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FirstMerit Bank, N.A. v. The Kloysner Group, LLC

United States District Court, N.D. Illinois

November 6, 2017

FIRSTMERIT BANK, N.A., Plaintiff,
v.
THE KLOYSNER GROUP, LLC, BETSY BARBIER, ALLEN BARBIER, YMS VENTURES INTERNATIONAL, INC., AND LEONID GOLDFARB, Defendants.

          MEMORANDUM OPINION AND ORDER

          SHARON JOHNSON COLEMAN United States District Court Judge.

         Plaintiff FirstMerit Bank, N.A. (“FirstMerit”), as assignee of the Federal Deposit Insurance Company and receiver for Midwest Bank and Trust Company (“Midwest”), brings this suit against The Kloysner Group, LLC, (“Kloysner”), Betsy Barbier and Allen Barbier (“Barbier Defendants”), YMS Ventures International, Inc. (“YMS”), and Leonid Goldfarb (“Goldfarb”) alleging that Defendants violated various sections of the Illinois Uniform Fraudulent Transfer Act (“IUFTA”). Defendants now move this Court to dismiss the Amended Complaint for lack of subject-matter jurisdiction and failure to state a claim, pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). For the reasons set forth below, this Court denies Defendants' Motion to Dismiss [25].

         Background

         The following allegations from the Amended Complaint are taken as true for the purpose of ruling on the present motion. On September 12, 2007, Potomac Property Management, LLC (“Potomac”) borrowed $1.1 million from Midwest to purchase two parcels of real estate. The same day, Dalila Feldman (“Feldman”) executed a commercial guaranty backing Potomac's debt. Goldfarb also personally guaranteed Potomac's debt; however, on November 30, 2010, he was declared bankrupt and his liability was discharged.

         In May of 2011, Potomac failed to repay its debt and defaulted on the loan. Feldman did not fulfill her obligation to repay Potomac's debt. The next month, FirstMerit-successor in interest to Midwest-filed a complaint in the Circuit Court of Cook County Illinois seeking to foreclose on Potomac's properties and suing Feldman for breach of her guaranty. The proceedings terminated on July 23, 2014 with the state court ordering a foreclosure of sale on Potomac's properties and entering a deficiency judgment against Feldman for $631, 235.43.

         Feldman was the sole owner and employee of Reliable Medical Supply, Inc. (“Reliable”), an Illinois corporation that delivered medical supplies to patients. Although Reliable had stopped conducting legitimate business in early 2012, it still retained large amounts of liquid assets and had no creditors. In an effort to discover Reliable's assets and recover the money owed by Feldman, FirstMerit served Reliable in State Court on February 9, 2015. Since Reliable did not respond or appear, the court issued a final judgment against the company for the amount of Feldman's debt, $614, 657.38.

         Shortly after FirstMerit sued Feldman, in April of 2012, she formed The Kloysner Group with the Barbier Defendants. During Feldman's examination for the state court case, she provided no meaningful testimony about the formation or purpose of Kloysner other than stating that money was put into the company. Kloysner's address was a residence where Feldman was primary owner and shared ten percent interest her daughters. It was never registered to do business in the state of Illinois, nor did it have any employees. Kloysner also did not observe any corporate formalities after its formation.

         Soon after creating Kloysner, Feldman transferred a total of $484, 000 of Reliable's assets to the new company without any consideration, and thereby diminished the value of Feldman's interest in Reliable. All of the assets held by Kloysner originated with Feldman or Reliable.

         On July 26, 2012, while under the control of Feldman, Kloysner transferred $150, 000 to Maple Properties Development, Goldfarb's company, to purchase the Maple Ave Property in Northbrook, Illinois. Maple Properties Development then transferred the Maple Avenue Property by warranty deed to Kloysner.

         On August 21, 2012, Kloysner transferred another $150, 000 to Maple Properties Development for the Maple Avenue Property, and two months later, Kloysner transferred the Maple Avenue Property, without receiving any consideration, to Feldman and the Barbier Defendants as joint tenants by quitclaim deed. Kloysner then paid $48, 961.06 to third parties in order to develop and improve the Maple Avenue Property for the benefit of the Barbier Defendants, who remain in sole possession and control of it. Again, Kloysner did not receive any consideration for these money transfers and Feldman received no economic benefit from her interest in the Maple Avenue Property.

         Feldman also used Kloysner assets to pay her personal expenses. Feldman withdrew $64, 000 on August 21, 2012 and $20, 000 on July 29, 2014 from Kloysner without giving any consideration for the transfer. Additionally, she paid her close, personal friend George Averbuch $7, 500 from Reliable's assets on August 12, 2014.

         Finally, on June 5, 2015, in spite of the state court's order permitting FirstMerit to collect Potomac's debt from Reliable, Feldman, through Reliable, transferred $234, 500 to YMS (the “YMS Transfer”). Goldfarb owns YMS with his wife, who is Feldman's daughter.

         The value purportedly provided to Reliable by YMS was the transfer of uncollectable debt obligations that had little to no value at the time they were exchanged because the debtors were all likely insolvent (“worthless obligations”). Neither Feldman nor Reliable made any attempt to collect on the worthless obligations.

         Legal ...


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