1ST Class Legal (I.S.), Ltd. v. Niro, et al.

Northern District of Illinois, ilnd-1:2016-cv-06793

ANSWER to counterclaim by 1st Class Legal (I.S.), Ltd.

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Case: 1:16-cv-06793 Document #: 14 Filed: 10/11/16 Page 1 of 11 PageID #:88 MARC S. MAZER WEILL & MAZER, A Professional Corporation 90 New Montgomery Street Suite 1400 San Francisco, CA 94507 Tele: 415 421 0730 STEVE VARHOLA LYMAN LAW FIRM 227 West Monroe Street, Suite 2650 Chicago, Illinois 60606 Telephone: (312) 762-9517 Attorneys for Plaintiff and Counter Defendant 1ST CLASS LEGAL (I.S.), LTD. UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION 1ST CLASS LEGAL (I.S.), LTD., a foreign) Case No.: 16-cv-06793 corporation,)) ANSWER TO COUNTERCLAIM; Plaintiffs,) and JURY DEMAND) v.)) RAYMOND NIRO, individually and doing) business as NIRO, HALLER & NIRO, an) Illinois Law Partnership, NIRO LAW,) LTD., an Illinois Corporation, formerly) known as NIRO, HALLER & NIRO, LTD.,) Honorable Robert M. Dow, Jr.) Defendants.) ____________________________________) and related Counter Claim)))) ANSWER BY COUNTERCLAIM DEFENDANT 1ST CLASS LEGAL (I.S.) LTD. TO DEFENDANT NIRO LAW, LTD.'S COUNTERCLAIM Counterclaim Defendant 1st Class Legal (I.S.), Ltd. (hereinafter "1CL") hereby provides the following Answers and Affirmative Defenses to Niro Law, Ltd.'s (hereinafter "Niro Law") Counterclaim. ANSWER TO COUNTER CLAIM AND JURY DEMAND CASE NO. 1:16-cv-06793 1 Case: 1:16-cv-06793 Document #: 14 Filed: 10/11/16 Page 2 of 11 PageID #:89 1. Counterclaim-Defendant, 1st Class Legal (L.S.), Ltd. ("1CL") is alleged to be a corporation formed and organized under the laws of the United Kingdom and has a registered office at Oak House Sitka Drive, Shrewsbury Business Park, Shrewsbury, Shropshire, SY2 6LG. ANSWER: 1CL lacks knowledge or information sufficient to form a belief about the entity identified in this paragraph as "1st Class Legal (L.S.), Ltd." for lack of knowledge thereof on that ground denies the same. However, assuming that Counterclaim Plaintiff intended to refer to 1st Class Legal (I.S.), Ltd. the reference to 1CL will hereafter refer to said entity and in reliance thereon, 1CL admits all other allegations in this paragraph. Except that in the United Kingdom, entities are not generally referred to as corporations as the term is used in the United States but, rather the equivalent is referred to as a limited company in the United Kingdom. 2. 1CL has transacted business in this judicial district by negotiating and entering the Master Loan Agreement and the Case Specific Loan Agreements in this judicial district. ANSWER: 1CL admits the allegations in this paragraph. 3. Counterclaim-Plaintiff, Niro Law, Ltd. ("Niro Law"), formerly known as Niro, Haller & Niro, Ltd. ("NHN") is, and at all times has been, an Illinois corporation. Niro Law and NHN have a place of business at 181 West Madison Street, Suite 4600, Chicago, Illinois 60602. For purposes of these counterclaims, the term "Niro Law" refers to both Niro Law and NHN. ANSWER: 1CL neither admits nor denies the allegations in this paragraph for lack of knowledge thereof and on those grounds denies the same. 4. This Court has subject matter jurisdiction over this case pursuant to 28 U.S.C. § 1332(a)(2) since 1CL is both incorporated and has its principal place of business in a foreign state, and Niro Law is both incorporated and has its principal place of business in Illinois. Therefore, there is complete diversity of citizenship between 1CL and Niro Law, and the amount in controversy exceeds $75,000 exclusive of interest and costs. ANSWER: 1CL admits the allegations in this paragraph. 5. Venue in this District is proper pursuant to 28 U.S.C. § 1391 in that a substantial part of the events or omissions giving rise to the claims and counterclaims occurred in this judicial district. ANSWER TO COUNTERCLAIM AND JURY DEMAND CASE NO. 1:16-cv-06793 2 Case: 1:16-cv-06793 Document #: 14 Filed: 10/11/16 Page 3 of 11 PageID #:90 ANSWER: 1CL admits the allegations in this paragraph. 