Chatz v. World Wide Wagering, Inc. et al

Filing 54

MEMORANDUM Opinion and Order Signed by the Honorable John J. Tharp, Jr on 9/11/2019: For the reasons set forth in the accompanying Memorandum Opinion and Order, the defendants' motion to dismiss various counts and to strike certain allegations 31 is denied. A further status hearing will be set when discovery has been completed. Mailed notice(air, )

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IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
BARRY A. CHATZ,
Plaintiff,
v.
WORLD WIDE WAGERING, INC., et al.,
Defendants.

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No. 17 CV 4229
Judge John J. Tharp, Jr.

MEMORANDUM OPINION AND ORDER
Horse racing “has an unsavory, or at least a shadowed, reputation, growing out of a long
history of fixing, cheating, doping of horses, illegal gambling, and other corrupt practices.” Dimeo
v. Griffin, 943 F.2d 679, 681 (7th Cir. 1991) (en banc). This case does not implicate the integrity
of any racing results, but nevertheless involves a series of allegedly corrupt practices engaged in
by the directors of two now-defunct horse racing tracks, Balmoral Racing Club, Inc. (“Balmoral”)
and Maywood Park Trotting Association, Inc. (“Maywood”). In 2006 and 2008, to assist the
struggling horse racing industry, the Illinois legislature passed two statutes that ultimately provided
for the distribution of roughly $56 million in funds to Balmoral and Maywood. Yet according to
the plaintiff—Barry Chatz, the Trustee of the Balmoral Racing Club, Inc. and Maywood Park
Trotting Association, Inc. Creditor Trust—much of this money was misappropriated. The Trustee
asserts that the directors of Balmoral and Maywood made a series of illegal payments, totaling
approximately $20 million, to enrich themselves and others before the tracks ultimately filed for
bankruptcy in December 2014. The defendants, including those directors as well as other
individuals and related corporate entities, have moved to dismiss eight of the nine counts listed in
the Trustee’s amended complaint. They have also moved to strike certain allegations in the

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complaint under Fed. R. Civ. P. 12(f). The motion to dismiss and the motion to strike are both
denied.
BACKGROUND1
Balmoral and Maywood were two Illinois racetracks, formerly located in Crete and
Melrose Park, respectively. In the 1980s, both Balmoral and Maywood were purchased by a group
of individuals led by William H. Johnston, Jr. (“Billy Johnston”). See Am. Compl. for Breaches
of Fiduciary Duties, Civil Conspiracy, Fraudulent Transfers, Preferential Transfers, Declaratory J.
and Turnover (“Am. Compl.”) ¶ 2, 25, ECF No. 24. At the time of the events at issue in this case,
the companies that operated the racing tracks were both controlled by a single board of directors.2
The members of the board included Billy Johnston, his sons John Johnston and William H.
Johnston III (“Duke Johnston”), and other associates of the Johnston family, including Steven E.
Anton, Phillip Langley, Lester McKeever, and Stephen Swindal. Id. ¶¶ 2-3. All of these
directors—except for John Johnston, who has previously settled claims against him—are
defendants in this action. See id. ¶¶ 2-3. Both tracks were owned by a holding company, defendant
World Wide Wagering, Inc. (“WWW”), which had no employees and whose sole assets were
Balmoral and Maywood. See id. ¶ 15.
While horse racing had historically been a popular spectator sport, its popularity declined
over time. By 2009, for example, Balmoral and Maywood were each losing approximately $1
million to $2 million each year. See id. ¶ 26. Many attribute the decline in racing revenues to the
advent and growth of casino gambling. Beginning in 2006, the Illinois General Assembly passed

1

As it must in evaluating a motion to dismiss, the Court accepts the well-pleaded facts in
the amended complaint as true and draws all permissible inferences in favor of the Trustee. Agnew
v. NCAA, 683 F.3d 328, 334 (7th Cir. 2012).
2

The Court will refer to both the tracks and the companies that operated them as simply
“Balmoral” and “Maywood.”
2

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two successive statutes that were intended to assist the horse racing industry, which are known as
the “Racing Acts.” Both laws required four Illinois casinos to pay 3 percent of their revenues into
a fund for redistribution to various horse racing tracks in Illinois, including Balmoral and
Maywood. See id. ¶¶ 27, 34. Each law contained a sunset provision: the first one was enacted in
May 2006, remained in effect for two years, and then expired in May 2008. See id. ¶¶ 28, 32. The
second, which was signed into law in December 2008, effectively extended the provisions of the
first one. See id. ¶¶ 32, 34.
Upon the passage of the first Racing Act, the affected casinos immediately challenged the
validity of the law in court; they would later do the same for the second act after it was enacted.
As a result, when the first act took effect, and the casinos began complying with it by paying 3
percent of their revenues, these monies were put into a protest fund. See id. ¶ 30. The funds were
not available to the racetracks while the litigation proceeded, but were ultimately disbursed in late
2011. By that time, the casinos had paid about $141.8 million under the Racing Acts, and
approximately $56 million of that was released to Balmoral and Maywood. See id. ¶ 35.
The Racing Acts required that 40 percent of the funds disbursed to the racetracks be used
to improve, maintain, market, and operate the racing facilities, while the other 60 percent was to
support prize money for races. Id. ¶ 41. The board that controlled Balmoral, Maywood, and
WWW, however, had other plans. Instead, from 2012 to 2014, the board used the Racing Act funds
to make a series of payments, totaling roughly $20 million. These payments took various forms.
Some went to the directors themselves, including in the form of directors’ fees and increased
executive compensation. See id. ¶ 95. Other “distributions” were funneled through WWW, and

