Stahler v. Antenna Systems, Inc. et al

Filing 123

MEMORANDUM OPINION and PRELIMINARY INJUNCTION ORDER Signed by the Honorable Young B. Kim on 5/22/2015. (ma,)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
JEFFREY STAHLER,
Plaintiff,
v.
ANTENNA SYSTEMS, INC., an
Illinois Corp., ANTENNA FACTORY,
INC., an Illinois Corp., ANTENNA
SYSTEMS & SOLUTIONS, INC., an
Illinois Corp., MICHAEL TADROS, an
individual, and GEORGE TADROS,
an individual,
Defendants.

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No. 13 CV 1909
Magistrate Judge Young B. Kim

May 22, 2015

MEMORANDUM OPINION and PRELIMINARY INJUNCTION ORDER
Plaintiff Jeffrey Stahler, on behalf of himself and the opt-in plaintiffs Jack A.
Lawson and Timothy Bolton, submitted an Ex Parte Motion for Temporary
Restraining Order (“Ex Parte Motion”) and an Emergency Ex Parte Motion for
Substitution of Parties, Entry of an Order of Contempt, Temporary Restraining
Order (“TRO”), Entry of an Asset Restraining Order, and Expedited Discovery
Order (“Ex Parte Motion for Substitution”), against Defendants1 Antenna Systems,
Inc., Antenna Factory, Inc., Antenna Systems & Solutions, Inc., and Michael Tadros
(“Mr. Tadros”), and against Joyce Tadros (“Mrs. Tadros”) and Spectrawave
Communications, Inc. (“Spectrawave”) (collectively, “Respondents”).

1

This Order does not pertain to Defendant George Tadros.

Having considered the court’s judgment, Ex Parte Motion, including the
affidavits of Jezieel Cortes, Jeffrey Grant Brown, and Carol Coplan Babbitt, the
exhibits attached thereto, Ex Parte Motion for Substitution, including the exhibits
attached thereto, and representations of Plaintiff and Respondents during in-court
hearings, this court now confirms the conversion of the TRO to a Preliminary
Injunction:
Procedural History
On April 8, 2015, the court granted Plaintiff’s Ex Parte Motion and entered a
TRO. Under 28 U.S.C. § 1292(a)(1), a temporary restraining order “is deemed a
preliminary injunction and so is appealable” if kept in force for more than 20 days
without the parties’ consent. Chi. United Indus., Ltd. v. City of Chi., 445 F.3d 940,
943 (7th Cir. 2006). Respondents did not consent to the continued enforcement of
the TRO. Therefore, the TRO converted to a preliminary injunction on April 29,
2015.
On May 20, 2015, Mr. Tadros advised the court by telephone that both he and
his wife, Mrs. Tadros, had filed for bankruptcy in South Carolina, along with their
company, Spectrawave. Mr. Tadros represented that he would mail the court a copy
of the bankruptcy petition. As of the date of this Order, the court has not received
the petition by mail. On May 21, 2015, however, Plaintiff filed a Notification of
Bankruptcy Filing with the court, confirming that Mr. Tadros, Mrs. Tadros, and
Spectrawave Communication Systems, Inc. filed a Chapter 7 bankruptcy petition in
South Carolina. (R. 120, Notification of Bankruptcy Filing.) The court understands

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that such a petition may trigger an automatic stay of this court’s post-judgment
proceedings against certain Respondents pursuant to 11 U.S.C. § 362(a).2

This

court respects and is not seeking to circumvent such a stay. Because this court
entered the TRO against Respondents on April 8, 2015, the TRO was deemed a
preliminary injunction as of April 29, 2015—well before the bankruptcy petition.
Therefore, for the following reasons, the court confirms the entry of the Preliminary
Injunction as to Respondents:
Facts
Respondents have not introduced, or indicated any intention to introduce,
evidence to controvert the material facts set forth by Plaintiff in his Ex Parte
Motions. Therefore, the court accepts the recitation of facts set forth by Plaintiff
solely for purposes of the Preliminary Injunction Order.
Motion for Substitution of Parties at 4-12.)

