United States District Court, N.D. Illinois
June 2, 2004.
EUROPAPER B.V., Plaintiff, V. INTEGRATED MATERIAL MANAGEMENT SERVICES, INC. A/K/A SIKUSTAM CORP., AND PETER MATSUKIS, Defendants
The opinion of the court was delivered by: WILLIAM J. HIBBLER, District Judge
MEMORANDUM OPINION AND ORDER
In October 2000, Europaper, a Dutch corporation, contracted to sell
Illinois-based IMMS 5,000 metric tons of waste paper at the price of
$106.50 per metric ton on a FAS (free alongside ship)*fn1 Antwerp or
Rotterdam basis. (Pl. Local Rule 56.1(a) Statement of Facts (Pl.
Statement), ¶ 47, Def. Local Rule 56.1(b)(3)(A) Statement of Facts
(Def. Statement) ¶ 47). Thus, once the waste paper was brought to
dock at Antwerp or Rotterdam, IMMS became obligated to Europaper for the
particular quantity ordered and delivered. (Pl. Statement ¶ 50; Def.
Statement ¶ 50). Bram Reek signed the contract on behalf of
Europaper, and Peter Matsukis signed the contract on behalf of IMMS. (Pl.
Ex. G). Europaper delivered 2,044.02 metric tons of waste paper in three
separate shipments on November 8, 2000, November 16, 2000 and November
21, 2000, and IMMS accepted delivery of these shipments. (Pl. Statement
¶ 56-57; Def. Statement ¶ 56-57). Unfortunately, the rest of the contract was not fulfilled so smoothly.
Although IMMS accepted $217,688.13 worth of waste paper in the three
November 2000 shipments, it paid Europaper only $20,000 for these
shipments. On November 29, Matsukis sent an e-mail to Reek, explaining
that he would soon deliver in person an $80,000 check and wire the
remaining balance in the following week. (Pl. Ex. I). Believing that
Matsukis would solve IMMS's apparent cash flow problems, Europaper
shipped another 1,036.96 metric tons on December 1. (Pl. Statement ¶¶
61-62; Def. Statement ¶¶ 61-62). But by December 4, IMMS had yet to
send the $80,000 payment that Matsukis promised in the previous week.
(Pl. Ex. N; Pl. Statement ¶ 64; Def. Statement 64). On December 6 the
$80,000 promised by Matsukis had yet to arrive. (Pl. Ex. I). Matsukis and
Reek met on that day, however, and agreed mat IMMS owed Europaper
$328,124.37 and that it had paid $20,000 already. At the meeting,
Matsukis also promised Reek that $80,000 had been transferred by bankwire
that day, that he would wire $100,000 by Thursday of the following week,
and that he would pay the remaining $128,124.37 by a letter of credit
early the following week. (Pl. Ex. I). But Matsukis's claim that $80,000
had been wired that day turned out to be a lie, for no such amount was
ever wired from IMMS to Europaper, and his promises to pay the remaining
balance in two further payments also went unfulfilled.
And so the problems between IMMS and Europaper mounted. In an attempt
to explain IMMS's difficulties, Matsukis sent an e-mail to Reek on
December 6. (Pl. Ex. P). Matsukis explained that a price drop in the
waste paper market and the expense of paying freight in advance had
placed IMMS in a "serious deficit" and asked Reek to "have patience with"
him, promising that his waste-paper brokering business would go smoother.
(Pl. Ex. P). Reek sent Matsukis a response on December 8 in which he
detailed Europaper's position regarding IMMS's outstanding balance. (Pl. Ex. Q). Reek expressed frustration that the balance had yet to
be paid and that none of Matsukis's promises to send payment had been
fulfilled. (Pl. Ex. Q).
Despite IMMS's failure to pay Europaper, two additional shipments (for
1, 047.68 and 527.29 metric tons) arrived in Rotterdam on December 10.
(Pl. Exs. R & S; Pl. Statement ¶¶ 70-71; Def. Statement ¶¶
70-71). The two December 10 shipments brought IMMS's total balance to
$495,808, of which it still had paid only $20,000. (Pl. Statement ¶
68; Def. Statement ¶ 68; Pl. Ex, T). Matsukis sent Reek another
e-mail on December 13 explaining many of the problems IMMS experienced.
