Nalco Company v. Chen, No. 1:2012cv09931 - Document 228 (N.D. Ill. 2018)
Court Description: MEMORANDUM Opinion and Order Signed by the Honorable Harry D. Leinenweber on 2/2/2018. Mailed notice (cc, )
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Nalco Company v. Chen Doc. 228 IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION NALCO COMPANY, Plaintiff, Case No. 12 C 9931 v. Judge Harry D. Leinenweber DAVID T. CHEN, Defendant. MEMORANDUM OPINION AND ORDER Plaintiff Nalco Company moves for entry of an order [ECF No. 206] directing Defendant David T. Chen to turn over monies held in his foreign accounts sufficient to satisfy the over two million dollar judgment [ECF No. 62] that Chen yet owes to Nalco. Plaintiff further moves for an extension of the Citation to Discover Assets as to Chen. For the reasons stated herein, the Court grants both requests. I. This judgment opinion ruling presumes [ECF No. background of this case. BACKGROUND familiarity 120], which In brief: with ably this Court’s summarizes summary much of Nalco and Chen engaged in a joint venture to sell environmental technology to Chinese companies. in late 2009, it became apparent the that the joint venture When, required additional funding to stay afloat, the venture sought a $5 million dollar line of credit from Citibank. Citibank only agreed to provide the requested credit after Nalco provided a guarantee, a guarantee for which Chen executed an indemnification and reimbursement agreement, Dockets.Justia.com pledging to indemnify the venture in interest if Nalco were forced to pay. happened. an amount equal to Chen’s By early 2012, the worst had The venture failed to repay advances, and Citibank called in its guarantee. Nalco paid Citibank and then demanded that Chen reimburse Nalco as promised. He refused. Nalco sued Chen, and on June 4, 2014, this Court granted summary judgment for Nalco based on the indemnification agreement and entered judgment in interest accruing agreement. Nalco’s (ECF favor from Nos. in the 61, the time 62.) amount the of sum $2,044,592.27 became Thereafter, the due plus under Court 9% the reinstated Chen’s Counterclaims [ECF No. 77], and the parties litigated those issues anew; the Court eventually granted Nalco summary judgment on those Counterclaims, however, million dollar judgment. and thereafter reinstated the (Order, Oct. 20, 2015, ECF No. 130.) two The judgment became final and enforceable fourteen days later, after Chen failed within that period to post bond or obtain a stay of judgment as permitted under Federal Rule of Civil Procedure 62 and as explicitly mentioned by the Court’s Order (Order, ECF No. 130.) On November 17, 2015, the clerk issued a citation to discover Chen’s assets. (ECF No. 132.) The citation directed Chen to do two key things: (1) appear before the Court on December 1, 2015 to be examined regarding his assets susceptible to the October 20, 2015 judgment; and (2) produce all financial records concerning his property and income. (Citation, Ex. 1 to Nalco’s Mot. for Rule to Show Cause, ECF 140-1.) - 2 - Chen ignored the first of these mandates and did not appear for examination on December 1, 2015. intervention [ECF Nalco thereafter sought and received the Court’s No. 145], deposition on June 2, 2016. and Chen eventually appeared for As for the latter mandate, Chen has still — some two years later — not fully complied. The crux of Chen’s noncompliance with the citation concerns his foreign assets. Chen admits that as of June 2016, he had a savings account with the Bank of China, an investment in China Gas Industries Investment Holdings, Ltd. (“CGII”) worth approximately $15 million, and a salary from CGII of about $50,000 a year. (Chen’s Resp. at 2, ECF No. 208 (citing Ex. A, 6/2/16 Chen Dep. Tr. at 18-19, 27, 31, 3435, 40, 65-67).) Despite owning these properties, Chen produce the citation-required documentation for any of them. did not Indeed, he asserted in July 2016 that the only responsive document he had was an “account summary” he would request from the Bank of China regarding his holdings there. (See, Chen’s Resp. at 3.) Then Chen did not produce that summary either, apparently because he “determined he did not want to.” Id. On November 9, 2016, the Court ordered Chen to produce his Bank of China account (ECF No. 181.) held Chen in statements (among other yet-withheld Still, Chen refused to comply. contempt and fined produced