Guffy v. DeGuerin et al
MEMORANDUM AND ORDER denying 141 Motion for Final Judgment on Extinguished Claim, Alternatively for Full Settlement Credit and denying 142 Motion to Reconsider Motion for Summary Judgment Due to Settlement by Defendant Dick DeGuerin.(Signed by Judge Nancy F Atlas) Parties notified.(TDR, 4)
United States District Court
Southern District of Texas
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
BROWN MEDICAL CENTER, INC.,
ELIZABETH M. GUFFY, Plan Agent, §
DICK DEGUERIN, et al.,
September 15, 2017
David J. Bradley, Clerk
CIVIL ACTION NO. 16-0043
Bankruptcy Adversary No. 15-3228
MEMORANDUM AND ORDER
Elizabeth Guffy, the Plan Agent (“Plan Agent”) under the confirmed Chapter 11
Plan of Liquidation in the Brown Medical Center, Inc. bankruptcy, filed this adversary
proceeding seeking to avoid certain attorney’s fee and litigation expense payments as
fraudulent transfers. The case is now before the Court on the “Motion for Final
Judgment on Extinguished Claim, Alternatively for Full Settlement Credit” [Doc. #
141] and the “Motion to Reconsider Motion for Summary Judgment Due to
Settlement by Defendant Dick DeGuerin” [Doc. # 142] filed by Defendants Brian
Wice and Cathy E. Bennett & Associates, Inc. (“Bennett”), to which the Plan Agent
filed Responses [Docs. # 150 and # 151]. Wice and Bennett neither filed a reply nor
requested additional time to do so. Having reviewed the record and the applicable
legal authorities, the Court denies both pending motions.
Michael Brown, the owner of 100% of the shares of Debtor Brown Medical
Center, Inc. (“BMC”), was represented by several attorneys, including DeGuerin and
Wice, in connection with criminal cases against him. DeGuerin retained Bennett to
provide services as a jury consultant in connection with the criminal prosecutions.
Plaintiff alleges that BMC transferred funds to Defendants after BMC became
insolvent. Specifically, Plaintiff alleges that BMC transferred $1,875,869.00 to
DeGuerin during 2011. Plaintiff alleges that DeGuerin transferred $49,500.00 to
Wice in September 2011, and made two transfers to Bennett totalling $69,408.78 –
$40,000.00 in July 2011 and $29,408.78 in October 2011. DeGuerin also transferred
$530,671.43 to himself.
In January 2013, Brown filed a voluntary Chapter 11 bankruptcy petition. On
October 15, 2013, Brown’s Chapter 11 Trustee filed a voluntary Chapter 11
bankruptcy petition on behalf of BMC. The Bankruptcy Court appointed Plaintiff
Elizabeth Guffy as the Chapter 11 Trustee for BMC. On October 1, 2014, the
Bankruptcy Court confirmed a plan of liquidation in BMC’s bankruptcy case and
appointed Guffy as the Plan Agent.
Plaintiff filed this Adversary Proceeding against DeGuerin, Bennett, Wice, and
other Defendants, asserting fraudulent transfer claims under 11 U.S.C. § 548(a)(1)(B)
and under the Texas Uniform Fraudulent Transfer Act (“TUFTA”). See First
Amended Complaint [Doc. # 16]. By Memorandum and Order [Doc. # 15] entered
February 3, 2016, this Court withdrew the reference of this Adversary Proceeding and
retained the case on its own docket.
By Memorandum and Order [Doc. # 140] entered July 3, 2017, the Court
denied pending motions for summary judgment, including those filed by Wice and
Bennett. The Plan Agent later settled with DeGuerin for $500,000. Thereafter, Wice
and Bennett filed the pending motions, which are ripe for decision.
In their Motions for Summary Judgment, Bennett and Wice argued that they
were entitled to summary judgment because they were subsequent transferees of the
BMC funds and qualified as good faith transferees who took for value. Although
Bennett and Wice were correct that the Plan Agent cannot recover from a subsequent
transferee who received the transfer in good faith and for value, the Court found that
there were genuine issues of material fact regarding whether the funds from BMC to
DeGuerin, which were placed in DeGuerin’s IOLTA Trust Account, were within
DeGuerin’s dominion and control or remained the property of BMC. The Court found
that if the funds remained BMC’s property and were not “transferred” to DeGuerin,
then Bennett and Wice might not qualify as subsequent transferees but would, instead,
be initial transferees. Because their status as subsequent transferees entitled to assert
a good faith defense was in dispute, the Court denied their motions for summary
Wice and Bennett have now filed a Motion to Reconsider and a Motion for
Final Judgment. Each of the pending motions is based on the argument that
DeGuerin’s settlement with the Plan Agent (1) establishes that he was the initial
transferee of the BMC funds and, therefore, Wice and Bennett are subsequent
transferees as a matter of law and (2) extinguishes the Plan Agent’s claim. The
uncontroverted record demonstrates that DeGuerin settled for $500,000.00, an amount
less than the $530,671.43 DeGuerin withdrew from the IOLTA account and as to
which his initial transferee status was not in dispute. As a result, the DeGuerin
settlement does not affect the existence of a genuine issue of material fact regarding
whether Wice and Bennett were initial or subsequent transferees of the BMC funds.
