Elipas et al v. Jedynak et al

Filing 457

MEMORANDUM Opinion Signed by the Honorable John F. Grady on 11/3/2011. Mailed notice(cdh, )

07-3026.111-RSK

November 3, 2011

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
DR. JAMES ELIPAS, et al.,
Plaintiffs,
v.
JAMES K. JEDYNAK, B. GAIL HOWARD,
SCOTT H. CUMMINGS, et al.,
Defendants.

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No. 07 C 3026

MEMORANDUM OPINION
Before the court is counter-defendant James Elipas’ motion for
summary

judgment

on

counter-plaintiff

counterclaim for contribution.

Scott

H.

Cummings’

We grant Elipas’ motion for the

reasons explained below.
BACKGROUND
We will only briefly review the facts relevant to the current
motion, assuming that the reader is familiar with our earlier
opinions in this case.
WL

1286795

(N.D.

See Elipas v. Jedynak, No. 07 C 3026, 2010

Ill. Mar.

26,

2010)(“Elipas

I”);

Elipas

v.

Jedynak, No. 07 C 3026, 2010 WL 1611024 (N.D. Ill. Apr. 20, 2010)
(“Elipas II”); Elipas v. Jedynak, No. 07 C 3026, 2011 WL 1706059
(N.D. Ill. May 5, 2011) (“Elipas III”).

The two groups of

plaintiffs in this case — the “King Plaintiffs” and the “Elipas
Plaintiffs” — were investors in Unified Worldwide Transport, LLC

- 2 -

(“UWT”).

As we discussed at length in Elipas III, the materials

that some of these investors received in connection with their
investments contained false statements and material omissions.
Elipas III, 2011 WL 1706059, *3-9.

In addition, some plaintiffs

were directed to pay a company controlled by defendant James
Jedynak in exchange for their UWT securities.

Despite assurances

that the money would be transmitted to UWT, Jedynak and defendant
Betty Gail Howard used the money for their own personal expenses
and investments.

See Elipas II, 2010 WL 1611024, *2.

UWT declared

bankruptcy in June 2007 and, except for a few small distributions,
the money that the plaintiffs had invested was lost.

Id. at *3.

Howard and Jedynak have invoked their Fifth Amendment right against
self-incrimination in response to this lawsuit.

See Elipas II,

2010 WL 1611024, *2; Elipas III, 2011 WL 1706059, *3-9.1

Cummings,

a member (with Howard) of UWT’s two-person Executive Committee, has
defended this lawsuit pro se.

In Elipas III, we held that Cummings

is liable to some of the plaintiffs for recission as a controlling
person under the Illinois Securities Law.
1706059, *12-14.

Elipas III, 2011 WL

Cummings’ counterclaim seeks contribution from

Elipas — himself an investor in UWT and a plaintiff in this case —
for Elipas’ role in soliciting investments from other investors.

1/
Jedynak appeared and defended this lawsuit for a period of time before
invoking the privilege and settling with the plaintiffs.
Elipas I, 2010 WL
1286795, *1. Howard has never meaningfully participated in this suit. Id. Both
have been indicted for mail and wire fraud in connection with their role with
UWT. See United State v. Howard, No. 10-CR-786 (N.D. Ill. 2010).

- 3 -

See Illinois Contribution Act, 740 ILCS 100/2(a). His counterclaim
is based in large part on the King Plaintiffs’ complaint, which
describes Elipas’ alleged role in the defendants’ scheme without
actually naming him as a defendant.

(Am. Compl. ¶¶ 28-39.)

The

King Plaintiffs allege — and Cummings re-alleges — that Elipas
induced the King Plaintiffs to invest in UWT by making false
statements and omitting material information.

