Martin Sheehan v. Allen Saoud

Filing

UNPUBLISHED AUTHORED OPINION filed. Originating case number: 1:11-cv-00163-IMK-JSK. Copies to all parties and the district court/agency. [999831272]. [15-1338]

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UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

No. 15-1338

MARTIN P. SHEEHAN, Trustee of the Bankruptcy Estate of AGS,
Inc.,
Plaintiff - Appellant,
v.
ALLEN G. SAOUD,
Defendant - Appellee,
and
GEORGIA D. DANIEL; FRED D. SCOTT; WEST VIRGINIA DERMATOLOGY
ASSOCIATES, INC.; ROBERT R. FRASER; CENTRAL WEST VIRGINIA
DERMATOLOGY ASSOCIATES, INC.,
Defendants,
UNITED STATES OF AMERICA,
Intervenor/Defendant.

Appeal from the United States District Court for the Northern
District of West Virginia, at Clarksburg.
Irene M. Keeley,
District Judge. (1:11-cv-00163-IMK-JSK)

Argued:

March 24, 2016

Decided:

May 24, 2016

Before WILKINSON and NIEMEYER, Circuit Judges, and David C.
NORTON, United States District Judge for the District of South
Carolina, sitting by designation.

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Affirmed by unpublished opinion.
Judge Norton wrote
opinion, in which Judge Wilkinson and Judge Niemeyer joined.

the

ARGUED: Martin Patrick Sheehan, SHEEHAN & NUGENT, P.L.L.C.,
Wheeling, West Virginia, for Appellant. Paul J. Harris, HARRIS
LAW OFFICES, Wheeling, West Virginia, for Appellee.
ON BRIEF:
Patrick S. Cassidy, CASSIDY, COGAN, SHAPELL & VOEGELIN, L.C.,
Wheeling, West Virginia, for Appellant.

Unpublished opinions are not binding precedent in this circuit.

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NORTON, District Judge:
This case is on appeal from a post-trial judgment awarded
by the Honorable Irene M. Keeley, United States District Judge
for the Northern District of West Virginia.

For the reasons set

forth below, we affirm the district court’s ruling.
I.
Appellant Martin P. Sheehan (“Sheehan”) is the trustee of
the bankruptcy estate of AGS, Inc. (“AGS”).

Appellee Allen G.

Saoud (“Saoud”) was a licensed doctor of Osteopathic Medicine,
specializing in dermatology, who owned and operated AGS as a
medical corporation in West Virginia.

On January 25, 2005, the

United States filed charges against Saoud, alleging that between
May

1998

and

June

2004,

Saoud

submitted

billing claims to Medicare and Medicaid.

unsupported

medical

Saoud entered into a

settlement agreement with the United States under which he was
required

to

pay

required

to

admit

$310,800.58

in

liability.

penalties,

The

but

settlement

he

was

agreement

not
also

excluded Saoud from participating in Medicare, Medicaid, and all
other federal health programs, for ten years.

Thereafter, on

March 31, 2006, Saoud sold AGS to Georgia G. Daniel (“Daniel”),
a

nurse

practitioner

who

previously

dermatology practice, for $1,000,000.00.
contract

between

Daniel

and

Saoud,
3

worked

in

Saoud’s

Under the terms of the
Daniel

would

not

be

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personally liable for AGS’s liabilities.

Daniel also would not

be personally liable to Saoud for the purchase price.
After Saoud sold AGS to Daniel, various transfers were made
from AGS to Saoud and Daniel.
Saoud $50,000.00 in 2008. 1

Relevant to this appeal, AGS paid

Additionally, a certified copy of a

deed recorded in Harrison County, West Virginia shows that real
estate titled to AGS was sold to MedStar Real Estate Development
on March 23, 2005 for $460,000.00.

The proceeds of the sale

were not paid to AGS but rather to AGS Development Company,
another entity controlled by Saoud.

Further, Daniel received a

combined $418,675.00 from AGS in 2006, 2007, and 2008.
On May 9, 2009, AGS filed for Chapter 7 bankruptcy relief.
The

Bankruptcy

Court

appointed

Sheehan

to

serve

as

Trustee.

Saoud signed the original petition for bankruptcy relief, in
which he identified himself as the President and Owner of AGS.
However, during a meeting of creditors held on June 18, 2009,
Saoud subsequently indicated that he had sold his stock in AGS
to Daniel.

Saoud confirmed that he was not an owner or officer

of AGS during a continued meeting of creditors held on August
18, 2009.

On May 12, 2010, Saoud claimed that Daniel signed a

1

In the underlying action, Sheehan originally sought
$250,000.00 from Saoud, representative of the total value of all
transfers AGS made to Saoud after the sale to Danial. See J.A.
54–55. However, the only transfer subject to this appeal is the
2008 transfer of $50,000.00 from AGS to Saoud.
4

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corporate

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resolution

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authorizing

petition on behalf of AGS.

Saoud

to

file

a

bankruptcy

On August 23, 2010, Daniel testified

that she did not authorize Saoud to seek bankruptcy relief on
behalf of AGS and denied that the signature on the corporate
resolution was in fact hers.

Saoud filed a motion to dismiss

the bankruptcy petition, and Sheehan opposed the motion.
November

11,

2010,

the

Bankruptcy

Court

for

the

On

Northern

District of West Virginia denied the motion to dismiss.
In December 2012, a federal grand jury returned a twentythree count indictment charging Saoud with health care fraud,
concealing a material fact in a health care matter, corruptly
endeavoring to obstruct and impede the due administration of the
internal

revenue

laws,

making

a

false

oath

or

account

in

relation to a bankruptcy case, and making a false statement to a
federal

agent.

superseding

In

May

indictment

2013,

the

containing

grand
no

jury

returned

additional

a

charges.

