Carn v. Heesung Pmtech Corp.

• Decision Date: 27 September 2017
• Docket Number: CASE NO. 1:16–cv–703–TFM
• Citation: 579 B.R. 282
• Parties: William C. CARN, III, as Chapter 7 Trustee of SpecAlloy Corp., et al., Plaintiffs, v. HEESUNG PMTECH CORP., Defendant.
• Court: U.S. District Court — Middle District of Alabama

579 B.R. 282

William C. CARN, III, as Chapter 7 Trustee of SpecAlloy Corp., et al., Plaintiffs,

v.HEESUNG PMTECH CORP., Defendant.

CASE NO. 1:16–cv–703–TFM

United States District Court, M.D. Alabama, Southern Division.

Signed September 27, 2017

John Douglas Elrod, Greenberg Traurig, LLP, Benjamin R. Keck, Atlanta, GA, for Plaintiff

Alessandra C. Backus, David A. Wender, Alston & Bird LLP, Atlanta, GA, Daniel Davidson Sparks, Christian & Small, LLP, Birmingham, AL, Edward T. Kang, Alston & Bird LLP, Washington, DC, for Defendant

OPINION and ORDER

TERRY F. MOORER, UNITED STATES MAGISTRATE JUDGE

I. INTRODUCTION

On December 22, 2017, William C. Carn, III, as the Chapter 7 Trustee ("the Trustee") of SpecAlloy Corporation doing business as Panhandle Converter Recycling ("SpecAlloy" or "the Debtor"), LKQ Corporation ("LKQ"), Converter Brokers, LLC, ("Converter Brokers"), and Enterprise Recycling, Ltd., doing business as Wrench–A–Part and Commodity Recyclers ("Enterprise") filed the Amended Complaint against Defendant Heesung PMTech Corporation ("Heesung" or "Defendant").¹ The Trustee asserts claims of avoidable setoff pursuant to 11 U.S.C. §§ 553 and 550; avoidable preferences pursuant to 11 U.S.C. §§ 547 and 550; fraudulent transfers pursuant to 11 U.S.C. §§ 548 & 550; fraudulent transfers pursuant to the Uniform Fraudulent Transfer Act, Ala. Code § 8–9–1, et seq. , and 11 U.S.C. §§ 544 and 550; re-characterization of the advances; and equitable subordination. LKQ, Converter Brokers, and Enterprise (collectively "the Suppliers") assert state law claims of conversion; breach of contract; quantum meruit; unjust enrichment; principal liability; and partner/joint venture liability. Doc. 24.

A case related to this matter is currently pending in the United States Bankruptcy Court for the Middle District of Alabama. In re SpecAlloy , No. 16–10013 (DHW). On November 28, 2016, Judge Dwight H. Williams, Jr., generally continued the matters in the bankruptcy proceeding pending the outcome of litigation in this court. Id. , Doc. 43–1.

On January 5, 2017, Heesung filed the Motion to Dismiss the Amended Complaint pursuant to Fed.R.Civ.P. 12(b)(6) and 12(b)(7). Doc. 28. On January 27, 2017, Plaintiffs filed a response to the Motion. Doc. 37. Heesung filed a reply to the Plaintiff's response on February 3, 2017. Doc. 38. The parties attached evidentiary materials to the aforementioned pleadings, motion, and responses. They also submitted additional evidentiary materials prior to the status conference on March 23, 2017. Docs. 43 & 44.

Generally, a court may not consider matters outside the complaint without converting a motion to dismiss to a motion for summary judgment. However, the court may consider a document attached to a motion to dismiss without converting the motion into one for summary judgment if the attached document is (1) central to the plaintiff's claim and (2) undisputed. In this context, "undisputed" means that the authenticity of the document is not challenged. SFM Holdings, Ltd. v. Banc of Am. Sec., LLC , 600 F.3d 1334, 1337 (11th Cir. 2010) (citing Day v. Taylor , 400 F.3d 1272, 1276 (11th Cir. 2005) and Maxcess Inc. v. Lucent Techs., Inc. , 433 F.3d 1337, 1340 (11th Cir. 2005) ).

Heesung argues that its attached exhibits are "central to the claims asserted in the Amended Complaint." Doc. 37. Specifically, Heesung asserts that the documents are central to the claims because they "expressly contradict the limited 'factual' allegations contained in the Amended Complaint." Id. In addition, Heesung contends that this court may take judicial notice of the documents and evidentiary materials submitted in the bankruptcy case. Thus, this court must decide whether it is appropriate at this early stage of the proceedings to consider the attached evidence or whether it will consider the Motion solely by looking within the four corners of the Amended Complaint.

