857 F. Supp. 2d 719
N.D. Ill.2012Background
- Plaintiffs, minority KBP shareholders, allege a ten-year RICO and fraud scheme led by Adam Swiech, Derek Lewicki, and Richard Swiech.
- Plaintiffs claim sham contracts, self-dealing leases, land misappropriation, and construction kickbacks enriched the direct defendants and diluted plaintiffs’ ownership.
- Plaintiffs contend capital contributions by Adam increased his KBP stake from ~10% to ~74%, reducing plaintiffs’ interest to ~26%.
- A 2012 planned issuance of 1,200 new KBP shares in PLN 600,000 is expected to further dilute plaintiffs below 25%.
- If dilution occurs, Adam could hold >75% and control KBP, enabling a merger or other changes adverse to plaintiffs.
- The court granted TRO and preliminary injunction to prevent voting on such issuance and to protect plaintiffs’ interests.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether RICO permits preliminary injunctive relief | Bucklo grants relief under RICO authority. | Defendants contend RICO lacks power for such relief at this stage. | RICO authorizes preliminary injunctive relief. |
| Likelihood of success on the merits | Evidence shows substantial RICO/IL claims against direct defendants. | Arguments dispute the strength of the claims and admissibility of evidence. | Plaintiffs show a better than negligible chance of success. |
| Irreparable harm and adequacy of remedy at law | Dilution and loss of control irreparably harm plaintiffs. | No irreparable harm and adequate legal remedies exist. | Irreparable harm shown; lack of adequate remedy at law acknowledged; balance favors injunctive relief. |
| Balance of harms | Preventing further dilution preserves plaintiffs’ control and prevents ongoing fraud. | KBP needs capital; injunction harms ongoing operations. | The balance weighs in plaintiffs’ favor; injunction justified to preserve control and deter fraud. |
| Public interest | Public interest in preventing corporate fraud and enforcing RICO. | No explicit public-interest justification advanced by defendants. | Public interest supports relief. |
Key Cases Cited
- Ty, Inc. v. Jones Group, Inc., 237 F.3d 891 (7th Cir. 2001) (sliding-scale test for preliminary injunctions)
- NOW v. Scheidler, 267 F.3d 687 (7th Cir. 2001) (private plaintiffs can seek injunctive relief under RICO)
- Domanus v. Lewicki, 779 F.Supp.2d 739 (N.D. Ill. 2011) (prior dismissal motions resolved; evidence supports RICO claims)
- International Equity Investments, Inc. v. Opportunity Equity Partners, Ltd., 441 F.Supp.2d 552 (S.D.N.Y. 2006) (dilution or deprivation of corporate rights may be irreparable)
- Motorola Credit Corp. v. Uzan, 202 F.Supp.2d 239 (S.D.N.Y. 2002) (preliminary injunction under remedial framework)