Alliant Tax Credit Fund 31-A, Ltd. et al v. Murphy et al

Filing 53

ORDER granting in part and denying in part Defendants' Motions to Dismiss #3 , #10 , #12 , #17 , #23 , #25 and #26 ; denying Defendants' Motions for More Definite Statement #4 and #13 . Plaintiffs' Motions to Strike Defendants Carroll #35 and ARM's #36 Reply Briefs are granted. Defendants shall respond to Plaintiffs' Complaint #1 in accordance with the Federal Rules of Civil Procedure. Signed by Judge Richard W. Story on 7/26/11. (cem)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION
ALLIANT TAX CREDIT FUND
31-A, LTD., et al.,
Plaintiffs,
v.
M. VINCENT MURPHY, III, et
al.,
Defendants.

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CIVIL ACTION NO.
1:11-CV-00832-RWS

ORDER
This case comes before the Court on Motions to Dismiss Complaint from
Defendants Community Management Services, Inc. [3], Marilyn Murphy [10],
M. Vincent Murphy, III [12], Gazebo Park Apartments of Acworth, LLC [17],
Multifamily Housing Developers, LLC [23], Affordable Realty Management
Inc. [25], and Patrick Carroll [26]; Motions for More Definite Statement from
Defendant Community Management Services, Inc. [4] and M. Vincent Murphy,
III [13]; and, Plaintiffs’ Motions to Strike Defendants Patrick Carroll [35] and
Affordable Realty Management Inc.’s [36] Reply Briefs. After considering the
record, the Court enters the following Order.

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Background
Several entities under the umbrella name Alliant Tax Credit Fund
(“Alliant” or “Plaintiffs”) conduct business in Florida. (Dkt. No. [1] at ¶¶ 6–11).
From 2003 through 2005, Alliant entered into six partnership agreements
(“Partnerships”) with, inter alios, Defendant M. Vincent Murphy, III (“Mr.
Murphy” or “Judgment Debtor”) to “acquire, develop, construct, own, and
operate apartments as tax credit qualifying low income housing” for senior
citizens in Kentucky. (Id. at ¶¶ 1, 22–24). As a condition for its entry into the
Partnerships and to secure its investment, Alliant required Mr. Murphy to enter
into personal guaranty agreements on each of the Partnerships. (Id. at ¶ 25).
From 2004 through 2006, Mr. Murphy provided Alliant certified financial
information that showed his net worth to be in excess of $25 million, and
Alliant relied on this information to make decisions regarding its investment.
(Id. at ¶¶ 35–38).
Five projects were completed in September 2005 and subsequently
managed by Defendant Community Management Services, Inc. (“CMS”), a
Georgia corporation wholly-owned by Mr. Murphy. (Id. at ¶¶ 15, 26–27). One
project, however, remained uncompleted after Mr. Murphy sought and was
denied loan modifications. (Id. at ¶¶ 26, 28). Beginning in 2007, Judgment
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Debtor refused to pay interest and other expenses on all Partnership loans, and
he advised his lender that he would not honor his personal guarantees and that
he no longer possessed the previously disclosed guarantee assets. (Id. at ¶¶ 29,
31). Because the loans were in default, Alliant then sued Mr. Murphy, inter
alios, on November 20, 2007, in the United States Eastern District Court of
Kentucky, where he was found jointly and severally liable for $8,946,643
(“Judgment”) on March 22, 2010. (Id. at ¶¶ 19, 34). The Judgment was
registered in the Northern District of Georgia on November 12, 2010. (Id. at
¶ 20).
By the time of the Judgment, however, Alliant says that “Judgment
Debtor’s claimed net worth decreased from over $27 million in assets to
practically nothing, as a result of … fraudulent acts.” (Id. at ¶ 39). Generally,
Alliant alleges that “Judgment Debtor, with the assistance of [his family] and
affiliates, liquidated and divested his assets in such a way so as to allow [Mr.
Murphy] to maintain continued direct control … and enjoyment of the assets at
his discretion, while permitting him to disclaim … ownership in the assets and
avoid auditors.” (Id. at ¶ 41). Plaintiffs go on to specifically allege several
fraudulent acts.

