Sheehan v. Saoud et al
Filing
103
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS MOTION FOR SUMMARY JUDGMENT DKT. NO. 89 AND DENYING PLAINTIFFS MOTION FOR SUMMARY JUDGMENT DKT. NO. 91 . Signed by District Judge Irene M. Keeley on 1/28/2015. (jmm)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
MARTIN P. SHEEHAN, Trustee of
the Bankruptcy Estate of AGS, Inc.,
Plaintiff,
v.
//
CIVIL ACTION NO. 1:11CV163
(Judge Keeley)
ALLEN G. SAOUD, FRED D. SCOTT,
WEST VIRGINIA DERMATOLOGY
ASSOCIATES, INC., and CENTRAL
WEST VIRGINIA DERMATOLOGY
ASSOCIATES, INC.,
Defendants.
MEMORANDUM OPINION AND ORDER GRANTING IN PART
AND DENYING IN PART DEFENDANT’S MOTION FOR
SUMMARY JUDGMENT (DKT. NO. 89) AND DENYING
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT (DKT. NO. 91)
Pending before the Court are motions for summary judgment
filed by the defendant, Fred D. Scott (“Scott”) (Dkt. No. 89), and
the plaintiff, Martin P. Sheehan, as Trustee of the bankruptcy
estate of AGS, Inc. (“Sheehan” or “the Trustee”) (Dkt. No. 91).
For the reasons that follow, the Court GRANTS IN PART and DENIES IN
PART Scott’s motion, and DENIES Sheehan’s motion.
I. BACKGROUND
This case concerns the right of Sheehan, as Trustee, to
recover funds he contends are rightfully owed to the bankruptcy
estate of AGS, Inc (“AGS”).
The questions presented in Scott’s
motion for summary judgment include (1) whether the claims asserted
against him by Sheehan and co-defendant Allen G. Saoud (“Saoud”)
SHEEHAN V. SAOUD
1:11CV163
MEMORANDUM OPINION AND ORDER GRANTING IN PART
AND DENYING IN PART DEFENDANT’S MOTION
FOR SUMMARY JUDGMENT (DKT. NO. 89) AND DENYING PLAINTIFF’S
MOTION FOR SUMMARY JUDGMENT (DKT. NO. 91)
are barred by collateral estoppel, and (2) whether he can be held
personally liable for two contracts he executed in his capacity as
director
of
co-defendant
Central
Associates, Inc. (“CWVD”).
West
Virginia
Dermatology
The question presented in Sheehan’s
motion for summary judgment is whether, as Trustee for AGS, he is
entitled to judgment against Saoud.
A.
Factual Background1
Saoud
was
a
licensed
Doctor
of
Osteopathic
Medicine,
specializing in dermatology, who owned and operated a medical
corporation named AGS, a participating provider in the Medicare and
Medicaid programs.2
In 2001, Scott entered into the practice of
dermatology with Saoud at AGS.
On January 25, 2005, the United States filed charges alleging
that,
between
May
1998
and
June
2004,
Saoud
had
submitted
unsupported medical billing claims to Medicare and Medicaid for
payment. Saoud entered into a settlement with the United States on
1
Many of these facts come from Saoud’s criminal indictment
and subsequent jury verdict in Case No. 1:12CR113. His conviction
and sentence were affirmed on appeal in United States v. Saoud,
2014 WL 7210734 at *1 (4th Cir. Dec. 19, 2014).
2
Saoud’s license was suspended
eventually revoked on January 6, 2014.
2
on
May
26,
2011,
and
SHEEHAN V. SAOUD
1:11CV163
MEMORANDUM OPINION AND ORDER GRANTING IN PART
AND DENYING IN PART DEFENDANT’S MOTION
FOR SUMMARY JUDGMENT (DKT. NO. 89) AND DENYING PLAINTIFF’S
MOTION FOR SUMMARY JUDGMENT (DKT. NO. 91)
August 11, 2005, the terms of which required him to pay $310,800.58
in penalties, but did not require that he admit liability.
Of
importance, as part of that settlement, Saoud agreed to his
exclusion from Medicare and Medicaid, and all other federal health
programs, for ten years (“the exclusion agreement”).
1.
CWVD and AGS
Saoud’s exclusion agreement prohibited him from controlling
any medical practice that billed Medicare or Medicaid.3
Two weeks
after signing that exclusion agreement, on August 26, 2005, Saoud
“sold” his stock in CWVD, a medical corporation formed by him on
May 31, 2005, to its sole director, Scott, for $ 1.6 million.4
Scott, however, never paid Saoud for the stock.
Also on August
26th, Saoud resigned as President of CWVD, and, at least on paper,
transferred his staff and patients from AGS to CWVD. Nevertheless,
despite this transfer and the terms of the exclusion agreement,
3
“Control” includes directly or indirectly owning at least a
5% interest in a company, or acting as an “officer, director,
agent, or managing employee.” 42 C.F.R. § 2003.102(b)(12).
4
CWVD was not an operational medical practice prior to August
2005.
3
SHEEHAN V. SAOUD
1:11CV163
MEMORANDUM OPINION AND ORDER GRANTING IN PART
AND DENYING IN PART DEFENDANT’S MOTION
FOR SUMMARY JUDGMENT (DKT. NO. 89) AND DENYING PLAINTIFF’S
MOTION FOR SUMMARY JUDGMENT (DKT. NO. 91)
Saoud continued to exercise control over CWVD after August 26,
2005.
Although AGS had been left bereft of any patients or staff
following their transfer to CWVD, Saoud “sold” AGS to Georgia
Daniel (“Daniel”) on March 31, 2006, for $1 million.5
nurse
practitioner,
previously
dermatology practice.
had
worked
with
Daniel, a
Saoud
in
his
Shortly after that, in April 2006, Saoud
drafted a laboratory contract in which Daniel, as President of AGS,
purportedly agreed to sell the histopathology portion of AGS’s
practice to CWVD for $1 million. Scott signed that contract in his
capacity as director of CWVD.
More
than
two
years
later,
Saoud
prepared
a
purchase
agreement, in October 2008, that purported to transfer ownership of
CWVD from Scott to Daniel.
Then, in March 2009, Saoud prepared a
second purchase agreement that purported to transfer CWVD from
Daniel to Dr. Timothy Peasak.
After Scott resigned as director of
CWVD in June 2009, Saoud solicited Dr. Frank Swisher (“Swisher”),
a
family
practice
physician,
to
5
act
as
director
of
CWVD’s
West Virginia law prohibits a nurse practitioner from owning
a medical corporation.
4
SHEEHAN V. SAOUD
1:11CV163
MEMORANDUM OPINION AND ORDER GRANTING IN PART
AND DENYING IN PART DEFENDANT’S MOTION
FOR SUMMARY JUDGMENT (DKT. NO. 89) AND DENYING PLAINTIFF’S
MOTION FOR SUMMARY JUDGMENT (DKT. NO. 91)
laboratory.
Importantly, he never advised Swisher that Swisher’s
name and provider number would be used for billing, or that CWVD’s
laboratory would bill Medicare, Medicaid, and other federal health
care programs, for dermatological pathology services that were in
actuality performed by another lab.
2.
Bankruptcy of AGS
In an effort to avoid a civil law suit against AGS by Mountain
State Blue Cross/Blue Shield over alleged overbilling, Saoud filed
a bankruptcy petition on behalf of AGS on May 9, 2009.
Following
that filing, the Bankruptcy Court appointed Sheehan as Trustee with
the independent duty to pursue claims on behalf of AGS.
Saoud initially identified himself in the bankruptcy petition
as President and Owner of AGS.
At a meeting of AGS’ creditors
convened on June 18, 2009, however, Saoud disclosed that he
previously
had
sold
his
stock
in
AGS
to
Daniel.
Then,
on
August 18, 2009, he admitted that he was neither an owner nor an
officer of AGS at the time he signed the bankruptcy petition.
Later, on May 12, 2010, he claimed that Daniel had authorized him
to file AGS’ bankruptcy petition.
5
SHEEHAN V. SAOUD
1:11CV163
MEMORANDUM OPINION AND ORDER GRANTING IN PART
AND DENYING IN PART DEFENDANT’S MOTION
FOR SUMMARY JUDGMENT (DKT. NO. 89) AND DENYING PLAINTIFF’S
MOTION FOR SUMMARY JUDGMENT (DKT. NO. 91)
For her part, Daniel has denied that she ever authorized Saoud
to seek bankruptcy relief on behalf of AGS. Further, she contended
that Saoud had forged her signature on a document purporting to
authorize him to file the bankruptcy petition.6
3.
Criminal Prosecution of Saoud
In December 2012, a federal grand jury returned a twenty-three
count indictment charging Saoud with health care fraud, concealing
a material fact in a health care matter, corruptly endeavoring to
obstruct and impede the due administration of the internal revenue
laws, making a false oath or account in relation to a bankruptcy
case, and making a false statement to a federal agent.
In May
2013, the grand jury returned a superseding indictment containing
no additional offenses.
Then, on June 4, 2013, the grand jury
returned a second superseding indictment, which added new charges
of health care fraud and aggravated identity theft.
Following a jury trial, on June 25, 2013, Saoud was convicted
of thirteen counts of health care fraud, one count of aggravated
identity theft, one count of concealing a material fact in a health
6
At trial, Saoud was acquitted of one count of falsification
of bankruptcy documents.
6
SHEEHAN V. SAOUD
1:11CV163
MEMORANDUM OPINION AND ORDER GRANTING IN PART
AND DENYING IN PART DEFENDANT’S MOTION
FOR SUMMARY JUDGMENT (DKT. NO. 89) AND DENYING PLAINTIFF’S
MOTION FOR SUMMARY JUDGMENT (DKT. NO. 91)
care matter, one count of corruptly endeavoring to obstruct and
impede the due administration of internal revenue laws, five counts
of making a false oath or account in relation to a bankruptcy case,
and one count of making a false statement to a federal agent.7
On
March 25, 2014, he was sentenced to 99 months of incarceration, and
received a fine of $ 2,630,000.00.
His sentence also included a
forfeiture money judgment of $ 1,243,118.29.
