Opinion

UNITED STATES BANKRUPTCY COURT

SOUTHERN DISTRICT OF ILLINOIS

In Re )

) Case No. 23-30045

ACJK, Inc., )

) Chapter 11

Debtor. )

)

ACJK, Inc., )

)

Plaintiff, )

v. ) Adv. No. 25-03011

)

OptumRX, Inc., )

)

Defendant. )

___________________________________ )

)

In Re )

) Case No. 23-30045

ACJK, Inc., )

) Chapter 11

Debtor. )

)

ACJK, Inc. )

)

Plaintiff, )

v. ) Adv. No. 25-03012

)

Express Scripts, Inc., )

)

Defendant. )

O P I N I O N

Before the Court are motions to dismiss filed by the defendants in two

separate adversary proceedings commenced by the debtor in the same

underlying bankruptcy case. The motions seek dismissal of the claims against

the defendants pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to

state a claim. For the reasons set forth herein, the motions to dismiss will be

granted in part and denied in part.

I. Factual Background

ACJK, Inc. (“Debtor”), a corporation that operated a pharmacy in Granite

City, Illinois, commenced its voluntary Chapter 11 case on January 30, 2023, by

filing a bare-bones petition. The Debtor’s schedules and other required

documents were filed a month later. On Schedule D: Creditors Who Have Claims

Secured by Property, the Debtor listed Express Scripts, Inc., OptumRX, Inc., and

others as holders of claims in unknown amounts secured by the pharmacy’s

accounts receivable valued at $228,800. The debts were marked by the Debtor

as being “disputed.” Among the assets listed on Schedule A/B, the Debtor

identified potential causes of action for breach of contract and misrepresentation

against OptumRX, Express Scripts, and others of unknown values. On its

Statement of Financial Affairs, the Debtor identified OptumRX and Express

Scripts as recipients of prepetition transfers in unknown amounts described as

“offset DIR fees from Debtor’s accounts receivable.” OptumRX and Express

Scripts were similarly identified as having set off debts owed to them by taking

unknown amounts from the Debtor’s financial account without permission.

Neither entity filed a proof of claim in the case. But several other creditors filed

claims, including on account of unsecured prepetition debts.

The Debtor’s Second Amended Chapter 11 Plan was confirmed on March

5, 2024. The plan defined “DIR Fees” as “pharmaceutical-related expenses

deducted from Debtor’s gross sale proceeds by Pharmacy Benefit Mangers [sic]

(PBM’s) [sic], including” OptumRX and Express Scripts. The plan was to be

implemented in part through a litigation fund comprised of proceeds that might

be obtained in pursuing prepetition causes of action for the benefit of creditors

against the PBMs in relation to DIR Fees collected.

On January 29, 2025, the Debtor commenced an adversary proceeding

against OptumRX, Express Scripts, and several other entities asserting causes

of action against each for unauthorized postpetition transfers and constructively

fraudulent prepetition transfers under federal and state law based on DIR Fees

deducted from the Debtor’s accounts receivable in the months and years

surrounding the petition date.1 In an order entered February 13, 2025, the Judge

previously assigned to the proceeding found that, among other deficiencies, the

complaint impermissibly joined defendants in the same cause of action for what

appeared to be separate and distinct transactions or occurrences and directed

the Debtor to file separate adversary complaints against each defendant within

21 days. After an initial motion to reconsider was denied, the Debtor filed another

document labeled as a motion to reconsider or for clarification, asserting that it

had a right to file an amended complaint as a matter of course through which it

hoped to cure any issues. Consistent with that position, the Debtor filed a first

amended complaint which asserted essentially the same causes of action against

the same defendants. Several named defendants objected and asked the Court

1 The complaint identified OptumRX as “United Health Group d/b/a OptumRX, Inc. f/k/a Catamaran, Inc.” The

Motion to Dismiss in adversary case no. 25-03011 was filed on behalf of OptumRX.

to strike the amended complaint. Rather than strike the amended complaint, at

a hearing held on May 22, 2025, the Court ordered that the claims be severed so

that there would be separate adversary proceedings against each defendant and

further ordered the Debtor’s attorney to pay the filing fee for each of the severed

cases. The filing fees were paid, and the result was separate proceedings against

each defendant all based on the same first amended complaint.

Relevant to the present proceedings, Count I of the first amended

complaint alleges that OptumRX and Express Scripts deducted DIR Fees in

unknown amounts from the Debtor’s accounts receivable after the petition date

of January 30, 2023. Because the Debtor ceased operations on January 21,

2023, the Debtor alleges that such deductions must have been on account of

prepetition claims and are therefore avoidable under §549(a). Count I further

seeks an accounting and recovery of amounts avoided under §§542(a) and

550(a).

