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COTTON v. PRIVATE BANK & TRUST CO.

March 10, 2004.

SHERMAN COTTON, as Independent Executor of the Estate of Loy E. King, Jr. and Trustee of the Loy E. King, Jr. Living Trust, Plaintiff, V. PRIVATE BANK & TRUST CO., an Illinois corporation, BDO SEIDMAN, LLP, a New York limited liability partnership, Defendants V. LEWIS, RICE, FINGERSH, L, C., CREWS & ASSOCS., an Arkansas Corporation, CIBC WORLD MARKETS CORP., a Delaware corporation, SBU, INC., a Missouri corporation, FLAG FINANCE CORP., a Missouri corporation, JAMES R. G1BSON, MARJORIE G1BSON and JACQUELYNE GIBSON, Third Party Defendants/ Third Party Plaintiffs, V. BDO SEIDMAN, LLP, a New York limited liability partnership, Third Party Defendant.


The opinion of the court was delivered by: RONALD GUZMAN, District Judge

MEMORANDUM OPINION AND ORDER

This diversity action involves the alleged misappropriation and conversion of U.S. Treasury Stripped Bonds ("the Bonds") from trust accounts created for the purpose of making Page 2 periodic payments to Loy. E. King, Jr. ("King") and his estate pursuant to a settlement agreement. Plaintiff Sherman Cotton ("Cotton") has sued Lewis, Rice, Fingersh, L.C. ("Lewis Rice") for tortious interference with contract (Count IV), tortious interference with economic expectancy (Count V), inducement of breach of fiduciary duty (Count VI), conversion of assets (Count VII), and conspiracy to breach fiduciary duty (Count XVII). Defendant has moved to dismiss all five Counts of Plaintiff's second amended complaint currently pending against Lewis Rice pursuant to Fed.R.Civ.P. ("Rule") 12(b)(6). For the reasons set forth below, the Court denies Lewis Rice's motion.

FACTS

  This case arises out of a settlement agreement pertaining to a personal injury suit brought by King. As a part of the settlement agreement, the defendant in the personal injury suit assigned its rights and responsibilities to SBU, Inc. ("SBU"), a Missouri corporation, who agreed to make the requisite periodic payments to King and King's estate by way of a trust account consisting of U.S. Treasury Stripped Bonds ("Bonds"). SBU subsequently transferred the Bonds to Private Bank and Trust Company ("PrivateBank"), who created a structured settlement trust to distribute periodic payments to King.

  This trust designed SBU as the settlor and sole beneficiary, PrivateBank as the trustee, and Cotton as the trust creditor, PrivateBank, as trustee, then resigned as trustee and appointed Flag Finance Corporation ("Flag") as successor trustee. Subsequently, Flag and SBU, of both James R. Gibson ("Gibson") was officer and majority shareholder, directed PrivateBank to transfer securities including the Bonds to an account held by Crews & Associates, a broker-dealer, who then — at the request of either Flag or SBU or one or more of the Gibsons — Page 3 transferred some of the Bonds to a non-trustee account at C1BC World Markets Corp, ("CIBC").

  Plaintiff alleges that prior to the Fall of 1999, Gibson converted the Bonds from the structured settlement trust held by Crews and CIBC for his own use and benefit and left the country. King stopped receiving payments pursuant to the Trust Agreements in July 2000. On April 4, 2000, Cotton allegedly received notification that PrivateBank had previously in August 1996 resigned as trustee and paying agent.

  This suit commenced on February 16, 2001, when Plaintiff filed suit in the U.S. District Court for the Northern District of Illinois against PrivateBank for damages, costs and equitable relief related to the alleged misappropriation and conversion of the Bonds from the structured trust account detailed above. Private Bank then filed complaints against BDO Seidman, L.L.P. ("BDO"), Crews, CIBC, SBU, Flag, and Gibson. Cotton then amended his complaint to include BDO as a Defendant, a claim that has now been settled. See Cotton v. PrivateBank & Trust Co., No. 01 C 1099, 2003 WL 22220259, at *7 (N.D. Ill. Sept. 24, 2003).

  On July 7, 2003, Plaintiff was granted leave to amend the complaint to also add Lewis Rice ("Defendant") as a Defendant, alleging five counts: tortious interference with contract (Count IV), tortious interference with economic expectancy (Count V), inducement of breach of fiduciary duty (Count VI), conversion of assets (Count VII), and conspiracy to breach fiduciary duty (Count XVII). Plaintiff alleges that Lewis Rice, as attorney for Gibson, SBU, and King, was aware at the time of its relationship with those parties that there existed a valid and enforceable contract which obligated them to make periodic payments to King under the Trust Agreement; that nevertheless Lewis Rice advised and assisted Gibson and SBU to misappropriate and convert the trust assets to purchase twenty-three grocery stores, knowing that the transaction would deprive the Trust of its source of monies; and that Lewis Rice acted with Page 4 actual malice and was motivated throughout this transaction by a 30% fee contingent upon the closing of the deal to purchase said stores. (Compl. ¶¶ 103-07.)

  Defendant has filed a motion to dismiss pursuant to Rule 12(b)(6), arguing that Plaintiff's claims are time-barred under 735 ILL. COMP. STAT. 5/13-214, 3, as well as that Plaintiff's third-party, non-client causes of action are barred by Lewis Rice's qualified privilege against liability under Illinois law.

  DISCUSSION

 A. Statute of Limitations

  This Court sitting in diversity will apply the procedural and substantive law of the forum state, including its statute of limitations. See Reinke v. Boden, 45 F.3d 166, 172 (7th Cir. 1995) (holding that "it is clear that, as a general rule, Illinois considers statute of limitations matters to be procedural" and thus binding on federal courts in diversity suits).

  The general civil Illinois statute of limitations provides:
Except as provided in Section 2-725 of the "Uniform Commercial Code" . . . and Section 11-13 of "The Illinois Public Aid Code" . . . actions on unwritten contracts, expressed or implied, or on awards of arbitration, or to recover damages for an injury done to property, real or personal, or to recover the possession of personal property or damages for the detention or conversion thereof, and all civil actions not otherwise provided for, shall be commenced within 5 years next after the cause of action accrued,
735 ILL, COMP. STAT. 5/13-205 (emphasis added).

  Defendant Lewis Rice, however, argues that Plaintiffs claims of tortious interference, interference with economic expectancy, inducement to breach fiduciary duty, conversion of assets and conspiracy to breach fiduciary duty are time-barred under Illinois' statute of ...


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