Edelson PC v. Girardi et al
MEMORANDUM OPINION AND ORDER signed by the Honorable Matthew F. Kennelly on 7/19/2021: For the reasons stated in the accompanying Memorandum Opinion and Order, the Court denies Griffin's motion to dismiss [dkt. no. 41] and grants Lira's mo tion to dismiss [dkt. no. 43] in part, staying litigation on Count 1 (Unjust Enrichment - Constructive Trust) under 11 U.S.C. § 362(a)(3) unless and until the conclusion of the Girardi and Girardi Keese bankruptcy proceedings or until the bankru ptcy court orders otherwise. Both defendants are directed to answer all remaining claims by no later than August 9, 2021. Rule 26(a)(1) disclosures, unless already made, are to be made by August 16, 2021. The parties are directed to confer and att empt to agree upon a discovery and pretrial schedule and are to file by August 23, 2021 a joint status report setting out an agreed schedule or alternative proposed schedules. The case is set for a telephone status hearing on August 31, 2021 at 8:45 a.m., using call-in number 888-684-8852, access code 746-1053, though the Court reserves the right to vacate the status hearing if it determines a hearing is not needed. Counsel should wait for the case to be called before announcing themselves. (mk)
Case: 1:20-cv-07115 Document #: 91 Filed: 07/19/21 Page 1 of 36 PageID #:925
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
THOMAS GIRARDI, GIRARDI KEESE, )
ERIKA GIRARDI, EJ GLOBAL LLC,
GIRARDI FINANCIAL, INC., DAVID
LIRA, KEITH GRIFFIN, JOHNSON
HUTCHINSON & LIRA LLP, ROBERT )
FINNERTY, ABIR COHEN TREYZON )
SALO, LLP, CALIFORNIA ATTORNEY )
LENDING II, INC., STILLWELL
MADISON, LLC, and JOHN DOE 1-10, )
Case No. 20 C 7115
MEMORANDUM OPINION AND ORDER
MATTHEW F. KENNELLY, District Judge:
Edelson PC brought this suit seeking to recover money it contends it is owed and
disgorgement of money owed to clients in an underlying matter. Defendants David Lira
and Keith Griffin have moved to dismiss the claims against them. Pursuant to Federal
Rule of Civil Procedure 12(b)(2), Griffin contends that the Court lacks personal
jurisdiction over him. Lira, under Federal Rules of Civil Procedure 12(b)(1) and
12(b)(3), asserts that the Court lacks subject matter jurisdiction; this district is an
improper venue for litigating these claims; and the claims against him must be
automatically stayed under the Bankruptcy Code. 1
Lira includes Federal Rules of Civil Procedure 12(b)(2) and 12(b)(6) in his motion's title
but does not advance any arguments related to these rules.
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Edelson alleges that Lira and Griffin, then attorneys at the law firm Girardi Keese,
worked together with Thomas Girardi to embezzle settlement proceeds, commingled
those proceeds with attorneys' fees that belonged to Edelson, and shared in the illicit
At the center of the parties' dispute is litigation that followed a tragedy. In
October 2018, as the result of a fundamental system failure, Lion Air Flight 610 plunged
into the Java Sea. All 189 people on board were killed. Investigators determined that
the aircraft's anti-stall system had malfunctioned. The malfunction that caused Flight
610 to crash was attributed to design defects and other failures by the Boeing
Company, the plane's designer and manufacturer.
Nearly a dozen families of those who perished retained Girardi Keese, a
California-based firm, to represent them in litigation against Boeing. 3 Because the
litigation took place in Chicago, Girardi Keese contracted with Edelson so that Edelson's
attorneys would serve as local counsel and assist in the litigation and settlement
Two contracts governed the relationship between Girardi Keese and Edelson.
The first contract provided that Edelson would receive 50 percent of the total attorneys'
The following facts are drawn from Edelson's complaint. Because the Court is
considering a motion to dismiss, the Court accepts as true the well-pleaded factual
allegations in the complaint and views those allegations in the light most favorable to
Edelson. See Menzies v. Seyfarth Shaw LLP, 943 F.3d 328, 332 (7th Cir. 2019).
See In Re: Lion Air Flight JT 610 Crash, No. 18 C 7686 (N.D. Ill.).
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fees recovered by a specific portion of the clients. Griffin presented and executed this
contract. The second contract guaranteed that Edelson would receive 20 percent of the
total attorneys' fees recovered for another set of clients. Lira presented and executed
the second contract.
In 2020, the parties finalized individual settlements for each of the families Girardi
Keese and Edelson represented. The litigation against Boeing was dismissed on
February 24, 2020. Girardi Keese maintained total and exclusive control over
communications with the clients throughout the litigation and the post-settlement
process. Therefore, Boeing transferred the clients' settlement payments to Girardi
Keese, whose attorneys were responsible for disbursing funds to the clients.
Between February 2020 and December 2020, Edelson attorneys were in
frequent communication with Lira and Griffin about the status of the settlement. Initially,
through April and May, Griffin and Lira maintained that Girardi Keese had not received
any settlement funds because Boeing would fund the settlements only after it had
received all the clients' executed settlement agreements and releases. When Boeing
signaled publicly that it would consider bankruptcy, an Edelson attorney expressed
concern about the delay in finalizing the settlements. Lira responded by e-mail and
repeated that Boeing would release the settlement funds after receiving the agreements
and releases. Lira further explained that the settlement funds were paid by Boeing's
insurer and were secured in an escrow account.
In June 2020, Lira informed Edelson that he had left Girardi Keese. During a
phone call with an unidentified person at Edelson, Lira said the settlement had been
funded and that "the bulk of the funds were received and held by" Girardi Keese. Lira
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wondered which firm should be held responsible for paying Edelson's share of the
attorneys' fees—Girardi Keese or his new firm. Edelson asked whether the clients had
received their proceeds from the settlements, but Lira "failed to provide a coherent
answer." Compl. ¶ 46. Then, in July 2020, Lira sent a letter to Edelson asserting that
some of the firms' clients had received their settlement proceeds, and some had not.
With his letter, Lira included a portion of the attorneys' fees owed to Edelson and
indicated that this was a partial payment of what was owed to the firm.
Edelson did not cash the check. Instead, it sent a letter to both Girardi and Lira
inquiring on the status of the settlement payouts and declining to "accept any monies
until [it was] given adequate assurances that each and every one of our collective
clients . . . received the entirety of the monies owed." Id. ¶ 47. Lira responded but did
not say which clients had received full settlement payments and whether any clients
were still owed money. He further explained that because he was no longer with Girardi
Keese, he no longer had any ongoing involvement in the cases. Lira directed further
questions to Griffin and Girardi, Girardi Keese's sole equity partner.
In July 2020, Edelson's managing partner, Rafi Balabanian, took the lead in
communicating with Girardi Keese. When Balabanian contacted Girardi and Griffin, he
received many of the same answers Edelson's other attorneys had already received.
Griffin said that though Boeing had fully funded the settlements, the clients had not yet
received the full amount owed to them. He estimated that the clients were still owed
about half of the settlement amount. Griffin said he could not explain why the clients
had not received their full settlements or when they would receive the remaining
proceeds because Thomas Girardi had exclusive control over the firm's bank accounts,
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including the client trust accounts. And, Griffin said, Girardi was not available to answer
questions about this matter because he was unavailable due to serious illness.
Later in July, Balabanian was finally able to speak with Girardi. To the extent
Girardi provided an explanation for the delay, he blamed his illness and his clients' late
submission of the settlement agreements and releases. He promised to disburse the
remaining money within a few days and said he would follow up once he had done so.
Girardi kept neither promise. Balabanian spoke to Girardi again in August 2020—after
several unsuccessful attempts to touch base. Girardi took umbrage at Balabanian's
inquiries but nevertheless reported that he had made arrangement for his clients to
receive the remainder of the money owed.