(E.g., R. 98, Ex Parte

In short, the parties executed a

Settlement Agreement on May 20, 2014—and, for Defendant George Tadros, on
June 15, 2014. (Id. at 3.) The Settlement Agreement included a provision for the
entry of a Consent Judgment in the event of default.

(Id. at 4.)

Defendants

defaulted on their first payment. (Id.) Consequently, Plaintiff sought Judgment
against Defendants, which the court entered on July 8, 2014, in the amount of
$125,000. (R. 77, Judgment.)

As a result of the bankruptcy filing by Mr. and Mrs. Tadros and Spectrawave, this
court declines to rule on the remaining issues in Plaintiff’s Ex Parte Motion for
Substitution, including the request for substitution of parties and a contempt order,
until the automatic stay is lifted and/or deemed non-applicable to certain
Respondents for purposes of these proceedings.
2

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Since entry of the judgment, Plaintiff has sought to enforce the judgment.
(R. 98, Ex Parte Motion for Substitution of Parties at 4.) After Defendants’ default,
Plaintiff retained a private investigator and discovered that Defendants had ceased
their operation and the individual Defendants had left town.

(Id.)

Plaintiff

subsequently discovered facts showing that Defendants had relocated to South
Carolina but were continuing the same business under a new corporate entity,
Spectrawave Communications, Inc. (Id. at 5.) Indeed, Plaintiff secured an affidavit
from Defendants’ former employee Jezieel “Jesse” Cortes, lead salesperson and
technical engineer for Defendants from 2009 through mid-2014, attesting that:


Spectrawave was “an exact replica”
corporations, (id. at Ex. 5 ¶ 6(a));



Spectrawave “performed the same services, sold the same
products and was owned and managed by the same people” as
the Defendant corporations, (id.);



Mr. Tadros “changed the name and formulated a new
corporation solely to escape legal obligations, including a
judgment in this lawsuit in Illinois,” (id.);



“In or about February of 2014, Mr. Tadros announced that he
wanted to move out of the state of Illinois to ‘[expletive]
everyone’ involved in this (above-captioned) lawsuit” and that he
“wanted to ‘drag the proceedings out’ as long as he could to avoid
payment” in this case, (id. at Ex. 5 ¶ 6(b));



“[T]he Tadros family (including George, Michael and Joyce)
started running the same invoices through Spectrawave instead
of Antenna Systems or the [other Defendant corporations], and,
instead funneled all revenue into Spectrawave, the South
Carolina entity,” (id. at Ex. 5 ¶ 6(e));



“The Tadros’s [sic] began physically moving all inventory and
office supplies on hand with the [Defendant corporations] in

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of

the

Defendant

Schaumburg[, Illinois] to South Carolina, via trucks and
trailers,” (id. at Ex. 5 ¶ 6(f)); and


“George [Tadros] showed me the warehouse [in South Carolina]
that the Tadros’s [sic] eventually opened, and that contained all
of the same products they had in inventory in Schaumburg, and
that they intended to use in the ‘new’ business, which really was
just a continuation of the Schaumburg business in a different
state,” (id. at Ex. 5 ¶ 6(g)).

Respondents have not denied or otherwise refuted Cortes’s testimony.
Analysis
A.

Jurisdiction
There is no dispute that the court has jurisdiction over the subject matter of

the case and parties for purposes of enforcing the judgment. (R. 77). Mrs. Tadros
argues, however, that this court lacks jurisdiction over Respondents Spectrawave
and herself. (R. 114, Am. Mot. to Dissolve Ex Parte TRO at 5.) To that end, Mrs.
Tadros submitted an exhibit showing that Spectrawave is a South Carolina
corporation. (Id. at Ex. 1.) The court finds that Mrs. Tadros’s arguments as to
Spectrawave are invalid because the corporation must be represented by a licensed
attorney in good standing, and Mrs. Tadros is not an attorney. See Strong Delivery
Ministry Ass’n v. Bd. of Apps. of Cook Cnty., 543 F.2d 32, 33-34 (7th Cir. 1976).
In any event, the court has jurisdiction over Spectrawave as a successor to
the Defendant corporations.

