Webb v. Frawley, 18-1607

Citation906 F.3d 569
Decision Date11 October 2018
Docket NumberNo. 18-1607,18-1607
Parties Nicholas WEBB, Plaintiff-Appellant, v. Michael FRAWLEY, Defendant-Appellee.
CourtUnited States Courts of Appeals. United States Court of Appeals (7th Circuit)

Kevin Q. Butler, Nathan P. Karlsgodt, Cornelius E. McKnight, Attorneys, MCKNIGHT & KITZINGER, LLC, Chicago, IL, for Plaintiff - Appellant.

Dawn Marie Canty, J Matthew W. Haws, Attorney, KATTEN MUCHIN ROSENMAN LLP, Chicago, IL, for Defendant - Appellee.

Before Wood, Chief Judge, and Flaum and Hamilton, Circuit Judges.

Flaum, Circuit Judge.

Plaintiff-appellant Nicholas Webb sued defendant-appellee Michael Frawley for tortiously interfering with his employment contract and for knowingly misrepresenting company policy, both of which resulted in Webb’s termination. The district court granted Frawley’s motion to dismiss Webb’s claims. Webb appeals that decision. For the reasons that follow, we affirm the judgment of the district court.

I. Background
A. Factual Background1

In 2010, Jefferies LLC, an independent securities and investment banking firm, sought to enter the commodities future marketplace in over-the-counter trading of base, ferrous, and precious metals. As part of this strategy, Jefferies acquired a company that offered this expertise, and Jefferies hired the CEO of Newedge USA, LLC, Patrice Blanc, to serve as the CEO of the acquired company.

Michael Frawley, Thad Beversdorf, and Nicholas Webb worked together in Newedge’s Global Metals Group as experts in base, ferrous, and precious metals trading. They worked within the following hierarchy: Frawley, the Global Head of the Metals Group, reported to Blanc (until Blanc left Newedge for Jefferies); Beversdorf, a director in the Global Metals Group, reported to Frawley; and Webb, a sales executive in the Global Metals Group, reported to Beversdorf.

Within six months of becoming CEO of Jefferies’s newly-acquired company, Blanc approached Frawley about hiring other employees from Newedge’s Global Metals Group to accelerate Jefferies’s entrance into the metals market. Frawley promised Blanc that he could propel Jefferies into that market and he told Blanc that members from his team at Newedge would follow him to Jefferies. A few months later, Frawley successfully recruited Beversdorf and Webb to leave Newedge and to come work at Jefferies. On or about June 4, 2012, Frawley, Beversdorf, and Webb resigned from Newedge; both Beversdorf and Webb entered into employment contracts with Jefferies in its Chicago office.

Soon thereafter, Newedge sued Jefferies for hiring its employees. In July 2012, after receiving notice of Newedge’s lawsuit, Jefferies adopted an internal policy that required all metals trades by former-Newedge employees to be executed through the Jefferies Metals Desk in London (so as not to tie any profitability back to former-Newedge employees). Additionally, Jefferies implemented an internal accounting procedure that attributed several categories of expenses to the metals trading business units, even though those units did not incur such expenses. This meant that the metals trading business units appeared unprofitable, but Jefferies’s overall performance was not diminished.

Frawley stated his disagreement with the policy and procedure publicly. By making Frawley’s business units appear unprofitable, the policy and procedure caused real harm to his individual success within Jefferies as well as to his commercial reputation in the industry. Additionally, Frawley knew that the policy and procedure would make qualified personnel in his business unit less likely to stay, since they would become ineligible for bonuses and compensation under the new regime.

To make matters worse for Frawley, in May 2013, Jefferies decided to abandon the iron ore business altogether. Jefferies instructed Frawley to direct his employees not to pursue or book trades in iron ore, but Frawley did not follow those orders.

In direct contravention of Jefferies’s instruction, Frawley told Beversdorf and Webb to pursue iron ore business, and he told them that they would be facilitating iron ore trades across the Metals Desk globally. Frawley also told "various employees of Jefferies" in an e-mail that Beversdorf and Webb would be facilitating such trades. Frawley took these steps because he was desperate to save his commercial reputation. According to the complaint, Frawley believed his job, compensation, and commercial reputation depended on his ability to establish a book of business that did not trade through the Metals Desk in London.

Since Frawley refused to inform Webb of Jefferies’s decision, Webb remained unaware of the change in business strategy. He simply followed Frawley’s orders and spent hundreds of hours with Beversdorf over the course of several months after May 2013 devoted to strategizing how to build the iron ore desk in Chicago. That was time Webb could have used to pursue other transactions that would have been profitable to him and to Jefferies. But Frawley continued to have conversations with Webb after May 2013 wherein he told Webb that Jefferies intended to continue its plan to dominate the iron ore market.

In early August 2013, Frawley warned Beversdorf and Webb that Jefferies had started laying off some employees due to a lack of profitability and that their positions were in jeopardy. At the end of that month, Frawley called Beversdorf to say that Human Resources had started processing his and Webb’s termination, but that they could save their jobs if they booked a few large iron ore deals. And when Beversdorf sent Frawley a request to approve a pending iron ore trade that he had worked on with Webb, Frawley again ignored Jefferies’s policy and approved the trading limits.

The day after Frawley’s approval, however, the COO of Jefferies told Webb that Jefferies had formally cancelled the iron ore product at a meeting that Frawley attended back in May. Shortly thereafter, on September 3, 2013, the COO of Jefferies e-mailed Beversdorf to say that Jefferies would not consider the iron ore deal and that Jefferies remained steadfast in its decision to not market that product.

