South Carolina lawyer Fred Thompson wants to carry on a $39 million class action suit against four non-Illinois businesses on behalf of investors in 38 states who bought bonds in Michigan, Indiana and Wisconsin.
And, he wants to pursue the claim in Madison County Circuit Court.
Thompson now stands a step away from class certification, as Circuit Judge Daniel Stack has taken under advisement a certification motion.
At a hearing in September, Thompson asked Stack to certify Lillard Hedden of Pekin, William Tennison of Arkansas and Al Kellerman of Arkansas as class representatives for 2,013 bond buyers.
Fifty-seven members of the proposed class, not quite three percent, live in Illinois.
Thompson blames Chicago businessman Reynold Banks for a "Ponzi scheme" that cheated the class, but he doesn't seek damages from Banks.
Instead, he seeks damages from banks – Wells Fargo in San Francisco and Fifth Third in Columbus, Ohio.
He alleges that the banks, bond counsel Gilmore and Bell of Kansas City, and accounting firm Blue and Company of Indianapolis conspired with Banks.
Thompson's clients admit they didn't read any documents, but in Thompson's view that makes their case stronger.
"If you had a sharp guy, he wouldn't buy this stuff," he told Stack at the hearing.
Thompson's firm, Motley Rice of Mount Pleasant, S.C., filed the suit in 2001.
Motley Rice alleged that Reynold Banks arranged financing for nursing homes by channeling municipal bonds through a Chicago nonprofit, Malachi Corporation.
Motley Rice didn't sue Banks, who had declared bankruptcy.
Motley Rice sued Arkansas broker Marion Bass Securities and 30 other defendants including Malachi board members and their lawyer, who died with the suit hanging over him.
The firm never pursued claims against Marion Bass or Malachi, and by the time Stack held his hearing the list of defendants had dwindled to four.
Thompson told Stack that the class representatives were "perfect" because "these guys are the people that were intentionally targeted by this scheme."
"They are unsophisticated," Thompson said. "They are mom and pop."
"Illinois is the center of this scheme and Illinois is the place where all of these people can be brought before the court."
He said an entity named Health Bank held the nursing home licenses and did not transfer them as they should have.
He said his clients are old and confused.
"They don't make the best witnesses for themselves," he said.
He said he wouldn't shrink from the Illinois Supreme Court decision, Avery v. State Farm, that sharply limited class actions.
"Avery was a remarkable over reaching of state law," he said.
2.8 percent from Illinois
Catherine Schroeder of Thompson Coburn, representing Wells Fargo, told Stack that 2.8 percent of the transactions occurred in Illinois.
"We do not believe that Illinois law can be applied across the board to all the transactions," she said.
She said there was no evidence Wells Fargo had anything to do with a Ponzi scheme.
"We were an indenture trustee with limited contractual duties," she said.
She said plaintiffs did fine at depositions. "They told the truth," she said.
Hedden made 12 purchases totaling $255,000 without seeing literature of any kind, she said, and he testified he never talked to Wells Fargo.
She said Kellerman made a single purchase from Carty and Company, and didn't know if he sued Carty and Company.
"These are unrated bonds, the risky bonds," she said. "They have a higher rate of interest because they were unrated."
Scott Kane of Squire, Sanders and Dempsey argued for Fifth Third that individual issues predominated over common questions.
"It is wholly inappropriate for class treatment particularly with respect to Fifth Third who only participated in one of these transactions, the very first one," he said.
For Blue and Company, Mark Bauman of Hinshaw and Culbertson argued that his client showed that Malachi was losing money hand over fist.
He said plaintiffs could pursue individual suits, noting that Tennison purchased bonds worth $365,000.
"These guys never relied on anything," Bauman said. "They made their own decisions based upon what a broker told them or what nobody told them."
For Gilmore and Bell, Michael Pitzer of Rabbitt, Pitzer and Snodgrass said, "The alleged schemers and defrauders and profiteers are gone, dismissed, bankrupt or otherwise not available for Fred's long arm reach."
Pitzer said, "He somehow claims that we had a duty to rate these bonds."
He said there was no evidence linking Gilmore and Bell with any fraud, adding that no plaintiff heard of Gilmore and Bell.
As of Nov. 19, Stack had not ruled on the motion for class certification.