UNITED STATES COURT OF APPEALS FOR THE …online.wsj.com/public/resources/documents/panda.pdfunited states court of appeals for the seventh circuit ... 113 f.3d 706 (7th cir. 1997)

No. 13-2818

UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

Dr. Fortunee Massuda, Plaintiff-Appellant v. Panda Express, Inc., Panda Restaurant Group, Inc., Citadel-Panda Express, Inc., Andrew Cherng and Peggy Cherng, Defendants-Appellees

Appeal From The United States District Court For the Northern District of Illinois, Eastern Division

Case No. 12 CV 9683 The Honorable Ronald A. Guzman

BRIEF OF THE DEFENDANTS-APPELLEES PANDA EXPRESS, INC., PANDA RESTAURANT GROUP, INC., CITADEL-PANDA

EXPRESS, INC., ANDREW CHERNG, AND PEGGY CHERNG

GIBSON, DUNN & CRUTCHER LLP Theodore J. Boutrous Jr. Christopher D. Dusseault Alexander K. Mircheff 333 South Grand Avenue Los Angeles, California 90071 (213) 229-7000 EDWARDS WILDMAN PALMER LLP Michael Docketerman William R. Lee Tanya H. Miari 225 West Wacker Drive, Suite 3000 Chicago, Illinois 60606 (312) 201-2000 Attorneys for Defendants-Appellees

Case: 13-2818 Document: 23-1 Filed: 11/12/2013 Pages: 40 (1 of 129)

CIRCUIT RULE 26.1 DISCLOSURE STATEMENT

The undersigned, counsel of record for Defendants-Appellees Panda Express, Inc., Panda

Restaurant Group, Inc., Citadel-Panda Express, Inc., Andrew Cherng, and Peggy Cherng,

furnishes the following list in compliance with Circuit Rule 26.1:

(1) The full name of every party that the attorney represents in the case:

Panda Express, Inc., Panda Restaurant Group, Inc., Citadel-Panda Express, Inc., Andrew

Cherng, and Peggy Cherng

(2) The names of all law firms whose partners or associates have appeared for the

party in the case (including the proceedings in the district court or before an

administrative agency) or are expected to appear for the party in this court:

GIBSON, DUNN & CRUTCHER LLP; EDWARDS WILDMAN PALMER LLP

(3) If the party or amicus is a corporation, i) Identify its parent corporations, if any:

Panda Express, Inc. and Citadel Panda Express, Inc. are wholly owned subsidiaries of

Panda Restaurant Group, Inc. (“PRG”). PRG is a subsidiary of Andrew and Peggy Cherng

Family Company.

ii) Any publicly held company that owns 10% or more of the party’s or amicus’ stock:

None.

/s/ Christopher D. Dusseault Christopher D. Dusseault GIBSON, DUNN & CRUTCHER LLP 333 South Grand Avenue Los Angeles, California 90071 (213) 229-7000 /s/ Michael Docketerman Michael Docketerman EDWARDS WILDMAN PALMER LLP 225 West Wacker Drive, Suite 3000 Chicago, Illinois 60606 (312) 201-2000


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TABLE OF CONTENTS

I. JURISDICTIONAL STATEMENT ................................................................................... 1

II. STATEMENT OF ISSUES ................................................................................................ 1

III. STATEMENT OF THE CASE ........................................................................................... 2

IV. STATEMENT OF FACTS ................................................................................................. 4

A. Background ............................................................................................................. 4

B. The Instant Allegations ........................................................................................... 6

C. The District Court’s Order ...................................................................................... 8

V. SUMMARY OF ARGUMENT ........................................................................................ 10

VI. ARGUMENT .................................................................................................................... 11

A. The District Court Correctly Dismissed the Claims Plaintiff Asserts Because They Are Derivative And Were Released By PE Chicago. ................... 11

1. The Claims Are Derivative Under Tooley. ............................................... 11

2. Gentile Does Not Change the Claims’ Derivative Characterization. ....... 14

3. PE Chicago Settled and Released the Claims. .......................................... 18

B. The District Court Was Well Within Its Discretion to Reject Judicial Estoppel................................................................................................................. 20

1. PE Chicago’s Claims Were Addressed on the Merits. ............................. 21

2. Defendants’ Arguments Have Been Entirely Consistent. ......................... 23

C. The District Court Properly Dismissed Plaintiff’s Fraud Claim For Failure To Adequately Plead Intent, Reliance, and Damages. .......................................... 25

D. Leave to Amend Should be Denied. ..................................................................... 29

VII. CONCLUSION ................................................................................................................. 31


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TABLE OF AUTHORITIES

Cases

Agostino v. Hicks, 845 A.2d 1110 (Del. Ch. 2004) ................................................................................................ 24

Allied Artists Pictures Corp. v. Baron, 413 A.2d 876 (Del. 1980) ......................................................................................................... 18

Ashcroft v. Iqbal, 556 U.S. 662 (2009) .................................................................................................................. 29

Avacus Partners, L.P. v. Brian, 1990 WL 161909 (Del. Ch. Oct. 24, 1990) .............................................................................. 14

B A Mortg. & Int’l Realty Corp. v. Taylor, No. 84 C 7739, 1985 WL 1703 (N.D. Ill. June 7, 1985) .......................................................... 27

Beckham v. Keith, 2011 WL 9557991 (Mass. Super. Ct. June 15, 2011) ............................................................... 17

Boland v. Engle, 113 F.3d 706 (7th Cir. 1997) .................................................................................................... 30

Borsellino v. Goldman Sachs Group, Inc., 477 F.3d 502 (7th Cir. 2007) .................................................................................................... 26

Braddock v. Zimmerman, 906 A.2d 776 (Del. 2006) ......................................................................................................... 19

Connick v. Suzuki Motor Co., 675 N.E.2d 584 (Ill. 1996) ........................................................................................................ 27

Cyrus v. Town of Mukwonago, 624 F.3d 856 (7th Cir. 2010) .................................................................................................... 27

Economy Folding Box Corp. v. Anchor Frozen Foods Corp., 515 F.3d 718 (7th Cir 2008) ..................................................................................................... 14

Elf Atochem N. Am. v. Jaffari, 727 A.2d 286 (Del. 1999) ......................................................................................................... 12

Farnham v. Windle, 918 F.2d 47 (7th Cir. 1990) ...................................................................................................... 30

Feldman v. Cutaia, 951 A.2d 727 (Del. 2008) ....................................................................................... 12, 13, 16, 17


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Feldman v. Cutaia, 956 A.2d 644 (Del. Ch. 2007) .................................................................................................. 17

For Your Ease Only, Inc. v. Calgon Carbon Corp., 560 F.3d 717 (7th Cir. 2009) .................................................................................................... 28

G & S Holdings LLC v. Cont’l Cas. Co., 697 F.3d 534 (7th Cir. 2012) .................................................................................................... 12

Gatz v. Ponsoldt, 925 A.2d 1265 (Del. 2007) ....................................................................................................... 16

Gentile v. Rossette, 906 A.2d 91 (Del. 2006) ................................................................................... 10, 14, 15, 16, 17

In re CD Liquidation Co., 462 B.R. 124 (D. Del. Bnkpcy. 2011) ...................................................................................... 17

In re First Interstate Bancorp Consol. S’holder Litig., 729 A.2d 851 (Del. Ch. 1998) ............................................................................................ 13, 18

In re Knight-Celotex, LLC, 695 F.3d 714 (7th Cir. 2012) .................................................................................................... 20

In re NYMEX S’holder Litig., 2009 WL 3206051 (Del. Ch. Sept. 30, 2009) ........................................................................... 13

Innovative Therapies, Inc. v. Meents, No. DKC 12-3309, 2013 WL 2919983 (D. Md. June 12, 2013) .............................................. 17

Int’l Mktg., Ltd. v. Archer-Daniels-Midland Co., 192 F.3d 724 (7th Cir. 1999) .................................................................................................... 30

Joe W. & Dorothy Dorsett Brown Foundation v. Frazier Healthcare V, L.P., 889 F. Supp. 2d 893 (W.D. Tex. 2012) .................................................................................... 17

Kennedy v. Four Boys Labor Servs. Inc., 664 N.E.2d 1088 (Ill. App. Ct. 1996) ....................................................................................... 29

Kramer v. W. Pac. Indus., Inc., 546 A.2d 348 (Del. 1988) ............................................................................................. 12, 13, 14

Loral Space & Communications, Inc. v. Highland Crusader Offshore Partners, L.P., 977 A.2d 867 (Del. 2009) ......................................................................................................... 16

Metro. Life Ins. Co. v. Tremont Grp. Holdings, Inc., No. Civ. A. 7092–VCP, 2012 WL 6632681 (Del. Ch. Dec. 20, 2012) ........................ 13, 18, 24


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Nikoonahad v. Greenspun Corp., No. C09-02242, 2010 WL 1268124 (N.D. Cal. Mar. 31, 2010) ............................................... 17

Nunez-Moron v. Holder, 702 F.3d 353 (7th Cir. 2012) .................................................................................................... 19

Ogden Martin Sys. of Indianapolis, Inc. v. Whiting Corp., 179 F.3d 523 (7th Cir. 1999) .................................................................................................... 21

Pontarelli Limousine, Inc. v. City of Chicago, 929 F.2d 339 (7th Cir. 1991) .............................................................................................. 23, 25

Prime Leasing Inc. v. Kendig, 773 N.E.2d 84 (Ill. 2002) .................................................................................................... 27, 28

Ravenswood Inv. Co., L.P. v. Winmill, No. Civ. A. No. 3730–VCN, 2011 WL 2176478 (Del. Ch. May 31, 2011) ............................. 13

Rhodes v. Silkroad Equity, LLC, No. Civ. A. 2133-VCN, 2007 WL 2058736 (Del. Ch. July 11, 2007) ..................................... 16

Swanson v. Citibank, N.A., 614 F.3d 400 (7th Cir. 2010) .................................................................................................... 26

Tooley v. Donaldson, Lufkin & Jenrette, Inc., 845 A.2d 1031 (Del. 2004) ........................................................................... 1, 12, 13, 14, 23, 24

Tricontinental Indus., Ltd. v. PricewaterhouseCoopers, LLP, 475 F.3d 824 (7th Cir. 2007) .............................................................................................. 26, 27

United States v. Christian, 342 F.3d 744 (7th Cir. 2003) .................................................................................................... 23

VGS, Inc. v. Castiel, 2003 WL 723285 (Del. Ch. Feb. 23, 2003) .............................................................................. 12

Wells v. Coker, 707 F.3d 756 (7th Cir. 2013) .................................................................................................... 21

Wigod v. Wells Fargo Bank, N.A., 673 F.3d 547 (7th Cir. 2012) .................................................................................................... 27

Wilkinson v. Appleton, 190 N.E.2d 727 (Ill. 1963) ........................................................................................................ 28

Young v. Verizon’s Bell Atl. Cash Balance Plan, 667 F. Supp. 2d 850 (N.D. Ill. 2009) ........................................................................................ 21


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Statutes

28 U.S.C. § 1291 ........................................................................................................................... 30

28 U.S.C. § 1292 ........................................................................................................................... 30

740 Ill. Comp. Stat. 160/2(c) ........................................................................................................ 29

740 Ill. Comp. Stat. 160/2(d) ........................................................................................................ 29

740 Ill. Comp. Stat. 160/2(i) ......................................................................................................... 29

Rules

Fed. R. Civ. P. 9(b) ..................................................................................................... 25, 26, 28, 29

Fed. R. Civ. P. 12(b)(1)................................................................................................................. 12

Fed. R. Civ. P. 23.1 ....................................................................................................................... 19

Other Authorities

19 Am. Jur. 2d Corporations § 1949 ............................................................................................. 24

Balotti & Finkelstein, The Delaware Law of Corporations and Business Organizations § 13.10 (2011) ........................................................................................................................... 15


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I. JURISDICTIONAL STATEMENT

Defendants and Appellees Panda Express, Inc. (“Panda”), Panda Restaurant Group, Inc.

(“PRG”), Citadel-Panda Express, Inc., Andrew Cherng, and Peggy Cherng agree that Plaintiff

and Appellant Fortunee Massuda’s jurisdictional statement is complete and correct.

II. STATEMENT OF ISSUES

This is a case in which an indirect shareholder in a Delaware company seeks to re-litigate

claims previously brought, settled, and released by the company itself. Plaintiff contends that

she has been harmed because the company did not receive fair value when it sold Defendants its

“only real asset”—a 50% interest in a partnership that operated Chicago-area restaurants—

causing lost profits and proceeds to the company, and thus to its parent, and thus to investors in

the parent like Plaintiff. The District Court correctly held that the claims Plaintiff asserts, with

one exception, were derivative rather than direct. The District Court held that Plaintiff cannot

bring these claims on her own behalf because, under governing Delaware law, a shareholder’s

direct claim requires some harm that is “independent of any injury to the corporation.” Tooley v.

Donaldson, Lufkin & Jenrette, Inc., 845 A.2d 1031, 1038 (Del. 2004) (emphasis added). And

because the company settled these claims in a prior suit, Plaintiff cannot proceed derivatively on

the company’s behalf. The District Court also dismissed the sole claim that it deemed to be

individual—a fraud claim based on Panda’s alleged characterization of Massuda’s interest in the

parent company as “worthless”—because Plaintiff failed to adequately allege the essential

elements of intent, reliance, and damages.

The questions presented are as follows:

1. Did the District Court correctly apply Tooley to hold that the claims Plaintiff

asserted were derivative where she failed to allege any harm independent of the injury allegedly


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suffered by the company in which she was an indirect investor, and did it properly dismiss those

derivative claims where the company previously released them as part of a settlement?

2. Was the District Court within its discretion in concluding that Defendants were

not judicially estopped from arguing that the claims Plaintiff asserted were derivative simply

because Defendants had argued, the first time they had to defend them, that the claims lacked

merit?

3. Did the District Court properly dismiss Plaintiff’s supposedly individual fraud

claim, where she failed to sufficiently plead the essential elements of intent, reliance, and

damages?

III. STATEMENT OF THE CASE

This case arises from a June 2006 transaction in which Panda purchased PE Chicago,

LLC’s (“PE Chicago’s”) one-half interest in the Rezko-Citadel Partnership, a partnership formed

to open and operate Chicagoland restaurants. Panda was the general partner in Rezko-Citadel,

while PE Chicago—a Delaware limited liability company controlled by Tony Rezko—was its

limited partner. Panda sought to end that relationship amicably, paid PE Chicago a negotiated

price for its partnership interest, and, consistent with Panda’s long practice of minimizing

publicity regarding its business decisions, agreed to Rezko’s request that the sale be kept

confidential (a standard arrangement in partnership dissolutions). In 2008, Semir Sirazi, one of

Rezko’s longtime investors, sued Panda in connection with that transaction, alleging, among

other things, that Panda paid too little for PE Chicago’s interest in the partnership. Two years

later, PE Chicago itself, by then controlled by Sirazi, joined that lawsuit and asserted the same

claims (and others).

On Defendants’ motions, the court adjudicated most of Sirazi’s and PE Chicago’s claims


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(as well as Panda’s counterclaim against PE Chicago) in Defendants’ favor. Three claims were

tried to a jury, which rendered a verdict against Defendants. While the parties’ post-trial motions

were pending—and notwithstanding Defendants’ belief that the verdict was legally flawed and

factually baseless—Defendants agreed to settle with Sirazi and PE Chicago in order to buy

peace. In exchange for substantial consideration, PE Chicago agreed to a broad release of all

claims related to the Rezko-Citadel Partnership (a fact Plaintiff does not mention in her Opening

Brief). Thereafter, the Sirazi/PE Chicago court vacated the jury’s verdict and resulting

judgment.

Plaintiff—another longtime investor in Rezko’s businesses and an investor in PE

Chicago’s parent company—sat on the sidelines for more than four years while Sirazi and PE

Chicago litigated and then settled the prior case. Just a month after the settlement agreement was

signed, however, Plaintiff—represented by the same attorneys who had represented Sirazi and

PE Chicago—filed a copycat lawsuit, asserting claims identical to the ones PE Chicago had just

settled. Like the prior complaint, the claims here were premised on the allegation that PE

Chicago had unfairly lost the fair market value of its partnership interest, which harmed PE

Chicago, and thus its parent company because of lost proceeds and distributions, and thus

investors in the parent like Plaintiff.

Defendants moved to dismiss Plaintiff’s claims, arguing among other things that the

claims Plaintiff asserted were based on purported injuries to PE Chicago, and that, under

governing Delaware law, those claims were therefore derivative claims that PE Chicago had

already settled and released. The District Court agreed and dismissed the case, including a

supposedly individual fraud claim because Plaintiff failed to plead intent, reliance, or damages,

and declined to amend her complaint to attempt to do so.


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IV. STATEMENT OF FACTS

A. Background

On June 1, 2006, PE Chicago and Panda entered into a Purchase and Sale Agreement, in

which PE Chicago sold Panda its “only real asset”—a 50% interest in a partnership with Panda

known as “Rezko Citadel.” A1–2, 22.1 Plaintiff does not claim a direct interest in the

partnership, or even in PE Chicago. Rather, PE Chicago was wholly owned and controlled by

Rezko Enterprises (“Enterprises”), a Delaware limited liability company that in turn was

controlled by its managing member, Tony Rezko. A1–2, 4. Plaintiff at one point had an 11%

interest in Enterprises by virtue of a subscription agreement she entered in the late 1990s. A4.

In 2008, another investor in Enterprises, Semir Sirazi, sued Panda and two affiliated

entities, Panda Restaurant Group, Inc. and Citadel Panda Express, Inc., asserting various tort

claims in connection with the 2006 transaction and claiming PE Chicago did not receive fair

value. Sirazi v. Panda Exp., Inc., Case No. 08-cv-02345 (N.D. Ill.) (Sirazi/PE Chicago). PE

Chicago later joined that action as a plaintiff in an amended complaint that added Panda’s former

general counsel and its co-owners, Andrew and Peggy Cherng, as defendants. Sirazi and PE

Chicago were represented in the prior lawsuit by the same lawyers who represent Plaintiff here.

Like Plaintiff here, PE Chicago asserted claims for, among other things, unjust

enrichment, fraud, conspiracy to defraud, aiding and abetting a breach of fiduciary duty, and

actual and constructive fraud in violation of Illinois’s Uniform Fraudulent Transfer Act. The

District Court adjudicated each of those claims on the merits in Defendants’ favor.2 After the

1 Adopting the abbreviations used in the Appellant’s Opening Brief (“AOB”), “SA” refers to Plaintiff’s

Required Short Appendix (which contains the District Court’s Order), and “A” refers to Plaintiff’s Separate Appendix. “SuppA” refers to Defendants’ Supplemental Appendix.

2 The court granted summary judgment for Defendants on PE Chicago’s fraud, conspiracy to defraud, and fraudulent transfer claims, SuppA 76–77 (citing Sirazi, ECF No. 228); granted judgment as a

(Cont'd on next page)


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jury decided certain other claims, the parties filed post-trial motions in May 2012, and PE

Chicago sought reinstatement of all of its claims. SuppA 78 (citing Sirazi/PE Chicago, ECF

No. 344 at 10 (“Plaintiffs’ Unjust Enrichment Claims Should Be Reinstated.”)); id. (citing

Sirazi/PE Chicago, ECF No. 344 at 13 (“All of PE Chicago’s Claims That Were Dismissed At

Summary Judgment Should be Reinstated”)); id. (citing Sirazi/PE Chicago, ECF No. 369 at 12

(“All of PE Chicago’s Claims Should Be Reinstated”)).

While the parties’ post-trial motions were pending, Defendants—despite believing that

the jury verdict was wrong as a matter of law and would likely be vacated on appeal—decided to

settle the claims. In October 2012, Sirazi, PE Chicago, and Defendants entered into a General

Release and Settlement Agreement. In exchange for substantial consideration from Defendants,

PE Chicago “compromise[d] and settle[d]” all its claims, and “agree[d] that this Settlement

Agreement shall constitute a bar to [its] making any Claims, including filing of any other action

related to or arising under the Rezko-Citadel Partnership at any time or for any reason.” SA5

(quoting General Release & Settlement Agreement § 2.1) (emphasis added).

Following the settlement, on October 31, 2012, the District Court entered an order

vacating the Sirazi/PE Chicago verdict and judgment pursuant to Federal Rule of Civil

Procedure 60(b).

(Cont'd from previous page)

matter of law for Defendants on PE Chicago’s unjust enrichment claim, SuppA 82–83 (citing Sirazi/PE Chicago, Trans. at 1390:2–1391:6); and entered judgment for Defendants on PE Chicago’s claim for aiding and abetting a breach of fiduciary duty, SuppA 77 (citing Sirazi/PE Chicago, ECF No. 318). In April 2012, the court entered judgment against PE Chicago on Panda’s counterclaim, and against Defendants on Sirazi’s claims for conspiracy to defraud and aiding and abetting a breach of fiduciary duty and PE Chicago’s claim for breach of contract. SuppA 70 (citing Sirazi/PE Chicago, ECF No. 318). Given the volume of the record in the Sirazi/PE Chicago matter, Defendants’ pleadings in the District Court referred to pleadings and orders in the prior litigation by their ECF docket number. For the ease of this Court’s reference, Defendants would be pleased to submit each of those pleadings here upon request.


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B. The Instant Allegations

On December 5, 2012, Plaintiff—represented by the very same lawyers who represented

PE Chicago in the Sirazi/PE Chicago matter and who signed and approved the settlement

agreement as to form—filed the instant lawsuit, asserting the very same claims that PE Chicago

settled: unjust enrichment, fraud, conspiracy to defraud, aiding and abetting a breach of fiduciary

duty, and violations of the Illinois Uniform Fraudulent Transfer Act. As in PE Chicago’s

complaint, Plaintiff’s core allegation in this lawsuit is that “Defendants conspired with Tony

Rezko to acquire PE Chicago’s entire interest in the Rezko-Citadel partnership and at a price far

less than the fair value of such interest, and to funnel the proceeds of the transaction to Rezko

personally, thereby depriving PE Chicago, and those with interests in PE Chicago, of the money

to which they were rightfully due.” A1–2. And by Plaintiff’s own admission, “PE Chicago’s

tort claims”—which PE Chicago settled and released just weeks before Plaintiff filed the instant

complaint—were “the very claims [she] advanced here.” AOB 5 (internal punctuation omitted).

Indeed, the factual bases for Plaintiff’s and PE Chicago’s claims, and the focus on injury

allegedly sustained by PE Chicago, are virtually identical:

Claims Asserted by Massuda and PE Chicago

Basis for Claims Asserted by Massuda (emphases added)

Basis for Claims Asserted by PE Chicago (emphases added)

Count I: Unjust Enrichment “Defendants took advantage of the circumstances that Tony Rezko was in with regard to his distressed financial situation and extensive legal troubles to purchase PE Chicago’s interest in Rezko-Citadel at a price well below its fair value.” A15.

“Panda Express took advantage of the circumstances that Tony Rezko was in with regard to his distressed financial situation and extensive legal troubles to purchase PE Chicago’s interest in Rezko-Citadel at a price well below its fair value.” SuppA 73 (citing Sirazi/PE Chicago First Amended Compl. ¶ 48).

Count II: Fraud “Plaintiff alleges that Defendants intentionally

“Plaintiffs allege that Defendants intentionally


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defrauded Dr. Massuda, PE Chicago and Enterprises out of the fair market value of PE Chicago’s 50% interest in the Rezko-Citadel partnership.” A16.

defrauded Sirazi, PE Chicago and Enterprises out of the fair market value of PE Chicago’s 50% interest in the Rezko-Citadel partnership.” SuppA 73–74 (citing Sirazi/PE Chicago First Amended Compl. ¶ 55).

Count III: Conspiracy to Defraud

“At a time specifically unknown to Plaintiff, but on information and belief around May of 2006, Defendants and Tony Rezko entered into an agreement and conspiracy to defraud PE Chicago and Enterprises, and those with interests in PE Chicago and Enterprises, of the fair value of their interest in the Rezko-Citadel partnership.” A19.

“At a time specifically unknown to Plaintiffs, but on information and belief around May-June of 2006, Defendants and Tony Rezko entered into an agreement and conspiracy to defraud PE Chicago and Enterprises, and those with interests in PE Chicago and Enterprises, of the fair value of their interest in the Rezko-Citadel partnership.” SuppA 74 (citing Sirazi/PE Chicago First Amended Compl. ¶ 65).

Count IV: Aiding and Abetting a Breach of Fiduciary Duty

“Defendants knowingly participated, assisted in, and benefited from, Tony Rezko’s breaches of his fiduciary duties.” A21.

“Defendants knowingly participated, assisted in, and benefited from, Tony Rezko’s . . . breaches of [his] fiduciary duties.” SuppA 74 (citing Sirazi/PE Chicago First Amended Compl.¶ 77).

Count V: Violation of Illinois Uniform Fraudulent Transfer Act—Actual Fraud

“The transfer of PE Chicago’s 50% interest in Rezko-Citadel was made with the actual intent to delay, hinder, and/or defraud PE Chicago and PE Chicago’s and Enterprises’ creditors, including Dr. Massuda.” A22.

“The transfer of PE Chicago’s 50% interest in Rezko-Citadel was made with the actual intent to delay, hinder, and/or defraud PE Chicago and PE Chicago’s and Enterprises’ creditors, including Sirazi.” SuppA 74 (citing Sirazi/PE Chicago First Amended Compl. ¶ 80).

Count VI: Violation of Illinois Uniform Fraudulent Transfer Act—Constructive Fraud

“Panda Express did not provide PE Chicago or Enterprises with a reasonably equivalent value, as defined in 740 ILCS 160/4(a), in

“Panda Express did not provide PE Chicago or Enterprises with a reasonably equivalent value, as defined in 740 ILCS I60/4(a), in exchange for the transfer of


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exchange for the transfer of PE Chicago’s 50% interest in the Rezko-Citadel partnership.” A25.

PE Chicago’s 50% interest in the Rezko-Citadel partnership.” SuppA 74 (citing Sirazi/PE Chicago First Amended Compl. ¶ 94).

Plaintiff also asserted a fraud claim alleging that, in April 2006—months before the

transaction at issue—she and her husband “informed Panda Express that she was suing Tony

Rezko, Enterprises, and other business entities that he controlled for monies owed to her,” and

“inquired whether Panda Express had an interest in buying her stake in Enterprises.” A9.

According to Plaintiff, Panda’s general counsel responded to this unsolicited inquiry by telling

Plaintiff and her husband “that Panda Express was not interested and that her interest in

Enterprises . . . was worthless.” Id. The complaint contains no allegations or facts sufficient to

establish that Panda made this statement with an intent to induce her to take action, that she

relied on this statement in any way, or that that this statement caused her to suffer damages. See

id. Nor does the complaint plead facts demonstrating that Plaintiff’s minority “stake in

Enterprises” was in fact worth anything to Defendants, given that Rezko still would have had

control over PE Chicago. See id.

C. The District Court’s Order

Defendants moved to dismiss the complaint on the grounds that Plaintiff’s lawsuit was an

improper derivative suit asserting claims that PE Chicago had already settled and released, that

the claims were time-barred, and the claims failed on the merits in any event. SuppA 1–27.

After Defendants’ motion was fully briefed, the District Court asked for supplemental briefing

from both parties concerning the scope of release granted by PE Chicago when it settled the

Sirazi/PE Chicago litigation, and also concerning Plaintiff’s suggestion that Defendants

previously had argued that PE Chicago did not have certain claims.


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The District Court dismissed Plaintiff’s complaint in its entirety. SA8–10. The District

Court correctly held that “any harm that Massuda suffered was derivative of the injury sustained

by PE Chicago for allegedly not having received fair market value for its assets,” and, except for

her fraud claim, “Massuda alleges no injury independent of that suffered by PE Chicago,” such

that “Massuda’s claims are derivative.” SA3. “Based on the plain language of the Settlement

Agreement” between PE Chicago and Defendants, the District Court “conclude[d] that

Massuda’s claims, which all ‘relat[e] to’ the Rezko-Citadel partnership . . . are actually those of

PE Chicago [and] are barred.” SA5.

