Greco v. FMR LLC

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

Stephen Albert Greco and Spotlight

Asset Group,

Plaintiffs,

v.

Peter Mallouk, individually, Creative

Planning, LLC, CPI Holdco A, LLC,

CPI Holdco B, LLC, General Atlantic Case No. 22 C 2661

Service Company LP, General Atlantic

Hon. LaShonda A. Hunt

(CP) Collections, LP, FMR LLC d/b/a

Fidelity Investments Inc., National

Financial Services LLC, TD Ameritrade

Holding Corporation, TD Ameritrade,

Inc., The Charles Schwab Corporation,

and Charles Schwab & Co., Inc.,

Defendants.

MEMORANDUM OPINION AND ORDER

Plaintiffs Stephen Albert Greco and Spotlight Asset Group, Inc. bring this action asserting

various claims under the Sherman, Clayton, and RICO Acts, California and Illinois statutes, and

state common law against 13 Defendants relating to the investment advisory industry. Essentially,

Plaintiffs allege in their 15-count Complaint (Dkt. 1) that Defendants engaged in wide-ranging

unfair and anticompetitive practices and schemes, Greco reported their conduct, and, as a result,

Defendants attempted to silence Greco and retaliate by interfering with Plaintiffs’ business.

Defendants filed a joint motion to dismiss the Complaint for failure to state a claim under Federal

Rule of Civil Procedure 12(b)(6) (Dkt. 58). For the reasons discussed below, Defendants’ motion

to dismiss is granted in part and denied in part.

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BACKGROUND1

The investment advisory industry is made up of individuals and companies that provide

advice and services related to securities investments. An “investment adviser” is “any person who,

for compensation, engages in the business of advising others . . . as to the value of securities or as

to the advisability of investing in, purchasing, or selling securities, or who, for compensation and

as part of a regular business, issues or promulgates analyses or reports concerning securities . . . .”

15 U.S.C. § 80b-2(a)(11). Subject to certain exceptions, investment advisers are required to

register with the Securities Exchange Commission (“SEC”). 15 U.S.C. § 80b-3. Any investment

adviser registered with the SEC is referred to as a “registered investment adviser” (“RIA”).

(Compl. ¶ 4).

RIAs are subject to strict rules concerning custody of client assets under management

(“AUM”), including the requirement that assets be maintained by a “qualified custodian” in a

separate account. 17 C.F.R. § 275.206(4)-2. Services provided by qualified custodians include

custody, clearing, trading, and brokerage of investment assets. (Compl. ¶ 110). Any person who

works for an RIA as an investment adviser by providing clients with investment advice, portfolio

management, and other advisory services is referred to as “investment adviser representative”

(“IAR”). (Id. ¶ 84). IARs are required to be licensed and registered through the SEC and the

Financial Industry Regulatory Authority (“FINRA”). (Id.)

Plaintiff Spotlight is an independent RIA, and Plaintiff Greco is an IAR and Spotlight’s

chief executive officer. (Id. ¶¶ 26-30). Defendant Creative Planning, LLC is an independent RIA,

and Defendant Peter Mallouk is an IAR and Creative Planning’s president, chief executive officer,

1 This section consists of allegations from Plaintiffs’ Complaint, (Compl., Dkt. 1), which are taken as true

purposes of this motion unless otherwise noted. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

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and majority owner.2 (Id. ¶¶ 62, 64, 68). Defendants Fidelity,3 Charles Schwab,4 and AMTD5

(collectively, the “Broker-Custodian Defendants”) are financial services firms that operate as

RIAs, brokerages, and qualified custodians.

Greco has over two decades of experience in the investment advisory industry, having

worked for AMTD, Schwab, and Creative Planning. (Id. ¶ 7). Most recently, Greco was employed

by Creative Planning as its national director of wealth management from September 2013 through

March 2017. (Id. ¶ 319). During that time, Creative Planning had approximately 35-40 employees

and $7 billion in AUM. (Id.) Based on Greco’s years of experience in the industry and first-hand

involvement in Creative Planning’s operations, he came to believe that some of the company’s

practices were in violation of federal laws and regulations. (Id. ¶ 321). Specifically, Greco became

concerned that certain client referral programs, purported collusive agreements, asset management,

trading, and other related practices created direct conflicts of interest and caused breaches of

fiduciary duties owed to clients. (Id. ¶¶ 322-324). When Greco raised concerns with Mallouk, they

were dismissed, and he was reminded that his compensation was tied to the percentage of referrals

Creative Planning received through the AMTD referral program. (Id. ¶¶ 354-358). Because of

these perceived issues, Greco resigned from Creative Planning in March 2017. (Id. ¶ 379). Greco

subsequently filed two complaints, one with the SEC and the other with the Department of Justice

2 “Creative Planning” refers to Defendant Creative Planning LLC. “CP Defendants” refers collectively to

Creative Planning and Defendants Peter Mallouk, CPI Holdco A, LLC, CPI Holdco B, LLC, Creative Planning

Holdco, LLC, General Atlantic (CP) Collections, L.P., and General Atlantic Service Company LP, which own interests

in Creative Planning. (Id. ¶¶ 69-72).

3 “Fidelity” refers collectively to Defendants FMR LLC d/b/a Fidelity Investments Inc. and National

Financial Services LLC.

4 “Charles Schwab” refers collectively to Defendants The Charles Schwab Corporation and Charles Schwab

& Co, Inc.

5 “AMTD” refers collectively to Defendants TD Ameritrade Holding Corporation and TD Ameritrade, Inc.

On October 6, 2020, AMTD became a wholly owned subsidiary of Charles Schwab. (Compl. ¶ 43).

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reporting the issues he believed existed. (Id. ¶¶ 383, 594). In anticipation of leaving Creative

Planning, Greco opened and began operating his own RIA, Spotlight.

According to Greco, Defendants were involved in three illegal schemes that are the subject

of the Complaint: the “CP Fraudulent Growth Scheme”; the “RIA Services Scheme”, and the

“Silencing and Retaliation Scheme”. The specifics of each scheme will be discussed in greater

detail throughout this Opinion, but they are summarized as follows:

• The CP Fraudulent Growth Scheme allegedly involved illegal transactions with celebrity

Tony Robbins, SEC statements and investigations, mishandling of client funds, acquisition

of competitors, and participation in referral programs.

• The RIA Services Scheme involved supposedly conspiratorial and anticompetitive

activity of the Broker-Custodian Defendants, in which the CP Defendants partook.

Specifically, Plaintiffs allege that the scheme involved selective referral programs,

supportive independence programs, non-compete restrictions on IARs, group boycotts, and

mischaracterizing how the programs work to hide kickback and incentives. In addition,

Defendants made more overt steps towards consolidating their market power through

acquisitions such as Creative Planning’s acquisition of other independent RIAs, General

Atlantic’s purchase of a partnership interest in Creative Planning, and Schwab’s acquisition

of AMTD. According to Plaintiffs, all of these activities were carried out through mail and

over wire.

• Finally, Plaintiffs claim that Defendants engaged in a Silencing and Retaliation Scheme

aimed at disrupting Plaintiffs’ business in response to Greco’s complaints. This purported

scheme involved certain communications and legal actions relating to non-solicitation,

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arbitration actions against former advisors, and decisions not to terminate custodial

agreements and cease doing business with Plaintiffs.

As a result of all these purported schemes, Plaintiffs claim to have suffered injuries to their

business in the form of being unable to recruit from the IAR labor market and lost clients, which

resulted in decreased AUM and stifled growth. Still, from 2017 to 2020, Plaintiffs’ allegations tend

to show that Spotlight experienced overall growth and success as an RIA. More broadly, Plaintiffs

assert that Defendants’ wrongful conduct has caused and will result in industry-wide decreases in

competition, barriers to access, and increased costs for consumers.

Plaintiffs commenced this action in May 2022, asserting the following claims: Count 1 –

Violation of Lanham Act (Spotlight v. All Defendants); Count 2 – Violation of Sherman Act § 1,

2, & 3 and Clayton Act § 4 (All Plaintiffs v. All Defendants); Count 3 – Violation of Clayton Act

§ 7 (All Plaintiffs v. All Defendants); Count 4 – Violation of Cartwright Act (All Plaintiffs v. All

Defendants); Count 5 – Violation of California’s Unfair Competition Law (UCL) (All Plaintiffs v.

All Defendants); Count 6 – Civil Conspiracy (All Plaintiffs v. All Defendants); Count 7 – Breach

of Contract (Spotlight v. Broker-Custodian Defendants); Count 8 – Tortious Interference with

Contract (All Plaintiffs v. All Defendants); Count 9 – Intentional Inference with Prospective

Economic Advantage (All Plaintiffs v. All Defendants); Count 10 – Breach of Contract (Greco v.

