Primex Plastics Corporation v. Zamec, Curtis et al

Filing 44

OPINION AND ORDER denying 13 Motion for Partial Summary Judgment. Signed by District Judge Barbara B. Crabb on 2/23/16. (jat)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF WISCONSIN
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - PRIMEX PLASTICS CORPORATION,
OPINION AND ORDER
Plaintiff,
15-cv-175-bbc
v.
CURTIS ZAMEC,
THE NANCY L. ZAMEC REVOCABLE TRUST,
THE ZAMEC FAMILY TRUST,
THE CURTIS J. ZAMEC REVOCABLE TRUST,
THE ZAMEC MARITAL TRUST
and TRIENDA, LLC,
Defendants.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - From 2008 to 2010, plaintiff Primex Plastics Corporation sold various plastic
products to defendant Trienda, LLC, under a credit agreement. However, Trienda started
falling behind on its payments and failed to pay plaintiff approximately $2.7 million for
invoiced goods. Plaintiff contends that Trienda, defendant Curtis Zamec (Trienda’s majority
owner) and several Zamec family trusts may be held liable for breach of fiduciary duty and
violating the Wisconsin Fraudulent Transfers Act. In addition, plaintiff asks the court to
order defendants to hold in trust the amount of money that they owe plaintiff.
Plaintiff has filed a motion for partial summary judgment with respect to its claims
under the Wisconsin Fraudulent Transfers Act and its request for a constructive trust. Dkt.
#13. Plaintiff argues that defendants violated the Act when Trienda transferred $7 million

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to the Nancy Zamec Trust in December 2009 without getting anything of comparable value
in return, even though defendants knew or should have known that the transfer would
render Trienda unable to pay its debt to plaintiff. The parties recently agreed to dismiss the
claims against Trienda, dkt. #41, but none of the parties suggest that Trienda’s dismissal has
any effect on plaintiff’s claims against the other defendants. Both sides assume that the
other defendants may be held jointly and severally liable for Trienda’s conduct, at least for
the purpose of plaintiff’s motion, so I will do the same.
The parties agree that plaintiff must prove its claims under the Wisconsin Fraudulent
Transfers Act by clear and convincing evidence. E.g., Operating Engineers Local 139 Health
Benefits Fund v. Huml Contractors Inc., No. 08-C-1103, 2012 WL 664494, at *6 (E.D.
Wis. Feb. 28, 2012); SJ Properties Suites v. STJ, P.C., 759 F. Supp. 2d 1032, 1043 (E.D.
Wis. 2010); Mann v. Hanil Bank, 920 F. Supp. 944, 950 (E.D. Wis. 1996). Although
plaintiff has submitted some evidence in favor of its claims, defendants have cited evidence
that points in the other direction.

Because I conclude that plaintiff’s evidence is not

sufficient to show as a matter of law that Trienda violated the Act and that there are genuine
issues of material fact, I am denying plaintiff’s motion for partial summary judgment.

OPINION
A. Subject Matter Jurisdiction
As a basis for jurisdiction, plaintiff relies on 28 U.S.C. § 1332, which requires
diversity of citizenship between plaintiff and defendants and an amount in controversy more

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than $75,000. Because plaintiff alleges that defendants owe millions of dollars, the amount
in controversy requirement is met. As requested by the court, dkt. #40, plaintiff has filed
supplemental materials showing diversity. Plaintiff is a citizen of New Jersey and Indiana,
dkt. #29 at ¶ 1; Zamec is a citizen of Illinois and he is the sole trustee for each of the trusts.
Dkt. ##42 and 43. Because Trienda has been dismissed from the case, I need not consider
its citizenship.

B. Merits
Plaintiff raises claims under two related statutes that are both part of the Wisconsin
Fraudulent Transfers Act, Wis. Stat. §§ 242.04(1) and 242.05(1):
A transfer made or obligations incurred by a debtor is fraudulent as to a
creditor, whether the creditor's claim arose before or after the transfer was
made or the obligation was incurred, if the debtor made the transfer or
incurred the obligation:
(a) With actual intent to hinder, delay or defraud any creditor of the debtor;
or
(b) Without receiving a reasonably equivalent value in exchange for the
transfer or obligation, and the debtor:
1. 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
2. Intended to incur, or believed or reasonably should have believed that the
debtor would incur, debts beyond the debtor's ability to pay as they became
due.
Wis. Stat. § 242.04(1).
A transfer made or obligation incurred by a debtor is fraudulent as to a