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First, Plaintiffs allege that Mr. Murphy transferred his interest in his
marital residence at 410 Society Street, Alpharetta, Georgia to his then-wife
Defendant Marilyn Murphy (“Ms. Murphy”) on March 23, 2007, despite
Ms. Murphy giving no consideration in return. (Id. at ¶¶ 42S44). Alliant claims,
upon information and belief, that Mr. Murphy still lives at the marital residence
although Mr. Murphy and Ms. Murphy divorced in late 2007. (Id. at ¶¶ 45–46).
Second, Plaintiffs allege that Mr. Murphy and Ms. Murphy’s divorce
“was a sham” because Defendants continue to jointly operate businesses, share
property, and reside at the same residence. (Id. at ¶ 50). The Property
Settlement Agreement executed in connection with the divorce transferred Mr.
Murphy’s interest in, inter alia, furniture, stock, and other real property. (Id. at
¶¶ 47–48). Alliant claims these ownership transfers were made without
consideration. (Id. at ¶ 49).
Third, Plaintiffs state that Mr. Murphy tried to hide assets via a
fraudulent transfer through CMS and CMS’s subsidiary, Defendant Multifamily
Housing Developers, LLC (“Multifamily Housing”). (Id. at ¶¶ 15–16, 58–59).
In exchange for management services, CMS received a portion of the revenue
from various apartment complexes owned, in whole or in part, by Mr. Murphy
through his other corporate entities. (Id. at ¶¶ 63–64). In 2006, CMS had a
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market value of $1,862,310, and Multifamily Housing had a market value of
$24,460. (Id. at ¶¶ 60, 62). On August 30, 2007, Mr. Murphy incorporated
Defendant Affordable Realty Management, Inc. (“ARM”) “for the purpose of
transferring CMS’s assets out of his wholly-owned entity and into ARM, a shell
entity also owned and controlled by” Mr. Murphy. (Id. at ¶¶ 17, 65). Judgment
Debtor allegedly “effectuated a transfer of the CMS Assets to ARM, thereby
removing himself as an owner of the CMS Assets,” to “hinder, delay, and
defraud his creditors, including Alliant.” (Id. at ¶¶ 68–69).
Fourth, Plaintiffs allege that Mr. Murphy tried to hide assets via a
fraudulent transfer through Park Bridge Acworth LLC (“Park Bridge”), which
was 99.9% owned by Mr. Murphy and consisted of a large apartment complex
(“Apartment Complex”) worth an estimated $8,760,000. (Id. at ¶ 51). CMS
served as Park Bridge’s property manager. (Id. at ¶¶ 15, 51). After Mr. Murphy
defaulted on his obligations to Alliant, he filed an application of incorporation
for Defendant Gazebo Park Apartments of Acworth, LLC (“Gazebo Park”),
which was formally incorporated on March 9, 2007. (Id. at ¶¶ 52–53). Ms.
Murphy became Gazebo Park’s managing member. (Id. at ¶ 53). On April 30,
2007, Mr. Murphy effectuated a transfer of the Apartment Complex from Park
Bridge to Gazebo Park, which removed his ownership interest in the Apartment
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Complex although he continued to act as the Apartment Complex’s agent. (Id.
at ¶¶ 15, 51, 55). In 2009 “the Judgment Debtor replaced himself and listed
[ARM] as Gazebo Park’s registered agent, which also shared the same address
as CMS, Park Bridge, and Gazebo Park.” (Id. at ¶ 56). Alliant claims Mr.
Murphy “has continued to exercise an unbroken chain of control over” the
Apartment Complex despite these transfers. (Id. at ¶ 57).
Finally, Plaintiffs allege that Mr. Murphy made a personal loan of
$968,000 to Defendant Patrick Carroll (“Carroll”)—ARM’s CEO—in March
2010 through Multifamily Housing. (Id. at ¶¶ 14, 70). The promissory note
requires Carroll to pay $24,071.14 to Multifamily Housing each month for 47
months. (Id. at ¶ 71). Because Judgment Debtor is the sole signatory of
Multifamily Housing’s bank account and has sole control over the entity,
Alliant claims Carroll’s payments are transferred to Mr. Murphy. (Id. at
¶¶ 72–73).
On March 17, 2011, Plaintiffs sued Defendants in federal court, alleging
civil conspiracy and multiple violations of the Georgia Uniform Fraudulent
Transfers Act (“UFTA”), O.C.G.A. § 18-2-70 et seq. (Id. at ¶¶ 74–168). Each
Defendant filed a motion to dismiss. (Dkt. Nos. [3], [10], [12], [17], [23], [25],
and [26]). Mr. Murphy and CMS each filed a motion for a more definite
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statement pursuant to Federal Rule of Civil Procedure 12(e), (Dkt. Nos. [4, 13]),
and Plaintiffs filed two motions to strike ARM and Carroll’s replies in support
of the Defendants’ motions to dismiss. (Dkt. Nos. [35–36]).
Discussion
I.

