SJ Properties Suites BuyCo ehf et al v. Development Opportunity Corp et al

Filing 83

ORDER signed by Judge Rudolph T Randa on 11/30/2009 granting 40 Motion for Extension of Time to Answer; granting 46 Motion to Vacate; denying 50 Motion for Default Judgment; denying 59 Motion for service of summons and complaint; granting [61 ] Motion to Dismiss Counterclaims; granting 81 Motion to Lift Stay; granting 81 Motion for Hearing. Telephonic Scheduling Conference set for 1/28/2010 09:30 A.M. The Court will initiate the call. With respect to the following motions filed in the 09-C-569 action: EPs motion to dismiss 35 is DENIED; Buycos motion for default judgment as to EP 17 is DENIED; EPs motion for extension of time 33 is GRANTED; and,EPs motion to vacate entry of default 34 is GRANTED. (cc: all counsel) (Koll, J)

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF WISCONSIN
S J PROPERTIES SUITES, BUYCO, EHF; SJ FASTEIGNIR, EHF; and, A S K A R CAPITAL, HF; P l a i n t if fs , and, S E T H E. DIZARD, Court-Appointed Receiver of DOC Milwaukee LP; Intervenor Plaintiff, v. C a s e No. 09-C-0533 (C o n so lid a te d with Case No. 09-C-0569)

S T J , P.C., d/b/a ECONOMOU PARTNERS; E P MILWAUKEE, LLC; E C O N O M O U PARTNERS CONSTRUCTION, INC.; JOHN W. ECONOMOU; STEVE J. ECONOMOU; and, THOMAS V. ECONOMOU; Defendants.

STJ, P.C., d/b/a ECONOMOU PARTNERS; E P MILWAUKEE, LLC; E C O N O M O U PARTNERS CONSTRUCTION, INC.; JOHN W. ECONOMOU; STEVE J. ECONOMOU; and, THOMAS V. ECONOMOU; Counterclaimants, v. SJ PROPERTIES SUITES, BUYCO, EHF; Counterclaim Defendant.

SJ PROPERTIES SUITES, BUYCO, EHF; Plaintiff - Counterclaim Defendant, and, SETH E. DIZARD, Court-Appointed Receiver of DOC Milwaukee LP; Intervenor Plaintiff, v. EP MILWAUKEE, LLC; D e fe n d a n t- C o u n te r c la im a n t.

DECISION AND ORDER

T h is consolidated action relates to a construction project that is a hotel and c o n d o m in iu m real estate development located at 1150 North Water Street, in downtown M ilw a u k e e, Wisconsin (the "Milwaukee Project"). This Decision and Order addresses ten p e n d in g motions.1 The remaining motion for summary judgment on the declaratory judgment a c ti o n , originally filed in Case No. 09-C-569 (the "569 action"), is not completely briefed a n d will be addressed in a subsequent decision. Except for the Plaintiffs' motion to lift stay and for a scheduling conference, th e motions were filed prior to the consolidation of the actions and were assigned docket

1 A November 13, 2009, letter from the Plaintiffs, SJ Properties Suites BuyCo ehf ("Buyco"); SJ-Fasteignir e h f ("Fasteignir'); and, Askar Capital hf ("Askar") (collectively the "Plaintiffs"), lists ten pending motions. The P l a i n t i f fs subsequently filed a motion to lift stay and for a scheduling conference.

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n u m b e rs in the action in which they were filed. Thus, to avoid confusion, the Court will refer to the actions, Case No. 09-C-533 (the "533 action") and the 569 action, in association with th o s e motions. EP's Motion to Dismiss P u rsu an t to Federal Rule of Civil Procedure 12(b)(1), Defendant EP Milwaukee L L C ("EP") seeks dismissal of the 569 action for lack of subject matter jurisdiction. S p e c if ic a lly, EP maintains that Buyco has rendered the action moot, by seeking the re c e iv e rs h ip in state court. In considering motions to dismiss for lack of subject matter jurisdiction, "a d istric t court must accept as true all well-pleaded factual allegations and draw all reasonable in f e re n c es in favor of the plaintiff." St. John's United Church of Christ v. City of Chi., 502 F .3 d 616, 625 (7th Cir. 2007)(quoting Long v. Shorebank Dev. Corp., 182 F.3d 548, 554 (7th C ir. 1999)). In considering such a motion, "the district court may properly look beyond the ju ris d ic tio n a l allegations of the complaint and view whatever evidence has been submitted o n the issue to determine whether in fact subject matter jurisdiction exists." Id. (quoting L o n g , 182 F.3d at 554). Buyco, as the proponent of federal subject matter jurisdiction in the 5 6 9 action, bears the burden of proof as to the existence of such jurisdiction. See Meridian S e c . Ins. Co. v. Sadowski, 441 F.3d 536, 540 (7th Cir. 2006) (citing McNutt v. General M o to r s Acceptance Corp. of Ind., 298 U.S. 178, 189 (1936)). Under Article III of the Constitution, the judicial power of the United States e x te n d s only to cases and controversies. Steel Co. v. Citizens for a Better Env't, 523 U.S. 83,

