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Eggmann v. Myers

April 23, 2009

ROBERT E. EGGMANN, IN HIS CAPACITY AS TRUSTEE OF THE ESTATE OF JOSEPH W. DIEKEMPER AND MARGARET A. DIEKEMPER, PLAINTIFF,
v.
JAMES RICHARD MYERS, A NATURAL PERSON, LEFEVRE OLDFIELD MYERS APKE & PAYNE LAW GROUP, LTD., AN ILLINOIS CORPORATION, JOSEPH W. DIEKEMPER, A NATURAL PERSON, MARGARET A. DIEKEMPER, A NATURAL PERSON, AND RAY L. HOLCOMB, A NATURAL PERSON, DEFENDANTS.



The opinion of the court was delivered by: J. Phil Gilbert District Judge

MEMORANDUM AND ORDER

This matter comes before the Court on the Motion to Dismiss Party (Doc. 22) filed by Defendants James Richard Myers (Myers) and LeFevre Oldfield Myers Apke & Payne Law Group, Ltd. (LOMAP). Plaintiff has responded (Doc. 27). The time for further response has passed. For the following reasons, the Court DENIES the Motion.

BACKGROUND

For purposes of a motion to dismiss, the court must accept all factual allegations in the complaint as true and draw all reasonable inferences from those facts in favor of the plaintiff. Erickson v. Pardus, 127 S.Ct. 2197, 2200 (2007) (per curiam ) (quoting Bell Atlantic Corp. v. Twombly, 127 S.Ct. 1955, 1965 (2007)); Tricontinental Indus., Ltd. v. PricewaterhouseCoopers, LLP, 475 F.3d 824, 833 (7th Cir.2007).

Defendants Myers and LOMAP were retained as counsel for Defendants Margaret A. Diekemper and Joseph W. Diekemper to assist them in filing for bankruptcy. On May 21, 2004, the Diekempers filed a voluntary petition for reorganization pursuant to the provisions of Chapter 12 of the United States Bankruptcy Code, 11 U.S.C. §§ 1201-1231. Upon filing the petition, the Diekempers became Debtors-in-Possession (DIPs) of the estate, charged with all the same functions and duties (with exceptions not relevant here) of a trustee serving the estate under Chapter 11.

Only "family farmers" qualify for reorganization pursuant to Chapter 12. A "family farmer" is defined by the Bankruptcy Code as "an individual or individual and spouse engaged in a farming operation whose aggregate debts do not exceed $1,500,000." Because the Diekemper's aggregate debts of over $4,900,000 exceeded this amount, they did not qualify for reorganization under Chapter 12. On May 31, 2004, the Diekempers, Meyers and LOMAP filed an Application to Employ Attorney, asking the bankruptcy court to appoint Meyers and LOMAP as counsel for the DIPs. As appointed counsel, Myers and LOMAP would be charged with assisting the DIPs in carrying out their duties to the estate and their duties as fiduciaries of the estate's creditors. Both DIPs and the attorneys assisting them must be disinterested persons not having "an interest materially adverse to the interest of the estate or of any class of creditor." 11 U.S.C. § 101(14), 11 U.S.C. § 328-29. Pursuant to the Application to Employ Attorney, the bankruptcy court appointed Myers and LOMAP to represent the Diekempers as DIPs.

According to the Complaint, the Diekempers, aided by Myers and LOMAP, engaged in numerous acts designed to conceal from the bankruptcy court the fact that reorganization under Chapter 12 was not proper, in order to gain time to conceal and convert assets of the estate. Additionally, as counsel for the DIPs under Chapter 12, Myers and LOMAP applied for fees and expenses to be paid out of the assets of the estate. According to the Complaint, Myers and LOMAP advised the bankruptcy court that they had earned the fees by doing work that, in fact, had never been done. Based on these representations, the bankruptcy court allowed the fees to be taken, resulting in a depletion of the estate.

On July 7, 2004, the matter was converted to a reorganization pursuant to Chapter 11 of the Bankruptcy Code. The Diekempers remained as DIPs for the estate. Myers and LOMAP continued on as counsel for the DIPs. Again, according to the Complaint, the Diekempers, aided by Myers and LOMAP, engaged in numerous acts designed to conceal from the bankruptcy court the fact that reorganization under Chapter 11 was not proper, in order to gain time to conceal and convert assets of the estate. Myers and LOMAP again received fees and expenses paid out of the assets of the estate by falsely certifying to the bankruptcy court that they had done work that was never, in fact, done.

On December 20, 2006, the action was finally converted to a Chapter 7 liquidation, the course of action alleged to have been the proper one from the beginning. By that time,the assets of the estate had been significantly depleted for the benefit of Defendants and to the detriment of the estate and its creditors.

Plaintiff was made trustee of the estate and, in that capacity, brought this action alleging that Defendants conspired to commit bankruptcy fraud, committed and aided and abetted the commission of bankruptcy fraud, and that Defendants Myers and LOMAP breached their professional duties to the estate. Defendants Myers and LOMAP brought the instant Motion to Dismiss asserting that (1) their duties ran only to the Diekempers and not to the estate, (2) as a matter of law, an attorney cannot conspire with nor aid and abet his client, and (3) that Plaintiff's Complaint fails to meet the heightened specificity requirements of Rule 9 of the Federal Rules of Civil Procedure. The Court will address these arguments in reverse order.

ANALYSIS

I. Complaint Meets the Pleading Requirements of Rule 9

Generally, courts will not grant a motion to dismiss merely because the complaint is vague or lacking in detail so long as it pleads "the bare minimum facts necessary to put the defendant on notice of the claim so that he can file an answer." Higgs v. Carver, 286 F.3d 437, 439 (7th Cir. 2002); see Kolupa, 438 F.3d at 714-15; Brown, 398 F.3d at 908. There is an exception to this general rule, however, regarding allegations of fraud. "In all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity. Malice, intent, knowledge, and other condition of mind of a person may be averred generally." Fed. R. Civ. Pro. 9(b). The "circumstances constituting fraud" must include the "who, what, when, where and how: the first paragraph of any newspaper story." DiLeo v. Ernst & Young, 901 F.2d 624, 627 (7th Cir. 1990).

Here, in a twenty-eight page complaint, Plaintiff has made detailed allegations describing exactly which statements made by the Diekempers, Myers, and LOMAP were false, the dates on which those false statements were made, how the false statements were made, and to whom they were made. Paragraph 49 of the Complaint is a simple example. It reads: "The Application to Employ [Attorney] (alleged in paragraph 14 to have been filed by the Diekempers, Myers, and LOMAP with the bankruptcy court on May 31, ...


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