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went to the directors, their families, and related trusts.3 See id. ¶¶ 45, 95. Still other payments went
to a separate company named Coast to Coast Food Service, Ltd. (“Coast to Coast”), which
provided food and beverage services at the tracks; Coast to Coast was controlled by the same board
of directors that oversaw WWW, Balmoral, and Maywood. See id. ¶¶ 2, 16. The complaint alleges
that the defendants used a variety of mechanisms to direct profits to Coast to Coast and losses to
Balmoral and Maywood.
Meanwhile, a separate lawsuit was proceeding against John Johnston, Balmoral, and
Maywood. In 2008, Johnston, on behalf of Balmoral and Maywood, had agreed to make a
$100,000 contribution to the campaign fund of then-Illinois Governor Rod Blagojevich—in other
words, a bribe—to convince Blagojevich to sign the 2008 Racing Act into law.4 Id. ¶¶ 33-34. The
casinos’ second lawsuit alleged that Balmoral and Maywood had engaged in a conspiracy to
violate the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1961 et
seq., and brought other claims for civil conspiracy and unjust enrichment. That case proceeded to
a jury trial in December 2014. The jury ruled in the casinos’ favor and awarded $25,940,000 in
damages, which was trebled under RICO to $77,820,000. Empress Casino Joliet Corp. v. Balmoral
Racing Club, Inc., 831 F.3d 815, 820 (7th Cir. 2016). The Seventh Circuit would later reduce the
damages to $25,940,000, concluding that the casinos were entitled to that amount based on the
state-law claims, but not to have the damages trebled under RICO. Id.
The judgment on the jury’s $77.8 million verdict was entered on December 10, 2014. Am.
Compl. ¶ 39. Two weeks later, on December 24, Balmoral and Maywood each filed for bankruptcy
3

Certain recipients of these payments who were not directors are also named as defendants
in this case. They include Jane Johnston (Billy Johnston’s wife), Heather Johnston (Billy
Johnston’s daughter), and Michael Anton. All of these individuals were shareholders of WWW.
4

Blagojevich was convicted of this bribery scheme (among other charges) in a criminal
trial. See United States v. Blagojevich, 794 F.3d 729, 734 (7th Cir. 2015); Am. Compl. ¶ 34.
4

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under Chapter 11, automatically initiating proceedings in the bankruptcy court in this district. Id.
In August 2016, the bankruptcy court affirmed a joint liquidating plan. The plan created a creditor
trust, named Barry Chatz as Trustee, and preserved several causes of actions for the Trustee. In
December 2016, the Trustee filed an adversary complaint in the bankruptcy court. Several groups
of defendants moved to dismiss that complaint. In May 2017, in an oral ruling, Bankruptcy Judge
Cassling dismissed certain of the Trustee’s claims without prejudice and with leave to replead, and
dismissed others for lack of subject-matter jurisdiction. Shortly after that ruling, the Trustee filed
a motion to withdraw the reference, which this Court granted. See generally Order and Statement,
ECF No. 20.
After the Court granted the motion to withdraw the reference, the Trustee filed an amended
complaint in this Court. The defendants responded by filing a motion to dismiss, asking this Court
to dismiss eight of the nine counts listed in the amended complaint under Fed. R. Civ. P. 12(b)(6).
In the same motion, the defendants have also asked the Court to strike certain allegations in the
complaint under Rule 12(f). That motion is now before this Court.
DISCUSSION
I.

Motion to Dismiss
A.

Pleading Requirements

A motion to dismiss under Rule 12(b)(6) challenges the sufficiency of the complaint.
Hallinan v. Fraternal Order of Police of Chicago Lodge No. 7, 570 F.3d 811, 820 (7th Cir. 2009).
To survive such a motion, “a complaint 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 Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). 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.
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The amended complaint and the motion to dismiss in this case follow a familiar pattern.
That is, the complaint sets forth nine “counts,” and the motion to dismiss responds by addressing
eight of the nine counts and attempting to shoot each one down in succession. This approach, while
common in litigation, obscures the important difference between claims and counts. A claim is a
set of facts that could entitle the plaintiff to relief under some legal theory. Counts, in contrast,
“describe legal theories by which those facts purportedly give rise to liability and damages.”
Volling v. Antioch Rescue Squad, 999 F. Supp. 2d 991, 996 (N.D. Ill. 2013). While pleading in
counts is often useful, it is not required unless “doing so would promote clarity” and “each claim
[is] founded on a separate transaction or occurrence.” Fed. R. Civ. P. 10(b). Indeed, it is a wellestablished principle that “complaints need not plead legal theories” at all. Jogi v. Voges, 480 F.3d
822, 826 (7th Cir. 2007). The complaint must simply provide “a short and plain statement of the
claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2).
This distinction has significant implications. For one thing, because a claim consists of a
set of facts, “[o]ne set of facts producing one injury creates one claim for relief, no matter how
many laws the deeds violate.” NAACP v. Am. Family Mut. Ins. Co., 978 F.2d 287, 292 (7th Cir.
1992). However many counts a plaintiff may plead, they constitute a single claim to the extent that
they are premised on the same facts. Another consequence follows from the fact that Rule 12(b)(6)
does not allow for “piecemeal dismissals of parts of claims.” BBL, Inc. v. City of Angola, 809 F.3d
317, 325 (7th Cir. 2015) (emphasis in original). A Rule 12(b)(6) motion should therefore be
granted only when the facts in the complaint, taken as true, do not state a plausible claim under
any recognized legal theory. Volling, 999 F. Supp. 2d at 996; see also Richards v. Mitcheff, 696
F.3d 635, 638 (7th Cir. 2012). The Federal Rules of Civil Procedure allow for dismissal of a
complaint for failure to state a claim, but they provide no basis “for striking individual legal

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theories.” Zidek v. Analgesic Healthcare, Inc., No. 13 C 7742, 2014 WL 2566527, at *2 (N.D. Ill.
June 6, 2014). Thus, if there is any identifiable legal theory that supports a given claim, that claim
survives, and the Court has no need—or authority—to “dismiss” alternative legal theories
presented in support of that claim at this stage of the litigation.
B.

The Trustee’s Claims

The Trustee’s amended complaint lists nine counts.5 The defendants have asked the Court
to dismiss all of them except for Count VI. As each “count” is properly understood as a legal theory
rather than a claim, the Court’s first task is to determine how many claims are advanced in the
complaint and the claims to which each count applies. As the Court reads the complaint, it puts
forward three claims. The first and most important one is that the director defendants made a series
of payments from Balmoral and Maywood to themselves and others. These payments took various
forms, such as distributions, increased executive compensation, directors’ fees, and “pre-paid”
expenses to Coast to Coast. But the essence of the claim is that all of these payments, which added
up to approximately $20 million, were unlawful. These payments form the basis for Count I, which
charges that they represented a breach of the defendants’ fiduciary duties as directors of Balmoral
and Maywood.
In addition, these payments are also the basis for Counts III, IV, and V. In those three
counts, the Trustee invokes 11 U.S.C. § 548, which provides a mechanism for a trustee to “avoid”
transfers made by debtors under certain circumstances. The complaint separates the payments out

