QB\15406570.1
UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
In re ) Chapter 11
)
GIORDANO'S ENTERPRISES, INC., et al., ) Case No. 11-06098
) (Substantively Consolidated)
Debtors. )
) Hon. Eugene R. Wedoff
)
JOHN APOSTOLOU, et al., )
) Adv. Pro. No. 11-02477
)
Plaintiffs, ) Hearing Date: December 28, 2011
) Hearing Time: 10:00 a.m.
v. )
)
B. ALLEN AYNESSAZIAN, et al., )
)
Defendants. )
)
NOTICE OF MOTION
PLEASE TAKE NOTICE that on Wednesday, December 28 2011, at 10:00 a.m.
Central Time, or as soon thereafter as counsel may be heard, we shall appear before the
Honorable Eugene R. Wedoff, Room 744, United States Courthouse, 219 South Dearborn Street,
Chicago, Illinois, or any other Judge sitting in his place or stead, and then and there present the
Trustee's Motion to Intervene in Adversary Proceeding Pursuant to Federal Rule of
Bankruptcy Procedure 7024, a copy of which is herewith served upon you.
Dated: December 21, 2011 PHILIP V. MARTINO, not individually, but solely
as chapter 11 Trustee for the consolidated estate of
Giordano's Enterprises, Inc.
By: /s/ Faye B. Feinstein
One of his attorneys
Faye B. Feinstein (ARDC No. 6186627)
Christopher Combest (ARDC No. 06224701)
Sarah K. Baker (ARDC No. 6298223)
Quarles & Brady LLP
300 N. LaSalle Street, Suite 4000
Chicago, IL 60654
Telephone: (312) 715-5000
Facsimile: (312) 632-1723
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SERVICE LIST
Zane Smith Zane D. Smith & Assoc., Ltd. 415 N. LaSalle St., Suite 300 Chicago, IL 60654
James Roche James J. Roche & Associates, LLP 642 N. Dearborn Street Chicago, IL 60654
Chester H. Foster, Jr. Foster & Smith
3825 W. 192nd Street Homewood, IL 60430
Carmen D. Caruso Carmen D. Caruso P.C.
77 West Wacker Drive Suite 4800 Chicago, IL 60601
Barry A. Chatz Michael Gesas, David Golin, Kevin Morse and Miriam Stein Arnstein & Lehr LLP 120 South Riverside Plaza, Suite 1200 Chicago, IL 60606
Michael Gesas Amstein & Lehr LLP 120 South Riverside Plaza, Suite 1200 Chicago, IL 60606
Michaela Stapleton-Corcoran 308 West Randolph Street, Suite 400 Chicago, IL 60606 Michael Maksimovich Maksimovich & Association 8643 Ogden Avenue Lyons, IL 60534
Michael Maksimovich 642 North Dearborn Street Chicago, IL 60654 Amy Centeno 3004 Vimy Ridge Drive Joliet, IL 60435 Anthanassios Kourliouros 224 S. Shaddle Avenue, #204 Mundelein, IL 60060 Anthony Prokos 6220 Squire Lane Willowbrook, IL 60527 Ascencion Centeno 295 N. Charles Street Cortland, IL 60112 Athena's Best Pizza, Inc. Attn: Peter Skiouris 5927 W. Irving Park Road Chicago, IL 60634 Barry Allen Aynessazian 340 East Randolph Street, Suite 5003 Chicago, IL 60601 Best in Town, Inc. Attn: Athanassios Kourliouros 107 Hamilton Place Vernon Hills, IL 60061 Best in Town, Inc. 270 N. McHenry Road Buffalo Grove, IL 60089 Best Pizza, Inc. Attn: Carol A. Mengel 36 Park Lane, P.O. Box 85 Golf, IL 60029
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Cara Sales, Inc.
Attn: Amy Centeno
3004 Vimy Ridge Drive
Joliet, IL 60435
Cara Sales, Inc.
2344 S. Route 59 Plainfield, IL 60544
Centos & Sons, Inc.
Attn: Thomas H. Chapman
461 N. Mulford Road, Suite 2
Rockford, IL 61107
Centos & Sons, Inc.
1556 Buttitta Dr.
Streamwood, IL 60107
Centos, Inc.
333 Executive Parkway
Rockford, IL 61107
CMJ, Inc.
Attn: Constantinos Alexakos
5115 Main Street
Downers Grove, IL 60515
Constantinos Alexakos
1733 Brookfield Court
Aurora, IL 60503
Dimitri Dimitropoulos
10466 Waterford Drive
Westchester, IL 60154 Dimitri S. Dimitri 582 Le Parc Circle Buffalo Grove, IL 60089
Eat at Joe & Al's, Inc.
Attn: Barry Allen Aynessazian
340 East Randolph Street, Suite 5201
Chicago, IL 60601
Eat at Joe & Al's, Inc.
14325 S. LaGrange
Orland Park, IL 60462
Eat at Joe's II, Inc.
3324 S. Route 59
Suite 120
Naperville, IL 60564
Eat at Joe's, Inc.
Attn: Barry Allen Aynessazian
340 East Randolph Street, Suite 5201
Chicago, IL 60601
Eat at Joe's Inc. 2870 W. Route 34
Oswego, IL 60543
Eat Pizza at Dale Mabry, Inc.
401 N. Dale Mabry Hwy.
Tampa, FL 33609
Eat Pizza in Brandon, Inc.
Attn: Barry Allen Aynessazian
340 East Randolph Street, Suite 5201
Chicago, IL 60601
Eat Pizza in Brandon, Inc.
