Ochs v. Hindman

• Decision Date: 25 November 2013
• Docket Number: No. 13 C 3098.,13 C 3098.
• Citation: Ochs v. Hindman, 984 F.Supp.2d 903 (N.D. Ill. 2013)
• Parties: Terence W. OCHS, Plaintiff, v. Nicholas C. HINDMAN, Sr., Defendant.
• Court: U.S. District Court — Northern District of Illinois

984 F.Supp.2d 903

Terence W. OCHS, Plaintiff,

v.Nicholas C. HINDMAN, Sr., Defendant.

No. 13 C 3098.

United States District Court,

N.D. Illinois,

Eastern Division.

Nov. 25, 2013.

Matthew Michael Wawrzyn, Stephen Charles Jarvis, Wawrzyn LLC, Chicago, IL, for Plaintiff.

Nicholas C. Hindman, Sr., Lisle, IL, pro se.

MEMORANDUM OPINION AND ORDER

RUBEN CASTILLO, Chief Judge.

Terence W. Ochs (“Plaintiff”) brings this one-count diversity action against Nicholas C. Hindman, Sr. (“Defendant”) alleging breach of a promissory note (the “Note”). Presently before the Court are Defendant's motion to dismiss the complaint pursuant to Federal Rules of Civil Procedure 12(b)(6) and 12(b)(7) and Plaintiff's motion for sanctions. For the reasons set forth below, Defendant's motion to dismiss is denied, and Plaintiff's motion for sanctions is denied.

RELEVANT FACTS

Plaintiff is a citizen of Wisconsin. (R. 14, Am. Compl. ¶ 1.) Defendant is a citizen of Illinois and the president of Infratel Communications Corporation (“Infratel”). ( Id.; R. 14–1, Ex. A, Note at 3.) On July 1, 2010, Plaintiff executed the Note with Infratel and Defendant. (R. 14, Am. Compl. ¶ 7.) In the Note, Infratel, as maker, and Defendant, as guarantor, promise to pay Plaintiff $200,000.00 plus interest in consideration for a loan of the same amount made by Plaintiff to Infratel. ( Id.) Defendant signed the Note on behalf of Infratel, as President, and in his individual capacity as the guarantor of Infratel's promise. ( Id.; R. 14–1, Ex. A, Note at 3.)

The Note does not contain a specific maturity date; instead, the terms of the Note state that “[i]f the Lender desires repayment in full or in part of the principal sum, Lender shall give the Maker 90 days notice of such repayment.” (R. 14–1, Ex. A, Note at 1.) If an “event of default” occurred, however, the Note provides that all amounts owed on the Note would become “due and payable forthwith” and Plaintiff was not required to provide notice. ( Id.) The Note defines an “event of default” as when (1) Infratel failed to pay the loan plus all accrued interest pursuant to the terms of the Note; (2) there was a change of control of more than 50% of Infratel's voting stock; (3) Infratel dissolved, became insolvent, or ceased to exist; (4) a material portion of Infratel's assets was transferred, sold, or assigned to a third party; or (5) there was an assignment of assets to the benefit of creditors or an initiation by or against Infratel of any bankruptcy proceedings. ( Id.) Infratel became insolvent and was involuntarily dissolved on October 14, 2011. (R. 14, Am. Compl. ¶ 8.) Neither Infratel nor Defendant has paid any principal amount or interest on the Note. ( Id. ¶ 11.)

PROCEDURAL HISTORY

Plaintiff filed his complaint on April 24, 2013, alleging a breach of the Note. (R. 1, Compl.) He only named Defendant in his claim for the principal and interest, and he did not bring suit against Infratel. ( Id.) Defendant, proceeding pro se,¹ filed his first motion to dismiss on May 20, 2013, (R. 10, Def.'s First Mot. Dismiss), and Plaintiff filed an amended complaint on June 10, 2013, (R. 14, Am. Compl.). Defendant filed a second motion to dismiss on July 2, 2013, alleging failure to state a claim pursuant to Rule 12(b)(6) and failure to join a necessary party pursuant to Rule 12(b)(7). (R. 16, Def.'s Second Mot. Dismiss.) Plaintiff responded on August 1, 2013, (R. 18, Pl.'s Mem.), and also filed a motion for sanctions against Defendant on August 6, 2013, (R. 19, Pl.'s Mot. Sanctions). Defendant replied to Plaintiff's memorandum in opposition to his motion to dismiss and responded to Plaintiff's motion for sanctions on September 5, 2013. (R. 23, Def.'s Reply; R. 22, Def.'s Resp. Mot. Sanctions.) Defendant's motion to dismiss and Plaintiff's motion for sanctions are presently before the Court.

LEGAL STANDARDS

A motion under Rule 12(b)(7) seeks dismissal based on the failure to join a necessary party as required by Federal Rule of Civil Procedure 19. Fed.R.Civ.P. 12(b)(7). A Rule 12(b)(7) motion to dismiss requires the court to accept the allegations in the complaint as true, but the court may consider extrinsic evidence beyond the pleadings. Davis Cos. v. Emerald Casino, Inc., 268 F.3d 477, 480 n. 4 (7th Cir.2001). On a Rule 12(b)(7) motion, the movant bears the burden of demonstrating that the absent party is a necessary and indispensable party that must be joined. NanoeXa Corp. v. Univ. of Chi., No. 10 C 7177, 2011 WL 4729797, at *1 (N.D.Ill. Apr. 13, 2011); see Ploog v. HomeSide Lending, Inc., 209 F.Supp.2d 863, 873 (N.D.Ill.2002).

