United States District Court, N.D. Indiana, Hammond Division
JOSEPH ELWELL, CRYSTAL ELWELL, DEBORAH BALDWIN, Individually and as custodian for her minor children William McDaniel and Alexander McDaniel, and ROBERT BALDWIN, Plaintiffs,
FIRST BAPTIST CHURCH OF HAMMOND, INC., Defendant.
OPINION AND ORDER
P. Rodovich United States Magistrate Judge
matter is before the court on the Motion to Dismiss Count III
of Plaintiffs' Complaint [DE 13] filed by the defendant,
First Baptist Church of Hammond, Inc., on July 26, 2016. For
the following reasons, the motion is DENIED.
January 2006, Pastor Jack Schaap hired Thomas Kimmel as an
employee of the First Baptist Church to provide financial
advice, debt counseling, budgeting, and investment planning
advice to the members of First Baptist Church. In February
2006, Kimmel began soliciting investments in the
collateralized note program related to Sure Line Acceptance
Corporation. On July 2, 2007, the Elwells invested $160,
000.00 and by October 2009 had invested a total of $225,
000.00, and the Baldwins invested a total of $398, 400.00 in
the note program.
note program began to fail in January 2012 when Sure Line
entered a court ordered receivership. On August 21, 2013,
Kimmel was charged with conspiracy to commit wire fraud and
mail fraud regarding the sale and solicitation of the note
program. Around this time, Deborah Baldwin learned from the
FBI that Kimmel and Pastor Schaap were receiving commissions
from the proceeds of the investments in the program.
plaintiffs' claims arose from the alleged negligent and
intentional conduct of First Baptist Church regarding the
plaintiffs' financial investments in the collateralized
note program that was marketed and sold by Kimmel. According
to Count I and Count II, plaintiffs alleged that the
defendant is liable for Kimmel's conduct under a theory
of respondeat superior. The defendant filed its answer and
affirmative defenses regarding Count I and II. The defendant
has argued that Count III was not pled in the alternative and
alleged Kimmel's conduct was within the scope of his
employment. Therefore, the defendant has requested that Count
III be dismissed with prejudice for failing to state a claim
under Indiana law. The motion also has raised a statute of
defendant, First Baptist Church of Hammond, Inc., has
requested the court to dismiss Count III of the
plaintiffs' complaint pursuant to Federal Rule of Civil
Procedure 12(b)(6), which allows for a complaint to be
dismissed if it fails to “state a claim upon which
relief can be granted.” Allegations other than those of
fraud and mistake are governed by the pleading standard
outlined in Federal Rule of Civil Procedure 8(a)(2), which
requires a “short and plain statement” to show
that a pleader is entitled to relief. See Cincinnati Life
Ins. Co. v. Beyrer, 722 F.3d 939, 946 (7th Cir. 2013).
The Supreme Court clarified its interpretation of the Rule
8(a)(2) pleading standard in a decision issued in May 2009.
While Rule 8(a)(2) does not require the pleading of detailed
allegations, it nevertheless demands something more
“than an unadorned, the-defendant-unlawfully-harmed-me
accusation.” Ashcroft v. Iqbal, 556 U.S. 662,
678, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009). In order
to survive a Rule 12(b)(6) motion, a complaint “must
contain sufficient factual matter, accepted as true, to
‘state a claim to relief that is plausible on its
face.'” Iqbal, 556 U.S. at 678 (quoting
Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570,
127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)); Cincinnati Life
Ins., 722 F.3d at 946 (“The primary purpose of
[Fed.R.Civ.P. 8 and 10(b)] is to give defendants fair notice
of the claims against them and the grounds supporting the
claims.”) (quoting Stanard v. Nygren, 658 F.3d
792, 797 (7th Cir. 2011)); Peele v. Clifford Burch,
722 F.3d 956, 959 (7th Cir. 2013) (explaining that one
sentence of facts combined with boilerplate language did not
satisfy the requirements of Rule 8); Joren v.
Napolitano, 633 F.3d. 1144, 1146 (7th Cir. 2011). This
pleading standard applies to all civil matters.
Iqbal, 556 U.S. at 684.
decision in Iqbal discussed two principles that
underscored the Rule 8(a)(2) pleading standard announced by
Twombly. See Twombly, 550 U.S. at 555
(discussing Rule 8(a)(2)'s requirement that factual
allegations in a complaint must “raise a right to
relief above the speculative level”). First, a court
must accept as true only factual allegations pled in
a complaint-“[t]hreadbare recitals of the elements of a
cause of action” that amount to “legal
conclusions” are insufficient. Iqbal, 556 U.S.
at 678. Next, only complaints that state
“plausible” claims for relief will survive a
motion to dismiss. Iqbal, 556 U.S. at 678. If the
pleaded facts do not permit the inference of more than a
“mere possibility of misconduct, ” then the
complaint has not met the pleading standard outlined in Rule
8(a)(2). Iqbal, 556 U.S. at 678-79; see Brown v.
JP Morgan Chase Bank, 2009 WL 1761101, at *1 (7th Cir.