In September 2020, Griffin told Balabanian that Girardi Keese had wired half of
the outstanding amount to clients, with the other half ready to be sent the next week.
But although Griffin said he would send proof of the wired funds, he never did.
Regardless, Edelson attorneys were under the impression that the clients had been
paid and all that remained to be paid were its own fees. In November 2020, Lira wrote
Edelson that Girardi had transferred some portion of the attorneys' fees generated from
the litigation to a litigation funder. Edelson expressed concern, again.
When Balabanian talked with Griffin next—Girardi was again receiving medical
treatment—he learned that Girardi had not paid his clients the remaining amount due.
Worse, Griffin said that he was skeptical that Girardi or the Girardi Keese firm had the
financial means to satisfy the firm's obligations to its clients or to Edelson. In the final
analysis, a substantial portion of the settlement funds were never disbursed to Girardi
Keese's clients, and Edelson was never paid the share of the attorneys' fees it was
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In December 2020—after Edelson filed the complaint in this case—a number of
Girardi Keese's creditors filed involuntary Chapter 7 bankruptcy petitioners against the
firm and Girardi in the United States Bankruptcy Court for the Central District of
California. The bankruptcy court opened Chapter 7 cases against the firm and Girardi,
and trustees have been appointed to manage the respective estates. Neither Lira nor
Griffin has filed for bankruptcy.
Before turning to the merits, the Court addresses the standards for considering
the defendants' motions. Griffin challenges the sufficiency of Edelson's complaint under
Rule 12(b)(2). A complaint is not deficient just because facts demonstrating personal
jurisdiction are not included among the complaint's allegations. Purdue Rsch. Found. v.
Sanofi-Synthelabo, S.A., 338 F.3d 773, 782 (7th Cir. 2003). When a defendant moves
to dismiss a complaint under Rule 12(b)(2), however, the plaintiff must establish the
existence of jurisdiction. Curry v. Revolution Lab'ys, LLC, 949 F.3d 385, 392 (7th Cir.
2020) (internal quotation marks omitted). When, as here, a court has not held an
evidentiary hearing (Griffin did not seek one), the plaintiff only bears "the burden of
making a prima facie case for personal jurisdiction." Id. at 393.
When considering a Rule 12(b)(2) motion, the Court is permitted to consider
affidavits, but "in evaluating whether the prima facie standard has been satisfied, the
plaintiff is entitled to the resolution in its favor of all disputes concerning relevant facts
presented in the record." Id. (alterations accepted) (internal quotation marks omitted).
Therefore, though the Court must accept as true "any facts in the defendants' affidavits
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that do not conflict with anything in the record," id., "[t]he plaintiff is entitled to have any
conflicts in the affidavits (or supporting materials) resolved in its favor." Purdue Rsch.
Found., 338 F.3d at 783.
Lira seeks dismissal under Rules 12(b)(1) and (b)(3). He first challenges
Edelson's standing under Rule 12(b)(1). When considering a challenge to subject
matter jurisdiction, "the court must first determine whether a factual or facial challenge
has been raised." Silha v. ACT, Inc., 807 F.3d 169, 173 (7th Cir. 2015). In a facial
challenge to subject matter jurisdiction, the defendant argues that the plaintiff has
insufficiently alleged a basis for subject matter jurisdiction. Id. Because the plaintiff is
the party who invoked federal jurisdiction, when faced with a facial challenge, he "bears
the burden of establishing the required elements of standing." Lee v. City of Chicago,
330 F.3d 456, 468 (7th Cir. 2003)
In a factual challenge, the defendant contends that "the complaint is formally
sufficient but . . . that there is in fact no subject matter jurisdiction." Apex Digital, 572
F.3d at 444 (internal quotation marks omitted). When weighing factual challenges, a
court must look past "the jurisdictional allegations of the complaint and view whatever
evidence has been submitted on the issue to determine whether in fact subject matter
jurisdiction exists." Id. (internal quotation marks omitted). Plaintiffs undergoing a factual
challenge to standing must establish standing by a preponderance of the evidence.
See Kathrein v. City of Evanston, 636 F.3d 906, 914 (7th Cir. 2011).
Rule 12(b)(3) allows dismissal for improper venue. RAH Color Techs., LLC v.
Quad/Graphics, Inc., No. 17 C 4931, 2018 WL 439210, at *1 (N.D. Ill. Jan. 16, 2018).
When reviewing a motion to dismiss under 12(b)(3), courts "assume[ ] the truth of the
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allegations in the plaintiff's complaint, unless contradicted by the defendant's affidavits.”
Deb v. SIRVA, Inc., 832 F.3d 800, 809 (7th Cir. 2016). The "low" burden of establishing
proper venue rests with the plaintiff. RAH Color Techs., LLC, 2018 WL 439210, at *1
("[T]he plaintiff's burden in defending a Rule 12(b)(3) motion is low because courts
resolve factual conflicts in the plaintiff's favor.").
Griffin's motion to dismiss
With the proper standards in mind, the Court begins its analysis by considering
the issue of personal jurisdiction. This case was brought under the Court's diversity
jurisdiction. See 28 U.S.C. § 1332. As such, the Court may exercise personal
jurisdiction only if an Illinois state court would have jurisdiction over the defendant. See
Citadel Grp. Ltd. v. Washington Reg'l Med. Ctr., 536 F.3d 757, 760 (7th Cir. 2008) ("A
federal court sitting in diversity has personal jurisdiction only where a court of the state
in which it sits would have such jurisdiction."). Illinois law permits its courts to exercise
jurisdiction to the extent allowed by both the Illinois and federal constitutions. Colucci v.
Whole Foods Mkt. Servs., Inc., No. 19-CV-8379, 2021 WL 1222804, at *2 (N.D. Ill. Apr.
1, 2021); 735 Ill. Comp. Stat. 5/2-209(c). Because "the Illinois Constitution is coextensive with the Federal Constitution, jurisdiction is proper as long as it meets due
process requirements." Id. (citing Noboa v. Barcelo Corporacion Empresarial, SA, 812
F.3d 571, 572 (7th Cir. 2016)); see also Citadel Grp. Ltd., 536 F.3d at 761 ("We have
previously noted . . . that no case has yet emerged where due process was satisfied
under the federal constitution but not under the Illinois constitution . . . . thus, we will
proceed with the federal analysis.").
There are two types of personal jurisdiction, general and specific. Goodyear
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Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011). General jurisdiction
exists only "in the limited number of fora in which the defendant can be said to be 'at
home.'" Advanced Tactical Ordnance Sys., LLC v. Real Action Paintball, Inc., 751 F.3d
796, 800 (7th Cir. 2014), as corrected (May 12, 2014). Specific jurisdiction, by contrast,
exists when a "defendant’s contacts with the forum" are "directly related to the conduct
pertaining to the claims asserted." Brook v. McCormley, 873 F.3d 549, 552 (7th Cir.
Griffins argues that the Court does not have general jurisdiction over him
because he is not and never has been domiciled in Illinois. Edelson makes no
counterargument. Therefore, the Court will limit its discussion to specific personal
jurisdiction. Cf. Rogers v. City of Hobart, 996 F.3d 812, 818 (7th Cir. 2021) ("Here, Mr.
Rogers focuses solely on [specific jurisdiction], so we need not evaluate whether he
could show general jurisdiction.").
Specific jurisdiction exists when: (1) "the defendant’s contacts with the forum
state . . . show that it purposefully availed itself of the privilege of conducting business in
the forum state or purposefully directed its activities at the state"; (2) "the plaintiff’s
alleged injury . . . [arose] out of the defendant’s forum-related activities"; and (3) "any
exercise of personal jurisdiction must comport with traditional notions of fair play and
substantial justice." Lexington Ins. Co. v. Hotai Ins. Co., Ltd., 938 F.3d 874, 878 (7th
Cir. 2019) (alterations accepted) (internal quotation marks omitted).