5

They are as follows: breach of directors’ fiduciary duties (Count I); civil conspiracy
(Count II); avoidance and recovery of fraudulent transfers to the board (Count III); avoidance and
recovery of fraudulent transfers to the Johnston family and trusts (Count IV); avoidance and
recovery of fraudulent transfers to affiliated entities (Count V); recovery of improper preference
payments (Count VI); unjust enrichment (Count VII); declaratory judgment (Count VIII); and
turnover (Count IX). See Am. Compl. ¶¶ 89-166.
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based on who the recipient was: Count III covers the directors; Count IV covers the Johnston
family and related trusts; and Count V covers Coast to Coast. All of the transfers that the Trustee
seeks to avoid in these counts, however, appear to consist of the same payments made by the
director defendants in Count I. Compare Am. Compl. ¶ 95, with Am. Compl. ¶¶ 114, 125, 131. In
short, breach of fiduciary duty and avoidance are simply alternative legal theories that, according
to the complaint, allow the Trustee to recover for the same underlying payments.6
The Court similarly concludes that the payments are also the basis for Count VII, for unjust
enrichment. One might argue, to the contrary, that Count VII is a distinct claim, because the
conduct at issue in that count is the act of retaining the payments, not making them. See id. ¶ 146
(asserting that the defendants “have each retained improper distributions, executive compensation,
directors’ fees, ‘pre-paid expenses’ and fraudulent transfers made to them”). The problem with
this approach, however, is that the charge of unjust enrichment presumes that the payments were
unlawful. See id. (“For them to retain this money, obtained in violation of the law, while Balmoral
and Maywood’s actual creditors go unpaid, violates fundamental principles of justice, equity, and
good conscience.”) (emphasis added). That is, the only reason why the defendants’ “enrichment”
would be “unjust” is if the payments were made in violation of the law. Thus, at its core, Count
VII is premised on the same conduct as Counts I, III, IV, and V.
The second claim is that the directors entered into a conspiracy among themselves. This is
the essence of Count II, for civil conspiracy. The object of the conspiracy was to make the same
$20 million in payments. But the conduct encompassed by the claim is the agreement among the
directors to use the Racing Act funds for that purpose. The complaint alleges that the agreement

6

It is not entirely clear whether Count VI, for recovery of improper preference payments,
also falls under this category. Because the defendants have not asked the Court to dismiss Count
VI, the Court need not address that issue in this opinion.
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began as early as May 2009. See id. ¶ 102. It further alleges that the director defendants took a
series of steps in furtherance of this conspiracy. These included not just making the payments
themselves but also misleading regulators at the Illinois Racing Board in order to obscure the fact
that the payments had been made. Id. ¶ 103. In other words, the agreement to make the payouts is
a distinct claim, separate and independent from the payouts themselves.
Finally, the third claim is embodied in Count VIII and Count IX, which should be read
together. Count VIII seeks a declaratory judgment “that WWW, Balmoral, Maywood, [and] Coast
to Coast are alter egos of each other, and further that WWW and Coast to Coast are simply alter
egos of their shareholders, and in particular the Johnston family and insider shareholders named
here.” Id. ¶ 148. The implication of this, the Trustee says, is that “all of these defendants’ assets
are subject to administration as assets of Balmoral and Maywood” for the purpose of satisfying
creditors’ claims against the estates. Id. Count IX, in turn, asks that the Court require these
defendants “to turn over to the Trustee assets sufficient to pay all of Balmoral and Maywood’s
creditors’ claims in full satisfaction as part of Debtors’ bankruptcy estates under 11 U.S.C. § 542.”
Id. ¶ 166.
Section 542(a) “requires parties holding or controlling property of the estate to deliver it to
the trustee.” In re Glick, 568 B.R. 634, 653 (Bankr. N.D. Ill. 2017). As the attorney for the Trustee
made clear in the May 2017 hearing in which Judge Cassling issued his oral ruling, the § 542
turnover claim is “not limited to the extent of the fraudulent transfers.” Ex. C, May 9, 2017 Hr’g
Tr. 37:13-14, ECF No. 1-4. Because, the Trustee asserted, “this was sort of a rat’s nest of
interrelated entities that didn’t follow corporate formalities,” the defendants were “responsible for
all of the obligations that the debtors have to the creditors, not limited to the amount of the
fraudulent transfers.” Id. at 37:15-21. What the Trustee seeks to do in Count IX, therefore, is to

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recover for all of Balmoral’s and Maywood’s obligations, separate from the specific payments that
are the subject of the first claim. The alter-ego allegations in Count VIII are not themselves an
independent basis for relief, but they provide some of the grounding for the turnover request in
Count IX. The logic behind this is that if the defendants are alter egos of Balmoral and Maywood,
their property is properly considered the property of the bankruptcy estate.
C.