CP Defendants); Count 11 – Defamation (Greco v. All Defendants); Count 12 – Unjust Enrichment

(All Plaintiffs v. All Defendants); Count 13 – Violation of RICO Act (All Plaintiffs v. All

Defendants); Count 14 – Violation of Illinois Consumer Fraud and Deceptive Business Practices

Act (CFA) (All Plaintiffs v. All Defendants); Count 15 – Violation of Illinois Uniform Deceptive

Trade Practices Act (DTPA) (All Plaintiffs v. All Defendants). Plaintiffs seek the following relief:

acceptance of jurisdiction; adjudication and decree of violations of statutes; finding of market

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monopoly and resulting injury; permanent injunction; compensatory damages, or, alternatively,

disgorgement or restitution; constructive trust; treble damages; punitive damages; costs and fees;

and pre- and post-judgment interest.

Defendants jointly moved to dismiss all claims in the Complaint, and after extensive

briefing, (Dkts. 59, 60, 61, 62 , 69, 74), the matter is ready for ruling.

LEGAL STANDARD

Rule 12(b)(6) permits a party to move for dismissal based on a pleading’s “failure to state

a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). In determining whether a

complaint states a claim under Rule 12(b)(6), courts must accept all non-conclusory factual

allegations as true. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). However, legal conclusions and

“[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory

statements, do not suffice.” Id. at 678 (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)).

In addition, the Court must construe the complaint in the light most favorable to the plaintiff and

draw all reasonable inferences in the plaintiff’s favor. Levy v. W. Coast Life Ins. Co., 44 F.4th 621,

626 (7th Cir. 2022). While ruling on a motion to dismiss for failure to state a claim, a court may

generally consider only the plaintiff’s complaint, exhibits to the complaint, matters central to the

plaintiff’s claim and incorporated into the complaint by reference, and items subject to judicial

notice. Geinosky v. City of Chi., 675 F.3d 743, 745 n.1 (7th Cir. 2012). Applying these principles,

a complaint will survive a motion to dismiss if it “states a plausible claim for relief.” Iqbal, 556

U.S. at 679 (2009) (citing Twombly, 550 U.S. at 556). To state a plausible claim for relief, a

complaint must “permit the court to infer more than the mere possibility of misconduct[.]” Id. at

679. The movant has the ultimate burden to show that dismissal is warranted. Marcure v. Lynn,

992 F.3d 625, 631 (7th Cir. 2021).

6

DISCUSSION

Defendants’ joint memorandum of law and supplemental briefs in support of dismissal

present myriad challenges to the Complaint, some of which apply to all claims and all Defendants

and others apply to only some claims and some Defendants. The Court will first address issues

that affect the entire pleading or multiple counts and then turn to arguments directed at specific

claims.

I. General Rules of Pleading

“A pleading that states a claim for relief must contain . . . a short and plain statement of

the claim showing that the pleader is entitled to relief[.]” Fed. R. Civ. P. 8(a)(2) (emphasis added);

see also Fed. R. Civ. P. 8(d)(1) (“Each allegation must be simple, concise, and direct.”). Because

“[l]ength may make a complaint unintelligible, by scattering and concealing in a morass of

irrelevancies the few allegations that matter,” United States ex rel. Garst v. Lockheed-Martin

Corp., 328 F.3d 374, 378 (7th Cir. 2003), district courts have the right to dismiss a complaint “so

long that it imposes an undue burden on the judge, to the prejudice of other litigants seeking the

judge’s attention,” Kadamovas v. Stevens, 706 F.3d 843, 844 (7th Cir. 2013).

Defendants argue that Plaintiffs’ 199-page, 899-paragraph6 Complaint should be dismissed

for failure to comply with Rule 8 because it “is overlong, needlessly complex, obscures the relevant

actors through rampant group pleading, fails to connect the alleged facts and causes of action, and

is largely indecipherable.” (Joint Mem. at 54, Dkt. 59).7 In support of this argument, Defendants

6 The paragraphs of Plaintiffs’ Complaint are misnumbered in several locations. (See, e.g., Compl. at 49

(jumping from ¶ 154 to ¶ 164), 108-111 (jumping from ¶ 386 to ¶ 365), and 116-117 (jumping from ¶ 385 to ¶ 461).

Although the final numbered paragraph is ¶ 899, taking into account the foregoing errors, the total number of

paragraphs appears to be 834.

7 Unless otherwise noted, all references to page numbers in the parties’ filings are to page numbers in the

CM/ECF header, not the document.

7

cite several cases in which lengthy complaints were dismissed. See, e.g., Lockheed-Martin, 328

F.3d at 378 (155-page, 400-paragraph complaint); Mann v. Boatright, 477 F.3d 1140, 1148 (10th

Cir. 2007) (99-page, single-spaced complaint); In re Westinghouse Sec. Litig., 90 F.3d 696, 703

(3d Cir. 1996) (240-page, 600-paragraph complaint); Michaelis v. Nebraska State Bar Ass’n, 717

F.2d 437, 439 (8th Cir. 1983) (per curiam) (98-page, 144-paragraph complaint); but see

Kadamovas, 706 F.3d at 844 (“[A] complaint may be long not because the draftsman is

incompetent or is seeking to obfuscate . . . , but because it contains a large number of distinct

charges.”). While Plaintiffs do not directly address this argument, in response to Defendants’

assertion that the complaint is lacking in detail, they remark that “[i]ronically, Plaintiffs give

[Defendants] much more specificity than required . . . .” (Resp. at 15, Dkt. 69).

True, this Complaint is overlong and needlessly complex. Plaintiffs included many

irrelevant details, repeated the same information in several different places, and combined 15

causes of action against 13 defendants in a single case. This is why it was necessary for Plaintiffs

to append a 13-page, 125-section “Table of Complaint Citations” to their Response. (See Resp.

Ex. A, Dkt. 69-1). Still, the Court declines to dismiss the pleading on that basis. Defendants were

able to glean the pertinent information from the pleading to formulate their briefs, and the Court

has also done so to craft this decision. And if the Court were to dismiss the Complaint under Rule

8(a), Plaintiffs would be allowed to replead, Defendants would undoubtedly move to dismiss

again, and the briefing cycle would begin anew. Enough ink has been split on the pleadings in this

case. Briefing is complete, and the matter has been under advisement long enough. To restart the

pleading process would be a waste of resources. For these reasons, the Court declines to dismiss

the case for failure to comply with Rule 8(a) but cautions the parties that further unduly lengthy

filings will not be allowed.

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II. False Advertising Claims (Counts 1, 14, and 15)

In Counts 1, 14, and 15 of the Complaint, Plaintiffs assert claims for false advertising under

the Lanham Act, CFA, and DTPA, respectively. “To invoke the Lanham Act’s cause of action for

false advertising, a plaintiff must plead (and ultimately prove) an injury to a commercial interest

in sales or business reputation proximately caused by the defendant’s misrepresentations.”

Lexmark Int’l, Inc. v. Static Control Components, Inc., 572 U.S. 118, 140 (2014). If based on the

same misrepresentation, “claims for false advertising under the [DTPA] and CFA rise or fall with

[a] claim under the Lanham Act[.]” AAVN, Inc. v. WestPoint Home, Inc., No. 17 C 8329, 2019 WL

1168102, at *4 (N.D. Ill. Mar. 13, 2019). Defendants argue that Plaintiffs’ false advertising claims

should be dismissed because Plaintiffs failed to plausibly allege harm to their own commercial

interests. (Joint Mem. at 48-50). In addition, because Plaintiffs failed to respond to that argument,

Defendants contend that those claims should be deemed abandoned and dismissed with prejudice.

(Reply at 44, Dkt. 74).8

Longstanding and abundant case law in this Circuit holds that a person effectively

abandons (or waives) a claim by not responding to arguments made in a motion to dismiss. See

Alioto v. Town of Lisbon, 651 F.3d 715, 721 (7th Cir. 2011) (affirming district court’s decision

that the plaintiff had forfeited his opportunity to oppose the defendants’ motions to dismiss by

failing to respond to the arguments in support of those motions); Bonte v. U.S. Bank, N.A., 624

F.3d 461, 466 (7th Cir. 2010) (“Failure to respond to an argument—as the [plaintiffs] have done

here—results in waiver.”); County of McHenry v. Ins. Co. of the West, 438 F.3d 813, 818 (7th Cir.

2006) (“When presented with a motion to dismiss, the non-moving party must proffer some legal

8 Defendants also argue that Counts 14 (CFA) and 15 (DTPA) are barred by their respective statutes of

limitations; however, that issue will be discussed separately below.

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basis to support his cause of action.”) (internal quotations omitted); Lekas v. Briley, 405 F.3d 602,

614 (7th Cir. 2005) (finding that claim had been waived where the plaintiff “did not present legal

arguments or cite relevant authority to substantiate that claim in responding to defendants’ motion

to dismiss[.]”); Kirksey v. R.J. Reynolds Tobacco Co., 168 F.3d 1039, 1041 (7th Cir. 1999) (“Our

system of justice is adversarial, and our judges are busy people. If they are given plausible reasons

for dismissing a complaint, they are not going to do the plaintiff’s research and try to discover

whether there might be something to say against the defendants’ reasoning. An unresponsive

response is no response. In effect the plaintiff was defaulted for refusing to respond to the motion

to dismiss. And rightly so.”); Stransky v. Cummins Engine Co., 51 F.3d 1329, 1335 (7th Cir. 1995),

as amended (Apr. 7, 1995) (“when presented with a motion to dismiss, the non-moving party must

proffer some legal basis to support his cause of action. The federal courts will not invent legal

arguments for litigants.”) (internal citation omitted); see also 7241 W. 100th Place Corp. v. Vill.

of Bridgeview, No. 13 C 4336, 2014 WL 517961, at *3 (N.D. Ill. Feb. 6, 2014) (“[B]ecause claims

that a plaintiff fails to defend in opposing a Rule 12(b)(6) motion are deemed abandoned, the

dismissal is with prejudice.”); Jones v. Connors, No. 11 C 8276, 2012 WL 4361500, at *7 (N.D.