Counts VI and VII seek to avoid constructively fraudulent transfers to

Express Scripts under §548(a)(1)(B) and 740 ILCS 160/5, respectively. Count VI

alleges that, between January 31, 2021, and January 30, 2023, Express Scripts

“offset approximately $103,142.84 in DIR FEEs from [the Debtor’s] Accounts

Receivable” for obligations incurred by the Debtor within that period. The Debtor

alleges that it received less than a reasonably equivalent value in exchange for

the “excessive” DIR Fees collected and that it was insolvent at the time or made

insolvent thereby. Count VI further alleges that Express Scripts was an insider

of the Debtor as defined in the Bankruptcy Code. Count VII, in turn, alleges that

Express Scripts “offset approximately $136,362.47 in DIR FEES from [the

Debtor’s] Accounts Receivable” between January 31, 2019, and January 30,

2023, on account of obligations incurred by the Debtor over the same period.

The Debtor alleges it received less than a reasonably equivalent value for the

described transfers and that the Debtor was “insolvent on the date the [allegedly

fraudulent] transfers were made and/or incurred or became insolvent as a result

of such transfers.”

Counts XII and XIII similarly seek to avoid constructively fraudulent

transfers to OptumRX under §548(a)(1)(B) and 740 ILCS 160/5, respectively.

They make the same allegations against OptumRX that are set forth in Counts

VI and VII against Express Scripts, differing only in the amounts of the alleged

transfers. In that regard, Count XII alleges that OptumRX “offset approximately

$196,692.18 in DIR FEEs” in the two-year period ending on the petition date,

and Count XIII alleges that OptumRX “offset approximately $332,570.05 in DIR

FEES” in the four years preceding the bankruptcy.

Although OptumRX and Express Scripts are represented by different

attorneys, each filed substantially identical Motions to Dismiss ACJK, Inc.’s First

Amended Complaint Pursuant to Federal Rule of Civil Procedure 12(b)(6) for

Failure to State a Claim and related supporting briefs (collectively “Motions to

Dismiss”) in the respective proceeding against them.

On September 25, 2025, the above-captioned proceedings, along with the

other severed actions based on the same amended complaint, were reassigned

to the undersigned Judge. A hearing was set for status on pending matters in

each proceeding. In the meantime, the Debtor filed responses in opposition to

the Motions to Dismiss in the present proceedings. At the status hearing held

October 23, 2025, the Court stated it would take the Motions to Dismiss under

advisement. That same day, the Debtor filed in the bankruptcy case a motion to

modify its confirmed plan to add a provision in response to arguments made in

the Motions to Dismiss filed here regarding whether the Debtor had adequately

reserved authority to pursue certain causes of action asserted against OptumRX

and Express Scripts.

The Defendants filed a joint objection to the motion to modify plan and,

after hearing and additional briefing on the issues raised by the motion to modify,

the Court took the matter under advisement. Based on the adversary parties’

agreement that the motion to modify could be consequential to the adversary

litigation, orders were separately entered in each of the adversary proceedings

putting the Motions to Dismiss on hold pending resolution of the motion to

modify in the bankruptcy case.

The motion to modify was ultimately denied by order entered March 25,

2026. The denial was based primarily on the Debtor’s stipulation that

distributions had begun under the confirmed plan, and, as such, the plan had

been substantially consummated and could not be modified. The concluding

paragraph of the order noted that the Motions to Dismiss had been put on hold

pending decision on the motion to modify and would be taken under advisement

once again.

The Court has reviewed and considered the parties’ arguments along with

the entire case record in each proceeding. The Motions to Dismiss are ready for

decision.

II. Jurisdiction

This Court has jurisdiction over proceedings “arising under title 11, or

arising in or related to cases under title 11” pursuant to 28 U.S.C. §1334. All

bankruptcy cases and proceedings filed in the Southern District of Illinois have

been referred to the bankruptcy judges. SDIL-LR Br1001.1; see 28 U.S.C.

§157(a). Matters concerning the administration of the estate, proceedings to

determine, avoid, or recover fraudulent conveyances, and other proceedings

affecting the liquidation of assets of the estate or the adjustment of the debtor-

creditor relationship are core proceedings. 28 U.S.C. §157(b)(2)(A), (H), (O).

While statutorily core, there is some disagreement about whether

fraudulent conveyance actions are constitutionally core in the wake of the

Supreme Court’s decisions in Stern v. Marshall, 564 U.S. 462, 493 (2011), and

Executive Benefits Insurance Agency v. Arkinson, 573 U.S. 25, 37-38 (2014).

Compare Maxwell v. United States (In re Horizon Grp. Mgmt., LLC), 617 B.R. 581,

585 (Bankr. N.D. Ill. 2020) (finding fraudulent transfer action under §548

constitutionally core), with Brandt v. FDIC (In re Equip. Acquisition Res., Inc.), 560

B.R. 501, 504 (Bankr. N.D. Ill. 2016) (finding that state-law fraudulent transfer

claims as well as §548 claims are not constitutionally core). But the prevailing

opinion in this Circuit is that avoidance of fraudulent transfers under §548 are

constitutionally core. In any event, the first amended complaint also asserts

state-law fraudulent conveyance causes of action against each Defendant which

do not arise exclusively under the Bankruptcy Code and do not strictly arise in

a bankruptcy case, and this Court is therefore exercising “related to” jurisdiction

in these proceedings. Absent consent of the parties, the Court’s authority to enter

final judgment on at least the state-law fraudulent conveyance actions is limited.