(Id. at ¶¶ 35-36;

Counterclaim ¶¶ 9–13.)
Although we have referred to the “King Plaintiffs” and the
“Elipas Plaintiffs” for the sake of convenience, each plaintiff’s
claim stands or falls on its own.
Cummings’

counterclaim,

that

It follows, for purposes of

Cummings

must

establish

Elipas’

potential liability for each individual plaintiff’s injury.

In

opposition to Elipas’ motion for summary judgment, Cummings relies
chiefly on the deposition testimony of three plaintiffs: Brian
King, David Spinney, and Janice Migon.

His complaint alleges that

other members of the King Plaintiffs received information from
Elipas, (see id. at ¶ 11), but he has not cited any evidence
substantiating that allegation. Accordingly, Elipas is entitled to
summary judgment on Cummings’ claim for contribution with respect
to his liability (if any) to the other plaintiffs besides King,
Spinney, and Migon.

See Marion v. Radtke, 641 F.3d 874, 876-77

(7th Cir. 2011) (“When a plaintiff fails to produce evidence, the
defendant is entitled to judgment; a defendant moving for summary

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judgment need not produce evidence of its own.”); see also Arnett
v. Webster, — F.3d —, 2011 WL 4014343, *14 (7th Cir. Sept. 12,
2011) (“Arnett’s pro se status doesn’t alleviate his burden on
summary judgment.”).

Furthermore, we denied Spinney’s and Migon’s

motion for summary judgment against Cummings. See Elipas III, 2011
WL 1706059, *14.

The plaintiffs have informed the court that they

are not going to pursue their remaining claims against Cummings,
electing instead to share whatever money they can collect on the
judgments already entered.

Accordingly, there is not (nor in all

likelihood will there be) any liability for Elipas to share with
Cummings with respect to Spinney’s and Migon’s claims.

See 740

ILCS 100/2(b) (“The right of contribution exists only in favor of
a tortfeasor who has paid more than his pro rata share of the
common liability, and his total recovery is limited to the amount
paid by him in excess of his pro rata share.”).2
If Elipas is liable to Cummings for contribution, then it is
with respect to Cummings’ liability to King.

See Elipas III, 2011

WL 1706059, *14 (entering summary judgment in favor of King and
against Cummings with respect to King’s initial $100,000 UWT
investment,
investment).

but
At

denying
his

summary

deposition,

judgment
King

as

to

his

second

testified

that

Elipas

2/
Even if the plaintiffs’ sharing agreement leaves open the possibility
that Cummings could be liable to Spinney and Migon at some future date, our
ruling on the merits of Cummings’ counterclaim would preclude a finding that
Elipas is liable to Cummings for contribution as to that liability. (See infra
Part B.)

- 5 -

contacted him about investing in UWT and presented him with a
“booklet” describing the company. (King Dep., attached as Ex. B to
Cummings’ Resp., at 5-6, 11.)

The deposition excerpts attached to

Cummings’ brief are vague and incomplete, so it is difficult to
determine exactly which documents King received from Elipas.

We

will assume, for purposes of this motion, that King received the
“UWT Business Plan” and UWT’s Amended and Restated Operating
Agreement, which were designated exhibits at King’s deposition.
(King Dep. at 3; see also id. at 11, 17.)3

King knew Elipas, who

is a podiatrist, through their prior participation in an informal
investment

group

that

Elipas

had

“developed.”

(Id.

at

5-6

(testifying about an oil and gas enterprise in which King, Elipas,
and others had invested).) Later, in connection with King’s second
UWT investment, Elipas told King to make his check payable to KKJ
Holdings, a company controlled by Jedynak.

(Id. at 25.)

Elipas,

to King’s recollection, was vague about why the check was being
made to KKJ, not UWT.

(Id. at 25-26.)