(Pl. Ex. U). In the e-mail, Matsukis claimed that 1,000 metric tons of
the shipped waste paper were supposed to have been shipped to
"Norwegian," but that "Norwegian" never confirmed the order and that he
had not found another purchaser. (Pl. Ex. U). Matsukis then claimed that
another 1,000 metric tons of waste paper were in fact shipped to Shanghai
but that the order was not confirmed and awaiting final pricing. (Pl. Ex.
U). Matsukis claimed that the third 1,000 metric tons had been shipped to
Navashiva, but that order also had not been confirmed. (Pl. Ex. U).
Matsukis explained that part of IMMS's problem was that the ONP (Old
Newspaper) market had crashed and the price being offered for the paper
was substantially less than expected. (Pl. Ex. U). Matsukis promised to
"make sure that all the material and freight will be paid, but.
. . . a little later than . . . expected" and asked Reek to "have some
patience [so that IMMS can] get all things done right." (Pl. Ex. U).
Matsukis also wrote that he had "confirmed with [his] bank that $70,000
. . . has been wired to [Europaper]." (Pl. Ex. U).
But contrary to Matsukis's claim, he had never wired Europaper $70,000.
(Pl. Statement ¶ 74; Def. Statement 74; Matsukis Dep. at 173). By
December 13, 2000, the relationship between IMMS and Europaper broke down
completely. Europaper sent IMMS an invoice for $47,588.52 for, among other things, interest on the balance owed and storage. (Pl.
Ex. T). Reek also sent Matsukis an e-mail threatening to "take all
necessary actions" to recover the $475,858.68 (not including the recent
invoice for $47,000) that IMMS owed to Europaper. (Pl. Ex. T). Matsukis
responded the same day in another e-mail that a business associate who
owed him money would send Europaper $100,000 and that he was owed $33
5,000 from "Lexious" (which he would send to Europaper when received).
(Pl. Ex. W; Pl. Statement ¶ 76; Def. Statement 76). In the December
13 e-mail, Matsukis suddenly claimed that there had been $30,000 in
confirmed wires, despite the fact that every other e-mail between the
parties indicated that only $20,000 had actually been wired. (Pl. Ex. W).
In a story that now sounds like a broken record, Matsukis's promises to
remit $335,000 and to have an associate send $100,000 were never
fulfilled. (Pl. Statement ¶ 77; Def. Statement ¶ 77). On December
27, Europaper wrote Matsukis to inform him that the balance of more than
$438,000 was still owed. (Pl. Ex. X; Pl. Statement ¶ 79; Def.
Statement ¶ 79). Europaper attempted to resell some of the paper that
Matsukis left sitting dockside, and received $66,005.70 in two separate
sales. (Pl. Statement ¶¶ 84-85; Def. Statement ¶¶ 84-85; Pl.
In January 2001, Europaper sued IMMS and its holding company, Sikustam,
for breach of contract. Europaper claims that IMMS and Sikustam now owe
it $457,441.59 ($543,447.29 in invoices detailed above minus $20,000 in
payment and $66,005.70 in mitigation). (Pl. Statement ¶ 86).*fn2 There is more to this story however, because IMMS is bankrupt and
Europaper wants to collect the debt from Matsukis, and so amended its
complaint to include a breach of contract and fraud claim against
Matsukis, arguing that the corporate veil should be pierced. Matsukis
formed IMMS in 1997. (Pl. Ex. D (Matsukis Sep. 19, 2002 Dep.) at 18).
During its entire existence, IMMS held but one board meeting the
meeting at which Matsukis signed the application for incorporation and
named himself the sole director and officer of IMMS. (Pl. Statement ¶¶
5, 30; Def. Statement ¶¶ 5, 30). The only corporate book or record
that exists for IMMS is the incorporation document. (Pl. Statement ¶
15; Def. Statement ¶ 15). The record contains no evidence that IMMS
ever passed any corporate bylaws. Furthermore, IMMS did not even file tax
returns for 1999, 2000, or 2001. (Pl. Statement ¶ 25; Def. Statement
¶ 25). IMMS never issued a dividend or paid a salary. (Pl. Statement
¶¶ 22, 26; Def. Statement ¶¶ 22, 26). And throughout its existence,
IMMS had only one employee, shareholder, director and officer
Matsukis, who made a single $1,000 investment to capitalize IMMS. (Pl.
Statement ¶¶ 9-13, 28; Def. Statement ¶¶ 9-13, 28).*fn3
Although Matsukis does not have any corporate books or records for IMMS
(Pl. Statement ¶ 15; Def. Statement ¶ 15), he did, however, admit
to commingling funds from his corporations with his own personal funds.
