Armada (Singapore) PTE Limited v. Amcol International Corp. et al
MEMORANDUM Opinion and Order signed by the Honorable Elaine E. Bucklo on 3/21/2017. Mailed notice. (mgh, )
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
ARMADA (SINGAPORE) PTE
CORPORATION, ET AL.,
No. 13 C 3455
MEMORANDUM OPINION AND ORDER
Armada (Singapore) Pte. Ltd. (“Armada”) has sued Amcol
International Corporation (“Amcol”) and two of its wholly-owned
subsidiaries, American Colloid Company (“ACC”) and Volclay
International Corporation (“Volclay”) (Amcol, ACC, and Volclay
collectively, “the defendants”), for causes of action under
federal law, Illinois law, and maritime law. The claims arise in
connection with the insolvency of Ashapura Minechem Limited
(“Ashapura”), an Indian company with respect to which the
defendants are alleged to be affiliates and/or insiders.1 The
defendants have moved for a judgment on the pleadings pursuant
Ashapura is also named as a defendant in the suit but is not a
party to the instant motion. In addition, Armada’s complaint
lists several Doe Defendants, who are identified as past and/or
present senior officers employed by the defendants. See First
Amended Complaint ¶ 4.
to Rule 12(c) of the Federal Rules of Civil Procedure. For the
reasons below, the motion is granted in part and denied in part.
Armada’s complaint alleges2 that in April 2008, it entered
into two contracts of affreightment (COAs) with Ashapura.3 Under
the COAs, Armada agreed to ship loads of Ashapura’s bauxite from
India to various foreign ports. Armada’s complaint alleges that
in September 2008, after encountering difficulties with its
bauxite suppliers, Ashapura breached the COAs.
Shortly thereafter, Armada began efforts to collect on the
debt it was owed by Ashapura as a result of the breach. In
September 2008, Armada initiated two separate maritime
attachment proceedings against Ashapura in the Southern District
of New York pursuant to Rule B of the Supplemental Rules for
Certain Admiralty and Maritime Claims of the Federal Rules of
Civil Procedure. And in August 2010, Armada commenced Rule B
attachment proceedings in this court, naming the defendants --
For purposes of a Rule 12(c) motion, I take all facts alleged
in the complaint as true and draw all reasonable inferences in
the plaintiff’s favor. See, e.g., Matrix IV, Inc. v. Am. Nat.
Bank & Trust Co. of Chicago, 649 F.3d 539, 547 (7th Cir. 2011).
“A contract of affreightment is a charter to carry multiple
cargoes of a given commodity along the same route during a given
period of time lasting anywhere from a few weeks to several
years.” In re Britannia Bulk Holdings Inc. Sec. Litig., 665 F.
Supp. 2d 404, 415 n.7 (S.D.N.Y. 2009).
who until 2014 owned roughly twenty percent of Ashapura’s stock
-- as garnishees.
Armada also instituted two arbitration proceedings against
Ashapura in London, England. In February 2010, the arbitrator
issued default judgments in Armada’s favor totaling roughly $70
million. In May 2011, Ashapura sought protection from India’s
Board of Industrial and Financial Reconstruction (BIFR), and in
October 2011, Ashapura commenced Chapter 15 bankruptcy
proceedings in the Southern District of New York. Armada was an
objecting creditor in the Chapter 15 proceedings.
Armada alleges that the defendants exercised control rights
over Ashapura, and that once they learned of Ashapura’s
impending insolvency, they engaged in various machinations to
deplete Ashapura’s assets, thereby hindering Armada’s and other
creditors’ collection efforts. In particular, Armada alleges
that the defendants engaged in the following schemes:
The Euro-Payment Scheme: in the Southern District of New
York attachment proceedings, Armada obtained an order providing
for the seizure of, inter alia, wire transfers received by
Ashapura. In order to avoid detection, the defendants arranged
with Ashapura for wire payments to Ashapura to be made in euros
-- even when the relevant contracts required payment in dollars.
The Contra-Charging Plan: once the defendants became aware
of Ashapura’s insolvency, they adopted a practice of charging
Ashapura for purchases made by other Amcol affiliates.
Specifically, from roughly Spring 2008 to Spring 2009, if an
Amcol affiliate owed a debt to the defendants, it was treated as
being owed by Ashapura. In turn, any payments the defendants
owed Ashapura were set-off against the amounts Ashapura was
deemed to owe the defendants.
