Chandler et al v. Fischler

Filing 62

MEMORANDUM OPINION AND ORDER denying defendant Michael Fischler's 37 MOTION to Dismiss for Lack of Personal Jurisdiction; finding that the arbitration award does not preclude the claims against Fischler under either res judicata or collater al estoppel, and that the automatic stay provision in the United States Bankruptcy Code, 11 U.S.C. § 362(a)(1), does not apply to the plaintiffs' claims against Fischler, and the case will thus proceed; denying plaintiffs' 44 MOTION for Leave to File Amended complaint. Signed by Judge Joseph R. Goodwin on 9/21/2012. (cc: attys; any unrepresented party) (mkw)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF WEST VIRGINIA
CHARLESTON DIVISION

CATHERINE C. CHANDLER, et al.,
Plaintiffs,
v.

CIVIL ACTION NO. 2:10-cv-00839

JOURNEY EDUCATION MARKETING, INC., et al.,
Defendants.

MEMORANDUM OPINION AND ORDER
Pending before the court is the Renewed Motion to Dismiss for Lack of Personal
Jurisdiction by Defendant Michael Fischler and Incorporated Memorandum of Law [Docket 37]
(“Renewed Motion to Dismiss”). The parties have fully briefed this issue. The parties have also
fully briefed the two issues on which the court requested supplemental briefing: the effect of the
arbitration award on the pending claims against Fischler and the effect of the automatic stay
resulting from Journey’s bankruptcy filing on the pending claims against Fischler. Also pending
before the court is the Plaintiffs’ Motion for Leave to File Amended Complaint [Docket 44]. For
the reasons set forth below, the defendant’s Renewed Motion to Dismiss [Docket 37] is
DENIED and the plaintiffs’ Motion for Leave to File Amended Complaint [Docket 44] is
DENIED.
I.

Factual Background
The plaintiffs, Catherine C. Chandler, Thomas C. Naerebout, Donna Hamra, and Cheryl

K. Narum, are former shareholders of CCV Software, Inc. (“CCV”), a West Virginia corporation
with its principal place of business in Kanawha County, West Virginia. In February 2008, the
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plaintiffs entered into an agreement to sell CCV to Journey Education Marketing, Inc.
(“Journey”). Pursuant to the terms of a Merger Agreement and Plan of Reorganization (the
“Merger Agreement”), Journey agreed to pay $2.25 million in exchange for all of CCV’s
outstanding stock. At closing, Journey delivered half of that sum. The other half ($1.125 million)
was to be wired at closing to “an interest bearing escrow account,” and then “released by the
escrow agent one hundred eighty (180) days from the date of Closing subject to the satisfaction
of the terms and conditions of Section 5.1.13 of the Merger Agreement.” (Compl. [Docket 1-2] ¶
17.)
Chandler, individually and in her role as a representative of CCV’s shareholders,
separately executed an agreement concerning the escrow account (the “Escrow Agreement”).
The plaintiffs claim that Journey never formally executed the Escrow Agreement and never
established or funded the escrow account. Instead, on July 1, 2008, Journey sent the plaintiffs an
e-mail advising them that a “new” escrow agent had been selected, necessitating the signing of a
new escrow agreement. The plaintiffs claimed that the defendants misrepresented the status of
the escrow account, misleading the plaintiffs into believing that the “old” Escrow Agreement had
been formally executed and that an escrow account had been funded.
Contemporaneously with the Merger Agreement and the Escrow Agreement, Journey
entered into a “Business Services Agreement” with plaintiffs Chandler and Naerebout. The
Business Services Agreement allowed Chandler and Naerebout to earn deferred compensation
and bonuses based on the post-merger financial performance of the former CCV operations.
According to the plaintiffs, Chandler and Naerebout were fraudulently induced by Journey, and
by its president Michael S. Fischler (“Fischler”), to enter into the Business Services Agreement.

