In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 03-2408
THOMAS ADAMS,
Plaintiff-Appellant,
v.
RICHARD CATRAMBONE and GREAT LAKES BUILDING
MATERIALS, INC.,
Defendants-Appellees.
____________
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 02 C 8700—Edward A. Bobrick, Magistrate Judge.
____________
ARGUED JANUARY 7, 2004—DECIDED FEBRUARY 19, 2004
____________
Before FLAUM, Chief Judge, and MANION and EVANS,
Circuit Judges.
MANION, Circuit Judge. Thomas Adams appeals from
the dismissal of his claims that both Richard Catrambone
and Great Lakes Building Materials, Incorporated (“Great
Lakes“) withheld his pay in violation of the Illinois Wage
Payment and Collection Act, 815 ILCS 115/1, et seq. (“Wage
Act“), and that Catrambone interfered with Adams’s pros-
pective economic advantage and breached a fiduciary duty
to Adams. We reverse and remand for further proceedings
as to all three claims.
2 No. 03-2408
I.
As this is an appeal from a dismissal under Federal
Rule of Civil Procedure 12(b)(6), we assume the truth of
the allegations in the complaint. In doing so, we in no
way vouch for the truth of the allegations, in particular the
serious charges that Catrambone engaged in corruption by
siphoning off corporate assets. At the time of Great Lakes’s
1
formation in July 2001, Adams and Catrambone intended
that Adams would become a 50% shareholder in the com-
pany. On October 1, 2001, Adams paid $50,000 for his stock
interest in Great Lakes and became a full-time employee of
the company, working primarily as a salesman. At some
point (the exact date is unclear from the complaint), Adams
actually became a 50% owner and vice president of the
company. Adams did substantial work in 2001 and 2002 for
Great Lakes. Most of that work took place in Illinois, al-
though Adams is a resident of Michigan. Great Lakes and
Catrambone, however, paid Adams for only three weeks of
his work. In addition to not paying Adams, in September
2002 Catrambone terminated Adams’s employment just
before he was about to expose Catrambone’s corruption, in-
cluding the diversion of Great Lakes’s money into the
accounts of Catrambone’s other businesses. Over Adams’s
protest, Catrambone then returned the $50,000 that Adams
had paid for his stock.
1
Although Adams does not specifically set it out in the com-
plaint, Catrambone states in his brief that he was the sole in-
corporator, officer, and shareholder when the corporation was
first set up. The primary questions raised by the complaint are
whether, at some point, Adams and Catrambone “were to be
equal shareholders in Great Lakes,“ and that Adams paid “50,000
dollars for the stock interest in Great Lakes.“
No. 03-2408 3
Adams filed suit in the district court, invoking diversity
jurisdiction. First, Adams alleged that both defendants vio-
lated the Wage Act by failing to pay him for the services
he rendered to the company. Second, Adams alleged that
Catrambone interfered with his prospective economic ad-
vantage. Third, Adams alleged that Catrambone breached
his fiduciary duty to Adams. Adams also seeks other forms
of relief—an accounting, back wages, and reimbursement of
business expenses—that he styles as “counts,“ but that are
really just remedies to which he might be entitled if he were
2
to prevail on his substantive claims. Adams maintains that,
all told, he is entitled to more than $75,000 in monetary
relief, that he is a citizen of Michigan, and that Catrambone
and Great Lakes are citizens of Illinois. Diversity jurisdiction
thus exists on the face of the complaint. 28 U.S.C. § 1332
3
(2000).
2
An accounting is a form of equitable relief incidental to a
substantive claim. See 2416 Corp. v. First Nat'l Bank of Chicago, 415
N.E.2d 420, 426 (Ill. App. Ct. 1980). Back wages and reimburse-
ment of business expenses are forms of relief to which Adams
might be entitled were he to prevail on his claim under the Wage
Act. See 820 ILCS 115/2.
3
In the original complaint, Adams properly pleaded the Illinois
citizenship of Great Lakes Building Materials, Inc., asserting that
both its state of incorporation and principal place of business
were in Illinois. As to the two individual parties, however,
the complaint merely alleged that Adams was a “resident“ of
Michigan and that Catrambone was a “resident“ of Illinois.
“When the parties allege residence but not citizenship, the
[district] court must dismiss the suit.“ Guaranty Nat. Title Co. v.
J.E.G. Associates, 101 F.3d 57, 59 (7th Cir. 1996). On appeal, we
ordered Adams to amend his complaint in this court, pursuant to
28 U.S.C. § 1653, by alleging the citizenship, not residence, of the
(continued...)
