Case: 1:15-cv-11534 Document #: 76 Filed: 09/23/16 Page 1 of 12 PageID #:603
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`UNITED STATES DISTRICT COURT
`NORTHERN DISTRICT OF ILLINOIS
`EASTERN DIVISION
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`15 C 11534
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`ELIZABETH BERG, as trustee for the
`bankruptcy estate of John Wiesner,
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`Plaintiff,
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`v.
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`NEXUS RISK MANAGEMENT INC.,
`NEXUS RISK MANAGEMENT LP.,
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`CI INVESTMENTS INC., and
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`CHARLES GILBERT,
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`Defendants.
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`_________________________________
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`CI INVESTMENTS, INC.,
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`Third Party Plaintiff,
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`v.
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`CHARLES GILBERT,
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`NEXUS RISK MANAGEMENT INC., and
`NEXUS RISK MANAGEMENT LP.,
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`Third Party Defendants.
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`MEMORANDUM OPINION
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`CHARLES P. KOCORAS, District Judge:
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`This matter comes before the Court on the motion of Defendant and Third
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`Party Plaintiff, CI Investments Inc. (“CI”) for leave to file a crossclaim against
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`Defendants and Third Party Defendants, Charles Gilbert (“Gilbert”), Nexus Risk
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`Case: 1:15-cv-11534 Document #: 76 Filed: 09/23/16 Page 2 of 12 PageID #:604
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`Management Inc., and Nexus Risk Management LP (collectively, “Nexus
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`Defendants”). Dkt. 58. For the following reasons, the motion is granted.
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`BACKGROUND
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`On July 28, 2014, John Wiesner (“Wiesner”) filed a “voluntary petition for
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`relief under chapter 7 of the Bankruptcy Code.” Dkt. 75-1, Ex. 2, ¶ 1. Plaintiff,
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`Elizabeth Berg (“Berg”) “was appointed as successor chapter 7 trustee of the Estate of
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`John Wiesner on November 7, 2014.” Id., ¶ 8. Subsequently, Berg “not personally
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`but solely as the chapter 7 trustee” of Wiesner’s estate (“Estate”) filed a Second
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`Amended Complaint against the Nexus Defendants and CI. Dkt. 69, p. 1. CI attached
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`the Second Amended Complaint1 to its Reply In Support Of Its Motion To File A
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`Cross Claim. Dkt. 75-1, Ex. 2. Berg alleges in the Second Amended Complaint that
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`“[f]rom 2010 until 2013, [Wiesner] was a contractor working as a Risk Management
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`Strategist for the Chicago Board Options Exchange (‘CBOE’).” Dkt. 75-1, Ex. 2,
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`¶ 31. While employed by the CBOE, Wiesner supposedly developed intellectual
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`property including “software, code, formula, and other elements utilized in trading
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`strategies.” Id., ¶ 32. Specifically, Berg claims that Wiesner “developed Realized
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`Historical VIX, Static Volatility Surfaces, Static Delta Gamma, Weez-a-tron and
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`skewed volatility parameters in a modified Black-Scholes formula; a formula he had
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`1 Berg and the Nexus Defendants’ Response references the “First Amended Complaint,” but CI’s
`Motion For Leave To File Cross-Claim and its Reply In Support Of Its Motion To File A Cross
`Claim reference a “Second Amended Complaint.” According to the docket, an Answer was filed
`in response to the Second Amended Complaint. Moreover, Exhibit 2 of CI’s Reply in Support
`Of Its Motion To File A Cross Claim appears to be the Second Amended Complaint. Thus, the
`Court assumes the operative complaint is the Second Amended Complaint.
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`2 
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`Case: 1:15-cv-11534 Document #: 76 Filed: 09/23/16 Page 3 of 12 PageID #:605
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`originally written in 2002.” Id., ¶ 32. Berg also alleges that “[t]he Static Volatility
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`Surfaces and skewed volatility parameters in a modified Black-Scholes formula are
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`trade secrets” that belong to Wiesner “and have only ever been used with the
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`understanding that they would stay a secret and not be made available to the public.”
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`Id., ¶ 34.