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Moreover, all of the plaintiffs allege that both Journey and Fischler fraudulently induced the
plaintiffs to enter into the Merger Agreement and Escrow Agreement.
One hundred and eighty days after the closing, Journey objected to the release of any
escrowed funds to the plaintiffs. Specifically, Journey claimed that it was entitled to “offsets”
against those funds. The plaintiffs, on the other hand, claimed that Journey wrongfully withheld
the balance of the purchase price owed to them under the terms of the Merger Agreement and the
Escrow Agreement ($1.125 million). The plaintiffs also claimed that they were owed the
compensation due to Chandler and Naerebout pursuant to the Business Services Agreement.
II.

Procedural History
On February 9, 2009, Chandler, in her role as the representative of CCV’s former

shareholders, filed a demand for arbitration with the American Arbitration Association in Dallas,
Texas. Just under a year later, on January 29, 2010, the plaintiffs filed the instant lawsuit in the
Circuit Court of Kanawha County, West Virginia, naming Journey and Fischler as defendants.
Thereafter, the defendants timely removed the action to this court on the basis of diversity
jurisdiction. The defendants then filed a Motion to Dismiss, Transfer, or Stay [Docket 5], which
the court granted in part and stayed the case pending arbitration [Docket 15]. The court did not
reach the issue of personal jurisdiction over Fischler at that time.
The parties arbitrated their dispute in Dallas, Texas from September 14 to September 22,
2011. The arbitrator, Susan S. Soussan, a former Texas district judge, issued an Arbitration
Award on December 2, 2011, awarding the plaintiffs $2,619,589.33, which included attorney’s
fees totaling $420,665.00. (Pls.’ Mot. Confirm Arbitration Award [Docket 16], Ex. 3, at 17-18.)
The award also directed that the sums, principal, and interest in escrow at CapitalOne be released
to Chandler. (Id.) On December 19, 2011, the plaintiffs filed a motion to confirm the arbitration

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award [Docket 29], alleging that CapitalOne refused to disburse the escrow account. The court
granted the motion to confirm and ordered the disbursement of the escrow account at
CapitalOne, and reserved the question of personal jurisdiction over Fischler until a renewed
motion was filed.
On June 19, 2012, Fischler filed the Renewed Motion to Dismiss for lack of personal
jurisdiction. On July 11, 2012, the plaintiffs filed a Motion for Leave to File Amended
Complaint to add certain claims, including fraudulent transfer against Fischler and a theory of
successor liability against Digital River, Inc. (“Digital River”).1 On July 31, 2012, Journey filed
for Chapter 7 bankruptcy. The court subsequently asked the parties for supplemental briefing on
two issues: the effect of the arbitration award on the plaintiffs’ pending claims against Fischler,
and the effect of the automatic stay resulting from Journey’s bankruptcy filing on the plaintiffs’
pending claims against Fischler. Both parties have fully briefed all of the issues currently before
the court.
III.

The Court has Personal Jurisdiction over Fischler
Fischler has renewed his motion to dismiss for lack of personal jurisdiction pursuant to

FED. R. CIV. P. 12(b)(2). Fischler asserts that “he has absolutely no connection to West Virginia
sufficient to subject him to jurisdiction.” (Mot. to Dismiss [Docket 37], at 2.) He argues that the
Complaint is “largely devoid of any allegations regarding Fischler, personally” and that the only
two allegations regarding Fischler is that he is a resident of Dallas, Texas, and that he either
made or was aware of some alleged misrepresentations. (Id. at 2, 4.) The plaintiffs argue that
Fischler actively pursued the purchase of CCV, a West Virginia corporation, traveled to West
Virginia and made false representations to at least one West Virginia plaintiff and former
1

The amended complaint alleges that on or about August 1, 2010, Digital River purchased all or
most of the assets of Journey and assumed the liabilities of the arbitration and litigation between the
plaintiffs and Journey. (See Mot. for Leave to File Amended Compl., Ex. 1 [Docket 45-1], ¶¶ 65-72.)

