Freed v. JPMorgan Chase Bank, NA

Filing 117

MEMORANDUM Opinion and Order written by the Honorable Gary Feinerman on 6/13/2013.Mailed Notice.(jlj)

UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
ERIC D. FREED,
Plaintiff,
vs.
PAUL M. WEISS, RONALD WEISS, and COMPLEX
LITIGATION GROUP LLC, an Illinois limited liability
company,
Defendants.
_____________________________________________
ERIC D. FREED,
Plaintiff,
vs.
JPMORGAN CHASE BANK, N.A.,
Defendant/Third-Party Plaintiff,
vs.
COMPLEX LITIGATION GROUP LLC, PAUL M.
WEISS, and JAMIE E. WEISS,
Third-Party Defendants.

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12 C 6720
Judge Feinerman

_______________________

12 C 1477
Judge Feinerman

MEMORANDUM OPINION AND ORDER
Eric D. Freed brought Case 12 C 1477 against JPMorgan Chase Bank, N.A., in the
Circuit Court of Cook County, Illinois. Doc. 1-1 (12 C 1477). Chase removed the case, which
includes only state law claims but which falls within the federal diversity jurisdiction, to this
court. Doc. 1 (12 C 1477). The court dismissed Freed’s first amended complaint. Doc. 34 (12 C
1477); Freed v. JPMorgan Chase Bank, N.A., 2012 WL 3307091 (N.D. Ill. Aug. 13, 2012).

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Freed then filed a second amended complaint, Doc. 42 (12 C 1477), Chase again moved to
dismiss, and the court denied the motion, Doc. 66 (12 C 1477); Freed v. JPMorgan Chase Bank,
N.A., 2012 WL 6193964 (N.D. Ill. Dec. 12, 2012). Chase answered and brought third-party
claims against Complex Litigation Group LLC (“the LLC”), Paul M. Weiss (“Weiss”), and
Weiss’s wife, Jamie Saltzman Weiss (“Saltzman”). Doc. 75 (12 C 1477).
Freed brought Case 12 C 6720 in federal court against Weiss, the LLC, and Weiss’s
father, Ronald Weiss (“Ronald Weiss”). Doc. 1 (12 C 6720). Case 12 C 6720, like Case 12 C
1477, brings only state law claims and falls within the court’s diversity jurisdiction. Case 12 C
6720 was reassigned to the undersigned judge’s calendar pursuant to Local Rule 40.4 because it
is “related” to Case 12 C 1477. Docs. 15, 16 (12 C 6720). There have been no substantive
rulings in Case 12 C 6720.
For ease of exposition, this opinion will refer to all parties other than Freed collectively
as “Defendants.” Defendants in both cases have moved the court to abstain under the doctrine
set forth in Colorado River Water Conservation District v. United States, 424 U.S. 800 (1976),
pending the resolution of an earlier-filed suit in Illinois state court, Freed v. Weiss, 2011 CH
41529 (Cir. Ct. Cook Cnty., Ill. filed Dec. 5, 2011). Docs. 71, 79 (12 C 1477); Doc. 23 (12 C
6720). In the state court suit, Freed sued Weiss and Saltzman, Doc. 27-4 (12 C 6720), and Weiss
and the LLC filed counterclaims against Freed, which they styled as “Emergency Petitions,”
Docs. 83-5, 83-6 (12 C 1477). After Defendants filed their abstention motions in this court, the
state court granted Freed’s motion to dismiss his state court claims. Doc. 86 (12 C 1477); Doc.
32 (12 C 6720). Because Weiss and the LLC had filed counterclaims, the state court’s dismissal
of Freed’s claims did not end the state court case, and so this court requested supplemental
briefing on whether the state court counterclaims justified federal abstention even with Freed’s

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state court claims out of the picture. Doc. 90 (12 C 1477); Doc. 35 (12 C 6720). The parties
adhered to their initial positions. Docs. 91, 92, 96, 98 (12 C 1477); Docs. 41, 42-1 (12 C 6720).
For the following reasons, the abstention motions are granted and the two federal cases
are stayed pending the outcome of the state court lawsuit.
Discussion
The Colorado River doctrine provides that “a federal court may stay or dismiss a suit in
exceptional circumstances when there is a concurrent state proceeding and the stay or dismissal
would promote ‘wise judicial administration.’” Caminiti & Iatarola, Ltd. v. Behnke
Warehousing, Inc., 962 F.2d 698, 700 (7th Cir. 1992) (quoting Colorado River, 424 U.S. at 818).
The Supreme Court “has cautioned that abstention is appropriate only in ‘exceptional
circumstances,’ and has also emphasized that federal courts have a ‘virtually unflagging
obligation … to exercise the jurisdiction given them.’” AXA Corporate Solutions v.
Underwriters Reins. Corp., 347 F.3d 272, 278 (7th Cir. 2003) (quoting Colorado River, 424 U.S.
at 813, 817). In determining whether to abstain, the court’s task is “not to find some substantial
reason for the exercise of federal jurisdiction by the district court; rather, the task is to ascertain
whether there exist exceptional circumstances, the clearest of justifications, that can suffice
under Colorado River to justify the surrender of that jurisdiction.” Moses H. Cone Mem’l Hosp.
v. Mercury Constr. Corp., 460 U.S. 1, 25-26 (1983) (internal quotation marks omitted).
The Colorado River analysis has two steps. First, the court “inquire[s] whether the
concurrent state and federal proceedings are parallel.” Caminiti, 962 F.2d at 700. If the
proceedings are parallel, the court then weighs ten non-exclusive factors to determine whether
abstention is proper. Id. at 701.

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I.

Whether the Federal and State Cases Are Parallel
The parallelism analysis requires a description of the factual allegations and legal claims

in the federal cases and the state court case. The court will begin with Case 12 C 6720 because
the discussion of that case provides necessary background for the discussion of Case 12 C 1477.
Unless otherwise noted, citations to docket entries in the following subsections are to the docket
for the case discussed in that subsection.
A.

