Firestone Financial Corp. v. JHM Equipment Leasing Company et al
Filing
187
MEMORANDUM Opinion and Order Signed by the Honorable Amy J. St. Eve on 7/29/2016:Mailed notice(kef, )
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
FIRESTONE FINANCIAL, LLC,
successor by merger to FIRESTONE
FINANCIAL CORP.,
Plaintiff,
v.
JOHN MEYER, et al.,
Defendants.
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Case No. 13 C 7241
Hon. Amy J. St. Eve
MEMORANDUM OPINION AND ORDER
AMY J. ST. EVE, District Court Judge:
Defendant JHM Equipment Leasing Company, Defendant J. H. Meyer Enterprises, Inc.,
and Defendant Dolphin Laundry Services, Inc. seek relief under Rule 60(b)(4) and Rule 60(b)(6)
from the former district court’s order dismissing the three corporations’ counterclaim. For the
following reasons, the Court denies the companies’ motion.
FACTUAL BACKGROUND
On December 18, 2013, corporate defendants JHM Equipment Leasing Company
(“JHM”), J. H. Meyer Enterprises, Inc. (“Meyer Enterprises”), and Dolphin Laundry Services,
Inc. (“Dolphin”), along with Defendant John Meyer (“Meyer”), filed a Counterclaim (the
“Counterclaim”) against Firestone Financial, LLC (“Firestone”), alleging a claim of promissory
estoppel. (R. 23 at 26, ¶¶ 20–28.)
The Court takes the following relevant facts from Plaintiff’s Complaint (R. 1) and
Defendants’ Answer, Affirmative Defenses & Counterclaim. (R. 23.)
Firestone is a Massachusetts finance company with its principal place of business in
Massachusetts. (R.1 at 1, ¶ 1.) John Meyer is a citizen of the State of Illinois and resides in
Hinsdale, Illinois. (Id. at 2, ¶ 5.) JHM, Meyer Enterprises, and Dolphin, are all Illinois
corporations with their principal places of business in Illinois. (Id. at 1–2, ¶¶ 2–4.) JHM is an
Illinois corporation in the business of renting commercial laundry machines to building owners
in and around Chicago. (R. 23 at 22, ¶ 1.)
Between June 2012 and June 2013, Firestone made a series of four loans to JHM for the
laundry machine company to finance new equipment. (R. 1 at 2–7.) In total, Firestone loaned
JHM about $254,114.99. (Id.) JHM secured each loan with its laundry equipment. (Id.)
Additionally, Meyer Enterprises, Dolphin, and Meyer guaranteed each loan. (Id.) Eventually,
JHM defaulted on all four loans. (Id. at 7–8.) Afterward, Firestone filed the present diversity
action against Meyer and the three companies alleging claims of breach of contract, breach of
guaranty, replevin, and detinue. (Id.) Meyer and the three corporations filed an answer and the
Counterclaim. (R. 23.)
Meyer alleges that Firestone was aware that the three corporations were connected and
engaged in the commercial laundry business. (Id. at 23, ¶¶ 8–9.) Specifically, JHM places
commercial laundry equipment in apartment buildings and businesses and sells domestic
equipment. (Id.) Dolphin purchases laundry equipment and sells it to JHM and other laundry
businesses. (Id.) Meyer Enterprises leases equipment from JHM for use in its commercial
laundry business. (Id.) Meyer asserts that Firestone, through then Vice President of Business
Development, Dan McAllister (“McAllister”), knew that the three businesses were growing.
(Id.) Indeed, Meyer Enterprises had recently opened a new facility, doubling its capacity, while
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JHM’s primary customer was aggressively buying and renovating buildings for the rental
market. (Id. at 23, ¶ 9.)
According to Meyer, around November 2012, McAllister told Meyer that he wanted to
expand Firestone’s investments in the laundry business. (Id. at 23, ¶ 11.) McAllister, alleges
Meyer, stated that Firestone would fund any equipment through the end of the year and would
create a “$500,000 line of credit for JHM’s use in 2013.” (Id.) Originally, McAllister said the
line of credit would be established in January 2013. (Id. at 24, ¶ 12.) After the process was
delayed, however, McAllister allegedly stated that Firestone would still “fund any equipment
packages submitted by JHM in 2013 until the line of credit was established.” (Id.) The parties
agreed on the terms of the financing which were identical to the terms of the first and second
loans made in 2012. (Id.)