For example, Matsukis used IMMS money to buy himself a 2000 Buick Regal.
(Pl. Statement ¶ 31; Def. Statement ¶ 31). He also used MMS money
to buy his wife a 2000 Dodge Durango. (Pl. Statement ¶ 32; Def. Statement ¶ 32).
IMMS paid Matsukis's mother $1,700 to babysit Matsukis's children. (Pl.
Statement ¶ 21; Pl. Ex. E; Def. Statement ¶ 21). Matsukis allowed
IMMS and Sikustam to use his furniture, his computers, and his
refrigerator. (Pl. Statement ¶¶ 38-41; Def. Statement for 38-41).
IMMS rented office space from Matsukis's wife, relying on an oral lease
and paying $5,000 per month.*fn4 (Pl. Statement ¶¶ 17-20; Def.
Statement ¶¶ 17-20).
Europaper moves for summary judgment against Matsukis on both its
breach of contract and fraud claims. Matsukis moves for summary judgment
against Europaper. Summary judgment is proper when there is no genuine
issue of material fact and the moving party is entitled to judgment as a
matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322-323,
106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Fed.R.Civ.P. 56(c). The party
seeking summary judgment bears the initial burden of proving there is no
genuine issue of material fact. Celotex Corp., 477 U.S. at 323.
In response, the non-moving party cannot rest on bare pleadings alone but
must designate specific material facts in the record showing that there
is a genuine issue for trial. Id. at 324; Insolia v. Philip
Morris Inc., 216 F.3d 596, 598 (7th Cir. 2000). In ruling on a
motion for summary judgment, the Court must construe all facts in a light
most favorable to the non-moving party as well as view all reasonable
inferences in that party's favor. Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A
genuine issue of material fact exists only if there is sufficient
evidence for a jury to return a verdict for the non-moving party.
Liberty Lobby, Inc., 477 U.S. at 249; Alexander v. Wisconsin Dep `t of Health and Family Servs., 263 F.3d 673,
680 (7th Cir. 2001); Insolia, 216 F.3d at 598-99.
In general, shareholders, officers, and directors of a corporation are
not liable for its debts and obligations. Cosgrove Distrib., Inc. v.
Haff, 343 Ill. App.3d 426, 428-29, 798 N.E.2d 139, 141 (2003).*fn5
But the corporate veil shielding shareholders and officers from liability
can be pierced if "(1) a unity of interest and ownership that causes the
separate personalities of the corporation and the individual to no longer
exist; an (2) the presence of circumstances under which adherence to the
fiction of a separate corporate existence would sanction a fraud, promote
injustice or promote inequitable consequences." Id. Courts look
to many factors to determine whether to pierce the corporate veil. These
factors include: inadequate capitalization; failure to issue stock;
failure to observe corporate formalities; nonpayment of dividends;
insolvency of the debtor corporation; nonfunctioning of the other
officers or directors; absence of corporate records; commingling of
funds; diversion of assets from the corporation by or to a shareholder,
failure to maintain arm's-length relationships among related entities;
and whether the corporation is a mere facade for the operation of the
dominant shareholders. Id. at 429; 798 N.E.2d at 141-42;
Jacobson v. Buffalo Rock Shooters Supply, Inc.,
278 Ill. App.3d 1084, 1088, 664 N.E.2d 328, 331 (1996).
Matsukis argues that Europaper relies solely on the fact that IMMS was
undercapitalized to pierce the corporate veil. (Matsukis Response to
Summ. J. at 8). The Court disagrees. Europaper has shown not only that it is undisputed that IMMS was undercapitalized
(it had no assets and Matsukis invested only $1,000 in IMMS at the time
of incorporation, making no further capital investments in the
corporation), but also that it is undisputed that virtually all
of the factors that might justify the piercing of the corporate veil are
present. IMMS never issued any stock. It never held any meetings of its
board of directors but for the meeting necessary to sign the papers for
incorporation. It never paid any dividends. It had only one shareholder,
director and employee during its entire existence. It failed to file tax
returns in three consecutive calender years. It failed to maintain
corporate records of any sort. It failed to follow corporate formalities
leases were entered into without written agreements, IMMS paid
Matsukis commissions and also paid for his insurance premiums without any
corporate resolutions, and IMMS had no corporate by-laws. And Matsukis
commingled funds. He used IMMS money to pay for cars for himself and his
wife and to pay his mother for baby sitting services. He allowed IMMS to
use his furniture, his computer equipment, and his refrigerator. But more
amazing still is that Europaper wrote in its statement of facts that
"IMMS is Matsukis" and Matsukis admitted this fact. (Pl.