Motions to Strike
Both Carroll [34] and ARM [33] filed reply briefs in support of their

motions to dismiss. In these replies, they argue that Georgia law prohibits
“outsider reverse veil-piercing,” in which a creditor tries to make a company
liable for the debts of a member; therefore, Defendants allege, Plaintiffs failed
to state a claim against ARM and Carroll. (Dkt. No. [35-1] at 4–7; Dkt. No. [361] at 4–7). Plaintiffs have moved to strike the replies because they contain
arguments not initially raised in Defendants’ motions to dismiss. (Dkt. No. [351] at 3–4; Dkt. No. [36-1] at 3–4). In the alternative, Plaintiffs ask the Court to
allow them the opportunity to file surreplies. (Dkt. No. [35-1] at 4–5; Dkt. No.
[36-1] at 4–5).
Under the Federal Rule of Civil Procedure 12(f), “[t]he court may strike
from a pleading an insufficient defense or any redundant, immaterial,
impertinent, or scandalous matter.” Also, it is common practice for the Court
not to hear arguments raised for the first time in a reply brief. See United States
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v. Oakley, 744 F.2d 1553, 1556 (11th Cir. 1984) (“Arguments raised for the
first time in a reply brief are not properly before the reviewing court.”); United
States v. Ga. Dep’t of Natural Res., 897 F. Supp. 1464, 1471 (N.D. Ga. 1995)
(“This court will not consider arguments raised for the first time in a reply
brief.”). Although Carroll and ARM say that the “ ‘new argument’ raised by the
movant[s] in the[ir] reply brief[s] is merely an extension of the arguments
originally made,” the Court finds this assertion without merit because the
“outsider reverse veil-piercing” argument is an affirmative defense that is
distinct from Defendants’ original arguments. (Dkt. No. [37] at 3, 5; Dkt. No.
[38] at 3, 5). Therefore, the Court will not consider the argument at this time.
Plaintiffs’ Motions to Strike Defendants Patrick Carroll [35] and ARM’s [36]
Reply Briefs are GRANTED.
II.

Motions for More Definite Statement
In their Motions for More Definite Statement, Defendants Mr. Murphy

and CMS argue that “Plaintiffs’ claims of a ‘fraudulent transfer’ are so vague or
ambiguous that [they] cannot reasonably prepare a response.” (Dkt. No. [4-1] at
5; Dkt. No. [13-1] at 5). First, Defendants argue that the Complaint [1] fails to
comply with Federal Rule of Civil Procedure 8(a)(2) because “[t]here is not a
scrap of information to show fraudulent intent;” no evidence proves that the
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decline in Mr. Murphy’s financial health was due to anything but the economy
and his divorce; there is not sufficient detail about the transfer between CMS
and ARM; and, “there is no such thing as a ‘civil conspiracy.’ ” (Dkt. No. [4-1]
at 6–7; Dkt. No. [13-1] at 6–7). Second, Defendants argue the Complaint [1]
fails to comply with Federal Rule of Civil Procedure 9(b) because it “contains
not a shred of information which would enable Defendant to determine why the
property settlement was not ‘equitable’ ” and there is not sufficient detail on the
alleged transfer between CMS and ARM in which ARM served as a “shell.”
(Dkt. No. [4-1] at 7–8; Dkt. No. [13-1] at 8). Therefore, Defendants ask for
“clarification as to the meaning of the term ‘shell,’ as well as supporting facts;
… specifics as to why or how the transfer was ‘fraudulent’; and how each of the
Defendants benefits as a result of the alleged fraud.” (Dkt. No. [4-1] at 8; Dkt.
No. [13-1] at 8).
Plaintiffs respond that their Complaint [1] is sufficiently intelligible and
detailed to permit a response. (Dkt. No. [21] at 7). Furthermore, Defendants’
reliance on Rule 8(a)(2) is improper because no authority exists to indicate the
Court should apply Twombly’s pleading standard to a Rule 12(e) motion. (Id. at
8). Finally, the facts included to support Plaintiffs’ fraud claims, which must

