West Michigan Debt Collection, Inc. v. Weber, Jr. et al

Filing 81

ORDER-WRITTEN Opinion entered by the Honorable Philip G. Reinhard on 1/17/2018: For the reasons stated below, the motions of Holmstrom 56 and McGreevy 62 are granted in part and denied in part. The motions are granted as to Counts II, III, and I V and denied as to Count V. Counts II, III, and IV are dismissed without prejudice. Plaintiff shall file any amended complaint as to Counts II through IV on or before February 9, 2018. [see STATEMENT-OPINION] Signed by the Honorable Philip G. Reinhard on 1/17/2018. Electronic notice (kms)

IN THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF ILLINOIS
WESTERN DIVISION
West Michigan Debt Collection , Inc.,
Plaintiff,
vs.
Gerald H. Weber, Jr., et al.,
Defendants.

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Case No. 17 C 04308

Judge Philip G. Reinhard

ORDER
For the reasons stated below, the motions of Holmstrom [56] and McGreevy [62] are
granted in part and denied in part. The motions are granted as to Counts II, III, and IV and
denied as to Count V. Counts II, III, and IV are dismissed without prejudice. Plaintiff shall file
any amended complaint as to Counts II through IV on or before February 9, 2018.
STATEMENT - OPINION
Plaintiff, West Michigan Debt Collections, Inc., a Michigan corporation with its principal
place of business in Michigan, brings this action against defendants, Gerald H. Weber, Jr.
(“Weber”), Ronald E. Swenson (“Swenson”), Patti Weber (“Patti”), Joann Swenson (“Joann”),
Zachary Knutson (“Knutson”), Wildcat Capital Enterprises, LLC (“Wildcat”), North Rock Real
Estate, LLC (“North Rock RE”), North Rock Development Partners, LLC (“North Rock DP”),
First Boston Property Management Corporation (“First Boston”), Prairie Services, LLC
(“Prairie”), HolmstromKennedy, P.C. (“Holmstrom”) and McGreevy Williams, P.C.
(“McGreevy”) All defendants are citizens only of Illinois.1 The amount in controversy exceeds
$75,000. Subject matter jurisdiction is proper under 28 U.S.C. § 1332(a)(1).
Plaintiff is the owner of a Michigan state-court judgment against Weber and Swenson.
This action is an attempt to realize on that judgment under various theories against various
parties. Plaintiff seeks to register and enforce the Michigan state-court judgment against Weber
and Swenson (Count I). Plaintiff also asserts claims for fraudulent transfers (Count II & III),