4 No. 03-2408
The district court, with a magistrate judge presiding
by consent of the parties, dismissed the Wage Act claim
on the ground that only Illinois residents are employees
within the Act’s protection. It dismissed Adams’s claim
for interference with prospective economic advantage on the
ground that Adams had not pleaded that Catrambone acted
toward a third party. Finally, the district court dismissed
Adams’s claim for breach of fiduciary duty on the ground
that Adams failed to plead the existence of a fiduciary
relationship. Adams appeals from the dismissal of each
claim.
II.
We review de novo the district court’s grant of a motion
to dismiss pursuant to Federal Rules of Civil Procedure
12(b)(6). International Mktg., Ltd. v. Archer-Daniels-Midland
Co., 192 F.3d 724, 729 (7th Cir. 1999). Dismissal is proper
“only if it is clear that no relief could be granted under any
set of facts that could be proved consistent with the al-
legations.“ Hishon v. King & Spalding, 467 U.S. 69, 73 (1984).
The district court dismissed Adams’s claim under the
Wage Act solely because it concluded that nonresidents of
Illinois are not employees within the ambit of the statute,
regardless of whether they work in Illinois. Determining
whether the Wage Act applies to employees who work,
but do not reside, in Illinois is a matter of interpreting
state law, and the Supreme Court of Illinois has not ad-
(...continued)
individual parties. See Quinn v. McGraw-Hill Cos., 168 F.3d 331,
334 n.1 (7th Cir. 1999). Adams did so, the defendants do not
challenge the existence of diversity jurisdiction, and we now are
satisfied that the parties actually are diverse.
No. 03-2408 5
dressed this issue. We therefore determine the question as
we predict the Supreme Court of Illinois would if it were
deciding the case. Mutual Serv. Cas. Ins. v. Elizabeth State
Bank, 265 F.3d 601, 612 (7th Cir. 2001). The decisions of the
Illinois Appellate Court are persuasive authority. AAR
Aircraft & Engine Group, Inc. v. Edwards, 272 F.3d 468, 470
(7th Cir. 2001). Although those decisions do not bind us, we
shall follow them unless we have a “compelling reason“ to
believe that they have stated the law incorrectly. Id.
The Wage Act “applies to all employers and employees in
[Illinois].“ 820 ILCS 115/1 (West 1999 & Supp. 2003).
Relying entirely on Glass v. Kemper Corp., 133 F.3d 999, 1000
(7th Cir. 1998), the district court held that nonresidents
of Illinois are not “employees in [Illinois],“ regardless
of whether they work in the state, and that Adams therefore
failed to state a claim. We interpret Glass differently, and we
anticipate that the Supreme Court of Illinois would hold
that the Wage Act protects nonresidents of Illinois who
perform work in that state for an in-state employer. Ac-
cording to the Illinois Supreme Court, “[t]he primary rule of
statutory construction is to ascertain and give effect to the
intent of the legislature.“ People v. Donoho, 788 N.E.2d 707,
715 (Ill. 2003). The best evidence of that intent is the lan-
guage of the statute. Id. When possible, the Supreme Court
of Illinois will “interpret the statute according to the plain
and ordinary meaning of the language.“ Id. It will also
consider the law’s purpose. Id. If the statute is “subject to
two or more reasonable interpretations,“ the Illinois Su-
preme Court will resort to interpretive aids. Id.
As stated previously, the Wage Act “applies to all em-
ployers and employees in [Illinois].“ 820 ILCS 115/1.
Adams alleges that he worked in Illinois for Great Lakes,
which would seem to place him within the class of workers
to whom the Wage Act applies. The Wage Act’s definition
6 No. 03-2408
of “employee“ gives further illumination: “[a]s used in this
Act, the term 'employee' shall include any individual per-
mitted to work by an employer in an occupation.“ 820 ILCS
4
115/2. But the statute also carves out an exclusion from this
definition. It states that the term “employee“
shall not include any individual:
(1) who has been and will continue to be free from
control and direction over the performance of his
work, both under his contract of service with his
employer and in fact;
and
(2) who performs work which is either outside the
usual course of business or is performed outside all
of the places of business of the employer unless the
employer is in the business of contracting with third
parties for the placement of employees; and
(3) who is in an independently established trade,
occupation, profession or business.