The District Court also rejected Plaintiff’s argument that Defendants were judicially

estopped from asserting that Plaintiff’s claims were derivative and that Plaintiff therefore lacked

standing. Plaintiff argued that estoppel should apply because, in the Sirazi/PE Chicago lawsuit,

“Defendants argued that PE Chicago could not assert the claims that Massuda asserts here

because it was a party to the transaction at issue and could not have been deceived by it.” SA3.

The District Court, however, explained that “the standing issue and the merits issue are two

different inquiries,” and found that “Defendants in the Sirazi[/PE Chicago] case did not assert

that PE Chicago lacked standing; instead, they argued that the claims had no merit because PE

Chicago was a party to the transaction.” SA3–4. The court concluded that “the positions are not

inconsistent,” and “[s]imply because another court held that PE Chicago’s tort claims had no

merit does not mean that it is not the proper party to assert them.” SA4.

The District Court held that the only claim asserted by Plaintiff that was individual rather

than derivative was her fraud claim to the extent it was based on Panda’s purported statement to

her and her husband that her indirect interest in PE Chicago was “worthless.” SA9. The District

Court dismissed that theoretically individual claim with leave to amend, because Plaintiff


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“fail[ed] to point to any facts in support of her claim that Defendants made the alleged statement

[that her interest in Enterprises was ‘worthless’] intending that it would induce [her] to act, that

she relied on the truth of the statement, or that she suffered any damages as a result of the

allegedly fraudulent statement.” SA8. In addition, the court found that Plaintiff “fail[ed] to

plead the claim with particularity including alleging who supposedly made the statement to her,

where or how it was made,” and that, “to the extent [Plaintiff] attempts to plead fraud by

omission, she has failed to allege facts showing that Defendants were under a duty to disclose

material facts to her.” Id. Plaintiff declined the District Court’s invitation to amend, choosing

instead to stand on her fraud claim as pleaded. SuppA 85–86.

Accordingly, the District Court dismissed Plaintiff’s complaint in its entirety and with

prejudice. This appeal followed.

V. SUMMARY OF ARGUMENT

The District Court’s decision was correct and should be affirmed. First, Plaintiff does

not allege a single injury to herself that does not depend on PE Chicago’s being harmed by its

supposed failure to receive the value to which it was allegedly entitled for its interest in the

Rezko-Citadel partnership. The claims Plaintiff asserts are therefore derivative under a

straightforward application of the standard the Delaware Supreme Court set forth in Tooley—a

point she fastidiously refuses to address in her opening brief. Contrary to Plaintiff’s new

contention on appeal, she does not bring the kind of direct claim recognized in Gentile v.

Rossette, 906 A.2d 91 (Del. 2006). As the Gentile Court itself recognized, such claims “arise[]

only” with allegations far different than Plaintiff’s—i.e., where an “overpayment” is made in the

form of “corporate shares” issued to a controlling shareholder, which injures minority investors

“directly” by expropriating the “economic value and voting power” of their shares. A


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controlling shareholder expropriating minority shareholders’ relative voting power directly

injures them, without regard to any injury suffered by the company. But Plaintiff here alleges no

such direct injury to voting power, and any economic harm she claims flowed exclusively

through injury to the company from alleged harm to its asset. This case does not involve an

overpayment of company shares, let alone shares with voting rights or shares that Plaintiff even

owned, and not a single case from the Delaware Supreme Court (or any other court) has ever

extended Gentile to hold that all alleged breaches by controlling shareholders gave rise to direct

claims. The claims Plaintiff asserts are derivative, and she cannot litigate them on the

company’s behalf because (among other things) the company already settled and released them.

Second, the District Court correctly concluded that Defendants’ arguments in this case

(that the claims are derivative) are entirely consistent with their arguments in the prior case (that

PE Chicago’s claims failed on the merits). The court therefore properly rejected Plaintiff’s

hollow argument that Defendants were judicially estopped from challenging her standing to sue.

Finally, the District Court properly dismissed Plaintiff’s supposedly individual fraud

claim for failure to plead intent, reliance, or damages flowing from Panda’s alleged statement

that Plaintiff’s shares in Enterprises were “worthless” to Panda. Plaintiff’s opening brief simply

ignores her own failure and inability to plead the essential elements of intent, reliance, and

damages. Indeed, when the District Court gave Plaintiff leave to amend these allegations if she

could, she chose not to do so.

VI. ARGUMENT

A. The District Court Correctly Dismissed the Claims Plaintiff Asserts Because They Are Derivative And Were Released By PE Chicago.

1. The Claims Are Derivative Under Tooley.

As the District Court held, and as Plaintiff now concedes, AOB 14, this case is governed


12

by the Delaware Supreme Court’s seminal decision in Tooley v. Donaldson, Lufkin & Jenrette,

Inc., 845 A.2d 1031, 1038 (Del. 2004). Tooley holds that a shareholder can bring a claim

directly on her own behalf, as opposed to derivatively on behalf of the company, only by

properly alleging she suffered some harm that is “independent of any injury to the corporation.”

Id.3 “The mere fact that the alleged harm is ultimately suffered by, or the recovery would

ultimately inure to the benefit of, the stockholders does not make a claim direct under Tooley.”

Feldman v. Cutaia, 951 A.2d 727, 733 (Del. 2008). Under Tooley, “[t]he stockholder’s claimed

direct injury must be independent of any alleged injury to the corporation.” 845 A.2d at 1039.

“The stockholder must demonstrate that the duty breached was owed to the stockholder and that

he or she can prevail without showing an injury to the corporation.” Id. (emphases added); see

also id. at 1037 (rejecting attempt to distinguish direct from derivative actions based on whether

“the injury falls equally on all shareholders” as “confusing and inaccurate”), cited in SA4.

Here, Plaintiff’s complaint makes clear at every turn that the claims she asserts derive

wholly from injury supposedly suffered in the first instance by PE Chicago as a result of the sale

of its partnership asset. E.g., A1, 15, 16, 18, 19, 24. These claims are derivative because they do

not allege even a single injury to Plaintiff “independent” of the harm PE Chicago supposedly

suffered. SA3; Tooley, 845 A.2d at 1039; Kramer v. W. Pac. Indus., Inc., 546 A.2d 348, 353–54

& n.7 (Del. 1988). Instead, every single claim is expressly predicated on the sale of “PE

3 The same rules apply where, as here, the entity at issue is a limited liability company. The

“derivative suit is a corporate concept grafted onto the limited liability company form,” Elf Atochem N. Am. v. Jaffari, 727 A.2d 286, 293–94 & n.40 (Del. 1999), and “case law governing corporate derivative suits is equally applicable to suits on behalf of an L.L.C,” VGS, Inc. v. Castiel, 2003 WL 723285, at *11 (Del. Ch. Feb. 23, 2003). See also AOB 14; G & S Holdings LLC v. Cont’l Cas. Co., 697 F.3d 534, 541–42 (7th Cir. 2012) (affirming dismissal pursuant to Fed. R. Civ. P. 12(b)(1) where the alleged “injury to the plaintiffs stems from the injury to [the company], and is derivative not direct”).


13

Chicago’s 50% interest in Rezko-Citadel.”4 As the District Court held, this is exactly the kind of

claim that depends on an injury to the company and therefore is solely derivative under Tooley.

E.g., SA2–3, 5, 8–9. “[A]ny harm that Massuda suffered was derivative of the injury sustained

by PE Chicago for allegedly not having received fair market value for its assets.” Id. This is

because Plaintiff’s theory of damages is that PE Chicago (a subsidiary of the company she

actually invested in) wrongly lost its “only real asset” (its interest in the Rezko-Citadel

partnership), and that the repercussions reverberated up the chain, causing lost profits and

proceeds to PE Chicago, and thus to Enterprises, and thus to Plaintiff.5 In holding that Plaintiff’s

claims were “disfavored” “attempts to recast derivative claims as direct,” SA4, the District Court

faithfully applied Tooley and numerous other controlling Delaware authorities, and its decision

should be affirmed.6

4 E.g., A15, 16 (Count I) (emphasis added); accord, e.g., A16 (Count II); A19 (Count III); A21 (Count

IV); A22 (Count V); A25 (Count VI).

5 E.g., A16 (“Defendants intentionally defrauded Dr. Massuda, PE Chicago and Enterprises out of the fair market value of PE Chicago’s 50% interest in the Rezko-Citadel partnership.”); A19 (“Defendants and Tony Rezko . . . caused PE Chicago to transfer its 50% interest in the Rezko-Citadel partnership to Panda Express at a price that was well below fair value, to the detriment of PE Chicago and Enterprises and those who have interests in PE Chicago and Enterprises.”).

6 E.g., Feldman, 951 A.2d 727 at 734-35 (reaffirming that “claims of mismanagement resulting in a decrease in the value of corporate stock are derivative in nature”); Metro. Life Ins. Co. v. Tremont Grp. Holdings, Inc., No. Civ. A. 7092–VCP, 2012 WL 6632681, at *8 (Del. Ch. Dec. 20, 2012); Ravenswood Inv. Co., L.P. v. Winmill, No. Civ. A. No. 3730–VCN, 2011 WL 2176478, at *2, *6 (Del. Ch. May 31, 2011) (claims were derivative where shareholders allegedly had “breached their fiduciary duties to the class” by causing company to sell its “50% interest” in subsidiary, through transaction that allowed managers to “improperly receive compensation . . . that should have instead gone to shareholders”); see also, e.g., Kramer, 546 A.2d at 350-54 & nn.2, 7 (claims were derivative when defendants with “large stock holdings” allegedly “violated their fiduciary duty to the [shareholder] class of candor, loyalty, and due care” by “diverting . . . sale proceeds” to themselves); In re NYMEX S’holder Litig., 2009 WL 3206051, at *9 (Del. Ch. Sept. 30, 2009) (“A breach of fiduciary duty” claim alleging that the company was “precluded from . . . maximiz[ing] the return on its assets” is derivative because “the company suffers the harm”); In re First Interstate Bancorp Consol. S’holder Litig., 729 A.2d 851, 864 (Del. Ch. 1998) (where “claims of primary liability . . . belong to the corporation and could only be maintained in a derivative capacity, that finding logically applies with equal force to the alleged claims of secondary liability” against third party).


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2. Gentile Does Not Change the Claims’ Derivative Characterization.

Because Plaintiff suffered no independent injury, she attempts to side-step Tooley’s

injury-based analysis. She relies on a single, inapposite case, Gentile v. Rossette, 906 A.2d 91

(Del. 2006), which she now claims is “on all fours” with this case even though she did not even

cite it before the District Court.7 As discussed below, Gentile claims represent a narrow

exception to Delaware’s usual treatment of “corporate overpayment” cases, which “[n]ormally

. . . are treated as [alleging] harm solely to the corporation and, thus, are regarded as derivative.”

906 A.2d at 99. Gentile claims “arise[] only” when a controlling shareholder receives an

overpayment in the form of company shares that dilutes the relative economic and voting power

of the shares held by minority shareholders. Id. at 100. In that limited circumstance, where a

controlling shareholder directly expropriates minority shareholders’ relative economic and

voting power by granting to himself excessive additional shares, minority shareholders are

harmed directly and uniquely, and independent of any injury to the company. But that situation

is not present here, and therefore Gentile does not apply.

a. Gentile Is Inapposite on Its Face.

As an initial matter, unlike Gentile, this is not even an overpayment case. Plaintiff’s

entire complaint arises from the sale of PE Chicago’s interest in the partnership, allegedly for too

little consideration. A1–26. This is a straightforward claim that the transaction “constitutes a

waste of corporate assets”—a familiar type of claim that Delaware courts have always viewed

exclusively as derivative. Tooley, 845 A.2d at 1038; Kramer, 546 A.2d at 353.8

7 “It is axiomatic that an issue not first presented to the district court may not be raised before the

appellate court as a ground for reversal.” E.g., Economy Folding Box Corp. v. Anchor Frozen Foods Corp., 515 F.3d 718, 720 (7th Cir 2008).

8 See also, e.g., Avacus Partners, L.P. v. Brian, 1990 WL 161909, at *7 (Del. Ch. Oct. 24, 1990) (“Claims of waste will always be derivative . . . .”); Balotti & Finkelstein, The Delaware Law of

(Cont'd on next page)


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Moreover, whatever corporate waste Plaintiff alleges has nothing to do with the issuance

of company shares to a controlling shareholder, and thus in no way entails the direct taking of

economic value and voting rights from minority shareholders, both of which Gentile’s narrow

exception requires. Gentile claims have two elements, neither of which is present here:

(1) a stockholder having . . . control causes the corporation to issue “excessive” shares of its stock in exchange for assets of the controlling stockholder that have a lesser value; and (2) the exchange causes an increase in the percentage of the outstanding shares owned by the controlling stockholder, and a corresponding decrease in the share percentage owned by the [minority] shareholders.

906 A.2d at 100 (emphases added). As the Delaware Supreme Court explained, “[b]ecause the

shares representing the ‘overpayment’ embody both economic value and voting power, the end

result of this type of transaction is an . . . expropriation . . . of economic value and voting power

from the [minority] shareholders to the majority or controlling stockholder.” Id. (emphasis

added). “As a consequence” of this “direct” “expropriation” of relative value and voting power

(not present here) the minority shareholders “are harmed, uniquely and individually,” and

therefore they can sue directly, on their own behalf. Id.

Though Plaintiff does not mention it, the Delaware Supreme Court held that a Gentile

claim “arises only” when its core requirement is present—the “overpayment” to the controlling

shareholder must come in the form of “shares” in the company, directly expropriating the

“economic value and voting power” of the company shares held by minority shareholders. 906

A.2d at 100 & n.20 (emphases added). Overpayment in shares is critical. “Unlike the typical

‘overpayment’ transaction, where the form of overpayment (cash or stock) does not matter [and

(Cont'd from previous page)

Corporations and Business Organizations § 13.10 (2011) (“A claim . . . for alleged breaches of fiduciary duty which caused injury to the corporation and its stockholders as a whole remains derivative, as does a claim that a particular transaction constitutes a waste of corporate assets.”).


16

the claim is solely regarded as derivative], in this atypical type of transaction, the dual character

of the harm, and of the [dual derivative and direct] claims resulting from that harm, arise where

the overpayment takes the form of issued corporate stock.” Id. n.21 (emphasis added).

Plaintiff’s complaint alleges no such thing. She does not allege that shares in PE Chicago

were issued to the controlling shareholder (Rezko) for too little consideration, or even that she

owned shares in PE Chicago at all. Instead, Plaintiff merely protests PE Chicago’s sale of its

interest in Rezko-Citadel, a partnership in which Plaintiff held no direct interest. AOB 14–16.

Gentile’s express limitations are fatal to Plaintiff’s appeal.

b. No Court Has Ever Extended Gentile to Claims Like Plaintiff’s.

Moreover, no court has expanded Gentile in the manner Plaintiff urges here. The

Delaware Supreme Court has carefully adhered to the limitations it articulated in Gentile and

confined its application to the particular “species” of claims for overpayment via the issuance of

company shares “upon which [the Gentile] doctrine rests.” Gatz v. Ponsoldt, 925 A.2d 1265,

1278, 1280 (Del. 2007) (Gentile requires expropriation “by means of a stock issuance” to the

controlling shareholder, whether directly or in “substance”); Feldman, 951 A.2d at 732 n.26

(affirming dismissal of claims as derivative and stating that a Gentile claim arises where

controlling stockholder expropriates “both economic value and voting power” from minority

shareholders); Loral Space & Communications, Inc. v. Highland Crusader Offshore Partners,

L.P., 977 A.2d 867, 869–70 (Del. 2009) (allowing Gentile claims entailing overpayment of

“shares” that embodied “both economic value and voting power”).9

Courts nationwide also have properly constrained Gentile’s application. The U.S.

9 Cf. Rhodes v. Silkroad Equity, LLC, No. Civ. A. 2133-VCN, 2007 WL 2058736, at *5 (Del. Ch. July

11, 2007) (applying Gentile exception where the “true substantive effect” of transactions was “‘extraction’ of economic value and residual voting power” from minority shareholders).


17

District Court for the District of Maryland, for example, recently held that Gentile’s “narrow”

exception did not apply even where a controlling shareholder had acquired stock without

providing adequate consideration to the company, because the allegations “rest[ed] solely on a

purported loss in the economic value of [the minority shareholder’s] ownership stake rather than

any loss of voting power.” Innovative Therapies, Inc. v. Meents, No. DKC 12-3309, 2013 WL

2919983, at *5 (D. Md. June 12, 2013). As the court explained, “the Delaware Supreme Court

has emphasized . . . that the exception established by Gentile is limited to situations involving

‘transactions that resulted in an improper transfer of both economic value and voting power from

the minority stockholder to the controlling shareholder’”—of which Plaintiff here alleges neither.

Id. (citing Feldman, 951 A.2d at 732 n.26) (emphasis in original). See also Joe W. & Dorothy

Dorsett Brown Foundation v. Frazier Healthcare V, L.P., 889 F. Supp. 2d 893, 899-900 (W.D.

Tex. 2012) (“narrow” Gentile exception did not apply even where controlling shareholder was

overpaid with stock, because it had not obtained “exclusive benefit of increased equity ownership

and voting power”); Nikoonahad v. Greenspun Corp., No. C09-02242, 2010 WL 1268124, at *5

(N.D. Cal. Mar. 31, 2010) (Gentile did not apply where company “overpaid” for stock it

repurchased as opposed to being undercompensated for stock it issued); In re CD Liquidation

Co., 462 B.R. 124, 132-33 (D. Del. Bnkpcy. 2011) (claims based on “decrease in share value”

were “derivative” and not within Gentile). Courts have consistently recognized that reading

Gentile in the manner Plaintiff suggests—i.e., to apply whenever a controlling stockholder

allegedly commits a tort that ultimately harms the minority—“would swallow the general rule

. . . and would greatly cast doubt on the continuing validity of the Tooley framework. Neither of

these outcomes is warranted.” Beckham v. Keith, 2011 WL 9557991, at *4 (Mass. Super. Ct.

June 15, 2011) (quoting Feldman v. Cutaia, 956 A.2d 644, 657 (Del. Ch. 2007)).


18

Not a single published decision from any court has allowed a shareholder to bring a direct

claim under Gentile absent allegations that an improper issuance of undervalued stock impaired

both the economic value and the voting power of the shareholder’s own shares. This Court

should not be the first to ignore Gentile’s limitations and dramatically expand this narrow

exception to swallow and overrule Tooley. And it certainly should not do so on the purported

ground that “Massuda’s only option and ability to seek redress is to pursue a direct action against

Panda.” AOB 16. That demonstrably false assertion is legally insufficient to state a Gentile

claim, and it also ignores that Plaintiff is free (though her counsel probably is not) to pursue a

claim against PE Chicago for whatever share of the settlement proceeds to which she is entitled.

Plaintiff’s argument before this Court is not really that she has a Gentile claim—she

obviously does not, given that this is not an overcompensation case and there was no direct

expropriation from shareholders but rather alleged harm to the company. Rather she claims that

it is close enough simply because she alleges some sort of wrongdoing by a controlling

shareholder (Rezko) that ultimately harmed her. AOB 14-16. Plaintiff is wrong. Under Tooley,

Plaintiff’s claims are plainly derivative, as she suffered no injury independent of PE Chicago.

3. PE Chicago Settled and Released the Claims.

Having correctly concluded that Plaintiff’s claims were derivative, the District Court was

also correct in dismissing those derivative claims with prejudice, because PE Chicago settled and

released all its claims in the General Release and Settlement Agreement that resolved the

Sirazi/PE Chicago matter. Metro. Life Ins., 2012 WL 6632681, at *9–13 (classifying

purportedly direct claims as derivative and dismissing because company had settled them); First

Interstate Bancorp, 729 A.2d at 865 n.11 (dismissing derivative action where “any potential

claim” by the company “was released in the Settlement Agreement”); Allied Artists Pictures

Corp. v. Baron, 413 A.2d 876, 880 (Del. 1980) (“[A]ction that cures the alleged wrong to the


19

corporation[] . . . moots or settles the [derivative] lawsuit”).10

With the advice of the same counsel that represent Plaintiff here, PE Chicago released all

“disputes, claims, causes of action, [or] actions . . . arising from all matters, facts, events and

circumstances relating to the Rezko-Citadel Partnership[.]” SuppA 56–57.11 It is beyond dispute

that the claims Plaintiff seeks to pursue in this action “relat[e] to” the Rezko-Citadel Partnership.

Indeed, Plaintiff’s complaint refers to the Rezko-Citadel partnership 34 times, and all of her

claims are founded on the purchase of PE Chicago’s partnership interest. Those claims thus fit

squarely within the scope of the release granted by PE Chicago.12

Tacitly conceding that claims cannot be litigated derivatively after a company settles

them, Plaintiff falls back on musings about whether “a company [can] settle claims it never

possessed in the first instance.” AOB 19. However, Plaintiff confuses “possess[ing] claims”

with possessing meritorious claims. As explained below, PE Chicago did possess its claims in

the sense that it had standing to bring them. Those claims, however, failed on the merits (not for

lack of standing), in a series of rulings that PE Chicago—represented by the same lawyers who 10 In addition, Plaintiff did not even to attempt to comply with Federal Rule of Civil Procedure 23.1,

which constitutes an alternate basis for affirmance. See, e.g., Nunez-Moron v. Holder, 702 F.3d 353, 358 n.10 (7th Cir. 2012); Braddock v. Zimmerman, 906 A.2d 776, 784 (Del. 2006).

11 Section A of the Recitals to the Settlement Agreement identified the claims that PE Chicago had asserted in that matter: “unjust enrichment, fraud, civil conspiracy, breach of fiduciary duty, breach of contract, . . . and violations of the Illinois Fraudulent Transfer Act . . . based upon the transfer of PE Chicago’s 50% interest in the Rezko-Citadel Partnership in June 2006.” SuppA 53 [General Release & Settlement Agreement]. In Section 2.1 of the Settlement Agreement, PE Chicago “compromise[d] and settle[d]” each of these claims, and “agree[d] that this Settlement Agreement shall constitute a bar to [its] making any Claims, including filing of any other action related to or arising under the Rezko-Citadel Partnership at any time or for any reason.” SA5 (emphasis added). Further, in Section 4.1 of the Settlement Agreement, PE Chicago agreed to “release, relieve, waive, relinquish and discharge Defendants” from any and all “disputes, claims, causes of action, [or] actions . . . arising from all matters, facts, events and circumstances relating to the Rezko-Citadel Partnership[.]” SuppA 56–57.

12 It is irrelevant that the release does not expressly reference investors, and that Plaintiff did not participate in it. AOB 16. PE Chicago released its claims, and an indirect investor like Plaintiff cannot derivatively bring the claims PE Chicago released.


20

represent Plaintiff in this case—was challenging in a post-trial motion still pending at the time of

settlement. SuppA 78 (citing Sirazi/PE Chicago, ECF No. 344 at 10 (“Plaintiffs’ Unjust

Enrichment Claims Should Be Reinstated.”)); id. (citing Sirazi/PE Chicago, ECF No. 344 at 13

(“All of PE Chicago’s Claims That Were Dismissed At Summary Judgment Should be

Reinstated”)); id. (citing Sirazi/PE Chicago, ECF No. 369 at 12 (“All of PE Chicago’s Claims

Should Be Reinstated”)).

Parties of course can, and regularly do, settle and release claims on which they did not

prevail before the district court but where they seek to reverse that result through post-trial

motions, appeal, or both. That is just what happened here. PE Chicago was free to release these

claims for whatever they were worth, and it explicitly did so in the Settlement Agreement, with

the advice and the signatures of the same lawyers who represent Plaintiff here. The District

Court was absolutely correct to prevent Plaintiff from re-litigating these same claims.

B. The District Court Was Well Within Its Discretion to Reject Judicial Estoppel.

Unable to meaningfully dispute the District Court’s conclusion that the claims she asserts

were derivative and already settled and released by PE Chicago, Plaintiff contends that

Defendants are judicially estopped from raising this point because Defendants argued, and the

Sirazi/PE Chicago court concluded, that PE Chicago’s claims failed on the merits. AOB 18–19.

The District Court acted well within its discretion in rejecting that tortured and unsupported

argument and the “extreme” implications it would entail. SA4.

Contrary to Plaintiff’s suggestion that it is a purely legal matter here, “[j]udicial estoppel

is a matter of equitable judgment and discretion, and [this Court] review[s] the [district] court’s

decision for an abuse of that discretion.” In re Knight-Celotex, LLC, 695 F.3d 714, 721 (7th Cir.

2012). In reviewing the exercise of that discretion, this Court “examine[s] three factors”: “(i)

whether the party’s positions in the two litigations are clearly inconsistent; (ii) whether the party


21

successfully persuaded a court to accept its earlier position; and (iii) whether the party would

derive an unfair advantage if not judicially estopped.” Wells v. Coker, 707 F.3d 756, 761 (7th

Cir. 2013). “The threshold for prevailing on a judicial estoppel argument regarding

inconsistency is high.” Young v. Verizon’s Bell Atl. Cash Balance Plan, 667 F. Supp. 2d 850,

905–06 (N.D. Ill. 2009); see also Ogden Martin Sys. of Indianapolis, Inc. v. Whiting Corp., 179

F.3d 523, 528 (7th Cir. 1999) (judicial estoppel “may not be used to hamstring a litigant from

advancing a particular position when this position is not clearly inconsistent with a prior

position”). The District Court properly determined that Plaintiff had not even come close to

crossing that threshold here, because there is no inconsistency whatsoever between Defendants’

argument in the Sirazi/PE Chicago case (that PE Chicago’s claims lacked merit) and their

argument in this case (that Plaintiff lacks standing to assert PE Chicago’s already-released claims

derivatively). Declining to apply the “extreme” doctrine of judicial estoppel on these facts was

well within the District Court’s discretion. SA4.

1. PE Chicago’s Claims Were Addressed on the Merits.

As with her argument that PE Chicago could not have settled its claims, Plaintiff’s

judicial estoppel argument confuses the question whether a party has standing to assert claims

and the very different question whether those claims have merit. She argues that she can re-

litigate the very same claims that PE Chicago brought, settled, and released in Sirazi/PE Chicago

because “[o]n summary judgment in Sirazi, Panda argued, and won its argument, that PE

Chicago had no such claims.” AOB 7. Plaintiff is wrong. To the extent she hoped the

deliberately vague phrase “had no such claims” would create the misimpression that the

Sirazi/PE Chicago court dismissed PE Chicago’s claims because they belonged to investors like

Plaintiff, her position is belied by Defendants’ pleadings and the court’s actual holdings in the

Sirazi/PE Chicago matter—none of which Plaintiff quotes or even cites. In fact, the Sirazi/PE


22

Chicago court rejected PE Chicago’s claims on the merits, not for lack of standing.

First, in granting judgment as a matter of law for Defendants on PE Chicago’s unjust

enrichment claim, the Sirazi/PE Chicago court concluded there was “no evidence to support” PE

Chicago’s theory—repeated by Plaintiff here—that PE Chicago was somehow deprived of

partnership distributions it was supposedly due. SuppA 82–83; A15.

As to its fraud claim, PE Chicago made two allegations: first, “that the defendants made

false statements indicating that the price they were paying for PE Chicago’s interest in Rezko-

Citadel was a fair one,” SuppA 76 (citing Sirazi/PE Chicago, ECF No. 228 at 9); and second,

“that defendants concealed the sale of PE Chicago’s interest in Rezko-Citadel,” id. (citing

Sirazi/PE Chicago, ECF No. 228 at 10). The court rejected the claim based on false statements

about fair market value because “PE Chicago was equally a partner in Rezko-Citadel and could

have valued its interest” and “defendants did not owe PE Chicago a fiduciary duty at the time of

the sale.” Id. The court rejected the claim based on concealment because PE Chicago “was a

party to the transaction” and thus knew its terms. Id. (citing Sirazi/PE Chicago, ECF No. 228 at

12). Because the court granted summary judgment on PE Chicago’s fraud claim, it also granted

summary judgment for Defendants on PE Chicago’s claim for conspiracy to defraud. See id.

(citing Sirazi/PE Chicago, ECF Nos. 227; 228 at 9, 21).