The Payments

As the previous section illustrates, at the core of the Trustee’s complaint are a series of
payments made by the director defendants to themselves, their associates, and other related
entities. This included more than $7 million in distributions, $5 million in increased executive
compensation, $1.4 million in directors’ fees, and nearly $3 million in “pre-paid” expenses. Am.
Compl. ¶ 95. The first legal theory that the Trustee has put forward as to why these payments were
unlawful is that they represented a breach of the directors’ fiduciary duties. Because the Trustee
has stated a claim on this basis, the Court need not address his alternative legal theories.
As this lawsuit was filed in Illinois, the choice-of-law rules of Illinois apply. Those
principles dictate that a suit against a director for breach of fiduciary duty is governed by the law
of the state of incorporation. CDX Liquidating Trust v. Venrock Assocs., 640 F.3d 209, 212 (7th
Cir. 2011). Here, Balmoral is an Ohio corporation, whereas Maywood is an Illinois corporation.
Am. Compl. ¶¶ 13-14. The elements of breach of fiduciary duty are similar under the law of both
states. In both cases, the plaintiff must demonstrate that a fiduciary duty existed; that it was
breached; and that the breach proximately caused the injury of which the plaintiff is complaining.
See Neade v. Portes, 193 Ill. 2d 433, 444, 739 N.E.2d 496, 502 (2000) (Illinois law); In re Nat’l
Century Fin. Enters., Inc., Inv. Litig., 617 F. Supp. 2d 700, 717 (S.D. Ohio 2009) (Ohio law).
The legal premise of the Trustee’s claim is unquestionably sound: directors owe fiduciary
duties to the companies they govern, and the misappropriation of funds that are corporate property
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for personal uses plainly constitutes a breach of fiduciary duty. The defendants make two principal
arguments as to why the Trustee’s complaint has not stated a claim for breach of fiduciary duty,
neither of which is convincing. The first is that the allegations in the amended complaint that are
properly pleaded are equally consistent with lawful conduct. On this point, the defendants rely
heavily on the Seventh Circuit’s decision in Brooks v. Ross, 578 F.3d 574 (7th Cir. 2009). That
suit was brought by a plaintiff, Victor Brooks, who was previously a member of the Illinois Prison
Review Board. It stemmed from a controversial hearing before that board in which there were
allegations of misconduct by Brooks and another individual. The state police conducted an
investigation, and defendant Mark Ross served as the case agent. As a result of Ross’s
investigation, Brooks was indicted by a grand jury and charged with official misconduct and wire
fraud; he was later acquitted. Brooks subsequently sued Ross and other defendants under 42 U.S.C.
§ 1983, alleging, among other things, that they had violated his due process rights. The Seventh
Circuit concluded that the defendants’ activities as alleged by Brooks—that Ross had produced
investigative reports, one of which named Brooks, and that other individuals had either given
interviews or assisted with interviews—were insufficient to state a § 1983 due process claim. Id.
at 580-81. Part of the reason for this, the court stated, was that the “behavior Brooks has alleged
that the defendants engaged in is just as consistent with lawful conduct as it is with wrongdoing.”
Id. at 581. It compared Brooks’s case to Twombly, in which the Supreme Court concluded that the
plaintiffs’ allegations “of parallel conduct were ‘consistent with conspiracy, but just as much in
line with a wide swath of rational and competitive business strategy unilaterally prompted by
common perceptions of the market.’” Id. (quoting Twombly, 550 U.S. at 554).
The defendants argue that the same is true in the present case: making the types of payments
that are at issue here, they say, is just routine business. It is a common practice, they observe, to

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pay things like directors’ salaries, directors’ fees, and distributions to shareholders. See Mem. of
Law in Supp. of Defs.’ Mot to Dismiss Counts I, II, III, IV, V, VII, VIII, and IX of Trustee’s Am.
Compl. and to Strike Certain Allegations Pursuant to Fed. R. Civ. P. 12(f) (“MTD”) 5, ECF No.
32. They contend that the Trustee’s assertion that this compensation was excessive is merely
editorializing. See id. at 7. In short, according to the defendants, the actions taken by the directors
were equally consistent with lawful conduct, as in Brooks and Twombly.
This is not at all persuasive, for two reasons. First, recall that by statute, the Racing Act
funds were required to be used on improving, maintaining, and operating the racing facilities, as
well as for prize money for races. See Am. Compl. ¶ 41. In this context, one could reasonably
conclude that it was a breach of the directors’ fiduciary duties to do anything with the money other
than to use it as mandated by the Racing Acts, for the long-term health of the tracks. It is decidedly
not a normal business practice for a company’s directors to violate the law by taking money that
was provided for a specific statutory purpose and instead using it to pay themselves, their families,
and their associates.
Second, Brooks is easily distinguishable on its facts. The conduct at issue in Brooks—such
as producing investigative reports, and taking part in or assisting with interviews—is genuinely
routine and ordinarily would not raise any inference of impropriety. While one might say the same,
in the abstract, about paying out distributions or executive compensation, the potential for abuse
in these types of actions is inherently greater. That potential is magnified under certain
circumstances, such as when, as here, the company is in questionable financial shape and the scale
of the payments runs into the millions of dollars. Against this factual background, it is simply
inaccurate to say that the payments were equally consistent with lawful conduct. In this context,
and assuming the truth of the allegations in the complaint, it would be an entirely fair conclusion

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to say that the directors breached their fiduciary duties by making the $20 million in various
payments.
There are numerous examples of specific transfers of funds alleged in the amended
complaint that plausibly suggest that the board member defendants breached their fiduciary duties.
The distributions of millions of dollars of Racing Act funds to the board member defendants and
other insiders by direct transfers funneled through WWW, see id. ¶ 45, certainly fall comfortably
within this category. This is particularly so given that these distributions were authorized at times
when the directors had financial reports projecting that the tracks would not have funds to pay all
of their creditors. Id. ¶ 48. There is no basis (and the defendants offer none) to characterize the
transfer of funds to a holding company with no assets and then on to the defendants themselves as
equally consistent with lawful conduct, particularly when the funds were appropriated to the tracks
for the specific purposes of improving the racing facilities and providing prize money. These
transfers don’t even enjoy the coverage of a fig leaf labeled “normal business practice”; as alleged,
they represent naked transfers of Racing Act funds to the director defendants and insider
shareholders.
As for the payments that the defendants characterize as forms of executive compensation,
the defendants argue that there are “no factual allegations to support that the salaries or bonuses
were actually out of proportion with the compensation of executives in similarly situated
enterprises.” MTD 7. This ignores the fact that the complaint alleges that none of the director
defendants “did any extra work or provided additional benefits” to the tracks to warrant the
compensation increases, as well as the fact that the executive compensation of all of the directors
increased between 2011 and 2014; it doubled or more for most of them. Am. Compl. ¶¶ 59-60.
There is no reason to think that any of them were contributing more value to Balmoral or Maywood

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in 2014 than they were in 2011.7 Indeed, the complaint alleges that the director defendants
continued to pay Billy Johnston an annual salary ranging from roughly $190,000 to $345,000
when, as Johnston conceded, he had “pretty much” retired more than a decade earlier. See id.
¶¶ 59-61.
Further, in arguing that their alleged actions are consistent with lawful behavior, the
defendants simply ignore the allegations of fraudulent acts and intent that pepper the complaint.
The complaint alleges, for example, that defendant Duke Johnston, along with John Johnston,
falsified records provided to state regulators to show that operating expenses had been paid with
Racing Act funds when they had actually been paid in the ordinary course of business from
operating revenues. Id. ¶ 43. Similarly, it alleges that the defendants stopped paying Billy
Johnston’s annual salary in 2015 as a means of warding off the efforts of the casinos to install a
trustee to manage the companies. Id. ¶ 61. The complaint further alleges that on the eve of the trial
in the RICO lawsuit, the defendants approved the pre-payment of $350,000 in directors’ fees for
the upcoming year (2015) with the specific intent “to shield this money” from creditors and to take
it for themselves. Id. ¶ 67. That the defendants ultimately rescinded this pre-payment on the advice
of counsel, see id. ¶ 68, only highlights the plausible inference that the transaction was animated
not by concerns to protect the tracks but rather to milk them for funds before they collapsed.
These allegations—along with the others described earlier in this section—are more than
sufficient to plausibly raise the prospect of self-dealing, particularly in the context of Balmoral’s
and Maywood’s strained financial condition.

