367 F. Supp. 3d 66
S.D. Ill.2019Background
- Plaintiff William H. Jennings II, a retired Wall Street executive, entered into a Management Agreement and an Employment Agreement in January 2017 with Hunt Financial Services, LLC (HFS), a wholly‑owned broker‑dealer subsidiary of Hunt Companies, Inc. (HCI).
- The Employment Agreement named Jennings president of HFS, guaranteed minimum seven years employment, and obligated him to build HFS into a functioning broker‑dealer; Jennings alleges he performed and built the business.
- In early 2018 HCI allegedly sought to "re‑trade" the agreements, threatened to withhold a $1.5 million bonus and to manufacture grounds for termination; Jennings refused and was terminated on February 1, 2018.
- Jennings sued HFS and HCI asserting two breach of contract claims (each Agreement), a breach of the covenant of good faith and fair dealing claim, a New York labor law wage claim, and demanded punitive damages. Diversity jurisdiction was asserted under 28 U.S.C. § 1332.
- Defendants moved to dismiss all claims against HCI, the labor law and covenant claims (and punitive damages), and to strike punitive damages; Plaintiff withdrew the labor law, covenant of good faith, and punitive damages claims in opposition.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the covenant of good faith, NY labor law claims, and punitive damages survive | Plaintiff implicitly conceded those claims cannot survive and withdrew them | Move to dismiss as unopposed | Court: Dismissed with prejudice (claims abandoned) |
| Whether HCI (a non‑signatory parent) can be liable on contracts signed by HFS | Jennings: HCI manifested intent to be bound by participating in negotiations, providing resources, and benefiting from the agreements | HCI: Theory first raised in opposition; should be dismissed for failing to plead theory and for insufficient facts showing intent | Court: Denied dismissal as to HCI; allegations (parent/subsidiary relationship, HCI officers negotiating/approving, resource promises) sufficiently allege manifest intent to be bound |
| Whether a party may first assert a legal theory in opposition brief rather than the complaint | Jennings: He did not add new facts—only advanced a legal theory based on pleaded facts | HCI: Legal theory must be pled in complaint; cannot be raised first in opposition | Court: Rejected HCI's procedural argument; distinguishing new factual pleading (impermissible) from advancing a legal theory based on facts already alleged |
| Pleading standard applicable on Rule 12(b)(6) review | N/A (context) | N/A | Court applied Twombly/Iqbal standards: accept factual allegations, reject conclusory assertions; here allegations survive dismissal for breach claims against HCI |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading standard: plausible claim required; courts need not accept conclusory allegations)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (pleading must state a plausible claim to relief)
- Horsehead Indus., Inc. v. Metallgesellschaft A.G., 239 A.D.2d 171 (1st Dep't 1997) (parent can be bound by subsidiary's contract where parent manifests intent to be bound)
- MBIA Ins. Corp. v. Royal Bank of Canada, 706 F. Supp. 2d 380 (S.D.N.Y. 2009) (alter ego/privity evidence can support inference that parent intended to be bound)
- Travelers Cas. & Sur. Co. v. Dormitory Auth.-State of New York, 735 F. Supp. 2d 42 (S.D.N.Y. 2010) (complaint must provide notice of breach theory to non‑signatories; cannot raise new theories late in case)
- Verdi v. City of New York, 306 F. Supp. 3d 532 (S.D.N.Y. 2018) (district courts may deem claims abandoned when plaintiff fails to defend them in opposition)