Opinion

IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF ILLINOIS

MIDWEST RAILCAR

CORPORATION, et al.,

Plaintiffs,

v. Case No. 25-CV-01950-SPM

STEEL ON STEEL RAILWAYS,

LLC, et al.,

Defendants.

MEMORANDUM AND ORDER

McGLYNN, District Judge:

Pending before the Court is Defendants Steel on Steel Railways, LLC (“Steel

on Steel”), Rochester Iron & Metal, LLC (“Rochester”), and Jason W. Grube’s Motion

to Dismiss Plaintiffs’ First Amended Complaint. (Doc. 44). Having been fully advised

of the issues presented, this Court GRANTS Defendants’ Motion to Dismiss.

RELEVANT FACTUAL AND PROCEDURAL BACKGROUND

On August 18, 2022, Plaintiff Midwest Railcar Corporation (“MRC”) entered

into a “Full Service Master Lease Agreement” (“Master Lease”) with Defendant Steel

on Steel. (Doc. 38, ¶ 5).Under the Master Lease, MRC agreed to lease 30 railcars to

Steel on Steel, an Indiana limited liability company. (Id., ¶ 7). On August 18, 2022,

Defendant Rochester signed a corporate guaranty in which Rochester agreed to pay

MRC all rents and other sums due in the Master Lease. (Id., ¶ 6). Defendant Jason

Grube signed the corporate guaranty as a member of Rochester. (Id.). On April 29,

2024, Rochester executed an Assignment and Assumption Agreement with Steel on

Steel, wherein Rochester agreed to assume all obligations and rights of Steel on Steel

under the Master Lease. (Id., ¶ 8). Defendant Grube signed the Assignment and

Assumption Agreement as both a member of Rochester and Steel on Steel. (Id.) In the

summer of 2025, Rochester experienced financial difficulties and was forced to

surrender its operating assets to Lake City Bank. (Id., Ex. E). On August 14, 2025,

Plaintiff MRC received a letter from Lake City Bank informing MRC that Rochester

had sold all its assets to Lake City Bank pursuant to its rights as a secured creditor

of Rochester. (Id. ¶ 10).

On September 29, 2025, Plaintiffs commenced this action in the Third Judicial

Circuit, Madison County. (See Doc. 1, p. 1). The case was removed to federal court on

October 22, 2025. (Id.). On December 3, 2025, Plaintiffs filed their First Amended

Complaint. (Doc. 38). In the Complaint, Plaintiffs allege that Defendants owe

Plaintiffs damages in the amount of $1,532,893.20 plus additional consequential

damages, court costs, attorney’s fees, and prejudgment interest as provided by Illinois

law. (Id., p. 11). Plaintiffs’ damages allegations arise from Rochester’s alleged failure

to perform its obligations under the Master Lease, including its failure to pay

amounts due to MRC. (See id., pp. 4–5). Plaintiffs further allege that Steel on Steel,

Rochester, and Grube represented to MRC that Steel on Steel was not in default

under the Master Lease; that MRC reasonably relied on that representation in

executing the April 29 Assignment and Assumption Agreement; and that MRC

suffered damages as a direct and proximate result of its reliance. (Id., p. 7).

On December 12, 2025, Defendants Steel on Steel, Rochester, and Grube filed

the instant Motion to Dismiss, arguing that the Court lacks personal jurisdiction over

Grube and that Plaintiffs failed to adequately plead Counts II and V under Federal

Rules of Civil Procedure 12(b)(6) and 9(b). (See Doc. 45). Plaintiffs filed their

Opposition on January 12, 2026, and Defendants Steel on Steel, Rochester, and Grube

filed their Reply on January 27, 2026. (See Docs. 48, 52). Defendant Lewis Salvage

Shred Services, LLC filed a separate Motion to Dismiss on December 4, 2025, that is

not resolved in this Order. (See Doc. 39).