11310 Causeway Blvd.
Brandon, FL 33511
Eat Pizza In Downtown Naperville, Inc.
Attn: Barry Allen Aynessazian
340 East Randolph Street, Suite 5201
Chicago, IL 60601
Eat Pizza in Port Richey, Inc.
Attn: Barry Allen Aynessazian
340 East Randolph Street, Suite 5201
Chicago, IL 60601
Eat Pizza in Port Richey, Inc.
10042 Hwy. 19 North
Port Richey, FL 34668
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Eat Pizza, Inc. Attn: Barry Allen Aynessazian 340 East Randolph Street, Suite 5201 Chicago, IL 60601
Eat Pizza, Inc. 11400 Lincoln Hwy. Mokena, IL 60448
For Love of Pizza, Inc. Attn: Thomas H. Chapman 461 N. Mulford Road, Suite 2 Rockford, IL 61107
For Love of Pizza, Inc. 1840 De Kalb Rd. Sycamore, IL 60178
Giordano's of Westchester, Inc. 10410 W. Cermak Road Westchester, IL 60164
Grand West, Inc. Attn: Athanassios Kourliouros 107 Hamilton Place
Vernon Hills, IL 60061
Grand West, Inc. 7105 Grand Avenue Gurnee, IL 60031
J.B.A., Inc. Attn: Peter Skiouris 5927 W. Irving Park Road Chicago, IL 60634
J.B.A., Inc. 5309 S. Blackstone Chicago, IL 60615
Jason's Pizza, Inc. Attn: Peter Skiouris 5927 W. Irving Park Road Chicago, IL 60634
Jason's Pizza, Inc. 455 W. Roosevelt Road Glen Ellyn, IL 60137
John Daoulos
8825 Kostner Terrace Skokie, IL 60076 John Nikolopoulos 1103 Robert Drive Mount Prospect, IL 60056
Jose Centeno
1781 Marshfield Drive Rockford, IL 61107
Joseph Locascio 4521 Roslyn Road Downers Grove, IL 60515
Kimberly Centeno 1781 Marshfield Drive Rockford, IL 61107
Laganes, LLC Attn: Constantinos Alexakos 1733 Brookfield
Aurora, IL 60504
Laganes, LLC 1323 W. Lake St. Addison, IL 60101
Leonidas Theodorpopoulos 8912 Harms Road
Morton Grove, IL 60053
Marie s Best Pizza, Inc. Attn: Peter Skiours 5927 W. Irving Park Road Chicago, IL 60634
Marie's Best Pizza, Inc. 1115 W. Chicago Oak Park, IL 60301
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Milton Alexakos 635 Dee Road Park Ridge, IL 60068
Morton North, Inc. Attn: Leonidas Theodoropoulos 8912 Harms Road Morton Grove, IL 60053
Morton North, Inc. 2010 W. Montrose Chicago, IL 60618
Mt. Prospect Venture, Inc. Attn: Theodore Mavrakis 36 Park Lane, PO Box 85 Golf, IL 60029
Peter Skiouris
307 Dundee Road Barrington, IL 60010
Pizza Best, Inc. Attn: Leonidas Theodoropoulos 8912 Harms Road
Morton Grove, IL 60053
Pizza Best, Inc. 2855 N. Milwaukee Ave. Chicago, IL 60618
Rafael Centeno 3004 Vimy Ridge Drive Joliet, IL 60435
Rambo's Pizza of Fox Lake, Inc. Attn: Ramiz Mareewa 1924 S. Racine Chicago, IL 60608
Rambo's Pizza of Fox Lake, Inc. 1388 S. Rt. 12
Fox Lake, IL 60020
Rambo's Pizza of Lake Zurich, Inc. Attn: Ramiz Mareewa 1924 S. Racine Chicago, IL 60608 Rambo's Pizza of Lake Zurich, Inc. 455 S. Rand Road Lake Zurich, IL 60047 Ramiz Mareewa 1924 S. Racine Avenue Chicago, IL 60608
Randall Third, Inc. Attn: Athanassios Kourliouros 107 Hamilton Place
Vernon Hills, IL 60061
Randall Third, Inc. 1505 S. Randall Rd. Algonquin, IL 60102
SKDD Pizza, Inc. Attn: Stanley Kondiles 320 Randall South Elgin, IL 60177
Stanley Kondiles 1026 South Vail Avenue Arlington Heights, IL 60005
Stefano's Pizza on Sheridan, Inc. Attn: David E. Zajicek 4343 Commerce Court, Suite 415 Lisle, IL 60532
Stefano's Pizza on Sheridan, Inc. 6836 N. Sheridan Road Chicago, IL 60626
Stephanos Vaiopouls 2633 W. Winona Street, #2W Chicago, IL 60625
Ted Mavrakis 580 E. Oakton St.
Des Plaines, IL 60018
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Fifth Third Bank Attn: Scott Mier, Chip Reeves, Brace Lee, Graeme Jack, Michael King, Jeff Tischler 38 Fountain Square Plaza
Cincinnati, OH 45263
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CERTIFICATE OF SERVICE
I, Faye B. Feinstein, an attorney, certify that, on the 21st day of December, 2011, I
caused the Trustee's Motion to Intervene in Adversary Proceeding Pursuant to Federal
Rule of Bankruptcy Procedure 7024 to be filed electronically, via the Court's CM/ECF
System, Notice of this filing will be sent by operation of the Court's electronic filing system to
all registered ECF users in this case.
