Illinois

Warning: The following opinion is provided for purposes of discussion only. We have not Shepardized™ this opinion, and do not know the subsequent disposition of this case nor whether the effect of the opinion has been overruled or superceded by other law.

Baldi v. Longview,
No. 02 C 4608 (N.D.Ill. 10/06/2003)

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

02 C 4608

2003.NDIL.0000393

October 6, 2003

BALDI
v.
LONGVIEW

The opinion of the court was delivered by: Judge Zagel

Defendants and Third-Party plaintiffs ("Lynch et al.") move to strike certain sections of Third-Party Defendant's ("Seyfarth") affirmative defenses and counterclaims. In the underlying lawsuit, Joseph Baldi, as Chapter 11 trustee for McCook Metals, LLC ("McCook"), filed an adversary complaint against Lynch et al., contending that the formation of Longview Aluminum, LLC ("Longview") and Longview's subsequent acquisition of an aluminum reduction plant constituted a breach of fiduciary duty and a fraudulent conveyance with respect to McCook. Lynch et al. filed a third-party complaint for indemnification against Seyfarth, alleging that they relied upon Seyfarth's allegedly inept representation in the formation of Longview and the acquisition of the aluminum reduction plant. Seyfarth filed an answer to the complaint, as well as affirmative defenses and counterclaims for fraud, conspiracy, and contribution. Although Lynch et al. brings this motion under Fed. R. Civ. P. ("Rule") 12, I stated in open court that I would treat it as a Rule 11 motion as well.

Lynch et al. argue that certain sections of Seyfarth's answer, affirmative defenses, and counterclaims are irrelevant, scandalous, and if true, implicate Seyfarth in the alleged wrongdoing. If I understand Seyfarth's main argument, it is that at the time they represented Lynch et al. in the Longview formation and plant acquisition, they were unaware of allegedly fraudulent conduct committed by Lynch et al., and it was that alleged conduct that precipitated the bankruptcy of McCook. In other words, Seyfarth asserts that it represented Lynch et al. in good faith, operating upon information that it believed to be true, and its advice would not have been "inept" but for things not known at the time the advice was given.

The parties disagree as to the time at which Seyfarth became aware of any possible wrongdoing, as well as the verity of Seyfarth's allegations. However, these are issues of fact and their disputability alone does not warrant striking allegations under Rules 11 and 12. Seyfarth has provided evidentiary support sufficient to meet the pleading standards of their answers and affirmative defenses. With respect to these answers and affirmative defenses, I find that they are relevant to the complaint. It is a legitimate defense to Lynch et al.'s allegations of malpractice that Seyfarth operated under false or misleading information, and while some of the allegations are serious in nature, it is in Seyfarth's best interests to plead with as much particularity as possible. It is entirely possible that what Seyfarth alleges is proven to be untrue, but at this stage, I am unwilling to throw out the answers and affirmative defenses without giving Seyfarth a chance to defend itself.

With respect to the counterclaims, however, I find that these are not pled adequately, and further, allowing them to stand will only open the door to needless litigation and make this case more complicated than it should be. The counterclaims, which are for fraud, conspiracy, and contribution, largely incorporate the allegations contained within the answers and affirmative defenses, and this does not meet the higher standard of pleading these offenses with particularity. In addition, if I let these counterclaims stand, Lynch et al. may very well file their own counterclaims of fraud, conspiracy, and contribution based on their allegations of Seyfarth's participation in the alleged wrongdoing, which in turn may result in a never-ending cycle of counterclaims. To allow these counterclaims to stand will only muddy the waters of this case, and I see no justification for it.

For the reasons stated above, Lynch et al.'s motion to strike is DENIED with respect to Seyfarth's answers and affirmative defenses and GRANTED with respect to the counterclaims.

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