Gierum v. Glick (In re Glick)

• Decision Date: 08 June 2017
• Docket Number: No. 13 B 20989,No. 15 A 324,13 B 20989,15 A 324
• Citation: 568 B.R. 634
• Parties: IN RE: Jonathan F. GLICK, Debtor. John Gierum, not individually but as trustee of the bankruptcy estate of Jonathan F. Glick, Plaintiff, v. Jonathan Glick; JCG 2012 Trust dated February 4, 2012; Nancy Glick, trustee of the JCG 2012 Trust; Lawrence Glick, predecessor trustee of the JCG 2012 Trust; Bari Wood; Michelle Alilovich; Theodore Allen Wolff; BTM, LLC, an Illinois limited liability company; Robert Chapman; Optimum Fulfillment, LLC, an Illinois limited liability company; Horwood, Marcus & Berk, Chartered, an Illinois corporation; Hal J. Wood, Jeffrey A. Hechtman, and Kenneth A. Goldstein, as agents of Horwood, Marcus & Berk; and the Law Office ofWilliam J. Factor, Ltd., Defendants.
• Court: U.S. Bankruptcy Court — Northern District of Illinois

568 B.R. 634

IN RE: Jonathan F. GLICK, Debtor.

John Gierum, not individually but as trustee of the bankruptcy estate of Jonathan F. Glick, Plaintiff,

v.Jonathan Glick; JCG 2012 Trust dated February 4, 2012; Nancy Glick, trustee of the JCG 2012 Trust; Lawrence Glick, predecessor trustee of the JCG 2012 Trust; Bari Wood; Michelle Alilovich; Theodore Allen Wolff; BTM, LLC, an Illinois limited liability company; Robert Chapman; Optimum Fulfillment, LLC, an Illinois limited liability company; Horwood, Marcus & Berk, Chartered, an Illinois corporation; Hal J. Wood, Jeffrey A. Hechtman, and Kenneth A. Goldstein, as agents of Horwood, Marcus & Berk; and the Law Office ofWilliam J. Factor, Ltd., Defendants.

No. 13 B 20989

No. 15 A 324

United States Bankruptcy Court, N.D. Illinois, Eastern Division.

Signed June 8, 2017

Attorneys for plaintiff John Gierum, chapter 7 trustee: Scott N. Schreiber, Pamela J. Leichtling, Clark Hill PLC, Chicago, IL; Michael L. Gesas, Michelle G. Novick, Arnstein & Lehr LLP, Chicago, IL

Attorneys for defendants Jonathan F. Glick, The JCG 2012 Trust, Nancy Glick, Michelle Alilovich, and The Law Office of William J. Factor, Ltd.: William J. Factor, Jeffrey K. Paulsen, FactorLaw, Chicago, IL

Attorneys for defendant Lawrence Glick: Christopher S. Wunder, Eric D. Kaplan, Kaplan Papadakis & Gournis, P.C., Chicago, IL

Attorneys for defendants Horwood Marcus & Berk Chartered, Hal J. Wood, Jeffrey A. Hechtman, and Kenneth A. Goldstein: Marc O. Beem, Edward W. Feldman, Melissa B. Pryor, Miller Shakman & Beem LLP, Chicago, IL

Attorneys for defendant Bari Wood: Alan R. Dolinko, Robinson Curley & Clayton, P.C., Chicago, IL

Attorneys for defendants Robert Chapman, BTM, LLC, and Optimum Fulfillment, LLC: N. Neville Reid, Brian Wilson, Fox, Swibel, Levin & Carroll, LLP

MEMORANDUM OPINION

A. Benjamin Goldgar, United States Bankruptcy Judge

Jonathan Glick is an entrepreneur. In the early 2000s, Glick did business in the children's toy and consumer goods industries through a complex web of limited liability companies and partnerships. A trust established in 1999 was the ultimate owner of these entities, but practically speaking Glick ran them all. One of Glick's principal products was a toy car in which a Glick company, Awesome Toys, LLC, held the patent rights. Awesome Toys licensed several other Glick companies to sell the toy car.

Working capital was necessary to run this enterprise, and different Glick businesses borrowed money from different lenders on a secured basis. Glick guaranteed all the loans. Eventually, though, the businesses ran into trouble and defaulted. The lenders accommodated Glick for a time but ultimately sued the businesses and Glick.

During these financial troubles, Glick had his lawyers establish a new trust and new companies, some owned by the new trust and some by the old. Most of the new companies sold consumer goods like facial masks and jewelry, but one of them, Play Makers Group, sold the toy car, and Awesome Toys licensed Play Makers to sell it.

Meanwhile, the lenders obtained judgments in their actions against Glick and began enforcing them. (One of the lenders even seized and sold the patent rights to the toy car.) Faced with the judgments, Glick filed this chapter 7 case in 2013. John Gierum was appointed trustee, and in 2015 he filed this adversary proceeding.

In his complaint, Gierum asserts that the Glick businesses were a sham, simply alter egos of Glick himself. Gierum alleges that the issuance of the license to Play Makers was a fraudulent pre-petition transfer, as were several other transfers, and that Glick also made unauthorized post-petition transfers. According to Gierum, Glick perpetrated these transfers through his lawyers, his business associates, even his parents, all to the detriment of his creditors.

With twenty-three counts directed at fifteen defendants, the amended complaint is a massive tome: 667 paragraphs of allegations spread over 91 pages, plus nearly 500 pages of exhibits. Gierum ultimately asks for the many Glick companies and the two trusts to be declared Glick's alter egos and ordered to turn over their assets. Alternatively, Gierum asks to avoid the transfers (pre-and post-petition) and recover the transferred assets. He also requests damages against Glick's lawyers, business associates, and parents for aiding and abetting the transfers. And he wants an order requiring an accounting from some of the Glick companies as well as an order subordinating a claim based on a loan to one of them.