"[T]he nature of the purposeful-direction/purposeful-availment inquiry depends in
large part on the type of claim at issue." Felland v. Clifton, 682 F.3d 665, 674 (7th Cir.
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2012). To determine whether a defendant has purposefully availed himself of the
privilege of conducting business in the forum state, courts look to see if there are
"minimum contacts between the defendant and the forum State." Lexington Ins. Co.,
938 F.3d at 879 (internal quotation marks omitted). A defendant may not be "haled into
a jurisdiction solely as a result of random, fortuitous, or attenuated contacts, or of the
unilateral activity of another party or third person." Curry, 949 F.3d at 396 (internal
quotation marks omitted).
In a breach-of-contract suit, personal jurisdiction typically will turn "on whether
the defendant purposefully availed himself of the privilege of conducting business in the
forum state." Felland, 682 F.3d at 674; see also Tamburo v. Dworkin, 601 F.3d 693,
702 (7th Cir. 2010) ("Personal jurisdiction in breach-of-contract actions often turns on
whether the defendant 'purposefully availed' himself of the privilege of conducting
business or engaging in a transaction in the forum state."). By contrast, the personal
jurisdiction inquiry in a case involving an intentional tort typically focuses "on whether
the conduct underlying the claim was purposely directed at the forum state." Felland,
682 F.3d at 674 (alterations accepted) (internal quotation marks omitted) (citing
Tamburo, 601 F.3d at 702). There are three requirements to demonstrate "purposeful
direction" in the intentional torts context: "(1) intentional conduct (or 'intentional and
allegedly tortious' conduct); (2) expressly aimed at the forum state; (3) with the
defendant's knowledge that the effects would be felt—that is, the plaintiff would be
injured—in the forum state." Tamburo, 601 F.3d at 703.
"The relevant contacts are those that center on the relations among the
defendant, the forum, and the litigation." Advanced Tactical Ordnance Sys., 751 F.3d at
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801. But not all contacts are created equal. Purposeful availment is demonstrated
through the defendant's suit-related conduct and that conduct's substantial connection
with the forum state. Id. "The mere fact that defendant's conduct affected plaintiffs with
connections to the forum [state] does not suffice to authorize jurisdiction." Id.
(alterations accepted) (internal quotation marks omitted); see also Walden v. Fiore, 571
U.S. 277, 285 (2014) (stating that minimum contacts are "the defendant's contacts with
the forum [state] itself, not the defendant's contacts with persons who reside there").
"Contacts between the plaintiff or other third parties and the forum do not satisfy this
requirement." Advanced Tactical Ordnance Sys., 751 F.3d at 801.
Turning to the case before the Court, Edelson asserts that several facts
demonstrate Griffin's purposeful availment. First, in order to litigate in Illinois, Griffin
prepared and executed with Edelson one of the two contracts that retained Edelson as
local counsel. Second, Griffin submitted petitions to practice pro hac vice in Illinois,
designated a Chicago-based Edelson attorney as his associated Illinois attorney, and
registered with the Illinois Attorney Registration and Disciplinary Commission (IARDC).
And third, Griffin flew to Chicago on separate occasions to participate in in-person
mediations for the Lion Air case.
Griffin disagrees. He says he was, at all times identified in the complaint, "a W-2
employee" of Girardi Keese. Dkt. no. 42-9 ¶ 1. Given his status as an employee, Griffin
argues that during the relevant times, his actions were on behalf of his employer and
"cannot be manipulated into any individual conduct of purposeful availment." Griffin's
Br. at 10. In other words, Griffin contends that the contacts cited by Edelson are
irrelevant because they were undertaken not on his own behalf but on behalf of his
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With regard to the Court's jurisdiction over Edelson's contract claims (breach of
contract and unjust enrichment), the Court concludes that Griffin purposefully availed
himself "of the privilege of conducting business or engaging in a transaction" in Illinois.
See Tamburo, 601 F.3d at 702. Several facts support this conclusion. First, the feesharing contract that Griffin executed. The Supreme Court has "emphasized that
parties who reach out beyond one state and create continuing relationships and
obligations with citizens of another state are subject to regulation and sanctions in the
other State for the consequences of their activities." Burger King Corp. v. Rudzewicz,
471 U.S. 462, 473 (1985) (internal quotation marks omitted); see also Walden, 571 U.S.
at 285 ("Accordingly, we have upheld the assertion of jurisdiction over defendants who
have purposefully 'reach[ed] out beyond' their State and into another by, for example,
entering a contractual relationship that 'envisioned continuing and wide-reaching
contacts' in the forum State.").
At bottom, the complaint alleges that Griffin did just that. The complaint alleges
that Girardi Keese wanted to engage Edelson as local counsel so that Griffin could
In his reply brief, Griffin argues that personal jurisdiction is barred by Illinois's so-called
fiduciary shield doctrine, which "denies personal jurisdiction over an individual whose
presence and activity in the state in which the suit is brought were solely on behalf of his
employer or other principal." See Fletcher v. Doig, 125 F. Supp. 3d 697, 716 (N.D. Ill.
2014) (internal quotation marks omitted). That argument was not made in his initial
brief. Instead, Griffin cited only federal caselaw and (seemingly) argued that his status
as an employee precluded personal jurisdiction under federal due process principles.
See Griffin's Br. at 9–10. Thus, Griffin's argument under the fiduciary shield doctrine is
forfeited. See O'Neal v. Reilly, 961 F.3d 973, 974 (7th Cir. 2020) ("[W]e have
repeatedly recognized that district courts are entitled to treat an argument raised for the
first time in a reply brief as waived.").
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appear in Illinois courts on behalf of the Lion Air clients. 5 Griffin, on behalf of Girardi
Keese, signed and executed an agreement to this effect. He, along with other
defendants, received and benefited from the legal services provided by Edelson in
Illinois. Though Griffin argues that he was not a party to the agreement he signed—a
fact that is arguably neither dispositive in or even important to determining whether he
purposefully availed himself of Illinois and its laws—the complaint alleges otherwise.
See Compl. ¶ 106 ("Defendants GK, Girardi, and Griffin, and Lira breached their
contractual obligations by not paying Edelson its share of attorney's fees."). At this
stage, the Court accepts the well-pleaded allegations from the complaint. See Menzies,
943 F.3d at 332.
The second and third facts that Edelson offers to support personal jurisdiction are
that Griffin requested permission to practice pro hac vice in Illinois and registered with
the IARDC, the administrative agency charged with regulating Illinois's lawyers. Finally,
Edelson says, Griffin traveled to Chicago on two occasions to participate in in-person
mediations that resulted in the Lion Air settlements at issue in this case. See Walden,
571 U.S. at 285 ("And although physical presence in the forum is not a prerequisite to
jurisdiction . . . physical entry into the State—either by the defendant in person or
through an agent, goods, mail, or some other means—is certainly a relevant contact.").
These are not "random, fortuitous, or attenuated contacts." See Curry, 949 F.3d at 396
(internal quotation marks omitted). Rather, each was deliberate and directly connected
Griffin contends that he did not appear in the Lion Air Illinois state court proceedings or
make an appearance in federal court once the case was removed. Griffin's Reply Br. at
3. He does not explain why this would matter, but in any event his non-appearance
would not undermine or negate his other contacts with Illinois.
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to the matters at issue in the present case.
Regarding jurisdiction over Edelson's intentional tort claim (conversion), the
Court concludes that Edelson has sufficiently shown that Griffin's alleged conduct with
respect to that claim was purposely directed at Illinois. See Tamburo, 601 F.3d at 702.
There can be no question that the complaint alleges Griffin's conduct was intentional.
