II. The releases and non-recourse provisions

Counter-defendants contend the CRA released their note obligations because they were
associates and affiliates of VMS partners and VMS principal entities. The Trust asserts counter-
defendants did not work for VMS partners or principal entities, but rather were associates or
affiliates of VMS entities, namely VMS Realty, Inc. or VMS Realty Partners.

For purposes of this motion, the court must only decide if it can reasonably be inferred
that counter-defendants were not associates or affiliates of VMS partners or principal entities.
Based on the pleadings, it can reasonably be concluded that counter-defendants were not affiliates
of a VMS partner or principal entity. Counter-defendants offer no facts suggesting that they were
controlled by or under common control with a VMS partner or principal entity.’ Similarly, the
pleadings do not preclude a conclusion that counter-defendants were exclusively associates of
VMS entities, rather than associates of the VMS partners. Counter-defendants were not named
as partner associates in the CRA or mutual releases. In fact, their names were never specifically
mentioned. Furthermore, neither the CRA nor the pleadings define counter-defendants’ job
responsibilities.’ Accordingly, it may reasonably be inferred from the pleadings that the mutual

releases and the CRA’s non-recourse provisions do not protect counter-defendants from liability.

°The Trust’s remaining arguments pertaining to counter-defendants’ status as affiliates are
moot.

*In their reply, counter-defendants offer the deposition testimony of Joel Stone, the
Trust’s primary witness and one of the VMS partners’ principals. Stone testified that counter-
defendants advised the VMS partners. Counter-defendants’ Reply, Ex. 1 at pp. 95-96. Although
parties moving for judgment may introduce evidence to support their positions, thus turning the
motion into one for summary judgment, they may not introduce new arguments and evidence for
the first time in a reply brief. United States v, Feinberg, 89 F.3d 333, 340-41 (7" Cir. 1996).

-4.


the right to seek or assert (A) any respective assets, (B) a judgment

against any Non-Recourse Parties or any of their respective assets,

(C) any other legal action against any Non-Recourse Parties or any

of their respective assets, except for the right to realize

upon . . . assets of the VMS Principal Entities... .
Id. at § 10.04. Non-recourse parties are defined as “any VMS Partner or any Affiliates or
Associates of any of them or any Affiliates or Associates of any VMS Principal Entity . . . or any
successors or assigns of any of them.” Jd. An affiliate of a person is defined as “a person that
directly or indirectly through one or more intermediaries, controls, is controlled by or is under
common contro! with that person...” Jd. at § 1.01. Based on these definitions, the parties
dispute whether the CRA released counter-defendants from their note obligations.

DISCUSSION

I. Motion for judgment standard

After pleadings are closed, a party may move for judgment on the pleadings. Fed.R.Civ.P.
12(c). When the moving party does not submit evidence outside the pleadings, a 12(c) motion is
evaluated under the same standard as a motion to dismiss. Northern Indiana Gun & Outdoor
Shows, Inc. v. City of South Bend, 163 F.3d 449, 452 (7" Cir. 1998); Paist v. Town and Country
Corp., 744 F.Supp. 179, 181 (N.D. Ill. 1990). The court will grant a 12(c) motion only if “it
appears beyond doubt that the plaintiff cannot prove any facts that would support his claim for
relief.” Northern Indiana Gun & Outdoor Shows, Inc., 163 F.3d at 452 (citing Craigs, Inc. v.

General Elec. Capital Corp., 12 F.3d 686, 688 (7" Cir. 1993)). The facts are viewed in the light

most favorable to the nonmovant. /d.

3+


Ill. Previous litigation

A. In re VMS Securities Litigation

Counter-defendants contend they were released from their note obligations by a settlement
agreement reached in Jn re VMS Securities Litigation, No. 89 C 9448 (N.D. Ill. 1991). This
contention is not mandated by the pleadings. First, the settlement agreement is restricted to
actions and claims made in connection with certain funds. It is neither clear from the pleadings
nor was there any evidence presented to show counter-defendants’ notes are related to these
funds. In fact, the Trust asserts it can prove the notes are not related to the funds.

Second, it is not clear that the Trust was one of the parties bound by the settlement
agreement. The settlement agreement provides that “other defendants” shall release each other
from certain claims. The Trust is not listed as an “other defendant” in the agreement. Counter-
defendants assert the Trust is an “other defendant” because many of the named “other
defendants” assigned their assets to the Trust. Counter-defendants point to no case law to
support this proposition. Moreover, VMS Mortgage Company, the entity that assigned the notes
at issue to the Trust, is not listed as an “other defendant.”

Finally, the relevant sections of the release are limited to claims that exist “to and including
the date of signing this stipulation.” The stipulation was signed on September 24, 1991. The
CRA was not executed until six months later.

B. In the Matter of VMS Limited Partnership Securities Litigation

Counter-defendants further contend they were released from their note obligations by a
settlement agreement reached in /n the Matter of VMS Limited Partnership Securities Litigation,

90 C 2412 (N.D. II. 1991). This conclusion cannot be drawn from the pleadings alone. First, the

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Minute Orter Form (06/97)

United States District Court, Northern District of IHinois

Name of Assigned Judi Sitting Judge if Other
serge Magistrate Judge Suzanne B. Conlon than Assigned Judge
CASE NUMBER 00 C 7337 DATE 6/12/2001
CASE George Ruff, et al. vs. Partner’s Liquidating Trust
TITLE

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

the motion being presented.]

