Hensiek v. Board of Directors of Casino Queen Holding Company, Inc.

IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF ILLINOIS

TOM HENSIEK, et al., )

)

Plaintiffs, )

)

vs. )

)

BD. OF DIRECTORS OF CASINO QUEEN )

HOLDING CO., INC., et. al., )

)

Defendants. )

_________________________________________ )

BD. OF DIRECTORS OF CASINO QUEEN )

HOLDING CO., INC., et. al., )

)

Crossclaim/Third-Party Plaintiffs, )

)

vs. )

)

CHARLES BIDWILL, III, et al., )

)

Crossclaim/Third-Party Defendants. ) Case No. 3:20-cv-377-DWD

_________________________________________ )

CHARLES BIDWILL, III, )

TIMOTHY J RAND, )

)

Defendants/Counterclaimants, )

Crossclaim/Third Party Plaintiffs, )

)

vs. )

)

TOM HENSIEK, et. al., )

)

Counterclaim/Crossclaim/Third-Party )

Defendants. )

_________________________________________ )

JAMES G. KOMAN, )

)

Crossclaim Plaintiff, )

vs. )

)

BD. OF DIRECTORS OF CASINO QUEEN )

HOLDING CO., INC., et al. )

)

Crossclaim Defendants. )

_________________________________________ )

MEMORANDUM & ORDER

DUGAN, District Judge:

Before the Court are several motions filed by the Third-Party Defendants, namely:

1. Third-Party Defendants Joan Kenny Rose, James C. Kenny, John E. Kenny, Jr.,

Patrick B. Kenny, and Philip B. Kenny’s Motion to Dismiss Third-Party

Complaint (Doc. 430);

2. Third-Party Defendant Philip B. Kenny’s Motion to Dismiss Third-Party

Complaint (Doc. 432);

3. Third-Party Defendants Gaughan and Toti’s Motion to Dismiss Third-Party

Complaints (Doc. 449); and

4. Third-Party Defendant GreatBanc’s Motion to Dismiss Third-Party Complaint

(Doc. 451).

I. BACKGROUND

Plaintiffs Tom Hensiek, Jason Gill, and Lillian Wrobel filed suit under the

Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1001-1461 (“ERISA”), on

behalf of a proposed class of participants and beneficiaries in the Casino Queen Employee

Stock Ownership Plan (“ESOP”), an ERISA-protected retirement plan. In the First

Amended Class Action Complaint (Doc. 144), Plaintiffs allege, as current or former

employees of Casino Queen Hotel & Casino, they are participants and beneficiaries of the

ESOP. This putative class action was filed in relation to two alleged unlawful

transactions, referred to as the 2012 Stock Purchase Transaction and the 2013 Asset Sale,

which allegedly violated Defendants’ fiduciary duties under ERISA. (Doc. 144).

Defendants are generally comprised of two groups: (1) the “Fiduciary

Defendants,” and (2) the “Selling Shareholders.” (Docs. 426, 427). In addition to the Board

of Directors of the Casino Queen Holding Company, Inc, and the Administrative

Committee of the Casino Queen ESOP, the Fiduciary Defendants include Defendants

Charles Bidwill, Timothy J. Rand, James G. Koman, Jeffrey Watson, and Robert Barrow.

(Doc. 144, ¶ 203). The Selling Shareholders are alleged family members (or trust-related

entities set up to benefit family members) of the five founding family groups of Casino

Queen, Inc. (“CQI”), and its subsequent holding company, Casino Queen Holding

Company, Inc. (“CQH”). (Doc. 144, ¶¶ 2, 72).1 Many Defendants filed crossclaims and

third-party actions. (Docs. 153, 154, 157). Relevant to the instant Motions are two Third-

Party Complaints filed by (1) Defendants the Board of Directors of CQH, Robert Barrows,

Jeffrey Watson, and the Administrative Committee of the Casino Queen ESOP, and

(2) Defendants Charles Bidwill and Timothy Rand. (Docs. 153 & 154).