But he “assured” King that

“the monies will be going to your [King’s] investment in UWT.” (Id.
at 26.)4

King gave the check to Elipas, but none of the money that

King and the other plaintiffs paid to KKJ was ever transmitted to

3/

King’s discovery responses indicate that Elipas also gave him a
subscription agreement and an investor questionnaire. (See Pl.’s Answers to
Interrogatories, attached as Ex. 3 to Cummings’ Resp., at 2.) However, there is
no evidence that those documents were misleading, at least as they applied to
King’s initial investment.
4/
King also received a letter from Howard stating that Jedynak was
authorized to collect funds “on behalf of UWT.” Elipas II, 2010 WL 1611024, *2.

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UWT. See Elipas I, 2010 WL 1611024, *2.

Instead, Jedynak used the

money to enrich himself and, in at least one instance, transmitted
to Howard funds intended for UWT.

Id.

King also testified that

throughout the life of his investment, Elipas was his primary
source for information about UWT.

(King Dep. at 36.)

Spinney and

Migon testified similarly: Elipas solicited their investment and
was their main source for information about the company.

(Spinney

Dep., attached as Ex. C to Cummings’ Resp., at 6, 21; Migon Dep.,
attached as Ex. D to Cummings’ Resp., at 5-7.)

And Migon, like

King, wrote a check payable to KKJ and delivered it to Elipas.
(Migon Dep. at 7.)
DISCUSSION
A.

Legal Standard
“The court shall grant summary judgment if the movant shows

that there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.”
P. 56(a).

Fed. R. Civ.

In considering such a motion, the court construes the

evidence and all inferences that reasonably can be drawn therefrom
in the light most favorable to the nonmoving party.

See Pitasi v.

Gartner Group, Inc., 184 F.3d 709, 714 (7th Cir. 1999).

“The court

need consider only the cited materials, but it may consider other
materials in the record.”

Fed. R. Civ. P. 56(c)(3).

judgment should be denied if the dispute is ‘genuine’:

“Summary
‘if the

evidence is such that a reasonable jury could return a verdict for

- 7 -

the nonmoving party.’”

Talanda v. KFC Nat’l Mgmt. Co., 140 F.3d

1090, 1095 (7th Cir. 1998) (quoting Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 248 (1986)).

The court will enter summary

judgment against a party who does not “come forward with evidence
that would reasonably permit the finder of fact to find in [its]
favor on a material question.”

McGrath v. Gillis, 44 F.3d 567, 569

(7th Cir. 1995).
B.

The Illinois Contribution Act
Section 2 of the Illinois Contribution Act provides, in

pertinent part:
Right of Contribution. (a) Except as otherwise provided
in this Act, where 2 or more persons are subject to
liability in tort arising out of the same injury to
person or property, or the same wrongful death, there is
a right of contribution among them, even though judgment
has not been entered against any or all of them.
(b) The right of contribution exists only in favor of a
tortfeasor who has paid more than his pro rata share of
the common liability, and his total recovery is limited
to the amount paid by him in excess of his pro rata
share. No tortfeasor is liable to make contribution
beyond his own pro rata share of the common liability .
. . .
740 ILCS 100/2.

“The purpose of the Contribution Act is to balance

the equities between all culpable parties while ensuring that
plaintiffs do not receive double recovery.” Sompo Japan Ins., Inc.
v. Nippon Cargo Airlines Co., Ltd., 522 F.3d 776, 783 (7th Cir.
2008).

Elipas argues that he is entitled to summary judgment

because Cummings has yet to pay any judgment or settlement in this

- 8 -

case,

much

liability.

less
The

an

amount

Illinois

exceeding
Supreme

his

pro

rata

share

Court

has

construed

of
the

Contribution Act to require a defendant seeking contribution to
file a counterclaim or a third-party complaint in the plaintiff’s
(i.e., the injured party’s) suit. See Laue v. Leifheit, 473 N.E.2d
939, 941 (Ill. 1984); see also 740 ILCS 100/5 (“A cause of action
for contribution among joint tortfeasors may be asserted by a
separate action before or after payment, by counterclaim or by
third-party complaint in a pending action.”).5

As such, the

statute contemplates the defendant filing a contribution claim
before his liability is even determined, as Cummings did in this
case.