Ill. Sept. 20, 2012) (“A party’s failure to respond to arguments the opposing party makes in a

motion to dismiss operates as a waiver or forfeiture of the claim and an abandonment of any

argument against dismissing the claim.”).

Accordingly, because Defendants have offered plausible arguments for dismissal and

Plaintiffs have failed to respond, any argument to the contrary has been forfeited and the false

advertising claims have been abandoned. Counts 1, 14, and 15 are therefore dismissed with

prejudice.

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III. Conspiracy-Based Claims (Counts 2, 4, 6, and 13)

In Counts 2, 4, 6, and 13 of the Complaint, Plaintiffs assert conspiracy-based claims for

violations of the Sherman,9 Clayton, Cartwright, and RICO Acts and for civil conspiracy. To

survive dismissal, each of these claims must all plausibly allege the existence of an illegal

agreement or conspiracy, among other things. See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556

(2007) (“we hold that stating [a Sherman Act § 1] claim requires a complaint with enough factual

matter (taken as true) to suggest that an agreement was made.”); McCoy v. Gamesa Tech. Corp.,

2012 WL 245166, at *4-5 (N.D. Ill. Jan. 26, 2012) (noting that a plaintiff alleging antitrust

conspiracy must ultimately “establish that the alleged conspirators ‘had a conscious commitment

to a common scheme designed to achieve an unlawful objective.’”) (quoting Omnicare, Inc. v.

UnitedHealth Grp., Inc., 629 F.3d 697, 706 (7th Cir. 2011); Monsanto Co. v. Spray-Rite Serv.

Corp., 465 U.S. 752, 764 (1984))); Cnty. of Tuolumne v. Sonora Cmty. Hosp., 236 F.3d 1148, 1160

(9th Cir. 2001) (The analysis for Cartwright Act claims “mirrors the analysis under federal

[antitrust] law.”); McCoy, 2012 WL 245166, at *4 (“To establish a civil conspiracy under Illinois

law, a plaintiff must show that each alleged conspirator ‘knowingly and voluntarily participated in

a common scheme to commit an unlawful act or a lawful act in an unlawful manner.’”) (quoting

McClure v. Owens Corning Fiberglass Corp., 188 Ill. 2d 102, 133 (1999)); Bobb v. Swartz-Retson

P.C., No. 17 C 7694, 2018 WL 4384292, at *6 (N.D. Ill. Sept. 14, 2018) (“the existence of an

‘enterprise’ is fundamental to each provision [of RICO].”) (citing 18 U.S.C. §§ 1962(a)-(d)).

9 The title of Count 2 references Sections 1, 2, and 3 of the Sherman Act. Section 1 is discussed herein.

Section 2 is addressed below. Section 3 “merely extends the [geographic] reach of Section 1,” meaning that “Section

3 claims are analyzed in the same manner as Section 1 claims.” Spinelli v. Nat’l Football League, 96 F. Supp. 3d 81,

106 n.10 (S.D.N.Y. 2015).

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To determine whether Plaintiffs have plausibly alleged conspiracy, “the crucial question is

whether . . . [defendants’] conduct stemmed from independent decision or from an agreement, tacit

or express.” Theatre Enters., Inc. v. Paramount Film Distrib. Corp., 346 U.S. 537, 540 (1954); see

also Twombly, 550 U.S. at 556 (“Asking for plausible grounds to infer an agreement does not

impose a probability requirement at the pleading stage; it simply calls for enough fact to raise a

reasonable expectation that discovery will reveal evidence of illegal agreement.”). To meet that

requirement, a plaintiff may allege an illegal agreement through direct or circumstantial evidence.

In re Dealer Mgmt. Sys. Antitrust Litig., 313 F. Supp. 3d 931, 949 (N.D. Ill. 2018). Direct evidence

constitutes a “smoking gun” and “is explicit and requires no inferences to establish the proposition

or conclusion being asserted.” Id. (quoting In re Dairy Farmers of Am., Inc., Cheese Antitrust

Litig., 60 F. Supp. 3d 914, 950 (N.D. Ill. 2014); In re Baby Food Antitrust Litig., 166 F.3d 112,

118 (3d Cir. 1999)). Circumstantial evidence consists of “facts ‘from which the existence of such

an agreement can be inferred.’” Dealer Mgmt., 313 F. Supp. 3d at 949 (quoting In re High Fructose

Corn Syrup Antitrust Litig., 295 F.3d 651, 654 (7th Cir. 2002)).

“Absent ‘smoking gun’ direct evidence of a conspiracy . . . , circumstantial evidence can

support an inference of an agreement if it sufficiently alleges ‘a mixture of parallel behaviors,

details of industry structure, and industry practices, that facilitate collusion.”’ Reapers Hockey

Ass’n, Inc. v. Amateur Hockey Ass’n Ill., Inc., 412 F. Supp. 3d 941, 955 (N.D. Ill. 2019) (quoting

In re Text Messaging Antitrust Litig., 630 F.3d 622, 627 (7th Cir. 2010)). Alleging inferences of

“parallel conduct that could just as easily be independent action does not suggest a conspiracy to

restrain trade” and are therefore not enough. Reapers Hockey, 412 F. Supp. 3d at 955 (citing

Twombly, 550 U.S. at 556-557). Thus, a plaintiff alleging a conspiracy based on circumstantial

evidence must also allege certain “plus factors[,]” which “are economic actions and outcomes that

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are largely inconsistent with unilateral conduct but largely consistent with explicitly coordinated

action.” In re Musical Instruments & Equip. Antitrust Litig., 798 F.3d 1186, 1194 (9th Cir. 2015)

(citing Twombly, 550 U.S. at 557 [sic] n. 4). Relevant “plus factors” may include “a common

motive to conspire, evidence that shows that the parallel acts were against the apparent individual

economic self-interest of the alleged conspirators, and evidence of a high level of interfirm

communications.” In re Outpatient Med. Ctr. Emp. Antitrust Litig., 630 F. Supp. 3d 968, 985 (N.D.

Ill. 2022) (quoting PharmacyChecker.com, LLC v. Nat’l Ass’n of Bds. of Pharmacy, 530 F. Supp.

3d 301, 334 (S.D.N.Y. 2021); Mayor of Baltimore v. Citigroup, Inc., 709 F.3d 129, 136 (2d Cir.

2013)).

Defendants argue that Plaintiffs’ conspiracy-based claims should be dismissed because

Plaintiffs have failed to plausibly allege the existence of an illegal agreement between Defendants.

Specifically, Defendants claim that the allegations concerning the purported RIA Services Scheme

and Silencing and Retaliation Scheme are insufficient to show any agreement between the

Defendants because Plaintiffs allege only parallel conduct (i.e., offering broadly similar packages

of investment products, participating in an RIA referral program, and eliminating certain

commissions) and nothing consistent with coordinated action. (Joint Mem. at 25-26).

Plaintiffs respond that they have alleged direct evidence of a conspiracy in the form of

agreements, communications, admissions, and threats. (Resp. at 26-27). Specifically, Plaintiffs

point to allegations about referral agreements between RIAs and the Broker-Custodian

Defendants, admissions concerning such agreements, communications between Mallouk, Creative

Planning, and AMTD about the Silencing and Retaliation Scheme, communications between

Schwab and Fidelity about pricing and confidential information in the context of due diligence for

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mergers and acquisitions, threats by Schwab and Fidelity concerning a group boycott, and threats

by Creative Planning concerning no-poach agreements.

Even if those allegations of direct evidence are insufficient, Plaintiffs claim that they have

alleged adequate circumstantial evidence to infer a conspiracy. Namely, Plaintiffs assert that

Defendants engaged in parallel conduct, had many common motives to conspire, shared

information, participated in mergers and acquisitions, had opportunities to meet, and were subject

to industry characteristics that facilitated collusion. (Resp. at 31). In response to Defendants’

argument that the alleged parallel conduct is nothing more than “individual responses to common

stimuli[,]” (Joint Mem. at 26), Plaintiffs contend that they need not plead around alternative

explanations and that, in any event, Defendants’ assertion that their pricing changes were

consumer-friendly ignores the fact that there were corresponding changes to other terms that

increased costs, and this is a dispute of fact that precludes dismissal, (Resp. at 31-32). In addition,

Plaintiffs challenge a number of Defendants’ attacks to their conspiracy-based claims on other

miscellaneous grounds and for reasons applicable to specific Defendants (e.g., Creative Planning

and General Atlantic). Because the Court agrees with Defendants that there are fundamental

problems with Plaintiffs’ conspiracy allegations, the Court need not address the miscellaneous and

defendant-specific issues.