According to Meyer, it was custom for JHM to purchase equipment before it had
financed the equipment. (Id. at 24, ¶ 13.) Further, Meyer alleges that “Firestone knew this and
actually preferred this method of financing because the equipment could be placed in JHM’s
Route Business and begin generating income contemporaneously with the financing.” (Id.)
When McAllister promised to fund any new equipment purchase, Meyer claims, he knew Meyer
and the Corporate Defendants would purchase equipment based on his representation and seek
financing afterward. (Id.) Thus, Meyer concludes, McAllister’s promise to finance the
equipment induced Meyer and the Corporate Defendants to purchase equipment that they would
not have otherwise purchased, as they did not have the money to do so on their own. (Id. at 24, ¶
14.)
At first, Firestone allegedly held up its side of the agreement. (Id. at 24–25, ¶ 16.)
Indeed, Meyer maintains that Firestone provided JHM with the financing it requested in
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February of 2013. (Id.) Between then and June 2013, however, circumstances began to change.
(Id.) McAllister left Firestone’s employment, and David Cohen (“Cohen”) began acting on
behalf of Firestone. (Id.) Importantly, Meyer asserts that Cohen told JHM that he was aware of
Firestone’s agreement to finance any equipment packages in 2013. Despite Cohen’s
acknowledgment, however, Firestone only financed one more equipment package. (Id. at 25, ¶
17.) After June 2013, Firestone refused to finance JHM’s additional financing requests. (Id.) At
that point, Meyer alleges that JHM had already purchased laundry equipment from Maytag. (Id.)
Consequently, without Firestone’s financing, JHM could not discharge its Maytag debt. (Id.) As
a result, Maytag refused to sell equipment to the three corporations and placed the companies on
a credit hold. (Id.) Ultimately, Meyer concludes, “[b]ecause of Firestone’s actions, JHM,
Dolphin and Meyer Enterprises could no longer acquire equipment and could not sell
equipment.” (Id. at 25, ¶ 18.) Meyer claims that, without Firestone’s inducement, they would not
have purchased the equipment, and that Firestone is liable on the basis of promissory estoppel.
(Id. at 25–26, ¶ 19.)
PROCEDURAL BACKGROUND
In February 2014, Firestone filed a motion to dismiss the Counterclaim, pursuant to
Federal Rule of Civil Procedure 12(b)(6), arguing that the Counterclaim was implausible. (R. 42
at 5.) Afterward, the three corporations’ legal counsel withdrew from the case, and the
companies did not obtain substitute counsel. (R. 113 at 4.) Consequently, on April 7, 2014,
Judge Shadur, who presided over the case at the time, entered a default judgment against the
three corporations, as they failed to properly appear through counsel. (R. 55, 56.) As such,
Judge Shadur dismissed the companies from the case. (Id.) In addition, Judge Shadur addressed
the Counterclaim as to the three corporations on April 7, 2016. Indeed, not only did he dismiss
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the companies, but he also stated, “I am granting . . . Firestone’s motion to strike the existing
pleadings basically.” (R. 167, Transcript of proceedings held on April 7, 2014, at 7.)
On April 24, 2014, the court granted Firestone’s motion to dismiss the Counterclaim,
finding that it was facially implausible. (Id. at 5.) Firestone then moved for summary judgment
on its remaining claims against Meyer, arguing that he based his defenses on the same factual
allegations asserted in the Counterclaim that the court previously had dismissed. (Id.) The court
agreed and granted Firestone’s motion. (Id.)
Subsequently, on September 19, 2014, Meyer filed an appeal, challenging the former
district court’s dismissal of the Counterclaim and granting of summary judgment in Firestone’s
favor. (R. 95.) The three corporations did not appeal. On August 10, 2015, the Seventh Circuit
reversed and remanded the former district court’s order. (R. 113 at 2.) Specifically, after
accepting the allegations in the Counterclaim as true, the Seventh Circuit found that Meyer had
stated a plausible claim of promissory estoppel. (Id. at 10–11.)
