Guidry et al v. Seven Trails West, LLC et al

Filing 38

MEMORANDUM AND ORDER IT IS HEREBY ORDERED that defendants Seven Trails West LLC and UBS Realty Investors LLC's Motion to Dismiss for Failure to State a Claim (Doc. #21) is DENIED. IT IS FURTHER ORDERED that defendants Seven Trails West LLC and UBS Realty Investors LLC shall answer plaintiffs' Second Amended Complaint within the time prescribed by Fed. R. Civ. P. 12(a). Denying 21 Motion to Dismiss Case. Signed by Magistrate Judge Frederick R. Buckles on 5/6/2013. (NCL)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
JOHN GUIDRY, et al.,
Plaintiffs,
v.
SEVEN TRAILS WEST, LLC,
et al.,
Defendants.

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No.

4:12CV1652 FRB

MEMORANDUM AND ORDER
Presently pending before the Court is defendants Seven
Trails West LLC and UBS Realty Investors LLC’s Motion to Dismiss
for Failure to State a Claim (Doc. #21).

All matters are pending

before the undersigned United States Magistrate Judge, with consent
of the parties, pursuant to 28 U.S.C. § 636(c).
Plaintiffs John Guidry and Simul-Vision Cable Systems,
Ltd., cable service providers, bring this fraudulent transfer
action against defendants Seven Trails West, LLC (Seven Trails);
UBS Realty Investors, LLC (UBS); and Allegis Multifamily Trust,
L.P. (AMT), alleging that defendants fraudulently caused assets to
be transferred from Seven Trails to AMT so as to avoid plaintiffs’
collection of a monetary debt owed to them by Seven Trails as a
result of a state court judgment.1

Plaintiffs also allege that

defendants UBS and AMT are alter egos of defendant Seven Trails and
1

By a separate Memorandum and Order entered this date,
defendant AMT was dismissed from this cause without prejudice due
to lack of personal jurisdiction.

thus bear the legal duty to pay the judgment owed by Seven Trails
to plaintiffs.

Plaintiffs, Missouri residents, originally brought

this action on August 3, 2012, in the Circuit Court of St. Louis
County, Missouri.

Defendant Seven Trails, a Delaware corporation,

removed the cause to this Court on September 14, 2012, invoking
this Court’s diversity jurisdiction.
businesses

incorporated

in

the

Defendants UBS and AMT,

States

of

Massachusetts

and

Delaware, respectively, consented to the removal of the matter to
this

Court.

Inasmuch

as

the

amount

in

controversy

exceeds

$75,000.00, this Court has subject matter jurisdiction over the
cause.

28 U.S.C. §§ 1332(a), 1441.
Defendants Seven Trails and UBS now seek to dismiss

plaintiffs’ claims pursuant to Fed. R. Civ. P. 12(b)(6), arguing
that they fail to state a claim against them upon which relief can
be granted inasmuch as they are barred by the relevant statute of
limitations.

Defendants also seek to dismiss plaintiffs’ claims

pursuant to Fed. R. Civ. P. 9(b), arguing that they fail to meet
the heightened pleading standard for bringing claims of fraud.
Plaintiffs have responded to the motion to which defendants have
replied.

For the following reasons, defendants’ motion should be

denied.
I.

Allegations in the Complaint

A review of plaintiffs’ Second Amended Complaint (Doc.
#15) shows plaintiffs to allege the following:

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During and prior to March 2006, defendant Seven Trails
owned property known as Seven Trails Apartments (the Apartments),
in relation to which plaintiffs were parties to a contract for
cable service.

Defendant UBS, a Massachusetts company, is the

manager of Seven Trails.

AMT, a Delaware limited partnership, is

the sole member of Seven Trails and has held assets for Seven
Trails.
In August 2001, plaintiffs issued a demand letter to the
managing company for the Apartments for amounts owed, stating that
they

had

dollars.

been

injured

in

an

amount

exceeding

$1.453

million

In March 2003, plaintiffs sued Seven Trails and UBS for

breach of contract.

In March 2006, Seven Trails completed a sales

transaction whereupon it transferred title and possession of the
Apartments,

its

$36,750,000.00.

sole

asset,

to

BPG

Properties,

Ltd.,

for

The proceeds from the sale were wired directly to

a bank account held by AMT.

Seven Trails has held no assets in its

name since the sale of the Apartments.
On May 18, 2006, two months subsequent to Seven Trails’
sale of the Apartments, judgment was entered against Seven Trails
in the amount of $706,000.00 in favor of plaintiffs.

Seven Trails

appealed the judgment and posted an appeal bond secured by a letter
of credit in the amount of $749,100.00 based upon monies provided
to Seven Trails by AMT.

