RNS Servicing, LLC v. Spirit Construction Services, Inc. et al
Filing
92
MEMORANDUM Opinion and Order signed by the Honorable Edmond E. Chang. For the reasons stated in the Opinion, Defendant's motion 64 for summary judgment is granted and Plaintiff's cross-motion is denied. The case is dismissed with prejudice on statute of limitations grounds. The status hearing of 04/29/2020 is vacated. A separate AO-450 judgment shall be entered. Civil case terminated. Mailed notice (mw, )
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
RNS SERVICING, LLC,
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Plaintiff,
v.
SPIRIT CONSTRUCTION SERVICES,
INC., et al.
Defendants.
No. 17-cv-00108
Judge Edmond E. Chang
MEMORANDUM OPINION AND ORDER
More than a decade ago, RNS Servicing’s predecessor-in-interest (IFC Credit
Corporation) entered into a settlement agreement that was supposed to be worth $3.9
million but later turned out to be worth nothing. RNS now alleges that Defendants
Spirit Construction, Steve Van Den Heuvel, and Sharad Tak fraudulently induced
IFC to enter into the agreement. R. 31, Am. Compl.1 As Defendants point out,
however, the alleged fraud occurred back in 2007, which they argue is way beyond
the scope of any relevant statute of limitations that might govern this case. Naturally,
the parties now dispute when exactly the claims against Defendants accrued and
started the ticking of the limitations clock. Defendants argue that IFC should have
known about the alleged fraud back in 2007 or 2008 at the latest, while RNS
maintains that the limitations period did not start running until 2016.
1Citation
to the docket is “R.” followed by the entry number and, when necessary, the
relevant page or paragraph number.
1
The statute of limitations issue was first raised at the pleading stage, but the
Court held off on ruling until the parties were given an opportunity to engage in
limited discovery on the issue. R. 51. Now that discovery on this issue is complete,
the parties have filed cross-motions for summary judgment on the limitations
question only. R. 64; R. 76. For the reasons discussed below, RNS’s motion is denied,
and the Defendants’ motion is granted: the case was untimely filed and is dismissed.
I. Background
The facts narrated below are undisputed unless otherwise noted.2 In 2005, IFC
Credit Corporation, an equipment-lease finance company, entered into a series of
lease agreements with a group of tissue-paper manufacturing companies. R. 65,
DSOF ¶¶ 10, 12. These tissue-paper manufacturing companies were all operated by
an individual named Ron Van Den Heuvel. Id. ¶ 14. For the sake of convenience, the
companies will collectively be referred to as the “Ron Companies.”
Unfortunately, the Ron Companies soon defaulted on the leasing agreements;
IFC sued the Ron Companies for breach of contract; and then IFC and Ron tried to
work out various settlement agreements. DSOF ¶¶ 14-18. This initial settlement
process proved largely unsuccessful until Ron enlisted the help of his brother, Steve
Van Den Heuvel. Long story short, IFC eventually agreed to settle its claims against
the Ron Companies for a total of $23.9 million. Id. ¶¶ 23, 29-30. The bulk of the
2Citations
to the parties’ Local Rule 56.1 Statements of Fact are identified as follows:
“DSOF” for the Defendants’ Statement of Facts [R. 65]; “Pl.’s Resp. DSOF” for RNS’s response
to the Defendants’ Statement of Facts [R. 75]; “PSOF” for RNS’s Statement of Additional
Facts [R. 75]; and “Defs.’ Resp. PSOF” for the Defendants’ response to RNS’s Statement of
Additional Facts [R. 85].
2
settlement would be paid upfront,3 while the remaining $3.9 million would be paid to
IFC in monthly installments. Id. ¶¶ 23, 28.