The Dividend Fraudulent Transfer: in October 2008, despite
its looming insolvency, Ashapura paid a $2.75 million dividend
to its shareholders. The defendants’ portion of the dividend was
The Buy-Back Fraudulent Transfer: in December 2009,
Ashapura purchased some of its own stock from the defendants,
shortly before the stock’s price dropped precipitously.
Bankruptcy Proceedings: the defendants coordinated the
filing of Ashapura’s Chapter 15 bankruptcy petition in order to
stay creditors’ actions. In addition, the defendants
deliberately misled the bankruptcy court by failing to disclose
that certain of Ashapura’s assets (i.e., Ashapura’s bentonite
line of business, which the defendants had valued at up to $60
million) had been diverted to one of Ashapura’s affiliates
shortly before Ashapura’s BIFR filing.
The AANV-Related Debt: at some point around 2007, Ashapura
entered into a joint venture called “Ashapura Amcol NV” (“AANV”)
with one of the defendants’ European affiliates. In December
2007, the defendants lent Ashapura €7.1 million to cover
Ashapura’s portion of AANV’s start-up funding (“the AANV-related
debt”). Although by January 2011, the defendants considered the
debt to be worthless, they arranged for Ashapura to repay it by
way of two “restructuring transactions.” The first of these took
place on June 30, 2011. In exchange for forgiving half of
Ashapura’s AANV-related debt, Ashapura gave the defendants an
increased stake in another joint venture, Ashapura Volclay
Limited-Unit II (“AVL-Unit II”). In addition, Ashapura made a
€1.5 million ($2.3 million) payment to buy out the defendants’
interest in AANV. The remainder of the AANV-related debt was
forgiven by a series of transactions in 2013-2014. These
essentially involved Ashapura’s buy-back of the defendants’
remaining Ashapura stock and the defendants’ acquisition of
Ashapura’s twenty percent ownership of another joint venture.
Armada’s original complaint alleged several claims under
the Illinois Uniform Fraudulent Transfer Act (“IUFTA”), 740 ILCS
§§ 160/1 et seq., and the Racketeer Influenced and Corrupt
Organizations Act (“RICO”), 18 U.S.C. § 1964. It also asserted
common-law claims for wrongful payment of dividends and wrongful
assumption of a debt. The defendants filed a motion to dismiss,
which I granted as to two of the RICO counts but otherwise
denied. Armada (Singapore) PTE Ltd. v. AMCOL Int’l Corp., No. 13
C 3455, 2013 WL 5781845, at *8 (N.D. Ill. Oct. 25, 2013)
Armada subsequently filed an amended complaint that
realleged the IUFTA counts, the surviving RICO counts, and the
wrongful-dividend claim. Additionally, the amended complaint
abandoned the claim alleging wrongful assumption of a debt and
added a claim for breach of fiduciary duty. Armada also added a
cause of action styled “maritime fraudulent transfer.” The
defendants now move pursuant to Rule 12(c) for a judgment on the
pleadings with respect to each of Armada’s claims.
“Under Rule 12(c), a party can move for judgment on the
pleadings after the filing of both the complaint and answer.”
Brunt v. Serv. Employees Int’l Union, 284 F.3d 715, 718 (7th
Cir. 2002). “Rule 12(b)(6) and Rule 12(c) employ the same
standard: the complaint must state a claim that is plausible on
its face.” St. John v. Cach, LLC, 822 F.3d 388, 389 (7th Cir.
2016) (quotation marks omitted). “A claim has facial
plausibility when the plaintiff pleads factual content that
allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.” Id. (quotation
Congress enacted RICO in an attempt to eradicate criminal
racketeering activity. See, e.g., Midwest Grinding Co. v. Spitz,
976 F.2d 1016, 1019 (7th Cir. 1992). In addition to the criminal
provisions set forth in § 1962 of the statute, § 1964 provides a
civil cause of action for “[a]ny person injured in his business
or property by reason of a violation” of the statute’s criminal
provisions. 18 U.S.C. § 1964(c). In Count VIII of the amended
complaint, Armada alleges that the defendants violated RICO §
1962(c), which makes it “unlawful for any person employed by or
associated with any enterprise engaged in ... interstate or
foreign commerce, to conduct or participate ... in the conduct
of such enterprise’s affairs through a pattern of racketeering
activity.” 18 U.S.C. § 1962(c). According to Armada, the
defendants engaged in a pattern of racketeering activity by
committing numerous acts of mail fraud and wire fraud in
stripping Ashapura of its assets. In Count IX, Armada alleges a
violation of RICO § 1962(d), which makes it a crime to conspire
to violate RICO’s other criminal provisions.
