08 B 01187,08 A 00237
In this chapter 11 matter, the shares of the Debtor were held in a trust. Wayne and Terry Cohen were beneficiaries of the trust and two co-trustees were named as trustees of the trust. Wayne was the President of the Debtor and Terry was its CEO. Both were the sole directors of the Debtor. Beginning in 2000, Wayne suspected Terry of looting the Debtor’s assets and notified the co-trustees on several occasions. Pursuant to the trust agreement, the co-trustees had the ability to appoint or remove directors and officers. Despite numerous assurance that they would investigate, the co-trustees did not act. Wayne eventually filed a shareholder’s derivative suit in the Chancery Court of Cook County, Illinois against Terry and the co-trustees for breach of fiduciary duty and civil conspiracy. Eventually, the Debtor was placed into bankruptcy and a creditors’ committee was formed. The committee removed the derivative action to this Court and filed its own adversary proceeding against, inter alai, Terry, Wayne, and the co-trustees. The committee’s complaint also sought relief for breach of fiduciary duty, recovery of fraudulent transfers, and other relief. Wayne eventually amended his complaint to include a RICO cause of action against Terry. The co-trustees moved to dismiss Wayne’s complaint on standing, causation, damages, and mitigation grounds. The co-trustees similarly moved against the committee. Terry moved to dismiss Wayne’s complaint on standing grounds. Wayne moved for judgment on the pleadings regarding the committee’s complaint against him alleging fraudulent transfers. The Court granted the motions to dismiss in part and denied them in part. Wayne’s motion for judgment on the pleadings was denied.