Ciuetat v. Lindberg

• Docket Number: Civil Action 1:23-00369-KD-N
• Decision Date: 18 December 2023
• Parties: RONALD CIEUTAT, Plaintiff, v. GREG LINDBERG, et al., Defendants.
• Court: U.S. District Court — Southern District of Alabama

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RONALD CIEUTAT, Plaintiff, v. GREG LINDBERG, et al., Defendants.

Civil Action No. 1:23-00369-KD-N

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

December 18, 2023

REPORT & RECOMMENDATIONS

KATHERINE P. NELSON, UNITED STATES MAGISTRATE JUDGE

This action is before the Court^[1] on PlaintiffRonald J. Cieutat's motion to remand the above-styled civil action to the Circuit Court of Mobile County, Alabama (Doc. 20), which has been fully briefed.(Docs. 32, 34).Upon consideration and for the reasons stated herein, the undersigned RECOMMENDS the motion be GRANTED.

I.Background

Cieutat as representative and on behalf of each seller under an Equity Purchase Agreement (“EPA”) dated January 19, 2018, initiated an action in the Circuit Court of Mobile County, Alabama(“Circuit Court”) on August 22, 2023.(Doc. 1-4, PageID.37-55).^[2] The underlying factual allegations stem from the execution of this EPA, which provided for the sale of nine corporate entities (hereinafter, the “acquired entities”)^[3] to DefendantHPCSP Investments, LLC(“HPCSP Investments”).(Doc. 14, PageID.56-152).The EPA lists DefendantGreg Lindberg as manager of HPCSP Investments.(Id.).The sale of the acquired entities to HPCSP Investments closed April 13, 2018.(Id.).As part of the consideration for the sellers' interests in the acquired entities, the sellers, HPCSP Investments and Lindberg entered into an Equity Equivalence Agreement (“EEA”).(Doc. 1-4, PageID.38-54, 154-64).^[4] The terms of the EEA granted the sellers an equitable interest in HPCSP Investments, initially valued at 25% of the company.(Id.).Relevant here, the EEA gave Cieutat a put right that would ripen as of April 13, 2023.(Id.).If and when this put right was exercised, it would begin the process for the sellers to redeem their equity in HPCSP Investments.(Id.).Also relevant here, in the event of a sale of HPCSP Investments, the EEA provides terms for redemption of the sellers' interest in the form of a “Transfer of Control Payment.”(Id.).Lindberg signed this agreement both in his capacity as manager of HPCSP Investments and as Guarantor.(Id.).

On April 29, 2022, Cieutat wrote Eli Global, LLC(“Eli Global”), Lindberg, Peter Nordberg and Michael Pereira, requesting information regarding any sale or potential sale of HPCSP Investments.(Doc. 1-4, PageID.38-54, 166).He received no response.(Doc. 1-4, PageID.39).About a year later, Cieutat's put right ripened and he exercised it by letter dated April 14, 2023 sent to Eli Global, Lindberg, Nordberg and Pereira.(Doc. 1-4, PageID.38-54, 168-73).Pereira wrote Cieutat in response on June 14, 2023, explaining HPCSP Investments' sole member, HPCSP Holdings, LLC(“HPCSP Holdings”), was conveyed to the HPCSP Trust on June 3, 2021 via a “Trust Agreement and Transfer and Consent Agreement,” and that this prior sale terminated Cieutat's put right under the EEA.(Doc. 1-4, PageID.38-54, 175-267).According to the letter, the sale resulted in negative proceeds, such that the Transfer of Control Payment owed to Cieutat was $0.(Id.).Included with Pereira's letter were several documents related to the conveyance of HPCSP Holdings to the HPCSP Trust, including: (1) a “Seventh Amended and Restated Operating Agreement of HPCSP Investments, LLC” effective June 3, 2021, which identifies HPCSP Holdings as HPCSP Investments' sole member, (2) the Transfer and Consent Agreement, under which HPCSP Grantor, LLC(“HPCSP Grantor”) purports to transfer 100% of its interest in HPCSP Holdings to the HPCSP Trust, in exchange for (3) a $95,000,000 promissory note issued by the HPCSP Trust to HPCSP Grantor, and (4) the Trust Agreement between HPCSP Grantor (as Grantor) and Hugh Steven Wilson(as Trustee of the HPCSP Trust).(Id.).Of note, Lindberg is a signatory on the Trust Agreement as manager of HPCSP Grantor, on the Transfer and Consent Agreement as manager of both HPCSP Grantor and HPCSP Holdings, and on the promissory note as manager of HPCSP Grantor.(Id.).