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comply with heightened pleading standard, are sufficiently detailed to satisfy
Rule 9(b) requirements. (Id. at 10–19).
Federal Rule of Civil Procedure 12(e) provides that “[a] party may move
for a more definite statement of a pleading to which a responsive pleading is
allowed but which is so vague or ambiguous that the party cannot reasonably
prepare a response.” The Court holds that Plaintiffs’ Complaint [1] is
“sufficiently detailed to permit a response.” See Roy ex rel. Roy v. Fulton Cnty.
Sch. Dist., 509 F. Supp. 2d 1316, 1323 (N.D. Ga. 2007) (noting that although
the plaintiff’s complaint was “not a model of clarity,” the basis of the claim was
“not exceedingly vague or ambiguous, and the allegations supporting the claim
[were] sufficiently detailed to permit a response”). Defendants are certainly able
to respond in good faith and without prejudice to themselves. See Adelphia
Cable Partners, L.P. v. E & A Beepers Corp., 188 F.R.D. 662, 665 (S.D. Fla.
1999) (“A motion for more definite statement will only be granted where the
pleading is so vague or ambiguous that the opposing party cannot respond in
good faith or without prejudice to himself.”). Indeed, the Complaint [1] is 42
pages long and includes 92 pages of attached exhibits that relate to Plaintiffs’
allegations. The specific facts that Defendants demand can be obtained through
discovery and are most likely to be within Defendants’ control. Therefore,
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Defendants CMS [4] and Mr. Murphy’s [13] Motions for More Definite
Statement are DENIED.
III.

Motions to Dismiss
A.

Standard for Motion to Dismiss

Federal Rule of Civil Procedure 8(a)(2) requires that a pleading contain a
“short and plain statement of the claim showing that the pleader is entitled to
relief.” While this pleading standard does not require “detailed factual
allegations,” “labels and conclusions” or “a formulaic recitation of the elements
of a cause of action will not do.” Ashcroft v. Iqbal, __ U.S. __, 129 S. Ct. 1937,
1949 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)).
To withstand a motion to dismiss, “a complaint must contain sufficient factual
matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ ”
Id. (quoting Twombly, 550 U.S. at 570). A complaint is plausible on its face
when the plaintiff pleads factual content necessary for the court to draw the
reasonable inference that the defendant is liable for the conduct alleged. Id.
(citing Twombly, 550 U.S. at 556).
At the motion to dismiss stage, “all well-pleaded facts are accepted as
true, and the reasonable inferences therefrom are construed in the light most
favorable to the plaintiff.” Bryant v. Avado Brands, Inc., 187 F.3d 1271, 1273
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n.1 (11th Cir. 1999). However, the same does not apply to legal conclusions set
forth in the complaint. Sinaltrainal v. Coca-Cola Co., 578 F.3d 1252, 1260
(11th Cir. 2009) (citing Iqbal, 129 S. Ct. at 1949). “Threadbare recitals of the
elements of a cause of action, supported by mere conclusory statements, do not
suffice.” Iqbal, 129 S. Ct. at 1949. The court does not need to “accept as true a
legal conclusion couched as a factual allegation.” Papasan v. Allain, 478 U.S.
265, 286 (1986).
B.

FRCP 9(b)

