9586 LLC v. Great Am. Grp. LLC (In re Abound Solar Mfg., LLC)
| Decision Date | 01 March 2016 |
| Docket Number | Adv. Proc. No. 15-50057 (MFW),Case No. 12-11974 (MFW) (Jointly Administered) |
| Citation | 547 B.R. 611 |
| Parties | In re: Abound Solar Manufacturing, LLC, Abound Solar Technology Holdings, LLC, Abound Solar, Inc., Debtors. 9586 LLC, A Colorado Limited Liability Company, Plaintiff, v. Great American Group LLC, A California Limited Liability Company, The Branford Group, A Connecticut Corporation, Defendants. |
| Court | U.S. Bankruptcy Court — District of Delaware |
Lisa Cresci McLaughlin, Stephen W. Spence, Phillips, Goldman & Spence, P.A., Wilmington, DE, Ann M. Rhodes, Giovanni Michael Ruscitti, Berg Hill Greenleaf & Ruscitti LLP, Boulder, CO, for Plaintiff.
Michael C. Falk, Robert P. Frank, Reed Smith LLP, Philadelphia, PA, Richard A. Robinson, Reed Smith, Wilmington, DE, for Defendant.
Before the Court is the Motion of Great American Group LLC and The Branford Group (the "Defendants") to Dismiss the adversary complaint ("Complaint") filed by 9586 LLC (the "Plaintiff").
The Defendants conducted the auction of certain contaminated assets of the Debtors2 at the Plaintiff's property in Longmont, Colorado (the "Property"). The Plaintiff, as assignee of the Trustee3 , asserts the following claims: breach of contract, negligence, unjust enrichment, fraud, violation of the Colorado Consumer Protection Act (the "CCPA"), and negligent misrepresentation. In addition, the Plaintiff asserts its own claims for negligence and nuisance.
The Court will dismiss the unjust enrichment claim because a valid contract governs the parties' relationship. The Court will also dismiss the CCPA claim for Plaintiff's failure to state a claim. The Court will deny the motion with respect to the other claims.
The Debtors operated a solar panel manufacturing business. As part of President Obama's Stimulus Plan, the Debtors received approximately $400 million in loans from the United States Department of Energy (the "DOE"), secured by a first priority lien on all of the Debtors' assets. The Debtors leased the Property from the Plaintiff for solar panel production. The Property contained an isolated area, in which cadmium and tellurium, two cancer-causing chemicals, were deposited onto the solar panels (the "Restricted Area").
In 2012, the Debtors ceased operations and filed voluntary petitions under chapter 7. As of the Petition Date, the hazardous chemicals were only contained inside the Restricted Area or inside certain laser scribes and etching machines located outside the Restricted Area.
Post-petition, the Trustee decided to auction the remaining assets at the Property. To fund the liquidation of the Debtors' estate, the DOE and the Trustee entered into a cash collateral agreement. On August 8, 2012, the Court approved the agreement.
Shortly thereafter, the DOE and the Trustee solicited proposals from auctioneers. The Trustee and the DOE interviewed several auctioneers, including the Defendants who submitted a written proposal (the "Proposal"), which highlighted the Defendants' expertise in liquidating solar panel manufacturing facilities. The Defendants were selected to serve as the auctioneers. The Trustee and the Defendants, with the approval of the DOE, entered into a Consulting and Auction Agreement (the "Auction Agreement"). On September 6, 2012, the Trustee's motion for approval to conduct the auction was granted by the Court.
Prior to the auction, the Trustee and the DOE engaged Advanced Chemical Transport ("ACT"), an environmental clean-up company, to prepare the assets for auction. ACT cleaned up certain surfaces in the Restricted Area and issued a report stating that the contamination level was sufficiently low to allow potential buyers to inspect the equipment. The Complaint alleges that The Defendants advocated that the requirement for protective equipment be dropped to prevent a "chilling effect" on the auction. The requirements were removed.
On October 1, 2012, potential buyers toured the facilities. The auction took place on October 2–3, 2012. The Defendants managed and supervised the auction and the disassembly and removal of purchased equipment. No environmental health or safety protocols were implemented by the Defendants during or after the auction. Post-auction testing revealed that areas outside the Restricted Area had been contaminated.
