                           In the
 United States Court of Appeals
              For the Seventh Circuit
                        ____________

Nos. 04-3821, 04-4044
MICHAEL BRANDON,
                                             Plaintiff-Appellant,
                               v.


ANESTHESIA & PAIN MANAGEMENT
ASSOCIATES, LTD., et al.,
                                          Defendants-Appellees.
                        ____________
           Appeals from the United States District Court
                for the Southern District of Illinois.
      Nos. 97-CV-1004, 03-CV-0493—Michael J. Reagan, Judge.
                        ____________
       ARGUED MAY 9, 2005—DECIDED AUGUST 15, 2005
                        ____________




  Before POSNER, EASTERBROOK, and EVANS, Circuit Judges.
   POSNER, Circuit Judge. The plaintiff, a physician, won a
$2.53 million judgment in a diversity suit for retaliatory
discharge that he had brought in a federal district court in
Illinois against his former employer, a corporation named
Anesthesia & Pain Management Associates (APM). We
affirmed the judgment, 277 F.3d 936 (7th Cir. 2002), but
APM refused to pay any part of it. Brandon then filed a
2                                      Nos. 04-3821, 04-4044

supplementary proceeding, Fed. R. Civ. P. 69(a), in the
course of which he learned that after he had filed his tort
suit APM had transferred $878,000 in receipts from accounts
receivable that it had collected and $300,000 in cash bonuses
(for a total of $1,178,000) to the three physicians who owned
APM—Drs. Ravi, Slocomb, and Boivin—and to two physi-
cians employed by the corporation, Drs. Gillen and
Chintapalli. All five physicians were named as defendants
in the supplementary proceeding. The $1,178,000 figure
seems to be erroneous; the value of the accounts receivable
transferred, so far as we can determine from the record, was
not $878,000 but $931,000. That is a matter to be straight-
ened out on remand.
  Brandon contended in the supplementary proceeding that
the payment to the defendants, after he filed suit against
APM, of the bonuses and of the receipts from the collection
of the accounts receivable—payments that left APM with
only $39,000 in assets—were fraudulent conveyances of
property that belonged to the corporation.
  Years later he brought a separate supplementary proceed-
ing against the three shareholders, claiming that they were
alter egos of APM and therefore personally liable for the
corporation’s debt to him. This second proceeding named as
an additional defendant a corporation, St. Clair Anesthesia
Ltd., that APM’s shareholders had formed the day after the
verdict in Brandon’s favor in the tort suit. He claimed that
St. Clair was a successor to APM and therefore liable for its
debt to him (though there is no “therefore,” as we’ll see),
and alternatively that St. Clair had been formed to squirrel
away assets of APM on which Brandon was entitled to levy
in order to collect his judgment. After St. Clair was formed,
APM ceased to do any business (though it has never been
dissolved), except to collect accounts receivable. It was out
of receipts from those collections that most of the challenged
Nos. 04-3821, 04-4044                                         3

payments to the individual defendants were made.
  Both supplementary proceedings are governed by the law
of Illinois, the state that the federal district court in which
the suit was filed is located in. Fed. R. Civ. P. 69(a). The
district judge dismissed them after a one-day bench trial,
ruling that the transfers had not been fraudulent convey-
ances, that the shareholders were not alter egos of APM, and
that St. Clair was not APM’s successor.
  The district court committed a succession of errors in
reaching the startling conclusion that none of the entities
from which Brandon is seeking payment of his judgment
(the five individual doctors plus St. Clair) owe him any-
thing. The first error was to rule that the accounts receivable
were owned by the individual physicians who owned or
were employed by APM rather than by APM itself, and the
second was to rule that the bonuses the physicians received
were in compensation for services they had rendered APM
rather than shares of the corporation’s profits.
  The corporation’s practice, which preceded Brandon’s
lawsuit against it, of deeming its accounts receivable the
property of its shareholders and physician employees was
actually a device for corporate profit sharing. For when
APM’s patients paid the receivables, they paid them to
APM, not to the receivables’ nominal owners, the physi-
cians; and APM used the money to pay its debts and other-
wise conduct its business before it paid any of the money to
the shareholders and employees. The receivables were thus
treated as a corporate asset. In re Marriage of Rubinstein, 495
N.E.2d 659, 663 (Ill. App. 1986); In re Marriage of Davis, 476
N.E.2d 1137, 1140-41 (Ill. App. 1985); cf. In re Milwaukee
Cheese Wisconsin, Inc., 112 F.3d 845, 846-47 (7th Cir. 1997); In
re Bullion Reserve of North America, 836 F.2d 1214, 1217 (9th
Cir. 1988). As a detail, we note that the price at which the
receivables were “sold” to the shareholders and employees
4                                      Nos. 04-3821, 04-4044

