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Alonso v. Weiss

United States District Court, N.D. Illinois, Eastern Division

June 10, 2015

MICHAEL ALONSO, et al., Plaintiffs,
v.
LESLIE J. WEISS, et al., Defendants

Page 957

[Copyrighted Material Omitted]

Page 958

For Michael Alonso, individually and derivatively on behalf of Nutmeg/Mercury Fund, LLLP (hereinafter within this caption, Mercury Fund, LLLP), Altholtz Family Limited Partnership, Lawrence Altholtz, Esq.; individually and derivatively on behalf of Mercury Fund, LLLP, Melanie Altholtz Ilit, individually and derivatively on behalf of Nutmeg/Tropical Fund, LP (hereinafter within this caption, " Tropical Fund, LP", Nanobac Fund, LP, Fortuna Fund, LLLP, Patriot Fund, LLLP; and Mercury Fund, LLLP, Richard Carr, individually and derivatively on behalf of Michael Fund, LP, Donald Chermel, individually and derivatively on behalf of Fortuna Fund, LLLP, and Patriot Fund, LLLP, Brad Cohen, as representatives of UTD 9-11-01, individually and derivatively on behalf of Lightning Fund, LLLP, October 2005 Fund, LLLP, Michael Fund, LP and Fortuna Fund, LLLP, Robyn Cohen, as representatives of UTD 9-11-01, individually and derivatively on behalf of Lightning Fund, LLLP, October 2005 Fund, LLLP, Michael Fund, LP and Fortuna Fund, LLLP, Dillard Coleman, as representatives of the Coleman Living Trust 11/7/01, individually and derivatively on behalf of Tropical Fund, LP, Nanobac Fund, LP, MiniFund II, LLLP, MiniFund II, LLLP, Lightning Fund, LLLP, October 2005 Fund, LLLP, Michael Fund, LP and Patriot Fund, Glenda Coleman, as representatives of the Coleman Living Trust 11/7/01, individually and derivatively on behalf of Tropical Fund, LP, Nanobac Fund, LP, MiniFund II, LLLP, MiniFund II, LLLP, Lightning Fund, LLLP, October 2005 Fund, LLLP, Michael Fund, LP and Patriot Fund, Clifford R Cross, individually and derivatively on behalf of Patriot Fund, LLLP and Mercury Fund, LLLP, Melodie K. Cross, individually and derivatively on behalf of Patriot Fund, LLLP and Mercury Fund, LLLP, Michael J Cummings, individually and derivatively on behalf of Mercury Fund, LLLP, Del Monte Holdings, LLC, individually and derivatively on behalf of Mercury Fund, LLLP, Lawrence DePaolo, individually and derivatively on behalf of Mercury Fund, LLLP, Kenneth Diamond, individually and derivatively on behalf of Fortuna Fund, LLLP and Mercury Fund, LLLP, Peter Dolan, individually and derivatively on behalf of Mercury Fund, LLLP, Patricia Eitzen, individually and derivatively on behalf of Nanobac Fund, LP, and Tropical Fund, LP, Myra Fishman, individually and derivatively on behalf of Fortuna Fund, LLLP, Patriot Fund, LLLP and Mercury Fund, LLLP, Zachary Fishman, individually and derivatively on behalf of Fortuna Fund, LLLP, Patriot Fund, LLLP, and Michael Fund, LP, Daniel Ford, individually and derivatively on behalf of Tropical Fund, LP, MiniFund, LLLP, MiniFund II, LLLP, Lightning Fund, LLLP, October 2005 Fund, LLLP, Michael Fund, LP, Fortuna Fund, LLLP and Patriot Fund, LLLP, Donna Ford, individually and derivatively on behalf of Tropical Fund, LP, MiniFund, LLLP, MiniFund II, LLLP, Lightning Fund, LLLP, October 2005 Fund, LLLP, Michael Fund, LP, Fortuna Fund, LLLP and Patriot Fund, LLLP, Dwain Ford, individually and derivatively on behalf of Tropical Fund, LP, MiniFund, LLLP, MiniFund II, LLLP, Lightning