TCF National Bank v. SIS Global (USA) Inc. et al
Filing
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MEMORANDUM Opinion and Order. The Court denies SIS Global's motion to dismiss 41 . Status hearing remains set for 11/18/15 at 9:30 a.m. Plaintiff's motion to deposit funds 62 is granted. Defendants JK Group Holdings, LLC, Jayshreeben S. Kakkad, Sunil Kakkad, SAI Infosystems (India) Ltd.'s motion for extension of time to answer or otherwise plead to 11/12/15 and for Michael Tootooian to file Additional Appearance on behalf of these Defendants 65 is granted. Motion hearing dates of 11/3/15 and 11/5/15 are stricken. Signed by the Honorable Jorge L. Alonso on 10/30/2015. Notice mailed by judge's staff notice(ntf, )
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
TCF NATIONAL BANK,
Plaintiff,
v.
SIS GLOBAL (USA), INC., SUNIL
KAKKAD, JAYSHREEBEN S. KAKKAD,
JK GROUP HOLDINGS, LLC, SAI
INFOSYSTEMS (INDIA), LTD., and
STATE BANK OF INDIA,
Defendants.
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No. 14 C 9429
Judge Jorge L. Alonso
MEMORANDUM OPINION AND ORDER
TCF National Bank (“TCF”) brought this interpleader action and has deposited with the
court $713,110.21 from an account opened in the name of defendant SIS Global (USA), Inc.
(“SIS Global”), after receiving competing claims to the funds amid reports that they may have
been obtained through wrongdoing. One of the claimants, the State Bank of India, has filed a
cross-claim against the other interpleader defendants. SIS Global now moves to dismiss Counts
I and IV of the cross-claim. For the following reasons, the motion is denied.
BACKGROUND
According to the allegations of the interpleader complaint, SIS Global, an Illinois
corporation, opened a corporate checking account with TCF in August 2013. (Compl. ¶ 12.) On
September 26, 2013, First American Title Company deposited $717,143.16 into the SIS Global
account. (Id. ¶¶ 13, 23.) On September 30, 2013, $4,000 was withdrawn from the account and
deposited into an account in the name of defendant JK Group Holdings, LLC. (Id. ¶ 15.) On
October 1, 2013, defendant Jayshreeben Kakkad attempted to transfer $500,000 from the SIS
Global Account to the JK Group Holdings, LLC account. (Id. ¶ 16.)
However, TCF declined the transfer and placed a hold on the funds. (Id.) Corporate
documents filed with the Illinois Secretary of State listed Sunil Kakkad, Jayshreeben’s husband,
as the president of SIS Global, and TCF could not verify Jayshreeben’s authority to act on behalf
of SIS Global. (Id. ¶¶ 20-22.) Further, TCF noticed that First American Title Company had
made its check payable to “SIS Global, Inc.,” not “SIS Global (USA) Inc,” and TCF was
uncertain which party was the proper payee. (Id. ¶ 23.)
Jayshreeben Kakkad, when told that she would be unable to make the $500,000
withdrawal, requested TCF to place a note on the account that no one should be allowed to make
any withdrawals unless she was present. (Id. ¶ 17.) On October 3, 2013, another individual,
Rakeshbhai Patel, inquired about the availability of the funds. (Id. ¶ 18.) Later that day,
Jayshreeben inquired about the funds again and explained that she urgently needed to gain access
to the funds because her husband Sunil was missing. (Id. ¶ 19.)
TCF became aware of multiple news reports that Sunil Kakkad was indeed missing,
having allegedly absconded with millions of dollars taken from SAI Infosystems (India), Ltd.,
(“SIS”), an Indian telecommunications company of which he was Chairman and Managing
Director, and deposited the stolen monies in other business entities he controlled. (Id. ¶¶ 25-26.)
SIS had filed a complaint with authorities in India to freeze the assets of all of Sunil Kakkad’s
companies, including SIS Global. (Id. ¶¶ 7, 27.) The State Bank of India, which headed a
consortium of lenders that lent money to SIS and may have an interest in the disputed funds in
this case, publicly warned against dealing with SIS or any associated entities. (Id. ¶¶ 8, 28.)
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TCF reported its concerns to the Secret Service, which requested TCF to place a hold on the
funds voluntarily, pending further inquiry. (Id. ¶ 24.)
On June 28, 2014, according to news reports, Sunil was arrested by Interpol in Liberia.