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Weber, Swenson, Patti, Joann and Knutson are each citizens of Illinois. Patti and Joann
are the members of Wildcat. Patti, Joann and Knutson are the members of North Rock RE and
North Rock DP. Weber and Swenson are the members of Prairie. First Boston is an Illinois
corporation with its principal place of business in Illinois. Holmstrom and McGreevey are
Illinois professional corporation with their principal places of business in Illinois.
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fraud (Count IV), civil conspiracy and aiding and abetting (Count V), and asks for a declaratory
judgment declaring certain defendants to be the alter egos of Weber and Swenson and for the
piercing of the corporate veil as to certain defendants (Count VI). Holmstrom [56] and
McGreevy [62] move to dismiss counts II through V against them pursuant to Fed. R. Civ. P.
9(b), 12(b)(1) and 12(b)(6).2
PNC Equipment Finance, LLC (“PNC”) obtained a judgment against Weber and
Swenson in case number 11cv4922 in the United States District Court for the Northern District
of Illinois, Eastern Division (“PNC Case”), in the amount of $25,546,359.87. Patti, Weber’s
wife, and Joann, Swenson’s wife, formed Wildcat. Wildcat then purchased PNC’s judgment
against Weber and Swenson, along with all PNC’s “right, title, liens, encumbrances and interest
in” citations to discover assets issued in that case against Weber and Swenson. Wildcat, Weber
and Swenson then entered an agreed turnover order (“ATO”) transferring assets of Weber and
Swenson to Wildcat and crediting Weber and Swenson the sum of $500,000 against the
outstanding judgment. Wildcat also caused wage deduction orders (“WDOs)” to be entered
directing North Rock RE to deduct during each pay period 15% of Weber and Swenson’s nonexempt gross compensation until the judgment plus interest and costs is paid in full to Wildcat.
These wage deduction orders “have priority over any subsequent wage deduction order or lien
except for Spouse/Child Support Orders or Liens.”
The complaint alleges the ATO was entered to render Weber and Swenson insolvent for
the purpose of making them appear uncollectible to their legitimate creditors. The ATO
effectively diverted all non-exempt assets and income of Weber and Swenson to Wildcat in order
to frustrate their creditors’ ability to collect from them. Attached to plaintiff’s response to the
motions to dismiss, are answers to wage deduction summonses served by plaintiff on Weber and
Swenson in state court proceedings. In those proceedings, plaintiff registered its judgment
against Weber and Swenson. It then served wage deduction summonses on North Rock RE. The
answers filed by North Rock RE show the prior WDOs entered in favor of Wildcat in the PNC
Case. The answers show no available wages payable to plaintiff because of the prior WDOs.
The crux of plaintiff’s complaint is that the actions just described were undertaken to
“indefinitely frustrate the attempts of legitimate creditors from collecting” against Weber and
Swenson. Plaintiff contends all of the defendants played some role in this scheme and that their
actions were unlawful.
The first matter to address is jurisdiction. Holmstrom and McGreevy separately move to
dismiss pursuant to Fed. R. Civ. P. 12(b)(1) for lack of subject matter jurisdiction arguing the
case against them is not ripe for adjudication. The court is “obligated to consider its jurisdiction
at any stage of the proceedings and ripeness, when it implicates the possibility of [the] Court
issuing an advisory opinion, is a question of subject matter jurisdiction under the case-orcontroversy requirement.” Wisconsin Cent., Ltd. v. Shannon, 539 F.3d 751, 759 (7th Cir. 2008)