Here is where Steve comes in. Steve owned a construction company called
Spirit Construction. DSOF ¶ 2. And while all of this was going on, Spirit had entered
into a construction deal with another company called ST Paper I, which was owned
by an individual named Sharad Tak. Id. ¶¶ 3, 19. Pursuant to this deal, Steve and
Tak had apparently executed four contracts for Spirit to perform engineering
procurement and construction work for ST Paper I. Id. ¶ 19. These will be referred to
as the EPC Contracts. The EPC Contracts were supposed to be lucrative; RNS alleges
that each contract was represented to be worth at least $200 to $400 million. R. 75,
PSOF ¶ 6. The plan was for Spirit to hire the Ron Companies as subcontractors on
the four EPC projects. DSOF ¶ 26. That meant the Ron Companies would work on
the EPC projects in exchange for subcontractor payments, which could then be used
by the Ron Companies to pay back IFC. Indeed, the Ron Companies explicitly
assigned to IFC their right to receive the first $3.9 million in subcontractor payments
under the EPC Contracts. Id. ¶ 28. According to Ron, the EPC Contracts would be
funded within a few weeks. R. 75, Pl.’s Resp. DSOF ¶ 37.
What really cinched the deal was that Spirit and Steve also signed a separate
agreement to make the EPC subcontractor payments directly to IFC until Ron’s $3.9
This upfront portion of the settlement payment was technically split between two
other lenders (Fortress and George Washington State Bank); it did not go to IFC. Pl.’s Resp.
DSOF ¶ 33. IFC had previously transferred to Fortress and GWS Bank certain rights to lease
payments from the Ron Companies, which is why Fortress and GWS Bank were part of the
ultimate settlement agreement with Ron. DSOF ¶¶ 11, 14.
3
3
million debt had been paid off. DSOF ¶ 30. So instead of Spirit paying Ron and then
Ron paying IFC, Spirit would just directly pay IFC. Also, Spirit and Steve
acknowledged in writing that the Ron Companies were indeed subcontractors in
connection with the EPC Contracts; they would receive more than $3.9 million in
subcontractor payments; and the EPC Contracts were in full force and effect. Id. ¶¶
26-30. Around this same time, IFC also received in-person assurances about the EPC
Contracts from Tak. Specifically, Tak met with IFC’s CEO (Rudy Trebels) and CFO
(Marc Langs) and confirmed that he and Steve had in fact executed the EPC
Contracts; he fully intended to build the four projects contemplated by the four EPC
Contracts; the EPC Contracts would be sufficiently financed; and finally, the Ron
Companies would be hired as subcontractors under the EPC Contracts. Id. ¶¶ 31-32.
The parties dispute whether IFC ever reviewed the four EPC Contracts
themselves before entering the settlement agreement. According to RNS, Defendants
refused to allow IFC to access the EPC Contracts because of “regulatory and
confidentiality concerns.” PSOF ¶¶ 8, 12. Defendants, on the other hand, maintain
that IFC was given access to the contracts. R. 85, Defs.’ Resp. PSOF ¶ 12. In any
event, IFC apparently believed that the Ron Companies would have access to ample
income via the EPC Contracts, which is why IFC agreed to formally settle its claims
against the Ron Companies in March 2007.
But the money did not start pouring in. By June 2007, Ron had still not yet
made a single payment. DSOF ¶ 33; Pl.’s Resp. DSOF ¶ 33. So, in September 2007,
IFC initiated its second lawsuit against Ron, this time for breaching the settlement
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agreement and misrepresenting the funding status of the EPC Contracts. Id. ¶ 34. In
the complaint, IFC also named Spirit as a defendant, seeking a preliminary
injunction prohibiting Spirit from making any direct payments to the Ron Companies
until IFC’s $3.9 million debt had first been paid off. Id.
The second case eventually proceeded to discovery and then summary
judgment. In support of summary judgment, Marc Langs (IFC’s CFO) signed an
affidavit in which he stated that “IFC would not have agreed to allow [the Ron
Companies] a ten-month payment schedule if we had known that the EPC Contracts
were not going to be funded for many months (to our knowledge, the EPC Contracts
are still not funded.) Nor would IFC have allowed [the Ron Companies] a ten-month
payment schedule if we knew that those companies were not going to receive
‘substantial payments’ under the EPC Contracts.” DSOF ¶ 37.