Fund, LLLP, October 2005 Fund, LLLP, Michael Fund, LP, Fortuna Fund, LLLP and Patriot Fund, LLLP, Douglas Ford, individually and derivatively on behalf of Tropical Fund, LP, MiniFund, LLLP, MiniFund II, LLLP, Lightning Fund, LLLP, October 2005 Fund, LLLP, Michael Fund, LP, Fortuna Fund, LLLP and Patriot Fund, LLLP, Rick M Freedman, as a representative of the Rick Martin Freedman Trust, individually and derivatively on behalf of Tropical Fund, L.P., Nanobac Fund, LP, MiniFund, LLLP, MiniFund II, LLLP, Lightning Fund, LLLP, October 2005 Fund and Michael Fund, LP, Jeffrey Friedman, as representative of the Jeffrey R Friedman Revocable Trust U/A dated 10/26/06, individually and derivatively on behalf of Mercury Fund, LLLP, Robert M Gale, individually and derivatively on behalf of Nanobac Fund, LP, MiniFund II, LLLP, Tropical Fund, LP, MiniFund, LLLP, Lightning Fund I, LLLP, and October 2005 Fund, LLLP, Stanley Gottlieb, individually and derivatively on behalf of Mercury Fund, LLLP, Paul Gougelman, individually and derivatively on behalf of Patriot Fund, LLLP, Billy E Grace, as representatives of The Grace Family Trust, individually and derivatively on behalf of MiniFund II, LLLP, Ralph Gracia, individually and derivatively on behalf of Tropical Fund, LP, Nanobac Fund, LP, MiniFund, LLLP, MiniFund II, LLLP, Lightning Fund, LLLP, October 2005 Fund, LLLP and Michael Fund, LP, Jerry L Hall, individually and derivatively on behalf of Michael Fund, LP, Fortuna Fund, LLLP, and Patriot Fund, LLLP, Harrison Business LP, individually and derivatively on behalf of Patriot Fund, LLLP, Michael Fund, LP, Lightning Fund I, LLLP, and October 2005 Fund, LLLP, Kimberly C Harrison, individually and derivatively on behalf of Tropical Fund, LP, MiniFund, LLLP, Mini Fund II, LLLP, Nanobac Fund, LP, Patriot Fund, LLLP, Michael Fund, LP, Lightning Fund I, LLLP, and October 2005 Fund, LLLP., Steven H Harrison, as trustee for AMANDA L. HARRISON, individually and derivatively on behalf of Tropical Fund, LP, and October 2005 Fund, LLLP, Darren A Hearns, as a representative of the Hearns Family Trust, individually and derivatively on behalf of MiniFund II, LLLP, Paula Heggerick, individually and derivatively on behalf of Fortuna Fund, LLLP, Patriot Fund, LLLP and Mercury Fund, LLLP, Scott Hill, individually and derivatively on behalf of Michael Fund, LP, Patricia S Horvath, individually and derivatively on behalf of Mercury Fund, LLLP, Jaffe Revocable Living Trust, individually and derivatively on behalf of Nanobac Fund, LP, Fortuna Fund, LLLP, Patriot Fund, LLLP and Mercury Fund, LLLP, Barbara J Johnson, individually and derivatively on behalf of Patriot Fund, LLLP, Roger K Johnson, individually and derivatively on behalf of Patriot Fund, LLLP, Allen Kalkstein, individually and derivatively on behalf of Mercury Fund, LLLP, Marshall Katzman, individually and derivatively on behalf of Nanobac Fund, LP and Mercury Fund, LLLP, Harvey Levin, individually and derivatively on behalf of Fortuna Fund, LLLP, Glen Lundahl, individually and derivatively on behalf of Fortuna Fund, LLLP and Mercury Fund, LLLP, Roberta Lundahl, individually and derivatively on behalf of Fortuna Fund, LLLP and Mercury Fund, LLLP, Raymond Lutze, individually and derivatively on behalf of Mercury Fund, LLLP, Kevin Lyons, individually and derivatively on behalf of Fortuna Fund, LLLP and Patriot