Edelson alleges that Griffin participated in the "theft and subsequent cover-up" of the
Lion Air settlement proceeds paid by Boeing. Pl.'s Resp. Br. at 17; see Compl. ¶¶ 40–
56. Likewise, there can be no doubt Griffin knew his conduct, to the extent it deprived
Edelson of fees it was owed, was aimed at or would be felt in Illinois, the state where
Edelson is based. Edelson alleges that Griffin and his co-defendants assumed control
of the agreed upon attorney's fees, deprived Edelson of this property, and despite
multiple demands refused to transfer Edelson the amount it was owed. See Compl. ¶¶
Griffin argues that because all of these contacts were in furtherance of his
employer's interest, he cannot have purposefully availed himself of Illinois and its laws.
That argument does not wash. (Again, Griffin has forfeited for present purposes the
fiduciary shield argument asserted for the first time in his reply brief.) Federal due
process principles do not permit Griffin to use his status as an employee to shield him
from personal jurisdiction. Calder v. Jones, 465 U.S. 783, 790 (1984) ("Petitioners are
correct that their contacts with California are not to be judged according to their
employer's activities there. On the other hand, their status as employees does not
somehow insulate them from jurisdiction. Each defendant's contacts with the forum
State must be assessed individually."). Having assessed Griffin's actions vis-à-vis
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Illinois, the Court concludes that Edelson has shown contacts sufficient to support
jurisdiction over Griffin here.
Arise out of or relate to
"The proper exercise of specific jurisdiction requires that the defendant's
minimum contacts with the forum state be suit-related." Curry, 949 F.3d at 401 (internal
quotation marks omitted). Until recently, the Supreme Court had not elaborated on this
requirement beyond stating that "the plaintiff must also show that his injury 'arises out of'
or 'relates to' the conduct that comprises the defendant's contacts." See Felland, 682
F.3d at 676; see also Tamburo, 601 F.3d at 708. This lack of elaboration has led to
"difficulty in applying" the requirement and "conflict among the circuits." Tamburo, 601
F.3d at 708. The split centers around "how close the causal connection must be; more
specifically, the circuits disagree about whether the defendant's contacts must have
been the factual cause of the plaintiff's injury, the factual and proximate cause, or
perhaps some intermediate standard between the two." Felland, 682 F.3d at 676. It
does not appear the Seventh Circuit has taken a firm position in this debate. See id. at
676–77 (citations omitted) ("We have suggested in passing that a mere 'but for' causal
relationship is insufficient to establish the required nexus between a defendant's
contacts and the underlying cause of action, but we have declined to definitively resolve
In a recent case, the Supreme Court clarified that this inquiry does not require
the claim to result from the in-defendant's state contacts. See Ford Motor Co. v.
Montana Eighth Jud. Dist. Ct., 141 S. Ct. 1017, 1026 (2021) ("[W]e have never framed
the specific jurisdiction inquiry as always requiring proof of causation—i.e., proof that
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the plaintiff's claim came about because of the defendant's in-state conduct."). Instead,
the Supreme Court's "most common formulation of the rule demands that the suit 'arise
out of or relate to the defendant's contacts with the forum.'" Id. In other words, specific
jurisdiction can be satisfied with a causal showing or "another 'activity or occurrence'
involving the defendant that takes place in the State." Id. (alterations accepted).
Griffin contends that Ford Motor is distinguishable because that case involved a
company that "systematically served a market in Montana and Minnesota for the very
vehicles that the plaintiffs allege malfunctioned and injured them in those States." See
id., 141 S. Ct. at 1028; Griffin's Reply Br. at 4–5. That difference might matter if the
Court were analogizing the facts in this case to the facts in Ford Motor. But the fact that
Griffin is not a multinational corporation with systematic contacts does not shield him
from the Supreme Court's more general proposition: the Court has "never framed the
specific jurisdiction inquiry as always requiring proof of causation." Ford Motor Co, 141
S. Ct. at 1026; see also id. at 1033 (Alito, J., concurring) ("Ford . . . asks us to adopt an
unprecedented rule under which a defendant's contacts with the forum State must be
proven to have been a but-for cause of the tort plaintiff ’s injury. The Court properly
rejects that argument . . ."). Thus, the Court is not persuaded that Ford Motor should
not apply in this case.
Griffin argues that all the claimed wrongdoing that led to this suit took place in
California and thus the Court may not exercise jurisdiction over him. Griffin Br. at 9.
("[A]ny injury suffered by the Plaintiff did not arise from any forum-related activity by
Defendant Griffin."). This argument is akin to the one made by the petitioner in Ford
Motor. See Ford Motor, 141 S. Ct. at 1026 (explaining Ford's view that "[j]urisdiction
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attaches 'only if the defendant's forum conduct gave rise to the plaintiff's claims.'"). The
Supreme Court rejected that argument, and so does this Court. See id. at 1026 ("Ford's
causation-only approach finds no support in this Court's requirement of a 'connection'
between a plaintiff's suit and a defendant's activities."). It may be true that many, if not
all of, the alleged actions regarding Griffin's involvement in withholding the attorneys'
fees took place in California. 6 If so, however, that would only shut down the "arises out
of" route to personal jurisdiction, not the "or related to" route.
Griffin's contacts with Illinois are undoubtedly related to Edelson's claims. In
order to appear in Illinois court, Griffin prepared and executed a contract that made
Edelson local counsel. That contract guaranteed Edelson a portion of the Lion Air
settlement and it is the basis for each of Edelson's claims against Griffin. For the
underlying case, Griffin executed petitions for permission to practice pro hac vice in
Illinois, appointed an Illinois-based Edelson attorney as his associated Illinois attorney,
and registered with the state's regulating body for attorneys. Griffin also flew to Chicago
to participate in mediations for the underlying litigation; these mediations led to the
settlement at the heart of this matter.
Along with his causation argument, Griffin also asserts that the Court lacks
personal jurisdiction over him for the same reasons discussed in Wallace v. Herron, 778
Griffin says that his all his communications with Edelson about the fee dispute took
place in California and were with Rafey Balabanian, a California-based lawyer. See
Griffin Br. at 11 (citing Dkt. no. 42-1). Therefore, Griffin claims, Edelson's claims cannot
have arisen out of his conduct in Illinois. Yet, Edelson has submitted an affidavit from
Ari J. Scharg, an Edelson attorney based in Illinois, who swears that Griffin
communicated with him about the settlements as well. See Dkt. no. 78-5. It is unclear if
Griffin and Scharg specifically discussed the fee dispute or even if these
communications were related to other allegations in the complaint.
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F.2d 391 (7th Cir. 1985), and Cote v. Wadel, 796 F.2d 981 (7th Cir. 1986). Those
cases, however, bear little resemblance to this one. In Wallace, the defendantattorneys "lacked the necessary minimum contacts with Indiana" because the asserted
contacts were attenuated. Wallace, 778 F.2d at 394. Three of the defendants had
never had contact with Indiana having "[n]ever set foot in Indiana, conducted business
in Indiana, or been licensed to practice law in Indiana." Id. Though one defendant had
come to Indiana "on one occasion to take depositions," the controversy at the heart of
the case did not arise out of her single contact with Indiana. Id. And although the
defendants filed motions on behalf of their clients, those motions were not filed in
Indiana. Id. The case for jurisdiction in Cote was even weaker than in Wallace. Cote,
796 F.2d at 984. The plaintiff brought a malpractice suit against his attorney and the
attorney's law firm, but "there was no act or omission" by the defendants that occurred
in the forum state. See id. Because the "only significant connection between the suit
and [the forum state] was that the plaintiff live[d] there," jurisdiction was improper. Id.
As established above, Griffin's contacts are far stronger than the contacts (or lack
thereof) in Wallace and Cote. Griffin traveled to Illinois to participate in the underlying
litigation. He contracted with an Illinois based firm so that he could appear in an Illinois
court. He executed the necessary paperwork to represent the Lion Air plaintiffs in
Illinois. Finally, Griffin's contacts with the state are related to Edelson's claims, as those
contacts are related to the underlying litigation and its settlement, out of which Edelson's
fee claims arise. Said differently, this suit has the "essential foundation" for specific
jurisdiction: a strong relationship between Griffin, Illinois, and the claims presented.