The United States
Court
affirmed
of
Appeals
for
the
convictions in December 2014.
Fourth
Circuit
Saoud’s
See United States v. Saoud, 2014 WL
7210734 at *1 (4th Cir. Dec. 19, 2014).
B.
Procedural Background
On October 13, 2011, in his capacity as Trustee of AGS,
Sheehan sued Saoud, Scott, CWVD, Daniel, and Robert R. Fraser
(“Fraser”),8 under federal bankruptcy law and the West Virginia
Uniform Fraudulent Transfers Act (“the WVUFTA”), W. Va. Code § 40-
7
The jury acquitted Saoud of one count of making and
subscribing a false tax return, one count of aiding and assisting
in the presentation of a false and fraudulent return, one count of
falsification of bankruptcy documents, and five counts of
bankruptcy fraud.
8
Fraser is an accountant who had prepared tax returns for
Daniel and CWVD.
7
SHEEHAN V. SAOUD
1:11CV163
MEMORANDUM OPINION AND ORDER GRANTING IN PART
AND DENYING IN PART DEFENDANT’S MOTION
FOR SUMMARY JUDGMENT (DKT. NO. 89) AND DENYING PLAINTIFF’S
MOTION FOR SUMMARY JUDGMENT (DKT. NO. 91)
1A-1, et seq. (Dkt. No. 3).
Scott in turn filed a crossclaim
against Saoud (Dkt. No. 19). Eventually, Daniel and Fraser settled
with Sheehan, and were dismissed as defendants on May 15, 2012
(Dkt. No. 37).
Saoud filed a motion to dismiss both the complaint
and Scott’s cross-claim against him, but subsequently withdrew
those motions (Dkt. No. 48). Saoud then answered the complaint and
asserted a crossclaim against Scott (Dkt. No. 55).
On June 1, 2012, the Court referred the case to the Honorable
Patrick M. Flatley, United States Bankruptcy Judge, for a report
and recommendation (Dkt. No. 40).
Due to his earlier involvement
in the AGS bankruptcy petition, however, Judge Flatley could not
consider the case (Dkt. No. 44), and the Court withdrew the
reference.
The United States moved to intervene (Dkt. No. 71) on
June 5, 2013, seeking to stay the civil case until after the
conclusion of Saoud’s criminal case.
The Court denied that motion
as moot on July 2, 2013, following Saoud’s convictions at the
conclusion of his criminal trial (Dkt. No. 76).
On October 6, 2014, Sheehan filed an amended complaint against
Saoud, Scott, and CWVD (Dkt. No. 86), alleging that CWVD still owed
$634,159.00 to AGS based on the sale of AGS’ laboratory to CWVD for
8
SHEEHAN V. SAOUD
1:11CV163
MEMORANDUM OPINION AND ORDER GRANTING IN PART
AND DENYING IN PART DEFENDANT’S MOTION
FOR SUMMARY JUDGMENT (DKT. NO. 89) AND DENYING PLAINTIFF’S
MOTION FOR SUMMARY JUDGMENT (DKT. NO. 91)
$1 million. (Count I).
Id. at 9.
He also alleged 1) that the
transfers of ownership among Saoud, Daniel, and Scott “constituted
a scheme to defraud the creditors of AGS, Inc.,” and thus were
voidable as a fraudulent transfer under 11 U.S.C. § 547 (Count II);
2) that the transfers of ownership were voidable as fraudulent
transfers under the WVUFTA (Count III); 3) that the fraudulent
transfers “constituted a conspiracy to violate” the WVUFTA (Count
IV); and 4) that Saoud committed bankruptcy fraud and “conducted a
criminal enterprise engage(sic) in, and whose activities, affect
interstate commerce” in violation of 18 U.S.C. § 1962, and that
Saoud is liable for attorneys’ fees and treble damages (Count VI9).
Id. at 9-10.
Scott answered the amended complaint on October 8, 2014 (Dkt.
No. 87), followed by Saoud, who filed his answer on October 10,
2014 (Dkt. No. 88). With his answer, Saoud refiled his crossclaim
against Scott stemming from the sale of Saoud’s shares in CWVD
(Dkt. No. 88 at 8).
Saoud alleged that Scott had breached his
contract by failing to pay the $1,600,000 purchase price, and that
9
Although Sheehan amended the complaint, he left Count V,
which only relates to Fraser, intact. Fraser was dismissed from
the case, so the Court DISMISSES Count V as moot.
9
SHEEHAN V. SAOUD
1:11CV163
MEMORANDUM OPINION AND ORDER GRANTING IN PART
AND DENYING IN PART DEFENDANT’S MOTION
FOR SUMMARY JUDGMENT (DKT. NO. 89) AND DENYING PLAINTIFF’S
MOTION FOR SUMMARY JUDGMENT (DKT. NO. 91)
he also had breached his duty of good faith and fair dealing by
never intending to repay the purchase price.
Id. at 8-9.
On October 20, 2014, Scott moved for summary judgment on both
the complaint and Saoud’s crossclaim (Dkt. No. 89), and Sheehan
sought summary judgment against Saoud (Dkt. No. 91). Both of these
motions are fully briefed, and the matter is ripe for disposition.
II. STANDARD OF REVIEW
Summary
documents,
judgment
is
electronically
declarations,
stipulations
appropriate
stored
.
.
where
the
information,
.,
admissions,
“depositions,
affidavits
or
interrogatory
answers, or other materials” show that “there is no genuine dispute
as to any material fact and the movant is entitled to judgment as
a matter of law.”
Fed R. Civ. P. 56(c)(1)(A), (a).
When ruling on
a motion for summary judgment, the Court reviews all the evidence
“in the light most favorable” to the nonmoving party.
Providence
Square Assocs., L.L.C. v. G.D.F., Inc., 211 F.3d 846, 850 (4th Cir.
2000).
The Court must avoid weighing the evidence or determining
the truth and limit its inquiry solely to a determination of
whether genuine issues of triable fact exist.
Lobby, Inc., 477 U.S. 242, 249 (1986).
10
Anderson v. Liberty
SHEEHAN V. SAOUD
1:11CV163
MEMORANDUM OPINION AND ORDER GRANTING IN PART
AND DENYING IN PART DEFENDANT’S MOTION
FOR SUMMARY JUDGMENT (DKT. NO. 89) AND DENYING PLAINTIFF’S
MOTION FOR SUMMARY JUDGMENT (DKT. NO. 91)
The moving party bears the initial burden of informing the
Court
of
the
basis
for
the
motion
and
nonexistence of genuine issues of fact.
477 U.S. 317, 323 (1986).
of
establishing
the
Celotex Corp. v. Catrett,
Once the moving party has made the
necessary showing, the nonmoving party “must set forth specific
facts showing that there is a genuine issue for trial.”
Anderson,
477 U.S. at 256 (internal quotation marks and citation omitted).
The “mere existence of a scintilla of evidence” favoring the
nonmoving party will not prevent the entry of summary judgment; the
evidence
must
be
such
that
a
rational
reasonably find for the nonmoving party.
trier
of
fact
could
Id. at 248–52.
III. DISCUSSION
A.
Scott’s Motion for Summary Judgment as to Sheehan’s Amended
Complaint
Scott seeks summary judgment on all the claims alleged against
him in Sheehan’s amended complaint (Dkt. No. 89). Before the Court
can address his motion, however, it must determine which counts in
the amended complaint actually relate to Scott.
As Scott points
out in his motion, Count I, by its terms, only applies to CWVD
(Dkt. No. 86 at 9).
Count V applies only to Fraser, and Count VI
11
SHEEHAN V. SAOUD
1:11CV163
MEMORANDUM OPINION AND ORDER GRANTING IN PART
AND DENYING IN PART DEFENDANT’S MOTION
FOR SUMMARY JUDGMENT (DKT. NO. 89) AND DENYING PLAINTIFF’S
MOTION FOR SUMMARY JUDGMENT (DKT. NO. 91)
applies exclusively to Saoud.
Therefore, in reviewing Scott’s
motion, the Court will consider only Counts II, III, and IV.
Scott
premises
his
principal arguments.
motion
for
summary
judgment
on
two
First, he contends that AGS’ claims are
barred by collateral estoppel.
Next, he asserts that, because any
documents he signed were signed in his capacity as director of
CWVD, he is not personally liable as a matter of law (Dkt. No. 90
at 7).
In its consideration of Scott’s motion, the Court will
review all the evidence “in the light most favorable” to Sheehan,
the non-moving party, Providence Square Assocs., L.L.C., 211 F.3d
at 850.
1.
Counts II and III:
Voidable Transactions
In Counts II and III of the amended complaint, Sheehan alleges
that Saoud, Daniel, and Scott schemed to defraud creditors by
transferring AGS’ assets for less than reasonably equivalent value,
thus causing AGS to become insolvent (Dkt. No. 86 at 9-10).
Transfers for less than reasonably equivalent value are generally
voidable as fraudulent transfers under 11 U.S.C. § 547, and W. Va.
Code § 40-1A-1 et seq.
Id.
12
SHEEHAN V. SAOUD
1:11CV163
MEMORANDUM OPINION AND ORDER GRANTING IN PART
AND DENYING IN PART DEFENDANT’S MOTION
FOR SUMMARY JUDGMENT (DKT. NO. 89) AND DENYING PLAINTIFF’S
MOTION FOR SUMMARY JUDGMENT (DKT. NO. 91)
Sheehan also asserts that, although Scott agreed to purchase
Saoud’s interest in CWVD for $ 1.6 million, he never paid any money
to Saoud because the scheme was intended as a leveraged buy-out
whereby CWVD would pay Saoud and Scott would become the owner of
CWVD (Id. at 4; Dkt. No. 93 at 6).
The amended complaint also
alleges that Scott signed the laboratory purchase agreement on
behalf of CWVD, thereby indebting CWVD to AGS for $ 1 million (Dkt.
No. 86 at 5).10
11 U.S.C. § 547 of the Bankruptcy Code generally allows
Sheehan, as Trustee, to “avoid any transfer of an interest” of AGS
made “to or for the benefit of a creditor” for payment of “an
antecedent debt owed by the debtor,” so long as the transfer was
made while the debtor was insolvent, and within 90 days before the
filing of the bankruptcy petition.
