CIC Plus, Inc. v. Darren Dexheimer

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CIC PLUS, INC., Plaintiff/Counter-Defendant, v. DARREN DEXHEIMER, Defendant/Counter-Plaintiff.

No. 22 C 1523

United States District Court, N.D. Illinois, Eastern Division

November 17, 2022

MEMORANDUM OPINION AND ORDER

Jeffrey T. Gilbert United States Magistrate Judge.

This matter is before the Court on Plaintiff/Counter-Defendant CIC Plus, Inc.'s Motion to Dismiss Dexheimer's Counterclaims [ECF No. 15], For the reasons set forth below CIC's Motion to Dismiss Dexheimer's Counterclaims [ECF No. 15] is granted in part without prejudice and denied in part.

BACKGROUND

Defendant/Counter-Plaintiff Darren Dexheimer (“Dexheimer”) was employed by Plaintiff/Counter-Defendant CIC Plus, Inc. (“CIC”) as a remote software developer for approximately 13 years from 2008 to 2021, When he was hired in 2008, it is not disputed that Dexheimer and CIC entered into an employment agreement (hereinafter, the “2008 Agreement”) that provided, among other things Dexheimer's compensation would include a 3% share of CIC's profits. See Verified Complaint for Declaratory Judgment (“Complaint”) [ECF No. 1-1] Ex. A at ¶¶ 6-7. CIC alleges that the parties later re-negotiated the 2008 Agreement and entered into a superseding employment agreement in 2015 (hereinafter, the “2015 Agreement”), which altered Dexheimer's compensation package, including the profit sharing component, so that Dexheimer was paid based on an annual compensation plan that raised his salary and provided a performance-based bonus. See Complaint [ECF No. 1-1], Ex, B at ¶¶ 9-14).

After the employment relationship ended in 2021 (the parties dispute whether Dexheimer resigned or not), Dexheimer requested CIC pay him 3% of CIC's profits from 2015 to 2021 pursuant to the 2008 Agreement. CIC refused that request which laid the groundwork for this lawsuit. Dexheimer disputes CIC's version of the facts, particularly that the parties entered into the 2015 Agreement and re-negotiated his compensation. See Dexheimer's Resp. to Motion to Dismiss [ECF No. 25], at 1-2. Specifically, Dexheimer “disputes the authenticity of the [the 2015 Agreement] ... because the signature is suspect and he has no recollection of receiving the document or agreeing to its terms.” Id. at 5; see also Answer, Affirmative Defenses, and Counterclaims [ECF No. 11], at ¶ 2 (stating the 2015 Agreement “has a signature that is not the signature Dexheimer used to execute documents”). Dexheimer also says he never forfeited his right to a 3% share of CIC's profits and the purported 2015 Agreement does not say otherwise. See Answer [ECF No. 11], at ¶ 2.

CIC filed this action for declaratory relief seeking a declaration that the 2015 Agreement governs the parties' contractual relationship, and that CIC does not owe Dexheimer 3% of its profits from 2015-2021. See generally Complaint [ECF No. 1-1], In response to CIC's complaint, Dexheimer filed his answer with ten affirmative defenses and also included three counterclaims for breach of contract, bad faith, and unjust enrichment. See generally Answer, Affirmative Defenses, and Counterclaims [ECF No. 11]. CIC's complaint seeks relief based on the parties' 2015 Agreement while Dexheimer's counterclaims are based on the 2008 Agreement. CIC attached both the 2008 and 2015 Agreements to its complaint, but Dexheimer attached only the 2008 Agreement to his answer and counterclaims. Dexheimer does not mention the 2015 Agreement in his counterclaims.

CIC filed a Motion to Dismiss Dexheimer's Counterclaims [ECF No, 15] and a Motion to Strike Dexheimer's Affirmative Defenses [ECF No. 16]. In this Memorandum Opinion and Order, the Court addresses CIC's Motion to Dismiss Dexheimer's Counterclaims [ECF No. 15]. At base, CIC argues that the plain terms of the 2015 Agreement bar Dexheimer's counterclaims, but Dexheimer disputes the validity of the 2015 Agreement in his answer and contends in his counterclaims that the 2008 Agreement, in particular the compensation terms of the 2008 Agreement, governs the parties' current dispute.

ANALYSIS

The purpose of a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) is to test the legal sufficiency of a complaint, in this instance Dexheimer's counterclaims not its factual sufficiency. FED. R. ClV. P. 12(b)(6); Szabo v. Bridgeport Mach., Inc., 249 F.3d 672, 675-76 (7th Cir. 2001). The court will grant a motion to dismiss only if “it appears beyond doubt that the [counterclaimant] can prove no set of facts in support of his claim which would entitle him to relief.” Centers v. Centennial Mortg., Inc., 398 F.3d 930, 933 (7th Cir. 2005). In making its determination, the court must assume the truth of the facts alleged in the counterclaims, construe allegations liberally, and view them in the light most favorable to the counterclaim plaintiff. See Centers, 398 F.3d at 933; Cozzi Iron & Metal v. U.S. Office Equip., Inc., 250 F,3d 570, 574 (7th Cir. 2001).