was based on the value of existing receivables; no part of the
price represented the value of future receivables. Yet it was
future receivables that were transferred to the doctors, and
these receivables, not having been part of the sales, were
unquestionably a corporate asset.
  The analysis of the bonuses is similar to that of the pro-
ceeds from the collection of the accounts receivable. The
bonuses were neither wages contractually due the recipients
nor even “earned bonuses” (which the Illinois Wage
Payment and Collection Act equates to wages, 820 ILCS
115/2); they were shares of corporate profits. The cash used
to pay them was a corporate asset, just like the receipts from
collecting the accounts receivable.
  The payments to the individual defendants of the bonuses
and the receipts were fraudulent conveyances in both senses
of the term. There was (1) no consideration (the bonuses
were not accrued wages and the defendants had not paid or
given other value for the accounts receivable) and there
were insufficient remaining assets to satisfy creditors, and
(2) the payments were intended to prevent a creditor from
collecting on his claim. 740 ILCS 160/5(a)(1), (2); Gendron v.
Chicago & North Western Transportation Co., 564 N.E.2d 1207,
1214-15, (Ill. 1990); Scholes v. Lehmann, 56 F.3d 750, 756-57
(7th Cir. 1995).
   An alternative route that Brandon could have followed
would have been to petition APM into bankruptcy; its
liabilities (primarily to him) exceeded its assets. Had he fol-
lowed this route, he could have reached back and undone
as preferential transfers the payments to the individual
defendants made within a year (now two years, as a result
of a 2005 amendment) before the bankruptcy. 11 U.S.C.
§ 548. The physicians might have benefited from APM’s
bankruptcy as well (and if so could have had APM file a
voluntary petition for bankruptcy) by limiting their liability
Nos. 04-3821, 04-4044                                           5

and shielding their postpetition income while paying part
of Brandon’s claim out of prepetition income and assets. By
trying to stiff Brandon, they exposed their future assets and
income to levy. That is what now comes to pass: money they
made, and assets they acquired, long after the verdict will
be used to satisfy the judgment debt. They blew their
opportunity to use bankruptcy law to enable a fresh start.
   Brandon’s alter ego theory, an alternative to the fraudu-
lent-conveyance theory, is that the ownership of APM’s
accounts receivable by the physicians—which, remember,
predated his tort suit—and the corporation’s practice (also
predating the suit) of distributing profits, as they accumu-
lated, in the form of bonuses, meant that APM operated
with virtually no corporate assets. It is natural for a group
of doctors, faced as they are with the possibility of malprac-
tice suits, to want to operate in a judgment-proof format.
But it is a risky gambit, for, since APM was a shell, Brandon
was entitled to pierce the corporate veil and levy on the
owners’ personal assets to the full extent of his judgment; in
the jargon of corporate law, the corporation was not a
separate entity from its owners but merely their “alter ego.”
Mark I, Inc. v. Gruber, 38 F.3d 369, 371 (7th Cir. 1994); In re
Kaiser, 791 F.2d 73, 75 (7th Cir. 1986). The owners’ liability
to Brandon is, moreover, joint and several. Knickman v.
Midland Risk Services-Illinois, Inc., 700 N.E.2d 458, 462-63 (Ill.
App. 1998); Fentress v. Triple Mining, Inc., 635 N.E.2d 102,
107 (Ill. App. 1994); Quantum Color Graphics, LLC v. Fan
Association Event Photo GmbH, 185 F. Supp. 2d 897, 901 (N.D.
Ill. 2002).
   The district judge rejected the alter ego theory on several
unpersuasive grounds, such as that APM had not stripped
itself of assets in order to prevent Brandon from collecting
his judgment, for the stripping (the purported vesting of
ownership of the corporation’s accounts receivable in the
6                                      Nos. 04-3821, 04-4044

