New La. Holdings, LLC v. Arrowsmith
| Decision Date | 04 December 2012 |
| Docket Number | No. 11 C 5031,11 C 5031 |
| Parties | NEW LOUISIANA HOLDINGS, LLC; FOUNTAIN VIEW 215 TENANT LLC; JACKSON MANOR 1691 TENANT LLC; PANOLA 501 GP LLC; RETIREMENT CENTER 14686 TENANT LLC; ACADIAN 4005 TENANT LLC; LAKEWOOD QUARTERS REHAB 8225 TENANT LLC; REGENCY 14333 TENANT LLC; SHERWOOD 2828 TENANT LLC; LAKEWOOD QUARTERS ASSISTED 8585 TENANT LLC; PANOLA 501 PARTNERS LP; CITISCAPE OUT PARCEL TENAT LLC; CITISCAPE 5010 TENANT LLC; ST. CHARLES 1539 TENANT LLC; WOODLAND VILLAGE 5301 TENANT LLC; ATRIUM 6555 TENANT LLC; and HARRIS SCHWARTZBERG, Plaintiffs, v. RICHARD ARROWSMITH, Defendant |
| Court | U.S. District Court — Northern District of Illinois |
MEMORANDUM OPINION AND ORDER
New Louisiana Holdings, et al.1 ("Plaintiffs") initiated this discrimination suit against GEBusiness Financial Services, Inc. ("GE Financial"); GE Healthcare Financial Services, Inc.; General Electric Capital Corporation; CIT Healthcare LLC ("CIT"); Marathon Structured Finance Fund, L.P. ("Marathon") (collectively, the "Entity Defendants"); and Richard Arrowsmith ("Arrowsmith") (collectively, with the Entity Defendants, "Defendants). The Plaintiffs bring claims pursuant to 42 U.S.C. § 1981 ("Section 1981") and the Equal Credit Opportunity Act ("ECOA"), 15 U.S.C. § 1691 et seq. (R. 1, Compl.) Presently before the Court are Arrowsmith's motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6),2 (R. 25, Arrowsmith's Mot.), and Arrowsmith's amended petition for fees, (R. 58, Arrowsmith's Am. Pet).3 For the reasons discussed herein, the Court grants Arrowsmith's motion to dismiss and his petition for fees.
Corporate Plaintiffs consist of a network of nursing facilities that provide long-term care to seniors. Plaintiff Harris Schwartzberg ("Schwartzberg") and his father, Albert Schwartzberg, who is not a party to this suit (collectively, the "Schwartzbergs"), are Jewish. (R. 1, Compl. at 2.) According to Plaintiffs, on January 18, 2006, "the Schwartzbergs, through Plaintiff New Louisiana Holdings, LLC and its affiliates, acquired theright to operate twelve nursing and assisted living facilities in and around Louisiana." (Id. at 3; id. ¶ 39.) The acquisition was effected through a number of agreements. (Id. ¶ 40.) The purchase of the twelve nursing facilities was financed through a term loan that was secured by the real estate and physical assets of the facilities. (Id. ¶¶ 40-41.) The borrowers on the term loan (the "Term Borrowers") are the title holders of the real estate and physical assets of the twelve nursing facilities and are not parties to this action. (Id. ¶ 41.) The Term Borrowers lease the twelve nursing facilities to Corporate Plaintiffs. (Id.) In addition to leasing the twelve nursing and assisted living facilities, the Corporate Plaintiffs also operate the facilities. (Id. ¶ 42.) Merrill Lynch Capital ("Merrill"), CIT, and Marathon were the original lenders on the Term Loan. (Id. ¶ 40.)
In a separate agreement, the original lenders entered into a Credit and Security Agreement (the "Operating Loan") with Corporate Plaintiffs. (Id. ¶ 42.) The Operating Loan contains two credit facilities: (1) a term loan in the original principal amount of $14 million, and (2) arevolving credit loan of up to $8 million.4 (Id.) The Operating Loan appointed an "Adniinistrative Agent" and granted the Administrative Agent discretion to make decisions regarding the revolving loan. (Id. ¶ 45.) Originally, Merrill acted as the Administrative Agent. (Id. ¶ 49.) In connection with Corporate Plaintiffs' execution of the Operating Loan, Schwartzberg executed Guaranty Agreements, (id. ¶¶ 17, 143), pursuant to which he personally guaranteed the payment of the Operating Loan. (R. 29-3, Ex. B, Guaranty Agreement; R. 29-4, Ex. C, Amended Guaranty Agreement.) In December 2007, GE Financial acquired Merrill's healthcare financing business and, as a result, assumed Merrill's position as the Administrative Agent for the Operating Loan,5 (Id. ¶ 50.) GE Financial designated Arrowsmith as the individual responsible for administering the Operating Loan. (Id. ¶ 51.)