II. THE THIRD-PARTY COMPLAINTS (DOCS. 153 & 154)

Defendants/Third-Party Plaintiffs the Board of Directors of CQH, Robert Barrows,

Jeffrey Watson, and the Administrative Committee of the Casino Queen ESOP assert

third-party claims against Third-Party Defendants Franklin Toti, Joan Kenny Rose, Philip

B. Kenny, James C. Kenny, Michael Gaughan, Mary Ann Kenny Smith, Patrick B. Kenny,

and John E. Kenny, Jr. (Doc. 153). All Third-Party Defendants, except Defendant Mary

1These Defendants also include Bidwill, Rand, James Koman, Watson, and Barrows, in addition to

Mary C. Bidwill, Brian R. Bidwill, Patricia M. Bidwill, Shauna Bidwill Valenzuela, the Bidwill Succession

Trust, the William J. Koman, Sr., Living Trust, the William J. Koman, Jr., Irrevocable Trust, the Karen L.

Hamilton Irrevocable Trust, the Janis A. Koman Irrevocable Trust, the Elizabeth S. Koman Irrevocable

Trust, and the James C. Koman Irrevocable Trust. (Doc. 144, ¶¶ 65-66).

Ann Kenny Smith, who has not appeared, seek a dismissal. (Docs. 430 & 449).

Notably, a review of the record shows that Mary Ann Kenny Smith has not entered

an appearance in this matter. Accordingly, within 30 days, Defendants/Third-Party

Plaintiffs the Board of Directors of CQH, Robert Barrows, Jeffrey Watson, and the

Administrative Committee of the Casino Queen ESOP are DIRECTED TO SHOW

CAUSE as to why Third-Party Defendant Mary Ann Kenny Smith should not be

dismissed for a failure to prosecute under Federal Rule of Civil Procedure 41.

Moreover, Defendants/Third-Party Plaintiffs Bidwill and Rand assert third-party

claims against Third-Party Defendants Phillip B. Kenny, Michael Gaughan, and

GreatBanc Trust, who seek to dismiss the claims. (Docs. 154, 432, 449, 451).

III. THE MOTIONS TO DISMISS

A. GENERAL LEGAL STANDARDS

Under Federal Rule of Civil Procedure 14(a)(1), “[a] defending party may, as third-

party plaintiff, serve a summons and complaint on a nonparty who is or may be liable to

it for all or part of the claim against it.” Fed. R. Civ. P. 14(a)(1). “[T]he same principles

governing the disposition of a 12(b)(6) motion apply whether the plaintiff’s original

complaint or a third-party complaint is involved.” Foote v. U.S., 648 F. Supp. 735, 736

(1986) (citing 6 C. Wright & A. Miller, Federal Practice and Procedure § 1455 (1971)).

Federal Rule of Civil Procedure 12(b)(6) allows challenges to a pleading based on

the failure to state a claim for which relief may be granted. Firestone Fin. Corp., 796 F.3d

822, 825 (7th Cir. 2015) (quoting Camasta v. Jos. A. Bank Clothiers, Inc., 761 F.3d 732, 736

(7th Cir. 2014)). To survive a Rule 12(b)(6) motion, which tests the sufficiency of the

pleading but not its merits, the pleading must allege enough facts for the claim to be

facially plausible. Kloss v. Acuant, Inc., 462 F. Supp. 3d 873, 876 (7th Cir. 2020) (quoting

McReynolds v. Merrill Lynch & Co., Inc., 694 F.3d 873, 878 (7th Cir. 2012)); Fosnight v. Jones,

41 F.4th 916, 921-22 (7th Cir. 2022) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544,

570 (2007)). There must be enough facts pled to draw inferences as to liability. Fosnight,

41 F.4th at 922 (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). A pleading need not

allege “detailed factual allegations,” but it must lift the claim above the speculative level.

Kloss, 462 F. Supp. 3d at 876 (citing Twombly, 550 U.S. at 555). “Threadbare recitals,”

supported by conclusions, do not suffice. Trivedi v. Wells Fargo Bank, N.A., 609 F. Supp.

3d 628, 631 (N.D. Ill. 2022) (quoting Iqbal, 556 U.S. at 678). When ruling, the Court accepts

all well-pled facts as true and draws all inferences for the pleader. Id. (quoting Tamayo v.

