Kunes Country Automotive Management Inc v. Walters
2:23-cv-01204
E.D. Wis.May 10, 2024Background
- Kunes Country Automotive Management, Inc. ("Kunes") and Ignition Dealer Services, Inc. ("IDS") filed suit after a failed business relationship involving F&I (finance and insurance) product marketing.
- Plaintiffs allege that key former employees (Walters, Hwang, Barkes) and their entities (CRT, Everly) engaged in self-dealing, secret kickbacks, and misappropriated client information with the help of former vendor, TruWarranty.
- After resignations in 2022, Plaintiffs discovered alleged fraudulent activity, including diversion of clients, trade secret theft, and deletion of CRM data.
- Plaintiffs brought 20 claims, including for fraud, Lanham Act, RICO, and various state torts and statutory claims.
- Defendants filed motions to dismiss under Rule 12(b)(6), challenging the sufficiency and plausibility of numerous claims.
- The court decided only which claims could go forward at the pleading stage—not the merits—applying heightened standards for fraud and federal law requirements.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Fraud claims (Walters, TruWarranty) | Defendants fraudulently concealed secret kickbacks, inducing contracts. | Claims lack Rule 9(b) particularity; not material; economic loss doctrine bars claims. | Sufficiently pleaded to survive dismissal. |
| Lanham Act claims | Defendants made false statements to clients, harming Plaintiff's reputation. | Not pleaded with Rule 9(b) particularity; lacks commercial advertising/passing off. | Insufficiently pleaded and dismissed. |
| RICO claims | Defendants formed an enterprise to engage in racketeering activity. | No plausible enterprise or pattern; just a failed business dispute. | No viable RICO claim; dismissed. |
| Unjust enrichment | Defendants unjustly retained benefits from secret commissions, etc. | Claims rely on express contracts; inconsistent with pleadings. | Dismissed; contractual claims preclude unjust enrichment. |
| Conversion | Defendants wrongly took/kept Plaintiff’s property (commissions). | Lack of specificity; defendants didn't owe Plaintiff that money. | Adequately pleaded as to Walters, CRT, Everly. |
| State statutory claims (trade secrets, civil theft, identity theft) | Defendants misappropriated trade secrets, stole money, used login info without consent. | Not all defendants were employees; some claims lack factual support. | Some claims (against Everly, CRT) dismissed; others survive. |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (pleading standard for plausibility)
- Ashcroft v. Iqbal, 556 U.S. 662 (pleading factual content for reasonable inference)
- Roberts v. City of Chicago, 817 F.3d 561 (facts taken as true at dismissal stage)
- Borsellino v. Goldman Sachs Grp., Inc., 477 F.3d 502 (fraud claims subject to Rule 9(b))
- Ramsden v. Farm Credit Servs. of N. Cent. Wis. ACA, 590 N.W.2d 1 (elements of fraud in Wisconsin)
- Kaloti Enters. v. Kellogg Sales Co., 699 N.W.2d 205 (nondisclosure and duty to disclose)
- Boyle v. United States, 556 U.S. 938 (RICO enterprise structure)
- Menzies v. Seyfarth Shaw, 943 F.3d 328 (civil RICO limitations)
- Midwest Grinding Co. v. Spitz, 976 F.2d 1016 (RICO pattern: continuity prong)
- Sears v. Likens, 912 F.2d 889 (Rule 9(b) specificity requirement)
- Ollerman v. O’Rourke Co., 288 N.W.2d 95 (materiality in fraud)
- N. Highland Inc. v. Jefferson Mach. & Tool Inc., 898 N.W.2d 741 (elements of civil conspiracy in Wisconsin)