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The motion of the other defendants will be addressed in a separate order.
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(quotation marks and citations omitted). “Ripeness reflects constitutional considerations that
implicate Article III limitations on judicial power, as well as, prudential reasons for refusing to
exercise jurisdiction.” Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662, 670 n. 2
(2010) (quotation marks and citation omitted). “In evaluating a claim to determine whether it is
ripe for judicial review, we consider both the fitness of the issues for judicial decision and the
hardship of withholding court consideration.” Id. (quotation marks and citation omitted). “A
claim is not ripe for adjudication if it rests upon contingent future events that may not occur as
anticipated, or indeed may not occur at all.” Texas v. United States, 523 U.S. 296, 300 (1998)
(quotation marks and citations omitted). On a motion to dismiss for lack of subject matter
jurisdiction all well-pleaded factual allegations are accepted as true and all reasonable inferences
are drawn in favor of the plaintiff. Citadel Securities, LLC v. Chicago Bd. Options Exchange,
Inc., 808 F.3d 694, 698 (7th Cir. 2015). The court may “consider matters outside the pleadings,
such as the exhibits attached to Plaintiff’s Response.” Cochran v. BMA Management, Ltd., No.
08-cv-0215-DRH, 2008 WL 4530692, * 2 (S.D. Ill. Oct. 7, 2008), citing, Roman v. U.S. Postal
Serv., 821 F.2d 382, 385 (7th Cir. 1987).
Holmstrom and McGreevy argue plaintiff’s claims against them are not ripe because
plaintiff has not alleged it has made any failed attempt to collect its judgment from Weber and
Swenson that failed because of an act by Holmstrom or McGreevy. Nor, they argue, has plaintiff
alleged it has made any failed attempt to collect its judgment from Wildcat on a veil piercing or
alter ego theory that failed because of an act of Holmstrom or McGreevy. They contend the
claims against them are entirely speculative as the claims rest on a contingent future event that
may not occur – plaintiff being unable to collect its judgment against Weber, Swenson or
Wildcat. Plaintiff’s only response to the lack of ripeness argument is that the “claims are ripe
because the alleged conduct has siphoned all assets from Gerald Weber and Ronald Swenson
that otherwise would be available to pay Plaintiff’s judgment.”
The complaint alleges McGreevy, as counsel for Weber and Swenson, submitted the
ATO which had been prepared by Holmstrom, and that this was done to render Weber and
Swenson insolvent for the purpose of making them appear uncollectible to their legitimate
creditors. The ATO effectively diverted all non-exempt assets and income of Weber and
Swenson to Wildcat in order to frustrate their creditors’ ability to collect from them. The WDOs
were prepared by Holmstrom. In Exhibit C to plaintiff’s complaint, which is an order entered in
the PNC Case, Judge Bucklo found that Wildcat had conceded that a Holmstrom attorney came
up with the idea for forming Wildcat to purchase the PNC judgment. Attached to plaintiff’s
response to the motion to dismiss, are answers to wage deduction summonses served by plaintiff
on Weber and Swenson in state court proceedings. In those proceedings, plaintiff registered its
judgment against Weber and Swenson. It then served wage deduction summonses on North
Rock RE. The answers filed by North Rock RE show the prior WDOs entered in favor of
Wildcat in the PNC Case. The answers show no available wages payable to plaintiff because of
the prior WDOs.
Considering the allegations in the complaint and the information contained in plaintiff’s
response to the motions to dismiss, plaintiff has sufficiently alleged a ripe controversy. Plaintiff
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has shown an attempt to collect its judgment from Weber and Swenson that was thwarted by the
prior WDOs and ATO. Neither McGreevy nor Holmstrom cite any authority for the proposition
that the case is not ripe because the possible inability of plaintiff to collect its judgment from
Weber, Swenson, and Wildcat is a contingent future event that may not occur. The court did not
find any authority for such a proposition. The actions are alleged to have hindered and delayed
collection of the judgment. The allegations of this present injury are sufficient. This case is ripe
for adjudication and subject matter jurisdiction is secure.
Holmstrom and McGreevy each argue the complaint fails to meet the pleading
requirements of Fed. R. Civ. P. 9(b). Rule 9(b) provides: “In alleging fraud or mistake, a party
must state with particularity the circumstances constituting fraud or mistake.” They contend the
complaint does not allege fraud with sufficient particularity.
What is required in the way of particularity in pleading fraud