Blagojevich, 526 F.3d 1074, 1081 (7th Cir. 2008)); accord Kloss, 462 F. Supp. 3d at 874-75.

B. THE KENNYS’ MOTION TO DISMISS (DOCS. 430 & 431)

Defendants/Third-Party Plaintiffs the Board of Directors of CQH, Robert Barrows,

Jeffrey Watson, and the Administrative Committee of the Casino Queen ESOP filed a

Notice of Voluntary Dismissal of their third-party claims asserted against Third-Party

Defendants Philip B. Kenny, James C. Kenny, John E. Kenny, Patrick B. Kenny, and Joan

Kenny Rose. (Doc. 479). The parties have reached an agreement as to those third-party

claims, so they seek a dismissal of the claims without prejudice.

Rule 41 allows for the dismissal of “actions,” not “parties” or “claims,” meaning it

cannot cleave away claims or parties from a larger case. See Taylor v. Brown, 787 F.3d 851,

857-58 (7th Cir. 2015). The Seventh Circuit has made clear that to dismiss claims or parties

from an action that will continue, a plaintiff must file an amended complaint. Id. While

the Court acknowledges the plain reading of Rule 41, the Court finds, in this limited

instance due to the procedural posture of the case, judicial economy counsels in favor of

allowing Defendant/Third-Party Plaintiffs to voluntarily dismiss Third-Party

Defendants Philip B. Kenny, James C. Kenny, John E. Kenny, Patrick B. Kenny, and Joan

Kenny Rose without filing an amended third-party complaint. Accordingly, the Third-

Party Complaint at Doc. 153 is AMENDED by interlineation. The claims against Third-

Party Defendants Philip B. Kenny, James C. Kenny, John E. Kenny, Patrick B. Kenny, and

Joan Kenny Rose are STRICKEN. As agreed to by the parties, the dismissal of the claims

is without prejudice. The Kennys’ Motion to Dismiss (Doc. 430) is DENIED as moot.

C. THE MOTIONS TO DISMISS OF THIRD-PARTY DEFENDANTS

GAUGHAN, TOTI, AND PHILIP B. KENNY (DOCS. 432, 449, 450)

ERISA § 502(a)(3) provides that “[a] civil action may be brought…by a participant,

beneficiary, or fiduciary…to obtain other appropriate equitable relief…to redress such

violations or…to enforce any provisions of this subchapter or the terms of the plan.” 29

U.S.C. § 1132(a)(3); see also Keach v. U.S. Trust Co., N.A., 244 F. Supp. 2d 968, 972 (C.D. Ill.

2003) (“Any liability of a non-fiduciary party-in-interest stems from duties imposed by

§ 502(a)(3).”); Chesemore v. Fenkell, 829 F.3d 803, 812 (7th Cir. 2016) (“ERISA’s grant of

equitable remedial power and its foundation in principles of trust law permit the courts

to order contribution or indemnification among cofiduciaries based on degrees of

culpability.”). Under this statutory provision, our Supreme Court has noted as follows:

[I]t has long been settled that when a trustee in breach of his fiduciary duty

to the beneficiaries transfers trust property to a third person, the third

person takes the property subject to the trust, unless he has purchased the

property for value and without notice of the fiduciary’s breach of duty. The

trustee or beneficiaries may then maintain an action for restitution of the

property (if not already disposed of) or disgorgement of proceeds (if

already disposed of), and disgorgement of the third person’s profits

derived therefrom.

* * *

Only a transferee of ill-gotten trust assets may be held liable, and then only

when the transferee (assuming he has purchased for value) knew or should

have known of the existence of the trust and the circumstances that

rendered the transfer in breach of the trust. Translated to the instant context,

the transferee must be demonstrated to have had actual or constructive

knowledge of the circumstances that rendered the transaction unlawful.

Those circumstances, in turn, involve a showing that the plan fiduciary, with

actual or constructive knowledge of the facts satisfying the elements of a

§ 406(a) transaction, caused the plan to engage in the transaction.