The defendants argue that Armada’s RICO claims must be
dismissed in light of the Supreme Court’s recent decision in RJR
Nabisco, Inc. v. European Community, 136 S. Ct. 2090 (2016),
which held that the civil RICO statute does not apply
extraterritorially. The suit in RJR Nabisco was brought by the
European Community and several of its member states, alleging
that RJR Nabisco had participated in a global money-laundering
scheme in association with various organized crime groups. Id.
at 2098. RJR Nabisco moved to dismiss the RICO claims on the
ground that they required an improper extraterritorial
application of the statute. Id. at 2099.
The Court began by observing that it is “a basic premise of
our legal system that, in general, United States law governs
domestically but does not rule the world.” Id. at 2100
(quotation marks omitted). This principle, the Court explained,
gives rise to a presumption that federal statutes do not apply
extraterritorially. Thus, “[a]bsent clearly expressed
congressional intent to the contrary, federal laws will be
construed to have only domestic application.” Id. (citing
Morrison v. National Australia Bank Ltd., 561 U.S. 247, 255
The Court first considered RICO § 1962(c) and concluded
that the statute applies extraterritorially in some cases -namely, where the underlying racketeering activity involves
violation of a predicate statute that itself applies
extraterritorially. Id. at 2102. However, the Court separately
considered whether RICO’s private right of action under §
1964(c) applied extraterritorially, and concluded that it did
not. To state a claim under § 1964(c), therefore, a “plaintiff
[must] allege and prove a domestic injury to business or
property.” Id. at 2111.
The defendants contend that Armada has failed to allege a
domestic injury to its business or property. I agree. RJR
Nabisco itself did not address the question of how to determine
whether an injury was foreign or domestic for purposes of §
1964, and the Court acknowledged that the application of its
holding “in any given case will not always be self-evident, as
disputes may arise as to whether a particular alleged injury is
‘foreign’ or ‘domestic.’” Id. Nevertheless, language in the
opinion strongly suggests that the inquiry turns on where the
plaintiff’s injury was suffered. Throughout its discussion of
§ 1964(c), the Court repeatedly frames the question as whether
the statute applies to injuries suffered outside of the United
States. See, e.g., 136 S. Ct. at 2099 (describing the question
presented as whether “RICO’s private right of action, contained
in § 1964(c), appl[ies] to injuries that are suffered in foreign
countries”); id. at 2108 (“Nothing in § 1964(c) provides a clear
indication that Congress intended to create a private right of
action for injuries suffered outside of the United States.”);
id. at 2109 (“The question is ... whether the court has
authority to recognize a cause of action under U.S. law for
injury suffered overseas.”) (emphasis omitted). In contrast, in
its discussion of the extraterritoriality of RICO’s underlying
criminal provisions, the Court consistently frames the inquiry
as whether the statute reaches “conduct that occurs in foreign
countries.” Id. at 2099 (emphasis added); see also id. at 2101
(addressing “whether RICO’s substantive prohibitions in § 1962
may apply to foreign conduct”).
Armada’s injury was not suffered in the United States.
Indeed, Armada does not dispute this point. The harm it alleges
-- its inability to collect on the arbitral award it obtained
against Ashapura -- is pecuniary. A corporate entity generally
suffers economic harm in its principal place of business. See,
e.g., Kamel v. Hill-Rom Co., 108 F.3d 799, 805 (7th Cir. 1997)
(place of injury was Saudi Arabia, where plaintiff’s business
would suffer as a result of defendant’s tortious conduct);
Czarobski v. St. Kieran’s Church, 851 F. Supp. 1219, 1221 (N.D.
Ill. 1994) (economic injuries suffered at the party’s principal
place of business); see also Dakota Indus., Inc. v. Dakota
Sportswear, Inc., 946 F.2d 1384, 1388-89 (8th Cir. 1991)
(“[Plaintiff] has its principal place of business in the forum
state and thus suffered the economic injury there.”). Since
Armada’s principal place of business is in Singapore, any harm
resulting from the defendants’ alleged racketeering activity was
This line of analysis has been applied by several other
courts addressing RICO’s domestic-injury requirement following
RJR Nabisco. See, e.g., Absolute Activist Value Master Fund Ltd.
v. Devine, No. 215CV328FTM29MRM, 2017 WL 519066, at *20 (M.D.
Fla. Feb. 8, 2017); City of Almaty, Kazakhstan v. Ablyazov, No.
