive the public so as to pass off the goods or business
of one person as and for that of another....’” Id. (quoting Hartzler v. Goshen Churn & Ladder
Co., 104 N.E. 34, 37 (Ind. App. 1914)). The Amended Complaint makes no allegation that
LISC passed off or attempted to pass of any goods or business as and for that of another.
Thus, it does not state a claim for unfair competition against LISC.
Conversion. To state a claim for conversion, a plaintiff must allege facts showing
“‘an immediate, unqualified right to possession resting on a superior claim of title’ and
establish the ‘appropriation of personal property by another for that party’s own use and
benefit in exclusion and defiance of the owner’s rights.’” Frager v. Indianapolis Colts, Inc.,
Cause No. 1:16-cv-632-WTL-DML, 2016 WL 6610854, at *1 (S.D. Ind. Nov. 9, 2016)
(quoting Estate of Verdak v. Butler Univ., 856 N.E.2d 126, 136 (Ind. Ct. App. 2006)); see also
Shourek v. Stirling, 621 N.E.2d 1107, 1109 (Ind. 1993) (“The essential elements ... [of
conversion] are an immediate, unqualified right to possession resting on a superior claim
of title.”). The allegations against LISC relating to conversion are “threadbare,”
amounting to nothing more than “mere conclusory statements,” and are therefore
insufficient to defeat the motion to dismiss. Iqbal, 556 U.S. at 678. [See Am. Compl., doc.
54, ¶¶ 130, 132 (alleging Defendants including LISC interfered with the Wakley’s personal
property rights and exerted unauthorized control over Plaintiffs’ property). ]
Trespass to Land. Trespass under Indiana law has two elements: (1) the plaintiff
possessed the land, and (2) the defendant entered the land without legal right. Bentz v.
City of Kendallville, 577 F.3d 776, 781 (7th Cir. 2009); Marshall v. JP Morgan Chase Bank, No.
3:11 CV 332, 2015 WL 1455083, at *9 (N.D. Ind. 2015). At a minimum, the Amended
Complaint fails to state a claim for trespass against LISC because it does not allege that
LISC entered any land possessed by the Wakleys without legal right. Instead, it alleges
that certain defendants entered the property of Save Our Veterans, and the defendants
who are identified as having entered the property do not include LISC. [Am. Compl., doc.
54, ¶¶ 6-9.]
Finally, the Amended Complaint claim fails to allege sufficient factual matter as to
LISC to plausibly state a claim for a conspiracy to violate Plaintiffs’ civil rights. The
conclusory statements are not enough to withstand a motion to dismiss.
For the foregoing reasons, Local Initiatives Support Corporation’s Motion to Dismiss
[doc. 60] is GRANTED and the claims against LISC in the Amended Complaint are
dismissed without prejudice. Plaintiffs are granted leave to replead the claims against
LISC within thirty days, if they can do so consistent with their obligations under Rule 11
of the Federal Rules of Civil Procedure. If they fail to replead the claims against LISC
within the time allowed, the claims will be dismissed with prejudice.
Electronic Distribution to All Counsel of Record
U.S. Mail to:
PO Box 11292
Indianapolis, IN 46201
101 S. Parker Ave.
Indianapolis, IN 46201
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