The overarching problem with Plaintiffs’ conspiracy-based claims is that although the

Complaint allegations are voluminous, they remain conclusory in many respects. As Defendants

note, Plaintiffs often engage in “group pleading” alleging that “Defendants” or the “Broker-

Custodian Defendants” engaged in certain activity but failing to differentiate with factual

allegations about specific Defendants. This is particularly problematic where the Court must

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consider whether allegations about each Defendant’s purported conduct is sufficient to infer an

illegal agreement.

Looking beyond this fundamental issue, Plaintiffs’ conspiracy-based claims are also

lacking in factual allegations of direct or circumstantial evidence of an illegal agreement. In

support of Plaintiffs argument that there is direct evidence of an agreement in the form of

agreements, communications, admissions, and threats, Plaintiffs cite sections of chart attached as

Exhibit A to the Response, which in turn cites paragraphs of the Complaint that supposedly contain

relevant allegations. Not only are the cited allegations conclusory, but also, they are not direct

evidence of a conspiracy. For example, Plaintiffs point to the existence of RIA referral agreements

as direct evidence of a conspiracy, but that reasoning is flawed. The purported RIA Services

Scheme involves the use of referral agreements in furtherance of the overall scheme, so the referral

agreements themselves cannot constitute direct evidence of an agreement to collude. The alleged

communications, admissions, and threats do not fare any better. None include statements that

constitute “smoking gun” direct evidence of the existence of a conspiracy.

Plaintiffs’ allegations of circumstantial evidence of a conspiracy are also insufficient. The

first step in alleging circumstantial evidence of a conspiracy is to describe parallel conduct.

Although Plaintiffs plausibly allege that Defendants all engaged in similar conduct with respect to

the RIA Services Scheme and the Silencing and Retaliation Scheme, Plaintiffs fail to establish that

such conduct was parallel. Specifically, Plaintiffs claims that in furtherance of the RIA Services

Scheme, the Broker-Custodian Defendants engaged in simultaneous price cuts by dropping certain

commissions to zero. At the same time, Plaintiffs allege that those cuts were actually made first by

Schwab, then by AMTD, and eventually by Fidelity. Absent other evidence of collusion, it is not

reasonable to infer that price cuts made close in time were effectively done in concert with each

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other as opposed to being done in response to each other, as competitors do. Furthermore, although

Plaintiffs now argue that the price cuts were made in connection with other changes that resulted

in net increased costs, they have not cited any authority to show that consecutive price cuts may

be indicative of a conspiracy. Similarly, with respect to the Silencing and Retaliation Scheme,

Plaintiffs characterize the Broker-Custodian Defendants’ respective decisions to cease doing

business with Plaintiffs over the course of over a year as a parallel conduct in the form of a group

boycott. This characterization ignores the fact that each Defendant cut ties with Plaintiffs at

different times and for seemingly different reasons, which belies any suggestion of a group boycott

or other conspiracy.

Even if Plaintiffs had sufficiently alleged parallel conduct in connection with the RIA

Services Scheme and Silencing and Retaliation Scheme, the conspiracy-based claims would still

fail because Plaintiffs do not plausibly allege sufficient plus factors. Plaintiffs’ allegations in this

regard are categorical and lacking in detail but also substantively deficient. Many of the purported

motives to conspire (e.g., increased profits, competitive advantage, increase revenue, etc.), (Resp.

at 30), boil down to their motivation to increase profits, which always exists and does not give rise

to an inference of a conspiracy. Musical Instruments, 798 F.3d at 1195 n.8. The allegations

regarding the other purported plus factors (e.g., information sharing, opportunities to meet,

mergers and acquisitions, etc.) are insufficient because, again, although they are not brief, they are

conclusory and lacking the requisite factual content. (See Compl. ¶¶ 296-315).

The bottom line is that the allegations of conspiracy are heavy on theories and labels and

light on details. Furthermore, even reading the conspiracy-based claims in the light most favorable

to Plaintiffs, they lack adequate factual content about Defendants’ conduct to infer the existence

16

of any agreement to engage in the schemes alleged by Plaintiffs. Accordingly, Plaintiffs’

conspiracy-based claims (Counts 2, 4, 6, and 13)10 are dismissed.

IV. Antitrust Claims (Counts 2-4)

In Counts 2, 3, and 4 of the Complaint, Plaintiffs assert antitrust claims against Defendants

under Sherman Act §§ 1 and 2, Clayton Act § 7, and the Cartwright Act,11 respectively. As

discussed above in Section III, Counts 2 and 4 fail because Plaintiffs failed to plausibly allege a

conspiracy.12 As such, the only antitrust claim remaining for discussion is Count 3, for violation

of Section 7 of the Clayton Act.

A. Clayton Act § 7 (Count 3)

Section 7 of the Clayton Act prohibits the acquisition of a company where “the effect of

such acquisition may be substantially to lessen competition, or to tend to create a monopoly.” 15

U.S.C. § 18. A plaintiff asserting a Section 7 claim must first “identify the relevant product and

geographic markets.” FTC v. Advoc. Health Care Network, 841 F.3d 460, 467 (7th Cir. 2016)

(citing Brown Shoe Co. v. United States, 370 U.S. 294, 324 (1962)). Second, a plaintiff must

plausibly allege that the effect of the merger may be substantially to lessen competition in the

relevant market. FTC v. Advoc. Health Care, 2017 WL 1022015, at *7 (N.D. Ill. Mar. 16, 2017).

10 Defendants’ Joint Memorandum refers to Counts 2, 4, 6, and 13 as the conspiracy-based claims, (Joint

Mem. at 11-19), but Defendants’ Joint Reply expands that category to include Count 5, (Joint Reply at 20). Because

arguments may not be raised for the first time in a reply brief, the Court declines to extend this section to Count 5.

11 The parties agree that the analysis under the Sherman Act and Cartwright Act is the same. (Joint Mem. at

23) (citing Cnty. of Tuolumne v. Sonora Cmty. Hosp., 236 F.3d 1148, 1160 (9th Cir. 2001)); (Resp. at 35) (citing In

re Copper Antitrust Litig., 436 F.3d 782, 802 (7th Cir. 2006)).

12 Even if Plaintiffs’ Sherman Act and Cartwright Act claims were not dismissed for that reason, it is doubtful

that they would survive. To state a claim under either law, a plaintiff must allege, among other things, antitrust injury

and a restraint on trade resulting from the purported anticompetitive behavior. See Agnew v. Nat’l Collegiate Athletic

Ass’n, 683 F.3d 328, 335 (7th Cir. 2012). Although the Court need not reach the issue for purposes of these claims,

the allegations attempting to connect the alleged anticompetitive conduct to injuries suffered by Plaintiffs for the

relevant markets lack sufficient facts to show a causal nexus. Because there are other reasons for dismissal, the Court

also declines to address the parties’ arguments regarding antitrust injury, restraint on trade, implied immunity, and

exclusionary conduct.

17

Plaintiffs’ Clayton Act claim challenges (1) Schwab’s horizontal acquisition of AMTD;

(2) Creative Planning’s acquisitions of competitor RIAs13; and (3) Fidelity and Schwab’s

“acquisition” of small RIAs and IARs through their supportive independence programs. (Compl.

¶¶ 741-745). These claims fail because Plaintiffs have not sufficiently alleged a “reasonable

probability, not mere possibility, of anticompetitive effect.” Lektro-Vend Corp. v. Vendo Co., 660

F.2d 255, 274 (7th Cir. 1981).

With respect to the Schwab-AMTD acquisition, Plaintiffs’ Complaint is both contradictory

and conclusory. While claiming that the acquisition was monopolistic, Plaintiffs also allege

Fidelity competes with Schwab, (Compl. ¶ 120), and other competitors are entering the market,

albeit with limited offerings, (id. ¶ 193-194). Furthermore, Plaintiffs do not attempt to connect

allegations about diminished competition with the acquisition on anything more than a superficial

level. As a result of these deficiencies, Plaintiffs’ Complaint fails to plausibly allege a connection

between the Schwab-AMTD acquisition and any anticompetitive effect. CP’s acquisition of

independent RIAs does not fare any better. Put simply, Creative Planning takes up too small of a

share of the RIA market to pose any real risk of monopolization. For the relevant time period,

Plaintiffs claim that the relevant market consists of $5.7 trillion total AUM, (Resp. at 10 ) (citing

Compl. ¶¶ 107-112), and CP’s AUM was $133 billion. It is not plausible that acquisitions resulting

in such a small market share could give rise to a reasonable probability of anticompetitive effect.

13 Plaintiffs allege that General Atlantic’s acquisition of a partnership interest in Creative Planning was in

furtherance of Creative Planning’s purported attempts to monopolize the independent RIA market. (Compl. ¶ 743).

