## In the



# U n ited S ta tes Co urt o f Ap p ea ls

F o rth eS e v e n th C ir cu it

N o. 11

- 2108 I NDEPENDENT T RUS T C ORPO RA T I ON, a n I l l i no i s c o r po r a t i o n no w i n r e c e i v e r s hi p, Plai nt i f f

-Appe l l ant, v.
S TEWART I NF OR MAT I ON S ERV ICES C ORPO RA T I ON, etal. , D efend a nts-A pp ellees.
Appeal from the United States District Court fo r the N o rthernDi stricto f Illino is, Eas tern Div isi on. No . 1:10- cv-04430

—Jo hn W. Darrah, Judg e.
A RG UE D S EP TE MBE R 27, 2011

— D ECI DE D J AN UA RY 6, 2012

Befo re F LA UM, K ANN E , a nd H A MI L T ON, C ircu it Judges. H A MI L T ON, C ircu it Judge. T h i s a p p e a l a r i s e s fr o m a s e r i e s o fb u s i ne s s d e a l i n g s th a te n d e d i n 1 9 9 5
. We co nc l ude tha t th e di st rictc o ur t pr o per l y di smi ss ed th e co m pl ainta s ba r r ed bythe s ta tu te o fl i m i ta ti o ns . The Illino is d oc tr in e o fa d ve rs e d om in at ion d oe s n otap p ly to the clai m s against the d e fend an ts he re and therefore did notto l l the sta tute ofl i m i tat i ons.2 N o. 11

- 2108 I n the 1980 s a nd 19 90s, Interco u n ty Tit l e Insurance Co. ofI l l i n ois w as i n the busi ness ofi ssui ng ti tl e insurance pol i ci es and provi ding re ales tat e cl osing se rv i ces. Fr om 1984 thr ough 1 995, i t s er ved as the e xcl usi ve Ch i cago area age nt f ordefendants S tewart I nfo rm ati on S er vi ces Cor po r at i o n, S te war t Ti tl e Guar an tyCo m pan y, a nd S t e w a r t T it le C o m p a n y (col lectively, “Stew art”). I nt ercou nt y even t u a lly grew to becom e Stew art’s l ar ges t ind ependent age nt. A s par t o f its busi ness, I nter county cre ate d and m anage d an esc ro w acc ount. Stew ar t co ntra ctual l y a gr eed to i nsure the e scr ow fund s that Inter county m anage d as S tewart’ s a gent. Bu t Inter county w as not profi tabl e. The co m p an y was run a nd c o nt r o l l e d b y La ur e nc e Ca pr i o t t i a nd J ack Ha r g r o v e , wh o de c i de d t o i nv e s tthe r e a l e s t a t e es cro w funds wi thwhi chInt er co unty was e nt r us te d i n v ar io us in ve st m en t s c h em es . W h ile w ait in g for th e pa yo ff on th eir “i nvest m ents”

— w e use the ter m l oo sel y

— Ca pr i o tt i a nd H a r g ro ve u se d inc om in g e sc ro w fu n d s t o p ay off old es c r o w ob l i g a t i o n s . In o th e r wo r d s , th e y r a n t he I nter county escr ow account a s a Ponzische m e. Theiri nvest m ents f ai l ed. By the end of 198 9, ther e was a $ 2 6 mi l l i o n s ho r t f a l l i n the I nt e r c o un t y e s c r o w account. W hen St ew art learned ofthe shor tf al l, i t pr essure d Int e r c o un t y t o b r i ngthe a c c o un ti nt o b a l a nce. St ew ar t a l so al l owed Inter county to fi re i ts audito rs . Capr i o tt i a nd H ar g r o ve wer e al so di r ec to r s o fthe pla i nti ffi n thi s ca se, Ind ependent Trust Corpor ati on ( known her e a s “ I nTrust”)

. InTrust was the tr ustee f or near l y 20,0 00 tr ust a ccounts, pri m ar i l y ind i vi du alr eti re -N o. 11

- 2108 3

m en t ac co unt s, c o l l ec ti ve l y v alue d a t o ve r $ 1 bi l l i o n. To fi l l the hol e in the I nter county escr ow account, Capri ott i and H ar gr ove beg an l oo tin g InTrust. They t ra nsfer re d tens ofm i l l i ons ofdol l ar s in I nTrust account ho l der funds t o Int e r c o un t y, wh i c h us e d the t r a ns fe r r e d fun ds to pay am ounts owed fro m i ts escr ow account. So m e o f th i s m o ne y wentt o pa y S tew art po l i cy ho l der s, a nd som e o fi t went to pay St ew ar t di re ctl y. Stew art the refore w as a d irect and i nd irect ben efi ciary ofthe I nter county/I nTrust a rr angem ent. I fIntercoun ty had not be en abl e t o m ake i ts escr ow p aym ents, S tewart, as the i n su re r of the es cro w fund s, would have had to co ve r the l o ss es . Butb etwee n De ce m be r 1 990 a nd the en d o f1 99 5, whenInt er cou nt y t er m i na te d i ts r el at i o nsh i p wi thS te war t, $ 40
. 9 m i l l i o n o fInTr us t acc o unt hol der fund s had be en tr ansfer red to the Inter county escr ow account t o cove r St ew ar t’ s in su re ds. A s m uch as $27 m i l l i on o fIn Trust acco unt-ho l der fund s were tr ansferre d dir ectly t o St ew ar t o r to thi rd part i es f or St ew ar t’ s be nefi t. The I l l i n o i s C o mmi s s i o n e r o fth e O ffi c e o fB a n k s a nd RealEstat e ( “OB RE ”) beg an i nvest i gat i ng InTrust’ s r el atio nshi p w i th Inter county i n 199 4, but i t was notun til F e b r u a r y 2 0 0 0 th a tth e O B R E l e a r n e d th a tth e fun ds In T ru st h ad tra n sfe rre d to Int er c ou n ty w er e m iss in g. A f e w mo nths a ft e r tha t, o n Apr i l 1 4 , 2 0 0 0 , the OB RE t o ok c o nt r o l o fI nT r us ta nd p l a c e d i ti n r e c e i v e r s hi p. Pricew aterh ou seC oop ers L L P w as ap p ointed receiver, and on behal fo fInTrust, pursued ci vi l sui ts aga i nst Cap ri ott i, H ar gr ove , Inter county, and I TI Enter pri ses , Inc.4 N o. 11

- 2108

C a p r i o t t i a n d H a r g r o v e w e r e a l s o i n d i c t e d o n fe d e r a l c r i m- 1 inal charges

. Cap ri ott i pled gu il ty i n J une 2005, ad m it ti ng that he an d H ar gr ov e ha d par t i c i pat ed i n a s c he m e t o de f ra ud InTrust. H arg ro v e w ent to t ri al and w as convict ed on ten c ount s ofthe i ndi c t m en t, whi c h i nc l uded a l l eg at i ons thathe ha d p articip ated in a sch em e to d efrau d InT ru st. ( anothe r Cap ri ott i and H ar gr ove co m pany)

. The Recei ver o bt aine d judgment s ag ains t th es e defen dan ts i n the am ount o f$6 8 m i l l i on. The j ud gm ent a gainst Hargr ove w as ove rturned on a pp eal, but the R ec eive r set tl ed i ts cl ai m s ag ains t H ar g r o ve f o r $ 50 mil l i o n. 1 Th i s b a c k g r o un d b r i ng s u s t o thi s c a s e , a nd this a ppea l

. On J ul y 1 5, 2 01 0, the R ece i ve r fi l ed a fi ve - co unt c o mp l a i n ta g a i n s tS t e wa r to n b e h a l fo fIn T r u s t
. I t s c l a i ms i nc l ude d m o ne y had and r ec ei ve d ( Cou ntI ) , unj us t en r i ch

m en t (Cou nt I I ), vicari ou s li abili ty for I nt erco u n t y ’s tor ti ous c onduct ( Count I I I ) , aid i ng and abe tting br each of fidu ciary d u ty (Cou nt I V ), and cons p iracy ( C ou nt V). St ew ar t m ov ed to d ism iss for fa ilu re to st at e a cla im u n d e r R u l e 1 2 ( b ) ( 6 ) , a r g u i n gth a tth e R e c e i v e r ’ s c l a i ms w er e ba rr ed by the a pp l ica b le s tatute o fl i m i tat i ons. The Recei ver reli ed on the doctr i ne o fadver se dom i nati o n t o a r g ue tha t the s t a t ut e o f l i mi t a t i o ns wa s t o l l ed at all tim es be for e A p ril 20 00 . U n d er Il lin o i s la w , th is d oct rine i s defi ned as “ an equi tabl e doct rine thatto l ls the sta tute of l i m i tat i ons f or cl ai m s by a c or p orati on aga i nst i ts offi cer s a nd di re cto rs w hi l e the co rpor ati on is c on tr o lled by th os e w ro n gd oin g off ice rs or d ire c to rs .” Lea se R e sol utio n C o rp. v. La rney, 719 N .E .2d 16 5, 17 0 (Ill. A pp . 19 99)