7

The defendants argue that the increases in executive compensation from 2011 to 2012
merely represented the restoration of pay cuts made in 2011. See MTD 9. As this argument relies
on factual allegations outside the complaint, the Court does not consider it.
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The defendants’ second argument is that the complaint does not identify which state law
applies to the claims for breach of fiduciary duty. This is erroneous on multiple levels. For one,
the complaint does in fact do exactly what the defendants say it does not: it alleges that in their
capacity as directors of Balmoral, the director defendants were responsible under Ohio law, and
that in their capacity as directors of Maywood, they were responsible under Illinois law. See Am.
Compl. ¶¶ 92-93. More fundamentally, as discussed above, see supra at 5-7, a complaint need not
plead legal theories at all. If a plaintiff is not required to plead legal theories to begin with, it
necessarily follows that he is under no obligation to identify what state law applies to any legal
theory he might or might not put forward. Cf. Landmark Document Servs., LLC v. Omega Litig.
Sols., LLC, No. 05 C 7300, 2006 WL 2861098, at *2 (N.D. Ill. Sept. 29, 2006) (“Defendants offer
no rule, statute, or case law obligating Plaintiff to plead choice of law in the complaint and indeed
do not even attempt to explain how this alleged deficiency is relevant to the legal sufficiency of
Plaintiff’s claims.”).
In summary, the director defendants do not contest that they owed fiduciary duties as
directors of Balmoral and Maywood. The Trustee has plausibly alleged that they breached those
duties by paying out $20 million in Racing Act funds to themselves, other Johnston family
members, and other related entities, even as they knew the tracks were in questionable financial
shape. The payments caused financial injury to the tracks in the form of lost income, which, one
could infer, was at least a contributing factor in leading to their ultimate bankruptcy. The Court
therefore concludes that the Trustee has stated a claim that the various payments were unlawful
based on a theory of breach of fiduciary duty. Accordingly, that claim survives, and it is

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unnecessary to address the merits of the defendants’ other challenges to the Trustee’s alternative
theories of avoidance8 and unjust enrichment.
D.

Civil Conspiracy

Under Illinois law, there are three elements of a civil conspiracy: “(1) a combination of two
or more persons, (2) for the purpose of accomplishing by some concerted action either an unlawful
purpose or a lawful purpose by unlawful means, (3) in the furtherance of which one of the
conspirators committed an overt tortious or unlawful act.” Fritz v. Johnston, 209 Ill. 2d 302, 317,
807 N.E.2d 461, 470 (2004). In the present case, the defendants do not even really contest that the
Trustee has adequately alleged the elements of civil conspiracy. Instead, their sole argument as to
why this claim should be dismissed is that, they say, under Illinois law “civil conspiracy is not an
independent cause of action, and only becomes actionable if the underlying conduct is
independently tortious.” MTD 12. Thus, if “the underlying claims in an action are dismissed, the
civil conspiracy claim must also be dismissed.” Id. The Trustee, for his part, rejects this conclusion.
See Trustee’s Resp. to Defs.’ Mot. to Dismiss Counts I, II, III, IV, V, VII, VIII, and IX of Trustee’s

8

While the Court need not, and does not, address the merits of the avoidance theory, it
bears noting that, in their motion to dismiss, the defendants also object to the amended complaint
on the basis of Rule 9(b), which requires that in alleging fraud, “a party must state with particularity
the circumstances constituting fraud.” This argument is specifically related to Counts III, IV, and
V, which alleges that the transfers in question were fraudulent. The defendants’ particular
objection is that the complaint does not adequately “inform each defendant of the nature of his or
her alleged participation in the fraud.” MTD 15 (quoting PharMerica Chicago, Inc. v. Meisels,
772 F. Supp. 2d 938, 955 (N.D. Ill. 2011)). The Court rejects this argument. The complaint satisfies
the oft-repeated requirement that it must provide the “who, what, when, where, and how” of the
fraud. DiLeo v. Ernst & Young, 901 F.2d 624, 627 (7th Cir. 1990). Virtually all of the allegedly
fraudulent actions described in the complaint were taken by the combined board that oversaw
Balmoral and Maywood. The relevant conduct of the individual directors was to vote for those
plans. Whether the defendants actually committed fraud remains to be seen, but the complaint has
sufficiently alleged fraud so as to satisfy Rule 9(b).
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Compl. and to Strike Certain Allegations Pursuant to Fed. R. Civ. P. 12(f) (“Response”) 14-16,
ECF No. 35.
It is not necessary to resolve this dispute at this stage in the litigation. As the Court has
already concluded, the Trustee has adequately pleaded his allegations regarding breach of fiduciary
duty. The Trustee has stated a claim that the director defendants breached their fiduciary duties by
making the roughly $20 million in payouts. In other words, the Trustee has adequately alleged that
the underlying conduct was independently tortious. As a result, even if the defendants were correct
as a general matter that civil conspiracy cannot serve as a standalone cause of action in Illinois,
this would not serve as an obstacle to the Trustee’s claim in this case. The amended complaint
plausibly alleges that the director defendants combined to accomplish the independently unlawful
purpose of enriching themselves and their associates by misappropriating Racing Act funds. It
further alleges that the defendants committed multiple overt acts in furtherance of this conspiracy,
including casting those self-dealing votes to make the payments and misleading regulators at the
Illinois Racing Board. See Am. Compl. ¶ 103. Based on these allegations, the Trustee’s civil
conspiracy claim may go forward.
E.