A district court may invoke the successor liability

theory to grant equitable remedies. EEOC v. N. Star Hospitality, Inc., 777 F.3d
898, 901 (7th Cir. 2015).

In cases involving “more than one corporate entity,

successor liability is ‘the default rule . . . to enforce federal labor or employment

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laws.’” Id. (quoting Teed v. Thomas & Betts Power Solutions, Inc., 711 F.3d 763, 769
(7th Cir. 2013)). Without successor liability, “the victim of the illegal employment
practice is helpless to protect his rights against an employer’s change in the
business.” N. Star, 777 F.3d at 901-02 (quoting Musikiwamba v. ESSI, Inc., 760
F.2d 740, 746 (7th Cir. 1985)). Additionally, if the successor company has notice of
its predecessor’s obligations, “there is a presumption in favor of finding successor
liability.” N. Star, 777 F.3d at 902 (quoting Worth v. Tyler, 276 F.3d 249, 260 (7th
Cir. 2001)). For federal employment cases, courts examine the following factors to
determine successor liability:
1.

whether the successor had notice of the pending lawsuit;

2.

whether the predecessor could have provided the relief sought
before the sale or dissolution;

3.

whether the predecessor could have provided relief after the sale
or dissolution;

4.

whether the successor can provide the relief sought; and

5.

whether there is continuity between the operations and work
force of the predecessor and successor.

N. Star, 777 F.3d at 902 (emphasis in original).
Successor liability is the “default rule” to enforce Plaintiff’s underlying claims
of violations of the Fair Labor Standards Act, 29 U.S.C. § 201, et seq. (the “FLSA”).
N. Star, 777 F.3d at 901; (R. 1, Compl. ¶ 1.)

Plaintiff has submitted evidence

showing that, under the five-factor successor liability test articulated by the
Seventh Circuit, Spectrawave is a successor to the Defendant corporations. Under
factor one, there can be no dispute that Spectrawave had notice of this lawsuit

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because Mr. Tadros is one of the Defendants in this case and a “key actor” for
Spectrawave. N. Star, 777 F.3d at 902. Cortes’s affidavit shows a clear connection
between Mr. Tadros and Spectrawave. (R. 98, Ex Parte Motion for Substitution of
Parties at 5-7 & Ex. 5 ¶¶ 6(a)-(h).) Moreover, Plaintiff supplied the court with a
printout of the “About Us” page from early versions of Spectrawave’s website, listing
Mr. Tadros’s personal telephone number as Spectrawave’s contact number. (Id. at 5
& Ex. 6.) Spectrawave therefore was on notice of the judgment entered in this case.
Under factor two, Defendant corporations could have provided the relief
sought before they ceased to operate and diverted income and assets to
Spectrawave. Plaintiff provided evidence that Defendant Antenna Systems, Inc.
received regular deposits in its bank account from January to July 2014. (Id. at 9 &
Ex. 14.)

Cortes also provided sworn testimony that Defendants re-directed

revenues and moved assets to Spectrawave to evade the judgment entered in this
case. (Id. at Ex. 5 ¶¶ 6(a)-(h).)
As for factor three, there is no doubt that Defendants could not have satisfied
the judgment owed to Plaintiff after they had emptied their coffers. (Id.)
Factor four “is a goes without saying condition, not usually mentioned,”
according to the Seventh Circuit. N. Star, 777 F.3d at 903. In any event, financial
statements detailing Spectrawave’s revenues until the entry of the TRO show that
Spectrawave can provide the relief sought. Indeed, Plaintiff pointed to Suntrust
account statements showing that Spectrawave received $217,686.58 in the first
three months of 2015. (R. 110, Pl.’s Reply at 2; R. 108, Suntrust Account Stmts.)