Wellness Int’l Network, Ltd. v. Sharif, 575 U.S. 665, 669 (2015); Exec. Benefits,

573 U.S. at 37-38; Stern, 564 U.S. at 493; 28 U.S.C. §157(c).

Here, the Defendants have not consented to entry of final orders on the

merits of the claims asserted against them. Even so, this Court has authority to

enter orders on preliminary matters to the extent they do not constitute a final

adjudication on the merits of underlying causes of action over which the Court

does not have constitutional authority to enter a final order. See Lordstown

Motors Corp. v. Hon Hai Precision Indus. Co. (In re Nu Ride Inc.), 666 B.R. 510,

512 (Bankr. D. Del. 2024). The authority to enter orders on such preliminary

matters generally includes orders resolving motions to dismiss. Id.; Settlers’

Hous. Serv., Inc. v. Schaumburg Bank & Trust Co. (In re Settlers’ Hous. Serv., Inc.),

514 B.R. 258, 268-69 (Bankr. N.D. Ill. 2014) (bankruptcy court has authority to

deny motion to dismiss because such denial does not result in entry of judgment;

and, while an order of dismissal may be a final judgment, if order adjudicates

fewer than all claims or rights of all parties then it is not a final judgment).

Because the orders entered in connection with these adversary proceedings will

grant dismissal only in part, they will adjudicate fewer than all claims or rights

of the parties and are therefore not final judgments.

III. Legal Analysis

To survive a motion to dismiss for failure to state a claim upon which relief

can be granted, a complaint need only allege enough factual allegations to

plausibly suggest a claim for relief. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570

(2007); Fed. R. Civ. P. 12(b)(6); Fed. R. Bankr. P. 7012. That is, a complaint must

“plausibly suggest that the plaintiff has a right to relief, raising that possibility

above a speculative level[.]” EEOC v. Concentra Health Servs., Inc., 496 F.3d 773,

776 (7th Cir. 2007) (internal quotation marks omitted) (citing Twombly, 550 U.S.

at 555); see also Fed. R. Civ. P. 8(a); Fed. R. Bankr. P. 7008. “[A] plaintiff’s

obligation to provide the grounds of his entitlement to relief requires more than

labels and conclusions, and a formulaic recitation of the elements of a cause of

action will not do[.]” Twombly, 550 U.S. at 555 (internal quotation marks

omitted). Twombly “demands more than an unadorned, the-defendant-

unlawfully-harmed-me accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)

(citations omitted). While detailed specifics may not be required, there must be

some facts alleged to support each element of the cause of action. Id. at 678-79;

see also Olson v. Champaign Cnty., 784 F.3d 1093, 1098-99 (7th Cir. 2015).

“A claim has facial plausibility ‘when the plaintiff pleads factual content

that allows the court to draw the reasonable inference that the defendant is liable

for the misconduct alleged.’” Bissessur v. Indiana Univ. Bd. of Trs., 581 F.3d 599,

602 (7th Cir. 2009) (quoting Iqbal, 556 U.S. at 678). When ruling on a motion to

dismiss, a court must accept all well-pleaded factual allegations as true and draw

all reasonable inferences in favor of the non-moving party. Iqbal, 556 U.S. at

678; McReynolds v. Merrill Lynch & Co., 694 F.3d 873, 879 (7th Cir. 2012). Those

well-pleaded facts, however, must “permit the court to infer more than the mere

possibility of misconduct[.]” Iqbal, 556 U.S. at 679.

A. The Undeveloped Factual Record Prevents the Court from Concluding that

the Transactions at Issue are Unavoidable Setoffs or Recoupment.

The Motions to Dismiss make three main arguments in support of

dismissal. The first argument focuses on the nature of the transactions as setoffs

or recoupment. Pointing to the Debtor’s repeated use of the term “offset” to

describe the alleged transfers, the Defendants argue that Counts I, VI/XII, and

VII/XIII must be dismissed because a setoff is not a transfer as defined in the

Bankruptcy Code and therefore not avoidable under §§544, 548, or 549. The

Defendants go one step further, contending that the alleged “offsets” are actually

in the nature of recoupment and, in addition to not being subject to avoidance,

are not subject to the automatic stay.

The Defendants rely primarily on Matter of Prescott, 805 F.2d 719, 730-31

(7th Cir. 1986), in which case the Seventh Circuit described the history around

setoffs and their exclusion from the bankruptcy legislation definition of a

“transfer,” setting up its holding that a setoff is not avoidable as a preference

except as provided in §553. Although Prescott and the legislative history upon

which it relied both addressed whether a setoff is a transfer in the context of a

preference under §547, “there is little reason to believe that Congress intended

a different understanding of transfer to apply in the fraudulent conveyance

context.” 5 COLLIER ON BANKRUPTCY ¶553.09 n.8 (16th ed. 2026).