. The doctr i n e also appli es to cl ai m s a gainst othe r parti es w ho a re co - conspi ra tor s o fthe w ro ng-N o. 11

- 2108 5

Because we a ffir m the dist ri ctcourt on the s tatute ofl im it a- 2 tion s, w e ne ed no t d iscuss S tew art’s arg u m en ts on the m erits ofthe Rec ei v er’s claim s . St ewar tBr. 43

- 49
. W e al s o do not a d d r e ss S t e w a r t ’s a r g u m e n t i n a fo o tn o t e th a tth e R e c e i v e r ’s alleg atio n s fa il to estab lish for p u rp oses o f the Illinois a d v e r se d o m i n a t i o n d o c t r i n e th a ta m ajo r i t y o f I n T r u st ’s b oa rd m em b ers w ere w ro ng d oe rs. doi ng dire cto rs . S ee id

. at17 2. The di str i ct c ourtgr anted S t e w a r t ’ s m o t i o n a n d d i s m i s s e d th e R e c e i v e r ’ s c l a i ms on the st atute o fl i m i tat i ons d efe n se. The Recei ver m oved to al ter or am en d the j ud gm en t u n d e r Ru le 59(e) , an d the di st r i ctc o ur t den i ed i ts mot i o n. The Recei verappeal s. On the m er i ts, i t a rgu es fi rs t that the di strict c ou rter re d by ho l ding that the a dvers e d om inati o n d octrine d oes not ap p ly to non -cons p irators o fwro ng do i ngdi r ec to r s, a nd s ec o nd tha t ev eni fthe d istri ct cou rt’s holding i s corr e c t, t he com p lai nt sufficie n tly alleg es t h a t Ste w ar t w as a c o-c on sp ira to r in Capr i o tt i ’ s an d Har g r o ve ’ s l o o tingo fInTr us t. The R eceiver also argu e s tha t, in ruling on Stew art’s m otion to di sm i ss, the dist ri ct c ourti m proper l y t oo k j ud i ci alnot i ce o fadj ud i cati ve f acts and er re d by g r an tingthe mot i o n t o di smi ss wi thpr ej udi ce wi th o ut fi r s tp e r mi t t i n gth e R e c e i v e r t o fi l e a n a me n d e d c o mp l a i n t
. We a ffi r m. 2

I. Stan da rd o

f R eview W e r e v i e w de no v o a di s t r i c t c o ur t ’ s o r de r g r a nt i nga Rule 12(b) ( 6) m oti on t o dism iss base d on the sta tute of6 N o. 11

- 2108 l i m i tat i ons. S ee M i ddl e t on v. Ci ty of Chi cago , 57 8 F
. 3d 655, 657 ( 7th Ci r. 20 09). In doi ng so , we tak e “ al l well

- ple aded alle ga tio n s o f t h e c om p lain t a s t ru e a n d vie w [ ] th em in the l i ght m ostf avo rabl e t o the pl ain tiff.” San t i ago v. Walls , 5 9 9 F
. 3 d 74 9 , 7 5 6 ( 7 th C i r . 2 0 1 0 )

. T o s a t i s fy t he n ot ice -p lea d in g s ta n d ar d of t h e Fe d er al R u les of C ivil Pr o ce du re, a c o m pl aintmustpr o vi de a “s ho r t an d p lain st at em en t o f th e c laim sh ow in g t h at th e p l e a d e r is enti tl ed to r el i ef

. ” F ed. R. Ci v. P . 8 (a)( 2)

. In other w or ds, the p l a i nt i ff’ s c o mpl a i ntmus tb e s uffi c i e ntt o p r o v i de th e d efe n d an t w ith “fa ir n ot i c e ” o f th e p lain tiff’s cla im an d its ba sis
. Er i c ks o n v . Pa r dus , 551 U

. S. 89, 93 (2007), qu o t i ng B el l Atlanti c Corp. v. Tw om bly, 55 0 U.S

. 54 4, 55 5 (2007). The Su p r e me C o u r ta l s o i n s t r u c t s u s t o e x a mi ne w h et h er th e alleg at ion s in th e com p lain t st a t e a “p lau sib le” c la i m fo r r elie f. Ash crof tv. Iq b al , 55 6 U.S

. 66 2, 12 9 S. Ct. 19 37, 19 49 (2 00 9). To sur vi ve a m oti on t o dism i ss, th e com p lai nt“m us t con tain su ffic ien t factu al m atter, ac c ep te d as tru e, to ‘st at e a cla im to relie ft h at is pla us ib l e o n i t s f a c e ’

. . . . A c l a i m ha s f a c i a l p l a usi bi l i ty wh e n th e p l a i n t i ffp l e a d s f a c t u a l c o n te nt th a ta l l o ws the c ourtto d ra w the re aso nabl e infe re nce that the defendant i s l i abl e forthe m isc on d uct al l ege d.” Id

. , quo ting Tw om bly, 550 U .S. at 5 70 . Th e c om p lain t “ m u st ac tu ally suggestthatthe pla i nti ffhas a r i ght to re l i ef, by provi ding al l ega ti ons that ra i se a r i ght t o re li efabo ve the specul ati ve l eve l

. ” Wind y C ityM etal Fa brica to rs & Su pp ly, Inc . v. CITTech no lo gy F i n a n cin g S ervic es , 53 6 F

. 3d 66 3, 6 68 ( 7th Ci r . 2 00 8) ( emphas i s i n o rigina l ) , quo ting Tam ayo v. Blag ojevi ch , 5 26 F
. 3d 10 74, 1 08 4 ( 7th Ci r . 2 008).N o. 11

- 2108 7 B u t a p lain tiff’s cla im n ee d n o t be p ro b ab le, on ly pla usibl e: “a well

- ple aded com pla i nt m ay proceed eve n i fi t s tr i kes a savv y j ud ge that actua l p ro ofo ftho se f acts i s i m pr o babl e, a nd tha t a r ec o ve r y i s very r emot e an d u n l i kel y. ” Tw om bly, 5 5 0 U. S

. a t5 5 6 ( i nt e r na l quo t a ti on o mi t t e d )

. T o me e tth i s p l a us ib i l i t y s t a n d a r d , th e c o mp lain t m u st su p p ly “ en ou gh fac t t o ra ise a re as on ab le e xp e c t a t i o n tha tdi s c o v e r y wi l l r e v e a l e v i de nc e ” s up p or tin g t h e p lain tiff’s alleg at ion s. Id

. He r e , th e d i s t r i c tc o u r td i s mi s s e d th e R e c e i v e r ’ s c l a i ms upo n fi n d i n gth a tth e a p p l i c ab l e s t a t u t e o fl i mi t a t i o ns had run. A st atute o fl i m i tat i ons provi d es a n affi rm ativ e d efense, and a pl ai nti ffi s no t r equi re d to ple ad f acts i n the com pla i nt to anti ci pate a nd defeataffi rm ati ve defe nses. But w hen a pla i nti ff’ s co m pla i nt nonethel ess set s o ut al l o fthe el em ents ofan a ffirm ativ e defense, dism i ssa l under Rul e 1 2( b) (6) is appropr i ate
. S ee Brooks v. R o ss , 5 78 F
. 3d 574, 5 79 ( 7th Ci r . 2 00 9)

. W he n r ev i ewing a Rul e 12(b)(6 ) di smi ss alo fs ta te l aw c l ai m s ba se d o n a st atut e o fl i m i ta ti o ns , w e appl y s ta te l aw r eg ar di ngthe sta tute ofl i m i tat i ons a n d “ an y r ule s that a re an integr al par t o fthe s ta tu te o fl i m i ta ti o ns , s ucha s tol li ng a nd equi tabl e e sto pp el

. ” P a rish v . City of E lkha rt, 61 4 F
. 3d 677, 679 (7th C ir. 2010).