15-CV-5345 (AJN), 2016 WL 7756629, at *9 (S.D.N.Y. Dec. 23,
2016); Exeed Indus., LLC v. Younis, No. 15 C 14, 2016 WL
6599949, at *1 (N.D. Ill. Nov. 8, 2016); Garcia v. Lion Mexico
Consol., L.P., No. 5:15-CV-1116-DAE, 2016 WL 6157436, at *3
(W.D. Tex. Oct. 21, 2016); Bascuñan v. Daniel Yarur ELS Amended
ComplaintA, No. 15-CV-2009 (GBD), 2016 WL 5475998, at *6
(S.D.N.Y. Sept. 28, 2016). In each of these cases, the courts
held that the plaintiffs’ RICO claims failed because their
injuries had not been suffered in the United States. And in each
of the cases (with the exception of Bascuñan, which was brought
by an individual), the plaintiffs were foreign corporations and
were deemed to have suffered their injuries in their principal
places of business.
Armada argues that the property at issue in its RICO counts
consists of the legal claims and judgments it sought to enforce
in the U.S. attachment and bankruptcy proceedings. According to
Armada, the defendants injured its property by thwarting its
attempts to pursue these claims and judgments. Since the
proceedings were based in the U.S., Armada maintains, it
suffered harm a domestic harm to its property.
As an initial matter, this argument is not entirely
consistent with the allegations underlying the RICO counts,
which cite not only the defendants’ activities during the
attachment and bankruptcy proceedings, but also conduct
occurring before the proceedings were commenced (e.g., the
contra-charging program), and after they were concluded (e.g.,
the restructuring transactions in 2013). The more fundamental
problem, however, is Armada’s premise that the relevant issue is
“whether Armada’s business or property was injured in the United
States,” and not whether “Armada felt its injuries in the United
States or abroad.” Resp. Br. at 14. As previously discussed, RJR
Nabisco indicates implicitly, and later cases have held
explicitly, that the reverse is true: the salient fact is where
the injury was suffered. Since Armada’s injury was suffered in
Singapore instead of the U.S., it has not alleged a domestic
injury for purposes of its RICO claims. Armada’s RICO claims
must therefore be dismissed.4
The foregoing analysis centers on Armada’s RICO claim based on
violations of § 1962(c) (Count VIII) rather than the claim based
on violations of § 1962(d) (Count IX). Like the parties in RJR
Nabisco, the parties here do not discuss the two RICO claims
separately. Hence, like the Court in RJR Nabisco, I assume
without deciding that the two should be treated identically. See
RJR Nabisco, 136 S. Ct. at 2103; cf. Domanus v. Locke Lord LLP,
847 F.3d 469, 482–83 (7th Cir. 2017) (noting that although RJR
Claims Under Illinois Law
In addition to its RICO claims, Armada asserts six causes
of action under Illinois law. Four of these (Counts I-III & VII)
arise under Illinois’ Fraudulent Transfer Act.5 The remaining two
claims -- for wrongful dividend (Count V) and breach of
fiduciary duty (Count VI) -- arise under common law.
As with Armada’s RICO claims, the defendants contend that
its IUFTA claims must be dismissed because they require an
impermissible extraterritorial application of the statute. I
Like federal courts, Illinois courts employ “the longstanding rule of construction ... which holds that a statute is
without extraterritorial effect unless a clear intent in this
respect appears from the express provisions of the statute.”
Nabisco did not specifically decide the issue, “a person
asserting a private right under subsection (d) to recover for
foreign injuries may have an uphill battle after RJR Nabisco”).
Counts I and II are based on the same underlying transactions
but are brought under different IUFTA provisions. Count I is
based on 740 ILCS 160/6(a), which applies to claims arising
prior to the fraudulent transfers; and Count II is based on 740
ILCS 160/5(a)(1) and (2), which apply to claims arising both
before or after the transfers. Count III is based on 740 ILCS
160/6(b), which applies to payments to insiders for antecedent
debts made during a debtor’s insolvency. Unlike Counts I and II,
Count III seeks redress solely for repayments made on account of
transactions relating to the AANV-Related Debt. Count VII, which
the parties do not discuss in any depth, seeks injunctive relief
under the IUFTA.
Avery v. State Farm Mut. Auto. Ins. Co., 835 N.E.2d 801, 852
(2005) (quotation marks omitted). IUFTA contains no express
provision indicating that it was intended to apply
extraterritorially. Nor does Armada point to any case authority
suggesting that IUFTA was intended to apply beyond the state’s
borders. Further, Illinois’ versions of other uniform statutes
have been held not to apply extraterritorially. See, e.g., IPOX
Schuster, LLC v. Nikko Asset Mgmt. Co., No. 15 C 9955, 2016 WL
3194445, at *11 (N.D. Ill. June 9, 2016) (Illinois’ Deceptive
Trade Practices Act); Liaquat Khan v. Van Remmen, Inc., 756
N.E.2d 902, 913 (Ill. App. Ct. 2001) (Illinois Wage Payment and
Collection Act); Graham v. Gen. U.S. Grant Post No. 2665, V. F.