At the Rule 12(b)(6) stage, a court is permitted to consider exhibits attached to a complaint or counterclaim, but when an exhibit conflicts with the allegations of the complaint or counterclaim, the exhibit typically controls. Centers, 398 F.3d at 933. “A copy of any written instrument which is an exhibit to a pleading is a part thereof for all purposes.” FED. R. ClV, P. 10(c). Typically, a court would not consider documents extrinsic to the challenged pleading in a motion to dismiss. See FED, R. ClV. P. 12(d); Swanson u. Bank of Am., N.A., 566 F.Supp.2d 821, 823 (N.D. Ill. 2008). The challenged pleading in this instance are Dexheimer's counterclaims. The Seventh Circuit instructs, however, that a “district court may consider extrinsic exhibits if the documents are both referred to in the complaint and are also central to the . .. claims.” Swanson, 566 F.Supp.2d at 823 (citing Tierney v. Vahle, 304 F.3d 734, 738-39 (7^th Cir. 2002)). To be considered at the Rule 12(b)(6) stage, the documents must also be indisputably authentic. Id.

Here, the relevant exhibits are the 2008 Agreement and 2015 Agreement,^[1] Both documents clearly are central to the parties' dispute and the claims and counterclaims at issue in this lawsuit. The 2015 Agreement, on which CIC relies, is not specifically referenced in Dexheimer's counterclaims, but he denies the validity of the 2015 Agreement in his answer.^[2] Although Dexheimer does not explicitly reference the 2015 Agreement in his counterclaims, he does implicitly acknowledge it with his statements, among others, that “CIC did not amend the terms of this compensation agreement by mutual assent” and “CIC falsely claims Dexheimer renegotiated his compensation rate.” See Counterclaims [ECF No, 11], at ¶¶ 5.13, 5.18. More specifically.

CIC argues Dexheimer cannot deny the validity of the 2015 Agreement and contends that Dexheimer never denied he signed the 2015 Agreement. However, there is no allegation in CIC's complaint that Dexheimer signed the 2015 Agreement, so Dexheimer was not required to admit or deny a non-existent allegation. In any event, in his answer, Dexheimer stated that “has no recollection of the 2015 [Agreement],” that it bears “a signature that is not the signature Dexheimer used to execute documents,” and that “it was not supported by consideration.” See Answer [ECF No. 11], at ¶ 2, CIC cites case law that a lack of recollection is insufficient to i create a dispute as to either the substance or the authenticity of a document. U.S. v. Romero, 2017 WL 61025, at *3 (N.D. Ill. Jan. 5, 2017). That may or may not be true, but the issue here is not simply a lack of recollection. Dexheimer expressly challenges the authenticity of the electronic signature on the 2015 Agreement and that calls into question the authenticity of the document. See Answer [ECF No. 11], at ¶ 2. Although CIC accuses Dexheimer of being coy in not directly denying that he signed the 2015 Agreement, that is, in the Court's view, at best splitting hairs and at worst a misreading of the pleadings. Giving Dexheimer the benefit of the doubt as is required at this stage of the case, Dexheimer appears to be challenging the authenticity, validity, and enforceability of the 2015 Agreement.^[3]

CIC's tendering of an affidavit from its general counsel, Mitchell Rose, in which Rose avers that he received the fully executed 2015 Agreement from Dexheimer on January 7, 2015, does not close the deal for CIC in the context of a Rule 12(b)(6) motion to dismiss. See Affidavit of Mitchell Rose in Support of Motion to Dismiss [ECF No. 15], Ex. A at ¶ 2. It just confirms there is a factual dispute here as to whether Dexheimer executed the 2015 Agreement and whether that document governed the parties' employment relationship from 2015 forward instead of the 2008 Agreement. Neither Rose's affidavit nor CIC's other arguments persuade the Court that it must flatly reject Dexheimer's challenge to the validity of the 2015 Agreement at this early stage of the proceedings as CIC strenuously argues the Court should do as a matter of law.^[4] With the above discussion as prologue, the Court now turns to Dexheimer's counterclaims. Dexheimer has asserted three counterclaims: breach of contract, bad faith, and unjust enrichment. At the motion to dismiss stage, it is well-settled law that a court must assume the truth of the facts alleged in the counterclaims, construe allegations liberally, and view them in the light most favorable to the counterclaim plaintiff. See FED. R. ClV. P. 12(b)(6). With that in mind, this Court cannot and will not resolve at this stage in the litigation the issue of which employment contract was the operative agreement from 2015 until 2021 when Dexheimer's employment with CIC ended, what his terms of compensation were during that same time period, or whether the 2015 Agreement...