RDS Real Estate, LLC v. Abrams Group Construction, LLC et al

Filing 179

ORDER denying 140 Motion for Summary Judgment; denying 144 Motion for Summary Judgment Signed by Chief District Judge Louis Guirola, Jr on 01/23/2017 (Guirola, Louis)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
SOUTHERN DIVISION
RDS REAL ESTATE, LLC

PLAINTIFF

v.

CAUSE NO. 1:15CV361-LG-RHW

ABRAMS GROUP CONSTRUCTION, LLC,
et al.

DEFENDANTS

ORDER DENYING MOTIONS FOR SUMMARY JUDGMENT
BEFORE THE COURT are the [140, 144] Motions for Summary Judgment
filed by Defendants George E. Spellmeyer, Norma Spellmeyer, and Michael
Spellmeyer (collectively, “the Spellmeyer defendants”) and Defendant Tusitala, Inc.
(“Tusitala”) regarding the allegations against them in the [107] Amended
Complaint filed by Plaintiff RDS Real Estate, LLC. The Court has extensively
outlined the background of this action in its previous [174, 175, 177] Orders, and
incorporates those discussions by reference herein. For the reasons discussed
below, the Court finds that the Motions should be denied.1
DISCUSSION
Defendants have raised arguments for dismissal under both Federal Rule of
Civil Procedure 12(b)(6) and for summary judgment under Rule 56. Because the
Court has already found that any 12(b)(6) argument is untimely, (see Order 3-4,

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Defendant Abrams Group Construction, LLC, is not a party to the current
Motions. Accordingly, the Court sometimes refers to the Spellmeyer defendants and
Tusitala simply as “Defendants” in this Order. The Court has also disregarded
RDS’s Response arguments that relate to transfers made to Abrams, as the Court
has previously denied summary judgment in favor of RDS on those claims and on
its declaratory judgment claim against that defendant. (See generally Orders, ECF
Nos. 175, 177).

ECF No. 174), it will treat Defendants’ dismissal arguments as being made
pursuant to Rule 12(c). See Jones v. Greninger, 188 F.3d 322, 324 (5th Cir. 1999).
Defendants’ Rule 12(c) Arguments for Dismissal
Under Rule 12(c), “[a]fter the pleadings are closed – but early enough not to
delay trial – a party may move for judgment on the pleadings.” “‘The standard for
dismissal under Rule 12(c) is the same as that for dismissal for failure to state a
claim under Rule 12(b)(6).’” Bosarge v. Miss. Bureau of Narcotics, 796 F.3d 435, 439
(5th Cir. 2015) (citation and brackets omitted). The Court “‘accept[s] all wellpleaded facts as true, viewing them in the light most favorable to the plaintiff.’” Id.
(citation omitted). “[A] complaint must contain sufficient factual matter, accepted
as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556
U.S. 662, 678 (2009) (citation and quotation marks omitted). “When there are wellpleaded factual allegations, a court should assume their veracity and then
determine whether they plausibly give rise to an entitlement to relief.” Id. at 679.
Defendants make multiple arguments for dismissal of the Amended
Complaint related to both RDS’s fraudulent transfers claims and its allegations of
piercing the corporate veil. The Court will discuss the arguments related to the
fraudulent transfer claims, and will next consider the allegations of piercing the
corporate veil against each Defendant.
A.