Case 12 C 6720: Freed v. Weiss

In Case 12 C 6720, Freed alleges that he was a member of the LLC along with Weiss but
that he voluntarily dissociated from the LLC on August 21, 2012. Doc. 1 at ¶¶ 1, 3-4. The sixcount complaint seeks (1) to force the LLC to purchase Freed’s distributional interest in the LLC
and (2) to dissolve the LLC, and it claims (3) that Weiss breached fiduciary duties owed to Freed
as a member and manager of the LLC, (4) that Weiss breached the Partnership Agreement that
Freed and Weiss executed when they formed the LLC, (5) that the LLC itself breached the
Partnership Agreement, and (6) that Ronald Weiss breached fiduciary duties owed to Freed as
Freed’s or the LLC’s accountant. Id. at pp. 17-26.
The federal suit centers on a scheme allegedly concocted and executed by Weiss, assisted
by Saltzman and Ronald Weiss, to push Freed out of the LLC and to take its assets. Id. at ¶¶ 1-3,
49-55. Freed alleges that Weiss carried out this scheme by fraudulently transferring the LLC’s
funds into bank accounts at Chase that were controlled by Weiss, and also by excluding Freed
from control of the LLC by asserting that Freed had withdrawn LLC funds in violation of the
Partnership Agreement in March 2011 and had thereby voluntarily disassociated himself from
the LLC and given up his right to participate in its control. Id. at ¶¶ 1, 3, 24-48, 56-66.

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These factual allegations ground Freed’s claims in federal court for dissolution of the
LLC, Doc. 1 at ¶¶ 78-79; for breach of fiduciary duty by Weiss, id. at ¶¶ 84-87; for breach of the
Partnership Agreement by Weiss, id. at ¶¶ 90, 93; and for breach of the Partnership Agreement
by the LLC, id. at ¶ 100. The allegations are also pertinent to Freed’s claim to require the LLC
to purchase his distributional interest, id. at ¶¶ 71-76, because the relevant value of his interest
turns on whether he dissociated in March 2011, as claimed by Weiss, id. at ¶¶ 62-66, or in
August 2012, as claimed by Freed, id. at ¶ 74 (“Freed has the right to his ‘distributional
interest’—53% under the Partnership Agreement—of the LLC’s ‘fair value determined as of the
date of the member’s dissociation,’ or August 21, 2012.”) (quoting 805 ILCS 180/35-60)
(emphasis added).
Freed brought the state court case on behalf of himself and derivatively on behalf of the
LLC (then called “Freed & Weiss LLC”—the same entity now called Complex Litigation Group
LLC) against Weiss and Saltzman. Doc. 27-4. Freed’s factual allegations in the state court case
largely overlap with those in Case 12 C 6720. As mentioned above, Freed has dismissed his
state court claims, and so the question becomes whether abstention is appropriate in light of the
counterclaims filed by Weiss and the LLC, which is now under Weiss’s control.
The counterclaims allege that Freed had dissociated from the LLC in March 2011; allege
further that Freed’s misconduct after March 2011 should result in his being expelled from the
LLC under the Illinois Limited Liability Company Act, 805 ILCS 180/1-1 et seq., if he had not
in fact already dissociated in March 2011; ask the court to enjoin Freed from representing
himself to third parties as a member or manager of the LLC; and, in the alternative to a
declaration that Freed is disassociated from the LLC, seek a judicial determination that the LLC
is dissolved. Docs. 83-5, 83-6 (12 C 1477). On March 4, 2013, after the abstention motions

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were filed and after the state court dismissed Freed’s claims, Weiss and the LLC filed a
“Renewed Motion to Set the Trial” in state court. Doc. 41-1. The motion notes that the
counterclaims had been pending for over a year and that an evidentiary hearing on the
counterclaims had been continued on several occasions. Id. at 1-4. The motion requests, among
other things, the following relief:
1.

A declaration that Freed was dissociated from CLG by at least March
20, 2011 because Freed voluntarily terminated his membership interest
in CLG pursuant to the Partnership Agreement by that date because
Freed had deliberately withheld all of his services from CLG and Freed
had been fully paid all amounts due to him under the Partnership
Agreement.
*

*

*

5.

Monetary relief against Freed for his unlawful conduct directed toward
CLG and the Weisses.

6.

A judicial determination that CLG is dissolved and a distribution of its
assets.

Id. at 9-10.
Freed contends that this court should not even consider the renewed motion to set trial in
evaluating whether abstention is appropriate, reasoning: “The motion for ‘Immediate Trial’ on
phantom, never-before-pled claims, is obviously a last-ditch effort by Defendants to create an
appearance of ‘parallelism’ that is plainly absent. This is precisely the type of bad-faith conduct
that the Seventh Circuit held would warrant summary denial of an abstention motion. See Day v.
Union Mines Inc., 862 F.2d 652, 658 (7th Cir. 1988).” Doc. 45 at 3. In fact, Day recognizes that
the precise claims advanced in a state case can evolve over time and that sound judicial
administration requires the federal court to look to whether the suits are parallel as of the time it
rules on the abstention motion, not to whether they were parallel at some earlier date. See Day,
862 F.2d at 658 (“a stay should be upheld in the interests of judicial economy if the concurrent