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creditor whose claim arose before the transfer was made or the obligation was
incurred if the debtor made the transfer or incurred the obligation without
receiving a reasonably equivalent value in exchange for the transfer or
obligation and the debtor was insolvent at that time or the debtor became
insolvent as a result of the transfer or obligation.
Wis. Stat. § 242.05(1).
In its opening brief, plaintiff argues that Trienda violated four provisions:

§

242.04(1)(a), § 242.04(1)(b)1, § 242.04(1)(b)2 and § 242.05(1). However, in its reply
brief, plaintiff says nothing about § 242.04(1)(b)1, so I assume that plaintiff has abandoned
that claim for the purpose of its motion for partial summary judgment and I will limit my
analysis to the other three provisions.

1. Wis. Stat. § 242.04(1)(a)
The focus of the dispute under this provision is whether Trienda made the $7 million
transfer to the trust with “actual intent” to avoid paying its debt to plaintiff. Of course,
proving a party’s mental state is a difficult thing to do in the context of a motion for
summary judgment. If the party denies that it acted with the required intent and the party’s
testimony is not incredible as a matter of law, then the issue must be resolved by the
factfinder rather than as a matter of law. In re Chavin, 150 F.3d 726, 728 (7th Cir. 1998)
(court may not discredit witness testimony unless it is “utterly implausible in light of all
relevant circumstances”); Day v. City of Baraboo, 06–C–188–C, 2007 WL 5633174 (W.D.
Wis. Jan.31, 2007) (in case involving intent as element, “[o]nce the defendant testifies that
he did not have a[n] [unlawful] motive . . . it would be the rarest of instances in which the

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plaintiff could prevail at summary judgment. A court would have to conclude that the
defendant was lying, but this is a determination almost always reserved for the factfinder.”)
Not surprisingly, defendants deny that Trienda made the transfer to avoid paying
plaintiff. Dfts.’ PFOF ¶¶ 93-95, dkt. #39. (Defendants say that the transfer was part of
Zamec’s estate planning. Id. at ¶ 16.) Further, plaintiffs do not argue that defendants’
testimony is incredible as a matter of law. Rather, plaintiff seems to concede that avoiding
payment to plaintiff was not a factor in Trienda’s decision to make the transfer. Plt.’s Resp.
to Dfts.’ PFOF ¶ 93, dkt. #39 (not disputing defendants’ proposed finding of fact that
transfer “had nothing to do with Primex”).
Plaintiff attempts to circumvent this problem by arguing in the introduction portion
of its opening brief that, “[u]nder Wisconsin law, there is no obligation to delve into the
mind of the transferor” to prove “actual intent.” Plt.’s Br., dkt. #14, at 3. Plaintiff does not
explain this argument, but I understand plaintiff to be drawing an inference from Wis. Stat.
§ 242.04(2), which lists a number of objective factors that may inform the determination
of “actual intent,” such as “[t]he transfer or obligation was to an insider,” “[t]he debtor
retained possession or control of the property transferred after the transfer” and “[t]he
transfer or the obligation was disclosed or concealed.” Plaintiff seems to believe that it is
entitled as a matter of law to a finding of “actual intent” if it can adduce evidence in support
of some of the listed factors.
Plaintiff’s reading of § 242.04(2) is not a reasonable one. The listed factors are not
a statutory definition of “actual intent.” Rather, § 242.04(2), states that, “[i]n determining

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actual intent . . . . consideration may be given, among other factors, to” the listed factors.
There is no indication that the statute is altering the ordinary meaning of “actual intent.”
Town of Hoard v. Clark County, 2015 WI App 100, ¶ 17, 366 Wis. 2d 239, 873 N.W.2d
241, 245 (“Statutory language is construed based on its common and ordinary meaning.”).
Because mental status is difficult to prove, it is not unusual to use circumstantial
evidence involving more objective facts in an attempt to prove intent indirectly. E.g.,
Whitley v. Albers, 475 U.S. 312, 320 (1986) (listing objective factors that may inform
determination whether correctional officer used force “maliciously and sadistically for the
very purpose of causing harm”). However, this does not mean that the plaintiff is excused
from proving intent or that a finding of intent is compelled by circumstantial evidence.
Rather, it simply means that a finder of fact may infer intent from that circumstantial
evidence.
Not surprisingly, plaintiff does not cite any case law to support its counterintuitive
proposition that “actual intent” is an objective standard.

