Panos Trading LLC v. Forrer

2023 IL App (1st) 220451

218 N.E.3d 505

467 Ill.Dec. 170

PANOS TRADING LLC, Plaintiff,

v.Richardo FORRER, Joseph Hayes, and Jacques Fernandes, Defendants-Appellees

(Louis Panos, Third-Party Respondent-Appellant).

No. 1-22-0451

Appellate Court of Illinois, First District, THIRD DIVISION.

Filed March 29, 2023

Andrew R. Schwartz, of Schwartz & Kanyock, LLC, of Chicago, for appellant.

Charles J. Risch and Katelyn M. Hodgman, of Lawrence Kamin LLC, of Chicago, for appellees.

JUSTICE REYES delivered the judgment of the court, with opinion.

¶ 1 Richardo Forrer, Joseph Hayes, and Jacques Fernandes (collectively, the Forrer Group) are former members of Panos Trading LLC (Panos Trading), an Illinois limited liability company that was engaged in the proprietary trading of financial instruments. After a dispute regarding the division of profits, the Forrer Group obtained an arbitration award of $1.295 million against Panos Trading, and the circuit court of Cook County confirmed the arbitration award in 2012. During citation proceedings, the Forrer Group discovered that Panos Trading was unable to fully satisfy the judgment. The Forrer Group filed a petition under the Illinois Uniform Fraudulent Transfer Act (UFTA) ( 740 ILCS 160/1 et seq. (West 2012)) to recover amounts that had been transferred previously by Panos Trading to its manager and member, Louis Panos (Louis). Following extensive litigation—including a prior appeal to this court—the circuit court concluded that the amount owed on the judgment against Panos Trading, plus accrued interest, was approximately $956,000 as of February 28, 2022. To satisfy this obligation, the circuit court avoided and reversed 10 transfers from Panos Trading to Louis that had occurred between 2009 and 2011.

¶ 2 Louis advances three primary arguments on appeal. He initially contends that the circuit court erred in failing to dismiss the UFTA petition after the underlying judgment became dormant under Illinois law. He next asserts that the circuit court did not comply with this court's remand instructions in its earlier decision by failing to consider evidence of Panos Trading's liquidity. Finally, Louis argues that the circuit court erred in its calculation of postjudgment interest by failing to terminate such interest when the Forrer Group purportedly refused Louis's tender of payment in 2017. For the reasons discussed below, we reject the foregoing contentions and affirm the judgment of the circuit court.

¶ 3 BACKGROUND

¶ 4 Arbitration Proceedings

¶ 5 Panos Trading was an exchange trading permit holder on the Chicago Board Options Exchange (CBOE), a self-regulating organization. The Class B members of Panos Trading included the Forrer Group; Louis was the sole Class A member.

¶ 6 A dispute regarding the division of profits arose between the Forrer Group and Panos Trading in 2008. After unsuccessful negotiations, the Forrer Group initiated an arbitration proceeding before the CBOE against Panos Trading and Louis, alleging breach of contract and other claims. In late 2011, the arbitration panel partially granted the Forrer Group's request for compensatory damages against Panos Trading (but not Louis) in the amount of $1,295,001.

¶ 7 Panos Trading filed a petition to vacate the arbitration award in the circuit court of Cook County, alleging that the CBOE did not disclose certain potential conflicts of interest of the chairman of the arbitration panel; the petition ultimately was denied. The Forrer Group filed a counterpetition to confirm the arbitration award. In an order entered on April 5, 2012, the circuit court confirmed the arbitration award and entered judgment in the amount of $1,295,001.

¶ 8 Citation Proceedings and UFTA Petition

¶ 9 During a citation examination, Louis testified that Panos Trading could not satisfy the judgment. Panos Trading apparently had ceased operations and was generating minimal income. After recovering against various accounts through citation proceedings, the balance owed to the Forrer Group was approximately $882,000 as of November 2012.

¶ 10 In December 2012, the Forrer Group filed a petition to recover funds from Louis and from Craig Callahan¹ —a class B member of Panos Trading—pursuant to the UFTA, a statutory scheme that provides creditors with remedies when a debtor transfers assets that would otherwise be available to satisfy indebtedness. The UFTA petition alleged that bank statements, tax returns, and other documents revealed that Panos Trading had transferred more than $9 million in cash collectively to Louis and Callahan from 2008 to 2011. According to the Forrer Group, the transfers were fraudulent under sections 5 and 6 of the UFTA, which address actual and constructive fraud.²

¶ 11 Louis filed a motion to dismiss the UFTA petition pursuant to section 2-619.1 of the Code of Civil Procedure (Code) ( 735 ILCS 5/2-619.1 (West 2012) ). He argued that the Panos Trading limited liability company agreement (LLC agreement) and the Illinois Limited Liability Company Act (LLC Act) ( 805 ILCS 180/1-1 et seq. (West 2012)) barred the Forrer Group from pursuing claims against him individually. Louis also asserted that the petition failed to state a claim under section 6 of the UFTA ( 740 ILCS 160/6 (West 2012) ). Louis maintained that the Forrer Group were not creditors of Panos Trading before the transfers—and Panos Trading was not insolvent at the time of the transfers—as is required for avoidance under section 6.

