Lacey Marketplace Associates II LLC v. United Farmers of Alberta Co-Operative Limited et al

Filing 242

ORDER denying Sportsman's 188 Motion for Judgment by Judge James L. Robart.(RS) Modified on 5/22/2015/cc Gaube (RS).

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UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
AT SEATTLE

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LACEY MARKETPLACE
ASSOCIATES II, LLC,

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Plaintiff,

CASE NO. C13-0383JLR
ORDER ON MOTION FOR
ENTRY OF JUDGMENT

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v.
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UNITED FARMERS OF ALBERTA
COOPERATIVE LTD, et al.,

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Defendants.

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BURLINGTON RETAIL, LLC,
Plaintiff,

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v.

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UNITED FARMERS OF ALBERTA
COOPERATIVE LTD, et al.,

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Defendants.

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//

ORDER- 1

CASE NO. C13-0384JLR

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I.

INTRODUCTION

Before the court is Defendant Sportsman’s Warehouse, Inc.’s (“Sportsman”)

3 “Motion for Entry of Judgment on Plaintiffs’ Fraudulent Transfer Claims under RCW
4 19.40.081(b).” (Mot. (Dkt. # 188).) The court has considered the motion, all
5 submissions filed in support of and opposition to the motion, the balance of the record,
6 and the applicable law. Being fully advised, and deeming oral argument unnecessary, the
7 court DENIES Sportsman’s motion for entry of judgment.
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II.

BACKGROUND

This case arises out of Defendant Wholesale Sports USA, Inc.’s (“Wholesale”)

10 failure to make rental payments for two large commercial spaces it leased from Plaintiffs
11 Lacey Marketplace Associates II, LLC (“Lacey”) and Burlington Retail, LLC
12 (“Burlington”). In the aftermath of Wholesale’s breach, Plaintiffs brought fraudulent
13 transfer claims against Defendants United Farmers of Alberta Co-Op Limited (“UFA”),
14 Alamo Group, LLC (“Alamo”), Donald Gaube (“Mr. Gaube”), and Sportsman.1 (See
15 Pretrial Order (Dkt. # 178).) Plaintiffs’ fraudulent transfer claims arise from a series of
16 transactions in which Defendants engaged pursuant to their Master Transaction
17 Agreement (“MTA”). (See MTA (Dkt. # 118-1); Tr. Ex. 1.)
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Under this agreement, Wholesale sold all of its assets to Sportsman. (See id.

19 ¶¶ 2.1, 2.2.) Sportsman paid $47 million for the assets. (See 3/4/15 Tr. Trans. (Dkt.
20 # 225) at 24:3-14.) The parties dispute whether Sportsman initially paid the purchase
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Plaintiffs also brought other claims, which are not relevant to this motion.

ORDER- 2

1 price to Wholesale or to Wholesale’s parent, UFA.2 Regardless, the purchase price was
2 ultimately applied to UFA’s benefit: approximately $31 million was used to satisfy
3 Wholesale’s debt to UFA, and $16 million was used to satisfy UFA’s own debt. (3/4/15
4 Tr. Trans. at 95:4-96:14; 142:19-24; 3/6/15 Tr. Trans. (Dkt. # 227) at 26:2-12.)
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After the asset sale, UFA gave Wholesale’s shares to Alamo for either $1.00 or

6 $0.00.3 After some last-minute negotiations, Alamo was paid approximately $1.8 million
7 to accept Wholesale’s shares. (3/4/15 Tr. Trans. at 76:3-78:8-20.) Of that payment,
8 Sportsman contributed roughly $600,000.00 and either UFA or Wholesale contributed
9 about $1.2 million. (Id.)
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A jury trial was held on Plaintiffs’ claims. (See Dkt. ## 223-227 (trial

11 transcripts).) After hearing the evidence described above, the court instructed the jury as
12 to the circumstances in which a transfer by Wholesale to a third party would be found
13 intentionally or constructively fraudulent. (Jury Inst. (Dkt. # 183) Nos. 28-36). The
14 court further instructed the jury that, if the jury found Wholesale had fraudulently
15 transferred an asset, Plaintiffs “may recover judgment against the first transferee of the
16 asset or the person for whose benefit the transfer was made.” (Jury Inst. No. 37.)
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Under the written terms of the MTA, Sportsman was to pay Wholesale, who would immediately

