Midwest Commerce Banking Company, 4 F.3d 521, 523 (7" Cir. 1993). The Rule does not
require the plaintiff “to plead facts showing that the representation is indeed false.” Bankers
Trust Company v. Old Republic Insurance Company, 959 F.2d 677, 683 (7" Cir. 1992).
Furthermore, because Rule 9(b) requires only that intent be pleaded generally, LFG does not have
to allege how or why the Navarres knew the act was ultra vires. For these reasons, the Court
declines to dismiss Counts 1, 2, or 3 or to require a more definite statement.

B. Count 4

Count 4 sets forth a claim of conversion. LFG alleges that Klemen unlawfully and
without authority took dominion and contro! over LFG’s funds and transferred those funds to the
Navarres who, without authority, wrongfully assumed dominion and control over the funds. LFG
further alleges that it was the sole and exclusive lawful owner of the funds and that it is entitled
to immediate, absolute, and unconditional possession of the funds. Finally, LFG alleges that it
has demanded the return of the funds from the Navarres, but they have refused to repay the sums
they received.

The Navarres argue that Count 4 is legally insufficient because Illinois law does not
recognize a cause of action for conversion of an intangible right like money. They argue that
under Illinois law, a claim for conversion cannot be based on a “mere obligation to pay money.”
The Navarres also argue that when the property allegedly converted is money, the conversion is
not actionable unless the money can be described as a “specific chattel,” which they contend
means that it was a “specific identifiable amount” kept separate from LFG’s general funds.

Each of these arguments is based on In re Thebus, 108 Il.2d 255, 260, 483 N.E.2d 1258,

1260 (1985), or on Horbach vy. Kaczmarek, 95 C 5180, 1997 WL 102540, at *1 (N.D. Ill. Mar. 5,


acceptance of the loan repayment was wrongful. The Court rejects this argument. As we have
discussed, federal pleading rules do not require such matters to be described with particularity in

acomplaint. Count 5 is pled sufficiently to give the Navarres notice of the nature of the claim.
D. Punitive Damages
LFG’s conversion claim (Count 4) includes a request for an award of punitive

damages. Defendants argue that Illinois law does not support this request, and they ask that it be
stricken. The Court denies this motion. Illinois law permits an award of punitive damages on a

claim of conversion. See Cirrincione v. Johnson, 184 Tll.2d 109, 114, 703 N.E.2d 67, 70 (1998).
Whether LFG will be able to show that punitive damages should be awarded is an issue that will

be determined later in the litigation.
E. Attorney’s Fees

Each of LFG’s claims includes a request for a award of attorney’s fees. The Navarres
argue that this should be stricken from the state law claims because the law does not support an
award of attomey’s fees. LFG has not responded to this argument, and the Court agrees with the
Navarres. The request for attorney’s fees is stricken from Counts 4 and 5. The Court rejects,
however, the Navarres’ request to strike the request for fees from the fraudulent conveyance
claims brought pursuant to the Bankruptcy Code. Those requests are supported by 11 U.S.C. §§
550, which provides the basis for such an award. See In re Fugazy Express, Inc., 159 B.R. 432,

437 (Bankr. S.D.N.Y. 1993).

Conclusion

For the foregoing reasons, the Court denies defendants’ motion to dismiss or for a


charge. The defendant can get all the information he needs by filing a contention interrogatory.”
Ackerman v. Northwestern Mutual Life Insurance Co., 172 F.3d 467, 469 (7" Cir. 1990). Rather,
the purpose of the requirement is “to force the plaintiff to do more than the usual investigation
before filing his complaint.” Jd.

Rule 9(b) “requires the plaintiff to state with particularity any circumstances constituting
fraud. Although states of mind may be pleaded generally, the circumstances must be pleaded in
detail. This means the who, what, when, where, and how: the first paragraph of any newspaper
story.” DiLeo v. Ernst & Young, 901 F.2d 624, 627 (7" Cir. 1990). LFG’s complaint complies
with these requirements. The “who” is identified in paragraphs 7-12 of the complaint: LFG, the
Navarres, Klemen, and Linnco. The “what” is identified in paragraphs 13-20 of the complaint:
the original loan is described by naming the amount, the date it was made, and to whom it was
made. The allegedly fraudulent repayment of the loan is described in paragraphs 17-20 by
naming the amount, the person who authorized it, the recipients of the repayment, the nature of
the actions taken to make the repayment, and the circumstances under which the repayment was
made. The terms of the promissory note are also described. The “when” is provided in
paragraphs 11, 13, and 17, which identify the dates during which Klemen was the manager of
LFG, and the dates on which the original loan and the repayment were made.