See Ford Motor, 141 S. Ct. at 1028. As such, the Court concludes that the connection
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between the plaintiff's claims and Griffin activities is "close enough to support
jurisdiction." See id at 1032.
Traditional notions of fair play and justice
There is one final step. The Court must ensure that the "exercise of jurisdiction
does not offend traditional notions of fair play and substantial justice." Curry, 949 F.3d
at 402 (internal quotation marks omitted). To make this determination, the Court may
the burden on the defendant, the forum State's interest in adjudicating the
dispute, the plaintiff's interest in obtaining convenient and effective relief,
the interstate judicial system's interest in obtaining the most efficient
resolution of the underlying dispute, and the shared interest of the several
States in furthering fundamental substantive social policies.
Purdue Rsch. Found., 338 F.3d at 781 (7th Cir. 2003) (alterations accepted). "When
the defendant's minimum contacts with the forum are relatively weak (although
existent), these considerations may militate in favor of the exercise of jurisdiction." Id.
Griffin claims that exercising personal jurisdiction over him would run afoul of
traditional notions of fair play and substantial justice, for two reasons. First, he says "it
cannot be disputed that the burdens on [him] to litigate [are] substantial" because he is
a "now-unemployed attorney residing in California." Griffin Br. at 13. Though the Court
sympathizes with Griffin, it is not persuaded by this argument. "[A]s long as the plaintiff
has made a threshold showing of minimum contacts, that showing is generally defeated
only where the defendant presents 'a compelling case that the presence of some other
considerations would render jurisdiction unreasonable.'" Curry, 949 F.3d at 402.
Griffin's personal circumstances, while unfortunate, are not unreasonable or a proper
basis to decline to exercise jurisdiction over him.
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Griffin's second argument is that Edelson cannot obtain "convenient and effective
relief" in this Court because Girardi Keese has filed for bankruptcy and cannot be sued
or cross-claimed. Griffin Br. at 14 (internal quotation marks omitted). As discussed
earlier, the complaint alleges that Griffin was a party to the contract. See Compl. ¶ 106
("Defendants GK, Girardi, and Griffin, and Lira breached their contractual obligations by
not paying Edelson its share of attorney's fees."). If Edelson establishes this, Griffin
would be individually liable on the breach-of-contract claim. And even if the complaint
did not assert a breach of contract against Griffin, he is still named as a defendant on
Edelson's conversion claim and would be individually liable on that claim if Edelson
prevails. The fact that Griffin cannot assert a claim against Girardi for contribution or
indemnification in any place other than bankruptcy court has no bearing on the proper
exercise of jurisdiction here.
In short, Griffin had sufficient contacts with Illinois that are clearly related to the
claims in this suit. The Court is convinced that exercising jurisdiction over Griffin would
not offend traditional notions of fair play and substantial justice. For these and the other
reasons discussed, the Court concludes that it may exercise personal jurisdiction over
Griffin and therefore denies his motion to dismiss.
Lira's motion to dismiss
Next, the Court considers Lira's arguments for dismissal.
In federal courts, a plaintiff must meet the "irreducible constitutional minimum of
standing" to establish that his claim is justiciable. See Lujan v. Defs. of Wildlife, 504
U.S. 555, 560 (1992). To establish Article III standing, a plaintiff must demonstrate that:
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(1) he "has suffered an injury in fact that is (a) concrete and particularized and (b) actual
or imminent, not conjectural or hypothetical"; (2) his "injury is fairly traceable to the
challenged action of the defendant"; and (3) "it is likely, as opposed to merely
speculative, that [his] injury will be redressed by a favorable decision." Silha, 807 F.3d
173 (internal quotation marks omitted).
In drive-by fashion, Lira argues that Edelson may not assert its claims for
conversion, nor seek the remedies of constructive trust or accounting, because Edelson
seeks to recover fees on behalf of the Lion Air clients—the plaintiffs in the underlying
case, with whom Edelson no longer has an attorney-client relationship with. 7 Though
this argument is barely developed in Lira's initial brief, as Edelson itself recognizes, the
Court is "duty-bound" to consider standing whenever the question arises. See
Robertson v. Allied Sols., LLC, 902 F.3d 690, 698 (7th Cir. 2018) ("Article III's
requirements must be continuously met throughout the life of a case.").
Lira does not say whether his challenge to Edelson's standing is a facial
challenge or a factual one, so the Court will consider Lira's arguments under both
analyses, starting with the facial challenge. When considering a facial challenge to
subject matter jurisdiction, the Court accepts "all well-pleaded factual allegations as true
and draw[s] all reasonable inferences in favor of the plaintiff." Silha, 807 F.3d at 173.
As noted earlier, the plaintiffs have the burden of establishing that they meet the
requirements for standing. See Disability Rts. Wis., Inc. v. Walworth Cty. Bd. of
Supervisors, 522 F.3d 796, 800 (7th Cir. 2008). The Court considers Edelson's
Lira does not challenge Edelson's standing to assert its the breach-of-contract claim.
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standing on each of the challenged remedies or claims separately.
First up is the request for an accounting. 8 Edelson has sufficiently alleged that it
suffered an injury in fact (the loss of attorneys' fees it was owed) and that its injury was
the result of the defendants' actions (the alleged theft and cover-up). Lira does not
contest this. Instead, Lira asserts that by pursuing an accounting, Edelson is seeking
relief on behalf of the Lion Air clients, not on its own behalf. Specifically, Lira points to
language in the complaint where Edelson says that it seeks "an accounting of all funds
transferred from Boeing that were intended for any GK client (inclusive of any transfers
to third parties associated with, or transfers made for the benefit of, GK) related to
settlements in In Re: Lion Air Flight JT 610 Crash and a full accounting of what
subsequently became of those funds." Compl. ¶ 16; see also id. at 29, ¶ B.
The Court disagrees. The availability of an accounting is dependent on the facts
of the case. See Tufo v. Tufo, 2021 IL App (1st) 192521, ¶ 93. Looking to the
complaint's full allegations, it is plain that Edelson does not seek this remedy on behalf
of the Lion Air plaintiffs. Edelson claims that it has no knowledge of the "whereabouts,
distribution, allocation, or transfer" of the "large, but confidential sum of money" from the
settlement. Compl. ¶¶ 97–98. And because Edelson is not certain which defendant "is
responsible, in what amount, for its damages," it seeks an accounting of the all
transactions or records relating to the settlement. Id. ¶¶ 99–100. An accounting of all
An accounting is an equitable remedy. See Kempner Mobile Elecs., Inc. v. Sw. Bell
Mobile Sys., 428 F.3d 706, 715 (7th Cir. 2005). A plaintiff seeking the remedy of an
accounting must allege "the absence of an adequate remedy at law." Id. Moreover, the
plaintiff must allege at least one of the following: "(1) a breach of a fiduciary relationship,
(2) a need for discovery, (3) fraud, or (4) the existence of mutual accounts which are of
a complex nature." Id.
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Lion Air transactions makes sense and seems prudent, as the fee-sharing agreements
between Edelson and Girardi Keese are dependent on the settlement amount for the
Lion Air clients. In other words, in order for Edelson to know and prove what it is owed,
it reasonably needs to "trace the stolen funds and . . . understand the nature of the
financial relationship" among the defendants. Pl.'s Resp. Br. at 6. That is enough to
confer standing for this equitable remedy.