Defendants argue that it is unclear how the acquisition of a partnership interest alone supports the broader theory that

Creative Planning’s acquisition of competitors had anticompetitive effects, given that General Atlantic is alleged to

be an investor only and not an RIA or a custodian. Plaintiffs insist that General Atlantic is subject to liability for

Creative Planning’s tortious conduct as a partner but do not otherwise respond to this argument. The Court agrees that

General Atlantic’s acquisition of a partnership interest in Creative Planning is distinct from Creative Planning’s

purported anticompetitive conduct. Therefore, the Clayton Act claim fails to the extent it is based on General Atlantic’s

acquisition of a partnership interest in Creative Planning.

18

See, e.g., Mullis v. Arco Petroleum Corp., 502 F.2d 290, 297 (7th Cir. 1974) (3-percentage market

share did not even lend colorable support for comparable Sherman Act § 2 monopoly claim). Last,

Fidelity and Schwab’s supported independence programs definitionally cannot support a Clayton

Act § 7 claim. Section 7 is limited to direct or indirect acquisitions. See 15 U.S.C. § 18. Fidelity

and Schwab’s supported independence programs, as alleged in the Complaint, are in the nature of

agreements and business relationships between custodians and the independent and/or small RIAs.

Plaintiffs fail to allege and explain how such facts could be characterized as an acquisition. For

these reasons, Plaintiffs’ Clayton Act § 7 claims fail to plausibly allege that the effect of any of

the purportedly monopolistic conduct “may be substantially to lessen competition in the relevant

market” and are therefore dismissed.

V. California Claims (Counts 4 and 5)

In Counts 4 and 5 of the Complaint, Plaintiffs assert claims under California’s Cartwright

Act and UCL (the “California Claims”), respectively. To the extent the California Claims do not

fail for the same reasons as other claims,14 Defendants make the limited argument that the

disgorgement sought by Plaintiffs, (see Compl. ¶ 759), is unavailable under the UCL. (Joint Mem.

at 53-54) (citing Elzeftawy v. Pernix Grp., Inc., 477 F. Supp. 3d 734, 787 n.23 (N.D. Ill. 2020)

(“plaintiffs generally cannot recover money damages on a UCL claim.”); Korea Supply Co. v.

Lockheed Martin Corp., 29 Cal. 4th 1134, 1144-1151 (2003)). As with many other arguments,

Plaintiffs failed to address this one and have therefore forfeited the opportunity to respond and

waived and abandoned their request for disgorgement.

In addition, the Fidelity Defendants argue that the California Claims against them fail

because Plaintiffs did not allege any nexus between Fidelity’s alleged conduct and California. The

14 As discussed in Section VI, Count 5 for violation of the UCL is dismissed in its entirety.

19

Court is not persuaded by this argument. Plaintiffs allege that Greco is registered as an IAR in

California, Spotlight does business throughout the United States, and the Fidelity Defendants

provide a wide range of relevant services in the national investment advisory industry. (Compl.

¶¶ 27, 30, 31-42). It is reasonable to infer from these allegations that there is a nexus between the

Fidelity Defendants’ purported conduct, Plaintiffs’ alleged injuries, and California. Accordingly,

to the extent the California Claims are not dismissed for other reasons, the grounds raised by the

Fidelity Defendants do not support dismissal.

VI. Fraud-Based Claims (Counts 1, 5, and 13-15)

Defendants argue that the following fraud-based claims should be dismissed because they

are not pleaded with the level of particularity required by Rule 9(b): Counts 1 (Lanham Act false

advertising), 5 (UCL), 13 (civil RICO), 14 (CFA), and 15 (DTPA). Indeed, such claims must be

pleaded with particularity. See Conditioned Ocular Enhancement, Inc. v. Bonaventura, 458 F.

Supp. 2d 704, 709 (N.D. Ill. 2006) (Lanham Act); Kearns v. Ford Motor Co., 567 F.3d 1120, 1125

(9th Cir. 2009) (UCL); Goren v. New Vision Int’l, Inc., 156 F.3d 721, 726 (7th Cir. 1998) (RICO);

Nakajima All Co. v. SL Ventures Corp., No. 00 C 6594, 2001 WL 641415, at *4 (N.D. Ill. June 4,

2001) (CFA and DTPA). Under Rule 9(b), “[i]n alleging fraud or mistake, a party must state with

particularity the circumstances constituting fraud or mistake.” Fed. R. Civ. P 9(b). In plain terms,

this means that “a plaintiff must plead the ‘who, what, when, where, and how’ of the alleged fraud.”

Calavan v. First Love Int’l Ministries, 590 F. Supp. 3d 1131, 1139 (N.D. Ill. 2022) (quoting

Menzies v. Seyfarth Shaw LLP, 943 F.3d 328, 338 (7th Cir. 2019)). Allegations of fraud may be

plead on information and belief if the facts constituting the fraud are unavailable to the plaintiff,

but the plaintiff must then plead the grounds for his suspicions. Goldberg v. Rush Univ. Med. Ctr.,

929 F. Supp. 2d 807 (N.D. Ill. 2013).

20

Defendants cite many instances throughout the Complaint where Plaintiffs generally allege

that Defendants engaged in fraud and even quote various communications made by specific

Defendants. (See, e.g., Compl. ¶¶ 137, 229-234, 240, 281, 568, 613, 693). But according to

Defendants, these allegations are insufficient under Rule 9(b) because they are too generalized and

do not spell out the “who, what, when, where, and how” of the purported fraud. In response,

Plaintiffs say that Defendant’s argument is “simply wrong[,]” that their “well-plead, factually

specific allegations speak for themselves[,]” and that it is perfectly acceptable to plead fraud on

information and belief. (Resp. at 15-16). Ironically, Plaintiffs’ conclusory and generalized

argument suffers from the same deficiencies as their fraud allegations—lack of particularity.

In response to a motion to dismiss, it is not enough to tell the Court that the movant is

“simply wrong” and the allegations “speak for themselves.” Defendants are right—“[j]udges are

not like pigs, hunting for truffles buried in briefs,” United States v. Dunkel, 927 F.2d 955, 956 (7th

Cir. 1991), and “[i]t is not the Court’s responsibility to find arguments, facts, and supporting case

law for the parties,” Sanders v. JGWPT Holdings, Inc., 2016 WL 4009941, at *11 (N.D. Ill. July

26, 2016). (Reply at 13). That is especially true where the pleading is as lengthy, repetitive, and

convoluted as Plaintiffs’ Complaint here. Based on the Court’s review of the Complaint and

Defendants’ citation to various instances of generalized fraud allegations, the Court has no trouble

concluding that the allegations of fraud do not come close to meeting the heightened pleading

standard set forth in Rule 9(b).

Indeed, many of the allegations do generally reference categories of statements and

representations made by all the Defendants or sub-groups of Defendants; they are still insufficient

to support fraud-based claims. (See, e.g., Compl. ¶ 281) (“Defendants make intentionally false and

misleading representations and omissions in their SEC Reports, and in other representations to

21

clients, about [listing generalized topics].”). Many other allegations quote and cite specific

communications, which is better but not enough, because the statements themselves do not contain

any actionable misrepresentations. (See, e.g., Compl. ¶ 613) (citing a solicitation letter stating that

Fidelity is “focused on helping your firm succeed” and thanks the recipient for its interest in

Fidelity’s services “to help you grow your business.”). To the extent any of the fraud-based

allegations were based on information and belief,15 as Plaintiffs’ response suggests, Plaintiffs

failed to provide any explanation as to the grounds for such belief, let alone cite to any allegations

containing such grounds. For these reasons, Plaintiffs have not demonstrated that their fraud-based

allegations are plead with the requisite level of particularity, and Counts 1, 5, 13, 14, and 15 are

all dismissed for that reason.

VII. Statutes of Limitations (Counts 2, 4, 5, and 13-15)

Defendants argue that the following claims, to the extent they are based on the RIA

Services Scheme or the CP Fraudulent Growth Scheme, should be dismissed because they are

barred by their respective statutes of limitations: Counts 2 (Sherman Act), 4 (Cartwright Act), 5

(UCL), 13 (RICO Act), 14 (FCA), and 15 (DTPA). Generally, the dismissal of claims “as untimely

at the pleading stage is an unusual step, since a complaint need not anticipate and overcome

affirmative defenses, such as the statute of limitations.” Cancer Found., Inc. v. Cerberus Cap.

Mgmt., LP, 559 F.3d 671, 674 (7th Cir. 2009). However, a court may dismiss a claim barred by

the statute of limitations “when the plaintiff pleads himself out of court by alleging facts sufficient

to establish the complaint’s tardiness.” Id. at 674-675. Because that approach is “irregular,” it is

appropriate “only where the allegations of the complaint itself set forth everything necessary to

15 The Complaint generally states: “Plaintiffs . . . complain, upon information and belief, except as to

allegations particularly pertaining to themselves, which are based on personal knowledge, against [Defendants].”

(Compl. at 5).

22

satisfy the affirmative defense.” Chi. Bldg. Design, P.C. v. Mongolian House, Inc., 770 F.3d 610,

613-614 (7th Cir. 2014); see also see also Walker v. Thompson, 288 F.3d 1005, 1009 (7th Cir.