The Navarres argue (p. 13-14 of the motion to dismiss) that the complaint does not
explain why the transfer was fraudulent, why it constituted an ultra vires act, or why they should
have known the act was ultra vires. That is not what Rule 9(b) requires. “Rule 9(b) does not
require that the complaint explain the plaintiff's theory of the case, but only that it state the

misrepresentation, omission, or other action or inaction that the plaintiff claims was fraudulent.


1997), which discusses Thebus. The Navarres’ first objection, that LFG’s claim merely concerns
a general debt, misapplies the rule of law established by the Court in Thebus.

In Thebus, the Supreme Court of Illinois addressed the issue of when a plaintiff can bring
a claim for conversion of a sum of money. In that case, the defendant, an attorney, withheld
money from his employees’ paychecks to pay their federal income taxes but then failed to pay
that money to the Internal Revenue Service. The Administrator of the Attorney Registration and
Disciplinary Commission sought to discipline the attorney, claiming that he had converted the
employees’ funds. The court disagreed. It determined that the sum withheld was not a
conversion of the employees’ funds because the employees had no interest in the funds. See id.
at 262, 483 N.E.2d at 1261. The court also found that the sum withheld was not a conversion of
the government’s funds because it was not the government’s money. Rather, the plaintiff simply
owed a debt to the government. Jd.

The Navarres’ claim that LFG’s conversion claim represents a “mere obligation to pay
money” evinces a basic misunderstanding of Thebus. The primary proposition that Thebus
stands for is that a plaintiff's claimed interest in the property that was allegedly converted must
be one the law protects. See id. at 260-3, 483 N.E.2d at 1260-2. In Thebus, the government had
no protectible interest in the funds because it was simply owed a debt. The same is not true here;
the money belonged to LFG. This is sufficient to satisfy the requirement that the victim of a
conversion must be someone who has a right to immediate possession of the property.

Thebus makes it clear that money can be the subject of a conversion claim. See id. at 260,
483 N.E.2d at 1260. The requirement that the money “be capable of being described as a specific

chattel,” id., is satisfied in this case by LFG’s specific identification of the funds that were


more definite statement. The Court grant defendants’ motion to strike in part. The requests for
attorney’s fees are stricken from Counts 4 and 5. The motion to strike is otherwise denied.

Defendants are directed to answer the complaint on or before July 10, 2002. The case is set for a

status hearing on July 17, 2002 at 9:30 a.m.

Dated: June 26, 2002 WW VMN,

MATTHEW F. KENNEL!
United States District Judge



Minute Order Form (06/97)

» aff
United States District Court, Northern District of Mlinois

Nz of Assigned Jud; Sitting Judge if Oth
roe Magistrate Judge Matthew F. Kennelly than Assigned Judge
CASE NUMBER 01 C 9451 DATE 6/26/2002
CASE LFG, LLC vs. Navarre, et al
TITLE

[ln the following box (a) indicate the party filing the motion, e.g, plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature

of the motion being presented.)

a)

MOTION:

DOCKET ENTRY:

qd) a Filed motion of [ use listing in “Motion” box above.]

(2) o Brief in support of motion due

(3) ia} Answer brief to motion due___. Reply to answer brief due.

(4) oO Ruling/Hearingon___setfor___—at__

(5) ij Status hearing set for 6/17/2002 at 9:30 A.M..

(6) Oo Pretrial conference{held/continued to] [set for/re-set for]on__setfor__— ss at__

(7) QO Trial[set for/re-set for]on__at

(8) im [Bench/Jury trial] [Hearing] held/continued to__at

(9) oO This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]
COFRCP4(m) O General Rule21 CFRCP41(a)(1) [ FRCP41(a)(2).

(do) [Other docket entry) | Enter memorandum opinion and order that the court denies defendants’

motion to dismiss or for a more definite statement. The court grants defendants’ motion to strike in part.
The requests for attorney’s fees are stricken from Counts 4 and 5. The motion to strike is otherwise

denied. Defendants are directed to answer the complaint on or before July 10, 2002.

i | [For further detail see order attached to the original minute order.]

No notices required, advised in open court.

No notices required.
omg gf notes

Notices mailed by judge's staff. r4 2002

Notified counsel by telephone. date docketed

Docketing to mail notices.