11 U.S.C. § 547(b).
The WVUFTA is a state statute that allows creditors to negate
a
debtor’s
fraudulent
transactions
by
avoiding
transfers
or
obligations, attaching assets, enjoining further disposition of
property, or appointing a receiver to take charge of assets.
10
W.
This allegation is also the basis for Count I, where Sheehan
claims that CWVD still owes AGS $634,159.00 on the purchase price
of the contract (Dkt. No. 86 at 9).
13
SHEEHAN V. SAOUD
1:11CV163
MEMORANDUM OPINION AND ORDER GRANTING IN PART
AND DENYING IN PART DEFENDANT’S MOTION
FOR SUMMARY JUDGMENT (DKT. NO. 89) AND DENYING PLAINTIFF’S
MOTION FOR SUMMARY JUDGMENT (DKT. NO. 91)
Va. Code § 40-1A-7(a).
If a debtor such as AGS transfers property
or incurs obligations, either with the “actual intent to hinder,
delay or defraud any creditor,” or without receiving “reasonably
equivalent value” for the transfer, and the debtor’s remaining
assets “were unreasonably small in relation to the business or
transaction” or if it intended to incur debts beyond its ability to
pay, the transfer is fraudulent as to a creditor.
W. Va. Code §
40-1A-4(a).
As best the Court can tell, Sheehan seeks to void Saoud’s
transfer of AGS’ laboratory to CWVD for $1 million as a transfer
“for less than reasonably equivalent value” under W. Va. Code § 401A-4(b)(8).
The amended complaint alleges that Saoud’s transfer
caused AGS to become insolvent, to have unreasonably small capital,
and to incur debts beyond its ability to pay (Dkt. No. 86 at 9-10).
In response to Scott’s motion for summary judgment, Sheehan
contends that Scott exercised “dominion and control” over CWVD’s
assets, aside from his role as CWVD’s president and owner (Dkt. No.
93 at 6-7).
In support of his contention, Sheehan asserts that
Scott withdrew $26,000 from a company bank account and kept the
funds.
Id. at 7; Dkt. No. 94-4; Dkt. No. 94-1 at 47.
14
SHEEHAN V. SAOUD
1:11CV163
MEMORANDUM OPINION AND ORDER GRANTING IN PART
AND DENYING IN PART DEFENDANT’S MOTION
FOR SUMMARY JUDGMENT (DKT. NO. 89) AND DENYING PLAINTIFF’S
MOTION FOR SUMMARY JUDGMENT (DKT. NO. 91)
Putting two and two together, it appears that Sheehan, on
behalf of AGS, seeks to hold Scott personally liable and recoup
assets of CWVD over which Scott allegedly exercised dominion and
control.
In his response, Scott argues that AGS is collaterally
estopped from asserting claims against him because it is in privity
with Saoud, who has already been adjudged guilty (Dkt. No. 101 at
6).
As an initial matter, there are sufficient facts in dispute to
create a question of material fact concerning whether Scott was a
participant
in
the
fraudulent
transfers
that
dissipated
AGS’
assets, as Sheehan contends, or whether, as Scott asserts, he was
a victim of Saoud’s criminal conduct.
(Dkt. No. 101 at 6).
As a general legal principle, when a criminal conviction is
based on a guilty verdict, “‘issues which were essential to the
verdict
must
judgment.’”
be
regarded
as
having
been
determined
by
the
Wolfson v. Baker, 623 F.2d 1074, 1078 (5th Cir. 1980)
(quoting Emich Motors Corp. v. General Motors Corp., 340 U.S. 558,
569, 71 S.Ct. 408, 414 (1951)).
Scott to be a victim.
Here, the jury did not “find”
In paragraph 16 of the second superseding
indictment, the United States charged that Saoud had established
15
SHEEHAN V. SAOUD
1:11CV163
MEMORANDUM OPINION AND ORDER GRANTING IN PART
AND DENYING IN PART DEFENDANT’S MOTION
FOR SUMMARY JUDGMENT (DKT. NO. 89) AND DENYING PLAINTIFF’S
MOTION FOR SUMMARY JUDGMENT (DKT. NO. 91)
CWVD and transferred ownership of it to Scott (Dkt. No. 90-3 at 5).
Despite the purchase price of $1.6 million, it is undisputed that
Saoud never received any payment from Scott for that transfer. Id.
Scott’s status–whether as a victim or otherwise–was not “essential
to the verdict;” nor was it decided by the jury in any way.
As to
the five counts of health care fraud on which the jury convicted
Saoud, Scott was only listed in Count One, which charged, among
other matters, that Saoud had requested Scott to sign a document
that
included
false
and
misleading
statements
about
CWVD’s
financial obligations to AGS, and Saoud’s managerial interest in
CWVD.
Id. at 7.
The Court is unable to glean Scott’s interpretation–that the
jury “found” he was a victim–from either the plain language of the
indictment or the jury’s verdict.
Moreover, Scott never sought
restitution from Saoud in the criminal case (Case No. 1:12CR113,
Dkt. No. 197).11
Therefore, whether Scott participated in the
11
In contrast, Daniel settled with Sheehan and then sought
restitution from Saoud in the criminal suit, which the Court
granted. She was awarded $99,750 in restitution for attorneys’
fees and settlement fees related to this proceeding (Case No.
1:12CR113, Dkt. No. 193).
16
SHEEHAN V. SAOUD
1:11CV163
MEMORANDUM OPINION AND ORDER GRANTING IN PART
AND DENYING IN PART DEFENDANT’S MOTION
FOR SUMMARY JUDGMENT (DKT. NO. 89) AND DENYING PLAINTIFF’S
MOTION FOR SUMMARY JUDGMENT (DKT. NO. 91)
fraudulent transfers with the requisite intent,12 and possessed
assets rightfully belonging to AGS, or whether he was in fact a
victim of Saoud’s criminal scheme, are material factual questions
that remain in dispute.
Scott also is not entitled to judgment on the basis that
Sheehan’s claims are barred by collateral estoppel because Saoud’s
conduct is personally attributable to AGS (Dkt. No. 90 at 13).
Collateral estoppel is a doctrine that precludes relitigation of an
issue.
“[O]nce an issue is actually and necessarily determined by
a court of competent jurisdiction, that determination is conclusive
in subsequent suits based on a different cause of action involving
a party to the prior litigation.”
Montana v. United States, 440
U.S. 147, 153, 99 S.Ct. 970, 973 (1979).
A party seeking to rely on collateral estoppel must establish
five elements:
(1) that the issue previously decided is identical
to the issue in the current action; (2) that the issue was actually
determined in the previous proceeding; (3) that the determination
12
The Court is well aware that the federal bankruptcy statute
does not necessarily require proof of the debtor’s intent if he
“received less than a reasonably equivalent value in exchange for
such transfer or obligation . . . .” 11 U.S.C. § 548(a)(1)(B)(I).
It is unclear, however, which avenue Sheehan is choosing to pursue.
17
SHEEHAN V. SAOUD
1:11CV163
MEMORANDUM OPINION AND ORDER GRANTING IN PART
AND DENYING IN PART DEFENDANT’S MOTION
FOR SUMMARY JUDGMENT (DKT. NO. 89) AND DENYING PLAINTIFF’S
MOTION FOR SUMMARY JUDGMENT (DKT. NO. 91)
of the issue was “a critical and necessary part of the decision in
the prior proceeding; (4) that the prior judgment is final and
valid;” and, “(5) that the party against whom collateral estoppel
is asserted had a full and fair opportunity to litigate the issue”
in the prior case.
Collins v. Pond Creek Mining Co., 468 F.3d 213,
217 (4th Cir. 2006) (internal citations omitted).
Collateral estoppel generally applies only against persons who
were parties to a previous suit, because nonparties usually would
not have had a full and fair opportunity to litigate the issues.
Virginia Hosp. Ass’n v. Baliles, 830 F.2d 1308, 1312 (4th Cir.
1987).
In some instances, however, a nonparty to a previous suit
may be “collaterally estopped by the judgment rendered in that suit
if (1) the person had a direct financial or proprietary interest in
the prior litigation; and (2) the person assumed control over the
prior litigation.”
Virginia Hosp. Ass’n, 830 F.2d at 1312.
When an issue is decided in a criminal action and collateral
estoppel is asserted in a later civil action, a court must ask
“whether the issue for which estoppel is sought was ‘distinctly put
in
issue
and
directly
determined’
in
the
criminal
action.”
Wolfson, 623 F.2d at 1078 (quoting Emich Motors Corp., 340 U.S. at
18
SHEEHAN V. SAOUD
1:11CV163
MEMORANDUM OPINION AND ORDER GRANTING IN PART
AND DENYING IN PART DEFENDANT’S MOTION
FOR SUMMARY JUDGMENT (DKT. NO. 89) AND DENYING PLAINTIFF’S
MOTION FOR SUMMARY JUDGMENT (DKT. NO. 91)
569, 71 S.Ct. at 414).
When a criminal conviction is based on a
guilty verdict, “‘issues which were essential to the verdict must
be regarded as having been determined by the judgment.’” Id.
The Court agrees with Scott that Saoud’s criminal judgment is
valid and final.
Berman v. United States, 302 U.S. 211, 212, 58
S.Ct. 164, 166 (1937) (“Final judgment in a criminal case means
sentence.
The sentence is the judgment.”).
It also agrees that
the general issues in Saoud’s criminal trial, namely, the contracts
between Saoud, on behalf of AGS, and Scott, on behalf of CWVD, were
the same (Dkt. No. 90-3 at 5).
It cannot agree, however, that the
relevant issue here is the exact one decided in Saoud’s criminal
case.
Although Saoud’s culpability in structuring fraudulent
transfers
was
at
issue
in
that
case,
Scott’s
role
in
those
transactions, particularly whether he possessed the requisite
actual intent under W. Va. Code § 40-1A-4, was not.
