Urban One, Inc. v. Tucci, 17 C 7892
| Decision Date | 30 September 2018 |
| Docket Number | No. 17 C 7892,17 C 7892 |
| Parties | URBAN ONE, INC. f/k/a RADIO ONE, INC., Plaintiff, v. DEAN TUCCI, Defendant. |
| Court | U.S. District Court — Northern District of Illinois |
URBAN ONE, INC. f/k/a RADIO ONE, INC., Plaintiff,
v.
DEAN TUCCI, Defendant.
No. 17 C 7892
UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION
September 30, 2018
Hon. Virginia M. Kendall
MEMORANDUM OPINION AND ORDER
This matter is before the Court on Plaintiff Urban One, Inc.'s (formerly known as Radio One, Inc.) Motion for a Preliminary Injunction against Defendant Dean Tucci. (Dkts. 7, 8). Also before the Court are Tucci's Motion to Strike Urban One's Motion For Preliminary Injunction, Vacate the Agreed Temporary Restraining Order, and Terminate the Hearing (Dkt. 22) and Tucci's Motion for Rule 12(h)(3) Determination of Subject Matter Jurisdiction (Dkt. 31). Finally, Tucci has filed a Motion to Seal (Dkt. 51), and Urban One has filed a Motion for a Determination of Whether Exhibits Shall be Filed Under Seal (Dkt. 56), both of which concern certain preliminary-injunction hearing exhibits including those that Tucci seeks to file under seal.
For the reasons explained below, Tucci's motions to strike and to dismiss for lack of subject matter jurisdiction (Dkts. 22, 31) are denied. Urban One's motion for a preliminary injunction (Dkts. 7, 8) is granted. Finally, the parties' motions regarding exhibit sealing (Dkts. 51, 56) are granted in part and denied in part. The exhibits at issue shall remain under seal until October 15, 2018. On that date, the parties shall submit a proposed agreed protective order and re-designate (and redact as necessary) the exhibits as appropriate under that proposed agreed order. Finally, this case is set for further status on November 14,, 2018.
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On November 1, 2017, Urban One filed the instant lawsuit against Tucci, seeking to hold him responsible for a default judgment entered in Radio One, Inc. v. Direct Media Power, Inc., No. 16 C 1867 (N.D. Ill.) (the "Radio One Litigation"). The complaint contains two counts: an action to pierce the corporate veil of Direct Media Power, Inc. and DMP Holdings, Inc. (Count I) and fraud (Count II). (Dkt. 1). In support of these claims, Urban One alleges that Tucci engaged in an "elaborate fraudulent scheme to enrich himself and avoid Urban One's $1.4 million judgment" against Direct Media Power in the Radio One Litigation by moving assets and devising a complicated corporate structure to hide funds that Direct Media Power owed to Urban One. Id. at ¶ 2. Specifically, Urban One complains about the timing of the formation of DMP Holdings on February 25, 2016, just 23 days after the Radio One Litigation was filed, and Tucci's transfer of his ownership interest of Direct Media Power, TelDebt Solutions, Inc. and FDATR, Inc. ownership to that newly created entity. Id. at ¶¶ 13-14. Despite these formal ownership changes, Tucci continued to run Direct Media Power, TelDebt, and FDATR in the same way that he had done so previously, which included taking money out of the companies beyond his salary, paying personal expenses, transferring money among the companies to pay various debts, and paying family members out of the companies for no legitimate business reason. Id. at ¶ 18.
Urban One further alleges that after the default judgment was entered in the Radio One Litigation, Tucci transferred Direct Media Power's funds from accounts held at U.S. Bank to those held at Bank of America to avoid a hold on the accounts by way of the imminent citation procedure, leaving a total of only $687 across two accounts. Id. at ¶¶ 20-21. Urban One points to transfers of almost $400,000 to Tucci-affiliated companies TelDebt and Dang Enterprises, LLC and also to Tucci personally after the default judgment was entered. See id. at ¶¶ 23, 28.
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A Citation to Discover Assets was served on Direct Media Power on November 11, 2016. Urban One alleges that Tucci transferred an additional $154,000 out of Direct Media Power to both Dang and himself after that date. Id. at ¶¶ 25. On November 21, 2016, instead of proceeding with the citation hearing as noticed by Urban One, Direct Media Power filed for Chapter 11 bankruptcy. Even during the bankruptcy proceedings, however, Tucci continued to transfer funds out of Direct Media Power and into his other entities or to himself (approximately $475,000), in violation of the bankruptcy court orders and budgets. Id. at ¶ 27. Ultimately, Urban One alleges that: (1) Tucci exercised complete dominion over Direct Media Power and DMP Holdings such that their separate corporate existence from him is only a fiction; and (2) Tucci caused Direct Media Power to fraudulently transfer more than $1 million to entities owned and controlled by Tucci after the default judgment was entered. As relief, Urban One seeks to hold Tucci personally liable for its judgment against Direct Media Power ($1,398,658.58) plus post-judgment interest and attorneys' fees in this action.
