Gann v. William Timblin Transit, Inc.

• Court: U.S. District Court — Northern District of Illinois
• Writing for the Court: Nlow
• Citation: Gann v. William Timblin Transit, Inc., 522 F.Supp.2d 1021 (N.D. Ill. 2007)
• Decision Date: 20 November 2007
• Docket Number: No. 07 C 3252.,07 C 3252.
• Parties: Geraldine GANN, Personal Representative of the Estate of Jessie L. Gann, deceased, Plaintiff, v. WILLIAM TIMBLIN TRANSIT, INC., and William Timblin Sr., Defendants.

522 F.Supp.2d 1021

Geraldine GANN, Personal Representative of the Estate of Jessie L. Gann, deceased, Plaintiff, v. WILLIAM TIMBLIN TRANSIT, INC., and William Timblin Sr., Defendants.

No. 07 C 3252.

United States District Court, N.D. Illinois, Eastern Division.

November 20, 2007.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Bruce Robert Pfaff, Michael Thomas Gill, Pfaff & Gill Ltd., Chicago, IL, for Plaintiff.

John William Patton, Jr., Patton & Ryan, LLC, Chicago, IL, for Defendants.

MEMORANDUM OPINION AND ORDER

MORTON DE NLOW, United States Magistrate Judge.

Plaintiff Geraldine Gann, Personal Representative of the Estate of Jessie L. Gann, deceased ("Plaintiff"), filed a two count complaint against William Timblin Transit, Inc. ("Timblin Inc.") and William Timblin Sr. ("Timblin Sr.") (collectively, "Defendants"). In Count I, Plaintiff seeks to pierce the corporate veil in order to hold Timblin Sr. personally liable for a $9,362,580 wrongful death judgment awarded to Plaintiff against TTI, Inc. pursuant to a jury verdict. In Count II she alleges that Timblin Inc. is liable to Plaintiff for monetary damages under the Wisconsin Financial Responsibility Statute. Defendants moved to dismiss both counts pursuant to Federal Rule of Civil Procedure 12(b)(6). Oral argument was held on November 6, 2007. For the reasons stated below, the motion to dismiss Counts I and II is denied.

I. BACKGROUND FACTS

A. Procedural History

A previous wrongful death lawsuit was filed with this Court by Plaintiff against Timblin Inc. and Dennis Oltesvig ("Gann I"). The complaint alleged that on January 9, 2006, TTI Inc.'s employee, Dennis Oltesvig, struck and killed Jesse Gann with his trailer, which was owned by Timblin Inc. and leased and operated by TTI, Inc. Plaintiff later amended the complaint to add TTI, Inc. and Timblin Sr. as defendants. The new pleadings added a Count III to the complaint, claiming that the corporate veils of both TTI Inc. and Timblin Inc. should be pierced and that Timblin Sr. should be held personally liable. On December 1, 2006, pursuant to the parties stipulation, the Court voluntarily dismissed Count III without prejudice to its being refiled within one year. During trial, the Court entered a directed verdict dismissing Timblin Inc. as a defendant. On March 28, 2007, a jury reached a verdict against Dennis Oltesvig and TTI Inc., awarding $9,362,580 in damages to the Estate of Jesse Gann.

On April 9, 2007, Plaintiff filed a motion in Gann I for leave to file a third amended complaint, reinstating Count III, the veilpiercing claim against Timblin Sr., and adding Count IV, a claim against Timblin Inc. under the Wisconsin Financial. Responsibility Statute. On May 23, 2007, this Court denied Plaintiff's motion "without prejudice to Plaintiff pursuing these claims either by means of a separate law suit or as post judgment claims." 5/23/07 Doc. 134.¹

B. Relationship Between the Parties

The following is a summary of the facts alleged in the Gann II complaint. For the purposes of a Rule 12(b)(6) motion, the Court accepts as true all well-plead factual allegations, and construes them in the light most favorable to the Plaintiff. Christensen v. County of Boone, IL, 483 F.3d 454, 457 (7th Cir.2007).

Timblin Sr. is the founder of both TTI, Inc. and Timblin Inc. Comp. ¶ 1.6-7. He created TTI, Inc. as an entity to operate a trucking business, wherein TTI, Inc. would employ drivers, but not own vehicles. Comp. ¶ I.6. He created Timblin Inc. as an entity to own trucks, trailers and vans, and to lease them exclusively to TTI, Inc. Comp. ¶ I.7. Timblin Inc. is a Wisconsin corporation with its principal place of business in Wisconsin. Comp. ¶ II.2. The officers of Timblin Inc. and TTI, Inc. are the same family members of Timblin Sr. Comp. ¶ I.8. TTI, Inc. has no board of directors, has not issued stock or dividends, and has had no board of directors meetings. Comp. ¶ I.9-I.10. TTI, Inc. is underfunded, undercapitalized and does not observe corporate formalities. Comp. ¶ I.11. TTI Inc. has "failed to maintain arm's-length relationships among related entities, and is a mere facade for the business activities of Timblin Sr. Comp. ¶ I.12.

On January 9, 2006, Timblin Inc. owned the tractor and trailer that struck Jesse Gann. Comp. ¶ II.4, II.6. Timblin Inc. leased them to TTI, Inc. for use, in part, in picking up a shipment of steel products from Pacesetter Steel in Sauk Village, Illinois. Comp. ¶ II.4, The lease agreement between Timblin Inc. and TTI, Inc. was created in Wisconsin. Comp. ¶ II.5. Representatives of TTI, Inc. and Dennis Oltesvig have informed Plaintiff that they will be unable to satisfy the $9,362,580 judgment against them. Comp. ¶ II.10.