The court also entered judgment for Defendants on PE Chicago’s claim for aiding and

abetting a breach of fiduciary duty. SuppA 77 (citing Sirazi/PE Chicago, ECF No. 318).

Although the docket reflects no written order explaining the court’s reason for dismissing this

claim, there is no indication that it was for lack of standing or that Defendants sought dismissal

on that basis.

Lastly, the Sirazi/PE Chicago court granted summary judgment for Defendants on PE


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Chicago’s fraudulent transfer claims. The court “[a]ssum[ed] PE Chicago may bring an actual

fraudulent transfer claim,” but found that the “claim [was] time-barred.” SuppA 77 (citing

Sirazi/PE Chicago, ECF No. 228 at 28). PE Chicago had not “move[d] to amend the complaint

to make its claim until July 22, 2010 and did not file the amended complaint until November 10,

2010”—more than four years after “[t]he sale of PE Chicago’s interest occurred on June 1,

2006.” Id. PE Chicago’s constructive fraudulent transfer claim was time-barred for the same

reason. Id. (citing Sirazi/PE Chicago, ECF No. 228 at 29).

That PE Chicago’s claims in the prior case failed on the merits has nothing to do with

whether Plaintiff has standing to assert PE Chicago’s claims here, because, as the District Court

explained, and as Plaintiff “agrees,” “the standing issue and the merits issue are two different

inquiries.” AOB 18 (quoting SA3). And nothing in Sirazi/PE Chicago in any way contradicts

the point Defendants are making now: that none of Plaintiff’s claims is “independent of any

[supposed] injury to [PE Chicago],” because all of those claims depend on the allegation that PE

Chicago was wrongfully deprived of its 50% interest in the Rezko-Citadel partnership. Tooley,

845 A.2d at 1038.13

2. Defendants’ Arguments Have Been Entirely Consistent.

Recognizing the weakness of her position, Plaintiff attempts to manufacture an

13 It is entirely unremarkable that Sirazi survived a motion to dismiss that argued that his claims, too,

were derivative. AOB 16. During the pre-trial motion practice in Sirazi/PE Chicago, Defendants’ prior counsel did not cite Tooley or any Delaware case on this point, and the District Court (unsurprisingly, therefore) did not apply Delaware law—authority that Plaintiff now concedes is controlling, AOB 14. The prior proceeding is relevant in this respect (if at all) only because it demonstrates the consistency of Defendants’ arguments and defeats any possibility of judicial estoppel. See United States v. Christian, 342 F.3d 744, 748 (7th Cir. 2003) (refusing to apply judicial estoppel where positions were not “clearly inconsistent”). And in any event, the Sirazi/PE Chicago judgment was vacated, so it can have no preclusive effect here (and Plaintiff does not argue otherwise). See Pontarelli Limousine, Inc. v. City of Chicago, 929 F.2d 339, 340 (7th Cir. 1991) (“A vacated judgment has no collateral estoppel or res judicata effect under Illinois law.”).


24

inconsistency by cobbling together a series of legal fallacies. Plaintiff contends that “because

Panda argues that Massuda’s claims are derivative,” Defendants argue that “only PE Chicago is

entitled to relief on Massuda’s tort claims,” while “[i]n essence, in the prior litigation Panda

argued, and succeeded, that PE Chicago was not entitled to relief on its claims.” AOB 19 (first

emphasis added). Plaintiff’s strained syllogism, however, is premised on an argument that

Defendants have never made (that PE Chicago was in fact “entitled to relief”), and on a principle

of “Delaware law” that does not exist—the deeply misguided, and indeed remarkable notion that

“a claim cannot be derivative if the company is not entitled to relief on such a claim.” AOB 18–

19. Tellingly, Plaintiff does not attempt to support that supposed rule with even a single citation.

Nor can she, because she is wrong.

Derivative claims, of course, often fail on the merits. See, e.g., Tooley, 845 A.2d at 1033

(affirming the dismissal of derivative claims where “the complaint does not set forth any claim

on which relief can be granted”); see also Metro. Life Ins. Co., 2012 WL 6632681, at *8

(characterizing claim as derivative and dismissing it as barred by res judicata); Agostino v. Hicks,

845 A.2d 1110, 1126 (Del. Ch. 2004) (same as to bar by bankruptcy code). Moreover, it is

axiomatic that “[t]he plaintiffs in a derivative action are in no better or stronger position than the

corporation itself would be had it instituted the action, and any bar to an action by the

corporation is also a bar to a derivative action by the stockholder.” 19 Am. Jur. 2d Corporations

§ 1949. Here, PE Chicago did institute an action against Defendants, and its claims failed on the

merits; it would make no sense if Plaintiff—an indirect shareholder in PE Chicago unable to

assert any injury beyond that to the company—could now re-litigate those claims derivatively. It

likewise makes no sense for Plaintiff to suggest that Defendants had been disingenuous merely

because other parties may have been in the past. AOB 18 n.6. And in any event, determinations


25

in the Sirazi/PE Chicago litigation can have no preclusive effect here because they never became

final: the Sirazi/PE Chicago judgment was vacated when the parties—including PE Chicago—

settled and released their claims. Pontarelli Limousine, 929 F.2d at 340.

The District Court was correct to reject Plaintiff’s judicial estoppel argument, and this

Court should do the same.

C. The District Court Properly Dismissed Plaintiff’s Fraud Claim For Failure To Adequately Plead Intent, Reliance, and Damages.

Attempting to salvage the only claim that the District Court held not to be derivative and

settled by PE Chicago, Op. at 4, Plaintiff contends that the District Court erred by ruling that she

failed to state a claim for common-law fraud and failed to plead with the particularity required

under Federal Rule of Civil Procedure 9(b). AOB 20-21. But in quibbling around the edges of

the District Court’s opinion, Plaintiff elides the District Court’s core holding: that Plaintiff failed

to plead any facts at all—let alone plead them with particularity—in support of three of the five

elements of a fraud claim. SA8.14

The District Court again was correct. Plaintiff’s fraud claim comes nowhere close to

satisfying the rigorous requirements of Federal Rule of Civil Procedure 9(b), which requires that

a plaintiff “state with particularity the circumstances constituting fraud.” The elements of

Illinois common-law fraud are: “(1) a false statement of material fact; (2) defendant’s knowledge

that the statement was false; (3) defendant’s intent that the statement induce the plaintiff to act;

14 The absence of the necessary facts is not even the only difficulty with the fraud claim; it is also

untimely. Although the District Court concluded that Plaintiff was bound by a statement she made in February 2007 that “the Panda Express restaurants [had] been fraudulently and secretly sold out from under [her] without any distribution of the proceeds to her,” the court concluded it could not determine on the pleadings whether Plaintiff’s December 2012 complaint was barred by the five-year statute of limitations. SA 6–7. However, if this Court were to reverse any portion of the District Court’s Order, the statute of limitations on the fraud claim (and all others, id. at 6 n.2) would remain a major hurdle for Plaintiff at summary judgment and trial.


26

(4) plaintiff’s reliance upon the truth of the statement; and (5) plaintiff’s damages resulting from

reliance on the statement.” Tricontinental Indus., Ltd. v. PricewaterhouseCoopers, LLP, 475

F.3d 824, 841 (7th Cir. 2007) (citation and quotation marks omitted). Under Rule 9(b), factual

allegations must include “the who, what, when, where, and how” of the alleged fraud. Borsellino

v. Goldman Sachs Group, Inc., 477 F.3d 502, 507 (7th Cir. 2007) (emphasis added). To satisfy

this heightened standard, a plaintiff must plead, with particularity, “actual damages arising from

her reliance on a fraudulent statement.” Swanson v. Citibank, N.A., 614 F.3d 400, 406 (7th Cir.

2010) (emphases added).

The District Court held that Plaintiff alleged only one statement by Panda that

represented a possible independent basis for Plaintiff to bring a fraud claim on her own behalf:

the purported statement to Plaintiff that her “interest in Enterprises and PE Chicago was

‘worthless.’” A17.15 However, as the District Court held, this claim fails for at least three

reasons: Plaintiff does not and cannot allege any facts suggesting (1) that Panda made this

statement to Plaintiff intending that it would induce her to act, (2) that Plaintiff reasonably or

even actually relied upon this statement, or (3) that she suffered damages as a result of relying on

it. SA8.

Each of these defects represents an independent basis for affirming dismissal of the fraud

claim. First, Plaintiff pleads no facts to square the incongruity in her timeline. On the face of the

complaint, Panda could not possibly have intended an April 2006 statement to induce Plaintiff to

take (or fail to take) any action with respect to a transaction that Plaintiff alleges was not even 15 The other statement that Plaintiff alleged in support of her fraud claim, which the District Court

properly dismissed as derivative, was “that the purchase price [Panda Express] offered for PE Chicago’s 50% interest in Rezko-Citadel represented a fair value.” A17. This statement was not even made to Massuda; it was allegedly made only to PE Chicago, and Plaintiff does not even attempt to allege (or argue on appeal) that Panda somehow intended it to induce her to act or that she relied on it.


27

conceived of at the time and was not even proposed to Panda until May 2006. A9; AOB 20; see

also Tricontinental, 475 F.3d at 841-42.

Nor does Plaintiff attempt to allege (even in conclusory fashion) that she actually or

reasonably relied on any statement from Panda “to [her] detriment.” Prime Leasing Inc. v.

Kendig, 773 N.E.2d 84, 93 (Ill. 2002).16 Even in her attempt to insert additional facts into the

record via her opening brief, Plaintiff still does not even argue that she actually relied on the

supposedly false statement that her shares in Enterprises were “worthless.” AOB 20.

In addition, the statement bears no relationship at all to the damages Plaintiff alleges PE

Chicago (and therefore Enterprises, and therefore Plaintiff, derivatively) suffered—the transfer

of PE Chicago’s 50% interest in the Rezko-Citadel partnership to Panda for a below-market

price. Plaintiff’s new theory on appeal that she was “harmed by not acting to protect her

[indirect] interests in the partnership,” AOB 21, is alleged nowhere in her complaint, let alone

with particularity. And again, this theory has gaping holes that cannot be patched, much less

with the “facts” she improperly attempts to insert into her brief on appeal. Id. Any

individualized damages to Plaintiff from the alleged statement would depend on unpleaded

shareholder rights to influence the business decisions of PE Chicago—which Plaintiff, an 11

percent owner in Enterprises, did not even have in Enterprises let alone in PE Chicago. SuppA

16 Plaintiff appears instead to fall back on a fraud-by-omission theory based on supposed “concealment

of the transaction.” AOB 21. But as the District Court held, Plaintiff pleads no facts suggesting that Defendants had a duty to disclose anything to her, and Plaintiff has abandoned this theory on appeal by failing to argue otherwise. See Cyrus v. Town of Mukwonago, 624 F.3d 856, 864 (7th Cir. 2010) (an issue “unaddressed” is “therefore abandoned on appeal”); Wigod v. Wells Fargo Bank, N.A., 673 F.3d 547, 571-72 (7th Cir. 2012) (“courts in Illinois have rarely found a special trust relationship” creating a “duty to speak” “in the absence of a more formal fiduciary one”); B A Mortg. & Int’l Realty Corp. v. Taylor, No. 84 C 7739, 1985 WL 1703, at *4 (N.D. Ill. June 7, 1985) (“normal, commercial transaction conducted at arm's length . . . will not generate any fiduciary duties”); Connick v. Suzuki Motor Co., 675 N.E.2d 584, 593 (Ill. 1996) (“In order to state a claim for fraudulent concealment, a plaintiff must allege that the defendant concealed a material fact when he was under a duty to disclose.”).


28

42 (“The Manager [Rezko Concessions, Inc.] shall have full and exclusive power to manage and

control the business and affairs of [Enterprises], and the Members [including Massuda] shall

have no right to act on behalf of or bind [Enterprises].”).

Moreover, no particularized allegations even indicate that this purported statement was

actionably false. “Ordinarily erroneous statements as to matters of opinion,” such as a seller’s

“representations of the value of property, do not amount to fraud.” Wilkinson v. Appleton, 190

N.E.2d 727, 730 (Ill. 1963); Prime Leasing, 773 N.E.2d at 92-93. A statement regarding value

can support a fraud claim only when it “relates to some specific extrinsic fact materially

affecting value, and where the fact is one peculiarly within the knowledge of the speaker.”

Wilkinson, 190 N.E.2d at 730. Here, Plaintiff has alleged only that Panda misrepresented its

opinion that Massuda’s shares in Enterprises were “worthless.” A17. Plaintiff has not alleged

that Panda made a representation of any kind relating to an extrinsic fact materially affecting the

value of PE Chicago’s or Massuda’s interest, and certainly not one that was uniquely within

Panda’s control. Fed. R. Civ. P. 9(b). And just because Panda later acquired PE Chicago’s

interest in the partnership, that does not mean that Plaintiff’s shares in Enterprises had value to

Panda. Becoming a minority investor in a corporate parent controlled by Tony Rezko, with no

additional right to influence the affairs of the joint venture, is not remotely the same thing as

severing ties with his companies entirely by buying out their interest in the partnership.

These defects are fatal to the fraud claim. Apparently recognizing this, Plaintiff oddly

attempts to recast this claim on appeal as a claim for fraudulent transfer and thereby eliminate

the five elements required for pleading common-law fraud. AOB 20-21 & n.7. Of course this is

improper. The only cases cited by Plaintiff in support of her fraud claim, For Your Ease Only,

Inc. v. Calgon Carbon Corp., 560 F.3d 717, 721 (7th Cir. 2009) and Kennedy v. Four Boys


29

Labor Servs. Inc., 664 N.E.2d 1088, 1093 (Ill. App. Ct. 1996), analyze claims brought under the

Illinois Uniform Fraudulent Transfer Act and are entirely inapposite to whether Plaintiff has

stated a claim for common-law fraud. Unlike the claim that is actually at issue—the common-

law fraud claim—the UFTA contains no requirement that a false statement be made with intent

to induce reliance, or that a plaintiff allege reasonable reliance or damages flowing from that

statement. Plaintiff tried separately to plead claims under the UFTA, and the District Court

properly found these claims to be derivative, because they alleged no injury apart from harm to

PE Chicago and Enterprises. SA4. In any event, whether Plaintiff stated a claim under the

UFTA (she did not)17 and whether Panda was a good faith purchaser (it was) is entirely irrelevant

to whether Plaintiff stated a claim for fraud. This argument is a red herring and provides no

basis for reinstating Plaintiff’s fraud claim.

Because, as the District Court found, facts required to support three of the five elements

of a fraud claim are entirely omitted from (and in some cases contradicted by) Plaintiff’s

complaint, Plaintiff’s fraud claim would fail even under the Rule 8 pleading standard, and it

certainly fails under the heightened standard of Rule 9(b). See Ashcroft v. Iqbal, 556 U.S. 662,

678 (2009) (“To survive a motion to dismiss, a complaint must contain sufficient factual matter,

accepted as true, to ‘state a claim to relief that is plausible on its face’ . . . . The plausibility

standard . . . asks for more than a sheer probability that a defendant has acted unlawfully.”).

D. Leave to Amend Should be Denied.

Finally, Plaintiff’s request that this Court give her leave to amend should quickly be

denied. With respect to the fraud claim, the District Court’s dismissal originally was with leave

17 Plaintiff failed to state a claim under the UFTA because, among other reasons, she does not even

qualify as a “creditor” for purposes of the statute. 740 Ill. Comp. Stat. 160/2(c), (d), (i).


30

to amend. SA8–9. But Plaintiff chose to stand on the allegations in her initial complaint rather

than amend it, and she actually asked that the District Court dismiss her complaint with prejudice

so that she could take an immediate appeal. SuppA 85. When she “decided to forgo [her]

opportunity to amend the complaint and instead to pursue an immediate appeal,” she made a

“strategic decision [that] meant that [her] case can be resuscitated only if [she] is able to

convince this court that [she] had in fact properly stated [her fraud] claim[] in the form [it] took

before the district court in the unamended complaint.” Int’l Mktg., Ltd. v. Archer-Daniels-

Midland Co., 192 F.3d 724, 727 (7th Cir. 1999); see also Boland v. Engle, 113 F.3d 706, 714

(7th Cir. 1997) (a litigant who stands on her initial allegations and takes an immediate appeal

“must live with the consequences of [her] gamble” and may not be given the opportunity to

amend on remand). Allowing Plaintiff to amend her fraud claim “would only serve to defeat the

limits Congress has set on [this Court’s] interlocutory jurisdiction in 28 U.S.C. § 1292 and the

complementary final judgment requirement of 28 U.S.C. § 1291.” Int’l Mktg., 192 F.3d at 733.

As to her complaint more generally, Plaintiff waived her request to amend her claims by

failing to make it to the District Court, whether in her briefing or at oral argument. Farnham v.

Windle, 918 F.2d 47, 51 (7th Cir. 1990). She should not be allowed to raise the request belatedly

now, particularly in the absence of any indication that she could plead facts to save the claims.


31

VII. CONCLUSION

The District Court correctly held that Plaintiff was attempting to derivatively litigate

claims for injuries allegedly suffered by PE Chicago—claims that PE Chicago already settled

and released. Plaintiff cannot avoid that fatal defect in her case by claiming that Panda should be

estopped from even asserting it simply because Panda previously argued that PE Chicago’s

claims lacked merit. Plaintiff also failed to adequately plead her fraud claim, and declined to

amend when given leave to do so. This Court should affirm the District Court’s judgment.

Dated: November 12, 2013 Respectfully submitted,

PANDA EXPRESS, INC., PANDA RESTAURANT GROUP, INC., CITADEL-PANDA EXPRESS, INC., ANDREW CHERNG, and PEGGY CHERNG

By: /s/ Christopher D. Dusseault Christopher D. Dusseault One of Their Attorneys GIBSON, DUNN & CRUTCHER LLP 333 South Grand Avenue

Los Angeles, California 90071 Tel.: (213) 229-7000 [email protected] Attorneys for Defendants-Appellees


CERTIFICATE OF COMPLIANCE

I certify that this appellee’s brief complies with the page and type-volume limitation set

forth in Fed. R. App. P. 32(a)(7)(A–B) and Cir. R. 32(b), in that it contains 10,519 words

according to the count provided by the Microsoft Word word-processing software. I also certify

that this brief complies with the typeface requirements of Fed. R. App. P. 32(a)(7)(B)(iii) and

Cir. R. 32(b). This brief was prepared with Microsoft Word, using New Century Schoolbook, a

proportionally-spaced typeface including serifs, with the body in 12-point font.

/s/ Christopher D. Dusseault Christopher D. Dusseault GIBSON, DUNN & CRUTCHER LLP 333 South Grand Avenue Los Angeles, California 90071 Tel.: (213) 229-7000 [email protected] Attorneys for Defendants-Appellees


CERTIFICATE OF SERVICE

I am lead counsel for Defendants-Appellees Panda Express, Inc., Panda Restaurant

Group, Inc., Citadel-Panda Express, Inc., Andrew Cherng, and Peggy Cherng, and I hereby

certify that I have caused a true and correct copy of the foregoing Brief to be served

electronically upon counsel of record in compliance with Fed. R. App. P. 25 and Cir. R. 25.

Participants in the case who are registered CM/ECF users will be served by the CM/ECF system.

/s/ Christopher D. Dusseault Christopher D. Dusseault GIBSON, DUNN & CRUTCHER LLP 333 South Grand Avenue Los Angeles, California 90071 Tel.: (213) 229-7000 [email protected] Attorneys for Defendants-Appellees


No. 13-2818

UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

Dr. Fortunee Massuda,

Plaintiff-Appellant

v.

Panda Express, Inc., Panda Restaurant Group, Inc., Citadel-Panda Express, Inc.,

Andrew Cherng and Peggy Cherng,

Defendants-Appellees

Appeal From The United States District Court

For the Northern District of Illinois, Eastern Division

Case No. 12 CV 9683

The Honorable Ronald A. Guzman

DEFENDANTS-APPELLEES’ SUPPLEMENTAL APPENDIX

GIBSON, DUNN & CRUTCHER LLP

Christopher D. Dusseault

Alexander K. Mircheff

333 South Grand Avenue

Los Angeles, California 90071

(213) 229-7000

EDWARDS WILDMAN PALMER LLP

Michael Docketerman

William R. Lee

Tanya H. Miari

225 West Wacker Drive, Suite 3000

Chicago, Illinois 60606

(312) 201-2000

Attorneys for Defendants-Appellees


INDEX

Defendants’ Memorandum of Points and Authorities in

Support of Motion to Dismiss Plaintiff’s Complaint

(electronically filed February 1, 2013)

SuppA 1

Rezko Enterprises LLC Agreement

(electronically filed February 1, 2013 as Exhibit D to Defendants’

Memorandum of Points and Authorities)

SuppA 29

General Release and Settlement Agreement

(redacted; manually filed February 1, 2013 as Exhibit A to Defendants’

Memorandum of Points and Authorities)

SuppA 53

Sirazi/PE Chicago ECF No. 318

(manually filed February 1, 2013 as Exhibit B to the General Release

and Settlement Agreement)

SuppA 69

Supplemental Memorandum in Support of Defendants’ Motion

to Dismiss

(electronically filed May 14, 2013)

SuppA 71

Excerpts of Sirazi/PE Chicago Transcript

(electronically filed May 14, 2013 as Exhibit A to Supplemental

Memorandum)

SuppA 80

Plaintiff’s Status Report

(electronically filed July 23, 2013)

SuppA 85


IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

DR. FORTUNEE MASSUDA, an Illinois resident and citizen,

Plaintiff,

v.

PANDA EXPRESS, INC., a California corporation, PANDA RESTAURANT GROUP, INC. f/k/a PANDA MANAGEMENT COMPANY, INC., a California corporation, ANDREW CHERNG, a California resident and citizen, and PEGGY CHERNG, a California resident and citizen.

Defendants.

Civil Action No. 12-CV-09683

Honorable Ronald A. Guzman

DEFENDANTS’ MEMORANDUM IN SUPPORT OF DEFENDANTS’ MOTION TO DISMISS PLAINTIFF’S COMPLAINT

PURSUANT TO FED R. CIV. P. 12(b)(1), 12(b)(6), 9(b), and 23.1

Case: 1:12-cv-09683 Document #: 23 Filed: 02/01/13 Page 1 of 28 PageID #:230

SuppA 1


Table of Contents

Page

I. INTRODUCTION AND BACKGROUND ...................................................................... 1

II. ARGUMENT..................................................................................................................... 3

A. Plaintiff Lacks Standing to Sue Because the Claims Are Derivative of Claims that PE Chicago Has Already Settled and Released.................................. 4

1. Plaintiff Cannot Bring the Claims on Her Own Behalf. ............................ 5

2. Plaintiff Cannot Bring the Claims Derivatively......................................... 8

B. The Claims are Time-Barred. .............................................................................. 10

1. The Limitations Periods Have Expired.................................................... 10

2. The Limitations Periods Have Not Been Tolled...................................... 12

C. Each of the Causes of Action Fails to State a Claim. .......................................... 14

1. Plaintiff Has Failed to State a Claim for Unjust Enrichment................... 14

2. Plaintiff Has Failed to Adequately Plead a Claim for Fraud. .................. 15

3. Plaintiff Fails to Plead Facts Showing that Defendants Conspired to Defraud Her........................................................................ 16

4. Plaintiff Has Not Pleaded Facts Sufficient to Show that Defendants Aided or Abetted a Breach of Fiduciary Duty...................... 18

5. Plaintiff Is Not a Creditor Under the UFTA as a Matter of Law............. 19

III. CONCLUSION................................................................................................................ 20


SuppA 2


Table of Authorities

Page(s)

Cases

Adcock v. Brakegate, Ltd., 645 N.E.2d 888 (Ill. 1994)........................................................................................................ 17

Allied Artists Pictures Corp. v. Barron, 413 A.2d 876 (Del. 1980) ........................................................................................................... 8

Anderson v. Simon, 217 F.3d 472 (7th Cir. 2000) ................................................................................................ 4, 11

Ashcroft v. Iqbal, 556 U.S. 662 (2009).............................................................................................................. 3, 13

Ass’n Benefit Servs., Inc. v. Caremark RX, Inc., 493 F.3d 841 (7th Cir. 2007) .................................................................................................... 14

Avacus Partners, L.P. v. Brian, 1990 WL 161909 (Del. Ch. Oct. 24, 1990) ................................................................................ 6

B A Mortg. & Int’l Realty Corp. v. Taylor, 1985 WL 1703 (N.D. Ill. June 7, 1985).................................................................................... 14

Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007)........................................................................................................ 4, 13, 19

Blanchard v. EdgeMark Fin. Corp., 2001 WL 587861 (N.D. Ill. Mar. 12, 2001).............................................................................. 18

Borsellino v. Goldman Sachs Group, Inc., 477 F.3d 502 (7th Cir. 2007) .................................................................................................... 15

Braddock v. Zimmerman, 906 A.2d 776 (Del. 2006) ........................................................................................................... 9

Burns Philp Food, Inc. v. Cavalea Cont’l Freight, Inc., 135 F.3d 526 (7th Cir. 1998) .................................................................................................... 10

Carollo v. Irwin, 959 N.E.2d 77 (Ill. App. Ct. 2011) ........................................................................................... 18

CDX Liquidating Trust v. Venrock Assocs., 640 F.3d 209 (7th Cir. 2011) .................................................................................................... 19

Cede & Co. v. Technicolor, Inc., 542 A.2d 1182 (Del. 1988) ......................................................................................................... 8

Clark v. Robert W. Baird Co., 142 F. Supp. 2d 1065 (N.D. Ill. 2001) ...................................................................................... 10


SuppA 3


Table of Authorities (continued)

Page(s)

ii

Clay v. Kuhl, 727 N.E.2d 217 (Ill. 2000)........................................................................................................ 13

Cleary v. Philip Morris Inc., 656 F.3d 511 (7th Cir. 2011) .................................................................................................... 14

Connick v. Suzuki Motor Co., 675 N.E.2d 584 (Ill. 1996)........................................................................................................ 16

Craig v. Ontario Corp., 543 F.3d 872 (7th Cir. 2008) ...................................................................................................... 3

Doe v. Noe, 293 Ill. App. 3d 1099 (Ill. App. Ct. 1997) ................................................................................ 17

Elf Atochem N. Am. v. Jaffari, 727 A.2d 286 (Del. 1999) ........................................................................................................... 5

Feldman v. Cutaia, 951 A.2d 727 (Del. 2008) ....................................................................................................... 5, 6

First Midwest Bank, N.A. v. Sparks, 682 N.E. 2d 373 (Ill. App. Ct. 1997) ........................................................................................ 17

G & S Holdings LLC v. Cont’l Cas. Co., 697 F.3d 534 (7th Cir. 2012) ...................................................................................................... 4

Gas Tech. Inst. v. Rehmat, 2006 WL 3743576 (N.D. Ill. Dec. 15, 2006)............................................................................ 11

Geinosky v. City of Chicago, 675 F.3d 743 (7th Cir. 2012) ...................................................................................................... 4

Go For It, Inc. v. Aircraft Sales Corp., 2003 WL 21504600 (N.D. Ill. June 27, 2003).......................................................................... 18

Gredell v. Wyeth Labs., Inc., 2005 WL 4774219 (Ill. App. Ct. June 10, 2005) ................................................................ 10, 12

Green v. Warden, U.S. Penitentiary, 699 F.2d 364 (7th Cir. 1983) ...................................................................................................... 4

Horne v. Flores, 557 U.S. 433 (2009).................................................................................................................... 3

In re Berkshire Realty Co., Inc., 2002 WL 31888345 (Del. Ch. Dec. 18, 2002)............................................................................ 5

In re First Interstate Bancorp Consol. S’holder Litig., 729 A.2d 851 (Del. Ch. 1998) ................................................................................................ 6, 8


SuppA 4



Page(s)

iii

In re J.P. Morgan Chase & Co. S’Holder Litig., 906 A.2d 808 (Del. Ch. 2005) .................................................................................................... 5

In re NYMEX S’holder Litig., 2009 WL 3206051 (Del. Ch. Sept. 30, 2009) ............................................................................. 7

Joyce v. Morgan Stanley & Co., Inc., 538 F.3d 797 (7th Cir. 2008) .................................................................................................... 10