Id. (emphasis on the conjunctives added). Considering 820
ILCS 115/1 and 115/2 together, it becomes apparent that
whether someone is an employee within the ambit of the
Wage Act hinges on (1) whether he was an “individual
permitted to work by an employer in an occupation“ in
Illinois, and (2) whether he is excepted under the three-
pronged test for exclusion listed in 820 ILCS 115/2(1)-(3).
4
This exclusion is designed to distinguish between protected
employees and independent contractors, who are not protected.
Cf. Carpetland v. Illinois Dept. of Emp. Sec., 776 N.E.2d 166, 169 (Ill.
2002) (construing a similarly worded exclusion in 820 ILCS
405/212).
No. 03-2408 7
With regard to prong one, the defendants rely on Khan v.
Van Remmen, Inc., 756 N.E.2d 902, 913 (Ill. App. Ct. 2001),
for the proposition that the Wage Act applies only to resi-
dents of Illinois. But Khan resolved a different question:
whether a resident of Illinois “can state a cause of action
against an out-of-state employer under the Wage Act.“
Id. Khan did not address the converse question we face here:
whether a nonresident employee who worked in Illinois
could maintain a claim under the Wage Act against an in-
state employer. Nothing in Khan suggests that the Wage Act
can never apply to a nonresident of Illinois, and so that
decision does not lead us to believe that the Illinois Supreme
Court would reach that conclusion either.
The defendants nevertheless point out, correctly, that both
the court below and the district court in PRM Realty Group
v. Wood, No. 02 C 3396, 2002 WL 1792063, at *1 (N.D. Ill.
Aug. 5, 2002), have interpreted Glass to indicate that the
Wage Act applies only to Illinois residents. But, in relevant
part, that is not what Glass says:
The dismissal of the statutory claim was clearly
correct. The act “applies to all employers and em-
ployees in this State.“ 820 ILCS 115/1. The plaintiff
is not, and at no time relevant to this suit was he, a
resident of Illinois. Nor did he perform any work in
Illinois; all the work that he did for the defendants
was done in Spain. Although the employer defen-
dants have their principal places of business in
Illinois, and are therefore “employers . . . in this
State,“ we do not think the statute has an extra-
territorial reach. Its evident purpose is to protect
employees in Illinois from being stiffed by their
employers; to this end it imposes heavy sanctions
on employers who fail to pay wages that have ac-
crued. 820 ILCS 115/14.
8 No. 03-2408
Glass, 133 F.3d at 1000 (emphasis added). In our view, Glass
implies that the Wage Act protects an employee who per-
forms work in Illinois for an Illinois employer, even if he
resides in another state. That is why the court in Glass found
it necessary to point out, when it explained why dismissal
of Glass’s Wage Act claim was appropriate, that Glass had
not “perform[ed] any work in Illinois.“ Logically, if the
employee performs his work in Illinois, he is an employee
in Illinois. Thus, to whatever extent the Supreme Court of
Illinois might find Glass persuasive, it would be more likely
to hold that the Wage Act applies to a nonresident, such as
Adams, who performs his work within Illinois for an in-
state employer.
After considering the authorities discussed above, we
hold what Glass implied and what the language of the stat-
ute makes plain: nonresidents of Illinois who work in that
state for an in-state employer may qualify as employees
within the protection of the Wage Act. This interpretation of
the statute promotes the Wage Act’s purpose: “to protect
employees in Illinois from being stiffed by their employers.“
Id. (emphasis in original). The Wage Act’s applicability to
nonresidents who perform their work in Illinois for an in-
state employer is sufficiently clear to preclude any need to
resort to additional interpretive aids.
The defendants argue in the alternative that, even if the
Wage Act were to apply to nonresidents, dismissal would
still be appropriate because Adams comes under the ex-
clusion in 820 ILCS 115/2, making him a non-employee.
Nothing in the complaint could be construed to suggest that
he fits within the provisions of 820 ILCS 115/2(2) or (3), and
the defendants do not argue as much. That observation
would seem dispositive, because the three-pronged exclu-
sion is, as we emphasized, drafted in the conjunctive;
meeting just one of the three prongs will not suffice. None-
No. 03-2408 9
theless, relying on Doherty v. Kahn, 682 N.E.2d 163 (Ill.
App. Ct. 1997), the defendants argue that we should read
the exclusion in the disjunctive and affirm dismissal of
Adams’s Wage Act claim simply because Adams meets the
first prong of the exclusion, 820 ILCS 115/2(1). The defen-
dants maintain that Adams, by alleging that he was a 50%
shareholder and vice-president of Great Lakes, has estab-
lished that he was “free from control and direction over the
performance of his work, both under his contract of service
with his employer and in fact“ and that 820 ILCS 115/2(1)
thus establishes that he was not an employee under the
Wage Act.