On November 5, 2015, the Executive Committee reassigned the case to this Court. In its
April 19, 2016 Memorandum Opinion and Order, the Court clarified that the former district
court’s order dismissed the three corporations from the case. (R. 145.) The companies now
request relief under Rule 60(b)(4) and Rule 60(b)(6) from the former district court’s order
dismissing their Counterclaim. (R. 159.)
ANALYSIS
I.
Rule 60(b)(4)
Federal Rule of 60(b)(4) provides that, “[o]n motion and just terms, the court may relieve
a party or its legal representative from a final judgment, order or proceeding . . . [if] the judgment
is void[.]” Fed. R. Civ. P. 60(b)(4). “Rule 60(b)(4) is intended for cases where the district court
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issuing the underlying judgment lacked jurisdiction or acted in a manner inconsistent with due
process.” Richards v. Stevens, 327 Fed. App’x 659, 660 (7th Cir. 2009) (citing Marques v. Fed.
Reserve Bank of Chicago, 286 F.3d 1014, 1018 (7th Cir. 2002); Robinson Eng’g Co. Pension
Plan & Trust v. George, 223 F.3d 445, 448 (7th Cir. 2000)); see also Burris v. Shaw, 124 Fed.
App’x 431, at *1 (7th Cir. 2004) (“A void judgment has been narrowly defined, therefore, to
exist only where a court usurps power by rendering a judgment over matters beyond the scope of
authority granted to it by its creators.”) (quoting Ben Sager Chemicals Int’l., Inc. v. E. Targosz &
Co., 560 F.2d 805, 812 (7th Cir. 1977)).
The three corporations do not allege that the district court lacked jurisdiction to issue the
April 7, 2014 default judgment dismissing them from the case. Instead, they cursorily assert that
“the District Court’s entry of the April 24, 2014 Order dismissing the Defendants’ Counterclaim,
in their absence after having entered a default judgment in Plaintiff’s favor on April 7, 2014,
raises due process concerns sufficient to justify the relief under Rule 60(b)(4).” (R. 172 at 5–6.)
The companies, however, fail to support their argument with any legal authority or analysis. The
Seventh Circuit has made clear that undeveloped and merely perfunctory arguments like this are
waived. See United States v. Beavers, 756 F.3d 1044, 1059 (7th Cir. 2014) (finding that
arguments “without discussion or citation to pertinent legal authority” in opening brief were
waived); see also Willis v. Lepine, 687 F.3d 826, 836 (7th Cir. 2012) (“Merely reciting the Rule
59(a) standard and then tossing the motion into the court’s lap is not enough. Failure to
adequately present an issue to the district court waives the issue on appeal.”); United States v.
Hassebrock, 663 F.3d 906, 914 (7th Cir. 2011) (finding the argument was “decidedly
underdeveloped and therefore waived”); United States v. Foster, 652 F.3d 776, 792 (7th Cir.
2011) (“As we have said numerous times, undeveloped arguments are deemed waived[.]”)
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(internal quotation marks and citation omitted). Thus, the Corporate Defendants have waived
this argument. Regardless, there is no basis to support their assertion that the district court’s
2014 orders violated their due process.
The three corporations also claim that they “are entitled to [r]elief [u]nder Rule 60(b)(4)
based upon the [Seventh] Circuit Court of Appeal’s Reversal of the District Court’s April 24,
2014 Order.” (R. 172 at 3.) The Seventh Circuit’s ruling had no such effect.
On April 7, 2014, the district court properly granted Plaintiff’s motion for default
judgment against the Corporate Defendants for lacking corporate counsel. (R. 55, 56.); see also
Fox Valley Const. v. G. M. Randa, Inc., No. 09 C 3038, 2010 WL 3746852, at *1 (N.D. Ill. Sept.
15, 2010) (cautioning a corporate defendant that “failure to obtain substitute counsel may lead to
the entry of an order of default and ultimately to entry of a default judgment against [it]”) (citing
Fidelity Nat’l, Title Ins. Co. v. Intercounty Nat’l. Title Ins. Co., 310 F.3d 537, 541 (7th Cir. 2002)
(noting that withdrawal of corporate counsel most likely “would leave [corporate entities]
unrepresented, leading to default judgments against the three corporations (which can appear
only by counsel)”) (emphasis in original)). Indeed, “[a] corporation must be represented by
counsel in legal proceedings.” Downtown Disposal Services, Inc. v. City of Chicago, 2012 IL
112040, 979 N.E.2d 50l, 365 Ill. Dec. 684, 688 at ¶ 17 (2012). As noted earlier, the district court
also struck the corporations’ pleadings. Accordingly, John Meyer was the sole defendant
remaining in the case.