See Laue, 473 N.E.2d at 942.

Conceivably, a party could

establish through interrogatories or requests to admit that the
party seeking contribution cannot or will not pay more than his pro
rata share of the common liability, but Elipas has not cited any
evidence that would support such a finding in this case.

Elipas is

not entitled to summary judgment on this ground.
Elipas also argues that he is entitled to summary judgment
because Cummings has not been found “liable in tort.”

Although

Elipas has not cited, nor are we aware of, any Illinois authorities
squarely on point, we conclude that a claim for recission under §

5/

The Illinois Supreme Court declared the 1995 amendment to Section 5 of
the Contribution Act to be unconstitutional.
See Harshman v. DePhillips, 844
N.E.2d 941, 942 n.1 (Ill. 2006) (citing Best v. Taylor Machine Works, 689 N.E.2d
1057 (1997)). Therefore, we have cited the version that was in effect prior to
the amendment.
Id. (“[T]he amended version of section 5 was rendered void ab
initio, and the version of the statute in existence prior to its amendment
remained in effect.”).

- 9 -

13(A) of the Illinois Securities Law is not a tort claim.

See

Lucas v. Downtown Greenville Investors Ltd. Partnership, 671 N.E.2d
389, 399 (Ill. App. Ct. 1996) (“Unlike their federal counterparts,
Illinois courts have not interpreted actions brought under the Act
to be based in common-law fraud or tort.”).

The plaintiffs sought

and obtained summary judgment against Cummings only with respect to
this claim.

However, the Contribution Act only requires that the

party seeking contribution, and the party from whom contribution is
sought, be “potentially” liable in tort for the same injury.

See

Joe & Dan Intern. Corp. v. U.S. Fidelity & Guar. Co., 533 N.E.2d
912, 918 (Ill. App. Ct. 1988); see also Sompo, 522 F.3d at 783.
“As such, [their liability] is determined at the time of the injury
to the plaintiff seeking to hold liable under some theory, not
necessarily

a

tort

theory,

potentially liable therefor.”

less

than

all

parties

who

were

Joe & Dan, 533 N.E.2d at 918; see

also Doyle v. Rhodes, 461 N.E.2d 382, 388 (Ill. 1984) (“[T]he
Contribution Act focuses . . . on the culpability of the parties
rather than on the precise legal means by which the plaintiff is
ultimately able to make each defendant compensate him for his
loss.”).

The fact that we have found Cummings liable for a non-

tort claim does not foreclose his contribution claim if he can show
that he and Elipas are both “potentially” liable in tort for King’s
injury.

See Joe & Dan, 533 N.E.2d at 918 (“[T]hat plaintiff sued

USF&G and Pomper under nontort theories was not dispositive of
whether

both

might

also

be

subject

to

liability

in

tort

to

- 10 -

plaintiff for the same injury for purposes of contribution between
them.”);

see

also

Sompo,

522

F.3d

at

786

(“A

party

seeking

contribution or a right of setoff under the JTCA must show that the
plaintiff potentially had a cause of action sounding in tort
against both the party seeking contribution and the party from whom
contribution is sought.’”) (citing North American Van Lines, Inc.
v. Pinkerton Sec. Systems, Inc., 89 F.3d 452, 456 (7th Cir. 1996))
(emphasis in original).
Cummings argues that Elipas committed an unspecified “tort”
because

he

plaintiffs.

lacked

authority

to

solicit

(Cummings Resp. at 6.)

investments

from

the

The thrust of Cummings’

argument seems to be that he would not have been liable to King but
for Elipas’ conduct, which is probably true: if King had not
learned about UWT from Elipas he probably would not have invested
in the company.
tort.