APPLICABLE LAW AND LEGAL STANDARDS

In analyzing a motion to dismiss for failure to state a claim filed pursuant to

Federal Rule of Civil Procedure 12(b)(6), this Court must determine whether or not

the complaint contains “sufficient factual matter, accepted as true, to ‘state a claim

to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)

(quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). The Court of Appeals

for the Seventh Circuit has explained that “‘[p]lausibility’ is not a synonym for

‘probability’ in this context, but it asks for ‘more than a sheer possibility that a

defendant has acted unlawfully.’” Bible v. United Student Aid Funds, Inc., 799 F.3d

633, 639 (7th Cir. 2015) (quoting Olson v. Champaign County, 784 F.3d 1093, 1099

(7th Cir. 2015)). Although “a complaint attacked by a Rule 12(b)(6) motion to dismiss

does not need detailed factual allegations[,] . . . [the] [f]actual allegations must be

enough to raise a right to relief above the speculative level . . . .” Twombly, 550 U.S.

at 555.

District courts are required by the Court of Appeals for the Seventh Circuit to

review the facts and arguments in Rule 12(b)(6) motions “in the light most favorable

to the plaintiff, accepting as true all well-pleaded facts alleged and drawing all

possible inferences in her favor.” Tamayo v. Blagojevich, 526 F.3d 1074, 1081 (7th

Cir. 2008). “The purpose of a motion to dismiss is to test the sufficiency of the

complaint, not to decide the merits.” Gibson v. City of Chicago, 910 F.2d 1510, 1520

(7th Cir. 1990).

A motion to dismiss under Rule 12(b)(2) challenges the Court’s jurisdiction over

a party. See FED. R. CIV. PRO. 12(b)(2). When a defendant raises a Rule 12(b)(2)

challenge, “the plaintiff bears the burden of demonstrating the existence of

jurisdiction.” Curry v. Revolution Laboratories, LLC, 949 F.3d 385, 392 (7th Cir. 2020)

(citation omitted). When a Court rules on a Rule 12(b)(2) motion without an

evidentiary hearing, the plaintiff need establish only a prima facie case of personal

jurisdiction. Id. at 392–93; Northern Grain Marketing, LLC v. Greving, 743 F.3d 487,

491 (7th Cir. 2014). In deciding whether a plaintiff has met the prima facie standard,

courts are not limited to the pleadings and may consider affidavits and other written

materials. See Patton v. Fiducial Financial Services, Inc., No. 1:05-cv-1481-RLY-

WTL, 2006 WL 2540337, at *1 (S.D. Ind. Aug. 31, 2006). See also Andersen v.

Sportmart, Inc., 57 F. Supp.2d 651, 654–55 (N.D. Ind. 1999).

Personal jurisdiction is proper where it comports with both state law and

federal constitutional principles of due process. See uBID, Inc. v. GoDaddy Group,

Inc., 623 F.3d 421, 425 (7th Cir. 2010). The Illinois long-arm statute provides that an

Illinois court may exercise jurisdiction on any basis “now or hereafter permitted by

the Illinois Constitution and the Constitution of the United States.” 735 ILCS 5/2-

209(c). The Seventh Circuit has noted that there is no “operative difference” between

Illinois and federal due process limits on the exercise of personal jurisdiction. Mobile

Anesthesiologists Chicago, LLC v. Anesthesia Associates of Houston Metroplex, P.A.,

623 F.3d 440, 443 (7th Cir. 2010); see also Citadel Grp. Ltd. v. Washington Regional

Medical Center, 536 F.3d 757, 761 (7th Cir. 2008) (citation omitted) ( “no case has yet

emerged where due process was satisfied under the federal constitution but not under

the Illinois Constitution”). “Under the Illinois Constitution’s due process guarantee,

a court may exercise jurisdiction ‘only when it is fair, just and reasonable to require

a nonresident defendant to defend an action in Illinois, considering the quality and

nature of defendant’s acts which occur in Illinois or which affect interests located in

Illinois.’” Kostal v. Pinkus Dermatopathology Laboratory, P.C., 827 N.E.2d 1031, 1039

(Ill. App. Ct. 2005) (citing Rollins v. Ellwood, 565 N.E.2d 1302, 1316 (Ill. 1990)).

ANALYSIS

I. Personal Jurisdiction over Defendant Jason Grube

Plaintiffs’ primary basis for asserting personal jurisdiction over Defendant

Jason Grube is that Grube subjected himself to jurisdiction in Illinois when he signed

the Master Lease, which contained a jurisdictional waiver. (Doc. 48, pp. 1–2, 4).