Although related concepts, recoupment and setoff differ in that

recoupment requires the countervailing claims to arise from the same

transaction, typically resulting in some type of “overpayment.” Raleigh v. Mid Am.

Nat. Bank & Trust Co. (In re Stoecker), 131 B.R. 979, 982-83 (Bankr. N.D. Ill.

1991). Further, unlike setoff, “recoupment is not subject to the automatic stay

of §362” and therefore could preclude a potential argument for avoidance under

§549 based on a theory that an unauthorized postpetition setoff is a transfer.

Warsco v. Household Bank, 272 B.R. 246, 253 (Bankr. N.D. Ind. 2002), aff’d sub

nom., Kleven v. Household Bank, 334 F.3d 638 (7th Cir. 2003). And because it is

different from setoff, recoupment would also not be subject to the provisions of

§553 governing avoidance of setoffs. Id.

The Defendants further cite bankruptcy decisions outside the Seventh

Circuit in support of their broader contention that “recoupments simply are not

subject to the avoidance powers under Chapter 5 of the Bankruptcy Code[,]” but

the reasoning of those decisions is premised on the nature of recoupment as

merely a defense to liability by way of reducing the defendant’s obligation, the

burden of which rests with the party asserting the defense to establish. See

Mercy Hosp. of Watertown v. New York State Dep’t of Soc. Servs., 171 B.R. 490,

495-96 (N.D.N.Y. 1994); Visiting Nurse Ass’n of Tampa Bay, Inc. v. Sullivan

(Matter of Visiting Nurse Ass’n of Tampa Bay, Inc.), 121 B.R. 114, 121 (Bankr.

M.D. Fla. 1990); see also Rainsdon v. Davisco Foods Int’l, Inc. (In re Azevedo), 497

B.R. 590, 598 (Bankr. D. Idaho 2013) (“even if recoupment is available,

[defendant] must show” requirements of defense are satisfied); Jobin v. Ripley (In

re M & L Bus. Mach. Co.), 198 B.R. 800, 811 (D. Colo. 1996) (party asserting

defense must prove entitlement). In other words, whether and to what extent

recoupment is a defense to an avoidance claim is a factual inquiry. See Sec. Inv.

Prot. Corp. v. Bernard L. Madoff Inv. Sec. LLC, 654 B.R. 224, 236 (Bankr. S.D.N.Y.

2023) (quoting In re Malinowski, 156 F.3d 131, 135 (2d Cir. 1998)) (because

defense of recoupment is equitable in nature, “the facts in the particular case

are important”); Mercy Hosp. of Watertown, 171 B.R. at 496 (factual inquiry

necessary to determine whether transaction is in nature of recoupment).

Turning then to the Debtor’s amended complaint here, it is not clear that

the transactions complained of are in the nature of setoff or recoupment as the

Defendants contend. Their argument is based on the Debtor’s use of the term

“offsets” to describe the transactions upon which the avoidance claims are

founded. But terminology notwithstanding, the allegations of the amended

complaint describe a varied process by which transactions between the parties

were settled at different times. Among them, the Debtor does allege that net claim

reimbursement proceeds were routinely deposited into the Debtor’s account after

deducting DIR Fees owed to the Defendants, suggestive of setoff or recoupment.

But the allegations also describe a process by which the Defendants would pay

the reimbursement proceeds in full to the Debtor’s account with Cardinal and

Cardinal would thereafter pay the Defendants’ claims for DIR Fees from the

account. For instance, the amended complaint alleges that reimbursement

proceeds from all PBMs were deposited into the same account with Cardinal

where they “were comingled before any DIR FEES were deducted therefrom” and

that “Cardinal processed each of the PBM’s DIR FEE claims and collectively offset

them against the aggregate proceeds of [the Debtor’s] Accounts Receivable.”

Indeed, the Debtor’s response to the Motions to Dismiss contends that “the

reality is that the transfers at issue in this case are not offsets but rather

payments of DIR fees from [the Debtor’s] property to the [Defendants].”

Inartful as they are, the allegations of the amended complaint provide

enough to give the Defendants notice of the grounds for the Debtor’s avoidance

claims and to withstand, at least for now, the Defendants’ assertion that the

transactions at issue are not subject to avoidance as setoffs or recoupment. If

true, the Debtor’s allegations of Cardinal affirmatively paying the Defendants for

DIR Fees owed to them could be sufficient to dispose of any argument of setoff

or recoupment. But the Court cannot make that determination on the record

before it; the nature of the transactions at issue is a disputed fact for which

further development of the factual record is needed. Further, in terms of

recoupment specifically, the Debtor’s allegation that Cardinal would

indiscriminately settle claims by PBMs for DIR Fees from the commingled pot of

aggregate proceeds received from all PBMs creates a dispute of fact as to whether

the “same transaction” requirement for recoupment exists. The Defendants may

ultimately prevail defending against the Debtor’s avoidance actions if the facts

in the record establish that the transactions at issue were setoffs or recoupment.