In any event, because AGS was not a party in Saoud’s criminal
case, it never had a full and fair opportunity to litigate these
issues. United States v. Alcatel-Lucent France, SA, 688 F.3d 1301,
19
SHEEHAN V. SAOUD
1:11CV163
MEMORANDUM OPINION AND ORDER GRANTING IN PART
AND DENYING IN PART DEFENDANT’S MOTION
FOR SUMMARY JUDGMENT (DKT. NO. 89) AND DENYING PLAINTIFF’S
MOTION FOR SUMMARY JUDGMENT (DKT. NO. 91)
1306 (11th Cir. 2001) (noting that victims are non-parties).13
As
Sheehan points out, the government had no incentive to present AGS
as an honest corporate citizen freed from Saoud’s domination by the
bankruptcy proceedings (Dkt. No. 93 at 5).
Rather, Sheehan
contends, it made sense for the government to portray AGS “as the
instrument of illegality being used by defendant Saoud.”
Id.
Thus, even if material facts regarding Scott’s intent and role were
not in dispute, he would not be entitled to judgment as a matter of
law because AGS never had a full and fair opportunity to litigate
its claims against him.
The Court therefore DENIES Scott’s motion
for summary judgment as to Counts II and III.
2.
Count IV:
Civil Conspiracy
In Count IV, Sheehan alleges that the agreements between
Saoud, Daniel, and Scott “constituted a conspiracy to violate” the
WVUFTA, “and are actionable under principals [sic] of West Virginia
common law. . . .”
(Dkt. No. 86 at 10).
Scott asserts that
Sheehan’s civil conspiracy claim fails as a matter of law because
13
Sheehan portrays AGS as a “victim” in the criminal case
(Dkt. No. 93 at 2). The Court reminds him, however, that it denied
restitution to AGS after Saoud’s criminal trial, a decision later
affirmed by the Fourth Circuit. See In re Bankruptcy Estate of
AGS, Inc., 565 Fed. Appx. 172 (4th Cir. 2014) (unpublished).
20
SHEEHAN V. SAOUD
1:11CV163
MEMORANDUM OPINION AND ORDER GRANTING IN PART
AND DENYING IN PART DEFENDANT’S MOTION
FOR SUMMARY JUDGMENT (DKT. NO. 89) AND DENYING PLAINTIFF’S
MOTION FOR SUMMARY JUDGMENT (DKT. NO. 91)
a valid claim requires an underlying tort (Dkt. No. 101 at 2).
He
asserts that, because “the only factual allegation in the Amended
Complaint directed toward [him] alleges that either Dr. Scott or
CWVD purchased a laboratory for $1,000,000 and failed to pay the
purchase price . . . [,] [t]he allegations clearly state a contract
claim.”
Id.
There is no dispute that West Virginia recognizes a cause of
action for civil conspiracy.
Kessel v. Leavitt, 511 S.E.2d 720,
753 (W. Va. 1998). A civil conspiracy is defined as “a combination
of two or more persons by concerted action to accomplish an
unlawful purpose or to accomplish some purpose, not in itself
unlawful, by unlawful means.”
Dunn v. Rockwell, 689 S.E.2d 255,
268 (W. Va. 2009) (quoting Dixon v. American Indus. Leasing Co.,
253 S.E.2d 150, 152 (W. Va. 1979)).
Importantly, “[t]he cause of action is not created by the
conspiracy but by the wrongful acts done by the defendants to the
injury of the plaintiff.”
Id.
Thus, civil conspiracy is not a
stand alone cause of action, but “a legal doctrine under which
liability for a tort may be imposed on people who did not actually
21
SHEEHAN V. SAOUD
1:11CV163
MEMORANDUM OPINION AND ORDER GRANTING IN PART
AND DENYING IN PART DEFENDANT’S MOTION
FOR SUMMARY JUDGMENT (DKT. NO. 89) AND DENYING PLAINTIFF’S
MOTION FOR SUMMARY JUDGMENT (DKT. NO. 91)
commit a tort themselves but who shared a common plan for its
commission with the actual perpetrator(s).”
Id. at 269.
Courts in West Virginia, including this one, have granted
summary judgment as to claims of civil conspiracy where there is no
underlying tort to support the claim.
See, e.g., Long v. M&M
Transp., LLC, __ F.Supp.2d ___, 2014 WL 4388337 at *13 (N.D.W. Va.
Sept. 5, 2014)(Groh, J.).
In addition, a court should grant a
motion to dismiss a civil conspiracy charge when the plaintiffs
claim that the defendants “engaged in a civil conspiracy” and
“individually and collectively” committed wrongs, but fail to
allege facts to support that allegation.
Tucker v. Thomas, 853
F.Supp.2d 576, 594 (N.D.W. Va. 2012)(Stamp, J.).
As to Sheehan’s allegation that Saoud, Daniel, and Scott
conspired to violate the WVUFTA (Dkt. No. 86 at 9-11), case law in
West Virginia is bereft of guidance as to whether such a claim
sounds in contract or tort. Nevertheless, courts in other states
that, like West Virginia, have adopted the Uniform Fraudulent
Transfers Act have held that a violation of a state’s enactment of
the act is not a tort.
See, e.g., F.D.I.C. v. S. Prawer & Co., 829
F.Supp.2d 453, 455 (D. Ma. 1993) (“The Court is satisfied that
22
SHEEHAN V. SAOUD
1:11CV163
MEMORANDUM OPINION AND ORDER GRANTING IN PART
AND DENYING IN PART DEFENDANT’S MOTION
FOR SUMMARY JUDGMENT (DKT. NO. 89) AND DENYING PLAINTIFF’S
MOTION FOR SUMMARY JUDGMENT (DKT. NO. 91)
violation of . . . Maine’s Uniform Fraudulent Transfers Act . . .
is not a tort . . . although there appears to be a tort of
fraudulent concealment in Maine, it has not been alleged in this
complaint.”).
In S. Prawer, the district court in Maine listed other courts
that
“have
persuasively
concluded
that
actions
to
set
aside
fraudulent conveyances under the Uniform Fraudulent Conveyance Act
are in the nature of contract rather than tort actions.”
(citing cases).
Id.
Additionally, it observed that “[t]he fact that
the complaint alleged actual intent on the part of the debtor to
evade the creditor did not transform the complaint into an action
to recover on the ground of actual fraud.”
Id. (quoting United
States v. Franklin Nat’l Bank, 376 F.Supp. 378, 382 (E.D.N.Y.
1973)).
Following a careful weighing of the matter, the Court agrees
with Scott that a violation of the WVUFTA sounds in contract; thus,
Sheehan, by having relied on the WVUFTA, has failed to plead a
tort.
Moreover, even if he had pleaded a tort by alleging a
violation of the WVUFTA, Sheehan’s factual allegations are wholly
inadequate regarding “how and when the defendants engaged in civil
23
SHEEHAN V. SAOUD
1:11CV163
MEMORANDUM OPINION AND ORDER GRANTING IN PART
AND DENYING IN PART DEFENDANT’S MOTION
FOR SUMMARY JUDGMENT (DKT. NO. 89) AND DENYING PLAINTIFF’S
MOTION FOR SUMMARY JUDGMENT (DKT. NO. 91)
conspiracy.”
Tucker v. Thomas, 2011 WL 1119661 at *13 (N.D.W. Va.
Mar. 24, 2011); Acadian Energy Resources, LLC v. Carpenter, 2009 WL
5217679 at *7-9 (S.D.W. Va. Dec. 31, 2009) (dismissing plaintiff’s
civil
conspiracy
claim
without
prejudice
when
it
contained
conclusory allegations regarding a conspiracy to defraud).
Sheehan’s problem is that there simply is no evidence in the
record to support a civil conspiracy claim against Scott.
Merely
alleging that Scott was part of “a conspiracy” to violate the
WVUFTA because he signed two contacts on behalf of CWVD is wholly
inadequate (Dkt. No. 86 at 10).
A close examination of the
remainder of the amended complaint, as well as of the depositions
and other materials submitted by Sheehan and Scott for review on
summary judgment, leaves the Court none the wiser as to any of the
details of the alleged conspiracy, particularly “how and when” the
defendants
engaged
in
it.
Tucker,
2011
WL
1119661
at
*13.
Therefore, based on the absence of any disputed material facts, and
the conclusion that a violation of the WVUFTA does not sound in
tort for purposes of establishing a civil conspiracy claim, the
Court GRANTS Scott’s motion for summary judgment as to Count IV.
24
SHEEHAN V. SAOUD
1:11CV163
MEMORANDUM OPINION AND ORDER GRANTING IN PART
AND DENYING IN PART DEFENDANT’S MOTION
FOR SUMMARY JUDGMENT (DKT. NO. 89) AND DENYING PLAINTIFF’S
MOTION FOR SUMMARY JUDGMENT (DKT. NO. 91)
B.
Scott’s Motion for Summary Judgment As To Saoud’s Crossclaim
Saoud’s crossclaim against Scott for $1,600,000 stems from the
contract between Saoud and CWVD (Dkt. No. 88 at 7).
Saoud claims
that Scott “was to begin making payments starting March 1, 2006,”
but “failed to make any payment on the note as agreed” and “failed
to use best efforts in keeping the corporation functioning properly
and syphoned off cash for his own use rather than paying defendant
Saoud as provided in the agreement.”
Scott never intended to repay him.
Id.
Saoud also alleges that
Id.
Saoud’s crossclaim
includes two counts. The first asserts a breach of contract claim;
the second alleges a breach of the duty of good faith and fair
dealing.
Id. at 8-9.
Scott’s motion is premised on collateral estoppel, as well as
the lack of any personal liability under the contract (Dkt. Nos.
89, 90). Saoud, in response, argues that 1) the jury acquitted him
of bankruptcy fraud in his criminal trial; 2) Scott’s conduct was
not litigated during his criminal trial; and 3) questions of
material fact are in dispute as to whether Scott personally
25
SHEEHAN V. SAOUD
1:11CV163
MEMORANDUM OPINION AND ORDER GRANTING IN PART
AND DENYING IN PART DEFENDANT’S MOTION
FOR SUMMARY JUDGMENT (DKT. NO. 89) AND DENYING PLAINTIFF’S
MOTION FOR SUMMARY JUDGMENT (DKT. NO. 91)
benefitted from any of the transactions (Dkt. No. 96 at 2-4).14
Again, the Court reviews all the evidence “in the light most
favorable” to Saoud, the non-moving party.