MOTION:

DOCKET ENTRY:

(1) o Filed motion of [ use listing in “Motion” box above.]
(2) o Brief in support of motion due
(3) o Answer brief to motion due. . Reply to answer brief due
(4) oOo Ruling/Hearing on set for at
(5) O Status hearing[held/continued to] {set for/re-set for] on setfor at .
(6) 0 Pretrial conference[held/continued to] [set for/re-set for] on set for at _
(7) im) Trial[set for/re-set for] on at
(8) i) [Bench/Jury trial] [Hearing] held/continued to at :
(9) o This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to}
OFRCP4(m) General Rule21 COFRCP4I(a)(1) OO FRCP41(a)(2).
(0) +f [Other docket entry] Third-party defendants Leonard Levine’s and Neil Hansen’s motion for
judgment on the pleadings [24-1] is denied. ENTER MEMORANDUM OPINION AND ORDER.

ab a [For further detail see order (on reverse side offattached to) the original minute order.]

No notices required, advised in open court

No notices required smumber of woices
VY | Notices mailed by judge’s staff.

Notified counsel by telephone.
Docketing to mail notices,

\) (|

Mail AO 450 form.

Copy to judge/magisteate judge. : OOCAETING
J bus GOCACTING
on2i2001

date mailed notice

coustoom Ol JUN 18 Pil 6: G9
” ints

Date/time received in
central Clerk's Office



settlement agreement only binds “settling defendants.” Counter-defendants assert the Trust is a
“settling defendant” because many of the “settling defendants” assigned their assets to the Trust.
Counter-defendants point to no case law to support this proposition.

In addition, counter-defendants assert they are “released persons” as defined under the
agreement. Released persons include all “settling defendants” and their affiliates and associates.
Itis not clear from the pleadings whether counter-defendants were associates of a “settling
defendant,” and the Trust disputes this fact.

Finally, released claims are defined as those arising from or in connection with the settled
claims. Counter-defendants fail to explain how the Trust’s claims relate to the settled claims.
Additionally, the Trust points to a provision in the agreement that states each of the “settling
defendants” reserve claims not arising from the released claims. The Trust contends its claims do
not arise from the released claims. Read in a light most favorable to the Trust, there are genuine
issues of material fact pertaining to whether the settlement agreements preclude its claims against
counter-defendants.

CONCLUSION

Counter-defendants’ motion for judgment on the pleadings is denied.

ENTER:

Suzann@’B. Conlon
June 12, 2001 United States District Judge



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

EASTERN DIVISION
GEORGE RUFF, ET AL., )
)
Plaintiff, ) No. 00 C 7337
)
Vv. ) Suzanne B. Conlon, Judge
)
PARTNER’S LIQUIDATING TRUST, ) > pay,
) DOCKED
Defendants. JUN 19 2
007

MEMORANDUM OPINION AND ORDER

George Ruff, Dennis Callaghan, Scott L. Lager, Mitchell Hochberg, Stephen Berini, Jack
Shaffer, and Allen Seeland sue Partners Liquidating Trust (“the Trust”) for attorneys fees and costs
and seek declaratory relief as to the extent and nature of their liability under six promissory notes
allegedly assigned to the Trust. The Trust has filed a third-party complaint against Leonard Levine
(“Levine”) and Neil Hansen (“Hansen”) (collectively “third-party defendants”) for defaulting on
promissory notes. Third-party defendants move for judgment on the pleadings, pursuant to

Fed.R.Civ.P 12(c).

BACKGROUND
For purposes of a motion for judgment on the pleadings, the court accepts all well-pleaded
facts in the complaint as true and draws all reasonable inferences in favor of the nonmovant.
Forseth v, Village of Sussex, 199 F.3d 363, 368 (7" Cir. 2000). On December 31, 1984 third-
party defendants signed partial recourse promissory notes in the amount of $1,180,000 in favor of

VMS Mortgage Company III (“VMS III”). These notes are the subject of this dispute.


On March 31, 1992, VMS partners and VMS principal entities (collectively “VMS”)

entered into the “Creditor Repayment Agreement” (“CRA”) with their creditors, who are

beneficiaries of the Trust.' Under the CRA, VMS assigned its assets to the Trust for the benefit

of its creditors, in exchange for mutual releases. The mutual releases were signed pursuant to the

CRA and released the following:

Each of the VMS Partners and their respective Associates . . . from
any and all claims whatsoever which any of the VMS Releasing
Partners may have had, presently have or in the future may have
against the Creditor Released Parties which arise, have arisen or
may hereinafter arise in whole or in part out of or on account of such
Creditor’s Existing Indebtedness, whether known or unknown and if
unknown, whether or not the unknown matter would have been
material to . . . the decision to enter into this Release or the

Creditor Repayment Agreement.

Am. Cmplt. Ex. 8. The CRA defines associates of a person as “such Person’s shareholders,

general partners, directors, officers, employees, agents, and advisors, and shareholders, general

partners and family members of any of the foregoing Persons.” The Trust’s Response to Motion

For Judgment (“Trust Resp.”), Ex. A, vol. 1, CRA at § 1.01.

VMS and the Trust further agreed that no recourse could be taken against non-recourse

parties with respect to any documents relating to the CRA. Specifically, the agreement provided:

“[N]o recourse (including, without limitation, recourse under any
deficiency judgment) shall be had against the Non-Recourse
Parties .. . or any of their respective assets,” and “each VMS
Partner, with respect to Partner Indebtedness only, hereby waives

'The CRA created three tiers for over 400 VMS entities. Tier I, entitled "VMS partners"

consisted of named VMS partners plus four additional corporations and two additional

partnerships. Tier 2, entitled "VMS principal entities," was made up of seven specifically named
partnerships. Tier 3, entitled "VMS entities," included VMS partners and principal entities, VMS

Mortgage Companies I, II, and III, and VMS Realty, Inc. Tiers 3 did not sign the CRA or the
mutual releases.

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