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1 0 2 (1998). Under Article III, "cases that do not involve `actual, ongoing controversies' are m o o t and must be dismissed for lack of jurisdiction." Fed'n of Adver. Indus. Representatives, In c . v. City of Chi., 326 F.3d 924, 929 (7th Cir. 2003) (quoting Stotts v. Cmty. Unit Sch. Dist. N o . 1, 230 F.3d 989, 990-91 (7th Cir. 2000)). "Mootness is often described as `the doctrine o f standing set in a time frame: The requisite personal interest that must exist at the c o m m e n c em e n t of the litigation (standing) must continue throughout its existence (m o o tn e ss ).'" Wis. Right to Life, Inc. v. Schober, 366 F.3d 485, 491 (7th Cir. 2004) (citing A r iz o n a n s for Official English v. Arizona, 520 U.S. 43, 68 n. 22 (1997); United States Parole C o m m 'n v. Geraghty, 445 U.S. 388, 397 (1980). But see Friends of the Earth v. Laidlaw E n v t l. Servs., 528 U.S. 167, 189-90 (2000) (explaining that this description of mootness is " n o t comprehensive")).) The party asserting mootness bears the burden of persuasion. Wis. R ig h t to Life, Inc., 366 F.3d at 491 (citing Laidlaw, 528 U.S. at 189.) The crux of EP's argument is that because of the state court receivership, Buyco n o longer has an "actual on-going controversy." In opposing the motion to dismiss, Buyco a ss e rts that the sole question is whether the receivership makes it impossible for the Court to g ra n t the relief sought by Buyco in its declaratory judgment action. In Cornucopia Institute v . United States Department of Agriculture, 560 F.3d 673, 676 (7th Cir. 2009), the court s ta te d that "if an event occurs while a case is pending . . . that makes it impossible for the c o u rt to grant `any effectual relief whatever' to a prevailing party, the [case] must be d is m is s e d ." Id. (citing Church of Scientology of Cal. v. United States, 506 U.S. 9, 12 (1992) (q u o tin g Mills v. Green, 159 U.S. 651, 653(1895)). While Congress has authorized the

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c o u r ts to issue declaratory relief in some cases, this authority is merely procedural and the c o n stitu tio n a l requirement of a justiciable case or controversy remains applicable. C o rn u c o p ia Inst., 560 F.3d at 676. The court of appeals has ruled that declaratory judgment is only appropriate when the Court's ruling would have an impact on the parties. Id. EP relies upon the state court receivership and the expansive language of the s ta te court order appointing Dizard as the receiver. In particular, EP relies upon the provision stating that "all creditors of DOC Milwaukee LP [DOC LP], other than secured creditors c u rre n tly of record, are hereby enjoined and restrained from (a) commencing any action or p ro s e c u tin g any other action now pending other than in these proceedings, (b) enforcing a g a in s t [DOC LP], or its property any judgment; and (c) taking any action to collect or re c o v er a claim against [DOC LP]." (Wieser Aff. Supp. Mot. Dismiss filed 8/20/09 ¶ 3, Ex. B , ¶ 5.) EP does not cite any case law regarding receiverships in support of its contention. A s stated in Harrigan v. Gilchrist, 99 N.W. 909, 937 (Wis. 1904)(quoting G lu c k & Becker on Receivers of Corporations, § 58): "Property ­ and by this is meant any conceivable kind ­ may h a v e gone beyond the recall and reach of the insolvent c o rp o ra tio n itself, and yet, by reason of the fraud practiced, may s ti ll be subjected to the claims of creditors and the rights of sto c k h o ld e rs, under the familiar rule that fraud vitiates nearly, if n o t all transactions. Such property, so far as the creditors and sto c k h o ld e rs are concerned, still remains a part of the trust estate a n d therefore a part of the assets of the corporation. There is no so u n d reason why the court cannot marshal those assets as well a s other assets of the corporation for the benefit of the same p a rt ie s ."

