United States District Court, S.D. Indiana, Indianapolis Division
ENTRY ON DEFENDANT/COUNTERCLAIMANT TIM DURHAM'S
MOTION FOR SUMMARY JUDGMENT AND PLAINTIFF/COUNTER-DEFENDANT
NATIONAL LAMPOON'S MOTION FOR SUMMARY JUDGMENT
RICHARD L. YOUNG, JUDGE.
February 28, 2013, Plaintiff, National Lampoon, Inc., filed a
five-count Complaint against Tim Durham, its former Chief
Executive Officer, and the law firm that represented him in
his criminal case, Brown Tompkins Lory & Mastrian,
arising out of a $1, 000, 000 transfer from National
Lampoon's business checking account into John
Tompkins' law firm account. In its First Amended
Complaint, National Lampoon brings claims for: (1)
embezzlement, (2) breach of fiduciary duty, (3) conversion,
(4) fraudulent conveyance, and (5) unjust enrichment. Durham
filed a counterclaim against National Lampoon seeking
back-pay and a declaration regarding his stock ownership in,
and loans to, National Lampoon.
now moves for summary judgment on all claims alleged in the
First Amended Complaint and his two counterclaims. National
Lampoon moves for summary judgment on Durham's
counterclaims. For the reasons that follow, National
Lampoon's motion is GRANTED and
Durham's motion is DENIED.
addressing the facts relevant to the present motions, the
court must first address National Lampoon's request for
the court to take judicial notice of public civil court
filings and other public records, including forms filed with
the Securities and Exchange Commission (“SEC”).
(See generally Filing No. 158, National
Lampoon's Appendix of Exhibits).
to Rule 201(b) of the Federal Rules of Evidence, a court may
take judicial notice of an adjudicative fact that is both
“not subject to reasonable dispute” and either:
(1) “generally known within the trial court's
territorial jurisdiction;” or (2) capable of accurate
and ready determination “from sources whose accuracy
cannot reasonably be questioned.” The documents at
issue are public records and documents “whose accuracy
cannot reasonably be questioned.” Fed.R.Evid. 201(b).
The court will therefore consider National Lampoon's
exhibits for purposes of the parties' motions for summary
judgment. General Elec. Capital Corp. v. Lease Resolution
Corp., 128 F.3d 1074, 1081 (7th Cir. 1997) (recognizing
court may take judicial notice of the contents of court
records); Opoka v. INS, 94 F.3d 392, 394 (7th Cir.
1996) (recognizing that proceedings in other courts, both
inside and outside the federal system, may be judicially
noticed); In re Guidant Corp. v. Sec. Litig., 536
F.Supp.2d 913, 921 (S.D. Ind. 2008), aff'd sub nom.
Fannon v. Guidant Corp., 583 F.3d 995 (7th Cir. 2009)
(recognizing court may take judicial notice of SEC filings at
the 12(b)(6) stage); Grimes v. Navigant Consulting,
Inc., 185 F.Supp.2d 906, 913 (N.D. Ill. 2002)
(recognizing court may take judicial notice of published
his criminal indictment for securities fraud in December
2008, Daniel Laikin resigned as CEO of National Lampoon and,
on December 18, 2008, Durham replaced him as the new CEO.
(Filing No. 158-1, Securities and Exchange Commission
(“SEC”) Form 8-K; see also Filing No.
98, Trustee's Motion to Intervene at 3). Durham alleges
National Lampoon's Board of Directors agreed to pay him a
base salary of $250, 000. National Lampoon disputes this
allegation. (SEC Form 8-K) (“Mr. Durham is serving [as
CEO] without compensation.”).
time he was CEO of National Lampoon, Durham owned Fair
Finance Company, a financial services business located in
Akron, Ohio. United States v. Durham, et al., No.
1:11-cr-42-JMS-DML, Filing No. 217, Superseding Indictment
¶¶ 1-2. On February 8, 2010, creditor-investors
filed an involuntary Chapter 7 bankruptcy petition in the
United States Bankruptcy Court for the Northern District of
Ohio against Fair Finance following an FBI raid on its Akron,
Ohio offices and on the Indianapolis offices of Durham's
other company, Obsidian Enterprises, Inc. (See
Filing No. 158-7, Trustee's Memorandum in Support of
Motion to Approve Compromise with National Lampoon, Inc.
(“Trustee's Motion to Approve”) ¶ 9;
Filing No. 98, Trustee's Motion to Intervene at 1-2)).