Fund, LLLP, Tracy L Mead, individually and derivatively on behalf of Mercury Fund, LLLP, and Fortuna Fund, LLLP, Caroline Mickelson, individually and derivatively on behalf of Fortuna Fund, LLLP, Patriot Fund, LLLP, and Michael Fund, LP, David Mickelson, individually and derivatively on behalf of Fortuna Fund, LLLP, Patriot Fund, LLLP, and Michael Fund, LP, Sarah Mickelson, individually and derivatively on behalf of Mercury Fund, LLLP, Stuart P. Miller, MD.; individually and derivatively on behalf of Tropical Fund, LP, Nanobac Fund, LP, MiniFund, LLLP, MiniFund II, LLLP, Lightning Fund, LLLP, October 2005 Fund, LLLP, Michael Fund, LP, Fortuna Fund, LLLP, Patriot Fund, LLLP and Mercury Fund, LLLP, Margaret Milstead, as a representative of Margaret M. Milstead LT 3-7-00, individually and derivatively on behalf of Tropical Fund, LP, Donald S. Monopoli, individually and derivatively on behalf of Tropical Fund, LP, Nanobac Fund, LP, Lightning Fund, LLLP, October 2005 Fund, LLLP, Michael Fund, LP, Fortuna Fund, LLLP and Patriot Fund, LLLP, Laura E. Monopoli, individually and derivatively on behalf of Tropical Fund, LP, Nanobac Fund, LP, Lightning Fund, LLLP, October 2005 Fund, LLLP, Michael Fund, LP, Fortuna Fund, LLLP and Patriot Fund, LLLP, Richard A Nunn, individually and derivatively on behalf of Mercury Fund, LLLP, James O'Malley, individually and derivatively on behalf of Tropical Fund, LP, Nanobac Fund, LP, MiniFund, LLLP and Michael Fund, LP, Juan Pardo de Zela, individually and derivatively on behalf of MiniFund II, LLLP, Lightning Fund, LLLP and October 2005 Fund, LLLP, Louis R. Pertz, individually and derivatively on behalf of Mercury Fund, LLLP, Francie Pinkwater, individually and derivatively on behalf of Patriot Fund, LLLP and Mercury Fund, LLLP, Krisztina Pipo, individually and derivatively on behalf of MiniFund II, LLLP, Erik Poch, individually and derivatively on behalf of MiniFund, LLLP, MiniFund II, LLLP, Lightning Fund, LLLP October 2005 Fund, LLLP, Michael Fund, LP and Fortuna Fund, LLLP, Katie Poch, individually and derivatively on behalf of MiniFund I, LLLP, MiniFund II, LLLP, Lightning Fund, LLLP October 2005 Fund, LLLP, Michael Fund, LP and Fortuna Fund, LLLP, Oskar R. Poch, individually and derivatively on behalf of Nanobac Fund, LP, MiniFund, LLLP, Lightning Fund, LLLP, October 2005 Fund, LLLP, Michael Fund, LP, Fortuna Fund, LLLP, Patriot Fund, LLLP and Mercury Fund, LLLP, Joesph J Prischak, individually and derivatively on behalf of Mercury Fund, Michael Fund, and October 2005 Fund, Stephanie Regan, individually and derivatively on behalf of Mercury Fund, LLLP, Brian Ross Reinglass, individually and derivatively on behalf of Fortuna Fund, LLLP, and Patriot Fund, LLLP, Elizabeth Reinglass, individually and derivatively on behalf of Fortuna Fund, LLLP, and Patriot Fund, LLLP, Howard Reinglass, individually and derivatively on behalf of Mercury Fund, LLLP, Fortuna Fund, LLLP, and Patriot Fund, LLLP, Jo Ellen Reinglass, individually and derivatively on behalf of Fortuna Fund, LLLP, and Patriot Fund, LLLP, Frank Ripa, individually and derivatively on behalf of Tropical Fund, LP, Nanobac Fund, LP, MiniFund, LLLP and October 2005 Fund, LLLP, Jackie Ripa, individually and derivatively on behalf of Tropical Fund, LP, Nanobac Fund, LP, MiniFund, LLLP and October 2005 Fund, LLLP, Ripa & Associates, LLC, individually and