Mart v. Forest River, Inc., 3:10 CV 118.

CourtUnited States District Courts. 7th Circuit. United States District Court of Northern District of Indiana
Writing for the CourtJAMES T. MOODY
Citation854 F.Supp.2d 577
PartiesBrad A. MART, Plaintiff, v. FOREST RIVER, INC., Peter J. Liegl, and Berkshire Hathaway, Inc., Defendants.
Docket NumberNo. 3:10 CV 118.,3:10 CV 118.
Decision Date22 February 2012

854 F.Supp.2d 577

Brad A. MART, Plaintiff,
FOREST RIVER, INC., Peter J. Liegl, and Berkshire Hathaway, Inc., Defendants.

No. 3:10 CV 118.

United States District Court,
N.D. Indiana,
South Bend Division.

Feb. 22, 2012.

[854 F.Supp.2d 580]

Kristen E. Knauf PHV, Stephen A. Kennedy PHV, Steven E. Clark PHV, McDole Kennedy & Williams PC, Dallas, TX, Stanley F. Wruble, III, Law Office of Stanley F. Wruble, III, South Bend, IN, for Plaintiff.

Gerald F. Lutkus, Barnes & Thornburg LLP, South Bend, IN, Ronald L. Lipinski PHV, Steven J. Pearlman PHV, Seyfarth Shaw LLP, Chicago, IL, for Defendants.


JAMES T. MOODY, District Judge.

Defendants Forest River and Peter Liegl (“the FR defendants”) have moved to dismiss several of plaintiff's claims under Fed. R. Civ. P. 12(b)(6) (DE # 27) and Fed. R. Civ. P. 12(b)(1) (DE # 29). Defendant Berkshire Hathaway (“Berkshire”) has also moved to dismiss plaintiff's claims against it under Fed. R. Civ. P. 12(b)(1), Fed. R. Civ. P. 12(b)(2), and Fed. R. Civ. P. 12(b)(6). (DE # 32.) In his amended complaint, plaintiff brought six claims in total. (DE # 5 at 15–21.) Count One is a breach of contract claim against Forest River. ( Id. at 15–16.) Count Two is a Sarbanes–Oxley Act claim against each of the defendants. ( Id. at 16–18.) Count Three is a retaliatory discharge claim against Forest River. ( Id. at 18–19.)

[854 F.Supp.2d 581]

Count Four is a negligent misrepresentation claim against each of the defendants. ( Id. at 19–20.) Count Six is a claim against Forest River alleging violations of the Family Medical Leave Act. ( Id. at 20–21.) Finally, Count Seven is a defamation claim against the FR defendants. ( Id. at 21.) The court will address each of these motions in turn.


Plaintiff Brad Mart sold real estate to defendant Peter Liegl in 2000, and the two later became friends. (DE # 5 at 5.) At that point Liegl was, and still is, the CEO of defendant Forest River. ( Id. at 1.) In 2005, Mart analyzed defendant Forest River's business to develop strategic alternatives for Liegl. ( Id. at 5.) During this time, Mart came to believe that Forest River was the type of company that defendant Berkshire would find attractive. ( Id.) With Liegl's permission, Mart submitted a business overview of Forest River to Berkshire CEO Warren Buffet, and in August of 2005, Berkshire purchased Forest River, making Forest River a wholly owned subsidiary of Berkshire. ( Id.)

After the acquisition, Liegl hired Mart to be the general manager of Forest River Financial Services, a new business unit at Forest River. ( Id. at 6.) In the fall of 2007, Liegl told Mart that he (Liegl) was planning to retire, and asked Mart to take over as the CEO of Forest River. ( Id. at 7) This move would have required Mart to move his family from Illinois to Indiana. ( Id.) Although Mart was hesitant, Liegl eventually convinced Mart to take the position, and on October 31, 2007, Mart accepted the position of CEO of Forest River. ( Id.) He entered into a written agreement 2 with Liegl and Forest River to become the CEO of Forest River, effective immediately. ( Id.)

After accepting the position, Mart bought a house in Granger, Indiana. ( Id.) From November 2007 to February 2008, Mart approached Liegl several times to discuss his transition to the CEO position, but Liegl refused to discuss the matter. ( Id. at 8.) Mart eventually posed two questions directly to Liegl: (1) “Are you still planning to retire at the end of 2008?” and (2) “Are you still planning for me to be

[854 F.Supp.2d 582]

CEO?” ( Id.) Liegl responded to both questions with “hell yes.” ( Id.) After getting this affirmation, Mart hired a contractor to make significant renovations to the home he had purchased in Granger, and on July 18, 2008, Mart and his family moved to Granger to live in the renovated home. ( Id.)

During the Fall of 2008, Mart discovered that Forest River, acting through Liegl, and at least two other “shadow-companies” owned by Liegl, were engaging in unlawful transactions. ( Id. at 9.) Mart realized that Liegl had been siphoning money from Forest River through a series of unlawful maneuvers. ( Id.) Mart began to question this conduct, and got “pushback” from Liegl. ( Id. at 10.) Mart believed some of this conduct violated federal law. ( Id.) He also believed some of this conduct to be in violation of the Berkshire Hathaway Code of Business Conduct and Ethics (the “Code”) (DE # 93–1 at 12), and reported the conduct to Buffet. (DE # 5 at 11.)