Turnover

11 U.S.C. § 542(a) provides that any entity “in possession, custody, or control, during the
case, of property that the trustee may use, sell, or lease . . . shall deliver to the trustee, and account
for, such property or the value of such property, unless such property is of inconsequential value
or benefit to the estate.” In other words, the statute requires any entity in possession of property
that is the property of the estate to deliver it to the trustee. When property has not been delivered,
a trustee may sue under § 542(a) to compel its turnover. Glick, 568 B.R. at 668.
The defendants argue that a turnover action in this case is inappropriate “because the Tracks
relinquished control of the subject property prior to the Petition Date.” MTD 26. Accordingly, they
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say, “the proper way for the Trustee to recover the property is through a fraudulent transfer action,
rather than a turnover action.” Id. To the extent that Count IX seeks to recover specific payments
made to the defendants, they are correct. As the Seventh Circuit has made clear, a § 542 turnover
action “generally cannot substitute for a fraudulent-transfer action. In other words, the
representative of a bankruptcy estate cannot use a Section 542 turnover action to regain the
debtor’s interest in property when he transferred it to someone else before filing for bankruptcy.”
In re Veluchamy, 879 F.3d 808, 816 (7th Cir. 2018). In the present case, all of the relevant
payments appear to have been made prior to Balmoral’s and Maywood’s bankruptcy filings on
December 24, 2014. The Trustee therefore cannot recover them in a turnover action.
This does not, however, appear to be the basis for the turnover request. Instead, as discussed
above, see supra at 9-10, the turnover request is based primarily on the alter-ego theory that is
spelled out in Count VIII. In general, a corporation “is a legal entity that exists separately and
distinctly from its shareholders, officers, and directors, who generally are not liable for the
corporation’s debts.” In re Rest. Dev. Grp., Inc., 394 B.R. 171, 183 (Bankr. N.D. Ill. 2008). A
court may disregard that separate legal existence “and pierce the veil of limited liability where the
corporation is merely the alter ego or business conduit of another person or entity.” Id. Here, the
Trustee argues that “WWW, Balmoral, Maywood, [and] Coast to Coast are alter egos of each
other, and further that WWW and Coast to Coast are simply alter egos of their shareholders, and
in particular the Johnston family and insider shareholders named here.” Am. Compl. ¶ 148. What
the Trustee seeks to do, in effect, is to treat the assets of all these defendants—independent of any
specific transfers or payments—as the assets of the bankruptcy estate, under the theory that the
defendants are alter egos of Balmoral and Maywood. Cf. Glick, 568 B.R. at 652 (“Gierum is
employing his veil-piercing theories partly to set up turnover claims that will force the assets of

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the alter egos into Glick’s bankruptcy estate.”). This Court does not read Veluchamy to bar this
type of action. At the same time, the Court acknowledges that this is an area where the governing
law is not entirely clear. For the sake of evaluating the motion to dismiss, the Court will assume
that the Trustee may seek a turnover on this basis; this does not prevent the defendants from
reasserting this challenge at any later stage in the litigation.
Attempts to pierce the corporate veil are “governed by the law of the state of
incorporation.” Stromberg Metal Works, Inc. v. Press Mech., Inc., 77 F.3d 928, 933 (7th Cir. 1996).
In the present case, the companies involved are organized under the laws of Illinois (Maywood
and Coast to Coast), Ohio (Balmoral), and Delaware (WWW). The various tests that these three
states employ to determine when the corporate veil may be pierced have some differences between
them, but are broadly similar. In Illinois, courts use a two-part test: “(1) there must be such unity
of interest and ownership that the separate personalities of the corporation and the individual no
longer exist; and (2) circumstances must exist such that adherence to the fiction of a separate
corporate existence would sanction a fraud, promote injustice, or promote inequitable
consequences.” Fontana v. TLD Builders, Inc., 362 Ill. App. 3d 491, 500, 840 N.E.2d 767, 776
(2005).9 Courts look at a variety of factors as part of this analysis, including:
inadequate capitalization; failure to issue stock; failure to observe
corporate formalities; nonpayment of dividends; insolvency of the
debtor corporation; nonfunctioning of the other officers or directors;
9

For comparison, Ohio law requires that, in order to pierce the corporate veil, “(1) control
over the corporation by those to be held liable was so complete that the corporation has no separate
mind, will, or existence of its own, (2) control over the corporation by those to be held liable was
exercised in such a manner as to commit fraud, an illegal act, or a similarly unlawful conduct or
an illegal act against the person seeking to disregard the corporate entity, and (3) injury or unjust
loss resulted to the plaintiff from such control and wrong.” Meinert Plumbing v. Warner Indus.,
Inc., 90 N.E.3d 966, 976 (Ohio Ct. App. 2017). Under Delaware law, to “state a ‘veil-piercing
claim,’ the plaintiff must plead facts supporting an inference that the corporation, through its alterego, has created a sham entity designed to defraud investors and creditors.” Crosse v. BCBSD,
Inc., 836 A.2d 492, 497 (Del. 2003).
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absence of corporate records; commingling of funds; diversion of
assets from the corporation by or to a shareholder; failure to
maintain arm’s length relationships among related entities; and
whether the corporation is a mere facade for the operation of the
dominant shareholders.
Jacobson v. Buffalo Rock Shooters Supply, Inc., 278 Ill. App. 3d 1084, 1088, 664 N.E.2d 328, 331
(1996).
In his May 2017 oral ruling, Judge Cassling rejected “the defendants’ assertions that the
trustee has not adequately pled claims for alter ego and piercing the corporate veil.” May 9, 2017
Hr’g Tr. at 17:11-14. He concluded that “[t]he Complaint contains enough factual detail to give
the defendants fair notice of the basis for relief sought, and the allegations plausibly suggest that
the trustee has a right to relief.” Id. at 17:14-18. The Court agrees with this assessment. To begin
with the corporate entities, the amended complaint pleads sufficient facts to allow one to
reasonably conclude that WWW, Balmoral, Maywood, and Coast to Coast were alter egos of each
other. According to the complaint, a single board of directors oversaw and controlled all of these
entities. Am. Compl. ¶ 2. These entities had no separate corporate offices. Id. ¶ 83. No separate
board meetings were held for each of them; instead, meetings were held by the single board for all
of them. Id. ¶ 84. Only minimal corporate records were kept that identified any degree of
separation between the various corporate entities. Id. ¶ 156. WWW had no employees at all, and
its only purpose was to serve as a conduit for transfers of money. Id. ¶ 15. The other three
companies shared overlapping officers and employees without regard to corporate form. Id. ¶ 85.
The amended complaint also contains allegations about more specific ways in which the
various corporate entities were used. For example, it alleges that the corporate entities had an
arrangement whereby profits were allocated to Coast to Coast whereas losses were allocated to
Balmoral and Maywood. Id. ¶ 154. This led to a distribution of $1.25 million in profits to Coast to
Coast shareholders that should have gone to Balmoral and Maywood. Id. The complaint further
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alleges that the director defendants adopted a so-called “Asset Protection Plan” by which assets
were moved away from Balmoral and Maywood in anticipation of a possible large judgment in
the RICO lawsuit. Id. ¶ 75. As part of this plan, Balmoral and Maywood made various “prepayments” of expenses, agreed to at a board meeting on November 24, 2014, including one such
payment of $412,475 to Coast to Coast. Id. In short, one could reasonably conclude, on the basis
of all the complaint’s well-pleaded allegations, that there was such a unity of interest among the
various corporate entities that they did not have separate legal personalities. One could also
conclude that to adhere to the fiction of legal separateness would sanction fraud, promote injustice,
or serve as a sham, causing injury by draining Balmoral and Maywood of funds that should have
belonged to them and otherwise would have been available to repay creditors.
The defendants do not spend a lot of energy challenging the plausibility of the veil-piercing
theory as to WWW, which existed (as alleged) solely to transfer funds between the tracks and the
Johnston family and its acolytes. They do, however, challenge the propriety of piercing the veil as
to Coast to Coast, which was not a shareholder of either WWW or the two tracks. See MTD 2324. As the defendants acknowledge, however, and as the cases they cite indicate, “it is possible for
a nonshareholder to be found personally liable under a veil-piercing theory.” Id. at 23; see also
Buckley v. Abuzir, 2014 IL App (1st) 130469 ¶ 29, 8 N.E.3d 1166, 1176-77 (“[T]he weight of
authority supports the conclusion that lack of shareholder status—and, indeed, lack of status as an
officer, director, or employee—does not preclude veil-piercing.”). What is required, as the more
general formulation of the alter-ego test quoted above shows, is simply that there must be such
unity of interest and ownership that the separate legal personalities of the two entities do not exist.
As the previous several paragraphs demonstrate, the complaint plausibly suggests that this is the
case with respect to all of the corporate entities in this case—including Coast to Coast. As the