Thomas V Askounis [email protected],
[email protected];[email protected]
Ronald Barliant [email protected],
Jennifer S Burt [email protected]
Christopher M Cahill [email protected], [email protected]
Carmen D Caruso [email protected], [email protected]
Joshua W Cohen [email protected]
Michael M. Eidelman [email protected], [email protected]
Yeny C. Estrada [email protected],
[email protected];[email protected]
Thomas R. Fawkes [email protected], [email protected]
[email protected];[email protected]
Jonathan P Friedland [email protected], [email protected]
James G Froberg [email protected], [email protected]
Zachary J Garrett [email protected]
Cameron M Gulden [email protected],
[email protected];[email protected]
Aaron L Hammer [email protected], [email protected]
Stephanie K. Hor-Chen [email protected], [email protected]
Christopher J. Horvay [email protected]
Brian J Jackiw [email protected], [email protected]
Vivek Jayaram [email protected]
Gregory J Jordan [email protected]
Danielle Juhle [email protected], [email protected]
Kathryn A Klein [email protected], [email protected]
Randall Klein [email protected],
[email protected];[email protected]
Richard S Lauter [email protected], [email protected]
Patrick S Layng [email protected]
Joanne Lee [email protected], [email protected]
Neil Lloyd [email protected], [email protected]
Terri M Long [email protected]
Karen Newbury [email protected], [email protected]
Andre Ordeanu [email protected],
[email protected];[email protected];[email protected];
Lester A Ottenheimer, III [email protected], [email protected]
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Lars A Peterson [email protected]
James M Philbrick [email protected]
Jeffrey R Platt [email protected], [email protected]
Mark L Radtke [email protected], [email protected]
Bryan I Schwartz [email protected]
Jason R. Sleezer [email protected], [email protected]
James B. Sowka [email protected],
[email protected];[email protected]
Lawrence A. Stein [email protected], [email protected]
Jeffrey Strange [email protected], [email protected]
Pia N Thompson [email protected], [email protected]
Steven B Towbin [email protected]
Daniel A Zazove [email protected]
I further certify that, on the 21st day of December, 2011, I caused a copy of the Trustee's
Motion to Intervene in Adversary Proceeding Pursuant to Federal Rule of Bankruptcy
Procedure 7024 and a proposed Order, to be served, via first-class U.S. Mail, postage prepaid,
upon the parties in the attached Service List.
/s/ Faye B. Feinstein
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UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
In re ) Chapter 11
)
GIORDANO'S ENTERPRISES, INC., et al., ) Case No. 11 - 06098
) (Substantively Consolidated)
Consolidated Debtor. )
) Hon. Eugene R. Wedoff
__________________________________________)
)
JOHN APOSTOLOU, et al., )
) Adv. Pro. No. 11-02477
)
Plaintiffs,1 ) Hearing Date: December 28, 2011
) Hearing Time: 10:00 a.m.
v. )
)
)
B. ALLEN AYNESSAZIAN, et al., )
)
Defendants.2 )
)
TRUSTEE'S MOTION TO INTERVENE IN ADVERSARY PROCEEDING PURSUANT
TO FEDERAL RULE OF BANKRUPTCY PROCEDURE 7024
1 The Plaintiffs in this adversary proceeding are John Apostolou, individually, as Trustee for the John Apostolou
Irrevocable Trust, as Trustee for the John Apostolou Revocable Trust, and as Trustee for the Eva Apostolou
Irrevocable Trust; Eva Apostolou, individually, and as Trustee for the Eva Apostolou Revocable Trust; Basil
Apostolou, as Beneficiary of the John and Eva Apostolou Irrevocable Trusts, the Dorian Trust, and the
Hellenikon Trust; George Apostolou, as Beneficiary of the John and Eva Apostolou Irrevocable Trusts, the
Dorian Trust, and the Hellenikon Trust; and Joanna Apostolou, as Beneficiary of the John and Eva Apostolou
Irrevocable Trusts, the Dorian Trust, and the Hellenikon Trust.
2 The Defendants in this adversary proceeding are: B. Allen Aynessazian, James Roche, Fifth-Third Bank, Scott
Mier, Sean McGuire, Chip Reeves, Bruce Lee, Graeme Jack, Michael King, Jeff Tischler, Joseph Locascio, Eat
Pizza, Inc., Eat at Joe and AI’s, Inc., Eat at Joe’s, Inc., Eat Pizza in Port Richey, Inc., Eat at Joe’s II, Inc., Eat
Pizza on Dale Mabry, Inc., Eat Pizza in Downtown Naperville, Inc., Peter Skiouris, Jason’s Pizza, Inc.; IB.A.,
Inc.; Athena’s Best Pizza, Inc., Marie’s Best Pizza, Inc., Constantinos Alexakos, Milton Alexakos, John
Nikolopoulos, Laganes, LLC, Jose Centeno, Kimberly Centeno, Ascencion Centeno, Centos, Inc., Centos &
Sons, Inc., For Love of Pizza, Inc., Stephanos Vaiopouls, John Daoulas, Stefano’s Pizza on Sheridan, Inc.,
Leonidas Theodoropoulos, Morton North, Inc., Pizza Best, Inc., Downers CMJ, Inc., Rafeal Centeno, Amy
Centeno, Cara Sales, Inc., Ramiz Mareewa, Rambo’s Pizza of Fox Lake, Inc., Rambo’s Pizza of Lake Zurich,
Inc., Stanley Kondiles, Dimitri Dimitropoulos, Dimitri Dimitri, Anthony Prokos, SKDD Pizza, Inc., Giordano’s
of Westchester, Inc., Ted Mavrakis, Mt. Prospect Venture, Inc., Best Pizza, Inc., Anthanassios Kourliouros,
Randall Third, Inc., Best in Town, Inc., Grand West, Inc., Arnstein and Lehr, LLP., Michael Gesas, Michaela
Stapleton-Corcoran, and Michael Maksimovich.