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Finally, factor five further supports a finding of successor liability because
Plaintiff presented evidence showing the continuity between the operations and key
actors of Defendant corporations and Spectrawave. (R. 98, Ex Parte Motion for
Substitution of Parties at 5-7 & Ex. 5 ¶¶ 6(a)-(h).) Taken together, all five factors
weigh in favor of successor liability.
Furthermore, under Illinois successor liability law,3 when one corporation
transfers assets to another, the corporation receiving the assets may be liable for
debts or liabilities of the transferor corporation where, for example, “the purchaser
is merely a continuation of the seller” or “the transaction is for the fraudulent
purpose of escaping liability for the seller’s obligations.” GMAC, LLC v. Hillquist,
652 F. Supp. 2d 908, 918 (N.D. Ill. 2009). Plaintiff presented sufficient evidence
that Respondents have engaged in a concerted effort to conceal and dissipate
Defendants’ assets to Plaintiff’s detriment. (R. 98, Ex Parte Motion for Substitution
of Parties at 4-7.)

Respondents did so in part by creating a South Carolina

corporation that was merely a continuation of Defendant corporations.
Furthermore,

Respondents

unlawfully

transferred

Defendants’

assets

(Id.)
to

The parties in this case were Illinois residents and/or Illinois corporations. (R. 1,
Compl. ¶¶ 4-7.) Moreover, the underlying conduct that allegedly was unlawful
occurred in Illinois. (R. 1, Compl. ¶ 3.) None of the parties or Respondents has
argued that South Carolina law applies here. Nonetheless, South Carolina
successor liability law is not materially different from Illinois law for purposes of
resolving this dispute. See, e.g., Walton v. Mazda of Rock Hill, 376 S.C. 301, 305-06
(S.C. Ct. App. 2008) (“[A] successor company is not ordinarily liable for the debts of
a predecessor company under a theory of successor liability unless . . . (c) the
successor company was a mere continuation of the predecessor company[] or (d) the
transaction was fraudulently entered into for the purpose of wrongfully denying
creditor claims.”).
3

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Spectrawave for the fraudulent purpose of avoiding liability for Defendants’
obligations to Plaintiff. (Id. at 5-7) Respondents did not submit any evidence to
refute Plaintiff’s evidence. Given that there are no genuine issues of material fact,
the court finds—for purposes of this order only—that Spectrawave is a successor to
the Defendant corporate entities and cannot escape its obligations to Plaintiff.
With respect to Mrs. Tadros, she avers that she has been a resident of South
Carolina for more than a year. (R. 114, Am. Mot. to Dissolve Ex Parte TRO at 5.)
The court on May 8, 2015, ordered Plaintiff to respond to the jurisdictional issue
raised as to Mrs. Tadros on or before May 22, 2015. (R. 115, Order of May 8, 2015.)
Plaintiff did not file a response as ordered in light of Mrs. Tadros’s pending
bankruptcy petition but is not conceding this point.
Bankruptcy Filing.)

(R. 120, Notification of

The court will address this jurisdictional issue as to

Mrs. Tadros if the automatic stay is lifted in the bankruptcy proceedings.
B.

Preliminary Injunction Order
Plaintiff has satisfied the standard for the issuance of a preliminary

injunction, which is the same standard that applies to the issuance of a TRO. See
Crawford & Co. Med. Benefit Trust v. Repp, No. 11 CV 50155, 2011 WL 2531844, at
*1 (N.D. Ill. June 24, 2011). The party seeking relief must show “(1) no adequate
remedy at law and . . . irreparable harm if a preliminary injunction is denied and (2)
some likelihood of success on the merits.” Ezell v. City of Chi., 651 F.3d 684, 694
(7th Cir. 2011). If the moving party satisfies these conditions, “the district court
weighs the factors against one another, assessing whether the balance of harms