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`Between 2010 and 2013, Wiesner also allegedly produced a trading strategy
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`using the intellectual property that he had already created. Id., ¶ 35. Subsequently,
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`Wiesner “created software to implement [that] trading strategy.” Id., ¶ 36. This
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`required Wiesner to code his trading strategy into an Excel Spreadsheet, known as
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`“The Giant Spreadsheet.” Id., ¶ 37. Wiesner later used The Giant Spreadsheet, and
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`other intellectual property he had previously created, to make the Validation Tool and
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`the Live Trading Sheet. Id., ¶ 40. According to the Second Amended Complaint,
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`Berg has had “copyrights granted for The Giant Spread Sheet [ ], Static Delta Gamma
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`[ ], Weez-a-tron [ ], and Realized Historical VIX [ ], and [she] owns the rights and
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`title to the copyright in the software code, spreadsheets, and other intellectual
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`property.” Id., ¶ 41. The Estate purportedly owns Wiesner’s intellectual property and
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`Berg “is the real party in interest to pursue claims and causes of action” that relate to
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`Wiesner’s intellectual property. Id., ¶ 19.
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`Nexus Risk Management Inc. is a Canadian corporation “engaged in
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`developing software for companies to use for hedging variable annuities.” Id.,
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`¶¶ 21, 22. Nexus Risk Management Inc. is the parent company of Nexus Risk
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`3 
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`Case: 1:15-cv-11534 Document #: 76 Filed: 09/23/16 Page 4 of 12 PageID #:606
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`Management LP, an Illinois limited partnership with its principal place of business in
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`Chicago. Id., ¶¶ 23–24. Gilbert is a Canadian citizen, and he is the president and
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`majority owner of Nexus Risk Management Inc. Id., ¶ 29. CI is a Canadian
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`corporation that operates as a mutual fund company. Id., ¶¶ 26–27.
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`In 2009, “CI contracted with Nexus Risk Management Inc. to develop a new
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`trading strategy for its new G5|20 mutual fund.” Id., ¶ 42. However, according to the
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`Second Amended Complaint, Gilbert and Nexus Risk Management Inc. were unable
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`to provide CI with “a satisfactory and effective trading strategy” between 2009 and
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`2010. Id., ¶ 46. Consequently in 2010, Gilbert contacted Wiesner to create a trading
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`strategy for CI. Id., ¶ 47. Wiesner allegedly created “a trading strategy for CI,”
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`which incorporated intellectual property that he had previously developed. Id., ¶ 48.
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`“For the creation of a trading strategy and the continued use of his intellectual
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`property,” Berg claims that Wiesner “was promised twenty percent [ ] ownership of
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`the Nexus parent company, Nexus Risk Management Inc., and a base salary when the
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`fund started generating revenue.” Id., ¶ 49.
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`Over time, Wiesner’s involvement with the Nexus Defendants and CI
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`supposedly changed from merely creating the trading strategy to also implementing
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`the strategy into usable software. Id., ¶ 52. According to Berg, this required Wiesner
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`to use The Giant Spreadsheet, which was copyrighted and contained his trading
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`strategy. Id., ¶¶ 41, 53. During the time that Wiesner was working as a contractor for
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`CI, he also maintained his contract position with the CBOE. Id., ¶¶ 51, 58. However,
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`4 
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`Case: 1:15-cv-11534 Document #: 76 Filed: 09/23/16 Page 5 of 12 PageID #:607
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`in June of 2013, “CI required [Wiesner] to quit as a contractor with the CBOE” and
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`work full time for the Nexus Defendants because once the fund went live, Wiesner
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`“would be directing trades to the CBOE floor,” which could have caused a potential
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`conflict of interest. Id., ¶ 58.
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`On October 1, 2013, CI’s G5|20 fund went live. Id., ¶ 61. During the three
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`years prior to launching CI’s G5|20  fund, Wiesner’s strategy was apparently
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`“developed, improved upon, and modified.” Id., ¶ 60. Wiesner was terminated on
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`November 12, 2013 and never received the twenty percent ownership in Nexus Risk
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`Management Inc. that he was allegedly promised. Id., ¶¶ 62–63.
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`After CI’s G5|20 fund went live, on January 27, 2014, CI and Nexus Risk
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`Management, Inc. “entered into an amended and restated software license agreement,
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`under which CI made a $1,750,000.00 equity investment in Nexus Risk Management
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`Inc. and $500,000.00 loan to the Nexus entities in exchange for a Canadian exclusive
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`license to use,” what Berg claims is Weisner’s intellectual property. Id., ¶ 66.