But on the undeveloped record at this stage of the proceedings, the Defendants’

assertions of setoff and recoupment are not a basis for dismissing the Debtor’s

avoidance claims.

B. The Debtor’s Confirmed Plan Failed to Preserve Postpetition Causes of

Action for Postconfirmation Prosecution by the Debtor.

The Defendants’ second argument for dismissal focuses on Count I and its

request for relief under §542. Their argument is twofold. They contend that, due

to the postconfirmation status of the case and the Debtor’s failure to preserve

any claims under §542 through the confirmed plan, the bankruptcy estate and

the Debtor’s ability to assert such claims have been extinguished. And even if

the Debtor could assert the claim, the Defendants argue that §542(a) does not

provide a basis for recovery of postpetition transfers. In its response, the Debtor

counters that the provisions of its confirmed plan did preserve the claims

asserted against the Defendants but does not address whether §542(a) even

provides a basis for relief.

Count I of the amended complaint seeks relief under §542 as well as §§549

and 550, all based on postpetition transactions and occurrences. Such relief is

generally reserved for the trustee to pursue. 11 U.S.C. §§542, 549, 550. But in

Chapter 11 cases where, as here, no trustee is appointed, the debtor acts as a

debtor-in-possession with generally all the rights and duties of a trustee. See 11

U.S.C. §§1101, 1107(a). Among such rights is the exercise of the trustee’s

authority under the turnover and avoidance provisions of Chapter 5 of the Code.

LB Steel, LLC v. Walsh Const. Co. (In re LB Steel, LLC), 572 B.R. 690, 705 (Bankr.

N.D. Ill. 2017). But absent plan provisions to the contrary, those powers

generally disappear along with a debtor’s status as debtor-in-possession upon

confirmation of a Chapter 11 plan. Red Barn Motors, Inc. v. Louisiana’s First

Choice Auto Auction, LLC, 2015 WL 9701040, at *3 (S.D. Ind. Dec. 11, 2015).

Section 1123(b)(3)(B) allows for Chapter 11 plans to provide for the

“retention and enforcement by the debtor, by the trustee, or by a representative

of the estate appointed for such purpose, of any . . . claim or interest” belonging

to the debtor or the estate. 11 U.S.C. §1123(b)(3)(B). Courts have adopted a

standard for determining whether a claim is adequately retained by a Chapter

11 plan, requiring that the plan include retention language that is “specific and

unequivocal” but disagreeing about how to apply the standard. See, e.g., In re

Futter Lumber Corp., 473 B.R. 20, 30-31 (E.D.N.Y. 2012) (collecting and

categorizing cases into three approaches). The Seventh Circuit has commented

on the “specific and unequivocal” standard, noting that the statute itself

importantly “contains no such requirement.” Matter of P.A. Bergner & Co., 140

F.3d 1111, 1117 (7th Cir. 1998). Although it did not disavow the standard, the

court in P.A. Bergner opted against a literal interpretation of the phrase. Id.

Instead, the Seventh Circuit looked to the circumstances underlying decisions

applying the standard and concluded that a plan should unequivocally retain

claims of a given type but need not specifically identify individual claims. Id.

Since P.A. Bergner, courts in the Seventh Circuit have varied in their

determination of whether the language of a particular plan was sufficient to

retain claims postconfirmation. Among the decisions, that in KHI Liquidation

Trust v. Wisenbaker Builder Servs., Ltd. (In re Kimball Hill, Inc.), 449 B.R. 767

(Bankr. N.D. Ill. 2011), stands out as a thorough and well-reasoned synthesis of

the issue. Picking up where P.A. Bergner left off, the court in Kimball Hill explored

the bounds of what plan language would suffice to retain a claim for prosecution

after confirmation. Noting P.A. Bergner’s favorable citation to In re Acequia, Inc.,

34 F.3d 800, 807-08 (9th Cir. 1994)—which dealt with decidedly broad plan

language—and the pitfalls of requiring exacting specificity which would only

delay confirmation and could still lead to detrimental consequences to the estate

for even the slightest inaccuracy, the court in Kimball Hill concluded that broad,

categorical retention language is adequate as long as it is clear in what it

reserves. Kimball Hill, 449 B.R. at 774-78.