Harris Trust and Sav. Bank v. Salomon Smith Barney, Inc., 530 U.S. 238, 250-51 (2000)

(Emphasis in original.) (internal citations omitted); accord Keach, 244 F. Supp. 2d at 972;

see also Mejia v. Verizon Mgmt. Pension Plan, No. 11-cv-3949, 2012 WL 1565336, *11 (N.D.

Ill. May 2, 2012) (“Liability of a non-fiduciary for aiding a fiduciary breach…requires

(1) alleging a fiduciary breach in the first instance and (2) alleging that the non-fiduciary

knowingly participated in that prohibited conduct.”) (Emphasis in original).

Here, Third-Party Defendants Gaughan and Toti jointly seek to dismiss all of the

third-party claims filed against them, arguing as follows:

Plaintiffs’ claims fall under two sets of facts: the transfer of ownership of

the Casino Queen to an ESOP (the “2012 Transaction”) and the later sale of

its real property in order to, inter alia, pay off promissory notes held by all

original owners except Gaughan and Toti (the “2013 Asset Sale”). Movants

Gaughan and Toti were partial owners of the Casino Queen prior to the

2012 Transaction but, unlike the other Defendants, severed all ties to the

Casino Queen and related entities when the 2012 Transaction closed on

December 26, 2012. The facts alleged in the Third-Party Complaints and

attached exhibits show that Gaughan and Toti were complete strangers to

subsequent events, including the 2013 Asset Sale. Thus, to the extent the

Third-Party Complaints seek relief from Gaughan and Toti for conduct

post-December 26, 2012, based upon the face of their own pleadings, they

have failed to state a claim and must be dismissed pursuant to Fed. R. Civ.

P. 12(b)(6).

(Docs. 449, pg. 2; 450, pg. 2).

Based on this argument, Third-Party Defendants Gaughan and Toti assert that

they could not have, and are not alleged to have, knowingly participated in fiduciary

breaches after December 26, 2012. They request a dismissal, with prejudice, of the First

Cause of Action alleged against them for restitution under 29 U.S.C. § 1132(a)(3) in the

Casino Queen Third-Party Complaint (Doc. 153, pg. 100), and (2) Counts VIII and IX of

the Bidwill and Rand Third-Party Complaint (Doc. 154, pgs. 76-82) alleged against

Gaughan for contribution, indemnification, and/or apportionment. (Doc. 449, pg. 2).

Defendants/Third-Party Plaintiffs the Board of Directors of CQH, Robert Barrows,

Jeffrey Watson, and the Administrative Committee of the Casino Queen ESOP respond:

Although the CQ Third-Party Plaintiffs deny that they are liable with

respect to any claims asserted against them…in the event it is determined

that any of the CQ Third-Party Plaintiffs are liable, then Gaughan, Toti and

others who received money from the sale of their CQH shares should be

required to make restitution by disgorging the amount of any overpayment

they received from the sale of their respective CQH shares. This is a

contingent claim only, as the CQ Third-Party Plaintiffs deny that they

violated any duties arising under ERISA.

(Doc. 472, pgs. 2-3).

They further state a “[d]ismissal…for any time period encompassing either the

ESOP Transaction or the Real Property Sale is improper as the[y]…have plausibly alleged

a claim for restitution pursuant to ERISA Section 502(a)(3), 29 U.S.C. § 1132(a)(3).” (Doc.

472, pg. 3). After all, Gaughan and Toti are former shareholders of CQI and CQH who

exchanged their respective shares of CQI stock for the same number of shares of CQH

stock, then sold their respective shares of CQH stock to the ESOP as part of the ESOP

Transaction. (Docs. 153, pg. 101; 472, pg. 4). Upon information and belief, Gaughan and

Toti “were involved in the negotiation and consummation of the ESOP Transaction, and

had knowledge of the transaction and the consideration to be received.” (Docs. 153, pg.