Kaplan v. Peat, Marwick, Mitchell & Co., 540 A.2d 726 (Del. 1988) ......................................................................................................... 10

Khan v. Deutsche Bank AG, 978 N.E.2d 1020 (Ill. 2012)...................................................................................................... 10

Kramer v. W. Pac. Indus., Inc., 546 A.2d 348 (Del. 1988) ................................................................................................... 5, 7, 8

Loudon v. Archer-Daniels-Midland Co., 700 A.2d 135 (Del. 1997) ......................................................................................................... 17

Maldonado v. Flynn, 413 A.2d 1251, 1260 (1980)....................................................................................................... 8

Mehl v. Navistar Int’l Corp., 670 F. Supp. 239 (N.D. Ill. 1987) ............................................................................................. 18

Metro. Life Ins. Co. v. Tremont Group Holdings, Inc., 2012 WL 6632681 (Del. Ch. Dec. 20, 2012).......................................................................... 5, 8

Norman v. Brandt, 929 N.E.2d 14 (Ill. App. 2010) ................................................................................................. 19

Opoka v. I.N.S., 94 F.3d 392 (7th Cir. 1996) ...................................................................................................... 11

Parfi Holding AB v. Mirror Image Internet, Inc., 954 A.2d 911 (Del. Ch. 2008) .................................................................................................... 9

PharMerica Chicago, Inc. v. Meisels, 772 F. Supp. 2d 938 (N.D. Ill. 2011) .......................................................................................... 8

Pirelli Armstrong Tire Corp. v. Walgreen Co., 631 F.3d 436 (7th Cir. 2011) ...................................................................................................... 4

Portnoy v. Kawecki Berylco Indus., Inc., 607 F.2d 765 (7th Cir. 1979) ...................................................................................................... 9

Prime Leasing v. Kendig, 773 N.E.2d 84 (Ill. 2002).......................................................................................................... 15


SuppA 5



Page(s)

iv

Rawoof v. Texor Petroleum Co., Inc., 521 F.3d 750 (7th Cir. 2008) ...................................................................................................... 5

RMB Fasteners, Ltd. v. Heads & Threads Int’l, LLC, 2012 WL 401490 N.D. Ill. Feb. 7, 2012).................................................................................... 5

Seidel v. Byron, 405 B.R. 277 (N.D. Ill. 2009) ................................................................................................... 11

Sorrell v. IMS Health Inc., 131 S. Ct. 2653 (2011).............................................................................................................. 17

Stroud v. Grace, 606 A.2d 75 (Del. 1992) ........................................................................................................... 18

The Ravenswood Investment Company, L.P. v. Winmill, 2011 WL 2176478 (Del. Ch. May 31, 2011).............................................................................. 7

Thornwood, Inc. v. Jenner & Block, 344 Ill. App. 3d 15 (2003) ........................................................................................................ 18

Tooley v. Donaldson, Lufkin & Jenrette, Inc., 845 A.2d 1031 (Del. 2004) ......................................................................................... 2, 5, 6, 7, 9

Trade Fin. Partners, LLC v. AAR Corp., 573 F.3d 401 (7th Cir. 2009) .................................................................................................... 15

TRW Title Ins. Co. v. Sec. Union Title Ins. Co., 153 F.3d 822 (7th Cir. 1998) .................................................................................................... 14

Umble v. Sandy McKie & Sons, Inc., 690 N.E.2d 157 (Ill. App. Ct. 1998) ......................................................................................... 19

Vector-Springfield Props., Ltd. v. Central Ill. Light Co., Inc., 108 F.3d 806 (7th Cir. 1997) .............................................................................................. 10, 12

VGS, Inc. v. Castiel, 2003 WL 723285 (Del. Ch. Feb. 23, 2003) ................................................................................ 5

Wigod v. Wells Fargo Bank, N.A., 673 F.3d 547 (7th Cir. 2012) .................................................................................................... 14

Wilkinson v. Appleton, 190 N.E.2d 727 (Ill. 1963).................................................................................................. 15, 16

Statutes

16 Am. Jur. 2d Conspiracy § 55 (2012)........................................................................................ 17

740 Ill. Comp. Stat. 160/10..................................................................................................... 10, 19


SuppA 6



Page(s)

v

Other Authorities

Balotti & Finkelstein, The Delaware Law of Corporations and Business Organizations § 13.10 (2011) ..................................................................................................... 6

Illinois Jurisprudence, Personal Injury and Torts § 9.19 (2007) ................................................. 18

Rest. (Second) of Torts § 876, Ills. 6 (1977) ................................................................................ 19

Rules

Fed. R. Civ. P. 11.......................................................................................................................... 12

Fed. R. Civ. P. 12(b)(1)........................................................................................................... 3, 4, 8

Fed. R. Civ. P. 12(b)(6)........................................................................................................... 1, 3, 4

Fed. R. Civ. P. 23.1(b)(1)................................................................................................................ 9

Fed. R. Civ. P. 23.1(b)(3)............................................................................................................ 4, 9

Fed. R. Civ. P. 9(b) ............................................................................................................. 4, 15, 16


SuppA 7


I. INTRODUCTION AND BACKGROUND

This lawsuit arises from a June 2006 transaction between Defendant Panda Express

(“Panda”) and an entity known as PE Chicago. Compl. ¶ 1.1 PE Chicago was wholly owned

and controlled by Rezko Enterprises (“Enterprises”), a Delaware limited liability company that

in turn was controlled by its managing member, Tony Rezko. Id. ¶¶ 1, 11. In the transaction at

issue, PE Chicago sold its “only real asset” to Panda—a 50% interest in a partnership with Panda

known as “Rezko Citadel.” Id. ¶¶ 1, 76.

Plaintiff Fortunee Massuda at one point had an approximately 11% interest in Enterprises

by virtue of a subscription agreement she entered in late 1997 or early 1998. Id. ¶ 12. Her core

allegation is that “Defendants conspired with Tony Rezko to acquire PE Chicago’s entire interest

in the Rezko-Citadel partnership and at a price far less than the fair value of such interest, and to

funnel the proceeds of the transaction to Rezko personally, thereby depriving PE Chicago, and

those with interests in PE Chicago, of the money to which they were rightfully due.” Id. ¶ 1.

What Plaintiff fails to tell the Court, however, is that PE Chicago—the allegedly

“depriv[ed]” party to the transaction at issue—is one of the obliquely referenced “parties” that

“reached a settlement” with Defendants in a case brought years ago based on precisely the same

claims that Plaintiff belatedly brings here, represented by precisely the same lawyers. See id.

¶ 33; Ex. A [Settlement Agreement].2

Plaintiff’s attempt to bring these claims on her own behalf now fails as a matter of law,

for at least three independent reasons. First, the Complaint is an improper derivative lawsuit,

1 Panda strongly disputes the allegations of the Complaint. For purposes of its Rule 12(b)(6) motion only, Panda takes the properly pleaded allegations of the Complaint as true.

2 The settlement is referenced in the Complaint and otherwise part of the record now. Infra Part II.A.2.


SuppA 8


2

because it does not allege a single injury to Plaintiff that is “independent of any injury to the

[company],”—i.e., PE Chicago and Enterprises. Tooley v. Donaldson, Lufkin & Jenrette, Inc.,

845 A.2d 1031, 1038 (Del. 2004) (emphasis added). To the contrary, Plaintiff’s Complaint

makes clear at every turn that her claims derive wholly from injury supposedly suffered by PE

Chicago as a result of the sale of its asset, which Plaintiff claims harmed PE Chicago and thus

Enterprises and thus her. E.g., Compl. ¶¶ 1, 41, 44, 46, 53, 58, 79. Because Plaintiff cannot

prevail on her own claims without proving her allegation that the sale actually injured PE

Chicago and Enterprises, her claims are derivative even though they are “cloaked” as direct

claims for breaches of duties supposedly owed to her. Plaintiff cannot assert such claims

directly. And she cannot assert them derivatively because PE Chicago already has brought and

released them, and also because she cannot allege that she maintains her ownership interest today

or that she has attempted to cause the company to act on its own behalf, as derivative plaintiffs

must. Plaintiff is asking Panda to pay for the same alleged harm twice: once to PE Chicago

through the settlement of its direct lawsuit, and then again to a one-time investor in Enterprises

who claims an indirect harm. Such a lawsuit cannot stand, and the Court need go no further.

Second, Plaintiff’s claims are time-barred. Plaintiff had sufficient information about the

injuries she alleges—all of which derive from the June 1, 2006 sale—to reasonably have been

alerted to the need for further inquiry well before December 5, 2007 (five years before she filed

this Complaint). Based on her own allegations, Plaintiff should have discovered her supposed

injury before December 5, 2007, because she specifically alleges that even before the transaction,

(1) it was “widely known that Rezko was in severe financial distress and had extensive legal

troubles”; and (2) she was already engaged in litigation with “Rezko, Enterprises, and other

business entities that he controlled for monies owed to her.” Compl. ¶¶ 22, 23. The statute of


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limitations, just like the derivative nature of her claims, are fatal to Plaintiff’s entire case.

Third, if the Court considers the merits of each specific claim (it need not), each fails on

its own terms. For example, Plaintiff has come nowhere close to pleading sufficient facts to

support her fraud claim, because she never alleges even in conclusory form that she actually

relied upon any misstatement by Defendants and identifies no actionable misstatement at all.

Similarly, her fraudulent transfer claims fail because she was not a creditor but rather an indirect

investor in the transferor. And her conspiracy and aiding-and-abetting claims fail because they

depend on a failure to disclose the sale to her, which Panda had no duty to do and which caused

her no harm in any event. For these and other reasons, Plaintiff’s claims should be dismissed.

II. ARGUMENT

Standing to sue is a threshold requirement in every federal action. Horne v. Flores, 557

U.S. 433, 445 (2009). When considering a Rule 12(b)(1) motion challenging the factual basis

for subject matter jurisdiction, district courts look beyond the pleadings, “no presumptive

truthfulness attaches to plaintiff’s allegations, and the existence of disputed material facts will

not preclude the trial court from evaluating for itself the merits of jurisdictional claims.”3 “[T]he

party asserting a right to a federal forum has the burden of proof . . . .” Craig v. Ontario Corp.,

543 F.3d 872, 876 (7th Cir. 2008).

Moreover, a complaint must be dismissed under Rule 12(b)(6) unless it “contain[s]

sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’”

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544,

3 Hay v. Ind. State Bd. of Tax Comm’rs, 312 F.3d 876, 879 (7th Cir. 2002); Apex Digital Inc. v.

Sears, Roebuck & Co., 572 F.3d 440, 444 (7th Cir. 2009); Triumph Packaging Grp. v. Ward, 877 F. Supp. 2d 629, 638 (N.D. Ill. 2012) (“[T]he Court may look beyond the allegations to determine whether Ward has standing, and thus whether the Court has subject matter jurisdiction over his derivative claims.”).


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570 (2007)). A court should disregard “legal conclusions” or “[t]hreadbare recitals of the

elements of a cause of action.” Id.4 A motion under Rule 12(b)(6) can be based on “documents

attached to the complaint, documents that are critical to the complaint and referred to in it, and

information that is subject to proper judicial notice,” Geinosky v. City of Chicago, 675 F.3d 743,

745 (7th Cir. 2012), such as “matters of public record,” Anderson v. Simon, 217 F.3d 472, 474-

75 (7th Cir. 2000), including “notice of proceedings in other courts,” Green v. Warden, U.S.

Penitentiary, 699 F.2d 364, 369 (7th Cir. 1983).

A. Plaintiff Lacks Standing to Sue Because the Claims Are Derivative of Claims that PE Chicago Has Already Settled and Released.

All of Plaintiff’s claims should be dismissed because they derive entirely from alleged

injuries to PE Chicago and its parent, Enterprises (the entity in which Plaintiff actually owned an

interest), that allegedly caused Plaintiff only indirect harm. As explained below, under

governing Delaware law: (i) such claims could only be litigated derivatively on behalf of the

companies; (ii) PE Chicago already brought and settled its claims; and (iii) Plaintiff has not

established the requisite current ownership interest in Enterprises or PE Chicago. Plaintiff thus

lacks standing to bring such claims, and the claims should therefore be dismissed pursuant to

Rule 12(b)(1). E.g., G & S Holdings LLC v. Cont’l Cas. Co., 697 F.3d 534, 541-42 (7th Cir.

2012) (affirming dismissal pursuant to Rule 12(b)(1) where the alleged “injury to the plaintiffs

stems from the injury to [company], and is derivative not direct]”). Alternatively, the claims

should be dismissed pursuant to Rules 12(b)(6) and 23.1 because Plaintiff does not attempt to

plead that it would be futile for her to demand that PE Chicago pursue claims on its own behalf.

4 And where, as here, a plaintiff alleges claims sounding in fraud, “the circumstances constituting

fraud” must be pled “with particularity.” E.g., Pirelli Armstrong Tire Corp. v. Walgreen Co., 631 F.3d 436, 441 (7th Cir. 2011); Fed. R. Civ. P. 9(b). Particularity is also required for a derivative plaintiff’s allegations that she has demanded that the entity proceed on its own behalf. Fed. R. Civ. P. 23.1(b)(3).


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1. Plaintiff Cannot Bring the Claims on Her Own Behalf.

Under Delaware law, “[t]he stockholder’s claimed direct injury must be independent of

any alleged injury to the corporation.” Tooley, 845 A.2d at 1039.5 “The stockholder must

demonstrate that the duty breached was owed to the stockholder and that he or she can prevail

without showing an injury to the corporation.” Id. (emphasis added). If the nature of the injury

“falls directly on the business entity as a whole and only secondarily on individual investors ‘as a

function of and in proportion to [their] pro rata investment in the [entity],’ then the claim is

derivative and must be prosecuted on behalf of the entity.” Metro. Life Ins. Co. v. Tremont

Group Holdings, Inc., 2012 WL 6632681, at *8 (Del. Ch. Dec. 20, 2012) (citation omitted).

Here, Plaintiff’s claims wholly depend on an injury to PE Chicago, and she cannot avoid

the rules governing derivative litigation “by cloaking [her] derivative suit in direct suit clothing.”

In re Berkshire Realty Co., Inc., 2002 WL 31888345, at *3 (Del. Ch. Dec. 18, 2002). “[U]nder

Tooley, the duty of the court is to look at the nature of the wrong alleged, not merely at the form

of words used in the complaint.” In re J.P. Morgan Chase & Co. S’Holder Litig., 906 A.2d 808,

817 (Del. Ch. 2005); accord Kramer v. W. Pac. Indus., Inc., 546 A.2d 348, 352 (Del. 1988). The

emphasis is on the “type of harm” alleged, and “creative attempt[s] to recast . . . derivative

claims” as direct are “disfavored.” Feldman v. Cutaia, 951 A.2d 727, 733 (Del. 2008). “The

5 “Although federal law generally controls the question of standing, whether the shareholder’s

claims are derivative or direct for purposes of the shareholder standing rule is controlled by the law of the state of incorporation”—in this case Delaware, where Enterprises was formed. Rawoof v. Texor Petroleum Co., Inc., 521 F.3d 750, 762 (7th Cir. 2008); see also RMB Fasteners, Ltd. v. Heads & Threads Int’l, LLC, 2012 WL 401490, at *14 (N.D. Ill. Feb. 7, 2012) (“Plaintiff lacks standing under Delaware law to bring this direct claim[.]”). The same rules apply where, as here, the entity at issue is not a corporation but a limited liability company. The “derivative suit is a corporate concept grafted onto the limited liability company form,” Elf Atochem N. Am. v. Jaffari, 727 A.2d 286, 293-94 & n.40 (Del. 1999), and “case law governing corporate derivative suits is equally applicable to suits on behalf of an L.L.C.” VGS, Inc. v. Castiel, 2003 WL 723285, at *11 (Del. Ch. Feb. 23, 2003).


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mere fact that the alleged harm is ultimately suffered by . . . stockholders does not make a claim

direct under Tooley.” Id.

Although they are not labeled as such, Plaintiff’s claims are “derivative’ because they are

“essentially for” aiding and abetting Rezko’s corporate waste or “mismanagement of corporate

assets.” Tooley, 845 A.2d at 1038; see also In re First Interstate Bancorp Consol. S’holder

Litig., 729 A.2d 851, 864 (Del. Ch. 1998) (where “the claims of primary liability . . . belong to

the corporation and could only be maintained in a derivative capacity, that finding logically

applies with equal force to the alleged claims of secondary liability” against a third party).6

Plaintiff’s core theory is that PE Chicago (a subsidiary of the company she actually invested in)

lost the benefit of its “only real asset” (the partnership interest) because of Defendants’ and

Rezko’s allegedly wrongful conduct, and that the repercussions reverberated up the chain,

causing lost profits and proceeds to PE Chicago, and thus to Enterprises, and thus to Plaintiff.

E.g., Compl. ¶ 46 (“Defendants intentionally defrauded Dr. Massuda, PE Chicago and

Enterprises out of the fair market value of PE Chicago’s 50% interest in the Rezko-Citadel

partnership.”); id. ¶ 58 (“Defendants and Tony Rezko . . . caused PE Chicago to transfer its 50%

interest in the Rezko-Citadel partnership to Panda Express at a price that was well below fair

value, to the detriment of PE Chicago and Enterprises and those who have interests in PE

Chicago and Enterprises.”); id. ¶ 79 (“PE Chicago did not receive a reasonably equivalent value

. . . in exchange for the transfer of its partnership interest to Panda Express.”). Plaintiff’s entire

Complaint is derivative because it does not allege even a single injury “independent” of alleged

6 See also, e.g., Avacus Partners, L.P. v. Brian, 1990 WL 161909, at *7 (Del. Ch. Oct. 24, 1990)

(“Claims of waste will always be derivative claims . . . .”); Balotti & Finkelstein, The Delaware Law of Corporations and Business Organizations § 13.10 (2011) (“A claim that seeks relief for alleged breaches of fiduciary duty which caused injury to the corporation and its stockholders as a whole remains derivative, as does a claim that a particular transaction constitutes a waste of corporate assets.”).


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harm to PE Chicago resulting from the supposedly below-market sale and alleged “diversion of

funds” from the “sale proceeds” to Rezko. Kramer, 546 A.2d at 353-54 & n.7. To the contrary,

every single cause of action is expressly predicated on the loss of “PE Chicago’s 50% interest in

Rezko-Citadel.” E.g., Compl. ¶¶ 39, 41, 44 (Count I) (emphasis added); accord, e.g., id. ¶ 46

(Count II); id. ¶ 58 (Count III); id. ¶ 66 (Count IV); id. ¶ 71 (Count V); id. ¶ 87 (Count VI).

The Delaware Court of Chancery recently addressed similar claims in The Ravenswood

Investment Company, L.P. v. Winmill, 2011 WL 2176478 (Del. Ch. May 31, 2011). Ravenswood

illustrates that merely pleading a claim for “breach[] [of] fiduciary dut[y]” that was owed to the

shareholder does not satisfy Tooley’s conjunctive requirement that a shareholder bringing a

direct claim can also “prevail without showing an injury to the corporation” such that the claim is

“independent of any alleged injury to the corporation.” Id. at *2; Tooley, 845 A.2d at 1036, 1038

(emphases added). In Ravenswood, the plaintiff brought purportedly direct claims alleging that

the managers of a holding company had “breached their fiduciary duties” to shareholders by

causing the company to sell its “50% interest” in a subsidiary, through a transaction that allowed

the managers to “improperly receive compensation . . . that should have instead gone to the

[company’s] shareholders.” 2011 WL 2176478, at *2, *6. The court readily concluded that the

claims “involve injuries to the Company as a whole, and not to individual shareholders of the

Company.” Id. The court therefore “dismisse[d] the direct claims” and held the suit was solely

derivative. Id.

Similarly, in Kramer, the Delaware Supreme Court held that the claims were derivative

where the Delaware shareholder alleged waste of corporate assets and that the directors had

diverted funds to themselves and to third parties. 546 A.2d at 353-54 & n.7; see also, e.g., In re

NYMEX S’holder Litig., 2009 WL 3206051, at *9 (Del. Ch. Sept. 30, 2009) (“A breach of


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fiduciary duty” claim alleging that the company was “precluded from . . . maximiz[ing] the

return on its assets” is treated as derivative because “the company suffers the harm”).7 Plaintiff’s

purportedly direct claims thus should be dismissed under Rule 12(b)(1) because Plaintiff cannot

bring them on her own behalf. E.g., G & S Holdings LLC, 697 F.3d at 541-42.

2. Plaintiff Cannot Bring the Claims Derivatively.

Plaintiff also cannot bring the claims derivatively—for three reasons. First, the claims

have already been brought, settled, and released by PE Chicago itself. By bringing those claims

derivatively here, Plaintiff is thus improperly “seek[ing] to assert a right not legally assertable by

[the company],” so her claims fail for lack of redressability and are moot. E.g., Maldonado v.

Flynn, 413 A.2d 1251, 1260 (1980), rev’d on other grounds, 430 A.2d 779 (Del. 1981).8

Plaintiff expressly refers to both the lawsuit and the settlement in her Complaint (¶¶ 32-33), but

neglects to mention that PE Chicago was a plaintiff in that suit and released all of its claims

arising from the sale of the Partnership Interest. As demonstrated by Section 4.1 of the

settlement agreement, which is being filed under seal and which the Court may consider because

it is referenced in the Complaint and under Rule 12(b)(1), PE Chicago released the very claims

that Plaintiff purports to bring here. See, e.g., PharMerica Chi., Inc. v. Meisels, 772 F. Supp. 2d

7 Plaintiff has not alleged that she “los[t] share membership through misrepresentation, conspiracy,

fraud, or breach of fiduciary duty.” Cede & Co. v. Technicolor, Inc., 542 A.2d 1182, 1188 (Del. 1988) (emphasis added). Such former shareholders can bring direct actions, as “[n]o one would assert that a former owner suing for loss of property through deception or fraud has lost standing to right the wrong.” Id.; see also Kramer, 546 A.2d at 354 (characterizing Cede as involving “direct attacks on transactions involving corporate restructuring” that cashed out the complaining shareholders). Here, the claim is that Defendants “deplete[d] or destroy[ed] corporate assets and reduced the value of” the LLC’s membership interests)—a derivative claim. Cede, 542 A.2d at 1088 n.10.

8 See also Metro. Life Ins., 2012 WL 6632681, at *9–13 (classifying purportedly direct claims as derivative and dismissing because company had settled them); First Interstate Bancorp, 729 A.2d at 865 n.11 (dismissing derivative action where “any potential claim” by the company “was released in the Settlement Agreement”); Allied Artists Pictures Corp. v. Barron, 413 A.2d 876, 880 (Del. 1980) (“[A]ction that cures the alleged wrong to the corporation[] . . . moots or settles the [derivative] lawsuit”).


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938, 946 (N.D. Ill. 2011) (“the Settlement Agreement is considered part of the pleadings” if

relied on in a complaint) (citing cases).

Second, Plaintiff’s derivative claims fail for the independent reason that she has not made

the requisite allegation—required as a matter of both Delaware substantive and federal

procedural law—that she currently “retain[s] ownership” of her interest in Enterprises. E.g.,

Portnoy v. Kawecki Berylco Indus., Inc., 607 F.2d 765, 767 (7th Cir. 1979); Fed. R. Civ. P.

23.1(b)(1); Tooley, 845 A.2d at 1036; Parfi Holding AB v. Mirror Image Internet, Inc., 954 A.2d

911, 935 (Del. Ch. 2008). Plaintiff artfully claims that she acquired her “ownership interest”

through a subscription agreement she entered in 1997 or 1998—but she stops notably short of

claiming that she maintains that ownership interest now, and she concedes that she attempted to

sell her interests as far back as 2006. Compl. ¶¶ 12, 23. The reason that Plaintiff does not allege

current ownership is simple—she cannot truthfully do so. In fact, in the first lawsuit brought by

Plaintiff’s lawyers, Dr. Massuda’s husband admitted that she no longer owned her interest:

Q: Now, is Mr. — Dr. Massuda is an owner, still an owner, of Enterprises?

THE COURT: You mean Rezko Enterprises?

BY MR. MARCONI: Rezko Enterprises?

A: Not that we know of, sir.

Ex. B [Sirazi v. Panda Exp., Inc., No. 08-cv-02345, Tr. at 179:19-25]. Because Dr. Massuda

does not and clearly cannot allege a current ownership, direct or indirect, in PE Chicago, she

cannot bring the derivative claims that she seeks to bring here.

Third, Plaintiff’s derivative claims fail because she has not alleged (let alone with

particularity) that she made a demand on PE Chicago or Enterprises to sue for themselves, or that

such demand would be futile. E.g., Braddock v. Zimmerman, 906 A.2d 776, 784 (Del. 2006);


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Fed. R. Civ. P. 23.1(b)(3). “The purpose of pre-suit demand is to assure that the stockholder

affords the corporation the opportunity to address an alleged wrong without litigation and to

control any litigation which does occur.” Kaplan v. Peat, Marwick, Mitchell & Co., 540 A.2d

726, 730 (Del. 1988). Even if PE Chicago had not already “addressed [the] alleged wrong” for

itself, Plaintiff would need to give it fair opportunity to do so.

B. The Claims are Time-Barred.

1. The Limitations Periods Have Expired.

Plaintiff’s claims are also time barred. Plaintiff alleges that the wrongful sale of PE

Chicago’s interest in the Rezko-Citadel Partnership to Panda, out of which each of her claims

arises, occurred on June 1, 2006, more than six years before she brought the current lawsuit. She

also alleges that by late 2005 it was “widely reported . . . [and] widely known that Rezko was in

severe financial distress and had extensive legal troubles,” and that by April 2006 she was

pursuing litigation against “Rezko, Enterprises, and other business entities that he controlled for

monies owed to her.” Compl. ¶¶ 22, 23 (emphasis added). Based on these allegations alone,

Plaintiff cannot carry her burden to “allege facts” establishing delayed discovery, because she

had more than sufficient information (i) “to put a reasonable person on inquiry to determine

whether actionable conduct was involved” by December 5, 2007, five years before Plaintiff filed

her Complaint for Counts I through VI, and (ii) to alert a reasonable person to “the transfer” far

outside the one-year period for Counts V and VI.9 See Gredell v. Wyeth Labs., Inc., 2005 WL

9 Vector-Springfield Props., Ltd. v. Central Ill. Light Co., Inc., 108 F.3d 806, 809 (7th Cir. 1997);

see also Burns Philp Food, Inc. v. Cavalea Cont’l Freight, Inc., 135 F.3d 526, 528 (7th Cir. 1998) (unjust enrichment); Joyce v. Morgan Stanley & Co., Inc., 538 F.3d 797, 803 (7th Cir. 2008) (fraud); Khan v. Deutsche Bank AG, 978 N.E.2d 1020, 1028-29 (Ill. 2012) (civil conspiracy); Clark v. Robert W. Baird Co., 142 F. Supp. 2d 1065, 1074-75 (N.D. Ill. 2001) (breach of fiduciary duty); 740 Ill. Comp. Stat. 160/10(a) (“UFTA”).


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4774219, at *36 (Ill. App. Ct. June 10, 2005) (information “readily available with a modicum of

inquiry” started the statute of limitations).

As Plaintiff alleges, she was investigating her injury in connection with her ownership

interest in Enterprises at the time of the transaction and had even brought claims against Rezko.

By “April of 2006”—months before the sale at issue here—Plaintiff concedes that she had been

suing Rezko “for monies owed to her” in connection with Enterprises. Id. ¶ 23. Plaintiff

pursued that case during the entire period from June 1, 2006 through December 5, 2007. See Ex.

C [Massuda v. Rezko, Case No. 06 L 3510 (Cir. Ct. Cook Co.)].10 It is thus undisputed on the

face of Plaintiff’s Complaint and materials referenced therein that, when the transfer was made

on June 1, 2006, Plaintiff already was aware of Rezko’s financial troubles, was owed money by

Rezko in connection with her interest in Enterprises, and was actively pursuing a case against

him to recover that money.

