Degeer v. Gillis

• Decision Date: 21 April 2010
• Docket Number: No. 09 C 6974.,09 C 6974.
• Parties: Randall S. DeGEER, Plaintiff,v.M. Scott GILLIS; Joseph R. Shalleck; and Leroy J. Mergy, Defendants.
• Court: U.S. District Court — Northern District of Illinois

707 F.Supp.2d 784

Randall S. DeGEER, Plaintiff,v.M. Scott GILLIS; Joseph R. Shalleck; and Leroy J. Mergy, Defendants.

No. 09 C 6974.

United States District Court,

N.D. Illinois,

Eastern Division.

April 21, 2010.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Peter M. King, William H. Jones, Kasey M. Folk, Canel King & Jones, Chicago, IL, for Plaintiff.

Eric M. Nelson, Lisa Marie Sofio, Winston & Strawn LLP, New York, NY, Norman K. Beck, William Charles O'Neil, Winston & Strawn LLP, Chicago, IL, for Defendants.

MEMORANDUM OPINION AND ORDER

ELAINE E. BUCKLO, District Judge.

Plaintiff Randall S. DeGeer (“DeGeer”), sued M. Scott Gillis (“Gillis”), Joseph R. Shalleck (“Shalleck”), and Leroy J. Mergy (“Mergy”) (collectively, “defendants”), claiming that they refused to pay him a bonus to which he was entitled pursuant to an agreement they entered into when he joined their management consulting practice at Huron Consulting Services LLC. (“Huron”). Defendants have moved pursuant to Federal Rule 12(b)(6) to dismiss DeGeer's complaint. For the reasons discussed below, the motion is granted in part and denied in part.

I. Facts

Until March 2006, the defendants were partners of a management consulting firm called MSGalt & Company, LLC (“Galt”). On March 31, 2006, they entered into an Asset Purchase Agreement (“APA”) with Huron, under which Huron acquired Galt, and the defendants continued their consulting practice under the name “Galt & Company, a division of Huron.” Under the APA, Huron agreed to make annual “Earn-Out” payments to the defendants for a period of four years provided that specific financial milestones and conditions were achieved.

From 1992 through July 2006, DeGeer worked for the consulting firm of Marakon Associates (“Marakon”). After the defendants' practice was acquired by Huron, they recruited DeGeer to join Galt as a Managing Director. In July 2006, DeGeer entered into a Senior Management Agreement (“SMA”) with Huron. DeGeer's SMA and offer letter state that he would not be eligible to participate in Huron's employee incentive plan, but that he would be eligible to earn a discretionary bonus to be determined by the head of the Galt practice: ¹

Bonus Programs. As a Managing Director of the Galt practice, Executive shall not be eligible to participate in Huron Consulting Group employee incentive plans during the Term. Executive will be eligible to earn a discretionary annual bonus based upon the practice's performance and Executive's individual performance as determined by the Galt Practice Leader and payable in accordance with Huron's standard practices.

SMA, Pl.'s Ex. A, § 2.2 (Doc. 1-1).

DeGeer alleges, however, that prior to entering into the SMA with Huron, he entered into a separate agreement with the defendants. According to DeGeer, the latter agreement included a specific compensation program under which he would earn a base salary of $200,000, and would be awarded an additional bonus in accordance with a predetermined formula.² DeGeer insists that under this agreement, the defendants' obligation to pay his bonus was not discretionary.

DeGeer received his bonuses for fiscal years 2006 and 2007 without incident, but he alleges that he received no bonus for fiscal year 2008. According to DeGeer, based on the revenue he generated for Galt, he was entitled to a bonus of $3,953,000 for 2008. To date, he has received only $800,000 (the portion of the bonus contributed by Huron). DeGeer alleges that he has repeatedly sought to recover the remaining $3,153,000 from the defendants, and that they have refused.³

II. Legal Standard

A motion to dismiss pursuant to Rule 12(b)(6) tests the sufficiency of the complaint, not its merits. See, e.g., Gibson v. City of Chicago, 910 F.2d 1510, 1520 (7th Cir.1990). In resolving a Rule 12(b)(6) motion, all well-pleaded allegations in the complaint are taken as true, and all reasonable inferences are drawn in favor of the nonmoving party. See, e.g., McMillan v. Collection Prof'ls, Inc., 455 F.3d 754, 758 (7th Cir.2006). Dismissal is warranted under Rule 12(b)(6) only where the plaintiff can prove no set of facts in support of his claims that would entitle him to relief. See, e.g., Goren v. New Vision Intern., Inc., 156 F.3d 721, 726 (7th Cir.1998). To survive a Rule 12(b)(6) motion, “the complaint need only contain a ‘short and plain statement of the claim showing that the pleader is entitled to relief.’ ” EEOC v. Concentra Health Servs., Inc., 496 F.3d 773, 776 (7th Cir.2007) (quoting Fed.R.Civ.P. 8(a)(2)). The facts must provide the defendant with “ ‘fair notice of what the ... claim is and the grounds upon which it rests.’ ” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)). The plaintiff need not plead particularized facts, but the factual allegations in the complaint must be enough to raise a right to relief above the speculative level. Id.