W., 248 N.E.2d 657, 660 (1969) (Illinois’ Dram Shop Act).
Armada responds by citing cases holding that New York’s
fraudulent conveyance statute applies extraterritorially. See,
e.g., Eclaire Advisor as Tr. to Daewoo Int’l (Am.) Corp.
Creditor Trust v. Daewoo Eng’g & Constr. Co., 375 F. Supp. 2d
257, 268 n.4 (S.D.N.Y. 2005). The question here, however, is
whether the Illinois legislature intended for IUFTA to apply
extraterritorially, and whether that intention is clearly
evinced in the express provisions of the statute. That the New
York legislature might have intended its version of a similar
statute to apply extraterritorially is beside the point. I
therefore conclude that IUFTA does not apply extraterritorially.
This does not end the inquiry, however. Armada’s IUFTA
claims fail only if they in fact require extraterritorial
application of the statute. To determine whether a particular
claim requires a statute to be applied extraterritorially,
Illinois courts consider whether the circumstances relevant to
the claim are alleged to have occurred “primarily and
substantially” in Illinois. See, e.g., Avery, 835 at 853; see
also IPOX Schuster, 2016 WL 3194445, at *11.
Armada’s argument on this point is perfunctory. It makes
only the general assertion that the defendants “acted in
Illinois ... when they orchestrated and received (or received
the benefit) of fraudulently transferred property,” Pl.’s Resp.
Br. at 18. This contention ignores the fact that the
transactions at issue involved the transfer of assets between
and among a number of foreign entities, including not only
Ashapura, but a variety of foreign subsidiaries, joint-ventures,
and special purpose vehicles. It also ignores the fact that the
transactions required the assistance of individuals located in
India and other countries. For example, the Dividend Fraudulent
Transfer was issued by Ashapura, an Indian corporation, with the
assistance of Chetan Shah (“Shah”), Ashapura’s managing
director, a citizen of India. While Armada asserts that the
defendants received $550,000 as a result of the dividend, the
amended complaint also states that during the relevant time
period, the defendants owned only about twenty percent of
Ashapura’s stock. Thus, the lion’s share of the dividend, which
totaled $2.75 million, was reaped by other shareholders
(including, for example, Mr. Shah) who are not alleged to be
citizens of Illinois.
Similarly, the circumstances concerning the transactions
relating to the payment of the AANV-Related Debt also took place
primarily and substantially in India. For example, the transfer
was paid in part by Ashapura’s transfer to the defendants of its
stake in AVL-Unit II, an Indian joint venture between the
parties. And Ashapura transferred its interest in AVL-Unit II
via the creation of CETCO Environmental Technologies Private
Limited (“CETCO”), another joint venture between the parties in
In short, in light of the complaint’s allegations
concerning the transactions in question, I cannot conclude that
the relevant circumstances took place primarily and
substantially in Illinois. It follows that Armada’s IUFTA claims
require extraterritorial application of the statute. Since the
statute does not apply extraterritorially, Armada’s IUFTA claims
must be dismissed.
Common Law Claims
With respect to Armada’s claims for wrongful dividend
(Count V) and breach of fiduciary duty (Count VI), defendants’
appeal to the presumption against extraterritoriality loses
force. The presumption is, after all, a canon of statutory
construction. See, e.g., RJR Nabisco, 136 S. Ct. at 2100. The
defendants cite no authority to suggest that the principle
should apply to claims fashioned through common-law
adjudication. See, e.g., Leibman v. Prupes, No. 2:14-CV-09003CAS, 2015 WL 3823954, at *6 (C.D. Cal. June 18, 2015) (noting
defendant’s failure to cite “authority supporting the
proposition that the presumption against extraterritoriality
applies to common law claims”); Jeffrey A. Meyer,
Extraterritorial Common Law: Does the Common Law Apply Abroad?,
102 Geo. L.J. 301 (2014) (“To date, the presumption against
extraterritoriality has been applied to curb geographical
extension of statutes but not the common law.”).