II. Adve rs eD om i nat i on D oc t r i neun de rIl l i nois La w The pa r ti es do no t conte stthe di st r i ctc o ur t’ s fi ndi ng that the a cts gi vi ng r i se to the Rec ei ver ’ s cl ai m s o ccurr ed no l ate r than A u gu st 1996. U nd erI l l i noi s l aw , a fi veyea r sta tute ofl i m i tat i ons gov er ns the Recei ver ’ s cl ai m s.8 N o. 11

- 2108 735 I LC S 5/ 13- 205. Thus, t h e s tatute o fl i m i tat i ons on the Rec ei ver ’ s cl ai m s r an, atthe l ate st, i n A ugust 2 001. The parti es si gn ed a tol l i ng ag re em ent o n Octobe r 12, 20 01. T he que st i o n i s whethe r the t o l l i nga g r ee m en t cam e t oo l ate to sa ve the Rec ei ver ’ s cl ai m s. On A pr il 1 4, 2000 , the OB RE to ok contr olo fInTrust and place d i t in re cei ver ship . Pri orto A pri l 14, 20 00, Cap ri ott i and H ar gr ove co ntro l l ed I nTrust, and the Recei verar gues that the s tatute o fl i m i tat i ons w as tol led unt i l tha t dat e bythe do ct r i ne o fa dve r se do m i na tion, w hi ch “to l l s the st atute o fl i m i tat i ons f orcl ai m s by a co r po r at i o n a g ains t i ts o ffi ce r s an d di r ec to r s w hile the corp oration is controlled by th ose w rongd oing officers or di r ectors .” La rney, 719 N .E .2d at17 0. T h e d oc tr in e is ane xt en si o n o fthe I l l i no i s di sc o ve r y r ul e, whi cht o l l s th e st at u t e o fl im ita tio n s u n til a p lain tiff k n ow s o r sh ou ld know that he has bee n inj u red and thathi s inj ury w as w ro ngful. Because a pl ai nti ff

- cor pora ti on ca n l ear n that it ha s be en i nj ured o nl y thro ugh the knowle dge o fi ts ag en ts , i fthe a g en ts ’ i nt er es ts a r e adv er se t o the co r po r at i o n, the a g en ts ’ kno wl edg e i s no t i m put ed to the c or p or at ion . “T h e ra tio n ale be h i n d t h is d oc tr in e is

‘ th a tc o n t r o l o fth e b o a r d b y wr o n g d o e r s p r e c l u d e s the possibi l i ty f orfi l i ng sui t s i nce these i nd i vi du al s ca nn ot be e xpe ct ed to s ue the m se l ve s o r i ni ti at e ac ti o n c o nt r ar y to thei r own i nter est s. ’ ” La rney, 71 9 N
. E.2 d at 1 70, quoti ng Fe de r al D epos i tIns uranc e C o rp. v. Gr e e nwood, 73 9 F. S up p. 45 0, 45 3 ( C.D. I l l

. 19 89)

. The ke y t o th is c ase i s tha t, i n I l l i no i s , the do c t r i ne a pp l i e s t o c a us e s o fa c t i on aga i nst the wrongdoi ng d ire cto rs , but al so to causes of a c tio n ag ain st co -c on sp ira to rs of th e w r o n gd oe rs . Id

.N o. 11

- 2108 9
at 172. H er e, the dist ri ct c ou rt found that the a dvers e d om i na ti o n do ct r i ne , a s ar ti cul at ed i n La rney, wo ul d no t op erate to sav e the Rec eiver’s cl aim s against Stew art b ec au se th e d oc tr in e t olls a c or p or a t i o n ’ s c laim s o n ly ag ains t wrongd o i ngdi r ec to r s an d c o - co ns pi r at o r s, a nd because S tewart fi ts i n nei thercat ego ry . I n see ki ng to o ver turn t he di sm i ssa l, the Recei verfi rs t ar gues that a fi nd i ng o fco nspir acy i s no t nec essary t o tol l cl ai m s a gainst S tewart und erthe advers e dom i nati o n d octr i ne a s ar ti cul at ed i n La rney . A lte rn at ive ly, if th e d octrine w il l p reserve claim s o n ly again st d irectors and thei r co- conspira tor s, the Recei verar gues that S te war t was a c o - co ns pi r at o r i n Har g r o ve ’ s an d Cap ri ott i ’ s wrongdoing a nd thatthe advers e dom i nati on doct rine appli es . W e di sag re e with the Recei vero n both poi nts a nd affi rm the dist ri ct c ourt
. The Re ce i ve r fi r st f au l ts the di st r i ctc o ur t f o r b eg i nni ng an d e ndi ngi ts a na l y si s wi th La rney, a de ci si o n b y the A pp el l ate Courto fIl l i noi s, w i thout m aking an atte m pt “to p re d ict h ow th e I llin ois Su p re m e C ou rt w ou ld r u le o n the s c o pe o fthe a dv e r s e do mi na t i o n do c t r i ne . ” By an aly zinga nd a ppl y i ngthe Appel l at e Cou r t’ s r ea so ni ng i n La rney, th e d ist ric t c ou rtd id ex ac tly w h at it sh ou ld have. W here a sta te’ s s u p rem e co urt “has not yetpasse d on a n iss ue, we exam i ne deci si ons ofthe l ower s tat e cour ts to hel p f or m ula te an ans w er . ” Ka pla n v . Shu re B rothe rs, Inc. , 15 3 F
. 3d 413, 42 0 ( 7th Ci r. 19 98)

. The La rney c ou rt w as th e first an d is so far th e on ly Illino is a p p e ll ate co urt to disc uss the adver se dom i nati on doct rine, an d i ts ho l di ngha s no t be enunde r m i ne d b y i nt ervening10 N o. 11

- 2108 I l l i no i s pr e c e de nt
. Th e di s t r i c t c o ur t wa s c o r r e c t t o gi ve i t per suasi ve w ei ght. O n th e m e r i t s , t h e R ec eiv er arg u es th at a for m al c laim f orci vi l co nspir acy i s no t a p re re q uis i te f oradver se d om ination u nd er I ll inois l aw and that the d istri ct cou rt mi s r e a d La rney . The R ecei verco ntends thati ts bro ader read ing of La rney is ap p ro p ria te an d th at t h e Il lin ois Suprem e Cour t “ w oul d l i kelyfi nd thatadver se dom i nat i o n t o l l s th e s t a t u t e o fl i mi t a t i o n s f o r c o r p o r a t e c l a i ms ag ain stth ird p ar ti e s if p u rs u it of s u c h cla im s w ou ld bring to l i ght the dir ecto rs ’ m i sco nd uct, re gar dle ss of w hetherpl ai nti ffi ncl ud es a cl ai m f orci vi l co nspir acy agains t the third pa rties and regar d le ss of w he th er a c o n s p i r a c y e x i s t e d t o c o mmi tth e w r o n g d o i n g . ” We ag r ee wi ththe di st r i ctc o ur t th at, wi th o uta suffi ci en t sh ow ing t h a t Stew art w as a co-con sp irator in C ap riotti ’s an d Har g rove’ s l o o tingo fInTr us t ac co untfunds , the Illino is a d ve rs e d om in at io n d oc tr in e a s d efin ed in La rney wil l notsa ve the Rece i ver ’ s cl ai m s a gainst S tewart. The Recei verf ocu se s fi rs t o n the f act that, i n spi te of i ts l an g ua g e th atthe a dverse do m i na ti o n do ct r i ne “appli es to tol l the sta tu te of l i m i tat i ons f ora cause of a c t i o n b y a c o r po r a t i o n a g a i ns ta n o nb o a r d- memb e r c oco ns pi r at o r o fthe wro ng do i ngb o ar d m embe r s, ” th e La rney co urt perm itte d the pl ai nti ff s’ cl ai m s t o go f or w ar d even though theyhad not brou gh t a for m al conspi ra cy cl ai m ag ai nst the defendants. T h e Rece i ver q u o t e s , i n full, the “relevan t po rtion” of La rney . The add ed em phasi s i s o urs:N o. 11

- 2108 11

N ei the r di d the d i s t ri c tcour t
. The Rec ei verquo t es the r el eva nt 3 p o rt io n o f L arney , an d the n s t ates , i nc or re c t l y, that“[ t ] he d istrict cou rt i n t e r p reted this lang u ag e to m ean tha t pr op erly s t at i ng a claim f or c i vi l c ons pi ra c y was a pre re qui s i t e f or adve rs e dom i nat i on t ol l i ng wi th r es pec tt o c l ai m s ag ai ns tno n board m em bers

