United States District Court, N.D. Illinois, Eastern Division
SOUTHPORT BANK, Plaintiff.
CHARLES V. MILES. RANDOLPH S. MILES, AND GOEKEN GROUP CORP., Defendants. FIRST NATIONAL BANK OF OMAHA, Citation Respondent and Claimant.
Jeffery T. Gilbert United States Magistrate Judge.
Bank's Motion to Compel Against First National Bank of
Omaha [ECF No. 450] is denied. See Statement below for
October 14, 2014, Plaintiff Southport Bank
("Southport") obtained a judgment against Defendant
Goeken Group Corp. ("Goeken Group") in the total
amount of $6.8 million dollars [ECF No. 303], Since that
time, Southport has been trying to collect its judgment. In
furtherance of those efforts, it served a subpoena upon First
National Bank of Omaha ("FNBO"). FNBO made a loan
to Goeken Group in June 2015, after entry of the judgment in
this case. That loan was guaranteed by an individual member
of the Goeken family and the Goeken Trust, both of whom
posted cash on deposit at FNBO as collateral for the loan and
as security for their guarantees. Southport contends that
Goeken Group and Goeken Trust are alter egos of each other so
that Southport is entitled to the turnover of the cash Goeken
Trust posted to secure FNBO's loan to Goeken Group at an
appropriate time in this proceeding.
addition, Southport asserts that FNBO may have knowingly made
the loan with intent to aid Goeken Group in evading its
creditors, including Southport. Motion to Compel [ECF No.
450] at 2, 4. Southport contends that FNBO may have violated
its own loan policies, procedures and/or guidelines
("the loan policies") by making the loan [ECF No.
450-6, at ¶ l(i)], and it wants FNBO to produce those
loan policies so that Southport can use them to advance this
theory. FNBO objects to producing its loan policies. FNBO
argues that its loan policies are irrelevant to whether
Goeken Group and Goeken Trust are alter egos of each other,
and that Southport's fishing for those loan policies is
far in excess of the type of discovery to which Southport
legitimately is entitled in this post-judgment proceeding.
Court agrees with FNBO. In a post-judgment proceeding
pursuant to Rule 69(a)(2) of the Federal Rules of Civil
Procedure, a judgment creditor may obtain discovery from any
person, including the judgment debtor, as provided by the
Federal Rules of Civil Procedure or by procedure of the state
where the court is located. Fed.R.Civ.P. 69(a)(2). In
Illinois, a judgment creditor can initiate a supplementary
proceeding to discover assets or income of the judgment
debtor not exempt from the judgment and compel application of
those assets to pay all or part of the judgment. Broaddus
v. Shields, No. 08-cv-4420, 2012 WL 1144664, at *2 (N.D.
Ill. Apr. 5, 2009), citing 735 ILCS 5/2-1402 and other cases.
The relevant inquiries in a post-judgment proceeding to
discover assets are: (1) whether the judgment debtor is in
possession of assets that should be applied to satisfy the
judgment; or (2) whether a third party is holding assets of
the judgment debtor that should be applied to satisfy the
judgement. Broaddus at *2 (citations omitted).
See also Pyshos v. Heart-Land Dev. Co., 258
Ill.App.3d 618, 623, 630 N.E.2d 1054, 1057 (1994).
26(b)(1) of the Federal Rules of Civil Procedure stakes out
the boundaries of discovery that is relevant and obtainable
in federal court consistent with the demands and needs of a
Parties may obtain discovery regarding any nonprivileged
matter that is relevant to any party's claim or defense
and proportional to the needs of the case, considering the
importance of the issues at stake in the action, the amount
in controversy, the parties' relative access to relevant
information, the parties' resources, the importance of
the discovery in resolving the issues, and whether the burden
or expense of the proposed discovery outweighs its likely
Court agrees with FNBO that its loan policies are irrelevant
to whether it is holding assets of Goeken Group that can be
used to satisfy Southport's judgment against Goeken
Group. Southport argues that the loan policies are relevant
because FNBO may have violated its own loan policies in
making the loan to Goeken Group, and that fact could help
Southport show that Goeken Group and Goeken Trust are alter
egos of each other and even potentially that FNBO knowingly
assisted Goeken Group in efforts to evade its creditors
including Southport. There are several problems with this
initial matter, Southport does not explain how FNBO's
loan policies can assist it in showing that Goeken Group and
Goeken Trust are alter egos of each other. FNBO's
witnesses testified that FNBO made the loan to Goeken Group
because it was fully secured by cash posted by Goeken Trust
and the individual guarantor [ECF No. 467-1, Conlin Dep.