Despite the parties' multitude of attached evidentiary materials, this case is currently before the court on a motion to dismiss. As demonstrated by the sheer number of documents and the parties' extensive arguments over whether the facts as set forth in the Amended Complaint are a true representation of the circumstances in this case, it is clear that the parties aim to litigate factual questions beyond the scope of 12(b)(6). Michel v. NYP Holdings, Inc. , 816 F.3d 686, 701 (11th Cir. 2016). While trial courts may consider matters outside the pleadings on conversion of a motion to dismiss into a motion for summary judgment, the court has near-absolute discretion to take such a procedural detour. Jumbo v. Alabama State Univ. , 229 F.Supp.3d 1266, 1270–71 (M.D. Ala. 2017) (citing 5C Charles A. Wright & Arthur R. Miller, Federal Practice & Procedure § 1366 (3d ed. 2016) ("[F]ederal courts have complete discretion to determine whether or not to accept the submission of any material beyond the pleadings that is offered in conjunction with a Rule 12(b)(6) motion and rely on it, thereby converting the motion, or to reject it or simply not consider it.")). The claims in this case are fraught with factual allegations. Therefore, the court will not convert the motion to dismiss into a motion for summary judgment. To the extent the parties have submitted documents in an effort to contradict factual allegations made by another party, the court will not consider the material at this early stage of the proceedings.

This court has federal question jurisdiction pursuant to 28 U.S.C. § 1331, diversity jurisdiction pursuant to 28 U.S.C. § 1332, bankruptcy jurisdiction pursuant to 28 U.S.C. § 1334(b), and supplemental jurisdiction pursuant to 28 U.S.C. § 1367. The parties have consented to a United States Magistrate Judge conducting all proceedings in this case and ordering the entry of final judgment pursuant to 28 U.S.C. § 636(c)(1) and M.D. Ala. LR 73.1.

Now pending before the court is Defendant's Motion to Dismiss pursuant to Fed.R.Civ.P. 12(b)(6) and 12(b)(7) filed by Heesung. Doc. 28. Upon consideration of the Motion, the Response, and the Reply, the court concludes that the Motion to Dismiss is due to be DENIED.

II. STANDARD OF REVIEW

A Rule 12(b)(6) Motion tests the legal sufficiency of the complaint. Although it must accept well-pled facts as true, the court is not required to accept a plaintiff's legal conclusions. Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) ("[T]he tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions."). In evaluating the sufficiency of a plaintiff's pleadings, the court must indulge reasonable inferences in plaintiff's favor, but we are not required to draw a plaintiff's inference. Aldana v. Del Monte Fresh Produce, N.A., Inc. , 416 F.3d 1242, 1248 (11th Cir. 2005). Similarly, "unwarranted deductions of fact" in a complaint are not admitted as true for the purpose of testing the sufficiency of plaintiff's allegations. Id. ; see also Iqbal , 556 U.S. at 680, 129 S.Ct. at 1951 (stating conclusory allegations are "not entitled to be assumed true.")

A complaint may be dismissed if the facts as pled do not state a claim for relief that is plausible on its face. See Iqbal , 556 U.S. at 679, 129 S.Ct. at 1950 (explaining "only a complaint that states a plausible claim for relief survives a motion to dismiss"); Bell Atl. Corp. v. Twombly , 550 U.S. 544, 561–62, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (retiring the prior "unless it appears beyond doubt that the plaintiff can prove no set of facts" standard). In Twombly , the Supreme Court emphasized that a complaint requires "more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly , 550 U.S. at 555, 127 S.Ct. 1955. Factual allegations in a complaint need not be detailed but "must be enough to raise a right to relief above the speculative level on the assumption that all the allegations in the complaint are true (even if doubtful in fact)." Id. at 555, 127 S.Ct. 1955 (internal citations and emphasis omitted).

In Iqbal , the Supreme Court reiterated that although Fed. R. Civ. P. 8 does not require detailed factual allegations; it does demand "more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Iqbal , 556 U.S. at 678, 129 S.Ct. at 1949. A complaint must state a plausible claim for relief, and "[a] claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. The mere possibility the defendant acted unlawfully is insufficient to survive a motion to dismiss. Id. The well-pled allegations must nudge the claim "across the line from conceivable to plausible." Twombly , 550 U.S. at 570, 127 S.Ct. 1955.

III. THE PLAINTIFFS' FACTS

The following factual allegations as presented in the Amended Complaint will be construed in the light most favorable to the plaintiffs, as the court must do at this stage of the proceedings. See , e.g. , Financial Security Assur., Inc. v. Stephens, Inc. , 450 F.3d 1257, 1262 (11th Cir. 2006). SpecAlloy, doing business as Panhandle Converter Recycling, is a company based in Dothan, Alabama. SpecAlloy sources or dismantles catalytic converters it has purchased from other companies, such as LKQ, Enterprise Recycling, and Converter Brokers. SpecAlloy sells the components of the converters to buyers. Heesung was the primary buyer of materials, including precious metals sourced from the catalytic converters.

According to Plaintiffs, the relationship between SpecAlloy and Heesung changed in 2013. Prior to 2013, SpecAlloy sold materials to Heesung on a "cash-immediately-prior-to-shipment" basis. Pls' Amended Comp., p. 5. Beginning in 2013, SpecAlloy had insufficient working capital to continue its operations, source converters, and remain solvent. Thus, SpecAlloy required additional working capital in...