. . . . The dis tr ic t court concl ud ed that itw as the f or m al i nc l us i on of a c ons pi ra c y c ount that m at t ered .” The di s t ri c tc our tdi d no s uc h thi ng . I ts t at ed i ns t ea d, “Th ought (co n tin u ed ...) W e b elie ve th at th e fa c t t h a t tw o of t h e d efe n d an ts in thi s case were not m em ber s o fthe Board does not autom ati cal l y r ender the a dvers e dom inati on doctr i ne i na ppl i cabl e. Both [ defen dan ts ] La r ne y a nd M i dl an d wer e al l eg ed co - co ns pi r at o r s o f[ wro ng do i ng b oa rd m em b er s] L op in sk i an d L ip in sk i. Just a s a board com pris ed of a m ajority of wrongdo ers could not b e expec te d to f

il e sui t aga ins t itse lf

, such a board could not b e expe ct e d t o f

i l es ui taga i nst a non b oar d- m e m b e rc o- co nspirator b ec ause such act ion wo uld ne ce ss arily br in g to light its ow n wrong doing a n d w ould beadvers e to its ow n in terests. The r ati onal e be hi nd the ad ve rse d om in ati on doct rine appli es equal l y t o c aus e s of ac t i on agai ns tc o- co ns pi r at ors . W e fin d th at th e a d ve rs e d om inati on doct rine app l i es to tol l the sta tute ofl i m i tati ons f ora causeof act ion by a c orporatio n a g a inst a no nbo a rd-m em ber co-c o nsp ira to r o fthe wron g do i ng boar d m em ber s. La rney, 719 N .E .2d at17 2 (e m p h as is a d d ed ). La rney di d not ho l d tha t a f o r m alc o ns pi r ac y c l ai m i s ne ce ss ar y f o r the ad ve r se do m i na ti o n do ct r i ne t o a ppl y . But, c l ea r l y, the 312 N o. 11

- 2108

(

. . . c on t i nu e d) 3 [si c] [ the R eceiv er] ap p lies the lab el of coc on sp irato r to Ste w art, [ the Rec ei ver ’ s ] brie fc ont ai ns no r efer en c e t o s pe ci f i c a l l ega t i o ns in the C o m plainti n supp ort ofthatConclusi on. The ci ted par agr aphs of the Com pl ai nt c ont ai n n o al l ega t i ons of co nspi ra cy betweenI nTr us t ’ s boa rd an d St ewar tt o s uppor tthi s c onc l usi on. ” Indep end ent Tru st C orp. v. Stew art Inf orm ati on Services C orp. , 20 11 W L 529 39 0, at *5 ( N .D
. Ill. Fe b

. 7, 201 1) ( em p ha sis a d d ed ). A nd no t just an y d irecto rs, b u t the d irecto rs o f t h e corp or ate 4 p lain tiff. T his case is m u d d ied b eca u se H arg ro v e an d C ap riotti ea c h w or e tw o h ats b ased on their ro les w ith b oth Inter cou nty an d InT ru st. A t Interc ou nty an d as Inter cou nty officers, H arg ro v e an d C ap riot t i m isused escro w fu nd s. A t InT ru st an d as InTrust directors , the y pilfered acc ount fund s. The R ec e i v e r , r e p r e s e n t i n g I n T r u s t, i s a t t e mp t i n g t o b r i n g c l a i ms ag ain st Stew art. Fo r the ad v erse d om ina tion d octr ine to appl y t o pr e s e r ve In Tru st ’s c l ai m s , the Rec ei ver ’ s al l eg at i ons m us tde m on s t r a t e tha tS t e war tc on s pi r e d wi th Har gr ov e a n d C ap riotti i n t hei r rol e as InTrust di rect ors , s o the Re c ei ver m us ts how thatS tew art c ons pi re d i n the s c he m e t o s i phon m on ey ou t of InT ru st acco u nts. La rney c o ur t f o und tha t ev enwi th o uta form al c l ai m , the pla i nti ff s ha d suffi ci entl y a l l ege d that the La rney de fen dan ts wer e co - co ns pi r at o r s o fthe c o nt r o l l i ng, wro ng do i ng boar d m em ber s. S ee id . A form al claim of co n sp ira c y is n ot n ecessar y. But i n ar ti cul ating the doctr i ne i n I l l i noi s, the La rney c ou rt m ade cl earthata pla i nti ff’ s al l egat i ons m us t e s t ab l i s h th a t th e d e fe n d a n t wa s c o mpl i c i t i n t he w ro ngdoi ng o fthe d irecto rs f orthe advers e dom i nati on doct rine to to l l the sta tute ofl i m i tat i ons. 4N o. 11

- 2108 13 The Recei verar gues that La rney u se d the wor d c o nspi r at o r “ l o o se l y, ” an d tha t i ns te ad o fl o o k i nga t th e i denti ty ofthe defe nd ant, co urts apply i ng I l l i noi s l aw shoul d exam i ne the n at u re ofthe propos ed cause of acti on. I ft he cause o fact i on nece ssa ri l y would have ex po se d the unde r l y i ngwro ng do i ngo fthe c o nt rol l i ng offic er s o r d ire c to rs , t h e R ec eiv er arg u es , th e ra tio n ale o fthe a dve r se do m i na ti o n do ct r i ne a s ex pr es se d b y the La rney c o ur t sh o ul d e xt en d t o tha t ca us e o fa ct i o n. Re ce i ve r Br
. 2 1 ( “T he I l l i no i s Appel l at e Co ur t a l l o wed the pla i nti ff s t o proce ed aga i nst thi rd- parti es w ith out a c o ns p i r a c y c o u n tb e c a u s e th e i r c a u s e o fa c t i o n i mpli cate d the di re cto rs and , thu s, w as som ethi ng the dir ector s would neve r have perm i tte d to be fi l ed w hi l e they con troll ed the com p an y.”) . W e ap p reciate th e Re ceiver’s re as on in g a n d ac kn ow l ed ge th at it su gg es ts a p lau sib le e x t e n s i o n o fth e a d v e r s e d o mi n a t i o n d o c t r i n e . B u twe ar e no t per suaded that we shoul d ext end I l l i noi s l aw b e y o nd the c l e a r b ounds ofLa rney, i n w hich the cou rt sta ted explicitl y: “W e fi nd thatthe advers e dom i nati on d octrin e a p p li es to tollthe sta tu te of li m itations for a cause ofact i on bya cor pora ti on a gainst a non b oar dm em ber co-c o nsp ira to r o fthe wr o n g d o i n gb o a r d me mb er s. ” Id

. at 172 (em p ha sis add ed ). Th e Re ceiver’s i nt erp retati o n wo ul d r equi r e a si g ni fi ca nte xt en si o n o fthe a d v e r s e d o mi n a t i o n d o c t r i n e u n d e r I l l i n o i s s t a t e l a w, w i th co nsequences that w e ca nnot for ese e c lear l y. U nl ess a n d unt i l th e I l l i n o i s c o u r t s a d d r e s s th i s qu e s t i o n, we re ly on th e b ou n d ar ies of th e d o c t rin e a s s ta te d in La rney, and w e r efra i n fro m exte nd i ng the doctr i ne o f adv er se do m i na ti o n b ey o nd wr o ng do i ngdi r ec to r s an d thei r co- conspi ra tor s.14 N o. 11

- 2108 F i na l l y, the Re ce i ve r a r g ue s th atI l l i no i s case s appl y i ng the disc ove ry rul e and a dvers e dom i nati on case s fro m ot h er j u ris d ict ion s s u p p or t it s c on te n t i on th at th e Illino is Suprem e Cour t would e xtend the advers e dom i nati on d o c t r i n e t o p r e s e r v e th e R e c e i v e r ’ s c l a i ms a g a i ns t S t e war t. The I l l i noi s di sco ver y r ule o perat es to prese rv e a c laim u n til th e p lain tiff k n ow s o r re as on a b ly sh ou ld know that he o r she has bee n w ro ngfully inj u re d . S ee La rney, 71 9 N
. E.2 d at 1 70, ci ti ng He r m i t age Corp
. v. Cont r ac t ors Adj us t m e ntCo. , 651 N

. E
. 2d 1132, 1135 (I ll. 1995); Ja ckson Jo rda n, Inc
. v. Ley dig, Vo it & M a yer, 633 N

. E.2 d 627, 63 0- 31 ( I l l

. 1 99 4)