Each Defendant argues that Plaintiffs failed to meet the Federal Rule of
Civil Procedure 9(b) pleading standard. (Dkt. Nos. [3], [10], [12], [17], [23],
[25], and [26]). Under Federal Rule of Civil Procedure 9(b), “a party [alleging
fraud] must state with particularity the circumstances constituting fraud … .
Malice, intent, knowledge, and other conditions of a person's mind may be
alleged generally.” Although there is a split within the Eleventh Circuit over the
issue, the Northern District of Georgia has held that a heightened pleading
standard under Rule 9(b) applies to all claims of actual fraud under the UFTA,
but not constructive fraud claims. Compare Kipperman v. Onex Corp., No.
1:05-CV-1242-JOF, 2007 U.S. Dist. LEXIS 71551, at *17 (N.D. Ga. Sept. 26,
2007) (“ … Rule 9(b) applies to all claims of intentional fraud, … but it does
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not apply to claims of constructive fraud … .”) with Nesco, Inc. v. Cisco, No.
CV205-142, 2005 U.S. Dist. LEXIS 36189, at *8 (S.D. Ga. Oct. 7, 2005)
(“[T]he Court concludes that the requirements of Rule 9(b) need not be met in
an action for fraudulent conveyance.” (footnote omitted)). Therefore, the Court
assumes without deciding that Plaintiffs must meet the heightened standard for
their actual fraud claims.1
Rule 9(b) is satisfied for actual fraud claims under the UFTA when a
plaintiff submits:
(1) an allegation of jurisdiction, (2) a statement of the date and the
conditions of the indebtedness involved (often with the document itself
attached), (3) the amount owed, (4) a statement that the defendant
conveyed real and personal property of a given description to another for
the purpose of defrauding [the] plaintiff and hindering and delaying the
collection of the indebtedness described prior, and [(5)] a demand for
judgment.
Kipperman, 2007 U.S. Dist. LEXIS 71551, at *18–19.
Plaintiffs’ Complaint [1] properly alleges: jurisdiction, (Dkt. No. [1] at
¶¶ 1–18); a statement of the date and the conditions of the indebtedness
involved, with nearly a hundred pages of documents attached, (Id. at ¶¶ 19–20);
the amount owed, (Id. at ¶ 19); and a demand for judgment (Id. at 42).
1

Because the Court holds that Plaintiffs meet the heightened pleading standard,
whether or not Rule 9(b) should apply is inconsequential to the outcome of
Defendants’ motions to dismiss.
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Furthermore, the Court finds that Plaintiffs also properly made against
each Defendant a statement that the defendant conveyed or received real and
personal property of a given description to another for the purpose of
defrauding Plaintiffs and hindering and delaying the collection of the
indebtedness. Mr. Murphy made the allegedly fraudulent transfers to his wife
and was the catalyst for the allegedly fraudulent transfers between the various
entities in this case. (Id. at ¶¶ 78, 90, 102, 114, 126, 139, 152). Ms. Murphy
divorced Mr. Murphy soon after Mr. Murphy repudiated his guarantees, and she
received the marital residence and a substantial amount of other assets in the
process even while they lived and worked together. (Id. at ¶¶ 42–50, 74–97).
Carroll received a $986,000 personal loan within weeks of the Judgment. (Id. at
¶¶ 70–73, 101–121). As to Multifamily Housing, it loaned Carroll the $968,000
for the benefit of Mr. Murphy. (Id. at ¶¶ 70–73, 98–121). Soon after Mr.
Murphy repudiated his guarantees, CMS transferred assets to ARM, and
Gazebo Park was incorporated and received the Apartment Complex. (Id. at
¶¶ 53–55, 62–69, 122–159).
Lastly, Plaintiff has sufficiently alleged state of mind. In accordance with
Rule 9(b), Alliant has alleged intent generally. (Id. at ¶¶ 40, 77–79, 89–91, 102,
114–15, 126–27, 139–40, 152–53, 162). Also, in determining actual intent,
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O.C.G.A. § 18-2-74 provides that consideration may be given to a number of
factors, often referred to as “badges of fraud.”2 Akanthos Capital Mgmt. v.
Compucredit Holdings Corp., No. 1:10-CV-844-TCB, 2011 U.S. Dist. LEXIS
28568, at *39 (N.D. Ga. Mar. 15, 2011). Plaintiffs have alleged several facts
that are badges of fraud, including, inter alia, that all but one of the transfers
were to an “insider,” all transfers were made after Mr. Murphy had repudiated
the guarantees, and Mr. Murphy became insolvent after the transfers. (Dkt. No.
[1] at ¶¶ 36–69). Therefore, Plaintiffs satisfy the heightened pleading standard