In fact, common-law causes of action have been applied to
conduct occurring extraterritorially. See, e.g., Jovic v. L-3
Servs., Inc., 69 F. Supp. 3d 750, 762–63 (N.D. Ill. 2014)
(declining to dismiss state-law conspiracy claim brought against
private military contractor by Serbian survivors of military
operations Croatia); see also Norex Petroleum Ltd. v. Blavatnik,
22 N.Y.S.3d 138 (N.Y. Sup. 2015) (“New York courts have
historically found that there is no territorial limit to New
York common law causes of action, as there is with federal and
state statutes.”). Nevertheless, for separate reasons, Armada’s
wrongful-dividend and breach-of-fiduciary-duty claims fail.
Armada’s wrongful-dividend claim seeks to hold the
defendants liable for the dividend issued by Ashapura in October
2008. This claim must be dismissed because, as the defendants
point out, there is no cause of action for “wrongful dividend”
under Illinois law. Armada maintains that I held “wrongful
dividend” to be a viable claim in Armada I. That is not so. The
defendants’ Rule 12(b)(6) motions did not squarely challenge
whether the wrongful-dividend claim was cognizable, but instead
argued that Armada had failed to “plead sufficient facts
relating to Ashapura’s insolvency and the precise role of each
AMCOL entity in approving the October 2008 dividend payment.”
Armada I, 2013 WL 5781845, at *5. Having already rejected those
contentions as a basis for dismissing certain of Armada’s other
claims, I rejected them with respect to the wrongful-divided
claim without further discussion. Id.
In their Rule 12(c) motion, however, the defendants
expressly question the basis for the wrongful-dividend claim.
Armada has cited no case or other authority recognizing such a
cause of action under Illinois law, and I have found none. In
its previous response to the defendants’ motions to dismiss,
Armada argued that the claim was based on the so-called “trust
fund” theory of liability, according to which corporate assets
are held in trust for the benefit of a corporation’s creditors.
Specifically, Armada cited Central States, Southeast & Southwest
Areas Pension Fund v. LaCasse, 254 F. Supp. 2d 1069 (N.D. Ill.
2003), for the proposition that “it is a basic tenet of
corporate law that if a corporation transfers funds to its
shareholders leaving corporate debts unpaid, the shareholders
become liable to the corporation’s creditors.” Id. at 1072.
Armada also cited Central States, Southeast & Southwest Areas
Pension Fund v. Minneapolis Van & Warehouse Co., 764 F. Supp.
1289 (N.D. Ill. 1991), which further explained that “[t]his
‘trust fund’ theory ... is a matter not merely of state but also
of federal common law.” Id. at 1294.
But neither LaCasse nor Minneapolis Van suggests that
Illinois law recognizes a stand-alone claim for “wrongful
dividend.” Rather, each case invoked the “trust fund” theory in
connection with other claims. LaCasse addressed whether a statelaw claim for fraudulent transfer/conveyance was preempted by
ERISA, and discussed the trust fund theory in concluding that
even if the claim were preempted, it would remain viable as a
federal claim for fraudulent conveyance. 254 F. Supp. 2d at
1072. Minneapolis Van invoked the trust fund theory in the
context of imposing a constructive trust on one of the
defendants. 764 F. Supp. at 1295-96. Moreover, in Minneapolis
Van, the trust fund theory came into play because (unlike
Ashapura here) the corporation alleged to have issued the
improper dividend had been dissolved. Id. at 1294.
Because Armada has failed to show that Illinois recognizes
a claim for “wrongful dividend,” Count V of the amended
complaint must be dismissed.
Breach of Fiduciary Duty
In Count VI, Armada seeks to hold the defendants liable for
breach of fiduciary duty based on their approval and
coordination of Ashapura’s assumption in 2012 of a $4 million
debt incurred by one of its subsidiaries. See Am. Compl. ¶¶ 139,
140, 171. According to Armada, Ashapura’s assumption of the debt
had the effect of giving priority to the subsidiary’s creditor
over Armada in Ashapura’s insolvency proceedings before the
As with its wrongful-dividend claim, Armada argues that I
held in Armada I that it had stated a valid claim for breach of
fiduciary duty. Again, this contention is not accurate.
Originally, Armada advanced its breach-of-fiduciary-duty claim
as one for “wrongful assumption of a debt.” In their motions to
dismiss, the defendants argued that Illinois law recognized no
such cause of action, and in response, Armada contended that the
claim was cognizable under a breach-of-fiduciary-duty theory.