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" T h e property, to all intents and purposes, is the property of the creditors; and the receiver h o ld s the property and assets in trust for the creditors, as the agent of the court." Id. at 941. T h u s , a primary focus of the receivership of the insolvent limited partnership are its assets, a s well as the winding-up of the limited partnership. See Clark on Receivers, § 252 (3rd ed. 1 9 5 9 ) (discussing partnerships). Although the appointment of a receiver is not strictly a p ro c e ed in g in rem, it is nevertheless a proceeding in the nature of a proceeding in rem. Id. a t § 285. The nature of a receivership proceeding must be considered in construing the sta te court's order. The purpose of the declaratory judgment action ­ the 569 action ­ is to o b ta in a determination as to which member of the DOC LP partnership ­ BuyCo; DOC M ilw a u k e e II, LLC ("DOC II"); Development Opportunity Corp. ("Development O p p o rtu n ity" ); and, EP ­ has the authority to act on behalf of the partnership as the legitimate g e n e ra l partner, and the correct percentages of their respective ownership interests and voting rig h ts . The Court's declaratory judgment decision will not dispose of the property of the p a rtn e rs h ip . See Lavine v. Shapiro, 257 F.2d 14, 21 (7th Cir. 1958) (citing Princess Lida of T h u r n and Taxis v. Thompson, 305 U.S. 456, 466 (1939)). Thus, despite the broad language o f state court's order appointing the receiver, it is not "impossible" for this Court to grant e f f e c tu a l relief in the 569 action. See Cornucopia Inst., 560 F.3d at 676. Moreover, Dizard, th e receiver, is now a party to the consolidated action. Therefore, EP's motion to dismiss for la c k of subject matter jurisdiction is denied.

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S in c e the Court has an independent duty to consider subject matter jurisdiction, it has also considered the issue in the context of the 533 action. The standing of the Plaintiffs, b o th constitutionally and considering prudential limitations, was raised in that action by the m o tio n s of parties that were subsequently dismissed from that action. The 533 action alleges misappropriation and fraudulent transfers of DOC LP a ss e ts. The action directly relates to the state court receivership proceedings and the property o f DOC LP which is within the ambit of the receivership, and the order appointing the rec eive r. The Court relied upon the nature of those proceedings and the interests of Dizard in granting his motion to intervene in the 533 action. Based on Dizard's participation in the c o n so li d a t e d action, the Court concludes that it has subject matter jurisdiction over that a c tio n , see Fisher v. Am. United Life Ins. Co., 314 U.S. 549, 555 (1942); see also GP Credit C o , LLC v. Orlando Residence, Ltd., 349 F.3d 976, 981 (7th Cir. 2003), and will address the m o tio n s relating to default. Motions Pertaining to Default D e f au lt in the 533 action was entered by the Clerk of Court on August 17, 2009, ag ains t Defendants STJ, P.C., d/b/a Economou Partners ("STJ, P.C."); Economou Partners C onstru ctio n , Inc. ("Economou Construction'); John W. Economou ("John Economou"); and, S teve J. Economou ("Steve Economou"). Default in the 569 action was entered by the Clerk o f Court on July 30, 2009, against EP. There are seven pending motions relating to those d e f a u l ts .

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In the 533 action, there are four pending motions relating to the entry of default f o r the Plaintiffs against STJ, P.C.; Economou Construction; John Economou; and, Steve E c o n o m o u : (1) a motion to vacate the entry of default filed by STJ, P.C.; EP; Economou C o n s tru c tio n ; John Economou; Steve Economou; and, Thomas V. Economou ("Thomas E co n o m o u " )(c o lle c tiv e ly the "Economou Defendants");2 (2) a motion for extension of time to file their Answer filed by STJ, P.C.; EP; Economou Construction; John Economou; Steve E c o n o m o u ; and, Thomas Economou;3 (3) the Plaintiffs' motion for default judgment as to S T J, P.C.; Economou Construction; John Economou; and, Steve Economou; and, (4) the P la in tif f s' Rule 7.4 expedited non-dispositive motion for service of summons and complaint b y a Marshal. In the 569 action, there are three motions pertaining to the entry of default a g a in s t EP: (1) EP's motion to vacate entry of default; (2) EP's motion for extension of time to file its Answer; and, (3) Buyco's motion for default judgment as to EP. The Court will f irst address the motions to vacate entry of default. Motions to Vacate Entry of Default Federal Rule of Civil Procedure 55(c) states: "The court may set aside an entry o f default for good cause, and it may set aside a default judgment under Rule 60(b)." A party s e e k in g to vacate an entry of default prior to the entry of final judgment must show: "(1) good c a u se for the default; (2) quick action to correct it; and (3) a meritorious defense to the

2 The docket entry describing the motion to vacate default does not include STJ, P.C. However, that entity i s included on the motion. 3

The docket entry describing the motion for the extension of time to file an answer does not include STJ, P.C. H o w e v e r , that entity is included on the motion.