In 2009, the judge presiding over the second case ultimately denied IFC’s
motion for summary judgment on its injunctive-relief claim against Spirit and
granted Spirit’s summary judgment motion against that same claim. PSOF ¶ 14. (IFC
did prevail on its claims against the Ron Companies, Pl.’s Resp. DSOF ¶ 40, but as a
practical matter IFC could not collect on the judgment.) In the order denying
summary judgment against Spirit, the court explained that IFC did not have
standing for its claim against Spirit, because Spirit had not yet breached its
obligations under the settlement agreement. DSOF ¶ 40; Pl.’s Resp. DSOF ¶ 40.
Spirit’s contractual obligation was to pay IFC once Ron started working as a
subcontractor on the EPC Contracts, but because the EPC projects had not yet begun,
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it was premature for IFC to claim that Spirit was withholding subcontractor
payments from IFC. Id.
This was the end of the dispute for a while. According to IFC, its lawyers
reviewed the summary judgment order and decided that (1) IFC could not in good
faith appeal the order and (2) IFC did not have “standing” to make any claim against
Spirit, including fraud. PSOF ¶ 15. But there was another reason the dispute ended
in 2009. As Marc Langs later testified, the 2007 lawsuit against Ron and Spirit was
only the “first step” of a longer “process to look at and go back and find out what
happened” with the Ron transaction. Pl.’s Resp. DSOF ¶ 41. Unfortunately for IFC,
though, this investigatory process was “interrupted” in 2009, when IFC was forced to
file for Chapter 7 bankruptcy. Id.; PSOF ¶ 17. During the bankruptcy process, Trebels
and Langs resigned, PSOF ¶ 18, and then the Bankruptcy Trustee hired RNS
Servicing to come in and help with the IFC liquidation, DSOF ¶ 44.
Over the next six or so years, RNS worked on collecting on IFC’s outstanding
equipment-lease accounts. PSOF ¶ 20. At some point in 2010, RNS became aware of
the outstanding court judgment against the Ron Companies. Id. ¶ 21. And then in
2014, RNS actually purchased all of IFC’s rights under the settlement agreement
with the Ron Companies. DSOF ¶ 45. But it is undisputed that at no point during
this six-year period did RNS or the IFC Bankruptcy Trustee look into potential legal
claims against Spirit, Steve, or Tak. PSOF ¶¶ 21-22.
That all changed in 2016. At that point, seven years after the bankruptcy and
nine years after the initial alleged misrepresentations had been made, RNS reached
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out to Marc Langs, IFC’s former CFO. Specifically, RNS hired Langs to serve as an
independent consultant to assist RNS in enforcing the earlier judgment against Ron.
PSOF ¶ 25. In connection with this project, RNS gave Langs access to “voluminous
documentation” from the IFC bankruptcy estate to review, and Langs in turn filled
RNS in on the story of the 2007 settlement discussions with Ron, including the
representations that Spirit and Steve made about the EPC Contracts, as well as the
meeting about the EPC Contracts with Tak. Id. ¶ 28.
After Langs was brought onboard by RNS to investigate the Ron transaction,
he decided to follow up on the status of the EPC Contracts. So, in March 2016, Langs
called Steve. PSOF ¶ 30. Steve told Langs that the EPC projects had never been built.
Id. That same month, Langs also emailed Tak; during their email exchange, Tak
revealed that the EPC Contracts had been “frivolous” all along. DSOF ¶ 49. Finally,
Langs met with Steve in person, which is when Steve confirmed that the EPC
Contracts had never been funded but reiterated that he still hoped the projects would
go forward in the future. PSOF ¶ 36.
It was shortly after these conversations that RNS retained counsel and began
pursuing the current litigation against the Defendants. PSOF ¶ 37. In January 2017,
RNS (as the successor-in-interest to IFC) filed its original complaint alleging various
fraud claims against Spirit and Steve, R. 1, and in September 2017, RNS filed an
amended complaint adding Tak as a defendant. R. 31. Against all Defendants, RNS
alleges fraudulent inducement, negligent misrepresentation, and civil conspiracy, as
well as claims under the Illinois Consumer Fraud Act.
