2020 IL App (1st) 191072
Ill. App. Ct.2020Background
- Plaintiff Feis Equities, an arbitrage firm, owned Endurance Series C preferred shares and sold (and short‑sold) those shares in October 2017.
- Endurance merged into Sompo Holdings (March 2017); on Sept. 27, 2017 Endurance transferred substantially all assets/liabilities to Sompo International and said it would commence a voluntary liquidation.
- On Oct. 6, 2017 Endurance announced a liquidation distribution of $25.167 per preferred share ("in full satisfaction"); trading continued above that level through Oct. 20.
- On Nov. 6, 2017 Endurance announced an additional $1 final payment for holders of record Oct. 23, 2017; Feis had already sold and therefore did not receive the extra $1 and alleges a $51,000+ loss.
- Feis sued Sompo International and Sompo Holdings for securities fraud (815 ILCS 5/12(F) & (I)), Consumer Fraud Act, common‑law fraud, conspiracy, breach of contract, and promissory estoppel.
- The trial court dismissed the initial and amended complaints (with leave), then dismissed the second amended complaint with prejudice; Feis appealed and the appellate court affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the complaint states securities‑fraud claims (misstatement/omission, reliance, scienter) | Feis: Endurance/Defendants misclassified the transaction as a liquidation (not a merger), publicly promised only $25.167, withheld that some shareholders would get $1 extra, inducing Feis to sell/short and causing loss. | Sompo: Public filings (attached) show merger, later asset sale and voluntary liquidation were distinct and accurately disclosed; no false statement or intent to deceive; plaintiff's theory is hindsight. | Court held the exhibits (filings/Certificate) refute Feis’s theory; no adequate facts pleaded showing false/misleading statements or scienter; dismissal affirmed. |
| Whether the Certificate/transactions obligated payment of $26 (merger price) rather than $25 (liquidation price) | Feis: The March 2017 merger should have required a $26 redemption; the later asset sale/liquidation was a sham to avoid paying $26. | Sompo: Certificate distinguishes mergers (option to redeem at $26) from liquidations (mandatory $25); transactions were separately disclosed and within Certificate terms; no contractual breach. | Court held the Certificate and filings show no obligation to pay $26 at liquidation; plaintiff conflated distinct provisions and failed to plead facts showing no liquidation occurred. |
| Whether the later $1 payment and alleged trading pattern support an inference of fraud or concealed intent | Feis: Unusual trading above $25.167 and subsequent $1 payment permit an inference some shareholders had foreknowledge and defendants intended to mislead. | Sompo: Trading allegations are speculative; no pleaded facts showing defendants knew they would later pay $1 when announcing $25.167; business decision explanations suffice. | Court found trading allegations speculative and not the necessary/probable inference of fraud; defendants could lawfully make additional payment. |
| Whether promissory estoppel was adequately pled | Feis: October filings and Certificate promised that $25.167 was "in full satisfaction," Feis relied and was harmed. | Sompo: No unambiguous promise that $25.167 was the only possible payment; filings were fulfilled when liquidation payments were made; estoppel fails. | Court held promissory‑estoppel element (unambiguous promise and detrimental reliance) not adequately alleged; dismissal proper. |
Key Cases Cited
- Fillmore v. Taylor, 2019 IL 122626 (explains standard for 2‑615 motion to dismiss)
- Doe v. Coe, 2019 IL 123521 (Illinois pleading requirements; deferential review but must plead facts)
- Platinum Partners Value Arbitrage Fund, Ltd. P’ship v. Chicago Board Options Exchange, 2012 IL App (1st) 112903 (elements of securities claims under 815 ILCS 5/12)
- Slay v. Allstate Corp., 2018 IL App (1st) 180133 (exhibits attached to complaint become part of the pleading and control)
- Kopnick v. JL Woode Mgmt. Co., 2017 IL App (1st) 152054 (allegations cannot be rescued by conclusory assertions; exhibits prevail over allegations)
- First Mercury Ins. Co. v. Ciolino, 2018 IL App (1st) 171532 (elements of promissory estoppel)
- Pack v. Maslikiewicz, 2019 IL App (1st) 182447 (elements of Consumer Fraud Act and common‑law fraud pleading requirements)