Vukadinovich v. Posner
| Docket Number | 2:22-CV-118-TLS-JPK |
| Decision Date | 03 July 2023 |
| Parties | BRIAN VUKADINOVICH, Plaintiff, v. RICHARD A. POSNER, Defendant. |
| Court | U.S. District Court — Northern District of Indiana |
This matter is before the Court on the Plaintiff's Motion For Audit And Freezing Of Defendant's Assets (“Motion”) [DE 48].[1] For the reasons set forth below the Court denies the Motion.
Plaintiff filed this action alleging he is entitled to recover $170,000.00 under an oral employment agreement pursuant to which he provided “advisory” services to Defendant on personal and professional matters in addition to serving as the co-executive director of Defendant's nonprofit corporation. The Motion claims that Plaintiff is at risk of not being able to recover the claimed amount he believes he will ultimately be awarded. The asserted reasons for why this risk has arisen are the passage of time while Defendant's motions to dismiss the original and amended complaints have been pending and what Plaintiff characterizes as “fraudulent arguments by Defendant's lawyers” during the course of this litigation. Plaintiff also states that he is “concerned]” that Defendant's wife will “undertake action ... to wrongfully shield Defendant's assets in order to insulate Defendant from paying his debt to Plaintiff.” [DE 49 at 3]. Accordingly, Plaintiff asks the Court to “audit” and “freeze” Defendant's assets while the case is pending.
The Motion cites Indiana's Fraudulent Transfers Act, Ind Code § 32-18-2-1 et seq., and Indiana's prejudgment attachment statute, Ind. Code § 34-25-1-1 as the legal authority for the relief that it seeks of “auditing” and “freezing” Defendant's assets.
Plaintiff cites Section 14 of the Fraudulent Transfers Act, which states in part that “[a] transfer made or an obligation incurred by a debtor is voidable as to a creditor, whether the creditor's claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation: . with actual intent to hinder, delay, or defraud any creditor of the debtor ..” Ind. Code § 32-18-2-14(a)(1). Plaintiff also cites the language in the statute that provides, “[i]n determining actual intent under subsection (a)(1), consideration may be given, among other factors, to whether: . before the transfer was made or the obligation was incurred, the debtor had been sued or threatened with suit ..” Ind. Code § 32-18-2-14(b)(3).[2] In his reply brief, Plaintiff cites Section 17 of the Act, which states that “[i]n an action for relief against a transfer or an obligation under this chapter, a creditor ... may obtain ... [a]n attachment or other provisional remedy against the asset transferred or other property of the statute providing for attachment or other provisional remedy against debtors generally.” Ind. Code § 32-18-2-17(a)(2).[3]
The current complaint does not assert any claim under the Act. Therefore, the issue of whether the statute has been violated, subjecting Defendant to the remedies under that statute, is not properly before the Court. See, e.g., Lee's Ready Mix & Trucking, Inc. v. Creech, 660 N.E.2d 1033, 1036 (Ind.Ct.App. 1996) () (cited by Plaintiff [DE 49 at 3]). The Court notes that Plaintiff has filed a motion to amend the complaint [DE 61], but that motion is not yet ripe for ruling. In addition, the proposed Second Amended Complaint attached to the motion to amend also does not contain any count alleging a claim under the Fraudulent Transfers Act. See [DE 61-2].
In any event, Plaintiff has not alleged facts that would state a claim under the Act. The Act's provisions “appl[y] to all transfers made [past tense] and obligations incurred [past tense] after June 30, 1994.” Ind. Code § 32-18-2-1(a) (emphasis added). Similarly, both Sections 14 and 17 of the Act speak only in terms of transfers that have already taken place. See Ind. Code § 3218-2-14 (); Ind. Code § 32-18-2-17 () (emphasis added). Thus, while the Act does contain “provisional” remedies, as Plaintiff notes, those remedies are “against the asset transferred” or “other property” that is already in the hands “of the transferee, i.e. a person or entity other than the debtor to whom the debtor has (past tense) transferred the property. Plaintiff has not identified any “transfer” that Defendant has made, or “obligation” that Defendant has incurred, to which the provisions of the Act can be applied. Instead, Plaintiff refers only generally to “assets that may have already been transferred to the Defendant's wife, .or any other relatives or person's or entities.” [DE 49 at 4 (emphasis added)]. A vague statement about what “may” have happened, however, is not sufficient to plausibly allege that Defendant has already transferred any identifiable property.[4]
In addition to the Fraudulent Transfers Act, Plaintiff cites the Indiana prejudgment attachment statute in his reply brief. Sitting in diversity, the Court applies state substantive law and federal procedural law. Hanover Ins. Co. v. N. Bldg. Co., 751 F.3d 788, 792 (7th Cir. 2014). Federal Rule of Civil Procedure 64 establishes a framework for the seizure of property in order to enforce judgments and protect property. As such, Rule 64 is a procedural rule that governs how federal courts manage this litigation pending the ultimate resolution of a case. See Romans v. Orange Pelican, LLC, No. 22-CV-4169, 2022 WL 16856420, at *7 (N.D. Ill. Nov. 10, 2022). But Rule 64 directs the federal court to apply state procedural law. It states that, “[a]t the commencement of and throughout an action, every remedy is available that, under the law of the state where the court is located, provides for seizing a person or property to secure satisfaction of the potential judgment,” including “attachment.” Fed.R.Civ.P. 64(a), (b) (emphasis added).[5]
“An attachment is an ancillary proceeding auxiliary or incidental to the main action, by which the alleged debtor's property, subject to execution, is taken to secure the payment of any judgment that may be rendered in the main action.” Commercial Cred. Corp. v. Ensley, 136 Ind.App. 389, 391, 199 N.E.2d 108, 109 (1964); see also Bowyer Excavating, Inc. v. Comm'r, Ind. Dep't of Env't Mgmt., 671 N.E.2d 180, 184 (Ind.Ct.App. 1996) (an attachment is a process by which the “freezing” of a defendant's assets may occur).[6] “Indiana law includes two authorizations for pre-judgment attachment: Rule 64 of the Indiana Rules of Trial Procedure and Indiana Code § 34-25-2-1.” Woodward v. Algie, No. 1:13-CV-1435-RLY-DKL, 2014 WL 1414264, at *2 & n.2 (S.D. Ind. Apr. 14, 2014) (). Because neither party has raised Indiana Trial Rule 64 as a basis for the Motion, the Court will focus its attention on the statute.[7]
Ind. Code § 34-25-2-1(a) states as follows:
Ind. Code § 34-25-2-1. Woodward, 2014 WL 1414264, at *3 (citing Winstead v. Koonce, 241 Ind. 440, 449, 172 N.E.2d 859, 864 (Ind. 1961), and Schwedland v. Bachman, 512 N.E.2d 445, 451 (Ind.Ct.App. 1987).
As an initial matter, Plaintiff...
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