Rustom v. Rustom
| Decision Date | 27 August 2019 |
| Docket Number | No. 17 C 9061,17 C 9061 |
| Parties | MAHER RUSTOM, Plaintiff, v. NASER RUSTOM and NORTH STAR TRUST COMPANY, Defendants. |
| Court | U.S. District Court — Northern District of Illinois |
Hon. Marvin E. Aspen
Plaintiff Maher Rustom's third amended complaint asserts claims for fraud, conversion, partition, and unjust enrichment against his brother, Defendant Naser Rustom. Defendant moves to dismiss. (Mot. (Dkt. No. 98) at 1.) For the reasons set forth below, we dismiss all counts with prejudice.
For purposes of a motion to dismiss, we accept all well-pleaded factual allegations as true and draw all reasonable inferences in favor of the plaintiff. Katz-Crank v. Haskett, 843 F.3d 641, 646 (7th Cir. 2016). The present dispute concerns ownership of a commercial property and two businesses. (3d Am. Compl. ¶¶ 1-2.) Plaintiff resides in and practices medicine in Saudi Arabia, occasionally visiting the United States. (Id. ¶¶ 4, 9.) He was not educated in the United States and "does not speak or write English well." (Id. ¶ 1.) Defendant, also a doctor, is a citizen of Illinois and fluent in English. (Id. ¶¶ 1, 5.) Plaintiff claims he is the "owner of the . . . assets and real property" that are the subject of this action and that Defendant unlawfully possesses those properties. (Id. ¶¶ 4-5.)
On September 26, 1995, Plaintiff bought a commercial building ("the Property") at 4941 North Kedzie in Chicago, Illinois, which he allowed Defendant to manage while Plaintiff lived in Saudi Arabia. (Id. ¶ 7.) Plaintiff alleges that during one of his visits to the United States in 1999, Defendant told him to sign a quitclaim deed that would allow Defendant to manage the Property "without problems from local government officials" in Plaintiff's absence. (Id. ¶ 9.) Plaintiff signed the quitclaim deed with no knowledge the document would transfer ownership to Defendant; he only intended for Defendant "to continue to manage the building and act on [Plaintiff's] behalf as the owner." (Id.) Plaintiff asserts "he lost title of ownership to the real property" in reliance on Defendant's representation of the deed's purpose. (Id. ¶ 33.)
Plaintiff purchased the Property in 1995 to provide a building in which the Galilee Medical Center, S.C. ("the Medical Center") would operate. (Id. ¶ 7.) Plaintiff alleges that he, Defendant, and their brother Amer Rustom created the Medical Center in 1994 with the understanding they were to each have a one-third ownership interest in the company. (Id. ¶ 8.) Plaintiff claims that Defendant misrepresented Plaintiff's ownership interest in the Medical Center because Defendant knew that only Illinois-licensed doctors could own medical centers under Illinois law. (Id. ¶¶ 7, 37.) Specifically, Defendant (1) made untruthful statements in 1994 and 1995 to Plaintiff about his ownership of the Medical Center and (2) presented Plaintiff with a fake document titled "trust" in 2003 showing each of the brothers as "1/3 beneficiaries to the Medical Center." (Id. ¶ 37.) Because Plaintiff believed Defendant's representations, he allowed Defendant to use the Property for the Medical Center rent-free. (Id. ¶ 39.)
Plaintiff alleges he has owned all the shares of another company, Preferred Open MRI Ltd. ("Open MRI"), since 2002, and that he fired Defendant from his positions as Open MRI's president, secretary, and treasurer on March 1, 2018. (Id. ¶ 12.) He claims that "[w]ithout Maher's knowledge or authorization, Naser merged [Open MRI] with a medical center" on an unspecified date to prevent Plaintiff from owning the resultant entity, as Defendant knew Plaintiff could not own a medical services corporation under Illinois law. (Id. ¶ 13.) He also alleges Defendant used false and fraudulent documents in attempting to prove Defendant purchased Open MRI. (Id. ¶¶ 14, 18.) Although Plaintiff contends he "has always been the owner of [Open MRI]," he simultaneously states that he wishes to "restore his ownership interest in the MRI company." (Id. ¶¶ 13, 15.) Finally, Plaintiff alleges Defendant knowingly misrepresented the income and expenses of Open MRI, and that Defendant's false statements and fake accounting documents led Plaintiff to receive an inadequate profit from the business. (Id. ¶ 42.)
Plaintiff filed his third amended complaint on September 3, 2018. Count I asserts that Defendant fraudulently induced Plaintiff to sign the 1999 quitclaim deed, (id. ¶¶ 27-35), while Count II claims Defendant fraudulently induced Plaintiff to allow the Medical Center to operate rent-free in the Property, (id. ¶¶ 36-40). Count III states Defendant committed common law fraud pertaining to the Property, the Medical Center, and Open MRI. (Id. ¶¶ 41-44.) Count IV alleges that Defendant wrongfully converted Open MRI. (Id. at ¶¶ 45-50.) Count V seeks a partition of Open MRI. (Id. at ¶¶ 51-56.) Count VI pleads unjust enrichment in the alternative. (Id. at ¶¶ 57-63.)