Mail AO 450 form. docketinkeputyinitiats

Copy to judge/magistrate judge. 1ynod i myst sn
date mail lice
DL Sepuy's aj :8 Rd 92Nnr 20
initials - -
0 Rite mailing deputy initials



allegedly converted as a specific amount of money that belonged to LFG. Thebus does not
require that money have been kept in a separate account as a prerequisite to a claim of
conversion. Indeed, the court stated that “there is no requirement that the withheld sums be
segregated from the ...general funds or that they be deposited in a special bank account.” Jd. at
262, 483 N.E.2d at 1261. “Money is a specified and identifiable fund when it is not an estimate

a9

but rather ‘a specific amount transferred to [the defendant] from an outside source.”” Desmond
& Ahern, Ltd. v. Scheffki, No. 01 C 6098, 2001 WL 1646562, at *10 (N.D. Ill. Dec. 21, 2001)
(quoting Roderick Development Investment v. Community Bank of Edgewater, 282 Ill. App. 3d
1052, 1059, 668 N.E.2d 1129, 1135 (1996)); it need not be segregated in a separate account.
Roderick, 282 Ill. App. 3d at 1063, 668 N.E.2d at 1137. See also Chicago Dist. Council of
Carpenters Welfare Fund v. Gleason & Fritzshall, 295 Ill. App. 3d 719, 726, 693 N.E.2d 412,
416 (1998) (“Money may be identified by its source or description”).

The Navarres also argue that Count 4 is deficient because LFG has not explained
why it is entitled to immediate possession of the funds. The Federal Rules of Civil Procedure,
however, do not require a plaintiff to explain its legal theories in the complaint. See, e.g., Scott v.

City of Chicago, 195 F.3d 950, 951 (7" Cir. 1999) (complaint need not spell out every element of

a legal theory to provide notice of claim). Count 4 sufficiently sets forth a claim for conversion.
Cc. Count 5
In Count 5, LFG alleges that Defendants were unjustly enriched by the unlawful

transfer of LFG’s funds. The Navarres argue that Count V fails to state claim for unjust

enrichment because it does not set out specific factual allegations to show how Defendants’


IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION
LFG, LLC, ) y %
) Oy hp,
Plaintiff, ) *> @
) Up
v. ) No. 01 C9451
)
ROBERT NAVARRE and )
KAREN NAVARRE, )
)
Defendants. )

MEMORANDUM OPINION AND ORDER

MATTHEW F. KENNELLY, District Judge:

LFG, LLC has filed a complaint against Robert and Karen Navarre seeking to avoid and
recover allegedly fraudulent transfers under 11 U.S.C. §§ 548(a)(1)(B), 11 U.S.C. §§ 544 (b),
740 ILCS 160/5(a)(2), 740 ILCS 160/6(a), and asserting common law claims of conversion and
unjust enrichment. The Navarres have moved to dismiss the complaint pursuant to Federal Rules
of Civil Procedure 9(b) and 12(b)(6) and to strike certain requests for relief. For the reasons
stated below, the Court denies the motion to dismiss but grants the motion to strike in part.

Facts

LFG filed a Chapter 11 petition in April 2001 and has brought these claims as the debtor-
in-possession. LFG is an Illinois limited liability company of which 90% is owned by Linnco
Futures Group, an Illinois corporation. Linnco was managed by its CEO, Steve Klemen, who
also managed LFG until June 15, 2000.

On March 23, 1999, the Navarres loaned $3 million to Linnco, which signed a promissory


note for that amount and agreed to pay interest of 10% per annum. LFG was not a party to the
Joan or the note; in fact, it was precluded from entering into such an agreement by the terms of a
commitment agreement with several banks dated June 4, 1998.

On May 2, 2000, Klemen transferred $3,025,000 of LFG’s funds to the Navarres to repay
the loan. In its complaint, LFG contends that neither Klemen nor Linnco was authorized to make
the transfer, that Klemen acted ultra vires, and that the Navarres knew or should have known that
the transfer was made ultra vires. LFG seeks to avoid the transfer of its funds and to obtain
$3,025,000 plus interest from the Navarres. It also seeks attorney’s fees with respect to the
fraudulent conveyance claims and punitive damages on the conversion claim.

Defendants have moved to dismiss or strike all five of LFG’s claims or in the alternative
for a more definite statement. They argue that Counts 1, 2, and 3 (the fraudulent conveyance
claims) fail to satisfy the particularity requirement of the Federal Rule of Civil Procedure 9(b);
and that Counts 4 and 5 fail to state a claim, and that LFG’s request for punitive damages and
attorney’s fees should be stricken.

Discussion
A. Counts 1, 2 and 3

The Navarres argue that Count 1 should be stricken or that LFG should be ordered to
provide a more definite statement because it fails to satisfy the particularity requirements of Rule
9(b) of the Federal Rules of Civil Procedure. Rule 9(b) requires that in all averments of fraud or
mistake, the circumstances constituting fraud or mistake shall be stated with particularity. “The
purpose of requiring that fraud be pleaded with particularity is not...to give the defendant ...

enough information to prepare his defense. A charge of fraud is no more opaque than any other