CHB Uptown Properties, LLC v. Financial Place Apartments, LLC

• Court: Appellate Court of Illinois
• Decided: December 14, 2007
• Docket: 1-07-2035 NRel
• Status: Unpublished

Opinion

FIFTH DIVISION December 14, 2007

No. 1-07-2035

CHB UPTOWN PROPERTIES, LLC, a Delaware Limited ) Liability Company; and CHB FINANCIAL PLACE, LLC, ) a Delaware Limited Liability Company, ) Appeal from the ) Circuit Court of Plaintiffs-Appellees, ) Cook County ) v. ) ) FINANCIAL PLACE APARTMENTS, LLC, an Illinois ) Limited Liability Company; and ANTOIN REZKO, ) ) Defendants-Appellants ) Honorable ) Barbara A. McDonald, (Daniel Mahru, ) Judge Presiding. ) Defendant). )

JUSTICE O’MARA FROSSARD delivered the opinion of the court:

Defendants Antoin Rezko and Financial Place Apartments appeal the trial court order

which denied their motion to stay the instant proceedings in the circuit court of Cook County.

In support of their contention that the court erred by refusing to stay the proceedings, defendants

argue the following: (1) Rezko is under federal indictment and a stay is necessary to protect his

fifth amendment rights; (2) Rezko will be severely prejudiced without a stay; (3) a stay will further

the public interest and promote judicial efficiency; (4) plaintiffs will not be unduly prejudiced by a

stay; (5) a stay is appropriate because the subject of the instant lawsuit and the subject of the

federal indictment overlap; (6) a stay is justified even though the government is not a party to this 1-07-2035

lawsuit; and (7) this case should be stayed against Financial Place because without Rezko’s input

and assistance, Financial Place is powerless to present a defense. We address each argument in

turn. We review the trial court’s denial of the motion to stay under the abuse of discretion

standard. Kaden v. Pucinski, 263 Ill. App. 3d 611, 612 (1994).

BACKGROUND

A federal grand jury returned two indictments against Rezko in the Federal District Court

for the Northern District of Illinois on October 5, 2006. In United States v. Rezko, No. 06 CR

0729 (N.D. Ill. 2006), Rezko is charged with participating in a scheme to defraud and to obtain

over $10 million dollars in loans from GE Capital Corporation (Loan Fraud Case). A superseding

indictment added allegations regarding Rezko’s sham purchases and transactions to defraud GE

Capital corporation and named an additional defendant, Ali Ata. This case is pending before

United States District Judge James Zagel as of the date the opinion in the instant case was filed.

In United States v. Levine, No. 06 CR 0691 (superseding indictment returned October 5,

2006), Rezko is charged with a scheme to defraud the beneficiaries of the Teacher’s Retirement

System (TRS) of the State of Illinois through solicitation and receipt of kickbacks and payments

for the benefit of Rezko and others from investment firms seeking to do business with the TRS

(Public Corruption Case). This case is set for trial before United States District Judge Amy St.

Eve on February 25, 2008.

In the instant case, the two-count complaint against Financial Place, Rezko and Mahru

alleges that Financial Place defaulted on a loan modification agreement (Agreement) and Rezko

and Mahru individually breached a guarantee agreement (Guarantee) with plaintiff by failing to

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pay Financial Place’s indebtedness and the costs of collecting on the Agreement. Mahru is not a

party to the instant appeal.

Plaintiffs are limited liability companies that loaned Financial Place $3,250,000 pursuant to

a promissory note. The loan was guaranteed by Rezko and Mahru, the two members of Financial

Place, under a guaranty of payment. The parties, on January 1, 2005, entered into a second

amended and restated loan modification agreement in which Rezko and Mahru ratified and

affirmed the terms of the guaranty of payment. Plaintiffs, on June 7, 2005, brought this action for

breach of contract when Rezko, Mahru and Financial Place failed to make payments. Defendants

Rezko and Financial Place moved for a stay on April 25, 2007.

Rezko argued that without a stay pending the outcome of his federal criminal cases, he

would be forced to choose between his fifth amendment privilege against self-incrimination and

the risk of losing his civil case should he choose to invoke his fifth amendment right to remain

silent. Financial Place recognized that a business entity enjoys no fifth amendment privilege, but

argued it could not “mount a defense in this litigation because [Rezko] will invoke both the fifth

amendment and will be unavailable to aid [Financial Place’s] defense.”

After hearing oral argument, the trial court denied the stay for the following reasons: (1)

there was no commonality of subject matter because the civil and criminal actions “do not involve

the same transactions or the same parties, other than of course Mr. Rezko”; (2) both actions were

not brought by the government; (3) the posture of the criminal proceeding reflects that criminal

indictment is “on a totally different matter”; (4) a likelihood of wrongdoing or continuing

wrongdoing is only one factor of the public interest inquiry; (5) the interest of the plaintiffs in

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expeditious litigation weighs against a stay; and (6) there is no fraud claim but, rather, a strict

breach of contract alleged and no evidence has been presented that the government plans to indict

Rezko for other financial dealings that overlap with this civil proceeding, accordingly, Rezko is

not prejudiced because his fifth amendment rights are not implicated. Defendants filed their notice

of interlocutory appeal on July 20, 2007.

