United States District Court, E.D. Wisconsin
DECISION AND ORDER GRANTING MOTION TO
William C. Griesbach, District Judge.
case arises out of a dispute between four members of a
limited liability company named Fun2Play Toys, LLC, a toy and
novelty company. Two of the members, Plaintiffs David Grose
and Richard Corvese, sued two other members, Defendants Olen
B. Rice, III and Michael J. Bettiga, alleging claims for
breach of contract, breach of fiduciary duties, statutory
theft, and violation of Wisconsin's Uniform Securities
Act (“WUSA”). The complaint alleges the
plaintiffs are both citizens of Canada, Defendants Rice and
Bettiga are citizens of Wisconsin and Texas, respectively,
and the amount in controversy exceeds $75, 000. The court
thus has jurisdiction under 28 U.S.C. § 1332. The case
is before the court on Defendants' motion to dismiss for
failure to state a claim under Fed.R.Civ.P. 12(b)(6). Dkt.
No. 7. Plaintiffs have stipulated to the dismissal of their
WUSA claim, and Defendants' motion will be granted as to
the other claims with leave to replead.
12(b)(6) motion to dismiss tests the sufficiency of the
complaint. Fed.R.Civ.P. 12(b)(6); Hallinan v. Fraternal
Order of Police of Chi. Lodge No. 7, 570 F.3d 811, 820
(7th Cir. 2009). To state a cognizable claim, the plaintiff
is required to provide a “short and plain statement of
the claim showing that he is entitled to relief.”
Fed.R.Civ.P. 8(a)(2). A complaint must “give the
defendant fair notice of what the . . . claim is and the
grounds upon which it rests.” Conley v.
Gibson, 355 U.S. 41, 47 (1957). “While a complaint
attacked by a Rule 12(b)(6) motion to dismiss does not need
detailed factual allegations, . . . a plaintiff's
obligation to provide the ‘grounds' of his
‘entitle[ment] to relief' requires more than labels
and conclusions, and a formulaic recitation of the elements
of a cause of action will not do . . . .” Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 555 (2007) (citations
omitted). In considering a motion to dismiss, the court
construes all allegations in the complaint in the light most
favorable to the plaintiff, accepts all well-pleaded facts as
true, and draws all inferences in favor of the non-moving
party. Estate of Davis v. Wells Fargo Bank, 633 F.3d
529, 533 (7th Cir. 2011). But while well-pleaded facts are
accepted as true at the pleading stage, conclusions of law
are not. “Threadbare recitals of the elements of a
cause of action, supported by mere conclusory statements, do
not suffice.” Twombly, 550 U.S. at 555.
Twombly, 550 U.S. at 558-64, and Ashcroft v.
Iqbal, 556 U.S. 662, 684-85 (2009), the Supreme Court
adopted a plausibility standard for deciding Rule 12(b)(6)
motions to dismiss. The adoption of this standard was
intended in part to permit district courts to “weed
out” groundless lawsuits at the pleading stage in order
to limit the burden and high cost of litigation in cases with
non-existent claims. In describing the new standard, the
Supreme Court reminded lower courts and litigants that
“Rule 8 marks a notable and generous departure from the
hypertechnical, code-pleading regime of a prior era, but it
does not unlock the doors of discovery for a plaintiff armed
with nothing more than conclusions.” Iqbal,
556 U.S. at 678-79. Under the “plausibility”
standard, “[t]o survive a motion to dismiss, a
complaint must contain sufficient factual matter, accepted as
true, ‘to state a claim to relief that is plausible on
its face.'” Id. at 678 (quoting
Twombly, 550 U.S. at 556). “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. (citing Twombly, 550 U.S. at 556). The
complaint's allegations “must be enough to raise a
right to relief above the speculative level.”
Twombly, 550 U.S. at 555 (citation omitted).
