those eight affirmative defenses. RB&W seeks summary judgment due to
defendant’s default on payments and to the warrant of attorney and confession of
judgment clause contained in the promissory note. RB&W moves the court to enter
a judgment in its favor, awarding it the outstanding principal, all accrued interests,

and costs of suit.

LEGAL STANDARD

Summary judgment is appropriate when the record reveals that there is no
genuine issue as to any material fact and the moving party is entitled to judgment as
a matter of law. Fed. R. Civ. P. 56 (c). In seeking a grant of summary judgment the
moving party must identify “those portions of ‘the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the affidavits, if any,’ which it
believes demonstrate the absence of a genuine issue of material fact.”Celotex Corp.
v. Cartrett, 477 U.S. 317, 323 (1986) (quoting Fed. R. Civ. P. 56(c)). This initial
burden may be satisfied by presenting specific evidence on a particular issue or by
pointing out “an absence of evidence to support the non-moving party’s case.”Jd. at
325. Once the movant has met this burden, the non-moving party cannot simply rest
on the allegations in the pleadings, but “by affidavits or as otherwise provided for in
[Rule 56], must set forth specific facts showing that there is a genuine issue for
trial.” Fed. R. Civ. P. 56 (e). A “genuine issue” in the context of a motion for

summary judgment is not simply a “metaphysical doubt as to the material facts.”



arguments, RB&W’s untimely arguments are improper. In addition to it being unfair
to Buford, RB& W’s conduct has left the court without a complete briefing on the
novation issue. RB&W had express notice of Buford’s novation position in Buford’s
answer and RB& W’s failure to address the issues in its motion is inexcusable.
RB&W acknowledges in its reply that “all of the affirmative defenses are premised
upon defendant’s contention of a novation.” (Reply 2.). Yet there is not one
mention of the novation issue in RB& W’s motion for summary judgment or
accompanying memorandum. See Aliwoli v. Gilmore, 127 F.3d 632, 635 (7* Cir.
1997)(quoting United States v. Feinberg, 89 F.3d 333, 340- 41 (7th Cir.1996) for
statement that “[t}he reply brief is not the appropriate vehicle for presenting new
arguments or legal theories to the court."); Weizeorick v. ABN AMRO Mortgage
Group, Inc., 2004 WL 1880008, at *2 (N.D. Ill. 2004)(hoiding that “i]t is
elementary that parties may not raise new arguments or present new facts in their
teply, thus depriving their opponent of the opportunity to respond.”); Drwiega v.
Infrared Testing, Inc., 2004 WL 1427099, at *2 (N.D. Ill. 2004)(stating that “[a]
party cannot ‘circumvent the adversarial process by raising new arguments in [a]
reply.’")(quoting Parillo v. Commercial Union Insurance Co.,85 F.3d 1245, 1250
(7th Cir. 1996)); Stark v. PPM America, Inc., 2002 WL 31155083, at *7 (N.D. Ill.
2002)(stating that the movant “cannot raise new arguments or legal theories in his
reply brief.”); Ty, Inc. v. Jones Group, Inc. 2001 WL 1414232, at *2 (N.D. Ill.

2001)(stating that “a reply brief is not the appropriate vehicle for presenting new


appearance, on the debtor's behalf, of an attorney designated by the holder.” Medina
Supply Co. v. Corrado, 689 N.E.2d 600, 603 (Ohio App. Ct. 1996)(quotingD.H.
Overmyer Co. v, Frick Co. 405 U.S. 174 (1972)). A judgment on a cognovit note is
generally entered pursuant to a warrant of attorney which “consented to by a debtor
provides for waiver of prejudgment notice and hearing.” Fogg v. Friesner, 562
N.E.2d 937, 939 (Ohio App. Ct, 1988). Under Ohio Law, a cognovit note must
comply with the standards set forth in Ohio Revised Code (“ORC”) 2323.13 which
suggests the proper language that should be employed in a cognovit note and further
requires: 1) that a warning, in language the statute dictates, appear within the
promissory note, notifying the debtor of its existence, 2) that notice be given to the
debtor upon entry of judgment, and 3) that all consumer loans and consumer
transactions are thus excluded from the purview of this statute. The cognovit note
contained with the promissory note in the instant action complies with all the
requirements set forth in ORC 2323.13.

A defendant who seeks relief “from a judgment taken upon a cognovit note
need only establish (1) a meritorious defense and (2) that the motion was timely
made.” Medina Supply Co., 689 N.E.2d at 603. In the instant action, while a default
judgment was entered by Judge Holderman, the prior judge in this action, against
Buford on January 22, 2003, the default judgment was vacated by Judge Holderman
on March 31, 2003. Buford was also granted leave to answer RB& W’s complaint

for confession of judgment and Buford presented eight affirmative defenses in his


Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp, 475 U.S. 574, 586 (1986).
Rather, a genuine issue of material fact exists when “the evidence is such that a
reasonable jury could return a verdict for the nonmoving party.”Anderson v. Liberty,
Inc., 417 U.S. 242, 248 (1986); Insolia v. Phillip Morris, Inc. 216 F.3d 596, 599 (7*
Cir. 2000). The court must consider the record as a whole, in a light most favorable
to the non-moving party. Anderson, 477 U.S. at 255; Bay v. Cassens Transport Ca,
212 F.3d 969, 972 (7* Cir. 2002).