Subsequently, on June 4, 2013, the grand jury returned a third
superseding indictment, which added new charges of health care
fraud and aggravated identity theft.

On June 25, 2013, Saoud

was convicted after a jury trial of thirteen counts of health
care fraud, one count of aggravated identity theft, one count of
concealing a material fact in a health care matter, one count of
corruptly

endeavoring

to

obstruct
5

and

impede

the

due

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administration

of

the

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internal

revenue

laws,

five

counts

of

making a false oath or account in relation to a bankruptcy case,
and one count of making a false statement to a federal agent.
Saoud was sentenced to ninety-nine months’ imprisonment on March
25, 2014, and received a fine of $2,630,000.00.

The Fourth

Circuit affirmed his convictions and sentence in December 2014.
United States v. Saoud, No. 14-4288, 2014 WL 7210734, at *1 (4th
Cir. Dec. 19, 2014).
Sheehan,

in

his

capacity

as

trustee

of

AGS,

filed

a

complaint on October 13, 2011, in the United States District
Court

for

the

subsequently

Northern

filed

an

District

amended

of

West

complaint

Virginia.
on

October

Sheehan
6,

2014,

against Appellee Saoud, Daniel, Fred D. Scott (“Scott”), 2 Robert
R.

Fraser

(“Fraser”), 3

and

Central

West

Virginia

Dermatology

Associates, Inc. (“CWVDA”), asserting the following six causes
of

action:

Count

I

alleged

that

CWVDA

failed

to

complete

payments to AGS and remains indebted to AGS for $634,159.00;
Count II alleged that the agreements between Saoud, Daniel, and
Scott

were

voidable

as

fraudulent

transfers

pursuant

to

11

U.S.C. § 547, because the agreements constituted a scheme to
2

Scott practiced dermatology with Saoud at AGS, served as
director of CWVDA, and was involved in some of the transactions
at issue.
3
Fraser is an accountant who prepared tax returns for
Daniel and CWVDA.
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defraud AGS’s creditors by transferring AGS’s assets for less
than

reasonably

equivalent

value,

causing

AGS

to

become

insolvent; Count III alleged that the transfers were voidable by
a trustee in bankruptcy pursuant to the powers established under
11 U.S.C. § 544 and under the West Virginia Uniform Fraudulent
Transfer Act (“WVUFTA”), W. Va. Code §§ 41-1A-1 et seq.; Count
IV alleged that the actions outlined above constitute a civil
conspiracy to violate the WVUFTA and are actionable as a civil
conspiracy; Count V alleged that Fraser aided and abetted the
scheme to defraud AGS’s creditors under the WVUFTA; and Count VI
alleged
United

that
States

Saoud
mails

committed
to

bankruptcy

effectuate

his

fraud
scheme

and
to

used

the

defraud.

Sheehan sought to recoup the $50,000.00 that AGS paid to Saoud
in 2008, the $418,000.00 paid to Daniel after the sale, and the
$460,000.00 from the sale of certain real estate AGS owned.
Daniel and Fraser settled with Sheehan and were dismissed
as defendants on May 15, 2012.

The district court therefore

dismissed Count V, against Fraser only, as moot.

On October 20,

2014, Sheehan filed a motion for summary judgment against Saoud,
and Scott filed a motion for summary judgment against Sheehan’s
claims and Saoud’s cross claims.

On January 28, 2015, the court

granted in part and denied in part Scott’s motion for summary
judgment and denied Sheehan’s motion for summary judgment.
7

J.A.

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111–161.

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The court granted Scott’s motion for summary judgment

as to Count IV, holding that a claim under the WVUFTA was based
in contract and not tort and therefore could not support a civil
conspiracy action.

J.A. 133, 158–59.

The court further found

that even if Sheehan had pleaded a tort, the factual allegations
contained in his amended complaint were “wholly inadequate” to
support

a

civil

thereafter

conspiracy

abandoned

Counts

Counts III and IV.
the

$50,000.00

$460,000.00

J.A. 314–315.

I,

II,

J.A.
and

J.A. 160, 187.

that

from

claim.

AGS

the

sale

paid
of

to

133–34.

VI

and

Sheehan

pursued

only

Sheehan sought to recoup
Saoud

certain

real

in

2008

estate

and

AGS

the

owned.

However, in light of the court’s ruling on the

statute of limitations issues relating to the money transfers,
as fully set forth below, the only question submitted to the
jury involved the real estate transfer.
A

jury

returned

a

trial

was

held

verdict

on

March

on
3,

March
2015.

J.A. 340.
2–3,
The

2015.

The

jury

jury

found

that

Sheehan did not “file suit within one year after he knew, or
reasonably could have discovered, the real estate transfer from
AGS

to

MedStar

Real

$460,000.00 . . . .”
favor of Saoud.

Estate

J.A. 230.

and

Development,

LLC,

for

The jury unanimously found in

The district court affirmed the verdict, J.A.

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233, and Sheehan filed a notice of appeal on April 1, 2015.
J.A. 236.
II.
We review the denial of summary judgment de novo, applying
the same standards as the district court.

See Henson v. Liggett

Group, Inc., 61 F.3d 270, 274 (4th Cir.1995).

In reviewing a

denial of summary judgment, we view all facts and reasonable
inferences drawn therefrom in the light most favorable to the
nonmoving party.
F.3d

111,

119–20

PBM Prods., LLC v. Mead Johnson & Co., 639
(4th

Cir.

2011).

Summary

judgment

is

appropriate if there is no genuine issue of material fact and
the movant is entitled to judgment as matter of law.

Fed. R.