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favors the moving party or whether the harm to the nonmoving party or the public
is sufficiently weighty that the injunction should be denied.” Id. The more likely
the moving party is to succeed on the merits of its claims, the less harm it must
show as to the nonmoving party or the public if relief were to be granted. See Girl
Scouts of Manitou Council, Inc. v. Girl Scouts of the U.S. of Am., Inc., 549 F.3d
1079, 1086 (7th Cir. 2008).
Here, Plaintiff has demonstrated a substantial likelihood of success on the
merits of his claims to enforce the Judgment as to Defendants and Spectrawave.
Indeed, the parties already agreed to the Judgment in this action. (R. 77.) As
explained above, that Judgment extends to Spectrawave as successor to the
Defendant corporations.
Given that Plaintiff is likely to succeed on the merits, the court next
considers whether Plaintiff will suffer irreparable harm without a preliminary
injunction and whether Plaintiff has an adequate remedy at law. Plaintiff has been
trying to collect on the judgment for nearly a year, but to no avail thus far. (R. 98,
Ex Parte Motion for Substitution of Parties at 1-4.) In the meantime, Plaintiff has
shown that Respondents have taken elaborate steps to evade the judgment and to
hide or dispose of assets. (Id. at 4-7.) Thus, unless Respondents are preliminarily
enjoined by this Order, there will be immediate and irreparable harm to the court’s
ability to grant effective relief for Plaintiff to satisfy the judgment.
As the court explained in the TRO, the resulting harm to Plaintiff in not
granting the relief sought would be far greater than any injury this relief will inflict

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upon Defendants and Spectrawave, as successor to Defendant corporations, and it is
in the public interest to grant this preliminary relief. See Incredible Techs., Inc. v.
Virtual Techs., Inc., 400 F.3d 1007, 1011 (7th Cir. 2005). After entry of the TRO,
this court repeatedly invited Spectrawave to show how, if at all, Paragraph 1-f of
the TRO might be amended to ensure that Spectrawave could continue its business
operation, while at the same time protecting against unlawful diversion of
Spectrawave income away from discovered bank accounts. (See, e.g., R. 116, Tr. of
Apr. 14, 2015 Proceedings at 8; R. 112, Apr. 23, 2015 Order.) To date, the court has
not received any papers from Spectrawave or Mrs. Tadros showing what relief, if
any, might be needed to allow Spectrawave to continue to operate or providing
assurances that Spectrawave is not unlawfully diverting income to evade payment
of the judgment owed to Plaintiff. When this court entered the TRO and allowed
the TRO to convert to a preliminary injunction, Spectrawave had not filed for
bankruptcy or indicated that such a filing would be necessary in light of the
injunctive relief granted. And the evidence pointed to by Plaintiff showed a healthy
revenue stream to Spectrawave in the first three months of 2015. (R. 110, Pl.’s
Reply at 2; R. 108.) The court therefore had good cause for allowing the TRO to
convert to a Preliminary Injunction pursuant to Federal Rule of Civil Procedure
65(b). See Dexia Credit Local v. Rogan, 602 F.3d 879, 885 (7th Cir. 2010) (affirming
district court’s grant of preliminary injunction where targeted parties took elaborate
steps to evade judgment creditor and conceal and dispose of assets).

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Accordingly, the court hereby finds and orders that:
1.

This court has jurisdiction over the subject matter of this case, and

there is good cause to believe it has jurisdiction over Respondents.
2.

Venue lies properly with this court pursuant to 29 U.S.C. § 1391

because the allegedly unlawful conduct occurred in this district. (R. 1, Compl. ¶ 3.)
3.

Respondents, their officers, agents, servants, employees, attorneys, any

business entities and/or persons controlled directly or indirectly by Respondents,
and any persons acting in active concert or participation with them who receive
actual notice of this Order by personal service or otherwise are hereby permanently
enjoined and restrained from directly or indirectly:
a.

Transferring, converting, selling, concealing, assigning, spending,
withdrawing, perfecting a security interest in, or otherwise disposing
of any assets wherever located that are owned, controlled, or held by,
or for the benefit of, in whole or in part, any Respondent, or in the
actual or constructive possession of any Respondent;

b.

Opening or causing to be opened any safe deposit boxes, commercial
mail boxes, or storage facilities titled in the name or for the benefit of
any Respondent, or subject to access by any Respondent or under the
direct or indirect control of any Respondent, without providing Plaintiff
and this court with prior notice and an opportunity to inspect the
contents in order to determine that they contain no assets covered by
this Order;

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c.

