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FEDERAL DEPOSIT INSURANCE CORPORATION v. WABICK

THE FEDERAL DEPOSIT INSURANCE CORPORATION, as Successor to the Resolution Trust Corporation, as Receiver for the Home Federal Savings Association of Kansas City, F.A., and as Manager of the FSLIC Resolution Fund, Plaintiff,
v.
DAVID J. WABICK, PATRICIA A. WABICK, LAWRENCE ETTNER, JANELLE ETTNER, LORRAINE WABICK, and PAUL FREITAG, Defendants.



The opinion of the court was delivered by: JOHN W. DARRAH, District Judge

MEMORANDUM OPINION AND ORDER

Plaintiff, the Federal Deposit Insurance Corporation, filed suit against several Defendants, including Lawrence Ettner and Janelle Ettner. Plaintiff alleges Defendants delivered false documents which enabled an otherwise unqualified corporation to participate in a bidding process and purchase of certain loans. Plaintiff also alleges Defendants colluded with the then-owner of the loans to depress the bid price. Based on these actions, Plaintiff brings claims for fraud, breach of contract, and unjust enrichment against Defendants. Presently before the Court is Lawrence Ettner and Janelle Ettner's Omnibus Motion to Dismiss the Second Amended Complaint. For the following reasons, that motion is granted in part and denied in part. LEGAL STANDARD

In reviewing a motion to dismiss, the court reviews all facts alleged in the complaint and any reasonable inferences drawn therefrom in the light most favorable to the plaintiff. See Marshall-Mosby v. Corporate Receivables, Inc., 205 F.3d 323, 326 (7th Cir. 2000). A plaintiff is not required to plead the facts or elements of a claim, with the exceptions found in Federal Rule of Civil Procedure 9. See Swierkiewicz v. Sorema, 534 U.S. 506, 511 (2002); Walker v. Thompson, 288 F.3d 1005, 1007 (7th Cir. 2002). Dismissal is warranted only if "it appears beyond a doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46 (1957). The "suit should not be dismissed if it is possible to hypothesize facts, consistent with the complaint, that would make out a claim." Graehling v. Village of Lombard, Ill., 58 F.3d 295, 297 (7th Cir. 1995).

  BACKGROUND

  The facts, for the purposes of this motion, are taken as true from Plaintiff's Second Amended Complaint. Defendants David Wabick and Larry Ettner formed Gateway Capital. Together, Larry Ettner and his wife, Janelle Ettner, owned half of Gateway Capital; however, Gateway Capital was an alter-ego of David Wabick and Larry Ettner. Furthermore, Janelle Ettner took her direction as a shareholder in Gateway Capital from David Wabick and Larry Ettner, and thus acted as David Wabick's agent in this regard. David Wabick also controlled or owned another corporation, Connaught. The Resolution Trust Corporation was a United States corporation charged with protecting creditors and depositors of failed savings and loan institutions.*fn1 When one of these institutions was declared insolvent, the Resolution Trust Corporation was appointed as conservator or receiver. Consistent with its obligations, the Resolution Trust Corporation liquidated assets of failed savings and loan institutions at public auctions.

  To ensure that all potential bidders in the auctions operated with the same information, the Resolution Trust Corporation adopted certain policies and procedures, such as requiring prospective bidders, as prerequisites to bidding, to complete a Confidentiality Agreement and a Deposit Agreement. In these agreements, all prospective bidders of assets gave, on their own behalf and on behalf of their representatives, several certifications to the Resolution Trust Corporation, including: (1) a certification that the signer would not disclose to any third party any confidential information without prior written consent of the Resolution Trust Corporation; and (2) a certification that the signer would not communicate with any debtor, guarantor, or debtor's or guarantor's accountant or attorney relative to any asset without prior written consent of the Resolution Trust Corporation.