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employee-shareholder of CCV about her continuing employment in West Virginia with CCV.
(Resp. on Behalf of Pls. to Def. Michael S. Fischler’s Mot. to Dismiss for Lack of Personal
Jurisdiction [Docket 42], at 2.)
A.

Legal Standard

“When a defendant moves to dismiss for lack of personal jurisdiction, the plaintiff
ultimately bears the burden of proving to the district court judge the existence of jurisdiction
over the defendant by a preponderance of the evidence.” New Wellington Fin. Corp. v. Flagship
Resort Dev. Corp, 416 F.3d 290, 294 (4th Cir. 2005). When the court addresses the jurisdictional
question “on the basis only of motion papers, supporting legal memoranda and the relevant
allegations of a complaint, the burden on the plaintiff is simply to make a prima facie showing of
a sufficient jurisdictional basis to survive the jurisdictional challenge.” Id.; see also Combs v.
Bakker, 886 F.2d 673, 676 (4th Cir. 1989). “Under such circumstances, courts ‘must construe all
relevant pleading allegations in the light most favorable to the plaintiff, assume credibility, and
draw the most favorable inferences for the existence of jurisdiction.’” New Wellington, 416 F.3d
at 294 (quoting Combs, 886 F.2d at 676).
For a district court to validly assert personal jurisdiction over a non-resident defendant,
two conditions must be satisfied. Mylan Labs., Inc. v. Akzo, N.V., 2 F.3d 56, 59-60 (4th Cir.
1993). First, a state long-arm jurisdiction statute must authorize jurisdiction over the non-resident
defendant. Second, the court’s exercise of personal jurisdiction over the non-resident defendant
must “comport with the Due Process Clause.” In re Celotex Corp., 124 F.3d 619, 627 (4th Cir.
1997). “Because the West Virginia long-arm statute is coextensive with the full reach of due
process, it is unnecessary in this case to go through the normal two-step formula for determining
the existence of personal jurisdiction.” Id. at 627-28 (internal citations omitted). Consequently,

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the statutory inquiry merges with the Constitutional inquiry. See id. Accordingly, the court’s
inquiry centers on whether exercising personal jurisdiction over the defendants is consistent with
the Due Process Clause.
“A court’s exercise of personal jurisdiction over a non-resident defendant is consistent
with the Due Process Clause if the defendant has sufficient ‘minimum contacts’ with the forum
such that requiring the defendant to defend its interests in the forum does not ‘offend traditional
notions of fair play and substantial justice.’” In re Celotex, 124 F.3d at 628 (quoting Int’l Shoe
Co. v. Washington, 326 U.S. 310, 316 (1945)). The Fourth Circuit has applied a three-part test to
determine whether specific jurisdiction exists: “(1) the extent to which the defendant
purposefully availed itself of the privilege of conducting activities in the State; (2) whether the
plaintiff’s claims arise out of those activities directed at the State; and (3) whether the exercise of
personal jurisdiction would be constitutionally reasonable.” Mitrano v. Hawes, 377 F.3d 402,
407 (4th Cir. 2004) (quoting ALS Scan, Inc. v. Digital Serv. Consultants, Inc., 293 F.3d 707, 713
(4th Cir. 2002)). The “touchstone” of the specific jurisdiction analysis is whether the defendant
“engaged in some activity purposefully directed toward the forum state.” In re Celotex, 124 F.3d
at 628 (internal quotations omitted).
B.