Civ. P. 56(a); Glynn v. EDO Corp., 710 F.3d 209, 213 (4th Cir.
2013).
We review the denial of a motion for judgment as a matter
of law de novo, viewing the evidence in the light most favorable
to the nonmovant, and “draw[ing] all reasonable inferences in
her

favor

without

weighing

witnesses’ credibility.”

the

evidence

or

assessing

the

Ocheltree v. Scollon Prod., Inc., 335

F.3d 325, 331 (4th Cir. 2003) (quoting Anderson v. G.D.C., Inc.,
281 F.3d 452, 457 (4th Cir. 2002)).

Judgment as a matter of law

is proper only if “there can be but one reasonable conclusion as

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to the verdict.”

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Id. (quoting Anderson v. Liberty Lobby, Inc.,

477 U.S. 242, 250 (1986)).
III.
Sheehan
whether
doctrine

the
of

raises
district
adverse

limitations/repose

the

following

court

erred

domination

under

the

issues
when

did

West

on

it

not

appeal:

concluded

toll

Virginia

the

“(1)

that

the

statute

Uniform

of

Fraudulent

Transfer Act; (2) whether the district court erred in applying
the statute of limitations/repose to find that evidence of a
transfer in 2008 was outside the statute of limitations/repose
because

it

was

a

payment

due

under

what

purported

to

be

a

contract signed in 2005; (3) whether the district court erred in
concluding that a cause of action for civil conspiracy under
West Virginia law could not be based on a violation of the West
Virginia Uniform Fraudulent Transfer Act even where plaintiff
attempted to prove a subjective violation of the statute with
‘actual intent to hinder, delay, or defraud.’”

Appellant’s Br.

1.
A.
We turn first to Sheehan’s contention that the district
court

erred

when

it

concluded

that

the

doctrine

of

adverse

domination did not toll the statute of limitations or repose
under the WVUFTA.
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As a threshold matter, Sheehan failed to properly preserve
this issue for appeal.

During the Rule 50 hearing on March 2,

2015, Sheehan’s attorney had the following exchange with Judge
Keeley:
Court: [M]y finding is that that is the transfer or
that is the obligation and that those later payments
are not the transfer and it certainly was, not only
could, but was reasonably discovered by the Trustee,
as pled in paragraph 18 of document 51 of the
bankruptcy proceedings on 9/9/10, discovered at least
at that point in time and therefore I am going to
grant the motion under Rule 50 and dismiss that part
of the claim and it will not carry to the jury.
So—
and I’m ruling on that as a matter of law. So I think
that what’s left and what goes to the jury is the real
estate transaction, which is four hundred and sixty
thousand dollars.
It goes to the jury.
Is there
anything left? . . . Now in light of that, is the
question of adverse domination still in the case?
Mr. Cassidy:
The Court:
J.A.

340–41.

hearing

and

domination

We don’t need it.
Okay.

So there’s no adverse domination.

Based
the

with

on

court’s
Mr.

We don’t need it now.

the

aforementioned

entire

Cassidy,

discussion

Sheehan’s

passage

from

regarding

trial

the

adverse

counsel,

it

is

clear that Sheehan abandoned his adverse domination arguments
prior to the trial, and the court never made a ruling in that
regard.

See J.A. 315–40.

Therefore, Sheehan failed to properly

preserve this issue for appeal.
276,

285–86

failing

to

(4th

Cir.

preserve

a

See In re Under Seal, 749 F.3d

2014)

(discussing

claim

for
11

appeal);

the
see

consequences
also

Corti

of
v.

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Storage

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Tech.

(Niemeyer,

Corp.,

J.,

304

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F.3d

concurring)

336,

(“[I]t

343

remains

(4th
the

Cir.
law

2002)

of

this

circuit that when a party to a civil action fails to raise a
point at trial, that party waives review of the issue unless
there are exceptional or extraordinary circumstances justifying
review.”).
However, even if Sheehan had properly preserved the issue
for appeal, the statute of repose would still have expired one
month

prior

to

Sheehan

filing

suit,

application of adverse domination.

regardless

of

the

A creditor must bring suit

to enforce the provisions of the WVUFTA, W. Va. Code § 40–1A–
4(a)(1)–(2), within “four years after the transfer was made or
the obligation incurred, or, if later, within one year after the
transfer

or

obligation

was

discovered by the claimant.”
added).

or

could

reasonably

have

been

W. Va. Code § 40-1A-9 (emphasis

Because Sheehan filed suit on October 13, 2011, October

13, 2007 is the latest date on which the alleged fraudulent
transfers could have occurred such that he may obtain relief,
unless Sheehan establishes that he could not reasonably have
discovered the alleged fraudulent transfer or obligation more
than

one

statute

year
of

before

limitations

filing
should

suit.
be

12

Sheehan
tolled

by

argues
the

that

doctrine

the
of

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adverse domination, giving him four years from the date on which
he was appointed to bring suit.
“Adverse

domination

is

an

equitable

doctrine

that

tolls

statutes of limitations for claims by corporations against its
officers, directors, lawyers and accountants for so long as the
corporation

is

controlled

by

those

acting

against

its

interests.”

Clark v. Milam, 452 S.E.2d 714, 718 (W. Va. 1994)

(citing Int’l Rys. of Central Am. v. United Fruit Co., 373 F.2d
408, 412 (2d Cir. 1967)).

The adverse domination doctrine tolls

the statute “so long as there is no one who knows of and is able
and

willing

to

redress

the

misconduct

of

those

committing the torts against the corporate plaintiff.”

who

are

Clark v.

Allen, 139 F.3d 888 (4th Cir. 1998) (quoting Milam, 452 S.E.2d
at 719).

“[T]he defendants have the burden of showing that

there was someone who had the knowledge, ability and motivation
to bring suit during the period in which defendants controlled
the corporation.”
635

A.2d

394,

Id. (quoting Hecht v. Resolution Trust Corp.,
408

(Md.