See Providence Square
Assocs., L.L.C., 211 F.3d at 850.
1.
Collateral Estoppel
The Court need not reiterate the legal principles governing
collateral estoppel discussed earlier. Suffice it to say that, for
many of those same reasons, Scott’s argument that collateral
estoppel bars Saoud’s crossclaim fails.
Saoud’s criminal judgment is valid and final,
Berman, 302
U.S. at 212, 58 S.Ct. at 166, and the general issues tried in his
criminal case, including the contract between Saoud on behalf of
AGS and Scott on behalf of CWVD, were the same (Dkt. No. 90-3 at
5).
Notably, however, the issues presented here are not identical
to those decided in Saoud’s criminal case.
14
Moreover, it bears
Saoud also argues that his criminal conviction is not final,
because he appealed it to the Fourth Circuit. However, since he
filed his response brief on November 10, 2014, the Fourth Circuit
has affirmed his conviction and sentence. See United States v.
Saoud, 2014 WL 7210734 at *1 (4th Cir. Dec. 19, 2014). In any
event, Saoud’s conviction was final at sentencing. Berman, 302
U.S. at 212, 58 S.Ct. at 166.
26
SHEEHAN V. SAOUD
1:11CV163
MEMORANDUM OPINION AND ORDER GRANTING IN PART
AND DENYING IN PART DEFENDANT’S MOTION
FOR SUMMARY JUDGMENT (DKT. NO. 89) AND DENYING PLAINTIFF’S
MOTION FOR SUMMARY JUDGMENT (DKT. NO. 91)
repeating
that,
although
Saoud’s
culpability
in
structuring
fraudulent transfers was certainly on trial in his criminal case,
Scott’s role, if any, in those transactions was not.
The jury
convicted Saoud of the charges in Counts 1-5, including that he
“purportedly transferred ownership of CWVD to [Scott] . . .” for $
1.6 million, but did not receive any payment (Dkt. No. 90-3 at 5).
As to Scott’s liability for breach of the duty of good faith
and
fair
dealing,
Saoud
must
establish
that
Scott
impliedly
breached the contract with Saoud by acting with bad motives or
intentions.15
John Bourdeau, et. al., Breach of Implied Terms §
764, Corpus Juris Secundum, 17B C.J.S. Contracts § 764 (2014).
Scott’s intentions or mental state, clearly in dispute here,
certainly were never decided in Saoud’s trial.
Furthermore, Saoud’s assertion that, based on the language in
the counts on which he was acquitted, the jury must have believed
Scott agreed to purchase CWVD, thus conclusively establishing
Scott’s liability on the contract, is unavailing (Dkt. No. 96 at
15
Breach of the duty of good faith and fair dealing is not a
stand alone cause of action in West Virginia; instead, it sounds in
breach of contract. Gaddy Engineering Co. v. Bowles Rice McDavid
Graff & Love, LLP, 746 S.E.2d 568, 587 (W. Va. 2013).
27
SHEEHAN V. SAOUD
1:11CV163
MEMORANDUM OPINION AND ORDER GRANTING IN PART
AND DENYING IN PART DEFENDANT’S MOTION
FOR SUMMARY JUDGMENT (DKT. NO. 89) AND DENYING PLAINTIFF’S
MOTION FOR SUMMARY JUDGMENT (DKT. NO. 91)
3). As Scott correctly observes, for collateral estoppel purposes,
“[a] not guilty verdict is not the same as an innocence verdict.”
(Dkt. No. 100 at 4).
See Dowling v. United States, 493 U.S. 342,
349-50, 110 S.Ct. 668, 672-73 (1990).
That the jury acquitted Saoud of Counts 19, 22, 24, 25, 29,
and 31,16 out of a total of 32 counts, does not establish whether
the jury conclusively determined that Saoud’s account of those
events
was
accurate.
Rather,
the
jury
failed
to
find
that
sufficient evidence existed to convict Saoud of those crimes beyond
a reasonable doubt.
defendant
is
“[The acquittal did] not prove that the
innocent;
it
merely
proves
the
existence
of
a
reasonable doubt as to his guilt . . . . [T]he jury verdict in the
criminal action did not negate the possibility that a preponderance
of the evidence could show that [the defendant] was engaged in [the
conduct charged in the Indictment]. . . .”
Dowling, 493 U.S. at
349-50, 110 S.Ct. at 672-73 (1990) (quoting United States v. One
Assortment of 89 Firearms, 465 U.S. 354, 361-62, 104 S.Ct. 1099,
1104 (1984)).
“The Courts of Appeals have unanimously placed the
16
These counts related to Saoud’s allegedly false testimony
regarding his sale of AGS to Daniel and CWVD to Scott.
28
SHEEHAN V. SAOUD
1:11CV163
MEMORANDUM OPINION AND ORDER GRANTING IN PART
AND DENYING IN PART DEFENDANT’S MOTION
FOR SUMMARY JUDGMENT (DKT. NO. 89) AND DENYING PLAINTIFF’S
MOTION FOR SUMMARY JUDGMENT (DKT. NO. 91)
burden on the defendant to demonstrate that the issue whose
relitigation he seeks to foreclose was actually decided in the
first proceeding.”
Id. (listing cases).
Thus, a genuine dispute
of material fact exists regarding Scott’s culpability as to, and
liability based upon, his contracts with Saoud.
To sum up, the exact issue presented here was not litigated
during Saoud’s criminal trial.
Moreover, there are material facts
in dispute regarding 1) whether Scott personally benefitted from
the contract when CWVD purchased Saoud’s shares for $1.6 million,
and 2) whether he breached a contract with Saoud.
2.
Scott’s Personal Liability on the Contract
Scott further argues that, even though he signed the contract
to purchase Saoud’s shares, he cannot be held personally liable
because he signed only in his capacity as a director of CWVD (Dkt.
No. 90 at 4-5).
In support of his argument, Scott attached to his
summary judgment motion both the laboratory contract, and also the
purchase contract for Saoud’s shares in CWVD (Dkt. No. 90-4 and 905).
For his part, Saoud reiterates his argument about the effect
of his acquittal on the bankruptcy fraud charges in the criminal
29
SHEEHAN V. SAOUD
1:11CV163
MEMORANDUM OPINION AND ORDER GRANTING IN PART
AND DENYING IN PART DEFENDANT’S MOTION
FOR SUMMARY JUDGMENT (DKT. NO. 89) AND DENYING PLAINTIFF’S
MOTION FOR SUMMARY JUDGMENT (DKT. NO. 91)
case.
However, he never squarely addresses Scott’s argument that
he is not personally liable on the contract.
As an initial matter, it is unclear whether Sheehan’s amended
complaint actually seeks to impose personal liability on Scott.17
It appears that, as Trustee, Sheehan’s goal has been to void the
series
of
transactions
that
culminated
in
the
sale
of
AGS’
laboratory to CWVD, and the sale of Saoud’s stock to CWVD.
Because CWVD never made a payment on the $1.6 million debt it
allegedly owed to Saoud, Sheehan would not be in a position to
recover any of that money from it.
Therefore, any argument that
Scott may be obligated to pay back part of that money appears farfetched.
Scott, nevertheless, remains concerned by the specter of
personal liability, and seeks summary judgment to curtail that
possibility.
Any consideration of this issue must begin with reference to
the language of the contract, which reads as follows:
The directors of Central West Virginia Dermatology
Associates, Inc., a West Virginia corporation, consent to
the following:
17
In Sheehan’s motion for summary judgment against Saoud, he
lists certain enumerated “damages,” but damages from Scott are not
mentioned (Dkt. No. 91 at 10).
30
SHEEHAN V. SAOUD
1:11CV163
MEMORANDUM OPINION AND ORDER GRANTING IN PART
AND DENYING IN PART DEFENDANT’S MOTION
FOR SUMMARY JUDGMENT (DKT. NO. 89) AND DENYING PLAINTIFF’S
MOTION FOR SUMMARY JUDGMENT (DKT. NO. 91)
Agree to purchase from Allen G. Saoud D.O. all of
his outstanding shares of Central West Virginia
Dermatology Associates Inc. (100) shares for One million
six hundred thousand dollars ($1,600,000.00) which is 50%
of the gross annual income.
Payments are to be made
starting March 1, 2006 and will continue in equal
installments until February 28, 2011.
Purchase price
will accumulate interest at the prime rate until payoff
of the note.
Dated: 4.26.2005
By: /s/ Fred D. Scott D.O.
Director, Central West Virginia Dermatology
Associates Inc.
(Dkt. No. 90-5).
right corner.18
Id.
The contract is notarized in the bottom
It is clear from the contract’s language that
Scott did not execute a personal guarantee.
It is equally clear,
however, that, as the sole director and shareholder of CWVD, he
directly benefitted from the stock purchase.
Generally, an officer or director of a corporation is not
personally liable for the debts and obligations of the corporation,
particularly when signing a contract solely as director or officer
of the corporation.
See W. Va. Code § 31D-8-831(a).19
Directors
18
Scott later testified that he hadn’t read the contract
before he signed it (Dkt. No. 94-1 at 19, 28, 36).
19
Under West Virginia law, piercing the corporate veil is
another possible basis for a director’s personal liability. In
certain extraordinary circumstances, courts will “pierce the
31
SHEEHAN V. SAOUD
1:11CV163
MEMORANDUM OPINION AND ORDER GRANTING IN PART
AND DENYING IN PART DEFENDANT’S MOTION
FOR SUMMARY JUDGMENT (DKT. NO. 89) AND DENYING PLAINTIFF’S
MOTION FOR SUMMARY JUDGMENT (DKT. NO. 91)
and officers may incur personal liability, however, if they fail to
act in good faith, with due care, and in the best interests of the
corporation while performing their official duties.
W. Va. Code §
31D-8-842(a).