DISCUSSION
The main facts of this case are not in dispute. Both parties have admitted that
old and new promissory notes were entered into with a principal balance of
$800,000. The old promissory note was to be due on August 15, 1998. The New
Promissory note extended that maturity date to April 15, 2000. It is also not
disputed that Buford failed to make any payments on the principal balance before its
maturity date of April 15, 2000.

1, Cognovit Note

The promissory note, both old and new, contained a warrant of attorney and
confession of judgment clause or what is known as a cognovit note. Under Ohio law
a congnivit note is "a legal device by which the debtor consents in advance to the

holder's obtaining a judgment without notice or hearing, and possibly even with the


RB&W argues that it did not need to address the defenses since the defenses
were affirmative defenses, Buford had the burden to prove them. Such an argument
is without merit. The burden of proof has nothing to do with a movant’s obligation
to address contested issues in a motion for summary judgment. Regardless of who
bears the ultimate burden on proving the defenses, if RB&W contends that it is
entitled to judgment as a matter of law then it must show the court why that is so in
its motion and accompanying memorandum. See Ruff'v. Partner's Liquidating
Trust, 2001 WL 893820, at *8 n.11 (N.D. Ill. 2001)(holding that summary judgment
movant could not seek summary judgment on the issues regarding the affirmative
defenses because the arguments were not presented until the movant’s reply brief).

The first of Buford’s first affirmative defenses states specifically that Buford
was relieved from his obligation because a novation occurred. By ignoring the
affirmative defenses in its summary judgment motion, RB&W’s motion is facially
defective. Also, by ignoring the affirmative defenses RB&W was able to hold off on
presenting its arguments pertaining to a novation until its reply brief and was thus
able to prevent Buford from submitting a response to RB& W’s novation arguments.
RB&W’s motion should be able to stand on its own and should indicate why it is
entitled to judgment as a matter of law and RB&W cannot attempt to first address
key disputed issues in its reply, particularly when it had clear notice of Buford’s
position. Whether it was due to RB& W’s lack of preparation or it was an attempt at

motion strategy to deny Buford an opportunity to respond to RB& W’s novation


ute Ondeg Form (0697)

United States District Court, Northern District of Mlinois

Name of Assigned Judge _ i Sitting Judge if Oth
or Magistrate Judge Sanmuel Der-Yeghiayan ‘than Astigned Judge
CASE NUMBER 02 C 8853 DATE 11/3/2004
CASE RB&W Manufacturing vs. William Bufford, II
TITLE
[In the following box (a) indicate the party filing the motion, e.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature
MOTION: of the motion being presented.]
DOCKET ENTRY:
qd) aq Filed motion of [ use listing in “Motion” box above.}
(2) oO Brief in support of motion due
(3) o Answer brief to motion due. . Reply to answer brief due. .
(4) ia} Ruling/Hearing on set for at
(5) a Status hearing[held/continued to) [set for/re-set for] on set for at
(6) Oo Pretrial conference[held/continued to] [set for/re-set for] on set for at :
) oO Trial[set for/re-set for] on at
(8) a [Bench/Jury trial] [Hearing] he!d/continued to at
(9) Q This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to}
OFRCP4(m) O Local Rule 41.1 OFRCP41(a)(1) O FRCP41(a)(2).
(10) MM {Otherdocketentry] For the reasons stated in the attached memorandum opinion, plaintiff's motion
for summary judgment is denied. Enter Memorandum Opinion.
(il) @ [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.
ov | Docketing 10 mail notices.
Mail AO 450 form.
Copy to judge/magistrate judge.
courtroom Gia WY Ge AGH NOG
Mw deputy’s oar
inials Dateltimé received inl
central Clerk's Office

coe ee


arguments or legal theories to the court.”). RB&W’s first attempt to address the
novation issue was in its reply brief, thereby depriving Buford of an opportunity as
the non-movant to respond to RB&W’s novation arguments. Such gamesmanship is

improper. Therefore, we deny RB&W’s motion for summary judgment.

CONCLUSION
Based on the foregoing analysis, we deny RB&W’s motion for summary

judgment.

Samuel Der-Yeghiayan_ ; S 3

United States District Court Judge

Dated: November 3, 2004

10



answer. Thus, Buford entered a timely motion to vacate judgment and has presented
valid defenses. Therefore, the warrant of attorney and confession of judgment clause

or cognovit note are no longer applicable in this action.