depends on the purpose of imposing such a heightened requirement
of pleading—so at odds with the notice-pleading theory of the
federal rules. The purpose is to minimize the extortionate impact
that a baseless claim of fraud can have on a firm or an individual.
In the typical commercial case there is a substantial interval
between the filing of the complaint and the completion of enough
pretrial discovery to enable the preparation and disposition of a
motion by the defendant for summary judgment. Throughout that
period a claim of fraud will stand unrefuted, placing what may be
undue pressure on the defendant to settle the case in order to lift
the cloud on its reputation. The requirement that fraud be pleaded
with particularity compels the plaintiff to provide enough detail to
enable the defendant to riposte swiftly and effectively if the claim
is groundless. It also forces the plaintiff to conduct a careful
pretrial investigation and thus operates as a screen against spurious
fraud claims.
Fidelity Nat’l Ins. Co. v. Intercounty Nat’l Title Ins. Co., 412 F.3d 745, 748-49 (7th Cir.
2005) (citations omitted).
In support of its claims against Holmstrom and McGreevy, plaintiff relies extensively on
a memorandum opinion and order entered by Judge Bucklo in the PNC Case and attached as an
exhibit to plaintiff’s complaint. Judge Bucklo’s memorandum opinion and order is not
dispositive of the issues here but, as an exhibit to plaintiff’s complaint, it “is a part of the
pleading for all purposes,” Fed. R. Civ. P. 10(c), so its contents are part of the facts alleged in the
complaint for purposes of the motion to dismiss.
In that order, the court granted the motion of First Midwest, a creditor of Weber and
Swenson, to set aside the ATO for fraud on the court. Fed. R. Civ. P. 60(d)(3). Judge Bucklo
found that, through Wildcat, Weber and Swenson perpetrated a fraud on the court, that the
scheme for perpetrating the fraud originated with a Holmstrom attorney who furthered the
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scheme by simultaneously working for Weber, Swenson and Wildcat, and that McGreevy
(counsel for Weber and Swenson in the PNC case) played a key role in perpetrating the fraud.
Judge Bucklo noted that several of the “badges of fraud” outlined in the IUFTA were evident in
the case (transfer of assets to insiders; debtors retaining possession of assets after transfer;
concealing the transfer; transfer made after debtor had been sued; transfer of substantially all
debtors’ assets. 740 ILCS 160/5(b)(1),(2),(3) & (5)). Judge Bucklo referred to those “badges of
fraud” for illustration purposes only, as no substantive cause of action for fraudulent transfer was
before the court. The only issue under consideration was whether the ATO should be vacated
under Rule 60(d)(3) for fraud on the court. Plaintiff argues Holmstrom and McGreevy are liable
here because they originated and participated in the scheme Judge Bucklo found in the PNC
Case to exhibit the listed “badges of fraud” and to be a fraud on the court.
Plaintiff’s argument goes most directly to Count V. While the IUFTA does not
specifically provide for civil conspiracy or aiding and abetting causes of action, these claims
may supplement claims under IUFTA. 740 ILCS 160/11; Rubbermaid Inc. v. Robert Bosch Tool
Corp., No. 09-1395, 2010 WL 3834410, * 5 (C.D. Ill. Sept. 23, 2010). “[C]ivil conspiracy
claims as well as aiding and abetting claims against non-transferee defendants where transfers
were made as part of a scheme to defraud, hinder, or delay creditors” have been recognized
under Illinois law. Id.; see also, Coleman v. Greenfield, 05-cv-3984, 2005 WL 2592538 (N.D.
Ill. Oct. 11, 2005). Conspiracy claims are available against attorneys where attorneys participate
in a conspiracy with their clients3, Thornwood, Inc.v. Jenner & Block, 799 N.E.2d 756, 768 (Ill.
App. 2003), as are aiding and abetting claims against attorneys who “knowingly and
substantially assist their clients in causing another party’s injury.” Id.
The allegations of the complaint are sufficient to plead conspiracy and aiding and
abetting causes of action (Count V) against Holmstrom and McGreevy. They are alleged to have
been active participants in designing and executing the plan to divert effectively all of Weber
and Swenson’s non-exempt assets to Wildcat with the purpose of rendering them insolvent and
apparently uncollectible. They are alleged to have worked together with Weber, Swenson, and
Wildcat to get the ATO and WDOs entered in order to prevent legitimate creditors from realizing
on the assets of Weber and Swenson. The WDOs resulted in no wages being available to
plaintiff when it served its own wage deduction orders on Weber and Swenson’s employer,
North Rock RE. McGreevy and Holmstrom have enough information to know what actions of

