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Illinois Bankruptcy Court – No Thumb Rule, Allegations in Each Case Must be Carefully Examined to Determine Whether Fed. R. Civ. P. 15(c) Permits “Relation Back”

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January 22, 2021, Northern District of Illinois - Ronald Peterson filed an adversary complaint as trustee of two Debtors, Mack Industries, Ltd. ("Mack") and Oak Park Avenue Realty, Inc. ("Oak Park"), against Defendants Iryna Chakanava and Stanislav Taynitskiy. Subsequently, the Trustee filed an amended complaint alleging completely new transfers and the Defendants moved to dismiss based on the statute of limitations.

The Defendants argued that the original complaint identified only four transfers totaling $11,000 but the amended complaint identified 35 new transfers totaling $107,000. They contended that the new transfers were barred by the statute of limitations because the Trustee did not seek to avoid them before the two-year limitations period in 11 U.S.C. § 546(a). The Trustee responded that a statute of limitations defense cannot be resolved on a motion to dismiss and that the amended complaint "relates back" to the original complaint, under Rule 15(c). The Trustee further contended that the original complaint alleged that the Trustee intended to avoid all transfers within 10 years of the petition date and that the new transactions were part of the common course of conduct alleged in the original complaint.

The Court found in favor of the Trustee and dismissed Defendant's motion to dismiss because Defendant did not respond adequately. The Court held that there is no bright-line test or easy rule of thumb; the allegations in each case must be carefully examined to determine whether Rule 15(c) permits “relation back”.

In the case at bar, the Defendants did not file a reply brief. They could have made various arguments based on many cases the court discussed, but they did not. Moreover, the Trustee's argument that the new transactions "relate back" because they were a part of the fraudulent scheme (as alleged in the original complaint) was unchallenged.

The Court denied Defendant's motion to dismiss.

Peterson v. Chakanava (In re Mack Indus.), Nos. 17 B 09308, 19 A 00202, 2021 Bankr. LEXIS 114 (Bankr. N.D. Ill. Jan. 19, 2021)

 

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