103; 472, pg. 4). Therefore, if Defendants/Third-Party Plaintiffs the Board of Directors of

CQH, Robert Barrows, Jeffrey Watson, and the Administrative Committee of the Casino

Queen ESOP breached fiduciary duties or engaged in prohibited transactions in

connection with the 2012 ESOP Transaction, “then Gaughan, Toti, and other CQH selling

shareholders also had actual knowledge of the circumstances that made the ESOP

Transaction and [2013] Real Property sale unlawful.” (Docs. 153, pg. 103; 472, pg. 4).

As to Gaughan’s arguments, Defendants/Third-Party Plaintiffs Bidwill and Rand

respond that, to the extent he seeks a partial dismissal of contribution or indemnity

liability related to actions occurring after the formation of the ESOP, the Motion to

Dismiss must be denied. (Doc. 463, pg. 3). They note Plaintiffs’ liability theory arises from

the collective activity of the CQI Board, including (1) in failing to monitor the appointed

fiduciaries before the ESOP purchase and/or in connection with the valuations for the

2012 ESOP stock purchase, and (2) taking pre-2012 closing steps to thwart reliance on

projections that they claim were unrealistic and inflated. (Doc. 463, pgs. 7-8). To the extent

Plaintiffs can prove these allegations, Bidwill and Rand argue Gaughan, “in controlling

a CQI Board member (who would have likewise had the same information and engaged

in the same conduct as Bidwill and Rand acting as CQI Board members), would be liable

to Bidwill and Rand for contribution and/or indemnification as a co-fiduciary with

respect to the CQ ESOP Transaction.” (Docs. 154, pgs. 78-81; 463, pgs. 5-7).

Finally, for his part, Third-Party Defendant Philip B. Kenny seeks a Rule 12(b)(6)

dismissal of the claims for contribution, indemnity, and apportionment alleged against

him in Counts VIII and IX of the Third-Party Complaint of Defendants/Third-Party

Plaintiffs Bidwill and Rand. (Docs. 432 & 433). He argues Bidwill and Rand are allegedly

guilty of malfeasance with respect to their breaches of fiduciary duties to the ESOP. (Doc.

433, pg. 3). However, in his view, “[n]owhere does the third-party complaint spell out

what knowledge…[he] had of any specific ERISA violations that form the basis for the

claims against Bidwill and Rand, much less that…[he] actively participated in those

activities” between December 26, 2012, and January 23, 2014. (Doc. 433, pgs. 3-7). Third-

Party Defendant Philip B. Kenny notes he was a member of the CQI Board until his

resignation on December 26, 2012, he was never a member of the CQH Board, he was not

a plan fiduciary, and for these reasons he is not a named Defendant. (Doc. 433, pg. 3).

In response to these arguments, Defendants/Third-Party Plaintiffs Bidwill and

Rand argue, as they did with respect to Gaughan, to the extent they are liable to Plaintiffs,

“Philip B. Kenny…is liable to Bidwill and Rand for contribution and/or indemnification

because Plaintiffs not only attempt to hold Bidwill and Rand liable based on their

positions on the CQH Board…but also under a ‘de facto’ fiduciary theory based on them

serving as…[CQI] board members” who voted in favor of the ESOP creation. (Doc. 464,

pgs. 2, 6-7). In short, Defendants/Third-Party Plaintiffs Bidwill and Rand argue

allegations for contribution and indemnity arising from collective actions with Kenny on

the CQI Board are sufficient to withstand a Rule 12(b)(6) challenge. (Doc. 464, pgs. 3-4).

On review of the parties’ arguments, the Court finds each Third-Party Complaint

(Docs. 153 & 154) sufficiently alleges facially plausible claims for relief from Third-Party

Defendants Gaughan, Toti, and Philip B. Kenny. For example, as to Gaughan and Toti,

who argue for a dismissal of each Third-Party Complaint on the sole basis that they

“severed all ties to the Casino Queen and related entities when the 2012 Transaction

closed on December 26, 2012,” the Court agrees, on the pleadings, that argument does

not necessarily foreclose the liability asserted in the Third-Party Complaints. That is, the

Court cannot conclude the fact that CQH shares were sold in December 2012 entirely

negates the liability alleged with respect to the 2013 Asset Sale.

