DISCUSSION

1. Jurisdiction

Karamuzis argues that we lack subject matter jurisdiction because Judge
Leinenweber held that the only basis for jurisdiction in the case before him was the
Higher Education Act in 20 U.S.C. §1087 and that the Act was not applicable
because there was no binding contract between Karamuzis and UDE. Plaintiff
contends that we have subject matter jurisdiction under 28 U.S.C.§ 1345 and 28
U.S.C. § 1355. We do not agree that 28 U.S.C. 1355 is applicable because it
provides exclusive jurisdiction in the federal courts for the “recovery or
enforcement of any fine, penalty, or forfeiture . . . incurred under any Act of
Congress ....” In the instant case Plaintiffs are limited to equitable remedies rather
than statutory remedies and Plaintiffs cannot seek to enforce the contractual
obligations of the education loans. However, 28 U.S.C. § 1345 states that “the
district courts shall have original jurisdiction of all civil actions, suits or
proceedings commenced by the United States....” The instant suit was
commenced by the United States and thus the statutory provision provides a basis

for jurisdiction. 28 U.S.C. § 1331.


not deny that he has not paid for his legal education. Based on a technicality another
court ruled that no contract existed between UDE and Karamuzis. We are not
disagreeing with Judge Leinenbewer’s ruling which merely found that there is no
contract between UDE and Karamuzis. However, that does not mean that within the
spectrum of quasi-legal remedies and equitable remedies that the United States
should not be able to recover the money loaned to Karamuzis that made his
education possible. The doctrine of res judicata is based upon the equitable notions.
It is not logical that such a doctrine could be used to bar Plaintiff from recovering
funds that Karamuzis concedes are owed to it in all fairness.

Karamuzis apparently received a good education at DePaul while the
government funded his tuition because he is now able to employ his legal knowledge
to try and cheat the government out of its rightful repayment based upon a
technicality. Plaintiffs have alleged that Karamuzis has even gone as far as to tell
DePaul that he would not repay the amount of the loan even if DePaul took the loan
back from UDE, although he had a promissory note with DePaul for repayment.
Karamuzis’ callous disregard for what is just and right provides a poor example of
those engaged in the legal profession. Through the generosity of the federal
government and associations such as the Illinois Student Assistance Commission
Karamuzis obtained financial assistance for law school. Now that he has his degree
he apparently has no qualms about walking away from the sources of his good

fortune and ignoring his moral and equitable obligations.


that favor the plaintiff, construe the allegations of the complaint in the light most
favorable to the plaintiff, and accept as true all well-pleaded facts and allegations in
the complaint. Thompson v. Illinois Dep't of Prof’l Regulation, 300 F.3d 750, 753
(7th Cir. 2002); Perkins v. Silverstein, 939 F.2d 463, 466 (7th Cir. 1991). The
allegations of a complaint should not be dismissed for a failure to state a claim
“unless it appears beyond doubt that the plaintiff can prove no set of facts in support
of his claim which would entitle him to relief.” Conley v. Gibson, 355 U.S. 41, 45-
46 (1957). Nonetheless, in order to withstand a motion to dismiss, a complaint must
allege the “operative facts” upon which each claim is based. Kyle v. Morton High
School, 144 F.3d 448, 444-45 (7th Cir. 1998);Lucien v. Preiner, 967 F.2d 1166,
1168 (7th Cir. 1992). The plaintiff need not allege all of the facts involved in the
claim and can plead conclusions. Higgs v. Carter, 286 F.3d 437, 439 (7th Cir.
2002); Kyle, 144 F.3d at 455. However, any conclusions pled must “provide the
defendant with at least minimal notice of the claim,”/d., and the plaintiff cannot
satisfy federal pleading requirements merely “by attaching bare legal conclusions to
narrated facts which fail to outline the bases of [his} claim.” Perkins, 939 F.2d at

466-67.


I. Re: i

Karamuzis argues that the instant case is barred under the doctrine of res
judicata because of the May 6, 2002 order issued by Judge Leinenweber. Under the
doctrine of res judicata the parties 7 a suit and their privies are prohibited from
relitigating a matter that was decided on the merits by a court of competent
jurisdiction and resulted in a final judgment on the merits. Hawxhurst v. Pettibone
Corp., 40 F.3d 175, 180 (7* Cir. 1994), The doctrine precludes relitigation of all
matters offered to support or defeat the claim in the prior litigation and all matters
that could have been offered to support or defeat the claim. Jd. The elements for res
judicata are: 1) final judgment, 2) identity of the cause of action, and 3) identities of
parties or privies in the suits. Jd.

Plaintiff argues that the parties are not identical in this action and the action
before Judge Leinenweber. Plaintiff argues that the United States is not the same as
the UDE and therefore there is not an identity of parties. However, the court notes
that there is privity between Plaintiff and UDE. Plaintiff United States has not
alleged facts that indicate that it is pursuing a separate claim in its own right.
Although, Plaintiff is not technically the same entity as the UDE, Plaintiff states in
its complaint that it is “acting on behalf of the U.S. Department of Education.”
(Compl. 3). Plaintiff is properly deemed to be an agent of the UDE claim and there

is an identity of the parties.


IIL. Compulsory Counterclaim

Karamuzis argues that the instant unjust enrichment claims arise out of the
same transaction and occurrence as in the suit before Judge Leinenweber.
Karamuzis thus argues that the claims in the instant action were compulsory
counterclaims pursuant to Federal Rule of Civil Procedure 13(a) and therefore
Plaintiff is barred from presenting the claims in the instant action. However, the
“usual method by which [Rule 13(a)] is enforced is simply by the plaintiffs pleading
res judicata in the defendant’s suit.” Asset Allocation and Mgmt. Co. v. Western
Employers Ins. Co., 892 F.2d 566, 572 (7 Cir. 1989). As we indicated above, the
doctrine of res judicata is not applicable and therefore, we deny Karamuzis’ motion

to dismiss.

