Free Opening Brief in Support - District Court of Delaware - Delaware

Case 1:04-cv—O1268—***—MPT Document 36-4 Filed O3/O2/2005 Page1 of 4
EXHIBIT C

Case 1:04-cv—O1268—***—MPT Document 36-4 Filed O3/O2/2005 Page 2 of 4
LEXSEE 2004 US DIST LEXIS 3 l56
IN RE: marcl1FiRST, INC., etal., Debtors. ANDREW J. MAXWELL, Trustee,
Plaintiff, vs. LIEA`VELAW.COM, INC., Defendant.
No. 03 C 4043
UNITED STATES DISTRICT COURT F OR THE NORTHERN DISTRICT OF
ILLINOIS, EASTERN DIVISION
2004 U.S. Dist. LEXIS 3156
February 27, 2004, Decided
March 1, 2004, Docketed
DISPOSITION: {*1] 'I`rustec's motion to dismiss the trustee’s motion to dismiss is granted [*2] and his
anted and his motion to alter or amend order denied as motion to alter or amend the order is denied as moot.
ST
moot.
BACKGROUND
LexisNexis{R) Headnotes The debtor, march.FlRST Inc. allegedly made a
payment in the amount of S [5,000 to the defendant in
January 2001, less than 90 days prior to filing at
COUNSEL: For ANDREW I MAXWELL, plaintifft bankruptcy petition on April 21, 2001. Maxwell, as
Steven Shaw Potts, Law Offices of Andrew J. Maxwell, uustee of the bankruptcy estate, tiled an adversary suit
Chicago, [L. David Henry McCarthy, III, Law Oflices of against defendant in an effort to recover the $ 15,000,
David H. McCarthy, III, Naperville. Il,. arguing that the payment was a preference and therefore
voidable under bankruptcy law.
For LEAVELAW.COM INC, defendant: Jeff P Thomas, D f d , .\ I , H th
MW Utica ¤**'==“"*`*=¤·m·S· CMU- Hr pn. IZiiiSQ°;ré“.ri.Z.§.$Z`§,“L?iT§Z.‘ii..“l$`rE;.€`..“ig°§.d fi
_ _ ,1 [E . organization known as Receivable Control Corporation
S H MORM Scmm Judgc' U` S` (RCC), developed a scheme whereby they would have an
` organization called Preference Recovcries (PR) seek to
: G] IE ` AN collect claims of the bankrupt from the defendant and
OPINIONBY J SB MOR other parties. in furtherance of this scheme, defendant
OPINION: claims that someone from PR sent two letters claiming
that the estate was entitled to the money and that an
MEMORANDUM OPINION AND ORDER agent of PR made a series of misleading representations
_ . to LL‘s chief executive officer. Specifically, defendant
Andrew}. Maxwell, the bankruptcy trustee, filed an Claims thm the PRI agent nssumd LL mm ml www
adversary complaint against defendant Ieaveiawcom, ,_ . _ , .
Ima (LL) in the Bankruptcy Cmnt for me Ncnhcn proéect 1.Ls interests Jelattng to the return of the
District of Illinois, seeking the return of an alleged pl? cum? pnymcnh { 3] {MI PR were pmwdc U"
with unbiased bankruptcy law interpretations; and that
preference payment made to the defendant. Defendant PR www WO k with uv [0 dat mma the V 1,d.i f
then tiled a thrce—count countencomplaint against the h HBH b ILM Ep Li E M EY O any
trustee and withdrew reference to the hanlouptcy court. C a gas y ` O CO cc on
The trustee now seeks to dismiss the counterclaims Defendant further alleges that the trustee
pursuant to Federal Rules of Civil Pr·ocedtrrr;· ]2(b)(1) misrepresented I..L's legal obligations and rights and that
and 12{b)(6) and to amend the order granting defendants he made material misrepresentations of fact. As a result
motion to withdraw reference. For the following reasons, of these "deceptive acts," defendant claims that it felt

Case 1.04-cv-01268-***-IVIPT Document 36-4 Filed O3/O2/2005 Page 3 of 4
Pa e 2
2004 US. Dist. LEXIS 3156, * E
"bnllled, intimidated, threatened, confused, frustrated, recover only from the trustee, rather than from the estate
worn out, defenseless and bleak." LL claims that this »— other debtors and creditors would not be affected.