The gravamen of Plaintiffs' complaint is that Arrowsmith's anti-Semitism affected the adrninistration of the Operating Loan, making it difficult for Corporate Plaintiffs to operate effectively. (Id. at 2-4.) According to Plaintiffs, "Arrowsmith embarked upon a campaign to harm the Schwartzberg family and to hurt their business after he took over as the loan administrator for the Lenders." (Id. at 3.) Specifically, Plaintiffs allege that Arrowsmith declared a series of defaults under both the Operating and Term Loans, (id. ¶¶ 56-57), dramatically decreased the amount of funds available to be borrowed through the Operating Loan, (id. ¶ 59), caused GE Financial to assess financial penalties on Corporate Plaintiffs, (id.), and increased the amount of required reserves thereby further reducing the amount of funds available to be borrowed, (id. ¶¶ 62, 72-73). Plaintiffs allege that Arrowsmith referred to the Schwartzbergs as "those people," (id. at 4, ¶ 63), and that he was motivated to take these actions by his anti-Semitism, (id. ¶ 66).
On June 2, 2011, Plaintiffs filed a six-count complaint against Defendants in the United States District Court for the Southern District of New York ("the New York Action"), asserting that Arrowsmith had discriminated against them in violation of Section 1981 and the ECO A. (R. 9-1, Ex. 1, S.D.N. Y. Compl.) Plaintiffs also asserted claims for breach of contract, and breach of the covenant of good faith and fair dealing, and they sought an accounting and a declaratory judgment6 (Id.) Plaintiffs filed their action in the Southern District of New York, even though Corporate Plaintiffs agreed in the Operating Loan to submit to the jurisdiction of state or federalcourts in Chicago, Illinois. On July 13, 2011, Defendants filed a letter with Judge Naomi Reice Buchwald, the judge in the Southern District of New York to whom Plaintiffs' action was assigned. (R. 9-2, Ex. 2, July 13, 2011 Letter.) In their letter, Defendants requested a pre-motion conference in advance of filing a motion to dismiss and setting forth the anticipated basis of that motion. (Id; R. 9, Defs.' Mot for Costs Mem. at 3.) On July 21, 2011, Judge Buchwald informed the parties via letter that the court "wish[ed] to afford plaintiffs an opportunity to amend their complaint within twenty (20) days[.]" (R. 9-4, Ex. 4, July 21, 2011 Letter at 2.) Judge Buchwald further stated that "having been afforded the opportunity to amend the complaint in response to the defendants' letter submission, plaintiffs should not anticipate being granted a further opportunity to amend, should [the court] find that there is merit in some or all of the defendants' arguments." (Id.) On July 25, 2011, Plaintiffs voluntarily dismissed the New York Action pursuant to Rule 41(a) of the Federal Rules of Civil Procedure and did not amend their complaint. Min. Entry, New Louisiana Holdings, LLC v. GE Business, No. 11-3773 (July 25, 2011) ECF No. 4. That same day, in compliance with the terms of the Operating Loan, Plaintiffs re-filed their action against Defendants in the Northern District of Illinois. (R.1, Compl.) The case was randomly assigned to this Court.
On July 29, 2011, Defendants moved the Court for an order directing Plaintiffs to pay the costs and fees they incurred in defending the suit that Plaintiffs filed in the Southern District of New York, and for an order staying the current action until Plaintiffs did so, pursuant to Rule 41(d) (the "Costs Motion"). (R. 8, Defs.' Mot at 1-2.) On August 10, 2011, the Court granted Defendants' Costs Motion. (R. 20, Min. Entry.) The Court awarded Defendants those costsincurred in litigating the New York Action that were not necessary or useful to the instant action, and ordered Defendants to file a petition for costs by August 24, 2011. (Id.; R. 59-1, Ex. 1, Aug. 10,2011 Tr. at 8:9-13.) On August 24, 2011, Defendants filed the court-ordered petition.
On November 16, 2011, the Entity Defendants and Plaintiffs filed an agreed motion to dismiss the Entity Defendants, which the Court granted on November 21, 2011. (R. 38, Joint Mot.) The Entity Defendants were thereby dismissed from this action with prejudice and without cost to Plaintiffs or Entity Defendants. (R. 44, Min. Entry; R. 45, Order of Dismissal.) On June 4, 2012, the Court dismissed as moot Defendants' petition for costs on the grounds that the Entity Defendants were no longer parties to the action subject to the agreed order of dismissal. (R. 46, Min. Entry.) On June 19, 2012, Arrowsmith moved for reconsideration of the Court's June 4 minute entry because Defendants' petition for fees was filed on behalf of all Defendants, including Arrowsmith, and therefore the petition for fees was not moot as to him. (R. 47, Arrowsmith's Mot. Recons.; R. 48, Arrowsmith's Mem.) On June 28, 2012, the Court heard the motion to reconsider and ordered Arrowsmith to submit a separate fee petition by July 12, 2012, (R. 55, Min. Entry.) On July 12, 2012, Arrowsmith filed an amended fee petition seeking $16,269.00 in attorneys' fees incurred in litigating the New York Action and $13,710.00 incurred in researching, drafting, and filing the Costs Motion, for a total of $29,979.00 in attorneys' fees. (R. 58, Arrowsmith's Am. Pet. at 1-2.) On July 23, 2012, Plaintiffs filed a response brief in opposition to Arrowsmith's amended fee petition. (R. 61, Pl.'s Resp.)
In the instant action, Plaintiffs assert six counts against Defendants. The relevant counts that remain after the dismissal of the Entity Defendants are Counts I, II, and V.7 In Count I, Corporate Plaintiffs8 allege that "Defendants intentionally discriminated against [them] on...
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