RDS’s Fraudulent Transfer Claims

To the extent Defendants argue that that RDS had to specifically cite the
applicable provisions of the Uniform Fraudulent Transfer Act (UFTA) to state a
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claim thereunder, the Court is not persuaded by such an argument. Under Federal
Rule of Civil Procedure 8(a)(2), a complaint “must contain . . . a short and plain
statement of the claim showing that the pleader is entitled to relief . . . .” “Rule
8(a)(2) . . . does not treat legal descriptions of a claim the same as factual
averments.” Johnson v. Honda, No. 3:15cv223-DPJ-FKB, 2015 WL 5794449, at *3
(S.D. Miss. Oct. 1, 2015). “A complaint need not . . . articulate a perfect ‘statement
of the legal theory supporting the claim asserted.’” Smith v. Bank of Am., N.A., 615
F. App’x 830, 833 (5th Cir. 2015) (citing Johnson v. City of Shelby, 135 S. Ct. 346,
347 (2014)) (emphasis in original). All that is required of a plaintiff is to inform the
defendant “of the factual basis for their complaint . . . .” See Johnson v. City of
Shelby, 135 S. Ct. at 347. Here, the Court finds that, while RDS’s Amended
Complaint could be clearer, the Amended Complaint satisfies this low threshold.
Defendants also contend that the Amended Complaint does not comply with
Federal Rule of Civil Procedure 9(b), which states in pertinent part that “[i]n
alleging fraud or mistake, a party must state with particularity the circumstances
constituting fraud or mistake.” The Fifth Circuit has not yet had occasion to
address whether Rule 9(b) applies to UFTA claims. See Janvey v. Alguire, 647 F.3d
585, 599 (5th Cir. 2011). This Court need not decide this issue, either, as it is of the
opinion that RDS has pled its fraudulent transfer claims with sufficient
particularity even to satisfy Rule 9(b)’s more stringent standard. See, e.g., Biliouris
v. Sundance Res., Inc., 559 F. Supp. 2d 733, 736 (N.D. Tex. 2008); In re Tex.
Rangers Baseball Partners, 498 B.R. 679, 712 (Bankr. N.D. Tex. 2013).
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B.

RDS’s Allegations of Piercing the Corporate Veil
Related to the Spellmeyer Defendants

The Spellmeyer defendants also challenge the legal sufficiency of RDS’s
attempts to pierce the corporate veil of S&S Construction, LLC, and hold them
individually liable for the judgment RDS obtained against S&S. In doing so, they
rely on Mississippi law, but the Court has already determined that Alabama law
applies to this issue. (See Order 5-6, ECF No. 177). Accordingly, dismissal is not
warranted on the ground that RDS has failed to state a claim under Mississippi
law. In any event, the Court is of the opinion that the allegations of the [107]
Amended Complaint are sufficient under Alabama law. See, e.g., Claybar v.
Huffman, 54 F. Supp. 3d 1284, 1290 (S.D. Ala. 2014).
C.

RDS’s Allegations of Piercing the Corporate Veil
Related to Tusitala

As discussed in the Court’s [177] Order, the Mississippi Limited Liability
Company Act has been interpreted to mean that the veil-piercing standard of the
law of the state under which an LLC exists applies when a party attempts to pierce
the LLC’s veil. (See id. at 5-6). “On the other hand, when considering whether the
corporate veil [of Tusitala, Inc.] should be pierced, the choice of laws is not as clear
because the Mississippi Business Corporation Act contains no provision that
specifically addresses this question.” See In re Thorne, No. 09-11763-DWH, 2011
WL 2496217, at *2 (Bankr. N.D. Miss. June 22, 2011). Nonetheless, “[w]hen
confronted with an uncertainty such as this, several courts have decided that the
law of the state of incorporation . . . should be applied.” See id. This Court agrees.
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Since Tusitala is an Alabama corporation, Alabama law applies to RDS’s veil
piercing allegations related to Tusitala. Because Tusitala has not made any
argument for dismissal based on the applicable law, the Court finds that its Motion
should be denied.2
Defendants’ Summary Judgment Arguments
A summary judgment motion shall be granted “if the movant shows that
there is no genuine dispute as to any material fact and the movant is entitled to
judgment as a matter of law.” Fed. R. Civ. P. 56(a). If the movant carries its
burden of demonstrating the absence of a genuine issue of material fact, the burden
shifts to the non-movant to show that summary judgment should not be granted.
Celotex Corp. v. Catrett, 477 U.S. 317, 323-25 (1986).
“[T]he court must view the facts in the light most favorable to the nonmoving party and draw all reasonable inferences in its favor.” Deville v. Marcantel,
567 F.3d 156, 164 (5th Cir. 2009). “In reviewing the evidence, the court must
‘refrain from making credibility determinations or weighing the evidence.’” Id.
(citation omitted).

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The same is true with respect to Tusitala’s claim that summary judgment is
warranted based on Mississippi law pertaining to piercing the corporate veil/alter
ego. However, the Court notes that it is unclear whether RDS is even attempting to
state any claims beyond its fraudulent transfer claims against Defendant Tusitala.
Indeed, in moving for summary judgment, RDS argued that it was entitled to
summary judgment that the veil of S&S should be pierced and that the Spellmeyers
should be individually liable, but it did not make any such argument related to
Tusitala. The parties should address this issue in their proposed pretrial order.
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A.