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c o m p la in t." Cracco v. Vitran Exp., Inc., 559 F.3d 625, 630-31 (7th Cir. 2009) (citing Sun v. B d . of Trs. of the Univ. of Ill., 473 F.3d 799, 810 (7th Cir. 2007)(citing Pretzel & Stouffer v. Im p e ria l Adjusters, Inc., 28 F.3d 42, 45 (7th Cir. 1994)); see also Fed. R. Civ. P. 55(c). " W h ile the same test applies for motions seeking relief from default judgment under both R u le 55(c) and Rule 60(b), the test "is more liberally applied in the Rule 55(c) context." C r a c c o , 559 F.3d at 631 (quoting United States v. Di Mucci, 879 F.2d 1488, 1495 (7th Cir. 1 9 8 9 )). The case law of this circuit articulates a policy of favoring trial on the merits over d e f a u lt judgment. Cracco, 559 F.3d at 631 (citing Sun, 473 F.3d at 811 (citing C.K.S. Eng'rs, In c . v. White Mountain Gypsum Co., 726 F.2d 1202, 1205 (7th Cir. 1984) (collecting cases)). W ith respect to the good cause for the default, John Economou and Steven E c o n o m o u were personally served with summons and complaint in the 533 action on June 4 , 2009. (Wieser Aff. filed 8/14/09 ¶¶ 2-3.) As of August 14, 2009, Thomas Economou had n o t been served with the summons and complaint in the 533 action. (Id. at ¶ 4.) On June 5, 2 0 0 9 , John Wieser ("Wieser"), who is general counsel and an employee of STJ, P.C., was s e rv e d with the summons and complaint as the registered agent of STJ, P.C., Economou C o n stru c tio n , and EP.4 (Id. at ¶¶ 5-7.) W ie se r, as the registered agent of EP, was served with the summons and c o m p la in t in the 569 action on June 17, 2009. (Wieser Aff. filed 8/20/09 ¶ 2.) O n June 22, 2009, Buyco filed the state court receivership action in Milwaukee C o u n ty Circuit Court, Case No. 09 CV 009785, seeking the appointment of a receiver for

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Default was not entered against EP in the 533 action.

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D O C LP. (Wieser Aff. filed 8/14/09 ¶ 8; Wieser Aff. filed 8/20/09 ¶ 8.) On about June 30, 2 0 0 9 , the parties reached an informal agreement that the time to plead in the 533 and 569 a c tio n s would be tolled until either August 1, 2009, or two weeks after completion of the f o re n sic accountant's report for the receiver. (Wieser Aff. filed 8/14/09 ¶ 10; Wieser Aff. f ile d 8/20/09 ¶ 10.) August 1, 2009, was the projected completion date for the report. (Id.) O n July 8, 2009, by email, counsel for the parties agreed to an extension of the tim e to plead in the 533 and 569 actions until July 22, 2009. (Wieser Aff. filed 8/14/09 ¶ 12; W ie s e r Aff. filed 8/20/09 ¶ 12.) On July 10, 2009, Wieser and counsel for the Plaintiffs, S c o tt R. Halloin ("Halloin"), had a telephone conversation during which Halloin agreed to th e July 22, 2009, extension of time and also stated that he could probably give two additional o n e week extensions after the July 22nd date. (Wieser Aff. filed 8/14/09 ¶ 13; Wieser Aff. f ile d 8/20/09 ¶ 13.)5 S o m e tim e in July 2009, Wieser also raised the possibility of resolving the law su its by obtaining financing from Ron Zimmerman ("Zimmerman").6 O n July 21, 2009, Wieser signed and returned the stipulation and proposed o rd e r for extension of time. (Wieser Aff. filed 8/14/09 ¶ 16.) Wieser thought that he had e x e cu te d the stipulation in both federal actions, but later learned he had only done so for one

There is a factual dispute between the parties regarding whether an additional telephone conversation o c c u r r e d on July 15, 2009. Absent a hearing and credibility determination, the Court could not resolve the factual d i s p u t e . However, whether or not that conversation occurred is not material to the resolution of the motion to vacate t h e default.
6 There is a factual dispute between the parties regarding the date in July that financing through Zimmerman w a s discussed. Absent a hearing and credibility determination, the Court cannot resolve the factual dispute. However, t h e exact date of that discussion is not material to the resolution of the motion to vacate the default.

