Peterson v. Hans Imhof et al

Filing 39

MEMORANDUM OPINION AND ORDER. Mailed notice(drw, )

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
In re:
LANCELOT INVESTORS FUND, L.P., et al.
No. 12 C 04579
Judge James B. Zagel

Debtor,
_____________________________________
RONALD R. PETERSON, as Chapter 7
Trustee for Lancelot Investors Fund, L.P., et
al.,
Plaintiff,
v.
HANS IMHOF, WELLS L. MARVIN, THE
RUSSELL ELDON HATLE AND LORRAIN
LOUIS HATLE REVOCABLE TRUST, THE
L. HATLE TRUST, DATED DECEMBER
30, 1991, JEFFREY WOLFER, KEVIN
WOLFER, GREGG WOLFER, and
KENNEDY FUNDING, INC.,
Defendant.

MEMORANDUM OPINION AND ORDER

Ronald R. Peterson, as the Chapter 7 Trustee for the estate of Lancelot Investors Fund,
L.P., et al., has brought this action against Defendants Hans Imhof, Wells L. Marvin, the Russell
Eldon Hatle and Lorraine Louise Hatle Revocable Trust, the L. Hatle Trust, Dated December 30,
1991, Kennedy Funding, Inc., Jeffrey Wolfer, Kevin Wolfer, and Gregg Wolfer. The action is
for, inter alia, breach of contract, unjust enrichment, turnover of property pursuant to 11 U.S.C.
§ 542(a), violation of automatic stay pursuant to U.S.C. § 362, and conversion.

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Defendants have moved to dismiss for lack of subject matter jurisdiction pursuant to
Fed.R.Civ.P. 12(b)(1), improper venue pursuant to Fed.R.Civ.P. 12(b)(3), and failure to state a
claim upon which relief can be granted pursuant to Fed.R.Civ.P. 12(b)(6). In accordance with a
properly asserted forum selection cause calling for this action to be heard in the state or federal
courts of New Jersey, Defendants’ motion to dismiss for improper venue is granted.
Defendants’ motions to dismiss for lack of subject matter jurisdiction and failure to state a claim
are therefore denied as moot.
BACKGROUND
In October 2007, Defendant Kennedy Funding, Inc., as agent for certain unnamed lenders
(the “Co-Lenders”), entered into a Loan and Security Agreement (“Loan Agreement”) with
Clearwater Development, Inc. (“Clearwater”) wherein the Co-Lenders agreed to loan Clearwater
up to approximately $47 million. The loan was secured by certain real property. At the same
time, Defandants Hans Imhof, Wells L. Marvin, the Russell Eldon Hatle and Lorraine Louise
Hatle Revocable Trust, and the L. Hatle Trust, Dated December 30, 1991 (the “Guarantors”)
executed a guaranty of the loan (the “Guaranty”) wherein Mr. Imhof guaranteed $6 million of
the loan, Mr. Marvin guaranteed $11 million of the loan, and the two trusts collectively
guaranteed $6 million of the loan.
In November 2007, Kennedy Funding entered into a “Co-Lenders Agreement” with KD8,
LLC (“KD8”) and several other co-lenders, wherein KD8 and the other co-lenders agreed to
participate in the loan to Clearwater. They thus became the unnamed lenders referenced in the
Loan Agreement. KD8, for its part, acquired 43.52% of the loan.
In October 2008, KD8 and eighteen related entities filed for Chapter 7 bankruptcy
protection in the bankruptcy court for the Northern District of Illinois. That case is being
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administered under the caption In re Lancelot Investors Fund, L.P., et al., Case No. 08-28225.
Plaintiff Ronald R. Peterson was appointed Trustee of KD8 and the other debtors.
Clearwater has been in default for nonpayment of the loan since January 2009.
Apparently without KD8’s knowledge, however, in June 2009 Kennedy Funding entered into a
new agreement with the Guarantors (the “Modification of Guaranty”) that essentially relieved
the Guarantors of their obligation under the Guaranty in return for $500,000 and a promise to
fund upkeep of the real estate collateral in the amount of $3 million. Plaintiff, as Trustee for
KD8, now brings this action against both the Guarantors and Kennedy Funding. Against the
Guarantors, Plaintiff brings an action for breach of contract, declaratory relief holding that the
Guarantors are still obligated under the Guaranty, and avoiding post-petition transfer of the
estate’s property right to collect from the Guarantors on the Guaranty. Against Kennedy
Funding, Plaintiff brings an action for breach of contract, unjust enrichment, turnover of
property, violation of automatic stay, and conversion.
DISCUSSION
Kennedy Funding and the Guarantors both assert that this action should be brought, if at
all, in the state or federal courts of New Jersey. The Loan Agreement contains a forum selection
clause which reads in relevant part: “[a]t lender’s election, to be entered in its sole discretion,
any legal suit, action or proceeding against borrower or lender arising out of or relating to this
note or the other loan documents shall be instituted in any federal or state court in New Jersey.”
The first paragraph of the Loan Agreement makes clear that the unnamed lenders and the
“Agent” (Kennedy Funding) are, for purposes of the Agreement, collectively referred to as
“Lender.” As a subsequently named lender, KD8 is clearly a “partially disclosed principal” and