RDS’s Fraudulent Transfer Claims Against Defendants

Under Mississippi’s UFTA, “[a] transfer made . . . by a debtor is fraudulent as
to a creditor, whether the creditor’s claim3 arose before or after the transfer was
made . . . , if the debtor made the transfer . . . with actual intent to hinder, delay or
defraud any creditor of the debtor.” Miss. Code § 15-3-107(1). Courts generally
consider eleven “badges of fraud” in determining whether a transfer was made with
actual intent to hinder, delay, or defraud. While this list is not exhaustive,
consideration may be given, among other factors, to whether:
(a) The transfer . . . was to an insider;
(b) The debtor retained possession or control of the property
transferred after the transfer;
(c) The transfer . . . was disclosed or concealed;
(d) Before the transfer was made . . . , the debtor had been sued or
threatened with suit;
(e) The transfer was of substantially all the debtor’s assets;
(f) The debtor absconded;
(g) The debtor removed or concealed assets;
(h) The value of the consideration received by the debtor was
reasonably equivalent to the value of the asset transferred . . . ;
(i) The debtor was insolvent or became insolvent shortly after the
transfer was made . . . ;

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Under UFTA, a “‘[c]laim’ means a right to payment, whether or not the
right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured, or unsecured.” Miss.
Code § 15-3-101(c).
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(j) The transfer occurred shortly before or shortly after a substantial
debt was incurred; [and]
(k) The debtor transferred the essential assets of the business to a
lienor who transferred the assets to an insider of the debtor . . . .
Miss. Code § 15-3-107(2).
Although there is little Mississippi case law on UFTA, there is ample case
law from courts in other jurisdictions that have adopted UFTA and from
bankruptcy courts discussing related provisions of the Bankruptcy Code. “No
specific combination of badges is necessary for a finding of actual intent and the
presence of any of the badges of fraud does not compel such a finding.” In re Vista
Bella, Inc., 511 B.R. 163, 194 (Bankr. S.D. Ala. 2014). “The badges merely highlight
circumstances that suggest that the transfer was made with fraudulent intent.
With that being said, it is clear that actual intent to hinder, delay, or defraud is a
heavily fact-dependent question.” Id. at 194-95.
Defendants first argue that they are not “debtors” under the statute and that
“RDS must assert its UFTA claim against S&S Construction, LLC itself, which it
has not in the present action.” (See, e.g., Spellmeyer Defs. Mem. 21-22, ECF No.
141). However, UFTA specifically provides for claims against a transferee of a
debtor. See Miss. Code §§ 15-3-111 to -113; see also Swift Fin. Corp. v. Bath Planet
of Miss., LLC, No. 3:15CV846-DPJ-FKB, 2016 WL 3180291, at *6 (S.D. Miss. June
6, 2016). Furthermore, as already discussed by the Court in its [177] Order, neither
UFTA nor case law interpreting the statute required that RDS name S&S as a
party to this action. See, e.g., Bally Gaming, Inc. v. Caldwell, 12 F. Supp. 3d 907,
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917 (S.D. Miss. 2014); see also Canty v. Otto, No. CV0950281525, 2010 WL 797206,
at *5 (Conn. Super. Ct. Feb. 4, 2010); Official Post-Confirmation Comm. of Creditors
Holding Unsecured Claims v. Markheim, No. CV-04-040, 2005 WL 3340353, at *2
(Me. Super. Ct. Oct. 7, 2005).
Defendants also argue that there is no evidence of actual intent. For the
sake of brevity, the Court finds it unnecessary to include a detailed analysis of each
of Defendants’ arguments on this point. After careful consideration of the badges of
fraud discussed above, the Court is of the opinion that Defendants have not
satisfied their summary judgment burden to establish a lack of genuine issue of
material fact on this issue and that, in any event, RDS has met its summary
judgment burden to show that genuine issues of material fact remain regarding
S&S’s intent.
This includes evidence establishing that one or more of the transfers at issue
was made to an insider, see Miss. Code § 15-3-101, and that Defendants had, at a
minimum, been threatened with suit at the time certain transfers were made.
Furthermore, there is conflicting evidence about the value of consideration received
by S&S, including about whether transfers were truly loan repayments. Summary
judgment is not warranted in favor of Defendants on RDS’s fraudulent transfer
claims. See, e.g., De Beck v. United States, No. SA-11-CA-45-FB, 2012 WL
12860949, at *28 (W.D. Tex. July 31, 2012) (“fraudulent intent typically is not
appropriate for summary judgment because it is a question of fact generally
reserved for the trier of fact”).
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Finally, even if there was no actual fraud – and the Court has determined
that there are multiple genuine issues of material fact that remain surrounding this
claim – UFTA also recognizes constructive fraud as an alternative way to prove
fraudulent transfer claims. See Miss. Code §§ 15-3-107(2)(m) & (n). Defendants
have not moved for summary judgment on this ground. Regardless, even a cursory
review of RDS’s evidence shows that summary judgment in favor of Defendants
would also be inappropriate on RDS’s constructive fraud claims.
B.