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2 QB\15253634.5
Philip V. Martino, the duly appointed and serving Chapter 11 trustee ("Trustee")
for the consolidated bankruptcy estate administered through the captioned chapter 11 case of
Giordano's Enterprises, Inc. (the "Debtor")3, hereby seeks entry of an order, in the form
submitted with this Motion (the "Order"), in the form submitted with this Motion as Exhibit A,
authorizing the Trustee to intervene in Adversary Proceeding No. 11-02477, with respect to the
First Amended Complaint brought by John Apostolou, Eva Apostolou, Basil Apostolou, George
Apostolou and Joanna Apostolou, individually and as trustees and beneficiaries of the trusts
identified therein (collectively, the "Apostolou Plaintiffs"), filed in the Circuit Court of Cook
County, Illinois, No. 11 CH 27344, and removed to this Court by Arnstein & Lehr LLP ("A&L")
and Michael L. Gesas ("Gesas") pursuant to a Notice of Removal of Action filed on November
23, 2011 (the "Notice of Removal") (Docket No. 997). In support, the Trustee states:
Jurisdiction
1. This Court has jurisdiction pursuant to 28 U.S.C. §§157 and 1334(a) .
2. Venue is proper in this District pursuant to 28 U.S.C. §§ 1408 and 1409. This
Motion constitutes a core proceeding pursuant to 28 U.S.C. §157(b).
Background
3. On February 16 and 17, 2011, Debtor and the other entities listed in Footnote 3
3 The chapter 11 estates of the Debtors in the following cases have been substantively consolidated into and with
the chapter 11 estate of Giordano’s Enterprises, Inc.: Illinois Management Company, Inc., JBA Equipment
Finance, Inc., Altamonte Partners, LLC, Giordano's Franchise, Inc., Giordano's of Florida, Inc., Giordano's
Restaurants, Inc., Giordano's Famous Stuffed Pizza, Inc., Americana Foods, Inc., Pizza Pizazze, Inc.,
Giordano's, LLC, Oakbrook Partners, LLC, Randolph Partners, LLC, Randolph Partners, LLC 20-24 Series,
Randolph Partners, LLC – 327 Series, Randolph Partners, LLC – Lake Street Series, Randolph Partners, LLC –
Formosa Series, Randolph Partners, LLC – Minooka Series, Randolph Partners, LP, Randolph Partners, LLC –
740 Series, Randolph Partners, LLC – 308 Series, Randolph Partners, LLC – Ogden Oswego Series, Randolph
Partners, LLC – 1425 Series, Randolph Partners, LLC – Mount Prospect Series, Belmont Pizza, Inc., Rush
Pizza, Inc., Greektown Pizza, Inc., Rosemont Pizza, Inc., Willowbrook Pizza, Inc., Randolph Partners, LLC –
Sherberth Series, Randolph Partners, LLC – Oakbrook Partners Series, Randolph Partners, LLC – Cotton Lane
Series, and Randolph Partners, LLC – Randall Orchard Series.
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3 QB\15253634.5
hereto (collectively, the "Separate Debtors") filed voluntary petitions for relief under chapter
11 of the United States Bankruptcy Code, 11 U.S.C. §§101 et seq. (the "Code").
4. Pursuant to Code §§1107(a) and 1108, the Separate Debtors initially operated
their businesses and managed their financial affairs as debtors in possession.
5. On February 22, 2011, this Court entered an Order Authorizing Debtors to: (A)
Use Cash Collateral on an Emergency Basis Pending a Final Hearing; (B) Incur Postpetition
Debt on an Emergency Basis Pending a Final Hearing; and (C) Grant Adequate Protection and
Provide Security and Other Relief to Fifth Third Bank (the "Interim Cash Collateral/DIP
Financing Order").
6. Pursuant to the Interim Cash Collateral/DIP Financing Order, the Debtors and
Fifth Third Bank ("Fifth Third") entered into a Debtor-In-Possession Loan Agreement, dated as
of February 22, 2011 (the "DIP Loan Agreement").
7. On March 7, 2011, the United States Trustee appointed a committee of unsecured
creditors (the "Committee").
8. On March 17, 2011, this Court entered the Final Cash Collateral/DIP Financing
Order which, inter alia, authorized the Debtors to use the cash collateral of Fifth Third and to
obtain debtor in possession financing from Fifth Third.
9. On May 12, 2011, upon the motion of the United States Trustee, the Court
appointed Philip V. Martino to be the Trustee for the Separate Debtors, thereby taking the
Separate Debtors out of possession and placing their assets and businesses under the control of
the Trustee.
10. By orders entered May 31, 2011 (Docket No. 378), August 16, 2011 (Docket No.
621), and November 2, 2011 (Docket No. 933), this Court approved certain amendments to the
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DIP Loan Agreement and Final Cash Collateral/DIP Financing Order. Those orders collectively
approved the First, Second, Third, and Fourth Amendments to the DIP Loan Agreement (the
"Prior Amendments" and together with the DIP Loan Agreement, the "Amended DIP Loan
Agreement").
