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Ruttenberg v. Ruttenberg

February 18, 2009


The opinion of the court was delivered by: Judge George M. Marovich


Plaintiff Myra A. Ruttenberg ("Myra") filed in the Circuit Court of Cook County a complaint against defendants Geoffrey W. Ruttenberg ("Geoffrey"), David Ruttenberg ("David"), Jerome Meyer ("Meyer"), the Aldine Trust and 2002 North Mohawk, LLC. Defendants removed the case here on the basis of federal question jurisdiction. Myra then filed an amended complaint. In her amended complaint, Myra asserted that defendants violated the Racketeer Influenced and Corrupt Practices Act ("RICO"), 18 U.S.C. § 1962, committed common-law fraud, violated the Uniform Fraudulent Transfer Act, 740 ILCS 160/2(d), and were unjustly enriched. Defendants move to dismiss the amended complaint.

I. Background

The Court takes as true the allegations in plaintiff's amended complaint.

Plaintiff Myra and defendant Geoffrey were married in 1998. Geoffrey (like his father, defendant David) is a real-estate developer. Geoffrey has achieved some economic success in real estate development. For example, Geoffrey and Myra's tax return for the year 2004 reflects adjusted gross income of $788,262.00. Geoffrey does his real estate development through Brixton Group, LLC, his wholly-owned corporation.

The marriage was less successful than the real estate business. Myra filed for divorce in December 2005. At that point, according to plaintiff's allegations, Geoffrey and David launched a scheme to hide Geoffrey's income and assets so that Myra would get significantly less money as a result of the divorce. First, Geoffrey pretended to reconcile with Myra. In May 2006, she dismissed her divorce suit. By January 2008, Geoffrey had filed for divorce.

In the meantime, Geoffrey and David worked together to transfer Geoffrey's income and wealth to the Aldine Trust, of which David is the beneficiary. The idea was that the financial rewards for Geoffrey's real estate efforts would go not to Geoffrey or Brixton but to the Aldine Trust. Plaintiff alleges that defendant Meyer, who is the trustee for the Aldine Trust, knowingly cooperated with Geoffrey and David's scheme.

The complaint outlines several examples of how the scheme played out. In 2004, Geoffrey and Brixton formed 600 Fairbanks LLC to develop a high-rise condominium building. Geoffrey was to have a 41.71% interest, and the developer profits were expected to be more than $27,000,000.00. When Geoffrey sold his interest in the project, the proceeds ($1,770,880.00) went to the Aldine Trust, which received the money in April 2006. With respect to the sale, Geoffrey used the mail to consult his father on where the proceeds should go, and David used the mail to negotiate the sale as Geoffrey's attorney.

In January 2005, the Aldine Trust was given a 100% Class B interest in 3607-11 Bosworth LLC in exhange for $1,000. Although Brixton Group was the developer and manager on the project, $400,000.00 of the proceeds went to the Aldine Trust. The Aldine Trust was also given a 100% Class B interest in 3546-48 Janssen, LLC in exchange for nothing. The Aldine Trust received $997,625.00 of the proceeds on that project.

In April 2006, Geoffrey formed CA/23, LLC to develop a high-rise condominium building at 23 North Aberdeen Street. In May 2006, CA/23, LLC borrowed nearly $4.5 million with Geoffrey's personal guarantee. Geoffrey spends most of his time developing this project, but he has received no compensation. Nor is he scheduled to. Instead, he sold the entire equity interest to the Aldine Trust, which is expected to receive approximately $2,000,000.00. Geoffrey used the mails to form CA/23, LLC (in that he mailed the Articles of Incorporation to the Illinois Secretary of State's office) and to apply for its federal tax identification number.

In December 2006, Geoffrey formed the Grace/Marshfield, LLC to develop a 16-unit condominium building at 1622 W. Grace. In April 2007, Grace/Marshfield, LLC borrowed more than $3,000,000.00 with Geoffrey's personal guarantee. The funds were wire-tranferred. The development was managed by Brixton Group, but the Aldine Trust bought the ownership share for $1,000.00. Although the development is not finished, the Aldine Trust is expected to obtain a substantial profit.

The final real estate project with which plaintiff takes issue is located at 2002 N. Mohawk. Geoffrey and Myra purchased the lot in 2003, using money provided by David. By 2004, Geoffrey and Myra decided not to move into the house they were building at 2002 N. Mohawk. Geoffrey created defendant 2002 North Mohawk, LLC and convinced Myra (with his promise to sell the property and use the money to purchase a new marital home) to quit-claim her interest to the LLC. In December 2006, Geoffrey and Myra decided to move into the 2002 N. Mohawk residence, where they lived until Geoffrey forced Myra out in January 2008, when he filed for divorce. At some point, Geoffrey had arranged for the Aldine Trust to own 99% of the 2002 North Mohawk, LLC. The house was sold in April 2008. The mails and the wires were used to effectuate the sale. Plaintiff attached an email message from Geoffrey that stated the Aldine Trust was to receive the first $200,000.00 from the sale and defendant 2002 North Mohawk, LLC the remainder.

II. Standard on a Motion to Dismiss

The Court may dismiss a claim pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure if the plaintiff fails "to state a claim upon which relief can be granted." Fed.R.Civ.P. 12(b)(6). In considering a motion to dismiss, the Court accepts as true all well-pleaded factual allegations and draws all reasonable inferences in the plaintiff's favor. McCullah v. Gadert, 344 F.3d 655, 657 (7th Cir. 2003). Under the notice-pleading requirements of the Federal Rules of Civil Procedure, a complaint must "give the defendant fair notice of what the . . . claim is and the grounds upon which it rests." Bell Atlantic Corp. v. Twombley, 127 S.Ct. 1955, 1964 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). A complaint need not provide detailed factual allegations, but mere conclusions and a "formulaic recitation of the elements of a cause of action" will not suffice. Bell Atlantic, 127 S.Ct. at 1964-1965. A complaint must include enough factual allegations to "raise a right to relief above a speculative level." Bell Atlantic, 127 S.Ct. at 1965. "After Bell Atlantic, it is no longer sufficient for a complaint 'to avoid foreclosing possible bases for relief; it must actually suggest ...

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