1994))

(internal

quotation

marks

omitted).
Sheehan
support

of

cites
his

several

appeal

and

cases
relies

from

the

Tenth

on

two

unpublished

Circuit opinions as “particularly legally similar.”

Circuit

in

Tenth

Appellant’s

Br. 15–16 (citing Wing v. Buchanan, 533 F. App’x 807 (10th Cir.
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2013); Wing v. Dockstader, 482 F. App’x 361 (10th Cir. 2012)).
Both

unpublished

opinions

involved

a

series

of

cases

that

stemmed from the collapse of VesCor Capital and the receiver’s
subsequent
transfers

attempts
to

to

investors.

recover

VesCor’s

Buchanan,

533

alleged
F.

fraudulent

App’x

at

809.

Analyzing statute of limitations issues in Buchanan, the court
recognized

that

under

Utah’s

Fraudulent

Transfer

Act, 4

a

plaintiff seeking to recoup transfers based on allegations of
actual fraud must file his complaint “within four years after
the transfer was made or the obligation was incurred or, if
later, within one year after the transfer or obligation was or
could reasonably have been discovered by the claimant.”
810.

Id. at

At issue was when the discovery period began to run.

Id.

The court applied the doctrine of adverse domination to hold
that the discovery period would not begin to run until the bad
actors controlling the entity were removed.

Id.

The court held

that, based on the record, it could not determine how to apply
the discovery rule to the alleged fraudulent transfers.
811.

Id. at

The court remanded the case back to the district court “to

determine

which

of

the

alleged

4

fraudulent

transfers

‘could

The Utah Uniform Fraudulent Transfer Act and the WVUFTA
have the same statute of limitations and repose provisions.
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reasonably have been discovered’ by the bankruptcy trustee—thus
triggering the one-year statute of limitations.”
In

Dockstader,

applying

the

statute

of

Id.
repose

discussed

above, the court held that the receiver could not reasonably
have

discovered

appointment.
adverse

any

fraudulent

transfer

482 F. App’x at 364.

domination

doctrine

and

prior

to

his

The court recognized the

found

that

“[b]ecause

the

[r]eceiver was appointed on May 5, 2008 and filed this action
just over five months later,” the receiver’s claims were timely.
Id.

The Tenth Circuit’s holdings in Buchanan and Dockstader do

not support Sheehan’s position because even after recognizing
the doctrine of adverse domination, the court applied the oneyear statute of repose under Utah’s Fraudulent Transfer Act—the
same one-year statute of repose under the WVUFTA.
Applying
Buchanan

and

the

same

Dockstader,

reasoning
Sheehan’s

as

the

claims

Tenth
are

Circuit
barred.

in
On

September 9, 2010, Sheehan filed an opposition to Saoud’s motion
to withdraw the bankruptcy petition in which he stated:
The Trustee has identified several valuable causes of
action to recover assets for the bankruptcy estate of
AGS, Inc. These include actions to recover fraudulent
and preferential transfers to Allen G. Saoud and
Georgia Daniel.
J.A.

337.

The

district

court

held

that

the

statute

of

limitations could only be tolled until this date because Sheehan
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clearly had knowledge of the fraudulent transfers by that time.
The district court then applied the one-year statute of repose
outlined

above.

It

is

clear

that

not

only

could

Sheehan

reasonably have discovered the fraudulent transfers by September
9, 2010, but that he did in fact discover the alleged fraudulent
transfers as of that date.

Unlike the bankruptcy trustees in

Buchanan and Dockstader, Sheehan had knowledge of the alleged
fraudulent

transfers

more

than

a

year

before

he

filed

suit.

Thus, even if the doctrine of adverse domination were to apply,
the statute of repose expired one year after Sheehan’s September
9, 2010 filing in the Bankruptcy Court and one month before
Sheehan filed suit on October 13, 2011.
Accordingly,

even

if

Sheehan

had

properly

preserved

the

adverse domination issue for appeal, he would not be entitled to
the relief requested.
B.
Sheehan

next

argues

that

the

district

court

erred

by

concluding that his action to recover the $50,000.00 payment
from AGS to Saoud in 2008 was barred by the four-year statute of
limitations because the payment was made in connection with the
2006 sale to Daniel.

Appellant’s Br. 17. 5

5

Although Sheehan states in his brief that the transfer at
issue occurred in 2005, it is clear from the entirety of
Sheehan’s brief that he is referring to the March 31, 2006 sale
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To enforce the provisions of the WVUFTA, the creditor must
bring suit “within four years after the transfer was made or the
obligation was incurred or, if later, within one year after the
transfer

or

obligation

was

discovered by the claimant.”

or

could

reasonably

have

been

W. Va. Code Ann. § 40-1A-9.

West

Virginia Code section 40-1A-6(d) provides that:
A transfer is not made until the debtor has acquired
rights in the asset transferred and an obligation is
incurred.
If the obligation is oral, a transfer is
made when the obligation becomes effective.
If the
obligation is evidenced by a writing, the obligation
becomes effective when the writing is delivered to or
for the benefit of the obligee.
W. Va. Code Ann. § 40-1A-6(d) (emphasis added).

The district

court found that the 2008 payment was made pursuant to AGS’s
obligation incurred on the 2006 sale instrument.
“transfer”—as

defined

beginning

running

time.

the

under
of

the

the

Therefore, the

WVUFTA—occurred

statute

of

in

limitations

at

2006,
that

The district court found that even if the discovery rule

as outlined in the statute of repose applies, the clock stopped
running on September 9, 2010.