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a c tio n .7 (Wieser Aff. filed 8/20/09 ¶ 16.) Wieser was also under the impression that the P la in tif f s would agree to an additional week to two week extension of the deadline for the th e Economou Defendants to file an answer or other responsive pleading. (Wieser Aff. filed 8 /14 /09 ¶ 16; Wieser Aff. filed 8/20/09 ¶ 16.) On July 24, July 27, and July 28, 2009, Wieser emailed Halloin requesting the s e c o n d extension. (Wieser Aff. filed 8/14/09 ¶¶ 17-19; Wieser Aff. filed 8/20/09 ¶¶ 17-19.) In his July 28, 2009, email to Halloin, Wieser stated "we have secured counsel in Milwaukee a n d can file responsive pleadings and counter-claims in both actions in short order, if n e c es s a ry." (Halloin Aff. filed 9/03/09 ¶ 12, Ex. A.) Halloin states that he was out of the o f f ic e on July 24, 2009, and did not receive that request. (Id. at ¶ 11.) Halloin responded to Wieser's request on July 28, 2009, by an email indicating th a t he thought that Wieser had dropped his request for the second extension because he had sig n e d the stipulation for the first extension, and made it clear that the Economou Defendants w o u ld not be receiving any additional extensions of time to plead in the federal actions. (W ieser Aff. filed 8/14/09 ¶ 20; Wieser Aff. filed 8/20/09 ¶ 20.) Wieser then resumed his search for, and retained local counsel to represent the E c o n o m o u Defendants in the federal actions and the state court receivership action. (Wieser A ff . filed 8/14/09 ¶ 21; Wieser Aff. filed 8/20/09 ¶ 21.)

The stipulation and proposed order were filed in the 533 action on July 22, 2009, and the Court entered the o r d e r in that action on July 22, 2009.

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O n July 30, 2009, Buyco filed a motion for entry of default judgment against E P in the 569 action. Default was entered by the Clerk of Court against EP in the 569 action o n July 30, 3009. On about July 31, 2009, Wieser was served with the motion for default jud g m en t in the 569 action. (Wieser Aff. ¶ 22 filed 8/20/09.) On August 5, 2009, Wieser met with local counsel to explain the facts and is s u e s relating to the Milwaukee Project and the resultant lawsuits. (Wieser Aff. filed 8/14/09 ¶¶ 17-20; Wieser Aff. filed 8/20/09 ¶ 23.) On August 14, 2009, the Economou Defendants appeared in the 533 action and f ile d various papers including an answer and counterclaims, a motion for extension of time to answer, and a brief and an affidavit in support of that motion. On August 20, 2009, EP appeared in the 569 action and filed various papers in c lu d in g an answer and counterclaims, a motion for extension of time to answer, and a brief a n d an affidavit in support of that motion, and a motion to vacate default. On August 17, 2009, the Plaintiffs filed a motion for entry of default in the 533 a c tio n . Default was entered against STJ, P.C.; Economou Construction; John Economou; a n d , Steve Economou on August 17th. On August 20, 2009, the Economou Defendants filed a motion to vacate entry of default. On August 21, 2009, the Plaintiffs filed their motion for d e f a u lt judgment.

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G o o d Cause for Default "Good cause" cannot be established where a party has exhibited willful d is re g a rd for duties, carelessness, or negligence. Jones v. Phipps, 39 F.3d 158, 162 (7th Cir. 1 9 9 4 ); Zuelzke Tool & Eng'g Co., Inc. v. Anderson Die Castings, Inc., 925 F.2d 226, 229 (7 th Cir. 1991). Despite some immaterial factual disputes between the parties, the Economou D e f e n d a n ts have established that Wieser mistakenly believed that the Economou Defendants h a d until either July 29 or August 5, 2009, to file pleadings in the federal actions. On July 2 8 , 2009, Wieser learned that he was wrong. While an agreement to extend time for pleading m u st be approved by Court order, see Charles Alan Wright & Arthur R. Miller, 5B Federal P r a c tic e and Procedure: Civil 3d § 1345 (West 2004), the Plaintiffs do not refute Wieser's s ta te m e n t that extensions beyond the July 22 date were discussed. Wieser also thought that th e actions could be resolved by obtaining financing from Zimmerman and was pursuing that a p p r o a c h until July 28, 2009, when it was clearly communicated that the financing with Z im m e rm a n was not acceptable to the Plaintiffs. Despite his July 28, 2009, representation to Halloin that the Economou D e f en d a n ts had already "secured counsel in Milwaukee," it was only thereafter that Wieser b e g a n looking for local counsel to represent the Economou Defendants in the federal actions a n d the state receivership action. Within eight days, Wieser met with local counsel. Within n in e days of Wieser's meeting with local counsel, the Economou Defendants appeared in the 5 3 3 action. Within 15 days of that meeting, EP appeared in the 569 action. There is also no

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in d ic a tio n that the default was willful.

See Cracco, 559 F.3d at 631.

Under the

circu m stan ce s, the Court concludes that STJ, P.C.; Economou Construction; John Economou; a n d , Steve Economou, have established good cause for their default in the 533 action. Furthermore, EP has established good cause for its default in the 569 action. Quick Action to Correct Default "[T]he `quick action' prong of the standard for vacating default judgments must c o n c e rn itself with the time elapsing between entry of judgment and the motion to vacate." P h ip p s , 39 F.3d at 165. In Zuelzke Tool & Engineering Co., Inc., 925 F.2d at 230, the Court o f Appeals held that a delay of four months between a party's awareness of a default ju d g m e n t and its motion to vacate the judgment was too long to be considered quick action. In Phipps, 39 F.3d at 165, the court held that a delay of approximately five weeks was too lo n g .

