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Gil v. Gil

March 3, 2010

JOSEPH GIL, PLAINTIFF,
v.
ANNA GIL, LOUISE MAKUCH REVOCABLE TRUST, GILMART, LTD., GILMART II, INC., JOSEF JAMROZ, BYRNE, BYRNE, & CO., LOWELL INTERNATIONAL CO., AND EAGLE DISTRIBUTORS, INC. DEFENDANTS.



The opinion of the court was delivered by: Judge Joan H. Lefkow

OPINION AND ORDER

Joseph Gil ("Joe") filed a twenty-one count complaint against Anna Gil ("Anna"), Josef Jamroz ("Josef"), Waclaw Jamroz,*fn1 the Louise Makuch Revocable Trust ("Trust"), Gilmart, Ltd. ("Gilmart"), Gilmart II, Inc. ("Gilmart II"), Byrne, Byrne & Company ("Byrne"), Lowell International Company ("Lowell"), and Eagle Distributors, Inc. ("Eagle"). Joseph brings claims under the Racketeer Influenced Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq., against Anna, Josef, Byrne, Lowell, and Eagle, in addition to various state law claims. The court's jurisdiction is based on 18 U.S.C. § 1964(c) and 28 U.S.C. §§ 1331 and 1367.

Before the court are Anna's and Lowell's motions to dismiss the RICO claims under Federal Rules of Civil Procedure 12(b)(6) and 9(b).*fn2 For the following reasons, the motions [#13, 23] are granted.

BACKGROUND*fn3

While married, Joe and Anna together owned and operated Gilmart, an ethnic grocery storelocated in the south suburbs of Chicago. Compl. at 2. Joe and Anna were each 50 percent shareholders of Gilmart. Id. ¶ 3. Anna was in charge of bookkeeping and bill paying. Id. Anna received over $3.7 million in excess compensation and draws from Gilmart from the time of its establishment to 2001. Id. ¶ 11. Anna took this money to avoid Gilmart's paying taxes on it and to keep money from Joe. Id. In 2001, Gilmart's tax return reflected $3,782,471.00 in cash, but this money was not in any Gilmart account. Id. ¶ 11; Ex. 2 to Compl. On Gilmart's 2002 and 2003 tax returns, much of this amount was recharacterized as a shareholder loan. Compl. ¶ 11; Exs. 3--4 to Compl. The IRS audited Gilmart, presumably in 2004, and declared these shareholder loans to be dividends, requiring Joe, who had never received any of the money, to pay taxes on it. Id. ¶ 11.

In 2004, Anna began transferring money from Gilmart's or her own accounts to other individuals. Around May 27, 2004, she transferred $50,000 of her own funds to her mother, Louise Makuch. Id. ¶ 13. On June 2, 2004, she transferred $235,000 from Gilmart to Makuch. Id. ¶ 14. On June 3, 2004, Makuch bought commercial property in Willow Springs ("the Willow Springs property"), making at least a $500,000 down payment using funds Anna had transferred to her. Id. ¶ 17; Ex. 6 to Compl. On June 15, 2004, Anna transferred another $100,000 from Gilmart to Makuch. Compl. ¶ 16. On June 17, 2004, Makuch transferred $200,000 to Josef, a Gilmart employee. Id. ¶ 18. On June 21, 2004, Josef paid $196,198.35 in cash for property in Willow Springs ("the Oakwood Property"). Id. ¶ 19. In 2004 and 2005, Anna also transferred over $154,000 from Gilmart to Ludka Inc., a corporation owned by Makuch, even though Ludka did not provide Gilmart with any services or products. Id. ¶ 16. In 2005, Anna withdrew over $350,000 from Gilmart to pay her personal taxes. Id. ¶ 12.

On July 23, 2004, Makuch established the Trust. Id. ¶ 20. The Trust named Makuch as trustee and Anna and her brother, Andrew Makuch, as beneficiaries upon Makuch's death. Id. Steven Gustafson was named successor trustee upon Makuch's death. Id. ¶ 31. The trustee was directed "to take any and all actions to ensure that any trust assets that are to pass to Anna be protected from ever benefiting Joe Gil." Ex. 7 to Compl. § 8.01(a)(1). Anna later admitted to having signed the Trust documents in her mother's name. Compl. ¶¶ 21--22; Ex. 8 to Compl. On August 12, 2004, Makuch transferred ownership of the Willow Springs property to a land trust, with the Trust holding the beneficial interest. Compl. ¶ 23. Josef followed suit, transferring ownership of the Oakwood Property to a land trust, with the Trust again holding the beneficial interest. Id. ¶ 24.

On November 2, 2004, Anna filed for divorce and sought injunctive relief against Joe, claiming he had mismanaged Gilmart, converted corporate property, breached his fiduciary duties, and interfered with contractual and business relationships. Id. ¶ 25. Anna paid her attorney, Gustafson, with Gilmart funds. Id. ¶ 26. Shortly after Anna filed for divorce, the divorce court ordered Gilmart to pay Joe $2,000 a week and to pay all taxes, penalties, and interest that Joe was required to pay due to the IRS audit of Gilmart's 2001, 2002, and 2003 tax returns. Id. at 3.