“[T]he plausibility standard is not akin to a
‘probability requirement,' but it asks for more
than a sheer possibility that a defendant has acted
unlawfully.” Iqbal, 556 U.S. at 678.
“[W]here the well-pleaded facts do not permit the court
to infer more than the mere possibility of misconduct, the
complaint has alleged-but it has not
‘show[n]'-‘that the pleader is entitled to
relief.'” Id. at 679 (quoting Fed.R.Civ.P.
standard is higher where there are allegations of fraud. For
complaints alleging claims sounding in fraud, Rule 9(b)
imposes a heightened pleading standard that requires a
plaintiff to “state with particularity the
circumstances constituting fraud or mistake.”
Fed.R.Civ.P. 9(b). Pleading with particularity means
providing “the who, what, when, where, and how: the
first paragraph of any newspaper story.” U.S. ex
rel. Lusby v. Rolls-Royce Corp., 570 F.3d 849, 853 (7th
Cir. 2009) (quoting DiLeo v. Ernst & Young, 901
F.2d 624, 627 (7th Cir. 1990)).
these principles in mind, the court now turns to the
allegations of the complaint.
OF THE COMPLAINT
complaint alleges that “Fun2Play is a toy and novelty
company that advertises the provision of ‘wacky and
creative' products for customers.” Compl. ¶ 9.
Plaintiffs allege that they were primarily responsible for
the success of the business. Plaintiff Corvese provided the
creative and artistic contributions, and Plaintiff Grose was
primarily involved in sales. Id. at ¶¶
12-14. Defendant Rice was a co-president of the company, but
contributed little before abruptly resigning in February
2018. Id. ¶¶ 115-17. The complaint alleges
that Rice controlled the monetary resources and used this
control to pay himself and a separate company he owned while
failing to pay Plaintiffs. Defendant Rice allegedly gave
Defendant Bettiga an ownership interest and power of attorney
over Fun2Play without Plaintiffs' consent. Both
Defendants are alleged to have interfered with
Plaintiffs' relationships with customers and associates
by making false statements about them and their relationship
to Fun2Play. Rice “fabricated ‘resignations'
by Corvese and Grose, and his counsel has attempted to move
forward as if Corvese and Grose have resigned.”
Id. ¶¶ 20, 27-30. The complaint alleges
that Plaintiffs have not resigned and are entitled to a share
of the seven figure revenue generated through their efforts.
Defendants are allegedly denying Plaintiffs those benefits
“through an intentional scheme to defraud Plaintiffs
and to benefit themselves.” Id. ¶¶
noted above, the remaining claims are breach of contract,
breach of fiduciary duty, and statutory theft. The court will
address each in turn.
Breach of Contract
of the complaint first realleges and incorporates all of the
foregoing paragraphs. Compl. ¶ 35. The complaint next
alleges that “through the above actions, Defendants
have breached their contractual obligations to Plaintiffs in
the Operating Agreement.” Id. ¶ 36.
Finally, the complaint alleges “these breaches are
material and substantial and have damaged Plaintiffs in an
amount to be determined at trial.” Id. ¶
37. Although the complaint alleges in an earlier paragraph
that the Operating Agreement for Fun2Play is “attached
hereto as Exhibit A, ” id.
¶ 11, no exhibit is attached. No contractual language is
cited in the complaint, and there is no indication of what
conduct of Defendants constitutes a breach of which
provision. There are no allegations about which of the two
Defendants did anything described as a breach of a
contractual provision, nor is there any explanation of how
whatever was done constitutes a breach of contract.
allegations are insufficient to state a claim for breach of
contract. The complaint fails to provide Defendants notice of
what conduct they engaged in that might be actionable under
such a theory. The allegation that “Defendants have
breached their contractual obligations to Plaintiffs in the
Operating Agreement” is nothing more than a conclusion
of law. Under Twombly and Iqbal,
conclusions of law are to be disregarded and are not enough
to “unlock the doors of discovery” and ...