Miller v. Harris
985 N.E.2d 671
Ill. App. Ct.2013Background
- Miller and Harris, as founders/shareholders of Claimsco International, Inc., sue Verchota (and others) for breach of fiduciary duty by the accountant who handled their and Claimsco’s tax matters.
- Plaintiffs allege an oral retention where Verchota would follow the 1990 shareholders’ agreement and perform accounting with loyalty and no conflicts.
- Plaintiffs claim Verchota also owed loyalty and candor, and concealed or failed to disclose conflicts and adverse actions benefiting others over the Millers.
- In 2002, Harris and Hoxie allegedly consolidated control; plaintiffs allege Verchota assisted this, while continuing to manage Claimsco’s books in a manner detrimental to the Millers.
- A 2002 Agreement and an Executive Agreement were signed under duress/coercion allegations; plaintiffs contend these agreements were invalid or not proper consideration.
- The trial court dismissed count II (breach of fiduciary duty) under 2-615; on appeal, the court reverses and remands for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Existence of fiduciary relationship | Miller asserts Verchota owed loyalty and honesty to them. | Verchota argues no fiduciary duty arose toward Millers in the stated context. | A fiduciary relationship existed |
| Whether the complaint states a breach of fiduciary duty | Alleges ongoing duty of loyalty and honesty and breach through adverse actions against Millers. | Argues allegations rely on contract; insufficient to plead fiduciary breach. | Complaint pleads breach of fiduciary duty |
| Effect of attached agreements on pleading | Agreements do not control fiduciary claim; claim is legally grounded in fiduciary duties. | The 2002 Agreement purportedly governs duties in performing accounting. | Agreements do not defeat fiduciary claim; not controlling in 2-615 context |
| Appropriate scope of section 2-615 review | Court should consider pleadings and reasonable inferences; discovery may flesh out terms. | Merits of the agreements should be resolved later; not proper at 2-615 stage. | Scope limited to well-pleaded allegations; not to merits |
| Whether other defenses render the claim non-viable | Claims are for fiduciary duty, not contract; unclean hands and malpractice defenses are inappropriate at this stage. | Various defenses (coercion, duress, lack of consideration, lack of duty) bar the claim. | Defenses do not defeat pleading; remand for further proceedings |
Key Cases Cited
- Khan v. Deutsche Bank AG, 2012 IL 112219 (Illinois Supreme Court, 2012) (fiduciary duty requires existence of a fiduciary relationship and breach; 2-615 analysis limited to pleadings)
- Armstrong v. Guigler, 174 Ill. 2d 281 (Illinois Supreme Court, 1996) (fundamental rules on fiduciary duties and agency)
- Beaton & Associates, Ltd. v. Joslyn Manufacturing & Supply Co., 159 Ill. App. 3d 834 (Illinois Appellate Ct. 1987) (fiduciary duties include candor and loyalty)
- County of Cook v. Barrett, 36 Ill. App. 3d 623 (Illinois Appellate Ct. 1975) (agents must not place personal interests ahead of principals)
- Gonzalez v. American Express Credit Corp., 315 Ill. App. 3d 199 (Illinois Appellate Ct. 2000) (fiduciary duties arise from relationship; duties of honesty and loyalty)
- Abrams v. Illinois College of Podiatric Medicine, 77 Ill. App. 3d 471 (Illinois Appellate Ct. 1979) (oral contract specificity standards; fine distinctions for pleadings)
- Makela v. Roach, 142 Ill. App. 3d 827 (Illinois Appellate Ct. 1986) (professional malpractice/unclean hands considerations at pleadings stage)
- Wabash County v. Illinois Municipal Retirement Fund, 408 Ill. App. 3d 924 (Illinois Appellate Ct. 2011) (look to substance over form when evaluating fiduciary claims)