United States District Court, N.D. Illinois
February 13, 2004.
CENTRAL STATES, SOUTHEAST AND SOUTHWEST AREAS PENSION FUND and HOWARD McDOUGALL, Trustee, Plaintiffs,
FREYCO TRUCKING, INC., Defendant
The opinion of the court was delivered by: JOHN GRADY, Senior District Judge
Before the court is plaintiffs' motion for judgment against Cindi
Frey. For the reasons set forth below, the motion is denied.
Central States, Southeast and Southwest Areas Pension Fund ("the
Pension Fund") and Howard McDougall, the Pension Fund's trustee
(together, "plaintiffs") brought this ERISA action against Freyco
Trucking, Inc. ("Freyco") seeking to recover employer contributions
Freyco allegedly owed to the Pension Fund. Freyco was properly served
with a summons and complaint but failed to respond. Upon plaintiff's
motion, the court on July 24, 2002 entered a default judgment against
Freyco in the amount of $31,932.35.
Plaintiffs then commenced supplemental collection proceedings by
serving Cindi Frey ("Frey") in her capacity as
"President of Freyco Trucking, Inc." with a citation to discover
assets. Plaintiffs scheduled Frey's deposition pursuant to the citation,
but she failed to appear. Instead, William Frey (Frey's husband) and Bill
Tutlewski, both former Freyco employees, appeared and testified.
According to plaintiffs, William Frey's and Tutlewski's testimony, and
the documents they produced, reveal that: (i) Freyco ceased operations
"at the end of December 2001"; (ii) Freyco never had any assets other
than accounts receivable; (iii) Frey was Freyco's sole shareholder and
officer; and (iv) at or around the time of Freyco's dissolution, equity
distributions amounting to $25,380.00 were made only to Frey.
Having had no success in enforcing the judgment against the
now-dissolved Freyco, plaintiffs move for a default judgment against
Litigants who have secured judgments in federal court can seek to
enforce those judgments either in state court (see 735 ILCS 5/12-650, et
seq.) or in federal court pursuant to Federal Rule of Civil Procedure
69(a). See Resolution Trust. Corp. v. Ruggiero, 994 F.2d 1221, 1226 (7th
Cir. 1993). Plaintiffs have opted for the latter route, and Rule 69(a)
instructs federal courts, in the absence of an applicable federal
statute, to apply the law of the forum state in post-judgment collection
proceedings. See Cacok v. Covington, 111 F.3d 52, 53 (7th Cir. 1997); Matos
v. Richard A.
Nellis, Inc., 101 F.3d 1193, 1195 (7th Cir. 1996). No federal law applies
here, so the law of Illinois, the forum state, is controlling.
Our analysis begins, and ends, with the Seventh Circuit's holding in
Matos. In that case, the plaintiff had won a judgment in a Title VII
action against her former employer, Nellis, Inc., which had since been
dissolved. The plaintiff had difficulty collecting and suspected that
Nellis; Inc.'s owner, Mr. Nellis, had withdrawn all of the company's
assets. Following unsuccessful Rule 69 proceedings against Mr. Nellis,
the plaintiff moved the district court for a turnover order and
sanctions. Instead, the district court (a visiting judge who had tried
the Title VII case) terminated the Rule 69 proceedings "ruling that a
federal court lacks authority to require an investor to pay the
corporation's debts." Matos, 101 F.3d at 1195.
On appeal, the Seventh Circuit acknowledged that "Rule 69 conforms
collection proceedings to state law, and Illinois likely would not permit
veil-piercing in supplementary proceedings. . . ." Id. But, the Court
held, since Nellis Inc. had been dissolved, the case did not present a
veil-piercing issue, and under Illinois law, collection proceedings
against a defunct corporation's distributees were proper. See id. The
Nellis Inc. is gone, dissolved under state law, and
the investors who received its assets are liable for
the debts, to the extent of the distributions they
received. For all practical purposes . . . the
distributees replace the defunct corporation as the
real parties in interest. Distributee liability lasts
for five years, and this action was commenced in
time, so Nellis and any other recipients of corporate
assets are directly answerable.
* * *
Matos is entitled to use Rule 69 proceedings to find
out how much Nellis received, and the district judge
must direct Nellis to divulge that information and
turn over the proceeds (if there was a distribution)
to satisfy the judgment.
101 F.3d at 1195-96 (citations omitted).
Therefore, because Matos allows a litigant who holds a judgment against
a dissolved corporation to enforce that judgment directly against the
corporation's distributees, plaintiffs here need not pursue a separate
judgment against Frey. Instead, plaintiffs may enforce the Freyco
judgment against Frey, pursuant to Rule 69, to the extent of any asset
distributions she received as a result of Freyco's dissolution. If Frey
did receive any such distributions, she will be ordered to turn over
those proceeds in satisfaction, or partial satisfaction, of the Freyco
Going forward, then, we must determine what distributions, if any, were
received by Frey. Typically, the court would order Frey to appear at
citation deposition or to appear before this court for a hearing on the
matter. See generally Textile Banking Co. v. Rentschler, 657 F.2d 844,
850 (7th Cir. 1981). However, at least at this point, a second citation
deposition and/or hearing
are unnecessary. "Proceedings to enforce judgments are meant to be
swift, cheap, informal. . . .[and] Illinois law appears to leave the
procedure to be followed in such proceedings largely to the judge's
discretion. . . ." Resolution Trust Corp., 994 F.2d at 1226 (citations
omitted). And here, the evidence proffered in support of plaintiff's
motion the deposition transcript of Messrs. Frey and Tutlewski, as well
as Freyco balance sheets and accounting statements is already
sufficient to make a prima facie showing that Frey did in fact receive
Freyco asset distributions totaling $25,380.00. Frey's response brief,
consisting of unsupported and conclusory denials, does nothing to rebut
plaintiff's evidence. However, we recognize that prior to this order the
basis for Frey's potential liability may not have been clear, so we will
give her another at-bat.
Any renewed filing by Frey shall include a statement detailing all
Freyco asset distributions she received from January 2001 to the
present. In addition, to the extent Frey contests plaintiff's
characterization of monies she received as being something other than
distributions, she shall explain the nature of those payments, complete
with any supporting evidence available. In other words, plaintiffs have
come forth with sufficient evidence to shift the burden to Frey to show
that the payments which plaintiffs have identified were not Freyco asset
For the foregoing reasons, plaintiff's motion for judgment against
Cindi Frey is denied. Frey may have until March 5, 2004 to file a brief
consistent with this opinion and with counsel's obligations under
Fed.R.Civ.P. 11. Should the court require a further response from
plaintiffs, they will be so notified. If Frey fails to make a showing
that makes further briefing necessary, the court will order Frey to pay
plaintiffs an amount equal to her Freyco asset distribution.
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