Turning to the Debtor’s confirmed plan here, Section IV.A provides for the

liquidation of assets comprised in part of “pre-petition Causes of Action against

. . . the PBM’s [sic].” Section IV.B provides for the creation of a “Litigation Fund”

into which proceeds from litigation and settlement of “Causes of Action” are to

be deposited and distributed for the benefit of creditors according to the

procedures set forth. The plan does not define “Causes of Action,” but the

definitions for other terms are helpful. The plan defines “Litigation Proceeds” as

including money collected from litigation or settlement of causes of action

against persons or entities that collected DIR Fees. “DIR Fees” are defined as

“pharmaceutical-related expenses deducted from Debtor’s gross sale proceeds

by Pharmacy Benefit Mangers [sic] (PBM’s) [sic],” naming the Defendants as

being among such PBMs. “Litigation Fund” is defined as “the fund established

pursuant to Section IV.B of the Plan[,]” which section makes reference to the

Debtor having “pre-petition causes of action against . . . the PBM’s [sic], as more

fully described in the Disclosure Statement.”

The Second Amended Disclosure Statement identifies “pre-petition Causes

of Action” falling into three categories: two involving non-PBM entities and thus

not relevant here, and a third category described as “causes of action against the

PBM’s [sic] for unfair and deceptive practices involving the collection of

approximately $1,000,000 in DIR Fees from Debtor’s accounts receivable in the

five years preceding the Petition Date.” Consistent with the plan, the disclosure

statement calls for the establishment of a “Litigation Fund” into which any

“proceeds attributable to Debtor’s causes of action shall be paid” for purposes of

implementing and funding the plan. The final paragraph of the disclosure

statement provides as follows:

D. Retention of Causes of Action and Jurisdiction. All rights

and causes of action held by the Debtor prior to confirmation

shall be retained by Debtor, as Debtor-in-Possession and

successor in interest, regardless of whether such rights or

causes of action came into being pre-petition or post-petition.

The Bankruptcy Court will retain jurisdiction over matters

related to the Plan to the full extent available by law.

Although neither the plan nor disclosure statement describes avoidance

or other Code-based causes of action to be pursued by the Debtor—indeed the

disclosure statement describes the causes of action as unfair and deceptive

practice claims—they do identify the basic transactions and occurrences upon

which the claims are based and the entities against whom the claims are to be

made. Adopting the reasoning of the Kimball Hill decision, this Court finds that

the plan and disclosure statement language is enough to make clear the Debtor’s

intention to pursue the Defendants regarding the prepetition collection of DIR

Fees. Indeed, even under a narrower interpretation of “specific and unequivocal”

followed in some jurisdictions outside Seventh Circuit, naming the prospective

defendant and stating the factual basis for claims would be enough to preserve

them for postconfirmation prosecution. Kimball Hill, 449 B.R. at 774 (citing

Browning v. Levy, 283 F.3d 761, 775 (6th Cir. 2002) (noting significance, in

deeming blanket reservation ineffective, that the plan “neither names [the

defendant] nor states the factual basis for the reserved claims”)).

But the plan and disclosure statement language at issue here is clearly

limited to causes of action based on prepetition events and claims. In specifying

its intention to pursue prepetition causes of action it might have against the

Defendants and their collection of DIR Fees, the Debtor defined the category of

claims to be preserved such that those claims falling into the category were

successfully retained to the exclusion of all others. Chapter 11 plans are

essentially contracts which should be interpreted to give effect to all terms

according to their ordinary and natural meaning. Kmart Corp. v. Intercraft Co. (In

re Kmart Corp.), 310 B.R. 107, 125 (Bankr. N.D. Ill. 2004) (citations omitted). The

only reasonable interpretation of the plan’s reference to prepetition causes of

action here is that it did not apply to postpetition causes of action. The

Defendants are therefore correct that the plan failed to preserve the postpetition

claims in Count I for turnover and accounting under §542. And, although not

argued by the Defendants, the same reasoning extends to the Debtor’s other

claims in Count I for avoidance and recovery of postpetition transfers under

§§549 and 550.

To be sure, the disclosure statement does contain a broad retention

provision in its final paragraph, which warrants a brief discussion even if the

Debtor failed to mention it. It provides that “[a]ll rights and causes of action held

by the Debtor prior to confirmation shall be retained by Debtor, as Debtor-in-

Possession and successor in interest, regardless of whether such rights or causes

of action came into being pre-petition or post-petition.” While a natural reading

of the provision would include the causes of action asserted in Count I of the

amended complaint, courts have widely concluded that similar provisions alone

are ineffective for purposes of §1123(b)(3)(B). See, e.g., D & K Props. Crystal Lake

v. Mutual Life Ins. Co. of New York, 112 F.3d 257, 261 (7th Cir. 1997) (“blanket

reservation that seeks to reserve all causes of action reserves nothing”); Red Barn

Motors, 2015 WL 9701040, at *3 (recognizing authorities holding blanket

reservation ineffective but concluding broad retention provision at issue saved

by other provisions specifically naming causes of action and defendants); Kmart,

310 B.R. at 123-24 (“open-ended statement that the debtor reserves actions it

may choose to institute leaves creditors in the dark about whether post-

confirmation recoveries will in fact be retained for potential enforcement”). The

final paragraph in the disclosure statement here purports to reserve everything

and therefore reserves nothing. To the extent the retention provision is saved by

other provisions in the disclosure statement and plan, it is only to the extent of

the effectiveness of those other provisions, which the Court has already

explained is limited to prepetition causes of action. The retention provision in

the disclosure statement adds nothing to alter the outcome here.