Once again, Sheehan’s knowledge

of the alleged fraudulent transfers by September 9, 2010, at the
latest, is evidenced by his filing with the bankruptcy court.

of AGS to Daniel, and therefore the 2008 payment of $50,000.00
to Saoud.
See Appellant’s Br. 17–19.
Further, during oral
argument, the parties clarified that the transfer in dispute is
indeed the $50,000.00 transfer from AGS to Saoud.
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See J.A. 337.

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Therefore, because Sheehan did not file suit

until October 13, 2011, more than a month after the statute of
repose expired, the district court held that Sheehan’s WVUFTA
claims relating to the 2008 transfer were barred by the statute
of repose.
The district court based its ruling on LaRosa v. LaRosa,
482 F. App’x 750 (4th Cir. 2012), an unpublished Fourth Circuit
opinion.

In LaRosa, two brothers loaned their cousin and his

wife (“the debtors”) $800,000.00.

Id. at 751.

The cousin was

the sole shareholder of a company called Cheyenne.

Id.

In

2001, Cheyenne entered into a loan agreement with a bank that
permitted Cheyenne to borrow up to $950,000.00 on a line of
credit.

Id. at 753.

The cousin pledged a series of securities

to secure the line of credit.

Id.

In 2003, the cousin’s son

drew down $700,000.00 on the line of credit with the bank, and
Cheyenne purchased over a million dollars in annuities with the
money.

Id.

The annuities were owned and controlled by Cheyenne

but the accounts were used to transfer money to the cousin’s son
according to a sham land renewal lease.

Id.

The district court

found the scheme fraudulent under the WVUFTA and awarded the
creditors $700,000.00.

Id.

On appeal of the judgment, this Court addressed whether the
plaintiffs’ WVUFTA claim “based on a corporation’s drawdown on
18

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its line of credit and purchase of annuities was time-barred.”
Id. at 751.

This Court held that the “transfer” in question was

not the 2003 drawdown but rather the original establishment of
the line of credit in 2001.

Id. at 755.

Therefore, the Court

held that because the creditors did not file their claim within
four years of the establishment of the line of credit, their
claim was barred by the WVUFTA statute of repose.

Id. at 753

(“Because the language and history of the statute of repose make
clear that it runs from the date of the security pledge, we
reverse the district court and hold that the Creditors’ WVUFTA
claim on the line of credit was time-barred.”).

Judge Keeley

relied on this Court’s reasoning in LaRosa to hold that the 2008
transfer

was

contract.

an

obligation

incurred

J.A. 152; 339–40.

under

the

2006

sales

Therefore, because Sheehan did not

file suit until October 13, 2011, his claim was barred by the
four year statute of limitations.
A

dissenting

“transfer”
LaRosa,

482

under
F.

opinion
the

App’x

in

WVUFTA
at

Id.
LaRosa

interpreted

differently

758–59.

than

Analyzing

the
the

the

term

majority.
statute

of

limitations provisions of the WVUFTA, the dissent stated the
following:
By employing the definite article, the last clause,
“within four years after the transfer was made,”
refers back to the opening clause—“[a] cause of action
with respect to a fraudulent transfer.”
West
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Virginia’s statute, therefore, does not extinguish
fraudulent transfer suits by reference to related, but
nonfraudulent, transfers.
Instead, like any sensible
statute of repose, the provision only bars causes of
action for fraudulent transfers that have accrued.
LaRosa, 482 F. App’x at 759 (quoting W. Va. Code Ann. § 40-1A9).

Because there was no suggestion in the record that there

was any fraudulent intent or purpose in creating the line of
credit,

the

dissent

found

that

the

actionable

fraudulent

transfer occurred in 2003 when the $700,000.00 drawdown took
place.

Id.

Therefore, the creditors properly brought their

claim within the four-year statute of limitations.
Sheehan
because

the

argues
sale

legality”

to

of

because

practice

a

that

an

AGS

LaRosa
to

Daniel

“osteopath

non-osteopath

Appellant’s Br. 20.

is

easily

in

2006

cannot
under

Id.
distinguishable

was

transfer
West

“of

dubious

a

medical

Virginia

law.”

However, the district court never deemed

the sale illegal or voidable.

Further, there is no indication

that the district court’s application of the holding in LaRosa
would be altered if the transfer was “illegal.”

All fraudulent

transfers are “illegal”; thus, just because a transfer is made
pursuant to an illegal contract does not change the statute of
limitations analysis under the WVUFTA.
On March 31, 2006, Daniel and Saoud executed a document in
which

Daniel

agreed

to

purchase
20

AGS

from

Saoud

for

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$1,000,000.00.
name,

J.A. 62.

corporate

goodwill

were

Under the purchase agreements, the

standing,

included;

Pg: 21 of 32

disposable

however,

the

medical
cash

supplies,

in

the

and

account,

accounts receivable, equipment, and software were all excluded
from the sale.
agreement

Id.

for

“any

Further, Daniel was not liable under the
liabilities

that

have

been

incurred

by

[Saoud] while he has been President of [AGS] or any liabilities
that [AGS] currently has.”
by

Saoud

and

Daniel

on

Id.

A second document, also signed

March

purchase of AGS and states:

31,

2006,

recognizes

Daniel’s

“Daniel is also not responsible

personally for payback of the purchase price.”

J.A. 63.

Under the plain language of section 40A-1A-6, the statute
of limitations began to run in 2006.

As stated above, “[a]

transfer is not made until the debtor has acquired rights in the
asset transferred and an obligation is incurred.”
40-1A-6(d).

W. Va. Code §

If the obligation is evidenced by a writing, the

obligation becomes effective when the writing is delivered to or
for the benefit of the obligee.

Id.

Saoud and Daniel signed

documents transferring ownership in AGS to Daniel on March 31,
2006.

Under the March 31, 2006 sale documents, Daniel acquired

rights in AGS and AGS incurred an obligation to pay Saoud the
purchase price.