Analysis

The plaintiffs have made a sufficient showing that the court has specific jurisdiction over
Fischler. First, with regard to purposeful availment, the Fourth Circuit has recognized a variety
of nonexclusive factors in determining whether a defendant has purposefully availed himself of
the privilege of conducting business under the laws of the forum state. See Consulting Eng’rs
Corp. v. Geometric Ltd., 561 F.3d 273, 278 (4th Cir. 2009). One of the factors is “whether the
defendant reached into the forum state to solicit or initiate business.” Id. Another is “whether the

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defendant made in-person contact with the resident of the forum in the forum state regarding the
business relationship.” Id.
The complaint alleges that “the defendants” fraudulently misrepresented to the plaintiffs
certain facts, and fraudulently induced them to enter into the Merger Agreement, Escrow
Agreement, and Business Services Agreement.2 (Compl. [Docket 1-2] ¶¶ 56-61.) One of the
plaintiffs, Donna Hamra, is a West Virginia resident. (Id. ¶ 6.) As previously noted, CCV is a
West Virginia corporation. (Id. ¶ 4.) Therefore, the complaint alleges, inter alia, that Fischler
made certain fraudulent misrepresentations to a West Virginia resident and fraudulently induced
a West Virginia resident to enter into a Merger Agreement and Escrow Agreement to sell a West
Virginia corporation to Journey.3 During the arbitration proceedings, Fischler testified that he
met with Hamra in Charleston, West Virginia, and the testimony at issue related to the allegation
of fraudulent misrepresentation and inducement. Thus, sufficient evidence exists to find that
Fischler purposefully availed himself of the privilege of conducting business under the laws of
West Virginia.
Second, the plaintiffs’ claims arise, at least in part, out of Fischler’s alleged activities
directed at West Virginia. The plaintiffs’ claims arise generally out of Fischler’s pursuit of
Journey’s purchase of CCV. More specifically, Hamra’s claims arise out of Fischler’s visit to
Charleston, West Virginia and speaking with her, where he allegedly made fraudulent
misrepresentations and induced her to enter into the Merger Agreement and Escrow Agreement.
Finally, the exercise of personal jurisdiction over Fischler is constitutionally reasonable.
Factors that the court considers are:

2

The complaint is written such that when only certain defendants are included in the allegations,
the complaint uses the name of that defendant. Thus, when the complaint references “defendants” as a
whole, it includes Fischler.
3
Hamra was not a party to the Business Services Agreement.

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(1) the burden on the defendant of litigating in the forum; (2) the interest of the
forum state in adjudicating the dispute; (3) the plaintiff’s interest in obtaining
convenient and effective relief; (4) the shared interest of the states in obtaining
efficient resolution of disputes; and (5) the interests of the states in furthering
substantive social policies.
Consulting Eng’rs. Corp., 561 F.3d at 279. The burden on Fischler of litigating in West Virginia
certainly weighs against such a finding, as he is a resident of Texas. However, the remaining
factors weigh in favor of exercising personal jurisdiction in the Southern District of West
Virginia. West Virginia has an interest in adjudicating disputes regarding misrepresentations to
its residents and disputes over the purchase of a West Virginia corporation. The plaintiffs’ and
states’ interests are furthered by resolution in this court, as the parties have already litigated in
this court for over two years and the court is familiar with the facts, procedural history, and legal
issues involved in the instant case.
Accordingly, I FIND that the court has personal jurisdiction over the defendant Michael
Fischler, and the Renewed Motion to Dismiss [Docket 37] is DENIED.
IV.

The Arbitration Award does not Preclude the Plaintiffs’ Pending Claims Against
Fischler
The arbitration award presents an issue of res judicata and collateral estoppel. The parties

agree, and the court also finds, that the law for res judicata and collateral estoppel are
sufficiently similar under West Virginia, Texas, and federal law, such that no choice of law
analysis is necessary. A lawsuit is barred by res judicata if three elements are satisfied:
First, there must have been a final adjudication on the merits in the prior action by
a court having jurisdiction of the proceedings. Second, the two actions must
involve either the same parties or persons in privity with those same parties.
Third, the cause of action identified for resolution in the subsequent proceeding
either must be identical to the cause of action determined in the prior action or
must be such that it could have been resolved, had it been presented, in the prior
action.