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Holmstrom and McGreevy argue Illinois law does not recognize a conspiracy claim
between an agent and its principal, Buckner v. Atlantic Plant Maintenance, Inc., 964 N.E.2d 565,
571 (Ill. 1998), and that because the attorney-client relationship is an agency relationship, no
conspiracy is possible between attorney and client. However, Thornwood states that a cause of
action for an attorney-client conspiracy is available. The court will not, based on what it has
before it at this time, find that Thornwood has incorrectly stated Illinois law as to the availability
of claims for attorney-client conspiracies. Holmstrom and McGreevy may re-visit this argument
at a later stage of the case.
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their’s are claimed to have injured plaintiff. There is no basis in the record that suggests the
pendency of these claims puts undue pressure on Holmstrom or McGreevy to settle these claims.

Count IV does not contain any specific allegations as to Holmstrom or McGreevy. Count
IV alleges “all Defendants actively participated in the fraudulent scheme to hinder, delay and
defraud the legitimate creditors” of Weber and Swenson. Holmstrom and McGreevy argue fraud
is not properly alleged because fraud requires misrepresentations by them to the plaintiff and no
such misrepresentations have been pled. Holmstrom and McGreevy are correct on this point.
Plaintiff’s use of the term “fraud” does not go to common law fraud, involving
misrepresentations, but instead goes to participation in the plan for Weber and Swenson to
violate IUFTA by making transfers to hinder or delay creditors. The allegations in this count
appear to duplicate the Count V conspiracy/aiding and abetting claims. If plaintiff wishes to
pursue an actual common law fraud claim, it will need to re-plead in order to provide sufficient
factual allegations of the elements of common law fraud.
The complaint also alleges in Counts II and III that McGreevy and Holmstrom each
were transferees of transfers that were fraudulent under the Illinois Uniform Fraudulent Transfer
Act (740 ILCS 160/1 et seq.) (“IUFTA”). Holmstrom is alleged to have been “the payee of
$300,000 that is deposited in Wildcat’s account.” Wildcat is alleged to have been directed by
Weber and Swenson to pay Holmstrom and McGreevy from Wildcat’s account “for debts that
Wildcat does not owe including but not limited to attorneys fees” that were owed instead by
Weber and Swenson. McGreevy and Holmstrom are alleged to have received payments from
Wildcat knowing the transfers were part of a “fraudulent scheme to defraud” the creditors of
Weber and Swenson. McGreevy and Holmstrom are alleged to have received transfers without
providing reasonably equivalent value and to have received payments from Wildcat for legal fees
incurred in representing Weber and Swenson rather than Wildcat.
The allegations as to fraudulent transfers to Holmstrom and McGreevy lack sufficient
specificity. Plaintiff alleges Holmstrom was the payee of $300,000 that was deposited in
Wildcat’s account. This allegation is unclear. Is it alleging Holmstrom received $300,000 and
then deposited it in Wildcat’s account? If so, the complaint does not allege who paid
Holmstrom this amount and it is not clear why Holmstrom depositing money into Wildcat’s
account would harm plaintiff. Or is it alleging $300,000 that was deposited into Wildcat’s
account by someone was paid to Holmstrom? If so, the source of the funds deposited is not
identified. Was it Weber or Swenson?
Wildcat is alleged to have paid McGreevy and Holmstrom for debts owed them by Weber
and Swenson. It is not clear why Wildcat paying a debt of Weber and Swenson is a fraudulent
transfer. Is plaintiff claiming any transfer by Wildcat is fraudulent because all its assets are
really the assets of Weber and Swenson? Are these transfers fraudulent because the legal fees
were incurred for services rendered in carrying out Weber and Swenson’s plan to hinder or delay
their creditors? There are allegations the transfers were not for reasonably equivalent value.
What facts lead plaintiff to this conclusion? There is not enough alleged to give McGreevy and
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Holmstrom a clear enough understanding of which transfers they are alleged to have received
that are claimed to be fraudulent under IUFTA.
For the foregoing reasons, the motions of Holmstrom [56] and McGreevy [62] are
granted in part and denied in part. The motions are granted as to Counts II, III, and IV and
denied as to Count V. Counts II, III, and IV are dismissed without prejudice. Plaintiff shall file
any amended complaint as to Counts II through IV on or before February 9, 2018.
Date: 1/17/2018

ENTER:

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United States District Court Judge

Electronic Notices. (LC)

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