Cashing any checks or depositing or processing any payments from
customers of Respondents;

d.

Incurring charges or cash advances on any credit card issued in the
name, singly or jointly, of any Respondent;

e.

Incurring liens or encumbrances on real property, personal property,
or other assets in the name, singly or jointly, of any Respondent or of
any corporation, partnership, or other entity directly or indirectly
owned, managed, or controlled by any Respondent;

f.

Transferring any funds or other assets subject to this Order for
attorney’s

fees

or

living

expenses;

provided

however

that,

notwithstanding the above, any Respondent may pay, from funds
subject to this Order, reasonable, usual, ordinary, and necessary living
expenses and attorney’s fees, not to exceed $1,000, without written
prior approval by the Plaintiff or as otherwise authorized by this court;
g.

Creating, operating, or exercising any control over any business entity
without first providing Plaintiff and this court with a written
statement disclosing the name of the business entity, its address and
telephone number, its officers, directors, principals, managers, and
employees, and a detailed description of the business entity’s intended
activities; and

h.

Destroying, mutilating, concealing, altering, or otherwise disposing of
any documents or records of any kind that relate to the business

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practices or business and personal finances of the Respondents until
further order of the court.
4.

Any financial or brokerage institution, escrow agent, title company,

commodity trading company, entity, trust, or person that holds, controls or
maintains accounts or assets of, or on behalf of, or for the direct or indirect benefit
of, any Respondent, that has been served with a copy of this Order or otherwise has
actual or constructive knowledge of this Order, shall:
a.

Hold and retain within its control and prohibit the transfer,
conversion, sale, withdrawal, removal, assignment, encumbrance, or
other disposal of any such asset except by further order of this court;

b.

Deny Respondents access to any safe deposit box titled in any
Respondent’s name, individually or jointly, or otherwise subject to
access by any Respondent; and

c.

Upon request by Plaintiff, promptly provide Plaintiff with copies of all
records or other documentation pertaining to each such account or
asset, including but not limited to originals or copies of account
applications, account statements, signature cards, checks, drafts,
deposit tickets, transfers to and from the accounts, all other debit and
credit instruments or slips, currency transaction reports, 1099 forms,
and safe deposit box logs.

5.

Respondents shall allow Plaintiff, within five (5) business days after

receipt of actual notice of this Order, as long as any applicable bankruptcy stay is

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lifted, to inspect and copy any documents and records in Respondents’ possession or
control relating to any financial accounts owned or controlled by Respondents,
including their officers, agents, servants, employees, attorneys, and any persons
acting in active concert or participation with them, including such accounts residing
with or under the control of any banks, savings and loan associations, payment
processors or other financial institutions, including merchant account providers,
payment providers, third-party processors, and credit card associations, from
February 2014 to the present, if not already provided.
6.

Respondents shall immediately provide a copy of this Order to each

affiliate, subsidiary, division, sales entity, successor, assignee, officer, director,
employee, independent contractor, client company, agent, attorney, spouse, and
representative, and shall, within ten (10) days from the date of entry of this Order,
provide Plaintiff and this court with a sworn statement that Respondents have
complied with this provision of the Order, which statement shall include the names
and addresses of each such person or entity who received a copy of this Order, once
any applicable bankruptcy stay is lifted.
7.

Plaintiff shall continue to maintain his deposit with the court of ten

thousand dollars ($10,000) as security, either cash or surety bond, to be paid by
Plaintiff or Plaintiff’s counsel’s Interest on Lawyers Trust Account, which the court
determines is adequate for the payment of such damages as any person may be
entitled to recover as a result of a wrongful restraint hereunder.

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Conclusion
For the foregoing reasons, the court hereby confirms the conversion of the
TRO to a Preliminary Injunction, with certain modifications in light of the
bankruptcy petition by certain Respondents. This Order does not materially alter
the Preliminary Injunction that went into effect on April 29, 2015.
ENTER:

____________________________________
Young B. Kim
United States Magistrate Judge

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