the documents as ordered. him $500/day The Court accordingly to (ECF No. 187.) still not produced these documents. - 3 - documents). accrue until he To date, Chen has II. DISCUSSION Nalco filed the Motion now at bar on August 2, 2017, seeking an order directing Chen to turn over his foreign assets, including those held in three foreign accounts that Nalco learned about through citation discovery (namely, an HSBC Hong Kong account ending in -6142 and two Bank of China accounts ending in -2956 and -0161). Nalco requests a third extension of the citation. Second, Chen argues the Court may not order the first and should not order the latter. The Court disagrees on both fronts and grants Nalco the relief it seeks in its Motion. A. Nalco’s Motion for Turnover of Chen’s Foreign Assets Nalco seeks a turnover order commanding Chen to do what he should have done back when this Court’s judgment for Nalco became final and enforceable in October 2015: cough up the money he owes. says his assets in China are safe. He says the Court has no power to order turnover of his foreign-held assets. finished.” (Chen’s Resp. at 1.) But Chen He says “this case is He is mistaken. In post-judgment proceedings such as these, Federal Rule of Civil Procedure 69(a) instructs district courts to follow supplementary proceedings of the state in which they sit. the law of FED. R. CIV. P. 69(a); Laborers’ Pension Fund v. Pavement Maint., Inc., 542 F.3d 189, 191 (7th Cir. 2008). § 5/2-1402. mechanics. In Illinois, that statute is 735 ILCS Illinois Supreme Court Rule 277 describes that statute’s ILL. R. S. CT. 277. Subsection (f) is squarely at issue here: - 4 - A proceeding under this rule continues until terminated by motion of the judgment creditor, order of the court, or satisfaction of the judgment, but terminates automatically 6 months from the date of (1) the respondent’s first personal appearance pursuant to the citation or (2) the respondent's first personal appearance pursuant to subsequent process issued to enforce the citation, whichever is sooner. The court may, however, grant extensions beyond the 6 months, as justice may require. Orders for the payment of money continue in effect notwithstanding the termination of the proceedings until the judgment is satisfied or the court orders otherwise. ILL. R. S. CT. 277(f). The parties have two main squabbles over this rule. The first concerns whether Rule 277 eliminates the Court’s jurisdiction. The second concerns whether, as a procedural matter, the Court may enter a turnover order even if the citation has lapsed. can be silenced quickly. The first squabble There is no jurisdictional issue here. The Seventh Circuit has held explicitly that Rule 277 has no effect on a district court’s subject matter jurisdiction, which is determined by the facts that existed when the suit was filed. Laborers’ Pension Fund, 542 F.3d at 194 (citing Olympia Express, Inc. v. Linee Aeree Italiane, omitted). S.P.A., 509 F.3d 347, 349 (7th Cir. 2007)) (citation This Court sat in diversity jurisdiction when this case began, and it retains that jurisdiction now. (See, Mem. Op. and Order, Aug. 22, 2013, at 3, ECF No. 33.) As to the second squabble: Rule 277’s procedural impositions upon the Court do not offer Chen any succor. Chen argues that when the citation expired on August 2, 2017, the Court’s power to order turnover evaporated. (Chen’s Resp. at 8.) - 5 - Chen accordingly maintains that the Court cannot enter the requested turnover order until Nalco moves to reopen Rule 277(a). supplementary proceedings (Chen’s Resp. at 8.) in accordance with Case law demonstrates otherwise. See, e.g., W. Bend Mutual Ins. Co. v. Belmont State Corp., No. 09 C 354, 2010 WL 5419061, at *4-5 (N.D. Ill. Dec. 23, 2010) (finding that a motion for turnover made nine days before the citation expired would be timely even if the court had not extended the citation date), aff’d, 712 F.3d 1030 (7th Cir. 2013). Here, turnover order before the citation expired. Nalco moved for a That closes the matter. Its Motion is timely, and the Court now grants it. B. Nalco’s Motion to Extend the Citation Nalco also moves the Court to extend the citation. issued on November 17, 2015. (ECF No. 132.) The citation Rule 277(f) imposes a six month expiration date for such citations, but that six month clock did not start to run until Chen sat for his deposition on June 2, 2016. See, ILL. R. S. CT. 277(f); TM