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Slider v. State Farm Mut. Auto Ins. Co., 210 W. Va. 476, 480 (2001) (quoting Blake v.
Charleston Area Med. Ctr., Inc., 201 W. Va. 469 (1997); see also Travelers Ins. Co. v. Joachim,
315 S.W.3d 860, 862 (Tex. 2010). Collateral estoppel requires a showing that:
(1) The issue previously decided is identical to the one presented in the action in
question; (2) there is a final adjudication on the merits of the prior action; (3) the
party against whom the doctrine is invoked was a party or in privity with a party
to a prior action; and (4) the party against whom the doctrine is raised had a full
and fair opportunity to litigate the issue in the prior action.
State ex rel. McGraw v. Johnson & Johnson, 226 W. Va. 677, 688 (2010) (quoting State v.
Miller, 194 W. Va. 3 (1995). Arbitration judgments are entitled to preclusive effect. See Rashid
v. Schenck Constr. Co., 190 W. Va. 363, 366-67 (1993); Davis v. Chevy Chase Fin., Ltd., 667
F.2d 160, 172 (D.C. Cir. 1981).
Here, neither res judicata nor collateral estoppel precludes the claims against Fischler.
Fischler was not a party to the arbitration agreement but appeared at the arbitration as Journey’s
representative. Fischler was thus not a party to the arbitration proceeding. Moreover, under
collateral estoppel, the arbitrator did not “actually resolve” the issue of fraud and fraudulent
inducement on the merits of the claims. Nor, under res judicata, was there a prior final
adjudication “on the merits” of the fraud claim. The arbitrator directed the verdict in favor of
Journey on the fraud claims not on the merits, but because she concluded that any damages
claimed based on fraud would be the same damages that the plaintiffs were entitled to under
breach of contract. (Supp. Br. Regarding Effect of Arb. on Claims Against Def. Michael S.
Fischler, Ex. 1 [Docket 43-1].) The arbitrator’s decision thus did not determine whether fraud or
fraudulent inducement had actually occurred. Therefore, I FIND that the claims against Fischler
are not precluded by either res judicata or collateral estoppel.

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V.

The Automatic Stay Provision in 11 U.S.C. § 362(a)(1) does not Apply to the
Pending Claims Against Fischler
Although their underlying arguments differ, both parties agree that the automatic stay

provision in the United States Bankruptcy Code, 11 U.S.C. § 362(a)(1), pursuant to Journey’s
Chapter 7 bankruptcy, does not apply to the plaintiffs’ pending claims against Fischler. Fischler
has not moved the bankruptcy court for an injunction under 11 U.S.C. § 105 and that provision is
therefore not at issue here.
A.

The Court has Authority to Stay the Case Against Fischler

The court “continues to have jurisdiction over this action inasmuch as the automatic stay
provisions of [11 U.S.C. § 362] merely suspend proceedings and do not divest the district court
of subject matter jurisdiction.” Holland v. High Power Energy, 248 B.R. 53, 56 (S.D. W. Va.
2000). “[W]hile it is correct that the bankruptcy court is the exclusive forum to consider a motion
for relief from the automatic stay, the district court retains jurisdiction independent of the
bankruptcy court to determine whether a pending civil action is subject to the automatic stay.”
Id.
B.

