SUGARTOWN WORLDWIDE LLC v. SHANKS et al

Filing 80

ORDER THAT DEFENDANT KENNETH LINN SHANKS' MOTION TO DISMISS IS GRANTED IN PART AND DENIED IN PART AS OUTLINED HEREIN. SHANKS SHALL ANSWER THE AMENDED COMPLAINT NO LATER THAN 9/28/2015. SIGNED BY HONORABLE MARK A. KEARNEY ON 9/14/2015. 9/14/2015 ENTERED AND COPIES E-MAILED.(kp, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA

SUGARTOWN WORLDWIDE LLC

v.

CIVIL ACTION

N0.14-5063

SHANKS, et al.
ORDER
AND NOW, this 14th day of September 2015, upon consideration of Defendant Kenneth
Linn Shanks' ("Shanks") Motion to Dismiss the Amended Complaint (ECF Doc. No. 56),
Plaintiffs Revised Response (ECF Doc. No. 74), mindful of our March 24, 2015 Memorandum
(ECF Doc. No. 21) and for the reasons, in part, in the accompanying Memorandum, it is

ORDERED Shanks' Motion (ECF Doc. No. 56) is GRANTED in part and DENIED in part:
1.

Shanks' Fed. R. Civ. P. 12(b)(6) Motion to Dismiss Count I (action to enforce

judgment) is DENIED as to Outlook Hong Kong as Plaintiff states a claim for Shanks' potential
alter ego liability for the default judgment against Outlook Hong Kong;
2.

Shanks' Fed.R.Civ.P. 12(b)(6) Motion to Dismiss Count I (action to enforce

judgment) is GRANTED without prejudice as to any claim against Shanks for alter ego liability
for Outlook Singapore as there is no judgment against Outlook Singapore and no present
pleading of Shanks' personal benefit arising from conduct through Outlook Singapore under
Count II;
3.

Shanks' Fed.R.Civ.P. 12(b)(6) Motion to Dismiss Count III (unjust enrichment)

under Fed. R. Civ. P. 12(b)(6) is DENIED; 1

Shanks' Motion (ECF Doc. No. 56) seeks "an Order dismissing Plaintiffs Amended
Complaint under Fed.R.Civ.P. 12(b)(6) for failure to state a claim upon which relief can be

4.

Shanks' Fed.R.Civ.P. 12(b)(6) Motion to Dismiss Count IV (Pennsylvania

Uniform Fraudulent Transfer Act) is DENIED for the reasons set forth in our March 24, 2015
Memorandum (ECF Doc. No. 21);
5.

Defendant's Fed.R.Civ.P. 12(b)(6) Motion to Dismiss Count V (breach of

fiduciary duty) is DENIED; 2
6.

Shanks' Fed.R.Civ.P. 12(b)(6) Motion to Dismiss Count VI (tortious interference

with existing contractual relationships) is DENIED as Plaintiff specifically pleads: a guaranty
between Plaintiff and Outlook Hong Kong; Defendant Shanks intended to interfere with the

granted." Presumably, Shanks seeks dismissal of the Amended Complaint in its entirety but it is
unclear whether he wishes to dismiss the unjust enrichment claim (Count III) because (i) he
failed to submit a form of order, as required by Local Rule 7.l(a), which, if approved by the
Court, would grant the relief sought by his motion, and (ii) we find no argument in Shanks' brief
to support the dismissal of the unjust enrichment claim as required by Local Rule 7.1 (c).
Accordingly, we deny Shanks' motion to dismiss Count III, to the extent it is even made, without
prejudice and with leave to renew his motion under Fed.R.Civ.P. 56.
2

As a threshold matter, Shanks asserts we "should be asking [Sugartown]" to define its breach
of fiduciary duty claim under Hong Kong and Singapore law. For the reasons set forth in our
August 28, 2015 Order, we reject Shanks' argument. Under Fed.R.Civ.P. 44.1, it is Shanks'
burden of raising both the issue of the application of foreign law and adequately proving foreign
law to enable the Court to apply it. See August 28, 2015 Order at n. 2 (ECF Doc. No. 69).
Having failed to satisfy these burdens, the law of Pennsylvania will apply.
As addressed in March 24, 2015 Memorandum (ECF Doc. No. 21), as officers, directors and
controlling shareholders, Shanks and Glover have a fiduciary duty to Outlook Hong Kong.
When Outlook Hong ·Kong becomes insolvent, Shanks then owes a fiduciary duty to the
corporation's creditors. See Mar~h 24, 2015 Memorandum at 21. Shanks argues Sugartown fails
to state a claim because it did not allege Outlook Hong Kong's insolvency at the time of the
alleged fraudulent transfers. The Amended Complaint alleges a scheme by which Shanks
transferred assets out of Outlook Hong Kong to prevent Sugartown from collecting on its default
judgment against it, "leav[ing] Outlook Hong Kong insolvent and unable to pay its debts,
including its debts to Sugartown." (Am.Compl. at ifif80; see also ifif27-47). In considering
Shanks' 12(b)(6) motion, we accept Sugartown's well-pleaded allegations as true and interpret
them in light most favorable to it, and draw all inference in favor of Sugartown. Under the wellsettled standard, we find the Amended Complaint "contain[s] 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) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
2

guaranty relationship; Defendant Shanks lacked privilege or justification; and, Plaintiff suffered
damage as a result of Defendant Shank's interference with the existing guaranty before
judgment. Plaintiff plausibly pleads motive subject to factual analysis of actual malice and may
evidence conduct against Outlook Hong Kong's interest.
7.

Shanks' Fed. R. Civ. P. 12(b)(6) and 9(b) Motion to Dismiss for failure to plead

fraud with required specificity is DENIED without prejudice to be renewed as part of the
substantive challenge at summary judgment where the Court expects Plaintiff to specifically
identify the individual conduct of Defendants Shanks and Glover and not rely solely on a
theories of a de facto partnership; and,
8.

Shanks shall answer the Amended Complaint no later than September 28, 2015.

3