BMO Harris Bank N.A. v. Radium2 Capital, LLC

Background

BMO Harris Bank N.A. alleged that automobile dealerships had pledged vehicles, parts, accessories, and payment rights to BMO as collateral for floor-plan financing. Beginning at least in September 2017, Radium2 Capital, LLC allegedly entered into undisclosed merchant cash advance agreements with the dealerships secured by the same collateral. The dealerships allegedly paid Radium2 more than $4.1 million between September 26, 2017, and January 2018.

BMO sued Radium2 on September 29, 2022, asserting five claims: common-law conversion, constructive fraudulent transfer under the Illinois Uniform Fraudulent Transfer Act, fraudulent transfer with intent to defraud under that Act, unjust enrichment, and tortious interference with contract. The parties had a tolling agreement covering the period from May 6, 2022, through September 30, 2022. BMO later moved to amend its complaint, and Radium2 moved to dismiss.

Timeliness of the Common-Law Claims

The court held that BMO’s conversion, unjust-enrichment, and tortious-interference claims were time-barred. Because the case was based on diversity jurisdiction, the court applied New York’s statutes of limitations. New York generally provides a three-year limitations period for these claims, while Illinois provides five years.

The court rejected BMO’s argument that Illinois’s longer period should apply. It explained that New York treats statutes of limitations for common-law claims as procedural, so New York’s limitations rules applied. The court also rejected BMO’s equitable-estoppel argument because BMO did not allege that Radium2 took a later, specific action that prevented BMO from bringing suit on time. Finally, the court declined to apply New York’s six-year period for fraud claims because the alleged fraud was incidental to the alleged conversion: the same conduct, injury, and requested relief supported the claims.

Timeliness of the Illinois Statutory Claims

The court also held that both Illinois Uniform Fraudulent Transfer Act claims were time-barred. The constructive-fraud claim had to be brought within four years after the transfer or obligation, and BMO identified no relevant event within four years before the May 6, 2022 tolling date.

The court explained that the one-year discovery period applied to BMO’s fraudulent-transfer claim with alleged intent to defraud, but not to the constructive-fraud claim. Even under that discovery rule, the claim was untimely because BMO alleged that Radium2’s agreements became known to BMO when the dealerships went into liquidation in 2019. The court concluded that BMO had enough information at that time to investigate possible wrongdoing, but the tolling agreement did not begin until about three years later.

Motions and Disposition

The court concluded that all five claims were time-barred based on the complaint and related documents. It therefore granted Radium2’s motion to dismiss as to all counts. The court did not reach Radium2’s alternative argument that some claims failed to satisfy the heightened pleading requirements for fraud.

The court denied BMO’s motion to amend as futile. Applying Rule 15 of the Federal Rules of Civil Procedure, the court reasoned that the proposed amended complaint would not save any of Counts I through V from the applicable statutes of limitations. The court directed the Clerk to terminate the two motions and close the case.