Specifically, Armada cited Phipps v. Harding, 70 F. 468 (7th
Cir. 1895), which held that “[w]hen a private corporation is
dissolved, or becomes insolvent, and determines to discontinue
the prosecution of business, its property is thereafter affected
by an equitable lien or trust for the benefit of creditors.” Id.
at 479 (quotation marks omitted). Phipps additionally stated
that “[a]lthough such directors and officers are not technical
trustees, they hold, in respect of the property under their
control, a fiduciary relation to creditors.” Id. (quotation
marks omitted). Based on the arguments before me at that point,
I concluded that Armada had stated a plausible claim that
assumption of the debt was wrongful under a breach-of-fiduciaryduty theory.
Despite its initial plausibility, however, the breach-offiduciary-duty theory does not hold up under scrutiny. While the
officers and directors of an insolvent corporation may owe a
fiduciary duty to creditors, Illinois law does not permit
individual creditors to bring claims for breaching that duty.
Rather, such claims may be brought only by the corporation or
its representative in bankruptcy. See, e.g., Fisher Tool Co. v.
Stampede Tool Co., No. 13 C 7252, 2014 WL 2932168, at *2 (N.D.
Ill. June 27, 2014).
Although the Illinois Supreme Court has not addressed the
issue, and there has been some disagreement on the question
among lower courts, compare Prime Leasing, Inc. v. Kendig, 773
N.E.2d 84, 97 (Ill. App. Ct. 2002) (“The special-circumstance
fiduciary duty runs to all creditors as a group, and not to any
individual creditor.”), with O’Connell v. Pharmaco, Inc., 493
N.E.2d 1175, 1182 (Ill. App. Ct. 1986) (“When an officer
breaches his fiduciary duty by wrongfully converting or
misappropriating funds and thereby adversely affecting the
relation between the corporation and its creditors, a creditor
can maintain an action against the officer personally.”), a
consensus has gradually converged on the proposition that
individual creditors do not have standing to bring breach-offiduciary-duty claims. See, e.g., Fisher Tool Co., 2014 WL
2932168, at *3 (“Consistent with what appears to be the trend
among courts in this district, we predict that the Illinois
Supreme Court would not permit an individual creditor to pursue
a direct action for breach of the ‘special circumstances’
fiduciary duty.”); GoHealth, LLC v. Simpson, No. 13 C 02334,
2013 WL 6183024, at *5 (N.D. Ill. Nov. 26, 2013); RMB Fasteners,
Ltd. v. Heads & Threads Int’l, LLC, No. 11 CV 02071, 2012 WL
401490, at *15 (N.D. Ill. Feb. 7, 2012). Thus, while a claim may
lie against the defendants for breach of fiduciary duty, the
claim cannot be asserted by Armada.6 Accordingly, Count VI of the
amended complaint must be dismissed.
A related question exists as to whether Illinois law -- as
opposed to, say, the law of India or Singapore -- would be used
In sum, Armada’s IUFTA claims fail because they require an
improper extraterritorial application of the statute; its
wrongful-dividend claim fails because there is no such cause of
action under Illinois law; and its breach-of-fiduciary-duty
claim fails for lack of standing. As a result, the defendants’
motion for a judgment on the pleadings is granted with respect
to Armada’s state-law claims.
Maritime Fraudulent Transfer7
Finally, the defendants seek a judgment on the pleadings as
to Count IV of Armada’s First Amended Complaint, which asserts a
claim for “Maritime Fraudulent Transfer.”
The defendants first argue that there is no substantive
cause of action for fraudulent transfer under maritime law. This
contention is correct, see, e.g. Flame S.A. v. Freight Bulk Pte.
Ltd., 807 F.3d 572, 589 (4th Cir. 2015) (no federal admiralty
rule governs claims for fraudulent conveyance); but it is beside
the point. It is well-settled that federal maritime jurisdiction
may be invoked to avoid or set aside fraudulent transfers made
for the purpose of circumventing a judgment entered by a court
in adjudicating Armada’s claim for breach of fiduciary duty.
Since the claim must be dismissed, however, it is unnecessary to
address the issue.
In the relevant case law, the terms “admiralty” and “maritime”
are generally used interchangeably. See, e.g., Weaver v.
Hollywood Casino-Aurora, Inc., 255 F.3d 379, 381 n.2 (7th Cir.
2001). I use the terms synonymously here as well.
sitting in admiralty. See, e.g., Atlanta Shipping Corp. v. Chem.
Bank, 818 F.2d 240, 248 (2d Cir. 1987) (“Ordinarily, federal
admiralty jurisdiction is strictly limited to claims
traditionally raised in admiralty. A notable exception to this
rule extends that jurisdiction to encompass equitable claims,
such as that of fraudulent transfer... [to set] aside a
fraudulent transfer aimed at evading a judgment entered in
admiralty.”); see also Flame, 807 F.3d at 582; Fertilizantes
Fosfatados Mexicanos, S.A. v. Chen, No. 91 CIV. 2048 (MJL), 1992
WL 204394, at *3 (S.D.N.Y. Aug. 11, 1992).