Statement ¶ 24; Def. Statement ¶ 24). The Court is hard pressed
to imagine a more compelling set of facts to demonstrate a unity of
interest between a sole shareholder and the corporation. The adherence to
the fiction of a separate corporate existence would also promote
injustice or promote inequitable consequences in this case. It is
undisputed that Matsukis commingled funds. It is also undisputed that he
repeatedly promised that he had already wired part of the money IMMS owed
to Europaper and that Europaper continued to fulfill its obligations
under the contract because of these promises. Illinois courts have
pierced corporate veils to avoid injustice when failure to do so would
unfairly enrich one of the parties. B. Kreisman & Co. v. First
Arlington Nat'l Bank, 91 Ill. App.3d 847, 415 N.E.2d 1070 (1980). Matsukis in his last gasp argues that there is no evidence in the
record that Matsukis agreed to personally guaranty the contract between
IMMS and Europaper. Of course, this is true. But it is also entirely
irrelevant to the question of whether the corporate veil should be
pierced. If Matsukis had personally guaranteed the contract, there would
he no need to pierce the corporate veil. Piercing the corporate veil is a
means to hold a shareholder or director liable for the debts and
obligations of a corporation despite the fact that ordinarily a
shareholder or director is not liable for those debts and obligations.
Cosgrove Distributors, Inc., 343 Ill. App.3d at 428-29, 798
N.E.2d at 141. The Court finds that there is no genuine issue of material
fact as to whether there was unity of interest and ownership between
Matsukis and IMMS that causes the separate personalities of the
corporation and the individual to no longer exist and that adherence to
the fiction of a separate corporate existence would promote an
inequitable consequences. Thus, the Court finds that as a matter of law
Matsukis is liable for the debts of IMMS.
Matsukis next contends that summary judgment is improper because the
amount IMMS owed to Europaper is also in dispute. Again the Court
disagrees. Matsukis first argues that Reek unilaterally altered the
contract and required Matsukis to change the payment terms from an open
account to cash against document. Matsukis points to a December 28, 2000
e-mail. But Matsukis's deposition makes clear that the parties never had
an open account payment agreement. Repeatedly, throughout Matsukis's
deposition, he admits that IMMS became obligated to pay Europaper when
the waste paper arrived. (Pl, Ex. C (Matsukis May 23, 2002 Dep.) at 33,
38, 42). Further, Matsukis's deposition testimony clearly conflicts with
his assertion. In his deposition, Matsukis admitted that he
agreed to the change in payment terms on October 11, 2000,
during contract negotiations and before Europaper had even shipped the
first installment of the waste paper. (Matsukis May 23, 2002 Dep. at 42). Matsukis also argues that Reek
refused to release the bills of lading, which prevented him from
reselling the waste paper. In his brief, Matsukis argues that "based upon
information and belief, Bram Reek instructed all freight carriers who
delivered the materials to IMMS to not release the bills of lading to
IMMS. Based upon information and belief, this was done so that Europaper,
through Fibrenet, could resell the materials to other entities as set
forth below." But Matsukis cannot rely on conjecture to defeat a summary
judgment motion. At summary judgment, a party must "put up or shut up"
and show what evidence it has that would convince a trier of fact to
accept its version of events. Johnson v. Cambridge Industries,
Inc., 325 F.3d 892, 901 (7th Cir. 2003); Price v. Rockford,
947 F.2d 829, 832 (7th Cir. 1991) (statements based on information and
belief cannot be used to defeat summary judgment). Furthermore,
Matsukis's reliance on his self-serving affidavit is improper. The
affidavit conflicts with not only his prior deposition testimony (as
noted above) but also the e-mail correspondence between himself and Reek.
