Firestone Financial Corp. v. Meyer
2015 U.S. App. LEXIS 13978
| 7th Cir. | 2015Background
- Firestone (Massachusetts) made four loans totaling $254,114.99 to JHM (Illinois) between June 2012 and June 2013; loans were secured by equipment and guaranteed by J H Meyer Enterprises, Dolphin Laundry Services, and John R. Meyer.
- JHM defaulted; Firestone sued in federal district court (diversity) for breach of contract, breach of guaranty, replevin, and detinue against JHM, the three corporate guarantors, and Meyer personally.
- Defendants denied breach, asserted promissory estoppel as a counterclaim, and raised affirmative defenses (including promissory estoppel and prior breach) based on allegations that a Firestone VP (McAllister) promised a $500,000 line of credit and later assured financing on 2013 equipment purchases on prior terms.
- After defense counsel withdrew and corporate defendants went unrepresented, the district court entered default against the corporate defendants, then granted Firestone’s Rule 12(b)(6) motion dismissing Meyer’s counterclaim as facially implausible.
- The district court later granted summary judgment for Firestone on Meyer’s guaranty liability; the court did not explicitly analyze Meyer’s promissory-estoppel or prior-breach defenses but appears to have rejected them as barred by the earlier dismissal.
- Meyer appealed; the Seventh Circuit reversed both the dismissal of the counterclaim and the grant of summary judgment, and remanded for further proceedings.
Issues
| Issue | Firestone's Argument | Meyer’s Argument | Held |
|---|---|---|---|
| Whether the promissory-estoppel counterclaim should be dismissed under Rule 12(b)(6) as implausible | The oral promise of a $500,000 line of credit to a small business was implausible and thus not pled plausibly | Allegations of a clear promise by a Firestone VP, foreseeable reliance, and resulting detriment state a plausible promissory-estoppel claim | Reversed: the complaint’s nonconclusory factual allegations must be accepted as true and are sufficient to state a plausible claim under Twombly/Iqbal |
| Whether Meyer waived the right to challenge dismissal by not responding to the motion to dismiss | Failure to respond forfeits the issue | The court’s legal rationale can be attacked on appeal even if the respondent did not oppose the motion | Held for Meyer: appellate review permitted because he challenges the district court’s legal theory rather than raising a new issue |
| Whether the district court properly granted summary judgment on Meyer’s guaranty claim by rejecting his affirmative defenses (promissory estoppel, prior breach) | These defenses were barred because the court had already dismissed the counterclaim as implausible | The defenses implicated the same factual allegations as the now-reinstated counterclaim and therefore should not have been rejected without proper analysis | Reversed: district court erred in relying (implicitly) on its erroneous dismissal; summary judgment cannot stand on that ground |
| Whether the district court needed to clarify its reasoning for rejecting defenses on summary judgment | Firestone argued district court’s ruling stands; no other grounds were necessary | Meyer argued the court relied on the dismissed counterclaim and provided no alternative reasoning or notice of other grounds | Court must not grant summary judgment on unargued grounds without notice; because the only asserted ground was erroneous, reversal and remand required |
Key Cases Cited
- Camasta v. Jos. A. Bank Clothiers, Inc., 761 F.3d 732 (7th Cir. 2014) (Rule 12(b)(6) motion context and standards)
- Bruce v. Guernsey, 777 F.3d 872 (7th Cir. 2015) (de novo review of Rule 12(b)(6) dismissal)
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (plausibility standard for pleading)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (Twombly pleading principles)
- Wigod v. Wells Fargo Bank, N.A., 673 F.3d 547 (7th Cir. 2012) (promissory-estoppel pleading sufficiency)
- Newton Tractor Sales, Inc. v. Kubota Tractor Corp., 233 Ill.2d 46 (Ill. 2009) (elements of promissory estoppel under Illinois law)
- Williams v. City of Chicago, 733 F.3d 749 (7th Cir. 2013) (courts may not grant summary judgment on unsupported grounds without notice)
- Sidney Hillman Health Ctr. of Rochester v. Abbott Labs., 782 F.3d 922 (7th Cir. 2015) (distinguishing waiver from ability to attack a district court’s legal theory on appeal)