June 23, 2009) (defining “facially plausible”
claim as a set of facts that allows for a reasonable
inference of liability). The Supreme Court has suggested a
two-step process for a court to follow when considering a
motion to dismiss. First, any “well-pleaded factual
allegations” should be assumed to be true by the court.
Next, these allegations can be reviewed to determine if they
“plausibly” give rise to a claim that would
entitle the complainant to relief. Iqbal, 556 U.S.
at 678-79; Bonte v. U.S. Bank, N.A., 624 F.3d 461,
465 (7th Cir. 2010). Reasonable inferences from well-pled
facts must be construed in favor of the plaintiff. Murphy
v. Walker, 51 F.3d 714, 717 (7th Cir. 1995); Maxie
v. Wal-Mart Store, 2009 WL 1766686, at *2 (N.D. Ind.
June 19, 2009) (same); Banks v. Montgomery, 2009 WL
1657465, at *1 (N.D. Ind. June 11, 2009) (same).
complaint that lacks organization and coherence so that it is
too confusing to understand the factual basis of the wrongful
conduct also is subject to dismissal. Cincinnati Life
Ins., 722 F.3d at 946. The court assesses this by
considering whether it can make out the essence of the
claims. Cincinnati Life Ins., 722 F.3d at 946. A
complaint is not unintelligible simply because it contains
repetitive and irrelevant matter. Cincinnati Life
Ins., 722 F.3d at 946. “Rather, we have found
complaints wanting when they present a ‘vague,
confusing, and conclusory articulation of the factual and
legal basis for the claim and [take] a general “kitchen
sink” approach to pleading the case.' . . .
[D]ismissal is the appropriate remedy for district courts
presented with ‘a bucket of mud.'”
Cincinnati Life Ins., 722 F.3d at 946-47 (quoting
Stanard, 658 F.3d at 798).
federal court sitting in diversity applies the substantive
law of the forum state, so Indiana law applies here. Erie
R. Co. v. Tompkins, 304 U.S. 64 (1938); Ruiz v.
Blentech, 89 F.3d 320, 324 (7th Cir. 1996). Indiana
recognizes a cause of action for negligent retention of an
employee. Restatement (Second) of Torts § 317; Grzan
v. Charter Hosp. of Northwest Indiana, 702 N.E.2d 786
(Ind. App. Ct. 1998). Negligent retention and supervision is
a species of negligence and has the following elements: 1) a
duty of care owed by an employer to a third person; 2) breach
of that duty; and 3) injury to the third person proximately
caused by the employer's breach. Scott v. Retz,
916 N.E.2d 252, 257 (Ind. App. Ct. 2009). In order to
determine if an employer is liable for negligent hiring or
retention of an employee, the court must determine if the
employer exercised reasonable care. Konkle v.
Henson, 672 N.E.2d 450, 454-55 (Ind. App. Ct. 1996).
Under the principle of negligent retention, an employer may
be liable for retaining an employee only if it knows the
employee has a habit of misconduct that is dangerous to
others. Briggs v. Finley, 631 N.E.2d 959, 966-67
(Ind. App. Ct. 1994).
retention and supervision is a distinct tort from respondeat
superior; it may impose liability on an employer when an
employee “steps beyond the recognized scope of his [or
her] employment to commit a tortious injury upon a third
party.” Clark v. Aris, Inc., 890 N.E.2d 760,
765 (Ind. App. Ct. 2008); Scott v. Retz, 916 N.E.2d
252, 257 (Ind. App. Ct. 2009). Under the doctrine of
respondeat superior, an employer is liable for the acts of
its employees which were committed within the course and
scope of their employment. Stropes v. Heritage House
Childrens Center of Shelbyville, 547 N.E.2d 244, 247
(Ind. 1989). In order for an employee's act to fall
“within the scope of employment, ” the injurious
act must be incidental to the conduct authorized or it must,
to an appreciable extent, further the employer's
business. Barnett v. Clark, 889 N.E.2d 281, 283-84
(Ind. 2008) (quoting Celebration Fireworks, Inc. v.
Smith, 727 N.E.2d 450, 453 (Ind. 2000). An
employee's act is not within the scope of employment when
it occurs within an independent course of conduct not
intended by the employee to serve any purpose of the
employer. Barnett, 889 N.E.2d at 284 (quoting
Restatement Third of Agency § 7.07(2)).
plaintiffs have argued that under Count III the complaint
alleged that Kimmel's conduct was outside the scope of
his employment by soliciting specific investments. The
plaintiffs indicated that Kimmel's employment gave him
the authority to give financial advice, rather than solicit
investments in a specific program. The plaintiffs indicated
that the defendant is liable for negligent retention since
Kimmel's misconduct was outside the scope of his
employment, it knew or should have known of the fraudulent
conduct, and it should have terminated Kimmel's ability
to offer the investment advice or solicit First Baptist
members to invest in the note program.
defendant has argued that soliciting investment advice was
incidental to Kimmel's employment. Also, that his
solicitation of the investments allowed parishioners to
accumulate more money and therefore further First
Baptist's business. Therefore, the defendant has argued