Ryan Co. v. 5350 S. Shore, L.L.C., 836 N.E.2d 803, 811 (Ill. App. Ct. 2005) (discussing same). extended that timeline on two occasions: The Court First, on Nalco’s October 2016 Motion (ECF No. 178) after Chen steadfastly refused to produce his foreign asset documentation despite the mandate in the citation that he do so (ECF No. 181); second, on Nalco’s May 2017 Motion (ECF No. 202), after Chen maintained his refusal to produce. (ECF No. 205.) After those extensions, the citation had an expiration date of August 2, 2017. - 6 - Now that Nalco again requests an extension, Laborer’s Pension Fund once more provides helpful instruction. Laborer’s Pension Fund, 542 F.3d 189. In that case, the Seventh Circuit reached all the way back to to 1968 endorse approach” to Rule 277. the state appellate court’s “flexible Id. at 194 (citing with approval Levine v. Pascal, 236 N.E.2d 425, 431 (Ill. App. Ct. 1968) (“[T]he Supreme Court Rules are to be construed liberally and not literally . . . . While rules of court are to be obeyed, ‘unswerving obedience’ demanded where no material harm is done to any litigant.”)). is not Contrary to Chen’s proclamation that the Rules are rigid, they actually leave “the procedure to be followed judge’s discretion.” in such proceedings largely to the Resolution Trust Corp. v. Ruggiero, 994 F.2d 1221, 1226 (7th Cir. 1993); accord, Ill. Sup. Ct. R. 277(e) (“The court may at any time . . . control and direct the proceeding to the end that the rights and interests of all parties and persons involved may be protected and harassment avoided.”). The Court has discretion to extend the citation. But should it? Chen maintains that Nalco has used the citation proceedings to harass him and his family, and any extension of the citation would be used for more of the same. Specifically, Chen claims Nalco: citation drive proceedings (consistent subjected with the Chen’s wife to Court’s and up costs on the above-mentioned daughter to The Court is incredulous. - 7 - contempt irrelevant generally created uncertainty and costs for Chen. at 10.) order delayed of $500/day sanction); depositions; and (See, Chen’s Resp. True, Nalco waited until the citation’s expiration day to move for turnover. But moving sooner would not have freed Chen of his $500/day obligation, which he carries at this Court’s direction for banking documents as ordered. his abject refusal to produce his If this daily accruing cost weighs on Chen, he can free himself of it at any time by complying with this Court’s orders. discover Chen’s As to the depositions: assets and collect the Nalco conducted those to judgment amount; there is nothing untoward there. In short, the Court cannot agree that Chen has been harassed by the citation proceedings. This is not (as Chen suggests) a case like Vance v. Dispatch Management Services, No. 99 C 6631, 2002 WL 773840, at *3 (N.D. Ill. Apr. 26, 2002), in which the party subject to the citation “fully cooperated” by providing information “in the exact manner” requested, only to see the judgment creditor sit, inert, on the information provided. uncooperative with the To the contrary, Chen has been resolutely citation proceedings, refused to produce required documentation under pain of contempt, and to date has not paid out any of the more than two million dollars he owes Nalco. In these post-judgment proceedings, all harms Chen suffers flow from his conduct alone. As such, extending the citation will not do Chen any material harm, but it will preserve Nalco’s ability to uncover and seek turnover of further foreign assets that Chen might have. Of course, if Chen complies with this order and turns over foreign assets sufficient to satisfy Nalco’s judgment, the citation will lose its - 8 - utility and Chen may move to have the citation terminated even before the new expiration date the Court now orders. III. CONCLUSION For the reasons stated herein, the Court orders Chen to turn over to Nalco all assets held in his foreign accounts, including in his HSBC Hong Kong bank account ending in -6142 and his Bank of China bank accounts ending in -2956 and -0161 in an amount sufficient to satisfy fully this Court’s October 20, 2015 judgment. The Court further orders the Citation to Discover Assets continued to July 1, 2018. IT IS SO ORDERED. Harry D. Leinenweber, Judge United States District Court Dated: 2/2/2018 - 9 -
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