Summary
The Seventh Circuit considered whether Ryan Building Group, Inc. violated an Illinois citation to discover assets by calculating and paying former employee Thomas Lindstrom a severance amount based on stock options and debts owed to the company. The court held that the record raised material factual questions about whether the transaction frustrated restitution creditor David Venkus’s superior lien rights and remanded for an evidentiary hearing. The court also addressed, but did not fully resolve in the provided text, whether Illinois’s 15% wage-garnishment cap applies to severance payments.
Topics
Practice areas
Questions Presented
- Whether the record required an evidentiary hearing on whether RBG's calculation and payment of Lindstrom's purported severance transferred or otherwise frustrated the value of assets subject to Venkus's citation to discover assets.
- Whether a severance payment is subject to Illinois's 15 percent wage-garnishment cap under 735 ILCS 5/12-803, including whether the payment satisfies the statute's alleged periodicity requirement.
- Whether Venkus was entitled to attorney's fees if RBG is found to have violated the citation and is held in contempt.
Holdings
- The district court erred in denying Venkus's motion without further factual development because material questions remained regarding whether RBG's purported severance transaction transferred, retained, or otherwise frustrated Venkus's right to reach the value of Lindstrom's stock options under the citation.
- The court did not decide whether the payment was subject to the 15 percent cap. It remanded for the district court to address in the first instance whether the payment was wages under section 12-801 and, if so, whether section 12-803's cap applies to a one-time severance payment.
- The district court should consider attorney's fees if, on remand, it finds that RBG violated the citation.
Key quotations
“Section 2–1402(f)(1)’s “restraining provision” requires a third party under a citation “to freeze assets” of the judgment debtor that the citation entitles the judgment creditor to claim.” (at 10)
“The citation “requires that the party hold property which is subject to the reach of the judgment creditor in status quo until the judgment creditor’s rights can be determined.”” (at 10-11)
“The record needs further development of the facts and circumstances leading to RBG’s calculation of Lindstrom’s severance.” (at 16)
“For the reasons discussed, we REVERSE the decision of the district court and REMAND for an evidentiary hearing and any further discovery and proceedings the district court deems necessary.” (at 20)
Factual background
Thomas Lindstrom was ordered to pay David Venkus $13,776,518 in criminal restitution after pleading guilty to wire fraud that caused the collapse of Venkus's trading firm. Venkus served Lindstrom's employer, Ryan Building Group, Inc., with an Illinois citation to discover assets that created a lien and restrained transfers of Lindstrom's property controlled by RBG. After terminating Lindstrom for embezzlement, RBG paid him $73,090, calculated by assigning a hypothetical $445,633 value to stock options that had allegedly expired and offsetting that amount by $372,543 in debt Lindstrom owed RBG. RBG paid Venkus only 15 percent of the purported severance, and the record did not establish whether the payment was genuinely gratuitous or instead represented value owed to Lindstrom.
Procedural history
Venkus registered a $13,776,518 criminal restitution judgment against Thomas Lindstrom as a civil judgment and obtained a citation to discover assets against RBG under 735 ILCS 5/2-1402. After RBG terminated Lindstrom, calculated a purported severance payment using the value of expired stock options offset by Lindstrom's debt to RBG, and paid Venkus only 15 percent of the payment, Venkus moved for a finding of citation liability and attorney's fees. The Northern District of Illinois denied the motion without an evidentiary hearing. The Seventh Circuit reversed and remanded for an evidentiary hearing and any further discovery or proceedings necessary.
Remand instructions
The district court must hold an evidentiary hearing concerning the nature and circumstances of RBG's severance calculation and payment, determine whether RBG violated the citation, and address the section 12-801 and section 12-803 questions in the first instance. The district court may order further discovery or other proceedings as it deems necessary and should consider attorney's fees if it finds a citation violation.