11. On August 3, 2011, the Apostolou Plaintiffs filed a complaint (the "Original
Complaint") in the Circuit Court of Illinois (the "Circuit Court") styled John Apostolou, et al.
v. B. Allen Aynessazian, et al., No. 11 Ch 27344 against (i) forty seven entities identified as
"Giordano's Franchisees" or the owners of Giordano's Franchises; (ii) Fifth Third and various of
its employees and agents; (iii) Debtors' former bankruptcy and corporate counsel, Michael Gesas
and James Roche, respectively); and (iv) a former officer and director of the Debtors (the
"Apostolou Litigation").
12. On August 8, 2011, Fifth Third asserted its right to indemnification for the
defense costs and other damages arising from the claims made by the Apostolou Plaintiffs (the
"Indemnification Claim"). The Indemnification Claim was made pursuant to Section 7.3(r) of
the Amended DIP Loan Agreement.
13. On August 12, 2011, Fifth Third filed a Notice of Removal and removed the
Original Complaint to this Court as adversary proceeding 11-01716 (the "Original Adversary
Proceeding"). (Docket No. 628.)
14. On August 15, 2011, Fifth Third filed its Motion For Sanctions And For Order Of
Contempt Against Zane Smith And Plaintiffs In The Apostolou Lawsuit (the "Contempt and
Sanctions Motion"). (Docket No. 613.)
15. On August 19, 2011, the Trustee filed his Motion to Enforce Automatic Stay
against Apostolou Plaintiffs (the "Stay Motion").
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16. On August 29, 2011, the Apostolou Plaintiffs moved for remand or abstention.
(Docket No. 676.)
17. This Court held a hearing on the Original Adversary Proceeding on September 6,
2011. (Original Adversary Proceeding Docket No. 18.) At the September 6 hearing, the Court
granted the Trustee's Stay Motion, subject to the submission of an order, and continued the
hearing on remand to September 21, 2011.
18. A&L and Gesas filed their Renewed Objection to Remand on September 20, 2011
(the "Renewed Objection"). (Original Adversary Proceeding Docket No. 19.)
19. At the September 21, 2011 hearing, the Trustee and the Apostolou Plaintiffs
presented an order granting the Stay Motion, and striking certain portions of the Original
Complaint as being in violation of the automatic stay. (Docket No. 763.) The Trustee and the
Apostolou Plaintiffs agreed to make the changes to the Original Complaint that removed those
portions of the complaint that were claims belonging to the Trustee or that constituted property
of the estate (the "Amended Complaint"). (Id.)
20. The Court also entered orders (i) granting in part and denying in part Fifth Third's
Contempt and Sanctions Motion (Docket No. 761); and (ii) granting in part and denying in part
the Renewed Objection for reasons stated on the record, and expressly conditioned its remand on
the following order: "notwithstanding any allegation currently stated in the Amended Complaint,
the Apostolou [Plaintiffs] will not urge in the Circuit Court of Cook Count [sic] as a basis for any
liability on the part of A&L or Gesas any conduct occurring from and after the filing of the
bankruptcy case (No. 11-06098)." (Docket No. 814.)
21. On October 4, 2011, Fifth Third filed a Notice of Appeal to the District Court of
the order granting in part and denying in part its Motion for Contempt and Sanctions. (Docket
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No. 817.)
22. On November 7, 2011, the Apostolou Plaintiffs filed the Amended Complaint in
the Circuit Court of Cook County. The Amended Complaint contains nine counts as follows: (i)
Shareholder Oppression under Section 12.56 of the Illinois Business Corporation Act; (ii)
Tortious Interference with the Apostolous' Prospective Economic Advantage; (iii) Breach of
Fiduciary Duty; (iv) Fraud and Constructive Fraud; (v) Defamation Per Se; (vi) Conspiracy to
Commit Fraud; (vii) Conspiracy to Injury the Apostolou's Business; (viii) Conspiracy to Violate
Fiduciary Duty; and (ix) Conspiracy to Defame.
23. On November 8 and 9, 2011, the Court entered orders in the individual chapter 11
cases of each of the Separate Debtors, which orders, collectively, consolidated the assets and
liabilities of the Separate Debtors into one estate, administered in the name of "Giordano's
Enterprises, Inc." and under Consolidated Case No. 11-06098 (the Separate Debtors are
hereinafter referred to as the "Debtors").
24. On November 18, 2011, following the extremely productive auction of the
Debtors' assets, the Court entered three separate sale orders (Docket Nos. 992, 993, and 994,
collectively, the "Sale Orders"), collectively authorizing the sale of substantially all of the
Debtors' assets free and clear of liens, claims, encumbrances, and interests except as set forth in
the Sale Orders for a collective purchase price of $61,600,779. See Trustee's Report of Sales,
Docket No. 1039. Other assets have been sold, bringing total asset sales proceeds to over $65
million.
25. On November 23, 2011, A&L and Gesas filed the Notice of Removal (Docket No.
997) of the Amended Complaint to this Court as adversary proceeding no. 11-02477 (the
"Adversary Proceeding"). By their Notice of Removal, A&L and Gesas have requested that
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7 QB\15253634.5
this Court make a determination that it has exclusive jurisdiction over claims in the Amended
Complaint that are asserted against A&L and Gesas.