A director may be held liable if a plaintiff can establish
that: (1) provisions in the corporation’s articles of incorporation
do not bar director liability; and, (2) the director’s challenged
conduct was the result of (a) an action not in good faith, (b) a
decision the director did not reasonably believe to be in the best
interests of the corporation, (c) a decision as to which the
director was not reasonably informed, (d) a lack of objectivity due
to the director’s domination and control by another person who has
a material interest in the conduct, (e) the director’s failure to
devote sufficient attention to the affairs of the corporation, or
corporate veil” and impose liability on a corporate officer. See
S.E.C. v. Woolf, 835 F.Supp.2d 111, 123 (E.D. Va. 2011). Courts
assess several factors when determining whether to pierce a
corporate veil, including: inadequate capital structures, whether
personal and corporate funds have been commingled, siphoning funds
from one corporation to another, a unity of interest and ownership,
and total dominance and control of one corporation by a
shareholder. S. Elec. Supply Co. v. Raleigh Cty. Nat’l Bank, 320
S.E.2d 515, 523 (W. Va. 1984). Sheehan , however, has not advanced
a piercing the corporate veil theory to establish liability against
Scott.
32
SHEEHAN V. SAOUD
1:11CV163
MEMORANDUM OPINION AND ORDER GRANTING IN PART
AND DENYING IN PART DEFENDANT’S MOTION
FOR SUMMARY JUDGMENT (DKT. NO. 89) AND DENYING PLAINTIFF’S
MOTION FOR SUMMARY JUDGMENT (DKT. NO. 91)
(f) the director’s receipt of a financial benefit to which he was
not entitled, or any other breach of his duties.
31D-8-831(a)(2).
W. Va. Code §
Furthermore, a person seeking to hold a director
liable for money damages must establish that the corporation has
suffered
harm
that
challenged conduct.
Scott
is
was
proximately
caused
by
the
director’s
W. Va. Code § 31D-8-831(b).
not
entitled
to
crossclaim for several reasons.
summary
judgment
on
Saoud’s
In the first place, it is unclear
from the pleadings and briefing whether Sheehan’s amended complaint
actually seeks to impose personal liability on Scott.
Even if it
does, questions of fact abound as to whether Scott acted in good
faith, was dominated by Saoud, and benefitted personally, in breach
of the duty he owed to CWVD.
Sheehan
has
proffered
W. Va. Code § 31D-8-831(b).
evidence
that
Scott
intermingled
corporate and personal funds (Dkt. No. 94-1 at 47-49), and aided
Saoud in shifting funds from AGS to CWVD (Dkt. No. 94-1 at 12-13,
28-29, 39). Of course, Scott maintains that he emptied CWVD’s bank
account at Huntington Bank to keep the funds in escrow (Dkt. No.
94-1 at 49), and that he is a victim of Saoud’s scheme to
fraudulently bill Medicare and Medicaid.
33
Ultimately, it is the
SHEEHAN V. SAOUD
1:11CV163
MEMORANDUM OPINION AND ORDER GRANTING IN PART
AND DENYING IN PART DEFENDANT’S MOTION
FOR SUMMARY JUDGMENT (DKT. NO. 89) AND DENYING PLAINTIFF’S
MOTION FOR SUMMARY JUDGMENT (DKT. NO. 91)
province of the jury, not this Court, to determine which facts are
more credible.
Therefore, the Court DENIES Scott’s motion for
summary judgment as to Saoud’s crossclaim.
C.
Sheehan’s Motion for Summary Judgment Against Saoud
Initially, it is unclear on which counts in his amended
complaint Sheehan is seeking summary judgment against Saoud.
As
noted earlier, Count I refers only to CWVD, while Count V refers
only to Fraser (Dkt. No. 86 at 9-10).
Because Counts II, III, IV,
and VI remain, and all apply to Saoud, the Court will address them
first.
Id. at
9-11.
Count II of the amended complaint alleges that Saoud, Daniel,
and Scott perpetrated a scheme to defraud creditors of AGS by
transferring its assets for less than reasonably equivalent value,
thereby causing AGS to become insolvent, to have unreasonably small
capital, and to incur debts beyond its ability to pay.
Id.
Sheehan seeks to void all transfers pursuant to “such agreements”
as fraudulent transfers under 11 U.S.C. § 547.
Id. at 10.
Count III of the amended complaint alleges that all transfers
pursuant to the agreements between Saoud, Daniel, and Scott also
are voidable as fraudulent transfers under the WVUFTA.
34
Id.
Count
SHEEHAN V. SAOUD
1:11CV163
MEMORANDUM OPINION AND ORDER GRANTING IN PART
AND DENYING IN PART DEFENDANT’S MOTION
FOR SUMMARY JUDGMENT (DKT. NO. 89) AND DENYING PLAINTIFF’S
MOTION FOR SUMMARY JUDGMENT (DKT. NO. 91)
IV alleges that the scheme to violate the WVUFTA constituted a
civil conspiracy under West Virginia common law.
Id.
Finally, Count VI of the amended complaint alleges that “for
the purpose of executing the scheme to defraud AGS, Inc., and to
deprive it of its ability to pay its creditors, [Saoud] used the
United States mail to receive mail, and to send mail and used
interstate wire transmissions for the same purpose.”
Id. at 11.
It further alleges that Saoud “has committed bankruptcy fraud” and
“has conducted a criminal enterprise engage in (sic), and whose
activities, affect interstate commerce by conducting, participating
in the conduct of such activities in violation of 18 U.S.C.
§ 1962.”20
Finally, it alleges Saoud is liable under 18 U.S.C.
§ 1964, the remedies portion of the statute, for treble damages and
attorneys’ fees.
light
most
Id.
favorable
The Court reviews all the evidence in the
to
Saoud,
the
non-moving
party.
See
Providence Square Assocs., L.L.C., 211 F.3d at 850.
20
Section 1962, part of the Racketeer Influenced and Corrupt
Organizations Act (“RICO”), prohibits a person who derives income
“from a pattern of racketeering activity or through collection of
an unlawful debt” to use or invest that money in interstate
commerce or to control any enterprise engaged in interstate
commerce. 18 U.S.C. § 1962.
35
SHEEHAN V. SAOUD
1:11CV163
MEMORANDUM OPINION AND ORDER GRANTING IN PART
AND DENYING IN PART DEFENDANT’S MOTION
FOR SUMMARY JUDGMENT (DKT. NO. 89) AND DENYING PLAINTIFF’S
MOTION FOR SUMMARY JUDGMENT (DKT. NO. 91)
Without any contrary indication, one might assume that Sheehan
seeks summary judgment on all counts naming Saoud.
In his reply
brief, however, Sheehan explains that he “did not move for summary
judgment on Count VI.” (Dkt. No. 99 at 5).
Sheehan further
explains that, although Fraser has been dismissed from the case for
some time, he seeks joint and several liability from Saoud as a
“co-conspirator” of Fraser “for damages caused by proof of Mr.
Frazier’s (sic) involvement in these schemes.”
Id. at 3-4.
Until now, Sheehan has never alleged that Saoud and Fraser
were co-conspirators,21 and the Court rejects the notion that he can
inject
such
a
theory
at
this
late
stage
in
the
litigation.
Therefore, it declines to consider Counts I, V, or VI,22 and will
look only to the state of the evidence as to Counts II, III, and
IV.
21
He advances a rather interesting theory that, because he has
alleged that Saoud and Daniel were conspirators, Fraser is also now
a co-conspirator in “a chain conspiracy with Ms. Daniel as the
link.” Dkt. No. 99 at 5.
22
As discussed earlier, Count I refers only to CWVD.
The
Court has already dismissed Count V, and Sheehan does not move for
summary judgment on Count VI.
36
SHEEHAN V. SAOUD
1:11CV163
MEMORANDUM OPINION AND ORDER GRANTING IN PART
AND DENYING IN PART DEFENDANT’S MOTION
FOR SUMMARY JUDGMENT (DKT. NO. 89) AND DENYING PLAINTIFF’S
MOTION FOR SUMMARY JUDGMENT (DKT. NO. 91)
1.
Inadequacy of the Motion for Summary Judgment
At the outset, the Court is faced with the unenviable task of
reminding Sheehan of his unfulfilled obligation as the movant to
“identify[] those portions of ‘the pleadings, depositions, answers
to interrogatories, and admissions on file . . .’ which [he]
believes demonstrate the absence of a genuine issue of material
fact.”
Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct.
2548, 2553 (1986).
Federal Rule of Civil Procedure 56(c)(1)
requires that a party “asserting that a fact cannot be . . .
genuinely
disputed
must
support
the
assertion
by
particular parts of materials in the record . . . .”
citing
to
Fed. R. Civ.
Pro. 56(c)(1) (emphasis added).
Sheehan’s motion fails to cite to the record for many material
facts that he alleges are “undisputed.”
Therefore, following an
initial review of the matter after it was fully briefed, the Court
ordered Sheehan to refile his summary judgment motion and provide
specific citations to the record for all undisputed material facts
(Dkt. No. 102).
Unfortunately, Sheehan never did so, despite
having been given ample time.
37
SHEEHAN V. SAOUD
1:11CV163
MEMORANDUM OPINION AND ORDER GRANTING IN PART
AND DENYING IN PART DEFENDANT’S MOTION
FOR SUMMARY JUDGMENT (DKT. NO. 89) AND DENYING PLAINTIFF’S
MOTION FOR SUMMARY JUDGMENT (DKT. NO. 91)
In similar circumstances, courts have concluded that, on
summary judgment, they are not required to consider anything other
than properly cited material.
United States v. Dunkel, 927 F.2d
955, 956 (7th Cir. 1991)(“Judges are not like pigs, hunting for
truffles buried in briefs.”).
See, e.g., Porter v. Progressive
Directions, Inc., 2011 WL 2471541 at *5, fn. 1 (M.D. Tenn. June 21,
2011)(stating that the court need not consider improperly cited
facts); Stanford v. Nat’l Grange Ins. Co., 2014 WL 5527744 at *1,
fn. 2 (E.D. Pa. Nov. 3, 2014) (deeming the movant’s factual
assertions as undisputed for purposes of the motion because the
non-movant’s response contained no citations to the record).