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suits are parallel at the time of review, as they are here, even if they were not parallel when the
stay was entered”). True, as Freed observes, Day also says that “if there is evidence of bad faith
on the part of the party attempting to stay out of federal court, a district court or a reviewing
court can deny a party’s motion to stay the federal proceedings.” Ibid. But there is no evidence
of “bad faith” by Weiss, who merely is seeking to have the state court, the forum in which Freed
initially sued him, resolve Freed’s and Weiss’s disputes about the LLC. Contrary to Freed’s
submission, there is not much (if any) daylight between the counterclaims as pleaded and the
motion to set the trial, and any such daylight reflects the modest evolution of state court claims
that Day recognizes can occur. It therefore is appropriate to consider whether abstention is
warranted in light of Weiss’s and the LLC’s motion to set the trial, which is nothing more,
nothing less, than a motion intended to advance the counterclaims to judgment.
State and federal proceedings need not be identical to be parallel. See Interstate Material
Corp. v. City of Chicago, 847 F.2d 1285, 1288 (7th Cir. 1988) (“Interstate is correct in its
assertion that differences exist. However, the requirement is of parallel suits, not identical
suits.”). Proceedings are parallel for Colorado River purposes “when substantially the same
parties are contemporaneously litigating substantially the same issues in another forum.” Tyrer
v. City of S. Beloit, 456 F.3d 744, 752 (7th Cir. 2006) (internal quotation marks omitted). Put
another way, “[t]he question is not whether the suits are formally symmetrical, but whether there
is a substantial likelihood that the [state court] litigation will dispose of all claims presented in
the federal case.” AAR Int’l, Inc. v. Nimelias Enters. S.A., 250 F.3d 510, 518 (7th Cir. 2001)
(internal quotation marks omitted). “[A]ny doubt regarding the parallel nature of the [state
court] suit should be resolved in favor of exercising jurisdiction.” Id. at 520.

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Here, although the state and federal cases do not involve identical parties, they do involve
“substantially the same parties.” Tyrer, 456 F.3d at 752. In both suits, Freed sued Weiss and an
alleged accomplice (Ronald Weiss in the federal suit, and Saltzman in the state suit), and in both
suits the LLC is aligned with Weiss, as a defendant in the federal suit and as a counter-plaintiff
in the state suit. Ronald Weiss is a defendant only in the federal suit. But Freed’s claim against
Ronald Weiss is derivative of his claim against Weiss, in that Freed claims that Ronald Weiss
breached duties owed to Freed when Weiss “received the help of his father Ronald Weiss, the
LLC’s accountant, to create false accounting records that concealed Weiss’s theft from Freed.”
Doc. 1 at ¶ 49. If Weiss is not liable for any “theft” or other misconduct, then Ronald Weiss
could hardly be liable for having helped Weiss to cover up that alleged misconduct.
Settled law holds that state and federal suits are not rendered non-parallel by the inclusion
in one suit of a party not present in the other. See AAR Int’l, Inc., 250 F.3d at 518 (“the mere
presence of additional parties … in one of the cases will not necessarily preclude a finding that
they are parallel”); Lumen Constr., Inc. v. Brant Constr. Co., 780 F.2d 691, 695 (7th Cir. 1985).
“If the rule were otherwise, the Colorado River doctrine could be entirely avoided by the simple
expedient of naming additional parties. … [I]ts impact cannot be obliterated by the stroke of a
pen.” Lumen Constr., Inc., 780 F.2d at 695; see also Pieleanu v. Mortg. Elec. Registration Sys.,
Inc., 2010 WL 1251445, at *2 (N.D. Ill. Mar. 24, 2010) (“if the plaintiff could simply add new
defendants to avoid Colorado River, that doctrine would lose much of its force”). Under the
present circumstances—where Ronald Weiss’s liability in the federal suit is derivative of the
liability of Weiss, a co-defendant in the federal suit and a party in the state court suit, and also
where Ronald Weiss’s presence in the federal suit and absence from the state court suit is
entirely Freed’s doing—Ronald Weiss’s absence from the state suit does not defeat parallelism.

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The issues being litigated in the two suits are “substantially the same” as well. Tyrer, 456
F.3d at 752. In the federal suit, Freed alleges that Weiss, assisted by Ronald Weiss, converted
the LLC’s funds to his personal use without authorization and wrongfully excluded Freed from
control of the LLC. The state court counterclaims are mirror images of Freed’s federal claims: in
state court, Freed argues that Weiss concocted a false ground for forcing him out of the LLC in
March 2011 and that Freed disassociated only as of August 2012, while Weiss and the LLC
claim that Freed voluntarily dissociated in March 2011 or shortly thereafter. Doc. 41-1 at 9;
Doc. 83-5 (12 C 1477) at ¶¶ 8-10; Doc. 98-1 (12 C 1477) at 4-6. Both cases turn on whether
Freed dissociated as of March 2011 or August 2012 or at some intermediate point, and both thus
“will be resolved largely by reference to the same evidence.” Tyrer, 456 F.3d at 752-53.
Given the foregoing, the state and federal suits are parallel for purposes of Colorado
River. In arguing to the contrary, Freed contends that his claim seeking to force the LLC to buy
his distributional interest is before only the federal court. It is true that Freed did not present that
particular request for relief in state court, but recall that suits need not be identical to be
“parallel” for Colorado River purposes so long as they present “substantially” the same issues.
As explained above, the issues are substantially the same. Moreover, although Freed did not ask
the state court to require the LLC buy his distributional interest, the state court counterclaims do
ask the state court for a “judicial determination that [the LLC] is dissolved and a distribution of
its assets,” Doc. 41-1 at 10. And Freed’s dissolution request in federal court turns on the same
issue as Weiss’s and the LLC’s mirror-image request in state court: whether Freed dissociated in
March 2011, as Weiss contends, or in August 2012, as Freed contends, or at some intermediate
point. Given this, Freed does not and could not explain how this court could award him the
proper distributional interest once the state court decides how the LLC’s assets should be

