United States District Court, E.D. Wisconsin
DECISION AND ORDER
ADELMAN District Judge
Milwaukee Center for Independence, Inc., brings this action
for breach of contract against defendants Milwaukee Health
Care, LLC ("MHC"), William Nicholson, and William
Koski. The plaintiff alleges that MHC failed to remit funds
that it collected from third parties on the plaintiff’s
behalf. MHC is a Delaware limited liability company, and
defendants Nicholson and Koski are its members. Before me now
is Nicholson and Koski’s motion to dismiss the amended
complaint, as it pertains to them, under Federal Rule of
Civil Procedure 12(b)(6).
to the allegations of the plaintiff’s amended
complaint, the plaintiff operates the Nexday Brain Injury
Rehab Center (the "BIRC"), which provides care for
people recovering from a brain injury or stroke, or who
require rehabilitative services because of a disability.
Those whom the BIRC assists are not ready to be discharged
from inpatient care, and the BIRC’s services are
designed to enable patients to return home through a
community re-entry program. Under Wisconsin licensing and
certification requirements, the plaintiff must operate the
BIRC within a skilled nursing facility.
MHC operates a skilled nursing facility known as Wellspring
of Milwaukee. Between June 2014 and January 2016, the
plaintiff operated the BIRC within the Wellspring facility.
Most recently, this was pursuant to a contract between the
plaintiff and MHC dated June 1, 2015. Under the contract, the
plaintiff agreed to provide the professional and other
services necessary to operate the BIRC, and MHC agreed to set
aside, for the exclusive use of the BIRC, a designated 18-bed
unit at Wellspring. Also under the contract, MHC agreed to
bill third parties for the BIRC’s services and to remit
the amounts collected, less a deduction for the amounts owed
to Wellspring, to the plaintiff.
complaint, the plaintiff alleges that MHC breached the
contract by failing to remit to the plaintiff at least $748,
252 in BIRC collections. Discovery relating to this claim is
underway. However, besides suing MHC for breach of contract,
the plaintiff also sues William Nicholson and William Koski,
who are the members of MHC, contending that they are
personally liable for the breach. The plaintiff contends
that, although members of a limited liability company are not
ordinarily liable for the company’s obligations, here
Nicholson and Koski agreed in the contract to be personally
liable for the BIRC collections. Nicholson and Koski have
moved to dismiss this claim, contending that, as a matter of
law, they are not personally liable for the BIRC collections.
survive a Rule 12(b)(6) motion, plaintiff must "state a
claim to relief that is plausible on its face." Bell
Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). "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." Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009). The complaint must, at a minimum, "give the
defendant fair notice of what the claim is and the grounds
upon which it rests." Twombly, 550 U.S. at 555.
In construing plaintiff’s complaint, I assume all
factual allegations to be true but disregard statements that
are conclusory. Iqbal, 556 U.S. 678.
present case, the parties agree that Wisconsin contract law
applies to their dispute. Under Wisconsin law, a
court’s primary goal in contract interpretation is to
give effect to the parties’ intent, as expressed in the
language of the contract. Maryland Arms Ltd. P’ship
v. Connell, 326 Wis.2d 300, 311 (2010). The court must
"interpret the language consistent with what a
reasonable person would understand the words to mean under
the circumstances." Id.
plaintiff contends that Nicholson and Koski are liable for
the BIRC collections because the contract between the
plaintiff and MHC contains a clause stating that the
"obligations of Facility" (i.e., of MHC)
under the contract "shall be binding" on various
other persons and entities, including MHC’s
"members." The full text of this clause is as
The obligations of Facility contained in this Amended
Agreement shall be binding upon Facility, its members,
managers, directors, officers, employees, agents, and
independent contractors, as well as Facility’s
successors and assigns (hereinafter defined) regardless of
any actual or constructive notice to them.
Restated Traumatic Brain Injury Servs. Agmt. [hereinafter
"Conrtact"] § 21. This "obligations"
clause is found within a larger section of the contract
containing other general clauses that are ordinarily part of
a contract between commercial entities, including an
integration clause, a clause forbidding oral modifications,
clauses governing waiver of rights under the contract, and a
clause prohibiting assignment of a party’s rights
without the consent of the other party. Id.
obligations clause resembles a typical, boilerplate
"successors and assigns" clause. Such clauses
usually provide that a contract is "binding upon"
and "inures to the benefit of" the parties and
their successors and assigns. See Negotiating and
Drafting Contract Boilerplate 87 (Tina L. Stark ed.
2003). Here, it is clear that the obligations clause was
modeled on this type of clause. The difference is that the
drafter of the obligations clause expanded the list of
persons supposedly bound by the contract beyond merely the
parties and their successors and assignees. The list now
includes almost any person or entity that is affiliated with
MHC-its "members, managers, directors, officers,
employees, agents, and independent contractors." Another
difference between a typical successors-and-assigns clause
and the obligations clause is that the latter refers to only
one party’s "obligations" and omits any
reference to the contract’s benefits.
on contract drafting have criticized the typical
successors-and-assigns clause, noting that its meaning is
unclear and that those who insert it into contracts usually
do not know the function it is intended to serve.
See Stark, supra, at 81 (noting that
successors-and-assigns clauses are inserted into contracts
"almost ritualistically" and that "its
function and effect are rarely understood"); Kenneth A.
Adams, It’s Time to Get Rid of the "Successors
and Assigns" Provision, The Advocate, June/July
2013, at 30, 31 (stating that successors-and-assigns clause
is "a useless provision that survives because drafters
are unsure what function it serves and so are loath to get
rid of it, " and that "it’s sufficiently
obscure that one can project onto it all sorts of unlikely
meanings"); Stephen L. Sepinuck, Successors &
Assigns Clauses, The Transactional Lawyer, Apr.2014, at
4, 7 (stating that a typical successors-and-assigns clause
"serves no clear purpose and can be safely
discarded"). These experts have identified five (and
sometimes more) potential purposes of such clauses: (1) to
bind an assignee to perform the assignor’s obligations;
(2) to bind a nonassigning party to perform in favor or the
assignee; (3) to determine whether the contract permits
assignment in the first place; ...