Again, the Casino Queen Third-Party Complaint alleges, inter alia, Gaughan and

Toti are former shareholders of the CQI and CQH who exchanged shares of CQI stock

for shares of CQH stock, then, after being involved in the negotiation and consummation

of the ESOP transaction, sold their shares of CQH stock to the ESOP. (Docs. 153, pg. 101,

103; 472, pg. 4). Likewise, Bidwill and Rand’s Third-Party Complaint alleges, inter alia,

Gaughan and Philip B. Kenny, prior to the transfer of their CQI ownership interest to

CQH in December 2012, were shareholders of CQI who either personally or through a

designee served as a CQI Board member. (Doc. 154, pg. 49). As such, Defendants/Third-

Party Plaintiffs Bidwill and Rand allege, to the extent they are liable under Plaintiffs’

theory as to the collective activity of the CQI Board, Gaughan and Philip B. Kenny are

also liable due to, inter alia, their participation in CQI Board meetings on the creation of

the ESOP, exchange of CQI shares for CQH shares, involvement in producing inaccurate

financial projections, and their responsibility to monitor company management or

control a CQI Board member. (Docs. 154, pgs. 78-81; 463, pgs. 5-7). These facts plausibly

allege claims for relied under the above-cited legal authorities. See 29 U.S.C. § 1132(a)(3);

Harris, 530 U.S. at 250-51; Keach, 244 F. Supp. 2d at 972; Mejia, 2012 WL 1565336 at *11.

Since the allegations stated in the Third-Party Complaints satisfy the Rule 12(b)(6)

standard, the Motions to Dismiss of Gaughan, Toti, and Philip B. Kenny are DENIED.

D. THIRD-PARTY DEFENDANT GREATBANC’S

MOTION TO DISMISS THIRD-PARTY COMPLAINT (DOC. 451)

Finally, under Rule 12(b)(6), Third-Party Defendant GreatBanc seeks a dismissal

of the claims alleged against it in the Bidwill and Rand Third-Party Complaint. (Doc. 451

& 452). By extension, Third-Party Defendant GreatBanc seeks to be dismissed as a party

to the case. (Doc. 451 & 452). As support, Third-Party Defendant GreatBanc argues the

indemnity and contribution claims are time barred and, in any event, are inapplicable

here. (Doc. 452, pgs. 5, 8-13). On the former argument, Third-Party Defendant GreatBanc

indicates “because Plaintiffs’ underlying claims would have been time-barred as against

GreatBanc when filed, Rand and Bidwill’s contribution and indemnity claims are

likewise time-barred.” See 735 ILCS 5/13-204(c); (Doc. 452, pg. 10). On the latter

argument, Third-Party Defendant GreatBanc argues, since Plaintiffs’ claims against Rand

and Bidwill involve a clear element of fault and they are not seeking a theory whereby

full liability may be shifted to Third-Party Defendant GreatBanc, Rand and Bidwill

cannot obtain an implied indemnification. (Doc. 452, pgs. 12-13). Similarly, as to the claim

for contribution, Third-Party Defendant GreatBanc argues that is off the table because

Rand and Bidwill’s claims “turn[] on an underlying finding of intentional and bad-faith

misconduct,” which is not allowed under Illinois law (Doc. 452, pg. 13).

Further, GreatBanc argues it cannot be liable for negligent misrepresentation

because such a claim is preempted by ERISA. See 29 U.S.C. § 1144(a); (Doc. 452, pgs. 5,

14-16). Alternatively, Third-Party Defendant GreatBanc argues the Bidwill and Rand

Third-Party Complaint fails to plead the requisite elements for such a claim. (Doc. 452,

pgs. 5, 16-21). For example, no alleged statement constitutes a false statement of material

fact, as they are non-actionable representations of law, statements relating to future

events, statements that are not alleged to be untrue, and/or statements that were not

made by Third-Party Defendant GreatBanc. (Doc. 452, pgs. 17-18). Further, Third-Party

Defendant GreatBanc argues the Bidwill and Rand Third-Party Complaint does not allege

it was careless or negligent in ascertaining the truth of the statements, intended to induce

or did induce reliance, or caused damages. (Doc. 452, pgs. 19-20).

