United States District Court, N.D. Indiana
ANTHONY E. ELLO and EVELYN ELLO, Plaintiffs,
GARY R. BRINTON and SEVEN PEAKS MARKETING CHICAGO, LLC, Defendants.
OPINION AND ORDER
THERESA L. SPRINGMANN,
This matter is before the Court on a Partial Motion to Dismiss [ECF No. 7] filed on October 6, 2014, by Defendants Gary R. Brinton and Seven Peaks Marketing Chicago, LLC. For the reasons stated in this Opinion and Order, the Court will grant in part and deny in part the Defendants’ Motion.
The Plaintiffs, Anthony and Evelyn Ello, filed this action against the Defendants on August 25, 2014 [ECF No. 1]. Seven Peaks is a limited liability company with its principal place of business in Utah, and Brinton is a Utah resident and member of Seven Peaks. According to the Complaint, in July of 2013, Brinton-on behalf of Seven Peaks- initiated lease negotiations with the Plaintiffs. That same month, Seven Peaks and the Plaintiffs entered into a 13-year written lease agreement, in which Seven Peaks leased commercial property owned by the Plaintiffs and located in Chesterton, Indiana. The Plaintiffs allege, in part, that upon taking possession of the property, Seven Peaks failed to secure a $75, 000 security deposit bond. They further allege that in July of 2014, Seven Peaks vacated the property without notice or explanation to the Plaintiffs, ceased paying rent, and removed fixtures from the property.
The Plaintiffs assert claims of breach of contract (Count I) against Seven Peaks, and fraud (Count III) against both Defendants. The Plaintiffs are also seeking personal liability against Brinton based on the alter ego doctrine (Count II). On October 6, 2014, the Defendants filed a Partial Motion to Dismiss [ECF No. 7] and an accompanying Memorandum in Support [ECF No. 8], arguing that Counts II and III should be dismissed for failure to state a claim. On November 3, 2014, the Plaintiffs filed a Response [ECF No. 11], and on November 25, 2014, the Defendants filed a Reply [ECF No. 18]. The Motion is now fully briefed and ripe for ruling.
STANDARD OF REVIEW
A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) tests the sufficiency of the complaint and not the merits of the suit. Gibson v. City of Chi., 910 F.2d 1510, 1520 (7th Cir. 1990). The court presumes all well-pleaded allegations to be true, views them in the light most favorable to the plaintiff, and accepts as true all reasonable inferences to be drawn from the allegations. Whirlpool Fin. Corp. v. GN Holdings, Inc., 67 F.3d 605, 608 (7th Cir. 1995).
The Supreme Court has articulated the following standard regarding factual allegations that are required to survive dismissal:
While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff’s obligation to provide the “grounds” of his “entitlement to relief” requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. Factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact).
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal quotation marks, ellipsis, citations, and footnote omitted). A complaint must contain sufficient factual matter to “state a claim to relief that is plausible on its face.” Id. at 570. “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.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 556).
Additionally, when pleading fraud, the federal rules set a higher bar. Federal Rule of Civil Procedure 9(b) states that in fraud cases, “a party must state with particularity the circumstances constituting fraud.” The Seventh Circuit has stated that Rule 9(b) “effectively carves out an exception to the otherwise generally liberal pleading requirements under the Federal Rules.” Graue Mill Dev. Corp. v. Colonial Bank & Trust Co. of Chi., 927 F.2d 988, 992 (7th Cir. 1991). To satisfy the requirement of Rule 9(b), a plaintiff pleading fraud must state “the identity of the person who made the misrepresentation, the time, place, and content of the misrepresentation, and the method by which the misrepresentation was communicated to the plaintiff.” Vicom, Inc. v. Harbridge Merch. Servs., Inc., 20 F.3d 771, 777 (7th Cir. 1994) (internal quotation marks removed) (quoting Uni*Quality, Inc. v. Infotronx, Inc., 974 F.2d 918, 923 (7th Cir. 1992)). Stated differently, a plaintiff pleading fraud must state “the who, what, when, where, and how: the first paragraph of any newspaper story.” DiLeo v. Ernst & Young, 901 F.2d 624, 627 (7th Cir. 1990). Additionally, “[c]ryptic statements suggesting fraud are not enough.” Graue Mill, 927 F.2d at 992 (internal quotation marks and citations omitted). “Rather, pleadings must state the ‘specific content of the false representations as well as the identities of the parties to the misrepresentation.’” Id. (citation omitted).
Lastly, in ruling on Rule 12(b)(6) motions to dismiss, courts generally must confine their inquiry to the factual allegations set forth within the operative complaint. Rosenblum v. Travelbyus.com, 299 F.3d 657, 661 (7th Cir. 2002). Under Rule 10(c), a “copy of a written instrument that is an exhibit to a pleading is a part of the pleading for all purposes.” Fed.R.Civ.P. 10(c). Further, in the Seventh Circuit, “[d]ocuments that a defendant attaches to a motion to dismiss are considered part of the pleadings, ” and may be considered on a motion to dismiss, “if they are referred to in the plaintiff’s complaint and are central to her claim.” Venture Assoc. Corp. v. Zenith Data Sys. Corp., 987 F.2d 429, 431 (7th Cir. 1993). Here, a copy of the written lease agreement between the parties is attached to the Complaint and the Defendants’ Partial Motion to Dismiss. Because the lease agreement is an exhibit to the Complaint and is also central to the Plaintiffs’ claims of breach of contract and fraud, the Court will consider the lease agreement as part of the pleadings.
A. Governing Law