Other judicially noticeable materials further confirm that Plaintiff’s claims are time-

barred. For example, as a result of her ownership interest in Enterprises, Plaintiff was owed: (1)

distributions of any cash flow “no later than March 31 following the end of each fiscal year”; and

(2) “financial statements of [Enterprises] for the fiscal year ended (including a balance sheet and

statement of income)” within ninety days after the close of each fiscal year. Ex. D [Enterprises

LLC Agreement], at 7, 13.11 She was also entitled to “inspect, extract, and copy” Enterprises’

books and records. Id. at 13. Whether Plaintiff did or did not receive the information that

10 It is well-settled that the docket sheets are subject to judicial notice at the pleading stage where, as

here, “the proceedings have a direct relation to the matters at issue.” E.g., Opoka v. I.N.S., 94 F.3d 392, 394 (7th Cir. 1996) (internal citations omitted); Anderson, 217 F.3d at 474-75; Green, 699 F.2d at 369.

11 The “LLC agreement” is subject to “judicial notice,” is “central to the Plaintiff[’s] claims,” and should be considered “in deciding the motion to dismiss.” E.g., Seidel v. Byron, 405 B.R. 277, 284-85 (N.D. Ill. 2009) (considering certificate of incorporation); Gas Tech. Inst. v. Rehmat, 2006 WL 3743576, at *17 (N.D. Ill. Dec. 15, 2006) (considering LLC agreement).


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Enterprises was required to provide, either occurrence should have alerted her to the possibility,

as she alleges, that Rezko had looted the proceeds from the sale of “the only real asset held by

PE Chicago,” which Enterprises “wholly owned and managed.” Compl. ¶¶ 1, 11, 76.

Further, Plaintiff has not carried her “burden . . . to show that the [discovery] rule

applies” by alleging that she, in fact, did not discover the June 1, 2006 transaction. See Gredell,

2005 WL 4774219, at *12. Again, Plaintiff does not allege these facts because she cannot. In

the prior case brought by the same lawyers, Plaintiff testified under oath that she found out about

the sale in the “summer of 2006.” Ex. E [Massuda Depo. at 30:22-24]. Thus Plaintiff clearly

could not cure her deficient pleadings consistent with Rule 11, and her claims should be

dismissed with prejudice.

Counts I through IV are therefore time-barred because a reasonably diligent person

should have been “on inquiry to determine whether actionable conduct was involved” in the

transfer long before December 5, 2007. Vector-Springfield Props., 108 F.3d at 809; Joyce, 538

F.3d at 803 (upon experiencing a financial loss, plaintiffs were “put on notice of the need to

investigate”). Counts V and VI are even more clearly barred, because Plaintiff should have

discovered “the transfer” more than a year before filing this suit (before December 5, 2011).12

2. The Limitations Periods Have Not Been Tolled.

Plaintiff alleges that her claims were tolled because Defendants supposedly fraudulently

12 These conclusions are bolstered by the fact that Sirazi had discovered sufficient facts to initiate

his lawsuit by April 24, 2008, when he (with the same attorneys) filed a complaint alleging all of the causes of action that are in Plaintiff’s Complaint and virtually identical facts based on the same June 1, 2006 transaction. Ex. F [Sirazi v. Panda Exp., Inc., No. 08-cv-2345 (Dkt. No. 1)]. Sirazi even alleged that “[i]n or around March or April of 2006, . . . Massuda contacted Panda Express and informed Panda Express that she was suing Tony Rezko and the business entities that he controlled for monies owed to her.” Id. ¶ 25. Of course, Sirazi could only have known this by asking Massuda—yet another fact establishing reasonable notice that should have prompted Massuda to investigate her potential claims.


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concealed the June 1, 2006 sale from her. Compl. ¶¶ 34-37. But this theory fails because she

has not come close to alleging that (1) Defendants committed “affirmative acts . . . designed to

prevent the discovery” of the transaction from her; or that (2) those acts, in fact, reasonably

concealed the transaction from her. Clay v. Kuhl, 727 N.E.2d 217, 223 (Ill. 2000).

As discussed above, Plaintiff alleges no facts sufficient to show that a reasonable person

would not have discovered the sale at a point when reasonable time remained within the normal

limitations period. Tolling by fraudulent concealment therefore cannot have occurred. Barratt,

694 N.E.2d at 609. Further, Plaintiff does not allege any affirmative acts that purportedly

concealed the transaction from her to prevent her from discovering her claims. She states only

the legal conclusions that “Defendants affirmatively concealed from . . . Massuda the wrongful

actions described in this Complaint” and that “Defendants had a duty to inform Plaintiff” of the

June 1, 2006 transaction but did not. Compl. ¶¶ 34, 35. Mere “legal conclusions” are

insufficient to plead fraudulent concealment. Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S.

at 570). And to the extent that Plaintiff alleges any affirmative acts of concealment at all (she

does not), she certainly points to none that were specifically designed to prevent her from

discovering her claims apart from the conduct underlying her substantive claims. But “[m]ere

silence on the part of the defendant and failure by the claimant to learn of the cause of action are

not enough.” Barratt v. Goldberg, 694 N.E.2d 604, 608 (Ill. App. Ct. 1998). If the alleged

concealment for statute of limitations purposes consists of the same “allegedly fraudulent

statements or omissions that form the basis of the cause of action”—rather than a separate act of

concealment that specifically “tend[] to conceal the cause of action”—no tolling occurs.13 Thus

13 In addition, there could be no concealment because Defendants had no duty to tell Massuda about

the sale. Because Panda and Massuda had no relationship at all, and “courts in Illinois have rarely found

[Footnote continued on next page]


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there was no tolling, and each of the claims is time-barred.

C. Each of the Causes of Action Fails to State a Claim.

1. Plaintiff Has Failed to State a Claim for Unjust Enrichment.

Plaintiff’s claim for unjust enrichment also fails because it is merely duplicative of

plaintiffs’ other claims. “[I]f an unjust enrichment claim rests on the same improper conduct

alleged in another claim, then . . . unjust enrichment will stand or fall with the related claim.”

Cleary v. Philip Morris Inc., 656 F.3d 511, 517 (7th Cir. 2011). And where, as here, a plaintiff

predicates an unjust enrichment claim on “the same allegations of fraudulent conduct that

[would] support an independent claim of fraud, resolution of the fraud claim against the plaintiff

is dispositive of the unjust enrichment claim as well.” Ass’n Benefit Servs., Inc. v. Caremark RX,

Inc., 493 F.3d 841, 855 (7th Cir. 2007).

Here, Plaintiff’s unjust enrichment claim is entirely duplicative of her other claims, and

because she fails to state a claim for fraud, she likewise fails to state a claim for unjust

enrichment. In any event, “[a]n unjust enrichment claim or other equitable relief is denied to a

plaintiff whose recklessness caused his claimed injury . . . . To allow an unjust enrichment claim

in these circumstances would be to convert this equitable action into an insurance policy for

those who gamble by avoiding safeguards they know they should take.” TRW Title Ins. Co. v.

Sec. Union Title Ins. Co., 153 F.3d 822, 829 (7th Cir. 1998). As a longtime investor in Rezko’s

[Footnote continued from previous page] a special trust relationship to exist in the absence of a more formal fiduciary one,” there can be no duty to disclose. Wigod v. Wells Fargo Bank, N.A., 673 F.3d 547, 571-72 (7th Cir. 2012) (compiling cases). Nor did Panda acquire any fiduciary or other special relationship with Massuda (whether on the basis of an alleged phone call that Massuda made to Panda or for any other reason) that would require it to notify her of the transaction by conducting “a normal, commercial transaction . . . at arm’s length” with an entity—PE Chicago—in which Massuda was a minority shareholder. See, e.g., B A Mortg. & Int’l Realty Corp. v. Taylor, 1985 WL 1703, at *4 (N.D. Ill. June 7, 1985).


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ventures, Massuda was well aware of the risks of dealing with Rezko. See Compl. ¶¶ 12, 22-23.

2. Plaintiff Has Failed to Adequately Plead a Claim for Fraud.

Massuda’s fraud claim comes nowhere close to satisfying the rigorous requirements of

Federal Rule of Civil Procedure 9(b), which requires that a plaintiff “state with particularity the

circumstances constituting fraud.” Under Rule 9(b)’s heightened pleading standard, factual

allegations must include “the who, what, when, where, and how” of the alleged fraud. Borsellino

v. Goldman Sachs Group, Inc., 477 F.3d 502, 507 (7th Cir. 2007). And under Illinois law, “[a]

plaintiff alleging fraud must prove by clear and convincing evidence that (1) the defendant made

a false statement of material fact; (2) the defendant knew that the statement was false; (3) the

defendant intended that the statement induce plaintiff to act; (4) the plaintiff justifiably relied

upon the statement’s truth; and (5) the plaintiff suffered damages as a result of relying on the

statement.” Trade Fin. Partners, LLC v. AAR Corp., 573 F.3d 401, 413 (7th Cir. 2009).

Here, Plaintiff has failed to this heightened pleading standard with respect to any element

of a fraud claim. Plaintiff bases her fraud claim on two allegedly false statements purportedly

made by Panda (though not the other Defendants, which is enough by itself to defeat the fraud

claim against them). She claims that it was false for Panda to say: (1) “that the purchase price it

offered for PE Chicago’s 50% interest in Rezko-Citadel represented a fair value”; and (2) that

“her interest in Enterprises and PE Chicago was ‘worthless,’ when Defendants instead paid

millions to Rezko personally for his supposed interest in said companies.” Compl. ¶ 49. Yet no

particularized facts indicate that these purported statements were actionably false. “Ordinarily

erroneous statements as to matters of opinion,” such as a seller’s “representations of the value of

property, do not amount to fraud.” Wilkinson v. Appleton, 190 N.E.2d 727, 730 (Ill. 1963);

Prime Leasing v. Kendig, 773 N.E.2d 84, 92-93 (Ill. 2002). A false statement regarding value

may support a fraud claim only when it “relates to some specific extrinsic fact materially


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affecting value, and where the fact is one peculiarly within the knowledge of the speaker.”

Wilkinson, 190 N.E.2d at 730. Here, Plaintiff has alleged only that Panda misrepresented its

opinion that the purchase price represented fair value and that Massuda’s shares were

“worthless,” which was subjectively true from Panda’s perspective. Plaintiff has not alleged that

Panda misrepresented a fact materially affecting the value of PE Chicago’s or Massuda’s interest

that was uniquely within its control. Fed. R. Civ. P. 9(b).

Furthermore, Plaintiff does not and cannot allege that she reasonably relied upon these

statements, or that she suffered damages as a result of relying on them. Rather, she alleges that

by making these statements, “Defendants intended to cause PE Chicago, through its agent Tony

Rezko . . . to transfer its 50% interest in Rezko-Citadel to Panda Express for a price that was well

below fair value.” Compl. ¶ 53 (emphasis added). The first purported statement was not even

made to Massuda; it was allegedly made only to PE Chicago, and Plaintiff does not even attempt

to allege that she relied on it. Meanwhile, the second statement bears no relationship at all to the

damages Plaintiff purportedly suffered as a result of the supposed fraud. Therefore, even if

Plaintiff did rely on a statement that her interest in Enterprises was “worthless,” she has alleged

no damages as a result of that purported statement.

Finally, Plaintiff claims she is a fraud victim because Panda did not inform her of the sale

of PE Chicago’s partnership interest to Panda. Compl. ¶ 50. But this omission theory fails

because Plaintiff has pleaded no facts to support her legal conclusion that Panda had a duty to

inform Plaintiff of the June 1, 2006 sale of PE Chicago’s partnership interest, Connick v. Suzuki

Motor Co., 675 N.E.2d 584, 593 (Ill. 1996), and Panda in fact had no such duty, supra n.13.

3. Plaintiff Fails to Plead Facts Showing that Defendants Conspired to Defraud Her.

Plaintiff also fails to plead facts plausibly showing that any of the Defendants somehow


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conspired with Rezko to defraud her. Under Illinois law, “[a] cause of action for civil conspiracy

exists only if one of the parties to the agreement commits some act in furtherance of the

agreement, which is itself a tort . . . .” Adcock v. Brakegate, Ltd., 645 N.E.2d 888, 894 (Ill.

1994). “Thus, the gist of a conspiracy claim is not the agreement itself, but the tortious acts

performed in furtherance of the agreement.” Id. But “[t]ort liability arising from conspiracy

presupposes that the coconspirator is legally capable of committing a tort in that he or she owes a

duty recognized by law to the plaintiff and is potentially subject to liability for breach of that

duty.” 16 Am. Jur. 2d Conspiracy § 55 (2012) (emphasis added).

Here, again, Plaintiff has pleaded no facts showing that either Panda or the Cherngs owed

her a duty to disclose. Supra n.13. And because “[n]o independent duty is imposed” on Panda

or the Cherngs “to disclose,” “no conspiracy can be stated” against them for failure to disclose

the fact that Panda purchased PE Chicago’s interest in the Rezko-Citadel partnership. Doe v.

Noe, 293 Ill. App. 3d 1099, 1114 (Ill. App. Ct. 1997), vacated on other grounds, 303 Ill. App. 3d

139 (Ill. 1998). To impose liability on Panda for failure to speak where it had no duty to speak

would raise serious First Amendment concerns. Sorrell v. IMS Health Inc., 131 S. Ct. 2653,

2659 (2011); Wooley v. Maynard, 430 U.S. 705, 714 (1977).

Nor has Plaintiff pleaded an underlying tort at all, because she pleads no facts to show

that she was in a “special or fiduciary relationship” with Rezko that “would raise a duty to speak”

about the sale of the partnership interest, which is a prerequisite for fraudulent concealment.

E.g., First Midwest Bank, N.A. v. Sparks, 682 N.E. 2d 373, 379 (Ill. App. Ct. 1997). Under

governing Delaware law, an affirmative duty to disclose to shareholders generally is triggered

only in select situations—e.g., when directors are seeking shareholders’ action or approval.

Loudon v. Archer-Daniels-Midland Co., 700 A.2d 135, 137 (Del. 1997); Stroud v. Grace, 606


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A.2d 75, 84 (Del. 1992).14 Plaintiff was at most a minority shareholder of Rezko Enterprises

LLC at the time of the sale of PE Chicago’s interest in Rezko-Citadel, so Rezko owed her no

duty of disclosure. And the lack of an underlying “fraudulent concealment” by Rezko means

that Panda and the Cherngs cannot be liable for “conspiring” with Rezko to fraudulently conceal.

E.g., Go For It, Inc. v. Aircraft Sales Corp., 2003 WL 21504600, at *3 (N.D. Ill. June 27, 2003).

At a minimum, Plaintiff has not pleaded any facts sufficient to show that the Cherngs

personally entered a conspiracy. An officer or director who enters into a contract on behalf of a

corporation has not personally entered an agreement with the counter-party. Carollo v. Irwin,

959 N.E.2d 77, 92 (Ill. App. Ct. 2011). It follows that, as here, “corporate directors can never be

personally liable for damages stemming from an unlawful conspiracy between the corporation

and independent third parties where the corporate directors were acting solely on behalf of the

corporation . . . .” Illinois Jurisprudence, Personal Injury and Torts § 9.19 (2007); Mehl v.

Navistar Int’l Corp., 670 F. Supp. 239, 241 (N.D. Ill. 1987). Plaintiff’s conspiracy claim

therefore fails as to the Cherngs individually.

4. Plaintiff Has Not Pleaded Facts Sufficient to Show that Defendants Aided or Abetted a Breach of Fiduciary Duty.

Plaintiff also fails to plead facts to support her claim that Defendants aided and abetted a

breach of fiduciary duty. An alleged aider and abettor is liable only if he “knows that the other’s

conduct constitutes a breach of duty and gives substantial assistance or encouragement to the

other so to conduct himself[.]” Thornwood, Inc. v. Jenner & Block, 344 Ill. App. 3d 15, 27–28

(2003) (emphasis added). Plaintiff’s claims cannot satisfy either element of that test.

14 See also Blanchard v. EdgeMark Fin. Corp., 2001 WL 587861, at *4 (N.D. Ill. Mar. 12, 2001)

(absent some other relationship, “a corporation and its shareholders do not have the kind of fiduciary relationship which requires total disclosure”).


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First, while Plaintiff asserts that “Defendants were aware, or should have been aware, of

Tony Rezko’s fiduciary duties and obligations to shareholders and creditors of PE Chicago and

Enterprises” Compl. ¶ 67, she pleads no facts to support that legal conclusion. Twombly, 550

U.S. at 570. Again, Plaintiff pleads no facts to show that Rezko owed her a duty to speak,

whatever duties he may have owed generally. And Plaintiff pleads no facts to show that Panda

or the Cherngs knew of any alleged undervaluing of the partnership. Merely “reduc[ing] the sale

price through arm’s-length negotiations cannot give rise to liability for aiding and abetting.”

CDX Liquidating Trust v. Venrock Assocs., 640 F.3d 209, 220 (7th Cir. 2011).

Second, Plaintiff has not pleaded—and cannot plead—facts sufficient to show that Panda

or the Cherngs “substantially assisted” any potential breach of fiduciary duty by Rezko. Illinois

courts “do not equate failing to prevent certain conduct with actively encouraging that conduct,”

and refuse to find substantial assistance in such circumstances. Umble v. Sandy McKie & Sons,

Inc., 690 N.E.2d 157, 159 (Ill. App. Ct. 1998). Because any alleged assistance here did not

proximately enable the underlying breach, it is “insufficient to be considered ‘substantial

assistance’” to whatever torts Rezko may have committed. Norman v. Brandt, 929 N.E.2d 14,

20-21 (Ill. App. Ct. 2010) (citing Rest. (Second) of Torts § 876, Ills. 6, 11, at 318 (1977)). It

simply is not plausible that Panda or the Cherngs had any impact on Rezko’s non-disclosure of

the sale. Their remaining silent did not substantially assist Rezko in being silent himself, nor

does Plaintiff allege that her minority interest in Enterprises meant that she could have somehow

accessed the sale proceeds of PE Chicago had the transaction simply been disclosed.

5. Plaintiff Is Not a Creditor Under the UFTA as a Matter of Law.

Finally, Massuda has failed to state claims of actual and constructive fraud under the

Illinois Uniform Fraudulent Transfer Act because she is not a “creditor” for purposes of the

statute. 740 Ill. Comp. Stat. 160/2(c), (d), (i). In her complaint, Massuda characterizes the only


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interest she ever had in Enterprises and/or PE Chicago to arise as “the result of her subscription

agreement, whereby she invested $4,000,000 in Enterprises to become a 10.67% owner of that

company in late 1997/early 1998.” Compl. ¶ 12 (emphasis added). She then makes the legal

allegation that she qualifies as a “creditor” pursuant to the UFTA, but she asserts no facts at all in

support of this allegation. As a shareholder, if she was unhappy with a transaction entered into

by PE Chicago, her remedy was to bring a proper shareholder derivative suit against PE Chicago

(which she has not done).15

III. CONCLUSION

Accordingly, each of Plaintiff’s claims should be dismissed with prejudice.

Respectfully submitted, PANDA EXPRESS, INC., PANDA RESTAURANT GROUP, INC., CITADEL PANDA EXPRESS, INC., ANDREW CHERNG, and PEGGY CHERNG

Dated: February 1, 2013 By:___/s/ Christopher D. Dusseault____________ One of Their Attorneys

Michael Dockterman (IL Bar No. 3121675) Christopher D. Dusseault* William R. Lee (IL Bar No. 6280450) Theane Evangelis Kapur* Tanya H. Miari (IL Bar No. 6290224) GIBSON, DUNN & CRUTCHER LLP EDWARDS WILDMAN PALMER LLP 333 South Grand Avenue 225 West Wacker Drive, Suite 3000 Los Angeles, California 90071 Chicago, Illinois 60606 (213) 229-7000 (312) 201-2000 [email protected] * Admitted pro hac vice

15 Nor could she assert that she became a “tort creditor” entitled to sue under the UFTA because the

value of her equity interest was impaired by the June 1, 2006 sale. An impairment in the value of an investor’s equity interest in an entity is not the sort of injury the UFTA is intended to remedy. If the rule were otherwise, it would obliterate rule that shareholders lack standing to pursue corporate claims for themselves. E.g., Small v. Sussman, 713 N.E.2d 1216, 1219 (Ill. App. Ct. 1999); supra Part II.A.


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The undersigned, an attorney, hereby certifies that on February 1, 2013, a true and correct copy of the foregoing Memorandum In Support of Defendants’ Motion to Dismiss, with Exhibits A-F, Dusseault Declaration, and Appendix of Unreported Cases was filed with the Clerk of the Court for the United States District Court, Northern District of Illinois, using the CM/ECF system, which will send notification of such filing to the all parties of record, and was caused to be served via first class mail upon the following:

Robert S. Grabemann Timothy M. Schaum Vincent V. Frigo Daspin & Aument 227 West Monroe St. Suite 3500 Chicago, IL 60601

______/s/ Tanya H. Miari_____


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EXHIBIT D

Case: 1:12-cv-09683 Document #: 23-4 Filed: 02/01/13 Page 1 of 24 PageID #:321

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AMENDED AND RESTATED OPERATlNG AGREEMENT

FOR

REZKO ENTERPRISES; L.L.C .

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AMENDED AND RESTATED OPERATING AGREEMENT FOR REZKO ENTERPRISES. L.L.C.

Table of Contents

1. ORGANIZATION ................................................................................................................... 2 1.01· Continuation of Limited Liability Company ............................................................. 2 1.02 Name ................................................................................................................... 2 1.03 PrinCipal Office, Registered Office And Registered Agent ............. ~ ........... ; ................ 2 1.04 Purpose .................................................................................................... ; ...... · .......... 2 1.05 Fiscal Year .................................................................................. '.' ...................... 2 1.06 Term ............................................................... : ................... :.: ..... ·; .. : ..................... 2

n. GOORAL·DEFOOfIONS ............................................ : ................................. : ...................... 2 2.01 Act- ................. : ................................................................................................... 3 2.02 Affiliate ofa Member .................... : ....................................................................... .3 2.03 Agreement ............................................................. '" ........................................... 3 . 2.04 Bankrupl ... ; ....................... : ................................................................... ; .............. 3 2.05 Bankruptcy Code ......................... : ........................ : ....... , ....................................... 3 2.06 Cash Flow ...................................................................................... : .................... 3 2.07 Code ................................................................................................ .' ................... 3 2.08 Company ..................... : ........................................................................... , ........... 3 2.09 Manager ........ : ................................................ : ........................................................ 4 2.'10 Members .............................................................................................................. '4 2.11 Membership Interest ..................................... : ...................... , ....................... : .......... 4 2.12 MemorandUIn ...................... .' ........................................... , ................. , ............ , ...... 4 2.13 Property ......... ~ ............... ~ ............................................... ~ ... : ... : .............................. 4 . 2.14 Subscription AgreeJ;llent. ........................................................................................... 4 2.15 . Treasury Regulations .: ..................................................... " ........................ .- .......... 4

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m. CAPITAL CONTRIBUTIONS AND CAPITAL ACCOUNTS ........................... : ....... : ........... 4 3.01 . Capital Contributions ............................................................................................. 4 3.02 Capital ACcount RevaluB.ti.ons ................... : .............................................................. 4 3,03 Additional Capital Contributions ......... ; ................... : .............................................. 5 3.04. Capital Accounts .. , ...................... : ............ ~ ....... :., ..................... ~ ........... ; .................. 6 . 3.05 L~ted Liability ......... ~ .................................. :_ ................................ ,.~ ................ 6 3.06 No Interest on or Right to Withdraw Capital Contributions .............................. ~ .......... 6

IV. COMPANYFUNDS ..................... : ......... : ...................................................................... : ......... 6

v: ALLOCATIONS ANDDIS11-UBUTIONS ............................ ; ................................................... 7 5.01 Allocation of Profits or Losses .............................. : .................................... :: .......... 7 5'.02 Distribution of Cash Flow _ ............................. : .............. , .......................................... 7 5.03 Code §704(c) Allocations ...................... ; ............. ; .................................................. 7 .

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5.04 Varying Interests ............................................................. '" ................. , .................. 7 5.05 lllinois Personal Property Tax Replacement Income Tax .............................................. 8 ' 5.06 Priority And Distribution of .AI;sets .............. ., .................................... ~ ............... : ....... 9

VI. M.ANAGEMENT: RIGHTS, POWERS AND OBLIGATIONS OF THE MEMBERS ., .. , ................... 9 6.01 Management and'Control in Gen~ral .................................... ' ... ; ......................... , ...... '" 9 6.02 Specific Rights and Powers. The Manager is'hereby granted therigbt, power and authority to

do on behalf of the Company ........................ : ............ ; ......................... : ............... 9

6.03 Employment of Others, Including Affiliates ......................... : ........... : .......................... 9 6.04 Compensation to Manager .................. ~ ................................................ , ...................... 10 .

6.05 Expenses ........................................................................ , .. .-..... : .............. ~ ................ 10 6.06 Other Activities ..................................................................................................... 10 6.07 Title to Property ............................................................................. " ................. .-... 10 6.08 Liabi1ityoftheManager ..... : .................... ~ ................................................... ; ..... ~ ... 10 6.09 Indenmification ........... : .......... ; ....................................... .- ........................................ 10 6.10 Conversion of Company to Corporation or Other Entity ............................................. 11 6.11 Tax Matters Partner ....... : .......................... .-............................................................ 11

VII. TRANSFERS OF MEMBERSHIP INTERESTS; ADMISSION OF NEW MEMBERS .................. 11 7.01 Restrictions on Transfer and Withdrawal .................................................................. 11 7.02 Admission of Additional or Substitute Members ......................................................... 12 7.03 Termination of Meinber's Interest in Company ..................................................... ; .... 12 7.04 Substitute or Additional Member .............. : .............................................................. 12

vm. REPORTS AND TAX. MATIER.S ........................................................................ ,· ............ 13 . . 8.01 Books, Reconis' and R~ports ...... : .............. : ..... ~ ...................................................... ~ 13 8.02 Tax Elections ...................................... : .................... ; .... ~ ......................... , ............... 13

IX. DISSOLUTION AND TERMJNATION ........... .-................................................................. 14 9.01 . Dissolution of the Compariy ................................................................................... 14 9.02 Liquidator .................................................... c .......................................................... 14 9.03 Source of Distributions ........•............. : .................. ~ .............................. , .................. 15

:x.. POWER. OF ATIORNEY ............................................................ : ............ : ............... ; ........ 15 10.01 Power of Attorney .......................... : ................................. , ........................... .- ........ 15 10.02 Nature of Power of Attorney .................................................................................... 15

XI. WSCELLANEOUS.PROVlSIONS ...................................... : ........ " .................................... 15 11.01 Notices ..... ~.-.: ................ ; ....................... , .............................................................. 15 11.02 Gove~g Law .............................. .-............................. " .......................... , ............ 16 11.03 Successors and Assigns ............................ : ........................................... , .................. 16.

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11.04 Counterparts ......................................................................................................... 16 11.05 Modification ........ _ ............................................................ , .................... , ........... 16 . 11.06 No Partition ......... ; ............................................................................................. 16 11.07 No Walver ....................................................... c ..... .-.••.•••.••••••• , .......................... 16 11.08 Gen4er and Number ...................... '" ....................................... " ; ......... ' ................ 17 . 11.09 'Headings ....................................................................................... : .................. .17 11.10 Validity· and Severability ...................................................................................... 17 11.11 Additional Assurances .................................................. ~ ...... '. '" ... '" ............ ~ ......... 17 11.12 No Third PartY Rights ............................................................ " ........................... 17

SCII.EDULE A ............................................................... ' ........................................................... 19

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AMENDED AND RESTATED OPERATING AGREEMENT FOR REZKO ENTERPRISES, L.L.C.

TIllS AMENDED AND RESTATED OPERATING AGREEMENT is made and entered into as of the 1st day of December 2001, by aDd between Rezko Concessions, Inc. ("Concessions" or the "Manager") and those persons whose names are set forth on ScheduJ.e A attached hereto.