The purpose of a Rule 12(b)(6) motion to dismiss is to test the sufficiency of the complaint, not to resolve the case on the merits. Autry v. Nw. Premium Servs., 144 F.3d 1037, 1039 (7th Cir.1998). A plaintiff must plead “only enough detail to give the defendant fair notice of what the claim is and the grounds upon which it rests.” Reger Dev., LLC v. Nat'l City Bank, 592 F.3d 759, 764 (7th Cir.2010) (quoting Tamayo v. Blagojevich, 526 F.3d 1074, 1083 (7th Cir.2008) (internal quotation marks omitted). In evaluating a motion to dismiss, the Court accepts as true all well-pleaded factual allegations in the complaint and draws all reasonable inferences in the plaintiff's favor. Ashcroft v. Iqbal, 556 U.S. 662, 679, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009)). In order to survive a motion to dismiss, a complaint must allege “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). A claim is facially plausible when the facts alleged allow the Court to draw a reasonable inference that the defendant is liable for the alleged wrong. Iqbal, 556 U.S. at 678, 129 S.Ct. 1937. In other words, “the court will ask itself could these things have happened, not did they happen.” Swanson v. Citibank, N.A., 614 F.3d 400, 404 (7th Cir.2010).

Generally, when ruling on a Rule 12(b)(6) motion to dismiss, the Court may only consider the plaintiff's complaint. Rosenblum v. Travelbyus.com Ltd., 299 F.3d 657, 661 (7th Cir.2002). Rule 10(c) of the Federal Rules of Civil Procedure, however, provides that “[a] copy of a written instrument that is an exhibit to a pleading is a part of the pleading for all purposes.” Fed.R.Civ.P. 10(c). The Seventh Circuit has held that “this rule includes a limited class of attachments to Rule 12(b)(6) motions.” Rosenblum, 299 F.3d at 661. Specifically, “documents attached to a motion to dismiss are considered part of the pleadings if they are referred to in the plaintiff's complaint and are central to his claim.” Wright v. Assoc. Ins. Cos. Inc., 29 F.3d 1244, 1248 (7th Cir.1994). Because the promissory note was attached to Plaintiff's first amended complaint, and is central to Plaintiff's claim and referred to extensively in the complaint, the Court will consider the Note in ruling on Defendant's Rule 12(b)(6) motion.

ANALYSIS

I. Whether Infratel is a necessary party under Rule 19

Defendant argues that this suit should be dismissed pursuant to Rule 12(b)(7) because Plaintiff failed to join Infratel as a party, in violation of Rule 19. (R. 16, Def.'s Second Mot. Dismiss ¶¶ 8, 17.) The purpose of Rule 19 is to “permit joinder of all materially interested parties to a single lawsuit so as to protect interested parties and avoid waste of judicial resources.” Askew v. Sheriff of Cook Cnty., 568 F.3d 632, 634 (7th Cir.2009) (quoting Moore v. Ashland Oil, Inc., 901 F.2d 1445, 1447 (7th Cir.1990)). To evaluate a Rule 12(b)(7) motion, the Court must engage in a two-step inquiry. First, the Court must determine whether a party is necessary under Rule 19(a). Thomas v. United States, 189 F.3d 662, 667 (7th Cir.1999). A person is a necessary party if:

(A) in that person's absence, the court cannot accord complete relief among existing parties; or

(B) that person claims an interest relating to the subject of the action and is so situated that disposing of the action in the person's absence may: (i) as a practical matter impair or impede the person's ability to protect the interest; or (ii) leave an existing party subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations because of the interest.

Fed.R.Civ.P. 19(a)(1). If absent parties meet this criteria, “the court must order that the person be made a party.” Fed.R.Civ.P. 19(a)(2).

Second, if a person is necessary under Rule 19(a) but cannot be joined, the Court must determine “whether, in equity and good conscience, the action must proceed among the existing parties or should be dismissed.” Fed.R.Civ.P. 19(b). Rule 19(b) lists a number of factors the Court should consider in making this determination, “with an emphasis on practical measures that will allow either the entire suit or part of it to go forward.” Askew, 568 F.3d at 635. If the Court finds that “there is no way to structure a judgment in the absence of the party that will protect both the party's own rights and the rights of the existing litigants, the unavailable party is regarded as ‘indispensable’ and the action is subject to dismissal upon proper motion under Federal Rule of Civil Procedure 12(b)(7).” Thomas, 189 F.3d at 667. Dismissal, however, is not the preferred outcome, particularly where the plaintiff would be deprived of a forum in which to bring his claim. Askew, 568 F.3d at 634.

A. Whether complete relief may be accorded among the existing parties

To determine whether Infratel is a necessary party, the Court first considers whether complete relief may be accorded among the existing parties without joinder. Fed.R.Civ.P. 19(a)(1)(A); Thomas, 189 F.3d at 667. “The term complete relief refers only to relief between the persons already parties, and not as between a party and the absent person whose joinder is sought.” Perrian v. O'Grady, 958 F.2d 192, 196 (7th Cir.1992) (quoting Arkwright–Boston Mfrs. Mut. Ins. Co. v. City of New York, 762...