(Id. ¶ 29.) TCF filed this interpleader action on November 25, 2014.
The State Bank of India has filed a cross-claim against the other interpleader defendants,
in which it alleges that, as part of a consortium of lenders, it lent approximately $96,930,000 to
SIS; SIS defaulted on the loan; State Bank of India has demanded that SIS repay the loan; Sunil
and Jayshreeben Kakkad personally guaranteed repayment of the loan; and the Kakkads have
commingled the proceeds of the loan among various business entities, including the entity
defendants in this case, which are no more than the Kakkads’ alter egos. (Answer and CrossClaim ¶¶ 46-54.) State Bank of India makes claims against SIS Global in Count I, for breach of
contract, and in Count IV, for declaratory judgment. In Count I, State Bank of India claims that
SIS breached its loan repayment obligations, and SIS, along with any of the other defendants
who may have received the proceeds of the loan “without appropriate consideration and not as
part of arms-length transactions” (id. ¶ 63), including SIS Global, must repay the loan. In Count
IV, State Bank of India seeks a declaration that it should be paid the disputed funds because the
funds were obtained “through misappropriation of the proceeds of the Loan and/or improper and
fraudulent transfers between SIS, SIS Global, Sunil Kakkad, Jayshreeben Kakkad and/or JK
Group” in an effort to “avoid payment obligations under the [State Bank of India’s loan to SIS]
and/or the Sunil and Jayshreeben Guarantees” (id. ¶ 78).
DISCUSSION
“A motion under Rule 12(b)(6) tests whether [a pleading] states a claim on which relief
may be granted.” Richards v. Mitcheff, 696 F.3d 635, 637 (7th Cir. 2012). Under Rule 8(a)(2), a
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pleading that states a claim for relief—in this case, a cross-claim—must include “a short and
plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P.
8(a)(2). The short and plain statement under Rule 8(a)(2) must “give the defendant fair notice of
what the claim is and the grounds upon which it rests,” and the “[f]actual allegations must be
enough to raise a right to relief above the speculative level.” Bell Atl. Corp. v. Twombly, 550
U.S. 544, 555 (2007) (ellipsis omitted). Stated differently, a pleading that purports to state a
claim for relief “must contain sufficient factual matter, accepted as true, to ‘state a claim to relief
that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly,
550 U.S. at 570).
SIS Global moves to dismiss State Bank of India’s cross-claim, contending that State
Bank of India has not made any sufficiently specific allegations of a breach of contract or
fraudulent transfer to state a plausible claim for relief, State Bank of India seeks an improper
prejudgment attachment, and State Bank of India has not demonstrated that this is an appropriate
case in which to pierce the corporate veil of SIS Global.
The prejudgment attachment issue is easily dealt with. State Bank of India explains in its
response brief that its cross-claim does not seek a prejudgment attachment at all. Based on the
language of the cross-claim, the Bank is correct; the term “prejudgment attachment” does not
even appear in the cross-claim. It appears from the reply brief that SIS Global’s concern actually
has little to do with State Bank of India’s cross-claim; SIS Global apparently believes that this
entire interpleader action is akin to a prejudgment attachment because SIS Global has been
denied access to the funds deposited into its bank account before any judgment has been entered
against it. Other than in some blustery statements in its answer (SIS Global Answer ¶ 26), SIS
Global never raised this issue until after TCF already deposited the funds with the Court (indeed,
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it expressly declined to object to TCF’s depositing the disputed funds with the Court (ECF No.
33)), and in any case, SIS Global has cited no authority suggesting that it has any valid basis for
contending that this interpleader action is improper.
According to the allegations of the
complaint, TCF had doubts about the rightful ownership of the funds it was holding in the SIS
Global account, it feared double or multiple liability, and it wished to ensure that the funds are
paid to the proper party, so it filed an interpleader action. (Compl. ¶¶ 32-35.) The Federal Rules
of Civil Procedure and the laws of the United States specifically contemplate just this sort of
action. See Fed. R. Civ. P. 22; 28 U.S.C. §§ 1335, 1397, 2361. If SIS Global takes issue with
interpleader actions categorically because it believes they are de facto prejudgment attachments,
it must take its concern to a higher authority than this Court.
