Hepp et al v. Ultra Green Energy Services LLC
Filing
94
MEMORANDUM Opinion and Order:The Court concludes that Ultra Green's counterclaim is barred by the statute of limitations provided in 5/28-8(b), and is not entitled to the benefit of 5/13-207. As such, Hepp's motion to dismiss Ultra Green's counterclaim 79 , is granted, and Ultra Green's counterclaim is dismissed with prejudice. Signed by the Honorable Thomas M. Durkin on 12/12/2014:Mailed notice(srn, )
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
Curt Hepp,
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Plaintiff,
v.
Ultra Green Energy Services, LLC,
and
M1 Energy Risk Management, LLC,
Defendants.
No. 13 C 4692
Judge Thomas M. Durkin
MEMORANDUM OPINION AND ORDER
Curt Hepp (“Hepp”), brings this action against Ultra Green Energy Services
LLC (“Ultra Green”) and M1 Energy Risk Management, LLC (“M1 Energy”)
alleging two counts of breach of contract. R. 53. Specifically, Hepp alleges that M1
Energy breached its contract with Hepp by failing to pay Hepp the total amount due
pursuant to the terms of a jointly executed promissory note. Id. Hepp further
alleges that Ultra Green breached its contract with Hepp by failing to honor its
guarantee of M1 Energy’s payment of the note. Id. Ultra Green subsequently filed a
counterclaim against Hepp asserting that the agreement which gave rise to the
promissory note was an illegal wager under 720 ILCS 5/28-1(a)(1) and (2). R. 73. As
such, Ultra Green requests that the Court declare the agreement void under 720
ILCS 5/28-7, and order Hepp to return to Ultra Green the monies paid pursuant to
720 ILCS 5/28-8(a). R. 73. Hepp moves to dismiss Ultra Green’s counterclaim on
three grounds: (1) that Ultra Green has procedurally waived its counterclaim; (2)
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that Ultra Green’s counterclaim is barred by the statute of limitations; and (3) that
Ultra Green has failed to properly plead a violation of 720 ILCS 5/28-1 pursuant to
Federal Rule of Civil Procedure 12(b)(6). R. 80. For the following reasons, the Court
grants Hepp’s motion to dismiss, R. 79.
BACKGROUND
The Court provided a detailed recitation of the relevant facts underlying this
cause of action in its Opinion and Order dated May 22, 2014, and presumes
familiarity therewith. R. 61. While those facts were taken from Hepp’s amended
complaint, they are generally not in dispute for purposes of this motion. However,
Ultra Green’s counterclaim contains the following additional factual allegations 1
that are relevant to the pending motion. Ultra Green alleges that the biodiesel
financial swap agreement did not provide for the exchange of any goods or services
between the parties. R. 73 ¶ 8. Ultra Green further alleges that there was no
underlying derivative asset associated with or connected to the agreement. Id. ¶ 9.
According to Ultra Green, the agreement was executed privately, without the
oversight of a regulated commodities exchange, and was in fact “a wager between
the parties; a game of chance in which each party…agreed to pay a fixed amount of
money to the other party depending upon the outcome of a future event.” Id. ¶¶ 10,
12. Because the Court finds that Ultra Green’s counterclaim is barred by the statute
of limitations, it declines to address the alternative grounds for dismissal.
Again, those facts are taken as true, with reasonable inferences construed in Ultra
Green’s favor. See Mann, 707 F.3d at 877. To the extent Ultra Green’s facts conflict
with the facts as stated by the Court in its May 22, 2014, Order, Ultra Green’s
version of the facts control for purposes of this Opinion and Order.
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ANALYSIS
Ultra Green’s counterclaim asserts that the biodiesel financial swap
agreement entered into by Hepp and a managing member of Ultra Green, was an
illegal game of chance under 720 ILCS 5/28-1(a)(1) and (2), and is therefore void
pursuant to 720 ILCS 5/8-7. R. 73. Accordingly, Ultra Green seeks a refund of the
monies paid by Ultra Green to Hepp pursuant to 720 ILCS 5/28-8(a). 2 Id.
Hepp moves to dismiss Ultra Green’s counterclaim arguing that its claim is
barred by the 6-month statute of limitations established in 720 ILCS 5/28-8(b). R.
80. Ultra Green advances two arguments in support of its contention that its claim
is not barred by the statute of limitations: (1) the statute of limitations has not
begun running because the full amount of the alleged illegal wager has not been
The Court seriously questions whether the agreement alleged in Hepp’s amended
complaint and Ultra Green’s counterclaim is illegal gambling as defined in 720
ILCS 5/28-1(a). However, because Ultra Green has alleged the agreement as such,
and because for purposes of this motion Ultra Green’s factual allegations are taken
as true, with reasonable inferences construed in Ultra Green’s favor, the Court
analyzes the present motion assuming that the agreement constituted illegal
gambling. See Mann v. Vogel, 707 F.3d 872, 877 (7th Cir. 2013).