In
short, Sheehan was on notice that his motion was deficient, was
given the opportunity to remedy that deficiency, but failed to do
so.
Sheehan also has declined to advance a collateral estoppel
argument, similar to Scott’s, based on Saoud’s criminal conviction
(Dkt. No. 99 at 6).
Rather, he asserts that Saoud’s criminal case
is “not material to the motion for summary judgment,” and that he
purposely “did not rely on [it] to establish any facts.”
Id.
The
Court, however, has already determined, that, because Saoud’s
38
SHEEHAN V. SAOUD
1:11CV163
MEMORANDUM OPINION AND ORDER GRANTING IN PART
AND DENYING IN PART DEFENDANT’S MOTION
FOR SUMMARY JUDGMENT (DKT. NO. 89) AND DENYING PLAINTIFF’S
MOTION FOR SUMMARY JUDGMENT (DKT. NO. 91)
criminal conviction is final, any facts essential to the verdict
can be considered in this civil action.
It is not the province of the Court to rewrite Sheehan’s
summary judgment motion, particularly when he has clearly stated he
does not wish to rely on collateral estoppel.
Greenlaw v. United
States, 554 U.S. 237, 244, 128 S.Ct. 2559, 2564 (2008) (describing
the party presentation principle, and explaining that courts rely
on the parties to frame the issues for decision); Castro v. United
States, 540 U.S. 375, 386, 124 S.Ct. 786 (2003) (explaining that
courts “do not, or should not, sally forth each day looking for
wrongs to right.
We wait for cases to come to us, and when they do
we normally decide only questions presented by the parties.”
(internal citations omitted)).
It, therefore, will address the
arguments raised by Sheehan within the confines of the facts he did
cite in his briefing.
2.
Count II: Fraudulent Transfer Pursuant to 11 U.S.C. § 547
In Count II, Sheehan alleges that Saoud, Daniel, and Scott
schemed to defraud AGS’ creditors by transferring its assets for
less than reasonably equivalent value, thus causing AGS to become
insolvent, have unreasonably small capital, and incur debts beyond
39
SHEEHAN V. SAOUD
1:11CV163
MEMORANDUM OPINION AND ORDER GRANTING IN PART
AND DENYING IN PART DEFENDANT’S MOTION
FOR SUMMARY JUDGMENT (DKT. NO. 89) AND DENYING PLAINTIFF’S
MOTION FOR SUMMARY JUDGMENT (DKT. NO. 91)
its ability to pay (Dkt. No. 86 at 9-10).
He seeks an order
voiding “[a]ll transfers pursuant to such agreements” under 11
U.S.C. § 547.
Section 547 provides that a trustee “may avoid any transfer of
an interest of the debtor in property” if the transfer is:
(1) to or for the benefit of a creditor;
(2) for or on account of an antecedent debt owed by the
debtor before such transfer was made;
(3) made while the debtor was insolvent;
(4) made–
(A) on or within 90 days before the date of the
filing of the petition; or
(B) between ninety days and one year before the
date of the filing of the petition, if such
creditor at the time of such transfer was an
insider; and
(5) that enables such creditor to receive more than such
creditor would receive if–
(A) the case were a case under chapter 7 of this
title;
(B) the transfer had not been made; and
(C) such creditor received payment of such debt to
the extent provided by the provisions of this
title.
11 U.S.C. § 547(b).
A trustee may not avoid transfers intended by the creditor to
“be a contemporaneous exchange for new value given to the debtor,”
and that were in fact a substantially contemporaneous exchange. 11
U.S.C. § 547(c)(1).
A trustee also may not avoid a transfer the
40
SHEEHAN V. SAOUD
1:11CV163
MEMORANDUM OPINION AND ORDER GRANTING IN PART
AND DENYING IN PART DEFENDANT’S MOTION
FOR SUMMARY JUDGMENT (DKT. NO. 89) AND DENYING PLAINTIFF’S
MOTION FOR SUMMARY JUDGMENT (DKT. NO. 91)
debtor makes to pay a debt incurred in the ordinary course of
business, so long as the transfer was actually made in the ordinary
course of business, or made according to ordinary business terms.
11 U.S.C. § 547(c)(2).
As a preliminary matter, it is unclear which transfers Sheehan
seeks
to
avoid.
He
merely
“incorporates”
all
of
the
other
paragraphs in the complaint, which include the following transfers:
(1) Saoud’s transfer of his interest in CWVD to Scott on August 26,
2005 (Dkt. No. 86 at 4); (2) Saoud’s transfer of AGS to Daniel for
$1 million on March 31, 2006 (Id. at 4-5); (3) Daniel’s transfer of
a laboratory from AGS to CWVD for $1 million on April 3, 2006 (Id.
at 5); and (4) Saoud’s transfer of real estate owned by AGS on
March 18, 2005 (Id. at 4).
Pursuant to 11 U.S.C. § 547(e)(2), a transfer is “made” at any
of several points in time:
long
as
it
is
It may be made when it takes effect, so
perfected;
at
the
time
it
immediately before the filing of the petition.
is
perfected;
Id.
or
A transfer
also cannot be made unless the debtor has rights in the property
transferred.
11 U.S.C. § 547(e)(3).
A trustee can only avoid
transfers made “on or within 90 days before the date of the filing
41
SHEEHAN V. SAOUD
1:11CV163
MEMORANDUM OPINION AND ORDER GRANTING IN PART
AND DENYING IN PART DEFENDANT’S MOTION
FOR SUMMARY JUDGMENT (DKT. NO. 89) AND DENYING PLAINTIFF’S
MOTION FOR SUMMARY JUDGMENT (DKT. NO. 91)
of the petition,” or, if the creditor is an insider, “between
ninety days and one year before the date of the filing of the
petition.”
11 U.S.C. § 547(b)(4).
In addition, the transfer must
be made “while the debtor was insolvent.”
The
debtor
is
presumed
to
be
insolvent
11 U.S.C. § 547(b)(3).
for
the
preceding the filing of the bankruptcy petition.
ninety
days
11 U.S.C.
§ 547(f).
It is undisputed that AGS filed for bankruptcy relief on
May 9, 2009 (Dkt. No. 86 at 1).
But the four transfers cited above
occurred on dates ranging from March 18, 2005, at the earliest, to
March 31, 2006, at the latest. There is no evidence that any of
these transfers were not “made” within the meaning of the statute.
Even given the one year grace period in § 547(b)(4), Sheehan can
only avoid transfers dating back to May 9, 2008, which leaves the
four contracts outside the range of the statute. Sheehan’s failure
to explain this anomaly, alone, requires the Court to deny his
motion for summary judgment.23
23
Sheehan pleaded in the amended complaint that Saoud, Daniel,
and others “concealed and obstructed the right of action by
creditors to discover their rights to pursue causes of action as
may have exited at state law,” requiring the Court to toll any
state law cause of actions under W. Va. Code § 55-2-17 (Dkt. No. 86
42
SHEEHAN V. SAOUD
1:11CV163
MEMORANDUM OPINION AND ORDER GRANTING IN PART
AND DENYING IN PART DEFENDANT’S MOTION
FOR SUMMARY JUDGMENT (DKT. NO. 89) AND DENYING PLAINTIFF’S
MOTION FOR SUMMARY JUDGMENT (DKT. NO. 91)
In addition, Sheehan has failed to establish that the debtor,
AGS, was “insolvent” at the time of the transfer.
AGS is presumed
to be insolvent from 90 days before Saoud filed the bankruptcy
petition, but the Court has already calculated that the transfers
occurred much earlier than that.
11 U.S.C. § 547(f).
Sheehan has
attached numerous tax documents to his motion, but has failed to
point to any that support the conclusion AGS was insolvent when the
transfers were made.24
Sheehan has failed to meet his burden of establishing that no
material facts are in dispute regarding his attempt to avoid
transfers made by the defendants.
summary
judgment
complaint.
3.
to
Sheehan
as
The Court therefore DENIES
to
Count
II
of
his
amended
Celotex, 477 U.S. at 323, 106 S.Ct. at 2553.
Count III: The WVUFTA
In Count III, Sheehan alleges that “[t]he acts described above
constituted
a
conspiracy
to
violate
[the
WVUFTA],”
and
are
at 8). Of course, this defense is applicable to Sheehan’s cause of
action under the WVUFTA, but it would not apply to the federal
bankruptcy statute.
24
This is not surprising, considering that Sheehan does not
even discuss the elements of 11 U.S.C. § 547.
43
SHEEHAN V. SAOUD
1:11CV163
MEMORANDUM OPINION AND ORDER GRANTING IN PART
AND DENYING IN PART DEFENDANT’S MOTION
FOR SUMMARY JUDGMENT (DKT. NO. 89) AND DENYING PLAINTIFF’S
MOTION FOR SUMMARY JUDGMENT (DKT. NO. 91)
actionable by him as Trustee pursuant to his powers under 11 U.S.C.
§ 544.
Yet again, the Court is left to speculate about the “acts”
on which Sheehan relies, but will assume, for purposes of the
motion, that he is referring to the following four transfers:
(1)
Saoud’s transfer of his interest in CWVD to Scott on August 26,
2005 (Dkt. No. 86 at 4); (2) Saoud’s transfer of AGS to Daniel for
$1 million on March 31, 2006 (Id. at 4-5); (3) Daniel’s transfer of
a laboratory from AGS to CWVD for $1 million on April 3, 2006 (Id.
at 5); and (4) Saoud’s transfer of real estate owned by AGS on
March 18, 2005 (Id. at 4).
The WVUFTA’s operations are very similar to those of the
federal bankruptcy statute in that it allows a creditor to avoid a
transfer
or
circumstances.
obligation
made
by
W. Va. Code 40-1A-7.
a
debtor
under
certain
The statute contains two
prongs, under the first of which, a transfer or obligation may be
fraudulent as to a creditor if the debtor made the transfer or
incurred the obligation “[w]ith actual intent to hinder, delay or
defraud any creditor of the debtor.”
