The opinion of the court was delivered by: Rebecca R. Pallmeyer United States District Judge
Judge Rebecca R. Pallmeyer
MEMORANDUM OPINION AND ORDER
Plaintiff Creative Trade Group, Inc. ("Creative") is an automobile broker and seller who claims that Defendant McGrath Lexus ("McGrath"), a Chicago-area car dealership, fraudulently obtained and converted over $171,000 of Creative's funds in connection with the aborted sale of two luxury automobiles. In its decision denying Creative's motion for summary judgment, the court recounted the parties' divergent factual accounts and commented on the possibility that Valeriy Pychnenko, who arranged the transaction that gave rise to this lawsuit, might be a necessary party under FED.R.CIV.P. 19. McGrath has taken the hint and has moved to compel Plaintiff to join Pychnenko as a necessary party. For the reasons explained here, the court finds that Pychnenko is indeed a necessary party to this action and orders his joinder. The court directs McGrath to serve Pychnenko with process.
The facts, as more fully described in the earlier opinion, are as follows: Gregory Katz, Creative's owner and sole director, claims he contacted Pychnenko in December 2007 in an effort to locate and purchase luxury automobiles. See Creative Trade Group, Inc. v. International Trade Alliance, No. 08 C 2561, 2009 WL 3713345, *1-6 (N.D.Ill. Nov. 4, 2009). Katz had done business with Pychnenko in the past and was aware that Pychnenko had relationships with car dealerships and auto brokers that might be of assistance. In response to Katz's request, Pychnenko forwarded a promotional e-mail that Pychnenko had received from Yaroslav Farber, president of International Trade Alliance ("ITA"), an automobile broker. (ITA was originally named as a Defendant in this case but has filed for bankruptcy protection.)
The e-mail, which the parties agree was never intended for Katz or Creative, advertised the availability of two vehicles that fit Katz's request. Pychnenko assured Katz that Creative could rely on Pychnenko's contacts with ITA to obtain the vehicles. Based on these assurances, Creative alleges, Katz and Pychnenko entered into an oral contract, whereby Creative agreed to pay the sales price for the vehicles directly to the titleholder and a finder's fee to Pychnenko upon delivery. ITA's and McGrath's principals deny any knowledge of such an agreement and, in fact, maintain that they knew nothing about Katz or Creative until well after the transaction in question had occurred. The parties agree that Pychnenko was not an agent of either ITA or McGrath and that he had no authority to make representations or enter contracts on behalf of those entities.
Following his negotiation and agreement with Katz, Pychnenko contacted Farber at ITA and expressed an interest in purchasing a block of four automobiles, including the two vehicles that he had promised to obtain on behalf of Creative. According to Farber, Pychnenko never mentioned Katz or Creative and did not say that he was acting on behalf of any other purchaser. Farber replied to Pychnenko by e-mail, instructing Pychnenko to wire $342,726.00, the total price for the four vehicles that Pychnenko had requested, to Defendant McGrath's dealership account. McGrath and ITA enjoyed a long-standing business relationship and had established a process in which ITA or its customers would wire money directly into McGrath's account with the expectation that ITA would later identify cars it desired to purchase from McGrath. The apparent implication of the e-mail exchange between Farber and Pychnenko was that ITA would instruct McGrath to apply Pychnenko's money toward the purchase of the four vehicles he had requested. That is not, however, the instruction that ITA ultimately gave McGrath.
Unbeknownst to Farber, Pychnenko forwarded Farber's e-mail containing the wire transfer instructions to Katz and directed Katz to transfer $171,388 to McGrath's account. Katz did so, allegedly with the expectation that McGrath would accept the funds as payment for the two vehicles that Creative desired. Bank records show that, on January 18, 2008, Katz transferred $171,388 from Creative's bank account to the McGrath account, exactly as Pychnenko had instructed. Katz admits that he never contacted McGrath or ITA before initiating this wire transfer.