18 transfer the money to UFA. (See MTA ¶¶ 2.1, 2.2.) At trial, however, the parties put forth conflicting
evidence as to whether the account to which the money was transferred was controlled by Wholesale or
19 UFA. (See 3/4/15 Tr. Trans. at 88:8-20 (UFA Chief Executive Officer testifying that the account was a
Wholesale account)); 3/6/15 at 24:3-23, 29:25-30:21 (UFA’s director of finance testifying that the
account was a Wholesale account); Tr. Exs. A-239, A-240; but see Tr. Ex. 5 (funds flow chart showing
20 the account was titled “United Farmers of Alberta Co-Operative Limited”); 3/6/15 Tr. Trans. at 36:1937:18 (deposition testimony by UFA’s Chief Executive Officer stating that “the funds didn’t go through
21 Wholesale Sports US. Those funds went to UFA . . . .”)).
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provided for a
22 the $1.00 The MTApaid (3/6/15 Tr.$1.00 purchase price (MTA ¶ 2.2), but there is no documentation that
was ever
Trans. at 40:3-9).

ORDER- 3

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The jury returned a verdict for Plaintiffs on all fraudulent transfer claims against

2 all Defendants. (See Verdict (Dkt. # 187).) The jury awarded Plaintiffs their requested
3 monetary damages: $5,218,493.35 to Lacey and $6,668,255.94 to Burlington. (Id.)
4 Sportsman now moves the court to direct entry of judgment on the fraudulent transfer
5 claims against UFA only, but not against the other three Defendants. (See Mot.)
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III.

ANALYSIS

In general, Federal Rule of Civil Procedure 58 provides that “[e]very

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8 judgment . . . must be set out in a separate document.” Fed. R. Civ. P. 58(a).
9 Accordingly, after a jury returns a verdict, a party may request the court to direct entry of
10 a final judgment on the jury’s verdict. Fed. R. Civ. P. 58(d). Here, however, Sportsman
11 relies on Rule 58 to request that the court disregard the jury’s verdict and instead enter a
12 judgment on the fraudulent transfer claims against UFA only. (See Mot.) For the reasons
13 set forth below, the court denies Sportsman’s motion.
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Sportsman’s position

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Washington’s Uniform Fraudulent Transfer Act (“WUFTA”) provides that if a

16 debtor is found to have fraudulently transferred an asset, the debtor’s creditor may void
17 the transfer or recover a monetary judgment in the amount the debtor owed the creditor.
18 RCW 19.40.071; RCW 19.40.081(b). Pursuant to WUFTA, such a “judgment may be
19 entered against: (1) The first transferee of the asset or the person for whose benefit the
20 transfer was made . . . .” RCW 19.40.081(b). In general, “the principles of law and
21 equity . . . supplement [WUFTA’s] provisions.” RCW 19.40.902.
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ORDER- 4

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Relying on that statutory language, Sportsman arrives at the conclusion that a

2 court “has discretion to enter judgment on a fraudulent transfer claim against the
3 transferee of the debtor’s asset, or against the beneficiary of the transfer, but not [against]
4 both.” (Mot. at 7.) Specifically, Sportsman contends that the word “may” in RCW
5 19.40.081(b) means that the court has discretion to decline to enter judgment against an
6 entity that is otherwise liable. (Id. at 6.) Sportsman further contends that the word “or”
7 means that the court can only enter judgment against one, but not multiple entities for a
8 given fraudulent transfer. (Id. at 7.) Sportsman concludes that a court should exercise
9 this discretion guided by unspecified “principles of law and equity.” (Id.)
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Accordingly, Sportsman argues that the court is permitted to enter judgment

11 against either UFA or Sportsman, but not both, and that the principles of equity favor
12 entering judgment against UFA rather than Sportsman.4 The court disagrees.
13 B.

Multiple party liability

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Sportsman’s contention that a court cannot find two parties liable for a given

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15 fraudulent transfer is not supported by caselaw. Because it does not appear that the

16 Washington Supreme Court has addressed the issue, the court looks to existing state law
17 to predict how the Washington Supreme Court would resolve the question. See Ticknor
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Although Sportsman moves for the court to enter judgment only against UFA, Sportsman fails
to discuss why the court should disregard the jury’s findings that Alamo and Mr. Gaube were also liable
20 on the fraudulent transfer claims. (See Mot.; Reply (Dkt. #213).) Because Sportsman does not address
Alamo’s or Mr. Gaube’s liability, neither does the court.

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The court notes that Sportsman’s argument is also flawed because it assumes, but fails to
demonstrate, that the jury could have found UFA and Sportsman liable only for the same fraudulent
22 transfer by Wholesale, rather than on separate transfers. See infra Section III.C.
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ORDER- 5

1 v. Choice Hotels Int’l, Inc., 265 F.3d 931, 939 (9th Cir. 2001). Sportsman provides no
2 Washington State precedent in which a court held or otherwise stated that only one party
3 can be liable for a given fraudulent transfer. (See Mot.; Reply.) In fact, contrary to
4 Sportsman’s position, the Washington Court of Appeals has found it is proper to enter
5 judgment against both the first transferee and the person for whose benefit the fraudulent
6 transfer was made. See Eagle Pac. Ins. Co. v. Christensen Motor Yacht Corp., 934 P.2d
7 715, 720 (Wash. Ct. App. 1997), as amended on reconsideration (Aug. 5, 1997) (“Here,
8 it is undisputed that CGI and CSL were first transferees. Further, as the sole shareholder
9 of both CSL and CGI, David Christensen is the person who ultimately benefited from the
10 disputed transfers. If the UFTA applies to any of the disputed transactions, entering
11 judgment against CGI or CSL as first transferees, and against David Christensen as a
12 person benefited, was proper under RCW 19.40.081(b).”).
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Moreover, courts in other jurisdictions interpreting an almost identical fraudulent

14 transfer provision in the Bankruptcy Code6 have consistently found that the initial
15 transferee and person for whose benefit the transfer was made are both liable for a money
16 judgment. See, e.g., In re Bullion Reserve of N. Am., 922 F.2d 544, 546-47 (9th Cir.
17 1991) (“[T]he trustee can recover from both the initial transferee and any secondary
18 transferee, as well as from any entity for whose benefit the initial transfer was made.”); In
19 re Ogden, 314 F.3d 1190, 1202 (10th Cir. 2002) (“As we have noted, section 550 makes
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Specifically, 11 U.S.C. § 550 provides that, in the event of an avoidable transfer, “the trustee
may recover . . . the property transferred, or, if the court so orders, the value of such property, from,
22 from—(1) the initial transferee of such transfer or the entity for whose benefit such transfer was made.”
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ORDER- 6

1 both the initial transferee of a preferential transfer and ‘the entity for whose benefit the
2 [preferential] transfer was made’ strictly liable to the bankruptcy estate for the value of
3 the preferential transfer.”).7 Although a creditor is only entitled to a single satisfaction,
4 he or she is entitled to choose from which entity to recover. In re Eleva, Inc., 302 B.R.
5 112 (B.A.P. 10th Cir. 2003) (collecting cases); see also In re Sufolla, Inc., 2 F.3d 977,
6 980 (9th Cir. 1993); In re H & S Transp. Co., Inc., 939 F.2d 355, 358 (6th Cir. 1991); In
7 re Circuit Alliance, Inc., 228 B.R. 225, 236 (Bankr. D. Minn. 1998). Sportsman has
8 provided no authority from other jurisdictions to the contrary. (See Mot.)
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The WUFTA provision on which Sportsman relies was adopted from the Uniform

10 Fraudulent Transfer Act, which in turn “derived [that provision] from § 550(a) of the
11 Bankruptcy Code.” Unif. Fraud. Trans. Act § 8 (comment (2)). Because an “explicit
12 purpose” of the Uniform Fraudulent Transfer Act is uniformity among adopting
13 jurisdictions, Washington courts are guided by the interpretations of courts in other
14 jurisdictions applying the Uniform Fraudulent Transfer Act and, when applicable, the
15 underlying Bankruptcy Code. Thompson v. Hanson, 174 P.3d 120, 126 (2007) (Wash.
16 Ct. App. 2009) (looking to First Circuit and Colorado State law to interpret WUFTA
17 terms); see also Kreidler v. Cascade Nat’l Ins. Co., 321 P.3d 281, 288 (Wash. Ct. App.
18 2014) (interpreting the WUFTA phrase “reasonably equivalent value” and finding
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See also Qwest Commc’ns Corp. v. Weisz, 278 F. Supp. 2d 1188, 1192 (S.D. Cal. 2003); In re
Dominion Corp., 199 B.R. 410, 412-13 (B.A.P. 9th Cir. 1996); In re Julien Co., 136 B.R. 760, 765
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(Bankr. W.D. Tenn. 1991); Leonard v. Optimal Payments Ltd. (In re Nat’l Audit Defense Network), 332
B.R. 896, 915-16 (Bankr. D. Nev. 2005).

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ORDER- 7

1 “because the provisions in which this phrase appear mirror the fraudulent transfer
2 provision of the Bankruptcy Code, decisions under the Code are instructive”).
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Accordingly, the court concludes that the Washington Supreme Court would,

4 consistent with the weight of authority interpreting similar fraudulent transfer provisions,
5 find that multiple entities may be held liable on a fraudulent transfer claim under RCW
6 19.40.081(b). Therefore, the court is not required to enter judgment only against
7 Sportsman or UFA.
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Court’s discretion

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Sportsman maintains that, even if the court is not required to do so, the court has

10 discretion to enter judgment against UFA only, notwithstanding the jury verdict finding
11 Sportsman liable. (See Reply at 6.) However, the only Washington case Sportsman cites
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12 in its favor is non-precedential, and involved a bench trial rather than a jury verdict. See

13 Meridian Place, LLC v. Haughney, 176 Wash. App. 1006 (Wash. Ct. App. 2013). UFA,
14 however, protests that it has a right to a jury trial on the fraudulent transfer claim, and a
15 so-called “equitable” decision by the court absolving Sportsman of liability after the jury
16 delivered a contrary verdict would violate that right. (UFA Resp. (Dkt. # 203)); see also
17 Granfinanciera, S.A. v. Nordberg, 492 U.S. 33, 49 (1989) (finding that a fraudulent
18 transfer claim that sought money damages “should be characterized as legal rather than as
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Sportsman’s remaining supporting case is also distinguishable: it stands for the unremarkable

20 position that a money judgment may not be entered against the transferring debtor as a “person for whose
benefit the transfer was made” because doing so would result in double liability for the debtor. See Renda
21 v. Nevarez, 167 Cal. Rptr. 3d 874, 876-77 (Cal. Ct. App. 2014); see also In re Coggin, 30 F.3d 1443,
1454 (11th Cir. 1994) abrogated on unrelated grounds by Kontrick v. Ryan, 540 U.S. 443 (2004)
created by
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avoidable conveyance from a
debtor.”).

ORDER- 8

1 equitable,” and therefore merited a jury trial pursuant to the Seventh Amendment); Simler
2 v. Conner, 372 U.S. 221, 222 (1963) (“[T]he right to a jury trial in the federal courts is to
3 be determined as a matter of federal law in diversity as well as other actions.”).
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The court declines to decide whether it may permissibly exercise its discretion to

5 enter judgment contrary to the jury’s verdict under RCW 19.40.081(b). Even if the court
6 were permitted to do so, the court would decline to exercise its discretion in that fashion
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First, Sportsman contends that “equity and common sense” require the court to

9 absolve Sportsman of liability. (Mot. at 7.) The only equitable consideration that
10 Sportsman advances is that Sportsman did not receive a windfall from its purchase of the
11 assets: Sportsman actually paid $47 million for the assets it received. (Id. at 7-8.) But
12 unlike the situation in Meridian, Sportsman does not contend that it affirmatively lost
13 money on various parties’ transactions. See Meridian Place, 176 Wash. App. 1006 at *7
14 (finding that the purported beneficiary in fact lost $114,000 in the transaction).
15 Moreover, Sportsman, as a party to and participant in the MTA, was on notice that a
16 significant portion of the money it paid was destined to enrich UFA rather than
17 compensate Wholesale. (See MTA ¶ 2.1 (sale of Wholesale’s assets to Sportsman),
18 ¶ 2.2(a) (“immediate” transfer of asset purchase price to UFA).) On the whole, the court
19 is unconvinced that equity weighs so heavily in Sportsman’s favor as to justify the drastic
20 step of overruling the jury’s verdict.
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Second, the majority of Sportsman’s arguments improperly go to the merits of the

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ORDER- 9

1 claims rather than to equitable principles. (See Mot.) Specifically, Sportsman assumes
2 that the account to which Sportsman transferred the asset purchase price for belonged to
3 Wholesale, rather than UFA. (See id.) Sportsman’s motion is based on the conclusion
4 that the asset transfer was not fraudulent because Wholesale received reasonably
5 equivalent value.9 However, at trial, evidence was presented on both sides of the issue:
6 some evidence showed the account belonged to Wholesale, other evidence suggested it
7 belonged to UFA. (See, e.g., 3/4/15 Tr. Trans. at 88:8-20); 3/6/15 Tr. Trans. at 24:3-23,
8 29:25-30:21, 36:19-37:18; Tr. Exs. 5, A-239, A-240.) The fact was disputed at trial, and
9 on this motion Sportsman may not simply assume it was resolved one way or the other.
10 To the extent Sportsman believes the evidence that the account belonged to UFA is
11 insufficient to support a jury finding to that effect, that contention must be raised and
12 proved under the standard for judgment as a matter of law. See Fed. R. Civ. P. 50(a);
13 Ostad v. Or. Health Sci. Univ., 327 F.3d 876, 881 (9th Cir. 2003) (stating that judgment
14 as a matter of law is permitted only where a reasonable jury would not have had a legally
15 sufficient evidentiary basis for the challenged finding).
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Nonetheless, operating from that favorable but un-established factual premise,

17 Sportsman contends that the court should not enter judgment against it because (1) the
18 jury could not appropriately find that Wholesale’s transfer of its assets to Sportsman was
19 intentionally fraudulent, (2) the jury could not appropriately find that Sportsman was
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The court notes that receipt of reasonably equivalent value is dispositive of constructive
fraudulent transfer claims, but not intentional fraudulent transfer claims. (See Jury Inst. Nos. 31-34);
22 RCW 19.40.041(a); RCW 19.40.05.

ORDER- 10

1 liable for Wholesale’s transfer of the purchase price to UFA’s lenders as “the person for
2 whose benefit the transfer was made,” and (3) Plaintiffs’ counsel made improper and
3 legally incorrect remarks during closing arguments. (See Mot.; Reply.) Sportsman,
4 however, puts forth no authority showing that a court can enter judgment under RCW
5 19.40.081(b) after a jury verdict based solely on the court’s view of the merits of the
6 claim. At this stage in the proceedings, Sportsman’s arguments regarding the merits are
7 properly raised only in a motion for judgment as a matter of law under Rule 50 or for a
8 new trial under Rule 59. See Fed. R. Civ. P. 50(b), 59(a). Unless Sportsman meets the
9 standards set forth in Rule 50 or Rule 59, the court cannot enter judgment contrary to the
10 jury’s verdict on the basis of alleged jury or legal error. See Ostad, 327 F.3d at 881;
11 Molski v. M.J. Cable, Inc., 481 F.3d 724, 729 (9th Cir. 2007) (stating that a new trial is
12 required when the jury’s finding is against the “clear weight of the evidence”).
At bottom, Sportsman’s motion is based less on equitable principles operable after

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14 a finding of liability than on Sportsman’s belief that the jury should not have found it
15 liable in the first place. The court rejects Sportsman’s attempt to short circuit the process
16 established by the Federal Rules of Civil Procedure for challenging a jury’s verdict.
17 Therefore, the court denies Sportsman’s motion to direct entry of judgment. The denial is
18 without prejudice to timely raising the arguments contained therein in a procedurally
19 proper motion.
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ORDER- 11

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IV.

CONCLUSION

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For the foregoing reasons, the court DENIES Sportsman’s motion (Dkt. # 188).

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Dated this 21st day of May, 2015.

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A

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JAMES L. ROBART
United States District Judge

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ORDER- 12