Alternatively, Plaintiffs argue that jurisdiction over Grube can be established on an

alter-ego theory of jurisdiction. (Id., pp. 6–7).

a. Jurisdictional Waiver

The jurisdictional waiver in the Master Lease provides that “Lessee agrees

that the state and federal courts in the State of Illinois shall have exclusive

jurisdiction over all matters arising out of this Master Lease . . . .” There is no

question that the jurisdictional waiver is valid. See Burger King Corp. v. Rudzewicz,

471 U.S. 462, 473 n.14 (1985); (Doc. 48, p. 4). There is, however, a question as to

whether the waiver applies to Grube in his personal capacity because he signed the

Master Lease on behalf of Steel on Steel. (See Doc. 38, p. 34). Plaintiffs argue that it

does. (Doc. 48, pp. 4–5). Although Defendants cite applicable caselaw supporting the

argument that corporate representatives are not personally bound to agreements that

they sign, (see Doc. 45, pp. 7–9), Plaintiffs counter with the argument that Grube is

bound to the waiver because he is “not merely signing a corporate document, [but he]

is deeply involved in the negotiations of multiple defendants and deeply intertwined

with the facts of this case,” (Doc. 48, p. 4). It is true that corporate representatives

are not personally bound by forum selection clauses and that Grube signed the

Master Lease in his capacity as member of Steel on Steel. See Monco v. Zoltek Corp.,

No. 1:17-CV-06882 2019 WL 952138, at *15 (N.D. Ill. Feb. 27, 2019); (Doc. 38, Ex. A,

p. 10). Plaintiffs allege, however, that it is not Grube’s signature that binds him, but

his affiliation with the other parties in the suit. (Doc. 48).

Plaintiffs cite established precedent stating that “A nonparty will be bound by

a forum selection clause if the nonparty is closely related to the dispute such that it

becomes foreseeable that the nonparty will be bound.” (Id. (citing Coatney v.

Ancestry.com DNA, LLC, 93 F.4th 1014, 1022 (7th Cir. 2024))). Under the closely

related parties test, “[w]here there is a sufficiently close relationship between the

non-signatory and the dispute and the parties, it does not defy the non-signatory’s

reasonable expectations that it would be bound.” Solargenix Energy, LLC v. Acciona,

S.A., 17 N.E.3d 171, 182 (2014).

The question is whether Grube is so closely related to the dispute that he can

be personally bound by the jurisdictional waiver found in the Master Lease. In Adams

v. Raintree Vacation Exchange, LLC, 702 F.3d 436 (7th Cir. 2012), the Seventh

Circuit provided guidance for the closely related test. The Court broke the test into

two “reasonably precise principles,” namely “affiliation” and “mutuality.” Id. at 439.

Affiliation is when a forum selection clause is enforced by or against a company that

is under common ownership (such as a parent and its subsidiary) with a party to the

contract. Id. at 440–41; see also American Patriot Ins. Agency, Inc. v. Mutual Risk

Mgmt., Ltd., 364 F.3d 884, 888–89 (7th Cir. 2004). Mutuality refers to non-signatories

to a contract choosing to hold plaintiffs to a forum-selection clause when those

plaintiffs could have held defendants to the clause on the principal of affiliation.

Adams, 702 F.3d at 443. Further, in Coatney, 93 F.4th at 1023, the Seventh Circuit

identified two situations where closely related parties test was met. The first was

Solargenix, where a jurisdictional waiver was found valid because two Spanish

companies, as parents of American subsidiaries, were found to be “heavily involved

in negotiating and approving the joint venture agreements.” Id. (citing Solargenix, 17

N.E.3d at 182.) The second was Hugel, where a jurisdictional waiver was found

validly applied to two companies because those two companies were under the full

ownership and control of the signatory, despite the companies themselves not being

signatories on the agreement. Id. (citing Hugel v. Corporation of Lloyd’s, 999 F.2d

206, 209–10 (1993)).

The present case is distinguishable from Solargenix. There, the parent

corporations were found to be closely related to the dispute because one had consented

to be bound to the joint venture agreement in a separate agreement and the other

had conducted due diligence on and approved the joint venture agreement.