II. Alleged Novation and Other Affirmative Defense Issues

Buford included in his answer to the complaint several affirmative defenses,
one of which was that a novation occurred, thereby relieving Buford of his
obligation to RB&W. Buford contends that there are legitimately disputed facts
involved in the determination of whether or not a novation occurred that prevent a
finding in favor of RB&W as a matter of law. Buford stated under oath in the instant
action that he negotiated a novation in Cleveland, Ohio in July 2000 with officers of
RB&W and that under the new agreement, Reliant was substituted for Buford as the
debtor.

We shall not address RB& W’s arguments pertaining to the novation issue or
any other issue pertaining to one of Buford’s affirmative defenses. RB& W had the
burden to explain to the court in its motion for summary judgment why it is entitled
to judgment as a matter of law. However, in its motion RB& W completely ignored
the affirmative defenses listed in Buford’s answer to the complaint. All Buford
really needed to do in response to the instant motion is to point out his affirmative
defenses included in his answer and point out that the issues were not addressed in

RB&W’s motion.


judgments against the undersigned.

In July 2000, meetings occurred between Buford, representatives of Reliant,
representatives of RB&W, and a representative of Park-Ohio Industries (who had
acquired RB&W prior to 2000). The New Promissory note was discussed and a new
agreement was reached. Under the New Agreement, Reliant replaced Buford as the
obligor under the promissory note. In addition, funds from the $1,000,000 held in
escrow were to be released in order to cover the remaining purchase price. On
August 4, 2000, RB& W received payment in the amount of $189,870.95 released
from the escrow account. One month later, an additional $10,129.05 was paid from
the escrow account to RB&W. In March 2001, Reliant made a payment of $40,000
to RB&W to cover interest for the period from July 11, 2000 through February 28,
2001. In July 2001, Reliant made a payment to RB& W in the amount of $25,666.67.
To this date, payments received on the principal balance of $800,000 equal
$250,000, and $41,166.67 has been paid toward interest accrued. There remains
$550,000 due on the principal plus accrued interest.

RB&W brought this suit for confession of judgment on December 6, 2002,
invoking the warrant of attorney and confession of judgment clause contained within
the promissory note. RB&W moved the court for a default judgment against the
defendant, which was granted. Buford then filed a motion to vacate default
judgment and for leave to file answer instanter, which was also granted. In Buford’s

answer he asserted eight affirmative defenses. RB&W did not file an answer to

3


subsidiaries of Reliant. Reliant purchased Capital Fasteners, Inc, from RB&W in
August of 1993, Part of the agreement included Reliant placing $1,000,000 of the
purchase price into escrow with National City Bank of Cleveland, Ohio. This
money was to be a reserve for any environmental expenses that may arise for Capital
Fasteners, Inc. The rest of the purchase price was to be paid by way of a promissory
note. On August 15, 1993, Buford promised to pay $800,000 to RB&W, through a
promissory note that was to mature on August 15, 1998.

On December 20, 1996, Buford and Reliant negotiated with RB& W to extend
the maturity date of the promissory note to April 15, 2000. The New Promissory
note with the new maturity date is signed by Buford and provided that, “the entire
principal balance, together with all unpaid accrued interest theron, shall be due in
full and payable on April 15, 2000.” It is not disputed that Buford failed to pay
RB&W the New Promissory Note’s principal by April 15, 2000.

The New Promissory Note also contained the following warrant of attorney
and confession of judgment clause:

The undersigned authorizes any attorney at law at any time or times after the
maturity hereof (whether maturity occurs by lapse of time or by acceleration)
to appear in any state or federal court of record in the United States of
America, to waive the issuance and service of process, to admit the maturity
of this note and the nonpayment thereof when due, to confess judgment
against the undersigned in favor of the holder of this Note for the amount then
appearing due, together with interest and costs of suit, and thereupon to
release all errors and to waive all rights of appeal and stay of execution. The
foregoing warrant of attorney shall survive any judgment, and if any judgment
be vacated for any reason, the holder hereof nevertheless may thereafter use
the foregoing warrant of attorney to obtain an additional judgment or

2


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

RB&W MANUFACTURING LLC by )
merger Successor of RB& W Corporation, )

Plaintiff,

No. 02 C 8853

WILLIAM M. BUFORD III,

wwe wwe wr Se

Defendant.

MEMORANDUM OPINION

SAMUEL DER-YEGHIAYAN, District Judge

This matter is before the court on Plaintiff RB& W Manufacturing L.L.C.’s

(“RB&W”) motion for summary judgment. For the qeasons-below, we any 5

summary judgment.

NOV 0 4 2004

BACKGROUND
RB&W is a company with its principle place ‘sf business in Ohio: Defendant
William McKinley Buford III (“Buford”) is a resident of Illinois and is the former
Chairman and CEO of Reliant Enterprises, Inc. (“Reliant”). Corporations named

Reliant Holdings, Inc., and Capital Fasteners, Inc. are both wholly owned