United States of America v. Stabl, Inc.. et al

Filing 23

MEMORANDUM AND ORDER - The Motion to Dismiss/Motion to Make More Definite Statement, ECF No. 14 , is denied. Defendants will respond to the Complaint on or before December 12, 2016. Ordered by Chief Judge Laurie Smith Camp. (GJG)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEBRASKA
UNITED STATES OF AMERICA,
Plaintiff,

8:16CV233

vs.
MEMORANDUM
AND ORDER

STABL, INC., LANT, INC., LEON
JOHNSON, AND ANN JOHNSON,
Defendants.

This matter is before the Court on the Motion to Dismiss/Motion to Make More
Definite Statement, ECF No. 14 (“Motion to Dimiss”), filed by Defendants Stabl, Inc.
(f/k/a Nebraska By-Products), Lant, Inc., Leon Johnson, and Ann Johnson (collectively
“Defendants”). For the reasons discussed below, the Motion to Dismiss will be denied.
BACKGROUND
The following facts are those pled in the Complaint, ECF No. 1, and assumed
true for purposes of the Motion to Dismiss.
Stabl, Inc., (“Stabl”) is a Nebraska corporation, originally incorporated as
Nebraska By-Products, Inc., in March 1979, and renamed Stabl, Inc., on June 3, 2010.
ECF No. 1 ¶ 4, Page ID 2. Stabl is wholly owned by Lant, Inc., (“Lant”), which is wholly
owned by Leon Johnson (“Johnson”), who serves as president of both corporations. Id.
¶ 8, Page ID 2. Lant filed tax returns on behalf of Stabl, as Stabl’s holding company.
Id.
From 1995 to 2010, Stabl owned and operated an animal rendering plant in
Lexington, Nebraska.

Id. ¶ 12, Page ID 3.

On August 18, 2006, the Nebraska

Department of Environmental Quality (“NDEQ”) issued a Notice of Violation to Johnson

as owner of Stabl, stating that Stabl was not in compliance with the Clean Water Act, 33
U.S.C. §§ 1251–1388 (“Clean Water Act”), and that such noncompliance could result in
injunctive relief and penalties of up to $10,000 per day per violation. Id. ¶ 13, Page
ID 3. In 2007, the NDEQ sent Stabl a draft pretreatment plan, as well as a revised draft
pretreatment plan in 2008. Id. ¶¶ 14–15, Page ID 3. Both plans stated that failure to
comply could result in the imposition of penalties.

Id.

In February of 2008, the

Environmental Protection Agency (“EPA”) inspected the Stabl facility. Id. ¶ 16, Page
ID 4. The EPA later sent Johnson a copy of the inspection, which stated that the EPA
was reserving its rights to take enforcement action. Id.
On July 8, 2009, NDEQ issued a Notice of Violation to Johnson, as owner of
Stabl, stating that noncompliance could result in issuance of a Compliance Order, or
referral to the Attorney General for penalties of up to $10,000 per day per violation
and/or injunctive relief. Id. ¶ 18, Page ID 4. On July 28, 2009, the EPA issued an
Administrative Compliance Order, requiring Stabl to come into compliance with the
requirements of the Clean Water Act, and to submit a plan to the EPA describing how it
intended to come into compliance. Id. ¶ 19, Page ID 4. In September 2009, Stabl
provided a compliance plan to the EPA but never achieved compliance with the Clean
Water Act. Id. ¶ 20, Page ID 4.
On May 28, 2010, Stabl sold its facility for $15.2 million. Id. ¶ 28, Page ID 5. The
price paid was decreased by $1 million due to Stabl’s noncompliance with the Clean
Water Act and the expected costs of bringing the plant into compliance. Id. ¶ 29, Page
ID 5.

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On July 8, 2010, the U.S. Department of Justice (“DOJ”) sent a letter to Stabl’s
counsel discussing, among other things, a potential civil enforcement action pursuant to
the Clean Water Act.

Id. ¶ 22, Page ID 4. The letter made reference to monetary

penalties owed by Stabl, specifically $2,883,414. Id. Five days later, on July 13, 2010,
Stabl transferred approximately $8 million, almost all of its assets, directly to Leon and
Ann Johnson, Id. ¶ 23, Page ID 5, via three wire transfers. Id. ¶ 31, Page ID 6. Stabl
was either already insolvent or became insolvent at the time of the transfers. Id. ¶ 34,
Page ID 7.
On August 10, 2011, the United States and the State of Nebraska filed an action
against Stabl in this Court alleging violations of the Clean Water Act and Nebraska state
law. Id. ¶ 24, Page ID 5. During the litigation, the United States specifically requested
that Stabl produce documents showing who received the proceeds of the facility sale,
but no documents were produced. Id. ¶ 30, Page ID 6. On January 31, 2014, the Court
entered a judgment against Stabl in the amount of $2,285,874. Id. ¶ 25, Page ID 5.
The amount was to be divided equally between the State of Nebraska and the United
States. Id.
Plaintiff United States (“United States”) filed this action on May 26, 2015, alleging
fraudulent transfers under §§ 3304(a)(1)(A) & 3304(b)(1)(A) of the Federal Debt
Collection Practices Act, 28 U.S.C. §§ 3001–3308 (“FDCPA”). ECF No. 1 ¶¶ 46–55,
Page ID 8–9. The United States seeks to void the $8 million transfer in an amount
sufficient to satisfy its judgment against Stabl in the amount of $1,142,937, and seeks
entry of personal judgments against Johnson, Ann Johnson, and Lant for that sum. As