Next is Edelson's request for a constructive trust as a remedy for the defendants'
unjust enrichment. 9 Again, Lira asserts that Edelson lacks standing to pursue this
remedy because it is for the benefit of the Lion Air plaintiffs. In its complaint, Edelson
alleges that it has a "contractually created property right to specific percentages of the
attorneys' fees" generated by the Boeing settlement funds. Compl. ¶¶ 86–87. Edelson
further alleges that the funds owed to Edelson are "commingled with the funds owed to
the Lion Air clients" and that the defendants have distributed these funds among
themselves. Id. ¶ 88. Edelson says that it believes "principles of equity and good
conscience, as well as the Rules of Professional Conduct," require that the Lion Air
plaintiffs receive what is owed to them before Edelson receives what it is owed. Id. ¶
94. For this reason, Edelson asks that a constructive trust be imposed "for the benefit
of the Lion Air clients first, then for the benefit of Plaintiff, if sufficient funds remain in
Like an accounting, constructive trust is an equitable remedy. See DeGeer v. Gillis,
707 F. Supp. 2d 784, 796 (N.D. Ill. 2010) ("[C]ourtsf have consistently affirmed that the
imposition of a constructive trust is a particular type of remedy."). "A constructive trust
is a device used . . . to compel one who unfairly holds property to convey the property to
the party to whom it justly belongs." People ex rel. Hartigan v. Candy Club, 149 Ill. App.
3d 498, 502, 501 N.E.2d 188, 191 (1986). Constructive trusts may be imposed when "a
party has received money properly belonging to another under circumstances that, in
equity, the party ought not be allowed to retain." Jackson v. Callan Pub., Inc., 356 Ill.
App. 3d 326, 334, 826 N.E.2d 413, 423 (2005).
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trust." Id. ¶ 95.
The Court agrees with Lira, in part. To the extent Edelson seeks a constructive
trust to be imposed for the benefit of the Lion Air clients, it lacks the standing to do so.
All parties agree that Edelson no longer has an attorney-client relationship with the Lion
Air plaintiffs. Without that relationship, Edelson lacks standing to vindicate those
plaintiffs' rights. Kowalski v. Tesmer, 543 U.S. 125, 129–30, (2004) ("We have adhered
to the rule that a party 'generally must assert his own legal rights and interests, and
cannot rest his claim to relief on the legal rights or interests of third parties' . . . . [W]e
have recognized an [existing] attorney-client relationship as sufficient to confer thirdparty standing."). Though Edelson argues that principles of equity and good
conscience, as well as the Illinois Rules of Professional Conduct, require it to seek a
constructive trust for both itself and the Lion Air clients, that argument cannot overcome
the requirement for Edelson to have standing to assert its claims and to seek its
requested remedies. See Friends of the Earth, Inc. v. Laidlaw Env't Servs. (TOC), Inc.,
528 U.S. 167, 185 (2000) ("[P]laintiff must demonstrate standing separately for each
form of relief sought."). Edelson cites no case to the contrary, and the Court has not
been able to identify any.
But the fact that Edelson lacks standing to seek a constructive trust on behalf of
the Lion Air plaintiffs does not mean it lacks standing to seek a constructive trust over
the property belonging to Edelson that it alleges the defendants unjustly hold. See
Jackson, 356 Ill. App. 3d at 334, 826 N.E.2d at 423. Again, Lira does not contest that
Edelson has an injury in fact and that its injury was the result of the defendants' actions.
And there is no question that Edelson's injury can be redressed by the imposition of a
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constructive trust. If Lira and the other defendants are in possession of money to which
they are not entitled because it is owed to Edelson and "in equity and good conscience
[they] ought not retain it, a constructive trust can be imposed to avoid unjust
enrichment.” See Nat'l Union Fire Ins. Co. of Pittsburgh v. DiMucci, 2015 IL App (1st)
122725, ¶ 76, 34 N.E.3d 1023, 1045 (internal quotation marks omitted).
Third to consider is Edelson's claim for conversion. In its complaint, Edelson
alleges that it "has an absolute and unconditional right to the immediate possession of
the attorneys' fees, once the appropriate settlement funds have been transferred to the
Lion Air clients." Compl. ¶ 117. It further alleges that though it "made numerous
demands" on the defendants for an accounting and for payment, its requests were
ignored. See id. ¶ 118. Instead, the defendants "assumed control and ownership over
the attorneys' fees and refused to provide them." Id. ¶ 119.
As with the previously discussed remedies, Lira argues that Edelson lacks
standing to pursue its conversion claim because it seeks to vindicate the rights of the
Lion Air plaintiffs. The Court disagrees. The only mention of the Lion Air clients in
Edelson's claim for conversion is an allegation in which Edelson explains that under the
fee-sharing contracts, it "has an absolute and unconditional right to the immediate
possession of the attorneys' fees, once the appropriate settlement funds have been
transferred to the Lion Air clients." Compl. ¶ 117. That allegation does not amount to
seeking a remedy on behalf of a third party. Unlike with its unjust enrichment claim and
with the remedy of constructive trust, Edelson limits its conversion claim and the
resulting damages to its "share of the attorneys' fees." Id. ¶ 120. Given that Edelson
has sufficiently alleged injury, causation, and redressability, the Court concludes that
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Edelson has standing to bring its conversion claim.
Consideration of Lira's standing challenge as a factual attack produces the same
results as the facial attack did. Though "a facial attack does not challenge the alleged
facts themselves . . . . a factual attack does [by] testing the existence of the jurisdictional
facts underlying the allegations." Bazile v. Fin. Sys. of Green Bay, Inc., 983 F.3d 274,
279 (7th Cir. 2020) (citation omitted). And although "a plaintiff undergoing only a facial
attack enjoys treatment of her allegations as true," a plaintiff undergoing a factual attack
does not have that benefit. Id. Instead, courts considering factual attacks to subject
matter jurisdiction "may consider and weigh evidence outside the pleadings to
determine whether it has power to adjudicate the action." Id. Furthermore, once a
factual attack is launched, "the plaintiff must support each controverted element of
standing with . . . a showing by a preponderance of the evidence, or proof to a
reasonable probability, that standing exists." Id. at 278 (citations omitted).
Looking to Lira's arguments, he only attacks Edelson's standing for the
constructive trust, conversion, and accounting on the basis that the remedies and claim
are premised on the rights of plaintiffs Edelson no longer represents. The Court has
already concluded that neither the conversion claim nor the request for an accounting
directly implicate the rights of third parties. Lira has produced no evidence that would
undermine that conclusion. In fact, the only evidence outside the pleadings that Lira
cites are three exhibits that show that Edelson is no longer representing the Lion Air
plaintiffs—a fact Edelson does not dispute. See dkt. nos. 44-9, 44-10, 44-11, 44-12,
With regard to the constructive trust claim, because Edelson does not dispute
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that it has no existing attorney-client relationship with the Lion Air plaintiffs, the Court's
analysis on this issue is likewise unchanged. As noted above, Edelson cannot seek a
constructive trust on behalf of the Lion Air plaintiffs. But, for the reasons already
discussed, Edelson may still seek a constructive trust for the property it alleges it is
entitled to that the defendants unjustly hold.
There is one last matter to address before moving on. In addition to the portions
of the complaint already considered above, Lira cites a few other portions of the
complaint that reference the Lion Air clients, their injuries, or what is owed to them.
These statements are not coupled with any particular claim or remedy. See Compl. at
1–2 ("Plaintiff . . . brings this lawsuit to recover monies due and owing to itself, as well
as to seek the disgorgement of all monies due and owing to all clients of Girardi Keese
in the matter of In Re: Lion Air Flight JT 610 Crash"); id. ¶ 7 ("And while the present
Complaint is brought in part to enforce Plaintiff’s fee agreement with GK, those fees are
not the primary focus of this Complaint; rather, this Complaint also seeks to force GK . .
. to uphold its fiduciary duty to the surviving families of the victims of Lion Air Flight 610
that it agreed to represent"); id. ¶ 16 ("this lawsuit requests that the Court order . . . (2)
the disgorgement of all [Boeing settlement] funds from any Defendant (or any non-party)
who is improperly in receipt of those funds; (3) the transfer of those funds to the
appropriate client recipients; and, only after those steps have been accomplished (and
any other remedial steps the Court deems warranted), (4) the payment of the
contractually required attorneys’ fees to Edelson PC"); id. at 29 ¶ F (asking the Court to
require "the transfer of all Lion Air client funds to the appropriate client recipients"); id. at
30 ¶ G (requesting that the Court require "the payment of all contractually required
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attorneys’ fees to Edelson PC, only after the Court confirms the full and complete
payment to the Lion Air clients).