On August 1, 2005, Anna allegedly sent notice to Joe and herself, as the only Gilmart board members and shareholders, of three Gilmart meetings: (1) a special meeting of the Board of Directors on August 25, 2005, (2) the annual meeting of the Board of Directors on August 26, 2005, and (3) the annual shareholders' meeting on August 26, 2005. Id. ¶ 27; Ex. 9 to Compl. Joe never received these notices and believes they were never sent to him. Compl. ¶ 27. At the special meeting, at which only Anna was present, Gilmart's bylaws were amended to reduce the number of directors to one and to change the quorum requirement for shareholders' meetings from a majority to a majority of shareholders present. Id. ¶ 27; Ex. 9 to Compl. Additionally, Joe was relieved of his duties as an officer and director. Compl. ¶ 27; Ex. 9 to Compl.

On January 20, 2006, Anna called another special meeting of the Board of Directors, at which the Board adopted a resolution allowing Gilmart to file a Chapter 11 bankruptcy petition and authorizing Anna to perform all acts necessary for the bankruptcy. Compl. ¶ 28. Joe never received notice of this meeting. Id. Gilmart filed for bankruptcy on January 27, 2006. Id. at 3. Joe filed two motions to dismiss the bankruptcy filing, one based on Joe's not receiving notice of the January 20, 2006 Board meeting and the other based on Anna's actions subsequent to the filing, which allegedly included gross mismanagement of the bankruptcy estate, failure to abide by filing requirements, and failure to pay domestic support and tax obligations to Joe. Id. at 4. The bankruptcy court granted both motions and sanctioned Anna $65,000 personally for failing to conduct a reasonable inquiry as to whether Gilmart was authorized to file for bankruptcy. Id. at 4--5, ¶ 30.

After the Chapter 11 petition was dismissed, Anna negotiated with three of Gilmart's creditors, Byrne, Lowell, and Eagle, to have them file an involuntary bankruptcy petition in exchange for preferential treatment. Id. ¶ 32. Byrne's vice president, Clyde Patterson, and Eagle's president, Walter Podmanski, were friends of Anna's and all three companies had longstanding relationships with Anna and Gilmart. Id. ¶¶ 8, 10, 32. On September 20, 2006, Byrne, Lowell, and Eagle filed an involuntary Chapter 7 bankruptcy petition. Id. ¶ 32; Ex. 12 to Compl. Byrne was listed on the petition as being owed $31,088, but Gilmart's accounts payable ledger did not list Byrne as being owed anything as of November 2006. Id. ¶ 8. Lowell was listed as being owed $59,719.70. Ex. 12 to Compl. Eagle was listed as being owed $146,566.20 in the bankruptcy petition, but Gilmart's ledger only showed $47,114.10 owed to Eagle as of November 2006. Id. ¶ 10. The case was converted to Chapter 11 and, on Joe's request, a trustee was appointed. Id. ¶ 33. On August 7, 2007, the trustee sold substantially all of Gilmart's assets to the Trust. Id. ¶ 34. Joe claims that, by this sale, the Trust was able to purchase Joe's interest in Gilmart for a "significantly reduced value." Id. ¶ 36.

Joe claims defendants violated RICO in that Anna, Josef, Byrne, Lowell, and Eagle, along with Gilmart and Fr. Jamroz, formed an association-in-fact enterprise and engaged in a pattern of racketeering activity, namely fraud. Joe alleges that "by the sale, liquidation and hypothecation of a substantial part of Gilmart's and Anna's assets, by the fraudulent transfer of Anna's assets to third parties and to the Louise Makuch Revocable Trust, and by the filing of the first Chapter 11 bankruptcy petition and manufacture of the involuntary bankruptcy petition," id. ¶ 37, these individuals and Gilmart "engaged in a scheme to hinder, delay and defraud Joseph Gil, and avoid the seizure of the property, cash and other assets owned by Anna if Joseph Gil obtained a judgment against Anna individually." Id. Joe alleges that Anna operated and managed the racketeering enterprise. Id. ¶ 38.

LEGAL STANDARD

A motion to dismiss under Rule 12(b)(6) challenges a complaint for failure to state a claim upon which relief may be granted. See Fed. R. Civ. P. 12(b)(6); Gen. Elec. Capital Corp. v. Lease Resolution Corp., 128 F.3d 1074, 1080 (7th Cir. 1997). In ruling on a 12(b)(6) motion, the court accepts as true all well-pleaded facts in the plaintiff's complaint and draws all reasonable inferences from those facts in the plaintiff's favor. Dixon v. Page, 291 F.3d 485, 586 (7th Cir. 2002). In order to survive a Rule 12(b)(6) motion, the complaint must not only provide the defendant with fair notice of the claim's basis, but must also establish that the requested relief is plausible on its face. Ashcroft v. Iqbal, --- U.S. ----, 129 S.Ct. 1937, 1949, 173 L.Ed. 2d 868 (2009); see also Bell Atl. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed. 2d 929 (2007). Allegations of fraud are subject to the heightened pleading standard of Rule 9(b), which requires a plaintiff to "state with particularity ...


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