2

Specifically, O.C.G.A. § 18-2-74(b) provides that the Court may consider,
among other factors, whether:
(1) The transfer or obligation was to an insider;
(2) The debtor retained possession or control of the property transferred after
the transfer;
(3) The transfer or obligation was disclosed or concealed;
(4) Before the transfer was made or obligation was incurred, the debtor had
been sued or threatened with suit;
(5) The transfer was of substantially all the debtor's assets;
(6) The debtor absconded;
(7) The debtor removed or concealed assets;
(8) The value of the consideration received by the debtor was reasonably
equivalent to the value of the asset transferred or the amount of the obligation
incurred;
(9) The debtor was insolvent or became insolvent shortly after the transfer was
made or the obligation was incurred;
(10) The transfer occurred shortly before or shortly after a substantial debt was
incurred; and
(11) The debtor transferred the essential assets of the business to a lienor who
transferred the assets to an insider of the debtor.
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for their actual fraud claims under the UFTA, and each defendant’s motion to
dismiss based upon Plaintiffs’ satisfaction of Rule 9(b) is DENIED.
C.

FRCP 8(a)(2)

Each Defendant also argues that Plaintiffs failed to meet the pleading
standard under Federal Rule of Civil Procedure 8(a)(2). (Dkt. Nos. [3], [10],
[12], [17], [23], [25], and [26]). Plaintiffs who bring an actual fraud claim under
the UFTA “must show that (1) they are the Defendants’ creditors;
(2) Defendants made a transfer or incurred an obligation; and (3) Defendants
did so with the actual intent to hinder, delay or defraud Plaintiffs.” Akanthos
Capital Mgmt., 2011 U.S. Dist. LEXIS 28568, at *35 (footnote omitted) (citing
O.C.G.A. § 18-2-74(a)(1)). To bring a constructive fraud claim, a plaintiff must
show that the defendant
(1) made a transfer or incurred an obligation (2) without “receiving a
reasonably equivalent value in exchange for the transfer or obligation,”
and (3) either: (a) was engaged or was about to engage in a business or a
transaction for which its remaining assets were unreasonably small in
relation to the business or transaction; (b) intended to incur, or believed
or reasonably should have believed that it would incur, debts beyond its
ability to pay as they became due; or (c) was insolvent at that time or
became insolvent as a result of the transfer.
Id. at *44S45 (footnote omitted) (citations omitted).

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The Court holds that Plaintiffs have sufficiently pleaded facts to make
their UFTA claims plausible. As to the actual fraud claims, it is undisputed that
Plaintiffs qualify as “creditors” under O.C.G.A. § 18-2-71(4) because they have
brought a claim pursuant to the UFTA. See id. at *35–36 n.7 (finding that the
plaintiffs are creditors under the UFTA because they “have brought ‘claims’
pursuant to the UFTA”). As to the second element, the UFTA defines a
“transfer” as “every mode, direct or indirect, absolute or conditional, voluntary
or involuntary, of disposing of or parting with an asset or an interest in an asset
and includes payment of money, release, lease, and creation of a lien or other
encumbrance.” O.C.G.A. § 18-2-71(12). Furthermore, a transfer occurs “when
[a] transfer is so far perfected that a creditor on a simple contract cannot acquire
a judicial lien … that is superior to the interest of the transferee,” except
through the fraudulent transfer statute. O.C.G.A. § 18-2-76(1)(B). As already
discussed, Plaintiffs have pleaded instances of allegedly fraudulent transfers for
each Defendant. As to the third element, Plaintiff has alleged scienter generally
and has, as already discussed, alleged several facts that are “badges of fraud.”
As to the constructive fraud claims, Plaintiffs alleged that all Defendants
made a transfer or incurred an obligation. (Dkt. No. [1] at ¶¶ 53–55, 62–69,
70–73, 78, 90, 98–159). Furthermore, they alleged that Defendants did not
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receive a reasonably equivalent value in exchange for the transfers or
obligations. (Id. at ¶¶ 44, 49, 79, 93, 103, 105, 115, 117, 129, 140, 142, 153,
155). Finally, Plaintiffs sufficiently alleged that the transactions occurred when
Mr. Murphy reasonably should have believed that he would incur debts beyond
his ability to pay as they became due or when he was insolvent, or that the
transactions made Mr. Murphy insolvent. (Id. at ¶¶ 77, 79, 81–82, 89, 91,
93–94, 103, 105–06, 115, 117–18, 127, 129–30, 140, 142–43, 153, 155–56).
Therefore, because Plaintiffs pleaded the factual content necessary for the
court to draw the reasonable inference that Defendants are liable for the conduct
alleged, Plaintiffs’ claims are plausible. Accordingly, each Defendant’s motion
to dismiss pursuant to Rule 8(a) is DENIED.
D.