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distributed. See Lumen Constr., Inc., 780 F.2d at 695 (a court considering a Colorado River
motion should “look not for formal symmetry between the two actions, but for a substantial
likelihood that the state litigation will dispose of all claims presented in the federal case”).
Freed’s arguments against abstention rest in large part on his assertions about Illinois
state court procedure. He argues that his alleged dissociation from the LLC in August 2012
mooted the state court counterclaims. Doc. 30 at 16-21. Yet as the parties reported at a status
hearing on June 6, 2013, that very issue is pending in state court, where Freed’s motion to moot
the counterclaims has been submitted for decision. Freed also argues at length that 805 ILCS
180/35-60(d) renders improper Weiss’s and the LLC’s counterclaims to the extent they seek
dissolution of the LLC and distribution of its assets; Freed submits that only the disassociated
member can seek dissolution and distribution. Doc. 106 (12 C 1477). But as the parties reported
at the June 6 status hearing, the motion to set the trial is pending in state court and will be heard
by Judge Kathleen Pantle, the judge presiding over the state court suit, if Freed’s motion to moot
the counterclaims is denied. This means that the state court is set to resolve Freed’s argument
regarding the propriety Weiss’s and the LLC’s request for dissolution and distribution.
Freed’s submissions regarding the possible mootness and procedural propriety of the
state court counterclaims miss the point of a Colorado River motion, which is not to decide who
has the better case, but merely to decide which court should decide. This court should not and
will not pass on the merits of the state law issues now pending in state court. If the state court
holds that Weiss’s and the LLC’s counterclaims are moot, or if it holds that 805 ILCS 180/3560(d) preclude Weiss and the LLC from pursuing their dissolution and distribution claims, then
the parallelism that now exists likely will disappear and Colorado River likely will no longer

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apply. Until that happens, the issues and parties in the state case are substantially the same as the
issues and parties in the federal case, satisfying the first Colorado River requirement.
B.

Case 12 C 1477: Freed v. JPMorgan Chase Bank, N.A.

In Case 12 C 1477, as in Case 12 C 6720, Freed alleges that he and Weiss were the two
members and managers of the LLC. Doc. 42 at ¶¶ 2, 15, 16, 19. Allegedly—a qualification that
applies to the following recitation of facts as well but that will not be repeated—Weiss and
Saltzman concocted a plot to eliminate Freed from control of the LLC and to divest him of the
portion of the LLC’s funds to which the Partnership Agreement entitled him. Id. at ¶¶ 13, 29.
Weiss and Saltzman did this by opening bank accounts with Chase while falsely representing to
Chase that Weiss was the LLC’s sole member and manager and that he therefore did not need
anyone else’s consent to move the funds. Id. at ¶¶ 30-31, 33-34, 36-39, 41-43, 45. Chase could
have investigated Weiss’s assertions and seen that they were false, but it did not do so. Id. at
¶¶ 32, 34-35, 37, 40, 44, 46-47.
Weiss took his scheme to the next stage in March 2011. In response to Freed’s
withdrawal of some funds from the LLC’s accounts, Weiss asserted that Freed had “voluntarily
withdrawn” from the LLC and locked Freed out of the LLC’s property, computer systems, and
bank accounts. Id. at ¶ 53. Weiss also transferred LLC funds to which Freed was entitled under
the Partnership Agreement, including loan repayments and profit distributions, into the Chase
accounts set up and controlled by him and Saltzman. Id. at ¶ 54.
In November 2011, after learning that the funds had been transferred to the Chase
accounts, Freed delivered to Chase a written demand that it freeze the accounts immediately. Id.
at ¶ 56; Doc. 42-7. The letter provided Chase with a copy of the Partnership Agreement,
informed Chase that Freed was a member of the LLC and that Weiss lacked authority to

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unilaterally transfer or use the LLC’s funds, and demanded that Chase freeze all funds held in the
LLC’s accounts. Doc. 42-7. Instead of complying, Chase (acting through an employee)
contacted Weiss, alerted him to Freed’s freeze demand, advised Weiss that the accounts likely
would be frozen in response to the demand, encouraged Weiss to move the funds out of the
accounts before they could be frozen, and aided him in doing so by helping him to obtain a
$750,000 cashier’s check and to move that money from Chase to another bank, Northern Trust.
Doc. 42 at ¶¶ 3, 57-58, 67-68. Weeks later, the same Chase employee helped Weiss arrange to
move other funds, which were then about to be deposited into the Chase accounts, to another
bank. Id. at ¶ 59.
At the time Chase took these actions, it was aware of the Partnership Agreement’s terms
and of Weiss’s plot to take control of the LLC’s funds, including money owed to Freed to repay
his loans to the LLC, in violation of the Agreement. Id. at ¶¶ 61, 64-66, 74. Without Chase’s
assistance, Weiss would have been unable to misappropriate the funds after Freed delivered his
freeze demand. Id. at ¶¶ 69-71. As of late 2011, when Weiss improperly transferred the funds
out of the Chase accounts, Freed was owed at least $500,000 in repayments for loans he had
made to the LLC, as well as millions of dollars in profit distributions. Id. at ¶¶ 72-73.
In his second amended complaint, Freed claims that Chase committed tortious
interference with contract (the Partnership Agreement) when it encouraged and assisted Weiss to
remove the funds from the Chase accounts after receiving Freed’s freeze demand. Id. at ¶ 75.
Freed also claims that Chase aided and abetted Weiss’s breach of fiduciary duties that he owed to
Freed by virtue of their positions as members and managers of the LLC. Id. at ¶¶ 77-81. Both of
Freed’s claims against Chase require him to prove that Weiss committed underlying wrongs:
breach of the Partnership Agreement and breach of fiduciary duty. See Echo, Inc. v. Timberland

