Radio One, Inc. v. Direct Media Power, Inc.

• Decision Date: 28 September 2018
• Docket Number: No. 16 C 1867,16 C 1867
• Citation: Radio One, Inc. v. Direct Media Power, Inc., No. 16 C 1867 (N.D. Ill. Sep 28, 2018)
• Parties: RADIO ONE, INC., Plaintiff, v. DIRECT MEDIA POWER, INC., Defendant.
• Court: U.S. District Court — Northern District of Illinois

RADIO ONE, INC., Plaintiff, v. DIRECT MEDIA POWER, INC., Defendant.

No. 16 C 1867

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

September 28, 2018

Hon. Virginia M. Kendall

MEMORANDUM OPINION AND ORDER

On February 2, 2016, Plaintiff Radio One, Inc. filed this action against Defendant Direct Media Power, Inc. ("DMP"), now a dissolved corporation, for breach of contract. (Dkt. 1). DMP filed an Answer and Counterclaim¹ on February 26, 2016, but then failed to participate in discovery as directed by the Court. (Dkts. 8, 9, 32). Accordingly, on October 3, 2016, the Court entered an order of default against DMP, and on October 26, 2016, the Court entered a default judgment in the amount of $1,398,658.58 plus post-judgment interest against DMP. (Dkts. 34, 38). The case is now in supplementary post-judgment collection proceedings. Currently before the Court are Radio One's motions: (1) to set aside certain fraudulent transfers and for turnover of certain assets (Dkt. 74); and (2) for a finding that DMP and its principal Dean Tucci are in civil contempt of this Court and for a referral to the United States Attorney for prosecution of Tucci for criminal contempt (Dkt. 78). Also before the Court is DMP's motion to vacate the default judgment and dismiss the action for lack of jurisdiction. (Dkt. 88). For the reasons set forth below, the Court denies Tucci's motion to vacate and dismiss (Dkt. 88), denies without prejudice to renewal Radio One's motion for fraudulent transfer and turnover order (Dkt. 74), and grants in part and denies in part Radio One motion for contempt (Dkt. 78).

BACKGROUND

Beginning in 2013, Radio One² and DMP had a business relationship where DMP would buy discounted radio airtime from Radio One and Radio One would invoice DMP. At some point in 2014, DMP stopped paying Radio One's invoices, and Radio One eventually filed this action to recover the unpaid amounts. At that time, 100% of DMP was owned by Dean Tucci and Tucci served as its president and CEO. As relevant herein, Tucci also owned 100% of following entities: TelDebt Solutions, Inc.; FDATR, Inc.; and Dang Enterprises, LLC. Not even one month after Radio One filed suit Tucci formed a new entity—DMP Holdings, Inc.—in which holds a 90% ownership interest and his significant other, Beatta Piliciauskiene, holds a 10%) interest. Immediately after DMP Holdings was formed, Tucci transferred to it his ownership of DMP, TelDebt, and FDATR. Tucci's ownership of Dang was not affected.

On October 26, 2016, Radio One obtained a default judgment against DMP in the amount of $1,398,658.58 plus post-judgment interest, which remains unsatisfied. (Dkt. 38). Radio One issued a citation to discover assets on November 10, 2016, which was served on Tucci's executive assistant November 11, 2016. (Dkts. 75-15, 75-16). As relevant herein, the citation provided:

YOU ARE PROHIBITED from making or allowing any transfer or other disposition of or interfering with any property not exempt from execution or garnishment belonging to any of the Judgment Debtors or to which any of the Judgment Debtors may be entitled to that may be acquired by or become due to any of the Judgment Debtors and from paying over or otherwise disposing of any money not so exempt that is due or becomes due to any of the Judgment Debtors, until further order of the Court or termination of the proceedings. You are not required to withhold the payment of any money beyond double the amount of the judgment.

(Dkt. 75-15) at 4. The citation set a hearing date for November 21, 2016. Id. Instead of appearing on the citation, DMP initiated Chapter 11 bankruptcy proceedings. See In re DirectMedia Power, Inc., No. 16-36934 (Dkt. 1) (Bankr. N.D. Ill. Nov. 21, 2016); (Dkt. 75-23). DMP converted the bankruptcy to a Chapter 7 proceeding, and the case was dismissed on September 20, 2017. In March 2018, the bankruptcy court found that DMP had violated its orders during the proceedings, held DMP and Tucci in civil contempt, and ordered that they pay Radio One's attorneys' fees. See generally In re Direct Media Power, Inc., 582 B.R. 739 (Bankr. N.D. Ill. 2018).

After the bankruptcy proceeding ended, Radio One immediately resumed the supplementary proceedings here by reissuing the previous citations (to DMP and U.S. Bank) and issuing eight additional citations. See (Dkts. 50, 52). Tucci sat for a citation exam on October 27, 2017. (Dkt. 75-15).

On November 1, 2017, Radio One filed a new action against Tucci for fraud and seeking to pierce the corporate veils of DMP and DMP Holdings and thereby hold Tucci liable for the default judgment. See Urban One, Inc. v. Tucci, No. 17 C 7892 (Dkt. 1) (N.D. Ill. Nov. 1, 2017). The Court granted Radio One's motion for a temporary restraining order in that case, held a three-day evidentiary hearing on Radio One's motion for a preliminary injunction, and granted the requested injunctive relief. That case remains pending.

