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FM. Industries, Inc. v. Citicorp Credit Services

September 3, 2009


The opinion of the court was delivered by: Magistrate Judge Morton Denlow


This case comes before this Court on the Motion for Turnover, Assignment, and Judicial Sale of Certain of Judgment Debtor's Assets filed by Defendant the Law Office of Ross Gelfand, LLC ("Gelfand"), directed at the assets of the judgment debtor, FM. Industries, Inc. ("FMI"). These assets include FMI's ownership interest in: (1) TUCANS software and copyrights*fn1 (collectively "TUCANS"); (2) a one-half interest in a 2004 Sea Ray Sundancer Boat ("Boat"); (3) a one-half interest in a 2006 BMW Model 330I ("Auto"); (4) two large color printers ("Printers"); (5) one computer work station and monitor ("Computer"); (6) the rights and interests of FMI in its claims against Gelfand only in this lawsuit (07 C 1794) currently on appeal to the Seventh Circuit Court of Appeals ("07 C 1794 Chose in Action"). This excludes claims in this lawsuit against Citicorp Credit Services, Inc., Citigroup, Inc., and Citibank (South Dakota), N.A. (collectively, "Citigroup"); (7) the rights and interests of FMI in the pending lawsuit before Judge Joan H. Lefkow against Gelfand, et al.*fn2 ("08 C 517 Chose in Action"); (8) the rights and interests of FMI in unfiled but asserted causes of action ("Other Choses in Action")*fn3; and (9) the rights and interests of FMI in other license agreements ("Other License Agreements")*fn4.

In its response and objections to Gelfand's motion, FMI requests this Court to (a) grant a stay of all supplemental proceedings without bond pending the outcome of issues on appeal; (b) enter and continue the motion pending the outcome of issues on appeal; (c) deny Gelfand's motion for turnover of FMI's copyright in TUCANS software; (d) deny Gelfand's motion for judicial sale of certain FMI "choses in action;" and (e) dismiss the citation proceedings pending against FMI. Dkt. 630. This Court held oral argument on August 17, 2009. For the follow reasons, this Court grants Gelfand's motion, with limited exceptions, and denies FMI's request for relief. As it relates to the sale procedure and the rights and interests of FMI in other licensing agreements, this Court finds the procedures set forth by Gelfand to be appropriate.


The factual and procedural history of this case is complex. Therefore, for purposes of this opinion, this Court sets forth only the details necessary to decide the present motion. On February 4, 2009, a judgment was entered awarding $410,156.68 in favor of Gelfand and against FMI ("Judgment"). Dkt. 552, 553, 592. On February 27, 2009, Gelfand issued a citation to discover assets under the Illinois Citation Statute against FMI which was served on March 2, 2009. Dkt. 588, 592. On March 5, 2009, Gelfand issued a citation to discover assets which was served upon FMI's President, Michael Friedman ("Friedman"), on March 7, 2009. Dkt. 581, 592. The citations were referred to this Court by Judge Conlon on March 18, 2009. Dkt. 593.

Michael Friedman has been the President of FMI since 2001. (Dkt. 282, Aff. of Michael Friedman). Mr. Friedman appeared for a deposition in connection with both citations on April 20, 2009 ("Friedman Dep."). Since that time, Gelfand's counsel has made numerous attempts to resolve all of the discovery issues related to the Citation in order to ascertain FMI's ownership interest in certain assets.


Federal Rule of Civil Procedure 69 ("Rule 69") provides that "A money judgment is enforced by a writ of execution, unless the court directs otherwise. The procedure on execution-and in proceedings supplementary to and in aid of judgment or execution-must accord with the procedure of the state where the court is located, but a federal statute governs to the extent it applies." Fed. R. Civ. P. 69(a)(1). The judgment creditor may obtain discovery from the judgment debtor as provided in Rule 69 or by the procedure of the forum state. Fed. R. Civ. P. 69(a)(2). Absent a federal statute, Rule 69 requires a federal court to adopt the procedural law from the forum state. Star Ins. Co. v. Risk Marketing Group Inc., 561 F. 3d 656, 661 (7th Cir. 1993). See also Resolution Trust Corp. v. Ruggiero, 994 F.2d 1221, 1226 (7th Cir. 2009) ("The draftsmen of the rule, rather than design a format for supplementary proceedings-with stages, deadlines, and other forms, powers, and limitations specially adapted to the needs of such proceedings-decided... to borrow the format employed in the courts of the forum state"). Therefore, Rule 69 conforms supplementary proceedings to state law, adopting state court procedures "unless there is an applicable federal statute expressly regulating the execution of judgments." Star Ins. Co., 561 F. 3d at 661; Fed. R. Civ. P. 69(a). In Illinois, civil judgments may be enforced through supplementary proceedings pursuant to 735 ILCS 5/2-1402 and Illinois Supreme Court Rule 277.