  In addition, the Resolution Trust Corporation adopted a number of eligibility requirements to prevent assets controlled by the Resolution Trust Corporation from being won at auction by those who had caused losses to the insurance funds or who were otherwise unsuitable purchasers. All prospective bidders were required to complete and submit a "Collection Policy Certification" as a prerequisite to participation. This certification required all purchasers to certify on their own behalf and on behalf of all their affiliates that: (1) no defaults, by the prospective purchasers or its affiliates, existed on any obligation to the Resolution Trust Corporation or other certain federal corporations involved with insuring savings and loan institutions; and (2) a certification that no litigation existed between the prospective purchaser and the Resolution Trust Corporation or other certain federal corporations involved with insuring savings and loan institutions.

  One group of loans the Resolution Trust Corporation auctioned off was the Merit Loans. The lender on the Merit Loans was declared insolvent, and the Resolution Trust Corporation was appointed its receiver. Merit Corporation, Merit Holding Corporation, and Trison Corporation (collectively, the "Merit Entities") were either debtors or controlled the debtors on some or all of the Merit Loans. Albert Ichelson, Jr. controlled or owned each of the Merit Entities.

  Before the auction, all prospective bidders received a bid package, including: (1) an explanation of the Collection Policy Certification, (2) copies of the certification forms described above, (3) a Credit History and Legal Record Statement, (4) instructions for completing the forms and the Credit History, and (5) the Confidentiality Agreement and the Deposit Agreement. Delivery of these forms was a prerequisite to participate in the auction.

  Gateway Capital intended to bid on the Merit Loans. Defendants, as detailed below, made a number of misrepresentations on various forms prepared so that Gateway Capital could bid on the Merit Loans, including: (1) the Confidentiality Agreements, (2) the Deposit Agreements, (3) the Collection Policy Certifications, (4) the Credit Histories, (5) a Purchase Agreement, and (6) an affidavit. On September 4, 1992, in anticipation of participation in the auction, Defendant David Wabick, on behalf of Gateway Capital, signed: (1) a Confidentiality Agreement and agreed not to communicate with nor disclose confidential information to any debtor whose loan was contained in the Merit Loans package; (2) a Deposit Agreement in which David Wabick certified that Gateway Capital had no known material business relationship with any obligor under any mortgage loan contained in the Merit Loans package; and (3) the requisite Collection Policy Certification. These items were sent to the Resolution Trust Corporation.

  Included in these documents were certifications that: (1) no default existed with respect to any obligation of Gateway Capital or its affiliates to the Resolution Trust Corporation or other certain federal corporations involved with insuring savings and loan institutions; and (2) Gateway Capital was not purchasing assets on behalf of or for resale to a restricted purchaser.

  Gateway Capital, Defendant Patricia A. Wabick, and Larry Ettner signed Credit Histories dated September 4, 1992; October 19, 1992; and October 20, 1992, respectively. On October 21, 1992, the Collection Policy Certification was signed on behalf of Gateway Capital in Illinois. These documents were sent to the company the Resolution Trust Corporation hired to investigate the Credit Histories of the prospective bidders.

  The signers of the Credit Histories represented that neither they nor any related entity had: (1) any outstanding judgments; (2) filed for bankruptcy or been declared bankrupt in the preceding ten years; (3) owned property which had been foreclosed or given title or deed in lieu thereof in the preceding seven years; (4) been in default on any obligations to pay principal or interest to any credit institution, including the Resolution Trust Corporation or other certain federal corporations involved with insuring savings and loan institutions; and (5) been a party to any pending lawsuit at the time the Credit Histories were executed.

  While Gateway Capital was preparing the required materials for its bid, Wabick also sent a fax to the Resolution Trust Corporation receiver. This fax contained a signed affidavit from David Wabick stating that prior to receiving the bid package and executing the Confidentiality Agreement and the Deposit Agreement, Gateway Capital had entered into discussions with Ichelson regarding the Merit Loans. Wabick further certified that after executing these documents, Gateway Capital had no further discussions with any ...


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