Nowaczyk v. Matingas

146 F.R.D. 169, 1993 U.S. Dist. LEXIS 1332, 1993 WL 30332
CourtDistrict Court, N.D. Illinois
DecidedFebruary 8, 1993
DocketNo. 92 C 4898
StatusPublished
Cited by18 cases

This text of 146 F.R.D. 169 (Nowaczyk v. Matingas) is published on Counsel Stack Legal Research, covering District Court, N.D. Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Nowaczyk v. Matingas, 146 F.R.D. 169, 1993 U.S. Dist. LEXIS 1332, 1993 WL 30332 (N.D. Ill. 1993).

Opinion

MEMORANDUM OPINION AND ORDER

ALESIA, District Judge.

Before the court are Defendants’ Motion to Dismiss, Motion to Stay Discovery, and Motion for a Protective Order.

FACTS

Fundusz Obslugi Zadluzenia Zagranicznego (“FOZZ”) was established by an act of Polish Parliament in February, 1989 as [171]*171an instrumentality of and vested with the authority of the government of Poland to service Poland’s foreign debt. FOZZ was placed in liquidation by the Polish Parliament as of December 1990 following the discovery of major improprieties and fraud. Hieronim Nowaczyk, a citizen and resident of Poland, has been appointed Liquidator of FOZZ by the Polish Ministry of Finance and is charged with the task of marshalling FOZZ’s assets. In the 1980’s the government of Poland suspended all payments on its foreign debt (“Debt”). This Debt was subsequently traded in commerce from time to time in private and secondary transactions often at substantial discounts. FOZZ determined it could reduce Poland’s outstanding Debt if the Debt was repurchased on the secondary markets.

ABI is an Illinois corporation with its principal place of business in Chicago, Illinois'. ABI was incorporated with minimum capital ($1,000) and with Dino Matingas (“Matingas”), as the sole director. ABI has over twenty subsidiaries or affiliates, which purport to be engaged in the business of obtaining loans and aiding customers in investment transactions.

The plaintiff's Amended Complaint includes three counts. Count I alleges fraud, Count II seeks an accounting, and Count III alleges conversion. Each count involves allegations that defendants engaged in a fraudulent scheme to embezzle or otherwise misappropriate FOZZ funds. The plaintiff alleges that Gregory Zemek (“Zemek”), then director of FOZZ, and defendants diverted FOZZ funds for their personal benefit.

Specifically, plaintiff alleges that Zemek entered into a Letter Agreement dated May 26,1989 between FOZZ and ABI 368 pursuant to which ABI 368 agreed to repurchase various amounts of the Debt. The Letter Agreement stated that “Fozz and ABI 368, Inc., from time to time and on a case-by-case basis, mutually agree to enter into transactions involving purchases in the secondary market (“Purchases”) of external debt of the Polish Peoples Republic (the “Assets”).” Plaintiff alleges that pursuant to the Letter Agreement, FOZZ would provide funds owned by the government of Poland to Matingas and his shell corporation, ABI 368, for the sole purpose of purchasing certificates of deposit. These certificates of deposit would then be used as collateral, for loans obtained by ABI 368 for the repurchase of the Debt.

Plaintiff alleges that defendants never at any time acquired or intended to acquire the Debt as they had represented to FOZZ; rather, they conspired to and did misappropriate and convert at least $15.5 million of FOZZ funds for their own personal, unlawful gain. Plaintiff contends that defendants converted the funds to pay off past loans and refinance property, uses not beneficial to nor authorized by FOZZ.

I. MOTION TO DISMISS

Defendants have moved for dismissal of Plaintiff’s Amended Complaint for failure to state a claim upon which relief can be granted. Federal Rule of Civil Procedure 12(b)(6). Therefore, the court “must accept as true all the plaintiff’s well-pleaded factual allegations and inferences reasonably drawn from them.” Swofford v. Mandrell, 969 F.2d 547, 549 (7th Cir.1992). An action may be dismissed only if the complaining party “can prove no set of facts in support of his claim that would entitle him to relief.” Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957).

Primarily, defendants challenge the sufficiency of plaintiff’s fraud claim as stated in Count I of Plaintiff’s Amended Complaint. Furthermore, defendants argue that since the fraud claim in Count I forms the basis for Count II seeking an accounting and Count III alleging conversion, plaintiff’s complaint should be dismissed in its entirety. To state a claim for fraud under Illinois law, plaintiff must plead and prove:

(1) A false statement of material fact; (2) by a party who knows or believes it to be false; (3) with the intent to induce another to act; (4) action by the other in reliance of the statement’s truth; and (5) injury to the other resulting from that reliance. In addition, the injured party [172]*172must have been justified in relying on the other’s statement.

Runnemede Owners, Inc. v. Crest Mortg. Corp., 861 F.2d 1053, 1056 (7th Cir.1988) (emphasis in original).

The defendants challenge two elements of plaintiff’s fraud claim. First, the defendants dispute plaintiff’s claim that the ABI Defendants made a false statement of material fact by promising to purchase Polish Debt in the secondary market under the Letter Agreement since they had no intention of purchasing such debt. Amended Complaint, at ¶ 19. Defendants argue that they were not obligated under the Letter Agreement to purchase Polish Debt with the funds transferred by FOZZ and therefore the plaintiff has failed to allege any conduct contrary to the defendants’ contractual obligations under the Letter Agreement. Memorandum in Support of Defendants’ Motion to Dismiss Amended Complaint (“Defendants’ Memo in Support”), at 7. Second, defendants contend that even if the alleged promise constituted a false statement of material fact, the plaintiff could not have justifiably relied on the alleged misrepresentations, which purportedly induced FOZZ to transfer funds to the ABI defendants, because such misrepresentations were contrary to the express provisions of the governing Letter Agreement. Id. at 8.

1. False Statement of Material Fact

FOZZ and ABI 368, Inc. executed a Letter Agreement whereby they agreed “to enter into transactions involving purchases in the secondary market ... of external debt of the Polish People’s Republic____” Amended Complaint, Ex. A, at 1. In furtherance of this agreement, FOZZ agreed to transfer an unspecified amount of money to ABI 368 for the purchase of interest-bearing certificates of deposit to be held by ABI 368 for the benefit of FOZZ. Id. at ¶ 1. The Letter Agreement authorized ABI 368 “to encumber these certificates of deposit by pledging them as security for any loans obtained by ABI 368” and provided that “[t]he proceeds of any such loans shall be available to ABI 368 at ABI 368’s sole discretion.” Id. (emphasis added). Further, the Letter Agreement states that FOZZ would give ABI 368 written notice of FOZZ’s desire to purchase Polish Debt, and within thirty days of receiving notice, ABI 368 would enter negotiations with third parties owning the assets to be purchased. Id. at ¶ 2. Finally, the Letter Agreement stated that the “ultimate decision to purchase these assets will be made jointly by FOZZ and ABI 368.” Id.

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Cite This Page — Counsel Stack

Bluebook (online)
146 F.R.D. 169, 1993 U.S. Dist. LEXIS 1332, 1993 WL 30332, Counsel Stack Legal Research, https://law.counselstack.com/opinion/nowaczyk-v-matingas-ilnd-1993.