Count I relates exclusively to postpetition claims which the Debtor’s

confirmed plan failed to preserve for postconfirmation pursuit by the Debtor.

Count I must therefore be dismissed in its entirety in each proceeding. And,

because the problems with Count I could not be cured through amendment, the

dismissal is with prejudice.

C. Neither §160/5(a) of the Illinois Uniform Fraudulent Transfer Act Nor

§544(b) of the Bankruptcy Code Requires the Debtor to Identify the

Creditor in Whose Shoes it Stands for Pleading Purposes.

The Defendants’ final argument for dismissal relates to Count VII against

Express Scripts and Count XIII against OptumRX, both brought under 740 ILCS

160/5 of the Illinois Uniform Fraudulent Transfer Act (“IUFTA”) and grounded in

§544(b) of the Bankruptcy Code.2 According to the Defendants, Counts VII and

XIII must be dismissed because the Debtor failed to allege the existence of a

creditor against whom the transfer is voidable. Although the Debtor’s response

acknowledges the argument, it does not actually contest the Defendants’

assertions.

2 Although Counts VII and XIII reference §541(a), §544(b) provides the authority for a trustee to step into the shoes

of a creditor to avoid a transfer under nonbankruptcy law for the benefit of all creditors. It is apparent that this is the

avenue through which relief is being sought, and the Debtor’s failure to cite §544 as the basis for the claim asserted

does not prevent the Court from construing it as such. See King v. Kramer, 763 F.3d 635, 642 (7th Cir. 2014)

(citations omitted).

The Defendants cite cases supporting the proposition that the plaintiff in

a fraudulent transfer action rooted in §544(b) must establish the existence of a

qualifying creditor to obtain relief—a generally uncontroversial point. See, e.g.,

Karnes v. McDowell (In re McDowell), 87 B.R. 554, 558 (Bankr. S.D. Ill. 1988).

But more than that, the Defendants contend that the Debtor is further required

to affirmatively allege the existence of a qualifying unsecured creditor, citing

Aluminum Mills Corp. v. Citicorp North America, Inc. (In re Aluminum Mills Corp.),

132 B.R. 869, 889 (Bankr. N.D. Ill. 1991).

The Seventh Circuit has unequivocally stated, however, that a plaintiff

need not articulate a specific creditor in whose shoes it is stepping for purposes

of avoiding transfers under state law; it is sufficient if unsecured claims were

filed by creditors, any one of whose position a trustee could assume. Matter of

Leonard, 125 F.3d 543, 544 (7th Cir. 1997). The Seventh Circuit has reiterated

the point several times. See, e.g., In re Chicago Mgmt. Consulting Grp., Inc., 929

F.3d 803, 807, 811 (7th Cir. 2019) (affirming bankruptcy court determination

that existence of IRS and credit card debt was sufficient to permit §544(b) and

IUFTA action); In re Image Worldwide, Ltd., 139 F.3d 574, 577 (7th Cir. 1998)

(trustee need not identify creditor, so long as the unsecured creditor exists). Still,

the Seventh Circuit precedent leaves open the question of whether the plaintiff,

in bringing a claim rooted in §544(b), must plead the existence of a qualifying

creditor, even if only in general terms.

There is post-Leonard precedent from within this Circuit requiring such

pleading. In Covey v. Webster (In re Webster), 1999 WL 33582261, at *1 (Bankr.

C.D. Ill. Apr. 27, 1999) (Altenberger, J.), the court acknowledged the Seventh

Circuit’s conclusion that a plaintiff need not identify a creditor by name but

ultimately dismissed the action due to the plaintiff’s failure to allege that any

creditor existed at the time of the transfer, noting that the amended complaint

only needed to allege that a creditor existed. Cf. Maxwell v. Michael (In re Horizon

Grp. Mgmt., LLC), 652 B.R. 764, 789-91 (Bankr. N.D. Ill. 2023) (questioning the

scope and application of Leonard, noting that the decision does not affect the

plaintiff’s burden of proving the existence of a qualifying creditor, and stating

that, “[a]t the very least, the court must be reasonably assured that such a

creditor exists, even if the plaintiff need not specifically identify the creditor”).

Importantly, those decisions have in common a distinguishing fact: none

of the claims at issue involved §160/5 of the IUFTA under which the Debtor’s

claims here are brought. Both Webster and Horizon Group Management were

decided in the context of 740 ILCS 160/6(a), which requires the existence of a

creditor at the time of the transfer. Because it does not automatically follow that

such creditor also held an allowable claim at the time the bankruptcy petition

was filed for purposes of §544(b), it is understandable why courts would be

inclined to require plaintiffs to affirmatively plead the existence of such creditor.

