U.S. Bank National Association et al v. Londrigan, Potter & Randle, P.C. et al
Filing
211
OPINION BY RICHARD MILLS, United States District Judge: The motion of Defendants for leave to file a motion for summary judgment on behalf of members as to Counts VI, VII and VIII (d/e 166 ) is DENIED. The Clerk will terminate the motion for partial summary judgment on behalf of Members as to Counts VI, VII and VIII (d/e 167 ). The Plaintiffs' motion in limine regarding Constructive Members lack of standing to pursue UFTA claims (d/e 179 ) is DENIED. SEE WRITTEN OPINION. Entered on 4/26/2019. (MJC, ilcd)
E-FILED
Friday, 26 April, 2019 04:48:34 PM
Clerk, U.S. District Court, ILCD
IN THE UNITED STATES DISTRICT COURT
FOR THE CENTRAL DISTRICT OF ILLINOIS
SPRINGFIELD DIVISION
CSMC 2007-C4 EGIZII PORTFOLIO LLC,
and
U.S. BANK NATIONAL ASSOCIATION,
as Trustee for the Registered Holders of
the MEZZ CAP COMMERCIAL
MORTGAGE TRUST 2007 C-5,
COMMERCIAL MORTGAGE PASSTHROUGH CERTIFICATES, SERIES
2007-C5,
Plaintiffs,
v.
SPRINGFIELD PRAIRIE PROPERTIES,
LLC, an Illinois limited liability company;
ROBERT W. EGIZII, an individual;
MICHAEL EGIZII, an individual;
RODNEY EGIZII, an individual; JODI
BAPTIST, an individual; JOHN PRUITT,
an individual; PAMELA JOHNSON,
EXECUTOR OF THE ESTATE OF CLYDE
BEIMFOHR; EEI HOLDING
CORPORATION, an Illinois
Corporation; and EGIZII PROPERTY
MANAGERS, LLC, an Illinois limited
liability company,
Defendants.
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OPINION
RICHARD MILLS, United States District Judge:
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Case No. 15-3195
(consolidated)
Pending is the Plaintiffs’ motion in limine regarding the Constructive
Members’ affirmative defense of lack of standing.
Pending also is the motion of Defendant Robert W. Egizii and Defendant
Members Thomas Egizii, Michael Egizii, Rodney Egizii, Jodi Baptist, John Pruitt
and Pamela Johnson, Executor of the Estate of Clyde Beimfohr, for leave to file a
motion for summary judgment on behalf of the Members as to Counts VI, VII and
VIII.
I.
Plaintiffs move in limine to prohibit any argument or evidence relating to the
affirmative defense asserted by the Constructive Members—Defendant Robert W.
Egizii, and Defendant Members Thomas Egizii, Michael Egizii, Jodi Baptist, John
Pruitt and Pamela Johnson, Executor of the Estate of Clyde Beimfohr—that
Plaintiffs lack standing to pursue claims against the Constructive Members under
Counts VI and VII of the Plaintiffs’ complaint, which seeks recovery under the
Uniform Fraudulent Transfer Act, 740 ILCS 160/1 et seq. (“UFTA”). The Plaintiffs
claim the defense is not legally sufficient.
The Constructive Members allege the affirmative defense applies based on
two scenarios: (1) Plaintiffs lack standing as a creditor as far as the Members are
concerned because the Members are not personally liable for the debts of Defendant
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Springfield Prairie Properties, LLC (“the Borrower”); and (2) as members of an
LLC, the Constructive Members are exempt from liability for any transfers under
the Limited Liability Company Act, 805 ILCS 180/10-10(a).
The Plaintiffs allege that, when read in its entirety, UFTA permits Plaintiffs
to assert a claim against the Constructive Members. They claim the transfers to the
Constructive Members are voidable as fraudulent transfers and, under UFTA,
voidable transfers entitle creditors like the Plaintiffs to obtain judgments against the
transferees as well as the transferors.
Although members of an entity are not typically liable for the entity’s debts,
the Plaintiffs claim that insiders can be held liable if they receive fraudulent transfers
of funds. The Seventh Circuit observed:
[O]nce the fraudulent nature of the transaction is established, 740 ILCS
160/8 provides the creditor with various equitable remedies for the acts
of “debtors” and “transferees.” Similarly, 160/9 permits a money judgment
against “(1) the first transferee of the asset or the person for whose benefit
the transfer was made; or (2) any subsequent transferee other than a goodfaith transferee who took for value or from any subsequent transferee.”