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Seventh Circuit has put it, “the corporate form may be disregarded where one corporation is so
organized and controlled and its affairs so conducted that it is a mere instrumentality or adjunct of
another corporation.” Cont’l Cas. Co. v. Symons, 817 F.3d 979, 993 (7th Cir. 2016) (citation and
internal quotation marks omitted). That description fits the Trustee’s allegations as to Coast to
Coast as hand in glove.
Further, the Court has no difficulty concluding, based on the allegations of the complaint,
that piercing the veil of WWW and Coast to Coast to reach the individuals associated with them
is plausibly warranted as to the director defendants. As discussed above, the complaint amply
alleges that they orchestrated a scheme to transfer millions of dollars of Racing Act funds to
themselves. Where affiliated corporations disregard their legal distinctiveness and operate through
intermingled “business transactions, functions, property, employees, funds, [and] records,” id. at
996, it is appropriate to treat them as a single enterprise and to conclude that the enterprise exists
as the alter ego of those responsible for disregarding the legal distinctions between its component
corporations. That is precisely what happened in Symons, where the Seventh Circuit affirmed a
judgment entered against an insurance business and the father and sons who were its principals
and controlling shareholders. The business consisted of a number of related corporate entities, all
of which were “controlled as one enterprise by the Symons family,” and whose operations were
run “for the benefit of the Goran empire.” Id. The Seventh Circuit approved of the district court’s
conclusion that the individual family members and the corporate entities were all alter egos of one
another. Id. at 993-97; see also IGF Ins. Co. v. Cont’l Cas. Co., No. 1:01-cv-799-RLY-KPF, 2009
WL 4016608, at *63 (S.D. Ind. Oct. 19, 2009) (“[T]he court finds that CCC has proven, by a
preponderance of the evidence, that Alan Symons, Doug Symons, Gordon Symons, SIG, Goran,
Granite Re, IGF, IGFH, Pafco, and Superior were all alter egos of one another.”). Here, the director

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defendants took most of the relevant actions described in the complaint collectively, acting as a
single board. As alleged, they are responsible for both the conduct of the tracks, WWW, and Coast
to Coast, as well as for the failure to respect corporate formalities and the legal distinctions among
all of these organizations. This is enough to plausibly allege that the directors were alter egos of
WWW and Coast to Coast.
A stronger argument against veil-piercing might be made with respect to the non-director
defendants (Jane Johnston, Heather Johnston, and Michael Anton). Notably, these defendants did
not play a significant role in directing or controlling the actions of the tracks or the corporations.
The case for veil-piercing as to these defendants rests primarily on the allegation that they received
distributions from WWW and Coast to Coast. In addition, the Trustee alleges that all three of these
individuals “received this money after being told, including at shareholder meetings, that they were
receiving Racing Act funds money and further that Balmoral and Maywood were losing money
annually and that both entities were in a precarious financial position, facing insolvency.” Am.
Compl. ¶ 51. In this light, the Trustee argues, “the shareholders are properly found alter-egos
where they acquiesced to corporate formalities not being followed and received millions of dollars,
even after being told at shareholders’ meetings about the Tracks’ financial position and that Racing
Acts funds were funding these transactions.” Response 25. Wachovia Secs., LLC v. Banco
Panamerico, Inc., 674 F.3d 743 (7th Cir. 2012), on which the Trustee relies, supports this point.
In that case, the Seventh Circuit affirmed the district court’s decision to pierce the veil as to two
shareholders where the district court had also found that they were nonfunctioning officers. See id.
at 755, 757. The Seventh Circuit wrote that the “culpability shared by Jahelka and Nichols is
immaterial in determining whether the shareholders had a unity of interest and ownership. The