physicians and the treatment of corporate profits as earned
bonuses) had occurred earlier. That is irrelevant and like-
wise the fact also stressed by the judge that personal-services
corporations usually don’t have sizable assets compared to
other corporations. As the judge himself noted, a principal
asset of personal-service corporations is their accounts
receivable, and APM stripped itself of this asset.
  The alter ego theory offers broader relief to Brandon in
one sense, because as we have noted it enables him to collect
his entire judgment out of the personal assets of the three
shareholder defendants. But he does not seek relief on this
theory against the other two physicians, the employees, as
to whom he is therefore limited to obtaining the money
fraudulently conveyed to them.
  Had APM continued in business, it would have earned
additional profits on which Brandon could have levied. As
the defendants acknowledge, APM was deactivated (except
as a conduit of collected receivables to the individual
defendants), and St. Clair started up in its place, in order to
thwart Brandon’s efforts to collect his judgment. The idea
was that APM would have no assets to pay Brandon and St.
Clair would have no liability to him. Since the bonuses and
the payments of the proceeds of collection of the accounts
receivable do not add up to the amount of Brandon’s
judgment, and it is uncertain what personal assets the
shareholder defendants have that might be levied on to
satisfy the judgment, Brandon is eager to reach St. Clair’s
assets as well.
  The defendants say, presumably tongue in cheek, that
St. Clair was formed not to thwart the collection of the judg-
ment but merely to forestall its “negative conse-
quences”—namely a reduction in their wealth! The owner-
ship structure, contracts, etc., of St. Clair appear to be
identical (with one exception, discussed below) to the
Nos. 04-3821, 04-4044                                          7

corresponding attributes of APM. Basically what happened
was a change in name, and a change in the name of the
debtor doesn’t defeat a creditor’s claim. E.g., Vernon v.
Schuster, 688 N.E.2d 1172, 1176 (Ill. 1997); Bernardi Bros., Inc.
v. Great Lakes Distributing Inc., 712 F.2d 1205, 1207 (7th Cir.
1983) (Illinois law).
  But if St. Clair is merely the continuation of APM under a
different name, and APM is a shell, St. Clair must be a shell
too—so why is Brandon trying to collect from it? But—and
this is the exception we referred to—St. Clair owns its own
accounts receivable rather than the doctors owning them; at
least they didn’t own them when the record closed. Some of
the receipts from the payment of receivables by patients
may therefore still be in St. Clair’s possession.
  The defendants persuaded the district judge that St. Clair
cannot be APM’s successor because APM still exists; al-
though it no longer has assets, the defendants pay the State
of Illinois the annual fee required to continue a corporation
in existence. Successorship or absence thereof might seem
irrelevant because a successor corporation, in the sense of a
corporation that has purchased all the assets of another
corporation which then dissolves, does not inherit its prede-
cessor’s liabilities. Myers v. Putzmeister, Inc., 596 N.E.2d 754,
754-55 (Ill. App. 1992); General Electric Capital Corp. v. Lease
Resolution Corp., 128 F.3d 1074, 1083 (7th Cir. 1997) (Illinois
law). (The predecessor’s take from the sale remains avail-
able to satisfy its debts.) But that is in general, not in every
case. A “continuation exception to the rule of successor
corporate nonliability applies when the purchasing corpora-
tion is merely a continuation or reincarnation of the selling
corporation. In other words, the purchasing corporation
maintains the same or similar management and ownership,
but merely ‘wears different clothes.’ ” Vernon v. Schuster,
supra, 688 N.E.2d at 1176; see also Steel Co. v. Morgan
8                                       Nos. 04-3821, 04-4044

