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Pavlik v. FDIC

October 5, 2010

PAVLIK ET AL
v.
FDIC



Name of Assigned Judge Sitting Judge if Other or Magistrate Judge Amy J. St. Eve than Assigned Judge

DOCKET ENTRY TEXT

The Court, in its discretion, grants in part and denies in part Plaintiffs' motion to strike [28]. Specifically, the Court denies Plaintiffs' motion as to the FDIC's Answers to Paragraphs 1, 2, 10-18, 22, 25, 29, 34, 42-46, and 48. The Court grants Plaintiffs' motion as to the FDIC's Affirmative Defenses Nos. 1 and 2 and strikes Affirmative Defense Nos. 1 and 2 without prejudice. The FDIC shall file and serve an Amended Answer in compliance with this order on or before 10/26/10.

O[ For further details see text below.] Notices mailed by Judicial staff.

STATEMENT

On February 5, 2010, Plaintiffs John Pavlik and Donna Smithey, on behalf of themselves, Universal Federal Savings Bank ("Universal"), and a class of FDIC certified Universal claimants, filed the present two-count Complaint against Defendants Federal Deposit Insurance Company ("FDIC"), in its Corporate and Receivership Capacity, and Adam Resnick seeking declaratory judgment. Before the Court is Plaintiffs' Motion to Strike the FDIC's Answers to Paragraphs 1, 2, 10-18, 22, 25, 29, 34, 42-46, and 48 and the FDIC's Affirmative Answers Nos. 1 and 2. For the following reasons, the Court, in its discretion, grants in part and denies in part Plaintiffs' motion. Specifically, the Court denies Plaintiffs' motion as to the FDIC's Answers to Paragraphs 1, 2, 10-18, 22, 25, 29, 34, 42-46, and 48. The Court grants Plaintiffs' motion as to the FDIC's Affirmative Defenses Nos. 1 and 2 and strikes Affirmative Defense Nos. 1 and 2 without prejudice. The FDIC shall file and serve an Amended Answer in compliance with this order on or before October 26, 2010.

LEGAL STANDARD

"Rule 12(f) provides that a district court 'may strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter.'" Delta Consulting Group, Inc. v. R. Randle Const., Inc., 554 F.3d 1133, 1141 (7th Cir. 2009) (quoting Fed.R.Civ.P. 12(f)). Motions to strike pursuant to Rule 12(f) are disfavored, see Williams v. Jader Fuel Co., 944 F.2d 1388, 1405-1406 (7th Cir. 1991), and often squander judicial resources. Cf. Custom Vehicles, Inc. v. Forest River, Inc., 464 F.3d 725, 728 (7th Cir. 2006) (Easterbrook, J.) (in chambers). Motions to strike are appropriate, however, if they serve to expedite litigation. See Heller Fin., Inc. v. Midwhey Powder Co., 883 F.2d 1286, 1294 (7th Cir. 1989); see also Talbot v. Robert Matthews Distrib. Co., 961 F.2d 654, 664 (7th Cir. 1992) (allegations may be stricken if the matter bears no possible relation to controversy). District courts have considerable discretion to strike allegations under Rule 12(f). See Delta, 554 F.3d at 1141-42. "The party moving to strike has the burden of showing that the challenged allegations are so unrelated to plaintiff's claim as to be devoid of merit, unworthy of consideration, and unduly prejudicial." E & J Gallo Winery v. Morand Bros. Beverage Co., 247 F.Supp.2d 979, 982 (N.D. Ill. 2003) (citation and internal quotation omitted).

BACKGROUND

In 2001, Defendant Resnick perpetrated a fraud that led to the FDIC's takeover of Universal, which is a Nominal Defendant in this lawsuit. (R. 1, Compl. ¶ 9.) In particular, Universal's failure was due to a check-kiting scheme that Resnick conducted from December 2001 until June 2002. (Id. ¶ 12.) Universal was a federal savings bank located at 1800 South Halsted Street, Chicago, Illinois and the FDIC insured the deposits of Universal. (Id. ¶ 9.) Due to Resnick's conduct, the FDIC, as receiver of Universal, closed Universal in June 2002. (Id.)

On July 6, 2006, Resnick entered into a plea agreement with the United States that required him to pay $9,750,545.00 in restitution to the FDIC. (Id. ¶ 18.) After Resnick pleaded guilty, he was sentenced to forty-two months imprisonment. (Id. ¶ 17.) In addition to the $9,750,545.60 restitution owed by Resnick, the FDIC -- as receiver of Universal -- obtained a judgment of $848,197.63 against Domenic Poeta, who was a bookie who had received money from Resnick. (Id. ¶¶ 26, 27.)

Prior to being indicted on the check-kiting scheme, Resnick was employed as a consultant at U.S. Pharmacy and during that time he became aware of a fraudulent health care scheme. (Id. ¶ 19.) After the United States Attorney for the Northern District of Illinois declined to prosecute the matter, Resnick persuaded the law firm of Phillips & Cohen LLP to initiate a qui tam action with Resnick as the relator. (Id. ¶ 20.) In November 2009, Omnicare, Inc. agreed to pay well over $19 million to settle the qui tam action. (Id. ¶ 21.) As relator, Resnick is entitled to approximately $2 million of this qui tam award. (Id. ¶ 22.)

In the present Complaint, Pavlick alleges that he had deposited over $100,000 at Universal before and during the time of the FDIC's takeover. (Id. ¶ 4.) Smithey, owner of Building Solutions, Chicago, LLC, also alleges that she had deposited over $100,000 at Universal during the relevant time period. (Id. ¶ 5.) Both Pavlick and Smithey allege that they have not received their entire deposits back from the FDIC. (Id. ¶¶ 4, 5.) Plaintiffs thus allege two claims. Count I seeks a declaratory judgment that the depositors and creditors of Universal must be paid from Resnick's restitution. (Id. ¶¶ 41-45.) Count II seeks a declaratory judgment that the FDIC's retention of the Resnick restitution and the Poeta judgment are unconstitutional takings under the Fifth Amendment of the United States Constitution. (Id. ¶¶ 46-48.) Plaintiffs specifically bring this action to force the FDIC to: (1) pay former depositors the remaining unpaid portions of their Universal deposits in excess of $100,000 from Resnick's qui tam settlement; (2) pay creditors pursuant to 12 U.S.C. § 1821's priority scheme; and (3) return all profits gained from Resnick's restitution to the bank's depositors. (Id. ¶ 1.)

ANALYSIS

I. The FDIC's ...


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