Solargenix, 17 N.E.3d at 177, 186–89. Here, Grube submitted an unrebutted

declaration stating that he “did not personally negotiate the Master Lease, Corporate

Guaranty, and/or Assignment Agreement.” (Doc. 45, Ex. A, p. 2). Plaintiffs have

neither alleged nor submitted evidence demonstrating that Grube was involved in

negotiating the Master Lease. Plaintiffs offer only the conclusory assertion that

Grube was “deeply involved in the negotiations” without identifying any factual

allegations or evidence supporting that claim. See Mold-A-Rama Inc. v. Collector-

Concierge-Int’l, 451 F. Supp. 3d 881, 884 (N.D. Ill. 2020) (“If the plaintiff fails to refute

a fact contained in the defendant’s affidavit, that fact is accepted as true” for purposes

of a Rule 12(b)(2) motion.). Accordingly, Solargenix does not support the exercise of

personal jurisdiction over Grube based on the closely related parties doctrine.

Hugel is likewise distinguishable. There, the Seventh Circuit concluded that

two non-signatory corporations were bound by a forum-selection clause because they

were wholly owned and controlled by the signatory, rendering them sufficiently

affiliated with both the agreement and the dispute. Hugel, 999 F.2d at 209–10. Hugel

exemplifies the “affiliation” principle, under which a forum-selection clause may be

enforced against a non-signatory entity under common ownership with a signatory.

Adams, 702 F.3d at 440–41. Unlike the corporate entities in Hugel, Grube is an

individual who executed the Master Lease solely in his representative capacity on

behalf of Steel on Steel. Accordingly, Hugel does not support extending the Master

Lease’s jurisdictional waiver to Grube in his personal capacity.

Further, Hugel underscores a distinguishing factor between the present case

and the “closely related” caselaw. Plaintiffs are arguing that personal jurisdiction can

be found over Grube, an individual, using a theory of jurisdiction that is generally

applied to closely related entities. In Monco, the Northern District of Illinois, applying

the Seventh Circuit’s concept of affiliation, wrote that “[t]here can be no allegation

that this concept allows jurisdiction here; Rumy is an officer, not a subsidiary, of

Zoltek.” 2019 WL 952138, at *16. The same holds true here. Grube is not a corporate

affiliate of Steel on Steel or Rochester; he is a member. Judge Posner wrote in Adams,

“there has to be a reason, rather than the mere fact of affiliation, for a nonparty to a

contract to be able to invoke, or to be bound by, a clause in it.” Adams, 702 F.3d at

440. Were this Court to bind Grube to the jurisdictional waiver found in the Master

Lease based on these facts, then every officer of every corporation would be bound in

similar circumstances. As the Northern District of Illinois wrote in Guaranteed Rate,

Inc. v. Conn, there are “serious concerns over whether it would be ‘reasonable and

just’” under Burger King Corp., 471 U.S. at 473 n.14, “to apply a ‘close relationship’

test relying on ‘foreseeability’ to find implied consent to personal jurisdiction.” 264 F.

Supp. 3d 909, 927 (N.D. Ill. 2017).

Finally, Plaintiffs argue that Grube signed multiple agreements on behalf of

both Steel on Steel and Rochester, rather than a single corporate document. (Doc. 48,

p. 6). These actions by Grube do not tie him to the underlying dispute any more than

if he had only signed the Master Lease itself, at least as it pertains to the “closely

related” test. Accordingly, personal jurisdiction cannot be established over Grube on

this basis.

b. Alter-ego Theory

Courts may enforce waivers in corporate contracts against individuals when

the individual is an alter ego of the corporation and will pierce the corporate veil to

the hold the individual liable. See Kaeser & Blair, Inc. v. Willens, 845 F. Supp. 1228,

1234 (N.D. Ill. 1993). To invoke veil piercing, the plaintiff must show “such unity of

interest and ownership that the separate personalities of the corporation and the

individual no longer exist . . . and the circumstances [are] such that adherence to the

fiction of separate corporate existence would sanction a fraud or promote injustice.”

