Zwick v. Inteliquent, Inc.
83 F. Supp. 3d 804
N.D. Ill.2015Background
- Plaintiff David Zwick, former CFO of Inteliquent, alleges he was terminated in August 2013 in retaliation for raising concerns about insider share sales and after an internal investigation cleared him of anonymous allegations.
- Zwick claims breach of stock grant and option agreements (accelerated vesting on a "Change of Control") based on an April 30, 2013 asset sale; he alleges roughly $54.5M of assets were sold against an asserted company fair market value of ~$96M, exceeding the 40% threshold.
- Zwick also alleges wrongful termination in violation of Sarbanes-Oxley and Illinois common law, and claims unpaid final compensation under the IWPCA against Inteliquent and two in-house officers, Richard Monto and John Harrington.
- Defendants moved to dismiss Counts I & II (Change of Control breach), Count VIII (Illinois common-law retaliatory discharge), and Count IX as pleaded against Monto and Harrington; the court considered Zwick’s proposed amended allegations for Count IX.
- The court took judicial notice of Inteliquent’s SEC 10-Q balance sheet showing substantially higher total assets than Zwick alleged, but declined to treat those figures as dispositive for purposes of a 12(b)(6) motion given ambiguities about whether balance-sheet values equal "total gross fair market value."
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the April 30, 2013 asset sale triggered "Change of Control" acceleration of stock grants/options | Zwick: sale was ~57% of company value based on his alleged ~$96M FMV, so >40% threshold | Inteliquent: SEC 10-Q shows much larger asset base (~$150.6M) so sale was only ~33% and not a Change of Control | Motion to dismiss Counts I & II denied; factual dispute and valuation method ambiguity render complaint plausible |
| Whether Illinois common-law retaliatory discharge claim can proceed alongside Sarbanes-Oxley claim | Zwick: both claims should proceed; state common law permits punitive damages not available under SOX | Inteliquent: Illinois law bars common-law retaliation claims when a statutory remedy provides an adequate alternative deterrent | Count VIII dismissed with prejudice; SOX provides adequate alternative remedy under Illinois law |
| Whether original IWPCA allegations against Monto and Harrington state a claim | Zwick: conceded original pleading deficient; sought leave to amend with additional facts | Monto & Harrington: even amended allegations fail because only employers/board decisions can give rise to personal IWPCA liability; they were not decision-makers | Court granted leave to amend and held amended allegations sufficiently allege these individuals knowingly permitted the violation; Count IX as amended survives |
| Whether leave to amend Count IX should be granted | Zwick: proposed amendments plausibly allege officers’ roles in severance/final pay decisions | Defendants: amendments insufficient; leave should be denied | Court granted leave to amend and ordered Zwick to file second amended complaint incorporating proposed allegations |
Key Cases Cited
- Hallinan v. Fraternal Order of Police of Chicago Lodge No. 7, 570 F.3d 811 (7th Cir. 2009) (pleading sufficiency standard under Rule 12(b)(6))
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility standard for complaints)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (application of Twombly plausibility to factual allegations)
- Mann v. Vogel, 707 F.3d 872 (7th Cir. 2013) (accept well-pleaded facts and draw inferences for nonmoving party)
- Sanders v. Jackson, 209 F.3d 998 (7th Cir. 2000) (distinguishing balance-sheet values from fair-market valuations)
- Cole v. C.I.R., 871 F.2d 64 (7th Cir. 1989) (balance sheets reflect cost less depreciation, not necessarily fair market value)
- Fishman v. Estate of Wirtz, 807 F.2d 520 (7th Cir. 1986) (market valuation differs from balance-sheet accounting)
- Andrews v. Kowa Printing Corp., 838 N.E.2d 894 (Ill. 2005) (IWPCA personal liability limited to officers/agents who knowingly permit the wage violation)