Litigation Law Roundup

Sharp Thinking

No. 194     Perspectives on Developments in the Law from Sharp-Hundley, P.C.     March 2021

 Gratuitous Transfers Don’t Violate Citation Statute

Gratuitous transfers for the benefit of the judgment debtor by citation respondents during the pendency of a citation to discover assets do not violate the restraining provisions of the citation statute, a panel of the Appellate Court in Chicago has ruled.

Acting in Door Properties, LLC v. Nahlawi, 2020 IL App (1st) 173163, the court dealt with a situation in which citation respondents had paid the judgment debtor’s attorney fees during the pendency of the citation.  The judgment debtor and the citation respondents claimed the payments were gratuitous, but the judgment creditor pointed to testimony that the citation respondents “wanted to pay [judgment debtor] back” for paying their attorney fees in previous matters and for other support he allegedly had provided. The creditor claimed this was a debt to which the citation attached.

It said the citation statute “does not forbid gratuitous payments to benefit a judgment debtor.  It requires only that a third party [citation respondent] disclose, preserve, and turn over to a judgment creditor any property or assets in its possession that belong to the judgment debtor.”  It said a “gratuitous payment on the judgment debtor’s behalf, out of goodwill or love or familial obligation *** is not covered” by the restraint provisions of 735 ILCS 5/2-1402(f)(1).

Because the record did not show whether the alleged obligation to the judgment debtor was legally enforceable or just moral, the appellate panel sent the case back to the trial court for further proceedings.

Laches Bars Challenge To Defective “Et Al.” Summons

In a recent issue, we discussed the trend in the Second District of the Appellate Court to do away with the time-honored principle that a void judgment may be attacked by anyone at any time.  See Sharp Thinking No. 188 (September 2020).  That trend is continuing.

In Ocwen Loan Servicing, LLC v. DeGomez, 2020 IL App (2d) 190774, that court paid lip service to that principle and to the rule that an “et al.” summons is void (see generally Sharp Thinking No. 135 (October 2016)) but held that a petition under 735 ILCS 5/2-1401 should not be granted under the doctrine of laches.

Dealing with the summons at issue, the court said it “failed to name Trujillo on its face and thus *** was no summons at all” as to him.  However, it held “that laches bars [movant’s] claim for possession, use and occupancy . . . . Laches can preclude relief in an appropriate case where prejudice is demonstrated.”

In Ocwen, the movants did not deny that they had been served with the defective summons.  However, they waited more than eight years before seeking to vacate the resulting default judgment.   In the interim, the property had been sold at a sheriff’s sale and re-sold to the eventual owners.  Even though the defect in the summons was apparent from the court file, the court held laches to apply. 

New 7th Circuit Rules On Standing Continue Apace

In Sharp Thinking No. 192 (January 2021), we noted the several contexts in which the Seventh Circuit’s beefed-up standing rules were to be applied.  In Nettles v. Midland Funding LLC, 983 F.3d 896 (7th Cir. 2020), the court added another context: the appellate one.

In Nettles, the parties dealt mostly with whether the plaintiff’s case under the Fair Debt Collection Practices Act (15 U.S.C. § 1692 et seq.) (FDCPA) had to be arbitrated.  However, the Seventh Circuit on appeal ordered the case remanded with instructions to dismiss.

Although “in the district court, no one addressed whether Nettles adequately pleaded an injury traceable to the alleged FDCPA violations”, “Article III standing is jurisdictional and cannot be waived,” the appeals court said.   Moreover, dealing with an action for statutory damages created by that act, the court said “Article III standing requires a concrete injury even in the context of a statutory violation.”

“Nettles alleges that Midland violated [15 U.S.C. § 1692e and 15 U.S.C. § 1692f] when it over-stated the amount of her debt in its collection letter,” the court noted.  “But her complaint does not allege that the statutory violations harmed her in any way or created any appreciable risk of harm to her.”  Compare Smith v. GC Services L.P., 986 F.3d 708 (7th Cir. 2021).

Then in Thornley v. Clearview AI, Inc., 984 F.3d 1241 (7th Cir. 2021), the court applied those new standing rules in a new substantive context: an action under Illinois’ Biometric Information Privacy Act, 740 ILCS 14 (BIPA).  In Thornley, the court relied upon FDCPA cases to hold that the BIPA plaintiffs “did not present a case that lies within the boundaries set by Article III.”  It said they “have described only a general, regulatory violation, not something that is particularized to them and concrete.”  It implied that the complaint at issue might stand muster if brought in state court.

And in Gracia v. SigmaTron International, Inc., 986 F.3d 1058 (7th Cir. 2021), it applied standing doctrine in a Title VII context.

High Court Grants PLA In Void Judgment Challenge Case

In a recent issue, and on page 1 of this issue, we noted the trend in the Appellate Court’s Second District to limit the historic rule that a void judgment may be attacked at any time. See Sharp Thinking No. 188 (September 2020).  Now it appears that the Supreme Court is going to review that trend.  Recently the high court granted a petition for leave to appeal in PNC Bank, N.A. v. Kusmierz, 2020 IL App (2d) 190521, a key part of that trend.  The appeal has been docketed at No. 126606.