In the 533 action, the Economou Defendants filed their motion to vacate default th re e days after default was entered against STJ, P.C.; Economou Construction; John E c o n o m o u ; and, Steve Economou. Such action constitutes quick action to vacate the default. S e e Cracco, 559 F.3d at 631 (holding motion to vacate filed eight days after entry of default w a s timely). In the 569 action, EP filed its motion to vacate default three weeks after default h a d been entered. Default was entered against EP in the declaratory judgment action, two d a ys after Wieser learned that EP would have no additional extensions of time to answer and

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to retain local counsel. The Economou Defendants also had to take action to vacate the d e f a u l t in the 533 action. Under the circumstances, the Court deems that EP acted with s u f f ic ie n t speed to vacate the default in the 569 action to constitute prompt action. Meritorious Defenses A meritorious defense is not necessarily one which must, beyond a doubt, s u c c ee d in defeating a default judgment, but rather one which at least raises a serious question re g a rd in g the propriety of a default judgment and which is supported by a developed legal a n d factual basis. Phipps, 39 F.3d at 165. In the answer and counterclaims filed by the E c o n o m o u Defendants in the 533 action, they assert that the allegedly misappropriated trust f u n d s were not paid by Economou Construction to DOC Fort Myers ("Fort Myers") and that a n y funds paid to Fort Myers were paid directly by DOC LP. They also assert that Economou C o n s tru c tio n did not divert any funds in concert with DOC LP to Fort Myers, and that the f u n d s were loaned to Fort Myers with the full knowledge of all entities in DOC LP and that F o r t Myers is responsible for repayment. The Economou Defendants also allege that STJ, P .C .; and, Steve, John, and Thomas Economou did not receive any misappropriated funds. F in a lly, with respect to the alleged fraudulent transfer involving Steve and John Economou, th e y allege that the transfer to Fort Myers was done with the approval of all members of DOC L P including those Plaintiffs who were members. The Court concludes that STJ, P.C.;

E c o n o m o u Construction; John Economou; and, Steve Economou have presented meritorious d e f e n s e s in the 533 action.

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B y EP's answer and counterclaims in the 569 action for declaratory judgment, E P asserts that Buyco remains a limited partner, EP still is the general partner, Buyco m is re a d s the partnership agreement, and the funds that Buyco advanced were not capital c o n trib u tio n s , rather they were loans which were to be repaid as a priority. EP has satisfied th e meritorious defense requirement in the 569 action. Based on the foregoing, the Court grants the motions to vacate the default a g a in s t STJ, P.C.; Economou Construction; John Economou; and, Steve Economou in the 533 a c tio n , and against EP in the 569 action. Motions for Enlargement of Time W h e n an act may or must be done within a specified time, Rule 6(b)(1) of the F e d e ra l Rules of Civil Procedure allows the Court to exercise its discretion and, for good c a u se , extend the time "on motion made after the time has expired if the party failed to act b e c au s e of excusable neglect" Fed. R. Civ. P. 6(b)(1). Courts should take the burden of s h o w in g "excusable neglect" seriously lest parties ignore deadlines with impunity. Donald v . Cook County Sheriff's Dep't., 95 F.3d 548, 558 (7th Cir. 1996). To demonstrate excusable n e g le c t, a party must demonstrate good faith and a reasonable basis for his failure to follow th e rules. Ooley v. Schwitzer Div., Household Mfg., Inc., 961 F.2d 1293, 1306 (7th Cir. 1 9 9 2 ). Put another way, the moving party must first show neglect and, secondly, must show th a t his neglect was excusable. When considering whether an omission is excusable, the Court must take into a c c o u n t all relevant circumstances surrounding the party's failure to act. Pioneer Inv. Servs.