Id. (quoting Van Dorn Co. v. Future Chemical and Oil Corp., 753 F.2d 565, 569–70

(7th Cir. 1985). Courts are generally reluctant to pierce the corporate veil. See Judson

Atkinson Candies, Inc. v. Latini-Hohberger Dhimantec, 529 F.3d 371, 379 (7th Cir.

2008). A party bringing a veil-piercing claim bears the burden of showing that the

corporation is in fact a “dummy or sham” for another person or entity. Id. (citing

Jacobson v. Buffalo Rock Shooters Supply, Inc., 664 N.E.2d 328, 331 (Ill. App. Ct.

1996)). In Illinois, the following factors are used when determining whether there is

sufficient “unity of interest” to justify disregarding the corporate form:

(1) inadequate capitalization; (2) failure to issue stock; (3) failure to

observe corporate formalities; (4) nonpayment of dividends; (5)

insolvency of the debtor corporation; (6) nonfunctioning of the other

officers or directors; (7) absence of corporate records; (8) commingling of

funds; (9) diversion of assets from the corporation by or to a stockholder

or other person or entity to the detriment of creditors; (10) failure to

maintain arm’s-length relationships among related entities; and (11)

whether, in fact, the corporation is a mere facade for the operation of the

dominant stockholders. Id.

Id. (citing Fontana v. TLD Builders Inc., 840 N.E.2d 767, 778 (Ill. App. Ct. 2005)).

Plaintiffs allege in their Response to Defendants’ Motion to Dismiss that Grube is

bound under an alter-ego theory of jurisdiction because Grube intentionally or

negligently failed to disclose material information that he was aware of, made

representations that his companies were not in default, induced plaintiffs to sign a

contract which he knew was false, and did so by “hiding behind constant shells and

entities.” (Doc. 48, p. 7). As Defendants point out, Plaintiffs do not identify any factual

allegations supporting this theory. (Doc. 52, p. 3). But more importantly, these

allegations do not support a theory of veil piercing as they do not meaningfully speak

to any of the factors referenced above. Additionally, Grube made a sworn declaration

which indicates that himself, Rochester, and Steel on Steel have not commingled

funds or assets and that both companies follow necessary corporate formalities. The

standard for veil piercing is high. See Monco, 2019 WL 952138, at *16. In this case,

the record does not support the possibility of veil piercing. Accordingly, the

jurisdictional waiver may not be applied against Grube.

c. Jurisdictional Discovery

The Court denies Plaintiffs’ request for jurisdictional discovery. Jurisdictional

discovery is not warranted here. Before a plaintiff is entitled to jurisdictional

discovery, the plaintiff must first make a colorable or prima facie showing that

personal jurisdiction exists. See Central States, Se. & Sw. Areas Pension Fund v.

Reimer Express World Corp., 230 F.3d 934, 946 (7th Cir. 2000) (citing Ellis v. Fortune

Seas, Ltd., 175 F.R.D. 308, 312 (S.D. Ind. 1997)) (“[A]t a minimum, the plaintiff must

establish a colorable or prima facie showing of personal jurisdiction before discovery

should be permitted.”); Thomas v. Granite Nursing & Rehab. Ctr., LLC, No. 13-cv-

1320-JPG-DGW, 2014 WL 2535254, at *4 (S.D. Ill. June 5, 2014). As discussed above,

Plaintiffs have failed to make such a showing. Plaintiffs acknowledge that Grube is

an Indiana resident and do not allege that Grube personally negotiated the

agreements in Illinois, traveled to Illinois in connection with the transactions at

issue, or otherwise purposefully directed conduct toward Illinois sufficient to

establish specific personal jurisdiction. (Doc. 38, ¶ 21; Doc. 45, Ex. A, p. 2). To the

contrary, the unrebutted declaration submitted by Grube establishes that he did not

personally negotiate the Master Lease, did not travel to Illinois to conduct business

related to the transactions at issue, does not regularly visit Illinois, and owns no

property in Illinois. (Doc. 45, Ex. A, ¶¶ 14–17). On this record, Plaintiffs have failed

to demonstrate a basis for believing that jurisdictional discovery would uncover facts

sufficient to establish personal jurisdiction. With respect to specific jurisdiction, there

is no basis in the record to suspect that discovery would identify any other relevant

contacts between Grube and Illinois. Regarding the allegations in Counts II and V,

even assuming Grube personally participated in the alleged misrepresentations,

Plaintiffs have not alleged facts demonstrating that he purposefully availed himself

of Illinois or expressly aimed tortious conduct at Illinois sufficient to satisfy due

process. There is also no basis to support a finding of general jurisdiction. Plaintiffs

likewise fail to identify what jurisdictional discovery they seek or explain how such

discovery would establish personal jurisdiction over Grube. See John Crane Inc. v.