Matsukis's e-mails to Reek repeatedly acknowledge IMMS's indebtedness to
Europaper and Matsukis acknowledges that IMMS owed Europaper in excess of
$495,000 as of December 13, 2000. (Pl. Ex. W). Further, in multiple
e-mails, Matsukis explains many of the problems IMMS was having in paying
Europaper. Not once did Matsukis mention that Reek had withheld bills of
lading. Instead, Matsukis explains in the e-mails that IMMS's problems
arose from a crash in the market for waste paper. Matsukis sent at least
one such e-mail on December 13, after Europaper had delivered
the final shipment of waste paper. (Pl. Ex. U). Finally, in a December 13
e-mail, Matsukis again explicitly contradicts the claim made in his
affidavit that Reek had withheld the bills of lading because he explains
that IMMS had actually shipped 3,000 metric tons (of the
approximately 4,600 metric tons delivered) to "Norwegian," Shanghai, and
Navashiva, but that none of the potential buyers had confirmed the orders because of a drop in the price for
the waste paper. (Pl. Ex. U). Matsukis cannot rely on a self-serving
affidavit that clearly contradicts prior deposition testimony and other
admissions made by Matsukis to create an issue of material fact.
Kalis v. Colgate-Palmolive Co., 231 F.3d 1049, 1056 (7th
Cir. 2000).*fn6 The Court finds that there is no genuine issue of
material fact as to the total amount IMMS owed Europaper: IMMS owed
Europaper a total of $543,447.29. (Pl. Exs. H, K, M, R, S, T).
Matsukis's final argument is that Europaper has underreported the
amount it received when it resold the waste paper, and thus he and IMMS
is not liable for the amount Europaper claims that it is. Matsukis's
argument is premised on his contention that "Reek through his two
companies, Europaper and Fibrenet, never sent the materials to IMMS and
instead sent the materials to other companies from whom Fibrenet, not
Europaper, received the proceeds." (Def. Response to Pl. Summ. J. at 5).
But again, Matsukis rests his argument on "information and belief."
Although he submits bills of lading,*fn7 which he claims (without evidentiary
support) were altered by Reek, nothing in these bills of lading, other
than Matsukis's own speculation, links them to Europaper. Europaper
submitted evidence that it received $66,005.70 when it resold the waste
paper that IMMS was unable to sell. (Pl. Statement ¶¶ 84-85). Matsukis
admitted these statements. (Def. Statement ¶¶ 84-85).
Matsukis points only to his own self-serving affidavit and
unauthenticated bills of lading that do not even mention Europaper.
Matsukis cannot defeat summary judgment with rampant speculation and
cannot rely on affidavits not based on any personal knowledge and
unauthenticated documents. He must point to articulable facts that
Europaper received more than $66,005.70 in mitigation, which he has not.
As a result, the Court finds there is no genuine issue of material fact
as to the amount Europaper received in mitigation $66,005.70.
Europaper also moves for summary judgment against Matsukis on its fraud
claim. Under Illinois law, the elements of an action for fraud consist of
(1) a false statement of material fact; (2) knowledge of the falsity of
the statement by the party making it; (3) intention to induce the other
party to act; (4) reliance on the false statement by the other party; and
(5) damage to the other party resulting from the reliance. Board of
Educ. of City of Chicago v. A. C and S, Inc., 131 Ill.2d 428, 452,
546 N.E.2d 580, 591 (1989), Matsukis seems to ignore this claim entirely.
The Court finds that Matsukis repeatedly told Europaper that he had wired
money that he had not, in fact, wired. Matsukis's assurances of payment
induced Europaper to continue to ship him more waste paper. And because Europaper shipped Matsukis waste paper that he could
not pay for, it was damaged. The elements of fraud are satisfied, and the
Court grants summary judgment in favor of Europaper on its fraud claim.
Matsukis's dealings with Europaper were riddled with lies, broken
promises, and shenanigans. The only evidence Matsukis points to in
defense of Europaper's summary judgment motion is a self-serving
affidavit that contradicts all of the other sworn testimony given by
Matsukis. This last gasp effort to stave off his creditor falls short.
The Court finds that there is no genuine issue of material fact as to
whether Matsukis should be liable for the debts of IMMS to Europaper. The
Court further finds that there is no genuine issue of material fact as to
whether IMMS breached the contract it had with Europaper and that
Matsukis committed fraud when he repeatedly lied about having sent
Europaper partial payment for IMMS's debts. Finally, the Court finds that
there is no genuine issue of material fact as to the amount IMMS owed
Europaper. Accordingly, the Court grants summary judgment in favor of
Europaper against Matsukis in the amount of $457,441.59 ($543,447.29 in
invoices minus $20,000 in payment tendered and $66,005.70 in mitigation)
on Counts II and III.
IT IS SO ORDERED.