2002) (“[W]hen the existence of a valid affirmative defense is so plain from the face of the

complaint that the suit can be regarded as frivolous, the district judge need not wait for an answer

before dismissing the suit.”). “As long as there is a conceivable set of facts, consistent with the

complaint, that would defeat a statute of limitations defense, questions of timeliness are left for

summary judgment (or ultimately trial), at which point [the Court] may determine compliance with

the statute of limitations based on a more complete factual record.” Sidney Hillman Health Ctr. v.

Abbott Lab’ys, Inc., 782 F.3d 922, 928 (7th Cir. 2015).

Defendants contend that the above-referenced claims have statutes of limitations that expired

before Plaintiffs filed the Complaint and that the allegations concerning them establish the

tardiness of the claims to the extent that they are based on the RIA Services Scheme or the CP

Fraudulent Growth Scheme. (Joint Mem. at 51-53). The relevant claims have 3 or 4-year

limitations periods. See 15 U.S.C. § 15b (4-year limitations period for Sherman Act claims);

Garrison v. Oracle Corp., 159 F. Supp. 3d 1044, 1062 (N.D. Cal. 2016) (4-year limitations period

for Cartwright Act claims); Jay E. Hayden Found. v. First Neighbor Bank, N.A., 610 F.3d 382,

386 (7th Cir. 2010) (4-year limitations period for civil RICO claims); Beaver v. Tarsadia Hotels,

816 F.3d 1170, 1178 (9th Cir. 2016) (4-year limitations period for UCL claims); 815 ILCS

505/10a(e) (3-year limitations period for CFA claims); Underground Sols., Inc. v. Palermo, 2014

WL 4703925, at *2 (N.D. Ill. Sept. 22, 2014) (3-year limitations period for DTPA claims).

Defendants thus insist that those claims are untimely because Plaintiffs filed the Complaint in 2022

but allege awareness of the purported wrongful conduct by at least 2017 and possibly as early as

2013 in some instances. (See Compl. ¶¶ 320, 323-324, 365-367, 382-386, 710, 750, 860, 876-886,

23

887-888, 890-893). Plaintiffs oppose dismissal of their claims as untimely on the basis that such a

determination is premature at this stage in the case, causes of action or conspiracy to violate

antitrust laws accrue each time a plaintiff is injured by a continuing violation, and allegations of

events occurring outside the limitations period are relevant to provide context. (Resp. at 62) (citing

Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321, 338 (1971) (accrual for continuing

violations); Colorado ex rel. Woodard v. Ramsour Bros., No. 84 C 802, 1986 WL 7823, at *6 (D.

Colo. July 9, 1986) (relevance of events outside limitations period)). Plaintiffs’ response is silent

as to the non-antitrust claims.

Considering the nature of the alleged wrongdoing in this case, the Court finds that it would

be inappropriate to take the “unusual” and “irregular” step of dismissing Plaintiffs’ claims as

untimely at this stage in the case. As alleged, both the RIA Services Scheme and the CP Fraudulent

Growth Scheme involve fluid and ongoing conduct Plaintiffs learned of as early as 2013 in some

cases but continued to feel the effects of into the limitations periods for the relevant claims.

Because claims accrue each time a plaintiff is injured by an act of the defendants in the context of

a continuing conspiracy to violate the antitrust laws, Zenith, 401 U.S. at 338, the allegations that

Plaintiffs continued to suffer harm after learning of Defendants’ conduct are enough to avoid

dismissal under the statutes of limitations for these claims. Accordingly, to the extent that the

claims at issue in this section are not subject to dismissal for other reasons, the Court declines to

dismiss them as untimely.

VIII. Compulsory Counterclaims (Counts 8, 10, 11, and 12)

The CP Defendants argue that the following claims should be dismissed because they are

compulsory counterclaims that should have been brought in earlier litigation in Kansas between

the parties: Counts 8 (tortious interference with economic advantage), 10 (breach of contract), 11

24

(defamation), and 12 (unjust enrichment). (CP Supp. Mem. at 7-9, Dkt. 60). Under Rule 13, a

counterclaim is compulsory in federal court if it “(A) arises out of the transaction or occurrence

that is the subject matter of the opposing party’s claim; and (B) does not require adding another

party over whom the court cannot acquire jurisdiction.” Fed. R. Civ. P. 13(a). The relevant Kansas

statute mirrors the language of Rule 13. See K.S.A. § 60-213(a). “In this circuit, whether a claim

is a compulsory counterclaim hinges on whether the claim of the defendant—whether asserted in

the same case or in a subsequent action—is ‘logically related’ to the claim asserted by the

plaintiff.” Inforizons, Inc. v. VED Software Servs., Inc., 204 F.R.D. 116, 119 (N.D. Ill. 2001)

(citing Colonial Penn Life Ins. Co. v. Hallmark Ins. Adm’rs, Inc., 31 F.3d 445, 448 (7th Cir. 1994)).

“[T]he test is to be applied flexibly in order to further the policies of Rule 13(a).” Inforizons, 204

F.R.D. at 119 (“The purpose of Rule 13(a) is judicial economy: ‘to avoid a multiplicity of actions

by resolving in a single lawsuit all disputes that ensue from a common factual background.’”)

(quoting In re Price, 42 F.3d 1068, 1073 (7th Cir.1994)). If a court finds that a claim before it is a

compulsory counterclaim that should have been brought in earlier litigation, the second claim

should be dismissed in favor of the first-filed case. See Inforizons, 204 F.R.D. at 120.

Creative Planning filed suit against Plaintiffs in Kansas state court on June 11, 2020.

(Compl. ¶ 605) (citing Creative Planning, LLC f/k/a Creative Planning, Inc. v. Stephen A. Greco,

et. al., 20 CV 02465 (Johnson Cnty., Kan.). The Kansas suit relates to the breakdown of the

relationship between Plaintiffs and the CP Defendants and a 2017 settlement agreement, and raises

claims for breach of contract, tortious interference, defamation, and civil conspiracy. (CP Supp.

Mem., Ex. A to the Decl. of Melissa Sherman, Dkt. 60-2).16 Defendants argue that Plaintiffs’ state-

16 The Court takes judicial notice of the Kansas suit. See Daniel v. Cook Cty., 833 F.3d 728, 742 (7th Cir.

2016); World Water Works Holdings, Inc. v. Continental Cas. Co., 392 F. Supp. 3d 923, 932 (N.D. Ill. 2019).

25

law claims “in this action stem from the same transactions and facts at issue in the Kansas Action—

including, e.g., Greco’s departure, the parties’ Settlement Agreement, and Greco’s SEC

Complaint—they are “logically related” and therefore constitute compulsory counterclaims.” (CP

Supp. Mem. at 8). Plaintiffs respond by trying to differentiate the cases on the basis that 12 of the

13 Defendants present in this action are not parties to the Kansas suit, but that is not persuasive

given that not all parties to this suit are involved in the common facts underlying the two cases.

Plaintiffs also argue that the facts, law, and evidence are different because this case involves a

larger and more complex conspiracy, essentially making the Kansas suit peripheral. The Court

disagrees. The Kansas case was filed two years before the instant suit and involves the exact same

failed business relationship, allegedly breached 2017 settlement agreement, and set of events that

give rise to the state-law claims against the CP Defendants in this case.

Despite the connection between those underlying transactions and facts and the larger

conspiracy that Plaintiffs allege here, it seems that the purpose of Rule 13—to promote judicial

economy—would best be served by Plaintiffs’ state-law claims against the CP Defendants being

litigated in the first-filed Kansas suit. Accordingly, Counts 8 (tortious interference with economic

advantage), 10 (breach of contract), 11 (defamation), and 12 (unjust enrichment) are dismissed

without prejudice to being filed as compulsory counterclaims in the Kansas case as to the CP

Defendants.

IX. Breach of Contract Against Broker-Custodian Defendants (Count 7)

In Count 7 of the Complaint, Spotlight asserts claims for breach of contract against the

Broker-Custodian Defendants. Essentially, Spotlight alleges that the Broker-Custodian Defendants

breached RIA Custodial Agreements with Spotlight by violating the duty of good faith and fair

dealing owed to Spotlight, and that Schwab and AMTD coordinated termination of their respective

26

RIA Custodial Agreements with Spotlight to amplify harm to Spotlight. The Broker-Custodian

Defendants argue that Spotlight’s breach of contract claims should be dismissed because the RIA

Custodial Agreements were subject to termination at-will by either party at any time for any

reason17 and violation of the covenant of good faith and fair dealing is not a stand-alone obligation

that can form the basis of a breach of contract claim. Without citing relevant authority, Spotlight

responds that there are still limitations to termination of an at-will contract and maintains that the

Broker-Custodian Defendants terminated in bad faith for illegal reasons is sufficient.