ANALYSIS

The right against self-incrimination is one of the most fundamental rights under the

Constitution of the United States. A party has the right to invoke his fifth amendment privilege

when involvement in a civil case may force him to involuntarily disclose information that could be

used to implicate him criminally. People ex rel. Hartigan v. Kafka & Sons Building & Supply

Co., 252 Ill. App. 3d 115, 119 (1993). 10-Dix Building Corp. v. McDannel, 134 Ill. App. 3d

664, 672 (1985).

In determining the propriety of a stay, the court may consider factors including, but not

limited to the following: (1) the posture of the criminal proceeding; (2) the interests of and

burdens on defendant, including the extent to which defendant’s fifth amendment rights are

implicated if a stay is denied; (3) the effect on the public interests at stake if a stay were issued;

(4) the plaintiff’s interest in expeditious resolution of the civil case and any prejudice to plaintiff in

not proceeding; (5) whether the criminal and civil actions involve the same subject matter; and (6)

whether both actions were brought by the government. See Jacksonville Savings Bank v. Kovak,

326 Ill. App. 3d 1131, 1136 (2002). A court may also take into consideration the need to manage

its docket and the efficient use of its judicial resources. Jacksonville Savings Bank, 326 Ill. App.

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3d at 1136.

The party seeking the stay has the burden of proving adequate justification for it. Zurich

Insurance Co. v. Raymark Industries, Inc., 213 Ill. App. 3d 591, 595 (1991). The issue in the

instant case is whether the trial court abused its discretion in denying defendants’ motion for a

stay of proceedings. Kaden v. Pucinski, 263 Ill. App. 3d 611, 612 (1994).

A. Defendant Rezko’s Fifth Amendment Rights

Defendants argue that because Rezko is under federal indictment, a stay is necessary and

appropriate to protect Rezko’s fifth amendment rights. Defendants contend that “[i]f a civil

proceeding might undermine a party’s fifth amendment rights, deferring that proceeding is both

‘necessary and wise,’ and a trial court should give this factor substantial weight.”

In support of this argument, defendants rely on two cases involving Rezko in which

proceedings have been stayed. In Papa Johns International, Inc. v. Rezko, No. 04 C 3131, slip

op. at 1 (March 2, 2007) (Papa Johns) United States District Judge Moran, in granting the stay,

noted that “the two [civil and criminal] actions, in substantial respects, involve the same subject

matter.” However, in the instant case, the record reflects the federal indictments are unrelated to

the civil contract case at issue.

The second case involving Rezko relied upon by defendants is Massuda v. Rezko, Case

No. 06 L 3510 (Cir. Ct. Cook Co.) (Massuda), which is pending in the circuit court. The stay

regarding Rezko in the Massuda case is based on the significant overlap between the issues in

Massuda and the issues in the criminal Loan Fraud Case pending in federal court. This overlap

was recognized in the Massuda case by Judge Burke in his March 28, 2007, order which reflects

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that “the allegations of this indictment [the Loan Fraud Case] have been incorporated into

Plaintiff’s Second Amended Complaint, specifically pages 8-9, and Count VIII (fraud against

Rezko), pages 28-31.” Incorporating the allegations from the federal indictment into the second

amended complaint as noted in Judge Burke’s order created “a significant overlap between the

criminal case and case sub judice.”

In the instant case, plaintiffs’ contract complaint against defendants is completely

unrelated to the entities or transactions in the federal cases. The trial court considered whether

there was any overlap between the federal cases and the instant contract case. Based on the

record, we find no abuse of discretion by the circuit court’s determination that there was no

overlap and, accordingly, no danger of a fifth amendment violation.

B. Rezko Will Not be Severely Prejudiced Without a Stay

Defendants argue that “Rezko has already indicated in his lower-court filings that he

believes it may be appropriate to assert his Fifth Amendment rights to the allegations in this case.”

However, the record reflects no reason why Rezko’s assertion of his fifth amendment privilege

would be proper. The record does not reflect how Rezko’s testimony in oral discovery would

incriminate him. Moreover, the government, at either the state or federal level, has demonstrated

no interest in the instant case. The government has not sought to intervene or attempted to gain

access to any discovery responses from plaintiffs or any other source.

Based on our review of the record, the circuit court did not abuse its discretion.

C. Promote Public’s Interest and Judicial Efficiency

We are mindful that the circuit court acknowledged that there was “no reason” to find that

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the kind of public harm contemplated by law would occur if the stay were granted and concluded

that this factor “weighs in favor of the stay.” Accordingly, this issue is not in dispute.