Also on November 1, 2017, Radio One filed a Motion for Fraudulent Transfers and Turnover of Assets (Dkt. 74) and a Motion for Civil and Criminal Contempt Against Direct Media Power and Dean Tucci (Dkt. 78). In support of these motions, Radio One has offered the following evidence regarding transfers made after the default judgment, after the citation to discover, and during the bankruptcy proceedings. As of the date of the default judgment (October 26, 2016), DMP banked almost exclusively at U.S. Bank with accounts ending in 9293and 8690.³ Between that date and November 11, 2016, DMP sent significant sums to other accounts that it held with Bank of America ("BOA") ending in 6530 and 6543 that had previously only been used for payroll purposes, and this was done to avoid a hold on those amounts by way of a citation proceeding as Tucci testified that he moved the money "to Bank of America to keep my corporation running." (Ex. 75-18) (1/5/17 Tr. of Creditors Meeting Pursuant to Bankruptcy Code Section 341 ("341 Meeting")) at 47:14-25; see (Dkt. 76-4) (DMP U.S. Bank 8690 statement for 10/3/16 to 10/31/16); (Dkt. 76-5) (DMP U.S. Bank 8690 statement for 11/1/16 to 11/30/16); see, e.g., (Dkt. 76-4) at 19 (for example, for check no. 130254 dated 10/27/16 for $20,000 made out to Direct Media Power and signed by Tucci, the memo reads: "8690 to 6530").

During this time, DMP also made transfers to Dang ($345,000) to a U.S. Bank account ending in 9319, TelDebt ($30,000) in the BOA account ending in 6556, and to Tucci's personal accounts at U.S. Bank ending in 9216 and 7601 ($7,900). The transfers continued after the citation was served on DMP on November 11. Specifically, between November 14, 2016 and the bankruptcy filing date (November 21, 2016), DMP transferred a total of $152,000 to Dang from both the U.S. Bank and BOA accounts, and $1,500 to Tucci's accounts. See (Dkt. 76-1) (DMP BOA 6530 statement for 11/1/16 to 11/30/16); (Dkt. 76-3) (Check No. 2510 dated 11/21/16 from DMP BOA 6530 in the amount of $12,000 signed by Tucci with the memo "6530 to 9319"); (Dkt. 75-4) (DMP U.S. Bank 8690 statement for 10/3/16 to 10/31/16); (Dkt. 76-14) (U.S. Bank 9293 statement for 11/1/16 to 11/30/16). Finally, after the bankruptcy proceedingsbegan, even more large transfers were made from DMP to TelDebt ($470,851), Dang ($4,000), and again Tucci ($3,600). See (Dkt. 76-2) (BOA 6530 statement for 2/1/17 to 2/28/17). Radio One seeks to void these transfers and also uses them as a basis for its argument that Tucci should be held in contempt for violating the citation's restraint provision.

On July 15, 2018, Direct Media Power moved to vacate the default judgment under Federal Rule of Civil Procedure 60(b)(4) and to dismiss the case for lack of subject matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1). (Dkt. 88). The Court addresses each motion in turn.

DISCUSSION

I. DMP's Motion to Vacate Default Judgment and Dismiss for Lack of Diversity Jurisdiction (Dkt. 88)

Although it was filed last, the Court first addresses DMP's Federal Rule of Civil Procedure 12(b)(1) and 60(b)(4) motion to vacate the default judgment entered in this matter and dismiss the action for lack of jurisdiction. Radio One's Complaint bases this Court's jurisdiction on diversity of citizenship. (Dkt. 1) at ¶ 4; see 28 U.S.C. § 1332(a). Section 1332(a)(1) states that "[t]he district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is between citizens of different states." A corporation, for diversity purposes, is "deemed to be a citizen of every State and foreign state by which it has been incorporated and of the State or foreign state where it has its principal place of business." 28 U.S.C. § 1332(c)(1); see Hertz Corp. v. Friend, 559 U.S. 77, 80 (2010). The Court considers the entire record in evaluating the existence of diversity jurisdiction. See Harmon v. OKI Sys., 115 F.3d 477, 47980 (7th Cir. 1997).

At this late juncture, DMP moves to vacate the default judgment and dismiss the case arguing that it is not diverse from Radio One, a citizen of Delaware and Maryland. This isbecause DMP, whose principal place of business is in Illinois, argues that it has two states of incorporation—both Illinois and Delaware—and therefore is a citizen of both states. (Dkt. 88) at 2. However, the evidence submitted in the record in this matter indicates that there were two separate DMP entities—a Delaware one and an Illinois one—and that only the Illinois entity is implicated in these proceedings.

Direct Media Power, Inc. was incorporated in Delaware on April 7, 2010. (Dkt. 90-1) at 1 (Delaware Entity Details). According to the Delaware Division of Corporations website, only two filings have been made on its behalf: (1) a Certificate of Incorporation for Stock Corporation that was filed on April 7, 2017; and (2) a Certificate for Revival of Charter for a Voided Corporation that...