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`However, shortly thereafter, “[o]n November 14, 2014, CI terminated its relationship
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`with the Nexus” Defendants. Id., ¶ 68. The Asset Purchase Agreement, attached as
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`Exhibit A to Berg’s and the Nexus Defendants’ Response And Objection To Motion
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`For Leave, contains the terms of the termination. See Dkt. 73, Ex. A. Pursuant to the
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`Asset Purchase Agreement, Nexus Risk Management Inc. agreed to transfer
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`ownership of the Nexus Risk Platform to CI. Id., p. 2. The Nexus Risk Platform
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`includes “all right, title and interest in and to . . . [Nexus Risk Management Inc.’s]
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`5 
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`Case: 1:15-cv-11534 Document #: 76 Filed: 09/23/16 Page 6 of 12 PageID #:608
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`software platform . . . which comprises an integrated suite of modules and utilities that
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`enable companies to execute asset liability management and dynamic hedging
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`strategies.” Id., p. 3. According to Berg’s allegations, it appears that the Nexus Risk
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`Platform uses the software programs that Wiesner developed and implemented, or
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`some type of derivative work of Wiesner’s intellectual property. See Dkt. 75-1, Ex. 2,
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`¶ 69 (“As part of the termination of the relationship with CI, the Nexus companies and
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`Charles Gilbert transferred [Wiesner’s] intellectual property, including the Validation
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`Tool, the Live Trading Sheet, and The Giant Spreadsheet, to CI”); see also id., ¶¶ 72–
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`73 (“CI continues to offer the G5|20 fund for sale in Canada,” which relies on
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`Wiesner’s intellectual property or a derivative work of Wiesner’s intellectual
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`property); and ¶ 71 (“As part of the termination . . . CI licensed to the Nexus
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`companies the right to market and use [Wiesner’s] intellectual property and trading
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`strategy anywhere outside of Canada in perpetuity for $1.”). Berg claims that the
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`Nexus Defendants and CI do not own Wiesner’s intellectual property, and that once
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`he “was terminated, they no longer continue[d] to have a license to use [his]
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`intellectual property.” Id., ¶ 65. The Second Amended Complaint contains six
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`counts, all of which include allegations regarding Wiesner’s intellectual property and
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`the Nexus Defendants’ and CI’s use, or alleged misuse, of that property. See 75-1,
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`Ex. 2.
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`Count I of CI’s proposed crossclaim alleges that if CI is found liable on Berg’s
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`claims due to a finding “that Nexus did not own material portions of the Nexus Risk
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`6 
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`Case: 1:15-cv-11534 Document #: 76 Filed: 09/23/16 Page 7 of 12 PageID #:609
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`Management Platform,” then the Nexus Defendants breached Article IV sections
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`4.3(a) and 4.4 of the Asset Purchase Agreement.2 Dkt. 58, Ex. 1, p. 3–4. In the
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`alternative, Count II of CI’s proposed crossclaim seeks contribution pursuant to the
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`Illinois Joint Tortfeasor Contribution Act, 740 ILCS 100/1, from the Nexus
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`Defendants should CI be found liable on Berg’s Illinois common law unjust
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`enrichment count, “based on trade secret claims and not based on any copyright
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`claims.” Id., p. 4–5. Now before the Court is CI’s Motion For Leave To File Cross-
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`Claim. Dkt. 58.
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`LEGAL STANDARD
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`Pursuant to Federal Rule of Civil Procedure 13(g) (“Rule 13(g)”), “[a] pleading
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`may state as a crossclaim any claim by one party against a coparty if the claim arises
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`out of the transaction or occurrence that is the subject matter of the original action or
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`of a counterclaim, or if the claim relates to any property that is the subject matter of
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`the original action.” Cutler v. Quality Terminal Servs., LLC, No. 08-cv-6630, 2011
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`WL 98927, at *1 (N.D. Ill. Jan. 12, 2011) (quoting Fed. R. Civ. P. 13(g)). “Rule 13(g)
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`does not impose any time limitations on the filing of cross claims.” Id. Accordingly,
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`after “the parties have filed their initial pleadings, any motion to amend those
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`2 Section 4.3(a) states, “[neither] the execution and delivery of this Agreement or any other
`agreement or document to which the Vendor [Nexus Risk Management Inc.] is or will become a
`party as contemplated by this Agreement, the consummation of the transactions contemplated
`herein or therein nor compliance by the Vendor with any provisions hereof or thereof will . . .
`(iv) result in the creation or imposition of any encumbrance upon the Nexus Risk Platform.”
`Dkt. 58, Ex. 1, p. 3–4; see also Dkt. 73, Ex. A, p. 7 Section 4.4 explains, “[t]he Vendor [Nexus
`Risk Management Inc.] has good, valid and marketable title to all the Nexus Risk Platform, with
`good and valid title, free and clear of all encumbrances.” Id.