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of the date of the filing of this action, Stabl had not paid any money to the United States
toward satisfying the judgment. Id. ¶ 45, Page ID 8.
STANDARD OF REVIEW
A complaint must contain “a short and plain statement of the claim showing that
the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). To satisfy this requirement, a
plaintiff must plead “enough facts to state a claim to relief that is plausible on its face.”
Corrado v. Life Inv’rs Ins. Co. of Am., 804 F.3d 915, 917 (8th Cir. 2015) (quoting Bell
Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial plausibility
when the plaintiff pleads factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct alleged.” Barton v. Taber, 820
F.3d 958, 964 (8th Cir. 2016) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 677 (2009)).
“Threadbare recitals of the elements of a cause of action, supported by mere conclusory
statements, do not suffice.” Zink v. Lombardi, 783 F.3d 1089, 1098 (8th Cir. 2015)
(quoting Iqbal, 556 U.S. at 678), cert. denied, 135 S. Ct. 2941 (2015). The complaint’s
factual allegations must be “sufficient to ‘raise a right to relief above the speculative
level.’” McDonough v. Anoka Cty.,799 F.3d 931, 946 (8th Cir. 2015) (quoting Twombly,
550 U.S. at 555).

The Court must accept factual allegations as true, but it is not

required to accept any “legal conclusion couched as a factual allegation.” Brown v.
Green Tree Servicing LLC, 820 F.3d 371, 373 (8th Cir. 2016) (quoting Twombly, 550
U.S. at 555). Thus, “a pleading that offers ‘labels and conclusions’ or ‘a formulaic
recitation of the elements of a cause of action will not do.’”

Ash v. Anderson

Merchandisers, LLC, 799 F.3d 957, 960 (8th Cir. 2015) (quoting Iqbal, 556 U.S. at 678),
cert. denied, 136 S. Ct. 804 (2016).
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On a motion to dismiss, courts must rule “on the assumption that all the
allegations in the complaint are true,” and “a well-pleaded complaint may proceed even
if it strikes a savvy judge that actual proof of those facts is improbable, and ‘that a
recovery is very remote and unlikely.’” Twombly, 550 U.S. at 555–56 (quoting Scheuer
v. Rhodes, 416 U.S. 232, 236 (1974)). “Determining whether a complaint states a
plausible claim for relief . . . [is] a context-specific task that requires the reviewing court
to draw on its judicial experience and common sense.” Mickelson v. Cty. Of Ramsey,
823 F.3d 918, 923 (8th Cir. 2016) (alternation in original) (quoting Iqbal, 556 U.S. at
678).
DISCUSSION
Defendants seek dismissal of this action because, they argue, the United States
did not plead sufficient facts to satisfy Rule 12(b)(6) or Rule 9.
“In alleging fraud or mistake, a party must state with particularity the
circumstances constituting fraud or mistake.” 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.” U.S. ex rel. Joshi v. St. Luke's Hosp., Inc., 441
F.3d 552, 556 (8th Cir. 2006) (citing Corsello v. Lincare, Inc., 428 F.3d 1008, 1012 (11th
Cir. 2005); Schaller Tel. Co. v. Golden Sky Sys., Inc., 298 F.3d 736, 746 (8th Cir.
2002)). “Put another way, the complaint must identify the ‘who, what, where, when, and
how’ of the alleged fraud.” Id. (quoting U.S. ex rel. Costner v. United States, 317 F.3d
883, 888 (8th Cir. 2003)).
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Under § 3304(a)(1)(A) of the FDCPA, a transfer made by a debtor is fraudulent
“as to a debt to the United States which arises before the transfer is made or the
obligation is incurred if the debtor makes the transfer or incurs the obligation without
receiving a reasonably equivalent value in exchange for the transfer or obligation.” 28
U.S.C. § 3304(a)(1)(A). Such transfers are similarly fraudulent under § 3304(b)(1)(A) of
the FDCPA if the debtor was insolvent at the time of transfer. Id. § 3304(b)(1)(A).
Defendants claim that the Complaint fails under Rule 9 because it is not
sufficiently specific regarding the “actual ownership” of the proceeds, the “actual
property” sold by Stabl, the specific debts that Stabl could not pay while insolvent, and
various other details underlying the claims.

The Court disagrees.

The Complaint

identifies the source of the proceeds, the specific wire transfers by which the funds were
transferred, to whom the transfers were made, and the relevant dates the various
defendants were notified of potential violations and resulting penalties against Stabl.
The Complaint sufficiently apprises Defendants of the claims against them, including the
“who, what, where, when, and how” of the alleged fraud.
To the extent Defendants attempt to argue through evidence outside the
pleadings that Stabl did not have an ownership interest in the sale proceeds, such
arguments are better suited to a motion for summary judgment. The Court will not
consider them here.

See Fed. R. Civ. P. 12(d) (“If, on a motion under Rule

12(b)(6) . . . matters outside the pleadings are presented to and not excluded by the
court, the motion must be treated as one for summary judgment under Rule 56.”).

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Because the United States has pled its claims with sufficient specificity, and
Defendants reasonably can be expected to prepare a response, the motion for a more
definite statement also will be denied. See Fed. R. Civ. P. 12(e). Accordingly,
IT IS ORDERED:
1. The Motion to Dismiss/Motion to Make More Definite Statement, ECF No. 14,
is denied; and
2. Defendants will respond to the Complaint on or before December 12, 2016.
Dated this 29th day of November, 2016
BY THE COURT:
s/Laurie Smith Camp
Chief United States District Judge

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