Simon Greenstone Panatier Bartlett, APC, No. 16 C 5918, 2017 WL 1093150, at *13

(N.D. Ill. Mar. 23, 2017) (rejecting a one-sentence request for discovery where the

plaintiff failed to identify the discovery sought, explain why it was necessary, or

demonstrate how it would support personal jurisdiction). Accordingly, the Court

denies Plaintiffs’ request for jurisdictional discovery.

II. Fraudulent Misrepresentation (Count II)

Defendants argue that Plaintiffs fail to state a claim for fraudulent

misrepresentation in Count II of the First Amended Complaint. Specifically,

Defendants contend that Plaintiffs fail to plead fraud with the particularity required

by Federal Rule of Civil Procedure 9(b), fail to plausibly allege that Plaintiffs

justifiably relied on the alleged misrepresentation, and fail to identify an actionable

false statement of material fact. (Doc. 45, pp. 9–15). Plaintiffs respond that the First

Amended Complaint identifies the alleged misrepresentation, the parties who made

it, and the document in which it appears, and that whether Plaintiffs’ reliance was

justified presents a question of fact not appropriately resolved on a motion to dismiss.

(Doc. 48, pp. 7–11).

Under Illinois common law, a fraudulent misrepresentation claim requires “(1)

a false statement of material fact, (2) knowledge or belief of the falsity by the party

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

in reliance on the truth of the statements, and (5) damage to the other party resulting

from such reliance.” Board Of Educ. Of City of Chicago v. A, C & S, Inc., 546 N.E.2d

580, 591 (Ill. 1989). A complaint alleging fraudulent misrepresentation must “state

with particularity the circumstances constituting fraud or mistake.” FED. R. CIV. P.

9(b). This requires a plaintiff to plead the “who, what, when, where, and how” of the

alleged fraud. Pirelli Armstrong Tire Corp. Retiree Med. Benefits Tr. v. Walgreen Co.,

631 F.3d 436, 442 (7th Cir. 2011).

Defendants contend that Plaintiffs impermissibly lump Steel on Steel,

Rochester, and Grube together without identifying which Defendant made the alleged

misrepresentation. Although Plaintiffs’ allegations could more clearly distinguish the

role of each Defendant, the Court concludes that dismissal under Rule 9(b) is not

warranted. The First Amended Complaint identifies a single allegedly fraudulent

representation, the date on which it was made, and the document in which it

appears—the Assignment and Assumption Agreement attached to the Complaint.

(Doc. 38, Ex. D). The Agreement itself reflects that Steel on Steel and Rochester were

parties to the transaction and that Grube executed the Agreement on behalf of both

entities. Under these circumstances, the Complaint adequately identifies the

transaction and conduct forming the basis of the alleged fraud and provides

Defendants with sufficient notice of the claim against them. This case is therefore

distinguishable from the case relied upon by Defendants, where the plaintiffs alleged

that one or more defendants made unspecified misrepresentations without

identifying who made them or the circumstances under which they were made. See

Westchester Fire Ins. Co. v. Rock Island Hous. Auth., No. 4:16-CV-4060-SLD-JEH,

2017 WL 3090291, at *2 (C.D. Ill. Feb 8, 2017). Likewise, the Seventh Circuit has

cautioned against “hedging” allegations that attribute fraudulent conduct to one

defendant “and/or” another, thereby leaving open multiple possible theories of

liability. See Cincinnati Life Ins. Co. v. Beyrer, 722 F.3d 939, 949 (7th Cir. 2013).

Plaintiffs have not alleged alternative or uncertain representations of that nature

here. Rather, they identify a single written representation contained in a specific

agreement executed by the parties to the transaction. (Doc. 38, ¶ 24). Accordingly,

the Court declines to dismiss Count II on Rule 9(b) grounds.