W. Va. Code 40-1A-4(a)(1).
Alternatively, under the second prong, a debtor’s transfer or
44
SHEEHAN V. SAOUD
1:11CV163
MEMORANDUM OPINION AND ORDER GRANTING IN PART
AND DENYING IN PART DEFENDANT’S MOTION
FOR SUMMARY JUDGMENT (DKT. NO. 89) AND DENYING PLAINTIFF’S
MOTION FOR SUMMARY JUDGMENT (DKT. NO. 91)
obligation may be fraudulent as to the creditor if it made the
transfer or incurred the obligation
[w]ithout 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(a)(2).
The first prong requires the creditor to prove the debtor’s
actual intent.
In determining actual intent, courts consider a
number of factors.
These include whether:
(1) [t]he transfer or obligation was to an insider;
(2) [t]he debtor retained possession or control of the
property transferred after the transfer;
(3) [t]he transfer or obligation was disclosed or
concealed;
(4) [b]efore the transfer was made or obligation was
incurred, the debtor had been sued or threatened with
suit;
(5) [t]he transfer was of substantially all the debtor’s
assets;
(6) [t]he debtor absconded;
(7) [t]he debtor removed or concealed assets;
(8) [t]he value of the consideration received by the
debtor was reasonably equivalent to the value of the
asset transferred or the amount of the obligation
incurred;
45
SHEEHAN V. SAOUD
1:11CV163
MEMORANDUM OPINION AND ORDER GRANTING IN PART
AND DENYING IN PART DEFENDANT’S MOTION
FOR SUMMARY JUDGMENT (DKT. NO. 89) AND DENYING PLAINTIFF’S
MOTION FOR SUMMARY JUDGMENT (DKT. NO. 91)
(9) [t]he debtor was insolvent or became insolvent
shortly after the transfer was made or the amount of the
obligation incurred;
(10) [t]he transfer occurred shortly before or shortly
after a substantial debt was incurred; and
(11) [t]he debtor transferred the essential assets of the
business to a lienor who transferred the assets to an
insider of the debtor.
W. Va. Code 40-1A-4(b)(1)-(11).
A creditor must bring suit to enforce the provisions of W. Va.
Code 40-1A-4(a)(1)-(2) within “four years after the transfer was
made or the obligation incurred, or, if later, within one year
after the transfer or obligation was or could reasonably have been
discovered by the claimant.”
W. Va. Code 40-1A-9.
Sheehan filed this lawsuit on October 13, 2011 (Dkt. No. 3),
thus making October 13, 2007 the latest date on which the transfers
could have occurred.
The four transfers, however, occurred on
dates ranging from March 18, 2005, at the earliest, to March 31,
2006, at the latest.
Saoud has interposed the statute of limitations as a defense
to Sheehan’s allegations. (Dkt. No. 88 at 7).
Sheehan, however,
asserts that the statute of limitations should be tolled because
Saoud “concealed and obstructed the right of action by creditors.”
(Dkt. No. 86 at 9).
He suggests that the tolling period should
46
SHEEHAN V. SAOUD
1:11CV163
MEMORANDUM OPINION AND ORDER GRANTING IN PART
AND DENYING IN PART DEFENDANT’S MOTION
FOR SUMMARY JUDGMENT (DKT. NO. 89) AND DENYING PLAINTIFF’S
MOTION FOR SUMMARY JUDGMENT (DKT. NO. 91)
continue until November 10, 2010, the date on which the bankruptcy
court determined it had jurisdiction, because Saoud misrepresented
his status as AGS’ representative and caused much delay and
confusion concerning whether AGS’ petition was properly filed. Id.
If this were true, Sheehan’s suit, filed on October 13, 2011,
was properly brought within the one-year limitation period in W.
Va. Code 40-1A-9.
See Dkt. No. 91 at 5-6 (discussing Saoud’s
obstruction of the bankruptcy proceedings, but not citing to any
authority).
At this time, however, the evidence is insufficient
for the Court to conclusively determine whether the statute is
tolled.
Moreover, it bears repeating that, in his brief, Sheehan
failed to establish that no material facts are in dispute, or that
he is entitled to judgment as a matter of law. Factual questions to
be determined at trial on the relevant issues include: (1) whether
Saoud actually intended to hinder, delay, or defraud creditors; (2)
whether the amounts received by AGS were “reasonably equivalent
value”;
(3)
whether
AGS’
assets
“were
unreasonably
small
in
relation to the business” at the time the transfers were made; and
(4) whether Saoud intended to incur, or should have known that he
47
SHEEHAN V. SAOUD
1:11CV163
MEMORANDUM OPINION AND ORDER GRANTING IN PART
AND DENYING IN PART DEFENDANT’S MOTION
FOR SUMMARY JUDGMENT (DKT. NO. 89) AND DENYING PLAINTIFF’S
MOTION FOR SUMMARY JUDGMENT (DKT. NO. 91)
would incur, debts beyond AGS’ ability to pay.
1A-4.
W. Va. Code § 40-
See Dkt. No. 91 at 2-3 (discussing the transfers between
Saoud and Daniel, and
stating that the meaning of the transfer is
disputed, and vaguely mentioning “still other asset transfers”);
Id. at 10 (discussing that distributions are fraudulent transfers,
but failing to cite to the record); Dkt. No. 99 at 4 (stating that
liability under the WVUFTA “is clear here” without stating facts or
citing to the record).
See Celotex, 477 U.S. at 323, 106 S.Ct. at
2553 (describing the moving party’s initial burden on summary
judgment). Based on Sheehan’s failure to meet his evidentiary
burden as to these issues, the Court DENIES his motion for summary
judgment as to Count III.
4.
Count IV: Civil Conspiracy
Count IV of Sheehan’s amended complaint alleges that Saoud,
Daniel, and Scott conspired to violate the WVUFTA in violation of
principles of West Virginia common law (Dkt. No. 86 at 10; Dkt. No.
91 at 8).25
In resisting Sheehan’s motion for summary judgment,
25
As noted earlier, Daniel was dismissed in 2012, and the
Court has already granted Scott’s motion for summary judgment as to
Count IV.
48
SHEEHAN V. SAOUD
1:11CV163
MEMORANDUM OPINION AND ORDER GRANTING IN PART
AND DENYING IN PART DEFENDANT’S MOTION
FOR SUMMARY JUDGMENT (DKT. NO. 89) AND DENYING PLAINTIFF’S
MOTION FOR SUMMARY JUDGMENT (DKT. NO. 91)
Saoud argues that this count is repetitive of Count III, and does
not
state
a
Alternatively,
separate
he
cause
argues
of
that,
action
because
(Dkt.
No.
98
“allegations
at
of
3).
fraud
necessarily rest on intent of the parties,” this is a question of
material fact for a jury.
Id.
As discussed in Section III.A.2 above, a violation of the
WVUFTA does not sound in tort as is required to establish a civil
conspiracy claim under West Virginia law. Therefore, Sheehan has
failed to plead adequately the claim of civil conspiracy alleged in
Count IV of the amended complaint, and the Court DENIES his motion
for summary judgment as to that Count.
IV. CONCLUSION
For the reasons discussed, the Court GRANTS IN PART and DENIES
IN PART Scott’s motion for summary judgment, and DENIES Sheehan’s
motion for summary judgment.
C
Specifically, it:
DENIES Scott’s motion as to Counts II and III of the
amended complaint;
C
GRANTS Scott’s motion as to Count IV of the amended
complaint;
C
DISMISSES Count V as moot;
49
SHEEHAN V. SAOUD
1:11CV163
MEMORANDUM OPINION AND ORDER GRANTING IN PART
AND DENYING IN PART DEFENDANT’S MOTION
FOR SUMMARY JUDGMENT (DKT. NO. 89) AND DENYING PLAINTIFF’S
MOTION FOR SUMMARY JUDGMENT (DKT. NO. 91)
C
DENIES Scott’s motion as to Counts I and II of Saoud’s
crossclaim; and,
C
DENIES Sheehan’s motion as to Counts II, III, and IV.
It further FINDS that the following issues are ripe for trial:
1.
Whether CWVD is liable to AGS for the remaining purchase
price of $634,159.00, stemming from the April 2006 sale
of AGS’ laboratory to CWVD (Count I);
2.
Whether the agreements involving Saoud, Daniel, and Scott
were voidable as fraudulent transfers under 11 U.S.C.
§ 547 (Count II);
3.
Whether the agreements involving Saoud, Daniel, and Scott
were voidable as fraudulent transfers under W. Va. Code
§ 40-1A-1, et seq. (Count III);
4.
Whether Saoud violated 18 U.S.C. § 1962, and, if so,
whether
Sheehan
is
entitled
to
treble
damages
and
attorneys’ fees under 18 U.S.C. § 1964(c) (Count VI);
5.
Whether, given the Court’s ruling that a violation of the
WVUFTA does not sound in tort, Count IV should be
dismissed as a matter of law; and,
50
SHEEHAN V. SAOUD
1:11CV163
MEMORANDUM OPINION AND ORDER GRANTING IN PART
AND DENYING IN PART DEFENDANT’S MOTION
FOR SUMMARY JUDGMENT (DKT. NO. 89) AND DENYING PLAINTIFF’S
MOTION FOR SUMMARY JUDGMENT (DKT. NO. 91)
6.
Whether Sheehan is entitled to damages in the amount of
$1,136,226.64,26 including real estate sold by AGS to
MedStar, $250,000 on the sale of AGS’ laboratory to CWVD,
$409,032 on the distributions to Daniel, $22,000 in
return of capital, and sums equal to the value of assets
removed from AGS when it was sold to Daniel.
It is so ORDERED.
The Court directs the Clerk to transmit copies of this Order
to counsel of record.
DATED: January 28, 2015.
/s/ Irene M. Keeley
IRENE M. KEELEY
UNITED STATES DISTRICT JUDGE
26
Sheehan only seeks damages to the extent necessary to
reimburse creditors of AGS because Saoud is the true owner, and, as
such, any return obtained by Sheehan in excess of the amount
necessary to pay creditors would return to Saoud (Dkt. No. 91 at
10-11).
51
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