Doherty supports the defendants’ position. The Doherty
court held that, because the plaintiff “was an employee who
also had some control over the business and direction over
the performance of his work,“ he fit within the exclusion of
820 ILCS 115/2(1) and, for that reason alone, did “not fall
into the class of employees the Wage Act seeks to protect.“
Id. at 173 (emphasis added). In reaching that conclusion, the
Doherty court did not find it necessary to address the second
or third prongs of the exclusion, 820 ILCS 115/2(2) and (3).
Were we to find Doherty persuasive, and confine our
analysis to the first prong, we would affirm dismissal of
Adams’s claim under the Wage Act, at least insofar as
Adams sought to recover wages earned after, as he claims,
he became a 50% shareholder and officer of Great Lakes. In
paragraph seven of the complaint, Adams alleges that in his
capacity “as a shareholder and officer of Great Lakes,“ he
secured a $250,000 line of credit for the company in Febru-
ary 2002. Only a person with at least some control over the
business and direction over the performance of his work
could accomplish such a task, and so Adams has alleged
himself to be in a position analogous to the one occupied by
the unsuccessful plaintiff in Doherty.
10 No. 03-2408
But Doherty is unpersuasive because, as we emphasized
above, 820 ILCS 115/2 is drafted in the conjunctive: the
word “and“ joins 820 ILCS/2(1), (2), and (3), which means
that only a plaintiff who meets all three prongs of 820 ILCS
115/2 falls within the statutory exclusion to the Wage Act’s
definition of “employee.“ Cf. City of Carbondale v. Brewer, 773
N.E.2d 182, 186 (Ill. App. Ct. 2002) (interpreting “and“ as
conjunctive). In its short analysis of 820 ILCS 115/2, Doherty
did not address the second or third prongs of the exclusion.
Instead, it upheld the dismissal of Doherty’s claim under the
Wage Act because he satisfied just the first prong of the
exclusion. As noted above, the conjunctive language in the
statute requires that all three prongs be met.
This conclusion is strongly supported by AFM Messenger
Serv., Inc. v. Department of Emp. Sec., 763 N.E.2d 272 (Ill.
2001), where the Illinois Supreme Court applied a similarly
worded exclusion to the Illinois Unemployment Insurance
Act and reasoned that “because the three conditions . . . are
phrased in the conjunctive, all three conditions must be sat-
isfied for the independent contractor exemption to apply.“
Id. at 283; see Amoroso v. Crescent Private Capital, L.P., No. 02
C 1453, 2003 WL 22344098, at *3 (N.D. Ill. Oct. 14, 2003).
Based on the holding in AFM, were this question before the
Supreme Court of Illinois, it would hold that all three con-
ditions of 820 ILCS 115/2 must likewise be satisfied before
the exclusion could apply. As nothing in the complaint
shows that Adams meets all three prongs of the exclusion
delineated in 820 ILCS 115/2, we conclude that the exclu-
sion does not apply to him.
Thus we conclude that nonresidents who work in Illinois
for an in-state employer may state a claim under the Wage
Act and that the exclusion to the Wage Act’s definition of
“employee“ does not apply to Adams. We reverse the dis-
trict court’s dismissal of Adams’s claim under the Wage Act.
No. 03-2408 11
We next consider the dismissal of Adams’s claim against
Catrambone for interference with prospective econo-
mic advantage. The district court dismissed this claim for
one reason: Adams had not pleaded that Catrambone
acted toward a third party. “[T]he tort of interference with
prospective advantage requires a showing of action by the
defendant toward a third party.“ Vickers v. Abbott Labs.,
719 N.E.2d 1101, 1116 (Ill. App. Ct. 1999). The district
court reasoned thus: “Plaintiff’s complaint does not mention
any third party. All plaintiff alleges is, essentially, that
Catrambone was supposed to make him a shareholder but
did not.“
Although not particularly well drafted, Adams’s com-
plaint sets forth that Catrambone interfered with his pros-
pective employment with Great Lakes (the third party), and
the future economic advantages it entailed, for an illegiti-
mate purpose: to thwart Adams’s incipient exposure of
5
Catrambone’s fraud against the corporation. The district
court should not have dismissed this claim on the ground
5
The assertion that Catrambone siphoned money from the
corporation is in paragraph fifteen of the complaint, where
Adams alleges that “in the course of conducting business,
the Plaintiff ascertained and determined that the Defendant,
Richard Catrambone, failed to disclose and clandestinely hid
from Plaintiff, certain profits and avails that were diverted from
Great Lakes and Plaintiff to the benefit of Defendant, Richard
Catrambone.“ The allegation that Catrambone fired Adams as
part of a cover-up is in paragraph sixteen, where Adams pleads
that after he confronted Catrambone, he “was effectively ter-
minated from all information, operation and access“ at Great
Lakes. Although these allegations come under the heading of
count I, “Accounting and Other Relief,“ they nonetheless notify
the defendants of the basis of Adams’s claim. Under Federal Rule
of Civil Procedure 8, that suffices. See Bartholet v. Resihauer A.G.
