Mack Industries

Current status of Mack Industries litigation – there have been a number of recent developments that improve the prospect of the Mack Industries cases being wound up in the near future. First, the Bankruptcy Court has increased our ability to get the information and documents that we need to support our defenses and dispose of cases. From the beginning of these cases in 2019, the court did not allow either side to take the usual “discovery” steps to get information and documents, such as bank records and invoices, that are usually available in litigation. This was because, with over 400 Mack cases pending, the court did not want either side to have to go through a huge effort to investigate and produce such documents, with all the issues that go along with such a process (and have to get resolved by the court, one painful dispute after another). With that opportunity, we have made requests for checks and invoices on all cases in which we represent a defendant.

We have notified each of our clients that, if we can get documentation that shows that, if the Mack-related company that shows up in the contracts, invoices, or employment records for a particular defendant matches the company that paid the amount we are fighting about, we have a much better chance to win. We have filed several motions for “summary judgment” in cases like that, and we invite every one of our defendant clients to search their records for records of who it was you provided goods or services to (or who was handling your rent money), and exactly who paid you.

Next, the court has ruled on several motions, brought by large institutions with deep pockets, that limit the allegations that the Mack trustee can pursue. In other words, the number of issues that we have to deal with in each case has been reduced by the court. These rulings are on appeal, but we agree with the Bankruptcy Court and we are hopeful that the appellate court affirms these rulings.

Finally, the court has ordered that all cases be referred to a mediator, who is an impartial umpire that can help the parties try to settle the matter, and also point out to one side or the other where they are mistaken about their position. The mediation sessions in our cases will not start before March, 2021, and we will be in contact with every one of our clients before then to discuss your own case in detail.

Frequently Asked Questions

What’s the worst that can happen — can I go to jail?

This is a civil law suit. We do not know of any criminal investigation. The worst that can happen is that the trustee can get a judgment against you in the full amount in the complaint. The trustee can then take a number of legal actions to collect the judgment—garnishments against your bank account, actions against your customers (if you are business) or wage deductions (if you are an individual).

What will this cost me?

Defending against a lawsuit of this type can cost thousands of dollars. Doing nothing is even more expensive, because that would allow the trustee to get a judgment in the full amount of his claim. We hope that, by serving a large number of defendants, we can share legal and accounting expenses and avoid duplication of effort.  It’s too early to know just what the case will cost, but the more defendants hire one firm, the smaller the cost will be for each defendant.

What if I have no ability to pay claims?

You likely received a complaint asking for thousands, or even hundreds of thousands, of dollars. We can definitely approach the trustee and tell him that you do not have the ability to pay. First we will try to convince a court that you don’t owe anything at all; but if the court decides that the trustee has the legal right to collect, we can negotiate a settlement that you can afford. You don’t want this case to put you in your own bankruptcy, and the trustee recognizes that he can’t get paid if he forces you into bankruptcy.

What if I can’t pay defense costs?

We are trying to gather as many defendants as possible to retain one firm, to spread around the defense costs. If we have enough defendants working together, the total defense cost could be as little as $1,000 for each defendant.

What if I do nothing?

If you do nothing, the trustee will get a judgment against you. The trustee can then take a number of legal actions to collect the judgment—garnishments against your bank account, actions against your customers (if you are business) or wage deductions (if you are an individual).

I was an employee or contractor of Mack Industries. Why is the trustee trying to recover from me?

The trustee claims that the company was run as a fraudulent business. Under bankruptcy law, any payment—to anyone—that was made with the actual intent to defraud other creditors is a “fraudulent transfer,” and the trustee can recover the payment from you. We do not believe that Mack Industries was ever a fraudulent business. The company had financial problems because of problems in the real estate industry. We intend to prove that you did nothing wrong, and that you should not have to pay the trustee anything.

This claim is against my company. Am I on the hook personally for any monetary repayment?

In some circumstances, you might be. The whole point to setting up your business as a corporation or an LLC is to protect your personal finances from the business debt. Depending on how you have handled your business, and how well you separated your business from your own finances, you should be able to keep that protection—but you need legal assistance to make sure this happens.

I provided products or services to Mack Industries and I have receipts. Why do I have to defend myself or my company against claims about these?

The trustee claims that the company was run as a fraudulent business. The question is not whether you provided the actual work or product that you were paid for—if the company made the payment to you as part of a fraudulent scheme, under bankruptcy law the trustee can recover the payment from you. We do not believe that Mack Industries was ever a fraudulent business, and we will defend our clients against the trustee’s claims.

I provided products or services to Mack Industries and I do not have receipts. Is this a problem?

If we can prove that the company was not operated as a fraudulent business, or if we can prove that you had nothing to do with anything improper that the company might have done, it does not matter that you don’t have receipts for the goods or services you provided.

My company has closed. Do I have anything to worry about?

You might. If the trustee gets a judgment against your former company, he can then bring you in on an examination called a “citation,” and force you to provide financial documentation about your business. In some circumstances the court can make you personally liable for your company’s debts. In short, just because your business is closed, you should not ignore the trustee’s complaint.

I am not located in Illinois. Must I travel to participate in court proceedings?

Most likely, yes. Bankruptcy Court is a federal court and can exercise jurisdiction over anyone located anywhere in America. If you have an attorney in Chicago, he or she can attend most court hearings for you.

What about the owners and officers of Mack Industries – what’s happening to them in this matter?

The trustee has spent two years and thousands of dollars investigating all aspects of Mack Industries’ business. The trustee has filed complaints against the owners and officers of Mack Industries as well.

What happens if the named defendant is my ex-spouse or my ex-spouse’s company?

You should not be liable for any claims against your ex-spouse or your ex-spouse’s company. You should provide a copy of the complaint and summons to your ex-spouse. You should also consult with a lawyer so that you are sure you are not liable for the claim. You should treat the matter as seriously as if the claim is against you personally.

What happens if a named defendant is deceased?

If there is a probate case open, give the complaint and summons to the executor or administrator, and let them contact our firm for more information. If there is no probate estate, the heirs are not ordinarily liable for claims against the decedent; but if there was money that was distributed to heirs, the trustee may have a claim to recover some of that money. You should treat the matter as seriously as if the claim is against you personally.

I am seriously ill or I represent the named defendant, who is seriously ill. Is there any way to be excused from this case?

Not really. The trustee will pursue the claim against you without regard to your health. You should have a family member or friend help you in contacting a lawyer to assist you.

What if I have already contacted the trustee?

As long as you have not reached an agreement to pay the trustee a definite amount of money, you can still hire a lawyer to defend against the trustee’s claim. You should not negotiate directly with the trustee or his lawyers without knowing all about your defenses, and it’s important to consult with an attorney to discuss your options.

What will happen next and what deadlines must I be aware of?

The deadline for filing an answer, or other response, to the trustee’s complaint is, technically, 30 days after the case was filed. That is likely in late April, 2019. The court has set a status hearing on May 22, 2019. As a practical matter, in view of the large number of cases filed, if you file a response, and a request to extend time, before May 22, the court should allow you to defend the case. The rules for filing an answer to a complaint in bankruptcy court are very technical, and you should have an experienced bankruptcy lawyer assist you in defending against the trustee’s complaint.