In such actions, it is unnecessary to rely on substantive
admiralty law, for courts sitting in admiralty look to state law
in cases where there is no applicable admiralty law on point.
See, e.g., Shipping Corp. of India v. Jaldhi Overseas Pte Ltd.,
585 F.3d 58, 70 (2d Cir. 2009) (“When there is no federal
maritime law to guide our decision, we generally look to state
law to determine property rights.”); Ost-W.-Handel Bruno
Bischoff GmbH v. Project Asia Line, Inc., 160 F.3d 170, 174 (4th
Cir. 1998) (“[I]n an admiralty case, a court applies federal
common law and can look to state law in situations where there
is no admiralty rule on point.”).
Here, Armada has properly invoked the court’s admiralty
jurisdiction because it seeks in Count IV to set aside transfers
that the defendants allegedly made to avoid garnishment in the
prior attachment proceedings in this court. The fact that there
is no substantive cause of action for fraudulent transfer under
admiralty law means only that Illinois law will supply the rule
of decision. See, e.g., Flame, 807 F.3d at 589 (“Given no
federal admiralty rules govern such a claim [for fraudulent
conveyance], the district court appropriately looked to Virginia
Next, the defendants argue that, as with Armada’s other
claims, its maritime fraudulent transfer claim should be
dismissed because it would entail an impermissible
extraterritorial application of state and/or federal law. But
the defendants fail to explain why concerns over
extraterritoriality remain relevant to causes of action premised
on the court’s maritime jurisdiction, which by its very nature
extends to matters beyond the nation’s borders. See, e.g.,
Trans-Tec Asia v. M/V HARMONY CONTAINER, 518 F.3d 1120, 1131
(9th Cir. 2008) (“Hardly any area of law could be viewed as more
extraterritorial than admiralty law.... Save for inland
navigable waters, ports, and a few other locations, admiralty
jurisdiction by definition extends beyond United States
territorial boundaries.”). The defendants have cited no case or
any other authority to indicate the existence of territorial
limits on actions to avoid fraudulent transfers pursuant to
federal maritime jurisdiction.
In passing, the defendants also appear to suggest that
Armada cannot rely on maritime jurisdiction to set aside the
transfers at issue in Count IV because those transfers did not
take place in Illinois and thus were not subject to the
attachment proceedings in this court. As indicated above, the
court’s maritime jurisdiction may be invoked to set aside
fraudulent transfers only in the case of transactions made for
the purpose of thwarting the court’s maritime jurisdiction.
Thus, if the transfers in question involved assets that were not
subject to garnishment, the maritime fraudulent transfer claim
This argument is contradicted by the complaint’s
allegations. Armada specifically contends that the defendants
incurred debts and obligations to Ashapura as a result of the
AANV-related debt, and that these were subject to garnishment in
the attachment proceedings. The amended complaint details the
transactions at length and specifically alleges that if the
transfers had been disclosed, Armada “would have looked to
garnish or otherwise address the resulting proceeds” of the
transactions. Am. Compl. ¶ 119. Taking the allegations and
inferences in Armada’s favor, it has alleged transactions
subject to garnishment in the attachment proceedings.
Finally, the defendants argue that the maritime fraudulent
transfer claim must fail because the party alleged to have
loaned the AANV start-up funds (one of the defendants’ European
affiliates) has not been named as a defendant in this suit. The
defendants further maintain that Armada has failed to allege any
reason why any of the named defendants might be held liable for
the affiliate’s wrongdoing. This argument again ignores the
complaint’s allegations. Armada specifically asserts that the
affiliate’s role in the transaction was “nothing more than such
affiliate serving as an agent on behalf of the AMCOL Defendants
as principal.” Am. Compl. ¶ 122(d). At this stage, it is not
possible to determine the affiliate’s culpability vis-à-vis that
of the defendants. Despite the defendants’ insistence to the
contrary, the exhibits attached to Armada’s amended complaint do
not establish that the affiliate is the only potentially liable
Thus, insofar as the defendants seek dismissal of Armada’s
maritime fraudulent transfer claim, their motion is denied.
For the reasons discussed above, I grant the defendants’
motion for a judgment on the pleadings with respect to Armada’s
RICO and state-law claims, and I deny the motion with respect to
its maritime fraudulent transfer claim.
laine E. Bucklo
United States D
Dated: March 21, 2017
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?