The parties hereto, intending to be legally bound, agree as follows:

WHEREAS, Concessions organized Rezko Enterprises, L.L.C., a Delaware limited liability . company (the "Company"), by the filing of Articles of Organization with the Delaware Secretary of State on December 22, 1997;-

WHEREAS, pursuant to a Private Placement Memorandum dated April 13, 1998, the Company accepted subscriptions for Units from Paul S. Ray and Fortunee Massuda (the "Initial Investors");

WHEREAS, also pursuant to a Private Placement Memorandum dated April 13,1998, on April 5, .2000, the Company accepted a subscription for Units in the Company from David Lasko ("Lasko");

WHEREAS, pursuant to a Confidential Information Memorandum dated October --' 2000, the - Company accepted a subscription for l!nits ill the Company from Alber Najjar and Najab Najjar, husban-d

and wi~e, as joint tenants (collectiv<?ly "Najjar");

WHEREAs; pursuant to a Confidential InfOImation Memorandum- dated December ~ 2001, the Company accepted a subscription for Units in the company from Michel Malek ("MaJek");

WID;:REAS, the Company has received a capital contribution from Malek and desires to admit him . __ as an additional Member of the Company; and

WHEREAS, Concessions, the Initial Investors, and Lasko and Najjar, also desire to adillit Malek as an additional member of the LLC.

NOW TIfEREFORE, in consideration ofthetenns ~d provisions-contained herein, theparties agree as follows:

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ARTICLE I

ORGANIZATION

1.01 Continuation of Limited Liability Company. The parties to this Agreement hereby ~gree to continue the Company as a limited liability company under the "Act"as hereinafter defined, upon the tenus and conditions set forth in this First Amended and Restated Operating Agreement, and agree to execute all documents and perform aU acts necessary to comply with the requirements of a limited liability company under the laws of the State of Delaware. The rights an~ liabilities of the Members shall be as provided in the Act, except as otherwise expressly provided. Upon the execution of this Agreement, the Manager shall takeall actions necessary or available to ensure that the Coillpany continues to be classified as a limited liability company under the laws of the State of Delaware.

1.02 Name. The business of the Company shall be conducted under the name of Rezko Enterprises, L.L.c. or such other name as the Manager may designate in writing to the Members.

1.03 Principal Office, Registered Office And Registered Agent. The principal business offiCe of the Company shall he located at 409 West Huron, Sixth Floor, Chicago, illinois 60610, the Comp?lly's

, registered ofl?ce shall be located at 1013 Centre Road, wilmln,gton, Delaware 19805 and its initial' registered agent shall be Corporation Service Company. The Manager may, within its sole and unrestricted discretion, change the principal office, registered office or registered agent of the Company; and in such event, shall give written notice thereof to all Members, and the Manager may establish additional offices of the Company,

, '1.04 Purpose. The purpose of the Company is to operate restaurants and food service establishments including, but notlirnited to, Panda Express and Papa John's restaurants, and all use and purposes ancillary thereto. The, Company shall have the power to do all things necessary or useful in pursuance of the Company business.

1.05 Fiscru. Year, The fiscal year of the Compap.y -shall be the calendar year or such other fiscal year as the Manager shall determine pursuant to the provisions of Code § 706(b). -

1.06 Term. The term of the Company shall commence as of the effective date 01 this Agreement and shall teiminate in accordance with Section 9.'01. _.. , '

ARTICLE n GENERAL

i \ L J DEFINITIONS

f ! , l ~ 1 -,k used in this Agreement, the following tenns shall each have the meaning set forth in this

Article (~ess the context otherwise requires): For purposes of this Agreement, the tenn ' .,r J i i 1 E 2

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"Person" shall include individuals, corporatiollB, aSE;ociations, partnersbips, limited liability companies, t:ruSts, estates and other entities.

2.01 Act shaH mean the Delaware Limited Liability Company Act, as now in effect or as hereafter amended or revised.

1.02 Affiliate of a Member shall qlean any person directly or indirectly controlling, contron~by or under commol} control with a Member or Members.

2.03 Agreement shall mean this Open~ting Agreement, as the same may be amended or supplemented from time to 'time in accordance with the provisions hereof.

2:04 Bankrupt shall mean, with respect to any Member, the occurrence of anyone or more of the following: (i) 'the making by him of an assignment fqr the benefit of creditors; (n) the filing of an involuntary petition seeking an adjudication ofbanlrruptcy under Chapter 7 oftbe Bankruptcy Code, which filing is not dismissed within sixty (60) days of i?e filing; (ill) the filing of a voluntary petitioI;! by him under Chapter 7 of the Bankruptcy Code; (b) the filing of a voluntary or involuntary petition under Chapters 11 or 13 of the Bankruptcy-Code which isnot dismissed within sixty (60) days of the filing, but only if the Member is not the debtor-in-possession of his assets; (vi) the entry of an order, judgment or' decree by a court of competent jUrisdiction providing for the liquidation of the assets of the Member or appointing a receiver, trustee or other administrator of the Member's assets which continues in effect and uustayed for a period of sixty (60) days; or (vii) the confirmation of any plan ofreorganization imder either Chapter 11 or 13 of the Bankruptcy Code providing for the liquidation of substantially aU of the Member's assets. For purposes of (v) above, a Member shall ,not be considered a debtor-ill-possession of his ass~ts if a trustee, receiver or othe!; person or entity is appointed to, or in fact does, -control or operate . the assets of the Member. . ,

2.05 Banktuptcy Code shall mean Title 11 of the United States. Code, as now in effect or as hereafter amended.

2.06 Cash Flow shall mean all cash received by the Company from all sources (including capital cOIitributions and borrowings), less cash expended or reserved ill the discretion of the Manager for liabilities (contingent or otherwis~), expenses, capital expenditures and obligations oftbe COIDpany or obligati'ons secured by the assets of the Company. "

2.07 Code shall mean the Internal Revenue Code of 1986, as now in effector as hereafter amended.

2.08 Company shall mean Rezko Enterpris6s, Ll.C., the limited liabilitycornpany formed by the filirig of the Aiticies of Organization, as constituted from time to time. '

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2.09 Manager shall meari Rezko Concessions, Inc. and any successor Manager admitted as such in accordance with Paragraph 9.01 (b), in such person's capacity as 8. Manager.

2.10 Members shall mean the persons set forth on Schedule A attached hereto, and any person admitted as an additional or substitute Member in accordance with Article VII, in such person's capacity as ,a Member.

2.1] Member~hip Interest shall mean, with respect to a Member, the percentage of ownership interest in the Company of such Member, as set forth on Schedule A.

2.12 Memorandurn s1:tall mean, the Private Placement Memorandum dated April 13, 1998, issued

by the Company to each prospective Member upon which such offeree may tnake an investment decision whether or not to subscnbe t.o become a Member of the Company.

2.13' Propertysha1l mean, at any time, all property, whether real or personal, interests, assets or

rights owned or held by or on behalf of the Company at such time.

2.14 Subscription Agreement shall mean the agreement to subscription for the purchase of Membership mterest(s) in such form as approved by the Manager.

2.15 Treasury Regulations shall mean regulations, including temporary and proposed regulations, pr6m~gated by'Treasury under the Code as now in effect or as hereafter amended

ARTICLE III CAPITAL CONTRIBUTIONS AND CAPITAL

ACCOUNTS

3.01 Capital ContnbutioDS. Concessions previously contributed to the Company its entire partnership interest in Rezko-Citadel, Ltd., an illinois limited partnership, the Papa JobIi's pizza franchises acquired during the period December, 1997 through April 13, 1998 and all its rights t6 acquire additional Papa Jobn's franchises, subject to debt 0($3,500,000, and this capital contribution was valued at

$29,500,000. Massuda previously contributed $4,302,550 as her capit81 contribution totbe Company,

, $.500,000 of which Was allocated to the ~pjtal account of Concessjons in order to Tefiect the interest in Concessions issued to Mas~d~ ·~d R3.ycontributed $1,000,000 as his capital contrib,utio~ .to,1:he ~mpany. Najjar, Lask~, and Malek have each conthouted the sum of $500,000 to theCcimpany as their capital contributionS. The number of Units of each Member and the Membership Interest of each Member

'and Concessions are set forth on Schedule A attached hereto.

3.02 Capital Account Revaluations. Subsequent to the admission of the Wtial I1?vestors, but

prior tci the admission of Najjar, Lasko, and Malekceriam distributions were made to Massuda and Ray, ,

which had the effect ofreducing their capital account balances. In addition,

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Certain losses were allocated to Concessions, Massuda and Ray in proportion to their respective Membeiship Interests. In order to place the Members in parity and to reflCfCt the appreciation in the value .

. of the business and assets .of the Company from the date of the admission of the Initiallnvestors unbl . January I, 2000, the effective date of the admission of Lasko and Najjar (notwithstanding that their capital contributions were made to the Company later in calendar year 2000), the parties agree that the capital accounts of Concessions, Massuda and Ray shall be increased to $29,500,000, $3,802,550 and $1,000,000, respectively, which value shall be conclusive. The book (economic) basis of the assets of the Company

. shall be correspondingly increased, such increase to be allocated among the Company's assets in the manner detennined by the Manager in accordance with Treas. Reg. § 1.704-1 (b)(2)(iv)(1) and tax allocations with respect to such increases shall be made in the manner described in Section 5.03.

3.03 Additional Capital Contributions. If the Manager determines that aq.ditional capital contributions are needed for Company purposes, the Members shall have the first right, but not the . obligation, t() CQntrjbute the additional capital. In such event, the Manager shall notify the Members of the amount of additional capital needed and the mi.n:imum contribution that will be accepted in the aggregate from each of them. The notice ("Notice") shall also set forth the terms for such additional capital contributions, including, but not limited to, a preference to the individuals making such additional contributions of a share ofpI'ofits, losses and/or distributions of Cash F1ow.

Within fifteen (15) days after the delivery of Notice from the Manager, each Member.may exercise his right to contribute additional capital to the Company by giving written notice to.the Manager that he desires to con'tnbute a9ditional capital. Failure of a Member to so notify the Manager shall constitute a waiver of any rights to contribute the additional capital being requested. If there shall be more than one Member exercising his rights hereunder to contribute additional capital, then. unless limited as hereinafter· provideq, each such Member. who elects to contribute additional capital shall be deemed to have elected to contrIbute such proportion of the additional capital to which the Membership Inter<;st owned by the Member as of the date of Notice bears to the aggregate Membership Interests then owned by all Members who elect to contribute additional capital. However, if any Member by his Notice to contnbute additional capital·limits the amount of additional capital which he desires to contribute to less than the maximum amolUlt of additional capital to which he is entitled to. contnouteas aforesaid, the remaining Members, if any, who have not limited their election to contribute additional capital, shall conf!ibute the teinaiiring additional capital not ·otherwise e1~tedto be contributed'to the Company by the Members, in proportion to their respective Membership Interests. . .

. .

The additional capital shall be paid to the Company within fifteen (15) days of written notice from the Manager of the· amoUnt the Member shall contribute. lithe Membersdonot contribute, as aforesaid, all

the needed additional capital, the Manager shall have the right to seek new Members 1,IDder terms and

conditions no mORfavorable than those under which the Members were solicited for additional capital.

Additional capital contributions shall be made upon execution arid acknowledgment of instruments in form

and substance satisfactory· to the Manager.

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3.04 Capital Accounts. The Compan:y shall maintain separate capital'acco~ts fOT each Member. The capital account of each MembershaU be credited with his capital contnbutions (at net fair market value with respect to contnbuted property) and shall be appropriately adjusted to refleCt each Member's allocations of profits, gains, losses, deducti~ns, ~e net fair market value of distnbutions .made to the Member and such ~ther adjustmenb. as shall be reqqired by ¢ode §704(b) and the Regulations promulgated there under. In the event of a permitted transfer of a Membership Interest, the capital account of the transferorshall become the capital ,account of the transferee to the extent it relates to the transferred Membership Interest.

3.05 Limited Liability. The Merri~rs ~hall n(ih~ve'any personal ii~bility for liabilities or obligations of the Company e~cept to the extent oftbeir caPital contnbutious', and the Members shall not be required to make any farther or additional contnbution to the Company or to lend or advance funds to the. Company for any purpose. Notwithstanding the foregoing, (i) if any court of competent jurisdiction holds that distributions (or apy part thereof) received by a Member pursuant to the provisions hereof constitute a return of capital and directs that a Member pay such amount (with or without interest thereon) . to or for the account of the Company or any creditor thereof, such obligation shall be the obligation of said Member and 'Dot of any other Member or the Company, and (ii) a Member ~hall indemnify and hold harm1essthe Company and each Member from any liability or loss incurred by virtue of the assessment of any tax with respect to such Member's allocahle share .oftheprofits or gain oftbe Company.

3.06 No futerest on or Right to Withdraw Capital Contributions. No interest shall be paid by the Company on capital contributions or on the balance in any capital account and no M~mber shall have tbe right to withdraw his capital contnbution or to demand Dr receive a return ofhis capital contnbution ..

ARTICLE IV

COMP ANY FuNDs

All ~ds received by the Company shall be utilized for Company purposes as deternllned by the Manager.in the best interestS of the Company. The Manager or its designee shall have the right to draw checb; payable in such funds and make, deliver. accept and endorse negotiable instruments in connection

. with the Company's business. Company funds.shall notbecOIDIllingledwith the ~dsofany other person.

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ARTICLE V ALLOCATIONS AND

DISTRIBUTIONS

5.01 Allocation of Profits or Losses. All profits, gains, losses and deductions sball be allocated among the Members in proportion to their respective Membership Interests. Notwithstanding the foregoing, in the event a Member lends funds to the Company, appropriate adjustments shallbe made to the foregoing pro rata allocations to reflect th·e requirements of Code § 704(b) that losses and· deductions be allocated to the Member bearing the risk ofloss (and., to the extent appropriate;subsequent allocations

. of profit or gain shall be correspondingly adjusted).

5.02 Distribution of Cash Flow. Cash Flow shall be distnbuted to the Members in such amounts and at such intervals as the Manager shall determine in its sole and unrestricted discretion. Any Cash Flow distributed in accordance with the provisions of this Seqtion 5.02·shall be allocated and distrIbuted to the Members in proportion to their respective Membership Interests. Notwithstailding the foregoing, no later than March :3 1 followmg the end of each fiscal year ~f the Company, Cash Flow shall be distnbuted to the Members in an amount eqUal to the excess, if any, of (i) forty percent (40%) multiplied by the aggregate profits and gains (net of any losses and deductions) of the Company, if any, for the entire term of the Company over (ii) the aggregate distnbutions of Cash Flow to the Members for the entire term of the Coinpany.

·5.03 Code §704(c) Allocations. In accordance with Code §704(c) and applicable Treasury Regulations, income, gain, loss and deduction with respect to any property con1nbuted to the Company

. shall, solely for tax purposes, be allocated among, the Members so as t? take account of any variation between the adjusted baSis of such property tathe Company for federal income tax purposes ·and the va·iue. ascnbed to it under this Agreement, utilizing the "traditional" method ("Traditional Method") as defined in Treas.Reg. §1.704-3(b). In addition., in the event the value of any Company asset IS reqcired to be adjusted pursuant to the provisions of Code § 704(b) and the Treasury Regulations there under, subsequent allocations of income, gain, loss and deduction for tax pUrposes with respect to such asset shall take accOunt of ally variation between the adjusted basis of such asset for federal income tax purposes and its adjusted value, in: the same manner asunder Code §704( c) and the appli(;1lble Treasury R~gulations. Any elections or other decisions relating to such allocations shall be made by the Manager in such manner as it . shall determine in its sole ap.d umestricted discretion. Allocati~ns pms~t tQ'tbis Section ~:03 are soiely for purposes of federal, state and local taxes, as appropriate, and shall not affect, or in any way be taken into account in computing, any Member's capital account or share of profits, losses, other items or d.isipbutions pursuant to· any provlsion of this Agreement.

5.04 Varying ffiterests. In the event of any changes in Membership Interests during the fiscal y~, then forpurposesof this Article V, the Manager shall take into account the requirementS of Code §·706( d) and shall have the right to select any method of determining the varying interests of the Members

dtning the year which satisfies Code §706(d), including the

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right to use multiple methods during any particular year. In the event Members are admitted to the Company on varying dates and, pursuant. to Code §706( d), profits and losses are consequently allocated. among the Members to reflect such varying admission dates ("varying admission allocations''), subsequent allocations of profits and losses shall be made to the Members to offset such varying admission allocations.

5.05 lllinois Personal Property Tax Replacement Income Tax. Notwithstanding any of the . ,

provisions of this Agreement, in the event the Company incurs a tax liability under the Personal Property· Tax Replacement Income Tax of the Stat~ of illinois (111. Rev. Stat. Ch. 120, §2-201 et seq. (1997)), as aniended from time to time (the "Replacement Tax"), the effect of the Replacement Tax on the Company shall be treated in accordance with the provisions oftllls Section 5,05 and all other provisions of this Agreement shall be deemed .appropriately modified. If the Replacement Tax expense of the Company is reduced by reason of certain., but Dot all, of its Members 'being entities subject to the Replacement Tax (the "Subject Entities"), the following allocation of Company profits and losses and distribution of Company assets shall be made:

(a) For pllIJloses of allocation of profit or loss of the Company pursuant to this Article V, no deduction shall be taken for the Replacement Tax expense of the Company;

(b) The Replacement Tax expense of the Company shall be allocated to the Members who are not Subject Entities in proportion to the profit of the Company allocated to such Members pursuant to this Article V (taking into account paragraph (a) above); and

(c) The Company shall then compute its Replacement Tax liability as if none of its Members were SUpject En~ties and shail subtract there from the amount of its actual Replacement Tax

. expense, as aforesaid, and cash in the amount of such difference shall be distributed to the Members· which are Subject Entities in proportion to the amount of profit or loss of the Company for such period allocated to such Members pursuant to this Article V (taking mto account paragraph (a) above).

The amounts allocated and distributed as provided in paragraphs (b) and (c) above shall be charged to the respective capital accounts of the Members to whom allocated or distributed.

It ~s the intention of the Company that no Member shall bear the burden of more than his pro rata

share of the Replacement Tax liability generated by the activities andlor investments of the Company and that appropriate allocatioDS:and distnbutiODS shallbe made so as to effect such result regardless of .

whether the Company or its Mei:nb~ or Affiliates of any of its Members are the entities responsible for. ultimate payment of the ReplaceIll~t Tax to the State oflllinois. 'the above-descnbed calculations shall be modified if at any time such inodification shall be necessary to effectuate such intent. The principles of

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this Section 5.05 shall also applyifthe Company Isstibject to any other tax the computation ofwmch

depends in whole or in part up0Q, the character of the Members.

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5.06 Priority And Distribution of Assets. Except as otherwise provided herein, no Member shall have priority over any other Member either as to the return· of capital or ruLto profits, losses or dis1n DUti aIlE.

ARTICLE VlMANAGEMENT; RIGHTS, P.OWERS AND OBUGATIONS OF THE

MEMBERS

6.01 Management and Control in General. The Manager shall have full and exclusive power to manage and control the business and affairs ofllie Company, and the Members shall have no right to act on behalf of or bind the Company. The Manager may, howev~[, delegate its power of decision, in whole or in part, to any person (whether such person is or is not a Member), whether by power of attorney, action taken under contract or otherwise. The Manager shall hfive all the rights, powers and obligations of a manager as provided in the Act and as otherwise provided by law, and any action taken by the Manager shall constitute the act of and serve to bind the Company. Such officers of the Manager as it shall authorize may act for it in its name in the exercise of any of its rights and powers hereunder. In dealing with the Manager or authorized officers of the Manager acting for on behalf of the Company, no person shall be required to inquire into, and all persons are entitled to rely conclusively on, the authority of the Manager or such authorized officers of the Manager to bind the Company.

6.02· Specific Rights and Powers. The Manager is hereby granted the right, power and authority to do on bebal1 of the Company all things Consistent with this Agreement which are connected with or . incidental to the business of the Company; including, but not limited to, to cause the Company to acquire and finance the acquisition of Company Property; to operate, manage, lease; encumber or otherwise deal with all or any part oftbe Comp<my Property; to borrow on a recp\ITse OJ non-recourse basis, and· on such other terms as the Manager in its sole and Unrestricted discretion shan determine;. to lend money to a ~ Member on such terms as the Manager in its sole and unrestricted discretion shall determine; to seD, exchange or convey, and to grant an option for the sale, exchange or conveyance of all OJ any portion.of the ~mpany Property at such price or amOlmt. for cash; notes, securities or other property, and upon such

. other 'terms as the Manager deems proper in its sole and umestricted discretion; and to enter into, eXt?Cute, ackllowledge and deliver any and all contracts, agreements or other instnnnents necessary or appropriate to effectuate any or all of the foreg<?ing, .

6.03 Emp10yment of Others, Including Affiliates. The Manager shall not be required to devote

full time to the affairs ofllie· Coillpimyand shall devote such time to Company affa~, as it-in its·sole and

unrestricted discretion deems necessary to manage and supervise the operations and buSiness of the Company. Nothing contrined in this Agreement shall preclude the employment by the Manager, on behalf

of and at the eXpense of the Company, of any agent or third parly to operate·and manage all or any portion of the Property or to proviile any service relafug t() the business, subject to the control of the·Manager .. The ManagerulaY, on behalf of the Company, engage one or more Affiliates of the Manager to render services to the Company, provided that any such engagement shall be upon terms and condition·s no less

favorable to the Company than could be obtained from an.indepeildent third party. Neither the Company

nor any of the Members shall have, as a consequence of the relationship created hereby, any right in or to

any inc9rne or profits derived by the Manager or an Affi.I.iate C?f the Manager from any business

arrangements . with the Company that are .consistent With this Section.

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6.04 Compensation to Manager. The Manager shall be entitled to receive reasonable compensation for services rendered to the Company.

6.05 Expenses. The Company shall pay all costs and expenses arising from or relating to the organization ofthe Company, the acquisition of Property and the commencement and continuation of' Company operations.

6.06 Other Activities. Duiing the term, of this Agreement, the Manager and any Affiliate of the Manager may engage in or possess an interest in other business ventures or investments of any kind, including,but not limited to, ventures engaged in owning, operating or managing businesses or properties similar to or competitive with those businesses or properties owned or operated by the Company. The fact that the M~ager or imy Affiliate of the Manager may ~vail itself of such opportunities, eitherby itself or with other persons, including persons in which it has an interest, and not offer such opportunities to the Company or to a Member, shall :pot subject the Member or such Affiliate to liability to the Company or to any other Member on account oflost opportunity. Neither the Company nor any Member shall have any right by virtue of this Agreement or the relationship created hereby in or to such opportunities, or to the income or profits derived there from, and the pursuit of such opportunities, even though competitive with the business of the Company. shall not be deemed wrongful or improper or in violation of this Agreement

6.07 Title to Property. Title to Property shall be taken in the name of the Company or in the name, or names of a nominee or nominees designated by the Manager.

6.08 Liability of the Manager. The Manager and any Affiliate of the Manager, and their respective officers, shareholders, controlling persons, directors, agents and employees, shall not be liable, resPonsible or accountablem d~ges or otherWise to the Comp~y or to any of the Members, their successors or permitted assigns, except by reaSon of acts or omissions due to gross negligence or willful misconduct Any action taken in good faith in reliance upon and in a~ordance with the advice or opinion ,of co~el shall be conclusively deemed not to conStitute gross negligence or willful misconduct.

6.09 Indemnification. The Company shall indemnify, defend and hold harmless the Manager and any Affili~te oftbe Manager (the "Iud(!mnified PartY'.) who was or is a party or is threatened to be made a party to any threatened; pending or completed action, "SUit or proCeeding, whether civil, criIDinal, administrative' or investigative (~clud.ing any action by or in therig~t of

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the Company), against losses, damages, claims or expenses actwilly and rellfonably incurred by it for which such Indemnified party has not otherwise been reimbursed (including reasonable attorneys' fees, judgments, fines and amounts paid in settlement) in connection with such action, suit Or proceeding, by reason of any acts, omissions OJ; alleged acts or omissions aris.ing out of the Indemnified paity's activities as a Manager, or as an officer, shareholder, director, agynt or employee of the Manager, on behalf of.the

_ Company or in furtherance of the interests 'of the Compai::ly, so long as the Indemnified Party did not act in a manner constituting gross negligence or willful misconduct The termination oLany action. suit or proceeding by judgment, order, settlement, or upon a plea of nolo contendere or its equivalent, shall not of itself create a presumption thatthe Indemnified Party's conduct constituted gross negligence or Willful misconducl

6.10 Conversion of Company to Corporation or Other Entity. The Members have selected a limited liability company as the entity in which to operate the business of the Company. However, in the future the Manager may determine that it may be neees.sary to change the legal form in which the business

. of the COIDpany is operated, including, by means of example but not limitation, to convert the Company to a corporation so as to enable it to participate in a public offering of its stock. Accordingly, in the event the Manager in its sole and unrestricted discretion determines it is in the best interests of the Company that it be converted to B corporation: or any other type of entity, each Member agrees to execute such documents and take such other actions·as shall be determined· to be necessary by the Manager to effeCtuate such conversIOn.

'6.11 Tax Matters Partner.The Manager shall be the "tax matters partner" for purposes of Subchapter C of Chapter 63 of Subtitle F of the Code (Code §§6221:"6233), and shall have the authority to exercise all functions provided for in said Act, or in regulations promUlgated hereunder by Treasury, including, to the extent permitted by such regulations, the authority to delegate the function of "tax matters partner" to any other perso~. The Manager shall be reimbursed for all reasonable" expenses incmred as a result of its duties as tax patters partner. In the event the Manager resigns as tax matters partner or as a Manager, or its entire Membership Interest is disposed of or terminated, the successor Manager shall become the tax matterS partner.

ARTICLE VU TRANSFERS OF MEl\ffiERSHIP INTERESTS: ADMISSION OF NEW

MEMBERS

. 1 7.01 Restrictions on Transfer and Withdrawal. A Member roay not sell or transfer all or any part ! J t .1 of his Membership Illterest or withdraw from fue Company except with the prior written 'consent of the

Manager, which consent may be withheld by the Manager in its sole and unrestricted discretion. Any sale

r 'I or transfer V1ithout said cOnsent shall be null and void and confer DO rights on the transferee as against the I I t . .1 Company or as against the Manager. In addition,

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before a permitted transferee shall be admitted to the Company as a substitute or additional Member, the conditions set forth in Section 7.05 must be satisfied.

7.02 Admission of Additional or Substitute Members. No person may be admitted as a substitute MeIDher without the prior written consent of the Manager, which consent may be withheld by the Manager in its sole arid unrestricted discretion. Moreover, it is anticipated that employees of the Company (or employe~s of the Manager) may be admitted as Me~bers from time to time upon the detennination of the Manager- in its sole and unrestricted discretion, upon such terms as the Manager determines, even if the eff~t of the adi-nission- is to dilute the Membership Interests of the Members. In such event, any dilution

- shall be home by-all Members in proportion to their respective Membership Interests.

-7.03 Termination of Member's Interest in Company. A Member's death, a Member becOming Bankrupt or the terIDination of a Member's- interest in the Company (by with<kaw-alor otherwise) shall not dissolve the Company, and such Member's legal representative shall have all the rights of the Member for the purpose of settling the Member's estate aDd such power as the Member possessed to transfer his Membership Interest and to join with the transferee thereof in satisfying the conditions precedent to such trai:lsferee becoming a substitute Member which are set forth in this Article vrr. Each Member expressly agrees that in the event of his death he waives on behalf ofbimself and his estate, and he directs the legal representative of his estate and any person interested therein, to waive thefumishing of any inventory, accounting or appraisal of the assets of the Company and any right to any audit or examination of the books of the Company.

7.04 Substitute or Additional Member.

(a) A person shall only be admitted as a substi~te or additiol).al MeIIl-q~r under this Agreement in compliance with the fol1owmg:.

(i) a transfer conteinplated by Section 7.01 shall be made only by written document, signed by the transferor Member and a6ceptedin writing by the transferee, and a duplicate original of such document shall be delivered to the Company and consented to by the Manager in writing (which consent may be withheld in fue sole and unrestricteddisyretion ofllie Manager);

(Ii) the transferee shall execute and deliver to the Company a written agreement, in fomi reasonably satisfactory to the Manager, pursuant to which said person agrees to be boUnd by this Agreement and grants the power of attorney contained in this AgreeI1)ent; and-

; l (b) In the event a transfer is made in accordance with the teIms ofthisArtic~e, unless

l i- o~erwise required by the Code:

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the effective date of such transfer shall be the date the written documents described in Subparagraphs 7.04(a)(i) and (ii) are approved by the Manager; and

the CompaI1Y and the Manager shall be entitled to treat the transferor Member ~ the absolute owner of the transferred Membership Interest in all respects and shall incur no liability for distributions or allocations made pursuant to Article V in" good faith to such transferor until such time as the written documents described in Subparagraphs 7.04(a)(i) and (ii)) are approved by the Man.ager.