Edelson says that these statements are best read in line with its view that the
"principles of equity and good conscience, as well as the Rules of Professional
Conduct," require that the Lion Air plaintiffs receive what is owed to them before
Edelson receives what it is owed. See id. ¶ 94. But, as the Court has already
explained, to the extent Edelson seeks any remedy on behalf of the Lion Air plaintiffs, it
lacks standing to do so. Edelson admits it no longer has an attorney-client relationship
with the Lion Air plaintiffs, and without some other basis for standing, Edelson is
permitted to vindicate only its own interests and rights. See Kowalski, 543 U.S. at 129–
In sum, Edelson has standing to seek the equitable remedies of constructive trust
and accounting, as well as to pursue its claim for conversion. It may not, however, seek
relief on behalf of the Lion Air plaintiffs.
Automatic bankruptcy stay
Lira next argues that this suit should be automatically stayed pursuant to 11
U.S.C. § 362(a)(1) and (a)(3). 10 The automatic stay is a powerful tool. Fox Valley
Const. Workers Fringe Ben. Funds v. Pride of Fox Masonry & Expert Restorations, 140
F.3d 661, 666 (7th Cir. 1998). The relevant provisions of section 362 read:
(a) Except as provided in subsection (b) of this section, a petition filed under
section 301, 302, or 303 of this title, or an application filed under section
5(a)(3) of the Securities Investor Protection Act of 1970, operates as a stay,
applicable to all entities, of--
It is worth noting that the Court has already stayed the case as to Girardi and Girardi
Keese based on their pending bankruptcy cases. See Dkt. no. 48.
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(1) the commencement or continuation, including the issuance or
employment of process, of a judicial, administrative, or other action or
proceeding against the debtor that was or could have been commenced
before the commencement of the case under this title, or to recover a claim
against the debtor that arose before the commencement of the case under
(3) any act to obtain possession of property of the estate or of property from
the estate or to exercise control over property of the estate.
11 U.S.C. § 362(a).
Courts begins its analysis by considering section 362(a)(1). "On the filing of a
bankruptcy petition, the stay automatically stops any other proceedings against the
debtor." Fox Valley, 140 F.3d at 666. Non-bankrupt third parties generally are not
protected by the stay, unless the debtor and the non-bankrupt third party "have such a
similarity of interests that failure to protect the third party will mean that the assets of the
debtor itself will fall into jeopardy." Id. (citing See A.H. Robins Co. v. Piccinin, 788 F.2d
994, 998 (4th Cir. 1986)). Both Girardi and Girardi Keese have filed for bankruptcy in
the Central District of California. Lira, however, has not filed for bankruptcy, nor has an
involuntary bankruptcy petition been filed against him. Instead, he contends the stay
should apply to claims against him because he has a right to indemnification against
Girardi Keese or Girardi under equitable principles and a statutory right to
indemnification under California law.
To establish that he has a "similarity of interests" with Girardi and Girardi Keese
such that this suit should be stayed, Lira says that this case presents an "unusual
situation" that falls within an exception to the general rule. See A.H. Robins Co., 788
F.2d at 999 (An example of an "unusual situation" is "a suit against a third-party who is
entitled to absolute indemnity by the debtor on account of any judgment that might
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result against them in the case."). That exception would apply the automatic stay
pursuant to section 362(a)(1), where "'there is such identity between the debtor and the
third-party defendant that the debtor may be said to be the real party defendant and that
a judgment against the third-party defendant will in effect be a judgment or finding
against the debtor.'" Matter of Fernstrom Storage & Van Co., 938 F.2d 731, 736 (7th
Cir. 1991) (quoting A.H. Robins Co., 788 F.2d at 999).
The problem with Lira's argument is that he is presenting it to the wrong court.
His contention must be adjudicated by the bankruptcy court in California, not this Court.
Lira misunderstands the applicability of A.H. Robins Co. when he suggests that section
362(a)(1), alone, results in a stay of the proceedings against him in this case. The
purpose of section 362(a) "is to protect the debtor from an uncontrollable scramble for
its assets in a number of uncoordinated proceedings in different courts, to preclude one
creditor from pursuing a remedy to the disadvantage of other creditors.” Fox Valley,
140 F.3d at 66 (internal quotation marks omitted). The plain words of section 362(a)(1)
do not "touch proceedings to enforce a court order against non-bankrupt third parties."
See id. In other words, section 362(a)(1) does not, on its face, automatically stay
proceedings involving a non-debtor. That is presumably why in A.H. Robins Co., the
case Lira relies upon, the court premised the exceptions to the general rule regarding
the applicability of section 362(a)(1) on bankruptcy courts' authority under section
362(a)(1) and 11 U.S.C. § 105, which gives bankruptcy courts the authority to issue an
injunction that is necessary or appropriate to carry out the provisions of the Bankruptcy
Code. See A.H. Robins Co., 788 F.2d at 1002 ("The statutory power of the bankruptcy
court to stay actions involving the debtor or its property is not, however, limited to
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section 362(a)(1) and (a)(3). It has been repeatedly held that 11 U.S.C. § 105 which
provides that the bankruptcy court 'may issue any order, process, or judgment that is
necessary or appropriate to carry out the provisions of this title,' 'empowers the
bankruptcy court to enjoin parties other than the bankrupt' from commencing or
The Seventh Circuit has not yet had the opportunity to consider the correct
process for invoking an exception to the general rule regarding the applicability of
section 362(a)(1). That is because in the handful of times the Seventh Circuit has
considered A.H. Robins Co or other exceptions to section 362(a)(1), it has found that
the non-debtor does not qualify for the exceptions. See Harley-Davidson Credit Corp. v.
JHD Holdings Inc., No. 19-CV-155-JDP, 2020 WL 7078828, at *1 (W.D. Wis. Dec. 3,
2020); see, e.g., Matter of Fernstrom Storage & Van Co., 938 F.2d at 736 (deciding
non-debtor did fit within the exception from A.H. Robins Co. or another case and
affirming the bankruptcy court); Fox Valley, 140 F.3d at 666 (rejecting attorney's
argument that "the automatic stay deprived the district court of jurisdiction to sanction
Other courts have considered A.H. Robins Co., however, and they have come to
same conclusion this Court has. See, e.g., Patton v. Bearden, 8 F.3d 343, 349 (6th Cir.
1993) ("It should be noted that . . . extensions [of section 362(a)(10] to non-debtors,
although referred to as extensions of the automatic stay, were in fact injunctions issued
by the bankruptcy court after hearing and the establishment of unusual need to take this
action to protect the administration of the bankruptcy estate. Even if we were to adopt
the unusual circumstances test, the bankruptcy court would first need to extend the
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automatic stay under its equity jurisdiction pursuant to 11 U.S.C. § 105."); In re Chugach
Forest Prods., Inc., 23 F.3d 241, 247 (9th Cir. 1994) (citing Patton and reaching the
same conclusion); Harley-Davidson Credit Corp., 2020 WL 7078828, at *2 (citing both
Patton and Chugach and reaching the same conclusion).
Even if Lira could invoke section 362(a)(1) here, the Court would deny a stay
under that provision. Lira asserts that a stay under section 362(a)(1) is required
because he has a right of indemnification by Girardi or Girardi Keese under California's
Labor Code. Lira's Br. at 8; see A.H. Robins Co., 788 F.2d at 999 (An example of an
"unusual situation" is "a suit against a third-party who is entitled to absolute indemnity
by the debtor on account of any judgment that might result against them in the case.").