Even assuming Plaintiffs have adequately alleged a false statement of material

fact, Count II nevertheless fails because Plaintiffs have not plausibly alleged

justifiable reliance. Under Illinois law, a plaintiff asserting fraudulent

misrepresentation must establish that its reliance on the alleged misrepresentation

was reasonable in light of the facts known to it or readily discoverable through the

exercise of ordinary prudence. See Siegel Dev., LLC v. Peak Constr. LLC, 993 N.E.2d

1041, 1060 (Ill. App. Ct. 2013). Although justifiable reliance is ordinarily a question

of fact, dismissal is appropriate where the allegations of the complaint establish that

no reasonable trier of fact could conclude the plaintiff’s reliance was justified. Cozzi

Iron & Metal, Inc. v. U.S. Off. Equip., Inc., 250 F.3d 570, 574 (7th Cir. 2001). Illinois

courts have consistently recognized that a plaintiff cannot establish justifiable

reliance where the alleged misrepresentation concerns facts equally available to both

parties or readily ascertainable through the plaintiff’s own exercise of ordinary

prudence. See Cozzi, 250 F.3d at 574; Johnson v. Waterfront Servs. Co., 909 N.E.2d

342, 350 (Ill. App. Ct. 2009) (“The question of justifiable reliance takes into account

both what the plaintiff knew and what he could have learned through the exercise of

ordinary prudence.”); D.S.A. Fin. Corp. v. Cnty. of Cook, 801 N.E.2d 1075, 1081 (Ill.

App. Ct. 2003) (showing that parties may not have their eyes closed to available

information and then act as though they have been deceived by another). Here,

Plaintiffs allege that, prior to executing the Assignment and Assumption Agreement,

they requested Steel on Steel’s audited financial statements and other financial

information pursuant to the Master Lease, but Steel on Steel failed to provide those

materials. (Doc. 38, ¶¶ 23–27). Plaintiffs therefore knew, or, at the very least, could

have readily determined, whether Steel on Steel had complied with that obligation

under the Master Lease. Because the factual predicate underlying the alleged

misrepresentation was equally available to Plaintiffs through their own records and

dealings with Steel on Steel, Plaintiffs cannot plausibly allege that they reasonably

relied on Steel on Steel’s subsequent representation that it was “not in default” under

the Master Lease. Accordingly, Plaintiffs have failed to plausibly allege the element

of justifiable reliance, and therefore Count II must be dismissed.

III. Negligent Misrepresentation / Fraudulent Concealment (Count V)

Finally, Defendants argue that Count V fails to state a claim because Plaintiffs

have not adequately alleged fraudulent concealment. Specifically, Defendants

contend that Plaintiffs fail to plead the claim with particularity, fail to allege a duty

requiring Defendants to disclose the allegedly concealed information, and fail to

identify any actionable concealed material fact. (Doc. 45, pp. 15–20). Plaintiffs

respond that Defendants misconstrue Count V, arguing that Count V alleges

negligent concealment or negligent misrepresentation rather than fraudulent

concealment, and therefore is not subject to Rule 9(b)’s heightened pleading standard.

(Doc. 48, pp. 11–14).

The Court need not resolve whether Count V is properly characterized as a

claim for fraudulent concealment or negligent misrepresentation because Plaintiffs

fail to state a claim under either theory. To state a claim for fraudulent concealment

under Illinois law, a plaintiff must allege, among other things, that the defendant

concealed a material fact that it was under a duty to disclose. Squires-Cannon v.

Forest Pres. Dist. of Cook Cnty., 897 F.3d 797, 805 (7th Cir. 2018). The duty to disclose

arises only in certain situations, including where the “plaintiff and defendant are in

a fiduciary or confidential relationship” and “where plaintiff places trust and

confidence in defendant, thereby placing defendant in a position of influence and

superiority over plaintiff. Id. (citing Connick v. Suzuki Motor Co., 675 N.E.2d 584,

591 (Ill. 1996)). Likewise, a negligent misrepresentation claim requires “a duty on the

party making the statement to communicate accurate information.” First Midwest

Bank, N.A. v. Stewart Title Guar. Co., 843 N.E.2d 327, 335 (Ill. 2006). Moreover,

where, as here, a plaintiff seeks recovery for purely economic loss, Illinois imposes

such a duty “only if the party is in the business of supplying information for the

guidance of others in their business transactions.” Id. Because Count V fails to

plausibly allege the existence of any such duty, it cannot proceed regardless of the

theory under which Plaintiffs seek to characterize it.