On April 24, 2014, the district court dismissed the Counterclaim as to Meyer, and, later,
granted Firestone’s motion for summary judgment based on the same facts. John Meyer
appealed, and the three corporations, as they concede in their motion, did not appeal and were
not parties to Meyer’s appeal. See Firestone Fin. Corp. v. John R. Meyer, 796 F.3d 822 (7th Cir.
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2015); see also (R. 159 at 3 (“Defendant Meyer appealed the Summary Judgment Order which
terminated the case[.]”).)
On August 10, 2015, the Seventh Circuit found that the district court had dismissed the
Counterclaim and granted Firestone’s summary judgment, in error. Specifically, the Seventh
Circuit held that the Counterclaim was adequately pled. Id. This decision did not render the
district court’s April 7, 2014 default judgment “void” under Rule 60(b)(4). Instead, it simply
allowed John Meyer, the sole remaining defendant in the case, to pursue the Counterclaim.
Significantly, the three corporations never appealed the district court’s April 7, 2014 order
dismissing them from the case and striking their pleadings. Instead, over two years later, they
now seek Rule 60(b) relief to reenter the case. See United States v. Indoor Cultivation Equip.
from High Tech Indoor Garden Supply, 55 F.3d 1311, 1313 (7th Cir. 1995) (“[t]o prevail on a
motion to vacate a default judgment under Rule 60(b), a party must show[, in part,] . . . quick
action to correct the default[.]”) (citing Jones v. Phipps, 39 F.3d 158, 162 (7th Cir. 1994); United
States v. DiMucci, 879 F.2d 1488, 1495 (7th Cir. 1989)). “A Rule 60(b) motion,” however, “is
not a substitute for appeal[.]” Stoller v. Pure Fishing, Inc., 528 F.3d 478, 480 (7th Cir. 2008)
(citing Bell v. Eastman Kodak Co., 214 F.3d 798, 801 (7th Cir. 2000)). Thus, having shown
neither jurisdictional nor due process maladies, the Court denies the Corporate Defendant’s
motion for Rule 60(b)(4) relief.
The three corporations’ counterargument is unavailing. Specifically, they argue that “the
district Court’s prior April 7, 2014 Order granting Plaintiff’s Motion for Default judgment did
not address Defendant’s Counterclaim, and the Corporate Defendants’ failure to seek relief as to
that Order is not fatal to the instant Motion.” (R. 172 at 8.) Put differently, the Corporate
Defendants assert that, although the Court dismissed them from the case, they nonetheless can
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still participate by asserting their Counterclaim. This is nonsensical. After the Court dismissed
the Corporate Defendants from the case, they failed to properly appeal and seek reentry. They
may not now slip through the proverbial backdoor to continue pursuing their claims. This would
render the default judgment meaningless. Indeed, doing so would equate to using a Rule 60(b)
motion as a substitute for a timely appeal from their default judgment dismissing them from the
case. As noted earlier, such a procedural action is improper. See Stoller, 528 F.3d at 480 (citing
Bell, 214 F.3d at 801). Moreover, Judge Shadur did address the Counterclaim as to the three
corporations on April 7, 2016. Indeed, not only did he dismiss the companies, but he also stated,
“I am granting . . . Firestone’s motion to strike the existing pleadings basically.” (R. 167,
Transcript of proceedings held on April 7, 2014, at 7.) Judge Shadur then granted Firestone’s
motion to dismiss the Counterclaim as to Meyer on April 24, 2014.
Regardless, the three corporations motion is untimely. Although there is no precise
deadline to file a Rule 60(b)(4) or Rule 60(b)(6) motion, a party must make such a motion
“within a reasonable time.” Fed. R. Civ. P. 60(c)(1). What constitutes a reasonable time
depends on the circumstances of the case. Lac Courte Oreilles Band of Lake Superior Chippewa
Indians of Wisconsin v. Wisconsin, 769 F.3d 543, 548 (7th Cir. 2014). As noted earlier, parties
seeking relief from default judgments must show, in part, “quick action to correct the default[.]”