derivatively on behalf of Tropical Fund, LP, Nanobac Fund, LP, MiniFund, LLLP and October 2005 Fund, LLLP, Rivers Enterprises, FLLP, individually and derivatively on behalf of Patriot Fund, LLLP, Nancy Rogers, as executrix for the estate of James P. Rogers and representative of Equity Trust Co. Custodian FBO James P. Rogers, IRA, individually and derivatively on behalf of Michael Fund, LP, Fortuna Fund, LLLP and Patriot Fund, LLLP, Allen Rubens, individually and derivatively on behalf of MiniFund, LLLP, Lightning Fund, LLLP, October 2005 Fund, LLLP, Michael Fund, LP, Fortuna Fund, LLLP and Mercury Fund, LLLP, Howard Salamon, individually and derivatively on behalf of Lightning Fund, LLLP, October 2005 Fund, LLLP, Michael Fund, LP, Fortuna Fund, LLLP, Patriot Fund, LLLP and Mercury Fund, LLLP, Jason Elliot Salamon, individually and derivatively on behalf of Lightning Fund, LLLP, October 2005 Fund, LLLP, Michael Fund, LP, Fortuna Fund, LLLP, Patriot Fund, LLLP and Mercury Fund, LLLP, Pamela Salamon, individually and derivatively on behalf of Lightning Fund, LLLP, October 2005 Fund, LLLP, Michael Fund, LP, Fortuna Fund, LLLP, Patriot Fund, LLLP and Mercury Fund, LLLP, Samuel Salamon, individually and derivatively on behalf of Lightning Fund, LLLP, October 2005 Fund, LLLP, Michael Fund, LP, Fortuna Fund, LLLP, Patriot Fund, LLLP and Mercury Fund, LLLP, Sheri Salamon, individually and derivatively on behalf of Lightning Fund, LLLP, October 2005 Fund, LLLP, Michael Fund, LP, Fortuna Fund, LLLP, Patriot Fund, LLLP and Mercury Fund, LLLP, William Daniel Salamon, individually and derivatively on behalf of Lightning Fund, LLLP, October 2005 Fund, LLLP, Michael Fund, LP, Fortuna Fund, LLLP, Patriot Fund, LLLP and Mercury Fund, LLLP, Ana Schuster, individually and derivatively on behalf of MiniFund II, LLLP, October 2005 Fund, LLLP and Michael Fund, LP, Georgene Schuster, individually and derivatively on behalf of MiniFund II, LLLP, October 2005 Fund, LLLP and Michael Fund, LP, Robert Schuster, individually and derivatively on behalf of MiniFund II, LLLP, October 2005 Fund, LLLP and Michael Fund, LP, Garland Sheats, individually and derivatively on behalf of Lightning Fund, LLLP, October 2005 Fund, LLLP, Michael Fund, LP, Fortuna Fund, LLLP and Patriot Fund, LLLP, Jeffrie Silverberg, individually and derivatively on behalf of MiniFund, LLLP and October 2005 Fund, LLLP, Dennis L. Smith, individually and derivatively on behalf of Patriot Fund, LLLP and Mercury Fund, LLLP, Kenneth Snider, individually and derivatively on behalf of Mercury Fund, LLLP, Mark Sperber, individually and derivatively on behalf of Tropical Fund, LP, MiniFund I, LLLP, MiniFund II, LLLP, Lightning Fund, LLLP, October 2005 Fund, LLLP, Michael Fund, LP, Fortuna Fund, LLLP and Patriot Fund, LLLP, Patricia Sperber, individually and derivatively on behalf of Nanobac Fund, LP, Larry A. Spindler, individually and derivatively on behalf of Mercury Fund, LLLP, Fortuna Fund, LLLP, and Patriot Fund, LLLP, Ronald Stevens, individually and derivatively on behalf of Fortuna Fund, LLLP, Patriot Fund, LLLP and Mercury Fund, LLLP, Michael Traczuk, individually and derivatively on behalf of Mercury Fund, LLLP, John R. Troup, individually and derivatively on behalf of Patriot Fund, LLLP and Mercury Fund, LLLP, Sue S. Troup, individually and derivatively on behalf of Patriot Fund, LLLP and