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Machs. & Irrigation, Inc., 661 F.3d 959, 968 (7th Cir. 2011) (noting that the elements of a
tortious interference with contract claim under Illinois law include the existence of a contract
between the plaintiff and a third party and a breach by the third party that was induced by the
defendant); Hefferman v. Bass, 467 F.3d 596, 601 (7th Cir. 2006) (“Under Illinois law, to state a
claim for aiding and abetting, one must allege (1) the party whom the defendant aids performed a
wrongful act causing an injury ….”).
As mentioned above, Chase filed a third-party complaint against Weiss, Saltzman, and
the LLC. Doc. 75 at 24-28. The third-party complaint repeats the allegations of wrongdoing
against Weiss and Saltzman from Freed’s second amended complaint. It further claims that “[t]o
the extent that [Chase] is found liable to Freed in connection with the claims Freed asserts
against [Chase] or [Chase] otherwise incurs or sustains any damages, [Chase] is entitled to
contribution and/or indemnity from the LLC, Weiss, and/or Saltzman, jointly and severally,
based upon the conduct alleged in the [second amended complaint].” Id. at 24-25. To support
the contribution claim, Chase states that “[t]he Joint Tortfeasor Contribution Act … provides …
that ‘where two or more persons are subject to liability in tort arising out of the same injury to
person or property … there is a right of contribution among them, even though judgment has not
been entered against any or all of them.’” Id. at 26 (quoting 740 ILCS 100/2(a)). To support the
indemnity claim, Chase states that the “Account Rules and Regulations [that governed its
depository relationship with the LLC] provide that [Chase] shall be relieved of any and all
liability for acting upon the instructions of the LLC and/or the signatories on the LLC’s account
and that the LLC shall indemnify and hold [Chase] harmless for all such actions.” Id. at 27.
Chase concludes that “[a]s Freed’s claims arise out of transactions and conduct undertaken
pursuant to the instructions of the signatories of the Accounts, Weiss and/or Saltzman, as

13

representatives of the LLC, the LLC must indemnify and hold [Chase] harmless from any and all
such liability, attorneys’ fees, costs, and expenses pursuant to the Account Rules and
Regulations.” Id. at 28.
The state and federal proceedings involve “substantially the same parties.” In the federal
suit, Freed sues Chase and Chase sues Weiss, Saltzman, and the LLC. In the state suit, Chase is
not a party, Freed had sued Weiss and Saltzman but dismissed his claims, and Weiss and the
LLC sue Freed. The absence of Saltzman from the state case in immaterial for the reasons given
above regarding Ronald Weiss—the claims against Saltzman are derivative of the claims against
Weiss. See Lumen Constr., Inc., 780 F.2d at 695; Pieleanu, 2010 WL 1251445, at *2.
As for the absence of Chase from the state court suit, that distinction between the state
case and Case 12 C 1477 is entirely attributable to Freed. It was Freed who decided to sue Chase
in a separate suit rather than adding Chase as a defendant in his state court suit against Weiss.
Indeed, Freed brought yet another suit in which he sued Northern Trust, a second bank that Freed
believes was in cahoots with Weiss. Doc. 32-4 (12 C 1477). Judge Pantle has repeatedly
remarked, with ample justification, that Freed is attempting to avoid her courtroom, and her
adverse rulings, by filing several suits rather than combining all of his related claims before her
in the state court Freed v. Weiss lawsuit. Doc. 27-1 (12 C 6720) at 3 (“I am concerned about
whether or not Mr. Freed is abusing the process here by filing other lawsuits that are actually
related to this lawsuit, that belong with this lawsuit, and what he is doing is attempting to
undermine and undercut this court’s authority in the case that’s before the court by getting
rulings from other judges. … I’m very concerned about an abuse of process here and a
manipulation of the system”); Doc. 27-2 (12 C 6720) at 4-5 (“You know, it’s just a shell game …
it appears now to be a game that … Mr. Freed is trying to play to get away from me. So, you

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know, we’ll file suit against all sorts of unrelated parties and make them sound like they’re
independent lawsuits and, you know, that way we can get a judge other than Judge Pantle. We’ll
go to federal court to get away from her … this is just outrageous …”); Doc. 27-12 (12 C 6720)
at 15 (sanctioning Freed pursuant to Illinois Supreme Court Rule 137 for filing a case that “was
not well-grounded in law” against Northern Trust).
Freed’s choice to sue Chase in a separate lawsuit enabled Chase to remove that suit, for
had Freed joined Chase as a defendant in the Freed v. Weiss state court suit, removal would have
been prohibited by 28 U.S.C. § 1441(b)(2) because diversity provides the only basis for federal
jurisdiction and Weiss is a citizen of Illinois, the State in which the state court action was
brought. See 28 U.S.C. § 1441(b)(2) (“A civil action otherwise removable solely on the basis of
jurisdiction under section 1332(a) of this title may not be removed if any of the parties in interest
properly joined and served as defendants is a citizen of the State in which such action is
brought.”); Hurley v. Motor Coach Indus., Inc., 222 F.3d 377, 378 (7th Cir. 2000) (discussing the
“forum defendant rule”). And even if the state court Freed v. Weiss suit had been removable,
Freed could have ensured that all defendants would have stayed together whether they removed
or not by suing them in a single suit rather than bringing separate suits. In short, Freed preferred
to bring a barrage of separate state court suits, and that is why his claims against Chase—which
ultimately depend on the facts and law in the state court case, because if Freed disassociated in
March 2011, then Weiss did not violate his contractual and fiduciary obligations to Freed, and if
Weiss did not violate those obligations, then Chase is not liable to Freed—will be resolved after
the state court resolves his disputes with Weiss rather than as part of the same case.
As the foregoing discussion makes clear, the issues being litigated in Case 12 C 1477 are
substantially similar to the issues being litigated in state court. Freed’s claims against Chase in