As for whether State Bank of India states a valid claim for breach of contract against SIS
Global on a theory of piercing or reverse-piercing the corporate veil, the Court concludes that it
does. First, State Bank of India alleges that SIS breached an agreement to repay a loan and the
Kakkads breached agreements to guarantee the loan. It is axiomatic that a failure to repay a loan
is a breach of contract. See, e.g., 1515 N. Wells, L.P. v. 1513 N. Wells, L.L.C., 913 N.E.2d 1, 7
(Ill. App. Ct. 2009).
As for whether SIS Global can be liable for the breach on a theory of piercing or reversepiercing the corporate veil, State Bank of India alleges that the funds of SIS, SIS Global, the
Kakkads and JK Group Holdings, LLC were commingled; SIS, SIS Global and JK Group
Holdings failed to follow corporate formalities; and the Kakkads are the alter ego of SIS Global. 1
(Answer & Cross-Cl. ¶¶ 54, 60, 63.) In Illinois, a corporation’s veil of limited liability may be
pierced if “there is such unity of interest and ownership that the separate personalities of the
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These allegations are consistent with the allegations of TCF’s interpleader complaint, to the extent that TCF was
uncertain which of the Kakkads was authorized to act on behalf of which business entity and whether the business
entities were distinct, with legitimate, arms-length relationships. (Compl. ¶¶ 17-21, 25-28.)
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corporation and the individual no longer exist and when adherence to the fiction of separate
corporate existence would sanction a fraud or promote injustice.” Judson Atkinson Candies, Inc.
v. Latini-Hohberger Dhimantec, 529 F.3d 371, 379 (7th Cir. 2008) (alterations and internal
quotation marks omitted). To determine whether there is a unity of interest, courts consider
numerous factors, none of which is required or dispositive by itself, including failure to observe
corporate formalities, commingling of funds, and failure to maintain arms-length relationships
between related entities. Auto. Fin. Corp. v. Joliet Motors, Inc., 761 F. Supp. 2d 789, 792-93
(N.D. Ill. 2011). Illinois also permits reverse-piercing the corporate veil, or “reaching through”
an individual to the corporation he controls, and subjects reverse-piercing theories to the same
analysis as standard piercing. See In re Canopy Fin., Inc., 477 B.R. 696, 703 (N.D. Ill. 2012)
(citing Sea–Land Servs., Inc. v. Pepper Source, 941 F.2d 519, 521–22 (7th Cir.1991)). Thus, if
the test for veil-piercing is met, a plaintiff may reach through either a business entity or person to
hold a controlling entity or person liable.
State Bank of India cites several cases in support of its position that, assuming the truth
of its allegations, and in accordance with the above principles, it has sufficiently pleaded its veilpiercing theory to survive a motion to dismiss. See Trs. of the Auto. Mechs.’ Indus. Welfare &
Pension Funds Local 701 v. Elmhurst Lincoln Mercury, 677 F. Supp. 2d 1053, 1055-56 (N.D. Ill.
2010); Wachovia Sec., LLC v. Neuhauser, No. 04 C 3082, 2004 WL 2526390, at *10-11 (N.D.
Ill. Nov. 5, 2004); see also Deschepper v. Midwest Wine & Spirits, Inc., 84 F. Supp. 3d 767, 781
(N.D. Ill. 2015) (allegations that “satisfactorily track the elements necessary to pierce the
corporate veil, and adequately place the defendants on notice of the plaintiffs’ intent to rely on a
piercing the corporate veil theory” are sufficient to survive a motion to dismiss) (internal
quotation omitted). In reply, SIS Global fails to cite any contrary authority (indeed, it cites no
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authority at all) or to address the substance of State Bank of India’s argument. Under such
circumstances, SIS Global waives any argument. See United States v. Giovannetti, 919 F.2d
1223, 1230 (7th Cir. 1990) (“A litigant who fails to press a point by supporting it with pertinent
authority, or by showing why it is a good point . . . in the face of contrary authority, forfeits the
point.” (second emphasis added)). State Bank of India’s allegations of breach of contract on a
veil-piercing theory are sufficient to survive a motion to dismiss, and SIS Global’s motion to
dismiss must be denied.
CONCLUSION
For the reasons set forth above, the Court denies SIS Global’s motion to dismiss [41].
Status hearing remains set for 11/18/15 at 9:30 a.m.
SO ORDERED.
ENTERED: October 30, 2015
______________________
HON. JORGE L. ALONSO
United States District Judge
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