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Fcstone, LLC v. Scott A. Adams

January 6, 2011

FCSTONE, LLC, PLAINTIFF,
v.
SCOTT A. ADAMS, ROBERT W. WALFORD, SAMANTHA GARBER- ADAMS, AND LISA WALFORD, DEFENDANTS.



The opinion of the court was delivered by: Judge Ronald A. Guzman

MEMORANDUM OPINION AND ORDER

Plaintiff has sued Scott A. Adams and Robert W. Walford for breach of contract and all defendants for fraud, conspiracy and a declaration that Samantha Garber-Adams and Lisa Walford are not entitled to one-half of any tax refunds Adams and Walford received. All defendants have filed a motion to stay, Garber-Adams and Lisa Walford have a filed a motion to dismiss for lack of personal jurisdiction and failure to state a claim, and plaintiff has filed a motion for partial summary judgment. For the reasons set forth below, the Court denies the motions.

Facts

Plaintiff is a futures commission merchant. (Second Am. Compl. ¶ 2.) Defendant Scott Adams ("Adams") is married to defendant Samantha Garber-Adams. (Id. ¶ 3.) Defendant Robert Walford ("Walford") is married to defendant Lisa Walford. (Id. ¶ 4.) The individual defendants live in New York. (Id. ¶¶ 3-6.)

Adams and Walford opened a joint trading account with plaintiff pursuant to an account agreement, which states:

[Adams and Walford] agree[] to indemnify [plaintiff] and hold [it] harmless from and against any and all liabilities, losses, damages, costs and expenses . . . incurred . . . by [plaintiff] because . . . the agreements made herein by [Adams and Walford] shall not be fully and timely performed, from any action or omission by [Adams and Walford] with respect to the account(s), including but not limited to, any debit and deficit balances which may occur in [Adams and Walford's] account . . . . (Id. ¶ 11; id., Ex. D, Joint Customer Agreement ¶ 5.) Adams and Walford accumulated a deficit in their account of $127 million. (Id. ¶ 12.)

On March 11, 2009, plaintiff, Walford and Adams executed a forbearance agreement in which Walford and Adams acknowledged liability for the deficit, and plaintiff agreed not to start collection proceedings if Adams and Walford: (1) executed a $127 million promissory note in plaintiff's favor; (2) prepared their 2008 tax returns and amended their returns for previous years to reflect carry-back losses; and (3) assigned their tax refunds to plaintiff, one-third of which would be applied to the note and two-thirds of which would be used to fund a new trading account, to secure payment of the promissory note. The agreement contains a forum selection clause that states: "The Parties each agree and consent to the exclusive jurisdiction of the state and federal courts in Illinois, in all actions, proceedings and litigation arising from or related directly or indirectly to this Agreement." (Id., Ex. A, Forbearance Agreement ¶¶ 1, 2, 8.)

The same day, Adams and Walford signed a note promising to pay plaintiff $127 million plus interest five years from the day they started trading in the new trading account. (Id., Ex. B, Promissory Note ¶ 2.) Adams' and Walford's failure to perform any of their obligations under the assignments or forbearance agreement is one of the events of default under the note. (Id. ¶ 4.)

The assignments Adams and Walford executed pursuant to the forbearance agreement state: Assignor assigns to Assignee all of Assignor's interest in the refunds Assignor may be entitled to receive from the Internal Revenue Service in accordance with Assignor's United States Individual Income Tax Returns for the years 2008, 2009, and all previous years. . . .

Assignor assigns to Assignee all of Assignor's interest in the refunds Assignor may be entitled to receive from the New York Department of Taxation and Finance or other tax authority in accordance with Assignor's state and city income tax returns for the years 2008, 2009, and all previous years. (Id., Ex. C, Assignments ¶¶ 2-3.)

In October and November 2009, respectively, Walford received refunds for his 2008 state and federal taxes but did not give any of the money to plaintiff. (Second Am. Compl. ¶ 25 .) Moreover, Walford and Adams did not amend their tax returns for the years 2005-07 or open a new trading account. (Id. ¶¶ 25-27.)

In December 2009, Garber-Adams and Lisa Walford sued their husbands and plaintiff in New York state court seeking a declaration that their husbands assigned only their own shares of the refunds to plaintiff, and thus, Garber-Adams and Lisa Walford were entitled to half of any refunds received. (See Pl.'s Mem. Law Opp'n Garber-Adams & Lisa Walford's Mot. Dismiss, Ex. 7, Compl.)

Discussion

Personal Jurisdiction

In determining whether it has personal jurisdiction over Garber-Adams and Lisa Walford, the Court accepts as true "all well-pleaded jurisdictional allegations in the complaint . . . unless [they are] controverted by affidavit." Travelers Cas. & Sur. Co. v. Interclaim (Bermuda) Ltd., 304 F. Supp. 2d 1018, 1021 (N.D. Ill. 2004). ...


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