6. On or about December 15, 2011, 1CL and Niro Law entered into a Master Loan Agreement ("Master Loan Agreement") (attached as Exhibit A to the Complaint, Doc. No. 1). ANSWER: 1CL neither admits nor denies the allegations contained in this paragraph on the grounds that it lacks information and on those grounds denies same. The Master Loan Agreement does not mention or reference "Niro Law, Ltd." or any other corporation as being the borrower. The law firm of attorneys known as Niro Haller & Niro was the party to the Master Loan Agreement. 1CL alleges that it was led to believe that Niro Haller & Niro was a general partnership. Niro Law, Ltd. is named as a party to this lawsuit only because it claims to be a party to the Master Loan Agreement so, therefore, it along with the general partnership of Niro Haller & Niro would be liable for the obligations under said agreement. 7. The Master Loan Agreement recognizes that Niro Law (then known as Niro, Haller & Niro, Ltd.) is a corporation: 22.1 The Borrower [defined as "the firm of attorneys known as Niro, Haller & Niro with offices at 181 West Madison Street, Suite 4600, Chicago, Illinois, 60602-4515, United States of America"] is duly incorporated under the laws of the state in which it is incorporated. *** 23.2 All necessary corporate, shareholder or other action has been taken to authorize (sic) the execution, delivery and performance of the Finance Documents. ANSWER: 1CL admits that it is a party to the Master Loan Agreement and denies all other allegations in this paragraph. 8. Pursuant to the Master Loan Agreement, 1CL was required to make available to Niro Law certain amounts specified in three separate case specific loan agreements: 9. The Lender shall make available to the Borrower the Loan detailed in the CSLA upon and subject to the terms and conditions of this Agreement and as detailed in the CSLA for the exclusive purpose of assisting the Borrower to defray the costs as detailed in clause 10 below. ANSWER: 1CL denies the allegations in this paragraph. 9. 1CL is in the business of providing non-recourse loans to attorneys who have significant monetary claims for advancing a certain sum of money in consideration of the attorneys agreeing to pay back the loans from a portion of the contingency fees received in the ANSWER TO COUNTER CLAIM AND JURY DEMAND CASE NO. 1:16-cv-06793 3 Case: 1:16-cv-06793 Document #: 14 Filed: 10/11/16 Page 4 of 11 PageID #:91 litigation. The loans are structured such that if there was no recovery in the litigation, the attorneys would be under no obligation to repay the funding and there would be no recourse. 1CL represents itself to be a sophisticated litigation funding company with extensive experience in funding litigation around the world. ANSWER: 1CL admits that it represents itself to be a litigation funding company with extensive experience in funding litigation and denies all other allegations in this paragraph. 10. A Case Specific Loan Agreement was entered between Niro Law and 1CL in or about December 2011 pertaining to Niro Law's client Oplus Technologies Corporation ("the Oplus CSLA"). The Oplus CSLA is attached as Exhibit 1. ANSWER: 1CL admits that a copy of a case specific loan agreement with 1CL pertaining to Oplus Technologies Corporation is part of the Exhibit 1 attached to Counterclaim and denies all other allegations in the paragraph. 11. The Oplus CSLA specified that the total facility distribution and payment schedule was set forth in an attached budget which formed part of and should be read in conjunction with the Oplus CSLA. Pursuant to the budget attached to the Oplus CSLA, the total funding required by 1CL to be paid to Niro Law was $40,000 per month from December 2011 through December 2013, for a total of $1 million. ANSWER: 1CL admits that the Oplus CSLA is part of Exhibit 1 attached to the Counterclaim and denies all other allegations in this paragraph. 12. Niro Law submitted drawdown requests to 1CL on a periodic or monthly basis. ANSWER: 1CL denies the allegations in this paragraph. 13. 