Cieutat contends the transfers of the sellers' interests in HPCSP Investments were not done in accordance with the terms of the EPA/EEA, that one of two things happened in doing so, and that HPCSP Investments and Lindberg owe Cieutat a “substantial sum of money” either way.(Doc. 1-4, PageID.38-54).First, Cieutat proffers there was no transfer of HPCSP Investments and that the above-noted conveyances do not constitute a “sale” under the terms of the EPA/EEA, therefore his put right should have been honored, and HPCSP Investments and Lindberg are in breach of the EEA by failing to do so. (Id.).Second, if these transfers were a “sale” under the EPA/EEA, Cieutat contends he is entitled to the Transfer of Control Payment (specifically, 25% of the value of the $95,000,000 promissory note), and that HPCSP Investments and Lindberg are in breach of the EEA by failing to make this payment.(Id.).Further, Cieutat maintains the above-noted conveyances were fraudulent in any event and alleges they were made intentionally in order to avoid collection.(Id.).

The initial complaint filed August 22, 2023 asserted causes of action for specific performance, breach of contract, fraudulent transfer (under Ala. Code § 8-9A-1 et seq.), conspiracy to defraud, fraudulent and voidable transfer (under Ala. Code §§ 8-9A-1 et seq., and 8-9B-1 et seq.), for declaratory judgment, and sought equitable and injunctive relief.(Doc. 1-4, PageID.37-55).Each was brought against varying groups of seven named defendants - Lindberg, HPCSP Investments, Wilson (both individually and as Trustee of the HPCSP Trust), HPCSP Grantor, HPCSP Holdings, Eli Global, and Global Growth Holdings, Inc.(formerly known as Academy Association, Inc.) - and a group of fictitious parties described as “persons or entities which have received and/or transferred assets of Eli Global, LLC and/or Greg Lindberg subject to the Fraudulent/Voidable Transfer Act.”(Id.).Motions for a temporary restraining order(“TRO”) and for a preliminary injunction were filed with the complaint.(Doc. 1-4, PageID.30, 323-42).

On August 23,^[5]the Circuit Court entered a TRO and set a preliminary injunction hearing for August 31.(Doc. 1-4, PageID.343-45).Cieutat filed the operative first amended complaint (“FAC”) on August 30, fully incorporating his initial complaint, adding a Count 8 (Alter Ego/Pierce the Corporate Veil) and adding six new named defendants - HPC, LLC (“HPC”), Hemophilia Preferred Care of Memphis, Inc. (“HPCM”), HPC Biologicals, LLC (“HPCB”), Apex International, LLC, Northern Air, LLC and 633 Days, LLC - along with a second group of fictitious parties described as “persons or entities which have been operated as an instrumentality and or alter ego of Greg Lindberg and/or Eli Global, LLC.”(Doc. 1-4, PageID.365-69).The preliminary injunction hearing was held August 31, and the Circuit Court subsequently granted Cieutat's motion for injunctive relief by order dated September 1.(Doc. 1-4, PageID.382-90).The order specifically found notice was adequately provided to defendants and/or their counsel pursuant to Ala. R. Civ. P. 65(a)(1),^[6] and that they failed to appear.(Id.).In its order, the Circuit Court determined Cieutat would suffer irreparable harm if the requested relief was not granted and that he was entitled to the same after showing a reasonable success of likelihood on the merits.(Id.).Specifically, the Circuit Court's order entered a preliminary injunction...

... prohibiting any Defendant from selling, conveying, assigning or transferring HPCSP Investments, LLC, or selling, conveying, assigning or transferring any entity owned by HPCSP Investments, LLC or selling, conveying, assigning or transferring any entity that owns HPCSP Investments, LLC, whether such ownership is direct or indirect, until the conclusion of this matter, and... prohibiting any Defendant from making any distributions or payments from HPCSP Investments, LLC or any distributions or payments from any entity owned by HPCSP Investments, LLC to any owners of HPCSP Investments, LLC, whether such ownership is direct or indirect, until the conclusion of this matter.

HPCSP Investments, LLC and its subsidiaries may continue to operate in a normal course of business of a specialty pharmacy, but are otherwise further prohibited from distributing money or assets or making payments, for the benefit of any third party, including but not limited to, for the benefit of DefendantGreg Lindberg.

(Doc. 1-4, PageID.388).

On September 27, Defendants removed the action to this Court, purporting to do so on diversity jurisdiction grounds, 28 U.S.C. § 1332(a), pursuant to 28 U.S.C. §§ 1441,1446.(Doc. 1).In the notice of removal, Defendants averred complete diversity existed “among all properly joined parties.”(Id.).The notice asserts that HPC, HPCM and HPCB are Alabama citizens that were fraudulently joined to defeat diversity and urged the Court to disregard their citizenships and deem the removal proper.(Id.).

Plaintiff contends their joinder was not fraudulent and filed the operative motion to remand on October 13, which has been fully briefed and is ripe for disposition.(Docs. 20, 22, 32, 34).

II.Legal Standards

Article III of the United States Constitution limits the subject-matter jurisdiction of federal courts to certain justiciable “Cases” and “Controversies.”U.S. Const. art. III, § 2.Among them, federal district courts are statutorily authorized to adjudicate “civil actions where the matter in controversy exceeds the sum or value of $75,000, exclusive of interests and costs, and is between... citizens of different states.”28 U.S.C. § 1332(a).However, “[d]iversity jurisdiction requires complete diversity; every plaintiff must be diverse...