On January 17, 2013, the Plaintiff filed proofs of claim seeking compensation for the pre- and post-petition contamination of the Property. In addition, the Plaintiff initiated an adversary proceeding against the Debtors' former insurer, Chubb Custom Insurance ("Chubb"), asserting claims under the Debtors' environmental pollution policy. In May 2014, the Plaintiff, the Trustee, Chubb, and the DOE reached a court-approved settlement of those claims (the "Settlement Agreement").
Pursuant to the Settlement Agreement, the Trustee agreed to pay more than $4 million to the Plaintiff and assigned to it any claims the Trustee had against the Defendants. On January 19, 2015, the Plaintiff initiated this adversary proceeding against the Defendants. On April 17, 2015, the Defendants filed a motion to dismiss the Complaint for failure to state a claim (the "Motion to Dismiss"). Briefing on the Motion to Dismiss was completed on June 30, 2015. The matter is ripe for decision.
The Court has subject matter jurisdiction over this adversary proceeding. 28 U.S.C. §§ 157 and 1334.
Rule 12(b)(6) of the Federal Rules of Civil Procedure, made applicable by Rule 7012(b) of the Federal Rules of Bankruptcy Procedure, governs a motion to dismiss for failure to state a claim. Joseph v. Frank (In re Troll Commc'ns, LLC), 385 B.R. 110, 116 (Bankr.D.Del.2008). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim [for] relief that is plausible on its face.’ " Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). At this stage in the proceeding, it is not a question of "whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims." Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974), abrogated on other grounds by, Harlow v. Fitzgerald, 457 U.S. 800, 814–15, 102 S.Ct. 2727, 73 L.Ed.2d 396 (1982).
Since the Twombly and Iqbal decisions, "pleading standards have seemingly shifted from simple notice pleading to a more heightened form of pleading...." Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir.2009). This new standard requires "a plaintiff to plead more than the possibility of relief to survive a motion to dismiss." Id. It is insufficient to provide "threadbare recitals of a cause of action's elements, supported by mere conclusory statements ...." Iqbal, 129 S.Ct. at 1940 (citing Twombly, 550 U.S. at 555, 127 S.Ct. 1955 ). Under the heightened standard, a complaint "must contain either direct or inferential allegations respecting all the material elements necessary to sustain recovery under some viable legal theory." Twombly, 550 U.S. at 562, 127 S.Ct. 1955 (citation omitted). The Court, in order to determine whether a claim meets this requirement, must "draw on its judicial experience and common sense." Burtch v. Huston (In re USDigital, Inc.) , 443 B.R. 22, 35 (Bankr.D.Del.2011) (citation omitted).
In Fowler, the Third Circuit articulated a two-part analysis to be applied in evaluating a complaint. Fowler, 578 F.3d at 210–11. First, the court "must accept all of the complaint's well-pleaded facts as true, but may disregard any legal conclusions." Id. at 210–11 (citation omitted). Second, the court must determine "whether the facts alleged in the complaint are sufficient to show that the plaintiff has a ‘plausible claim for relief.’ " Id. at 211 (citation omitted).
The moving party has the burden of demonstrating that dismissing the complaint is appropriate. Troll Commc'ns, LLC, 385 B.R. at 117 (citation omitted).
A claim for fraud must comply with the pleading requirements of Rule 9(b) of the Federal Rules of Civil Procedure which "requires that a plaintiff set forth the ‘who, what, when, where and how’ of the alleged fraud." Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d 899, 903 (5th Cir.1997) (citation omitted). For example, the plaintiff must "set forth the time, place, and contents of the false representation, the identity of the party making the false statements and the consequences thereof." Koch v. Koch Indus., Inc., 203 F.3d 1202, 1236 (10th Cir.2000) (citation and internal quotations omitted). A bankruptcy trustee, as a third party outsider, however, is generally afforded greater liberality when pleading fraud. Global Link Liquidating Trust v. Avantel, S.A. (In re Global Link Telecom Corp.) , 327 B.R. 711, 717 (Bankr.D.Del.2005) (citation omitted).
With respect to six claims alleged in the Complaint, the Plaintiff asserts that pursuant to the Settlement Agreement and with the approval of the DOE, it has been assigned the Trustee's claims against the auctioneers. The Defendants argue that, under that Agreement, an assigned claim might be precluded from assignment if challenged by a third party.
The pertinent provision in the Settlement Agreement states as follows:
The Trustee hereby unconditionally and irrevocably assigns to Owner [the Plaintiff] any and all claims that he or any of the Chapter 7 estates may have against any third-party relating to the 9586 Property .... In the event that any third-party asserts that an Assigned Claim may not be assigned and a...
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