¶ 12 The Forrer Group responded, in part, that the LLC agreement and the LLC Act were not relevant, as Louis was not being held personally liable in his capacity as a member of Panos Trading but rather as a recipient of fraudulent transfers that rendered Panos Trading unable to pay the amounts owed to the Forrer Group.

¶ 13 In an order entered in October 2013, the circuit court denied most of the relief requested in Louis's motion to dismiss. The circuit court, however, dismissed the Forrer Group's claims under section 6 of the UFTA as to transfers that occurred prior to November 3, 2019, i.e. , the date that the CBOE arbitration was initiated. The circuit court reasoned that the respondents were not "creditors" before that date, as is required by the UFTA.

¶ 14 After filing an answer to the complaint and affirmative defenses, Louis filed a motion for summary judgment under section 2-1005 of the Code ( 735 ILCS 5/2-1005 (West 2014) ). Louis advanced multiple arguments as to the remaining claims, including that (a) the Forrer Group were not creditors of Panos Trading, (b) Panos Trading was not insolvent at the time of the transfers, and (c) even if the Forrer Group were considered "creditors," there was no actual intent to defraud any creditors of Panos Trading. He noted that Panos Trading satisfied the minimum capital requirements of the CBOE and the United States. Securities and Exchange Commission and was never barred from trading. Alternatively, Louis asserted that the LLC agreement limited his liability to his current capital contribution, i.e. , $239,389 at the time of the arbitration award.

¶ 15 In a cross-motion for summary judgment, the Forrer Group argued that their claim arose before the challenged transfers, the transfers were capital distributions for which no reasonably equivalent value was received, and Panos Trading was insolvent at the time of the transfers.

¶ 16 The circuit court entered a memorandum decision in December 2015, which denied Louis's motion for summary judgment and granted the Forrer Group's motion as to the UFTA section 6(a) claims against Louis (and Callahan). The Forrer Group then filed a motion for entry of a money judgment that effectively requested the reversal of all transfers made between mid-2010 and October 17, 2011. Louis filed a combined opposition to the motion and a motion for reconsideration of the memorandum decision. The circuit court granted the Forrer Group's motion for entry of a money judgment and denied Louis's request for reconsideration.

¶ 17 Appellate Court Decision

¶ 18 Louis and Callahan filed timely appeals to this court, which were consolidated. In a Rule 23 order filed on June 29, 2017 ( Panos Trading, LLC v. Forrer , 2017 IL App (1st) 161460-U, 2017 WL 2855571 ; Ill. S. Ct. R. 23(b) (eff. July 1, 2011)), this court addressed Louis's contention that the circuit court applied the incorrect insolvency standard to determine which transfers could be reversed to satisfy Panos Trading's debt. Louis had argued that the LLC Act provides an "accounting book" insolvency test—i.e. , an examination of the company's balance sheets—which differed from the UFTA insolvency standard. In rejecting this contention, this court observed that it is "well settled law" that a UFTA petitioner is not required to demonstrate accounting book insolvency and that insolvency for purposes of a UFTA claim means that a debtor has not retained sufficient assets after a transfer to discharge its obligations to its creditors.

¶ 19 This court also rejected Louis's arguments that the Forrer Group were not creditors, that the UFTA petition was untimely, and that any judgment should be capped at his capital contribution amount at the time of the arbitration award. This court further found that Louis had waived any challenge to the collection of postjudgment interest, as his appellate arguments were neither clear nor supported by authority, in violation of Illinois Supreme Court Rule 341(h)(7) (eff. July 1, 2008).

¶ 20 Callahan had joined in Louis's arguments but raised additional challenges, one of which this court determined to be potentially meritorious. Specifically, Callahan asserted that a $350,000 transfer he received on September 29, 2011, was not a capital distribution but was instead the repayment of a short-term loan he had made so Panos Trading could meet a margin call. This court found that the record presented a factual dispute as to the proper characterization of the $350,000 transaction and whether the source of the funds...