Firestone Fin. Corp. v. Meyer

• Decision Date: 10 August 2015
• Docket Number: No. 14–3075.,14–3075.
• Parties: FIRESTONE FINANCIAL CORP., Plaintiff–Appellee, v. John R. MEYER, Defendant–Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

796 F.3d 822

FIRESTONE FINANCIAL CORP., Plaintiff–Appellee

v.John R. MEYER, Defendant–Appellant.

No. 14–3075.

United States Court of Appeals, Seventh Circuit.

Submitted May 15, 2015.^*

Decided Aug. 10, 2015.

Alex Darcy, Charles Randall Woolley, II, Askounis & Darcy, P.C., Chicago, IL, for Plaintiff–Appellee.

John R. Meyer, Hinsdale, IL, pro se.

Before WOOD, Chief Judge, and CUDAHY and RIPPLE, Circuit Judges.

Opinion

RIPPLE, Circuit Judge.

This case arises from a series of loans made by Firestone Financial Corporation (“Firestone”) to JHM Equipment Leasing Company (“JHM”). After JHM defaulted on the loans, Firestone filed suit against JHM, John R. Meyer (JHM's owner), and two of Mr. Meyer's other companies to collect on the debt. The defendants filed an answer denying the allegations of breach, asserting a counterclaim of promissory estoppel, and raising various affirmative defenses. Relying on Federal Rule of Civil Procedure 12(b)(6), the district court dismissed the defendants' counterclaim as implausible and later awarded summary judgment to Firestone on its claim against Mr. Meyer. Mr. Meyer now appeals both the district court's dismissal of his counterclaim as well as the court's grant of summary judgment to Firestone. For the reasons set forth in this opinion, we reverse both decisions and remand this case for further proceedings.

IBACKGROUND

Firestone is a finance company incorporated under the laws of Massachusetts with its principal place of business in that state. JHM is an Illinois corporation that rents commercial laundry machines to apartment building owners in Chicago and its suburbs. Mr. Meyer owns and operates JHM and two related companies, J H Meyer Enterprises, Inc. (“Meyer Enterprises”) and Dolphin Laundry Services, Inc. (“Dolphin”). Mr. Meyer is an Illinois citizen, residing in Hinsdale, Illinois; his three companies are all incorporated in Illinois and have their principal place of business in that state.

Between June 2012 and June 2013, Firestone made four separate loans to JHM, totaling $254,114.99. Each loan was secured by JHM's laundry equipment and guaranteed by Meyer Enterprises, Dolphin, and Mr. Meyer.

Between June and August of 2013, JHM defaulted on each of its four loans. Shortly afterward, Firestone filed this diversity action in the district court against Mr. Meyer and his three companies, alleging claims for breach of contract, breach of guaranty, replevin, and detinue.

The defendants filed an answer, denying the allegations of breach and asserting a counterclaim of promissory estoppel. In this counterclaim, the defendants alleged that in November 2012, after Firestone's first two loans to JHM, Firestone vice president Dan McAllister had represented that his company “wanted to expand [its] investment in the laundry business,” and that it “would create a $500,000 line of credit” to fund the defendants' equipment purchases in 2013.¹ This promise, according to the defendants, “induced JHM into purchasing equipment” that it would not otherwise have purchased.² Consequently, when Firestone later reneged on this promise, JHM was left unable to pay for its newly purchased equipment. As a result, JHM's equipment supplier (Maytag) refused to sell laundry equipment to any of Mr. Meyer's three companies, resulting in substantial losses to the defendants.

The defendants' answer also raised four affirmative defenses, including that of promissory estoppel and prior breach of contract. These latter two defenses were based on the same factual allegations as the defendants' counterclaim.

In February 2014, Firestone moved to dismiss the defendants' counterclaim under Rule 12(b)(6). The company submitted that the claim was implausible because it was premised on “the unheard of position that Firestone, a corporation with nearly 50 years in business, [would make] a handshake deal to loan half a million dollars to a start up business to be secured after the fact.”³

Shortly thereafter, defense counsel withdrew from the case. In the following month, the defendants did not obtain substitute counsel. As a result, Firestone moved for an entry of default judgment against the three corporate defendants, submitting that they were required to have legal counsel under Illinois law. The court granted Firestone's motion and entered default judgment against the three corporate defendants. The court's judgment did not address the defendants' counterclaim.