. And a s th e Re ce i ve r po i nt s o ut, the I l l i noi s di sco ver y r u le “has b een a pp l i ed acr oss a bro ad spectr um o fl i ti gat i on t o al l evi ate wh at h as been vi ew ed as hars h re su lts re sul ti ng fro m the l i ter alappli cati on o f the s tatute. ” Rece i verB r. 2 3, quoting Knox Col l egev. Cel ot ex Corp. , 4 30 N. E. 2d 97 6, 9 79 ( I l l

. 1 98 1)

. Butthe La rney c o ur t ha d the di sc o ve r y r ul e an d i ts s uppo r ting p olic y a t it s fin ge rt ip s. It cle ar ly c on sid er ed th e Illino is di sc o ve r y r ul e an d i ts i m pl i ca ti o ns for c o r po r at e pl ainti ff s. I t r ecogni ze d tha t th e adv er se do m i na ti o n do ct r i ne w as a l ogi calexte nsi on o fth e d i sco ver y r ule and re l ate d ag en c y p rin c ip les , Larn ey , 71 9 N
. E.2 d at 1 70, but, o nce aga i n, i t dre w the boundary at w ro ng d oing dir ecto rs o f th e pl aint if f co r po r at i o n a nd the i r c o - co ns pi r at o r s, a nd n o fu r t h e r. Id

. a t1 7 2
. We a r e n o tp e r s u a d e d we sh o ul d pr edi ctthe e xt en si o n o fthe do ct r i ne b eyon d the boundary setthus f arbythe A pp el l ate Courto fI l l i noi s. The Recei veral so ci tes adver se dom i nati on ca ses fro m othe r j uri sdic ti ons and asks us t o extend the ra ti onal es ex p re ss ed in th os e ca se s to Illino is. B u t w h er e a n Il l i n oisN o. 11

- 2108 15 appell ate co urt has s poken c l ear l y on the i ssue, we have no r eas on t o l oo k b eyo nd I l l i noi s forgui dance . Here, I l l i n o i s l a w se ems s u ffi c i e n t l y c l e a r . Ac c o r d i n g l y, we affi rm the dist ri ct c ourtco ncer nin g the bo und ar i es of th e I l l i no i s adv er se do m i na ti o n do ct r i ne . The do ct r i ne can hel p the Rece i verh er e on ly i fi t ca n show (o r f or now at l east al le g e ) th at Stew art con sp ired w ith I nT rus t’s dir ecto rs to st ealfro m InTrust a ccount hol ders.

III
. C onspiracy The Recei verco ntends t hat i t has sa ti sfi ed the re quir em en ts o fthe a dve r se do m i na ti o n doct r i ne b y a l l eg i ng that St ew ar t co nspir ed w i th C ap ri otti and H ar gr ove to tak e I nTrust fund s f or the benefi t of I nter county. In I l l i noi s, a ci vi l co nspir acy i s defi ned as “ ‘ a co m bi nati on o ft wo o r mor e per so ns f o r th e purpo se o fa cc o m pl i sh i ng by co nc er te d ac ti o n ei th er an unl awful pur po se or a l aw ful pu rpos e byunl aw ful m eans. ’ ” M cClurev. O wen s Corn i ng Fi b e rglas Corp
. , 720 N
. E
. 2d 242, 258 (I ll

. 1999), quoti ng B uck nerv. AtlanticPlant M ainte nance, Inc. , 69 4 N
. E.2 d 565, 57 1 ( I l l

. 19 98)

. A pl ai nti ffm ust a l l ege f acts est abl i shi ng bo th ( 1) an a greem ent t o acco m pli sh such a goala nd ( 2 ) a t o r t i o us a c tc o mm i t t e d in fur the r ance of th at ag re em en t. M cC lure , 7 20 N
. E.2 d at 2 58. Thus, f or th e I l l i no i s adv er se do m i na ti o n do ct r i ne to a ppl y, the al l ega ti ons i n the Recei ver ’s c om pla i nt, r ead i n i ts fav or , m u st su gg es t p lau sib ly th at Ste w ar t “ kn ow in gly and vol untari l y par ti ci pat e[d ] i n a c om m on s chem e t o co m m i t anunl awfula cto r a l awful a cti n a n un l awful m anner. ” Adcock v. B r akegat e, Lt d. , 64 5 N .E .2d 88 8, 89 4 (Ill.16 N o. 11

- 2108

Agai n, no tj us tan y “ unl awful ac t, ” butHargr ove ’ s an d 5 Ca pr i ot t i ’ s s c he m e , a s I nT r us t ’ s di r e c t or s , t o r a i d the fun ds of InT ru st acco u nt h old ers. 1994 )

. S tat ed differ entl y, “[ t] here is no s uch thi ng as

5 ac ci den ta l, i na dve r te nto r ne g l i g en t par ti ci pat ion i n a conspi ra cy. ” Id

. S te wart m ust ha ve “ unde r [ st o o d] the gener al obj ecti ves of the conspi ra tor i al schem e, accept[ ed] them , a n d a gr ee [d ], e i therexpl i ci tl y o r i m pli c itly t o do i ts part to furthertho se obj ecti ves. ” Id

. The di st r i ctc o ur t f o und tha t the Re ce i ve r ’ s al l eg at i o ns do no t amount to a c o ns pi r ac y b etwee n S te war t an d the InTrust di re cto rs under I l l i noi s l aw , and w e a gr ee. The Recei verar gu es that i ts com pla i nt i ncor pora tes f ac t u a l a l l e g a t i o n s s u p p o r t i n ga l l th e e l e me n t s o fc o ns p i r a c y u n d e r I l l i n o i s l a w. L i k e th e d i s t r i c tc o u r t, we na r r o w ourf o cus t o o nl y o ne o ftho se e l ement s: a n a g reem e ntbetw een Ste w ar t a nd InTrust t o m i sappropri ate I n T rust fund s. The Recei ver ’ s co m pla i nt co nsi sts o f 90 p ag es an d 21 4 p ar ag ra p h s a n d is flu sh w ith d et ail re gar ding H ar gr ove ’ s a nd Capri ott i ’ s v ar iou s m i sdeeds. Buti t f ai l s to l i nkS te war t to th e InTr us t fr au d b y p lau sib l y su gg es tin g t h at Ste w ar t p ar tic ip at ed in th atfr au d a s a co - co ns pi r at o r . S i m pl y s tate d, the Re ce i ve r ’ s al l eg at i o ns do no t pl au sibl y s uppo r t th e i nfe r e n c e th a tS t e wa r ta g r e e d , e i th e r ex p l i c i t l y o r i mpl i citly, tha t H ar g r o ve a nd Ca pr i o tt i s ho ul d r ai d the fund s o fInTrust a ccount hol ders. W e begin by tak in g a careful l ook at the Rec eiver’s al l ega tion s co ncer ni ng wh at St ew ar t di d, w hat i t di d notN o. 11

- 2108 17 do , whati t k ne w, a nd w ha t it d i d no t k no w re g ar di ng I nt er co unty a nd I nTrus t. The Re ce i ve r ’ s co m pl aint al l ege s that in N ove m ber19 84, S tewart appoint ed I nt erco unty a s i ts e xc l us i ve Chi ca g o l an d a g en t. The und er w ri ti ng ag re em ent g ave St ew ar t the r i ght t o au di t I nt er co unty ’ s es cr o w a cc o unt s an d o th er fi na nc ial st at em en ts an d to te rm in at e t h e a gr ee m en t if In te rc ou n ty d id n otm an ag e it s e sc ro w fu n d s a p p ro p riately. C om p l. ¶ ¶ 3 0-31. U nt ilFebru ary 1991 , Stew art owne d s t o c k i n I nt e r c o un t y, whi c h g a v e i t the r i g htto re cei ve mon thly fi na nc i a l sta tem ents and annual au d ite d fin a n c ial st at em en ts from Int er c ou n ty . C om p l. ¶ 26

. The R ec eive r al l ege s that the fi nanci alst ate
m ents that St ew ar t r ecei ved and re view ed showed that H ar gr ove and Capri ott i were usi ng the Inte rco unty e scr ow ac co unti m pr o per l y t o fund v ar i o us s ch emes , i nc l udi ng a m or tg a g e d efe as an c e p ro gr am an d j u n k b on d s. C om p l. ¶ ¶ 42 -43 . Ste w ar t b ec am e a w ar e o f th es e s c h em es . I t d irected Int ercou nt y not t o ente r i nt o any m ore defeasanc e tr an sa ct i o ns a nd t o s el l i ts j unkb o nds