Under state law applicable to the RIA Custodial Agreements, termination of an at-will

contract under the terms of the agreement cannot form the basis of a stand-alone claim for violation

of the implied covenant of good faith and fair dealing. See Mill-Bern Assocs., Inc. v. Dallas

Semiconductor Corp., 2002 WL 1340853, at *10 (Mass. Super. Ct. June 13, 2002) (holding that

termination of an at-will contract generally cannot form the basis of a claim for breach of the

covenant of good faith and fair dealing); Terry A. Lambert Plumbing, Inc. v. W. Sec. Bank, 934

F.2d 976, 983 (8th Cir. 1991) (holding that “[a]cting according to express terms of a contract[, as

opposed to exercising discretion granted by contract,] is not a breach of good faith and fair

dealing.”); Carma Devs. (Cal.), Inc. v. Marathon Dev. Cal., Inc., 2 Cal. 4th 342, 374 (1992) (“We

are aware of no reported case in which a court has held the covenant of good faith may be read to

prohibit a party from doing that which is expressly permitted by an agreement.”).

The RIA Custodial Agreements are at-will, (see Fidelity Contract ¶ 18, Schwab Contract

¶ 18, AMTD Contract at 6), meaning that either party can terminate for at any time for any reason.

17 Although the RIA Custodial Agreements attached to the Broker-Custodian Defendants’ briefs (Fidelity

Supp. Resp., Ex. A (Fidelity Contract), Dkt. 61-1; Schwab/AMTD Supp. Resp. Ex. A (Schwab Contract), Dkt. 62-1,

& Ex. B (AMTD contract), Dkt. 62-2 ) were not attached to the Complaint, the Court may consider them because they

are referred to in the Complaint and central to Plaintiffs’ breach of contract claims. See Wright v. Assoc. Ins. Cos., 29

F.3d 1244, 1248 (7th Cir. 1994).

27

Thus, Spotlight cannot assert claims for breach based on violation of the implied covenant of good

faith and fair dealing for exercising an express term of the contracts. Accordingly, Spotlight’s

breach of contract claims against the Broker-Custodian Defendants (Count 7) are dismissed with

prejudice.18

X. Tortious Interference with Contract (Count 8)

In Count 8 of the Complaint, Plaintiffs assert a claim for tortious interference with contract

against Defendants. To state a claim for tortious interference with contract under Illinois law,19 a

plaintiff must allege: “(1) the existence of a valid contract between plaintiff and another; (2) the

defendants’ awareness of this contract; (3) defendants’ intentional and unjustified inducement of

a breach of the contract; (4) a subsequent breach by the other, caused by defendants’ wrongful

conduct; and (5) damages.” Von Der Ruhr v. Immtech Int’l, Inc., 326 F. Supp. 2d 922, 927 (N.D.

Ill. 2004) (citing HPI Health Care Servs., Inc. v. Mt. Vernon Hosp., Inc., 131 Ill. 2d 145, 154-155

(1989)); see also Nat’l Experiential, LLC v. City of Chicago, 590 F. Supp. 3d 1116, 1129 (N.D.

Ill. 2022) (dismissing a tortious interference claim based on the fourth element because “without

a breach, there is no tortious interference claim”). In addition, it should go without saying, but a

“party cannot tortiously interfere with his own contract; the tortfeasor must be a third party to the

contractual relationship.” Douglas Theater Corp. v. Chi Title & Tr. Co., 288 Ill. App. 3d 880, 884

(1997) (citing Quist v. Bd. of Trustees, 258 Ill. App. 3d 814, 821 (3d Dist. 1994)). Thus, “Illinois

courts require that a tortious interference claim be supported by allegations that the defendant acted

18 Spotlight did not respond to FMR’s argument that a breach of contract claim cannot be asserted against a

nonparty to the contract or allege that FMR was a party to any RIA Custodial Agreement. Accordingly, to the extent

Count 7 includes a breach of contract claim against FMR, it is also dismissed.

19 Although Plaintiffs do not specify the state law under which this claim is asserted, Illinois law applies

under “most significant relationship” standard. See Alea v. Wilson Sporting Goods Co., 2017 WL 5152344, at *3 (N.D.

Ill. Nov. 7, 2017) (“the law of the State that has the most significant relationship to the occurrence and the parties

applies.”) (quoting Restatement (Second) of Conflict of Laws § 145(1) (1971)).

28

toward a third party.” Du Page Aviation Corp. v. Du Page Airport Auth., 229 Ill. App. 3d 793, 804

(2d Dist. 1992). In the same vein, a plaintiff must include allegations regarding “specific third

parties.” Id. at 803 (emphasis in original).

The central allegation of Plaintiffs’ contract interference claim is “Defendants repeatedly,

maliciously, willfully, and intentionally interfered with Plaintiffs’ valid and existing contracts,

including its valid and enforceable contracts for RIA Custodial Services, as well as with

approximately 10 wealth adviser contracts, and over 200 advisory client contracts (collectively

referred to as “Terminated Contracts”). (Compl. ¶ 790). Defendants argue that this allegation (and

the others supporting the contract interference claim) are insufficient because, among other things,

Plaintiffs do not allege that Defendants’ purported interference caused any other party to breach a

contract with Plaintiffs. In addition, Defendants fault Plaintiffs’ lack of specificity with regard to

the identities of the counterparties to the contracts. With respect to the RIA Custodial Agreements,

the Broker-Custodian Defendants contend that their own alleged breach cannot serve as the basis

for an interference claim and that Plaintiffs do not sufficiently allege the Broker-Custodian

Defendants’ interference with each other’s agreements. In response, Plaintiffs claim that

“Defendants’ disparaging and defamatory statements about Plaintiffs led to the proverbial

“slippery slope” of third-party interference with the various contracts.” (Resp. at 56-57). As an

example, Plaintiffs point to the communication of “misleading, disparaging, and defamatory”

information between attorneys for Schwab and Fidelity in connection with earlier litigation and

other disputes. (Compl. ¶¶ 623-625, 627-629).

Plaintiffs fail to state a claim for tortious interference with contract for several reasons.

First, as observed by Defendants, Plaintiffs fail to allege the existence of valid contracts with others

in sufficient detail. Conclusory allegations about the existence of “approximately 10 wealth adviser

29

contracts” and “over 200 advisory client contracts” are not enough to make out a claim for contract

interference. Although it is likely not necessary to identify each and every counter party to a

contract purportedly interfered with in a case like this, Plaintiffs must at least allege facts from

which the Court can infer the existence of valid contracts—simply stating that they exist does not

suffice. More importantly, Plaintiffs fail to include any allegations that these nonparty contracts

were breached. The Complaint defines the contracts as the “Terminated Contracts” but nowhere is

it actually alleged that the contracts were terminated, let alone breached—which is an essential

element of a contract interference claim. See Von Der Ruhr, 326 F. Supp. 2d at 927. Furthermore,

as discussed above in Section IX, Plaintiffs have not sufficiently alleged breach of the RIA

Custodian Agreements. Without sufficient allegations of breach, Plaintiffs cannot also maintain

contract interference claims based on the Broker-Custodian Defendants’ purported interference

with each other’s contract. And, in any event, the allegations about misleading, disparaging, and

defamatory statements are too broad and conclusory to support the inference that the Broker-

Custodian Defendants intentionally and unjustifiably induced each other to breach their contracts

with Plaintiffs. For these reasons, Plaintiffs tortious interference with contract claims (Count 8)

are dismissed.

XI. Intentional Interference with Prospective Economic Advantage (Count 9)

In Count 9 of the Complaint, Plaintiffs assert claims for intentional interference with

prospective economic advantage against Defendants. “To state a claim under Illinois law for

intentional interference with prospective economic advantage ‘a plaintiff must allege (1) a

reasonable expectancy of entering into a valid business relationship, (2) the defendant’s knowledge

of the expectancy, (3) an intentional and unjustified interference by the defendant that induced or

caused a breach or termination of the expectancy, and (4) damage to the plaintiff resulting from

30

the defendant’s interference.’”20 Foster v. Principal Life Ins. Co., 806 F.3d 967, 971 (7th Cir.

2015) (quoting Voyles v. Sandia Mort. Co., 196 Ill. 2d 288, 296 (2001)). In the context of

interference claims, “‘inducement’ means ‘some active persuasion, encouragement, or inciting that

goes beyond merely providing information in a passive way.’” Cohen v. Lewis, No. 03 C 5454,

2004 WL 2481015, at *6 (N.D. Ill. Nov. 3, 2004) (quoting In re Estate of Albergo, 275 Ill. App.3d

439, 446 (2d Dist. 1995)). Similar to the contract interference, to state a claim for intentional

interference with prospective economic advantage, a plaintiff must identify specific third parties

with whom plaintiff expected to do business and defendant wrongfully interfered. See Du Page

Aviation, 229 Ill. App. 3d at 803-04; see also Suhadolnik v. City of Springfield, 184 Ill. App. 3d

155, 184 (4th Dist. 1989) (dismissing commercial disparagement claim for failure to identify third

parties with whom plaintiff expected to do business).