At the same time Urban One filed its Complaint, it moved for a temporary restraining order. See (Dkts. 7, 8). On November 2, 2017, the Court held a hearing on the motion and heard argument from both parties for more than two hours. See (Dkt. 14) (TRO Tr.). The Court found, analyzing the factors set forth in Wachovia Sec., LLC v. Banco Panamericano, Inc., 674 F.3d 743 (7th Cir. 2012), that Urban One had shown—primarily through Tucci's deposition testimony—that Direct Media Power and DMP Holdings failed to observe corporate formalities, had a non-functioning corporate officer, and were missing corporate records. In addition, Urban One had shown there was a commingling of funds and a failure to maintain an arm's length relationship among the entities. See (Dkt. 14) (TRO Tr.) at 40-51, 65-66, 76-79. The Court further held that Urban One had shown by a preponderance of the evidence that the movement of funds between Tucci's
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companies and out of Direct Media Power was "done in order to keep DMP insolvent, in order not to have money to pay [the Radio One Litigation] judgment," and therefore Urban One had shown a likelihood of success on the merits of its claim to pierce the corporate veil. The Court also held that Urban One had demonstrated an irreparable injury without an adequate legal remedy, and that public policy supported the issuance of a TRO because tolerating the abuse of a court order promotes injustice. Id. at 77-78. Accordingly, the Court issued a TRO including the following restraints:
1. Freezing Tucci's assets "with the exception of normal living expenses to include attorney expenses, which the Court may review upon motion by Urban One or upon sua sponte order of the Court"; and
2. Ordering Tucci to disclose to Urban One the bank accounts and personal financial records for the period February 2, 2016 to the present, by providing to counsel for Urban One a list of all bank accounts including account numbers and addresses and account holder names.
(Dkt. 13) (TRO). At the conclusion of the hearing, Tucci's counsel represented that Tucci's personal assets were already frozen on account of a default on $1.5 million in Direct Media Power loans that Tucci personally guaranteed and subsequent action by the creditors on those loans. (Dkt. 14) (TRO Hrg. Tr.) at 81:1-8. The parties later agreed to extend the TRO to January 10, 2018. (Dkt. 17).
The parties next appeared before the Court on November 17, 2017 to discuss a briefing schedule on the preliminary injunction. At that time, Urban One elected to stand on its Memorandum in Support of its Motion for Temporary Restraining Order (Dkt. 8). See (Dkt. 46) (11/17/17 Hrg. Tr.) at 5:12-17. Tucci submitted a brief in opposition to the motion for preliminary injunction (Dkt. 24) and Urban One submitted a reply brief. (Dkt. 36).
In January 2018, the Court held a three-day preliminary-injunction hearing in this matter and allowed the parties to present argument, witness testimony, and evidence supporting their
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positions. In addition to Tucci, the following former Direct Media Power employees testified: (1) Desiree Keller,1 an accounting and payroll manager from November 2010 to May 2012 who then served as Tucci's executive and personal assistant from May 2012 to May 2017; (2) Brian Czahor, a senior account executive from 2010 until May 2017; (4) Anthony Maltese, an accountant from July 2016 to May 2017; and (5) Nathan Hays, the Director of Information Technology from July 2015 until May 2017. The hearing provided the Court with the opportunity to determine the credibility of each witness through observation of their demeanors, including body language, tone of voice, facial expressions, mannerisms, and other indicative factors, as well as through the answers that each provided. On this point, the Court has considered the following: Currently, Keller and Czahor work together at a company owned by Czahor called BC Media and Associates that has a business similar to that of Direct Media Power and does business with Urban On; both Keller and Czahor also are involved in a state court litigation matter against FDATR president Ken Halverson and Tucci; further, at the time of the hearing both Maltese and Hays were still employed by Tucci (Hays testified that he worked for a Tucci-owned entity named "National Media Calls"), and Maltese admitted to pleading guilty to theft of property in violation of 720 ILCS 5/16-1(b)(5), a Class 2 felony.
Pursuant to Federal Rules of Civil Procedure 52(a)(2) and 65, the Court begins with a recitation of the facts pertinent to its analysis. The Court relies on the parties' proposed findings (Dkts. 53, 55), the transcripts of hearing testimony, the parties' exhibits, and where necessary, the Court's assessment of witness credibility.
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A. The Parties
Urban One is a Delaware corporation with its principal place of business in Silver Spring, Maryland. (Dkt. 1) at ¶ 8; (Dkt. 50) at ¶ 8. Prior to May 2017, Urban One operated under the name "Radio One, Inc.." (Dkt. 1) at 1 n.1. Urban One is a broadcasting company that operates radio stations...
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