Here, an argument as to the fact-intensive issue of a statute of limitations is an

affirmative defense that must be pled in an answer and proved after discovery. See George

v. Kraft Foods Global, Inc., 674 F. Supp 2d 1031, 1042-43 (N.D. Ill. 2009); (citing Fed. R. Civ.

P. 8(c)(1)); see also Dale v. NFP Corp., 658 F. Supp. 3d 620, 633 (N.D. Ill. 2023) (“Generally,

‘complaints are not required to anticipate affirmative defenses,’ so ‘dismissal under Rule

12(b)(6) on statute of limitations grounds is considered ‘irregular.’ ”). The same is true

with respect to arguments on ERISA preemption. Garrity v. Sun Life and Health Ins. Co.

(U.S.), 596 F. Supp. 3d 1111, 1115 (N.D. Ill. 2022). The Court notes, “[a]s a practical matter,

courts have sometimes taken shortcuts, particularly if the complaint leaves no doubt that

there is a good statute-of-limitations or claim-preclusion defense[,] [b]ut it is safer to insist

on compliance with the rules.” Luna Vanegas v. Signet Builders, Inc., 46 F.4th 636, 640 (7th

Cir. 2022). For these reasons, the Court will not presently consider arguments on the

statute of limitations or preemption as bases for a dismissal under Rule 12(b)(6). See id.

(discussing the interplay between Rule 8 and Rule 12(b), from which “[i]t follows from

th[e] structure [of the rules] and from the plain language of Rule 8(c)(1) that an affirmative

defense must be raised in the answer, not by motion”) (Emphasis added.).

Further, the Court disagrees with Third-Party Defendant GreatBanc, at this stage,

that the indemnity and contribution claims in the Bidwill and Rand Third-Party

Complaint are otherwise inapplicable. (Doc. 452, pgs. 5, 12-13). As noted elsewhere in

this Memorandum & Order, the Court has an equitable remedial power to order

contribution or indemnification among cofiduciaries. See Chesemore, 829 F.3d at 812; see

also Free v. Briody, 732 F.2d 1331, 1337 (7th Cir. 1984) (“ERISA grants the courts the power

to shape an award so as to make the injured plan whole while at the same time

apportioning the damages equitably between the wrongdoers.”); Alton Memorial Hosp. v.

Metro. Life Ins. Co., 656 F.2d 245, 250 (7th Cir. 1981) (“[W]here an ERISA plan suffers losses

and where the plan participants and beneficiaries have established a cause of action on

their own behalf or on behalf of the plan assets against one fiduciary, that fiduciary may

seek indemnification or contribution from co-fiduciaries in accordance with 29 U.S.C.

§ 1105(a).”). As alleged by Defendants/Third-Party Plaintiffs Bidwill and Rand, Third-

Party Defendant GreatBanc owed fiduciary duties as independent trustee under the

Independent Fiduciary Agreement. (Doc. 471, pg. 13). The Court finds there is a plausible

claim for relief in the context of Rule 12(b)(6).

Finally, the Court finds the Bidwill and Rand Third-Party Complaint adequately

pleads a claim of negligent misrepresentation. Such a claim, which is not governed by a

heightened pleading standard, requires Bidwill and Rand to plead (1) a false statement

of material fact; (2) carelessness or negligence in ascertaining the truth of the statement

by the party making it; (3) an intention to induce the other party to act; (4) action by the

other party in reliance on the truth of the statement; (5) damage to the other party

resulting from such reliance; and (6) a duty on the party making the statement to

communicate accurate information. Tricontinental Indust., Ltd. v. PricewaterhouseCoopers,

LLP, 475 F.3d 824, 833-34 (7th Cir. 2007) (quoting First Midwest Bank, N.A. v. Stewart Title

Guar. Co., 218 Ill. 2d 326, 334-35 (2006)).