1CL paid the drawdown requests submitted by Niro Law for a period of time, but did not fulfill the entire obligation under the Oplus CSLA, and fell hundreds of thousands of dollars short of its funding commitment, despite Niro Law's repeated submission of drawdown requests. ANSWER: 1CL denies the allegations in this paragraph. 14. Throughout the course of the Oplus representation, Niro Law provided 1CL with periodic formal status reports regarding the Oplus cases, and performed all of its other contractual obligations. ANSWER: 1CL denies the allegations in this paragraph. ANSWER TO COUNTERCLAIM AND JURY DEMAND CASE NO. 1:16-cv-06793 4 Case: 1:16-cv-06793 Document #: 14 Filed: 10/11/16 Page 5 of 11 PageID #:92 15. Throughout the course of the Oplus representation, Niro Law ANSWERed questions 1CL had with respect to the litigation. ANSWER: 1CL denies the allegations in this paragraph. 16. A separate Case Specific Loan Agreement was entered between Niro Law and 1CL in or about December 2011 pertaining to Niro Law's client Cascades Computer Innovation, LLC ("the Cascades CSLA"). The Cascades CSLA is attached as Exhibit 2. ANSWER: 1CL admits that a copy of a case specific loan agreement with 1CL pertaining to Cascades Computer Innovation, LLC is part of the Exhibit 2 attached to the Counterclaim and denies all other allegations in this paragraph. 17. The Cascades CSLA specified that the total facility distribution and payment schedule was set forth in an attached budget which formed part of and should be read in conjunction with the Cascades CSLA. Pursuant to the budget attached to the Cascades CSLA, the funding required by 1CL to pay to Niro Law was $140,000 per month from December 2011 through April 2012, and $40,000 per month from May 2012 through December 2013, for a total of $1,500,000. ANSWER: 1CL admits that a copy of a case specific loan agreement with 1CL pertaining to Cascades Computer Innovation, LLC is part of the Exhibit 2 attached to the Counterclaim and denies all other allegations in this paragraph. 18. Niro Law submitted drawdown requests to 1CL on a periodic or monthly basis. ANSWER: Deny the allegations in this paragraph. 19. 1CL paid the drawdown requests submitted by Niro Law for a period of time, but did not fulfill the entire obligation under the Cascades CSLA, and fell hundreds of thousands of dollars short of its funding commitment, despite Niro Law's repeated submission of drawdown requests. ANSWER: 1CL deniesthe allegations in this paragraph. 20. Throughout the course of the Cascades representation, Niro Law provided 1CL with periodic formal status reports regarding the Cascades cases, and performed all of its other contractual obligations. ANSWER: 1CL denies the allegations in this paragraph. 21. Throughout the course of the Cascades representation, Niro Law ANSWERed ANSWER TO COUNTER CLAIM AND JURY DEMAND CASE NO. 1:16-cv-06793 5 Case: 1:16-cv-06793 Document #: 14 Filed: 10/11/16 Page 6 of 11 PageID #:93 questions 1CL had with respect to the litigation. ANSWER: 1CL denies the allegations of this paragraph. 22. A separate Case Specific Loan Agreement was entered between Niro Law and 1CL in or about April 2012 pertaining to Niro Law's client 21srl. Pursuant to the 21srl CSLA, 1CL was to advance to Niro Law a total amount of $1,500,000. The 21srl CSLA is attached as Exhibit 3. ANSWER: 1CL admits that a copy of a case specific loan agreement with 1CL pertaining to 21 srl is part of the Exhibit 3 attached to the Counterclaim and denies all other allegations in this paragraph. 23. The 21srl specified that the total facility distribution and payment schedule was set forth in an attached budget which formed part of and should be read in conjunction with the 21srl CSLA. Pursuant to the writings attached to the 21srl CSLA, the total funding required 1CL to pay to Niro Law was $60,000 per month from April 2012 through April 2014 for a total of $1,500,000. ANSWER: 1CL neither admits nor deniesthe allegations of the first sentence in this Paragraph for lack of knowledge thereof and on that ground denies the same, but deniesall other allegations in this paragraph. 