. But Stew art d id n ot force In tercou nt y to l im it i ts ex p osu re and did not ter m i nate i ts agree m en t with I nter county. Com pl. ¶¶ 5 0- 54. W he n I nt e r c o un ty’ s e s c r o w “ i nv e s t men t s ” f a i l e d, l eaving a m ult i

- m i l l i on dol l arsho rt f all i n the escr ow acc o u n t, I nt ercou nt y d isclosed the sh ortfallto Stew art vi a Inter county’ s a ud i te d a nd r evi ew ed fi nanci alst ate
m en ts. C om p l. ¶¶ 80-83 , 87. I nT rus t all e g e s th at Stew art knew that ther e w as no way Inter county’ s business oper ati ons coul d cove r the shor tf al l, and i t a l so knew that i t was l i abl e forthe shor tf al l as the ti tl e insurer . Com pl. ¶¶ 8 8- 93,18 N o. 11

- 2108 96- 97. A gain, i nstea d ofterm i nati ng the ag re em ent, Stew ar t al l o wed Int er co unty t o c o nt i nue r unningthe es cr o w ac co unt“ o n the fl o at ” an d l eft i t to Ca pr i o tt i a nd H ar gr ove to fi nd a soluti on f orthe shor tf al l

. Com pl. ¶ 9 8. Con t i nu i ng t o g i v e the Re c e i v e r the b e ne fi t o f a l l i ts alleg ati ons, S tewart knew by thi s point thatInter county w as w i l l i ng to m i suse escr ow fund s, i t knew thatCapri ott i and H ar gr ove had purch as ed InTrust, and “i t a l so knew that the o nl y untapped escr ow accoun t contr ol l ed by I nter county w as the one conta i ni ng the fun d s of I nTrust’ s cl i ents. ” Com pl. ¶¶ 1 11- 12, 13 4- 36, 13 8. Even though i t had thi s k now led ge , St ew ar t w ai ved I nter coun ty ’s contr actualo bl i gat i on t o subm i t t o an annua l a udi t. Co m p l. ¶ 1 02
. I t al so “ pr es su r ed” a nd “dem anded ” that Inter coun ty fi nd a sour ce o ffund s t o fi l l the e sc r o w ga p. Co m pl

. ¶ ¶ 4, 1 05 , 1 08 , 1 10

. By the end of19 96, Capri ott i and H ar gr ov e had cause d I nTrust t o de po s i to v e r $ 4 5 mi l l i o n o fIn Tr us ta c c o un tfun ds i nto the Int e r c o un t y e s c r o w a c c o un t
. Co mpl

. ¶ ¶ 1 1 4 , 1 1 6. W i thout St ew ar t’ s fi nanci alo ver si ght, Int er county w as abl e t o “st ealte ns o fm i l l i ons ofdol l ar s fro m InTrust an d p ay m u c h of th e In T ru st m on ey to o r f o r t h e b en efit ofS tewart. ” Com pl. ¶ 1 02. F u n d a me n t a l l y, th e R e c e i v e r ’ s a r g u me n t i s th a t th e pr es su r e St ew ar t ex er te d o n Int er co unty t o fi l l the es cr o w ga p, c o m bine d wi thi ts f ai l ur e to pr ev en t th e fra ud byei therdem anding an audi t o r ter m i nati ng i ts u n d er w rit in g a gr ee m en t, am ou n ts to Ste w ar t’s im p licit ag re em en t th at H ar gr ov e an d C ap riot ti, in t h e i r role as I nTrust di re cto rs , sho uld fraud ule ntl y s i phon m oneyN o. 11

- 2108 19 fro m InTrust a ccounts to fi l l the I nter county escr ow sh o r ta g e. W e do no t ag r ee tha t th es e i ng r edi en ts a m o unt to a S tewart- I nTrust co nspir acy. The Recei verhas si m plyf ai l ed to al l ege an agre em e nt
. U rg i ng Inter county to re sol ve its e sc ro w s h or ta ge , n o m at te r how st r enuo us l y, was no t anim p l i ci t o r e xpl i ci t ag r ee m en t that I nter county shoul d res ol ve i ts escr ow sh or tag e by em b ez zlin g fu n d s fro m InT ru st . See , e.g ., Bos ak v

. M cDonough, 54 9 N
. E.2 d 643, 64 6 ( I l l

. A pp . 19 89) ( att or ney w ho a dvis ed re al torto co versho rt age i n hi s e scr ow acco unt, but did notag ree to p er petra te fra ud ag ai nst invest or, cou ld not be held l iable for civil c o n sp iracy). A nd the Receiver poi nts t o no a uthor i ty supp or ti ng i ts as se r ti o n tha t S te war t’ s f ai l ur e to d o m o r e to pr ev en t th e fr a u d ma k e s i ta c o - c o n s p i r a t o r i n th e fr a u d

. T o the contr ar y, o ur pre cedent ho l ds that, i n the abse nce o f any e vi dence ofan e xpli ci t o r i m pli ci t a gr eem ent, a def enda nt ’ s f a i l ur e t o pr e v e nt ha r m t o a pl a i nt i ffdoes not am ount to a consp ira c y. Se e Tie rney v. Va hle, 30 4 F.3d 734 , 739-40 (7th C ir. 2002). F i na l l y, r ely i ngo n Har t f or d A ccide ntan d Inde m ni ty Co. v. Su l l i van, 84 6 F

. 2d 377 ( 7th Ci r. 19 88) , the Rec ei ver ar gues that because S tewart dir ectly an d i nd i re ctl y b enefi tte d fr om the fra ud , i t s houl d be hel d l i abl e a s a co c on sp i ra tor
. But Sul l i van i s e asi l y di stingui shabl e. In Sul l i van , we re ver sed a tr i alco urt’ s findi ng tha t a l awy erc o ul d no t be he l d l i ab l e as a c o-cons pi r at o r i n a schem e t o defr aud a bank ofm i l l i ons of dol l ar s when th e l awy erha d a cted as a di r ec t par ti ci pan t i n o nl y o ne l oan und er l yi ng the l ar gersche m e. W e r elied i n parto n the fac t that the l aw yerhad benefi tte d fr om the l ar ger20 N o. 11

- 2108

s c h e me . We r e c o g n i z e d t ha ta s th e l a r g e r s c h e me g r e w, th e con sp irators’ d em an d s for th e law yer’s l eg a l w ork i nc r ea se d, a nd pr o ce eds fr o m ot herfr au dul en t l o an s w er e use d to pay the i nter estdue on the l oan i n w hi ch h e w as a p ar tic ip an t. Sul l i van , 8 46 F
. 2d at3 84
. B ut the evi dence at t ria l al so est abl i shed that the l aw yerwas a kn ow in g p ar tic ip an t i n th e fra u d . H e h ad as sis te d in l aunching the s chem e a nd kne w t hat i t was co nti nuing. T h e o n ly iss u e w as w h et h er th e la w ye r c o u l d b e h eld l i ab l e f o r the e nt i r e sc o pe o fthe fr au d, o r o nl y the s mal l e r fr a ud ul e ntt r a ns a c t i o n i n whi c h he p a r t i c i pa t e d. Id

. a t 38 5 ( “We ho l d tha t unde r I l l i no i s law o ne who parti ci pates act i vel y in l aunching a co nspir acy w i th l i m i te d a i m s, who kno ws tha t th e ai m s ha ve b ee n e xceed ed , and w ho kn ow ingly obtains d irect m one tary be ne fi ts fr o m the e xpa nde d c o ns pi r ac y, i s a pa r ti ci pan t i n that conspi ra cy as w el l as i n the narrow er o ne fro m w hi ch i t g re w . ”)

. H er e, al though S tewart m ay have been a be nefi ci ar y o fH ar gr ove ’ s a nd Capri ott i ’ s m i sdeeds, the a l l ega ti ons i n the com pla i nt do no t pl ausib ly sugge st that St ew ar t launched the Inter county escr ow short age o r tha t i t k ne w ofo r was c o m pl i cit in th e unde r l y i ng fra ud ag ai nst InTrust. M oreover, as the d istric t c o urt noted , the R eceiver’s specul ati ve and concl usor y a ss erti on o fa St ew ar tI nTr us t consp irac y i s be l i ed byo th era l l eg at i o ns i n the Re ce i ve r ’ s co m pl ainttha t Stew ar t was e nt i r ely i g no r an t of I nTrust’ s w ro ngdoi ng. For i nstance , the Recei ver al l ege s: “S tew art di dn ’ t know the detai l s o fhow I nter county had stay ed i n busi ness. ” Com p l