The Court also notes that Ultra Green’s counterclaim alleges that the parties’
agreement is void pursuant to 720 ILCS 5/28-7 and requests an order declaring it
so. R. 73 ¶ 13; R. 73 at 3. However, the Court finds that the counterclaim frames
this request not as an independent claim for a declaratory judgment, but as a
necessary step prior to requesting that the Court order Hepp to return the monies
paid pursuant to the alleged illegal wager under 720 ILCS 5/28-8(a). This finding is
supported by the fact that neither Party mentions Ultra Green’s request for an
order in their birefs, and both argued as though Ultra Green’s counterclaim would
be dismissed in its entirety if the Court held that the statute of limitations barred
Ultra Green’s request for the return of the monies paid to Hepp. As such, the Court
finds that Ultra Green’s claim pursuant to 5/28-8(a) was the sole claim in Ultra
Green’s counterclaim and analyzes the pending motion accordingly. This finding
does not cause Ultra Green any prejudice as it has pled illegality as an affirmative
defense to Hepp’s amended complaint. R. 71 at 12.
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paid; and (2) 735 ILCS 5/13-207 exempts Ultra Green’s counterclaims from being
dismissed on statute of limitations grounds. R. 86 at 7. The Court finds neither
argument persuasive.
I.
Ultra Green’s Claim Is Barred Pursuant To 720 ILCS 5/28-8(b)
720 ILCS 5/28-8(a) provides that “[a]ny person who by gambling shall lose to
another person, any sum of money or thing of value, amounting to the sum of $50 or
more and shall pay or deliver the same or any part thereof, may sue for and recover
the money or other thing of value, so lost and paid or delivered, in a civil action
against the winner thereof.” (emphasis added). The statute goes on to say that “[i]f
within 6 months, such person who under the terms of Subsection 28-8(a) is entitled
to initiate an action to recover his losses does not in fact pursue his remedy, any
person may initiate a civil action against the winner.” 720 ILCS 5/28-8(b). This
language has been interpreted as imposing a 6-month statute of limitations on the
“loser’s” right to recover monies paid under 5/28-8(a). See Kizer v. Walden, 198 Ill.
274 (Ill. 1902) (court held that gambling statute with nearly identical language
imposed a 6-month statute of limitations on the loser’s right to initiate a private
cause of action to recover the money paid pursuant to the wager); see also Bartlett v.
Slusher, 215 Ill. 348 (Ill. 1905); Holland v. Swain, 94 Ill. 154 (Ill. 1879); Moench v.
Graff, 212 Ill. App. 42 (Ill. App. 3 Dist. 1918).
Ultra Green does not contest that subsection 28-8(a) allows for the recovery of
partial payments made pursuant to a lost wager. Indeed, Ultra Green relies on this
subsection as providing the legal basis for its recovery of the partial payments it
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made to Hepp pursuant to the alleged illegal wager. Ultra Green also does not
contest that subsection 28-8(b) imposes a 6-month statute of limitations on the
“loser’s” right to recover payments made under 28-8(a). Ultra Green asks this Court
to find, however, that the statute of limitations in subsection 28-8(b) does not begin
to run until the loser of the wager pays the full value of the lost wager. In other
words, Ultra Green asks this Court to limit the applicability of the statute of
limitations espoused in subsection 28-8(b) to those who have paid the full value of
their lost wager. Ultra Green does not provide any statutory authority supporting
this argument. Absent a basis in the statute supporting Ultra Green’s
interpretation, the Court must apply the statute according to its plain language.
The 6-month statute of limitations found in subsection 28-8(b) explicitly
applies to a “person who under the terms of Subsection 28-8(a) is entitled to initiate
an action to recover his losses.” 5/28-8(b) (emphasis added). The plain language of
subsection 28-8(a) clearly covers “any person who by gambling shall lose…any sum
of money…and shall pay…the same or any part thereof.” 5/28-8(a) (emphasis
added). As such, the statute of limitation clearly applies to “person[s] who under the
terms of Subsection 28-8(a) [are] entitled to initiate an action to recover [their]
losses,” including those “who by gambling [lost] to another person, any sum of
money,” and paid the same, “or any part thereof.” 28-8(a). Thus, under the statute’s
plain language, the statute of limitations begins running from the date the payment
is made.