Plaintiffs essentially claim that Defendants interfered with Spotlight’s ability to procure

RIA custodial services, employ IARs, effectively service clients, and merge or partner with or be

acquired by interested parties. (Compl. ¶¶ 795-815). Because Greco is Spotlight’s CEO and

majority owner, he claims to have suffered from the interference as well. (Id.) By way of example,

Plaintiffs describe an attempt to enter into a referral agreement with Madison Partners, which

Plaintiffs claim to have failed because of Fidelity’s refusal to provide services to any current or

former Spotlight advisor. (Id. ¶¶ 639-648, 808). In addition, Plaintiffs allege that a potential

partnership agreement with Strategic Wealth Partners failed due to Fidelity and Schwab’s refusal

to provide custodial services to Greco. (Id. ¶¶ 651-657). Last, Plaintiffs describe a similar failed

20 As with the contract interference claims, although Plaintiffs do not identify the law under which their

intentional interference with prospective economic advantage claims are asserted, Illinois law applies based on under

“most significant relationship” standard.

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attempt to enter a business relationship with Zoe Financial, although without specifics regarding

interference by any Defendant. (Id. ¶¶ 658-659).

As to the CP Defendants, Plaintiffs’ economic advantage interference claims fail because

there is no allegation that they directly knew of or interfered with any specific prospective

economic advantage. With respect to Fidelity and Schwab, although Plaintiffs allege interference

with potential business relationships with Madison Partners and Strategic Wealth Partners, Fidelity

and Schwab’s alleged involvement appears to have been limited to providing information about

their relationship (or lack thereof) with Plaintiffs in response to inquiries from the prospective

partners. In doing so, neither Fidelity nor Schwab went beyond merely providing information in a

passive way, which is not enough to support an economic advantage interference claim. The

allegations concerning Zoe Financial are so lacking in detail that it is impossible for them to

support the claim. Finally, to the extent that Plaintiffs rely on other allegations of the Complaint

incorporated by reference into Count 9, the Court agrees with Schwab that Plaintiffs have engaged

in the type of improper “shotgun pleading” that prevents the Court from reviewing the sufficiency

of the claim and Defendants from reasonably being able to prepare a response (or makes the burden

of doing so much more difficult). See SEC v. Winemaster, 529 F. Supp. 3d 880, 906-07 (N.D. Ill.

2021); SEC v. Ustian, 229 F. Supp. 3d 739, 778 (N.D. Ill. 2017); CustomGuide v. CareerBuilder,

LLC, 813 F. Supp. 2d 990, 1001 (N.D. Ill. 2011). Accordingly, Plaintiffs’ intentional interference

with prospective economic advantage claims (Count 9) are dismissed.

XII. Defamation (Count 11)

In Count 11 of the Complaint, Greco asserts claims for defamation under Illinois law

against all Defendants. According to Greco, Defendants made numerous false, disparaging,

defamatory, and harmful statements about Greco to third parties. (Compl. ¶ 834). To state a claim

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for defamation under Illinois law, a plaintiff must allege “that the defendant made a false statement

about the plaintiff, the defendant made an unprivileged publication of that statement to a third

party, and that this publication caused damages.” L. Offs. of David Freydin v. Chamara, 24 F.4th

1122, 1129 (7th Cir. 2022) (quoting Solaia Tech., LLC v. Specialty Publ. Co., 221 Ill.2d 558, 579

(2006)). “There are five categories of statements that are defamatory per se, where harm or

damages are presumed without specific proof.” Freydin, 24 F.4th at 1129 (listing categories).

Greco claims that Defendants’ statements fall into three of those categories: (1) commission of a

criminal offense; (2) words that impute a person is unable to perform or lacks integrity in

performing her or his employment duties; and (3) words that impute a person lacks ability or

otherwise prejudices that person in her or his profession. (Compl. ¶ 835). “Like a common law

fraud claim, a defamation per se claim must be pled with a heightened level of precision and

particularity.” Green v. Rogers, 234 Ill. 2d 478, 495 (2009). A plaintiff may also allege defamation

per quod, where extrinsic facts are necessary to show the defamatory meaning of the statements

and damages are not presumed.

The CP Defendants, Fidelity, and Schwab/AMTD each separately argue that Greco has

failed to state a claim for defamation against them. (See CP Supp. Mem. at 9-12; Fidelity Supp.

Mem. at 11-12, Dkt. 61; Schwab/AMTD Supp. Mem. at 13-15, Dkt. 62). Although Count 11

“repeats, realleges, and incorporates by reference each paragraph alleged in this Complaint as if

fully set forth [t]herein[,]” (Compl. ¶ 832), Greco does not specifically identify which alleged

statements found in the over 800 other paragraphs of the Complaint are the focus of this claim.

Fortunately, Defendants point out in their briefs the Complaint paragraphs that contain allegations

about statements purportedly made by them about Greco. (See CP Supp. Mem. at 10) (citing

Compl. ¶¶ 261-264, 382, 384, 463, 467-469, 480, 508-509, 512, 597-600); Fidelity Supp. Mem. at

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12) (citing Compl. ¶¶ 643, 655); Schwab/AMTD Supp. Mem. 13-15 (citing Compl. ¶¶ 560, 592,

623, 832-842). Among other things, Defendants argue that the relevant statements were not alleged

to be false, made to third parties, or with an adequate degree of specificity. After reciting one page

of black letter defamation law, Plaintiffs simply respond: “As alleged with specificity throughout

the Complaint, Defendants each made numerous disparaging and defamatory statements about

Plaintiffs, individually, and in combination, and as part of their conspiracy, through their Silencing

and Retaliation Scheme and Group Boycott. Plaintiffs also alleged injury from the defamation.

(Compl. ¶¶ 640[-]644, 646[-]648, 652, 841, 842).” (Resp. at 59-61).

For the same reasons discussed in Section II above with respect to the abandoned claims,

Plaintiffs’ cursory and conclusory response to Defendants’ arguments for dismissal of the

defamation claims operates as a forfeiture of any substantive argument in response and waiver and

abandonment of the claims. See, e.g., Kirksey, 168 F.3d at 1041 (“Our system of justice is

adversarial, and our judges are busy people. If they are given plausible reasons for dismissing a

complaint, they are not going to do the plaintiff’s research and try to discover whether there might

be something to say against the defendants’ reasoning. An unresponsive response is no response.

In effect the plaintiff was defaulted for refusing to respond to the motion to dismiss. And rightly

so.”); see also Stransky, 51 F.3d at 1335 (“The federal courts will not invent legal arguments for

litigants.”). Accordingly, Count 11 is dismissed because Defendants have offered plausible

substantive grounds to dismiss Greco’s defamation claims and Greco failed to offer any

meaningful response.

XIII. Unjust Enrichment (Count 12)

In Count 12 of the Complaint, Plaintiffs assert a claim for unjust enrichment against all

Defendants. Essentially, Plaintiffs claim that Defendants have benefited from receiving increased

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revenue as a result of their alleged wrongful conduct, Plaintiffs have suffered by being charged

anticompetitive prices, and it would be inequitable to allow Defendants to retain the benefit of

their wrongful conduct. (Compl. ¶¶ 843-852). Although the unjust enrichment claim is pleaded in

the alternative, (id. ¶ 845), it also “repeat[s], reallege[s], and incorporate[s] by reference each

paragraph alleged in [the] Complaint[,]” (id. ¶ 843).

As Defendants contend, (Joint Mem. at 51), “recovery for unjust enrichment is unavailable

where the conduct at issue is the subject of an express contract between the plaintiff and

defendant.” Cohen v. Am. Sec. Ins. Co., 735 F.3d 601, 615 (7th Cir. 2013). For this reason, even

where unjust enrichment is pleaded as an alternative theory of recovery, “a party may not

incorporate by reference allegations of the existence of a contract between the parties in the unjust

enrichment count.” LKQ Corp. v. Rutledge, 96 F.4th 977, 981 (7th Cir. 2024) (quoting Gociman

v. Loyola Univ. of Chi., 41 F.4th 873, 887 (7th Cir. 2022)). Because Plaintiffs’ unjust enrichment

claim incorporates allegations of the existence of express contracts with Defendants, (Compl.

¶ 843), “this pleading error prevents their unjust enrichment claim from going forward.” LKQ, 96

F.4th at 981 (quoting Gociman, 41 F.4th at 887). Accordingly, Count 12 for unjust enrichment is

dismissed.

XIV. RICO (Count 13)

In Count 13 of the Complaint, Plaintiffs assert RICO Act claims against all Defendants. As

discussed in Sections III and VI above, Plaintiffs’ RICO claims fail because they have failed to

sufficiently allege the existence of an agreement or enterprise between Defendants and the

allegations of fraud supporting the claims are not pleaded with the requisite level of particularity.

Because these reasons provide two independent grounds for dismissal, the Court declines to decide

whether Plaintiffs sufficiently alleged viable predicate acts; however, to the extent that Plaintiffs’

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RICO claims are premised on antitrust violations, the analysis above in Section IV is equally

applicable.

CONCLUSION

For all the reasons stated above, Defendants’ joint motion to dismiss [58] is granted in part

and denied in part. Plaintiffs may file a proposed amended complaint consistent with this

Memorandum Opinion and Order, Rule 8, and Rule 11 by October 4, 2024. The Court will first

review any proposed amended complaint filed by that date and enter an appropriate order.

DATED: September 9, 2024 ENTERED:

Aotimde A. Unt

LASHONDAA.HUNT s—S

United States District Judge

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