CONCLUSION

Based on the foregoing analysis we deny the motion to dismiss.

Samuel eer q
United States District Court Judge

Dated: March 30, 2004



Minate Order Forma (06°97)
-¢

United States District Court, Northern District of Illinois

Name of Assigned Judge ' i Sicting Judge if Other
or Magistrate Judge Samuel Der-Yeghiayan than “Assigned Judge
CASE NUMBER 02 C7993 DATE 3/30/2004
CASE USA vs. Karamuzis
TITLE
[In the following box (a) indicate the party filing the motion, ¢.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature

MOTION: of the motion being presented.]

DOCKET ENTRY:

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

(2) oO Brief in support of motion due

@) o Answer brief to motion due. . Reply to answer brief due. :

4) Oo Ruling/Hearing on set for at :

(5) 0 Status hearing{held/continued to] [set for/re-set for] on set for at

(6) a Pretrial conference[held/continued to] [set for/re-set for] on set for at :

(7) Oo Trial[set for/re-set for] on at

(8) Oo (Bench/Jury trial] [Hearing] held/continued to at

(9) a This case is dismissed [with/without} prejudice and without costs[by/agreement/pursuant to]

QFRCP4(m) (Local Rule 41.1 OFRCP41(a)(t) 0 FRCP41(a\(2).

(10). [MM (Otherdocketentry) For the reasons stated on the attached memorandum opinion, the Court hereby
denies the defendant’s motion to dismiss. All previously set dates are to stand, Enter Memorandum
Opinion.

(a1 @ [For further detail see order attached to the original minute order.)

No notices required, advised in open court,
No notices required.

Notices mailed by judge's staff,

Notified counsel by telephone.

ao | Docketing to mail notices.
Mail AO 450 form.

Copy to judge/magistrate judge.
courtroom ero fe. Suet
MW deputy’s Sati eS kG see
initials
Date/time received in| .
central Clérk's Office rmalling deputy itinte

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There is also an identity of the causes of action. Res judicata applies even if
“the prior suits charged different violations of law, alleged different facts, and sought
different relief.” Okoro v. Bohman, 164 F.3d 1059, 1062 (7* Cir. 1999). The
doctrine of res judicata exists under the federal common law and bars a claim in a
subsequent suit “if the claim on which it is based arises from the same incident,
events, transaction, circumstances, or other factual nebula as a prior suit that had
gone to final judgment.” Jd. The same cause of action res judicata test “does not
require identity of legal theory or of facts. . .” Jd. Even though the suit before Judge
Leinenweber concerned legal theories and the instant suit is based upon equitable
theories, the facts, events, transactions, and circumstances are the same in this case
and the case before Judge Leinenweber.

In this case although the doctrine of res judicata is apparently applicable we
must not forget that the doctrine is an equitable doctrine. Walsh v. International
Longshoremen’s Assoc, AFL-CIO, Local 799 630 F.2d 864, 875 (1* Cir. 1980).
Since the doctrines of equity are based on fundamental notions of faimess a court “is
not bound to give res judicata effect to a previous judgment if an inequitable
situation would thereby result.” /d.; see also Stewart v. Anderson, 2000 WL
1741885, at *4 (N.D. Ill, 2000)(stating that a “[cJollateral estoppel . . . is an
equitable doctrine subject to limitations where fairness and justice require.”). The
instant case is exactly the type of case that the equitable principles are intended to

address. Karamuzis does not deny that he received his legal education and he does


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

EASTERN DIVISION DOCuETED
UNITED STATES OF AMERICA, MAR 3 0 2004
Plaintiff,
v. No. 02 C 7993
ANTHONY KARAMUZIS,

DEPAUL UNIVERSITY, and the
ILLINOIS STUDENT ASSISTANCE
COMMISSION,

www wa wae wwe SS Sw

Defendants.

MEMORANDUM OPINI
SAMUEL DER-YEGHIAYAN, District Judge
This matter is before the court on Defendant Anthony G. Karamuzis’
(“Karamuzis”) motion to dismiss. For the reasons stated below we deny the motion

to dismiss,

BACKGROUND
Plaintiff United States of America alleges that Karamuzis applied to the U.S.
Department of Education (“UDE”) for a federal direct consolidation loan application

and promissory note to consolidate his school loans totaling approximately $46,000.

q\0



Plaintiff alleges that Karamuzis used the loans to finance his legal education. After
the UDE purchased Karamuzis’ loan from DePaul University (“DePaul”), DePaul
sent a promissory note to Karamuzis marked “paid in full.” UDE also purchased a
loan from the Illinois Student Assistance Commission (“Commission”) and the
Commission sent a promissory note to Karamuzis marked “paid in full.” Plaintiffs
allege that Karamuzis never made a single payment to UDE on the consolidated loan
and in May of 2001 Karamuzis filed a claim for injunctive relief to prevent the UDE
from taking action against Karamizis for non-payment. On May 6, 2002 Judge
Leinenweber entered a declaratory judgment indicating that no valid contract existed
between Karamuzis and UDE and prohibiting the UDE from attempting to enforce
or collect the subject loan. Plaintiff alleges that on August 8, 2002 Karamuzis
contacted DePaul and indicated that he would not sign a new promissory note to
DePaul and indicated that he would not repay the amount of the loan even if DePaul
took the loan back from UDE. Plaintiffs contend that Karamuzis has not made full
payment of his law school loans to UDE, DePaul, or the Commission. Plaintiffs

bring the instant action based upon the doctrine of unjust enrichment.

LEGAL STANDARD

In ruling on a motion to dismiss, the court must draw all reasonable inferences