(Zurich), 953 F.2d 1073, 1078 (7th Cir. 1992).
12 No. 03-2408
that Adams failed to plead the element of action by
Catrambone toward a third party.
Catrambone argues in the alternative that dismissal of this
claim was appropriate because, as a corporate officer, he
enjoyed a qualified privilege to interfere with Adams’s
prospective economic advantage with the corporation. Such
a privilege exists, but it is inapplicable where, as Adams
alleges, the defendant’s action is without justification (e.g.,
when the interference was designed to cover up the defen-
dant’s theft of corporate assets). Mittelman v. Witous, 552
N.E.2d 973, 987 (Ill. 1989), abrogated on other grounds by
Kuwik v. Starmark Star Marketing & Admin., Inc., 619 N.E.2d
129 (Ill. 1993); Schuler v. Abbott Labs., 639 N.E.2d 144, 148 (Ill.
App. Ct. 1993) (stating that the privilege is inapplicable
where the defendant’s “actions were unrelated to or antago-
nistic to the interest that gave rise to the privilege“). We
therefore reverse dismissal of Adams’s claim for interfer-
ence with prospective economic advantage.
Adams’s final claim is for breach of fiduciary duty. A
claim “for breach of fiduciary duty must set forth . . . that a
fiduciary relationship existed between the parties, that the
trustee owed certain, specific duties to the plaintiff, that the
trustee breached those duties, and that there were resulting
damages.“ Chicago City Bank & Trust Co. v. Lesman, 542
N.E.2d 824, 826 (Ill. App. Ct. 1989). The district court
dismissed this claim on the ground that Adams did not
allege the existence of a fiduciary relationship. It reached
this conclusion because, in its view, the complaint alleged
no more than a failed business deal, and the parties to a
business deal do not owe one another a fiduciary duty.
We disagree with the district court’s characterization of
the complaint. Although not a model of clarity, the com-
plaint does allege that Catrambone, who was a 50% share-
holder in Great Lakes, “owed a fiduciary duty to Plaintiff as
No. 03-2408 13
a 50% shareholder and co-venturer in the entity and busi-
ness to act in an honest forthright manner and deal fairly
and honestly with the Plaintiff.“ These allegations, if true,
would establish the existence of a fiduciary duty:
“[s]hareholders in a close corporation owe to each other
fiduciary duties similar to those of partners in a partner-
ship.“ Anest v. Audino, 773 N.E.2d 202, 209 (Ill. App. Ct.
2002). It is true that some aspects of the complaint, taken in
isolation, could be read to suggest that Adams was never a
50% shareholder, that he was only supposed to become one.
The complaint suffices, however, to place Catrambone on
notice that he is alleged to have violated a fiduciary duty to
Adams, the only other shareholder in the corporation, by
siphoning off corporate assets. The complaint is therefore
good enough for Adams’s claim to survive a motion to
dismiss. See Ross Bros. Const. Co. v. International Steel Servs.,
283 F.3d 867, 873 (7th Cir. 2002).
III.
The Wage Act applies to nonresidents who work in
Illinois for an Illinois employer, and not all three criteria of
the exclusion in 820 ILCS 115/2 apply to Adams. We
therefore reverse dismissal of his claim under the Wage Act.
Adams alleged that Catrambone interfered with his pro-
spective economic relations with a third party, Great Lakes,
and that Catrambone did so in order to cover up his diver-
sion of corporate assets. We therefore REVERSE dismissal of
Adams’s claim for interference with prospective economic
advantage. Adams alleged that he and Catrambone were
shareholders in a close corporation, and that Catrambone
thus had a fiduciary duty to Adams. Accordingly, we
REVERSE dismissal of Adams’s claim for breach of fiduciary
duty. We REMAND for further proceedings.
14 No. 03-2408
A true Copy:
Teste:
_____________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—2-19-04