Later Good Faith Purchaser Prevents Turnover Order
For Your Ease Only, Inc. v. Calgon Carbon Corp., No. 02 C 7345, 2007 WL 3357631 (N.D. Ill. Nov. 13, 2007) (Andersen, J.).
Judge Andersen denied plaintiff’s motion for a turnover order regarding payments made by third party Home Shopping Network (“HSN”) to purchase defendants’ anti-tarnish jewelry boxes that infringe plaintiff’s patent. In June 2007, the Court entered a $2.1M default judgment against defendants Mark Schneider (“Schneider”) and Product Concepts Company (“PCC”). After the Court entered the judgment, Schneider transferred his supply of the infringing jewelry boxes from PCC, which he controlled, to Sevenquest, which Schneider also controlled. The Court held that this transfer evidenced a sufficient number of the “badges of fraud” set forth in 740 ILCS 160/5(b) to be presumed fraudulent. Among others, the transfer was to Schneider (an insider), Schneider retained control of the products after the transfer, Schneider concealed the transfer, Schneider was sued before he made the transfer, the transfer constituted substantially all of the assets and Schneider moved to Costa Rica after making the transfer.
But the Court held that Sevenquest’s later transfer of the jewelry boxes to Anewco, who sold the boxes to HSN, did not evidence sufficient badges of fraud. Anewco, owned by Schneider’s brother-in-law Douglas Fournier (“Fournier”), received no immediate consideration for the jewelry boxes. But Fournier testified that he had an oral contract with Schneider granting Fournier control of the jewelry box business in three years, and that Fournier performed substantial sourcing and sales work based upon the oral agreement. Because Sevenquest’s transfer of the jewelry boxes to Anewco appeared to be in good faith, the Court did not void the transfer to Anewco. And because HSN, therefore, held no assets of defendants, the Court denied the turnover order.
