Chepstow Ltd. v. Hunt

• Decision Date: 19 August 2004
• Docket Number: No. 03-14051.,03-14051.
• Citation: 381 F.3d 1077
• Parties: CHEPSTOW LIMITED, Plaintiff-Appellant, v. Marshall B. HUNT, Martha Hunt, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Eleventh Circuit

381 F.3d 1077

CHEPSTOW LIMITED, Plaintiff-Appellant, v. Marshall B. HUNT, Martha Hunt, et al., Defendants-Appellees.

No. 03-14051.

United States Court of Appeals, Eleventh Circuit.

August 19, 2004.

T. Michael Guiffré, Jean V. MacHarg, Washington, DC, Steven M. Collins, Candace N. Smith, Alston & Bird, LLP, Atlanta, GA, for Plaintiff-Appellant.

William Dale Matthews, Greene, Buckley, Jones & McQueen, Michael R. Smith, Amy Yervanuan, King & Spalding, Gus H Small, Jr., Kevin Timothy O'Sullivan, Cohen, Pollock, Merlin, Axelrod, P.C., J. Michael Lamberth, Lamberth, Bonapfel, Cifelli & Wilson, Mark A. Kelley, Kitchens, Kelley, Gaynes, P.C., Atlanta, GA, for Defendants-Appellees.

John Matney Harmon, Graves, Dougherty, Hearon & Moody, P.C., Austin, TX, for Mier, Amicus Curiae.

Appeal from the United States District Court for the Northern District of Georgia.

Before ANDERSON, CARNES and MARCUS, Circuit Judges.

CARNES, Circuit Judge:

Chepstow Ltd. filed a lawsuit in the district court alleging that Marshall B. Hunt had fraudulently transferred millions of dollars of his assets in order to avoid payment on a prior judgment held by Chepstow against him. The complaint alleged that Hunt, with some assistance from a Georgia company of which he was CEO, transferred a large portion of his assets to his wife, children, and a friend— all of whom are also defendants in the case—in violation of Georgia's fraudulent transfer statutes, Ga.Code Ann. § 18-2-22 (repealed July 1, 2002) and the Uniform Fraudulent Transfer Act, § 18-2-70, et seq. (effective July 1, 2002). The district court granted the defendants' motions to dismiss for failure to state a claim and entered final judgment against Chepstow. This is Chepstow's appeal.

I.

In a previous action filed in February 2001, Chepstow's predecessor in interest, Tapir Investments (Bahamas) Ltd., brought a breach of contract action in the district court against Hunt in order to collect on a past-due promissory note. During the pendency of that action—sometime between February 2001 and May 2002—Chepstow acquired all of Tapir's rights in the action and was substituted as the plaintiff. In May 2002, the district court granted summary judgment in favor of Chepstow, and entered final judgment along with a writ of execution against Hunt in the amount of $9,281,131.02. Hunt did not appeal. Despite Chepstow's best efforts at collection, its judgment against him remains unsatisfied in an amount exceeding $8 million.

In November 2002, Chepstow filed a complaint alleging that Hunt, with the knowledge and assistance of the other named defendants, engaged in numerous fraudulent transfers of his assets in order to defeat Chepstow's efforts to collect its judgment. Count 1 of the complaint alleged that Hunt had transferred assets to his wife, Martha Hunt; to his children, Marshall Blair Hunt, Jr., Calvin Hunt, Hastings Hunt, Paul Hunt, and Mary Hunt; to a Georgia limited partnership of which Hunt and his wife are general partners, Hunt Family Investments, L.L.L.P. (HFI); and to Hunt's business associate and friend William E. Peterson, all in violation of Ga.Code Ann. § 18-2-22 and the UFTA. Count 1 also alleged that Horizon Medical Products, Inc. (Horizon), a public company of which Hunt is CEO and in which he owned more than 20% of all outstanding shares, aided and abetted Hunt in making some of the fraudulent transfers. In Count 2 of the complaint, Chepstow alleged that Hunt, Martha, HFI, Peterson, and Horizon conspired to defraud Chepstow and to hinder and delay Chepstow's collection of its outstanding judgment against Hunt through the transfers.

The complaint specifically alleged that Hunt fraudulently transferred the following property: (1) all of his right, title, and interest in his home valued at $3.5 million to his wife, Martha; (2) hundreds of thousands of dollars in assets to Martha and his children; (3) 225,000 shares of his stock in Horizon to HFI; and, (4) assets in a bank account jointly held by both Hunt and Peterson to an account held solely by Peterson.

The defendants filed motions to dismiss for failure to state a claim on which relief could be granted. They asserted that Chepstow's complaint failed to state a claim under Ga.Code Ann. § 18-2-22, because that code section had been repealed without reservation by the Uniform Fraudulent Transfer Act (UFTA), Ga.Code Ann. § 18-2-70, et seq. The defendants further asserted that Chepstow's complaint failed to state a claim based on the UFTA because the complaint did not allege any fraudulent transfers occurring after the July 1, 2002 effective date of the UFTA.