Mercury Fund, LLLP, Sean Underwood, as a representative of the Underwood Living Trust, individually and derivatively on behalf of Tropical Fund, LP, Albert Wakin, individually and derivatively on behalf of Mercury Fund, LLLP, Adam White, individually and derivatively on behalf of Tropical Fund, LP, MiniFund II, LLLP, Lightning Fund, and LLLP, Brittany White, individually and derivatively on behalf of Lightning Fund, LLLP, Michael Fund, LP, and Fortuna Fund, LLLP, Randi White, individually and derivatively on behalf of Lightning Fund, LLLP, October 2005 Fund, LLLP, Michael Fund, LP, Fortuna Fund, LLLP, and Patriot Fund, LLLP, Ashley Young, individually and derivatively on behalf of Fortuna Fund, LLLP, Patriot Fund, LLLP and Mercury Fund, LLLP, Brandt Young, individually and derivatively on behalf of Fortuna Fund, LLLP, Patriot Fund, LLLP and Mercury Fund, LLLP, Laurie Young, individually and derivatively on behalf of Fortuna Fund, LLLP, Patriot Fund, LLLP and Mercury Fund, LLLP, Michael Young, individually and derivatively on behalf of Fortuna Fund, LLLP, Patriot Fund, LLLP and Mercury Fund, LLLP, Altholtz FLP, individually and derivatively on behalf of Nutmeg/Nanobac Fund, LLLP (hereinafter within this caption, Nanobac Fund, LP), Nutmeg/MiniFund II, LLLP, (hereinafter, within this caption, Mini Fund II, LLLP), Nutmeg/Michael Fund, LP, (hereinafter within this caption, " Michael Fund, LP" ), Nutmeg/Fortuna Fund, LLLP, (hereinafter within this caption, " Fortuna Fund, LLLP" ), Nutmeg/Patriot Fund, LLLP, (hereinafter within this caption, " Patriot Fund, LLLP" ), Kenneth Diamond, as a representative of Pensco Trust Co. Custodian FBO Ken Diamond DI1CP, individually and derivatively on behalf of Fortuna Fund, LLLP and Mercury Fund, LLLP, Steven H. Harrison, as trustee for S. PATRICK HARRISON, individually and derivatively on behalf of Tropical Fund, LP, Michael Fund, LP, and October 2005 Fund, LLLP, Mark Sperber, as a representative of Resources Trust, individually and derivatively on behalf of Nanobac Fund, LP, October 2005 Fund, LLLP, Michael Fund, LP, Fortuna Fund, LLLP and Patriot Fund, LLLP, Karyn Blaise Irrevocable Trust, individually and derivatively on behalf of Michael Fund, LP, Fortuna Fund, LLLP, Patriot Fund, LLLP and Mercury Fund, LLLP, D. Douglas Cassat, as a Representative of Cassat 1981 Trust UAD 11/17/1981, individually and derivatively on behalf of Mercury Fund, LLLP, Stephen Chipman, individually and derivatively on behalf of Tropical Fund LP, Nanobac Fund, LP, Nutmeg/MiniFund, LLLP (hereinafter within this caption, " MiniFund, LLLP" ) Nutmeg/Lightning Fund I, LLLP (hereinafter within this caption, " Lightning Fund I, LLLP, Ronald J. Fishman, as a representative of Pensco Trust Co. Custodian FBO Ronald J. Fishman IRA, individually and derivatively on behalf of Fortuna Fund, LLLP, Michael Fund, LP, Patriot Fund, LLLP and Mercury Fund, LLLP, Glena C. Grace, as representatives of The Grace Family Trust, individually and derivatively on behalf of MiniFund II, LLLP, Hannahlu Ventures, LP, individually and derivatively on behalf of Mercury Fund, LLLP, Fortuna Fund, LLLP, Patriot Fund, LLLP, and Michael Fund, LP, Tamar Fink, individually and derivatively on behalf of Mercury Fund, LLLP, Plaintiffs: Eric W. Berry, LEAD ATTORNEY, Berry Law PLLC, New York, NY; Adam B Goodman Goodman Tovrov Hardy & Johnson LLC, Chicago, IL.