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II. Standard of Review
Summary judgment must be granted “if the movant shows that there is no
genuine dispute as to any material fact and the movant is entitled to judgment as a
matter of law.” Fed. R. Civ. P. 56(a). A genuine issue of material fact exists if “the
evidence is such that a reasonable jury could return a verdict for the nonmoving
party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). In evaluating
summary judgment motions, courts must “view the facts and draw reasonable
inferences in the light most favorable to the” non-moving party. Scott v. Harris, 550
U.S. 372, 378 (2007) (cleaned up).4 The Court “may not weigh conflicting evidence or
make credibility determinations,” Omnicare, Inc. v. UnitedHealth Grp., Inc., 629 F.3d
697, 704 (7th Cir. 2011) (cleaned up), and must consider only evidence that can “be
presented in a form that would be admissible in evidence.” Fed. R. Civ. P. 56(c)(2).
The party seeking summary judgment has the initial burden of showing that there is
no genuine dispute and that they are entitled to judgment as a matter of law.
Carmichael v. Vill. of Palatine, 605 F.3d 451, 460 (7th Cir. 2010); see also Celotex
Corp. v. Catrett, 477 U.S. 317, 323 (1986). If this burden is met, the adverse party
must then “set forth specific facts showing that there is a genuine issue for trial.”
Anderson, 477 U.S. at 256.
This Opinion uses (cleaned up) to indicate that internal quotation marks, alterations,
and citations have been omitted from quotations. See Jack Metzler, Cleaning Up Quotations,
18 Journal of Appellate Practice and Process 143 (2017).
4
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III. Analysis
IFC argues that it only agreed to settle its claims against the Ron Companies
because it believed—based on the alleged misrepresentations by Spirit, Steve, and
Tak—that the EPC Contracts would be a valuable revenue stream for the Ron
Companies. When that turned out to not be true, IFC initiated this current fraud
lawsuit against Spirit, Steve, and Tak. But before getting to the merits of these fraud
claims, the parties dispute whether this case was brought on time under the relevant
statutes of limitations.
There is no dispute that the alleged misrepresentations by Spirit, Steve, and
Tak were made in 2007. There is also no dispute that the statute of limitations for
RNS’s common law fraud and civil conspiracy claims is five years, 735 ILCS 5/13-205,
while the statute of limitations for the ICFA claim is three years, 815 ILCS
505/10a(e). Meanwhile, the complaint (naming Spirit and Steve) and amended
complaint (adding claims against Tak) in this case were both filed in 2017. So, at first
glance, RNS’s claims would seem to fall outside of the statutes of limitations. RNS
resists this conclusion, and the Court now turns to RNS’s arguments.
A. Discovery Rule
RNS first argues that the discovery rule should apply. Under Illinois law, the
discovery rule “delays the start of the limitations period until the claimant knew or
reasonably should have known of the injury and that the injury was wrongfully
caused.” Am. Family Mut. Ins. Co. v. Krop, 120 N.E.3d 982, 987-88 (Ill. 2018). This is
also called inquiry notice, and what it means is that the statute of limitations starts
9
to run when the plaintiff “is under an obligation to inquire further to determine
whether an actionable wrong was committed.” Knox College v. Celotex Corp., 430
N.E.2d 976, 980 (Ill. 1981) (cleaned up). Inquiry notice is different from actual notice;
the plaintiff does not need to know every fact about the injury in order for the statute
of limitations to start running. For instance, the plaintiff does not necessarily have
to know the identity of every potential wrongdoer. Wells v. Travis, 672 N.E.2d 789,
793 (Ill. App. Ct. 1996) (“Knowledge that an injury has been ‘wrongfully caused’ does
not mean knowledge of a specific defendant’s negligent conduct.”). So, here, the
question is: at what point did IFC either realize, or have reason to realize, that the
status of the EPC Contracts had been misrepresented?