In their opposition brief,

defendants cite Mann v. Hanil Bank, 920 F. Supp. 944, 952 (E.D. Wis. 1996), in which the
court declined to decide this issue as a matter of law. Rather, despite strong objective
evidence supporting many of the statutory factors, the court concluded that “a reasonable
jury could conclude that the plaintiffs failed to establish intent to defraud by clear and
convincing evidence, especially if it finds [the defendant’s] story believable or his testimony
credible.” Because I agree with the approach taken in Mann and plaintiff does not cite any
contrary authority, I am denying plaintiff’s motion for summary judgment with respect to

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§ 242.04(1)(a).

2. Wis. Stat. § 242.04(1)(b)2
With respect to this provision, the parties dispute whether plaintiff has satisfied two
requirements: (1) whether Trienda received something of “reasonably equivalent value” for
the transfer; and (2) whether Trienda “believed or reasonably should have believed” that it
“would incur . . . debts beyond [its] ability to pay as they became due.” Plaintiff must prove
both of these requirements to prove a violation of this provision. Because I conclude that
plaintiff has not proven the second requirement as a matter of law, I need not address the
first at this stage of the proceedings.
In its opening brief, plaintiff says that Trienda knew or should have known that it
would be unable to pay its debts to plaintiff after the $7 million transfer on December 30,
2009, to the trust because it foresaw even before the transfer that the company was in
financial trouble. In support, plaintiff relies on two documents: (1) a December 20, 2009
email from Raymond Kolodziej (one of Trienda’s vice presidents) to defendant Zamec and
others, dkt. #18-16; and (2) a December 22, 2009 letter from Jan Acker (Trienda’s
president) to plaintiff, dkt. #17-2.
In the December 20 email, Kolodziej says that Trienda is adjusting its sale forecast
downward “based upon the lower SAS demand in the first quarter of 2010.” Dkt. #18-16.
SAS was Trienda’s biggest customer, accounting for nearly 90 percent of Trienda sales. Plt.’s
PFOF ¶ 14, dkt. #29. Kolodziej explained the effect of the lower demand on the company:

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[A]ccounts receivable and inventory levels are substantially lower than we
experienced in the last quarter of 2009. Since our ability to borrow under the
proposed Fifth Third bank line is tied directly to our accounts receivable and
inventory balances, our borrowing capacity has been significantly diminished
during the first four months of 2010. To make matters worse, we must pay
higher vendor payments for higher volume purchases in the last quarter of
2009 in the first two months of 2010. This “perfect storm” results in a $4.8
million cash shortfall in the first three months of 2010 . . . The deficit does
not turn around until May 2010.
Id. Kolodziej recommended that Trienda “[n]egotiate extended terms with our vendor
supply base” and “[n]egotioate higher lines of credit with our banks.” Id.
In the December 22 letter to plaintiff, Acker wrote the following:
[O]ur largest customer announced the undertaking of a Q1 2010 design
modification material change in order to capture greater opportunities with
their largest customer and others in the pooling marketplace.
While we are very excited with the opportunities that lie ahead when this
project is completed, the interim period will require making a transition which
includes a draw down of the current pallet inventory, UL certification of the
modified pallet and tooling conversion.
As such, Trienda’s product requirements for Q1 2010 will be proportionately
reduced during the inventory draw down period. Requirements remain strong
for the current product offering.
Historically, our customer’s forecasting has been on the conservative side and
they have exceeded all forecasts and plans. We hope this to be the case in Q1
2010 as well.
Having stated that, Trienda and the entire supply chain must respond to the
reality at hand while still recognizing the upside potential.
Going forward in Q1 2010, Trienda will be adjusting all supply chain payment
terms to 75 days in coordination with the product transition timeline. Should
the inventory draw down plan be accelerated and the current product
requirements increase over forecase, Trienda would review and reassess the 75
day term requirement accordingly.