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federal court depend on his allegations that Weiss, assisted by Saltzman and Ronald Weiss,
converted the LLC’s funds to his personal use without authorization and wrongfully excluded
Freed from control of the LLC. If Weiss did not breach contractual and fiduciary duties owed to
Freed, than Chase cannot be liable for having induced or aided and abetted a breach. See Echo,
Inc., 661 F.3d at 968; Hefferman, 467 F.3d at 601. The state court counterclaims will resolve the
same issue from the opposite direction by determining whether Freed in fact voluntarily
dissociated from the LLC in March 2011, in which case Weiss did not breach either the
Partnership Agreement or his fiduciary duties by taking steps to ensure Freed’s exclusion from
the LLC. Doc. 41-1 (12 C 6720) at 9. The state court’s resolution of that in Weiss’s favor would
necessarily entail rejection of Freed’s position, essential to his claims against Chase, that he did
not dissociate in March 2001 and that Weiss falsely asserted that Freed had dissociated as a way
of taking the LLC and its assets for himself.
In arguing that the suits are not parallel, Freed says that “the State Action will not dispose
of Freed’s claims against Chase.” Doc. 83 at 4. This contention fails to recognize that, as noted
above, Freed bears primary if not sole responsibility for Chase not having been made part of the
state court Freed v. Weiss suit. The contention also misunderstands both the elements of Freed’s
claims against Chase—which do turn on the issues being litigated in the state action—and the
principles of res judicata, which, if Freed loses in state court based on a finding that he
voluntarily dissociated in March 2011, almost certainly would provide Chase with an immediate
victory in this case. See In re Owens, 532 N.E.2d 248, 251 (Ill. 1988) (“Defensive use of
collateral estoppel precludes a plaintiff from relitigating issues by switching adversaries, and
thus gives a plaintiff an incentive to try and join all defendants in the first action.”); Ill. State
Chamber of Commerce v. Pollution Control Bd., 398 N.E.2d 9, 11-12 (Ill. 1979) (excising the

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mutuality requirement from the Illinois collateral estoppel doctrine); see also Havoco of Am.,
Ltd. v. Freeman, Atkins & Coleman, Ltd., 58 F.3d 303, 308 n.9 (7th Cir. 1995) (discussing the
Illinois defensive nonmutual collateral estoppel doctrine). True, if Freed prevails in state court,
he likely will be unable to use that victory offensively against Chase due to a lack of privity
between Chase, on the one hand, and Weiss and the LLC, on the other. See Congregation of the
Passion, Holy Cross Province v. Touche Ross & Co., 636 N.E.2d 503, 510 (Ill. 1994) (“Three
factors are necessary for the application of collateral estoppel,” including “(3) the party against
whom the estoppel is asserted must be a party, or in privity with a party, to the prior
adjudication.”); Havoco of Am., Ltd., 58 F.3d at 308 n.9 (same). But parallelism under Colorado
River requires only that there be “a substantial likelihood,” not a certainty, “that the [state court]
litigation will dispose of all claims presented in the federal case.” AAR Int’l, Inc., 250 F.3d at
518 (internal quotation marks omitted). Because that standard is met here, Case 12 C 1477 and
the state case are parallel.
II.

The Colorado River Factors
The second step in the Colorado River analysis requires examining and balancing the

following ten non-exclusive factors:
1) whether the state has assumed jurisdiction over property; 2) the
inconvenience of the federal forum; 3) the desirability of avoiding piecemeal
litigation; 4) the order in which jurisdiction was obtained by the concurrent
forums; 5) the source of governing law, state or federal; 6) the adequacy of
state-court action to protect the federal plaintiff’s rights; 7) the relative
progress of state and federal proceedings; 8) the presence or absence of
concurrent jurisdiction; 9) the availability of removal; and 10) the vexatious or
contrived nature of the federal claim.
Tyrer, 456 F.3d at 754 (quoting Caminiti, 962 F.2d at 701). “No one factor is necessarily
determinative; a carefully considered judgment taking into account both the obligation to
exercise jurisdiction and the combination of factors counseling against that exercise is required.”

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Colorado River, 424 U.S. at 818-19; see also Tyrer, 456 F.3d at 754. The court will address
each factor in turn, making distinctions between the two federal suits where appropriate.
1. Whether the state has assumed jurisdiction over property. Defendants contend that
the state court “assumed jurisdiction of the [LLC’s] bank accounts” by “preventing Freed from
putting holds on the bank accounts” and by “enjoin[ing] Freed from interfering with accounts
receivable and … enter[ing] orders governing [the LLC’s] property, including its computer
system, furniture, office location and client files.” Doc. 27 (12 C 6720) at 20 (brackets and
internal quotation marks omitted); see also Doc. 79 (12 C 1477) at 9. In response, Freed asserts
only that “the state court has not ‘assumed jurisdiction over property,’ which weighs against
abstention from this Court’s exercise of jurisdiction.” Doc. 30 (12 C 6720) at 21. Freed’s failure
to rebut or even to address Defendants’ specific arguments is a forfeiture, and so the court will
accept that the state court has assumed jurisdiction over property related to this lawsuit. See
Bonte v. U.S. Bank, N.A., 624 F.3d 461, 466 (7th Cir. 2010) (“Failure to respond to an
argument—as the Bontes have done here—results in waiver.”); Cincinnati Ins. Co. v. E. Atl. Ins.
Co., 260 F.3d 742, 747 (7th Cir. 2001) (a party’s failure to respond to a non-frivolous argument
“operates as a waiver”).
2. The inconvenience of the federal forum. Because the federal and state lawsuits are
pending in courts located in Chicago, the federal forum is not inconvenient and the second factor
weighs against abstention.
3. The desirability of avoiding piecemeal litigation. “Piecemeal litigation occurs when
different tribunals consider the same issue, thereby duplicating efforts and possibly reaching
different results.” Day, 862 F.2d at 659. “Dual proceedings could involve what we have called a
‘grand waste of efforts by both the court and parties in litigating the same issues regarding the