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C o . v. Brunswick Assoc. Ltd. P'ship, 507 U.S. 380, 395 (1993). Pioneer applies whenever " e x cu s a b le neglect" appears in the federal procedural rules. Raymond v. Ameritech Corp., 4 4 2 F.3d 600, 606 (7th Cir. 2006). Rule 6(b)(2) gives courts discretion in most situations to f o rg iv e missed deadlines by reason of "excusable neglect." Id. The standard for excusable neglect: is at bottom an equitable one, taking account of all relevant c irc u m s ta n c es surrounding the party's omission. These include . . . the danger of prejudice to the [defendant], the length of the d e la y and its potential impact on judicial proceedings, the re a so n s for the delay, including whether it was within the re a so n a b le control of the movant, and whether the movant acted in good faith. Pioneer, 507 U.S. at 395 (citation omitted). The Plaintiffs assert that STJ, P.C.; Economou Construction; John Economou; a n d , Steve Economou cannot establish excusable neglect, citing Marine Travelift, Inc. v. Toby S e x to n Tire, Inc., No. 08-C-601, 2009 WL 2421593 *1 (E.D. Wis. Aug. 9, 2009). However, M a rin e Travelift is not analogous or persuasive because in this case, the STJ, P.C.; Economou C o n s tru c tio n ; John Economou; and, Steve Economou did not simply ignore their obligation to answer "simply because they did not want to." See id. They secured an extension of time in the 533 action ­ though not as long an extension as they had hoped for and ­ attempted to s e c u re an extension of time in the 569 action. H e re , the answer and counterclaims was filed in the 533 action on August 14, 2 0 0 9 ­ 23 days after the deadline set by the Court's order allowing the extension of time and 1 7 days after Wieser knew that the Economou Defendants would not be allowed any

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a d d itio n a l time to respond. The Plaintiffs assert that they will be prejudiced citing the s ig n if ic a n t financial problems that the Milwaukee project is experiencing. However, the P lain tiff s do not explain how the delay of approximately three weeks in this litigation will w o rs e n those financial woes. The delay was occasioned by the time it took the Economou D e f en d a n ts to retain local counsel, the factual complexity of the matters, and the fact that th e r e were three lawsuits requiring action by the Economou Defendants. The Court also n o tes that the filings of the Economou Defendants, upon their initial appearance, also reflects s u b s ta n tia l work by counsel. Under the circumstances of this action, the Court concludes that th e Economou Defendants have established excusable neglect and grants their motion for e x te n s io n of time in the 533 action. EP also moves for an extension of time in the 569 action. Unlike the 533 a c tio n , no order allowing additional time for EP to answer was entered. Having been served w ith the 569 action summons and complaint on June 17, 2009, EP was required to file an a n s w e r or otherwise plead on or before July 8, 2009.8 EP did not file its papers until 43 days la te r on August 20, 2009. However, the parties had agreed that EP could have until July 22, 2 0 0 9 , to answer and Wieser intended to file the stipulation and proposed order in both a c tio n s , but neglected to do so. Wieser also believed that the Plaintiffs would agree to an a d d itio n a l one- to two-week extension until he was advised otherwise on July 28, 2009. T w e n ty-th re e days elapsed between that date and the date that EP responded to the complaint.

8 Buyco states EP's answer was due on July 7th. (Pl.'s Resp. Br. Opp'n EP's Mot. Extension of Time and M o t . Vacate 1.) However, under Federal Rule of Civil Procedure 6(a), the day on which a period begins is excluded a n d the last day is included, with certain exceptions not applicable here.

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T h e other relevant factors outlined with respect to the 533 action are applicable an d do not require reiteration. Having carefully considered the circumstances, the Court c o n c lu d e s that EP has established excusable neglect. Therefore, the motions for extension of tim e are granted in both actions. Motions for Service of Summons and Complaint by Marshal and for Default Judgment The Plaintiffs filed a motion for service of the summons and complaint by the Marshal because they assert Thomas Economou has evaded service. Thomas Economou in d ica tes that he had not been served in the motion to extend time and in Wieser's affidavit in support of that motion. However, he did not file a motion to dismiss pursuant to Rule 1 2 (b )(2 ) asserting that the Court lacked personal jurisdiction over him and the answer filed b y the Economou Defendants does not include the defense of lack of personal jurisdiction.

Defenses, such as inadequate service of process, should be promptly asserted to eliminate harmful delay and waste of judicial resources. Trustees of Cent. Laborers' W e lfa r e Fund v. Lowery, 924 F.2d 731, 734 (7th Cir. 1991). "A party may waive a defense o f insufficiency of process by failing to assert it seasonably in a motion or their first re sp o n s iv e pleading. That defense . . . may be waived by formal submission in a cause, or b y submission through conduct. A party need not actually file an answer or motion before w a iv e r is found." Id. at 732-33 (internal citations and quotations omitted). Although Thomas E c o n o m o u notified the Court that he was not served, he has waived that defense by his p a rtic ip a tio n in the 533 action. See id.; O'Brien v. R.J. O'Brien & Assocs., Inc., 998 F.2d 19