But that is not enough to make Elipas liable in

See Movitz v. First Nat. Bank of Chicago, 148 F.3d 760, 762

(7th Cir. 1998) (“[B]ut-for causation is not enough to establish
civil liability for carelessness or other wrongdoing . . . .”).
Indeed, Cummings

has

not

cited

any

legal

authorities

response brief besides the Contribution Act itself.

in

his

We must

liberally construe his filings, but this principle has limits.

We

are not Cummings’ advocate, and it would be unfair to Elipas if we
constructed legal arguments and performed legal research for him.
See Anderson v. Hardman, 241 F.3d 544, 545 (7th Cir. 2001).
Nevertheless, we will address the one “potential” tort claim

- 11 -

clearly

suggested

misrepresentation.

by

the

parties’

pleadings:

negligent

(See Am. Compl. ¶¶ 175-180; see also Elipas

Mem. at 4-5.) “The elements of a negligent misrepresentation claim
under Illinois law are: (1) a duty on the part of [the defendant]
to

communicate

accurate

information;

(2)

false

statements

of

material fact; (3) carelessness or negligence by [the defendant] in
ascertaining the truth of the statements; (4) intention to induce
[the plaintiff] to act; (5) action by [the plaintiff] in reliance
on the truth of the statements; and (6) damages.”

F:A J Kikson v.

Underwriters Laboratories, Inc., 492 F.3d 794, 801 (7th Cir. 2007)
(citing First Midwest Bank, N.A. v. Stewart Title Guar. Co., 843
N.E.2d

327,

exception

to

335
the

(2006)).
economic

Negligent
loss

misrepresentation

doctrine,

which

is

an

prohibits

a

plaintiff from suing in tort to recover purely economic losses.
See Moorman Mfg. Co. v. National Tank Co., 435 N.E.2d 443, 453
(Ill. 1982); see also In re Chicago Flood Litigation, 680 N.E.2d
265, 275 (Ill. 1997).
A person “in the business of supplying information for the
guidance of others in their business transactions” has a duty to
convey accurate information to his or her clients.

See Moorman,

435 N.E.2d at 453; see also First Midwest Bank, N.A. v. Stewart
Title

6/

Guar.

Co.,

843

N.E.2d

327,

335

(Ill.

2006).6

It

is

The Restatement (Second) of Torts indicates that a “pecuniary interest”
in the transaction in question is sufficient, but it appears that Illinois courts
have not adopted that particular formulation. See Orix Credit Alliance, Inc. v.
Taylor Machine Works, Inc., 125 F.3d 468, 476-77 (7th Cir. 1997) (“[W]e doubt
that the pecuniary interest theory is viable in Illinois because the Illinois

- 12 -

undisputed that Elipas was a podiatrist, not a financial adviser,
when he contacted King about investing UWT.

(See Elipas Aff.,

attached as Ex. 1 to Elipas’ L.R. 56.1 Stmt., ¶ 2); cf. Penrod v.
Merrill Lynch, Pierce, Fenner & Smith, Inc., 385 N.E.2d 376, 380
(Ill. App. Ct. 1979) (concluding that a stockbroker has a duty to
convey accurate information to his clients).

The fact that he

passed the “Series 7" examination in July 2006 does not create a
genuine dispute of fact with respect to his duty to convey accurate
information in January 2005.7
before

King’s

investment,

Even if he had passed the exam

there

is

no

evidence

conducted business as a registered representative.

that

Elipas

(See Elipas

Aff. ¶¶ 2-5 (stating, without contradiction, that he was not acting
as an investment adviser and never received anything of value in
exchange for recommending UWT).)