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same contract in two forums at once.’” Ibid. (quoting Microsoftware Computer Sys. v. Ontel
Corp., 686 F.2d 531, 538 (7th Cir. 1982)). Here, because the federal and state actions involve
substantially the same parties and legal issues, and because both cases turn on the veracity of
Freed’s assertions regarding Weiss’s alleged wrongdoing and also upon when Freed
disassociated from the LLC, proceeding simultaneously in both forums would ensure
“duplicative and wasteful litigation with the potential of inconsistent resolutions of the issue.”
Caminiti, 962 F.2d at 701.
Simultaneous proceedings also would create incentives for one or the other party to
attempt to delay proceedings in one forum should the other forum appear more favorable. See
ibid.; LaDuke v. Burlington N. R.R. Co., 879 F.2d 1556, 1560 (7th Cir. 1989). Indeed, Freed’s
complaint in Case 12 C 6720 essentially concedes that this was his aim in filing that case in
federal court despite the pendency of the state court suit: “Victimized by Weiss’s continued
pilfering, and denied any interim relief in the [Cook County] Circuit Court, Freed expressly
dissociated from the LLC on August 21, 2012. Freed then filed [Case 12 C 6720], over which
this Court now had jurisdiction based on diversity of citizenship.” Doc. 1 (12 C 6720) at ¶ 17;
see also id. at ¶¶ 7, 10 (explaining that Freed disassociated from the LLC to make himself
diverse from the LLC, which permitted him to bring state law claims against the LLC in federal
court). In essence, Freed is saying, “I was losing badly in state court, so I did what it took to get
a parallel case into federal court.” The third factor strongly favors abstention.
Freed responds that “the claims in the state court were rendered moot when Freed
dissociated so there is no credible concern over ‘piecemeal litigation.’” Doc. 30 (12 C 6720) at
21. As indicated above, the mootness issue is before the state court. If the state court agrees

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with Freed on mootness and dismisses the state court counterclaims, the predicate for Colorado
River abstention likely will disappear.
4. The order in which jurisdiction was obtained by the concurrent forums. This factor
favors abstention, as Freed filed the state court Freed v. Weiss suit in December 2011, Case 12 C
1477 in February 2012, and Case 12 C 6720 in August 2012. See Lumen Constr., Inc., 780 F.2d
at 697 (holding that this factor favored abstention where the state case was filed five months
before the federal case).
5. The source of governing law, state or federal. The source of the governing law in the
federal cases is state law, which favors abstention. See Day, 862 F.2d at 660 (“a state court’s
expertise in applying its own law favors a Colorado River stay”).
6. The adequacy of state court action to protect the federal plaintiff’s rights. The state
court is eminently competent to protect Freed’s rights, which turn on state law. Freed argues that
this conclusion ignores the principal goal of federal court diversity jurisdiction, “to protect nonresidents who seek redress under state law from the possible prejudice they might encounter in
local courts,” and asserts that “Freed, a citizen of Florida …, chose to commence these
proceedings in [federal court] to avoid any prejudice.” Doc. 30 (12 C 6720) at 22. Whatever
weight could be given to the abstract possibility of an Illinois state court’s being prejudiced
against a Florida citizen, the possibility is extraordinarily remote here. Freed’s assertion that he
fears prejudice as a Floridian is fatally undermined by the fact that Freed himself—a savvy and
experienced litigation attorney—elected the state forum to bring Case 12 C 1477 against Chase,
the state court Freed v. Weiss suit, and his related case against The Northern Trust. Freed even
identified himself in the December 2011 Freed v. Weiss state court complaint as “a resident of

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the state of Florida,” Doc. 1-1 (12 C 1477) at 13, showing that he had no fear that the state court
would exhibit prejudice towards someone claiming to be a Florida resident.
At the risk of overkill, it bears mention that Freed retains substantial ties to Illinois. In a
state court collection action brought against him by his former lawyers, Freed filed a pro se
pleading and served a pro se discovery response in July 2012 listing his address as Highland
Park, Illinois. Docs. 17-1, 17-2 (Doc. 12 C 6720). And in his original complaint against Chase,
the one filed in state court, Freed identified himself as a lawyer licensed to practice law in
Illinois. Doc. 1-1 (12 C 1477) at ¶ 1 (alleging that Freed “is a lawyer licensed by the States of
Illinois and California to practice law”).
In the end, having chosen the Circuit Court of Cook County, Illinois, as the forum for all
but one of his suits (Case 12 C 6720), Freed cannot now be heard to accuse that court of
prejudice against him due to his asserted Florida citizenship. If the state court views Freed in a
negative light, and it most certainly does, it is due to Freed’s behavior and tactics in state court,
not to his state of citizenship. The sixth factor favors abstention.
7. The relative progress of state and federal proceedings. In Case 12 C 6720, there was
an “absence of any proceedings in the [federal] District court, other than the filing of the
complaint [and a motion for jurisdictional discovery, Doc. 17], prior to the motion to [abstain].”
Colorado River, 424 U.S. at 820. By contrast, Judge Pantle has issued numerous rulings, several
of which have been appealed to and upheld by the Appellate Court of Illinois. Docs. 30-5, 30-6,
30-7, 30-8, 41-1 (12 C 6720). Freed counters that the state court case “has been hopelessly
stalled for several months” and that “any litigation before the state court effectively ended
months ago.” Doc. 30 (12 C 6720) at 23. But Freed acknowledges that “limited discovery” has
commenced in state court, Doc. 83 (12 C 1477) at 14-15, and he does not and could not deny that

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the state court has expended substantially greater judicial resources on this matter than has this
court.
In Case 12 C 1477, this court has granted one motion to dismiss and denied another. But
there has been no progress beyond Chase’s answering the second amended complaint and
bringing in Weiss, Saltzman, and the LLC as third-party defendants. True, there are no claims
against Chase in the state court action, though again that is because Freed chose to file a separate
suit against Chase rather than join Chase in the state court Freed v. Weiss suit. However,
because Freed’s claims against Chase depend on the success of his claims against Weiss, and
because Weiss’s state court counterclaims would, if successful, almost certainly deal a fatal blow
to Freed’s claims against Weiss and thus against Chase, the progress in the state court suit must
be considered in weighing the relative progress of the state court suit and Case 12 C 1477. It
follows that the state court suit has progressed substantially further than Case 12 C 1477, and
therefore that the seventh factor favors abstention.
8. The presence or absence of concurrent jurisdiction. All of Freed’s claims in federal
court arise under Illinois law, and Defendants would be susceptible to suit in Illinois court, so the
eighth factor favors abstention. Compare Caminiti, 962 F.2d at 702-03 (holding that the state
court’s lack of jurisdiction to hear a federal claim weighed against abstention). Freed responds
by pointing to 805 ILCS 180/35-60(d), which states: “The jurisdiction of the court in which the
proceeding [to force the LLC to purchase a member’s distributional interest] is commenced
under this subsection (d) is plenary and exclusive” (emphasis added). Doc. 30 (12 C 6720) at 24.
But again, Freed’s argument rests on the submission that Illinois law precludes Weiss and the
LLC from seeking dissolution of the LLC and distribution of its assets in the state court case, a
submission on which the state court soon will pass. If the state court agrees with Freed, then

