244 F. Supp. 3d 750
N.D. Ill.2017Background
- Armada (Singapore) contracted to ship Ashapura’s bauxite; Ashapura allegedly breached and Armada obtained ~ $70M in arbitration awards and pursued Rule B maritime attachment proceedings in the U.S.
- Armada alleges Amcol and its subsidiaries (ACC, Volclay) were Ashapura affiliates/insiders who, knowing of Ashapura’s insolvency, engineered transfers and transactions to deplete Ashapura and frustrate creditor collection.
- Alleged schemes include euro payments to evade attachment, contra-charging (offsets among affiliates), a $2.75M dividend (defendants’ share ≈ $550K), buy-back of stock, restructuring transactions tied to a €7.1M AANV-related debt, and coordination of Chapter 15 filings.
- Armada pleaded RICO ( §§1962(c) and (d)), multiple Illinois Uniform Fraudulent Transfer Act (IUFTA) counts, wrongful-dividend and breach-of-fiduciary-duty common-law claims, and a maritime fraudulent-transfer claim to set aside transfers that allegedly aimed to defeat admiralty garnishment.
- Defendants moved for judgment on the pleadings under Rule 12(c). The court considers extraterritoriality, statutory reach, and standing issues in resolving the motion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether RICO private cause of action applies | Armada: defendants’ racketeering (mail/wire fraud) injured Armada’s property (U.S. attachment/bankruptcy proceedings), so RICO applies | Defendants: RJR Nabisco bars extraterritorial application; Armada’s injury was abroad | Dismissed — Armada’s injury occurred in Singapore; §1964(c) requires a domestic injury after RJR Nabisco |
| Whether IUFTA claims apply | Armada: IUFTA can reach transfers that harmed creditors, including those tied to defendants | Defendants: IUFTA lacks clear extraterritorial intent; transactions occurred primarily abroad | Dismissed — IUFTA does not apply extraterritorially and relevant circumstances were not primarily in Illinois |
| Viability of wrongful-dividend claim under Illinois law | Armada: trust-fund theory supports holding shareholders liable for dividends that deplete assets | Defendants: Illinois recognizes no standalone wrongful-dividend cause of action | Dismissed — Illinois law does not recognize a standalone wrongful-dividend claim |
| Individual creditor’s standing to sue for breach of fiduciary duty | Armada: defendants breached fiduciary duties when favoring others/approving wrongful transactions | Defendants: Illinois law bars individual creditors from direct breach-of-fiduciary claims; remedy belongs to corporation or bankruptcy representative | Dismissed — individual creditor (Armada) lacks standing under Illinois law |
| Maritime fraudulent-transfer claim: admiralty jurisdiction and remedy | Armada: admiralty jurisdiction permits setting aside transfers made to evade maritime garnishment; state law supplies rule of decision | Defendants: no substantive admiralty fraudulent-transfer cause; extraterritorial/state-law limits bar claim; some transfers not subject to U.S. garnishment; unnamed affiliate is true actor | Denied — admiralty jurisdiction can reach transfers meant to defeat attachment; Illinois law supplies substantive rule; factual allegations suffice to proceed on maritime fraudulent-transfer claim |
Key Cases Cited
- RJR Nabisco, Inc. v. European Cmty., 136 S. Ct. 2090 (2016) (private RICO remedy does not reach injuries suffered abroad; §1964(c) requires domestic injury)
- Flame S.A. v. Freight Bulk Pte. Ltd., 807 F.3d 572 (4th Cir. 2015) (no substantive federal admiralty rule governing fraudulent conveyance; state law supplies rule of decision)
- Atlanta Shipping Corp. v. Chem. Bank, 818 F.2d 240 (2d Cir. 1987) (admiralty jurisdiction may be used to set aside fraudulent transfers made to evade an admiralty judgment)
- Shipping Corp. of India v. Jaldhi Overseas Pte Ltd., 585 F.3d 58 (2d Cir. 2009) (where no federal maritime rule exists, courts may look to state law to determine property rights)
- Midwest Grinding Co. v. Spitz, 976 F.2d 1016 (7th Cir. 1992) (RICO enacted to combat racketeering; background on RICO’s purposes)