III. Discussion

DeGeer's complaint asserts eight causes of action: conversion (Count I); breach of contract (Count II); breach of the parties' partnership agreement (Count III); breach of fiduciary duty (Count IV); constructive trust (Count V); promissory estoppel (Count VI); quantum meruit (Count VII); and violation of the Illinois Wage Payment and Collection Act (“the Wage Act”), 820 ILCS 115/1 et seq. (Count VIII). I discuss the defendants' arguments with respect to each claim in turn.

A. Conversion

In Count I, DeGeer seeks to hold the defendants liable for conversion. “To state a claim for conversion, a plaintiff must allege (1) he has a right to the property at issue; (2) he has an absolute and unconditional right to the immediate possession of the property; (3) he has made a demand for possession of the property; and (4) defendant has wrongfully assumed control, dominion, or ownership of the property without authorization.” Song v. PIL, L.L.C., 640 F.Supp.2d 1011, 1017 (N.D.Ill.2009) (citing Loman v. Freeman, 229 Ill.2d 104, 321 Ill.Dec. 724, 890 N.E.2d 446, 461 (2008)).

Courts have often observed that “[a]n asserted right to money normally will not support a claim for conversion.” Horbach v. Kaczmarek, 288 F.3d 969, 978 (7th Cir.2002). In order to state a claim for the conversion of money, the sum in question must constitute a “specific chattel.” Id. (quotation marks omitted). In addition, the plaintiff's right to the money must be absolute and immediate, and the money must belong to him at all times. Id. (“It must be shown that the money claimed, or its equivalent, at all times belonged to the plaintiff and that the defendant converted it to his own use.”) (quotation marks and alterations omitted); Safeco Ins. Co. v. Wheaton Bank and Trust Co., No. 07 C 2397, 2009 WL 2407740, at *4 (N.D.Ill. Aug. 4, 2009); Payton v. County of Kane, 301 F.Supp.2d 835, 839 (N.D.Ill.2004) (“To state a claim for conversion, plaintiffs must allege that the defendants wrongfully deprived them of money to which they had a right to immediate possession.”).

According to DeGeer, the defendants have committed conversion by “exert[ing] unauthorized and wrongful assumption and control over [his] portion of the Galt Earn-Out.” Compl. ¶ 27. The defendants argue that the claim must be dismissed for several reasons. While not all of their arguments are convincing, the defendants are ultimately correct in asserting that Count I must be dismissed.

The defendants first contend that DeGeer's conversion claim fails because the funds he seeks cannot be characterized as a “specific chattel.” Specifically, defendants claim that DeGeer's bonus money was never segregated from the other funds of which Galt's 2008 Earn-Out was comprised. This argument has little merit. As several courts have squarely held, funds need not be segregated in order to form the basis for a conversion claim. See, e.g., Doing Steel, Inc. v. Castle Const. Corp., No. 02 C 1674, 2002 WL 31664476, at *3 (N.D.Ill. Nov. 21, 2002) (“Although it is not necessary that the money be specifically segregated or earmarked, the money must be a determinate amount and identifiably distinct.”); Roderick Development Inv. Co., Inc. v. Community Bank of Edgewater, 282 Ill.App.3d 1052, 218 Ill.Dec. 297, 668 N.E.2d 1129, 1137 (1996) (“Although some courts in other states continue to require funds to be segregated in order to be the subject of a conversion action, we are persuaded by the reasoning of the courts in states that recognize that converted funds may be identifiable in other ways.”) (citation omitted).

Defendants are correct in maintaining that DeGeer must do more than assert a right to recover a specific sum of money. But DeGeer has done so: he alleges that his bonus is included along with other funds in a particular bank account. According to the complaint, “[t]he 2008 Earn-Out is a specific fund that DeGeer understands was deposited in a Merrill Lynch account under the name Rand Consulting, LLC.” Resp. at 8; see also Compl. ¶ 21.

Yet even if DeGeer's bonus can be characterized as a specific chattel, his conversion claim fails because he cannot show that his right to the funds was absolute and immediate and that the funds belonged to him at all times. To be sure, there is very little case authority addressing the question of when a given sum of money can be said to have belonged to a particular plaintiff “at all times,” or when a plaintiff's control over, or right to, a particular sum of money can be characterized as absolute and immediate. To the extent that courts have addressed similar or related issues, however, the decisions cut against DeGeer.

In Doing Steel, Inc. v. Castle Construction Corporation, No. 02 C 1674, 2002 WL 31664476 (N.D.Ill. Nov. 21, 2002), for example, Castle Construction entered into a contract with a school district to build a new school. Castle hired Doing Steel, Inc. as a subcontractor. The parties' agreement called for Castle to make “progress...