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Freed may move this court to lift the abstention order in light of the changed circumstances in
state court.
9. The availability of removal. This factor recognizes a policy against a federal court’s
hearing claims that are closely related to non-removable state proceedings. See Day, 862 F.2d at
659-60. As noted above, the state court suit was non-removable due to 28 U.S.C. § 1441(b)(2).
Because the federal suits are bound up with the claims in the non-removable state proceeding,
the ninth factor favors abstention.
10. The vexatious or contrived nature of the federal claims. There is no need to
comment adversely on Freed’s motives to conclude that, because his federal court claims closely
track the state court claims that he brought and that have been brought against him, the federal
suit is “vexatious” and “contrived” within the meaning of Colorado River. See Interstate
Material Corp., 847 F.2d at 1289 (“[T]he federal suit could be considered both vexatious and
contrived. Interstate filed both suits within seven months of each other seeking substantially the
same relief from substantially the same parties. Without presuming Interstate’s motives, we see
no reason why all claims and all parties could not have been, and still could not be, part of one
suit.”). That said there is overwhelming evidence that Freed behaved vexatiously by bringing
Case 12 C 6720 in federal court and Case 12 C 1477 as a separate suit in state court. As noted
above, Judge Pantle has remarked on several occasions that Freed has abused the judicial process
by bringing a series of suits in an effort to circumvent unfavorable rulings by her.
Judge Pantle’s rulings have been extremely unfavorable, as the following examples show.
Doc. 27-10 (12 C 6720) at 7 (Judge Pantle’s April 2012 order granting Weiss’s motion to enjoin
Freed from filing or pursuing other related suits in state court, and noting that Freed “has
specifically threatened to sue Tucker [Weiss’s attorney] in federal court probably because the

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appellate court has ruled that an Illinois trial court lacks the power to enjoin a party from filing
suit in federal court”); Doc. 18-1 (12 C 1477) at 57 (Order from the Appellate Court of Illinois
denying Freed’s interlocutory appeal of Judge Pantle’s April 2012 injunction); Doc. 18-1 (12 C
1477) at 72 (Judge Pantle’s May 2012 order granting Northern Trust’s motion to dismiss Freed’s
suit against it); Doc. 27-3 (12 C 6720) at 5 (Judge Pantle’s September 2012 order denying
Freed’s motion to stay the state court proceeding and to compel arbitration, and granting the
LLC’s motion to enjoin arbitration); Doc. 27-11 (12 C 6720) (Judge Pantle’s October 2012 order
denying Freed’s motion to continue a hearing or to excuse his attendance, and stating “Freed is
ordered to appear on October 4, 2012. His failure to appear will result in the issuance of a bench
warrant for his arrest.”); Doc. 27-12 (12 C 6720) (Judge Pantle’s November 2012 order granting
in part a motion for sanctions filed against Freed by Northern Trust and the LLC on the ground
that Freed’s suit against Northern Trust “was not well-grounded in law”). Freed also is in the
midst of contempt proceedings before Judge Pantle for various alleged instances of misconduct
in connection with the state court case. Doc. 31 (12 C 6720) at 13. It is obvious as obvious can
be that Freed brought a separate state court suit against Chase (12 C 1477), and then a separate
federal suit against Weiss, Ronald Weiss, and the LLC (12 C 6720), in an effort to evade Judge
Pantle’s courtroom and her stewardship of the litigation concerning Freed’s disputes with Weiss,
the LLC, and the others alleged to be in league with Weiss and the LLC. The tenth factor
accordingly weighs heavily in favor of abstention.
In sum, nine of the ten Colorado River factors—particularly the third, fourth, seventh,
eighth, and tenth factors—favor abstention and provide the “exceptional circumstances”
necessary to abstain under that doctrine.

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Conclusion
Under the test set forth by the Seventh Circuit, Colorado River abstention is the proper
course in both federal cases. The only remaining question is whether the federal suits should be
dismissed or stayed. The Seventh Circuit routinely holds that Colorado River should be
implemented through a stay, not dismissal. See Selmon v. Portsmouth Drive Condo. Ass’n, 89
F.3d 406, 409-10 (7th Cir. 1996); Rosser v. Chrysler Corp., 864 F.2d 1299, 1308 (7th Cir. 1988);
Lumen Constr., Inc., 780 F.2d at 697-98. Accordingly, the federal suits are stayed pending
resolution of the state court litigation. When the state court litigation terminates, any party may
move this court to lift the stay and proceed with the federal cases in a manner consistent with the
state court’s rulings and any applicable principles of res judicata. See Rogers v. Desiderio, 58
F.3d 299, 302 (7th Cir. 1995) (“It is sensible to stay proceedings until an earlier-filed state case
has reached a conclusion, and then (but only then) to dismiss the suit outright on grounds of
claim preclusion.”). Because the court has abstained under Colorado River, it unnecessary to
address the alternative argument made in Case 12 C 6720 that abstention should be ordered
under Burford v. Sun Oil Co., 319 U.S. 315 (1943).

June 13, 2013

United States District Judge

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