Fourteen of the fifteen defendants have moved to dismiss twenty-two of the twenty-three counts in the amended complaint. The motions seek dismissal under Rules 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure, Fed. R. Civ. P. 12(b)(1) and 12(b)(6) (made applicable by Fed. R. Bank. P. 7012(b) ), for lack of jurisdiction and failure to state a claim. For the reasons set forth below, the motions will be granted in part and denied in part. All but two of the claims will be dismissed with prejudice.

I. Facts

On a motion to dismiss under Rule 12(b)(6), all well-pleaded factual allegations in the complaint are taken as true, and all reasonable inferences are drawn in favor of the non-movant. Silha v. ACT, Inc. , 807 F.3d 169, 173–74 (7th Cir. 2015). (The same is true under Rule 12(b)(1). Id. ). In addition to the allegations, the court considers facts evident from exhibits attached to the complaint, Bible v. United Student Aid Funds, Inc. , 799 F.3d 633, 639–40 (7th Cir. 2015) ; Fed. R. Civ. P. 10(c) (made applicable by Fed. R. Bank. P. 7010 ), as well as facts alleged for the first time in a response to a dismissal motion, provided they are consistent with the complaint, Geinosky v. City of Chicago , 675 F.3d 743, 745 n.1 (7th Cir. 2012), and do not concern fraud, United States ex rel. Hanna v. City of Chicago , 834 F.3d 775, 779 (7th Cir. 2016).

The facts come from Gierum's sprawling amended complaint and its exhibits. Even greatly distilled, these facts make for an unsatisfying narrative, dull and difficult to follow. That cannot be helped, given the complexity of Glick's affairs, the detail necessary to address Gierum's legal theories, and the carelessness with which the amended complaint was drafted.

A. The JCG 1999 Trust

The story, such as it is, begins in 1999, when Glick established the JCG 1999 Trust (the "JCG 1999 Trust"). (Am. Compl. ¶¶ 33, 363, Ex. 2). Glick was the settlor and is also trustee. (Am. Compl. ¶ 363, Ex. 2 at 1). If he is unable or declines to act as trustee, his wife, Stacey Glick, and the Northern Trust Company become co-trustees. (Id. Ex. 2 at 48 & amend. dated Dec. 6, 2001, at 3). The JCG 1999 Trust was created "with the intent to shelter assets as a wealth management and estate planning strategy"; the goal was to benefit Glick's two sons by "provid[ing] a future business" for them. (Am. Compl. ¶ 366; see alsoid. ¶ 332, 335–36).

Under the trust declaration, Glick is entitled during his life to use income and principal of the trust estate as he deems necessary. (Am. Compl. Ex. 2 at 2, 4–5). In fact, the trustee is obligated in making distributions to use his discretionary powers "primarily to benefit the beneficiary [Glick] rather than the remaindermen [Stacey and any Glick children]." (Id. Ex. 2 at 28). If there is more than one beneficiary, however, the trustee can make distributions in "such equal or unequal proportions" as he sees fit considering "the standard of living to which [the] beneficiary shall have become accustomed to at the time of [Glick's] death." (Id. ). The "best interests" of a beneficiary "include any educational, business or personal endeavor" the trustee deems to be in the beneficiary's best interest. (Id. at 29).

On Glick's death (and assuming Stacey survives him), the trust estate is divided into a marital trust and a family trust. (Id. at 8–9). The marital and family trusts are then each divided into two other trusts. (Id. at 10, 21). Income from the two family trusts is paid to Stacey during her life, and on her death separate trusts are created for each Glick child. (Id. at 11, 13, 17). Income from the two marital trusts is also paid to Stacey during her life. (Id. at 24–25). On her death, the assets of one of the marital trusts are used to fund one of the family trusts. (Id. at 25). The other marital trust is divided into equal shares for each Glick child. (Id. at 26).

During his life, Glick has the power to amend or revoke the JCG 1999 Trust in his discretion. (Am. Compl. ¶ 363, Ex. 2 at 1). If the trust is revoked, trust property reverts to him. (Id. Ex. 2 at 1–2). The declaration provides that Illinois law governs the JCG 1999 Trust's validity and interpretation. (Id. Ex. 2 at 51).

B. The JCG 1999 Trust Property

According to the trust declaration, Glick "transferr[ed], assign[ed], and set[ ] over to himself as trustee" (i) the property described in schedule A attached to the JCG 1999 Trust, and (ii) the life insurance policies described in schedule B. (Id. at 1). The copies of schedules A and B attached to the amended complaint, however, do not list any property or policies, and Gierum alleges that the JCG 1999 Trust "had no assets at its inception." (Am. Compl. ¶ 367).

But according to Gierum, the JCG 1999 Trust eventually came to hold significant interests in property. On dates Gierum does not specify and in ways he does not describe, interests in thirty-three limited liability companies allegedly became, directly or indirectly, part of the JCG 1999 Trust estate. (Id. ¶ 367). One of those companies—of some importance here—was JZ Enterprises Limited Partnership ("JZ Enterprises LP"), a Delaware limited partnership. (See Pl. Resp. at 4). Another was JC Illinois Ventures Limited Partnership ("JC Illinois Ventures LP"), an Illinois limited partnership. (Am. Compl. ¶ 32).

The JCG 1999 Trust owns 99 percent of JZ Enterprises LP. (Id. ¶ 377). The other one percent is owned by JZ Enterprises GP, Inc. ("JZ Enterprises GP"), a...