26. On November 30, 2011, the sales of substantially all of the Debtors' assets closed.
The Sale Orders authorized the Trustee to pay Fifth Third the sum of $50,499,445.44 on account
of its secured claims. See Docket No. 992 at pg 15; Docket No. 993 at pg 5; Docket No. 994 at
pg. 15. This sum represented all amounts necessary to discharge the consolidated estate's
liabilities, obligations, and indebtedness to Fifth Third under the Prepetition Credit Agreements
and the Amended DIP Loan Agreement, with the exception of the Indemnification Claim, all
pursuant to the terms of the Amended DIP Loan Agreement, the Final Cash Collateral/DIP
Financing Order, and the Payoff Letter. Included in the $50,499,445.44 paid to Fifth Third was
reimbursement of an initial retainer in the amount of $350,000, which Fifth Third informed the
Trustee it had paid to its counsel in connection with its defense of the Amended Complaint.
27. Fifth Third's sole remaining claim against the Debtors is its Indemnification
Claim.
28. In addition to paying Fifth Third's secured claims, the Trustee also was authorized
to disburse the sum of $7,078.268.71, which was used to pay, among other things, various
creditors with security interests in property sold as part of the asset sales, taxing authorities, and
cure costs. Currently the estate holds about $6,000,000 in cash, from which it is obligated to
make substantial payments related to the closing, including to professionals, trade creditors, and
related wind down expenses. Even after those payments, the Trustee estimates that the net cash
proceeds remaining for the benefit of priority and unsecured creditors (assuming there were no
additional payments in connection with the estate's Indemnification Obligations) will be
$3,000,000. In addition, the Trustee has some lesser assets to liquidate that should generate
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several hundred thousand dollars over the next six months.
29. Pursuant to the Amended DIP Loan Agreement, future amounts claimed by Fifth
Third for the purposes of satisfying its Indemnification Claim are due and payable by the
Debtors' consolidated estate on demand.
30. In light of the "surplus" obtained from the sale of the Debtors' assets beyond all of
Fifth Third's claims other than the Indemnification Claim, Fifth Third's defense of the allegations
in the Amended Complaint will have a significant, direct, pecuniary impact on distributions to
unsecured creditors, i.e., the higher the legal fees, the less available for distribution to other
creditors.
31. On December 7, 2011, the Apostolou Plaintiffs filed a Motion to Remand the
Adversary Proceeding back to the Circuit Court (the "Remand Motion") (Adversary Proceeding
Docket No. 2). Contemporaneously herewith, the Trustee is filing his objection to the Remand
Motion (the “Remand Objection”).
RELIEF REQUESTED
32. By this Motion, the Trustee seeks entry of an order authorizing4 him to intervene
as a third party plaintiff in the Adversary Proceeding pursuant to Fed. R. Bankr. P. 7024 to assert
certain claims against John Apostolou and Eva Apostolou (together, the "Apostolous") for
prepetition breaches of their fiduciary duties to the Debtors (together, the "Apostolou Claims")
that are based in substantial part on the admissions they made in the Original and Amended
Complaint.
4 In the event the Court ultimately determines that the Adversary Proceeding should be remanded back to the
Circuit Court, the Trustee will reevaluate whether he wishes to proceed with the Apostolou Claims by
intervening in the Amended Complaint in the Circuit Court or by filing the Apostolou Claims as a separate
adversary proceeding in this Court.
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33. More particularly, the Trustee asserts that the Apostolou Plaintiffs admitted to
certain conduct in the Amended Complaint that would amount to breaches of the Apostolous'
fiduciary duties as officers of the Debtors under applicable state law. For example, the Amended
Complaint alleges that John and Eva Apostolou served as President and Treasurer of the Debtors,
respectively, from 1988 through May 2011. See ¶ 2 of Amended Complaint. The Amended
Complaint alleges that while they served as officers of the Debtors, the Apostolous never read
any of the Debtors' loan documents, even when the Debtors were experiencing financial distress,
and instead, merely signed whatever documents were placed before them. See, e.g., ¶¶ 79, 84,
86, 127, 140-43 of Amended Complaint. Stated differently, the Apostolous admit that they
"unquestioningly signed where [their advisors] told them to sign." ¶¶ 79, 84 of Amended
Complaint (Emphasis added). The Trustee believes that such unquestioning reliance on advisors,
particularly when the facts and circumstances known to the Apostolous demanded more careful
scrutiny of financial documents and transactions, supports claims against them for breaches of
their state law fiduciary duties of care.
34. As further explained herein and in the Remand Objection, the Trustee believes
that in light of the current posture of the bankruptcy case, i.e. the "surplus" subject to the
Indemnification Claim, this Court has jurisdiction over the Amended Complaint.
ARGUMENT
A. The Trustee Has A Right To Intervene In The Adversary Proceeding.
35. Trustee has a right to intervene as a third party plaintiff in the Adversary
Proceeding to assert the Apostolou Claims. Any doubts concerning the propriety of an
intervention should be resolved in the Trustee’s favor. Fed. Sav. & Loan Ins. Corp. v. Falls
Chase Special Taxing Dist., 983 F.2d 211, 216 (11th Cir. 1993); In re Foos, 183 B.R. 149, 154-
55 (Bankr. N.D. Ill. 1995) ("A motion to intervene as of right 'should not be [denied] unless it
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appears to a certainty that the intervenor is not entitled to relief under any set of facts which
could be proved under the complaint [or counterclaim].'") (quoting Lake Investors Dev. Group,
Inc. v. Egidi Dev. Group, 715 F.2d 1256, 1258 (7th Cir.1983)).
36. Rule 24(a)(2), incorporated by Fed. R. Bankr. P. 7024, establishes four
conjunctive criteria for intervention as of right:
(1) timely application;
(2) an interest relating to the subject matter of the action;
(3) potential impairment, as a practical matter, of that interest
by the disposition of the action; and
(4) lack of adequate representation of the interest by the
existing parties to the action.