APS Sports Collectibles, Inc. v. Sports Time, Inc., 299 F.3d 624, 630 (7th Cir. 2002).
Although the plaintiffs in APS Sports did not have a viable UFTA claim against the
shareholders/insiders, the Seventh Circuit stated, “It is certainly possible that other
facts might make an insider, or corporate officer, liable under the UFTA because of
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his or her status as ‘first transferee,’ ‘subsequent transferee’ or ‘debtor.’” Id. n.2.
Applying APS Sports, the Plaintiffs here contend that the Constructive Members’
status as a “first transferee” permits Plaintiffs to pursue them directly under UFTA.
The Plaintiffs claim that insider status does not insulate the Constructive
Members from liability under UFTA and, if Plaintiffs prove the transfers are
fraudulent within the meaning of UFTA, then Plaintiffs will prevail on those claims.
The Plaintiffs contend the Constructive Members’ affirmative defense of lack of
standing is legally insufficient, misconstrues the nature of Plaintiffs’ claims under
Counts VI and VII and ignores the plain language of UFTA and the Seventh Circuit’s
holding in APS Sports.
The Constructive Members note that, despite the language in footnote 2 of
APS Sports, the Plaintiffs here have not made the requisite factual showing to prove
liability as a transferee. In New Horizon Enterprises, Inc. v. Contemporary Closet
Design, Inc., 570 N.W.2d 12 (Minn. Ct. App. 1997), a case cited in APS Sports, the
court noted the Minnesota UFTA “permits a judgment to be entered against the first
transferee of the asset or the person for whose benefit the transfer was made.” Id. at
17 (internal quotation marks and citation omitted). The court in New Horizon also
found that personal liability was appropriate when the individual “not only
participated, but originated the scheme to frustrate the judgment creditor’s efforts to
enforce its arbitration award.” Id.
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The Constructive Members contend there are no allegations that would
indicate that most of the Members (except perhaps Robert Egizii) originated the
scheme to be recipients of fraudulent transfers. They claim they acted in good faith
and gave reasonably equivalent value for the transfers, which means the transfer is
not voidable under UFTA.
The Constructive Members further assert that, even though the court in APS
Sports noted numerous bad faith acts of the corporate officers and insiders to
disburse the assets of the company, the Seventh Circuit determined that the
individual corporate officers and shareholders could not be liable under UFTA. See
APS Sports, 299 F.3d at 630.
The Constructive Members also allege that the Illinois Limited Liability
Company Act, 805 ILCS 180/10, bars any claims against LLC members for fraud
and other misconduct while they are acting as members of an LLC.
Additionally, the Constructive Members claim that all of the Members except
Robert Egizii, as non-signatories to the Loan Documents, are immune from liability
under UFTA on the same basis as the Court already found the Law Firms immune
from liability under UFTA--pursuant to the Rents and Profits rule.
At this stage, the Court will allow the record to develop and will not preclude
assertion of the Constructive Members’ affirmative defense of lack of standing to
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pursue UFTA claims in Counts VI and VII. The Court will be able to consider the
language in Counts VI and VII, the plain wording of UFTA, the evidence presented
by the parties and any applicable case law in determining whether the affirmative
defense has any applicability.
II.
Defendant Robert W. Egizii and Defendant Members Thomas Egizii, Michael
Egizii, Rodney Egizii, Jodi Baptist, John Pruitt and Pamela Johnson, Executor of the
Estate of Clyde Beimfohr, have filed a motion for leave to file a motion for summary
judgment in behalf of the Members as to Counts VI, VII and VIII The motion was
filed on December 14, 2018, well after the dispositive motion deadline of August
31, 2018. The Court will deny the motion as untimely.
Any arguments raised in the motion for partial summary judgment on behalf
of the Members as to Counts VI, VII and VIII can be considered at trial and in posttrial briefs.
Ergo, the motion of Defendants for leave to file a motion for summary
judgment on behalf of members as to Counts VI, VII and VIII [d/e 166] is DENIED.
The Clerk will terminate the motion for partial summary judgment on behalf
of Members as to Counts VI, VII and VIII [d/e 167].
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The Plaintiffs’ motion in limine regarding Constructive Members lack of
standing to pursue UFTA claims [d/e 179] is DENIED.
ENTER: April 26, 2019
FOR THE COURT:
/s/ Richard Mills
Richard Mills
United States District Judge
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