1 3 9 4 , 1398 (7th Cir. 1983); Fed. R. Civ. P. 12(h)(1). Thus, the Plaintiffs' motion for the M a rs h a l to serve Thomas Economou is unnecessary and, therefore, is denied. Also remaining to be addressed are the Plaintiffs' and Buyco's motions for d e f au lt judgment. In light of the disposition of the foregoing default-related motions, the m o tio n s for default judgment are denied. Motion to Dismiss the Counterclaims of STJ, P.C.; Economou Construction; John Economou; Steve Economou; and, Thomas Economou The Plaintiffs seek an order dismissing the Counterclaims of STJ, P.C.; E c o n o m o u Construction; John Economou; Steve Economou; and, Thomas Economou in the 5 3 3 action pursuant to Federal Rule of Civil Procedure 12(b)(1) and 12(h)(3). The Plaintiffs a ss e rt that STJ, P.C.;Economou Construction; John Economou; Steve Economou; and, T h o m as Economou lack standing to bring the counterclaims against Buyco because they are n o t members of the DOC LP partnership ­ only EP has standing. The time for a response to the motion has passed, see Civil Local Rule 7.1(b), a n d none has been filed. The Plaintiffs' unopposed motion to dismiss the counterclaims of S T J , P.C.; Economou Construction; John Economou; Steve Economou; and, Thomas E c o n o m o u is granted because, as contended by the Plaintiffs, they are not members of DOC L P and, consequently, they have no standing to bring those claims. This ruling does not im p a c t on the counterclaims filed by EP in the 533 action. M o tio n to Lift Stay and Conduct Scheduling Conference The Plaintiffs request that the Court lift the stay and conduct a scheduling c o n f e r e n c e . While no stay has been entered, at this juncture, pursuant to Federal Rule of 20

C iv il Procedure 16(b), the Court will schedule a telephonic scheduling conference that will b e limited to the damages claims for Thursday, January 28, 2010, at 9:30 a.m (Central Time). T h e Court will initiate the call. The parties should be available at that time. The purpose of the conference call is to establish a Scheduling Order that will lim it the time: 1. 2. 3. to join other parties and to amend the pleadings; to file motions; and, to complete discovery;

The Scheduling Order may also: 4. m o d if y the timing for disclosure under Rules 26(a) and 26(e)(1) a n d of the extent of discovery to be permitted; p ro v id e for the disclosure or discovery of electronically stored in f o r m a tio n ; in c lu d e any agreements the parties reach for asserting claims of p riv ile g e or protection as trial preparation material after in f o rm a tio n is produced; th e date or dates for conferences before trial, a final pretrial c o n f ere n c e, and trial; and, a n y other matters appropriate in the circumstances of the case.

5.

6.

7.

8.

T h e time limitations set forth in the Scheduling Order may only be modified for good cause an d with the Court's consent. Fed. R. Civ. P. 16(b)(4). T h e parties should give special attention Rule 26(f), which requires that they c o n d u c t a settlement/discovery conference at least 21 days prior to the initial scheduling c o n f e re n c e . The Rule 26(f) conference may be conducted by telephone. 21

R u le 26 also mandates that the parties, within 14 days of their conference: (1) file a written report outlining the proposed discovery plan they have developed at their R u le 26(f) conference; and, (2) make the required initial disclosures under Rule 26(a) re g a rd in g witnesses and documents. In addition to the matters specified in Rule 26(f)(2) and (3 ), the Court requests that the proposed discovery plan submitted by the parties include a v e r y brief statement of the nature of the case of no more than several sentences. N O W , THEREFORE, BASED ON THE FOREGOING, IT IS HEREBY O R D E R E D THAT: The Economou Defendants' motion for extension of time to file answer ( D o c k e t No. 40) is GRANTED; The Economou Defendants' motion to vacate entry of default (Docket No. 46) is GRANTED; T h e Plaintiffs' motion for default judgment as to STJ, P.C.; Economou C o n s tr u c tio n ; John Economou; and, Steve Economou (Docket No. 50) is DENIED; T h e Plaintiffs' expedited non-dispositive motion for service of the summons a n d the complaint by a Marshal (Docket No. 59) is DENIED; T h e Plaintiffs' motion to dismiss the counterclaims of STJ, P.C.; Economou C o n s tru c tio n ; John Economou; Steve Economou; and, Thomas Economou (Docket No. 61) is GRANTED. This ruling does not impact on EP's counterclaims in the Answer and C o u n te rc la im s .

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T h e Plaintiffs' motion to lift stay and conduct scheduling conference (Docket N o . 81) is GRANTED to the extent that the parties MUST participate in a telephone s c h e d u lin g conference limited to the damages claims to be conducted by the Court on J a n u a r y 28, 2010, at 9:30 a.m. The Court will initiate the call. With respect to the following motions filed in the 09-C-569 action: EP's motion to dismiss (Docket No. 35) is DENIED; Buyco's motion for default judgment as to EP (Docket No. 17) is DENIED; E P ' s motion for extension of time (Docket No. 33) is GRANTED; and, EP's motion to vacate entry of default (Docket No. 34) is GRANTED. D a te d at Milwaukee, Wisconsin this 30th day of November, 2009. BY THE COURT

s / Rudolph T. Randa Hon. Rudolph T. Randa U .S . District Judge

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