Lira has not shown that he is "entitled" to "absolute indemnity." See id. Section 2802(a)
of the California Labor Code provides that:
(a) An employer shall indemnify his or her employee for all necessary
expenditures or losses incurred by the employee in direct consequence of
the discharge of his or her duties, or of his or her obedience to the directions
of the employer, even though unlawful, unless the employee, at the time of
obeying the directions, believed them to be unlawful.
Cal. Lab. Code § 2802(a). Lira's argument bypasses the last clause of the statute. An
employer is required to indemnify an employee unless the employee took actions that
he knew were unlawful. See Dowie v. Fleishman-Hillard Inc., 422 F. App'x 627, 629
(9th Cir. 2011). The complaint alleges that Lira knew his acts were unlawful. See
Compl. ¶ 54 ("Lira had knowledge of and cooperated with Girardi’s misappropriation
and conversion of settlement proceeds[.]"). Viewing the allegations in the light most
favorable to the Edelson, Lira's chance of indemnification by his employer would not
justify a stay. See Menzies, 943 F.3d at 332. Lira must "demonstrate his entitlement to
Case: 1:20-cv-07115 Document #: 91 Filed: 07/19/21 Page 33 of 36 PageID #:957
indemnity under the criteria set forth in the statute" before claiming that his entitlement
is absolute. See In re Bidermann Indus. U.S.A., Inc., 200 B.R. 779, 784–85 (Bankr.
Though Lira may not invoke section 362(a)(1) to obtain a stay of these
proceedings from this Court, he may be able to achieve the same result under section
362(a)(3). Section 362(a)(3) prevents "any act to obtain possession of property of the
estate or of property from the estate or to exercise control over property of the estate."
Though Edelson argues otherwise, the plain words of the provision go past protecting
just the debtor and protect any property of the estate. Another provision of the Code, 11
U.S.C. § 541(a), says that property of the estate includes "all legal or equitable interests
of the debtor in property as of the commencement of the case."
Off the bat, it seems obvious that Edelson's request for a constructive trust is
subject to a stay under section 362(a)(3). As stated clearly in Edelson's complaint, it
"seeks the imposition of a constructive trust on all money transferred from Boeing to
[Girardi Keese] in connection with the Lion Air settlements." Compl. ¶ 95. If Edelson
were to succeed on a constructive trust theory, "the value of [Girardi or Girardi Keese's]
bankruptcy estate would be reduced . . . because [the] property in which the debtor
holds legal but not equitable title as of the commencement of the case . . . is property of
the estate . . . to the extent of the debtor's legal title." See In re Nat. Century Fin.
Enters., Inc., 423 F.3d 567, 575 (6th Cir. 2005); see also 11 U.S.C. §541(d) (stating that
property "in which the debtor holds . . . only legal title and not an equitable interest . . .
becomes property of the estate under subsection (a)(1) or (2) of this section only to the
extent of the debtor's legal title to such property, but not to the extent of any equitable
Case: 1:20-cv-07115 Document #: 91 Filed: 07/19/21 Page 34 of 36 PageID #:958
interest in such property that the debtor does not hold."). Therefore, Edelson's request
for a constructive trust must be stayed until the bankruptcy litigation is resolved.
Conversely, section 363(a)(3) does not automatically stay the conversion and
breach-of-contract claims against Lira. The complaint alleges that Lira (along with the
other defendants), was a party to the fee arrangement contract he signed. See Compl.
¶¶ 15, 103, 106. 11 Edelson also alleges that Lira, with the other defendants, wrongfully
and without authorization assumed control and ownership of funds owed to Edelson and
converted those funds. See id. ¶¶ 119–120. Though Lira argues that judgment in favor
of Edelson on the conversion and breach-of-contract claims is tantamount to "immediate
possession of funds held by the bankruptcy estate," that is not so. See Lira's Reply Br.
at 11; see also id. at 10. On their face, these claims are based on Lira's conduct and
rest upon his own breach of duty, and thus they implicate Lira's individual liability. In
short, the bankruptcy estates would not be disturbed by entry of a judgment against him
on these counts.
Last to consider is the remedy of an accounting. Edelson requests that all
defendants be required "to provide a full and complete accounting of all funds
transferred from Boeing that were intended for any [Girardi Keese] client (inclusive of
any transfers to third parties associated with, or transfers made for the benefit of, Girardi
Keese) related to settlements in In Re: Lion Air Flight JT 610 Crash, and a full
accounting of what subsequently became of those funds." Compl. at 29, ¶ B. Lira is a
Lira repeatedly asserts that he was not a party to the fee-sharing contract. But at this
stage, and on this issue, the Court is required to accept all facts alleged in the complaint
as true, view them in the light most favorable to Edelson, and draw all reasonable
inferences in its favor. See Menzies, 943 F.3d at 332.
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defendant, and applying the remedy of an accounting to him would not impact the
bankruptcy estates. 12 In sum, this remedy is unaffected by the automatic stay.
To summarize, Lira's request to stay this case in its entirety under section
362(a)(1) is inappropriate because the bankruptcy court would first need to extend the
automatic stay under its equity jurisdiction pursuant to 11 U.S.C. § 105. Even if that
were not the case , the Court would not stay the claims against Lira because he has
not shown that he is entitled to absolute indemnity from Girardi or Girardi Keese.
Regarding Lira's assertion that this case must be stayed under section 362(a)(3), only
Edelson's request for the remedy of constructive trust must be automatically stayed as
that is the only provision that directly touches the Girardi or Girardi Keese bankruptcy
For the reasons stated above, the Court denies Griffin's motion to dismiss [dkt.
no. 41] and grants Lira's motion to dismiss [dkt. no. 43] in part, staying litigation on
Lira contends that no settlement funds were transferred to him and that he never had
control over these funds. These assertions ignore the allegations in the complaint.
Edelson makes clear that though it has no knowledge of the "whereabouts, distribution,
allocation, or transfer" of the Lion Air settlement proceeds, it believes the defendants do
and that they must therefore provide a full accounting. See id. ¶¶ 98–100.
Lira separately asks for an indefinite stay due to the pending bankruptcy proceedings
even if the automatic stay does not apply. See Munson v. Butler, 776 F. App'x 339, 342
(7th Cir. 2019) ("[A] district court has inherent power to exercise its discretion to stay
proceedings to avoid unnecessary litigation of the same issues."). The Court denies
this request. Aside from the constructive trust, the remaining claims against him do not
warrant a stay.
As noted at the April 6, 2021 status hearing, Lira's argument vis-à-vis venue is
underdeveloped and unsupported. It is thus forfeited. See Batson v. Live Nation Ent.,
Inc., 746 F.3d 827, 833 (7th Cir. 2014); Gonzales v. Madigan, 403 F. Supp. 3d 670, 679
(N.D. Ill. 2019) (Kennelly, J.), aff'd, 990 F.3d 561 (7th Cir. 2021).
Case: 1:20-cv-07115 Document #: 91 Filed: 07/19/21 Page 36 of 36 PageID #:960
Count 1 (Unjust Enrichment - Constructive Trust) under 11 U.S.C. § 362(a)(3) unless
and until the conclusion of the Girardi and Girardi Keese bankruptcy proceedings or
until the bankruptcy court orders otherwise. Both defendants are directed to answer all
remaining claims by no later than August 9, 2021. Rule 26(a)(1) disclosures, unless
already made, are to be made by August 16, 2021. The parties are directed to confer
and attempt to agree upon a discovery and pretrial schedule and are to file by August
23, 2021 a joint status report setting out an agreed schedule or alternative proposed
schedules. The case is set for a telephone status hearing on August 31, 2021 at 8:45
a.m., using call-in number 888-684-8852, access code 746-1053, though the Court
reserves the right to vacate the status hearing if it determines a hearing is not needed.
Counsel should wait for the case to be called before announcing themselves.
MATTHEW F. KENNELLY
United States District Judge
Date: July 19, 2021
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