Plaintiffs have failed to plausibly allege the existence of any duty giving rise

to liability under Count V. To the extent Plaintiffs seek to proceed under a negligent

misrepresentation theory, Illinois law is clear that, where a plaintiff seeks recovery

for purely economic loss, a defendant owes “a duty to avoid negligently conveying

false information only if the party is in the business of supplying information for the

guidance of others in their business transactions.” First Midwest Bank, 843 N.E.2d

at 335. Plaintiffs allege no facts suggesting that Steel on Steel, Rochester, or Grube

were in the business of supplying information for the guidance of others in their

business transactions. Rather, the First Amended Complaint alleges that Defendants

were parties to a commercial railcar lease and subsequent assignment agreement.

(Doc. 38, ¶¶ 5–18). That Defendants made representations concerning their own

contractual obligations in connection with that commercial transaction does not

transform them into information suppliers within the meaning of First Midwest

Bank. Accordingly, Plaintiffs have failed to allege the existence of a duty necessary

to sustain a negligent misrepresentation claim.

Nor have Plaintiffs plausibly alleged the type of relationship necessary to

impose a duty to disclose under a fraudulent concealment theory. Illinois recognizes

such a duty only where the parties stand in a fiduciary or confidential relationship or

where “the defendant is placed in a position of influence and superiority as a result

of the plaintiff’s trust and confidence.” Moore v. Pendavinji, 260 N.E.3d 111, 120–21

(Ill. App. Ct. 2024). Plaintiffs allege no such relationship here. The First Amended

Complaint alleges nothing more than an arm’s-length commercial leasing transaction

between sophisticated business entities. See State Sec. Ins. Co. v. Frank B. Hall &

Co., 630 N.E.2d 940, 947 (Ill. App. Ct. 1994) (“The mere fact that business

transactions occurred or that a contractual relationship existed is insufficient to

support” a fiduciary relationship.). Plaintiffs argue that Defendants possessed

superior knowledge because Grube controlled both Steel on Steel and Rochester and

therefore knew information concerning those entities’ financial condition that

Plaintiffs did not. (Doc. 48, pp. 12–13). But the relevant inquiry is not whether

Defendants possessed information unavailable to Plaintiffs; it is whether Defendants

occupied a position of influence or superiority because of Plaintiffs’ trust and

confidence. Plaintiffs allege no facts suggesting they reposed such trust in Defendants

or that Defendants exercised any corresponding influence over Plaintiffs’ decision-

making. Rather, the Complaint describes an ordinary commercial transaction in

which each party acted in its own economic interest. Under those circumstances,

Defendants’ superior knowledge of their own financial affairs does not give rise to a

legal duty to disclose under Illinois law.

Accordingly, because Plaintiffs have failed to plausibly allege the existence of

a legal duty to disclose or communicate the allegedly omitted information, Count V

fails to state a claim upon which relief may be granted. Count V is dismissed.

CONCLUSION

For the foregoing reasons, Defendants Steel on Steel Railways, LLC, Rochester

Iron & Metal, Inc., and Jason W. Grube’s Motion to Dismiss (Doc. 44) is GRANTED.

Defendant Jason W. Grube is TERMINATED from this action pursuant to Federal

Rule of Civil Procedure 12(b)(2). Counts II and V of Plaintiffs’ First Amended

Complaint are DISMISSED pursuant to Federal Rule of Civil Procedure 12(b)(6).

Because all claims against Defendant Steel on Steel Railways, LLC, are dismissed,

Steel on Steel is TERMINATED from this action. Count I remains pending against

Defendant Rochester Iron & Metal, Inc.

IT IS SO ORDERED.

DATED: September 2, 2026

STEPHEN P. McGLYNN

U.S. District Judge