Scanlan ex rel. Scanlan v. Eisenberg

913 F. Supp. 2d 591, 2012 WL 5568819, 2012 U.S. Dist. LEXIS 163475
District Court, N.D. Illinois·Decided November 15, 2012·No. No. 09 C 5026·Published·Cited by 2 cases

Opinion

MEMORANDUM OPINION

JOHN F. GRADY, District Judge.

Before the court is the motion of defendants Marshall Eisenberg, Earl Melamed, and Neal, Gerber & Eisenberg LLP (collectively, the “lawyer defendants”) to dismiss Counts I, II, and III of the Amended Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). For the reasons explained below, the motion is. granted in part and denied in part.

BACKGROUND

Plaintiff Mary Bucksbaum Scanlan (“Scanlan”) is the primary beneficiary of several discretionary trusts (the “Trusts”) that were established by her father and uncle, who were the' founders of General Growth Properties (“General Growth”), one of the largest publicly-traded real estate investment trusts in the United States. Scanlan’s children, Martin and Stella Scanlan, who are also plaintiffs, are contingent remaindermen of the Trusts. Each of the Trusts authorizes the corporate trustee, defendant General Trust Company (the “Trustee” or “GTC”), to distribute to Scanlan all or as much of the trust’s net income or principal as the Trustee deems necessary for her support or in her best interests.

It is alleged that defendant Neal, Gerber & Eisenberg (the “Law Firm”), primarily through two of its partners, defendants Marshall Eisenberg and Earl Melamed, generally represented Scanlan throughout her adult life “for every matter in which she needed legal advice.” (Am. Compl. ¶ 38.) At the same time, they represented the Trustee; General Growth; other Bucksbaum family members, some of whom managed General Growth; and the investment vehicles for the Trusts and the trusts of other Bucksbaum family members. Eisenberg and Melamed both own substantial amounts of General Growth stock. They also personally control the Trustee; Eisenberg is its majority owner, and both serve on its Board of Directors.

In 2007 and 2008, the price of General Growth stock fell dramatically. The plaintiffs allege that despite this fact, and without Mary’s knowledge, the defendants caused the Trusts to purchase (with the proceeds of the “Citi Loan,” a loan secured [594]*594by a pledge of the Trusts’ assets) more than $800 million in additional shares of the stock and explained that the purchases were an effort to stabilize the stock’s value in accordance with what the Trustee deemed to be in the best interest of the “Bucksbaum Family” as a whole. It is also alleged that without Mary’s knowledge, the defendants “caused assets owned by Mary’s Trusts to be used to make personal unsecured loans totaling at least $90 million to two officers of General Growth for the purpose of allowing those officers to meet margin calls associated with their holdings of General Growth stock.” (Am. Compl. ¶ 16.)

The plaintiffs complain that these transactions were not made in their best interests, but to further the interests of others such as the lawyer defendants and other members of the Bucksbaum family. The eight-count amended complaint contains different permutations of claims for legal malpractice, breach of fiduciary duty, and aiding and abetting the breach. It also seeks removal of the Trustee.

The lawyer defendants move to dismiss Counts I and II, which are the claims of Scanlan alone against the lawyer defendants alone for legal malpractice and breach of fiduciary duty. We will discuss those two counts below. They also move to dismiss Count III, a legal malpractice claim asserted by all three plaintiffs as third-party beneficiaries of the lawyer defendants’ attorney-client relationship with the Trustee. We have already dismissed Count III with prejudice as to Scanlan’s children’s claims. Scanlan v. Eisenberg, No. 09 C 5026, 2011 WL 862748, at *5 (N.D.Ill. Mar. 9, 2011). The lawyer defendants contend that our basis for dismissing the children’s claims applies equally to Scanlan’s claim, and Scanlan states in her response that she does not contest the dismissal of Count III. (PL’s Resp. at 17 n. 6.) Therefore, Count III will be dismissed with prejudice in its entirety. ■

DISCUSSION

In Count I of the amended complaint, Scanlan alleges that she had an attorney-client relationship with the lawyer defendants and that the lawyer defendants committed legal malpractice by breaching their duties to her in several ways. In Count II, which is also based on this alleged attorney-client relationship, Scanlan alleges that the lawyer defendants breached their fiduciary duties to her. The lawyer defendants argue that Counts I and II do not sufficiently allege an attorney-client relationship. They also contend that Count II must be dismissed because it is duplicative of Count I.

A. Do Counts I and II Sufficiently Allege an Attorney-Client Relationship?

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. 5B Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1356, at 354 (3d ed. 2004). Under federal notice-pleading standards, a complaint must offer more than just “labels and conclusions” but need not contain “detailed factual allegations.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). To 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.’ ” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Twombly, 550 U.S. at 570, 127 S.Ct. 1955). “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 al[595]*595leged.” Iqbal, 556 U.S. at 678, 129 S.Ct. 1937.

The Court of Appeals for the Seventh Circuit has observed that “[p]leading standards in federal litigation are in ferment after Twombly and Iqbal,” In re Text Messaging Antitrust Litigation, 630 F.3d 622, 627 (7th Cir.2010), and has issued additional guidance to the district courts. It has emphasized that Twombly and Iqbal “do not change” the fact that “[o]ur system operates on a notice pleading standard.” Bissessur v. Ind. Univ. Bd. of Trs., 581 F.3d 599, 603 (7th Cir.2009). The Court has also addressed the “plausibility” standard as follows:

The Court said in Iqbal that the “plausibility standard is not akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted unlawfully.” This is a little unclear because plausibility, probability, and possibility overlap. Probability runs the gamut from a zero likelihood to a certainty. What is impossible has a zero likelihood of occurring and what is plausible has a moderately high likelihood of occurring.

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Scanlan ex rel. Scanlan v. Eisenberg, 913 F. Supp. 2d 591, 2012 WL 5568819, 2012 U.S. Dist. LEXIS 163475 (N.D. Ill. 2012).

913 F. Supp. 2d 591 (Scanlan ex rel. Scanlan v. Eisenberg) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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