"The purpose of a motion to dismiss is to test the sufficiency of the complaint, not to decide the merits." Gibson v. City of Chi., 910 F.2d 1510, 1520 (7th Cir. 1990) (citing Triad Assocs., Inc. v. Chi. Housing Auth., 892 F.2d 583, 586 (7th Cir. 1989)). A court may grant a motion to dismiss under Rule 12(b)(6) only if a complaint lacks "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, 1974 (2007); accord Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S. Ct. 1937, 1949 (2009). The plausibility standard is not a "probability requirement," but it asks for "more than a sheer possibility that a defendant has acted unlawfully." Iqbal, 556 U.S. at 678, 129 S. Ct. at 1949 (quoting Twombly, 550 U.S. at 555, 127 S. Ct. at 1965). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. While the plaintiff need not plead "detailed factual allegations," he must allege facts sufficient "to raise a right to relief above the speculative level." Twombly, 550 U.S. at 555, 127 S. Ct. at 1964-65. At the motion to dismiss stage, we accept all well-pleaded factual allegations in the complaint as true and draw all inferences in the Plaintiff's favor. Cole v. Milwaukee Area Tech. Coll. Dist., 634 F.3d 901, 903 (7th Cir. 2011).
When a complaint pleads fraud or mistake, Rule 9(b) requires the circumstances constituting fraud or mistake to be stated with particularity. Fed. R. Civ. P. 9(b); see DiLeo v. Ernst & Young, 901 F.2d 624, 627 (7th Cir. 1990). To establish the "circumstances constituting fraud," the complaint must allege "the identity of the person who made the misrepresentation, the time, place and content of the misrepresentation, and the method by which the misrepresentation was communicated to the plaintiff." Windy City Metal Fabricators &Supply, Inc. v. CIT Tech. Fin. Servs., Inc., 536 F.3d 663, 668 (7th Cir. 2008) (quotation omitted). In other words, the plaintiff must plead the "who, what, when, where, and how" of the alleged fraud. Pirelli Armstrong Tire Corp. Retiree Med. Benefits Tr. v. Walgreen Co., 631 F.3d 436, 441-42 (7th Cir. 2011).
Defendant moves to dismiss all claims in Plaintiff's third amended complaint. (Mot.) Defendant argues that Plaintiff does not adequately allege all the elements of fraud as they pertain to the Property and the Medical Center. (Mot. ¶ 6.) Defendant argues that the law of the case doctrine forecloses Maher's claims of conversion and partition, (Mem. in Supp. of Mot. to Dismiss ("Mem.") (Dkt. No. 100) at 11-12), and contends Plaintiff's common law fraud claim fails to plead fraud with particularity under Federal Rule 9(b). (Mot. ¶ 7.) Finally, Defendant argues that Plaintiff's unjust enrichment claim must fail because his underlying fraud claims are deficient. (Mem. at 13.) We address each issue in turn.
Counts I and III allege Defendant committed fraud with respect to the Property by inducing Plaintiff to sign a quitclaim deed, making false statements, and showing Plaintiff false documents concerning the Property's income and expenses. (3d Am. Compl. ¶¶ 29, 42.) Defendant moves to dismiss these claims for failure to plead that Plaintiff justifiably relied on Defendant's alleged misrepresentations. (Mem. at 5-7.) Plaintiff responds that Defendant did not "point out which elements are allegedly missing" from these claims. (Resp. (Dkt. No. 104) at 11.)
To state a claim for fraud in Illinois, a claimant must show "(1) a false statement of material fact, (2) knowledge or belief of the falsity by the party making it, (3) intention to inducethe other party to act, (4) action by the other party in reliance on the truth of the statements, and (5) damage to the other party resulting from such reliance." Board of Educ. of City of Chi. v. A, C and S, Inc., 131 Ill. 2d 428, 452, 546 N.E.2d 580, 591 (Ill. 1989). The claimant's reliance on the false statement must be justified. Siegel Dev., LLC v. Peak Const. LLC, 2013 IL App (1st) 111973, ¶ 114, 993 N.E.2d 1041, 1060 (1st Dist. 2013); Vill. of Palatine v. Palatine Assoc., LLC, 2012 IL App (1st) 102707, ¶ 80, 966 N.E.2d 1174, 1196 (1st Dist. 2012). Determining whether reliance was justified requires consideration of all the surrounding circumstances, including the facts known by the claimant at the time of the misrepresentation, as well as those the claimant could have discovered by exercising ordinary prudence. D.S.A. Fin. Corp. v. Cty. of Cook, 801 Ill. App. 3d 554, 560, 801 N.E.2d 1075, 1081 (1st Dist. 2003); Kinsey v. Scott, 124 Ill. App. 3d 584, 590, 463 N.E.2d 1359, 1365 (2d Dist. 1984). When a claimant "'has ample opportunity to...
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