The district court issued an order dismissing Count 1 of the complaint on the ground that the enactment of the UFTA without a savings clause preserving § 18-2-22 not only repealed that provision insofar as future events were concerned, but also cut off all pending claims brought under it. The district court ruled in the alternative that even if § 18-2-22 were not repealed by the UFTA, Chepstow had failed to state a claim against Horizon in Count 1. The court reasoned that because Horizon was neither a debtor nor a transferee, it was not subject to liability under an aider and abettor theory for claims brought pursuant to § 18-2-22, because that statute explicitly imposes liability only on debtors and transferees. The district court also dismissed Chepstow's conspiracy claims in Count 2 based on its belief that the underlying Count 1 claims alleging fraudulent conveyance failed. Having thrown out both counts against all of the defendants, the district court entered final judgment dismissing Chepstow's complaint.

II.

We review de novo the district court's order granting the defendants' motions to dismiss pursuant to Fed.R.Civ.P. 12(b)(6) for failure to state a claim upon which relief can be granted. Harper v. Blockbuster Entm't Corp., 139 F.3d 1385, 1387 (11th Cir.1998). In doing so, we accept as true the factual allegations in the plaintiff's complaint and construe the facts in the light most favorable to the plaintiff as the non-moving party. Spain v. Brown & Williamson Tobacco Corp., 363 F.3d 1183, 1186 (11th Cir.2004). A motion to dismiss may be granted only when the defendant demonstrates "beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Harper, 139 F.3d at 1387 (internal quotation and citation omitted). We review questions of statutory interpretation de novo. United States v. DBB, Inc., 180 F.3d 1277, 1281 (11th Cir.1999).

This case requires us to examine issues concerning the substantive law of Georgia. "In rendering a decision based on state substantive law, [we] must decide the case the way it appears the state's highest court would. Where the state's highest court has not spoken to an issue, [we] must adhere to the decisions of the state's intermediate appellate courts absent some persuasive indication that the state's highest court would decide the issue otherwise." Ernie Haire Ford, Inc. v. Ford Motor Co., 260 F.3d 1285, 1290 (11th Cir.2001) (internal quotation marks and citation omitted).

III.

We first address the question of whether the repeal of Ga.Code Ann. § 18-2-22 which was effected through the enactment of the UFTA, retroactively extinguished all pending claims under § 18-2-22. The district court thought so, but we think not.

The Uniform Fraudulent Transfer Act (UFTA), 2002 Ga. Laws 141, § 3, as codified at §§ 18-2-70 to 18-2-80, became part of the Georgia code when the Governor signed it into law on April 4, 2002. It became effective on July 1, 2002. The UFTA repealed and replaced some of the existing Georgia fraudulent transfer provisions that had been in effect before its enactment. Importantly for this case, the UFTA repealed former § 18-2-22, which defined the conveyances by debtors that are per se fraudulent. However, the UFTA left intact § 18-2-20, which provides that the rights of creditors are favored in the courts, and § 18-2-21, which provides creditors with the right to attack judgments or conveyances which interfere with their rights.

The district court reasoned that since the UFTA repealed § 18-2-22 and contained no savings clause explicitly preserving causes of action that had already arisen under the now-repealed provision, it extinguished them one and all. As authority, the district court cited Fulton Bag & Cotton Mills v. Williams, 212 Ga. 783, 95 S.E.2d 848 (1956) and Gold v. Pioneer Fund, Inc., 107 Ga.App. 855, 132 S.E.2d 144 (1963). The court cited both of those decisions for the proposition that "the repeal of a statute without reservation takes away all remedies given by it and even defeats all actions and proceedings pending under it at the time of its repeal, and this is especially so where the statute repealed is one creating a cause of action." Gold, 132 S.E.2d at 148.

The district court was correct about the UFTA repealing § 18-2-22.¹ However, we do not agree with the district court that the repeal extinguished causes of action that had arisen under the repealed section but had not yet made it to final judgment. That is a question of state law, and there is a strong line of Georgia precedent establishing that the state constitution forbids the result the district court reached.

A.

Article I, Section 1, paragraph X of the Georgia Constitution provides that "[n]o bill of attainder, ex post facto law, retroactive law, or laws impairing the obligation of contract or making irrevocable grant of special privileges or immunities shall be passed." That provision was construed and applied in Dennington v. Mayor of Town of Roberta, 130 Ga. 494, 61 S.E. 20 (1908).

In Dennington, a statute enacted in 1900 required the town council of Roberta to levy a tax for the purpose of supporting the public schools, including teacher salaries, when the school board recommended that such a tax be levied. Id. at 21-22. The town council failed to levy the necessary...