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Zausa v. Pellin

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

May 26, 2017

TERRI ZAUSA, Plaintiff,


          AMY J. ST. EVE United States District Court Judge.

         Plaintiff Terri Zausa brought the present Complaint against Defendant Michael Pellin to enforce a purchase agreement and collect a debt as a judgement creditor. Defendant has moved to dismiss Plaintiff's Complaint pursuant to Federal Rules of Civil Procedure 12(b)(1), 12(b)(5), and 12(b)(6). For the following reasons, the Court grants Defendant's motion.


         Although Plaintiff's Complaint contains little factual detail, the Court has deduced from the exhibits attached to the Complaint that this case arises from the dissolution of a business relationship between Jack Zausa (“Zausa”) and Defendant, and Defendant's subsequent failure to pay all his debts to Zausa or to Plaintiff, Zausa's successor in interest.

         Defendant and Zausa were co-owners of United Rail Service, Inc. (“URS”), a corporation and business located at 1150 E. 145th Street, East Chicago, IN 46312. (R. 1, Compl., Ex. A, Purchase Agreement 5.) On March 31, 1990, Zausa divested all his equity and stock in URS, and pursuant to a Purchase Agreement, Pellin acquired all of Zausa's interest in URS for $1.8 million, payable to Zausa in monthly installments of $5, 000 over a 30-year period. (Id. 3.) On December 23, 2004, Zausa and Defendant executed a mutual release (the “Release”) of “all actions, claims, demands, damages, obligations, liabilities, controversies, and executions . . . whether known or unknown” arising from the 1990 Purchase Agreement and any failures to perform on that agreement. (R. 1, Compl., Ex. B, Release 1.) According to Plaintiff, Defendant executed the release for “tax purpose[s] only” and acknowledged at the time that he still owed money under the Purchase Agreement and that “he was in default when he agreed to the release.” (Compl. ¶ 4.) The Release does not include any restrictions or state that it was for “tax purposes” only. Plaintiff alleges that Defendant “remained personally liable” and continued to make payments pursuant to the Purchase Agreement until November 15, 2010. (Id.; Compl., Ex. C, Check Statements.)[1]

         On September 9, 2009, a Cook County court entered a judgment by confession against Zausa in favor of Plaintiff in the amount of $1, 885, 358. (Compl. ¶ 2; Ex. D, Turn-Over Order.) Plaintiff has not attached the underlying judgment by confession to her Complaint, and has instead attached a subsequent “Turn-Over Order, ” which a Cook County court issued in response to Plaintiff's citation to discover Zausa's assets. (Id.) In the Turn-Over Order, the court directed Zausa to give to Plaintiff the following property: (1) 8, 300 shares of common stack of New City Bank Corp., which had been pledged as collateral at Devon Bank and was held by Devon Bank; (2) all common stock in Zausa Development; and (3) Zausa's interest in a residence at 8365 Fars Cove, Burr Ridge, Illinois, which was subject to a $2.05 million mortgage. (Id. 1-2.) The Cook County court then dismissed the underlying citation and retained “jurisdiction of this matter to enforce said order.” (Id. 2.)

         Plaintiff, as Zausa's judgment creditor, now seeks to enforce the Purchase Agreement and claim the alleged $1, 044, 000 that Defendant still owes Zausa under the agreement. (Compl. ¶ 2.) Plaintiff alleges the Purchase Agreement “implies” that the parties are to cooperate in arbitration, but Defendant has refused to settle or arbitrate this dispute. (Id. ¶ 5.) Plaintiff claims, however, that arbitration does not apply to Plaintiff in this action and seeks to collect a debt owed to a judgment debtor under 735 ILCS 5/2-1402(c)(6) and to enforce paragraph 7 of the Purchase Agreement to purchase the business and real property at 1150 E 145th Street, East Chicago, IN. (Id. ¶¶ 6-7.)


         I. 12(b)(1)

         Article III of the Constitution limits federal judicial power to certain “cases” and “controversies, ” and the “irreducible constitutional minimum” of standing contains three elements. Lujan v. Defs. of Wildlife, 504 U.S. 555, 559-60 (1992) (internal citations and quotations marks omitted). “To establish Article III standing, ‘a plaintiff must show (1) it has suffered an ‘injury in fact' that is (a) concrete and particularized and (b) actual or imminent, not conjectural or hypothetical; (2) the injury is fairly traceable to the challenged action of the defendant; and (3) it is likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision.'” Silha v. ACT, Inc., 807 F.3d 169, 173 (7th Cir. 2015) (citations and quotations omitted); see also Berger v. Nat'l Collegiate Athletic Ass'n, 843 F.3d 285, 289 (7th Cir. 2016). The “[p]laintiff bears the burden of establishing the elements of Article III standing.” Id. (citing Lujan, 504 U.S. at 561). A facial challenge to subject matter jurisdiction contends that the plaintiffs' complaint lacks sufficient factual allegations to establish standing. Silha, 807 F.3d at 173. “In reviewing a facial challenge, the court must accept all well-pleaded factual allegations as true and draw all reasonable inferences in favor of the plaintiff.” Id.

         II. 12(b)(5)

         Under Rule 12(b)(5), a defendant may move to dismiss a complaint based on insufficient process. See Cardenas v. City of Chi., 646 F.3d 1001, 1005 (7th Cir. 2011). Once a plaintiff files a lawsuit in federal court, the plaintiff must ensure that each defendant receives a summons and a copy of the complaint. Fed.R.Civ.P. 4(b), (c)(1). A plaintiff can serve a summons by (1) completing service pursuant to the laws of the state in which the district court is located; (2) delivering a copy of the summons and complaint to the defendant individually; (3) leaving a copy of the summons and complaint at the defendant's dwelling with a person of suitable age who resides there; or (4) delivering a copy of the summons and complaint to an agent authorized by appointment or by law to receive service of process. Fed.R.Civ.P. 4(e). Illinois law requires that plaintiffs serve summons upon individual defendants by either leaving a copy of the summons with the defendant personally or both leaving a copy at the defendant's usual abode with a person of suitable age who resides there and sending a copy to the defendant at his usual place of abode. 735 ILCS 5/2-203(a).

         Unless the plaintiff can demonstrate good cause for being unable to do so, he must accomplish this service of process within 120 days of filing to avoid possible dismissal of the suit. Fed.R.Civ.P. 4(m). These service requirements serve several purposes: they “provide notice to parties, encourage parties and their counsel to diligently pursue their cases, and trigger a district court's ability to exercise jurisdiction over a defendant.” Cardenas, 646 F.3d at 1004-05 (citations omitted). “A defendant may enforce the service of process requirements through a pretrial motion to dismiss, ” at which point, the plaintiff “bears the burden to demonstrate that the district court has jurisdiction over each defendant through effective service.” Id. (citations omitted). The Court's decision on a Rule 12(b)(5) motion is “inherently discretionary.” Cardenas, 646 F.3d at 1005 (citations omitted).

         If an extension request is made under Rule 4(m), “a district court must first inquire whether a plaintiff has established good cause for failing to effect timely service.” Panaras v. Liquid Carbonic Indus. Corp., 94 F.3d 338, 340 (7th Cir. 1996). “If good cause is shown, the court shall extend the time for service for an appropriate period.” Id. “If, however, good cause does not exist, the court may, in its discretion, either dismiss the action without prejudice or direct that service be effected within a specified time.” Id. If the Court determines that the plaintiff lacks ...

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