The district court held a status hearing on the remaining claims in April 2014. The court started the hearing by discussing the defendants' efforts to obtain substitute counsel. Mr. Meyer informed the court that he was working to obtain counsel and that his corporate codefendants would have representation within approximately one week. In response, Firestone asserted that the defendants were taking too long to obtain counsel and that the court should rule on its pending motion to dismiss. Having apparently forgotten about this motion, the court replied, “Well, wait just a minute. Let me get the chambers file. You are right, I have given Mr. Meyer a lot of leeway.”⁴ After reviewing the motion and hearing argument from Mr. Meyer, the court granted Firestone's motion to dismiss, ruling that the defendants' counterclaim was facially implausible.

Shortly afterward, Firestone moved for summary judgment on its remaining breach of guaranty claim against Mr. Meyer. Regarding Mr. Meyer's promissory estoppel and prior-breach-of-contract defenses, Firestone asserted that, because those defenses were based on the same factual allegations as Mr. Meyer's counterclaim, they were barred by the court's earlier ruling dismissing his counterclaim as implausible. The court later granted Firestone's motion for summary judgment. In doing so, it did not specifically discuss either of the above-referenced affirmative defenses.

Mr. Meyer timely appealed.⁵

IIDISCUSSION

Mr. Meyer now challenges both the district court's dismissal of his counterclaim as well as the court's order awarding summary judgment to Firestone. We address these issues in turn.

A.

Mr. Meyer first submits that the district court erred in dismissing his counterclaim under Rule 12(b)(6). “A motion to dismiss pursuant to [Rule] 12(b)(6) challenges the viability of a complaint by arguing that it fails to state a claim upon which relief may be granted.” Camasta v. Jos. A. Bank Clothiers, Inc., 761 F.3d 732, 736 (7th Cir.2014). “We review a district court's dismissal for failure to state a claim de novo. ” Bruce v. Guernsey, 777 F.3d 872, 875 (7th Cir.2015).

1.

As a threshold matter, Firestone contends that Mr. Meyer waived his right to appeal this issue by failing to respond to its motion to dismiss in the district court. We cannot accept this view. Although a party generally forfeits an argument or issue not raised in response to a motion to dismiss, “it is well settled that [this] rule does not prevent a party from attacking on appeal the legal theory upon which the district court based its decision.” Sidney Hillman Health Ctr. of Rochester v. Abbott Labs., Inc.,

782 F.3d 922, 927 (7th Cir.2015) (quoting Hedge v. Cty. of Tippecanoe, 890 F.2d 4, 8 (7th Cir.1989) ).⁶ Although an “appellant may not ... raise an issue which was not considered by the court below,” this rule does not prevent a party “from urging that the grounds given by the district court for dismissing [his] complaint are wrong.” Walker v. S. Cent. Bell Tel. Co., 904 F.2d 275, 276 n. 1 (5th Cir.1990) (per curiam).

Here, Mr. Meyer does not challenge the district court's decision based on a newly raised argument or on an issue not considered by the district court; rather, he merely submits that the court's reason for dismissing his counter-claim—because its factual allegations were implausible—was wrong. No principle of waiver precludes Mr. Meyer from raising this limited argument on appeal. See Sidney Hillman Health Ctr. of Rochester, 782 F.3d at 927 ; Rosser v. Chrysler Corp., 864 F.2d 1299, 1306 n. 7 (7th Cir.1989).

2.

We now turn to the merits of Mr. Meyer's appeal. To survive a motion to dismiss under Rule 12(b)(6), “a complaint must allege ‘sufficient factual matter to state a claim to relief that is plausible on its face.’ ” Gogos v. AMS Mech. Sys., Inc., 737 F.3d 1170, 1172 (7th Cir.2013) (per curiam) (alterations omitted) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) ). “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.” Iqbal, 556 U.S. at 678, 129 S.Ct. 1937. Applying this standard, we first accept all well-pleaded facts in the complaint as true and then ask whether those facts state a plausible claim for relief. See id. at 679, 129 S.Ct. 1937 ; Santana v. Cook Cty. Bd. of Review, 679 F.3d 614, 620 (7th Cir.2012). Allegations that state “legal conclusions” or “[t]hreadbare recitals of the elements of a cause of action” are not entitled to the assumption of truth. Iqbal, 556 U.S. at 678, 129 S.Ct. 1937. As this analysis suggests, the plausibility standard does not allow a court to question or otherwise disregard nonconclusory factual allegations simply because they seem unlikely.See id. (“The plausibility standard is not akin to a ‘probability requirement’....”).⁷ Rather, “a well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of those facts is improbable, and that a recovery is very remote and unlikely.” Alam v. Miller Brewing Co., 709 F.3d 662, 666 (7th Cir.2013) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ).

Here, Mr. Meyer's counterclaim alleged (1) that Firestone vice president Dan McAllister had represented that Firestone “wanted to expand [its] investment in the laundry business,” and that it “would create a $500,000 line of credit” to fund the defendants' equipment purchases in 2013, and (2) that after ...