Fed. R .Civ. P. 24(a)(2); Security Ins. Co. of Hartford v. Schipporeit, Inc., 69 F.3d
1377, 1380 (7th Cir. 1995); In re Foos, 183 B.R. at 155.
37. Here, the Trustee's request satisfies all four criteria. Particularly, the Trustee’s
Motion is timely; discovery has not commenced, no substantive orders have been entered, and
the parties have taken no action other than the filing of the Amended Complaint and the Notice
of Removal. Cf. Reich v. ABC/York-Estes Corp., 64 F.3d 316, 321 (7th Cir. 1995) (motion to
intervene granted nineteen months after intervenor learned of litigation); South v. Rowe, 759
F.2d 610, 612 (7th Cir. 1985) (intervention two years after consent decree held timely).
38. “The most important consideration in deciding whether a motion to intervene is
untimely is whether the delay in moving for intervention will prejudice the existing parties to
the case.” Nissei Sangyo America, Ltd. v. United States, 31 F.3d 435, 439 (7th Cir. 1995).
Here, there is no delay and no potential prejudice due to timing. Within a reasonable time after
the filing of the Amended Complaint and the Notice of Removal, and prior to any hearing, the
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11 QB\15253634.5
Trustee has moved to intervene. As the Seventh Circuit explained, “the purpose of the
[timeliness] requirement is to prevent a tardy intervenor from derailing a lawsuit within sight
of the terminal.” United Stated v. South Bend Community School Corp., 710 F.2d 394, 396
(7th Cir. 1983). Here the litigation train has not yet left the station.
39. Further, now that the sale has been consummated, leaving a substantial
"surplus" for creditors but for Fifth Third's Indemnification Claim, the Trustee has a direct and
quantifiable interest in the captioned litigation.
40. The Trustee also has an interest relating to the subject matter of the adversary
proceeding. As stated above, the admissions in the Original and Amended Complaint to form
at least a portion of the factual predicate for the Apostolou Claims. The Apostolou Claims are
property of the Debtors' estates pursuant to 11 U.S.C. § 541(a). Koch Ref. v. Farmers Union
Cent. Exch., Inc., 831 F.2d 1339, 1343-44 (7th Cir. 1987) ("The section 541 estate has been
found to include any actions that a debtor corporation may have to recover damages for
fiduciary misconduct, mismanagement or neglect of duty, and the bankruptcy trustee succeeds
to that right for the benefit of all creditors of the estate"). Moreover, the conduct underlying
the Apostolou Claims arises from the same transactions and circumstances described in the
Amended Complaint. The Trustee is the proper party to bring the Apostolou Claims on behalf
of the Debtors' consolidated estate. Id. at 1343 ("It has also long been held that rights of action
against officers, directors and shareholders of a corporation for breaches of fiduciary duties . . .
become property of the estate which the trustee alone has the right to pursue after the filing of a
bankruptcy petition.").
41. If the Trustee is not permitted to intervene, the Trustee’s interest may be
impaired. The issues raised in the adversary proceeding are directly related to the Apostolou
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12 QB\15253634.5
Claims. Findings with respect to liability of the respective parties could materially impair the
estate's interests in recovering on the Apostolou Claims. Because the Trustee need only show
that his interest may be impaired, this criteria is clearly satisfied. See Fed. R. Civ. P. 24(a)(2)
(stating that on a timely motion, the court must permit anyone to intervene who "claims an
interest relating to the property or transaction that is the subject of the action, and is so situated
that disposing of the action may as a practical matter impair or impede the movant's ability to
protect its interest, unless existing parties adequately represent that interest") (emphasis added).
42. Finally, the estate's interest is not adequately represented by the parties to this
action. The Trustee asserts that the Adversary Proceeding is the proper place to bring the
Apostolou Claims because (i) the claims arise from certain admissions set forth in the
Apostolou Complaint, and (ii) the claims arise from the same operative facts upon which the
Apostolou Complaint is based. Moreover, the Trustee, as representative of the estate, is vested
with the power and duty to manage all of the assets of the Debtors' consolidated estate,
including bringing causes of action. As such, the Trustee is the party with the authority to
assert the Apostolou Claims. None of the other parties named in the Apostolou Complaint are
in a position to adequately represent or protect the consolidated estate's interest in the
Adversary Proceeding. Accordingly, the Trustee should be authorized to intervene in the
Adversary Proceeding to assert the Apostolou Claims; thus, enabling him to represent and
protect the consolidated estate's interests therein.
B. Alternatively, This Court Should Exercise Its Discretion to Permit the
Trustee To Intervene.
43. Just as the Trustee has demonstrated his right to intervene under Rule 24(a), the
Trustee should also be permitted to intervene under Rule 24(b), because the Apostolou Claims
have material questions of law and fact in common with the Adversary Proceeding. Permissive
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13 QB\15253634.5
intervention under Rule 24(b) only requires that (i) the request be filed in a timely fashion, (ii)
the applicant's claim and the main action are in common, and (iii) the court has considered the
potential for undue delay or prejudice to the original parties.5 Askin v. Quaker Oats Co., 2011
WL 5008524 (N.D. Ill. Oct. 20, 2011) ("Rule 24 allows for permissive intervention where the
movant “has a claim or defense that shares with the main action a common question of law or
fact. Fed. R. Civ. P. 24(b)(1)(B). The rule also requires the court to consider whether the
intervention will unduly delay or prejudice the adjudication of the original parties' rights.”); In re
DeLap, 44 B.R. 21, 22 (Bankr. W.D. Wis. 1984); In re Foos, 183 B.R. at 162; see also Flying J,
Inc. v. Van Hollen, 578 F.3d 569, 573 (7th Cir. 2009) ("All that is required by Rule 24(b)(1)(B) .