Defendants now move to dismiss both counts of Plaintiffs complaint ("Gann II") for failure to state a claim for which relief may be granted. Defendants also assert that Plaintiff's claims against Timblin Sr. and Timblin Inc. are precluded under the doctrine of claim preclusion.

IL STANDARD OF REVIEW FOR MOTION TO DISMISS

Under Rule 12(b)(6), to survive a motion to dismiss for failure to state a claim upon which relief may be granted, the complaint must only contain a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a); EEOC v. Concentra Health Services, Inc., 496 F.3d 773, 776 (7th Cir.2007). The complaint must "describe the claim in sufficient detail to give the defendant `fair notice of what the ... claim is and the grounds upon which it rests.'" EEOC, 496 F.3d at 776 (quoting Bell Atlantic Corp. v. Twombly, ___ U.S. ___, ___, 127 S.Ct. 1955, 1964, 167 L.Ed.2d 929 (2007)). The complaint must plausibly suggest that the plaintiff has a right to relief "by providing allegations that `raise a right to relief above the speculative level.'" Id. (quoting Bell Atlantic, 127 S.Ct. at 1965). If the allegations do not suggest such a right to relief, "the plaintiff pleads itself out of court." Id.

III. COUNTS I & II: CLAIM PRECLUSION

Pursuant to Rule 12(b)(6), Defendants have moved to dismiss Plaintiffs complaint for failure to state a claim upon which relief may be granted. Specifically, Defendants assert that Counts I and II are barred by the doctrines of claim preclusion and merger.²

A. Asserting the Claim Preclusion Defense Under Rule 12(b)(6) Motion to Dismiss

As stated above, to survive a motion to dismiss, a complaint must set forth "enough facts to state a claim to relief that is plausible on its face." Bell Atlantic, 127 S.Ct. at 1974; Waivio v. Board of Trustees University of Illinois at Chicago, 2007 WL 3087197 (N.D.Ill.2007). Parties need not anticipate or address potential defenses in their complaints. U.S. Gypsum Co. v. Indiana Gas Co., 350 F.3d 623, 625 (7th Cir.2003). Claim preclusion, also known as res judicata³, is an affirmative defense, and thus Plaintiff does not need to anticipate or plead around this defense. Waivio, 2007 WL 3087197; U.S. Gypsum Co., 350 F.3d at 626.

Technically, as a defense, claim preclusion cannot be raised until a motion for judgment on the pleadings under Rule 12(c). Forty One News, Inc., v. County of Lake, 491 F.3d 662, 664 (7th Cir.2007). However, "when a defendant raises [claim preclusion] as an affirmative defense and it is clear from the complaint's face and matters of which the district court can take judicial notice, that plaintiff's claims fail as a matter of law, then dismissal under Rule 12(b)(6) is appropriate." Local 25 S.E.I.U. Welfare Fund, et al. v. Great Lakes Maintenance and Security Corp., 55 Fed.Appx. 373, 374 n. 1 (7th Cir.2002) (unpublished opinion); See Brown v. Chrysler Financial Services, 218 Fed.Appx. 536 (7th Cir.2007) (unpublished opinion) (affirming district court's dismissal of a complaint under Rule 12(b)(6) based on it being barred by claim preclusion).

B. Illinois law determines the claimpreclusive effect of Gann I.

Under the Erie Doctrine, a federal court sitting in diversity applies state substantive law and federal procedural law. Gasperini v. Center for Humanities, Inc., 518 U.S. 415, 427, 116 S.Ct. 2211, 135 L.Ed.2d 659 (1996); Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938); Ritchie v. Glidden Co., ICI, 242 F.3d 713, 720 (7th Cir.2001). Where a dispute exists over whether a lawsuit is precluded by a previous lawsuit filed in federal court, the federal rules of claim preclusion apply. Rymer Foods, Inc. v. Morey Fish, 116 F.3d 1482, 1997 WL 358870, *4 (7th Cir.1997) (unpublished opinion); See Semtek Int'l Inc. v. Lockheed Martin. Corp., 531 U.S. 497, 508, 121 S.Ct. 1021, 149 L.Ed.2d 32 (2001). Under Semtek, when assessing the claim-preclusive effect of a dismissal by a federal court sitting in diversity, the federal rules require a court to apply the law of the state in which the federal diversity court sits, unless "the state law is incompatible with federal interests." Semtek, 531 U.S. at 508-09, 121 S.Ct. 1021; See 520 S. Michigan Ave. Assoc. Ltd. v. Devine, 433 F.3d 961, 964 (7th Cir.2006) (citing Semtek to find that a previous suit was "a federal judgment under federal substantive law, so its preclusive effect is determined by federal rules"); Extra Equipamentos E Exportacao Ltda v. Case Corp., 361 F.3d 359, 363 (7th Cir.2004) (citing Semtek to state that "under federal law Illinois' [sic] law of collateral estoppel would determine the preclusive effect of a federal judgement rendered in a diversity case governed by Illinois substantive law").

Although Semtek involved a state court determining the preclusive effect of a federal decision, this rule would likewise apply to a federal court determining the effect of a previous decision also in federal court. See NAS Electronics, Inc. v. Transtech Electronics PTE Ltd., 262 F.Supp.2d 134, 143 (S.D.N.Y.2003) ("Although Semtek involved a state court determining the preclusive effect of a federal decision in a diversity case, the rule announced in Sem...