Civil Conspiracy

Each Defendant also argues that the civil conspiracy claim under Count
IX should be dismissed. (Dkt. Nos. [3], [10], [12], [17], [23], [25], and [26]).
Defendants reason that (1) allegations in support of a civil conspiracy are
conclusory and subject to dismissal under Rule 8(a), and (2) there is no separate
cause of action for civil conspiracy under Georgia law. (Id.). Plaintiffs concede
that alleging a civil conspiracy does not furnish a separate cause of action, but
maintain that nothing prevents them from alleging conspiracy and that
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conspiracy can be pleaded in general terms; furthermore, Plaintiffs characterize
Defendants’ actions as “irrational” considering all the circumstances and
therefore sufficient to support an inference of a conspiracy. (Dkt. No. [10] at
18–20; Dkt. No. [20] at 18–20; Dkt. No. [28] at 13–16; Dkt. No. [29] at 15–16;
Dkt. No. [30] at 16–17; Dkt. No. [31] at 12–13).
“A conspiracy is a combination of two or more persons to accomplish an
unlawful end or to accomplish a lawful end by unlawful means.” MustaqeemGraydon v. Suntrust Bank, 573 S.E.2d 455, 461 (Ga. Ct. App. 2002) (quoting
First Fed. Sav. Bak v. Hart, 363 S.E.2d 832, 833 (Ga. Ct. App. 1987)). “To
recover damages for a civil conspiracy claim, a plaintiff must show that two or
more persons, acting in concert, engaged in conduct that constitutes a tort.” Id.
But, “[w]here civil liability for a conspiracy is sought to be imposed, the
conspiracy itself furnishes no cause of action. The gist of the action is not the
conspiracy alleged, but the tort committed against the plaintiff and the damage
thereby done.” Jones v. Spindel, 147 S.E.2d 615, 616 (Ga. Ct. App. 1966).
When alleged, a conspiracy may be pleaded in general terms. Id.
Although Plaintiffs’ claim for civil conspiracy does not 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
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UFTA. See Mustaqeem-Graydon, 573 S.E.2d at 461 (noting that civil coconspirators may be held liable for damages caused). Therefore, Defendants’
motions to dismiss Plaintiffs’ civil conspiracy claim are GRANTED insofar as
Plaintiffs allege a separate cause of action, but DENIED to the extent that a
conspiracy may be alleged as a theory to support underlying tort liability.
E.

Attorney’s Fees

ARM and Carroll argue that the Court should dismiss Count X for
attorney’s fees. (Dkt. No. [25-1] at 13–14; Dkt. No. [26-1] at 13–14). This
argument is meritless because a showing of intent or bad faith would entitle
Plaintiffs to attorney’s fees. See Tyler v. Lincoln, 527 S.E.2d 180, 183 (Ga.
2000) (“[E]very intentional tort invokes a species of bad faith that entitles a
person wronged to recover the expenses of litigation including attorney fees.”
(quoting Ponce de Leon Condos. v. DiGirolamo, 232 S.E.2d 62, 64 (Ga.
1977))). Therefore, Defendants’ motions to dismiss Plaintiffs’ claim for
attorney’s fees are DENIED.
F.

FRCP 5.2

Mr. Murphy and CMS understandably take issue with Plaintiffs including
confidential information in the Complaint [1], but this issue is MOOT because

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Exhibit F is sealed. The Court does not find that this inadvertent and remedied
error supports dismissal.
Conclusion
For the aforementioned reasons, Defendants’ Motions to Dismiss
Complaint, (Dkt. Nos. [3], [10], [12], [17], [23], [25], and [26]), are
GRANTED in part and DENIED in part; Defendants’ Motions for More
Definite Statement, (Dkt. Nos. [4] and [13]), are DENIED; and Plaintiffs’
Motions to Strike Defendants Carroll [35] and ARM’s [36] Reply Briefs are
GRANTED. Defendants shall respond to Plaintiffs’ Complaint [1] in
accordance with the Federal Rules of Civil Procedure.

SO ORDERED, this 26th day of July, 2011.

________________________________
RICHARD W. STORY
United States District Judge

21
AO 72A
(Rev.8/82)