Defendants naturally argue that IFC knew or reasonably should have known
about its potential claims against them in 2007, when it first realized that Ron was
not making any payments on the settlement agreement. R. 67, Defs.’ Br. at 11. That
alone should have put IFC on notice that Ron did not have access to the EPC Contract
revenue that Defendants said he had access to, which in turn meant that Defendants,
who vouched for Ron having access to ample revenue, might have lied to IFC too. In
the alternative, Defendants argue that even if IFC did not suspect the alleged fraud
in 2007, then IFC was definitely on inquiry notice (at the very least) by the following
year, as evidenced by several of IFC’s litigation positions during the lawsuit. Id. at
12. For instance, in 2008, IFC wrote in its motion for summary judgment against the
Ron Companies and Spirit that “[a]ccording to Spirit Construction’s president,
neither [of the Ron Companies] were ever seriously considered by Spirit Construction
10
to be likely subcontractors in connection with the construction contracts. In any
event, those construction contracts are still not funded.” DSOF ¶ 38. In support of
that same motion, Marc Langs also submitted an affidavit stating that “IFC would
not have agreed to allow [the Ron Companies] a ten-month payment schedule if we
had known that the EPC Contracts were not going to be funded for many months.”
Id. ¶ 37. And finally, in October 2008, IFC also filed a motion to strike in which it
referenced “the fraud committed by Spirit Construction to induce IFC to enter into
the Settlement Agreement” and the fact that “notwithstanding its statement to IFC,
Spirit Construction never intended to engage [the Ron Companies] in connection with
the EPC Contracts.” Id. ¶ 39.
RNS, for its part, contends that there was no reason for IFC to suspect fraud
on the part of the Defendants until March 2016, when Tak revealed for the first time
over email that the EPC Contracts were “frivolous.” R. 76, Pl.’s Resp. Br. at 2.
According to RNS, none of its litigation positions in the 2007 lawsuit matter because
the 2007 lawsuit targeted an entirely different injury than the injury at issue in this
current case. Id. at 3. Specifically, the 2007 lawsuit was supposedly all about Ron
failing to make installment payments pursuant to the settlement agreement, as well
as alleged misrepresentations by Ron pertaining to when the EPC Contracts would
be funded. Id. at 5. This case, on the other hand, is specifically about the
misrepresentations that Spirit, Steve, and Tak allegedly made about the EPC
Contracts. Id. And with regard to the specific litigation statements Defendants point
to as evidence that IFC knew Spirit had made misrepresentations, RNS explains that
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many of those statements were based on a confusing series of misunderstandings
about a contract that IFC’s counsel had shown Steve during his April 2008 deposition;
Steve had apparently made some representation about that contract being an EPC
Contract and then backtracked on his words later in the deposition. Id. at 6-7.
But even if IFC had only accused Spirit of lying based on a misunderstanding
about documents shown during a deposition, that does not change the fact that, from
a broader perspective, IFC indisputably suspected that Spirit was lying about
something. Based on that suspicion, IFC had an obligation to investigate Spirit and
the other Defendants. Specifically, when IFC realized that Ron was not making
payments under the settlement agreement, IFC was on notice that a number of things
could have gone wrong. For instance, it was possible that Ron simply lied about how
long it would take for the contracts to be funded. And indeed, IFC picked up on that
possibility and brought the 2007 lawsuit against Ron. But IFC should have also
investigated whether anyone else who made representations about the EPC Contracts
also lied. It took no extraordinary business or legal acumen to know that more
investigation was needed. For instance, if the contracts would not be funded in just a
few weeks, as Ron has said, then how long would it actually take for them to be
funded? When were the four projects supposed to start? At what point were the Ron
Companies supposed to get paid under the contracts? Were the Ron Companies in
fact hired as subcontractors? Were the contracts worth as much as IFC thought they
were worth? IFC apparently did not ask any of those basic questions.
12
So, even accepting as true RNS’s allegations that IFC had no actual knowledge
that Spirit, Steve, or Tak had misrepresented the status of the EPC Contracts in 2007
or 2008, that does not mean IFC could not have been on inquiry notice. And RNS puts
far too much stock in the distinction between the 2007 fraud claims against Ron and
the current fraud claims against the Defendants. Yes, the lawsuit technically and
initially targeted only Ron. See Pl.’s Resp. Br. at 5. But RNS has not provided a
convincing explanation for why IFC did not investigate whether Spirit, Steve, and
Tak also lied when it first suspected that Ron had lied about the status of the EPC
Contracts. At that point, IFC knew that Spirit, Steve, and Tak had also made
representations about the EPC Contracts. Just because those representations did not
come from Ron does not mean that IFC had no obligation to investigate those other
speakers and statements.
