130 F. Supp. 3d 1198
N.D. Ill.2015Background
- Cohn sold Manhattan Mortgage’s assets to Guaranteed Rate, Inc. (GRI) via an APA and then entered an employment Branch Manager Agreement (BMA) with GRI as Executive VP; the APA was between GRI and Manhattan Mortgage, not Cohn.
- Disputes arose over compensation and Cohn’s duties; GRI allegedly reduced her responsibilities and restricted her access beginning spring 2014.
- Cohn signed a March 18, 2014 Release (and a March 26 Addendum) that released GRI and related parties from claims accruing before March 18, 2014; GRI later executed the Release.
- Cohn’s counsel treated GRI’s conduct as constructive discharge and set August 8, 2014 as her final date; GRI refused to pay alleged termination compensation and threatened post-employment restrictions.
- Cohn sued asserting: (1) declaratory judgment (post‑employment restrictions invalid), (2) breach of contract (APA and BMA), (3) breach of implied covenant of good faith and fair dealing, and (4) fraud against GRI’s president Ciardelli. Defendants moved to dismiss the FAC.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether declaratory‑judgment claim presents an actual controversy | Cohn sought a declaration that she was constructively discharged and thus not subject to post‑employment restrictions | GRI’s threat of future suit was speculative and directed to Cohn’s former employer, not Cohn | Dismissed with prejudice: no actual controversy and claim duplicative of breach claim |
| Whether Cohn can enforce the APA | Cohn contends she is third‑party beneficiary (as Manhattan’s sole owner) and entitled to APA benefits | APA is between GRI and Manhattan Mortgage; contract language does not establish direct third‑party beneficiary rights | Dismissed with prejudice as to APA: Cohn not a party nor intended direct beneficiary (except limited disability clause not relied on) |
| Whether BMA breach is sufficiently pleaded (constructive discharge) | Cohn alleges GRI materially reduced her duties and effectively forced her resignation | Defendants argue duties listed are plaintiff’s obligations, not entitlements, and eliminating single duties isn't breach | Denied as to BMA: plausible claim that overall reduction of responsibilities and exclusion supported constructive discharge and breach |
| Whether fraud claim against Ciardelli survives | Cohn alleges false statements by Ciardelli before and after the Release induced harm | Defendants: pre‑Release statements are released by the March 18 Release; post‑Release statement relied on (the Release recital) was not alleged to have been made by Ciardelli personally | Dismissed without prejudice as to fraud: pre‑Release statements barred by Release; FAC fails to plead a false statement by Ciardelli with required particularity |
Key Cases Cited
- Yeftich v. Navistar, Inc., 722 F.3d 911 (7th Cir. 2013) (pleading standard and drawing inferences on Rule 12(b)(6))
- Long v. Shorebank Dev. Corp., 182 F.3d 548 (7th Cir. 1999) (pleading and inference principles)
- Williamson v. Curran, 714 F.3d 432 (7th Cir. 2013) (limits on materials considered on Rule 12(b)(6))
- Trippe Mfg. Co. v. Am. Power Conversion Corp., 46 F.3d 624 (7th Cir. 1995) (actual controversy requirement for declaratory relief)
- Hyatt Int’l Corp. v. Coco, 802 F.3d 707 (7th Cir. 2015) (threatened litigation must be immediate and real)
- Tempco Elec. Heater Corp. v. Omega Eng’g, Inc., 819 F.2d 746 (7th Cir. 1987) (discretion to decline declaratory relief when duplicative)
- Martis v. Grinnell Mut. Reinsurance Co., 905 N.E.2d 920 (Ill. App. Ct. 2009) (presumption contracts bind only parties; third‑party beneficiary test)
- Ball Corp. v. Bohlin Bldg. Corp., 543 N.E.2d 106 (Ill. App. Ct. 1989) (third‑party beneficiary status must be practically an express declaration)
- Trapkus v. Edstrom’s Inc., 489 N.E.2d 340 (Ill. App. Ct. 1986) (material reduction in duties can support breach/constructive discharge)
- Connick v. Suzuki Motor Co., Ltd., 675 N.E.2d 584 (Ill. 1996) (elements of common‑law fraud)
- Rakowski v. Lucente, 472 N.E.2d 791 (Ill. 1984) (releases can bar fraud claims)