Sheehan does not dispute that the 2008 money

transfer was made pursuant to the March 31, 2006 sale documents.
21

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Because

the

Filed: 05/24/2016

obligation

was

Pg: 22 of 32

evidenced

obligation became effective that day.

by

a

writing,

AGS’s

Therefore, the alleged

fraudulent “transfer”—as defined under the WVUFTA—took place on
March 31, 2006.

The statute of limitations expired on March 31,

2010, and the statute of repose expired on September 9, 2011,
one month before Sheehan filed suit.
Notably, if applied to this case, the dissent’s reasoning
in

LaRosa

would

also

not

alter

the

outcome,

because

Sheehan

alleged that Saoud’s 2006 sale of AGS to Daniel was fraudulent
in and of itself.

See Appellant’s Br. 18.

Therefore, unlike

the underlying facts in LaRosa, Sheehan alleges that both the
2008 money transfer and the 2006 sale were fraudulent.

Thus,

the statute of limitations expired under the analysis of both
the

majority

and

dissent

in

LaRosa.

For

these

reasons,

we

affirm the district court’s ruling that Sheehan’s WVUFTA claims
are barred by the statute of repose.
C.
Lastly, Sheehan argues that the district court erred in
holding that a cause of action for civil conspiracy could not be
based

on

a

violation

of

the

WVUFTA.

Appellant’s

Br.

21.

Sheehan argues that the statute makes actionable a transfer made
with “actual intent to hinder delay or defraud creditors” and is
therefore a tort.

Id. (citing W. Va. Code § 40-1A-4(a)(1)).
22

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First and foremost, because the district court had a valid
independent basis to support its ruling beyond holding that a
WVUFTA violation cannot support a civil conspiracy claim, it is
not necessary for the Court to decide this issue.

In addition

to finding that the WVUFTA did not provide a basis for a civil
conspiracy
Sheehan

claim,

failed

to

the

district

adequately

court

plead

alternatively

fraud.

In

its

held

that

order

on

Scott’s and Sheehan’s motions for summary judgment, the district
court stated the following when it addressed Sheehan’s civil
conspiracy claim under Count IV:
Following a careful weighing of the matter, the Court
agrees with Scott that a violation of the WVUFTA
sounds in contract; thus, Sheehan, by having relief on
the WVUFTA, has failed to plead a tort.
Moreover,
even if he had pleaded a tort by alleging a violation
of the WVUFTA, Sheehan’s factual allegations are
wholly
inadequate
regarding
how
and
when
the
defendants engaged in civil conspiracy.
J.A. 133–34 (emphasis added). 6

Addressing the same claim against

Saoud, the court stated as follows:
[A] violation of the WVUFTA does not sound in tort as
is required to establish a civil conspiracy claim
under West Virginia law.
Therefore, Sheehan has
failed to plead adequately the claim of civil

6

Scott is not a party to this appeal. Although this quote
comes from the portion of the court’s order addressing Scott’s
motion for summary judgment, the court subsequently recognized
its prior discussion of the civil conspiracy claim and applied
the reasoning to its disposition of Sheehan’s motion for summary
judgment on Count IV. J.A. 158–59.
23

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conspiracy
complaint.
J.A. 158–59.
February

alleged

in

Pg: 24 of 32

Count

IV

of

the

amended

Further, during the final pretrial conference on

18,

2015,

the

court

again

addressed

the

civil

conspiracy claim in Count IV, stating the following:
Mr. Sheehan never pled a civil conspiracy and to the
extent that you’re arguing here today that he did, I
think you need to go take a look at the amended
complaint and if you think he pled a plain vanilla
fraud tort civil conspiracy, you ought to look at your
facts there because under Rule 9 I would have kicked
it out had anybody moved. . . . Had it been pled, it
is woefully inadequate. It’s never been fixed. It’s
not a claim that could ever go to trial.
J.A.

273–74.

footnote:

Notably,

his

brief,

Sheehan

states

in

a

“The District Court also found a procedural default

to be applicable.
decision

in

[sic]

That default is an independent basis for
and

is

not

contested

Appellant’s Br. 21 (emphasis added).

in

this

appeal.”

Sheehan does argue, on the

other hand, that the district court’s ruling with respect to the
adequacy of the pleadings was an exercise in judicial activism
because Saoud never moved to dismiss the complaint.

However,

the court is not required to ignore an obvious failure to allege
facts setting forth a plausible claim for relief.

Weller v.

Dep’t of Soc. Servs., 901 F.2d 387, 391 (4th Cir. 1990).

In

such a circumstance, the court is authorized to dismiss a claim
sua sponte under Federal Rule of Civil Procedure 12(b)(6), as
long as there is notice and an opportunity to be heard.
24

See

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United Auto Workers v. Gaston Festivals, Inc., 43 F.3d 902, 905–
06 (4th Cir. 1995) (affirming the district court’s sua sponte
dismissal of plaintiff’s claims); see also Saifullah v. Johnson,
1991 WL 240479 (4th Cir. Nov. 20, 1991) (unpublished) (“A court
may,

on

its

own

initiative,

failing to state a claim.”).

dismiss

a

civil

complaint

for

Therefore, the district court’s

alternative holding that Sheehan failed to adequately plead his
civil conspiracy claim, uncontested on appeal, was proper and
provides an independent basis for affirming the district court’s
ruling.
Notwithstanding the foregoing, the Court will address the
merits of Sheehan’s arguments.

Sheehan argues that a violation

of the WVUFTA can support a civil conspiracy claim as sounding
in tort because the first prong deems fraudulent a transfer or
obligation incurred by a debtor “[w]ith actual intent to hinder,
delay or defraud any creditor of the debtor.”
§ 40-1A-4(a)(1).