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`7 
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`Case: 1:15-cv-11534 Document #: 76 Filed: 09/23/16 Page 8 of 12 PageID #:610
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`pleadings and file a cross-claim must be made pursuant to Federal Rule of Civil
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`Procedure 15.” Tragarz v. Keene Corp., 980 F.2d 411, 431 (7th Cir. 1992).
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`Federal Rule of Civil Procedure 15(a) (“Rule 15(a)”) provides that leave to
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`amend shall be freely given when justice so requires, but courts should consider the
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`following factors when deciding whether or not to grant leave to amend: (i) undue
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`delay or bad faith by the moving party; (ii) dilatory motive on the part of the movant;
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`(iii) repeated failure by the movant to cure deficiencies by amendments previously
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`allowed; (iv) undue prejudice to the opposing party; and (v) futility of the amendment.
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`See Cutler, 2011 WL 98927, at *1 (citing Forman v. Davis, 371 U.S. 178, 182
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`(1962)). “[T]he trial court must determine if prejudice to the defendant outweighs the
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`underlying policy of Rule 15 that a case be tried on the merits.” Il. Power Co. v.
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`Figgie Int’l., Inc., “Automatic” Sprinkler Corp. of Am. Div., No. 89 C 4632, 1991 WL
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`3323, at *2 (N.D. Ill. Jan. 7, 1991). “The decision whether to allow an amendment to
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`the pleadings rests within the sound discretion of the trial court.” Shapo v. Engle, No.
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`98 C 7909, 2000 WL 198435, at *1 (N.D. Ill. Feb. 11, 2000).
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`DISCUSSION
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`Berg and the Nexus Defendants contend that “CI’s Motion for Leave to file its
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`proposed Cross-Claim should be denied as it does not address transactions,
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`occurrences, or factual or legal issues that are identical to the” Second Amended
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`Complaint. Dkt. 69, p. 2. They further assert that CI’s proposed crossclaim “seeks to
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`resolve disputes solely related to the relationship between CI and the Nexus
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`Case: 1:15-cv-11534 Document #: 76 Filed: 09/23/16 Page 9 of 12 PageID #:611
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`Defendants” and that such resolution “will require an analysis of facts that are not
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`relevant to [Berg’s] claims.” Id., p. 3. Berg and the Nexus Defendants also argue that
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`the motion for leave to file the crossclaim should be denied: (i) because Count I of the
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`crossclaim involves a dispute between two Canadian entities, over a Canadian
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`contract, governed by Canadian law; and (ii) because CI cannot seek contribution
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`from the Nexus Defendants under the Illinois Contribution Among Joint Tortfeasors
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`Act. Dkt. 69, p. 3–6.
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`CI contends that Count I of the proposed crossclaim “arises out of the same
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`transaction that is the subject of the Second Amended Complaint” and “Count I also
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`relates to property that is the subject matter of the original action: the intellectual
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`property that” Berg alleges gives rise to the trade secret and copyright infringement
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`claims against CI and the Nexus Defendants. Dkt. 75, p. 4. CI also responds that
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`United States federal courts frequently apply Canadian law, and that “the burden for
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`U.S. courts in applying Canadian law is not noticeably different from the burden of
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`applying another state’s law.” Id., p. 6, 8. Moreover, CI argues, that because
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`“[u]njust enrichment claims are often founded in tort,” it has “a statutory right under
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`the plain wording of 740 ILCS 100/1 to pursue its contribution crossclaim (Count II)
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`against the Nexus Defendants.” Id., p. 8–9. Finally, CI asserts that granting the instant
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`motion “will not prejudice or interfere with these proceedings progressing efficiently”
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`because “[t]his case is in the early stages and discovery has just begun.” Dkt. 58,
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`¶¶ 1–2.