. ¶ 1 41; se e al so Com pl. ¶ 1 44 ( on M ar ch 14, 19 95, afterIntercounty sent St ew ar t c opi es ofcheck s deposi ted i nto the e scr owN o. 11

- 2108 21

acco unt, S tewart ask ed to co nfi rm th e s ourc e o fthe paym ents becau se “ th er e i s no way ofkno w i ng, f or i ns ta nc e, wher e I nt ercoun tyg o t th e m o ne y t o fund the es c ro w ac c ou n t re c en tly .”). H ow co u ld Ste w ar t “ ac t in concer t” w i th H ar gr ove and Capri ott i to st ealInTrust m oney, as the Recei verspecul ates, i fS tewart did not kn ow th e d et ails of h ow In t e r c ou n ty h ad st ay ed in bus i ne s s o r h o w i twa s r e pl e ni s hingthe de pl e t e d e s cro w acco unt? Th e Recei verdoes notm eani ngfully a nsw er th at qu e s t ion. W ithou t plau sible all egation s tha t Stew art had knowl edg e o fHar g r o ve ’ s an d Ca pr i o tt i ’ s fr au d ag ain stth e I n T ru st ac c ou n t h old er s a n d ac te d to h elp th em su cc ee d, the Re ce i ve r ha s f ai l ed to a l l eg e a co nspi ra cy that i ncl ud ed St ew ar t. A l ong these sa m e l i nes, the Recei veral so al l ege s that i n 199 5, S tewart “pres sure d fo r an audi t a nd a ‘ re str uctu ring ’ of i ts re l ati onshi p w i th I nter county, and .

. . to l d Ca pr i o tt i tha t i fInt er co unty di d no t r es to r e th e shor t a g e s i n i t s e s c r o w a c c o un t, [ i t ] wo ul d b e o b l i g a t ed to c o nt ac t th e I ll i no i s Depa r tmento fF i na nc i alIns ti tu
ti ons. ” Com pl. ¶ 1 42. S tewart sent i ts in te rnal audito rs to In te rc ou n ty se ve ra l tim es , “b u t In te rc ou n ty n ev er w ou ld give them eno ugh i nfo rm ati on o r ti m e t o fi ni sh the ir w or k. ” F i nal l y, i n Decem ber1995, Inte rco unty t er m i nated its assoc iation w ith Stew art. C om p l. ¶ 147 . St ew art’s o nl y po ss ibl e i nr o ad to o bt ain kno wl edg e o fthe mean s by w hi ch In ter county’ s o perat i on was being fund ed ( the In Trust fra ud ) was shut down byInter county. N ot only is it i m p la u s ibl e tha t all eged co-cons p irators woul d b eh av e an d c o m m uni ca te i n thi s m anne r, b ut th es e a lleg at ion s s h ow th at Int er c ou n ty w as ac tiv ely22 N o. 11

- 2108
tr yi ng to pre vent St ew ar t fro m uncove ring the tr uth ab o utthe InTr us t fr au d. W i th o utkno wl edg e o fthe schem e, S tewart coul d not hav e a gr eed to i t. I n sum , none ofthe al l ega ti ons ci ted bythe Recei ver su ppo r t ani nfer en ce th atS te war t k ne w of, l eta l o ne agr eed to, any unlawful acti vi ty i nvol vi ng m isappropri ati on o fInTrust fund s. W i thout a know i ng ag re em en t, th ere can be no con sp iracy, an d w ithou t a cons p iracy, the I l l in oi s a dvers e dom i nati on doct rine cannot apply to a no n-di re cto r. Becau se the a dvers e dom i nati on doctr i ne does notapply, the Recei ver ’ s cl ai m s a re bar re d by the a pp l i cab le s tatute o fl i m i tat i ons, and the Recei ver h as p l ed i tse l fo ut o fco urt. S ee Atki ns v. Ci ty of Chi cago , 631 F. 3d 823, 83 2 ( 7th Ci r. 2 011) ( a pl ai nti ffcan ple ad hi m sel fo ut o fcou rt bypl eadi ng f acts thatsho w he ha s no l ega l cl ai m ) ; se e a l so X ec hem , Inc. v. Bris tol-M yers Squib b Co. , 3 72 F
. 3d 89 9, 9 01 ( 7th Ci r . 2 00 4) (“Onl y whenthe pla i nt iff pl eads i tse l fo ut o fco urt

— tha t i s, a dm i ts a l l the i ngre d ien ts o fan i m penetr abl e defense

— ma y a c o mpla i nt t h at othe rwis e s tat es a cl ai m be dism i sse d und er Rule 12(b )(6). ”)

. A ccor dingl y, we affi rm the dist ri ct c ou rt ’s di sm i ssa l o fthe Recei ver ’ s cl ai m s, al l o fwh i ch ar e g ove rned bya fi ve- yea r sta tute ofl i m i tat i ons.

I V. “Judi ci al Not i ce ” an d Oppor t uni ty t o Am e nd Fi nal l y, the Recei verco ntends tha tthedi str i ct c ourter re d intw o ot h er r es p ec ts , ne ith er of w h ich is p er su as ive . I t ass er ts that i n rul i ng on St ew ar t’ s m oti on to d i sm i ss, the di str i ct c ourter re d by ta kin g j ud i ci alnot i ce o f adj ud i cati ve f acts , part i cul ar l y the H ar gr ove i nd ict-N o. 11

- 2108 23

m en t, th e C ap riottiplea agreem en t, an d the cou rt’s o pi ni o n in F i d e l i ty Nat ’ l Ti t l e In s . Co
. o f Ne w York v. Int e r co unty Nat’ l Tit l eIns . Co. , 200 8 W L 43 48 59 4 (N .D . I ll. M ar . 2 6, 2 00 8)

. Be f o r e addr es singthe R eceive r ’ s ar g um en t, we m us t r efr ame i t. W e do s o pr i m ar i l y b y quo ting the p a s s a g e o n whi c h the Recei ver ’ s a r g ume nti s b a s e d, w hich l argely spe aks for i tself. Af t e r th e d i s t r i c t c o u r t r u l e d i n f a v o r o f S t e wa r t an d dism i sse d the Rece i ver ’ s cl ai m s, th e Rece i verm ove d to al te r o r a m en d the j udg m en t pur su an t t o R ul e 59 ( e)

. The di st r i ctc o ur t den i ed th e m o ti o n. On pag e fi ve ofthe di st r i ctc o ur t’ s el ev en - pag e o p ini o n de ny i ng t he R eceiver’s m otion to alter or am en d , the district cou rt sai d i n a foo tnot e: T ha t I nT r u s t has fil ed a Ru le 59(e) m otion th at m ore orl ess r egur gi tat es i ts ar gum ents fro m the m oti on t o d i s mi s s b r i e fi n gi s n o tsu r p r i s i n g . In T r u s t ’ s C o mpla i nt i s e sse nti al l y i ts l astga sp in a m ara th on o f c ivil litig at ion
. A br ie

f s um m ary of the c ri m inal and ci vil litig a tio n th a t rela t e s t o th is case is as fo llo w s. In J une 20 05, Capri ott i pl ed gui l ty to parti ci pati ng with H ar gr ove i n a schem e t o defr aud, am ong othe rs , I nT rus t, [S tew art], and Fi d eli ty, an d m isusing Int erco un t y e s c r o w fun ds

. Ca pr i o t t i ’ s pl e a ag re em en t r efer s to mul ti pl e i ns ta nc es in w hi chthe f or m erInTrust a nd Inter county pri nci pal s del iber at ely m an ip u lat ed rec or d s t o c on c e a l es c ro w d eficienc ies from [ Stew art]. In Sep tem ber 2 0 0 5 , a j ury convi cted Hargr ove o n ten counts, i ncl ud i ng a fi nd i ng tha t Hargr ove part i ci pated in a schem e t o24 N o. 11

- 2108 d efr au d , am on g ot h er s, In T ru st, [ S te w ar t], an d Fid eli ty. A ro und the ti m e I nTrust and Inter county col l apsed i n 2 0 0 0 , F i d e l i t y fi l e d F i delity Na t. Title Ins. C o . of New York v. Int e r co unty Nat
. Tit l e Ins. C o. , N o. 00