The Trustee of that bankruptcy, Brian Bash, has since
intervened in this case. (Filing No. 103, Order granting
Motion to Intervene).
March 14, 2011, Durham was indicted and arrested for
securities fraud, wire fraud, and conspiring to commit fraud
for essentially engaging in a Ponzi scheme at the expense of
Fair Finance investors. (Filing No. 9, Superseding
Indictment; see also Filing No. 158-6, Trustee's
Complaint to Avoid Fraudulent Transfers Against National
Lampoon ¶ 2). Durham's criminal defense attorney at
the time was Mr. Tompkins. (Filing No. 73, Compl. ¶ 13).
From April 2011 through January 2012, Durham was under house
arrest at his home in Indiana. (Filing No. 77, Answer ¶
13, 2011, the Trustee filed an adversary proceeding against
National Lampoon in the Central District of California to
recover over $9, 000, 000 in fraudulent transfers allegedly
made to National Lampoon through Durham's and Laikin's
loans and investments. (Filing No. 158-6, Trustee's
Complaint to Avoid Fraudulent Transfers). In the
Trustee's litigation against National Lampoon, the
Trustee alleged that the purported loans and investments from
Durham had historically been the principal source of funds
used for operations and working capital at National Lampoon.
(Id. ¶ 45). Therefore, the Trustee sought to
recover any and all money Durham ever loaned or invested in
National Lampoon. (Id. ¶¶ 55, 65, 77).
midst of all this, on July 21, 2011, National Lampoon and
Warner Brothers entered into a Settlement Agreement and
Release that, among other things, resolved a dispute between
the parties concerning Warner's distribution of the
National Lampoon Vacation motion pictures and Warner's
accounting methods, calculations, and allocations, and
provided National Lampoon with an advance in the amount of
$2, 705, 448, recoupable from National Lampoon's share of
the Vacation motion pictures. The Settlement Agreement was
signed by Durham purportedly on behalf of National Lampoon.
(Filing No. 161-1, Affidavit of Cora Victoriano ¶ 6).
28, 2011, immediately after the settlement money from Warner
Brothers was deposited into National Lampoon's business
checking account, Durham instructed Comerica Bank to transfer
$1, 000, 000 out of National Lampoon's business checking
account (account number 1894202959) into Mr. Tompkins'
law firm account (account number 8003157). The wire transfer
was not authorized in accordance with National Lampoon's
corporate bylaws. (Id. ¶ 7). Durham claims
National Lampoon authorized him to take $545, 000 as partial
payment of his accrued and unpaid salary. (See
Filing No. 160-3, 2011 Form 1099-MISC).
January 2012, Durham resigned as CEO of National Lampoon.
(Answer ¶ 22).
20, 2012, Durham was found guilty on all counts in his
criminal trial. (United States v. Durham, et al.,
No. 1:11-cr-42-JMS-DML, Filing No. 354, Jury Verdict). He was
sentenced to fifty (50) years in prison and ordered to pay
$208, 830, 082.27 in restitution to the investment
certificate holders of Fair Finance, and to cooperate with
the Trustee. (Id., Filing No. 456, Amended
Durham's incarceration, the Trustee has obtained
judgments aggregating in excess of $136, 000, 000 against
Durham in other actions (other than an action brought by
Thomas McKibben, et al.) in the Northern District
of Ohio, including, on June 4, 2012, a judgment in the amount
of $152, 452.75; on May 28, 2013, a judgment in the amount of
$134, 837, 533.14; and on November 22, 2013, a judgment in
the amount of $1, 151, 953.39, plus post-petition interest on
all judgments. (Filing No. 158-3, Trustee's Motion to
Approve Assignment Agreement and Compromise of Claims Against
Timothy Durham at 3).
September 7, 2014, Durham fully executed an Assignment
Agreement and compromise of claims with the Chapter 7
Trustee, which transferred and conveyed virtually all of
Durham's assets to the Trustee. (Filing No. 158-4, Notice
of Execution of Assignment Agreement). However, with respect
to the pending action, the Assignment states:
[A]ssignor shall continue to litigate that action and defend
the claims against him and assert his claims, cross-claims
and counterclaims and shall retain ownership of such claims,
cross claims and counterclaims subject to Assignor's
current and continuing assignment of any and all proceeds of
claims asserted in the National Lampoon Litigation to the
Trustee, including any and all receivables due ...