RDS’s Allegations Related to Piercing the Corporate Veil

“[U]nder Alabama law, it is possible to ‘pierce the veil’ of an LLC in some
situations.” Filo Am., Inc. v. Olhoss Trading Co., 321 F. Supp. 2d 1266, 1269 (M.D.
Ala. 2004). Factors to consider “are: (1) inadequacy of capital; (2) fraudulent
purpose in conception or operation of the business; (3) operation of the corporation
as an instrumentality or alter ego.” See id.
The Alabama Supreme Court [has] also held . . . that, in order to
impose liability on a defendant for the acts of a corporation on the
grounds that the corporation was an ‘instrumentality’ or ‘alter-ego’ of
the defendant, a plaintiff must show that:
1) The dominant party must have complete control and
domination of the subservient corporation’s finances, policy and
business practices so that, at the time of the attacked
transaction, the subservient corporation had no separate mind,
will, or existence of its own;
2) The control must have been misused by the dominant party
...;
3) The misuse of this control must proximately cause the harm
or unjust loss complained of.

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Mama’s Enters., LLC v. United States, 883 F. Supp. 2d 1128, 1135 (N.D. Ala. 2012)
(citing Messick v. Moring, 514 So. 2d 892, 945-95 (Ala. 1987) (brackets omitted).
The Court denied summary judgment in RDS’s favor on this issue. (See
generally Order, ECF No. 177). However, the Court finds that while RDS’s evidence
was insufficient to grant judgment as a matter of law in its favor, it is sufficient to
raise multiple genuine issues of material fact regarding whether S&S’s corporate
veil should be pierced and the Spellmeyer defendants held individually liable. See,
e.g., Strickland v. Champion Enters., Inc., No. 1:06-CV-682-TFM, 2007 WL
1837136, at *4 (M.D. Ala. June 26, 2007) (“Given the fact-intensive nature of the
veil-piercing analysis, the determination is typically one to be resolved at trial,
where the trier of fact can make choices as to credibility and weight of the
evidence.”).
For example, there is conflicting evidence regarding the adequacy or
inadequacy of S&S’s capital, as well as with respect to monetary transfers that were
made out of the S&S account and whether the money was transferred to pay back
loans or was used for personal expenses or some other improper purpose. While
Defendants have attempted to explain these transfers through the deposition and
affidavit testimony of Norma Spellmeyer, at the summary judgment stage, the
Court must view the evidence in the light most favorable to the non-movant RDS
and must refrain from making credibility determinations. See Deville, 567 F.3d at
164. In short, summary judgment is not appropriate on this ground, either.

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CONCLUSION
To the extent the Court has not addressed any of the parties’ arguments, it
has considered them and determined that they would not alter this result. The
Court is of the opinion that the Motions filed by the Spellmeyer defendants and
Tusitala should be denied.
IT IS THEREFORE ORDERED AND ADJUDGED that the [140, 144]
Motions for Summary Judgment are DENIED.
SO ORDERED AND ADJUDGED this the 23rd day of January, 2017.

s/

Louis Guirola, Jr.

LOUIS GUIROLA, JR.
CHIEF U.S. DISTRICT JUDGE

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