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Laborers' Pension Fund v. KMC Masonry

May 4, 2010

LABORERS' PENSION FUND, LABORERS' WELFARE FUND OF THE HEALTH AND WELFARE DEPARTMENT OF THE CONSTRUCTION AND GENERAL LABORERS' DISTRICT COUNCIL OF CHICAGO AND VICINITY, AND JAMES S. JORGENSEN, ADMINISTRATOR OF THE FUNDS, PLAINTIFFS,
v.
KMC MASONRY, LLC, DEFENDANT.



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

MEMORANDUM OPINION AND ORDER

This case comes before the Court on the Motion to Bar Third Party Nicholas & Associates, Inc. ("Nicholas") from Transferring Assets to Defendant/Judgment Debtor KMC Masonry, LLC ("KMC"), filed by Plaintiffs Laborer's Pension Fund, Laborers' Welfare Fund of the Health and Welfare Department of the Construction and General Laborers' District Council of Chicago and Vicinity, and James R. Jorgensen ("Plaintiffs"). Plaintiffs obtained a default judgment against KMC in the amount of $279,725, and the case is now in the post-judgment collection phase. Dkt. 14. With this motion, Plaintiffs are asking the Court to bar Nicholas from transferring assets to KMC in connection with a pending state court suit without first paying the judgment entered here. For the reasons below, Plaintiffs' motion is granted to bar the transfer of funds up to the amount of $279,725.

I. BACKGROUND FACTS

Plaintiffs initially filed this claim against KMC alleging failure to pay employee benefit contributions and union dues in violation of the Employee Retirement Income Security Act of 1974 ("ERISA") and the Labor Management Relations Act ("LMRA"). On June 19, 2009, Judge Charles Norgle entered a default judgment on behalf of Plaintiffs and against KMC in the amount of $279,725, which included unpaid contributions and union dues, penalties, interest, and attorneys' fees and costs. Dkt. 14. On July 6, 2009, a citation to discover assets was issued to third party Nicholas & Associates, Inc., a general contractor who had in the past subcontracted masonry work to KMC. Dkt. 15. Nicholas attempted to quash the citation and intervene in the case, but this Court denied both motions. Dkt. 16, 37.Thereafter, Nicholas Papanicholas, president of Nicholas, appeared for a deposition on October 6, 2009, and additional records were submitted to Plaintiffs on December 8, 2009. Plaintiffs have not yet sought a turnover order for any assets or funds from Nicholas.

Nicholas subsequently informed Plaintiffs that KMC filed a lawsuit against Nicholas in Kane County, Illinois*fn1 on or about January 14, 2010, raising breach of contract and bond claims ("Kane County action"). Pl. Mot.*fn2 Ex. A. KMC is seeking judgment against Nicholas in the Kane County action in the amount of $1,872,767. Plaintiffs now ask this Court to extend the stay provided in the citation notice to Nicholas and enter a restraining order barring Nicholas from making payment to KMC in connection with the Kane County action without first satisfying the judgment entered in the present case.

II. LEGAL STANDARDS

In a federal proceeding, the procedure for executing a money judgment follows that of the state where the court is located, except to the extent a federal statute applies. Fed.R.Civ.P. 69(a). In this case, a court in this district entered the money judgment at issue, and no relevant federal statute exists, so Illinois procedure applies. Star Ins. Co. v. Risk Marketing Group Inc., 561 F.3d 656, 661-62 (7th Cir. 2009). In Illinois, civil judgments are enforced through supplementary proceedings pursuant to 735 ILCS 5/2-1402 and Illinois Supreme Court Rule 277. The collection statute is to be liberally construed, and vests courts with broad powers to enforce judgments. Society of Lloyd's v. Estate of McMurray, 274 F.3d 1133, 1136 (7th Cir.2001).

Illinois allows a judgment creditor to pursue assets or income of the judgment debtor by instituting citation proceedings against the judgment debtor and/or a third party. 735 ILCS 5/2-1402(a). When issued against a third party, the statute specifically provides that the citation "may prohibit the party to whom it is directed from making or allowing any transfer or other disposition of . . . any property . . . belonging to the judgment debtor or to which he or she may be entitled or which may thereafter be acquired by or become due to him or her, and from paying over . . . moneys . . . which are due or to become due to the judgment debtor . . . ." 735 ILCS 5/2-1402(f)(1).

Furthermore, under 735 ILCS 5/2-1402(m), a lien is created by proper service of a citation to discover assets that "binds nonexempt personal property, including money, choses in action, and effects of the judgment debtor. . . ." When the citation has been served on a third party, that lien reaches "all personal property belonging to the judgment debtor in the possession or control of the third party or which thereafter may be acquired or come due the judgment debtor . . . ." 735 ILCS 5/2-1402(m)(2). The lien is perfected on the date the citation is served. Cacok v. Covington Electric Co, Inc., 111 F.3d 52, 53 (7th Cir. 1997).*fn3

III. DISCUSSION

The issue presented in this case is whether 735 ILCS 5/2-1402 allows a judgment creditor to obtain a restraining order preventing a third-party citation respondent from making potential future payments to the judgment debtor pursuant to litigation brought by the judgment debtor against the third party.

Plaintiffs argue that this Court should apply 735 ILCS 5/2-1402(m) to prevent Nicholas from paying KMC anything in connection with the Kane County action without first satisfying the judgment in the present case. Plaintiffs argue that the Kane County action could be settled without public notice or trial, and thus a restraining order against Nicholas is required to ensure they do not transfer funds to KMC without first satisfying this Court's judgment.

Nicholas opposes the motion with the argument that Illinois law does not allow Plaintiffs to obtain a court order barring Nicholas from paying a potential future judgment. Rather, Nicholas contends Plaintiffs' only remedy is to seek a turnover order of the Kane County action and then prosecute as KMC's assignee, which Plaintiffs have not sought to do.

Plaintiffs' position is fully supported by the relevant precedent. A judgment creditor is allowed to pursue a contingent asset such as a potential judgment. FM Industries, Inc. v. Citicorp Credit Services, Inc., 656 F. Supp. 2d 795, 799 (N.D. Ill. 2009). Furthermore, Illinois clearly allows a judgment creditor to obtain a restraining order by means of a citation proceeding against a third party who is a defendant in a separate action brought by the judgment debtor. Cacok, 111 F.3d at 54-55; Podvinec v. Popov, 658 N.E.2d 433, 435 (Ill. 1995); Home State Bank/National Association ...


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