All Plaintiffs, Plaintiff, Pro se.

For Leslie J Weiss, Barnes & Thornburg LLP, Defendants: Stephen Novack, LEAD ATTORNEY, Rebekah Hava Parker, Novack and Macey LLP, Chicago, IL; Timothy John Miller, Novack & Macey, Chicago, IL.

Page 959

AMENDED OPINION AND ORDER[1]

Joan H. Lefkow, United States District Judge.

On September 14, 2012, a group of limited partners in one or more investment funds (collectively, " the Funds" )[2] managed by The Nutmeg Group, LLC (" Nutmeg" ), filed this individual and shareholder derivative action on behalf of the Funds against Leslie J. Weiss, the court-appointed receiver for Nutmeg and the Funds; Barnes & Thornburg, LLP (" Barnes & Thornburg" ), the law firm retained by the receiver to perform legal services; [3] Nutmeg; and the Funds. (Dkt. 1.) The case arises from a receivership in which Nutmeg was placed as a result of a lawsuit filed in this district by the Securities and Exchange Commission (" SEC" ) against Nutmeg, Randall Goulding (Nutmeg's managing member), and others in 2009. See SEC v. Nutmeg Grp., LLC, No. 09 C 1775. Leslie Weiss was appointed and remains receiver, and attorneys from her law firm, Barnes & Thornburg, have rendered legal counsel to her during the receivership. Plaintiffs claim that Weiss, during her receivership, has breached her fiduciary duties to the Funds and that the defendant attorneys have committed legal malpractice. (Dkt. 1.)

In addition to their state-law claims for breach of fiduciary duty and legal malpractice, plaintiffs brought a federal claim under § 206(4) of the Investment Advisors Act of 1940 and SEC Rule 206(4)-2. ( Id. ) On July 22, 2013, this court dismissed plaintiffs' federal claim with prejudice because

Page 960

the claim fell outside of the applicable statute of limitations. (Dkt. 35 at 11.) The court then dismissed the remaining state-law claims without prejudice to refiling in state court. ( Id. at 12.) Subsequently, on August 19, 2013, plaintiffs moved to amend the judgment to permit plaintiffs to file an amended complaint. (Dkt. 37.) In their motion, plaintiffs raised a new theory of subject matter jurisdiction: that the court had jurisdiction over the proposed amended complaint (dkt. 45 (" Compl." )) because it is brought against a receiver appointed by the district court. See 28 U.S.C. § 754; Robinson v. Michigan Consol. Gas Co., Inc., 918 F.2d 579, 586 (6th Cir. 1990) (citing C. Wright & A. Miller, Federal Practice and Procedure § 2985 at 45; Diners Club, Inc. v. Bumb, 421 F.2d 396, 398-401 (9th Cir. 1970)).[4] The court granted the motion on September 23, 2013, reinstated defendants' motion to dismiss, and deemed the motion to be directed at counts II through XXI of the amended complaint. (Dkt. 42.) That motion is again before the court for decision. The court assumes familiarity with the factual background contained in the court's opinion and order previously dismissing this suit.[5] Alonso v. Weiss, 958 F.Supp.2d 922, 923-25 (N.D. Ill. 2013); (dkt. 35 at 2-5.)

LEGAL STANDARD

A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) challenges a complaint for failure to state a claim on which relief may be granted. Fed.R.Civ.P. 12(b)(6). In ruling on a Rule 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. Active Disposal, Inc. v. City of Darien, 635 F.3d 883, 886 (7th Cir. 2011). To survive a Rule 12(b)(6) motion, the complaint must not only provide the defendant with fair notice of a claim's basis but must also establish that the requested relief is plausible on its face. See Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009); Bell A. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). The allegations in the complaint must be " enough to raise a right to relief above the speculative level." Twombly, 550 U.S. at 555. At the same time, the plaintiff need not plead legal theories; it is the facts that count. Hatmaker v. Mem'l Med. Ctr., 619 F.3d 741, 743 (7th Cir. 2010); see also Johnson v. City of Shelby, 574 U.S., 135 S.Ct. 346, 346, 190 L.Ed.2d 309 (2014) (per curiam) (" Federal pleading rules call for 'a short and plain statement of the claim showing the pleader is entitled to relief' . . . . [T]hey do not countenance dismissal of a complaint for imperfect statement of the legal theory supporting the claim asserted." ).

ANALYSIS

I. Immunity From Suit

In their motion to dismiss, defendants contend that the amended complaint fails to state a claim because Weiss, Nutmeg, and Barnes & Thornburg are entitled to various immunities. The court addresses each of defendants' arguments in turn.