The Automatic Stay does not Apply to the Pending Claims Against Fischler

11 U.S.C. § 362(a)(1) provides, in relevant part:
(a) . . . a petition filed under section 301, 302, or 303 of this title . . . operates as a
stay, applicable to all entities, of—
(1) the commencement or continuation, including the issuance or employment of
process, of a judicial, administrative, or other action or proceeding against the
debtor that was or could have been commenced before the commencement of the
case under this title, or to recover a claim against the debtor that arose the
commencement of the case under this title.
11 U.S.C. § 362(a)(1). As the language of the statute indicates, and as the Fourth Circuit has
held, “[s]ubsection (a)(1) is generally said to be available only to the debtor, not third party
defendants or co-defendants.” A.H. Robins Co. v. Piccinin, 788 F.2d 994, 999 (4th Cir. 1986);
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see also Westfield Ins. Co. v. Cazon, LLC, No. 2:12-cv-585, 2012 WL 3637396, at *3 (S.D. W.
Va. Aug. 22, 2012).
However, a narrow exception to this general rule exists: where “unusual circumstances”
are involved, the stay imposed by § 362(a)(1) may be expanded to include non-debtor codefendants. A.H. Robins Co., 788 F.2d at 999; see also Winters v. George Mason Bank, 94 F.3d
130, 133-34 (4th Cir. 1996). In particular, A.H. Robins Co. explained that an unusual situation
“arises when there is such identity between the debtor and the third-party defendant that the
debtor may be said to be the real party defendant and that a judgment against the third-party
defendant will in effect be a judgment or finding against the debtor.” A.H. Robins Co., 788 F.2d
at 999; see also Kreisler v. Goldberg, 478 F.3d 209, 213 (4th Cir. 2007). The Fourth Circuit
provided one illustration: “a suit against a third-party who is entitled to absolute indemnity by
the debtor on account of any judgment that might result against them in the case.” A.H. Robins
Co., 788 F.2d at 999. Thus, “unusual circumstances exist where the claim clearly arises out of
the defendant’s actions in his capacity as the debtor’s officer, and he is undisputedly entitled to
indemnity.” In re Bidermann Indus. U.S.A., Inc., 200 B.R. 779, 784 (Bankr. S.D.N.Y. 1996).
“Conversely, unusual circumstances do not exist where the debtor’s insider is independently
liable, the right to indemnity is not absolute, and the continuation of the suit will not interfere
with the bankruptcy.” Id.
The claims against Fischler are not brought against him in his official capacity, but rather
in his individual capacity. The Fourth Circuit noted that the “unusual circumstances” exception
does not apply to the situation “where the third party defendant was ‘independently liable as, for
example, where the debtor and another are joint tort feasors or where the nondebtor’s liability
rests upon his own breach of duty.’” A.H. Robins Co., 788 F.2d at 999 (internal citations

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omitted); see also In re Bidermann Indus. U.S.A., Inc., 200 B.R. at 784; CAE Indus. Ltd. v.
Aerospace Holdings Co., 116 B.R. 31, 33 (S.D.N.Y. 1990)).
Fischler argues that because Journey’s corporate Bylaws, § 8.08, include a broad
indemnity provision pursuant to which Fischler is entitled to full indemnity from Journey, A.H.
Robins Co. supports extending the stay to Fischler. The court disagrees. Simply because Fischler
may be entitled to contribution or indemnity from Journey does not call for expansion of the
automatic stay imposed by § 362(a)(1). See Doyle v. Fleetwood Homes of Va., Inc., No. 2:081442, 2009 WL 1210697, at *2 (S.D. W. Va. Apr. 30, 2009); Holland, 248 B.R. at 59. Here,
Fischler is not entitled to “absolute indemnity.” Section 8.08 of Journey’s Bylaws state, in part,
that “[t]he corporation’s obligations under this paragraph include, but are not limited to, the
convening of any meeting, and the consideration of any matter thereby, required by statute in
order to determine the eligibility of an officer or director for indemnification.” (Def.’s Br. on
Effect of Automatic Stay on Pending Claims Against Michael Fischler, Ex. A [Docket 59-1], at
13.) At least one court has found that where entitlement to indemnification is determined only
after review, the party is not “absolutely entitled to indemnity.” CAE Indus. Ltd., 116 B.R. at 33.
A review of the circumstances surrounding A.H. Robins Co. also leads to the conclusion
that the instant case is not unusual.