Section 160/5, on the other hand, is not restricted to creditors existing at the

time of the alleged fraudulent transfer but rather provides for avoidance of

transfers as to any creditor, “whether the creditor’s claim arose before or after

the transfer was made or the obligation was incurred[.]” 740 ILCS 160/5(a). As

a practical matter then, for purposes of asserting a claim under 740 ILCS

160/5(a) in bankruptcy pursuant to §544(b), a plaintiff only need establish the

existence of an unsecured creditor as of the bankruptcy petition date.

Similarly, Aluminum Mills and the other decisions cited by the Defendants

requiring plaintiffs to specifically plead the existence of a creditor with a pending

claim against the debtor at the time of the alleged fraudulent transfer “were

decided prior to the enactment of (or were not governed by) section 160/5 of the

[IUFTA]” and are therefore distinguishable. Brandt v. KLC Fin., Inc. (In re Equip.

Acquisition Res., Inc.), 481 B.R. 422, 429-30 (Bankr. N.D. Ill. 2012). In drawing

that distinction and explaining that it is not necessary for a plaintiff bringing an

action under §160/5 of the IUFTA to identify a creditor with an existing claim at

the time of the alleged fraudulent transfer, the court in Equipment Acquisition

Resources simply took judicial notice of the “scores of unsecured claims filed in

the record of [the] case” which it deemed adequate to establish the existence of

a qualifying creditor. Id. at 430.

In the underlying bankruptcy case here, several unsecured claims were

filed by creditors on account of prepetition debts that have been deemed allowed

in the absence of objection. The Court can and does take judicial notice of those

claims, and, accordingly, the Debtor’s failure to allege the existence of any one

of those qualifying creditors is not a basis for dismissal under Rule 12(b)(6). Id.

(citing Henson v. CSC Credit Servs., 29 F.3d 280, 284 (7th Cir. 1994)).

Even without taking judicial notice of the claims register in the underlying

bankruptcy case, the existence of at least one unsecured creditor can easily be

inferred from the allegations of Counts VII and XIII. The amended complaint

alleges in both Counts VII and XIII that the Debtor “was insolvent on the date”

of or “became insolvent as a result of” the allegedly fraudulent transfers. The

Debtor also alleges under both counts that those transfers occurred over a period

beginning four years prior to the bankruptcy and up to the day the bankruptcy

petition was filed. Section 160/3(a) of the IUFTA provides that “[a] debtor is

insolvent if the sum of the debtor’s debts is greater than all of the debtor’s assets

at a fair valuation.” 740 ILCS 160/3(a). Accepting the Debtor’s allegations that

it was insolvent or rendered insolvent by transfers occurring up to the

bankruptcy filing, the natural inference drawn is that there existed unsecured

claims on the petition date at least to the extent the Debtor’s liabilities exceeded

its assets. See Paloian v. Geneva Seal, Inc. (In re Canopy Fin., Inc.), 477 B.R. 696,

708-09 (N.D. Ill. 2012) (applying such reasoning in context of 740 ILCS 160/6(a)

where it was undisputed that the debtor was insolvent at all relevant times).

Notwithstanding the Debtor’s utter failure to address the Defendants’

argument that Counts VII and XIII must be dismissed for not alleging the

existence of a creditor in whose shoes the Debtor is standing to bring the causes

of action under the IUFTA, the Court finds that dismissal of Counts VII and XIII

is not warranted. The case law cited by the Defendants in support of their

argument is inapt. Dismissing Counts VII and XIII for failing to expressly allege

the existence of an unsecured creditor at the time of filing the bankruptcy

petition when a court could take judicial notice of such fact would further be as

unproductive as dismissing a cause of action arising under the Bankruptcy Code

for failing to expressly allege that a debtor was in bankruptcy. In any event, the

Debtor’s allegations here that it was insolvent at the time of or made insolvent

by the alleged fraudulent transfers are enough for the Court to draw the inference

that there existed unsecured creditors at the time the bankruptcy petition was

filed. Count VII against Express Scripts and Count XIII against OptumRX will

therefore survive dismissal.

IV. Conclusion

The Defendants’ Motions to Dismiss will be granted in part and denied in

part. Count I against both Defendants will be dismissed because it is based on

postpetition claims and transactions which the Debtor’s confirmed plan plainly

did not preserve for postconfirmation prosecution. Because the problems cannot

be cured by amendment, the dismissal of Count I is with prejudice. The Motions

to Dismiss are denied in all other respects. The proceedings will move forward

on the remaining Counts VI and VII against Express Scripts and Counts XII and

XIII against OptumRX.

This Opinion is to serve as Findings of Fact and Conclusions of Law

pursuant to Rule 7052 of the Rules of Bankruptcy Procedure.

See written Order.

ENTERED: June 10, 2026

/s/ Mary P. Gorman

_________________________________________

UNITED STATES BANKRUPTCY JUDGE