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`Case: 1:15-cv-11534 Document #: 76 Filed: 09/23/16 Page 10 of 12 PageID #:612
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`The Court agrees with CI. According to the Asset Purchase Agreement, when
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`CI and the Nexus Defendants terminated their relationship, the Nexus Defendants
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`agreed to transfer the Nexus Risk Platform to CI. Dkt. 73, Ex. A, p. 2. The Second
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`Amended Complaint alleges that “[a]s part of the termination of the relationship with
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`CI, the Nexus companies and Charles Gilbert transferred [Wiesner’s] intellectual
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`property, including the Validation Tool, the Live Trading Sheet, and The Giant
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`Spreadsheet, to CI.” Dkt. 75-1, Ex. 2, ¶ 69. Berg also asserts that both CI and the
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`Nexus Defendants “have and continue to reproduce, distribute, use, disclose and offer
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`for sale” Wiesner’s “intellectual property, including but not limited to The Giant
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`Spread Sheet, the Live Trading Sheet, and the Validation Tool.” Id., ¶ 89; see also
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`¶ 73, 83, 93. These allegations, among others, demonstrate that Count I of the
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`proposed crossclaim relates to the property that is the subject matter of the Second
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`Amended Complaint. As to Count II, CI seeks contribution from the Nexus
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`Defendants in the event that CI is found liable on Berg’s unjust enrichment count—
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`Count V of the Second Amended Complaint. Accordingly, Count II arises out of the
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`transactions or occurrences that are the subject matter of the Second Amended
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`Complaint. Thus, the requirements of Rule 13(g) have been satisfied. However,
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`because Rule 13(g) does not impose time limitations on the filing of crossclaims, the
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`Court must determine whether to grant the motion to amend the pleadings under Rule
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`15(a).
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`Case: 1:15-cv-11534 Document #: 76 Filed: 09/23/16 Page 11 of 12 PageID #:613
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`Neither Berg nor the Nexus Defendants assert that CI: (i) engaged in an
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`unreasonable delay or acted in bad faith; (ii) had a dilatory motive; or (iii) repeatedly
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`failed to cure deficiencies by amendments previously allowed. Nor does the Court
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`believe that any of these circumstances exist in the instant matter. As to undue
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`prejudice, Berg and the Nexus Defendants’ argue that the motion should be denied
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`because CI’s proposed crossclaim involves a dispute between CI and the Nexus
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`Defendants and resolution of that dispute “will require an analysis of facts that are not
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`relevant to [Berg’s] claims.” Dkt. 69, p. 2–3. While Count I of the crossclaim will
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`certainly require the Court to analyze additional facts that may or may not be relevant
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`to all of Berg’s claims, Count I is a breach of contract claim that involves intellectual
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`property that Berg alleges belongs to Wiesner. The question of ownership of the
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`intellectual property is thus relevant to both Berg’s claims and Count I of CI’s
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`proposed crossclaim. Accordingly, this argument is unpersuasive.
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`Berg and the Nexus Defendants arguments that CI’s motion should be denied
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`because it involves a “dispute over a Canadian contract entered into between entirely
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`Canadian parties” and because “CI is not entitled to contribution under the Illinois
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`Contribution Among Joint Tortfearors Act,” seem to suggest that leave should not be
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`granted because the amendment would be futile. Dkt. 69, p. 1. The first argument is
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`unconvincing because, as CI correctly argues, “federal courts are often compelled to
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`apply foreign law.” Canadian Pac. Express & Transp. Ltd. v. Baretz, No. 96 C 844,
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`1996 WL 515166, at *4 (N.D. Ill. Sept. 6, 1996) (“That we might be required to apply
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`Case: 1:15-cv-11534 Document #: 76 Filed: 09/23/16 Page 12 of 12 PageID #:614
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`Canadian Law . . . does not counsel otherwise for the federal courts are often
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`compelled to apply foreign law.”) (citing Lehman v. Humphrey Cayman, Ltd., 713
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`F.2d 339, 345 (8th Cir. 1983); see generally, Denison Mines, Ltd. v. Mich. Chem.
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`Corp., 469 F.2d 1301 (7th Cir. 1972) (applying Ontario contract law). The second
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`argument is also unavailing because “[i]nfringement of intellectual property rights
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`sounds in tort,” see Habitat Wallpaper and Blinds, Inc., v. K.T. Scott Ltd. P’ship,
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`807 F. Supp. 470, 473 (N.D. Ill. 1992), and Berg’s unjust enrichment count—Count V
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`of the Second Amended Complaint—is based on the alleged misappropriation of
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`Wiesner’s intellectual property. Thus, because the standards set out by Rule 13(g)
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`and Rule 15(a) have been satisfied, CI’s Motion For Leave To File Cross-Claim, Dkt.
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`58, is granted.
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`CONCLUSION
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`For the aforementioned reasons, CI’s Motion For Leave To File Cross-Claim,
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`Dkt. 58, is granted.
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` Charles P. Kocoras
`United States District Judge
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`Date: 9/23/2016
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