Exhibit A, p. 73]. That makes sense. Southport argues that,
as structured, FNBO effectively made its loan to the Goeken
Trust, which posted cash collateral to secure the loan and
committed to certain other undertakings to FNBO, rather than
to Goeken Group. Southport makes this argument mostly in its
Reply Memorandum [ECF No. 470] so FNBO did not have a chance
to respond to it. But if that is what Southport wants to
show, FNBO's general loan policies are of only tangential
or remote benefit. The other information Southport has
developed so far in written and oral discovery obtained from
FNBO and others would seem to be sufficient at least to allow
it to make that argument. Any incremental benefit the loan
policies would lend to this effort is outweighed by, among
other things, the burden on FNBO, a nonparty to these
proceedings, in being forced to share its proprietary loan
policies with another bank. See Fed.R.Civ.P.
26(b)(1) ("Parties may obtain discovery [that is]
proportional to the needs of the case.").
fundamentally, however, even if Southport could show that
FNBO did not comply fully with its loan policies when it made
a loan that was 100%-secured by cash on deposit at the bank,
and that Southport somehow could use that fact as a building
block in an effort to show that Goeken Group and Goeken Trust
are alter egos of each other, discovery on this alter ego
theory is beyond the scope of permissible discovery in this
post-judgment proceeding. Pyshos, 630 N.E.2d at
1057-58 ("Quite simply, what must be alleged to pierce
the corporate veil does not fall within the scope of what may
be heard in supplementary proceedings [under 735 ILCS
5/2-1402]. This means that a party who has secured a judgment
against a corporation may not seek to pierce the corporate
veil in supplementary proceedings.") See also Star
Ins. Co. v. Risk Mklg. Grp. Inc., 561 F.3d 656, 660-61
(7th Cir. 2009) ("we have previously held
that Illinois courts likely would not 'permit
veil-piercing in supplementary proceedings under §
5/2-1402."') (citations omitted); Fish v.
Hennessy, No. 12-cv-1856, 2013 WL 5770512, at *1 (N.D.
Ill. Oct. 24, 2013) (same).
is another reason that Southport's request for FNBO's
loan policies is beyond the scope of discovery permitted in
this proceeding. Southport appears to be trying to use this
supplementary post-judgment proceeding - designed to locate a
judgment debtor's assets ~ to obtain discovery that it
might use in an independent action alleging that FNBO
conspired with Goeken Group to hide assets. If that is what
Southport really is trying to do, that would be an improper
use of the limited discovery available in this proceeding
under Federal Rules of Procedure 26(b)(1) and 69(a)(2).
Discovery permitted in this case must advance this
case on the merits. Discovery aimed at allowing
Southport to develop an independent claim against FNBO goes
beyond the bounds of discovery permitted by Rule 26(b)(1). In
particular, that Rule limits discovery to that which is
"relevant to any party's claim or defense" in
this case. Fed.R.Civ.P. 26(b)(1).
Court does not mean to say or imply that Southport's
potential claim against FNBO would have merit. The only point
is that Southport's allegation that FNBO made a sham loan
to aid Goeken Group in its alleged efforts to evade
creditors, and Southport's argument that it needs
FNBO's loan policies to support that allegation, seem to
be much more relevant to an independent, and as yet unfiled,
claim against FNBO than to the more narrow purpose for which
these post-judgment proceedings are designed as discussed
above. Permitting Southport to expand the scope of discovery
in this case into whether FNBO violated its own loan policies
in making a loan to Goeken Group therefore would not
"secure the just, speedy, and inexpensive
determination" of this case within the meaning of Rule 1
of the Federal Rules of Civil Procedure. Fed.R.Civ.P. 1. As
amended effective December 1, 2015, the Federal Rules of
Civil Procedure are to be "construed, administered, and