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Dkt. #17-2.
In support of their argument that Trienda could have reasonably believed that it
would be able to continue paying its debts, defendants cite a 2012 report prepared by the
Capital Valuation Group that concluded that “Trienda was solvent after refinancing its debt
and redeeming the membership interests on December 30, 2009.” Dkt. #32-40 at 10.
More specifically, the report concluded that Trienda could have “comfortably continued to
meet its cash obligations for day-to-day operations as well as pay principal and interest on
its term loans and reduce the line of credit balance” after the December 30, 2009 transfer.
Id. at 11.
In addition, defendants say that Trienda had a greater ability to repay its debts after
the transfer because the transfer was part of a new financing agreement with Fifth Third
Bank. Under the new agreement, Trienda’s total credit line increased by $3.5 million;
Trienda’s revolving credit line increased by $8 million; Trienda was subject to fewer
covenant restrictions; Fifth Third gave Trienda better advance rates; and Trienda’s loan
payments were reduced by more than $100,000 a month. Dfts.’ PFOF ¶ 31, dkt. #39.
More generally, defendants say that Trienda’s failure to pay its debt to plaintiff had
nothing to do with the transfer to the trust. Rather, defendants say the problem was that
Trienda’s primary customer, SAS, got into a warranty dispute with one of its own major
customers in the spring of 2010 and stopped playing Trienda, which, in turn, had a dramatic
effect on Trienda’s ability to pay its bills. In addition, defendants say that the warranty
dispute had nothing to do with SAS’s previous slowdown, so Trienda could not have

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predicted that problem.

Dfts.’ PFOF ¶¶ 76-78, dkt. #39.

The letter and email are circumstantial evidence that Trienda knew or should have
known at the time of the transfer that it would have greater difficulty paying its debts.
However, I cannot say that plaintiff has proven a violation of Wis. Stat. § 242.04(2) as a
matter of law. To begin with, plaintiff does not develop an argument as to what plaintiff’s
actual assets and liabilities were at the time of the transfer, making it difficult to say for
certain what Trienda could or could not pay. (It was not until its reply brief that plaintiff
submitted evidence regarding Trienda’s actual payments after the transfer, dkt. #38, but that
was too late. Narducci v. Moore, 572 F.3d 313, 324 (7th Cir. 2009) (“[T]he district court
is entitled to find that an argument raised for the first time in a reply brief is forfeited.”).)
Plaintiff treats the December 22 letter as an admission that Trienda could not pay its
debts on time because Trienda stated that it might not be able to pay for products for 75
days, which was longer than the usual 30-day grace period. However, plaintiff does not say
it objected to those terms, and it continued shipping products to Trienda.

Thus, a

reasonable jury could find that any new debts incurred after the transfer did not “bec[o]me
due” for 75 days. Because the letter does not indicate that Trienda’s financial problems
would be long-term, the letter does not prove as a matter of law that Trienda should have
known that it would be unable to pay its debt to plaintiff.
Second, plaintiff does not develop an argument as to how the transfer contributed to
any inability by Trienda to pay its debts. The letter and email were written before the
transfer and they do not suggest that Trienda’s financial woes were caused by the transfer

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or would be worsened by it. In fact, plaintiff does not respond to defendants’ argument that
the transfer did not have an adverse effect on Trienda’s financial status because the transfer
was part of a larger financial arrangement that Trienda made with Fifth Third Bank and that
gave Trienda more flexibility. That is reason alone to deny plaintiff’s motion for partial
summary judgment on this issue. Bonte v. United States Bank, N.A., 624 F.3d 461, 466
(7th Cir. 2010) (“Failure to respond to an argument . . . results in waiver.”).

3. Wis. Stat. § 242.05(1)
In its opening brief, plaintiff does not develop a separate argument regarding why it
believes that Trienda “was insolvent at [the] time [of the transfer] or . . . became insolvent
as a result of the transfer or obligation.” Wis. Stat. § 242.05(1). Rather, it simply refers
back to its argument that Trienda’s December 22, 2009 letter shows that it was unable to
pay its debts. Because I have concluded that the letter does not show as matter of law what
Trienda’s financial status was, I am denying plaintiff’s motion for summary judgment as to
this claim as well. Plaintiff includes a much more developed argument regarding § 242.05
in its reply brief, but, again, that was too late. Narducci, 572 F.3d at 324. Plaintiff will have
to raise those arguments at trial.

4. Constructive trust
Plaintiff’s request for a constructive trust is contingent on a finding that Trienda
violated Wisconsin Fraudulent Transfers Act. Because I am concluding that genuine issues

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of material fact remain on plaintiff’s claims under the Act, it would be premature to
determine whether plaintiff is entitled to a constructive trust. Plaintiff does not argue that
it is entitled to the creation of a trust as a prophylactic measure.

ORDER
IT IS ORDERED that the motion for partial summary judgment filed by plaintiff
Primex Plastics Corporation, dkt. #13, is DENIED.
Entered this 23d day of February, 2016.
BY THE COURT:
/s/
BARBARA B. CRABB
District Judge

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