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Ultra Green’s reliance on Holmes v. Brickey, 335 Ill. App. 390 (1948), is
misplaced. The question in Holmes was limited to whether the statute of limitations
began running from the day the plaintiff lost the wager, or from the day the
plaintiff paid the amount owed under the wager. Id. at 393. The court held that the
statute did not create a cause of action for the mere losing of a wager, but rather,
the cause of action, and resulting limitation, did “not commence to run until the
money or thing of value won by the winner ha[d] been paid or delivered by the
loser.” Id. at 395. The court did not consider the question presented in this case –
whether the statute of limitations begins to run upon partial payment of a wager.
However, to the extent Holmes is relevant to this case, its holding supports this
Court’s determination that the statute of limitations began running when Ultra
Green made partial payment to Hepp as the court found that the running of the
statute of limitations was triggered by payment of the wager, not simply the
determination of winner and loser.
Ultimately, Ultra Green alleges that it paid monies to Hepp pursuant to an
illegal wager. It is those sums which Ultra Green seeks to recover under 5/28-8(a).
As such, the Court holds that the statute of limitations began running from the date
each sum was paid: February 22, 2011 for the $250,000 Ultra Green paid to Hepp,
R. 53 ¶ 22; and June 1, 2011 for the $70,398 3 paid to Hepp, R. 53 ¶ 29. Therefore, at
Hepp’s Amended Complaint alleges that this payment was made by M1 Energy,
not Ultra Green. However, for purposes of the motion and determining the latest
possible date which the statute of limitations could have begun running, the Court
will assume that Ultra Green is seeking recovery of this payment as well as the
$250,000 paid on February 22, 2011.
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the very latest, the statute of limitations for Ultra Green to recover the monies paid
to Hepp expired on December 1, 2011. Ultra Green’s counterclaim was not filed
until July 10, 2014. As such, Ultra Green’s claim under subsection 28-8(a) is barred
by subsection 28-8(b).
II.
735 ILCS 5/13-207 Does Not Apply To Ultra Green’s Counterclaim
Ultra Green argues that 735 ILCS 5/13-207 precludes its counterclaim from
being barred by the statute of limitations. Section 5/13-207 states that “[a]
defendant may plead a set-off or counterclaim barred by the statute of limitation
while held by him or her, to any action, the cause of which was owned by the
plaintiff or person under who he or she claims, before such set-off or counterclaim
was so barred, and not otherwise.” In other words, “a defendant in a lawsuit may
bring a counterclaim after the period authorized in the applicable statute of
limitations has elapsed, as long as the Hepp’s claim arose before the cause of action
brought as a counterclaim was barred.” R. 86 at 7.
The Court notes that Ultra Green neglects to provide the relevant dates to
support its argument that section 5/13-207 saves its counterclaim. Regardless, the
Court is able to discern the dates from Hepp’s amended complaint, R. 53, and
Hepp’s memorandum, R. 80. 4 Hepp demanded payment from M1 Energy for the
remaining amount due and owing under the promissory note on March 22, 2012. R.
53 ¶ 31. M1 refused to make payment. Id. Sometime thereafter, Ultra Green
Ultra Green’s response to Hepp’s motion to dismiss does not dispute the dates
Hepp relied on in arguing that the statute of limitations barred Ultra Green’s
counterclaim. R. 86.
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refused to honor its guarantee of the promissory note. R. 53 ¶ 32. As such, Hepp’s
claim against Ultra Green arose sometime after March 22, 2012. However, even if
the Court were to assume that Hepp’s claim arose as early as March 22, 2012,
section 5/13-207 would not save Ultra Green’s counterclaim. The statute of
limitations on the counterclaim expired on December 1, 2011, which was over 3
months prior to Hepp’s cause of action against Ultra Green arising. Accordingly,
section 5/13-207 does not apply to Ultra Green’s counterclaim, and Ultra Green’s
counterclaim is time-barred pursuant to 5/28-8(b).
CONCLUSION
The Court concludes that Ultra Green’s counterclaim is barred by the statute
of limitations provided in 5/28-8(b), and is not entitled to the benefit of 5/13-207. As
such, Hepp’s motion to dismiss Ultra Green’s counterclaim, R. 79, is granted, and
Ultra Green’s counterclaim is dismissed with prejudice. Ultra Green requests that if
the Court finds that its counterclaim is barred by the statute of limitations, it be
granted leave to substitute the named plaintiff in the Counterclaim to a comanaging member of Ultra Green, as provided in 5/28-8(b). R. 86 at 8. A
counterclaim, by definition, is a claim brought by a pleader against an opposing
party, both of whom are already in suit. See Fed.R.Civ.Proc. 13. The managing
members of Ultra Green, in their individual capacity, are not presently parties in
this suit. As such, the Court cannot grant Ultra Green leave to substitute a
managing member of Ultra Green for Ultra Green as the named Plaintiff in the
counterclaim.
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ENTERED:
_______________________________
Honorable Thomas M. Durkin
United States District Judge
Dated: December 12, 2014
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