In supplementary proceedings, the relevant inquiries by the court include: (1) whether the judgment debtor possesses assets to be applied in order to satisfy the judgment; or (2) whether a third party holds any of the judgment debtor's assets to be applied to satisfy the judgment. Star Ins. Co., 561 F.3d at 660-661; Pyshos v. Heart-Land Dev. Co., 630 N.E.2d 1054, 1057 (Ill. App. Ct. 1994).

Supplementary proceedings involve post-judgment processes which support the judgment creditor in asset discovery and final satisfaction of judgment. Star Ins. Co., 561 F.3d at 662-63. Supplementary proceedings are initiated by the service of a citation to discover assets. 735 ILCS 5/2-1402(a); see also Cacok v. Covington, 111 F.3d 52, 53 (7th Cir. 1997). The judgment becomes a lien on the judgment debtor's personal property once the citation is properly served upon a party. 735 ILCS 5/2-1402(m); Cacok, 111 F.3d at 54. The court may, by appropriate order or judgment, "[c]ompel the judgment debtor to deliver up, to be applied in satisfaction of the judgment, in whole or in part, money, choses in action, property or effects in his or her possession or control, so discovered, capable of delivery and to which his or her title or right of possession is not substantially disputed." 735 ILCS 5/2-1402(c)(1). The sheriff shall collect or sell at public sale the property delivered up by an ordered party; the proceeds of the sheriff's sale with be applied toward the ordered party's payment of costs and the satisfaction of the judgment. 735 ILCS 5/2-1402(e). If the judgment debtor's property cannot be readily delivered to the sheriff for public sale or if another method is more appropriate, then the court may order the property sale by the debtor, a third party respondent, or by a selling agent upon such terms as are just and equitable. Id.

Gelfand proposes to conduct the judicial sale of the alleged FMI assets in the following manner. Gelfand will sell FMI's right, title and interests, if any, in and to the FMI assets listed. Any proceeds received in the sale will be applied to reduce the judgment, together with interest at the statutory judgment interest rate. Additional and permitted costs incurred by Gelfand may be added after the judgment. Gelfand's counsel, Brad A. Berish, will be the Selling Officer who will sell the items in six separate groupings for cash at a publicly advertised auction conducted on a date that is no sooner than fourteen days following initial notice. Notice will be given in the Chicago Tribune for two consecutive Sundays and will serve a copy of the Notice via email or personal delivery to all parties. The sale will take place at Adelman & Gettleman, Ltd., at 53 West Jackson Blvd., Suite 1050, Chicago, IL 60604. Prior to the sale, Gelfand and its Selling Officer shall be given access to the FMI assets upon reasonable notice of no less than twenty-four hours to inspect any or all of the assets. Successful purchasers shall pay the Selling Officer by cash or certified funds, which the Selling Officer shall hold pending approval of a confirmation order. Unless agreed to in writing, the successful purchaser will not assume or be liable for any liabilities of FMI on the sold assets. Within seven days following the sale's conclusion, the Selling Officer will file a report with this Court evidencing that the procedures have been complied with and specifying the amount of sale proceeds realized. Upon entry of the confirmation order from this Court, the Selling Officer will execute a bill of sale to the successful purchaser which will convey all rights, title and interest of FMI.

There is no sheriff in this Court; likewise, the federal marshal's office in this Court is not equipped to hold public sales of personal property in connection with civil judgments. Gelfand's proposed sale procedure is appropriate pursuant to 735 ILCS 5/2-1402(e). Moreover, FMI does not object to the proposed sale procedure.


1. TUCANS Software and Related ...

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