(c) The costs incurred by the Company associated with the admission of a substitute or

additional Member contemplated by this Article (including reasonable attorneys' fees) shall be borne by the transferee .

ARTICLE VIII REPORTS AND TAX

MATTERS

8.01 Books, Records and Reports.

(a) Accurate books, records and accounts shall be maintained by the Company showing its assets, liabilities, operatioIlS, 1:ral}Sactions and financial condition, as well as the names and addresses of the Members. The Company books and records shall be kept under such generally accepted accounting principles as the Manager"n:my d,eten;nine. The Company boob shaUbe maintained at the principal office of the" Company, and each Member shall have the right upon reasonable notice given to the Company to inspect, extract and copy sUyh booles " during regular business bours of the Company.

(b) ~e Manager shall cause income tax returns for the Company to be prepared and filed with the appropriate authorities. Wit1lln ninety days after the clo'se of each fiscal year of the

Company. the Manager shall send to each person who was a Member at any time during such fiscal year

such information as will be sufficient to prepare documents which may be required to be filed under

1 relevant federal and "state income tax ~aWs. ; i ~. J "

(c) Within ninety (90) days "after the close of the Company's fiscal year, the Manager

; -1 shall make the best effort t9 ~aUse each Mem:her to Teceive financial statements of the Company for the

; "i fiscal year ended (including a balance sheet and statement of income) prepared by (or at the direction of) the Manager.

r 1 i I "~ I 8.02 Tax Elections: The Manager shall have the power to millee such tax elections as it considers

appropriate in its sole and unrestricted " discretion .

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ARTICLE IX DISSOLUTION AND

TERMINA nON

9.01 Dissolution of the Company.}he Comp~y shall dissolve and be,terminated on December 31,2096, or upon the earlier happening of anyone of the following:

(a) upon the sale of substantially all of the Property or other conversion of substantially all the Company's assets to cash;

(b) as applicable, upon the death, retirement, resignation. Bankruptcy, court declaration of incompetence with respect to, or dissolution of the Manager, unless within ninety (90) days thereafter Members holding a majority of the Membership Interests appoint a successor Manager; or

( c) entry of a decree of judicial dissolution under Section 18-802 of the Act

9.02 Liquidator.

(a) Upon dissolution of the Company. the Manager, or if there is no Manager. such person as the Members holding a majority of the Membership lnterests may designate, shall act as liquidator of the Company (in either case, the "Liquidator"). The LiquidatOr shall, with rea·sonable speed, wind up the affairs of the Co~pany and liquidate the Property. The Liquidator shall have unlimited discretion to determine the time, manner and terms of any sale of-Property having due regard to the activity and condition of the relevant market and general financial and economic conditions. The 'Liquidat~~ shail distrib~k any proceeds received from th~ disposition of the Property and any other assets of the Company in acCordance with the Members respective positive capital aCcOlmt balances. The capital accounts of the Members shall also be adjusted to reflect any gain or loss that would be recognized upon the sale of any Property (at its then fair market value, as determined by the Liquidator) that the Liquidator desires to distribute in kind to the Members. In the liquidation of the Company, the Liquidator may distribute Property in kind to the Members, which shall not be required to be pro rata as among the Membyrs; provided, however, that no Member shall receive Property or procee<!s there from in excess of the positive bruance inhis capital accotint, as adjusted pursuant .to this Para~ph 9.02(a).

(b) If any Member shall be indebted to the Company, then until payment of such- amount by him, the Liquidator· shalf retain such Member's distributive share of Property and apply the same to the liquid~tion of such indebtedness. . .

( c) The Liquidator shall comply with all requirements of the Act and other applicable .

law pertairring to th.e winding up of a limited liability company, following whlch the Company shall stand liquidated and terminated. . . -.

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9.03 Source of Distributions. Each Member shall look solely to the assets of the ~mpany for all distributions with resPect to the Company, the retuin of his capital contribution thereto and his share of .. profits or losses thereof, and shall have no recourse therefore (upon dissolution or otherwise) against any other Member or Manager.

ARTICLE X POWER OF

ATTORNEY

10.01 Power of Attorney. Each Member, by executing this Agreement or a counterpart hereof, does hereby irrevocably constitute and appoint the Manager, the Chairman offue Board, the President and any Vice President of the Manager, and each of them, and any successor Manager of the Company, with full power of substitution, as such Member's true and lawful Attorney~in-fact (the "AttorneY-in-Factlf),.in his name~ place and stead, to execute, acknowledge, swear to, deliver, file and record such documents which are DOW or may hereafter be required by law to be filed on behalf of the Company or are deemed necessary or desirable by the Manager to carry out fully the provisions oftbis Agreement in_ ~ccordance with its terms.

10.02 Nature of Power of Attorney. The grant of authority in Section 10.01 by each Member (i) is a special power of attorney coupled wi,th an interest in favor·oftbe Attorney-in.-Fact and as such shall be irrevocable and shall survive the death or legal incapacity of the Member; (ii) may be exercised for the Member by a facsimile sigilature of the Attorney-in-Fact; and (iii) shall survive the assignment by the Member of all or any portion of his Membership Interest, e>;.cept that where the assignee of the entire Membersbip Interest of the Member has furnished a power of attorney and has been approved by the Company for admission to the Company as a 'substitute Member pursuant t~ Article vn, tJie power of ~ttorney granted in Section 10.01 shall survive such assigrullent for the sole plllpose of enabling the Attorney-in-Fact to execute, acknowledge and file any in~ment necessarito effect such substitution and shall thereafter terminate.

ARTICLE XI MISCELLANEOUS

PROVISIONS

11.0 1 Notices. All notices or other communications required or permitted to be given pursUant to this Agreement shall be in writing and shall be considered as properly given: (i) in the case of a report to be. given to a Meml?er, if personally .delivered or if mailed by Umted States first-class mail, postage prepai~ addressed to·such Member at his address on the rec~rds of the Company; and (ii) in the case of notices' or comm~cations to be given to any Member, if personally deliVered or· if mailed by United States fust-class certified or registered mail, return receipt request~ postage prepaid, or if sent by prepaid telegram, ~lex .or private courier service

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addressed to such Member at his address on the recordS of the Company. A Member may change his address for notices by giving notice in like manner. Any notice or other communication shall be deemed to' . have been given to, or received by, the appropriate party as of the date on which it is personally delivered or, if mailed, on the third business day after the date on which it is deposited in the United States mail, or if telegraphed, telexed or sent by private c:ourier service on the business day after it is transmitted.

"11.02 Goverrring Law. This Agreement shall be goveme<i by and construed in accordance with the laws of the State of Delaware.

11.03 Successors and Assigns. This Agreement and all theterms and provisions hereof shall be

binding upon and shall inUre to the benefit o!the Members and their respective heirs, executors, . administrators, successors and permitted assigris. Any person acquiring or claiming an interest in the

. Company, in any manner wh.li.tsoever, shall be subject to and bound by~n the terms,conditions and obligations of this Agreement to which his predecessor in interest w3.:s subject or bound, without regard to whether such person has executed this Agreement or a counterpart hereof or any other document conte~plated hereby. No person shall have any rights or obligations relating to the Company greater than those set forth in this Agreement and no person shall acquire an interest in the Company or become a Member thereof except as permitted by the te~ of this Agreement.

11 .04 Counterparts. This Agreement may be executed in any number of identical counterparts, each of which., for all pmposes, shall be deemed an original; and.aU of which consti"tUte, collectively, one and the same Agi-eeme~l In addition, this Agreement may contain more than one counterpart signature page and may be executed by the affixing of the signature of each of the Members to one of such counterpart signature pages and all such counterpart signature pages shall be read as one and shall have the same force and effect as though all the signers had si.gned the same signature page.

11.05 Modification.Ibis Agreement constitutes the entire understanding of the parties hereto with respect to the subject matter bereof and supersedes any and all prior negotiations, UDd~standings and agreements in regard hereto. This Agreement may not be amended except with the unanimous consent of all the Members; No amendment, modification or alteration of the terms hereof shall be b-indingunless the

same is in writing and is effected in accordance with this Agreement

11.06 No Partition. Each of the' parties hereto irrevocably waives during the t~ of the Company any right that he may have to maintain any action for partition with respect to Company Property.

11.07 No Waiver. Failure or delay of any party in exercising any right or remedy. under this Agreement, or any other agreement between the parties, or otherwise, shall not operate as a waiver thereof. The express waiver by any parly of a breach of any provision oftbis Agreement

16

S-3880


SuppA 49


n [I

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: I

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by any other party shall not operate or be construed as a waiver of any subsequent breach by said party. No waiver shall be effective unless and until it is in written form and signed by the waiving party.

11.08 Gender and Number. Wherever from the context is appears appropriate, each term stated in either the singular or plural shall include the singular and phrral, and pronouns stated in either the . masculine, the feminine or the neuter gender shall include the masculine, fe.minine and neuter.

1l.09 Headings. The captions in this Agreement are inserted for conve:ruence ofreference only and shall not affect the construction of this AgreemenL References in this Agreement to any Article, Section, Paragraph, Subparagraph or Schedule are to the same contained in this Agree·menL

11.10 Validity and Severability. If any provision of this Agreement. contravenes any la~ and such contravention would thereby invalidate this AgreeIDen~ or make a Member generally liable for the obligations 9f the Company, then such provision is" de-dared to be invalid and sul;>ject to severance from the remaining portion of this Agreement and this Agreement sba·U be read and construed as though it did not contain such provision in a manner to give effect to the intention of the parties to the fullest ex.tent

. possible.

. 11.11 Additional Assurances. Upon the request of the Manager, each Member agrees to perfonn all further acts and execute, acknowledge and deliver any documents which the Manager deems reasonably necessary to effectuate the provisions of this Agreement.

11.12 No Third Party Rights. This Agreement and the covenants and agreements contained herein are solely for the benefit of the parties hereto and their Affiliates. No other person shall be entitled.to enforce or make any claims, or have any right pursuant to the provisiDns of this Agreement .

17

S-3881


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I ~ I . !

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IN WITNESS WHEREOF, the Members have causyd this First Amended and Restated Operating Agreement to be executed as of the date first set forth above.

REZKO CONCESSIONS, INC.

By. ~. ______________________ _

Antoin S. Rezko, Presjdent Paul Ray

Fortunee Massuda

Albert Najjar

Najah Najjar

David Lasco

Michel Malek

8-3882 ·18


SuppA 51


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SCHEDULE A AMENDED AND RESTATED OPERATING AGREEMENT

FOR REZKO ENTERPRISES, L.L.C.

Membership Revalued Capital Name & Address Units Interest Account Balance Rezko Concessions 83.99% $29,500,000 409 West Huron, 6th F100r Chicago, IL 60610

Paul Ray 4 2.57% $1,000,000 16W665 Hillside Lane WilloWbrook, lL 60527

' Fortunee Massuda 10.145 9.80% $3,802,550 ,175 East Delaware Place, #770 Chicago,IL 60611

Albert Najjar 2 1.32% $500,000 6915 Latrobe Skokie, IL 60077

David Lasco 2 1.32% $500,000 Lasco Development Corp. 10787 Randolph Street Crown Point, 1N 46307

Michel Malek 2 1.0% $500,000 577 West Hawthorne Place Chicago, n. 60.657

TOTAL _ 20.145 100% $35~802,550.00

S-3883


SuppA 52


GENERAI. RELEASE AND SETTLEMENT AGREEMENT

This General Release and Settlement Agreement, dated as of October 19, 2012 (this

"Agreement" or "Settlement Agreement"}, is entered into among Panda Express, Inc., Panda

Restaurant Group, Inc., Citadel Panda Express, Inc., Andrew Cherng, Peggy Cherng, and R.

Michael Wilkinson {"Defendants") on the one hand, and Semir D. Sirazi ("Mr. Sirazi") and

PE Chicago, LLC ("PE Chicago," and together with Mr. Sirazi, "Plaintiffs") on the other

hand. Each of Plaintiffs and Defendants is individually referred to as a "Party" and

collectively as the "Parties."

RECITALS

A. WHEREAS, on or around July 28, 2010, Plaintiffs filed a First Amended

Complaint in the United States District Court far the Northern District of Illinois (the

"Court") against Defendants alleging causes of action for unjust enrichment, fraud, civil

conspiracy, breach of fiduciary duty, breach of contract, aiding and abetting a breach of

fiduciary duty and vialatians of the Illinois Uniform Fraudulent Transfer Act (the "Action"),

based aeon the transfer of PE Chicagds 50% interest in the Rezko-Citadel Partnership in

June 2006. A hue and correct copy of the First Amended Complaint is attached hereto as

Exhibit A; and

1

SuppA 53


SuppA 54


SuppA 55


4. RELEASES AND DISMISSALS WITH PREJUDICE

4.1 Plaintiffs' Release of Defendants

As part of this Settlement Agreement, Plaintiffs, on behalf of themselves and their

agents, employees, officers, directors, representatives, assigns, heirs, executors, trustees, joint

venturers, partners, attorneys, successors and assigns, and each of them, do hereby

absolutely, dully and forever release, relieve, waive, relinquish and discharge Defendants and

all of their past, present and future partners, officers, directors, employees, agents, attorneys,

parent companies (including Rezko Concessions, Inc. and Rezko Enterprises LLC),

subsidiaries, affiliates, stockholders, accountants, insurers, predecessors, successors, assigns,

and divisions (the "Released Parties"), of and from all disputes, claims, causes of action,

actions, judgments, liens, indebtedness, costs, damages, obligations, attorneys' fees, losses,

4

SuppA 56


liabilities and demands of whatever kind and character that now exist, or may exist or have

existed, from the beginning of time until the present, known or unknown, foreseen or

unforeseen, liquidated or unliquidated, potential or actual, against Defendants arising from

all matters, facts, events and circumstances relating to tlae Rezko-Citadel Partnership (the

"Released Claims"). Other than ?VIr. Sirazi's claims in the United States Bankruptcy Court of

the Northern District of Illinois {Petition No. 08-11591), Plaintiffs further agree that they

have not and sha11 not file or submit any claims, requests, suits, complaints, causes of action,

demands, disputes, affidavits, arbitrations, proceedings or other actions with any regulatory

or administrative agency or other organization with xespect to matters related to or arising

under the Released Clauns, and any such claims, requests, suits, complaints, demands,

disputes, affidavits, arbitrations, proceedings or other actions filed yr submitted prior to the

execution of this Settlement Agreement shall be dismissed or withdrawn with prejudice.

Notwithstanding anything to the contrary in this Section 4.1, Plaintiffs do not release

Defendants from any of their obligations under this Settlement Agreement.

4.2 Defendants' Release of Plaintiffs

As part of this Settlement Agreement, Defendants, on behalf of themselves and their

agents, employees, officers, directors, representatives, assigns, heirs, executors, trustees, joint

venturers, partners, attorneys, successors and assigns, and each of them, do hereby

absolutely, fully and forever release, relieve, waive, relinquish and discharge Plaintiffs, their

agents, O~CCTS~ d1I'CCtOZS~ P111p10y0eS~ I~Y'ESeI1t3t1Vf.S~ SUCC~SSOrS~ 8SSI~ILSs ~le1TS~ eXeCUtOTS~

trustees, joint venturers, partners, and attorneys of and from all disputes, claims, causes of

action, actions, judgments, liens, indebtedness, costs, damages, obligations, attorneys' fees,

losses, liabilities and demands of whatever kind and character that now e~cist, or may exist or

have existed, from the begirming of time until the present, known or u~►lrnown, foreseen or

unforeseen, liquidated or unliquidated,potential or actual, against Plaintiffs arising from ail

matters, facts, events and circumstances relating to the Rezko-Citadel Parhr~ership. Other

than Defendants' claims in the United States Bankruptcy Court for the Northern District of

SuppA 57


Illinois {Petition No. d8-11591 }, Defendants further agree that they have nat and shall nat file

or submit any claims, requests, suits, complaints, causes of action., demands, disputes,

affidavits, axbitrations, proceedings or other actions with any court, regulatory or

administrative agency or other organization with respect to matters related to or arising under

the Released Claims. Notwithstanding anykhing to the contrary in this Section 4.2,

Defendants do nat release Plaintiffs from any of their obligations under this Settlement

Agreement.

6

SuppA 58


SuppA 59


SuppA 60


SuppA 61


10

SuppA 62


1~

SuppA 63


12

SuppA 64


IN WITNESS WHEREOF, the Parties have caused this Settlement Agreement to

be executed as of the dates set forth below.

ACCEPTED AND AGREED

Dated: October _, 2012 By.

Semir D. Sirazi

Dated: October ~, 2012 By:

Name:

Title:

For PE Chicago, LLC

Dated: October2.~, 2012 By:

Andrew g

Da#ed: October"L3 2012 By: ._

Peggy Cherng, Ph.D.

Dated: October , 2012 By:

R, Michael Wilkinson

Dated: October ~ 2012 By: `~-~~-~-~-~---

Name: (~1

Title: ~D ~ ~!~,IYC~I'~~n ~i 0 ~- ~~For Panda Express, Inc., Panda Restaurant

Crroup, Inc., Citadel Panda Express, Inc.

Dated: October_, 2012 By:

Name: Robert S. Crrab~mann

Title: AttorneyFor Daspin & Aument LLP

13

SuppA 65


IN WITNESS WHEREOF, the Parties have caused this Settlemen# Agreement to

be executed as of the dates set forth below.

ACCEPTED AND AGREED

Dated: October_, 2012

Dated: October ~, 2012

By:Semir D. Sirazi

By:Name:

Title:

For PE Chicago, LLC

Dated: October_, 2012 By:

Andrew Cherng

Da#ed: October,Y 2012 By:

Peggy Chemg, Ph.D.

Dated: October^, 2012 By: ~ ~..~~,.~A~-~-~ ~-~•+~? r-tile...

R Michael Wilkinson

Dated: October ~, 2012 By:

Name:

Title:

For Panda E~cpress, Inc., Panda Restaurant

Croup, Inc., Citadel Panda Express, Inc.

Dated: October ~, 20I2 By:

Name: Robert S. Grabemann

Title: AttorneyFor Daspin 8t Aument LLP

I3

SuppA 66


Dated: October ~ 201 By: ,~ G ~`'"''~Name• Christopher D. Dusseault

Title: AttorneyFox Gibson Dunn & Crutcher LLP

Dated: October ~ 2012 ByName• Joe MarconiTitle: Attorney

14

SuppA 67


1N 1~~ITN.ESS I~THEKLOP, ll~e Parties have caused this Settlenieilt r'~gcee~uent to

ve elecuted as of tl~e dates set foi~li belotiv.

ACCEPTED AND ~GREEll

Dated: October 23, ZU.I Z

Dated: ~ctober?3, ?012

Dafied: October T, 2012

Dated: October ̀ . 2012

Dated: October _, 2d12

Dated: Octobez ~, 2012

Dated: October2.3; 2012

Error: No property name supplied.

c ~ !~~

By:

Sen~ir D. Sirazir

73y: ~ ~ P

Nc1111G': ~Y.,I ~ ~ ~ ~~3Vf~Z,'~

Title: 1~'t,d~~'r46 ~.- --

For PE Clucaga, LLC

BSJ:

Andret~ Cherng

By:Peggy Chei7ig; PIi.D.

By:

R. Michael. Wilkinson

B}~:

I`~ame:

Title:

Far Panda Express, Inc., Yaitda Resiatuaizt

Grai~p, Inc., Citade Wanda Express, Lrac.

By: /V

Nance: IZobei~t S. Grabe~~a~m

Title: .~ttoi7ievFor Daspin & Aument LLP

13

SuppA 68


9

SuppA 69


o~ra,,,~o,n~~ase: 1:~8-cv-02345 Document#: 318 Filed: 04/25/12 Page 1 of 1 PagelD #:6740

United States District Caurt, Northern District of Illinois

Name of Asaigaed Jrdgeor Msgixtrate Judge

~a~ew F. Kennelly Shtix~ Jndge it Other~y~ A86igned Judge

CASE NUMBER 08 C 2345 DATE 4/25/2012

CASE Sirazi vs. Panda Express, et al

TITLE

M]f~It 1A`i~ RN iT?V 'ITi.Y'T

The judgment is entered as follows:on Counts 1, 2, 5, 6, and 8 of plaintiffs' first amended complaint, in favor of defendants PandaExpress, Inc., Panda Restaurant Group, Inc., and Citadel Panda Express, Inc. and against plaintiffsSemir Sirazi and PE Chicago, LLC;

on Count 7 of plaintiffs' first amended complaint, in favor afi plaintiff PE Chicago, LLC and againstdefendant Panda Express, Inc. in the amount of $5,144,000, and in favor of atl other defendants

~ [For further details see text below.]

STA'

and against plaintiff.

Docking m mau notices.

on Counts 3 and 4 of plaintiffs' first amended complaint, in favor of plaintiff Semir Sirazi and againstdefendants Panda Express, Inc.,-Panda Restaurant Group, Inc., Citadei Panda Express, Inc,,Andrew Chemg, and Peggy Chemg, jointly and severally, in the amount of $1,1~U,000 forcompensatory damages, and for punitive damages individually as follows: against PandaRestaurant Group, Inc. in the amount of $2,oao,000, against Andrew Cherng in the amount of$2,000,000, and against Peggy Chemg in the amount of $2,000,000.

on Counts 3 and 4 of plaintiffs' first amended complaint, in favor of all defendants and againstplaintiff PE Chicago, tLC.

on the counterclaim of defendant Panda Restaurant Group, lnc., in favor of defendant and againstplaintiff PE Chicago, Ll.0 i~a the 3maur~t of $858,327.08.

CowUnam Deputy ~ ORInitials:

08C234S Sirazi vs. Panda Express, et al Page 2 of 1

SuppA 70



EASTERN DIVISION

DR. FORTUNEE MASSUDA, an Illinois resident and citizen,

Plaintiff,

v.

PANDA EXPRESS, INC., a California cor-poration, PANDA RESTAURANT GROUP, INC. f/k/a PANDA MANAGEMENT COM-PANY, INC., a California corporation, CITADEL PANDA EXPRESS, INC., a Cali-fornia Corporation, ANDREW CHERNG, a California resident and citizen, and PEGGY CHERNG, a California resident and citizen.

Defendants.

Civil Action No. 12-CV-09683

Honorable Ronald A. Guzman

SUPPLEMENTAL MEMORANDUM IN SUPPORT OF DEFENDANTS’ MOTION TO DISMISS


SuppA 71


1

I. INTRODUCTION

Pursuant to this Court’s April 30, 2013 Minute Entry, ECF No. 46, Defendants respect-

fully submit this supplemental memorandum supporting the argument that PE Chicago has re-

leased all of its claims relating to the transaction at issue in this lawsuit. In Sirazi v. Panda Exp.,

Inc., No. 08-cv-02345, PE Chicago asserted each and every one of the claims that Plaintiff now

brings in this case. When PE Chicago settled the Sirazi case, it granted Defendants a broad and

sweeping release that encompassed those claims and more, extending to any and all “disputes,

claims, causes of action, [or] actions . . . arising from all matters, facts, events and circumstances

relating to the Rezko-Citadel Partnership.” Dusseault Decl. ¶ 2, Ex. A at 4–5 (emphasis added).

Each of the claims that Plaintiff now brings is derivative of PE Chicago’s claims, has been re-

leased, and must be dismissed. See Metro. Life Ins. v. Tremont Grp. Holdings, Inc., 2012 WL

6632681, at *8 (Del. Ch. Dec. 20, 2012) (claim is derivative where, as here, the injury alleged

“falls directly on the business entity as a whole and only secondarily on individual investors”).1

Plaintiff also argues that “Judge Kennelly previously ruled that PE Chicago could not as-

sert any of the claims that the Plaintiff is pursuing in this case.” ECF No. 38 at 8. This incom-

plete and misleading characterization of Judge Kennelly’s prior rulings does nothing to save

Plaintiff from dismissal of her claims here. Judge Kennelly did not rule that PE Chicago “could

not assert” these claims in the sense that it lacked standing or was attempting to assert a claim

that belonged to another party, such as Plaintiff. Judge Kennelly ruled that each claim failed on

its merits. Plaintiff has no more right to reassert PE Chicago’s meritless, released claims on a

derivative basis than she would have to reassert its meritorious, released claims on a derivative

1 Defendants would be entitled to dismissal even if PE Chicago had not settled and released its claims

for the additional, independent reasons set forth in the moving papers, including Plaintiff’s failure to make the statutorily required demand on PE Chicago and her failure to bring her claims within the applicable statute of limitations. See ECF No. 23 at 9–14.


SuppA 72


2

basis. See 19 Am. Jur. 2d Corporations § 1949 (“any bar to an action by the corporation is also a

bar to a derivative action by the stockholder.”).

II. ARGUMENT

A. PE Chicago Brought the Same Claims in Sirazi that Plaintiff brings here.

In its First Amended Complaint in the Sirazi action, PE Chicago asserted each and every

one of the six claims that Plaintiff now seeks to bring in this action: unjust enrichment (Count I),

fraud (Count II), conspiracy to defraud (Count III), aiding and abetting a breach of fiduciary duty

(Count IV), and violations of the Illinois Uniform Fraudulent Transfer Act (Counts V and VI).

Compare ECF No. 1, with Sirazi v. Panda Exp., No. 08-cv-02345, ECF No. 120. Indeed, the

factual bases for each claim are virtually identical, and Plaintiff’s factual allegations only serve

to highlight that she is bringing derivative claims that relate to the Rezko-Citadel partnership and

are based on harm allegedly done to PE Chicago:

Claims Asserted by Massuda and PE Chicago2

Basis for Claims Asserted by Massuda (all emphases added)

Basis for Claims Asserted by PE Chicago

Count I: Unjust Enrichment “Defendants took advantage of the circumstances that Tony Rezko was in with regard to his distressed financial situa-tion and extensive legal trou-bles to purchase PE Chicago’s interest in Rezko-Citadel at a price well below its fair val-ue.” (Compl. ¶ 39.)

“Panda Express took advantage of the circumstances that Tony Rezko was in with regard to his distressed financial situation and extensive legal troubles to purchase PE Chicago’s interest in Rezko-Citadel at a price well below its fair value.” (Compl. ¶ 48.)

Count II: Fraud “Plaintiff alleges that Defend-ants intentionally defrauded Dr. Massuda, PE Chicago and Enterprises out of the fair mar-ket value of PE Chicago’s 50% interest in the Rezko-

“Plaintiffs allege that Defend-ants intentionally defrauded Si-razi, PE Chicago and Enterpris-es out of the fair market value of PE Chicago’s 50% interest in the Rezko-Citadel partnership.”

2 In counts VII and VIII of its complaint, PE Chicago asserted claims for breach of contract and breach

of fiduciary duty that Plaintiff does not allege here. See Sirazi, ECF No. 120 at 28–30.


SuppA 73


3

Citadel partnership.” (Compl. ¶ 46.)

(Compl. ¶ 55.)

Count III: Conspiracy to Defraud

“At a time specifically un-known to Plaintiff, but on in-formation and belief around May of 2006, Defendants and Tony Rezko entered into an agreement and conspiracy to defraud PE Chicago and En-terprises, and those with inter-ests in PE Chicago and Enter-prises, of the fair value of their interest in the Rezko-Citadel partnership.” (Compl. ¶ 56.)

“At a time specifically unknown to Plaintiffs, but on information and belief around May-June of 2006, Defendants and Tony Rezko entered into an agree-ment and conspiracy to defraud PE Chicago and Enterprises, and -those with interests in PE Chicago and Enterprises, of the fair value of their interest in the Rezko-Citadel partnership.” (Compl. ¶ 65.)