24. Niro Law submitted drawdown requests to 1CL on a periodic or monthly basis. ANSWER: 1CL denies the allegations in this paragraph. 25. 1CL paid the drawdown request submitted by Niro Law for a period of time, but did not fulfill the entire obligation under the 21srl CSLA, and fell hundreds of thousands of dollars short of its funding commitment, despite Niro Law's repeated submission of drawdown requests. ANSWER: 1CL denies the allegations in this paragraph. 26. Throughout the course of the 21srl representation, Niro Law provided 1CL with periodic formal status reports regarding the 21srl cases, and performed all of its other contractual obligations. ANSWER: 1CL denies the allegations of this paragraph. 27. Throughout the course of the 21srl representation, Niro Law ANSWERed questions 1CL had with respect to the litigation. ANSWER TO COUNTERCLAIM AND JURY DEMAND CASE NO. 1:16-cv-06793 6 Case: 1:16-cv-06793 Document #: 14 Filed: 10/11/16 Page 7 of 11 PageID #:94 ANSWER: 1CL denies the allegations of this paragraph. 28. On December 23, 2013, Niro Law sent an email to Robert Gordon ("Gordon"), the managing director of 1CL, stating: "We have settled a Cascades case with Hynix for $1.6 million and will use First Class' $160,000 payment to reduce the $400,000 due April-December down to $240,000." The reference to $400,000 was to the amount then owed to Niro Law by 1CL on Cascades that 1CL had failed to pay. ANSWER: 1CL neither admits nor denies the allegations in this paragraph for lack of knowledge thereof and on that ground denies the same. 29. Gordon responded on December 23, 2013, "Well done on the settlement and I note this will reduce sums due as stated." Further, Gordon stated that "[y]ou will be getting a substantial transfer in the morning…" No such transfer was ever made. ANSWER: 1CL neither admits nor denies the allegations in this paragraph for lack of knowledge thereof and on that ground denies the same. 30. Counterclaim-Defendant re-alleges and incorporates Paragraphs 1 through 29 of this Counterclaim as though fully set forth herein. ANSWER: 1CL restates and realleges and incorporates by reference each of its answers to Paragraphs 1 through 29 of the Counterclaim as for its answer to Paragraph 30, as though fully set forth herein. 31. The Master Loan Agreement, in conjunction with the three CSLAs, constituted a valid and binding contract. ANSWER: 1CL admits that the Master Loan Agreement and the three Case Specific Loan Agreements are valid and binding contracts and denies all other allegations in this paragraph. 32. Niro performed all of its contractual obligations under the Master Loan Agreement and the CSLAs. 1CL failed to make all payments when due and, in fact, ceased making any payments in connection with drawdown requests for March 2013 and beyond. ANSWER: 1CL denies the allegations in this paragraph. 33. The amount owed to Niro Law under the Master Loan Agreement (including the CSLAs) is in excess of $1 million. ANSWER TO COUNTER CLAIM AND JURY DEMAND CASE NO. 1:16-cv-06793 7 Case: 1:16-cv-06793 Document #: 14 Filed: 10/11/16 Page 8 of 11 PageID #:95 ANSWER: 1CL denies the allegations in this paragraph. 34. 1CL has breached the Master Loan Agreement, the Cascades CSLA, the Oplus CSLA and the 21srl CSLA. ANSWER: 1CL denies the allegations in this paragraph. 35. The Master Loan Agreement provide that 1CL was to arrange for insurance to cover the risk that the litigation would be unsuccessful in order to cover the loss of the actual funding amount. ANSWER: 1CL denies the allegations in this paragraph. 36. 1CL never arranged for, or obtained, any insurance to cover the risk that the litigation would be unsuccessful. If 1CL had obtained the required insurance, any loss of the actual funding amount to 1CL would be recovered. 1CL's action amounts to an additional breach of the Agreements. ANSWER: 1CL denies the allegations in this paragraph. 