Page 961

A. Immunity Under the Appointment Order

1. Weiss and Barnes & Thornburg

Defendants first argue that the claims against Weiss and Barnes & Thornburg are absolutely barred because the order appointing Weiss receiver provides that Weiss and Barnes & Thornburg cannot be liable for actions taken in the course of their official duties. Thus, according to defendants, because plaintiffs have not alleged that Weiss or Barnes & Thornburg acted outside the scope of their responsibilities under the appointment order, Weiss and Barnes & Thornburg are absolutely immune from suit.

The appointment order provides, " In no event shall the Receiver or Retained Personnel be liable to anyone (1) with respect to the performance of their duties and responsibilities as Receiver or Retained Personnel, or (2) for any actions taken or omitted by them, except upon a finding by this Court that they acted or failed to act as a result of malfeasance, bad faith, gross negligence, or in reckless disregard of their duties." (Dkt. 13-1 Exh. A ¶ G (emphasis added).) Defendants suggest that the modifying clause beginning " except upon a finding by this Court" applies only to provision (2), thus exempting Weiss and Barnes & Thornburg from any liability whatsoever for actions taken in the course of their duties. But that interpretation is grammatically incorrect and does not comport with common sense. See To-Am Equip. Co. v. Mitsubishi Caterpillar Forklift Am., 913 F.Supp. 1148, 1153 (N.D. Ill. 1995) (noting that pursuant to the last antecedent doctrine, modifying words or clauses apply to the immediately preceding phrase alone unless the modifier is preceded by a comma). Because the plain language of the appointment order allows for the imposition of liability on Weiss and Barnes & Thornburg for actions taken during the performance of their duties under certain, albeit narrow, circumstances, defendants' argument that Weiss and Barnes & Thornburg are absolutely immune under the appointment order fails.

2. Nutmeg

Defendants also assert that the appointment order bars any claims against Nutmeg because plaintiffs did not follow the applicable claims process or otherwise obtain leave of court before filing suit. Plaintiffs do not respond to this argument. The appointment order provides,

" Except by leave of this Court, during pendency of the receivership ordered herein, all investors, limited partners, creditors, and other persons . . . are stayed from: . . . (4) Asserting any claim against Nutmeg's or the Funds' property other than in the manner for making claims established by the Receiver."

(Dkt. 13-1 Exh. A ¶ M.) Under the procedure established by Weiss, the opportunity to submit claims against Nutmeg closed on March 9, 2011. (SEC dkt. 269.) Plaintiffs filed this lawsuit well after that date. ( See dkt. 1.) Moreover, plaintiffs did not obtain leave of court before filing this suit. Although plaintiffs sought leave in the SEC action to file their original complaint (SEC dkt. 406), the court determined that seeking leave was unnecessary because the Northern District of Illinois constitutes a single court for purposes of the Barton Doctrine.[6]

Page 962

SEC v. Nutmeg Grp., LLC, No. 09 C 1775, 2012 WL 3307406, at *2 (N.D. Ill. Aug. 13, 2012); (SEC dkt. 533 at 3.) In fact, the court expressly declined to reach the issue of whether leave was granted to file the complaint. Id. Therefore, because plaintiffs failed either to follow the claims process established by Weiss or to obtain leave of court prior to filing suit, plaintiffs' claims against Nutmeg are dismissed.

B. Quasi-Judicial Immunity

Defendants next assert that they are entitled to absolute immunity for those counts of the amended complaint that are based on acts performed by defendants pursuant to court order. This analysis begins with the " fundamental principle that judges are entitled to absolute immunity from damages for their judicial conduct." Richman v. Sheahan, 270 F.3d 430, 434 (7th Cir. 2001) (citing Mireles v. Waco, 502 U.S. 9, 11-12, 112 S.Ct. 286, 116 L.Ed.2d 9 (1991); Forrester v. White, 484 U.S. 219, 225-29, 108 S.Ct. 538, 98 L.Ed.2d 555 (1988)). Although originally confined to members of the judiciary, judicial immunity has been extended to " quasi-judicial conduct" of " [n]on-judicial officials whose official duties have an integral relationship with the judicial process." Henry v. Farmer City State Bank, 808 F.2d 1228, 1238 (7th Cir. 1986) (citation omitted). Parties, including receivers, who execute judicial orders are entitled to absolute immunity. Coleman v. Dunlap, 695 F.3d 650, 652 (7th Cir. ...


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