W. Va. Code Ann.

West Virginia recognizes a cause of action

for civil conspiracy.

Kessel v. Leavitt, 511 S.E.2d 720, 753

(W. Va. 1998) (“The law of this State recognizes a cause of
action sounding in civil conspiracy.”).

“[A] civil conspiracy

is a combination of two or more persons by concerted action to
accomplish an unlawful purpose or to accomplish some purpose,
not in itself unlawful, by unlawful means.”
25

Dixon v. Am. Indus.

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Leasing Co., 253 S.E.2d 150, 152 (W. Va. 1979).

“The cause of

action is not created by the conspiracy but by the wrongful acts
done by the defendants to the injury of the plaintiff.”
Therefore,

civil

conspiracy

is

not

a

stand-alone

cause

Id.
of

action, but is rather “a legal doctrine under which liability
for a tort may be imposed on people who did not actually commit
a

tort

themselves

but

who

shared

a

common

commission with the actual perpetrator(s).”

plan

for

its

Dunn v. Rockwell,

689 S.E.2d 255, 269 (W. Va. 2009) (citing Kessel, 511 S.E.2d at
754).

As such, courts in West Virginia dismiss civil conspiracy

claims when they are not supported by an underlying tort.

See,

e.g., Long v. M & M Transp., LLC, 44 F. Supp. 3d 636, 652
(N.D.W. Va. 2014) (“[B]ecause the Court granted summary judgment
as to the deliberate intent and outrage claims, there is no
underlying

tort

to

support

the

civil

conspiracy

claim.

Accordingly, this claim fails as a matter of law.”).
The

district

court

recognized

that

“case

law

in

West

Virginia is bereft of guidance as to whether [a conspiracy claim
for violation of the WVUFTA] sounds in contract or tort.”
132.

J.A.

However, the district court looked for guidance elsewhere

and noted cases from other jurisdictions that have adopted the
Uniform Fraudulent Transfer Act and whose courts have held that
a violation of the act is not a tort.
26

J.A. 132–33 (citing

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F.D.I.C. v. S. Prawer & Co., 829 F. Supp. 453, 455 (D. Me. 1993)
(“The Court is satisfied that violation of . . . Maine’s Uniform
Fraudulent
carefully

Transfers
weighing

Act . . . is

the

matter,

the

not

a

tort.”)).

district

court

After

determined

that a violation of the WVUFTA sounds in contract, and therefore
does not support a civil conspiracy claim.
The

WVUFTA

provides

two

separate

J.A. 133.
prongs

under

which

a

transfer made by a debtor may be deemed fraudulent as to the
creditor.
fraudulent

The
if

the

first

prong

debtor

provides

made

the

that

transfer

a
or

transfer
incurred

is
the

obligation “[w]ith actual intent to hinder, delay or defraud any
creditor of the debtor.”

W. Va. Code Ann. § 40-1A-4(a)(1).

A

transfer may also be deemed fraudulent under the second prong if
the debtor made the transfer or incurred the obligation:
Without receiving a reasonably equivalent value in
exchange for the transfer or obligation and the
debtor:
(i) Was engaged or was about to engage in a
business or a transaction for which the remaining
assets of the debtor were unreasonably small in
relation to the business or transaction; or (ii)
Intended to incur, or believed or reasonably should
have believed that he (or she) would incur, debts
beyond his (or her) ability to pay as they became due.
W. Va. Code Ann. § 40-1A-4(a)(2).
only

required

to

demonstrate

Therefore, a plaintiff is

actual

intent

fraudulent transfer under the first prong.

27

to

establish

a

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Although the Fourth Circuit has not addressed the issue,
courts

from

violations

varying

of

the

jurisdictions

Uniform

have

Fraudulent

refused

Transfer

to
Act

recognize
as

torts.

See, e.g., United States v. Neidorf, 522 F.2d 916, 917–18 (9th
Cir. 1975); Desmond v. Moffie, 375 F.2d 742, 743 (1st Cir. 1967)
(finding fraudulent conveyance claim under Massachusetts Uniform
Fraudulent
action

for

Conveyance

Act

purposes

of

to

be

a

applying

contract

rather

appropriate

than

statute

tort
of

limitations); S. Prawer, 829 F. Supp. at 456 (finding fraudulent
conveyance claim not to be a tort claim for purposes of the
Federal Tort Claims Act); Branch v. Fed. Deposit Ins. Corp., 825
F.Supp. 384 (D. Mass. 1993) (finding fraudulent conveyance claim
not to be a tort claim for purposes of the Federal Tort Claims
Act); Fed. Deposit Ins. Corp. v. Martinez Almodovar, 671 F.Supp.
851, 871 (D.P.R. 1987) (finding fraudulent conveyance claim not
to be a tort for purposes of choosing appropriate statute of
limitations); In re Fedders N. Am., Inc., 405 B.R. 527, 549
(Bankr. D. Del. 2009) (“Likewise, the authorities are also clear
that there is no such thing as liability for . . . conspiracy to
commit a fraudulent transfer as a matter of federal law under
the Code.”); Freeman v. First Union Nat’l Bank, 865 So.2d 1272,
1277 (Fla. 2004) (“We simply can see no language in FUFTA that
suggests an intent to create an independent tort for damages.”).
28

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However, a handful of courts from other jurisdictions have
recognized violations of the Uniform Fraudulent Transfer Act as
torts.
2011

See, e.g., Alliant Tax Credit Fund 31-A, Ltd. v. Murphy,

WL

3156339,

Plaintiffs’

at

claim

*8

for

(N.D.

civil

Ga.