Moreover, the Plan Agent in this lawsuit is seeking to recover allegedly fraudulent
transfers of approximately $1.8 million. The settlement of the Plan Agent’s claims
against one Defendant for $500,000.00 does not extinguish the entire claim.
Motion to Reconsider
Wice and Bennett seek reconsideration of the Court’s summary judgment
ruling. Reconsideration of a judgment is an “extraordinary remedy that should be
used sparingly.” Waites v. Lee County, Miss., 498 F. App’x 401, 404 (5th Cir. Nov.
26, 2012) (quoting Templet v. Hydrochem, Inc., 367 F.3d 473, 479 (5th Cir. 2004)).
A motion for reconsideration “is not the proper vehicle for rehashing evidence, legal
theories, or arguments that could have been offered or raised before the entry of
judgment.” Templet v. HydroChem Inc., 367 F.3d 473, 479 (5th Cir. 2004); Knight
v. Kellogg Brown & Root Inc., 2009 WL 1471788, at *6 (5th Cir. 2009) (quoting
Templet, 367 F.3d at 479). Instead, reconsideration under the Federal Rules serves the
narrow purpose of allowing a party to bring errors or newly discovered evidence to
the Court’s attention. See In re Rodriguez, 695 F.3d 360, 371 (5th Cir. 2012) (citing
In re Transtexas Gas Corp., 303 F.3d 571, 581 (5th Cir. 2002)).
Wice and Bennett argue that judicial estoppel precludes the Plan Agent from
arguing that DeGuerin was not the initial transferee of the BMC funds. Therefore,
according to Wice and Bennett, because initial transferee DeGuerin is no longer in the
lawsuit, there is no longer a fact dispute that they are subsequent transferees. “Judicial
estoppel is an equitable doctrine that ‘prevents a party from asserting a position in a
legal proceeding that is contrary to a position previously taken in the same or some
earlier proceeding.’” Hopkins v. Cornerstone Am., 545 F.3d 338, 347 (5th Cir. 2008)
(quoting Hall v. GE Plastic Pac. PTE Ltd., 327 F.3d 391, 396 (5th Cir. 2003)).
The Plan Agent has argued in this case that DeGuerin was an initial transferee.
She has also, however, asserted alternatively that “should it be shown that Dick
DeGuerin was not the initial transferee, any person or entity that received funds from
Brown Medical Center, Inc. via the funds transferred to Dick DeGuerin would be the
initial transferee.” See Motion to Reconsider [Doc. # 142], p. 5 (quoting Plan Agent’s
Answer to Interrogatory No. 7). Similarly, the Plan Agent pled that Defendants were
“the initial transferee, the beneficiary and/or the immediate or mediate transferee” of
the transfers at issue. See First Amended Complaint [Doc. # 16], ¶ 31; see also id.,
¶ 44. As a result, Wice and Bennett have not demonstrated that the Plan Agent is
judicially estopped to argue that they are initial transferees of the BMC funds. The
Motion to Reconsider is denied.
Motion for Final Judgment
Wice and Bennett seek entry of final judgment in their favor based on the
argument that the Plan Agent’s claim has been satisfied. Wice and Bennett cite no
legal authority to support their argument that the claim is extinguished and they are
entitled to final judgment in their favor, and this Court is aware of none.
As to their request for a full credit for the amount DeGuerin paid to settle the
claims against him, Wice and Bennett’s reliance on the “one satisfaction rule” under
Texas law is misplaced. The rule “emerges in Texas Supreme Court jurisprudence as
a tort law contribution doctrine, and its application has generally been limited to cases
in which a plaintiff settles with an alleged joint tortfeasor.” GE Capital Commercial,
Inc. v. Worthington Nat’l Bank, 754 F.3d 297, 307 (5th Cir. 2014). As a result, the
doctrine is not applicable to require a settlement credit in this TUFTA action in which
there is no allegation that DeGuerin, Wice and Bennett were joint tortfeasors. See id.
Accordingly, Wice and Bennett are not entitled to have DeGuerin’s payment of
$500,000 applied to satisfy the Plan Agent’s claims against them.
CONCLUSION AND ORDER
There remain genuine issues of material fact regarding whether Wice and
Bennett were initial transferees of the BMC funds or were subsequent transferees
entitled to assert a good faith defense. The Plan Agent is not judicially estopped to
argue that Wice and Bennett are initial transferees, having asserted their initial
transferee status as an alternative position throughout this litigation. The Plan Agent’s
settlement with DeGuerin does not extinguish or otherwise affect the Plan Agent’s
claims against Wice and Bennett. It is, therefore, hereby
ORDERED that the Motion for Final Judgment on Extinguished Claim,
Alternatively for Full Settlement Credit [Doc. # 141] and Motion to Reconsider
Motion for Summary Judgment Due to Settlement by Defendant DeGuerin [Doc.
# 142] are DENIED. The case remains scheduled for docket call on November 13,
SIGNED at Houston, Texas, this 15th day of September, 2017.
NAN Y F. ATLAS
STATES DISTRICT JUDGE
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