37. Due to the breaches, Niro Law has been damaged in the amount of at least $1 million plus interest. ANSWER: 1CL denies the allegations in this Paragraph. AFFIRMATIVE DEFENSES: FIRST AFFIRMATIVE DEFENSE As a First Affirmative Defense, 1CL states that the Counterclaim fails to state facts sufficient to constitute any cause of action. SECOND AFFIRMATIVE DEFENSE As a Second Affirmative Defense, 1CL states that the Counterclaim Plaintiff lacks standing to sue. THIRD AFFIRMATIVE DEFENSE As a Third Affirmative Defense, 1CL states that to the extent the Counterclaim seeks equitable relief, such relief may be barred by the doctrine of unclean hands. FOURTH AFFIRMATIVE DEFENSE ANSWER TO COUNTERCLAIM AND JURY DEMAND CASE NO. 1:16-cv-06793 8 Case: 1:16-cv-06793 Document #: 14 Filed: 10/11/16 Page 9 of 11 PageID #:96 As a Fourth Affirmative Defense, 1CL states that to the extent any contract existed between Niro Law, Ltd. and 1CL, any breach was caused by Niro Law, Ltd. FIFTH AFFIRMATIVE DEFENSE As a Fifth Affirmative Defense, 1CL states that the Counterclaim and each cause of action stated therein may be barred by the doctrine of estoppel. SIXTH AFFIRMATIVE DEFENSE As a Sixth Affirmative Defense, 1CL states that the Counterclaim and each cause of action stated therein may be barred, in whole or in part, because of a defect or misjoinder of parties. SEVENTH AFFIRMATIVE DEFENSE As a Seventh Affirmative Defense, 1CL states that if Counterclaim Plaintiff suffered any damages, it may have failed to mitigate the damages. EIGHTH AFFIRMATIVE DEFENSE As An Eighth Affirmative Defense, 1CL states that the Counterclaim and each cause of action stated therein may be barred by the doctrine of waiver. NINTH AFFIRMATIVE DEFENSE As a Ninth Affirmative Defense, 1CL states that if Counterclaim Plaintiff has suffered any damages, the damages may be the proximate result of the actions of Counterclaim Plaintiff itself. TENTH AFFIRMATIVE DEFENSE As a Tenth Affirmative Defense, 1CL states that to the extent that Counterclaim Plaintiff suffered damages, if any, such damages may be offset by the damage caused 1CL as a result of the negligence, breaches of contract, and/or possible intentional torts of Counterclaim ANSWER TO COUNTER CLAIM AND JURY DEMAND CASE NO. 1:16-cv-06793 9 Case: 1:16-cv-06793 Document #: 14 Filed: 10/11/16 Page 10 of 11 PageID #:97 Plaintiff. ELEVENTH AFFIRMATIVE DEFENSE 1CL reserves all affirmative defenses under Rule 8(c) of the Federal Rules of Civil Procedure, and any other defenses, at law or in equity, that may now exist or in the future be available based on discovery and further factual investigation in this case. WHEREFORE, Defendant-Counterclaimant 1st Class Legal (I.S.), Ltd. seeks the following relief in response to the Counterclaim: A. Judgment in favor of 1st Class Legal (I.S.), Ltd.; and B. Such other and further relief as the Court deems reasonable and just. Respectfully submitted, 1ST CLASS LEGAL (I.S.), LTD. By: /s/ Marc S. Mazer Marc S. Mazer WEILL & MAZER, A Professional Corporation 90 New Montgomery Street, Suite 1400 San Francisco, CA 94507 Attorneys for Plaintiff and Counter Defendant 1st Class Legal (I.S.), Ltd. ANSWER TO COUNTERCLAIM AND JURY DEMAND CASE NO. 1:16-cv-06793 10 Case: 1:16-cv-06793 Document #: 14 Filed: 10/11/16 Page 11 of 11 PageID #:98 JURY DEMAND Plaintiff and Counterdefendant 1ST Class Legal hereby demands a jury trial on all issues in this action to which it is so entitled. Dated: October 11, 2016 Respectfully submitted, 1ST CLASS LEGAL (I.S.), LTD. By: /s/ Marc S. Mazer Marc S. Mazer WEILL & MAZER, A Professional Corporation 90 New Montgomery Street, Suite 1400 San Francisco, CA 94507 Attorneys for Plaintiff and Counter Defendant 1st Class Legal (I.S.), Ltd. CERTIFICATE OF SERVICE The undersigned, an attorney, certifies that on October 11, 2016, he caused the foregoing Answer to Counterclaim to be served upon all counsel of record via the court's electronic docketing system. Dated: October 11, 2016 1ST CLASS LEGAL (I.S.), LTD. By: /s/Steve M. Varhola Steve M. Varhola LYMAN LAW FIRM 227 West Monroe Street, Suite 2650 Chicago, Illinois 60606 (312) 762-9517 Attorneys for Plaintiff and Counter-Defendant 1st Class Legal (I.S.), Ltd. ANSWER TO COUNTER CLAIM AND JURY DEMAND CASE NO. 1:16-cv-06793 11