For these reasons, the Court concludes that RNS was on inquiry notice of the
fraud claims against Defendants by 2007, when it filed its lawsuit against the Ron
Companies and Spirit, and by 2008 at the very latest, as evidenced by its litigation
positions in that lawsuit. Thus, the claims are barred by the three- and five-year
statutes of limitations unless one of the tolling exceptions raised by RNS applies.
B. Equitable Tolling
On tolling, RNS first asserts that even if the claims did accrue back in 2007 or
2008, they were equitably tolled for seven years between 2009 and 2016 because of
the previous court’s 2009 summary judgment ruling that IFC “lacked standing to
assert its claim for injunctive relief against Spirit—which was based on Spirit’s
13
alleged misrepresentations in this case.” Pl.’s Resp. Br. at 17. “While equitable tolling
is recognized in Illinois, it is rarely applied.” Am. Family Mut. Ins. Co. v. Plunkett, 14
N.E.3d 676, 681 (Ill. App. Ct. 2014). In order for equitable tolling to apply, a plaintiff
must have (1) pursued its rights diligently and (2) been prevented from filing on time
by some extraordinary circumstance. Holland v. Florida, 560 U.S. 631, 649 (2010).
“Extraordinary barriers include legal disability, an irredeemable lack of information,
or situations where the plaintiff could not learn the identity of proper defendants
through the exercise of due diligence.” Plunkett, 14 N.E.3d at 681 (cleaned up).
Here, RNS argues that the previous court’s 2009 summary judgment was
precisely that—an extraordinary circumstance that prevented IFC from asserting its
fraud claims against Defendants at that time. But this argument is wrong. The
previous court did not hold that IFC had no standing to pursue any fraud claims
against Spirit. Rather, the previous court held that IFC had no standing to pursue a
contract claim against Spirit. See IFC Credit Corp. v. Tissue Prod. Tech. Corp., 2009
WL 901009, at *10 (N.D. Ill. Mar. 31, 2009) (“Presently, a breach has not occurred
nor has IFC presented evidence that a breach is likely to occur in the near future.”).
To the extent that IFC in that lawsuit was merely trying to ensure that Spirit held
up its end of the deal under the settlement agreement—that is, make sure all
subcontractor payments owed to Ron were funneled to IFC instead—then the court
was correct in holding that Spirit had not yet breached that agreement. But there
was nothing in the 2009 summary judgment ruling preventing IFC from bringing a
new lawsuit (or adding a claim) against Spirit (and Steve and Tak) alleging that they
14
fraudulently misrepresented the status or existence of the EPC Contracts in the first
place. Moreover, even if the previous court had somehow opined on IFC’s ability to
bring fraud claims against Defendants, there was nothing preventing IFC from
appealing that decision. Thus, the 2009 summary judgment ruling does not constitute
an extraordinary circumstance that would warrant equitable tolling.
The diligence requirement has also not been met. As the Defendants point out,
“the only thing preventing the discovery of the purportedly revelatory information
Langs learned from Tak in the March 2016 email exchange sooner was [IFC’s] own
lack of diligence.” Defs.’ Br. at 16. Well before March 2016, IFC could have resorted
to the court to examine the four EPC Contracts themselves, considering how central
they were to the entire $3.9 million settlement agreement. According to RNS, IFC
asked Defendants for the contracts, and Defendants refused on supposed
confidentiality and regulatory grounds. PSOF ¶ 1. (Defendants dispute this fact.
Defs.’ Resp. PSOF ¶ 1.) But even if that happened (as the Court assumes it did to
view the evidence in RNS’s favor), IFC did not have to stop there. IFC could have
issued a formal discovery request or subpoena for the contracts, and if that did not
work, IFC could have then filed a motion to compel production of the contracts. Given
the gravity of the situation and the fact that IFC knew Ron was not making
payments, IFC should have done more than continue to rely on the “good business
reputations” of the Defendants.
Finally, even if the claims had somehow been equitably tolled starting in 2009,
there is no explanation for why a tolling period of seven years is justified in this case.