- cv- 5658 , 2008 W L 43485 94, at * 1 (N

. D
. I ll

. M ar. 26, 2008) ( F i delity ), aga in st Int er c ou n ty , C ap riot ti, H ar gr ov e, IN T IC an d numer o us o th er s, i nc l udi ng[ Stew ar t] , making si m i l ar al l eg at i o ns as I nTr us t m ak es i n i ts C om pl aint here

. In 200 8, Judge N or gl e g ra nted [ St ew ar t’ s] m oti on f orsum m ar y j ud gm ent on a l l r em ai ni ng cl ai m s, fi nd i ng: “Inter county and i ts executi ves did w hatev er th eyco ul d t o k ee p S te war t i n the da r kr eg ar di nga ny esc row acc ount defi ci enci es at
. . . Inter county. ” Id

. at * 6. In 200 5, the Recei verfi l ed Indepe nde nt Tru s t Corp
. v. Fi de l i ty Nat
. Tit l e Ins . Co. of Ne w Yo rk, 57 7 F
. S up p. 2d 10 23 ( N
. D. I l l

. 20 08) , se eking $6 8 m i l l i on ba sed o n Fi del i ty’ s r el ati onshi p f rom 1 995 thr ough 2 000 w i th I n t e r c o u n t y, C a p r i o t t i, a n d H a r g r o v e , ma k i n gc l a i ms th at w er e s im ilar to th os e m ad e a g a in st Ste w ar t in the instant Com pla i nt. On A ugust 2 6, 20 08 , J ud ge Pal l m eye r gr anted sum m ar y j ud gm ent fo r Fi del i ty on In T ru st ’s re m ain in g c laim s. Id

. at10 37- 52. Ind epen den t Trust C o rp. v. Stew a rt Info rm a tio n S ervic es Corp
. , 20 11 W L 18315 86, at* 3, n. 1 (N .D. I l l

. M ay 11, 20 11) (em p h a s is ad d ed and i nt erna l record citations om itted ). W hen the “adj ud i cati ve f acts ” a re r ead i n the proper c on te x t, it is a p p ar en t t h at th e R ec eiv er ’s a r g u m en t is speciou s. The dis tr i ct c ourtwas re ci ti ng the l ong proce dur alhi st o r y o fthi s ca se . The Har g r o ve i ndi ct m en t, the Ca pr i o t t i p l e a a g r e e men t, a nd Fidel ity v . Inte rc ountyare docum ents in the pu bl i c dom ai n that furtherthatpro ce-N o. 11

- 2108 25 du ra l n ar ra ti ve. The di str i ct c ourtto ok j ud i ci alnot i ce o f the ind i sputabl e f acts thattho se docum ents exi st, they say w ha tthe y s a y, a nd the y h a v e h a d l e g a l c o ns equences. The di str i ct c ourtdi d n ot r el y o n the docum ents as proo fo fdi sputed f acts i n any othe r sense . Finally, th e R eceiver argu es th at th e d istr ic t cou rt ab us ed i ts di sc r et i o n b y di smi ss i ngthe i ni ti alc o m pl aint w i th prejud ice w i thout al l owing an o pp or tuni ty to amend. Rul e 15 o r di na r i l y requ ires tha t l ea ve t o a m en d b e g ra n te d atlea st on c e w h en th er e is a p ot en tia lly curabl e pr obl em with the co m pla i nt o r othe r ple ading

. A pl ai nti ffi s e nti tl ed to am end the co m pla i nt once as a m att ero fri ght i fi t a cts quick l y e nough, se e F ed. R. Ci v. P. 15(a), and even after that tim e has exp ired, a c o urt “shoul d “fre el y g i ve l eav e [ to am end] when j usti ce s o re quir es. ” F ed. R. Ci v. P. 15 ( a) ( 2) ; see al so Baus ch v. Stry k er C o rp . , 6 30 F
. 3d 54 6, 5 62 ( 7th Ci r . 2 01 0) , c i ting Air b or neBe epe rs & Vi de o, Inc . v. AT & TM o b i l i ty L LC, 49 9 F
. 3 d 6 6 3 , 6 6 6 ( 7 th C i r . 2 0 0 7 )

. I n a p p l y i n g R u l e 1 5 ( a ) , t he unc er ta i nty i n pl ea di ngs ta nda r ds res ul tingfr o m the S upr eme Co urt ’s de ci si o ns i n Iq bal a nd Tw om b l y al so p ro vid es p ow er fu l rea so n s t o giv e p ar t i e s a rea so n ab le opportunity t o cure defe cts i denti fi ed by a di str i ct co ur t. Her e, ho wev er, the R ece i ve r di d no t r eque stthe oppo rt u ni ty to am end untili ts m oti on t o am end or al te r a nd, m osti m po r ta nt, di d no t o ffera ny mean i ng ful i nd i cati on of how i t w oul d plea d differ entl y. S ee He cke rv. D eere & Co. , 5 5 6 F
. 3 d 5 7 5 , 5 9 0

- 9 1 ( 7 th Ci r . 2 0 0 9 ) ( “Once j ud gm ent has bee n ente re d, th er e i s a pre sum pti on that the c ase i s fi ni shed, and the b u rd en i s o n the party w ho w an ts t o up set th at j ud gm en t to show the cou rt26 N o. 11

- 2108 that ther e is good reas on to set i t asi de. ”) , ci ti ng Vicom , Inc. v. Ha rbridg e M ercha nt S ervic es , 20 F. 3d 771, 785 (7th Cir. 1994 ) ( f aul ti ng pl ai nti fff ornotat tachi ng a propos ed c om p lain t o r sp ec ifica lly in for m in g t h e c ou rtof h ow it w ou ld cu re d efic ien c ies in t h e e ar lier c om p lain t); Tw ohy v. Fi rs tN a tio nal Bank, 758 F.2d 118 5, 1189 , 1197 (7th Cir. 1985 ) ( sam e)

. Instea d, the Rec ei verput i t t o the di str i ct c o ur tt o i de nt i fy wh a ti tn e e de d to ple a d t o s uc c e e d, te llin g t h at co u rt : “[T ] h e C ou rtsh ou ld sp ec ifica lly add r e s s th e c o n s p i r a c y a l l e g a t i o n s a n d e x p l a i n why th e y a r e d e fi c i e n t
. A n d i n s t e a d o fd i s mi s s i n gth e c o mpla i nt with prej ud i ce, the Recei versho uld be g iven l eave to re p l ead i ts conspi ra cy al l ega ti ons to cor re ct whatever d efic ien c ies th e C ou rtid en tifie s.” I n supp or t o fi ts ar gum ent o n appeal, the R ec ei ver c o nt e nd s o nly tha t whe n i t s c o mpl a i nt was di s mi s s e d, it h ad fil ed onl y o ne co m pla i nt o n behal fo fInTrust. ( It do e s no t t r y t o a s s i g n us the t a s k o f r e - pl e a di ngf or i t, as i t di d t he di st r i ctc o ur t. ) The Re ce i ve r o ffer s no a r g um ent a t a l lag ai nst futi l i ty, and i t is w ell settl ed that a di s t r i c tc o ur tma y r e fus e l e a v e t o a men d wh e r e a men dm ent woul d be futi le. Se e Foste r v. D eLuca , 54 5 F
. 3d 582, 584 ( 7th Ci r. 20 08) , ci ti ng A irbo rne B eepers , 499 F. 3d at 666. N othi ng the Recei verhas bro ught fo rw ard so f ar, ei ther i n i ts com pla i nt al l ega ti ons, i ts ar gu m en ts in f avo r ofi ts m ot ion to alt er or a m en d , or its arg u m en ts on ap p ea l, su fficie n tly su p p or ts its th eo ry th a t Ste w ar t k n ow in gly an d i nt en ti o na l l y c o ns pi r ed wi thInTrus t. Ba se d o n the Recei ver ’ s o w n al l ega ti ons, S tew ar t di d not know o f H ar g r o ve ’ s an d Ca pr i o tt i ’ s I nTr us t m alf eas an ce . W i th o ut k no wl edg e o fHargrov e’ s an d Ca pr i o tt i ’ s ac ti vi ti es a ndN o. 11

- 2108 27 p u rp os e, St ew ar t c ou ld n oth a ve co n sp ire d in t h eir fr au d. I n th e ab se nc e o fa ny s ug g es ti o n o fho w the R ec eiv er m igh t o v e r c om e t h es e s elf-c re at ed h u rd les if i t were to re ple ad, the dist rict c ou rt di d not abuse i ts disc re ti on in denyi ng the Recei verthato pp or tuni ty. A FFI RMED .

1- 6- 12