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shareholders, by failing to act as they would in a truly independent corporation, enabled the fraud
or injustice.” Id. at 755.
In Symons, the Seventh Circuit did, however, acknowledge that concern about the effect of
veil piercing on “innocent third-party shareholders” might warrant consideration in assessing the
propriety of veil piercing in the context of a publicly traded company, where many shareholders
would undoubtedly have no knowledge of the conduct making the company susceptible to veil
piercing. 817 F.3d at 996. The court of appeals nevertheless affirmed the district court’s decision
to pierce the veil to hold the principal family shareholders liable for corporate debt on an alter-ego
theory. Id. The allegations of this complaint warrant a similar conclusion: where the alleged looting
of corporate assets went to the benefit of not only the controlling principals but also to a close
circle of family and associates, concern for “innocent third-party shareholders” is misplaced. This
is particularly so in view of the Trustee’s allegations that all of the non-director individual
defendants were told, prior to accepting the distributions, both that Balmoral and Maywood were
facing insolvency and that they were being paid with Racing Act funds—meaning that they knew
or should have had reason to know that the payments were unlawful. In short, while the nondirector individual defendants represent the closest call, the Court concludes that at this stage the
Trustee has stated a plausible claim that they were also alter egos of WWW and Coast to Coast.
Finally, the Court also rejects the defendants’ contention that the Trustee engaged in
improper group pleading. An “allegation directed at multiple defendants can be adequate to plead
personal involvement.” Rivera v. Lake County, 974 F. Supp. 2d 1179, 1194 (N.D. Ill. 2013). A
complaint will not fail on the grounds of “group pleading” when it “refers adequately to specific
Defendants or subgroups of Defendants when possible, and includes enough factual content to
give those Defendants fair notice of the claims against them.” Id. at 1195. The fact that the

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Trustee’s amended complaint often groups the conduct of different individual defendants together
is not an appropriate basis for dismissal under the circumstances of this case. For the board
defendants, as noted above, see supra at 16 n.8, most of the relevant actions they took were done
through the board itself. To allege that the board took an action is to allege that the individual
directors did so as well, in their capacity as directors. And as for the non-director defendants, the
complaint alleges that all of them—meaning each of them as individuals—received distributions
after being told both that Balmoral and Maywood were facing insolvency and that they were
(unlawfully) being paid with Racing Act funds. See Am. Compl. ¶ 51. For each subgroup of
defendants, this is sufficient to give notice of the claims against them.10 The Trustee’s turnover
claim accordingly survives.
II.

Motion to Strike
Finally, the defendants have asked the Court to strike certain allegations made in the

amended complaint. Federal Rule of Civil Procedure 12(f) provides that a court “may strike from
a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous
matter.” A motion to strike under this rule “will not be granted unless the statement in question

10

It is also worth noting in this regard that the Trustee named only 19 of WWW’s 57
shareholders as defendants in this case. See MTD 19. (This calculation appears to count some
defendants multiple times, for those who are named both in an individual capacity and as a trustee,
but this does not change the legal analysis.) The defendants’ argument that the remaining
shareholders are necessary parties under Rule 19 has no merit. See id. at 25. The defendants
contend that the unnamed shareholders are indispensable parties to this action because “the Trustee
seeks a finding that the Tracks and WWW, are alter egos of each other, and further that WWW is
the alter ego of its shareholders.” Id. This misreads the complaint. While the complaint is not
entirely clear on this point, the most natural reading of the relevant portion—particularly when it
is interpreted in light of the rest of the complaint—is that it asks for a declaratory judgment that
the companies are alter egos of the named shareholders. See Am. Compl. ¶ 148. In this context,
the absence of the unnamed shareholders is not a barrier to the granting of relief, and the unnamed
shareholders have no interest in the action that would require them to be joined under Rule 19.
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bears no possible relation to the dispute, might cause unfair prejudice to a party, or could confuse
the issues.” Goede v. Mare Rest., No. 95 C 5238, 1995 WL 769766, at *5 (N.D. Ill. Dec. 29, 1995).
The portions of the complaint that the defendants would like the Court to strike concern
two would-be transactions. In the first, the amended complaint alleges that in November 2014, the
director defendants voted to “pre-pay” themselves $350,000 in directors’ fees for 2015,
representing $50,000 for each of them. See Am. Compl. ¶ 67. When Balmoral and Maywood’s
bankruptcy counsel learned of these transfers, they directed that the board members return these
payments, which they apparently did. Id. ¶ 68. In the second incident, which took place the
following month, the board allegedly approved a complicated transaction in which the board voted
to give one of the trusts involved in this case the option to buy all of Balmoral’s and Maywood’s
assets for far less than they were then valued. See id. ¶ 76. Five days later, again at the insistence
of bankruptcy counsel, the board voted to rescind this transaction. Id. ¶ 77. According to the
defendants, the inclusion of these allegations in the complaint is improper because the two
transactions never went forward. The defendants argue that the allegations should be stricken on
the grounds that they are irrelevant to the legal issues at hand and that they only serve to prejudice
the defendants. See MTD 26-27.
The defendants’ motion must be rejected. The allegations related to these two transactions
are relevant to the Trustee’s case. In particular, as the Trustee correctly points out, in Counts III,
IV, and V, the Trustee seeks to avoid a series of allegedly fraudulent transfers under 11 U.S.C.
§ 548. To invoke this mechanism, a plaintiff must demonstrate that there was either constructive
fraud or actual fraud; here, the Trustee has pleaded both in the alternative. For actual fraud, that
requires the Trustee to show that a transfer was made “with actual intent to hinder, delay, or
defraud any entity to which the debtor was or became, on or after the date that such transfer was

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made or such obligation was incurred, indebted.” 11 U.S.C. § 548(a)(1)(A). In other words, the
defendants’ intent in making the other transfers that the Trustee is seeking to avoid is at issue in
this case. The allegations regarding these two transactions are relevant to that issue. While these
transactions may have been unwound or rescinded—apparently at the urging of counsel—at the
very least, they are relevant to the subject of the director defendants’ intent around the time that
they were making the other decisions in question. This is enough to satisfy the very low bar of
bearing some “possible relation” to the dispute under Rule 12(f). The Court also rejects the
suggestion that the inclusion of these allegations in the complaint serves to confuse the issues or
prejudice the defendants. Any prospective jury would be more than capable of understanding the
difference between a transfer of money that was later rescinded and one that was not.
Perhaps recognizing the weakness of their case regarding the motion to strike, the
defendants do not even address this issue in their reply brief. The Court concludes that the
contested allegations are both relevant to this dispute and that they do not serve to confuse the
issues or prejudice the defendants. The motion to strike is therefore denied.
*

*

*

Because the Trustee’s amended complaint satisfies the Rule 12(b)(6) standard with respect
to all of his claims, the defendants’ motion to dismiss is denied. The Court also denies the
defendants’ motion to strike under Rule 12(f).

______________________
John J. Tharp, Jr.
United States District Judge

Dated: September 11, 2019

27