Marshall Industries, Inc., 662 N.E.2d 595, 600 (Ill. App. 1996);
North Shore Gas Co. v. Salomon Inc., 152 F.3d 642, 653 (7th
Cir. 1998) (Illinois law). As is implicit in the quoted lan-
guage, there can be continuation without formal successor-
ship. “Continuation” is just a less colorful name for the
“changed name,” “different clothes,” or “new hat” rule.
Baltimore Luggage Co. v. Holtzman, 562 A.2d 1286, 1293 (Md.
App. 1989). “[I]f a corporation goes through a mere change
in form without a significant change in substance, it should
not be allowed to escape liability.” Vernon v. Schuster, supra,
688 N.E.2d at 1176; see also Fenderson v. Athey Products
Corp., 581 N.E.2d 288, 290 (Ill. App. 1991).
   Notice the terms “similar” and “significant” in the pas-
sages that we quoted from Vernon v. Schuster. That St. Clair
has a different practice from APM with regard to accounts
receivable does not preclude application of the continuation
rule. Otherwise the rule would be too easily evaded. The
evasive purpose of creating St. Clair is plain and supports
our interpretation of the rule’s scope. The rule that a
corporation can’t have a successor if it hasn’t been dis-
solved, Domine v. Fulton Iron Works, 395 N.E.2d 19, 23 (Ill.
App. 1979), is not intended to deprive the victim of a fraud
of his legal remedy, as the defendants attempted to do here
by preserving a ghostly existence for APM. The defendants
admit that they pay the annual corporate fee for APM for the
sole purpose of preventing St. Clair’s being held liable for
APM’s debt to Brandon. It’s as if the caretaker of a wealthy
old man, who had obtained control of his assets and didn’t
want them to go to the man’s heirs, placed him on life
support. APM is brain dead, but is being kept on corporate
life support in order to prevent Brandon from getting hold
of any of St. Clair’s assets.
  It doesn’t matter whether we call St. Clair APM’s continu-
ation, or APM’s alter ego (the same corporation, just with a
Nos. 04-3821, 04-4044                                          9

different name), or a fraudulent shield interposed between
Brandon’s claim and the defendants’ assets. See Johnson v.
Ventra Group, Inc., 191 F.3d 732, 742 (6th Cir. 1999); Bud
Antle, Inc. v. Eastern Foods, Inc., 758 F.2d 1451, 1457-58 (11th
Cir. 1985). Under any of these formulations, Brandon is
entitled to ignore the formation of St. Clair and treat its
assets as if they were APM’s.
   In finding no liability in this case, the district judge may
have been confused by the “badges of fraud.” This archaic
term, an unfortunate legal cliché that like many such can
exercise a mesmerizing force on lawyers and judges, refers
to a list of 11 symptoms of fraud now codified in the
Uniform Fraudulent Transfer Act, which is law in Illinois.
740 ILCS 160/5(b)(1)-(11); Steel Co. v. Morgan Marshall
Industries, Inc., supra, 662 N.E.2d at 601-02. The district judge
found that five of the “badges” were present in this case,
short of a majority and thus not enough, he thought, to
prove fraud. But the symptoms are not additive. To treat
them as such is the equivalent of saying that if there are 11
common symptoms of serious disease, and a patient has
only 5 (a low white corpuscle count, internal bleeding, fever,
shortness of breath, and severe nausea), he is not seriously
ill. One of the “badges,” for example, is that “the debtor
absconded.” Another is that “the debtor transferred the
essential assets of the business to a lienor who transferred
the assets to an insider of the debtor.” One would hardly
expect to find both of these in the same case, and either one
will ordinarily be quite sufficient to entitle the plaintiff to
relief.
  Critics of the decision of the Uniform State Commissioners
to codify the “badges” in the UFTA worried that judges
might attach controlling weight to one, Frank R. Kennedy,
“The Uniform Fraudulent Transfer Act,” 18 UCC L.J. 195,
201 (1986); Jeffrey L. LaBine, “Michigan’s Adoption of the
10                                    Nos. 04-3821, 04-4044

Uniform Fraudulent Transfer Act: An Examination of the
Changes Effected to the State of Fraudulent Conveyance
Law,” 45 Wayne L. Rev. 1479, 1492-93 (1999), or—we add on
the basis of what happened in this case—to whether a
majority of them are present or absent. The critics had a
point.
  There was another reason not to get hung up on the
“badges of fraud” in this case: it is misleading to describe
the issue in supplementary proceedings to collect a judg-
ment as “fraud.” The doctrine of “fraudulent conveyance”
has specific elements, as do the alter ego and continuation
rules, that differ from normal usages of the word “fraud,”
which is therefore best avoided. In particular, the doctrine
and rules do not require proof of fraudulent intent—though
there was plenty of that here.
 The judgment is reversed with directions to enter judg-
ment for the plaintiff in accordance with this opinion.
                                 REVERSED and REMANDED.

A true Copy:
       Teste:

                          _____________________________
                           Clerk of the United States Court of
                             Appeals for the Seventh Circuit




                   USCA-02-C-0072—8-15-05
