# Opinion

> District Court, S.D. Illinois · September 2, 2026

URL: https://www.frixlaw.com/law-library/cases/11433902

## Case

- **Full name:** Midwest Railcar Corporation, et al. v. Steel on Steel Railways, LLC, et al.
- **Court:** District Court, S.D. Illinois
- **Decided:** September 2, 2026
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

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## Opinion text

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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/11433902. Public record. Not legal advice.