July

conspiracy

26,

2011)

does

not

(“Although
furnish

an

independent cause of action on which to hold Defendants liable,
it can be used to establish some of Defendants’ liability for
fraudulent transfers under the UFTA.”); Valvanis v. Milgroom,
529 F. Supp. 2d 1190, 1203 (D. Haw. 2007) (“[T]he underlying
actionable

tort

for

the

conspiracy

claim

is

the

fraudulent

transfer of the Hawaii Property [under the HUFTA].”); Gutierrez
v. Givens, 1 F. Supp. 2d 1077, 1087 (S.D. Cal. 1998) (“The Court
finds that a triable issue of fact exists as to whether Colonial
may

be

found

liable

for

a

civil

conspiracy

to

violate

the

UFTA.”); In re Advanced Telecomm. Network, Inc., 2013 WL 414654,
at *3 (Bankr. M.D. Fla. Feb. 4, 2013) (“The Amended Complaint
properly pleads civil conspiracy against the Defendants to the
extent it alleges they knowingly agreed and aided the Allens in
violating

the

UFTA’s

constructive

fraudulent

transfer

provisions.”); In re Penn Packing Co., 42 B.R. 502, 505 (Bankr.
E.D. Pa. 1984) (Pennsylvania’s fraudulent conveyance act claim a
tort

for

purposes

of

choosing

Pennsylvania

statute

of

limitations); Banco Popular N. Am. v. Gandi, 876 A.2d 253, 263
29

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(N.J. 2005) (recognizing a claim for civil conspiracy for aiding
and abetting a fraudulent transfer under the UFTA); Double Oak
Const., LLC v. Cornerstone Dev. Int’l, LLC, 97 P.3d 140, 146
(Colo. App. 2003) (“[W]e conclude that a transfer in violation
of

CUFTA

is

a

legal

wrong

which

will

support

a

conspiracy

claim.”); McElhanon v. Hing, 728 P.2d 256, 263 (Ariz. Ct. App.
1985) aff’d in part, vacated in part, 728 P.2d 273 (Ariz. 1986)
(“[U]pon passage of the Uniform Fraudulent Conveyances Act, a
conveyance to defraud a general creditor became a legal wrong,
properly the subject of a suit for civil conspiracy.”).
Further,
circuit

while

courts

conspiracy

have

based

Transfer Act.

very

few

have

recognized

on

a

a

violation

addressed
cause
of

of

the

the

issue,

action
Uniform

for

some
civil

Fraudulent

See, e.g., CNH Capital Am. LLC v. Hunt Tractor,

Inc., 568 F. App’x 461, 473 (6th Cir. 2014), as amended (July 2,
2014)

(recognizing

transferee

or

that

Kentucky

transferor

for

law

civil

allows

recovery

conspiracy

to

from

a

commit

a

fraudulent conveyance, but denying relief because defendant was
neither the transferee nor the transferor); Chepstow Ltd. v.
Hunt, 381 F.3d 1077, 1090 (11th Cir. 2004) (recognizing a cause
of action for civil conspiracy based on the UFTA under Georgia
law

against

Comparet,

62

non-transferee

defendants);

F.

153

App’x

151,

30

(9th

Forum

Cir.

2003)

Ins.

Co.

v.

(“California

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allows for a cause of action for conspiracy to commit fraudulent
transfers, and allows a plaintiff to recover legal damages on
such a cause of action.”).
courts

applied

the

law

However, in these cases, the circuit
as

already

decided

by

state

courts

recognizing such civil conspiracy claims.
As outlined above, there are two prongs of the WVUFTA, only
one of which requires proof of fraudulent intent.

Conceivably,

a plaintiff could adequately plead a violation of the WVUFTA
under the first prong with actual intent to hinder, delay, or
defraud,

sufficient

to

support

a

civil

conspiracy

claim.

However, a violation of the second prong would not be sufficient
to

support

a

civil

conspiracy

claim.

Therefore,

the

Court

cannot hold, as a matter of law, that a violation of the WVUFTA
can support a claim for civil conspiracy in all circumstances.
Further, the Court is reticent to expand the bounds of West
Virginia

policy

by

recognizing

a

civil

conspiracy

violation of the WVUFTA for the first time.

claim

for

“Absent a strong

countervailing federal interest, the federal court . . . should
not elbow its way into this controversy to render what may be an
uncertain

and

ephemeral

interpretation

of

state

law.”

Time

Warner Entm’t–Advance/Newhouse P'ship v. Carteret-Craven Elec.
Membership Corp., 506 F.3d 304, 314 (4th Cir. 2007) (quoting
Mitcheson

v.

Harris,

955

F.2d
31

235,

238

(4th

Cir.

1992)).

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Therefore,

Filed: 05/24/2016

the

Court

Pg: 32 of 32

declines

to

make

such

a

policy

determination to recognize that a violation of the WVUFTA sounds
in tort.
Regardless,
violation

of

even

the

if

the

WVUFTA

court

sounds

were
in

to

recognize

tort,

that

Sheehan’s

a

civil

conspiracy claim would be barred by the statute of repose as
fully set forth above.

In West Virginia, “the statute of

limitation for a civil conspiracy claim is determined by the
nature

of

the

underlying

conspiracy is based.”
Va. 2009).

conduct

on

which

the

claim

of

Dunn v. Rockwell, 689 S.E.2d 255, 269 (W.

Therefore, because the statute of limitations for

Sheehan’s WVUFTA claim expired, it necessarily must follow that
the statute of limitations for Sheehan’s civil conspiracy claim
has also expired.

Thus, the Court affirms the district court’s

dismissal of Sheehan’s claims for violation of the WVUFTA.
IV.
For the reasons set forth above, we conclude that Sheehan’s
WVUFTA and civil conspiracy claims are barred by the applicable
statute

of

limitations.

We

therefore

affirm

the

district

court’s dismissal of Sheehan’s claims.
AFFIRMED

32