The parties dispute the true origin of the funds that Katz transferred. Records of Creative's bank account show that, moments before Creative wired the funds to McGrath, Creative's account received an incoming wire transfer in the amount of $182,290. That transfer originated in an account in the name of "Hazel U.K. Limited Companies House" ("Hazel U.K.") at a branch bank located on the island of Cyprus. Katz testified that Hazel U.K. is Creative's long-standing customer and that Hazel U.K. had agreed, under a separate contractual arrangement, to finance Creative's deal with Pychnenko and later to convey the two luxury automobiles to an end-purchaser in Ukraine. Creative asserts that either Hazel U.K. or its unidentified customer prepaid the entire sale. In response to a challenge to its standing to proceed in this lawsuit, Creative produced an assignment from Hazel U.K., but Creative's agents have steadfastly refused to reveal Hazel U.K.'s end purchaser or the nature of Creative's relationships with that entity. (Katz Dep. at 56, 83, 92.)
McGrath contests the existence of Hazel U.K. as anything more than a legal form, and has presented evidence showing the following: that Hazel U.K. is registered as a corporation in the United Kingdom, but that the corporation's registered address is in fact the address of an entirely different and unrelated company; that Hazel U.K. maintains no publicly-available telephone or fax numbers; and that Hazel U.K.'s lone registered corporate director has recorded approximately 68 other company appointments in the United Kingdom, one listing his occupation as "caterer," and lists as his mailing address a location in the Republic of Seychelles, an archipelago nation of 115 islands in the Indian Ocean. In its earlier opinion, this court noted the possibility that "Hazel U.K. may be nothing more than a shell company, either of Pychnenko or some other entity." Creative Trade Group, Inc., 2009 WL 3713345 at *10.
Both Yaroslav Farber and Leszek Przybylski, co-owners of ITA, testified that they believed the January 18 wire transfer originated solely with Pychnenko. In his prior dealings with ITA, Pychnenko's common practice had been to funnel payments from offshore bank accounts through various third-party companies as intermediaries. (Farber Dep. at 61; Przybylski Dep. at 41.) Farber and Przybylski also claim that Pychnenko had represented to them that he was responsible for the transfer. (Przybylski Dep. at 33; Farber Aff. at ¶ 12.) According to Farber, Pychnenko owed ITA more than $700,000 from previous purchases and was in ongoing negotiations with the company to retire his substantial debt. Farber stated that ITA decided to claim the $171,388 as partial satisfaction of Pychnenko's outstanding debt based on the assumption that Pychnenko was the true originator of the wired funds. Thus, Przybylski contacted McGrath's sales manager, Michael Simon, purportedly by fax, and instructed Simon to apply the proceeds of the wire transfer toward ITA's general account with the McGrath dealership. (A copy of this instruction is in the record, but it bears no date or other markings reflecting facsimile transmission.) Presumably in late January, Simon did as Przybylski instructed. McGrath never sent the vehicles or returned any money to Creative or Pychnenko.
Simon testified that he was not aware of any dispute over the transferred funds until February 13, 2008, when he received a letter and telephone call from Plaintiff's attorney, Glenn Seiden. According to Simon, Seiden initially represented himself as the attorney for Valeriy Pychnenko and demanded either delivery of the vehicles or the return of the transferred funds. McGrath has produced copies of demand letters sent by Seiden on Pychnenko's behalf as late at March 2008, two months before Seiden filed this suit on behalf of Creative. Simon ultimately refused Seiden's requests, ostensibly because McGrath was unable to determine whether the transferred funds had originated with Creative or Pychnenko. (Simon Aff. at ¶ 9.)
Creative filed suit against McGrath and ITA in May 2008. ITA filed a third-party complaint against Pychnenko two months later, but could not locate Pychnenko to effectuate service of process. Pychnenko resurfaced in July 2009, when he was arrested by DEA agents in connection with a narcotics sting operation in Camden, New Jersey. Indicted on federal charges in New Jersey, Pychnenko is currently in federal custody awaiting trial on a charge of conspiracy to possess and distribute cocaine. (See Criminal Complaint, Ex. F to Def. Mot.)
Prompted by the court's concerns, Defendant McGrath argues that Pychnenko is a necessary party and seeks an order ...