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Accepting RNS’s allegations as true, then the only reason RNS discovered the fraud
claims against Defendants was because of Tak’s email revealing that the EPC
Contracts had been “frivolous.” The Tak email only came about because Marc Langs,
in March 2016, decided to reach out to Tak to ask about the EPC Contracts. But why
did RNS (and Marc Langs) wait until 2016 to reach out to Tak and Steve? IFC surely
could have asked Tak and Steve that same question in 2007, or 2008, or even 2009.
The bankruptcy proceeding is no excuse for a seven-year delay, nor are the
subsequent resignations of Trebels and Langs; there is nothing extraordinary about
executives leaving a company. Allowing those sorts of excuses as grounds for
equitable tolling would break the dam wide open to tolling, contrary to Illinois law.
Equitable tolling is not applicable to this case.
C. Fraudulent Concealment
Finally, RNS argues that Defendants “fraudulently concealed the true
‘frivolous’ nature” of the EPC Contracts. R. 87, Pl.’s Reply Br. at 8. Under Illinois law,
if a person conceals their liability for an action from the injured party, the statute of
limitations is extended five years from the date of discovery. 735 ILCS 5/13-215. But
the fraudulent-concealment exception only applies if the defendant took “affirmative
acts or representations calculated to lull or induce a claimant into delaying filing of
his or her claim, or to prevent a claimant from discovering a claim.” Orlak v. Loyola
Univ. Health Sys., 885 N.E.2d 999, 1009 (Ill. 2007) (emphasis added). In fraud cases
like this one, the “acts constituting fraudulent concealment are distinct from the acts
that make the underlying conduct fraudulent.” Saleh as Tr. of Nabil Saleh M.D. LTD
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Pension Plan v. Merch., 2019 WL 1331788, at *7 (N.D. Ill. Mar. 25, 2019) (citing
Gredell v. Wyeth Labs., Inc., 803 N.E.2d 541, 548-49 (Ill. App. Ct. 2004)).
Here, RNS argues that the Defendants fraudulently concealed IFC’s claims
when they refused to let IFC review the EPC Contracts “because regulatory concerns
required Spirit and Tak to keep them confidential while Tak was seeking financing
for the projects.” Pl.’s Reply Br. at 9. IFC apparently did not push this point, because
of the “good business reputations” of Defendants. Id. As explained above, however,
the mere fact that Defendants refused to let IFC examine the EPC Contracts due to
supposed regulatory concerns does not warrant any sort of tolling of the statute of
limitations. Here, even if the Defendants did lie about the regulatory concerns, that
does not amount to fraudulent concealment of IFC’s claims.
It is true that the EPC Contracts themselves might have provided valuable
evidence that would have helped IFC prove that Defendants misrepresented the
status of the contracts. But in terms of discovering the potential fraud claim in the
first place, IFC did not need to see the actual EPC Contracts to suspect that
something might have been wrong with Defendants’ representations. It is notable,
for instance, that IFC thought to ask Defendants to examine the EPC Contracts in
the first place. After all, if IFC truly had no idea that there was any problem with the
status or existence of the EPC Contracts, then IFC would not have asked to see them.
But the fact that IFC did ask Defendants to examine the contracts shows that IFC
knew that the contracts themselves (or the lack thereof) would shed some light on
why Ron had not been making settlement payments. And then Defendants’ stubborn
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resistance to handing over the contracts should have in itself been a red flag for IFC.
Lastly, IFC took no steps to formally compel the Defendants to disclose the contracts,
so IFC itself did not reasonably pursue the inquiry.
In short, even if Defendants committed a fraudulent act by lying about why
they could not allow IFC to examine the EPC Contracts, that act of fraud did not do
anything to prevent IFC from suspecting, investigating, and litigating its potential
claims against Defendants. Thus, the fraudulent concealment exception does not
apply here either.
IV. Conclusion
For the reasons discussed above, RNS’s claims are barred by the statutes of
limitations. RNS’s motion for summary judgment is thus denied, and Defendants’
motion for summary judgment is granted. The status hearing of April 29, 2020 is
vacated, and the Court will enter final judgment.
ENTERED:
s/Edmond E. Chang
Honorable Edmond E. Chang
United States District Judge
DATE: March 25, 2020
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