. . is that the applicant's claim or defense and the main action have a question of law or fact in
common."). Aside from those requirements, permitting intervention under Rule 24(b) is entirely
within the discretion of the court. In re Foos, 183 B.R. at 162. As explained above, the Trustee's
petition is timely and common questions of fact and law exist. Further, the Adversary
Proceeding is in its infancy; there is no potential for undue delay or prejudice to the other parties.
44. Accordingly, for the reasons set forth above, the Trustee should be authorized to
intervene in the Adversary Proceeding.
Notice
This Motion has been filed electronically in both Consolidated Case No. 11-06098 and
Adversary Proceeding No. 11-02477. Notice thereof will be provided electronically, via the
Court's CM/ECF System, to (a) counsel for (i) Fifth Third Bank; (ii) the Committee; and (iii) the
5 Some courts hold that permissive intervention under Rule 24(b) requires the applicant to demonstrate that
independent jurisdiction exists. See, e.g., Security Ins. Co. of Hartford v. Schipporeit, Inc., 69 F.3d 1377, 1381
(7th Cir. 1995). The Trustee asserts that this Court properly has jurisdiction over the Apostolou Claims
pursuant to 28 U.S.C. §§ 157 and 1334. Moreover, for the reasons stated in the Remand Objection, the Trustee
asserts that this court has "related to" jurisdiction over the Amended Complaint pursuant to 28 U.S.C. §§ 157
and 1334 because that litigation will affect the ultimate distribution of assets to creditors of the Debtors'
consolidated bankruptcy estate.
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14 QB\15253634.5
United States Trustee; and (b) entities, or their counsel, who have filed a notice of appearance
through the Court's CM/ECF System. This Motion will be served on parties to the Apostolou
Litigation via U.S. Mail. The Trustee asks the Court to find that such notice is sufficient and to
approve the same under Fed. R. Bankr. P. 9007.
WHEREFORE, Philip V. Martino, Chapter 11 Trustee, requests that this Court enter an
order (A) authorizing the Trustee to intervene in the Adversary Proceeding, and (B) granting the
Trustee such other and further relief as the Court deems appropriate.
Dated: December 21, 2011 PHILIP V. MARTINO, not individually, but solely
as chapter 11 Trustee for the consolidated estate of
Giordano's Enterprises, Inc.
By: /s/ Faye Feinstein
One of his attorneys
Faye Feinstein (ARDC No. 6186627)
Sarah K. Baker (ARDC No. 6298223)
Quarles & Brady LLP
300 N. LaSalle Street, Suite 4000
Chicago, IL 60654
Telephone: (312) 715-5000
Facsimile: (312) 632-1723
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EXHIBIT A
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UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF ILLINOIS
Eastern Division
In Re: GIORDANO'S ENTERPRISES, INC., et al., (Substantively Consolidated)
) BK No.: 11-06098 )
) Chapter: 11 ) ) Honorable Eugene R. Wedoff
) ) ) Adv. No.: 11-02477
) ) ) ) )
)
JOHN APOSTOLOU, et al.,
B. ALLEN AYNESSAZIAN, et al.,
Debtor(s)
Plaintiff(s)
Defendant(s)
ORDER ON TRUSTEE'S MOTION TO INTERVENE IN ADVERSARY PROCEEDING PURSUANT TO FEDERAL RULE OF BANKRUPTCY PROCEDURE 7024
This matter having come before the Court on the Trustee's motion to intervene in Adversary Proceeding No. 11-02477, originally filed in the Circuit Court of Cook County, Illinois, No. 11 CH 27344, and removed to this Court by Arnstein & Lehr LLP and Michael L. Gesas, by virtue of the Notice of Removal filed on November 23, 2011 (the "Motion" all capitalized terms used but not defined herein shall have the meanings ascribed to them in the Motion); the Court having reviewed the Motion and having heard the statements of counsel at a hearing before the Court; the Court finding that the Court has jurisdiction over this matter pursuant to 28 U.S.C. §§157 and 1334 and Rule 40.3.1 of the Local Rules of Procedure of the United States District Court for the Northern District of Illinois and; sufficient notice of the Motion having been provided to all parties entitled thereto; and no other or further notice being required; the Court finding that the relief requested in the Motion is in the best interest of the Debtors, their estates, and their creditors, and the Court being otherwise fully advised in the premises,
NOW, THEREFORE, IT IS HEREBY ORDERED THAT:
1. The Motion is GRANTED.
2. The Trustee is authorized to take such actions as he deems necessary and appropriate to intervene as a third-party plaintiff in the Amended Complaint pursuant to Fed. R. Bankr. P. 7024.
3. This Court shall retain jurisdiction with respect to all matters relating to the interpretation or implementation of this Order.
Enter:
Honorable Eugene R. Wedoff
Dated: United States Bankruptcy Judge
Rev: 20110318._apo
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Prepared by:
Faye Feinstein (ARDC No. 6186627) Sarah K. Baker (ARDC No. 6298223) Quarles & Brady LLP 300 N. LaSalle Street, Suite 4000 Chicago, IL 60654 Telephone: (312) 715-5000 Facsimile: (312) 632-1723
Rev: 20110318_apo
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