Specifically, Defendants/Third-Party Plaintiffs Bidwill and Rand note that they

allege Third-Party Defendant GreatBanc falsely represented:

(i) that it would conduct due diligence appropriate and necessary for

GreatBanc to determine whether to direct the ESOP’s Co-Trustees to

enter into the ESOP Transaction; (ii) that GreatBanc alone would

provide the directions as to whether CQH should sell its stock to the

ESOP (which conflicts with Plaintiffs’ allegations and theory of this

case); (iii) its representation that the transactions contemplated by

the Direction either qualified as an exemption from constituting or

did not constitute prohibited transactions under ERISA; and (iv) that

its valuations, to the extent the Court determines the CQH shares

were purchased by the ESOP at less than fair market value, were

made in accordance with the requirements of the Standards Rule 10-

2(a) of the Uniform Standards of Professional Appraisal Practice, the

“Business Valuation Standards” of the American Society of

Appraisers, the requirements of ERISA, and the requirements of the

Internal Revenue Code related to independent appraisals for ESOP

purposes.

(Docs. 154, pgs. 74-75; 471, pg. 17).

Defendants/Third-Party Plaintiffs Bidwill and Rand acknowledge representations

of law are generally not actionable as misrepresentations, but they argue they “could not

discover, with the exercise of ordinary diligence, misrepresentations made by the

independent trustee regarding fair market value and whether the transactions

constituted prohibited transactions.” (Doc. 471, pgs. 17-18). Also, the statements were

allegedly untrue and, at a minimum, whether the misrepresentations were statements of

opinion or fact is a question for a jury. (Doc. 471, pgs. 18-20). Likewise, they argue

forward-looking statements in the engagement documents are actionable because they

concerned matters in the control of Third-Party Defendant GreatBanc. (Doc. 471, pg. 18).

As to carelessness or negligence in ascertaining the truth, Bidwill and Rand again

note that the alleged misrepresentations were “exclusively within Greatbanc’s control[]

and…[it] had the exclusive ability to ensure that its representations were accurate.” (Doc.

471, pg. 20). And, in Bidwill and Rand’s view, Plaintiffs’ allegations created a conflict with

“the GreatBanc Independent Fiduciary Agreement and Direction.” (Doc. 471, pgs. 20-21).

Similarly, as to intent to induce and reliance, Bidwill and Rand suggest they were bound

as Directed Trustees to proceed with the transaction, and they would have relied on

GreatBanc’s Direction when completing the ESOP Transaction. (Doc. 471, pg. 21). Other

documents allegedly “granted permission to rely on this letter solely in connection with

matters related to this [ESOP] transaction.” (Doc. 471, pg. 21).

Finally, as to damages, Bidwill and Rand note, in the event Plaintiffs are successful

in this case, they will obviously owe money damages stemming from GreatBanc’s alleged

misrepresentations. (Doc. 471, pg. 21). At this stage, the Court finds adequate allegations

of damages, notwithstanding GreatBanc’s reliance on an alleged superseding cause

related to the statute of limitations, which, again, it does not address at this time.

Based on the above arguments, the Court finds they have satisfied the Rule 12(b)(6)

standard. Third-Party Defendant GreatBanc’s Motion to Dismiss is DENIED.

IV. CONCLUSION

For the foregoing reasons, the Third-Party Complaint at Doc. 153 is AMENDED

by interlineation to STRIKE the claims against Third-Party Defendants Philip B. Kenny,

James C. Kenny, John E. Kenny, Patrick B. Kenny, and Joan Kenny Rose. The dismissal of

those claims is without prejudice. By virtue of this ruling, the Kennys’ Motion to Dismiss

(Doc. 430) is DENIED as moot. Further, within 30 days, Defendants/Third-Party

Plaintiffs the Board of Directors of CQH, Robert Barrows, Jeffrey Watson, and the

Administrative Committee of the Casino Queen ESOP are DIRECTED TO SHOW

CAUSE as to why Third-Party Defendant Mary Ann Kenny Smith should not be

dismissed for a failure to prosecute under Rule 41. Finally, the remaining Motions to

Dismiss at issue under Rule 12(b)(6) (Docs. 432, 449, 451) are DENIED.

SO ORDERED.

Dated: March 29, 2024

s/ David W. Dugan

__________________________

DAVID W. DUGAN

United States District Judge