Webb went to Human Resources to inquire about his employment status, but Human Resources refused to comment. And on September 6, 2013, Webb began calling his prospective iron ore clients to explain that Jefferies would not take such deals anymore. Having to make those calls irreparably damaged Webb’s commercial reputation.

About five weeks after Beversdorf and Webb told Frawley that they had updated their prospective clients about Jefferies’s iron ore policy, they were both terminated without explanation. Beversdorf and Webb were later advised that Jefferies fired them for poor performance and a lack of production.

Webb alleges that Frawley used him in an attempt to resurrect or save Frawley’s commercial reputation. Specifically, Webb complains that Frawley intentionally induced a breach of Webb’s employment contract with Jefferies by ordering Webb to pursue business that Jefferies refused to fulfill and by reporting to Jefferies that Webb was not performing. Webb further accuses Frawley of knowingly misrepresenting to Webb that Jefferies wanted him to seek iron ore trades with the intention that Webb would rely on and act on that misrepresentation in making trades, which would have the effect of preserving Frawley’s compensation and possibly his job.

B. Procedural Background

Before filing this lawsuit, which was one of many actions Beversdorf and Webb pursued in relation to their termination from Jefferies, Beversdorf and Webb initiated an arbitration action with FINRA. That arbitration process had not concluded when Beversdorf and Webb withdrew their action.

Beversdorf and Webb then filed a complaint in the Law Division of the Circuit Court of Cook County against Frawley (and named Jefferies as a respondent in discovery), bringing tortious interference with contract and common-law fraud claims.2 Frawley removed that lawsuit to the United States District Court for the Northern District of Illinois, thereby starting this federal action. Webb moved to remand the case, but the district court denied the motion. Next, Jefferies filed a motion to compel arbitration, and the district court dismissed the case with leave to reinstate it within one year. Beversdorf and Webb appealed both decisions.

This Court affirmed the decision not to remand the case to state court. See Webb v. Frawley , 858 F.3d 459, 461 (7th Cir. 2017). As to the decision to compel arbitration and to dismiss the case, the Court affirmed in part, reversed in part, and remanded. Id. We held that Beversdorf had waived his right to trial by jury and had agreed to arbitrate any dispute with Jefferies by signing a form; this Court, therefore, affirmed the district court’s conclusion that Beversdorf must arbitrate his claims. By contrast, this Court held that Webb had not signed the same form or otherwise waived his right to trial by jury; so, we reversed and remanded the district court’s decision that Webb must arbitrate his claims.

Back before the district court, Frawley moved to enter a scheduling order, hoping the district court would set a deadline for Webb to file an amended complaint. Webb declined to do so, however. After the parties finished briefing Frawley’s motion to dismiss the complaint, the Executive Committee reassigned the case from Judge Der-Yeghiayan to Judge Bucklo. Judge Bucklo granted the motion to dismiss because Webb failed to state a claim for tortious interference with contract under Federal Rule of Civil Procedure 12(b)(6) and because Webb’s common-law fraud claim failed to meet the standards of Rule 9(b). Accordingly, Judge Bucklo dismissed the complaint with prejudice and entered judgment. Webb did not seek post-judgment relief; instead, he appealed the decision.

II. Discussion

We review a district court’s grant of a motion to dismiss based on Rules 12(b)(6) and 9(b) de novo. Forgue v. City of Chicago , 873 F.3d 962, 966 (7th...

To continue reading

Request your trial
83 cases
  • Dinerstein v. Google, LLC, No. 19 C 4311
    • United States
    • U.S. District Court — Northern District of Illinois
    • September 4, 2020
    ...and (5) damages.’ " Gen. Elec. Co. v. Uptake Techs., Inc. , 394 F. Supp. 3d 815, 834 (N.D. Ill. 2019) (quoting Webb v. Frawley , 906 F.3d 569, 577 (7th Cir. 2018) ). The parties have not addressed the question whether Plaintiff may pursue this claim absent an adequate claim for damages for ......
  • Maui Jim, Inc. v. Smartbuy Guru Enters.
    • United States
    • U.S. District Court — Northern District of Illinois
    • February 7, 2020
    ...of the contract, (4) a subsequent breach by the other caused by Defendants’ conduct, and (5) damages. See, e.g., Webb v. Frawley , 906 F.3d 569, 577 (7th Cir. 2018) ; Hess v. Kanoski & Assocs. , 668 F.3d 446, 454 (7th Cir. 2012). The first element that Maui Jim must show is the existence of......
  • Creation Supply, Inc. v. Hahn
    • United States
    • U.S. District Court — Northern District of Illinois
    • June 24, 2022
    ...for the purpose of harming Plaintiff, or contrary to Selective's interests." Hahn , 2020 WL 4815905, at *6 ; accord Webb v. Frawley , 906 F.3d 569, 577 (7th Cir. 2018). Because the original complaint demonstrated that Defendants acted on behalf of and to further Selective's interests, the c......
  • Gen. Elec. Co. v. Uptake Techs., Inc.
    • United States
    • U.S. District Court — Northern District of Illinois
    • June 25, 2019
    ...of a breach of contract, (4) a subsequent breach of contract caused by defendant's wrongful conduct, and (5) damages." Webb v. Frawley , 906 F.3d 569, 577 (7th Cir. 2018) (citations omitted).Uptake argues that this claim fails because the NSAs and Confidentiality Agreements are invalid and ......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT