LaRosa et al v. Pecora et al

Filing 416

MEMORANDUM OPINION AND ORDER Denying Parties' Motions for Release of the Bond Obligation as Moot and Amending the Judgment: 409 Motion for Release of Bond Obligation; and 411 Motion for Release of Bond Obligation are Denied as Moot; partie s to meet, confer, and calculate post-judgment interest and to report to Court on or before 3/21/13 concerning their calculations.Clerk is directed to enter judgment pursuant to FRCP 58. Signed by Senior Judge Frederick P. Stamp, Jr on 3/7/13. (soa)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
JOSEPH LAROSA and DOMINICK LAROSA,
Plaintiffs,
v.

Civil Action No. 1:07CV78
(STAMP)
ANDREA PECORA, also known as Andrea Fucillo,
JENNIFER LAROSA WARD, CHRIS WARD,
VIRGIL D. LAROSA, SANDRA LAROSA
and CHEYENNE SALES CO., INC.,
Defendants.
MEMORANDUM OPINION AND ORDER
DENYING PARTIES’ MOTIONS FOR RELEASE
OF THE BOND OBLIGATION AS MOOT
AND AMENDING THE JUDGMENT
I.

Background

The above-styled civil action concerns alleged fraudulent
transfers made by the defendants1 in an attempt to hinder, delay,
and/or

defraud

judgment.2

the

plaintiffs

from

satisfying

a

bankruptcy

In its September 15, 2010 order, this Court issued

findings of fact and conclusions of law stating that the plaintiffs
are entitled to an attachment in their favor against Virgil D.
LaRosa and Sandra LaRosa in the amount of $6,799,161.42, which is
the amount of the original judgment that the plaintiffs secured in
Maryland against Virgil B. LaRosa and Joan LaRosa (“debtors”),
1

This Court uses “defendants” throughout this opinion to refer
to the remaining non-settling defendants, Virgil D. LaRosa and
Sandra LaRosa.
2

See ECF No. 322 for this Court’s original findings of fact
and conclusions of law.

including interest and attorneys’ fees.

This Court also awarded

judgment for the plaintiffs in the amount of $1,191,609.00.

The

Court further noted that during the pendency of this action, the
plaintiffs reached a settlement with defendants Andrea Pecora,
Jennifer LaRosa Ward, and Chris Ward and that the judgment would be
subject to a setoff that may be determined to be appropriate
through this settlement.

As the parties and this Court were

unaware of the exact amount of the setoff at the time of the
judgment order, the findings of fact and conclusions of law did not
reflect the amount of any setoff.3
After this Court made its findings, the parties filed motions
to alter and amend the judgment and the plaintiffs also filed a
motion for order of contempt of court.

In the defendants’ motion

to alter or amend the judgment, the defendants argued that postjudgment attachment is not available under the West Virginia
Uniform Fraudulent Transfer Act (“WVUFTA”) and alternatively even
if it is, the amount of the attachment is clearly erroneous as the
amount of the attachment should have been limited to the value of
the fraudulently transferred assets. The defendants further argued
that this Court should reduce the amount of the judgment by the
amount of setoff resulting from the co-defendants’ settlement.
This Court granted the defendants’ motion to alter or amend the

3

This amount was later
$186,390.00. See ECF No. 382

agreed
2

by

the

parties

to

be

judgment insomuch as it sought to reduce the judgment based on the
amount of the setoff resulting from the co-defendants’ settlement
and reduce the amount of attachment to reflect the value of the
fraudulently transferred assets.

However, this Court denied the

defendants’ motion to alter or amend the judgment insomuch as it
argued that attachment was not available under the WVUFTA.
In the plaintiffs’ motion to alter or amend the judgment, the
plaintiffs argued that they specifically sought a judgment against
the defendants in the full amount of $6,799,161.00, not just an
attachment of that amount, and the plaintiffs were entitled to such
a judgment as a result of the Court’s findings.

These findings

included a finding that certain transfers between Cheyenne Sales
Company (“Cheyenne”) and Regal Coal Company, Inc. (“Regal”), whose
sole shareholder is defendant Virgil D. LaRosa, were fraudulent.
The plaintiffs argued that these transfers resulted in a judgment
above what this Court awarded.

This Court denied the plaintiffs’

motion to alter to amend the judgment.

In the plaintiffs’ motion

for an order of contempt, the plaintiffs argued that the defendants
violated this Court’s injunction order of April 29, 2009 by
altering the value of their equity in Regal Coal Company.

This

Court denied the plaintiffs’ motion for an order of contempt
because it found that the plaintiffs failed to prove that the
defendants’ conduct violated the terms and conditions of the
injunction.

3

The parties then appealed this Court’s findings to the United
States Court of Appeals for the Fourth

Circuit.

On appeal, the

defendants took issue with the Court’s original findings of fact
and conclusions of law. The defendants argued that there can be no
liability stemming from Cheyenne’s annuities purchase based on
Cheyenne’s $700,000.00 drawdown of its credit line.

Specifically,

the defendants argued that because Virgil B. LaRosa’s pledge of
securities that served as guaranty of the $700,000.00 line of
credit occurred more than four years before the plaintiffs filed
this case, the claim is time barred by the WVUFTA.

The Fourth

Circuit agreed and reversed this Court’s findings, stating that
“because the [plaintiffs] did not file their claim within four
years of the establishment of the line of credit, their claim was
time barred by the WVUFTA’s statute of repose.”

LaRosa v. LaRosa,

482 F. App’x 750, 755 (4th Cir. 2012).

Therefore, the Fourth

Circuit

judgment

reduced

this

Court’s

original

against

the

defendants by $700,000.00, from $1,191,609.00 to $491,609.00.
The plaintiffs also appealed.

Specifically, the plaintiffs

appealed the denial of their motion to alter or amend the judgment.
The plaintiffs argued that it was an abuse of discretion for this
Court to find that certain transfers from Cheyenne to Regal were
fraudulent but not assign a value and award a remedy for such
transfers. The Fourth Circuit agreed. As such, the Fourth Circuit
remanded the issue for this Court to make further findings.

4

The

Fourth Circuit stated that first it was remanding the case for this
Court to “engage in further fact-finding to determine the amount of
the award owed to the [plaintiffs].”

Id. at 756.

Second, it

stated that “assuming the district court maintains its finding that
the Cheyenne Regal transfers violated the WVUFTA,” this Court was
to make “specific findings as to which property of the [defendants]
was transferred that brought the Cheyenne-Regal transactions within
the reach of the WVUFTA.”
Upon
conference.

remand,

this

Id.
Court

held

a

status

and

scheduling

After this conference, this Court issued an order

directing the parties to advise the Court of the status of the case
and setting a briefing schedule.

The parties were to brief the

remaining issues in the case as a result of the remand.

In the

order, this Court indicated that the cash bond would remain in
place, but it reserved its option to reduce or eliminate it at a
later date. Thereafter, the parties both filed motions for release
of the bond obligation.

The parties also filed briefs on the

remaining issues in the case, as directed to by this Court.
Initially, this Court finds that the parties’ motions for
release of the bond obligations are denied as moot.

As such, any

issue concerning the amount of the bond to be released to the
parties is resolved by this Court’s findings regarding the issues
on remand.

For the reasons stated below, this Court finds that

upon further review after the remand, the plaintiffs are entitled

5

to a judgment, and as such an attachment, in the amount of
$305,219.00 plus post-judgment interest calculated in accordance
with 28 U.S.C. § 1961.
II.

Discussion

In the plaintiffs’ brief on remand, the plaintiffs argue that
they are entitled to a $6,255,233.00 judgment based on fraudulent
transfers relating to the transfer of profits and opportunities for
profits from 2003 through 2008, as such transfers were transfers of
the debtors’ property.
were

made

between

The plaintiffs state that the transfers

the

debtors

and

the

defendants.

The

$6,255,233.00 figure allegedly represents the profits generated by
Regal from 2003 to 2008.
should

have

been

paid

The plaintiffs claim that these funds
to

Cheyenne

had

the

funds

not

been

intentionally and fraudulently transferred to the defendants.

The

plaintiffs provide specific instances of how they believe the
profits were diverted from Cheyenne to Regal.
In the defendants’ brief on remand, the defendants first
assert that assets owned by a corporation in which a debtor is a
shareholder are not the property of the debtor, but are instead
owned by the corporation.

Therefore, they assert that viewing the

opportunity for profit as an asset under the WVUFTA requires that
it be considered an asset of Cheyenne, not of the debtors as
shareholders.

Moreover,

the

defendants

assert

that

such

an

opportunity may not even be considered an asset under the WVUFTA,

6

and even if it is considered an asset, it was encumbered by a valid
lien and excluded as an asset under the WVUFTA.

The defendants

also take issue with the dollar figure that the plaintiffs claim
they

are

entitled

to.

The

defendants

assert

that

if

the

transactions are seen as transfers by the debtor, this figure
grossly overvalues the transactions between Cheyenne and Regal and
it is not related to the transfer of the debtors’ assets, as it is
only based on Regal’s profits.
The Fourth Circuit stated that upon remand, this Court is “to
make specific findings as to which property of the debtors was
transferred that brought the Cheyenne-Regal transactions within the
reach of the WVUFTA.”

LaRosa, 482 F. App’x at 756.

However, this

statement was qualified by stating that such findings should be
made “assuming the district court maintains its finding that the
Cheyenne-Regal transfers violated the WVUFTA.”

Id.

Because this

Court finds that it was not the property of the debtors that was
transferred,

but

rather

the

property

of

Cheyenne

that

was

transferred, this Court cannot find that such transfers violated
the WVUFTA.
The following is required to assert a violation of the WVUFTA:
(a) A transfer made or obligation incurred by a debtor
is fraudulent as to a creditor, whether the creditor’s
claim arose before or after the transfer was made or the
obligation was incurred, if the debtor made the transfer
or incurred the obligation:
(1) With actual intent to hinder, delay or
defraud any creditor of the debtor; or

7

(2) Without receiving a reasonably equivalent
value in exchange for the transfer or
obligation and the debtor:
(i) Was engaged or was about to
engage
in
a
business
or
a
transaction for which the remaining
assets
of
the
debtor
were
unreasonably small in relation to
the business or transaction; or
(ii) Intended to incur, or believed
or reasonably should have believed
that he (or she) would incur, debts
beyond his (or her) ability to pay
as they became due.
W. Va. Code § 40–1A–4. Accordingly, the debtor must have “made the
transfer or incurred the obligation.” Id.

Such a transfer is “not

made

rights

until

transferred.”

the

debtor

has

acquired

W. Va. Code § 40-1A-6(d).

in

the

asset

The debtor who must

acquire these rights is the “person who is liable on a claim.”

W.

Va. Code § 40-1A-1(f).

An asset is defined by the WVUFTA as the

“property of a debtor.”

W. Va. Code § 40-1A-1(b).

Further, as the

defendants indicated, “[a]ssets owned by a corporation in which a
debtor is a stockholder are not property of the debtor, but that of
the corporation.” In re Levitsky, 401 B.R. 695, 710 (Bankr. D. Md.
2008) (citing Kreisler v. Goldberg, 478 F.3d 209, 214 (4th Cir.
2007)).
As the Fourth Circuit stated, “the WVUFTA does not prohibit
the fraudulent transfer of assets from Cheyenne to Regal; it
prohibits

fraudulent

transfers

from

the

Debtors

to

others.”

LaRosa, 482 F. App’x at 757 (citing W. Va. Code § 40–1A–1).

