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Northern Trust Co. v. Hedges

July 24, 2008

THE NORTHERN TRUST COMPANY, PLAINTIFF,
v.
LUND MILLS HEDGES, DEFENDANT.
LUND MILLS HEDGES, THIRD-PARTY PLAINTIFF,
v.
LJH GLOBAL INVESTMENTS, L.L.C.; N1LJH, LTD., AND JAMES R. HEDGES IV, THIRD-PARTY DEFENDANTS.



The opinion of the court was delivered by: James B. Zagel United States District Judge

Judge James B. Zagel

MEMORANDUM OPINION AND ORDER

I. Introduction

Plaintiff is The Northern Trust Company, an Illinois banking corporation ("Northern Trust"). Defendant Lund Mills Hedges is an individual citizen of Florida. Northern Trust has asserted three claims pertaining to notes and personal guarantees executed by Defendant and her ex-husband: breach of contract (Count I) and breach of personal guarantees (Counts II and III). Defendant responded with several affirmative defenses, a counterclaim, and a Third-Party complaint against her ex-husband, Mr. Hedges, LJH Global Investments, L.L.C. ("Global"), and N1LJH, Ltd. ("N1LJH"). Northern Trust subsequently filed a motion to strike several of Defendant's affirmative defenses and a motion to dismiss Defendant's counterclaim. Third-Party Defendants have filed a motion to dismiss Defendant's Third-Party complaint.

Before me are: Northern Trust's motion to strike Defendant's fourth through sixth affirmative defenses (failure of consideration, laches, and breach of covenant of good faith), Northern Trust's motion to dismiss Defendant's counterclaim for an accounting, and Third-Party Defendant's motion to dismiss Defendant's Third-Party complaint for joint and several liability, indemnification, and contribution.

For the reasons stated below, Northern Trust's motion to strike Defendant's fourth through sixth affirmative defenses is granted. Northern Trust's motion to dismiss Defendant's counterclaim is also granted. Third-Party Defendants' motion to dismiss Defendant's Third-Party complaint is granted with respect to Global and N1LJH and denied with respect to Jim Hedges.

II. Statement of Facts

On October 1, 2003, Defendant and Mr. Hedges signed a personal guaranty securing a $1,662,644 loan that Northern Trust gave Mr. Hedges' company, Global. Several months later, on December 31, the couple executed another personal guaranty for a $1,729,500 loan made by Northern Trust to Mr. Hedges' other company, N1LJH. Global and N1LJH have failed to make payments, and Northern Trust has filed breach of personal guaranty claims against Defendant to recover the value of the loans (Counts II and III).

Approximately one year later, on December 31, 2004, Defendant and Mr. Hedges jointly executed a Master Note payable to Northern Trust in the amount of $5,067,740 ("Hedges Note"). Northern Trust asserts that Defendant and her ex-husband remain in default on the loan despite the bank's demands for payment. Northern Trust filed a breach of contract claim against Defendant for the unpaid balance of the Hedges Note (Count I).

On June 30, 2006, Defendant and Mr. Hedges divorced, and a court of the Twentieth Judicial Circuit of Florida entered a Final Judgment of Dissolution of Marriage and Other Relief (the "Divorce Judgment"). The divorce judgment is final and non-appealable, and sets out the various obligations of Defendant and her ex-husband. Relevant here is section 33, which provides that "[t]he parties shall equally divide the debt in the approximate amount of $8,500,000 to Northern Trust." Divorce Judgment at 16, ¶ 33. Defendant and Mr. Hedges were each responsible for one-half of the obligations to Northern Trust, including the Hedges Note and both personal guarantees.

Mr. Hedges, Global, and N1LJH have entered into forbearance agreements with Northern Trust and have adopted a specific time schedule for repayment of their shares of the debt. Defendant has not reached a similar arrangement with Northern Trust concerning her debt. Northern Trust has therefore sued Defendant for the entirety of the obligations under the Hedges Note and the personal guarantees. Defendant seeks to implead her ex-husband as a joint obligor for his half of the Hedges Note. She also seeks indemnification and contribution from Global and N1LJH, asserting that they are the primary obligors.

III. Standards of Review

A court may strike "from any pleading any insufficient defense or any redundant, immaterial, impertinent, or scandalous matter." Fed. R. Civ. P. 12(f). This district has adopted a three-part test for examining motions to strike affirmative defenses. Van Schouwen v. Connaught Corp., 782 F.Supp. 1240, 1245 (N.D. Ill. 1991). First, the Court must "determine whether the matter is appropriately pleaded as an affirmative defense." Id. Next, the affirmative defense must meet the requirements of Rules 8 and 9 of the Federal Rules of Civil Procedure. Id. Lastly, the defense must withstand a Rule 12(b)(6) examination. Id.

"The recognized standard for reviewing the grant of a motion to dismiss for failure to state a claim is whether 'it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.'" Mescall v. Burrus, 603 F.2d 1266, 1269 (7th Cir. 1979) (quoting Conley v. Gibson, 355 U.S. 41, 45-46 (1957)). Though the Court must interpret all factual allegations and ...


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