Indoor Cultivation Equip., 55 F.3d at 1313. The district court dismissed the companies from the
case on April 7, 2014. (R. 55, 56.) They retained counsel and filed their motion seeking relief
from said default judgment on May 10, 2016—over two years later. This lengthy delay does not
constitute “quick action.” Indoor Cultivation Equip., 55 F.3d at 1313. The three corporations
counter that they had to wait for the Seventh Circuit’s decision to bring the instant Rule 60(b)
motion. See (R. 172 at 3.) The companies misunderstand the law. They must show “quick
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action” to correct the default, which, in this case, means retaining counsel and seeking relief
from the judgment, not filing a Rule 60(b) motion. Regardless, following the companies’ logic,
their motion was still untimely. John Meyer did not file his appeal until September 19, 2014—
about five months after Judge Shadur dismissed the companies from the case. (R. 95.) The
Seventh Circuit entered its decision on August 10, 2015, and its mandate issued on September 1,
2015. The three corporations then waited over eight months to file this motion in May 2016. In
sum, discounting the appellate process still reveals that the companies waited over thirteen
months to move for Rule 60(b) relief.1 Thus, the Court denies the corporations’ Rule 60(b)
motion.
II.
Rule 60(b)(6)
Finally, the three corporations seek relief under Rule 60(b)(6). Under Federal Rule of
Civil Procedure 60(b)(6), “the court may relieve a party or its legal representative from a final
judgment, order, or proceeding for . . . any other reason that justifies relief.” Fed. R. Civ. P.
60(b)(6). “Relief under Rule 60(b)(6) ‘is limited to extraordinary circumstances.’” Huerth v.
Pressman, No. 10 C 5049, 2014 WL 688074, at *5 (N.D. Ill. Feb. 21, 2014) (quoting Mendez v.
Republic Bank, 725 F.3d 651, 657 (7th Cir. 2013)); see also Gonzalez v. Crosby, 545 U.S. 524,
534, 125 S. Ct. 2641, 162 L. Ed. 2d 480 (2005). Indeed, Rule 60(b)(6) “requires the Court to
examine all the circumstances, bearing in mind the need for the party invoking the rule to
demonstrate why extraordinary circumstances justify relief.” Ramirez v. U.S., 799 F.3d 845, 851
(7th Cir. 2015).
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If the Court interprets the Corporate Defendants’ argument under Rule 60(b)(1), their motion meets the same fate.
Under Rule 60(b)(1), the Court may “relieve a party or its legal representative from a final judgment, order, or
proceeding for . . . mistake, inadvertence, surprise, or excusable neglect.” Fed. R. Civ. P. 60(b)(1). Rule 60(c)(1),
however, mandates that a “motion under Rule 60(b) . . . (1), (2), or (3) [be filed] no more than a year after the entry
of the judgment or order or the date of the proceeding.” Fed. R. Civ. P. 60(c)(1). Here, the Corporate Defendants
moved for Rule 60(b) relief over thirteen months after the April 7, 2014 judgment, discounting the appellate process.
As such, they are precluded from Rule 60(b)(1) relief.
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The companies have not demonstrated extraordinary circumstances. Specifically, they
conclusively state that “the [Seventh] Circuit Court of Appeal’s decision, reversing the District
Court’s dismissal of Defendants’ Counterclaim, clearly justifies this Court granting the
Corporate Defendants relief from the dismissal order.” (R. 172 at 8.) The companies fail to
explain why this is so, let alone make it “clear.” The Seventh Circuit’s August 10, 2015 reversal
enabled John Meyer to continue pursuing the case, including the Counterclaim. This holding
does not amount to an automatic “green light” for the three corporations to reenter the case and
join him in that pursuit. Instead, they remain dismissed from the case until they properly seek to
reenter. To date, they have failed in that endeavor. As such, their motion for Rule 60(b) relief is
denied.
CONCLUSION
For the foregoing reasons, the Court denies the corporations’ motion under Rule 60(b)(4)
and Rule 60(b)(6) for relief from the default judgment dismissing them from the case.
DATED: July 29, 2016
ENTERED
______________________________
AMY J. ST. EVE
United States District Court Judge
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