caused it to shut down its website and forego numerous S T, I 367 . _ . . d. . .
valuable business opportunities, and that it suffered d. EL QOH ` .d gives ub no pim? llimin Over fills
swam economic damages as a msuih isputer lt provi es supplemental Juriscltctron over all
other claims that are so related to claims rn the action
DISCUSSION within such original jurisdiction that they form part of
. .... the same case or controversy under Article Ill of the
d We i?O_nDi lmvc. Sublgm mime? Junsdmmn Owl United States Constitution" See Rothman ir. Emory
efendants counterclatms. Defendant does not argue that Univem 123 F 3d 446 454 (ml Cir 1997) HC B the
we have original jurisdiction under 28 USC. § 1331 or . . 'I mt. " b 1; 1 t { ` fa d
§ 1332. No federal question is implicated by defendant Ongmu ac mn was y l C es ii C O {Gemini im a cgi:
. _ . . ,. preference for the benefit of the estate [*6] and its
and it does not argue that there is complete diversity or . ,_ . . .
. _ . creditors. Defendants claims have very little to do with
that the amount in controversy is greater than$ 75,000 the bankruptcy Of mmchFIRS,}. Instead they inmivc
Defendant also fails to demonstrate that we have alleged actions by thetrustee in late 2002 and early 2003,
jurisdiction from some other source. ln the counter- well over a year after the S 15,000 payment and the
complaint, defendant stated that we have jurisdiction bankruptcy declaration They are not part of the same
pursuant to 28 USC. §§ 1334 [*4} and H6?. Section controversy, which is a simple preference claim
I334 provides that district courts have jurisdiction over Defendanfs claims have no bearing on whether or not the
bankruptcy proceedings and states in relevant part: $ l5,000 payment was a preference Anti even if we were
in error about that, we would decline to exercise
Notwithstanding any Actof Congress that supplemental jurisdiction pursuant to section 1367(c),
confers exclusive jurisdiction on a court because defendants state law claims substantially
or courts other than the district courts, the predominate over the claim over which the court has
district courts shall have original but not jurisdiction.
cx°msw.c iunilimmn {if . an civil Even if we did have jurisdiction to resolve this
proceedings arising under title I1, or dis gc I . FH, f .1 t I . bl I . f
arising in or related to cases under title tl. Pu ’ P mil m S O S mc il wglllm B Palin Di
relief. ln deciding a Rule 12{b)(6) motion to dismiss we
. . must assume the truth of all well—pleadcd allegations,
tUj,§£B§ {Vis: ll;;;§;iigT"&:cwéi§£l&i;pig$ making all inferences in the plaintiffs favor. Sidney S.
dispute Ans: Co. v. Pipefitrers WEUBFB Educ. Fund, 25 F..3d 417,
‘ 420 (7th Cir. 1994). The court should dismiss a claim
The counterclaims clearly do not arise under Title only if` it appears "beyond doubt that the plaintiff can
I1. In order for such jurisdiction to apply, the cause of prove no set of facts in support of his claim which would
action must he created by bankruptcy law. In re entitle him to [*7] relief." Conley v. Gibson, 3.5.5 US
Sprzrrlaling & Co., I3} B.R.. 84, 88 (ND. Ill, 1990). On 41, 45-46, 2 L Ed. 2d BO, 78 S. Cr. 99 {1957}. While the
their face, defenda.nt's claims rely on causes of action complaint does not need to provide the correct legal
created by illinois statutory and common law. theory to withstand a Rule 12(bJ(6) motion, it must
nsw., t.rt..i....t nr. .0 .a.nn. t..a_ at gfl@$2;*;;§,;f;;§_;é=;;;*SF#gg,¤;p_;7 jg;tg;,;§;§¥*»¤;;gf;jj
°"“"‘?'°i‘*"?"’.“’° ‘“"‘¥"d ‘° ”‘° b“‘E‘i““*"°l l""°°°°d‘"g‘ een. matter, rxr us. 1047, ss 1, sa 2d 574, 106 s. cr.