Count IV: Aiding and Abet-ting a Breach of Fiduciary Duty

“Defendants knowingly partic-ipated, assisted in, and benefit-ed from, Tony Rezko’s breaches of his fiduciary du-ties.” (Compl. ¶ 68.)

“Defendants knowingly partici-pated, assisted in, and benefited from, Tony Rezko’s . . . breach-es of [his] fiduciary duties.” (Compl. ¶ 77.)

Count V: Violation of Illi-nois Uniform Fraudulent Transfer Act—Actual Fraud

“The transfer of PE Chicago’s 50% interest in Rezko-Citadel was made with the actual in-tent to delay, hinder, and/or defraud PE Chicago and PE Chicago’s and Enterprises’ creditors, including Dr. Mas-suda.” (Compl. ¶ 71.)

“The transfer of PE Chicago’s 50% interest in Rezko-Citadel was made with the actual intent to delay, hinder, and/or defraud PE Chicago and PE Chicago’s and Enterprises’ creditors, in-cluding Sirazi.” (Compl. ¶ 80.)

Count VI: Violation of Illi-nois Uniform Fraudulent Transfer Act—Constructive Fraud

“Panda Express did not pro-vide PE Chicago or Enterpris-es with a reasonably equivalent value, as defined in 740 ILCS 160/4(a), in exchange for the transfer of PE Chicago’s 50% interest in the Rezko-Citadel partnership.” (Compl. ¶ 87.)

“Panda Express did not provide PE Chicago or Enterprises with a reasonably equivalent value, as defined in 740 ILCS I60/4(a), in exchange for the transfer of PE Chicago’s 50% interest in the Rezko-Citadel partnership.” (Compl. ¶ 94.)

B. PE Chicago’s Release of Liability Encompasses the Claims Advanced by Plaintiff.

On October 19, 2012, PE Chicago entered into a General Release and Settlement Agree-

ment with Defendants resolving the Sirazi matter. Section A of the Recitals to the Settlement

Agreement identified the claims that PE Chicago had asserted in that matter: “unjust enrich-


SuppA 74


4

ment, fraud, civil conspiracy, breach of fiduciary duty, breach of contract, . . . and violations of

the Illinois Fraudulent Transfer Act . . . based upon the transfer of PE Chicago’s 50% interest in

the Rezko-Citadel Partnership in June 2006.” Dusseault Decl. ¶ 2, Ex. A at 1. In Section 2.1 of

the Settlement Agreement, PE Chicago “compromise[d] and settle[d]” each of these claims, and

“agree[d] that this Settlement Agreement shall constitute a bar to [its] making any Claims, in-

cluding filing of any other action related to or arising under the Rezko-Citadel Partnership at any

time or for any reason.” Id. at 3 (emphasis added). Further, in Section 4.1 of the Settlement

Agreement, PE Chicago agreed to “release, relieve, waive, relinquish and discharge Defendants”

from any and all “disputes, claims, causes of action, [or] actions . . . arising from all matters,

facts, events and circumstances relating to the Rezko-Citadel Partnership[.]” Id. at 4–5.

It is beyond dispute that the claims Plaintiff seeks to pursue in this action “relat[e] to” the

Rezko-Citadel Partnership. Indeed, Plaintiff refers to the Rezko-Citadel partnership 34 times in

her Complaint, and all of her claims are founded on the purchase of PE Chicago’s partnership

interest. Those claims fit squarely within the scope of the release granted by PE Chicago.3

C. Judge Kennelly’s Dismissal of PE Chicago’s Claims Is in No Way Inconsistent with Dismissal of the Derivative Claims Here.

1. The Court Rejected PE Chicago’s Claims on Their Merits, Not Because They Belonged to Another Party.

Plaintiff argues that she can re-litigate the very same claims that PE Chicago brought and

released in Sirazi because “Judge Kennelly previously ruled that PE Chicago could not assert any

of the claims that the Plaintiff is pursuing in this case.” ECF 38 at 8. Plaintiff is wrong. To the

extent she was hoping to create the misimpression that Judge Kennelly dismissed PE Chicago’s

3 That the release does not expressly reference investors is irrelevant. PE Chicago released its claims,

and an indirect investor like Plaintiff cannot bring PE Chicago’s released claims derivatively.


SuppA 75


5

claims for lack of standing or because those claims belonged to another party, such as Plaintiff,

her position is belied by Judge Kennelly’s actual holdings (which Plaintiff chose not to detail in

her papers). Judge Kennelly rejected PE Chicago’s claims on the merits:

Unjust Enrichment. Although the court denied summary judgment for defendants on PE

Chicago’s unjust enrichment claim, the court later granted judgment as a matter of law for de-

fendants on that claim. The court concluded there was “no evidence to support” PE Chicago’s

theory—repeated by Plaintiff here—that PE Chicago was somehow deprived of distributions it

was supposedly due. Sirazi, Trans. at 1390:2–1391:6 (attached as Exh. A); Compl. ¶ 41.4

Fraud. PE Chicago asserted two bases for its fraud claim against Defendants: first, “that

the defendants made false statements indicating that the price they were paying for PE Chicago’s

interest in Rezko-Citadel was a fair one,” Sirazi, ECF No. 228 at 9; and second, “that defendants

concealed the sale of PE Chicago’s interest in Rezko-Citadel,” id. at 10. The court rejected the

claim based on false statements about fair market value because “PE Chicago was equally a

partner in Rezko-Citadel and could have valued its interest” and “defendants did not owe PE

Chicago a fiduciary duty at the time of the sale.” Id. The court rejected the claim based on con-

cealment because PE Chicago “was a party to the transaction” and thus knew its terms. Id. at 12.

Conspiracy to Defraud. Because the court granted summary judgment on PE Chicago’s

fraud claim, it also granted summary judgment for Defendants on PE Chicago’s conspiracy to

defraud claim. See Sirazi, ECF No. 227; ECF No. 228 at 9, 21.

4 The Sirazi court rejected a separate theory of unjust enrichment—not asserted by or applicable to

Plaintiff in this case—“that Mr. Rezko . . . didn’t have the entitlement to sell the asset because he had no voting rights over Concessions because he had pledged them to the bank.” Sirazi, Trans. at 1391:7–11. The court concluded that that was not “an unjust enrichment claim that the plaintiffs in this case can make,” because that claim apparently belonged to the bank (if anyone). Id. at 1394:9–12.


SuppA 76


6

Aiding and Abetting a Breach of Fiduciary Duty. Judgment was entered for Defendants

on PE Chicago’s claim for aiding and abetting a breach of fiduciary duty. ECF No. 318. Alt-

hough the docket reflects no written order explaining the court’s reason for dismissing this claim,

there is no indication that it was for lack of standing or that Defendants sought dismissal on that

basis.

Fraudulent Transfer. The Sirazi court granted summary judgment for Defendants on PE

Chicago’s fraudulent transfer claims. The court “assum[ed] PE Chicago may bring an actual

fraudulent transfer claim,” but found that the “claim [was] time-barred.” Sirazi, ECF No. 228 at

28. PE Chicago had not “move[d] to amend the complaint to make its claim until July 22, 2010

and did not file the amended complaint until November 10, 2010”—more than four years after

“[t]he sale of PE Chicago’s interest occurred on June 1, 2006.” Id. PE Chicago’s constructive

fraudulent transfer claim was time-barred for the same reason. Id. at 29.

2. Judge Kennelly’s Rejection of PE Chicago’s Claims Does Not Mean that They Have Not Been Released Or that They Belong to Plaintiff.

To the extent Plaintiff is arguing that dismissal of PE Chicago’s claims on their merits

somehow entitles her to re-litigate those same claims derivatively, or that the expansive release

to which PE Chicago agreed cannot extend to dismissed claims, that argument is specious. See

ECF No. 38 at 8 (arguing that “Claims That Do Not ‘Exist’ To A Third-Party . . . Cannot Be Set-

tled By Said Third-Party,” and insisting that because PE Chicago’s claims were rejected “PE

Chicago could not release them to anyone”).

First, the fact that PE Chicago’s claims failed on their merits in the district court does not

mean that PE Chicago could not release them. PE Chicago was free to release these claims for

whatever they were worth—and explicitly did so in the Settlement Agreement, with the advice of

the same lawyers who represent Plaintiff here.


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7

Second, the Sirazi judgment had not become final at the time of the settlement, and PE

Chicago challenged the dismissal and sought reinstatement of its dismissed claims in a post-trial

motion pending at the time of settlement. Sirazi, ECF No. 344 at 10 (“Plaintiffs’ Unjust Enrich-

ment Claims Should Be Reinstated.”); id. at 13 (“All of PE Chicago’s Claims That Were Dis-

missed At Summary Judgment Should be Reinstated”); ECF No. 369 at 12 (“All of PE Chicago’s

Claims Should Be Reinstated”).

Third, the fact that PE Chicago’s claims failed does not give Plaintiff license to re-assert

those flawed claims derivatively. See 19 Am. Jur. 2d Corporations § 1949 (“The plaintiffs in a

derivative action are in no better or stronger position than the corporation itself would be had it

instituted the action, and any bar to an action by the corporation is also a bar to a derivative ac-

tion by the stockholder.”). PE Chicago’s claims—whether meritorious or meritless—have been

brought, settled, and released by PE Chicago, and Plaintiff cannot bring them once again here.

III. CONCLUSION

For the reasons set forth above and for the independent reasons set forth in Defendants’

moving papers, this Court should dismiss Plaintiff’s claims.

Respectfully submitted, PANDA EXPRESS, INC., PANDA RES-TAURANT GROUP, INC., CITADEL PANDA EXPRESS, INC., ANDREW CHERNG, and PEGGY CHERNG

Dated: May 14, 2013 By:___/s/ Christopher D. Dusseault____________ One of Their Attorneys

Michael Dockterman (IL Bar No. 3121675) Christopher D. Dusseault* William R. Lee (IL Bar No. 6280450) Theane Evangelis Kapur* Tanya H. Miari (IL Bar No. 6290224) GIBSON, DUNN & CRUTCHER LLP EDWARDS WILDMAN PALMER LLP 333 South Grand Avenue 225 West Wacker Drive, Suite 3000 Los Angeles, California 90071 Chicago, Illinois 60606 (213) 229-7000 (312) 201-2000 [email protected] * Admitted pro hac vice


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AM 20072905.1


I hereby certify that on May 14, 2013, I caused a copy of the foregoingSUPPLEMENTAL MEMORANDUM IN SUPPORT OF DEFENDANTS’ MOTION TODISMISS together with EXHIBIT A thereto to be filed with the Clerk of the Court for theUnited States District Court, Northern District of Illinois, using the CM/ECF system, which willsend notification of such filing to the all parties of record.

______/s/ Tanya H. Miari_____


SuppA 79


EXHIBIT A


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-1

2

3

IN THE UNITED STAlES DISTRICT COURT NORTHERN DISTRICT OF ILLINOIS

EASlERN DIVISION

4 SEMIR D. SIRAZI, et al. ,

5

6 vs.

Plaintiffs,

7 PANDA EXPRESS, INC., et al.,

8 Defendants.

9

Docket No. 08 C 2345

Chicago, Illinois April 16, 2012 9:00 a.m.

VOLUME 6 10 TRANSCRIPT OF PROCEEDINGS

1150

BEFORE THE HONORABLE MATTHEW F . KENNELLY AND A JURY 11

1 2 APPEARANCES:

13

14

15

16

For the Plaintiff: DASPIN & AUMENT BY: MR. ROBERT S. GRABEMANN

MR. TIMOTHY M. SCHAUM 227 West Monroe Street, Sui te 3500 Chi cago, III i noi s 60601

17 For the Defendant: JOHNSON & BELL, L TO .

18

19

20

21

22

23

24

25

BY: MR. JOSEPH R. MARCONI MR. VICTOR J. PIOLl

33 West Monroe Street, Sui te 2700 Chicago, Illinois 60603

LAURA M. BRENNAN - Official Court Reporter 219 South Dearborn Street - Room 2102

Chicallo, Illinois 60604 (312) 435-5785

1151

(The following proceedings were had out of the presence

2 and hearing of the jury:)

THE CLERK: 08 C 2345, 5irazi v. Panda Express.

4 THE COURT: Can I get the lawyers' appearances for

5 the record, please?

6

7

8 March.

MR. SCHAUM: Your Honor, Tim Schaum for plaintiffs.

MR. GRABEMANN: Robert Grabemann, also for plaintiffs

9 MR. MARCONI: Joe Marconi and Victor Pioli for the

10 defendants.

11 THE COURT: Okay. So what's next up in terms of

12 witnesses? We're going to --

1152

then there is like 20 minutes left of the tape.

2 THE COURT: Okay. In other words, interrupt the dep,

3 do him at 1 :30, go back to the dep.

MR. MARCONI: Yes, if that's okay with you. 4

5

6

7

8

THE COURT: I don't have a problem with that.

MR. GRABEMANN: And Mr. Valenti would still be first.

THE COURT: He's still first.

MR. MARCONI: He's first, and then we have a very

9 short, maybe a minute, minute and a half, of Davin that we

10 somehow forget to put in the first part. It's very short.

11 THE COURT: Okay. What dep of whom?

12 MR. MARCONI: Davin.

13 THE COURT: Oh, Davin. You're still doing Davin's

14 deposition? This is like the fourth try, or is it the third?

15 MR. GRABEMANN: And we have an objection to that.

16 THE COURT: Tell me what it is. I will just deal

17 with it now because we have a few minutes.

18

19

Augie, why don't you see if they're here.

MR. GRABEMANN: We had designations and

20 counterdesignations for Mr. Davin. We saw him last week. We

21 got this yesterday. They want to play another clip. You

22 know, everybody has had their shot with this, with him, and,

23 you know, we haven't had any chance to go in and counter to

24 what they seek --

25 THE COURT: Here is what I would suggest. What I

1153

would suggest is that --

2 I'm going to let them do it, okay. I mean, it's,

3 quote, unquote, their case. So what I would suggest is that

4 you go back in there over the lunch hour, see if there's

5 anything that you want to counterdesignate, and then we'll try

6 to do it all at once.

7 So aside from Mr. Valenti, Rezko's depOSition, this

8 little clip of Davin and the expert, what else is there?

9 That's it. So we are going to finish the evidence today, it

10 seem s like.

11 MR. PIOL!: Judge, we're going to put up the

12 affidavit of Mr. 5irazi, as I mentioned.

13 Do you have Mr. Valenti here, or no? 13 THE COURT: Just make sure you've gone over what

jl:: ~:~ ::~::~A:oN~e~reeS'g:~~: ~::::~:ei~h Mr. Valenti ::

16 first, and then you've got your jury expert. 16

17 MR. MARCONI: I think we're going to put the Rezko 17

you're going to do.

MR. GRABEMANN: Then we have--

THE COURT: You know, we had sort of put the pause

button on financial condition evidence, and I think we were

I 18 tape on. He didn't get in until this morning because of the 18 going to come back to that at some point in time. I don't

19 weather yesterday. So we're kind of -- 19 know if you have already gotten in what you need to. I mean,

20 THE COURT' Oh late in the day So he was flying in 20 there was something that came in another way, but just I 21 late when it was dOi~9 fU~ny stuff. . 21 remember about that. I 22 MR. MARCONI: Yes, in the afternoon. 22 MR. GRABEMANN: I think we're probably okay on that.

23 THE COURT: Yes, okay. 23 Then we have a rebuttal witness. I 24 MR. MARCONI: So we're going to put the Rezko tape on 24 THE COURT: Which is going to be whom?

iL'~2~5~~a~n~d~t~h~e~n~m~a~y~b~e~,_i_f_w~e~c~a_n~,_t~h_e~n_p~u_t_o_u __ r_e~x~p_e_r_t_a_t __ l_:_3_0~, __ a_n_d ______ ~_2=5=-~~~~ __ M_R_. __ G_R_A __ B_E_M __ A_N __ N_: ___ M_r_._G __ e_r_tz __ a_g~a_in~.~~~~~~-=~~~ Page 1150 to 1153 of 1195 04/16/201201:23:59 PM 1 of 12 sheets


SuppA 81


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1387

1 note.

2 THE COURT: Okay. So let me make sure I've got it.

'fo the bank was supposed to get paid out from the business.

' .. ' MR. SCHAUM: Yes.

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THE COURT: It wasn't. And, therefore, Mr. Sirazi

got stuck on -- or was it Mr. Sirazi that got stuck or one of

the entities that got stuck?

MR. SCHAUM: PE Chicago.

THE COURT: PE Chicago got stuck on the note.

MR. SCHAUM: Right.

THE COURT: The MB Financial note.

MR. SCHAUM: Right.

THE COURT: And then just remind me what ended up

happening -- what's the harm as a result of that? Who has to

pay what and how does it hurt --

MR. SCHAUM: We have to pay. We've got a note

against us for 825 when that debt should have been paid off,

years ago.

THE COURT: Okay. All right. And I'm not

disagreeing with you, but there's a lot of -- a lot of

evidence has come in, and there's evidence that Mr. Sirazi or

somebody on his behalf ended up having to pay the note.

MR. SCHAUM: They -- when MB foreclosed, Panda took

them out, and that's the judgment they have against us, for

that amount. } 1389

because you're not going to be able to go on to the next step

and say, and we then got sued for it and had to pay it,

because you asked me to keep that out of the case. So how is

the jury even going to understand this claim in this form?

MR. GRABEMANN: I've got another.

THE COURT: I want to do one point at a time. I

really do. I mean, it's important just in terms of organizing

the thinking on this.

So how do I get there? I mean, you're asking me to

instruct the jury on a claim that you really can't even

explain to them.

MR. MARCONI: The other part of it is -

THE COURT: I'm not to you yet on this.

MR. GRABEMANN: Well, I think also we talked about

the contract and the distributions, but as to Mr. Sirazi on

the unjust enrichment, what happened is, and I think the

evidence is clear, is Panda would lend money to Rezko, Panda

would lend money to Papa John's, and then Rezko, operating,

you know, these various entities, would stick the debt on PE

? .... J .. Chicago. So at the end of the day when the transaction

~'. occurred, $6 million is paid to Panda for loans it made to

22 Tony personally, loans it made to --

23 THE COURT: Respectfully, Mr. Grabemann, I want to

24 stick on what we're talking about here.

25 MR. GRABEMANN: All right. I was moving on to a new

1388

1 THE COURT: Got it. That's the counterclaim.

2 MR. SCHAUM: Right.

3 THE COURT: Ah.

4 MR. MARCONI: Which they --

5 THE COURT: Hang on a second. I'm just taking a

6 note.

7 Go ahead.

8 MR. MARCONI: Which they filed a motion in limine to

9 keep out of this case, and you granted.

10 MR. SCHAUM: Well, the exhibits are in.

11 THE COURT: Well, no, I understand that. No, what I

12 was asked to keep out of the case was the fact that you guys

13 got a judgment on it. But is there evidence in the case that

14 Mr. Sirazi -- there's not evidence in the case that Mr. Sirazi

15 got stuck on it because you did ask me to keep it out of the

16 case. So how would the jury be able to decide this claim?

17 MR. SCHAUM: Well, I think it goes to essentially

18 what should have gone to PE Chicago to get rid of that debt.

19 THE COURT: I understand that, but I just want to put

20 this in a more practical context. You're standing up there in

21 front of the jury. You're explaining the unjust enrichment

22 claim, or at least this part of it. And you're saying, okay,

23 here's what happened. You didn't get distributions. The bank

24 didn't get distributions. Therefore, PE Chicago got stuck on

25 the note. And then you're going to have to stop right there

1390

1 one. I'm sorry.

2 THE COURT: Basically the theory is, this part of the

3 unjust enrichment, the theory is no, it's not our contract,

4 it's not our partnership agreement, it's the contract with MB

5 Financial that -- and that we got, we being the plaintiffs in

6 the case, namely, PE Chicago --

7 MR. SCHAUM: Right.

8 THE COURT: -- not really Mr. Sirazi, but PE Chicago

9 got stuck on this note because Mr. Rezko didn't do what he was

10 supposed to do in distributing money. Okay.

11 So there is no evidence in the case that you got

12 stuck on the note. The evidence in the case is, and the only

13 evidence on this is that Panda Express paid the note. We

14 don't have anything about Panda Express sticking that to PE

15 Chicago because I was asked to keep it out of the case and

16 agreed with you.

17 MR. SCHAUM: Your Honor, hindsight is always 20/20,

18 but on the unjust enrichment, here's the issue: There is

19 evidence in the case that millions of dollars of distributions

20 each year went to payoff Panda's note and interest. I mean,

21 it's five million in interest. That email came in. If the

22 distributions had gone as they were supposed to, we would have

23 no debt with the bank and the members of Enterprises would be

24 paid according to their interest.

25 THE COURT: Okay. I don't think you can get an 04/16/201208.45.42 PM Page 1387 to 1390 of 1395 8 of 10 sheets


SuppA 82


1391

1 instruction on that part of your unjust enrichment theory

2 because there's no evidence to support it. What I mean by

"'",that is there's no evidence that Panda Express was unjustly

)enriched because the unjust enrichment consists of the fact

5 that they were able to put that note to you, and that's not in

- 6 the case at this point.

7 So let's move to the second theory. The second basis

8 for the unjust enrichment claim is that Mr. Rezko couldn't

9 sell the asset, he didn't have the entitlement to sell the

10 asset because he had no voting rights over Concessions because

11 he had pledged them to the bank. Okay. So let's assume --

12 and, I mean, I grant you that that is different from the other

13 theories. It's different from the other claims. So it's not

14 within the language of the Cleary case that it rises or falls

15 with the other claims. So let's sort of talk that through

16 where it gets you.

17 How does that mean that the defendants were unjustly

18 enriched? And I'm not disagreeing with you. I just want to

19 get the theory articulated here.

20 So if he couldn't sell the asset, that means what?

21 Basically this amounts to a rescission claim. Couldn't sell

22 it. Therefore, we have to unwind the sale. Everybody turns

23 back over whatever there was and so on. Right?

24. MR. SCHAUM: Yes.

;r,\ THE COURT: Okay. It's a rescission claim.

) 1393

1 is this your claim as opposed to somebody else's claim? You

2 still have to have standing. And so how does this end up

3 being the plaintiff's claim in this case?

4 MR. SCHAUM: Well, it is PE Chicago, and it is

5 Mr. Sirazi both have the unjust enrichment claim, so I think

6 and that's what -- PE Chicago has essentially pledged its

7 interest in violation of MB Financial's. So what happens is,

8 is Mr. Rezko acts ultra vires and sells it and gets his money.

9 MR. MARCONI: Ultra vires. I mean, he was running

10 the company. I don't understand how pledging the stock

11 prevents you from having the authority to act for the

12 corporation.

13 MR. SCHAUM: You can act for the corporation, but you

14 can't appear on the collateral, and he signed a resolution

15 under the -- it's a resolution of the corporation, thereby

16 terminating his rights to impair the collateral, the value of

17 the collateral, the stock.

18 MR. PIOLI: It makes the transaction voidable, not

19 VOid, and it would be up to the bank to assert their rights

2")" under that agreement to void the transaction, which they

~ idn't do. You heard Mr. Valenti. He got paid off. He was

22 happy. And that was the end of it. The bank relinquished its

23 rights at that point. So Mr. Sirazi doesn't have standing to

24 assert the bank's rights to come in and undo the transaction.

25 MR. SCHAUM: It wasn't just the bank's rights.

1392

1 All right. Let me hear your arguments on that one.

2 If it's a rescission claim, is it the kind of thing that the

3 jury would have to decide? Rescission is a form of equitable

4 relief.

5 MR. PIOLI: It's equitable remedy, Judge.

6 MR. MARCONI: But is that a remedy you can get under

7 unjust enrichment? I never heard of that.

8 THE COURT: I don't know.

9 MR. SCHAUM: Yeah, absolutely.

10 MR. MARCONI: The other thing is, Judge, they're

11 saying that he didn't have the authority. Who was running the

12 company?

13 THE COURT: I mean, I don't think they said he didn't

14 sell the asset. I think they're saying that he couldn't

15 properly sell the asset. I mean, all sorts of people do

16 things that they can't properly do. If that weren't the case,

17 Mr. Rezko would not have been appearing by video. Okay. He

18 did all sorts of things in other contexts that he couldn't

19 properly do.

20 In fact, we would all be out of a job, or at least I

21 would, half of my job.

22 MR. MARCONI: And isn't that the bank's claim? I

23 mean--

24 THE COURT: Well, so that's really the question, I

25 think. That to me is the question that comes to mind, is how

1394

1 Mr. Sirazi's interests were subordinate to the bank. He was

2 next in line. That's the pOint. Once the bank is paid off,

3 he comes --

4 MR. MARCONI: No. Panda was next in line.

5 MR. SCHAUM: No. Panda got paid off on its debt.

6 That was the whole --

7 MR. MARCONI: So it went to a creditor. I don't

8 understand the theory, Judge.

9 THE COURT: I don't think that's an unjust enrichment

10 claim that the plaintiffs in this case can make. So what this

11 amounts to is I'm granting the Rule 50 -- a Rule 50 motion on

12 the unjust enrichment claim.

13 So the case is going to go to the jury on three

14 claims. I'll have to do some renumbering and some rewording.

15 And I will get you a revised set of these things tonight.

16 What else does anybody need to talk about? And we're

17 really talking about now other than the thing I left open,

18 which is you hopefully giving me some other sort of a subset

19 list later tonight that these are the exhibits that we really

20 want in evidence and to go to the jury, those two things, in

21 my view, being coextensive. This is really a speak now or

22 forever hold your peace moment. So is there anything else?

23 MR. GRABEMANN: Then I'll speak, if I may. And this

24 goes back to Page 13 of the instruction.

25 THE COURT: Yes. Page 13. 9 of 10 sheets Page 1391 to 1394 of 1395 04/16/201208:45:42 PM


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MR. PIOLI: Thank you, Judge.

THE COURT: The exhibits will be available in

chambers for you tomorrow.

MR. SCHAUM: Okay.

(Which were all the proceedings had in the above-entitled

cause on the days and dates aforesaid.)

C E R T I F I C A T E

I hereby certify that the foregoing is a true and

correct transcript of the above-entitled matter.

/s/ Laura M. Brennan April 18, 2012

Laura M. BrennanOfficial Court Reporter DateNorthern District of Illinois


SuppA 84



EASTERN DIVISION

DR. FORTUNEE MASSUDA, an Illinois ) resident and citizen, ) ) Plaintiff, ) ) No. 12 CV 9683 v. ) ) PANDA EXPRESS, INC., a California ) Hon. Ronald A. Guzmán corporation, et al., ) ) Defendants. )

PLAINTIFF’S STATUS REPORT

Plaintiff wishes to inform the Court as to how she intends to proceed in the case

upon receiving the Court’s recent Memorandum Opinion. As to the remaining count of fraud,

which was dismissed without prejudice, Plaintiff respectfully intends to stand on the allegations

of the Complaint. Even though the parties are before the Court this Thursday, Plaintiff wanted as

a courtesy to inform the Court and opposing counsel of this decision immediately.

Respectfully submitted,

DR. FORTUNEE MASSUDA

Dated: July 23, 2013 By: /s/ Robert S. Grabemann One of Her Attorneys


SuppA 85


-2-

Robert S. Grabemann Timothy M. Schaum DASPIN & AUMENT, LLP 227 West Monroe Street Suite 3500 Chicago, Illinois 60606 (312) 258-1600


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-3-

CERTIFICATE OF SERVICE The undersigned, an attorney, hereby certifies that he caused a copy of the foregoing PLAINTIFF’S STATUS REPORT via electronic service, on the 23rd day of July, 2013 on: Michael Dockertman William R. Lee Tanya H. Miari EDWARDS WILDMAN PALMER LLP 225 West Wacker Drive Suite 3000 Chicago, Illinois 60606 (312) 201-2000 Christopher D. Dusseault Theane Evangelis Kapur GIBSON, DUNN & CRUTCHER LLP 333 South Grand Avenue Los Angeles, California 90071 (213) 229-7000

/s/ Robert S. Grabemann


SuppA 87


Documents

UNITED STATES COURT OF APPEALS FOR THE …online.wsj.com/public/resources/documents/panda.pdfunited states court of appeals for the seventh circuit ... 113 f.3d 706 (7th cir. 1997)