Defendants further argue that a stay will promote judicial efficiency by eliminating the

duplication of “efforts of both the parties and the Court” and by eliminating a drain on judicial

resources if repeated challenges to Rezko’s fifth amendment arguments need be adjudicated. The

record does not disclose that any discovery which overlaps with the federal criminal cases has

been requested in the instant case. Accordingly, the record does not reflect judicial resources will

be drained or judicial efficiency impacted by denying a stay of the proceedings.

D. Prejudicial Impact of Stay on Plaintiffs

Defendants argue that “[w]hile a plaintiff certainly has an interest in expeditious litigation,

this reason alone has specifically and repeatedly been held insufficient to deny a stay.” That

argument ignores the fact that while the trial court considered the interest of plaintiffs in the

instant case in expeditious litigation, that interest was just one of several factors which supported

the decision to deny a stay. The court did not rely on that reason alone but, rather, took into

consideration various factors as articulated in its ruling after hearing oral argument regarding the

issue of staying the proceedings.

Defendants further argued that “[c]ontinuing financial damage is simply not a unique

enough injury to overcome a defendant’s interest in the fundamental Constitutional privilege

against self-incrimination.” The record reflects the trial court gave proper consideration to

defendant Rezko’s fundamental Constitutional privilege against self-incrimination, but found no

fifth amendment concerns because the civil and federal criminal cases were unrelated.

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E. Subject Matter Overlap

Defendants argue the subject matter of the instant case and the federal criminal cases

overlaps. In support of that argument, defendants contend that it is “more than a mere possibility

that Rezko’s testimony regarding his business practices in connection with this case could be used

against him by the government, either in its investigation or at trial.”

The circuit court rejected the argument by defendants that there was a connection between

the instant case and the federal criminal cases. The record supports that conclusion. The instant

case involves plaintiffs’ allegation of breach of contract by defendants. The issue in the Loan

Fraud Case is whether Rezko made misrepresentations, caused documents to be created and used

sham corporations to defraud GE Capital Corporation. The indictment in the Loan Fraud Case in

no way refers to any of the plaintiffs in the instant case, the corporate defendant in the instant case

or the contract between plaintiffs and defendants. Moreover, the instant case does not involve

GE Capital Corporation or Rezko Enterprises. The Public Corruption Case is similarly unrelated.

Defendants further argue that the trial court’s determination that the Loan Fraud Case and

the instant case were unrelated “colored the court’s” analysis of the other factors to be considered

in determining the issue of whether a stay should be granted. The record does not support that

argument. Rather, the record reflects the circuit court gave careful consideration to appropriate

factors in denying the stay.

F. Stay Justified Even Though Government Is Not a Party

Defendants argue that “the trial court ignored entirely the numerous cases in which courts

have granted stays even where the government was not a party to the civil proceeding.” In the

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factual context of the instant case, the record reflects the trial court considered the fact that the

government was not a party to the instant case. That fact was one of several factors properly

considered by the trial court in denying the stay.

G. No Error in Denying Stay to Financial Place

Defendants argue that the case should be “stayed as against Financial Place as well as

Rezko because without Rezko’s input and assistance, Financial Place is powerless to present a

defense in this civil matter.” In support of that argument, defendants rely upon the following

cases. United States v. All Meat & Poultry Products, No 02 C 5145 (October 3, 2003);

American Express Business Finance Corp. v. RW Professional Leasing Services Corp., 225 F.

Supp. 2d 263, 265-66 (2002); Volmar Distributors, Inc. v. New York Post Co., 152 F.R.D. 36, 41

(S.D.N.Y. 1993); Bruner Corp. v. Balogh, 819 F. Supp. 811, 816 (E.D. Wis. 1993). We are

mindful that in those cases corporate defendants have been able to obtain a stay because the

criminal and civil matters overlapped. However, in the factual context of the instant case, we do

not find the above-noted cases instructive. Unlike the cases relied upon by defendants, in the

instant case, there is no overlap or similarity of issues between the civil and criminal cases.

CONCLUSION

It is not disputed by the parties that in determining whether to grant a stay the following

factors are to be considered: (1) the posture of the criminal proceeding; (2) the interests of and

burdens on defendants, including the extent to which defendants’ fifth amendment rights are

implicated if a stay is denied; (3) the effect on the public interests at stake if a stay were issued;

(4) the plaintiff’s interest in expeditious resolution of the civil case and any prejudice to plaintiff in

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not proceeding; (5) whether the criminal and civil actions involve the same subject matter; and (6)

whether both actions were brought by the government. See Jacksonville Savings Bank v. Kovak,

326 Ill. App. 3d 1131, 1136 (2002).

Based on our review of the record, we conclude the trial court gave proper consideration

to appropriate factors in denying the stay. There was no abuse of discretion. For the reasons

previously discussed, we affirm the trial court’s decision and order on June 29, 2007, denying

defendants’ motion to stay the proceedings.

Affirmed.

FITZGERALD SMITH, P.J., and GALLAGHER, J., concur.

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