This

is because Cheyenne is not the debtor, but rather Virgil B. LaRosa
8

and Joan LaRosa are the debtors in this matter.

Id. at 755 n.3.

Therefore, any transfers must have involved the assets of Virgil B.
LaRosa and Joan LaRosa, not the assets of Cheyenne in order to
constitute a violation of the WVUFTA.
The plaintiffs have not indicated any actual assets of the
debtors that were transferred to Cheyenne or to Regal that resulted
in fraudulent transfers under WVUFTA. Instead, the plaintiffs rely
on Cheyenne’s transfers of profits and opportunities for profit.
For instance, the plaintiffs take issue with Cheyenne selling coal
to Regal at a lower price than it could obtain by selling the coal
to others.

While Cheyenne may have made more money by selling the

coal to a different company and it may be considered a transfer of
profits or opportunity for profit, this transfer dealt with the
assets of Cheyenne not the debtors.
coal owned by Cheyenne.
debtors,

as

assets

of

Specifically, it dealt with

These assets are not property of the
a

corporation

are

not

the

assets

of

shareholders.
This Court recognizes that in its findings of fact and
conclusions of law that was entered after the trial of this matter,
this Court found that the transactions between Cheyenne and Regal
were transfers of assets away from the debtors.
*38.

See ECF No. 322

However, upon further review, this Court must modify these

findings.

Accordingly, this Court finds that these transfers were

not transfers away from the debtors, but instead transfers away

9

from Cheyenne.

Therefore, the plaintiffs are not entitled to any

additional judgment as a result of such transfers.
The last matter this Court must address is the actual judgment
owed to the plaintiffs as a result of the Fourth Circuit’s and this
Court’s findings. As indicated above, this Court originally issued
a judgment against the defendants in the amount of $1,191,609.00.
This judgment was subject to a setoff as determined by the amount
of the settlement reached between the plaintiffs and defendants
Andrea Pecora, Jennifer LaRosa Ward, and Chris Ward.
was later agreed by the parties to be $186,390.00.
*8.

This amount

See ECF No. 382

Thereafter, the Fourth Circuit reversed this Court’s findings

in part, and found that $700,000.00 of that judgment, which
constituted

Cheyenne’s drawdown of its credit line was not to be

included in the final judgment, because the claim involving the
drawdown was time barred.

Deducting the settlement amount and the

drawdown amount, the judgment is reduced to $305,219.00.
amount

is

not

transactions

enlarged

discussed

as

a

above

result
due

concerning those transaction.

to

of
this

the

This

Cheyenne-Regal

Court’s

findings

Therefore, this Court amends its

findings to reflect a judgment for the plaintiffs in the amount of
$305,219.00.
III.

Conclusion

For the reasons stated above, the amount of bond to be
released

to

the

plaintiffs

is

10

$305,219.00

plus

post-judgment

interest, calculated in accordance with 28 U.S.C. § 1961 from the
date of the original judgment, September 16, 2010. Counsel for the
parties are DIRECTED to meet and confer to calculate such interest
and are further DIRECTED to report to this Court on or before March
21, 2013 concerning their calculations. The remainder of the bond,
after

the

interest

defendants.4

is

calculated

is

to

be

released

to

the

As such, the parties’ motions for partial release of

the bond obligation (ECF Nos. 409 and 411) are DENIED AS MOOT.
IT IS SO ORDERED.
The Clerk is DIRECTED to transmit a copy of this memorandum
opinion and order to counsel of record herein. Pursuant to Federal
Rule of Civil Procedure 58, the Clerk is DIRECTED to enter judgment
on this matter.
DATED:

March 7, 2013

/s/ Frederick P. Stamp, Jr.
FREDERICK P. STAMP, JR.
UNITED STATES DISTRICT JUDGE

4

The current bond amount is $1,010,000.00. See ECF No. 387.
Therefore, after the judgment amount plus interest is released to
the plaintiffs from this amount, the defendants are entitled to the
remainder of this bond, including any interest thereon.
11