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Alonso v. Weiss

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

September 30, 2016

MICHAEL ALONSO et al., Plaintiffs,
v.
LESLIE J. WEISS et al., RANDALL S. GOULDING, Plaintiff,
v.
LESLIE J. WEISS, BARNES & THORNBURG, LLP et al., Defendants.

          OPINION AND ORDER

          Joan H. Lefkow U.S. District Judge.

         Plaintiffs, limited partners in one or more investment funds (collectively, the Funds), filed suit individually and derivatively against (1) the Funds; (2) the Nutmeg Group, LLC (Nutmeg), the manager of the Funds; (3) Leslie J. Weiss, the court-appointed receiver for Nutmeg and the Funds; and (4) Barnes & Thornburg, LLP, the law firm retained by the receiver to perform legal services. In a twenty-one count amended complaint, plaintiffs allege, among other things, that Weiss, Barnes & Thornburg, and Nutmeg breached their fiduciary duties and committed legal malpractice. Discovery has closed. Before the court is plaintiffs' motion for summary judgment with respect to defendants' fourth, fifth, and sixth affirmative defenses.[1] For the following reasons, their motion (dkt. 99) is granted in part and denied in part.

         BACKGROUND[2]

         On August 6, 2009, the court appointed Leslie J. Weiss to be the equity receiver for Nutmeg in SEC v. The Nutmeg Group, LLC, et al., No. 09 C 1775. (Dkt. 124-2 at 5-14.) In doing so, the court ordered, “The Receiver shall be the agent of this Court and solely the agent of this Court in acting as Receiver under this Order.” (Id. at 5.) The order set out the receiver's numerous powers and duties. (Id. at 5-10.) Of importance here, the order directed Weiss to file with the court, in regular intervals, reports of her acts and transactions in her capacity as receiver. (Id. at 10.)

         During the course of her receivership, Weiss filed numerous reports with the court explaining to some extent what she had done, what she was doing, what she was planning to do, and her reasons for doing so. (See dkts. 124-2-124-11.) A copy of each of these reports was sent to and received by plaintiffs. (Dkt. 124-11 at 31-37.) The first indication of any qualms plaintiffs may have had regarding Weiss's actions appeared on December 9, 2009, when Goulding's former administrative assistant, herself an investor in Nutmeg, appeared at a hearing to express concern about the receivership. (Dkt. 124-12 at 41.) At that time, Judge Hibbler[3] in open court explained to the investor that “if there are materials that you believe it is important that the Court both hear and consider, there are certain alternatives available to you.” (Id.) The investor was advised to either retain counsel or visit the pro se desk at the courthouse to inquire about filing a motion in order to intervene in some fashion. (Id.) Although the investor indicated that she intended to do so, neither she nor any other investor ever followed the court's suggestion as to how they could be heard pertaining to the receivership. (Dkt. 124-13 at 55-169.)

         On September 14, 2012, plaintiffs filed their original complaint and on September 26, 2013 an amended complaint. (Id. ¶ 11.) On June 10, 2015, the court granted in part and denied in part defendants' motion to dismiss. (Dkt. 55.) The court held that only claims alleging breach of fiduciary duty against Weiss were sufficiently pleaded and explained that only “willful and deliberate” breaches of fiduciary duty by a receiver are actionable. (Id. at 13.)

         Weiss filed an answer on August 14, 2015, in which she asserted numerous affirmative defenses. (Dkt. 70.) The affirmative defenses at issue here are the fourth, fifth, and sixth. The fourth affirmative defense alleges:

The Amended Complaint is barred, in whole or in part, by the doctrines of waiver, ratification, and/or acquiescence. Among other things, Ms. Weiss disclosed all the decisions that are now being challenged in one or more of her reports to the court in connection with her role as Receiver, and none of the Plaintiffs objected.

(Id. at 154.) The fifth affirmative defense alleges:

The Amended Complaint is barred, in whole or in part, by the doctrine of laches. Among other things, Ms. Weiss disclosed all the decisions that are now being challenged in one or more of her reports to the court in connection with her role as Receiver, and none of the Plaintiffs objected. Defendants have been prejudiced by Plaintiffs' failure to act due to, among other things, the passage of time and the death of Judge Hibbler.

(Id. at 154-55.) The sixth affirmative defense alleges:

The Amended Complaint is barred in whole or in part by the doctrines of contributory negligence and assumption of risk. Among other things, Plaintiffs knew or should have known that Mr. Goulding was a convicted felon at the time they invested with him, that many of Mr. Goulding's investments were illegitimate, and that Mr. Goulding vastly overvalued their investments. Yet, they failed to take any action to protect themselves.

(Id. at 155.)

         LEGAL STANDARD

         Summary judgment obviates the need for a trial where there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). A genuine issue of material fact exists if “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). To determine whether any genuine fact issue exists, the court must pierce the pleadings and assess the proof as presented in depositions, answers to interrogatories, admissions, and affidavits that are part of the record. Fed.R.Civ.P. 56(c). In doing so, the court must view the facts in the light most favorable to the non-moving party and draw all reasonable inferences in that party's favor. Scott v. Harris, 550 U.S. 372, 378, 127 S.Ct. 1769, 167 L.Ed.2d 686 (2007). The court may not weigh conflicting evidence or make credibility determinations. Omnicare, 629 F.3d at 704.

         The party seeking summary judgment bears the initial burden of proving there is no genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). In response, the non-moving party cannot rest on bare pleadings alone but must designate specific material facts showing that there is a genuine issue for trial. Id. at 324; Insolia v. Philip Morris Inc., 216 F.3d 596, 598 (7th Cir. 2000). If a claim or defense is factually unsupported, it should be disposed of on summary judgment. Celotex, 477 U.S. at 323- 24.

         ANALYSIS

         I. The Sixth Affirmative Defense Alleging Contributory Negligence

         Plaintiffs argue that, since the surviving claims in this case involve “willful and deliberate” breaches of a fiduciary duty, any contributory negligence on their part is irrelevant as a matter of law. (Dkt. 100 at 4.) Plaintiffs cite Brewer v. United States, 864 F.Supp. 741, 746 (N.D.Ill. 1994), where the court found that contributory negligence is not a defense to willful conduct. Because the court agrees and defendant has failed to respond to plaintiffs' motion as it relates to defendant's sixth ...


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