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a party to the Agreement under New Jersey law,1 a point that should put to rest both defendants’
challenges to Plaintiff’s standing to bring this suit. See African Bio-Botanica, Inc. v. Leiner, 264
N.J. Super. 359, 364 (App. Div. 1993) (“if the other party has notice that the agent is or may be
acting for a principal but has no notice of the principal’s identity, the principal for whom the
agent is acting is a partially disclosed principal); McBride v. Minstar, Inc., 283 N.J. Super. 471
(Law Div. 1994) (“unless otherwise agreed, a disclosed or partially disclosed principal is a party
to a contract made by his agent within his authority”); Restatement (Second) of Agency § 4
(1958). KD8 is thus part of the lender collective for purposes of the Loan Agreement. And
Kennedy Funding, although an “agent,” is also clearly meant to be included in the lender
collective.
Accordingly, the lender collective, in whose sole discretion the forum selection clause
may be asserted, is of two minds as to whether to assert it. Kennedy Funding says yes; KD8
says no. The Loan Agreement, however, does not expressly require unanimity among the lender
collective to assert the forum selection clause, and I will not read such a requirement into its
language. By its terms, Kennedy Funding is a “lender” under the Loan Agreement. Kennedy
Funding may thus properly assert the forum selection clause.
It is well-settled that contractual forum selection clauses are prima facie valid, see M/S
Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10 (1972), and the parties do not dispute the
validity of the forum selection clause here. Rather, Plaintiff argues that at least some of the
claims he has brought simply do not fall under the reach of the forum selection clause, that is,
they do not arise out of or relate to the Loan Agreement. I turn then to the meaning of the
clause.
This forum selection clause is worded broadly, encompassing “any legal suit, action or
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All parties agree that New Jersey law governs this suit.

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proceeding” that arises out of or relates to the Loan Agreement. Other courts in this District
have noted that the inclusion of the term “relating to” in addition to “arising out of” is not mere
surplusage, but rather broadens the reach of the clause to cover a much wider scope of disputes.
See, e.g., Methode Electronics, Inc. v. Delphi Automotive Systems, LLC, 639 F.Supp.2d 903,
908-09 (N.D.Ill. 2009); Ward Enterprises, Inc. v. Bang & Olufsen America, 2004 WL 830461,
*2 (N.D.Ill. April 15, 2004).
Plaintiff asserts that the claims he has brought against Kennedy Funding are for breach of
the Co-Lender’s Agreement, which contains no forum selection clause, and that the forum
selection clause in the Loan Agreement is “completely inapplicable.” But this is contrary to the
Loan Agreement’s terms. The Co-Lender’s Agreement allegedly obligates Kennedy Funding to
distribute certain payments it has received or will receive by virtue of the Loan Agreement to
KD8. It is no stretch to say that a suit over the former “relates” to the latter. Similarly, a suit
brought over the Guaranty, which allegedly obligates the Guarantors to guarantee the loan
provided for in the Loan Agreement, also relates to the Loan Agreement.
Though the argument is underdeveloped, Plaintiff also asserts that I may nevertheless
find proper venue in the Northern District of Illinois under 28 U.S.C. § 1404(a), independent of
the forum selection clause. To be sure, the Supreme Court has held that a “forum selection
clause, which represents the parties’ agreement as to the most proper forum, should receive
neither dispositive consideration…nor no consideration.” Stewart Organization, Inc. v. Ricoh
Corp., 487 U.S. 22, 31 (1988). In Stewart, the Court noted that the “broad discretion” accorded
district courts with respect to changes of venue under § 1404(a) could conceivably lead a district
court to refuse to transfer a case “notwithstanding the counterweight of a forum selection
clause.” Id. at 30-31; see also In re HA-LO Industries, Inc., 2003 WL 21982145, *1-2 (N.D.Ill.

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Aug. 19, 2003); 15 C. Wright, A. Miller, & E. Cooper, Federal Practice and Procedure § 3847.
Be that as it may, I see no reason here to exercise that discretion in contravention of both
the will of the majority of the parties to the suit and the forum selection clause to which all
parties agreed. Because Kennedy Funding, a lender under the Loan Agreement, has elected to
assert the Agreement’s forum selection clause, and because the claims brought by Plaintiff relate
to the Loan Agreement, this action should be heard in the state or federal courts of New Jersey.
CONCLUSION
For the foregoing reasons, Defendants’ motion to dismiss for improper venue is granted.
Defendants’ motions to dismiss for lack of subject matter jurisdiction and failure to state a claim
are denied as moot.

ENTER:

James B. Zagel
United States District Judge

DATE: November 9, 2012

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