In 2008, the Missouri Court of Appeals

reversed the judgment on damages and remanded the matter for a new

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trial thereon.

Seven Trails was released from the appeal bond and

repaid AMT the full amount of $749,100.00.

On remand, the trial

court determined a new damage award on the existing record and
without a new trial.

In 2010, the Missouri Court of Appeals

reversed this judgment and remanded the matter to the trial court
with instruction to conduct a new trial on the issue of damages.
In September 2011, a new trial on damages was held, and
a

jury

rendered

its

verdict

against

plaintiffs $1,675,000.00 in damages.

Seven

Trails,

awarding

On September 4, 2012, the

Missouri Court of Appeals affirmed this judgment of the trial
court.

Seven Trails did not post an appeal bond or offer security

against the September 2011 judgment.

Seven Trails has asserted to

plaintiffs that it has no assets.
Plaintiffs claim that as of May 18, 2006, they were
creditors of Seven Trails as a result of the judgment entered that
date against Seven Trails, and that Seven Trails’ transfer of its
assets in March 2006 – done at the direction of UBS – constituted
a fraudulent transfer done with the intent to hinder, delay or
defraud plaintiffs in their attempt to collect monies owed to them.
Plaintiffs also claim that UBS is the alter ego of Seven Trails and
thus is liable for the debt owed by Seven Trails to plaintiffs.
II.
A.

Discussion

Failure to State a Claim - Statute of Limitations
When reviewing a motion to dismiss for failure to state

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a claim under Fed. R. Civ. P. 12(b)(6), the Court must accept as
true all factual allegations contained in the Complaint, and review
the Complaint to determine whether its allegations show the pleader
to be entitled to relief.

Bell Atl. Corp. v. Twombly, 550 U.S.

544, 555-56 (2007); Fed. R. Civ. P. 8(a)(2).

The purpose of a

motion to dismiss for failure to state a claim is to test the legal
sufficiency of the challenged claim.

A claim must be dismissed

under Rule 12(b)(6) if it does not plead “enough facts to state a
claim to relief that is plausible on its face.”

Twombly, 550 U.S.

at 570 (abrogating the traditional 12(b)(6) “no set of facts”
standard set forth in Conley v. Gibson, 355 U.S. 41, 45-46 (1957)).
While the Complaint need not provide specific facts in support of
the claims contained therein, Erickson v. Pardus, 551 U.S. 89, 93
(2007)

(per

curiam),

it

“must

include

sufficient

factual

information to provide the ‘grounds’ on which the claim rests, and
to raise a right to relief above a speculative level.”

Schaaf v.

Residential Funding Corp., 517 F.3d 544, 549 (8th Cir. 2008)
(citing Twombly, 550 U.S. at 555-56 & n.3).

This obligation

requires a plaintiff to plead “more than labels and conclusions,
and a formulaic recitation of the elements of a cause of action
will not do.”

Twombly, 550 U.S. at 555.

When determining a motion

to dismiss under Rule 12(b)(6), “[t]he issue is not whether a
plaintiff will ultimately prevail but whether the claimant is
entitled to offer evidence to support the claims.”

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Scheuer v.

Rhodes, 416 U.S. 232, 236 (1974).
Defendants contend that plaintiffs are unable to obtain
relief on the claims raised in their Second Amended Complaint
inasmuch as the alleged wrongful conduct occurred outside the
relevant statute of limitations. Defendants argue, therefore, that
the claims must be dismissed under Fed. R. Civ. P. 12(b)(6).
Under Mo. Rev. Stat. 428.049.1,
A claim for relief or cause of action with
respect to a fraudulent transfer or obligation
. . . is extinguished unless action is brought
. . . 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[.]
The Second Amended Complaint claims that the alleged fraudulent
transfer occurred in March 2006.

Plaintiffs filed the instant

cause of action in August 2012, over six years after the alleged
wrongful conduct.

As such, if the Court were to focus only on the

"within four years after the transfer was made" language of the
statute, plaintiffs' claims of fraudulent transfer would be barred.
However, the statute also provides that, if a claim
alleges

conduct

outside

the

four-year

limitations

period,

it

nevertheless is timely if it is brought "within one year after the
transfer . . . was or could reasonably have been discovered by the
claimant[.]"

Notably, plaintiffs' Second Amended Complaint is

silent as to when they discovered defendants' alleged wrongful
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conduct.