A.H. Robins Co. involved thousands of product liability

suits, which were stayed upon the filing of Robins’ bankruptcy. See A.H. Robins Co., 788 F.2d at
996. The plaintiffs attempted to sever their actions and continue against the non-bankrupt
officers in their individual capacities. Id. Based on this, the Robins court found that the “officers’
interests were so closely intertwined with those of the debtor could be said to be the real party in
interest,” and allowing the plaintiffs to proceed “would risk the result of inconsistent judgments
that may unfairly impact upon limited insurance proceeds.” Id. at 996-1001. Such unusual

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circumstances simply do not exist in the instant case. Journey is not facing a multiplicity of
lawsuits, and Fischler was named as a defendant in his individual capacity from the beginning.
Therefore, I FIND that the automatic stay does not apply to the plaintiffs’ pending claims against
Fischler and the case will proceed.
VI.

The Plaintiffs do not Have Standing to Bring the New Claims in the Amended
Complaint
The plaintiffs have moved for leave to file an amended complaint to add certain claims

against Fischler and Digital River. Count II, breach of fiduciary duty, and Count III, conversion,
would be amended to include allegations regarding the sale of Journey’s assets to Digital River.
The new Count IV alleges fraudulent transfer of corporate assets under the Uniform Fraudulent
Transfer Act (UFTA) and asks the court to avoid the transfer, attach the assets transferred or
other property of the transferees, and/or issue an attachment against the assets. The new Count V
names Digital River as a defendant under a successor liability theory.
Fischler has repeatedly argued that under Nat’l Am. Ins. Co. v. Ruppert Landscaping Co.,
187 F.3d 439 (4th Cir. 1999), the plaintiffs do not have standing to assert these claims because
they belong to the trustee in bankruptcy. The plaintiffs have not argued otherwise. In Nat’l Am.
Ins. Co., the insurance companies pursued a variety of counts against a company in Chapter 7
bankruptcy, including successor liability, tortious interference, and statutory and common law
conspiracy. Id. at 441. The district court granted summary judgment to the bankrupt company,
finding that the insurance companies lacked standing to bring these claims. Id. The Fourth
Circuit agreed, noting that the insurance companies’ claims depend on showing fraud; the
underlying focus was fraudulent conveyance, and only the trustee has standing to bring that
claim. Id.; see also Poth v. Russey, 99 F. App’x 446, 457-58 (4th Cir. 2004) (finding that
fraudulent conveyance claims belong to the trustee and, where claims share the same underlying
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focus, the claim belongs to the trustee even if it does not contain elements identical to a
fraudulent conveyance claim). The amended claims in the instant case are similar, depending on
a showing of fraudulent conveyance for liability.
Although courts should freely grant plaintiffs leave to amend complaints, such leave
should be denied when the amendment would be futile. Edwards v. City of Goldsboro, 178 F.3d
231, 242 (4th Cir. 1999). Here, the amendment would be futile, as the court would only
subsequently dismiss the amended claims based on fraudulent conveyance for lack of standing.
Accordingly, the plaintiffs’ Motion for Leave to File Amended Complaint [Docket 44] is
DENIED.
VII.

Conclusion
In sum, I FIND that the court has personal jurisdiction over the defendant Michael

Fischler, and Fischler’s Renewed Motion to Dismiss [Docket 37] is accordingly DENIED. I
further FIND that the arbitration award does not preclude the claims against Fischler under either
res judicata or collateral estoppel, and that the automatic stay provision in the United States
Bankruptcy Code, 11 U.S.C. § 362(a)(1), does not apply to the plaintiffs’ claims against Fischler,
and the case will thus proceed. Finally, because the plaintiffs have no standing to bring the new
claims under their amended complaint, the plaintiffs’ Motion for Leave to File Amended
complaint [Docket 44] is hereby DENIED.
The court DIRECTS the Clerk to send a copy of this Order to counsel of record and any
unrepresented party.
ENTER:

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September 21, 2012