In late 2008, Mart reported the violations to Buffet during a series of phone calls. (DE # 5 at 11.) During one of these phone calls, Buffet told Mart that only he (Buffet) had the authority to hire and fire the CEO of a Berkshire subsidiary. (DE # 94 at 3.) Buffet also told Mart that Mart would be made whole as a result of his reliance on the October 31, 2007, agreement. ( Id.) Buffet made it clear to Mart that he should discuss these issues with Liegl, and that Mart and Liegl might have to resolve these issues by going to Omaha, with either Mart or Liegl likely not working at Forest River after that meeting. ( Id.) During one of these conversations, Mart told Buffet he planned to meet with Liegl that same day, and Buffet wished him luck. ( Id. at 3–4.)

After informing Buffet about the improprieties, Mart confronted Liegl directly. (DE # 5 at 11.) Liegl responded by verbally abusing Mart, including threatening Mart's life. ( Id.) After that encounter, Liegl began subjecting Mart to a hostile work environment. ( Id.) Mart would not have approached Liegl if he had not received the assurance from Buffet that he would be made whole, and his belief that he would be protected by the Code. (DE # 94 at 4.) After Mart confronted Liegl, Buffet was no longer willing to discuss these matters with Mart. (DE # 5 at 15; DE # 94 at 4.) Despite these conversations, Buffet took no action after learning about this conduct. (DE # 5 at 11.)

In October 2008, Liegl made a company-wide announcement that Mart was taking over as “President” of Forest River. ( Id. at 12.) This position did not previously exist, and Mart had been under the impression that he was sharing the role of CEO with Liegl until Liegl retired at the end of 2008. ( Id.) Mart and Liegl sat down for a meeting on October 9, 2008, to discuss Mart's transition into the CEO position. ( Id.) However, the meeting became heated, and Liegl refused to discuss the matter further. ( Id.) Finally, in a letter from Forest River dated November 19, 2008, Mart was informed he was being terminated. ( Id.)


Defendants have moved to dismiss plaintiff's claims under Rule 12(b)(6) of the Federal Rules of Civil Procedure for failure to state a claim upon which relief may be granted. Rule 8 of the Federal Rules of Civil Procedure sets forth the pleading standard for complaints filed in

[854 F.Supp.2d 583]

federal court; specifically, that rule requires that a complaint contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8. “The RULE reflects a liberal notice pleading regime, which is intended to focus litigation on the merits of a claim rather than on technicalities that might keep plaintiffs out of court.” Brooks v. Ross, 578 F.3d 574, 580 (7th Cir.2009) (internal quotation marks omitted). “While the federal pleading standard is quite forgiving ... ‘the complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.’ ” Ray v. City of Chicago, 629 F.3d 660, 662–63 (7th Cir.2011) (quoting Bonte v. U.S. Bank, N.A., 624 F.3d 461, 463 (7th Cir.2010)); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007).

I. The Forest River Defendants' Motion to Dismiss

The FR defendants have moved to dismiss plaintiff's state law claims: breach of contract, retaliatory discharge, negligent misrepresentation, and defamation. (DE # 27.) In his response brief, plaintiff agrees to drop his retaliatory discharge and defamation claims. (DE # 93 at 2.) Therefore, only the breach of contract and negligent misrepresentation claims remain on this motion to dismiss.

A. Plaintiff's Response Brief

As an initial matter, the FR defendants contend that Mart, in his response brief to the FR defendants' motion to dismiss, improperly alleges new theories of contractual liability. (DE # 100 at 5–6.) The FR defendants allege that Mart has essentially amended his amended complaint through his response brief. ( Id.)

“[I]t is axiomatic that the complaint may not be amended by the briefs in opposition to a motion to dismiss.” Car Carriers, Inc. v. Ford Motor Co., 745 F.2d 1101, 1107 (7th Cir.1984); see also Thomason v. Nachtrieb, 888 F.2d 1202, 1205 (7th Cir.1989) (“It is a basic principle that the complaint may not be amended by the briefs in opposition to a motion to dismiss....”) However, plaintiff has not improperly amended his amended complaint here because he has simply alleged new theories about his breach of contract claim. Milazzo v. O'Connell, 925 F.Supp. 1331, 1340 (N.D.Ill.1996).

In Milazzo, the plaintiff brought an action claiming a violation of her procedural due process rights after she was terminated from her job working at a county circuit court. Milazzo, 925 F.Supp. at 1336–37. The plaintiff had originally claimed a property interest in continued employment because her employer's employee handbook provided for a hearing prior to the discharge of an employee. Id. at 1337. But in her response brief to the defendant's motion to dismiss, the plaintiff changed her property interest theory by claiming that her property interest in continued employment arose out of an oral promise of continued employment from her supervisor. Id. at 1339.

In Milazzo, similar to the case at hand, the defendants argued the plaintiff should not be allowed to “assert new facts to bolster her complaint in her...

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