Although defendants cite to various occurrences from

which plaintiffs could have reasonably discovered the transfer
which

would

limitations

place
period,

plaintiffs'
this

Court

claims
must

outside
afford

the

one-year

plaintiffs

all

reasonable inferences in determining this motion to dismiss and
must limit its review to the allegations on the face of the
Complaint, generally ignoring matters outside the pleading. Butler
v. Bank of Am., N.A., 690 F.3d 959, 961 (8th Cir. 2012); Miller v.
Redwood

Toxicology

Lab.,

688

F.3d

928,

931

(8th

Cir.

2012).

Nevertheless, where the running of a statute of limitations depends
upon when a plaintiff discovered or by reasonable diligence could
have discovered the alleged fraudulent conduct, a factual question
exists and summary disposition is inappropriate.

Bueneman v.

Zykan, 181 S.W.3d 105, 112 (Mo. Ct. App. 2005).2
On review of the allegations raised in plaintiffs' Second
Amended Complaint, it cannot be said that plaintiffs cannot obtain
relief on the claims raised or are not entitled to offer evidence
to support their claims.

Defendants' Motion to Dismiss under Rule

12(b)(6) should therefore be denied.
B.

Heightened Pleading Standard of Rule 9(b)
“In alleging fraud . . . , a party must state with
2

In addition, given the lengthy history of the underlying
litigation, there is a question as to when plaintiffs would have
had standing to bring a fraudulent transfer action inasmuch as the
monetary judgment against Seven Trails, and plaintiffs’ ability to
collect thereon, remained uncertain and without finality until well
after March 2006.
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particularity the circumstances constituting fraud[.]”

Fed. R.

Civ. P. 9(b).
To satisfy the particularity requirement of
Rule 9(b), the complaint must plead such facts
as the time, place, and content of the
defendant's false representations, as well as
the details of the defendant's fraudulent
acts, including when the acts occurred, who
engaged in them, and what was obtained as a
result.
United States, ex rel. Raynor v. National Rural Utils. Coop. Fin.,
Corp., 690 F.3d 951, 955 (8th Cir. 2012) (internal quotation marks
and citation omitted).
A review of plaintiffs’ Second Amended Complaint shows it
to satisfy the requirement to plead “‘the who, what, when, where,
and how’” of defendants’ alleged fraudulent conduct.

Ritchie

Capital Mgmt., L.L.C. v. Jeffries, 653 F.3d 755, 764 (8th Cir.
2011) (quoting Summerhill v. Terminix, Inc., 637 F.3d 877, 880 (8th
Cir. 2011)).

The details provided in plaintiffs’ Second Amended

Complaint identify the parties and set out the specific conduct
involved in the alleged fraudulent transfer, and specifically, that
UBS

directed

Seven

Trails

to

transfer

the

proceeds

from

the

Apartments sale directly into the account of a separate entity,
AMT; that such transfer occurred during the pendency of plaintiffs’
lawsuit against Seven Trails and UBS, and was completed in March
2006, two months prior to the entry of judgment against Seven
Trails; and that the intent of defendants’ conduct and the result
thereof was to deliberately undercapitalize Seven Trails and render
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it insolvent so as to avoid its legal duty to pay any judgment owed
to plaintiffs. These specific allegations fulfill the goal of Rule
9(b) to enable the defendants to respond specifically and quickly
to the potentially damaging allegations.

Id. at 764.

Therefore,

to the extent defendants seeks to dismiss plaintiffs’ claims for
failure to meet the heightened pleading requirement of Rule 9(b),
defendants’ motion should be denied.
C.

Miscellaneous Grounds for Dismissal
Defendants raise various other grounds upon which they

claim the Second Amended Complaint should be dismissed.

Some of

these grounds restate defendants' arguments under Rules 9(b) and
12(b)(6), and others appear to argue for a more definite statement.
Upon review of the defendants' contentions, it cannot be said that
plaintiffs' claims are so unintelligible or fail to give fair
notice such that a responsive pleading cannot be fashioned.

See

Young v. Warner-Jenkinson Co., Inc., 170 F.R.D. 164, 165-66 (E.D.
Mo. 1996).
Accordingly, defendants' miscellaneous grounds upon which
to dismiss plaintiffs' Second Amended Complaint should be denied.

Therefore, for all of the foregoing reasons,
IT IS HEREBY ORDERED that defendants Seven Trails West
LLC and UBS Realty Investors LLC's Motion to Dismiss for Failure to
State a Claim (Doc. #21) is DENIED.

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IT IS FURTHER ORDERED that defendants Seven Trails West
LLC and UBS Realty Investors LLC shall answer plaintiffs’ Second
Amended Complaint within the time prescribed by Fed. R. Civ. P.
12(a).

UNITED STATES MAGISTRATE JUDGE

Dated this

6th

day of May, 2013.

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