Such jurisdiction applies only to disputes that affect the 1265 (*,986}
payments to the banicrupt's other creditors or the `
administration of the estate. Matter of Kubly, BIB F .2d Defendant alleges violation ofthe Iliinois Collection
643, 645 (71lz Cir. l987), [*5] Merc overlap between the Agency Act {ICAA), 22.5 ILCS 42.5/J et seq., the Illinois
banlcrupfs affairs and adispute is insufiicient to establish Consumer Fraud and Deceptive Trade Practices Act
jurisdiction. Home Ins. Co. v. Cooper di Cooper, Ltd., (EFDTPA), 815 ILCS 505/1 et req. and common law
889 F.2d 746, 749 (7rlr Cir. 1989ln Defendants fraud. Defendant fails to allege any connection between
counterclairns do not implicate the bankruptcy estate in the trustee's actions and the alleged damages. lt admits
any way. Defendant admitted as much in arguing in that the$ 15,000 was never paid to the estate, but claims
support oil the motion to withdraw reference. At best, that the alleged damages occurred when defendant shut
both disputes involve the$ 15,000 paid by rnarchFlRST down its website, became distracted and passed up
to defendant, but the claims at issue here involve only numerous business opportunities. There is no apparent
alleged wrongdoing by Maxwell, the trustee. lfdcicndant connection between these losses and any of the
prevailed on the counlerclaims, it would be able to rnisrepresentations or deceptive acts alleged by the
defendant. Even taking all of del`endant's allegations as

Case 1:04-cv—O1268—***—MPT Document 36-4 Filed O3/O2/2005 Page 4 of 4
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ZODA U S Dist. LEXES 3156, *
true, the trustees contact with the defenclant involved word "personally" in the order, we simply wanted to
two letters and xr few phone callsduring [*8} which the make clear that the counterciairns were not hrought
trustee demanded payment of the $ 15,000, promised to against the bankruptcy estate, but rather against
protected defendants interests and yet failed to do so, Maxwell, the trustee. We did not intend to indicate that
essentially misleading defendant as to its financial Maxwell would be subject to personal liability, separate
obligations There is no indication that these statements from his duties as trustee. in any case, as the
actually induced any reliance (or how they could have counterclairns are dismissed, that motion is moot nt
done so), or otherwise caused any damage to defendant.
In tact, defendants assertions show that the trustee failed
in his only stated goal: recovering the money. All of the nl in the Memorandum and Order of
actions taken by defendant that ultimately lcd to the loss September 19, 2003, withdrawing the reference,
of business opportunities, appear to have been entirely we inadvertently omitted the word "not" after the
voluntary word "has" in the first line of the second full
oeremtam is r commercial maplin, not amt are address dd Pdds 2 it tt dtddddrd dt tddddd tr-
and vulnerable consumer. It was asked to refund some
money, thus placing it in an adversarial relationship with CONCLUSION
those requesting the funds. How, in those circumstances, F the { S D_ Bas the t uma, t_ t
it could become an emotional basket case or could think d, ,0T, m 5 mg (ms} Lt S mu I? hg
the requestor became its agent and personal advisor is igmjsls és gmgm dd IS tdsddd [O tds OF amcn t E
not explained, nor can any explanation be conjectured. dt cf is °m° as mom
The trustee also seeks to amend the September l9, JAMES B` MORAN
2003, Memorandum Opinion and Order granting Senior Judge, US. DistrictCourt
defendants motion to withdraw reference to the
bankruptcy court Specifically, he seeks to delete the Feb. 27, 2004.
word "personally" hom the {*9} order. When using the