It appears that Elipas was an

amateur investor who passed along bad information to some of his
patients and professional acquaintances:
Cummings: Did Dr. Elipas come to you and express concern
at some point down the road with regards to what was
going on at UWT?
Spinney: Well, at first he was so gung ho. I mean, you
just — so as an investor he’s naive. He’s a doctor.
Yeah, for months and months he was going, Oh, God, going

courts have not expressly recognized it.”). Cummings has not cited, nor are we
aware of, any Illinois case decided after Orix that recognizes the theory.
7/

“The Series 7 Examination is the Qualification Examination for General
Securities Registered Representatives. As a qualification examination, it is
intended to safeguard the investing public by helping to ensure that registered
representatives are competent to perform their jobs.” Content Outline for the
General Securities Registered Representative Examination (Test Series 7),
available
at:
http://www.finra.org/web/groups/industry/@ip/@comp/@regis/
documents/industry/p038201.pdf.

- 13 -

to make so much money on this.
work on my foot, will you?
(Spinney Dep. at 42.)

And I’m going, Joe, just

It is true that he accepted checks from some

of these individuals, but we do not think that is sufficient to
create a material dispute of fact about whether he was “in the
business of supplying information for the guidance of others in
their business transactions.”
We

also

conclude

that

there

is

insufficient

evidence

establishing that Elipas’ alleged negligence proximately caused
King’s injury.

“The requirement of proving loss causation,” as

proximate cause is sometimes called in securities cases, “is a
general requirement of tort law.”

Movitz, 148 F.3d at 763; see

also Ray v. Citigroup Global Markets, Inc., 482 F.3d 991, 994-95
(7th Cir. 2007) (“If the plaintiff cannot prove ‘loss causation’ —
that is, the fact that the defendant’s actions had something to do
with the drop in value — then the claim must fail.”).

As such, it

applies to tort claims for negligent misrepresentation.

See

Movitz, 148 F.3d at 763 (applying the loss-causation requirement to
a claim for negligent misrepresentation).

Loss causation is often

difficult to prove in securities cases, a fact that may have
motivated plaintiffs to seek summary judgment against Cummings only
with respect to their Illinois Securities Law claims against him.
See Lucas,

671

N.E.2d

at

398–400

(holding

that

the

Illinois

Securities Law does not require proof of loss causation).

As we

discussed in Elipas III, the “UWT Business Plan” and UWT’s Amended

- 14 -

and Restated Operating Agreement created the misleading impression
that (1) UWT did not have any operational history before it was
formed in June 2003, and (2) Howard’s most recent relevant business
experience was a highly successful venture called “Northstar.” See
Elipas III, 2011 WL 1706059, *5-6.

In fact, UWT continued a

business that Howard had previously conducted through predecessor
companies.

Id. at *5.

Those companies lost money and left

disgruntled investors in their wake.

Id.

This information would

be important to investors considering an investment in UWT, and all
the plaintiffs have affirmed that they would not have invested in
the company

if

they

had

known

the

truth.

But there

is

no

evidentiary basis to conclude that the plaintiffs would not have
lost money if UWT had been a true start-up company without any
previous operational history.

See Ray, 482 F.3d at 995 (affirming

summary judgment where the plaintiffs failed to cite any evidence
that the defendants’ misrepresentations caused the company’s share
price to drop).

UWT did not declare bankruptcy until June 2007,

four years after it assumed its predecessors’ operations. No doubt
Jedynak’s and Howard’s embezzlement scheme played a role in UWT’s
demise, but we have held that plaintiffs are not entitled to
summary judgment against Cummings insofar as they were victims of
that particular scheme.

See Elipas III, 2011 WL 1706059, *14;

Elipas I, 2010 WL 1286795, *5.

In sum, we conclude that Cummings

has failed to come forward with evidence that would support a
finding that Elipas is liable in tort for plaintiffs’ losses.

- 15 -

Accordingly, Elipas is entitled to summary judgment on Cummings’
counterclaim for contribution.
CONCLUSION
Elipas’ motion for summary judgment on Cummings’ counterclaim
(437) is granted.

A status hearing is scheduled for November 16,

2011 at 10:30 a.m.

DATE:

November 3, 2011

ENTER:

___________________________________________
John F. Grady, United States District Judge